<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 2000
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
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CAMPBELL ASSET ALLOCATION TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 6799 52-2238521
(STATE OF ORGANIZATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
CLASSIFICATION NUMBER)
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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
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act") check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------
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.
CALCULATION OF REGISTRATION FEE
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==========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT BEING OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES BEING REGISTERED REGISTERED UNIT PRICE REGISTRATION FEE
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Units of Beneficial Interest.................. $50,000,000 Net Asset Value $50,000,000 $13,200
==========================================================================================================================
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CAMPBELL ASSET ALLOCATION TRUST
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CROSS REFERENCE SHEET
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<CAPTION>
ITEM
NO. PROSPECTUS HEADING
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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 Trusts
4. Use of Proceeds........................... Use of Proceeds; Campbell & Company, Inc.;
The Futures and Forward 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... Certain 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 and Forward Markets;
Index to Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Conflicts of Interest
</TABLE>
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Preliminary Prospectus Dated May 22, 2000 -- Subject to Completion
PART ONE -- DISCLOSURE DOCUMENT
CAMPBELL ASSET ALLOCATION TRUST
$50,000,000
UNITS OF BENEFICIAL INTEREST
THE OFFERING
The Trust trades speculatively in the U.S. and international futures, forward
and swap 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 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.
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. See "Distributions and Redemptions."
- - Transfers of interest in the units are subject to limitations, such as 30
days' advance written notice of any intent to transfer. Also, Campbell &
Company may deny a request to transfer if it determines that the transfer may
result in adverse legal or tax consequences for the Trust. See "Declaration of
Trust and Trust Agreement -- Dispositions."
- - Substantial expenses must be offset by trading profits and 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 in connection with
their 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
, 2000
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(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 3.
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 ASSET ALLOCATION 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 dealer
are not affiliated with Campbell & Company or the Trust.
[ORGANIZATIONAL CHART]
* Campbell & Company presently serves as commodity pool operator for five other
commodity pools.
ii
<PAGE> 7
TABLE OF CONTENTS
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PAGE
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<S> <C>
SUMMARY............................... 1
General.......................... 1
Plan of Distribution............. 1
Risk Factors You Should Consider
Before Investing in the
Trust.......................... 2
Investment Factors You Should
Consider Before Investing in
the Trust...................... 2
Campbell & Company, Inc.......... 3
Charges to the Trust............. 3
Estimate of Break-Even Level..... 3
Distributions and Redemptions.... 4
Federal Income Tax Aspects....... 4
THE RISKS YOU FACE.................... 5
Market Risks..................... 5
Possible Total Loss of an
Investment in the Trust... 5
The Trust Will Be Highly
Leveraged................. 5
Illiquidity of Your
Investment................ 5
Forward Transactions are Not
Regulated and are Subject
to Credit Risk............ 5
Non-Correlated, Not
Negatively Correlated,
Performance Objective..... 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
Trust Trading is Not
Transparent............... 6
Tax Risks........................ 6
Investors are Taxed Based on
Their Share of Trust
Profits................... 6
Tax Could be Due from
Investors on Their Share
of the Trust's Ordinary
Income Despite Overall
Losses.................... 7
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PAGE
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Deductibility of Brokerage
and Performance Fees...... 7
Other Risks...................... 7
Fees and Commissions are
Charged Regardless of
Profitability and are
Subject to Change......... 7
Failure of Brokerage Firms;
Disciplinary History of
Clearing Broker........... 7
Investors Must Not Rely on
the Past Performance of
Campbell & Company in
Deciding Whether to Buy
Units..................... 8
Conflicts of Interest....... 8
Lack of Independent Experts
Representing Investors.... 8
Reliance on Campbell &
Company................... 8
Possibility of Termination
of the Trust 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 Will Trade
Extensively in Foreign
Markets................... 9
Restrictions on
Transferability........... 9
A Single-Advisor Fund May Be
More Volatile Than a
Multi-Advisor Fund........ 9
CAMPBELL & COMPANY, INC. ............. 10
Description...................... 10
The Trading Advisor.............. 12
Trading Systems.................. 12
PAST PERFORMANCE OF TRADING PROGRAMS
OF CAMPBELL & COMPANY, INC. ........ 14
CONFLICTS OF INTEREST................. 20
Campbell & Company, Inc.......... 20
</TABLE>
iii
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PAGE
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The Clearing Broker and the
Foreign Exchange Dealer........ 20
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.......... 22
The Clearing Broker.............. 23
Selling Agents................... 24
Foreign Exchange Dealer.......... 24
Organization and Offering
Expenses....................... 24
Other Expenses................... 24
USE OF PROCEEDS....................... 24
THE CLEARING BROKER................... 25
FOREIGN EXCHANGE DEALER............... 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.......... 28
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.......................... 29
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
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Interest Income.................. 30
Limited Deduction for Certain
Expenses....................... 30
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
INVESTMENT BY ERISA ACCOUNTS.......... 31
General.......................... 31
Special Investment
Consideration.................. 31
The Trust Should Not Be Deemed to
Hold "Plan Assets"............. 31
Ineligible Purchasers............ 32
PLAN OF DISTRIBUTION.................. 32
Subscription Procedure........... 32
Representations and Warranties of
Investors in the Subscription
Agreement...................... 33
Minimum Investment............... 33
Investor Suitability............. 34
The Selling Agents............... 34
CERTAIN LEGAL MATTERS................. 35
EXPERTS............................... 35
INDEX TO FINANCIAL STATEMENTS......... 36
</TABLE>
PART TWO STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
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The Futures and Forward Markets....... 1
The Historical Perspective of Managed
Futures............................. 3
Investment Factors.................... 4
Value of Diversifying into Managed
Futures............................. 6
Supplemental Performance
Information......................... 14
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EXHIBITS
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EXHIBIT A: Amended and Restated
Declaration and Agreement of
Trust............................... A-1
EXHIBIT B: Request for Redemption..... B-1
EXHIBIT C: Subscription
Requirements........................ C-1
EXHIBIT D: Subscription
Instructions........................ D-1
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iv
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SUMMARY
GENERAL
Campbell Asset Allocation Trust allows you to participate in the U.S. and
international futures, forward and swap 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 metal 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.
The following summary provides a review in outline form of certain
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, 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 Trust was designed specifically for clients with "wrap fee" accounts.
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 a
minimum investment of $1,000.
IS THE CAMPBELL ASSET ALLOCATION 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
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<PAGE> 10
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.
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.
- For every gain made in a futures, forward or swap transaction, the
opposing side of that transaction will have an equal and offsetting loss.
Campbell & Company has from time to time in the past incurred substantial
losses in trading on behalf of its clients.
- 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;
2) Campbell & Company, the Trust's clearing broker and foreign exchange
dealers may have incentives to favor other accounts over the Trust;
and
3) Campbell & Company, the Trust's clearing broker and 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. For the same
reasons, Campbell & Company has a disincentive to add or replace
advisors, even if doing so may be in the best interests of 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 3.6% 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.
- 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.
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.
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
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<PAGE> 11
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
February 29, 2000, Campbell & Company was managing approximately $1.9 billion in
the futures and forward markets, including approximately $1.5 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
The Trust's charges are substantial and must be offset by trading gains and
interest income in order to avoid depletion of the Trust's assets.
CAMPBELL & COMPANY
- Brokerage fee of up to 3.6% of net assets per annum, of which up to 0.75%
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 each such
expense, estimated at and not to exceed 1% 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
Because interest income (based on current rates) is anticipated to equal
the Trust's ongoing fees and expenses, in order for an investor to "break-even"
on his investment in the first year of trading, assuming an initial investment
of $10,000, and interest income of 5% per year, the Trust will not be required
to earn trading profits.
<TABLE>
<CAPTION>
<S> <C>
Assumed Initial Selling Price
Per Unit.................... $10,000.00
Brokerage Fee (3.6%).......... 360.00
Organization & Offering
Expense Reimbursement
(1%)........................ 100.00
Operating Expenses (0.4%)..... 40.00
Less: Interest Income (5%).... (500.00)
----------
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........................ $ 0.00
==========
The maximum organization and offering
expense and operating expense
reimbursement is 1% 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>
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<PAGE> 12
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
POSSIBLE TOTAL LOSS OF AN 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.
ILLIQUIDITY OF YOUR INVESTMENT
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. Forward contracts
are typically traded through a dealer market which is dominated by major money
center 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. 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.
NON-CORRELATED, NOT NEGATIVELY CORRELATED,
PERFORMANCE OBJECTIVE
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-correlation, the Trust cannot be expected to be
automatically profitable during unfavorable periods for the stock market, or
vice versa. The futures, forward and swap markets are fundamentally different
from the securities markets in that for every gain made in a futures, forward or
swap 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
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<PAGE> 14
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.
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.
TRUST TRADING IS NOT TRANSPARENT
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 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
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<PAGE> 15
whether they redeem any units or receive any cash
distributions from the Trust.
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.
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
FEES AND COMMISSIONS ARE CHARGED REGARDLESS OF PROFITABILITY AND ARE SUBJECT TO
CHANGE
The Trust is subject to substantial charges payable irrespective of
profitability in addition to performance fees which are payable based on the
Trust's profitability. Included in these charges are brokerage fees and
operating expenses. On the Trust's forward trading, "bid-ask" spreads and prime
brokerage fees are incorporated into the pricing of the Trust's forward and swap
contracts, respectively, by the counterparties in addition to the brokerage fees
paid by the Trust. It is not possible to quantify the "bid-ask" spreads and
prime brokerage fees paid by the Trust because the Trust cannot determine the
profit its counterparty is making on its forward and swap transactions. Such
spreads can at times be significant. In addition, while currently not
contemplated, the Trust Agreement allows for changes to be made to the brokerage
fee and performance fee upon sixty days' notice to the unitholders.
FAILURE OF BROKERAGE FIRMS; DISCIPLINARY HISTORY OF CLEARING BROKER
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.
-7-
<PAGE> 16
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.
CONFLICTS OF INTEREST
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.
Other conflicts are also present in the operation of the Trust. See
"Conflicts of Interest."
LACK OF 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.
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.
POSSIBILITY OF TERMINATION OF THE TRUST 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
addition to swaps, in the future, the Trust may also trade
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<PAGE> 17
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 WILL TRADE EXTENSIVELY IN FOREIGN MARKETS
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 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.
RESTRICTIONS ON TRANSFERABILITY
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, it is anticipated that the Trust may have a greater profit
potential than investment vehicles employing multiple advisors, but may also
have increased performance volatility and a higher risk of loss. Campbell &
Company may retain additional trading advisors on behalf of the Trust in the
future.
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<PAGE> 18
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 February 29,
2000, Campbell & Company had approximately $1.9 billion under management in the
futures and forward markets (including approximately $1.5 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; Campbell Global Investment 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.
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.
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<PAGE> 19
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-Marketing 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 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
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<PAGE> 20
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.
CAMPBELL & COMPANY, INC.
STAFF AS MARCH 2000
[STAFF ORGANIZATIONAL CHART]
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.
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<PAGE> 21
Campbell & Company trades 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,
5) The Global Diversified Small Portfolio,
6) The Interest Rates, Stock Indices and Commodities Portfolio, and
7) The Ark 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 or the
Global Diversified Large Portfolio. The Trust Agreement allows Campbell &
Company to utilize various portfolios in its sole discretion.
COMPOSITION OF THE FINANCIAL, METAL & ENERGY LARGE PORTFOLIO AS OF MARCH 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. There is no limit on the portion of
Trust assets that can be allocated to any single sector.
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
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<PAGE> 22
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 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 calendar years and
year-to-date 2000 is presented for each portfolio in Tables 2 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.
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
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<PAGE> 23
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 ASSET ALLOCATION TRUST
The Trust has not commenced trading and does not have any performance
history.
TABLE 2
PERFORMANCE OF TRADING PORTFOLIOS
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 PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
COMMODITY TRADING ADVISOR: Campbell & Company, Inc.
INCEPTION OF CTA'S TRADING: January 1972
TOTAL ASSETS UNDER MANAGEMENT
BY CTA: $1.9 Billion
INCEPTION OF TRADING OF THE PORTFOLIO: April 1983 February 1986 November 1990
TOTAL ASSETS/ACCOUNTS CURRENTLY
TRADED IN THE PORTFOLIO: $1.492 Billion / 11 Accounts $143.4 Million / 2 Accounts $33.2 Million / 3 Accounts
WORST MONTHLY PERCENTAGE
DRAW-DOWN: April 1998 / 5.88% February 1996 / 7.22% May 1995 / 10.37%
WORST PEAK-TO-VALLEY August 1993 - January 1995 / April 1995 - October 1995 / July 1993 - January 1995 /
DRAW-DOWN: 31.78% 7.56% 44.73%
ANNUAL RETURNS:
2000 (YTD THROUGH FEBRUARY) 3.35% 2.33% 6.80%
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 3
PERFORMANCE OF OTHER TRADING PORTFOLIOS
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: $1.9 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 $211.9 Million / $5.7 Million / $12.8 Million / $2.6 Million / Closed January
PORTFOLIO 37 Accounts 5 Accounts 1 Account 11 Accounts 1995
WORST MONTHLY PERCENTAGE October 1998 / July 1998 / January 1995 /
DRAW-DOWN: April 1998 / 5.99% April 1998 / 5.92% 6.75 11.86 4.21%
December 1996 -
WORST PEAK-TO-VALLEY February -May 1997 April 1997 / July 1998 / January 1995 /
DRAW-DOWN: / 7.61% April 1998 / 5.92% 9.94% 11.86 4.21%
ANNUAL RETURNS:
2000 (YTD THROUGH FEBRUARY) 2.73% 3.77% 1.31% 6.61% N/A
1999 6.82% 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: 4.46%
WORST PEAK-TO-VALLEY January 1995 /
DRAW-DOWN: 4.46%
ANNUAL RETURNS:
2000 (YTD THROUGH FEBRUARY) 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
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<PAGE> 25
TABLE 4
PERFORMANCE OF POOLS OPERATED BY CAMPBELL & COMPANY, INC.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
<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:
$497,878,826 $21,719,360 $17,477,990 $75,580,121 $4,274,049
AGGREGATE
SUBSCRIPTIONS:
$503,919,911 $19,210,324 $11,559,886 $83,512,808 $1,747,667
CURRENT NET ASSET
VALUE:
February 1996 /
April 1998 / 6.69% August 1997 / 5.95% 7.18% April 1998 / 6.13% April 1998 / 5.99%
WORST MONTHLY
PERCENTAGE DRAW-DOWN:
June 1994 - January July 1993 - January July 1993 - January
1995 / 18.09% 1995 / 29.42% 1995 / 12.95% April 1998 / 6.13% April 1998 / 5.99%
WORST PEAK-TO-VALLEY
DRAW-DOWN:
Financial, Metal &
Energy Large /
Global Diversified Global Diversified Financial, Metal & Financial, Metal & Financial, Metal &
Large Large Energy Large Energy Large Energy Small
TRADING PORTFOLIO USED:
ANNUAL RETURNS:
2.91% 3.24% 3.35% 3.22% 3.43%
2000 (YTD THROUGH
FEBRUARY)
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
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<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 2 contains the composite performance of accounts
traded pursuant to the Financial, Metal & Energy Large Portfolio. The data
presented reflects the composite performance of 122 accounts traded according
to the Financial, Metal & Energy Large Portfolio. The data below is as of
February 29, 2000. During the period presented, 111 accounts have been
closed; 96 of which
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<PAGE> 27
NOTES TO PERFORMANCE TABLES -- (CONTINUED)
transferred to the Financial, Metal & Energy Small Portfolio. Of the
remaining 15 closed accounts, 5 closed with a profit and 10 closed with a
loss. Eleven accounts remained open, all of which were profitable. The open
accounts ranged in size from $8,500,000 to in excess of $200,000,000, with an
average account size of approximately $135,600,000. The average composite
monthly return for the period from January 1995 through February 2000 was
1.61% compared to the average of average monthly returns for all accounts of
1.39% 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 2 reflects the composite performance of all
accounts (a total of 12 accounts) traded according to the Global Diversified
Large Portfolio. During the period presented, 10 accounts have been closed;
all of which transferred to the Global Diversified Small Portfolio. The 2
open accounts are profitable. The average composite monthly return for the
period from January 1995 through February 2000 is 1.09% compared to the
average of average monthly returns for all accounts of 1.13% 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 2 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 February
29, 2000, two of the accounts included notional equity of $23,000,000. The
average composite monthly return for the period from January 1995 through
February 2000 is 1.72% compared to the average of average monthly returns for
all accounts of 1.67% 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.
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<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 may receive 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.
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.
THE CLEARING BROKER AND THE FOREIGN EXCHANGE DEALER
The clearing broker, currently PaineWebber Incorporated, and the foreign
exchange dealer, currently 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. The clearing broker also may serve as a broker for
other commodity pools and the foreign exchange dealer acts as dealer for other
clients, which could
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<PAGE> 29
give rise to conflicts of interest between their responsibility to the Trust and
to those pools and clients.
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 certain remedies 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 certain 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 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.
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<PAGE> 30
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.
BROKERAGE FEE
The Trust pays a single asset-based fee for all brokerage and management
services. The fee is equal to up to 3.6% 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 3.6% brokerage fee, Campbell & Company remits up to 0.75% 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 0.75% 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
- -------- -------------------- --------------------
<C> <S> <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 1% of net
assets per annum
Dealers "Bid-Ask" spreads Indeterminable
and prime brokerage because imbedded in
fees price of forward and
swap contracts
Others Legal, accounting, As incurred, up to a
printing, postage maximum of 0.4% of
and administrative average month end
costs net assets per annum
</TABLE>
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 3.6% per annum as
described earlier.
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<PAGE> 31
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
2000 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 2000. 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 2000 but did not pay a performance fee at the end of the
second quarter of 2000 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 2000,
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 0.75% per annum of the net assets of the Trust, which
is a portion of the maximum 3.6% 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 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").
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<PAGE> 32
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 DEALER
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 1% 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 1% 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 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 dealer. The remaining 30%
to
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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.
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.
On July 16, 1996, PaineWebber entered into a Stipulation and Order
resolving a civil complaint filed by the United States Department of Justice,
alleging that it and other NASDAQ market makers violated Section 1 of the
Sherman Act in connection with certain market making practices. In entering into
the Stipulation and Order, without admitting the allegations, the parties agreed
that the defendants would not engage in certain types of market making
activities and the defendants undertook specified steps to assure compliance
with their agreement. On April 24, 1997, the United States District Court for
the Southern District of New York approved the Stipulation and Order. The
district court's approval was appealed by certain private parties in May 1997
and was affirmed in August 1998.
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 in
connection with specified NASDAQ securities, failed to maintain certain required
books and records and failed reasonably to supervise in connection with the
above activities. 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 of the federal securities laws in connection with the
offer and sale of certain limited partnership interests between 1986 and 1992
and failed
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<PAGE> 34
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 DEALER
The Trust trades foreign exchange and other forward contracts through
"dealers" in such contracts. The dealer that maintains the forward positions, or
acts as the counterparty, for the Trust is 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 ABN AMRO Bank, N.V., Chicago Branch. All assets and
positions relating to the Trust's forward contract investments will be held by
ABN AMRO Bank, N.V., Chicago Branch. Campbell & Company is not obligated to
continue to use the foreign exchange dealer 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.
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 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
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<PAGE> 35
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 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
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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.
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.
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
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<PAGE> 37
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
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."
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
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<PAGE> 38
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."
LIMITED DEDUCTION FOR CERTAIN EXPENSES
Campbell & Company does not consider the brokerage fee and the performance
fees, as well as other ordinary expenses of the Trust, investment advisory
expenses or other expenses of producing income. Accordingly, Campbell & Company
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
-30-
<PAGE> 39
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.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS BEFORE
DECIDING WHETHER TO INVEST.
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.
-31-
<PAGE> 40
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
3) is an employer maintaining or contributing to such Plan.
NONE OF CAMPBELL & COMPANY, THE CLEARING BROKER, THE FOREIGN EXCHANGE
DEALER 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 , 2000, subject to extension until ,
2000 in 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.
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
-32-
<PAGE> 41
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 Asset Allocation Trust, Escrow
Account" or by authorizing his selling agent to debit his customer 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.
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<PAGE> 42
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 certain 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 Trust was designated specifically for clients with "wrap fee" accounts.
Selling agents will receive a wrap fee from unitholders' brokerage accounts with
the selling agents. The wrap fee will not be paid by either the Trust or
Campbell & Company.
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. Certain employees
of Campbell & Company will provide wholesaling services as well and will receive
compensation therefor.
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 certain seminars 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 1% 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 connec-
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<PAGE> 43
tion 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.
CERTAIN 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, 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 balance sheet of Campbell & Company as of March 31, 2000 is unaudited.
In the opinion of Campbell & Company, the unaudited balance sheet reflects all
adjustments which were of a normal and recurring nature, necessary for a fair
presentation of financial position as of March 31, 2000.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
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<PAGE> 44
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CAMPBELL ASSET ALLOCATION TRUST
INDEPENDENT AUDITOR'S REPORT................................ 37
STATEMENT OF FINANCIAL CONDITION
May 10, 2000.............................................. 38
NOTES TO STATEMENT OF FINANCIAL CONDITION................... 39
CAMPBELL & COMPANY, INC.
BALANCE SHEET
March 31, 2000 (Unaudited)................................ 41
NOTES TO BALANCE SHEET (UNAUDITED).......................... 42
INDEPENDENT AUDITOR'S REPORT................................ 46
BALANCE SHEET
December 31, 1999......................................... 47
NOTES TO BALANCE SHEET...................................... 48
</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> 45
INDEPENDENT AUDITOR'S REPORT
To the Unitholder
Campbell Asset Allocation Trust
We have audited the accompanying statement of financial condition of
Campbell Asset Allocation 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
Asset Allocation 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> 46
CAMPBELL ASSET ALLOCATION TRUST
STATEMENT OF FINANCIAL CONDITION
May 10, 2000
------------------------
<TABLE>
<S> <C>
ASSETS
Cash...................................................... $2,000
======
UNITHOLDER'S CAPITAL (2 units outstanding).................. $2,000
======
</TABLE>
See accompanying notes.
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<PAGE> 47
CAMPBELL ASSET ALLOCATION TRUST
NOTES TO STATEMENT OF FINANCIAL CONDITION
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Trust
Campbell Asset Allocation 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 1% 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.
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
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<PAGE> 48
CAMPBELL ASSET ALLOCATION TRUST
NOTES TO STATEMENT OF FINANCIAL CONDITION -- (CONTINUED)
NOTE 2. MANAGING OWNER AND TRADING ADVISOR -- (CONTINUED)
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 3.6% per annum
of the Trust's average month-end net asset value, a portion (up to .75%)
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.
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<PAGE> 49
CAMPBELL & COMPANY, INC.
BALANCE SHEET
March 31, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $ 5,116,367
Deposits with foreign exchange dealer 2,232,168
Accounts receivable
Advisory and performance fees 3,758,211
Receivable from Campbell Strategic Allocation Fund,
L.P. 1,918,005
Other receivables 203,788
-----------
Total current assets 13,228,539
-----------
Property and equipment
Furniture and office equipment 2,330,226
Leasehold improvements 211,297
-----------
2,541,523
Less accumulated depreciation and amortization (1,550,302)
-----------
Total property and equipment 991,221
-----------
Other assets
Cash surrender value of life insurance, net of policy
loans of $181,925 189,450
Investments in commodity pools 5,860,966
Other 7,290,557
-----------
Total assets $27,560,733
===========
LIABILITIES
Current liabilities
Accounts payable and accrued expenses $ 4,563,745
Subordinated debt 15,000,000
-----------
Total liabilities 19,563,745
-----------
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 7,939,820
-----------
Total stockholders' equity 7,996,988
-----------
Total liabilities and stockholders' equity $27,560,733
===========
</TABLE>
See accompanying notes.
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<PAGE> 50
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.
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<PAGE> 51
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 March 31,
2000:
<TABLE>
<S> <C>
Campbell Strategic Allocation Fund, L.P. $5,564,460
Campbell Financial Futures Fund Limited Partnership 268,618
The Campbell Fund Trust 27,888
----------
Total $5,860,966
==========
</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 quarter ended March 31, 2000. Included in
advisory and performance fees receivable at March 31, 2000, is
approximately $1,234,130 due from Strategic for such fees.
Summarized financial information with respect to Strategic as of March
31, 2000, is as follows:
<TABLE>
<S> <C>
Balance Sheet Data
Assets $507,352,236
Liabilities (9,436,594)
------------
Net Asset Value $497,915,642
============
</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 March 31, 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 $272,499 as of March 31, 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 $4,688,449 as of March 31, 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.
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
-43-
<PAGE> 52
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
(UNAUDITED)
NOTE 3. INVESTMENTS IN COMMODITY POOLS -- (CONTINUED)
fee which is based on the monthly net asset value of Strategic. As of
March 31, 2000, $4,210,645 in selling agent commissions is subject to
future reimbursement, of which $1,645,506 is included in Receivable
from Campbell Strategic Allocation Fund, L.P. and $2,565,139 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 March 31, 2000, totaled $11,333,902.
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 March 31, 2000, totaled
$19,988,042.
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 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.
-44-
<PAGE> 53
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
(UNAUDITED)
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 March 31, 2000, $15,000,000 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 MARCH 31
--------------------
<S> <C>
2001 $ 339,096
2002 345,926
2003 352,838
2004 359,832
2005 366,991
Thereafter 1,342,233
----------
Total base annual rentals $3,106,916
==========
</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.
-45-
<PAGE> 54
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
-46-
<PAGE> 55
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 earnings 22,768,311
-----------
Total stockholders' equity 22,825,479
-----------
Total liabilities and stockholders' equity $39,646,662
===========
</TABLE>
See accompanying notes.
-47-
<PAGE> 56
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.
-48-
<PAGE> 57
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.
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
-49-
<PAGE> 58
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 2. INVESTMENTS IN COMMODITY POOLS -- (CONTINUED)
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.
The Company has established procedures to actively monitor the market
risk and minimize the credit risk of such commodity pools.
-50-
<PAGE> 59
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
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.
-51-
<PAGE> 60
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
<PAGE> 61
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
CAMPBELL ASSET ALLOCATION 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
, 2000
----------------------------------------------
<PAGE> 62
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
<PAGE> 63
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Futures and Forward Markets............................. 1
Historical Perspective of Managed Futures................... 3
Investment Factors.......................................... 4
Value of Diversifying into Managed Futures.................. 6
Supplemental Performance Information........................ 14
</TABLE>
----------------------------------------------
EXHIBITS
<TABLE>
<S> <C>
Exhibit A: Amended and Restated
Declaration and Agreement of Trust........................ A-1
Exhibit B: Request for Redemption........................... B-1
Exhibit C: Subscription Requirements........................ C-1
Exhibit D: Subscription Instructions........................ D-1
</TABLE>
i
<PAGE> 64
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
<PAGE> 65
THE FUTURES AND FORWARD 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 ABN AMRO Bank, N.V., Chicago Branch, the foreign exchange dealer 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
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.
The CFTC has adopted Part 35 to its Rules which provides non-exclusive safe
harbor treatment from regulations under the Commodity
-1-
<PAGE> 66
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
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.]
-2-
<PAGE> 67
HISTORICAL PERSPECTIVE OF MANAGED FUTURES
MANAGED FUTURES INDUSTRY VOLUME BY MARKET SECTOR
<TABLE>
<CAPTION>
[PIE CHART]
ENERGY INTEREST RATES CURRENCIES AGRICULTURE METALS OTHER
- ------ -------------- ---------- ----------- ------ -----
<S> <C> <C> <C> <C> <C>
3 13.5 4.6 64.2 16.3 1.1
CURRENCIES AGRICULTURE STOCK INDICIES METALS INTEREST RATES ENERGY
- ---------- ----------- -------------- ------ -------------- ------
5 15.3 9.8 3.6 50.3 15.7
[PIE CHART]
CURRENCIES OTHER
- ---------- -----
5 0.3
CURRENCIES AGRICULTURE STOCK INDICIES METALS INTEREST RATES ENERGY
- ---------- ----------- -------------- ------ -------------- ------
1980 1999
CURRENCIES OTHER
- ---------- -----
1980
</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> 68
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 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, forwards and options 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 make
money, whether markets are rising or falling
-4-
<PAGE> 69
around the globe, 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.
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 -- Illiquidity
of Your Investment."
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> 70
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 60% stock and 40% bond allocation, 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 20%, returns
increased and standard deviation, one measure of risk, was reduced. If more than
20% 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.
ADVANTAGE OF ADDING MANAGED FUTURES TO A HYPOTHETICAL PORTFOLIO CONTAINING
STOCKS AND BONDS
JANUARY 1980 -- DECEMBER 1999*
[CHART]
<TABLE>
<S> <C> <C>
0/40/60 15.21 9.45
5/35/60 15.30 9.25
10/30/60 15.39 9.11
15/25/60 15.48 9.04
20/20/60 15.57 9.06
25/15/60 15.65 9.14
30/10/60 15.74 9.30
35/5/60 15.83 9.53
40/0/60 15.92 9.83
</TABLE>
STANDARD DEVIATION OF ANNUAL RETURNS (1980-1999)
This chart, prepared by Campbell & Company, contains historical trading
results hypothetically blended.
The stocks portion is 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> 71
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 -- DECEMBER 1999*
(COMPOUNDED QUARTERLY RETURNS)
[CHART]
<TABLE>
<CAPTION>
60%STOCKS40%BONDS 60%STOCKS30%BONDS10%FUTURES
----------------- ---------------------------
<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 11503.2 11995
Nov-80 12234.3 12758.6
Dec-80 12149.9 12575.1
Jan-81 11847.3 12343
Feb-81 11911.5 12468.4
Mar-81 12312.7 12767.8
Apr-81 12059.5 12581.5
May-81 12203.4 12770.5
Jun-81 12171.3 12865.4
Jul-81 12111.8 12869.5
Aug-81 11631.6 12383.5
Sep-81 11325.4 12006.4
Oct-81 11930.4 12537.7
Nov-81 12551.3 13207.5
Dec-81 12232.2 12802.1
Jan-82 12167.6 12771.3
Feb-82 11834.5 12477.2
Mar-82 11850.5 12582.5
Apr-82 12283.7 12995.6
May-82 12103.7 12797
Jun-82 11937.9 12744.8
Jul-82 12002 12656.9
Aug-82 13083.1 13793.4
Sep-82 13356.3 14130.8
Oct-82 14519.6 15244.9
Nov-82 14921.4 15597.7
Dec-82 15207.9 15893.5
Jan-83 15549.7 16406.6
Feb-83 15908.4 16625.1
Mar-83 16253.4 16934.3
Apr-83 17162.8 17832.8
May-83 17006.6 17728.3
Jun-83 17422.1 18018
Jul-83 17005 17597.6
Aug-83 17197.6 17956
Sep-83 17534.8 18247.5
Oct-83 17437 18135.9
Nov-83 17733.7 18340.4
Dec-83 17696.5 18253.4
Jan-84 17756.2 18306.8
Feb-84 17355.7 17886
Mar-84 17486.1 18052.9
Apr-84 17589.1 18120.8
May-84 16846.6 17497.3
Jun-84 17136.9 17663.6
Jul-84 17269.2 18061
Aug-84 18516.5 19200.7
Sep-84 18669.5 19376.8
Oct-84 18998 19581.3
Nov-84 19001.8 19359.2
Dec-84 19413.9 19907.4
Jan-85 20473.7 21049.7
Feb-85 20484.1 21208.4
Mar-85 20647.9 21264.7
Apr-85 20800.6 21423.5
May-85 21905.2 22474.4
Jun-85 22201.4 22675.1
Jul-85 22156.2 22891.1
Aug-85 22186.5 22862.8
Sep-85 21827.8 22239.4
Oct-85 22596.8 23152.9
Nov-85 23724.7 24427.1
Dec-85 24700.9 25493.9
Jan-86 24837 25667.1
Feb-86 26349.3 27469.6
Mar-86 27643.4 28894.9
Apr-86 27503.1 28511.6
May-86 28130.2 29039.9
Jun-86 28781.1 29472.3
Jul-86 27898.2 28641.5
Aug-86 29455.3 30302
Sep-86 27810.4 28343.5
Oct-86 28926.2 29274.3
Nov-86 29481.1 29709.2
Dec-86 29050.9 29245.6
Jan-87 31524.8 32029.4
Feb-87 32357.9 32893.8
Mar-87 32841.7 33497.8
Apr-87 32343.6 33509
May-87 32456.2 33569.7
Jun-87 33591.6 34684.2
Jul-87 34584.4 35839
Aug-87 35281.1 36493
Sep-87 34543.3 35733.5
Oct-87 30616.4 31600.9
Nov-87 29162.6 30328.8
Dec-87 30632.5 32005.8
Jan-88 31805.7 32956.9
Feb-88 32827.4 34026.5
Mar-88 32084.5 33227.5
Apr-88 32229.4 33308.4
May-88 32302.8 33603.5
Jun-88 33477.1 35257.3
Jul-88 33309.5 34955.3
Aug-88 32658.7 34309.6
Sep-88 33777.4 35418.7
Oct-88 34579.1 36248.1
Nov-88 34119.6 35832.4
Dec-88 34528.4 36167
Jan-89 36216.6 38057.2
Feb-89 35559.1 37224.7
Mar-89 36143 37913.8
Apr-89 37577.1 39285.9
May-89 38840.6 40914.8
Jun-89 39228.4 41193.2
Jul-89 41682.8 43866.9
Aug-89 41889.9 43962.9
Sep-89 41859.6 43812.5
Oct-89 41710.9 43369.8
Nov-89 42381 44104.3
Dec-89 43019.6 44907.8
Jan-90 41045 42993.4
Feb-90 41397.4 43433.8
Mar-90 42051.7 44187.3
Apr-90 41275.2 43575
May-90 44145.3 46279.9
Jun-90 44245.7 46366.7
Jul-90 44387.4 46650.1
Aug-90 41736.2 44161.9
Sep-90 40679.5 43079.9
Oct-90 40841.5 43288.2
Nov-90 42785.1 45274.6
Dec-90 43765.1 46190.3
Jan-91 45093.1 47378.5
Feb-91 47128.5 49459.2
Mar-91 47908.7 50482.2
Apr-91 48187 50709.9
May-91 49506 52022.9
Jun-91 48118.4 50612.6
Jul-91 49692 52034.5
Aug-91 50857.5 52972.3
Sep-91 50773.9 53017.1
Oct-91 51360.4 53503.4
Nov-91 50328.3 52352.3
Dec-91 54462.4 57241.5
Jan-92 53514.4 55966.4
Feb-92 54013.5 56269.1
Mar-92 53258.5 55483.6
Apr-92 54329.7 56469.8
May-92 54891.2 56944.9
Jun-92 54715.4 56973.8
Jul-92 56607.8 59163.1
Aug-92 56123.8 58812.3
Sep-92 56836.2 59431.2
Oct-92 56625.9 59278.4
Nov-92 57741.1 60491.5
Dec-92 58554.2 61207.2
Jan-93 59346.5 61857.3
Feb-93 60306.4 63055.8
Mar-93 61149.4 63883
Apr-93 60451 63293.2
May-93 61391.8 64326.4
Jun-93 62044.5 64953.1
Jul-93 62046.1 65167.8
Aug-93 64009.2 67066.7
Sep-93 63803.3 66773.9
Oct-93 64691.5 67650.7
Nov-93 64038.6 67046.4
Dec-93 64603.2 67818.5
Jan-94 66537.4 69541.7
Feb-94 64363.5 67372.6
Mar-94 61550 64835.9
Apr-94 61730.2 65012.7
May-94 62166.1 65624.6
Jun-94 61008.9 64685.2
Jul-94 63044.6 66513.1
Aug-94 64398.6 67885
Sep-94 62641.5 66332.8
Oct-94 63390.3 67139.7
Nov-94 62166.8 65861.3
Dec-94 63099.4 66670.8
Jan-95 64563.8 67975.7
Feb-95 66671.2 70176.1
Mar-95 68017.7 71994.8
Apr-95 69615.8 73682.1
May-95 72404.2 76427
Jun-95 73635.5 77541.8
Jul-95 74990.9 78896.2
Aug-95 75454.5 79348.4
Sep-95 77653.8 81445.4
Oct-95 77959.5 81606.4
Nov-95 80497.4 84227.9
Dec-95 81884.9 85861.7
Jan-96 83754.9 87940.1
Feb-96 82604 86797.6
Mar-96 82807 87140.3
Apr-96 83326.8 88077.6
May-96 84557.5 89237.6
Jun-96 85187.1 89779.8
Jul-96 83015.2 87427.1
Aug-96 83805 88352.4
Sep-96 87189.1 92031.5
Oct-96 89398.7 94662
Nov-96 94071.8 99850.6
Dec-96 92569.9 98228.5
Jan-97 95726.9 101994
Feb-97 96180 102679
Mar-97 92874.7 99358.9
Apr-97 97067.9 103467
May-97 101054 107556
Jun-97 104553 111157
Jul-97 112006 118991
Aug-97 106959 113619
Sep-97 111686 118447
Oct-97 110943 117182
Nov-97 114607 120999
Dec-97 116530 123078
Jan-98 118263 124803
Feb-98 123028 129926
Mar-98 126913 134139
Apr-98 127836 134741
May-98 127496 134422
Jun-98 131825 138755
Jul-98 130742 137599
Aug-98 121758 128202
Sep-98 128284 134847
Oct-98 133677 140355
Nov-98 138942 145592
Dec-98 143666 150853
Jan-99 144384 152212
Feb-99 142657 150390
Mar-99 146343 154060
Apr-99 152863 160644
May-99 148442 156316
Jun-99 156241 164140
Jul-99 153116 160783
Aug-99 153159 160649
Sep-99 151474 158736
Oct-99 154543 161978
Nov-99 156784 164535
Dec-99 164388 172105
</TABLE>
This chart, prepared by Campbell & Company, contains historical trading results
hypothetically blended.
The stocks portion is 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.
-7-
<PAGE> 72
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
CORRELATION OF MONTHLY RETURNS
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 S&P 500 Index and various stock, bond and managed
futures indices, using the S&P 500 Index as the benchmark for comparison. The
second chart shows the correlation between the same indices, this time using
Campbell's FME Large Portfolio as the benchmark. Managed futures have
historically had a lower correlation with the S&P 500 Index than other stock and
bond indices. This does not mean that the Trust is a hedge for a stock
portfolio, but merely that the returns of each may be somewhat independent of
the other.
HISTORICAL CORRELATION OF MONTHLY RETURNS WITH THE S&P 500 INDEX
APRIL 1983 -- DECEMBER 1999
[CHART]
<TABLE>
<CAPTION>
S&P 500 COMPOSITE INDEX DOW NASDAQ LEHMAN BROS. CAMPBELL MAR
- ----------------------- INDUSTRIAL COMPOSITE EUROPE, GOVT. BOND FME LARGE FUND/POOL
AVERAGE INDEX AUSTRALASIA, INDEX PORTFOLIO QUALIFIED
---------- --------- FAR EAST ------------ --------- UNIVERSE
INDEX INDEX
------------ ---------
<S> <C> <C> <C> <C> <C> <C>
100 88.10 82.50 48.00 27.60 20.90 9.90
<CAPTION>
S&P 500 COMPOSITE INDEX BARCLAY CTA
- ----------------------- INDEX
-----------
<S> <C>
100 2.10
</TABLE>
HISTORICAL CORRELATION OF MONTHLY RETURNS WITH CAMPBELL'S FME LARGE PORTFOLIO
APRIL 1983 -- DECEMBER 1999
[CHART]
<TABLE>
<CAPTION>
CAMPBELL FME LARGE MAR BARCLAY CTA S&P DOW LEHMAN BROS. NASDAQ
PORTFOLIO FUND/POOL INDEX COMPOSITE INDUSTRIAL GOVT. BOND COMPOSITE
- ------------------ QUALIFIED ----------- INDEX AVARAGE INDEX INDEX
UNIVERSE --------- ---------- ------------ ---------
INDEX
---------
<S> <C> <C> <C> <C> <C> <C>
100 70.7 63.5 20.9 15.1 10 9.3
<CAPTION>
CAMPBELL FME LARGE
PORTFOLIO EUROPE,
- ------------------ AUSTRALASIA,
FAR EAST
INDEX
------------
<S> <C>
100 5.4
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
-8-
<PAGE> 73
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
VOLATILITY COMPARISON (APRIL 1983 -- DECEMBER 1999)
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 MAR Fund/Pool Qualified Universe Index, FME Large, 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 stock indices has been rising. During the last two
years, FME Large has had lower volatility than equity indices. Past performance
is not necessarily indicative of future results, and there is no guarantee that
such low volatility will persist into the future. 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 positive months. Downside volatility
measures the volatility of only the losing months. Investors are typically more
concerned with downside volatility, which is perhaps a better historical
indicator of the risk of actually losing money. The second chart compares the
upside volatility for the MAR Fund/Pool Qualified Universe Index, FME Large, the
EAFE Index, the S&P 500 Index and the NASDAQ Composite Index. The third chart
compares downside volatility for the same portfolio and indices. Campbell &
Company believes that prospective investors should note that FME Large, for the
past five years, 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
[CHART]
<TABLE>
<CAPTION>
Since Inception Last 60 Months Last 24 Months Last 12 Months
<S> <C> <C> <C> <C>
MAR Fund/Pool 4.28% 2.27% 2.05% 1.99%
FME Large 6.41% 4.31% 3.66% 3.18%
EAFE 4.86% 3.99% 4.53% 3.48%
S&P 500 Index 4.18% 3.97% 4.87% 3.39%
NASDAQ 5.87% 6.84% 8.98% 8.06%
</TABLE>
UPSIDE VOLATILITY
[CHART]
<TABLE>
<CAPTION>
Since Inception Last 60 Months Last 24 Months Last 12 Months
<S> <C> <C> <C> <C>
MAR Fund/Pool 3.50% 1.57% 1.23% 1.00%
FME Large 5.00% 3.06% 2.23% 1.78%
EAFE 3.23% 2.40% 2.6% 2.26%
S&P 500 Index 2.81% 2.17% 2.24% 1.86%
NASDAQ 4.21% 4.96% 6.07% 6.27%
</TABLE>
DOWNSIDE VOLATILITY
[CHART]
<TABLE>
<CAPTION>
Since Inception Last 60 Months Last 24 Months Last 12 Months
<S> <C> <C> <C> <C>
MAR Fund/Pool -2.36% -1.09% -1.15% -1.26%
FME Large -3.62% -1.75% -1.88% -1.81%
EAFE -3.14% -2.95% -4.11% -1.99%
S&P 500 Index -2.71% -3.36% -4.19% -0.97%
NASDAQ -3.61% -4.79% -6.48% -3.04%
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
-9-
<PAGE> 74
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>
BAR 23.73% FME 26.96% EAFE 52.98% EAFE 66.80% FME 64.38% EAFE 25.65%
- ----------------------------------------------------------------------------------------------------------------------------
S&P 22.56% LBBI 14.49% FME 33.05% S&P 18.67% BAR 57.24% BAR 21.72%
- ----------------------------------------------------------------------------------------------------------------------------
EAFE 20.91% DJIA 13.10% S&P 31.74% LBBI 15.31% MAR 46.88% S&P 16.61%
- ----------------------------------------------------------------------------------------------------------------------------
NAS 19.88% BAR 8.74% NAS 31.46% NAS 7.36% EAFE 23.19% NAS 15.41%
- ----------------------------------------------------------------------------------------------------------------------------
DJIA 15.07% S&P 6.28% MAR 26.95% DJIA 7.26% S&P 5.25% LBBI 9.12%
- ----------------------------------------------------------------------------------------------------------------------------
LBBI 7.41% EAFE 5.02% BAR 25.49% BAR 3.87% LBBI -2.68% MAR 8.43%
- ----------------------------------------------------------------------------------------------------------------------------
MAR -7.59% MAR 4.18% LBBI 20.43% MAR -11.52% NAS -5.25% FME 7.96%
- ----------------------------------------------------------------------------------------------------------------------------
FME -10.34% NAS -11.30% DJIA 16.42% FME -30.45% DJIA -25.32% DJIA 2.64%
- ----------------------------------------------------------------------------------------------------------------------------
</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% BAR 20.98% FME 31.12% FME 13.47% LBBI 17.31% S&P 1.31%
- ----------------------------------------------------------------------------------------------------------------------------
NAS 19.25% MAR 19.51% S&P 30.46% LBBI 7.97% MAR 15.15% DJIA -0.22%
- ----------------------------------------------------------------------------------------------------------------------------
LBBI 18.90% DJIA 7.39% LBBI 18.61% S&P 7.64% NAS 14.75% BAR -0.64%
- ----------------------------------------------------------------------------------------------------------------------------
MAR 10.10% LBBI 6.35% EAFE 10.18% MAR 1.03% BAR 10.34% MAR -2.18%
- ----------------------------------------------------------------------------------------------------------------------------
EAFE 9.23% S&P -3.12% MAR 9.80% DJIA 0.90% S&P 10.07% NAS -3.20%
- ----------------------------------------------------------------------------------------------------------------------------
DJIA 2.24% NAS -17.82% DJIA 5.04% BAR -0.90% DJIA 5.59% LBBI -6.92%
- ----------------------------------------------------------------------------------------------------------------------------
BAR 1.78% EAFE -24.70% BAR 3.75% EAFE -13.87% FME 4.68% FME -16.76%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NAS 39.92% FME 35.96% S&P 33.37% NAS 50.79% NAS 84.55%
- -------------------------------------------------------------------------------------------------------
S&P 37.58% S&P 22.97% NAS 21.64% S&P 28.55% EAFE 25.26%
- -------------------------------------------------------------------------------------------------------
LBBI 30.73% NAS 22.70% FME 18.75% FME 20.07% S&P 20.95%
- -------------------------------------------------------------------------------------------------------
FME 19.46% MAR 11.89% LBBI 14.91% EAFE 18.24% DJIA 11.22%
- -------------------------------------------------------------------------------------------------------
BAR 13.66% DJIA 9.61% BAR 10.88% DJIA 17.07% FME 6.81%
- -------------------------------------------------------------------------------------------------------
MAR 9.66% BAR 9.13% MAR 9.49% LBBI 13.48% MAR 1.48%
- -------------------------------------------------------------------------------------------------------
EAFE 9.42% EAFE 4.38% EAFE 0.24% BAR 6.99% BAR -1.21%
- -------------------------------------------------------------------------------------------------------
DJIA 6.85% LBBI -0.76% DJIA -0.46% MAR 6.80% LBBI -8.71%
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
FME = Financial, Metal & Energy Large Portfolio (Campbell)
BAR = Barclay CTA Index
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
DJIA = Dow Industrial Average
</TABLE>
This chart was prepared by Campbell & Company. See the glossary following this
section for information integral to this chart.
-10-
<PAGE> 75
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 -- DECEMBER 1999
[CHART]
<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
</TABLE>
NASDAQ COMPOSITE INDEX
APRIL 1983 -- DECEMBER 1999
[CHART]
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
'83 19.88 -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 -4.63
'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
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
-11-
<PAGE> 76
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.
S&P 500 INDEX
APRIL 1983 -- DECEMBER 1999
[CHART]
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
'83 22.56 -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 -2.05
'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 14.64 -6.25
</TABLE>
EUROPE, AUSTRALASIA, FAR EAST INDEX (EAFE)
APRIL 1983 -- DECEMBER 1999
[CHART]
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
'83 20.91 -1.82
'84 5.02 -18.06
'85 52.98 -0.76
'86 66.80 -7.87
'87 23.19 -15.54
'88 26.65 -9.50
'89 9.23 -8.38
'90 -24.70 -30.59
'91 10.18 -11.04
'92 -13.87 -13.18
'93 30.47 -8.72
'94 6.23 -4.78
'95 9.42 -4.49
'96 4.38 -4.10
'97 0.24 -10.68
'98 18.24 -15.11
'99 25.26 -5.15
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
-12-
<PAGE> 77
VALUE OF DIVERSIFYING INTO MANAGED FUTURES -- (CONTINUED)
GLOSSARY OF PORTFOLIOS AND INDICES
BONDS
LEHMAN BROTHERS GOVERNMENT BOND INDEX*
Composed of bonds that are investment grade (as rated by Moody or Standard &
Poor). 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
BARCLAY COMMODITY TRADING ADVISOR (CTA) INDEX
Measures the composite performance of established CTAs (those with four or more
years of documented performance history). Once a CTA passes this four-year
hurdle mark, its subsequent performance is included in this non-weighted index.
The Barclay CTA Index does not represent an actual portfolio in which one could
invest, and therefore, the index performance results should be deemed to be of
comparative value only.
CAMPBELL'S FME LARGE PORTFOLIO
Contains the composite performance of all accounts traded in the Portfolio since
inception, 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
DOW JONES INDUSTRIAL AVERAGE*
A price weighted average of 30 stocks selected by Dow Jones & Company. Because
it is price weighted (as opposed to capitalization weighted) the stocks in the
index with the highest prices have the biggest effect on the performance of the
index.
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST INDEX (EAFE)*
Composed of approximately 1,000 stocks traded on 21 stock exchanges from around
the world.
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 based on industry
representation, liquidity and stability. The stocks in the S&P 500 are not the
500 largest companies, but an index 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.
-13-
<PAGE> 78
SUPPLEMENTAL PERFORMANCE
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
TABLE 1 -- FINANCIAL, METAL & ENERGY LARGE PORTFOLIO
APRIL 1983 -- DECEMBER 1999
WORST MONTHLY PERCENTAGE DRAW-DOWN (3): JUNE 1986/17.68%
WORST PEAK-TO-VALLEY DRAW-DOWN (4): MARCH -- NOVEMBER 1986/41.94%
[CHART- LARGE PORTFOLIO]
<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
</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>
3/86 - 11/86 42% 8 mos. 5 mos. 64%
7/93 - 1/95 32% 18 mos. 21 mos. 32%
9/87 - 4/88 16% 7 mos. 9 mos. 35%
7/85 - 9/85 14% 2 mos. 2 mos. 4%
7/89 - 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.
<TABLE>
<CAPTION>
APRIL 1983- NUMBER OF NUMBER NUMBER PERCENTAGE
DECEMBER 1999 TIME PERIODS PROFITABLE UNPROFITABLE PROFITABLE
<S> <C> <C> <C> <C>
Total Months 201 118 83 58.71%
Total Years 17 14 3 82.09%
12-Month Rolling Windows 190 159 31 83.68%
24-Month Rolling Windows 178 157 21 88.20%
36-Month Rolling Windows 166 155 11 93.37%
48-Month Rolling Windows 154 154 0 100.00%
60-Month Rolling Windows 142 142 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%.
-14-
<PAGE> 79
SUPPLEMENTAL PERFORMANCE -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
TABLE 2 -- GLOBAL DIVERSIFIED LARGE PORTFOLIO
FEBRUARY 1986 -- DECEMBER 1999
WORST MONTHLY PERCENTAGE DRAW-DOWN (3): APRIL 1986/14.41%
WORST PEAK-TO-VALLEY DRAW-DOWN (4): MARCH -- NOVEMBER 1986/29.71%
[CHART]
<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 4.59
</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>
3/86 - 11/86 30% 8 mos. 19 mos. 26%
7/93 - 2/94 26% 7 mos. 23 mos. 27%
12/91 - 5/92 17% 5 mos. 2 mos. 45%
7/87 - 10/87 15% 3 mos. 8 mos. 38%
12/87 - 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.
-15-
<PAGE> 80
SUPPLEMENTAL PERFORMANCE -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
TABLE 3 -- FOREIGN EXCHANGE PORTFOLIO
NOVEMBER 1990 -- DECEMBER 1999
WORST MONTHLY PERCENTAGE DRAW-DOWN (3): JULY 1991/17.01%
WORST PEAK-TO-VALLEY DRAW-DOWN (4): JULY 1993 -- JANUARY 1995/44.73%
[CHART-FOREIGN EXCHANGE PORTFOLIO]
<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
</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 mos. 23 mos. 42%
11/90 - 2/91 28% 4 mos. 1 mos. 43%
7/91 - 4/92 24% 10 mos. 10 mos. 38%
4/94 - 6/95 14% 3 mos. 2 mos. 39%
1/98 - 2/98 12% 2 mos. 8 mos. 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.
-16-
<PAGE> 81
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
-17-
<PAGE> 82
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 374 accounts traded according to
the Financial, Metal & Energy Large Portfolio. The data below is as of
February 29, 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. Eleven accounts remained open,
all of which were profitable. The open accounts ranged in size from
$8,500,000 to in excess of $200,000,000, with an average account size of
approximately $135,600,000. The average composite monthly return for the
period from January 1995 through February 29, 2000 was 1.61% compared to
the average of average monthly returns for all accounts of 1.39% 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 February 29, 2000 is 1.09% compared to the average of average
monthly returns for all accounts of 1.13% 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 February 29, 2000, two of the accounts included
notional equity of $23,000,000. The average composite monthly return for
the period from January 1995 through February 29, 2000 is 1.72% compared
to the average of average monthly returns for all accounts of 1.67% 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.
-18-
<PAGE> 83
EXHIBIT A
CAMPBELL ASSET ALLOCATION 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 May , 2000, 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, 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.
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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.
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(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
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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 .083% per month (1% 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.
A-18
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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:
A-19
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SCHEDULE A
FORM
OF
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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<PAGE> 104
EXHIBIT B
CAMPBELL ASSET ALLOCATION 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 ASSET ALLOCATION
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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<PAGE> 106
EXHIBIT C
CAMPBELL ASSET ALLOCATION TRUST
------------------------
SUBSCRIPTION REQUIREMENTS
By executing the Subscription Agreement and Power of Attorney for Campbell
Asset Allocation 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 , 2000 (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 Asset
Allocation Trust" unless the purchaser's payment will be made by debiting their
brokerage account maintained with their selling agent. 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 and become a Unitholder pursuant to the Trust Agreement
which is attached to the prospectus as Exhibit A.
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(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>
<S> <C>
1. 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.
2. California -- Net worth of at least $100,000 and an annual income of at least $50,000.
3. 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.
4. 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.
</TABLE>
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<PAGE> 108
<TABLE>
<S> <C>
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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>
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EXHIBIT D
CAMPBELL ASSET ALLOCATION TRUST
SUBSCRIPTION INSTRUCTIONS
------------------------
SUBSCRIPTION AGREEMENT DATED , 2000
Any person considering subscribing for the units should carefully
read and review a current prospectus. The prospectus should be
accompanied by the most recent monthly report of the Trust.
THE DATE PRINTED ON THE FRONT OF THE PROSPECTUS AND AT THE TOP OF THE
SUBSCRIPTION
AGREEMENT CAN BE NO LATER THAN 9 MONTHS OLD. IF THE DATE IS MORE THAN
9 MONTHS OLD, NEW MATERIALS ARE AVAILABLE AND MUST BE UTILIZED.
1. Enter the total dollar amount being invested on LINE 1.
2. Enter the investor's brokerage account number on LINE 2, and check the
box if the account is to be debited for investment.
3. Enter the Social Security Number OR Taxpayer ID Number, as applicable,
on LINE 3 and check the appropriate box to indicate ownership type. For IRA
accounts, the Taxpayer ID Number of the Custodian should be entered, as well as
the Social Security Number of the investor.
4. Check box in LINE 4 if this is an addition to an existing account and
list Unitholder #.
5. Enter the name of the investor on LINE 5. For UGMA/UTMA (Minor), enter
the Minor name on line 5, followed by "Minor", and enter the custodian name on
LINE 6. For Trusts, enter the Trust name on LINE 5 and the Trustee(s) name(s) on
LINE 6. For Corporations, Partnerships, and Estates, enter the entity name on
LINE 5, and officer or contact person name on LINE 6. Investors who are not
individuals may be required to furnish a copy of organizing or other documents
evidencing the authority of such entity to invest in the Trust. For example,
trusts may be required to furnish a copy of the trust agreement, corporations
must furnish a corporate resolution or bylaws.
6. Enter the legal address (which is the residence or domicile address used
for tax purposes) of the investor on LINE 7 (no post office boxes). Line 7 must
be completed.
7. If the mailing address is different from the legal address, enter on
LINE 8.
8. If an IRA account, enter Custodian's name and address on LINE 9.
9. The investor must sign and date LINE 10. If it is a joint account, both
investors must sign. In the case of IRAs, the Custodian's signature, as well as
the investor's signature, is required.
10. The Financial Advisor must sign in LINE 11. Some broker/dealers may
also require the signature of an office manager.
11. The name of the selling firm, Financial Advisor name, Financial Advisor
number, and address and phone number must be entered in LINE 12.
The investor should return this Subscription Agreement and payment to his
or her Financial Advisor's office address.
Subscription agreements, payment, and any other required documents should
be sent by the Financial Advisor to either:
1) the administration or Trust Administration office of the selling firm,
if firm procedures require, or
2) to the custodial firm if one is required (sending document early in the
month is best if it is to reach Campbell before month end), or
D-1
<PAGE> 111
3) to Campbell Asset Allocation Trust, 210 W. Pennsylvania Avenue, Suite
770, Towson, MD 21204, Attn: Fund Administration.
If payment is being made by wire transfer, the Financial Advisor should
contact either his or her firm's Fund Administration department or Campbell's
Fund Administration Department for instructions. Payments made by check must be
received AT LEAST THREE BUSINESS DAYS prior to the last business day of the
month, and personal checks must be received AT LEAST FIVE BUSINESS DAYS prior to
the last business day of the month.
Subscriptions close on the last business day of each month. However, the
selling firm's Fund Administration department may have an earlier cut-off for
subscriptions.
If Financial Advisors have specific questions about the subscription
process, please call Campbell's Fund Administration Department at 800-698-7235,
or your fund administration department.
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<PAGE> 112
CAMPBELL ASSET ALLOCATION TRUST
UNITS OF BENEFICIAL INTEREST
------------------------
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
Campbell Asset Allocation 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 Asset Allocation 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 , 2000 (the
"prospectus"). The undersigned's check payable to "Campbell Asset Allocation
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
D-3
<PAGE> 113
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
Campbell Asset Allocation Trust and by either (i) enclosing a check payable to
"CAMPBELL ASSET ALLOCATION 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 ______________. 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
other qualified accounts; $1,000 or more for additional account, 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)
Survivorship
[ ] Corporation* [ ] Community Property [ ] Trust other than a Grantor or Revocable
Non-Taxable Investors (check one): Trust*
[ ] 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
</TABLE>
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 ______________. 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.
<TABLE>
<S> <C>
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>
D-4
<PAGE> 114
(THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.)
<PAGE> 115
PROSPECTUS BACK COVER
<PAGE> 116
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 1% 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 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.
II-1
<PAGE> 117
(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>
(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.
II-2
<PAGE> 118
(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.
II-3
<PAGE> 119
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 22nd day of May, 2000.
CAMPBELL ASSET ALLOCATION 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 May 22, 2000
- ------------------------------------------------
D. Keith Campbell
/s/ BRUCE L. CLELAND President, Chief Executive Officer May 22, 2000
- ------------------------------------------------ and Director (Principal Executive
Bruce L. Cleland Officer)
/s/ THERESA D. BECKS Chief Financial Officer, Secretary, May 22, 2000
- ------------------------------------------------ Treasurer and Director (Principal
Theresa D. Becks Financial Officer)
/s/ WILLIAM C. CLARKE, III Executive Vice President and Director May 22, 2000
- ------------------------------------------------
William C. Clarke, III
/s/ JAMES M. LITTLE Executive Vice President and Director May 22, 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 May 22, 2000
By: /s/ BRUCE L. CLELAND
-------------------------------------------
Bruce L. Cleland
Chief Executive Officer
</TABLE>
II-4
<PAGE> 120
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.
3.01 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>
<PAGE> 1
EXHIBIT 1.01
CAMPBELL ASSET ALLOCATION TRUST
SELLING AGREEMENT
This Agreement made as of the ________ of
______________________, _______ by and among Campbell Asset Allocation Trust, a
Delaware business trust (the "Trust"), Campbell & Company, Inc., (the "Managing
Owner"), Campbell Financial Services, Inc., a Maryland corporation (the "Selling
Agent"), and PaineWebber Incorporated (the "Clearing Broker").
W I T N E S S E T H:
WHEREAS, the Managing Owner has caused the Trust to be
organized under a declaration of trust and trust agreement dated as of May 1,
2000 (together, the "Trust Agreement") to engage in speculative trading of
commodity futures contracts, options thereon, and other commodity interests and
to file a registration statement on Form S-1 with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act of 1933 (the "Securities
Act") and the rules and regulations adopted by the SEC thereunder, as amended to
the date hereof (the "Rules"); the term "Final Amendment" means the amendment to
such registration statement which has been submitted by the Trust to the SEC to
permit such registration statement to become effective; the date on which the
registration statement becomes effective being hereinafter referred to as the
"Effective Date"; the term "Registration Statement" means such registration
statement in the form in which it becomes effective; the term "Prospectus" means
the prospectus included in the Registration Statement, substantially in the
form, heretofore submitted to, and not reasonably objected to by, the Selling
Agent, or the Managing Owner; and the term "preliminary prospectus" means any
preliminary prospectus (as described in Rule 433 under the Securities Act)
included at any time in the registration statement prior to its becoming
effective with the SEC.
WHEREAS, the Clearing Broker is to be the clearing broker for
the Trust's commodity futures transactions pursuant to the terms of the
agreement between the Clearing Broker and the Trust (the "Customer Agreement")
described in the Prospectus; and
WHEREAS, the Trust proposes to issue and sell to the public
its Units of Beneficial Interest ("Units"), provided that Units may only be sold
to investors who have "wrap fee" accounts with a selling agent, as described
in the Prospectus; and
WHEREAS, the Selling Agent desires to assist in the sale of
the Units upon the terms and in reliance upon the representations, warranties
and covenants set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. OFFERING OF UNITS
(a) Appointment
The Trust hereby appoints the Selling Agent as one of its
agents on a non-exclusive basis to offer and sell the Units. The Managing Owner
will retain additional Selling Agents ("Additional Selling Agents") who will
attempt to sell the Units on a best efforts basis at the price and in the manner
<PAGE> 2
described in the Prospectus and in compliance with the terms and conditions set
forth therein and herein. Units may only be sold to investors who have "wrap
fee" accounts with an Additional Selling Agent.
During the period from the commencement of the offering of the
Units to the initial Closing Date (as defined in Section 3 hereof), the Trust
will offer the Units at a price of $1,000 per Unit. Such initial Offering Period
shall terminate on the initial Closing Date as determined pursuant to Section 3
hereof.
During the offering period in respect of the Units (the
"Continuing Offering Period"), the Trust may continue to offer Units at the
month-end Net Asset Value per Unit as of the last business day of the month
during which subscriptions are received by the Managing Owner (each, a "Closing
Date"). Such Continuing Offering Period shall terminate at any time as
determined by the Managing Owner.
No selling commissions will be charged to the subscribers with
respect to the offer and sale of the Units.
The Trust hereby authorizes the Selling Agent to distribute
the Prospectus and any amendments or supplements thereto in accordance with the
terms of this Agreement.
(b) Compensation
In consideration of the Selling Agent administering the Units,
the Managing Owner shall pay the Selling Agent an ongoing fee for
administrative, legal and client reporting services of 0.35% per annum of the
net assets of the Trust, as defined in the Prospectus, by the Managing Owner.
The Selling Agent may pass along a portion of such fee to another selling agent
which is appropriately registered with or a member of, as applicable, the
National Futures Association (the "NFA"), the National Association of Securities
Dealers, Inc. (the "NASD"), the SEC, the securities or Blue Sky administrators
of the several states and various other jurisdictions and any other regulatory
body.
(c) Undertaking of Selling Agent
The Selling Agent will use its best efforts to find eligible
persons to purchase Units on the terms stated herein and in the Prospectus and
any amendments or supplements thereto. In connection with the offer and sale of
the Units, the Selling Agent represents, warrants and agrees that it will comply
fully with all applicable laws and the rules of the NFA, the NASD, the SEC, the
securities or Blue Sky administrators of the several states and various other
jurisdictions and any other applicable regulatory body. It is understood that
the Selling Agent has no commitment with regard to the offer or sale of the
Units other than to use its best efforts as described above. The Selling Agent
will deliver all cash and checks received by it from subscribers to the escrow
of funds account (Campbell Asset Allocation Trust, Escrow Account) (the "Escrow
Account") established by the Trust with the Mercantile-Safe Deposit & Trust
Company (the "Escrow Agent") pursuant to an Escrow Agreement, dated as of
_______, 2000 (the "Escrow Agreement"). Such cash and checks shall be
transmitted to the Escrow Agent by the Selling Agent no later than noon on the
business day next succeeding the receipt of such cash and checks by the Selling
Agent. Such cash or checks will be accompanied by one executed copy of the
subscription agreement/power of attorney for each subscription obtained,
properly completed and executed and in the form of Exhibit D to the Prospectus
(a "Subscription Agreement"). All checks received by the Selling Agent from
subscribers shall be made payable to "Campbell Asset Allocation Trust, Escrow
Account." The Selling Agent will promptly deliver to the Managing Owner one
photocopy of each such Subscription Agreement. Promptly after receipt of a
subscription and the funds therefor by the Escrow Agent and delivery of a copy
of the related Subscription Agreement to the Managing Owner, an interim
2
<PAGE> 3
receipt will be mailed by the Managing Owner to each such subscriber for the
amount deposited in the Escrow Account on behalf of such subscriber.
(d) Finder's Fees
None of the Selling Agent, the Trust or the Managing Owner
shall, directly or indirectly, pay or award any finder's fees, commissions or
other compensation to any person engaged by a potential investor for investment
advice as an inducement to such advisor to recommend the purchase of Units;
provided, however, the normal sales commissions payable to a registered
broker-dealer or other properly licensed person for selling Units shall not be
prohibited hereby.
2. BLUE SKY FILINGS
The Trust agrees to prepare, execute, file and amend, as
necessary, all applications for registration of the Units, consents to service
of process, reports of sale of Units and similar Blue Sky qualification,
registration and exemption documents and to take such other actions which may be
necessary or advisable, in the opinion of the Managing Owner or its counsel, in
order to qualify the Units for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States of America as the Managing
Owner may reasonably request; provided, that in no event shall the Trust be
obligated to (i) take any action which would subject it to service of process in
suits, other than those arising out of the offering or sale of the Units, or
taxes in any jurisdiction where it is not now so subject or (ii) offer in any
jurisdiction that would require a change in any term in the Registration
Statement, as the same may be supplemented or amended.
The Managing Owner agrees to cause its counsel to prepare and
deliver to the Selling Agent a Blue Sky Survey which shall set forth, for the
guidance of the Selling Agent, in which United States jurisdictions the Units
may be offered and sold. It is understood and agreed that the Selling Agent may
rely, in connection with the offering and sale of Units in any jurisdiction, on
advice given by such counsel as to the legality of the offer or sale of the
Units in such jurisdiction, provided, however, that the Selling Agent shall be
responsible for compliance with all applicable laws, rules and regulations with
respect to the actions of its employees, acting as such, in connection with
sales of Units in any jurisdiction.
3. CLOSING DATE
If at least $8,000,000 of Units shall have been so subscribed
for, then on the first business day ninety (90) days following the SEC
effectiveness of the Registration Statement (the "Effectiveness Date") or (i) at
such earlier time after subscriptions for at least $8,000,000 of Units shall
have been received by the Managing Owner or (ii) at such later date up to 180
days after the Effectiveness Date to which the Managing Owner may extend the
initial offering, the Managing Owner shall notify the Selling Agent of the
initial closing of the Trust (the "initial Closing Date"), as well as of the
aggregate number of Units for which the Managing Owner has received acceptable
subscriptions. Payment of the purchase price for the Units shall be made at the
office of Campbell & Company, Inc., 210 West Pennsylvania Avenue, Suite 770,
Towson, Maryland 21204, at 10:00 A.M., Eastern time, on such day and time (not
later than five (5) business days after the end of the initial Offering Period)
as shall be agreed upon among the Selling Agent and the Managing Owner.
Subject to the Managing Owner's right to terminate the
offering at any time and subject to the conditions and requirements stated in
the Prospectus and herein, there shall be a closing on the last business day of
each month during the Continuing Offering Period (a "Closing Date"), with
respect to subscriptions received during each month of the Continuing Offering
Period. Such closing shall be held
3
<PAGE> 4
at the offices of the Managing Owner (or other location as selected by the
Managing Owner), and shall provide for (i) payment of the aggregate purchase
price for the Units to the Trust by release of funds from the Escrow Account,
and (ii) compliance with Section 8 hereof.
4. REPORTS FOR SELLING AGENT
The Trust agrees that so long as any of the Units are
outstanding, it will, at the Trust's expense, deliver to the Selling Agent upon
request all financial statements and other periodic and special reports
distributed generally to the Unitholders or required to be delivered to the
Unitholders or filed with the SEC or the Commodity Futures Trading Commission
(the "CFTC") under the Trust Agreement or any federal statute, rule or
regulation relating to securities, commodities or commodity futures.
5. AGREEMENTS OF THE TRUST AND THE MANAGING OWNER
The Trust and the Managing Owner jointly and severally agree
as follows:
(a) Promptly to file the Final Amendment and the Prospectus
with the SEC, but not to file any amendment or supplement to the Registration
Statement or Prospectus, except such as counsel for the Managing Owner shall
deem advisable in order to assure compliance with applicable laws.
(b) To advise the Selling Agent (i) when the Registration
Statement has become effective, (ii) of the issuance by the SEC, CFTC or any
other federal or state regulatory body of any stop order suspending the
effectiveness of the Registration Statement under the Securities Act, the CFTC
registration or NFA membership of the Managing Owner as a commodity pool
operator or the registration of Units under the Blue Sky or securities laws of
any state or other jurisdiction or any order or decree enjoining the offering or
the use of the then current Prospectus or of the institution, or notice of the
intended institution, of any action or proceeding for that purpose and (iii) the
receipt by the Trust or any representative or attorney of the Trust of any other
material communication from the SEC, CFTC, NFA or any Blue Sky or securities law
administrator relating to the Trust, the Registration Statement, any preliminary
prospectus or the Prospectus, as it may be amended or supplemented. The Trust
will make every reasonable effort to prevent the issuance of any order
suspending the effectiveness of the Registration Statement under the Securities
Act or the registration of Units under the laws of the several states and
various other jurisdictions or enjoining the offering and, if any such order is
issued, to obtain as soon as possible the withdrawal thereof; provided, that in
no event shall the Trust be obligated to (i) take any action which would subject
it to service of process in suits, other than those arising out of the offering
or sale of the Units, or taxes in any jurisdiction where it is not now so
subject or (ii) change any term in the Registration Statement, as the same may
be amended or supplemented.
(c) To deliver to the Selling Agent, without charge, as many
conformed copies of the registration statement as originally filed and of the
Registration Statement and each amendment or supplement thereto (including all
exhibits filed with, or incorporated by reference in, any such document) as the
Selling Agent may reasonably request.
(d) During the Continuing Offering Period to deliver, without
charge, to the Selling Agent, at such office or offices within the United States
of America as the Selling Agent may reasonably designate, as many copies of the
Prospectus, as amended or supplemented, as the Selling Agent may reasonably
request.
4
<PAGE> 5
6. AMENDMENT OF THE REGISTRATION STATEMENT AND PROSPECTUS
The Trust agrees, at its expense, to amend the Registration
Statement and Prospectus or to supplement the Prospectus if, at any time after
the Effective Date and prior to each Closing Date, (i) such amendment or
supplement is necessary to comply with the Securities Act, the Commodity
Exchange Act (the "Commodity Act"), the securities or Blue Sky laws of any
jurisdiction or the rules or regulations promulgated under such Acts or laws, is
necessary to comply with any NFA deficiency notices or is necessary to correct
any material untrue statement in the Prospectus or Registration Statement or to
eliminate any material omission therein or any omission therein which renders
any of the statements therein materially misleading, or (ii) the Selling Agent
or the Clearing Broker advises the Trust that, in its opinion and that of its
counsel, such amendment or supplement is necessary to comply with such Acts or
laws or the rules or regulations promulgated thereunder, to comply with any such
deficiency notice or to correct any such material untrue statement or to
eliminate any such omission. The Managing Owner agrees to notify the Trust, the
Selling Agent and the Clearing Broker and each of the Selling Agent and the
Clearing Broker agrees to notify the Managing Owner and the Trust, immediately
(y) upon discovery of any untrue or misleading statements or omissions in the
Prospectus or Registration Statement concerning such party and (z) of the
occurrence of any event or change in circumstances which would result in there
being any untrue or misleading statement or omission in the Prospectus or
Registration Statement, in each case relating to the Managing Owner, the Selling
Agent, the Clearing Broker, respectively. The representations, warranties and
indemnifications of all parties hereto contained herein relating to the
Registration Statement and Prospectus shall attach to any such amendment or
supplement.
7. REPRESENTATIONS AND WARRANTIES
(a) The Managing Owner, represents and warrants to the
Selling Agent and the Clearing Broker that:
(i) The Trust is duly organized and validly existing as
a business trust under the laws of the State of Delaware, and has full power and
authority under the Trust Agreement to conduct its business as described in the
Registration Statement and Prospectus and to issue, sell and deliver the Units.
The Trust is not required to take any action to be qualified to do business in
the State of Maryland.
(ii) The Managing Owner is a corporation duly organized
and validly existing in good standing under the laws of the State of Maryland,
has full corporate power to perform its obligations and enter into the
transactions described in the Registration Statement and Prospectus, as the same
may be amended or supplemented. All the present principals of the Managing Owner
are identified as such in the Registration Statement and Prospectus.
(iii) The Units, when issued and sold pursuant to the
terms hereof and of the Registration Statement, Prospectus and Subscription
Agreements, will be validly issued, fully paid and not subject to further call
or assessment.
(iv) The Customer Agreement dated as of _____, 2000,
between the Trust and the Clearing Broker (the "Customer Agreement") has been
duly and validly authorized, executed and delivered by the Managing Owner on
behalf of the Trust. The Escrow Agreement and this Agreement have each been duly
and validly authorized, executed and delivered by the Managing Owner on behalf
of the Trust and each is, assuming that it has been duly and validly authorized,
executed and delivered by the other parties thereto (other than the Managing
Owner), a valid and binding agreement of the Trust, except insofar as
bankruptcy, moratorium or other similar laws may be applicable and except that
the
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exculpation, indemnification and contribution provisions of such agreements
may be limited by applicable law and enforcement of any specific terms or
remedies may be unavailable.
(v) The Trust Agreement and this Agreement have each been
duly and validly authorized, executed and delivered on behalf of the Managing
Owner and each is, assuming that it has been duly and validly authorized,
executed and delivered by the other parties thereto (other than the Trust), a
valid and binding agreement of the Managing Owner except insofar as bankruptcy,
moratorium or other similar laws may be applicable, and except that the
exculpation, indemnification and contribution provisions of such agreements may
be limited by applicable law and enforcement of any specific terms or remedies
may be unavailable.
(vi) The Trust has, or is in the process of obtaining,
all federal and state governmental and regulatory approvals and licenses, and is
maintaining on a current basis all filings and registrations with federal and
state governmental and regulatory agencies, required to conduct its business to
be conducted, all as described in the Registration Statement and Prospectus.
(vii) The Managing Owner has all federal and state
governmental and regulatory, and to the best of its knowledge, commodity
exchange licenses and approvals, and is maintaining on a current basis all
filings and registrations with federal and state governmental and regulatory
agencies, required to act as described in the Registration Statement and
Prospectus (including, without limitation, registration as a commodity pool
operator under the Commodity Act and membership as a commodity pool operator in
NFA), and the performance of such actions will not violate or result in a breach
of any provision of its articles of incorporation, by-laws or any agreement,
instrument, order, law or regulation binding upon it.
(viii) On the Effective Date and the date on which the
Prospectus is first filed with the SEC pursuant to Rule 424(b), the Registration
Statement and the Prospectus (or when any post-effective amendment to the
Registration Statement becomes effective or any supplement to the Prospectus is
filed with the SEC, the Registration Statement, as amended, and the Prospectus,
as amended or supplemented) will comply fully in all material respects with the
requirements of the Securities Act and the Rules and the Commodity Act and the
published rules of the CFTC thereunder, and will accurately describe the
proposed operation of the Trust; and each of the Registration Statement, as it
may be amended, and the Prospectus, as it may be amended or supplemented, will
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, as it may be amended or
supplemented, in the light of the circumstances under which such statements were
made); except that this representation and warranty does not apply to any
statement or omission in the Registration Statement, as it may be amended, or
the Prospectus, as it may be amended or supplemented, made in reliance upon
information furnished in writing to the Trust by the Clearing Broker or the
Selling Agent, respectively, expressly for use therein.
(ix) All references to the Managing Owner and its
principals in the Registration Statement and the Prospectus are accurate and
complete in all material respects, set forth in all material respects the
information required to be disclosed to prospective investors under the
Commodity Act and the rules and regulations thereunder and, as to the Managing
Owner and its principals, the Registration Statement and Prospectus do not
contain any misleading or untrue statement of a material fact or omit to state a
material fact which is required to be stated therein or necessary to make the
statements therein not misleading (in the case of the Prospectus, in the light
of the circumstances under which such statements were made).
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<PAGE> 7
(x) The balance sheet of the Managing Owner and the notes
thereto included in the Registration Statement present fairly the financial
position of the Managing Owner as of the date thereof, in conformity or (in the
case of any unaudited balance sheet) in substantial conformity with generally
accepted accounting principles. Since the date of the most recent such balance
sheet, there have been no changes in the financial condition of the Managing
Owner, other than changes which, in the aggregate, are not materially adverse or
which are disclosed in the Prospectus, and since such date there have been no
changes in the business of the Managing Owner which are material in the context
of the offering of the Units.
(xi) The certificate delivered pursuant to subsection (b)
of Section 8 hereof and all other certificates delivered by the Trust and the
Managing Owner pursuant to this Agreement were on the dates on which they were
delivered, or will be on the dates on which they are to be delivered, accurate
and complete in all material respects.
(xii) The Trust will file any promotional brochure or
other marketing materials (collectively, "Promotional Material") with the NASD,
and will not use any such Promotional Material to which the NASD has not stated
in writing that it has no objections. The Trust will file all Promotional
Material in all state jurisdictions where such filing is required, and will not
use any such Promotional Material in any state which has expressed any objection
thereto (except pursuant to agreed-upon modifications to the Promotional
Material).
(xiii) The Trust and the Managing Owner have trust or
corporate power and authority under applicable law to perform their respective
obligations under the Trust Agreement, the Customer Agreement and this
Agreement, as described in the Registration Statement and Prospectus.
(xiv) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus, there has not been
any material adverse change in the condition, financial or otherwise, business
or prospects of the Managing Owner or the Trust, whether or not arising in the
ordinary course of business.
(xv) At the initial Closing Date, as set forth in
the opinion of Sidley & Austin, counsel for the Managing Owner, the Trust will
be classified as a partnership for Federal income tax purposes under the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder.
(xvi) There is not pending, or, to the best of the
Managing Owner's knowledge, threatened, any action, suit or proceeding before or
by any court or other governmental body to which the Managing Owner or the Trust
is a party, or to which any of the assets of the Managing Owner or the Trust is
subject, which is not referred to in the Prospectus and which might reasonably
be expected to result in any material adverse change in the condition (financial
or otherwise), business or prospects of the Managing Owner or the Trust or is
required to be disclosed in the Prospectus pursuant to applicable CFTC
regulations. The Managing Owner has not received any notice of an investigation
or warning letter from the NFA or the CFTC regarding non-compliance by the
Managing Owner with the Commodity Act or the regulations thereunder.
(b) The Clearing Broker represents and warrants to the Trust,
the Selling Agent and the Managing Owner:
(i) The Clearing Broker is a corporation duly organized
and validly existing in good standing under the laws of its state of
incorporation and in good standing and qualified to do business in each
jurisdiction in which the nature or conduct of its business requires such
qualifications
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<PAGE> 8
and the failure to be duly qualified would materially adversely affect the
Clearing Broker's ability to perform its obligations hereunder or under the
Customer Agreement. The Clearing Broker has full power and authority to perform
its obligations as described in the Registration Statement and Prospectus.
(ii) The Customer Agreement and this Agreement have each
been duly and validly authorized, executed and delivered by the Clearing Broker
and each is, assuming that it has been duly and validly authorized, executed and
delivered by the other parties thereto, a valid and binding agreement of the
Clearing Broker, except insofar as bankruptcy, moratorium or other similar laws
may be applicable and except that the exculpation, indemnification and
contribution provisions of such agreements may be limited by applicable law and
enforcement of any specific terms or remedies may be unavailable.
(iii) The Clearing Broker has all federal and state
governmental and regulatory and commodity exchange licenses and approvals, and
is maintaining on a current basis all filings and registrations with federal and
state governmental and regulatory agencies required, to perform its obligations
under the Customer Agreement and this Agreement and to act as described in the
Registration Statement and Prospectus (including, without limitation,
registration of the Clearing Broker as a futures commission merchant under the
Commodity Act and membership of the Clearing Broker as a futures commission
merchant in NFA), and the performance of the Clearing Broker's obligations under
the Customer Agreement and this Agreement and of such actions will not violate
or result in a breach of any provision of the Clearing Broker's articles of
incorporation, by-laws or any agreement, instrument, order, law or regulation
binding upon the Clearing Broker.
(iv) All references to the Clearing Broker in the
Registration Statement and Prospectus are accurate and complete in all material
respects, and set forth in all material respects the information required to be
disclosed therein under the Commodity Act and the rules and regulations
thereunder. As to the Clearing Broker, (i) the Registration Statement and
Prospectus contain all statements and information required to be included
therein under the Commodity Act and the rules and regulations thereunder, (ii)
the Registration Statement as of its Effective Date did not contain any
misleading or untrue statement of a material fact or omit to state a material
fact which is required to be stated therein or necessary to make the statements
therein not misleading and (iii) the Prospectus as of the initial Closing Date
did not and will not contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not misleading,
in light of the circumstances under which such statements were made.
(v) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as may
otherwise be stated in or contemplated by the Registration Statement and the
Prospectus, there has not been any material adverse change in the condition,
financial or otherwise, business or prospects of the Clearing Broker, whether or
not arising in the ordinary course of business.
(vi) In the ordinary course of its business, the Clearing
Broker is engaged in civil litigation and subject to administrative proceedings.
Neither the Clearing Broker nor any of its principals have been the subject of
any administrative, civil, or criminal actions within the five years preceding
the date hereof that would be required to be disclosed in the Prospectus by CFTC
regulations and which are not disclosed in the Prospectus.
(c) The Selling Agent represents and warrants to the Trust,
the Managing Owner and the Clearing Broker:
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<PAGE> 9
(i) The Selling Agent is a corporation duly organized and
validly existing and in good standing under the laws of the state of its
incorporation, is a member in good standing of the NASD and has full power and
authority to act as selling agent in the manner contemplated by this Agreement
and as described in the Registration Statement and the Prospectus. The Selling
Agent is in good standing and qualified to do business in each jurisdiction in
which the nature or conduct of its business requires such qualification and the
failure to be duly qualified would materially adversely affect the Selling
Agent's ability to perform its obligations hereunder.
(ii) The Selling Agent is in good standing and in
compliance with all applicable broker-dealer registration requirements in the
places where the Units will be sold by the Selling Agent.
(iii) Any use or distribution of the Registration
Statement, the Prospectus or any related preliminary prospectus by the Selling
Agent will comply with the terms and conditions set forth in the Prospectus and
with the Securities Act, the Securities Exchange Act of 1934, as amended, all
applicable securities and Blue Sky laws of the states in which the Selling Agent
intends to sell Units, the rules and regulations promulgated under all such Acts
and all such laws, and all applicable rules and regulations of the NASD and all
other self-regulatory organizations. In particular, and not by way of
limitation, the Selling Agent represents and warrants that it is aware of NASD
Rule 2810 and that it will comply fully with all the terms thereof in connection
with the offer and sale of the Units. The Selling Agent agrees not to recommend
either the purchase or redemption of Units to any subscriber unless the Selling
Agent shall have reasonable grounds to believe, on the basis of information
obtained from the subscriber concerning, among other things, the subscriber's
investment objectives, other investments, financial situation and needs, that
the subscriber is or will be in a financial position appropriate to enable the
subscriber to realize to a significant extent the benefits of the Trust,
including tax benefits described in the Registration Statement and the
Prospectus; the subscriber has a fair market net worth sufficient to sustain the
risks inherent in participating in the Trust, including loss of investment and
lack of liquidity; and the Units are otherwise a suitable investment for the
subscriber. The Selling Agent agrees to maintain files of information disclosing
the basis upon which the Selling Agent determined that the suitability
requirements of NASD Rule 2810 were met as to each subscriber (the basis for
determining suitability may include the Subscription Agreements and other
certificates submitted by subscribers). The Selling Agent represents and
warrants that it has reasonable grounds to believe, based on information in the
Registration Statement and Prospectus, that all material facts relating to an
investment in the Units are adequately and accurately disclosed in the
Registration Statement and Prospectus. In connection with making the foregoing
representations and warranties, the Selling Agent further represents and
warrants that it has, among other things, examined the Registration Statement
and Prospectus and obtained such additional information from the Managing Owner
regarding the information set forth thereunder as the Selling Agent has deemed
necessary or appropriate to determine whether the Registration Statement and
Prospectus adequately and accurately disclose all material facts relating to an
investment in the Trust and provide an adequate basis to subscribers for
evaluating an investment in the Units. In connection with making the
representations and warranties set forth in this paragraph, the Selling Agent
has not relied on inquiries made by or on behalf of any other parties.
The Selling Agent agrees to inform all prospective purchasers
of Units of all pertinent facts relating to the liquidity and marketability of
the Units as set forth in the Registration Statement and Prospectus.
(iv) The Selling Agent and its representatives have all
required federal and state governmental and regulatory approvals and licenses
and have effected all filings and registrations with federal and state
governmental and regulatory agencies required to conduct its business and to
perform their obligations under this Agreement and to act as described in the
Registration Statement and
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the Prospectus. The performance of the obligations of the Selling Agent under
this Agreement and its acting as described in the Registration Statement and the
Prospectus will not violate or result in a breach of any provisions of its
Articles of Incorporation or by-laws or any agreement, instrument, order, law or
regulation binding upon it.
(v) This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Selling Agent, and is, assuming that it
has been duly and validly authorized, executed and delivered by the other
parties hereto (other than the Selling Agent), a valid and binding agreement of
the Selling Agent and enforceable in accordance with its terms.
(vi) Any references to the Selling Agent in the
Registration Statement and Prospectus are accurate and complete in all material
respects, and set forth in all material respects the information required to be
disclosed therein under the Commodity Act and the rules and regulations
thereunder. As to the Selling Agent, (i) the Registration Statement and
Prospectus contain all statements and information required to be included
therein under the Commodity Act and the rules and regulations thereunder, (ii)
the Registration Statement as of its Effective Date did not contain any
misleading or untrue statement of a material fact or omit to state a material
fact which is required to be stated therein or necessary to make the statements
therein not misleading and (iii) the Prospectus at its date of issue and as of
the initial Closing Date did not and will not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading, in light of the circumstances under which such
statements were made.
(vii) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as may
otherwise be stated in or contemplated by the Registration Statement and the
Prospectus, there has not been any material adverse change in the condition,
financial or otherwise, business or prospects of the Selling Agent, whether or
not arising in the ordinary course of business.
(viii) In the ordinary course of its business, the
Selling Agent is engaged in civil litigation and subject to administrative
proceedings. Neither the Selling Agent nor any of its principals have been the
subject of any administrative, civil, or criminal actions within the five years
preceding the date hereof that would be required to be disclosed in the
prospectus by CFTC regulations and which are material to an investor's decision
to purchase the Units.
(ix) The execution and delivery of this Agreement, the
incurrence of the obligations set forth herein and the consummation of the
transactions contemplated herein and in the Prospectus will not constitute a
breach of, or default under, any instrument by which the Selling Agent is bound
or any order, rule or regulation applicable to the Selling Agent of any court or
any governmental body or administrative agency having jurisdiction over the
Selling Agent.
8. CLOSING REQUIREMENTS
The issue and sale of the Units and the release of the funds
from the Escrow Account to the Trust shall be subject to the accuracy on and as
of the Closing Date of, and compliance on each Closing Date with, the
representations and warranties of the Managing Owner, the Selling Agent and the
Clearing Broker herein and the performance by the Trust, the Managing Owner, the
Selling Agent and the Clearing Broker of their obligations hereunder and the
following conditions:
(a) The Trust, the Selling Agent and the Clearing Broker shal
have received a certificate of the Managing Owner executed by an officer of the
Managing Owner, which shall state that (i) no order suspending the effectiveness
of the Registration Statement, as it may be amended, or
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prohibiting the sale of the Units is in effect and no proceedings for such
purpose are pending before or, to the knowledge of such officers, threatened by
the SEC, (ii) no adverse comments or deficiency notices relating to the
Prospectus have been received from the CFTC or NFA which have not been responded
to the satisfaction of such agencies and (iii) the representations and
warranties of the Managing Owner contained herein are true and correct on and as
of the Closing Date, and the Managing Owner and the Trust, as the case may be,
have performed all covenants and agreements herein contained to be performed on
their respective parts at or prior to the date of the certificate.
(b) At the initial Closing Date, Sidley & Austin, counsel to
the Managing Owner, shall deliver to all the parties hereto its opinion, in form
and substance satisfactory to each of the parties hereto, to the effect that:
(i) Upon payment of the consideration therefor specified
in the accepted Subscription Agreements and Powers of Attorney, the Units will
constitute valid units of beneficial interest in the Trust and each subscriber
who purchases Units will become a Unitholder, subject to the requirement that
each such purchaser shall have duly completed, executed and delivered to the
Trust a Subscription Agreement and Power of Attorney relating to the Units
purchased by such party, that such purchaser meets all applicable suitability
standards as set forth in the Prospectus and that the representations and
warranties of such purchaser in the Subscription Agreement and Power of Attorney
are true and correct.
(ii) The Trust need not effect any other filings or
qualifications under the laws of the United States and the States of Illinois
and New York in order to preserve the status of the Trust as a business trust or
to enable the Trust to perform its obligations under this Agreement and to
conduct the business in which it proposes to be engaged as described in the
Prospectus.
(iii) The Managing Owner is qualified to do business and
is in good standing as a foreign corporation in each other jurisdiction in which
the failure to so qualify might, in their opinion, reasonably be expected to
result in material adverse consequences to the Trust.
(iv) Each of the Managing Owner (including the
principals, as defined in the Commodity Act, of the Managing Owner) and the
Trust has all Federal and Illinois and New York State governmental and
regulatory licenses and approvals and has received or made all filings and
registrations with Federal and Illinois and New York State governmental and
regulatory agencies necessary in order for each of the Managing Owner and the
Trust to conduct its business as described in the Registration Statement and
Prospectus, and, to the best of their knowledge, none of such approvals,
licenses or registrations have been rescinded or revoked.
(v) Each of the Trust Agreement, the Customer Agreement
and this Agreement, assuming that such agreements are legal, valid and binding
on the other parties hereto and thereto, constitutes a legal, valid and binding
agreement of the Managing Owner or the Trust (as the case may be) enforceable in
accordance with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
applicability relating to or affecting the enforcement of creditors' rights and
by the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
(vi) The execution and delivery of this Agreement, the
Trust Agreement and the Customer Agreement and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions
contemplated herein and therein and in the Prospectus, to their knowledge, will
not constitute a breach of, or default under, any instrument by which the
Managing Owner or the Trust is bound or any order, rule or regulation applicable
to the Managing Owner or the
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Trust of any court or any governmental body or administrative agency having
jurisdiction over the Managing Owner or the Trust.
(vii) To their knowledge, there are no actions, claims
or proceedings pending or threatened in any court or before or by any
governmental or administrative body, nor have there been any such suits, claims
or proceeding within the last five years, to which the Managing Owner (or any
principal of the Managing Owner) or the Trust is or was a party, or to which any
of their assets is or was subject, which are required to be, but are not
disclosed in, the Registration Statement or Prospectus or which might reasonably
be expected to materially adversely affect the condition (financial or
otherwise), business or prospects of the Managing Owner or the Trust.
(viii) No authorization, approval or consent of any
governmental authority or agency is necessary in connection with the
subscription for and sale of the Units, except such as may be required under the
Securities Act, the Commodity Act, NFA compliance rules or applicable securities
or "Blue Sky" laws.
(ix) The terms and provisions of the Trust Agreement, the
Customer Agreement and this Agreement conforms in all material respects to
descriptions thereof contained in the Prospectus.
(x) The Registration Statement is effective under the
Securities Act and, to the best of their knowledge, no proceedings for a stop
order are pending or threatened under Section 8(d) of the Securities Act.
(xi) At the time the Registration Statement initially
became effective and at the time any post-effective amendment thereto became
effective, the Registration Statement, and at the time the Prospectus and any
amendments or supplements thereto were first issued, the Prospectus, complied as
to form in all material respects with the requirements of the Securities Act,
the Rules and CFTC regulations. Nothing has come to their attention that would
lead them to believe that with respect to the Managing Owner and the Selling
Agent (a) at the time the Registration Statement initially became effective and
at the time any post-effective amendment thereto became effective, the
Registration Statement contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or (b) the Prospectus as first issued
or as subsequently issued or at the initial Closing Date contained an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that such counsel need
express no opinion (A) as to the financial statements, notes thereto and other
financial or statistical data set forth in the Registration Statement and
Prospectus or (B) as to any performance data set forth in the Registration
Statement, and Prospectus, including the performance summaries (and the notes
thereto) in the Registration Statement and Prospectus, except that such counsel
shall opine, without rendering any opinion as to the accuracy of the information
in the performance summaries, that such the performance summaries comply as to
form in all material respects with applicable CFTC rules.
(xii) Such counsel confirm their opinion, a form of
which appears as Exhibit 8.01 to the Registration Statement, that the summary of
Federal income tax consequences to Unitholders set forth under the caption
"Federal Income Tax Aspects" in the Prospectus accurately describes the material
tax consequences set forth therein and that such counsel further confirm their
advice to the Managing Owner explicitly set forth therein and in such Exhibit
8.01.
(xiii) To the best of their knowledge, (a) there are no
contracts, indentures, mortgages, loan agreements, leases or other documents of
a character required to be described or referred
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to in the Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement other than those described or referred to therein or
filed as exhibits thereto, and with respect to the existing contracts,
indentures, mortgages, loan agreements, leases and other documents so described,
referred to or filed, the descriptions thereof, references thereto or copies so
filed are correct in all material respects, and (b) no material default on the
part of the Managing Owner or the Trust exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract or lease so described or filed.
(xiv) Assuming operation in accordance with the
Prospectus, the Trust, at the Closing Date, is not an "investment company" as
that term is defined in the Investment Company Act of 1940, as amended.
(c) At the initial Closing Date, Richards, Layton & Finger,
Delaware counsel to the Trust, shall deliver to all the parties hereto its
opinion, in form and substance satisfactory to each of the parties hereto, to
the effect that:
(i) The Certificate of Trust pursuant to which the Trust
has been formed and the Trust Agreement each provides for the subscription for
and sale of the Units; all Delaware action required to be taken by the Managing
Owner and the Trust as a condition to the subscription for and sale of the Units
to qualified subscribers therefor has been taken; and, upon payment of the
consideration therefor specified in the accepted Subscription Agreements and
Powers of Attorney, the Units will constitute valid units of beneficial interest
in the Trust and each subscriber who purchases Units will become a Unitholder,
subject to the requirement that each such purchaser shall have duly completed,
executed and delivered to the Trust a Subscription Agreement and Power of
Attorney relating to the Units purchased by such party, that such purchaser
meets all applicable suitability standards as set forth in the Prospectus and
that the representations and warranties of such purchaser in the Subscription
Agreement and Power of Attorney are true and correct.
(ii) The Trust is a business trust duly organized
pursuant to the Certificate of Trust, the Trust Agreement and the Delaware
Business Trust Act and validly existing under the laws of the State of Delaware
with trust power and authority to conduct the business in which it proposes to
engage as described in the Prospectus; the Trust need not effect any other
filings or qualifications under the laws of the State of Delaware, in order to
preserve the status of the Trust as a business trust or to enable the Trust to
perform its obligations under this Agreement and to conduct the business in
which it proposes to be engaged as described in the Prospectus.
(iii) The Trust has any Delaware licenses and approvals
and has received or made all filings and registrations with Delaware
governmental and regulatory agencies necessary in order for the Trust to conduct
its business as described in the Registration Statement and Prospectus, and, to
the best of their knowledge, none of such approvals, licenses or registrations
have been rescinded or revoked.
(iv) Each of the Trust Agreement, the Customer
Agreement and this Agreement has been duly and validly authorized, executed and
delivered by or on behalf of the Trust and the Trust Agreement constitutes a
legal, valid and binding agreement of the Trust (as the case may be) enforceable
in accordance with its terms, except to the extent enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws of general
applicability relating to or affecting the enforcement of creditors' rights and
by the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
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(v) The execution and delivery of this Agreement, the
Trust Agreement and the Customer Agreement and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions
contemplated herein and therein and in the Prospectus will not be in
contravention of any of the provisions of the Trust Agreement, and, to their
knowledge, will not constitute a breach of, or default under, any instrument by
which the Trust is bound or any order, rule or regulation applicable to the
Trust of any court or any governmental body or administrative agency having
jurisdiction over the Trust.
(d) At the initial Closing Date, Church & Houff, Maryland
counsel to the Managing Owner, shall deliver to all the parties hereto its
opinion, in form and substance satisfactory to each of the parties hereto, to
the effect that:
(i) All action required to be taken by the Managing Owner
under the Maryland General Corporation Law as a condition to the subscription
for and sale of the Units to qualified subscribers therefor has been taken.
(ii) To our knowledge, the Trust is not required to make
any filings in order to qualify to do business in Maryland and need not effect
any other filings or qualifications under the corporate laws of the State of
Maryland in order to enable the Trust to perform its obligations under this
Agreement and to conduct the business in which it proposes to be engaged as
described in the Prospectus.
(iii) The Managing Owner is duly organized and validly
existing and in good standing as a corporation under the laws of the State of
Maryland with corporate power and authority to act as managing owner of the
Trust. The Managing Owner has full corporate power and authority to perform its
obligations as described in the Registration Statement and Prospectus.
(iv) The Managing Owner (including its principals), has
all licenses and approvals and has received or made all filings and
registrations with Maryland governmental and regulatory agencies necessary in
order for the Managing Owner to conduct its business as described in the
Registration Statement and Prospectus, and, to the best of their knowledge, none
of such approvals, licenses or registrations have been rescinded or revoked.
(v) Each of the Trust Agreement, the Customer Agreement
and this Agreement has been duly and validly authorized, executed and delivered
by or on behalf of the Managing Owner and, assuming that such agreements are
legal, valid and binding on the other parties hereto and thereto, each of the
Trust Agreement, the Customer Agreement and this Agreement constitutes a legal,
valid and binding agreement of the Managing Owner enforceable in accordance with
its terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(vi) The execution and delivery of this Agreement, the
Trust Agreement and the Customer Agreement and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions
contemplated herein and therein and in the Prospectus will not be in
contravention of any of the provisions of the Managing Owner's certificate of
incorporation or by-laws, and, to their knowledge, will not constitute a breach
of, or default under, any order, rule or regulation applicable to the Managing
Owner of any court or any governmental body or administrative agency of the
State of Maryland having jurisdiction over the Managing Owner.
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<PAGE> 15
(vii) To their knowledge, there are no actions, claims
or proceedings pending or threatened in any court or before or by any
governmental or administrative body, nor have there been any such suits, claims
or proceeding within the last five years, to which the Managing Owner (or any
principal of the Managing Owner) is or was a party, or to which any of their
assets is or was subject, which are required to be, but are not disclosed in,
the Registration Statement or Prospectus or which might reasonably be expected
to materially adversely affect the condition (financial or otherwise), business
or prospects of the Managing Owner.
(e) At the initial Closing Date, the Clearing Broker shall
deliver a certificate to the effect that the representations and warranties of
the Clearing Broker contained herein are true and correct with the same effect
as though expressly made at the initial Closing Date and in respect of the
Registration Statement as in effect at the initial Closing Date.
(f) At the initial Closing Date, the Selling Agent shall
deliver a certificate to the effect that the representations and warranties of
the Selling Agent contained herein are true and correct with the same effect as
though expressly made at the initial Closing Date and in respect of the
Registration Statement as in effect at the initial Closing Date.
(g) The parties hereto shall have been furnished with such
additional information, opinions and documents, including supporting documents
relating to parties described in the Prospectus and certificates signed by such
parties with regard to information relating to them and included in the
Prospectus as they may reasonably require for the purpose of enabling them to
pass upon the sale of the Units as herein contemplated and related proceedings,
in order to evidence the accuracy or completeness of any of the representations
or warranties or the fulfillment of any of the conditions herein contained; and
all actions taken by the parties hereto in connection with the sale of the Units
as herein contemplated shall be reasonably satisfactory in form and substance to
counsel to the Clearing Broker, counsel to the Selling Agent and counsel to the
Managing Owner.
If any of the conditions specified in this Section 8 shall not
have been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement and all obligations hereunder may be canceled by any party hereto by
notifying the other parties hereto of such cancellation in writing or by
telegram at any time at or prior to the initial Closing Date, and any such
cancellation or termination shall be without liability of any party to any other
party except as otherwise provided in Section 9.
(h) Certain or all of the conditions of closing set forth in
this Section 8 shall, at the option of the Managing Owner, apply at each
subsequent Closing Date.
9. INDEMNIFICATION
(a) The Managing Owner agrees to indemnify and hold harmless
the Selling Agent, the Clearing Broker and each person, if any, who controls the
Selling Agent and the Clearing Broker within the meaning of Section 15 of the
Securities Act, as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto) or any omission or alleged omission therefrom of a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, unless (a) in the case
of the Selling Agent, such untrue statement
15
<PAGE> 16
or omission or alleged untrue statement or omission was made in reliance upon
and in conformity with information relating to the Selling Agent or furnished or
approved by the Selling Agent or (b) in the case of the Clearing Broker, such
untrue statement or omission or alleged untrue statement or omission was made in
reliance upon and in conformity with information relating to the Clearing Broker
furnished or approved by the Clearing Broker;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever to the extent of the aggregate amount paid in settlement
of any litigation, or any investigation or proceeding by any governmental agency
or body commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission or any such alleged untrue statement or omission
(any settlement to be subject to indemnity hereunder only if effected with the
written consent of the Managing Owner); and
(iii) against any and all expense whatsoever (including
the fees and disbursements of counsel) reasonably incurred in investigating,
preparing or defending against litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense is not paid
under clauses (i) or (ii) above.
The Managing Owner agrees to notify the Clearing Broker and
the Selling Agent within a reasonable time of the assertion of any claim in
connection with the sale of the Units against it or any of its officers or
directors or any person who controls the Managing Owner within the meaning of
Section 15 of the Securities Act.
(b) The Clearing Broker agrees to indemnify and hold harmless
the Selling Agent, the Managing Owner, the Trust and each person, if any, who
controls the Selling Agent, the Trust or the Managing Owner within the meaning
of Section 15 of the Securities Act (and, in the case of the Managing Owner and
the Trust, each person who signed the Registration Statement or is a director of
the Managing Owner), to the same extent as the indemnity from the Managing Owner
set forth in Section 9(a) hereof, but only insofar as the losses, claims,
damages, liabilities or expenses indemnified against arise out of or are based
upon any untrue statement or omission or alleged untrue statement or omission
relating or with respect to Clearing Broker, which was made in any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment or
supplement thereto and furnished by or approved by the Clearing Broker for
inclusion therein.
(c) The Selling Agent agrees to indemnify and hold harmless
the Clearing Broker, the Managing Owner, the Trust and each person, if any, who
controls the Clearing Broker, the Managing Owner or the Trust within the meaning
of Section 15 of the Securities Act (and in the case of the Managing Owner and
the Trust, each person who signed the Registration Statement or is a director of
the Managing Owner), (i) to the same extent as the indemnify from the Managing
Owner set forth in Section 9(a) hereof, but only insofar as the losses, claims,
damages, liabilities or expenses indemnified against arise out of or are based
upon any untrue statement or omission or alleged untrue statement or omission
relating or with respect to the Selling Agent or any of its principals, or their
operations, which was made in any preliminary prospectus, the Registration
Statement or the Prospectus or any amendment or supplement thereto and furnished
by or approved by the Selling Agent for inclusion therein and (ii) against any
and all loss, liability, claim, damage and expense whatsoever resulting from a
demand, claim, lawsuit, action or proceeding relating to the actions or
capacities of the Selling Agent (including a breach of its obligations
hereunder).
(d) Each of the parties to this Agreement understands that the
obligations of each party subject to this Section 9 are separate and distinct.
Notwithstanding any other provision of this
16
<PAGE> 17
Section 9, (i) the Managing Owner shall have no obligation to indemnify the
Selling Agent for more than the amount of proceeds resulting from the sale of
Units by the Selling Agent during the period from the commencement of the
offering of the Units to the initial Closing Date and during the Continuing
Offering Period plus the Selling Agent's actual expenses incurred in connection
with any loss, claim, damage, charge or liability (including reasonable
attorneys' and accountants' fees incurred in defense thereof) and (ii) any
obligation of the Managing Owner to indemnify the Selling Agent shall be
adjusted to reflect the relative responsibility of the Selling Agent (if any)
for the circumstances giving rise to the losses, claims, damages, costs,
expenses, liabilities or actions for which indemnification is sought.
(e) Notwithstanding any other provision of this Section 9,
(i) the Selling Agent shall have no obligation to indemnify the Managing Owner
for more than the amount of proceeds resulting from the sale of Units by the
Selling Agent during the period from the commencement of the offering of the
Units to the initial Closing Date and during the Continuing Offering Period plus
the Managing Owner's actual expenses incurred in connection with any loss,
claim, damage, charge or liability (including reasonable attorneys' and
accountants' fees incurred in defense thereof) and (ii) any obligation of the
Selling Agent to indemnify the Managing Owner shall be adjusted to reflect the
relative responsibility of the Managing Owner (if any) for the circumstances
giving rise to the losses, claims, damages, costs, expenses, liabilities or
actions for which indemnification is sought.
(f) Notwithstanding any other provision of this Agreement,
indemnification of the Managing Owner or its controlling persons by the Trust
shall be permitted only to the extent permitted by the Trust Agreement, as
amended.
(g) Any party which proposes to assert the right to be
indemnified under this Section 9 will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying party under this Section 9,
notify each such indemnifying party of the commencement of such action, suit or
proceeding but the omission to notify an indemnifying party shall not relieve
such indemnifying party from any liability which it may have to any indemnified
party under this Section 9 except to the extent, and only to the extent, that
such omission was prejudicial to the indemnifying party. In no event shall any
such omission relieve an indemnifying party of any liability which it may have
to an indemnified party otherwise than under this Section 9. In case any such
action, suit or proceeding shall be brought against any indemnified party, and
such party shall notify the indemnifying party of the commencement thereof; the
indemnifying party shall be entitled to participate therein, and, if it shall
wish, individually or jointly with any other indemnifying party, to assume (or
have such other party assume) the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election (or the election of such other
party) so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses, other than
reasonable costs of investigation requested by the indemnifying party (or such
other party), subsequently incurred by such indemnified party in connection with
the defense thereof. The indemnified party shall have the right to employ its
counsel in any such action, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the employment by counsel by
such indemnified party has been authorized by the indemnifying party (or such
other indemnifying party as may have assumed the defense of the action in
question), (ii) the indemnified party shall have reasonably concluded that there
may be a conflict of interest between the indemnifying party (or such other
party) and the indemnified party in the conduct of the defense of such action
(in which case the indemnifying party (or such other party) shall not have the
right to direct the defense of such action on behalf of the indemnified party)
or (iii) the indemnifying party shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel shall be at the expense of the indemnifying party (subject to
possible reimbursement of the indemnifying party by such other party). An
indemnifying party shall not be liable for any settlement of any action or claim
effected
17
<PAGE> 18
without its consent. In the case of (ii) above, the indemnifying party (or the
indemnifying parties, if an indemnified party shall have a claim for
indemnification against more than one indemnifying party) shall not be liable
for the expenses of more than one separate counsel for each of the following
groups: (x) the Selling Agent and any person who controls the Selling Agent
within the meaning of Section 15 of the Securities Act; (y) the Trust and the
Managing Owner and any person who controls the Trust and Managing Owner within
the meaning of Section 15 of the Securities Act; and (z) the Clearing Broker and
any person who controls the Clearing Broker within the meaning of Section 15 of
the Securities Act.
(h) The exculpation provisions of the Trust Agreement shall
not relieve the Managing Owner or its principals from any liability they may
have or incur to the Trust under this Agreement.
10. FEES AND EXPENSES
Subject to reimbursement or partial reimbursement on an
installment basis by the Trust, as set forth in the Prospectus, the Managing
Owner will pay all costs and expenses relating to (i) the preparation, printing
and filing with the SEC, CFTC and NFA of the Registration Statement and (in
certain cases) exhibits thereto, each preliminary prospectus, the Prospectus and
all amendments and supplements to the Registration Statement and the Prospectus,
(ii) the registration or qualification of the Units for offer and sale under the
securities or Blue Sky laws of the various jurisdictions referred to in Section
2 hereof, including the fees and disbursements of legal counsel in connection
therewith and in connection with the preparation and printing of preliminary or
supplementary Blue Sky Surveys, (iii) the furnishing to the Selling Agents of
copies of each preliminary prospectus, the Prospectus, the Registration
Statement and all amendments or supplements thereto, and of such other documents
required to be furnished to the Selling Agents, including costs of shipping and
mailing, (iv) the filing requirements of the NASD in connection with its review
of the terms and arrangements of the proposed financing, (v) the fees and
disbursements of the Escrow Agent, (vi) all fees and disbursements of Arthur F.
Bell, Jr. & Associates in connection with the financial statements and the
performance records contained in the Prospectus and the preparation and delivery
of any other documents to be prepared and delivered in connection with the
transactions contemplated hereby, (vii) the fees and disbursements of legal
counsel in connection with the organization of the Trust and the offering of the
Units, and (viii) all other organization and offering expenses relating to the
Trust, including any expenses incurred in any "roadshow" relating to the
offering of the Units and the Selling Agents' reasonable "due diligence"
expenses, within the guidelines established by NASD Rule 2810. Each other party
shall bear all of its expenses under this Agreement, including fees and
disbursements of its counsel.
11. SURVIVAL OF COVENANTS; CAPTIONS; SUCCESSORS AND ASSIGNS
The indemnification agreements contained in Section 9 hereof,
the obligation to settle accounts hereunder and the agreements, representations
and warranties herein shall survive (a) the issue and payment for the Units
hereunder, (b) any investigation made by any party hereto or by a controlling
person of any party hereto, as "controlling person" is defined in Section 15 of
the Securities Act and (c) the termination of the Agreement.
All captions used herein are for convenience of reference
only, are not a portion of this Agreement and are not to be used in construing
or interpreting any aspect of this Agreement.
This Agreement has been and is made solely for the benefit of
the Selling Agent, the Trust, the Managing Owner and the Clearing Broker and
their respective successors and assigns, and, to the extent expressed herein,
for the benefit of persons controlling any of the Selling Agent, the Trust, the
Managing Owner and the Clearing Broker and their respective successors and
assigns within the meaning
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<PAGE> 19
of Section 15 of the Securities Act, and no other person, partnership,
association or corporation shall acquire or have any right under or by virtue of
this Agreement. The term "successors and assigns" shall not include any
purchaser of Units merely because of such purchase.
12. TERMINATION
Each party may terminate this Agreement at any time, in its
discretion, by giving prior written notice of such termination to the other
parties. Obligations incurred prior to termination shall survive termination.
13. NOTICES
Any notices under this Agreement shall be in writing
(including telegraphic communication) or by telephone, confirmed in writing, all
such writings to be sent by first class mail, postage prepaid, addressed to the
recipient party at the address previously furnished in writing by such party to
each of the other parties hereto. Copies of all notices shall be sent to Sidley
& Austin, 875 Third Avenue, New York, New York, 10022, Attn: Michael
Schmidtberger.
14. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original agreement, but all of which together
shall constitute one and the same instrument.
15. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the
parties hereto with respect to the subject matter contained herein.
16. GOVERNING LAW
This Agreement shall be deemed to be made under and construed
in accordance with the law of the State of New York, without regard to
principles of conflicts of laws.
17. REQUIREMENTS OF LAW
Whenever in this Agreement it is stated that a party will take
or refrain from taking a particular action, such party may nevertheless refrain
from taking or take such action if advised in a formal legal opinion of
nationally recognized counsel that doing so is required by law or advisable to
ensure compliance with law, and shall not be subject to any liability hereunder
for doing so, although such action shall permit termination of the Agreement by
the other parties hereto.
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<PAGE> 20
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto as of the day and year first above written.
CAMPBELL ASSET ALLOCATION TRUST
By: CAMPBELL & COMPANY, INC.
ITS MANAGING OWNER
By:
------------------------------------
CAMPBELL & COMPANY, INC.
By:
------------------------------------
PAINEWEBBER INCORPORATED
By:
------------------------------------
CAMPBELL FINANCIAL SERVICES, INC.
By:
------------------------------------
(Sign Name)
By: Theresa D. Becks
------------------------------------
(Print Name)
Selling Agent's Legal Name and Address:
CAMPBELL FINANCIAL SERVICES, INC.
- ----------------------------------------
210 West Pennsylvania Avenue, Suite 770
- ----------------------------------------
Towson, Maryland 21204
- ----------------------------------------
ATTN.: Theresa D. Becks
----------------------------------
TAX I.D. NO.: 52-2023096
--------------------------
PHONE: 1-800-698-7235
----------------------------------
FAX: 410-842-4702
-------------------------
20
<PAGE> 1
Exhibit 1.02
CAMPBELL ASSET ALLOCATION TRUST
(A DELAWARE BUSINESS TRUST)
$50,000,000 OF UNITS OF BENEFICIAL INTEREST
(SUBSCRIPTION PRICE: $1,000 PER UNIT
DURING THE INITIAL OFFERING PERIOD;
NET ASSET VALUE PER UNIT DURING THE ONGOING OFFERING PERIOD)
ADDITIONAL SELLING AGENT AGREEMENT
___________ ___, 2000
[Additional Selling Agent]
Dear Sirs:
Campbell & Company, Inc., a Maryland corporation (the
"Managing Owner"), has caused the formation of a business trust pursuant to the
Delaware Business Trust Act (the "Delaware Act") under the name, CAMPBELL ASSET
ALLOCATION TRUST (the "Trust"), for the purpose of engaging 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. As described in
the Prospectus referred to below, the Trust will engage in this business under
the direction of the Managing Owner. The Trust proposes to make a public
offering of units of beneficial interest in the Trust (the "Units"). In
connection with the proposed public offering, the Trust has filed with the
United States Securities and Exchange Commission (the "SEC"), pursuant to the
United States Securities Act of 1933, as amended (the "1933 Act"), a
registration statement on Form S-1 to register the Units, and as part thereof a
prospectus (Registration No. 333-_____) (which registration statement, together
with all amendments thereto, shall be referred to herein as the "Registration
Statement" and which prospectus together with all amendments and supplements
thereto in the forms filed with the SEC pursuant to Rule 424 under the Act shall
be referred to herein as the "Prospectus"). The Managing Owner and the Trust
have entered into a selling agreement dated as of _________ __, 2000 among
Campbell Financial Services, Inc., the Managing Owner, the Trust and others (the
"Selling Agreement"), a copy of which has been furnished to you. Other selling
agents, including those introduced by wholesalers ("Wholesalers") to the Trust
and the Managing Owner (the "Additional Selling Agents" and together with the
Wholesalers, the "Selling Agents"), may be selected by the Managing Owner. You
have been so selected by the Managing Owner. We
<PAGE> 2
confirm our agreement with you as follows. Capitalized terms used but otherwise
not defined herein shall have the meanings ascribed to them in the Selling
Agreement unless the context indicates otherwise.
1. Appointment and Undertakings of the Additional Selling Agent
(a) Subject to the terms and conditions set forth in this Agreement, the
Selling Agreement and the Registration Statement, the Additional Selling Agent
is hereby appointed, and hereby accepts such appointment, as one of the Trust's
non-exclusive selling agents to offer and sell the Units on a best-efforts basis
without any commitment on the Additional Selling Agent's part to purchase any
Units. Units may only be sold to investors who have "wrap fee" accounts with the
Additional Selling Agent. It is understood and agreed that the Managing Owner
may retain other selling agents (including those introduced by Wholesalers). The
Additional Selling Agent agrees to comply with the terms and conditions of this
Agreement and any terms and conditions of the Selling Agreement applicable to
Additional Selling Agents.
(b) The Additional Selling Agent agrees to use its reasonable efforts to
procure subscriptions for the Units as long as this Agreement and the Selling
Agreement remain in effect and to make the offering of Units at the offering
price and minimum amounts and on the other terms and conditions set forth in the
Prospectus and the Selling Agreement.
(c) The Additional Selling Agent shall offer and sell Units only to persons
and entities who satisfy the suitability and/or investment requirements set
forth in the Prospectus and the subscription agreements attached thereto and
who, to the Managing Owner's satisfaction, complete the subscription agreements
and related subscription documents used in connection with the offering of the
Units (the "Subscription Documents") and remit good funds for the full
subscription price. The Additional Selling Agent shall conduct a thorough review
of the suitability of each subscriber for Units that it solicits and of the
Subscription Documents. The Additional Selling Agent shall not forward to the
Managing Owner any Subscription Documents that are not in conformity with the
requirements specified in the Prospectus and in the Subscription Documents
appropriate for the particular subscriber, or that is illegible in any respect
or is not fully completed, dated, or signed, or that represents the subscription
of a person or entity not satisfying the suitability and/or investment
requirements applicable to such person or entity. The Additional Selling Agent
shall not execute any transactions in Units in a discretionary account over
which it has control without prior written approval of the customer in whose
name such discretionary account is maintained.
The Additional Selling Agent agrees not to recommend the purchase of
Units to any subscriber unless the Additional Selling Agent shall have
reasonable grounds to believe, on the basis of information obtained from the
subscriber concerning, among other things, the subscriber's investment
objectives, other investments, financial situation and needs, that the
subscriber is or will be in a financial position appropriate to enable the
subscriber to realize to a significant extent the benefits of the Trust,
including the tax benefits (if any) described in the Prospectus; the subscriber
has a fair market net worth sufficient to sustain the risks inherent in
participating in the Trust, including loss of investment and lack of liquidity;
and the Units are otherwise a suitable investment for the subscriber. In
addition to submitting such information to the Managing Owner, the Additional
Selling Agent agrees to maintain files of information
2
<PAGE> 3
disclosing the basis upon which the Additional Selling Agent determined that the
suitability requirements of Rule 2810(b)(2) of the National Association of
Securities Dealers, Inc. (the "NASD") were met as to each subscriber (the basis
for determining suitability may include the Subscription Documents and other
certificates submitted by subscribers). In connection with making the foregoing
representations and warranties, the Additional Selling Agent further represents
and warrants that it has received copies of the Registration Statement, as
amended to the date hereof, and the Prospectus and has, among other things,
examined the following sections in the Prospectus and obtained such additional
information from the Managing Owner regarding the information set forth
thereunder as the Additional Selling Agent has deemed necessary or appropriate
to determine whether the Prospectus adequately and accurately discloses all
material facts relating to an investment in the Trust and provides an adequate
basis to subscribers for evaluating an investment in the Units:
"Summary"
"The Risks You Face"
"Investment Factors"
"Campbell & Company, Inc."
"Conflicts of Interest"
"Charges to the Trust"
"Use of Proceeds"
"Distributions and Redemptions"
"Declaration of Trust & Trust Agreement"
"Federal Income Tax Aspects"
In connection with making the representations and warranties set forth
in this paragraph, the Additional Selling Agent has not relied on inquiries made
by or on behalf of any other parties.
The Additional Selling Agent agrees to inform all prospective
purchasers of Units of all pertinent facts relating to the liquidity and
marketability of the Units as set forth in the Prospectus.
The Additional Selling Agent shall offer and sell Units in compliance
with the requirements set forth in the Registration Statement (particularly the
"Subscription Requirements" attached as Exhibit B thereto), this Agreement and
the Blue Sky Survey delivered to the Additional Selling Agent pursuant to
Section 4(e) below. The Additional Selling Agent represents and warrants that it
shall comply fully at all times with all applicable federal and state securities
and commodities laws (including without limitation the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), the Commodity Exchange Act,
as amended (the "CEA"), and the securities and Blue Sky laws of the
jurisdictions in which the Additional Selling Agent solicits subscriptions, all
applicable rules and regulations under such laws, and all applicable
requirements, rules, policy statements and interpretations of the NASD, and the
securities and commodities exchanges and other governmental and self-regulatory
authorities and organizations having jurisdiction over it or the offering of
Units). The Additional Selling Agent shall under no circumstances engage in any
activities hereunder in any jurisdiction (i) in which the Managing Owner has not
informed the Additional Selling Agent that counsel's advice has been received
that the Units are qualified for sale or are exempt under the applicable
3
<PAGE> 4
securities or Blue Sky laws thereof or (ii) in which the Additional
Selling Agent may not lawfully engage.
The Additional Selling Agent further agrees to comply with the
requirement under applicable federal and state securities laws to deliver to
each offeree a Prospectus and any amendments or supplements thereto (including
summary financial information, if available, after the Trust has commenced
operations). Neither the Additional Selling Agent nor any of its employees,
agents or representatives will use or distribute any marketing material or
information other than that prepared by the Trust and the Managing Owner. It is,
however, understood that the Additional Selling Agent may use documents that it
prepares solely for the purpose of communicating with its Registered
Representatives provided that the Additional Selling Agent provides to the
Managing Owner a copy of each such document prior to such use.
(d) The additional services that the Additional Selling Agent will
provide on an ongoing basis to Unitholders will include but not be limited to:
(i) inquiring of the Managing Owner from time to time, at the request of
Unitholders, as to the Net Asset Value of a Unit, (ii) inquiring of the Managing
Owner from time to time at the request of the Unitholders, as to the commodities
markets and the activities of the Trust, (iii) assisting, at the request of the
Managing Owner, in the redemption of Units sold by the Additional Selling Agent,
(iv) responding to questions of Unitholders from time to time with respect to
monthly account statements, annual reports and financial statements furnished to
Unitholders, and (v) providing such other services to the owners of Units as the
Managing Owner may, from time to time, reasonably request.
All payments for subscriptions shall be made by transfer of
funds to the escrow account of the Trust as described in the Prospectus,
provided that any such arrangements must comply in all relevant respects with
Rules 10b-9 and 15c2-4 under the 1934 Act.
2. Compensation
(a) In consideration of the Additional Selling Agent administering the
Units, the Managing Owner shall pay the Additional Selling Agent an ongoing fee
for administrative, legal and client reporting services of 0.35% per annum of
the net assets of the Trust, as defined in the Prospectus attributable to
subscriptions from subscribers which are customers of the Additional Selling
Agent. The Additional Selling Agent may pass along a portion of such fee to
another selling agent which is appropriately registered with or a member of, as
applicable, the National Futures Association (the "NFA"), the NASD, the SEC,
the securities or Blue Sky administrators of the several states and various
other jurisdictions and any other regulatory body.
The Additional Selling Agent shall not, directly or indirectly, pay
or award any finder's fees, commissions or other compensation to any person
engaged by a potential investor for investment advice as an inducement to such
advisor to advise the purchase of Units; provided, however, the normal sales
commissions payable to a registered broker-dealer or other properly licensed
person for selling Units shall not be prohibited hereby.
(b) Notwithstanding any other provision of this Agreement to the contrary
the Managing Owner shall have sole discretion to accept or reject any
subscription for the Units in whole or in part.
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<PAGE> 5
(c) The Managing Owner agrees to make all payments to the Additional
Selling Agent pursuant to this Section 2 within 15 days following the end of a
monthly period in which compensation is earned.
3. Representations and Warranties
(a) The Managing Owner hereby represents and warrants as follows:
(i) The Trust is duly organized and validly existing as a business
trust under the laws of the State of Delaware, and has full power and authority
under the Trust Agreement to conduct its business as described in the
Registration Statement and Prospectus and to issue, sell and deliver the Units.
The Trust is not required to take any action to be qualified to do business in
the State of Maryland.
(ii) The Managing Owner is a corporation duly organized and validly
existing in good standing under the laws of the State of Maryland, has full
corporate power to perform its obligations and enter into the transactions
described in the Registration Statement and Prospectus, as the same may be
amended or supplemented. All the present principals of the Managing Owner are
identified as such in the Registration Statement and Prospectus.
(iii) The Units, when issued and sold pursuant to the terms hereof
and of the Registration Statement, Prospectus and Subscription Agreements, will
be validly issued, fully paid and not subject to further call or assessment.
(iv) The Escrow Agreement and this Agreement have each been duly and
validly authorized, executed and delivered by the Managing Owner on behalf of
the Trust and each is, assuming that it has been duly and validly authorized,
executed and delivered by the other parties thereto (other than the Managing
Owner), a valid and binding agreement of the Trust, except insofar as
bankruptcy, moratorium or other similar laws may be applicable and except that
the exculpation, indemnification and contribution provisions of such agreements
may be limited by applicable law and enforcement of any specific terms or
remedies may be unavailable.
(v) The Trust Agreement and this Agreement have each been duly and
validly authorized, executed and delivered on behalf of the Managing Owner and
each is, assuming that it has been duly and validly authorized, executed and
delivered by the other parties thereto (other than the Trust), a valid and
binding agreement of the Managing Owner except insofar as bankruptcy, moratorium
or other similar laws may be applicable, and except that the exculpation,
indemnification and contribution provisions of such agreements may be limited by
applicable law and enforcement of any specific terms or remedies may be
unavailable.
(vi) The Trust has, or is in the process of obtaining, all federal
and state governmental and regulatory approvals and licenses, and is maintaining
on a current basis all filings and registrations with federal and state
governmental and regulatory agencies, required to conduct its business to be
conducted, all as described in the Registration Statement and Prospectus.
5
<PAGE> 6
(vii) The Managing Owner has all federal and state governmental and
regulatory, and to the best of its knowledge, commodity exchange licenses and
approvals, and is maintaining on a current basis all filings and registrations
with federal and state governmental and regulatory agencies, required to act as
described in the Registration Statement and Prospectus (including, without
limitation, registration as a commodity pool operator under the Commodity Act
and membership as a commodity pool operator in NFA), and the performance of such
actions will not violate or result in a breach of any provision of its articles
of incorporation, by-laws or any agreement, instrument, order, law or regulation
binding upon it.
(viii) On the Effective Date and the date on which the Prospectus is
first filed with the SEC pursuant to Rule 424(b), the Registration Statement and
the Prospectus (or when any post-effective amendment to the Registration
Statement becomes effective or any supplement to the Prospectus is filed with
the SEC, the Registration Statement, as amended, and the Prospectus, as amended
or supplemented) will comply fully in all material respects with the
requirements of the Securities Act and the Rules and the Commodity Act and the
published rules of the CFTC thereunder, and will accurately describe the
proposed operation of the Trust; and each of the Registration Statement, as it
may be amended, and the Prospectus, as it may be amended or supplemented, will
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, as it may be amended or
supplemented, in the light of the circumstances under which such statements were
made); except that this representation and warranty does not apply to any
statement or omission in the Registration Statement, as it may be amended, or
the Prospectus, as it may be amended or supplemented, made in reliance upon
information furnished in writing to the Trust by the Additional Selling Agent
expressly for use therein.
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<PAGE> 7
(vii) The Managing Owner has all federal and state governmental and
regulatory, and to the best of its knowledge, commodity exchange licenses and
approvals, and is maintaining on a current basis all filings and registrations
with federal and state governmental and regulatory agencies, required to act as
described in the Registration Statement and Prospectus (including, without
limitation, registration as a commodity pool operator under the Commodity Act
and membership as a commodity pool operator in NFA), and the performance of such
actions will not violate or result in a breach of any provision of its articles
of incorporation, by-laws or any agreement, instrument, order, law or regulation
binding upon it.
(viii) On the Effective Date and the date on which the Prospectus is
first filed with the SEC pursuant to Rule 424(b), the Registration Statement and
the Prospectus (or when any post-effective amendment to the Registration
Statement becomes effective or any supplement to the Prospectus is filed with
the SEC, the Registration Statement, as amended, and the Prospectus, as amended
or supplemented) will comply fully in all material respects with the
requirements of the Securities Act and the Rules and the Commodity Act and the
published rules of the CFTC thereunder, and will accurately describe the
proposed operation of the Trust; and each of the Registration Statement, as it
may be amended, and the Prospectus, as it may be amended or supplemented, will
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, as it may be amended or
supplemented, in the light of the circumstances under which such statements were
made); except that this representation and warranty does not apply to any
statement or omission in the Registration Statement, as it may be amended, or
the Prospectus, as it may be amended or supplemented, made in reliance upon
information furnished in writing to the Trust by the Additional Selling Agent
expressly for use therein.
(ix) All references to the Managing Owner and its principals in the
Registration Statement and the Prospectus are accurate and complete in all
material respects, set forth in all material respects the information required
to be disclosed to prospective investors under the Commodity Act and the rules
and regulations thereunder and, as to the Managing Owner and its principals, the
Registration Statement and Prospectus do not contain any misleading or untrue
statement of a material fact or omit to state a material fact which is required
to be stated therein or necessary to make the statements therein not misleading
(in the case of the Prospectus, in the light of the circumstances under which
such statements were made).
(x) The balance sheet of the Managing Owner and the notes thereto
included in the Registration Statement present fairly the financial position of
the Managing Owner as of the date thereof, in conformity or (in the case of any
unaudited balance sheet) in substantial conformity with generally accepted
accounting principles. Since the date of the most recent such balance sheet,
there have been no changes in the financial condition of the Managing Owner,
other than changes which, in the aggregate, are not materially adverse or which
are disclosed in the Prospectus, and since such date there have been no changes
in the business of the Managing Owner which are material in the context of the
offering of the Units.
(xi) The Trust will file any promotional brochure or other marketing
materials (collectively, "Promotional Material") with the NASD, and will not use
any such Promotional Material to which the NASD has not stated in writing that
it has no objections. The Trust will
7
<PAGE> 8
file all Promotional Material in all state jurisdictions where such filing is
required, and will not use any such Promotional Material in any state which has
expressed any objection thereto (except pursuant to agreed-upon modifications to
the Promotional Material).
(xii) The Trust and the Managing Owner have trust or corporate power
and authority under applicable law to perform their respective obligations under
the Trust Agreement and this Agreement, as described in the Registration
Statement and Prospectus.
(xiii) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any material
adverse change in the condition, financial or otherwise, business or prospects
of the Managing Owner or the Trust, whether or not arising in the ordinary
course of business.
(xiv) At the initial Closing Date, as set forth in the opinion of
Sidley & Austin, counsel for the Managing Owner, the Trust will be classified as
a partnership for Federal income tax purposes under the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations thereunder.
(xv) There is not pending, or, to the best of the Managing Owner's
knowledge, threatened, any action, suit or proceeding before or by any court or
other governmental body to which the Managing Owner or the Trust is a party, or
to which any of the assets of the Managing Owner or the Trust is subject, which
is not referred to in the Prospectus and which might reasonably be expected to
result in any material adverse change in the condition (financial or otherwise),
business or prospects of the Managing Owner or the Trust or is required to be
disclosed in the Prospectus pursuant to applicable CFTC regulations. The
Managing Owner has not received any notice of an investigation or warning letter
from the NFA or the CFTC regarding non-compliance by the Managing Owner with the
Commodity Act or the regulations thereunder.
(b) The Additional Selling Agent hereby represents and warrants as
follows:
(i) The Additional Selling Agent is a ___________________________ duly
organized, validly existing, and in good standing under the laws of the state of
its incorporation and has power and authority to enter into and carry out its
obligations under this Agreement.
(ii) The Additional Selling Agent has all governmental and regulatory
registrations, qualifications, approvals and licenses required to perform its
obligations under this Agreement (including, but not limited to, registration as
a broker-dealer with the SEC, membership in such capacity in the NASD,
registration as a futures commission merchant or introducing broker under the
CEA and membership with NFA, and registration or qualification under the laws of
each state in which Additional Selling Agent will offer and sell Units); the
performance by the Additional Selling Agent of its obligations under this
Agreement will not violate or result in a breach of any provision of its
certificate of incorporation or by-laws or any agreement, order, law, or
regulation binding upon it.
(iii) This Agreement has been duly and validly authorized, executed,
and delivered on behalf of the Additional Selling Agent and is a valid and
binding agreement of the Additional Selling Agent enforceable against the
Additional Selling Agent in accordance with its
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<PAGE> 9
terms, subject only to bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability generally of
rights of creditors except as enforceability of the indemnification provisions
contained in this Agreement may be limited by applicable law and the enforcement
of specific terms or remedies may be unavailable.
(iv) Neither the Additional Selling Agent nor any of its principals
have been the subject of any administrative, civil, or criminal actions within
the five years preceding the date hereof that would be material for an
investor's decision to purchase the Units which are not disclosed to the Trust
or the Managing Owner.
(v) The information, if any, relating to the Additional Selling Agent
which the Additional Selling Agent has furnished to the Trust and the Managing
Owner for use in the Registration Statement is correct.
4. Covenants of the Trust and the Managing Owner
The Trust and the Managing Owner jointly and severally agree as
follows:
(a) To advise the Additional Selling Agent (i) when the Registration
Statement has become effective, (ii) of the issuance by the SEC, CFTC or any
other federal or state regulatory body of any stop order suspending the
effectiveness of the Registration Statement under the Securities Act, the CFTC
registration or NFA membership of the Managing Owner as a commodity pool
operator or the registration of Units under the Blue Sky or securities laws of
any state or other jurisdiction or any order or decree enjoining the offering or
the use of the then current Prospectus or of the institution, or notice of the
intended institution, of any action or proceeding for that purpose and (iii) the
receipt by the Trust or any representative or attorney of the Trust of any other
material communication from the SEC, CFTC, NFA or any Blue Sky or securities law
administrator relating to the Trust, the Registration Statement, any preliminary
prospectus or the Prospectus, as it may be amended or supplemented. The Trust
will make every reasonable effort to prevent the issuance of any order
suspending the effectiveness of the Registration Statement under the Securities
Act or the registration of Units under the laws of the several states and
various other jurisdictions or enjoining the offering and, if any such order is
issued, to obtain as soon as possible the withdrawal thereof; provided, that in
no event shall the Trust be obligated to (i) take any action which would subject
it to service of process in suits, other than those arising out of the offering
or sale of the Units, or taxes in any jurisdiction where it is not now so
subject or (ii) change any term in the Registration Statement, as the same may
be amended or supplemented.
(b) To deliver to the Additional Selling Agent, without charge, as many
conformed copies of the registration statement as originally filed and of the
Registration Statement and each amendment or supplement thereto (including all
exhibits filed with, or incorporated by reference in, any such document) as the
Selling Agent may reasonably request.
(c) During the Continuing Offering Period to deliver, without charge, to
the Additional Selling Agent, at such office or offices within the United States
of America as the Selling Agent may reasonably designate, as many copies of the
Prospectus, as amended or supplemented, as the Additional Selling Agent may
reasonably request.
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<PAGE> 10
(d) If any event shall occur as a result of which it is necessary, in the
reasonable opinion of the Managing Owner, to amend or supplement the Prospectus
in order (i) to make the Prospectus not materially misleading in the light of
the circumstances existing at the time it is delivered to a subscriber, or (ii)
to conform with applicable CFTC or SEC Regulations, the Managing Owner shall
forthwith prepare and furnish to the Additional Selling Agent, at the expense of
the Managing Owner, a reasonable number of copies of an amendment or amendments
of, or a supplement or supplements to, the Prospectus which will amend or
supplement the Prospectus so as to effect the necessary changes.
(e) To cause its counsel to prepare and deliver to the Additional Selling
Agent a Blue Sky Survey which shall set forth, for the guidance of the
Additional Selling Agent, in which United States jurisdictions the Units may be
offered and sold. It is understood and agreed that the Additional Selling Agent
may rely, in connection with the offering and sale of Units in any jurisdiction,
on advice given by such counsel as to the legality of the offer or sale of the
Units in such jurisdiction, provided, however, that the Additional Selling Agent
shall be responsible for compliance with all applicable laws, rules and
regulations with respect to the actions of its employees, acting as such, in
connection with sales of Units in any jurisdiction.
5. Conditions of Closing.
The sale of the Units and the release of subscription funds for the
escrow account are subject to the accuracy of the representations and
warranties of the parties hereto, to the performance by such parties of their
respective obligations hereunder and to the following further conditions:
(a) At each Closing Time no order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceeding
therefor initiated or threatened by the SEC, and the CFTC shall have filed the
Prospectus as a Disclosure Document without a finding of further deficiencies.
(b) At each Closing Time, the Managing Owner shall deliver a certificate
to the effect that: (i) no order suspending the effectiveness of the
Registration Statement has been issued and no proceedings therefor have been
instituted or to the best of their knowledge upon due and diligent inquiry
threatened by the SEC, the CFTC or other regulatory or self-regulatory body;
(ii) the representations and warranties of the Managing Owner contained herein
are true and correct with the same effect as though expressly made at such
Closing Time and in respect of the Registration Statement as in effect at such
Closing Time; and (iii) the Managing Owner has performed all covenants and
agreements herein contained which are required to be performed on their part at
or prior to such Closing Time.
(c) The parties hereto shall have been furnished with such additional
information, opinions and documents, including supporting documents relating to
parties described in the Prospectus and certificates signed by such parties with
regard to information relating to them and included in the Prospectus as they
may reasonably require for the purpose of enabling them to pass upon the sale of
the Units as herein contemplated and related proceedings, in order to evidence
the accuracy or completeness of any of the representations or warranties or the
fulfillment of any of the conditions herein contained; and all actions taken by
the parties hereto
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<PAGE> 11
in connection with the sale of the Units as herein contemplated shall be
reasonably satisfactory in form and substance to Sidley & Austin, counsel for
the Managing Owner and to the respective counsel for each of the Additional
Selling Agent.
If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement to be fulfilled prior
to a Closing Time, this Agreement and all obligations hereunder may be canceled
by any party hereto by notifying the other parties hereto of such cancellation
in writing or by telegram at any time at or prior to such Closing Time, and any
such cancellation or termination shall be without liability of any party to any
other party other than in respect of Units already sold and except as otherwise
provided in Section 5 of this Agreement.
6. Indemnification and Contribution
(a) The Managing Owner agrees to indemnify and hold harmless the
Additional Selling Agent, and each person, if any, who controls the Additional
Selling Agent within the meaning of Section 15 of the Securities Act, as
follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment thereto)
or any omission or alleged omission therefrom of a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue statement of
a material fact contained in the Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, unless such untrue statement or
omission or alleged untrue statement or omission was made in reliance upon and
in conformity with information relating to the Additional Selling Agent or
furnished or approved by the Additional Selling Agent;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, or any investigation or proceeding by any governmental agency or
body commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission or any such alleged untrue statement or omission
(any settlement to be subject to indemnity hereunder only if effected with the
written consent of the Managing Owner); and
(iii) against any and all expense whatsoever (including the fees and
disbursements of counsel) reasonably incurred in investigating, preparing or
defending against litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid under
clauses (i) or (ii) above.
The Managing Owner agrees to notify the Additional Selling Agent
within a reasonable time of the assertion of any claim in connection with the
sale of the Units against it or
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<PAGE> 12
any of its officers or directors or any person who controls the Managing Owner
within the meaning of Section 15 of the Securities Act.
(b) The Additional Selling Agent agrees to indemnify and hold harmless the
Managing Owner and the Trust and each person, if any, who controls the Managing
Owner and the Trust within the meaning of Section 15 of the Securities Act (and
each person who signed the Registration Statement or is a director of the
Managing Owner), (i) to the same extent as the indemnify from the Managing Owner
set forth in Section 6(a) hereof, but only insofar as the losses, claims,
damages, liabilities or expenses indemnified against arise out of or are based
upon any untrue statement or omission or alleged untrue statement or omission
relating or with respect to the Additional Selling Agent or any of its
principals, or their operations, which was made in any preliminary prospectus,
the Registration Statement or the Prospectus or any amendment or supplement
thereto and furnished by or approved by the Additional Selling Agent for
inclusion therein and (ii) against any and all loss, liability, claim, damage
and expense whatsoever resulting from a demand, claim, lawsuit, action or
proceeding relating to the actions or capacities of the Additional Selling Agent
(including a breach of its obligations hereunder).
(c) Each of the parties to this Agreement understands that the obligations
of each party subject to this Section 6 are separate and distinct.
Notwithstanding any other provision of this Section 6, (i) the Managing Owner
shall have no obligation to indemnify the Additional Selling Agent for more than
the amount of proceeds resulting from the sale of Units by the Additional
Selling Agent during the period from the commencement of the offering of the
Units to the initial Closing Date and during the Continuing Offering Period plus
the Additional Selling Agent's actual expenses incurred in connection with any
loss, claim, damage, charge or liability (including reasonable attorneys' and
accountants' fees incurred in defense thereof) and (ii) any obligation of the
Managing Owner to indemnify the Additional Selling Agent shall be adjusted to
reflect the relative responsibility of the Additional Selling Agent (if any) for
the circumstances giving rise to the losses, claims, damages, costs, expenses,
liabilities or actions for which indemnification is sought.
(d) Notwithstanding any other provision of this Section 6, (i) the
Additional Selling Agent shall have no obligation to indemnify the Managing
Owner for more than the amount of proceeds resulting from the sale of Units by
the Additional Selling Agent during the period from the commencement of the
offering of the Units to the initial Closing Date and during the Continuing
Offering Period plus the Managing Owner's actual expenses incurred in connection
with any loss, claim, damage, charge or liability (including reasonable
attorneys' and accountants' fees incurred in defense thereof) and (ii) any
obligation of the Additional Selling Agent to indemnify the Managing Owner shall
be adjusted to reflect the relative responsibility of the Managing Owner (if
any) for the circumstances giving rise to the losses, claims, damages, costs,
expenses, liabilities or actions for which indemnification is sought.
(e) Notwithstanding any other provision of this Agreement, indemnification
of the Managing Owner or its controlling persons by the Trust shall be permitted
only to the extent permitted by the Trust Agreement, as amended.
(f) Any party which proposes to assert the right to be indemnified under
this Section 6 will, promptly after receipt of notice of commencement of any
action, suit or proceeding
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<PAGE> 13
against such party in respect of which a claim is to be made against an
indemnifying party under this Section 6, notify each such indemnifying party of
the commencement of such action, suit or proceeding but the omission to notify
an indemnifying party shall not relieve such indemnifying party from any
liability which it may have to any indemnified party under this Section 6 except
to the extent, and only to the extent, that such omission was prejudicial to the
indemnifying party. In no event shall any such omission relieve an indemnifying
party of any liability which it may have to an indemnified party otherwise than
under this Section 6. In case any such action, suit or proceeding shall be
brought against any indemnified party, and such party shall notify the
indemnifying party of the commencement thereof; the indemnifying party shall be
entitled to participate therein, and, if it shall wish, individually or jointly
with any other indemnifying party, to assume (or have such other party assume)
the defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election (or the election of such other party) so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses, other than reasonable costs of investigation
requested by the indemnifying party (or such other party), subsequently incurred
by such indemnified party in connection with the defense thereof. The
indemnified party shall have the right to employ its counsel in any such action,
but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment by counsel by such indemnified party
has been authorized by the indemnifying party (or such other indemnifying party
as may have assumed the defense of the action in question), (ii) the indemnified
party shall have reasonably concluded that there may be a conflict of interest
between the indemnifying party (or such other party) and the indemnified party
in the conduct of the defense of such action (in which case the indemnifying
party (or such other party) shall not have the right to direct the defense of
such action on behalf of the indemnified party) or (iii) the indemnifying party
shall not in fact have employed counsel to assume the defense of such action, in
each of which cases the fees and expenses of counsel shall be at the expense of
the indemnifying party (subject to possible reimbursement of the indemnifying
party by such other party). An indemnifying party shall not be liable for any
settlement of any action or claim effected without its consent. In the case of
(ii) above, the indemnifying party (or the indemnifying parties, if an
indemnified party shall have a claim for indemnification against more than one
indemnifying party) shall not be liable for the expenses of more than one
separate counsel for each of the following groups: (y) the Additional Selling
Agent and any person who controls the Additional Selling Agent within the
meaning of Section 15 of the Securities Act and (z) the Trust and the Managing
Owner and any person who controls the Trust and Managing Owner within the
meaning of Section 15 of the Securities Act.
(g) The exculpation provisions of the Trust Agreement shall not relieve
the Managing Owner or its principals from any liability they may have or incur
to the Trust under this Agreement.
7. Termination
(a) This Agreement shall terminate on the earlier of (i) such date as the
Managing Owner may determine by giving 30 days' prior written notice to the
Additional Selling Agent, (ii) the termination of the offering of the Units or
(iii) by the Managing Owner, without notice, upon breach by the Additional
Selling Agent of, or non-compliance by the Additional Selling Agent with, any
material term of this Agreement.
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<PAGE> 14
(b) The Additional Selling Agent shall have the right to terminate its
participation under this Agreement (i) at any time upon breach by the Managing
Owner or the Trust of or non-compliance with, any material term of this
Agreement; and (ii) at any time upon thirty business days' prior written notice
of such termination to the Managing Owner and the Trust.
(c) The termination of this Agreement for any reason set forth in Sections
7(a)(i), 7(a)(ii) or 7(b) shall not affect (i) the ongoing obligations of the
Managing Owner to pay the compensation described in Section 2(a) hereof accrued
prior to the termination hereof, (ii) the Additional Selling Agent's obligations
under Section 1(d) hereof or (iii) the indemnification obligations under Section
6 hereof. In the event this Agreement is terminated pursuant to Section
7(a)(iii), the Managing Owner may withhold accrued but unpaid compensation due
the Additional Selling Agent until the Managing Owner has been put in the same
financial position as it would have been in absent such breach or
non-compliance.
8. Miscellaneous
(a) This Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of the parties hereto; provided,
however, that a party hereto may not assign any rights, obligations, or
liabilities hereunder without the prior written consent of the other parties.
(b) All notices required or desired to be delivered under this Agreement
shall be in writing and shall be effective when delivered personally on the day
delivered or, when given by registered mail, postage prepaid, return receipt
requested, on the day of receipt, addressed as follows (or to such other address
as the party entitled to notice shall hereafter designate in accordance with the
terms hereof):
if to the Managing Owner or the Trust:
Campbell and Company, Inc.
-------------------------------------------
210 West Pennsylvania Avenue, Suite 770
-------------------------------------------
Towson, Maryland 21204
-------------------------------------------
Attn: Lauren Masters
-----------------------------------
Phone: 1-800-698-7235
-----------------------------------
Fax: 410-842-4702
-----------------------------------
if to the Additional Selling Agent:
-------------------------------------------
-------------------------------------------
-------------------------------------------
Attn:
-------------------------------------
Phone:
-------------------------------------
Fax:
-------------------------------------
Tax I.D. No.:
-----------------------------
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<PAGE> 15
(c) This Agreement shall be governed by, and construed in accordance with,
the law of the State of New York without regard to the principles of choice of
law thereof.
(d) All captions used in this Agreement are for convenience only, are not
a part hereof, and are not to be used in construing or interpreting any aspect
hereof.
(e) This Agreement may be executed in counterparts, each such counterpart
to be deemed an original, but which all together shall constitute one and the
same instrument.
(f) This Agreement may not be amended except by the express written
consent of the parties hereto. No waiver of any provision of this Agreement may
be implied from any course of dealing between or among any of the parties hereto
or from any failure by any party hereto to assert its rights under this
Agreement on any occasion or series of occasions.
(g) The provisions of this Agreement shall survive the termination of this
Agreement with respect to any matter arising while this Agreement was in effect.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
us in accordance with its terms.
Very truly yours,
CAMPBELL & COMPANY, INC.
By:
-----------------------------------
Its
------------------------------
CAMPBELL ASSET ALLOCATION TRUST
By: CAMPBELL & COMPANY, INC., the
Managing Owner
By:
-----------------------------------
Its
------------------------------
CONFIRMED AND ACCEPTED
[Additional Selling Agent]
By:
-----------------------------------
Its
-----------------------------
15
<PAGE> 1
EXHIBIT 3.01
DECLARATION AND AGREEMENT OF TRUST
OF
CAMPBELL ASSET ALLOCATION TRUST
THIS Declaration and Agreement of Trust of Campbell Asset Allocation
Trust, dated as of May 1, 2000 (this "Agreement"), is entered into by and
between Campbell & Company, Inc., a Maryland corporation, as managing owner (the
"Managing Owner"), and First Union Trust Company, National Association, a
national banking association, as trustee (the "Trustee"). The Managing Owner and
the Trustee hereby agree as follows:
1. Name. The name of the trust formed hereby is Campbell Asset
Allocation Trust (the "Trust").
2. Creation of Trust. The Trustee hereby acknowledges that the
Trust has received the sum of $2,000 in an account in the name of the Trust from
the Managing Owner as a grantor of the Trust, which shall constitute the initial
trust estate. The Trustee hereby declares that the trust estate will be held in
trust for the Managing Owner. It is the intention of the parties hereto that the
Trust created hereby constitutes a business trust under Chapter 38 of Title 12
of the Delaware Code, 12 Del. C. Section 3801, et seq., as amended from time to
time (the "Act"), and that this document constitutes the governing instrument of
the Trust. The Trustee is hereby authorized and directed to file a certificate
of trust with the Delaware Secretary of State.
3. Powers of the Managing Owners and the Trustee. The duty and
authority of the Trustee to manage the business and affairs of the Trust is
hereby delegated to the Managing Owner. The Trustee shall have only the rights,
obligations and liabilities specifically provided for herein and in the Act and
shall have no implied rights, obligations and liabilities with respect to the
business or affairs of the Trust. The Trustee shall not have any duty or
obligation hereunder or with respect to the activities of the Trust or the trust
estate, except as otherwise required by applicable law.
4. Power to Resign. The Trustee may resign at any time by 60 days'
notice in writing delivered to the Trust.
5. Indemnification. The Managing Owner shall indemnify and hold
harmless the Trustee, its affiliates and all officers, directors, stockholders,
employees, representatives and agents of the Trustee (each, a "Covered Person"),
from and against any loss, damage or claim imposed on, incurred by or asserted
at any time against such Covered Person in any way relating to or arising out of
this Agreement, the administration of the trust estate or the action or inaction
of such Covered Person hereunder, except that no such Covered Person shall be
entitled to indemnification for losses, damages, or claims arising or resulting
from its own bad faith, willful misconduct, gross negligence or reckless
disregard of its duties and obligations hereunder.
6. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all which shall constitute one in
the same instrument.
<PAGE> 2
7. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware, all rights
and remedies being governed by such laws.
IN WITNESS WHEREOF, the parties hereto have executed this Declaration
and Agreement of Trust as of the date and year first above written.
CAMPBELL & COMPANY, INC.,
as Managing Owner
By: /s/ THERESA D. BECKS
-------------------------------
Name: Theresa D. Becks
Title: Chief Financial Officer
FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION
as Trustee
By: /s/ STERLING C. CORREIA
-------------------------------
Name: Sterling C. Correia
Title: Vice President
-2-
<PAGE> 1
EXHIBIT 3.02
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
<PAGE> 1
EXHIBIT 5.01.a
[SIDLEY & AUSTIN LETTERHEAD]
May 22, 2000
Campbell Asset Allocation Trust
c/o Campbell & Company, Inc.
Managing Owner
210 West Pennsylvania Avenue, Suite 770
Towson, Maryland 21204
Re: Campbell Asset Allocation Trust
Units of Beneficial Interest
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-1 (the
"Registration Statement"), filed on the date hereof by Campbell Asset Allocation
Trust, a Delaware business trust (the "Trust"), under the Securities Act of 1933
(the "1933 Act"), with the Securities and Exchange Commission, relating to the
registration under the 1933 Act of $50,000,000 of Units of Beneficial Interest
(the "Units").
In giving the opinion herein, we have relied exclusively on the
opinion dated May 22, 2000 of Messrs. Richards, Layton & Finger, Wilmington,
Delaware (the "RL&F Opinion"), a copy of which is attached hereto. Based solely
upon the RL&F Opinion, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act.
2. The Units being offered for sale as described in the Registration
Statement, when sold in the manner and under the conditions set forth
therein, will be validly issued and, subject to the qualifications set
forth herein, will be fully paid and nonassessable beneficial interests in
the Trust, as to which the Unitholders, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit, subject to the obligation
of a Unitholder to make payments provided for in Section 17(c) of the
Amended and Restated Declaration of Trust and Trust Agreement and to repay
any funds wrongfully distributed to it from the Trust.
<PAGE> 2
SIDLEY & AUSTIN NEW YORK
Campbell Asset Allocation Trust
May 22, 2000
Page 2
We do not find it necessary for the purposes of this opinion to
cover, and accordingly we express no opinion as to, the application of the
securities or blue sky laws of the various states (including the state of
Delaware) to the sale of the Units.
We are not authorized, and do not purport, to practice law in the
State of Delaware.
This opinion speaks as of the date hereof, and we assume no
obligation to update this opinion as of any future date. We hereby consent to
the filing of this opinion as an Exhibit to the Registration Statement and to
all references to our firm included in or made a part of the Registration
Statement. This opinion shall not be used by any other person for any purpose
without our written consent.
Very truly yours,
SIDLEY & AUSTIN
<PAGE> 1
EXHIBIT 5.01.b
[RICHARDS, LAYTON & FINGER LETTERHEAD]
May 22, 2000
Sidley & Austin
875 Third Avenue
New York, New York 10022
Re: Campbell Asset Allocation Trust
Gentlemen:
We have acted as special Delaware counsel for Campbell Asset
Allocation Trust, a Delaware business trust (the "Trust"), in connection
with the matters set forth herein. At your request, this opinion is
being furnished to you.
For purposes of giving the opinions hereinafter set forth,
our examination of documents has been limited to the examination of
executed or conformed counterparts, or copies otherwise proved to our
satisfaction, of the following:
(a) The Certificate of Trust of the Trust, dated May 1,
2000 (the "Certificate of Trust"), as filed in the office of the
Secretary of State of the State of Delaware (the "Secretary of State")
on May 3, 2000;
(b) The Declaration and Agreement of Trust of the Trust,
dated as of May 1, 2000;
<PAGE> 2
Sidley & Austin
May 22, 2000
Page 2
(c) A registration statement (the "Registration
Statement") on Form S-1, to be filed by the Trust with the Securities and
Exchange Commission on or about May 22, 2000;
(d) A form of Amended and Restated Declaration of Trust
and Trust Agreement of the Trust (the "Agreement"), attached to the
Registration Statement as Exhibit "A";
(e) A form of Subscription Agreement and Power of
Attorney, including a Subscription Agreement and Power of Attorney
Signature Page of the Trust (the "Subscription Agreement"), attached to
the Registration Statement as Exhibit "D"; and
(f) A Certificate of Good Standing for the Trust, dated
May 22, 2000, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise
defined are used as defined in the Agreement.
For purposes of this opinion, we have not reviewed any
documents other than the documents listed above, and we have assumed
that there exists no provision in any document not listed above that
bears upon or is inconsistent with the opinions stated herein. We have
conducted no independent factual investigation of our own, but rather
have relied solely upon the foregoing documents, the statements and
information set forth therein and the additional matters recited or
assumed herein, all of which we have assumed to be true, complete and
accurate in all material respects.
With respect to all documents examined by us, we have
assumed that (i) all signatures on documents examined by us are genuine,
(ii) all documents submitted to us as originals are authentic, and (iii)
all documents submitted to us as copies conform with the original copies
of those documents.
For purposes of this opinion, we have assumed (i) the due
authorization, execution and delivery by all parties thereto of all
documents examined by us, including, without limitation, the Agreement
by each beneficial owner of the Trust and the Trustee, the Certificate
by the Trustee and the Subscription Agreement by each Unitholder (as
defined below), (ii) that after the issuance and sale of beneficial
interests of the Trust (the "Units") under the Registration Statement
and the Agreement, the dollar amount of the Units issued by the Trust
will equal or exceed the minimum, and the dollar amount of the Units
issued and reserved for issuance by the Trust will not exceed the
maximum, dollar
<PAGE> 3
Sidley & Austin
May 22, 2000
Page 3
amount of the Units which may be issued by the Trust under the
Registration Statement and the Agreement, (iii) that the Agreement
constitutes the entire agreement among the parties thereto with respect
to the subject matter thereof, including with respect to the admission
of beneficial owners to, and the creation, operation and termination of,
the Trust and that the Agreement and the Certificate are in full force
and effect, have not been amended and no amendment of the Agreement or
the Certificate is pending or has been proposed, and (iv) except for the
due creation and valid existence in good standing of the Trust as a
business trust under the Delaware Business Trust Act (12 Del.C. Section
3801, et seq.) (the "Act"), the due creation, organization or formation,
as the case may be, and valid existence in good standing of each party
to the documents examined by us under the laws of the jurisdiction
governing its creation, organization or formation and the capacity of
persons and entities who are parties to the documents examined by us.
Insofar as the opinions expressed herein relate to the Units and persons
and entities to be admitted to the Trust as beneficial owners of the
Trust in connection with the Registration Statement (the "Unitholders"),
the opinions expressed herein relate solely to the Unitholders and the
Units to be issued in connection with the Registration Statement. We
have not participated in the preparation of the Registration Statement
and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have
not considered and express no opinion on the laws of any other
jurisdiction, including federal laws and rules and regulations relating
thereto. Our opinions are rendered only with respect to Delaware laws
and rules, regulations and orders thereunder which are currently in
effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have
considered necessary or appropriate, and subject to the assumptions,
qualifications, limitations and exceptions set forth herein, we are of
the opinion that:
1. The Trust has been duly created and is validly
existing in good standing as a business trust under the Act.
2. Assuming (i) that the Managing Owner has taken all
corporate action required to be taken by it to authorize the issuance
and sale of Units to the Unitholders and to authorize the admission to
the Trust of the Unitholders as beneficial owners of the Trust, (ii) the
due authorization, execution and delivery to the Managing Owner of a
Subscription Agreement by each Unitholder, (iii) the due acceptance by
the Managing Owner of each Subscription Agreement and the due acceptance
by the Managing
<PAGE> 4
Sidley & Austin
May 22, 2000
Page 4
Owner of the admission of the Unitholders as beneficial owners of the
Trust to the Trust, (iv) the payment by each Unitholder to the Trust of
the full consideration due from it for the Units subscribed to by it,
(v) the due authorization, execution and delivery by all parties
thereto, including the Unitholders as beneficial owners of the Trust, of
the Agreement, (vi) that the books and records of the Trust set forth
all information required by the Agreement and the Act, including all
information with respect to all persons and entities to be admitted as
Unitholders and their contributions to the Trust, and (vii) that the
Units are offered and sold as described in the Registration Statement
and the Agreement, the Units to be issued to the Unitholders will be
validly issued and, subject to the qualifications set forth herein, will
be fully paid and nonassessable beneficial interests in the Trust, as to
which the Unitholders, as beneficial owners of the Trust, will be
entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit, subject to the
obligation of a Unitholder to make contributions required to be made by
it to the Trust, to make other payments provided for in the Agreement
and to repay any funds wrongfully distributed to it from the Trust.
We understand that you will rely as to matters of Delaware
law upon this opinion in connection with an opinion to be submitted by
you to the Trust and filed by it with the Securities and Exchange
Commission as an exhibit to the Registration Statement in connection
with the filing by the Trust of the Registration Statement under the
Securities Act of 1933, as amended. In connection with such opinion, we
hereby consent to your relying as to matters of Delaware law upon this
opinion. This opinion is rendered solely for your benefit in connection
with the foregoing. We hereby consent to the use of this opinion as an
exhibit to the Registration Statement and to the use of our name under
the heading "Legal Matters" in the Prospectus. In giving the foregoing
consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933
or the rules and regulations of the Securities and Exchange Commission
thereunder. Except as stated above, without our prior consent, this
opinion may not be furnished or quoted to, or relied upon by, any other
person or entity for any purpose.
Very truly yours,
/s/ RICHARDS, LAYTON & FINGER, P.A.
DKD/jmb
<PAGE> 1
EXHIBIT 8.01
[SIDLEY & AUSTIN LETTERHEAD]
May 22, 2000
Campbell & Company, Inc.
Managing Owner of
Campbell Asset Allocation Trust
210 West Pennsylvania Avenue
Baltimore, Maryland 21204
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as your counsel in connection with the preparation and
filing with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), of the Registration Statement on
Form S-1 on or about May 22, 2000 (the "Registration Statement"), relating to
Units of Beneficial Interest ("Units") of Campbell Asset Allocation Trust (the
"Trust"), a business trust organized under the Delaware Business Trust Act.
We have reviewed such data, documents, questions of law and fact and
other matters as we have deemed pertinent for the purpose of this opinion. Based
upon the foregoing, we hereby confirm our opinion expressed under the caption
"Federal Income Tax Aspects" in the Prospectus (the "Prospectus") constituting a
part of the Registration Statement that the Trust will be taxed as a partnership
for federal income tax purposes.
We also advise you that in our opinion the description set forth
under the caption "Federal Income Tax Aspects" in the Prospectus correctly
describes (subject to the uncertainties referred to therein) the material
aspects of the federal income tax treatment to a United States individual
taxpayer, as of the date hereof, of an investment in the Trust.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and all references to our firm included in or made a part
of the Registration Statement. In giving such consent, we do not thereby admit
that we are in the category of persons whose consent is required under Section 7
of the Act or the rules and regulations of the Commission thereunder.
Very truly yours,
SIDLEY & AUSTIN
<PAGE> 1
EXHIBIT 10.01
PAINEWEBBER
- -------------------------------------------------------------------------------
INSTITUTIONAL FUTURES AND OPTIONS
ACCOUNT DOCUMENTATION
- -------------------------------------------------------------------------------
PAINEWEBBER INCORPORATED
<PAGE> 2
INSTITUTIONAL ACCOUNT DOCUMENTS
COMMODITIES, FUTURES AND OPTIONS
<TABLE>
<CAPTION>
Branch Account Number Broker
<S> <C> <C> <C>
[ ][ ] [ ][ ][ ][ ][ ] [ ][ ]
</TABLE>
<TABLE>
<CAPTION>
Full Account Name Federal Tax I.D. No.
<S> <C>
Campbell Allocation Asset Trust 52-2238521
</TABLE>
- -------------------------------------------------------------------------------
PLEASE READ THE SEPARATE RISK DISCLOSURE STATEMENTS
BEFORE SIGNING THIS FORM
- -------------------------------------------------------------------------------
1. INTRODUCTION
In this Agreement, "Customer" means Campbell Allocation Asset Trust.
"PaineWebber" means PaineWebber Incorporated, its successor firms, subsidiaries,
correspondents, affiliates and assigns. "Contracts" mean physical commodities,
commodity futures, financial futures, and options on any of the forgoing.
"Account" means any and all accounts opened or maintained by PaineWebber on
Customer's behalf to trade Contracts. "Property" means all Contracts, securities
and commodities, including but not limited to cash, monies, stocks, options,
bonds, notes, forward contracts, futures contracts, physical commodities,
commodity options, certificates of deposit and other obligations.
In consideration of PaineWebber's opening and maintaining an Account,
Customer hereby represents and agrees as follows:
2. CUSTOMER REPRESENTATIONS
Customer represents and warrants that (i) it is authorized to enter
into transactions in Contracts and to execute this Agreement and perform its
obligations, and has taken all necessary action to authorize such execution and
performance; (ii) it shall enter into such transactions as principal (or, if
agreed in writing in advance of the execution of any transaction on Customer's
behalf by PaineWebber, as agent for a disclosed principal); (iii) each person
signing this Agreement on Customer's behalf is duly authorized to do so on its
behalf (and on behalf of any such disclosed principal) and to bind Customer to
the obligations, representations and warranties under this Agreement; (iv)
Customer has obtained all
2
<PAGE> 3
authorizations of any governmental body required in connection with this
Agreement and such authorizations are in full force and effect; and (v) the
execution, delivery and performance of this Agreement and any transaction in
Contracts entered into by Customer will not violate any law, ordinance, charter,
by-law or rule applicable to it or any agreement by which it is bound or by
which any of its assets are affected. Upon the execution of any transaction by
PaineWebber on Customer's behalf, Customer shall be deemed to repeat all of the
foregoing representations.
3. APPLICABLE LAW
Customer agrees to conduct its business with PaineWebber in accordance
with all applicable federal and state laws and regulations. Customer agrees to
take no action placing PaineWebber in violation of any such law or regulation,
or in violation of the rules, regulations or other requirements of the exchanges
or clearing houses on which PaineWebber executes transactions for Customer,
including margin requirements. If Customer itself violates or causes PaineWebber
to violate any such rule, regulation or other requirement, or any applicable
federal or state law or regulation, Customer shall indemnify and hold
PaineWebber harmless from the consequences.
4. TRADING RECOMMENDATIONS
Customer acknowledges that any trading recommendation or information
furnished by PaineWebber is provided without any warranty, representation or
guaranty as to accuracy, completeness, profitability or timeliness and Customer
shall in no way hold PaineWebber responsible for any loss incurred as a result
of PaineWebber's recommendations or suggestions.
PaineWebber, and its officers, directors, affiliates, stockholders, or
employees may take or hold positions in, or advise other customers concerning
Contracts which are the subject of recommendations or information provided to
Customer, which positions or advice may be inconsistent with recommendations
given to, or positions established by Customer.
5. COMMISSIONS AND FEES
Customer understands that PaineWebber charges commissions for the
execution of transactions. Customer shall pay such commissions, as defined in
Campbell Asset Allocation Trust's Prospectus and agreed to by both parties to
this Agreement. Such charges incurred in connection with transactions in the
Account, including, without limitation, any tax, transaction fee, charge, fine,
penalty or other expense imposed by any exchange, clearing house,
Self-Regulatory Organization or governmental body are acknowledged by the
Customer.
6. CONFIRMATIONS
Verbal reports of the execution of orders made by PaineWebber to
Customer prior to the opening of business on the business day following the
execution of each trade shall be conclusive and deemed ratified if not objected
to immediately. PAINEWEBBER'S STATEMENTS AND CONFIRMATIONS ARE IMPORTANT.
PAINEWEBBER RECOMMENDS THAT CUSTOMER HAVE DUPLICATE STATEMENTS AND CONFIRMATIONS
SENT TO CUSTOMER'S INTERNAL AUDITOR, AND TO ANY PERSON RESPONSIBLE FOR
MONITORING CUSTOMER'S TRADER. CUSTOMER AGREES TO REVIEW ALL STATEMENTS AND
CONFIRMATIONS UPON RECEIPT, AND TO NOTIFY PAINEWEBBER IMMEDIATELY IF CUSTOMER
BELIEVES THERE IS ANY ERROR OR OMISSION OR IF THE WRITTEN REPORT IS NOT
CONSISTENT WITH THE PREVIOUS VERBAL REPORT SO THAT THE
3
<PAGE> 4
DISCREPANCY CAN BE RECONCILED PROMPTLY. Customer shall be responsible for any
failure to so notify PaineWebber and for any delay in notifying PaineWebber of
any error, omission or discrepancy.
Any such notification should be directed to:
PAINEWEBBER INCORPORATED
Attention: Manager, Futures Credit Department
800 Washington Boulevard
Jersey City, New Jersey 07310-1998
(201) 318-3000
(312) 533-8217 (Fax)
If Customer fails to make such notification, Customer shall be deemed
to have adopted and ratified any such trade and to have waived any right to have
it removed from the Account. Losses incurred from any delay in notifying
PaineWebber shall be borne by Customer and in any event Customer agrees that
reports of the execution of orders and statements of account will be conclusive
and will be accepted as belonging to Customer if not objected to within two (2)
business days from the date the statement, confirmation or duplicate is
received. If PaineWebber discovers any error or omission, PaineWebber has the
right to correct it and adjust Customer's Account accordingly. If PaineWebber
does so, it will promptly notify Customer, which notification may be in the form
of a written confirmation or statement.
7. DELIVERY OR EXERCISE
In the event Customer undertakes to exercise an option or to accept an
option assignment, or PaineWebber undertakes to sell or deliver, or buy or take
delivery of any Property on behalf of Customer, Customer shall supply
PaineWebber with the instructions and/or Property at the time, in the manner and
under the terms and conditions necessary for PaineWebber to effect such exercise
or delivery. If Customer fails to so supply PaineWebber with same before any
deadline PaineWebber may reasonably set, then, in addition to any other right or
remedy PaineWebber may have, PaineWebber may purchase or borrow for the account
of Customer any Property necessary to make or receive delivery on such terms and
conditions as PaineWebber, in its discretion, may determine. If funds,
documents, or instructions are not received by the time specified, PaineWebber
may, without notice to Customer and upon such terms and by such methods as
PaineWebber may determine in its discretion, (i) exercise or liquidate the
positions of Customer; (ii) make or receive delivery of the positions of
Customer; (iii) make or receive delivery on behalf of Customer; or (iv) allow
Contracts to expire, all for the account and risk of Customer.
8. POSITION LIMITS
PaineWebber has the right, at any time and in its discretion, to limit
the number of open positions in Property that may be carried in Customer's
Account. Customer shall not exceed any position limit that may be established by
PaineWebber or by any governmental regulation or the rules of any exchange or
Self-Regulatory Organization, whether Customer is acting alone or in concert
with others. If Customer exceeds any such limit, PaineWebber may, in its
discretion, decline to accept any order, or require that positions in Customer's
Account be transferred to another firm, and liquidate any position that is not
promptly transferred. Customer shall promptly notify PaineWebber of any position
for which Customer is required to file reports under any governmental regulation
or the rules of any exchange or Self-Regulatory Organization, including any
large trader report filed with the Commodity Futures Trading Commission or any
exchange or Self-Regulatory Organization. When and if PaineWebber imposes its
4
<PAGE> 5
own position limits on Customer, PaineWebber does so for internal reasons, (such
as limiting PaineWebber's own financial exposure). Customer may make its own
determination what limits are appropriate for Customer. Customer agrees not to
look to PaineWebber to enforce it's own self-imposed limits.
9. FURNISHING INFORMATION
Upon request, Customer shall promptly furnish PaineWebber with such
documents and information relating to any transaction or position effected or
carried for Customer (including, without limitation, any transaction in physical
commodities in connection with an exchange for physicals transaction on any
exchange) considered necessary by PaineWebber to ensure compliance with any law,
governmental regulation or the rules of any exchange, clearing house or
Self-Regulatory Organization applicable to PaineWebber. PaineWebber may, from
time to time, contact third persons to verify any financial information
furnished to it by Customer.
10. EMERGENCY ACTIONS
In addition to any other right or remedy PaineWebber has under this
Agreement, any governmental regulation or the rules of any exchange, clearing
house or Self-Regulatory Organization, PaineWebber is authorized, without notice
to Customer, to take such steps as it, in its discretion, considers necessary or
appropriate in the event any exchange, clearing house, Self-Regulatory
Organization or governmental authority orders emergency or other action. Such
authority may include, without limitation, steps to (i) liquidate Property
carried in the Account of Customer, (ii) enter into straddle or spread
positions, or (iii) transfer Property in any account of Customer at PaineWebber
to another account of Customer at PaineWebber or another futures commission
merchant or broker.
11. CURRENCY EXCHANGE RATES
In the event that any transaction is effected on any exchange in a
foreign currency, any profit or loss arising as a result of a fluctuation in the
exchange rate affecting such currency shall be entirely for the account and risk
of Customer. Initial and subsequent deposits for margin purposes shall be made
in United States currency, unless PaineWebber requests or specifically agrees
with Customer to accept any such deposit in the currency of some other country,
in which case such deposit shall be made in such currency. When any position is
liquidated, PaineWebber will debit or credit the Account of Customer in United
States currency at the rate of exchange determined by PaineWebber in good faith,
unless Customer shall have given PaineWebber specific written instructions to
make such debit or credit in the foreign currency involved. Certain transactions
in foreign currencies will also be subject to the Subordination Agreement and
Disclosure Relating to Funds Held Outside the United States.
12. EVENTS BEYOND PAINEWEBBER'S CONTROL
PaineWebber will not be liable for delays or errors in the transmission
or execution of orders due to (i) the breakdown or failure of transmission or
communication facilities; (ii) government, market or exchange restrictions;
(iii) suspension of trading; (iv) war, strikes, or natural disasters; or (v) for
any other cause beyond PaineWebber's control.
5
<PAGE> 6
13. COMMUNICATIONS
a. All reports of transactions, statements, notices and other
communications required or permitted under this Agreement may
be transmitted to Customer at the address or to any of the
telephone, telex or telefax numbers specified by Customer in
this Agreement, or at such other address or number as Customer
may specify by written notice to PaineWebber. All such
reports, statements, notices and other communications will be
deemed delivered when telephoned, or when delivered in person,
or when deposited in the United States mail, or when
dispatched in the case of telex, telefax or other electronic
transmission.
b. PaineWebber may record any telephone conversation between any
of its employees and Customer. Customer agrees to such
recording without further notice and waives any and all rights
to object to the admissibility into evidence of any such
recording in any legal proceeding. This Agreement shall not
obligate PaineWebber to make any such recording, to keep any
recording it makes, or to make available to Customer any such
recording.
c. Customer acknowledges that all price quotations, trade reports
and other information are subject to correction, as well as
delays in reporting.
14. INDEMNIFICATION, CONTRIBUTION AND REIMBURSEMENT
a. Customer agrees to indemnify PaineWebber and its shareholders,
directors, officers, employees and agents against any
liability which they may incur with respect to Customer's
Account or as a result of Customer's violation of any
obligation under this Agreement, or of Customer's
misstatements in connection with Customer's Account. Such
indemnification shall include, without limitation, legal fees
and expenses, settlements of claims, interest and any fine
imposed by an exchange, clearinghouse, Self-Regulatory
Organization, or governmental body. PaineWebber will remain
liable, however, for acts and omissions which arise from
PaineWebber's breach of this Agreement or violation of any
law, rule or governmental regulation, except to the extent
that PaineWebber was acting in good faith or according to
Customer's instruction.
b. If in any circumstance the indemnification provided for in
paragraph (a) is legally held to be unavailable from Customer,
the parties will contribute to such liability in proportions
appropriate to reflect the parties' relative benefits and
faults in connection with any act or omission.
c. Customer agrees to reimburse PaineWebber and its shareholders,
directors, officers, employees and agents on demand for any
cost incurred in collecting any sum Customer owes under this
Agreement and any cost of successfully defending against any
claim asserted by Customer.
d. Any outstanding debit balance in Customer's Account will
accrue interest, in accordance with PaineWebber's usual
custom, at the maximum rate permitted by the laws of the State
of New York. Any such interest unpaid at the end of a calendar
month will be added automatically to the opening balance in
such Customer Account for the next calendar month.
15. MARGINS AND PREMIUMS
With respect to each Contract purchased, sold or cleared for Customer,
Customer shall make, or cause to be made, all applicable original margin,
variation margin and premium payments, and perform all
6
<PAGE> 7
other obligations attendant to transactions or positions in Contracts, as such
payments or performance may be required by PaineWebber, applicable federal and
state law and regulations, and the rules, regulations and other requirements of
the applicable exchange or clearing house. It is understood and agreed that
margins required by PaineWebber may be higher than the minimum required by
various exchanges and may be increased at any time and from time to time without
prior notice to Customer.
16. SECURITY
a. As security for the performance of all of Customer's
obligations to PaineWebber arising in connection with the
Account, transactions and/or positions included in this
Agreement, Customer hereby pledges, assigns and grants
PaineWebber a lien on and security interest in all of
Customer's Property in Customer's accounts at PaineWebber
(whether held as margin, or for safekeeping or otherwise).
Customer shall take such actions as PaineWebber reasonably
requires to perfect this lien and security interest.
b. If,
i. Customer commences a voluntary case, or an involuntary
case is commenced against Customer, under any
applicable bankruptcy, insolvency or other similar
law, or a receiver, liquidator, trustee, custodian,
sequestrator, or other similar official is appointed
or takes possession of Customer or Customer's
property, or Customer is insolvent, makes any general
assignment for the benefit of creditors, or fails
generally to pay debts as they become due; or
ii. Customer takes any corporate, partnership or other
action to effect a dissolution, liquidation,
reorganization, or winding up of Customer's affairs;
or
iii. Customer fails or refuses to pay margin or any other
sum as and when due or defaults in the performance of
any of its other obligations under this Agreement; or
PaineWebber may take any action set forth in Section 11 (Emergency
Actions) and may also take any one or more of the following actions
with respect to Customer's Account:
A. sell, exercise, offset, deliver or otherwise liquidate any or
all Property long;
B. buy in, offset, take delivery of, or otherwise liquidate any
or all Property short;
C. buy or sell Property, or enter into and/or liquidate straddle
or spread positions, in order to liquidate or reduce the risk
associated with carrying any Property long or short;
D. cancel any outstanding order, close out any or all outstanding
Contracts, close the Account, sell, set off against or
otherwise dispose of any Property (whether held as margin or
otherwise) and satisfy any obligation Customer may have to
PaineWebber or its agents out of any such Property or the
proceeds from its sale or other disposition; or
E. exercise all rights and remedies of a secured party under the
Uniform Commercial Code and other applicable law.
Any of these actions may be taken without demand for margin or
additional margin, and without notice to Customer. In all cases, a prior demand,
call or notice of the time or place of sale or purchase shall not be considered
a waiver of PaineWebber's right to sell or to buy without demand, call or notice
as herein provided. Any purchase, sale, offset or liquidation may be made, in
PaineWebber's discretion, either by direct sale or purchase in the same market
and for delivery in the same month, or in another market or another month, or by
spread or straddle transactions, and may be made on any exchange or elsewhere.
PaineWebber will not be liable for any loss incurred or any damage which
Customer suffers
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<PAGE> 8
because of this action. In the event that the Property which PaineWebber holds
and applies is insufficient for the payment in full of all of Customer's
obligations owing to PaineWebber, Customer shall remain liable for the deficit
upon demand, together with interest thereon and all costs of collection
(including attorney's fees and expenses.)
17. TERMINATION
This Agreement may be terminated by either party hereto in its sole
discretion upon giving ten (10) days notice to the other, except that this
Agreement shall, notwithstanding such notice, remain applicable to any Property
then outstanding and will not relieve either party of any obligation in
connection with any debit balance or credit balance or other liability or
obligation accruing prior to such termination.
18. TRADING SESSION ACKNOWLEDGMENT
Customer understands and acknowledges that PaineWebber may provide
brokerage service for the trading of Contracts on various exchanges and at
various times. Customer further acknowledges that this Agreement does not
entitle Customer to participate in any particular trading session unless
qualified in accordance with PaineWebber policy.
19. GOVERNING LAW
THIS AGREEMENT AND ITS ENFORCEMENT SHALL BE GOVERNED BY THE LAWS OF THE
UNITED STATES AND THE STATE OF NEW YORK AND ITS PROVISIONS SHALL BE CONTINUOUS,
AND SHALL COVER INDIVIDUALLY AND COLLECTIVELY ALL ACCOUNTS WHICH CUSTOMER MAY
OPEN OR REOPEN WITH PAINEWEBBER TO TRADE CONTRACTS AND EACH AND EVERY
TRANSACTION EFFECTED OR POSITION CARRIED FOR CUSTOMER.
20. SEVERABILITY/WAIVER/MODIFICATION
a. Each provision herein shall be treated as separate and
independent from any other provision and will be enforceable
notwithstanding the inability to enforce any other provision.
b. If any provision herein is or should become inconsistent with
any present or future law, rule or regulation, such provision
will be deemed to be rescinded or modified in accordance with
any such law, rule or regulation. In all other respects, this
Agreement will continue and remain in full force and effect.
c. No waiver or breach of, or default under, any provision of
this Agreement shall constitute a waiver or breach of, or
default under, any other provision of this Agreement. Any
failure on PaineWebber's part to exercise any right, privilege
or remedy under this Agreement, or under applicable laws,
governmental regulations or rules, shall not give rise to any
right, privilege or remedy on the part of Customer, it being
understood that such rights, privileges and remedies are for
PaineWebber's protection.
d. No material provision of this Agreement shall in any respect
be waived, altered, modified or amended except in writing,
signed by the parties' authorized officers, or except as a
result of the parties' need to comply with any law, rule, or
regulation or amendment thereto.
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<PAGE> 9
e. This Agreement and any document annexed hereto constitute the
entire agreement between the parties. Customer has not relied
on any statement, representation, promise or understanding of
any kind not embodied herein.
OPTIONAL AUTHORIZATIONS
21. OPTIONAL ELECTIONS
The following provisions, which are fully set forth in this agreement,
need not be entered into to open an Account with PaineWebber. Customer agrees
that Customer's optional elections are as follows (please provide signature and
date):
AUTHORIZATION TO TRANSFER FUNDS (Agreement Section 23):
-----------------------------------------------------------------
Authorized Signature Date
AUTHORIZATION TO CROSS TRANSACTIONS (Agreement Section 24):
-----------------------------------------------------------------
Authorized Signature Date
ARBITRATION AGREEMENT (Agreement Section 25):
-----------------------------------------------------------------
Authorized Signature Date
22. RULE 190.06(d) ELECTION
Customer specifies and agrees that in the unlikely event of
PaineWebber's bankruptcy, it prefers that the bankruptcy trustee (check
appropriate box):
[ ] Election A - Liquidate all open contracts without first seeking either
of Customer's or its advisor's instructions
or
[ ] Election B - Attempt to contact Customer or its advisor for
instructions with respect to the disposition of all open contracts
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<PAGE> 10
23. ACKNOWLEDGMENT OF RECEIPT OF SEPARATE RISK DISCLOSURE DOCUMENTS
Customer hereby acknowledges its separate receipt from PaineWebber, its
review and its understanding of each of the following documents prior to the
opening of Customer Account (please provide signature and date):
RISK DISCLOSURE STATEMENT FOR FUTURES AND OPTIONS
-----------------------------------------------------------------
Authorized Signature Date
SUBORDINATION AGREEMENT AND DISCLOSURE RELATING
TO FUNDS HELD OUTSIDE OF THE UNITED STATES
-----------------------------------------------------------------
Authorized Signature Date
MUTUAL OFFSET SYSTEM DISCLOSURE STATEMENT
-----------------------------------------------------------------
Authorized Signature Date
IN WITNESS WHEREOF the undersigned officers who are authorized to enter into and
execute the foregoing Agreement on behalf of Customer, and hereby agree to its
terms and conditions:
Customer Name & Address: Campbell Asset Allocation Trust
C/O Campbell & Company, Inc, Managing Owner
210 West Pennsylvania Avenue, Suite 770
Towson, MD 21204
By: By:
---------------------------- ----------------------------
Title: Title:
------------------------------- -------------------------------
Date: Date:
------------------------------ ------------------------------
10
<PAGE> 1
EXHIBIT 10.03
CAMPBELL ASSET ALLOCATION TRUST
ESCROW AGREEMENT
This Escrow Agreement is made and entered into as of ___________, 2000
by and among Mercantile-Safe Deposit & Trust Company, a Maryland bank & trust
company, as escrow agent (the "Escrow Agent"), Campbell Asset Allocation Trust,
a Delaware business trust (the "Trust") and Campbell & Company, Inc., a Maryland
corporation, the managing owner of the Trust ("Campbell" or the "Managing
Owner").
Commencing upon the execution of this Agreement, the Escrow Agent shall
act as escrow agent and agrees to receive, hold, deal with and disburse the
proceeds from the sale of Units (the "Proceeds") and any other property at any
time held by the Escrow Agent hereunder in accordance with this Agreement.
All Proceeds of subscriptions for Units of the Trust shall be deposited
in an escrow account established by the Escrow Agent on behalf of the Trust. All
Proceeds shall be denominated in dollars and deposited in the escrow account by
check or wire transfer, duly made out to Campbell Asset Allocation Trust, Escrow
Account." The Escrow Agent shall promptly notify Campbell of any discrepancy
between the amounts set forth on any statement delivered by Campbell or the
Selling Agents and the sum or sums delivered therewith to the Escrow Agent. In
the event that any checks or other instruments deposited in the escrow account
prove uncollectible, the Escrow Agent shall promptly notify Campbell and the
appropriate Selling Agent and forward such checks or other instruments to the
appropriate Selling Agent.
Campbell shall deliver to all prospective subscribers interim receipts
for the amount of the Proceeds deposited in this escrow account, reciting the
substance of this Agreement.
The Escrow Agent, is hereby directed to hold, deal with and dispose of
the aforesaid property and any other property at any time held by the Escrow
Agent hereunder in the following manner subject, however, to the terms and
conditions hereinafter set forth.
1. If acceptable subscriptions (as determined by the Managing Owner
in its discretion) of at least 8,000 Units (constituting cleared
funds in the aggregate value of at least $8,000,000) have been
received at any time prior to 180 days from the beginning of the
offering period for the Units (as described in the Trust's
Prospectus dated ________ , 2000 (the "Prospectus")) as
evidenced by (i) written instructions by the Managing Owner,
(ii) an affidavit of the Managing Owner and (iii) possession in
the escrow account of at least $8,000,000 in collected funds in
payment of such subscriptions, all sums accumulated in this
escrow account shall be paid over pursuant to the Managing
Owner's written request. Such affidavit shall set forth the day
for such payment (the "Closing Date"), which shall not be more
than ten business days after the close of the initial offering
period for the Units.
The offering will continue after the Closing Date. Subscriptions
will be deposited in the escrow account until each month-end at
which time the sums accumulated
<PAGE> 2
in this escrow account shall be paid over pursuant to the
Managing Owner's written request setting forth the date for such
payment.
2. If acceptable subscriptions (as determined by the Managing Owner
in its discretion) of at least 8,000 Units have not been
received prior to 180 days from the beginning of the offering
period, as evidenced by an affidavit of the Managing Owner as
described above, remittance of all funds accumulated in this
escrow account shall be made within two business days of the
termination of the initial offering period, by the Escrow Agent
directly to the persons on whose behalf such funds were
deposited, pursuant to the written direction of the Managing
Owner, and without deductions of any kind or character.
3. For the purposes of Paragraphs 1 and 2 above, (i) the offering
period for the Units shall be deemed to begin on the date that
appears on the cover page of the Prospectus and (ii) in
computing the aggregate number of Unit subscriptions, the
Managing Owner shall not include the initial unit holder's
investment for the purpose of permitting the formation of the
Trust.
4. Prior to the delivery, if any, of the escrowed funds to the
Trust upon sale of the Units, as described above, the Trust
shall have no title to nor interest in the funds on deposit, and
such funds shall under no circumstances be subject to the
liabilities or indebtedness of the Trust.
5. The Escrow Agent shall cause all funds deposited with the Escrow
Agent pursuant to this Agreement to be maintained and invested
as the Managing Owner may from time to time direct in bank
(including Mercantile-Safe Deposit & Trust Company) certificates
of deposit, savings or money market accounts, short-term
securities issued or guaranteed by the United States Government
or mutual funds investing solely in the foregoing in compliance
with the Rule 15c2-4 under the Securities Exchange Act of 1934
(the "Exchange Act"), as elaborated upon by the Securities and
Exchange Commission in the National Association of Securities
Dealers, Inc. Notice to Members 84-7, so that such funds can be
readily liquidated so that 100% of the funds so deposited can be
returned to the person entitled thereto under the circumstances
described above or below. If the deposit into the escrow account
is made by Federal Funds wire transfer, the Escrow Agent shall
invest the funds deposited on the same day as deposited,
provided that such deposit is received by 10 a.m. New York City
Time. If the deposit into the escrow account is made by Federal
Funds wire transfer and received by the Escrow Agent after 10:00
a.m. New York City Time, the Escrow Agent shall invest the funds
deposited on the next business day. If the deposit into the
escrow account is made by clearinghouse or certified check, the
Escrow Agent shall invest the funds deposited on the next
business day following the receipt of the check. The Escrow
Agent will incur no liability for any loss suffered so long as
the Escrow Agent follows such direction, subject to the standard
of liability set forth below. Whether or not subscriptions are
accepted and Units are sold, or subscriptions are returned and
no Units are sold, the Managing Owner shall pay the Escrow Agent
fees as set forth in Schedule I hereto for the Escrow Agent's
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<PAGE> 3
services as Escrow Agent on the Closing Date, if there is one,
or if there is no Closing Date, within two business days of the
termination of the offering period. The Escrow Agent agrees that
it shall have no right against the Trust with respect thereto.
6. Interest earned on funds attributable to accepted subscriptions
while held in the escrow account shall be allocated to the Trust
and not to any individual subscriber.
7. At any time prior to the initial Closing Date, if any, and
subsequent Closing Dates, the Managing Owner is authorized to
notify the Escrow Agent that a subscription agreement of a
subscriber has not been accepted by the Managing Owner and to
direct the Escrow Agent to return any funds held in this escrow
account for the benefit of such subscriber directly to such
subscriber. If subscription funds (and interest earned thereon,
if any) shall be returned to subscribers, due to rejection of
subscriptions or the non-occurrence of the initial Closing Date,
the Escrow Agent shall do so to the same source from which
(i.e., a subscriber or an applicable Selling Agent for credit to
the account of a subscriber) subscription funds were received.
All documents, including any instrument necessary for the negotiation or
other transfer of escrow assets deposited simultaneously with the execution of
this Agreement are approved by the parties thereto, other than the Escrow Agent.
The Escrow Agent shall not be obliged to inquire as to the form, manner of
execution or validity of these documents or any document hereafter deposited or
delivered to the Escrow Agent pursuant to the provisions hereof, and the Escrow
Agent shall be entitled to rely on each document received and believed by it to
be genuine, nor shall the Escrow Agent be obliged to inquire as to the identity,
authority or rights of the persons executing the same.
The Escrow Agent shall be liable under this Agreement only for its
failure to exercise due care in the performance of its duties expressly set
forth herein.
Campbell agrees to pay to the Escrow Agent, promptly upon demand, the
Escrow Agent's reasonable expenses, judgments, attorney's fees and other
liabilities which the Escrow Agent may incur or sustain by reason of this
Agreement.
In the case of conflicting demands upon the Escrow Agent, the Escrow
Agent may withhold performance of this Agreement until such time as said
conflicting demands shall have been withdrawn or the rights of the respective
parties shall have been settled by court adjudication, arbitration, joint order
or otherwise.
Any notice which the Escrow Agent is required or desires to give
hereunder to any of the undersigned shall be in writing and may be given by
mailing the same to the address of the undersigned (or to such other address as
said undersigned may have theretofore substituted therefore by written
notification to the Escrow Agent), by registered or first class mail, postage
prepaid. For all purposes hereof any notice so mailed shall be as effectual as
though served upon the person of the undersigned to whom it was mailed at the
time it is deposited in the United
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<PAGE> 4
States mail by the Escrow Agent whether or not such undersigned thereafter
actually received such notice. Notices to the Escrow Agent shall be in writing
and shall not be deemed to be given until actually received by the Escrow
Agent's trust department. Whenever under the terms hereof the time for giving a
notice of performing an act falls upon a Saturday, Sunday or bank holiday, such
time shall be extended to the Escrow Agent's next business day.
The Escrow Agent's duties and responsibilities shall be limited to those
expressly set forth in this Escrow Agreement and the Escrow Agent shall not be
subject to, or obligated to recognize, any other agreement between or direction
or instruction of, any or all of the parties hereto even though reference
thereto may be made herein; provided, however, with the Escrow Agent's written
consent, this Escrow Agreement may be amended at any time or times by an
instrument in writing signed by all of the then parties in interest.
If any property subject hereto is at any time attached, garnished or
levied upon, under any court order, or in case the payment, assignment,
transfer, conveyance or delivery of any such property shall be stayed or
enjoined by any court order or in case an order, judgment or decree shall be
made or entered by any court affecting such property, or any part thereof, then
in any of such events, the Escrow Agent is authorized, in its sole discretion,
to rely upon and comply with any such order, writ, judgment or decree, which it
is advised by legal counsel of its own choosing is binding upon it, and if it
complies with any such order, writ, judgment or decree, it shall not be liable
to any of the parties hereto or to any other person, firm or corporation by
reason of such compliance, even though such order, writ, judgment or decree may
be subsequently reversed, modified, annulled, set aside or vacated.
This Agreement shall be construed, enforced and administered in
accordance with the laws of the State of Delaware.
The Managing Owner may remove the Escrow Agent at any time (with or
without cause) by giving at least 15 days written notice thereof. Within 10 days
after giving such notice, the Managing Owner shall appoint a successor escrow
agent at which time the Escrow Agent shall either distribute the funds held in
the escrow account, its fees, costs and expenses or other obligations owed to
the Escrow Agent having been paid by Campbell, as directed by the instructions
of the Managing Owner or hold such funds, pending distribution, until all such
fees, costs and expenses or other obligations are paid by Campbell. If a
successor escrow agent has not been appointed or has not accepted such
appointment by the end of the 10-day period, the Escrow Agent may appeal to a
court of competent jurisdiction for the appointment of a successor escrow agent,
or for other appropriate relief and the costs, expenses and reasonable attorneys
fees which the Escrow Agent incurs in connection with such a proceeding shall be
paid by the Trust.
The Escrow Agent may resign by giving five days' written notice by
registered or first class mail sent to the undersigned at their respective
addresses herein set forth; and thereafter, subject to the provisions of the
third preceding paragraph hereof, shall deliver all remaining deposits in said
escrow account upon the written and signed order of the Managing Owner. If no
such notice is received by the Escrow Agent within thirty days after mailing
such notice, the Escrow Agent is unconditionally and irrevocably authorized and
empowered to send any and all Proceeds deposited hereunder by registered mail to
the respective subscribers thereof, or at its
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<PAGE> 5
sole option to deliver such deposited items to the respective depositors. If the
Escrow Agent resigns, reasonable fees and expenses of the Escrow Agent shall be
paid by Campbell.
In the event funds transfer instructions are given (other than in
writing at the time of execution of this Agreement), whether in writing, by
telecopier or otherwise, the Escrow Agent is authorized to seek confirmation of
such instructions by telephone call-back to the person or persons designated on
Schedule II hereto, and the Escrow Agent may rely upon the confirmations of
anyone purporting to be the person or persons so designated. The persons and
telephone numbers for call-backs may be changed only in a writing actually
received and acknowledged by the Escrow Agent. The parties acknowledge that such
security procedure is commercially reasonable.
Neither this Agreement nor any right or interest hereunder may be
assigned in whole or in part without the prior consent of the other parties.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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<PAGE> 6
Dated at Baltimore, Maryland as of ___________________________, 2000
PARTIES TO THE ESCROW AGREEMENT
MERCANTILE-SAFE DEPOSIT & CAMPBELL ASSET ALLOCATION TRUST
TRUST COMPANY
By: CAMPBELL & COMPANY, INC.
By: By:
------------------------------ -------------------------------
Attest: Attest:
-------------------------- ----------------------------
CAMPBELL & COMPANY, INC.
By:
--------------------------------
Attest:
----------------------------
6
<PAGE> 7
SCHEDULE I
Mercantile-Safe Deposit & Trust agrees to act as Escrow Agent for Campbell Asset
Allocation Trust for an annual fee of $1,500.00 including any fees on the M.S.D.
& T. Money Market Fund as outlined in the prospectus for that Fund. The fee is
subject to an annual review.
<PAGE> 8
SCHEDULE II
The escrow Agent is authorized to seek confirmation of instructions by telephone
call-back to the following persons:
Charlene Heaberlin - Fund Administration Manager
Jackie Bonjean - Fund Administration Assistant
Terri Becks - Chief Financial Officer
<PAGE> 1
EXHIBIT 10.04
INTERNATIONAL FOREIGN EXCHANGE MASTER AGREEMENT
WITH MARGIN ACCOUNT
MASTER AGREEMENT dated as of March 27, 2000, by and between Campbell
Asset Allocation Trust, a Delaware business trust (the "Customer") and ABN AMRO
Bank N.V., Chicago Branch, a Netherlands public company with limited liability
(the "Bank"). The Bank and the Customer are collectively referred to herein as
the "Parties" and each may be referred to separately as a "Party".
SECTION 1. DEFINITIONS
Unless otherwise required by the context, the following terms shall have
the following meanings in the Agreement:
"Advisor" shall mean Campbell & Company, Inc.
"Adjusted Collateral Value" has the meaning given to it in Section 4.2.
"Agreement" has the meaning given to it in Section 2.2.
"Bank's Custodian" shall mean LaSalle National Bank.
"Base Currency" means, as to a Party, the Currency agreed to as such in
relation to it in Part VII of the Schedule hereto.
"Base Currency Rate" means, as to a Party and any amount, the cost
(expressed as a percentage rate per annum) at which that Party would be able to
fund that amount from such sources and for such periods as it may in its
reasonable discretion from time to time decide, as determined in good faith by
it.
"Business Day" means (i) a day which is a Local Banking Day for the
applicable Designated Office of both Parties, or (ii) solely in relation to
delivery of a Currency, a day which is a Local Banking Day in relation to that
Currency.
"Close-Out Amount" has the meaning given to it in Section 6.1.
"Close-Out Date" means a day or days on which, pursuant to the
provisions of Section 6.1, the Non-Defaulting Party closes out and liquidates
Currency Obligations or such a close-out and liquidation occurs automatically.
"Closing Gain" means, as to the Non-Defaulting Party, the difference
described as such in relation to a particular Value Date under the provisions of
Section 6.1.
"Closing Loss" means, as to the Non-Defaulting Party, the difference
described as such in relation to a particular Value Date under the provisions of
Section 6.1.
"Collateral" means the items specified as such in Part XII of the
Schedule.
<PAGE> 2
"Collateral Value" means, at the time of any valuation, the sum of the
Collateral Value (as specified in Part XII of the Schedule) of the Collateral
delivered by the Customer to the Bank hereunder.
"Confirmation" means a writing (including telex, facsimile or other
electronic means from which it is possible to produce a hard copy) evidencing an
FX Transaction governed by the Agreement. All Confirmations relating to FX
Transactions shall specify (i) the Parties thereto and their Designated Offices
through which they are respectively acting, (ii) the amounts of the Currencies
being bought or sold and by which Party, (iii) the Value Date, and (iv) any
other term generally included in such a writing in accordance with the practice
of the relevant foreign exchange market.
"Credit Support Document" has the meaning set forth in Part X of the
Schedule.
"Credit Support Provider" means, with respect to a Party, the Credit
Support Provider specified as such in Part X of the Schedule.
"Currency" means money denominated in the lawful currency of any country
or the ECU (European Currency Unit).
"Currency Obligation" means any obligation of a Party to deliver
Currency pursuant to an FX Transaction governed by the Agreement, or pursuant to
the application of Sections 3.3(a) or 3.3(b).
"Custodian" has the meaning given to it in the definition of Event of
Default.
"Customer's Data Sheet" means any written information about the Customer
that is furnished by the Customer to the Bank.
"Defaulting Party" has the meaning given to it in the definition of
Event of Default.
"Deliver" means, with respect to any Collateral, and in accordance with
the instructions of the Bank or the Customer, as applicable:
in the case of cash, payment or delivery by wire transfer of immediately
available funds to one or more bank accounts specified by the recipient;
in the case of certificated securities that cannot be transferred by
book-entry, delivery in appropriate physical form to the recipient or its
account accompanied by any duly executed instruments of transfer, assignments in
blank, transfer tax stamps and any other documents necessary to constitute a
legally valid transfer to the recipient;
in the case of securities that can be transferred by book-entry, the giving of
written instructions to the relevant depository institution or other entity
specified by the recipient, together with a written copy thereof to the
recipient, sufficient if complied with to result in a legally effective transfer
of the relevant interest to the recipient.
"Designated Office(s)" means, as to a Party, the Office(s) specified in
Part II of the Schedule hereto, as such Schedule may be modified from time to
time by agreement of the Parties.
"Dollar Equivalent" of an amount of Currency at any time is (a) if such
Currency is U.S. Dollars, such amount, and (b) in the case of any other
Currency, the amount of U.S. Dollars which could be purchased at the Market Rate
prevailing at such time against delivery of such Currency on a specified date.
"Effective Date" means the date of this Master Agreement.
"Event of Default" means the occurrence of any of the following with
respect to a Party or, as applicable, to the Credit Support Provider of a Party
(the "Defaulting Party", the other Party being the "Non-Defaulting Party"):
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<PAGE> 3
(i) the Defaulting Party shall default in any payment under the
Agreement to the Non-Defaulting Party with respect to any sum when due under any
Currency Obligation or pursuant to the Agreement, and such failure shall
continue for two (2) Business Days after written notice of non-payment given by
the NonDefaulting Party to the Defaulting Party;
(ii) the Defaulting Party shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other similar relief with
respect to itself or to its debts under any bankruptcy, insolvency or similar
law, or seeking the appointment of a trustee, receiver, liquidator, conservator,
administrator, custodian or other similar official (each, a "Custodian") of it
or any substantial part of its assets, or shall take any corporate action to
authorize any of the foregoing;
(iii) an involuntary case or other proceeding shall be commenced against
the Defaulting Party seeking liquidation, reorganization or other similar relief
with respect to it or its debts under any bankruptcy, insolvency or similar law
or seeking the appointment of a Custodian of it or any substantial part of its
assets, and such involuntary case or other proceeding is not dismissed within
rive (5) days of its institution or presentation;
(iv) the Defaulting Party is bankrupt or insolvent, as defined under any
bankruptcy or insolvency law applicable to such Party;
(v) the Defaulting Party shall otherwise be unable to pay its debts as
they become due;
(vi) the Defaulting Party or any Custodian acting on behalf of the
Defaulting Party shall disaffirm, disclaim, or repudiate any Currency
Obligation;
(vii) (a) any representation or warranty made or deemed made by the
Defaulting Party pursuant to the Agreement or pursuant to any Credit Support
Document shall prove to have been false or misleading in any material respect as
at the time it was made or deemed made and one (1) Business Day has elapsed
after the Non-Defaulting Party has given the Defaulting Party written notice
thereof, or (b) the Defaulting Party fails to perform or comply with any
obligation assumed by it under the Agreement (other than an obligation to make
payment of the kind referred to in clause (i) of this definition of Event of
Default), and such failure is continuing thirty (30) days after the
Non-Defaulting Party has given the Defaulting Party WRITTEN NOTICE thereof;
(viii) the Defaulting Party consolidates or amalgamates with or merges
into or transfers all or substantially all its assets to another entity and (a)
the creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of the Defaulting Party prior to such action, or (b)
at the time of such consolidation, amalgamation, merger or transfer the
resulting, surviving or transferee entity fails to assume all the obligations of
the Defaulting Party under the Agreement by operation of law or pursuant to an
agreement satisfactory to the Non-Defaulting Party;
(ix) by reason of any default, or event of default or other similar
condition or event, any Specified Indebtedness of the Customer or any Credit
Support Provider in relation to it: (a) is not paid on the due date therefor and
remains unpaid after any applicable grace period has elapsed, or (b) becomes, or
becomes capable at any time of being declared, due and payable under agreements
or instruments evidencing such Specified Indebtedness before it would otherwise
have been due and payable;
(x) the Defaulting Party is in breach of or default under any Specified
Transaction and any applicable grace period has elapsed, and there occurs any
liquidation or early termination of, or acceleration of obligations under that
Specified Transaction, or the Defaulting Party (or any Custodian on its behalf)
disaffirms, disclaims or repudiates the whole or any part of a Specified
Transaction;
(xi) (a) any Credit Support Provider in relation to the Defaulting Party
or the Defaulting Party itself fails to comply with or perform any agreement or
obligation to be complied with or performed by it in accordance with the
applicable Credit Support Document and such failure is continuing after any
applicable grace period has elapsed; (b) any Credit Support Document relating to
the Defaulting Party expires or ceases to be in full force and effect prior to
the satisfaction of all obligations of the Defaulting Party under the Agreement,
unless otherwise agreed in writing by the Non-Defaulting Party or unless such
Credit Support Document remains in effect with respect to such obligations; (c)
the Defaulting Party or its Credit Support Provider (or, in either case, any
Custodian acting on its behalf) disaffirms, disclaims or repudiates, in whole or
in part, or challenges the validity of, the Credit Support Document; (d) any
representation or warranty made or deemed made by any
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Credit Support Provider pursuant to any Credit Support Document shall prove to
have been false or misleading in any material respect as at the time it was made
or given or deemed made or given and one (1) Business Day has elapsed after the
Non-Defaulting Party has given the Defaulting Party written notice thereof; or
(e) any event set out in (ii) to (vi) or (viii) to (x) above occurs in respect
of the Credit Support Provider; or
(xii) with respect to the Customer, (a) the Customer shall fail to
maintain at any time Collateral in the Margin Account having an Adjusted
Collateral Value in excess of the Maintenance Margin Amount, (b) a loss of or
impairment to the first priority status of the security interest granted by the
Customer to the Bank hereunder, (c) an attachment is levied against any of the
Customer's accounts with the Bank or a notice of levy with respect to any of the
Customer's accounts is served on the Bank by any competent taxing authority, or
(d) if an individual, the Customer dies or is judicially declared incompetent.
"Forward" means an FX Transaction in respect of which delivery is
designated as "forward" by the convention in the relevant foreign currency
market, which will normally mean that the foreign currencies subject of the FX
Transaction will be delivered at a fixed date occurring sometime after the first
two (2) Business Days following the date on which the FX Transaction is made.
"FX Transaction" means any transaction between the Parties for the
purchase by one Party of an agreed amount in one Currency against the sale by it
to the other of an agreed amount in another Currency, both such amounts being
deliverable on the same Value Date and in respect of which transaction the
Parties have agreed upon (whether orally, electronically or in writing) the
Currencies involved, the amounts of such Currencies to be purchased and sold,
which Party will purchase which Currency AND THE Value Date.
"Initial Percentage" shall mean the percentage specified as such in Part
XI of the Schedule.
"Local Banking Day" means (i) for any Currency, a day on which
commercial banks effect deliveries of that Currency in accordance with the
market practice of the relevant foreign exchange market and (ii) for any Party,
a day in the location of the applicable Designated Office of such Party on which
commercial banks in that location are not authorized nor required by law to
close.
"Maintenance Percentage" shall mean the percentage specified as such in
Part XI or the Schedule.
"Margin Account" has the meaning given to it in Section 4.1.
"Market Rate" means, at any given time, the rate determined by the Bank
(which determination shall be binding in the absence of manifest error) to be
the market rate available to the Bank at such time in the New York foreign
exchange market (or, at the option of the Bank, in the foreign exchange market
of any other financial center which is open for business) for the purchase or,
as the case may be, sale of one Currency against another Currency for delivery
on a specified date.
"Market Value" means, with respect to any Collateral at any given time,
the market price (net of expenses) determined by the Bank (which determination
shall be binding in the absence of manifest error) which could be obtained on a
sale of such Collateral at such time on any market on which property of the
same type is normally dealt.
"Master Agreement" means the terms and conditions set forth in this
master agreement and the Schedule hereto.
"Matched Pair Novation Netting Office(s)" means, in respect of a Party,
the Designated Offices) specified in Part V of the Schedule, as such Schedule
may be modified from time to time by agreement of the Parties.
"Net Open Position" means, at any given time, the aggregate amount of
Currency to be delivered by the Customer to the Bank under all Transactions,
provided however, that in calculating such aggregate amount (i) all Currency
Obligations under such Transactions shall be netted in the manner provided in
Section 3 of this Agreement, and (ii) any amount payable by the Customer in a
Currency other than U.S. Dollars under such Transaction shall be converted into
its Dollar Equivalent for delivery on its Value Date.
"Non-Defaulting Party" has the meaning given to it in the definition of
Event of Default.
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"Novation Netting Office(s)" means in respect of a Party the Designated
Office(s) specified in Part IV of the Schedule, as such Schedule may be modified
from time to time by agreement of the Parties.
"Parties" means the Bank and the Customer and shall include their
successors and permitted assigns (but without prejudice to the application of
clause (viii) of the definition of Event of Default); and the term "Party" shall
mean whichever of the Parties is appropriate in the context in which such
expression may be used.
"Potential Profit" means, at any given time in respect of each FX
Transaction for which the Settlement Value may not be determined under this
Agreement at such time, any positive amount produced by deducting (i) the Dollar
Equivalent at such time of the amount payable by the Customer under such FX
Transaction from (ii) the Dollar Equivalent at such time of the amount payable
by the Bank under such FX Transaction, and Potential Loss means any negative
amount produced by such calculation.
"Proceedings" means any suit, action or other proceedings relating to
the Agreement.
"Realized Profit" means, in respect of each Transaction for which the
Settlement Value may be determined under this Agreement, any positive amount
resulting from the calculation thereof which has been credited to the Margin
Account, and Realized Loss means any negative amount resulting from such
calculation which has been debited to the Margin Account.
"Settlement Netting Office(s)" means, in respect of a Party, the
Designated Office(s) specified in Part III of the Schedule, as such Schedule may
be modified from time to time by agreement of the Parties.
"Settlement Value" of a Transaction means any positive or (as the case
may be) negative figure calculated by deducting, at or about 5:00 p.m. (New York
City time), two (2) Business Days prior to its Value Date or Settlement Date, as
the case may be, (i) the Dollar Equivalent of the amount of Currency required to
be delivered by the Customer thereunder on such Value Date or Settlement Date
from (ii) the Dollar Equivalent of the amount of Currency required to be
delivered by the Bank thereunder on such Value Date or Settlement Date.
"Specified Indebtedness" means any obligation (whether present or
future, contingent or otherwise, as principal or surety or otherwise) in respect
of borrowed money, other than in respect of deposits received.
"Specified Transaction" means any transaction (including an agreement
with respect thereto) between one Party to the Agreement (or any Credit Support
Provider of such Party) and the other Party to the Agreement (or any Credit
Support Provider of such Party) which is a rate swap transaction, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
linked swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option, agreement for the purchase, sale or transfer of any commodity
or any other commodity trading transaction, or any other similar transaction
(including any option with respect to any of these transactions) or any
combination of any of the foregoing transactions. For this purpose, "commodity"
means any tangible or intangible commodity of any type or description
(including, without limitation, currencies, metals, interest rates, petroleum
and natural gas, and the products or by-products thereof).
"Split Settlement" has the meaning given to it in the definition of
Value Date.
"Total Net Profits" means, at any given time, any positive amount
produced by deducting (i) the aggregate of all Potential Losses, Unrealized
Losses and Realized Losses from (ii) the aggregate of all Potential Profits,
Unrealized Profits and Realized Profits, and "Total Net Losses" at any time
means any negative amount produced by such calculation.
"Transaction" means any transaction entered into by the Parties governed
by this Agreement.
"Unrealized Profits" on any date means any positive amount produced by
deducting (i) the aggregate of all positive Settlement Values which have not
been credited to the Margin Account from (ii) the aggregate amount of the
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absolute value of all negative Settlement Values which have not been debited to
the Margin Account, and "Unrealized Losses" on any date means any negative
amount produced by such calculation.
"Value Date" means, with respect to any FX Transaction, the Business Day
(or where market practice in the relevant foreign exchange market in relation to
the two Currencies involved provides for delivery of one Currency on one date
which is a Local Banking Day in relation to that Currency BUT NOT TO the other
Currency and for delivery of the other Currency on the next Local Banking Day in
relation to that other Currency ("Split Settlement") the two Local Banking Days
in accordance with that market practice) agreed by the Parties for delivery of
the Currencies to be purchased and sold pursuant to such FX Transaction, and,
with respect to any Currency Obligation, the Business Day (or, in the case of
Split Settlement, Local Banking Day) upon which the obligation to deliver
Currency pursuant to such Currency Obligation is to be performed.
SECTION 2. TRANSACTIONS
2.1 Scope of the Agreement. (a) Unless otherwise agreed in writing
by the Parties, any Transaction entered into between two Designated Offices of
the Parties on or after the Effective Date shall be governed by the Agreement.
(b) All Transactions between any two Designated Offices of the Parties
outstanding on the Effective Date which are identified in Part I of the Schedule
shall be Transactions governed by the Agreement.
2.2 Single Agreement. This Master Agreement, the particular terms
agreed between the Parties in relation to each and every Transaction governed by
this Master Agreement (and, insofar as such terms are recorded in a
Confirmation, each such Confirmation), the Schedule to this Master Agreement and
all amendments to any of such items shall together form the agreement between
the Parties (the "Agreement") and shall together constitute a single agreement
between the Parties. The Parties acknowledge that all Transactions governed by
the Agreement are entered into in reliance upon the fact that all items
constitute a single agreement between the Parties.
2.3 Confirmations. Transactions governed by the Agreement shall be
promptly confirmed by the Parties by Confirmations exchanged by mail, telex,
facsimile or other electronic means. The failure by a Party to issue a
Confirmation shall not prejudice or invalidate the terms of any Transaction
governed by the Agreement.
SECTION 3. SETTLEMENT AND NETTING OF FX TRANSACTIONS
3.1 Settlement. Subject to Section 2.2, each Party shall deliver to
THE OTHER PARTY THE AMOUNT of the Currency to be delivered by it under each
Currency Obligation on the Value Date for such Currency Obligation. Customer
acknowledges and agrees that the Bank's obligation to deliver Currency to the
Customer under this Section 3.1 on any Value Date is subject to the delivery by
the Customer of the total amount of any Currency required to be delivered by the
Customer to the Bank on such Value Date.
3.2 Net Settlement/Payment Netting. If on any Value Date more than
one delivery of a particular Currency is to be made between a pair of Settlement
Netting Offices, then each Party shall aggregate the amounts of such Currency
deliverable by it and only the difference between these aggregate amounts shall
be delivered by the Party owing the larger aggregate amount to the other Party,
and, if the aggregate amounts are equal, no delivery of the Currency shall be
made.
3.3 Novation Netting.
(a) By Currency. If the Parties enter into an FX Transaction
governed by the Agreement through a pair of Novation Netting Offices giving rise
to a Currency Obligation for the same Value Date and in the same Currency as a
then existing Currency Obligation between the same pair of Novation Netting
Offices, then immediately upon entering into such FX Transaction, each such
Currency Obligation shall automatically and without further action be
individually canceled and simultaneously replaced by a new Currency Obligation
for such Value Date determined as follows: the amounts of such Currency that
would otherwise have been deliverable by each Party on such Value Date shall be
aggregated and the Party with the larger aggregate amount shall have a new
Currency Obligation to deliver to the other Party the amount of such Currency by
which its aggregate amount exceeds the other Party's aggregate amount, provided
that if the aggregate amounts
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are equal, no new Currency Obligation shall arise. This Clause (a) shall not
affect any other Currency Obligation of a Party to deliver any different
Currency on the same Value Date.
(b) By Matched Pair. If the Parties enter into an FX Transaction
governed by the Agreement between a pair of Matched Pair Novation Netting
Offices, then the provisions of Section 3.3(a) shall apply only in respect of
Currency Obligations arising by virtue of FX Transactions governed by the
Agreement entered into between such pair of Matched Pair Novation Netting
Offices and involving the same pair of Currencies and the same Value Date.
3.4 General.
(a) Inapplicability of Sections 3.2 and 3.3. The provisions of
Sections 3.2 and 3.3 shall not apply with respect to FX Transactions if a
Close-Out Date has occurred or an involuntary case or other proceeding of the
kind described in clause (iii) of the definition of Event of Default has
occurred without being dismissed in relation to either Party.
(b) Failure to Record. The provisions of Section 3.3 shall apply
notwithstanding that either Party may fail to record the new Currency
Obligations in its books.
(c) Cutoff Date and Time. The provisions of Section 3.3 are subject
to any cut-off date and cut-off time agreed between the applicable Novation
Netting Offices and Matched Pair Novation Netting Offices of the Parties.
SECTION 4. MARGIN COLLATERAL
4.1 Margin. As security for the Customer's obligations under any FX
Transaction and this Agreement, the Customer shall at all times maintain
Collateral with the Bank or the Bank's Custodian as required from time to time
by the Bank in its sole and absolute discretion. The Bank will establish, or
will ensure that the Bank's Custodian establishes, on its books a separately
identified account ("Margin Account") in the Customer's name and all Collateral
Delivered by the Customer to the Bank under this Agreement shall be separately
identified on the Bank's or the Bank's Custodian's books and records as
belonging to the Customer in such Margin Account.
4.2 Amount of Collateral. Before the Bank will enter into any
Transaction with the Customer, the Customer must Deliver Collateral to the Bank
having a Collateral Value equal to or greater than the Initial Margin Amount.
Thereafter, the Bank and the Customer may enter into a Transaction, regardless
of amount, so long as: (i) the Collateral Value of the Collateral Delivered by
the Customer to the Bank; plus (ii) Total Net Profits or (as the case may be)
minus Total Net Losses at such time ("Adjusted Collateral Value") equals or
exceeds the product of the Initial Percentage and the Customer's Net Open
Position after giving effect to such Transaction ("Initial Margin Amount").
4.3 Close-Out if Margin Equals or Drops Below the Maintenance Margin
Amount. If at any time the Adjusted Collateral Value is equal to or less than
the product of the Maintenance Percentage and the Net Open Position
("Maintenance Margin Amount"), the Bank may (but is not required to), without
notice to the Customer, close out any or all Transactions of the Customer, in
whole or in part, in accordance with the Close-Out and Liquidation provisions
hereof. The Customer agrees and understands that, due to the volatility of the
foreign currency market, it is not practicable for the Bank to contact the
Customer prior to closing out its Transactions in the event that the Adjusted
Collateral Value does not exceed the Maintenance Margin Amount. While the Bank
has the right, at its option, to close out the Customer's open position in whole
or in part for failure to maintain the Adjusted Collateral Value required by the
Bank, the Customer understands and agrees that the Bank has no obligation to the
Customer to do so in the absence of specific instructions given to the Bank in
accordance with the provisions of Section 4.4.
4.4 Close-Out at Customer's Request. The Customer may request the
Bank to close out any or all Transactions at any time by telephone or telex,
telecopy or facsimile transmission, at the then prevailing market price for
Transactions having terms similar to the Transactions of the Customer to be
closed out. The Customer acknowledges that due to the volatility of the foreign
exchange market the Bank cannot guarantee execution of "stop limit" or "stop
loss" orders.
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4.5 Margin Monitoring; Bank has No Duty to Notify Customer. The Bank
will determine on a daily basis whether the Adjusted Collateral Value is equal
to the Initial Margin Amount. In the event the Adjusted Collateral Value is less
than the Initial Margin Amount, the Bank will use reasonable efforts to so
notify the Customer, but shall have no liability for failure to do so. In the
event the Adjusted Collateral Value exceeds the Initial Margin Amount, then,
upon the request of the Customer, the Bank shall Deliver to the Customer, within
2 Business Days of receipt of such request and in accordance with the Customer's
instructions, the amount of any excess Collateral.
4.6 Change in Initial and Maintenance Margin Percentages. The Bank
may at any time in its absolute discretion change the Initial Margin Percentage
and the Maintenance Margin Percentage upon written notice to the Customer or
upon telephonic notice to the Customer subsequently confirmed by the Bank in
writing. Any such change shall apply to any outstanding or subsequent
Transaction entered into by the Parties.
4.7 Pledge of Collateral. To secure the due and punctual payment of
its obligations hereunder, the Customer hereby pledges, transfers, assigns and
grants to the Bank a security interest in, and a right of set-off against, (A)
the Collateral and all additions thereto and substitutions therefor, whether
heretofore, now or hereafter received by or provided or delivered to the Bank,
(B) any investments thereof and dividends, distributions, interest and other
payments and rights with respect thereto and (C) any and all process of any and
all of the foregoing, and in each case not released by the Bank to the Customer
(the "Pledged Collateral"). The Customer confirms that it shall take the steps
available to it that would be necessary to provide the Bank with a valid, first
priority, perfected security interest in the Pledged Collateral, and agrees that
the Bank may take any action necessary to ensure that it has at all times a
valid, first priority, perfected security interest in the Pledged Collateral.
After giving effect to the Close-Out and Liquidation provisions hereof, the Bank
may sell or cause to be sold (in whole or in part) any Pledged Collateral which
is in its possession or control (or that of its agents) in one or more sales or
parcels at such prices as the Bank may deem commercially reasonable, and for
cash or on credit or for other property, or for immediate or future delivery,
without assumption of any credit risk at any broker's board or at public or
private sale, in any reasonable manner permissible under the Uniform Commercial
Code (except that, to the extent permissible thereunder, the Customer hereby
waives the requirements of said Code), and the Bank or anyone else may be the
purchaser of any or all of the Pledged Collateral so sold and thereafter hold
the same free from any claim or right of whatsoever kind, including, without
limitation, any equity of redemption of the Customer, any such right of
redemption being hereby expressly waived and released. The Bank shall then apply
the proceeds thereof to all amounts owed by the Customer to the Bank under this
Agreement in such order as the Bank may deem appropriate in its sole discretion.
4.8 Care of Collateral. The Bank will exercise reasonable care to
assure the safe custody of all Collateral to the extent required by applicable
law, and in any event the Bank will be deemed to have exercised reasonable care
if it exercises at least the same degree of care at it would exercise with
respect to its own property. Except as specified in the preceding sentence, the
Bank will have no duty with respect to Collateral, including, without
limitation, any duty to collect any distributions, or enforce or preserve any
rights pertaining thereto.
4.9 Interest on Collateral. Unless and until an Event of Default has
occurred and is continuing with respect to the Customer, the Bank shall pay the
Customer interest on all cash Collateral delivered to the Bank at such rate as
shall be agreed upon between the Parties at the time such cash Collateral is
deposited.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 General Representations and Warranties. Each Party represents
and warrants to the other Party as of the date of the Agreement and as of the
date of each Transaction governed by the Agreement that: (i) it has the
authority to enter into the Agreement and such Transaction; (ii) the persons
executing the Agreement and entering into such Transaction have been duly
authorized to do so; (iii) the Agreement and the Currency Obligations created
under the Agreement are binding upon it and enforceable against it in accordance
with their terms (subject to applicable principles of equity and bankruptcy and
insolvency laws) and do not and will not violate the terms of any agreements to
which such Party is bound; (iv) no Event of Default has occurred and is
continuing with respect to it; (v) it acts as principal in entering into each
and every Transaction governed by the Agreement; and (vi) it is an "eligible
swap participant" as defined in Section 35.1 of the Regulations of the Commodity
Futures Trading Commission.
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5.2 Representations of the Customer. The Customer represents and
warrants to the Bank as of the date of the Agreement and as of the date of each
Transaction governed by the Agreement that: (i) the Customer is a sophisticated
investor able to evaluate the risks of foreign exchange transactions; (ii) the
Customer understands and is able to assume the risk of loss associated with
foreign exchange transactions; (iii) the Customer is the sole, absolute owner of
the Collateral; (iv) the Collateral is not and will not at any time be subject
to any adverse claim or any lien except for the security interest granted to the
Bank hereby (unless otherwise expressly agreed in writing by the Bank and the
Customer); (v) all authorizations, consents, approvals and licenses of, and
filings and registrations with, any governmental authority required under
applicable law or regulations for the Customer to pledge the Collateral as
provided herein and to make and perform this Agreement have been obtained and
are in full force and effect; (vi) the obligation of the Customer to pledge
Collateral hereunder constitutes the legal, valid and binding obligation of the
Customer, and is enforceable against the Customer in accordance with the terms
of this Agreement; (vii) Customer has made and will make (or has authorized
Advisor to make) its own investment, hedging and trading decisions (including
decisions regarding the suitability of any Transaction pursuant to this
Agreement) based upon its own judgment and upon any advice from such advisors as
it has deemed necessary, and not upon advice of or actions in foreign exchange
markets by the Bank or its affiliates; (viii) Customer has notified the Bank of
any material adverse change in its financial condition since the date of the
most recent financial statement or report that it has provided to the Bank; (ix)
Customer has sufficient assets (and in the applicable Currencies) as necessary
to effect settlement of all Transactions governed by this Agreement; (x) it is
in compliance with, and its assets are being invested in accordance with, all
investment policies and restrictions applicable to it in its most recent
prospectus and statement of additional information; and (xi) it is not, nor is
it "controlled" by an "investment company", each within the meaning of the
Investment Company Act of 1940; (xii) the assets of the Customer are not
comprised of plan assets subject to the Employee Retirement Income Security Act
of 1974, as amended; (xiii) the Advisor has the full power and authority to
commit the Customer to Transactions and conclude Transactions (including the
delivery of collateral) on behalf of the Customer on such terms and conditions
as the Advisor may determine in its sole discretion; and (xiv) no representation
or warranty contained in this Agreement or any other document or instrument
furnished to the Bank in connection herewith contains any untrue statement of
any material fact as of the date when made or omits to state any material fact
necessary to make the statements herein or therein not misleading as of the date
when made.
Partnership Representations. Customer also represents and warrants that
(i) it is a duly organized and validly existing limited partnership and
is in good standing under the laws of the jurisdiction in which it was
formed and in each other jurisdiction in which such qualification is
required (except where the failure to so qualify would not have a
material adverse effect on its ability to perform its obligations
hereunder); (ii) it has full power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and is not
prohibited from doing so by any provision of its certificate of
incorporation, charter, by-laws, or by any contract, agreement, or
otherwise; (iii) this Agreement and all FX Transactions are legal, valid
and binding obligations on its part, enforceable against it in
accordance with their respective terms; (iv) its execution, delivery and
performance of this Agreement do not and will not violate or conflict
with any statute, rule, regulation or order by which it or its property
or assets is bound or affected; (v) the statements contained on
Customer's Data Sheet submitted herewith, and all financial information
furnished or to be furnished by Customer in connection herewith, are (or
will be when furnished) true and correct; and (vi) no person or entity
has any interest in or control of the account to which this Agreement
pertains except as disclosed in the Customer's Data Sheet.
5.3 Covenants.
(a) Each Party covenants to the other Party that: (i) it will at all times
obtain and comply with the terms of and do all that is necessary to maintain in
full force and effect all authorizations, approvals, licenses and consents
required to enable it to lawfully perform its obligations under the Agreement;
and (ii) it will promptly notify the other Party of the occurrence of any Event
of Default with respect to itself or any Credit Support Provider in relation to
it.
(b) The Customer additionally covenants to the Bank that unless previously
notified in writing by the Customer, the Bank may rely on all representations
and warranties of and actions by the Advisor in relation to this Agreement and
any Transactions. For these purposes, the Customer agrees to fully and
unconditionally indemnify and hold the Bank harmless for any and all losses,
damages, costs, and expenses directly sustained by the Bank (including those
incurred in unwinding any Transaction and any relevant hedging transaction) by
reason of (i) its bona fide reliance on the appointment by the Customer of the
Advisor as the Customer's agent to enter into Transactions hereunder,
irrespective of the invalidity,
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unenforeceability, termination or revocation of such appointment (unless
previously notified in writing by the Customer) or breach by the Advisor of the
terms and obligations set forth in any applicable agreement entered into between
the Customer and the Advisor or (ii) as a direct result of the Bank's bona fide
reliance upon the instructions, actions or ostensible authority of the Advisor.
Notwithstanding anything to the contrary herein, these indemnification
provisions shall survive any termination of this Agreement.
(c) Customer further covenants to the Bank that, for so long as this Agreement
shall be effect, Customer shall provide to the Bank, from time to time as the
Bank may request, such financial statements as Customer prepares in the ordinary
course of business, including but not limited to audited annual and unaudited
interim financial statements.
SECTION 6. CLOSE-OUT AND LIQUIDATION
6.1 Close-Out and Liquidation of FX Transactions. If an Event of
Default has occurred and is continuing, then the Non-Defaulting Party shall have
the right to close out and liquidate in the manner described below any or all
outstanding Currency Obligations (except to the extent that in the good faith
opinion of the Non-Defaulting Party certain of such Currency Obligations may not
be closed out and liquidated under applicable law), without notice to the
Defaulting Party. Where such close-out and liquidation is to be effected, it
shall be effected by:
(i) closing out each outstanding Currency Obligation under an FX
Transaction being liquidated (including any Currency Obligation which
has not been performed and in respect of which the Value Date is on or
precedes the relevant Close-Out Date) so that each such Currency
Obligation is canceled and the Non-Defaulting Party shall calculate in
good faith with respect to each such canceled Currency Obligation, the
Closing Gain or, as appropriate, the Closing Loss, as follows:
(x) for each Currency Obligation in a Currency other than
the Non-Defaulting Party's Base Currency, calculate a "Close-Out
Amount" by converting:
(A) in the case of a Currency Obligation whose Value
Date is the same as or is later than the relevant
Close-Out Date, the amount of such Currency Obligation;
or
(B) in the case of a Currency Obligation whose Value
Date precedes the relevant Close-Out Date, the amount of
such Currency Obligation increased, to the extent
permitted by applicable law, by adding interest thereto
from the Value Date to the relevant Close-Out Date at
the rate representing the cost (expressed as a
percentage rate per annum) at which the Non-Defaulting
Party would have been able, on such Value Date, to fund
the amount of such Currency Obligation for the period
from the Value Date to the relevant Close-Out Date;
into such Base Currency at the rate of exchange at which the
Non-Defaulting Party can buy or sell, as appropriate, such Base
Currency with or against the Currency of such Currency
Obligation for delivery on the Value Date of that Currency
Obligation, or if such Value Date precedes the Close-Out Date,
for spot delivery after that Close-Out Date; and
(y) determine in relation to each Value Date: (A) the sum of
all Close-Out Amounts relating to Currency Obligations under
which, and of all Currency Obligations in the Non Defaulting
Party's Base Currency under which, the Non-Defaulting Party
would otherwise have been obliged to deliver the relevant amount
to the Defaulting Party on that Value Date, adding (to the
extent permitted by applicable law), in the case of a Currency
Obligation in the Non-Defaulting Party's Base Currency whose
Value Date precedes the relevant Close-Out Date, interest for
the period from the Value Date to the relevant Close Out Date at
the Non-Defaulting Party's Base Currency Rate as at such Value
Date for such period; and (B) the sum of all Close-Out Amounts
relating to Currency Obligations under
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which, and of all Currency Obligations in the Non-Defaulting
Party's Base Currency under which, the Non-Defaulting Party
would otherwise have been entitled to receive the relevant
amount on that Value Date, adding (to the extent permitted by
applicable law), in the case of a Currency Obligation in the
Non-Defaulting Party's Base Currency whose Value Date precedes
the relevant Close-Out Date, interest for the period from the
Value Date to the relevant Close-Out Date at the Non-Defaulting
Party's Base Currency Rate as at such Value Date for such
period;
(z) if the sum determined under (y)(A) is greater than the
sum determined under (y)(B), the difference shall be the Closing
Loss for such Value Date; if the sum determined under (y)(A) is
less than the sum determined under (y)(B), the difference shall
be the Closing Gain for such Value Date;
(ii) to the extent permitted by applicable law, adjusting the Closing
Gain or Closing Loss for each Value Date falling after the final
Close-Out Date to present value by discounting the Closing Gain or
Closing Loss from the Value Date to the final Close-Out Date, at the
Non-Defaulting Party's Base Currency Rate, or at such other rate as may
be prescribed by applicable law;
(iii) aggregating the following amounts so that all such amounts are
netted into a single liquidated amount payable by or to the
Non-Defaulting Party: (x) the sum of the Closing Gains for all Value
Dates (discounted to present value, where appropriate, in accordance
with the provisions of Clause (ii) of this Section 6.1) (which for the
purposes of this aggregation shall be a positive figure) and (y) the sum
of the Closing Losses for all Value Dates (discounted to present value,
where appropriate, in accordance with the provisions of Clause (ii) of
this Section 6.1) (which for the purposes of the aggregation shall be a
negative figure); and
(iv) if the resulting net amount is positive, it shall be payable by
the Defaulting Party to the Non-Defaulting Party, and if it is negative,
then the absolute value of such amount shall be payable by the
Non-Defaulting Party to the Defaulting Party.
6.2 Calculation of Interest. Any addition of interest or discounting
required under Section 6.1 shall be calculated on the basis of the actual number
of days elapsed and of a year of such number of days as is customary for
transactions involving the relevant Currency in the relevant foreign exchange
market.
6.3 Other Transactions. Where close-out and liquidation occurs in
accordance with Section 6.1 the Non-Defaulting Party shall also be entitled to
close out and liquidate, to the extent permitted by applicable law, any other
Transactions entered into between the Parties which are then outstanding in
accordance with the provisions of Section 6.1.
6.4 Payment and Late Interest. The amount payable by one Party to
the other Party pursuant to the provisions of Sections 6.1 and 6.3 shall be paid
by the close of business on the Business Day following such close-out and
liquidation (converted as required by applicable law into any other Currency,
any costs of such conversion to be borne by, and deducted from any payment to,
the Defaulting Party). To the extent permitted by applicable law, any amounts
required to be paid under Sections 6.1 or 6.3 and not paid on the due date
therefor shall bear interest at the Non-Defaulting Party's Base Currency Rate
plus 1% per annum (or, if conversion is required by applicable law into some
other Currency, either (x) the average rate at which overnight deposits in such
other Currency are offered by major banks in the London interbank market as of
11:00 a.m. (London time) plus 1% per annum, or (y) such other rate as may be
prescribed by such applicable law) for each day for which such amount remains
unpaid.
6.5 Suspension of Obligations. Without prejudice to the foregoing,
so long as a Party shall be in default in payment or performance to the
Non-Defaulting Party under the Agreement and so long as the Non-Defaulting Party
has not exercised its rights under Section 6.1 the Non-Defaulting Party may, at
its election and without penalty, suspend its obligation to perform under the
Agreement.
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6.6 Expenses. The Defaulting Party shall reimburse the
Non-Defaulting Party in respect of all out-of-pocket expenses incurred by the
Non-Defaulting Party (including fees and disbursements of counsel, including
attorneys who may be employees of the Non-Defaulting Party) in connection with
any Event of Default and reasonable collection or other enforcement proceedings
related to the payments required under this Section 6.
6.7 Reasonable Pre-Estimate. The Parties agree that the amounts
recoverable under this Section 6 are a reasonable pre-estimate of loss and not a
penalty. Such amounts are payable for the loss of bargain and the loss of
protection against future risks and, except as otherwise provided in the
Agreement, neither Party will be entitled to recover any additional damages as a
consequence of such losses.
6.8 No Limitation of Other Rights; Set-Off. The Non-Defaulting
Party's rights under this Section 6 shall be in addition to, and not in
limitation or exclusion of, any other rights which the NonDefaulting Party may
have (whether by agreement, operation of law or otherwise). To the extent not
prohibited by applicable law, the Non-Defaulting Party shall have a general
right of set-off from time to time with respect to all amounts owed by each
Party to the other Party, whether due and payable or not due and payable
(provided that any amount not due and payable at the time of such set-off shall,
if appropriate, be discounted to present value in a commercially reasonable
manner by the Non-Defaulting Party). The Non-Defaulting Party's rights under
this Section 6.8 are subject to Section 6.7.
SECTION 7. ILLEGALITY, IMPOSSIBILITY AND FORCE MAJEURE
If either Party is prevented from or hindered or delayed by reason of
force majeure or act of State in the delivery or receipt of any Currency in
respect of a Transaction, or if it becomes or, in the good faith judgment of one
of the Parties, may become unlawful or impossible for either Party to make any
delivery or receive any Currency which is the subject of a Transaction, then
either Party may, by notice to the other Party, require the close-out and
liquidation of each affected Transaction in accordance with the provisions of
Sections 6.1, 6.2 and 6.4 and, for the purposes of enabling the calculations
prescribed by Sections 6.1, 6.2 and 6.4 to be effected, both Parties shall
effect the relevant calculations, and the arithmetic average of the amounts so
determined shall be due to the appropriate Party. Each Party shall make such
calculations based on (a) for exchange rates, the average of the rates quoted by
at least three and no more than five leading dealers for a transaction between
the Party obtaining the quote and the quoting dealer in the appropriate Currency
and (b) for interest rates, the rate at which deposits in the appropriate
Currency for the relevant period (interpolated between dates, if necessary) are
offered by major banks in the London interbank market as of 11:00 a.m. (London
time) on the relevant date, as quoted on Telerate or, if not so quoted, as
determined by such Party in any commercially reasonable manner. A "dealer" is a
person who regularly quotes as part of its business a two-way market to
commercial parties in the relevant Currencies, selected in a commercially
reasonable manner. Nothing in this Section 7 shall be taken as indicating that a
Party has committed any breach or default.
SECTION 8. PARTIES TO RELY ON THEIR OWN EXPERTISE
Each Party shall enter into each Transaction governed by the Agreement
in reliance only upon its own judgment. Neither Party holds itself out as
advising, or any of its employees or agents as having the authority to advise,
the other Party as to whether or not it should enter into any such Transaction
or as to any subsequent actions relating thereto or on any other commercial
matters concerned with any Transaction governed by the Agreement, and neither
Party shall have any responsibility or liability whatsoever in respect of any
advise of this nature given, or views expressed, by it or any of such persons to
the other Party, whether or not such advice is given or such views are expressed
at the request of the other Party.
SECTION 9. MISCELLANEOUS
9.1 Currency Indemnity. The receipt or recovery by either Party (the
"first Party") of any amount in respect of an obligation of the other Party (the
"second Party") in a Currency other than that in which such amount was due,
whether pursuant to a judgment of any court or pursuant to Section 6 or 7, shall
discharge such obligation only to the extent that on the first day on which the
first Party is open for business immediately following such receipt, the first
Party shall be able, in accordance with normal banking practice, to purchase the
Currency in which such amount was due with the Currency received. If the amount
so purchasable shall be less than the original amount of the Currency in which
such amount was due, the second Party shall, as a separate obligation and
notwithstanding any judgment of any court, indemnify the first Party
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against any loss sustained by it. The second Party shall in any event indemnify
the first Party against any costs incurred by it in making any such purchase of
Currency.
9.2 Assignments. Neither Party may assign, transfer or charge, or
purport to assign, transfer or charge, its rights or its obligations under the
Agreement or any interest therein without the prior written consent of the other
Party, and any purported assignment, transfer or charge in violation of this
Section 9.2 shall be void.
9.3 Telephonic Recording. The Parties agree that each may
electronically record all telephonic conversations between them and that any
such tape recordings may be submitted in evidence in any Proceedings relating to
the Agreement. In the event of any dispute between the Parties as to the terms
of aTransaction governed by the Agreement, the Parties may use electronic
recordings between the persons who entered into such Transaction as the
preferred evidence of the terms of such Transaction, notwithstanding the
existence of any writing to the contrary.
9.4 No Obligation. Neither Party to this Agreement shall be required
to enter into any Transaction with the other.
9.5 Notices. Unless otherwise agreed, all notices, instructions and
other communications to be given to a Party under the Agreement shall be given
to the address, telex (if confirmed by the appropriate answerback), facsimile
(confirmed if requested) or telephone number and to the individual or department
specified by such Party in Part VI of the Schedule attached hereto. Unless
otherwise specified, any notice, instruction or other communication given in
accordance with this Section 9.5 shall be effective upon receipt.
9.6 Termination. Each of the Parties hereto may terminate this
Agreement at any time by seven days prior written notice to the other Party
delivered as prescribed above, and termination shall be effective at the end of
such seventh day; provided, however, that any such termination shall not affect
any outstanding Transactions, and the provisions of the Agreement shall continue
to apply until all the obligations of each Party to the other under the
Agreement have been fully performed.
9.7 Severability. In the event any one or more of the provisions
contained in the Agreement should be held invalid, illegal or unenforceable in
any respect under the law of any jurisdiction, the validity, legality and
enforceability of the remaining provisions under the law of such JURISDICTION,
AND THE VALIDITY, legality and enforceability of such and any other provisions
under the law of any other jurisdiction, shall not in any way be affected or
impaired thereby.
9.8 Waiver. No indulgence or concession granted by a Party and no
omission or delay on the part of a Party in exercising any right, power or
privilege under the Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.
9.9 Master Agreement. Where one of the Parties to the Agreement is
domiciled in the United States, the Parties intend that the Agreement shall be a
master agreement, as defined in 11 U.S.C. Section 101 (55)(C) and 12 U.S.C.
Section 1821(e)(8)(D)(vii), and that FX Transactions governed by this Agreement
shall be "swap agreements" as defined in 11 U.S.C. Section 101(55).
9.10 Time of Essence. Time shall be of the essence in the Agreement.
9.11 Headings. Headings in the Agreement are for ease of reference
only.
9.12 Wire Transfers. Every payment or delivery of Currency to be made
by a Party under the Agreement shall be made by wire transfer, or its
equivalent, of same day (or immediately available) and freely transferable funds
to the bank account designated by the other Party for such purpose.
9.13 Adequate Assurances. If the Parties have so agreed in Part VIII
of the Schedule, the failure by a Party ("first Party") to give adequate
assurances of its ability to perform any of its obligations under the Agreement
within two (2) Business Days of a written request to do so when the other Party
("second Party") had reasonable grounds for insecurity shall
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be an Event of Default under the Agreement, in which case during the pendency of
a reasonable request by the second Party to the first Party for adequate
assurances of the first Party's ability to perform its obligations under the
Agreement, the second Party may, at its election and without penalty, suspend
its obligations under the Agreement.
9.14 FDICIA Representation. If the Parties have so agreed in Part IX
of the Schedule, each Party represents and warrants to the other Party that it
is a financial institution under the provisions of Title IV of the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), and the
Parties agree that the Agreement shall be a netting contract, as defined in
FDICIA, and each receipt or payment or delivery obligation under the Agreement
shall be a covered contractual payment entitlement or covered contractual
payment obligation, respectively, as defined in and subject to FDICIA.
9.15 Confirmation Procedures. In relation to Confirmations, unless
either Party objects to the terms contained in any Confirmation within three (3)
Business Days of receipt thereof, or such shorter time as may be appropriate
given the Value Date of the FX Transaction, the terms of such Confirmation shall
be deemed correct and accepted absent manifest error, unless a corrected
Confirmation is sent by a Party within such three Business Days, or shorter
period, as appropriate, in which case the Party receiving such corrected
Confirmation shall have three (3) Business Days, or shorter period, as
appropriate, after receipt thereof to object to the terms contained in such
corrected Confirmation. In the event of any conflict between the terms of a
Confirmation and this Master Agreement, the terms of this Master Agreement shall
prevail, and the Confirmation shall not modify the terms of this Master
Agreement unless the Confirmation expressly states that it intends to amend this
Master Agreement with respect to such specific Confirmation and both Parties
agree.
9.16 Amendments. No amendment, modification or waiver of the
Agreement will be effective unless in writing executed by each of the Parties.
9.17 Customer's Acknowledgement of Risks.
(a) The Customer understands that the risk of loss in trading foreign exchange
can be substantial. The Customer acknowledges that engaging in FX Transactions
is speculative, involves a high degree of risk and is suitable only for those
who are sophisticated and can assume the risk of loss in excess of their margin
deposits.
(b) The Customer understands and agrees that if the amount of margin required by
it to be deposited with the Bank ever drops below the Maintenance Margin Amount
established by the Bank and advised to the Customer from time to time, the Bank
immediately may (but is not required to) close out any or all Transactions,
without notice to the Customer, and any loss resulting from this will be for the
account of the Customer.
(c) Due to the volatility of the foreign exchange markets, the Customer
understands that the Bank cannot guarantee execution of "stop limit" or "stop
loss" orders instructing the Bank to close out any or all of the Customer's
Transactions in the event that the current market exchange rate for one or more
currencies into U.S.
Dollars or another currency reaches an exchange rate specified by the Customer
to the Bank.
(d) The Customer acknowledges and agrees that Collateral in the form of
securities may decline speedily in value and is of a type customarily sold on a
recognized market, and, accordingly, the Customer is not entitled to prior
notice of any sale of Collateral, except notice required by lava which cannot be
waived.
(e) The Customer understands that the Bank and its affiliates are active, both
for their own account and for the account of other customers, in the foreign
exchange markets, AND THAT THE Bank and its affiliates may frequently be trading
and holding Currency positions in the same Currencies as the Customer. Customer
will make its own independent decisions on Transactions and will in no way rely
on advice of or the actions in the foreign exchange markets by the BUNK or its
affiliates.
(f) The Customer acknowledges and agrees that the Bank is not a trustee and does
not assume any fiduciary obligations hereunder.
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SECTION 10. TAXES
10.1 Withholding Taxes. All payments under the Agreement will be made
without any deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law then in effect. If a
Party is so required to deduct or withhold, then that Party ("X") will (1)
promptly notify the other Party ("Y") of such requirement; (2) pay to the
relevant authorities the full amount required to be deducted or withheld
(including the full amount required to be deducted or withheld from any
additional amount paid by X or Y under this SECTION 10), PROMPTLY UPON the
earliest of determining that such withholding or deduction is required or
receiving notice that such amount has been assessed against Y; (3) promptly
forward to Y an official receipt (or certified copy) or other documentation
reasonably acceptable to Y evidencing such payment to such authorities; and (4)
if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to
which Y is otherwise entitled under the Agreement, such additional amount as is
necessary in order that the net amount actually received by Y after the required
deduction or withholding (including any required deduction and withholding on
such additional amount whether assessed against X or Y), shall equal the full
amount Y would have received has not such deduction or withholding been
required; provided, however that X will not be required to pay any additional
amount to Y to the extent that it would not be required to pay such amount but
for the failure by Y to comply with or perform any agreement contained in
Section 10.3 hereof.
10.2 Tax Indemnity. If (i) X is required by any applicable law to
make any deduction or withholding in respect of which X would not be required to
pay an additional amount to Y under Section 10.1(4) above, (ii) X does not so
deduct or withhold and (iii) a liability resulting from such Tax is assessed
directly against X, then, except to the extent Y has satisfied or then satisfies
the liability resulting from such Tax, Y will upon demand pay to X the amount of
such liability (including any related liability for interest, but including any
related liability for penalties only is such liability for penalties results
from Y's failure to comply with or perform any agreement contained in Section
10.3 hereof).
10.3 Furnish Specified Information. Each Party agrees with the other
that so long as either Party has or may have any obligation under the Agreement,
it will deliver to the other Party or, in certain cases, to such government or
taxing authority as the other Party reasonably directs, any form, certificate or
document that may be required or reasonably requested in writing in order to
allow such other Party to make a payment under the Agreement or any applicable
Credit Support Document without any deduction or withholding for or on account
of any Tax or with such deduction or withholding at a reduced rate (so long as
the completion, execution or submission of such form or document would not
materially prejudice the legal or commercial position of the Party in receipt of
such demand), with any such form, certificate or document to be accurate and
completed in a manner reasonably satisfactory to such other Party and to be
executed and to be delivered with any reasonably required certification. A Party
shall deliver any such form, certificate or documentation described in this
Section 10.3 promptly upon the earlier to occur of (i) reasonable demand by such
other Party or (ii) learning that such form, certificate or document is
required.
10.4 Certain Definitions. The following terms used in this Section 10
shall have the meanings set forth below:
"Tax" shall mean any present or future tax, levy, duty, fee or charge of
any nature whatsoever (including interest, penalties, and addition thereto) that
is imposed by any government or other taxing authority in respect of any payment
under the Agreement other than a stamp, registration, documentation or similar
tax.
"Change in Tax Law" shall mean the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the official
interpretation or application of any law) that occurs on or after the date on
which the relevant Transaction is entered into.
"Indemnifiable Tax" shall mean any Tax other than a Tax that would not
be imposed in respect of a payment under the Agreement but for a present or
former connection between the jurisdiction of the government or taxation
authority imposing such Tax and the recipient of such payment or person related
to such recipient, including, without limitation, a connection arising from such
recipient or related person being or having been a citizen or resident of such
jurisdiction or being or having been organized, present or engaged in a trade or
business in such jurisdiction, or having or having had a permanent establishment
or fixed placed of business in such jurisdiction, but excluding a connection
arising solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, the
Agreement or a Credit Support Document.
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10.5 Tax Event Close-Out. In the event that either Party (the
"Affected Party") (i) is required to pay the other Party an additional amount in
respect of an Indemnifiable Tax under Section 10.1(4) or (ii) will receive a
payment from which an amount is required to be deducted or withheld for or on
account of a Tax and no additional amount is required to be paid in respect of
such Tax under Section 10.1(4) as a result of (a) a Change in Tax Law or (b) any
action taken by a taxing authority, or brought in a court of competent
jurisdiction, on or after the date on which a Transaction is entered into
(regardless of whether such action is taken or brought with respect to a Party
to this Agreement) then such Affected Party may, upon written notice to the
other Party, close out each affected Currency Obligation and Transaction in
accordance with the provisions of Section 6 hereof. For purposes of Section 6,
the Affected Party shall be deemed the Defaulting Party and the other Party
shall be deemed the Non-Defaulting Party.
SECTION 11. LAW AND JURISDICTION
11.1 Governing Law. The Agreement shall be governed by, and construed
in accordance with the laws of the State of New York without giving effect to
conflict of laws provisions.
11.2 Consent to Jurisdiction. With respect to any Proceedings, each
Party irrevocably (i) submits to the nonexclusive jurisdiction of the courts of
the State of New York and the United States District Court located in the
Borough of Manhattan in New York City and (ii) waives any objection which it may
have at any time to the laying of venue of any Proceedings brought in any such
court, waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with respect to such
Proceedings, that such court does not have jurisdiction over such Party. Nothing
in the Agreement precludes either Party from bringing Proceedings in any other
jurisdiction, nor will the bringing of Proceedings in any one or more
jurisdictions preclude the bringing of Proceedings in any other jurisdiction.
11.3 Waiver of Immunities. Each Party irrevocably waives to the
fullest extent permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended use) all immunity on
the grounds of sovereignty or other similar grounds from (i) suit, (ii)
jurisdiction of any courts, (iii) relief by way of injunction, order for
specific performance or for recovery of property, (iv) attachment of its assets
(whether before or after judgment) and (v) execution or enforcement of any
judgment to which it or its revenues or assets might otherwise be entitled in
any Proceedings in the courts of any jurisdiction, and irrevocably agrees to the
extent permitted by applicable law that it will not claim any such immunity in
any Proceedings. Each Party consents generally in respect of any Proceedings to
the giving of any relief or the issue of any process in connection with such
Proceedings, including, without limitation, the making, enforcement or execution
against any property whatsoever of any order or judgment which may be made or
given in such Proceedings.
11.4 Waiver of Jury Trial. Each Party hereby irrevocably waives any
and all right to trial by jury in any Proceedings.
11.5 Counterparts. This Master Agreement and the Schedule attached
hereto may be executed in any number of counterparts, each of which when so
executed shall be deemed an original and all of which taken together shall
constitute but one instrument.
IN WITNESS WHEREOF, the Parties have caused the Agreement to be duly
executed by their respective authorized officers as of the date first written
above.
ABN AMRO BANK N.V., CHICAGO BRANCH CAMPBELL ASSET ALLOCATION TRUST
BY: BY:
------------------------------- ---------------------------------
NAME: NAME:
TITLE: TITLE:
BY:
-------------------------------
NAME:
TITLE:
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Schedule
Part I: Scope of Agreement
The Agreement shall apply to all Transactions
outstanding between any two Designated Offices of ABN
AMRO Bank N.V. and Campbell Asset Allocation Trust on
the Effective Date.
Part II: Designated Offices
Each of the following shall be a Designated Office:
With respect to ABN AMRO Bank N.V.: Chicago Branch
With respect to Campbell Asset Allocation Trust: Towson,
MD
Part III: Settlement Netting Offices
Net settlement provisions of Section 3.2 shall apply to
the following Settlement Netting Offices:
Same as Part II above.
Part IV: Novation Netting Offices
Netting by novation provisions of Section 3.3(a) shall
apply to the following Novation Netting Offices and
shall apply to all FX Transactions:
Same as Part II above.
Part V: Matched Pair Novation Netting Offices
Matched pair netting by novation provisions of Section
3.3(b) shall not apply.
Part VI: Notices
Addresses for Notices:
With respect to ABN AMRO Bank N.V.:
With respect to FX transactions through its Chicago
Branch:
Address:
ABN AMRO Bank N. V., Chicago Branch
181 West Madison Avenue
Chicago, Illinois 60602
Attention:Treasury Operations
Telex No.: 62734 Answerback: ABN UW
Facsimile No.: (312)-904-5778
Telephone No.:(312)-904-5905
Electronic Messaging System Details:ABN AUS 33a XXX
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With respect to Campbell Asset Allocation Trust:
Address:
c/o Campbell & Company, Inc.
210 West Pennsylvania Avenue
Towson, MD 21204
Attn: Theresa D. Livesey, CPA
Chief Financial Officer
Tele: (410)-296-3301
Fax: (410)-296-3311
Part VII: Base Currency
U.S. Dollars
Part VIII: Adequate Assurances
The provisions of Section 9.13 shall not apply to the
Agreement.
Part IX: FDICIA Representations
The provisions of Section 9.14 shall not apply to the
Agreement.
Part X: Credit Support
Credit Support Document with respect to
ABN AMRO Bank N.V.: Inapplicable
Credit Support Document with respect to
Campbell Asset Allocation Trust: Inapplicable
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Part XI: Margin Percentage
Initial Percentage: TBD
Maintenance Percentage: TBD
Part XII: Collateral/Collateral Value
Collateral Collateral Value
Cash (U.S. dollars) 100% of Market Value
U.S. Treasury Bills % of Principal Amount
maturity under 90 days 98% of Principal Amount
maturity 91-181 days 95% of Principal Amount
maturity 182-365 days 90% of Principal Amount
U.S. Treasury obligations
maturity beyond 365 days TBD% of Market Value
Letters of Credit issued
by depository institutions
acceptable to the Bank TBD% of Face Value
Part XIII: Tax ID Numbers
With respect to ABN AMRO Bank N.V.: 13-5268975
With respect to Campbell Asset Allocation Trust:
52-2238521
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EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in the Prospectus constituting part of this Registration
Statement on Form S-1 of our report dated May 10, 2000 on the statement of
financial condition of Campbell Asset Allocation Trust as of May 10, 2000 and
our report dated February 29, 2000 on the balance sheet of Campbell & Company,
Inc. as of December 31, 1999, which appear in such Prospectus. We also consent
to the statements with respect to us as appearing under the heading "Experts" in
the Prospectus.
/s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Hunt Valley, Maryland
May 22, 2000
