Table of Contents

FORM10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(X) QUARTERLYREPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIESEXCHANGE ACT OF 1934

OR ( ) TRANSITION REPORT UNDERSECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF1934

For The Quarter Ended June 30, 2006

Commission File Number 0-50272

SALOMON SMITHBARNEY AAA ENERGY FUND L.P.II

|  |
|--|
|  |  |
|  |

(Exact nameof registrant as specified in its charter)

|         |  |  |            |
|---------|--|--|------------|
| NewYork |  |  | 03-0407557 |
|         |

|  |
|--|
|  |  |
|  |

|                                                              |  |  |                                      |
|--------------------------------------------------------------|--|--|--------------------------------------|
| (Stateor other jurisdiction of incorporation or organization |  |  | (I.R.S. Employer Identification No.) |
|                                                              |

c/oCitigroup Managed Futures LLC 731 Lexington Avenue. – 25thFl. New York, New York 10022

|  |
|--|
|  |  |
|  |

(Address and ZipCode of principal executive offices)

(212) 559-2011

|  |
|--|
|  |  |
|  |

(Registrant'stelephone number, including area code)

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

YesX        No    

Indicate by checkmark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of‘‘accelerated filer and large acceleratedfiler’’ in Rule 12b-2 of the Exchange Act. (Checkone):

Large accelerated filer            Accelerated filer             Non-acceleratedfiler    X    

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

Yes             NoX

----

SALOMON SMITHBARNEY AAA ENERGY FUND L.P. II

FORM10-Q

INDEX

|                                 |  |  |                                                                                                                             |  |  |              |
|---------------------------------|--|--|-----------------------------------------------------------------------------------------------------------------------------|--|--|--------------|
|                            |  |  |                                                                                                                        |  |  | PageNumber   |
| PART I - FinancialInformation:  |  |  |                                                                                                                        |
|                            |  |  |                                                                                                                        |  |  |         |
|     Item1.  |  |  | FinancialStatements:                                                                                                        |  |  |         |
|                            |  |  | Statements of FinancialCondition at June 30, 2006 and December 31, 2005(unaudited)                                          |  |  | 3            |
|                            |  |  | Statements of Income and Expenses and Partners'Capital for the three and six months ended June 30, 2006 and 2005(unaudited) |  |  | 4            |
|                            |  |  | Statements of CashFlows for the three and six months ended June 30, 2006 and 2005(unaudited)                                |  |  | 5            |
|                            |  |  | Notes to FinancialStatements, including the Financial Statements of SB AAA Master FundLLC (unaudited)                       |  |  | 6 – 15 |
|     Item2.  |  |  | Management's Discussion and Analysis of FinancialCondition and Results ofOperations                                         |  |  | 16 –18 |
|     Item 3. |  |  | Quantitativeand Qualitative Disclosures about Market Risk                                                                   |  |  | 19           |
|     Item 4. |  |  | Controls andProcedures                                                                                                      |  |  | 20           |
| PARTII - OtherInformation       |  |  | 21                                                                                                                          |
|                                 |

2

----

Table of Contents

PART I

Item 1.Financial Statements

Salomon Smith Barney AAA Energy Fund L.P.II Statements of Financial Condition(Unaudited)

|                                                                                                                                          |  |  |             |   |             |                  |  |  |  |   |             |  |
|------------------------------------------------------------------------------------------------------------------------------------------|--|--|-------------|---|-------------|------------------|--|--|--|---|-------------|--|
|                                                                                                                                     |  |  | June30,2006 |   |             | December 31,2005 |
| Assets:                                                                                                                                  |  |  |             |   |        |                  |  |  |  |   |        |  |
| Investmentin the Master, at fairvalue                                                                                                    |  |  |             | $ | 593,176,646 |                  |  |  |  | $ | 500,832,721 |  |
| Cash                                                                                                                                     |  |  |             |   | 40,481      |                  |  |  |  |   | 26,541      |  |
|                                                                                                                                     |  |  |             | $ | 593,217,127 |                  |  |  |  | $ | 500,859,262 |  |
| Liabilitiesand Partners'Capital:                                                                                                         |  |  |             |   |        |                  |  |  |  |   |        |  |
| Liabilities:                                                                                                                             |  |  |             |   |        |                  |  |  |  |   |        |  |
| Accruedexpenses:                                                                                                                         |  |  |             |   |        |                  |  |  |  |   |        |  |
| Brokeragecommissions                                                                                                                     |  |  |             | $ | 2,156,444   |                  |  |  |  | $ | —     |  |
| Managementfees                                                                                                                           |  |  |             |   | 985,080     |                  |  |  |  |   | 850,749     |  |
| Administrativefees                                                                                                                       |  |  |             |   | 246,270     |                  |  |  |  |   | 212,687     |  |
| Other                                                                                                                                    |  |  |             |   | 12,715      |                  |  |  |  |   | 14,883      |  |
| Dueto Special LimitedPartner                                                                                                             |  |  |             |   | 26,780,662  |                  |  |  |  |   | —     |  |
| Redemptionspayable                                                                                                                       |  |  |             |   | 17,684,871  |                  |  |  |  |   | 32,907,562  |  |
|                                                                                                                                     |  |  |             |   | 47,866,042  |                  |  |  |  |   | 33,985,881  |  |
| Partners'Capital:                                                                                                                        |  |  |             |   |        |                  |  |  |  |   |        |  |
| General Partner,2,501.2826 Unit equivalents outstanding in 2006 and2005                                                                  |  |  |             |   | 6,758,666   |                  |  |  |  |   | 5,433,711   |  |
| Special Limited Partner 4,111.1273 Redeemable Units of LimitedPartnership Interest outstanding in 2006 and 2005respectively              |  |  |             |   | 11,108,595  |                  |  |  |  |   | 8,930,890   |  |
| LimitedPartners, 195,213.8548 and 208,301.6497 Redeemable Units of LimitedPartnership Interest outstanding in 2006 and 2005,respectively |  |  |             |   | 527,483,824 |                  |  |  |  |   | 452,508,780 |  |
|                                                                                                                                     |  |  |             |   | 545,351,085 |                  |  |  |  |   | 466,873,381 |  |
|                                                                                                                                     |  |  |             | $ | 593,217,127 |                  |  |  |  | $ | 500,859,262 |  |
|                                                                                                                                          |

SeeAccompanying Notes to Financial Statements.

3

----

Table of Contents

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

|                                                                                                                                       |  |  |                           |   |             |                         |  |  |      |   |             |      |  |  |  |   |              |   |  |  |  |   |             |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--|--|---------------------------|---|-------------|-------------------------|--|--|------|---|-------------|------|--|--|--|---|--------------|---|--|--|--|---|-------------|---|
|                                                                                                                                  |  |  | ThreeMonths EndedJune 30, |   |             | Six Months EndedJune30, |
|                                                                                                                                  |  |  | 2006                      |   |             | 2005                    |  |  | 2006 |   |             | 2005 |
| Income:                                                                                                                               |  |  |                           |   |        |                         |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |        |   |
| Realizedgains on closed positions allocated fromMaster                                                                                |  |  |                           | $ | 87,133,278  |                         |  |  |      | $ | 26,464,755  |      |  |  |  | $ | 284,129,710  |   |  |  |  | $ | 38,321,754  |   |
| Changein unrealized gains (losses) on open positions fromMaster                                                                       |  |  |                           |   | (58,109,351 | )                       |  |  |      |   | 21,624,161  |      |  |  |  |   | (136,611,467 | ) |  |  |  |   | 58,858,551  |   |
| Interestincome allocated fromMaster                                                                                                   |  |  |                           |   | 5,187,148   |                         |  |  |      |   | 1,201,054   |      |  |  |  |   | 9,462,804    |   |  |  |  |   | 1,976,053   |   |
| Expensesallocated fromMaster                                                                                                          |  |  |                           |   | (678,512    | )                       |  |  |      |   | (1,424,800  | )    |  |  |  |   | (1,218,863   | ) |  |  |  |   | (2,658,335  | ) |
|                                                                                                                                  |  |  |                           |   | 33,532,563  |                         |  |  |      |   | 47,865,170  |      |  |  |  |   | 155,762,184  |   |  |  |  |   | 96,498,023  |   |
| Expenses:                                                                                                                             |  |  |                           |   |        |                         |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |        |   |
| Brokeragecommissions                                                                                                                  |  |  |                           |   | 1,813,402   |                         |  |  |      |   | —     |      |  |  |  |   | 4,940,791    |   |  |  |  |   | —     |   |
| Managementfees                                                                                                                        |  |  |                           |   | 3,054,756   |                         |  |  |      |   | 1,197,712   |      |  |  |  |   | 5,883,370    |   |  |  |  |   | 2,057,664   |   |
| Administrativefees                                                                                                                    |  |  |                           |   | 763,688     |                         |  |  |      |   | 299,428     |      |  |  |  |   | 1,470,841    |   |  |  |  |   | 514,415     |   |
| Other                                                                                                                                 |  |  |                           |   | 50,535      |                         |  |  |      |   | 38,140      |      |  |  |  |   | 101,068      |   |  |  |  |   | 74,421      |   |
|                                                                                                                                  |  |  |                           |   | 5,682,381   |                         |  |  |      |   | 1,535,280   |      |  |  |  |   | 12,396,070   |   |  |  |  |   | 2,646,500   |   |
| Netincome before allocation to Special LimitedPartner                                                                                 |  |  |                           |   | 27,850,182  |                         |  |  |      |   | 46,329,890  |      |  |  |  |   | 143,366,114  |   |  |  |  |   | 93,851,523  |   |
| Allocationto Special LimitedPartner                                                                                                   |  |  |                           |   | (4,532,607  | )                       |  |  |      |   | (9,025,767  | )    |  |  |  |   | (26,780,662  | ) |  |  |  |   | (18,375,094 | ) |
| Netincome after allocation to Special LimitedPartner                                                                                  |  |  |                           |   | 23,317,575  |                         |  |  |      |   | 37,304,123  |      |  |  |  |   | 116,585,452  |   |  |  |  |   | 75,476,429  |   |
| Additions– LimitedPartners                                                                                                      |  |  |                           |   | 873,000     |                         |  |  |      |   | 26,852,000  |      |  |  |  |   | 20,570,000   |   |  |  |  |   | 63,727,000  |   |
| Redemptions– LimitedPartners                                                                                                    |  |  |                           |   | (43,175,320 | )                       |  |  |      |   | (7,114,311  | )    |  |  |  |   | (58,677,748  | ) |  |  |  |   | (11,055,739 | ) |
| Netincrease (decrease) in Partners'Capital                                                                                            |  |  |                           |   | (18,984,745 | )                       |  |  |      |   | 57,041,812  |      |  |  |  |   | 78,477,704   |   |  |  |  |   | 128,147,690 |   |
| Partners'Capital, beginning ofperiod                                                                                                  |  |  |                           |   | 564,335,830 |                         |  |  |      |   | 189,129,095 |      |  |  |  |   | 466,873,381  |   |  |  |  |   | 118,023,217 |   |
| Partners'Capital, end ofperiod                                                                                                        |  |  |                           | $ | 545,351,085 |                         |  |  |      | $ | 246,170,907 |      |  |  |  | $ | 545,351,085  |   |  |  |  | $ | 246,170,907 |   |
| Netasset value per Redeemable Unit (201,826.2647 and 143,792.3920Redeemable Units outstanding at June 30, 2006 and 2005,respectively) |  |  |                           | $ | 2,702.08    |                         |  |  |      | $ | 1,711.99    |      |  |  |  | $ | 2,702.08     |   |  |  |  | $ | 1,711.99    |   |
| Netincome per Redeemable Unit of Limited Partnership Interest and GeneralPartner Unitequivalent                                       |  |  |                           | $ | 106.77      |                         |  |  |      | $ | 261.85      |      |  |  |  | $ | 529.71       |   |  |  |  | $ | 562.25      |   |
|                                                                                                                                       |

SeeAccompanying Notes to Financial Statements.

4

----

Table of Contents

Salomon Smith Barney AAA Energy Fund L.P.II Statements of Cash Flows(Unaudited)

|                                                                                                 |  |  |                           |   |             |                        |  |  |      |   |             |      |  |  |  |   |              |   |  |  |  |   |             |   |
|-------------------------------------------------------------------------------------------------|--|--|---------------------------|---|-------------|------------------------|--|--|------|---|-------------|------|--|--|--|---|--------------|---|--|--|--|---|-------------|---|
|                                                                                            |  |  | ThreeMonths EndedJune 30, |   |             | SixMonths EndedJune30, |
|                                                                                            |  |  | 2006                      |   |             | 2005                   |  |  | 2006 |   |             | 2005 |
| Cashflows from operatingactivities:                                                             |  |  |                           |   |        |                        |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |        |   |
| Netincome                                                                                       |  |  |                           | $ | 23,317,575  |                        |  |  |      | $ | 37,304,123  |      |  |  |  | $ | 116,585,452  |   |  |  |  | $ | 75,476,429  |   |
| Adjustmentsto reconcile net income (loss) to net cash provided by (used in)operatingactivities: |  |  |                           |   |        |                        |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |        |   |
| Changesin operating assets andliabilities:                                                      |  |  |                           |   |        |                        |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |        |   |
| Purchaseof investment inMaster                                                                  |  |  |                           |   | (873,000    | )                      |  |  |      |   | (26,852,000 | )    |  |  |  |   | (59,500,890  | ) |  |  |  |   | (65,435,907 | ) |
| Proceedsfrom sale of investment inMaster                                                        |  |  |                           |   | 32,686,654  |                        |  |  |      |   | 7,901,458   |      |  |  |  |   | 112,358,166  |   |  |  |  |   | 13,855,105  |   |
| Netunrealized (appreciation) depreciation on investmentinMaster                                 |  |  |                           |   |        |                        |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |        |   |
|                                                                                            |  |  |                           |   | (28,371,637 | )                      |  |  |      |   | (46,678,416 | )    |  |  |  |   | (145,201,201 | ) |  |  |  |   | (94,554,294 | ) |
| Accruedexpenses:                                                                                |  |  |                           |   |        |                        |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |        |   |
| Increase(decrease) in commissionsfees                                                           |  |  |                           |   | 74,637      |                        |  |  |      |   | —     |      |  |  |  |   | 2,156,444    |   |  |  |  |   | —     |   |
| Increase(decrease) in managementfees                                                            |  |  |                           |   | (5,861      | )                      |  |  |      |   | 96,878      |      |  |  |  |   | 134,331      |   |  |  |  |   | 234,213     |   |
| Increase(decrease) in administrativefees                                                        |  |  |                           |   | (1,465      | )                      |  |  |      |   | 24,220      |      |  |  |  |   | 33,583       |   |  |  |  |   | 58,554      |   |
| Increase(decrease) inother                                                                      |  |  |                           |   | (52,702     | )                      |  |  |      |   | (64,289     | )    |  |  |  |   | (2,168       | ) |  |  |  |   | (28,009     | ) |
| Increase(decrease) in due to Special LimitedPartner                                             |  |  |                           |   | 4,532,607   |                        |  |  |      |   | 9,025,767   |      |  |  |  |   | 26,780,662   |   |  |  |  |   | 18,375,094  |   |
| Netcash provided by (used in) operatingactivities                                               |  |  |                           |   | 31,306,808  |                        |  |  |      |   | (19,242,259 | )    |  |  |  |   | 53,344,379   |   |  |  |  |   | (52,018,815 | ) |
| Cashflows from financingactivities:                                                             |  |  |                           |   |        |                        |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |        |   |
| Proceedsfrom additions – LimitedPartners                                                  |  |  |                           |   | 873,000     |                        |  |  |      |   | 26,852,000  |      |  |  |  |   | 20,570,000   |   |  |  |  |   | 63,727,000  |   |
| Paymentsfor redemptions – LimitedPartners                                                 |  |  |                           |   | (32,232,510 | )                      |  |  |      |   | (7,675,889  | )    |  |  |  |   | (73,900,439  | ) |  |  |  |   | (11,722,376 | ) |
| Netcash provided by (used in) financingactivities                                               |  |  |                           |   | (31,359,510 | )                      |  |  |      |   | 19,176,111  |      |  |  |  |   | (53,330,439  | ) |  |  |  |   | 52,004,624  |   |
| Netchange incash                                                                                |  |  |                           |   | (52,702     | )                      |  |  |      |   | (66,148     | )    |  |  |  |   | 13,940       |   |  |  |  |   | (14,191     | ) |
| Cash,at beginning ofperiod                                                                      |  |  |                           |   | 93,183      |                        |  |  |      |   | 102,360     |      |  |  |  |   | 26,541       |   |  |  |  |   | 50,403      |   |
| Cash,at end ofperiod                                                                            |  |  |                           | $ | 40,481      |                        |  |  |      | $ | 36,212      |      |  |  |  | $ | 40,481       |   |  |  |  | $ | 36,212      |   |
|                                                                                                 |

SeeAccompanying Notes to FinancialStatements.

5

----

Table of Contents

SalomonSmith Barney AAA Energy Fund L.P. II Notes to FinancialStatements June 30, 2006(Unaudited)

1.    General:

Salomon Smith Barney AAA Energy Fund L.P. II (the‘‘Partnership’’) is a limited partnershiporganized on March 25, 2002 under the partnership laws of the State ofNew York to engage, directly or indirectly, in the speculative tradingof a diversified portfolio of commodity interests, including commodityoptions and commodity futures contracts on United States exchanges andcertain foreign exchanges. The Partnership may trade commodity futuresand options contracts of any kind. In addition, the Partnership mayenter into swap contracts on energy-related products. During theinitial offering period (May 31, 2002 through July 1, 2002), thePartnership sold 93,975 redeemable units of Limited PartnershipInterest (‘‘Redeemable Units’’). ThePartnership commenced trading on July 1, 2002.

Effective July 1,2002, the Partnership allocated all of its capital to SB AAA MasterFund LLC, a New York limited liability company (the‘‘Master’’). With this cash, the Partnershippurchased 64,945.0387 Units of the Master with a fair value of$94,925,000. The Master was formed in order to permit commodity poolsmanaged by AAA Capital Management Advisors, Ltd. (successor to AAACapital Management, Inc.) (the ‘‘Advisor’’)using the Energy Program – Futures and Swaps, the Advisor'sproprietary trading program, to invest together in one trading vehicle.In addition, the Advisor is a special limited partner of thePartnership. Principals of the Master's Advisor were formerlyemployees of Smith Barney and associated persons of CGM. Individual andpooled accounts currently managed by the Advisor, including thePartnership (collectively, the ‘‘FeederFunds’’), are permitted to be non-managing members of theMaster. The General Partner and the Advisor believe that tradingthrough this master/feeder structure should promote efficiency andeconomy in the trading process. Expenses to investors as a result ofthe investment in the Master are approximately the same and redemptionrights are not affected. The Master may trade commodity futures andoptions contracts of any kind, but trades solely energy andenergy-related products. In addition, the Master may enter into swapcontracts or trade in energy-related products. The commodity intereststhat are traded by the Master are volatile and involve a high degree ofmarket risk.

As of June 30, 2006, the Partnership ownedapproximately 53.1% of the Master. It is the Partnership'sintention to continue to invest substantially all of its assets in theMaster. The performance of the Partnership is directly affected by theperformance of the Master. The Master's Statements of FinancialCondition, Statements of Income and Expenses and Members'Capital, Condensed Schedules of Investments and Statements of CashFlows are included herein.

Citigroup Managed Futures LLC acts asthe General Partner (the ‘‘General Partner’’)of the Partnership and the managing member of the Master, as definedbelow. The Partnership's/Master's commodity broker isCitigroup Global Markets Inc. (‘‘CGM’’). CGM isan affiliate of the General Partner. The General Partner is whollyowned by Citigroup Global Markets Holdings Inc.(‘‘CGMHI’’), which is the sole owner of CGM.CGMHI is a wholly owned subsidiary of Citigroup Inc.(‘‘Citigroup’’).

The accompanyingfinancial statements are unaudited but, in the opinion of management,include all adjustments, consisting only of normal recurringadjustments, necessary for a fair presentation of thePartnership's financial condition at June 30, 2006 and December31, 2005 and the results of its operations and cash flows for the threeand six months ended June 30, 2006 and 2005. These financial statementspresent the results of interim periods and do not include alldisclosures normally provided in annual financial statements. Youshould read these financial statements together with the financialstatements and notes included in the Partnership's Annual Reporton Form 10-K filed with the Securities and Exchange Commission for theyear ended December 31, 2005.

Prior to January 1, 2006,round-turn commissions were borne at the Master level and allocateddown to the feeder funds based on each funds' ownership.Effective January 1, 2006, round-turn commissions are borne by thePartnership consistent with contractual agreements.

Due to thenature of commodity trading, the results of operations for the interimperiods presented should not be considered indicative of the resultsthat may be expected for the entire year.

6

----

Table of Contents

SalomonSmith Barney AAA Energy Fund L.P. II Notes to FinancialStatements June 30, 2006(Unaudited)

The Master's Statements of FinancialCondition and Condensed Schedules of Investments as of June  30,2006 and December 31, 2005 and Statements of Income and Expenses andMembers' Capital and Statements of Cash Flows for the three andsix months ended June 30, 2006 and 2005 are presented below:

SBAAA Master Fund LLCStatements of FinancialCondition(Unaudited)

|                                                                                                                 |  |  |             |   |               |                  |  |  |  |   |               |  |
|-----------------------------------------------------------------------------------------------------------------|--|--|-------------|---|---------------|------------------|--|--|--|---|---------------|--|
|                                                                                                            |  |  | June30,2006 |   |               | December 31,2005 |
| Assets:                                                                                                         |  |  |             |   |          |                  |  |  |  |   |          |  |
| Equityin commodity futures tradingaccount:                                                                      |  |  |             |   |          |                  |  |  |  |   |          |  |
| Cash (restricted$18,496,236 and $4,130,046 in 2006 and 2005, respectively)                                      |  |  |             | $ | 934,279,723   |                  |  |  |  | $ | 557,878,760   |  |
| Netunrealized appreciation on open futurespositions                                                             |  |  |             |   | 60,252,028    |                  |  |  |  |   | 260,548,395   |  |
| Unrealized appreciation on open swapscontracts                                                                  |  |  |             |   | 198,780,567   |                  |  |  |  |   | 193,692,178   |  |
| Commodity options owned, at fair value (cost$212,807,941 and $129,024,667 in 2006 and 2005,respectively)        |  |  |             |   | 214,054,143   |                  |  |  |  |   | 225,052,075   |  |
|                                                                                                            |  |  |             |   | 1,407,366,461 |                  |  |  |  |   | 1,237,171,408 |  |
| Due frombrokers                                                                                                 |  |  |             |   | 20,167,985    |                  |  |  |  |   | 14,310,966    |  |
| Interestreceivable                                                                                              |  |  |             |   | 3,106,310     |                  |  |  |  |   | 1,813,732     |  |
|                                                                                                            |  |  |             |   |          |                  |  |  |  |   |          |  |
|                                                                                                            |  |  |             | $ | 1,430,640,756 |                  |  |  |  | $ | 1,253,296,106 |  |
| Liabilities and Members'Capital:                                                                                |  |  |             |   |          |                  |  |  |  |   |          |  |
| Liabilities:                                                                                                    |  |  |             |   |          |                  |  |  |  |   |          |  |
| Unrealizeddepreciation on open swap contracts                                                                   |  |  |             | $ | 136,584,394   |                  |  |  |  | $ | 165,265,325   |  |
| Commodity options written, atmarket value (premium $188,925,002 and $147,363,753 in 2006 and 2005,respectively) |  |  |             |   | 157,015,271   |                  |  |  |  |   | 114,859,048   |  |
| Accruedexpenses:                                                                                                |  |  |             |   |          |                  |  |  |  |   |          |  |
| Commissions                                                                                                     |  |  |             |   | —       |                  |  |  |  |   | 3,198,816     |  |
| Professionalfees                                                                                                |  |  |             |   | 157,281       |                  |  |  |  |   | 143,268       |  |
| Due tobrokers                                                                                                   |  |  |             |   | 18,930,030    |                  |  |  |  |   | 13,948,544    |  |
| DistributionPayable                                                                                             |  |  |             |   | 3,090,805     |                  |  |  |  |   | 1,798,953     |  |
|                                                                                                            |  |  |             |   | 315,777,781   |                  |  |  |  |   | 299,213,954   |  |
| Members'Capital:                                                                                                |  |  |             |   |          |                  |  |  |  |   |          |  |
| Members'Capital, 220,757.0556 and 246,785.2714 Unitsoutstanding in 2006and 2005, respectively                   |  |  |             |   | 1,114,862,975 |                  |  |  |  |   | 954,082,152   |  |
|                                                                                                            |  |  |             | $ | 1,430,640,756 |                  |  |  |  | $ | 1,253,296,106 |  |
|                                                                                                                 |

7

----

Table of Contents

SalomonSmith Barney AAA Energy Fund L.P. II Notes to FinancialStatements June 30, 2006(Unaudited)

SB AAA Master Fund LLCCondensedSchedule of InvestmentsJune 30,2006(Unaudited)

|                                           |  |  |                   |  |        |            |  |  |                     |   |              |   |  |  |  |  |        |   |
|-------------------------------------------|--|--|-------------------|--|--------|------------|--|--|---------------------|---|--------------|---|--|--|--|--|--------|---|
|                                      |  |  | NumberofContracts |  |        | Fair Value |  |  | % ofMembers'Capital |
| FuturesContractsPurchased                 |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| Energy                                    |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| IPEGas Oil – Nov 06 – March07 |  |  |                   |  | 10,379 |            |  |  |                     | $ | 82,256,752   |   |  |  |  |  | 7.38   | % |
| Other                                     |  |  |                   |  |   |            |  |  |                     |   | 22,123,318   |   |  |  |  |  | 1.98   |   |
| Totalfutures contractspurchased           |  |  |                   |  |   |            |  |  |                     |   | 104,380,070  |   |  |  |  |  | 9.36   |   |
| FuturesContractsSold                      |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| Energy                                    |  |  |                   |  |   |            |  |  |                     |   | (44,128,042  | ) |  |  |  |  | (3.96  | ) |
| Totalfuturescontracts                     |  |  |                   |  |   |            |  |  |                     |   | 60,252,028   |   |  |  |  |  | 5.40   |   |
| OptionsOwned                              |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| Energy                                    |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| NYMEXNatural Gas Sep. 06 – Apr.07   |  |  |                   |  | 4,415  |            |  |  |                     |   | 59,144,770   |   |  |  |  |  | 5.31   |   |
| Other                                     |  |  |                   |  |   |            |  |  |                     |   | 154,909,373  |   |  |  |  |  | 13.89  |   |
| Totaloptionsowned                         |  |  |                   |  |   |            |  |  |                     |   | 214,054,143  |   |  |  |  |  | 19.20  |   |
| OptionsWritten                            |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| Energy                                    |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| NYMEXNatural Gas Aug. 06 – Jan.07   |  |  |                   |  | 5,334  |            |  |  |                     |   | (66,176,650  | ) |  |  |  |  | (5.93  | ) |
| Other                                     |  |  |                   |  |   |            |  |  |                     |   | (90,838,621  | ) |  |  |  |  | (8.15  | ) |
| Totaloptionswritten                       |  |  |                   |  |   |            |  |  |                     |   | (157,015,271 | ) |  |  |  |  | (14.08 | ) |
| UnrealizedAppreciation on SwapContracts   |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| Energy                                    |  |  |                   |  |   |            |  |  |                     |   | 198,780,567  |   |  |  |  |  | 17.83  |   |
| UnrealizedDepreciation on SwapContracts   |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| Energy                                    |  |  |                   |  |   |            |  |  |                     |   | (136,584,394 | ) |  |  |  |  | (12.25 | ) |
| TotalEnergy FairValue                     |  |  |                   |  |   |            |  |  |                     | $ | 179,487,073  |   |  |  |  |  | 16.10  | % |
|                                           |

|  |                                                                     |
|--|---------------------------------------------------------------------|
|  | Percentagesare based on Members' Capital unless otherwiseindicated. |

8

----

Table of Contents

SalomonSmith Barney AAA Energy Fund L.P. II Notes to FinancialStatements June 30, 2006(Unaudited)

SB AAA Master Fund LLCCondensedSchedule of InvestmentsDecember 31,2005(Unaudited)

|                                                                 |  |  |                   |  |        |            |  |  |                     |   |              |   |  |  |  |  |        |   |
|-----------------------------------------------------------------|--|--|-------------------|--|--------|------------|--|--|---------------------|---|--------------|---|--|--|--|--|--------|---|
|                                                            |  |  | NumberofContracts |  |        | Fair Value |  |  | % ofMembers'Capital |
| FuturesContractsPurchased                                       |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| Energy                                                          |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| NYMEXHenry Hub Natural Gas Swap – April 07 – Dec.09 |  |  |                   |  | 6,496  |            |  |  |                     | $ | 61,657,788   |   |  |  |  |  | 6.46   | % |
| NYMEXNatural Gas Aug. 06 – Dec.10                         |  |  |                   |  | 9,869  |            |  |  |                     |   | 107,175,497  |   |  |  |  |  | 11.23  |   |
| Other                                                           |  |  |                   |  |   |            |  |  |                     |   | 45,857,146   |   |  |  |  |  | 4.81   |   |
| Totalfutures contractspurchased                                 |  |  |                   |  |   |            |  |  |                     |   | 214,690,431  |   |  |  |  |  | 22.50  |   |
|                                                            |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| FuturesContractsSold                                            |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| Energy                                                          |  |  |                   |  |   |            |  |  |                     |   | 45,857,964   |   |  |  |  |  | 4.81   |   |
| Totalfuturescontracts                                           |  |  |                   |  |   |            |  |  |                     |   | 260,548,395  |   |  |  |  |  | 27.31  |   |
|                                                            |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| OptionsOwned                                                    |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| Energy                                                          |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| NYMEXNatural Gas Feb. 06 – July06                         |  |  |                   |  | 4,778  |            |  |  |                     |   | 78,598,570   |   |  |  |  |  | 8.24   |   |
| Other                                                           |  |  |                   |  |   |            |  |  |                     |   | 146,453,505  |   |  |  |  |  | 15.35  |   |
| Totaloptionsowned                                               |  |  |                   |  |   |            |  |  |                     |   | 225,052,075  |   |  |  |  |  | 23.59  |   |
|                                                            |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| OptionsWritten                                                  |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| Energy                                                          |  |  |                   |  |   |            |  |  |                     |   | (114,859,048 | ) |  |  |  |  | (12.04 | ) |
|                                                            |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| UnrealizedAppreciation on SwapContracts                         |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| Energy                                                          |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| GulfCoast Unleaded Gas Calendar2006                             |  |  |                   |  | 1,750  |            |  |  |                     |   | 67,563,451   |   |  |  |  |  | 7.08   |   |
| Other                                                           |  |  |                   |  |   |            |  |  |                     |   | 126,128,727  |   |  |  |  |  | 13.22  |   |
| Totalunrealized appreciation on swapcontracts                   |  |  |                   |  |   |            |  |  |                     |   | 193,692,178  |   |  |  |  |  | 20.30  |   |
|                                                            |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| UnrealizedDepreciation on SwapContracts                         |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| Energy                                                          |  |  |                   |  |   |            |  |  |                     |   |         |   |  |  |  |  |   |   |
| GulfCoast Unleaded Gas Calendar2006                             |  |  |                   |  | 1,750  |            |  |  |                     |   | (65,229,496  | ) |  |  |  |  | (6.84  | ) |
| Other                                                           |  |  |                   |  |   |            |  |  |                     |   | (100,035,829 | ) |  |  |  |  | (10.48 | ) |
| Totaldepreciation on swapcontracts                              |  |  |                   |  |   |            |  |  |                     |   | (165,265,325 | ) |  |  |  |  | (17.32 | ) |
| TotalEnergy FairValue                                           |  |  |                   |  |   |            |  |  |                     | $ | 399,168,275  |   |  |  |  |  | 41.84  | % |
|                                                                 |

|  |                                                                     |
|--|---------------------------------------------------------------------|
|  | Percentagesare based on Members' Capital unless otherwiseindicated. |

9

----

Table of Contents

SalomonSmith Barney AAA Energy Fund L.P. II Notes to FinancialStatements June 30, 2006(Unaudited)

SB AAA Master Fund LLC Statements ofIncome and Expenses and Members' Capital (Unaudited)

|                                                                                                                  |  |  |                   |   |               |                 |  |  |      |   |             |      |  |  |  |   |               |   |  |  |  |   |             |   |
|------------------------------------------------------------------------------------------------------------------|--|--|-------------------|---|---------------|-----------------|--|--|------|---|-------------|------|--|--|--|---|---------------|---|--|--|--|---|-------------|---|
|                                                                                                             |  |  | ThreeMonths Ended |   |               | Six MonthsEnded |
|                                                                                                             |  |  | June30,           |   |               | June30,         |
|                                                                                                             |  |  | 2006              |   |               | 2005            |  |  | 2006 |   |             | 2005 |
| Income:                                                                                                          |  |  |                   |   |          |                 |  |  |      |   |        |      |  |  |  |   |          |   |  |  |  |   |        |   |
| Netgains (losses) on trading of commodityinterests:                                                              |  |  |                   |   |          |                 |  |  |      |   |        |      |  |  |  |   |          |   |  |  |  |   |        |   |
| Realizedgains on closed positions                                                                                |  |  |                   | $ | 163,585,293   |                 |  |  |      | $ | 59,813,219  |      |  |  |  | $ | 542,416,640   |   |  |  |  | $ | 89,629,447  |   |
| Change in unrealized gains (losses) on openpositions                                                             |  |  |                   |   | (109,721,086  | )               |  |  |      |   | 45,857,753  |      |  |  |  |   | (261,903,227  | ) |  |  |  |   | 135,553,460 |   |
|                                                                                                             |  |  |                   |   | 53,864,207    |                 |  |  |      |   | 105,670,972 |      |  |  |  |   | 280,513,413   |   |  |  |  |   | 225,182,907 |   |
| Interestincome                                                                                                   |  |  |                   |   | 9,980,631     |                 |  |  |      |   | 2,724,168   |      |  |  |  |   | 18,320,770    |   |  |  |  |   | 4,664,278   |   |
|                                                                                                             |  |  |                   |   | 63,844,838    |                 |  |  |      |   | 108,395,140 |      |  |  |  |   | 298,834,183   |   |  |  |  |   | 229,847,185 |   |
| Expenses:                                                                                                        |  |  |                   |   |          |                 |  |  |      |   |        |      |  |  |  |   |          |   |  |  |  |   |        |   |
| Brokeragecommissions including clearing fees of $690,114, $410,082, $1,224,774and $727,286, respectively         |  |  |                   |   | 1,169,618     |                 |  |  |      |   | 3,098,850   |      |  |  |  |   | 2,095,567     |   |  |  |  |   | 6,040,508   |   |
| ProfessionalFees                                                                                                 |  |  |                   |   | 106,500       |                 |  |  |      |   | 67,862      |      |  |  |  |   | 213,000       |   |  |  |  |   | 122,386     |   |
|                                                                                                             |  |  |                   |   | 1,276,118     |                 |  |  |      |   | 3,166,712   |      |  |  |  |   | 2,308,567     |   |  |  |  |   | 6,162,894   |   |
| Netincome                                                                                                        |  |  |                   |   | 62,568,720    |                 |  |  |      |   | 105,228,428 |      |  |  |  |   | 296,525,616   |   |  |  |  |   | 223,684,291 |   |
| Additions                                                                                                        |  |  |                   |   | 22,922,343    |                 |  |  |      |   | 32,264,517  |      |  |  |  |   | 161,101,037   |   |  |  |  |   | 75,289,996  |   |
| Redemptions                                                                                                      |  |  |                   |   | (83,091,699   | )               |  |  |      |   | (36,649,976 | )    |  |  |  |   | (278,620,004  | ) |  |  |  |   | (54,873,321 | ) |
| Distribution of Interest to feederfunds                                                                          |  |  |                   |   | (9,931,324    | )               |  |  |      |   | (2,692,662  | )    |  |  |  |   | (18,225,826   | ) |  |  |  |   | (4,589,301  | ) |
| Net increase (decrease) in Members'Capital                                                                       |  |  |                   |   | (7,531,960    | )               |  |  |      |   | 98,150,307  |      |  |  |  |   | 160,780,823   |   |  |  |  |   | 239,511,665 |   |
| Members' Capital, beginning ofperiod                                                                             |  |  |                   |   | 1,122,394,935 |                 |  |  |      |   | 477,856,893 |      |  |  |  |   | 954,082,152   |   |  |  |  |   | 336,495,535 |   |
| Members' Capital, end ofperiod                                                                                   |  |  |                   | $ | 1,114,862,975 |                 |  |  |      | $ | 576,007,200 |      |  |  |  | $ | 1,114,862,975 |   |  |  |  | $ | 576,007,200 |   |
| Net asset value per Unit(220,757.0556 and 196,355.4097 Units outstanding in June 30, 2006 and2005, respectively) |  |  |                   | $ | 5,050.18      |                 |  |  |      | $ | 2,933.49    |      |  |  |  | $ | 5,050.18      |   |  |  |  | $ | 2,933.49    |   |
|                                                                                                             |  |  |                   |   |          |                 |  |  |      |   |        |      |  |  |  |   |          |   |  |  |  |   |        |   |
| Netincome per Unit of MemberInterest                                                                             |  |  |                   | $ | 275.47        |                 |  |  |      | $ | 535.54      |      |  |  |  | $ | 1,263.33      |   |  |  |  | $ | 1,141.57    |   |
|                                                                                                                  |

10

----

Table of Contents

SalomonSmith Barney AAA Energy Fund L.P. II Notes to FinancialStatements June 30, 2006(Unaudited)

SB AAA Master Fund LLC Statements ofCash Flows (Unaudited)

|                                                                                           |  |  |                   |   |             |                 |  |  |      |   |             |      |  |  |  |   |              |   |  |  |  |   |              |   |
|-------------------------------------------------------------------------------------------|--|--|-------------------|---|-------------|-----------------|--|--|------|---|-------------|------|--|--|--|---|--------------|---|--|--|--|---|--------------|---|
|                                                                                      |  |  | ThreeMonths Ended |   |             | Six MonthsEnded |
|                                                                                      |  |  | June30,           |   |             | June30,         |
|                                                                                      |  |  | 2006              |   |             | 2005            |  |  | 2006 |   |             | 2005 |
| Cashflows from operatingactivities:                                                       |  |  |                   |   |        |                 |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |         |   |
| Net Income                                                                                |  |  |                   | $ | 62,568,720  |                 |  |  |      | $ | 105,228,428 |      |  |  |  | $ | 296,525,616  |   |  |  |  | $ | 223,684,291  |   |
| Adjustments to reconcile netincome to net cash provided by (used in) operatingactivities: |  |  |                   |   |        |                 |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |         |   |
| Changesin operating assets andliabilities:                                                |  |  |                   |   |        |                 |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |         |   |
| (Increase)decrease in restricted cash                                                     |  |  |                   |   | 135,177,432 |                 |  |  |      |   | (1,546,704  | )    |  |  |  |   | (14,366,190  | ) |  |  |  |   | 24,480,571   |   |
| (Increase) decrease in net unrealized                                                     |  |  |                   |   |        |                 |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |         |   |
| appreciation/depreciationon open futures positions                                        |  |  |                   |   | 150,810,499 |                 |  |  |      |   | (39,138,657 | )    |  |  |  |   | 200,296,367  |   |  |  |  |   | (83,762,054  | ) |
| (Increase) decrease in unrealized appreciation on open swapscontracts                     |  |  |                   |   | 33,822,037  |                 |  |  |      |   | 15,515,826  |      |  |  |  |   | (5,088,389   | ) |  |  |  |   | (109,872,235 | ) |
| (Increase)decrease in commodity options owned at fairvalue                                |  |  |                   |   | (97,813,302 | )               |  |  |      |   | (9,150,792  | )    |  |  |  |   | 10,997,932   |   |  |  |  |   | (64,886,251  | ) |
| (Increase) decrease in due frombrokers                                                    |  |  |                   |   | (6,827,435  | )               |  |  |      |   | (2,746,802  | )    |  |  |  |   | (5,857,019   | ) |  |  |  |   | (7,629,130   | ) |
| (Increase) decrease in interestreceivable                                                 |  |  |                   |   | 284,580     |                 |  |  |      |   | (84,412     | )    |  |  |  |   | (1,292,578   | ) |  |  |  |   | (460,313     | ) |
| Increase (decrease) in unrealized depreciation on open swapcontracts                      |  |  |                   |   | (42,776,742 | )               |  |  |      |   | (14,851,315 | )    |  |  |  |   | (28,680,931  | ) |  |  |  |   | 94,299,056   |   |
| Increase (decrease) in commodity options written, at fairvalue                            |  |  |                   |   | 17,647,672  |                 |  |  |      |   | 9,148,623   |      |  |  |  |   | 42,156,223   |   |  |  |  |   | 16,447,907   |   |
| Accruedexpenses:                                                                          |  |  |                   |   |        |                 |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |         |   |
| Increase(decrease) in commissions                                                         |  |  |                   |   | —     |                 |  |  |      |   | (52,074     | )    |  |  |  |   | (3,198,816   | ) |  |  |  |   | 923,781      |   |
| Increase (decrease) in professionalfees                                                   |  |  |                   |   | (92,487     | )               |  |  |      |   | (48,270     | )    |  |  |  |   | 14,013       |   |  |  |  |   | 6,254        |   |
| Increase (decrease) in due tobrokers                                                      |  |  |                   |   | 4,547,830   |                 |  |  |      |   | 688,143     |      |  |  |  |   | 4,981,486    |   |  |  |  |   | 4,921,682    |   |
| Increase (decrease)in due to CGM                                                          |  |  |                   |   | —     |                 |  |  |      |   | —     |      |  |  |  |   | —      |   |  |  |  |   | (22,978      | ) |
| Net cashprovided by (used in) operatingactivities                                         |  |  |                   |   | 257,348,804 |                 |  |  |      |   | 62,961,994  |      |  |  |  |   | 496,487,714  |   |  |  |  |   | 98,130,581   |   |
|                                                                                      |  |  |                   |   |        |                 |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |         |   |
| Cashflows from financingactivities:                                                       |  |  |                   |   |        |                 |  |  |      |   |        |      |  |  |  |   |         |   |  |  |  |   |         |   |
| Proceedsfrom additions                                                                    |  |  |                   |   | 22,922,343  |                 |  |  |      |   | 32,264,517  |      |  |  |  |   | 161,101,037  |   |  |  |  |   | 75,289,996   |   |
| Payments forredemptions                                                                   |  |  |                   |   | (83,091,699 | )               |  |  |      |   | (36,649,976 | )    |  |  |  |   | (278,620,004 | ) |  |  |  |   | (54,873,321  | ) |
| Distribution of interest to feederfunds                                                   |  |  |                   |   | (10,215,266 | )               |  |  |      |   | (2,609,144  | )    |  |  |  |   | (16,933,974  | ) |  |  |  |   | (4,131,132   | ) |
| Net cash provided by (used in) financingactivities                                        |  |  |                   |   | (70,384,622 | )               |  |  |      |   | (6,994,603  | )    |  |  |  |   | (134,452,941 | ) |  |  |  |   | 16,285,543   |   |
| Net change in cash                                                                        |  |  |                   |   | 186,964,182 |                 |  |  |      |   | 55,967,391  |      |  |  |  |   | 362,034,773  |   |  |  |  |   | 114,416,124  |   |
| Unrestricted cash, at beginning ofperiod                                                  |  |  |                   |   | 728,819,305 |                 |  |  |      |   | 331,987,915 |      |  |  |  |   | 553,748,714  |   |  |  |  |   | 273,539,182  |   |
| Unrestricted cash, at end ofperiod                                                        |  |  |                   | $ | 915,783,487 |                 |  |  |      | $ | 387,955,306 |      |  |  |  | $ | 915,783,487  |   |  |  |  | $ | 387,955,306  |   |
|                                                                                           |

11

----

Table of Contents

SalomonSmith Barney AAA Energy Fund L.P. II Notes to FinancialStatements June 30, 2006(Unaudited)

2.    Financial Highlights:

Changes in Net Asset Value per Redeemable Unit for the three and sixmonths ended June  30, 2006 and 2005 were as follows:

|                                                        |  |  |                           |   |          |                         |  |  |      |   |          |      |  |  |  |   |          |   |  |  |  |   |          |   |
|--------------------------------------------------------|--|--|---------------------------|---|----------|-------------------------|--|--|------|---|----------|------|--|--|--|---|----------|---|--|--|--|---|----------|---|
|                                                   |  |  | ThreeMonths EndedJune 30, |   |          | Six Months EndedJune30, |
|                                                   |  |  | 2006                      |   |          | 2005                    |  |  | 2006 |   |          | 2005 |
| Netrealized and unrealized gains*                      |  |  |                           | $ | 121.47   |                         |  |  |      | $ | 327.76   |      |  |  |  | $ | 642.42   |   |  |  |  | $ | 704.60   |   |
| Interestincome                                         |  |  |                           |   | 24.32    |                         |  |  |      |   | 8.49     |      |  |  |  |   | 43.69    |   |  |  |  |   | 14.59    |   |
| Expensesand allocation to Special LimitedPartner**     |  |  |                           |   | (39.02   | )                       |  |  |      |   | (74.40   | )    |  |  |  |   | (156.40  | ) |  |  |  |   | (156.94  | ) |
| Increasefor theperiod                                  |  |  |                           |   | 106.77   |                         |  |  |      |   | 261.85   |      |  |  |  |   | 529.71   |   |  |  |  |   | 562.25   |   |
| NetAsset Value per Redeemable Unit, beginning ofperiod |  |  |                           |   | 2,595.31 |                         |  |  |      |   | 1,450.14 |      |  |  |  |   | 2,172.37 |   |  |  |  |   | 1,149.74 |   |
| NetAsset Value per Redeemable Unit, end ofperiod       |  |  |                           | $ | 2,702.08 |                         |  |  |      | $ | 1,711.99 |      |  |  |  | $ | 2,702.08 |   |  |  |  | $ | 1,711.99 |   |
|                                                        |

|   |                                                                        |
|---|------------------------------------------------------------------------|
| * | IncludesPartnership commissions and Expenses allocated from theMaster. |

|    |                                                                        |
|----|------------------------------------------------------------------------|
| ** | Excludes Partnership commissions andExpenses allocated from theMaster. |

|                                                                    |  |  |  |  |        |    |  |  |  |  |        |    |  |  |  |  |        |    |  |  |  |  |        |    |
|--------------------------------------------------------------------|--|--|--|--|--------|----|--|--|--|--|--------|----|--|--|--|--|--------|----|--|--|--|--|--------|----|
| Ratiosto average netassets:***                                     |  |  |  |  |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |  |  |  |   |    |
| Netinvestment loss before allocation to Special LimitedPartner**** |  |  |  |  | (0.8   | )% |  |  |  |  | (3.3   | )% |  |  |  |  | (1.1   | )% |  |  |  |  | (3.7   | )% |
| Operatingexpense                                                   |  |  |  |  | 4.5    | %  |  |  |  |  | 5.5    | %  |  |  |  |  | 4.6    | %  |  |  |  |  | 5.8    | %  |
| Allocationto Special LimitedPartner                                |  |  |  |  | 0.8    | %  |  |  |  |  | 4.2    | %  |  |  |  |  | 4.9    | %  |  |  |  |  | 10.0   | %  |
| Totalexpenses and allocation to Special LimitedPartner             |  |  |  |  | 5.3    | %  |  |  |  |  | 9.7    | %  |  |  |  |  | 9.5    | %  |  |  |  |  | 15.8   | %  |
| Totalreturn:                                                       |  |  |  |  |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |  |  |  |   |    |
| Totalreturn before allocation to Special LimitedPartner            |  |  |  |  | 5.0    | %  |  |  |  |  | 22.4   | %  |  |  |  |  | 30.5   | %  |  |  |  |  | 60.0   | %  |
| Allocationto Special Limited Partner                               |  |  |  |  | (0.9   | )% |  |  |  |  | (4.3   | )% |  |  |  |  | (6.1   | )% |  |  |  |  | (11.1  | )% |
| Total return after allocation toSpecial LimitedPartner             |  |  |  |  | 4.1    | %  |  |  |  |  | 18.1   | %  |  |  |  |  | 24.4   | %  |  |  |  |  | 48.9   | %  |
|                                                                    |

|     |                                                              |
|-----|--------------------------------------------------------------|
| *** | Annualized(except for allocation to Special Limited Partner) |

|      |                                                                                         |
|------|-----------------------------------------------------------------------------------------|
| **** | Interest income less total expenses(exclusive of allocation to Special Limited Partner) |

The above ratios may vary for individual investors based onthe timing of capital transactions during the year. Additionally, theseratios are calculated for the Limited Partner class using the LimitedPartners' share of income, expenses and average netassets.

12

----

Table of Contents

SalomonSmith Barney AAA Energy Fund L.P. II Notes to FinancialStatements June 30, 2006(Unaudited)

|  |  |
|--|--|
|  |  |

Financial Highlights oftheMaster:

|                                             |  |  |                           |   |          |                         |  |  |      |   |          |      |  |  |  |   |          |   |  |  |  |   |          |   |
|---------------------------------------------|--|--|---------------------------|---|----------|-------------------------|--|--|------|---|----------|------|--|--|--|---|----------|---|--|--|--|---|----------|---|
|                                        |  |  | ThreeMonths EndedJune 30, |   |          | Six Months EndedJune30, |
|                                        |  |  | 2006                      |   |          | 2005                    |  |  | 2006 |   |          | 2005 |
| Netrealized and unrealizedgains*            |  |  |                           | $ | 231.63   |                         |  |  |      | $ | 522.04   |      |  |  |  | $ | 1,184.65 |   |  |  |  | $ | 1,118.42 |   |
| Interestincome                              |  |  |                           |   | 44.32    |                         |  |  |      |   | 13.85    |      |  |  |  |   | 79.60    |   |  |  |  |   | 23.78    |   |
| Expenses**                                  |  |  |                           |   | (0.48    | )                       |  |  |      |   | (0.35    | )    |  |  |  |   | (0.92    | ) |  |  |  |   | (0.63    | ) |
| Increasefor theperiod                       |  |  |                           |   | 275.47   |                         |  |  |      |   | 535.54   |      |  |  |  |   | 1,263.33 |   |  |  |  |   | 1,141.57 |   |
| Distributions                               |  |  |                           |   | (44.10   | )                       |  |  |      |   | (13.69   | )    |  |  |  |   | (79.19   | ) |  |  |  |   | (23.40   | ) |
| NetAsset Value per Unit, beginning ofperiod |  |  |                           |   | 4,818.81 |                         |  |  |      |   | 2,411.64 |      |  |  |  |   | 3,866.04 |   |  |  |  |   | 1,815.32 |   |
| NetAsset Value per Unit, end ofperiod       |  |  |                           | $ | 5,050.18 |                         |  |  |      | $ | 2,933.49 |      |  |  |  | $ | 5,050.18 |   |  |  |  | $ | 2,933.49 |   |
|                                             |

|   |                               |
|---|-------------------------------|
| * | Includesbrokerage commissions |

|    |                               |
|----|-------------------------------|
| ** | Excludes brokeragecommissions |

|                                |  |  |  |  |        |   |  |  |  |  |        |    |  |  |  |  |        |   |  |  |  |  |        |    |
|--------------------------------|--|--|--|--|--------|---|--|--|--|--|--------|----|--|--|--|--|--------|---|--|--|--|--|--------|----|
| Ratiosto average netassets:*** |  |  |  |  |   |   |  |  |  |  |   |    |  |  |  |  |   |   |  |  |  |  |   |    |
| Netinvestment gain(loss)****   |  |  |  |  | 3.1    | % |  |  |  |  | (0.3   | )% |  |  |  |  | 3.0    | % |  |  |  |  | (0.7   | )% |
| Operatingexpense               |  |  |  |  | 0.4    | % |  |  |  |  | 2.5    | %  |  |  |  |  | 0.4    | % |  |  |  |  | 2.7    | %  |
| Totalreturn                    |  |  |  |  | 5.7    | % |  |  |  |  | 22.2   | %  |  |  |  |  | 32.7   | % |  |  |  |  | 62.9   | %  |
|                                |

|     |            |
|-----|------------|
| *** | Annualized |

|      |                                    |
|------|------------------------------------|
| **** | Interest income less totalexpenses |

|  |                                                                                                               |
|--|---------------------------------------------------------------------------------------------------------------|
|  | The above ratios may vary for individualinvestors based on the timing of capital transactions during theyear. |

13

----

Table of Contents

SalomonSmith Barney AAA Energy Fund L.P. II Notes to FinancialStatements June 30, 2006(Unaudited)

3.    Trading Activities:

ThePartnership was formed for the purpose of trading contracts in avariety of commodity interests, including derivative financialinstruments and derivative commodity instruments. The Partnershipinvests the majority of its assets through a ‘‘masterfund/feeder fund’’ structure. The results of thePartnership's investment in the Master are shown in theStatements of Income and Expenses and Partners' Capital and arediscussed in Item 2, Management's Discussion and Analysis ofFinancial Condition and Results of Operations.

The respectiveCustomer Agreements between the Partnership and CGM and the Master andCGM give the Partnership and the Master, respectively, the legal rightto net unrealized gains and losses.

All of the commodityinterests owned by the Master are held for trading purposes. Theaverage fair values of these interests during the six and twelve monthsended June 30, 2006 and December 31, 2005, based on a monthlycalculation, were $233,951,355 and $199,595,694, respectively. The fairvalues of these commodity interests, including options and swapsthereon, if applicable, at June 30, 2006 and December 31, 2005 were$179,487,073 and $399,168,275, respectively. Fair values for exchangetraded commodity futures and options are based on quoted market pricesfor those futures and options. Fair values for all other financialinstruments for which market quotations are not readily available arebased on calculations approved by the General Partner.

4.    Financial Instrument Risks:

In the normal course ofits business, the Partnership, through its investment in the Master, isparty to financial instruments with off-balance sheet risk, includingderivative financial instruments and derivative commodity instruments.These financial instruments may include forwards, futures, options andswaps, whose values are based upon an underlying asset, index, orreference rate, and generally represent future commitments to exchangecurrencies or cash flows, to purchase or sell other financialinstruments at specific terms at specified future dates, or, in thecase of derivative commodity instruments, to have a reasonablepossibility to be settled in cash, through physical delivery or withanother financial instrument. These instruments may be traded on anexchange or over-the-counter (‘‘OTC’’).Exchange-traded instruments are standardized and include futures andcertain option contracts. OTC contracts are negotiated betweencontracting parties and include forwards and certain options. Each ofthese instruments is subject to various risks similar to those relatedto the underlying financial instruments including market and creditrisk. In general, the risks associated with OTC contracts are greaterthan those associated with exchange-traded instruments because of thegreater risk of default by the counterparty to an OTC contract. TheMaster's swaps contracts are OTC contracts.

Market risk isthe potential for changes in the value of the financial instrumentstraded by the Master due to market changes, including interest andforeign exchange rate movements and fluctuations in commodity orsecurity prices. Market risk is directly impacted by the volatility andliquidity in the markets in which the related underlying assets aretraded.

Credit risk is the possibility that a loss may occur dueto the failure of a counterparty to perform according to the terms of acontract. Credit risk with respect to exchange-traded instruments isreduced to the extent that an exchange or clearing organization acts asa counterparty to the transactions. ThePartnership's/Master's risk of loss in the event ofcounterparty default is typically limited to the amounts recognized inthe statements of financial condition and not represented by thecontract or notional amounts of the instruments. The Partnership,through its investment in the Master, has concentration risk becausethe sole counterparty or broker with respect to the Master'sassets is CGM.

14

----

Table of Contents

SalomonSmith Barney AAA Energy Fund L.P. II Notes to FinancialStatements June 30, 2006(Unaudited)

The General Partner monitors and controlsthe Partnership's/Master's risk exposure on a daily basisthrough financial, credit and risk management monitoring systems, andaccordingly believes that it has effective procedures for evaluatingand limiting the credit and market risks to which thePartnership/Master is subject. These monitoring systems allow theGeneral Partner to statistically analyze actual trading results withrisk adjusted performance indicators and correlation statistics. Inaddition, on-line monitoring systems provide account analysis offutures, forwards and options positions by sector, margin requirements,gain and loss transactions and collateral positions.

Themajority of these instruments mature within one year of June 30, 2006.However, due to the nature of the Partnership's/Master'sbusiness, these instruments may not be held tomaturity.

15

----

Table of Contents

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations.

Liquidity andCapital Resources

The Partnership does not engage inthe sale of goods or services. Its only assets are its investment inthe Master and cash. The Master does not engage in the sale of goods orservices. Because of the low margin deposits normally required incommodity futures trading, relatively small price movements may resultin substantial losses to the Partnership. While substantial lossescould lead to a decrease in liquidity, no such losses occurred duringthe second quarter of 2006.

The Partnership's capitalconsists of the capital contributions of the partners as increased ordecreased by its investment in the Master, expenses, interest income,redemptions of Redeemable Units and distributions of profits, ifany.

For the six months ended June 30, 2006, Partnership capitalincreased 16.8% from $466,873,381 to $545,351,085. This increasewas attributable to net income from operations of $116,585,452 coupledwith the addition of 9,071.9459 Redeemable Units totaling $20,570,000,partially offset by the redemption of 22,159.7408 Redeemable Unitstotaling $58,677,748. Future redemptions can impact the amount of fundsavailable for investment in the Master in subsequent periods.

The Master's capital consists of the capital contributions ofthe members as increased or decreased by realized and/or unrealizedgains or losses on commodity futures trading, expenses, interestincome, redemptions of Units and distributions of profits, if any.

For the six months ended June 30, 2006, the Master's capitalincreased 16.9% from $954,082,152 to $1,114,862,975. Thisincrease was attributable to net income from operations of$296,525,616, coupled with the addition of 39,778.1299 Units totaling$161,101,037 which was partially offset by the redemption of65,806.3457 Units totaling $278,620,004 and distributions of interesttotaling $18,225,826 to the non-managing members of the Master. Futureredemptions can impact the amount of funds available for investments incommodity contract positions in subsequent periods.

Critical Accounting Policies

Thepreparation of financial statements in conformity with U.S. generallyaccepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets andliabilities, and disclosures of contingent assets and liabilities atthe date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Actual results coulddiffer from these estimates.

All commodity interests of theMaster (including derivative financial instruments and derivativecommodity instruments) are used for trading purposes. The commodityinterests are recorded on trade date and open contracts are recorded inthe statement of financial condition at fair value on the last businessday of the period, which represents market value for those commodityinterests for which market quotations are readily available or othermeasures of fair value deemed appropriate by management of the GeneralPartner for those commodity interests and foreign currencies for whichmarket quotations are not readily available, including dealer quotesfor swaps and certain option contracts. Investments in commodityinterests denominated in foreign currencies are translated into U.S.dollars at the exchange rates prevailing on the last business day ofthe period. Realized gains (losses) and changes in unrealized values oncommodity interests and foreign currencies are recognized in the periodin which the contract is closed or the changes occur and are includedin net gains (losses) on trading of commodity interests.

Thevalue of the Partnership's investment in the Master reflects thePartnership's proportional interest in the members' capitalof the Master. All of the income and expenses and unrealized andrealized gains and losses from the commodity transactions of the Masterare allocated pro rata among the investors at the time of suchdetermination.

Foreign currency contracts are those contractswhere the Partnership agrees to receive or deliver a fixed quantity offoreign currency for an agreed-upon price on an agreed future date.Foreign currency contracts are valued daily, and thePartnership's net equity therein, representing unrealized gain orloss 

16

----

Table of Contents

on the contracts as measured by thedifference between the forward foreign exchange rates at the dates ofentry into the contracts and the forward rates at the reporting dates,is included in the statement of financial condition. Realized gains(losses) and changes in unrealized values on foreign currency contractsare recognized in the period in which the contract is closed or thechanges occur and are included in the statements of income and expensesand partners' capital.

Results ofOperations

During the Partnership's secondquarter of 2006, the Net Asset Value per Redeemable Unit increased4.1% from $2,595.31 to $2,702.08 as compared to an increase of18.1% in the second quarter of 2005. The Partnership experienceda net trading gain before brokerage commissions and related fees in thesecond quarter of 2006 of $29,023,927. Gains were primarilyattributable to the Master's trading of commodity futures inNYMEX Crude Oil, NYMEX Natural Gas, NYMEX Unleaded Gas, NYMEX FreightFutures, NYMEX Energy Swaps and Gasoline and were partially offset bylosses in IPE Gas Oil, NYMEX Heating Oil, IPE Crude Oil and OTC EnergySwaps. The Partnership experienced a net trading gain before brokeragecommissions and related fees in the second quarter of 2005 of$48,088,916. Gains were primarily attributable to the Master'strading of commodity futures in NYMEX Crude Oil, NYMEX Gasoline, NYMEXHeating Oil, IPE Natural Gas, NYMEX Natural Gas, NYMEX Unleaded Gas,and OTC Energy Swaps and were partially offset by losses in IPE CrudeOil, NYMEX Energy Swaps and IPE Gas Oil.

The second quarter 2006was challenging for the Advisor as the energy markets went throughseveral phases in a short period. The two key themes were widefluctuations in crude oil prices with an upward bias and decliningnatural gas prices. In both cases, the risk and reward opportunitieswere on the relative price differences between the near-term andlong-term price curves.

The Advisor had a successful April withpositive returns from both oil and gas positions. Long position inpetroleum were profitable as was a sizable bull spread position in theDec/Red Dec NYMEX crude spread. The run-up in gasoline values in thefirst half of the month also contributed to gas crack and gas/heatpositions. Natural gas positions continued to benefit from longpositions in the long dated part of the price curve. Stepped up shortpositions on the front end of the curve on the brief run of gas pricesabove $8.00/MM BTU also bolstered the bottom line.

May provedmore difficult with a great deal of speculative/fund short interest innatural gas and bearish storage fundamentals which were well discountedinto the market. Natural gas prices stabilized at $6.00/MM BTU with alate May rebound to $6.725/MM BTU which led to losses. On the oil sideof the complex the sharp decline in the Dec 2006 versus Dec 2007 crudecurve spreads also resulted in losses to a smaller degree.

Themonth of June closed out on a positive note following a weak start forthe Advisor's natural gas positions and amid a great deal ofmarket volatility on both sides of the energy complex. Overall marketexposure and risk were reduced during June.

During the sixmonths ended June 30, 2006, the Net Asset Value per Redeemable Unitincreased 24.4% from $2,172.37 to $2,702.08 as compared to anincrease of 48.9% in the same period of 2005. The Partnershipexperienced a net trading gain before brokerage commissions and relatedfees in the six months ended June 30, 2006 of $147,518,243. Gains wereprimarily attributable to the Master's trading of commodityfutures in NYMEX Crude Oil, NYMEX Natural Gas, NYMEX Unleaded Gas,NYMEX Freight Futures, IPE Gas Oil, NYMEX Energy Swaps and Gasoline andwere partially offset by losses in NYMEX Heating Oil, IPE Crude Oil andOTC Energy Swaps. The Partnership experienced a net trading gain beforebrokerage commissions and related fees in the six months ended June 30,2005 of $97,180,305. Gains were primarily attributable to theMaster's trading of commodity futures in NYMEX Crude Oil, NYMEXGasoline, NYMEX Heating Oil, IPE Natural Gas, NYMEX Natural Gas, NYMEXUnleaded Gas, and OTC Energy Swaps and were partially offset by lossesin IPE Crude Oil, NYMEX Energy Swaps and IPE Gas Oil.

Commodityfutures markets are highly volatile. The potential for broad and rapidprice fluctuations increases the risks involved in commodity trading,but also increases the possibility of profit. The 

17

----

Table of Contents

profitability of the Partnership (and theMaster) depends on the Advisor's ability to forecast pricechanges in energy and energy-related commodities. Such price changesare influenced by, among other things, changing supply and demandrelationships, weather, governmental, agricultural, commercial andtrade programs and policies, national and international political andeconomic events and changes in interest rates. To the extent that theAdvisor correctly makes such forecasts, the Partnership (and theMaster) expects to increase capital through operations.

Interest income on 80% of the Partnership'saverage daily equity allocated to it by the Master was earned at a30 -day U.S. Treasury bill rate determined weekly by CGM based onthe average non-competitive yield on 3- month U.S. Treasury billsmaturing in 30 days. CGM may continue to maintain the Master'sassets in cash and/or place all of the Master's assets in 90-dayTreasury bills and pay the Partnership its allocated share of80% of the interest earned on the Treasury bills purchased. CGMwill retain 20% of any interest earned on Treasury billspurchased. Interest income allocated from Master for the three and sixmonths ended June 30, 2006 increased by $3,986,094 and $7,486,751, ascompared to the corresponding periods in 2005. The increase in interestincome is primarily due to higher average net assets and an increase ininterest rates during the three and six months ended June 30, 2006 ascompared to 2005.

Management fees are calculated as a percentageof the Partnership's net asset value as of the end of each monthand are affected by trading performance and redemptions. Managementfees for the three and six months ended June 30, 2006 increased by$1,857,044 and $3,825,706, as compared to the corresponding periods in2005. The increase in management fees is due to an increase in averagenet assets during the three and six months ended June 30, 2006 ascompared to 2005.

Administrative fees are calculated as apercentage of the Partnership's net asset value as of the end ofeach month and are affected by trading performance and redemptions.Administrative fees for the three and six months ended June 30, 2006increased by $464,260 and $956,426, as compared to the correspondingperiods in 2005. The increase in administrative fees is due to anincrease in net assets during the three and six months ended June 30,2006 as compared to 2005.

Special limited partner profit shareallocations (incentive fees) are based on the new trading profitsgenerated by the Advisor at the end of the year, as defined in theadvisory agreements between the Partnership, the General Partner andthe Advisor. The profit share allocation accrued for the three and sixmonths ended June 30, 2006 was $4,532,607 and $26,780,662. The profitshare allocation accrued for the three and six months ended June 30,2005 was $9,025,767 and $18,375,094.

18

----

Table of Contents

Item 3.    Quantitative and QualitativeDisclosures about Market Risk

All of the Partnership'sassets are subject to the risk of trading loss through its investmentin the Master. The Master is a speculative commodity pool. The marketsensitive instruments held by it are acquired for speculative tradingpurposes, and all or substantially all of the Master's assets aresubject to the risk of trading loss. Unlike an operating company, therisk of market sensitive instruments is integral, not incidental, tothe Master's main line of business.

Market movementsresult in frequent changes in the fair value of the Master's openpositions and, consequently, in its earnings and cash flow. TheMaster's market risk is influenced by a wide variety of factors,including the level and volatility of interest rates, exchange rates,equity price levels, the value of financial instruments and contracts,the diversification effects of the Master's open positions andthe liquidity of the markets in which it trades.

The Masterrapidly acquires and liquidates both long and short positions in arange of different markets. Consequently, it is not possible to predicthow a particular future market scenario will affect performance, andthe Master's past performance is not necessarily indicative ofits future results.

Value at Risk is a measure of the maximumamount which the Master could reasonably be expected to lose in a givenmarket sector. However, the inherent uncertainty of the Master'sspeculative trading and the recurrence in the markets traded by theMaster of market movements far exceeding expectations could result inactual trading or non-trading losses far beyond the indicated Value atRisk or the Master's experience to date (i.e., ‘‘riskof ruin’’). In light of the foregoing as well as the risksand uncertainties intrinsic to all future projections, the inclusion ofthe quantification in this section should not be considered toconstitute any assurance or representation that the Master'slosses in any market sector will be limited to Value at Risk or by theMaster's attempts to manage its market risk.

Exchangemaintenance margin requirements have been used by the Master as themeasure of its Value at Risk. Maintenance margin requirements are setby exchanges to equal or exceed the maximum losses reasonably expectedto be incurred in the fair value of any given contract in95%-99% of any one-day interval. Maintenance margin hasbeen used rather than the more generally available initial margin,because initial margin includes a credit risk component, which is notrelevant to Value at Risk.

The following table indicates thetrading Value at Risk associated with the Master's open positionsby market category as of June 30, 2006 and the highest, lowest andaverage value during the three months ended June 30, 2006. All openposition trading risk exposures of the Master have been included incalculating the figures set forth below. As of June 30, 2006, theMaster's total capitalization was $1,114,862,975. There has beenno material change in the trading Value at Risk information previouslydisclosed in the Partnership's Annual Report on Form 10-K for theyear ended December 31, 2005.

June 30,2006

|               |  |  |             |  |             |                         |  |  |                                 |  |       |                  |  |  |                      |  |              |  |  |  |  |  |             |  |  |  |  |  |             |  |
|---------------|--|--|-------------|--|-------------|-------------------------|--|--|---------------------------------|--|-------|------------------|--|--|----------------------|--|--------------|--|--|--|--|--|-------------|--|--|--|--|--|-------------|--|
|          |  |  |        |  |             |                    |  |  | ThreeMonths Ended June 30, 2006 |
| Market Sector |  |  | ValueatRisk |  |             | % ofTotalCapitalization |  |  | HighValue atRisk                |  |       | LowValue at Risk |  |  | AverageValue atRisk* |
| Energy        |  |  |             |  | $14,366,191 |                         |  |  |                                 |  | 1.29% |                  |  |  |                      |  | $149,543,621 |  |  |  |  |  | $14,366,191 |  |  |  |  |  | $53,342,470 |  |
| EnergySwaps   |  |  |             |  | 4,130,046   |                         |  |  |                                 |  | 0.37% |                  |  |  |                      |  | $4,130,046   |  |  |  |  |  | $ 4,130,046 |  |  |  |  |  | $ 4,130,046 |  |
| Total         |  |  |             |  | $18,496,237 |                         |  |  |                                 |  | 1.66% |                  |  |  |                      |  |         |  |  |  |  |  |        |  |  |  |  |  |        |  |
|               |

|  |
|--|
|  |  |
|  |

|  |                                 |
|--|---------------------------------|
|  | *Average monthly Values at Risk |

19

----

Table of Contents

Item 4.    Controls and Procedures

The General Partner of the Partnership, with the participation ofthe General Partner's Chief Executive Officer and Chief FinancialOfficer, has evaluated the effectiveness of the design and operation ofits disclosure controls and procedures (as defined in Rules 13a-15(e)and 15d-15(e) of the Exchange Act) with respect to the Partnership asof the end of the period covered by the report, and, based on thisevaluation, has concluded that these disclosure controls and proceduresare effective. There was no change in the Partnership's internalcontrol over financial reporting during the period covered by thisreport that has materially affected, or is reasonably likely tomaterially affect, the Partnership's internal control overfinancial reporting.

20

----

Table of Contents

PART II. OTHERINFORMATION

Item 1. Legal Proceedings

The followinginformation supplements and amends our discussion set forth under PartI, Item 3 ‘‘Legal Proceedings’’ in our AnnualReport on Form 10-K for the fiscal year ended December 31, 2005 andunder Part II, Item 1, ‘‘Legal Proceedings’’ inthe Partnership's Quarterly Report on Form 10-Q for the quarterended March 31, 2006.

Enron Corp.

 On May24, 2006, the District Court gave final approval to Citigroup'ssettlement of the securities class action (NEWBY, ET AL. V. ENRONCORP., ET AL.).

Research

 On May  12, 2006,the District Court preliminarily approved the class action settlementsin IN RE SALOMON ANALYST LEVEL 3 LITIGATION, IN RE SALOMON ANALYST XOLITIGATION, and IN RE SALOMON ANALYST WILLIAMS LITIGATION.

 On May  18, 2006, the District Court gave finalapproval to the settlement in NORMAN v. SALOMON SMITH BARNEY.

 On June  20, 2006, the District Court certified theplaintiff class in IN RE SALOMON ANALYST METROMEDIA LITIGATION.

 On June  26, 2006, the United States Supreme Courtgranted plaintiffs' petition for a writ of certiorari, vacatedthe opinion of the United States Court of Appeals for the SeventhCircuit in DISHER v. CITIGROUP GLOBAL MARKETS  INC., and thenremanded the case to the Seventh Circuit for further proceedings inlight of the Supreme Court's decision in Kircher v.Putnam Funds Trust.

Adelphia CommunicationsCorporation

 Without admitting any liability, CGMI andnumerous other financial institution defendants have agreed to settleIN RE ADELPHIA COMMUNICATIONS CORPORATION SECURITIES AND DERIVATIVELITIGATION for a total of $250  million, subject to final courtapproval. On June  15, 2006, the court granted its preliminaryapproval of the settlement and set November  10, 2006 for a finalhearing. CGMI's share of the settlement is covered by existingreserves.

Item 1A. Risk Factors

There are no materialchanges from the risk factors set forth under Part I, Item 1A.‘‘Risk Factors’’ in our Annual Report on Form10-K for the fiscal year ended December 31,2005.

21

----

Table of Contents

Item 2.    Unregistered Sales of EquitySecurities and Use of Proceeds

For the three monthsended June 30, 2006 there were additional sales of 334.5276 RedeemableUnits totaling $873,000. The Redeemable Units were issued in relianceupon applicable exemptions from registration under Section 4(2) of theSecurities Act of 1933, as amended, and Section 506 of Regulation Dpromulgated thereunder.

Proceeds from the sale ofadditional Redeemable Units are used in the trading of commodityinterests including futures contracts, options, forwards and swapcontracts.

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

|                                   |  |  |                                     |  |             |                                  |  |  |                                                                                    |  |  |                                                                                                              |  |     |  |  |  |  |  |     |  |
|-----------------------------------|--|--|-------------------------------------|--|-------------|----------------------------------|--|--|------------------------------------------------------------------------------------|--|--|--------------------------------------------------------------------------------------------------------------|--|-----|--|--|--|--|--|-----|--|
| Period                            |  |  | (a)Total Number of Units Purchased* |  |             | (b) Average Price Paidper Unit** |  |  | (c) Total Number of Units Purchased asPart of Publicly Announced Plans or Programs |  |  | (d)Maximum Number (or Approximate Dollar Value) of Units thatMay Yet Be Purchased Under the Plans orPrograms |
| April 1, 2006–April 30,2006 |  |  |                                     |  | 3,698.2489  |                                  |  |  | $2,863.51                                                                          |  |  |                                                                                                              |  | N/A |  |  |  |  |  | N/A |  |
| May1, 2006 –May 31,2006     |  |  |                                     |  | 5,709.7604  |                                  |  |  | $2,609.65                                                                          |  |  |                                                                                                              |  | N/A |  |  |  |  |  | N/A |  |
| June1, 2006 –June 30,2006   |  |  |                                     |  | 6,544.9101  |                                  |  |  | $2,702.08                                                                          |  |  |                                                                                                              |  | N/A |  |  |  |  |  | N/A |  |
|                              |  |  |                                     |  | 15,952.9194 |                                  |  |  | $2,725.08                                                                          |  |  |                                                                                                              |  | N/A |  |  |  |  |  | N/A |  |
|                                   |

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | *Generally, Limited Partners are permitted to redeem their RedeemableUnits as of the end of each month on 10 days' notice to theGeneral Partner. Under certain circumstances, the General Partner cancompel redemption but to date, the General Partner has not exercisedthis right. Purchases of Redeemable Units by the Partnership reflectedin the chart above were made in the ordinary course of thePartnership's business in connection with effecting redemptionsfor Limited Partners. |

|  |                                                                                                                                           |
|--|-------------------------------------------------------------------------------------------------------------------------------------------|
|  | ** Redemptions of RedeemableUnits are effected as of the last day of each month at the Net AssetValue per Redeemable Unit as of that day. |

Item3.    Defaults Upon Senior Securities – None

Item 4.    Submission of Matters to a Vote of SecurityHolders – None

Item 5.    OtherInformation

|        |                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | As of April 3, 2006,AAA Capital Management, Inc. ceased acting as a commodity tradingadvisor for the Fund. The portions of the Fund's assets formerlyallocated to AAA Capital Management, Inc. were reallocated to AAACapital Management Advisors, Ltd. effective  April 3, 2006. Acopy of the management agreement between AAA Capital ManagementAdvisors, Ltd. and the Fund is attached to this Form 10-Q as anexhibit. |

Item 6.    Exhibits

|        |                                                                                                                                                                                                                 |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | The exhibits required to be filed by Item 601of Regulation S-K are incorporated herein by reference to the exhibitindex of the Partnership's Annual Report on Form 10-K for theperiod ended December  31, 2005. |

Exhibit– 31.1 – Rule 13a-14(a)/15d-14(a) Certification(Certification of President and Director).

Exhibit – 31.2 – Rule13a-14(a)/15d-14(a) Certification (Certification of Chief FinancialOfficer and Director).

Exhibit – 32.1– Section 1350 Certification (Certification of President andDirector).

Exhibit – 32.2 –Section 1350 Certifications (Certification of Chief Financial Officerand Director).

|        |                                                                                                                                                   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Exhibit – 33– Management Agreement among the Partnership, the General Partnerand AAA Capital Management Advisors, Ltd. (filedherein). |

22

----

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.

SALOMON SMITH BARNEY AAA ENERGY FUND L.P.II

|        |  |  |                                                              |
|--------|--|--|--------------------------------------------------------------|
| By:    |  |  | CitigroupManaged Futures LLC                                 |
|   |  |  | (General Partner)                                            |
| By:    |  |  | /s/David J. Vogel                                            |
|   |  |  | David J. Vogel Presidentand Director                         |
| Date:  |  |  | August14, 2006                                               |
| By:    |  |  | /s/Daniel R. McAuliffe, Jr.                                  |
|   |  |  | Daniel R. McAuliffe, Jr.Chief Financial Officer and Director |
| Date:  |  |  | August14, 2006                                               |
|        |

23

----