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EX-31.01 - EX-31.01 - CAMPBELL ALTERNATIVE ASSET TRUST | w82243exv31w01.htm |
EX-32.01 - EX-32.01 - CAMPBELL ALTERNATIVE ASSET TRUST | w82243exv32w01.htm |
EX-32.02 - EX-32.02 - CAMPBELL ALTERNATIVE ASSET TRUST | w82243exv32w02.htm |
EX-31.02 - EX-31.02 - CAMPBELL ALTERNATIVE ASSET TRUST | w82243exv31w02.htm |
Table of Contents
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] |
For the Fiscal Year Ended December 31, 2010
Commission File Number 0-33311 and
2-84126
Commission File Number 0-33311 and
2-84126
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to __________
CAMPBELL ALTERNATIVE ASSET TRUST
(Exact name of Registrant as specified in its charter)
DELAWARE | 52-2238521 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) |
2850 Quarry Lake Drive, Baltimore, Maryland 21209
Registrants telephone number, including area code: (410) 413-2600
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Units of Beneficial Interest
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes o No þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of the Registrants knowledge,
in definitive proxy or information statements incorporated by reference in Part II of this Form
10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definition of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller Reporting Company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).
Yes o No þ
The Registrant has no voting stock. As of December 31, 2010 there were 16,954.41 Units of
Beneficial Interest issued and outstanding.
Total number of pages 65. Consecutive page numbers on which exhibits commence: 6.
TABLE OF CONTENTS
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Table of Contents
PART I
Item 1. Business
Overview
Campbell Alternative Asset Trust (the Registrant or the Trust) is a Trust which was formed
on May 3, 2000 under the Delaware Business Trust Act. The Registrant operates as a commodity
investment pool, whose purpose is to trade speculatively in the U.S. and international futures,
forward and options markets. Specifically, the Trust trades a portfolio primarily focused on
financial futures, which are instruments designed to hedge or speculate on changes in interest
rates, currency exchange rates or stock index values. A secondary emphasis is on metals, energy
and agriculture values.
The trustee of the Trust is U.S. Bank National Association (the Trustee) (formerly Wachovia
Trust Company, National Association). The managing owner and trading advisor of the Registrant is
Campbell & Company, Inc. (Campbell & Company). In addition to making all trading decisions in
its capacity as trading advisor, Campbell & Company conducts and manages all aspects of the
business and administration of the Registrant in its role as managing owner. Campbell & Company
uses a systematic trading approach combined with quantitative portfolio management analysis and
seeks to identify and profit from price movements in the futures, forward and option markets.
Multiple trading models are utilized across most markets traded. Each model analyzes market
movements and internal market and price configurations in order to generate signals to be executed
through a variety of execution platforms.
As a registrant with the Securities and Exchange Commission, the Trust is subject to the
regulatory requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934.
As a commodity investment pool, the Trust is subject to the provisions of the Commodity Exchange
Act, regulations of the Commodity Futures Trading Commission, an agency of the United States (U.S.)
government which regulates most aspects of the commodity futures industry; rules of the National
Futures Association, an industry self-regulatory organization; and the requirements of the various
commodity exchanges where the Trust executes transactions. Additionally, the Trust is subject to
the requirements of futures commission merchants (brokers) and interbank market makers through
which the Trust trades.
The Registrant originally filed a registration statement with the U.S. Securities and Exchange
Commission for the sale of a minimum of $8,000,000 and a maximum of $50,000,000 in Units of
Beneficial Interest at $1,000 each, which registration statement was effective on May 15, 2001.
The Trust has since filed additional registration statements with the U.S. Securities and Exchange
Commission to bring the sum of existing and offered Units of Beneficial Interest to a maximum of
approximately $250,000,000 through March 2003. The Unit selling price during the initial offering
period, which lasted for approximately 130 days and ended on September 30, 2001, was $1,000. Since
September 30, 2001, Units of Beneficial Interest of the Trust have been offered on an ongoing basis
during the Trusts continuing offering period. During the continuing offering period,
subscriptions are accepted monthly and proceeds are transferred to bank and brokerage accounts for
trading purposes. The Unit selling price during the continuing offering period is the net asset
value per unit as of the last business day of the month in which the subscription is accepted.
Units were offered to the public until Campbell & Company terminated the continuing offering
to the public effective December 31, 2002. The current offering is only available to the Campbell
& Company, Inc. 401(k) Plan.
A total of $56,618,830 was raised in the initial and continuing offering periods through
December 31, 2010.
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Under the Amended and Restated Declaration of Trust and Trust Agreement, the Trustee has
delegated to Campbell & Company the exclusive management of all aspects of the business and
administration of the Registrant.
The Registrant will be terminated and dissolved promptly thereafter upon the happening of the
earlier of: (a) the expiration of the Registrants stated term of December 31, 2030; (b) an
election to dissolve the Registrant at any time by Unitholders owning more than 50% of the Units
then outstanding; (c) the withdrawal of Campbell & Company unless one or more new managing owners
have been elected or appointed pursuant to the Amended and Restated Declaration of Trust and Trust
Agreement; (d) a decline in the aggregate net assets of the Trust to less than $500,000 (e) any
event which shall make unlawful the continuing existence of the Registrant or (f) the Registrant is
dissolved by operation of law.
Campbell & Company, Inc. (Campbell) has made the decision to cease the Trust offering,
effective April 22, 2011. The decision to cease the offering is the precursor to closing the Trust
as of May 31, 2011. The Trust initially began trading in October 2001 but has not offered units to
the public since December 2002; however, the registered units continued to be offered exclusively
for sale to the Campbell & Company, Inc. 401(k) Plan (the Plan).
The assets of the Trust are largely comprised (87%) of affiliated entities of Campbell;
Campbells management team has elected to construct a more suitable entity to facilitate the Plan.
The current, non-affiliated, investors in the Trust may have opportunities to invest in other
Campbell fund or trust offerings based on suitability requirements and in consideration with ERISA
capacity. This change is part of Campbells continuing efforts to focus administrative resources
on our currently available offerings which hold the majority of Campbell & Company, Inc. assets.
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.
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The CFTC has recently proposed the imposition of position limits on energy futures contracts
such as crude oil, heating oil, natural gas, gasoline and other energy products. We do not
anticipate these limits, if accepted, will affect the Trusts ability to trade, but it is possible that they may in the future
if either or both Trusts assets increase dramatically.
It is impossible to predict what additional interim or permanent governmental restrictions may
be imposed on the markets and/or the effect of such restrictions on the trading strategies.
However, the trading advisor believes that there is a high likelihood of significantly increased
regulation of the financial markets, and that such increased regulation could be detrimental to the
Trust.
Operations
The Registrant conducts its business in one industry segment, the speculative trading of
futures, forward and option contracts. The Registrant is a market participant in the managed
futures industry. The managed futures industry has grown substantially in the previous ten years.
Market participants include all types of investors, such as corporations, employee benefit plans,
individuals and foreign investors. Service providers of the managed futures industry include (a)
pool operators, which conduct and manage all aspects of trading funds (except trading decisions),
such as the Registrant, (b) trading advisors, which make the specific trading decisions, and (c)
commodity brokers, which execute and clear the trades pursuant to the instructions of the trading
advisor. The Registrant has no employees, and does not engage in the sale of goods or services.
The Registrant engages in financial instrument trading in approximately 55 financial
instrument contracts on domestic and international markets. All of the Trusts assets are
currently allocated to the Financial, Metal & Energy Large Portfolio (FME Large). The FME Large
Portfolio seeks exposure to financial markets, such as interest rates, foreign exchange and stock
indices, as well as metals, energy products, soft commodities and other commodities. The FME Large
Portfolio seeks exposure to these markets by following signals generated by a series of systematic
computer models. The FME Large Portfolio employs a broad spectrum of models including traditional
and factor-based trend following models, as well as a number of macroeconomic-based models. As of
December 2010, the percentage of component risk for each major sector was as follows: 23% to
currencies, 36% to commodity products, 24% to stock indices and 17% 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.
The Trust appointed Wilmington Trust Investment Management LLC, a wholly owned subsidiary of
Wilmington Trust Corporation (the Cash Manager) as a cash manager under the non-custody
Investment Advisory Agreement dated July 8, 2009. The cash manager is registered as an investment
adviser with the Securities and Exchange Commission of the United States under the Investment
Advisers Act of 1940.
The Trust opened a custodial account at The Northern Trust Company (the Custodian), and has
granted the Cash Manager authority to make certain investments on behalf of the Trust provided such
investments are consistent with the investment guidelines created by the trading advisory to the
Trust. Such investments include, but are not limited to, U.S. Treasury securities, securities
issued by U.S. Government Agencies, high quality money-market securities and repurchase agreements.
All securities purchased by the Cash Manager on behalf of the Trust or other liquid funds of the
Trust will be held in its custody account at the Custodian. The Cash Manager will have no
beneficial or other interest in the securities and cash in such a custody account.
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Table of Contents
Charges
The following is a description of the current charges to the Trust.
RECIPIENT | NATURE OF PAYMENT | AMOUNT OF PAYMENT | ||
Campbell & Company
|
Brokerage Fee | The Trust will pay Campbell & Company a brokerage fee of up to 2.85% of the Trusts month-end net asset value per annum (prior to accruals for such brokerage fee or performance fees), irrespective of profitability, of which up to 0.35% is paid to the selling agents. Campbell & Company retains the remaining 2.50%. | ||
Campbell & Company
|
Performance Fee | Campbell & Company will be paid a quarterly performance fee equal to 20% of aggregate cumulative appreciation in the Trusts net asset value per unit, if any, excluding interest income and as adjusted for subscriptions and redemptions. | ||
Campbell & Company
|
Offering Costs | Campbell & Company pays the Trusts offering costs and is subsequently reimbursed by the Trust. Reimbursement of the Trusts offering costs are not to exceed 0.9% of the aggregate subscriptions accepted by Campbell & Company. | ||
Cash Manager and
Custodian Fees
|
Cash Management and Custody fees | Cash management and custodial fees for the Trusts non-margin assets is estimated at 0.10% per annum based on the percentage of assets under management by the cash managers. |
Other Information
The Trust files quarterly, annual and current reports with the Securities and Exchange
Commission (SEC). These reports are available to read and copy at the SECs Public Reference
Facilities in Washington, D.C. at 100 F Street, N.E., Washington, D.C. 20549. Please call the
SECs toll free number, 1-800-SEC-0330, for further information. The Trust does not maintain a
website where these reports are posted. However, the Trusts filings are posted on the SECs
website at http://www.sec.gov.
Item 1A. Risk Factors
The following is a discussion of the risk factors applicable to the Registrant.
Market Risks
You Could Possibly Lose Your Total Investment in the Trust
Futures, forward and option contracts have a high degree of price variability and are subject
to occasional rapid and substantial changes. Consequently, you could lose all or a substantial
amount of your investment in the Trust.
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The Trust is Highly Leveraged
Because the amount of margin funds necessary to be deposited in order to enter into a futures,
forward or option contract position is typically about 2% to 10% of the total value of the
contract, Campbell & Company is able to hold positions in the Trusts account with face values
equal to several times the Trusts net assets. The ratio of margin to equity is typically 10% to
30%. As a result of this leveraging, even a small movement in the price of a contract can cause
major losses.
Changes In Financing Policies or the Imposition of Other Credit Limitations or Restrictions Could
Compel the Trust to Liquidate Positions at Disadvantageous Prices
The Trust may utilize and may depend on the availability of credit in order to trade its
portfolio. There can be no assurance that the Trust will be able to maintain adequate financing
arrangements under all market circumstances. As a general matter, the dealers that provide
financing to the Trust can apply essentially discretionary margin, haircut, financing security and
collateral valuation policies. Changes by dealers in such financing policies, or the imposition of
other credit limitations or restrictions, whether due to market circumstances or governmental,
regulatory or judicial action, may result in large margin calls, loss of financing, forced
liquidation of positions at disadvantageous prices, termination of swap and repurchase agreements
and cross-defaults to agreements with other dealers. Any such adverse effects may be exacerbated in
the event that such limitations or restrictions are imposed suddenly and/or by multiple market
participants at or about the same time. The imposition of such limitations or restrictions could
compel the Trust to liquidate all or part of its portfolio at disadvantageous prices. In 2009,
banks and dealers substantially curtailed financing activities and increased collateral
requirements, forcing many hedge funds to liquidate.
Your Investment Could Be Illiquid
Futures, forward and option positions cannot always be liquidated at the desired price; this
can occur when the market is thinly traded (i.e., a relatively small volume of buy and sell orders)
or in the event of disrupted markets and other extraordinary events in which historical pricing
relationships become materially distorted. The financing available to the Trust from banks, dealers
and other counterparties is likely to be restricted in disrupted markets. The Trust may incur
material losses and the risk of loss from pricing distortions is compounded by the fact that in
disrupted markets many positions become illiquid making it difficult or impossible to close out
positions against which the markets are moving. For example, in 1994, 1998 and again in 2007-2009
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. It is possible that in the
future, in such situations, Campbell & Company may be unable for some time to liquidate certain
unprofitable positions thereby increasing the loss to the Trust from the trade. Additionally,
foreign governments may take or be subject to political actions which disrupt the markets in their
currency or major exports, such as energy products or metals. Market disruptions caused by
unexpected political, military and terrorist events may from time to time cause dramatic losses for
the Trust, and such events can result in otherwise historically low-risk strategies performing with
unprecedented volatility and risk. Any of these actions could also result in losses to the Trust. A
subscription for Units should be considered only by persons financially able to maintain their
investment and who can afford the loss of all or substantially all of such investment.
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Suspension of Redemptions
Also, there is no secondary market for the Units and none is expected to develop. While the
Units have redemption rights, there are restrictions. For example, redemptions can occur only at
the end of a month. If a large number of redemption requests were to be received at one time, the Trust might have to liquidate
positions to satisfy the requests. Such a forced liquidation could adversely affect the Trust and
consequently your investment.
Transfers of interest in the Units are subject to limitations, such as 30 days advance
written notice of any intent to transfer. Also, Campbell & Company may deny a request to transfer
if it determines that the transfer may result in adverse legal or tax consequences for the Trust.
See Declaration of Trust and Trust Agreement Dispositions.
Market Disruptions: Governmental Intervention; The Dodd Frank Wall Street Reform and Consumer
Protection Act (the Reform Act)
The global financial markets have in the past few years gone through pervasive and fundamental
disruptions that 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 previously successful investment strategies.
The Trust may incur major losses in the event of disrupted markets and other extraordinary
events in which historical pricing relationships become materially distorted. 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. The financing available to the Trust from its banks, dealers and other counterparties is
typically reduced in disrupted markets. Such a reduction may result in substantial losses to the
Trust. Market disruptions may from time to time cause dramatic losses for the Trust, and such
events can result in otherwise historically low-risk strategies performing with unprecedented
volatility and risk.
In response to the recent financial crises, the Obama Administration and the U.S. Congress
proposed sweeping reform of the U.S. financial regulatory system. After over a year of debate, the
Reform Act became law in July 2010. The Reform Act seeks to regulate markets, market participants
and financial instruments that previously have been unregulated and substantially alters the
regulation of many other markets, market participants and financial instruments. Because many
provisions of the Reform Act require rulemaking by the applicable regulators before becoming fully
effective and the Reform Act mandate multiple agency reports and studies (which could result in
additional legislative or regulatory action), it is difficult to predict the impact of the Reform
Act on the Trust, Campbell & Company, and the markets in which they trade and invest. The Reform
Act could result in certain investment strategies in which the Trust engages or may have otherwise
engaged becoming non-viable or non-economic to implement. The Reform Act and regulations adopted
pursuant to the Reform Act could have material adverse impact on the profit potential of the Trust.
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Speculative Position Limits
The Commodity Futures Trading Commission (CFTC) and certain exchanges have established
position limits on the maximum net long or short futures and options positions which any person or
group of persons acting in concert may hold or control in particular futures contracts. The CFTC
has adopted a rule generally requiring each domestic U.S. exchange to set speculative position
limits, subject to CFTC approval, for all futures contracts and options traded on such exchanges
which are not already subject to speculative position limits established by the CFTC or such
exchange. The CFTC has jurisdiction to establish speculative position limits with respect to all
futures contracts and options traded on exchanges located in the United States, and any such
exchange may impose additional limits on positions on that exchange. Generally, no speculative
position limits are in effect with respect to the trading of forward contracts or trading on
non-U.S. exchanges. All trading accounts owned or managed by Campbell & Company acting on behalf of
the Trust, its respective principals and affiliates will be combined for speculative position limit purposes. Because future position
limits allow a commodity trading advisor and its principals to control only a limited number of
contracts in any one commodity, Campbell & Company and their principals are potentially subject to
a conflict among the interests of all accounts the Trust and its principals control which are
competing for shares of that limited number of contracts. Although Campbell & Company may be able
to achieve the same performance results with OTC substitutes for futures contracts, the OTC market
may be subject to differing prices, lesser liquidity and greater counterparty risks than the
regulated U.S. commodities exchanges. Campbell & Company may in the future reduce the size of the
positions which would otherwise be taken or not trade in certain markets on behalf of the Trust in
order to avoid exceeding such limits. Modification of such trades that would otherwise be made by
Campbell & Company, if required, could adversely affect the Trusts operations and profitability.
Such modification, if required, could require the Trust to liquidate certain positions more rapidly
than might otherwise be desirable, and could adversely affect the performance of the Trust. A
violation of speculative position limits by the Trust could lead to regulatory action materially
adverse to the Trusts prospects for profitability.
The CFTC has proposed and invited public comment regarding a new rule to implement speculative
position limits for futures and options contracts in certain energy commodities. Such speculative
position limits may apply to traders engaged in trading that is neither for bona fide hedging nor
swap dealer risk management purposes. Depending on the outcome of this or any future CFTC
regulatory action, the rules concerning speculative position limits may be amended in a manner that
is either detrimental or favorable to the Trust. For example, if the amended rules are detrimental
to the Trust, the Trusts ability to invest in additional commodity futures contracts may be
limited to the extent these activities would cause the Trust to exceed the applicable speculative
position limits.
In addition, it is possible that the CFTC may propose new rules that would consider futures
contracts underlying OTC transactions in calculating position limits. Such a change could alter,
perhaps to a material extent the nature of an investment in the Trust to continue to implement its
investment approach.
Over-the-Counter Transactions are Subject to Little, if Any, Regulation
The Trust trades forward and option contracts in foreign currencies. Such contracts are
typically traded over-the-counter through a dealer market, which is dominated by major money center
and investment banks, and 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 Trust. The market for forward and option
contracts relies upon the integrity of market participants in lieu of the additional regulation
imposed by the CFTC on participants in the futures markets. This regulation includes, for example,
trading practices and other customer protection requirements, and minimum financial and trade
reporting requirements. The absence of regulation could expose the Trust 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.
Over-the-Counter Transactions May Be Subject to the Risk of Counterparty Default
The Trust 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. Unlike
in futures contracts, the counterparty to these contracts is generally a single bank or other
financial institution, rather than a clearing organization backed by a group of financial
institutions. As a result, there will be greater counterparty credit risk in these transactions.
The clearing member, clearing organization or other counterparty may not be able to meet its
obligations, in which case, your Units could suffer significant losses on these contracts.
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Options on Futures and Over-the-Counter Contracts are Speculative and Highly Leveraged
Options on futures and over-the-counter contracts may be used by the Trust to generate premium
income or capital gains. The buyer of an option risks losing the entire purchase price (the premium
as well as any commissions and fees) of the option. The writer (seller) of an option risks losing the
difference between the premium received for the option and the price of the commodity, futures or
forward contract underlying the option which the writer must purchase or deliver upon exercise of
the option (which losses can be unlimited). Specific market movements of the commodity, futures or
forward contracts underlying an option cannot accurately be predicted. Successful options trading
requires an accurate assessment of near-term volatility in the underlying instruments, as that
volatility is immediately reflected in the price of the option. Correct assessment of market
volatility can therefore be of much greater significance in trading options than it is in trading
futures and forwards, where volatility may not have as great an effect on price.
An Investment in the Trust May Not Diversify an Overall Portfolio
Historically, alternative investments such as managed futures funds have been generally
non-correlated to the performance of other asset classes such as stocks and bonds. Non-correlation
means that there is no statistically valid relationship between the past performance of futures,
forward and option contracts on the one hand and stocks or bonds on the other hand. Non-correlation
should not be confused with negative correlation, where the performance of two asset classes would
be exactly opposite.
Because of this non-correlation, the Trust cannot be expected to be automatically profitable
during unfavorable periods for the stock market, or vice versa. The futures, forward and option
markets are fundamentally different from the securities markets in that for every gain made in a
futures, forward or option transaction, the opposing side of that transaction will have an equal
and off-setting loss. If the Trust 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 Trust may have no gains to offset your losses from other
investments.
The Regulatory Risk Associated with Futures Contracts Could Adversely Affect the Trusts Operations
and The Profitability of Your Investment
The CFTC has recently proposed and invited public comment regarding a new rule to implement
position limits on energy futures contracts such as crude oil, heating oil, natural gas, gasoline
and other energy products and has solicited public comment regarding that advisability of imposing
similar limits in the metals futures markets. We do not anticipate these limits will affect the
Trusts ability to trade, but it is possible that they may in the future if the assets under
management increase dramatically.
Regulatory Changes or Actions May Alter the Operations and Profitability of the Trust
Considerable regulatory attention has been focused on non-traditional investment pools. There
is a possibility of future regulatory changes altering, perhaps to a material extent, the nature of
an investment in the Trust or the ability of the Trust to continue to implement its investment
strategies.
The futures markets are subject to comprehensive statutes, regulations and margin
requirements. In addition, the CFTC and the exchanges are authorized to take extraordinary actions
in the event of a market emergency, including, for example, the retroactive implementation of
speculative position limits or higher margin requirements, the establishment of daily price limits
and the suspension of trading. The regulation of swaps and futures transactions in the United
States is a rapidly changing area of law and is subject to modification by government and judicial
action. The effect of any future regulatory change on the Trust is impossible to predict, but could
be substantial and adverse.
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Trading Risks
There are Disadvantages to Making Trading Decisions Based Primarily on Technical Market Data
The trading systems used by Campbell & Company for the Trust are primarily technical. The
profitability of trading under these systems depends on, among other things, the occurrence of
significant price movements, up or down, in futures, forward and option prices. Such price
movements may not develop; there have been periods in the past without such price movements.
The likelihood of the Units being profitable could be materially diminished during periods
when events external to the markets themselves have an important impact on prices. During such
periods, Campbell & Companys historic price analysis could establish positions on the wrong side
of the price movements caused by such events.
Increased Competition from Other Trend-Following Traders Could Reduce Campbell & Companys
Profitability
There has been a dramatic increase in the volume of assets managed by trend-following trading
systems like some of the Campbell & Company programs. For example in 1980, the assets in the
managed futures industry were estimated at approximately $300 million; by the end of 2009, this
estimate had risen to approximately $213.6 billion. Increased trading competition from other
trend-following traders could operate to the detriment of the Trust. It may become more difficult
for the Trust to implement its trading strategy if other trading advisors using technical systems
are, at the same time, also attempting to initiate or liquidate futures, forward or option
positions, or otherwise alter trading patterns.
Limits Imposed by Futures Exchanges or Other Regulatory Organizations, Such As Speculative Position
Limits and Daily Price Fluctuation Limits, May Alter Trading Decisions for the Trust
The CFTC and U.S. futures exchanges have established limits, known as speculative position
limits, on the maximum net long or net short positions which any person may hold or control in
certain futures and options on futures contracts. Most U.S. futures exchanges also have established
daily price fluctuation limits which preclude the execution of trades at prices outside of the
limit. Contract prices have occasionally moved the daily limit for several consecutive days with
little or no trading. All accounts controlled by Campbell & Company, including the account of the
Trust, 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, such limits could cause a modification of Campbell & Companys trading
decisions for the Trust or force 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.
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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, and is actively engaged in raising assets for existing and new accounts. Should the amount
of equity that Campbell & Company manages increase, it may be more difficult 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 Trust which could have a
detrimental effect on your investment. Such considerations may also cause Campbell & Company to
eliminate smaller markets from consideration for inclusion in its Financial, Metal & Energy Large
Portfolio, reducing the range of markets in which trading opportunities may be pursued. Campbell &
Company reserves the right to make distributions of profits to Unitholders in an effort to control
asset growth. In addition, Campbell & Company may have an incentive to favor other accounts because the compensation
received from some other accounts does exceed the compensation it receives from managing the
Trusts account. Because records with respect to other accounts are not accessible to Unitholders
in the Trust, the Unitholders will not be able to determine if Campbell & Company is favoring other
accounts. See Campbell & Company, Inc. Trading Capacity.
Investors Will Not Be Able to Review the Trusts Holdings on a Daily Basis
Campbell & Company makes the Trusts trading decisions. While Campbell & Company receives
daily trade confirmations from the futures broker and over-the-counter counterparty, the Trusts
trading results are reported to Unitholders monthly. Accordingly, an investment in the Trust does
not offer Unitholders the same transparency, i.e., an ability to review all investment positions
daily, that a personal trading account offers.
Tax Risks
Investors are Taxed Based on Their Share of the Trusts Profits
Investors are taxed each year on their share of the Trusts profits, if any, irrespective of
whether they redeem any units or receive any cash distribution from the Trust. The managing owner
has the authority to make such distributions at any time in its sole discretion.
All performance information included in this Offering Memorandum is presented on a pre-tax
basis; the investors (other than tax-exempt investors) who experienced such performance had to pay
the related taxes from other sources.
Tax Could be Due from Investors on Their Share of the Trusts Ordinary Income Despite Overall
Losses
Investors may be required to pay tax on their allocable share of the Trusts ordinary income,
which in the case of the Trust is the Trusts interest income, gain on some foreign futures
contracts, and certain other investment assets, even though the Trust incurs overall losses.
Capital losses of individual taxpayers can be used only to offset capital gains and, in the case of
non-corporate investors, $3,000 of ordinary income each year. Consequently, if an individual
investor were allocated $5,000 of ordinary income and $10,000 of capital losses, the investor would
owe tax on $2,000 of ordinary income even though the investor would have a $5,000 economic loss for
the year. The remaining $7,000 capital loss could be used in subsequent years to offset capital
gain and ordinary income, but subject to the same annual limitation on its deductibility against
ordinary income.
There Could be a Limit on the Deductibility of Management and Performance Fees
Although the Trust treats the management and performance fees paid to the managing owner as
ordinary and necessary business expenses, upon an IRS audit, the Trust may be required to treat
such fees as investment advisory fees if the Trusts trading activities did not constitute a
trade or business for tax purposes. Investment advisory fees are subject to substantial
restrictions on deductibility for federal income tax purposes. Such treatment would likely create
or increase the tax liability of non-corporate unitholders.
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Other Risks
Fees and Commissions are Charged Regardless of Profitability and are Subject to Change
The Trust is subject to substantial charges payable irrespective of profitability, in addition
to performance fees which are payable based on the Trusts profitability. Included in these charges
are brokerage fees and operating expenses. On the Trusts forward and option trading, bid-ask
spreads and prime brokerage fees are incorporated into the pricing of the Trusts forward and
option contracts by the counterparties in addition to the brokerage fees paid by the Trust. It is
not possible to quantify the bid-ask spreads paid by the Trust because the
Trust cannot determine the profit its counterparty is making on the forward and option
transactions. Such spreads can at times be significant. In addition, while currently not
contemplated, the Trust Agreement allows for changes to be made to the brokerage fee and
performance fee upon sixty days notice to the Unitholders.
The Trusts Service Providers Could Fail
The institutions with which the Trust trades or invests may encounter financial difficulties
that impair the operational capabilities or the capital position of the Trust. The futures broker
is generally required by U.S. law to segregate all funds received from such brokers customers from
such brokers proprietary assets. If the futures broker fails to do so to the full extent required
by law, the assets of the Trust might not be fully protected in the event of the bankruptcy of the
futures broker. Furthermore, in the event of the futures brokers bankruptcy, the Trust could 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 Trust (for example, Treasury bills deposited by the Trust
with the futures broker as margin) was held by the futures broker. Furthermore, dealers in forward
and option contracts are not regulated by the Commodity Exchange Act and are not obligated to
segregate customer assets. The futures broker has been the subject of regulatory and private causes
of action, as described under The Futures Broker.
Although the managing owner regularly monitors the financial condition of the counterparties
it uses, if the Trusts counterparties were to become insolvent or the subject of liquidation
proceedings in the United States (either under the Securities Investor Protection Act of the United
States Bankruptcy Code), there exists the risk that the recovery of the Trusts assets from such
counterparty will be delayed or be a value less than the value of the assets originally entrusted
to such counterparty.
Inadequate Models Could Negatively Affect the Trusts Portfolio
Campbell & Companys trading is highly model driven, and is materially subject to possible
flaws in the models. As market dynamics (for example, due to changed market conditions and
participants) shift over time, a previously highly successful model often becomes outdated or
inaccurate, sometimes without Campbell & Company recognizing that fact before substantial losses
are incurred. In particular, the Trust may incur major losses in the event of disrupted markets and
other extraordinary events that cause Campbell & Companys pricing models to generate prices which
deviate from the market. The risk of loss to the Trust in the case of disrupted markets is
compounded by the number of different investment models of pricing, each of which may independently
become wholly unpredictable during market disruptions. In addition, in disrupted derivatives
markets, many positions may become illiquid, making it difficult or impossible to close out
positions against which the markets are moving. There can be no assurance that Campbell & Company
will be successful in continuing to develop and maintain effective quantitative models.
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Investors Must Not Rely on the Past Performance of Either Campbell & Company or the Trust in
Deciding Whether to Buy Units
The future performance of the Trust is not predictable, and no assurance can be given that the
Trust and Campbell & Company will perform successfully in the future in as much as past performance
is not necessarily indicative of future results. The trading advisors trading systems are
continually evolving and the fact that the Trust and the trading advisor may have traded
successfully in the past does not mean that they will do so in the future. Additionally, the markets in which the Trust operates have been severely disrupted over the past year or more, so
results observed in earlier periods may have little relevance to the results observable in the
current environment.
The past performance of the Trust may not be construed as an indication of the future results.
The personnel of Campbell & Company responsible for managing the investment portfolio have
substantial experience in managing investments and private investment funds and have provided and
continue to provide advisory and management services to clients and private and registered
investment funds.
Parties to the Trust Have Conflicts of Interest
Campbell & Company has not established any formal procedures to resolve the following
conflicts of interest. Consequently, there is no independent control over how Campbell & Company
resolves these conflicts which can be relied upon by investors as ensuring that the Trust is
treated equitably with other Campbell & Company clients.
Campbell & Company has a conflict of interest because it acts as the managing owner and sole
trading advisor for the Trust.
Since Campbell & Company acts as both trading advisor and managing owner for the Trust, it is
very unlikely that its advisory contract will be terminated by the Trust. The fees payable to
Campbell & Company were established by it and were not the subject of arms-length negotiation.
These fees consist of up to a 3.5% brokerage fee (of which 2.5% is retained) and a 20% performance
fee. Campbell & Company, as managing owner, determines whether or not distributions are made and it
receives increased fees to the extent distributions are not made. Campbell & Company has the
authority to make such distributions at any time in its sole discretion.
Other conflicts are also present in the operation of the Trust. See Conflicts of Interest.
There are No Independent Experts Representing Investors
Campbell & Company has consulted with counsel, accountants and other experts regarding the
formation and operation of the Trust. No counsel has been appointed to represent the Unitholders in
connection with the offering of the Units. Accordingly, each prospective investor should consult
his own legal, tax and financial advisers regarding the desirability of an investment in the Trust.
The Trust Places Significant Reliance on Campbell & Company and the Incapacity of its Principals
Could Adversely Affect the Trust
The incapacity of Campbell & Companys principals could have a material and adverse effect on
Campbell & Companys ability to discharge its obligations under the Trust 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 Trust Could Terminate Before You Achieve Your Investment Objective, Causing Potential Loss of
Your Investment or Disrupting Your Investment Portfolio Allocation
As managing owner, Campbell & Company may withdraw from the Trust upon 120 days notice, which
would cause the Trust to terminate unless a substitute managing owner were obtained. Other events,
such as a long-term substantial loss suffered by the Trust, could also cause the Trust to terminate
before the expiration of its stated term. This could cause you to liquidate your investments and
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 broker were revoked or suspended, such entity would no longer be able to provide services to the Trust.
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The Trust Is Not A Regulated Investment Company and Is Therefore Subject to Different Protections
Than a Regulated Investment Company
Although the Trust and Campbell & Company are subject to regulation by the CFTC, the Trust is
not an investment company subject to the Investment Company Act of 1940 and Campbell & Company is
not registered as an investment advisor under the Investment Advisors Act of 1940. Accordingly, you
do not have the protections afforded by those statutes which, for example, require 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 Trust Will Not Receive the Same Protections on These Transactions
The Trust trades foreign exchange contracts and options in the interbank market. In the
future, the Trust may also trade swap agreements, hybrid instruments and other off-exchange
contracts. Swap agreements involve trading income streams such as fixed rate for floating rate
interest. Hybrids are instruments which combine features of a security with those of a futures
contract. The dealer market for off-exchange instruments is becoming more liquid. There is no
exchange or clearinghouse for these contracts and they are not regulated by the CFTC. The Trust
will not receive the protections which are provided by the CFTCs regulatory scheme for these
transactions.
The Trust is Subject to Foreign Market Credit and Regulatory Risk
A substantial portion of Campbell & Companys trades takes place on markets or exchanges
outside the United States. From time to time, over 50% of the Trusts overall market exposure could
involve positions taken on foreign markets. The risk of loss in trading foreign futures contracts
and foreign options can be substantial. Participation in foreign futures contracts and foreign
options transactions involves the execution and clearing of trades on, or subject to the rules of,
a foreign board of trade. Non-U.S. markets may not be subject to the same degree of regulation as
their U.S. counterparts. None of the CFTC, NFA or any domestic exchange regulates activities of any
foreign boards of trade, including the execution, delivery and clearing of transactions, nor do
they have the power to compel enforcement of the rules of a foreign board of trade or any
applicable foreign laws. Trading on foreign exchanges also presents the risks of exchange controls,
expropriation, taxation and government disruptions.
The Trust is Subject to Foreign Exchange Risk
The price of any foreign futures or foreign options contract and, therefore, the potential
profit and loss thereon, may be affected by any variance in the foreign exchange rate between the
time a position is established and the time it is liquidated, offset or exercised. Certain foreign
exchanges may also be in a more or less developmental stage so that prior price histories may not
be indicative of current price dynamics. In addition, the Trust may not have the same access to
certain positions on foreign exchanges as do local traders, and the historical market data on which
Campbell & Company bases its strategies may not be as reliable or accessible as it is in the United
States. The rights of clients (such as the Trust) in the event of the insolvency or bankruptcy of a
non-U.S. market or broker are also likely to be more limited than in the case of U.S. markets or
brokers.
Transfers Could Be Restricted
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 Trust.
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Restrictions on Investment by ERISA Plans, Employee Retirement Income Security Act of 1974
The managing owner anticipates that the underlying assets of the Trust may be considered for
purposes of Title I of the Employee Retirement Income Security Act of 1974 (ERISA), as amended,
and Section 4975 of the Internal Revenue Code of 1986, as amended (the Code), to be assets of
certain employee benefit plans and other Plans that purchase units. Under such circumstances, the
investments of the Trust and the activities of the managing owner will be subject to and, in
certain cases, limited by, ERISA and the Code.
When considering an investment in the Trust of the assets of an ERISA Plan, a fiduciary with
respect to such plan should consider, among other things: (i) the definition of Plan assets under
ERISA and regulations issued by the Department of Labor (DOL) regarding the definition of Plan assets; (ii)
whether the investment satisfies the diversification requirements of Section 404(a)(1) of ERISA;
(iii) whether the investment satisfies the prudence requirements of Section 404(a)(1) of ERISA; and
(iv) that there will be no secondary market in which such fiduciary can sell or otherwise dispose
of the units.
A Single-Advisor Fund May be More Volatile Than a Multi-Advisor Fund
The Trust is currently structured as a single-advisor managed futures fund. 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 a
single-advisor managed futures fund, the Trust may have increased performance volatility and a
higher risk of loss than investment vehicles employing multiple advisors. Campbell & Company may
retain additional trading advisors on behalf of the Trust in the future.
The Performance Fee Could Be an Incentive to Make Riskier Investments
Campbell & Company employs a speculative strategy for the Trust and receives performance fees
based on the trading profits earned by it for the Trust. Campbell & Company would not agree to
manage the Trusts account in the absence of such a performance fee arrangement. Accordingly,
Campbell & Company may make investments that are riskier than might be made if the Trusts assets
were managed by a trading advisor that did not require performance-based compensation.
The Trust May Distribute Profits to Unitholders at Inopportune Times
Campbell & Company reserves the right to make distributions of profits of the Trust to the
unitholders at any time in its sole discretion in order to control the growth of the assets under
Campbell & Companys management. Unitholders will have no choice in receiving these distributions
as income, and may receive little notice that these distributions are being made. Distributions may
be made at an inopportune time for the unitholders.
Potential Inability to Trade or Report Due to Systems Failure
Campbell & Companys strategies are dependent to a significant degree on the proper
functioning of its internal computer systems. Accordingly, systems failures, whether due to third
party failures upon which such systems are dependent or the failure of Campbell & Companys
hardware or software, could disrupt trading or make trading impossible until such failure is
remedied. Any such failure, or consequential inability to trade (even for a short time), could, in
certain market conditions, cause the Trust to experience significant trading losses or to miss
opportunities for profitable trading. Additionally, any such failures could cause a temporary delay
in reports to investors.
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Failure to Receive Timely and Accurate Market Data from Third Party Vendors Could Cause Disruptions
or the Inability to Trade
Campbell & Companys strategies are dependent to a significant degree on the receipt of timely
and accurate market data from third party vendors. Accordingly, the failure to receive such data in
a timely manner or the receipt of inaccurate data, whether due to the acts or omissions of such
third party vendors or otherwise, could disrupt trading to the detriment of the Trust or make
trading impossible until such failure or inaccuracy is remedied. Any such failure or inaccuracy
could, in certain market conditions, cause the Trust to experience significant trading losses,
effect trades in a manner which it otherwise would not have done, or miss opportunities for
profitable trading. For example, the receipt of inaccurate market data may cause the Trust 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 Trust to reverse such action or
inaction, all of which may ultimately be to the detriment of the Trust.
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
The Registrant does not use any physical properties in the conduct of its business. Its
assets currently consist of futures and other contracts, cash, U.S. Treasury Bills, and other fixed
income securities.
Item 3. Legal Proceedings
Campbell & Company is not aware of any material legal proceedings to which the Registrant is a
party or to which any of their assets are subject.
Item 4. (Removed and Reserved)
PART II
Item 5. Market for Registrants Common Equity , Related Stockholder Matters and Issuer
Purchases of Equity Securities
Units of Beneficial Interest are not publicly traded. Units may be transferred or redeemed
subject to the conditions imposed by the Amended and Restated Declaration of Trust and Trust
Agreement. As of December 31, 2010, there were 84 Unitholders in the Registrant and 16,954.41
Units of Beneficial Interest outstanding.
Campbell & Company has sole discretion in determining what distributions, if any, the
Registrant will make to its Unit holders. Campbell & Company has not made any distributions as of
the date hereof.
The Registrant has no securities authorized for issuance under equity compensation plans.
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Item 6. Selected Financial Data
Dollars in thousands, except per Unit amounts
The following summarized financial information is for the years ended December 31, 2010,
2009, 2008, 2007, and 2006.
For the Years Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Total Assets |
$ | 30,990,022 | $ | 31,009,469 | $ | 36,668,639 | $ | 37,566,581 | $ | 43,619,109 | ||||||||||
Total Unitholders Capital |
29,727,966 | 29,002,062 | 35,835,483 | 36,288,756 | 42,871,715 | |||||||||||||||
Total Net Trading Gain (Loss)
(includes brokerage commissions) |
4,632,309 | (826,016 | ) | 1,568,937 | (4,880,807 | ) | 2,971,747 | |||||||||||||
Net Income (Loss) |
3,817,397 | (1,807,668 | ) | 977,473 | (4,555,069 | ) | 3,250,791 | |||||||||||||
Net Income (Loss) Per Managing
Owner and Other Unitholder Unit * |
210.52 | (85.69 | ) | 43.49 | (195.52 | ) | 135.31 | |||||||||||||
Increase (Decrease) in Net Asset Value
Per Managing Owner and Other
Unitholder Unit |
215.83 | (94.41 | ) | 28.40 | (211.94 | ) | 123.59 |
* | - Based on weighted average number of units outstanding during the period. |
The following summarized quarterly financial information (unaudited) presents the results of
operations for the three-month periods ending March 31, June 30, September 30 and December 31, 2010
and 2009.
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | |||||||||||||
2010 | 2010 | 2010 | 2010 | |||||||||||||
Total Net Trading Gain(Loss) (net of brokerage
Commissions) |
($665,443 | ) | $ | 217,585 | $ | 2,576,890 | $ | 2,503,277 | ||||||||
Net Income (Loss) |
(872,094 | ) | 572 | 2,406,440 | 2,282,479 | |||||||||||
Net Income (Loss) per Managing Owner and
Other Unitholder Unit |
(45.45 | ) | 0.03 | 137.75 | 130.78 | |||||||||||
Increase (Decrease) in Net Asset Value per Managing
Owner and Other Unitholder Unit |
(51.13 | ) | (1.60 | ) | 137.72 | 130.84 | ||||||||||
Net Asset Value per Managing Owner and Other
Unitholder Unit at the End of the Period |
1,486.45 | 1,484.85 | 1,622.57 | 1,753.41 |
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | |||||||||||||
2009 | 2009 | 2009 | 2009 | |||||||||||||
Total Net Trading Gain(Loss) (net of brokerage
Commissions) |
$ | 75,143 | $ | (2,137,482 | ) | $ | 1,317,012 | $ | (80,689 | ) | ||||||
Net Income (Loss) |
(207,164 | ) | (2,392,807 | ) | 1,078,786 | (286,483 | ) | |||||||||
Net Income (Loss) per Managing Owner and
Other Unitholder Unit |
(9.33 | ) | (110.22 | ) | 52.82 | (14.29 | ) | |||||||||
Increase (Decrease) in Net Asset Value per Managing
Owner and Other Unitholder Unit |
(12.84 | ) | (113.43 | ) | 49.41 | (17.55 | ) | |||||||||
Net Asset Value per Managing Owner and Other
Unitholder Unit at the End of the Period |
1,619.15 | 1,505.72 | 1,555.13 | 1,537.58 |
* | - Based on weighted average number of units outstanding during the period. |
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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Introduction
The offering of Campbell Alternative Asset Trusts (the Trust) Units of Beneficial Interest
commenced on May 15, 2001, and the initial offering terminated on September 30, 2001 with proceeds
of $15,821,743. The continuing offering period commenced immediately after the termination of the
initial offering period; additional subscriptions totaling $40,797,087 have been accepted during
the continuing offering period as of December 31, 2010. Redemptions over the same time period
total $44,580,834. The Trust commenced operations on October 1, 2001.
As of December 31, 2002, units are no longer offered to the public, but are offered exclusively for
sale to the Campbell & Company, Inc. 401(K) Plan.
Campbell & Company, Inc. (Campbell) has made the decision to cease the Trust offering,
effective April 22, 2011. The decision to cease the offering is the precursor to closing the Trust
as of May 31, 2011. The Trust initially began trading in October 2001 but has not offered units to
the public since December 2002; however, the registered units continued to be offered exclusively
for sale to the Campbell & Company, Inc. 401(k) Plan (the Plan).
The assets of the Trust are largely comprised (87%) of affiliated entities of Campbell;
Campbells management team has elected to construct a more suitable entity to facilitate the Plan.
The current, non-affiliated, investors in the Trust may have opportunities to invest in other
Campbell fund or trust offerings based on suitability requirements and in consideration with ERISA
capacity. This change is part of Campbells continuing efforts to focus administrative resources
on our currently available offerings which hold the majority of Campbell & Company, Inc. assets.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and expense during the
reporting period. Management believes that the estimates utilized in preparing the financial
statements are reasonable and prudent; however, actual results could differ from those estimates.
The Trusts significant accounting policies are described in detail in Note 1 of the Financial
Statements.
The Trust records all investments at fair value in its financial statements, with changes in
fair value reported as a component of realized and change in unrealized trading gain (loss) in the
Statements of Operations. Generally, fair values are based on market prices; however, in certain
circumstances, estimates are involved in determining fair value in the absence of an active market
closing price (e.g. forward and option contracts which are traded in the inter-bank market).
Capital Resources
The Trust will raise additional capital only through the sale of Units offered pursuant to the
continuing offering, and does not intend to raise any capital through borrowing. Due to the nature
of the Trusts business, it will make no capital expenditures and will have no capital assets which
are not operating capital or assets.
The Trust maintains 40-80% of its net asset value in cash, cash equivalents or other liquid
positions in its cash management program over and above that needed to post as collateral for
trading. These funds are available to meet redemptions each month. After redemptions and
additions are taken into account each month, the trade level of the Trust are adjusted and
positions in the instruments the Trust trades are added or liquidated on a pro-rata basis to meet
those increases or decreases in trade levels.
Liquidity
Most United States futures 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 Trust
from promptly liquidating unfavorable positions and subject the Trust to substantial losses which
could exceed the margin initially committed to such trades. In addition, even if futures prices
have not moved the daily
limit, the Trust may not be able to execute futures trades at favorable prices, if little trading
in such contracts is taking place. Other than these limitations on liquidity, which are inherent
in the Trusts commodity futures trading operations, the Trusts assets are expected to be highly
liquid.
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The entire offering proceeds, without deductions, will be credited to the Trusts bank
brokerage and/or cash management accounts. The Trust meets margin requirements for its trading
activities by depositing cash and U.S. government securities with the futures broker and the
over-the-counter counterparties. This does not reduce the risk of loss from trading activities. The
Trust receives all interest earned on its assets. No other person shall receive any interest or
other economic benefits from the deposit of Trust assets.
Approximately 10% to 30% of the Trusts assets normally are committed as required margin for
futures contracts and held by the futures broker, although the amount committed may vary
significantly. Such assets are maintained in the form of cash or U.S. Treasury bills in segregated
accounts with the futures broker pursuant to the Commodity Exchange Act and regulations thereunder.
Approximately 10% to 30% of the Trusts assets are deposited with over-the-counter counterparties
in order to initiate and maintain forward contracts. Such assets are not held in segregation or
otherwise regulated under the Commodity Exchange Act, unless such over-the-counter counterparty is
registered as a futures commission merchant. These assets are held either in U.S. government
securities or short-term time deposits with U.S.-regulated bank affiliates of the over-the-counter
counterparties.
The managing owner deposits the majority of those assets of the Trust that are not required to
be deposited as margin with the futures broker and over-the-counter counterparty in a custodial
account with Northern Trust Company. The assets deposited in the custodial account with Northern
Trust Company are segregated. The custodial account constitutes approximately 40% to 80% of the
Trusts assets and is invested directly by Wilmington Trust Investment Management LLC
(Wilmington). Wilmington is registered with the Securities and Exchange Commission as an
investment adviser under the Investment Advisers Act of 1940. Wilmington does not guarantee any
interest or profits will accrue on the Trusts assets in the custodial account. Wilmington will
invest according to agreed upon investment guidelines that are modeled after those investments
allowed by the futures broker as defined under The Commodity Exchange Act, Title 17, Part 1, § 1.25
Investment of customer funds. Investments can include, but are not limited to, (i) U.S. Government
Securities, Government Agency Securities, Municipal Securities, banker acceptances and certificates
of deposits; (ii) commercial paper; and (iii) corporate debt.
The Trust occasionally receives margin calls (requests to post more collateral) from its
futures broker or over-the-counter counterparties, which are met by moving the required portion of
the assets held in the custody account at Northern Trust to the margin accounts. In the past three
years, the Trust has not needed to liquidate any position as a result of a margin call.
The Trusts assets are not and will not be, directly or indirectly, commingled with the
property of any other person in violation of law or invested with or loaned to Campbell & Company
or any affiliated entities.
Off-Balance Sheet Risk
The term off-balance sheet risk refers to an unrecorded potential liability that, even
though it does not appear on the balance sheet, may result in future obligation or loss. The Trust
trades in futures, forward and options contracts and is therefore a party to financial instruments
with elements of off-balance sheet market and credit risk. In entering into these contracts there
exists a risk to the Trust, market risk, that such contracts may be significantly influenced by
market conditions, such as interest rate volatility, resulting in such contracts being less
valuable. If the markets should move against all of the futures interests positions of the Trust
at the same time, and if the Trusts trading advisor was unable to offset futures interests
positions of the Trust, the Trust could lose all of its assets and the Unitholders would realize a
100% loss. Campbell & Company, Inc., the managing owner
(who also acts as trading advisor), minimizes market risk through real-time monitoring of open
positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely
exceeds 30%.
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In addition to market risk, in entering into futures, forward and option contracts there is a
credit risk that a counterparty will not be able to meet its obligations to the Trust. The
counterparty for futures contracts traded in the United States and on most foreign exchanges is the
clearinghouse associated with such exchange. In general, clearinghouses are backed by the
corporate members of the clearinghouse who are required to share any financial burden resulting
from the non-performance by one of their members and, as such, should significantly reduce this
credit risk. In cases where the clearinghouse is not backed by the clearing members, like some
foreign exchanges, it is normally backed by a consortium of banks or other financial institutions.
In the case of forward and option contracts, which are traded on the interbank market rather
than on exchanges, the counterparty is generally a single bank or other financial institution,
rather than a group of financial institutions; thus there may be a greater counterparty credit
risk. Campbell & Company trades for the Trust only with those counterparties which it believes to
be creditworthy. All positions of the Trust are valued each day on a mark-to-market basis. There
can be no assurance that any clearing member, clearinghouse or other counterparty will be able to
meet its obligations to the Trust.
Disclosures About Certain Trading Activities that Include Non-Exchange Traded Contracts Accounted
for at Fair Value
The Trust invests in futures, forward currency and options on forward currency contracts. The
market value of futures (exchange-traded) contracts is determined by the various futures exchanges,
and reflects the settlement price for each contract as of the close of the last business day of the
reporting period. The market value of forward (non-exchange traded) contracts is extrapolated on a
forward basis from the spot prices quoted as of 3:00 P.M. (E.T.) of the last business day of the
reporting period. The market value of option (non-exchange traded) contracts is calculated by
applying an industry-standard adaptation of the Black-Scholes options valuation model to foreign
currency options, using as input, the spot prices, interest rates and option implied volatilities
quoted as of 3:00 P.M. (E.T.) on the last business day of the reporting period.
Results of Operations
The returns for the years ended December 31, 2010, 2009 and 2008 were 14.04%, (5.78)%, and
1.77%, respectively. The following is a discussion of the brokerage and performance fees accrued
and paid. During the years ended December 31, 2010, 2009, and 2008, the Trust accrued brokerage
fees in the amount of $802,334, $941,871, and $1,055,055, respectively, and paid brokerage fees in
the amounts of $805,793, $952,313, and $1,063,516, respectively. During the years ended December
31, 2010, 2009, and 2008, the Trust accrued and paid performance fees in the amount of $0, $0, and
$0, respectively.
2010
For the 2010 increase of 14.04%, approximately 17.51% was due to trading gains (before
commissions) and approximately 0.34% due to investment income offset by approximately (3.81)% due
to brokerage fees, operating costs and offering costs borne by the Trust. An analysis of the
17.51% trading gain by sector is as follows:
Sector | % Gain (Loss) | |||
Interest Rates |
12.36 | % | ||
Commodities |
4.20 | |||
Currencies |
3.36 | |||
Stock Indices |
(2.38 | ) | ||
17.52 | % | |||
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The New Year began with an equity sell-off in the second half of the month as global
confidence in a steady recovery, again, began to waver, resulting in trading losses for the Trusts
net long equity indices positions. Primary drivers were related to: (1) Chinas efforts to manage
growth; (2) questionable stability of the European Union as Greece potentially defaults on
sovereign debt; and (3) the potential heavy-handed regulation of the U.S. banking system. As the
global risk trade unwound, the Trusts commodity positions also produced losses, largely in the
energy complex and in base metals. The global negative news detracted from a relative positive
earnings season and signs of improved economic data. Further losses were recorded in currency
trading as the U.S. Dollar was, once again, seen as a safe haven as the economic health of several
nations was called into question. Marginal gains were recorded in fixed income as we were able to
benefit from the steepening of the yield curve as a result of short-term interest rates being kept
at extremely low levels by global central banks.
The first half of February was somewhat subdued as the market digested mixed U.S. employment
numbers versus the unemployment rate. By mid-month, the Federal Reserve surprised the markets by
decided to hike the discount rate, in a clear sign that the pace of their exit strategy may be more
aggressive than originally anticipated. Our long position in short-term rates, both in the U.S. and
Europe, fueled strong gains in the sector for the remainder of the month. Gains were also recorded
in currency trading as the Euro currency weakened against most majors on accelerated sovereign
fears evidenced by the record high cost of insuring Greek and Portuguese debt. Global equity
indices trading produced small losses for the Trust as a result of dealing with diverse global
macroeconomic challenges (weakening Euro, China central bank intervention and U.S. employment and
earnings season results). While the market finished generally negative in Europe and Asia, the U.S.
managed to record a gain on largely upbeat fourth quarter earnings announcements with many S&P
constituents beating consensus expectations. Commodity trading resulted in generally negative
results as the structural imbalances in Europe, and the strong relative performance of the U.S.
economy versus the Eurozone helped de-link Europe from the risk trade, keeping commodities in
alignment with U.S. stocks. While energy prices rallied for most of the month, precious metals sold
off early only to turn positive as the market used gold as a safe haven against Eurozone turmoil.
March proved to be a very strong month for trends as our long positions in energies and base
metals benefited from prices moving higher on climbing global economic growth prospects. Global
equity indices also provided gains for the Trusts long positions as prices surged on renewed
merger and acquisition activity, positive news centered on economic releases, and subdued fears
regarding Greeces finances. Marginal gains were recorded in the foreign exchange markets as the
return of the carry trade pushed commodity linked currencies higher. Almost all central banks have
acknowledged that the worst has passed; however, the lack of flexibility to induce fresh fiscal or
monetary stimulus has forced a lower for longer interest rate policy globally. The Trusts net
gains were partially offset by losses in the fixed income markets from long positions in U.S.
Treasury futures as prices fell during the month. In the U.S. fixed income market, heavy supply put
pressure on bond prices, and U.S. Treasury yields were higher than swap yields for the first time
on record.
April performance was led by strong gains in the fixed income markets from long positions in
Europe and from U.S. bond prices that moved higher during the month as the Greece sovereign debt
concerns and fears of contagion played center stage in global markets. Currency trading also
benefited from the sovereign debt fears and from perceived signs of positive economic growth
beginning to materialize. Further gains were recorded in energy and precious metals, as energy
markets continued its high correlation to the S&P and investor demand for precious metals continued
to grow. Marginal losses were incurred in base metals trading as these markets moved lower on U.S.
dollar strength. Global equity indices trading produced flat performance, with net longs across the
board producing positive results in the U.S., negative results in Europe, and flat performance in
Asia.
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As European sovereign debt concerns persisted and China tightened credit in an attempt to cool
overheating in its property sector, the decline in equity markets by the end of May was wide-spread
across the U.S., Europe, and Asia. Certainly the flash crash on May 6th only added to
the unsettling nature of equity market price behavior throughout the month. While the Trust
experienced losses in equity indices, gains in fixed income help offset the flight from risky
assets in favor of government debt. Commodity trading was difficult for the Trust, particularly in
the energy sector, as the complex fell in tandem with the equity markets until a late month bounce.
While BPs spill in the Gulf continued to flow uncontrollably, the disaster has not significantly
affected the supply of oil into the U.S. to date. Along with the scare in Greece, the Euro
came under pressure against the U.S. Dollar as comments from Federal Reserve Chairman Bernanke
raised concerns over the Eurozones bank funding. The U.S. Dollar was, once again, viewed as a safe
position trade as risk aversion, volatility and liquidity dominated currency markets contributing
to gains in the foreign exchange sector for the Trust.
In June, another month of the risk off trade gave government bonds a bid, which produced
healthy gains from long global fixed income positions. Unfortunately, these gains were offset by
losses in equity indices, foreign exchange and commodities. Long equity positions suffered from an
equity sell-off, which primarily stemmed from weaker than expected U.S. and Chinese economic data,
negative corporate news and interbank funding concerns in the European region. Foreign exchange
trading generated losses primarily from the Trusts short Swiss Franc position as the currency
rallied 7% vs. the U.S. Dollar based on Swiss National Bank comments softening its intervention
language. Commodity trading produced minimal losses, largely from our trading in natural gas
futures which ended up 3.6% after finally breaking out of a three-month range. The oil spill in the
Gulf of Mexico has not been a significant factor on short-term price movements but most analysts
agree that the real impact will be long-term as the cost of production is almost sure to go higher
on the back of tighter regulation.
Catalysts for the equity rally in July hinged on strong economic data out of Europe, positive
results from European bank stress tests and an increase in positive sentiment out of China. The S&P
500 and Dow Jones recorded gains of approximately 7% in July, adding another twist to their
rollercoaster paths. Small gains were recorded in the European and U.S. equity markets from long
positions in stock index futures as over-sold conditions paved the way for a reversal higher.
Stocks rallied on better-than-expected second quarter earnings, increased M&A activity, higher
dividends and additional buybacks. The Trust experienced losses in commodities, primarily from
short positions in crude oil and long positions in precious metals. The correlation between
equities and energies remained high and the rally in global equities sparked profit taking,
reducing investor demand for gold as a safe haven. The Trust had additional losses in foreign
exchange from short positions in the Euro/Yen cross, as the Euro showed renewed signs of life,
appreciating more than 4% against the Yen. Losses were offset by gains in equities trading and in
short-term fixed income markets from long positions in Eurodollar interest rate futures.
Weaker-than-expected U.S. economic data led the market to believe that the U.S. Federal Reserve
will need to keep interest rates low for an extended period.
The release of the August U.S. Federal Reserve meeting minutes resulted in yet another
sell-off of risk assets, which helped contributed to the rise in fixed income prices. Yields
reached multi-year lows in the U.S., Europe, and U.K., resulting in gains from the Trusts long
fixed income positions, especially on the long end of the curve. Smaller gains were realized in the
commodity markets, primarily in precious metals. Gold fully retraced Julys corrective sell-off,
with its August month-end market value closing several ticks higher than the June close. The
Trusts long gold position benefitted from golds safe-haven status, as well as from news out of
China, the worlds largest consumer and producer of gold, that they will allow greater access to
trading of the metal. The Trusts long silver position also produced favorable results due to its
lock-step trading with gold. Long global equity indices holdings resulted in losses for the month.
Weak labor and housing data releases, coupled with the Federal Open Market Committee (FOMC) of
the U.S. Federal Reserves downgrade of its assessment of the U.S. economic outlook, contributed to
the poor performance of U.S. market indices. Japanese equities fared worse, as the stubbornly
strong Japanese Yen weighs on Japanese exporters. By month-end, the Euro Stoxx 50 lost nearly 4.5%,
the S&P 500 fell about 4.75%, and the Japanese Nikkei lost almost 7.5%. Additional losses were
recorded in the foreign exchange markets from short positions in the Euro/Yen cross as the Euro
appreciated more than 4% against the Japanese Yen. The Euro moved higher against most currencies as
investors covered short positions as the Euro showed renewed signs of life.
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Asset prices during the month of September were driven by FOMC hinting that the Federal
Reserve is ready and willing to undergo a second round of quantitative easing. While the U.S.
Dollar and interest rates fell, equities and commodities rose significantly. Commodity trading was
the dominant contributor to positive performance for the month, particularly in precious and base
metals, grains and soft commodities. Gold prices reached all-time highs, while silver rallied 12%
to levels not seen since the early 1980s. Aluminum and nickel prices also posted double-digit
increases during the month. Elevated demand and weather-related supply
concerns pushed sugar, cotton and corn prices up over 22%, 17% and 10%, respectively. While
commodity trading was a strong driver, foreign exchange was also a material contributor to
performance, particularly from commodity-linked currencies. The month brought U.S. Dollar weakness
against all major currencies as investors bet the Federal Reserve would implement a fresh round of
asset purchases to jump-start the slowing U.S. economy. Smaller gains were recorded in the equity
markets as prices surged higher on fewer concerns of a double-dip U.S. recession and a continued
increase in M&A activity. Stocks in Asia took the lead, followed by the U.S. and Europe, which
lagged due to ongoing sovereign debt level concerns. A portion of the Portfolios gains were offset
by losses in fixed income markets as bond prices were extremely volatile during September.
Financial markets in October were fixated on the U.S. Federal Reserves intentions to engage
in a second round of Quantitative Easing (QE2). In September, markets began pricing in the
anticipated QE2 stimulus, which clearly continued into October. Over the course of the month the
U.S. Treasury markets shifted from speculating on a future deflationary environment to pricing in
future inflation in the TIPS market. Perhaps the markets were reacting to Chairman Bernankes
comments that inflation is too low and unemployment is too high. Commodity trading was a primary
driver of gains for the Trust as silver and gold reached new highs mid-month, and zinc and copper
surged higher in the base metal category. Sugar and cotton both rose over 22% on supply/demand
imbalances, while grains continued their upward trend with corn leading the way in performance for
the sector. The growing expectations of QE2 in the U.S., third quarter earnings that largely beat
analyst estimates and market expectations for a congressional change of power at the mid-term
elections, propelled the global equity markets higher. The Trust recorded strong gains in stock
index trading, particularly in the U.S. and Europe. QE2 also took center stage in currency trading,
allowing the Trust to benefit from a weaker U.S. Dollar against most major currencies. Asian-based
currencies and commodity-linked currencies were, in particular, profitable. Minimal losses were
recorded in the fixed income markets as positive intra-month economic data caused market
participants to question if additional QE on a global level was warranted on such a massive scale.
After much anticipation and debate, the second effort by the U.S. Federal Reserve to stimulate
the U.S. economy through government bond purchases. Perhaps a case of buy the rumor, sell the
fact, bond prices fell following the announcement and continued to fall for the remainder of the
month generating losses for the Trust in fixed income trading. In currency trading, once QE2 was
announced, the U.S. Dollar never looked back. The Trusts short U.S. Dollar position was
significantly reduced during the month; however, small losses in currency trading were incurred. In
Europe, the Euro dropped below 1.30 for the first time in more than 10 weeks as speculation leaned
toward a worsening debt crisis, and unemployment in the region rose to the highest level in more
than 12 years. Commodities were volatile and mixed, generating small gains in the sector for
Campbell on the month. Gains in energy trading and metals were dampened by losses in grains and
soft commodities. While the energy complex made new highs for the year, primarily on the Chinese
inflation story, cotton prices fell 26% from the mid-November high. It seems to be all about China
these days as they attempt to dampen growth for fear of inflation. Equity trading was marginally
positive despite mixed performance around the globe. While major U.S. indices finished slightly
lower on the month, Japans Nikkei was up 8%, primarily driven by the weakening Yen. Global Central
Bank intervention has made trading based solely on macroeconomic measures difficult. The Trusts
models have naturally tilted to technical indicators until the value of fundamental information is
once again relevant to asset prices.
The appetite for risk-based assets was clearly back in vogue during the month of December.
Commodities were the strongest performing sector during the month for the Trust as the rally in
energies, metals, soft commodities and grain markets continued. The petroleum and industrial metal
complexes closed December near the years highs on steady demand and a healthy global economic
picture. Cotton rallied over 25% during the month to finish up over 90% on the year. Additional
gains were recorded in stock index trading as global equity markets staged a strong rally during
the month on better than expected economic data, including strong consumer spending during the 2010
holiday season, and increased M&A activity. Despite signs of a stronger economy and higher interest
rates, the U.S. Dollar weakened against all major currencies in December, fueling gains for the
Trust in the currency sector. Commodity-linked currencies, in particular, enjoyed a strong rally
with the Australian Dollar reaching its strongest level since 1982. Despite its strong year-to-date
performance, Fixed
Income was the only losing sector for the Trust in December, as economic conditions improved
and Central Bank policies across the globe remained unchanged.
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2009
For the 2009 decrease of 5.78%, approximately 1.74% was due to trading losses (before
commissions) and approximately 0.15% due to investment income offset by approximately (4.19)% due
to brokerage fees, operating costs and offering costs borne by the Trust. An analysis of the 1.74
% trading loss by sector is as follows:
Sector | % Gain (Loss) | |||
Currencies |
3.41 | % | ||
Commodities |
(0.32 | ) | ||
Stock Indices |
(0.68 | ) | ||
Interest Rates |
(4.15 | ) | ||
(1.74 | )% | |||
President Obamas stimulus plan took center stage in January; however, weak economic data
continued to negatively impact global stock markets into the start of the New Year. An early month
rally fizzled quickly, causing notable declines in major global indices. The Trust gained in
equity indices trading on net short positions across each region. Gains were recorded in fixed
income trading as the worlds central banks continued to lower interest rates. Mounting fiscal
deficits and huge issuance needs begin to weigh heavy on the long-end; however, credit markets
generally improved in January with yield spreads continuing to contract. Foreign exchange trading
finished slightly negative on the month. Risk aversion and capital preservation benefited the
Trusts net long U.S. Dollar position; however, the U.K. governments unprecedented move to give
the Bank of England power to increase their stake in Royal Bank of Scotland to 70% helped fuel a
late month rally in the British Pound, eliminating gains from a previous decline. Commodity
trading was generally flat on volatility across precious and base metals and a slowing of the
negative energy trend.
In February, the U.S. governments ability to address the economic crisis was met with
skepticism by Wall Street. Economic data remained persistently weak, especially on the employment
and housing fronts. The U.S. was not alone in reporting negative news, as European and Asian
economies also continued with the release of dismal economic data such as declining exports and
falling dividends. The majority of February gains in the Trust resulted from equity indices
trading, particularly from short positions in the U.S. and Asia. Additional gains were recorded
in foreign exchange trading as investors continued to feed U.S. Dollar strength, particularly
relative to the Japanese Yen. The U.S. Dollar continues to be the safe haven pick as the risk
aversion theme continued, as evidenced by the U.S. treasury yields recording all-time lows.
Stock markets rallied in March as the 2008 fourth quarter earnings announcements subsided and
large U.S. banks announced they would be profitable for the first two months of 2009. The majority
of the Trusts losses in March resulted from equity indices trading, as the equity rally adversely
impacted net short positions globally. Commodities recorded losses as energy price swings have
become correlated with equities and metals surged on news of Chinas economic stimulus plan. Gains
from fixed income markets were recorded from the Trusts long global bond positions as prices moved
significantly higher on announcements from the Swiss, British and American Central Banks on their
intentions of adding liquidity by purchasing medium to long-term bonds in the market. Foreign
exchange trading resulted in gains as investors sought currencies whose home central banks were not
keen on engaging in quantitative easing.
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Table of Contents
While equity index trading produced the most profitable sector results for the Trust for 2008,
the Trusts net exposure on the short side of global stock indices through April 2009 has hurt
performance as markets continued to stage rallies that began in mid-March. U.S. economic
indicators, including housing and manufacturing, showed signs of improvement and stabilization
rather than further deterioration. In addition, the G-20 agreed to fund more than $1 trillion in
emergency aid to help cushion the economic fallout of the current
international financial crisis. While the general tone of the economic outlook was more
upbeat, officials have still been cautious in their assessment. April saw a continuation of the
March risk-seeking rally leading to several growth currencies registering solid gains against the
dollar. Losses were realized in the foreign exchange sector due to the Trusts general bias to be
long the dollar against most major currencies. In fixed income, the equity market rally helped
general investor sentiment, driving bond prices lower across the board which produced losses for
the Trust in this sector. Commodity trading finished relatively flat with gains from the energy
sector offsetting small losses in base and precious metals.
In May, conflicting signals on global recovery weighed on the direction of the markets as
increased risk appetite and signs of stabilization in the global economy emerged. Equity markets
continued their rally, particularly in Asia, generating small gains in the stock index sector.
Fixed income trading generated a marginal positive return as short-term rates in Europe climbed
higher following the European Central Bank rate cut of 25 basis points. The gains in the stock
index and fixed income sectors were offset by losses in the foreign exchange sector. The U.S.
Dollar suffered a broad based decline in May on a combination of stronger risk appetite and growing
fears over structural deficiencies in the U.S. Investors moved dormant dollar denominated assets
overseas to capture growth and risk in commodity block currencies. Smaller losses were also
recorded in the commodities sector as natural gas finished a volatile month higher.
During June, a surprise payroll number to the upside for May prompted an aggressive sell-off
in short-term U.S. rates and raised market expectations of a rate hike in 2009. The price reaction
was swift and caused particular difficulty for systematic trading. Losses for the Trust in the
fixed income sector were offset by marginal gains in the foreign exchange sector. The Trusts
currency positions were generally mixed, thus hedging some U.S. Dollar risk, as investors crowded
the Dollar as a safe-haven trade, pushing it higher on the month. Marginal gains were also
recorded in the commodities sector, primarily from long positions in the energy complex. As
geo-political headlines were plentiful, energies traded in a highly correlated fashion to global
equity markets. The stock index sector finished basically flat for the month as global equity
markets reflected mixed results congruent with both positive and negative economic data relating to
global recovery.
Contrary to investor fears, global stock market returns in 2009 have fueled improved risk
appetite as economic data and corporate earnings support the rally for yet another month in July.
The Trusts trading performance was relatively flat, with positive results from long stock and
short U.S. Dollar positions being offset by losses incurred from short interest rate positions.
For the first half of 2009, many trend-following strategies struggled to curb losses and eked out
small gains in a market environment that is in a classic consolidation (trendless and choppy)
period.
While risk appetite was generally strong in August, investors risk behavior was a bit random
as fixed income initially sold off on better than expected payrolls data, but spent the rest of the
month rallying. Bernankes nomination for a second term and continued lower rates for longer
comments from Fed officials helped support treasury prices against the Trusts general positioning
across the curve. Smaller losses were recorded in currency trading as investors appeared unwilling
to chase growth currencies higher, at the expense of the dollar, from already stretched levels.
Gains were recorded in commodity markets as the Trust increased its exposure to this sector with
the launch of more agile models providing more efficient holding period 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.
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Table of Contents
During the month of September, the Trusts technical and fundamental strategies both recorded
healthy gains in the foreign exchange sector from short positions in the U.S. Dollar vs. most major
currencies. Commodity-linked currencies were particularly profitable for the Trust, as both the
Australian and New Zealand Dollars rose in value close to 5%. Technical and fundamental signals
were also effective in the equity index sector, where the Trust benefited from primarily long
positions across global stock indices. With the exception of Japan, global equities moved higher
by 2 3% during the month on healthy M&A activity, as well as favorable
signs of a manufacturing rebound and consumer spending renewal. Results were mixed in fixed
income trading as gains earned from short-term rates were largely offset by losses on the long end
of the curve. Commodities trading resulted in marginal losses overall, primarily due to short
positions in natural gas. The price of natural gas rallied over 20% during the month as a result
of significant short covering in the market despite record storage levels.
The risk pendulum continued to swing between risk on and risk off during the month of
October, culminating in risk off at month-end and impacting all sectors of the portfolio. As
global equity markets fell, commodities fell in tandem and the U.S. Dollar rallied along with fixed
income in a thematic trade tied to central bank activity. While the Trusts risk exposure to
equity indices was relatively low, our net long position yielded the largest sector loss during the
month. The high volatility environment for mean-reversion equity trading was quite favorable,
resulting in gains in the cash equities statistical models in both U.S. and Japan. The
perseverance of the risk off trade at month-end resulted in modest losses in foreign exchange,
modest gains in commodities.
November saw strong trends generate a return of 3.03%, with solid gains in interest rates,
foreign exchange, and commodities. Weaker than expected new home sales to start the month, the
Federal Open Market Committees retention of extended period language at mid-month, and a flight
to quality at month-end fueled by fears over Dubai debt pushed bond prices higher throughout the
month. Thus, trading in fixed income contributed to strong gains from both the short and long end
of the curve; foreign exchange trading profited from a continued downward trend of the U.S. Dollar;
and commodity trading benefitted from gains in precious metals.
In December, the markets saw a rapid reversal in fixed income and the U.S. Dollar.
Inflationary fears subsided as better than expected U.S. economic data fueled equity prices higher
and bond prices lower. While market participants seemed to be trading at reduced risk levels,
price trends were inconsistent leading into the holiday break, causing losses for many systematic
managers, including Campbell. Sharp losses in fixed income trading and modest losses in foreign
exchange outweighed solid gains in cash equities and equity indices trading, resulting in a net
loss for the month.
2008
For the 2008 increase of 1.77%, approximately 4.43% was due to trading gains (before
commissions) and approximately 1.51% due to interest income offset by approximately (4.17)% due to
brokerage fees, operating costs and offering costs borne by the Trust. An analysis of the 4.43%
trading gain by sector is as follows:
Sector | % Gain (Loss) | |||
Stock Indices |
9.10 | % | ||
Commodities |
0.35 | |||
Currencies |
(0.51 | ) | ||
Interest Rates |
(4.51 | ) | ||
4.43 | % | |||
The first quarter of 2008 began where 2007 left off, with the credit crisis causing more
write-downs, more credit downgrades, and a growing realization that sub-prime issues would have
broader and longer-lasting impacts than initially suspected. In January, weak economic data caused
the Federal Open Market Committee to cut short-term rates by a total of 1.25%, which included an
unprecedented 0.75% emergency cut. The S&P 500 recorded one of its worst monthly performances in
the history of the index. The Trusts performance in January was basically flat, with gains in
equity indices trading more than offset by losses in currencies and flat performance in fixed
income and commodities.
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Table of Contents
February saw the U.S. dollar weaken against most major currencies, as U.S. economic data
disappointed, stagflation concerns grew and U.S. interest rate expectations declined dramatically.
The Trusts currency trading profited from these moves, generating a positive return for the month.
The Trust also recorded gains in equity
indices trading, as the S&P 500, Dow, and NASDAQ continued to slide. Overall, the Trust had a
positive month, posting a 1.68% gain.
March brought more Federal Reserve intervention, which resulted in a slight recovery by U.S.
stocks from mid-month slides to finish flat for the month, but still significantly negative for the
year. The US dollar continued to weaken. The Trusts performance was close to flat for the month
at (0.08)%, with gains in equity indices and currencies offset by losses in commodities and fixed
income. The Trust closed the first quarter of 2008 with a year-to-date gain of 1.57%.
In April, the U.S. Dollar rallied against key funding currencies, despite a generally weak
global economy. The Trust realized gains in foreign exchange and commodities. However, those
gains were overshadowed by losses in the fixed income and equity indices sectors, as prior trends
in both sectors reversed course. For the month of April, the Trust suffered a loss of 2.32%.
May was a strong month for the Trust. Positive commodity trading led the charge as crude oil
breached new technical levels, touching $135 mid-month. Foreign exchange models also posted gains,
as high-yielding currencies performed well. These gains, together with modest gains in the fixed
income more than offset a loss in equity indices. The Trust achieved a positive return on the
month of 2.07%.
In June the Trust realized its best month of the year, posting a return of 5.26%. Equity
indices trading produced strong gains as short positions benefitted from the negative news that
roiled the markets around the globe. Signs of commodity-based inflation were constantly in the
headlines. Consumer confidence fell to a 16-year low, as U.S., European, and Asian equities
markets fell in tandem. Fixed income trading produced additional gains for the Trust, in response
to fears of inflation and the ECBs increasingly hawkish stance. Commodities also posted gains as
crude oil hit new highs on the back of increased tensions in the Middle East and among OPEC
members. In addition, the Trust had modest gains in foreign exchange sector. The Trust concluded
the second quarter with a gain of 5.40% for the quarter, and a year-to-date gain of 7.05%.
The month of July was characterized by reversals in many asset classes. The Dow and S&P hit
technical bear market territory early in the month, while Japanese equities saw their longest
back-to-back losing streak in 54 years. Equity markets seemed to find a bottom mid-month after the
U.S. announced the Government-Sponsored Enterprises bailout plan. Commodity prices also reversed,
with crude oil declining almost 12% on fears that a weakened economy would reduce global demand.
The Trust earned profits in equity indices trading. Those gains were offset by losses in fixed
income and commodities. All-in, the Trust finished the month with a loss of 1.10%.
In August, sub-prime fallout continued to plague the global financial markets. The U.S.
unemployment rate hit a four-year high. Commodity prices continued to decline, with natural gas
leading the way with a decline of 12.75% and gold falling to its lowest level in eight months. The
Trust experienced losses in foreign exchange and commodities sectors as currencies linked to
commodities fell in tandem with metal and energy markets, while the U.S. Dollar Index posted
unusually strong gains. Those losses edged out gains in fixed income, resulting in a loss for the
month of 1.37%.
September saw concern over the widening credit crises come to a boiling point. Equity markets
in the U.S., Europe, and Asia declined sharply. Investors fled high-yielding currencies in
response to the global decline in equity markets. The Trust posted a loss of 1.36%. Gains in
equity indices were offset by losses in foreign exchange, fixed income, and commodities.
Diversification of positions by sector and geography played an important role in dampening losses
to the Trust, as did a decrease in risk levels across the portfolio. The Trust concluded the third
quarter with a loss of 3.78% for the quarter, leaving the year-to-date gain at 3.00%.
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At the time, the month of October seemed like a month to remember, as equity markets around
the world plummeted, fueling further anxiety about the length and depth of a global recession and
further exacerbating the
liquidity, growth, and confidence crisis. With the benefit of hindsight, it was but the
beginning of a quarter to remember. For the Trust, the month was about the benefits and
disadvantages of diversification. Modest gains in equity indices trading were more than offset by
losses in foreign exchange and fixed income, resulting in a loss for the month of 0.91%.
November brought further global economic panic, as governments around the world continued to
announce plans to help bolster sagging economies. The U.S. reversed course on its bailout effort,
from buying troubled assets to facilitating lending flow. Economic data reflected another sharp
drop in manufacturing, rising unemployment, and the largest drop in retail sales since 1992,
prompting wild swings in both equity and bond markets. The Trust maintained a relatively low risk
profile during the month, which resulted in marginal losses and gains across the sectors. For the
Trust, losses in fixed income offset marginal gains in other sectors, resulting in a loss for the
month of 1.07%.
December saw more of the same on the global economic front. The Trust, however, took
advantage of dramatic moves in the British Pound, particularly against the Euro, to achieve gains
in foreign exchange. Likewise, fixed income trading was profitable as central banks across the
globe continued to lower interest rates on persistent negative data. Overall, the Trust gained
0.80% for December.
The Trust completed the fourth quarter of 2008, one of the most volatile in market history,
with a loss for the quarter of 1.19%, bringing the return for the year to 1.77%.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Introduction
Past Results Not Necessarily Indicative of Future Performance
The Trust is a speculative commodity pool. The market sensitive instruments held by it are
acquired for speculative trading purposes, and all or a substantial amount of the Trusts assets
are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive
instruments is integral, not incidental, to the Trusts main line of business.
Market movements result in frequent changes in the fair market value of the Trusts open
positions and, consequently, in its earnings and cash flow. The Trusts market risk is influenced
by a wide variety of factors, including the level and volatility of exchange rates, interest rates,
equity price levels, the market value of financial instruments and contracts, the diversification
effects among the Trusts open positions and the liquidity of the markets in which it trades.
The Trust rapidly acquires and liquidates both long and short positions in a wide range of
different markets. Consequently, it is not possible to predict how a particular future market
scenario will affect performance, and the Trusts past performance is not necessarily indicative of
its future results.
Standard of Materiality
Materiality as used in this section, Quantitative and Qualitative Disclosures About Market
Risk, is based on an assessment of reasonably possible market movements and the potential losses
caused by such movements, taking into account the leverage, and multiplier features of the Trusts
market sensitive instruments.
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Quantifying the Trusts Trading Value at Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Trusts market risk exposures contain
forward-looking statements within the meaning of the safe harbor from civil liability provided
for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All
quantitative disclosures in this section are deemed to be forward-looking statements for purposes
of the safe harbor, except for statements of historical fact (such as the dollar amount of
maintenance margin required for market risk sensitive instruments held at the end of the reporting
period).
The Trusts risk exposure in the various market sectors traded is estimated in terms of Value
at Risk (VaR). The Trust estimates VaR using a model based upon historical simulation (with a
confidence level of 97.5%) which involves constructing a distribution of hypothetical daily changes
in the value of a trading portfolio. The VaR model takes into account linear exposures to risks,
including equity and commodity prices, interest rates, foreign exchange rates, and correlation
among these variables. The hypothetical changes in portfolio value are based on daily percentage
changes observed in key market indices or other market factors to which the portfolio is sensitive.
The Trusts VaR at a one day 97.5% confidence level VaR corresponds to the negative change in
portfolio value that, based on observed market risk factors, would have been exceeded once in 40
trading days or one day in 40. VaR typically does not represent the worst case outcome.
The Trust uses approximately one quarter of daily market data and revalues its portfolio for
each of the historical market moves that occurred over this time period. This generates a
probability distribution of daily simulated profit and loss outcomes. The VaR is the 2.5
percentile of this distribution.
The VaR for a sector represents the one day downside risk for the aggregate exposures
associated with this sector. The current methodology used to calculate the aggregate VaR
represents the VaR of the Trusts open positions across all market sectors, and is less than the
sum of the VaRs for all such market sectors due to the diversification benefit across asset
classes.
The Trusts VaR computations are based on the risk representation of the underlying benchmark
for each instrument or contract and does not distinguish between exchange and non-exchange
dealer-based instruments. It is also not based on exchange and/or dealer-based maintenance margin
requirements.
VaR models, including the Trusts, are continually evolving as trading portfolios become more
diverse and modeling techniques and systems capabilities improve. Please note that the VaR model
is used to numerically quantify market risk for historic reporting purposes only and is not
utilized by the Trust in its daily risk management activities. Please further note that VaR as
described above may not be comparable to similarly titled measures used by other entities.
Because the business of the Trust is the speculative trading of futures, forwards and options,
the composition of the Trusts trading portfolio can change significantly over any given time
period, or even within a single trading day, which could positively or negatively materially impact
market risk as measured by VaR.
The Trusts Trading Value at Risk in Different Market Sectors
The following tables indicate the trading Value at Risk associated with the Trusts open
positions by market category as of December 31, 2010, 2009 and 2008 and the trading gains/losses by
market category for the years then ended.
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December 31, 2010 | ||||||||
Trading | ||||||||
Market Sector | Value at Risk* | Gain/(Loss)** | ||||||
Commodities |
0.83 | % | 4.20 | % | ||||
Stock Indices |
0.48 | % | (2.38 | )% | ||||
Currencies |
0.46 | % | 3.36 | % | ||||
Interest Rates |
0.45 | % | 12.36 | % | ||||
Aggregate/Total |
1.72 | % | 17.52 | % | ||||
* | - The VaR for a sector represents the one day downside risk for the aggregate exposures associated with this sector. The aggregate VaR represents the VaR of the Trusts open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes. | |
** | - Of the 14.04% return for the year ended December 31, 2010, approximately 17.51% was due to trading gains (before commissions) and approximately 0.34% due to interest income offset by approximately (3.81)% due to brokerage fees, operating costs and offering costs borne by the Trust. |
December 31, 2009 | ||||||||
Trading | ||||||||
Market Sector | Value at Risk* | Gain/(Loss)** | ||||||
Currencies |
0.90 | % | 3.41 | % | ||||
Interest Rates |
0.68 | % | (4.15 | )% | ||||
Stock Indices |
0.45 | % | (0.68 | )% | ||||
Commodities |
0.41 | % | (0.32 | )% | ||||
Aggregate/Total |
1.62 | % | (1.74) | % | ||||
* | - The VaR for a sector represents the one day downside risk for the aggregate exposures associated with this sector. The aggregate VaR represents the VaR of the Trusts open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes. | |
** | - Of the (5.78)% return for the year ended December 31, 2009, approximately (1.74)% was due to trading gains (before commissions) and approximately 0.15% due to interest income offset by approximately (4.19) due to brokerage fees, operating costs and offering costs borne by the Trust. |
December 31, 2008 | ||||||||
Trading | ||||||||
Market Sector | Value at Risk* | Gain/(Loss)** | ||||||
Currencies |
0.50 | % | (0.51 | )% | ||||
Interest Rates |
0.30 | % | (4.51 | )% | ||||
Stock Indices |
0.18 | % | 9.10 | % | ||||
Commodities |
0.05 | % | 0.35 | % | ||||
Aggregate/Total |
0.60 | % | 4.43 | % | ||||
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* | - The VaR for a sector represents the one day downside risk for the aggregate exposures associated with this sector. The aggregate VaR represents the VaR of the Trusts open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes. | |
** | - Of the 1.77% return for the year ended December 31, 2008, approximately 4.43% was due to trading gains (before commissions) and approximately 1.51% due to interest income offset by approximately (4.17)% due to brokerage fees, operating costs and offering costs borne by the Trust. |
Material Limitations of Value at Risk as an Assessment of Market Risk
The following limitations of VaR as an assessment of market risk should be noted:
1) | Past changes in market risk factors will not always result in accurate predictions of the distributions and correlations of future market movements; | |
2) | Changes in portfolio value caused by market movements may differ from those of the VaR model; | |
3) | VaR results reflect past trading positions while future risk depends on future positions; | |
4) | VaR using a one day time horizon does not fully capture the market risk of positions that cannot be liquidated or hedged within one day; and | |
5) | The historical market risk factor data for VaR estimation may provide only limited insight into losses that could be incurred under certain unusual market movements. |
VaR is not necessarily representative of historic risk nor should it be used to predict the
Trusts future financial performance or its ability to manage and monitor risk. There can be no
assurance that the Trusts actual losses on a particular day will not exceed the VaR amounts
indicated or that such losses will not occur more than once in 40 trading days.
Non-Trading Risk
The Trust has non-trading market risk on its foreign cash balances not needed for margin.
However, these balances (as well as the market risk they represent) are immaterial. The Trust also
has non-trading market risk as a result of investing a substantial portion of its available assets
in U.S. Treasury Bills held at the broker and over-the-counter counterparty. The market risk
represented by these investments is minimal. Finally, the Trust has non-trading market risk on
fixed income securities held as part of its cash management program. The cash manager will use its
best endeavors in the management of the assets of the Trust but provide no guarantee that any
profit or interest will accrue to the Trust as a result of such management.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Trusts market risk exposures except
for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how
the Trust manages its primary market risk exposures constitute forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act.
The Trusts primary market risk exposures as well as the strategies used and to be used by Campbell
& Company for managing such exposures are subject to numerous uncertainties, contingencies and
risks, any one of which could cause the actual results of the Trusts risk controls to differ
materially from the objectives of such strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant fundamental factors, political
upheavals, changes in historical price relationships, an influx of new market participants,
increased regulation and many other factors could result in material losses as well as in material
changes to the risk exposures and the risk management strategies of the Trust. There can be no
assurance that the Trusts current market exposure and/or risk management strategies will not
change materially or that any such strategies will be effective in either the short- or long-term.
Investors must be prepared to lose all or substantially all of their investment in the Trust.
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The following were the primary trading risk exposures of the Trust as of December 31,
2010, by market sector.
Currencies
Exchange rate risk is a principal market exposure of the Trust. The Trusts currency exposure
is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These fluctuations are influenced by
interest rate changes as well as political and general economic conditions. The Trust trades in a
large number of currencies, including crossrates i.e., positions between two currencies other
than the U.S. Dollar. Campbell & Company does not anticipate that the risk profile of the Trusts
currency sector will change significantly in the future.
Interest Rates
Interest rate risk is a significant market exposure of the Trust. Interest rate movements
directly affect the price of the sovereign bond positions held by the Trust and indirectly the
value of its stock index and currency positions. Interest rate movements in one country as well as
relative interest rate movements between countries materially impact the Trusts profitability.
The Trusts primary interest rate exposure is to interest rate fluctuations in the United States
and the other G-7 countries. Campbell & Company anticipates that G-7 interest rates will remain
the primary rate exposure of the Trust for the foreseeable future. The changes in interest rates
which have the most effect on the Trust are changes in long-term, as opposed to short-term rates.
Most of the speculative positions held by the Trust are in medium- to long-term instruments.
Stock Indices
The Trusts primary equity exposure is to equity price risk in the G-7 countries and
several other countries (Hong Kong, Spain, the Netherlands and Taiwan). The stock index
futures traded by the Trust are by law limited to futures on broadly based indices. The Trust
is primarily exposed to the risk of adverse price trends or static markets in the major U.S.,
European and Japanese indices. Markets that trade in a narrow range could result in the
Trusts positions being whipsawed into numerous small losses.
Energy
The Trusts 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 Trusts metals market exposure is to fluctuations in the price of aluminum, copper, gold,
nickel, silver, and zinc.
Agricultural
The Trusts agricultural exposure was to the fluctuations in the price of wheat, corn, coffee,
sugar, soy, hogs, cattle, and cotton.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the primary non-trading risk exposures of the Trust as of December 31, 2010.
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Foreign Currency Balances
The Trusts primary foreign currency balances are in Australian Dollars, Canadian Dollars,
Japanese Yen, British Pounds and Euros. The Trust controls the non-trading risk of these balances
by regularly converting these balances back into dollars (no less frequently than twice per month,
and more frequently if a particular foreign currency balance becomes unusually large).
Fixed Income Securities
The Trusts primary market exposure iin instruments (other than treasury positions described
in the subsequent section) held other than for trading is in its fixed income portfolio. All
securities purchased by the cash manager on behalf of the Trust are held in the Trusts custody
account at the custodian.
Treasury Bill Positions Held for Margin Purposes
The Trust also has market exposure in its Treasury Bill portfolio. The Trust holds Treasury
Bills (interest bearing and credit risk-free) with maturities no longer than six months. Violent
fluctuations in prevailing interest rates could cause minimal mark-to-market losses on the Trusts
Treasury Bills, although substantially all of these short-term investments are held to maturity.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Trust and Campbell & Company, severally, attempt to manage the risk of
the Trusts open positions is essentially the same in all market categories traded. Campbell &
Company applies risk management policies to its trading which generally limit the total exposure
that may be taken per risk unit of assets under management. In addition, Campbell & Company
follows diversification guidelines (often formulated in terms of the balanced volatility between
markets and correlated groups), as well as precalculating stop-loss points at which systems will
signal to close out open positions.
Campbell & Company manages the risk of the Trusts non-trading instruments of Treasury Bills
held for margin purposes by limiting the duration of such instruments to no more than six months.
Campbell & Company manages the risk of the Trusts fixed income securities held for cash management
purposes by restricting the cash managers to investing in securities that are modeled after those
investments allowed by the futures broker as defined under The Commodity Exchange Act, Title 17,
Part 1, § 1.25 Investment of customer funds. Investments can include, but are not limited to, (i)
U.S. Government Securities, Government Agency Securities, Municipal Securities, bankers
acceptances and certificates of deposit; (ii) commercial paper; and (iii) corporate debt.
General
The Trust is unaware of any (i) anticipated known demands, commitments or capital
expenditures; (ii) material trends, favorable or unfavorable, in its capital resources; or (iii)
trends or uncertainties that will have a material effect on operations. From time to time, certain
regulatory agencies have proposed increased margin requirements on futures contracts. Because the
Trust generally will use a small percentage of assets as margin, the Trust does not believe that
any increase in margin requirements, as proposed, will have a material effect on the Trusts
operations.
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Item 8. | Financial Statements and Supplementary Data |
Financial statements meeting the requirements of Regulation S-X appear beginning on Page 46 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 managing owner of the Trust, with the participation of the
managing owners chief executive officer and chief financial officer, has evaluated the
effectiveness of the design and operation of its disclosure controls and procedures (as defined in
the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Trust as of
the end of the period covered by this annual report. Based on their evaluation, the chief
executive officer and chief financial officer have concluded that these disclosure controls and
procedures are effective. There were no changes in the managing owners internal control over
financial reporting applicable to the Trust identified in connection with the evaluation required
by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the last fiscal
quarter that have materially affected, or is reasonably likely to materially affect, internal
control over financial reporting applicable to the Trust.
Managements Annual Report on Internal Control over Financial Reporting
Campbell & Company, Inc. (CCI), the managing owner of the Trust, is responsible for the
management of the Trust. Management of CCI (Management) is responsible for establishing and
maintaining adequate internal control over financial reporting. The internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.
The Managements internal control over financial reporting includes those policies and procedures
that:
| Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Trust; | ||
| Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the partnerships transactions are being made only in accordance with authorizations of Management and; | ||
| Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Trusts assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Trusts internal control over financial reporting
as of December 31, 2010. 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, 2010 , the Trusts internal control
over financial reporting was effective.
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Item 9B. | Other Information |
There was no information required to be disclosed in a report on form 8-K during the fourth
quarter of 2010.
PART III
Item 10. | Directors and Executive Officers of the Registrant |
The Registrant has no directors or executive officers. The Registrant has no employees. It
is managed by Campbell & Company in its capacity as general partner. Campbell & Company has been
registered as a commodity pool operator (CPO) since September 1982. Its main business address is
located at 2850 Quarry Lake Drive, Baltimore, Maryland 21209, (410) 413-2600. Campbell & Companys
directors and executive officers are as follows:
G. William Andrews, born in 1972, has been employed by Campbell & Company since April 1997 and
was appointed Chief Operating Officer in January 2010, was Vice President: Director of Operations
from April 2007 to January 2010, and was Vice President: Director of Research Operations from March
2006 to April 2007 and Research Assistant from March 2005 to February 2006. As Chief Operating
Officer, he is involved in all operational aspects of the firm. In March 2010, Mr. Andrews was
appointed to the firms Investment Committee, and in that capacity is responsible for the
management of the research and investment process at the firm. In March 2010, Mr. Andrews was
appointed the Vice President and Chief Operating Officer of both Campbell & Company Investment
Adviser LLC, a wholly-owned subsidiary of Campbell & Company, a registered commodity trading
advisor and an SEC registered investment adviser, and The Campbell Multi-Strategy Trust, a
registered investment company. 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. Mr. Andrews became listed as
Principal of Campbell & Company Investment Adviser LLC effective March 29, 2010.
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, Director since
January 1994, and was Chief Financial Officer and Treasurer until July 2008. Since April 2007, Ms.
Becks has served as the President and Chief Executive Officer of Campbell & Company Investment
Adviser LLC, a wholly-owned subsidiary of Campbell & Company, a registered commodity trading
advisor and an SEC-registered investment adviser; she previously served as Chief Financial Officer,
Treasurer and Assistant Secretary commencing December 2005. Ms. Becks has served since April 2007
as Trustee, President and Chief Executive Officer of The Campbell Multi-Strategy Trust, a
registered investment company; she previously served as Treasurer, Chief Financial Officer and
Assistant Secretary commencing June 2005. In May 2010, Ms. Becks was incorporated in The Bahamas.
Ms. Becks served as a member of the Board of Directors of the Managed Funds Association from
November 2002 to November 2006. 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 in 1972, was President until January 1994, and was
Chief Executive Officer until January 1998. Mr. Campbell is the majority voting stockholder of
Campbell & Company. Mr. Campbell has acted as a commodity trading advisor since January 1972 when,
as general partner of the Campbell Fund, a limited partnership engaged in commodity futures
trading, he assumed sole responsibility for trading decisions made on its behalf. Since then, he
has applied various technical trading models to numerous discretionary futures trading accounts.
Mr. Campbell is registered with the CFTC and NFA as a commodity pool operator. Mr. Campbell became
registered as an Associated Person and listed as a Principal and NFA Associate Member of Campbell &
Company effective October 29, 1997, September 29, 1978 and September 29, 1997, respectively. Mr.
Campbell became listed as a Principal of Campbell & Company Investment Adviser LLC effective July
9, 2008. Mr. Campbell became listed as a Principal of his Commodity Pool Operator effective March
10, 1975.
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Bruce L. Cleland, born in 1947, joined Campbell & Company in January 1993 and has served as
Vice Chairman of the Board of Directors of Campbell & Company since April 2007, was President from
January 1994 to April 2007, and Chief Executive Officer from January 1998 to April 2007. From
December 2005 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, a
registered commodity trading advisor and an SEC-registered investment advisor. From June 2005 until
April 2007, Mr. Cleland also served as Trustee, Chief Executive Officer and President of The
Campbell Multi-Strategy Trust, a registered investment company. In March 2010, Mr. Cleland was
appointed to the firms Investment Committee, and in that capacity is responsible for the
management of the research and investment process at the firm. 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 Futures 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 again 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 was an Associated Person, Principal and NFA Associate Member of Campbell & Company
Investment Adviser LLC from December 2005 to April 2007. Effective July 9, 2008, Mr. Cleland again
became listed as a Principal of Campbell & Company Investment Adviser LLC.
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, since April 2007, the Chief Financial Officer, Treasurer and Assistant Secretary of both
Campbell & Company Investment Adviser LLC, a wholly-owned subsidiary of Campbell & Company, a
registered commodity trading advisor and an SEC-registered investment advisor, and The Campbell
Multi-Strategy Trust, a registered investment company, and since May 2010 as Treasurer of Campbell
& Company International Bahamas Limited, an international business company incorporated in The
Bahamas. From November 2003 to October 2006, Mr. Donovan was employed by Huron Consulting Services,
a managing consulting firm, serving as Director in the Financial and Economic Consulting 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. In March 2010, Mr. Harris was appointed to the firms Investment
Committee, and in that capacity is responsible for the management of the investment process of the
firm. 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.
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Xiaohua Hu, born in 1963, joined Campbell & Company in April 1994 and was appointed Research
Director in March 2010. Since he joined the firm, Mr. Hu has had a major role in the ongoing
research and development of Campbell & Companys trading systems. In March 2010, Mr. Hu was
appointed to the firms Investment Committee, and in that capacity is responsible for the
management of the research and investment process at the firm. Mr. Hu holds a B.A. in Manufacturing
Engineering from Changsha University of Technology in China. He went on to receive an M.A. and
Ph.D. in Systems and Information Engineering from the Toyohashi University of Technology, in Japan.
During his studies at Toyohashi, Mr. Hu was also a Visiting Researcher in Computer Science and
Operations Research and published several research papers. Mr. Hu was listed as a
Principal of Campbell & Company from February 1998 to December 2001. Mr. Hu again became listed as
a Principal of Campbell & Company effective April 7, 2010.
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, since September
2005, the Secretary, Chief Compliance Officer and Assistant Treasurer of both Campbell & Company
Investment Adviser LLC, a wholly-owned subsidiary of Campbell & Company, a registered commodity
trading advisor, and an SEC-registered investment adviser, and The Campbell Multi-Strategy Trust, a
registered investment company, and since May 2010 as Secretary of Campbell & Company International
Bahamas Limited, an international business company incorporated in The Bahamas. 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. 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 registered as
an Associated Person and listed as a Principal and NFA Associate Member of Campbell & Company
effective August 30, 2010, October 20, 2005 and August 30, 2010, respectively. Mr. Lloyd became
listed as a Principal of Campbell & Company Investment Adviser LLC effective December 12, 2005.
Robert W. McBride, born in 1970, has been employed by Campbell & Company since January 2004
and was appointed Director Software Development and Research Operations in May 2010, was
Director of Research Operations & Trade Operations from January 2010 to May 2010, Research
Operations Code Management Manager from March 2006 to January 2010, and Research Programmer from
January 2004 to March 2006. Mr. McBride holds a M.S. in Computer Science from South Dakota Schools
of Mines and Technology and a B.S. in Computer Science from Minnesota State University Mankato. Mr.
McBride became listed as a Principal of Campbell & Company effective May 25, 2010.
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. Ms. Wills-Zapata is also,
since December 2008, Vice President of both Campbell & Company Investment Adviser LLC, a
wholly-owned subsidiary of Campbell & Company, a registered commodity trading advisor and an
SEC-registered investment adviser, and The Campbell Multi-Strategy Trust, a registered investment
company. 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., and from
February 2003 to January 2005 with DB Advisors LLC. 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., and from January 2003 to January
2005 with DB Advisors LLC. 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.
38
Table of Contents
No Forms 3, 4, or 5 have been furnished to the Registrant since inception. To the best of the
Registrants knowledge, no such forms have been or are required to be filed.
Audit Committee Financial Expert
The Board of Directors of Campbell & Company, in its capacity as the audit committee for the
Trust, has determined that Gregory T. Donovan qualifies as an audit committee financial expert in
accordance with the applicable rules and regulations of the Securities and Exchange Commission. He
is not independent of management.
Code of Ethics
Campbell & Company has adopted a code of ethics for its chief executive officer, chief
financial officer, director of fund accounting, accounting managers and persons performing similar
functions. A copy of the code of ethics may be obtained at no charge by written request to
Campbell & Companys corporate secretary, 2850 Quarry Lake Drive, Baltimore, Maryland 21209 or by
calling 1-800-698-7235.
Item 11. | Executive Compensation |
The Registrant is managed by its managing owner, Campbell & Company. Campbell & Company
receives from the Registrant a Brokerage Fee equal to 2.85% of the Registrants month-end Net
Assets per year. From such 2.85% Brokerage Fee, Campbell & Company remits 0.35% to the
broker-dealers which engaged in the distribution of the Units in return for ongoing services to the
Unitholders. Campbell & Company retains the remaining 2.5% as management fees (2% for providing
advisory fees and 0.5% for acting as managing owner). Campbell & Company also receives a
performance fee of 20% of the aggregate cumulative appreciation (if any) in Net Asset Value per
unit at the end of each calendar quarter, exclusive of the appreciation attributable to interest
income. The performance fee is paid on the cumulative increase if any, in the Net Asset Value per
Unit over the highest previous cumulative Net Asset Value per Unit (commonly referred to as a High
Water Mark). In determining the fees in this paragraph, adjustments shall be made for capital
additions and withdrawals and Net Assets shall not be reduced by the fees being calculated for such
current period. The performance fee is not subject to any clawback provisions. The brokerage fee
and performance fee are typically paid in the month following the month n which they are earned.
The brokerage fee and performance fee are paid from the available cash at the Trusts bank, broker
or cash management accounts.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
(a) | Security Ownership of Certain Beneficial Owners. As of December 31, 2010, no Units of Beneficial Interest are owned or held by an officer of Campbell & Company. As of December 31, 2010, the following beneficial owners owned more than five percent of the Units: |
Name of Beneficial | Number of Units | Percentage of | ||||||
Owner | Owned | Trust | ||||||
Campbell & Company, Inc. 401(k) Plan |
14,005.882 | 82.41 | % |
(b) | Security Ownership of Management. As of December 31, 2010, Campbell & Company owned 741.284 Units of Managing Owner Interest having a value of $1,236,580.32. Units of Managing Owner Interest will always be owned by Campbell & Company in its capacity as managing owner. |
Item 13. | Certain Relationships and Related Transactions |
See Item 11, Executive Compensation and Item 12, Security Ownership of Certain Beneficial
Owners and Management.
39
Table of Contents
Item 14. | Principal Accounting Fees and Services |
The principle accountant for the year ended December 31, 2010 was Deloitte & Touche LLP. |
(a) | Audit Fees | ||
The aggregate fees billed for professional services rendered by the principal accountant for the audit of the Trusts annual financial statements, for review of financial statements included in the Trusts Forms 10-Q and other services normally provided in connection with regulatory filings for the years ended December 31, 2010 and 2009 were $52,275 and $36,450, 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, 2010 and 2009 were $0 and $5,070, respectively. | |||
(c) | Tax Fees | ||
None | |||
(d) | All Other Fees | ||
None | |||
(e) | The Board of Directors of Campbell & Company approved all of the services described above. The Board of Directors has determined that the payments made to its independent accountants for these services are compatible with maintaining such auditors independence. The Board of Directors explicitly pre-approves all audit and non-audit services and all engagement fees and terms |
PART IV
Item 15. | Exhibits, Financial Statement Schedules, and Reports on Form 8-K |
(a) | The Following documents are filed as part of this report: |
(1) | See Financial Statements beginning on page 46 hereof. | ||
(2) | Schedules: | ||
Financial statement schedules have been omitted because they are not included in the financial statements or notes hereto applicable or because equivalent information has been included in the financial statements or notes thereto. | |||
(3) | Exhibit |
Exhibit Number | Description of Document | |
1.01
|
Selling Agreement among the Registrant, Campbell & Company, PaineWebber Incorporated and the Selling Agent. (Incorporated by reference to the respective exhibit to the Post-Effective Amendment No. 11 to the Registrants Registration Statement on Form S-1 (No. 333-74014) filed on November 25, 2008). | |
1.02
|
Additional Selling Agreement among the Registrant, Campbell & Company and the Additional Selling Agent. (Incorporated by reference to the respective exhibit to the Post-Effective Amendment No. 11 to the Registrants Registration Statement on Form S-1 (No. 333-74014) filed on November 25, 2008). |
40
Table of Contents
Exhibit Number | Description of Document | |
3.01
|
Declaration of Trust and Trust Agreement of the Registrant dated May 1, 2000. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Form S-1 (No. 333-37548) filed on May 22, 2000). | |
3.02
|
Certificate of Trust of the Registrant. (Incorporated by reference to the respective exhibit to the Pre-Effective Amendment No. 1 to the Registrants Registration Statement on Form S-1 (No. 333-37548) filed on November 9, 2000). | |
3.03
|
Fourth Amended and Restated Declaration of Trust and Trust Agreement of the Registrant. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Form S-1 (No. 333-167794) filed on June 25, 2010). | |
10.01
|
Customer Agreement between the Registrant and UBS Securities LLC. (Incorporated by reference to the respective exhibit to the Post-Effective Amendment No. 11 to the Registrants Registration Statement on Form S-1 (No. 333-74014) filed on November 25, 2008). | |
10.02
|
Subscription Agreement and Power of Attorney. (Incorporated by reference to the respective exhibit to the Registrants Registration Statement on Post-Effective Amendment No. 11 to Form S-1 (No. 333-74014) filed on November 25, 2008). | |
10.03
|
Escrow Agreement between the Registrant and Mercantile Safe Deposit & Trust Company. (Incorporated by reference to the respective exhibit to the Post-Effective Amendment No. 11 to the Registrants Registration Statement on Form S-1 (No. 333-74014) filed on November 25, 2008). | |
10.05
|
Form ofInternational Swap Dealers Association, Inc. Master Agreement between the Registrant and Deutsche Bank AG. (Incorporated by reference to the respective exhibit to the Post-Effective Amendment No. 11 to the Registrants Registration Statement on Form S-1 (No. 333-74014) filed on November 25, 2008.) | |
10.06
|
Non-Custody Investment Advisory Agreement between the Registrant and Wilmington Trust Company. (Incorporated by reference to the respective exhibit to the Post-Effective Amendment No. 12 to the Registration Statement on Form S-1 (No. 333-74014) filed on August 25, 2009. | |
10.07
|
Global Institutional Master Custody Agreement. (Incorporated by reference to the respective exhibit to the Post-Effective Amendment No. 12 to the Registration Statement on Form S-1 (No. 333-74014) filed on August 25, 2009. | |
16.01
|
Letter regarding change in Certifying Accountant. (Incorporated by reference to the respective exhibit to the Report on Form 8-K (No. 000-33311) filed on September 27, 2005. | |
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. |
41
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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, 2011.
CAMPBELL ALTERNATIVE ASSET TRUST |
||||
By: | CAMPBELL & COMPANY, INC. | |||
Managing Owner | ||||
By: | /s/ Theresa D. Becks | |||
Theresa D. Becks | ||||
Chief Executive Officer and Director | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant in the capacities of Campbell &
Company, Inc., Managing Owner of the Registrant indicated on March 31, 2011.
Signature | Capacity | |
/s/ D. Keith Campbell
|
Chairman of the Board of Directors | |
/s/ Bruce L. Cleland
|
Vice Chairman of the Board of Directors | |
/s/ Theresa D. Becks
|
Chief Executive Officer | |
/s/ Gregory T. Donovan
|
Chief Financial Officer, Principal Accounting Officer |
42
Table of Contents
CAMPBELL ALTERNATIVE ASSET TRUST
ANNUAL REPORT
December 31, 2010
43
Table of Contents
CAMPBELL ALTERNATIVE ASSET TRUST
TABLE OF CONTENTS
PAGES | ||||
Deloitte & Touche LLP |
45 | |||
Financial Statements |
||||
46-51 | ||||
52 | ||||
53 | ||||
54 | ||||
55 | ||||
56 | ||||
57-65 |
44
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Unitholders of
Campbell Alternative Asset Trust
Campbell Alternative Asset Trust
We have audited the accompanying statements of financial condition of Campbell Alternative Asset
Trust (the Trust), including the condensed of schedules of investments, as of December 31, 2010
and 2009, and the related statements of operations, cash flows, changes in unitholders capital
(net asset value) and financial highlights for each of the three years in the period ended December
31, 2010. These financial statements and financial highlights are the responsibility of the
Trusts management. Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial highlights are free of
material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Trusts internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly,
in all material respects, the financial position of Campbell Alternative Asset Trust as of December
31, 2010 and 2009, the results of its operations, its cash flows, changes in its unitholders
capital (net asset value) and financial highlights for each of the three years in the period ended
December 31, 2010, in conformity with accounting principles generally accepted in the United States
of America.
/s/ DELOITTE & TOUCHE LLP | ||||
Philadelphia, Pennsylvania | ||||
March 29, 2011 | ||||
45
Table of Contents
Campbell Alternative Asset Trust
Condensed Schedule of Investments
December 31, 2010
FIXED INCOME SECURITIES
Maturity | % of Net | |||||||||||
Face Value | Description | Values ($) | Asset Value | |||||||||
Certificate Of Deposit |
||||||||||||
Canada |
||||||||||||
Certificate of Deposit
Financials (cost $740,000) |
$ | 740,659 | 2.49 | % | ||||||||
Commercial Paper |
||||||||||||
United Kingdom |
||||||||||||
Consumer Staples
(cost $742,778) |
$ | 742,826 | 2.50 | % | ||||||||
United States |
||||||||||||
Consumer Discretionary |
$ | 3,697,905 | 12.44 | % | ||||||||
Energy |
$ | 249,972 | 0.84 | % | ||||||||
Financials |
$ | 742,982 | 2.50 | % | ||||||||
Industrial |
$ | 742,918 | 2.50 | % | ||||||||
Municipal |
$ | 430,017 | 1.45 | % | ||||||||
Utilities |
$ | 1,946,850 | 6.55 | % | ||||||||
Total United States (cost $7,810,309) |
$ | 7,810,644 | 26.28 | % | ||||||||
Total Commercial Paper
(cost $8,553,087) |
$ | 8,553,470 | 28.78 | % | ||||||||
Corporate Bonds |
||||||||||||
United States |
||||||||||||
Financials
(cost $1,529,608) |
$ | 1,536,950 | 5.17 | % | ||||||||
Government And Agency Obligations |
||||||||||||
United States |
||||||||||||
US Government Agency |
$ | 998,100 | 3.36 | % | ||||||||
US Treasury Bill |
||||||||||||
U.S. Treasury Bills * |
||||||||||||
$ | 5,000,000 | Due 01/13/2011 |
$ | 4,999,842 | 16.82 | % | ||||||
Total United States (cost $5,999,742) |
$ | 5,997,942 | 20.18 | % | ||||||||
Short Term Investment Funds |
||||||||||||
United States |
||||||||||||
Short Term Investment Funds
(cost $3,070,325) |
$ | 3,070,325 | 10.33 | % | ||||||||
Total Fixed Income Securities
(cost $19,892,762) |
$ | 19,899,346 | 66.95 | % | ||||||||
See Accompanying Notes to Financial Statements.
46
Table of Contents
Campbell Alternative Asset Trust
Condensed Schedule of Investments
December 31, 2010
Condensed Schedule of Investments
December 31, 2010
LONG FUTURES CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Agriculture |
$ | 200,217 | 0.67 | % | ||||
Energy |
$ | 68,603 | 0.23 | % | ||||
Long-term interest rates |
$ | 3,254 | 0.01 | % | ||||
Metals |
$ | 238,213 | 0.80 | % | ||||
Short-term interest rates |
$ | 34,455 | 0.12 | % | ||||
Stock indices |
$ | 1,453 | 0.00 | % | ||||
Total long futures contracts |
$ | 546,195 | 1.83 | % | ||||
SHORT FUTURES CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Agriculture |
$ | (10,356 | ) | (0.03 | )% | |||
Energy |
$ | (24,831 | ) | (0.08 | )% | |||
Long-term interest rates |
$ | (52,701 | ) | (0.18 | )% | |||
Metals |
$ | (12,703 | ) | (0.04 | )% | |||
Short-term interest rates |
$ | (469 | ) | 0.00 | % | |||
Stock indices |
$ | 4,024 | 0.01 | % | ||||
Total short futures contracts |
$ | (97,036 | ) | (0.32 | )% | |||
Total futures contracts |
$ | 449,159 | 1.51 | % | ||||
FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Various long forward currency contracts |
$ | 2,407,765 | 8.10 | % | ||||
Various short forward currency contracts |
$ | (1,930,792 | ) | (6.49 | )% | |||
Total forward currency contracts |
$ | 476,973 | 1.61 | % | ||||
PURCHASED OPTIONS ON FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Purchased options on forward currency contracts
(premiums paid $96,376) |
$ | 132,809 | 0.45 | % | ||||
See Accompanying Notes to Financial Statements.
47
Table of Contents
Campbell Alternative Asset Trust
Condensed Schedule of Investments
December 31, 2010
Condensed Schedule of Investments
December 31, 2010
WRITTEN OPTIONS ON FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Written options on forward currency contracts (premiums received $-20,991) |
$ | (61,350 | ) | (0.21 | )% | |||
* | Pledged as collateral for the trading of futures, forward and option positions. |
See Accompanying Notes to Financial Statements.
48
Table of Contents
Campbell Alternative Asset Trust
Condensed Schedule of Investments
December 31, 2009
Condensed Schedule of Investments
December 31, 2009
FIXED INCOME SECURITIES
Maturity | % of Net | |||||||||||
Face Value | Description | Values ($) | Asset Value | |||||||||
Bank Deposits |
||||||||||||
United States |
||||||||||||
Financials
(cost $1,100,000) |
$ | 1,100,627 | 3.79 | % | ||||||||
Commercial Paper |
||||||||||||
Germany |
||||||||||||
Materials
(cost $588,603) |
$ | 588,850 | 2.03 | % | ||||||||
Netherlands |
||||||||||||
Consumer Discretionary
(cost $827,966) |
$ | 827,971 | 2.85 | % | ||||||||
United States |
||||||||||||
Consumer Discretionary |
$ | 2,048,923 | 7.06 | % | ||||||||
Consumer Staples |
$ | 1,523,579 | 5.25 | % | ||||||||
Energy |
$ | 924,969 | 3.19 | % | ||||||||
Financials |
$ | 1,708,792 | 5.89 | % | ||||||||
Industrials |
||||||||||||
Avery Dennison Corporation |
||||||||||||
$ | 2,290,000 | Due 01/04/2010 |
$ | 2,289,921 | 7.90 | % | ||||||
Municipal |
$ | 6,549,496 | 22.58 | % | ||||||||
Telecommunications |
$ | 382,987 | 1.32 | % | ||||||||
Total United States (cost $15,424,662) |
$ | 15,428,667 | 53.19 | % | ||||||||
Total Commercial Paper
(cost $16,841,231) |
$ | 16,845,488 | 58.07 | % | ||||||||
Corporate Bonds |
||||||||||||
United States |
||||||||||||
Financials
(cost $1,395,877) |
$ | 1,397,647 | 4.82 | % | ||||||||
Government And Agency Obligations |
||||||||||||
United States |
||||||||||||
US Government Agency |
$ | 4,249,147 | 14.65 | % | ||||||||
US Treasury Bill |
||||||||||||
U.S. Treasury Bills * |
||||||||||||
$ | 5,000,000 | Due 04/01/2010 |
$ | 4,999,431 | 17.24 | % | ||||||
U.S. Treasury Bills * |
||||||||||||
$ | 1,650,000 | Due 03/25/2010 |
$ | 1,649,753 | 5.69 | % | ||||||
Total United States (cost $10,896,184) |
$ | 10,898,331 | 37.58 | % | ||||||||
Short Term Investment Funds |
||||||||||||
United States |
||||||||||||
Short Term Investment Funds
(cost $34,246) |
$ | 34,246 | 0.12 | % | ||||||||
Total Fixed Income Securities
(cost $30,267,538) |
$ | 30,276,339 | 104.38 | % | ||||||||
See Accompanying Notes to Financial Statements.
49
Table of Contents
Campbell Alternative Asset Trust
Condensed Schedule of Investments
December 31, 2009
Condensed Schedule of Investments
December 31, 2009
LONG FUTURES CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Agriculture |
$ | (3,889 | ) | (0.01 | )% | |||
Energy |
$ | 18,479 | 0.06 | % | ||||
Long-term interest rates |
$ | (252,217 | ) | (0.87 | )% | |||
Metals |
$ | 163,924 | 0.57 | % | ||||
Short-term interest rates |
$ | (100,836 | ) | (0.35 | )% | |||
Stock indices |
$ | 213,758 | 0.74 | % | ||||
Total long futures contracts |
$ | 39,219 | 0.14 | % | ||||
SHORT FUTURES CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Agriculture |
$ | 838 | 0.00 | % | ||||
Long-term interest rates |
$ | 11,956 | 0.04 | % | ||||
Metals |
$ | (107,732 | ) | (0.37 | )% | |||
Total short futures contracts |
$ | (94,938 | ) | (0.33 | )% | |||
Total futures contracts |
$ | (55,719 | ) | (0.19 | )% | |||
FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Various long forward currency contracts |
$ | (1,124,565 | ) | (3.88 | )% | |||
Various short forward currency contracts |
$ | 859,412 | 2.96 | % | ||||
Total forward currency contracts |
$ | (265,153 | ) | (0.92 | )% | |||
See Accompanying Notes to Financial Statements.
50
Table of Contents
Campbell Alternative Asset Trust
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 $70,105) |
$ | 70,935 | 0.24 | % | ||||
WRITTEN OPTIONS ON FORWARD CURRENCY CONTRACTS
% of Net | ||||||||
Description | Values ($) | Asset Value | ||||||
Written options on forward currency contracts (premiums received $21,883) |
$ | (19,069 | ) | (0.07 | )% | |||
* | Pledged as collateral for the trading of futures, forward and option positions. |
See Accompanying Notes to Financial Statements.
51
Table of Contents
Campbell Alternative Asset Trust
Statements of Financial Condition
December 31, 2010 And 2009
2010 | 2009 | |||||||
ASSETS |
||||||||
Equity in broker trading accounts |
||||||||
Cash |
$ | 7,272,155 | $ | 695,155 | ||||
Fixed income securities
(cost $4,999,842 and $4,999,431, respectively) |
4,999,842 | 4,999,431 | ||||||
Net unrealized gain (loss) on open futures contracts |
449,159 | (55,719 | ) | |||||
Total equity in broker trading accounts |
12,721,156 | 5,638,867 | ||||||
Cash |
2,502,810 | 279,164 | ||||||
Restricted cash deposits with forwards broker |
249,673 | 0 | ||||||
Fixed income securities
(cost $14,892,920 and $25,268,107, respectively) |
14,899,504 | 25,276,908 | ||||||
Options purchased, at fair value
(premiums paid $96,376 and $70,105, respectively) |
132,808 | 70,935 | ||||||
Net unrealized gain (loss) on open forward
currency contracts |
476,973 | (265,153 | ) | |||||
Interest receivable |
3,739 | 7,530 | ||||||
Prepaid expenses |
3,359 | 1,218 | ||||||
Total assets |
$ | 30,990,022 | $ | 31,009,469 | ||||
LIABILITIES |
||||||||
Accounts payable |
$ | 38,155 | $ | 31,880 | ||||
Brokerage fee |
14,679 | 18,138 | ||||||
Options written, at fair value
(premiums received $20,991 and $21,883, respectively) |
61,350 | 19,069 | ||||||
Accrued commissions and other trading fees
on open contracts |
4,070 | 4,701 | ||||||
Offering costs payable |
0 | 5,727 | ||||||
Redemptions payable |
1,143,802 | 1,927,892 | ||||||
Total liabilities |
1,262,056 | 2,007,407 | ||||||
UNITHOLDERS CAPITAL (Net Asset Value) |
||||||||
Managing Owner - 741.284 and 1,413.580 redeemable units
outstanding at December 31, 2010 and December 31, 2009 |
1,299,767 | 2,173,492 | ||||||
Other Unitholders - 16,213.126 and 17,448.570 redeemable units
outstanding at December 31, 2010 and December 31, 2009 |
28,428,199 | 26,828,570 | ||||||
Total unitholders capital (Net Asset Value) |
29,727,966 | 29,002,062 | ||||||
Total liabilities and unitholders capital (Net Asset Value) |
$ | 30,990,022 | $ | 31,009,469 | ||||
See Accompanying Notes to Financial Statements.
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Campbell Alternative Asset Trust
Statements
of Operations
For The Years Ended December 31, 2010, 2009 And 2008
2010 | 2009 | 2008 | ||||||||||
TRADING GAINS (LOSSES) |
||||||||||||
Futures trading gains (losses) |
||||||||||||
Realized |
$ | 3,254,038 | $ | (1,734,107 | ) | $ | 2,020,401 | |||||
Change in unrealized |
504,878 | (49,564 | ) | (203,665 | ) | |||||||
Brokerage commissions |
(72,262 | ) | (47,647 | ) | (53,459 | ) | ||||||
Net gain (loss) from futures trading |
3,686,654 | (1,831,318 | ) | 1,763,277 | ||||||||
Forward currency and options on forward currency trading gains (losses) |
||||||||||||
Realized |
218,740 | 1,430,644 | (1,162,559 | ) | ||||||||
Change in unrealized |
734,554 | (419,623 | ) | 969,895 | ||||||||
Brokerage commissions |
(7,639 | ) | (5,719 | ) | (1,676 | ) | ||||||
Net gain (loss) from forward currency
and options on forward currency trading |
945,655 | 1,005,302 | (194,340 | ) | ||||||||
Total net trading gain (loss) |
4,632,309 | (826,016 | ) | 1,568,937 | ||||||||
NET INVESTMENT INCOME (LOSS) |
||||||||||||
Investment income |
||||||||||||
Interest income |
90,271 | 40,809 | 554,492 | |||||||||
Realized gain (loss)
on fixed income securities |
6,920 | (1,277 | ) | 0 | ||||||||
Change in unrealized gain (loss)
on fixed income securities |
(2,217 | ) | 8,801 | 0 | ||||||||
Total investment income |
94,974 | 48,333 | 554,492 | |||||||||
Expenses |
||||||||||||
Brokerage fee |
802,334 | 941,871 | 1,055,055 | |||||||||
Operating expenses |
107,552 | 88,114 | 90,901 | |||||||||
Total expenses |
909,886 | 1,029,985 | 1,145,956 | |||||||||
Net investment income (loss) |
(814,912 | ) | (981,652 | ) | (591,464 | ) | ||||||
NET INCOME (LOSS) |
$ | 3,817,397 | $ | (1,807,668 | ) | $ | 977,473 | |||||
NET INCOME (LOSS) PER MANAGING OWNER
AND OTHER UNITHOLDERS UNIT
(based on weighted average number of units outstanding during the year) |
$ | 210.52 | $ | (85.69 | ) | $ | 43.49 | |||||
INCREASE (DECREASE) IN NET ASSET VALUE
PER MANAGING OWNER AND OTHER UNITHOLDERS UNIT |
$ | 215.83 | $ | (94.41 | ) | $ | 28.40 | |||||
See Accompanying Notes to Financial Statements.
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Campbell Alternative Asset Trust
Statements
of Cash Flows
For The Years Ended December 31, 2010, 2009 And 2008
2010 | 2009 | 2008 | ||||||||||
Cash flows from (for) operating activities |
||||||||||||
Net income (loss) |
$ | 3,817,397 | $ | (1,807,668 | ) | $ | 977,473 | |||||
Adjustments to reconcile net income (loss) to
net cash from (for) operating activities |
||||||||||||
Net change in unrealized |
(1,237,215 | ) | 460,386 | (766,230 | ) | |||||||
(Increase) decrease in restricted cash |
(249,673 | ) | 1,180,793 | (1,180,793 | ) | |||||||
(Increase) decrease in option premiums paid |
(26,271 | ) | (56,330 | ) | 60,384 | |||||||
Increase (decrease) in option premiums received |
(892 | ) | (28,624 | ) | 8,662 | |||||||
(Increase) decrease in interest receivable |
3,791 | (6,972 | ) | 7,336 | ||||||||
(Increase) decrease in prepaid expenses |
(2,141 | ) | 782 | (2,000 | ) | |||||||
Increase (decrease) in accounts payable and accrued
expenses |
2,185 | (41,526 | ) | 12,709 | ||||||||
Purchases of investments in
fixed income securities |
(280,397,793 | ) | (587,829,404 | ) | (200,204,242 | ) | ||||||
Sales/maturities of investments in
fixed income securities |
290,772,568 | 558,661,867 | 233,000,000 | |||||||||
Net cash from (for) operating activities |
12,681,956 | (29,466,696 | ) | 31,913,299 | ||||||||
Cash flows from (for) financing activities |
||||||||||||
Addition of units |
2,287,795 | 1,906,380 | 2,404,879 | |||||||||
Redemption of units |
(6,087,148 | ) | (5,388,845 | ) | (3,949,714 | ) | ||||||
Offering costs paid |
(81,957 | ) | (300,730 | ) | (335,846 | ) | ||||||
Net cash from (for) financing activities |
(3,881,310 | ) | (3,783,195 | ) | (1,880,681 | ) | ||||||
Net increase (decrease) in cash |
8,800,646 | (33,249,891 | ) | 30,032,618 | ||||||||
Unrestricted cash |
||||||||||||
Beginning of year |
974,319 | 34,224,210 | 4,191,592 | |||||||||
End of year |
$ | 9,774,965 | $ | 974,319 | $ | 34,224,210 | ||||||
End of year cash consists of: |
||||||||||||
Cash in broker trading accounts |
$ | 7,272,155 | $ | 695,155 | $ | 33,954,446 | ||||||
Cash |
2,502,810 | 279,164 | 269,764 | |||||||||
Total end of year cash |
$ | 9,774,965 | $ | 974,319 | $ | 34,224,210 | ||||||
See Accompanying Notes to Financial Statements.
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Campbell Alternative Asset Trust
Statements of Changes in Unitholders Capital (Net Asset Value)
For The Years Ended December 31, 2010, 2009 And 2008
Unitholders Capital | ||||||||||||||||||||||||
Managing Owner | Other Unitholders | Total | ||||||||||||||||||||||
Units | Amount | Units | Amount | Units | Amount | |||||||||||||||||||
Balances at January 1,
2008 |
1,413.580 | $ | 2,266,803 | 21,216.063 | $ | 34,021,953 | 22,629.643 | $ | 36,288,756 | |||||||||||||||
Net income (loss) |
61,100 | 916,373 | 977,473 | |||||||||||||||||||||
Additions |
0.000 | 0 | 1,450.873 | 2,370,941 | 1,450.873 | 2,370,941 | ||||||||||||||||||
Redemptions |
0.000 | 0 | (2,122.394 | ) | (3,468,513 | ) | (2,122.394 | ) | (3,468,513 | ) | ||||||||||||||
Offering costs |
(20,955 | ) | (312,219 | ) | (333,174 | ) | ||||||||||||||||||
Balances at
December 31,
2008 |
1,413.580 | 2,306,948 | 20,544.542 | 33,528,535 | 21,958.122 | 35,835,483 | ||||||||||||||||||
Net income (loss) |
(113,540 | ) | (1,694,128 | ) | (1,807,668 | ) | ||||||||||||||||||
Additions |
0.000 | 0 | 1,204.263 | 1,906,380 | 1,204.263 | 1,906,380 | ||||||||||||||||||
Redemptions |
0.000 | 0 | (4,300.235 | ) | (6,634,701 | ) | (4,300.235 | ) | (6,634,701 | ) | ||||||||||||||
Offering costs |
(19,916 | ) | (277,516 | ) | (297,432 | ) | ||||||||||||||||||
Balances at
December 31,
2009 |
1,413.580 | 2,173,492 | 17,448.570 | 26,828,570 | 18,862.150 | 29,002,062 | ||||||||||||||||||
Net income (loss) |
131,904 | 3,685,493 | 3,817,397 | |||||||||||||||||||||
Additions |
0.000 | 0 | 1,507.036 | 2,287,795 | 1,507.036 | 2,287,795 | ||||||||||||||||||
Redemptions |
(672.296 | ) | (1,000,000 | ) | (2,742.480 | ) | (4,303,058 | ) | (3,414.776 | ) | (5,303,058 | ) | ||||||||||||
Offering costs |
(5,629 | ) | (70,60l | ) | (76,230 | ) | ||||||||||||||||||
Balances at
December 31, 2010 |
741.284 | $ | 1,299,767 | 16,213.126 | $ | 28,428,199 | 16,954.410 | $ | 29,727,966 | |||||||||||||||
Net Asset Value per Managing Owner and Other Unitholders Unit
December 31, 2010 | December 31, 2009 | December 31, 2008 | ||
$1,753.41 |
$1,537.58 | $1,631.99 | ||
See Accompanying Notes to Financial Statements.
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Campbell Alternative Asset Trust
Financial Highlights
For The Years Ended December 31, 2010, 2009 And 2008
For The Years Ended December 31, 2010, 2009 And 2008
The following information presents per unit operating performance data and other supplemental
financial data for the years ended December 31, 2010, 2009 and 2008. This information has been
derived from information presented in the financial statements.
2010 | 2009 | 2008 | ||||||||||
Per Unit Performance
(for a unit outstanding throughout the entire year) |
||||||||||||
Net asset value per unit at beginning of year |
$ | 1,537.58 | $ | 1,631.99 | $ | 1,603.59 | ||||||
Income (loss) from operations: |
||||||||||||
Total net trading
gains (losses) (1) |
264.97 | (33.77 | ) | 69.54 | ||||||||
Net investment income (loss) (1) |
(44.94 | ) | (46.54 | ) | (26.32 | ) | ||||||
Total net income (loss) from operations |
220.03 | (80.31 | ) | 43.22 | ||||||||
Offering costs (1) |
(4.20 | ) | (14.10 | ) | (14.82 | ) | ||||||
Net asset value per unit at end of year |
$ | 1,753.41 | $ | 1,537.58 | $ | 1,631.99 | ||||||
Total Return |
14.04 | % | (5.78 | )% | 1.77 | % | ||||||
Supplemental Data |
||||||||||||
Ratios to average net asset value: |
||||||||||||
Expenses prior
to performance fee |
3.26 | % | 3.13 | % | 3.11 | % | ||||||
Performance fee |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Total expenses |
3.26 | % | 3.13 | % | 3.11 | % | ||||||
Net investment income (loss) (2) |
(2.92 | )% | (2.98 | )% | (1.61 | )% | ||||||
Total returns are calculated based on the change in value of a unit during the year. An individual
unitholders 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.
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Table of Contents
Campbell Alternative Asset Trust
Notes to Financial Statements
December 31, 2010
December 31, 2010
Note 1. | ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
A. | General Description of the Trust | |
Campbell Alternative Asset Trust (the Trust) is a Delaware statutory trust which operates as a commodity investment pool. The Trust was formed on May 3, 2000 and commenced trading on October 1, 2001. The Trust engages in the speculative trading of futures contracts, forward currency contracts and options on forward currency contracts. | ||
As of December 31, 2002, units are no longer offered to the public, but are offered exclusively for sale to the Campbell & Company, Inc. 401(K) Plan (the 401(K) Plan). At December 31, 2010 and December 31, 2009, the 401(K) Plan held approximately 83% and 74% of the Trusts outstanding units, respectively. | ||
B. | Regulation | |
As a registrant with the Securities and Exchange Commission, the Trust is subject to the regulatory requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934. As a commodity investment pool, the Trust is subject to the regulations of the Commodity Futures Trading Commission, an agency of the United States (U.S.) government which regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of the various commodity exchanges where the Trust executes transactions. Additionally, the Trust is subject to the requirements of futures commission merchants (brokers) and interbank market makers through which the Trust trades. | ||
C. | Method of Reporting | |
The Trusts financial statements are presented in accordance with accounting principles generally accepted in the United States of America, which may require the use of certain estimates made by the Trusts management. Actual results may differ from these estimates. Investment transactions are accounted for on the trade date. Gains or losses are realized when contracts are liquidated. Unrealized gains and losses on open contracts (the difference between contract trade price and market price) are reported in the statement of financial condition as a net gain or loss, as there exists a right of offset of unrealized gains or losses in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 210-20, Offsetting Balance Sheet. 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 on the last business day of the reporting period. The fair 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. | ||
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 inputs the spot prices, interest rates and option implied volatilities quoted as of 3:00 P.M. (E.T.) on the last business day of the reporting period. Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. | ||
When the Trust writes an option, an amount equal to the premium received by the Trust is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current fair 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, are held at the custodian and marked to market on the last business day of the reporting period by the 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 are held at the brokers or interbank market makers and are stated at cost plus accrued interest, which approximates fair value. Premiums and discounts on fixed income securities are amortized for financial reporting purposes. |
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Table of Contents
Campbell Alternative Asset Trust
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
For purposes of both financial reporting and calculation of redemption value, Net Asset Value per unit is calculated by dividing Net Asset Value by the number of outstanding units. | ||
The Trust follows the provisions of ASC 820, Fair Value Measurements and Disclosures as of January 1, 2008. ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. | ||
ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). | ||
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Trust has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The value of the Trusts exchange-traded futures contracts fall into this category. | ||
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. This category includes forward currency contracts and options on forward currency contracts that the Trust values using models or other valuation methodologies derived from observable market data. This category also includes fixed income investments. | ||
Level 3 inputs are unobservable inputs for an asset or liability (including the Trusts 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 period ended December 31, 2010, the Trust did not have any Level 3 assets or liabilities. | ||
In January 2010, the FASB 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. As of January 1, 2010, the Trust adopted the provisions of ASC 2010-06 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 management does not expect that adoption of the remaining provisions will have a material impact on the Trusts financial statement disclosures. | ||
The following tables set forth by level within the fair value hierarchy the Trusts investments accounted for at fair value on a recurring basis as of December 31, 2010 and 2009. |
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Campbell Alternative Asset Trust
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
Fair Value at December 31, 2010 | ||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments |
||||||||||||||||
Fixed income securities |
$ | 0 | $ | 19,899,346 | $ | 0 | $ | 19,899,346 | ||||||||
Other Financial Instruments |
||||||||||||||||
Exchange-traded futures contracts |
449,159 | 0 | 0 | 449,159 | ||||||||||||
Forward currency contracts |
0 | 476,973 | 0 | 476,973 | ||||||||||||
Options purchased |
0 | 132,808 | 0 | 132,808 | ||||||||||||
Options written |
0 | (61,350 | ) | 0 | (61,350 | ) | ||||||||||
Total |
$ | 449,159 | $ | 20,447,777 | $ | 0 | $ | 20,896,936 | ||||||||
Fair Value at December 31, 2009 | ||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments |
||||||||||||||||
Fixed income securities |
$ | 0 | $ | 30,276,339 | $ | 0 | $ | 30,276,339 | ||||||||
Other Financial Instruments |
||||||||||||||||
Exchange-traded futures contracts |
(55,719 | ) | 0 | 0 | (55,719 | ) | ||||||||||
Forward currency contracts |
0 | (265,153 | ) | 0 | (265,153 | ) | ||||||||||
Options purchased |
0 | 70,935 | 0 | 70,935 | ||||||||||||
Options written |
0 | (19,069 | ) | 0 | (19,069 | ) | ||||||||||
Total |
$ | (55,719 | ) | $ | 30,063,052 | $ | 0 | $ | 30,007,333 | |||||||
The gross presentation of the fair value of the Trusts derivatives by instrument type is shown in Note 8. See Condensed Schedule of Investments for additional detail categorization. | ||
D. | Income Taxes | |
The Trust prepares calendar year U.S. federal and applicable state information tax returns and reports to the unitholders their allocable shares of the Trusts income, expenses and trading gains or losses. No provision for income taxes has been made in the accompanying financial statements as each unitholder is individually responsible for reporting income or loss based on such unitholders respective share of the Trusts income and expenses as reported for income tax purposes. | ||
Management has continued to evaluate the application of ASC 740, Income Taxes to the Trust, and has determined that no reserves for uncertain tax positions were required. The Trust files federal and state tax returns. The 2007 through 2010 tax years generally remain subject to examination by the U.S. federal and most state tax authorities. | ||
E. | Offering Costs | |
Campbell & Company, Inc. (Campbell & Company) has incurred all costs in connection with the initial and continuous offering of units of the Trust (offering costs). Offering costs are charged to the Trust at a monthly rate of 1/12 of 0.9% (0.9% annualized) of the Trusts month-end net asset value (as defined in the Amended and Restated Declaration of Trust and Trust Agreement) until such amounts are fully reimbursed. Such amounts are charged directly to unitholders capital. The Trust is only liable for payment of offering costs on a monthly basis. At December 31, 2010 and December 31, 2009, the Trust reflects a liability in the statement of financial condition for offering costs payable to Campbell & Company of $0 and $5,727, respectively. | ||
The offering costs for which Campbell & Company are being reimbursed relate to the offering of units of the Trust to all unitholders except the 401(K) Plan. Therefore, Campbell & Company rebates to the 401(K) Plan the offering costs charged to the 401(K) Plan. All such rebates are made by issuing additional units to the 401(K) Plan. | ||
Effective May 2010, the Trust has reimbursed Campbell & Company for all offering costs incurred in the initial and continuing offering of the Trust. Additional offering costs with regard to the Trusts continued offering will be incurred by Campbell & Company. Campbell & Company will not be reimbursed by the Trust for these costs. At December 31, 2010 and December 31, 2009, the amount of unreimbursed offering costs incurred by Campbell & Company is $0 and $25,094, respectively. |
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Campbell Alternative Asset Trust
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
F. | Foreign Currency Transactions | |
The Trusts functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the statement of financial condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income. | ||
G. | Reclassification | |
Certain 2009 and 2008 amounts in the Statement of Cash Flows were reclassified to conform with the 2010 presentation. Specifically, purchases and sales/maturities of fixed income securities are presented on a gross basis as components of cash flow from (for) operating activities. |
Note 2. | MANAGING OWNER AND COMMODITY TRADING ADVISOR | |
The managing owner of the Trust is Campbell & Company, which conducts and manages the business of the Trust. Campbell & Company is also the commodity trading advisor of the Trust. The Amended and Restated Declaration of Trust and Trust Agreement requires Campbell & Company to maintain a capital account equal to 1% of the total capital accounts of the Trust. Additionally, Campbell & Company is required by the Amended and Restated Declaration of Trust and Trust Agreement to maintain a net worth of not less than $1,000,000. | ||
The Trust pays a monthly brokerage fee of 1/12 of 2.85% (2.85% annualized) of month-end net assets to Campbell & Company and approximately $4 per round turn to the broker for execution and clearing costs. Such costs are limited to 3.5% of average month-end net assets per year. From the 2.85% fee, a portion (0.35%) is used to compensate selling agents for administrative services and a portion (2.5%) is retained by Campbell & Company for trading and management services rendered. | ||
Campbell & Company is also paid a performance fee equal to 20% of New Appreciation (as defined) calculated as of the end of each calendar quarter and upon redemption of units. More specifically, the performance fee is paid on the cumulative increase, if any, in the Net Asset Value per Unit over the highest previous cumulative Net Asset Value per Unit (commonly referred to as a High Water Mark) adjusting for investment income. In determining the brokerage and performance fees, adjustments shall be made for capital additions and withdrawals and Net Assets shall not be reduced by the fees being calculated for such current period. The performance fee is not subject to any clawback provisions. The brokerage fee and performance fee are typically paid in the month following the month in which they are earned. The brokerage fee and performance fee are paid from the available cash at the Trusts bank, broker or cash management accounts. | ||
Campbell & Company rebates to the 401(K) Plan the brokerage fee and the performance fee applicable to the 401(K) Plan. All such rebates are made by issuing additional units to the 401(K) Plan. |
Note 3. | TRUSTEE | |
The trustee of the Trust is U.S. Bank National Association, a national banking corporation. The trustee has delegated to the managing operator the duty and authority to manage the business and affairs of the Trust and has only nominal duties and liabilities with respect to the Trust. |
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Campbell Alternative Asset Trust
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
Note 4. | CASH MANAGER AND CUSTODIAN | |
The Trust appointed Wilmington Trust Investment Management LLC, a wholly owned subsidiary of Wilmington Trust Corporation, as cash manager under the Non-Custody Investment Advisory Agreement dated July 8, 2009, to manage and control the liquid assets of the Trust. The cash manager is registered as an investment adviser with the Securities and Exchange Commission of the United States under the Investment Advisers Act of 1940. The Trust has terminated the Non-Custody Investment Advisory Agreement appointing Wilmington Trust Investment Management LLC as cash manager, effective December 31, 2010. | ||
The Trust opened a custodial account at The Northern Trust Company (the custodian) and has granted the cash manager authority to make certain investments on behalf of the Trust provided such investments are consistent with the investment guidelines created by the managing operator. All securities purchased by the cash manager on behalf of the Trust will be held in its custody account at the custodian. The cash manager will have no beneficial or other interest in the securities and cash in such custody account. |
Note 5. | DEPOSITS WITH BROKER | |
The Trust deposits assets with a broker subject to Commodity Futures Trading Commission regulations and various exchange and broker requirements. Margin requirements are satisfied by the deposit of U.S. Treasury bills and cash with such broker. The Trust typically earns interest income on its assets deposited with the broker. |
Note 6. | OPERATING EXPENSES | |
Operating expenses of the Trust are restricted by the Amended and Restated Declaration of Trust and Trust Agreement to 0.40% per annum of the average month-end Net Asset Value of the Trust. The operating expenses of the Trust did not exceed the 0.40% threshold for the years ended December 31, 2010, 2009 and 2008. |
Note 7. | SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS | |
Investments in the Trust are made by subscription agreement, subject to acceptance by Campbell & Company. | ||
The Trust is not required to make distributions, but may do so at the sole discretion of Campbell & Company. A unitholder may request and receive redemption of units owned, subject to restrictions in the Declaration of Trust and Trust Agreement. Units are transferable, but no market exists for their sale and none is expected to develop. Monthly redemptions are permitted upon ten (10) business days advance written notice to Campbell & Company. |
Note 8. | TRADING ACTIVITIES AND RELATED RISKS | |
The Trust engages in the speculative trading of U.S. and foreign futures contracts, forward currency contracts and options on forward currency contracts (collectively, derivatives). Specifically, the Fund trades a portfolio focused on financial futures, which are instruments designed to hedge or speculate on changes in interest rates, currency exchange rates, stock index values, as well as metals, energy and agriculture values. The Trust is exposed to both market risk, the risk arising from changes in the market value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract. | ||
Purchase and sale of futures contracts requires margin deposits with the broker. 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. |
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Campbell Alternative Asset Trust
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
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, 2010 and 2009 was $4,999,842 and $6,649,184, respectively, which equals 17% and 23% of Net Asset Value, respectively. The cash deposited with interbank market makers at December 31, 2010 and December 31, 2009 was $2,547,070 and $102,855, respectively, which equals 9% and 0% of Net Asset Value, respectively. Included in cash deposits with the broker and interbank market maker at December 31, 2010 and December 31, 2009 was restricted cash for margin requirements of $249,673 and $0 respectively, which equals 0.8% and 0.0% of Net Asset Value respectively. | ||
The Trust trades forward currency and options on forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty nonperformance. Accordingly, the risks associated with forward currency and options on foreign currency contracts are generally greater than those associated with exchange traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward currency and options on forward currency contracts typically involves delayed cash settlement. | ||
The Trust has a substantial portion of its assets on deposit with financial institutions. In the event of a financial institutions insolvency, recovery of Trust assets on deposit may be limited to account insurance or other protection afforded such deposits. | ||
For derivatives, risks arise from changes in the market value of the contracts. Theoretically, the Trust is exposed to a market risk equal to the notional contract value of futures and forward currency contracts purchased and unlimited liability on such contracts sold short. As both a buyer and seller of options, the Trust pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Trust to potentially unlimited liability, and purchased options expose the Trust to a risk of loss limited to the premiums paid. See Note 1. C. for an explanation of how the Trust determines its valuation for derivatives as well as the netting of derivatives. | ||
The Trust has adopted the provisions of ASC 815, Derivatives and Hedging, (ASC 815). 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. | ||
The following tables summarize quantitative information required by ASC 815. | ||
The fair value of the Trusts derivatives by instrument type, as well as the location of those instruments on the Statements of Financial Condition, as of December 31, 2010 and 2009 is as follows: |
Asset | Liability | |||||||||||||
Derivatives | Derivatives at | |||||||||||||
Statement of Financial | at December 31, | December 31, 2010 | ||||||||||||
Type of Instrument * | Condition Location | 2010 Fair Value | Fair Value | Net | ||||||||||
Agricultural Contracts |
Equity in broker trading accounts |
$ | 200,217 | $ | (10,356 | ) | $ | 189,861 | ||||||
Energy Contracts |
Equity in broker trading accounts |
87,953 | (44,181 | ) | 43,772 | |||||||||
Metal Contracts |
Equity in broker trading accounts |
238,213 | (12,703 | ) | 225,510 | |||||||||
Stock Indices Contracts |
Equity in broker trading accounts |
67,063 | (61,586 | ) | 5,477 | |||||||||
Short-Term Interest Rate Contracts |
Equity in broker trading accounts |
34,455 | ( 469 | ) | 33,986 | |||||||||
Long Term Interest Rate Contracts |
Equity in broker trading accounts |
12,905 | (62,352 | ) | (49,447 | ) | ||||||||
Forward Currency Contracts |
Net unrealized gain (loss) on forward currency contracts |
2,407,765 | (1,930,792 | ) | 476,973 |
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Campbell Alternative Asset Trust
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
Asset | Liability | |||||||||||||
Derivatives | Derivatives at | |||||||||||||
Statement of Financial | at December 31, | December 31, 2010 | ||||||||||||
Type of Instrument * | Condition Location | 2010 Fair Value | Fair Value | Net | ||||||||||
Purchased Options on Forward Currency Contracts |
Options purchased, at fair value | 132,808 | 0 | 132,808 | ||||||||||
Written Options on Forward Currency Contracts |
Options written, at fair value | 0 | (61,350 | ) | (61,350 | ) | ||||||||
Totals |
$ | 3,181,379 | $ | (2,183,789 | ) | $ | 997,590 | |||||||
* | Derivatives not designated as hedging instruments under ASC 815 |
Asset | Liability | |||||||||||||
Derivatives at | Derivatives at | |||||||||||||
Statement of Financial | December 31, 2009 | December 31, 2009 | ||||||||||||
Type of Instrument * | Condition Location | Fair Value | Fair Value | Net | ||||||||||
Agricultural Contracts |
Equity in broker trading accounts | $ | 12,155 | $ | (15,206 | ) | $ | (3,051 | ) | |||||
Energy Contracts |
Equity in broker trading accounts | 19,804 | (1,325 | ) | 18,479 | |||||||||
Metal Contracts |
Equity in broker trading accounts | 223,512 | (167,320 | ) | 56,192 | |||||||||
Stock Indices Contracts |
Equity in broker trading accounts | 231,004 | (17,246 | ) | 213,758 | |||||||||
Short-Term Interest Rate Contracts |
Equity in broker trading accounts | 0 | (100,836 | ) | (100,836 | ) | ||||||||
Long Term Interest Rate Contracts |
Equity in broker trading accounts | 43,376 | (283,637 | ) | (240,261 | ) | ||||||||
Forward Currency Contracts |
Net unrealized gain (loss) on forward currency contracts | 1,170,194 | (1,435,347 | ) | (265,153 | ) | ||||||||
Purchased Options on Forward Currency Contracts |
Options purchased, at fair value | 70,935 | 0 | 70,935 | ||||||||||
Written Options on Forward Currency Contracts |
Options written, at fair value | 0 | (19,069 | ) | (19,069 | ) | ||||||||
Totals |
$ | 1,770,980 | $ | (2,039,986 | ) | $ | (269,006 | ) | ||||||
* | Derivatives not designated as hedging instruments under ASC 815 |
The trading revenue of the Trusts derivatives by instrument type, as well as the location of those
gains and losses on the Statements of Operations, for the years ended December 31, 2010 and 2009 is
as follows:
Trading Revenue for the | Trading Revenue for the | |||||||
Twelve Months Ended | Twelve Months Ended | |||||||
Type of Instrument | December 31, 2010 | December 31, 2009 | ||||||
Agricultural Contracts |
$ | 1,320,674 | $ | (111,725 | ) | |||
Energy Contracts |
(1,092,112 | ) | (482,311 | ) | ||||
Metal Contracts |
940,327 | 441,641 | ||||||
Stock Indices Contracts |
(585,777 | ) | (342,289 | ) | ||||
Short-Term Interest Rate Contracts |
1,510,181 | (177,489 | ) | |||||
Long Term Interest Rate Contracts |
1,678,738 | (1,121,620 | ) |
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Campbell Alternative Asset Trust
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
Trading Revenue for the | Trading Revenue for the | |||||||
Twelve Months Ended | Twelve Months Ended | |||||||
Type of Instrument | December 31, 2010 | December 31, 2009 | ||||||
Forward Currency Contracts |
1,198,606 | 593,074 | ||||||
Purchased Options on Forward Currency
Contracts |
(842,721 | ) | (668,111 | ) | ||||
Written Options on Forward Currency Contracts |
597,409 | 1,086,058 | ||||||
Total |
$ | 4,725,325 | $ | (782,772 | ) | |||
Trading Revenue for the | Trading Revenue for the | |||||||
Twelve Months Ended | Twelve Months Ended | |||||||
Line Item in the Statement of Operations | December 31, 2010 | December 31, 2009 | ||||||
Futures trading gains (losses): |
||||||||
Realized |
$ | 3,267,153 | $ | (1,744,229 | ) | |||
Change in unrealized |
504,878 | (49,564 | ) | |||||
Forward currency and options on forward
currency trading gains (losses): |
||||||||
Realized |
218,740 | 1,430,644 | ||||||
Change in unrealized |
734,554 | (419,623 | ) | |||||
Total |
$ | 4,725,325 | $ | (782,772 | ) | |||
For the twelve months ended December 31, 2010 and 2009, the monthly average of futures contracts bought and sold was approximately 2,300 and 900 respectively, and the monthly average of notional value of forward currency and options on forward currency contracts was $215,500,000 and $175,300,000 respectively. | ||
Open contracts generally mature within three months; as of December 31, 2010, the latest maturity date for open futures contracts is March 2012, the latest maturity date for open forward currency contracts is March 2011, and the latest expiry date for options on forward currency contracts is January 2011. However, the Trust intends to close all futures and foreign currency contracts prior to maturity. | ||
Campbell & Company has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. Campbell & Companys basic market risk control procedures consist of continuously monitoring open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 30%. Campbell & Companys attempt to manage the risk of the Trusts open positions is essentially the same in all market categories traded. Campbell & Company applies risk management policies to its trading which generally limit the total exposure that may be taken per risk unit of assets under management. In addition, Campbell & Company follows diversification guidelines (often formulated in terms of the balanced volatility between markets and correlated groups), as well as precalculating stop-loss points at which systems will signal to close open positions. Campbell & Company controls the risk of the Trusts non-trading fixed income instruments by limiting the duration of such instruments and requiring a minimum credit quality of the issuers of those instruments. | ||
Campbell & Company seeks to minimize credit risk primarily by depositing and maintaining the Trusts assets at financial institutions and brokers which Campbell & Company believes to be credit worthy. The unitholder bears the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received. |
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Campbell Alternative Asset Trust
Notes to Financial Statements
December 31, 2010
Notes to Financial Statements
December 31, 2010
Note 9. | INDEMNIFICATIONS | |
In the normal course of business, the Trust enters into contracts and agreements that contain a variety of representations and warranties which provide general indemnifications. The Trusts maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred. The Trust expects the risk of any future obligation under these indemnifications to be remote. |
Note 10. | SUBSEQUENT EVENTS | |
Management of the Trust has evaluated subsequent events through the date the financial statements were filed. In 2011, management of the Trust has made the decision to cease the Trust offering, effective April 22, 2011. The decision to cease the offering is the precursor to closing the Trust as of May 31, 2011. The financial statements for periods subsequent to December 31, 2010 will be presented on a liquidation-basis of accounting. Under the liquidation basis of accounting, assets are valued at their estimated net realizable amounts and liabilities are adjusted to the estimated amounts to be paid in settlement of the Trusts obligations. As the majority of the Trusts assets and liabilities are at fair value, management does not anticipate a material impact to result from the presentation of liquidation-basis financial statements. |
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EXHIBIT INDEX
Exhibit Number | Description of Document | Page Number | ||
31.01
|
Certification by Chief Executive Officer | E 2 | ||
31.02
|
Certification by Chief Financial Officer | E 3 | ||
32.01
|
Certification by Chief Executive Officer | E 4 | ||
32.02
|
Certification by Chief Financial Officer | E 5 |