<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1999
REGISTRATION NO. 333-80933
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
---------------
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6799 52-1823554
(STATE OF ORGANIZATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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. LIVESEY
CAMPBELL & COMPANY, INC.
COURT TOWERS BUILDING
210 WEST PENNSYLVANIA AVENUE
TOWSON, MARYLAND 21204
(410) 296-3301
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPY TO:
MICHAEL J. SCHMIDTBERGER
SIDLEY & AUSTIN
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 906-2348
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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. [ ]
<PAGE> 2
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. [ ]
---------------
Pursuant to the provisions of Rule 429 of the rules and regulations of the
Securities and Exchange Commission under the Securities Act of 1933, the form of
prospectus set forth herein also relates to the Registrant's Registration
Statement on Form S-1 (Registration Statement No. 333-68431 declared effective
February 1, 1999) and constitutes Post-Effective Amendment No. 3 to such
Registration Statement.
---------------
<PAGE> 3
SUPPLEMENT TO PROSPECTUS DATED AUGUST 27, 1999
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
UNITS OF LIMITED PARTNERSHIP INTEREST
Campbell & Company, Inc., the Fund's general partner, is supplementing
the Fund's prospectus dated August 27, 1999 in order to provide (i) quantitative
and qualitative disclosure and analysis relating to the Fund's risk exposure to
various U.S. and international futures and forward markets, and (ii) other
supplemental information.
The following sections of the prospectus are supplemented as set forth
herein:
- "Selected Financial Data" at Page 11 of the prospectus;
- "Management's Analysis of Operations" at Page 18 of the prospectus;
- "Past Performance of the Campbell Strategic Allocation Fund, L.P." at
Page 22 of the prospectus; and
- "Financial Statements" at Page 41 of the prospectus.
As of November 30, 1999, the Fund's net asset value per unit was $1,680.00.
-------------------------------------
The Fund's prospectus is delivered together with the supplement and is
incorporated herein by reference. Both this supplement and the prospectus
contain important information and must be considered in determining whether to
invest in the units.
-------------------------------------
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.
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.
GENERAL PARTNER
-------------------------------------
The date of this Supplement is __________________.
<PAGE> 4
TABLE OF CONTENTS
SELECTED FINANCIAL DATA............................. S-2
MANAGEMENT'S ANALYSIS OF OPERATIONS................. S-2
PAST PERFORMANCE OF THE CAMPBELL STRATEGIC
ALLOCATION FUND, L.P................................ S-8
FINANCIAL STATEMENTS................................ S-9
3. SELECTED FINANCIAL DATA
Dollars in thousands, except per unit amounts
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, ------------------------------------------ DECEMBER 31,
1999 1998 1997 1996 1995 1994
-------- -------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total Assets.......................... $471,489 $350,791 $220,404 $111,367 $46,492 $21,066
Total Partners' Capital............... 463,940 343,957 212,710 107,737 45,074 20,599
Total Income (Loss)................... 46,671 68,510 40,234 26,624 6,201 (1,215)
Net Income (Loss)..................... 24,544 40,695 24,011 19,058 3,509 (2,236)
Net Income (Loss) Per General
and Limited Partner Unit............ 104.60 232.33 208.78 327.00 103.74 (133.42)
Increase (Decrease) in Net
Asset Value per General and
Limited Partner Unit................ 84.29 211.67 181.48 296.12 88.27 (116.23)
</TABLE>
NOTE: The Fund commenced trading in April 1994; financial information is
provided since that inception date.
6. MANAGEMENT'S ANALYSIS OF OPERATIONS (Supplemental Information)
RESULTS OF OPERATIONS
The returns for the nine months ending September 30, 1999 and for the years
ended December 31, 1998 and 1997 were 5.07%, 14.60% and 14.31%, respectively.
1999 (9 MONTHS ENDING SEPTEMBER 30)
The returns for the nine months ending September 30, 1999 and 1998 were
5.07% and 10.72%, respectively. Of the 5.07% increase in 1999, approximately
8.55% was due to trading gains (before commissions) and approximately 3.26% was
due to interest income, offset by approximately 6.74% in brokerage fees,
performance fees, operating costs and offering costs borne by the Fund. An
analysis of the 8.55% trading gains by sector is as follows:
<TABLE>
<CAPTION>
SECTOR % GAIN (LOSS)
- ------ --------------
<S> <C>
Interest Rates 3.10%
Stock Indices (5.88)
Currencies 2.44
Metals .81
Agriculturals (.24)
Energy 8.32
----
8.55%
----
</TABLE>
In January 1999, most markets the Fund traded in were trendless, yet
volatile enough to move it in and out of positions, incurring a string of
relatively small losses. The gain for February was earned primarily in the
currency and interest rate sectors. Short positions in U.S. treasury notes and
bonds yielded enough profits to compensate for the losses incurred in European
interest rates, which have been slower to turn from long to short. The yen was
volatile, trading both
S-2
<PAGE> 5
sharply higher and sharply lower against the U.S. dollar during February, but it
ended the month on a slide which appeared to have some momentum. On balance the
Fund's yen positions lost money during February, but short positions in the
European currencies, primarily the Swiss franc and the Euro, were very
profitable. In March, the currency and energy sectors provided positive returns.
The U.S. dollar continued to appreciate against the Euro and the Swiss franc,
while weaker yen was profitable against sterling, the Swiss franc, and the Euro.
All other portfolio sectors showed small losses for the month.
April produced profitable results for the Fund with gains in the
currencies, stock indicies, energy and metals sectors. The U.S. dollar continued
its strong upward trend against the Euro and Swiss franc which led to the
Fund's gains in the currency sector. The Fund incurred losses in global interest
rates where the markets were too trendless to offer any real opportunity. In
May, the energy and metal sectors were down sharply causing losses on the Fund's
long positions in these two sectors contributing to our loss for the month.
Profits on short interest rate positions were offset by losses on long U.S.
dollar and foreign equity index positions. Interest rate positions were the
biggest contributor to the positive performance for June. The Fund's short
positions in this sector profited from the persistent increase in the U.S.
interest rates. The Fund also had strong performance in the energy and stock
indices sectors during the month.
The trends that were in place at the end of June continued into July and
the Fund experienced strong profits at mid month. During the second half of
July, every major trend failed and several markets turned sharply against the
Fund's positions, eliminating the profits earned in the first half of the month.
In August, the most profitable sectors were the energy and currency sectors.
Whipsawing inflation expectations caused losses in the stock indices and
interest rate sectors. In September, continued perception of recovery in Asia
pushed the yen higher against the U.S. dollar and European currencies and pushed
energy and base metal prices higher. The announcement of a coordinated change in
European central bank policy caused gold prices to rise significantly. The
Fund's gold position was small and the switch was made from short to long
positions early enough to stay flat in this market.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTRODUCTION
Past Results Not Necessarily Indicative of Future Performance
The Fund is a speculative commodity pool. The market sensitive instruments
held by it are acquired for speculative trading purposes, and all or
substantially all of the Fund's assets are subject to the risk of trading loss.
Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Fund's main line of business.
Market movements result in frequent changes in the fair market value of the
Fund's open positions and, consequently, in its earnings and cash flow. The
Fund's market risk is influenced by a wide variety of factors, including the
level and volatility of exchange rates, interest rates, equity price levels, the
market value of financial instruments and contracts, the diversification effects
among the Fund's open positions and the liquidity of the markets in which it
trades.
The Fund rapidly acquires and liquidates both long and short positions in a
wide range of different markets. Consequently, it is not possible to predict how
a particular future market scenario will affect performance, and the Fund's past
performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Fund could
reasonably be expected to lose in a given market sector. However, the inherent
uncertainty of the Fund's speculative trading and the recurrence in the markets
traded by the Fund of market movements far exceeding expectations could result
in actual trading or non-trading losses far beyond the indicated Value at Risk
or the Fund's experience to date (i.e., "risk of ruin"). In light of the
foregoing as well as the risks and uncertainties intrinsic to all future
projections, the inclusion of the quantification included in this section should
not be considered to constitute any assurance or representation that the Fund's
losses in any market sector will be limited to Value at Risk or by the Fund's
attempts to manage its market risk.
S-3
<PAGE> 6
Standard of Materiality
Materiality as used in this section, "Qualitative and Quantitative
Disclosures About Market Risk," is based on an assessment of reasonably possible
market movements and the potential losses caused by such movements, taking into
account the leverage, and multiplier features of the Fund's market sensitive
instruments.
QUANTIFYING THE FUND'S TRADING VALUE AT RISK
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Fund's market risk
exposures contain "forward-looking statements" within the meaning of the safe
harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).
All quantitative disclosures in this section are deemed to be forward-looking
statements for purposes of the safe harbor, except for statements of historical
fact (such as the dollar amount of maintenance margin required for market risk
sensitive instruments held at the end of the reporting period).
The Fund's risk exposure in the various market sectors traded by the
Advisor is quantified below in terms of Value at Risk. Due to the Fund's
mark-to-market accounting, any loss in the fair value of the Fund's open
positions is directly reflected in the Fund's earnings (realized or unrealized).
Exchange maintenance margin requirements have been used by the Fund as the
measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
intervals. The maintenance margin levels are established by dealers and
exchanges using historical price studies as well as an assessment of current
market volatility and economic fundamentals to provide a probabilistic estimate
of the maximum expected near-term one-day price fluctuation. Maintenance margin
has been used rather than the more generally available initial margin, because
initial margin includes a credit risk component which is not relevant to Value
at Risk.
In the case of market sensitive instruments which are not exchange-traded
(exclusively currencies in the case of the Fund), the margin requirements for
the equivalent futures positions have been used as Value at Risk. In those cases
in which a futures-equivalent margin is not available, dealers' margins have
been used.
In quantifying the Fund's Value at Risk, 100% positive correlation in the
different positions held in each market risk category has been assumed.
Consequently, the margin requirements applicable to the open contracts have
simply been aggregated to determine each trading category's aggregate Value at
Risk. The diversification effects resulting from the fact that the Fund's
positions are rarely, if ever, 100% positively correlated have not been
reflected.
S-4
<PAGE> 7
THE FUND'S TRADING VALUE AT RISK IN DIFFERENT MARKET SECTORS
The following table indicates the trading Value at Risk associated with the
Fund's open positions by market category as of September 30, 1999. All open
position trading risk exposures of the Fund have been included in calculating
the figures set forth below. As of September 30, 1999, the Fund's total
capitalization was approximately $464 million.
<TABLE>
<CAPTION>
% OF TOTAL
MARKET SECTOR VALUE AT RISK CAPITALIZATION
- ------------- ------------- --------------
<S> <C> <C>
Currencies $39.72 million 8.56%
Interest Rates 17.96 million 3.87
Stock Indices 10.31 million 2.22
Metals 7.24 million 1.56
Energy 3.95 million .85
Agriculturals .20 million .04
------------- ---
Total $79.38 million 17.10%
============= =====
</TABLE>
MATERIAL LIMITATIONS ON VALUE AT RISK AS AN ASSESSMENT OF MARKET RISK
The face value of the market sector instruments held by the Fund is
typically many times the applicable maintenance margin requirement (maintenance
margin requirements generally ranging between approximately 1% and 10% of
contract face value) as well as many times the capitalization of the Fund. The
magnitude of the Fund's open positions creates a "risk of ruin" not typically
found in most other investment vehicles. Because of the size of its positions,
certain market conditions -- unusual, but historically recurring from time to
time -- could cause the Fund to incur severe losses over a short period of time.
The foregoing Value at Risk table -- as well as the past performance of the Fund
- -- give no indication of this "risk of ruin."
NON-TRADING RISK
The Fund has non-trading market risk on its foreign cash balances not
needed for margin. However, these balances (as well as the market risk they
represent) are immaterial. The Fund also has non-trading market risk as a result
of investing a substantial portion of its available assets in U.S. Treasury
Bills. The market risk represented by these investments is immaterial.
QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES
The following qualitative disclosures regarding the Fund's market risk
exposures -- except for (i) those disclosures that are statements of historical
fact and (ii) the descriptions of how the Fund manages its primary market risk
exposures -- constitute forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act. The
Fund's primary market risk exposures as well as the strategies used and to be
used by the General Partner and the Advisor for managing such exposures are
subject to numerous uncertainties, contingencies and risks, any one of which
could cause the actual results of the Fund's risk controls to differ materially
from the objectives of such strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant fundamental factors,
political upheavals, changes in historical price relationships, an influx of new
market participants, increased regulation and many other factors could result in
material losses as well as in material changes to the risk exposures and the
risk management strategies of the Fund. There can be no assurance that the
Fund's current market exposure and/or risk management strategies will not change
materially or that any such strategies will be effective in either the short- or
long-term. Investors must be prepared to lose all or substantially all of their
investment in the Fund.
The following were the primary trading risk exposures of the Fund as of
September 30, 1999 by market sector:
S-5
<PAGE> 8
Currencies
Exchange rate risk is the principal market exposure of the Fund. The Fund's
currency exposure is to exchange rate fluctuations, primarily fluctuations which
disrupt the historical pricing relationships between different currencies and
currency pairs. These fluctuations are influenced by interest rate changes as
well as political and general economic conditions. The Fund trades in a large
number of currencies, including cross-rates -- i.e., positions between two
currencies other than the U.S. dollar. The General Partner does not anticipate
that the risk profile of the Fund's currency sector will change significantly in
the future. The currency trading Value at Risk figure includes foreign margin
amounts converted into U.S. dollars with an incremental adjustment to reflect
the exchange rate risk inherent to the dollar-based Fund in expressing Value at
Risk in a functional currency other than dollars.
Interest Rates
Interest rate risk is a significant market exposure of the Fund. Interest
rate movements directly affect the price of the sovereign bond positions held by
the Fund and indirectly the value of its stock index and currency positions.
Interest rate movements in one country as well as relative interest rate
movements between countries materially impact the Fund's profitability. The
Fund's primary interest rate exposure is to interest rate fluctuations in the
United States and the other G-7 countries. However, the Fund also takes
positions in the government debt of smaller nations -- e.g., Spain and
Australia. The General Partner anticipates that G-7 interest rates will remain
the primary market exposure of the Fund for the foreseeable future. The changes
in interest rates which have the most effect on the Fund are changes in
long-term, as opposed to short-term, rates. Most of the speculative positions
held by the Fund are in medium- to long-term instruments. Consequently, even a
material change in short-term rates would have little effect on the Fund were
the medium- to long-term rates to remain steady.
Stock Indices
The Fund's primary equity exposure is to equity price risk in the G-7
countries and several other countries (Australia, Hong Kong and Taiwan). The
stock index futures traded by the Fund are by law limited to futures on broadly
based indices. As of September 30, 1999, the Fund's primary exposures were in
the S&P 500 and Nikkei (Japan) stock indices. The Fund is primarily exposed to
the risk of adverse price trends or static markets in the major U.S., European
and Japanese indices. (Static markets would not cause major market changes but
would make it difficult for the Fund to avoid being "whipsawed" into numerous
small losses.)
Energy
The Fund's primary energy market exposure is to gas and oil price
movements, often resulting from political developments in the Middle East.
Although the Advisor does trade natural gas, oil is the dominant energy market
exposure of the Fund. Oil prices can be volatile and substantial profits and
losses have been and are expected to continue to be experienced in this market.
Metals
The Fund's primary metals market exposure is to fluctuations in the price
of aluminum, copper, gold and nickel. The Advisor's gold trading has been
increasingly limited due to the long-lasting and mainly non-volatile price of
gold over the last 10-15 years. The General Partner anticipates that aluminum
and copper will remain the primary metals market exposure for the Fund, although
Metals as a sector represent less than 5% of the Fund's total portfolio.
Agriculturals
The Fund's primary agricultural exposure is to softs and grains price
movements, which are often directly affected by severe or unexpected weather
conditions. Soybean oil, corn, coffee, cotton and wheat accounted for all of the
Fund's agricultural exposure as of September 30, 1999.
S-6
<PAGE> 9
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE
The following were the only non-trading risk exposures of the Fund as of
September 30, 1999.
Foreign Currency Balances
The Fund's primary foreign currency balances are in Japanese yen, Euros,
British pounds and Swiss Francs. The Fund controls the non-trading risk of these
balances by regularly converting these balances back into dollars (no less
frequently than twice a month, and more frequently if a particular foreign
currency balance becomes unusually high).
Treasury Bill Positions
The Fund's only market exposure in instruments held other than for trading
is in its Treasury Bill portfolio. The Fund holds Treasury Bills (interest
bearing and credit risk-free) with durations no longer than six months. Violent
fluctuations in prevailing interest rates could cause immaterial mark-to-market
losses on the Fund's Treasury Bills, although substantially all of these
short-term investments are held to maturity.
QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE
The means by which the Fund and the Advisor, severally, attempt to
manage the risk of the Fund's open positions is essentially the same in all
market categories traded. The Advisor applies risk management policies to its
trading which generally limit the total exposure that may be taken per "risk
unit" of assets under management. In addition, the Advisor follows
diversification guidelines (often formulated in terms of the balanced volatility
between markets and correlated groups), as well as imposing "stop-loss" points
at which open positions must be closed out.
The General Partner controls the risk of the Fund's non-trading instruments
(Treasury Bills held for cash management purposes) by limiting the duration of
such instruments to no more than six months.
S-7
<PAGE> 10
7. PAST PERFORMANCE OF THE CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
[APRIL 1994 (INCEPTION) -- NOVEMBER 1999]
TYPE OF POOL: Publicly offered
INCEPTION OF TRADING: April 18, 1994
AGGREGATE GROSS CAPITAL SUBSCRIPTIONS TO THE FUND: $466,701,158
CURRENT NET ASSET VALUE OF THE FUND: $467,546,462
WORST MONTHLY PERCENTAGE DRAW-DOWN(1): April 1998/6.69%
WORST PEAK-TO-VALLEY DRAW-DOWN(1): July 1994 -- January 1995/17.99%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Rate of Return (2)
(Computed on a compounded monthly basis)
----------------------------------------------------------------------
Month 1999 YTD 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
January -5.02% 2.74% 4.52% 5.79% -4.67%
- ------------------------------------------------------------------------------------
February 1.67% -2.81% 2.03% -5.97% 4.21%
- ------------------------------------------------------------------------------------
March 0.46% 4.68% -2.47% 4.72% 8.77%
- ------------------------------------------------------------------------------------
April 5.33% -6.69% -3.60% 3.59% 1.13% 0.16%
- ------------------------------------------------------------------------------------
May -3.69% 4.07% -2.92% -2.18% -0.84% -2.42%
- ------------------------------------------------------------------------------------
June 4.81% 1.29% 2.48% 0.75% -1.77% 5.15%
- ------------------------------------------------------------------------------------
July -0.32% -4.00% 9.12% -0.78% -3.82% -3.94%
- ------------------------------------------------------------------------------------
August 0.82% 9.48% -5.69% 1.84% 5.47% -3.89%
- ------------------------------------------------------------------------------------
September 1.36% 2.47% 4.51% 1.77% -3.93% 5.20%
- ------------------------------------------------------------------------------------
October -4.31% 3.97% 1.83% 12.44% 0.79% -0.14%
- ------------------------------------------------------------------------------------
November 0.58% -0.75% 0.17% 11.00% -0.15% -6.67%
- ------------------------------------------------------------------------------------
December 0.30% 4.46% -4.41% 5.35% -4.98%
- ------------------------------------------------------------------------------------
Total 1.13% 14.60% 14.31% 30.46% 9.99% -11.62%
- ------------------------------------------------------------------------------------
</TABLE>
(1) "Draw-down" means losses experienced by the Fund over a specified period.
(2) The "Rate of Return" for a period is calculated by dividing the net profit
or loss by the assets at the beginning of such period. Additions and
withdrawals occurring during the period are included as an addition to or
deduction from beginning net assets in the calculations of "Rates of
Return."
The Campbell Strategic Allocation Fund is currently one of approximately 70
accounts managed by Campbell & Company, with total assets as of November 30,
1999 of $1.7 billion. Approximately $1.4 billion of this total is traded
pursuant to Campbell's FME Large Portfolio, the portfolio primarily utilized to
trade the Fund's assets.
S-8
<PAGE> 11
22. FINANCIAL STATEMENTS (Supplemental Information)
MONTHLY REPORT - NOVEMBER 1999 FOR PARTNER #XXXX
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
<TABLE>
<S> <C>
NAV per unit on 30-Nov-1999 $1,680.00
NAV per unit on 31-Oct-1999 $1,670.31
Unit Value Monthly Gain (Loss) .58%
Fund 1999 YTD Gain (Loss) 1.13%
Number of units you own XXXX
Total value of units you own $XXXXX
STATEMENT OF CHANGES IN NET ASSET VALUE
Net Asset Value (272,026.355 units) at October 31, 1999 $ 454,369,574
Additions of 8,891.716 units on November 30, 1999 14,938,053
Redemptions of 2,617.343 units on November 30, 1999 (4,397,136)
Offering Costs (259,595)
Net Income (Loss) - November 1999 2,895,566
--------------
Net Asset Value (278,300.728 units) at November 30, 1999 $ 467,546,462
==============
Net Asset Value per Unit at November 30, 1999 $ 1,680.00
==============
STATEMENT OF INCOME (LOSS)
Income:
Gains (losses) on futures contracts:
Realized $ (8,866,552)
Change in unrealized 7,469,825
Gains (losses) on forward contracts:
Realized 0
Change in unrealized 5,515,533
Interest income 1,811,927
--------------
5,930,733
--------------
Expenses:
Brokerage fee 2,951,390
Performance fee 0
Operating expenses 83,777
--------------
3,035,167
--------------
Net Income (Loss) - November 1999 $ 2,895,566
==============
</TABLE>
To the best of my knowledge and belief, the information
contained herein is accurate and complete.
/s/ Theresa D. Livesey
--------------------------------------------
Theresa D. Livesey, Chief Financial Officer
Campbell & Company, Inc.
General Partner
Campbell Strategic Allocation Fund, L.P.
Prepared without audit
S-9
<PAGE> 12
MONTHLY REPORT - OCTOBER 1999 FOR PARTNER #XXXX
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
<TABLE>
<S> <C>
NAV per unit on 31-Oct-1999 $1,670.31
NAV per unit on 30-Sept-1999 $1,745.60
Unit Value Monthly Gain (Loss) (4.31%)
Fund 1999 YTD Gain (Loss) .54%
Number of units you own XXXX
Total value of units you own $XXXXX
STATEMENT OF CHANGES IN NET ASSET VALUE
Net Asset Value (265,776.483 units) at September 30, 1999 $ 463,940,005
Additions of 7,894.025 units on October 31, 1999 13,185,477
Redemptions of 1,644.153 units on October 31, 1999 (2,746,247)
Offering Costs (259,595)
Net Income (Loss) - October 1999 (19,750,066)
------------------
Net Asset Value (272,026.355 units) at October 31, 1999 $ 454,369,574
==================
Net Asset Value per Unit at October 31, 1999 $ 1,670.31
==================
STATEMENT OF INCOME (LOSS)
Income:
Gains (losses) on futures contracts:
Realized $ 4,470,082
Change in unrealized (18,317,335)
Gains (losses) on forward contracts:
Realized 0
Change in unrealized (4,820,443)
Interest income 1,853,879
------------------
(16,813,817)
------------------
Expenses:
Brokerage fee 2,866,949
Performance fee 0
Operating expenses 69,300
------------------
2,936,249
------------------
Net Income (Loss) - October 1999 $ (19,750,066)
==================
</TABLE>
To the best of my knowledge and belief, the information
contained herein is accurate and complete.
/s/ Theresa D. Livesey
--------------------------------------------
Theresa D. Livesey, Chief Financial Officer
Campbell & Company, Inc.
General Partner
Campbell Strategic Allocation Fund, L.P.
Prepared without audit
S-10
<PAGE> 13
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
September 30, 1999 (Unaudited) and December 31, 1998 (Audited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Equity in broker trading accounts
Cash $ 30,881,723 $ 88,830,060
United States government securities 255,401,651 114,491,286
Unrealized gain on open futures contracts 14,276,778 3,917,717
------------ ------------
Deposits with broker 300,560,152 207,239,063
Cash 32,960,232 44,879,656
United States government securities 129,240,814 99,677,514
Unrealized gain (loss) on open forward contracts 8,728,133 (1,005,425)
------------ ------------
Total assets $471,489,331 $350,790,808
============ ============
LIABILITIES
Accounts payable $ 196,719 $ 222,124
Brokerage fee 2,930,127 2,164,020
Performance fee 756,138 1,985,393
Offering costs payable 244,374 185,312
Redemptions payable 3,010,170 2,260,525
Subscription deposits 411,798 16,786
------------ ------------
Total liabilities 7,549,326 6,834,160
------------ ------------
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner - 2,750.443 and 2,096.643 units
outstanding at September 30, 1999 and 4,801,173 3,483,174
December 31,1998
Limited Partners - 263,026.040 and 204,942.359 units
outstanding at September 30, 1999 and
December 31, 1998 459,138,832 340,473,474
------------ ------------
Total partners' capital
(Net Asset Value) 463,940,005 343,956,648
------------ ------------
$471,489,331 $350,790,808
============ ============
</TABLE>
See accompanying notes.
S-11
<PAGE> 14
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF OPERATIONS
For the Three Months and Nine Months
Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME
Futures trading gains (losses)
Realized $15,133,172 $ 10,678,426 $15,528,154 $26,666,162
Change in unrealized (8,538,272) 25,809,659 10,359,061 22,434,743
----------- ------------ ----------- -----------
Gain from futures trading 6,594,900 36,488,085 25,887,215 49,100,905
Forward trading gains (losses)
Realized (3,374,275) (12,651,292) 908,774 (9,074,793)
Change in unrealized 10,038,953 2,611,978 9,733,558 (766,829)
----------- ------------ ----------- -----------
Gain (loss) from forward
trading 6,664,678 (10,039,314) 10,642,332 (9,841,622)
Interest income 5,133,358 3,538,612 13,141,100 9,590,250
----------- ------------ ----------- -----------
Total income 18,392,936 29,987,383 49,670,647 48,849,533
----------- ------------ ----------- -----------
EXPENSES
Brokerage fee 8,455,263 5,478,314 22,821,715 14,691,213
Performance fee 756,138 2,440,760 1,780,670 4,272,499
Operating expenses 203,172 123,473 524,752 363,623
----------- ------------ ----------- -----------
Total expenses 9,414,573 8,042,547 25,127,137 19,327,335
----------- ------------ ----------- -----------
NET INCOME $ 8,978,363 $ 21,944,836 $24,543,510 $29,522,198
=========== ============ =========== ===========
NET INCOME PER GENERAL
AND LIMITED PARTNER UNIT
(based on weighted average
number of units outstanding
during the period) $ 35.52 $ 119.62 $ 104.60 $ 175.03
=========== ============ =========== ===========
INCREASE IN NET ASSET
VALUE PER GENERAL
AND LIMITED PARTNER UNIT $ 31.96 $ 114.62 $ 84.29 $ 155.41
=========== ============ =========== ===========
</TABLE>
See accompanying notes.
S-12
<PAGE> 15
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net income $ 24,543,510 $ 29,522,198
Adjustments to reconcile net income to net cash for
operating activities
Net change in unrealized (20,092,619) (21,667,914)
Increase (decrease) in accounts payable and accrued expenses (488,553) 479,910
Net purchases of investments in United States government
and agency securities (170,473,665) (57,999,125)
------------- ------------
Net cash for operating activities (166,511,327) (49,664,931)
------------- ------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Addition of units 120,616,846 79,121,049
Increase (decrease) in subscription deposits 395,012 (880,104)
Redemption of units (23,108,841) (16,737,755)
Increase in redemptions payable 749,645 652,971
Offering costs charged (2,068,158) (1,393,575)
Increase in offering costs payable 59,062 49,509
------------- ------------
Net cash from financing activities 96,643,566 60,812,095
------------- ------------
Net increase (decrease) in cash (69,867,761) 11,147,164
CASH
Beginning of period 133,709,716 45,378,186
------------- ------------
End of period $ 63,841,955 $56,525,350
============= ============
End of period cash consist of:
Cash in broker trading accounts 30,881,723 13,587,364
Cash 32,960,232 42,937,986
------------- ------------
Total end of period cash $ 63,841,955 $56,525,350
============= ============
</TABLE>
See accompanying notes.
S-13
<PAGE> 16
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Partners' Capital
----------------------------------------------------------------------------------
General Limited Total
------------------------- --------------------------- ----------------------------
Units Amount Units Amount Units Amount
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
NINE MONTHS ENDED
SEPTEMBER 30, 1999
Balances at
December 31, 1998 2,096.643 $3,483,174 204,942.359 $ 340,473,474 207,039.002 $343,956,648
Additions 653.800 1,090,000 71,840.603 119,526,846 72,494.403 120,616,846
Net income for the nine months
ended September 30, 1999 249,008 24,294,502 24,543,510
Redemptions 0.000 0 (13,756.922) (23,108,841) (13,756.922) (23,108,841)
Offering costs (21,009) (2,047,149) (2,068,158)
---------- ---------- ----------- ------------- ----------- ------------
Balances at
September 30, 1999 2,750.443 $4,801,173 263,026.040 $ 459,138,832 265,776.483 $463,940,005
========== ========== =========== ============= =========== ============
NINE MONTHS ENDED
SEPTEMBER 30, 1998
Balances at
December 31, 1997 1,473.323 $2,135,788 145,259.520 $ 210,573,931 146,732.843 $212,709,719
Additions 503.205 750,000 52,812.331 78,371,049 53,315.536 79,121,049
Net income for the nine months
ended September 30, 1998 300,849 29,221,349 29,522,198
Redemptions 0.000 0 (11,131.620) (16,737,755) (11,131.620) (16,737,755)
Offering costs (14,211) (1,379,364) (1,393,575)
---------- ---------- ----------- ------------- ----------- ------------
Balances at
September 30, 1998 1,976.528 $3,172,426 186,940.231 $ 300,049,210 188,916.759 $303,221,636
========== ========== =========== ============= =========== ============
<CAPTION>
Net Asset Value Per Unit
----------------------------------------------------------------
September 30, December 31, September 30, December 31,
1999 1998 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C>
$ 1,745.60 $ 1,661.31 $ 1,605.05 $ 1,449.64
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
S-14
<PAGE> 17
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Partnership
Campbell Strategic Allocation Fund, L.P. (the Partnership) is a
Delaware limited partnership which operates as a commodity
investment pool. The Partnership's objective is the appreciation
of its assets through speculative trading of futures contracts
and other financial instruments.
B. Regulation
As a registrant with the Securities and Exchange Commission, the
Partnership is subject to the regulatory requirements under the
Securities Act of 1933 and the Securities Exchange Act of 1934.
As a commodity investment pool, the Partnership is subject to the
regulations of the Commodity Futures Trading Commission, an
agency of the United States (U.S.) government which regulates
most aspects of the commodity futures industry; rules of the
National Futures Association, an industry self-regulatory
organization; and the requirements of the various commodity
exchanges where the Partnership executes transactions.
Additionally, the Partnership is subject to the requirements of
Futures Commission Merchants (brokers) and interbank market
makers through which the Partnership trades.
C. Method of Reporting
The Partnership's financial statements are presented in
accordance with generally accepted accounting principles, which
require the use of certain estimates made by the Partnership's
management. Transactions are accounted for on the trade date.
Gains or losses are realized when contracts are liquidated.
Unrealized gains and losses on open contracts (the difference
between contract purchase price and market price) are reported in
the statement of financial condition as a net gain or loss, as
there exists a right of offset of unrealized gains or losses in
accordance with Financial Accounting Standards Board
Interpretation No. 39 - "Offsetting of Amounts Related to Certain
Contracts." Any change in net unrealized gain or loss from the
preceding period is reported in the statement of operations.
United States government securities are stated cost plus accrued
interest which approximates market value.
For purposes of both financial reporting and calculation of
redemption value, Net Asset Value per Unit is calculated by
dividing Net Asset Value by the number of outstanding Units.
D. Income Taxes
The Partnership prepares calendar year U.S. and state information
tax returns and reports to the partners their allocable shares of
the Partnership's income, expenses and trading gains or losses.
S-15
<PAGE> 18
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
E. Offering Costs
The General Partner has incurred total costs in connection with
the initial and continuous offering of Units of the Partnership
(offering costs) of $10,276,575 through September 30, 1999,
$6,003,485 of which has already been reimbursed to the General
Partner by the Partnership. At September 30, 1999, the
Partnership reflects a liability in the statement of financial
condition for offering costs payable to the General Partner of
$244,374. The Partnership's liability for offering costs is
limited to the maximum of total offering costs incurred by the
General Partner or 2.5% of the aggregate subscriptions accepted
during the initial and continuous offerings; this maximum is
further limited by 30 month pay-out schedules. The Partnership is
only liable for payment of offering costs on a monthly basis as
calculated based on the limitations stated above. If the
Partnership terminates prior to completion of payment of the
calculated amounts to the General Partner, the General Partner
will not be entitled to any additional payments, and the
Partnership will have no further obligation to the General
Partner.
The amount of monthly reimbursement due to the General Partner is
charged directly to partners' capital.
F. Foreign Currency Transactions
The Partnership's functional currency is the U.S. dollar;
however, it transacts business in currencies other than the U.S.
dollar. Assets and liabilities denominated in currencies other
than the U.S. dollar are translated into U.S. dollars at the
rates in effect at the date of the statement of financial
condition. Income and expense items denominated in currencies
other than the U.S. dollar are translated into U.S. dollars at
the rates in effect during the period. Gains and losses resulting
from the translation to U.S. dollars are reported in income
currently.
Note 2. GENERAL PARTNER AND COMMODITY TRADING ADVISOR
The General Partner of the Partnership is Campbell & Company, Inc.,
which conducts and manages the business of the Partnership. The
General Partner is also the commodity trading advisor of the
Partnership. The Amended Agreement of Limited Partnership provides
that the General Partner may make withdrawals of its Units, provided
that such withdrawals do not reduce the General Partner's aggregate
percentage interest in the Partnership to less than 1% of the net
aggregate contributions.
S-16
<PAGE> 19
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 2. GENERAL PARTNER AND COMMODITY TRADING ADVISOR (CONTINUED)
The General Partner is required by the Amended Agreement of Limited
Partnership to maintain a net worth equal to at least 5% of the
capital contributed by all the limited partnerships for which it acts
as general partner, including the Partnership. The minimum net worth
shall in no case be less than $50,000 nor shall net worth in excess of
$1,000,000 be required.
The Partnership pays a monthly brokerage fee equal to 1/12 of 7.7%
(7.7% annualized) of month-end net assets. The General Partner
receives 7% of this 7.7% fee, a portion (4%) of which is used to
compensate selling agents for ongoing services rendered and a portion
(3%) of which is retained by the General Partner for trading and
management services rendered. The remainder of the brokerage fee
(0.7%) is paid directly to the broker. During the nine months ended
September 30, 1999 and 1998, the amounts paid directly to the broker
amounted to $2,074,701 and $1,335,565, respectively.
The General Partner is also paid a quarterly performance fee of 20% of
the Partnership's aggregate cumulative appreciation in the Net Asset
Value per Unit, exclusive of appreciation attributable to interest
income.
Note 3. DEPOSITS WITH BROKER
The Partnership deposits funds with a broker subject to Commodity
Futures Trading Commission regulations and various exchange and broker
requirements. Margin requirements are satisfied by the deposit of U.S.
Treasury bills and cash with such broker. The Partnership earns
interest income on its assets deposited with the broker.
Note 4. OPERATING EXPENSES
Operating expenses of the Partnership are limited by the Amended
Agreement of Limited Partnership to 0.5% per year of the average
month-end Net Asset Value of the Partnership. Actual operating
expenses were less than 0.5% of average month-end Net Asset Value for
nine months ended September 30, 1999 and 1998.
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Partnership are made by subscription agreement,
subject to acceptance by the General Partner. As of September 30, 1999
and December 31, 1998, amounts received by the Partnership from
prospective limited partners who have not yet been admitted to the
Partnership by the General Partner total $411,798 and $16,786,
respectively.
S-17
<PAGE> 20
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS (CONTINUED)
The Partnership is not required to make distributions, but may do so
at the sole discretion of the General Partner. A Limited Partner may
request and receive redemption of Units owned, subject to restrictions
in the Amended Agreement of Limited Partnership. Redemption fees apply
through the first twelve month-ends following purchase as follows: 4%
of Net Asset Value per Unit redeemed through the third month-end, 3%
of Net Asset Value per Unit redeemed through the sixth month-end, 2%
of Net Asset Value per Unit redeemed through the ninth month-end and
1% of Net Asset Value per Unit redeemed through the twelfth month-end.
After the twelfth month-end following purchase of a Unit, no
redemption fees apply.
Note 6. TRADING ACTIVITIES AND RELATED RISKS
The Partnership engages 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 Partnership is
exposed to both market risk, the risk arising from changes in the
market value of the contracts, and credit risk, the risk of failure by
another party to perform according to the terms of a contract.
Purchase and sale of futures contracts requires margin deposits with
the broker. 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 amount of required margin and good faith deposits with the broker
and interbank market makers usually range from 10% to 30% of Net Asset
Value. The market value of securities held to satisfy such
requirements at September 30, 1999 and December 31, 1998 was
$384,642,465 and $214,168,800, respectively, which equals 83% and 62%
of Net Asset Value, respectively.
The Partnership trades forward contracts in unregulated markets
between principals and assumes the risk of loss from counterparty
nonperformance. Accordingly, the risks associated with forward
contracts are generally greater than those associated with exchange
traded contracts because of the greater risk of counterparty default.
Additionally, the trading of forward contracts typically involves
delayed cash settlement.
The Partnership has a substantial portion of its assets on deposit
with financial institutions. In the event of a financial institution's
insolvency, recovery of Partnership assets on deposit may be limited
to account insurance or other protection afforded such deposits. In
the normal course of business, the Partnership requires collateral for
repurchase agreements.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Partnership is exposed to a market risk
equal to the value of futures and forward contracts purchased and
unlimited liability on such contracts sold short.
S-18
<PAGE> 21
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
The fair value of derivatives represents unrealized gains and losses
on open futures and forward contracts. The average fair value of
derivatives during the nine months ended September 30, 1999 and 1998
and the related fair values as of September 30, 1999 and December 31,
1998 are as follows:
<TABLE>
<CAPTION>
Average Fair Value
As of September 30, Fair Value as of
------------------- ----------------------------------------
1999 1998 September 30, 1999 December 31, 1998
---- ---- ------------------ -----------------
<S> <C> <C> <C> <C>
Futures contracts $10,448,000 $7,768,000 $14,277,000 $ 3,918,000
Forward contracts 413,000 (567,000) 8,728,000 (1,005,000)
</TABLE>
The unrealized gain (loss) on open futures and forward contracts is
comprised of the following:
<TABLE>
<CAPTION>
Futures Contracts Forward Contracts
(exchange traded) (non-exchange traded)
---------------------------------- ----------------------------------
September 30, 1999 December 31, 1998 September 30, 1999 December 31, 1998
------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Gross unrealized gains $19,093,251 $6,289,815 $ 17,355,354 $ 7,377,712
Gross unrealized losses (4,816,473) (2,372,098) (8,627,221) (8,383,137)
----------- ---------- ------------ -----------
Net unrealized gain (loss) $14,276,778 $3,917,717 $ 8,728,133 $(1,005,425)
=========== ========== ============ ============
</TABLE>
Net trading results from futures contracts are reflected in the
statement of operations and equal gain from futures trading less the
portion of the brokerage fee paid directly to the broker. Net trading
results from forward contracts are reflected in the statement of
operations as gain (loss) from forward trading. Such trading results
reflect the net gain (loss) arising from the Partnership's speculative
trading of futures and forward contracts.
Open contracts generally mature within three months; as of September
30, 1999 the latest maturity date for open futures contracts is June
2000, and the latest maturity date for open forward contracts is
December 1999. However, the Partnership intends to close all contracts
prior to maturity. At September 30, 1999 and December 31, 1998, the
notional amount of open contracts is as follows:
S-19
<PAGE> 22
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
Contracts to Contracts to Contracts to Contracts to
Purchase Sell Purchase Sell
-------- ---- -------- ----
<S> <C> <C> <C> <C>
Futures contracts (exchange traded):
- Long-term interest rates $ 294,100,000 $ 711,800,000 $ 460,500,000 $ 148,700,000
- Short-term interest rates 461,600,000 1,283,700,000 305,900,000 307,900,000
- Stock indices 74,100,000 95,000,000 67,900,000 11,200,000
- Agricultural 200,000 4,100,000 2,000,000 8,700,000
- Metals 106,800,000 4,600,000 6,500,000 47,500,000
- Energy 68,900,000 0 0 17,100,000
Forward contracts (non-exchange traded):
- Currencies 930,300,000 565,500,000 435,100,000 386,200,000
-------------- -------------- -------------- -------------
$1,936,000,000 $2,664,700,000 $1,277,900,000 $ 927,300,000
============== ============== ============== =============
</TABLE>
The above amounts do not represent the Partnership's risk of loss due
to market and credit risk, but rather represent the Partnership's
extent of involvement in derivatives at the date of the statement of
financial condition.
The General Partner has established procedures to actively monitor and
minimize market and credit risk, although there can be no assurance
that they will, in fact, succeed in doing so. The General Partner's
basic market risk control procedures consist of continuously
monitoring open positions, diversification of the portfolio and
maintenance of a margin-to-equity ratio that rarely exceeds 30%. The
General Partner seeks to minimize credit risk primarily by depositing
and maintaining the Partnership's assets at financial institutions and
brokers which the General Partner believes to be creditworthy. The
Limited Partners bear the risk of loss only to the extent of the
market value of their respective investments and, in certain specific
circumstances, distributions and redemptions received.
Note 7. INTERIM FINANCIAL STATEMENTS
The Statement of Financial Condition as of September 30, 1999, the
Statements of Operations for the three months and nine months ended
September 30, 1999 and 1998, the Statements of Cash Flows for the nine
months ended September 30, 1999 and 1998 and the Statements of Changes
in Partners' Capital (Net Asset Value) for the nine months ended
September 30, 1999 and 1998 are unaudited. In the opinion of
management, such financial statements reflect all adjustments, which
were of a normal and recurring nature, necessary for a fair
presentation of financial position as of September 30, 1999 and the
results of operations for the three months and nine months ended
September 30, 1999 and 1998.
S-20
<PAGE> 23
CAMPBELL & COMPANY, INC.
BALANCE SHEET
September 30, 1999 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $14,344,134
Accounts receivable
Advisory and performance fees 7,028,383
Receivable from Campbell Strategic
Allocation Fund, L.P. 1,766,518
Other receivables 109,766
-------
Total current assets 23,248,801
----------
Property and equipment
Furniture and office equipment 2,055,811
Leasehold improvements 134,363
-------
2,190,174
Less accumulated depreciation and amortization (1,308,666)
-----------
Total property and equipment 881,508
-------
Other assets
Cash surrender value of life insurance,
net of policy loans of $165,672 157,177
Investments in commodity pools 5,094,020
Other 5,235,736
----------
Total assets $34,617,242
-----------
LIABILITIES
Current liabilities
Accounts payable and accrued expenses $ 9,003,712
Subordinated debt 6,500,000
---------
Total liabilities 15,503,712
----------
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 19,056,362
------------
Total stockholders' equity 19,113,530
----------
Total liabilities and stockholders' equity $34,617,242
-----------
</TABLE>
See accompanying notes.
S-21
<PAGE> 24
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General
Campbell & Company, Inc. (the Company) 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
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 performance
fee agreement 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.
S-22
<PAGE> 25
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET (CONTINUED)
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
F. Income Taxes
The Company has elected S corporation status, 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. INVESTMENTS IN COMMODITY POOLS
Investments in commodity pools consist of the following as of
September 30, 1999:
<TABLE>
<S> <C> <C>
Campbell Strategic Allocation Fund, L.P. $4,801,170
Campbell Financial Futures Fund Limited Partnership 264,918
The Campbell Fund Trust 27,932
-------------
Total $5,094,020
==========
</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 manager of
Campbell Strategic Allocation Fund, L.P. (Strategic). As General
Partner, the Company receives from Strategic a monthly brokerage
fee and quarterly performance fee. Included in advisory and
performance fees receivable at September 30, 1999 is
approximately $1,897,746 due from Strategic for such fees.
S-23
<PAGE> 26
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET (CONTINUED)
(Unaudited)
Note 2. INVESTMENTS IN COMMODITY POOLS (CONTINUED)
Campbell Strategic Allocation Fund, L.P. (Continued)
Summarized financial information with respect to Strategic as of
and for the nine month period ended September 30, 1999, is as follows:
<TABLE>
<S> <C>
Balance Sheet Data
Assets $471,489,331
Liabilities (7,549,326)
---------------
Net Asset Value $463,940,005
==============
Operating Data
Total income $ 49,670,647
Total expense (25,127,137)
--------------
Net income $ 24,543,510
==============
General Partner income allocation $ 249,008
==============
</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 extent of this commitment is
dependent on the subscriptions Strategic receives during the
continuing offering period provided for in Strategic's
prospectus. The Company, as General Partner, has contributed
capital of $3,757,000 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 as of September 30, 1999, of $244,374 from
Strategic for offering costs due to be reimbursed as of said
date. This amount is included in Receivable from Campbell
Strategic Allocation Fund, L.P. in the balance sheet. The
remaining offering costs of $4,028,716 as of September 30, 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 out of the asset over
time.
S-24
<PAGE> 27
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET (CONTINUED)
(Unaudited)
Note 2. INVESTMENTS IN COMMODITY POOLS (CONTINUED)
Campbell Strategic Allocation Fund, L.P. (Continued)
The Company also pays, up-front, a 4% commission to selling
agents for Strategic. The Company is then reimbursed by Strategic
for this cost, over twelve months, through a brokerage fee which
is based on the monthly net asset value of Strategic. As of
September 30, 1999, $2,692,196 in selling agent commissions is
subject to future reimbursement, of which $1,522,144 is included
in Receivable from Campbell Strategic Allocation Fund, L.P. and
$1,170,052 is included in Other assets in the balance sheet.
In the event Strategic terminates prior to the completion of any
reimbursement of the aforementioned costs, the Company will not
be entitled to any additional reimbursement from Strategic.
Campbell Financial Futures Fund Limited Partnership
The Company also acts as Co-General Partner in Campbell Financial
Futures Fund Limited Partnership (Financial Futures). The Net
Asset Value of Financial Futures as of September 30, 1999 totaled
$10,196,756.
The Campbell Fund Trust
The Company is the Managing Operator of The Campbell Fund Trust
(the Trust). The Trustee of the Trust has delegated to the
Managing Operator all of the power and authority to manage the
business affairs of the Trust. The Net Asset Value of the Trust
as of September 30, 1999 totaled $12,585,288.
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 partnerships
and the trust 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.
S-25
<PAGE> 28
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET (CONTINUED)
(Unaudited)
Note 3. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
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 partnerships and the trust 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 partnerships, the trust 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 average fair value of derivatives held by the partnerships
and the trust during the nine months ended September 30, 1999 was
approximately $11,838,000 and the related period-end fair value
was approximately $23,933,600.
At September 30, 1999, the notional amount of contracts acquired
by the partnerships and the trust to purchase totaled
approximately $2,031,100,000 and the notional amount of such
contracts to sell totaled approximately $2,795,600,000. These
amounts do not represent the partnerships' and the trust's risk
of loss due to market and credit risk, but rather represent the
extent of their involvement in derivatives at the balance sheet
date.
The Company has established procedures to actively monitor market
risk and minimize credit risk.
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 September 30, 1999, $6,500,000 was outstanding under
this agreement.
S-26
<PAGE> 29
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET (CONTINUED)
(Unaudited)
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:
Year ending September 30
2000 $ 277,583
2001 283,162
2002 288,877
2003 294,592
2004 300,443
Thereafter 1,263,002
-----------
Total base annual rentals $2,707,659
==========
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.
S-27
<PAGE> 30
THIS STICKER TO BE AFFIXED TO THE PROSPECTUS COVER
THE FUND'S SUPPLEMENT IS DELIVERED TOGETHER WITH THIS PROSPECTUS. THIS
SUPPLEMENT INCLUDES QUANTITATIVE AND QUALITATIVE DISCLOSURE AND ANALYSIS
RELATING TO THE FUND'S RISK EXPOSURE TO VARIOUS MARKETS AND OTHER INFORMATION.
BOTH THE PROSPECTUS AND THIS SUPPLEMENT MUST BE CONSIDERED IN DETERMINING
WHETHER TO INVEST IN THE UNITS.
<PAGE> 31
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
$262,000,000
UNITS OF LIMITED PARTNERSHIP INTEREST
THE OFFERING
The Fund trades speculatively in the U.S. and international futures and forward
markets. Specifically, the Fund 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, energy and agricultural products. Campbell &
Company, Inc., a commodity trading advisor, allocates the Fund's assets across a
broad spectrum of markets.
As of June 30, 1999, the Fund's net asset value per unit was $1,713.64. 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 Fund is speculative and leveraged. The Fund's assets are leveraged at a
ratio which typically ranges from 8:1 to 15:1.
- - Performance can be volatile. The net asset value per unit has fluctuated in a
single month as much as 12%.
- - You could lose all or substantially all of your investment in the Fund.
- - The use of a single advisor applying generally similar trading programs 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 and possible fees assessed. For example,
redemptions can occur only at the end of a month. See "Distributions and
Redemptions -- Redemption Fees."
- - Transfers of interest in the units are subject to limitations, such as 30
days' advance notice of any intent to transfer. Also, Campbell & Company may
deny a request to transfer if it determines that the transfer may result in
adverse legal or tax consequences for the Fund. See "Agreement of Limited
Partnership -- Dispositions."
- - Campbell & Company has total trading authority over the Fund.
- - Substantial expenses must be offset by trading profits and interest income.
The Fund must generate trading profits of 4.5% per annum to break even.
- - A substantial portion of the trades executed for the Fund take 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, legal 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.
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.
General Partner
August 27, 1999
<PAGE> 32
(This page has been left blank intentionally.)
<PAGE> 33
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 25 AND A
STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER
THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 4.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE,
BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY
STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK
FACTORS OF THIS INVESTMENT, AT PAGE 5.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES
OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES,
INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO
REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS
PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO
COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-
UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED.
------------------------
THIS PROSPECTUS DOES NOT INCLUDE ALL OF THE INFORMATION OR EXHIBITS IN THE
FUND'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 FUND 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 FUND'S FILINGS ARE POSTED AT THE SEC WEBSITE AT HTTP://WWW.SEC.GOV.
------------------------
CAMPBELL & COMPANY, INC.
GENERAL PARTNER
210 WEST PENNSYLVANIA AVENUE
TOWSON, MARYLAND 21204
(410) 296-3301
i
<PAGE> 34
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
ORGANIZATIONAL CHART
The organizational chart below illustrates the relationships among the
various service providers of this offering. Campbell & Company is both the
general partner and trading advisor for the Fund. The selling agents, commodity
broker and foreign exchange dealer are not affiliated with Campbell & Company or
the Fund.
<TABLE>
<S> <C>
-----------------------
Selling Agents
(currently 30-40
different
brokerage firms)
-----------------------
Selling
Agreement
- -------------------- Advisory ----------------------- Commodity ----------------------
Agreement Customer
Campbell Strategic Agreement Commodity Broker
Campbell & Allocation Fund, (currently
Company, Inc. L.P. PaineWebber
General Incorporated
Partner
- -------------------- ----------------------- ----------------------
General Foreign Exchange
Partner/Sponsor Dealer Agreement
- -------------------- -----------------------
Foreign Exchange
7 other commodity Dealer
pools (currently ABN
AMRO Bank N.V.,
Chicago Branch)
- -------------------- -----------------------
</TABLE>
* Campbell & Company presently serves as general partner or sponsor for seven
other commodity pools.
ii
<PAGE> 35
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1. SUMMARY..................................................... 1
General..................................................... 1
Plan of Distribution........................................ 1
Risk Factors You Should Consider Before Investing in the
Fund........................................................ 2
Investment Factors You Should Consider Before Investing in
the Fund.................................................... 2
Campbell & Company, Inc..................................... 3
Charges to the Fund......................................... 3
Estimate of Break-Even Level................................ 3
Distributions and Redemptions............................... 4
Federal Income Tax Aspects.................................. 4
2. THE RISKS YOU FACE.......................................... 5
Market Risks................................................ 5
Possible Total Loss of an Investment in the Fund....... 5
The Fund is 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 Fund.......................................... 6
Increase in Assets Under Management May Affect Trading
Decisions............................................. 6
Fund Trading is Not Transparent........................ 6
Tax Risks................................................... 6
Investors are Taxed Based on Their Share of Fund
Profits............................................... 6
Tax Could be Due from Investors on Their Share of the
Fund's Ordinary Income Despite Overall Losses......... 7
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
Commodity Broker...................................... 7
Investors Must Not Rely on the Past Performance of
either Campbell & Company or the Fund in Deciding
Whether to Buy Units.................................. 7
Conflicts of Interest.................................. 8
Lack of Independent Experts Representing Investors..... 8
Reliance on Campbell & Company......................... 8
Possibility of Termination of the Fund Before
Expiration of its Stated Term......................... 8
The Fund 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
The Fund Trades Extensively in Foreign Markets......... 9
Restrictions on Transferability........................ 9
</TABLE>
iii
<PAGE> 36
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
A Single-Advisor Fund May Be More Volatile Than a
Multi-Advisor Fund.................................... 9
Year 2000 ("Y2K") Issue................................ 9
Euro Conversion Will Limit Campbell & Company's Ability
to Trade Certain Individual Currencies And Could
Result in Trading Losses.............................. 10
3. SELECTED FINANCIAL DATA..................................... 11
4. INVESTMENT FACTORS.......................................... 11
Value of Diversifying into Managed Futures.................. 11
Advantages of Futures Fund Investments...................... 11
Historical Perspective of Managed Futures................... 13
5. CAMPBELL & COMPANY, INC..................................... 14
Description................................................. 14
The Advisory Agreement...................................... 16
Trading Systems............................................. 16
6. MANAGEMENT'S ANALYSIS OF OPERATIONS......................... 18
Introduction................................................ 18
Capital Resources........................................... 19
Liquidity................................................... 19
Results of Operations....................................... 19
Off-Balance Sheet Risk...................................... 21
7. PAST PERFORMANCE OF THE CAMPBELL STRATEGIC ALLOCATION FUND,
L.P......................................................... 22
8. CONFLICTS OF INTEREST....................................... 22
Campbell & Company, Inc..................................... 22
The Commodity Broker and the Foreign Exchange Dealer........ 23
The Selling Agents.......................................... 23
Fiduciary Duty and Remedies................................. 24
Indemnification and Standard of Liability................... 24
9. CHARGES TO THE FUND......................................... 25
Brokerage Fee............................................... 25
Other Fund Expenses......................................... 25
Campbell & Company, Inc..................................... 25
The Commodity Broker........................................ 27
Selling Agents.............................................. 27
Foreign Exchange Dealers.................................... 27
Offering Expenses........................................... 27
Other Expenses.............................................. 28
10. USE OF PROCEEDS............................................. 28
11. THE COMMODITY BROKER........................................ 28
12. FOREIGN EXCHANGE DEALER..................................... 29
13. CAPITALIZATION.............................................. 29
14. DISTRIBUTIONS AND REDEMPTIONS............................... 30
Distributions............................................... 30
Redemptions................................................. 30
Redemption Fees............................................. 30
</TABLE>
iv
<PAGE> 37
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Net Asset Value............................................. 31
15. THE FUTURES AND FORWARD MARKETS............................. 31
Futures Contracts........................................... 31
Forward Contracts........................................... 31
Regulation.................................................. 31
Margin...................................................... 32
16. AGREEMENT OF LIMITED PARTNERSHIP............................ 32
Organization and Limited Liabilities........................ 32
Management of Partnership Affairs........................... 32
Sharing of Profits and Losses............................... 32
Dispositions................................................ 33
Dissolution and Termination of the Fund..................... 33
Amendments and Meetings..................................... 33
Indemnification............................................. 33
Reports to Limited Partners................................. 34
17. FEDERAL INCOME TAX ASPECTS.................................. 34
The Fund's Partnership Tax Status........................... 34
Taxation of Limited Partners on Profits and Losses of the
Fund..................................................... 34
Fund Losses by Limited Partners............................. 34
"Passive-Activity Loss Rules" and Their Effect on the
Treatment of Income and Loss................................ 35
Cash Distributions and Unit Redemptions..................... 35
Gain or Loss on Section 1256 Contracts and Non-Section 1256
Contracts................................................ 35
Tax on Capital Gains and Losses............................. 35
Limited Deduction for Certain Expenses...................... 35
Interest Income............................................. 35
Syndication Fees............................................ 35
Investment Interest Deductibility Limitations............... 35
Unrelated Business Taxable Income........................... 36
IRS Audits of the Fund and its Limited Partners............. 36
State and Other Taxes....................................... 36
18. INVESTMENT BY ERISA ACCOUNTS................................ 36
General..................................................... 36
Special Investment Consideration............................ 36
The Fund Should Not Be Deemed to Hold "Plan Assets"......... 36
Ineligible Purchasers....................................... 37
19. PLAN OF DISTRIBUTION........................................ 37
Subscription Procedure...................................... 37
Representations and Warranties of Investors in the
Subscription Agreement...................................... 38
Minimum Investment.......................................... 38
Investor Suitability........................................ 38
The Selling Agents.......................................... 39
20. CERTAIN LEGAL MATTERS....................................... 40
21. EXPERTS..................................................... 40
22. INDEX TO FINANCIAL STATEMENTS............................... 41
</TABLE>
v
<PAGE> 38
<TABLE>
<S> <C>
APPENDICES
APPENDIX I Glossary......................................... APPI-1
APPENDIX II Supplementary Performance Information........... APPII-1
EXHIBITS
EXHIBIT A Agreement of Limited Partnership.................. A-1
EXHIBIT B Request For Redemption............................ B-1
EXHIBIT C Subscription Requirements......................... C-1
EXHIBIT D Subscription Agreement And Power of Attorney...... D-1
</TABLE>
vi
<PAGE> 39
1. SUMMARY
GENERAL
The Campbell Strategic Allocation Fund, L.P. allows you to participate in
the U.S. and international futures and forward markets. Specifically, the Fund
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,
energy and agricultural products. Campbell & Company, the Fund's general
partner, 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
Fund. 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 27 years. See "Past
Performance of the Campbell Strategic Allocation Fund, L.P." for a performance
record of the Fund through June 1999.
The following summary provides a review in outline form of certain
important aspects of an investment in the Fund.
PLAN OF DISTRIBUTION
HOW TO SUBSCRIBE FOR UNITS
- Investors must submit subscriptions at least five business days prior to
the applicable month-end closing date. Subscriptions will be accepted
once payments are received and cleared.
- The Fund 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 FUND
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. Limited partners may increase their investment in the Fund with
a minimum investment of $1,000.
IS THE CAMPBELL STRATEGIC ALLOCATION FUND A SUITABLE INVESTMENT FOR YOU?
An investment in the Fund is speculative and involves a high degree of
risk. The Fund is not a complete investment program. Campbell & Company offers
the Fund as a diversification opportunity for an investor's entire investment
portfolio, and therefore an investment in the Fund should only be a limited
portion of the investor's portfolio. You must, at a minimum, have:
1) a net worth of at least $150,000, exclusive of home, furnishings and
automobiles; or
2) a net worth, similarly calculated, of at least $45,000 and an annual
gross income of at least $45,000.
A number of jurisdictions in which the units are offered impose higher
minimum suitability standards on prospective investors. These suitability
standards are, in each case, regulatory minimums only, and merely because you
meet such standards does not mean that an investment in the units is suitable
for you. YOU MAY NOT INVEST MORE THAN 10% OF YOUR NET WORTH, EXCLUSIVE OF HOME,
FURNISHINGS AND AUTOMOBILES, IN THE FUND.
-1-
<PAGE> 40
RISK FACTORS YOU SHOULD CONSIDER BEFORE INVESTING IN THE FUND
- The Fund is a highly volatile and speculative investment. There can be no
assurance that the Fund will achieve its objectives or avoid substantial
losses. You must be prepared to lose all or substantially all of your
investment.
- For every gain in futures and forward trading, there is 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 Fund trades in futures and forward contracts. Therefore, the Fund 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 Fund.
- The Fund is subject to numerous conflicts of interest including the
following:
1) Campbell & Company is both the general partner and trading advisor of
the Fund and its fees were not negotiated at arm's length;
2) Campbell & Company, the Fund's commodity broker and foreign exchange
dealers may have incentives to favor other accounts over the Fund;
3) Campbell & Company, the Fund's commodity 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 Fund. 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 Fund;
and
4) Selling agents will be entitled to ongoing compensation as a result of
their clients remaining in the Fund, so a conflict exists between the
agents' interest in maximizing compensation and in advising their
clients to make investment decisions in the client's best interests.
- Limited partners take no part in the management of the Fund 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 8% 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.
Currently, the Fund's actual brokerage fee is 7.7% per annum.
- The Fund is a single-advisor fund which may be inherently more volatile
than multi-advisor managed futures products.
- Although the Fund 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. Redemption fees apply to units redeemed on or prior to the
twelfth month-end following purchase. 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 FUND
- The Fund 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 Fund.
- The Fund has the potential to help diversify traditional securities
portfolios. According to modern portfolio theory, a diverse portfolio
consisting of assets that perform in an unrelated manner, or
non-correlated assets, can increase overall return and reduce the
volatility (a primary measure of risk) of a portfolio. As a risk transfer
activity, futures and forward trading has no
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<PAGE> 41
inherent correlation with any other investment. However, non-correlation
will not provide any diversification advantages unless the non-correlated
assets are outperforming other portfolio assets, and there is no
guarantee that the Fund will outperform other sectors of an investor's
portfolio or not produce losses. The Fund's profitability also depends on
the success of Campbell & Company's trading techniques. If the Fund is
unprofitable, then it will not increase the return on an investor's
portfolio or achieve its diversification objectives.
- Investors in the Fund get the advantage of limited liability in highly
leveraged trading.
CAMPBELL & COMPANY, INC.
Campbell & Company, the general partner and trading advisor for the Fund,
administers the Fund as well as directs its trading. Its principals have over 27
years of experience trading in the futures and forward markets. As of June 30,
1999, Campbell & Company was managing approximately $1.6 billion in the futures
and forward markets, including approximately $1.3 billion in its Financial,
Metal & Energy Large Portfolio. The FME Large Portfolio, to which approximately
75% of the Fund's assets are currently allocated, is concentrated in the
financial markets such as interest rates, foreign exchange and stock indices, as
well as metals and energy products. The remainder of the Fund's assets are
traded pursuant to the Global Diversified Large Portfolio, which includes many
of the same markets as the FME Large Portfolio, as well as agricultural markets
such as grains, meats, rubber, orange juice, coffee and fibers. Campbell &
Company has sole authority and responsibility for directing investment and
reinvestment of the Fund'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 FUND
The Fund's charges are substantial and must be offset by trading gains and
interest income in order to avoid depletion of the Fund's assets.
Campbell & Company
- Brokerage fee of up to 8% of net assets per annum, of which up to 1% is
paid to the commodity broker, 4% is paid to the selling agents and
Campbell & Company retains the remainder.
- 20% of quarterly appreciation in the Fund's net assets, excluding
interest income and as adjusted for subscriptions and redemptions.
- Reimbursement of offering expenses incurred in the continuous offering
over a 30-month period following incurrence of each such expense,
estimated at and not to exceed 2.5% of the aggregate subscriptions
accepted by Campbell & Company.
- Redemption fees apply to units redeemed through the first twelve
month-ends following purchase.
Dealers and Others
- "Bid-ask" spread in off-exchange contracts.
- Operating expenses such as legal, auditing, administration, printing and
postage, up to a maximum of 0.5 of 1% of net assets per year.
ESTIMATE OF BREAK-EVEN LEVEL
In order for an investor to "break-even" on his investment in the first
year of trading, assuming an initial investment of $10,000, the Fund must earn
$450 per unit, or 4.50%, provided that no redemption charge is applicable.
Redemption fees apply through the first twelve month-ends following
purchase as follows: 4% of net asset value per unit redeemed through the third
month-end, 3% of net asset value per unit redeemed through the sixth month-end,
2% of net asset value per unit redeemed through the ninth month-end, and 1% of
net asset value per unit redeemed through the twelfth month-end.
-3-
<PAGE> 42
The month-end as of which the unit is purchased is counted as the first
month-end. After the twelfth month-end following purchase of a unit, no
redemption fees apply. Because the purchase date counts as the first month-end
in determining whether a redemption fee applies, no redemption fee would be due
in respect of a unit redeemed on the first anniversary of the purchase.
Accordingly, redemption fees are not included in the "break-even" estimate set
forth below.
<TABLE>
<CAPTION>
<S> <C>
Assumed Initial Selling Price
Per Unit...................... $10,000.00
----------
Brokerage Fee (8%)............ $ 800.00
Organization & Offering
Expense Reimbursement
(1%)........................ 100.00
Operating Expenses (0.5%)..... 50.00
Less: Interest Income (5%).... (500.00)
----------
Amount of Trading Income
Required for the Fund's Net
Asset Value per Unit at the
End of One Year to Equal the
Initial Selling Price per
Unit........................ $ 450.00
==========
Percentage of Assumed Initial
Selling Price per Unit...... 4.50%
==========
The maximum offering expense reimbursement
is 2.5% of the total subscription amount
over 30 months. This amount represents a
maximum during a twelve-month period of 1%
of average month-end net assets. Operating
expenses are subject to a maximum limit of
0.5% of net assets per annum. The
estimates also do not account for the
bid-ask spreads in connection with the
Fund'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 Fund
must be offset before a performance fee is
accrued.
</TABLE>
DISTRIBUTIONS AND REDEMPTIONS
The Fund 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 business days' written
notice to Campbell & Company. Redemption fees, as described above, apply through
the first twelve month-ends following purchase. After the twelfth month-end
following purchase of a unit, no redemption fees apply. Campbell & Company does
not intend to make any distributions.
FEDERAL INCOME TAX ASPECTS
In the opinion of Sidley & Austin, counsel to Campbell & Company, the Fund
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 limited
partners, each limited partner must report his or her allocable share of items
of income, gain, loss and deduction of the Fund and is individually liable for
income tax on such share. The Fund 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 Fund, which will generally constitute capital losses,
may only be available to offset a limited amount of interest income allocated to
the limited partners. 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.]
-4-
<PAGE> 43
2. THE RISKS YOU FACE
MARKET RISKS
POSSIBLE TOTAL LOSS OF AN INVESTMENT IN THE FUND
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 Fund.
THE FUND IS HIGHLY LEVERAGED
Because the amount of margin funds necessary to be deposited with a futures
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
is able to hold positions in the Fund's account with face values equal to
several times the Fund'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 Fund at any time or from time to
time. The large size of the positions which Campbell & Company acquires for the
Fund 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, and possible fees assessed. 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 Fund might have to
liquidate positions to satisfy the requests. Such a forced liquidation could
adversely affect the Fund and consequently your investment.
Transfers of interest in the units are subject to limitations, such as 30
days' advance notice of any intent to transfer. Also, Campbell & Company may
deny a request to transfer if it determines that the transfer may result in
adverse legal or tax consequences for the Fund. See "Agreement of Limited
Partnership -- Dispositions."
FORWARD TRANSACTIONS ARE NOT REGULATED AND ARE SUBJECT TO CREDIT RISK
The Fund 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 Fund. Also, the Fund 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 Fund cannot be expected to be
automatically profitable during unfavorable periods for the stock market, or
vice versa. The futures and forward markets are fundamentally different from the
securities markets in that for every gain in futures and forward trading, there
is an equal and off-setting loss. If the Fund does not perform in a manner
non-correlated with the general financial markets or does not perform
successfully, you will obtain no diversification benefits by investing in the
units and the Fund may have no gains to offset your losses from other
investments.
-5-
<PAGE> 44
TRADING RISKS
CAMPBELL & COMPANY ANALYZES ONLY TECHNICAL MARKET DATA, NOT ANY ECONOMIC FACTORS
EXTERNAL TO MARKET PRICES
The trading systems used by Campbell & Company for the Fund 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 1998, this estimate had
risen to approximately $40 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
Fund. It may become more difficult for the Fund 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 FUND
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 Fund, 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 Fund 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 Fund which could have a
detrimental effect on your investment.
FUND TRADING IS NOT TRANSPARENT
Campbell & Company makes the Fund's trading decisions. While Campbell &
Company receives daily trade confirmations from the commodity broker and foreign
exchange dealers, the Fund's trading results are reported to limited partners
monthly. Accordingly, an investment in the Fund does not offer limited partners
the same transparency, i.e., an ability to review all investment positions
daily, that a personal trading account offers.
TAX RISKS
INVESTORS ARE TAXED BASED ON THEIR SHARE OF FUND PROFITS
Investors are taxed each year on their share of the Fund's profits, if any,
irrespective of whether they redeem any units or receive any cash distributions
from the Fund.
All performance information included in this prospectus is presented on a
pre-tax basis; the
-6-
<PAGE> 45
investors who experienced such performance had to pay the related taxes from
other sources.
TAX COULD BE DUE FROM INVESTORS ON THEIR SHARE OF THE FUND'S ORDINARY INCOME
DESPITE OVERALL LOSSES
Investors may be required to pay tax on their allocable share of the Fund's
ordinary income, which in the case of the Fund is the Fund's interest income and
gain on some foreign futures contracts, even though the Fund 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 Fund as ordinary and
necessary business expenses, upon audit the Fund may be required to treat such
fees as "investment advisory fees" if the Fund's trading activities did not
constitute a trade or business for tax purposes. If the expenses were investment
advisory expenses, a limited partner'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 Fund's
capital gain or as an increase in the Fund's capital loss. If the brokerage fees
were so treated, a limited partner's tax liability would likely increase.
OTHER RISKS
FEES AND COMMISSIONS ARE CHARGED REGARDLESS OF PROFITABILITY AND ARE SUBJECT TO
CHANGE
The Fund is subject to substantial charges payable irrespective of
profitability in addition to performance fees which are payable based on the
Fund's profitability. Included in these charges are brokerage fees and operating
expenses. On the Fund's forward trading, "bid-ask" spreads are incorporated into
the pricing of the Fund's forward contracts by the counterparties in addition to
the brokerage fees paid by the Fund. It is not possible to quantify the
"bid-ask" spreads paid by the Fund because the Fund cannot determine the profit
its counterparty is making on the forward trades into which it enters. Such
spreads can at times be significant. In addition, while currently not
contemplated, the limited partnership agreement allows for changes to be made to
the brokerage fee and performance fee upon sixty days' notice to the limited
partners.
FAILURE OF BROKERAGE FIRMS; DISCIPLINARY HISTORY OF COMMODITY BROKER
The Commodity Exchange Act requires a clearing broker to segregate all
funds received from customers from such broker's proprietary assets. If the
commodity broker fails to do so, the assets of the Fund might not be fully
protected in the event of the bankruptcy of the commodity broker. Furthermore,
in the event of the commodity broker's bankruptcy, the Fund could be limited to
recovering only a pro rata share of all available funds segregated on behalf of
the commodity broker's combined customer accounts, even though certain property
specifically traceable to the Fund (for example, Treasury bills deposited by the
Fund with the commodity broker as margin) was held by the commodity broker. The
commodity broker has been the subject of certain regulatory and private causes
of action. The material actions are described under "The Commodity 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 protection in forward contracts.
INVESTORS MUST NOT RELY ON THE PAST PERFORMANCE OF EITHER CAMPBELL & COMPANY OR
THE FUND IN DECIDING WHETHER TO BUY UNITS
The future performance of the Fund is not predictable, and no assurance can
be given that the Fund will perform successfully in the future. Past performance
is not necessarily indicative of future results.
-7-
<PAGE> 46
CONFLICTS OF INTEREST
Campbell & Company has a conflict of interest because it acts as the
general partner and sole trading advisor for the Fund.
Since Campbell & Company acts as both trading advisor and general partner,
it is very unlikely that its advisory contract will be terminated by the Fund.
The fees payable to Campbell & Company were established by it and were not the
subject of arm's-length negotiation.
Selling agents will be entitled to ongoing compensation as a result of
their clients remaining in the Fund, so a conflict exists between the agent's
interest in maximizing compensation and in advising their clients to make
investment decisions in the client's best interests.
Other conflicts are also present in the operation of the Fund. 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 Fund. No counsel has been
appointed to represent the limited partners in connection with the offering of
the units. Accordingly, each prospective investor should consult his own legal,
tax and financial advisers regarding the desirability of an investment in the
Fund.
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 advisory 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 FUND BEFORE EXPIRATION OF ITS STATED TERM
As general partner, Campbell & Company may withdraw from the Fund upon 120
days' notice, which would cause the Fund to terminate unless a substitute
general partner were obtained. Other events, such as a long-term substantial
loss suffered by the Fund, could also cause the Fund to terminate before the
expiration of its stated term. This could cause you to liquidate your
investments and upset the overall maturity and timing of your investment
portfolio. If the registrations with the CFTC or memberships in the National
Futures Association of Campbell & Company or the commodity broker were revoked
or suspended, such entity would no longer be able to provide services to the
Fund.
THE FUND IS NOT A REGULATED INVESTMENT COMPANY
Although the Fund and Campbell & Company are subject to regulation by the
CFTC, the Fund 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 Fund is impossible to predict,
but could be substantial and adverse.
FORWARDS, SWAPS, HYBRIDS AND OTHER DERIVATIVES ARE NOT SUBJECT TO CFTC
REGULATION
The Fund trades foreign exchange contracts in the interbank market. In the
future, the Fund may also trade swap agreements, hybrid instruments and other
off-exchange contracts. Swap agreements involve trading income streams such
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<PAGE> 47
as fixed rate for floating rate interest. Hybrids are instruments which combine
features of a security with those of a futures contract. The dealer market for
off-exchange instruments is becoming more liquid. There is no exchange or
clearinghouse for these contracts and they are not regulated by the CFTC. The
Fund will not receive the protections which are provided by the CFTC's
regulatory scheme for these transactions.
THE FUND TRADES 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 Fund'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 Fund may not have
the same access to certain positions on foreign exchanges as do local traders,
and the historical market data on which Campbell & Company bases its strategies
may not be as reliable or accessible as it is in the United States. The rights
of clients (such as the Fund) in the event of the insolvency or bankruptcy of a
non-U.S. market or broker are also likely to be more limited than in the case of
U.S. markets or brokers.
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 Fund for federal income tax purposes.
A SINGLE-ADVISOR FUND MAY BE MORE VOLATILE THAN A MULTI-ADVISOR FUND
The Fund is 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
expected that the Fund 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.
YEAR 2000 ("Y2K") ISSUE
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the Year 2000 from the Year
1900 (commonly known as the "Y2K Problem"). Like other investment funds and
financial business organizations, the Fund could be adversely affected if the
computer systems used by Campbell & Company or the Fund's service providers do
not properly address this problem prior to January 1, 2000. Currently, Campbell
& Company does not anticipate that the transition to the 21st century will have
any material effect on the Fund.
Campbell & Company has established a "Y2K Task Force" consisting of
representatives of its information technology, research, accounting, compliance
and trading departments to specifically address all Y2K issues in a timely
manner. Actions taken have included an analysis of all in-house software and
hardware to determine Y2K compliance. Campbell & Company also requested
confirmation from all third parties with which they and the Fund have a material
relationship that said parties have taken the same actions. To date, 95% of the
confirmations have been returned. In-house assessment of all mission-critical
software is complete. Testing of corrected software is in
-9-
<PAGE> 48
progress, with final updates of compliant software targeted in production by the
end of the third quarter 1999. Contingency plans have been established for all
non-mission-critical systems. No direct costs have been or are expected to be
incurred in addressing the Y2K Problem. Campbell & Company has addressed all of
the issues as a part of their ongoing operations, so the Fund will not be
required to reimburse Campbell & Company for any expenses incurred.
Despite the corrective measures that Campbell & Company has implemented, no
assurance can be given that the service providers have anticipated every step
necessary to avoid any adverse effect on the Fund attributable to the Y2K
Problem. A most likely worst case scenario would be one in which trading of
contracts on behalf of the Fund becomes impossible as a result of the Y2K
Problem. Campbell & Company would be able to assess such a situation in advance
of the December 31, 1999 deadline and either liquidate all positions prior to
that date and/or establish relationships with additional counterparties.
Further, prospective limited partners should understand that the failure of
third parties, such as futures exchanges, clearing organizations or regulators,
to resolve the Y2K Problem in a timely manner could result in a material
financial risk to the Fund.
EURO CONVERSION WILL LIMIT CAMPBELL & COMPANY'S ABILITY TO TRADE CERTAIN
INDIVIDUAL CURRENCIES AND COULD RESULT IN TRADING LOSSES
On January 1, 1999, eleven countries in the European Union established
fixed conversion rates on their sovereign currencies and converted to a common
single currency, the Euro. The inauguration of the Euro, or any nation's
subsequent withdrawal from the European Monetary Union, could adversely affect
the trading opportunities, or trading results generally, of currency traders.
Further, the absence of Euro pricing data may reduce the effectiveness of
Campbell & Company's trading models.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
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<PAGE> 49
3. SELECTED FINANCIAL DATA
DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS
<TABLE>
<CAPTION>
PERIOD
ENDED YEAR ENDED PERIOD ENDED
JUNE 30, ---------------------------------------- DECEMBER 31,
1999 1998 1997 1996 1995 1994
-------- -------- -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Total Assets................... $431,709 $350,791 $220,404 $111,367 $46,492 $21,066
Total Partners' Capital........ 424,113 343,957 212,710 107,737 45,074 20,599
Total Income (Loss)............ 31,278 68,510 40,234 26,624 6,201 (1,215)
Net Income (Loss).............. 15,565 40,695 24,011 19,058 3,509 (2,236)
Net Income (Loss) Per General
and Limited Partner Unit..... 69.00 232.33 208.78 327.00 103.74 (133.42)
Increase (Decrease) in Net
Asset Value per General and
Limited Partner Unit......... 52.33 211.67 181.48 296.12 88.27 (116.23)
</TABLE>
NOTE: The Fund commenced trading in April 1994; financial information is
provided since that inception date.
4. INVESTMENT FACTORS
VALUE OF DIVERSIFYING INTO MANAGED FUTURES
Modern portfolio theory suggests that a diverse portfolio with assets that
have little or no correlation with each other should have higher returns and
lower risk than a less diversified portfolio. The Nobel Prize for Economics in
1990 was awarded to Dr. Harry Markowitz for demonstrating that the total return
can increase, and/or risks 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 Fund 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 Fund 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 Fund's performance
will likely have no relation to the performance of equity and debt instruments,
reflecting Campbell & Company's belief that certain factors which affect equity
and debt prices may affect the Fund 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
bear and bull markets. Campbell & Company has no expectation that the Fund'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
-11-
<PAGE> 50
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.
100% INTEREST CREDIT
Unlike some "alternative investment" funds, the Fund does not borrow money
in order to obtain leverage, so the Fund does not incur any interest expense.
Rather, the Fund's margin deposits are maintained in cash equivalents, such as
U.S. Treasury bills, and interest is earned on 100% of the Fund's available
assets, which include unrealized profits credited to the Fund'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, metals, meats, grains and
tropical commodities. While the Fund itself trades across a diverse selection of
global markets, an investment in the Fund is not a substitute for overall
portfolio diversification.
ABILITY TO PROFIT OR LOSE IN A RISING OR FALLING MARKET ENVIRONMENT
The Fund 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 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 allocates the Fund's capital among
more than 50 markets around the globe 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 Fund that divides capital among different trading systems
in an attempt to reduce performance volatility.
CONVENIENCE
Through the Fund, 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 excellent liquidity. Some markets
trade 24 hours on business days. While there can be exceptional cases where
there may be no buyer or seller for a particular market, the Fund selects
markets for investment based upon, among other things, its 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.
-12-
<PAGE> 51
Also, investors may redeem all or a portion of their units on a monthly
basis, subject to a declining redemption fee during the first year of ownership.
See "Distributions and Redemptions."
LIMITED LIABILITY
Investors' liability is limited to the amount of their investment in the
Fund. Investors will not be required to contribute additional capital to the
Fund.
HISTORICAL PERSPECTIVE OF MANAGED FUTURES
MANAGED FUTURES INDUSTRY VOLUME BY MARKET SECTOR
PIE CHART 1980
<TABLE>
<CAPTION>
AGRICULTURE OTHER METALS ENERGY INTEREST RATES CURRENCIES
- ----------- ----- ------ ------ -------------- ----------
<S> <C> <C> <C> <C> <C>
64.2% 1.10% 16.30% 0.30% 13.50% 4.60%
</TABLE>
PIE CHART 1988
<TABLE>
<CAPTION>
INTEREST RATES OTHERS ENERGY CURRENCIES AGRICULTURE STOCK INDICES METALS
- -------------- ------ ------ ---------- ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
55.1% 0.20% 12.70% 5.40% 14.60% 8.40% 3.20%
</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 1998. In 1980 the agricultural sector dominated most
managed futures allocations. However, by 1998 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 Fund in particular.
GROWTH IN THE MANAGED FUTURES INDUSTRY
JANUARY 1980 -- DECEMBER 1998
GROWTH CHART
<TABLE>
<CAPTION>
- ------------------------------------------------------------ -------------------------------------------
<S> <C>
80 0.30
0.30
82 0.50
0.70
84 1.00
1.40
86 2.60
2.60
88 4.30
5.20
90 8.50
11.40
92 19.00
22.60
94 19.10
22.80
96 28.80
34.90
98 39.90
</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.
-13-
<PAGE> 52
5. CAMPBELL & COMPANY, INC.
DESCRIPTION
Campbell & Company is the general partner and commodity trading advisor of
the Fund. 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 June 30, 1999,
Campbell & Company had approximately $1.6 billion under management in the
futures and forward markets (including approximately $1.3 billion traded
pursuant to the same Financial, Metal & Energy Large Portfolio as primarily
traded by the Fund). 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. It was the sole pool operator and general partner of
The Capital Fund I, which ceased operations in 1989. Other pools currently
operated by Campbell & Company and Mr. D. Keith Campbell include: Campbell
Financial Futures Fund, L.P.; Campbell Fund Trust; Campbell Global Assets Fund
Limited; Campbell Global Investment Fund Limited; Institutional Futures Fund
Limited Partnership; The Advantage Futures Fund, A Limited Partnership; and the
Capital Fund II, A Limited Partnership. Campbell & Company's compensation is
discussed in "Charges to the Fund."
The principals of Campbell & Company have not purchased and do not intend
to purchase units.
Campbell & Company has agreed that its capital account as general partner
at all times will equal at least 1% of the net aggregate capital contributions
of all partners.
There has never been any material administrative, civil or criminal
proceedings brought against Campbell & Company or its principals, whether
pending, on appeal or concluded.
Additional past performance information for Campbell & Company begins on
page APPII-1.
Campbell & Company's principals are Richard M. Bell, D. Keith Campbell,
William C. Clarke III, Bruce L. Cleland, Xiaohua Hu, Philip Lindner, James M.
Little, Theresa D. Livesey, V. Todd Miller, Albert Nigrin, Markus Rutishauser
and C. Douglas York. The majority voting stockholder of Campbell & Company is D.
Keith Campbell.
Richard M. Bell, 46, 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'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, 56, has served as the Chairman of the Board of Directors
of Campbell & Company since it began operations, was President until January 1,
1994, and Chief Executive Officer until January 1, 1998. Mr. Campbell is the
majority voting stockholder. From 1971 through June 1978 he was a registered
representative of a futures commission merchant. Mr. Campbell has acted as a
commodity trading advisor since January 1972 when, as general partner of the
Campbell Fund, a limited partnership engaged in commodity futures trading, he
assumed sole responsibility for trading decisions made on behalf of the Fund.
Since then he has applied various technical trading models to numerous
discretionary futures trading accounts. Mr. Campbell is registered with the CFTC
and NFA as a commodity pool operator. He is an Associated Person of Campbell &
Company.
William C. Clarke, III, 48, 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
-14-
<PAGE> 53
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, 51, 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, 35, 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 Toyohasi, Mr. Hu was also a Visiting Researcher in
Computer Science and Operations Research and published several research papers.
Phil Lindner, 45, 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, 53, 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.
Theresa D. Livesey, 36, 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. Livesey 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. Livesey is a C.P.A. and has a B.S.
in Accounting from the University of Delaware. Ms. Livesey is an Associated
Person of Campbell & Company.
V. Todd Miller, 37, 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, 37, 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
-15-
<PAGE> 54
both graduate and undergraduate students. While teaching, he also wrote and
published Neural Networks for Pattern Recognition. Mr. Nigrin received a B.A. in
Electrical Engineering in 1984 from Drexel University. He than 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, 38, serves as Vice President-Trading and has been
employed by Campbell & Company since October 1993, with responsibility for
day-to-day foreign exchange trading. 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.
C. Douglas York, 41, 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 OF JULY 1999
Keith Campbell - Chairman
Bruce Cleland - President & CEO
<TABLE>
<CAPTION>
ADMINISTRATION, CLIENT INFORMATION RESEARCH TRADING
ACCOUNTING & DEVELOPMENT TECHNOLOGY
COMPLIANCE
<S> <C> <C> <C> <C>
Dick Bell
Bill Clarke Senior Vice President
Terri Livesey Jim Little Phil Linder Executive
CFO, Secretary Executive Vice President Vice President Doug York
& Treasurer Vice President Senior Vice President
14 members 12 members 8 members 12 members 14 members
</TABLE>
THE ADVISORY AGREEMENT
Campbell & Company has the sole authority and responsibility for directing
the investment and reinvestment of the Fund's assets. The Fund's advisory
agreement with Campbell & Company is valid for successive periods of one year
subject to each party's right to terminate on 60 days' prior written notice. It
is unlikely that the Advisory Agreement would be terminated other than as a
direct result of the dissolution of the Fund.
The advisory agreement does not alter any fiduciary duties that may
otherwise be imposed by state law on Campbell & Company.
TRADING SYSTEMS
Campbell & Company makes the Fund'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.
Campbell & Company offers seven trading portfolios:
1) The Financial, Metal & Energy Large Portfolio,
2) The Financial, Metal & Energy Small Portfolio,
-16-
<PAGE> 55
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.
Approximately 75% of the Fund's assets are currently 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. The remaining 25% is currently
allocated to the Global Diversified Large Portfolio, which trades in the same
forward and futures markets as FME Large, as well as agricultural markets
including coffee, rubber, orange juice, grains, fibers, meat and livestock.
Campbell & Company currently allocates the Fund's assets as follows: 84% to
financial contracts, 4% to metals, 10% to energy products, and 2% to
agricultural contracts. These percentages will fluctuate from time to time. See
the following pie chart for a current listing of contracts, by sector.
PORTFOLIO COMPOSITION OF THE FUND AS OF JULY 1999
[PIE CHART]
CURRENCIES - 20%
Australian Dollar
British Pound
Euro
Hong Kong Dollar
Indonesian Rupiah
Japanese Yen
Mexican Peso
New Zealand Dollar
Norwegian Krone
Singapore Dollar
South African Rand
Swiss Franc
CROSS RATES - 15%
AD/CD
AD/JY
BP/JY
BP/SF
CD/JY
EU/BP
EU/JY
SF/JY
LONG-TERM INTEREST RATES - 24%
Bobl (Germany)
Bond/3 Yr. (Australia)
Bond/10 Yr. (Australia)
BTP (Italy)
Bund (Germany)
JGB (Japan)
Long Gilt (UK)
Notional (France)
Treasury Bond/30 Yr. (USA)
Treasury Note/5 Yr. (USA)
Treasury Note/10 Yr. (USA)
SHORT-TERM INTEREST RATES - 7%
Bankers Bill (Australia)
BAX (Canada)
Euribor (Europe)
Eurodollar (USA)
Euroswiss (Switzerland)
Euroyen (Japan)
Schatz (Germany)
Short Sterling (UK)
STOCK INDICES - 18%
All Ords (Australian)
DAX (German)
FTSE (UK)
Hang Seng (Hong Kong)
IBEX (Spain)
MSCI (Taiwan)
Nikkei (Japan)
OMLX (Sweden)
S&P 500 (USA)
METALS - 4%
Aluminum
Cooper
Gold
Nickel
ENERGY - 10%
Brent Crude
Gas Oil
Natural Gas
WTI Crude
AGRICULTURAL - 2%
Coffee
Corn
Cotton
Soybean Oil
Wheat
PORTFOLIO COMPOSITION PIE CHART TO COME
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 Fund. There are no
limits on the portion of assets that can be allocated to any single sector.
-17-
<PAGE> 56
Campbell & Company's trading models are designed to detect and exploit
medium-term to long-term price changes, while also applying proven risk
management and portfolio management principles. No one market exceeds 10% of a
total portfolio allocation.
Campbell & Company believes that utilizing multiple trading models for the
same client account provides an important level of diversification, and is most
beneficial when multiple contracts in each market are traded. Every trading
model may not trade every market. It is possible that one trading model may
establish a long position while another trading model establishes a short
position in the same market. Since it is unlikely that both positions would
prove profitable, in retrospect one or both trades will appear to have been
unnecessary. It is Campbell & Company's policy to follow trades signaled by each
trading model independently of the other models.
Over the course of a long-term trend, there are times when the risk of the
market does not appear to be justified by the potential reward. In such
circumstances some of Campbell & Company's trading models may exit a winning
position prior to the end of a price trend. While there is some risk to this
method (for example, being out of the market during a significant portion of a
price trend), Campbell & Company's research indicates that this is well
compensated for by the decreased volatility of performance which may result.
Campbell & Company's trading models may include trend-following trading
models, counter-trend trading models, and trading models that do not seek to
identify or follow price trends at all. Campbell & Company expects to develop
additional trading models and to modify models currently in use and may or may
not employ all such models for all clients' accounts. The trading models
currently used by Campbell & Company may be eliminated from use if Campbell &
Company ever believes such action is warranted.
While Campbell & Company normally follows a disciplined systematic approach
to trading, on occasion it may override the signals generated by the trading
models. Such 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 during periods of reduction in position size the
return that would have been realized had the account been fully invested would
be reduced.
Campbell & Company may, from time to time, increase or decrease the total
number of contracts held based on increases or decreases in the Fund'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 Fund'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.
6. MANAGEMENT'S ANALYSIS OF OPERATIONS
INTRODUCTION
The offering of the Fund's units of limited partnership interest commenced
on January 12, 1994, and the initial offering terminated on April 15, 1994 with
proceeds of $9,692,439. The continuing offering period commenced immediately
after the termination of the initial offering period; additional subscriptions
totaling $388,111,845 have been accepted during the continuing offering period
as of July 1, 1999. Redemptions over the same time period totaled $68,778,565.
The Fund commenced operations on April 18, 1994.
-18-
<PAGE> 57
CAPITAL RESOURCES
The Fund will raise additional capital only through the sale of units
offered pursuant to the continuing offering, and does not intend to raise any
capital through borrowing. Due to the nature of the Fund's business, it will
make no capital expenditures and will have no capital assets which are not
operating capital or assets.
LIQUIDITY
Most United States commodity exchanges limit fluctuations in commodity
futures contract prices during a single day by regulations referred to as "daily
price fluctuation limits" or "daily limits." During a single trading day, no
trades may be executed at prices beyond the daily limit. Once the price of a
futures contract has reached the daily limit for that day, positions in that
contract can neither be taken nor liquidated. Commodity futures prices have
occasionally moved to the daily limit for several consecutive days with little
or no trading. Similar occurrences could prevent the Fund from promptly
liquidating unfavorable positions and subject the Fund to substantial losses
which could exceed the margin initially committed to such trades. In addition,
even if commodity futures prices do not move to the daily limit, the Fund may
not be able to execute futures trades at favorable prices, if little trading in
such contracts is taking place. Other than these limitations on liquidity, which
are inherent in the Fund's commodity futures trading operations, the Fund's
assets are expected to be highly liquid.
RESULTS OF OPERATIONS
The returns for the six months ending June 30, 1999 and for the years ended
December 31, 1998 and 1997 were 3.15%, 14.60% and 14.31%, respectively.
1999 (6 MONTHS ENDING JUNE 30)
The returns for the six months ending June 30, 1999 and 1998 were 3.15% and
2.81%, respectively. Of the 3.15% increase, approximately 5.14% was due to
trading gains (before commissions) and approximately 2.18% was due to interest
income, offset by approximately 4.17% in brokerage fees, performance fees,
operating costs and offering costs borne by the Fund. An analysis of the 5.14%
trading losses by sector is as follows:
<TABLE>
<CAPTION>
SECTOR % GAIN (LOSS)
------ -------------
<S> <C>
Energy......................... 2.76%
Interest Rates................. 2.39
Currencies..................... .77
Stock Indices.................. .15
Agriculturals.................. (.24)
Metals......................... (.69)
----
5.14%
====
</TABLE>
In January 1999, most markets the Fund trades in were trendless, yet
volatile enough to move it in and out of positions, incurring a string of
relatively small losses. The gain for February was earned primarily in the
currency and interest rate sectors. Short positions in U.S. treasury notes and
bonds yielded enough profits to compensate for the losses incurred in European
interest rates, which have been slower to turn from long to short. The yen was
volatile, trading both sharply higher and sharply lower against the U.S. dollar
during February, but it ended the month on a slide which appeared to have some
momentum. On balance the Fund's yen positions lost money during February, but
short positions in the European currencies, primarily the Swiss franc and the
Euro, were very profitable. In March, the currency and energy sectors provided
positive returns. The U.S. dollar continued to appreciate against the Euro and
the Swiss franc, while weaker yen was profitable against sterling, the Swiss
franc, and the Euro. All other portfolio sectors showed small losses for the
month.
April produced profitable results for the Fund with gains in the
currencies, stock indicies, energy and metals sectors. The U.S. dollar continued
its strong upward trend against the Euro and Swiss franc which lead to the
Fund's gains in the currency sector. The Fund incurred losses in global interest
rates where the markets were too trendless to offer any real opportunity. In
May, the energy and metal sectors were down sharply causing losses on the Fund's
long positions in these two sectors contributing to our loss for the month.
Profits on short interest rate positions were offset by losses on long U.S.
dollar and foreign equity index positions. Interest rate positions were the
biggest contributor to the positive performance for June. The Fund's short
positions in this sector profited from the persistent increase in the U.S.
-19-
<PAGE> 58
interest rates. The Fund also had strong performance in the energy and stock
indices sectors during the month.
1998
The returns for the years ended December 31, 1998 and 1997 were 14.60% and
14.31%, respectively. For 1998, the majority of the 14.60% increase in net asset
value per unit occurred in the second half of the year, when approximately 77%
of the total trading gains for the year were posted. Of the 14.60% increase,
approximately 20.88% was due to trading gains (before commissions) and
approximately 4.81% was due to interest income, offset by approximately 11.09%
in brokerage fees, performance fees and operating costs borne by the Fund. An
analysis of the 20.88% trading gains by sector is as follows:
<TABLE>
<CAPTION>
SECTOR % GAIN (LOSS)
------ -------------
<S> <C>
Interest Rates................. 18.46%
Currencies..................... 2.41
Stock Indices.................. 2.03
Energy......................... (.11)
Agriculturals.................. (.62)
Metals......................... (1.29)
-----
20.88%
=====
</TABLE>
1998 began with positive performance being achieved in the interest rates,
stock indices and energy sectors. In January the interest rates were the most
profitable sector, with the deflationary implications of the Asian financial
crisis continuing to push U.S. and European yields lower. February was a month
of major trend transition. The significant losses in the currencies and cross
rates pulled returns down, most of which was attributable to the positions held
outright in Japanese yen and yen cross positions held against the other major
currencies. Currencies bounced back in March and stock indices were also
positive in March, as world equity markets continued their seemingly endless
ascent.
April was a month in which most market sectors performed poorly. The only
sector to finish on a positive note was the stock indices sector, where
continued strong economic growth and the perception of low or non-existent
inflation pushed U.S. and European stock indices to new highs. May resulted in a
continuing decline in yen against the U.S. and European currencies. Long-term
interest rate instruments moved higher, as Japan tried to re-float its economy
by lowering interest rates even further. The most profitable sector for the
month of June was foreign exchange, with profits being realized in Japanese yen,
Malaysian ringgitt and South African rand. A combination of excess production
and declining Asian demand for crude oil pushed crude prices lower during the
first half of June, but the announcement of further cuts by OPEC producers
caused a sharp short covering rally in the middle of the month. The Fund was
modestly short the energy sector during June, and realized small gains overall.
July was an unusual month in that the moderate negative result was broadly
dispersed over almost every market sector. Stock indices such as the S&P and
Nikkei had substantial negative results in July. With the situations in Asia and
Russia worsening, many global capital markets experienced a "flight to safety"
during August, as investors sold equities and bought government bonds. In August
virtually all returns for the month came from the global interest rates sector.
All other sectors showed small gains and losses, which were largely offsetting.
In September the interest rates sector returns dominated again. The Fund's
global bond positions did very well, and shorter-term interest rate positions
also contributed.
In early October the turmoil surrounding hedge funds' participation in
financial markets had a profound effect on the currency and interest rate
markets. Fears that other hedge funds had similar exposure prompted banks and
investment houses to reduce credit lines aggressively. The shift of investment
priority from profit potential to capital preservation created severe market
dislocations, as many large positions were unwound. The Fund recorded slight
losses in the long term interest rate sector, as long-term interest rate
instruments were initially bid to record highs, and then collapsed. Currencies
were the most profitable sector for the month with the majority of the gains
coming from the Japanese yen, Deutsche mark, and Swiss franc. November was a
choppy month, with the exception of the energy complex, which trended sharply
lower posting gains for the month. The currency sector contributed most of the
losses for the month. With the historic advent of the Euro closing in, and the
uncertainty that such a momentous event creates, there was anticipation of
illiquid and choppy currency markets through the end of the year. December was a
relatively
-20-
<PAGE> 59
slow month, largely as a result of the market illiquidity. Global interest rates
continued to decline except in the U.S. where bond prices weakened. The yen
continued to strengthen against the U.S. dollar posting gains for the month. The
strength of the yen was largely a result of the sharp increase in Japanese
interest rates, and the Fund's short positions in the interest rate instruments
benefited, although this was largely offset by losses in the Fund's U.S.
interest rate positions.
1997
For 1997, the majority of the 14.31% increase occurred in the second half
of the year, when approximately 90% of the total trading gains for the year were
posted. Unprecedented volatility in global equity markets provided good trading
opportunities, particularly in the stock indices and interest rates futures. The
long positions maintained in the S&P 500 Index and natural gas futures contracts
proved to be the best performing markets for the year. Trading in the currencies
sector also provided significant contributions to the positive performance. The
Fund continued to benefit from new capital management strategies and more
diverse portfolios. The 14.31% increase was the result of an approximate 19.22%
increase due to trading gains (before commissions) and an approximate 4.76%
increase due to interest income, offset by an approximate 9.67% decrease as a
result of brokerage fees, performance fees and operating costs borne by the
Fund. An analysis of the 19.22% trading gains by sector is as follows:
<TABLE>
<CAPTION>
SECTOR % GAIN (LOSS)
------ -------------
<S> <C>
Stock Indices.................. 6.98%
Interest Rate.................. 6.58
Currencies..................... 5.64
Energy......................... 2.71
Agriculturals.................. (0.64)
Metals......................... (2.05)
-----
19.22%
=====
</TABLE>
The Fund is unaware of any (i) anticipated known demands, commitments or
capital expenditures; (ii) material trends, favorable or unfavorable, in its
capital resources; or (iii) trends or uncertainties that will have a material
effect on operations. From time to time, certain regulatory agencies have
proposed increased margin requirements on commodity futures contracts. Because
the Fund generally uses a small percentage of assets as margin, the Fund does
not believe that any increase in margin requirements, if adopted as proposed,
will have a material effect on the Fund's operations. Management cannot predict
whether the Fund's net asset value per unit will increase or decrease. Inflation
is not a significant factor in the Fund's operations, except to the extent that
inflation may affect futures' prices.
OFF-BALANCE SHEET RISK
The term "off-balance sheet risk" refers to an unrecorded potential
liability that, even though it does not appear on the balance sheet, may result
in future obligation or loss. The Fund trades in futures and forward contracts
and is therefore a party to financial instruments with elements of off-balance
sheet market and credit risk. In entering into these contracts there exists a
risk to the Fund, market risk, that such contracts may be significantly
influenced by market conditions, such as interest rate volatility, resulting in
such contracts being less valuable. If the markets should move against all of
the futures interest positions of the Fund at the same time, and if Campbell &
Company were unable to offset positions, the Fund could lose all of its assets
and the limited partners would realize a 100% loss. Campbell & Company minimizes
market risk through real-time monitoring of open positions, diversification of
the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds
30%.
In addition to market risk, in entering into futures and forward contracts
there is a credit risk that a counterparty will not be able to meet its
obligations to the Fund. The counterparty for futures contracts traded in the
United States and on most foreign futures exchanges is the clearinghouse
associated with such exchange. In general, clearinghouses are backed by the
corporate members of the clearinghouse who are required to share any financial
burden resulting from the non-performance by one of their members and, as such,
should significantly reduce this credit risk.
In cases where the clearinghouse is not backed by the clearing members,
like some foreign exchanges, it is normally backed by a consortium of banks or
other financial institutions.
In the case of forward contracts, which are traded on the interbank market
rather than on exchanges, the counterparty is generally a single bank or other
financial institution, rather than a
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<PAGE> 60
group of financial institutions; thus there may be greater counterparty credit
risk. Campbell & Company trades for the Fund only with those counterparties
which it believes to be creditworthy. All positions of the Fund are valued each
day on a mark-to-market basis. There can be no assurance that any clearing
member, clearinghouse or other counterparty will be able to meet its obligations
to the Fund.
7. PAST PERFORMANCE OF THE CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
[APRIL 1994 (INCEPTION) -- JUNE 1999]
TYPE OF POOL: Publicly offered
INCEPTION OF TRADING: April 18, 1994
AGGREGATE GROSS CAPITAL SUBSCRIPTIONS TO THE FUND: $397,804,278
CURRENT NET ASSET VALUE OF THE FUND: $424,113,497
WORST MONTHLY PERCENTAGE DRAW-DOWN(1): April 1998/6.69%
WORST PEAK-TO-VALLEY DRAW-DOWN(1): June 1994 - January 1995/17.99%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
RATE OF RETURN(2)
(Computed on a compounded monthly basis)
MONTH 1999 YTD 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
January -5.02% 2.74% 4.52% 5.79% -4.67%
February 1.67% -2.81% 2.03% -5.97% 4.21%
March 0.46% 4.68% -2.47% 4.72% 8.77%
April 5.33% -6.69% -3.60% 3.59% 1.13% 0.16%
May -3.69% 4.07% -2.92% -2.18% -0.84% -2.42%
June 4.81% 1.29% 2.48% 0.75% -1.77% 5.15%
July -4.00% 9.12% -0.78% -3.82% -3.94%
August 9.48% -5.69% 1.84% 5.47% -3.89%
September 2.47% 4.51% 1.77% -3.93% 5.20%
October 3.97% 1.83% 12.44% 0.79% -0.14%
November -0.75% 0.17% 11.00% -0.15% -6.67%
December 0.30% 4.46% -4.41% 5.35% -4.98%
Total 3.15% 14.60% 14.31% 30.46% 9.99% -11.62%
</TABLE>
(1) "Draw-down" means losses experienced by the Fund over a specified period.
(2) The "Rate of Return" for a period is calculated by dividing the net profit
or loss by the assets at the beginning of such period. Additions and
withdrawals occurring during the period are included as an addition to or
deduction from beginning net assets in the calculations of "Rates of
Return."
The Campbell Strategic Allocation Fund is currently one of approximately 70
accounts managed by Campbell & Company, with total assets as of June 30, 1999 of
$1.6 billion. Approximately $1.3 billion of this total is traded pursuant to
Campbell's FME Large Portfolio, the portfolio primarily utilized to trade the
Fund's assets.
Please refer to Appendix II for additional performance information and
graphic presentations of the Fund and the historical performance data for the
FME Large Portfolio and Global Diversified Large Portfolio, the two portfolios
in which the Fund trades.
8. CONFLICTS OF INTEREST
CAMPBELL & COMPANY, INC.
A conflict exists between Campbell & Company's interests in and its
responsibilities to the Fund. The conflicts are inherent in Campbell & Company
acting as general partner and as trading advisor to the Fund. The conflicts and
the potential detriments to the limited partners are described below.
Campbell & Company's selection of itself as trading advisor was not
objective, since it is also the general partner of the Fund. In addition, it has
a disincentive to replace itself as the advisor. The
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<PAGE> 61
Advisory Agreement between the Fund 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 Fund
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 Fund.
Neither Campbell & Company nor its principals devote their time exclusively
to the Fund. Campbell & Company (or its principals) acts as general partner to
other commodity pools and trading advisor to other accounts, which may compete
with the Fund for Campbell & Company's services. Thus, Campbell & Company could
have a conflict between its responsibilities to the Fund 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 Fund. Campbell & Company, however,
trades all accounts of the Financial, Metals & Energy Large Portfolio (including
the Fund's) 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 Fund, 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 Fund'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 in
the same markets and at the same time, using the commodity broker to be used by
the Fund.
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 commodity broker, the Fund 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
Fund.
THE COMMODITY BROKER AND THE FOREIGN EXCHANGE DEALER
The commodity 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 Fund. The commodity broker also may serve as a broker for
other commodity pools and the foreign exchange dealers act as dealers for other
clients, which could give rise to conflicts of interest between their
responsibility to the Fund and to those pools and clients.
THE SELLING AGENTS
A current list of the selling agents for the Fund includes, but is not
limited to: A.G. Edwards & Sons, Inc.; Ferris, Baker Watts Incorporated; First
Union Capital Markets Corp.; H. Beck, Inc.; J.C. Bradford & Co.; Linsco/ Private
Ledger Corp.; PaineWebber Incorporated; Securities America, Inc.; and Wachovia
Securi-
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<PAGE> 62
ties, Inc. The selling agents (or their assignees) which are registered futures
commission merchants or introducing brokers will receive, beginning in the
thirteenth month after the sale of the units, ongoing compensation based on the
net asset value of the units which remain outstanding. Consequently, in advising
clients whether they should redeem their units or purchase additional units,
such selling agents will have a conflict of interest between the Selling Agent's
interest in maximizing the ongoing compensation which they will receive and
their interest in giving their client the financial advice which is in such
clients' best interests.
FIDUCIARY DUTY AND REMEDIES
In evaluating the foregoing conflicts of interest, a prospective investor
should be aware that Campbell & Company, as general partner, has a
responsibility to limited partners to exercise good faith and fairness in all
dealings affecting the Fund. The fiduciary responsibility of a general partner
to the limited partners is a rapidly developing and changing area of the law and
limited partners who have questions concerning the duties of Campbell & Company
as general partner should consult with their counsel. In the event that a
limited partner believes that Campbell & Company has violated its fiduciary duty
to the limited partners, he may seek legal relief individually or on behalf of
the Fund under applicable laws, including partnership and commodities laws, to
recover damages from or require an accounting by Campbell & Company. The Limited
Partnership Agreement is governed by Delaware law and any breach of Campbell &
Company's fiduciary duty under the Limited Partnership Agreement will generally
be governed by Delaware law. The Limited Partnership 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 the prospectus. Limited partners may also have
the right, subject to applicable procedural and jurisdictional requirements, to
bring partnership class actions in federal court to enforce their rights under
the federal securities laws and the rules and regulations promulgated thereunder
by the SEC. Limited partners 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 limited partners. Limited partners should be aware that performance by
Campbell & Company of its fiduciary duty to the Fund is measured by the terms of
the Limited Partnership Agreement as well as applicable law.
Limited partners 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
Fund or any limited partner 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.
Campbell & Company and its controlling persons shall not have any liability
to the Fund or to any limited partner for any loss suffered by the Fund 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 Fund and
such course of conduct did not constitute negligence or misconduct of Campbell &
Company. The Fund has agreed to indemnify Campbell & Company and its controlling
persons against claims, losses or liabilities based on their conduct relating to
the Fund, 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 Fund 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 Fund. 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 15 of the Limited
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<PAGE> 63
Partnership Agreement, included as Exhibit A to the prospectus.
The Fund 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 Section 15.2 of the Limited Partnership Agreement). The position of the SEC
is that any such indemnification is contrary to the federal securities laws and
therefore unenforceable.
9. CHARGES TO THE FUND
The following list of expenses includes all compensation, fees, profits and
other benefits (including reimbursement of out-of-pocket expenses) which
Campbell & Company, the selling agents, commodity broker and the affiliates of
those parties may earn or receive in connection with the offering and operation
of the Fund. Prospective investors should refer to the Summary for an estimate
of the break-even amount that is required for an investor to break even in the
first year of trading.
BROKERAGE FEE
The Fund pays a single asset-based fee for all brokerage and management
services. The fee is equal to up to 8% per annum of month-end net assets of the
Fund, 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 8% brokerage fee, Campbell & Company remits up to 1% to the
commodity broker for execution and clearing costs and 4% to the selling agents
for ongoing services to the limited partners. Campbell & Company will retain the
remaining 3% as management fees (2% for providing advisory services and 1% for
acting as general partner). The amount of the fee to be paid to the commodity
broker is evaluated from time to time based on the amount of trading for the
Fund that the broker is required to clear, but at no time will the amount exceed
the 1%.
<TABLE>
<S> <C> <C> <C>
- Up to 1% to
commodity
broker
- 4% to selling
agents
- 2% to
Campbell Campbell &
Fund - Up to 8% - & Company
Brokerage Fee Company (as trading
advisor)
- 1% to
Campbell &
Company
(as general
partner)
</TABLE>
OTHER FUND EXPENSES
The Fund 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
offering expenses. reimbursed, up to
2.5% of aggregate
subscriptions, in
30-month payment
periods.
Dealers "Bid-ask" spreads. Indeterminable
because imbedded in
price of forward
contract.
Others Legal, accounting, As incurred, up to a
printing, postage maximum of 0.5% of
and administrative average month-end
costs. net assets per
annum.
</TABLE>
The above fee, together with the brokerage fee, is the complete
compensation that will be received by Campbell & Company or its affiliates from
the Fund. This excludes redemption fees which will be charged to some limited
partners, if they redeem prior to one year of ownership.
CAMPBELL & COMPANY, INC.
BROKERAGE FEE
Campbell & Company receives a brokerage fee of up to 8% per annum as
described earlier.
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<PAGE> 64
Currently, due to a change in the average trading velocity (the number of
trades executed within a given period) for the Fund, as well as additional
allocations to forward contracts which trade on the inter-bank market, the
commodity broker has agreed to lower its fee from 1% to 0.7% annually, which
lowers the Fund's total brokerage fee to 7.7%. If trading velocity and/or
portfolio allocation change again in the future, the fee may be further reduced,
or it may be raised. The Fund's brokerage and commodity broker fees will not
exceed 8% and 1%, respectively.
REDEMPTION FEE
Redemption fees apply through the first twelve month-ends following
purchase (the month-end as of which the unit is purchased is counted as the
first month-end) as follows: 4% of net asset value per unit redeemed through the
third month-end, 3% of net asset value per unit redeemed through the sixth
month-end, 2% of net asset value per unit redeemed through the ninth month-end,
and 1% of net asset value per unit redeemed through the twelfth month-end. After
the twelfth month-end following purchase of a unit, no redemption fees apply.
Because the purchase date counts as of the first month-end in determining
whether a redemption fee applies, no redemption fee would be due in respect of a
unit redeemed on the first anniversary of the purchase.
PERFORMANCE FEE
The performance fee equals 20% of the aggregate cumulative appreciation (if
any) in the net asset value of the units calculated pursuant to the terms of the
advisory agreement between the Fund and Campbell & Company and paid quarterly.
"Aggregate cumulative appreciation" means the total increase in unit value from
the commencement of trading, minus the total increase in unit value for all
prior quarters, 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 any payment is made by the Fund in respect of a performance fee, and the
Fund 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 Fund overall incurred net losses. Trading losses shall be
carried forward and no further performance fees may be paid until the prior
losses have been recovered.
Below is a sample calculation of how the performance fee is determined:
Assume the Fund paid a performance fee at the end of the fourth quarter of
1998 and assume that the Fund recognized trading profits (net of all brokerage
fees and operating and offering expenses) of $200,000 during the first quarter
of 1999. The aggregate cumulative 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). Now assume that the Fund paid a performance fee at the
end of the third quarter of 1998 but did not pay a performance fee at the end of
the fourth quarter of 1998 because it had trading losses of $100,000. If the
Fund recognized trading profits of $200,000 at the end of the first quarter of
1999, the aggregate cumulative 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 limited partners 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
Fund as a whole has not experienced aggregate cumulative 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
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<PAGE> 65
the Fund 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.
Performance fees are not reduced by redemption charges.
The brokerage fee and performance fee may be increased upon sixty days'
notice to the limited partners, as long as the notice explains their redemption
and voting rights. Existing limited partners who redeem within twelve months
after any increase in fees would not be required to pay any redemption fees.
THE COMMODITY BROKER
As described earlier, the commodity broker receives from Campbell & Company
(and not the Fund) up to 1% per annum of the net assets of the Fund, which is a
portion of the maximum 8% brokerage fee. The commodity 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 commodity broker is
competitive with rates paid by other trading funds having assets and structure
similar to the Fund. The asset-based compensation to the commodity broker is
equivalent to approximately $10-$15 per round-turn trade per contract. The
compensation to be paid to the commodity broker will not exceed the guidelines
established by the North American Securities Administrators Association, Inc.
("NASAA").
SELLING AGENTS
The selling agents receive from Campbell & Company (and not the Fund)
selling commissions of up to 4% of the subscription amount of each subscription
for units. In addition, commencing thirteen months after the sale of units and
in return for ongoing services to the limited partners, Campbell & Company will
pay those selling agents (or their assignees) which are registered at such time
with the NFA as futures commission merchants or introducing brokers a portion of
the 8% brokerage fee of up to 4% per annum of average month-end net assets of
all units which remain outstanding.
Selling agents and registered representatives who are not registered with
the NFA as described above may receive additional selling commissions from
Campbell & Company. These additional selling commissions are paid on the same
basis as the ongoing payments, provided that the total of additional
commissions, plus:
(1) the initial 4% selling commission;
(2) salaries, expenses and bonuses of employees of Campbell & Company
engaged in wholesaling activities; and
(3) per-unit organization and offering costs properly deemed to constitute
costs allocable to the selling agents, such as a selling brochure,
seminar costs and travel expenses,
do not exceed 10% of such units' initial sale price. Such compensation may be
deemed to create a conflict of interest in that the selling agents have a
disincentive in advising investors to redeem their units. See "Conflicts of
Interest."
FOREIGN EXCHANGE DEALERS
The Fund 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.
OFFERING EXPENSES
The offering expenses during the continuing offering period as of June 30,
1999 totaled $9,257,659 and are estimated at $1,800,000 for the nine months
following the date of this prospectus, all of which will be advanced by Campbell
& Company. Such expenses include all fees and expenses in connection with the
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 Fund. Subject to the limit described below, Campbell &
Company will be reimbursed, without interest, by the Fund in 30-month payment
periods throughout the continuing offering. In no event shall the reimbursement
exceed 2.5% of the total subscriptions accepted by Campbell & Company, which,
based on the 30-month amortization period, repre-
-27-
<PAGE> 66
sents a maximum of 1% of month-end Net Assets per annum. Organization and
offering expenses equal to $240,961 were incurred during the initial offering
period and were advanced by Campbell & Company. Such expenses were reimbursed in
the same manner and were subject to the same 2.5% limit.
The Fund is required by certain state securities administrators to disclose
that the "organization and offering expenses" of the Fund, as defined by the
NASAA Guidelines, will not exceed 15% of the total subscriptions accepted.
Campbell & Company, and not the Fund, shall be responsible for any expenses in
excess of such limitation. Since Campbell & Company has agreed to limit its
reimbursement of such expenses to 2.5% of total subscriptions, the NASAA
Guidelines limit of 15% of total subscriptions (even when added to the selling
commissions) will not be reached.
OTHER EXPENSES
The Fund bears its operating expenses, including but not limited to
administrative, legal and accounting fees, and any taxes or extraordinary
expenses payable by the Fund. Such expenses are estimated to be 0.5% of the
Fund's net assets per annum; 3 basis points of the 50 estimated basis points
will be paid to Campbell & Company directly to cover administrative expenses
incurred on behalf of the Fund. Campbell & Company shall be responsible for any
such expenses during any year of operations which exceed such percentage
estimate. For the years ended December 31, 1998 and 1997, operating expenses
were 0.15% and 0.17%, respectively, of the Fund's year-end net assets. Indirect
expenses in connection with the administration of the Fund, such as indirect
salaries, rent, travel and other overhead of Campbell & Company, may not be
charged to the Fund. Actual expenses charged to the Fund are reflected on a
dollar basis in the financial statements for the Fund; see "Index to Financial
Statements."
10. USE OF PROCEEDS
The entire offering proceeds, without deductions, will be credited to the
Fund's bank and brokerage accounts to engage in trading activities and as
reserves for that trading. The Fund meets its margin requirements by depositing
U.S. government securities with the commodity broker and the foreign exchange
dealers. In this way, substantially all (i.e., 95% or more) of the Fund's
assets, whether used as margin for trading purposes or as reserves for such
trading, can be invested in U.S. government securities and time deposits with
U.S. banks. Investors should note that maintenance of the Fund's assets in U.S.
government securities and banks does not reduce the risk of loss from trading
futures contracts. The Fund receives all interest earned on its assets. No other
person shall receive any interest or other economic benefits from the deposit of
Fund assets.
Approximately 10% to 30% of the Fund's assets normally are committed as
margin for futures contracts and held by the commodity broker, although the
amount committed may vary significantly. Such assets are maintained in
segregated accounts with the commodity broker pursuant to the Commodity Exchange
Act and regulations thereunder. Approximately 10% to 20% of the Fund's assets
are deposited with foreign exchange dealers in order to initiate and maintain
currency forward contracts. Such assets are not held in segregation or otherwise
regulated under the Commodity Exchange Act, unless such foreign exchange dealer
is registered as a futures commission merchant. These assets are held either in
U.S. government securities or short-term time deposits with U.S.-regulated bank
affiliates of the foreign exchange dealers. The remaining 30% to 55% of the
Fund's assets will normally be invested in U.S. Treasury bills.
The Fund's assets are not and will not be, directly or indirectly,
commingled with the property of any other person in violation of law or invested
with or loaned to Campbell & Company or any affiliated entities.
11. THE COMMODITY BROKER
PaineWebber Incorporated ("PaineWebber"), a Delaware corporation, is the
Fund's commodity broker and one of the selling agents. The commodity broker's
principal office is located at 1000 Harbor Boulevard, Weehawken, New Jersey
07087, telephone: (201) 902-3000. The commodity 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.
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All futures trades made on behalf of the Fund are cleared through the
commodity broker. The commodity broker is not affiliated with Campbell &
Company. The commodity broker did not sponsor the Fund and is not responsible
for the activities of Campbell & Company. It will act only as the commodity
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 years that is
material to a decision whether to invest in the fund 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 reasonably to supervise certain registered representatives and other
employees 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.
12. FOREIGN EXCHANGE DEALER
The Fund 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 Fund is ABN AMRO Bank, N.V., Chicago Branch.
Unlike futures contracts which are traded through brokers such as the commodity
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. Campbell & Company is not obligated to continue to
use the foreign exchange dealer identified above and may select others or
additional ones in the future, provided Campbell & Company believes that their
service and pricing are competitive.
13. CAPITALIZATION
The Fund was formed on May 11, 1993. The table below shows the
capitalization of the Fund as of July 1, 1999 and as adjusted for the sale of
the maximum amount of units registered.
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<TABLE>
<CAPTION>
AS ADJUSTED
FOR SALE OF
OUTSTANDING MAXIMUM
AS OF AMOUNT
TITLE OF CLASS JULY 1, 1999 (1)(2)
- -------------------------- ------------ ------------
<S> <C> <C>
Units of General
Partnership Interest...... 2,541.937 4,004.978
Units of Limited
Partnership Interest.... 244,950.700 396,492.792
Total Partners' Capital... $424,113,497 $686,309,213
</TABLE>
(See accompanying notes)
(1) This calculation assumes that the sale of all units is made during the
continuing offering at the June 30, 1999 net asset value per unit of
$1,713.64. The maximum amount will vary depending on the unit value and
number of units sold during the continuing offering.
(2) To organize the Fund, the initial limited partner purchased one unit for
$1,000 and Campbell & Company purchased one general partnership unit for
$1,000. Campbell & Company has agreed to make capital contributions to the
Fund equal to at least 1% of the net aggregate capital contributions of all
partners. As of July 1, 1999, Campbell & Company owned 2,541.937 units of
general partnership interest.
14. DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Campbell & Company is not required to make any distributions to limited
partners. 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 Fund assets serve no useful purpose since the
limited partners 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 futures markets, especially in the short-term, the Fund is
recommended for those seeking a medium- to long-term investment (i.e., 3-5
years).
If the Fund realizes profits for any fiscal year, such profits will
constitute taxable income to the limited partners in accordance with their
respective investments in the Fund whether or not cash or other property has
been distributed to limited partners. Any distributions, if made, may be
inadequate to cover such taxes payable by the limited partners.
REDEMPTIONS
A limited partner, with the payment of charges below, may request any or
all of his units be redeemed by the Fund at the net asset value of a unit as of
the end of the month. Limited partners 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).
REDEMPTION FEES
Redemption fees apply through the first twelve month-ends following
purchase (the month-end as of which the unit is purchased is counted as the
first month-end) as follows: 4% of net asset value per unit redeemed through the
third month-end, 3% of net asset value per unit redeemed through the sixth
month-end, 2% of net asset value per unit redeemed through the ninth month-end,
and 1% of net asset value per unit redeemed through the twelfth month-end. After
the twelfth month-end following purchase of a unit, no redemption fees apply.
Because the purchase date counts as of the first month-end in determining
whether a redemption fee applies, no redemption fee would be due in respect of a
unit redeemed on the first anniversary of the purchase. Accordingly, redemption
fees are not included in the "break-even" estimate set forth below. For example,
if a unit were purchased on June 30, 1999 (the Closing Date for such unit), a
redemption fee of 4% would apply if the unit were redeemed on July 31, or August
31, 1999, a redemption fee of 3% would apply if the unit were redeemed on
September 30, October 31, or November 30, 1999, a redemption fee of 2% would
apply if the unit were redeemed on December 31, 1999, January 31, or February
29, 2000, a redemption fee of 1% would apply if the unit were redeemed on March
31, April 30, or May 31, 2000 and no redemption fee would apply if the unit were
redeemed on or after June 30, 2000.
In determining whether redemption fees apply to a particular Limited
Partner's units, units shall be deemed to be redeemed on a "first-in, first-out"
basis.
The Request for Redemption must specify the number of units for which
redemption is sought. Redemptions will be paid within 20 days after the date of
redemption, contingent upon the Fund having assets sufficient to discharge all
of its liabilities on the requested date of redemption. In the event that
redemptions are requested with respect to more units than Campbell & Company is
able to honor, Campbell & Company will honor requests for redemption in the
order actually
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received and will hold requests for redemption in such order. Limited partners
will be notified in the event a request for redemption cannot be honored, and
their requests will be honored thereafter at the first available opportunity.
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 limited partner'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 Fund, less all
liabilities of the Fund and accrued performance fees, determined in accordance
with the principles specified in the Limited Partnership Agreement. Where no
principle is specified in the Limited Partnership Agreement, the net asset value
is calculated in accordance with generally accepted accounting principles under
the accrual basis of accounting, divided by the number of units then
outstanding. Thus, if the net asset value of a unit for purposes of redemption
is determined as of a month-end which is not the end of a quarter, any
performance fees payable to Campbell & Company will be determined and charged to
such unit as though such month-end were the end of the quarter and such
performance fees will be paid to Campbell & Company.
15. 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 Fund 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 through banks or dealers pursuant to forward contracts. Currencies also
can be traded pursuant to futures contracts on organized futures exchanges;
however, Campbell & Company uses the dealer market in foreign exchange contracts
for most of the Fund's trading in currencies. Such dealer acts as "principal" in
the transaction and includes its profit in the price it quotes on the contract.
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 Fund is subject to the
creditworthiness of the dealers with whom it trades. 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.
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 commodity brokerage 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
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<PAGE> 70
pertinent CFTC licenses or NFA memberships were to lapse, be suspended or be
revoked, Campbell & Company would be unable to act as the Fund'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 Fund's trading.
The CFTC does not regulate forward contracts. Federal and state banking
authorities also do not regulate forward trading or forward dealers. The SEC has
indicated that it may consider foreign exchange contracts to constitute
securities for purposes of the Investment Company Act of 1940, which regulates
mutual funds, and the Investment Advisers Act of 1940, which regulates advisers
which render advice with respect to securities. Were the SEC to require the Fund
to register under the Investment Company Act of 1940 or the CFTC to prohibit the
Fund from trading foreign currency forward contracts, Campbell & Company would
likely trade foreign currency futures contracts instead of forward contracts.
Trading in foreign currency futures contracts may be less liquid and the Fund'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, commodity 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.
16. AGREEMENT OF LIMITED PARTNERSHIP
The following is a summary of the Limited Partnership Agreement, a form of
which is attached as Exhibit A and incorporated by reference.
ORGANIZATION AND LIMITED LIABILITIES
The Fund is organized under the Delaware Revised Uniform Limited
Partnership Act ("RULPA"). In general, a Limited Partner's liability under RULPA
is limited to the amount of his capital contribution and his share of any
undistributed profits.
MANAGEMENT OF PARTNERSHIP AFFAIRS
The Limited Partnership Agreement effectively gives Campbell & Company, as
general partner, full control over the management of the Fund and gives no
management role to the limited partners. To facilitate matters for Campbell &
Company, the limited partners must execute the attached Subscription Agreement
and Power of Attorney (Exhibit D).
SHARING OF PROFITS AND LOSSES
PROFIT POTENTIAL; FUND ACCOUNTING
Each limited partner has a capital account. Initially, the limited
partner's balance equals the amount paid for the units. The limited partner's
balance is then proportionally adjusted monthly to reflect his portion of the
Fund's gains or losses for the month.
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<PAGE> 71
FEDERAL TAX ALLOCATIONS
At year-end, the Fund will determine the total taxable income or loss for
the year. Subject to the special allocation of net capital gain or loss to
redeeming limited partners, the taxable gain or loss is allocated to each
limited partner in proportion to his capital account and each limited partner is
responsible for his share of the taxes. See Article 7 of the Limited Partnership
Agreement, and "Federal Income Tax Aspects."
For net capital gain and loss, the gains and losses are first allocated to
each limited partner who redeemed units during the year. The remaining net
capital gain or loss is then allocated to each limited partner in proportion to
his capital account.
Each limited partner'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 Fund's liquidation, each limited partner will receive his
proportionate share of the assets of the Fund.
DISPOSITIONS
A limited partner may transfer or assign his units in the Fund upon 30
days' prior written notice to Campbell & Company and subject to approval 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 Fund for federal income tax purposes. An assignee not
admitted to the Fund as a limited partner will have only limited rights to share
the profits and capital of the Fund 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 FUND
The Fund will be terminated and dissolved upon the happening of the earlier
of:
1) the expiration of the Fund's stated term on December 31, 2023;
2) limited partners owning more than 50% of the outstanding units vote to
dissolve the Fund;
3) Campbell & Company withdraws as general partner and no new general
partner is appointed;
4) the continued existence of the Fund becomes unlawful; or
5) the Fund is dissolved by operation of law.
AMENDMENTS AND MEETINGS
The Limited Partnership Agreement may be amended by Campbell & Company if
the limited partners owning more than 50% of the outstanding units concur.
Campbell & Company may make minor changes to the Limited Partnership Agreement
without the approval of the limited partners. These minor changes can be for
clarifications of inaccuracies or ambiguities, modifications in response to
changes in tax code or regulations or any other changes the general partner
deems advisable so long as they do not change the basic investment policy or
structure.
Limited partners owning at least 10% of the outstanding units can call a
meeting of the Fund. At that meeting, the limited partners, provided that
limited partners owning a majority of the outstanding units concur, can vote to:
1) amend the Limited Partnership Agreement without the consent of Campbell
& Company;
2) dissolve the Fund;
3) terminate contracts with Campbell & Company;
4) remove and replace Campbell & Company as general partner; and
5) approve the sale of Fund assets.
INDEMNIFICATION
The Fund agrees to indemnify Campbell & Company, as general partner, for
actions taken on behalf of the Fund, provided that Campbell & Company's conduct
was in the best interests of the Fund and the conduct was not the result of
negligence or misconduct. Indemnification by the
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<PAGE> 72
Fund 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 the states in which the units were offered and sold as to
indemnification for the violations.
REPORTS TO LIMITED PARTNERS
The limited partners shall have access to and the right to copy the Fund's
books and records. A limited partner may obtain a list of all limited partners
together with the number of units owned by each limited partner, provided such
request is not for commercial purposes.
Campbell & Company will provide various reports and statements to the
limited partners including:
1) monthly, Campbell & Company will provide an unaudited balance sheet and
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 limited partners' 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 limited partners of the relevant facts within
seven business days and declare a special redemption period.
17. 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 Fund.
THE FUND'S PARTNERSHIP TAX STATUS
Because the Fund is a partnership, the Fund does not pay any federal income
tax. Based on the expected income of the Fund, the Fund will not be taxed as a
"publicly traded partnership."
TAXATION OF LIMITED PARTNERS ON PROFITS AND LOSSES OF THE FUND
Each limited partner must pay tax on his share of the Fund's annual income
and gains, if any, even if the Fund does not make any cash distributions.
The Fund generally allocates the Fund's gains and losses equally to each
unit. However, a limited partner who redeems any units will be allocated his
share of the Fund's gains and losses in order that the amount of cash a limited
partner receives for a redeemed unit equals the limited partner's adjusted tax
basis in the redeemed unit. A limited partner'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.
FUND LOSSES BY LIMITED PARTNERS
A limited partner may deduct Fund losses only to the extent of his tax
basis in his units. Generally, a limited partner's tax basis is the amount paid
for the units reduced (but not below zero) by his share of any Fund
distributions, losses and expenses and increased by his share of the Fund's
income and gains. However, a limited partner 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 Fund.
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"PASSIVE-ACTIVITY LOSS RULES" AND THEIR EFFECT ON THE TREATMENT OF INCOME AND
LOSS
The trading activities of the Fund are not a "passive activity."
Accordingly, a limited partner can deduct Fund losses from taxable income.
However, a limited partner cannot offset losses from "passive activities"
against Fund gains.
CASH DISTRIBUTIONS AND UNIT REDEMPTIONS
A limited partner who receives cash from the Fund, 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 are, among other things, certain foreign
currency transactions, including Section 988 transactions -- transactions when
the amount paid or received is in a foreign currency. Gain and loss from these
Non-Section 1256 Contracts is 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 Fund could suffer significant losses
and a limited partner could still be required to pay taxes on his share of the
Fund'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.
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 Fund, 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 limited partner would have the amount of the ordinary expenses
allocated to him reduced accordingly.
INTEREST INCOME
Interest received by the Fund 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."
SYNDICATION FEES
Neither the Fund nor any limited partner is entitled to any deduction for
syndication expenses, nor can these expenses be amortized by the Fund or any
limited partner 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 Fund to Campbell & Company or part or all of any redemption fees paid by a
limited partner constitutes non-deductible syndication expenses.
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.
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UNRELATED BUSINESS TAXABLE INCOME
Tax-exempt limited partners will not be required to pay tax on their share
of income or gains of the Fund, provided that such limited partners do not
purchase units with borrowed funds.
IRS AUDITS OF THE FUND AND ITS LIMITED PARTNERS
The IRS audits Fund-related items at the Fund level rather than at the
limited partner level. Campbell & Company acts as "tax matters partner" with the
authority to determine the Fund's responses to an audit. If an audit results in
an adjustment, all limited partners 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
Fund and the limited partners may be subject to various state and other taxes.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS BEFORE
DECIDING WHETHER TO INVEST.
18. 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 Internal Revenue Code
of 1986, as amended (the "Code"), which a fiduciary of an "employee benefit
plan" as defined in and subject to ERISA or of a "plan" as defined in Section
4975 of the Code who has investment discretion should consider before deciding
to invest the plan's assets in the Fund (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 Fund, including the role
that an investment in the Fund plays or would play in the Plan's overall
investment portfolio. Each Plan Fiduciary, before deciding to invest in the
Fund, must be satisfied that such investment is prudent for the Plan, that the
investments of the Plan, including in the Fund, are diversified so as to
minimize the risk of large losses and that an investment in the Fund complies
with the terms of the Plan and related trust.
THE FUND 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 a limited
partnership will result in the underlying assets of the partnership 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 a limited
partnership will not be plan assets of a Plan which purchases an equity interest
in the partnership if the equity interest purchased is a "publicly-offered
security" (the "Publicly-Offered Security Exception"). If the underlying assets
of a partnership are considered to be assets of any Plan for purposes of ERISA
or Section 4975 of the Code, the operations of such partnership would be subject
to and, in some cases, limited by, the provisions of ERISA and Section 4975 of
the Code.
The Publicly-Offered Security Exception applies if the equity is a security
that is:
1) "freely transferable" (determined based on the applicable facts and
circumstances);
2) part of a class of securities that is "widely held" (meaning that the
class of securities is owned by 100 or more investors independent of the
issuer and of each other); and
3) either (a) part of a class of securities registered under Section 12(b)
or 12(g) of the Securities Exchange Act of 1934, or (b) sold to the Plan
as part of a public offering pursuant to an effective registration
statement under the Securities Act of 1933 and the class of which such
security is a part is registered under the Securities Exchange Act of
1934 within 120 days (or such later time as may be allowed by the SEC)
after the end of the fiscal year
-36-
<PAGE> 75
of the issuer in which the offering of such security occurred.
It appears that all of the conditions described above are satisfied with
respect to the units and, therefore, the units should constitute "publicly-
offered securities" and the underlying assets of the Fund 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 commodity 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 COMMODITY 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 FUND IN LIGHT OF THE
CIRCUMSTANCES OF THE PARTICULAR PLAN.
19. PLAN OF DISTRIBUTION
SUBSCRIPTION PROCEDURE
The Fund offers the units to the public during the continuing offering at
the net asset value per unit as of each 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. Campbell & Company may 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 including, but not limited to,
A.G. Edwards & Sons, Inc.; Ferris, Baker Watts Incorporated; First Union Capital
Markets Corp.; H. Beck, Inc.; J.C. Bradford & Co.; Linsco/Private Ledger Corp.;
PaineWebber Incorporated; Securities America, Inc.; and Wachovia Securities,
Inc., which are registered broker-dealers and members of the National
Association of Securities Dealers, Inc. Units are offered until such time as
Campbell & Company terminates the continuing offering. Subscriptions received
during the continuing offering period can be accepted on a monthly basis.
Subscribers whose subscriptions are canceled or rejected will be notified of
when their subscriptions, plus interest, will be returned, which shall be
promptly after rejection. Subscribers whose subscriptions are accepted will be
issued fractional units, calculated to three decimal places, in an amount equal
to the interest earned on their subscriptions. Campbell & Company may suspend,
limit or terminate the offering of units at any time.
The Fund'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 and no fees will be charged on any
subscriptions 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
-37-
<PAGE> 76
customer securities account at the Selling Agent on the settlement date.
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 towards 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 Strategic Allocation Fund, L.P." 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 Fund'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 Fund. The Fund 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 Fund. 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 Fund, 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). Limited partners may increase their investment in the Fund with
an investment of $1,000 or more. Prospective investors must be aware that the
price per unit during the continuing offering period will vary depending upon
the month-end net asset value per unit. Under the federal securities laws and
those of certain states, investors may be subject to special minimum purchase
and/or investor suitability requirements.
INVESTOR SUITABILITY
There can be no assurance that the Fund will achieve its objectives or
avoid substantial losses. An investment in the Fund is suitable only for a
limited segment of the risk portion of an investor's portfolio and no one should
invest more in the Fund 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 Fund.
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 FUND 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 FUND
AS WELL AS THE HIGH RISK AND HIGHLY LEVERAGED NATURE OF THE FINANCIAL INSTRUMENT
MARKETS IN DETERMINING WHETHER AN INVEST-
-38-
<PAGE> 77
MENT IN THE FUND 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, including certain foreign dealers who may elect to participate
in the offering, are bound by their respective Selling Agreements with the Fund.
Selling agents receive no commission from the proceeds of the offering.
Instead, they receive from Campbell & Company's brokerage fee an amount up to 4%
of the subscription amount for the units sold.
Selling commissions will not be paid from the proceeds of this offering.
Rather, the selling agents will receive from Campbell & Company, as general
partner, an amount up to 4% of the subscription amount as to any units sold.
Campbell & Company also will pay ongoing payments to the selling agents (or
their assignees) which are registered as "futures commission merchants" or
"introducing brokers" (or obtain such registration prior to commencement of such
ongoing payments) in return for continuing services to the limited partners of
up to 4% per annum of the month-end net asset value of units which remain
outstanding beginning at the end of the thirteenth full month after the units
were sold. Such selling agents may pay all or a portion of such ongoing payments
to account executives who are also registered with the CFTC and have passed all
applicable proficiency requirements.
Selling agents and registered representatives who are not registered with
the CFTC as described above may receive additional selling commissions from
Campbell & Company, paid on the same basis as the ongoing payments, provided
that the total of such additional selling commissions plus the initial 4%
selling commission, salaries, expenses and bonuses of employees of Campbell &
Company engaged in wholesaling activities and per unit offering costs properly
deemed to constitute costs allocable to the selling agents (such as a selling
brochure, seminar costs and travel expenses) do not exceed 10% of such units'
initial sale price. Such ongoing payments, salaries and bonuses and additional
selling commissions may be deemed to constitute underwriting compensation.
H. Beck, Inc., a registered broker-dealer, solicits other broker-dealers to
become selling agents of the Fund, i.e., it acts as a wholesaler. As such, H.
Beck, Inc. does not act as an "underwriter" or "promoter" as defined in the
Securities Act of 1933 and the regulations thereunder. The selling agents, and
not H. Beck, Inc., have responsibility with respect to the solicitation of
prospective investors, including determination of suitability of such investors.
As compensation for its activities, H. Beck, Inc. receives up to one-fourth of
the selling commissions otherwise payable to the selling agents. In the future,
other broker-dealers may be engaged by the Fund to conduct wholesaling
activities. Certain employees of Campbell & Company will provide wholesaling
services as well and will receive compensation therefor. The maximum aggregate
amount of such compensation with respect to the maximum offering proceeds is
estimated at $4,720,000.
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, and in no event shall the aggregate
amount of (i) such costs and (ii) the selling commission 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 by the Fund in connection with the solicitation of
purchases for units.
Campbell & Company will pay the Fund's offering expenses related to the
continuing offering and the Fund will reimburse Campbell & Company in 30-month
installment periods throughout the continuing offering period. Such
reimbursement, however, will not exceed 2.5% of the aggregate subscriptions
accepted by Campbell & Company as general partner. Organization and offering
expenses related to the Initial Offering are being reimbursed in the same
manner. See "Charges to the Fund -- Offering Expenses."
-39-
<PAGE> 78
In the Selling Agreement with each Selling Agent, Campbell & Company has
agreed to indemnify the selling agents against certain liabilities that the
selling agents may incur in connection with the offering and sale of the units,
including liabilities under the Securities Act of 1933, as amended.
20. 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 the
future, Sidley & Austin may advise Campbell & Company (and its affiliates) with
respect to its responsibilities as general partner and trading advisor of, and
with respect to, matters relating to the Fund. The statements under "Federal
Income Tax Aspects" have been reviewed by Sidley & Austin. Sidley & Austin has
not represented, nor will it represent, either the Fund or the limited partners
in matters relating to the Fund.
21. EXPERTS
The financial statements of the Fund as of December 31, 1998 and 1997, and
for the years ended December 31, 1998, 1997 and 1996, and the balance sheet of
Campbell & Company as of December 31, 1998, 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 statements have been
so included in reliance upon such reports, respectively, given upon the
authority of that firm as experts in auditing and accounting.
The financial statements of the Fund as of June 30, 1999 and for the three
months and six months ended June 30, 1999 and 1998, and the balance sheet of
Campbell & Company as of June 30, 1999 are unaudited. In the opinion of Campbell
& Company, such unaudited statements reflect all adjustments which were of a
normal and recurring nature, necessary for a fair presentation of financial
position and results of operations.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
-40-
<PAGE> 79
22. INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
June 30, 1999 (unaudited) and December 31, 1998
(audited)................................................. 42
STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months and Six Months Ended June 30, 1999
and 1998.................................................. 43
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, 1999 and 1998........... 44
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
(UNAUDITED)
For the Six Months Ended June 30, 1999 and 1998........... 45
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)................... 46
INDEPENDENT AUDITOR'S REPORT................................ 51
STATEMENTS OF FINANCIAL CONDITION
December 31, 1998 and 1997................................ 52
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998, 1997 and 1996...... 53
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996...... 54
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Years Ended December 31, 1998, 1997 and 1996...... 55
NOTES TO FINANCIAL STATEMENTS............................... 56
CAMPBELL & COMPANY, INC.
BALANCE SHEET
June 30, 1999 (Unaudited)................................. 61
NOTES TO BALANCE SHEET (UNAUDITED).......................... 62
INDEPENDENT AUDITOR'S REPORT................................ 66
BALANCE SHEET
December 31, 1998......................................... 67
NOTES TO BALANCE SHEET...................................... 68
</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.
-41-
<PAGE> 80
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
June 30, 1999 (Unaudited) and December 31, 1998 (Audited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Equity in broker trading accounts
Cash $ 16,166,563 $ 88,830,060
United States government securities 233,980,529 114,491,286
Unrealized gain on open futures contracts 22,815,050 3,917,717
------------ ------------
Deposits with broker 272,962,142 207,239,063
Cash 33,778,164 44,879,656
United States government securities 126,279,139 99,677,514
Unrealized loss on open forward contracts (1,310,821) (1,005,425)
------------ ------------
Total assets $431,708,624 $350,790,808
============ ============
LIABILITIES
Accounts payable $ 137,906 $ 222,124
Brokerage fee 2,680,103 2,164,020
Performance fee 1,018,497 1,985,393
Offering costs payable 237,274 185,312
Redemptions payable 3,345,648 2,260,525
Subscription deposits 175,699 16,786
------------ ------------
Total liabilities 7,595,127 6,834,160
------------ ------------
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner -- 2,541.937 and 2,096.643 units
outstanding at June 30, 1999 and December 31, 1998 4,355,965 3,483,174
Limited Partners -- 244,950.700 and 204,942.359 units
outstanding at June 30, 1999 and December 31, 1998 419,757,532 340,473,474
------------ ------------
Total partners' capital (Net Asset Value) 424,113,497 343,956,648
------------ ------------
$431,708,624 $350,790,808
============ ============
</TABLE>
See accompanying notes.
-42-
<PAGE> 81
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME
Futures trading gains (losses)
Realized $12,008,887 $(5,651,457) $ 394,982 $15,987,736
Change in unrealized 12,115,832 1,206,602 18,897,333 (3,374,916)
----------- ----------- ----------- -----------
Gain (loss) from futures trading 24,124,719 (4,444,855) 19,292,315 12,612,820
Forward trading gains (losses)
Realized 9,139,049 12,898,555 4,283,050 3,576,499
Change in unrealized (3,757,172) (9,686,807) (305,396) (3,378,807)
----------- ----------- ----------- -----------
Gain from forward trading 5,381,877 3,211,748 3,977,654 197,692
Interest income 4,240,493 3,136,981 8,007,742 6,051,638
----------- ----------- ----------- -----------
Total income 33,747,089 1,903,874 31,277,711 18,862,150
----------- ----------- ----------- -----------
EXPENSES
Brokerage fee 7,700,321 4,813,804 14,366,452 9,212,899
Performance fee 1,024,532 0 1,024,532 1,831,739
Operating expenses 147,484 117,023 321,580 240,150
----------- ----------- ----------- -----------
Total expenses 8,872,337 4,930,827 15,712,564 11,284,788
----------- ----------- ----------- -----------
NET INCOME (LOSS) $24,874,752 $(3,026,953) $15,565,147 $ 7,577,362
=========== =========== =========== ===========
NET INCOME (LOSS) PER GENERAL AND
LIMITED PARTNER UNIT
(based on weighted average number of units
outstanding during the period) $ 105.44 $ (17.78) $ 69.00 $ 46.99
=========== =========== =========== ===========
INCREASE (DECREASE) IN NET ASSET VALUE PER
GENERAL AND LIMITED PARTNER UNIT $ 101.99 $ (24.77) $ 52.33 $ 40.79
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
-43-
<PAGE> 82
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net income $ 15,565,147 $ 7,577,362
Adjustments to reconcile net income to net cash for
operating activities
Net change in unrealized (18,591,937) 6,753,723
Decrease in accounts payable and accrued expenses (535,031) (2,265,704)
Net purchases of investments in United States
government and agency securities (146,090,868) (86,021,413)
------------- ------------
Net cash for operating activities (149,652,689) (73,956,032)
------------- ------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Addition of units 79,843,496 57,786,355
Increase (decrease) in subscription deposits 158,913 (692,882)
Redemption of units (13,916,758) (9,220,782)
Increase (decrease) in redemptions payable 1,085,123 (438,183)
Offering costs charged (1,335,036) (876,693)
Increase in offering costs payable 51,962 31,760
------------- ------------
Net cash from financing activities 65,887,700 46,589,575
------------- ------------
Net decrease in cash (83,764,989) (27,366,457)
CASH
Beginning of period 133,709,716 45,378,186
------------- ------------
End of period $ 49,944,727 $ 18,011,729
============= ============
End of period cash consists of:
Cash in broker trading accounts 16,166,563 5,877,349
Cash 33,778,164 12,134,380
------------- ------------
Total end of period cash $ 49,944,727 $ 18,011,729
============= ============
</TABLE>
See accompanying notes.
-44-
<PAGE> 83
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
PARTNERS' CAPITAL
--------------------------------------------------------------------------------
GENERAL LIMITED TOTAL
---------------------- -------------------------- --------------------------
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT
--------- ---------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE
30, 1999
Balances at December
31, 1998 2,096.643 $3,483,174 204,942.359 $340,473,474 207,039.002 $343,956,648
Net gain for the six
months ended June
30, 1999 156,241 15,408,906 15,565,147
Additions 445.294 730,000 48,430.419 79,113,496 48,875.713 79,843,496
Redemptions 0.000 0 (8,422.078) (13,916,758) (8,422.078) (13,916,758)
Offering costs (13,450) (1,321,586) (1,335,036)
--------- ---------- ----------- ------------ ----------- ------------
Balances at
June 30, 1999 2,541.937 $4,355,965 244,950.700 $419,757,532 247,492.637 $424,113,497
========= ========== =========== ============ =========== ============
SIX MONTHS ENDED JUNE
30, 1998
Balances at December
31, 1997 1,473.323 $2,135,788 145,259.520 $210,573,931 146,732.843 $212,709,719
Net income for the
six months ended
June 30, 1998 76,477 7,500,885 7,577,362
Additions 374.034 550,000 38,951.755 57,236,355 39,325.789 57,786,355
Redemptions 0.000 0 (6,261.335) (9,220,782) (6,261.335) (9,220,782)
Offering costs (8,904) (867,789) (876,693)
--------- ---------- ----------- ------------ ----------- ------------
Balances at
June 30, 1998 1,847.357 $2,753,361 177,949.940 $265,222,600 179,797.297 $267,975,961
========= ========== =========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE PER UNIT
---------------------------------------------------------------------
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1999 1998 1998 1997
--------- ------------ --------- ------------
<S> <C> <C> <C>
$1,713.64 $1,661.31 $1,490.43 $1,449.64
========= ========= ========= =========
</TABLE>
See accompanying notes.
-45-
<PAGE> 84
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Partnership
Campbell Strategic Allocation Fund, L.P. (the Partnership) is a Delaware
limited partnership which operates as a commodity investment pool. The
Partnership's objective is the appreciation of its assets through
speculative trading of futures contracts and other financial
instruments.
B. Regulation
As a registrant with the Securities and Exchange Commission, the
Partnership is subject to the regulatory requirements under the
Securities Act of 1933 and the Securities Exchange Act of 1934. As a
commodity investment pool, the Partnership is subject to the regulations
of the Commodity Futures Trading Commission, an agency of the United
States (U.S.) government which regulates most aspects of the commodity
futures industry; rules of the National Futures Association, an industry
self-regulatory organization; and the requirements of the various
commodity exchanges where the Partnership executes transactions.
Additionally, the Partnership is subject to the requirements of Futures
Commission Merchants (brokers) and interbank market makers through which
the Partnership trades.
C. Method of Reporting
The Partnership's financial statements are presented in accordance with
generally accepted accounting principles, which require the use of
certain estimates made by the Partnership's management. Transactions are
accounted for on the trade date. Gains or losses are realized when
contracts are liquidated. Unrealized gains and losses on open contracts
(the difference between contract purchase price and market price) are
reported in the statement of financial condition as a net gain or loss,
as there exists a right of offset of unrealized gains or losses in
accordance with Financial Accounting Standards Board Interpretation No.
39 -- "Offsetting of Amounts Related to Certain Contracts." Any change
in net unrealized gain or loss from the preceding period is reported in
the statement of operations. United States government securities are
stated cost plus accrued interest which approximate market value.
For purposes of both financial reporting and calculation of redemption
value, Net Asset Value per Unit is calculated by dividing Net Asset
Value by the number of outstanding Units.
D. Income Taxes
The Partnership prepares calendar year U.S. and state information tax
returns and reports to the partners their allocable shares of the
Partnership's income, expenses and trading gains or losses.
E. Offering Costs
The General Partner has incurred total costs in connection with the
initial and continuous offering of Units of the Partnership (offering
costs) of $9,498,620 through June 30, 1999, $5,277,463 of which has
already been reimbursed to the General Partner by the Partnership. At
June 30, 1999, the Partnership reflects a liability in the statement of
financial condition for offering costs payable to the General Partner of
$237,274. The Partnership's liability for offering costs is limited to
the maximum of total offering costs incurred by the General Partner or
2.5% of the aggregate subscriptions accepted during the initial and
continuous offerings; this maximum is further limited by 30 month
pay-out schedules. The Partnership is only liable for payment of
offering costs on a monthly basis as calculated based on the limitations
stated above. If the Partnership terminates prior to completion of
payment of the calculated amounts to the General Partner, the General
Partner will not be entitled to any additional payments, and the
Partnership will have no further obligation to the General Partner.
-46-
<PAGE> 85
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(Unaudited)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
(CONTINUED)
The amount of monthly reimbursement due to the General Partner is
charged directly to partners' capital.
F. Foreign Currency Transactions
The Partnership's functional currency is the U.S. dollar; however, it
transacts business in currencies other than the U.S. dollar. Assets and
liabilities denominated in currencies other than the U.S. dollar are
translated into U.S. dollars at the rates in effect at the date of the
statement of financial condition. Income and expense items denominated
in currencies other than the U.S. dollar are translated into U.S.
dollars at the rates in effect during the period. Gains and losses
resulting from the translation to U.S. dollars are reported in income
currently.
G. Reclassification
Certain amounts in the 1998 financial statements were reclassified to
conform with the 1999 presentation.
NOTE 2. GENERAL PARTNER AND COMMODITY TRADING ADVISOR
The General Partner of the Partnership is Campbell & Company, Inc., which
conducts and manages the business of the Partnership. The General Partner is
also the commodity trading advisor of the Partnership. The Amended Agreement of
Limited Partnership provides that the General Partner may make withdrawals of
its Units, provided that such withdrawals do not reduce the General Partner's
aggregate percentage interest in the Partnership to less than 1% of the net
aggregate contributions.
The General Partner is required by the Amended Agreement of Limited
Partnership to maintain a net worth equal to at least 5% of the capital
contributed by all the limited partnerships for which it acts as general
partner, including the Partnership. The minimum net worth shall in no case be
less than $50,000 nor shall net worth in excess of $1,000,000 be required.
The Partnership pays a monthly brokerage fee equal to 1/12 of 7.7% (7.7%
annualized) of month-end net assets. The General Partner receives 7% of this
7.7% fee, a portion (4%) of which is used to compensate selling agents for
ongoing services rendered and a portion (3%) of which is retained by the General
Partner for trading and management services rendered. The remainder of the
brokerage fee (0.7%) is paid directly to the broker. During the six months ended
June 30, 1999 and 1998, the amounts paid directly to the broker amounted to
$1,273,345 and $837,536, respectively.
The General Partner is also paid a quarterly performance fee of 20% of the
Partnership's aggregate cumulative appreciation in the Net Asset Value per Unit,
exclusive of appreciation attributable to interest income.
NOTE 3. DEPOSITS WITH BROKER
The Partnership deposits funds with a broker subject to Commodity Futures
Trading Commission regulations and various exchange and broker requirements.
Margin requirements are satisfied by the deposit of U.S. Treasury bills and cash
with such broker. The Partnership earns interest income on its assets deposited
with the broker.
NOTE 4. OPERATING EXPENSES
Operating expenses of the Partnership are limited by the Amended Agreement
of Limited Partnership to 0.5% per year of the average month-end Net Asset Value
of the Partnership. Actual operating expenses were less than 0.5% of average
month-end Net Asset Value for six months ended June 30, 1999 and 1998.
-47-
<PAGE> 86
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(Unaudited)
NOTE 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Partnership are made by subscription agreement, subject
to acceptance by the General Partner. As of June 30, 1999 and December 31, 1998,
amounts received by the Partnership from prospective limited partners who have
not yet been admitted to the Partnership by the General Partner total $175,699
and $16,786, respectively.
The Partnership is not required to make distributions, but may do so at the
sole discretion of the General Partner. A Limited Partner may request and
receive redemption of Units owned, subject to restrictions in the Amended
Agreement of Limited Partnership. Redemption fees apply through the first twelve
month-ends following purchase as follows: 4% of Net Asset Value per Unit
redeemed through the third month-end, 3% of Net Asset Value per Unit redeemed
through the sixth month-end, 2% of Net Asset Value per Unit redeemed through the
ninth month-end and 1% of Net Asset Value per Unit redeemed through the twelfth
month-end. After the twelfth month-end following purchase of a Unit, no
redemption fees apply.
NOTE 6. TRADING ACTIVITIES AND RELATED RISKS
The Partnership engages 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 Partnership is exposed to both market risk, the
risk arising from changes in the market value of the contracts, and credit risk,
the risk of failure by another party to perform according to the terms of a
contract.
Purchase and sale of futures contracts requires margin deposits with the
broker. 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 amount of required margin and good faith deposits with the broker and
interbank market makers usually range from 10% to 30% of Net Asset Value. The
market value of securities held to satisfy such requirements at June 30, 1999
and December 31, 1998 was $360,259,668 and $214,168,800, respectively, which
equals 85% and 62% of Net Asset Value, respectively.
The Partnership trades forward contracts in unregulated markets between
principals and assumes the risk of loss from counterparty nonperformance.
Accordingly, the risks associated with forward contracts are generally greater
than those associated with exchange traded contracts because of the greater risk
of counterparty default. Additionally, the trading of forward contracts
typically involves delayed cash settlement.
The Partnership has a substantial portion of its assets on deposit with
financial institutions. In the event of a financial institution's insolvency,
recovery of Partnership assets on deposit may be limited to account insurance or
other protection afforded such deposits. In the normal course of business, the
Partnership requires collateral for repurchase agreements.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Partnership is exposed to a market risk equal to
the value of futures and forward contracts purchased and unlimited liability on
such contracts sold short.
-48-
<PAGE> 87
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(Unaudited)
NOTE 6. TRADING ACTIVITIES AND RELATED RISKS -- (CONTINUED)
The fair value of derivatives represents unrealized gains and losses on
open futures and forward contracts. The average fair value of derivatives during
the six months ended June 30, 1999 and 1998 and the related fair values as of
June 30, 1999 and December 31, 1998 are as follows:
<TABLE>
<CAPTION>
AVERAGE FAIR VALUE
AS OF JUNE 30, FAIR VALUE AS OF
------------------------ ---------------------------------
1999 1998 JUNE 30, 1999 DECEMBER 31, 1998
----------- ---------- ------------- -----------------
<S> <C> <C> <C> <C>
Futures contracts $10,296,000 $6,237,000 $22,815,000 $ 3,918,000
Forward contracts 323,000 180,000 (1,311,000) (1,005,000)
</TABLE>
The unrealized gain (loss) on open futures and forward contracts is
comprised of the following:
<TABLE>
<CAPTION>
FUTURES CONTRACTS FORWARD CONTRACTS
(EXCHANGE TRADED) (NON-EXCHANGE TRADED)
--------------------------------- ---------------------------------
JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1999 DECEMBER 31, 1998
------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
Gross unrealized gains $28,201,474 $ 6,289,815 $ 5,127,972 $ 7,377,712
Gross unrealized (losses) (5,386,424) (2,372,098) (6,438,793) (8,383,137)
----------- ----------- ----------- -----------
Net unrealized gain
(loss) $22,815,050 $ 3,917,717 $(1,310,821) $(1,005,425)
=========== =========== =========== ===========
</TABLE>
Net trading results from futures contracts are reflected in the statement
of operations and equal gain (loss) from futures trading less the portion of the
brokerage fee paid directly to the broker. Net trading results from forward
contracts are reflected in the statement of operations as gain from forward
trading. Such trading results reflect the net gain (loss) arising from the
Partnership's speculative trading of futures and forward contracts.
Open contracts generally mature within three months; as of June 30, 1999
the latest maturity date for open futures contracts is March 2000, and the
latest maturity date for open forward contracts is September 1999. However, the
Partnership intends to close all contracts prior to maturity. At June 30, 1999
and December 31, 1998, the notional amount of open contracts is as follows:
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
----------------------------- -----------------------------
CONTRACTS TO CONTRACTS TO CONTRACTS TO CONTRACTS TO
PURCHASE SELL PURCHASE SELL
------------ -------------- -------------- ------------
<S> <C> <C> <C> <C>
Futures contracts (exchange traded):
- Long-term interest rates $ 0 $1,343,400,000 $ 460,500,000 $148,700,000
- Short-term interest rates 0 2,314,100,000 305,900,000 307,900,000
- Stock indices 169,600,000 4,400,000 67,900,000 11,200,000
- Agricultural 0 9,800,000 2,000,000 8,700,000
- Metals 61,400,000 26,200,000 6,500,000 47,500,000
- Energy 72,900,000 0 0 17,100,000
Forward contracts (non-exchange traded):
- Currencies 506,900,000 779,200,000 435,100,000 386,200,000
------------ -------------- -------------- ------------
$810,800,000 $4,477,100,000 $1,277,900,000 $927,300,000
============ ============== ============== ============
</TABLE>
The above amounts do not represent the Partnership's risk of loss due to
market and credit risk, but rather represent the Partnership's extent of
involvement in derivatives at the date of the statement of financial condition.
The General Partner has established procedures to actively monitor and
minimize market and credit risk, although there can be no assurance that they
will, in fact, succeed in doing so. The General Partner's
-49-
<PAGE> 88
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(Unaudited)
NOTE 6. TRADING ACTIVITIES AND RELATED RISKS -- (CONTINUED)
basic market risk control procedures consist of continuously monitoring open
positions, diversification of the portfolio and maintenance of a
margin-to-equity ratio that rarely exceeds 30%. The General Partner seeks to
minimize credit risk primarily by depositing and maintaining the Partnership's
assets at financial institutions and brokers which the General Partner believes
to be creditworthy. The Limited Partners bear the risk of loss only to the
extent of the market value of their respective investments and, in certain
specific circumstances, distributions and redemptions received.
NOTE 7. INTERIM FINANCIAL STATEMENTS
The Statement of Financial Condition as of June 30, 1999, the Statements of
Operations for the three months and six months ended June 30, 1999 and 1998, the
Statements of Cash Flows for the six months ended June 30, 1999 and 1998 and the
Statements of Changes in Partners' Capital (Net Asset Value) for the six months
ended June 30, 1999 and 1998 are unaudited. In the opinion of management, such
financial statements reflect all adjustments, which were of a normal and
recurring nature, necessary for a fair presentation of financial position as of
June 30, 1999 and the results of operations for the three months and six months
ended June 30, 1999 and 1998.
-50-
<PAGE> 89
INDEPENDENT AUDITOR'S REPORT
To the Partners
Campbell Strategic Allocation Fund, L.P.
We have audited the accompanying statements of financial condition of
Campbell Strategic Allocation Fund, L.P. as of December 31, 1998 and 1997, and
the related statements of operations, cash flows and changes in partners'
capital (net asset value) for the years ended December 31, 1998, 1997 and 1996.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Campbell Strategic
Allocation Fund, L.P. as of December 31, 1998 and 1997, and the results of its
operations, cash flows and the changes in its net asset values for the years
ended December 31, 1998, 1997 and 1996, in conformity with generally accepted
accounting principles.
/s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Hunt Valley, Maryland
January 19, 1999
-51-
<PAGE> 90
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Equity in broker trading accounts Cash $ 88,830,060 $ 17,401,415
United States government securities 114,491,286 37,851,369
Unrealized gain on open futures contracts 3,917,717 8,567,066
------------ ------------
Deposits with broker 207,239,063 63,819,850
Cash and cash equivalents 44,879,656 27,976,771
United States government and agency securities 99,677,514 127,278,890
Unrealized gain (loss) on open forward contracts (1,005,425) 1,328,130
------------ ------------
Total assets $350,790,808 $220,403,641
============ ============
LIABILITIES
Accounts payable $ 222,124 $ 165,183
Brokerage fee 2,164,020 1,354,551
Performance fee 1,985,393 2,537,134
Offering costs payable 185,312 122,785
Redemptions payable 2,260,525 2,629,164
Subscription deposits 16,786 885,105
------------ ------------
Total liabilities 6,834,160 7,693,922
------------ ------------
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner -- 2,096.643 and 1,473.323 units
outstanding at December 31, 1998 and 1997 3,483,174 2,135,788
Limited Partners -- 204,942.359 and 145,259.520 units
outstanding at December 31, 1998 and 1997 340,473,474 210,573,931
------------ ------------
Total partners' capital (Net Asset Value) 343,956,648 212,709,719
------------ ------------
$350,790,808 $220,403,641
============ ============
</TABLE>
See accompanying notes.
-52-
<PAGE> 91
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
INCOME
Futures trading gains (losses)
Realized $53,795,803 $16,927,642 $18,780,574
Change in unrealized (4,649,349) 8,262,159 (2,493,831)
----------- ----------- -----------
Gain from futures trading 49,146,454 25,189,801 16,286,743
----------- ----------- -----------
Forward trading gains (losses)
Realized 8,873,435 7,406,539 5,203,452
Change in unrealized (2,333,555) (339,743) 1,895,170
----------- ----------- -----------
Gain from forward trading 6,539,880 7,066,796 7,098,622
----------- ----------- -----------
Interest income 12,823,294 7,977,840 3,238,486
----------- ----------- -----------
Total income 68,509,628 40,234,437 26,623,851
----------- ----------- -----------
EXPENSES
Brokerage fee 21,002,047 12,288,681 5,209,726
Performance fee 6,303,339 3,565,668 2,121,981
Operating expenses 509,686 368,925 234,090
----------- ----------- -----------
Total expenses 27,815,072 16,223,274 7,565,797
----------- ----------- -----------
NET INCOME $40,694,556 $24,011,163 $19,058,054
=========== =========== ===========
NET INCOME PER GENERAL AND LIMITED PARTNER UNIT
(based on weighted average number of units outstanding
during the year) $ 232.33 $ 208.78 $ 327.00
=========== =========== ===========
INCREASE IN NET ASSET VALUE PER GENERAL AND LIMITED
PARTNER UNIT $ 211.67 $ 181.48 $ 296.12
=========== =========== ===========
</TABLE>
See accompanying notes.
-53-
<PAGE> 92
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net income $ 40,694,556 $ 24,011,163 $ 19,058,054
Adjustments to reconcile net income to net cash
(for) operating activities
Net change in unrealized 6,982,904 (7,922,416) 598,661
Increase in accounts payable and accrued
expenses 314,669 1,193,491 2,530,672
Net (purchases) of investments in United
States government and agency securities (49,038,541) (118,621,145) (36,318,412)
------------ ------------- ------------
Net cash (for) operating activities (1,046,412) (101,338,907) (14,131,025)
------------ ------------- ------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Addition of units 117,408,144 96,000,283 52,969,550
Increase (decrease) in subscription deposits (868,319) 752,069 102,882
Redemption of units (24,906,260) (13,866,080) (8,743,067)
Increase (decrease) in redemptions payable (368,639) 2,052,048 (440,891)
Offering costs charged (1,949,511) (1,172,450) (621,268)
Increase in offering costs payable 62,527 66,158 19,440
------------ ------------- ------------
Net cash from financing activities 89,377,942 83,832,028 43,286,646
------------ ------------- ------------
Net increase (decrease) in cash and cash
equivalents 88,331,530 (17,506,879) 29,155,621
CASH AND CASH EQUIVALENTS
Beginning of year 45,378,186 62,885,065 33,729,444
------------ ------------- ------------
End of year $133,709,716 $ 45,378,186 $ 62,885,065
============ ============= ============
End of year cash and cash equivalents consists of:
Cash in broker trading accounts $ 88,830,060 $ 17,401,415 $ 15,907,914
Cash and cash equivalents 44,879,656 27,976,771 46,977,151
------------ ------------- ------------
Total end of year cash and cash
equivalents $133,709,716 $ 45,378,186 $ 62,885,065
============ ============= ============
</TABLE>
See accompanying notes.
-54-
<PAGE> 93
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
PARTNERS' CAPITAL
--------------------------------------------------------------------------------
GENERAL LIMITED TOTAL
---------------------- -------------------------- --------------------------
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT
--------- ---------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1995 472.222 $ 459,018 45,897.894 $ 44,614,516 46,370.116 $ 45,073,534
Net income for the year
ended December 31, 1996 190,771 18,867,283 19,058,054
Additions 413.716 480,000 46,205.096 52,489,550 46,618.812 52,969,550
Redemptions 0.000 0 (8,033.930) (8,743,067) (8,033.930) (8,743,067)
Offering costs (6,275) (614,993) (621,268)
--------- ---------- ----------- ------------ ----------- ------------
Balances at December 31,
1996 885.938 1,123,514 84,069.060 106,613,289 84,954.998 107,736,803
Net income for the year
ended December 31, 1997 244,185 23,766,978 24,011,163
Additions 587.385 780,007 71,325.080 95,220,276 71,912.465 96,000,283
Redemptions 0.000 0 (10,134.620) (13,866,080) (10,134.620) (13,866,080)
Offering costs (11,918) (1,160,532) (1,172,450)
--------- ---------- ----------- ------------ ----------- ------------
Balances at December 31,
1997 1,473.323 2,135,788 145,259.520 210,573,931 146,732.843 212,709,719
Net income for the year
ended December 31, 1998 417,357 40,277,199 40,694,556
Additions 623.320 950,000 75,725.965 116,458,144 76,349.285 117,408,144
Redemptions 0.000 0 (16,043.126) (24,906,260) (16,043.126) (24,906,260)
Offering costs (19,971) (1,929,540) (1,949,511)
--------- ---------- ----------- ------------ ----------- ------------
Balances at December 31,
1998 2,096.643 $3,483,174 204,942.359 $340,473,474 207,039.002 $343,956,648
========= ========== =========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE PER
GENERAL AND LIMITED PARTNER UNIT
---------------------------------------------------------
DECEMBER 31,
---------------------------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C>
$1,661.31 $1,449.64 $1,268.16
========= ========= =========
</TABLE>
See accompanying notes.
-55-
<PAGE> 94
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Partnership
Campbell Strategic Allocation Fund, L.P. (the Partnership) is a Delaware
limited partnership which operates as a commodity investment pool. The
Partnership's objective is the appreciation of its assets through
speculative trading of futures contracts and other financial
instruments.
B. Regulation
As a registrant with the Securities and Exchange Commission, the
Partnership is subject to the regulatory requirements under the
Securities Act of 1933 and the Securities Exchange Act of 1934. As a
commodity investment pool, the Partnership is subject to the regulations
of the Commodity Futures Trading Commission, an agency of the United
States (U.S.) government which regulates most aspects of the commodity
futures industry; rules of the National Futures Association, an industry
self-regulatory organization; and the requirements of the various
commodity exchanges where the Partnership executes transactions.
Additionally, the Partnership is subject to the requirements of Futures
Commission Merchants (brokers) and interbank market makers through which
the Partnership trades.
C. Method of Reporting
The Partnership's financial statements are presented in accordance with
generally accepted accounting principles, which require the use of
certain estimates made by the Partnership's management. Transactions are
accounted for on the trade date. Gains or losses are realized when
contracts are liquidated. Unrealized gains and losses on open contracts
(the difference between contract purchase price and market price) are
reported in the statement of financial condition as a net gain or loss,
as there exists a right of offset of unrealized gains or losses in
accordance with Financial Accounting Standards Board Interpretation No.
39 -- "Offsetting of Amounts Related to Certain Contracts." Any change
in net unrealized gain or loss from the preceding period is reported in
the statement of operations. United States government and agency
securities are stated at market value.
For purposes of both financial reporting and calculation of redemption
value, Net Asset Value per Unit is calculated by dividing Net Asset
Value by the number of outstanding Units.
D. Cash and Cash Equivalents
Cash and cash equivalents includes cash and short-term time deposits
held at financial institutions.
E. Income Taxes
The Partnership prepares calendar year U.S. and state information tax
returns and reports to the partners their allocable shares of the
Partnership's income, expenses and trading gains or losses.
F. Offering Costs
The General Partner has incurred total costs in connection with the
initial and continuous offering of Units of the Partnership (offering
costs) of $7,794,605 through December 31, 1998, $3,994,389 of which has
already been reimbursed to the General Partner by the Partnership. At
December 31, 1998, the Partnership reflects a liability in the statement
of financial condition for offering costs payable to the General Partner
of $185,312. The Partnership's liability for offering costs is limited
to the maximum of total offering costs incurred by the General Partner
or 2.5% of the aggregate subscriptions accepted during the initial and
continuous offerings; this maximum is further limited by 30 month
pay-out schedules. The Partnership is only liable for payment of
offering costs on a monthly basis as calculated based on the limitations
stated above. If the Partnership terminates prior to completion of
payment of the calculated amounts to the General
-56-
<PAGE> 95
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
(CONTINUED)
Partner, the General Partner will not be entitled to any additional
payments, and the Partnership will have no further obligation to the
General Partner.
The amount of monthly reimbursement due to the General Partner is
charged directly to partners' capital.
G. Foreign Currency Transactions
The Partnership's functional currency is the U.S. dollar; however, it
transacts business in currencies other than the U.S. dollar. Assets and
liabilities denominated in currencies other than the U.S. dollar are
translated into U.S. dollars at the rates in effect at the date of the
statement of financial condition. Income and expense items denominated
in currencies other than the U.S. dollar are translated into U.S.
dollars at the rates in effect during the period. Gains and losses
resulting from the translation to U.S. dollars are reported in income
currently.
H. Reclassification
Certain amounts in the 1997 and 1996 financial statements were
reclassified to conform with the 1998 presentation.
NOTE 2. GENERAL PARTNER AND COMMODITY TRADING ADVISOR
The General Partner of the Partnership is Campbell & Company, Inc., which
conducts and manages the business of the Partnership. The General Partner is
also the commodity trading advisor of the Partnership. The Amended Agreement of
Limited Partnership provides that the General Partner may make withdrawals of
its Units, provided that such withdrawals do not reduce the General Partner's
aggregate percentage interest in the Partnership to less than 1% of the net
aggregate contributions.
The General Partner is required by the Amended Agreement of Limited
Partnership to maintain a net worth equal to at least 5% of the capital
contributed by all the limited partnerships for which it acts as general
partner, including the Partnership. 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.
Commencing September 1, 1997, the Partnership pays a monthly brokerage fee
equal to 1/12 of 7.7% (7.7% annualized) of month-end net assets. The General
Partner receives 7% of this 7.7% fee, a portion (4%) of which is used to
compensate selling agents for ongoing services rendered and a portion (3%) of
which is retained by the General Partner for trading and management services
rendered. The remainder of the brokerage fee (0.7%) is paid directly to the
broker. Prior to September 1, 1997, the monthly brokerage fee was equal to 1/12
of 8% (8% annualized) of month-end net assets, with the amount paid directly to
the broker equal to 1/12 of 1% (1% annualized) of month-end net assets. During
1998, 1997 and 1996, the amounts paid directly to the broker amounted to
$1,909,277, $1,366,757 and $651,216, respectively.
The General Partner is also paid a quarterly performance fee of 20% of the
Partnership's aggregate cumulative appreciation in the Net Asset Value per Unit,
exclusive of appreciation attributable to interest income.
NOTE 3. DEPOSITS WITH BROKER
The Partnership deposits funds with a broker subject to Commodity Futures
Trading Commission regulations and various exchange and broker requirements.
Margin requirements are satisfied by the deposit of U.S. Treasury bills and cash
with such broker. The Partnership earns interest income on its assets deposited
with the broker.
-57-
<PAGE> 96
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. OPERATING EXPENSES
Operating expenses of the Partnership are limited by the Amended Agreement
of Limited Partnership to 0.5% per year of the average month-end Net Asset Value
of the Partnership. Actual operating expenses were less than 0.5% of average
month-end Net Asset Value for the years ended December 31, 1998, 1997 and 1996.
NOTE 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Partnership are made by subscription agreement, subject
to acceptance by the General Partner. As of December 31, 1998 and 1997, amounts
received by the Partnership from prospective limited partners who have not yet
been admitted to the Partnership by the General Partner total $16,786 and
$885,105, respectively.
The Partnership is not required to make distributions, but may do so at the
sole discretion of the General Partner. A Limited Partner may request and
receive redemption of Units owned, subject to restrictions in the Amended
Agreement of Limited Partnership. Redemption fees apply through the first twelve
month-ends following purchase as follows: 4% of Net Asset Value per Unit
redeemed through the third month-end, 3% of Net Asset Value per Unit redeemed
through the sixth month-end, 2% of Net Asset Value per Unit redeemed through the
ninth month-end and 1% of Net Asset Value per Unit redeemed through the twelfth
month-end. After the twelfth month-end following purchase of a Unit, no
redemption fees apply.
NOTE 6. TRADING ACTIVITIES AND RELATED RISKS
The Partnership engages 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 Partnership is exposed to both market risk, the
risk arising from changes in the market value of the contracts, and credit risk,
the risk of failure by another party to perform according to the terms of a
contract.
Purchase and sale of futures contracts requires margin deposits with the
broker. 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 amount of required margin and good faith deposits with the broker and
interbank market makers usually range from 10% to 30% of Net Asset Value. The
market value of securities held to satisfy such requirements at December 31,
1998 and 1997 was $214,168,800 and $110,574,485, respectively, which equals 62%
and 52% of Net Asset Value, respectively.
The Partnership trades forward contracts in unregulated markets between
principals and assumes the risk of loss from counterparty nonperformance.
Accordingly, the risks associated with forward contracts are generally greater
than those associated with exchange traded contracts because of the greater risk
of counterparty default. Additionally, the trading of forward contracts
typically involves delayed cash settlement.
The Partnership has a substantial portion of its assets on deposit with
financial institutions. In the event of a financial institution's insolvency,
recovery of Partnership assets on deposit may be limited to account insurance or
other protection afforded such deposits. In the normal course of business, the
Partnership requires collateral for repurchase agreements.
-58-
<PAGE> 97
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. TRADING ACTIVITIES AND RELATED RISKS -- (CONTINUED)
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Partnership is exposed to a market risk equal to
the value of futures and forward contracts purchased and unlimited liability on
such contracts sold short.
The fair value of derivatives represents unrealized gains and losses on
open futures and forward contracts. The average fair value of derivatives during
1998, 1997 and 1996, and the related fair values as of December 31, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
FAIR VALUE AS OF
AVERAGE FAIR VALUE DECEMBER 31,
------------------------------------ ------------------------
1998 1997 1996 1998 1997
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Futures contracts $9,660,000 $4,110,000 $3,280,000 $ 3,918,000 $8,567,000
Forward contracts 3,490,000 70,000 1,570,000 (1,005,000) 1,328,000
</TABLE>
The unrealized gain (loss) on open futures and forward contracts is
comprised of the following:
<TABLE>
<CAPTION>
FUTURES CONTRACTS FORWARD CONTRACTS
(EXCHANGE TRADED) (NON-EXCHANGE TRADED)
DECEMBER 31, DECEMBER 31,
------------------------ -------------------------
1998 1997 1998 1997
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Gross unrealized gains $ 6,289,815 $9,352,004 $ 7,377,712 $ 4,890,035
Gross unrealized (losses) (2,372,098) (784,938) (8,383,137) (3,561,905)
----------- ---------- ----------- -----------
Net unrealized gain (loss) $ 3,917,717 $8,567,066 $(1,005,425) $ 1,328,130
=========== ========== =========== ===========
</TABLE>
Net trading results from futures contracts are reflected in the statement
of operations and equal gain from futures trading less the portion of the
brokerage fee paid directly to the broker. Net trading results from forward
contracts are reflected in the statement of operations as gain from forward
trading. Such trading results reflect the net gain arising from the
Partnership's speculative trading of futures and forward contracts.
Open contracts generally mature within three months; as of December 31,
1998, the latest maturity date for open futures contracts is September 1999, and
the latest maturity date for open forward contracts is March 1999. However, the
Partnership intends to close all contracts prior to maturity. At December 31,
1998 and 1997, the notional amount of open contracts is as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------- -------------------------------
CONTRACTS TO CONTRACTS TO CONTRACTS TO CONTRACTS TO
PURCHASE SELL PURCHASE SELL
-------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Futures contracts (exchange traded):
- Long-term interest rates $ 460,500,000 $148,700,000 $ 759,600,000 $ 0
- Short-term interest rates 305,900,000 307,900,000 485,700,000 437,100,000
- Stock indices 67,900,000 11,200,000 21,000,000 13,000,000
- Agricultural 2,000,000 8,700,000 2,500,000 3,600,000
- Metals 6,500,000 47,500,000 2,800,000 32,400,000
- Energy 0 17,100,000 0 49,600,000
Forward contracts (non-exchange
traded):
- Currencies 435,100,000 386,200,000 284,900,000 472,800,000
-------------- ------------ -------------- --------------
$1,277,900,000 $927,300,000 $1,556,500,000 $1,008,500,000
============== ============ ============== ==============
</TABLE>
The above amounts do not represent the Partnership's risk of loss due to
market and credit risk, but rather represent the Partnership's extent of
involvement in derivatives at the date of the statement of financial condition.
-59-
<PAGE> 98
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. TRADING ACTIVITIES AND RELATED RISKS -- (CONTINUED)
The General Partner has established procedures to actively monitor and
minimize market and credit risk, although there can be no assurance that they
will, in fact, succeed in doing so. The General Partner's basic market risk
control procedures consist of continuously monitoring open positions,
diversification of the portfolio and maintenance of a margin-to-equity ratio
that rarely exceeds 30%. The General Partner seeks to minimize credit risk
primarily by depositing and maintaining the Partnership's assets at financial
institutions and brokers which the General Partner believes to be creditworthy.
The Limited Partners bear the risk of loss only to the extent of the market
value of their respective investments and, in certain specific circumstances,
distributions and redemptions received.
-60-
<PAGE> 99
CAMPBELL & COMPANY, INC.
BALANCE SHEET
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $ 7,862,826
Accounts receivable
Advisory and performance fees 6,917,463
Receivable from Campbell Strategic Allocation Fund,
L.P. 1,629,535
Other receivables 389,762
-----------
Total current assets 16,799,586
-----------
Property and equipment
Furniture and office equipment 2,010,296
Leasehold improvements 134,363
-----------
2,144,659
Less accumulated depreciation and amortization (1,206,666)
-----------
Total property and equipment 937,993
-----------
Other assets
Cash surrender value of life insurance, net of policy
loans of $165,672 157,177
Investments in commodity pools 4,640,463
Other 5,160,110
-----------
Total assets $27,695,329
===========
LIABILITIES
Current liabilities
Accounts payable and accrued expenses $ 4,676,394
Subordinated debt 10,000,000
-----------
Total liabilities 14,676,394
-----------
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 12,961,767
-----------
Total stockholders' equity 13,018,935
-----------
Total liabilities and stockholders' equity $27,695,329
===========
</TABLE>
THE INVESTOR WILL NOT RECEIVE ANY INTEREST IN THIS COMPANY.
See accompanying notes.
-61-
<PAGE> 100
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) 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 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 performance fee agreement 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, 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. INVESTMENTS IN COMMODITY POOLS
Investments in commodity pools consist of the following as of June 30,
1999:
<TABLE>
<S> <C>
Campbell Strategic Allocation Fund, L.P. $4,355,962
Campbell Financial Futures Fund Limited Partnership 257,228
The Campbell Fund Trust 27,273
----------
Total $4,640,463
==========
</TABLE>
-62-
<PAGE> 101
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 2. INVESTMENTS IN COMMODITY POOLS -- (CONTINUED)
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 manager of Campbell
Strategic Allocation Fund, L.P. (Strategic). As General Partner, the Company
receives from Strategic a monthly brokerage fee and quarterly performance fee.
Included in advisory and performance fees receivable at June 30, 1999 is
approximately $2,062,693 due from Strategic for such fees.
Summarized financial information with respect to Strategic as of and for
the six month period ended June 30, 1999, is as follows:
<TABLE>
<S> <C>
BALANCE SHEET DATA
Assets $431,708,624
Liabilities (7,595,127)
------------
Net Asset Value $424,113,497
============
OPERATING DATA
Total income $ 31,277,711
Total expense (15,712,564)
------------
Net income $ 15,565,147
============
General Partner income allocation $ 156,241
============
</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
extent of this commitment is dependent on the subscriptions Strategic receives
during the continuing offering period provided for in Strategic's prospectus.
The Company, as General Partner, has contributed capital of $3,397,000 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 as of June
30, 1999, of $237,274 from Strategic for offering costs due to be reimbursed as
of said date. This amount is included in Receivable from Campbell Strategic
Allocation Fund, L.P. in the balance sheet. The remaining offering costs of
$3,943,883 as of June 30, 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
out of the asset 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 fee which is based on the monthly net asset
value of Strategic. As of June 30, 1999, $2,571,518 selling agent commissions is
subject to future reimbursement, of which $1,392,261 is included in Receivable
from Campbell Strategic Allocation Fund, L.P. and $1,179,257 is included in
Other assets in the balance sheet.
-63-
<PAGE> 102
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 2. INVESTMENTS IN COMMODITY POOLS -- (CONTINUED)
In the event Strategic terminates prior to the completion of any
reimbursement of the aforementioned costs, the Company will not be entitled to
any additional reimbursement from Strategic.
Campbell Financial Futures Fund Limited Partnership
The Company also acts as Co-General Partner in Campbell Financial Futures
Fund Limited Partnership (Financial Futures). The Net Asset Value of Financial
Futures as of June 30, 1999 totaled $9,253,773.
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 June 30, 1999 totaled $10,640,994.
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
partnerships and the trust 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 partnerships and the trust 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 partnerships, the trust 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 average fair value of derivatives held by the partnerships and the
trust during the six months ended June 30, 1999 was approximately $11,424,800
and the related period-end fair value was approximately $22,658,700.
At June 30, 1999, the notional amount of contracts acquired by the
partnerships and the trust to purchase totaled approximately $829,800,000 and
the notional amount of such contracts to sell totaled approximately
$4,673,400,000. These amounts do not represent the partnerships' and the trust's
risk of loss due to market and credit risk, but rather represent the extent of
their involvement in derivatives at the balance sheet date.
The Company has established procedures to actively monitor market risk and
minimize credit risk.
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
-64-
<PAGE> 103
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 4. SUBORDINATED DEBT -- (CONTINUED)
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 June 30, 1999, $10,000,000 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 JUNE 30
- -------------------
<S> <C>
2000 $ 276,222
2001 281,766
2002 287,448
2003 293,163
2004 298,980
Thereafter 1,338,112
----------
Total base annual rentals $2,775,691
==========
</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.
-65-
<PAGE> 104
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, 1998. 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, 1998, in conformity with generally accepted accounting principles.
/s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Hunt Valley, Maryland
February 26, 1999
-66-
<PAGE> 105
CAMPBELL & COMPANY, INC.
BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $17,673,131
Accounts receivable
Advisory and performance fees 13,069,541
Receivable from Campbell Strategic
Allocation Fund, L.P. 1,309,478
Other receivables 307,375
-----------
Total current assets 32,359,525
-----------
Property and equipment
Furniture and office equipment 1,832,408
Leasehold improvements 134,363
-----------
1,966,771
Less accumulated depreciation and amortization (1,002,666)
-----------
Total property and equipment 964,105
-----------
Other assets
Cash surrender value of life insurance, net of policy
loans of $165,672 157,177
Investments in commodity pools 5,138,891
Other 5,886,080
-----------
Total assets $44,505,778
===========
LIABILITIES
Current liabilities
Accounts payable and accrued expenses $15,617,999
Subordinated debt 4,900,000
-----------
Total liabilities 20,517,999
-----------
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 23,930,611
-----------
Total stockholders' equity 23,987,779
-----------
Total liabilities and stockholders' equity $44,505,778
===========
</TABLE>
THE INVESTOR WILL NOT RECEIVE ANY INTEREST IN THIS COMPANY.
See accompanying notes.
-67-
<PAGE> 106
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General
Campbell and Company, Inc. (the Company) 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 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 performance fee agreement 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, 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. INVESTMENTS IN COMMODITY POOLS
Investments in commodity pools consist of the following as of December 31,
1998:
<TABLE>
<S> <C>
Campbell Strategic Allocation Fund, L.P. $3,483,174
SB Campbell Financial, Metals & Energy Fund plc 1,386,979
Campbell Financial Futures Fund Limited Partnership 242,316
The Campbell Fund Trust 26,422
----------
Total $5,138,891
==========
</TABLE>
-68-
<PAGE> 107
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 2. INVESTMENTS IN COMMODITY POOLS -- (CONTINUED)
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 manager of Campbell
Strategic Allocation Fund, L.P. (Strategic). As General Partner, the Company
receives from Strategic a monthly brokerage fee and quarterly performance fee.
Included in advisory and performance fees receivable at December 31, 1998, is
approximately $2,837,000 due from Strategic for such fees.
Summarized financial information with respect to Strategic as of and for
the year ended December 31, 1998, is as follows:
<TABLE>
<S> <C>
BALANCE SHEET DATA
Assets $350,790,808
Liabilities (6,834,160)
------------
Net Asset Value $343,956,648
============
OPERATING DATA
Total income $ 68,509,628
Total expense (27,815,072)
------------
Net income $ 40,694,556
============
General Partner income allocation $ 397,386
============
</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
extent of this commitment is dependent on the subscriptions Strategic receives
during the continuing offering period provided for in Strategic's prospectus.
The Company, as General Partner, has contributed capital of $2,667,000 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 as of
December 31, 1998, of $185,312 from Strategic for offering costs due to be
reimbursed as of said date. This amount is included in Receivable from Campbell
Strategic Allocation Fund, L.P. in the balance sheet. The remaining offering
costs of $3,564,983 as of December 31, 1998, 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 out of the asset 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 fee which is based on the monthly net asset
value of Strategic. As of December 31, 1998, $3,408,293 in selling agent
commissions is subject to future reimbursement, of which $1,124,166 is included
in Receivable from Campbell Strategic Allocation Fund, L.P. and $2,284,127 is
included in Other assets in the balance sheet.
-69-
<PAGE> 108
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 2. INVESTMENTS IN COMMODITY POOLS -- (CONTINUED)
In the event Strategic terminates prior to the completion of any
reimbursement of the aforementioned costs, the Company will not be entitled to
any additional reimbursement from Strategic.
Campbell Financial Futures Fund Limited Partnership
The Company also acts as Co-General Partner in Campbell Financial Futures
Fund Limited Partnership (Financial Futures). The Net Asset Value of Financial
Futures as of December 31, 1998, totaled $8,470,289.
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, 1998, totaled $5,817,411.
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
partnerships and the trust 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 partnerships and the trust 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 partnerships, the trust 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 average fair value of derivatives held by the partnerships and the
trust during 1998 was approximately $13,760,000 and the related year-end fair
value was approximately $3,316,000.
At December 31, 1998, the notional amount of contracts acquired by the
partnerships and the trust to purchase totaled approximately $1,318,500,000 and
the notional amount of such contracts to sell totaled approximately
$953,300,000. These amounts do not represent the partnerships' and the trust's
risk of loss due to market and credit risk, but rather represent the extent of
their involvement in derivatives at the balance sheet date.
The Company has established procedures to actively monitor market risk and
minimize credit risk.
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
-70-
<PAGE> 109
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 4. SUBORDINATED DEBT -- (CONTINUED)
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, 1998, $4,900,000 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>
1999 $ 273,501
2000 278,978
2001 284,590
2002 290,305
2003 296,054
Thereafter 1,488,334
----------
Total base annual rentals $2,911,762
==========
</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 January and February 1999, the Company made distributions to its
stockholders aggregating approximately $21,900,000. Additionally, the
stockholders made advances to the Company in accordance with the working capital
agreement aggregating approximately $5,100,000 to provide for additional working
capital.
-71-
<PAGE> 110
(This page has been left blank intentionally.)
<PAGE> 111
APPENDIX I
GLOSSARY
The following glossary may assist prospective investors in understanding
the terms used in this prospectus.
Commodity. Goods, wares, merchandise, produce and in general everything
that is bought and sold in commerce. Out of this large class, certain
commodities, because of their wide distribution, universal acceptance and
marketability in commercial channels, have become the subject of trading on
various national and international exchanges located in principal marketing and
commercial areas. Traded commodities include: grains, such as wheat, corn, oats
and rice; oilseed products, such as soybeans and soybean products (meal and
oil); foods, such as livestock and meat, sugar, cocoa and coffee; fibers, such
as cotton, lumber and plywood; metals, such as copper, silver, gold, palladium
and platinum; financial instruments, such as U.S. Treasury bonds, Eurodollars,
German Bund and Short Sterling rates; foreign currencies, such as British
pounds, Canadian dollars, Japanese yen and Swiss francs; energy supplies, such
as petroleum and petroleum products (heating oil); and stock indices, such as
the Standard & Poor's Composite Index, the New York Stock Exchange Composite
Index and the Nikkei Stock Index Average. Traded commodities are sold according
to uniform established grade standards, in convenient predetermined lots and
quantities such as bushels, pounds or bales, are fungible and, with a few
exceptions, are storable over periods of time.
Commodity Exchange Act. The statute providing the regulatory scheme for
trading in commodity futures and options contracts in the United States under
the administration of the Commodity Futures Trading Commission.
Commodity exchanges. Centralized market facilities, sometimes referred to
as contract markets, for trading in futures contracts relating to specified
commodities. Principal exchanges in the United States include the Board of Trade
of the City of Chicago, the Chicago Mercantile Exchange (including the
International Monetary Market), and the Commodity Exchange, Inc.
Commodity Futures Trading Commission ("CFTC"). An independent regulatory
commission of the United States government empowered to regulate commodity
futures transactions and other commodity transactions under the Commodity
Exchange Act.
Commodity Pool Operator. A person engaged in the business of operating an
organization that raises capital through the sale of interests in an investment
trust, syndicate or similar form of enterprise, and uses that capital to invest
either entirely or partially in commodity contracts.
Commodity Trading Advisor. A person who renders advice about commodities
or about the trading of commodities, as part of a regular business, for profit.
Daily price fluctuation limit. The maximum permitted fluctuation (imposed
by an exchange and approved by the CFTC) in the price of a commodity futures
contract for a given commodity that can occur on a commodity exchange on a given
day in relation to the previous day's settlement price, which maximum permitted
fluctuation is subject to change from time to time by the exchange (with CFTC
approval).
Delivery. The process of satisfying a commodity futures contract by
transferring ownership of a specified quantity and grade of a cash commodity to
the purchaser thereof.
Forward contract. A cash market transaction in which buyer and seller
agree to the purchase and sale of a specific quantity of a commodity for
delivery at some future time under such terms and conditions as the two may
agree upon.
Futures Commission Merchant. The person or organization that solicits or
accepts orders for the purchase or sale of any commodity for future delivery
subject to the rules of any contract market and in connection with such
solicitation or acceptance of orders, accepts money or other assets to margin,
guarantee, or secure any trades or contracts that result from such orders.
APPI-1
<PAGE> 112
Futures contract. A contract providing for (i) the delivery or receipt at
a future date of a specified amount and grade of a traded commodity at a
specified price and delivery point, or (ii) cash settlement of the change in the
value of the contract. The terms of these contracts are standardized for each
commodity traded on each exchange and vary only with respect to price and
delivery months. A commodity futures contract should be distinguished from the
actual physical commodity, which is termed a "cash commodity." Trading in
commodity futures contracts involves trading in contracts for future delivery of
commodities and not the buying and selling of particular lots of commodities. A
contract to buy or sell may be satisfied either by making or taking delivery of
the commodity and payment or acceptance of the entire purchase price therefor,
or by offsetting the contractual obligation with a countervailing contract on
the same exchange prior to delivery.
Limit order. A trading order which sets a limit on price of execution.
Limit orders (as contrasted with stop orders) do not become market orders.
Long contract. A commodity futures contract to accept delivery of (buy) a
specified amount and grade of a commodity at a future date at a specified price.
Market order. A trading order to execute a trade at the most favorable
price as soon as possible.
Margin. A good faith deposit with a broker to assure fulfillment of the
terms of a commodity futures contract. Commodity margins do not usually involve
the payment of interest.
Margin call. A demand for additional monies after depletion of the initial
good faith deposit required to maintain a customer's account in compliance with
the requirements of a particular commodity exchange or of a commodity broker.
Open position. A contractual commitment arising under a long contract or a
short contract that has not been extinguished by an offsetting trade or by
delivery.
Option contract. An option contract gives the purchaser of the option
contract the right (as opposed to the obligation) to acquire (call) or sell
(put) a given quantity of a commodity or a futures contract for a specified
period of time at a specified price.
Position limit. The maximum number of speculative futures contracts in any
one commodity (on one contract market) imposed by the CFTC or an exchange that
can be held or controlled at one time, by one person or a group of persons
acting together.
Round-turn trade. The initial purchase or sale of a commodity futures
contract and the subsequent offsetting sale or purchase of a contract.
Short contract. A futures contract to make delivery of (sell) a specified
amount and trade of a commodity at a future date at a specified price.
Spot contract. A cash market transaction in which buyer and seller agree
to the purchase and sale of a specified commodity lot for immediate delivery.
Spreads. A commodity futures trading transaction involving the
simultaneous holding of commodity futures contracts dealing with the same
commodity but involving different delivery dates or delivery markets, and in
which the trader expects to earn profits from a widening or narrowing movement
of the prices of the different commodity futures contracts.
Stop order. An order given to a broker to execute a trade in a futures
contract when the market price for the contract reaches the specified stop order
price. Stop orders are utilized to protect gains or losses on open positions.
Stop orders become market orders when the stop order price is reached.
Unrealized profit or loss. The profit or loss which would be realized on
an open position if it were closed at the current settlement price or the most
recent appropriate quotation as supplied by the broker or bank through which the
transaction is effected.
APPI-2
<PAGE> 113
BLUE SKY GLOSSARY
The following definitions are included in this Appendix I in compliance
with the requirements of various state securities administrators who review
public futures fund offerings for compliance with the "Guidelines for the
Registration of Commodity Pool Programs" Statement of Policy promulgated by the
North American Securities Administrators Association, Inc. The following
definitions are reprinted verbatim from such Guidelines and may, accordingly,
not in all cases be relevant to an investment in the Fund.
Definitions -- As used in the Guidelines, the following terms have the
following meanings:
Administrator -- The official or agency administering the security laws of
a state.
Advisor -- Any person who for any consideration engages in the business of
advising others, either directly or indirectly, as to the value, purchase, or
sale of commodity contracts or commodity options.
Affiliate -- An Affiliate of a Person means: (a) any Person directly or
indirectly owning, controlling or holding with power to vote 10% or more of the
outstanding voting securities of such Person; (b) any Person 10% or more of
whose outstanding voting securities are directly or indirectly owned, controlled
or held with power to vote, by such Person; (c) any Person, directly or
indirectly, controlling, controlled by, or under common control of such Person;
(d) any officer, director or partner of such Person; or (e) if such Person is an
officer, director or partner, any Person for which such Person acts in any such
capacity.
Capital Contributions -- The total investment in a Program by a Participant
or by all Participants, as the case may be.
Commodity Broker -- Any Person who engages in the business of effecting
transactions in commodity contracts for the account of others or for his own
account.
Commodity Contract -- A contract or option thereon providing for the
delivery or receipt at a future date of a specified amount and grade of a traded
commodity at a specified price and delivery point.
Cross Reference Sheet -- A compilation of the Guideline sections,
referenced to the page of the prospectus, Program agreement, or other exhibits,
and justification of any deviation from the Guidelines.
Net Assets -- The total assets, less total liabilities, of the Program
determined on the basis of generally accepted accounting principles. Net Assets
shall include any unrealized profits or losses on open positions, and any fee or
expense including Net Asset fees accruing to the Program.
Net Asset Value Per Program Interest -- The Net Assets divided by the
number of Program Interests outstanding.
Net Worth -- The excess of total assets over total liabilities are
determined by generally accepted accounting principles. Net Worth shall be
determined exclusive of home, home furnishings and automobiles.
New Trading Profits -- The excess, if any, of Net Assets at the end of the
period over Net Assets at the end of the highest previous period or Net Assets
at the date trading commences, whichever is higher, and as further adjusted to
eliminate the effect on Net Assets resulting from new Capital Contributions,
redemptions, or capital distributions, if any, made during the period decreased
by interest or other income, not directly related to trading activity, earned on
Program assets during the period, whether the assets are held separately or in a
margin account.
Organizational and Offering Expenses -- All expenses incurred by the
Program in connection with and in preparing a Program for registration and
subsequently offering and distributing it to the public, including, but not
limited to, total underwriting and brokerage discounts and commissions
(including fees of the underwriter's attorneys), expenses for printing,
engraving, mailing, salaries of employees while engaged in sales activity,
charges of transfer agents, registrars, trustees, escrow holders, depositories,
experts, expenses of qualification of the sale of its Program Interest under
federal and state law, including taxes and fees, accountants' and attorneys'
fees.
Participant -- The holder of a Program Interest.
APPI-3
<PAGE> 114
Person -- Any natural Person, partnership, corporation, association or
other legal entity.
Pit Brokerage Fee -- Pit Brokerage Fee shall include floor brokerage,
clearing fees, National Futures Association fees, and exchange fees.
Program -- A limited partnership, joint venture, corporation, trust or
other entity formed and operated for the purpose of investing in Commodity
Contracts.
Program Broker -- A commodity broker that effects trades in Commodity
Contracts for the account of a Program.
Program Interest -- A limited partnership interest or other security
representing ownership in a program.
Pyramiding -- A method of using all or a part of an unrealized profit in a
Commodity Contract position to provide margin for any additional Commodity
Contracts of the same or related commodities.
Sponsor -- Any Person directly or indirectly instrumental in organizing a
Program or any Person who will manage or participate in the management of a
Program, including a Commodity Broker who pays any portion of the Organizational
Expenses of the Program, and the general partner(s) and any other Person who
regularly performs or selects the Persons who perform services for the Program.
Sponsor does not include wholly independent third parties such as attorneys,
accountants, and underwriters whose only compensation is for professional
services rendered in connection with the offering of the units. The term
"Sponsor" shall be deemed to include its Affiliates.
Valuation Date -- The date as of which the Net Assets of the Program are
determined.
Valuation Period -- A regular period of time between Valuation Dates.
APPI-4
<PAGE> 115
APPENDIX II
SUPPLEMENTARY PERFORMANCE INFORMATION
The following supplement includes charts prepared by Campbell & Company and
provides a graphic presentation of:
1. the managed futures industry in general;
2. the performance of the Fund; and
3 and 4. the performance of the two Campbell & Company portfolios in which
the Fund trades.
Section 1 provides performance data comparing various investment asset
classes to the MAR Index, which is a broad measure of overall managed futures
returns. Section 2 presents the actual performance of the Fund since inception,
compared to several investment indices. Sections 3 and 4 present the overall
performance of Campbell & Company's management and trading systems within the
portfolios in which the Fund trades.
Campbell & Company is a highly systematic trader, which uses essentially
the same systematic approach in each market traded, and the basic trading
principles and policies have remained constant since the inception of trading in
the portfolios. Investors should note that both individual accounts within each
portfolio and other funds managed by Campbell & Company have at times incurred
significant losses, greater than any losses sustained to date by the Fund. The
industry and portfolio sections do not represent the actual performance of the
Fund and are not representative of how the Fund has performed or will perform.
THE FOLLOWING SECTIONS INCLUDE THE PERFORMANCE OF PROGRAMS AND ACCOUNTS
WHICH HAVE TRADED PURSUANT TO THE SAME SYSTEMS AS THE FUND, BUT WHICH HAVE
MATERIAL DIFFERENCES FROM THE FUND. THE FUND WILL NOT EXPERIENCE IN THE FUTURE
THE RESULTS SHOWN IN THE PORTFOLIO SECTIONS BECAUSE OF DIFFERENCES IN BROKERAGE
FEES, ADVISORY AND PERFORMANCE FEES AND TREATMENT OF INTEREST INCOME BETWEEN THE
FUND AND ACCOUNTS INCLUDED IN SUCH SECTIONS. THE SIZE OF THE FUND'S ASSETS ALSO
MAY AFFECT PARTICULAR TRADING DECISIONS, SUCH AS THE RELATIVE SIZE OF POSITIONS
TAKEN, DEGREE OF DIVERSIFICATION AND PARTICULAR COMMODITIES TRADED AND MAY
AFFECT GENERALLY THE DESIGN AND EXECUTION OF CAMPBELL & COMPANY'S TRADING
METHODS. IN ANY EVENT, PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS.
FUTURES TRADING IS SPECULATIVE. INVESTORS MAY LOSE ALL OR
SUBSTANTIALLY ALL OF THEIR INVESTMENT.
APPII-1
<PAGE> 116
SECTION 1
MANAGED FUTURES INDUSTRY
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
The chart below shows the historical correlation of the monthly returns of
various benchmarks with the S&P 500 Index. Note that stocks associated with the
NASDAQ and EAFE indices, as well as bonds, have historically had a higher
correlation with the S&P 500 Index than managed futures, as represented by the
MAR Index. This low correlation shows that managed futures have a tendency to
behave somewhat independently from stocks.
HISTORICAL CORRELATION OF MONTHLY RETURNS
WITH THE S&P 500 INDEX
JANUARY 1980 -- JUNE 1999
<TABLE>
<CAPTION>
MAR
Fund/Pool
NASDAQ Europe Lehman Bros. Qualified
Composite Australasia Far Govt. Bond Universe
S&P 500 Index Index East Index Index Index
<S> <C> <C> <C> <C>
1.00 0.87 0.49 0.28 0.09
</TABLE>
This chart was prepared by Campbell & Company. U.S. stocks are represented
by the S&P 500 Index and the NASDAQ Composite Index, international stocks by the
EAFE Index, and bonds by the Lehman Brothers Government Bond Index. These are
passive indices of equity and debt securities which are generally purchased by
investors with an investment objective of capital preservation, growth or
income. Managed futures are represented by the MAR Fund/Pool Qualified Universe
Index. The MAR Index is a dollar weighted index which includes performance of
current as well as retired public futures funds, private pools, and offshore
funds. 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 Fund, and the Fund may perform quite differently than the
Index, just as an individual stock may perform quite differently from the S&P
500 Index. A prospective investor is advised that this chart should not be
interpreted to mean that the Fund will obtain similar results or generate any
profits whatsoever in the future.
APPII-2
<PAGE> 117
MANAGED FUTURES INDUSTRY -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
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, futures were added in 5% increments while
the bond allocation was decreased by the same percentage. As the allocation of
futures increased up to approximately 20%, returns increased and standard
deviation (one measure of risk) was reduced. If more than 20% futures were
introduced, returns continued to increase, but risk increased also.
This is not a recommendation that anyone invest more than 10% of their net
worth, which is the maximum allocation allowed by the prospectus, in the Fund.
The positive effect of allocations to managed futures in a portfolio is only
evident during periods in which managed futures out-perform stocks or bonds.
THE EFFECT OF INCREASING ALLOCATIONS OF MANAGED FUTURES IN A PORTFOLIO
JANUARY 1980 -- DECEMBER 1998
[GRAPH]
This graph was prepared by Campbell & Company. The stocks portion is
represented by the S&P 500 Index, the bonds portion by the Lehman Brothers
Government Bond Index and the futures portion by the MAR Fund/Pool
Qualified Universe Index. The MAR Index is a dollar weighted index which
includes performance of current as well as retired public futures funds,
private pools, and offshore funds. 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 Fund, and
the Fund may perform quite differently than the Index, just as an
individual stock may perform quite differently from the S&P 500 Index.
This chart contains historical trading results hypothetically blended.
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.
APPII-3
<PAGE> 118
MANAGED FUTURES INDUSTRY -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
VOLATILITY COMPARISON
A common measure of risk is standard deviation of monthly returns. Standard
deviation measures the variability of returns around the average return for that
particular investment. Generally the higher the standard deviation, the higher
the volatility. Shown below are three comparisons of volatility: overall, upside
and downside.
Overall volatility is the most common measure of volatility or risk. Upside
volatility measures the volatility of only the positive months. Downside
volatility shows the volatility of only the losing months. Investors are
typically more concerned with downside volatility, which is perhaps a better
historical indication of the risk of actually losing money. As can be seen from
the chart, managed futures (MAR) have shown greater upside volatility and less
downside volatility than the other benchmarks with the exception of bonds. There
is no guarantee that this low downside volatility will persist into the future,
nor is this representative of future returns through an investment in the Fund.
VOLATILITY
JANUARY 1980 -- JUNE 1999
LINE GRAPH
<TABLE>
<CAPTION>
BOND INDEX MAR S&P 500 EAFE NASDAQ
---------- --- ------- ---- ------
<S> <C> <C> <C> <C> <C>
Overall Volatility 1.96 4.67 4.34 5.07 5.64
Upside Volatility 1.40 3.77 2.71 3.17 3.23
Downside Volatility 1.18 2.48 3.29 3.28 4.19
</TABLE>
This chart was prepared by Campbell & Company. U.S. stocks are represented
by the S&P 500 Index and the NASDAQ Composite Index, international stocks by the
EAFE Index, and bonds by the Lehman Brothers Government Bond Index. These are
passive indices of equity and debt securities which are generally purchased by
investors with an investment objective of capital preservation, growth or
income. Managed futures are represented by the MAR Fund/Pool Qualified Universe
Index. The MAR Index is a dollar weighted index which includes performance of
current as well as retired public futures funds, private pools, and offshore
funds. 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 Fund, and the Fund may perform quite differently than the
Index, just as an individual stock may perform quite differently from the S&P
500 Index. A prospective investor is advised that this chart should not be
interpreted to mean that the Fund will obtain similar results or generate any
profits whatsoever in the future.
APPII-4
<PAGE> 119
MANAGED FUTURES INDUSTRY -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
RISK PERSPECTIVE
The proper evaluation of any investment must include an assessment of the
risk which must be taken to achieve the prospective return. Another measure of
risk, in addition to standard deviation, is historical worst case decline, or
largest draw-down. In other words, if you had purchased an investment at a
month-end peak in performance and then subsequently sold at the lowest month-end
price thereafter, the worst case decline would be the largest percentage loss
experienced. The chart below shows the worst case cumulative monthly decline in
the Lehman Brothers Government Bond Index, MAR Index, EAFE Index, S&P 500 Index
and NASDAQ Composite Index since 1980. The MAR Index experienced a smaller peak
to valley decline than three out of the four indices. This does not imply that
managed futures are necessarily safer than the benchmarks compared; it is merely
intended to put risk in a historical perspective.
WORST CASE DECLINES
JANUARY 1980 -- JUNE 1999
<TABLE>
<CAPTION>
MAR
Fund/Pool
Lehman Qualified Europe NASDAQ
Bros. Govt. Universe S&P 500 Australasia Far Composite
Bond Index Index Index East Index Index
(1/94-10/94) (3/86-12/86) (8/87-11/87) (12/89-9/90) (8/87-11/87)
10 Months 10 Months 4 Months 10 Months 4 Months
<S> <C> <C> <C> <C>
-12% -28% -30% -32% -33%
</TABLE>
This chart was prepared by Campbell & Company. U.S. stocks are represented
by the S&P 500 Index and the NASDAQ Composite Index, international stocks by the
EAFE Index, and bonds by the Lehman Brothers Government Bond Index. These are
passive indices of equity and debt securities which are generally purchased by
investors with an investment objective of capital preservation, growth or
income. Managed futures are represented by the MAR Fund/Pool Qualified Universe
Index. The MAR Index is a dollar weighted index which includes performance of
current as well as retired public futures funds, private pools, and offshore
funds. 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 Fund, and the Fund may perform quite differently than the
Index, just as an individual stock may perform quite differently from the S&P
500 Index. A prospective investor is advised that this chart should not be
interpreted to mean that the Fund will obtain similar results or generate any
profits whatsoever in the future.
APPII-5
<PAGE> 120
SECTION 2
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
WORST MONTHLY PERCENTAGE DRAW-DOWN*: April, 1998/6.69%
WORST PEAK-TO-VALLEY DRAW-DOWN*: June, 1994 -- January, 1995/17.99%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
RATE OF RETURN(1)
(COMPUTED ON A COMPOUNDED MONTHLY BASIS)
MONTH 1999 YTD 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
January -5.02% 2.74% 4.52% 5.79% -4.67%
February 1.67% -2.81% 2.03% -5.97% 4.21%
March 0.46% 4.68% -2.47% 4.72% 8.77%
April 5.33% -6.69% -3.60% 3.59% 1.13% 0.16%
May -3.69% 4.07% -2.92% -2.18% -0.84% -2.42%
June 4.81% 1.29% 2.48% 0.75% -1.77% 5.15%
July -4.00% 9.12% -0.78% -3.82% -3.94%
August 9.48% -5.69% 1.84% 5.47% -3.89%
September 2.47% 4.51% 1.77% -3.93% 5.20%
October 3.97% 1.83% 12.44% 0.79% -0.14%
November -0.75% 0.17% 11.00% -0.15% -6.67%
December 0.30% 4.46% -4.41% 5.35% -4.98%
Total 3.15% 14.60% 14.31% 30.46% 9.99% -11.62%
</TABLE>
<TABLE>
<CAPTION>
COMPOUND ANNUAL RATES OF RETURN
APRIL 1994 - JUNE 1999
<S> <C>
12-month 14.97%
24-month 16.39%
36-month 18.35%
Since Inception 10.81%
</TABLE>
<TABLE>
<CAPTION>
STATISTICS
4/94 - 6/99
<S> <C>
Compounded Monthly Annual ROR: 10.81%
Average Monthly ROR: .96%
Standard Deviation of Monthly Returns: 4.48%
Annualized Standard Deviation: 15.52
Sharpe Ratio: .40
Average Monthly Gain: 4.01%
Average Monthly Loss: (3.39)%
Number of Profitable Months: 37
Number of Unprofitable Months: 26
Average Duration of Decline (Months): 1.93
Average Recovery Period: 2.80
</TABLE>
COMPOUND VALUE OF INITIAL $10,000 INVESTMENT
ANNUAL RETURNS SINCE INCEPTION
APRIL 1994 - JUNE 1999
<TABLE>
<CAPTION>
<S> <C>
INCEPT 4/94 10000
94 8838
95 9720
96 12682
97 14496
98 16613
99 17139
</TABLE>
*"Draw-down" means losses experienced by the Fund over a specified period.
APPII-6
<PAGE> 121
CAMPBELL STRATEGIC ALLOCATION FUND, L.P. -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
CAMPBELL STRATEGIC ALLOCATION FUND, L.P. (CSAF)
APRIL 1994 - JUNE 1999
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
94 -11.62% -13.99%
95 9.99% -6.32%
96 30.46% -5.97%
97 14.31% -8.73%
98 14.60% -6.69%
99 3.15% -5.02%
</TABLE>
NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTE (NASDAQ)
COMPOSITE INDEX
APRIL 1994 - JUNE 1999
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
94 1.93% -3.98%
95 39.88% -0.72%
96 22.69% -13.1%
97 21.62% -11.47%
98 39.62% -20.87%
99 22.53% -8.69%
</TABLE>
STANDARD & POOR 500 INDEX (S&P 500 INDEX)
APRIL 1994 - JUNE 1999
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
94 5.31% -3.88%
95 38.56% -0.36%
96 22.92% -4.42%
97 33.37% -5.6%
98 20.47% -15.35%
99 15.91% -3.11%
</TABLE>
EUROPEAN AUSTRALASIA FAR EAST INDEX (EAFE)
APRIL 1994 - JUNE 1999
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
94 3.01% -5.25%
95 9.46% -5.07%
96 4.40% -3.52%
97 0.19% -11.15%
98 18.31% -15.17%
99 3.28% -5.39%
</TABLE>
The first chart above presents the actual annual performance of Campbell
Strategic Allocation Fund, L.P. since inception, net of all fees and commissions
paid. The following three charts above present the annual returns for selected
stock indices. U.S. stocks are represented by the S&P 500 Index and the NASDAQ
Composite Index and international stocks are represented by the EAFE Index.
These are passive indices of equity securities which generally are purchased by
investors with an investment objective of capital preservation, growth or
income. There is generally no correlation between the returns of stocks and
futures investments (see the discussions on non-correlation in "The Risks You
Face" and "Investment Factors." The dark bars in each chart represent annual
returns (calculated on a compounded monthly basis). The lighter bars below the
zero line and to the right of the annual returns represent the worst case peak
to valley decline (draw-down) during each of the years shown.
APPII-7
<PAGE> 122
CAMPBELL STRATEGIC ALLOCATION FUND, L.P. -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
A common measure of risk is standard deviation, which evaluates the
variability of returns around the average return for that specific investment.
The higher the standard deviation is, the higher the volatility or risk. A
comparison of overall standard deviation of monthly returns for the Fund, EAFE
Index, S&P 500 Index and NASDAQ Composite Index is shown below. Notice that the
standard deviation for the Fund has been declining in recent years, while that
of the stock indices has been rising. During the last two years the Fund has had
lower standard deviation than equities. Past performance is not necessarily
indicative of future results, and there is no guarantee that such low volatility
will persist into the future.
The charts below also separate upside volatility from downside volatility.
Upside volatility looks only at the volatility of returns for profitable months,
while downside volatility measures only the volatility of losing months. The
charts compare the upside and downside volatility for the Fund, EAFE Index, S&P
500 Index and NASDAQ Composite Index since the inception of the Fund. Campbell &
Company believes that prospective investors should note the Fund is comparable
with equities in terms of downside volatility, especially during the last three
years. Once again, there is no guarantee that this low volatility will persist
into the future.
VOLATILITY
APRIL 1994 -- JUNE 1999
LINE GRAPH
OVERALL VOLATILITY
<TABLE>
<CAPTION>
CSAF EAFE S&P 500 NASDAQ
---- ---- ------- ------
<S> <C> <C> <C> <C>
since inception (4/94) 4.48% 3.91% 3.95% 5.86%
last 36 mos. 4.59% 4.52% 4.89% 7.19%
last 24 mos. 4.27% 5.07% 5.27% 7.73%
last 12 mos. 4.11% 5.67% 6.27% 9.72%
</TABLE>
LINE GRAPH
UPSIDE VOLATILITY
<TABLE>
<CAPTION>
CSAF EAFE S&P 500 NASDAQ
---- ---- ------- ------
<S> <C> <C> <C> <C>
since inception (4/94) 3.01% 2.25% 2.20% 3.68%
last 36 mos. 3.28% 2.48% 2.23% 3.71%
last 24 mos. 2.65% 2.55% 2.28% 4.07%
last 12 mos. 2.85% 2.60% 1.76% 3.72%
</TABLE>
LINE GRAPH
DOWNSIDE VOLATILITY
<TABLE>
<CAPTION>
CSAF EAFE S&P 500 NASDAQ
---- ---- ------- ------
<S> <C> <C> <C> <C>
since inception (4/94) 1.87% 2.89% 3.27% 4.52%
last 36 mos. 1.71% 3.54% 3.65% 5.18%
last 24 mos. 1.82% 4.04% 4.27% 5.95%
last 12 mos. 1.59% 4.18% 5.36% 7.35%
</TABLE>
APPII-8
<PAGE> 123
CAMPBELL STRATEGIC ALLOCATION FUND, L.P. -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
HISTORICAL CORRELATION OF MONTHLY RETURNS WITH THE S&P 500 INDEX
APRIL 1994 -- JUNE 1999
<TABLE>
<S> <C>
S&P 500 Index 1.00
NASDAQ Composite Index 0.84
Europe Australia Far East Index 0.27
CSAF 0.09
</TABLE>
One of the reasons that managed futures can potentially add value when
blended into a stock portfolio is that the correlation between equities and
managed futures has historically been quite low. The chart shows the correlation
coefficient between the S&P 500 Index and the NASDAQ Composite Index, the EAFE
Index, and the Fund. Please note that the correlation between the S&P 500 Index
and the Fund is lower than the correlation between the S&P 500 Index and the
other benchmarks. This does not mean that the Fund is a hedge for a stock
portfolio, but merely that the returns of each are somewhat independent of the
other.
APPII-9
<PAGE> 124
CAMPBELL STRATEGIC ALLOCATION FUND, L.P. -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
HISTORICAL CORRELATION OF MONTHLY RETURNS WITH THE S&P 500 INDEX
APRIL 1994 -- MARCH 1999
LINE GRAPH
<TABLE>
<S> <C>
S&P 500 Index 1.00
Dow Industrials 0.94
NASDAQ Composite Index 0.83
Russell 2000 Growth Index 0.76
Europe, Australia, Far East Index 0.68
REITs Composite 0.43
Lehman Bros. Govt. Bond Index 0.20
Salomon Broad Bond Index 0.08
CSAF 0.05
Barclay CTA Index 0.01
MAR Fund/Pool Qualified Universe Index -0.01
</TABLE>
HISTORICAL CORRELATION OF MONTHLY RETURNS WITH THE CAMPBELL
STRATEGIC ALLOCATION FUND, L.P.
APRIL 1994 -- MARCH 1999
BAR GRAPH
<TABLE>
<S> <C>
CSAF 1.00
MAR Fund/Pool Qualified Universe Index 0.81
Barclay CTA Index 0.78
Lehman Bros. Govt. Bond Index 0.30
Salomon Broad Bond Index 0.15
REITs Composite 0.08
S&P 500 Index 0.05
Europe, Australia, Far East Index 0.04
Dow Industrials 0.03
NASDAQ Composite Index -0.13
Russell 2000 Growth Index -0.16
</TABLE>
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, real estate and
managed futures indices. The second chart shows the correlation between the Fund
and the same indices. The first chart uses the S&P 500 Index as the benchmark
for comparison, while the second chart uses the Fund as the benchmark against
which the others are correlated. The stock indices are represented by the Dow
Industrials, NASDAQ Composite, Russell 2000 and EAFE Indices. Bonds are
represented by the Lehman Brothers Government Bond Index and the Salomon
Brothers Broad Index. Real estate is represented by the Real Estate Investment
Trust Index (REIT). Managed futures are represented by the Barclay Index, MAR
Index and the Fund. Note that the correlation between managed futures and the
S&P 500 Index is lower than that of stocks or bonds. Again, this does not mean
that the Fund is a hedge for a stock portfolio, but merely that the returns of
each are somewhat independent of the other.
APPII-10
<PAGE> 125
SECTION 3
FINANCIAL, METAL & ENERGY LARGE PORTFOLIO(4)
APRIL 1983 (INCEPTION) -- JUNE 1999
WORST MONTHLY PERCENTAGE DRAW-DOWN(2): June, 1986/17.68%
WORST PEAK-TO-VALLEY DRAW-DOWN(3): March -- November 1986/41.94%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
<S> <C>
83 -10.34
84 26.96
85 33.05
86 -30.45
87 64.38
88 7.96
89 42.23
90 35.24
91 31.12
92 13.47
93 4.68
94 -16.76
95 19.46
96 35.96
97 18.75
98 20.07
99 -0.45
</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 Fund'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.
SEE SECTION 2 ON PAGE APPII-6 FOR ACTUAL PERFORMANCE OF THE FUND.
<TABLE>
<CAPTION>
COMPOUND ANNUAL RATE OF RETURN
APRIL 1983 -- JUNE 1999
<S> <C>
12-month 17.93%
24-month 20.81%
36-month 23.06%
Since Inception 16.06%
</TABLE>
APPII-11
<PAGE> 126
FINANCIAL, METAL & ENERGY LARGE PORTFOLIO(4) -- (CONTINUED)
APRIL 1983 -- JUNE 1999
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
RATE OF RETURN(1)
(COMPUTED ON A COMPOUNDED MONTHLY BASIS)
MONTH 1999 YTD 1998 1997 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January -4.83% 3.25% 5.26% 5.46% -4.53% -4.67% -0.71% -5.54% -7.89%
February 1.45% -2.38% 2.26% -5.63% 5.85% -6.81% 13.74% -3.58% -1.59%
March 0.87% 4.95% -2.08% 5.62% 9.58% 7.00% -5.79% 1.05% 20.41%
April 5.60% -5.88% -3.84% 3.49% 2.08% -1.77% 2.99% -2.78% -1.87%
May -3.25% 4.34% -1.84% -1.71% 0.88% -2.78% 2.81% 1.14% 2.81%
June 4.63% 2.04% 2.23% 1.29% -0.90% 5.24% 2.55% 10.66% 1.49%
July -3.68% 9.27% 0.01% -4.05% -4.36% 5.55% 10.40% -7.96%
August 9.23% -5.14% 1.78% 5.83% -3.79% -4.33% 4.99% 3.79%
September 2.98% 4.23% 2.47% -3.47% 6.91% -4.83% -2.17% 6.07%
October 4.42% 2.39% 12.06% 1.20% 0.36% -6.19% -4.67% 0.63%
November -0.50% 0.57% 12.22% -0.24% -7.02% 0.59% 6.26% -2.03%
December 0.64% 4.95% -4.29% 6.82% -5.08% -0.08% -1.36% 17.45%
Year 4.11% 20.07% 18.75% 35.96% 19.46% -16.76% 4.68% 13.47% 31.12%
</TABLE>
<TABLE>
<CAPTION>
RATE OF RETURN(1)
(COMPUTED ON A COMPOUNDED MONTHLY BASIS)
MONTH 1990 1989 1988 1987 1986 1985 1984 1983
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 3.00% 7.90% -0.08% 33.71% -6.28% 3.63% 1.27%
February 0.59% -1.99% 2.39% 3.23% 17.84% 11.59% 2.12%
March 3.37% 10.74% -1.88% 13.51% 6.48% 0.74% 2.44%
April 4.62% 1.94% -5.12% 15.39% -7.87% 5.97% 0.09% -0.40%
May 11.50% 13.72% 1.63% -4.17% 5.01% 2.92% 9.78% 0.18%
June 8.29% 1.88% 8.29% -3.21% -17.68% -2.18% -5.50% -3.71%
July 10.04% 0.55% -0.68% 9.80% 5.21% 5.48% 6.86% 3.27%
August 12.30% -0.81% -0.22% -1.12% 7.61% -3.63% -1.34% -1.47%
September 2.59% -4.27% 4.80% 2.71% -17.22% -11.29% 8.32% 0.83%
October 1.25% -6.88% -0.06% -13.45% -11.74% 3.95% 2.79% -4.18%
November -1.35% 2.46% -0.35% -0.53% -11.84% 10.45% -3.12% -1.93%
December -0.54% 12.88% -0.42% 2.11% 1.84% 3.40% 1.49% -3.21%
Year 35.24% 42.23% 7.96% 64.38% -30.45% 33.05% 26.96% -10.34%
</TABLE>
*SEE SECTION 2 ON PAGE APPII-6 FOR ACTUAL PERFORMANCE OF THE FUND.
See the notes on page APPII-15 which are an integral part of the
performance presentation.
APPII-12
<PAGE> 127
SECTION 4
GLOBAL DIVERSIFIED LARGE PORTFOLIO(5)
FEBRUARY 1986 (INCEPTION) -- JUNE 1999
WORST MONTHLY PERCENTAGE DRAW-DOWN(2): April, 1986/14.41%
WORST PEAK-TO-VALLEY DRAW-DOWN(3): March -- November 1986/29.71%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
<S> <C>
86 -26.55
87 33.08
88 19.18
89 26.16
90 32.18
91 14.86
92 7.68
93 2.39
94 9.61
95 6.52
96 26.78
97 14.95
98 12.47
99 -1.42
</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 Fund'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>
RETURN FOR
RECOVERY 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 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.
SEE SECTION 2 ON PAGE APPII-6 FOR ACTUAL PERFORMANCE OF THE FUND.
<TABLE>
<CAPTION>
COMPOUND ANNUAL RATES OF RETURN
FEBRUARY 1986 -- JUNE 1999
<S> <C>
12-month 12.96%
24-month 14.03%
36-month 17.85%
Since Inception 12.46%
</TABLE>
APPII-13
<PAGE> 128
GLOBAL DIVERSIFIED LARGE PORTFOLIO(5) -- (CONTINUED)
FEBRUARY 1986 -- JUNE 1999
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
RATE OF RETURN(1)
(COMPUTED ON A COMPOUNDED MONTHLY BASIS)
MONTH 1999 YTD 1998 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January -5.03% 2.81% 3.68% 3.77% -2.87% -3.77% 0.31% -5.55%
February 2.54% -2.59% 1.77% -7.22% 4.85% -8.45% 12.43% -5.04%
March -0.31% 4.12% -2.08% 3.41% 4.02% 6.35% -3.09% -2.61%
April 4.86% -6.37% -2.56% 5.15% 1.40% -3.74% -0.01% -2.22%
May -3.55% 3.33% -1.74% -2.67% -1.30% 3.49% 2.79% -2.26%
June 4.57% 1.33% 3.19% 0.91% 0.08% 14.90% 3.81% 10.64%
July -4.05% 6.89% -1.13% -5.49% 2.53% 4.60% 11.14%
August 8.91% -5.11% 2.09% 2.57% -3.35% -6.12% 4.53%
September 1.86% 3.87% 1.73% -2.75% 3.48% -7.07% -0.43%
October 3.45% 1.80% 13.36% -0.75% 0.50% -5.45% -3.21%
November -0.83% 0.39% 10.38% 0.77% 2.84% -2.31% 4.24%
December 0.75% 4.59% -4.03% 6.47% -3.56% 4.17% -0.11%
Year 2.67% 12.47% 14.95% 26.78% 6.52% 9.61% 2.39% 7.68%
</TABLE>
<TABLE>
<CAPTION>
RATE OF RETURN(1)
(COMPUTED ON A COMPOUNDED MONTHLY BASIS)
MONTH 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C>
January -7.59% 5.63% -3.86% -5.70% 12.05%
February -2.58% 2.45% -1.28% 1.69% -1.09% -0.11%
March 16.04% 5.68% 10.69% -3.03% 3.24% 4.14%
April -1.66% 8.34% -1.01% -5.83% 16.56% -14.41%
May 2.66% -12.09% 11.35% 9.86% -1.28% 3.56%
June 5.43% 4.55% 0.72% 25.99% -1.53% -5.68%
July -8.54% 4.32% 4.64% -2.01% 5.25% 6.53%
August -2.92% 8.98% -4.47% 0.65% -3.88% 5.08%
September 2.11% 0.72% -2.68% 0.28% -1.72% -9.92%
October 0.31% 2.13% -3.08% -0.10% -10.16% -10.93%
November -2.09% 0.07% 4.07% 1.05% 8.18% -6.41%
December 16.01% -0.82% 10.24% -1.51% 6.23% 0.47%
Year 14.86% 32.18% 26.16% 19.18% 33.08% -26.55%
</TABLE>
*SEE SECTION 2 ON PAGE APPII-6 FOR ACTUAL PERFORMANCE OF THE FUND.
See the notes on page APPII-15 which are an integral part of the
performance presentation.
APPII-14
<PAGE> 129
NOTES TO SUPPLEMENTARY PERFORMANCE INFORMATION
1. The "RATE OF RETURN" for a period is calculated by dividing the net
profit or loss by the assets at the beginning of such period. Additions
and withdrawals occurring during the period are included as an addition
to or deduction from beginning net assets in the calculations of "Rates
of Return", except for accounts which close on the last day of a period
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. "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 drawdown. A small number of accounts
in the Portfolio composites have experienced monthly drawdowns which are
materially larger than the largest composite monthly drawdown. 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.
3. "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 frame of such
drawdown. A small number of accounts in the Portfolio composites have
experienced peak-to-valley drawdowns which are materially larger than
the largest composite peak-to-valley drawdown. 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. Section 3 contains the composite performance of accounts traded pursuant
to the Financial, Metal & Energy Large Portfolio, which is the portfolio
primarily utilized for the Fund. The data presented reflects the
composite performance of 371 accounts traded according to the Financial,
Metal & Energy Large Portfolio. The data below is as of May 31, 1999.
From inception of Campbell & Company's Financial, Metal & Energy Large
Portfolio in April 1983, 362 accounts have been closed; 96 of the
accounts closed transferred to the Financial, Metal & Energy Small
Portfolio. Of the remaining 266 closed accounts, 79 closed with a profit
and 187 closed with a loss. Nine accounts remained open, eight of which
were profitable and one with a loss. The open accounts ranged in size
from $20,000,000 to in excess of $200,000,000, with an average account
size of approximately $136,600,000. The average composite monthly return
for the period from January 1994 through May 1999 was 1.12% compared to
the average of average monthly returns for all accounts of .84% 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 in the tables 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
APPII-15
<PAGE> 130
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.
5. Section 4 reflects the composite performance of all accounts (a total of
20 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. The 1 open account is profitable. The
average composite monthly return for the period from January 1994
through May 1999 is 1.08% compared to the average of average monthly
returns for all accounts of 1.11% 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.
APPII-16
<PAGE> 131
EXHIBIT A
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
AMENDED AGREEMENT OF LIMITED PARTNERSHIP
ARTICLE 1.
FORMATION AND NAME
The parties to this Amended Agreement of Limited Partnership (the
"Agreement") dated as of August 1, 1997 have formed Campbell Strategic
Allocation Fund, L.P. (the "Partnership") under the Delaware Revised Uniform
Limited Partnership Act in effect on the date thereof (the "Act") and do hereby
continue the Partnership pursuant to the terms herein as of September 23, 1993.
Each Limited Partner hereby undertakes to furnish to the General Partner a power
of attorney which may be filed with this Agreement and any amendment hereto and
such additional information as is required from him to complete such documents
and to execute and cooperate in the filing, recording or publishing of such
documents at the request of the General Partner.
ARTICLE 2.
PRINCIPAL OFFICE AND REGISTERED AGENT
The principal office of the Partnership shall be 210 West Pennsylvania
Avenue, Baltimore, Maryland 21204, or such other place as the General Partner
may designate from time to time. The Registered Agent for the Limited
Partnership is D. Keith Campbell, 210 West Pennsylvania Avenue, Baltimore,
Maryland 21204. The Tax Matters Partner for the Limited Partnership is Campbell
& Company, Inc.
ARTICLE 3.
BUSINESS AND PURPOSE OF THE PARTNERSHIP
The Partnership's business and purpose is to trade, buy, sell or otherwise
acquire, hold or dispose of futures and other related investment interests and
any activities incidental or related thereto. The objective of the Partnership
business is appreciation of its assets through speculative trading.
ARTICLE 4.
TERM, DISSOLUTION AND FISCAL YEAR
4.1 Term. The term of the Partnership commenced upon the execution and
filing of the Certificate of Limited Partnership, as amended, and shall end upon
the first to occur of the following: (i) December 31, 2023; (ii) an election to
dissolve the Partnership in accordance with the provisions of Article 4.2 by
Limited Partners owning more than 50% of the Units then outstanding; (iii) the
withdrawal of the General Partner, as defined in, and subject to the limitations
of Article 13; (iv) a determination by the General Partner that the purpose of
the Partnership cannot be fulfilled; or (v) any event which constitutes a
dissolution of a limited partnership under the Act or otherwise makes it
unlawful for the existence of the Partnership to be continued.
4.2 Dissolution. Upon the occurrence of an event causing the dissolution
of the Partnership, the Partnership shall be wound up and terminated. Upon
dissolution and termination of the Partnership, the General Partner shall
contribute to the Partnership an amount equal in the aggregate to the lesser of
(a) the deficit balance in their capital accounts, or (b) the excess of 1.01% of
the total capital contributions paid in by the Limited Partners over any capital
previously contributed by the General Partner. Payment of creditors, and
distribution of the Partnership's assets shall be effected as soon as
practicable in accordance with the Act, and the General Partner and each Limited
Partner (and any assignee) shall share in the assets of the Partnership pro rata
in accordance with such Partner's respective capital account, less any amount
owing by such Partner (or assignee) to the Partnership.
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4.3 Fiscal Year. The fiscal year of the Partnership shall end on December
31, unless the General Partner elects, with the approval of the Internal Revenue
Service and the CFTC, a different fiscal year.
ARTICLE 5.
GENERAL PARTNER
The General Partner is Campbell & Company, Inc., a Maryland corporation,
210 West Pennsylvania Avenue, Baltimore, Maryland 21204.
ARTICLE 6.
CAPITAL CONTRIBUTIONS AND
UNITS OF LIMITED PARTNERSHIP INTEREST
6.1 Units and Capital Contributions of Limited Partners. Interests in the
Partnership other than the General Partner's interests, shall be evidenced by
Units (individually a "Unit").
6.2 Capital Contributions by General Partner; Net Worth. The General
Partner has contributed cash to the capital of the Partnership in an amount
equal to at least 1% of the net aggregate contributions of all Partners
including the General Partner. The General Partner's contribution shall be
evidenced by Units of General Partnership Interest. The General Partner may make
withdrawals of its Units provided that such withdrawals do not reduce the
General Partner's aggregate percentage interest in the Partnership to less than
1% of the net aggregate contributions. If additional Limited Partners are
admitted during any Continuing Offering pursuant to the provisions of Article 11
herein, the General Partner shall make such additional capital contributions as
may be required to maintain its interest at the required level in the
Partnership at all times during the term of the Partnership. The General Partner
shall maintain a net worth so long as it acts as general partner equal to at
least 5% of the capital contributed by all the limited partnerships for which it
acts as general partner, including the Partnership. The minimum required net
worth shall in no case be less than $50,000 nor shall net worth in excess of
$1,000,000 be required.
6.3 Availability of Contributions. The aggregate of all Partnership
contributions shall be available to the Partnership to carry on its business and
purpose, and no interest shall be paid to any Partner on any such contributions.
ARTICLE 7.
ALLOCATION OF PROFITS AND LOSSES
7.1 Capital Accounts. A capital account shall be established for each
Partner, including the General Partner. The initial balance of each Partner's
capital account shall be the amount of his initial capital contribution to the
Partnership.
7.2 Monthly Allocations. As of the close of business (as determined by
the General Partner) of the last day of each month, the following determinations
and allocations shall be made:
(1) The Net Assets of the Partnership (as defined in Article 7.4) before
the General Partner's Brokerage Fee, the direct administrative expenses and the
General Partner's performance fees payable shall be determined.
(2) Brokerage Fees payable by the Partnership and the direct administrative
expenses shall then be charged against the Net Assets.
(3) Accrued performance fees, if any, shall then be charged against the Net
Assets.
(4) Any increase or decrease in the Net Assets as of the end of the month
(after the adjustments in subparagraphs (2) and (3)) shall then be credited or
charged to the capital accounts of each Partner in the ratio that the balance of
each account bears to the balance of all accounts.
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(5) The amount of any distribution to a Partner, any amount paid to a
Limited Partner on redemption of Units, and any amount paid to the General
Partner by way of distribution or redemption of Units of General Partnership
Interest, shall be charged to such Partner's capital account.
7.3 Allocation of Profit and Loss for Federal Income Tax Purposes. At the
end of each taxable year, each item of Partnership taxable income, gain, loss,
deduction, or credit will be allocated among the Partners in accordance with the
following provisions:
(1) Capital gain shall be allocated first to each Partner who has redeemed
Units (Units of General Partnership Interest in the case of the General Partner)
during the year to the extent that the amount the Partner received on redemption
exceeds the amount paid for the redeemed Units (as set forth in subparagraph
(5));
(2) Capital gain remaining after the allocation in subparagraph (1) shall
be allocated among all Partners in the ratio that each Partner's capital account
bears to all Partner's capital accounts;
(3) Capital losses shall be allocated first to each Partner who has
redeemed Units (Units of General Partnership Interest in the case of the General
Partner) during the year to the extent that the amount the Partner paid for the
redeemed Units (as set forth in subparagraph (5)) exceeds the amount the Partner
received on redemption;
(4) Capital losses remaining after the allocation in subparagraph (3) shall
be allocated among all Partners in the ratio that each Partner's capital account
bears to all Partners' capital accounts;
(5) For the purpose of the allocations of capital gain and loss in
subparagraphs (1) and (3), the amount each Partner paid for each of his Units
shall be deemed to have increased by the amount of capital gain allocated to him
with respect to such Unit pursuant to subparagraph (2) or ordinary income
pursuant to subparagraph 6; decreased by the amount of any capital loss
allocated to him with respect to such Unit pursuant to subparagraph (4) or
ordinary expense pursuant to subparagraph 6; and decreased by the amount of any
distributions to him with respect to such Unit pursuant to Article 7.8;
(6) Items of ordinary income and expense will be allocated pro rata among
the Partners based upon their respective capital accounts as of the end of each
month in which the items of ordinary income or expense accrue; provided that any
performance fee paid to the General Partner 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 allocated to the capital account relating to such Unit over the
aggregate of all reversals of performance fees allocated to such Unit) bears to
the net performance fee of all Units;
(7) Notwithstanding subparagraphs (4) and (6), if the allocation of such
loss would cause a Limited Partner to have a capital account deficit, then such
loss shall be allocated to the General Partner, according to its capital
account, to the extent of such losses;
(8) For purposes of this Paragraph 7.3, "capital gain" and "capital loss"
shall mean gain or loss characterized as gain or loss from the sale or exchange
of a capital asset by the Internal Revenue Code of 1986, as amended (the
"Code"), including but not limited to gain or loss required to be taken into
account pursuant to Section 1256 thereof and any income, gain or loss determined
under Section 988 of the Code; and
(9) Allocations of capital gain or loss will be made pro rata from each
category of capital gain or loss determined under Section 1(h) of the Code and
income or loss determined under Section 988 of the Code.
7.4 Definitions; Accounting.
(1) Net Assets. "Net Assets" of the Partnership shall mean the total
assets of the Partnership, including all cash and cash equivalents (valued at
cost), plus accrued interest thereon, and the market value of all open commodity
positions and other assets of the Partnership, less all liabilities of the
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Partnership, including accrued performance fees determined in accordance with
the principles specified in this subparagraph and, where no principle is
specified, in accordance with generally accepted accounting principles
consistently applied under the accrual basis of accounting. The market value of
a commodity or commodity futures contract traded on an exchange, or through a
clearing firm or through a bank, shall mean the most recent available settlement
price or closing quotation, as appropriate on the exchange, or of the clearing
firm or bank on or through which the commodity or contract is traded by the
Partnership on the day with respect to which Net Assets are being determined. If
such contract cannot be liquidated, due to the operation of daily limits or
otherwise, on a day as of which Net Assets are determined, the liquidating value
on the first subsequent day on which the contract would be liquidated may be
used or such other value as the General Partner may deem fair and reasonable.
The market value of a commodity forward contract or a commodity futures contract
traded on a foreign exchange shall mean its market value as determined by the
General Partner on a basis consistently applied.
(2) Net Asset Value. The "Net Asset Value" of the Partnership shall mean
the total capital accounts of all Partners. The "Net Asset Value" of a Unit
shall be the total capital accounts of all Partners, divided by the number of
Units owned by all Partners.
(3) Blue Sky Glossary. The definitions in the Blue Sky Glossary in
Appendix I to the Partnership's Prospectus are hereby incorporated herein by
reference.
7.5 Expenses.
(1) The General Partner 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. Subject to the
limitation described below, the General Partner shall be reimbursed such
advanced amounts by the Partnership in approximately 30 equal installments
commencing after the closing of the initial offering and monthly during the
continuous offering. The General Partner shall have discretion to adopt
reasonable procedures to implement the amortization of such expenses, including
grouping expenses related to the same offering period and expensing de minimis
amounts as they are incurred. In no event shall the General Partner be entitled
to receive reimbursement in an amount greater than 2.5% of the aggregate
subscriptions accepted during the initial and continuous offerings, as the case
may be. In the event the Partnership terminates prior to completion of the
reimbursement, the General Partner will not be entitled to receive additional
reimbursement and the Partnership will have no obligation to make further
reimbursement payments to the General Partner. For purposes of this Agreement,
organization and offering expenses shall mean all costs paid or incurred by the
General Partner or the Partnership in organizing the Partnership and offering
the Units, including legal and accounting fees incurred, bank account charges,
all blue sky filing fees, filing fees payable upon formation and activation of
the Partnership, and expenses of preparing, printing and distributing the
prospectus and registration statement, but in no event shall exceed limits set
forth in Article 8 herein or guidelines imposed by appropriate regulatory
bodies.
(2) The Partnership shall be obligated to pay all liabilities incurred by
it, including without limitation, (i) Brokerage Fees; (ii) operating expenses
and performance fees; (iii) legal and accounting fees; and (iv) taxes and other
extraordinary expenses incurred by the Partnership. During any year of
operations, the General Partner shall be responsible for payment of operating
expenses in excess of 0.5% of the Partnership's month-end Net Asset Value during
that year. Indirect expenses of the General Partner, such as indirect salaries,
rent and other overhead expenses, shall not be liabilities of the Partnership.
The Partnership shall receive all interest earned on its assets.
(3) Compensation to any party, including the General Partner (or any
advisor which may be retained in the future), shall not exceed the limitations
imposed as of the date hereof by the North American Securities Administrators
Association ("NASAA"). In the event the compensation exceeds such limitations,
the General Partner shall promptly reimburse the Partnership for such excess.
NASAA limitations on fees are as follows: Management fees, advisory fees and all
other fees, except for incentive fees and commodity brokerage commissions, when
added to the customary and routine administrative
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expenses, shall not exceed 6% annually of net asset value. The aggregate
incentive fees shall not exceed 15% of new trading profits. The sponsor or
advisor will be entitled to an additional 2% incentive fee for each 1% by which
the net asset value fee is reduced below 6%. Commodity brokerage rates will be
presumptively reasonable if they satisfy either 80% of the published retail rate
plus pit brokerage fees or 14% annually of average net assets, including pit
brokerage fees. The Partnership will pay an 8% per annum Brokerage Fee, of which
3% will be for management services, allowing the incentive fee to be 20%, as
discussed above. The remaining 5% from the Brokerage Fee will be paid for
brokerage services (including the initial distribution of the Units, execution
of commodity transactions, and ongoing services to the Limited Partners), which
is less than the 14% limit imposed by NASAA.
(4) The Partnership shall also be obligated to pay any costs of
indemnification to the extent permitted under Article 15 of this Agreement.
7.6 Limited Liability of Limited Partners. Each Unit purchased by a
Limited Partner is fully paid and non-assessable. A Limited Partner shall be
liable for the Partnership's obligations to the extent of the capital
contributed by him plus his share of profits remaining in the Partnership, if
any.
In addition, if a Limited Partner receives a return of any part of his
capital contribution, he shall be liable to the Partnership for a period of one
year thereafter for the amount of the returned contribution, but only to the
extent necessary to discharge the Partnership's liabilities to creditors who
extended credit to the Partnership during the period the contribution was held
by the Partnership.
A Limited Partner shall also be liable to the Partnership for return of any
part of his capital contribution returned to him, for a period of six years, if
such return was in violation of this Agreement or the Act.
7.7 Return of Limited Partner's Capital Contribution. Except to the
extent that a Limited Partner shall have the right to redeem Units, no Limited
Partner shall have any right to demand the return of his capital contribution or
any profits added thereto, except upon dissolution and termination of the
Partnership. In no event shall a Limited Partner be entitled to demand or
receive property other than cash.
7.8 Distributions. The General Partner shall have sole discretion in
determining what distributions (other than on redemption of Units or
dissolution), if any, the Partnership will make to its Partners (or any assignee
thereof). Distributions shall be made pro rata in accordance with the respective
capital accounts of the Partners.
ARTICLE 8.
MANAGEMENT
8.1 General.
(1) The General Partner, to the exclusion of the Limited Partners, shall
conduct and manage the business of the Partnership including, without
limitation, all functions necessary for administration of the Partnership. The
General Partner shall have the fiduciary responsibility for the safekeeping and
use of all assets of the Partnership, whether or not in its immediate possession
or control, shall not contract away such duty and shall not employ or permit
another to employ such assets in any manner except for the exclusive benefit of
the Partnership. The General Partner, on behalf of the Partnership, shall make
all investment decisions regarding the Partnership and shall have complete
trading discretion. The General Partner shall seek the best price and services
available in its futures brokerage transactions, and all brokerage transactions
for the Partnership's futures trades will be effected at competitive rates.
(2) The General Partner shall receive from the Partnership: (i) Brokerage
Fees of 8% per annum of the month-end Net Assets; and (ii) a quarterly
"performance fee" of 20% of the Partnership's aggregate cumulative appreciation
in the Net Asset Value per Unit, exclusive of interest income. The performance
fee is paid on the cumulative increase, if any, in the Net Asset Value per Unit
over the highest previous cumulative Unit value or Unit value as of the
commencement of trading, whichever is higher. In
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determining the fees in this paragraph, adjustments shall be made for capital
additions and withdrawals and Net Assets shall not be reduced by the fees being
calculated for such current period. Such fees may be changed upon sixty days'
notice to the Limited Partners, provided that prior to the imposition of the
revised fees, Limited Partners have an opportunity to redeem (and there are no
delays in receiving payment therefor) and the notice explains their redemption
and voting rights. Further, any new contract with any advisor, including the
General Partner, shall carryforward all losses attributable to such advisor or
General Partner, as the case may be.
(3) The General Partner may take such other actions as it deems necessary
or desirable to manage the business of the Partnership including, but not
limited to, the following: entering into commercially reasonable contracts,
opening bank accounts, paying or authorizing the payment of distributions to the
Partners and expenses of the Partnership including fees to the General Partner,
taxes and other fees of governmental agencies.
(4) The General Partner shall keep and retain for at least six years, at
the principal office of the Partnership, such books and records relating to the
business of the Partnership as it deems necessary to substantiate that Units
were sold only to purchasers for whom such securities were suitable and which
are required by the Commodity Exchange Act, and the rules and regulations
thereunder. Such books and records shall be available to any Limited Partner or
his authorized attorney or agent for inspection and copying during normal
business hours of the Partnership.
(5) The General Partner may engage in other business activities and shall
not refrain from any other activity nor disgorge any profits from any such
activity, whether as general partner of additional partnerships for investment
in commodity futures or forward contracts or otherwise. Subject to the terms and
conditions set forth in this Agreement, the General Partner may engage and
compensate on behalf of the Partnership, from funds of the Partnership, such
persons, firms or corporations, as the General Partner in its sole judgment
shall deem advisable for the conduct and operation of the business of the
Partnership. The General Partner may develop and implement a cash management
facility. In such event, the General Partner may cause the Partnership to
participate in such facility if doing so would be in the best interests of the
Partnership. Competitive management fees may be paid to the General Partner or
an affiliate thereof.
(6) No person dealing with the General Partner shall be required to
determine its authority to make any undertaking on behalf of the Partnership,
nor to determine any fact or circumstance bearing upon the existence of such
authority.
(7) Except as provided by Article 13, the General Partner may not sell,
assign, or otherwise dispose of all or substantially all of its General
Partnership Interest in the Partnership except for a sale or transfer of all
Partnership interests of all Partners or a sale of all or substantially all of
its interest to a corporation controlled by such General Partner. The foregoing
restriction shall not be applicable to the General Partner mortgaging, pledging,
hypothecating or granting a security interest in its General Partnership
Interest as collateral for a loan or loans and any such assignment of all or any
portion of the General Partner's Interest shall not cause an event of withdrawal
with respect to the General Partner pursuant to Article 13 of this Agreement.
(8) The maximum period covered by any contract entered into by the
Partnership, except for certain provisions which survive the stated term, shall
be one year. Agreements between the Partnership and the General Partner or any
affiliate shall be terminable by the Partnership without penalty on 60 days'
written notice. All sales of Units in the United States shall be made by
registered brokers. No sales will be made by the General Partner or an
affiliate.
8.2 Prohibitions. The Partnership shall not: (i) engage in pyramiding;
(ii) commingle its assets with the assets of any other person, except as
permitted by law; (iii) make loans to the General Partner or any affiliate
thereof or to any person; (iv) pay per-trade compensation to the General Partner
or any advisor or any affiliate thereof or to any person who receives any other
form of compensation from the Partnership; or (v) permit rebates or give-ups to
be received by the General Partner or affiliates thereof
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nor shall the General Partner participate in any reciprocal business
arrangements which would circumvent the foregoing or any other provision of this
Agreement; or (vi) borrow cash or other assets from the General Partner.
ARTICLE 9.
REPORTS TO LIMITED PARTNERS
The books and records of the Partnership shall be audited annually by an
independent certified public accountant. Net Assets and Net Asset Value per Unit
shall be determined daily and will be supplied in writing to any Limited Partner
who requests such information. The General Partner will cause each Partner to
receive (i) within ninety (90) days after the close of each fiscal year an
annual report with audited financial statements (including a balance sheet and
income statement) for the fiscal year then ended, and (ii) within seventy-five
(75) days after the close of each fiscal year such tax information as is
necessary for the Partner to complete his federal income tax return. In
addition, the General Partner will report within 30 days after the end of each
month to the Limited Partners the information required by the CFTC to be
reported, which information currently includes the following: the total amount
of realized net gain or loss on commodity interest positions liquidated during
the month; the change in unrealized net gain or loss on commodity interest
positions during the month; the total amount of net gain or loss from all other
transactions engaged in by the Partnership during the month, including interest
earned; the total amount of all Brokerage Fees and performance fees, and all
other expenses incurred or accrued by the Partnership during the month; the Net
Asset Value of a Unit as of the end of the month and as of the end of the
previous month; the total amount of additions to the Net Assets of the
Partnership made during the month; the total amount of withdrawals from and
redemptions of Units for the month; and the total net income or loss of the
Partnership during the month. In the event either Net Asset Value per Unit as of
the end of any business day declines by more than 50% of the previous year-end
or month-end Net Asset Value per Unit, or there is a material change in the
advisory agreement with the General Partner or otherwise affecting the
compensation to any party, including the General Partner, the General Partner
will notify each Limited Partner of such information, their redemption and
voting rights and any material effect on the Units within seven business days.
In the event of the 50% decline in Net Asset Value per Unit referred to in the
previous sentence, the General Partner will declare a special redemption period
and temporarily suspend the Partnership's trading during such period.
ARTICLE 10.
DISPOSITIONS AND REDEMPTIONS OF PARTNERSHIP UNITS
10.1 Permissible Dispositions. A Limited Partner may transfer, assign,
pledge, or encumber his Units only as provided in this Article 10.1. No such
transferee, pledgee, assignee, or secured creditor shall become a substituted
Limited Partner unless the General Partner consents in writing to such
substitution. The General Partner has complete discretion to withhold consent
but only intends to do so in order to prevent or minimize potential adverse
legal or tax consequences to the Partnership. Any transfer or assignment of
Units which is permitted hereunder shall be effective as of the beginning of the
month following the month in which such transfer or assignment is made;
provided, however, that the Partnership need not recognize any transfer,
assignment, or pledge until it has received at least 30 days' prior written
notice thereof from the transferor, assignor, or pledgor, which notice shall
include (i) the name, signature, address and social security or taxpayer
identification number of the transferee, assignee, or pledgee, (ii) the number
of Units transferred, assigned or pledged, and (iii) the signature of the
transferor, assignor, or pledgor. The General Partner may, in its discretion,
waive receipt of the above described written notice or waive any defect therein.
No transfer or assignment shall be permitted unless the General Partner is
satisfied that (i) such transfer or assignment would not be in violation of the
Act, (ii) the amount of the transfer is at least the minimum subscription amount
except for transfers by gift, inheritance, or to affiliates, including family
members of the person transferring the Units, and (iii) notwithstanding such
transfer or assignment, the Partnership shall continue to be classified as a
partnership rather than as a corporation or an association under the Internal
Revenue Code, as amended.
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No transfer or assignment of Units shall be effective or recognized by the
Partnership if following such transfer or assignment there would result a
termination of the Partnership for federal income tax purposes as provided in
Code 708(b) and any attempted transfer or assignment in violation hereof shall
be ineffective to transfer or assign any such Units. Any transferee or assignee
of Units who has not been admitted to the Partnership as a substituted Limited
Partner shall not have any of the rights of a Limited Partner, except that the
assignee shall receive that share of capital and profits and shall have that
right of redemption to which his assignor would otherwise have been entitled and
shall remain subject to the other terms of this Agreement binding upon Limited
Partners. The transfer or assignment of Units shall be subject to all applicable
securities laws. The transferor or assignor shall bear all costs (including any
attorneys' fees) related to such transfer or assignment.
10.2 Redemptions.
(1) A Limited Partner (or any assignee thereof) may withdraw all or part of
his capital contribution and undistributed profits, if any, by requiring the
Partnership to redeem all or part of his Units at the Net Asset Value per Unit,
reduced as hereinafter described (such withdrawal being herein referred to as a
"Redemption").
(2) Redemptions shall be effective as of the end of any month ending after
a Request for Redemption in proper form has been timely received by the General
Partner (the "Redemption Date"). Redemption fees apply through the first twelve
month-ends following purchase (from and including the Closing Date on which the
Unit is purchased) as follows: 4% of Net Asset Value per Unit redeemed through
the third month-end, 3% of Net Asset Value per Unit redeemed through the sixth
month-end, 2% of Net Asset Value per Unit redeemed through the ninth month-end,
and 1% of Net Asset Value per Unit redeemed through the twelfth month-end. After
the twelfth month-end following purchase of a Unit, no redemption fees apply. As
used herein, "Request for Redemption" shall mean a written request of such
withdrawal transmitted by the Limited Partner (or any assignee thereof) to the
General Partner not less than ten business days prior to the end of the month or
such shorter period as established by the General Partner. Upon Redemption, a
Limited Partner (or any assignee thereof) shall receive, per Unit redeemed, an
amount equal to the Net Asset Value per Unit as of the Redemption Date, less any
amount owing by such Limited Partner (and his assignee, if any) to the
Partnership pursuant to Article 15.3, and less any applicable redemption fees
due to the General Partner. If redemption is requested by an assignee, all
amounts owed to the Partnership under Article 15.3 by the Partner to whom such
Unit was sold, as well as all amounts owed by the assignees of such Unit, shall
be deducted from the amount payable upon Redemption by any assignee. All
Requests for Redemption in proper form shall be honored and payment will be made
within twenty (20) business days following the Redemption Date, except that
under special circumstances, including, but not limited to, the inability on the
part of the Partnership to liquidate commodity positions or the default or delay
in payments due the Partnership from commodity brokers, banks, or other persons,
the Partnership may delay payment to Partners requesting Redemption of Units. In
the event that Redemptions are requested for more Units than the General Partner
is able to honor due to the foregoing contingencies, the General Partner will
honor Requests for Redemption in the order actually received and will hold
Requests for Redemption in such order. Limited Partners will be notified within
10 days after month-end if any Redemption cannot be honored under the terms
hereof and their Requests thereafter will be honored at the first available
opportunity. The Partnership shall not be obligated to redeem Units that are
subject to a pledge or otherwise encumbered in any fashion.
(3) Subparagraph (2) notwithstanding, if the Net Asset Value per Unit is
determined for purposes of Redemption as of a month-end which is not the end of
a quarter, any performance fees payable and applicable to such Unit, will be
determined and charged to such Unit as though such month-end were the end of a
quarter and such performance fees were payable and such performance fees will be
paid.
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ARTICLE 11.
OFFERING OF UNITS; ADMISSION OF ADDITIONAL LIMITED PARTNERS
The General Partner shall, from time to time, (i) cause the Partnership to
file a Registration Statement and such amendments as the General Partner deems
advisable, with the Securities and Exchange Commission for the registration and
public offering of the Units; (ii) seek to qualify the Units for sale in various
jurisdictions as the General Partner deems advisable; and (iii) take such other
actions as the General Partner deems advisable.
The General Partner, at its option, may admit additional Limited Partners
to the Partnership without the consent of the Limited Partners at any time. Such
additional Limited Partners shall contribute capital to the Partnership, and
shall be admitted as Limited Partners as of the first business day of the month
immediately following the month-end as of which their subscriptions were
accepted by the General Partner at no less than the Net Asset Value per Unit as
of such month-end.
ARTICLE 12.
SPECIAL POWER OF ATTORNEY
By execution of this Agreement, each Limited Partner irrevocably
constitutes and appoints the General Partner with full power of substitution, as
his true and lawful attorney-in-fact, in his name, place and stead, to execute,
acknowledge, swear to, file and record in his behalf in the appropriate public
offices and publish (i) this Agreement and any amendments thereto; (ii) all
instruments which the General Partner deems necessary or appropriate to reflect
any amendment, change, or modification of the Limited Partnership Agreement or
Certificate of Limited Partnership in accordance with the terms of this
Agreement; and (iii) Certificates of Fictitious or Assumed Name. The Power of
Attorney granted herein shall be irrevocable and deemed to be a power coupled
with an interest and shall survive the incapacity or death of a Limited Partner.
Each Limited Partner hereby agrees to be bound by any representation made by the
General Partner and by any successor thereto, acting in good faith pursuant to
such Power of Attorney.
ARTICLE 13.
WITHDRAWAL OF A PARTNER
The Partnership shall terminate and be dissolved upon the withdrawal, or
insolvency of the General Partner (unless in the case of the withdrawal of the
General Partner, the actions necessary to continue the Partnership are taken
pursuant to Article 16). The General Partner shall cease to be a general partner
of the Partnership upon the occurrence of any of the following events of
withdrawal: (i) the General Partner's bankruptcy or insolvency; (ii) any event
prescribed in the Act that is not encompassed in this Article 13; or (iii) 120
days' prior written notice to the Limited Partners of the General Partner's
intent to withdraw as a General Partner. If the General Partner withdraws as
general partner, it can redeem its interests in the Partnership at Net Asset
Value as of the next month-end in which it is calculated. If the Limited
Partners elect to continue the Partnership, the withdrawing General Partner
shall pay all Partnership expenses incurred as a result of its withdrawal. The
death, incompetency, incapacity, withdrawal, insolvency, or dissolution of a
Limited Partner shall not dissolve or terminate the Partnership, and said
Limited Partner, his estate, custodian, or personal representative shall have no
right to withdraw or value such Limited Partner's Units except as provided in
Article 10 hereof. Each Limited Partner (and any assignee of such Limited
Partner) expressly agrees that in the event of his death, he waives on behalf of
himself and his estate, and he directs the legal representative of his estate
and any person interested therein to waive the furnishing of any inventory,
accounting, or appraisal of the assets of the Partnership and any right to a
special audit of the books and records of the Partnership, provided that the
waiver shall not relieve the General Partner from its reporting obligations set
forth in Article 9.
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ARTICLE 14.
NO PERSONAL LIABILITY FOR RETURN OF CAPITAL
Subject to the provisions of Article 15 below, the General Partner shall
not be personally liable for the return or repayment of all or any portion of
the capital or profits of any Partner (or assignee), it being expressly agreed
that any such return of capital or profits made pursuant to this Agreement shall
be made solely from the assets (which shall not include any right of
contribution from the General Partner) of the Partnership.
ARTICLE 15.
STANDARD OF LIABILITY; INDEMNIFICATION
15.1 Standard of Liability. The General Partner and its controlling
persons shall have no liability to the Partnership or any Limited Partner for
any loss suffered by the Partnership which arises out of any action of the
General Partner if the General Partner, in good faith, determined that such
course of conduct was in the best interests of the Partnership and such course
of conduct did not constitute negligence or misconduct of the General Partner.
15.2 Indemnification by the Partnership. The Partnership shall indemnify,
defend, and hold harmless the General Partner (including controlling persons and
a former General Partner who has withdrawn from the Partnership) from and
against any loss, liability, damage, cost or expense (including attorneys' fees,
and expenses incurred in defense of any demands, claims or lawsuits) arising
from actions or omissions concerning the business or activities undertaken by or
on behalf of the Partnership, from any source only if all of the following
conditions are satisfied: (i) the General Partner has determined, in good faith,
that the course of conduct which caused the loss or liability was in the best
interests of the Partnership, (ii) the General Partner was acting on behalf of
or performing services for the Partnership, (iii) such liability or loss was not
the result of negligence or misconduct by the General Partner, and (iv) such
indemnification is recoverable only out of the Partnership's assets and not from
the Limited Partners. In no event shall the General Partner or any of the
selling agents receive indemnification from the Partnership arising out of
alleged violations of federal or state securities laws unless the following
conditions are satisfied; (a) there has been a successful adjudication on the
merits of each count involving alleged securities law violations, or (b) such
claims have been dismissed with prejudice on the merits by a court of competent
jurisdiction, or (c) a court of competent jurisdiction approves a settlement of
the claims and finds that indemnification of the settlement and related costs
should be made, and (d) in the case of subparagraph (c), the court considering
the request has been advised of the position of the Securities and Exchange
Commission and the states in which Units were offered and sold as to
indemnification for violations of securities laws; provided that the court need
only be advised and consider the positions of the securities regulatory
authorities in those states in which plaintiffs claim they were offered or sold
Units. The Partnership shall not incur the cost of that portion of liability
insurance which insures the General Partner for any liability as to which the
General Partner is prohibited from being indemnified herein.
15.3 Advance Payment. Expenses incurred in defending a threatened or
pending civil, administrative or criminal action, suit or proceeding against the
General Partner may be paid by the Partnership in advance of the final
disposition of such action, suit or proceeding, if and to the extent that (i)
the legal action relates to acts or omissions with respect to the performance of
duties or services on behalf of the Partnership, (ii) the legal action is
initiated by a party who is not a Limited Partner, or if by a Limited Partner,
then a court of competent jurisdiction specifically approves such advancement,
and (iii) the General Partner shall agree to reimburse the Partnership, together
with the applicable legal rate of interest thereon, in the event indemnification
is not permitted under this Article 15 upon final disposition.
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ARTICLE 16.
AMENDMENTS; MEETINGS
16.1 Amendments with Consent of the General Partner. If at any time
during the term of the Partnership the General Partner shall deem it necessary
or desirable to amend this Agreement, such amendment shall be effective only if
embodied in an instrument signed by the General Partner and by the holders of
more than fifty percent (50%) of the Units then owned by the Limited Partners.
Any such supplemental or amendatory agreement shall be adhered to and have the
same effect from and after its effective date as if the same had originally been
embodied in and formed a part of this Limited Partnership Agreement, provided,
however, that no such supplemental or amendatory agreement shall, without the
consent of all Limited Partners, change or alter this Section 16, extend the
term of the Partnership, reduce the capital account of any Partner or modify the
percentage of profits, losses or distributions to which any Partner is entitled.
In addition, reduction of the capital account of any assignee or modifications
of the percentage of profits, losses or distributions to which an assignee is
entitled hereunder shall not be effected by any amendment or supplement to this
Limited Partnership Agreement without such assignee's written consent. No
meeting procedure or specified notice period is required in the case of
amendments made with the consent of the General Partner, mere receipt of an
adequate number of unrevoked written consents being sufficient. The General
Partner may amend this Limited Partnership Agreement without the consent of the
Limited Partners in order (i) to clarify any clerical inaccuracy or ambiguity or
reconcile any inconsistency (including any inconsistency between this Agreement
and the Prospectus), (ii) to effect the intent of the tax allocations proposed
herein (including, without limitation, allocating capital gain and capital loss
on a net rather than a gross basis) 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 Partnership is not taxed as an
association taxable as a corporation for federal income tax purposes, (iv) to
delete or add any provision of or to this Limited Partnership 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 Act,
(v) to change the name of the Partnership and to make any modifications to this
Limited Partnership Agreement to reflect the admission of an additional or
substitute general partner, (vi) to make any amendment to this Limited
Partnership Agreement which the General Partner deems advisable, provided that
such amendment is not adverse to the Limited Partners and does not alter the
basic investment policies or structure of the Partnership, or that is required
by law, or (vii) to make any amendment that is appropriate or necessary, in the
opinion of the General Partner, to prevent the Partnership or the General
Partner or their respective directors, officers or controlling persons from in
any manner being subject to the provisions of the Investment Company Act of
1940, as amended, or "plan asset" regulations adopted under ERISA as a result of
their association with the Partnership.
16.2 Meetings. The General Partner will maintain at the office a list of
the names and addresses of all Limited Partners and the Units owned by them.
Upon request of any Limited Partner or his representative, the General Partner
shall make such list available for review by any Limited Partner or his
representative, and upon request, either in person or by mail, the General
Partner shall furnish a copy of such list by mail to any Limited Partner or his
representative, for the cost of duplication and postage. Upon receipt of a
written request, signed by Limited Partners owning at least 10% of the Units
then owned by Limited Partners, that a meeting of the Partnership be called to
vote upon any matter which the Limited Partners may vote upon pursuant to this
Agreement, the General Partner shall, by written notice, either in person or by
certified mail, to each Limited Partner of record mailed within 15 days after
such receipt, call a meeting of the Partnership. Such meeting shall be held at
least 30 days but not more than 60 days after the mailing of such notice, and
such notice shall specify the date, a reasonable place and time, and the purpose
of such meeting.
16.3 Amendments and Actions Without Consent of the General Partner. At
any meeting called pursuant to Article 16.2, upon the affirmative vote (which
may be in person or by proxy) of Limited Partners owning more than a majority of
the Units then owned by the Limited Partners (any Units held by the General
Partner or its affiliates shall be disregarded in calculating the percentage of
outstanding
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Units and the General Partner shall be prohibited from voting as a Limited
Partner) the following actions may be taken: (i) this Agreement may be amended
in accordance with and only to the extent permissible under the Act, provided,
however, that consent of all Limited Partners shall be required in the case of
amendments requiring the consent of all Limited Partners under the Act; (ii) the
Partnership may be dissolved; (iii) the General Partner may be removed and
replaced; (iv) a new general partner may be elected if the General Partner
withdraws from the Partnership; (v) any contracts with the General Partner may
be terminated on 60 days written notice; and (vi) the sale of all the assets of
the Partnership may be approved; provided, however, that none of the said
actions may be taken unless the action is permitted under the Act. In the event
of the occurrence of an event described in (iii) or (iv) above, the interest of
the General Partner shall be redeemed and paid to the General Partner on the
basis of the Net Assets allocable thereto on the date of such event.
ARTICLE 17.
GOVERNING LAW
The General Partner and Limited Partners expressly agree that all the terms
and provisions hereof shall be construed under the Delaware Revised Uniform
Limited Partnership Act as now adopted or as may be hereafter amended and shall
govern the partnership aspects of this Agreement absent contrary terms contained
in this Agreement.
ARTICLE 18.
MISCELLANEOUS
18.1 Priority Among Limited Partners. No Limited Partner shall be
entitled to any priority or preference over any other Limited Partner in regard
to the affairs of the Partnership.
18.2 Notices. All notices under this Agreement, other than Requests for
Redemption of Units, notices of assignment, transfer or pledge of Units, and
reports by the General Partner to the Limited Partners, 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, then, upon the deposit of such notice in the United
States mails. Reports by the General Partner to the Limited Partners shall be in
writing and shall be sent by first class mail to the last known address of each
Limited Partner. Requests for Redemption and notices of assignment, transfer or
pledge of Units shall be effective upon receipt by the Partnership.
18.3 Binding Effect. This Agreement shall inure to and be binding upon
all of the parties, their successors, assigns as permitted herein, custodians,
estates, heirs and personal representatives. For purposes of determining the
rights of any Partner or assignee hereunder, the Partnership and the General
Partner may rely upon the Partnership records as to who are Partners and
assignees, and all Partners and assignees agree that their rights shall be
determined and that they shall be bound hereby, including all rights which they
may have under Article 16 hereof.
18.4 Captions. Captions in no way define, limit, extend or describe the
scope of this Agreement nor the effect of any of its provisions.
18.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of such
counterparts together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first appearing above.
CAMPBELL & COMPANY, INC.
By: /s/ BRUCE L. CLELAND
------------------------------------
Name: Bruce L. Cleland
Title: President
LIMITED PARTNERS
Bruce L. Cleland as attorney-in-fact
for the Limited Partners who have
agreed by separate instrument to be a
party hereto.
/s/ BRUCE L. CLELAND
--------------------------------------
Bruce L. Cleland
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<PAGE> 145
EXHIBIT B
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
REQUEST FOR REDEMPTION
Please send original to:
Campbell & Company, Inc.
Court Towers Building
------------------------------------
210 West Pennsylvania Avenue Limited Partner Number
Suite 770
Towson, Maryland 21204
------------------------------------
Social Security Numbers/
Taxpayer ID Number
Dear Sirs:
The undersigned hereby requests redemption, as defined in and subject to all
the terms and conditions of the Limited Partnership Agreement of CAMPBELL
STRATEGIC ALLOCATION FUND, L.P. ("Fund"), of (insert number of units to
be redeemed; IF NO NUMBER OF UNITS IS ENTERED HERE, IT WILL BE ASSUMED THAT THE
LIMITED PARTNER WISHES TO REDEEM ALL UNITS) of the undersigned's limited
partnership units ("units") in the Fund 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. Redemption fees apply through the first twelve month ends following
purchase (from and including the closing date on which the unit is purchased) as
follows: 4% of net asset value per unit redeemed through the third month-end, 3%
of net asset value per unit redeemed through the sixth month-end, 2% of net
asset value per unit redeemed through the ninth month-end, and 1% of net asset
value per unit redeemed through the twelfth month-end. After the twelfth
month-end following purchase of a unit, no redemption fees apply.
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 LIMITED PARTNERS 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 LIMITED PARTNERS 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 Limited Partner Individual Limited Partner(s)
- -------------------------------------------------- --------------------------------------------------
(Name of Entity) (Signature of Limited Partner)
By:
- -------------------------------------------------- --------------------------------------------------
(Authorized Corporate Officer, (Signature of Limited Partner)
Partner, Custodian or Trustee)
- --------------------------------------------------
Title
</TABLE>
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EXHIBIT C
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
------------------------
SUBSCRIPTION REQUIREMENTS
By executing the Subscription Agreement and Power of Attorney for Campbell
Strategic Allocation Fund, L.P. (the "Fund"), each purchaser ("purchaser") of
Limited Partnership units in the Partnership ("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 Fund's prospectus dated August 27, 1999 (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
Strategic Allocation Fund, L.P." Purchaser is also delivering to the selling
agent an executed Subscription Agreement and Power of Attorney (Exhibit D to the
prospectus). If purchaser's Subscription Agreement and Power of Attorney is
accepted, purchaser agrees to contribute purchaser's subscription to the Fund
and to be bound by the terms of the Fund's Limited Partnership Agreement,
attached as Exhibit A to the prospectus. Purchaser agrees to reimburse the Fund
and Campbell & Company, Inc. (the "General Partner") 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 Limited Partnership Agreement.
As an inducement to the General Partner 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 or beneficiaries), by
executing and delivering purchaser's Subscription Agreement and Power of
Attorney, represents and warrants to the General Partner, the commodity broker
and the selling agent who solicited purchaser's subscription and the Fund, 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 Limited
Partnership Agreement.
(b) All information that purchaser has furnished to the General Partner 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 General
Partner.
(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 Limited Partner pursuant to the Limited
Partnership 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
Fund.
(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 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 Fund 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 Fund is consistent with the
Plan Fiduciary's responsibilities under ERISA; (c) the Plan's investment in the
Fund 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 Fund has been duly authorized and approved by all
necessary parties; (e) none of the General Partner, the Fund's advisors, the
Fund's cash manager, the Fund's futures 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 Fund, 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 General Partner, the Fund's advisors, the Fund's cash
manager, the Fund's futures 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 General Partner, furnish the General
Partner with such information as the General Partner 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.
<TABLE>
<C> <S>
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.
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.
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.
</TABLE>
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<TABLE>
<C> <S>
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 and the expectation of a taxable
income during the current 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 during the
past two years and anticipated taxable income in the current
year 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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<PAGE> 151
EXHIBIT D
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
UNITS OF LIMITED PARTNERSHIP INTEREST
------------------------
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
Campbell Strategic Allocation Fund, L.P.
c/o Campbell & Company, Inc.
Court Towers Building
210 West Pennsylvania Avenue
Towson, Maryland 21204
Dear Sirs:
1. Subscription for Units. I hereby subscribe for the number of Units of
Limited Partnership Interest ("units") in Campbell Strategic Allocation Fund,
L.P. (the "Fund") set forth below (minimum $10,000; $5,000 in the case of
trustees or custodians of employee benefit plans or individual retirement
accounts) in the Subscription Agreement and Power of Attorney Signature Page, at
net asset value per unit as set forth in the prospectus of the Fund dated August
27, 1999 (the "prospectus"). The undersigned's check payable to "Campbell
Strategic Allocation Fund, L.P.," in the full amount of the undersigned's
subscription (additional investments in excess of the required minimum
investment may be made in the amount of $1,000 or more, 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 General Partner 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 Fund, I do hereby irrevocably constitute and appoint the General Partner,
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
Fund 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 General Partner to carry out fully the provisions of the Limited
Partnership Agreement of the Partnership, 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 Fund.
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 Fund. 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
[SPECIMEN OVERLAY]
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<PAGE> 152
REVISED 8/27/99
EXHIBIT D
SIGNATURE PAGE
SUBSCRIPTION AGREEMENT
IMPORTANT: READ REVERSE SIDE BEFORE SIGNING
The investor named below, by execution and delivery of this Subscription
Agreement and Power of Attorney, by payment of the purchase price for Units of
Limited Partnership Interest in Campbell Strategic Allocation Fund, L.P. and by
either (i) enclosing a check payable to "CAMPBELL STRATEGIC ALLOCATION FUND,
L.P.," 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 Fund
dated August 27, 1999. Including the Fund's Limited Partnership 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 #
______________ - ______________ - ______________ ______________ - ______________ - ______________
</TABLE>
Taxable Investors (check one):
<TABLE>
<S> <C> <C> <C>
[ ] Individual Ownership [ ] Tenants in Common [ ] Estate [ ] UGMA/UTMA
[ ] Partnership [ ] Joint Tenants with Right of [ ] Grantor or Other Revocable Trust (Minor)
[ ] Corporation Survivorship [ ] Trust other than a Grantor or Revocable
[ ] Community Property Trust
(Trust agreement must accompany subscription)
</TABLE>
Non-Taxable Investors (check one):
<TABLE>
<S> <C> <C> <C>
[ ] IRA [ ] Profit Sharing [ ] Pension [ ] Other
[ ] IRA Rollover [ ] Defined Benefit [ ] SEP (specify)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
4) [ ] Check here if this is an addition to an existing account. Partner #:____________
5) LIMITED PARTNER NAME________________________________________________________________
6) ____________________________________________________________________________________
ADDITIONAL INFORMATION (FOR ESTATES, PARTNERSHIPS, TRUSTS AND CORPORATIONS)
7) RESIDENT ADDRESS
OF LIMITED PARTNER__________________________________________________________________
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
</TABLE>
<TABLE>
<S> <C>
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 General Partner with respect to an investment in the units,
as set forth in the prospectus dated August 27, 1999. 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 Fund 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)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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>
[SPECIMEN OVERLAY]
D-2
<PAGE> 153
(This page has been left blank intentionally.)
<PAGE> 154
PROSPECTUS BACK COVER
<PAGE> 155
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Campbell & Company will continue to 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 2.5% of the aggregate subscriptions accepted by Campbell & Company.
Offering expenses related to the initial offering and the continuing offering
prior to the date of the Prospectus included in this Registration Statement have
been incurred. Such expenses are included in the 2.5% maximum described above
but are not reflected in the figures below. The following is an estimate of the
expenses for the next nine-month period:
<TABLE>
<CAPTION>
APPROXIMATE
AMOUNT
-------------
<S> <C>
Printing Expenses....................................... $ 100,000
Fees of Certified Public Accountants.................... $ 10,000
Blue Sky Expenses (Excluding Legal Fees)................ $ 30,000
Fees of Counsel......................................... $ 25,000
Escrow Fees............................................. $ 1,000
Salaries of Employees Engaged in Sales Activity......... $ 1,400,000
Miscellaneous Offering Costs............................ $ 234,000
--------------
Total......................................... $ 1,800,000
==============
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 15 of the Amended Agreement of Limited Partnership (attached as
Exhibit A to the Prospectus which forms a part of this Registration Statement)
provides for the indemnification of the General Partner 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 Limited Partner are prohibited unless
specific court approval is obtained.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
There have been no sales of unregistered securities of the Registrant
within the last three years.
<PAGE> 156
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents (unless indicated) are filed herewith and made a
part of this Registration Statement.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- ------------------------------------------------------------
<S> <C>
1.01 Form of Selling Agreement among the Partnership, the General
Partner, PaineWebber Incorporated and the Selling Agent.****
1.02 Form of Auxiliary Selling Agreement.****
1.03 Form of Service Agreement among Steben Asset Management,
Inc. the
Registrant and the General Partner.**
1.04 Form of Correspondent Selling Agreement among the
Partnership, the General Partner, PaineWebber Incorporated
and Correspondent Selling Agents under PaineWebber
Incorporated.****
3.01 Agreement of Limited Partnership of the Registrant dated May
11, 1993.*
3.02 Certificate of Limited Partnership of the Registrant.*
3.03 Amended Agreement of Limited Partnership of the Registrant
(included as Exhibit A to the Prospectus).
5.01 Opinion of Sidley & Austin relating to the legality of the
Units.****
8.01 Opinion of Sidley & Austin with respect to federal income
tax consequences.****
10.01 Advisory Agreement between the Partnership and Campbell &
Company, Inc.*
10.02 Customer Agreement between the Partnership and PaineWebber
Incorporated.*
10.03 Subscription Agreement and Power of Attorney (included as
Exhibit D to Prospectus)
10.04 Escrow Agreement between the Partnership and Mercantile Safe
Deposit & Trust Company.*
10.05 International Foreign Exchange Master Agreement with Margin
Account between The Partnership and ABN AMRO Bank N.V.***
23.01 Consent of Sidley & Austin****
23.02 Consent of Arthur F. Bell, Jr. & Associates, L.L.C.
</TABLE>
- ----------
* This exhibit is included in exhibits filed by the Registrant as part of its
Registration Statement on Form S-1 (No. 33-67164) on August 9, 1993 and is
hereby incorporated herein by reference.
** This exhibit is included in the exhibits filed by the Registrant as part
of its Post-Effective Amendment No. 1 to the Registration Statement on
Form S-1 (No. 33-84126) on May 22, 1995 and is hereby incorporated herein
by reference.
*** This exhibit is included in exhibits filed by the Registrant as part of
its Pre-Effective Amendment No. 1 to the Registration Statement on Form
S-1 (No. 33-68431) on December 24, 1998 and is hereby incorporated herein
by reference.
**** This exhibit is included in exhibits filed by the Registrant as part of its
Registration Statement on Form S-1 (No. 333-80933) on June 17, 1999 and is
hereby incorporated herein by reference.
(b) Financial Statement Schedules.
No Financial Schedules are required to be filed herewith.
<PAGE> 157
ITEM 17. UNDERTAKINGS.
(a)(1) The undersigned registrant hereby undertakes 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,
represents 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.
(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.
<PAGE> 158
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the General
Partner of the Registrant has duly caused this Amendment to the 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 15th day
of December, 1999.
CAMPBELL STRATEGIC ALLOCATION
FUND, L.P.
By: Campbell & Company, Inc.
General Partner
By: /s/ BRUCE L. CLELAND
-------------------------------
Bruce L. Cleland
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons on
behalf of the General Partner of the Registrant in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE WITH REGISTRANT DATE
- ------------------------------------ ---------------------------------- -----------
<S> <C> <C>
/s/ D. KEITH CAMPBELL Chairman of the Board and December 15, 1999
- ------------------------------------ Director
D. Keith Campbell
/s/ BRUCE L. CLELAND President, Chief Executive December 15, 1999
- ------------------------------------- Officer and Director
Bruce L. Cleland (Principal Executive Officer)
/s/ THERESA D. LIVESEY Chief Financial Officer, December 15, 1999
- ------------------------------------ Secretary, Treasurer and Director
Theresa D. Livesey (Principal Financial Officer)
/s/ WILLIAM C. CLARKE, III Executive Vice President and December 15, 1999
- -------------------------------------- Director
William C. Clarke, III
/s/ JAMES M. LITTLE Executive Vice President and December 15, 1999
- ----------------------------------- Director
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>
<CAPTION>
<S> <C> <C>
CAMPBELL & COMPANY, INC. General Partner of Registrant December 15, 1999
By: /s/ BRUCE L. CLELAND
Bruce L. Cleland
Chief Executive Officer
</TABLE>
<PAGE> 159
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
-------- --------------------------------------------------
<S> <C>
23.02 Consent of Arthur F. Bell, Jr. & Associates, L.L.C.
</TABLE>
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in the Prospectus constituting part of this
Registration Statement on Post Effective Amendment Number 1 to Form S-1 of our
report dated January 19, 1999 on the financial statements of Campbell Strategic
Allocation Fund, L.P. as of December 31, 1998 and 1997 and for the years ended
December 31, 1998, 1997 and 1996 and our report dated February 26, 1999 on the
balance sheet of Campbell & Company, Inc. as of December 31, 1998, 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
December 15, 1999
