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EX-32.02 - EX-32.02 - CAMPBELL STRATEGIC ALLOCATION FUND LP | w77913exv32w02.htm |
EX-31.01 - EX-31.01 - CAMPBELL STRATEGIC ALLOCATION FUND LP | w77913exv31w01.htm |
EX-32.01 - EX-32.01 - CAMPBELL STRATEGIC ALLOCATION FUND LP | w77913exv32w01.htm |
EX-31.02 - EX-31.02 - CAMPBELL STRATEGIC ALLOCATION FUND LP | w77913exv31w02.htm |
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 0-22260 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 STRATEGIC ALLOCATION FUND, L.P.
(Exact name of Registrant as specified in its charter)
DELAWARE | 52-1823554 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) |
2850 Quarry Lake Drive, Baltimore, Maryland 21209
(Address of principal executive offices, including zip code)
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 Limited Partnership 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, or
a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule
12b-2 of the Exchange Act.
Large accelerate filer o | Accelerated filer o | Non-accelerated filer þ | Small Reporting Company o | |||
(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 713,543.470 Units of
General and Limited Partnership Interest issued and outstanding.
Total number of pages 59. Consecutive page numbers on which exhibits commence: 5.
TABLE OF CONTENTS
ii
PART I
Item 1. | Business |
Overview
Campbell Strategic Allocation Fund, L.P. (the Registrant or the Fund) is a limited
partnership, which was organized on May 11, 1993 under the Delaware Revised Uniform Limited
Partnership Act. The Registrant operates as a commodity investment pool, whose purpose is to trade
speculatively in the U.S. and international futures, forward and option markets. 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 general partner 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 general partner. 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 Fund 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 Fund 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 Fund executes transactions. Additionally, the Fund is subject to the
requirements of futures commission merchants (brokers) and interbank market makers through which
the Fund trades..
The Registrant originally filed a registration statement with the U.S. Securities and Exchange
Commission for the sale of a minimum of $2,500,000 and a maximum of $25,000,000 in Units of Limited
Partnership Interest at $1,000 each, which registration statement was effective on January 12,
1994. The Fund has since filed additional registration statements with the U.S. Securities and
Exchange Commission to bring the sum of existing and offered Units of Limited Partnership Interest
to a maximum of approximately $6,410,000,000 through December 2009. The Unit selling price during
the initial offering period, which lasted for approximately 90 days and ended on April 15, 1994,
was $1,000. Since April 15, 1994, Units of Limited Partnership Interest of the Fund have been
offered on an ongoing basis during the Funds 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.
Effective June 14, 2008, Units in the Fund were no longer offered for sale. For existing
investors in the Fund, business has been and will be conducted as usual. There will be no change
in trading, operations or monthly statements, etc. and redemptions will continue to be offered on a
monthly basis. On December 18, 2009, a registration statement was filed to reopen the Fund to
existing investors. As of March 31, 2010, the registration is not yet effective.
A total of $6,078,611,354 was raised during the initial and continuing offering periods ending
June 30, 2008.
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, 2023; (b) an
election to dissolve the Registrant at any time by Limited Partners owning more than 50% of the
Units then outstanding; (c) the withdrawal of Campbell &
1
Company, unless one or more new general
partners have been elected or appointed pursuant to the Amended Agreement of Limited Partnership
(d) Campbell & Company determines that the purpose of the Fund cannot be fulfilled; or (e) any
event which shall make unlawful the continuing existence of the Registrant.
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 Funds ability to trade, but it is possible
that they may in the future if either or both Funds 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 adviorss 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
Fund.
Operations
The Registrant conducts its business in one industry segment, the speculative trading of
futures, forwards 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 Funds assets are currently
allocated to the Financial, Metal &
2
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 Fund appointed Wilmington Trust Investment Management LLC, a wholly owned
subsidiary of Wilmington Trust Corporation, and Horizon Cash Management L.L.C. as cash managers
(the Cash Managers) under Non-Custody Investment Advisory Agreements dated July 8, 2009, to
manage and control the liquid assets of the Fund. Both Cash Managers are registered as investment
advisers with the Securities and Exchange Commission of the United States under the Investment
Advisers Act of 1940. The Cash Managers specialize 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 Fund opened custodial accounts at The Northern Trust Company (the Custodian), and has
granted the Cash Managers a limited power of attorney over such accounts. Such power of attorney
gives the Cash Managers authority to make certain investments on behalf of the Funds provided such
investments are consistent with the investment guidelines created by the trading advisor to both
Funds. 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 Managers on behalf of the Fund or other liquid funds of the
Fund will be held in its custody accounts at the custodian. The Cash Managers will have no
beneficial or other interest in the securities and cash in such custody accounts.
Charges
The following is a description of current charges to the Fund.
RECIPIENT | NATURE OF PAYMENT | AMOUNT OF PAYMENT | ||
Campbell & Company
|
Brokerage Fee | The Fund will pay Campbell & Company a brokerage fee of up to 8% of the Funds month-end net asset value per annum (prior to accruals for such brokerage fee or performance fees), irrespective of profitability, of which up to 1% is paid to the futures brokers and over-the-counter counterparties and 4% is paid to the selling agents. Campbell & Company retains the remaining 3%. | ||
Campbell & Company
|
Performance Fee | Campbell & Company will be paid a quarterly performance fee equal to 20% of aggregate cumulative appreciation in the Funds net asset value per Unit, if any, excluding interest income and as adjusted for subscriptions and redemptions. | ||
Campbell & Company
|
Offering Costs | Campbell & Company pays the Funds offering costs and is subsequently reimbursed by the Fund. Reimbursement of the Funds offering costs are limited to exceed 2.5% of the aggregate subscriptions accepted by Campbell & Company. | ||
Cash Managers and
Custodian Fees
|
Cash Management and Custody fees | Cash management and custodial fees for the Funds non-margin assets is estimated at 0.10% per annum based on the percentage of assets under management by the cash managers. |
3
Other Information
The Fund 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 Fund does not maintain a
website where these reports are posted. However, the Funds 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:
You Could Possibly Lose Your Total Investment in the Fund
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 Fund.
The Fund 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 Funds account with face values equal
to several times the Funds net asset value. 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 Fund to Liquidate Positions at Disadvantageous Prices
The Fund may utilize and may depend on the availability of credit in order to trade their
portfolios. There can be no assurance that the Fund will be able to maintain adequate financing
arrangements under all market circumstances. As a general matter, the dealers that provide
financing to the Fund 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 Fund 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.
4
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 Fund from banks, dealers and other counterparties is likely to be restricted
in disrupted markets. The Fund 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 Fund 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 Fund, 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 Fund. 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, and possible fees assessed. For example,
redemptions from the Fund can occur only at the end of a month. If a large number of redemption
requests were to be received at one time for the Fund, the Fund might have to liquidate positions
to satisfy the requests. Such a forced liquidation could adversely affect the Fund and consequently
your investment.
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 Fund.
Forward and Option Transactions are Over-the-Counter, are Not Regulated and are Subject to Credit
Risk
The Fund 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 is not regulated by the Commodity Futures Trading Commission. 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 Fund. 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 Fund 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 Fund faces the risk of non-performance by its
counterparties to forward and option contracts and such non-performance may cause some or all of
its gains to remain unrealized.
The Fund has a substantial portion of its assets on deposit with financial institutions. In
the event of a financial institutions insolvency, recovery of the Funds 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 Funds assets at
financial institutions and brokers that Campbell & Company believes to be creditworthy.
5
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 Fund 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 Fund 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 Fund 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 a futures, forward or option transaction, the opposing side of that
transaction will have an equal and off-setting loss. If the Fund does not 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 Fund 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 currently 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 Fund. Regulations in other jurisdictions also appear likely to take similar
action.
6
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 Funds ability to trade, but it is possible
that they may in the future if either or both Funds 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 detrimental to the Fund.
The Fund is a Party to Financial Instruments With Elements of Off-Balance Sheet Risk, Which Causes
the Fund 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 Fund
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 Fund, 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 Fund at
the same time, and if the Funds trading advisor was unable to offset futures interests positions
of the Fund, the Fund could lose all of its assets and the limited partners would realize a 100%
loss. Campbell & Company, Inc., the general partner (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 Campbell & Company for the Fund is 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 or 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 third quarter 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 Fund. It may become more
difficult for the Fund to implement its trading strategies 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 Fund
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
7
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 Fund 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 & Company 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 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 Fund 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 Financial, Metal & Energy Large,
reducing the range of markets in which trading opportunities may be pursued. Campbell & Company
reserves the right to make distributions of profits to limited partners 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 may exceed the compensation it receives from
managing the Funds account. Because records with respect to other accounts are not accessible to
limited partners in the Fund, the limited partners will not be able to determine if Campbell &
Company is favoring other accounts.
Investors Will Not be Able to View the Funds Holdings on a Daily Basis, Which May Result in
Unanticipated Losses
Campbell & Company makes the Funds trading decisions. While Campbell & Company receives daily
trade confirmations from the futures brokers and over-the-counter counterparties, the Funds
trading results are reported to limited partners monthly. Accordingly, an investment in the Fund
does not offer limited partners 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 Funds holdings.
Tax Risks
Investors are Taxed Based on Their Share of the Funds Profits
Investors are taxed each year on their share of the Funds profits, if any, irrespective of
whether they redeem any Units or receive any cash distributions from the Fund. Campbell & Company
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 Funds Ordinary Income Despite Overall Losses
Investors may be required to pay tax on their allocable share of the Funds ordinary income,
which in the case of the Fund is the Funds interest income, gain on some foreign futures
contracts, and certain other investment assets, even though the Fund incurs overall losses. Capital
losses of individual taxpayers can be used only to offset capital gains and $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 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.
8
There Could be a Limit on the Deductibility of Brokerage and Performance Fees
Although the Fund treats the brokerage fees and performance fees paid to Campbell & Company
and other expenses of the Fund as ordinary and necessary business expenses, upon an IRS audit the
Fund may be required to treat such fees as investment advisory fees if the Funds trading
activities did not constitute a trade or business
for tax purposes. If the limited partners share of expenses were deemed to be investment
advisory fees, a limited partners tax liability would likely increase because of statutory
limitations applicable to miscellaneous itemized deductions, including investment advisory fees, of
individual taxpayers. In addition, upon audit, a portion of the brokerage fees might be treated as
a non-deductible syndication cost or might be treated as a reduction in the Funds capital gain or
as an increase in the Funds capital loss. If the brokerage fees were so treated, a limited
partners tax liability would likely increase.
Other Risks
Fees and Commissions are Charged Regardless of Profitability and are Subject to Change
The Fund is subject to substantial charges payable irrespective of profitability, in addition
to performance fees which are payable based on the Funds profitability. Included in these charges
are brokerage fees and operating expenses. On the Funds forward and option trading, bid-ask
spreads and prime brokerage fees are incorporated into the pricing of the Funds forward and option
contracts by the counterparties in addition to the brokerage fees paid by the Fund. It is not
possible to quantify the bid-ask spreads paid by the Fund because the Fund 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, each Limited Partnership Agreement
allows for changes to be made to the brokerage fee and performance fee upon sixty days notice to
the limited partners.
The Funds Service Providers Could Fail, Which May Result in Losses to the Fund
The institutions, including but not limited to, the futures brokers, over-the-counter
counterparties, the cash managers and the custodian, with which the Fund trades or invests may
encounter financial difficulties that impair the operational capabilities or the capital position
of the Fund. The futures brokers are generally required by U.S. law to segregate all funds received
from such brokers customers from such brokers proprietary assets. If the futures brokers do not
do so to the full extent required by law, the assets of the Fund might not be fully protected in
the event of the bankruptcy of the futures brokers. Furthermore, in the event of the futures
brokers bankruptcy, the Fund could lose the entire amount, or 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 Fund (for example, Treasury
bills deposited by the Fund with the futures brokers as margin) was held by the futures brokers.
Furthermore, dealers in forward and option 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 action.
The recent events surrounding the bankruptcies or similar proceedings with respect to various
parties have demonstrated the risk that assets that traders such as the Fund 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.
9
Investors Must Not Rely on the Past Performance of Either Campbell & Company or the Fund in
Deciding Whether to Buy Units
The future performance of the Fund is not predictable, and no assurance can be given that the
Fund 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 Fund 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 Fund
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 Fund are
treated equitably with other Campbell & Company clients.
Campbell & Company has a conflict of interest because it acts as the general partner and sole
trading advisor for the Fund.
Since Campbell & Company acts as both trading advisor and general partner for the Fund, it is
very unlikely that its advisory contract will be terminated by the Fund. The fees payable to
Campbell & Company were established by it and were not the subject of arms-length negotiation.
These fees on the Strategic Allocation Fund consist of a (i) brokerage fee of up to 8% of the
Strategic Allocation Funds month-end net asset value per annum (prior to accruals for such
brokerage fee or performance fees) (of which 3% is retained by Campbell & Company) and (ii)
quarterly performance fee equal to 20% of aggregate cumulative appreciation in the Strategic
Allocation Funds net asset value per Unit, if any, excluding interest income and redemptions and
as adjusted for subscriptions and redemptions. Campbell & Company, as general partner, determines
whether or not distributions are made and it receives increased fees to the extent distributions
are not made.
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 Fund, 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 Fund. No counsel has been appointed to represent the limited
partners 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 Fund.
The Fund Places Significant Reliance on Campbell & Company and the Incapacity of its Principals
Could Adversely Affect the Fund
The incapacity of Campbell & Companys principals could have a material and adverse effect on
Campbell & Companys ability to discharge its obligations under the advisory agreement. However,
there are no individual principals at Campbell & Company whose absence would result in a material
and adverse effect on Campbell & Companys ability to adequately carry out its advisory
responsibilities.
The Fund Could Terminate Before You Achieve Your Investment Objective Causing Potential Loss of
Your Investment or Disrupting Your Investment Portfolio Allocation
As general partner of the Fund, Campbell & Company may withdraw from the Fund upon 120 days
notice, which would cause the Fund to terminate unless a substitute general partner were obtained.
Other events, such as a long-term substantial loss suffered by the Fund, could also cause the Fund
to terminate before the expiration of its stated term. This could cause you to liquidate your
investments and upset 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 brokers were revoked or suspended, such entity would no longer be able to
provide services to the Fund.
10
The Fund Is Not A Regulated Investment Company and Therefore Is Subject to Different Protections
Than a Regulated Investment Company
Although the Fund and Campbell & Company are subject to regulation by the CFTC, the Fund is 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.
Forwards, Options, Swaps, Hybrids and Other Derivatives are Not Subject to CFTC Regulation;
Therefore, the Fund Will Not Receive the Same Protections on These Transactions
The Fund trades foreign exchange contracts and options in the interbank market. In the future,
the Fund may also trade swaps, 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 Fund will not receive the
protections which are provided by the CFTCs regulatory scheme for these transactions.
The Fund 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 Funds 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 Fund 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 Fund 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 Fund) 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
You may transfer or assign your Units only upon 30 days prior written notice to Campbell &
Company and only if Campbell & Company is satisfied that the transfer complies with applicable laws
and would not result in adverse legal or tax consequences for the Fund.
11
A Single-Advisor Fund May Be More Volatile Than a Multi-Advisor Fund
The Fund is a single-advisor managed futures funds. You 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 single-advisor managed futures funds, the
Fund 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 speculative strategies for the Fund, and receives performance fees
based on the trading profits earned by it for the Fund. Campbell & Company would not agree to manage the
Funds accounts in the absence of such a performance fee arrangement. Accordingly, Campbell &
Company may make investments that are riskier than might be made if the Funds assets were managed
by a trading advisor that did not require performance-based compensation.
The Fund May Distribute Profits to Limited Partners at Inopportune Times
Campbell & Company reserves the right to make distributions of profits of the Fund to the
limited partners at any time in its sole discretion in order to control the growth of the assets
under Campbell & Companys management. Limited partners 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 limited partners.
Potential Inability to Trade or Report Due to Systems Failure Could Adversely Affect the Fund
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 Fund 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 Fund or make
trading impossible until such failure or inaccuracy is remedied. Any such failure or inaccuracy
could, in certain market conditions, cause the Fund 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 the Fund 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 the Fund to reverse such action or
inaction, all of which may ultimately be to the detriment of the Fund.
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, short-term time deposits and other
fixed income securities.
12
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 Limited Partnership Interest are not publicly traded. Units may be transferred or
redeemed subject to the conditions imposed by the Amended Agreement of Limited Partnership. As of
December 31, 2009, there were 28,672 Partners in the Registrant and 713,543.470 Units of General
and Limited Partnership 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 |
Dollars in thousands, except per Unit amounts
For the Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Total Assets |
$ | 1,858,856 | $ | 2,541,717 | $ | 3,999,585 | $ | 5,777,987 | $ | 5,233,064 | ||||||||||
Total Partners Capital |
1,708,492 | 2,455,894 | 3,803,392 | 5,654,540 | 5,175,699 | |||||||||||||||
Total Net Trading Gain (Loss)
(includes brokerage commissions) |
(56,051 | ) | 139,135 | (620,158 | ) | 348,176 | 611,580 | |||||||||||||
Net Income (Loss) |
(199,877 | ) | (24,940 | ) | (739,180 | ) | 211,997 | 424,794 | ||||||||||||
Net Income (Loss) Per General
and Limited Partner Unit * |
(240.77 | ) | (21.87 | ) | (440.33 | ) | 113.86 | 272.37 | ||||||||||||
Increase (Decrease) in
Net Asset Value per
General and Limited
Partner Unit |
(235.52 | ) | (40.75 | ) | (458.41 | ) | 121.64 | 261.69 |
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)
(includes brokerage
commissions) |
$ | 8,220 | $ | (137,234 | ) | $ | 79,151 | $ | (6,188 | ) | ||||||
Net Income (Loss) |
(34,226 | ) | (174,076 | ) | 46,059 | (37,634 | ) | |||||||||
Net Income (Loss)
per General and
Limited Partner
Unit * |
(37.40 | ) | (203.11 | ) | 57.43 | (50.42 | ) | |||||||||
Increase (Decrease)
in Net Asset Value
per General and
Limited Partner Unit |
(39.68 | ) | (202.41 | ) | 58.93 | (52.36 | ) | |||||||||
Net Asset Value per
General and Limited
Partner Unit at the
End of the Period |
2,590.22 | 2,387.81 | 2,446.74 | 2,394.38 |
* | - Based on weighted average number of units outstanding during the period. |
13
1 stQtr. | 2 ndQtr. | 3 rdQtr. | 4 thQtr. | |||||||||||||
2008 | 2008 | 2008 | 2008 | |||||||||||||
Total Net Trading
Gain (Loss)
(includes brokerage
commissions) |
$ | 64,968 | $ | 173,742 | $ | (85,127 | ) | $ | (14,448 | ) | ||||||
Net Income (Loss) |
27,628 | 130,870 | (124,310 | ) | (59,128 | ) | ||||||||||
Net Income (Loss)
per General and
Limited Partner
Unit * |
20.41 | 111.53 | (118.24 | ) | (60.14 | ) | ||||||||||
Increase (Decrease)
in Net Asset Value
per General and
Limited Partner Unit |
19.54 | 119.12 | (119.34 | ) | (60.07 | ) | ||||||||||
Net Asset Value per
General and Limited
Partner Unit at the
End of the Period |
2,690.19 | 2,809.31 | 2,689.97 | 2,629.90 |
* | - 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 Limited Partnership Interest commenced on January 12, 1994. The
initial offering terminated on April 15, 1994 and the Fund commenced operations on April 18, 1994.
The continuing offering period commenced at the termination of the initial offering period and
terminated on June 14, 2008.
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 Funds significant accounting policies are described in detail in Note 1 of the Financial
Statements.
The Fund 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. option, swap and forward contracts which are traded in the inter-bank market).
14
Capital Resources
Effective June 14, 2008, units in the Fund were no longer offered for sale. For existing
investors in the Fund, business has been and will be conducted as usual. There will be no
change in trading, operations or monthly statements, etc. and redemptions will continue to be
offered on a monthly basis.
The Fund does not intend to raise any capital through borrowing. Due to the nature of
the Funds business, it will make no capital expenditures and will have no capital assets,
which are not operating capital or assets.
The Fund 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 are taken into account each month, the trade level of the Fund is adjusted and
positions in the instruments the Fund trades are liquidated, if necessary, on a pro-rata basis
to meet those increases or decreases in trade levels.
Liquidity
Most United States commodity exchanges limit fluctuations in 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. Futures prices have occasionally moved to the daily limit for several
consecutive days with little or no trading. Similar occurrences could prevent the Fund from
promptly liquidating unfavorable positions and subject the Fund to substantial losses which could
exceed the margin initially committed to such trades. In addition, even if futures prices have not
moved the daily limit, the Fund 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 Funds futures trading operations, the Funds assets are expected to be highly
liquid.
The entire offering proceeds, without deductions, were credited to the Funds bank, brokerage
and/or cash management accounts. The Fund meets margin requirements for its trading activities by
depositing cash or U.S. government securities with the futures brokers and the over-the-counter
counterparties. This does not reduce the risk of loss from trading futures, forward and option
contracts. The Fund receives all interest earned on its assets. No other person shall receive any
interest or other economic benefits from the deposit of Fund assets.
Approximately 10% to 30% of the Funds assets normally are committed as required margin for
futures contracts and held by the futures brokers, 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 brokers pursuant to the Commodity Exchange Act and regulations
thereunder. Approximately 10% to 30% of the Funds assets are deposited with over-the-counter
counterparties in order to initiate and maintain forward and options on 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 general partner deposits the majority of those assets of the Fund that are not required to
be deposited as margin with the futures broker and over-the-counter counterparty in custodial
accounts with Northern Trust Company. The assets deposited in the custodial accounts with Northern
Trust Company are segregated. Such custodial accounts constitute approximately 40% to 80% of the
Funds assets and is invested, directly by Wilmington Trust Investment Management LLC
(Wilmington) and Horizon Cash Management LLC (Horizon). Wilmington and Horizon are registered
with the Securities and Exchange Commission as investment advisers under the Investment Advisers
Act of 1940. Wilmington and Horizon do not guarantee any interest or
15
profits will accrue on the Funds assets in the custodial account. Wilmington and Horizon 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 Fund occasionally receives margin calls (requests to post more collateral) from its
futures brokers or over-the-counter counterparties, which are met by moving the required portion of
the assets held in the custody accounts at Northern Trust to the margin accounts. In the past 3
years, the Strategic Allocation Fund has not needed to liquidate any position as a result of a
margin call.
The Funds 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 Fund
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 Fund, 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 Fund at
the same time, and if the Funds trading advisor was unable to offset futures interests positions
of the Fund, the Fund could lose all of its assets and the Limited Partners would realize a 100%
loss. Campbell & Company, Inc., the General Partner (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 Fund. 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 Fund only with those counterparties which it believes to be
creditworthy. All positions of the Fund 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 Fund.
Disclosures About Certain Trading Activities that Include Non-Exchange Traded Contracts
Accounted for at Fair Value
The Fund invests in futures, option and forward currency contracts. The fair 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 fair value of forward currency (non-exchange traded) contracts is
extrapolated on a forward basis from the spot prices quoted as of 3:00 P.M. (E.T.) of the last
business day of the reporting period or based on the market value of its exchange-traded
equivalent. The fair 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.
16
Results of Operations
The returns for the years ended December 31, 2009, 2008, and 2007 were (8.96)%, (1.53)%, and
(14.65)%, 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 Fund accrued
brokerage fees in the amount of $144,756,816, $215,712,348 and $348,527,101, respectively, and paid
brokerage fees in the amounts of $149,311,800, $224,173,238; and $358,887,478, respectively. No
performance fees were accrued or paid during the years ended December 31, 2009, 2008 and 2007.
2009
Of the (8.96)% return for the year ended December 31, 2009, approximately 1.66% was due to
trading losses (before commissions) and approximately 0.14% due to interest income offset by
approximately 7.44% due to brokerage fees, operating costs and offering costs borne by the Fund. An
analysis of the 1.66% trading loss by sector is as follows:
Sector | % Gain (Loss) | |||
Currencies |
3.70 | % | ||
Commodities |
(0.24 | ) | ||
Stock Indices |
(0.46 | ) | ||
Interest Rates |
(4.66 | ) | ||
(1.66 | )% | |||
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 Fund
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 Funds 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 Fund 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 Funds
17
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 Funds 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
Fund for 2008, the Funds 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 Funds
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 Fund 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 Fund in the fixed income sector were offset by marginal gains in the foreign exchange
sector. The Funds 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 Funds 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 Funds general positioning across the curve.
Smaller losses were recorded in currency trading as investors appeared unwilling to chase
growth currencies higher, at the
18
expense of the dollar, from already stretched levels. Gains
were recorded in commodity markets as the Fund increased its exposure to this sector with the
launch of more agile models providing more efficient holding period 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 Funds 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
Fund, 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 Fund 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 Funds risk exposure to
equity indices was relatively low, our net long position yielded the largest sector loss during the
month. 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
Of the (1.53)% return for the year ended December 31, 2008, approximately 4.19% was due to
trading gains (before commissions) and approximately 1.76% due to interest income offset by
approximately 7.48% due to brokerage fees, operating costs and offering costs borne by the Fund. An
analysis of the 4.19% trading gain by sector is as follows:
Sector | % Gain (Loss) | |||
Stock Indices |
8.58 | % | ||
Commodities |
0.81 | |||
Currencies |
(0.58 | ) | ||
Interest Rates |
(4.62 | ) | ||
4.19 | % | |||
19
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 Funds performance in January was a 0.46% loss, 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 Funds currency trading profited from these moves, generating a positive return for the month.
The Fund also recorded gains in equity indices trading, as the S&P 500, Dow, and NASDAQ continued
to slide. Overall, the Fund had a positive month, posting a 1.44% 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 Funds performance was close to flat for the month
at (0.23)%, with gains in equity indices and currencies offset by losses in commodities and fixed
income. The Fund closed the first quarter of 2008 with a year-to-date gain of 0.73%.
In April, the U.S. Dollar rallied against key funding currencies, despite a generally weak
global economy. The Fund 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 Fund suffered a loss of 2.69%.
May was a strong month for the Fund. 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 Fund achieved a positive return on the month
of 1.95%.
In June the Fund 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 Fund, 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 Fund had modest gains in foreign exchange sector. The Fund concluded
the second quarter with a gain of 4.43% for the quarter, and a year-to-date gain of 5.19%.
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 Fund earned profits in equity indices trading. Those gains were offset by losses in fixed
income and commodities. All-in, the Fund finished the month with a loss of 1.30%.
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
Fund 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 1.64%.
20
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 Fund posted a loss of 1.37%. 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 Fund, as did a decrease in risk levels across the portfolio. The Fund concluded the third
quarter with a loss of 4.25% for the quarter, leaving the year-to-date gain at 0.72%.
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 Fund, 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 1.22%.
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 Fund maintained a relatively low risk
profile during the month, which resulted in marginal losses and gains across the sectors. For the
Fund, losses in fixed income offset marginal gains in other sectors, resulting in a loss for the
month of 1.46%.
December saw more of the same on the global economic front. The Fund, 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 Fund gained 0.44% for
December.
The Fund completed the fourth quarter of 2008, one of the most volatile in market history,
with a loss for the quarter of 2.23%, bringing the return for the year to (1.53)%.
2007
Of the (14.65)% return for the year ended December 31, 2007, approximately 11.89% was due to
trading losses (before commissions) and approximately 7.46% due to brokerage fees, operating costs
and offering costs borne by the Fund offset by approximately 4.70% due to interest income. An
analysis of the 11.89% trading loss by sector is as follows:
Sector | % Gain (Loss) | |||
Interest Rates |
0.80 | % | ||
Metals |
(0.67 | ) | ||
Energy |
(1.79 | ) | ||
Stock Indices |
(2.61 | ) | ||
Currencies |
(7.62 | ) | ||
(11.89 | )% | |||
21
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 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 Funds 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 Fund 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 Fund 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 Funds positions resulting in one of the
Funds 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 Funds 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 Funds 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 Funds technical and macro models
were both exposed to high-yielding currencies that suffered market value declines of historical
proportions in mid-August. The Funds 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 Funds exposure
was reduced. The Fund 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 Funds 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
Fund 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
22
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
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.
23
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Introduction
Past Results Not Necessarily Indicative of Future Performance
The Fund 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 Funds
assets are subject to the risk of trading loss. Unlike an operating company, the risk of
market sensitive instruments is integral, not incidental, to the Funds main line of business.
Market movements result in frequent changes in the fair value of the Funds open
positions and, consequently, in its earnings and cash flow. The Funds 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 Funds open positions and the liquidity of the markets
in which it trades.
The Fund 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 Funds 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 Funds market sensitive instruments.
Quantifying the Funds Trading Value at Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Funds 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 Funds risk exposure in the various market sectors traded is estimated in terms of
Value at Risk (VaR). The Fund 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 portfolio value are
based on daily percentage changes observed in key market indices or other market factors to
which the portfolio is sensitive. The Funds VaR at a one day 97.5% confidence level of the
Funds 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.
24
The Fund 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 Funds 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 Funds 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 Funds, 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 Fund 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 Fund is the speculative trading of futures, forwards and
options, the composition of the Funds 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 Funds Trading Value at Risk in Different Market Sectors
The following tables indicate the trading Value at Risk associated with the
Funds 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 | % | 3.70 | % | ||||
Interest Rates |
0.68 | % | (4.66 | )% | ||||
Stock Indices |
0.45 | % | (0.46 | )% | ||||
Commodities |
0.41 | % | (0.24 | )% | ||||
Aggregate/Total |
1.62 | % | (1.66 | )% | ||||
* | - 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 Funds 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 1.66% was due to trading losses (before commissions) and approximately 0.14% due to interest income offset by approximately 7.44% due to brokerage fees, operating costs and offering costs borne by the Fund giving a net return of (8.96)%. |
25
December 31, 2008 | ||||||||
Trading | ||||||||
Market Sector | Value at Risk* | Gain/(Loss)** | ||||||
Currencies |
0.50 | % | (0.58 | )% | ||||
Interest Rates |
0.30 | % | (4.62 | )% | ||||
Stock Indices |
0.18 | % | 8.58 | % | ||||
Commodities |
0.05 | % | 0.81 | % | ||||
Aggregate/Total |
0.60 | % | 4.19 | % | ||||
* | - 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 Funds 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 4.19% was due to trading gains (before commissions) and approximately 1.76% due to interest income offset by approximately 7.48% due to brokerage fees, operating costs and offering costs borne by the Fund giving a net return of (1.53)%. |
December 31, 2007 | ||||||||
Trading | ||||||||
Market Sector | Value at Risk* | Gain/(Loss)** | ||||||
Currencies |
1.48 | % | (7.62 | )% | ||||
Stock Indices |
0.51 | % | (2.61 | )% | ||||
Interest Rates |
0.42 | % | 0.80 | % | ||||
Commodities |
0.22 | % | (2.46 | )% | ||||
Aggregate/Total |
1.72 | % | (11.89 | )% | ||||
* | - 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 Funds 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 11.89% was due to trading losses (before commissions) and approximately 7.46% due to brokerage fees, operating costs and offering costs borne by the Fund offset by approximately 4.70% due to interest income giving a net return of (14.65)%. |
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; |
26
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 Funds future financial performance or its ability to manage and monitor risk. There can
be no assurance that the Funds 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 Fund 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 Fund
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 Fund has
non-trading market risk on fixed income securities held as part of its cash management
program. The cash managers will use their best endeavors in the management of the assets of
the Fund but provide no guarantee that any profit or interest will accrue to the Fund as a
result of such management.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Funds market risk exposures
except for (i) those disclosures that are statements of historical fact and (ii) the
descriptions of how the Fund 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 Funds 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 Funds 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 Fund. There can be no assurance that the Funds
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 Fund.
The following were the primary trading risk exposures of the Fund as of December 31,
2009, by market sector.
Currencies
Exchange rate risk can be a significant market exposure of the Fund. The Funds currency
exposure is to foreign 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 Fund 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 Funds currency sector will change significantly in
the future.
Interest Rates
Interest rate risk can be a significant market exposure of the Fund. Interest rate
movements directly affect the price of the sovereign bond positions held by the Fund 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 Funds profitability. The Funds primary interest rate exposure is to
27
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 Fund for the foreseeable
future. Changes in the interest rate environment will have the most impact on longer dated
fixed income positions, at points of time throughout the year the majority of the speculative
positions held by the Fund may be held in medium to long-term fixed income positions.
Stock Indices
The Funds 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 Fund are by law limited to futures on broadly based indices. The Fund is
primarily exposed to the risk of adverse price trends or static markets in the major U.S.,
European and Japanese indices. Markets that trade in a narrow range could result in the
Funds positions being whipsawed into numerous small losses.
Energy
The Funds primary energy market exposure is to natural gas, 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 Funds metals market exposure is to fluctuations in the price of gold, silver, copper,
nickel and zinc.
Agricultural
The Funds agricultural exposure is to the fluctuations of the price of wheat, corn,
coffee and cotton.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the non-trading risk exposures of the Fund as of December 31, 2009.
Foreign Currency Balances
The Funds primary foreign currency balances are in Japanese Yen, British Pounds and
Euros. The Fund controls the non-trading risk of these balances by regularly converting these
balances back into dollars (no less frequently than twice a month, and more frequently if a
particular foreign currency balance becomes unusually large).
Fixed Income Securities
The Funds 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 managers, Wilmington and Horizon, have authority to make certain
investments on behalf of the Fund All securities purchased by the cash managers on behalf of
the Fund will be held in the Funds custody accounts at the custodian. The cash managers will
use their best endeavors in the management of the assets of the Fund but provide no guarantee
that any profit or interest will accrue to the Fund as a result of such management.
28
Treasury Bill Positions for Margin Purposes
The Fund also has market exposure in its Treasury Bill portfolio. The Fund 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 Funds 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 Fund and Campbell & Company, severally, attempt to manage the risk
of the Funds 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 manages the risk of the Funds 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 Funds 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.
General
The Fund 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 Fund generally will use a small percentage of assets as margin, the
Fund does not believe that any increase in margin requirements, as proposed, will have a
material effect on the Funds operations.
Item 8. Financial Statements and Supplementary Data
Financial statements meeting the requirements of Regulation S-X appear beginning on Page 38 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.
Item 9A. Controls and Procedures
Campbell & Company, Inc., the general partner of the Fund, with the participation of the
general partners 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))
29
with respect to the Fund 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 general partners internal control over
financial reporting applicable to the Fund 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 Fund.
Item 9A(T). Controls and Procedures
Managements Annual Report on Internal Control over Financial Reporting
Campbell & Company, Inc. (CCI), the general partner of the Fund is responsible for the management
of the partnership. 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 Partnerships 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 Partnership; | ||
| 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 Partnerships 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 Partnerships 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
Partnerships internal control over financial reporting was effective.
This annual report does not include an attestation report of the Partnerships 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.
30
PART III
Item 10. Directors, Executive Officers and Corporate Governance
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.
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
31
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 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
32
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.
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.
33
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 Fund,
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, Quarry Lake Drive, Baltimore, Maryland 21209 or by calling
1-800-698-7235.
Item 11. Executive Compensation
The Registrant is managed by its general partner, Campbell & Company. Campbell & Company
receives from the Registrant a Brokerage Fee equal to 7% of the Registrants month-end Net Assets
per year. From such 7% Brokerage Fee, Campbell & Company remits 4% to the broker-dealers which
engaged in the distribution of the Units in return for ongoing services to the Limited Partners.
Campbell & Company retains the remaining 3% as management fees (2% for providing advisory fees and
1% for acting as general partner). 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 Funds bank, broker or
cash management accounts.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
(a) | Security Ownership of Certain Beneficial Owners. As of December 31, 2009, no Units of Limited Partnership are owned or held by an officer of Campbell & Company. | ||
(b) | Security Ownership of Management. As of December 31, 2009, Campbell & Company owned 6,637.982 Units of General Partnership Interest having a value of $15,893,851. Units of General Partnership will always be owned by Campbell & Company in its capacity as general partner. The amounts are summarized in the table below: |
Name of Beneficial | Amount and Nature of | |||||
Title of Class | Owner | Beneficial Ownership | Percentage of Class | |||
Units of General
Partnership Interest
|
Campbell & Company, Inc. | 6,637.982 Units | 0.93% of Units outstanding |
Item 13. Certain Relationships and Related Transactions, and Director Independence
See Item 11, Executive Compensation and Item 12, Security Ownership of Certain
Beneficial Owners and Management.
34
Item 14. Principal Accounting Fees and Services
The principal accountant for the year ended December 31, 2009 and 2008 was Deloitte
& Touche LLP.
(a) | Audit Fees | ||
The aggregate fees billed for professional services rendered by the principal accountant for the audit of the Funds annual financial statements, for review of financial statements included in the Funds Forms 10-Q and other services normally provided in connection with regulatory filing or engagements for the years ended December 31, 2009 and 2008 were $121,500 and $117,500, 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 $16,900 and $0, repectively. | |||
(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
(a) | The Following documents are filed as part of this report: |
(1) | See Financial Statements beginning on page 33 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) | Exhibits |
Exhibit Number | Description of Document | |
1.01
|
Form of Selling Agreement among the Registrant, Campbell & Company, PaineWebber Incorporated and the Selling Agent. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Form S-1 (No. 333-43250) filed on August 8, 2000). | |
1.02
|
Form of Auxiliary Selling Agreement. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Form S-1 (No. 333-80933) filed on June 17, 1999). | |
3.01
|
Agreement of Limited Partnership of the Registrant dated May 11, 1993. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Form S-1 (No. 33-67164) filed on August 9, 1993). | |
3.02
|
Certificate of Limited Partnership of the Registrant. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Form S-1 (No. 33-67164) filed on August 9, 1993). | |
3.03
|
Amended Agreement of Limited Partnership of the Registrant. (Incorporated by reference to the respective exhibit to the Registrants Post-Effective Amendment Number 4 to the Registration Statement Form S-1 (No. 333-119259) filed on August 15, 2007). | |
10.01
|
Form of Advisory Agreement between the Registrant and Campbell & Company. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Form S-1 (No. 33-67164) filed on August 9, 1993). |
35
Exhibit Number | Description of Document | |
10.02
|
Form of Customer Agreement between the Registrant and PaineWebber Incorporated. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Form S-1 (No. 33-67164) filed on August 9, 1993). | |
10.03
|
Subscription Agreement and Power of Attorney. (Incorporated by reference to the respective exhibit to the Registrants Post-Effective Amendment Number 4 to the Registration Statement Form S-1 (No. 333-119259) filed on August 15, 2007). | |
10.04
|
Escrow Agreement between the Registrant and Mercantile Safe Deposit & Trust Company. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Form S-1 (No. 33-67164) filed on August 9, 1993). | |
10.05
|
International Swap Dealers Association, Inc. Master Agreement between the Registrant and ABN AMRO Bank, N.V. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement of Form S-1 (No. 333-61274) filed on May 18, 2001). | |
10.06
|
International Swap Dealers Association, Inc. Master Agreement between the Registrant and Deutsche Bank AG. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement of Form S-1 (No. 333-61274) filed on May 18, 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. |
36
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 STRATEGIC ALLOCATION FUND, L.P. By: CAMPBELL & COMPANY, INC. General Partner |
||||
By: | /s/ Theresa D. Becks | |||
Theresa D. Becks | ||||
Chief Executive Office 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., General Partner 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 |
37
CAMPBELL STRATEGIC ALLOCATION
FUND, L.P.
FUND, L.P.
ANNUAL REPORT
December 31, 2009
38
CAMPBELL STRATEGIC ALLOCATION FUND, L.P
INDEX
PAGES | ||||
Deloitte & Touche LLP
|
40 | |||
Financial Statements |
||||
41-45 | ||||
46 | ||||
47 | ||||
48 | ||||
49 | ||||
50 | ||||
51-59 |
39
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Campbell Strategic Allocation Fund, L.P.
Campbell Strategic Allocation Fund, L.P.
We have audited the accompanying statements of financial condition of Campbell Strategic Allocation
Fund, L.P. (the Partnership), including the condensed schedules of investments, as of December
31, 2009 and 2008, and the related statements of operations, cash flows, changes in partners
capital (net asset value) and financial highlights for each of the three years in the period then
ended. These financial statements and financial highlights are the responsibility of the
Partnerships 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 Partnership 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 Partnerships 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 Strategic Allocation Fund, L.P. as of
December 31, 2009 and 2008, the results of its operations, cash flows, changes in its partners
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
40
FIXED INCOME SECURITIES
Maturity | % of Net | |||||||||||
Face Value | Description | Values ($) | Asset Value | |||||||||
Bank Deposits
|
||||||||||||
United States |
||||||||||||
Financials (cost $65,590,000) |
$ | 65,689,065 | 3.84 | % | ||||||||
Commercial Paper
|
||||||||||||
Germany |
||||||||||||
Materials (cost $17,252,376) |
$ | 17,259,598 | 1.01 | % | ||||||||
Netherlands |
||||||||||||
Consumer
Discretionary (cost $23,481,034) |
$ | 23,481,191 | 1.37 | % | ||||||||
United States |
||||||||||||
Consumer Discretionary |
$ | 143,576,225 | 8.40 | % | ||||||||
Consumer Staples |
$ | 80,742,190 | 4.73 | % | ||||||||
Energy |
$ | 72,767,525 | 4.26 | % | ||||||||
Financials |
$ | 231,111,026 | 13.53 | % | ||||||||
Industrials |
$ | 79,892,248 | 4.68 | % | ||||||||
Municipal |
$ | 169,945,539 | 9.95 | % | ||||||||
Telecommunications |
$ | 4,409,848 | 0.26 | % | ||||||||
Utilities |
$ | 29,998,000 | 1.76 | % | ||||||||
Total United States (cost $812,299,397) |
$ | 812,442,601 | 47.57 | % | ||||||||
Total Commercial Paper
(cost $853,032,807) |
$ | 853,183,390 | 49.95 | % | ||||||||
Corporate Bonds
|
||||||||||||
United States |
||||||||||||
Financials (cost $106,198,611) |
$ | 106,210,199 | 6.22 | % | ||||||||
Government And Agency Obligations
|
||||||||||||
United States |
||||||||||||
U.S. Government Agency |
$ | 311,649,912 | 18.24 | % | ||||||||
U.S. Treasury Bills |
||||||||||||
$ | 30,000,000 | U.S. Treasury Bills Due 01/14/2010 * |
$ | 29,999,973 | 1.76 | % | ||||||
$ | 100,000,000 | U.S. Treasury Bills Due 01/28/2010 * |
$ | 99,998,667 | 5.85 | % |
See Accompanying Notes to Financial Statements.
41
Campbell Strategic Allocation Fund, L.P.
Condensed Schedule of Investments
December 31, 2009
Condensed Schedule of Investments
December 31, 2009
Maturity | % of Net | |||||||||||
Face Value | Description | Values ($) | Asset Value | |||||||||
$ | 37,000,000 | U.S. Treasury Bills Due 03/25/2010 * |
$ | 36,994,882 | 2.17 | % | ||||||
$ | 100,000,000 | U.S. Treasury Bills Due 04/01/2010 * |
$ | 99,988,750 | 5.85 | % | ||||||
Total United States (cost $579,049,811) |
$ | 578,632,184 | 33.87 | % | ||||||||
Short Term Investment Funds
|
||||||||||||
United States |
||||||||||||
Short Term
Investment Funds (cost $2,531,880) |
$ | 2,531,880 | 0.15 | % | ||||||||
Total Fixed Income Securities
(cost $1,606,403,109) |
$ | 1,606,246,718 | 94.03 | % | ||||||||
LONG FUTURES CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Agricultural |
$ | (59,783 | ) | 0.00 | % | |||
Energy |
$ | 798,745 | 0.05 | % | ||||
Metals |
$ | 4,011,004 | 0.23 | % | ||||
Stock indices |
$ | 12,654,145 | 0.74 | % | ||||
Short-term interest rates |
$ | (5,342,338 | ) | (0.31 | )% | |||
Long-term interest rates |
$ | (14,825,155 | ) | (0.87 | )% | |||
Total long futures contracts |
$ | (2,763,382 | ) | (0.16 | )% | |||
SHORT FUTURES CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Agricultural |
$ | 50,561 | 0.00 | % | ||||
Metals |
$ | (2,581,534 | ) | (0.15 | )% | |||
Long-term interest rates |
$ | 717,238 | 0.04 | % | ||||
Total short futures contracts |
$ | (1,813,735 | ) | (0.11 | )% | |||
Total futures contracts |
$ | (4,577,117 | ) | (0.27 | )% | |||
FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Various long forward currency contracts |
$ | (64,092,290 | ) | (3.75 | )% | |||
Various short forward currency contracts |
$ | 49,010,012 | 2.87 | % | ||||
Total forward currency contracts |
$ | (15,082,278 | ) | (0.88 | )% | |||
See Accompanying Notes to Financial Statements.
42
Campbell Strategic Allocation Fund, L.P.
Condensed Schedule of Investments
December 31, 2009
Condensed Schedule of Investments
December 31, 2009
PURCHASED OPTIONS ON FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Purchased options on forward currency contracts
(premiums paid $4,023,342) |
$ | 4,062,722 | 0.24 | % | ||||
WRITTEN
OPTIONS ON FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Written options on forward currency
contracts (premiums received
$1,254,708) |
$ | (1,094,738 | ) | (0.06 | )% | |||
* | Pledged as collateral for the trading of futures, forward and option positions. |
See Accompanying Notes to Financial Statements.
43
Campbell Strategic Allocation Fund, L.P.
Condensed Schedule of Investments
December 31, 2008
Condensed Schedule of Investments
December 31, 2008
FIXED INCOME SECURITIES
UNITED STATES GOVERNMENT SECURITIES*
Maturity | Maturity | % of Net | ||||||||||||||
Face Value | Date | Description | Values ($) | Asset Value | ||||||||||||
$ | 800,000,000 | 03/19/2009 | U.S. Treasury Bills |
$ | 799,948,669 | 32.57 | % | |||||||||
$ | 300,000,000 | 03/26/2009 | U.S. Treasury Bills |
$ | 299,986,000 | 12.21 | % | |||||||||
$ | 37,000,000 | 01/22/2009 | U.S. Treasury Bills |
$ | 37,000,000 | 1.51 | % | |||||||||
Total United States government securities (cost, including accrued interest, $1,136,934,669) | $ | 1,136,934,669 | 46.29 | % | ||||||||||||
LONG FUTURES CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Metals |
$ | 94,925 | 0.00 | % | ||||
Stock indices |
$ | 771,700 | 0.03 | % | ||||
Short-term interest rates |
$ | 3,840,778 | 0.16 | % | ||||
Long-term interest rates |
$ | 4,905,228 | 0.20 | % | ||||
Total long futures contracts |
$ | 9,612,631 | 0.39 | % | ||||
SHORT FUTURES CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Energy |
$ | (801,546 | ) | (0.03 | )% | |||
Metals |
$ | (1,664,930 | ) | (0.07 | )% | |||
Stock indices |
$ | (3,375,148 | ) | (0.14 | )% | |||
Short-term interest rates |
$ | (27,625 | ) | 0.00 | % | |||
Long-term interest rates |
$ | (3,537,223 | ) | (0.14 | )% | |||
Total short futures contracts |
$ | (9,406,472 | ) | (0.38 | )% | |||
Total futures contracts |
$ | 206,159 | 0.01 | % | ||||
See Accompanying Notes to Financial Statements.
44
Campbell Strategic Allocation Fund, L.P.
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 |
$ | 26,680,445 | 1.09 | % | ||||
Various short forward currency contracts |
$ | (15,851,597 | ) | (0.65 | )% | |||
Total forward currency contracts |
$ | 10,828,848 | 0.44 | % | ||||
PURCHASED
OPTIONS ON FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Purchased options on forward currency contracts
(premiums paid $969,001) |
$ | 519,315 | 0.02 | % | ||||
WRITTEN OPTIONS ON FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Written options on forward
currency contracts (premiums
received $3,537,352) |
$ | (3,202,653 | ) | (0.13 | )% | |||
* | Pledged as collateral for the trading of futures, forward and option positions. |
See Accompanying Notes to Financial Statements.
45
Campbell
Strategic Allocation Fund, L.P.
Statements
of Financial Conditions
December
31, 2009 And 2008
2009 | 2008 | |||||||
ASSETS |
||||||||
Equity in broker trading accounts |
||||||||
Cash |
$ | 224,803,378 | $ | 1,278,536,649 | ||||
Restricted cash |
0 | 41,411,655 | ||||||
Fixed income securities
(cost $199,987,417 and $1,099,934,669, respectively) |
199,987,417 | 1,099,934,669 | ||||||
Net unrealized gain (loss) on open futures contracts |
(4,577,117 | ) | 206,159 | |||||
Total equity in broker trading accounts |
420,213,678 | 2,420,089,132 | ||||||
Cash and cash equivalents |
41,337,614 | 30,721,976 | ||||||
Restricted cash deposits with forwards broker |
0 | 42,515,724 | ||||||
Fixed income securities
(cost $1,406,415,692 and $37,000,000, respectively) |
1,406,259,301 | 37,000,000 | ||||||
Options purchased, at fair value
(premiums paid $4,023,342 and $969,001, respectively) |
4,062,722 | 519,315 | ||||||
Net unrealized gain (loss) on open forward
currency contracts |
(15,082,278 | ) | 10,828,848 | |||||
Interest receivable |
2,064,955 | 41,698 | ||||||
Total assets |
$ | 1,858,855,992 | $ | 2,541,716,693 | ||||
LIABILITIES |
||||||||
Accounts payable |
$ | 642,518 | $ | 668,492 | ||||
Brokerage fee |
10,246,641 | 14,801,625 | ||||||
Options written, at fair value
(premiums received $1,254,708 and $3,537,352, respectively) |
1,094,738 | 3,202,653 | ||||||
Payable for securities purchased |
99,998,667 | 0 | ||||||
Accrued commissions and other trading fees
on open contracts |
206,347 | 114,176 | ||||||
Offering costs payable |
346,751 | 309,964 | ||||||
Redemptions payable |
37,828,712 | 66,725,891 | ||||||
Total liabilities |
150,364,374 | 85,822,801 | ||||||
PARTNERS CAPITAL (Net Asset Value) |
||||||||
General Partner 6,637.982 and 10,367.982 redeemable units
outstanding at December 31, 2009 and December 31, 2008 |
15,893,851 | 27,266,756 | ||||||
Limited Partners 706,905.488 and 923,465.791 redeemable units
outstanding at December 31, 2009 and December 31, 2008 |
1,692,597,767 | 2,428,627,136 | ||||||
Total partners capital (Net Asset Value) |
1,708,491,618 | 2,455,893,892 | ||||||
Total liabilities and partners capital (Net Asset Value) |
$ | 1,858,855,992 | $ | 2,541,716,693 | ||||
See Accompanying Notes to Financial Statements.
46
Campbell
Strategic Allocation Fund, L.P.
Statements of Operations
For
The Years Ended December 31, 2009, 2008 And 2007
2009 | 2008 | 2007 | ||||||||||
TRADING GAINS (LOSSES) |
||||||||||||
Futures trading gains (losses) |
||||||||||||
Realized |
$ | (112,411,933 | ) | $ | 179,004,073 | $ | (90,020,404 | ) | ||||
Change in unrealized |
(4,783,274 | ) | (25,817,098 | ) | (122,751,393 | ) | ||||||
Brokerage commissions |
(2,454,792 | ) | (3,568,175 | ) | (7,474,048 | ) | ||||||
Net gain (loss) from futures trading |
(119,649,999 | ) | 149,618,800 | (220,245,845 | ) | |||||||
Forward currency and options on forward
currency trading gains (losses) |
||||||||||||
Realized |
89,537,760 | (108,527,108 | ) | (116,066,270 | ) | |||||||
Change in unrealized |
(25,596,790 | ) | 98,446,709 | (280,170,992 | ) | |||||||
Brokerage commissions |
(342,095 | ) | (403,740 | ) | (3,674,992 | ) | ||||||
Net gain (loss) from forward
currency and options on forward
currency trading |
63,598,875 | (10,484,139 | ) | (399,912,254 | ) | |||||||
Total net trading gain (loss) |
(56,051,124 | ) | 139,134,661 | (620,158,099 | ) | |||||||
NET INVESTMENT INCOME (LOSS) |
||||||||||||
Income |
||||||||||||
Investment income |
3,038,024 | 53,353,643 | 231,682,261 | |||||||||
Realized gain (loss)
on fixed income securities |
(27,242 | ) | 0 | 0 | ||||||||
Change in unrealized gain (loss) on
fixed income securities |
(156,391 | ) | 0 | 0 | ||||||||
Total investment income |
2,854,391 | 53,353,643 | 231,682,261 | |||||||||
Expenses |
||||||||||||
Brokerage fee |
144,756,816 | 215,712,348 | 348,527,101 | |||||||||
Operating expenses |
1,923,333 | 1,715,745 | 2,177,186 | |||||||||
Total expenses |
146,680,149 | 217,428,093 | 350,704,287 | |||||||||
Net investment income (loss) |
(143,825,758 | ) | (164,074,450 | ) | (119,022,026 | ) | ||||||
NET INCOME (LOSS) |
$ | (199,876,882 | ) | $ | (24,939,789 | ) | $ | (739,180,125 | ) | |||
NET INCOME (LOSS) PER
GENERAL AND LIMITED PARTNER UNIT
(based on weighted average number of units outstanding during the year) |
$ | (240.77 | ) | $ | (21.87 | ) | $ | (440.33 | ) | |||
INCREASE (DECREASE) IN NET ASSET
VALUE PER GENERAL AND LIMITED PARTNER
UNIT |
$ | (235.52 | ) | $ | (40.75 | ) | $ | (458.41 | ) | |||
See Accompanying Notes to Financial Statements.
47
Campbell
Strategic Allocation Fund, L.P.
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) |
$ | (199,876,882 | ) | $ | (24,939,789 | ) | $ | (739,180,125 | ) | |||
Adjustments to reconcile net income (loss) to
net cash from (for) operating activities |
||||||||||||
Net change in unrealized |
30,536,455 | (72,629,611 | ) | 402,922,385 | ||||||||
(Increase) decrease in restricted cash |
83,927,379 | (83,927,379 | ) | 64,472,902 | ||||||||
(Increase) decrease in option premiums paid |
(3,054,341 | ) | 7,018,555 | (3,996,452 | ) | |||||||
Increase (decrease) in option premiums received |
(2,282,644 | ) | (947,652 | ) | 2,165,305 | |||||||
Increase (decrease) in payable for securities
purchased |
99,998,667 | 0 | 0 | |||||||||
(Increase) decrease in interest receivable |
(2,023,257 | ) | 1,054,378 | 5,249,167 | ||||||||
Increase (decrease) in accounts payable and
accrued expenses |
(4,488,787 | ) | (9,173,661 | ) | (11,714,926 | ) | ||||||
Net maturities (purchases) of investments in
fixed income securities |
(469,468,439 | ) | 2,401,398,318 | 116,703,926 | ||||||||
Net cash from (for) operating activities |
(466,731,849 | ) | 2,217,853,159 | (163,377,818 | ) | |||||||
Cash flows from (for) financing activities |
||||||||||||
Addition of units |
0 | 38,172,639 | 86,659,011 | |||||||||
Redemption of units |
(573,627,818 | ) | (1,457,812,994 | ) | (1,108,096,252 | ) | ||||||
Offering costs paid |
(2,757,966 | ) | (5,142,749 | ) | (6,074,654 | ) | ||||||
Net cash from (for) financing activities |
(576,385,784 | ) | (1,424,783,104 | ) | (1,027,511,895 | ) | ||||||
Net increase (decrease) in cash and cash equivalents |
(1,043,117,633 | ) | 793,070,055 | (1,190,889,713 | ) | |||||||
Cash and cash equivalents |
||||||||||||
Beginning of year |
1,309,258,625 | 516,188,570 | 1,707,078,283 | |||||||||
End of year |
$ | 266,140,992 | $ | 1,309,258,625 | $ | 516,188,570 | ||||||
End of year cash and cash equivalents consists of: |
||||||||||||
Cash in broker trading accounts |
$ | 224,803,378 | $ | 1,278,536,649 | $ | 274,531,263 | ||||||
Cash and cash equivalents |
41,337,614 | 30,721,976 | 241,657,307 | |||||||||
Total end of year cash and cash equivalents |
$ | 266,140,992 | $ | 1,309,258,625 | $ | 516,188,570 | ||||||
See Accompanying Notes to Financial Statements.
48
Campbell Strategic Allocation Fund, L.P.
Statements of Changes in Partners Capital (Net Asset Value)
For The Years Ended December 31, 2009, 2008 And 2007
Statements of Changes in Partners Capital (Net Asset Value)
For The Years Ended December 31, 2009, 2008 And 2007
Partners Capital | ||||||||||||||||||||||||
General Partner | Limited Partners | Total | ||||||||||||||||||||||
Units | Amount | Units | Amount | Units | Amount | |||||||||||||||||||
Balances at
December 31, 2006 |
19,222.982 | $ | 60,149,864 | 1,787,882.705 | $ | 5,594,390,302 | 1,807,105.687 | $ | 5,654,540,166 | |||||||||||||||
Net income (loss)
for the year ended
December 31,
2007 |
(8,740,910 | ) | (730,439,215 | ) | (739,180,125 | ) | ||||||||||||||||||
Additions |
5.000 | 13,617 | 29,737.090 | 86,729,507 | 29,742.090 | 86,743,124 | ||||||||||||||||||
Redemptions |
0.000 | 0 | (412,704.833 | ) | (1,192,493,381 | ) | (412,704.833 | ) | (1,192,493,381 | ) | ||||||||||||||
Offering costs |
(71,361 | ) | (6,146,858 | ) | (6,218,219 | ) | ||||||||||||||||||
Balances at
December 31,
2007 |
19,227.982 | 51,351,210 | 1,404,914.962 | 3,752,040,355 | 1,424,142.944 | 3,803,391,565 | ||||||||||||||||||
Net income (loss)
for the year ended
December 31,
2008 |
(239,626 | ) | (24,700,163 | ) | (24,939,789 | ) | ||||||||||||||||||
Additions |
0.000 | 0 | 14,098.315 | 38,088,526 | 14,098.315 | 38,088,526 | ||||||||||||||||||
Redemptions |
(8,860.000 | ) | (23,787,863 | ) | (495,547.486 | ) | (1,332,065,532 | ) | (504,407.486 | ) | (1,355,853,395 | ) | ||||||||||||
Offering costs |
(56,965 | ) | (4,736,050 | ) | (4,793,015 | ) | ||||||||||||||||||
Balances at
December 31,
2008 |
10,367.982 | 27,266,756 | 923,465.791 | 2,428,627,136 | 933,833.773 | 2,455,893,892 | ||||||||||||||||||
Net income (loss)
for the year ended
December 31,
2009 |
(2,437,542 | ) | (197,439,340 | ) | (199,876,882 | ) | ||||||||||||||||||
Redemptions |
(3,730.000 | ) | (8,906,531 | ) | (216,560.303 | ) | (535,824,108 | ) | (220,290.303 | ) | (544,730,639 | ) | ||||||||||||
Offering costs |
(28,832 | ) | (2,765,921 | ) | (2,794,753 | ) | ||||||||||||||||||
Balances at
December 31,
2009 |
6,637.982 | $ | 15,893,851 | 706,905.488 | $ | 1,692,597,767 | 713,543.470 | $ | 1,708,491,618 | |||||||||||||||
Net Asset Value per General and Limited Partner Unit | ||||||||
December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||
$2,394.38 |
$2,629.90 | $2,670.65 | ||||||
See
Accompanying Notes to Financial Statements.
49
Campbell Strategic Allocation Fund, L.P.
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 |
$ | 2,629.90 | $ | 2,670.65 | $ | 3,129.06 | ||||||
Income (loss) from operations: |
||||||||||||
Total net trading
gains (losses)
(1) |
(58.90 | ) | 107.33 | (383.81 | ) | |||||||
Net investment income (loss)
(1) |
(173.25 | ) | (143.88 | ) | (70.90 | ) | ||||||
Total net income (loss) from operations |
(232.15 | ) | (36.55 | ) | (454.71 | ) | ||||||
Offering
costs
(1) |
(3.37 | ) | (4.20 | ) | (3.70 | ) | ||||||
Net asset value per unit at end of year |
$ | 2,394.38 | $ | 2,629.90 | $ | 2,670.65 | ||||||
Total Return |
(8.96 | )% | (1.53 | )% | (14.65 | )% | ||||||
Supplemental Data |
||||||||||||
Ratios to average net asset value: |
||||||||||||
Expenses prior to performance fee |
7.16 | % | 7.19 | % | 7.11 | % | ||||||
Performance fee |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Total expenses |
7.16 | % | 7.19 | % | 7.11 | % | ||||||
Net
investment income (loss)
(2) |
(7.02 | )% | (5.43 | )% | (2.41 | )% | ||||||
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.
50
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. | General Description of the Fund | |
Campbell Strategic Allocation Fund, L.P. (the Fund) is a Delaware limited partnership which operates as a commodity investment pool. The Fund engages in the speculative trading of futures contracts, forward currency contracts and options on forward currency contracts. | ||
Effective June 14, 2008, units in the Fund were no longer offered for sale. For existing investors in the Fund, business is conducted as usual. There was no change in trading, operations or monthly statements, etc. and redemptions will continue to be offered on a monthly basis. | ||
B. | Regulation | |
As a registrant with the Securities and Exchange Commission, the Fund 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 Fund 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 Fund executes transactions. Additionally, the Fund is subject to the requirements of futures commission merchants (brokers) and interbank market makers through which the Fund trades. | ||
C. | Method of Reporting | |
The Funds 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 Funds 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 Fund writes an option, an amount equal to the premium received by the Fund 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, which approximates fair value. Premiums and discounts on debt securities are amortized for financial reporting purposes. |
51
Campbell Strategic Allocation Fund, L.P.
Notes to Financial Statements
December 31, 2009
Notes to Financial Statements
December 31, 2009
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 Fund 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 Fund 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 Funds 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 Fund 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 Fund did not have any Level 3 assets or liabilities. | ||
The following tables set forth by level within the fair value hierarchy the Funds 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 | $ | 1,606,246,718 | $ | 0 | $ | 1,606,246,718 | ||||||||
Other Financial Instruments |
||||||||||||||||
Exchange-traded futures
contracts |
(4,577,117 | ) | 0 | 0 | (4,577,117 | ) | ||||||||||
Forward currency contracts |
0 | (15,082,278 | ) | 0 | (15,082,278 | ) | ||||||||||
Options purchased |
0 | 4,062,722 | 0 | 4,062,722 | ||||||||||||
Options written |
0 | (1,094,738 | ) | 0 | (1,094,738 | ) | ||||||||||
Total |
$ | (4,577,117 | ) | $ | 1,594,132,424 | $ | 0 | $ | 1,589,555,307 | |||||||
52
Campbell Strategic Allocation Fund, L.P.
Notes to Financial Statements
December 31, 2009
Notes to Financial Statements
December 31, 2009
Fair Value at December 31, 2008 | ||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments |
||||||||||||||||
Fixed income securities |
$ | 0 | $ | 1,136,934,669 | $ | 0 | $ | 1,136,934,669 | ||||||||
Other Financial Instruments |
||||||||||||||||
Exchange-traded futures contracts |
206,159 | 0 | 0 | 206,159 | ||||||||||||
Forward currency contracts |
0 | 10,828,848 | 0 | 10,828,848 | ||||||||||||
Options purchased |
0 | 519,315 | 0 | 519,315 | ||||||||||||
Options written |
0 | (3,202,653 | ) | 0 | (3,202,653 | ) | ||||||||||
Total |
$ | 206,159 | $ | 1,145,080,179 | $ | 0 | $ | 1,145,286,338 | ||||||||
D. | Cash and Cash Equivalents | |
Cash and cash equivalents includes cash and overnight money market investments at financial institutions. | ||
E. | Income Taxes | |
The Fund prepares calendar year U.S. federal and applicable state information tax returns and reports to the partners their allocable shares of the Funds income, expenses and trading gains or losses. No provision for income taxes has been made in the accompanying financial statements as each partner is individually responsible for reporting income or loss based on such partners respective share of the Funds income and expenses as reported for income tax purposes. | ||
Management has continued to evaluate the application of ASC 740, Income Taxes (formerly FASB No. 48, Accounting for Uncertainty in Income Taxes) to the Fund, and has determined that no reserves for uncertain tax positions were required. There are no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months. The Fund 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. | ||
F. | Offering Costs | |
Campbell & Company, Inc. (Campbell & Company) has incurred all costs in connection with the initial and continuous offering of units of the Fund (offering costs). In addition, Campbell & Company continues to compensate wholesalers for services rendered to Limited Partners. The Funds liability for offering costs is limited to the maximum of total offering costs incurred by Campbell & Company or 2.5% of the aggregate subscriptions accepted during the initial and continuous offerings. The Fund is only liable for payment of offering costs on a monthly basis as calculated based on the limitations stated above. At December 31, 2009, and December 31, 2008, the Fund reflects a liability in the statement of financial condition for offering costs payable to Campbell & Company of $346,751 and $309,964, respectively. The amount of monthly reimbursement due to Campbell & Company is charged directly to partners capital. | ||
If the Fund terminates prior to completion of payment of the calculated amounts to Campbell & Company, Campbell & Company will not be entitled to any additional payments, and the Fund 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 $529,166 and $926,519, respectively. |
53
Campbell Strategic Allocation Fund, L.P.
Notes to Financial Statements
December 31, 2009
Notes to Financial Statements
December 31, 2009
G. | Foreign Currency Transactions | |
The Funds 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. | ||
H. | 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 Funds financial statements and disclosures, if any, is currently being assessed. |
Note 2. | GENERAL PARTNER AND COMMODITY TRADING ADVISOR |
The general partner of the Fund is Campbell & Company, which conducts and manages the business of the Fund. Campbell & Company is also the commodity trading advisor of the Fund. The Amended Agreement of Limited Partnership provides that Campbell & Company may make withdrawals of its units, provided that such withdrawals do not reduce Campbell & Companys aggregate percentage interest in the Fund to less than 1% of the net aggregate contributions. | ||
Campbell & Company is required by the Amended Agreement of Limited Partnership to maintain a net worth equal to at least 5% of the capital contributed by all the limited partnerships for which it acts as general partner, including the Fund. The minimum net worth shall in no case be less than $50,000 nor shall net worth in excess of $1,000,000 be required. | ||
The Fund pays a monthly brokerage fee equal to 1/12 of 7% (7% annualized) of month-end net assets to Campbell & Company and approximately $4 per round turn to the broker for execution and clearing costs. From the 7% fee, a portion (4%) is used to compensate selling agents for ongoing services rendered and a portion (3%) is retained by Campbell & Company for trading and management services rendered. The amount paid to the broker and interbank market makers for execution and clearing costs is limited to 1/12 of 1% (1% annualized) of month-end net assets. | ||
Campbell & Company is also paid a quarterly performance fee of 20% of the Funds aggregate cumulative appreciation in the Net Asset Value per unit, exclusive of appreciation attributable to interest income. 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 (the 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 fees are typically paid in the month following the month in which they are earned. The fees are paid from the available cash at the Funds bank, broker or cash management accounts. |
54
Campbell Strategic Allocation Fund, L.P.
Notes to Financial Statements
December 31, 2009
Notes to Financial Statements
December 31, 2009
Note 3. | CASH MANAGER AND CUSTODIAN |
In July 2009 the Fund appointed Wilmington Trust Investment Management LLC, a wholly owned subsidiary of Wilmington Trust Corporation, and Horizon Cash Management LLC as cash managers under the Non-Custody Investment Advisory Agreements to manage and control the liquid assets of the Fund. Each 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 Fund opened custodial accounts at The Northern Trust Company (the custodian) and has granted the cash managers authority to make certain investments on behalf of the Fund provided such investments are consistent with the investment guidelines created by the general partner. All securities purchased by the cash managers on behalf of the Fund will be held in the Funds custody accounts at the custodian. The cash managers will have no beneficial or other interest in the securities and cash in such custody accounts. The cash managers began trading on behalf of the Fund in August 2009. |
Note 4. | DEPOSITS WITH BROKERS |
The Fund deposits assets with brokers 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 brokers. The Fund typically earns interest income on its assets deposited with the brokers. |
Note 5. | OPERATING EXPENSES |
Operating expenses of the Fund are limited by the Amended Agreement of Limited Partnership to 0.5% per year of the average month end Net Asset Value of the Fund. Actual operating expenses were less than 0.5% (annualized) of average month-end Net Asset Value for the years ended December 31, 2009, 2008 and 2007. |
Note 6. | SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS |
Investments in the Fund were made by subscription agreement, subject to acceptance by Campbell & Company. | ||
The Fund is not required to make distributions, but may do so at the sole discretion of Campbell & Company. A limited partner may request and receive redemption of units owned, subject to restrictions in the Amended Agreement of Limited Partnership. 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. | ||
Redemption fees, which are paid to Campbell & Company, apply through the first twelve month-ends following purchase as follows: 4% of Net Asset Value per unit redeemed through the third month-end, 3% of Net Asset Value per unit redeemed through the sixth month-end, 2% of Net Asset Value per unit redeemed through the ninth month-end and 1% of Net Asset Value per unit redeemed through the twelfth month end. After the twelfth month-end following purchase of a unit, no redemption fees apply. For the years ended December 31, 2009 and 2008, Campbell & Company received redemption fees of $11,966 and $192,892 respectively. |
Note 7. | TRADING ACTIVITIES AND RELATED RISKS |
The Fund 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 Fund 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 Fund are acquired for speculative trading purposes, and all or a substantial amount of the Funds assets are subject to the risk of trading loss. Unlike an |
55
Campbell Strategic Allocation Fund, L.P.
Notes to Financial Statements
December 31, 2009
Notes to Financial Statements
December 31, 2009
operating company, the risk of market sensitive instruments is integral, not incidental, to the Funds 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 activities. A customers cash and other property (for example, U.S. Treasury bills) deposited with a broker are considered commingled with all other customer funds subject to the brokers segregation requirements. In the event of a brokers insolvency, recovery may be limited to a pro rata share of segregated Funds 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 $266,982,272 and $1,136,934,669, respectively, which equals 16% and 46% of Net Asset Value, respectively. The cash deposited with interbank market makers at December 31, 2009 and December 31, 2008 was $41,140,268 and $73,104,593, respectively, which equals 2% and 3% 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 $83,927,379 respectively, which equals 0% and 3% of Net Asset Value respectively. | ||
The Fund 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 Fund has a substantial portion of its assets on deposit with financial institutions. In the event of a financial institutions insolvency, recovery of Fund 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 Funds open positions and, consequently, in its earnings and cash flow. The Funds 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 Funds open positions and the liquidity of the markets in which it trades. Theoretically, the Fund 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 Fund 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 Fund to potentially unlimited liability, and purchased options expose the Fund to a risk of loss limited to the premiums paid. See Note 1. C. for an explanation of how the Fund 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 |
$ | 25,016,239 | $ | 14,648,019 | $ | 68,424,483 | $ | 64,296,837 | ||||||||
Gross unrealized losses |
(29,593,356 | ) | (14,441,860 | ) | (83,307,411 | ) | (53,582,976 | ) | ||||||||
Net unrealized gain
(loss) |
$ | (4,577,117 | ) | $ | 206,159 | $ | (14,882,928 | ) | $ | 10,713,861 | ||||||
56
Campbell Strategic Allocation Fund, L.P.
Notes to Financial Statements
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 Funds first fiscal year beginning after November 15, 2008. The Fund adopted ASC 815 effective January 1, 2009. | ||
The following tables summarize quantitative information required by ASC 815. | ||
The fair value of the Funds 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 | $ | 616,716 | $ | (625,938 | ) | $ | (9,222 | ) | |||||
Energy Contracts |
Equity in broker trading accounts | 999,217 | (200,472 | ) | 798,745 | |||||||||
Metal Contracts |
Equity in broker trading accounts | 7,483,987 | (6,054,517 | ) | 1,429,470 | |||||||||
Stock Indices Contracts |
Equity in broker trading accounts | 13,693,321 | (1,039,176 | ) | 12,654,145 | |||||||||
Short-Term Interest Rate Contracts |
Equity in broker trading accounts | 276,225 | (5,618,563 | ) | (5,342,338 | ) | ||||||||
Long Term Interest Rate Contracts |
Equity in broker trading accounts | 1,946,773 | (16,054,690 | ) | (14,107,917 | ) | ||||||||
Forward Currency Contracts |
Net unrealized gain (loss) on forward currency contracts | 66,727,508 | (81,809,786 | ) | (15,082,278 | ) | ||||||||
Purchased Options on Forward Currency Contracts |
Options purchased, at fair value | 4,062,722 | 0 | 4,062,722 | ||||||||||
Written Options on Forward Currency Contracts |
Options written, at fair value | 0 | (1,094,738 | ) | (1,094,738 | ) | ||||||||
Totals |
$ | 95,806,469 | $ | (112,497,880 | ) | $ | (16,691,411 | ) | ||||||
* | Derivatives not designated as hedging instruments under ASC 815 |
57
Campbell Strategic Allocation Fund, L.P.
Notes to Financial Statements
December 31, 2009
Notes to Financial Statements
December 31, 2009
The trading revenue of the Funds 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 |
$ | (6,276,313 | ) | |
Energy Contracts |
(25,247,449 | ) | ||
Metal Contracts |
23,508,827 | |||
Stock Indices Contracts |
(18,689,689 | ) | ||
Short-Term Interest Rate Contracts |
(12,593,188 | ) | ||
Long Term Interest Rate Contracts |
(78,495,735 | ) | ||
Forward Currency Contracts |
36,462,662 | |||
Purchased Options on Forward Currency Contracts |
(41,245,310 | ) | ||
Written Options on Forward Currency Contracts |
68,723,618 | |||
Total |
$ | (53,852,577 | ) | |
Trading Revenue for | ||||
the Year Ended | ||||
Line Item in the Statement of Operations | December 31, 2009 | |||
Futures trading gains (losses): |
||||
Realized |
$ | (113,010,273 | ) | |
Change in unrealized |
(4,783,274 | ) | ||
Forward currency and options on forward currency
trading gains (losses): |
||||
Realized |
89,537,760 | |||
Change in unrealized |
(25,596,790 | ) | ||
Total |
$ | (53,852,577 | ) | |
For the year ended December 31, 2009, the monthly average of futures contracts bought and sold was approximately 85,200, and the monthly average of notional value of forward currency and options on forward currency contracts was $10,284,500,000. | ||
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 Fund 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 Funds 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 Funds assets at financial institutions and brokers which Campbell & Company believes to be credit worthy. The limited partners 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. |
58
Campbell Strategic Allocation Fund, L.P.
Notes to Financial Statements
December 31, 2009
Notes to Financial Statements
December 31, 2009
Note 8. | INDEMNIFICATIONS |
In the normal course of business, the Fund enters into contracts and agreements that contain a variety of representations and warranties which provide general indemnifications. The Funds maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. The Fund expects the risk of any future obligation under these indemnifications to be remote. |
Note 9. | SUBSEQUENT EVENTS |
Management of the Fund has evaluated subsequent events through the date the financial statements were issued. Other than the following, there are no subsequent events to disclose or record. On December 18, 2009, a registration statement was filed with the Securities and Exchange Commission to reopen the Fund to existing investors. As of March 26, 2010, the registration is not yet effective. |
59
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