<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 9, 2000
REGISTRATION NO. 333-37548
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
PRE-EFFECTIVE AMENDMENT NUMBER 1
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------
CAMPBELL ALTERNATIVE ASSET TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6799 52-2238521
(STATE OF ORGANIZATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
CLASSIFICATION NUMBER)
</TABLE>
C/O CAMPBELL & COMPANY, INC.
COURT TOWERS BUILDING
210 WEST PENNSYLVANIA AVENUE
TOWSON, MARYLAND 21204
(410) 296-3301
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------
THERESA D. BECKS
CAMPBELL & COMPANY, INC.
COURT TOWERS BUILDING
210 WEST PENNSYLVANIA AVENUE
TOWSON, MARYLAND 21204
(410) 296-3301
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
MICHAEL J. SCHMIDTBERGER
SIDLEY & AUSTIN
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 906-2348
------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
CAMPBELL ALTERNATIVE ASSET TRUST
------------------------
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM
NO. PROSPECTUS HEADING
---- ------------------
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Cover Page; Table of Contents
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Risk Disclosure Statement; Summary;
The Risks You Face; Charges to the Trust
4. Use of Proceeds........................... Use of Proceeds; Campbell & Company, Inc.;
The Futures, Forward and Swap Markets
5. Determination of Offering Price........... Inside Cover Page; Plan of Distribution
6. Dilution.................................. Not Applicable
7. Selling Security Holders.................. Not Applicable
8. Plan of Distribution...................... Inside Cover Page; Plan of Distribution
9. Description of Securities to Be
Registered.............................. Cover Page; Distributions and Redemptions;
Agreement of Trust -- Allocation of
Profits and Losses
10. Interests of Named Experts and Counsel... Legal Matters; Experts
11. Information with Respect to the
Registrant.............................. Summary; The Risks You Face; Use of Proceeds;
Campbell & Company, Inc.; Charges to the
Trust; The Futures, Forward and Swap
Markets;
Index to Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Conflicts of Interest
</TABLE>
<PAGE> 3
PART ONE -- DISCLOSURE DOCUMENT
CAMPBELL ALTERNATIVE ASSET TRUST
$50,000,000
UNITS OF BENEFICIAL INTEREST
THE OFFERING
The Trust trades speculatively in the U.S. and international futures and forward
markets. Specifically, the Trust trades in 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 and energy products. Campbell & Company, Inc., a
commodity trading advisor, allocates the Trust's assets across a broad spectrum
of markets.
The units will be offered for sale at a price of $1,000 per unit for the initial
closing, and at net asset value per unit thereafter. Units will be available on
the last day of each month. The selling agents will use their best efforts to
sell the units offered.
No units will be sold unless acceptable subscriptions for at least 8,000 units
($8,000,000) are received on or before March 31, 2001 (subject to extension
until September 30, 2001 at the discretion of Campbell & Company). Subscription
funds received prior to reaching the minimum number of units will be held in an
interest-bearing escrow account for the benefit of subscribers.
THE RISKS
These are speculative securities. BEFORE YOU DECIDE WHETHER TO INVEST, READ THIS
ENTIRE PROSPECTUS CAREFULLY AND CONSIDER "THE RISKS YOU FACE" ON PAGE 5.
- The Trust is speculative and leveraged. The Trust's assets are leveraged at a
ratio which typically ranges from 6:1 to 15:1.
- Performance can be volatile and the net asset value per unit may fluctuate
significantly in a single month.
- You could lose all or substantially all of your investment in the Trust.
- Campbell & Company has total trading authority over the Trust. The use of a
single advisor could mean lack of diversification and, consequently, higher
risk.
- There is no secondary market for the units. While the units have redemption
rights, there are restrictions. For example, redemptions can occur only at the
end of a month.
- 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.
- Trust expenses must be offset by trading profits or interest income for the
Trust to be profitable.
- A substantial portion of the trades executed for the Trust takes place on
foreign exchanges. No U.S. regulatory authority or exchange has the power to
compel the enforcement of the rules of a foreign board of trade or any
applicable foreign laws.
MINIMUM INVESTMENT
FIRST-TIME INVESTORS:
$10,000 for initial investments
$1,000 or more for additional investments
TRUSTEES, IRAS, OTHER TAX-EXEMPT ACCOUNTS:
$5,000
------------------------
Investors are required to make representations and warranties relating to their
suitability in connection with this investment. Each investor is encouraged to
discuss the investment with his/her individual financial and tax adviser.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE DOCUMENT AND A STATEMENT OF
ADDITIONAL INFORMATION. THESE PARTS ARE BOUND TOGETHER, AND BOTH CONTAIN
IMPORTANT INFORMATION.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR
ACCURACY OF THIS DISCLOSURE DOCUMENT.
------------------------
CAMPBELL & COMPANY, INC.
Managing Owner
January 2, 2001
<PAGE> 4
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
<PAGE> 5
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU
TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS.
SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND
CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS
ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE
POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS
THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID
DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A
COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGE 22 AND A
STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER
THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 4.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE,
BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY
STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK
FACTORS OF THIS INVESTMENT, AT PAGE 5.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES
OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES,
INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO
REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS
PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO
COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-
UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED.
------------------------
THIS PROSPECTUS DOES NOT INCLUDE ALL OF THE INFORMATION OR EXHIBITS IN THE
TRUST'S REGISTRATION STATEMENT. YOU CAN READ AND COPY THE ENTIRE REGISTRATION
STATEMENT AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE SECURITIES AND
EXCHANGE COMMISSION IN WASHINGTON, D.C.
THE TRUST FILES QUARTERLY AND ANNUAL REPORTS WITH THE SEC. YOU CAN READ AND
COPY THESE REPORTS AT THE SEC PUBLIC REFERENCE FACILITIES IN CHICAGO, NEW YORK
OR WASHINGTON, D.C. PLEASE CALL THE SEC AT 1-800-SEC-0300 FOR FURTHER
INFORMATION.
THE TRUST'S FILINGS WILL BE POSTED AT THE SEC WEBSITE AT
HTTP://WWW.SEC.GOV.
------------------------
CAMPBELL & COMPANY, INC.
MANAGING OWNER
210 WEST PENNSYLVANIA AVENUE
TOWSON, MARYLAND 21204
(410) 296-3301
i
<PAGE> 6
CAMPBELL ALTERNATIVE ASSET TRUST
ORGANIZATIONAL CHART
The organizational chart below illustrates the relationships among the
various service providers of this offering. Campbell & Company is both the
managing owner and trading advisor for the Trust. The selling agents (other than
Campbell Financial Services, Inc.), clearing broker and foreign exchange dealers
are not affiliated with Campbell & Company or the Trust.
[ORGANIZATIONAL CHART]
* Campbell & Company presently serves as commodity pool operator for four other
commodity pools.
ii
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................... 1
General.......................... 1
Plan of Distribution............. 1
A Summary of Risk Factors You
Should Consider Before
Investing in the Trust......... 2
Investment Factors You Should
Consider Before Investing in
the Trust...................... 3
Campbell & Company, Inc.......... 3
Charges to the Trust............. 3
Estimate of Break-Even Level..... 4
Distributions and Redemptions.... 4
Federal Income Tax Aspects....... 4
THE RISKS YOU FACE.................... 5
Market Risks..................... 5
You Could Possibly Lose Your
Total Investment in the
Trust..................... 5
The Trust Will Be Highly
Leveraged................. 5
Your Investment Could be
Illiquid.................. 5
Forward Transactions are Not
Regulated and are Subject
to Credit Risk............ 5
An Investment in the Trust
May Not Diversify an
Overall Portfolio......... 5
Trading Risks.................... 6
Campbell & Company Analyzes
Only Technical Market
Data, Not any Economic
Factors External to Market
Prices.................... 6
Increased Competition from
Other Trend-Following
Traders Could Reduce
Campbell & Company's
Profitability............. 6
Speculative Position Limits
May Alter Trading
Decisions for the Trust... 6
Increase in Assets Under
Management May Affect
Trading Decisions......... 6
Investors Will Not be Able
to Review the Trust's
Holdings on a Daily
Basis..................... 6
Tax Risks........................ 7
Investors are Taxed Based on
Their Share of Trust
Profits................... 7
Tax Could be Due from
Investors on Their Share
of the Trust's Ordinary
Income Despite Overall
Losses.................... 7
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
There Could be a Limit on
the Deductibility of
Brokerage and Performance
Fees...................... 7
Other Risks...................... 7
The Clearing Firm Could Fail
and Has Been Subject to
Disciplinary Action....... 7
Investors Must Not Rely on
the Past Performance of
Campbell & Company in
Deciding Whether to Buy
Units..................... 7
Parties to the Trust Have
Conflicts of Interest..... 7
There are No Independent
Experts Representing
Investors................. 8
The Trust Places Significant
Reliance on Campbell &
Company................... 8
The Trust Could Terminate
Before Expiration of its
Stated Term............... 8
The Trust is Not a Regulated
Investment Company........ 8
Proposed Regulatory Change
is Impossible to
Predict................... 8
Forwards, Swaps, Hybrids and
Other Derivatives are Not
Subject to CFTC
Regulation................ 8
Options on Futures are
Speculative and Highly
Leveraged................. 9
The Trust is Subject to
Foreign Market Credit and
Regulatory Risk........... 9
The Trust is Subject to
Foreign Exchange Risk..... 9
Transfers Could be
Restricted................ 9
A Single-Advisor Fund May Be
More Volatile Than a
Multi-Advisor Fund........ 9
The Performance Fee Could be
an Incentive to Make
Riskier Investments....... 10
CAMPBELL & COMPANY, INC. ............. 10
Description...................... 10
The Trading Advisor.............. 13
Trading Systems.................. 13
PAST PERFORMANCE OF TRADING PROGRAMS
OF CAMPBELL & COMPANY, INC. ........ 14
CONFLICTS OF INTEREST................. 20
Campbell & Company, Inc. ........ 20
</TABLE>
iii
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Clearing Broker and the
Foreign Exchange Dealers....... 21
Fiduciary Duty and Remedies...... 21
Indemnification and Standard of
Liability...................... 21
CHARGES TO THE TRUST.................. 22
Brokerage Fee.................... 22
Other Trust Expenses............. 22
Campbell & Company, Inc. ........ 23
The Clearing Broker.............. 23
Selling Agents................... 24
Foreign Exchange Dealers......... 24
Organization and Offering
Expenses....................... 24
Other Expenses................... 24
USE OF PROCEEDS....................... 24
THE CLEARING BROKER................... 25
FOREIGN EXCHANGE DEALERS.............. 26
DISTRIBUTIONS AND REDEMPTIONS......... 26
Distributions.................... 26
Redemptions...................... 26
Net Asset Value.................. 26
DECLARATION OF TRUST & TRUST
AGREEMENT........................... 27
Organization and Limited
Liabilities.................... 27
Management of Partnership
Affairs........................ 27
The Trustee...................... 27
Sharing of Profits and Losses.... 28
Dispositions..................... 28
Dissolution and Termination of
the Trust...................... 28
Amendments and Meetings.......... 29
Indemnification.................. 29
Reports to Unitholders........... 29
FEDERAL INCOME TAX ASPECTS............ 29
The Trust's Partnership Tax
Status......................... 29
Taxation of Unitholders on
Profits and Losses of the
Trust.......................... 30
Trust Losses by Unitholders...... 30
"Passive-Activity Loss Rules" and
Their Effect on the Treatment
of Income and Loss............. 30
Cash Distributions and Unit
Redemptions.................... 30
Gain or Loss on Section 1256
Contracts and Non-Section 1256
Contracts...................... 30
Tax on Capital Gains and
Losses......................... 30
Interest Income.................. 30
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Limited Deduction for Certain
Expenses....................... 31
Syndication Fees................. 31
Investment Interest Deductibility
Limitations.................... 31
Unrelated Business Taxable
Income......................... 31
IRS Audits of the Trust and its
Unitholders.................... 31
State and Other Taxes............ 31
Taxation of Foreign
Unitholders.................... 31
INVESTMENT BY ERISA ACCOUNTS.......... 32
General.......................... 32
Special Investment
Consideration.................. 32
The Trust Should Not Be Deemed to
Hold "Plan Assets"............. 32
Ineligible Purchasers............ 32
PLAN OF DISTRIBUTION.................. 33
Subscription Procedure........... 33
Representations and Warranties of
Investors in the Subscription
Agreement...................... 34
Minimum Investment............... 34
Investor Suitability............. 34
The Selling Agents............... 34
LEGAL MATTERS......................... 35
EXPERTS............................... 35
INDEX TO FINANCIAL STATEMENTS......... 37
</TABLE>
PART TWO STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
<TABLE>
<S> <C>
The Futures, Forward and Swap
Markets............................. 1
The Historical Perspective of Managed
Futures............................. 3
Investment Factors.................... 4
Value of Diversifying into Managed
Futures............................. 6
Supplemental Performance
Information......................... 21
Pro Forma Performance Information..... 26
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A: Amended and Restated
Declaration of Trust and Trust
Agreement........................... A-1
EXHIBIT B: Request for Redemption..... B-1
EXHIBIT C: Subscription
Requirements........................ C-1
EXHIBIT D: Subscription
Instructions........................ D-1
</TABLE>
iv
<PAGE> 9
SUMMARY
GENERAL
Campbell Alternative Asset Trust allows you to participate in the U.S. and
international futures and forward markets. Specifically, the Trust trades in 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 and energy products.
Campbell & Company, the Trust's managing owner, uses its computerized,
trend-following, technical trading and risk control methods to seek substantial
medium- and long-term capital appreciation while, at the same time, seeking to
control risk and volatility. Campbell & Company provides advisory services to
numerous other funds and individually managed accounts similar to the services
Campbell & Company provides to the Trust. Campbell & Company has been using its
technical approach since 1972 -- one of the longest performance records of any
currently active futures manager and has developed and refined its approach over
the past 28 years.
Futures are standardized contracts traded on commodity exchanges that call
for the future delivery of commodities at a specified time and place. While
futures contracts are traded on a wide variety of commodities, the Trust will
concentrate its futures trading in financial instruments such as interest rates,
foreign exchange and stock index contracts, and metal and energy contracts. The
U.S. futures markets are regulated under the Commodity Exchange Act, which is
administered by the CFTC. The Trust will trade futures positions on margin,
meaning that the Trust will utilize leverage in its trading.
Currencies and other commodities may be purchased or sold by the Trust for
future delivery or cash settlement through banks or dealers pursuant to forward
contracts. Unlike futures contracts, forward contracts are not standardized and
the forward market is largely unregulated.
The following summary provides a review in outline form of important
aspects of an investment in the Trust.
PLAN OF DISTRIBUTION
HOW TO SUBSCRIBE FOR UNITS
- During the initial offering period, the Trust will accept subscriptions
until an aggregate of $8,000,000 in subscriptions has been received. Once
Campbell & Company has determined that the minimum amount of
subscriptions has been met, the initial closing date will be set.
- During the continuing offering period, units will be offered at a price
of net asset value per unit. The net assets of the Trust are its assets
less its liabilities determined in accordance with the Trust Agreement.
The net asset value per unit equals the net assets of the Trust divided
by the number of units outstanding as of the date of determination.
Investors must submit subscriptions at least five business days prior to
the applicable month-end closing date. Approved subscriptions will be
accepted once payments are received and cleared.
- The Trust will accept subscriptions throughout the continuing offering
period, which can be terminated by Campbell & Company at any time.
Campbell & Company has no present intention to terminate the offering.
- Interest earned while subscriptions are being processed will either be
paid to subscribers in the form of additional units or will be returned
in cash to those whose applications are rejected.
- The selling agents will use their best efforts to sell the units offered,
without any firm underwriting commitment. Investors are required to make
representations and warranties relating to their suitability to purchase
the units in the Subscription Agreement and Power of Attorney. Read the
Subscription Agreement and Power of Attorney as well as this prospectus
carefully before you decide whether to invest.
WHO MAY INVEST IN THE TRUST
The minimum investment is $10,000 except for trustees or custodians of
eligible employee benefit plans and individual retirement accounts, for which
the minimum investment is $5,000.
-1-
<PAGE> 10
These minimums are reduced to $5,000 and $2,000, respectively, for registered
representatives of NASD-registered broker-dealers. Unitholders may increase
their investment in the Trust with a minimum investment of $1,000.
IS THE CAMPBELL ALTERNATIVE ASSET TRUST A SUITABLE INVESTMENT FOR YOU?
An investment in the Trust is speculative and involves a high degree of
risk. The Trust is not a complete investment program. Campbell & Company offers
the Trust as a diversification opportunity for an investor's entire investment
portfolio, and therefore an investment in the Trust should only be a limited
portion of the investor's portfolio. You must, at a minimum, have:
1) a net worth of at least $150,000, exclusive of home, furnishings and
automobiles; or
2) a net worth, similarly calculated, of at least $45,000 and an annual
gross income of at least $45,000.
A number of jurisdictions in which the units are offered impose higher
minimum suitability standards on prospective investors. These suitability
standards are, in each case, regulatory minimums only, and merely because you
meet such standards does not mean that an investment in the units is suitable
for you. YOU MAY NOT INVEST MORE THAN 10% OF YOUR NET WORTH, EXCLUSIVE OF HOME,
FURNISHINGS AND AUTOMOBILES, IN THE TRUST.
A SUMMARY OF RISK FACTORS YOU SHOULD CONSIDER BEFORE INVESTING IN THE TRUST
- The Trust is a highly volatile and speculative investment. There can be
no assurance that the Trust will achieve its objectives or avoid
substantial losses. You must be prepared to lose all or substantially all
of your investment. Campbell & Company has from time to time in the past
incurred substantial losses in trading on behalf of its clients.
- Futures and forward trading is a "zero-sum" economic activity in which
for every gain there is an equal and offsetting loss (disregarding
transaction costs), as opposed to a typical securities investment, in
which there is an expectation of constant yields (in the case of debt) or
participation over time in general economic growth (in the case of
equity). It is possible that the Trust could incur major losses while
stock and bond prices rise substantially in a prospering economy.
- The Trust trades in futures and forward contracts. Therefore, the Trust
is a party to financial instruments with elements of off-balance sheet
market risk, including market volatility and possible illiquidity. There
is also a credit risk that a counterparty will not be able to meet its
obligations to the Trust.
- The Trust is subject to numerous conflicts of interest including the
following:
1) Campbell & Company is both the managing owner and trading advisor of
the Trust and its fees were not negotiated at arm's length. For these
reasons, Campbell & Company has a disincentive to add or replace
advisors, even if doing so may be in the best interest of the Trust;
2) Campbell & Company, the Trust's clearing broker and the Trust's
foreign exchange dealers may have incentives to favor other accounts
over the Trust; and
3) Campbell & Company, the Trust's clearing broker and the Trust's
foreign exchange dealers and their respective principals and
affiliates may trade in the futures and forward markets for their own
accounts and may take positions opposite or ahead of those taken for
the Trust.
- Unitholders take no part in the management of the Trust and although
Campbell & Company is an experienced professional manager, past
performance is not necessarily indicative of future results.
- Campbell & Company will be paid a brokerage fee of up to 3.5% annually,
irrespective of profitability. Campbell & Company will also be paid
quarterly performance fees equal to 20% of aggregate cumulative
appreciation, excluding interest income, in net asset value, if any.
-2-
<PAGE> 11
- The Trust is a single-advisor fund which may be inherently more volatile
than multi-advisor managed futures products.
- Although the Trust is liquid compared to other "alternative" investments
such as real estate or venture capital, liquidity is restricted, as the
units may only be redeemed on a monthly basis, upon ten business days'
notice. You may transfer or assign your units after 30 days' advance
notice, and only with the consent of Campbell & Company.
- Investors are taxed each year on their share of the Trust's profits,
irrespective of whether they redeem any units or receive any cash
distributions from the Trust.
INVESTMENT FACTORS YOU SHOULD CONSIDER BEFORE INVESTING IN THE TRUST
- The Trust is a leveraged investment fund managed by an experienced,
professional trading advisor and it trades in a wide range of futures and
forward markets.
- Campbell & Company utilizes several independent and different proprietary
trading systems for the Trust.
- The Trust has the potential to help diversify traditional securities
portfolios. A diverse portfolio consisting of assets that perform in an
unrelated manner, or non-correlated assets, may increase overall return
and/or reduce the volatility (a primary measure of risk) of a portfolio.
As a risk transfer activity, futures and forward trading has no inherent
correlation with any other investment. However, non-correlation will not
provide any diversification advantages unless the non-correlated assets
are outperforming other portfolio assets, and there is no guarantee that
the Trust will outperform other sectors of an investor's portfolio or not
produce losses. The Trust's profitability also depends on the success of
Campbell & Company's trading techniques. If the Trust is unprofitable,
then it will not increase the return on an investor's portfolio or
achieve its diversification objectives.
- Investors in the Trust get the advantage of limited liability in highly
leveraged trading.
CAMPBELL & COMPANY, INC.
Campbell & Company, the managing owner and trading advisor for the Trust,
administers the Trust as well as directs its trading. Its principals have over
28 years of experience trading in the futures and forward markets. As of
September 30, 2000, Campbell & Company was managing approximately $2.0 billion
in the futures and forward markets, including approximately $1.8 billion in its
Financial, Metal & Energy Large Portfolio. The FME Large Portfolio, to which all
the Trust's assets will initially be allocated, is concentrated in the financial
markets such as interest rates, foreign exchange and stock indices, as well as
metals and energy products. Campbell & Company has sole authority and
responsibility for directing investment and reinvestment of the Trust's assets.
Campbell & Company uses a computerized, technical, trend-following approach
combined with quantitative portfolio management analysis and seeks to identify
and profit from sustained price trends. Currently, over five trading models are
utilized in most markets traded. Each model analyzes market movements and
internal market and price configurations. Campbell & Company utilizes a
proprietary, volatility-based system for allocating capital to a portfolio's
constituent markets. Each market is assigned a dollar risk value based on
contract size and volatility, which forms the basis for structuring a
risk-balanced portfolio.
CHARGES TO THE TRUST
Trust expenses must be offset by trading gains or interest income in order
to avoid depletion of the Trust's assets.
CAMPBELL & COMPANY
- Brokerage fee of up to 3.5% of net assets per annum, of which up to 0.65%
is paid to the clearing broker, 0.35% is paid to the selling agents for
administrative services and Campbell & Company retains the remainder.
- 20% of quarterly appreciation in the Trust's net assets, excluding
interest income and as adjusted for subscriptions and redemptions.
- Reimbursement of organization and offering expenses incurred in the
initial and continuous offering following incurrence of
-3-
<PAGE> 12
each such expense, estimated at and not to exceed 0.9% of net assets per
annum.
DEALERS AND OTHERS
- "Bid-ask" spreads and prime brokerage fees for off-exchange contracts.
- Operating expenses such as legal, auditing, administration, printing and
postage, up to a maximum of 0.4% of net assets per year.
ESTIMATE OF BREAK-EVEN LEVEL
The Trust will not be required to earn trading profits in order for an
investor to "break-even" on his investment, as interest income (based on current
rates) is anticipated to exceed the Trust's ongoing fees and expenses.
<TABLE>
<CAPTION>
<S> <C>
Assumed Initial Selling Price
Per Unit.................... $10,000.00
Brokerage Fee (3.5%).......... 350.00
Organization & Offering
Expense Reimbursement
(0.9%)...................... 90.00
Operating Expenses (0.4%)..... 40.00
Less: Interest Income
(5.5%)...................... (550.00)
----------
Amount of Trading Income
Required for the Trust's Net
Asset Value per Unit at the
End of One Year to Equal the
Initial Selling Price per
Unit........................ $ (0.70)
==========
The maximum organization and offering
expense and operating expense
reimbursement is 0.9% and 0.4% of net
assets per annum, respectively. The
estimates do not account for the bid-ask
spreads and prime brokerage fees in
connection with the Trust's foreign
exchange forward contract trading. No
performance fee is included in the
calculation of the "break-even" level
since all operating expenses of the Trust
must be offset before a performance fee is
accrued.
</TABLE>
Campbell & Company estimates that the legal and audit fees chargeable to
the Trust during its first year of operations will be $135,000.
DISTRIBUTIONS AND REDEMPTIONS
The Trust is intended to be a medium- to long-term, i.e., 3- to 5-year,
investment. Units are transferable, but no market exists for their sale and none
will develop. Monthly redemptions are permitted upon ten (10) business days'
written notice to Campbell & Company. Campbell & Company does not intend to make
any distributions.
FEDERAL INCOME TAX ASPECTS
In the opinion of Sidley & Austin, counsel to Campbell & Company, the Trust
is classified as a partnership and will not be considered a publicly-traded
partnership taxable as a corporation for federal income tax purposes. As such,
whether or not Campbell & Company has distributed any cash to the unitholders,
each unitholder must report his or her allocable share of items of income, gain,
loss and deduction of the Trust and is individually liable for income tax on
such share. The Trust invests in futures and other commodity contracts, gain or
loss on which will, depending on the contracts traded, constitute a mixture of:
1) ordinary income or loss; and/or
2) capital gain or loss.
Trading losses of the Trust, which will generally constitute capital
losses, may only be available to offset a limited amount of interest income
allocated to the unitholders. Although Campbell & Company treats the brokerage
fees and performance fees paid to Campbell & Company as ordinary expenses, such
expenses may be subject to restrictions on deductibility for federal income tax
purposes or be treated as non-deductible syndication costs by the Internal
Revenue Service.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
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<PAGE> 13
THE RISKS YOU FACE
MARKET RISKS
YOU COULD POSSIBLY LOSE YOUR TOTAL INVESTMENT IN THE TRUST
Futures and forward contracts have a high degree of price variability and
are subject to occasional rapid and substantial changes. Consequently, you could
lose all or substantially all of your investment in the Trust.
THE TRUST WILL BE HIGHLY LEVERAGED
Because the amount of margin funds necessary to be deposited with a
clearing broker in order to enter into a futures or forward contract position is
typically about 2% to 10% of the total value of the contract, Campbell & Company
will be able to hold positions in the Trust's account with face values equal to
several times the Trust's net assets. The ratio of margin to equity is typically
20% to 30%, but can range from 10% to 40%. As a result of this leveraging, even
a small movement in the price of a contract can cause major losses.
YOUR INVESTMENT COULD BE ILLIQUID
Futures and forward positions cannot always be liquidated at the desired
price. It is difficult to execute a trade at a specific price when there is a
relatively small volume of buy and sell orders in a market. A market disruption,
such as when foreign governments may take or be subject to political actions
which disrupt the markets in their currency or major exports, can also make it
difficult to liquidate a position.
Unexpected market illiquidity has caused major losses in recent years in
such sectors as emerging markets and mortgage-backed securities. There can be no
assurance that the same will not happen to the Trust at any time or from time to
time. The large size of the positions which Campbell & Company will acquire for
the Trust increases the risk of illiquidity by both making its positions more
difficult to liquidate and increasing the losses incurred while trying to do so.
Also, there is no secondary market for the units. 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 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."
FORWARD TRANSACTIONS ARE NOT REGULATED AND ARE SUBJECT TO CREDIT RISK
The Trust trades forward contracts in foreign currencies, metals and
energy. Forward contracts are typically traded 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
contracts relies upon the integrity of market participants in lieu of the
additional regulation imposed by the CFTC on participants in the futures
markets. This regulation includes, for example, trading practices and other
customer protection requirements, and minimum financial and trade reporting
requirements. The absence of regulation could expose the Trust in certain
circumstances to significant losses in the event of trading abuses or financial
failure by participants in the forward markets which it might otherwise have
avoided. Also, the Trust faces the risk of non-performance by the counterparties
to the forward contracts and such non-performance may cause some or all of your
gain to be unrealized.
AN INVESTMENT IN THE TRUST MAY NOT DIVERSIFY AN OVERALL PORTFOLIO
Historically, managed futures 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 and forward 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-
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<PAGE> 14
correlation, the Trust cannot be expected to be automatically profitable during
unfavorable periods for the stock market, or vice versa. The futures and forward
markets are fundamentally different from the securities markets in that for
every gain made in a futures or forward 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.
TRADING RISKS
CAMPBELL & COMPANY ANALYZES ONLY TECHNICAL MARKET DATA, NOT ANY ECONOMIC FACTORS
EXTERNAL TO MARKET PRICES
The trading systems that will be used by Campbell & Company for the Trust
are technical, trend-following methods. The profitability of trading under these
systems depends on, among other things, the occurrence of significant price
trends which are sustained movements, up or down, in futures and forward prices.
Such trends may not develop; there have been periods in the past without price
trends.
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 & Company's 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 &
COMPANY'S PROFITABILITY
There has been a dramatic increase over the past 10 to 15 years in the
amount of assets managed by trend-following trading systems like the Campbell &
Company programs. In 1980, the assets in the managed futures industry were
estimated at approximately $300 million; by the end of 1999, this estimate had
risen to approximately $44 billion. It is also estimated that over half of all
managed futures trading advisors rely primarily on trend-following systems. This
means increased trading competition which could operate to the detriment of the
Trust. It may become more difficult for the Trust to implement its trading
strategy if these other trading advisors using technical systems are, at the
same time, also attempting to initiate or liquidate futures or forward positions
or otherwise alter trading patterns.
SPECULATIVE POSITION LIMITS MAY ALTER TRADING DECISIONS FOR THE TRUST
The CFTC has established limits on the maximum net long or net short
positions which any person may hold or control in certain futures contracts.
Exchanges also have established such limits. 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, such limits could cause a
modification of Campbell & Company's trading decisions for the Trust or force
liquidation of certain futures positions. Either of these actions may not be in
the best interest of the investors.
INCREASE IN ASSETS UNDER MANAGEMENT MAY AFFECT TRADING DECISIONS
Campbell & Company's current equity under management is at or near its
all-time high. Campbell & Company has not agreed to limit the amount of
additional equity which it may manage, and is actively engaged in seeking major
new accounts. The more equity Campbell & Company manages, the more difficult it
may be for Campbell & Company to trade profitably because of the difficulty of
trading larger positions without adversely affecting prices and performance.
Accordingly, such increases in equity under management may require Campbell &
Company to modify its trading decisions for the Trust which could have a
detrimental effect on your investment.
INVESTORS WILL NOT BE ABLE TO REVIEW THE TRUST'S HOLDINGS ON A DAILY BASIS
Campbell & Company makes the Trust's trading decisions. While Campbell &
Company receives daily trade confirmations from the clearing broker and foreign
exchange dealers, the Trust's trading results are reported to unitholders
monthly. Accordingly, an investment in the Trust
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<PAGE> 15
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 TRUST PROFITS
Investors are taxed each year on their share of the Trust's profits, if
any, irrespective of whether they redeem any units or receive any cash
distributions from the Trust. While Campbell & Company has the authority to make
such distributions, it does not intend to do so in the foreseeable future.
All performance information included in this prospectus is presented on a
pre-tax basis; the investors who experienced such performance had to redeem
units or pay the related taxes from other sources.
TAX COULD BE DUE FROM INVESTORS ON THEIR SHARE OF THE TRUST'S ORDINARY INCOME
DESPITE OVERALL LOSSES
Investors may be required to pay tax on their allocable share of the
Trust's ordinary income, which in the case of the Trust is the Trust's interest
income and gain on some foreign futures contracts, even though the Trust incurs
overall losses. Capital losses can be used only to offset capital gains and
$3,000 of ordinary income each year. Consequently, if an investor were allocated
$5,000 of ordinary income and $10,000 of capital losses, the investor would owe
tax on $2,000 of ordinary income even though the investor would have a $5,000
loss for the year. The $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 BROKERAGE AND PERFORMANCE FEES
Although Campbell & Company treats the brokerage fees and performance fees
paid to Campbell & Company and other expenses of the Trust as ordinary and
necessary business expenses, upon audit the Trust may be required to treat such
fees as "investment advisory fees" if the Trust's trading activities did not
constitute a trade or business for tax purposes. If the expenses were investment
advisory expenses, a unitholder's tax liability would likely increase. In
addition, upon audit, a portion of the brokerage fees might be treated as a
non-deductible syndication cost or might be treated as a reduction in the
Trust's capital gain or as an increase in the Trust's capital loss. If the
brokerage fees were so treated, a unitholder's tax liability would likely
increase.
OTHER RISKS
THE CLEARING FIRM COULD FAIL AND HAS BEEN SUBJECT TO DISCIPLINARY ACTION
The current clearing broker for the Trust is PaineWebber Incorporated. The
Commodity Exchange Act requires a clearing broker to segregate all funds
received from customers from such broker's proprietary assets. If the clearing
broker fails to do so, the assets of the Trust might not be fully protected in
the event of the bankruptcy of the clearing broker. Furthermore, in the event of
the clearing broker's bankruptcy, the Trust could be limited to recovering only
a pro rata share of all available funds segregated on behalf of the clearing
broker's combined customer accounts, even though certain property specifically
traceable to the Trust (for example, Treasury bills deposited by the Trust with
the clearing broker as margin) was held by the clearing broker. The clearing
broker has been the subject of certain regulatory and private causes of action.
The material actions are described under "The Clearing Broker."
Furthermore, dealers in forward contracts are not regulated by the
Commodity Exchange Act and are not obligated to segregate customer assets. As a
result, you do not have such basic protections in forward contracts.
INVESTORS MUST NOT RELY ON THE PAST PERFORMANCE OF CAMPBELL & COMPANY IN
DECIDING WHETHER TO BUY UNITS
The future performance of the Trust is not predictable, and no assurance
can be given that the Trust will perform successfully in the future. Past
performance of a trading program is not necessarily indicative of future
results.
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
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<PAGE> 16
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,
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 arm's-length negotiation. Campbell & Company, as managing owner,
determines whether or not distributions are made and it receives increased fees
to the extent distributions are not made. While Campbell & Company has the
authority to make such distributions, it does not intend to do so in the
foreseeable future.
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
The incapacity of Campbell & Company's principals could have a material and
adverse effect on Campbell & Company's 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 & Company's ability to adequately carry out its responsibilities.
THE TRUST COULD TERMINATE BEFORE EXPIRATION OF ITS STATED TERM
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 was 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 clearing broker were revoked or
suspended, such entity would no longer be able to provide services to the Trust.
THE TRUST IS NOT A REGULATED INVESTMENT COMPANY
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. Accordingly, you do not have the protections afforded by that
statute which, for example, require investment companies to have a majority of
disinterested directors and regulate the relationship between the adviser and
the investment company.
PROPOSED REGULATORY CHANGE IS IMPOSSIBLE TO PREDICT
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 futures and forward transactions in the United
States is a rapidly changing area of law and is subject to modification by
government and judicial action. In addition, various national governments have
expressed concern regarding the disruptive effects of speculative trading in the
currency markets and the need to regulate the "derivatives" markets in general.
The effect of any future regulatory change on the Trust is impossible to
predict, but could be substantial and adverse.
FORWARDS, SWAPS, HYBRIDS AND OTHER DERIVATIVES ARE NOT SUBJECT TO CFTC
REGULATION
The Trust will trade foreign exchange contracts in the interbank market. In
the future, the
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<PAGE> 17
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 CFTC's regulatory scheme for
these transactions.
OPTIONS ON FUTURES ARE SPECULATIVE AND HIGHLY LEVERAGED
In the future, options on futures contracts may be used by the Trust to
generate premium income or capital gains. Futures options involve risks similar
to futures in that options are speculative and highly leveraged. The buyer of an
option risks losing the entire purchase price (the premium) 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 or futures 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
commodities or futures contracts underlying an option cannot accurately be
predicted.
THE TRUST IS SUBJECT TO FOREIGN MARKET CREDIT AND REGULATORY RISK
A substantial portion of Campbell & Company's trades takes place on markets
or exchanges outside the United States. From time to time, as much as 20% to 50%
of the Trust's 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,
or has 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 the order is placed 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 if Campbell & Company is satisfied that the
transfer complies with applicable laws and would not result in the termination
of the Trust for federal income tax purposes.
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.
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<PAGE> 18
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 Trust's account in the
absence of such a performance fee arrangement. Accordingly, Campbell & Company
will make investments that are riskier than might be made if the Trust's assets
were managed by a trading advisor that did not require performance-based
compensation.
CAMPBELL & COMPANY, INC.
DESCRIPTION
Campbell & Company is the managing owner and commodity trading advisor of
the Trust. It is a Maryland corporation organized in April 1978 as a successor
to a partnership originally organized in January 1974. Its offices are located
at 210 West Pennsylvania Avenue, Towson, Maryland 21204, and its telephone
number is (410) 296-3301. Its sole business is the trading and management of
discretionary futures accounts, including commodity pools. As of September 30,
2000, Campbell & Company had approximately $2.0 billion under management in the
futures and forward markets (including approximately $1.8 billion traded
pursuant to the same Financial, Metal & Energy Large Portfolio as initially will
be traded by the Trust). Please refer to "Campbell & Company, Inc. -- Trading
Systems" for a discussion of all of the portfolios offered by Campbell &
Company, which includes the Financial, Metal & Energy Large Portfolio.
Campbell & Company is a member of the NFA and has been registered as a
commodity pool operator since September 10, 1982 and as a commodity trading
advisor since May 6, 1978. Pools currently operated by Campbell & Company
include: Campbell Financial Futures Fund, L.P.; Campbell Fund Trust; Campbell
Global Assets Fund Limited; and Campbell Strategic Allocation Fund, L.P.
Campbell & Company's compensation is discussed in "Charges to the Trust."
The principals of Campbell & Company have not purchased and do not intend
to purchase units.
Campbell & Company has agreed that its capital account as managing owner at
all times will equal at least 1% of the net aggregate capital contributions of
all unitholders.
There have never been any material administrative, civil or criminal
proceedings brought against Campbell & Company or its principals, whether
pending, on appeal or concluded.
For additional past performance information for Campbell & Company, see
"Past Performance of Trading Programs of Campbell & Company, Inc."
Campbell & Company's principals are Theresa D. Becks, Richard M. Bell, D.
Keith Campbell, William C. Clarke III, Bruce L. Cleland, Xiaohua Hu, Philip
Lindner, James M. Little, V. Todd Miller, Albert Nigrin, Markus Rutishauser and
C. Douglas York. The majority voting stockholder of Campbell & Company is D.
Keith Campbell.
Theresa D. Becks, born in 1963, joined Campbell & Company in 1991 and
serves as the Chief Financial Officer, Secretary, Treasurer, and a Director. In
addition to her role as CFO, Ms. Becks also oversees administration and
compliance. From December 1987 to June 1991, she was employed by Bank of
Maryland Corp., a publicly held company, as a Vice President and Chief Financial
Officer. Prior to that time, she worked with Ernst & Young. Ms. Becks is a
C.P.A. and has a B.S. in Accounting from the University of Delaware. Ms. Becks
is an Associated Person of Campbell & Company.
Richard M. Bell, born in 1952, began his employment with Campbell & Company
in May 1990 and serves as a Senior Vice President-Trading. His duties include
managing daily trade execution for the assets under Campbell & Company's
management. From September 1986 through May 1990, Mr. Bell was the managing
general partner of several partnerships registered as broker-dealers involved in
market making on the floor of the Philadelphia Stock Exchange ("PHLX") and
Philadelphia Board of Trade ("PBOT"). From July 1975 through September 1986, Mr.
Bell was a stockholder and Executive Vice-President of Tague Securities, Inc., a
registered broker-dealer. Mr. Bell graduated from Lehigh University with a B.S.
in Finance. Mr. Bell is an Associated Person of Campbell & Company.
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<PAGE> 19
D. Keith Campbell, born in 1942, has served as the Chairman of the Board of
Directors of Campbell & Company since it began operations, was President until
January 1, 1994, and Chief Executive Officer until January 1, 1998. Mr. Campbell
is the majority voting stockholder. From 1971 through June 1978, he was a
registered representative of a futures commission merchant. 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 behalf of
the fund. 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. He is an Associated Person of
Campbell & Company.
William C. Clarke, III, born in 1951, joined Campbell & Company in June
1977 and serves as an Executive Vice President and Director. Mr. Clarke holds a
B.S. in Finance from Lehigh University where he graduated in 1973. Mr. Clarke
currently oversees all aspects of research, which involves the development of
proprietary trading models and portfolio management methods. Mr. Clarke is an
Associated Person of Campbell & Company.
Bruce L. Cleland, born in 1947, joined Campbell & Company in January 1993
and serves as President, Chief Executive Officer and a Director. Prior to 1994
he was Executive Vice President. From May 1986 through December 1992, Mr.
Cleland had served in various principal roles with the following firms:
President, Institutional Brokerage Corp., a floor broker; President,
Institutional Advisory Corp., a commodity trading advisor and commodity pool
operator; President, F&G Management, Inc., a commodity trading advisor;
President, Hewlett Trading Corporation, a commodity pool operator. Prior to
this, Mr. Cleland was employed by Rudolf Wolff Futures Inc., a futures
commission merchant, where he served as President until 1986. Mr. Cleland
graduated in 1969 from Victoria University in Wellington, New Zealand where he
received a Bachelor of Commerce and Administration degree. Mr. Cleland is an
Associated Person of Campbell & Company.
Xiaohua Hu, born in 1963, serves as a Vice President-Research and has been
employed by Campbell & Company since 1994. From 1992 to 1994, he was employed in
Japan by Line System as a software engineer, where he participated in the
research and development of computer software, including programs for production
systems control and software development. Mr. Hu received his B.A. in
Manufacturing Engineering from Changsha University of Technology in China in
1982. He went on to receive an M.A. and Ph.D. in Systems and Information
Engineering from the Toyohashi University of Technology, in Japan, in 1987 and
1992 respectively. During his studies at Toyohashi, Mr. Hu was also a Visiting
Researcher in Computer Science and Operations Research and published several
research papers.
Phil Lindner, born in 1954, serves as Vice President-Information
Technology. He has been employed by Campbell & Company since October 1994 and
was appointed the IT Director in March 1996 and Vice President in January 1998.
Prior to joining Campbell & Company, Mr. Lindner worked as a programmer and
manager for Amtote, a provider of race track computer systems.
James M. Little, born in 1946, joined Campbell & Company in April 1990 and
serves as Executive Vice President-Client Development and a Director. Mr. Little
holds a B.S. in Economics and Psychology from Purdue University. From March 1989
through April 1990, Mr. Little was a registered representative of A.G. Edwards &
Sons, Inc. From January 1984 through March 1989, he was the Chief Executive
Officer of James Little & Associates, Inc., a commodity pool operator and
broker-dealer. Mr. Little is the co-author of The Handbook of Financial Futures,
and is a frequent contributor to investment industry publications. Mr. Little is
an Associated Person of Campbell & Company.
V. Todd Miller, born in 1962, serves as a Vice President-Research and has
been employed by Campbell & Company since 1994. From 1993 to 1994, Mr. Miller
was an assistant professor in the department of Computer Information Science at
the University of Florida, where he taught classes in object oriented
programming, numerical analysis and programming in C, C++ and LISP. Mr. Miller
holds a variety of degrees from the University of Florida, including an
Associates
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<PAGE> 20
degree in architecture and a B.A. in Business with a concentration in computer
science. In 1988 he received his M.A. in Engineering with a concentration in
artificial intelligence. Mr. Miller completed his education in 1993 with a Ph.D.
in Engineering with a concentration in computer simulation.
Albert Nigrin, born in 1961, serves as a Vice President-Research and has
been employed by Campbell & Company since 1995. From 1991 to 1995, Mr. Nigrin
was an assistant professor in the department of Computer Science and Information
Systems at American University in Washington D.C., where he taught classes in
artificial intelligence, computer programming and algorithms to both graduate
and undergraduate students. While teaching, he also wrote and published Neural
Networks for Pattern Recognition. Mr. Nigrin received a B.A. in Electrical
Engineering in 1984 from Drexel University. He then proceeded directly to a
Ph.D. program and received his degree in Computer Science in 1990 from Duke
University, where his doctoral studies concentrated in the areas of artificial
intelligence and neural networks.
Markus Rutishauser, born in 1961, serves as Vice President-Trading and has
been employed by Campbell & Company since October 1993. Prior to joining
Campbell, Mr. Rutishauser worked two years at Maryland National Bank in
Baltimore as an Assistant Vice President in Foreign Exchange trading. Prior to
that, he was employed by Union Bank of Switzerland, spending four years in their
Zurich office and another four years in their New York office, in the Foreign
Exchange Department. Mr. Rutishauser graduated from the University of Fairfield
with a degree in Finance. He subsequently completed his MBA at the University of
Baltimore in January 1996. Mr. Rutishauser is an Associated Person of Campbell &
Company.
C. Douglas York, born in 1958, has been employed by Campbell & Company
since November 1992 and serves as a Senior Vice President-Trading. His duties
include managing daily trade execution for foreign exchange markets. From
January 1991 to November 1992, Mr. York was the Global Foreign Exchange Manager
for Black & Decker. He holds a B.A. in Government from Franklin and Marshall
College. Mr. York is an Associated Person of Campbell & Company.
[STAFF ORGANIZATIONAL CHART]
-12-
<PAGE> 21
THE TRADING ADVISOR
Pursuant to the Trust Agreement, Campbell & Company has the sole authority
and responsibility for directing the investment and reinvestment of the Trust's
assets. Although Campbell & Company will initially serve as the sole trading
advisor of the Trust, it may, in the future, retain other trading advisors to
manage a portion of the assets of the Trust. Unitholders will receive prior
notice, in the monthly report from the Trust or otherwise, in the event that
additional trading advisors are to be retained on behalf of the Trust.
TRADING SYSTEMS
Campbell & Company makes the Trust's trading decisions using proprietary
computerized trading models which analyze market statistics. There can be no
assurance that the trading models will produce results similar to those produced
in the past. In addition, unitholders will not have any vote or consent with
respect to the trading approaches utilized by Campbell & Company or any other
trading advisor.
Campbell & Company currently offers the following portfolios:
1) The Financial, Metal & Energy Large Portfolio,
2) The Financial, Metal & Energy Small Portfolio,
3) The Foreign Exchange Portfolio,
4) The Global Diversified Large Portfolio, and
5) The Global Diversified Small Portfolio.
Initially, all of the Trust's assets are anticipated to be allocated to the
Financial, Metal & Energy Large Portfolio, which trades forward and futures
contracts on precious and base metals, energy products, stock market indices,
interest rate instruments and foreign currencies. In the future, Campbell &
Company may allocate the Trust's assets to the Foreign Exchange Portfolio, which
trades in foreign currencies only, or the Global Diversified Large Portfolio,
which trades in all sectors included in the Financial, Metal & Energy Large
Portfolio and also in futures on agricultural products. The Trust Agreement
allows Campbell & Company to utilize various portfolios in its sole discretion.
COMPOSITION OF THE FINANCIAL, METAL & ENERGY LARGE PORTFOLIO AS OF SEPTEMBER
2000
[PORTFOLIO COMPOSITION PIE CHART]
Portfolio composition, including contracts traded and percentage allocations to
each sector, may change at any time if Campbell & Company determines such change
to be in the best interests of the Trust. As clarification of the terms used,
please note that, as an example, aluminum is a market that is traded within the
metals sector.
-13-
<PAGE> 22
Campbell & Company's trading models are designed to detect and exploit
medium- to long-term price changes, while also applying proven risk management
and portfolio management principles. No one market exceeds 10% of a total
portfolio allocation.
Campbell & Company believes that utilizing multiple trading models for the
same client account provides an important level of diversification, and is most
beneficial when multiple contracts in each market are traded. Every trading
model may not trade every market. It is possible that one trading model may
establish a long position while another trading model establishes a short
position in the same market. Since it is unlikely that both positions would
prove profitable, in retrospect one or both trades will appear to have been
unnecessary. It is Campbell & Company's policy to follow trades signaled by each
trading model independently of the other models.
Over the course of a long-term trend, there are times when the risk of the
market does not appear to be justified by the potential reward. In such
circumstances some of Campbell & Company's trading models may exit a winning
position prior to the end of a price trend. While there is some risk to this
method (for example, being out of the market during a significant portion of a
price trend), Campbell & Company's research indicates that this is well
compensated for by the decreased volatility of performance which may result.
Campbell & Company's trading models may include trend-following trading
models, counter-trend trading models, and trading models that do not seek to
identify or follow price trends at all. Campbell & Company expects to develop
additional trading models and to modify models currently in use and may or may
not employ all such models for all clients' accounts. The trading models
currently used by Campbell & Company may be eliminated from use if Campbell &
Company ever believes such action is warranted.
While Campbell & Company normally follows a disciplined systematic approach
to trading, on occasion it may override the signals generated by the trading
models, such as when market conditions dictate otherwise. Such action may not
enhance the results achieved.
Campbell & Company applies risk management and portfolio management
strategies to measure and manage overall portfolio risk. These strategies
include portfolio structure, risk balance, capital allocation and risk
limitation. One objective of risk and portfolio management is to determine
periods of relatively high and low portfolio risk, and when such points are
reached, Campbell & Company may reduce or increase position size accordingly. It
is possible, however, that periods of reduction in position size may not enhance
the results achieved over time.
Campbell & Company may, from time to time, increase or decrease the total
number of contracts held based on increases or decreases in the Trust's assets,
changes in market conditions, perceived changes in portfolio-wide risk factors,
or other factors which may be deemed relevant.
Campbell & Company estimates that based on the margin required to maintain
positions in the markets currently traded, aggregate margin for all positions
will range between 10% and 40% of the Trust's net assets. From time to time,
margin commitments may be above or below these ranges.
The number of contracts that Campbell & Company believes can be bought or
sold in a particular market without undue adverse price movement may at times be
limited. In such cases a client's portfolio would be influenced by liquidity
factors because positions in such markets might be substantially smaller than
positions in other markets which offer greater liquidity.
PAST PERFORMANCE OF TRADING PROGRAMS OF CAMPBELL & COMPANY, INC.
Campbell & Company will initially allocate all of the Trust's assets to the
Financial, Metal & Energy Large Portfolio. Campbell & Company may allocate a
portion of the Trust's assets, in the future, to the Global Diversified Large
Portfolio and/or to the Foreign Exchange Portfolio.
The following performance capsules, tables and accompanying notes are
presented in an attempt to provide you with account performance information
regarding all portfolios managed by Campbell & Company and all pools for which
Campbell & Company is General Partner or Managing Operator. The performance data
required to be disclosed for the most recent five
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<PAGE> 23
calendar years and year-to-date 2000 is presented for each portfolio in Tables
2A, 2B and 3 and each pool in Table 4. In the opinion of Campbell & Company, the
performance records of the portfolios and pools are fairly stated. All of the
portfolios and pools presented have similar investment objectives to those of
the Trust. Prospective investors should understand that interest income earned
by accounts is included in the following composite performance records.
Accordingly, such income has the effect of enhancing results during periods of
positive trading performance and reducing overall losses during periods of
negative trading performance.
The rates of return presented for each portfolio are a composite weighted
average of all accounts included. An individual account's rate of return may not
match the composite. Rather, an individual account may have more or less
favorable results than the composite due to a variety of factors. Such factors
may include without limitation: (1) varying account sizes resulting in varying
portfolio compositions; (2) different fees; (3) different commission rates; (4)
timing of execution of orders; and (5) different starting and ending periods.
Another example of how differences in account size can affect an individual
account's performance relates to the fact that as an account grows, contracts
may be added to that account's portfolio. Because futures contracts may only be
bought and sold in whole numbers (i.e., there are no partial contracts), the
larger of two accounts of very similar trading values might trade more contracts
than the smaller account. The additional equity in the larger account may be
just enough to allow the account to trade an additional contract in a particular
market. If a significant move in that market were to occur, the larger account's
gain or loss would be proportionally greater than the difference in account size
would suggest.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
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<PAGE> 24
TABLE 1
CAMPBELL ALTERNATIVE ASSET TRUST
THE TRUST HAS NOT COMMENCED TRADING AND DOES NOT HAVE ANY PERFORMANCE HISTORY.
TABLE 2A
PERFORMANCE OF TRADING PORTFOLIOS
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All of the Trust's assets will initially be traded pursuant to the
Financial, Metal & Energy Large Portfolio. Campbell & Company may allocate a
portion of the Trust's assets, in the future, to the Global Diversified Large
Portfolio and/or to the Foreign Exchange Portfolio.
<TABLE>
<CAPTION>
FINANCIAL, METAL & ENERGY GLOBAL DIVERSIFIED LARGE FOREIGN EXCHANGE
LARGE PORTFOLIO(5) PORTFOLIO(6) PORTFOLIO(7)
<S> <C> <C> <C>
COMMODITY TRADING ADVISOR: Campbell & Company, Inc.
INCEPTION OF CTA'S TRADING: January 1972
TOTAL ASSETS UNDER MANAGEMENT
BY CTA: $2.012 Billion
INCEPTION OF TRADING OF THE PORTFOLIO: April 1983 February 1986 November 1990
TOTAL ASSETS/ACCOUNTS CURRENTLY
TRADED IN THE PORTFOLIO: $1.779 Billion / 15 Accounts $27.4 Million / 1 Account $32.7 Million / 3 Accounts
WORST MONTHLY PERCENTAGE
DRAW-DOWN(3): April 1998 / 5.88% February 1996 / 7.22% May 1995 / 10.37%
WORST PEAK-TO-VALLEY August 1993 - January 1995 / May 1995 - October 1995 / August 1993 - January 1995 /
DRAW-DOWN(4): 31.78% 7.56% 44.73%
ANNUAL RETURNS(1,2):
2000 (YTD THROUGH SEPTEMBER) 2.10% (.64)% 2.64%
1999 6.81% 4.57% 7.19%
1998 20.07% 12.47% 4.25%
1997 18.75% 14.95% 18.19%
1996 35.96% 26.78% 43.04%
1995 19.46% 6.52% 26.36%
</TABLE>
TABLE 2B
FINANCIAL, METAL & ENERGY LARGE PORTFOLIO
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
The monthly returns for the Financial, Metal & Energy Large Portfolio for
the most recent five years and year-to-date 2000 are as follows.
<TABLE>
<CAPTION>
RATE OF RETURN(1)
(Computed on a compounded monthly basis)
<S> <C> <C> <C> <C> <C> <C>
MONTH 2000 YTD 1999 1998 1997 1996 1995
JANUARY 3.70% (4.83)% 3.25% 5.26% 5.46% (4.53)%
FEBRUARY (0.35)% 1.45% (2.38)% 2.26% (5.63)% 5.85%
MARCH (1.96)% 0.87% 4.95% (2.08)% 5.62% 9.58%
APRIL (1.86)% 5.60% (5.88)% (3.84)% 3.49% 2.08%
MAY 2.74% (3.25)% 4.34% (1.84)% (1.71)% 0.88%
JUNE 1.96% 4.63% 2.04% 2.23% 1.29% (0.90)%
JULY (1.72)% (0.15)% (3.68)% 9.27% 0.01% (4.05)%
AUGUST 3.08% 1.22% 9.23% (5.14)% 1.78% 5.83%
SEPTEMBER (3.24)% 1.75% 2.97% 4.23% 2.47% (3.47)%
OCTOBER (4.25)% 4.41% 2.39% 12.06% 1.20%
NOVEMBER 0.53% (0.50)% 0.57% 12.22% (0.24)%
DECEMBER 3.64% 0.64% 4.95% (4.29)% 6.82%
YEAR 2.10% 6.81% 20.07% 18.75% 35.96% 19.46%
</TABLE>
-16-
<PAGE> 25
TABLE 3
PERFORMANCE OF OTHER TRADING PORTFOLIOS
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
In addition to the three portfolios that may be utilized by the Trust,
Campbell & Company also manages assets in the Financial, Metal & Energy Small
Portfolio, the Global Diversified Small Portfolio, the Interest Rates, Stock
Indices and Commodities Portfolio and the Ark Portfolio. The Diversified
Portfolio closed in January 1995 when all assets under management in the
portfolio were merged into the Global Diversified Portfolio. The Global
Financial Portfolio ceased trading in March 1995 when the last account under
management in the portfolio closed.
<TABLE>
<CAPTION>
INTEREST RATES,
FINANCIAL, METAL & STOCK INDICES &
ENERGY SMALL GLOBAL DIVERSIFIED COMMODITIES DIVERSIFIED
PORTFOLIO SMALL PORTFOLIO PORTFOLIO ARK PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
COMMODITY TRADING ADVISOR: Campbell & Company, Inc.
INCEPTION OF CTA'S TRADING: January 1972
TOTAL ASSETS UNDER MANAGEMENT
BY CTA: $2.012 Billion
INCEPTION OF TRADING OF THE
PORTFOLIO: February 1995 June 1997 February 1996 September 1996 January 1980
TOTAL ASSETS/ACCOUNTS $0/
CURRENTLY TRADED IN THE $156.2 Million / $4.3 Million / $10.3 Million / $2.5 Million / Closed
PORTFOLIO 38 Accounts 4 Accounts 1 Account 11 Accounts January 1995
WORST MONTHLY PERCENTAGE October 1998 / July 1998 / January 1995 /
DRAW-DOWN(3): April 1998 / 5.99% April 1998 / 5.92% 6.75 11.86 4.21%
February - December 1996 -
WORST PEAK-TO-VALLEY March - May September 2000 / April 1997 / July 1998 / January 1995 /
DRAW-DOWN(4): 1997 / 7.61% 9.73% 9.94% 11.86 4.21%
ANNUAL RETURNS(1,2):
2000 (YTD THROUGH SEPTEMBER) (2.74)% (5.92)% 1.93% 2.96% N/A
1999 6.83% 2.51% 6.85% 28.27% N/A
1998 22.16% 17.50% 27.08% 2.48% N/A
1997 17.30% 13.85%* 20.15% 20.49% N/A
1996 37.83% N/A 25.73%** 19.94%*** N/A
1995 20.34% N/A N/A N/A -4.21%****
<CAPTION>
GLOBAL FINANCIAL
PORTFOLIO
<S> <C>
COMMODITY TRADING ADVISOR:
INCEPTION OF CTA'S TRADING:
TOTAL ASSETS UNDER MANAGEMENT
BY CTA:
INCEPTION OF TRADING OF THE
PORTFOLIO: December 1993
TOTAL ASSETS/ACCOUNTS $0/
CURRENTLY TRADED IN THE Closed
PORTFOLIO March 1995
WORST MONTHLY PERCENTAGE January 1995 /
DRAW-DOWN(3): 4.46%
WORST PEAK-TO-VALLEY January 1995 /
DRAW-DOWN(4): 4.46%
ANNUAL RETURNS(1,2):
2000 (YTD THROUGH SEPTEMBER) N/A
1999 N/A
1998 N/A
1997 N/A
1996 N/A
1995 9.30%*****
</TABLE>
* Represents the period June 1, 1997 - December 31, 1997
** Represents the period February 1, 1996 - December 31, 1996
*** Represents the period September 1, 1996 - December 31, 1996
**** Represents the period January 1, 1995 - January 31, 1995
***** Represents the period January 1, 1995 - March 31, 1995
TABLE 4
PERFORMANCE OF POOLS OPERATED BY CAMPBELL & COMPANY, INC.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
CAMPBELL STRATEGIC CAMPBELL GLOBAL
ALLOCATION FUND, CAMPBELL FINANCIAL CAMPBELL GLOBAL INVESTMENT FUND
L.P. CAMPBELL FUND TRUST FUTURES FUND, L.P. ASSETS FUND LIMITED LIMITED
<S> <C> <C> <C> <C> <C>
Publicly Offered Privately Offered Privately Offered Offshore Offshore
TYPE OF POOL:
April 1994 January 1972 August 1992 February 1998 December 1987
INCEPTION OF TRADING:
$589,549,994 $30,916,888 $18,100,990 $141,877,595 $4,324,065
AGGREGATE SUBSCRIPTIONS:
Closed September
$540,017,645 $27,439,371 $11,084,349 $139,103,346 2000
CURRENT NET ASSET VALUE:
February 1996 / August 1997 / April 1998 /
April 1998 / 6.69% 7.18% 5.95% April 1998 / 6.13% 5.99%
WORST MONTHLY PERCENTAGE
DRAW-DOWN(3):
July 1994 - August 1993 - August 1993 -
January 1995 / January 1995 / January 1995 / April 1998 /
18.09% 12.95% 29.42% April 1998 / 6.13% 5.99%
WORST PEAK-TO-VALLEY
DRAW-DOWN(4):
Financial, Metal & Global Diversified Financial, Metal & Financial, Metal & Financial, Metal
Energy Large Large Energy Large Energy Large & Energy Small
TRADING PORTFOLIO USED:
ANNUAL RETURNS(1):
(.76) 1.22 2.40 3.63 (1.74)
2000 (YTD THROUGH
SEPTEMBER)
4.45% 5.03% 9.53% 9.89% 6.26%
1999
14.60% 15.80% 25.92% 21.74% * 17.09%
1998
14.31% 19.92% 17.34% N/A 5.41% **
1997
30.46% 32.86% 42.32% N/A N/A
1996
9.99% 4.83% 17.12% N/A N/A
1995
</TABLE>
* Represents the period February 1, 1998 - December 31, 1998
** Represents the period December 1, 1997 - December 31, 1997
-17-
<PAGE> 26
NOTES TO PERFORMANCE TABLES
1. In the accompanying performance tables, for the Financial, Metal & Energy
Large Portfolio, the Global Diversified Large Portfolio, the Interest Rates,
Stock Indices & Commodities Portfolio and for each Pool, the "ANNUAL RETURN"
is calculated by compounding the monthly rates of return during the year. The
rate of return for a month is calculated by dividing the net profit or loss
by the assets at the beginning of such month. Additions and withdrawals
occurring during the month are included as an addition to or deduction from
beginning net assets in the calculations of rates of return, except for
accounts which close on the last day of a month in which case the withdrawal
is not subtracted from beginning net assets for purposes of this calculation.
Rate of return is calculated using the Only Accounts Traded (OAT) method of
computation. This computation method is one of the methods approved by the
CFTC to reduce the distortion caused by significant additions or withdrawals
of capital during a month. The OAT method excludes from the calculation of
rate of return those accounts which had material intra-month additions or
withdrawals and accounts which were open for only part of the month. In this
way, the composite rate of return is based on only those accounts whose rate
of return is not distorted through intra-month capital changes.
2. In the accompanying performance tables, for the Foreign Exchange Portfolio,
the Financial, Metal & Energy Small Portfolio, the Global Diversified Small
Portfolio and the ARK Portfolio, Campbell & Company has adopted a method of
computing rate of return and performance disclosure, referred to as the
"Fully-Funded Subset" method, pursuant to an advisory published by the CFTC.
To qualify for the use of the Fully-Funded Subset method, the advisory
requires that certain computations be made in order to arrive at the
Fully-Funded Subset and that the accounts for which the performance is so
reported meet two tests which are designed to provide assurance that the
Fully-Funded Subset and the resultant rates of return are representative of
the trading program. The "ANNUAL RETURN" for the above mentioned portfolios
is calculated by compounding the monthly rates of return during the year. The
monthly rate of return for the above mentioned portfolios is calculated by
dividing net performance of the Fully-Funded Subset by the beginning net
assets of the Fully-Funded Subset, except in months of significant additions
or withdrawals to the accounts in the Fully-Funded Subset. In such instances,
the Fully-Funded Subset is adjusted to exclude accounts with significant
additions of withdrawals that would materially distort the rate of return.
3. "WORST MONTHLY PERCENTAGE DRAW-DOWN" is the largest monthly loss experienced
by the Portfolio/Pool on a composite basis in any calendar month expressed as
a percentage of the total equity in the Portfolio/Pool and includes the month
and year of such draw-down. A small number of accounts in the Portfolio
composites have experienced monthly draw-downs which are materially larger
than the largest composite monthly draw-down. These variances result from
such factors as small account size (i.e., accounts with net assets of less
than the prescribed Portfolio minimum, which therefore trade fewer contracts
than the standard Portfolio), intra-month account opening or closing,
significant intra-month additions or withdrawals, trading commissions in
excess of the stated average and investment restrictions imposed by the
client.
4. "WORST PEAK-TO-VALLEY DRAW-DOWN" is the largest cumulative loss experienced
by the Portfolio/Pool on a composite basis in any consecutive monthly period
on a compounded basis and includes the time frame of such draw-down. A small
number of accounts in the Portfolio composites have experienced
peak-to-valley draw-downs which are materially larger than the largest
composite peak-to-valley draw-down. These variances result from such factors
as small account size (i.e., accounts with net assets of less than the
prescribed Portfolio minimum, which therefore trade fewer contracts than the
standard Portfolio), intra-month account opening or closing, significant
intra-month additions or withdrawals, trading commissions in excess of the
stated average and investment restrictions imposed by the client.
5. The first column of Table 2A contains the composite performance of accounts
traded pursuant to the Financial, Metal & Energy Large Portfolio. The data
presented reflects the composite performance of 128 accounts traded according
to the Financial, Metal & Energy Large Portfolio. The data below is as of
September 30, 2000. During the period presented, 113 accounts have been
closed; 96 of which
-18-
<PAGE> 27
NOTES TO PERFORMANCE TABLES -- (CONTINUED)
transferred to the Financial, Metal & Energy Small Portfolio. Of the
remaining 17 closed accounts, 7 closed with a profit and 10 closed with a
loss. Fifteen accounts remained open, 13 are profitable and 2 are
unprofitable. The open accounts ranged in size from $11,100,000 to in excess
of $200,000,000, with an average account size of approximately $118,500,000.
The average composite monthly return for the period from January 1995 through
September 2000 was 1.44% compared to the average of average monthly returns
for all accounts of 1.21% over the same time period. The data in this
composite table do not reflect the performance of any one account. Therefore,
an individual account may have realized more or less favorable results than
the composite results indicate. The net performance figures used to determine
the monthly returns are net of management and incentive fees; these fees
range from 0% to 6% for management fees and 15% to 25% for incentive fees.
6. The second column of Table 2A reflects the composite performance of all
accounts (a total of 12 accounts) traded according to the Global Diversified
Large Portfolio. During the period presented, 11 accounts have been closed;
10 of which transferred to the Global Diversified Small Portfolio, and one of
which transferred to the FME Large Portfolio. The 1 open account is
profitable. The average composite monthly return for the period from January
1995 through September 2000 is .94% compared to the average of average
monthly returns for all accounts of .99% over the same time period. The data
in this composite table do not reflect the performance of any one account.
Therefore, an individual account may have realized more or less favorable
results than the composite results indicate.
7. The third column of Table 2A reflects the composite performance of all
accounts (a total of 7 accounts) traded according to the Foreign Exchange
Portfolio. During the period presented, 4 accounts have been closed; 3 with a
profit and 1 with a loss. The 3 open accounts are profitable. As of September
30, 2000, two of the accounts included notional equity of $23,000,000. The
average composite monthly return for the period from January 1995 through
September 2000 is 1.49% compared to the average of average monthly returns
for all accounts of 1.43% over the same time period. The data in this
composite table do not reflect the performance of any one account. Therefore,
an individual account may have realized more or less favorable results than
the composite results indicate.
-19-
<PAGE> 28
CONFLICTS OF INTEREST
CAMPBELL & COMPANY, INC.
Conflicts exist between Campbell & Company's interests in and its
responsibilities to the Trust. The conflicts are inherent in Campbell & Company
acting as managing owner and as trading advisor to the Trust. These conflicts
and the potential detriments to the unitholders are described below.
Campbell & Company's selection of itself as trading advisor was not
objective, since it is also the managing owner of the Trust. In addition, it has
a disincentive to replace itself as the advisor. The advisory relationship
between the Trust and Campbell & Company, including the fee arrangement, was not
negotiated at arm's length. Investors should note, however, that Campbell &
Company believes that the fee arrangements are fair to the Trust and competitive
with compensation arrangements in pools involving independent general partners
and advisors. Campbell & Company will review its compensation terms annually to
determine whether such terms continue to be competitive with other pools for
similar services and will lower such fees if it concludes, in good faith, that
its fees are no longer competitive. Neither Campbell & Company nor any advisor
may receive per-trade compensation directly or indirectly from the Trust.
Neither Campbell & Company nor its principals devote their time exclusively
to the Trust. Campbell & Company (or its principals) acts as general partner to
other commodity pools and trading advisor to other accounts which may compete
with the Trust for Campbell & Company's services. Thus, Campbell & Company could
have a conflict between its responsibilities to the Trust and to those other
pools and accounts. Campbell & Company believes that it has sufficient resources
to discharge its responsibilities in this regard in a fair manner.
Campbell & Company receives higher advisory fees from some of those other
accounts than it receives from the Trust. Campbell & Company, however, trades
all accounts in a substantially similar manner, given the differences in size
and timing of the capital additions and withdrawals. In addition, Campbell &
Company may find that futures positions established for the benefit of the
Trust, when aggregated with positions in other accounts of Campbell & Company,
approach the speculative position limits in a particular commodity. Campbell &
Company may decide to address this situation either by liquidating the Trust's
positions in that futures contract and reapportioning the portfolio in other
contracts or by trading contracts in other markets which do not have restrictive
limits.
Campbell & Company operates another publicly offered commodity pool, also
trading the Financial, Metal & Energy Large Portfolio, with a higher overall
cost structure. Selling agents offering both the Trust and such other pool may
have a conflict of interest between any responsibility that they may have to
advise eligible clients of the higher "break-even" level of such other pool and
in generating greater selling commissions for their employer.
Any principal of Campbell & Company may trade futures and related contracts
for its own account. In addition, Campbell & Company manages proprietary
accounts for its deferred compensation plan and a principal. There are written
procedures that govern proprietary trading by principals. Trading records for
all proprietary trading are available for review by clients and investors upon
reasonable notice. A conflict of interest exists if proprietary trades are
executed and cleared at more favorable rates than trades cleared on behalf of
the Trust.
When Campbell & Company executes an order in the market, the order is
typically placed on an aggregate basis for all accounts for which Campbell &
Company trades, and then is subsequently broken up and allocated among the
various accounts. To the extent executions are grouped together and then
allocated among accounts held at the clearing broker, the Trust may receive less
favorable executions than such other accounts. It is Campbell & Company's policy
to objectively allocate trade executions that afford each account the same
likelihood of receiving favorable or unfavorable executions over time. A
potential conflict also may occur when Campbell & Company or its principals
trade their proprietary accounts more aggressively, take positions in
proprietary accounts which are opposite, or ahead of, the positions taken by the
Trust.
-20-
<PAGE> 29
THE CLEARING BROKER AND THE FOREIGN EXCHANGE DEALERS
The clearing broker, currently PaineWebber Incorporated, and the foreign
exchange dealers, currently Deutsche Bank AG and ABN AMRO Bank N.V., Chicago
Branch, and the affiliates and personnel of such entities, may trade futures and
forward contracts for their own accounts. This trading could give rise to
conflicts of interest with the Trust.
PaineWebber is the clearing broker and also a selling agent of the Trust,
which could give rise to conflicts of interest because its compensation in each
role is based on the net asset value of units outstanding. Further, in making
recommendations to redeem or purchase additional units, PaineWebber employees
may have a conflict of interest between acting in the best interest of their
clients and assuring continued compensation to their employer.
FIDUCIARY DUTY AND REMEDIES
In evaluating the foregoing conflicts of interest, a prospective investor
should be aware that Campbell & Company, as managing owner, has a responsibility
to unitholders to exercise good faith and fairness in all dealings affecting the
Trust. The fiduciary responsibility of a managing owner to the unitholders is a
developing and changing area of the law and unitholders who have questions
concerning the duties of Campbell & Company as managing owner should consult
with their counsel. In the event that a unitholder believes that Campbell &
Company has violated its fiduciary duty to the unitholders, he may seek legal
relief individually or on behalf of the Trust under applicable laws, including
under the Delaware Business Trust Act and under commodities laws, to recover
damages from or require an accounting by Campbell & Company. The Trust Agreement
is governed by Delaware law and any breach of Campbell & Company's fiduciary
duty under the Trust Agreement will generally be governed by Delaware law. The
Trust Agreement does not limit Campbell & Company's fiduciary obligations under
Delaware or common law; however, Campbell & Company may assert as a defense to
claims of breach of fiduciary duty that the conflicts of interest and fees
payable to Campbell & Company have been disclosed in this prospectus.
Unitholders may also have the right, subject to applicable procedural and
jurisdictional requirements, to bring class actions in federal court to enforce
their rights under the federal securities laws and the rules and regulations
promulgated thereunder by the SEC. Unitholders who have suffered losses in
connection with the purchase or sale of the units may be able to recover such
losses from Campbell & Company where the losses result from a violation by
Campbell & Company of the federal securities laws. State securities laws may
also provide remedies, such as the ability to bring civil liability lawsuits, to
unitholders. Unitholders should be aware that performance by Campbell & Company
of its fiduciary duty to the Trust is measured by the terms of the Trust
Agreement as well as applicable law.
Unitholders are afforded rights to institute reparations proceedings under
the Commodity Exchange Act for violations of the Commodity Exchange Act or of
any rule, regulation or order of the CFTC by Campbell & Company.
INDEMNIFICATION AND STANDARD OF LIABILITY
Campbell & Company and its controlling persons may not be liable to the
Trust or any unitholder for errors in judgment or other acts or omissions not
amounting to misconduct or negligence, as a consequence of the indemnification
and exculpatory provisions described in the following paragraph. Purchasers of
units may have more limited rights of action than they would absent such
provisions.
The Trust Agreement provides that Campbell & Company and its controlling
persons shall not have any liability to the Trust or to any unitholder for any
loss suffered by the Trust which arises out of any action or inaction if
Campbell & Company, in good faith, determined that such course of conduct was in
the best interests of the Trust and such course of conduct did not constitute
negligence or misconduct of Campbell & Company. The Trust has agreed to
indemnify Campbell & Company and its controlling persons against claims, losses
or liabilities based on their conduct relating to the Trust, provided that the
conduct resulting in the claims, losses or liabilities for which indemnity is
sought did not constitute negligence or misconduct or breach of any fiduciary
obligation to the Trust and was done in good faith and in a manner which
Campbell & Company, in good faith, determined to be in the best
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interests of the Trust. Controlling persons of Campbell & Company are entitled
to indemnity only for losses resulting from claims against such controlling
persons due solely to their relationship with Campbell & Company or for losses
incurred in performing the duties of Campbell & Company. See Article 17 of the
Trust Agreement, included as Exhibit A to the prospectus.
The Trust will not indemnify Campbell & Company or its controlling persons
for any liability arising from securities law violations in connection with the
offering of the units unless Campbell & Company or its controlling persons
prevails on the merits or obtains a court approved settlement (in accordance
with Article 17 of the Trust Agreement). The position of the SEC is that any
such indemnification is contrary to the federal securities laws and therefore
unenforceable.
CHARGES TO THE TRUST
The following list of fees and expenses includes all compensation, fees,
profits and other benefits (including reimbursement of out-of-pocket expenses)
which Campbell & Company, the selling agents, the clearing broker, the foreign
exchange dealer and the affiliates of those parties may earn or receive in
connection with the offering and operation of the Trust. Prospective investors
should refer to the Summary for an estimate of the break-even amount that is
required for an investor to recoup such fees and expenses, or "break even" in
the first year of trading.
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.
BROKERAGE FEE
The Trust pays a single asset-based fee for all brokerage and management
services. The fee is equal to up to 3.5% per annum of month-end net assets of
the Trust, prior to accruals for such brokerage fee or performance fees. This
fee is paid to Campbell & Company which, in turn, remits a portion of such
brokerage fee to third parties as set forth below.
From such 3.5% brokerage fee, Campbell & Company remits up to 0.65% to the
clearing broker for execution and clearing costs and 0.35% to the selling agents
for ongoing administrative services to the unitholders. Campbell & Company will
retain the remaining 2.5% as management fees (2.0% for providing advisory
services and 0.5% for acting as managing owner). The amount of the fee to be
paid to the clearing broker is evaluated from time to time based on the amount
of trading for the Trust that the broker is required to clear, but at no time
will the amount exceed 0.65% of Trust net assets per annum.
[FEE PERCENTAGE ILLUSTRATION]
OTHER TRUST EXPENSES
The Trust also will be subject to the following fees and expenses.
<TABLE>
<CAPTION>
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
--------------------- ------------------- ----------------------
<S> <C> <C>
Campbell Quarterly 20% of cumulative
& Performance Fee appreciation in net
Company asset value per unit,
excluding interest
income, after
deduction for
brokerage fees
Reimbursement of As incurred; to be
Organization and reimbursed, up to a
Offering Expenses maximum of 0.9% of net
assets per annum
Dealers "Bid-Ask" spreads Indeterminable
and prime brokerage because imbedded in
fees price of forward
contracts
Others Legal, accounting, As incurred, up to a
printing, postage maximum of 0.4% of
and administrative average month end net
costs assets per annum
</TABLE>
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<PAGE> 31
The above fees, together with the brokerage fee, is the complete
compensation that will be received by Campbell & Company or its affiliates from
the Trust.
CAMPBELL & COMPANY, INC.
BROKERAGE FEE
Campbell & Company receives a brokerage fee of up to 3.5% per annum as
described earlier.
PERFORMANCE FEE
Campbell & Company receives a quarterly performance fee equal to 20% of the
new appreciation (if any) in the net asset value of the units. "New
appreciation" means the total increase in unit value from the commencement of
trading, minus the total increase in unit value for all prior quarters since the
last fee was paid (or inception of trading, if no performance fee has been paid
previously), multiplied by the number of units outstanding. The performance fee
is paid only on profits attributable to units outstanding, and no fee is paid
with respect to interest income. Because the performance fee is accrued monthly,
units that are redeemed other than at the end of the quarter will effectively
pay a performance fee, if accrued, as of the end of the month in which the
redemption occurs.
If a performance fee payment is made by the Trust, and the Trust thereafter
incurs a net loss, Campbell & Company will retain the amount previously paid.
Thus, Campbell & Company may be paid a performance fee during a year in which
the Trust overall incurred net losses. Trading losses will be carried forward
and no further performance fees may be paid until the prior losses have been
recovered.
Below is a sample calculation of the performance fee:
Assume the Trust paid a performance fee at the end of the first quarter of
2001 and assume that the Trust recognized trading profits (net of all brokerage
fees and operating and offering expenses) of $200,000 during the second quarter
of 2001. The new appreciation for the quarter (before interest earned) would be
$200,000 and Campbell & Company's performance fee would be $40,000 (0.2 x
$200,000).
Alternatively, assume that the Trust paid a performance fee at the end of
the first quarter of 2001 but did not pay a performance fee at the end of the
second quarter of 2001 because it had trading losses of $100,000. If the Trust
recognized trading profits of $200,000 at the end of the third quarter of 2001,
the new appreciation (before interest earned) for the quarter would be $100,000
($200,000 -- $100,000 loss carryforward) and Campbell & Company's performance
fee would be $20,000 (0.2 x $100,000). Please note that this simplified example
assumes that no unitholders have added or redeemed units during this sample time
frame. Such capital changes require that the calculation be determined on a "per
unit" basis.
If the net asset value per unit at the time when a particular investor
acquires units is lower than the net asset value per unit as of the end of the
most recent prior calendar quarter for which a performance fee was payable (due
to losses incurred between such quarter-end and the subscription date), such
units might experience a substantial increase in value after the subscription
date yet pay no performance fee as of the next calendar quarter-end because the
Trust as a whole has not experienced new appreciation.
If a performance fee accrual is in effect at the time when particular units
are purchased (due to gains achieved prior to the applicable subscription day),
the net asset value per unit reflects such accrual. In the event the net asset
value of the Trust declines after the subscription date, the incentive fee
accrual is "reversed" and such reversal is credited to all units equally,
including the units which were purchased at a net asset value per unit which
fully reflected such accrual.
The brokerage fee and performance fee may be increased upon sixty days'
notice to the unitholders, as long as the notice explains unitholders'
redemption and voting rights.
THE CLEARING BROKER
As described earlier, the clearing broker receives from Campbell & Company
(and not the Trust) up to 0.65% per annum of the net assets of the Trust, which
is a portion of the maximum 3.5% brokerage fee. The clearing broker is
responsible for all trading transactional costs, such as pit brokerage, exchange
and NFA fees, "give-up" and transfer fees. The compensation to the clearing
broker is competitive with rates paid by other
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trading funds having assets and a structure similar to the Trust. The
asset-based compensation to the clearing broker is equivalent to approximately
$10-$15 per round-turn trade per contract. The compensation to be paid to the
clearing broker will not exceed the guidelines established by the North American
Securities Administrators Association, Inc. ("NASAA").
SELLING AGENTS
The selling agents (the firm and not the individual representatives)
receive from Campbell & Company (and not the Trust) a selling agent
administrative fee of 0.35% of the Trust's net assets per annum for legal,
administrative, client reporting and ongoing services.
FOREIGN EXCHANGE DEALERS
The Trust trades currency forward contracts. Such contracts are traded
among dealers which act as "principals" or counterparties to each trade. The
execution costs are included in the price of the forward contract purchased or
sold, and, accordingly, such costs cannot be determined. Campbell & Company
believes the bid-ask spreads will be at the prevailing market prices.
ORGANIZATION AND OFFERING EXPENSES
Organization and offering expenses include all fees and expenses incurred
in connection with the formation of the Trust and distribution of the units
including legal, accounting, printing, mailing, filing fees, escrow fees,
salaries and bonuses of employees while engaged in sales activities and
marketing expenses of Campbell & Company and the selling agents which are paid
by the Trust and will be advanced by Campbell & Company. Subject to the limit
described below, Campbell & Company will be reimbursed, without interest, by the
Trust. In no event shall the reimbursement exceed 0.9% of net assets per annum.
In the event the Trust terminates prior to completion of the reimbursement of
actual costs incurred, the managing owner will not be entitled to receive
additional reimbursement and the Trust will have no obligation to make further
reimbursement payments to the managing owner.
The Trust is required by certain state securities administrators to
disclose that the "organization and offering expenses" of the Trust, as defined
by the NASAA Guidelines, will not exceed 15% of the total subscriptions
accepted. Campbell & Company, and not the Trust, shall be responsible for any
expenses in excess of such limitation. Since Campbell & Company has agreed to
limit its reimbursement of such expenses to 0.9% of net assets per annum, the
NASAA Guidelines limit of 15% of total subscriptions (even when added to the
selling agent administrative fee) will not be reached.
OTHER EXPENSES
The Trust bears its operating expenses, including but not limited to
administrative, legal and accounting fees, and any taxes or extraordinary
expenses payable by the Trust. Such expenses are estimated to be 0.4% of the
Trust's net assets per annum. Campbell & Company will be responsible for any
such expenses during any year of operations which exceed 0.4% of the Trust's net
assets per annum. Indirect expenses in connection with the administration of the
Trust, such as indirect salaries, rent, travel and overhead of Campbell &
Company, may not be charged to the Trust.
USE OF PROCEEDS
The entire offering proceeds, without deductions, will be credited to the
Trust's bank and brokerage accounts for the purpose of engaging in trading
activities and as reserves for that trading. The Trust meets its margin
requirements by depositing U.S. government securities with the clearing broker
and the foreign exchange dealer. In this way, substantially all (i.e., 95% or
more) of the Trust's assets, whether used as margin for trading purposes or as
reserves for such trading, can be invested in U.S. government securities.
Investors should note that maintenance of the Trust's assets in U.S. government
securities and banks does not reduce the risk of loss from trading futures and
forward contracts. The Trust receives all interest earned on its assets.
Approximately 10% to 30% of the Trust's assets will be committed as margin
for futures contracts and held by the clearing broker, although the amount
committed may vary significantly. Such assets are maintained in segregated
accounts with the clearing broker pursuant to the Commodity Exchange Act and
regulations thereunder. Approximately 10% to 20% of the Trust's assets will be
deposited with Deutsche Bank AG
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or ABN AMRO Bank, N.V., Chicago Branch, in order to initiate and maintain
currency forward contracts. Such assets are not held in segregation or otherwise
regulated under the Commodity Exchange Act, unless such foreign exchange dealer
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 foreign exchange dealers. The remaining 30% to 55% of the
Trust's assets will normally be invested in U.S. Treasury bills.
The Trust's assets are not and will not be, directly or indirectly,
commingled with the property of any other person by Campbell & Company nor
invested with or loaned to Campbell & Company or any affiliated entities.
THE CLEARING BROKER
PaineWebber Incorporated ("PaineWebber"), a Delaware corporation, is the
Trust's clearing broker and one of the selling agents. Additional or replacement
clearing brokers may be appointed in respect of the Trust's account in the
future solely at the discretion of Campbell & Company.
In the agreement between PaineWebber and the Trust, the Trust has agreed to
indemnify PaineWebber against any liability which they may incur with respect to
the Trust's account or as a result of the Trust's violation of any obligation
under the agreement, or of the Trust's misstatements in connection with the
Trust's account. PaineWebber will remain liable, however, for acts and omissions
which arise from PaineWebber's breach of the agreement or violation of any law,
rule or governmental regulation, except to the extent that PaineWebber was
acting in good faith or according to the Trust's instructions. Either party has
the right to terminate this agreement upon giving ten days notice to the other
party.
The clearing broker's principal office is located at 1000 Harbor Boulevard,
Weehawken, New Jersey 07087, telephone: (201) 352-3000. The clearing broker is a
clearing member of all principal U.S. futures exchanges. It is registered with
the CFTC as a futures commission merchant and is a member of the NFA in such
capacity. UBS AG ("UBS"), UBS Americas Inc. ("UBS Americas") and PaineWebber
Group Inc., the parent of PaineWebber ("PWG"), have entered into an Agreement
and Plan of Merger dated as of July 12, 2000, pursuant to which, subject to
certain conditions, PWG will merge with and into UBS Americas, thereby becoming
a wholly owned subsidiary of UBS (the "Merger"). The Merger is expected to be
completed in the fourth quarter of 2000.
All futures trades made on behalf of the Trust are cleared through the
clearing broker. The clearing broker is not affiliated with Campbell & Company.
The clearing broker did not sponsor the Trust and is not responsible for the
activities of Campbell & Company. It will act only as the clearing broker and
one of the selling agents.
Except as set forth below, neither PaineWebber nor any of its principals
have been involved in any administrative, civil or criminal proceeding --
whether pending, on appeal or concluded -- within the past five years that is
material to a decision whether to invest in the Trust in light of all the
circumstances.
In the Matter of Certain Market Making Activities on NASDAQ was an SEC
administrative action instituted and settled without a hearing or an admission
of or denial of findings on January 11, 1999. The administrative action found
that on certain occasions in 1994 PaineWebber traders and a PaineWebber
registered representative engaged in certain improper trading activities, which
included the coordination of quotations and transactions by traders making
markets in NASDAQ stocks in violation of antifraud and fictitious quotation
rules, the intentional delay of trade reports and other manipulative activity.
PaineWebber agreed to pay a civil penalty of $6.3 million and disgorgement of
$381,685; to an administrative cease and desist order prohibiting the firm from
violating certain provisions of the federal securities laws; and to submit
certain of its policies and procedures relating to the matters alleged in the
order to review by an SEC-appointed consultant. Twenty-seven other market makers
and fifty-one traders at the firms settled related SEC administrative actions at
the same time.
On or about January 18, 1996, PaineWebber consented, without admitting or
denying the findings therein, to the entry of an Order by the SEC which imposed
a censure, a cease and desist order, a $5 million civil penalty and various
remedial sanctions. The SEC alleged that PaineWebber violated the antifraud and
recordkeeping provisions
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of the federal securities laws in connection with the offer and sale of certain
limited partnership interests between 1986 and 1992 and failed reasonably to
supervise certain registered representatives and other employees involved in the
sale of those interests. PaineWebber must comply with its representations that
it had paid and will pay a total of $292.5 million to investors, including a
payment of $40 million for a claims fund. PaineWebber has also entered into
settlement agreements with all the states, Puerto Rico and the District of
Columbia.
FOREIGN EXCHANGE DEALERS
The Trust trades foreign exchange and other forward contracts through
"dealers" in such contracts. The dealers that maintain the forward positions, or
act as the counterparties, for the Trust are Deutsche Bank AG and ABN AMRO Bank,
N.V., Chicago Branch. Unlike futures contracts which are traded through brokers
such as the clearing broker, foreign exchange or currency forward contracts are
executed through a network of dealers. Campbell & Company then instructs the
executing dealer to "give up" the trade to Deutsche Bank AG or ABN AMRO Bank,
N.V., Chicago Branch. All assets and positions relating to the Trust's forward
contract investments will be held by Deutsche Bank AG or ABN AMRO Bank, N.V.,
Chicago Branch. Campbell & Company is not obligated to continue to use the
foreign exchange dealers identified above and may select others or additional
dealers and counterparties in the future, provided Campbell & Company believes
that their service and pricing are competitive and present minimal counterparty
credit risk.
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Campbell & Company is not required to make any distributions to
unitholders. While Campbell & Company has the authority to make such
distributions, it does not intend to do so in the foreseeable future. Campbell &
Company believes that distributions of Trust assets serve no useful purpose
since unitholders may redeem any or all of their units on a periodic basis. The
amount and timing of future distributions is uncertain. Because of the potential
volatility of the futures and forward contract markets, especially in the
short-term, the Trust is recommended for those seeking a medium- to long-term
investment (i.e., 3-5 years).
If the Trust realizes profits for any fiscal year, such profits will
constitute taxable income to the unitholders in accordance with their respective
investments in the Trust whether or not cash or other property has been
distributed to unitholders. Any distributions, if made, may be inadequate to
cover such taxes payable by the unitholders.
REDEMPTIONS
A unitholder may request any or all of his units be redeemed by the Trust
at the net asset value of a unit as of the end of the month. Unitholders must
transmit a written request of such withdrawal to Campbell & Company not less
than ten (10) business days prior to the end of the month (or such shorter
period as permitted by Campbell & Company) as of which redemption is to be
effective.
The Request for Redemption must specify the number of units for which
redemption is sought. Redemptions will generally be paid within 20 days after
the date of redemption. However, in special circumstances, including, but not
limited to, inability to liquidate dealers' positions as of a redemption date or
default or delay in payments due to the Trust from clearing brokers, banks or
other persons or entities, the Trust may in turn delay payment to persons
requesting redemption of units of the proportionate part of the net assets of
the Trust represented by the sums that are the subject of such default or delay.
No such delays have been imposed to date by any pool sponsored by Campbell &
Company.
The federal income tax aspects of redemptions are described under "Federal
Income Tax Aspects."
NET ASSET VALUE
The net asset value of a unit as of any date is the unitholder's share of
the sum of all cash, plus Treasury bills valued at cost plus accrued interest,
and other securities valued at market, plus the market value of all open
futures, forward and option positions maintained by the Trust, less all
liabilities of the Trust and accrued performance fees, determined in accordance
with the principles specified in the Trust Agreement. Where no
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principle is specified in the Trust Agreement, the net asset value is calculated
in accordance with generally accepted accounting principles under the accrual
basis of accounting. Thus, if the net asset value of a unit for purposes of
redemption is determined as of a month-end which is not the end of a quarter,
any performance fees payable to Campbell & Company will be determined and
charged to such unit as though such month-end were the end of the quarter and
such performance fees will be paid to Campbell & Company.
DECLARATION OF TRUST & TRUST AGREEMENT
The following is a summary of the Declaration of Trust and Trust Agreement,
a form of which is attached as Exhibit A and incorporated by reference.
ORGANIZATION AND LIMITED LIABILITIES
The Trust is organized under the Delaware Business Trust Act ("BTA"). In
general, a unitholder's liability under BTA is limited to the amount of his
capital contribution and his share of any undistributed profits. However,
unitholders could be required, as a matter of bankruptcy law, to return to the
Trust's estate any distribution which they received at a time when the Trust was
in fact insolvent or in violation of the Declaration of Trust.
MANAGEMENT OF PARTNERSHIP AFFAIRS
The Trust Agreement effectively gives Campbell & Company, as managing
owner, full control over the management of the Trust and gives no management
role to the unitholders. To facilitate matters for Campbell & Company, the
unitholders must execute the attached Subscription Agreement and Power of
Attorney (Exhibit D).
THE TRUSTEE
First Union Trust Company, National Association, a national banking
association, is the sole trustee of the Trust. The trustee's principal offices
are located at One Rodney Square, Suite 102, 920 King Street, Wilmington,
Delaware 19801, telephone number (302) 888-7528.
The trustee is unaffiliated with Campbell & Company or the selling agents.
The trustee's duties and liabilities with respect to the offering of the units
and the administration of the Trust are limited to its express obligations under
the Declaration of Trust. See "Exhibit A -- Amended and Restated Declaration of
Trust."
The rights and duties of the trustee, Campbell & Company and the
unitholders are governed by the provisions of the Delaware Business Trust Act
and by the Declaration of Trust. See "Exhibit A -- Amended and Restated
Declaration of Trust."
The trustee serves as the Trust's sole trustee in the State of Delaware.
The trustee will accept service of legal process on the Trust in the State of
Delaware and will make certain filings under the Delaware Business Trust Act.
The trustee does not owe any other duties to the Trust, Campbell & Company or
the unitholders. The trustee is permitted to resign upon at least sixty (60)
days' notice to the Trust, provided, that any such resignation will not be
effective until a successor trustee is appointed by Campbell & Company. The
Declaration of Trust provides that the trustee is compensated by the Trust, and
is indemnified by Campbell & Company against any expenses it incurs relating to
or arising out of the formation, operation or termination of the Trust or the
performance of its duties pursuant to the Declaration of Trust, except to the
extent that such expenses result from the gross negligence or willful misconduct
of the trustee. Campbell & Company has the discretion to replace the trustee.
Only Campbell & Company has signed the Registration Statement of which this
Prospectus is a part, and only the assets of the Trust and Campbell & Company
are subject to issuer liability under the federal securities laws for the
information contained in this Prospectus and under federal and state laws with
respect to the issuance and sale of the units. Under such laws, neither the
trustee, either in its capacity as trustee or in its individual capacity, nor
any director, officer or controlling person of the trustee is, or has any
liability as, the issuer or a director, officer or controlling person of the
issuer of the units. The trustee's liability in connection with the issuance and
sale of the units is limited solely to the express obligations of the trustee
set forth in the Declaration of Trust.
Under the Declaration of Trust, the trustee has delegated to Campbell &
Company the exclusive management and control of all aspects of
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the business of the Trust. The trustee will have no duty or liability to
supervise or monitor the performance of Campbell & Company, nor will the trustee
have any liability for the acts or omissions of Campbell & Company. In addition,
Campbell & Company has been designated as the "tax matters partner" of the Trust
for purposes of the Internal Revenue Code of 1986, as amended (the "Code"). The
unitholders have no voice in the operations of the Trust, other than certain
limited voting rights as set forth in the Declaration of Trust. In the course of
its management, Campbell & Company may, in its sole and absolute discretion,
appoint an affiliate or affiliates of Campbell & Company as additional managing
owners (except where Campbell & Company has been notified by the unitholders
that it is to be replaced as the managing owner) and retain such persons,
including affiliates of Campbell & Company, as it deems necessary for the
efficient operation of the Trust.
Because the trustee has delegated substantially all of its authority over
the operation of the Trust to Campbell & Company, the trustee itself is not
registered in any capacity with the CFTC.
SHARING OF PROFITS AND LOSSES
TRUST ACCOUNTING
Each unitholder has a capital account. Initially, the unitholder's balance
equals the amount paid for the units. The unitholder's balance is then
proportionally adjusted monthly to reflect his portion of the Trust's gains or
losses for the month.
FEDERAL TAX ALLOCATIONS
At year-end, the Trust will determine the total taxable income or loss for
the year. Subject to the special allocation of net capital gain or loss to
redeeming unitholders, the taxable gain or loss is allocated to each unitholder
in proportion to his capital account and each unitholder is responsible for his
share of taxable income. See Article 8 of the Trust Agreement, and "Federal
Income Tax Aspects."
For net capital gain and loss, the gains and losses are first allocated to
each unitholder who redeemed units during the year. The remaining net capital
gain or loss is then allocated to each unitholder in proportion to his capital
account.
Each unitholder's tax basis in his units is increased by the taxable income
allocated to him and reduced by any distributions received and losses allocated
to him.
Upon the Trust's liquidation, each unitholder will receive his
proportionate share of the assets of the Trust.
DISPOSITIONS
A unitholder may transfer or assign his units in the Trust upon 30 days'
prior written notice to Campbell & Company and subject to approval by Campbell &
Company of the assignee. Campbell & Company will provide consent when it is
satisfied that the transfer complies with applicable laws, and further would not
result in the termination of the Trust for federal income tax purposes. An
assignee not admitted to the Trust as a unitholder will have only limited rights
to share the profits and capital of the Trust and a limited redemption right.
Assignees receive "carry-over" tax basis accounts and capital accounts from
their assignors, irrespective of the amount paid for the assigned units.
Campbell & Company does not intend to permit purchase transfers.
DISSOLUTION AND TERMINATION OF THE TRUST
The Trust will be terminated and dissolved upon the happening of the
earlier of:
1) the expiration of the Trust's stated term on December 31, 2030;
2) unitholders owning more than 50% of the outstanding units vote to
dissolve the Trust;
3) Campbell & Company withdraws as managing owner and no new managing owner
is appointed;
4) a decline in the aggregate net assets of the Trust to less than
$500,000;
5) the continued existence of the Trust becomes unlawful; or
6) the Trust is dissolved by operation of law.
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AMENDMENTS AND MEETINGS
The Trust Agreement may be amended by Campbell & Company if unitholders
owning more than 50% of the outstanding units concur. Campbell & Company may
make minor changes to the Trust Agreement without the approval of the
unitholders. These minor changes can be for clarifications of inaccuracies or
ambiguities, modifications in response to changes in tax code or regulations or
any other changes the managing owner deems advisable so long as they do not
change the basic investment policy or structure of the Trust.
Unitholders owning at least 10% of the outstanding units can call a meeting
of the Trust. At that meeting, the unitholders, provided that unitholders owning
a majority of the outstanding units concur, can vote to:
1) amend the Trust Agreement without the consent of Campbell & Company;
2) dissolve the Trust;
3) terminate contracts with Campbell & Company;
4) remove and replace Campbell & Company as managing owner; and
5) approve the sale of Trust assets.
INDEMNIFICATION
The Trust agrees to indemnify Campbell & Company, as managing owner, for
actions taken on behalf of the Trust, provided that Campbell & Company's conduct
was in the best interests of the Trust and the conduct was not the result of
negligence or misconduct. Indemnification by the Trust for alleged violation of
securities laws is only available if the following conditions are satisfied:
1) a successful adjudication on the merits of each count alleged has been
obtained, or
2) such claims have been dismissed with prejudice on the merits by a court
of competent jurisdiction; or
3) a court of competent jurisdiction approves a settlement of the claims
and finds indemnification of the settlement and related costs should be
made; and
4) in the case of 3), the court has been advised of the position of the SEC
and certain states in which the units were offered and sold as to
indemnification for the violations.
REPORTS TO UNITHOLDERS
The unitholders shall have access to and the right to copy the Trust's
books and records. A unitholder may obtain a list of all unitholders together
with the number of units owned by each unitholder, provided such request is not
for commercial purposes.
Campbell & Company will provide various reports and statements to the
unitholders including:
1) monthly, Campbell & Company will provide an unaudited income statement
and a statement of changes in net asset value of the prior month's
activities;
2) annually, Campbell & Company will provide audited financial statements
accompanied by a fiscal year-end summary of the monthly reports
described above;
3) annually, Campbell & Company will provide tax information necessary for
the preparation of the unitholders' annual federal income tax returns;
and
4) if the net asset value per unit as of the end of any business day
declines by 50% or more from either the prior year-end or the prior
month-end unit value, Campbell & Company will suspend trading
activities, notify all unitholders of the relevant facts within seven
business days and declare a special redemption period.
FEDERAL INCOME TAX ASPECTS
The following constitutes the opinion of Sidley & Austin and summarizes the
material federal income tax consequences to individual investors in the Trust.
THE TRUST'S PARTNERSHIP TAX STATUS
Because the Trust is a partnership for federal income tax purposes, the
Trust does not pay any federal income tax. Based on the expected income of the
Trust, the Trust will not be taxed as a "publicly traded partnership."
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TAXATION OF UNITHOLDERS ON PROFITS AND LOSSES OF THE TRUST
Each unitholder must pay tax on his share of the Trust's annual income and
gains, if any, even if the Trust does not make any cash distributions.
The Trust generally allocates the Trust's gains and losses equally to each
unit. However, a unitholder who redeems any units will be allocated his share of
the Trust's gains and losses in order that the amount of cash a unitholder
receives for a redeemed unit equals the unitholder's adjusted tax basis in the
redeemed unit less any offering or syndication expenses allocated to such units.
A unitholder's adjusted tax basis in a redeemed unit equals the amount
originally paid for the unit, increased by income or gains allocated to the unit
and decreased (but not below zero) by distributions, deductions or losses
allocated to the unit.
TRUST LOSSES BY UNITHOLDERS
A unitholder may deduct Trust losses only to the extent of his tax basis in
his units. Generally, a unitholder's tax basis is the amount paid for the units
reduced (but not below zero) by his share of any Trust distributions, losses and
expenses and increased by his share of the Trust's income and gains. However, a
unitholder subject to "at-risk" limitations (generally, non-corporate taxpayers
and closely-held corporations) can only deduct losses to the extent he is
"at-risk." The "at-risk" amount is similar to tax basis, except that it does not
include any amount borrowed on a non-recourse basis or from someone with an
interest in the Trust.
"PASSIVE-ACTIVITY LOSS RULES" AND THEIR EFFECT ON THE TREATMENT OF INCOME AND
LOSS
The trading activities of the Trust are not a "passive activity."
Accordingly, a unitholder can deduct Trust losses from taxable income. However,
a unitholder cannot offset losses from "passive activities" against Trust gains.
CASH DISTRIBUTIONS AND UNIT REDEMPTIONS
A unitholder who receives cash from the Trust, either through a
distribution or a partial redemption, will not pay tax on that cash until his
tax basis in the units is zero.
GAIN OR LOSS ON SECTION 1256 CONTRACTS AND NON-SECTION 1256 CONTRACTS
Section 1256 Contracts are futures and most options traded on U.S.
exchanges and certain foreign currency contracts. For tax purposes, Section 1256
Contracts that remain open at year-end are treated as if the position were
closed at year-end. The gain or loss on Section 1256 Contracts is characterized
as 60% long-term capital gain or loss and 40% short-term capital gain or loss
regardless of how long the position was open.
Non-Section 1256 Contracts include, among other things, certain foreign
currency transactions such as transactions when the amount paid or received is
in a foreign currency. Gain and loss from these Non-Section 1256 Contracts are
generally short-term capital gain or loss or ordinary income or loss.
TAX ON CAPITAL GAINS AND LOSSES
Long-term capital gains -- net gain on capital assets held more than one
year and 60% of the gain on Section 1256 Contracts -- are taxed at a maximum
rate of 20%. Short-term capital gains -- net gain on capital assets held less
than one year and 40% of the gain on Section 1256 Contracts -- are subject to
tax at the same rates as ordinary income, with a maximum rate of 39.6% for
individuals.
Individual taxpayers can deduct capital losses only to the extent of their
capital gains plus $3,000. Accordingly, the Trust could suffer significant
losses and a unitholder could still be required to pay taxes on his share of the
Trust's interest income.
An individual taxpayer can carry back net capital losses on Section 1256
Contracts three years to offset earlier gains on Section 1256 Contracts. To the
extent the taxpayer cannot offset past Section 1256 Contract gains, he can carry
forward such losses indefinitely as losses on Section 1256 Contracts.
INTEREST INCOME
Interest received by the Trust is taxed as ordinary income. Net capital
losses can offset ordinary income only to the extent of $3,000 per year. See "--
Tax on Capital Gains and Losses."
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LIMITED DEDUCTION FOR CERTAIN EXPENSES
Campbell & Company does not consider the brokerage and performance fees, as
well as other ordinary expenses of the Trust, to be investment advisory
expenses. Accordingly, the Trust treats these expenses as ordinary business
deductions not subject to the material deductibility limitations which apply to
investment advisory expenses. The IRS could contend otherwise and to the extent
the IRS recharacterizes these expenses a unitholder would have the amount of the
ordinary expenses allocated to him reduced accordingly.
SYNDICATION FEES
Neither the Trust nor any unitholder is entitled to any deduction for
syndication expenses in the year they reduce net asset value, nor can these
expenses be amortized by the Trust or any unitholder even though the payment of
such expenses reduces net asset value.
The IRS could take the position that a portion of the brokerage fee paid by
the Trust to Campbell & Company constitutes syndication expenses which reduce a
unitholder's net asset value, but do not reduce a unitholder's adjusted tax
basis.
INVESTMENT INTEREST DEDUCTIBILITY LIMITATIONS
Individual taxpayers can deduct "investment interest" -- interest on
indebtedness allocable to property held for investment -- only to the extent
that it does not exceed net investment income. Net investment income does not
include adjusted net capital gain taxed at the lower 20% rate.
UNRELATED BUSINESS TAXABLE INCOME
Tax-exempt unitholders will not be required to pay tax on their share of
income or gains of the Trust, provided that such unitholders do not purchase
units with borrowed funds.
IRS AUDITS OF THE TRUST AND ITS UNITHOLDERS
The IRS audits Trust-related items at the Trust level rather than at the
unitholder level. Campbell & Company acts as "tax matters partner" with the
authority to determine the Trust's responses to an audit. If an audit results in
an adjustment, all unitholders may be required to pay additional taxes, interest
and penalties.
STATE AND OTHER TAXES
In addition to the federal income tax consequences described above, the
Trust and the unitholders may be subject to various state and other taxes.
TAXATION OF FOREIGN UNITHOLDERS
Subject to the discussion below regarding derivative transactions, a
non-resident alien individual not otherwise engaged in a United States trade or
business should not be deemed to be engaged in a United States trade or business
solely by virtue of an investment as a unitholder in the Trust. Capital gains
earned by the Trust and allocated to such a foreign unitholder will, as a
general matter, not be subject to United States federal income tax or
withholding, but may be subject to tax in the jurisdiction in which the foreign
unitholder is resident. Interest income earned by the Trust will, as a general
rule, likewise not be subject to United States federal income tax or
withholding, but may be subject to tax in other jurisdictions to which the
foreign unitholder is connected.
With respect to derivative transactions such as energy or interest rate
swaps or forwards, based on current law it is uncertain whether entering into
derivative transactions may cause the Trust, and therefore any foreign
unitholders, to be treated as engaged in a trade or business within the United
States. However, the Treasury has issued proposed regulations which, if
finalized in their current form, would provide that foreign unitholders should
not be deemed to be engaged in a United States trade or business solely by
virtue of an investment as a unitholder in the Trust even if the Trust enters
into derivative transactions. These regulations are proposed to be effective for
taxable years beginning 30 days after the date final regulations are published
in the Federal Register. The Trust may, however, elect to apply the final
regulations retroactively once they are finalized.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS BEFORE
DECIDING WHETHER TO INVEST.
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INVESTMENT BY ERISA ACCOUNTS
GENERAL
This section sets forth certain consequences under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and the Code, which a
fiduciary of an "employee benefit plan" as defined in and subject to ERISA or of
a "plan" as defined in and subject to Section 4975 of the Code who has
investment discretion should consider before deciding to invest the plan's
assets in the Trust (such "employee benefit plans" and "plans" being referred to
herein as "Plans," and such fiduciaries with investment discretion being
referred to herein as "Plan Fiduciaries").
SPECIAL INVESTMENT CONSIDERATION
Each Plan Fiduciary must give appropriate consideration to the facts and
circumstances that are relevant to an investment in the Trust, including the
role that an investment in the Trust plays or would play in the Plan's overall
investment portfolio. Each Plan Fiduciary, before deciding to invest in the
Trust, must be satisfied that such investment is prudent for the Plan, that the
investments of the Plan, including in the Trust, are diversified so as to
minimize the risk of large losses and that an investment in the Trust complies
with the terms of the Plan and related trust.
THE TRUST SHOULD NOT BE DEEMED TO HOLD "PLAN ASSETS"
A regulation issued under ERISA (the "ERISA Regulation") contains rules for
determining when an investment by a Plan in an equity interest of an entity will
result in the underlying assets of the entity being assets of the Plan for
purposes of ERISA and Section 4975 of the Code (i.e., "plan assets"). Those
rules provide in pertinent part that assets of an entity will not be plan assets
of a Plan which purchases an equity interest in the entity if the equity
interest purchased is a "publicly-offered security" (the "Publicly-Offered
Security Exception"). If the underlying assets of an entity are considered to be
assets of any Plan for purposes of ERISA or Section 4975 of the Code, the
operations of such entity would be subject to and, in some cases, limited by,
the provisions of ERISA and Section 4975 of the Code.
The Publicly-Offered Security Exception applies if the equity is a security
that is:
1) "freely transferable" (determined based on the applicable facts and
circumstances);
2) part of a class of securities that is "widely held" (meaning that the
class of securities is owned by 100 or more investors independent of the
issuer and of each other); and
3) either (a) part of a class of securities registered under Section 12(b)
or 12(g) of the Securities Exchange Act of 1934, or (b) sold to the Plan
as part of a public offering pursuant to an effective registration
statement under the Securities Act of 1933 and the class of which such
security is a part is registered under the Securities Exchange Act of
1934 within 120 days (or such later time as may be allowed by the SEC)
after the end of the fiscal year of the issuer in which the offering of
such security occurred.
It appears that all of the conditions described above will be satisfied
with respect to the units and, therefore, the units should constitute
"publicly-offered securities" and the underlying assets of the Trust should not
be considered to constitute assets of any Plan which purchases units.
INELIGIBLE PURCHASERS
In general, units may not be purchased with the assets of a Plan if
Campbell & Company, the clearing broker, any foreign exchange dealer, any of the
selling agents, any of their respective affiliates or any of their respective
employees either:
1) has investment discretion with respect to the investment of such plan
assets;
2) has authority or responsibility to give or regularly gives investment
advice with respect to such plan assets, for a fee, and pursuant to an
agreement or understanding that such advice will serve as a primary
basis for investment decisions with respect to such plan assets and that
such advice will be based on the particular investment needs of the
Plan; or
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<PAGE> 41
3) is an employer maintaining or contributing to such Plan.
None of Campbell & Company, the clearing broker, the foreign exchange
dealers or the selling agents make any representation that this investment meets
the relevant legal requirements with respect to investments by any particular
plan or that this investment is appropriate for any particular plan. The person
with investment discretion should consult with his or her attorney and financial
advisers as to the propriety of an investment in the trust in light of the
circumstances of the particular plan.
PLAN OF DISTRIBUTION
SUBSCRIPTION PROCEDURE
The Trust will offer the units to the public for an initial offering period
ending on or before March 31, 2001, subject to extension until September 30,
2001 at the discretion of Campbell & Company. During the initial offering
period, the units will be offered at a price of $1,000 per unit and all monies
received will be placed in an interest-bearing escrow account. Once Campbell &
Company has determined that $8,000,000 of the units have been subscribed for, it
will set the initial closing date, on which date the proceeds held in escrow
will be invested in the Trust. Escrow balances will be credited with interest at
the typical bank money market rate. If $8,000,000 of the units have not been
subscribed for during the initial offering period, Campbell & Company will
instruct the escrow agent to return 100% of the subscription amounts, plus
interest, to the persons who attempted to subscribe for units.
After the initial offering period, the Trust will offer the units to the
public during the continuing offering at the net asset value per unit as of each
month-end closing date on which subscriptions are accepted. Investors must
submit subscriptions at least five (5) business days prior to the applicable
month-end closing date and they will be accepted once payments are received and
cleared. Investors may rescind their subscription agreement within five (5)
business days of receipt of the Trust's prospectus. Campbell & Company may
suspend, limit or terminate the continuing offering period at any time.
The units are offered on a "best efforts" basis without any firm
underwriting commitment through selling agents which are registered broker-
dealers and members of the National Association of Securities Dealers, Inc.
Units are offered until such time as Campbell & Company terminates the
continuing offering. Subscriptions received during the continuing offering
period can be accepted on a monthly basis. Subscribers whose subscriptions are
canceled or rejected will be notified of when their subscriptions, plus
interest, will be returned, which shall be promptly after rejection. Subscribers
whose subscriptions are accepted will be issued fractional units, calculated to
three decimal places, in an amount which will include any interest earned on
their subscriptions.
The Trust's escrow account is maintained at Mercantile-Safe Deposit & Trust
Company, Baltimore, Maryland (the "Escrow Agent"). All subscription funds are
required to be promptly transmitted to the Escrow Agent. Subscriptions must be
accepted or rejected by Campbell & Company within five business days of receipt,
and the settlement date for the deposit of subscription funds in escrow must be
within five business days of acceptance. No fees or costs will be assessed on
any subscription while held in escrow, irrespective of whether the subscription
is accepted or subscription funds returned. The Escrow Agent will invest the
subscription funds in short-term United States Treasury bills or comparable
authorized instruments while held in escrow.
Subscriptions from customers of any of the selling agents may also be made
by authorizing such selling agent to debit the subscriber's customer securities
account at the selling agent. Promptly after debiting the customer's securities
account, the selling agent shall send payment to the Escrow Agent as described
above, in the amount of the subscription so debited.
Campbell & Company will purchase units for investment purposes only and not
with a view toward resale.
An investor who meets the suitability standards given below must complete,
execute and deliver to the relevant selling agent a copy of the Subscription
Agreement and Power of Attorney attached as Exhibit D. A subscriber can pay
either by a check made payable to "Campbell Alternative Asset Trust, Escrow
Account" or by authorizing his selling agent to debit his customer
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<PAGE> 42
securities account. Campbell & Company will then accept or reject the
subscription within five business days of receipt of the subscription. All
subscriptions are irrevocable once subscription payments are deposited in
escrow.
REPRESENTATIONS AND WARRANTIES OF INVESTORS IN THE SUBSCRIPTION AGREEMENT
Investors are required to make representations and warranties in the
Subscription Agreement. The Trust's primary intention in requiring the investors
to make representations and warranties is to ensure that only persons for whom
an investment is suitable invest in the Trust. The Trust is most likely to
assert representations and warranties if it has reason to believe that the
related investor may not be qualified to invest or remain invested in the Trust.
The representations and warranties made by investors in the Subscription
Agreement may be summarized as relating to:
1) eligibility of investors to invest in the Trust, including legal age,
net worth and annual income;
2) representative capacity of investors;
3) information provided by investors;
4) information received by investors; and
5) investments made on behalf of employee benefit plans.
See the Subscription Agreement and Power of Attorney attached as Exhibit D
for further detail.
MINIMUM INVESTMENT
The minimum investment is $10,000 except for trustees or custodians of
eligible employee benefit plans and individual retirement accounts, for which
the minimum investment is $5,000 (these minimums are reduced to $5,000 and
$2,000, respectively, for registered representatives of NASD registered
broker-dealers). Unitholders may increase their investment in the Trust with an
investment of $1,000 or more. Prospective investors must be aware that the price
per unit during the continuing offering period will vary depending upon the
month-end net asset value per unit. Under the federal securities laws and those
of certain states, investors may be subject to special minimum purchase and/or
investor suitability requirements.
INVESTOR SUITABILITY
There can be no assurance that the Trust will achieve its objectives or
avoid substantial losses. An investment in the Trust is suitable only for a
limited segment of the risk portion of an investor's portfolio and no one should
invest more in the Trust than he can afford to lose. The subscriber's selling
agent is responsible for determining if the units are a suitable investment for
the investor.
At an absolute minimum, investors must have (i) a net worth of at least
$150,000 (exclusive of home, furnishings and automobiles) or (ii) an annual
gross income of at least $45,000 and a net worth (as calculated above) of at
least $45,000. No one may invest more than 10% of his net worth (as calculated
above) in the Trust.
These standards (and the additional standards applicable to residents of
certain states as set forth under "Exhibit C -- Subscription Requirements"
herein) are regulatory minimums only. Qualification under such standards does
not necessarily imply that an investment in the trust is suitable for a
particular investor. Prospective subscribers should review Exhibit C and
consider the highly speculative and illiquid nature of an investment in the
Trust as well as the high risk and highly leveraged nature of the futures,
forward and related markets in determining whether an investment in the Trust is
consistent with their overall portfolio objectives.
THE SELLING AGENTS
The selling agents -- the broker-dealers who offer the units -- offer the
units on a best efforts basis without any firm underwriting commitment. The
selling agents for the Trust currently include Campbell Financial Services, Inc.
and PaineWebber. The Trust and Campbell & Company may retain additional selling
agents. The selling agents, including the foreign dealers who may elect to
participate in the offering, are bound by their respective Selling Agreements
with the Trust.
Selling agents receive no commission from the proceeds of the offering.
Instead, they receive from Campbell & Company's brokerage fee 0.35% of the
Trust's net assets per annum for ongoing legal, administrative, client reporting
and other services.
The aforesaid 0.35% brokerage fee will be paid to the selling agents (or
their assignees)
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<PAGE> 43
which are registered as "futures commission merchants" or "introducing brokers"
(or obtain such registration prior to commencement of such ongoing payments) in
return for the services described above. Such selling agents may pay all or a
portion of such ongoing payments to account executives who are also registered
with the CFTC and have passed all applicable proficiency requirements.
Selling agents and registered representatives who are not registered with
the CFTC as described above may still receive the 0.35% brokerage fee, paid on
the same basis as described above, provided that the maximum compensation to be
paid to underwriters and related persons regardless of the source of payment,
including but not limited to wholesaling salaries, bonus or sales incentives,
sales commissions, expense reimbursements, and continuing compensation to
non-duly registered selling agents will not exceed 10% of the initial gross
proceeds of such units' initial sales price, plus an additional 0.5% for bona
fide due diligence fees.
In the future, registered broker-dealers may be engaged by the Trust to
conduct wholesaling activities. As compensation for those activities, they may
receive a percentage of Campbell & Company's management fee; the maximum
aggregate amount of such compensation with respect to the maximum offering
proceeds is estimated at $25,000, or .05% of the proceeds. Certain employees of
Campbell & Company will provide wholesaling services as well and will receive
compensation therefor. The maximum aggregate amount of such compensation with
respect to the maximum offering proceeds, including any expense reimbursements,
is estimated at $1,000,000, or 2% of the proceeds.
Certain of the offering expenses paid by Campbell & Company might be deemed
to constitute costs properly allocated to the accounts of the selling agents.
Such costs will, for example, cover the expenses of producing a selling
brochure, organizing seminars to promote the Trust and related travel expenses.
Such costs are estimated at approximately $50,000 per annum, and in no event
shall the aggregate amount of (i) such costs and (ii) the selling agent
administrative fee exceed 10% of the gross proceeds of the offering of the
units, plus an additional 0.5% of such proceeds in respect of reimbursement of
bona fide due diligence expenses.
Other than as described above, Campbell & Company will pay no person any
commissions or other fees in connection with the solicitation of purchases for
units.
Campbell & Company will pay the Trust's offering expenses related to the
continuing offering and the Trust will reimburse Campbell & Company up to a
maximum of 0.9% of net assets per annum. Organization and offering expenses
related to the initial offering are being reimbursed in the same manner. See
"Charges to the Trust -- Organization and Offering Expenses."
In the Selling Agreement with each selling agent, Campbell & Company has
agreed to indemnify the selling agents against certain liabilities that the
selling agents may incur in connection with the offering and sale of the units,
including liabilities under the Securities Act of 1933, as amended.
Campbell & Company will not close the initial offering period unless it has
received acceptable subscriptions for at least 8,000 units ($8,000,000). After
the initial offering period, there is no minimum number of units which must be
sold as of the end of any month for any units then to be sold.
LEGAL MATTERS
Sidley & Austin, New York, New York and Chicago, Illinois will advise
Campbell & Company on all legal matters in connection with the units. In doing
so, Sidley & Austin will rely as to matters of Delaware law upon the opinion of
Richards, Layton & Finger, Wilmington, Delaware. In the future, Sidley & Austin
may advise Campbell & Company with respect to its responsibilities as managing
owner and trading advisor of, and with respect to, matters relating to the
Trust. The statements under "Federal Income Tax Aspects" have been reviewed by
Sidley & Austin. Sidley & Austin has not represented, nor will it represent,
either the Trust or the unitholders in matters relating to the Trust.
EXPERTS
The statement of financial condition of the Trust as of May 10, 2000 and
the balance sheet of Campbell & Company as of December 31, 1999,
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<PAGE> 44
included in this prospectus, have been audited by Arthur F. Bell, Jr. &
Associates, L.L.C., independent auditors, as stated in their reports appearing
herein. Such audited financial statements have been so included in reliance upon
such reports given upon the authority of that firm as experts in auditing and
accounting.
The statement of financial condition of the Trust as of September 30, 2000
and the balance sheet of Campbell & Company as of September 30, 2000 are
unaudited. In the opinion of Campbell & Company, such unaudited statements
reflect all adjustments which were of a normal and recurring nature, necessary
for a fair presentation of financial position as of September 30, 2000.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
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<PAGE> 45
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CAMPBELL ALTERNATIVE ASSET TRUST
INDEPENDENT AUDITOR'S REPORT................................ 38
STATEMENTS OF FINANCIAL CONDITION
September 30, 2000 (Unaudited) and May 10, 2000
(Audited)................................................. 39
NOTES TO STATEMENT OF FINANCIAL CONDITION -- May 10, 2000
(Audited)................................................. 40
NOTE TO STATEMENT OF FINANCIAL CONDITION -- September 30,
2000 (Unaudited).......................................... 42
CAMPBELL & COMPANY, INC.
BALANCE SHEET
September 30, 2000 (Unaudited)............................ 43
NOTES TO BALANCE SHEET (UNAUDITED).......................... 44
INDEPENDENT AUDITOR'S REPORT................................ 48
BALANCE SHEET
December 31, 1999......................................... 49
NOTES TO BALANCE SHEET...................................... 50
</TABLE>
Schedules are omitted for the reason that they are not required or are not
applicable or that equivalent information has been included in the financial
statements or notes thereto.
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<PAGE> 46
INDEPENDENT AUDITOR'S REPORT
To the Unitholder
Campbell Alternative Asset Trust
We have audited the accompanying statement of financial condition of
Campbell Alternative Asset Trust as of May 10, 2000. This financial statement is
the responsibility of the Trust's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of financial condition is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of financial condition.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall statement of
financial condition presentation. We believe that our audit of the statement of
financial condition provides a reasonable basis for our opinion.
In our opinion, the statement of financial condition referred to above
presents fairly, in all material respects, the financial position of Campbell
Alternative Asset Trust as of May 10, 2000, in conformity with generally
accepted accounting principles.
/s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Hunt Valley, Maryland
May 10, 2000
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<PAGE> 47
CAMPBELL ALTERNATIVE ASSET TRUST
STATEMENTS OF FINANCIAL CONDITION
September 30, 2000 (Unaudited) and May 10, 2000 (Audited)
------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, MAY 10,
2000 2000
------ ------
<S> <C> <C>
ASSETS
Cash...................................................... $2,000 $2,000
====== ======
UNITHOLDER'S CAPITAL (2 units outstanding).................. $2,000 $2,000
====== ======
</TABLE>
See accompanying notes.
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<PAGE> 48
CAMPBELL ALTERNATIVE ASSET TRUST
NOTES TO STATEMENT OF FINANCIAL CONDITION
MAY 10, 2000 (AUDITED)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Trust
Campbell Alternative Asset Trust (the Trust) is a Delaware business
trust organized on May 3, 2000, which has not yet commenced
operations. The capital contributions to the Trust as of May 10,
2000, total $2,000 and were contributed by the Trust's managing
owner, Campbell & Company, Inc.
The Trust intends to engage in the speculative trading of futures
contracts, forward contracts and swap agreements.
B. Proposed Public Offering of Units of Beneficial Interest
The Trust anticipates filing a registration statement with the
Securities and Exchange Commission offering to sell up to
$50,000,000 of units of beneficial interest. Units will be sold at
$1,000 per unit during the initial offering period and at the net
asset value per unit during the continuing offering period.
C. Regulation
As a registrant with the Securities and Exchange Commission, the
Trust will be 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 will be 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 will
execute transactions. Additionally, the Trust will be subject to the
requirements of futures commission merchants (brokers) and interbank
market makers through which the Trust will trade.
D. Method of Reporting
The Trust's statement of financial condition is presented in
accordance with generally accepted accounting principles.
E. Income Taxes
The Trust will prepare calendar year U.S. and state information tax
returns and report to the unitholders their allocable shares of the
Trust's income, expenses and trading gains or losses.
F. Organizational and Initial Offering Costs
Organization and initial offering costs (exclusive of the selling
firm administrative fee), estimated to total approximately $450,000,
will be advanced by the managing owner and charged to the Trust at
an annual rate of 0.9% of the Trust's month-end net asset value (as
defined in the Amended and Restated Declaration of Trust and Trust
Agreement) until such amounts are fully reimbursed. The Trust will
only be liable for payment of organization and initial offering
costs on a monthly basis. If the Trust terminates prior to
completion of payment of such amounts to the managing owner, the
managing owner will not be entitled to any additional payments, and
the Trust will have no further obligation to the managing owner.
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<PAGE> 49
CAMPBELL ALTERNATIVE ASSET TRUST
NOTES TO STATEMENT OF FINANCIAL CONDITION -- (CONTINUED)
MAY 10, 2000 (AUDITED)
NOTE 2. MANAGING OWNER AND TRADING ADVISOR
The managing owner of the Trust is Campbell & Company, Inc., which
conducts and manages the business of the Trust. Although the managing
owner will initially serve as the sole trading advisor of the Trust, it
may, in the future, retain other trading advisors to manage a portion of
the assets of the Trust. The Amended and Restated Declaration of Trust
and Trust Agreement requires the managing owner to maintain a capital
account equal to 1% of the total capital accounts of the Trust.
Additionally, the managing owner 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 managing owner will be paid a brokerage fee of up to 3.5% per annum
of the Trust's average month-end net asset value, a portion (up to .65%)
of which will be used to compensate the clearing broker for execution
and clearing costs and a portion (.35%) of which will be used to
compensate selling agents (the "selling firm administrative fee") for
ongoing administrative services to the unitholders. The managing owner
will retain the remainder (up to 2.5%) of the brokerage fee as a
management fee (2% for providing advisory services and .5% for acting as
managing owner).
The managing owner will also be 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.
NOTE 3. TRUSTEE
The trustee of the Trust is First Union Trust Company, National
Association, a national banking association. The trustee has delegated
to the managing owner the duty and authority to manage the business and
affairs of the Trust and has only nominal duties and liabilities with
respect to the Trust.
NOTE 4. OPERATING EXPENSES
Operating expenses of the Trust are restricted by the Amended and
Restated Declaration of Trust and Trust Agreement to 0.4% per annum of
the average month-end net asset value of the Trust.
NOTE 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Trust will be made by subscription agreement, subject
to acceptance by the managing owner.
The Trust is not required to make distributions, but may do so at the
sole discretion of the managing owner. A unitholder may request and
receive redemption of units owned, subject to restrictions in the
Amended and Restated Declaration of Trust and Trust Agreement.
-41-
<PAGE> 50
CAMPBELL ALTERNATIVE ASSET TRUST
NOTE TO STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 2000 (UNAUDITED)
NOTE 1. UNAUDITED STATEMENT OF FINANCIAL CONDITION
The statement of financial condition as of September 30, 2000 is
unaudited and does not include all disclosures required by generally
accepted accounting principles. Such financial statement should be read
in conjunction with the Trust's audited statement of financial condition
as of May 10, 2000, included in the preceding pages. In the opinion of
management, the statement of financial condition reflects all
adjustments, which were of a normal and recurring nature, necessary for
a fair presentation of financial position as of September 30, 2000.
-42-
<PAGE> 51
CAMPBELL & COMPANY, INC.
BALANCE SHEET
SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents.............................. $12,486,262
Deposit with foreign exchange dealer................... 3,090,591
Accounts receivable
Advisory and performance fees........................ 3,121,514
Receivable from Campbell Strategic Allocation Fund,
L.P................................................. 2,052,271
Other receivables...................................... 137,284
-----------
Total current assets.............................. 20,887,922
-----------
Property and equipment
Furniture and office equipment......................... 2,691,197
Leasehold improvements................................. 208,137
-----------
2,899,334
Less accumulated depreciation and amortization......... (1,793,138)
-----------
Total property and equipment...................... 1,106,196
-----------
Other assets
Cash surrender value of life insurance, net of policy
loans of $181,925..................................... 189,450
Investments in commodity pools......................... 5,812,837
Other.................................................. 7,339,673
-----------
Total assets...................................... $35,336,078
===========
LIABILITIES
Current liabilities
Accounts payable and accrued expenses.................. $7,552,176
Subordinated debt......................................... 6,500,000
-----------
Total liabilities................................. 14,052,176
-----------
STOCKHOLDERS' EQUITY
Capital stock
Class A voting, no par, $100 stated value; 2,500 shares
authorized; 105 shares outstanding.................... 10,500
Additional paid-in capital............................. 46,668
Retained earnings...................................... 21,226,734
-----------
Total stockholders' equity........................ 21,283,902
-----------
Total liabilities and stockholders' equity........ $35,336,078
===========
</TABLE>
THE INVESTOR WILL NOT RECEIVE ANY INTEREST IN THIS COMPANY.
See accompanying notes.
-43-
<PAGE> 52
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET
(UNAUDITED)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General
Campbell and Company, Inc. (the Company) is incorporated in Maryland
and earns fees as a Commodity Trading Advisor registered with and
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. It is also
subject to the rules of the National Futures Association, an
industry self-regulatory organization.
The Company's balance sheet is presented in accordance with
generally accepted accounting principles. The preparation of the
balance sheet in conformity with generally accepted accounting
principles 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
balance sheet. Actual results could differ from those estimates, and
such differences may be material to the balance sheet.
B. Cash and Cash Equivalents
Cash and cash equivalents consist of cash and money market
investments readily convertible into cash. The Company maintains its
cash and cash equivalents with primarily one financial institution.
At times, the balance on deposit may be in excess of available
federal deposit insurance.
C. Revenue Recognition
Advisory fees accrue monthly based on a percentage of assets under
management. Performance fees may be earned by achieving defined
performance objectives. Performance fees are accrued when the
conditions of the applicable performance fee agreements are
satisfied.
D. Property and Equipment
Property and equipment are stated at cost. Depreciation and
amortization is provided for over the estimated useful lives of the
assets using straight-line and accelerated methods. Such lives range
from 3 to 39 years.
E. Investments in Commodity Pools
Investments in commodity pools are carried at their reported net
asset values at the balance sheet date.
F. Income Taxes
The Company has elected S corporation status under the Internal
Revenue Code, pursuant to which the Company does not pay U.S. or
Maryland income taxes. The Company is subject to state income taxes
in certain states in which it conducts business and adequate
provision for such is provided for in the balance sheet. The
Company's taxable income is taxable to the stockholders on an
individual basis.
NOTE 2. DEPOSITS WITH FOREIGN EXCHANGE DEALER
The Company deposits assets with a foreign exchange dealer. In the event
of the foreign exchange dealer's insolvency, recovery of the Company's
assets on deposit may be limited.
-44-
<PAGE> 53
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
(UNAUDITED)
NOTE 3. INVESTMENTS IN COMMODITY POOLS
Investments in commodity pools consist of the following as of September
30, 2000:
<TABLE>
<S> <C>
Campbell Strategic Allocation Fund, L.P. $5,512,947
Campbell Financial Futures Fund Limited Partnership 271,800
The Campbell Fund Trust 28,090
----------
Total $5,812,837
==========
</TABLE>
In addition to its investments in these commodity pools, the Company has
general partner or managing operator responsibilities with regards to
the following:
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
The Company is the general partner and trading advisor of Campbell
Strategic Allocation Fund, L.P. (Strategic). As general partner, the
Company receives from Strategic a monthly brokerage fee and quarterly
performance fee. Such fees represented approximately 38% of the
Company's revenues for the nine months ended September 30, 2000.
Included in advisory and performance fees receivable at September 30,
2000, is approximately $1,325,464 due from Strategic for such fees.
Summarized financial information with respect to Strategic as of
September 30, 2000, is as follows:
<TABLE>
<S> <C>
Balance Sheet Data
Assets $548,842,916
Liabilities (8,825,271)
------------
Net Asset Value $540,017,645
============
</TABLE>
The Company has committed to maintaining an investment in Strategic
equal to at least 1% of the net aggregate capital contributions of all
partners. The Company, as general partner, has contributed capital of
$4,547,000 as of September 30, 2000 to Strategic. The Company is further
bound by Strategic's Amended Agreement of Limited Partnership to
maintain net worth equal to at least 5% of the capital contributed to
all the limited partnerships for which the Company acts as general
partner. The minimum net worth shall in no case be less than $50,000 nor
shall net worth in excess of $1,000,000 be required.
As general partner, the Company incurs costs in connection with
Strategic's initial and continuous offerings. The Company reflects a
receivable of $284,986 as of September 30, 2000 from Strategic for
offering costs due to be reimbursed. This amount is included in
Receivable from Campbell Strategic Allocation Fund, L.P. in the balance
sheet. The remaining unreimbursed offering costs of $4,589,090 as of
September 30, 2000 are included in Other assets in the balance sheet.
This amount is carried on the Company's books as an asset, because of
the probable future economic benefit to be obtained from the eventual
receipt from Strategic of these reimbursements, even though Strategic is
not liable for this amount at the current time. The Company recognizes
the newly recalculated amount due from Strategic each month as a
receivable, which reduces the balance remaining as an Other asset. The
Company analyzes the value of the remaining Other asset on its balance
sheet on a quarterly basis to ensure that the carrying value is an
accurate estimate of what the Company can expect to receive over time,
and expenses any excess value on its books.
-45-
<PAGE> 54
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
(UNAUDITED)
NOTE 3. INVESTMENTS IN COMMODITY POOLS -- (CONTINUED)
CAMPBELL STRATEGIC ALLOCATION FUND -- (CONTINUED)
The Company also pays, up-front, a 4% commission to selling agents for
Strategic. The Company is then reimbursed by Strategic for this cost,
over twelve months, through a brokerage fee which is based on the
monthly net asset value of Strategic. As of September 30, 2000,
$4,471,945 in selling agent commissions is subject to future
reimbursement, of which $1,767,285 is included in Receivable from
Campbell Strategic Allocation Fund, L.P. and $2,704,660 is included in
Other assets in the balance sheet.
In the event Strategic terminates prior to the completion of any
reimbursement of the aforementioned costs, the Company will not be
entitled to any additional reimbursement from Strategic.
CAMPBELL FINANCIAL FUTURES FUND LIMITED PARTNERSHIP
The Company also acts as co-general partner in Campbell Financial
Futures Fund Limited Partnership (Financial Futures). The net asset
value of Financial Futures as of September 30, 2000 totaled
$11,084,349.
THE CAMPBELL FUND TRUST
The Company is the managing operator of The Campbell Fund Trust (the
Trust). The Trustee of the Trust has delegated to the managing operator
all of the power and authority to manage the business affairs of the
Trust. The net asset value of the Trust as of September 30, 2000
totaled $27,439,371.
NOTE 4. TRADING ACTIVITIES AND RELATED RISKS
The commodity pools for which the Company is either the sole general
partner, co-general partner or managing operator engage in the
speculative trading of U.S. and foreign futures contracts and forward
contracts (collectively, "derivatives"). These derivatives include both
financial and non-financial contracts held as part of a diversified
trading program. The commodity pools are 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 broker's
proprietary activities. A customer's 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 broker's
segregation requirements. In the event of a broker's insolvency,
recovery may be limited to a pro rata share of segregated funds
available. It is possible that the recovered amount could be less than
total cash and other property deposited. The commodity pools also
trade forward contracts in unregulated markets between principals and
assume the risk of loss from counterparty nonperformance.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the commodity pools and the Company, as
general partner or managing operator, are exposed to a
-46-
<PAGE> 55
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
(UNAUDITED)
NOTE 4. TRADING ACTIVITIES AND RELATED RISKS -- (CONTINUED)
market risk equal to the value of derivatives purchased and unlimited
liability on derivatives sold short.
The Company has established procedures to actively monitor the market
risk and minimize the credit risk of such commodity pools.
NOTE 5. SUBORDINATED DEBT
The Company entered into a working capital agreement with the
stockholders of the Company in February, 1997. The agreement provides
for the issuance of unsecured notes to the Company which allows for
their subordination to any future borrowings of the Company. Interest
on any notes issued in accordance with the agreement is payable
annually at a rate of 8.0%. Any unpaid principal balance is due on the
tenth anniversary date of the commencement date of each note, or if
sooner, five years after a stockholder (a noteholder) ceases to be in
the employ of the Company. At September 30, 2000, $6,500,000 was
outstanding under this agreement.
NOTE 6. LEASE OBLIGATION
The Company leases office facilities under an agreement which provides
for minimum base annual rentals plus a proportionate share of operating
expenses. The lease expires September 30, 2008. The Company has the
option to renew the lease for an additional 60 months. Minimum base
annual rentals through the original lease term are as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30
------------------------
<S> <C>
2001 $ 342,470
2002 349,382
2003 356,294
2004 363,371
2005 370,612
Thereafter 1,156,927
----------
Total base annual rentals $2,939,056
==========
</TABLE>
NOTE 7. PROFIT SHARING PLAN
The Company has established a qualified 401(k) savings and profit
sharing plan (the Plan) for the benefit of its employees. The Company
is the plan administrator and certain Company employees are trustees of
the Plan. Under terms of the Plan, employees may elect to defer a
portion of their compensation. The Company matches employee
contributions up to a maximum of 3.75% of the employees' compensation.
The Company may also make optional additional contributions to the
Plan.
-47-
<PAGE> 56
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
Campbell & Company, Inc.
We have audited the accompanying balance sheet of Campbell & Company, Inc.
as of December 31, 1999. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Campbell & Company, Inc. as of
December 31, 1999, in conformity with generally accepted accounting principles.
/s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Hunt Valley, Maryland
February 29, 2000
-48-
<PAGE> 57
CAMPBELL & COMPANY, INC.
BALANCE SHEET
December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $20,021,171
Accounts receivable
Advisory and performance fees 3,567,069
Receivable from Campbell Strategic Allocation Fund,
L.P. 1,879,671
Other receivables 203,012
-----------
Total current assets 25,670,923
-----------
Property and equipment
Furniture and office equipment 2,264,405
Leasehold improvements 134,363
-----------
2,398,768
Less accumulated depreciation and amortization (1,429,606)
-----------
Total property and equipment 969,162
-----------
Other assets
Cash surrender value of life insurance, net of policy
loans of $181,925 189,450
Investments in commodity pools 5,333,658
Other 7,483,469
-----------
Total assets $39,646,662
===========
LIABILITIES
Current liabilities
Accounts payable and accrued expenses $10,321,183
Subordinated debt 6,500,000
-----------
Total liabilities 16,821,183
-----------
STOCKHOLDERS' EQUITY
Capital stock
Class A voting, no par, $100 stated value; 2,500 shares
authorized; 105 shares issued and outstanding 10,500
Additional paid-in capital 46,668
Retained earning 22,768,311
-----------
Total stockholders' equity 22,825,479
-----------
Total liabilities and stockholders' equity $39,646,662
===========
</TABLE>
THE INVESTOR WILL NOT RECEIVE ANY INTEREST IN THIS COMPANY.
See accompanying notes.
-49-
<PAGE> 58
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General
Campbell and Company, Inc. (the Company) is incorporated in Maryland
and earns fees as a Commodity Trading Advisor registered with and
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. It is also
subject to the rules of the National Futures Association, an industry
self-regulatory organization.
The Company's balance sheet is presented in accordance with generally
accepted accounting principles. The preparation of the balance sheet
in conformity with generally accepted accounting principles 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 balance sheet. Actual
results could differ from those estimates, and such differences may
be material to the balance sheet.
B. Cash and Cash Equivalents
Cash and cash equivalents consist of cash and money market
investments readily convertible into cash. The Company maintains its
cash and cash equivalents with primarily one financial institution.
At times, the balance on deposit may be in excess of available
federal deposit insurance.
C. Revenue Recognition
Advisory and management fees accrue monthly based on a percentage of
assets under management. Performance fees may be earned by achieving
defined performance objectives. Performance fees are accrued when the
conditions of the applicable performance fee agreements are
satisfied.
D. Property and Equipment
Property and equipment are stated at cost. Depreciation and
amortization is provided for over the estimated useful lives of the
assets using straight-line and accelerated methods. Such lives range
from 3 to 39 years.
E. Investments in Commodity Pools
Investments in commodity pools are carried at their reported net
asset values at the balance sheet date.
F. Income Taxes
The Company has elected S corporation status under the Internal
Revenue Code, pursuant to which the Company does not pay U.S. or
Maryland income taxes. The Company is subject to state income taxes
in certain states in which it conducts business and adequate
provision for such is provided for in the balance sheet. The
Company's taxable income is taxable to the stockholders on an
individual basis.
-50-
<PAGE> 59
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 2. INVESTMENTS IN COMMODITY POOLS
Investments in commodity pools consist of the following as of December
31, 1999:
<TABLE>
<S> <C>
Campbell Strategic Allocation Fund, L.P. $5,040,488
Campbell Financial Futures Fund Limited Partnership 265,419
The Campbell Fund Trust 27,751
----------
Total $5,333,658
==========
</TABLE>
In addition to its investments in these commodity pools, the Company
has general partner or managing operator responsibilities with regards
to the following:
Campbell Strategic Allocation Fund, L.P.
The Company is the general partner and trading advisor of Campbell
Strategic Allocation Fund, L.P. (Strategic). As general partner, the
Company receives from Strategic a monthly brokerage fee and quarterly
performance fee. Such fees represented approximately 35% of the
Company's revenues for the year ended December 31, 1999. Included in
advisory and performance fees receivable at December 31, 1999, is
approximately $1,215,000 due from Strategic for such fees.
Summarized financial information with respect to Strategic as of and
for the year ended December 31, 1999 is as follows:
<TABLE>
<S> <C>
Balance Sheet Data
Assets $496,840,501
Liabilities (12,820,397)
------------
Net Asset Value $484,020,104
============
</TABLE>
The Company has committed to maintaining an investment in Strategic
equal to at least 1% of the net aggregate capital contributions of all
partners. The Company, as general partner, has contributed capital of
$4,017,000 as of December 31, 1999 to Strategic. The Company is
further bound by Strategic's Amended Agreement of Limited Partnership
to maintain net worth equal to at least 5% of the capital contributed
by all the limited partnerships for which the Company acts as general
partner. The minimum net worth shall in no case be less than $50,000
nor shall net worth in excess of $1,000,000 be required.
As general partner, the Company incurs costs in connection with
Strategic's initial and continuous offerings. The Company reflects a
receivable of $259,595 as of December 31, 1999 from Strategic for
offering costs due to be reimbursed. This amount is included in
Receivable from Campbell Strategic Allocation Fund, L.P. in the
balance sheet. The remaining unreimbursed offering costs of $4,364,671
as of December 31, 1999 are included in Other assets in the balance
sheet. This amount is carried on the Company's books as an asset,
because of the probable future economic benefit to be obtained from
the eventual receipt from Strategic of these reimbursements, even
though Strategic is not liable for this amount at the current time.
The Company recognizes the newly recalculated amount due from
Strategic each month as a receivable, which reduces the balance
remaining as an Other asset. The Company analyzes the value of the
remaining Other asset on its balance sheet on a quarterly basis to
ensure that the carrying value is an accurate estimate of what the
Company can expect to receive over time, and expenses any excess value
on its books.
-51-
<PAGE> 60
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 2. INVESTMENTS IN COMMODITY POOLS -- (CONTINUED)
The Company also pays, up-front, a 4% commission to selling agents for
Strategic. The Company is then reimbursed by Strategic for this cost,
over twelve months, through a brokerage fee which is based on the
monthly net asset value of Strategic. As of December 31, 1999,
$4,701,904 in selling agent commissions is subject to future
reimbursement, of which $1,620,076 is included in Receivable from
Campbell Strategic Allocation Fund, L.P. and $3,081,828 is included in
Other assets in the balance sheet.
In the event Strategic terminates prior to the completion of any
reimbursement of the aforementioned costs, the Company will not be
entitled to any additional reimbursement from Strategic.
Campbell Financial Futures Fund Limited Partnership
The Company also acts as co-general partner of Campbell Financial
Futures Fund Limited Partnership (Financial Futures). The net asset
value of Financial Futures as of December 31, 1999 totaled
$10,318,940.
The Campbell Fund Trust
The Company is the managing operator of The Campbell Fund Trust (the
Trust). The trustee of the Trust has delegated to the managing
operator all of the power and authority to manage the business affairs
of the Trust. The net asset value of the Trust as of December 31, 1999
and 1998 totaled $17,008,375.
NOTE 3. TRADING ACTIVITIES AND RELATED RISKS
The commodity pools for which the Company is either the sole general
partner, co-general partner or managing operator engage in the
speculative trading of U.S. and foreign futures contracts and forward
contracts (collectively, "derivatives"). These derivatives include
both financial and non-financial contracts held as part of a
diversified trading program. The commodity pools are 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 broker's
proprietary activities. A customer's 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 broker's
segregation requirements. In the event of a broker's insolvency,
recovery may be limited to a pro rata share of segregated funds
available. It is possible that the recovered amount could be less than
total cash and other property deposited. The commodity pools also
trade forward contracts in unregulated markets between principals and
assume the risk of loss from counterparty nonperformance.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the commodity pools and the Company, as
general partner or managing operator, are exposed to a market risk
equal to the value of derivatives purchased and unlimited liability on
derivatives sold short.
-52-
<PAGE> 61
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 3. TRADING ACTIVITIES AND RELATED RISKS -- (CONTINUED)
The Company has established procedures to actively monitor the market
risk and minimize the credit risk of such commodity pools.
NOTE 4. SUBORDINATED DEBT
The Company entered into a working capital agreement with the
stockholders of the Company in February, 1997. The agreement provides
for the issuance of unsecured notes to the Company which allows for
their subordination to any future borrowings of the Company. Interest
on any notes issued in accordance with the agreement is payable
annually at a rate of 8.0%. Any unpaid principal balance is due on the
tenth anniversary date of the commencement date of each note, or if
sooner, five years after a stockholder (a noteholder) ceases to be in
the employ of the Company. At December 31, 1999, $6,500,000 was
outstanding under this agreement.
NOTE 5. LEASE OBLIGATION
The Company leases office facilities under an agreement which provides
for minimum base annual rentals plus a proportionate share of
operating expenses. The lease expires September 30, 2008. The Company
has the option to renew the lease for an additional 60 months. Minimum
base annual rentals through the original lease term are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
-----------------------
<S> <C>
2000 $ 327,718
2001 344,190
2002 351,097
2003 358,061
2004 365,187
Thereafter 1,434,918
----------
Total base annual rentals $3,181,171
==========
</TABLE>
NOTE 6. PROFIT SHARING PLAN
The Company has established a qualified 401(k) savings and profit
sharing plan (the Plan) for the benefit of its employees. The Company
is the plan administrator and certain Company employees are trustees
of the Plan. Under terms of the Plan, employees may elect to defer a
portion of their compensation. The Company matches employee
contributions up to a maximum of 3.75% of the employees' compensation.
The Company may also make optional additional contributions to the
Plan.
NOTE 7. SUBSEQUENT EVENT
In February 2000, the Company made distributions to its stockholders
aggregating approximately $20,800,000. Additionally, the stockholders
made advances to the Company in accordance with the working capital
agreement aggregating approximately $8,500,000, to provide for
additional working capital.
-53-
<PAGE> 62
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
<PAGE> 63
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
CAMPBELL ALTERNATIVE ASSET TRUST
$50,000,000
UNITS OF BENEFICIAL INTEREST
----------------------------------------------
THIS IS A SPECULATIVE, LEVERAGED INVESTMENT WHICH INVOLVES THE RISK OF LOSS.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
SEE "THE RISKS YOU FACE" BEGINNING AT PAGE 5 IN PART ONE.
THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE
DOCUMENT AND A STATEMENT OF ADDITIONAL
INFORMATION. THESE PARTS ARE BOUND
TOGETHER, AND BOTH CONTAIN
IMPORTANT INFORMATION.
CAMPBELL & COMPANY, INC.
Managing Owner
January 2, 2001
----------------------------------------------
<PAGE> 64
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
<PAGE> 65
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Futures, Forward and Swap Markets....................... 1
Historical Perspective of Managed Futures................... 3
Investment Factors.......................................... 4
Value of Diversifying into Managed Futures.................. 6
Supplemental Performance Information........................ 21
Pro Forma Performance Information........................... 26
</TABLE>
----------------------------------------------
EXHIBITS
<TABLE>
<S> <C>
Exhibit A: Amended and Restated
Declaration of Trust and Trust Agreement.................. A-1
Exhibit B: Request for Redemption........................... B-1
Exhibit C: Subscription Requirements........................ C-1
Exhibit D: Subscription Instructions........................ D-1
</TABLE>
i
<PAGE> 66
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
<PAGE> 67
THE FUTURES, FORWARD AND SWAP MARKETS
FUTURES CONTRACTS
Futures contracts are standardized agreements traded on commodity exchanges
that call for the future delivery of the commodity or financial instrument at a
specified time and place. A futures trader that enters into a contract to take
delivery of the underlying commodity is "long" the contract, or has "bought" the
contract. A trader that is obligated to make delivery is "short" the contract or
has "sold" the contract. Actual delivery on the contract rarely occurs. Futures
traders usually offset (liquidate) their contract obligations by entering into
equal but offsetting futures positions. For example, a trader who is long one
September Treasury bond contract on the Chicago Board of Trade can offset the
obligation by entering into a short position in a September Treasury bond
contract on that exchange. Futures positions that have not yet been liquidated
are known as "open" contracts or positions.
Futures contracts are traded on a wide variety of commodities, including
agricultural products, metals, livestock products, government securities,
currencies and stock market indices. Options on futures contracts are also
traded on U.S. commodity exchanges. The Trust concentrates its futures trading
in financial instruments such as interest rate, foreign exchange and stock index
contracts, and metal and energy contracts.
FORWARD CONTRACTS
Currencies and other commodities may be purchased or sold for future
delivery or cash settlement through banks or dealers pursuant to forward or swap
contracts. Currencies also can be traded pursuant to futures contracts on
organized futures exchanges; however, Campbell & Company will use the dealer
market in foreign exchange contracts for most of the Trust's trading in
currencies. Such dealers will act as "principals" in these transactions and will
include their profit in the price quoted on the contracts. Unlike futures
contracts, foreign exchange contracts are not standardized. In addition, the
forward market is largely unregulated. Forward contracts are not "cleared" or
guaranteed by a third party. Thus, the Trust is subject to the creditworthiness
of Deutsche Bank AG and ABN AMRO Bank, N.V., Chicago Branch, the foreign
exchange dealers with whom it maintains all assets and positions relating to the
Trust's forward contract investments. There also is no daily settlement of
unrealized gains or losses on open foreign exchange contracts as there is with
futures contracts on U.S. exchanges.
SWAP TRANSACTIONS
In the future, the Trust may periodically enter into transactions in the
forward or other markets which could be characterized as swap transactions and
which may involve interest rates, currencies, securities interests, commodities
and other items. A swap transaction is an individually negotiated,
non-standardized agreement between two parties to exchange cash flows measured
by different interest rates, exchange rates, or prices, with payments calculated
by reference to a principal ("notional") amount or quantity. Transactions in
these markets present certain risks similar to those in the futures, forward and
options markets:
(1) the swap markets are generally not regulated by any United States or
foreign governmental authorities;
(2) there are generally no limitations on daily price moves in swap
transactions;
(3) speculative position limits are not applicable to swap transactions,
although the counterparties with which the Trust may deal may limit the
size or duration of positions available as a consequence of credit
considerations;
(4) participants in the swap markets are not required to make continuous
markets in swaps contracts; and
(5) the swap markets are "principal markets," in which performance with
respect to a swap contract is the responsibility only of the
counterparty with which the trader has entered into a contract (or its
guarantor, if any), and not of any exchange or clearinghouse. As a
result, the Trust will be subject to the risk of the inability of or
refusal to perform with respect to such contracts on the part of the
counterparties with which the Trust trades.
-1-
<PAGE> 68
The CFTC has adopted Part 35 to its Rules which provides non-exclusive safe
harbor treatment from regulations under the Commodity Exchange Act as amended
for swap transactions which meet certain specified criteria, over which the CFTC
will not exercise its jurisdiction and regulate as futures or commodity option
transactions. Notwithstanding the CFTC's position, the CFTC or a court could
conclude in the future that certain swap transactions entered into by the Trust
constitute unauthorized futures or commodity option contracts subject to the
CFTC's jurisdiction or attempt to prohibit the Trust from engaging in such
transactions. If the Trust were restricted in its ability to trade in the swap
markets, the activities of Campbell & Company, to the extent that it trades in
such markets on behalf of the Trust, might be materially affected.
REGULATION
The U.S. futures markets are regulated under the Commodity Exchange Act,
which is administered by the CFTC, a federal agency created in 1974. The CFTC
licenses and regulates commodity exchanges, commodity pool operators, commodity
trading advisors and clearing firms which are referred to in the futures
industry as "futures commission merchants." Campbell & Company is licensed by
the CFTC as a commodity pool operator and commodity trading advisor. Futures
professionals are also regulated by the NFA, a self-regulatory organization for
the futures industry that supervises the dealings between futures professionals
and their customers. If the pertinent CFTC licenses or NFA memberships were to
lapse, be suspended or be revoked, Campbell & Company would be unable to act as
the Trust's commodity pool operator and commodity trading advisor.
The CFTC has adopted disclosure, reporting and recordkeeping requirements
for commodity pool operators and disclosure and recordkeeping requirements for
commodity trading advisors. The reporting rules require pool operators to
furnish to the participants in their pools a monthly statement of account,
showing the pool's income or loss and change in net asset value, and an annual
financial report, audited by an independent certified public accountant.
The CFTC and the exchanges have pervasive powers over the futures markets,
including the emergency power to suspend trading and order trading for
liquidation of existing positions only. The exercise of such powers could
adversely affect the Trust's trading.
The CFTC does not regulate forward contracts. Federal and state banking
authorities also do not regulate forward trading or forward dealers. Trading in
foreign currency futures contracts may be less liquid and the Trust's trading
results may be adversely affected.
MARGIN
The Trust will use margin in its trading. In order to establish and
maintain a futures position, a trader must make a type of good-faith deposit
with its broker, known as "margin," of approximately 2%-10% of contract value.
Minimum margins are established for each futures contract by the exchange on
which the contract is traded. The exchanges alter their margin requirements from
time to time, sometimes significantly. For their protection, clearing brokers
may require higher margins from their customers than the exchange minimums.
Margin also is deposited in connection with forward contracts but is not
required by any applicable regulation.
There are two types of margin. "Initial" margin is the amount a trader is
required to deposit with its broker to open a futures position. The other type
of margin is "maintenance" margin. When the contract value of a trader's futures
position falls below a certain percentage, typically about 75%, of its value
when the trader established the position, the trader is required to deposit
additional margin in an amount equal to the loss in value.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
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<PAGE> 69
HISTORICAL PERSPECTIVE OF MANAGED FUTURES
MANAGED FUTURES INDUSTRY VOLUME BY MARKET SECTOR
[PIE CHART]
<TABLE>
<CAPTION>
1980 1999
---- ----
<S> <C> <C>
Agriculture 64.2% 15.3%
Currencies 4.6% 5.0%
Energy 0.3% 15.7%
Interest Rates 13.5% 50.3%
Metals 16.3% 3.6%
Other 1.1% 0.3%
</TABLE>
The managed futures industry market sector distributions presented above
include both speculative and hedging transactions, as well as options on
futures. The charts were prepared by Campbell & Company using data obtained from
the Futures Industry Association. The charts show the change in market
concentration from 1980 to 1999. In 1980, the agricultural sector dominated most
managed futures allocations. However, by 1999, the agricultural sector makes up
only small portion of the total trading volume, with financial instruments such
as interest rates, stock indices and currencies representing the dominant
portion of trading. A significant portion of currency trading is done in the
forward rather than in the futures markets, and, accordingly, is not reflected
in the foregoing chart.
Please note that the pie charts above and the bar chart below reflect the
trading volume for the managed futures industry as a whole, and are not
indicative of the Trust in particular.
GROWTH IN THE MANAGED FUTURES INDUSTRY
JANUARY 1980 -- DECEMBER 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
$ Billions
<S> <C>
80 $ 0.3
81 0.3
82 0.5
83 0.5
84 0.7
85 1.0
86 1.4
87 2.6
88 4.3
89 5.2
90 8.5
91 11.4
92 19.0
93 22.6
94 19.1
95 22.8
96 28.8
97 34.9
98 43.9
99 43.9
</TABLE>
The managed futures industry has grown dramatically during the last two
decades. The chart was prepared by Campbell & Company and shows the industry
growth since 1980 using data obtained from Managed Account Reports.
-3-
<PAGE> 70
INVESTMENT FACTORS
THE ADVANTAGES OF NON-CORRELATION AND
DIVERSIFICATION OF YOUR PORTFOLIO
The Nobel Prize for Economics in 1990 was awarded to Dr. Harry Markowitz
for demonstrating that the total return can increase, and/or risk can be
reduced, when portfolios have positively performing asset categories that are
essentially non-correlated. Even many seemingly diverse portfolios may actually
be quite correlated. For instance, over time, alternative investment classes
such as real estate investment vehicles and international stocks and bonds may
correlate closely with domestic equities as the global economy expands and
contracts.
Historically, managed futures investments have had very little correlation
to the stock and bond markets. Campbell & Company believes that the performance
of the Trust should also exhibit a substantial degree of non-correlation (not,
however, necessarily negative correlation) with the performance of traditional
equity and debt portfolio components, in part because of the ease of selling
futures short. This feature of futures -- being able to be long or short a
futures position with similar ease -- means that profit and loss from futures
trading, unlike many debt and equity instruments, is not dependent upon economic
prosperity or stability.
However, non-correlation will not provide any diversification advantages
unless the non-correlated assets are outperforming other portfolio assets, and
there is no guarantee that the Trust will outperform other sectors of an
investor's portfolio (or not produce losses). Additionally, although adding
managed futures funds to a portfolio may provide diversification, managed
futures funds are not a hedging mechanism and there is no guarantee that managed
futures funds will appreciate during periods of inflation or stock and bond
market declines.
Non-correlated performance should not be confused with negatively
correlated performance. Non-correlation means only that the Trust's performance
will likely have no relation to the performance of equity and debt instruments,
reflecting Campbell & Company's belief that certain factors that affect equity
and debt prices may affect the Trust differently and that certain factors which
affect the former may not affect the latter. The net asset value per unit may
decline or increase more or less than equity and debt instruments during both
rising and falling cash markets. Campbell & Company has no expectation that the
Trust's performance will be negatively correlated to general debt and equity
markets, i.e., likely to be profitable when the latter are unprofitable, or vice
versa.
ADVANTAGES OF FUTURES FUND INVESTMENTS
Both the futures and forward markets and funds investing in those markets
offer many structural advantages that make managed futures an efficient way to
participate in global markets.
PROFIT POTENTIAL
Futures and related contracts can easily be leveraged, which magnifies the
potential profit and loss. As a result of this leveraging, even a small movement
in the price of a contract can cause major losses.
100% INTEREST CREDIT
Unlike some alternative investment funds, the Trust does not borrow money
in order to obtain leverage, so the Trust does not incur any interest expense.
Rather, the Trust's margin deposits are maintained in cash equivalents, such as
U.S. Treasury bills, and interest is earned on 100% of the Trust's available
assets, which include unrealized profits credited to the Trust's accounts.
GLOBAL DIVERSIFICATION WITHIN A SINGLE INVESTMENT
Futures and related contracts can be traded in many countries, which makes
it possible to diversify risk around the globe. This diversification is
available both geographically and across market sectors. For example, an
investor can trade interest rates, stock indices and currencies in several
countries around the world, as well as energy and metals. While the Trust itself
trades across a diverse selection of global markets, an investment in the Trust
is not a substitute for overall portfolio diversification.
ABILITY TO PROFIT OR LOSE IN A RISING OR
FALLING MARKET ENVIRONMENT
The Trust can establish short positions and thereby profit from declining
markets as easily as it can establish long positions. This potential to
-4-
<PAGE> 71
make money, whether markets are rising or falling around the world, makes
managed futures particularly attractive to sophisticated investors. Of course,
if markets go higher while an investor has a short position, he will lose money
until the short position is exited.
PROFESSIONAL TRADING
Campbell & Company is one of the world's largest and most experienced
commodity trading advisors. Campbell & Company's approach includes the following
elements:
- Disciplined Money Management. Campbell & Company generally allocates
between 1% and 5% of portfolio equity to any single market position.
However, no guarantee is provided that losses will be limited to these
percentages.
- Balanced Risk. Campbell & Company will allocate the Trust's capital to
more than 50 markets around the world 24 hours a day. Among the factors
considered for determining the portfolio mix are market volatility,
liquidity and trending characteristics.
- Capital Management. When proprietary risk/reward indicators reach
predetermined levels, Campbell & Company may increase or decrease
commitments in certain markets in an attempt to reduce performance
volatility.
- Multiple Systems. While Campbell & Company's approach is to find
emerging trends and follow them to conclusion, no one system is right all
of the time. Campbell & Company utilizes a multi-system strategy on
behalf of the Trust that divides capital among different trading systems
in an attempt to reduce performance volatility.
Campbell & Company receives advisory fees in exchange for these services.
CONVENIENCE
Through the Trust, investors can participate in global markets and
opportunities without needing to master complex trading strategies and monitor
multiple international markets.
LIQUIDITY
In most cases, the underlying markets have sufficient liquidity. Some
markets trade 24 hours on business days. While there can be cases where there
may be no buyer or seller for a particular market, the Trust tries to select
markets for investment based upon, among other things, their perceived
liquidity. Exchanges impose limits on the amount that a futures price can move
in one day. Situations in which markets have moved the limit for several days in
a row have not been common, but do occur. See "The Risks You Face -- Your
Investment Could Be Illiquid."
Also, investors may redeem all or a portion of their units on a monthly
basis. See "Distributions and Redemptions."
LIMITED LIABILITY
Investors' liability is limited to the amount of their investment in the
Trust. Investors will not be required to contribute additional capital to the
Trust.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
-5-
<PAGE> 72
VALUE OF DIVERSIFYING INTO MANAGED FUTURES
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE EFFECT OF INCREASING ALLOCATIONS OF MANAGED FUTURES IN A PORTFOLIO
The chart below shows the effect of allocating increasing percentages of
managed futures into a portfolio consisting of stocks and bonds. Beginning with
a portfolio made up of 40% bonds and 60% stocks, managed futures were added in
5% increments while the bond allocation was decreased by the same percentage. As
the allocation of managed futures increased up to approximately 10%, returns
increased and standard deviation, one measure of risk, was reduced. If more than
10% managed futures were introduced, returns continued to increase, but risk
increased as well. This is not a recommendation that anyone invest more than 10%
of their net worth, which is the maximum allocation allowed in the Trust. These
results are only evident during periods in which managed futures outperform
stocks and bonds.
THE EFFECT OF ADDING MANAGED FUTURES TO A HYPOTHETICAL PORTFOLIO CONTAINING
STOCKS AND BONDS
JANUARY 1980* -- JUNE 2000
[LINE GRAPH]
<TABLE>
<S> <C> <C>
0/40/60 14.94 10.38
5/35/60 15.03 10.27
10/30/60 15.11 10.22
15/25/60 15.18 10.25
20/20/60 15.24 10.36
25/15/60 15.29 10.53
30/10/60 15.34 10.77
35/5/60 15.37 11.07
40/0/60 15.40 11.42
</TABLE>
This chart, prepared by Campbell & Company, contains historical trading results
hypothetically blended.
The stocks are represented by the S&P 500 Index, the bonds are represented by
the Lehman Brothers Government Bond Index and managed futures are represented by
the MAR Fund/Pool
Qualified Universe Index. See the glossary following this section for
information integral to this chart.
* MAR data was not available prior to 1980.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF
WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL
OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND
THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL
TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR
EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING
PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY
AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE
MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING
RESULTS.
-6-
<PAGE> 73
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE EFFECT OF INCREASING ALLOCATIONS OF MANAGED FUTURES IN A PORTFOLIO
(CONTINUED)
The chart below shows the benefit of adding a 10% allocation of managed
futures to a hypothetical portfolio made up of stocks and bonds.
VALUE OF ADDING MANAGED FUTURES TO A HYPOTHETICAL PORTFOLIO CONTAINING
STOCKS AND BONDS WITH AN INITIAL $10,000 INVESTMENT
JANUARY 1980* -- JUNE 2000
[GRAPH]
<TABLE>
<CAPTION>
60%STOCKS 30% BONDS 10%
60% STOCKS 40% BONDS ANNUALIZED MANAGED FUTURES ANNUALIZED STD.
STD. DEV. 10.37% DEV. 10.22%
------------------------------- -------------------------------
<S> <C> <C>
$ 10000 $ 10000
Jan-80 10307.4 10526.6
Feb-80 10095.3 10367.2
Mar-80 9537.54 9832.73
Apr-80 10167.6 10390.2
May-80 10646.7 10861.4
Jun-80 10910.1 11145.4
Jul-80 11317.7 11708.7
Aug-80 11244.6 11657.5
Sep-80 11410.3 11850.9
Oct-80 11503.6 11995.4
Nov-80 12234.7 12759
Dec-80 12150.3 12575.5
Jan-81 11847.7 12343.4
Feb-81 11911.9 12468.8
Mar-81 12313.1 12768.2
Apr-81 12059.9 12582
May-81 12203.8 12770.9
Jun-81 12171.7 12865.8
Jul-81 12112.2 12869.9
Aug-81 11631.9 12383.9
Sep-81 11325.8 12006.8
Oct-81 11930.8 12538.1
Nov-81 12551.7 13207.9
Dec-81 12232.6 12802.5
Jan-82 12168 12771.7
Feb-82 11834.9 12477.6
Mar-82 11850.8 12582.9
Apr-82 12284.1 12996.1
May-82 12104.1 12797.4
Jun-82 11938.3 12745.2
Jul-82 12002.4 12657.3
Aug-82 13083.5 13793.9
Sep-82 13356.7 14131.3
Oct-82 14520.1 15245.4
Nov-82 14921.9 15598.2
Dec-82 15208.4 15894
Jan-83 15550.2 16407.1
Feb-83 15908.9 16625.6
Mar-83 16253.9 16934.8
Apr-83 17163.3 17833.3
May-83 17007.2 17728.9
Jun-83 17422.7 18018.6
Jul-83 17005.6 17598.2
Aug-83 17198.2 17956.6
Sep-83 17535.3 18248.1
Oct-83 17437.6 18136.5
Nov-83 17734.3 18341.1
Dec-83 17697.1 18254
Jan-84 17756.8 18307.3
Feb-84 17356.3 17886.6
Mar-84 17486.7 18053.5
Apr-84 17589.7 18121.4
May-84 16847.1 17497.9
Jun-84 17137.4 17664.2
Jul-84 17269.7 18061.6
Aug-84 18517.1 19201.3
Sep-84 18670.2 19377.4
Oct-84 18998.6 19581.9
Nov-84 19002.4 19359.8
Dec-84 19415.1 19908.7
Jan-85 20474.9 21051
Feb-85 20486 21210.4
Mar-85 20649.8 21266.7
Apr-85 20802.5 21425.5
May-85 21907.3 22476.5
Jun-85 22203.5 22677.3
Jul-85 22158.3 22893.3
Aug-85 22189.8 22866.3
Sep-85 21831 22242.7
Oct-85 22600.2 23156.3
Nov-85 23728.3 24430.7
Dec-85 24704.6 25497.7
Jan-86 24840.7 25670.9
Feb-86 26354 27474.5
Mar-86 27648.4 28900
Apr-86 27508 28516.6
May-86 28135.2 29045.1
Jun-86 28786.3 29477.5
Jul-86 27903.1 28646.6
Aug-86 29460.5 30307.4
Sep-86 27815.4 28348.6
Oct-86 28931.4 29279.6
Nov-86 29486.4 29714.4
Dec-86 29056.1 29250.8
Jan-87 31600.2 32087.8
Feb-87 32526.3 33023.1
Mar-87 32765.4 33441.2
Apr-87 32010.3 33254.7
May-87 32059 33266.1
Jun-87 33207.4 34391.5
Jul-87 33928.4 35334.3
Aug-87 34483.1 35878.3
Sep-87 33451.6 34889.5
Oct-87 30026.2 31149.7
Nov-87 28563.1 29866.7
Dec-87 30114.8 31606
Jan-88 31607.9 32813.1
Feb-88 32629.5 33883.7
Mar-88 31636.6 32889.9
Apr-88 31576.9 32812.2
May-88 31626.8 33086.5
Jun-88 32974 34869.7
Jul-88 32637.4 34434.9
Aug-88 32029 33821.7
Sep-88 33309.4 35060.1
Oct-88 34263.9 36010.4
Nov-88 33689.4 35503.4
Dec-88 34215.6 35932.3
Jan-89 36015.4 37911.1
Feb-89 35187.1 36944.1
Mar-89 35815.6 37667.9
Apr-89 37236.8 39031.1
May-89 38747.9 40854.3
Jun-89 39514.3 41431.9
Jul-89 42010.8 44140.8
Aug-89 42061.2 44113.4
Sep-89 42010.6 43946.5
Oct-89 42105 43693.6
Nov-89 42738.2 44400.6
Dec-89 43349.7 45184.2
Jan-90 41016.6 42989.6
Feb-90 41242.2 43330.1
Mar-90 41869.4 44062.2
Apr-90 40847.8 43255
May-90 43961.2 46158.3
Jun-90 44188.1 46344.3
Jul-90 44285.4 46592.8
Aug-90 41150 43719.9
Sep-90 40118.8 42656.6
Oct-90 40379.5 42942.9
Nov-90 42626.2 45173.3
Dec-90 43665.5 46137.3
Jan-91 45036.6 47361.8
Feb-91 47006.5 49392.7
Mar-91 47764 50398
Apr-91 48096.9 50669.2
May-91 49315.6 51904.5
Jun-91 47824.9 50411.8
Jul-91 49463.5 51887
Aug-91 50829.7 52984.9
Sep-91 50975.9 53209.4
Oct-91 51413.9 53579.3
Nov-91 50283.9 52349.7
Dec-91 54950.2 57659
Jan-92 53631.1 56089.2
Feb-92 54182.4 56433
Mar-92 53318.7 55561.7
Apr-92 54287 56468.4
May-92 54978.3 57045.2
Jun-92 54830.8 57096.4
Jul-92 57082.2 59568.1
Aug-92 56539.3 59172
Sep-92 57288.6 59819.5
Oct-92 56925.4 59547.9
Nov-92 58172.1 60866.3
Dec-92 59256.5 61794.6
Jan-93 60245.6 62597.4
Feb-93 61535.7 64056.3
Mar-93 62361.5 64869.7
Apr-93 61701.6 64311.7
May-93 62718.4 65406.9
Jun-93 63917.1 66460.1
Jul-93 64194.9 66895.1
Aug-93 66675.3 69195.6
Sep-93 66479.3 68909.8
Oct-93 67465.9 69862.3
Nov-93 66350.5 68900.8
Dec-93 66954.1 69708.7
Jan-94 68972 71490.4
Feb-94 66737.9 69275.5
Mar-94 63865.5 66701.2
Apr-94 64009 66849.1
May-94 64481.5 67494.3
Jun-94 63296.7 66540.3
Jul-94 65310 68342.8
Aug-94 66778.2 69804.6
Sep-94 64971.2 68219.3
Oct-94 65736.5 69041.4
Nov-94 64428.2 67695.6
Dec-94 65624.1 68708.5
Jan-95 67347.9 70210.9
Feb-95 69699.7 72604.4
Mar-95 71110.2 74488.3
Apr-95 72880.8 76313.2
May-95 76927.1 80042.7
Jun-95 78324.6 81279.8
Jul-95 79371 82392.5
Aug-95 80166.5 83102.1
Sep-95 82750.1 85490.3
Oct-95 83545.9 86023.5
Nov-95 86603.1 89047.5
Dec-95 88532.4 91111.3
Jan-96 90331.1 93144.7
Feb-96 89107.9 91948.5
Mar-96 88945.5 92016.4
Apr-96 89119.5 92708.1
May-96 90342.3 93856.7
Jun-96 91311.3 94657.9
Jul-96 90484.4 93344.5
Aug-96 89669.5 93035.9
Sep-96 93681.4 97215.1
Oct-96 96707.5 100501
Nov-96 102378 106491
Dec-96 100203 104339
Jan-97 103300 108089
Feb-97 104126 109079
Mar-97 100542 105546
Apr-97 105084 109914
May-97 109403 114261
Jun-97 113192 118087
Jul-97 120852 126091
Aug-97 115817 120720
Sep-97 120941 125854
Oct-97 120136 124510
Nov-97 124104 128566
Dec-97 126191 130778
Jan-98 128066 132612
Feb-98 133226 138055
Mar-98 137433 142531
Apr-98 138433 143172
May-98 138064 142832
Jun-98 142752 147436
Jul-98 141573 146200
Aug-98 131827 136199
Sep-98 138893 143258
Oct-98 144732 149110
Nov-98 150433 154674
Dec-98 155547 160262
Jan-99 160020 164562
Feb-99 153875 159329
Mar-99 157427 162888
Apr-99 161241 167366
May-99 157720 163746
Jun-99 162493 169205
Jul-99 159191 165705
Aug-99 158356 164881
Sep-99 156260 162640
Oct-99 162076 168030
Nov-99 163629 170063
Dec-99 168508 175505
Jan-00 164497 171274
Feb-00 164422 170527
Mar-00 176280 182080
Apr-00 172582 178275
May-00 169699 175599
Jun-00 170762 175824
</TABLE>
This chart, prepared by Campbell & Company, contains historical trading results
hypothetically blended.
The stocks are represented by the S&P 500 Index, bonds are represented by
the Lehman Brothers Government Bond Index and managed futures are represented by
the MAR Fund/Pool
Qualified Universe Index. See the glossary following this section for
information integral to this chart.
* MAR data was not available prior to 1980.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF
WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL
OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND
THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL
TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR
EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING
PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY
AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE
MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING
RESULTS.
-7-
<PAGE> 74
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE EFFECT OF INCREASING ALLOCATIONS OF MANAGED FUTURES IN A PORTFOLIO
(CONTINUED)
The charts on the preceding pages show that blending managed futures into a
portfolio has the potential to actually lower portfolio volatility while
simultaneously increasing returns. However, as the following two charts show,
such diversification benefits may not occur during periods where managed futures
either under-perform the other assets in the portfolio, or during periods in
which they are more volatile. For the period beginning in April 1983 (FME Large
Inception), blending the FME Large Portfolio into a stock and bond portfolio did
increase returns, but also increased total portfolio volatility.
THE EFFECT OF ADDING CAMPBELL FME LARGE PORTFOLIO TO A HYPOTHETICAL PORTFOLIO
CONTAINING
STOCKS AND BONDS
APRIL 1983 -- JUNE 2000
[LINE GRAPH]
<TABLE>
<S> <C> <C>
0/40/60 14.73 10.15
5/35/60 15.10 10.21
10/30/60 15.47 10.41
15/25/60 15.82 10.72
20/20/60 16.16 11.13
25/15/60 16.49 11.65
30/10/60 16.80 12.25
35/5/60 17.10 12.92
40/0/60 17.38 13.66
</TABLE>
This chart, prepared by Campbell & Company, contains historical trading results
hypothetically blended.
The stocks are represented by the S&P 500 Index, the bonds are represented by
the Lehman Brothers
Government Bond Index and managed futures are represented by the Campbell FME
Large Portfolio.
See the glossary following this section for information integral to this chart.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF
WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL
OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND
THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL
TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR
EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING
PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY
AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE
MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING
RESULTS.
-8-
<PAGE> 75
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE EFFECT OF INCREASING ALLOCATIONS OF MANAGED FUTURES IN A PORTFOLIO
(CONTINUED)
The chart below shows the benefit of adding a 10% allocation of Campbell
FME Large Portfolio to a hypothetical portfolio made up of stocks and bonds.
VALUE OF ADDING CAMPBELL FME LARGE PORTFOLIO TO A HYPOTHETICAL PORTFOLIO
CONTAINING
STOCKS AND BONDS WITH AN INITIAL $10,000 INVESTMENT
APRIL 1983 -- JUNE 2000
[GRAPH]
<TABLE>
<CAPTION>
60% STOCKS 30% BONDS 10%
60% STOCKS 40% BONDS ANNUALIZED CAMPBELL FME LARGE PORTFOLIO
STD. DEV. 10.15% ANNUALIZED STD. DEV. 10.41%
------------------------------- ----------------------------
<S> <C> <C>
Mar-83 10000.00 10000.00
Apr-83 10559.50 10533.80
May-83 10463.40 10450.00
Jun-86 10719.00 10663.80
Jul-83 10462.40 10460.00
Aug-83 10580.90 10557.00
Sep-83 10788.40 10742.90
Oct-83 10728.20 10634.40
Nov-83 10910.80 10783.30
Dec-83 10887.90 10723.20
Jan-84 10924.60 10755.00
Feb-84 10678.20 10539.10
Mar-84 10758.40 10651.60
Apr-84 10821.80 10714.70
May-84 10365.00 10391.30
Jun-84 10543.50 10502.30
Jul-84 10625.00 10615.60
Aug-84 11392.40 11352.30
Sep-84 11486.50 11517.60
Oct-84 11688.60 11708.30
Nov-84 11690.90 11653.90
Dec-84 11944.50 11906.90
Jan-85 12596.50 12576.70
Feb-85 12602.90 12750.40
Mar-85 12703.70 12837.60
Apr-85 12797.70 12983.60
May-85 13477.30 13651.20
Jun-85 13659.50 13791.90
Jul-85 13631.70 13843.40
Aug-85 13650.30 13789.50
Sep-85 13429.60 13401.90
Oct-85 13902.80 13901.80
Nov-85 14596.80 14710.60
Dec-85 15197.40 15321.30
Jan-86 15281.10 15301.20
Feb-86 16211.50 16444.50
Mar-86 17007.80 17294.40
Apr-86 16921.40 17063.30
May-86 17307.30 17576.70
Jun-86 17707.70 17615.60
Jul-86 17164.50 17154.30
Aug-86 18122.50 18193.70
Sep-86 17110.50 16892.80
Oct-86 17797.00 17348.90
Nov-86 18138.40 17456.40
Dec-86 17873.70 17230.60
Jan-87 19438.70 19291.00
Feb-87 20008.40 19891.70
Mar-87 20155.50 20356.20
Apr-87 19691.00 20290.50
May-87 19720.90 20255.40
Jun-87 20427.30 20888.00
Jul-87 20870.90 21591.60
Aug-87 21212.10 21953.00
Sep-87 20577.60 21447.80
Oct-87 18470.50 18819.20
Nov-87 17570.50 17888.80
Dec-87 18525.00 18859.60
Jan-88 19442.70 19677.70
Feb-88 20068.80 20336.90
Mar-88 19458.10 19740.40
Apr-88 19421.40 19644.20
May-88 19450.10 19723.20
Jun-88 20278.60 20652.40
Jul-88 20071.60 20468.50
Aug-88 19698.70 20074.70
Sep-88 20486.20 20901.00
Oct-88 21073.20 21436.20
Nov-88 20719.80 21113.20
Dec-88 21042.60 21406.20
Jan-89 22147.30 22652.60
Feb-89 21637.90 22132.40
Mar-89 22024.40 22743.90
Apr-89 22898.30 23641.80
May-89 23824.90 24826.60
Jun-89 24297.20 25221.40
Jul-89 25831.00 26770.70
Aug-89 25860.20 26849.90
Sep-89 25829.10 26694.70
Oct-89 25887.10 26463.10
Nov-89 26275.00 26906.30
Dec-89 26651.00 27638.30
Jan-90 25216.60 26327.50
Feb-90 25356.40 26503.70
Mar-90 25742.10 27000.60
Apr-90 25115.30 26531.40
May-90 27026.50 28127.70
Jun-90 27166.90 28442.00
Jul-90 27226.70 28760.90
Aug-90 25301.00 27199.60
Sep-90 24668.50 26561.70
Oct-90 24829.90 26708.40
Nov-90 26210.20 28044.30
Dec-90 26848.30 28658.40
Jan-91 27688.70 29291.80
Feb-91 28898.60 30519.10
Mar-91 29364.30 31621.60
Apr-91 29569.00 31738.90
May-91 30316.90 32634.90
Jun-91 29400.40 31719.60
Jul-91 30407.80 32503.80
Aug-91 31246.20 33414.30
Sep-91 31336.10 33605.30
Oct-91 31605.30 33910.50
Nov-91 30913.30 33080.60
Dec-91 33777.80 36523.30
Jan-92 32966.90 35561.40
Feb-92 33304.80 35776.50
Mar-92 32775.30 35283.20
Apr-92 33368.90 35819.60
May-92 33793.90 36228.80
Jun-92 33703.20 36461.30
Jul-92 35085.90 38185.80
Aug-92 34752.30 37986.90
Sep-92 35212.80 38349.00
Oct-92 34988.20 38006.10
Nov-92 35751.40 39059.40
Dec-92 36417.90 39624.30
Jan-93 37025.80 40141.90
Feb-93 37818.60 41420.20
Mar-93 38326.10 41728.30
Apr-93 37920.60 41370.60
May-93 38542.60 42161.30
Jun-93 39279.20 42891.60
Jul-93 39449.90 43243.60
Aug-93 40974.20 44555.10
Sep-93 40849.00 44185.10
Oct-93 41455.20 44540.40
Nov-93 40769.90 43951.00
Dec-93 41140.70 44327.00
Jan-94 42380.70 45347.80
Feb-94 41007.90 43752.90
Mar-94 39244.90 42362.70
Apr-94 39333.10 42440.60
May-94 39623.40 42661.80
Jun-94 38895.30 42140.70
Jul-94 40132.50 43169.70
Aug-94 41033.00 43997.50
Sep-94 39924.80 43249.30
Oct-94 40392.60 43790.10
Nov-94 39588.70 42590.20
Dec-94 40323.50 43061.30
Jan-95 41382.70 43881.90
Feb-95 42826.10 45542.90
Mar-95 43692.80 46871.70
Apr-95 44778.80 48049.90
May-95 47262.00 50378.00
Jun-95 48120.50 51194.50
Jul-95 48761.80 51753.30
Aug-95 49250.50 52463.50
Sep-95 50837.70 53881.50
Oct-95 51326.60 54305.90
Nov-95 53204.80 56140.50
Dec-95 54390.10 57623.60
Jan-96 55495.10 59110.10
Feb-96 54743.60 58259.40
Mar-96 54643.90 58591.40
Apr-96 54750.80 59011.30
May-96 55500.30 59744.20
Jun-96 56095.70 60336.00
Jul-96 55587.70 59527.20
Aug-96 55087.10 59419.70
Sep-96 57549.50 62059.70
Oct-96 59408.50 64568.30
Nov-96 62889.40 68926.20
Dec-96 61553.20 67327.40
Jan-97 63453.00 69870.60
Feb-97 63962.50 70531.60
Mar-97 61764.40 68133.10
Apr-97 64552.90 70788.10
May-97 67203.90 73484.20
Jun-97 69530.90 76050.00
Jul-97 74234.40 81520.80
Aug-97 71141.20 77869.60
Sep-97 74285.70 81419.70
Oct-97 73791.30 80800.40
Nov-97 76228.70 83408.80
Dec-97 77510.60 85088.40
Jan-98 78660.00 86452.30
Feb-98 81829.30 89793.70
Mar-98 84413.50 93054.10
Apr-98 85027.50 93155.00
May-98 84801.20 93133.40
Jun-98 87680.40 96262.00
Jul-98 86960.40 95161.60
Aug-98 80984.50 89074.10
Sep-98 85325.30 93775.40
Oct-98 88912.40 98289.00
Nov-98 92414.70 102037.00
Dec-98 95556.10 105585.00
Jan-99 98304.40 108014.00
Feb-99 94529.30 104557.00
Mar-99 96710.90 107085.00
Apr-99 99054.40 110252.00
May-99 96891.10 107698.00
Jun-99 99823.00 111537.00
Jul-99 97794.60 109299.00
Aug-99 97282.10 108921.00
Sep-99 95994.10 107582.00
Oct-99 99567.00 111137.00
Nov-99 100521.00 112332.00
Dec-99 103518.00 116246.00
Jan-00 101055.00 113726.00
Feb-00 101008.00 113324.00
Mar-00 108293.00 120894.00
Apr-00 106021.00 118221.00
May-00 104250.00 116701.00
Jun-00 106936.00 119580.00
</TABLE>
This chart, prepared by Campbell & Company, contains historical trading results
hypothetically blended.
The stocks are represented by the S&P 500 Index, the bonds are represented by
the Lehman Brothers
Government Bond Index and managed futures are represented by the Campbell FME
Large Portfolio.
See the glossary following this section for information integral to this chart.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF
WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL
OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND
THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL
TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR
EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING
PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY
AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE
MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING
RESULTS.
-9-
<PAGE> 76
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE EFFECT OF INCREASING ALLOCATIONS OF MANAGED FUTURES IN A PORTFOLIO
(CONTINUED)
The following two charts show that during the most recent ten year period,
blending in up to 10% of Campbell FME Large into a portfolio of stocks and bonds
has historically lowered volatility and increased returns. One reason that
adding Campbell FME Large lowered volatility over the most recent ten years, is
that Campbell FME Large volatility has been significantly lower in recent years
than it was in the early years of the program. This lower volatility can be
attributed partially to broader diversification among markets, more
diversification among trading models, and improved risk reduction techniques and
exiting strategies.
THE EFFECT OF ADDING CAMPBELL FME LARGE PORTFOLIO TO A HYPOTHETICAL PORTFOLIO
CONTAINING
STOCKS AND BONDS
JULY 1990 -- JUNE 2000
[LINE GRAPH]
<TABLE>
<S> <C> <C>
0/40/60 14.69 9.44
5/35/60 15.07 9.32
10/30/60 15.44 9.29
15/25/60 15.81 9.35
20/20/60 16.17 9.50
25/15/60 16.52 9.73
30/10/60 16.86 10.04
35/5/60 17.19 10.41
40/0/60 17.52 10.86
</TABLE>
This chart, prepared by Campbell & Company, contains historical trading results
hypothetically blended.
The stocks are represented by the S&P 500 Index, the bonds are represented by
the Lehman Brothers
Government Bond Index and managed futures are represented by the Campbell FME
Large Portfolio.
See the glossary following this section for information integral to this chart.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF
WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL
OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND
THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL
TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR
EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING
PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY
AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE
MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING
RESULTS.
-10-
<PAGE> 77
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE EFFECT OF INCREASING ALLOCATIONS OF MANAGED FUTURES IN A PORTFOLIO
(CONTINUED)
The chart below shows the benefit of adding a 10% allocation of Campbell
FME Large Portfolio to a hypothetical portfolio made up of stocks and bonds.
VALUE OF ADDING CAMPBELL FME LARGE PORTFOLIO TO A HYPOTHETICAL PORTFOLIO
CONTAINING
STOCKS AND BONDS WITH AN INITIAL $10,000 INVESTMENT
JULY 1990 -- JUNE 2000
[GRAPH]
<TABLE>
<CAPTION>
60% STOCKS 30% BONDS 10%
60% STOCKS 40% BONDS ANNUALIZED CAMPBELL FME LARGE PORTFOLIO
STD. DEV. 9.44% ANNUALIZED STD. DEV 9.29%
------------------------------- ----------------------------
<S> <C> <C>
Jun-90 10000.00 10000.00
Jul-90 10022.00 10112.10
Aug-90 9313.19 9563.16
Sep-90 9080.36 9338.90
Oct-90 9139.78 9390.49
Nov-90 9647.84 9860.18
Dec-90 9882.71 10076.10
Jan-91 10192.10 10298.80
Feb-91 10637.50 10730.30
Mar-91 10808.90 11117.90
Apr-91 10884.20 11159.20
May-91 11159.50 11474.20
Jun-91 10822.20 11152.40
Jul-91 11193.00 11428.10
Aug-91 11501.60 11748.20
Sep-91 11534.70 11815.40
Oct-91 11633.80 11922.70
Nov-91 11379.00 11630.90
Dec-91 12433.40 12841.30
Jan-92 12135.00 12503.10
Feb-92 12259.30 12578.70
Mar-92 12064.40 12405.30
Apr-92 12282.90 12593.90
May-92 12439.30 12737.80
Jun-92 12406.00 12819.50
Jul-92 12915.00 13425.80
Aug-92 12792.10 13355.90
Sep-92 12961.70 13483.20
Oct-92 12879.00 13362.70
Nov-92 13159.90 13733.00
Dec-92 13405.20 13931.60
Jan-93 13629.00 14113.60
Feb-93 13920.80 14563.00
Mar-93 14107.70 14671.40
Apr-93 13958.40 14545.60
May-93 14187.30 14823.60
Jun-93 14458.50 15080.40
Jul-93 14521.30 15204.10
Aug-93 15082.40 15665.30
Sep-93 15036.30 15535.10
Oct-93 15259.50 15660.00
Nov-93 15007.20 15452.80
Dec-93 15143.70 15585.00
Jan-94 15600.10 15944.00
Feb-94 15094.80 15383.20
Mar-94 14445.80 14894.40
Apr-94 14478.30 14921.80
May-94 14585.20 14999.60
Jun-94 14317.20 14816.30
Jul-94 14772.60 15178.10
Aug-94 15104.00 15469.20
Sep-94 14696.10 15206.10
Oct-94 14868.30 15396.30
Nov-94 14572.40 14974.40
Dec-94 14842.90 15140.00
Jan-95 15232.80 15428.60
Feb-95 15764.10 16012.50
Mar-95 16083.10 16479.70
Apr-95 16482.90 16894.00
May-95 17396.90 17712.50
Jun-95 17712.90 17999.60
Jul-95 17949.00 18196.10
Aug-95 18128.90 18445.80
Sep-95 18713.10 18944.30
Oct-95 18893.10 19093.60
Nov-95 19584.40 19738.60
Dec-95 20020.70 20260.00
Jan-96 20427.50 20782.70
Feb-96 20150.90 20483.60
Mar-96 20114.20 20600.30
Apr-96 20153.50 20747.90
May-96 20429.40 21005.60
Jun-96 20648.50 21213.70
Jul-96 20461.50 20929.30
Aug-96 20277.30 20891.50
Sep-96 21183.70 21819.70
Oct-96 21868.00 22701.70
Nov-96 23149.30 24233.90
Dec-96 22657.40 23671.80
Jan-97 23356.70 24566.00
Feb-97 23544.30 24798.40
Mar-97 22735.20 23955.10
Apr-97 23761.60 24888.60
May-97 24737.40 25836.50
Jun-97 25594.00 26738.60
Jul-97 27325.30 28662.10
Aug-97 26186.70 27378.40
Sep-97 27344.20 28626.60
Oct-97 27162.20 28408.80
Nov-97 28059.40 29325.90
Dec-97 28531.30 29916.40
Jan-98 28954.40 30396.00
Feb-98 30120.90 31570.80
Mar-98 31072.20 32717.10
Apr-98 31298.20 32752.60
May-98 31214.90 32745.00
Jun-98 32274.70 33845.00
Jul-98 32009.70 33458.10
Aug-98 29810.00 31317.80
Sep-98 31407.80 32970.70
Oct-98 32728.20 34557.70
Nov-98 34017.40 35875.30
Dec-98 35173.70 37122.80
Jan-99 36185.40 37977.00
Feb-99 34795.80 36761.30
Mar-99 35598.80 37650.20
Apr-99 36461.40 38763.90
May-99 35665.10 37865.80
Jun-99 36744.30 39215.70
Jul-99 35997.70 38428.60
Aug-99 35809.10 38295.70
Sep-99 35335.00 37825.00
Oct-99 36650.10 39074.80
Nov-99 37001.20 39495.20
Dec-99 38104.60 40871.20
Jan-00 37181.70 39967.90
Feb-00 37137.80 39798.10
Mar-00 39791.70 42430.30
Apr-00 38940.20 41474.40
May-00 38287.50 40938.50
Jun-00 39273.80 41948.50
</TABLE>
This chart, prepared by Campbell & Company, contains historical trading results
hypothetically blended.
The stocks are represented by the S&P 500 Index, the bonds are represented by
the Lehman Brothers
Government Bond Index and managed futures are represented by the Campbell FME
Large Portfolio.
See the glossary following this section for information integral to this chart.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF
WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL
OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND
THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL
TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR
EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING
PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY
AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE
MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING
RESULTS.
-11-
<PAGE> 78
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
CORRELATION OF MONTHLY RETURNS SINCE INCEPTION OF THE CAMPBELL FME LARGE
PORTFOLIO
The more similarly two markets behave, the higher their correlation.
Generally, asset allocation models attempt to reduce volatility by combining
instruments that behave differently from one another. The first chart shows the
correlation between the MAR Fund/Pool Qualified Universe Index and various
stock, bond and managed futures indices or asset categories. The second chart
shows the correlation between the same indices or asset categories, this time
using the S&P 500 Index as the benchmark.
HISTORICAL CORRELATION OF MONTHLY RETURNS WITH THE MAR FUND/POOL QUALIFIED
UNIVERSE INDEX
APRIL 1983 -- JUNE 2000
[BAR GRAPH]
<TABLE>
<CAPTION>
EUROPE,
MAR FUND/POOL QUALIFIED UNIVERSE CAMPBELL FME LEHMAN BROS. S&P 500 AUSTRALASIA, FAR NASDAQ
INDEX LARGE PORTFOLIO GOVT. BOND INDEX COMPOSITE INDEX EAST INDEX COMPOSITE INDEX
-------------------------------- --------------- ---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
100% 70.70% 17.90% 9.60% 2.70% -0.10%
</TABLE>
HISTORICAL CORRELATION OF MONTHLY RETURNS WITH THE S&P 500 INDEX
APRIL 1983 -- JUNE 2000
[BAR GRAPH]
<TABLE>
<CAPTION>
EUROPE, MAR FUND/POOL
NASDAQ AUSTRALASIA, FAR LEHMAN BROS. CAMPBELL FME QUALIFIED UNIVERSE
S&P 500 COMPOSITE INDEX COMPOSITE INDEX EAST INDEX GOVT. BOND INDEX LARGE PORTFOLIO INDEX
----------------------- --------------- ---------------- ---------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
100% 77.80% 48.90% 25.20% 20.10% 9.60%
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
-12-
<PAGE> 79
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
CORRELATION ANALYSIS SINCE INCEPTION OF THE CAMPBELL FME LARGE PORTFOLIO
These charts show that, historically, Campbell FME Large Portfolio returns
are not negatively correlated with stocks and bonds, but rather perform
independently from stocks and bonds. As displayed below, in a small percentage
of time, Campbell FME Large and stocks and bonds have experienced losses
simultaneously. In a larger percentage of time, Campbell FME Large has had
positive returns during periods when stocks and bonds were also experiencing
positive performance. However, in over 45% of the 207 months represented in
these charts, performance of Campbell FME Large and stocks and bonds have moved
in opposite directions.
CORRELATION ANALYSIS BETWEEN CAMPBELL FME LARGE PORTFOLIO AND S&P 500 INDEX
APRIL 1983 -- JUNE 2000
<TABLE>
<S> <C> <C>
[ARROWS] BOTH 80 OF 207
POSITIVE MONTHS
[ARROWS] OPPOSITE 98 OF 207
MONTHS
[ARROWS] BOTH 29 OF 207
NEGATIVE MONTHS
</TABLE>
[PIE CHART]
<TABLE>
<S> <C>
Both Negative 14%
Both Positive 39%
Opposite 47%
</TABLE>
CORRELATION ANALYSIS BETWEEN CAMPBELL FME LARGE PORTFOLIO AND
LEHMAN BROTHERS GOVERNMENT BOND INDEX
APRIL 1983 -- JUNE 2000
<TABLE>
<S> <C> <C>
[ARROWS] BOTH 80 OF 207
POSITIVE MONTHS
[ARROWS] OPPOSITE 100 OF 207
MONTHS
[ARROWS] BOTH 27 OF 207
NEGATIVE MONTHS
</TABLE>
[PIE CHART]
<TABLE>
<S> <C>
Both Negative 13%
Both Positive 39%
Opposite 48%
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
-13-
<PAGE> 80
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
VOLATILITY COMPARISON SINCE INCEPTION OF THE CAMPBELL FME LARGE PORTFOLIO (APRIL
1983 -- JUNE 2000)
A common measure of risk is standard deviation, which measures the
variability of returns around the average return for that specific investment.
Generally the higher the standard deviation, the higher the volatility or risk.
A comparison of overall volatility (measured by standard deviation) of monthly
returns for the Lehman Brothers Government Bond Index, MAR Fund/Pool Qualified
Universe Index, Campbell FME Large Portfolio, EAFE Index, S&P 500 Index and
NASDAQ Composite Index is shown in the first chart below. Notice that the
volatility for FME Large has been declining in recent years, while that of some
of the equity indices has been rising. During the last two years, FME Large has
had lower volatility than equity indices. Prospective investors must understand
that the FME Large Portfolio has experienced significant downside volatility in
the past and may do so again in the future. Upside volatility measures the
volatility of only the profitable months. Downside volatility measures only the
volatility of unprofitable months. Investors are typically more concerned with
downside volatility, which is perhaps a better historical indicator of the risk
of actually losing money. Campbell & Company believes that prospective investors
should note that the FME Large Portfolio, for the last 60 months, has had less
downside volatility, in most cases, when compared to equity indices. Once again,
there is no guarantee that this low volatility will persist into the future.
OVERALL VOLATILITY
[BAR GRAPH]
<TABLE>
<CAPTION>
MAR
LEHMAN FUND/POOL FME LARGE EAFE S&P 500
------ --------- --------- ---- -------
<S> <C> <C> <C> <C> <C>
Since Inception 2.32% 4.23% 6.33% 5.03% 4.26%
Last 60 Months 2.31% 2.14% 4.12% 4.14% 4.31%
Last 24 Months 2.06% 2.02% 3.30% 5.03% 5.33%
Last 12 Months 1.63% 1.55% 2.32% 4.27% 4.41%
<CAPTION>
NASDAQ
------
<S> <C>
Since Inception 6.18%
Last 60 Months 7.92%
Last 24 Months 10.92%
Last 12 Months 11.13%
</TABLE>
UPSIDE VOLATILITY
[BAR GRAPH]
<TABLE>
<CAPTION>
MAR
LEHMAN FUND/POOL FME LARGE EAFE S&P 500
------ --------- --------- ---- -------
<S> <C> <C> <C> <C> <C>
Since Inception 1.52% 3.48% 4.95% 3.20% 2.60%
Last 60 Months 1.23% 1.46% 2.92% 2.39% 2.37%
Last 24 Months 1.41% 1.25% 2.25% 2.60% 2.06%
Last 12 Months 0.96% 0.52% 1.11% 2.43% 2.84%
<CAPTION>
NASDAQ
------
<S> <C>
Since Inception 4.14%
Last 60 Months 5.53%
Last 24 Months 6.48%
Last 12 Months 7.34%
</TABLE>
DOWNSIDE VOLATILITY
[BAR GRAPH]
<TABLE>
<CAPTION>
MAR
LEHMAN FUND/POOL FME LARGE EAFE S&P 500
------ --------- --------- ---- -------
<S> <C> <C> <C> <C> <C>
Since Inception -1.34% -2.33% -3.59% -3.23% -3.30%
Last 60 Months -1.45% -1.06% -1.75% -2.90% -3.03%
Last 24 Months -1.20% -1.02% -1.67% -3.26% -3.62%
Last 12 Months -0.40% -1.21% -1.47% -1.49% -1.30%
<CAPTION>
NASDAQ
------
<S> <C>
Since Inception -4.40%
Last 60 Months -5.10%
Last 24 Months -6.38%
Last 12 Months -5.40%
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
-14-
<PAGE> 81
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE CHANGING INVESTMENT LANDSCAPE
The table below charts the annual rates of returns for various indices or
asset categories and illustrates that all sectors behave differently from year
to year. An index or asset category that is ranked at the top one year may be
ranked toward the bottom in subsequent years. The Trust is intended to be a
medium- to long-term investment. No one can predict which sectors are likely to
outperform the others during any specific period in the future.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
1983* 1984 1985 1986 1987 1988
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EAF 15.12% FME 26.96% EAFE 52.98% EAFE 66.80% FME 64.38% EAFE 26.66%
----------------------------------------------------------------------------------------------------------------------------
S&P 11.40% LBBI 14.49% FME 33.05% S&P 18.67% MAR 46.88% S&P 16.61%
----------------------------------------------------------------------------------------------------------------------------
LBBI 5.04% S&P 6.28% S&P 31.74% LBBI 15.31% EAFE 23.19% NAS 15.41%
----------------------------------------------------------------------------------------------------------------------------
NAS 2.89% EAFE 5.02% NAS 31.46% NAS 7.36% S&P 5.25% LBBI 9.12%
----------------------------------------------------------------------------------------------------------------------------
MAR -6.12% MAR 4.18% MAR 26.95% MAR -11.52% LBBI -2.68% MAR 8.42%
----------------------------------------------------------------------------------------------------------------------------
FME -10.34% NAS -11.30% LBBI 20.43% FME -30.45% NAS -5.25% FME 7.96%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FME 42.23% FME 35.24% NAS 56.86% NAS 15.46% EAFE 30.47% EAFE 6.23%
----------------------------------------------------------------------------------------------------------------------------
S&P 31.69% MAR 19.51% FME 31.12% FME 13.47% LBBI 17.31% S&P 1.31%
----------------------------------------------------------------------------------------------------------------------------
NAS 19.25% LBBI 6.35% S&P 30.46% LBBI 7.97% MAR 15.15% MAR -2.18%
----------------------------------------------------------------------------------------------------------------------------
LBBI 18.90% S&P -3.12% LBBI 18.61% S&P 7.64% NAS 14.75% NAS -3.20%
----------------------------------------------------------------------------------------------------------------------------
MAR 10.10% NAS -17.82% EAFE 10.18% MAR 1.03% S&P 10.07% LBBI -6.92%
----------------------------------------------------------------------------------------------------------------------------
EAFE 9.23% EAFE -24.70% MAR 9.80% EAFE -13.87% FME 4.68% FME -16.76%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1998 2000**
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NAS 39.92% FME 35.96% S&P 33.37% NAS 50.79% NAS 84.55% LBBI 9.11%
----------------------------------------------------------------------------------------------------------------------------
S&P 37.58% S&P 22.97% NAS 21.64% S&P 28.55% EAFE 25.26% FME 4.15%
----------------------------------------------------------------------------------------------------------------------------
LBBI 30.73% NAS 22.70% FME 18.75% FME 20.07% S&P 20.95% S&P -0.99%
----------------------------------------------------------------------------------------------------------------------------
FME 19.46% MAR 11.89% LBBI 14.91% EAFE 18.24% FME 6.81% NAS -2.54%
----------------------------------------------------------------------------------------------------------------------------
MAR 9.66% EAFE 4.38% MAR 9.49% LBBI 13.48% MAR 1.48% MAR -2.91%
----------------------------------------------------------------------------------------------------------------------------
EAFE 9.42% LBBI -0.76% EAFE 0.24% MAR 6.80% LBBI -8.71% EAFE -11.58%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
FME = Campbell Financial, Metal & Energy Large Portfolio
MAR = MAR Fund/Pool Qualified Universe Index
EAFE = Europe, Australasia, Far East Index
S&P = S&P 500 Composite Index
LBBI = Lehman Brothers Government Bond Index
NAS = NASDAQ Composite Index
* APRIL - DECEMBER 1983
** JANUARY - JULY 2000
</TABLE>
This chart was prepared by Campbell & Company. See the glossary following this
section for information integral to this chart.
-15-
<PAGE> 82
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ANNUAL RETURNS AND WORST DECLINES EACH YEAR
These charts illustrate the actual annual return for each represented
portfolio or index and the worst-case decline experienced within each year.
CAMPBELL FINANCIAL, METAL & ENERGY LARGE PORTFOLIO
SINCE INCEPTION APRIL 1983 -- JUNE 2000
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
'83 -10.34 % -10.34%
'84 26.96 % -5.50%
'85 33.05 % -14.51%
'86 -30.45 % -41.92%
'87 64.38 % -13.91%
'88 7.96 % -6.90%
'89 42.23 % -11.58%
'90 35.24 % -11.50%
'91 31.12 % -9.35%
'92 13.47 % -10.52%
'93 4.68 % -14.59%
'94 -16.76 % -16.76%
'95 19.46 % -4.91%
'96 35.96 % -5.63%
'97 18.75 % -7.57%
'98 20.07 % -5.88%
'99 6.81 % -4.83%
'00 4.15 % -4.12%
</TABLE>
MAR FUND/POOL QUALIFIED UNIVERSE INDEX
APRIL 1983 -- JUNE 2000
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
'83 -6.12% -8.70%
'84 4.18% -17.01%
'85 26.95% -11.32%
'86 -11.52% -28.13%
'87 46.88% -4.25%
'88 8.43% -8.25%
'89 10.10% -10.33%
'90 19.51% -4.67%
'91 9.80% -6.91%
'92 1.03% -11.84%
'93 15.15% -1.44%
'94 -2.18% -4.70%
'95 9.66% -4.38%
'96 11.89% -2.30%
'97 9.49% -2.95%
'98 5.80% -4.15%
'99 1.48% -4.74%
'00 -2.91% -4.33%
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
-16-
<PAGE> 83
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ANNUAL RETURNS AND WORST DECLINES EACH YEAR (CONTINUED)
These charts illustrate the actual annual return for each of the
represented indices and the worst-case decline experienced within each year.
LEHMAN BROTHERS GOVERNMENT BOND INDEX
APRIL 1983 -- JUNE 2000
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
'83 5.04% -2.25%
'84 14.49% -3.25%
'85 20.43% -1.71%
'86 15.31% -2.28%
'87 -2.68% -13.59%
'88 9.12% -5.91%
'89 18.90% -2.64%
'90 6.35% -6.35%
'91 18.61% -0.82%
'92 7.97% -3.64%
'93 17.31% -2.71%
'94 -6.92% -11.70%
'95 30.73% -1.64%
'96 -0.76% -8.62%
'97 14.91% -3.25%
'98 13.48% -1.68%
'99 -8.71% -9.54%
'00 9.11% -1.82%
</TABLE>
S&P 500 INDEX
APRIL 1983 -- JUNE 2000
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
'83 11.40% -2.95%
'84 6.28% -5.54%
'85 31.74% -4.09%
'86 18.67% -8.27%
'87 5.25% -29.58%
'88 16.61% -3.77%
'89 31.69% -2.72%
'90 -3.12% -14.70%
'91 30.46% -4.58%
'92 7.64% -2.52%
'93 10.07% -2.42%
'94 1.31% -6.95%
'95 37.58% -0.36%
'96 22.97% -4.42%
'97 33.37% -5.60%
'98 28.55% -15.38%
'99 20.95% -6.25%
'00 -0.99% -7.00%
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
-17-
<PAGE> 84
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ANNUAL RETURNS AND WORST DECLINES EACH YEAR (CONTINUED)
These charts illustrate the actual annual return for each of the
represented indices and the worst-case decline experienced within each year.
NASDAQ COMPOSITE INDEX
APRIL 1983 -- JUNE 2000
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
'83 2.89% -13.87%
'84 -11.30% -17.56%
'85 31.46% -6.96%
'86 7.36% -13.98%
'87 -5.25% -32.92%
'88 15.41% -5.87%
'89 19.25% -3.83%
'90 -17.82% -28.66%
'91 56.86% -5.97%
'92 15.46% -11.11%
'93 14.75% -5.01%
'94 -3.20% -11.82%
'95 39.92% -0.72%
'96 22.70% -13.10%
'97 21.64% -11.46%
'98 50.79% -20.87%
'99 84.55% -8.69%
'00 -2.54% -26.34%
</TABLE>
EUROPE, AUSTRALASIA, FAR EAST INDEX (EAFE)
APRIL 1983 -- JUNE 2000
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
'83 15.12% -1.82%
'84 5.02% -18.07%
'85 52.98% -0.76%
'86 66.80% -7.87%
'87 23.19% -15.54%
'88 26.66% -9.50%
'89 9.23% -8.38%
'90 -24.70% -31.55%
'91 10.18% -11.64%
'92 -13.87% -14.84%
'93 30.47% -8.86%
'94 6.23% -5.10%
'95 9.42% -4.95%
'96 4.38% -4.55%
'97 0.24% -11.16%
'98 18.24% -15.31%
'99 25.26% -5.26%
'00 -11.58% -15.37%
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
-18-
<PAGE> 85
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
PAST CONSISTENCY OF CAMPBELL FME LARGE PORTFOLIO
Campbell & Company believes that this investment should be considered as a
long-term investment, and should not be purchased with the intent to redeem the
investment within the first three years. The table below shows that holding the
investment for longer periods has historically increased the likelihood that the
investment was profitable. Naturally, past performance is not necessarily
indicative of future results.
<TABLE>
<CAPTION>
APRIL 1983- NUMBER OF NUMBER NUMBER PERCENTAGE
JUNE 2000 TIME PERIODS PROFITABLE UNPROFITABLE PROFITABLE
<S> <C> <C> <C> <C>
Total Months* 207 121 86 58.45%
Total Years 17 14 3 82.35%
12-Month Rolling Windows 196 165 31 84.18%
24-Month Rolling Windows 184 163 21 88.59%
36-Month Rolling Windows 172 161 11 93.60%
48-Month Rolling Windows 160 160 0 100.00%
60-Month Rolling Windows 148 148 0 100.00%
</TABLE>
* The average rate of return for total profitable months is approximately
+5%. The average rate of return for total unprofitable months is
approximately -4%.
This chart was prepared by Campbell & Company. See the glossary following this
section for information integral to this chart.
-19-
<PAGE> 86
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
GLOSSARY OF TERMS
BONDS
LEHMAN BROTHERS GOVERNMENT BOND INDEX*
Composed of bonds that are investment grade (as rated by Moody's or Standard &
Poor's). Issues must have at least one year to maturity. Total return comprises
price appreciation/depreciation and income as a percentage of the original
investment. Indexes are rebalanced monthly by market capitalization.
MANAGED FUTURES
CAMPBELL FME LARGE PORTFOLIO
Contains the composite performance of all accounts traded in the Portfolio since
inception (April 1983), net of all fees and commissions. All of the Trust's
assets will initially be allocated to this Portfolio. The Campbell FME Large
Portfolio is not the same as an investment in the Trust, because individual
accounts within the Portfolio may have results that differ from the Portfolio
composite. The objective of all actively managed accounts within the Portfolio
is speculative trading profits.
MAR FUND/POOL QUALIFIED UNIVERSE INDEX
A dollar weighted index that includes the performance of current as well as
retired public futures funds, private pools and offshore funds that have the
objective of speculative trading profits. The MAR Index is utilized as a broad
measure of overall managed futures returns, as compared to other indices that
measure the overall returns of stocks and bonds as separate asset classes. The
MAR Index is not the same as an investment in the Trust, and the Trust may
perform quite differently than the Index, just as an individual stock may
perform quite differently from the S&P 500 Index.
STOCKS
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST INDEX (EAFE)*
A cap weighted index that is designed to measure the investment returns of
developed economies outside of North America. The Index includes publicly traded
stocks from 21 countries that are divided into industry groups and then
representative stocks are selected from each industry group. In addition,
cross-ownership is tracked to ensure that the market weight given each company
is accurate.
NASDAQ COMPOSITE INDEX*
Measures all NASDAQ domestic and non-U.S. based common stocks listed on the
NASDAQ Stock Market (currently over 5,000 companies). The Index is market-value
weighted. This means that each company's security affects the Index in
proportion to its market value. The market value, the last sale price multiplied
by total shares outstanding, is calculated throughout the trading day, and is
related to the total value of the Index.
STANDARD & POOR'S 500 COMPOSITE STOCK INDEX (S&P 500 INDEX)*
The 500 stocks in the S&P 500 are chosen by Standard and Poor's based on
industry representation, liquidity and stability. The stocks in the S&P 500 are
not the 500 largest companies, rather the Index is designed to capture the
returns of many different sectors of the U.S. economy.
---------------
* Passive, unmanaged indices of equity and debt securities generally purchased
by investors with an investment objective of capital preservation, growth or
income.
-20-
<PAGE> 87
SUPPLEMENTAL PERFORMANCE INFORMATION
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
TABLE 1 -- FINANCIAL, METAL & ENERGY LARGE PORTFOLIO
APRIL 1983 -- JUNE 2000
WORST MONTHLY PERCENTAGE DRAW-DOWN (3): JUNE 1986/17.68%
WORST PEAK-TO-VALLEY DRAW-DOWN (4): APRIL -- NOVEMBER 1986/41.94%
TABLE 1- LARGE PORTFOLIO
[BAR GRAPH]
<TABLE>
<S> <C>
1983 -10.34%
1984 26.96%
1985 33.05%
1986 -30.45%
1987 64.38%
1988 7.96%
1989 42.23%
1990 35.24%
1991 31.12%
1992 13.47%
1993 4.68%
1994 -16.76%
1995 19.46%
1996 35.96%
1997 18.75%
1998 20.07%
1999 6.81%
2000 4.15%
</TABLE>
The Financial, Metal & Energy Large Portfolio is the composite performance
of all accounts traded in the portfolio since its inception, net of all fees and
commissions. This is not the Trust's performance and individual accounts within
the portfolio may have had returns that differ from the portfolio composite. The
bars represent annual returns (calculated on a compounded monthly basis).
<TABLE>
<CAPTION>
RECOVERY RETURN FOR FOLLOWING
PERIOD DECLINE LENGTH PERIOD 12 - MO. PERIOD
<S> <C> <C> <C> <C>
4/86 - 11/86 42% 8 mos. 5 mos. 64%
8/93 - 1/95 32% 18 mos. 21 mos. 32%
10/87 - 4/88 16% 7 mos. 9 mos. 35%
8/85 - 9/85 14% 2 mos. 2 mos. 4%
8/89 - 10/89 12% 3 mos. 2 mos. 59%
</TABLE>
This table shows the magnitude of the five largest declines in the FME
Large Portfolio since inception. The table also shows the duration of the
declines as well as the recovery period and the portfolio's composite return for
the following 12-month period.
-21-
<PAGE> 88
SUPPLEMENTAL PERFORMANCE INFORMATION -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
TABLE 2 -- GLOBAL DIVERSIFIED LARGE PORTFOLIO
FEBRUARY 1986 -- JUNE 2000
WORST MONTHLY PERCENTAGE DRAW-DOWN (3): APRIL 1986/14.41%
WORST PEAK-TO-VALLEY DRAW-DOWN (4): APRIL -- NOVEMBER 1986/29.71%
[BAR GRAPH]
<TABLE>
<S> <C>
1986 -26.55%
1987 33.08%
1988 19.18%
1989 26.16%
1990 32.18%
1991 14.86%
1992 7.68%
1993 2.39%
1994 9.61%
1995 6.52%
1996 26.78%
1997 14.95%
1998 12.47%
1999 4.57%
2000 2.32%
</TABLE>
The Global Diversified Large Portfolio is the composite performance of all
accounts traded in the portfolio since its inception, net of all fees and
commissions. This is not the Trust's performance and individual accounts within
the portfolio may have had returns that differ from the portfolio composite. The
bars represent annual returns (calculated on a compounded monthly basis).
<TABLE>
<CAPTION>
RECOVERY RETURN FOR FOLLOWING
PERIOD DECLINE LENGTH PERIOD 12 - MO. PERIOD
<S> <C> <C> <C> <C>
4/86 - 11/86 30% 8 mos. 19 mos. 26%
8/93 - 2/94 26% 7 mos. 23 mos. 27%
1/92 - 5/92 17% 5 mos. 2 mos. 45%
8/87 - 10/87 15% 3 mos. 8 mos. 38%
1/88 - 4/88 12% 4 mos. 2 mos. 42%
</TABLE>
This table shows the magnitude of the five largest declines in the Global
Diversified Portfolio since inception. The table also shows the duration of the
declines as well as the recovery period and the portfolio's composite return for
the following 12-month period.
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<PAGE> 89
SUPPLEMENTAL PERFORMANCE INFORMATION -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
TABLE 3 -- FOREIGN EXCHANGE PORTFOLIO
NOVEMBER 1990 -- JUNE 2000
WORST MONTHLY PERCENTAGE DRAW-DOWN (3): JULY 1991/17.01%
WORST PEAK-TO-VALLEY DRAW-DOWN (4): JULY 1993 -- JANUARY 1995/44.73%
[BAR GRAPH]
<TABLE>
<S> <C>
1990 -6.68%
1991 21.23%
1992 17.67%
1993 -8.49%
1994 -21.19%
1995 26.36%
1996 43.04%
1997 18.19%
1998 4.25%
1999 7.19%
2000 4.22%
</TABLE>
The Foreign Exchange Portfolio is the composite performance of all accounts
traded in the portfolio since its inception, net of all fees and commissions.
This is not the Trust's performance and individual accounts within the portfolio
may have had returns that differ from the portfolio composite. The bars
represent annual returns (calculated on a compounded monthly basis).
<TABLE>
<CAPTION>
RECOVERY RETURN FOR FOLLOWING
PERIOD DECLINE LENGTH PERIOD 12 - MO. PERIOD
<S> <C> <C> <C> <C>
8/93 - 1/95 45% 18 23 42%
11/90 - 2/91 28% 4 1 43%
7/91 - 4/92 24% 10 10 38%
4/95 - 6/95 14% 3 2 39%
1/98 - 2/98 12% 2 8 13%
</TABLE>
This table shows the magnitude of the five largest declines in the Foreign
Exchange Portfolio since inception. The table also shows the duration of the
declines as well as the recovery period and the portfolio's composite return for
the following 12-month period.
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<PAGE> 90
NOTES TO SUPPLEMENTAL PERFORMANCE INFORMATION
1. For the Financial, Metal & Energy Large Portfolio and the Global
Diversified Large Portfolio (Tables 1 and 2), the annual return is
calculated by compounding the monthly rates of return during the year.
The rate of return (ROR) for a month is calculated by dividing the net
profit or loss by the assets at the beginning of such month. Additions
and withdrawals occurring during the month are included as an addition
to or deduction from beginning net assets in the calculations of rates
of return, except for accounts which close on the last day of a month in
which case the withdrawal is not subtracted from beginning net assets
for purposes of this calculation. Beginning in January 1987, rate of
return is calculated using the Only Accounts Traded (OAT) method of
computation. This computation method is one of the methods approved by
the CFTC to reduce the distortion caused by significant additions or
withdrawals of capital during a month. The records of many of the
accounts in the tables prior to 1987 do not document the exact dates of
capital additions and withdrawals. Accordingly, there is insufficient
data to calculate rate of return during such periods using the OAT
method. Campbell & Company has no reason to believe that the pre-1987
annual rates of return would be materially different if the OAT method
were used to calculate such returns. The OAT method excludes from the
calculation of rate of return those accounts which had material
intra-month additions or withdrawals and accounts which were open for
only part of the month. In this way, the composite rate of return is
based on only those accounts whose rate of return is not distorted
through intra-month capital changes.
2. For the Foreign Exchange Portfolio (Table 3), Campbell & Company has
adopted a method of computing rate of return and performance disclosure,
referred to as the "Fully-Funded Subset" method, pursuant to an advisory
published by the CFTC. To qualify for the use of the Fully-Funded Subset
method, the advisory requires that certain computations be made in order
to arrive at the Fully-Funded Subset and that the accounts for which the
performance is so reported meet two tests which are designed to provide
assurance that the Fully-Funded Subset and the resultant rates of return
are representative of the trading program. Campbell & Company has
performed these tests for years subsequent to 1993. However, for 1993
and prior, due to cost considerations, the Fully-Funded Subset method
has not been used. Instead, the RORs reported are based on a computation
which uses the nominal values of all of the accounts included in the
composite tables, calculated in accordance with the OAT method as
described in Note 1. Campbell & Company believes that this method yields
substantially the same RORs as the Fully-Funded Subset method. And that
the RORs presented in this table are representative of the trading
portfolio for all periods presented. The annual return is calculated by
compounding the monthly rates of return during the year. The rate of
return for each year subsequent to 1993 is calculated by dividing net
performance of the Fully-Funded Subset by the beginning net assets of
the Fully-Funded Subset, except in months of significant additions or
withdrawals to the accounts in the Fully-Funded Subset. In such
instances, the Fully-Funded Subset is adjusted to exclude accounts with
significant additions or withdrawals that would materially distort the
rate of return pursuant to the Fully-Funded Subset method.
3. "WORST MONTHLY PERCENTAGE DRAW-DOWN" is the largest monthly loss
experienced by the Portfolio on a composite basis in any calendar month
expressed as a percentage of the total equity in the Portfolio and
includes the month and year of such draw-down. A small number of
accounts in the Portfolio composites have experienced monthly draw-downs
which are materially larger than the largest composite monthly
draw-down. These variances result from such factors as small account
size (i.e., accounts with net assets of less than the prescribed
Portfolio minimum, which therefore trade fewer contracts than the
standard Portfolio), intra-month account opening or closing, significant
intra-month additions or withdrawals, trading commissions in excess of
the stated average and investment restrictions imposed by the client.
4. "WORST PEAK-TO-VALLEY DRAW-DOWN" is the largest cumulative loss
experienced by the Portfolio on a composite basis in any consecutive
monthly period on a compounded basis and includes the time
-24-
<PAGE> 91
frame of such draw-down. A small number of accounts in the Portfolio
composites have experienced peak-to-valley draw-downs which are
materially larger than the largest composite peak-to-valley draw-down.
These variances result from such factors as small account size (i.e.,
accounts with net assets of less than the prescribed Portfolio minimum,
which therefore trade fewer contracts than the standard Portfolio),
intra-month account opening or closing, significant intra-month
additions or withdrawals, trading commissions in excess of the stated
average and investment restrictions imposed by the client.
5. Table 1 contains the composite performance of accounts traded pursuant
to the Financial, Metal & Energy Large Portfolio. The data presented
reflects the composite performance of 378 accounts traded according to
the Financial, Metal & Energy Large Portfolio. The data below is as of
June 30, 2000. From inception of Campbell & Company's Financial, Metal &
Energy Large Portfolio in April 1983, 363 accounts have been closed; 96
of the accounts closed transferred to the Financial, Metal & Energy
Small Portfolio. Of the remaining 267 closed accounts, 80 closed with a
profit and 187 closed with a loss. Fifteen accounts remained open, all
of which were profitable. The open accounts ranged in size from
$10,800,000 to in excess of $200,000,000, with an average account size
of approximately $105,500,000. The average composite monthly return for
the period from January 1995 through June 30, 2000 was 1.53% compared to
the average of average monthly returns for all accounts of 1.30% over
the same time period. The data in this composite table do not reflect
the performance of any one account. Therefore, an individual account may
have realized more or less favorable results than the composite results
indicate. The net performance figures used to determine the monthly
returns are net of management and incentive fees; these fees range from
0% to 6% for management fees and 15% to 25% for incentive fees. Prior to
January 1988, most of the client equity traded pursuant to the
Financial, Metal & Energy Portfolio consisted of one large account. Due
to client-imposed restrictions on this account and the small amount of
equity in other accounts, certain markets were not traded, including
stock indices, precious metals and energies. These differences affected
performance during this period.
6. Table 2 reflects the composite performance of all accounts (a total of
21 accounts) traded according to the Global Diversified Large Portfolio.
From inception of the Portfolio in February 1986, 19 accounts have been
closed; 10 of the accounts closed transferred to the Global Diversified
Small Portfolio. Of the remaining 9 closed accounts, 7 closed with a
profit and 2 closed with a loss. Both open accounts are profitable. The
average composite monthly return for the period from January 1995
through June 30, 2000 is 1.03% compared to the average of average
monthly returns for all accounts of 1.07% over the same time period. The
data in this composite table do not reflect the performance of any one
account. Therefore, an individual account may have realized more or less
favorable results than the composite results indicate.
7. Table 3 reflects the composite performance of all accounts (a total of
23 accounts) traded according to the Foreign Exchange Portfolio. From
inception of the Portfolio in November 1990, 20 accounts have been
closed; 6 with a profit and 14 with a loss. The 3 open accounts are
profitable. As of June 30, 2000, two of the accounts included notional
equity of $22,700,000. The average composite monthly return for the
period from January 1995 through June 30, 2000 is 1.58% compared to the
average of average monthly returns for all accounts of 1.51% over the
same time period. The data in this composite table do not reflect the
performance of any one account. Therefore, an individual account may
have realized more or less favorable results than the composite results
indicate.
-25-
<PAGE> 92
PRO FORMA PERFORMANCE INFORMATION
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
PRO FORMA PERFORMANCE OF THE FINANCIAL, METAL & ENERGY LARGE PORTFOLIO USING THE
CAMPBELL ALTERNATIVE ASSET TRUST EXPENSE STRUCTURE
JANUARY 1995 -- JUNE 2000
The capsule below contains the pro forma monthly rates of return for the
Financial, Metal & Energy Large Portfolio for the period January 1995 to June
2000. The returns were calculated using the actual expense structure for the
Trust and the gross trading performance of a large Campbell-advised account,
which trades pursuant to the Financial, Metal & Energy Large Portfolio.
WORST MONTHLY PERCENTAGE DRAW-DOWN (1): APRIL 1998/6.49%
WORST PEAK-TO-VALLEY DRAW-DOWN (1): MARCH 1997 -- MAY 1997/8.52%
<TABLE>
<CAPTION>
PRO FORMA RATE OF RETURN (2)
(Computed on a compounded monthly basis)
MONTH 2000 YTD 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
January 3.48% -4.71% 2.98% 5.06% 5.59% -4.28%
February -0.54% 1.71% -2.50% 2.42% -4.14% 4.73%
March -2.34% 1.03% 5.02% -2.26% 4.57% 7.56%
April -2.00% 5.47% -6.49% -3.46% 2.92% 1.32%
May 2.35% -3.10% 4.66% -3.03% -1.23% -0.26%
June 1.68% 4.75% 1.51% 2.60% 0.97% -1.37%
July -0.27% -3.68% 9.84% -0.32% -3.35%
August 1.23% 9.59% -5.18% 1.94% 6.19%
September 1.52% 3.12% 4.55% 1.76% -3.67%
October -3.82% 4.42% 2.11% 11.15% 1.61%
November 0.60% -0.44% 0.37% 11.69% -0.15%
December 3.68% 0.40% 4.69% -4.10% 5.17%
Year 2.51% 7.78% 19.02% 18.02% 33.74% 13.38%
</TABLE>
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF
WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL
OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND
THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL
TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR
EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING
PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY
AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE
MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING
RESULTS.
-26-
<PAGE> 93
NOTES TO PRO FORMA PERFORMANCE INFORMATION
(1)"Draw-down" means losses experienced by the pro forma Portfolio over a
specified period.
(2)The "Pro Forma Rate of Return" for a period is calculated by dividing
the pro forma net profit or loss by the assets at the beginning of such
period. Additions and withdrawals occurring during the period are
included as an addition to or deduction from beginning net assets in the
calculations of "Pro Forma Rates of Return". The beginning net assets,
additions, withdrawals, gross realized gain/loss, unrealized gain/loss
and interest income of a large Campbell-advised account, which trades
pursuant to the Financial, Metal and Energy Large Portfolio, were used
as the basis for calculating the Pro Forma Rate of Return. The actual
expected expenses of the Trust were used in the calculation of the Pro
Forma Rate of Return. These expenses include a 3.5% brokerage fee, of
which .65% is remitted to the clearing broker for execution and clearing
costs and .35% to the selling agents for ongoing administrative services
to the unitholders. Campbell & Company retains the remaining 2.5% as
management fees (2.0% for providing advisory services and 0.5% for
acting as managing operator). In addition, the Trust pays a performance
fee, equaling 20% of cumulative appreciation in net asset value per
unit, excluding interest income, after deduction for brokerage fees and
other expenses, to Campbell on a quarterly basis. Inception of trading
for this pro forma presentation is deemed to be January 1995, so no loss
carryforward prior to that date was utilized in calculating the
performance fee. The Trust also reimburses organization and offering
costs to Campbell & Company at the rate of 0.9% of net assets per annum
and pays other operating expenses, up to a maximum of 0.4% of average
month-end net assets per annum. The full 0.4% maximum was assumed for
the purposes of this calculation.
-27-
<PAGE> 94
EXHIBIT A
CAMPBELL ALTERNATIVE ASSET TRUST
AMENDED AND RESTATED
DECLARATION OF TRUST AND TRUST AGREEMENT
This Declaration of Trust and Trust Agreement (the "Declaration of Trust
Agreement") is made as of ________________, by and among Campbell & Company,
Inc., a Maryland corporation (the "Managing Owner"), First Union Trust Company,
National Association, a national banking association, as trustee (the "Trustee")
and each other party who becomes a party to this Declaration of Trust Agreement
as an owner of a unit ("Unit") of beneficial interest of the Trust or who
becomes a party to this Declaration of Trust as a Unitholder by execution of a
Subscription Agreement and Power of Attorney Signature Page or otherwise and who
is shown in the books and records of the Trust as a Unitholder (individually, a
"Unitholder" and, collectively, the "Unitholders").
WITNESSETH:
WHEREAS, the Managing Owner and the Trustee, formed a business trust
pursuant to and in accordance with the Delaware Business Trust Act, 12 Del.
C.sec. 3801, et seq., as amended from time to time (the "Act"), by executing the
Declaration of Trust and Trust Agreement dated as of May 1, 2000 and by filing a
Certificate of Trust with the office of the Secretary of State of the State of
Delaware on May 3, 2000 (a copy of which is attached in Schedule A); and
WHEREAS, a Certificate of Amendment to the Certificate of Trust was filed
with the office of the Secretary of State of the State of Delaware on October
16, 2000 (a copy of which is attached in Schedule A) which amended the name of
the Trust from "Campbell Asset Allocation Trust" to "Campbell Alternative Asset
Trust"; and
WHEREAS, the parties hereto desire to continue the Trust for the business
and purpose of issuing Units, the capital of which shall be used to engage in
trading, buying, selling or otherwise acquiring, holding or disposing of futures
contracts, forward contracts, foreign exchange commitments, swaps, exchange for
physicals, spot (cash) commodities, hybrid instruments, securities and other
items, options on and any rights pertaining to the foregoing throughout the
world with the objective of capital appreciation through speculative trading by
allocating Trust Assets to Campbell & Company and independent professional
trading advisors ("Advisors") selected from time to time by the Managing Owner.
NOW THEREFORE, the parties hereto agree as follows:
1. Declaration of Trust.
The Managing Owner hereby acknowledges that the Trust has received the sum
of $2,000 in a bank account opened in the name of the Trust from the Managing
Owner as grantor of the Trust, and the Trustee hereby declares that such sums
shall be held in such bank account in trust upon and subject to the conditions
set forth herein for the use and benefit of the Unitholders. It is the intention
of the parties hereto that the Trust shall be a business trust under the Act,
and that this Declaration of Trust shall constitute the governing instrument of
the Trust. The Trustee has filed the Certificate of Trust required by Section
3810 of the Act.
Nothing in this Declaration of Trust shall be construed to make the
Unitholders partners or members of a joint stock association except to the
extent that such Unitholders, as constituted from time to time, are deemed to be
partners under the Internal Revenue Code of 1986, as amended (the "Code"), and
applicable state and local tax laws. Notwithstanding the foregoing, it is the
intention of the parties hereto that the Trust be treated as a partnership for
purposes of taxation under the Code and applicable state and local tax laws.
Effective as of the date hereof, the Trustee shall have all of the rights,
powers and duties set forth herein and in the Act with respect to accomplishing
the purposes of the Trust.
A-1
<PAGE> 95
2. The Trustee.
(a) Term; Resignation.
(i) First Union Trust Company, National Association has been appointed
and hereby agrees to serve as the Trustee of the Trust. The Trust shall
have only one trustee unless otherwise determined by the Managing Owner.
The Trustee shall serve until such time as the Managing Owner removes the
Trustee or the Trustee resigns and a successor Trustee is appointed by the
Managing Owner in accordance with the terms of Section 2(e) hereof.
(ii) The Trustee may resign at any time upon the giving of at least
sixty (60) days' advance written notice to the Trust; provided, that such
resignation shall not become effective unless and until a successor Trustee
shall have been appointed by the Managing Owner in accordance with Section
2(e) hereof. If the Managing Owner does not act within such sixty (60) day
period, the Trustee may apply to the Court of Chancery of the State of
Delaware for the appointment of a successor Trustee.
(b) Powers. Except to the extent expressly set forth in this Section 2,
Section 3 and Section 23, the duty and authority of the Trustee to manage the
business and affairs of the Trust are hereby delegated to the Managing Owner.
The Trustee shall have only the rights, obligations or liabilities specifically
provided for herein and in the Act and shall have no implied rights, obligations
or liabilities with respect to the business or affairs of the Trust. The Trustee
shall have the power and authority to execute, deliver, acknowledge and file all
necessary documents, including any amendments to or cancellation of the
Certificate of Trust as required by the Act. The Trustee shall provide prompt
notice to the Managing Owner of its performance of any of the foregoing. The
Managing Owner shall keep the Trustee informed of any actions taken by the
Managing Owner with respect to the Trust that affect the rights, obligations or
liabilities of the Trustee hereunder or under the Act.
(c) Compensation and Expenses of the Trustee. The Trustee shall be
entitled to receive from the Managing Owner reasonable compensation for its
services hereunder in accordance with the Trustee's standard fee schedule, and
shall be entitled to be reimbursed by the Managing Owner for reasonable out-
of-pocket expenses incurred by the Trustee in the performance of its duties
hereunder, including without limitation, the reasonable compensation,
out-of-pocket expenses and disbursements of counsel and such other agents as the
Trustee may employ in connection with the exercise and performance of its rights
and duties hereunder, to the extent attributable to the Trust.
(d) Indemnification. The Managing Owner agrees, whether or not any of the
transactions contemplated hereby shall be consummated, to assume liability for,
and does hereby indemnify, protect, save and keep harmless the Trustee and its
successors, assigns, legal representatives, officers, directors, agents and
servants (the "Indemnified Parties") from and against any and all liabilities,
obligations, losses, damages, penalties, taxes (excluding any taxes payable by
the Trustee on or measured by any compensation received by the Trustee for its
services hereunder or as indemnity payments pursuant to this Section 2(d)),
claims, actions, suits, costs, expenses or disbursements (including legal fees
and expenses) of any kind and nature whatsoever (collectively, "Expenses"),
which may be imposed on, incurred by or asserted against the Indemnified Parties
in any way relating to or arising out of the formation, operation or termination
of the Trust, the execution, delivery and performance of any other agreements to
which the Trust is a party or the action or inaction of the Trustee hereunder or
thereunder, except for Expenses resulting from the gross negligence or willful
misconduct of the Indemnified Parties. The indemnities contained in this Section
2(d) shall survive the termination of this Declaration of Trust or the removal
or resignation of the Trustee. The Trustee nevertheless agrees that it will, at
its own cost and expense, promptly take all action as may be necessary to
discharge any liens on any part of the Trust Estate which result from claims
against the Trustee personally that are not related to the ownership or the
administration of the Trust Estate or the transactions contemplated by any
documents to which the Trust is a party.
A-2
<PAGE> 96
(e) Successor Trustee. Upon the resignation or removal of the Trustee,
the Managing Owner shall appoint a successor Trustee by delivering a written
instrument to the outgoing Trustee. Any successor Trustee must satisfy the
requirements of Section 3807 of the Act. Any resignation or removal of the
Trustee and appointment of a successor Trustee shall not become effective until
a written acceptance of appointment is delivered by the successor Trustee to the
outgoing Trustee and the Managing Owner and any fees and expenses due to the
outgoing Trustee are paid. Following compliance with the preceding sentence, the
successor Trustee shall become fully vested with all of the rights, powers,
duties and obligations of the outgoing Trustee under this Declaration of Trust,
with like effect as if originally named as Trustee, and the outgoing Trustee
shall be discharged of its duties and obligations under this Declaration of
Trust. Any successor Trustee appointed hereunder shall promptly file an
amendment to the Certificate of Trust reflecting the identity and principal
place of business of such successor Trustee in the State of Delaware.
(f) Liability of the Trustee. Except as otherwise provided in this
Section 2, in accepting the trust created hereby, First Union Trust Company,
National Association acts solely as Trustee hereunder and not in its individual
capacity, and all persons having any claim against the Trustee by reason of the
transactions contemplated by this Declaration of Trust and any other agreement
to which the Trust is a party shall look only to any cash, net equity in any
commodity futures, forward and option contracts, all funds on deposit in the
accounts of the Trust, any other property held by the Trust, and all proceeds
therefrom, including any rights of the Trust pursuant to any agreements to which
this Trust is a party (the "Trust Estate") for payment or satisfaction thereof.
The Trustee shall not be liable or accountable hereunder or under any other
agreement to which the Trust is a party, except for the Trustee's own gross
negligence or willful misconduct. In particular, but not by way of limitation:
(i) the Trustee shall have no liability or responsibility for the
validity or sufficiency of this Declaration of Trust or for the form,
character, genuineness, sufficiency, value or validity of the Trust Estate;
(ii) the Trustee shall not be liable for any actions taken or omitted
to be taken by it in accordance with the instructions of the Managing
Owner;
(iii) the Trustee shall not have any liability for the acts or
omissions of the Managing Owner;
(iv) the Trustee shall not be liable for its failure to supervise the
performance of any obligations of the Managing Owner, any clearing broker,
any selling agents or any additional selling agents;
(v) no provision of this Declaration of Trust shall require the
Trustee to expend or risk funds or otherwise incur any financial liability
in the performance of any of its rights or powers hereunder if the Trustee
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
or provided to it;
(vi) under no circumstances shall the Trustee be liable for
indebtedness evidenced by or other obligations of the Trust arising under
this Declaration of Trust or any other agreements to which the Trust is a
party;
(vii) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Declaration of Trust, or to
institute, conduct or defend any litigation under this Declaration of Trust
or any other agreements to which the Trust is a party, at the request,
order or direction of the Managing Owner or any Unitholders unless the
Managing Owner or such Unitholders have offered to the Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities
that may be incurred by the Trustee (including, without limitation, the
reasonable fees and expenses of its counsel) therein or thereby; and
(viii) notwithstanding anything contained herein to the contrary, the
Trustee shall not be required to take any action in any jurisdiction other
than in the State of Delaware if the taking of such action will (a) require
the consent or approval or authorization or order of or the giving of
notice
A-3
<PAGE> 97
to, or the registration with or taking of any action in respect of, any
state or other governmental authority or agency of any jurisdiction other
than the State of Delaware, (b) result in any fee, tax or other
governmental charge under the laws of any jurisdiction or any political
subdivision thereof in existence as of the date hereof other than the State
of Delaware becoming payable by the Trustee or (c) subject the Trustee to
personal jurisdiction other than in the State of Delaware for causes of
action arising from personal acts unrelated to the consummation by the
Trustee of the transactions contemplated hereby.
(g) Reliance by the Trustee and the Managing Owner; Advice of Counsel.
(i) In the absence of bad faith, the Trustee and the Managing Owner
may conclusively rely upon certificates or opinions furnished to the
Trustee or the Managing Owner and conforming to the requirements of this
Declaration of Trust in determining the truth of the statements and the
correctness of the opinions contained therein, and shall incur no liability
to anyone in acting on any signature, instrument, notice, resolution,
request, consent, order, certificate, report, opinion, bond or other
document or paper which is believed to be genuine and believed to be signed
by the proper party or parties, and need not investigate any fact or matter
pertaining to or in any such document; provided, however, that the Trustee
or the Managing Owner shall have examined any certificates or opinions so
as to determine compliance of the same with the requirements of this
Declaration of Trust. The Trustee or the Managing Owner may accept a
certified copy of a resolution of the board of directors or other governing
body of any corporate party as conclusive evidence that such resolution has
been duly adopted by such body and that the same is in full force and
effect. As to any fact or matter the method of the determination of which
is not specifically prescribed herein, the Trustee or the Managing Owner
may for all purposes hereof rely on a certificate, signed by the president
or any vice president or by the treasurer or other authorized officers of
the relevant party, as to such fact or matter, and such certificate shall
constitute full protection to the Trustee or the Managing Owner for any
action taken or omitted to be taken by either of them in good faith in
reliance thereon.
(ii) In the exercise or administration of the trust hereunder and in
the performance of its duties and obligations under this Declaration of
Trust, the Trustee, at the expense of the Trust, (i) may act directly or
through its agents, attorneys, custodians or nominees pursuant to
agreements entered into with any of them, and the Trustee shall not be
liable for the conduct or misconduct of such agents, attorneys, custodians
or nominees if such agents, attorneys, custodians or nominees shall have
been selected by the Trustee with reasonable care and (ii) may consult with
counsel, accountants and other skilled professionals to be selected with
reasonable care by the Trustee; provided that the Trustee shall not
allocate any of its internal expenses or overhead to the account of the
Trust. The Trustee shall not be liable for anything done, suffered or
omitted in good faith by it in accordance with the opinion or advice of any
such counsel, accountant or other such persons.
(h) Not Part of Trust Estate. Amounts paid to the Trustee from the Trust
Estate, if any, pursuant to this Section 2 shall be deemed not to be part of the
Trust Estate immediately after such payment.
3. Principal Office.
The address of the principal office of the Trust shall be c/o the Managing
Owner, Court Towers Building, 210 West Pennsylvania Avenue, Towson, Maryland
21204; telephone: (410) 296-3301. The Trustee is located at One Rodney Square,
Suite 102, 920 King Street, Wilmington, Delaware 19801, telephone: (302)
888-7528. The Trustee shall receive service of process on the Trust in the State
of Delaware at the foregoing address. In the event First Union Trust Company,
National Association resigns or is removed as the Trustee, the Trustee of the
Trust in the State of Delaware shall be the successor Trustee.
4. Business.
The Trust's business and purpose is to trade, buy, sell, swap or otherwise
acquire, hold or dispose of commodities (including, but not limited to, foreign
currencies, mortgage-backed securities, money market
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instruments, financial instruments, and any other securities or items which are
now, or may hereafter be, the subject of futures contract trading), domestic and
foreign commodity futures contracts, commodity forward contracts, foreign
exchange commitments, options on physical commodities and on futures contracts,
spot (cash) commodities and currencies, securities (such as United States
Treasury securities) approved by the Commodity Futures Trading Commission
("CFTC") for investment of customer funds and other securities on a limited
basis, and any rights pertaining thereto and any options thereon, whether traded
on an organized exchange or otherwise, and to engage in all activities
necessary, convenient or incidental thereto. The Trust may also engage in
"hedge," arbitrage and cash trading of any of the foregoing instruments. The
Trust may engage in such business and purpose either directly or through joint
ventures, entities or partnerships, provided that the Trust's participation in
any of the foregoing has no adverse economic or liability consequences for the
Unitholders, which consequences would not be present had the Trust engaged in
that same business or purpose directly. The objective of the Trust business is
appreciation of its assets through speculative trading.
5. Term, Dissolution, Fiscal Year.
(a) Term. The term of the Trust commenced on the day on which the
Declaration of Trust and Trust Agreement was executed and the Certificate of
Trust was filed with the Secretary of State of the State of Delaware pursuant to
the provisions of the Act and shall end upon the first to occur of the
following: (1) December 31, 2030; (2) receipt by the Managing Owner of an
approval to dissolve the Trust at a specified time by Unitholders owning Units
representing more than fifty percent (50%) of the outstanding Units then owned
by Unitholders, notice of which is sent by certified mail return receipt
requested to the Managing Owner not less than 90 days prior to the effective
date of such dissolution; (3) withdrawal, insolvency or dissolution of the
Managing Owner or any other event that causes the Managing Owner to cease to be
a managing owner unless (i) at the time of such event there is at least one
remaining managing owner of the Trust who carries on the business of the Trust
(and each remaining managing owner of the Trust is hereby authorized to carry on
the business of the Trust in such an event), or (ii) within one hundred twenty
days after such event Unitholders holding a majority of Units agree in writing
to continue the business of the Trust and to the appointment, effective as of
the date of such event, of one or more managing owners of the Trust; (4) a
decline in the aggregate Net Assets of the Trust to less than $500,000; (5)
dissolution of the Trust pursuant hereto; or (6) any other event which shall
make it unlawful for the existence of the Trust to be continued or require
termination of the Trust. In the event that the Managing Owner (or an affiliate
thereof) ceases to be the trust's managing owner, the word "Campbell" shall be
deleted from the name of the Trust, and any appropriate filings shall be made.
(b) Dissolution. Upon the occurrence of an event causing the dissolution
of the Trust, the Trust shall be dissolved and its affairs wound up. Upon
dissolution of the Trust, the Managing Owner, or another person approved by
holders of a majority of the Units, shall act as liquidator trustee.
(c) Fiscal Year. The fiscal year of the Trust shall begin on January 1 of
each year and end on the following December 31.
(d) Net Asset Value; Net Asset Value per Unit. The "Net Assets" of the
Trust are its assets less its liabilities determined in accordance with
generally accepted accounting principles. If a contract cannot be liquidated on
the day with respect to which Net Assets are being determined, the settlement
price on the first subsequent day on which the contract can be liquidated shall
be the basis for determining the liquidating value of such contract for such
day, or such other value as the Managing Owner may deem fair and reasonable. The
liquidating value of a commodity futures or option contract not traded on a
commodity exchange shall mean its liquidating value as determined by the
Managing Owner on a basis consistently applied for each different variety of
contract. Accrued Performance Fees (as described in the Prospectus, as defined
in Section 8 hereof) shall reduce Net Asset Value, even though such Performance
Fees may never, in fact, be paid. The "Net Asset Value per Unit" is the Net
Assets of the Trust divided by the number of Units outstanding as of the date of
determination. The Trust may issue an unlimited number of Units at the Net Asset
Value per Unit.
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6. Net Worth of Managing Owner.
The Managing Owner agrees that at all times so long as it remains managing
owner of the Trust, it will maintain its Net Worth at an amount not less than
$1,000,000.
The requirements of the preceding paragraph may be modified if the Managing
Owner obtains an opinion of counsel for the Trust that a proposed modification
will not adversely affect the classification of the Trust as a partnership for
federal income tax purposes and if such modification will reflect or exceed
applicable state securities and Blue Sky laws and qualify under any guidelines
or statements of policy promulgated by any body or agency constituted by the
various state securities administrators having jurisdiction in the premises.
7. Capital Contributions; Units.
The Unitholders' respective capital contributions to the Trust shall be as
shown on the books and records of the Trust.
The Managing Owner, so long as it is generally liable for the obligations
of the Trust, or any substitute managing owner, shall invest in the Trust, as a
general liability interest, sufficient capital so that the Managing Owner will
have at all times a capital account equal to 1% of the total capital accounts of
the Trust (including the Managing Owner's). The Managing Owner may withdraw any
interest it may have in excess of such requirement, and may redeem as of any
month-end any interest which it may acquire on the same terms as any Unitholder,
provided that it must maintain the minimum interest described in the preceding
sentence.
The requirements of the preceding paragraph may be modified if the Managing
Owner obtains an opinion of counsel for the Trust that a proposed modification
will not adversely affect the classification of the Trust as a partnership for
federal income tax purposes and if such modification will reflect or exceed
applicable state securities and Blue Sky laws and qualify under any guidelines
or statements of policy promulgated by any body or agency constituted by the
various state securities administrators having jurisdiction in the premises.
The Managing Owner may, without the consent of any Unitholders of the
Trust, admit to the Trust purchasers of Units as Unitholders of the Trust.
All Units subscribed for upon receipt of a check or draft of the subscriber
are issued subject to the collection of the funds represented by such check or
draft. In the event a check or draft of a subscriber for Units representing
payment for Units is returned unpaid, the Trust shall cancel the Units issued to
such subscriber represented by such returned check or draft. Any losses or
profits sustained by the Trust in connection with the Trust's commodity trading
allocable to such cancelled Units shall be deemed an increase or decrease in Net
Assets and allocated among the remaining Unitholders as described in Section 8.
The Trust may require a subscriber to reimburse the Trust for any expense or
loss (including any trading loss) incurred in connection with the issuance and
cancellation of any Units issued to him.
Any Units acquired by the Managing Owner or any of its affiliates will be
non-voting, and will not be considered outstanding for purposes of determining
whether the majority approval of the outstanding Units has been obtained. Such
Unitholder shall be deemed a beneficial owner within the meaning of the Act.
8. Allocation of Profits and Losses.
(a) Capital Accounts and Allocations. A capital account shall be
established for each Unit, and for the Managing Owner on a Unit-equivalent
basis. The balance of each Unit's capital account shall be the amount
contributed to the Trust with respect to such Unit, which amount shall be equal
to the Net Asset Value per Unit on the date each Unit is purchased after all
accrued fees and expenses, including Performance Fee accruals which may, in
fact, never be paid. As of the close of business (as determined by the Managing
Owner) on the last day of each month, any increase or decrease in the Trust's
Net Assets as compared to the last such determination of Net Assets shall be
credited or charged equally to the
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capital accounts of all Units then outstanding; provided that for purposes of
maintaining such capital accounts, amounts paid or payable to the Managing Owner
for items such as brokerage commissions and Performance Fees shall be treated as
if paid or payable to a third party and shall not be credited to the capital
account of the interest held by the Managing Owner.
For purposes of this Section 8, unless specified to the contrary, Units
redeemed as of the end of any month shall be considered outstanding as of the
end of such month.
(b) Allocation of Profit and Loss for Federal Income Tax Purposes. As of
the end of each fiscal year, the Trust's income and expense and capital gain or
loss shall be allocated among the Unitholders pursuant to the following
provisions of this Section 8(b) for federal income tax purposes. For purposes of
this Section 8(b), capital gain and capital loss shall be allocated separately
and not netted.
(1) First, items of ordinary income and expense (other than the
Performance Fee which shall be allocated as set forth in Section 8(b)(2))
shall be allocated pro rata among the Units outstanding as of the end of
each month in which the items of ordinary income and expense accrue.
(2) Second, any Performance Fee paid to the Managing Owner or any
other trading advisors of the Trust ("Advisors") shall be allocated among
the Units outstanding at any time during the fiscal year based upon the
ratio that each such Unit's Net Performance Fee (the excess, if any, of the
aggregate of all Performance Fees, as the case may be, allocated to the
capital account relating to such Unit over the aggregate of all "reversals"
of Performance Fees as the case may be, allocated to such Unit) bears to
the Net Performance Fee, as the case may be, of all Units; provided that
the Managing Owner may allocate Performance Fees first to Units whose Net
Asset Value was reduced by accrued Performance Fees upon redemption, in an
amount up to the amount of such reduction.
(3) Third, capital gain or loss shall be allocated as follows:
(A) There shall be established a tax account with respect to each
outstanding Unit. The balance of each tax account shall be the amount
paid to the Trust for each Unit. As of the end of each fiscal year:
(i) Each tax account shall be increased by the amount of income
or gain allocated to each Unit pursuant to Sections 8(b)(1) and
8(b)(3)(B) and (C).
(ii) Each tax account shall be decreased by the amount of
expense or loss allocated to each Unit pursuant to Sections 8(b)(1),
8(b)(2) and 8(b)(3)(D) and (E) and by the amount of any distributions
paid out with respect to the Units other than upon redemption.
(iii) When a Unit is redeemed, the tax account attributable to
such Unit (determined after making all allocations described in this
Section 8(b)) shall be eliminated.
(B) Each Unitholder who redeems a Unit during a fiscal year
(including Units redeemed as of the end of the last day of such fiscal
year) shall be allocated Capital Gain, if any, up to the amount of the
excess, if any, of the amount received in respect of the Units so
redeemed over the sum of the tax accounts (determined after making the
allocation described in Sections 8(b)(1) and 8(b)(2), but prior to
making the allocations described in this Section 8(b)(3)(B) or Section
8(b)(3)(D)) allocable to such Units (an "Excess"). In the event the
aggregate amount of Capital Gain available to be allocated pursuant to
this Section 8(b)(3)(B) is less than the aggregate amount of Capital
Gain required to be so allocated, the aggregate amount of available
Capital Gain shall be allocated among all such Unitholders in the ratio
which each such Unitholder's Excess bears to the aggregate Excess of all
such Unitholders.
(C) Capital Gain remaining after the allocation described in
Section 8(b)(3)(B) shall be allocated among all Unitholders who hold
Units outstanding as of the end of the applicable fiscal year (other
than Units redeemed as of the end of the last day of such fiscal year)
in proportion to their holdings of such Units.
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(D) Each Unitholder who redeems a Unit during a fiscal year
(including Units redeemed as of the end of the last day of such fiscal
year) shall be allocated Capital Loss, if any, up to the amount of the
sum of the excess of the tax accounts (determined after making the
allocations described in Sections 8(b)(1) and 8(b)(2), but prior to
making the allocations described in this Section 8(b)(3)(D) or Section
8(b)(3)(B)) allocable to the Units so redeemed over the amount received
in respect of such Units (a "Negative Excess"). In the event the
aggregate amount of available Capital Loss required to be allocated
pursuant to this Section 8(b)(3)(D) is less than the aggregate amount
required to be so allocated, the aggregate amount of available Capital
Loss shall be allocated among all such Unitholders in the ratio that
each such Unitholder's Negative Excess bears to the aggregate Negative
Excess of all such Unitholders.
(E) Capital Loss remaining after the allocation described in
Section 8(b)(3)(D) shall be allocated among all Unitholders who hold
Units outstanding as of the end of the applicable fiscal year (other
than Units redeemed as of the end of the last day of such fiscal year)
in proportion to their holdings of such Units.
(F) For purposes of this Section 8(b), "Capital Gain" or "Capital
Loss" shall mean gain or loss characterized as gain or loss from the
sale or exchange of a capital asset, as defined by the Code, including,
but not limited to, gain or loss required to be taken into account
pursuant to Section 1256 and Section 988 thereof.
(4) The allocation of profit and loss for federal income tax purposes
set forth herein is intended to allocate taxable profit and loss among
Unitholders generally in the ratio and to the extent that profit and loss
are allocated to such Unitholders so as to eliminate, to the extent
possible, any disparity between the Unitholder's capital account and his
tax account, consistent with principles set forth in Section 704 of the
Code, including without limitation a "Qualified Income Offset."
(5) The allocations of profit and loss to the Unitholders in respect
of the Units shall not exceed the allocations permitted under Subchapter K
of the Code, as determined by the Managing Owner, whose determination shall
be binding.
(6) The Managing Owner may adjust the allocations set forth in this
Section 8(b), in the Managing Owner's discretion, if the Managing Owner
believes that doing so will achieve more equitable allocations or
allocations more consistent with the Code.
(c) Performance Fees. Performance Fees shall be payable to the Managing
Owner as of the end of each calendar quarter and upon redemption of Units.
Performance Fees shall equal a percentage, as specified in the current
prospectus in respect of the Units, of New Appreciation (if any) calculated as
of the end of each calendar quarter and upon redemption of Units. New
Appreciation shall be calculated, not on a per-Unit basis, but on the basis of
the overall trading profits and losses of the Trust, net of all fees and
expenses paid or accrued other than the Performance Fee itself and after
subtraction of all interest income received by the Trust.
Performance Fees shall be paid by the Trust as a whole, irrespective of
whether the Net Asset Value has declined below the purchase price of such Unit.
Accrued Performance Fees shall reduce the redemption price of Units and shall be
paid to the Managing Owner upon redemption. The amount (if any) of the accrued
Performance Fee that shall be paid to the Managing Owner upon the redemption of
any Unit shall be determined by dividing the total Performance Fee as of such
redemption date by the number of Units then outstanding (including Units
redeemed as of such date); the remainder of the accrued Performance Fee shall be
paid to the Managing Owner on the last day of each calendar quarter.
For capital account purposes, accrued Performance Fees shall, in all cases,
be reflected equally as a reduction in the Net Asset Value per Unit of all Units
outstanding at the time the Performance Fee accrued, and reversals of accrued
Performance Fees shall equally increase the Net Asset Value per Unit of all
Units outstanding at the time of the accrual of such reversal, irrespective of
whether a particular Unit was outstanding when a particular Performance Fee was
accrued.
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In the event assets are withdrawn from an Advisor's account or the Trust as
a whole (other than to pay expenses), any loss carryforward shall be
proportionally reduced for purposes of calculating subsequent Performance Fees.
Loss carryforward reductions shall not be restored as a result of subsequent
additions of capital.
The Managing Owner may adjust the allocations set forth in this Section
8(c), in the Managing Owner's discretion, if the Managing Owner believes that
doing so will achieve more equitable allocations or allocations more consistent
with the Code.
(d) Expenses.
(1) The Managing Owner shall advance the organization and offering
expenses of the initial and continuous offerings of the Units, and no such
expenses shall be deducted from the proceeds of the offerings. The Managing
Owner shall be reimbursed such advanced amounts by the Trust via payments
equal to up to .075% per month (0.9% per annum) of the Trust's month-end
Net Asset Value. The Managing Owner shall have discretion to adopt
reasonable procedures to implement the authorization of such expenses,
including grouping expenses related to the same offering period and
expensing de minimis amounts as they are incurred. In the event the Trust
terminates prior to completion of the reimbursement, the Managing Owner
will not be entitled to receive additional reimbursement and the Trust will
have no obligation to make further reimbursement payments to the Managing
Owner. For purposes of this Agreement, organization and offering expenses
shall mean all costs paid or incurred by the Managing Owner or the Trust in
organizing the Trust and offering the Units, including legal and accounting
fees incurred, bank account charges, the fees paid to the Trustee as set
forth in Section 2(c) of this Agreement, all Blue Sky filing fees, filing
fees payable upon formation and activation of the Trust, and expenses of
preparing, printing and distributing the prospectus and registration
statement, but in no event shall exceed limits set forth in Article 9
herein or guidelines imposed by appropriate regulatory bodies.
(2) The Trust shall be obligated to pay all liabilities incurred by
it, including without limitation, (i) brokerage fees; (ii) operating
expenses and performances fees; (iii) legal and accounting fees; and (iv)
taxes and other extraordinary expenses incurred by the Trust. During any
year of operations, the Managing Owner shall be responsible for payment of
operating expenses in excess of 0.4% of the Trust's month-end Net Asset
Value during that year. Indirect expenses of the Managing Owner, such as
indirect salaries, rent and other overhead expenses, shall not be
liabilities of the Trust. The Trust shall receive all interest earned on
its assets.
(3) Compensation to any party, including the Managing Owner (or any
advisor which may be retained in the future), shall not exceed the
limitations imposed by the North American Securities Administrators
Association ("NASAA") currently in effect. In the event the compensation
exceeds such limitations, the Managing Owner shall promptly reimburse the
Trust for such excess.
(4) The Trust shall also be obligated to pay any costs of
indemnification to the extent permitted under Section 17 of this Agreement.
(e) Limited Liability of Unitholders. Each Unit, when purchased in
accordance with this Declaration of Trust and Trust Agreement, shall, except as
otherwise provided by law, be fully paid and nonassessable. Any provisions of
this Declaration of Trust and Trust Agreement to the contrary notwithstanding,
except as otherwise provided by law, no Unitholder shall be liable for Trust
obligations in excess of the capital contributed by such Unitholder, plus his
share of undistributed profits and assets. Each Unitholder will be entitled to
the same limitation of personal liability extended to stockholders of private
corporations for profit.
(f) Return of Capital Contributions. No Unitholder or subsequent assignee
shall have any right to demand the return of his capital contribution or any
profits added thereto, except through redeeming Units or upon dissolution of the
Trust, in each case as provided herein and in accordance with the Act. In no
event shall a Unitholder or subsequent assignee be entitled to demand or receive
property other than cash.
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9. Management of the Trust.
The Managing Owner, to the exclusion of all Unitholders, shall control,
conduct and manage the business of the Trust. The Managing Owner shall have sole
discretion in determining what distributions of profits and income, if any,
shall be made to the Unitholders (subject to the allocation provisions hereof),
shall execute various documents on behalf of the Trust and the Unitholders
pursuant to powers of attorney and supervise the liquidation of the Trust if an
event causing dissolution of the Trust occurs.
The Managing Owner may in furtherance of the business of the Trust cause
the Trust to retain Advisors, including, but not limited to, the Managing Owner,
to act in furtherance of the Trust's purposes set forth in Section 4, all as
described in the Prospectus relating to the offering of the Units in effect as
of the time that such Unitholder last purchased Units while in receipt of a
current Prospectus (the "Prospectus"). The Managing Owner may engage, and
compensate on behalf of the Trust from funds of the Trust, or agree to share
profits and losses with, such persons, firms or corporations, including (except
as described in this Declaration of Trust and Trust Agreement) the Managing
Owner and any affiliated person or entity, as the Managing Owner in its sole
judgment shall deem advisable for the conduct and operation of the business of
the Trust, provided, that no such arrangement shall allow brokerage commissions
paid by the Trust in excess of the amount described in the Prospectus or as
permitted under applicable North American Securities Administrators Association,
Inc. Guidelines for the Registration of Commodity Pool Programs ("NASAA
Guidelines") in effect as of the date of the Prospectus (i.e., 80% of the
published retail rate plus pit brokerage fees, or 14% annually -- including pit
brokerage and service fees -- of the Trust's average Net Assets, excluding the
assets not directly related to trading activity), whichever is higher. The
Managing Owner shall reimburse the Trust, on an annual basis, to the extent that
the Trust's brokerage commissions paid to the Managing Owner and the Quarterly
Performance Fee, as described in the Prospectus, have exceeded 14% of the
Trust's average Net Assets during the preceding year. The Managing Owner is
hereby specifically authorized to enter into, on behalf of the Trust, the
Advisory Agreements and the Selling Agreement as described in the Prospectus.
The Managing Owner shall not enter into an Advisory Agreement with any trading
advisor that does not satisfy the relevant experience (i.e., ordinarily a
minimum of three years) requirements under the NASAA Guidelines. The Trust's
brokerage commissions may not be increased without prior written notice to
Unitholders within sufficient time for the exercise of their redemption rights
prior to such increase becoming effective. Such notification shall contain a
description of Unitholder's voting and redemption rights and a description of
any material effect of such increase.
In addition to any specific contract or agreements described herein, the
Trust may enter into any other contracts or agreements specifically described in
or contemplated by the Prospectus without any further act, approval or vote of
the Unitholders, notwithstanding any other provisions of this Declaration of
Trust and Trust Agreement, the Act or any applicable law, rule or regulations.
The Managing Owner shall be under a fiduciary duty to conduct the affairs
of the Trust in the best interests of the Trust. The Unitholders will under no
circumstances be deemed to have contracted away the fiduciary obligations owed
them by the Managing Owner under the common law. The Managing Owner's fiduciary
duty includes, among other things, the safekeeping of all Trust funds and assets
and the use thereof for the benefit of the Trust. The Managing Owner shall at
all times act with integrity and good faith and exercise due diligence in all
activities relating to the conduct of the business of the Trust and in resolving
conflicts of interest. The Trust's brokerage arrangements shall be
non-exclusive, and the brokerage commissions paid by the Trust shall be
competitive. The Trust shall seek the best price and services available for its
commodity transactions.
The Managing Owner is hereby authorized to perform all other duties imposed
by Sections 6221 through 6234 of the Code on the Managing Owner as the "tax
matters partner" of the Trust.
The Trust shall make no loans to any party, and the funds of the Trust will
not be commingled with the funds of any other person or entity (deposit of funds
with a clearing broker, clearinghouse or forward dealer or entering into joint
ventures or partnerships shall not be deemed to constitute "commingling" for
these purposes). Except in respect of the Performance Fee, no person or entity
may receive, directly or
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indirectly, any advisory, management or performance fees, or any profit-sharing
allocation from joint ventures, partnerships or similar arrangements in which
the Trust participates, for investment advice or management who shares or
participates in any clearing brokerage commissions; no broker may pay, directly
or indirectly, rebates or give-ups to any trading advisor or manager or to the
Managing Owner or any of their respective affiliates in respect of sales of the
Units; and such prohibitions may not be circumvented by any reciprocal business
arrangements. The foregoing prohibition shall not prevent the Trust from
executing, at the direction of any Advisor, transactions with any futures
commission merchant, broker or dealer. No trading advisor for the Trust shall be
affiliated with the Trust's clearing broker, the Managing Owner or their
affiliates. The maximum period covered by any contract entered into by the
Trust, except for the various provisions of the Selling Agreement which survive
each closing of the sales of the Units, shall not exceed one year. Any material
change in the Trust's basic investment policies or structure shall require the
approval of Unitholders owning Units representing more than fifty percent (50%)
of all Units then owned by the Unitholders. Any agreements between the Trust and
the Managing Owner or any affiliate of the Managing Owner (as well as any
agreements between the Managing Owner or any affiliate of the Managing Owner and
any trading advisor) shall be terminable without penalty by the Trust upon no
more than 60 days' written notice. All sales of Units in the United States will
be conducted by registered brokers.
The Trust is prohibited from employing the trading technique commonly known
as "pyramiding" as such term is defined in Section I.B. of the NASAA Guidelines.
A trading manager or advisor of the Trust taking into account the Trust's open
trade equity on existing positions in determining generally whether to acquire
additional commodity positions on behalf of the Trust will not be considered to
be engaging in "pyramiding."
The Managing Owner may take such other actions on behalf of the Trust as
the Managing Owner deems necessary or desirable to manage the business of the
Trust.
The Managing Owner is engaged, and may in the future engage, in other
business activities and shall not be required to refrain from any other activity
nor forego any profits from any such activity, whether or not in competition
with the Trust. Unitholders may similarly engage in any such other business
activities. The Managing Owner shall devote to the Trust such time as the
Managing Owner may deem advisable to conduct the Trust's business and affairs.
10. Audits and Reports to Unitholders.
The Trust books shall be audited annually by an independent certified
public accountant. The Trust will use its best efforts to cause each Unitholder
to receive (i) within 90 days after the close of each fiscal year certified
financial statements of the Trust for the fiscal year then ended, (ii) within 90
days of the end of each fiscal year (but in no event later than March 15 of each
year) such tax information as is necessary for a Unitholder to complete his
federal income tax return and (iii) such other annual and monthly information as
the CFTC may by regulation require. The Trust shall notify Unitholders within
seven business days of any material change (i) in the agreements with the
Trust's Advisors, including any modification in the method of calculating the
advisory fee and (ii) in the compensation of any party relating to the Trust.
Unitholders or their duly authorized representatives may inspect the Trust books
and records during normal business hours upon reasonable written notice to the
Managing Owner and obtain copies of such records (including by post upon payment
of reasonable mailing costs), upon payment of reasonable reproduction costs;
provided, however, upon request by the Managing Owner, the Unitholder shall
represent that the inspection and/or copies of such records will not be for
commercial purposes unrelated to such Unitholder's interest as a beneficial
owner of the Trust. The Managing Owner shall have the right to keep confidential
from the Unitholders, for such period of time as the Managing Owner deems
reasonable, any information that the Managing Owner reasonably believes that the
Trust is required by law or by agreement with a third party to keep
confidential.
The Managing Owner shall calculate the approximate Net Asset Value per Unit
on a daily basis and furnish such information upon request to any Unitholder.
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The Managing Owner shall maintain and preserve all Trust records for a
period of not less than six (6) years.
The Managing Owner will, with the assistance of the Trust's clearing
broker, make an annual review of the clearing brokerage arrangements applicable
to the Trust. In connection with such review, the Managing Owner will ascertain,
to the extent practicable, the clearing brokerage rates charged to other major
commodity pools whose trading and operations are, in the opinion of the Managing
Owner, comparable to those of the Trust in order to assess whether the rates
charged the Trust are competitive in light of the services it receives. If, as a
result of such review, the Managing Owner determines that such rates are not
competitive in light of the services provided to the Trust, the Managing Owner
will notify the Unitholders, setting forth the rates charged to the Trust and
several funds which are, in the Managing Owner's opinion, comparable to the
Trust.
11. Assignability of Units.
Each Unitholder expressly agrees that he will not voluntarily assign,
transfer or dispose of, by gift or otherwise, any of his Units or any part or
all of his right, title and interest in the capital or profits of the Trust in
violation of any applicable federal or state securities laws or without giving
written notice to the Managing Owner at least 30 days prior to the date of such
assignment, transfer or disposition. No assignment, transfer or disposition by
an assignee of Units or of any part of his right, title and interest in the
capital or profits of the Trust shall be effective against the Trust or the
Managing Owner until the Managing Owner receives the written notice of the
assignment; the Managing Owner shall not be required to give any assignee any
rights hereunder prior to receipt of such notice. The Managing Owner may, in its
sole discretion, waive any such notice. No such assignee, except with the
consent of the Managing Owner, which consent may be withheld in the absolute
discretion of the Managing Owner, may become a substituted Unitholder, nor will
the estate or any beneficiary of a deceased Unitholder or assignee have any
right to redeem Units from the Trust except by redemption as provided in Section
12 hereof. Each Unitholder agrees that with the consent of the Managing Owner
any assignee may become a substituted Unitholder without need of the further act
or approval of any Unitholder. If the Managing Owner withholds consent, an
assignee shall not become a substituted Unitholder, and shall not have any of
the rights of a Unitholder, except that the assignee shall be entitled to
receive that share of capital and profits and shall have that right of
redemption to which his assignor would otherwise have been entitled. No
assignment, transfer or disposition of Units shall be effective against the
Trust or the Managing Owner until the first day of the month succeeding the
month in which the Managing Owner consents to such assignment, transfer or
disposition. No Units may be transferred where, after the transfer, either the
transferee or the transferor would hold less than the minimum number of Units
equivalent to an initial minimum purchase, except for transfers by gift,
inheritance, intrafamily transfers, family dissolutions, and transfers to
Affiliates.
12. Redemptions.
A Unitholder or any assignee of Units of whom the Managing Owner has
received written notice as described above may redeem all or any of his Units
(such redemption being herein referred to as a "redemption") effective as of the
close of business (as determined by the Managing Owner) on the last day of any
month; provided that: (i) all liabilities, contingent or otherwise, of the Trust
(including the Trust's allocable share of the liabilities, contingent or
otherwise, of any entities in which the Trust invests), except any liability to
Unitholders on account of their capital contributions, have been paid or there
remains property of the Trust sufficient to pay them; and (ii) the Managing
Owner shall have timely received a request for redemption, as provided in the
following paragraph.
Requests for redemption must be received by the Managing Owner at least ten
calendar days, or such lesser period as shall be acceptable to the Managing
Owner, in advance of the requested effective date of redemption. The Managing
Owner may declare additional redemption dates upon notice to the Unitholders as
well as to those assignees of whom the Managing Owner has received notice as
described above.
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If at the close of business (as determined by the Managing Owner) on any
day, the Net Asset Value per Unit has decreased to less than 50% of the Net
Asset Value per Unit as of the most recent month-end, after adding back all
distributions, the Trust shall notify Unitholders within seven business days and
shall liquidate all open positions as expeditiously as possible and suspend
trading. Within ten business days after the date of suspension of trading, the
Managing Owner (and any other managing owners of the Trust) shall declare a
Special Redemption Date. Such Special Redemption Date shall be a business day
within 30 business days from the date of suspension of trading by the Trust, and
the Managing Owner shall mail notice of such date to each Unitholder and
assignee of Units of whom it has received written notice, by first-class mail,
postage prepaid, not later than ten business days prior to such Special
Redemption Date, together with instructions as to the procedure such Unitholder
or assignee must follow to have his interest in the Trust redeemed on such date
(only entire, not partial, interests may be so redeemed unless otherwise
determined by the Managing Owner). Upon redemption pursuant to a Special
Redemption Date, a Unitholder or any other assignee of whom the Managing Owner
has received written notice as described above, shall receive from the Trust an
amount equal to the Net Asset Value of his interest in the Trust, determined as
of the close of business (as determined by the Managing Owner) on such Special
Redemption Date. No redemption charges shall be assessed on any such Special
Redemption Date. As in the case of a regular redemption, an assignee shall not
be entitled to redemption until the Managing Owner has received written notice
(as described above) of the assignment, transfer or disposition under which the
assignee claims an interest in the Units to be redeemed. If, after such Special
Redemption Date, the Net Assets of the Trust are at least $500,000 and the Net
Asset Value of a Unit is in excess of $250, the Trust may, in the discretion of
the Managing Owner, resume trading. The Managing Owner may at any time and in
its discretion declare a Special Redemption Date, should the Managing Owner
determine that it is in the best interests of the Trust to do so. The Managing
Owner in its notice of a Special Redemption Date may, in its discretion,
establish the conditions, if any, under which other Special Redemption Dates
must be called, which conditions may be determined in the sole discretion of the
Managing Owner, irrespective of the provisions of this paragraph. The Managing
Owner may also, in its discretion, declare additional regular redemption dates
for Units and permit certain Unitholders to redeem at other than month-end.
Redemption payments will be made within twenty business days after the
month-end of redemption, except that under special circumstances, including, but
not limited to, inability to liquidate dealers' positions as of a redemption
date or default or delay in payments due the Trust from clearing brokers, banks
or other persons or entities, the Trust may in turn delay payment to Unitholders
or assignees requesting redemption of their Units of the proportionate part of
the Net Asset Value of such Units equal to that proportionate part of the
Trust's aggregate Net Asset Value represented by the sums which are the subject
of such default or delay.
The Managing Owner may require a Unitholder to redeem all or a portion of
such Unitholder's Units if the Managing Owner considers doing so to be desirable
for the protection of the Trust, and will use best efforts to do so to the
extent necessary to prevent the Trust from being deemed to hold "plan assets"
under the provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the Code, with respect to any "employee benefit plan"
subject to ERISA or with respect to any plan or account subject to Section 4975
of the Code.
13. Offering of Units.
The Managing Owner on behalf of the Trust shall (i) cause to be filed a
Registration Statement or Registration Statements, and such amendments thereto
as the Managing Owner deems advisable, with the Securities and Exchange
Commission for the registration and ongoing public offering of the Units, (ii)
use its best efforts to qualify and to keep qualified Units for sale under the
securities laws of such States of the United States or other jurisdictions as
the Managing Owner shall deem advisable and (iii) take such action with respect
to the matters described in (i) and (ii) as the Managing Owner shall deem
advisable or necessary.
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The Managing Owner shall use its best efforts not to accept any
subscriptions for Units if doing so would cause the Trust to hold "plan assets"
under ERISA or the Code with respect to any "employee benefit plan" subject to
ERISA or with respect to any plan or account subject to Section 4975 of the
Code. If such a subscriber has its subscription reduced for such reason, such
subscriber shall be entitled to rescind its subscription in its entirety even
though subscriptions are otherwise irrevocable.
14. Additional Offerings.
The Managing Owner may, in its discretion, make additional public or
private offerings of Units, provided that the net proceeds to the Trust of any
such sales shall in no event be less than the Net Asset Value per Unit (as
defined in Section 5(d) hereof) at the time of sale (unless the new Unit's
participation in the profits and losses of the Trust is appropriately adjusted).
No Unitholder shall have any preemptive, preferential or other rights with
respect to the issuance or sale of any additional Units, other than as set forth
in the preceding sentence.
The Trust may offer different series or classes of Units having different
economic terms than previously offered series or classes of Units; provided that
the issuance of such a new series or class of Units shall in no respect
adversely affect the holders of outstanding Units; and provided further that the
assets attributable to each such series or class shall, to the maximum extent
permitted by law, be treated as legally separate and distinct pools of assets,
and the assets attributable to one such series or class be prevented from being
used in any respect to satisfy or discharge any debt or obligation of any other
such series or class.
15. Special Power of Attorney.
Each Unitholder by his execution of this Declaration of Trust and Trust
Agreement does hereby irrevocably constitute and appoint the Managing Owner and
each officer of the Managing Owner, with power of substitution, as his true and
lawful attorney-in-fact, in his name, place and stead, to execute, acknowledge,
swear to (and deliver as may be appropriate) on his behalf and file and record
in the appropriate public offices and publish (as may in the reasonable judgment
of the Managing Owner be required by law): (i) this Declaration of Trust and
Trust Agreement, including any amendments and/or restatements hereto duly
adopted as provided herein; (ii) certificates in various jurisdictions, and
amendments and/or restatements thereto, and of assumed name or of doing business
under a fictitious name with respect to the Trust; (iii) all conveyances and
other instruments which the Managing Owner deems appropriate to qualify or
continue the Trust in the State of Delaware and the jurisdictions in which the
Trust may conduct business, or which may be required to be filed by the Trust or
the Unitholders under the laws of any jurisdiction or under any amendments or
successor statutes to the Act, to reflect the dissolution or termination of the
Trust or the Trust being governed by any amendments or successor statutes to the
Act or to reorganize or refile the Trust in a different jurisdiction; and (iv)
to file, prosecute, defend, settle or compromise litigation, claims or
arbitrations on behalf of the Trust. The Power of Attorney granted herein shall
be irrevocable and deemed to be a power coupled with an interest (including,
without limitation, the interest of the other Unitholders in the Managing Owner
being able to rely on the Managing Owner's authority to act as contemplated by
this Section 15) and shall survive and shall not be affected by the subsequent
incapacity, disability or death of a Unitholder.
16. Withdrawal of a Unitholder.
The Trust shall be dissolved upon the withdrawal, dissolution, insolvency
or removal of the Managing Owner, or any other event that causes the Managing
Owner to cease to be a managing owner under the Act, unless the Trust is
continued pursuant to the terms of Section 5(a)(3). In addition, the Managing
Owner may withdraw from the Trust, without any breach of this Declaration of
Trust and Trust Agreement, at any time upon 120 days' written notice by first
class mail, postage prepaid, to each Unitholder and assignee of whom the
Managing Owner has notice. If the Managing Owner withdraws as managing owner and
the Trust's business is continued, the withdrawing Managing Owner shall pay all
expenses incurred directly as a result of its withdrawal. In the event of the
Managing Owner's removal or
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withdrawal, the Managing Owner shall be entitled to a redemption of its interest
in the Trust at its Net Asset Value on the next closing date following the date
of removal or withdrawal.
The Managing Owner may not assign its general liability interest or its
obligation to direct the trading of the Trust assets without the consent of each
Unitholder.
The death, incompetency, withdrawal, insolvency or dissolution of a
Unitholder or any other event that causes a Unitholder to cease to be a
Unitholder (within the meaning of the Act) in the Trust shall not terminate or
dissolve the Trust, and a Unitholder, his estate, custodian or personal
representative shall have no right to redeem or value such Unitholder's interest
in the Trust except as provided in Section 12 hereof. Each Unitholder expressly
agrees that in the event of his death, he waives on behalf of himself and his
estate, and directs the legal representatives of his estate and any person
interested therein to waive, the furnishing of any inventory, accounting or
appraisal of the assets of the Trust and any right to an audit or examination of
the books of the Trust. Nothing in this Section 16 shall, however, waive any
right given elsewhere in this Declaration of Trust and Trust Agreement for a
Unitholder to be informed of the Net Asset Value of his Units, to receive
periodic reports, audited financial statements and other information from the
Managing Owner or the Trust or to redeem or transfer Units.
17. Standard of Liability; Indemnification.
(a) Standard of Liability for the Managing Owner. The Managing Owner and
its Affiliates, as defined below, shall have no liability to the Trust or to any
Unitholder for any loss suffered by the Trust which arises out of any action or
inaction of the Managing Owner or its Affiliates if the Managing Owner, in good
faith, determined that such course of conduct was in the best interests of the
Trust and such course of conduct did not constitute negligence or misconduct of
the Managing Owner or its Affiliates.
(b) Indemnification of the Managing Owner by the Trust. To the fullest
extent permitted by law, subject to this Section 17, the Managing Owner and its
Affiliates shall be indemnified by the Trust against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any claims sustained by
them in connection with the Trust; provided that such claims were not the result
of negligence or misconduct on the part of the Managing Owner or its Affiliates,
and the Managing Owner, in good faith, determined that such conduct was in the
best interests of the Trust; and provided further that Affiliates of the
Managing Owner shall be entitled to indemnification only for losses incurred by
such Affiliates in performing the duties of the Managing Owner and acting wholly
within the scope of the authority of the Managing Owner.
Notwithstanding anything to the contrary contained in the preceding two
paragraphs, the Managing Owner and its Affiliates and any persons acting as
Selling Agents for the Units shall not be indemnified for any losses,
liabilities or expenses arising from or out of an alleged violation of federal
or state securities laws unless (1) there has been a successful adjudication on
the merits of each count involving alleged securities law violations as to the
particular indemnitee and the court approves indemnification of the litigation
costs, or (2) such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular indemnitee and the court
approves indemnification of the litigation costs, or (3) a court of competent
jurisdiction approves a settlement of the claims against a particular indemnitee
and finds that indemnification of the settlement and related costs should be
made.
In any claim for indemnification for federal or state securities law
violations, the party seeking indemnification shall place before the court the
position of the Securities and Exchange Commission, the California Department of
Corporations, the Massachusetts Securities Division, the Missouri Securities
Division, the Pennsylvania Securities Commission, the Tennessee Securities
Division, the Texas Securities Board and any other state or applicable
regulatory authority with respect to the issue of indemnification for securities
law violations.
The Trust shall not bear the cost of that portion of any insurance which
insures any party against any liability the indemnification of which is herein
prohibited.
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For the purposes of this Section 17, the term "Affiliates" shall mean any
person acting on behalf of or performing services on behalf of the Trust who:
(1) directly or indirectly controls, is controlled by, or is under common
control with the Managing Owner; or (2) owns or controls 10% or more of the
outstanding voting securities of the Managing Owner; or (3) is an officer or
director of the Managing Owner; or (4) if the Managing Owner is an officer,
director, partner or trustee, is any entity for which the Managing Owner acts in
any such capacity.
Advances from Trust funds to the Managing Owner and its Affiliates for
legal expenses and other costs incurred as a result of any legal action
initiated against the Managing Owner by a Unitholder are prohibited.
Advances from Trust funds to the Managing Owner and its Affiliates for
legal expenses and other costs incurred as a result of a legal action will be
made only if the following three conditions are satisfied: (1) the legal action
relates to the performance of duties or services by the Managing Owner or its
Affiliates on behalf of the Trust; (2) the legal action is initiated by a third
party who is not a Unitholder; and (3) the Managing Owner or its Affiliates
undertake to repay the advanced funds, with interest from the date of such
advance, to the Trust in cases in which they would not be entitled to
indemnification under the standard of liability set forth in Section 17(a).
In no event shall any indemnity or exculpation provided for herein be more
favorable to the Managing Owner or any Affiliate than that contemplated by the
NASAA Guidelines as currently in effect.
In no event shall any indemnification permitted by this subsection (b) of
Section 17 be made by the Trust unless all provisions of this Section for the
payment of indemnification have been complied with in all respects. Furthermore,
it shall be a precondition of any such indemnification that the Trust receive a
determination of qualified independent legal counsel in a written opinion that
the party which seeks to be indemnified hereunder has met the applicable
standard of conduct set forth herein. Receipt of any such opinion shall not,
however, in itself, entitle any such party to indemnification unless
indemnification is otherwise proper hereunder. Any indemnification payable by
the Trust hereunder shall be made only as provided in the specific case.
In no event shall any indemnification obligations of the Trust under this
subsection (b) of this Section 17 subject a Unitholder to any liability in
excess of that contemplated by subsection (e) of Section 8 hereof.
(c) Indemnification of the Trust by the Unitholders. In the event the
Trust is made a party to any claim, dispute or litigation or otherwise incurs
any loss or expense as a result of or in connection with any Unitholder's
activities, obligations or liabilities unrelated to the Trust's business, such
Unitholder shall indemnify and reimburse the Trust for all loss and expense
incurred, including reasonable attorneys' fees.
18. Amendments; Meetings.
(a) Amendments with Consent of the Managing Owner. The Managing Owner may
amend this Declaration of Trust and Trust Agreement with the approval of the
majority of the Units. No meeting procedure or specified notice period is
required in the case of amendments made with the consent of the Managing Owner,
mere receipt of an adequate number of unrevoked written consents being
sufficient. The Managing Owner may amend this Declaration of Trust and Trust
Agreement without the consent of the Unitholders in order (i) to clarify any
clerical inaccuracy or ambiguity or reconcile any inconsistency (including any
inconsistency between this Declaration of Trust and Trust Agreement and the
Prospectus), (ii) to effect the intent of the tax allocations proposed herein to
the maximum extent possible in the event of a change in the Code or the
interpretations thereof affecting such allocations, (iii) to attempt to ensure
that the Trust is not treated as an association taxable as a corporation for
federal income tax purposes, (iv) to qualify or maintain the qualification of
the Trust as a trust in any jurisdiction, (v) to delete or add any provision of
or to this Declaration of Trust and Trust Agreement required to be deleted or
added by the Staff of the Securities and Exchange Commission or any other
federal agency or any state "Blue Sky" official or similar official or in order
to opt to be governed by any amendment or successor statute to the
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Act, (vi) to make any amendment to this Declaration of Trust and Trust Agreement
which the Managing Owner deems advisable, including amendments that reflect the
offering and issuance of additional Units, whether or not issued through a
series or class, provided that such amendment is not adverse to the Unitholders,
or that is required by law, and (vii) to make any amendment that is appropriate
or necessary, in the opinion of the Managing Owner, to prevent the Trust or the
Managing Owner or its directors, officers or controlling persons from in any
manner being subjected to the provisions of the Investment Company Act of 1940,
as amended, or to prevent the assets of the Trust from being considered for any
purpose of ERISA or Section 4975 of the Code to constitute assets of any
"employee benefit plan" as defined in and subject to ERISA or of any "plan"
subject to Section 4975 of the Code.
(b) Amendments and Actions without Consent of the Managing Owner. In any
vote called by the Managing Owner or pursuant to section (c) of this Section 18,
upon the affirmative vote (which may be in person or by proxy) of more than
fifty percent (50%) of the Units then owned by Unitholders, the following
actions may be taken, irrespective of whether the Managing Owner concurs: (i)
this Declaration of Trust and Trust Agreement may be amended, provided, however,
that approval of all Unitholders shall be required in the case of amendments
changing or altering this Section 18, extending the term of the Trust, or
materially changing the Trust's basic investment policies or structure; in
addition, reduction of the capital account of any Unitholder or assignee or
modification of the percentage of profits, losses or distributions to which a
Unitholder or an assignee is entitled hereunder shall not be effected by any
amendment or supplement to this Declaration of Trust and Trust Agreement without
such Unitholder's or assignee's written consent; (ii) the Trust may be
dissolved; (iii) the Managing Owner may be removed and replaced; (iv) a new
managing owner or managing owners may be elected if the Managing Owner withdraws
from the Trust; (v) the sale of all or substantially all of the assets of the
Trust may be approved; and (vi) any contract with the Managing Owner or any
affiliate thereof may be disapproved of and, as a result, terminated upon 60
days' notice.
(c) Meetings; Other Voting Matters. Any Unitholder upon request addressed
to the Managing Owner shall be entitled to obtain from the Managing Owner, upon
payment in advance of reasonable reproduction and mailing costs, a list of the
names and addresses of record of all Unitholders and the number of Units held by
each (which shall be mailed by the Managing Owner to the Unitholder within ten
days of the receipt of the request); provided, that the Managing Owner may
require any Unitholder requesting such information to submit written
confirmation that such information will not be used for commercial purposes.
Upon receipt of a written proposal, signed by Unitholders owning Units
representing at least 10% of the Units then owned by Unitholders, that a meeting
of the Trust be called to vote upon any matter upon which the Unitholders may
vote pursuant to this Declaration of Trust and Trust Agreement, the Managing
Owner shall, by written notice to each Unitholder of record sent by certified
mail within 15 days after such receipt, call a meeting of the Trust. Such
meeting shall be held at least 30 but not more than 60 days after the mailing of
such notice, and such notice shall specify the date of, a reasonable place and
time for, and the purpose of such meeting.
The Managing Owner may not restrict the voting rights of Unitholders as set
forth herein.
In the event that the Managing Owner or the Unitholders vote to amend this
Declaration of Trust and Trust Agreement in any material respect, the amendment
will not become effective prior to all Unitholders having an opportunity to
redeem their Units.
(d) Consent by Trustee. The Trustee's written consent to any amendment of
this Declaration of Trust and Trust Agreement shall be required, such consent
not to be unreasonably withheld; provided, however, that the Trustee may, in its
sole discretion, withhold its consent to any such amendment that would adversely
affect any right, duty or liability of, or immunity or indemnity in favor of,
the Trustee under this Declaration of Trust and Trust Agreement or any of the
documents contemplated hereby to which the Trustee is a party, or would cause or
result in any conflict with or breach of any terms, conditions or provisions of,
or default under, the charter documents or by-laws of the Trustee or any
document contemplated thereby to which the Trustee is a party.
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19. Governing Law.
THE VALIDITY AND CONSTRUCTION OF THIS DECLARATION OF TRUST AND TRUST
AGREEMENT SHALL BE DETERMINED AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CAUSES
OF ACTION FOR VIOLATIONS OF FEDERAL OR STATE SECURITIES LAWS SHALL NOT BE
GOVERNED BY THIS SECTION 19.
20. Miscellaneous.
(a) Notices. All notices under this Declaration of Trust and Trust
Agreement shall be in writing and shall be effective upon personal delivery, or
if sent by first class mail, postage prepaid, addressed to the last known
address of the party to whom such notice is to be given, upon the deposit of
such notice in the United States mail.
(b) Binding Effect. This Declaration of Trust and Trust Agreement shall
inure to and be binding upon all of the parties, all parties indemnified under
Sections 2 and 17 hereof, and their respective successors and assigns,
custodians, estates, heirs and personal representatives. For purposes of
determining the rights of any Unitholder or assignee hereunder, the Trust and
the Managing Owner may rely upon the Trust records as to who are Unitholders and
assignees, and all Unitholders and assignees agree that their rights shall be
determined and they shall be bound thereby.
(c) Captions. Captions in no way define, limit, extend or describe the
scope of this Declaration of Trust and Trust Agreement nor the effect of any of
its provisions. Any reference to "persons" in this Declaration of Trust and
Trust Agreement shall also be deemed to include entities, unless the context
otherwise requires.
21. Benefit Plan Investors.
Each Unitholder that is an "employee benefit plan" as defined in and
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or a "plan" as defined in Section 4975 of the Code (each such
employee benefit plan and plan, a "Plan"), and each fiduciary thereof who has
caused the Plan to become a Unitholder (a "Plan Fiduciary"), represents and
warrants that: (a) the Plan Fiduciary has considered an investment in the Trust
for such Plan in light of the risks relating thereto; (b) the Plan Fiduciary has
determined that, in view of such considerations, the investment in the Trust for
such Plan is consistent with the Plan Fiduciary's responsibilities under ERISA;
(c) the investment in the Trust by the Plan does not violate and is not
otherwise inconsistent with the terms of any legal document constituting the
Plan or any trust agreement thereunder; (d) the Plan's investment in the Trust
has been duly authorized and approved by all necessary parties; (e) none of the
Managing Owner, any Advisor to the Trust, any selling agent, the clearing
broker, the escrow agent, any broker or dealer through which any Advisor
requires the Trust to trade, the Trustee, any of their respective affiliates or
any of their respective agents or employees: (i) has investment discretion with
respect to the investment of assets of the Plan used to purchase the Units; (ii)
has authority or responsibility to or regularly gives investment advice with
respect to the assets of the Plan used to purchase the Units for a fee and
pursuant to an agreement or understanding that such advice will serve as a
primary basis for investment decisions with respect to the Plan and that such
advice will be based on the particular investment needs of the Plan; or (iii) is
an employer maintaining or contributing to the Plan; and (f) the Plan Fiduciary:
(i) is authorized to make, and is responsible for, the decision for the Plan to
invest in the Trust, including the determination that such investment is
consistent with the requirement imposed by Section 404 of ERISA that Plan
investments be diversified so as to the risks of large losses; (ii) is
independent of the Managing Owner, any Advisor to the Trust, any selling agent,
the clearing broker, the escrow agent, any broker or dealer through which any
Advisor requires the Trust to trade, the Trustee and any of their respective
affiliates; and (iii) is qualified to make such investment decision.
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22. No Legal Title to Trust Estate.
The Unitholders shall not have legal title to any part of the Trust Estate.
23. Legal Title.
Legal title to all the Trust Estate shall be vested in the Trust as a
separate legal entity; except where applicable law in any jurisdiction requires
any part of the Trust Estate to be vested otherwise, the Managing Owner (or the
Trustee, if required by law) may cause legal title to the Trust Estate of any
portion thereof to be held by or in the name of the Managing Owner or any other
person as nominee.
24. Creditors.
No creditors of any Unitholders shall have any right to obtain possession
of, or otherwise exercise legal or equitable remedies with respect to, the Trust
Estate.
IN WITNESS WHEREOF, the undersigned have duly executed this Amended and
Restated Declaration of Trust and Trust Agreement as of the day and year first
above written.
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION
as Trustee
By:
--------------------------------------
Name:
Title:
CAMPBELL & COMPANY, INC.
as Managing Owner
By:
--------------------------------------
Name:
Title:
All Unitholders now and hereafter
admitted as Unitholders of the Trust,
pursuant to powers of attorney now and
hereafter executed in favor of, and
granted and delivered to, the Managing
Owner.
By: CAMPBELL & COMPANY, INC.
ATTORNEY-IN-FACT
By:
--------------------------------------
Name:
Title:
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SCHEDULE A
CERTIFICATE OF TRUST
OF
CAMPBELL ASSET ALLOCATION TRUST
THIS Certificate of Trust of CAMPBELL ASSET ALLOCATION TRUST (the "Trust"),
dated May 1, 2000, is being duly executed and filed by First Union Trust
Company, National Association, a national banking association, as trustee, to
form a business trust under the Delaware Business Trust Act (12 Del.C. 3801 et
seq.) (the "Act").
1. Name. The name of the business trust formed hereby is Campbell Asset
Allocation Trust.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware is First Union Trust Company, National
Association, One Rodney Square, Suite 102, 920 King Street, Wilmington,
Delaware 19801.
3. Series Trust. The Trust shall be a series trust and shall issue series
of beneficial interests having separate rights, powers and duties with
respect to property or obligations of the Trust, as provided in Sections
3804 and 3806(b)(2) of the Act, such that the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing
with respect to a particular series shall be enforceable against the
assets of such series only, and not against the assets of the Trust
generally or any other series.
4. Effective Date. This Certificate of Trust shall be effective upon the
date and time of filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has executed this Certificate of Trust as of the date first above written in
accordance with Section 3811(a) of the Act.
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION
as Trustee
By: /s/ STERLING C. CORREIA
-------------------------------------
Name: Sterling C. Correia
Title: Vice President
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CERTIFICATE OF AMENDMENT
OF
CAMPBELL ASSET ALLOCATION TRUST
FIRST: The name of the business trust is Campbell Asset Allocation Trust.
SECOND: Article I of the Certificate of Trust of the business trust is
hereby amended as follows:
1. The name of the business trust formed hereby is Campbell Alternative
Asset Trust.
THIRD: This Certificate of Amendment shall be effective upon the date and
time of filing.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment of Campbell Asset Allocation Trust this 16th day of October, 2000.
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION
as Trustee
By: /s/ EDWARD L. TRUITT, JR.
-------------------------------------
Name: Edward L. Truitt, Jr.
Title: Vice President
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EXHIBIT B
CAMPBELL ALTERNATIVE ASSET TRUST
REQUEST FOR REDEMPTION
Please send original to:
Campbell & Company, Inc.
Court Towers Building ------------------------------------
210 West Pennsylvania Avenue Unitholder Number
Suite 770
Towson, Maryland 21204
------------------------------------
Social Security Numbers/
Taxpayer ID Number
Dear Sir/Madam:
The undersigned hereby requests redemption, as defined in and subject to all
the terms and conditions of the Trust Agreement of CAMPBELL ALTERNATIVE ASSET
TRUST ("Trust"), of ________ (insert number of units to be redeemed; IF NO
NUMBER OF UNITS IS ENTERED HERE, IT WILL BE ASSUMED THAT THE UNITHOLDER WISHES
TO REDEEM ALL UNITS) of the undersigned's units of beneficial interest ("units")
in the Trust at the net asset value per unit, as described in the prospectus, as
of the close of business at the end of the current month. Redemption shall be
effective as of the month-end immediately following receipt by you of this
request for redemption, provided that this request for redemption is received
ten (10) business days prior to the end of such month.
The undersigned hereby represents and warrants that the undersigned is the
true, lawful and beneficial owner of the units to which this request for
redemption relates with full power and authority to request redemption of such
units. Such units are not subject to any pledge or otherwise encumbered in any
fashion.
UNITED STATES TAXABLE UNITHOLDERS ONLY
Under penalty of perjury, the undersigned hereby certifies that the Social
Security Number or Taxpayer ID Number indicated on this request for redemption
is the undersigned's true, correct and complete Social Security Number or
Taxpayer ID Number and that the undersigned is not subject to backup withholding
under the provisions of section 3406(a)(1)(C) of the Internal Revenue Code.
NON-UNITED STATES UNITHOLDERS ONLY
Under penalty of perjury, the undersigned hereby certifies that (a) the
undersigned is not a citizen or resident of the United States or (b) (in the
case of an investor which is not an individual) the investor is not a United
States corporation, partnership, estate or trust.
SIGNATURE(S) MUST BE IDENTICAL TO NAME(S)
IN WHICH UNITS ARE REGISTERED
Please forward redemption funds by mail to the undersigned at:
--------------------------------------------------------------------------------
Name Street City, State and Zip Code
<TABLE>
<S> <C>
Entity Unitholder Individual Unitholder(s)
-------------------------------------------------- --------------------------------------------------
(Name of Entity) (Signature of Unitholder)
By:
-------------------------------------------------- --------------------------------------------------
(Authorized Corporate Officer, (Signature of Unitholder)
Partner, Custodian or Trustee)
--------------------------------------------------
Title
</TABLE>
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EXHIBIT C
CAMPBELL ALTERNATIVE ASSET TRUST
------------------------
SUBSCRIPTION REQUIREMENTS
By executing the Subscription Agreement and Power of Attorney for Campbell
Alternative Asset Trust (the "Trust"), each purchaser ("purchaser") of units of
beneficial interest in the Trust ("units") irrevocably subscribes for units at a
price equal to the net asset value per unit as of the end of the month in which
the subscription is accepted provided such subscription is received at least
five business days prior to such month end, as described in the Trust's
prospectus dated January 2, 2001 (the "prospectus"). The minimum subscription is
$10,000; $5,000 for eligible employee benefit plans and individual retirement
accounts ($5,000 and $2,000, respectively, for registered representatives of
NASD registered broker-dealers); additional units may be purchased with a
minimum investment of $1,000. Subscriptions must be accompanied by a check in
the full amount of the subscription and made payable to "Campbell Alternative
Asset Trust" unless the purchaser's payment will be made by debiting their
brokerage account maintained with their selling agent. The selling agent will
promptly transmit any checks received to the escrow account established in
respect of the Trust. Purchaser is also delivering to the selling agent an
executed Subscription Agreement and Power of Attorney (Exhibit D to the
prospectus) and any other documents needed (i.e., Trust, Pension, Corporate). If
purchaser's Subscription Agreement and Power of Attorney is accepted, purchaser
agrees to contribute purchaser's subscription to the Trust and to be bound by
the terms of the Trust's Trust Agreement, attached as Exhibit A to the
prospectus. Purchaser agrees to reimburse the Trust and Campbell & Company, Inc.
(the "Managing Owner") for any expense or loss incurred as a result of the
cancellation of purchaser's units due to a failure of purchaser to deliver good
funds in the amount of the subscription price. By execution of the Subscription
Agreement and Power of Attorney, purchaser shall be deemed to have executed the
Trust Agreement.
As an inducement to the Managing Owner to accept this subscription,
purchaser (for the purchaser and, if purchaser is an entity, on behalf of and
with respect to each of purchaser's shareholders, partners, members or
beneficiaries), by executing and delivering purchaser's Subscription Agreement
and Power of Attorney, represents and warrants to the managing owner, the
clearing broker, the selling agent who solicited purchaser's subscription and
the Trust, as follows:
(a) Purchaser is of legal age to execute the Subscription Agreement and
Power of Attorney and is legally competent to do so. Purchaser acknowledges that
purchaser has received a copy of the prospectus, including the Trust Agreement.
(b) All information that purchaser has furnished to the Managing Owner or
that is set forth in the Subscription Agreement and Power of Attorney submitted
by purchaser is correct and complete as of the date of such Subscription
Agreement and Power of Attorney, and if there should be any change in such
information prior to acceptance of purchaser's subscription, purchaser will
immediately furnish such revised or corrected information to the Managing Owner.
(c) Unless (d) or (e) below is applicable, purchaser's subscription is made
with purchaser's funds for purchaser's own account and not as trustee, custodian
or nominee for another.
(d) The subscription, if made as custodian for a minor, is a gift purchaser
has made to such minor and is not made with such minor's funds or, if not a
gift, the representations as to net worth and annual income set forth below
apply only to such minor.
(e) If purchaser is subscribing in a representative capacity, purchaser has
full power and authority to purchase the units and enter into and be bound by
the Subscription Agreement and Power of Attorney on behalf of the entity for
which he is purchasing the units, and such entity has full right and power to
purchase such units and enter into and be bound by the Subscription Agreement
and Power of Attorney
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and become a Unitholder pursuant to the Trust Agreement which is attached to the
prospectus as Exhibit A.
(f) Purchaser either is not required to be registered with the Commodity
Futures Trading Commission ("CFTC") or to be a member of the National Futures
Association ("NFA") or if required to be so registered is duly registered with
the CFTC and is a member in good standing of the NFA.
(g) Purchaser represents and warrants that purchaser has (i) a net worth of
at least $150,000 (exclusive of home, furnishings and automobiles) or (ii) an
annual gross income of at least $45,000 and a net worth (similarly calculated)
of at least $45,000. Residents of the following states must meet the
requirements set forth below (net worth in all cases is exclusive of home,
furnishings and automobiles). In addition, purchaser may not invest more than
10% of his net worth (exclusive of home, furnishings and automobiles) in the
Trust.
(h) If the undersigned is acting on behalf of an "employee benefit plan,"
as defined in and subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or a "plan" as defined in and subject to Section
4975 of the Internal Revenue Code of 1986, as amended (the "Code") (a "Plan"),
the individual signing this Subscription Agreement and Power of Attorney on
behalf of the undersigned hereby further represents and warrants as, or on
behalf of, the Plan responsible for purchasing units (the "Plan Fiduciary")
that: (a) the Plan Fiduciary has considered an investment in the Trust for such
plan in light of the risks relating thereto; (b) the Plan Fiduciary has
determined that, in view of such considerations, the investment in the Trust is
consistent with the Plan Fiduciary's responsibilities under ERISA; (c) the
Plan's investment in the Trust does not violate and is not otherwise
inconsistent with the terms of any legal document constituting the Plan or any
trust agreement thereunder; (d) the Plan's investment in the Trust has been duly
authorized and approved by all necessary parties; (e) none of the Managing
Owner, the Trust's advisor, the Trust's cash manager, the Trust's clearing
broker, any selling agent, any of their respective affiliates or any of their
respective agents or employees: (i) has investment discretion with respect to
the investment of assets of the Plan used to purchase units; (ii) has authority
or responsibility to or regularly gives investment advice with respect to the
assets of the Plan used to purchase units for a fee and pursuant to an agreement
or understanding that such advice will serve as a primary basis for investment
decisions with respect to the Plan and that such advice will be based on the
particular investment needs of the Plan; or (iii) is an employer maintaining or
contributing to the Plan; and (f) the Plan Fiduciary (i) is authorized to make,
and is responsible for, the decision to invest in the Trust, including the
determination that such investment is consistent with the requirement imposed by
Section 404 of ERISA that Plan investments be diversified so as to minimize the
risks of large losses, (ii) is independent of the Managing Owner, the Trust's
advisor, the Trust's cash manager, the Trust's clearing broker, any selling
agent, each of their respective affiliates, and (iii) is qualified to make such
investment decision. The undersigned will, at the request of the Managing Owner,
furnish the Managing Owner with such information as the Managing Owner may
reasonably require to establish that the purchase of the units by the Plan does
not violate any provision of ERISA or the Code, including without limitation,
those provisions relating to "prohibited transactions" by "parties in interest"
or "disqualified persons" as defined therein.
(i) If the undersigned is acting on behalf of a trust (the "Subscriber
Trust"), the individual signing the Subscription Agreement and Power of Attorney
on behalf of the Subscriber Trust hereby further represents and warrants that an
investment in the Trust is permitted under the trust agreement of the Subscriber
Trust, and that the undersigned is authorized to act on behalf of the Subscriber
Trust under the trust agreement thereof.
<TABLE>
<C> <S>
1. Alaska -- Net worth of at least $225,000 or a net worth of
at least $60,000 and an annual taxable income of at least
$60,000.
2. Arizona -- Net worth of at least $225,000 or a net worth of
at least $60,000 and an annual taxable income of at least
$60,000.
3. California -- Net worth of at least $100,000 and an annual
income of at least $50,000.
</TABLE>
C-2
<PAGE> 120
<TABLE>
<C> <S>
4. Iowa -- Net worth of at least $225,000 or a net worth of at
least $60,000 and an annual income of at least $60,000.
Minimum purchase for IRAs and employee benefit plans in Iowa
is $2,500.
5. Maine -- Net worth of at least $200,000, or net worth of
$50,000 and an annual income of $50,000. Net worth is
calculated exclusive of home, home furnishings, and
automobiles.
6. Massachusetts -- Net worth of at least $225,000 or a net
worth of at least $60,000 and an annual income of at least
$60,000.
7. Michigan -- Net worth of at least $225,000 or a net worth of
at least $60,000 and a taxable income during the preceding
year of at least $60,000.
8. Minnesota -- Net worth of at least $225,000 or a net worth
of at least $60,000 and an annual taxable income of $60,000.
9. Missouri -- Net worth of at least $225,000 or a net worth of
at least $60,000 and an annual taxable income of $60,000.
10. New Hampshire -- Net worth of at least $225,000 or a net
worth of at least $60,000 and an annual income of at least
$60,000.
11. North Carolina -- Net worth of at least $225,000 or a net
worth of at least $60,000 and an annual taxable income of
$60,000.
12. Oklahoma -- Net worth of at least $225,000 or a net worth of
at least $60,000 and an annual taxable income of $60,000.
13. Oregon -- Net worth of at least $225,000 or a net worth of
at least $60,000 and an annual taxable income of $60,000.
14. Pennsylvania -- Net worth of at least $175,000 or a net
worth of at least $100,000 and an annual taxable income of
$50,000.
15. Tennessee -- Net worth of at least $225,000 or a net worth
of at least $60,000 and an annual taxable income of at least
$60,000.
16. Texas -- Net worth of at least $225,000 or a net worth of at
least $60,000 and an annual taxable income of at least
$60,000.
</TABLE>
C-3
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<PAGE> 122
CAMPBELL ALTERNATIVE ASSET TRUST
UNITS OF BENEFICIAL INTEREST
------------------------
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
Campbell Alternative Asset Trust
c/o Campbell & Company, Inc.
Court Towers Building
210 West Pennsylvania Avenue
Towson, Maryland 21204
Dear Sir/Madam:
1. Subscription for Units. I hereby subscribe for the number of units of
beneficial interest in Campbell Alternative Asset Trust (the "Trust") set forth
on the reverse side (minimum $10,000; $5,000 in the case of trustees or
custodians of employee benefit plans or individual retirement accounts) of this
Subscription Agreement and Power of Attorney Signature Page, at net asset value
per unit as set forth in the prospectus of the Trust dated January 2, 2001 (the
"prospectus"). The undersigned's check payable to "Campbell Alternative Asset
Trust, Escrow Account," in the full amount of the undersigned's subscription
(additions, in excess of the required minimum investment, may be made with a
minimum investment of $1,000, as described in the prospectus), accompanies the
Subscription Agreement and Power of Attorney Signature Page. If this
subscription is rejected, or if no units are sold, all funds remitted by the
undersigned herewith will be returned, together with any interest actually
earned thereon. If this subscription is accepted, subscribers will earn
additional units in lieu of interest earned on the undersigned's subscription
while held in escrow. The Managing Owner may, in its sole and absolute
discretion, accept or reject this subscription in whole or in part. All
subscriptions once submitted are irrevocable. All units are offered subject to
prior sale.
2. Representations and Warranties of Subscriber. I have received the
prospectus. By submitting this Subscription Agreement and Power of Attorney I am
making the representations and warranties set forth in "Exhibit
C -- Subscription Requirements" contained in the prospectus, including, without
limitation, those representations and warranties relating to my net worth and
annual income set forth therein.
3. Power of Attorney. In connection with my acceptance of an interest in
the Trust, I do hereby irrevocably constitute and appoint the Managing Owner,
and its successors and assigns, as my true and lawful Attorney-in-Fact, with
full power of substitution, in my name, place and stead, to (i) file, prosecute,
defend, settle or compromise litigation, claims or arbitrations on behalf of the
Trust and (ii) make, execute, sign, acknowledge, swear to, deliver, record and
file any documents or instruments which may be considered necessary or desirable
by the Managing Owner to carry out fully the provisions of the Declaration of
Trust and Trust Agreement, which is attached as Exhibit A to the prospectus,
including, without limitation, the execution of the said Agreement itself and by
effecting all amendments permitted by the terms thereof. The Power of Attorney
granted hereby shall be deemed to be coupled with an interest and shall be
irrevocable and shall survive, and shall not be affected by, my subsequent
death, incapacity, disability, insolvency or dissolution or any delivery by me
of an assignment of the whole or any portion of my interest in the Trust.
4. Irrevocability; Governing Law. I hereby acknowledge and agree that I am
not entitled to cancel, terminate or revoke this subscription or any of my
agreements hereunder after the Subscription Agreement and Power of Attorney has
been submitted (and not rejected) and that this subscription and such agreements
shall survive my death or disability, but shall terminate with the full
redemption of all my units in the Trust. This Subscription Agreement and Power
of Attorney shall be governed by and interpreted in accordance with the laws of
the State of Delaware.
READ AND COMPLETE REVERSE SIDE
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<PAGE> 123
EXHIBIT D
SIGNATURE PAGE
SUBSCRIPTION AGREEMENT
IMPORTANT: READ REVERSE SIDE BEFORE SIGNING
The investor named below, by execution and delivery of this Subscription
Agreement and Power of Attorney, by payment of the purchase price for Units of
Beneficial Interest in Campbell Alternative Asset Trust and by either (i)
enclosing a check payable to "CAMPBELL ALTERNATIVE ASSET TRUST, ESCROW ACCOUNT,"
or (ii) authorizing the Selling Agent (or Additional Seller, as the case may be)
to debit investor's customer securities account in the amount set forth below,
hereby subscribes for the purchase of units at net asset value per unit.
The named investor further acknowledges receipt of the prospectus of the Trust
dated January 2, 2001. Including the Trust's Amended and Restated Declaration of
Trust and Trust Agreement, the Subscription Requirements and the Subscription
Agreement and Power of Attorney set forth therein, the terms of which govern the
investment in the units being subscribed for hereby.
<TABLE>
<S> <C>
1) Total $ Amount ___________ - ___________ - ____________ 2) Account # ____________________________________ (must be completed)
(minimum of $10,000, except $5,000 minimum for IRAs and [ ] if payment is made by debit to investor's securities account,
other qualified accounts; $1,000 or more for additional check box
investments)
____________________________________________________________________________________________________________________________________
3) Social Security # ___________ - ___________ - ___________ Taxpayer ID # _______________ - _______________ - _______________
Taxable Investors (check one):
[ ] Individual Ownership [ ] Tenants in Common [ ] Estate [ ] UGMA/UTM
[ ] Partnership* [ ] Joint Tenants with Right of [ ] Grantor or Other Revocable Trust* (Minor)
[ ] Corporation* Survivorship [ ] Trust other than a Grantor or Revocable
[ ] Community Property Trust*
Non-Taxable Investors (check one):
[ ] IRA [ ] Profit Sharing* [ ] Pension* [ ] Other
[ ] IRA Rollover [ ] Defined Benefit* [ ] SEP (specify)
(*APPROPRIATE AUTHORIZATION DOCUMENTS MUST ACCOMPANY SUBSCRIPTION, I.E., TRUSTS, PENSION, CORPORATE DOCUMENTS)
____________________________________________________________________________________________________________________________________
4) [ ] Check here if this is an addition to an existing account. Unitholder #: _____________________________________________________
5) UNITHOLDER NAME _________________________________________________________________________________________________________________
6) _________________________________________________________________________________________________________________________________
ADDITIONAL INFORMATION (FOR ESTATES, PARTNERSHIPS, TRUSTS AND CORPORATIONS)
7) RESIDENT ADDRESS
OF UNITHOLDER ____________________________________________________________________________________________________________
STREET (P.O. BOX NOT ACCEPTABLE) CITY STATE ZIP CODE
8) MAILING ADDRESS
(IF DIFFERENT) ____________________________________________________________________________________________________________
STREET CITY STATE ZIP CODE
9) CUSTODIAN NAME
AND MAILING ADDRESS ____________________________________________________________________________________________________________
NAME STREET CITY STATE ZIP CODE
____________________________________________________________________________________________________________________________________
10) INVESTOR(S) MUST SIGN
X __________________________________________________________ X ____________________________________________________________
SIGNATURE OF INVESTOR DATE TELEPHONE NO. SIGNATURE OF JOINT INVESTOR (IF ANY) DATE
EXECUTING AND DELIVERING THIS SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SHALL IN NO RESPECT BE DEEMED TO CONSTITUTE A WAIVER OF
ANY RIGHTS UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF 1934.
UNITED STATES INVESTORS ONLY
I have checked the following box if I am subject to backup withholding under the provisions of Section 3406(a)(1)(C) of the Internal
Revenue Code: [ ]. Under penalties of perjury, by signature above I hereby certify that the Social Security Number or Taxpayer ID
Number next to my name is my true, correct and complete Social Security Number or Taxpayer ID Number and that the information given
in the immediately preceding sentence is true, correct and complete.
NON-UNITED STATES INVESTORS ONLY
Under penalties of perjury, by signature above I hereby certify that (a) I am not a citizen or resident of the United States or (b)
(in the case of an investor which is not an individual) the investor is not a United States corporation, partnership, estate or
trust.
____________________________________________________________________________________________________________________________________
11) FINANCIAL ADVISOR MUST SIGN
I hereby certify that I have informed the investor of all pertinent facts relating to the risks, tax consequences, liquidity,
marketability, management and control of the managing owner with respect to an investment in the units, as set forth in the
prospectus dated January 2, 2001. I have also informed the investor of the unlikelihood of a public trading market developing of the
units.
I have reasonable grounds to believe, based on information obtained from this investor concerning his/her investment objectives,
other investments, financial situation and needs and any other information known by me, that investment in the Trust is suitable for
such investor in light of his/her financial position, net worth and other suitability characteristics.
The Financial Advisor MUST sign below in order to substantiate compliance with NASD Rule 2810.
X _____________________________________________________________ X _____________________________________________________________
FINANCIAL ADVISOR SIGNATURE DATE OFFICE MANAGER SIGNATURE DATE
(if required by Selling Agent procedures)
____________________________________________________________________________________________________________________________________
12)
SELLING FIRM __________________________________ F.A. NAME ________________________________ F.A. NUMBER ____________________
(print clearly for proper credit)
____________________________________________________________________________________________________________________________________
F.A. PHONE F.A. FAX F.A. EMAIL ADDRESS
F.A. ADDRESS _______________________________________________________________________________________________________________________
(for confirmations) STREET (P.O. Box not acceptable) CITY STATE ZIP CODE
</TABLE>
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<PAGE> 125
PROSPECTUS BACK COVER
<PAGE> 126
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Campbell & Company will advance certain of the offering expenses, as
described in the Prospectus, for which it shall be reimbursed by the Registrant
in monthly installments throughout the offering period up to the lesser of the
actual amount of offering expenses advanced by Campbell & Company, Inc. or 0.9%
of net assets of the Trust per annum. The following is an estimate of the
expenses for the next nine-month period:
<TABLE>
<CAPTION>
APPROXIMATE
AMOUNT
-----------
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 13,200
National Association of Securities Dealers, Inc. Filing
Fee....................................................... $ 5,500
Printing Expenses........................................... $100,000
Fees of Certified Public Accountants........................ $ 15,000
Blue Sky Expenses (Excluding Legal Fees).................... $ 80,000
Fees of Counsel............................................. $120,000
Escrow Fees................................................. $ 5,000
Salaries of Employees Engaged in Sales Activity............. $ 80,000
Miscellaneous Offering Costs................................ $ 31,300
--------
Total............................................. $450,000
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 17 of the Trust Agreement (attached as Exhibit A to the Prospectus
which forms a part of this Registration Statement) provides for the
indemnification of the Managing Owner and certain of its controlling persons by
the Registrant in certain circumstances. Such indemnification is limited to
claims sustained by such persons in connection with the Registrant; provided
that such claims were not the result of negligence or misconduct on the part of
Campbell & Company or such controlling persons. The Registrant is prohibited
from incurring the cost of any insurance covering any broader indemnification
than that provided above. Advances of Registrant funds to cover legal expenses
and other costs incurred as a result of any legal action initiated against
Campbell & Company by a unitholder are prohibited unless specific court approval
is obtained.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On May 3, 2000, two Units of beneficial interest were sold to Campbell &
Company for $2,000 in order to permit the filing of a Certificate of Trust for
the Registrant. The sale of these Units were exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) thereof. No discounts or
commissions were paid in connection with the sale, and no other offeree or
purchaser was solicited. There have been no other unregistered sales of Units.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents (unless otherwise indicated) are filed herewith and
made a part of this Registration Statement.
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<PAGE> 127
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
-------- -----------------------
<S> <C>
1.01 Form of Selling Agreement among the Trust, the Managing
Owner, PaineWebber Incorporated and the Selling Agent.
1.02 Form of Additional Selling Agreement among the Trust, the
Managing Owner and the Additional Selling Agent.
3.01 Declaration of Trust and Trust Agreement of the Registrant
dated May 1, 2000.*
3.02 Statement of Trust of the Registrant.
3.03 Amended and Restated Declaration of Trust and Trust
Agreement of the Registrant (included as Exhibit A to the
Prospectus).
5.01(a) Opinion of Sidley & Austin relating to the legality of the
Units.
5.01(b) Opinion of Richards, Layton & Finger relating to the
legality of the Units.
8.01 Opinion of Sidley & Austin with respect to federal income
tax consequences.
10.01 Form of Customer Agreement between the Trust and PaineWebber
Incorporated.
10.02 Subscription Agreement and Power of Attorney (included as
Exhibit D to Prospectus).
10.03 Form of Escrow Agreement between the Trust and Mercantile
Safe Deposit & Trust Company.
10.04 Form of International Foreign Exchange Master Agreement with
Margin Account between the Trust and ABN AMRO Bank N.V.,
Chicago Branch
23.01 Consent of Sidley & Austin (included in Exhibit 5.01(a)).
23.02 Consent of Arthur F. Bell, Jr. & Associates, L.L.C.
23.03 Consent of Richards, Layton & Finger (included in Exhibit
5.01(b)).
</TABLE>
---------------
*This exhibit is included in exhibits filed by the Registrant as part of its
Registration Statement on Form S-1 (No. 333-37548) on May 22, 2000 and is
hereby incorporated by reference.
(b) Financial Statement Schedules.
No Financial Schedules are required to be filed herewith.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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<PAGE> 128
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant had been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any such
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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<PAGE> 129
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Managing
Owner of the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the County of
Baltimore in the State of Maryland on the 8th day of November, 2000.
CAMPBELL ALTERNATIVE ASSET TRUST
By: Campbell & Company, Inc.
Managing Owner
By: /s/ BRUCE L. CLELAND
------------------------------------
Bruce L. Cleland
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Managing Owner of the Registrant in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE WITH REGISTRANT DATE
---------- --------------------- ----
<C> <C> <S>
/s/ D. KEITH CAMPBELL Chairman of the Board and Director November 8, 2000
---------------------------------------
D. Keith Campbell
/s/ BRUCE L. CLELAND President, Chief Executive Officer November 8, 2000
--------------------------------------- and Director (Principal Executive
Bruce L. Cleland Officer)
/s/ THERESA D. BECKS Chief Financial Officer, Secretary, November 8, 2000
--------------------------------------- Treasurer and Director (Principal
Theresa D. Becks Financial Officer)
/s/ WILLIAM C. CLARKE, III Executive Vice President and Director November 8, 2000
---------------------------------------
William C. Clarke, III
/s/ JAMES M. LITTLE Executive Vice President and Director November 8, 2000
---------------------------------------
James M. Little
</TABLE>
(Being the principal executive officer, the principal financial and
accounting officer and a majority of the directors of Campbell & Company, Inc.)
<TABLE>
<C> <C> <S>
CAMPBELL & COMPANY, INC. Managing Owner of Registrant November 8, 2000
By: /s/ BRUCE L. CLELAND
---------------------------------------
Bruce L. Cleland
Chief Executive Officer
</TABLE>
II-4
<PAGE> 130
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
-------- -----------------------
<S> <C>
1.01 Form of Selling Agreement among the Trust, the Managing
Owner, PaineWebber Incorporated and the Selling Agent.
1.02 Form of Additional Selling Agreement among the Trust, the
Managing Owner and the Additional Selling Agent.
3.02 Statement of Trust of the Registrant.
3.03 Amended and Restated Declaration of Trust and Trust
Agreement of the Registrant (included as Exhibit A to the
Prospectus).
5.01(a) Opinion of Sidley & Austin relating to the legality of the
Units.
5.01(b) Opinion of Richards, Layton & Finger relating to the
legality of the Units.
8.01 Opinion of Sidley & Austin with respect to federal income
tax consequences.
10.01 Form of Customer Agreement between the Trust and PaineWebber
Incorporated.
10.02 Subscription Agreement and Power of Attorney (included as
Exhibit D to Prospectus).
10.03 Form of Escrow Agreement between the Trust and Mercantile
Safe Deposit & Trust Company.
10.04 Form of International Foreign Exchange Master Agreement with
Margin Account between the Trust and ABN AMRO Bank N.V.,
Chicago Branch
23.01 Consent of Sidley & Austin (included in Exhibit 5.01(a)).
23.02 Consent of Arthur F. Bell, Jr. & Associates, L.L.C.
23.03 Consent of Richards, Layton & Finger (included in Exhibit
5.01(b)).
</TABLE>
