<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One) FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
[X] OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Fiscal Year Ended December 31, 1998
Commission File Number 0-22260 and
2-84126
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 52-1823554
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
210 W. PENNSYLVANIA AVENUE
BALTIMORE, MARYLAND 21204
- ------------------------------------- --------------------------------------
Registrant's telephone number, including area code: (410) 296-3301
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Securities registered pursuant to Section 12 (b) of the Act: NONE
----
Securities registered pursuant to Section 12 (g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
---------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part II of this Form 10-K or any
amendment to this Form 10-K. [X]
The Registrant has no voting stock. As of December 31, 1998 there were
204,942.359 Units of Limited Partnership Interest issued and outstanding.
Total number of pages 31. Consecutive page numbers on which exhibits commence:
31.
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<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
Prospectus dated February 1, 1999 included within the Registration
Statement of Form S-1 (File No. 333-68431), incorporated by reference into
Parts I, II, III and IV.
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<PAGE> 3
PART I
ITEM 1. BUSINESS
Campbell Strategic Allocation Fund, L.P. (the "Registrant" or the
"Fund") is a limited partnership which was organized on May 11, 1993 under the
Delaware Revised Uniform Limited Partnership Act. The Registrant operates as a
commodity investment pool, whose purpose is to buy, hold and trade in commodity
futures and options contracts and other commodity interests, with primary
emphasis on financial futures (including interest rates, foreign exchange and
stock indices) and metals and energy contracts, and with limited allocations to
grains, meats and softs contracts. The objective is appreciation of assets
through speculative trading. The general partner and trading advisor of the
Registrant is Campbell & Company, Inc. ("Campbell & Company"). The Registrant's
operations are regulated by the provisions of the Commodity Exchange Act, the
regulations of the Commodity Futures Trading Commission, and the rules of the
National Futures Association.
The Registrant originally filed a registration statement with the U.S.
Securities and Exchange Commission for the sale of a minimum of $2,500,000 and
a maximum of $25,000,000 in Units of Limited Partnership at $1,000 each, which
registration statement was effective on January 12, 1994. The Fund has since
filed additional registration statements with the U.S. Securities and Exchange
Commission to bring the sum of existing and offered Units of Limited
Partnership Interests to a maximum of approximately $440,000,000 through March
1999. The Unit selling price during the initial offering period, which lasted
for approximately 90 days and ended on April 15, 1994, was $1,000. Since April
15, 1994, Units of Limited Partnership Interests of the Fund have been offered
on an ongoing basis during the Fund's continuing offering period. During the
continuing offering period, subscriptions are accepted monthly and proceeds are
transferred to bank and brokerage accounts for trading purposes. The unit
selling price during the continuing offering period is the net asset value per
unit as of the last business day of the month in which the subscription is
accepted.
A total of $317,960,788 has been raised in the initial and continuing
offering periods through December 31, 1998.
In addition to making all trading decisions in its capacity as trading
advisor, Campbell & Company controls all aspects of the business and
administration of the Registrant in its role as general partner.
The Registrant will be terminated and dissolved promptly thereafter
upon the happening of the earlier of: (a) the expiration of the Registrant's
stated term of December 31, 2023; (b) an election to dissolve the Registrant at
any time by Limited Partners owning more than 50% of the Units then
outstanding; (c) the withdrawal of Campbell & Company unless one or more new
general partners have been elected or appointed pursuant to the Agreement of
Limited Partnership; or (d) any event which shall make unlawful the continuing
existence of the Registrant.
REGULATION
Under the Commodity Exchange Act, as amended (the "Act"), commodity
exchanges and commodity futures trading are subject to regulation by the
Commodity Futures Trading Commission (the 'CFTC"). The National Futures
Association ("NFA'), a registered futures association under the Act, is the
only non-exchange self-regulatory organization for commodity industry
professionals. The CFTC has delegated to the NFA responsibility for the
registration of "commodity trading advisors," "commodity pool operators,"
"futures commission merchants," "introducing brokers" and their respective
associated persons and "floor brokers." The Act requires "commodity pool
operators," and "commodity trading advisors" such as Campbell & Company and
commodity brokers or "futures commission merchants" such as the Registrant's
commodity broker to be registered and to comply with various reporting and
recordkeeping requirements. Campbell & Company and the Registrant's commodity
broker are members of the NFA. The CFTC may suspend a commodity pool operator's
or trading advisor's registration if it finds that its trading
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<PAGE> 4
practices tend to disrupt orderly market conditions, or as the result of
violations of the Commodity Exchange Act or rules and regulations promulgated
thereunder. In the event Campbell & Company's registration as a commodity pool
operator or commodity trading advisor were terminated or suspended, Campbell &
Company would be unable to continue to manage the business of the Registrant.
Should Campbell & Company's registration be suspended, termination of the
Registrant might result.
In addition to such registration requirements, the CFTC and certain
commodity exchanges have established limits on the maximum net long and net
short positions which any person, including the Registrant, may hold or control
in particular commodities. Most exchanges also limit the maximum changes in
commodity futures contract prices that may occur during a single trading day.
The Registrant also trades in dealer markets for forward contracts, which is
not regulated by the CFTC. Federal and state banking authorities also do not
regulate forward trading or forward dealers. In addition, the Registrant trades
on foreign commodity exchanges which are not subject to regulation by any
United States government agency.
OPERATIONS
A description of the business of the Registrant, including trading
approach, rights and obligations of the Partners, and compensation arrangements
is contained in the Prospectus under "Summary," "The Risks You Face, "
"Investment Factors," "Campbell & Company, Inc.," "Conflicts of Interest," and
"The Futures and Forward Markets," and such description is incorporated herein
by reference from the Prospectus.
The Registrant conducts its business in one industry segment, the
speculative trading of commodity futures contracts. The Registrant is a market
participant in the "managed futures" industry. The managed futures industry has
grown substantially in the previous ten years. Market participants include all
types of investors, such as corporations, employee benefit plans, individuals
and foreign investors. Service providers of the managed futures industry
include (a) pool operators, which control all aspects of trading funds such as
the Registrant (except trading decisions), (b) trading advisors, which make the
specific trading decisions, and (c) commodity brokers, which execute and clear
the trades pursuant to the instructions of the trading advisor. The Registrant
has no employees, and does not engage in the sale of goods or services.
The Registrant engages in financial instrument trading in up to
approximately 60 financial instrument contracts on domestic and international
markets. Campbell & Company utilizes its Financial, Metal and Energy Large
Portfolio (75% allocation of Fund assets) and the Global Diversified Large
Portfolio (25% allocation) in trading the Registrant's assets. As of February,
1999, the Fund's assets are allocated to the different market sectors in
approximately the following manner: 40% to currencies, 30% to interest rates,
16% to stock indices, 9% to energy products, 3% to metals and 2% to
agricultural. The contracts traded by the Registrant will fluctuate from time
to time
The Registrant may, in the future, experience increased competition
for the commodity futures and other contracts in which it trades. Campbell &
Company will recommend similar or identical trades for other accounts under its
management. Such competition may also increase due to the widespread
utilization of computerized methods similar to those used by Campbell &
Company.
ITEM 2. PROPERTIES
The Registrant does not use any physical properties in the conduct of
its business. Its assets currently consist of commodity futures and other
contracts and cash.
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ITEM 3. LEGAL PROCEEDINGS
Campbell & Company is not aware of any material legal proceedings to
which the Registrant is a party or to which any of their assets are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Units of Limited Partnership Interest are not publicly traded. Units
may be transferred or redeemed subject to the conditions imposed by the
Agreement of Limited Partnership. As of December 31, 1998, there were 11,274
Limited Partners in the Registrant and 204,942.359 Units of Limited Partnership
Interest outstanding.
Campbell & Company has sole discretion in determining what
distributions, if any, the Registrant will make to its Unit holders. Campbell &
Company has not made any distributions as of the date hereof.
ITEM 6. SELECTED FINANCIAL DATA
DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------- Period Ended
1998 1997 1996 1995 December 31, 1994
--------- --------- --------- --------- ------------------
<S> <C> <C> <C> <C> <C>
Total Assets ..................... $350,791 $220,404 $111,367 $ 46,492 $ 21,066
Total Partners' Capital .......... 343,957 212,710 107,737 45,074 20,599
Total Income (Loss) .............. 68,510 40,234 26,624 6,201 (1,215)
Net Income (Loss) ................ 40,695 24,011 19,058 3,509 (2,236)
Net Income (Loss) Per General
and Limited Partner Unit .... 232.33 208.78 327.00 103.74 (133.42)
Increase (Decrease) in Net Asset
Value per General and Limited
Partner Unit ................ 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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
INTRODUCTION
The offering of its Units of Limited Partnership Interests commenced
on January 12, 1994. The initial offering terminated on April 15, 1994 and the
Fund commenced operations on April 18, 1994. The continuing offering period
commenced at the termination of the initial offering period and is ongoing.
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
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<PAGE> 6
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 contracts prices during a single day by regulations referred to as
"daily price fluctuation limits" or "daily limits." During a single trading
day, no trades may be executed at prices beyond the daily limit. Once the price
of a futures contract has reached the daily limit for that day, positions in
that contract can neither be taken nor liquidated. Commodity futures prices
have occasionally moved 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 have not moved the daily limit, the Fund may
not be able to execute futures trades at favorable prices if little trading in
such contracts is taking place. Other than these limitations on liquidity,
which are inherent in the Fund's commodity futures trading operations, the
Fund's assets are expected to be highly liquid.
RESULTS OF OPERATIONS
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%
Stock Indices 2.03
Currencies 2.41
Metals (.11)
Agriculturals (.62)
Energy (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 winning 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
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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 Fed-led bail out of LTCM 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. We 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 big winner 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 was the
biggest loser 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 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 our short positions in the interest
rate instruments benefited, although this was largely offset by losses in our
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>
Interest Rates 6.98%
Stock Indices 6.58
Currencies 5.64
Metals 2.71
Energy (0.64)
Agriculturals (2.05)
------
19.22%
======
</TABLE>
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POSSIBLE EFFECTS OF THE EUROPEAN MONETARY UNION
Campbell & Company trades the euro-currency (the "Euro"). The January
1, 1999 inauguration of the Euro and the market's reaction to the Euro, or any
nation's withdrawal from the European Monetary Union, may adversely affect the
trading opportunities, or trading results generally, of currency traders. The
absence of historical Euro pricing data could be detrimental to traders which
use trend-following trading models such as Campbell & Company.
The conversion to a single euro-currency is a very significant and
novel political and economic event and there can be no certainty about its
direct or indirect future effects on currency markets. Limited partners should
be aware that a risk exists that unforeseen effects of the European Monetary
Union could result in trading losses.
OFF-BALANCE SHEET RISK
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 interests
positions of the Fund at the same time, and if the Fund's trading advisor was
unable to offset futures interests positions of the Fund, the Fund could lose
all of its assets and the Limited Partners would realize a 100% loss. Campbell
& Company, Inc., the General Partner (who also acts as trading advisor),
minimizes market risk through real-time monitoring of open positions,
diversification of the portfolio and maintenance of a margin-to-equity ratio
that rarely exceeds 30%.
In addition to market risk, in entering into futures and forward
contracts there is a risk to the Fund (credit risk) that a counterparty will
not be able to meet its obligations to the Fund. The counterparty of the Fund
for futures contracts traded in the United States and most foreign exchanges on
which the Fund trades is the clearinghouse associated with such exchange. In
general, clearinghouses are backed by the membership of the exchange and will
act in the event of non-performance by one of its members or one of its
members' customers, and as such, should significantly reduce this credit risk.
In cases where the Fund trades on exchanges where the clearinghouse is not
backed by the membership (i.e. some foreign exchanges) or when the Fund enters
into off-exchange contracts (i.e. forward contracts) with a counterparty, the
sole recourse of the Fund will be the clearinghouse or the counterparty as the
case may be. Campbell & Company, Inc., in its business as a commodity trading
advisor and through its many relationships with brokers, monitors the
creditworthiness of the exchanges and the clearing members of the foreign
exchanges with which it does business for the Fund and other clients. With
respect to forward contract trading, the Fund trades with only those
counterparties which the General Partner has determined to be creditworthy.
All positions of the Fund are valued each day on a mark-to-market basis. While
the General Partner monitors the creditworthiness and risks involved in dealing
on the various exchanges and with counterparties, there can be no assurance
that an exchange or counterparty will be able to meet its obligations to the
Fund.
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.
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<PAGE> 9
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.
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
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<PAGE> 10
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.
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 December 31, 1998. All
open position trading risk exposures of the Fund have been included in
calculating the figures set forth below. As of December 31, 1998, the Fund's
total capitalization was approximately $344 million.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
% OF TOTAL
MARKET SECTOR VALUE AT RISK CAPITALIZATION
- ------------- ------------- --------------
<S> <C> <C>
Currencies $10.60 million 3.08%
Interest Rates $ 6.95 million 2.02%
Stock Indices $ 5.06 million 1.47%
Metals $ 2.82 million .82%
Energy $ 1.81 million .53%
Agriculturals $ .38 million .11%
-------------- -----
Total $27.62 million 8.03%
============== =====
</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
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<PAGE> 11
non-trading market risk as a result of investing a substantial portion of the
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 December 31, 1998, by market sector.
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, although it is difficult at this point
to predict the effect of the introduction of the Euro on the Advisor's currency
trading strategies. 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.
- 11 -
<PAGE> 12
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 December 31, 1998, the Fund's primary exposures were in
the S&P 500, Financial Times (England), Nikkei (Japan) and All Ordinaries
(Australia) 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 are currently depressed, but they 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 decline in
the 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. Soybeans, corn, coffee, cotton and orange juice accounted for the
substantial bulk of the Fund's agricultural exposure as of December 31, 1998.
The Fund also has limited market exposure to wheat and pork bellies and may
continue to in the future.
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE
The following were the only non-trading risk exposures of the Fund as
of December 31, 1998.
Foreign Currency Balances
The Fund's primary foreign currency balances are in Japanese yen,
German marks, British pounds and Italian lira. 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
- 12 -
<PAGE> 13
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.
GENERAL
The Fund is unaware of any (i) anticipated known demands, commitments
or capital expenditures; (ii) material trends, favorable or unfavorable, in its
capital resources; or (iii) trends or uncertainties that will have a material
effect on operations. From time to time, certain regulatory agencies have
proposed increased margin requirements on commodity futures contracts. Because
the Fund generally will use a small percentage of assets as margin, the Fund
does not believe that any increase in margin requirements, as proposed, will
have a material effect on the Fund's operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements meeting the requirements of Regulation S-X appear
beginning on Page 18 of this report. The supplementary financial information
specified by Item 302 of Regulation S-K is not applicable.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART II
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
The Registrant has no directors or executive officers. The Registrant
has no employees. It is managed by Campbell & Company in its capacity as
general partner. Campbell & Company has been registered as a commodity pool
operator (CPO) since September, 1982. Its main business address is 210 West
Pennsylvania Avenue, Baltimore, Maryland 21204, (410) 296-3301. Campbell &
Company's directors and executive officers are as follows:
Richard M. Bell, age 46, serves as a Senior Vice President-Trading.
Mr. Bell began his employment with Campbell & Company in May, 1990. His duties
include managing daily trade execution
- 13 -
<PAGE> 14
of the assets under Campbell & Company's management. From 1986 through 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 1975 through 1986,
Mr. Bell was a stockholder and Executive Vice President of Tague Securities,
Inc., a registered broker-dealer. Mr. Bell owns a seat on the PHLX and a
Philadelphia Currency Participation, which are leased out. Mr. Bell graduated
from Lehigh University with a B.S. in Finance.
D. Keith Campbell, age 56, has served as Chairman of the Board of
Directors of Campbell & Company since it began operations, was President until
January 1994 and Chief Executive Officer until January 1998. From 1971 through
June 1978, he was a registered representative of a futures commission merchant.
He has acted as a commodity trading advisor since January 1972 when, as general
partner of Campbell Fund, a limited partnership engaged in commodity futures
trading, he assumed sole responsibility for trading decisions made on behalf of
Campbell Fund. Since that time he has applied various technical trading systems
to numerous discretionary commodity trading accounts in which Campbell &
Company has had discretionary trading authority. 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, age 47, joined Campbell & Company in June 1977.
He is Executive Vice President-Research and a Director of Campbell & Company.
Mr. Clarke holds a B.S. in Finance from Lehigh University where he graduated in
1973. Mr. Clarke currently oversees all aspects of research which involves the
development of proprietary trading models and portfolio management methods. Mr.
Clarke is an Associated Person of Campbell & Company.
Bruce L. Cleland, age 51, joined Campbell & Company in January 1993.
Mr. Cleland serves as President, Chief Executive Officer and as a Director.
Prior to January 1994, he was Executive Vice President. From May 1986 through
December 1992, Mr. Cleland served in the following 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
clearing firm, 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. He has been
employed by Campbell & Company since 1994 in the Research Department, where he
has a major role in the ongoing research and development of Campbell &
Company's trading systems. From 1992 to 1994 he was employed in Japan by Line
System as a software engineer, where he participated in the research and
development of computer software, including programs for production systems
control and software development. Mr. Hu received his B.A. in Manufacturing
Engineering from Changsha University of Technology in China in 1982. He went on
to receive an M.A. and Ph.D. in Systems and Information Engineering from the
Toyohashi University of Technology, in Japan, in 1987 and 1992, respectively.
During his studies at Toyohashi, Mr. Hu was also a Visiting Researcher in
Computer Science and Operations Research and published several research papers.
Philip Lindner, 44, serves as Vice President-Information Technology.
He has been employed by Campbell & Company since October 1994, became the IT
Director in March 1996, and Vice President in January 1998. He oversees
Campbell & Company's computer and telecommunications systems, including a staff
of programmers that program proprietary applications for Campbell & Company's
Trading, Fund Administration, and Accounting functions, and provide complete
computer systems support to all Campbell & Company employees. Prior to joining
Campbell & Company, Mr. Lindner worked as a programmer and manager for Amtote,
a provider of race-track computer systems.
- 14 -
<PAGE> 15
James M. Little, age 52, joined Campbell & Company in April 1990 and
serves as Executive Vice President-Marketing and as a Director of Campbell &
Company. Immediately prior to that, Mr. Little was a registered representative
of A.G. Edwards & Sons, Inc. For the three years prior to that he was the Chief
Executive Officer of James Little & Associates, Inc., a registered commodity
pool operator and registered broker-dealer. Mr. Little holds a B.S. in
Economics and Psychology from Purdue University. Mr. Little has extensive
experience in the futures industry, having worked in the areas of hedging,
floor trading and managed futures. He is the co-author of The Handbook of
Financial Futures, and is a frequent contributor to investment publications.
Mr. Little is an Associated Person of Campbell & Company.
Theresa D. Livesey, age 35, serves as the Chief Financial Officer,
Treasurer, Secretary and a Director of Campbell & Company. Ms. Livesey joined
Campbell & Company in June 1991. In addition to her role as CFO, Ms. Livesey
also oversees administration and compliance at Campbell & Company. From
December 1987 to June 1991 she was employed by Bank Maryland Corp, a
publicly-held company. When she left she was 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.
V. Todd Miller, 37, serves as a Vice President-Research. He has been
employed by Campbell & Company since 1994 in the Research Department, where he
has a major role in the ongoing research and development of Campbell &
Company's trading systems. 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, beginning with an Associates' degree in
architecture. He followed that in 1986 with 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. He 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. He has been
employed by Campbell & Company since 1995 in the Research Department, where he
has a major role in the ongoing research and development of Campbell &
Company's trading systems. From 1991 to 1995 Mr. Nigrin was an assistant
professor in the department of Computer Science and Information Systems at
American University in Washington, D.C., where he taught classes in artificial
intelligence, computer programming and algorithms to both graduate and
undergraduate students. While teaching, he also wrote and published a book with
MIT Press, Neural Networks for Pattern Recognition. Mr. Nigrin received a B.A.
in Electrical Engineering in 1984 from Drexel University. He then proceeded
directly to a Ph.D. program and received his degree in Computer Science in 1990
from Duke University, where his doctoral studies concentrated in the areas of
artificial intelligence and neural networks.
Markus Rutishauser, 37, 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 & Company, 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 M.B.A. at the University of
Baltimore in January 1996.
C. Douglas York, 40, has been employed by Campbell & Company since
November 1992. He is a Senior Vice President-Trading for Campbell & Company.
His duties include managing daily trade execution for foreign exchange markets
and forward contracts on precious metals and energy markets. From January 1991
to November 1992, Mr. York worked for Black & Decker as Global Foreign Exchange
Manager. He holds a B.A. in Government from Franklin and Marshall College. Mr.
York is an Associated Person of Campbell & Company.
- 15 -
<PAGE> 16
There has never been a material administrative, civil or criminal
action brought against Campbell & Company or any of its directors, executive
officers, promoters or control persons.
No Forms 3, 4, or 5 have been furnished to the Registrant since
inception. To the best of the Registrant's knowledge, no such forms have been
or are required to be filed.
ITEM 11. EXECUTIVE COMPENSATION
The Registrant is managed by its general partner, Campbell & Company.
Campbell & Company receives from the Registrant a Brokerage Fee equal to up to
8% of the Registrant's month-end Net Assets per year. From such 8% Brokerage
Fee, Campbell & Company remits up to 1% to the Commodity Broker for execution
and clearing costs, and 4% to the broker-dealers which engaged in the
distribution of the Units in return for ongoing services to the Limited
Partners. Campbell & Company retains the remaining 3% as management fees (2%
for providing advisory fees and 1% for acting as general partner). Campbell &
Company also receives a performance fee of 20% of the aggregate cumulative
appreciation (if any) in Net Asset Value per unit at the end of each calendar
quarter, exclusive of the appreciation attributable to interest income.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners. As of
December 31, 1998, no Units of Limited Partnership are owned
or held by an officer of Campbell & Company.
(b) Security Ownership of Management. As of December 31, 1998,
Campbell & Company owned 2,096.643 Units of General
Partnership Interest having a value of $3,483,174. Units of
General Partnership will always be owned by Campbell &
Company in its capacity as general partner.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 11, Executive Compensation and Item 12, Security Ownership of
Certain Beneficial Owners and Management.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) The Following documents are filed as part of this report:
(1) See Financial Statements beginning on page 18
hereof.
(2) Schedules:
Financial statement schedules have been omitted
because they are not included in the financial
statements or notes hereto applicable or because
equivalent information has been included in the
financial statements or notes thereto.
(3) The exhibits listed in the "Index to Exhibits."
(b) Reports on Form 8-K
None.
- 16 -
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the Undersigned, thereunto duly authorized on March 26, 1999.
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
By: CAMPBELL & COMPANY, INC.
General Partner
By: /s/ Theresa D. Livesey
-----------------------------
Theresa D. Livesey
Chief Financial Officer, Secretary,
Treasurer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on March 26, 1999.
<TABLE>
<CAPTION>
Signature Capacity
--------- --------
<S> <C>
/s/ D. Keith Campbell
- ---------------------
D.Keith Campbell Chairman of the Board
/s/ William C. Clarke, III
- --------------------------
William C. Clarke, III Executive Vice President and Director
/s/ Bruce L. Cleland
- --------------------
Bruce L. Cleland President, Chief Executive Officer and Director
/s/ Theresa D. Livesey
- ----------------------
Theresa D. Livesey Chief Financial Officer, Secretary,
Treasurer and Director
/s/ James M. Little
- -------------------
James M. Little Executive Vice President and Director
</TABLE>
- 17 -
<PAGE> 18
CAMPBELL STRATEGIC ALLOCATION
FUND, L.P.
ANNUAL REPORT
December 31, 1998
- 18 -
<PAGE> 19
CAMPBELL STRATEGIC ALLOCATION FUND, L.P
INDEX
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
INDEPENDENT AUDITOR'S REPORT 20
FINANCIAL STATEMENTS
Statements of Financial Condition
December 31, 1998 and 1997 21
Statements of Operations For the Years
Ended December 31, 1998, 1997, and 1996 22
Statements of Cash Flows For the Years
Ended December 31, 1998, 1997, and 1996 23
Statements of Changes in Partners Capital (Net Asset Value)
For the years Ended December 31, 1998, 1997, and 1996 24
Notes to Financial Statements 25-30
</TABLE>
- 19 -
<PAGE> 20
ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
(410) 821-8000
FAX (410) 321-8359
Member:
American Institute of Certified Public Accountants Suite 200
SEC Practice Section 201 International Circle
Maryland Association of Certified
Public Accountants Hunt Valley, Maryland 21030
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
- 20 -
<PAGE> 21
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.
- 21 -
<PAGE> 22
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.
- 22 -
<PAGE> 23
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.
- 23 -
<PAGE> 24
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
----------------------------- ---------------------------------
Units Amount Units Amount
----- ------ ----- ------
<S> <C> <C> <C> <C>
Balances at
December 31, 1995 472.222 $ 459,018 45,897.894 $ 44,614,516
Net income for the year
ended December 31, 1996 190,771 18,867,283
Additions 413.716 480,000 46,205.096 52,489,550
Redemptions 0.000 0 (8,033.930) (8,743,067)
Offering costs (6,275) (614,993)
----------- ------------- ----------- -------------
Balances at
December 31, 1996 885.938 1,123,514 84,069.060 106,613,289
Net income for the year
ended December 31, 1997 244,185 23,766,978
Additions 587.385 780,007 71,325.080 95,220,276
Redemptions 0.000 0 (10,134.620) (13,866,080)
Offering costs (11,918) (1,160,532)
----------- ------------- ----------- -------------
Balances at
December 31, 1997 1,473.323 2,135,788 145,259.520 210,573,931
Net income for the year
ended December 31, 1998 417,357 40,277,199
Additions 623.320 950,000 75,725.965 116,458,144
Redemptions 0.000 0 (16,043.126) (24,906,260)
Offering costs (19,971) (1,929,540)
----------- ------------- ----------- -------------
Balances at
December 31, 1998 2,096.643 $ 3,483,174 204,942.359 $ 340,473,474
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
Partners' Capital
----------------------------------
Total
----------------------------------
Units Amount
----- ------
<S> <C> <C>
Balances at
December 31, 1995 46,370.116 $ 45,073,534
Net income for the year
ended December 31, 1996 19,058,054
Additions 46,618.812 52,969,550
Redemptions (8,033.930) (8,743,067)
Offering costs (621,268)
----------- -------------
Balances at
December 31, 1996 84,954.998 107,736,803
Net income for the year
ended December 31, 1997 24,011,163
Additions 71,912.465 96,000,283
Redemptions (10,134.620) (13,866,080)
Offering costs (1,172,450)
----------- -------------
Balances at
December 31, 1997 146,732.843 212,709,719
Net income for the year
ended December 31, 1998 40,694,556
Additions 76,349.285 117,408,144
Redemptions (16,043.126) (24,906,260)
Offering costs (1,949,511)
----------- -------------
Balances at
December 31, 1998 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.
- 24 -
<PAGE> 25
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 Acts of 1933 and 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.
- 25 -
<PAGE> 26
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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 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.
- 26 -
<PAGE> 27
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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.
- 27 -
<PAGE> 28
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
- 28 -
<PAGE> 29
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
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.
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.
- 29 -
<PAGE> 30
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
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.
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.
- 30 -
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Exhibit Page
- ----------- ------- ------------
<S> <C> <C>
1.01 Form of Selling Agreement among the Registrant, n/a
Campbell & Company, PaineWebber
Incorporated and the Selling Agent **
1.02 Form of Auxiliary Selling Agreement ** n/a
3.01 Agreement of Limited Partnership of the Registrant n/a
dated May 11, 1993 * (1)
3.02 Certificate of Limited Partnership of the n/a
Registrant *
3.03 Amended Agreement of Limited Partnership of the n/a
Registrant *** (1)
10.01 Form of Advisory Agreement between the Registrant and n/a
(Amended) Campbell & Company * (1)
10.02 Form of Customer Agreement between the Registrant n/a
and PaineWebber Incorporated *
10.04 Escrow Agreement between the Registrant and n/a
Mercantile Safe Deposit & Trust Company *
</TABLE>
- ---------------------------------------
* Incorporated by reference to the respective exhibit to the
Registrant's Registration Statement on Form S-1 (No. 333-67164) on
August 9, 1993.
** Incorporated by reference to the respective exhibit as Amendment No. 2
to the Registrant's Registration Statement on Form S-1 (No. 333-67164)
on December 30, 1993.
*** Incorporated by reference to the respective exhibit to the
Registrant's Registration Statement on Form S-1 (No. 333-68431) on
February 1, 1999.
(1) Management contract or compensatory plan or arrangement.
Upon request, the Registrant will furnish a copy of any Exhibit to this report
upon payment of reasonable copying and mailing expenses.
-31-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF CAMPBELL STRATEGIC ALLOCATION FUND, L.P. AS OF AND FOR THE YEAR
ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 88,830
<SECURITIES> 261,961
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 350,791
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 350,791
<CURRENT-LIABILITIES> 6,834
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 343,957
<TOTAL-LIABILITY-AND-EQUITY> 350,791
<SALES> 0
<TOTAL-REVENUES> 68,510
<CGS> 0
<TOTAL-COSTS> 27,815
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 40,695
<INCOME-TAX> 0
<INCOME-CONTINUING> 40,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,695
<EPS-PRIMARY> 211.67
<EPS-DILUTED> 211.67
</TABLE>
