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EX-31.1 - EX-31.1 - CAMPBELL ALTERNATIVE ASSET TRUST | w77914exv31w1.htm |
EX-31.2 - EX-31.2 - CAMPBELL ALTERNATIVE ASSET TRUST | w77914exv31w2.htm |
EX-32.1 - EX-32.1 - CAMPBELL ALTERNATIVE ASSET TRUST | w77914exv32w1.htm |
EX-32.2 - EX-32.2 - CAMPBELL ALTERNATIVE ASSET TRUST | w77914exv32w2.htm |
Table of Contents
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One) |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] |
For the Fiscal Year Ended December 31, 2009
Commission File Number 0-33311 and 2-84126
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] |
For
the transition period from
to
CAMPBELL ALTERNATIVE ASSET TRUST
(Exact name of Registrant as specified in its charter)
DELAWARE | 52-2238521 | |
(State or other jurisdiction of | (IRS Employer Identification Number) | |
incorporation or organization) |
2850
Quarry Lake Drive, Baltimore, Maryland 21209
Registrants telephone number, including area code:(410) 413-2600
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Units of Beneficial Interest
(Title of Class)
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes o No þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of the Registrants knowledge,
in definitive proxy or information statements incorporated by reference in Part II of this Form
10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definition of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerate filer o | Accelerated filer o | Non-accelerated filer o | Smaller Reporting Company þ | |||
(Do not check if a Smaller Reporting Company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).
Yes o No þ
The Registrant has no voting stock. As of December 31, 2009 there were 18,862.150 Units of
Beneficial Interest issued and outstanding.
Total number of pages 61. Consecutive page numbers on which exhibits commence: 5.
TABLE OF CONTENTS
Table of Contents
PART I
Item 1. | Business |
Overview
Campbell Alternative Asset Trust (the Registrant or the Trust) is a Trust which was formed
on May 3, 2000 under the Delaware Business Trust Act. The Registrant operates as a commodity
investment pool, whose purpose is to trade speculatively in the U.S. and international futures,
forward and options markets. Specifically, the Trust trades a portfolio primarily focused on
financial futures, which are instruments designed to hedge or speculate on changes in interest
rates, currency exchange rates or stock index values. A secondary emphasis is on metals, energy
and agriculture values.
The trustee of the Trust is U.S. Bank National Association (the Trustee) (formerly Wachovia
Trust Company, National Association). The managing owner and trading advisor of the Registrant is
Campbell & Company, Inc. (Campbell & Company). In addition to making all trading decisions in
its capacity as trading advisor, Campbell & Company conducts and manages all aspects of the
business and administration of the Registrant in its role as managing owner. Campbell & Company
uses a systematic trading approach combined with quantitative portfolio management analysis and
seeks to identify and profit from price movements in the futures, forward and option markets.
Multiple trading models are utilized across most markets traded. Each model analyzes market
movements and internal market and price configurations in order to generate signals to be executed
through a variety of execution platforms.
As a registrant with the Securities and Exchange Commission, the Trust is subject to the
regulatory requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934.
As a commodity investment pool, the Trust is subject to the provisions of the Commodity Exchange
Act, regulations of the Commodity Futures Trading Commission, an agency of the United States (U.S.)
government which regulates most aspects of the commodity futures industry; rules of the National
Futures Association, an industry self-regulatory organization; and the requirements of the various
commodity exchanges where the Trust executes transactions. Additionally, the Trust is subject to
the requirements of futures commission merchants (brokers) and interbank market makers through
which the Trust trades.
The Registrant originally filed a registration statement with the U.S. Securities and Exchange
Commission for the sale of a minimum of $8,000,000 and a maximum of $50,000,000 in Units of
Beneficial Interest at $1,000 each, which registration statement was effective on May 15, 2001.
The Trust has since filed additional registration statements with the U.S. Securities and Exchange
Commission to bring the sum of existing and offered Units of Beneficial Interest to a maximum of
approximately $250,000,000 through March 2003. The Unit selling price during the initial offering
period, which lasted for approximately 130 days and ended on September 30, 2001, was $1,000. Since
September 30, 2001, Units of Beneficial Interest of the Trust have been offered on an ongoing basis
during the Trusts continuing offering period. During the continuing offering period,
subscriptions are accepted monthly and proceeds are transferred to bank and brokerage accounts for
trading purposes. The Unit selling price during the continuing offering period is the net asset
value per unit as of the last business day of the month in which the subscription is accepted.
Units were offered to the public until Campbell & Company terminated the continuing offering
to the public effective October 29, 2002. The current offering is only available to the Campbell &
Company, Inc. 401 (k) Plan.
A total of $54,331,035 was raised in the initial and continuing offering periods through
December 31, 2009.
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Under the Amended and Restated Declaration of Trust and Trust Agreement, the Trustee has
delegated to Campbell & Company the exclusive management of all aspects of the business and
administration of the Registrant.
The Registrant will be terminated and dissolved promptly thereafter upon the happening of the
earlier of: (a) the expiration of the Registrants stated term of December 31, 2030; (b) an
election to dissolve the Registrant at any time by Unitholders owning more than 50% of the Units
then outstanding; (c) the withdrawal of Campbell & Company unless one or more new managing owners
have been elected or appointed pursuant to the Amended and Restated Declaration of Trust and Trust
Agreement; (d) a decline in the aggregate net assets
of the Trust to less than $500,000 (e) any event which shall make unlawful the continuing existence
of the Registrant or (f) the Registrant is dissolved by operation of law.
Regulation
Under the Commodity Exchange Act, as amended (the Act), commodity exchanges and commodity
futures trading are subject to regulation by the Commodity Futures Trading Commission (the
CFTC). The National Futures Association (the NFA), a registered futures association under the
Act, is the only non-exchange self-regulatory organization for commodity industry professionals.
The CFTC has delegated to the NFA responsibility for the registration of commodity trading
advisors, commodity pool operators, futures commission merchants, introducing brokers and
their respective associated persons and floor brokers. The Act requires commodity pool
operators, and commodity trading advisors, such as Campbell & Company, and commodity brokers or
futures commission merchants, such as the Registrants commodity broker, to be registered and to
comply with various reporting and recordkeeping requirements. Campbell & Company and the
Registrants commodity broker are members of the NFA. The CFTC may suspend a commodity pool
operators or commodity trading advisors registration if it finds that its trading practices tend
to disrupt orderly market conditions, or as the result of violations of the Commodity Exchange Act
or rules and regulations promulgated thereunder. In the event Campbell & Companys registration as
a commodity pool operator or commodity trading advisor were terminated or suspended, Campbell &
Company would be unable to continue to manage the business of the Registrant. Should Campbell &
Companys registration be suspended, termination of the Registrant might result.
In addition to such registration requirements, the CFTC and certain commodity exchanges have
established limits on the maximum net long and net short positions which any person, including the
Registrant, may hold or control in particular commodities. Most exchanges also limit the maximum
changes in futures contract prices that may occur during a single trading day. The Registrant also
trades in dealer markets for forward and option contracts, which are not regulated by the CFTC.
Federal and state banking authorities also do not regulate forward trading or forward dealers. In
addition, the Registrant trades on foreign commodity exchanges, which are not subject to regulation
by any United States government agency.
The CFTC has recently proposed the imposition of position limits on energy futures contracts
such as crude oil, heating oil, natural gas, gasoline and other energy products. We do not
anticipate these limits, if accepted, will affect the Trusts ability to trade, but it is possible
that they may in the future if either or both Trusts assets increase dramatically.
It is impossible to predict what additional interim or permanent governmental restrictions may
be imposed on the markets and/or the effect of such restrictions on the trading strategies.
However, the trading advisor believes that there is a high likelihood of significantly increased
regulation of the financial markets, and that such increased regulation could be detrimental to the
Trust.
4
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Operations
The Registrant conducts its business in one industry segment, the speculative trading of
futures, forward and option contracts. The Registrant is a market participant in the managed
futures industry. The managed futures industry has grown substantially in the previous ten years.
Market participants include all types of investors, such as corporations, employee benefit plans,
individuals and foreign investors. Service providers of the managed futures industry include (a)
pool operators, which conduct and manage all aspects of trading funds (except trading decisions),
such as the Registrant, (b) trading advisors, which make the specific trading decisions, and (c)
commodity brokers, which execute and clear the trades pursuant to the instructions of the trading
advisor. The Registrant has no employees, and does not engage in the sale of goods or services.
The Registrant engages in financial instrument trading in approximately 50 financial
instrument contracts on domestic and international markets. All of the Trusts assets are
currently allocated to the Financial, Metal & Energy Large Portfolio (FME Large). The FME Large
Portfolio seeks exposure to financial markets, such as interest rates, foreign exchange and stock
indices, as well as metals, energy products, soft commodities and other commodities. The FME Large
Portfolio seeks exposure to these markets by following signals generated by a series of systematic
computer models. The FME Large Portfolio employs a broad spectrum of models including traditional
and factor-based trend following models, as well as a number of macroeconomic-based models. As of
December 2009, the percentage of component risk for each major sector was as follows: 50% to
currencies, 20% to commodity products, 18% to stock indices and 12% to interest rates. The
contracts traded by the Registrant will fluctuate from time to time.
The Registrant may, in the future, experience increased competition for the futures and other
contracts in which it trades. Campbell & Company will recommend similar or identical trades for
other accounts under its management. Such competition may also increase due to the widespread
utilization of computerized methods similar to those used by Campbell & Company.
During 2009, The Trust appointed Wilmington Trust Investment Management LLC, a wholly owned
subsidiary of Wilmington Trust Corporation (the Cash Manager) as a cash manager under the
non-custody Investment Advisory Agreement dated July 8, 2009, to manage and control the liquid
assets of the Trust. The Cash Manager is registered as an investment adviser with the Securities
and Exchange Commission of the United States under the Investment Advisers Act of 1940. The Cash
Manager specialized in investments which are predominately short-term in maturity and high grade,
high quality in nature with particular emphasis on U.S. Treasury securities and U.S. Government
Agencies issues.
The Trust opened a custodial account at The Northern Trust Company (the Custodian), and has
granted the Cash Manager authority to make certain investments on behalf of the Trust provided such
investments are consistent with the investment guidelines created by the trading advisory to the
Trust. Such investments include, but are not limited to, U.S. Treasury securities, securities
issued by U.S. Government Agencies, high quality money-market securities and repurchase agreements.
All securities purchased by the Cash Manager on behalf of the Trust or other liquid funds of the
Trust will be held in its custody account at the Custodian. The Cash Manager will have no
beneficial or other interest in the securities and cash in such a custody account.
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Charges
The following is a description of the current charges to the Trust.
RECIPIENT | NATURE OF PAYMENT | AMOUNT OF PAYMENT | ||
Campbell & Company
|
Brokerage Fee | The Trust will pay Campbell & Company a brokerage fee of up to 2.85% of the Trusts month-end net asset value per annum (prior to accruals for such brokerage fee or performance fees), irrespective of profitability, of which up to 0.35% is paid to the selling agents. Campbell & Company retains the remaining 2.50%. | ||
Campbell & Company
|
Performance Fee | Campbell & Company will be paid a quarterly performance fee equal to 20% of aggregate cumulative appreciation in the Trusts net asset value per unit, if any, excluding interest income and as adjusted for subscriptions and redemptions. | ||
Campbell & Company
|
Offering Costs | Reimbursement of the Trusts offering costs are charged at a monthly rate of 1/12 of 0.9% of the Trusts month-end net asset value. Campbell & Company pays the Trusts offering costs and is subsequently reimbursed by the Trust. | ||
Cash Manager and
Custodian Fees
|
Cash Management and Custody fees | Cash management and custodial fees for the Trusts non-margin assets is estimated at 0.10% per annum based on the percentage of assets under management by the cash managers. |
Other Information
The Trust files quarterly, annual and current reports with the Securities and Exchange
Commission (SEC). These reports are available to read and copy at the SECs Public Reference
Facilities in Washington, D.C. at 100 F Street, N.E., Washington, D.C. 20549. Please call the
SECs toll free number, 1-800-SEC-0330, for further information. The Trust does not maintain a
website where these reports are posted. However, the Trusts filings are posted on the SECs
website at http://www.sec.gov.
Item 1A. | Risk Factors |
The following is a discussion of the risk factors applicable to the Registrant.
Market Risks
You Could Possibly Lose Your Total Investment in the Trust
Futures, forward and option contracts have a high degree of price variability and are subject
to occasional rapid and substantial changes. Consequently, you could lose all or a substantial
amount of your investment in the Trust.
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The Trust is Highly Leveraged
Because the amount of margin funds necessary to be deposited in order to enter into a futures,
forward or option contract position is typically about 2% to 10% of the total value of the
contract, Campbell & Company is able to hold positions in the Trusts account with face values
equal to several times the Trusts net assets. The ratio of margin to equity is typically 10% to
30%. As a result of this leveraging, even a small movement in the price of a contract can cause
major losses.
Changes In Financing Policies or the Imposition of Other Credit Limitations or Restrictions Could
Compel the Trust to Liquidate Positions at Disadvantageous Prices
The Trust may utilize and may depend on the availability of credit in order to trade their
portfolios. There can be no assurance that the Trust will be able to maintain adequate financing
arrangements under all market circumstances. As a general matter, the dealers that provide
financing to the Trust can apply essentially discretionary margin, haircut, financing security and
collateral valuation policies. Changes by dealers in such financing policies, or the imposition of
other credit limitations or restrictions, whether due to market circumstances or governmental,
regulatory or judicial action, may result in large margin calls, loss of financing, forced
liquidation of positions at disadvantageous prices, termination of swap and repurchase agreements
and cross-defaults to agreements with other dealers. Any such adverse effects may be exacerbated in
the event that such limitations or restrictions are imposed suddenly and/or by multiple market
participants at or about the same time. The imposition of such limitations or restrictions could
compel the Trust to liquidate all or part of
their portfolios at disadvantageous prices. In recent months, banks and dealers have substantially
curtailed financing activities and increased collateral requirements, forcing many hedge funds to
liquidate.
Your Investment Could be Illiquid
Futures, forward and option positions cannot always be liquidated at the desired price; this
can occur when the market is thinly traded (i.e., a relatively small volume of buy and sell orders)
or in the event of disrupted markets and other extraordinary events in which historical pricing
relationships become materially distorted. The financing available to the Trust from banks, dealers
and other counterparties is likely to be restricted in disrupted markets. The Trust may incur
material losses and the risk of loss from pricing distortions is compounded by the fact that in
disrupted markets many positions become illiquid making it difficult or impossible to close out
positions against which the markets are moving. For example, in 1994, 1998 and again from
20072009 (it appears at this time that the 2007-2009 liquidity crisis has eased, however the
potential of future liquidity issues continues to be a concern) there was a sudden restriction of
credit by the dealer community that resulted in forced liquidations and major losses for a number
of private investment funds. Campbell & Company was not forced to liquidate positions during the
1994, 1998 or 20072009 liquidity crises. However, it is possible that in the future, in such
situations, Campbell & Company may be unable for some time to liquidate certain unprofitable
positions thereby increasing the loss to the Trust from the trade. Additionally, foreign
governments may take or be subject to political actions which disrupt the markets in their currency
or major exports, such as energy products or metals. Market disruptions caused by unexpected
political, military and terrorist events may from time to time cause dramatic losses for the Trust,
and such events can result in otherwise historically low-risk strategies performing with
unprecedented volatility and risk. Any of these actions could also result in losses to the Trust. A
subscription for Units should be considered only by persons financially able to maintain their
investment and who can afford the loss of all or substantially all of such investment.
Also, there is no secondary market for the units and none is expected to develop. While the
units have redemption rights, there are restrictions. For example, redemptions can occur only at
the end of a month. If a large number of redemption requests were to be received at one time, the
Trust might have to liquidate positions to satisfy the requests. Such a forced liquidation could
adversely affect the Trust and consequently your investment.
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Further, most U.S. futures exchanges have established daily price fluctuation limits which
preclude the execution of trades at prices outside of the limit, and, from time to time, the CFTC
or the exchanges may suspend trading in market disruption circumstances. In these cases, it is
possible that Campbell & Company, as trading advisor, could be required to maintain a losing
position that it otherwise would exit and incur significant losses or be unable to establish a
position and miss a profit opportunity.
Transfers of interest in the units are subject to limitations, such as 30 days advance notice
of any intent to transfer. Also, Campbell & Company may deny a request to transfer if it determines
that the transfer may result in adverse legal or tax consequences for the Trust.
Forward and Option Transactions are Over-the-Counter, are Not Regulated and are Subject to Credit
Risk
The Trust trades forward and option contracts in foreign currencies. Such contracts are
typically traded over-the-counter through a dealer market, which is dominated by major money center
and investment banks, and are not regulated by the CFTC. Thus, you do not receive the protection of
CFTC regulation or the statutory scheme of the Commodity Exchange Act in connection with this
trading activity by the Trust. The market for forward and option contracts relies upon the
integrity of market participants in lieu of the additional regulation imposed by the CFTC on
participants in the futures markets. This regulation includes, for example, trading practices and
other customer protection requirements, and minimum financial and trade reporting requirements. The
absence of regulation could expose the Trust in certain circumstances to significant losses in the
event of trading abuses or financial failure by participants in the forward and option markets
which it might
otherwise have avoided. Also, the Trust faces the risk of nonperformance by its counterparties
to forward and option contracts, and such nonperformance may cause some or all of its gains to
remain unrealized.
The Trust has a substantial portion of its assets on deposit with financial institutions. In
the event of a financial institutions insolvency, recovery of the Trusts assets on deposit may be
limited to account insurance or other protection afforded such deposits, if any. Campbell & Company
seeks to minimize credit risk primarily by depositing and maintaining the Trusts assets at
financial institutions and brokers that Campbell & Company believes to be creditworthy.
Options on Futures and Over-the-Counter Contracts are Speculative and Highly Leveraged
Options on futures and over-the-counter contracts may be used by the Trust to generate premium
income or capital gains. The buyer of an option risks losing the entire purchase price (the premium
as well as any commissions and fees) of the option. The writer (seller) of an option risks losing
the difference between the premium received for the option and the price of the commodity, futures
or forward contract underlying the option which the writer must purchase or deliver upon exercise
of the option (which losses can be unlimited). Specific market movements of the commodity, futures
or forward contracts underlying an option cannot accurately be predicted. Successful options
trading requires an accurate assessment of near-term volatility in the underlying instruments, as
that volatility is immediately reflected in the price of the option. Correct assessment of market
volatility can therefore be of much greater significance in trading options than it is in trading
futures and forwards, where volatility may not have as great an effect on price.
An Investment in the Trust May Not Diversify an Overall Portfolio
Historically, alternative investments such as managed futures funds have been generally
non-correlated to the performance of other asset classes such as stocks and bonds. Non-correlation
means that there is no statistically valid relationship between the past performance of futures,
forward and option contracts, on the one hand, and stocks or bonds, on the other hand.
Non-correlation should not be confused with negative correlation, where the performance of two
asset classes would be exactly opposite.
Because of this non-correlation, the Trust cannot be expected to be automatically profitable
during unfavorable periods for the stock market or vice versa. The futures, forward and option
markets are fundamentally different from the securities markets in that for every gain made in
futures, forward or option transaction, the opposing side of that transaction will have an equal
and off-setting loss.
If the Trust does not
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perform in a manner non-correlated with the general
financial markets or does not perform successfully, you will obtain no diversification benefits by
investing in the units and the Trust may have no gains to offset your losses from other
investments.
The Current Markets are Subject to Market Disruptions and Governmental Intervention That May Be a
Detriment to Your Investment
The global financial markets are undergoing pervasive and fundamental disruptions which have
led to extensive and unprecedented governmental intervention. Such intervention has in certain
cases been implemented on an emergency basis, suddenly and substantially eliminating market
participants ability to continue to implement certain strategies or manage the risk of their
outstanding positions. In addition, as one would expect given the complexities of the financial
markets and the limited time frame within which governments have felt compelled to take action,
these interventions have typically been unclear in scope and application, resulting in confusion
and uncertainty which in itself has been materially detrimental to the efficient functioning of the
markets as well as to previously successful investment strategies. Confusion and uncertainty have
also resulted from the apparent inconsistency which has characterized recent governmental actions.
For example, while the Federal Reserve assisted or otherwise intervened with respect to certain
distressed financial institutions, it refused to do so for others. Such inconsistency has caused
both severe losses for a number of market participants, who assumed either no intervention or
intervention consistent with past precedent, and contributed to the general uncertainty and
resulting illiquidity of the markets.
The U.S. bailout of financial institutions is the largest governmental intervention in the
history of the U.S. financial markets. Moreover, the form of the bailout continues to shift as
the impact of the current financial crisis is further analyzed. For example, the Troubled Asset
Relief Program was initially designed to purchase illiquid mortgage-backed securities. Funds were
then used to inject capital directly into certain consumer-oriented financial companies. In further
response to this crisis, the U.S. government enacted the Emergency Economic Stabilization Act (the
EESA), the largest governmental intervention in the history of the U.S. financial markets. In
connection with the EESA, it seems highly likely that the U.S. Congress will require that new
market restrictions be applied to the U.S. financial markets, restrictions which may have a
material adverse impact on both the future competitiveness of these markets as well as the profit
potential of the Trust. Regulations in other jurisdictions also appear likely to take similar
action.
The CFTC has recently proposed the imposition of position limits on energy futures contracts
such as crude oil, heating oil, natural gas, gasoline and other energy products. We do not
anticipate these limits, if accepted, will affect the Trusts ability to trade, but it is possible
that they may in the future if either or both Trusts assets increase dramatically.
It is impossible to predict what additional interim or permanent governmental restrictions may
be imposed on the markets and/or effect of such restrictions on the trading managers strategies.
However, the trading advisor believes that there is a high likelihood of significantly increased
regulation of the financial markets, and that such increased regulation could be materially
detrimental to the Trust.
The Trust is a Party to Financial Instruments With Elements of Off-Balance Sheet Risk, Which Causes
the Trust to Lose All of Its Assets
The term off-balance sheet risk refers to an unrecorded potential liability that, even
though it does not appear on the balance sheet, may result in future obligation or loss. The Trust
trades in futures, forward and options contracts and are therefore a party to financial instruments
with elements of off-balance sheet market and credit risk. In entering into these contracts there
exists a risk to the Trust, market risk, that such contracts may be significantly influenced by
market conditions, such as interest rate volatility, resulting in such contracts being less
valuable. If the markets should move against all of the futures interests positions of the Trust at
the same time, and if the Trusts trading advisor was unable to offset futures interests positions
of the Trust, the Trust could lose
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all of its assets and the limited partners would realize a 100%
loss. Campbell & Company, Inc., the managing owner (who also acts as trading advisor), minimizes
market risk through real-time monitoring of open positions, diversification of the portfolio and
maintenance of a margin-to-equity ratio that rarely exceeds 30%; however, these precautions may not
be effective in limiting the risk of loss.
Trading Risks
There are Disadvantages to Making Trading Decisions Based Primarily on Technical Market Data
The trading systems used by the managing operator for the Trust are primarily technical. The
profitability of trading under these systems depends on, among other things, the occurrence of
significant price movements, up or down, in futures, forward and option prices. Such price
movements may not develop; there have been periods in the past without such price movements.
The likelihood of the units being profitable could be materially diminished during periods
when events external to the markets themselves have an important impact on prices. During such
periods, Campbell & Companys historic price analysis could establish positions on the wrong side
of the price movements caused by such events.
Increased Competition from Other Trend-Following Traders Could Reduce Campbell & Companys
Profitability
There has been a dramatic increase in the volume of assets managed by trend-following trading
systems like some of the Campbell & Company programs. For example, in 1980, the assets in the
managed futures industry were estimated at approximately $300 million; by the end of 2009, this
estimate had risen to approximately $212.6 billion. Increased trading competition from other
trend-following traders could operate to the detriment of the Trust. It may become more difficult
for the Trust to implement its trading strategy if other trading advisors using technical systems
are, at the same time, also attempting to initiate or liquidate futures, forward or option
positions, or otherwise alter trading patterns.
Limits Imposed by Futures Exchanges or Other Regulatory Organizations, Such As Speculative Position
Limits and Daily Price Fluctuation Limits, May Alter Trading Decisions for the Trust
The CFTC and U.S. futures exchanges have established limits, known as speculative position
limits, on the maximum net long or net short positions that any person may hold or control in
certain futures and option on futures contracts. Most U.S. futures exchanges also have established
daily price fluctuation limits which preclude the execution of trades at prices outside of the
limit. Contract prices have occasionally moved the daily limit for several consecutive days with
little or no trading. All accounts controlled by Campbell & Company are combined for speculative
position limit purposes. If positions in those accounts were to approach the level of the
particular speculative position limit, or if prices were to approach the level of the daily limit,
these limits could cause a modification of Campbell & Companys trading decisions for the Trust or
force the liquidation of certain futures or options on futures positions. Either of these actions
may not be in the best interest of the investors. From time to time, the CFTC or the exchanges may
suspend trading in market disruption circumstances. In these cases, it is possible that Campbell &
Company, as trading advisor, could be required to maintain a losing position that it otherwise
would exit and incur significant losses or be unable to establish a position and miss a profit
opportunity.
Increase in Assets Under Management May Make Profitable Trading More Difficult
Campbell & Companys current equity under management has increased substantially since the
inception of the Trust. The managing owner has not agreed to limit the amount of additional equity
which it may manage The more equity Campbell & Company manages, the more difficult it may be for
Campbell & Company
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to trade profitably because of the difficulty of trading larger positions
without adversely affecting prices and performance. Accordingly, such increases in equity under
management may require Campbell & Company to modify its trading decisions for the Trust which could
have a detrimental effect on your investment. Such considerations may also cause Campbell & Company
to eliminate smaller markets from consideration for inclusion in its FME Large Portfolio, reducing
the range of markets in which trading opportunities may be pursued. Campbell & Company reserves the
right to make distributions of profits to unitholders in an effort to control asset growth. In
addition, Campbell & Company may have an incentive to favor other accounts because the compensation
received from some other accounts does exceed the compensation it receives from managing the
Trusts account. Because records with respect to other accounts are not accessible to unitholders
in the Trust, the unitholders will not be able to determine if Campbell & Company is favoring other
accounts.
Investors Will Not be Able to View the Trusts Holdings on a Daily Basis, Which May Result in
Unanticipated Losses
The managing owner makes the Trusts trading decisions. While the managing operator receives
daily trade confirmations from the futures broker and over-the-counter counterparty, the Trusts
trading results are reported to unitholders monthly. Accordingly, an investment in the Trust does
not offer unitholders the same transparency, i.e., an ability to review all investment positions
daily, that a personal trading account offers. As a result, you may suffer unanticipated losses due
to the Trusts holdings.
Tax Risks
Investors are Taxed Based on Their Share of the Trusts Profits
Investors are taxed each year on their share of the Trusts profits, if any, irrespective of
whether they redeem any units or receive any cash distribution from the Trust. The managing owner
has the authority to make such distributions at any time in its sole discretion.
Tax Could be Due from Investors on Their Share of the Trusts Ordinary Income Despite Overall
Losses
Investors may be required to pay tax on their allocable share of the Trusts ordinary income,
which in the case of the Trust is the Trusts interest income, gain on some foreign futures
contracts, and certain other investment assets, even though the Trust incurs overall losses.
Capital losses of individual taxpayers can be used only to offset capital gains and, in the case of
non-corporate investors, $3,000 of ordinary income each year. Consequently, if an individual
investor were allocated $5,000 of ordinary income and $10,000 of capital losses, the investor would
owe tax on $2,000 of ordinary income even though the investor would have a $5,000 economic loss for
the year. The remaining $7,000 capital loss could be used in subsequent years to offset capital
gain and ordinary income, but subject to the same annual limitation on its deductibility against
ordinary income.
There Could be a Limit on the Deductibility of Management and Performance Fees
Although the Trust treats the management and performance fees paid to the managing owner as
ordinary and necessary business expenses, upon an IRS audit, the Trust may be required to treat
such fees as investment advisory fees if the Trusts trading activities did not constitute a
trade or business for tax purposes. Investment advisory fees are subject to substantial
restrictions on deductibility for federal income tax purposes. Such treatment would likely create
or increase the tax liability of non-corporate unitholders.
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Other Risks
Fees and Commissions are Charged Regardless of Profitability and are Subject to Change
The Trust is subject to substantial charges payable irrespective of profitability, in addition
to performance fees which are payable based on the Trusts profitability. Included in these charges
are brokerage fees and operating expenses. On the Trusts forward and option trading, bid-ask
spreads and prime brokerage fees are incorporated into the pricing of forward and option contracts
by the counterparties in addition to the brokerage fees paid by the Trust. It is not possible to
quantify the bid-ask spreads paid by the Trust because the Trust cannot determine the profit its
counterparty is making on the forward and option transactions. Such spreads can at times be
significant. In addition, while currently not contemplated, the Trust Agreement allows for changes to be made to
the brokerage fee and performance fee upon sixty days notice to the unitholders.
The Trusts Service Providers Could Fail, Which May Result in Losses to the Trust
The institutions, including, but not limited to, the futures broker the over-the-counter
counterparty, the Cash Manager and the Custodian, with which the Trust trades or invests may
encounter financial difficulties that impair the operational capabilities or the capital position
of the Trust. The futures broker is generally required by U.S. law to segregate all funds received
from such brokers customers from such brokers proprietary assets. If the futures broker did not
do so to the full extent required by law, the assets of the Trust might not be fully protected in
the event of the bankruptcy of the futures broker. Furthermore, in the event of the futures
brokers bankruptcy, the Trust could be limited to recovering only a pro rata share of all
available funds segregated on behalf of the futures brokers combined customer accounts, even
though certain property specifically traceable to the Trust (for example, Treasury bills deposited
by the Trust with the futures broker as margin) was held by the futures broker. Furthermore,
dealers in forward contracts are not regulated by the Commodity Exchange Act and are not obligated
to segregate customer assets. The futures brokers have been the subject of regulatory and private causes of actions.
The recent events surrounding the bankruptcies or similar proceedings with respect to various
parties have demonstrated the risk that assets that a trader such as the Trust believed were
custodial under statutory and regulatory protections could be subject to various risks, and
apparently significant losses incurred by many hedge funds in relation to the bankruptcy and/or
administration of Lehman Brothers Holdings and its affiliates illustrate the risks incurred in
other derivatives trading and brokerage arrangements. Although Campbell & Company had no assets
held at Lehman Brothers or its affiliates at the time of its bankruptcy, and accounts held by
Campbell & Company suffered no losses as a result of the Lehman Brothers bankruptcy, there is no
guarantee that Campbell & Company traded assets would be immune from such losses if a similar
scenario were to occur in the future.
Investors Must Not Rely on the Past Performance of Either Campbell & Company or the Trust in
Deciding Whether to Buy Units
The future performance of the Trust is not predictable, and no assurance can be given that the
Trust will perform successfully in the future in as much as past performance is not necessarily
indicative of future results. Additionally, the markets in which the Trust operates have been
severely disrupted over the past year or more, so results observed in earlier periods may have
little relevance to the results observable in the current environment.
Conflicts of Interest Exist in the Structure and Operation of the Trust
Campbell & Company has not established any formal procedures to resolve the following
conflicts of interest. Consequently, there is no independent control over how Campbell & Company
resolves these conflicts which can be relied upon by investors as ensuring that the Trust is
treated equitably with other Campbell & Company clients.
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Campbell & Company has a conflict of interest because it acts as the managing owner and sole
trading advisor for the Trust.
Since Campbell & Company acts as both trading advisor and managing owner for the Trust, it is
very unlikely that its advisory contract will be terminated by the Trust. The fees payable to
Campbell & Company were established by it and were not the subject of arms-length negotiation.
These fees consist of a brokerage fee of up to 2.85% (of which 2.5% is retained) and a 20%
performance fee. Campbell & Company, as managing owner, determines whether or not distributions are
made and it receives increased fees to the extent distributions are not made. Campbell & Company
has the authority to make such distributions at any time in its sole discretion.
Subject to the limit on selling agent compensation, selling agents will be entitled to ongoing
compensation as a result of their clients remaining in the Trust, so a conflict exists between the
selling agents interest in maximizing compensation and in advising its clients to make investment
decisions in the clients best interests.
There are No Independent Experts Representing Investors
Campbell & Company has consulted with counsel, accountants and other experts regarding the
formation and operation of the Trust. No counsel has been appointed to represent the unitholders in
connection with the offering of the units. Accordingly, each prospective investor should consult
his own legal, tax and financial advisers regarding the desirability of an investment in the Trust.
The Trust Places Significant Reliance on Campbell & Company and the Incapacity of its Principals
Could Adversely Affect the Trust
Unitholders are not entitled to participate in the management of the Trust or the conduct of
its business. Rather, the Trust is wholly dependent upon the services of the managing owner. There can be no
assurance that such services will be available for any length of time following the term of the
Advisory Agreement. Furthermore, the incapacity of the managing owners principals could have a
material and adverse effect on the managing owners ability to discharge its obligations under the
Advisory Agreement. However, there is no individual principal at Campbell & Company whose absence
would result in a material adverse effect on Campbell & Companys ability to adequately carry out
its advisory responsibilities.
The Trust Could Terminate Before You Achieve Your Investment Objective Causing Potential Loss of
Your Investment or Disrupting Your Investment Portfolio Allocation
The managing owner may withdraw from the Trust upon 120 days notice, which would cause the
Trust to terminate. Other events, such as a long-term substantial loss suffered by the Trust, could
also cause the Trust to terminate before the expiration of its stated term. This could cause you to
liquidate your investments and disrupt the overall maturity and timing of your investment
portfolio. If the registrations with the CFTC or memberships in the National Futures Association of
Campbell & Company or the futures broker were revoked or suspended, such entity would no longer be
able to provide services to the Trust.
The Trust Is Not A Regulated Investment Company and Therefore Is Subject to Different Protections
Than a Regulated Investment Company
Although the Trust and Campbell & Company are subject to regulation by the CFTC, the Trust is
not an investment company subject to the Investment Company Act of 1940 and Campbell & Company is
not registered as an investment adviser under the Investment Advisers Act of 1940. Accordingly, you
do not have the protections afforded by those statutes which, for example, requires investment
companies to have a majority of disinterested directors and regulates the relationship between the
adviser and the investment company.
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Forwards, Options, Swaps, Hybrids and Other Derivatives are Not Subject to CFTC Regulation;
Therefore, the Trust Will Not Receive the Same Protections on These Transactions
The Trust trades foreign exchange contracts and options in the interbank market. In the
future, the Trust may also trade swap agreements, hybrid instruments and other off-exchange
contracts. Swap agreements involve trading income streams such as fixed rate for floating rate
interest. Hybrids are instruments which combine features of a security with those of a futures
contract. The dealer market for off-exchange instruments is becoming more liquid. There is no
exchange or clearinghouse for these contracts and they are not regulated by the CFTC. The Trust
will not receive the protections which are provided by the CFTCs regulatory scheme for these
transactions.
The Trust is Subject to Foreign Market Credit and Regulatory Risk
A substantial portion of Campbell & Companys trades takes place on markets or exchanges
outside the United States. From time to time, over 50% of the Trusts overall market exposure
could involve positions taken on foreign markets. The risk of loss in trading foreign futures
contracts and foreign options can be substantial. Participation in foreign futures contracts and
foreign options transactions involves the execution and clearing of trades on, or subject to the
rules of, a foreign board of trade. Non-U.S. markets may not be subject to the same degree of
regulation as their U.S. counterparts. None of the CFTC, NFA or any domestic exchange regulates
activities of any foreign boards of trade, including the execution, delivery and clearing of
transactions, nor do they have the power to compel enforcement of the rules of a foreign board of
trade or any applicable foreign laws. Trading on foreign exchanges also presents the risks of
exchange controls, expropriation, taxation and government disruptions.
The Trust is Subject to Foreign Exchange Risk
The price of any foreign futures or foreign options contract and, therefore, the potential
profit and loss thereon, may be affected by any variance in the foreign exchange rate between the
time a position is established
and the time it is liquidated, offset or exercised. Certain foreign exchanges may also be in a
more or less developmental stage so that prior price histories may not be indicative of current
price dynamics. In addition, the Trust may not have the same access to certain positions on foreign
exchanges as do local traders, and the historical market data on which Campbell & Company bases its
strategies may not be as reliable or accessible as it is in the United States. The rights of
clients (such as the Trust) in the event of the insolvency or bankruptcy of a non-U.S. market or
broker are also likely to be more limited than in the case of U.S. markets or brokers.
Transfers Could be Restricted
Unitholders may transfer or assign units only upon 30 days prior written notice to the
managing owner and only if the managing owner is satisfied that the transfer complies with
applicable laws and would not result in adverse legal or tax consequences for the Trust. A
transferee shall not become a substituted unitholder without the written consent of the managing
owner.
Restrictions on Investment by ERISA Plans, Employee Retirement Income Security Act of 1974
The managing owner anticipates that the underlying assets of the Trust may be considered for
purposes of Title I of the Employee Retirement Income Security Act of 1974 (ERISA), as amended,
and Section 4975 of the Internal Revenue Code of 1986, as amended (the Code), to be assets of
certain employee benefit plans and other Plans that purchase units. Under such circumstances, the
investments of the Trust and the activities of the managing owner will be subject to and, in
certain cases, limited by, ERISA and the Code.
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When considering an investment in the Trust of the assets of an ERISA Plan, a fiduciary with
respect to such plan should consider, among other things: (i) the definition of Plan assets under
ERISA and regulations issued by the Department of Labor (DOL) regarding the definition of Plan
assets; (ii) whether the investment satisfies the diversification requirements of Section 404(a)(1)
of ERISA; (iii) whether the investment satisfies the prudence requirements of Section 404(a)(1) of
ERISA; and (iv) that there will be no secondary market in which such fiduciary can sell or
otherwise dispose of the units.
A Single-Advisor Fund May be More Volatile Than a Multi-Advisor Fund
The Trust is a single-advisor managed futures fund. Potential investors should understand that
many managed futures funds are structured as multi-advisor funds in order to attempt to control
risk and reduce volatility through combining advisors whose historical performance records have
exhibited a significant degree of non-correlation with each other. As a single-advisor managed
futures fund, the Trust may have increased performance volatility and a higher risk of loss than
investment vehicles employing multiple advisors.
The Performance Fee Could be an Incentive to Make Riskier Investments
Campbell & Company employs a speculative strategy for the Trust, and receives performance fees
based on the trading profits earned by it for the Trust. Campbell & Company would not agree to
manage the Trusts account in the absence of such a performance fee arrangement. Accordingly,
Campbell & Company may make investments that are riskier than might be made if the Trusts assets
were managed by a trading advisor that did not require performance-based compensation.
The Trust May Distribute Profits to Unitholders at Inopportune Times
Campbell & Company reserves the right to make distributions of profits of the Trust to the
unitholders at any time in its sole discretion in order to control the growth of the assets under
Campbell & Companys management. Unitholders will have no choice in receiving these distributions
as income, and may receive little notice that these distributions are being made. Distributions may
be made at an inopportune time for the unitholders.
Potential Inability to Trade or Report Due to Systems Failure
Campbell & Companys strategies are dependent to a significant degree on the proper
functioning of its internal computer systems. Accordingly, systems failures, whether due to third
party failures upon which such systems are dependent or the failure of Campbell & Companys
hardware or software, could disrupt trading or make trading impossible until such failure is
remedied. Any such failure, and consequential inability to trade (even for a short time), could, in
certain market conditions, cause the Trust to experience significant trading losses or to miss
opportunities for profitable trading. Additionally, any such failures could cause a temporary delay
in reports to investors.
Failure to Receive Timely and Accurate Market Data from Third Party Vendors Could Cause Disruptions
or the Inability to Trade
Campbell & Companys strategies are dependent to a significant degree on the receipt of timely
and accurate market data from third party vendors. Accordingly, the failure to receive such data in
a timely manner or the receipt of inaccurate data, whether due to the acts or omissions of such
third party vendors or otherwise, could disrupt trading to the detriment of the Trust or make
trading impossible until such failure or inaccuracy is remedied. Any such failure or inaccuracy
could, in certain market conditions, cause the Trust to experience significant trading losses,
effect trades in a manner which it otherwise would not have done, or miss opportunities for
profitable trading. For example, the receipt of inaccurate market data may cause Campbell & Company to establish (or exit) a position which it otherwise would not have established (or
exited), or fail to establish (or exit) a position which it otherwise would have established (or
exited), and any subsequent correction of such inaccurate data may cause Campbell & Company to
reverse such action or inaction, all of which may ultimately be to the detriment of the Trust.
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Item 1B. | Unresolved Staff Comments |
None
Item 2. | Properties |
The Registrant does not use any physical properties in the conduct of its business. Its
assets currently consist of futures and other contracts, cash, U.S. Treasury Bills, and other fixed income securities.
Item 3. | Legal Proceedings |
Campbell & Company is not aware of any material legal proceedings to which the Registrant is a
party or to which any of their assets are subject.
Item 4. | (Removed and Reserved) |
PART II
Item 5. | Market for Registrants Common Equity , Related Stockholder Matters and Issuer Purchases of Equity Securities |
Units of Beneficial Interest are not publicly traded. Units may be transferred or redeemed
subject to the conditions imposed by the Amended and Restated Declaration of Trust and Trust
Agreement. As of December 31, 2009, there were 109 Unitholders in the Registrant and 18,862.150
Units of Beneficial Interest outstanding.
Campbell & Company has sole discretion in determining what distributions, if any, the
Registrant will make to its Unit holders. Campbell & Company has not made any distributions as of
the date hereof.
The Registrant has no securities authorized for issuance under equity compensation plans.
Item 6. | Selected Financial Data |
The following summarized financial information is for the years ended December 31, 2009, 2008,
2007, 2006, and 2005.
For the Years Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Total Assets |
$ | 31,009,469 | $ | 36,668,639 | $ | 37,566,581 | $ | 43,619,109 | $ | 40,221,009 | ||||||||||
Total Unitholders Capital |
29,002,062 | 35,835,483 | 36,288,756 | 42,871,715 | 39,856,467 | |||||||||||||||
Total Net Trading Gain (Loss) (includes brokerage commissions) |
(826,016 | ) | 1,568,937 | (4,880,807 | ) | 2,971,747 | 5,125,300 | |||||||||||||
Net Income (Loss) |
(1,807,668 | ) | 977,473 | (4,555,069 | ) | 3,250,791 | 4,799,375 | |||||||||||||
Net Income (Loss) Per Managing Owner and Other Unitholder Unit * |
(85.69 | ) | 43.49 | (195.52 | ) | 135.31 | 204.75 | |||||||||||||
Increase (Decrease) in Net Asset Value Per Managing Owner and Other Unitholder Unit |
(94.41 | ) | 28.40 | (211.94 | ) | 123.59 | 190.55 |
* | - Based on weighted average number of units outstanding during the period. |
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The following summarized quarterly financial information presents the results of operations for the
three-month periods ending March 31, June 30, September 30 and December 31, 2009 and 2008.
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | |||||||||||||
2009 | 2009 | 2009 | 2009 | |||||||||||||
Total Net Trading Gain(Loss) (net of brokerage
Commissions) |
$ | 75,143 | $ | (2,137,482 | ) | $ | 1,317,012 | $ | (80,689 | ) | ||||||
Net Income (Loss) |
(207,164 | ) | (2,392,807 | ) | 1,078,786 | (286,483 | ) | |||||||||
Net Income (Loss) per Managing Owner and
Other Unitholder Unit |
(9.33 | ) | (110.22 | ) | 52.82 | (14.29 | ) | |||||||||
Increase (Decrease) in Net Asset Value per Managing
Owner and Other Unitholder Unit |
(12.84 | ) | (113.43 | ) | 49.41 | (17.55 | ) | |||||||||
Net Asset Value per Managing Owner and Other
Unitholder Unit at the End of the Period |
1,619.15 | 1,505.72 | 1,555.13 | 1,537.58 |
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | |||||||||||||
2008 | 2008 | 2008 | 2008 | |||||||||||||
Total Net Trading Gain(Loss) (net of brokerage
Commissions) |
$ | 693,007 | $ | 2,185,179 | $ | (1,217,518 | ) | $ | (91,731 | ) | ||||||
Net Income (Loss) |
659,620 | 2,045,059 | (1,366,878 | ) | (360,328 | ) | ||||||||||
Net Income (Loss) per Managing Owner and
Other Unitholder Unit |
28.97 | 91.39 | (61.14 | ) | (16.08 | ) | ||||||||||
Increase (Decrease) in Net Asset Value per Managing
Owner and Other Unitholder Unit |
25.13 | 87.87 | (64.92 | ) | (19.68 | ) | ||||||||||
Net Asset Value per Managing Owner and Other
Unitholder Unit at the End of the Period |
1,628.72 | 1,716.59 | 1,651.67 | 1,631.99 |
* | - Based on weighted average number of units outstanding during the period. |
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
Introduction
The offering of its Units of Beneficial Interest commenced on May 15, 2001. The initial
offering terminated on September 28, 2001 and the Trust commenced operations on October 1, 2001.
The continuing offering period commenced at the termination of the initial offering period and is
ongoing.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and expense during the
reporting period. Management believes that the estimates utilized in preparing the financial
statements are reasonable and prudent; however, actual results could differ from those estimates.
The Trusts significant accounting policies are described in detail in Note 1 of the Financial
Statements.
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The Trust records all investments at fair value in its financial statements, with changes in
fair value reported as a component of realized and change in unrealized trading gain (loss) in the
Statements of Operations. Generally, fair values are based on market prices; however, in certain
circumstances, estimates are involved in determining fair value in the absence of an active market
closing price (e.g. forward and option contracts which are traded in the inter-bank market).
Capital Resources
The Trust will raise additional capital only through the sale of Units offered pursuant to the
continuing offering, and does not intend to raise any capital through borrowing. Due to the nature
of the Trusts business, it will make no capital expenditures and will have no capital assets which
are not operating capital or assets.
The Trust maintains 40-80% of its net asset value in cash, cash equivalents or other liquid
positions in its cash management program over and above that needed to post as collateral for trading. These funds
are available to meet redemptions each month. After redemptions and additions are taken into account each
month, the trade levels of the Trust are adjusted and positions in the instruments the Trust trades are added
or liquidated on a pro-rata basis to meet those increases or decreases in trade levels.
Liquidity
Most United States commodity exchanges limit fluctuations in commodity futures contracts
prices during a single day by regulations referred to as daily price fluctuation limits or daily
limits. During a single trading day, no trades may be executed at prices beyond the daily limit.
Once the price of a futures contract has reached the daily limit for that day, positions in that
contract can neither be taken nor liquidated. Commodity futures prices have occasionally moved to
the daily limit for several consecutive days with little or no trading. Similar occurrences could
prevent the Trust from promptly liquidating unfavorable positions and subject the Trust to
substantial losses which could exceed the margin initially committed to such trades. In addition,
even if commodity futures prices have not moved the daily limit, the Trust may not be able to
execute futures trades at favorable prices, if little trading in such contracts is taking place.
Other than these limitations on liquidity, which are inherent in the Trusts commodity futures
trading operations, the Trusts assets are expected to be highly liquid.
The entire offering proceeds, without deductions, will be credited to the Trusts bank and
brokerage accounts to engage in trading activities and as reserves for that trading. The Trust
meets its margin requirements by depositing U.S. government securities with the futures broker and
the over-the-counter counterparties. In this way, substantially all (i.e., 95% or more) of the
Trusts assets, whether used as margin for trading purposes or as reserves for such trading, can be
invested in U.S. government securities and time deposits with U.S. banks. Investors should note
that maintenance of the Trusts assets in U.S. government securities and banks does not reduce the
risk of loss from trading futures and forward contracts. The Trust receives all interest earned on
its assets. No other person shall receive any interest or other economic benefits from the deposit
of Trust assets.
Approximately 10% to 30% of the Trusts assets normally are committed as required margin for
futures contracts and held by the futures broker, although the amount committed may vary
significantly. Such assets are maintained in the form of cash or U.S. Treasury bills in segregated
accounts with the futures broker pursuant to the Commodity Exchange Act and regulations thereunder.
Approximately 10% to 30% of the Trusts assets are deposited with over-the-counter counterparties
in order to initiate and maintain forward contracts. Such assets are not held in segregation or
otherwise regulated under the Commodity Exchange Act, unless such over-the-counter counterparty is
registered as a futures commission merchant. These assets are held either in U.S. government
securities or short-term time deposits with U.S.-regulated bank affiliates of the over-the-counter
counterparties.
The managing owner deposits the majority of those assets of the Trust that are not required to
be deposited as margin with the futures broker and over-the-counter counterparty in a custodial
account with Northern Trust Company. The assets deposited in the custodial account with Northern
Trust Company are segregated. The custodial account constitutes approximately 40% to 80% of the
Trusts assets and is invested
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directly by Wilmington Trust Investment Management LLC
(Wilmington). Wilmington is registered with the Securities and Exchange Commission as an
investment adviser under the Investment Advisers Act of 1940.
Wilmington does not guarantee any interest or profits will accrue on the Trusts assets in the
custodial account. Wilmington will invest according to agreed upon investment guidelines that are
modeled after those investments allowed by the futures broker as defined under The Commodity
Exchange Act, Title 17, Part 1, § 1.25 Investment of customer funds. Investments can include, but
are not limited to, (i) U.S. Government Securities, Government Agency Securities, Municipal
Securities, banker acceptances and certificates of deposits; (ii) commercial paper; and (iii)
corporate debt.
The Trust occasionally receives margin calls (requests to post more collateral) from its
futures broker or over-the-counter counterparties, which are met by moving the required portion of
the assets held in the custody account at Northern Trust to the margin accounts. In the past 3
years, the Trust has not needed to liquidate any position as a result of a margin call.
The Trusts assets are not and will not be, directly or indirectly, commingled with the
property of any other person in violation of law or invested with or loaned to Campbell & Company
or any affiliated entities.
Off-Balance Sheet Risk
The term off-balance sheet risk refers to an unrecorded potential liability that, even
though it does not appear on the balance sheet, may result in future obligation or loss. The
Trust trades in futures, forward and options contracts and is therefore a party to financial
instruments with elements of off-balance sheet market and credit risk. In entering into these
contracts there exists a risk to the Trust, market risk, that such contracts may be significantly
influenced by market conditions, such as interest rate volatility, resulting in such contracts
being less valuable. If the markets should move against all of the futures interests positions of
the Trust at the same time, and if the Trusts trading advisor was unable to offset futures
interests positions of the Trust, the Trust could lose all of its assets and the Unitholders would
realize a 100% loss. Campbell & Company, Inc., the managing owner (who also acts as trading
advisor), minimizes market risk through real-time monitoring of open positions, diversification of
the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 30%.
In addition to market risk, in entering into futures, forward and option contracts there is a
credit risk that a counterparty will not be able to meet its obligations to the Trust. The
counterparty for futures contracts traded in the United States and on most foreign exchanges is the
clearinghouse associated with such exchange. In general, clearinghouses are backed by the
corporate members of the clearinghouse who are required to share any financial burden resulting
from the non-performance by one of their members and, as such, should significantly reduce this
credit risk. In cases where the clearinghouse is not backed by the clearing members, like some
foreign exchanges, it is normally backed by a consortium of banks or other financial institutions.
In the case of forward and option contracts, which are traded on the interbank market rather
than on exchanges, the counterparty is generally a single bank or other financial institution,
rather than a group of financial institutions; thus there may be a greater counterparty credit
risk. Campbell & Company trades for the Trust only with those counterparties which it believes to
be creditworthy. All positions of the Trust are valued each day on a mark-to-market basis. There
can be no assurance that any clearing member, clearinghouse or other counterparty will be able to
meet its obligations to the Trust.
Disclosures About Certain Trading Activities that Include Non-Exchange Traded Contracts Accounted
for at Fair Value
The Trust invests in futures, forward currency and option on forward currency contracts. The
market value of futures (exchange-traded) contracts is determined by the various futures exchanges,
and reflects the settlement price for each contract as of the close of the last business day of the
reporting period. The market value of forward (non-exchange traded)
contracts is extrapolated on a forward basis from the spot prices
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quoted as of 3:00 P.M. (E.T.) of
the last business day of the reporting period. The market value
of option (non-exchange traded) contracts is calculated by applying an industry-standard adaptation
of the Black-Scholes options valuation model to foreign currency options, using as input, the spot
prices, interest rates and option implied volatilities quoted as of 3:00 P.M. (E.T.) on the last
business day of the reporting period.
Results of Operations
The returns for the years ended December 31, 2009, 2008 and 2007 were (5.78)%, 1.77% and
(11.67)%, respectively. The following is a discussion of the brokerage and performance fees accrued and paid. During the years ended December 31, 2009, 2008, and 2007, the
Trust accrued brokerage fees in the amount of $941,871, $1,055,055 and $1,157,288, respectively, and paid brokerage fees in the amounts of
$952,313, $1,063,516 and $1,170,369, respectively. During the years ended December 31, 2009, 2008, and 2007, the Trust accrued
and paid performance fees in the amount of $0, $0, and $270,167, respectively.
2009
For the 2009 decrease of 5.78%, approximately 1.74% was due to trading losses (before
commissions) and approximately 0.15% due to investment income offset by approximately (4.19)% due to
brokerage fees, operating costs and offering costs borne by the Trust. An analysis of the 1.74%
trading loss by sector is as follows:
Sector | % Gain (Loss) | |||
Currencies |
3.41 | % | ||
Commodities |
(0.32 | ) | ||
Stock Indices |
(0.68 | ) | ||
Interest Rates |
(4.15 | ) | ||
(1.74 | )% | |||
President Obamas stimulus plan took center stage in January; however, weak economic data
continued to negatively impact global stock markets into the start of the New Year. An early month
rally fizzled quickly, causing notable declines in major global indices. The Trust gained in
equity indices trading on net short positions across each region. Gains were recorded in fixed
income trading as the worlds central banks continued to lower interest rates. Mounting fiscal
deficits and huge issuance needs begin to weigh heavy on the long-end; however, credit markets
generally improved in January with yield spreads continuing to contract. Foreign exchange trading
finished slightly negative on the month. Risk aversion and capital preservation benefited the
Trusts net long U.S. Dollar position; however, the U.K. governments unprecedented move to give
the Bank of England power to increase their stake in Royal Bank of Scotland to 70% helped fuel a
late month rally in the British Pound, eliminating gains from a previous decline. Commodity
trading was generally flat on volatility across precious and base metals and a slowing of the
negative energy trend.
In February, the U.S. governments ability to address the economic crisis was met with
skepticism by Wall Street. Economic data remained persistently weak, especially on the employment
and housing fronts. The U.S. was not alone in reporting negative news, as European and Asian
economies also continued with the release of dismal economic data such as declining exports and
falling dividends. The majority of February gains in the Trust resulted from equity indices
trading, particularly from short positions in the U.S. and Asia. Additional gains were recorded
in foreign exchange trading as investors continued to feed U.S. Dollar strength, particularly
relative to the Japanese Yen. The U.S. Dollar continues to be the safe haven pick as the risk
aversion theme continued, as evidenced by the U.S. treasury yields recording all-time lows.
Stock markets rallied in March as the 2008 fourth quarter earnings announcements subsided and
large U.S. banks announced they would be profitable for the first two months of 2009. The majority
of the Trusts losses in March resulted from equity indices trading, as the equity rally adversely
impacted net short positions globally. Commodities recorded losses as energy price swings have
become correlated with equities and metals surged on news of Chinas economic stimulus plan. Gains
from fixed income markets were recorded from the
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Trusts long global bond positions as prices moved
significantly higher on announcements from the Swiss, British and American Central Banks on their
intentions of adding liquidity by purchasing medium to long-term bonds in the market. Foreign
exchange trading resulted in gains as investors sought currencies whose home central banks were not
keen on engaging in quantitative easing.
While equity index trading produced the most profitable sector results for the Trust for 2008,
the Trusts net exposure on the short side of global stock indices through April 2009 has hurt
performance as markets continued to stage rallies that began in mid-March. U.S. economic
indicators, including housing and manufacturing, showed signs of improvement and stabilization
rather than further deterioration. In addition, the G-20 agreed to fund more than $1 trillion in
emergency aid to help cushion the economic fallout of the current international financial crisis.
While the general tone of the economic outlook was more upbeat, officials have still been cautious
in their assessment. April saw a continuation of the March risk-seeking rally leading to several
growth currencies registering solid gains against the dollar. Losses were realized in the foreign
exchange sector due to the Trusts general bias to be long the dollar against most major
currencies. In fixed income, the equity market rally helped general investor sentiment, driving
bond prices lower across the board which produced losses for the Trust in this sector. Commodity
trading finished relatively flat with gains from the energy sector offsetting small losses in base
and precious metals.
In May, conflicting signals on global recovery weighed on the direction of the markets as
increased risk appetite and signs of stabilization in the global economy emerged. Equity markets
continued their rally, particularly in Asia, generating small gains in the stock index sector.
Fixed income trading generated a marginal positive return as short-term rates in Europe climbed
higher following the European Central Bank rate cut of 25 basis points. The gains in the stock
index and fixed income sectors were offset by losses in the foreign exchange sector. The U.S.
Dollar suffered a broad based decline in May on a combination of stronger risk appetite and growing
fears over structural deficiencies in the U.S. Investors moved dormant dollar denominated assets
overseas to capture growth and risk in commodity block currencies. Smaller losses were also
recorded in the commodities sector as natural gas finished a volatile month higher.
During June, a surprise payroll number to the upside for May prompted an aggressive sell-off
in short-term U.S. rates and raised market expectations of a rate hike in 2009. The price reaction
was swift and caused particular difficulty for systematic trading. Losses for the Trust in the
fixed income sector were offset by marginal gains in the foreign exchange sector. The Trusts
currency positions were generally mixed, thus hedging some U.S. Dollar risk, as investors crowded
the Dollar as a safe-haven trade, pushing it higher on the month. Marginal gains were also
recorded in the commodities sector, primarily from long positions in the energy complex. As
geo-political headlines were plentiful, energies traded in a highly correlated fashion to global
equity markets. The stock index sector finished basically flat for the month as global equity
markets reflected mixed results congruent with both positive and negative economic data relating to
global recovery.
Contrary to investor fears, global stock market returns in 2009 have fueled improved risk
appetite as economic data and corporate earnings support the rally for yet another month in July.
The Trusts trading performance was relatively flat, with positive results from long stock and
short U.S. Dollar positions being offset by losses incurred from short interest rate positions.
For the first half of 2009, many trend-following strategies struggled to curb losses and eked out
small gains in a market environment that is in a classic consolidation (trendless and choppy)
period.
While risk appetite was generally strong in August, investors risk behavior was a bit random
as fixed income initially sold off on better than expected payrolls data, but spent the rest of the
month rallying. Bernankes nomination for a second term and continued lower rates for longer
comments from Fed officials helped support treasury prices against the Trusts general positioning
across the curve. Smaller losses were recorded in currency trading as investors appeared unwilling
to chase growth currencies higher, at the expense of the dollar, from already stretched levels.
Gains were recorded in commodity markets as the Trust increased its exposure to this sector with
the launch of more agile models providing more efficient holding period
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diversification. Trading
in base and precious metals was a primary driver as the risk on trade prevailed on improving
economic data. Equity indices trading yielded a marginal gain as positioning geographically and
across model groups remains mixed.
During the month of September, the Trusts technical and fundamental strategies both recorded
healthy gains in the foreign exchange sector from short positions in the U.S. Dollar vs. most major
currencies. Commodity-linked currencies were particularly profitable for the Trust, as both the
Australian and New Zealand Dollars rose in value close to 5%. Technical and fundamental signals
were also effective in the equity index sector, where the Trust benefited from primarily long
positions across global stock indices. With the exception of Japan, global equities moved higher
by 2 3% during the month on healthy M&A activity, as well as favorable signs of a manufacturing
rebound and consumer spending renewal. Results were mixed in fixed income trading as gains earned
from short-term rates were largely offset by losses on the long end of the curve. Commodities
trading resulted in marginal losses overall, primarily due to short positions in natural gas. The
price of natural gas rallied over 20% during the month as a result of significant short covering in
the market despite record storage levels.
The risk pendulum continued to swing between risk on and risk off during the month of
October, culminating in risk off at month-end and impacting all sectors of the portfolio. As
global equity markets fell, commodities fell in tandem and the U.S. Dollar rallied along with fixed
income in a thematic trade tied to central bank activity. While the Trusts risk exposure to
equity indices was relatively low, our net long position yielded the largest sector loss during the
month. The high volatility environment for mean-reversion equity trading was quite favorable,
resulting in gains in the cash equities statistical models in both U.S. and Japan. The
perseverance of the risk off trade at month-end resulted in modest losses in foreign exchange,
modest gains in commodities.
November saw strong trends generate a return of 3.03%, with solid gains in interest rates,
foreign exchange, and commodities. Weaker than expected new home sales to start the month, the
Federal Open Market Committees retention of extended period language at mid-month, and a flight
to quality at month-end fueled by fears over Dubai debt pushed bond prices higher throughout the
month. Thus, trading in fixed income contributed to strong gains from both the short and long end
of the curve; foreign exchange trading profited from a continued downward trend of the U.S. Dollar;
and commodity trading benefitted from gains in precious metals.
In December, the markets saw a rapid reversal in fixed income and the U.S. Dollar.
Inflationary fears subsided as better than expected U.S. economic data fueled equity prices higher
and bond prices lower. While market participants seemed to be trading at reduced risk levels,
price trends were inconsistent leading into the holiday break, causing losses for many systematic
managers, including Campbell. Sharp losses in fixed income trading and modest losses in foreign
exchange outweighed solid gains in cash equities and equity indices trading, resulting in a net
loss for the month.
2008
For the 2008 increase of 1.77%, approximately 4.43% was due to trading gains (before
commissions) and approximately 1.51% due to interest income offset by approximately (4.17)% due to
brokerage fees, operating costs and offering costs borne by the Trust. An analysis of the 4.43%
trading gain by sector is as follows:
Sector | % Gain (Loss) | |||
Stock Indices |
9.10 | % | ||
Commodities |
0.35 | |||
Currencies |
(0.51 | ) | ||
Interest Rates |
(4.51 | ) | ||
4.43 | % | |||
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The first quarter of 2008 began where 2007 left off, with the credit crisis causing more
write-downs, more credit downgrades, and a growing realization that sub-prime issues would have
broader and longer-lasting impacts than initially suspected. In January, weak economic data caused
the Federal Open Market Committee to cut short-term rates by a total of 1.25%, which included an
unprecedented 0.75% emergency cut. The S&P 500 recorded one of its worst monthly performances in
the history of the index. The Trusts performance in January
was basically flat, with gains in equity indices trading more than offset by losses in
currencies and flat performance in fixed income and commodities.
February saw the U.S. dollar weaken against most major currencies, as U.S. economic data
disappointed, stagflation concerns grew and U.S. interest rate expectations declined dramatically.
The Trusts currency trading profited from these moves, generating a positive return for the month.
The Trust also recorded gains in equity indices trading, as the S&P 500, Dow, and NASDAQ continued
to slide. Overall, the Trust had a positive month, posting a 1.68% gain.
March brought more Federal Reserve intervention, which resulted in a slight recovery by U.S.
stocks from mid-month slides to finish flat for the month, but still significantly negative for the
year. The US dollar continued to weaken. The Trusts performance was close to flat for the month
at (0.08)%, with gains in equity indices and currencies offset by losses in commodities and fixed
income. The Trust closed the first quarter of 2008 with a year-to-date gain of 1.57%.
In April, the U.S. Dollar rallied against key funding currencies, despite a generally weak
global economy. The Trust realized gains in foreign exchange and commodities. However, those
gains were overshadowed by losses in the fixed income and equity indices sectors, as prior trends
in both sectors reversed course. For the month of April, the Trust suffered a loss of 2.32%.
May was a strong month for the Trust. Positive commodity trading led the charge as crude oil
breached new technical levels, touching $135 mid-month. Foreign exchange models also posted gains,
as high-yielding currencies performed well. These gains, together with modest gains in the fixed
income more than offset a loss in equity indices. The Trust achieved a positive return on the
month of 2.07%.
In June the Trust realized its best month of the year, posting a return of 5.26%. Equity
indices trading produced strong gains as short positions benefitted from the negative news that
roiled the markets around the globe. Signs of commodity-based inflation were constantly in the
headlines. Consumer confidence fell to a 16-year low, as U.S., European, and Asian equities
markets fell in tandem. Fixed income trading produced additional gains for the Trust, in response
to fears of inflation and the ECBs increasingly hawkish stance. Commodities also posted gains as
crude oil hit new highs on the back of increased tensions in the Middle East and among OPEC
members. In addition, the Trust had modest gains in foreign exchange sector. The Trust concluded
the second quarter with a gain of 5.40% for the quarter, and a year-to-date gain of 7.05%.
The month of July was characterized by reversals in many asset classes. The Dow and S&P hit
technical bear market territory early in the month, while Japanese equities saw their longest
back-to-back losing streak in 54 years. Equity markets seemed to find a bottom mid-month after the
U.S. announced the Government-Sponsored Enterprises bailout plan. Commodity prices also reversed,
with crude oil declining almost 12% on fears that a weakened economy would reduce global demand.
The Trust earned profits in equity indices trading. Those gains were offset by losses in fixed
income and commodities. All-in, the Trust finished the month with a loss of 1.10%.
In August, sub-prime fallout continued to plague the global financial markets. The U.S.
unemployment rate hit a four-year high. Commodity prices continued to decline, with natural gas
leading the way with a decline of 12.75% and gold falling to its lowest level in eight months. The
Trust experienced losses in foreign exchange and commodities sectors as currencies linked to
commodities fell in tandem with metal and energy markets, while the U.S. Dollar Index posted
unusually strong gains. Those losses edged out gains in fixed income, resulting in a loss for the
month of 1.37%.
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September saw concern over the widening credit crises come to a boiling point. Equity markets
in the U.S., Europe, and Asia declined sharply. Investors fled high-yielding currencies in
response to the global decline in equity markets. The Trust posted a loss of 1.36%. Gains in
equity indices were offset by losses in foreign
exchange, fixed income, and commodities. Diversification of positions by sector and geography
played an important role in dampening losses to the Trust, as did a decrease in risk levels across
the portfolio. The Trust concluded the third quarter with a loss of 3.78% for the quarter, leaving
the year-to-date gain at 3.00%.
At the time, the month of October seemed like a month to remember, as equity markets around
the world plummeted, fueling further anxiety about the length and depth of a global recession and
further exacerbating the liquidity, growth, and confidence crisis. With the benefit of hindsight,
it was but the beginning of a quarter to remember. For the Trust, the month was about the benefits
and disadvantages of diversification. Modest gains in equity indices trading were more than offset
by losses in foreign exchange and fixed income, resulting in a loss for the month of 0.91%.
November brought further global economic panic, as governments around the world continued to
announce plans to help bolster sagging economies. The U.S. reversed course on its bailout effort,
from buying troubled assets to facilitating lending flow. Economic data reflected another sharp
drop in manufacturing, rising unemployment, and the largest drop in retail sales since 1992,
prompting wild swings in both equity and bond markets. The Trust maintained a relatively low risk
profile during the month, which resulted in marginal losses and gains across the sectors. For the
Trust, losses in fixed income offset marginal gains in other sectors, resulting in a loss for the
month of 1.07%.
December saw more of the same on the global economic front. The Trust, however, took
advantage of dramatic moves in the British Pound, particularly against the Euro, to achieve gains
in foreign exchange. Likewise, fixed income trading was profitable as central banks across the
globe continued to lower interest rates on persistent negative data. Overall, the Trust gained
0.80% for December.
The Trust completed the fourth quarter of 2008, one of the most volatile in market history,
with a loss for the quarter of 1.19%, bringing the return for the year to 1.77%.
2007
For the 2007 decrease of (11.67)%, approximately (11.32)% was due to trading losses (before
commissions) and approximately (4.91)% was due to brokerage fees, performance fees, and operating
and offering costs borne by the Trust offset by approximately 4.56% due to interest income. An
analysis of the (11.32)% trading gain by sector is as follows:
Sector | % Gain (Loss) | |||
Interest Rates |
1.10 | % | ||
Metals |
(0.73 | ) | ||
Energy |
(1.99 | ) | ||
Stock Indices |
(2.53 | ) | ||
Currencies |
(7.17 | ) | ||
(11.32 | )% | |||
The first quarter demonstrated how market perceptions on the global macroeconomic environment
can drastically change during a quarter. Fixed income was initially a driver in performance as a
result of the acceleration of global economic momentum, but ultimately resulted in overall losses
for the quarter. The global growth environment turned into a flight to quality from risky assets,
sponsored by former Federal Reserve
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Chairman Alan Greenspans comments about a recession by year
end and the whipsaw activity experience in fixed income. Currency trading followed a similar path
of fixed income (initial gains and overall quarterly losses); initial gains from currency crosses
were generated from unexpected rate hikes by the Bank of England in the beginning of the quarter
but were wiped out by the liquidations of Yen-based carry trades in February, followed by whipsaw
activity at the end of quarter. The Trusts equity indices initially bucked the trend of fixed
income and currency with gains coming from our fundamental models and strong M&A activity, but
ultimately succumbed to an overall quarterly loss. Energy losses were driven by price declines in
January on inventory
build-ups due to warmer than average temperatures, but finished the last two months of the
quarter basically flat. Global economic worries that were sparked at the end of February continued
through the early part of March. All major market sectors experienced increased volatility
accompanied by sharply higher short-term correlation. Whipsaw activity in currencies, interest
rates and equities indices led to negative performance in all of these sectors, acting as the
primary drivers of March losses. Risk levels for the Trust were reduced early in March in response
to market conditions, and were restored to normal levels as conditions warranted.
The second quarter charged forward with M&A activity supported by impressive earnings,
unfettered access to liquidity and major U.S. indices reaching all time highs, to only end with
inflation concerns and a flight to quality related to the sub-prime world. Currencies provided
gains early and late in the quarter related to negative U.S. dollar sentiment, but experienced
losses mid-quarter mainly in outright exposures. Fixed income gains early in the month of April
were given back during the last days of the month, but global fixed income prices breaking out of
their trading ranges in May allowed the Trust to gain on both the long and short end of the yield
curve. Early in the quarter commodity trading was positive as copper prices rallied on Chinas
release of high import figures, then finished slightly negative mid-quarter with energy trading
gains mitigating some losses in metals. Commodities ended the quarter with small losses related to
being short crude as it rallied above $70 per barrel on geo-political risks and inventory changes
keeping traders bullish.
The third quarter began with a sudden flight to quality, reversal of high yielding currencies,
and a highly correlated, unusually large move against the Trusts positions resulting in one of the
Trusts largest monthly declines in recent years. Losses were broadly based and evenly spread
between the interest rate, foreign exchange and equity index sectors. In response to this perfect
storm, the Trusts leverage was temporarily cut by 50%. Continuing the unusual market conditions
theme into the first half of August, the contagion effect throughout the financial system created a
confidence and liquidity crisis that also negatively impacted the Trusts performance. Major stock,
bond and currency markets globally experienced double digit losses from mid-July to mid-August. The
foreign exchange sector proved very difficult in August as the Trusts technical and macro models
were both exposed to high-yielding currencies that suffered market value declines of historical
proportions in mid-August. The Trusts leverage was cut again in mid-August. Trading in the equity
indices sector was also difficult as volatility dominated global stock markets, with the S&P
dropping over 8% from its intra-month high only to bounce off of its lows once the Trusts exposure
was reduced. The Trust earned the majority of its gains at the end of the quarter in the foreign
exchange markets as higher-yielding currencies once again gained favor. Trading in the stock
indices sector also posted positive results, as the markets breathed a collective sigh of relief
that the Federal Reserve was seriously addressing the credit crisis and resulting economic impact.
The Trusts portfolio maintained a lower risk posture throughout the month of September with full
re-engagement resuming in the early part of the fourth quarter.
The fourth quarter started with mixed messages as corporate earnings reports either beat
estimates or severely disappointed, money centers and investment banks grappling with major credit
related losses, housing data continuing to soften, and the Federal Open Market Committee complying
with market expectations of a 25 basis point cut. High yielding currencies provided healthy gains
early in the quarter battling back from August lows, however, during the remainder of the quarter
the Trust incurred its largest sector losses in currencies enduring the yen reaching levels not
seen since June of 2005. Trading in global indices proved a similar fate to the currency sector,
initially beginning the quarter with gains followed up by two consecutive months of incurring
losses related to U.S. recessionary fears spawning fears of a global slowdown in growth. Fixed
income began the quarter flat as credit quality remained an underlying concern, then moving to
positive returns
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mid-quarter thanks to Treasuries posting the best month in 12 years, to finishing
negative at year-end related to extreme volatility. Energy and base metals began the quarter with
a minimal loss and flat performance, respectively, as the markets continued to wrestle with a tight
supply/demand picture, deteriorating geo-political landscape, a weakening dollar and strong growth
from India & China. This market landscape then switched to fears of slowing global growth and
fundamental arguments for lower energy prices in which Campbell recorded losses in both sectors.
The quarter ended with gains realized in base and precious metals as gold rallied 6% to all time
highs amid strong buying in the face of a bounce in the U.S. dollar.
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Introduction
Past Results Not Necessarily Indicative of Future Performance
The Trust is a speculative commodity pool. The market sensitive instruments held by it are
acquired for speculative trading purposes, and all or a substantial amount of the Trusts assets
are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive
instruments is integral, not incidental, to the Trusts main line of business.
Market movements result in frequent changes in the fair market value of the Trusts open
positions and, consequently, in its earnings and cash flow. The Trusts market risk is influenced
by a wide variety of factors, including the level and volatility of exchange rates, interest rates,
equity price levels, the market value of financial instruments and contracts, the diversification
effects among the Trusts open positions and the liquidity of the markets in which it trades.
The Trust rapidly acquires and liquidates both long and short positions in a wide range of
different markets. Consequently, it is not possible to predict how a particular future market
scenario will affect performance, and the Trusts past performance is not necessarily indicative of
its future results.
Standard of Materiality
Materiality as used in this section, Quantitative and Qualitative Disclosures About Market
Risk, is based on an assessment of reasonably possible market movements and the potential losses
caused by such movements, taking into account the leverage, and multiplier features of the Trusts
market sensitive instruments.
Quantifying the Trusts Trading Value at Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Trusts market risk exposures contain
forward-looking statements within the meaning of the safe harbor from civil liability provided
for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All
quantitative disclosures in this section are deemed to be forward-looking statements for purposes
of the safe harbor, except for statements of historical fact (such as the dollar amount of
maintenance margin required for market risk sensitive instruments held at the end of the reporting
period).
The Trusts risk exposure in the various market sectors traded is estimated in terms of Value
at Risk (VaR). The Trust estimates VaR using a model based upon historical simulation (with a
confidence level of 97.5%) which involves constructing a distribution of hypothetical daily changes
in the value of a trading portfolio. The VaR model takes into account linear exposures to risks,
including equity and commodity prices, interest rates, foreign exchange rates, and correlation
among these variables. The hypothetical changes in
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portfolio value are based on daily percentage
changes observed in key market indices or other market factors to which the portfolio is
sensitive. The Trusts VaR at a one day 97.5% confidence level VaR corresponds to the negative
change in portfolio value that, based on observed market risk factors, would have been exceeded
once in 40 trading days or one day in 40. VaR typically does not represent the worst case outcome.
The Trust uses approximately one quarter of daily market data and revalues its portfolio for
each of the historical market moves that occurred over this time period. This generates a
probability distribution of daily simulated profit and loss outcomes. The VaR is the 2.5
percentile of this distribution.
The VaR for a sector represents the one day downside risk for the aggregate exposures
associated with this sector. The current methodology used to calculate the aggregate VaR
represents the VaR of the Trusts open positions across all market sectors, and is less than the
sum of the VaRs for all such market sectors due to the diversification benefit across asset
classes.
The Trusts VaR computations are based on the risk representation of the underlying benchmark
for each instrument or contract and does not distinguish between exchange and non-exchange
dealer-based instruments. It is also not based on exchange and/or dealer-based maintenance margin
requirements.
VaR models, including the Trusts, are continually evolving as trading portfolios become more
diverse and modeling techniques and systems capabilities improve. Please note that the VaR model
is used to numerically quantify market risk for historic reporting purposes only and is not
utilized by the Trust in its daily risk management activities. Please further note that VaR as
described above may not be comparable to similarly titled measures used by other entities.
Because the business of the Trust is the speculative trading of futures, forwards and options,
the composition of the Trusts trading portfolio can change significantly over any given time
period, or even within a single trading day, which could positively or negatively materially impact
market risk as measured by VaR.
The Trusts Trading Value at Risk in Different Market Sectors
The following tables indicate the trading Value at Risk associated with the Trusts open
positions by market category as of December 31, 2009, 2008 and 2007 and the trading gains/losses by
market category for the years then ended.
December 31, 2009
Trading | ||||||||
Market Sector | Value at Risk* | Gain/(Loss)** | ||||||
Currencies |
0.90 | % | 3.41 | % | ||||
Interest Rates |
0.68 | % | (4.15 | )% | ||||
Stock Indices |
0.45 | % | (0.68 | )% | ||||
Commodities |
0.41 | % | (0.32 | )% | ||||
Aggregate/Total |
1.62 | % | (1.74) | % | ||||
* | - The VaR for a sector represents the one day downside risk for the aggregate exposures associated with this sector. The aggregate VaR represents the VaR of the Trusts open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes. | |
** | - Of the return for the year ended December 31, 2009, approximately (1.74)% was due to trading gains (before commissions) and approximately 0.15% due to interest income offset by approximately (4.19)% was due to brokerage fees, operating costs and offering costs borne by the Trust offset by giving a net return of (5.78)%. |
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December 31, 2008
Trading | ||||||||
Market Sector | Value at Risk* | Gain/(Loss)** | ||||||
Currencies |
0.50 | % | (0.51 | )% | ||||
Interest Rates |
0.30 | % | (4.51 | )% | ||||
Stock Indices |
0.18 | % | 9.10 | % | ||||
Commodities |
0.05 | % | 0.35 | % | ||||
Aggregate/Total |
0.60 | % | 4.43 | % | ||||
* | - The VaR for a sector represents the one day downside risk for the aggregate exposures associated with this sector. The aggregate VaR represents the VaR of the Trusts open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes. | |
** | - Of the return for the year ended December 31, 2008, approximately 4.43% was due to trading gains (before commissions) and approximately 1.51% due to interest income offset by approximately (4.17)% was due to brokerage fees, operating costs and offering costs borne by the Trust offset by giving a net return of 1.77%. |
December 31, 2007
Trading | ||||||||
Market Sector | Value at Risk* | Gain/(Loss)** | ||||||
Currencies |
1.48 | % | (7.17 | )% | ||||
Stock Indices |
0.51 | % | (2.53 | )% | ||||
Interest Rates |
0.42 | % | 1.10 | % | ||||
Metals |
0.14 | % | (0.73 | )% | ||||
Energy |
0.08 | % | (1.99 | )% | ||||
Aggregate/Total |
1.72 | % | (11.32 | )% | ||||
* | - The VaR for a sector represents the one day downside risk for the aggregate exposures associated with this sector. The aggregate VaR represents the VaR of the Trusts open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes. | |
** | - Of the return for the year ended December 31, 2007, approximately 11.32% was due to trading losses (before commissions) and approximately 4.91% due to brokerage fees, performance fees and operating and offering costs borne by the Trust offset by approximately 4.56% of interest income giving a net return of (11.67)%. |
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Material Limitations of Value at Risk as an Assessment of Market Risk
The following limitations of VaR as an assessment of market risk should be noted:
1) | Past changes in market risk factors will not always result in accurate predictions of the distributions and correlations of future market movements; | |
2) | Changes in portfolio value caused by market movements may differ from those of the VaR model; | |
3) | VaR results reflect past trading positions while future risk depends on future positions; | |
4) | VaR using a one day time horizon does not fully capture the market risk of positions that cannot be liquidated or hedged within one day; and | |
5) | The historical market risk factor data for VaR estimation may provide only limited insight into losses that could be incurred under certain unusual market movements. |
VaR is not necessarily representative of historic risk nor should it be used to predict the
Trusts future financial performance or its ability to manage and monitor risk. There can be no
assurance that the Trusts actual
losses on a particular day will not exceed the VaR amounts indicated or that such losses will
not occur more than once in 40 trading days.
Non-Trading Risk
The Trust has non-trading market risk on its foreign cash balances not needed for margin.
However, these balances (as well as the market risk they represent) are immaterial. The Trust also
has non-trading market risk as a result of investing a substantial portion of its available assets
in U.S. Treasury Bills held at the broker and over-the-counter counterparty. The market risk
represented by these investments is minimal. Finally, the Trust has non-trading market risk on
fixed income securities held as part of its cash management program. The cash manager will use its
best endeavors in the management of the assets of the Trust but provide no guarantee that any
profit or interest will accrue to the Trust as a result of such management.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Trusts market risk exposures except for
(i) those disclosures that are statements of historical fact and (ii) the descriptions of how the
Trust manages its primary market risk exposures constitute forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The
Trusts primary market risk exposures as well as the strategies used and to be used by Campbell &
Company for managing such exposures are subject to numerous uncertainties, contingencies and risks,
any one of which could cause the actual results of the Trusts risk controls to differ materially
from the objectives of such strategies. Government interventions, defaults and expropriations,
illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in
historical price relationships, an influx of new market participants, increased regulation and many
other factors could result in material losses as well as in material changes to the risk exposures
and the risk management strategies of the Trust. There can be no assurance that the Trusts
current market exposure and/or risk management strategies will not change materially or that any
such strategies will be effective in either the short- or long-term. Investors must be prepared to
lose all or substantially all of their investment in the Trust.
The following were the primary trading risk exposures of the Trust as of December 31, 2009, by
market sector.
Currencies
Exchange rate risk is the principal market exposure of the Trust. The Trusts currency
exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical
pricing relationships between different currencies and currency pairs. These fluctuations are
influenced by interest rate changes as well as political and general economic conditions. The
Trust trades in a large number of currencies, including cross-rates i.e., positions between two
currencies other than the U.S. Dollar. Campbell & Company does not anticipate that the risk
profile of the Trusts currency sector will change significantly in the future.
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Interest Rates
Interest rate risk is a significant market exposure of the Trust. Interest rate movements
directly affect the price of the sovereign bond positions held by the Trust and indirectly the
value of its stock index and currency positions. Interest rate movements in one country as well as
relative interest rate movements between countries materially impact the Trusts profitability.
The Trusts primary interest rate exposure is to interest rate fluctuations in the United States
and the other G-7 countries. Campbell & Company anticipates that G-7 interest rates will remain
the primary rate exposure of the Trust for the foreseeable future. The changes in interest rates
which have the most effect on the Trust are changes in long-term, as opposed to short-term rates.
Most of the speculative positions held by the Trust are in medium- to long-term instruments.
Stock Indices
The Trusts primary equity exposure is to equity price risk in the G-7 countries and several
other countries (Hong Kong, Spain, Taiwan, and Netherlands). The stock index futures traded by the Trust are by
law limited to futures on broadly based indices. The Trust is primarily exposed to the risk of
adverse price trends or static markets in the major U.S., European and Japanese indices. (Static
markets would not cause major market changes but would make it difficult for the Trust to avoid
being whipsawed into numerous small losses).
Energy
The Trusts primary energy market exposure is to crude oil and derivative product price
movements, often resulting from international political developments and ongoing conflicts in the
Middle East and the perceived outcome. Oil and gas prices can be volatile and substantial profits
and losses have been and are expected to continue to be experienced in this market.
Metals
The Trusts metals market exposure is to fluctuations in the price of gold, silver, copper,
nickel and zinc.
Agricultural
The Trusts agricultural exposure was to the fluctuations in the price of wheat, corn, coffee,
and cotton.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the primary non-trading risk exposures of the Trust as of December 31,
2009.
Foreign Currency Balances
The Trusts primary foreign currency balances are in Japanese Yen, British Pounds and Euros.
The Trust controls the non-trading risk of these balances by regularly converting these balances
back into dollars (no less frequently than twice per month, and more frequently if a particular
foreign currency balance becomes unusually large).
Fixed Income Securities
The Trusts primary market exposure in instruments (other than treasury positions described in
the subsequent section) held other than for trading is in its fixed income portfolio. The cash
manager, Wilmington, has authority to make certain investments on behalf of the Trust. All
securities purchased by the cash manager
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on behalf of the Trust will be held in the Trusts custody
account at the custodian. The cash manager will use its best endeavors in the management of the
assets of the Trust but provide no guarantee that any profit or interest will accrue to the Trust
as a result of such management.
Treasury Bill Positions Held for Margin Purposes
The Trust also has market exposure in its Treasury Bill portfolio. The Trust holds Treasury
Bills (interest bearing and credit risk-free) with maturities no longer than six months. Violent
fluctuations in prevailing interest rates could cause minimal mark-to-market losses on the Trusts
Treasury Bills, although substantially all of these short-term investments are held to maturity.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Trust and Campbell & Company, severally, attempt to manage the risk of
the Trusts open positions is essentially the same in all market categories traded. Campbell &
Company applies risk management policies to its trading which generally limit the total exposure
that may be taken per risk unit of assets under management. In addition, Campbell & Company
follows diversification guidelines (often formulated in terms of the balanced volatility between
markets and correlated groups), as well as precalculating stop-loss points at which systems will
signal to close out open positions.
Campbell & Company manages the risk of the Trusts non-trading instruments of Treasury Bills
held for margin purposes by limiting the duration of such instruments to no more than six months.
Campbell & Company manages the risk of the Trusts fixed income securities held for cash management
purposes by restricting the cash managers to investing in securities that are modeled after those
investments allowed by the futures broker as defined under The Commodity Exchange Act, Title 17,
Part 1, § 1.25 Investment of customer funds. Investments can include, but are not limited to, (i)
U.S. Government Securities, Government Agency Securities, Municipal Securities, banker acceptances
and certificates of deposits; (ii) commercial paper; and (iii) corporate debt.
Campbell & Company manages the risk of the Trusts non-trading instruments (Treasury Bills
held for cash management purposes) by limiting the duration of such instruments to no more than six
months.
General
The Trust is unaware of any (i) anticipated known demands, commitments or capital
expenditures; (ii) material trends, favorable or unfavorable, in its capital resources; or (iii)
trends or uncertainties that will have a material effect on operations. From time to time, certain
regulatory agencies have proposed increased margin requirements on futures contracts. Because the
Trust generally will use a small percentage of assets as margin, the Trust does not believe that
any increase in margin requirements, as proposed, will have a material effect on the Trusts
operations.
Item 8. | Financial Statements and Supplementary Data |
Financial statements meeting the requirements of Regulation S-X appear beginning on Page 31 of
this report. The supplementary financial information specified by Item 302 of Regulation S-K is
included in Item 6. Selected Financial Data.
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
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Item 9A. | Controls and Procedures |
Campbell & Company, Inc., the managing owner of the Trust, with the participation of the
managing owners chief executive officer and chief financial officer, has evaluated the
effectiveness of the design and operation of its disclosure controls and procedures (as defined in
the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Trust as of
the end of the period covered by this annual report. Based on their evaluation, the chief
executive officer and chief financial officer have concluded that these disclosure controls and
procedures are effective. There were no changes in the managing owners internal control over
financial reporting applicable to the Trust identified in connection with the evaluation required
by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the last fiscal
quarter that have materially affected, or is reasonably likely to materially affect, internal
control over financial reporting applicable to the Trust.
Item 9A (T). | Controls and Procedures |
Managements Annual Report on Internal Control over Financial Reporting
Campbell & Company, Inc. (CCI), the managing owner of the Trust, is responsible for the
management of the Trust. Management of CCI (Management) is responsible for establishing and
maintaining adequate internal control over financial reporting. The internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.
The Managements internal control over financial reporting includes those policies and procedures
that:
| Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Trust; |
| Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the partnerships transactions are being made only in accordance with authorizations of Management and; |
| Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Trusts assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Trusts internal control over financial reporting
as of December 31, 2009. In making this assessment, Management used the framework established in
Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). As a result of this assessment and based on the criteria in the COSO
framework, management has concluded that, as of December 31, 2009, the Trusts internal control
over financial reporting was effective.
This annual report does not include an attestation report of the Trusts registered public
accounting firm regarding internal control over financial reporting. Managements report was not
subject to attestation by the companys registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the company to provide only
managements reporting this annual report.
Item 9B. | Other Information |
There was no information required to be disclosed in a report on form 8-K during the fourth
quarter of 2009.
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PART III
Item 10. Directors and Executive Officers of the Registrant
The Registrant has no directors or executive officers. The Registrant has no employees. It
is managed by Campbell & Company in its capacity as general partner. Campbell & Company has been
registered as a commodity pool operator (CPO) since September 1982. Its main business address is
located at 2850 Quarry Lake Drive, Baltimore, Maryland 21209, (410) 413-2600. Campbell & Companys
directors and executive officers are as follows:
G. William Andrews, born in 1972, has been employed by Campbell & Company since April 1997 and
was appointed Vice President: Director of Research Operations in March 2006 and has served as Vice
President: Director of Operations since April 2007. His duties include managing daily research and
trade operations, new research product implementation and code management. From November 1995 to
April 1997, Mr. Andrews was
employed at Legg Mason as a Research Analyst in the Realty Group. Before immigrating to the United
States, he was employed by the Japanese Department of Education in the town of Fujimi, Nagano
prefecture. Mr. Andrews holds an M.B.A. in Finance from Loyola College in Maryland and a Bachelor
of Social Science from Waikato University, New Zealand. Mr. Andrews became listed as a Principal of
Campbell & Company effective June 21, 2006.
Theresa D. Becks, born in 1963, joined Campbell & Company in June 1991 and has served as
President and Chief Executive Officer since April 2007, Secretary since May 1992, a Director since
January 1994, and was Chief Financial Officer and Treasurer until July 2008. Ms. Becks is also the
President and Chief Executive Officer of Campbell & Company Investment Adviser LLC, a wholly-owned
subsidiary of Campbell & Company, and Trustee, President and Chief Executive Officer of The
Campbell Multi-Strategy Trust, a registered investment company. Ms. Becks served as a member of the
Board of Directors of the Managed Funds Association from November 2002 to November 2006. From
December 1987 to June 1991, she was employed by Bank Maryland Corp, a publicly held company, as a
Vice President and Chief Financial Officer. From September 1985 to December 1987, she worked with
the public accounting firm Ernst & Young as a C.P.A. Ms. Becks is a C.P.A. and has a B.S. in
Accounting from the University of Delaware. Ms. Becks became registered as an Associated Person and
listed as a Principal and NFA Associate Member of Campbell & Company effective May 7, 1999, March
10, 1993 and April 21, 1999, respectively. Ms. Becks became registered as an Associated Person and
listed as a Principal and NFA Associate Member of Campbell & Company Investment Adviser LLC
effective December 14, 2005, December 12, 2005 and December 14, 2005, respectively.
D. Keith Campbell, born in 1942, has served as the Chairman of the Board of Directors of
Campbell & Company since it began operations, was President until January 1994, and was Chief
Executive Officer until January 1998. Mr. Campbell is the majority voting stockholder of Campbell &
Company. Mr. Campbell has acted as a commodity trading advisor since January 1972 when, as general
partner of the Campbell Fund, a limited partnership engaged in commodity futures trading, he
assumed sole responsibility for trading decisions made on its behalf. Since then, he has applied
various technical trading models to numerous discretionary futures trading accounts. Mr. Campbell
is registered with the CFTC and NFA as a commodity pool operator. Mr. Campbell became registered as
an Associated Person and listed as a Principal and NFA Associate Member of Campbell & Company
effective October 29, 1997, September 29, 1978 and September 29, 1997, respectively. Mr. Campbell
became listed as a Principal of Campbell & Company Investment Adviser LLC effective July 9, 2008.
Mr. Campbell became listed as a Principal of his Commodity Pool Operator effective March 10, 1975.
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Bruce L. Cleland, born in 1947, joined Campbell & Company in January 1993 and has served as
Vice Chairman of the Board of Directors of Campbell & Company since April 2007, was President from
January 1994 to April 2007, and Chief Executive Officer from January 1998 to April 2007. Until
April 2007, Mr. Cleland was also the President and Chief Executive Officer of Campbell & Company
Investment Adviser LLC, a wholly-owned subsidiary of Campbell & Company, and Trustee, Chief
Executive Officer and President of The Campbell Multi-Strategy Trust, a registered investment
company. Mr. Cleland has worked in the international derivatives industry for over thirty years,
and has owned and managed firms engaged in global clearing, floor brokerage, trading and portfolio
management. Mr. Cleland is currently a member of the Board of Directors of the National Futures
Association, and previously served as a member of the Board of Directors of the Managed Funds
Association and as a member of the Board of Governors of the COMEX, in New York. Mr. Cleland is a
graduate of Victoria University in Wellington, New Zealand where he earned a Bachelor of Commerce
and Administration degree. Mr. Cleland became registered as an Associated Person and listed as a
Principal and NFA Associate Member of Campbell & Company effective December 15, 1993, September 15,
1993 and December 15, 1993, respectively. Mr. Cleland became listed as a Principal of Campbell &
Company Investment Adviser LLC effective July 9, 2008. Mr. Cleland was a registered Associated
Person and NFA Associate Member with Campbell & Company Investment Adviser LLC from December 2005
to April 2007.
Gregory T. Donovan, born in 1972, joined Campbell & Company in October 2006 and has served as
Chief Financial Officer and Treasurer of Campbell & Company since July 2008, and was Senior Vice
President of
Accounting and Finance from October 2006 to July 2008. His duties include oversight of accounting
and finance functions and review of accounting policies and procedures. Mr. Donovan is also the
Chief Financial Officer, Treasurer and Assistant Secretary of both Campbell & Company Investment
Adviser LLC, a wholly-owned subsidiary of Campbell & Company, and The Campbell Multi-Strategy
Trust, a registered investment company. From November 2003 to October 2006, Mr. Donovan was
employed by Huron Consulting Services serving as Director in the Financial and Economic Consulting
Practice. From May 1998 until November 2003, Mr. Donovan was employed by KPMG LLP in which he
served in the capacity of Manager in the Forensic and Litigation Services Practice. Mr. Donovan is
a C.P.A. and has a B.S. in Business Administration with concentrations in Accounting and Management
from Castleton State College and holds a M.S. in Finance from the University of Baltimore. Mr.
Donovan became registered as an Associated Person and listed as a Principal and NFA Associate
Member of Campbell & Company effective July 5, 2007, May 9, 2007 and July 2, 2007, respectively.
Mr. Donovan became listed as a Principal of Campbell & Company Investment Adviser LLC effective May
16, 2007.
Michael S. Harris, born in 1975, has been employed by Campbell & Company since July 2000, was
appointed Deputy Manager of Trading in September 2004 and has served as Vice President and Director
of Trading since June 2006. His duties include managing daily trade execution for the assets under
Campbell & Companys management. From October 1999 to July 2000, Mr. Harris worked as a futures and
options broker for Refco Inc. (NY). From May 1997 to October 1999, he worked in the Sales and
Product Development groups at Morgan Stanley Managed Futures. Mr. Harris holds a B.A. in Economics
and Japanese Studies from Gettysburg College. He also spent time studying abroad at Kansai Gaidai
University in Osaka, Japan. Mr. Harris became registered as an Associated Person and listed as a
Principal and NFA Associate Member of Campbell & Company effective September 21, 2000, June 15,
2006 and August 19, 2000, respectively.
Michael J. Hebrank, born in 1955, joined Campbell & Company in April 2004 and has served as
Chief Technology Officer since then. From February 1999 to April 2004, Mr. Hebrank was the Chief
Information Officer at Greater Baltimore Medical Center, the fourth largest healthcare system in
Maryland. Mr. Hebrank holds a B.S. in Applied Statistics from the University of Baltimore and an
M.S. in Computer Engineering from Loyola College of Maryland. Mr. Hebrank became listed as a
Principal of Campbell & Company effective June 21, 2006.
Kevin M. Heerdt, born in 1958, joined Campbell & Company in March 2003 and has served as Chief
Investment Officer and Director of Research since July 2007, was Executive Vice President-Research
from March 2003 to June 2007 and Chief Operating Officer from June 2005 to June 2007. His duties
include risk management, research, and the development of quantitatively based hedge fund and
options strategies. Mr. Heerdt is also the Vice President and Chief Investment Officer of both
Campbell & Company Investment Adviser LLC, a wholly-owned subsidiary of Campbell & Company, and The
Campbell Multi-Strategy Trust, a registered investment company. From February 2002 to March 2003,
he was the sole proprietor of Integrity Consulting, a start-up business consulting firm. From
December 1990 to February 2002, Mr. Heerdt worked for Moore Capital
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Management, Inc., a private
investment management firm, and its affiliates, where he was a Director and a Managing Director.
Mr. Heerdt holds a B.A. in Economics and in International Relations from the University of Southern
California. Mr. Heerdt became registered as an Associated Person and listed as a Principal and NFA
Associate Member of Campbell & Company effective April 15, 2003, April 15, 2003 and April 1, 2003,
respectively. Mr. Heerdt became registered as an Associated Person and listed as a Principal and
NFA Associate Member of Campbell & Company Investment Adviser LLC effective December 14, 2005,
December 12, 2005 and December 14, 2005, respectively. On March 12, 2010, by mutual agreement,
Chief Investment Officer Kevin Heerdt left Campbell & Company to pursue other interests. Going
forward, management of the research and investment process at Campbell will be conducted by an
Investment Committee chaired by Campbells Vice Chairman Bruce Cleland. Other members of the
Investment Committee will be Research Director, Xiaohua Hu, PhD, and Chief Operating Officer Will
Andrews.
Thomas P. Lloyd, born in 1959, joined Campbell & Company in September 2005 as General Counsel
and Executive Vice President-Legal and Compliance. In this capacity, he is involved in all aspects
of legal affairs, compliance and regulatory oversight. Since April 2007, Mr. Lloyd has also
overseen Campbell & Companys fund
administration function. Mr. Lloyd is also the Secretary, Chief Compliance Officer and Assistant
Treasurer of both Campbell & Company Investment Adviser LLC, a wholly-owned subsidiary of Campbell
& Company, and The Campbell Multi-Strategy Trust, a registered investment company. From July 1999
to September 2005, Mr. Lloyd was employed by Deutsche Bank Securities Inc. (DBSI) in several
positions, including Managing Director and head of the legal group for Deutsche Bank Alex. Brown,
the Private Client Division of DBSI. From March 1997 to July 1999, Mr. Lloyd was an attorney in the
Enforcement Department of NASD Regulation, Inc., and, from July 1995 to March 1997, he served as a
senior counsel in the Division of Enforcement of the United States Securities and Exchange
Commission. From January 1989 to July 1995, he was engaged in the private practice of law. Mr.
Lloyd holds a B.A. in Economics from the University of Maryland, and a J.D. from the University of
Baltimore School of Law. Mr. Lloyd is a member of the Bars of the State of Maryland and the United
States Supreme Court. Mr. Lloyd became listed as a Principal of Campbell & Company and Campbell &
Company Investment Adviser LLC effective October 20, 2005 and December 12, 2005, respectively.
Tracy Wills-Zapata, born in 1971, joined Campbell & Company in February 2006 and has served as
Managing Director Business Development since January 2007 and was Managing Director of
Institutional Business Development from February 2006 to January 2007. Prior to joining Campbell,
Ms. Wills-Zapata was a Managing Director of DB Advisors LLC, and affiliates, from September 2002 to
December 2005, where she was responsible for distribution of Deutsche Banks single manager hedge
fund platform. Ms. Wills-Zapata was registered as an Associated Person from January 2005 to
December 2005 with DB Capital Advisers Inc., from February 2003 to January 2005 with DB Advisors
LLC, and from November 2002 to February 2003 with Deutsche Bank Securities Inc. Ms. Wills-Zapata
was listed as a Principal with DB Advisors LLC from February 2003 to February 2004. Ms.
Wills-Zapata was an NFA Associate Member from December 2004 to December 2005 with DB Capital
Advisers Inc., from January 2003 to January 2005 with DB Advisors LLC, and from November 2002 to
February 2003 with Deutsche Bank Securities, Inc. From April 1995 to September 2002, Ms.
Wills-Zapata was employed by Dominion Capital Management, Inc., a global money management firm
specializing in financial derivatives portfolios, where she served as a Principal and Executive
Vice President. Ms. Wills-Zapata was registered as an Associated Person and listed as a Principal
and NFA Associate Member with Dominion Capital Management, Inc. from April 1995 to September 2002,
from November 1999 to September 2002, and from April 1995 to September 2002, respectively. From
December 1993 to April 1995, Ms. Wills-Zapata was employed by R.J. OBrien & Associates, Inc., an
independent futures brokerage firm, as an Executive Vice President. Ms. Wills-Zapata was registered
as an Associated Person and listed as an NFA Associate Member with R.J. OBrien & Associates, Inc.
from March 1995 to June 2000. Ms. Wills-Zapata is currently a member of the Board of Directors and
a Member of the Executive Committee for the Managed Funds Association. Ms. Wills-Zapata became
registered as an Associated Person and listed as a Principal and NFA Associate Member of Campbell &
Company effective March 27, 2006, July 21, 2008 and March 27, 2006, respectively. Ms. Wills-Zapata
became registered as an Associated Person and listed as a Principal and NFA Associate Member of
Campbell & Company Investment Adviser LLC effective February 18, 2009.
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There has never been a material administrative, civil or criminal action brought against
Campbell & Company or any of its directors, executive officers, promoters or control persons.
No Forms 3, 4, or 5 have been furnished to the Registrant since inception. To the best of the
Registrants knowledge, no such forms have been or are required to be filed.
Audit Committee Financial Expert
The Board of Directors of Campbell & Company, in its capacity as the audit committee for the
Trust, has determined that Gregory T. Donovan qualifies as an audit committee financial expert in
accordance with the applicable rules and regulations of the Securities and Exchange Commission.
He is not independent of management.
Code of Ethics
Campbell & Company has adopted a code of ethics for its chief executive officer, chief
financial officer, director of fund accounting, accounting managers and persons performing similar
functions. A copy of the code of ethics may be obtained at no charge by written request to
Campbell & Companys corporate secretary, 2850 Quarry Lake Drive, Baltimore, Maryland 21209 or by
calling 1-800-698-7235.
Item 11. | Executive Compensation |
The Registrant is managed by its managing owner, Campbell & Company. Campbell & Company
receives from the Registrant a Brokerage Fee equal to 2.85% of the Registrants month-end Net
Assets per year. From such 2.85% Brokerage Fee, Campbell & Company remits 0.35% to the
broker-dealers which engaged in the distribution of the Units in return for ongoing services to the
Unitholders. Campbell & Company retains the remaining 2.5% as management fees (2% for providing
advisory fees and 0.5% for acting as managing owner). Campbell & Company also receives a
performance fee of 20% of the aggregate cumulative appreciation (if any) in Net Asset Value per
unit at the end of each calendar quarter, exclusive of the appreciation attributable to interest
income. The performance fee is paid on the cumulative increase if any, in the Net Asset Value per Unit over the highest
previous cumulative Net Asset Value per Unit (commonly referred to as a High Water Mark). In determining
the fees in this paragraph, adjustments shall be made for capital additions and withdrawals and Net Assets shall not be
reduced by the fees being calculated for such current period. The performance fee is not subject to any clawback provisions. The
brokerage fee and performance fee are typically paid in the month following the month in which they are earned. The brokerage
fee and performance fee are paid from the available cash at the Trusts bank, broker or cash management accounts.
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
(a) | Security Ownership of Certain Beneficial Owners. As of December 31, 2009, no Units of Beneficial Interest are owned or held by an officer of Campbell & Company. As of December 31, 2009, the following beneficial owners owned more than five percent of the Units: |
Name of Beneficial Owner | Number of Units Owned | Percentage of Trust | ||||||
Campbell & Company, Inc. 401(k) Plan |
13,958.734 | 74.00 | % | |||||
Campbell & Company, Inc. |
1,413.580 | 7.49 | % |
(b) | Security Ownership of Management. As of December 31, 2009, Campbell & Company owned 1,413.580 Units of Managing Owner Interest having a value of $2,173,492. Units of Managing Owner Interest will always be owned by Campbell & Company in its capacity as managing owner. |
Item 13. | Certain Relationships and Related Transactions |
See Item 11, Executive Compensation and Item 12, Security Ownership of Certain Beneficial
Owners and Management.
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Item 14. | Principal Accounting Fees and Services |
The principle accountant for the year ended December 31, 2009 was Deloitte & Touche LLP.
(a) | Audit Fees | ||
The aggregate fees billed for professional services rendered by the principal accountant for the audit of the Trusts annual financial statements, for review of financial statements included in the Trusts Forms 10-Q and other services normally provided in connection with regulatory filings for the years ended December 31, 2009 and 2008 were $36,450 and $60,050, respectively. | |||
(b) | Audit Related Fees | ||
The aggregate fees billed for professional services rendered by the principal accountant in connection with Sarbanes Oxley compliance for the years ended December 31, 2009 and 2008 were $5,070 and $0, respectively. | |||
(c) | Tax Fees | ||
None | |||
(d) | All Other Fees | ||
None | |||
(e) | The Board of Directors of Campbell & Company approved all of the services described above. The Board of Directors has determined that the payments made to its independent accountants for these services are compatible with maintaining such auditors independence. The Board of Directors explicitly pre-approves all audit and non-audit services and all engagement fees and terms. |
PART IV
Item 15. | Exhibits, Financial Statement Schedules, and Reports on Form 8-K |
(a) | The Following documents are filed as part of this report: |
(1) | See Financial Statements beginning on page 40 hereof. | ||
(2) | Schedules: | ||
Financial statement schedules have been omitted because they are not included in the financial statements or notes hereto applicable or because equivalent information has been included in the financial statements or notes thereto. | |||
(3) | Exhibit |
Exhibit Number | Description of Document | |
1.01
|
Selling Agreement among the Registrant, Campbell & Company, PaineWebber Incorporated and the Selling Agent. (Incorporated by reference to the respective exhibit to the Pre-Effective Amendment No. 2 to the Registrants Registration Statement on Form S-1 (No. 333-37548) filed on February 26, 2001). | |
1.02
|
Additional Selling Agreement among the Registrant, Campbell & Company and the Additional Selling Agent. (Incorporated by reference to the respective exhibit to the Pre-Effective Amendment No. 2 to the Registrants Registration Statement on Form S-1 (No. 333-37548) filed on February 26, 2001). | |
3.01
|
Declaration of Trust and Trust Agreement of the Registrant dated May 1, 2000. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Form S-1 (No. 333-37548) filed on May 22, 2000). |
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Exhibit Number | Description of Document | |
3.02
|
Certificate of Trust of the Registrant. (Incorporated by reference to the respective exhibit to the Pre-Effective Amendment No. 1 to the Registrants Registration Statement on Form S-1 (No. 333-37548) filed on November 9, 2000). | |
3.03
|
Amended and Restated Declaration of Trust and Trust Agreement of the Registrant. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Post-Effective Amendment No. 12 to Form S-1 (No. 333-74014) filed on September 24, 2009). | |
10.01
|
Customer Agreement between the Registrant and Paine Webber Incorporated. (Incorporated by reference to the respective exhibit to the Pre-Effective Amendment No. 2 to the Registrants Registration Statement on Form S-1 (No. 333-37548) filed on February 26, 2001). | |
10.02
|
Subscription Agreement and Power of Attorney. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Post-Effective Amendment No. 12 to Form S-1 (No. 333-74014) filed on September 24, 2009). | |
10.03
|
Escrow Agreement between the Registrant and Mercantile Safe Deposit & Trust Company. (Incorporated by reference to the respective exhibit to the Pre-Effective Amendment No. 2 to the Registrants Registration Statement on Form S-1 (No. 333-37548) filed on February 26, 2001). | |
10.04
|
International Swap Dealers Association, Inc. Master Agreement between the Registrant and ABN AMRO Bank, N.V., Chicago Branch. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Post-Effective Amendment No. 1 to Form S-1 (No. 333-74014) filed on December 12, 2002). | |
10.05
|
International Swap Dealers Association, Inc. Master Agreement between the Registrant and Deutsche Bank AG. (Incorporated by reference to the respective exhibit to the Pre-Effective Amendment No. 2 to the Registrants Registration Statement on Form S-1 (No. 333-37548) filed on February 26, 2001.) | |
31.01
|
Certification of Theresa D. Becks, Chief Executive Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. | |
31.02
|
Certification of Gregory T. Donovan, Chief Financial Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. | |
32.01
|
Certification of Theresa D. Becks, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. | |
32.02
|
Certification of Gregory T. Donovan, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. |
(b) | Reports on Form 8-K | ||
None. |
38
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized on March 31, 2010.
CAMPBELL ALTERNATIVE ASSET TRUST |
||||
By: | CAMPBELL & COMPANY, INC. Managing Owner |
|||
By: | /s/ Theresa D. Becks | |||
Theresa D. Becks | ||||
Chief Executive Officer and Director | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant in the capacities of Campbell &
Company, Inc., Managing Owner of the Registrant indicated on March 31, 2010.
Signature | Capacity | |
/s/ D. Keith Campbell
|
||
D. Keith Campbell
|
Chairman of the Board of Directors | |
/s/ Bruce L. Cleland
|
||
Bruce L. Cleland
|
Vice Chairman of the Board of Directors | |
/s/ Theresa D. Becks
|
||
Theresa D. Becks
|
Chief Executive Officer | |
/s/ Gregory T. Donovan
|
||
Gregory T. Donovan
|
Chief Financial Officer, Principal Accounting Officer |
39
Table of Contents
CAMPBELL ALTERNATIVE ASSET TRUST
ANNUAL REPORT
December 31, 2009
40
Table of Contents
CAMPBELL ALTERNATIVE ASSET TRUST
TABLE OF CONTENTS
PAGES | ||||
Deloitte & Touche LLP |
42 | |||
Financial Statements |
||||
43-47 | ||||
48 | ||||
49 | ||||
50 | ||||
51 | ||||
52 | ||||
53-61 |
41
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Unitholders of Campbell Alternative Asset Trust
We have audited the accompanying statements of financial condition of Campbell Alternative Asset
Trust (the Trust), including the condensed of schedules of investments, as of December 31, 2009
and 2008, and the related statements of operations, cash flows, changes in unitholders capital
(net asset value) and financial highlights for each of the three years in the period ended December
31, 2009. These financial statements and financial highlights are the responsibility of the
Trusts management. Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial highlights are free of
material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Trusts internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly,
in all material respects, the financial position of Campbell Alternative Asset Trust as of December
31, 2009 and 2008, the results of its operations, cash flows, changes in its unitholders capital
(net asset value) and financial highlights for each of the three years in the period ended December
31, 2009, in conformity with accounting principles generally accepted in the United States of
America.
/s/ DELOITTE & TOUCHE LLP
Princeton, New Jersey
March 26, 2010
March 26, 2010
42
Table of Contents
Campbell Alternative Asset Trust
Condensed Schedule of Investments
December 31, 2009
Condensed Schedule of Investments
December 31, 2009
FIXED INCOME SECURITIES
Maturity | % of Net | |||||||||||
Face Value | Description | Values ($) | Asset Value | |||||||||
Bank Deposits |
||||||||||||
United States |
||||||||||||
Financials (cost $1,100,000) |
$ | 1,100,627 | 3.79 | % | ||||||||
Commercial Paper |
||||||||||||
Germany |
||||||||||||
Materials (cost $588,603) |
$ | 588,850 | 2.03 | % | ||||||||
Netherlands |
||||||||||||
Consumer Discretionary (cost $827,966) |
$ | 827,971 | 2.85 | % | ||||||||
United States |
||||||||||||
Consumer Discretionary |
$ | 2,048,923 | 7.06 | % | ||||||||
Consumer Staples |
$ | 1,523,579 | 5.25 | % | ||||||||
Energy |
$ | 924,969 | 3.19 | % | ||||||||
Financials |
$ | 1,708,792 | 5.89 | % | ||||||||
Industrials |
||||||||||||
$ | 2,290,000 | Avery Dennison Corporation Due 01/04/2010 |
$ | 2,289,921 | 7.90 | % | ||||||
Municipal |
$ | 6,549,496 | 22.58 | % | ||||||||
Telecommunications |
$ | 382,987 | 1.32 | % | ||||||||
Total United States (cost $15,424,662) |
$ | 15,428,667 | 53.19 | % | ||||||||
Total Commercial Paper (cost $16,841,231) |
$ | 16,845,488 | 58.07 | % | ||||||||
Corporate Bonds |
||||||||||||
United States |
||||||||||||
Financials (cost $1,395,877) |
$ | 1,397,647 | 4.82 | % | ||||||||
Government And Agency Obligations |
||||||||||||
United States |
||||||||||||
US Government Agency |
$ | 4,249,147 | 14.65 | % | ||||||||
US Treasury Bill |
||||||||||||
$ | 5,000,000 | U.S. Treasury Bills Due 04/01/2010* |
$ | 4,999,431 | 17.24 | % | ||||||
$ | 1,650,000 | U.S. Treasury Bills Due 03/25/2010* |
$ | 1,649,753 | 5.69 | % | ||||||
Total United States (cost $10,896,184) |
$ | 10,898,331 | 37.58 | % | ||||||||
Short Term Investment Funds |
||||||||||||
United States |
||||||||||||
Short Term Investment Funds (cost $34,246) |
$ | 34,246 | 0.12 | % | ||||||||
Total Fixed Income Securities (cost $30,267,538) |
$ | 30,276,339 | 104.38 | % | ||||||||
See Accompanying Notes to Financial Statements.
43
Table of Contents
Campbell Alternative Asset Trust
Condensed Schedule of Investments
December 31, 2009
Condensed Schedule of Investments
December 31, 2009
LONG FUTURES CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Agriculture |
$ | (3,889 | ) | (0.01 | )% | |||
Energy |
$ | 18,479 | 0.06 | % | ||||
Long-term interest rates |
$ | (252,217 | ) | (0.87 | )% | |||
Metals |
$ | 163,924 | 0.57 | % | ||||
Short-term interest rates |
$ | (100,836 | ) | (0.35 | )% | |||
Stock indices |
$ | 213,758 | 0.74 | % | ||||
Total long futures contracts |
$ | 39,219 | 0.14 | % | ||||
SHORT FUTURES CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Agriculture |
$ | 838 | 0.00 | % | ||||
Long-term interest rates |
$ | 11,956 | 0.04 | % | ||||
Metals |
$ | (107,732 | ) | (0.37 | )% | |||
Total short futures contracts |
$ | (94,938 | ) | (0.33 | )% | |||
Total futures contracts |
$ | (55,719 | ) | (0.19 | )% | |||
FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Various long forward currency contracts |
$ | (1,124,565 | ) | (3.88 | )% | |||
Various short forward currency contracts |
$ | 859,412 | 2.96 | % | ||||
Total forward currency contracts |
$ | (265,153 | ) | (0.92 | )% | |||
PURCHASED OPTIONS ON FORWARD CURRENCY CONTRACTS
See Accompanying Notes to Financial Statements.
44
Table of Contents
Campbell Alternative Asset Trust
Condensed Schedule of Investments
December 31, 2009
Condensed Schedule of Investments
December 31, 2009
Description | Values ($) | % of Net Asset Value |
||||||
Purchased
options on forward currency
contracts (premiums paid $70,105) |
$ | 70,935 | 0.24 | % | ||||
WRITTEN OPTIONS ON FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Written options on forward currency contracts
(premiums received $21,883) |
$ | (19,069 | ) | (0.07 | )% | |||
* | Pledged as collateral for the trading of futures, forward and option positions. |
See Accompanying Notes to Financial Statements.
45
Table of Contents
Campbell Alternative Asset Trust
Condensed Schedule of Investments
December 31, 2008
Condensed Schedule of Investments
December 31, 2008
FIXED INCOME SECURITIES
UNITED STATES GOVERNMENT SECURITIES*
Maturity | Maturity | |||||||||||||||
Face Value | Date | Description | Values ($) | % of Net Asset Value |
||||||||||||
$1,100,000 |
01/02/2009 | U.S. Treasury Bills | $ | 1,100,000 | 3.07 | % | ||||||||||
Total United States government
securities
(cost, including accrued interest, $1,100,000) |
$ | 1,100,000 | 3.07 | % | ||||||||||||
LONG FUTURES CONTRACTS
Description | Values ($) | % of Net Asset Value |
||||||
Stock indices |
$ | 11,598 | 0.03 | % | ||||
Short-term interest rates |
$ | 46,855 | 0.13 | % | ||||
Long-term interest rates |
$ | 62,096 | 0.17 | % | ||||
Total long futures contracts |
$ | 120,549 | 0.33 | % | ||||
SHORT FUTURES CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Energy |
$ | (8,848 | ) | (0.03 | )% | |||
Metals |
$ | (22,893 | ) | (0.06 | )% | |||
Stock indices |
$ | (40,610 | ) | (0.11 | )% | |||
Short-term interest rates |
$ | 125 | 0.00 | % | ||||
Long-term interest rates |
$ | (54,477 | ) | (0.15 | )% | |||
Total short futures contracts |
$ | (126,703 | ) | (0.35 | )% | |||
Total futures contracts |
$ | (6,154 | ) | (0.02 | )% | |||
See Accompanying Notes to Financial Statements.
46
Table of Contents
Campbell Alternative Asset Trust
Condensed Schedule of Investments
December 31, 2008
Condensed Schedule of Investments
December 31, 2008
FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Various long forward currency contracts |
$ | 438,448 | 1.22 | % | ||||
Various short forward currency contracts |
$ | (278,710 | ) | (0.78 | )% | |||
Total forward currency contracts |
$ | 159,738 | 0.44 | % | ||||
PURCHASED OPTIONS ON FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Purchased options on forward currency contracts
(premiums paid $13,775) |
$ | 7,494 | 0.02 | % | ||||
WRITTEN OPTIONS ON FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Written options on forward currency contracts
(premiums received $50,507) |
$ | (45,850 | ) | (0.13 | )% | |||
* | Pledged as collateral for the trading of futures, forward and option positions. |
See Accompanying Notes to Financial Statements.
47
Table of Contents
Campbell Alternative Asset Trust
Statements of Financial Condition
December 31, 2009 And 2008
2009 | 2008 | |||||||
ASSETS |
||||||||
Equity in broker trading accounts |
||||||||
Cash |
$ | 695,155 | $ | 33,954,446 | ||||
Restricted cash |
0 | 1,180,793 | ||||||
Fixed income securities
(cost $4,999,431 and $0, respectively) |
4,999,431 | 0 | ||||||
Net unrealized gain (loss) on open futures contracts |
(55,719 | ) | (6,154 | ) | ||||
Total equity in broker trading accounts |
5,638,867 | 35,129,085 | ||||||
Cash |
279,164 | 269,764 | ||||||
Fixed income securities
(cost $25,268,107 and $1,100,000, respectively) |
25,276,908 | 1,100,000 | ||||||
Options purchased, at fair value
(premiums paid $70,105 and $13,775, respectively) |
70,935 | 7,494 | ||||||
Net unrealized gain (loss) on open forward currency contracts |
(265,153 | ) | 159,738 | |||||
Interest receivable |
7,530 | 558 | ||||||
Prepaid expenses |
1,218 | 2,000 | ||||||
Total assets |
$ | 31,009,469 | $ | 36,668,639 | ||||
LIABILITIES |
||||||||
Accounts payable |
$ | 31,880 | $ | 66,072 | ||||
Brokerage fee |
18,138 | 28,580 | ||||||
Options written, at fair value
(premiums received $21,883 and $50,507, respectively) |
19,069 | 45,850 | ||||||
Accrued commissions and other trading fees on open contracts |
4,701 | 1,593 | ||||||
Offering costs payable |
5,727 | 9,025 | ||||||
Redemptions payable |
1,927,892 | 682,036 | ||||||
Total liabilities |
2,007,407 | 833,156 | ||||||
UNITHOLDERS CAPITAL (Net Asset Value) |
||||||||
Managing Owner - 1,413.580 redeemable units
outstanding at December 31, 2009 and December 31, 2008 |
2,173,492 | 2,306,948 | ||||||
Other Unitholders - 17,448.570 and 20,544.542 redeemable units
outstanding at December 31, 2009 and December 31, 2008 |
26,828,570 | 33,528,535 | ||||||
Total unitholders capital (Net Asset Value) |
29,002,062 | 35,835,483 | ||||||
Total liabilities and unitholders capital (Net Asset Value) |
$ | 31,009,469 | $ | 36,668,639 | ||||
See Accompanying Notes to Financial Statements
48
Table of Contents
Campbell Alternative Asset Trust
Statements of Operations
For The Years Ended December 31, 2009, 2008 And 2007
2009 | 2008 | 2007 | ||||||||||
TRADING GAINS (LOSSES) |
||||||||||||
Futures trading gains (losses) |
||||||||||||
Realized |
$ | (1,734,107 | ) | $ | 2,020,401 | $ | (784,118 | ) | ||||
Change in unrealized |
(49,564 | ) | (203,665 | ) | (885,438 | ) | ||||||
Brokerage commissions |
(47,647 | ) | (53,459 | ) | (72,611 | ) | ||||||
Net gain (loss) from futures trading |
(1,831,318 | ) | 1,763,277 | (1,742,167 | ) | |||||||
Forward currency and options on forward
currency trading gains (losses) |
||||||||||||
Realized |
1,430,644 | (1,162,559 | ) | (874,349 | ) | |||||||
Change in unrealized |
(419,623 | ) | 969,895 | (2,235,565 | ) | |||||||
Brokerage commissions |
(5,719 | ) | (1,676 | ) | (28,726 | ) | ||||||
Net gain (loss) from forward currency and options on
forward currency trading |
1,005,302 | (194,340 | ) | (3,138,640 | ) | |||||||
Total net trading gain (loss) |
(826,016 | ) | 1,568,937 | (4,880,807 | ) | |||||||
NET INVESTMENT INCOME (LOSS) |
||||||||||||
Income |
||||||||||||
Investment income |
40,809 | 554,492 | 1,850,313 | |||||||||
Realized gain (loss)
on fixed income securities |
(1,277 | ) | 0 | 0 | ||||||||
Change in unrealized gain (loss) on fixed income securities |
8,801 | 0 | 0 | |||||||||
Total investment income |
48,333 | 554,492 | 1,850,313 | |||||||||
Expenses |
||||||||||||
Brokerage fee |
941,871 | 1,055,055 | 1,157,288 | |||||||||
Performance fee |
0 | 0 | 270,167 | |||||||||
Operating expenses |
88,114 | 90,901 | 97,120 | |||||||||
Total expenses |
1,029,985 | 1,145,956 | 1,524,575 | |||||||||
Net investment income (loss) |
(981,652 | ) | (591,464 | ) | 325,738 | |||||||
NET INCOME (LOSS) |
$ | (1,807,668 | ) | $ | 977,473 | $ | (4,555,069 | ) | ||||
NET INCOME (LOSS) PER MANAGING OWNER AND
OTHER UNITHOLDERS UNIT (based on weighted average number of units outstanding during the year) |
$ | (85.69 | ) | $ | 43.49 | $ | (195.52 | ) | ||||
INCREASE (DECREASE) IN NET ASSET VALUE PER MANAGING OWNER
AND OTHER UNITHOLDERS UNIT |
$ | (94.41 | ) | $ | 28.40 | $ | (211.94 | ) | ||||
See
Accompanying Notes to Financial Statements.
49
Table of Contents
Campbell Alternative Asset Trust
Statements of Cash Flows
For The Years Ended December 31, 2009, 2008 And 2007
2009 | 2008 | 2007 | ||||||||||
Cash flows from (for) operating activities |
||||||||||||
Net income (loss) |
$ | (1,807,668 | ) | $ | 977,473 | $ | (4,555,069 | ) | ||||
Adjustments to reconcile net income (loss) to net cash from
(for) operating activities |
||||||||||||
Net change in unrealized |
460,386 | (766,230 | ) | 3,121,003 | ||||||||
(Increase) decrease in restricted cash |
1,180,793 | (1,180,793 | ) | 0 | ||||||||
(Increase) decrease in option premiums paid |
(56,330 | ) | 60,384 | (44,384 | ) | |||||||
Increase (decrease) in option premiums received |
(28,624 | ) | 8,662 | 24,509 | ||||||||
(Increase) decrease in interest receivable |
(6,972 | ) | 7,336 | 12,658 | ||||||||
(Increase) decrease in prepaid expenses |
782 | (2,000 | ) | 0 | ||||||||
Increase
(decrease) in accounts payable and accrued expenses |
(41,526 | ) | 12,709 | (48,656 | ) | |||||||
Net
maturities (purchases) of investments in fixed income securities |
(29,167,537 | ) | 32,795,758 | 651,527 | ||||||||
Net cash from (for) operating activities |
(29,466,696 | ) | 31,913,299 | (838,412 | ) | |||||||
Cash flows from (for) financing activities |
||||||||||||
Addition of units |
1,906,380 | 2,404,879 | 2,880,078 | |||||||||
Redemption of units |
(5,388,845 | ) | (3,949,714 | ) | (3,583,534 | ) | ||||||
Offering costs paid |
(300,730 | ) | (335,846 | ) | (369,590 | ) | ||||||
Net cash from (for) financing activities |
(3,783,195 | ) | (1,880,681 | ) | (1,073,046 | ) | ||||||
Net increase (decrease) in cash |
(33,249,891 | ) | 30,032,618 | (1,911,458 | ) | |||||||
Unrestricted cash |
||||||||||||
Beginning of year |
34,224,210 | 4,191,592 | 6,103,050 | |||||||||
End of year |
$ | 974,319 | $ | 34,224,210 | $ | 4,191,592 | ||||||
End of year cash consists of: |
||||||||||||
Cash in broker trading accounts |
$ | 695,155 | $ | 33,954,446 | $ | 2,538,672 | ||||||
Cash |
279,164 | 269,764 | 1,652,920 | |||||||||
Total end of year cash |
$ | 974,319 | $ | 34,224,210 | $ | 4,191,592 | ||||||
See
Accompanying Notes to Financial Statements.
50
Table of Contents
Campbell Alternative Asset Trust
Statements of Changes in unitholders capital (Net Asset Value)
For The Years Ended December 31, 2009, 2008 And 2007
Unitholders Capital | ||||||||||||||||||||||||
Managing Owner | Other Unitholders | Total | ||||||||||||||||||||||
Units | Amount | Units | Amount | Units | Amount | |||||||||||||||||||
Balances at December 31, 2006 |
1,413.580 | $ | 2,566,397 | 22,200.336 | $ | 40,305,318 | 23,613.916 | $ | 42,871,715 | |||||||||||||||
Net income (loss) for the year ended December 31, 2007 |
(277,422 | ) | (4,277,647 | ) | (4,555,069 | ) | ||||||||||||||||||
Additions |
0.000 | 0 | 1,444.335 | 2,501,152 | 1,444.335 | 2,501,152 | ||||||||||||||||||
Redemptions |
0.000 | 0 | (2,428.608 | ) | (4,163,583 | ) | (2,428.608 | ) | (4,163,583 | ) | ||||||||||||||
Offering costs |
(22,172 | ) | (343,287 | ) | (365,459 | ) | ||||||||||||||||||
Balances at December 31, 2007 |
1,413.580 | 2,266,803 | 21,216.063 | 34,021,953 | 22,629.643 | 36,288,756 | ||||||||||||||||||
Net income (loss) for the year ended December 31, 2008 |
61,100 | 916,373 | 977,473 | |||||||||||||||||||||
Additions |
0.000 | 0 | 1,450.873 | 2,370,941 | 1,450.873 | 2,370,941 | ||||||||||||||||||
Redemptions |
0.000 | 0 | (2,122.394 | ) | (3,468,513 | ) | (2,122.394 | ) | (3,468,513 | ) | ||||||||||||||
Offering costs |
(20,955 | ) | (312,219 | ) | (333,174 | ) | ||||||||||||||||||
Balances at December 31, 2008 |
1,413.580 | 2,306,948 | 20,544.542 | 33,528,535 | 21,958.122 | 35,835,483 | ||||||||||||||||||
Net income (loss) for the year ended December 31, 2009 |
(113,540 | ) | (1,694,128 | ) | (1,807,668 | ) | ||||||||||||||||||
Additions |
0.000 | 0 | 1,204.263 | 1,906,380 | 1,204.263 | 1,906,380 | ||||||||||||||||||
Redemptions |
0.000 | 0 | (4,300.235 | ) | (6,634,701 | ) | (4,300.235 | ) | (6,634,701 | ) | ||||||||||||||
Offering costs |
(19,916 | ) | (277,516 | ) | (297,432 | ) | ||||||||||||||||||
Balances at December 31, 2009 |
1,413.580 | $ | 2,173,492 | 17,448.570 | $ | 26,828,570 | 18,862.150 | $ | 29,002,062 | |||||||||||||||
Net Asset Value per Managing Owner and Other Unitholders Unit | |||||||||
December 31, 2009 | December 31, 2008 | December 31, 2007 | |||||||
$1,537.58 | $1,631.99 | $1,603.59 | |||||||
See Accompanying Notes to Financial Statements.
51
Table of Contents
Campbell Alternative Asset Trust
Financial Highlights
For The Years Ended December 31, 2009, 2008 And 2007
Financial Highlights
For The Years Ended December 31, 2009, 2008 And 2007
The following information presents per unit operating performance data and other supplemental
financial data for the years ended December 31, 2009, 2008 and 2007. This information has been
derived from information presented in the financial statements.
2009 | 2008 | 2007 | ||||||||||
Per Unit Performance |
||||||||||||
(for a unit outstanding throughout the entire year) |
||||||||||||
Net asset value per unit at beginning of year |
$ | 1,631.99 | $ | 1,603.59 | $ | 1,815.53 | ||||||
Income (loss) from operations: |
||||||||||||
Total net trading
gains (losses) (1) |
(33.77 | ) | 69.54 | (210.23 | ) | |||||||
Net investment
income (loss) (1) |
(46.54 | ) | (26.32 | ) | 13.98 | |||||||
Total net income (loss) from operations |
(80.31 | ) | 43.22 | (196.25 | ) | |||||||
Offering costs (1) |
(14.10 | ) | (14.82 | ) | (15.69 | ) | ||||||
Net asset value per unit at end of year |
$ | 1,537.58 | $ | 1,631.99 | $ | 1,603.59 | ||||||
Total Return |
(5.78 | )% | 1.77 | % | (11.67 | )% | ||||||
Supplemental Data |
||||||||||||
Ratios to average net asset value: |
||||||||||||
Expenses prior
to performance fee |
3.13 | % | 3.11 | % | 3.09 | % | ||||||
Performance fee |
0.00 | % | 0.00 | % | 0.67 | % | ||||||
Total expenses |
3.13 | % | 3.11 | % | 3.76 | % | ||||||
Net investment income (loss) (2) |
(2.98 | )% | (1.61 | )% | 1.47 | % | ||||||
Total returns are calculated based on the change in value of a unit during the year. An
individual partners total returns and ratios may vary from the above total returns and ratios
based on the timing of additions and redemptions.
(1) | Net investment income (loss) per unit and offering costs per unit are calculated by dividing the net investment income (loss) and offering costs by the average number of units outstanding during the year. Total net trading gains (losses) is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. | |
(2) | Excludes performance fee. |
See Accompanying Notes to Financial Statements.
52
Table of Contents
Campbell Alternative Asset Trust
Notes to Financial Statements
December 31, 2009
Notes to Financial Statements
December 31, 2009
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. | General Description of the Trust | |
Campbell Alternative Asset Trust (the Trust) is a Delaware statutory trust which operates as a commodity investment pool. The Trust was formed on May 3, 2000 and commenced trading on October 1, 2001. The Trust engages in the speculative trading of futures contracts, forward currency contracts and options on forward currency contracts. | ||
As of December 31, 2002, units are no longer offered to the public, but are offered exclusively for sale to the Campbell & Company, Inc. 401(K) Plan (the 401(K) Plan). At December 31, 2009 and December 31, 2008, the 401(K) Plan held approximately 74% and 68% of the Trusts outstanding units, respectively. | ||
B. | Regulation | |
As a registrant with the Securities and Exchange Commission, the Trust is subject to the regulatory requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934. As a commodity investment pool, the Trust is subject to the regulations of the Commodity Futures Trading Commission, an agency of the United States (U.S.) government which regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of the various commodity exchanges where the Trust executes transactions. Additionally, the Trust is subject to the requirements of futures commission merchants (brokers) and interbank market makers through which the Trust trades. | ||
C. | Method of Reporting | |
The Trusts financial statements are presented in accordance with accounting principles generally accepted in the United States of America, which may require the use of certain estimates made by the Trusts management. Actual results may differ from these estimates. Investment transactions are accounted for on the trade date. Gains or losses are realized when contracts are liquidated. Unrealized gains and losses on open contracts (the difference between contract trade price and market price) are reported in the statement of financial condition as a net gain or loss, as there exists a right of offset of unrealized gains or losses in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 210-20, Offsetting Balance Sheet, (formerly FAS No. 39 Offsetting of Amounts Related to Certain Contracts). The market value of futures (exchange-traded) contracts is determined by the various futures exchanges, and reflects the settlement price for each contract as of the close on the last business day of the reporting period. The market value of forward currency (non-exchange traded) contracts was extrapolated on a forward basis from the spot prices quoted as of 3:00 P.M. (E.T.) on the last business day of the reporting period or based on the market value of its exchange-traded equivalent. | ||
The market value of option (non-exchange traded) contracts is calculated by applying an industry-standard adaptation of the Black-Scholes options valuation model to foreign currency options, using as input, the spot prices, interest rates and option implied volatilities quoted as of 3:00 P.M. (E.T.) on the last business day of the reporting period. Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. | ||
When the Trust writes an option, an amount equal to the premium received by the Trust is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of option written. Brokerage commissions include other trading fees and are charged to expense when contracts are opened. | ||
The fixed income investments, other than U.S. Treasury bills held at the brokers or interbank market makers, are marked-to-market on the last business day of the reporting period by a custodian who utilizes a third party vendor hierarchy of pricing providers who specialize in such markets. The prices furnished by the providers consider the yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. U.S. Treasury bills not held by the custodian are stated at cost plus accrued interest, |
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Notes to Financial Statements
December 31, 2009
Notes to Financial Statements
December 31, 2009
which approximates fair value. Premiums and discounts on debt securities are amortized for financial reporting purposes. | ||
For purposes of both financial reporting and calculation of redemption value, Net Asset Value per unit is calculated by dividing Net Asset Value by the number of outstanding units. | ||
The Trust adopted the provisions of ASC 820, Fair Value Measurements and Disclosures (formerly FASB No. 157, Fair Value Measurements), as of January 1, 2008. ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. | ||
ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). | ||
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Trust has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The value of the Trusts exchange-traded futures contracts fall into this category. | ||
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. This category includes forward currency contracts and options on forward currency contracts that the Trust values using models or other valuation methodologies derived from observable market data. This category also includes fixed income investments. | ||
Level 3 inputs are unobservable inputs for an asset or liability (including the Funds own assumptions used in determining the fair value of investments). Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. As of and for the year ended December 31, 2009, the Trust did not have any Level 3 assets or liabilities. | ||
The following tables set forth by level within the fair value hierarchy the Trusts investments accounted for at fair value on a recurring basis as of December 31, 2009 and December 31, 2008. |
Fair Value at December 31, 2009 | ||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments |
||||||||||||||||
Fixed income securities |
$ | 0 | $ | 30,276,339 | $ | 0 | $ | 30,276,339 | ||||||||
Other Financial Instruments |
||||||||||||||||
Exchange-traded futures contracts |
(55,719 | ) | 0 | 0 | (55,719 | ) | ||||||||||
Forward currency contracts |
0 | (265,153 | ) | 0 | (265,153 | ) | ||||||||||
Options purchased |
0 | 70,935 | 0 | 70,935 | ||||||||||||
Options written |
0 | (19,069 | ) | 0 | (19,069 | ) | ||||||||||
Total |
$ | (55,719 | ) | $ | 30,063,052 | $ | 0 | $ | 30,007,333 | |||||||
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Fair Value at December 31, 2008 | ||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments |
||||||||||||||||
Fixed income securities |
$ | 0 | $ | 1,100,000 | $ | 0 | $ | 1,100,000 | ||||||||
Other Financial Instruments |
||||||||||||||||
Exchange-traded futures contracts |
(6,154 | ) | 0 | 0 | (6,154 | ) | ||||||||||
Forward currency contracts |
0 | 159,738 | 0 | 159,738 | ||||||||||||
Options purchased |
0 | 7,494 | 0 | 7,494 | ||||||||||||
Options written |
0 | (45,850 | ) | 0 | (45,850 | ) | ||||||||||
Total |
$ | (6,154 | ) | $ | 1,221,382 | $ | 0 | $ | 1,215,228 | |||||||
D. | Income Taxes | |
The Trust prepares calendar year U.S. federal and applicable state information tax returns and reports to the unitholders their allocable shares of the Trusts income, expenses and trading gains or losses. No provision for income taxes has been made in the accompanying financial statements as each unitholder is individually responsible for reporting income or loss based on such unitholders respective share of the Trusts income and expenses as reported for income tax purposes. | ||
Management has continued to evaluate the application of ASC 740, Income Taxes (formerly FIN No. 48, Accounting for Uncertainty in Income Taxes) to the Trust, and has determined that no reserves for uncertain tax positions were required. The Trust files federal and state tax returns. The 2006 through 2009 tax years generally remain subject to examination by the U.S. federal and most state tax authorities. | ||
E. | Offering Costs | |
Campbell & Company, Inc. (Campbell & Company) has incurred all costs in connection with the initial and continuous offering of units of the Trust (offering costs). Offering costs are charged to the Trust at a monthly rate of 1/12 of 0.9% (0.9% annualized) of the Trusts month-end net asset value (as defined in the Amended and Restated Declaration of Trust and Trust Agreement) until such amounts are fully reimbursed. Such amounts are charged directly to unitholders capital. The Trust is only liable for payment of offering costs on a monthly basis. At December 31, 2009 and December 31, 2008, the Trust reflects a liability in the statement of financial condition for offering costs payable to Campbell & Company of $5,727 and $9,025, respectively. | ||
The offering costs for which Campbell & Company are being reimbursed relate to the offering of units of the Trust to all unitholders except the 401(K) Plan. Therefore, Campbell & Company rebates to the 401(K) Plan the offering costs charged to the 401(K) Plan. All such rebates are made by issuing additional units to the 401(K) Plan. | ||
If the Trust terminates prior to completion of payment to Campbell & Company for the unreimbursed offering costs incurred through the date of such termination, Campbell & Company will not be entitled to any additional payments, and the Trust will have no further obligation to Campbell & Company. At December 31, 2009 and December 31, 2008, the amount of unreimbursed offering costs incurred by Campbell & Company is $25,094 and $114,051, respectively. |
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Notes to Financial Statements
December 31, 2009
Notes to Financial Statements
December 31, 2009
F. | Foreign Currency Transactions | |
The Trusts functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the statement of financial condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income. | ||
G. | Recently Issued Accounting Pronouncements | |
In January 2010, the Financial Accounting Standards Board issued Accounting Standards update No. 2010-06 (ASU 2010-06) for improving disclosure about fair value measurements. ASU 2010-06 adds new disclosure requirements about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances and settlements in the reconciliation for fair value measurements using significant unobservable inputs (Level 3). It also clarifies existing disclosure requirements relating to the levels of disaggregation for fair value measurement and inputs and valuation techniques used to measure fair value. The amended guidance is effective for financial statements for fiscal years and interim periods beginning after December 15, 2009 except for disclosures about purchases, sales, issuances and settlements in the rollforward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The impact of this guidance on the Trusts financial statements and disclosures, if any, is currently being assessed. |
Note 2. | MANAGING OWNER AND COMMODITY TRADING ADVISOR |
The managing owner of the Trust is Campbell & Company, which conducts and manages the business of the Trust. Campbell & Company is also the commodity trading advisor of the Trust. The Amended and Restated Declaration of Trust and Trust Agreement requires Campbell & Company to maintain a capital account equal to 1% of the total capital accounts of the Trust. Additionally, Campbell & Company is required by the Amended and Restated Declaration of Trust and Trust Agreement to maintain a net worth of not less than $1,000,000. | ||
The Trust pays a monthly brokerage fee of 1/12 of 2.85% (2.85% annualized) of month-end net assets to Campbell & Company and approximately $4 per round turn to the broker for execution and clearing costs. Such costs are limited to 3.5% of average month-end net assets per year. From the 2.85% fee, a portion (0.35%) is used to compensate selling agents for administrative services and a portion (2.5%) is retained by Campbell & Company for trading and management services rendered. | ||
Campbell & Company is also paid a performance fee equal to 20% of New Appreciation (as defined) calculated as of the end of each calendar quarter and upon redemption of units. More specifically, the performance fee is paid on the cumulative increase, if any, in the Net Asset Value per Unit over the highest previous cumulative Net Asset Value per Unit (commonly referred to as a High Water Mark) adjusting for investment income. In determining the brokerage and performance fees, adjustments shall be made for capital additions and withdrawals and Net Assets shall not be reduced by the fees being calculated for such current period. The performance fee is not subject to any clawback provisions. The brokerage fee and performance fee are typically paid in the month following the month in which they are earned. The brokerage fee and performance fee are paid from the available cash at the Trusts bank, broker or cash management accounts. | ||
Campbell & Company rebates to the 401(K) Plan the brokerage fee and the performance fee applicable to the 401(K) Plan. All such rebates are made by issuing additional units to the 401(K) Plan. |
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Note 3. TRUSTEE
The trustee of the Trust is U.S. Bank National Association, a national banking corporation. The trustee has delegated to the managing operator the duty and authority to manage the business and affairs of the Trust and has only nominal duties and liabilities with respect to the Trust. |
Note 4. CASH MANAGER AND CUSTODIAN
The Trust has appointed Wilmington Trust Investment Management LLC, a wholly owned subsidiary of Wilmington Trust Corporation, as cash manager under the Non-Custody Investment Advisory Agreement dated July 8, 2009, to manage and control the liquid assets of the Trust. The cash manager is registered as an investment adviser with the Securities and Exchange Commission of the United States under the Investment Advisers Act of 1940. |
The Trust opened a custodial account at The Northern Trust Company (the custodian) and has granted the cash manager authority to make certain investments on behalf of the Trust provided such investments are consistent with the investment guidelines created by the managing operator. All securities purchased by the cash manager on behalf of the Trust will be held in its custody account at the custodian. The cash manager will have no beneficial or other interest in the securities and cash in such custody account. The cash manager began trading on behalf of the Trust in August 2009. |
Note 5. DEPOSITS WITH BROKER
The Trust deposits assets with a broker subject to Commodity Futures Trading Commission regulations and various exchange and broker requirements. Margin requirements are satisfied by the deposit of U.S. Treasury bills and cash with such broker. The Trust typically earns interest income on its assets deposited with the broker. |
Note 6. OPERATING EXPENSES
Operating expenses of the Trust are restricted by the Amended and Restated Declaration of Trust and Trust Agreement to 0.40% per annum of the average month-end Net Asset Value of the Trust. |
Note 7. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Trust are made by subscription agreement, subject to acceptance by Campbell & Company. |
The Trust is not required to make distributions, but may do so at the sole discretion of Campbell & Company. A unitholder may request and receive redemption of units owned, subject to restrictions in the Declaration of Trust and Trust Agreement. Units are transferable, but no market exists for their sale and none is expected to develop. Monthly redemptions are permitted upon ten (10) business days advance written notice to Campbell & Company. |
Note 8. TRADING ACTIVITIES AND RELATED RISKS
The Trust engages in the speculative trading of U.S. and foreign futures contracts, forward currency contracts and options on forward currency contracts (collectively, derivatives). Specifically, the Fund trades a portfolio primarily focused on financial futures, which are instruments designed to hedge or speculate on changes in interest rates, currency exchange rates or stock index values. A secondary emphasis is on metals, energy and agriculture values. The Trust is exposed to both market risk, the risk arising from changes in the market value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract. The market sensitive instruments held by the Trust are acquired for speculative trading purposes, and all or a substantial amount of the Trusts assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Trusts main line of business. |
Purchase and sale of futures contracts requires margin deposits with the brokers. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a broker to segregate all customer transactions and assets from such brokers proprietary |
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December 31, 2009
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December 31, 2009
activities. A customers cash and other property (for example, U.S. Treasury bills) deposited with a broker are considered commingled with all other customer trusts subject to the brokers segregation requirements. In the event of a brokers insolvency, recovery may be limited to a pro rata share of segregated Trusts available. It is possible that the recovered amount could be less than total cash and other property deposited. | ||
The amount of required margin and good faith deposits with the broker and interbank market makers usually range from 10% to 30% of Net Asset Value. The market value of securities held to satisfy such requirements at December 31, 2009 and December 31, 2008 was $6,649,184 and $1,100,000, respectively, which equals 23% and 3% of Net Asset Value, respectively. The cash deposited with interbank market makers at December 31, 2009 and December 31, 2008 was $102,855 and $257,949, respectively, which equals 0% and 1% of Net Asset Value, respectively. These amounts are included in cash. Included in cash deposits with the broker and interbank market maker at December 31, 2009 and December 31, 2008 was restricted cash for margin requirements of $0 and $1,180,793 respectively, which equals 0% and 3% of Net Asset Value respectively. | ||
The Trust trades forward currency and options on forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty nonperformance. Accordingly, the risks associated with forward currency and options on foreign currency contracts are generally greater than those associated with exchange traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward currency and options on forward currency contracts typically involves delayed cash settlement. | ||
The Trust has a substantial portion of its assets on deposit with financial institutions. In the event of a financial institutions insolvency, recovery of Trust assets on deposit may be limited to account insurance or other protection afforded such deposits. | ||
For derivatives, risks arise from changes in the market value of the contracts. Market movements result in frequent changes in the fair market value of the Trusts open positions and, consequently, in its earnings and cash flow. The Trusts market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Trusts open positions and the liquidity of the markets in which it trades. Theoretically, the Trust is exposed to a market risk equal to the notional contract value of futures and forward currency contracts purchased and unlimited liability on such contracts sold short. As both a buyer and seller of options, the Trust pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Trust to potentially unlimited liability, and purchased options expose the Trust to a risk of loss limited to the premiums paid. See Note 1. C. for an explanation of how the Trust determines its valuation for derivatives as well as the netting of derivatives. | ||
The unrealized gain (loss) on open futures, forward currency and options on forward currency contracts is comprised of the following: |
Forward Currency and | ||||||||||||||||
Options on Forward | ||||||||||||||||
Futures Contracts | Currency Contracts | |||||||||||||||
(exchange traded) | (non-exchange traded) | |||||||||||||||
December 31, 2009 | December 31, 2008 | December 31, 2009 | December 31, 2008 | |||||||||||||
Gross unrealized gains |
$ | 529,851 | $ | 192,722 | $ | 1,199,815 | $ | 977,900 | ||||||||
Gross unrealized losses |
(585,570 | ) | (198,876 | ) | (1,461,324 | ) | (819,786 | ) | ||||||||
Net unrealized gain (loss) |
$ | (55,719 | ) | $ | (6,154 | ) | $ | (261,509 | ) | $ | 158,114 | |||||
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December 31, 2009
Notes to Financial Statements
December 31, 2009
In March 2008, the FASB issued ASC 815, Derivatives and Hedging (formerly SFAS No. 161, Disclosures about Dervative instruments and Hedging Activities). ASC 815 provides enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments are accounted for, and how derivative instruments affect an entitys financial position, financial performance and cash flows. ASC 815 is effective for financial statements issued for the Trusts first fiscal year beginning after November 15, 2008. The Trust adopted ASC 815 effective January 1, 2009. | ||
The following tables summarize quantitative information required by ASC 815. | ||
The fair value of the Trusts derivatives by instrument type, as well as the location of those instruments on the Statement of Financial Condition, as of December 31, 2009 is as follows: |
Asset | Liability | |||||||||||||
Derivatives at | Derivatives at | |||||||||||||
Statement of Financial | December 31, 2009 | December 31, 2009 | ||||||||||||
Type of Instrument * | Condition Location | Fair Value | Fair Value | Net | ||||||||||
Agricultural Contracts |
Equity in broker trading accounts | $ | 12,155 | $ | (15,206 | ) | $ | (3,051 | ) | |||||
Energy Contracts |
Equity in broker trading accounts | 19,804 | (1,325 | ) | 18,479 | |||||||||
Metal Contracts |
Equity in broker trading accounts | 223,512 | (167,320 | ) | 56,192 | |||||||||
Stock Indices Contracts |
Equity in broker trading accounts | 231,004 | (17,246 | ) | 213,758 | |||||||||
Short-Term Interest Rate Contracts |
Equity in broker trading accounts | 0 | (100,836 | ) | (100,836 | ) | ||||||||
Long Term Interest Rate Contracts |
Equity in broker trading accounts | 43,376 | (283,637 | ) | (240,261 | ) | ||||||||
Forward Currency Contracts |
Net unrealized gain (loss) on forward currency contracts | 1,170,194 | (1,435,347 | ) | (265,153 | ) | ||||||||
Purchased Options on Forward Currency Contracts |
Options purchased, at fair value | 70,935 | 0 | 70,935 | ||||||||||
Written Options on Forward Currency Contracts |
Options written, at fair value | 0 | (19,069 | ) | (19,069 | ) | ||||||||
Totals |
$ | 1,770,980 | $ | (2,039,986 | ) | $ | (269,006 | ) | ||||||
* | Derivatives not designated as hedging instruments under ASC 815 |
The trading revenue of the Trusts derivatives by instrument type, as well as the location of those gains and losses on the Statement of Operations, for the year ended December 31, 2009 is as follows: |
Trading Revenue for | ||||
the Year Ended | ||||
Type of Instrument | December 31, 2009 | |||
Agricultural Contracts |
$ | (111,725 | ) | |
Energy Contracts |
(482,311 | ) | ||
Metal Contracts |
441,641 | |||
Stock Indices Contracts |
(342,289 | ) | ||
Short-Term Interest Rate Contracts |
(177,489 | ) | ||
Long Term Interest Rate Contracts |
(1,121,620 | ) | ||
Forward Currency Contracts |
593,074 | |||
Purchased Options on Forward Currency Contracts |
(668,111 | ) | ||
Written Options on Forward Currency Contracts |
1,086,058 | |||
Total |
$ | (782,772 | ) | |
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Trading Revenue for | ||||
the Year Ended | ||||
Line Item in the Statement of Operations | December 31, 2009 | |||
Futures trading gains (losses): |
||||
Realized |
$ | (1,744,229 | ) | |
Change in unrealized |
(49,564 | ) | ||
Forward
currency and options on forward currency trading gains (losses): |
||||
Realized |
1,430,644 | |||
Change in unrealized |
(419,623 | ) | ||
Total |
$ | (782,772 | ) | |
For the year ended December 31, 2009, the monthly average of futures contracts bought and sold was approximately 900, and the monthly average of notional value of forward currency and options on forward currency contracts was $175,300,000. | ||
Open contracts generally mature within three months; as of December 31, 2009, the latest maturity date for open futures contracts is March 2011, the latest maturity date for open forward currency contracts is March 2010, and the latest expiry date for options on forward currency contracts is January 2010. However, the Trust intends to close all futures and foreign currency contracts prior to maturity. | ||
Campbell & Company has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. Campbell & Companys basic market risk control procedures consist of continuously monitoring open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 30%. Campbell & Companys attempt to manage the risk of the Trusts open positions is essentially the same in all market categories traded. Campbell & Company applies risk management policies to its trading which generally limit the total exposure that may be taken per risk unit of assets under management. In addition, Campbell & Company follows diversification guidelines (often formulated in terms of the balanced volatility between markets and correlated groups), as well as precalculating stop-loss points at which systems will signal to close open positions. Campbell & Company controls the risk of the Funds non-trading fixed income instruments by limiting the duration of such instruments and requiring a minimum credit quality of the issuers of those instruments. | ||
Campbell & Company seeks to minimize credit risk primarily by depositing and maintaining the Trusts assets at financial institutions and brokers which Campbell & Company believes to be credit worthy. The unitholder bears the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received. |
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Note 9. INDEMNIFICATIONS
In the normal course of business, the Trust enters into contracts and agreements that contain a variety of representations and warranties which provide general indemnifications. The Trusts maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred. The Trust expects the risk of any future obligation under these indemnifications to be remote. |
Note 10. SUBSEQUENT EVENTS
Management of the Trust has evaluated subsequent events through the date the financial statements were issued. There are no subsequent events to disclose or record. |
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EXHIBIT INDEX
Exhibit Number | Description of Document | Page Number | ||
31.01
|
Certification by Chief Executive Officer | E 2 | ||
31.02
|
Certification by Chief Financial Officer | E 3 | ||
32.01
|
Certification by Chief Executive Officer | E 4 | ||
32.02
|
Certification by Chief Financial Officer | E 5 |
E-1