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PART ONE -- DISCLOSURE DOCUMENT
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
$220,000,000
UNITS OF LIMITED PARTNERSHIP INTEREST
THE OFFERING
The Fund trades speculatively in the U.S. and international futures, forward and
swap 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 metals and energy products. Campbell & Company, Inc., a
commodity trading advisor, allocates the Fund's assets across a broad spectrum
of markets.
As of August 31, 2000, the Fund's net asset value per unit was $1,788.25. Units
will be available for sale 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 6.
- The Fund is speculative and leveraged. The Fund's assets are leveraged at a
ratio which typically ranges from 6:1 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.
- Campbell & Company has total trading authority over 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.
- Transfers of interest in the units are subject to limitations, such as 30
days' advance written notice of any intent to transfer. Also, Campbell &
Company may deny a request to transfer if it determines that the transfer may
result in adverse legal or tax consequences for the Fund.
- Substantial expenses must be offset by trading profits and interest income.
The Fund must generate trading profits of 3.65% per annum to break even.
- A substantial portion of the trades executed for the Fund takes place on
foreign exchanges. No U.S. regulatory authority or exchange has the power to
compel the enforcement of the rules of a foreign board of trade or any
applicable foreign laws.
MINIMUM INVESTMENT
FIRST-TIME INVESTORS:
$10,000 for initial investments
$1,000 or more for additional investments
TRUSTEES, IRAS, OTHER TAX-EXEMPT ACCOUNTS:
$5,000
------------------------
Investors are required to make representations and warranties relating to their
suitability in connection with this investment. Each investor is encouraged to
discuss the investment with his/her individual financial, 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.
THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE DOCUMENT AND A STATEMENT OF
ADDITIONAL INFORMATION. THESE PARTS ARE BOUND TOGETHER, AND BOTH CONTAIN
IMPORTANT INFORMATION.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR
ACCURACY OF THIS DISCLOSURE DOCUMENT.
------------------------
CAMPBELL & COMPANY, INC.
General Partner
October 27, 2000
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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 29 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 6.
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
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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, clearing
broker and over-the-counter counterparties are not affiliated with Campbell &
Company or the Fund.
[ORGANIZATIONAL CHART]
* Campbell & Company presently serves as general partner or sponsor for four
other commodity pools.
ii
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PART ONE -- DISCLOSURE DOCUMENT
TABLE OF CONTENTS
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SUMMARY............................... 1
General.......................... 1
Plan of Distribution............. 1
A Summary of Risk Factors You
Should Consider Before
Investing in the Fund.......... 2
Investment Factors You Should
Consider Before Investing in
the Fund....................... 3
Campbell & Company, Inc.......... 3
Charges to the Fund.............. 4
Estimate of Break-Even Level..... 4
Distributions and Redemptions.... 4
Federal Income Tax Aspects....... 4
THE RISKS YOU FACE.................... 6
Market Risks..................... 6
You Could Possibly Lose Your
Total Investment in the
Fund...................... 6
The Fund is Highly
Leveraged................. 6
Your Investment Could be
Illiquid.................. 6
Forward and Swap
Transactions are Not
Regulated and are Subject
to Credit Risk............ 6
An Investment in the Fund
May Not Diversify an
Overall Portfolio......... 6
Trading Risks.................... 7
Campbell & Company Analyzes
Only Technical Market
Data, Not any Economic
Factors External to Market
Prices.................... 7
Increased Competition from
Other Trend-Following
Traders Could Reduce
Campbell & Company's
Profitability............. 7
Speculative Position Limits
May Alter Trading
Decisions for the Fund.... 7
Increase in Assets Under
Management May Affect
Trading Decisions......... 7
Investors Will Not be Able
to View the Fund's
Holdings on a Daily
Basis..................... 7
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Tax Risks........................ 8
Investors are Taxed Based on
Their Share of Fund
Profits................... 8
Tax Could be Due from
Investors on Their Share
of the Fund's Ordinary
Income Despite Overall
Losses.................... 8
There Could be a Limit on
the Deductibility of
Brokerage and Performance
Fees...................... 8
Other Risks...................... 8
Fees and Commissions are
Charged Regardless of
Profitability and are
Subject to Change......... 8
The Clearing Firm Could Fail
and has Been Subject to
Disciplinary Action....... 8
Investors Must Not Rely on
the Past Performance of
Either Campbell & Company
or the Fund in Deciding
Whether to Buy Units...... 9
Parties to the Fund Have
Conflicts of Interest..... 9
There Are No Independent
Experts Representing
Investors................. 9
The Fund Places Significant
Reliance on Campbell &
Company................... 9
The Fund Could Terminate
Before Expiration of its
Stated Term............... 9
The Fund is Not a Regulated
Investment Company........ 9
Proposed Regulatory Change
is Impossible to
Predict................... 10
Forwards, Swaps, Hybrids and
Other Derivatives are Not
Subject to CFTC
Regulation................ 10
Options on Futures are
Speculative and Highly
Leveraged................. 10
The Fund is Subject to
Foreign Market Credit and
Regulatory Risk........... 10
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iii
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The Fund is Subject to
Foreign Exchange Risk..... 10
Transfers Could be
Restricted................ 11
A Single-Advisor Fund May Be
More Volatile Than a
Multi-Advisor Fund........ 11
SELECTED FINANCIAL DATA............... 12
CAMPBELL & COMPANY, INC. ............. 12
Description...................... 12
The Advisory Agreement........... 15
Trading Systems.................. 15
MANAGEMENT'S ANALYSIS OF OPERATIONS... 17
Introduction..................... 17
Capital Resources................ 17
Liquidity........................ 17
Results of Operations............ 18
Off-Balance Sheet Risk........... 21
Quantitative and Qualitative
Disclosures About Market
Risk........................... 22
PAST PERFORMANCE OF THE CAMPBELL
STRATEGIC ALLOCATION FUND, L.P. .... 26
CONFLICTS OF INTEREST................. 26
Campbell & Company, Inc.......... 26
The Clearing Broker and the
Over-the-Counter
Counterparties................. 27
The Selling Agents............... 27
Fiduciary Duty and Remedies...... 28
Indemnification and Standard of
Liability...................... 28
CHARGES TO THE FUND................... 29
Brokerage Fee.................... 29
Other Fund Expenses.............. 29
Campbell & Company, Inc.......... 30
The Clearing Broker.............. 31
Selling Agents................... 31
Over-the-Counter
Counterparties................. 31
Offering Expenses................ 31
Other Expenses................... 32
USE OF PROCEEDS....................... 32
THE CLEARING BROKER................... 32
OVER-THE-COUNTER COUNTERPARTIES....... 33
CAPITALIZATION........................ 34
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DISTRIBUTIONS AND REDEMPTIONS......... 34
Distributions.................... 34
Redemptions...................... 34
Redemption Fees.................. 34
Net Asset Value.................. 35
AGREEMENT OF LIMITED PARTNERSHIP...... 35
Organization and Limited
Liabilities.................... 35
Management of Partnership
Affairs........................ 35
Sharing of Profits and Losses.... 35
Dispositions..................... 36
Dissolution and Termination of
the Fund....................... 36
Amendments and Meetings.......... 36
Indemnification.................. 36
Reports to Limited Partners...... 37
FEDERAL INCOME TAX ASPECTS............ 37
The Fund's Partnership Tax
Status......................... 37
Taxation of Limited Partners on
Profits and Losses of the
Fund........................... 37
Fund Losses by Limited
Partners....................... 37
"Passive-Activity Loss Rules" and
Their Effect on the Treatment
of Income and Loss............. 37
Cash Distributions and Unit
Redemptions.................... 37
Gain or Loss on Section 1256
Contracts and Non-Section 1256
Contracts...................... 38
Tax on Capital Gains and
Losses......................... 38
Limited Deduction for Certain
Expenses....................... 38
Interest Income.................. 38
Syndication Fees................. 38
Investment Interest Deductibility
Limitations.................... 38
Unrelated Business Taxable
Income......................... 38
IRS Audits of the Fund and its
Limited Partners............... 38
State and Other Taxes............ 39
Taxation of Foreign Limited
Partners....................... 39
INVESTMENT BY ERISA ACCOUNTS.......... 39
General.......................... 39
Special Investment
Consideration.................. 39
The Fund Should Not Be Deemed to
Hold "Plan Assets"............. 39
Ineligible Purchasers............ 40
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PLAN OF DISTRIBUTION.................. 40
Subscription Procedure........... 40
Representations and Warranties of
Investors in the Subscription
Agreement...................... 41
Minimum Investment............... 41
Investor Suitability............. 41
The Selling Agents............... 42
LEGAL MATTERS......................... 43
EXPERTS............................... 43
INDEX TO FINANCIAL STATEMENTS......... 44
PART TWO -- STATEMENT OF
ADDITIONAL INFORMATION
TABLE OF CONTENTS
The Futures, Forward and Swap
Markets............................. 1
Historical Perspective of Managed
Futures............................. 3
Investment Factors.................... 4
Value of Diversification -- Managed
Futures Industry.................... 6
Value of Diversification -- Campbell
Strategic Allocation Fund, L.P. .... 9
Supplemental Performance
Information......................... 15
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
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v
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<PAGE> 9
SUMMARY
GENERAL
The Campbell Strategic Allocation Fund, L.P. allows you to participate in
the U.S. and international futures, forward and swap 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 metals
and energy 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 28 years. See "Past Performance of the
Campbell Strategic Allocation Fund, L.P." for a performance record of the Fund
through August 2000.
Futures are standardized contracts traded on commodity exchanges that call
for the future delivery of commodities at a specified time and place. While
futures contracts are traded on a wide variety of commodities, the Fund will
concentrate its futures trading in financial instruments such as interest rates,
foreign exchange and stock index contracts, and metal and energy contracts. The
U.S. futures markets are regulated under the Commodity Exchange Act, which is
administered by the CFTC. The Fund will trade futures positions on margin,
meaning that the Fund will utilize leverage in its trading.
Currencies and other commodities may be purchased or sold by the Fund for
future delivery or cash settlement through banks or dealers pursuant to forward
or swap contracts. Unlike futures contracts, forward contracts are not
standardized and the forward market is largely unregulated. The Fund may also
periodically enter into swap transactions, which are individually negotiated,
non-standardized agreements between two parties to exchange cash flows measured
by different interest rates, exchange rates, or prices, with payments calculated
by reference to a principal amount or quantity.
The following summary provides a review in outline form of important
aspects of an investment in the Fund.
PLAN OF DISTRIBUTION
HOW TO SUBSCRIBE FOR UNITS
- During the continuing offering period, units will be offered at a price
of net asset value per unit. The net assets of the Fund are its assets
less its liabilities determined in accordance with the Limited
Partnership Agreement. The net asset value per unit equals the net assets
of the Fund divided by the number of units outstanding as of the date of
the determination. Investors must submit subscriptions at least five
business days prior to the applicable month-end closing date. Approved
subscriptions will be accepted once payments are received and cleared.
- The 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.
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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.
A SUMMARY OF 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. Campbell & Company has from time to time in the past incurred
substantial losses in trading on behalf of its clients.
- Futures, forward and swap trading is a "zero-sum" economic activity in
which for every gain there is an equal and offsetting loss (disregarding
transaction costs), as opposed to a typical securities investment, in
which there is an expectation of constant yields (in the case of debt) or
participation over time in general economic growth (in the case of
equity). It is possible that the Fund could incur major losses while
stock and bond prices rise substantially in a prospering economy.
- The Fund trades in futures, forward and swap 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. For these
reasons, Campbell & Company has a disincentive to add or replace
advisors, even if doing so may be in the best interests of the Fund;
2) Campbell & Company, the Fund's clearing broker and over-the-counter
counterparties may have incentives to favor other accounts over the
Fund;
3) Campbell & Company, the Fund's clearing broker and over-the-counter
counterparties and their respective principals and affiliates may
trade in the futures, forward and swap markets for their own accounts
and may take positions opposite or ahead of those taken for 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,
irre-
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<PAGE> 11
spective 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 7.65% 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.
- Investors are taxed each year on their share of the Fund's profits,
irrespective of whether they redeem any units or receive any cash
distributions from the Fund.
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,
forward and swap 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. 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, forward and swap trading has no
inherent correlation with any other investment. However, non-correlation
will not provide any diversification advantages unless the non-correlated
assets are outperforming other portfolio assets, and there is no
guarantee that the 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 28
years of experience trading in the futures and forward markets. As of August 31,
2000, Campbell & Company was managing approximately $2.0 billion in the futures
and forward markets, including approximately $1.6 billion in its Financial,
Metal & Energy Large Portfolio. The FME Large Portfolio, to which all 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. Prior to September of 2000, 75% of the Fund's assets were
allocated to the FME Large Portfolio and 25% were allocated to the Global
Diversified Large Portfolio. The Global Diversified Large Portfolio trades the
same forward and futures markets as the FME Large Portfolio, as well as
agricultural markets. 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.
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<PAGE> 12
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 clearing 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" spreads and prime brokerage fees for off-exchange contracts.
- Operating expenses such as legal, auditing, administration, printing and
postage, up to a maximum of 0.5 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
$365 per unit, or 3.65%, 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. 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.
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Assumed Initial Selling Price
Per Unit.................... $10,000.00
----------
Brokerage Fee (7.65%)......... $ 765.00
Organization & Offering
Expense Reimbursement
(1%)........................ 100.00
Operating Expenses (0.5%)..... 50.00
Less: Interest Income
(5.5%)...................... (550.00)
----------
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........................ $ 365.00
==========
Percentage of Assumed Initial
Selling Price per Unit...... 3.65%
==========
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 forward and
swap 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
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<PAGE> 13
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.]
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<PAGE> 14
THE RISKS YOU FACE
MARKET RISKS
YOU COULD POSSIBLY LOSE YOUR TOTAL INVESTMENT IN THE FUND
Futures, forward and swap 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 in order to
enter into a futures, forward or swap 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.
YOUR INVESTMENT COULD BE ILLIQUID
Futures, forward and swap 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 AND SWAP TRANSACTIONS ARE NOT REGULATED AND ARE SUBJECT TO CREDIT RISK
The Fund trades forward and swap contracts in foreign currencies, metals
and energy. Forward and swap contracts are typically traded through a dealer
market which is dominated by major money center and investment banks and is not
regulated by the Commodity Futures Trading Commission. Thus, you do not receive
the protection of CFTC regulation or the statutory scheme of the Commodity
Exchange Act in connection with this trading activity by the Fund. The market
for forward and swap contracts relies upon the integrity of market participants
in lieu of the additional regulation imposed by the CFTC on participants in the
futures markets. This regulation includes, for example, trading practices and
other customer protection requirements, and minimum financial and trade
reporting requirements. The absence of regulation could expose the Fund to
significant losses in the event of trading abuses or financial failure by
participants in the forward and swap markets which it might otherwise have
avoided. Also, the Fund faces the risk of non-performance by the counterparties
to the forward and swap contracts and such non-performance may cause some or all
of your gain to be unrealized.
AN INVESTMENT IN THE FUND MAY NOT DIVERSIFY AN OVERALL PORTFOLIO
Historically, managed futures have been generally non-correlated to the
performance of other asset classes such as stocks and bonds. Non-correlation
means that there is no statistically valid relationship between the past
performance of futures, forward and swap 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
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<PAGE> 15
non-correlation, the Fund cannot be expected to be automatically profitable
during unfavorable periods for the stock market, or vice versa. The futures,
forward and swap markets are fundamentally different from the securities markets
in that for every gain made in a futures, forward or swap transaction, the
opposing side of that transaction will have an equal and off-setting loss. If
the 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.
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, forward or swap prices. Such
trends may not develop; there have been periods in the past without price
trends.
The likelihood of the units being profitable could be materially diminished
during periods when events external to the markets themselves have an important
impact on prices. During such periods, Campbell & Company's historic price
analysis could establish positions on the wrong side of the price movements
caused by such events.
INCREASED COMPETITION FROM OTHER TREND-FOLLOWING TRADERS COULD REDUCE CAMPBELL &
COMPANY'S PROFITABILITY
There has been a dramatic increase over the past 10 to 15 years in the
amount of assets managed by trend-following trading systems like the Campbell &
Company programs. In 1980, the assets in the managed futures industry were
estimated at approximately $300 million; by the end of 1999, this estimate had
risen to approximately $44 billion. It is also estimated that over half of all
managed futures trading advisors rely primarily on trend-following systems. This
means increased trading competition which could operate to the detriment of the
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, forward or swap
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. Either of these actions may not be in
the best interest of the investors.
INCREASE IN ASSETS UNDER MANAGEMENT MAY AFFECT TRADING DECISIONS
Campbell & Company's current equity under management is at or near its
all-time high. Campbell & Company has not agreed to limit the amount of
additional equity which it may manage, and is actively engaged in seeking major
new accounts. The more equity Campbell & Company manages, the more difficult it
may be for Campbell & Company to trade profitably because of the difficulty of
trading larger positions without adversely affecting prices and performance.
Accordingly, such increases in equity under management may require Campbell &
Company to modify its trading decisions for the Fund which could have a
detrimental effect on your investment.
INVESTORS WILL NOT BE ABLE TO VIEW THE FUND'S HOLDINGS ON A DAILY BASIS
Campbell & Company makes the Fund's trading decisions. While Campbell &
Company receives daily trade confirmations from the clearing broker and
over-the-counter counterparties, the Fund's trading results are reported to
limited partners monthly. Accordingly, an investment in
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<PAGE> 16
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. While Campbell & Company has the authority to make such
distributions, it does not intend to do so in the foreseeable future.
All performance information included in this prospectus is presented on a
pre-tax basis; the investors who experienced such performance had to 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.
THERE COULD BE A LIMIT ON THE DEDUCTIBILITY OF BROKERAGE AND PERFORMANCE FEES
Although Campbell & Company treats the brokerage fees and performance fees
paid to Campbell & Company and other expenses of the 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 and swap trading, "bid-ask" spreads and prime
brokerage fees 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 and prime brokerage fees paid by
the Fund because the Fund cannot determine the profit its counterparty is making
on the forward and swap transactions. 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.
THE CLEARING FIRM COULD FAIL AND HAS BEEN SUBJECT TO DISCIPLINARY ACTION
The current clearing broker for the Fund is PaineWebber Incorporated. The
Commodity Exchange Act requires a clearing broker to segregate all funds
received from customers from such broker's proprietary assets. If the clearing
broker fails to do so, the assets of the Fund might not be fully protected in
the event of the bankruptcy of the clearing broker. Furthermore, in the event of
the clearing broker's bankruptcy, the Fund could be limited to recovering only a
pro rata share of all available funds segregated on behalf of the clearing
broker's combined customer accounts, even though certain property specifically
traceable to the Fund (for example, Treasury bills deposited by the Fund with
the clearing broker as margin) was held by the clearing broker. The clearing
broker has been the subject of regulatory and
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<PAGE> 17
private causes of action, as described under "The Clearing Broker."
Furthermore, dealers in forward and swap 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 and swap 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.
PARTIES TO THE FUND HAVE CONFLICTS OF INTEREST
Campbell & Company has not established any formal procedures to resolve the
following conflicts of interest. Consequently, there is no independent control
over how Campbell & Company resolves these conflicts which can be relied upon by
investors as ensuring that the Fund is treated equitably with other Campbell &
Company clients.
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. Campbell & Company, as general partner,
determines whether or not distributions are made and it receives increased fees
to the extent distributions are not made. While Campbell & Company has the
authority to make such distributions, it does not intend to do so in the
foreseeable future.
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."
THERE ARE NO 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.
THE FUND PLACES SIGNIFICANT RELIANCE ON CAMPBELL & COMPANY
The incapacity of Campbell & Company's principals could have a material and
adverse effect on Campbell & Company's ability to discharge its obligations
under the 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.
THE FUND COULD TERMINATE 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 clearing 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
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<PAGE> 18
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
addition to swaps, in the future, the Fund may also trade hybrid instruments and
other off-exchange contracts. Swap agreements involve trading income streams
such as fixed rate for floating rate interest. Hybrids are instruments which
combine features of a security with those of a futures contract. The dealer
market for off-exchange instruments is becoming more liquid. There is no
exchange or clearinghouse for these contracts and they are not regulated by the
CFTC. The Fund will not receive the protections which are provided by the CFTC's
regulatory scheme for these transactions.
OPTIONS ON FUTURES ARE SPECULATIVE AND HIGHLY LEVERAGED
In the future, options on futures contracts may be used by the Fund to
generate premium income or capital gains. Futures options involve risks similar
to futures in that options are speculative and highly leveraged. The buyer of an
option risks losing the entire purchase price (the premium) of the option. The
writer (seller) of an option risks losing the difference between the premium
received for the option and the price of the commodity or futures contract
underlying the option which the writer must purchase or deliver upon exercise of
the option (which losses can be unlimited). Specific market movements of the
commodities or futures contracts underlying an option cannot accurately be
predicted.
THE FUND IS SUBJECT TO FOREIGN MARKET CREDIT AND REGULATORY RISK
A substantial portion of Campbell & Company's trades takes place on markets
or exchanges outside the United States. From time to time, as much as 20% to 50%
of the 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 FUND IS SUBJECT TO FOREIGN EXCHANGE RISK
The price of any foreign futures or foreign options contract and,
therefore, the potential profit and loss thereon, may be affected by any
variance in the foreign exchange rate between the time the order is placed and
the time it is liquidated, offset or exercised. Certain foreign exchanges may
also be in a more or less developmental stage so that prior price histories may
not be indicative of current price dynamics. In addition, the 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
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<PAGE> 19
limited than in the case of U.S. markets or brokers.
TRANSFERS COULD BE RESTRICTED
You may transfer or assign your units only upon 30 days' prior written
notice to Campbell & Company and if Campbell & Company is satisfied that the
transfer complies with applicable laws and would not result in the termination
of the 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, the
Fund may have increased performance volatility and a higher risk of loss than
investment vehicles employing multiple advisors.
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<PAGE> 20
SELECTED FINANCIAL DATA
DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS
<TABLE>
<CAPTION>
PERIOD
ENDED YEAR ENDED
AUGUST 31, ----------------------------------------------------
2000 1999 1998 1997 1996 1995
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Assets........................ $559,287 $496,841 $350,791 $220,404 $111,367 $46,492
Total Partners' Capital............. 550,666 484,020 343,957 212,710 107,737 45,074
Total Income (Loss)................. 44,738 57,598 68,510 40,234 26,624 6,201
Net Income (Loss)................... 17,861 23,306 40,695 24,011 19,058 3,509
Net Income (Loss) Per General and
Limited Partner Unit.............. 62.05 95.52 232.33 208.78 327.00 103.74
Increase (Decrease) in Net Asset
Value per General and Limited
Partner Unit...................... 53.06 73.88 211.67 181.48 296.12 88.27
</TABLE>
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 August 31,
2000, Campbell & Company had approximately $2.0 billion under management in the
futures, forward and swap markets (including approximately $1.6 billion traded
pursuant to the same Financial, Metal & Energy Large Portfolio as 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. Pools currently operated by Campbell & Company
include: Campbell Financial Futures Fund, L.P.; Campbell Fund Trust; Campbell
Global Assets Fund Limited; and Campbell Alternative Asset Trust. 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.
Campbell & Company's principals are Theresa D. Becks, Richard M. Bell, D.
Keith Campbell, William C. Clarke III, Bruce L. Cleland, Xiaohua Hu, Philip
Lindner, James M. Little, V. Todd Miller, Albert Nigrin, Markus Rutishauser and
C. Douglas York. The majority voting stockholder of Campbell & Company is D.
Keith Campbell.
Theresa D. Becks, born in 1963, joined Campbell & Company in 1991 and
serves as the Chief Financial Officer, Secretary, Treasurer, and a Director. In
addition to her role as CFO, Ms. Becks also oversees administration and
compliance. From December 1987 to June 1991, she was employed by Bank of
Maryland Corp, a publicly held company, as a Vice President and Chief Financial
Officer. Prior to that time, she worked with Ernst & Young. Ms. Becks is a
C.P.A. and has a B.S. in Accounting from the University of Delaware. Ms. Becks
is an Associated Person of Campbell & Company.
Richard M. Bell, born in 1952, began his employment with Campbell & Company
in May 1990 and serves as a Senior Vice President-Trading. His duties include
managing daily trade execution for the assets under Campbell's man-
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<PAGE> 21
agement. From September 1986 through May 1990, Mr. Bell was the managing general
partner of several partnerships registered as broker-dealers involved in market
making on the floor of the Philadelphia Stock Exchange ("PHLX") and Philadelphia
Board of Trade ("PBOT"). From July 1975 through September 1986, Mr. Bell was a
stockholder and Executive Vice-President of Tague Securities, Inc., a registered
broker-dealer. Mr. Bell graduated from Lehigh University with a B.S. in Finance.
Mr. Bell is an Associated Person of Campbell & Company.
D. Keith Campbell, born in 1942, has served as the Chairman of the Board of
Directors of Campbell & Company since it began operations, was President until
January 1, 1994, and Chief Executive Officer until January 1, 1998. Mr. Campbell
is the majority voting stockholder. From 1971 through June 1978 he was a
registered representative of a futures commission merchant. Mr. Campbell has
acted as a commodity trading advisor since January 1972 when, as general partner
of the Campbell Fund, a limited partnership engaged in commodity futures
trading, he assumed sole responsibility for trading decisions made on behalf of
the Fund. Since then, he has applied various technical trading models to
numerous discretionary futures trading accounts. Mr. Campbell is registered with
the CFTC and NFA as a commodity pool operator. Mr. Campbell is an Associated
Person of Campbell & Company.
William C. Clarke, III, born in 1951, joined Campbell & Company in June
1977 and serves as an Executive Vice President and Director. Mr. Clarke holds a
B.S. in Finance from Lehigh University where he graduated in 1973. Mr. Clarke
currently oversees all aspects of research, which involves the development of
proprietary trading models and portfolio management methods. Mr. Clarke is an
Associated Person of Campbell & Company.
Bruce L. Cleland, born in 1947, joined Campbell & Company in January 1993
and serves as President, Chief Executive Officer and a Director. Prior to 1994
he was Executive Vice President. From May 1986 through December 1992, Mr.
Cleland had served in various principal roles with the following firms:
President, Institutional Brokerage Corp., a floor broker; President,
Institutional Advisory Corp., a commodity trading advisor and commodity pool
operator; President, F&G Management, Inc., a commodity trading advisor;
President, Hewlett Trading Corporation, a commodity pool operator. Prior to
this, Mr. Cleland was employed by Rudolf Wolff Futures Inc., a futures
commission merchant, where he served as President until 1986. Mr. Cleland
graduated in 1969 from Victoria University in Wellington, New Zealand where he
received a Bachelor of Commerce and Administration degree. Mr. Cleland is an
Associated Person of Campbell & Company.
Xiaohua Hu, born in 1963, serves as a Vice President-Research and has been
employed by Campbell & Company since 1994. From 1992 to 1994 he was employed in
Japan by Line System as a software engineer, where he participated in the
research and development of computer software, including programs for production
systems control and software development. Mr. Hu received his B.A. in
Manufacturing Engineering from Changsha University of Technology in China in
1982. He went on to receive an M.A. and Ph.D. in Systems and Information
Engineering from the Toyohashi University of Technology, in Japan, in 1987 and
1992 respectively. During his studies at Toyohashi, Mr. Hu was also a Visiting
Researcher in Computer Science and Operations Research and published several
research papers.
Philip Lindner, born in 1954, serves as Vice President-Information
Technology. He has been employed by Campbell & Company since October 1994 and
was appointed the IT Director in March 1996 and Vice President in January 1998.
Prior to joining Campbell & Company, Mr. Lindner worked as a programmer and
manager for Amtote, a provider of race track computer systems.
James M. Little, born in 1946, joined Campbell & Company in April 1990 and
serves as Executive Vice President-Client Development and a Director. Mr. Little
holds a B.S. in Economics and Psychology from Purdue University. From March 1989
through April 1990, Mr. Little was a registered representative of A.G. Edwards &
Sons, Inc. From January 1984 through March 1989, he was the Chief Executive
Officer of James Little & Associates, Inc., a commodity pool operator and
broker-dealer. Mr. Little is the co-author of The Handbook of Financial Futures,
and is a frequent contributor to investment industry publications.
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<PAGE> 22
Mr. Little is an Associated Person of Campbell & Company.
V. Todd Miller, born in 1962, serves as a Vice President-Research and has
been employed by Campbell & Company since 1994. From 1993 to 1994, Mr. Miller
was an assistant professor in the department of Computer Information Science at
the University of Florida, where he taught classes in object oriented
programming, numerical analysis, and programming in C, C++ and LISP. Mr. Miller
holds a variety of degrees from the University of Florida, including an
Associates degree in architecture and a B.A. in Business with a concentration in
computer science. In 1988 he received his M.A. in Engineering with a
concentration in artificial intelligence. Mr. Miller completed his education in
1993 with a Ph.D. in Engineering with a concentration in computer simulation.
Albert Nigrin, born in 1961, serves as a Vice President-Research and has
been employed by Campbell & Company since 1995. From 1991 to 1995, Mr. Nigrin
was an assistant professor in the department of Computer Science and Information
Systems at American University in Washington D.C., where he taught classes in
artificial intelligence, computer programming and algorithms to both graduate
and undergraduate students. While teaching, he also wrote and published Neural
Networks for Pattern Recognition. Mr. Nigrin received a B.A. in Electrical
Engineering in 1984 from Drexel University. He then proceeded directly to a
Ph.D. program and received his degree in Computer Science in 1990 from Duke
University, where his doctoral studies concentrated in the areas of artificial
intelligence and neural networks.
Markus Rutishauser, born in 1961, serves as Vice President-Trading and has
been employed by Campbell & Company since October 1993, 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. Mr. Rutishauser is an Associated Person of Campbell & Company.
C. Douglas York, born in 1958, has been employed by Campbell & Company
since November 1992 and serves as a Senior Vice President-Trading. His duties
include managing daily trade execution for foreign exchange markets. From
January 1991 to November 1992, Mr. York was the Global Foreign Exchange Manager
for Black & Decker. He holds a B.A. in Government from Franklin and Marshall
College. Mr. York is an Associated Person of Campbell & Company.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
-14-
<PAGE> 23
CAMPBELL & COMPANY, INC. --
STAFF AS OF SEPTEMBER 2000
[STAFF ORGANIZATIONAL CHART]
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. In addition, limited partners will not have any vote or consent
with respect to the trading approaches utilized by Campbell & Company.
Campbell & Company currently offers the following portfolios:
1) The Financial, Metal & Energy Large Portfolio,
2) The Financial, Metal & Energy Small Portfolio,
3) The Foreign Exchange Portfolio,
4) The Global Diversified Large Portfolio, and
5) The Global Diversified Small Portfolio.
All of the Fund's assets are currently allocated to the Financial, Metal &
Energy Large Portfolio, which trades forward, futures and swap contracts on
precious and base metals, energy products, stock market indices, interest rate
instruments and foreign currencies. Prior to September of 2000, 75% of the
Fund's assets were allocated to the Financial, Metal & Energy Large Portfolio
and 25% were allocated to the Global Diversified Large Portfolio. The Global
Diversified Large Portfolio trades the same markets as the FME Large Portfolio,
as well as agricultural markets.
Campbell & Company currently allocates the Fund's assets as follows: 80% to
financial contracts, 15% to energy products and 5% to metals. These percentages
will fluctuate from time to time. See the following pie chart for a current
listing of contracts, by sector.
-15-
<PAGE> 24
PORTFOLIO COMPOSITION OF THE FUND AS OF SEPTEMBER 2000
PORTFOLIO COMPOSITION PIE CHART
<TABLE>
<CAPTION>
LONG-TERM SHORT-TERM
CROSS RATES* INTEREST RATES INTEREST RATES STOCK INDICES METALS ENERGY** CURRENCIES*
------------ -------------- -------------- ------------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
11 17.00 3.00 15.00 5.00 15.00 34.00
</TABLE>
* Traded as forward contracts, not futures
** Traded as futures or swap contracts
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. As clarification of the terms used,
please note that, as an example, aluminum is a market that is traded within
the metals sector.
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 profitable
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.
-16-
<PAGE> 25
Campbell & Company expects to develop additional trading models and to modify
models currently in use and may or may not employ all such models for all
clients' accounts. The trading models currently used by Campbell & Company may
be eliminated from use if Campbell & Company ever believes such action is
warranted.
While Campbell & Company normally follows a disciplined systematic approach
to trading, on occasion it may override the signals generated by the trading
models, such as when market conditions dictate otherwise. Such action may not
enhance the results achieved.
Campbell & Company applies risk management and portfolio management
strategies to measure and manage overall portfolio risk. These strategies
include portfolio structure, risk balance, capital allocation and risk
limitation. One objective of risk and portfolio management is to determine
periods of relatively high and low portfolio risk, and when such points are
reached, Campbell & Company may reduce or increase position size accordingly. It
is possible, however, that 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.
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 $565,215,727 have been accepted during the continuing offering period
as of September 1, 2000. Redemptions over the same time period totaled
$141,194,830. The Fund commenced operations on April 18, 1994.
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 futures exchanges limit fluctuations in 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. 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 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
futures trading operations, the Fund's assets are expected to be highly liquid.
-17-
<PAGE> 26
RESULTS OF OPERATIONS
The returns for the six months ending June 30, 2000 and for the three years
ended December 31, 1999, 1998 and 1997 were 2.35%, 4.45%, 14.60% and 14.31%,
respectively.
2000 (6 MONTHS ENDING JUNE 30)
The returns for the six months ending June 30, 2000 and 1999 were 2.35% and
3.15%, respectively. Of the 2.35% increase, approximately 3.95% was due to
trading gains (before commissions) and approximately 2.74% was due to interest
income, offset by approximately 4.34% in brokerage fees, performance fees,
operating costs and offering costs borne by the Fund. An analysis of the 3.95%
trading gains by sector is as follows:
<TABLE>
<CAPTION>
SECTOR % GAIN (LOSS)
------ -------------
<S> <C>
Energy......................... 9.09%
Currencies..................... 1.66
Stock Indices.................. 1.32
Agriculturals.................. (.12)
Metals......................... (1.40)
Interest Rates................. (6.60)
-----
3.95%
=====
</TABLE>
The first month of the New Year provided a highly volatile environment,
which offered the Fund the opportunity to perform well in most markets. Long
bond positions held for security over the Y2K year-end were sold off early in
the month benefiting short positions. Rising interest rates with still moderate
inflation numbers helped push the dollar higher against the Swiss Franc, the Yen
and the Euro, which benefited currency positions. In February, the volatility
seen in January continued, providing profits in some markets, but eliminating
January's gains in others. Currencies and energy continued to be profitable, but
these gains were more than offset by losses in short positions in the long-term
interest rate sector. March was a difficult month, as sharp reversals in the
energy sector and the Yen were the biggest factors in the loss for the month.
The dominant feature of April was the sell-off in the NASDAQ, which ended
almost as quickly as it began as investors used the sell-off as a buying
opportunity. Although the Fund managed gains in both the NASDAQ and S&P indices
during the month, the unprecedented volatility in global equity indices resulted
in a small loss in this sector overall. With respect to the energy sector, the
crude market rallied on news that OPEC would not drastically increase
production. The Fund suffered losses on short crude positions which more than
eliminated gains made on the upward trend of natural gas. Losses in the interest
rates sectors provided the majority of the losses for the month as the Fund's
long positions quickly became unprofitable as stability returned to the equity
markets.
The energy sector, specifically natural gas, provided the majority of the
profit for the month of May. Natural Gas prices moved sharply higher as summer
electricity demand increased. Crude oil resumed its upward trend when the
markets realized that OPEC production increases were still not meeting demand.
Continued economic strength caused the Federal Reserve to increase short-term
interest rates by 50 basis points mid-month as anticipated. The Fund experienced
a classic whipsaw as its interest rate positions flipped from long to short,
only to see the market rally hard again as softer economic numbers triggered
aggressive short covering. Higher interest rates pushed the Fund's long U.S.
Dollar positions up against the British Pound, New Zealand Dollar and South
African Rand.
During June, the energy sector continued to be the best performer. Although
the mid-month OPEC meeting increased the official supply of crude, most of the
increase was already being made available to the market through quota cheating.
Consequently, the OPEC decision only served to legitimize current production
levels, and this together with the apparent solidarity of OPEC, led to a strong
rally that was profitable for the Fund's long positions. Interest rates traded
sideways during the month causing small losses in many of the contracts traded
in this sector which offset some of the gain earned in energies. The rallies in
the S&P and NASDAQ indices at month-end contributed to a moderate gain in this
sector.
1999
The returns for the years ended December 31, 1999 and 1998 were 4.45% and
14.60%, respectively. For 1999, the majority of the 4.45% increase in net asset
value per unit occurred in the first half of the year, when approximately 60% of
the total trading gains for the year were posted. Of
-18-
<PAGE> 27
the 4.45% increase, approximately 9.19% was due to trading gains (before
commissions) and approximately 4.68% was due to interest income, offset by
approximately 9.42% in brokerage fees, performance fees and operating costs
borne by the Fund. An analysis of the 9.19% trading gains by sector is as
follows:
<TABLE>
<CAPTION>
SECTOR % GAIN (LOSS)
------ -------------
<S> <C>
Energies....................... 8.88%
Currencies..................... 2.48
Interest Rates................. .60
Metals......................... .51
Agriculturals.................. (.22)
Stock Indices.................. (3.06)
-----
9.19%
=====
</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 had 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 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 indices, energy and metal 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.
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
our portfolios showed strong profits at mid month. During the second half of
July, every major trend failed and several markets turned sharply against the
Fund 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 switched from short to long positions early enough to
stay flat in this market.
Price action was largely without direction in October until the end of the
month when the Employment Cost Index (ECI) numbers were released. Due to the ECI
being lower than expected, bond and equity prices rallied and base metal and
energy prices sold off causing losses in long energy, long metal and short
energy positions. The standout feature of November was the continued divergence
in the energy markets. During the month, crude oil traded higher while natural
gas sold off. By month-end, these trends were in reverse, but the Fund managed
to hold on to enough gains to register a small gain for the month. During
December, the air of uncertainty and apprehension left many market participants
unwilling to participate in global financial markets causing market liquidity to
be greatly reduced. The Fund's response was to trim its portfolio to only the
most liquid of contracts. The sectors that performed well were energies,
equities and interest rates.
-19-
<PAGE> 28
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 slow month, largely as a result of the market illiquidity. Global
interest rates continued to
-20-
<PAGE> 29
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>
Campbell & Company 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 the Fund's operations. From time to time,
regulatory agencies, such as the CFTC, have proposed increased margin
requirements on commodity futures contracts. Because the Fund generally uses a
small percentage of assets as margin, Campbell & Company does not believe that
any increase in margin requirements, if adopted as proposed, will have a
material effect on the Fund's operations. Campbell & Company 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, forward and swap
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, forward and swap
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 and swap contracts, which are traded on the
interbank market rather
-21-
<PAGE> 30
than on exchanges, the counterparty is generally a single bank or other
financial institution, rather than a group of financial institutions; thus there
may be 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.
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.
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 Campbell &
Company 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
-22-
<PAGE> 31
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
(which includes currencies and some energy products and metals 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 the case of contracts denominated in foreign currencies, the Value at
Risk figures include 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 U.S. Dollars.
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 tables indicate the trading Value at Risk associated with the
Fund's open positions by market category as of June 30, 2000, December 31, 1999
and December 31, 1998 and the trading gains/losses by market category for the
six months ended June 30, 2000 and the year ended December 31, 1999. All open
position trading risk exposures of the Fund have been included in calculating
the figures set forth below. As of June 30, 2000, December 31, 1999 and December
31, 1998, the Fund's total capitalization was approximately $524 million, $484
million and $344 million, respectively.
JUNE 30, 2000
<TABLE>
<CAPTION>
% OF TOTAL TRADING
MARKET SECTOR VALUE AT RISK CAPITALIZATION GAIN/(LOSS)*
------------- -------------- -------------- --------------
<S> <C> <C> <C>
Currencies........... $11.11 million 2.12% 1.66%
Interest Rates....... $10.83 million 2.07% (6.60%)
Energy............... $10.48 million 2.00% 9.09%
Stock Indices........ $ 6.53 million 1.25% 1.32%
Metals............... $ 1.92 million .36% (1.40%)
Agriculturals........ $ .50 million .10% (.12%)
-------------- ---- -----
Total........ $41.37 million 7.90% 3.95%
============== ==== =====
</TABLE>
---------------
* -- Of the 2.35% return for the six months ended June 30, 2000, approximately
3.95% was due to trading gains (before commissions) and approximately 2.74%
was due to interest income, offset by approximately 4.34% in brokerage
fees, performance fees and operating costs borne by the Fund.
DECEMBER 31, 1999
<TABLE>
<CAPTION>
% OF TOTAL TRADING
MARKET SECTOR VALUE AT RISK CAPITALIZATION GAIN/(LOSS)*
------------- -------------- -------------- --------------
<S> <C> <C> <C>
Interest Rates....... $12.32 million 2.55% .60%
Stock Indices........ $ 7.81 million 1.61% (3.06%)
Currencies........... $ 7.65 million 1.58% 2.48%
Energy............... $ 4.80 million .99% 8.88%
Metals............... $ 2.27 million .47% .51%
Agriculturals........ $ .19 million .04% (.22%)
-------------- ---- -----
Total........ $35.04 million 7.24% 9.19%
============== ==== =====
</TABLE>
---------------
* -- Of the 4.45% return for the year ended December 31, 1999, approximately
9.19% was due to trading gains (before commissions) and approximately 4.68%
was due to interest income, offset by approximately 9.42% in brokerage
fees, performance fees and operating costs borne by the Fund.
DECEMBER 31, 1998
<TABLE>
<CAPTION>
% 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
-23-
<PAGE> 32
(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 tables -- 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 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 Campbell & Company for managing such exposures are subject to numerous
uncertainties, contingencies and risks, any one of which could cause the actual
results of the 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
June 30, 2000, 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. Campbell & Company does not anticipate
that the risk profile of the Fund's currency sector will change significantly in
the future.
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 Switzerland. Campbell & Company 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 (Hong Kong and Spain). The
-24-
<PAGE> 33
stock index futures traded by the Fund are by law limited to futures on broadly
based indices. As of June 30, 2000, the Fund's primary exposures were in the
Nikkei (Japan), NASDAQ (USA), IBEX (Spain), S&P 500 (USA) and DAX (Germany)
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. As of
June 30, 2000, crude oil, unleaded gas and gas oil are the dominant energy
market exposures of the Fund. Gas and 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 metals market exposure is to fluctuations in the price of
aluminum, copper, gold, nickel and zinc. Campbell & Company'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.
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. Coffee and corn accounted for the substantial bulk of the Fund's
agricultural exposure as of June 30, 2000.
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE
The following were the only non-trading risk exposures of the Fund as of
June 30, 2000.
Foreign Currency Balances
The Fund's primary foreign currency balances are in Japanese Yen, British
Pounds and Euros. The Fund controls the non-trading risk of these balances by
regularly converting these balances back into U.S. Dollars (no less frequently
than twice a month, and more frequently if a particular foreign currency balance
becomes unusually large).
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 Campbell & Company, severally, attempt to
manage the risk of the Fund's open positions is essentially the same in all
market categories traded. Campbell & Company applies risk management policies to
its trading which generally limit the total exposure that may be taken per "risk
unit" of assets under management. In addition, Campbell & Company follows
diversification guidelines (often formulated in terms of the balanced volatility
between markets and correlated groups), as well as imposing "stop-loss" points
at which open positions must be closed out.
Campbell & Company 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.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
-25-
<PAGE> 34
PAST PERFORMANCE OF THE CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
[APRIL 1994 (INCEPTION) -- AUGUST 2000]
TYPE OF POOL: Publicly offered
INCEPTION OF TRADING: April 18, 1994
AGGREGATE GROSS CAPITAL SUBSCRIPTIONS TO THE FUND: $574,908,166
CURRENT NET ASSET VALUE OF THE FUND: $550,666,169
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>
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
RATE OF RETURN(2)
(Computed on a compounded monthly basis)
MONTH 2000 YTD 1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
January 3.53% -5.02% 2.74% 4.52% 5.79% -4.67%
February -0.60% 1.67% -2.81% 2.03% -5.97% 4.21%
March -2.67% 0.46% 4.68% -2.47% 4.72% 8.77%
April -1.81% 5.33% -6.69% -3.60% 3.59% 1.13% 0.16%
May 2.15% -3.69% 4.07% -2.92% -2.18% -0.84% -2.42%
June 1.87% 4.81% 1.29% 2.48% 0.75% -1.77% 5.15%
July -2.07% -0.32% -4.00% 9.12% -0.78% -3.82% -3.94%
August 2.82% 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 3.29% 0.30% 4.46% -4.41% 5.35% -4.98%
Total 3.06% 4.45% 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 82
accounts managed by Campbell & Company, with total assets as of August 31, 2000
of $2.0 billion. Approximately $1.6 billion of this total is traded pursuant to
Campbell's FME Large Portfolio, the portfolio utilized to trade the Fund's
assets.
Please refer to Part Two, the Statement of Additional Information, for
additional performance information and graphic presentations of the Fund.
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 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.
-26-
<PAGE> 35
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 receives 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 clearing 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 clearing 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 CLEARING BROKER AND THE OVER-THE-COUNTER COUNTERPARTIES
The clearing broker, currently PaineWebber Incorporated, and the
over-the-counter counterparties, currently ABN AMRO Bank N.V., Chicago Branch,
Morgan Stanley Capital Group, Inc. and one or more companies that are wholly
owned by The Goldman Sachs Group, Inc. (including J. Aron & Company) and the
affiliates and personnel of such entities, may trade futures, forward and swap
contracts for their own accounts. This trading could give rise to conflicts of
interest with the Fund.
PaineWebber is the clearing broker and also a selling agent of the Fund,
which could give rise to conflict of interest because its compensation in each
role is based on the net asset value of units outstanding. Further, in making
recommendations to redeem or purchase additional units, PaineWebber employees
may have a conflict of interest between acting in the best interest of their
clients and assuring continued compensation to their employer and themselves.
Finally, PaineWebber may offer additional pools managed by Campbell & Company in
which brokerage and selling fees paid to PaineWebber are lower than the Fund's
fees.
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.; Merrill Lynch, Pierce, Fenner & Smith Incorporated; PaineWebber
Incorporated; Securities America, Inc.; and Wachovia Securities, Inc. The
selling agents (or their assignees) which are registered futures commission
merchants or introducing brokers will
-27-
<PAGE> 36
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.
Campbell & Company operates another publicly-offered commodity pool, also
trading the Financial, Metal & Energy Large Portfolio, with a lower overall cost
structure. Selling agents offering both the Fund and such other pool may have a
conflict of interest between any responsibility that they may have to advise
eligible clients of the lower "break-even" level of such other pool and in
generating greater selling commissions for their employer.
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 remedies, such
as the ability to bring civil liability lawsuits, 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 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
-28-
<PAGE> 37
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 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.
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, clearing 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
clearing 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 clearing
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%.
[FEE PERCENTAGE ILLUSTRATION]
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
and prime brokerage because imbedded in
fees. price of forward and
swap contracts.
Others Legal, accounting, As incurred, up to a
printing, postage maximum of 0.5% of
and administrative average month-end
costs. net assets per
annum.
</TABLE>
The above fees, together with the brokerage fee, is the complete
compensation that will be received by Campbell & Company or its affiliates from
the Fund. This excludes redemption fees which will be charged to some limited
partners, if they redeem prior to one year of ownership.
-29-
<PAGE> 38
CAMPBELL & COMPANY, INC.
BROKERAGE FEE
Campbell & Company receives a brokerage fee of up to 8% per annum as
described earlier.
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 interbank market, the
clearing broker has agreed to lower its fee from 1% to 0.65% annually, which
lowers the Fund's total brokerage fee to 7.65%. 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 clearing 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
2000 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 2001. 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 2000 but did not pay a performance fee at the end of
the fourth quarter of 2000 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
2001, 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.
-30-
<PAGE> 39
If a performance fee accrual is in effect at the time when particular units
are purchased (due to gains achieved prior to the applicable subscription day),
the net asset value per unit reflects such accrual. In the event the net asset
value of the 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 CLEARING BROKER
As described earlier, the clearing 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 clearing broker is responsible for
all trading transactional costs, such as pit brokerage, exchange and NFA fees,
"give-up" and transfer fees. The compensation to the clearing broker is
competitive with rates paid by other trading funds having assets and structure
similar to the Fund. The asset-based compensation to the clearing broker is
equivalent to approximately $10-$15 per round-turn trade per contract. The
compensation to be paid to the clearing broker will not exceed the guidelines
established by the North American Securities Administrators Association, Inc.
("NASAA").
SELLING AGENTS
The selling agents 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."
OVER-THE-COUNTER COUNTERPARTIES
The Fund trades currency forward contracts and swap 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 or
swap 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 August
31, 2000 totaled $13,837,047 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,
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<PAGE> 40
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, represents 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 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, 1999 and 1998, operating expenses
were 0.16% and 0.15%, 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."
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 clearing broker and the over-the-counter
counterparties. 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 clearing broker, although the
amount committed may vary significantly. Such assets are maintained in
segregated accounts with the clearing broker pursuant to the Commodity Exchange
Act and regulations thereunder. Approximately 10% to 30% of the Fund's assets
are deposited with over-the-counter counterparties in order to initiate and
maintain forward and swap contracts. Such assets are not held in segregation or
otherwise regulated under the Commodity Exchange Act, unless such over-
the-counter counterparty is registered as a futures commission merchant. These
assets are held either in U.S. government securities or short-term time deposits
with U.S.-regulated bank affiliates of the over-the-counter counterparties. The
remaining 30% to 40% 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.
THE CLEARING BROKER
PaineWebber Incorporated ("PaineWebber"), a Delaware corporation, is the
Fund's clearing broker and one of the selling agents. Additional or replacement
clearing brokers may be appointed in
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<PAGE> 41
respect of the Fund's account in the future solely at the discretion of Campbell
& Company.
The clearing broker's principal office is located at 1000 Harbor Boulevard,
Weehawken, New Jersey 07087, telephone: (201) 352-3000. The clearing broker is a
clearing member of all principal U.S. futures exchanges. It is registered with
the CFTC as a futures commission merchant and is a member of the NFA in such
capacity. UBS AG ("UBS"), UBS Americas Inc. ("UBS Americas") and PaineWebber
Group Inc., the parent of PaineWebber ("PWG"), have entered into an Agreement
and Plan of Merger dated as of July 12, 2000 (the "Merger Agreement"), pursuant
to which, subject to certain conditions, PWG will merge with and into UBS
Americas, thereby becoming a wholly owned subsidiary of UBS (the "Merger"). The
Merger is expected to be completed in the fourth quarter of 2000.
All futures trades made on behalf of the Fund are cleared through the
clearing broker. The clearing broker is not affiliated with Campbell & Company.
The clearing broker did not sponsor the Fund and is not responsible for the
activities of Campbell & Company. It will act only as the clearing broker and
one of the selling agents.
Except as set forth below, neither PaineWebber nor any of its principals
have been involved in any administrative, civil or criminal proceeding --
whether pending, on appeal or concluded -- within the past 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 involved in the sale of those interests. PaineWebber must comply with
its representations that it had paid and will pay a total of $292.5 million to
investors, including a payment of $40 million for a claims fund. PaineWebber has
also entered into settlement agreements with all the states, Puerto Rico and the
District of Columbia.
OVER-THE-COUNTER COUNTERPARTIES
The Fund trades foreign exchange and other forward and swap 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 clearing broker, foreign exchange or currency forward contracts are
executed through a network of dealers. Camp-
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<PAGE> 42
bell & Company then instructs the executing dealer to "give up" the trade to ABN
AMRO Bank, N.V., Chicago Branch. The dealers used for swap contracts are Morgan
Stanley Capital Group, Inc. and one or more companies that are wholly owned by
The Goldman Sachs Group, Inc. (including J. Aron & Company).
Campbell & Company is not obligated to continue to use the over-the-counter
counterparties identified above and may select others or additional ones in the
future, provided Campbell & Company believes that their service and pricing are
competitive and present minimal counterparty credit risk.
CAPITALIZATION
The Fund was formed on May 11, 1993. The table below shows the
capitalization of the Fund as of September 1, 2000 and as adjusted for the sale
of the maximum amount of units registered.
<TABLE>
<CAPTION>
AS ADJUSTED
FOR SALE OF
OUTSTANDING MAXIMUM
AS OF AMOUNT
TITLE OF CLASS SEPTEMBER 1, 2000 (1)(2)
------------------------ ----------------- ------------
<S> <C> <C>
Units of General
Partnership
Interest.............. 3,201.572 4,393.109
Units of Limited
Partnership
Interest.............. 304,733.437 434,917.809
Total Partners'
Capital............... $550,666,169 $785,597,750
</TABLE>
(See accompanying notes)
(1) This calculation assumes that the sale of all units is made during the
continuing offering at the August 31, 2000 net asset value per unit of
$1,788.25 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 September 1, 2000, Campbell & Company owned 3,201.572 units
of general partnership interest.
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, 2000 (the Closing Date for such unit), a
redemption fee of 4% would apply if the unit were redeemed on July 31, or August
31, 2000, a redemption fee of 3% would apply if the unit were redeemed on
September 30, October 31, or
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<PAGE> 43
November 30, 2000, a redemption fee of 2% would apply if the unit were redeemed
on December 31, 2000, January 31, or February 28, 2001, a redemption fee of 1%
would apply if the unit were redeemed on March 31, April 30, or May 31, 2001 and
no redemption fee would apply if the unit were redeemed on or after June 30,
2001.
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 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.
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.
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 remain-
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<PAGE> 44
ing 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) 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 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
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<PAGE> 45
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 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.
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.
"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.
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<PAGE> 46
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 and performance fees, as
well as other ordinary expenses of the Fund, to be investment advisory expenses.
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 fees 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.
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.
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<PAGE> 47
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.
TAXATION OF FOREIGN LIMITED PARTNERS
Subject to the discussion below regarding derivative transactions, a
non-resident alien individual not otherwise engaged in a United States trade or
business should not be deemed to be engaged in a United States trade or business
solely by virtue of an investment as a limited partner in the Fund. Capital
gains earned by the Fund and allocated to such a foreign limited partner will,
as a general matter, not be subject to United States federal income tax or
withholding, but may be subject to tax in the jurisdiction in which the foreign
limited partner is resident. Interest income earned by the Fund will, as a
general rule, likewise not be subject to United States federal income tax or
withholding, but may be subject to tax in other jurisdictions to which the
foreign limited partner is connected.
With respect to derivative transactions such as energy or interest rate
swaps or forwards, based on current law it is uncertain whether entering into
derivative transactions may cause the Fund, and therefore any foreign limited
partners, to be treated as engaged in a trade or business within the United
States. However, the Treasury has issued proposed regulations which, if
finalized in their current form, would provide that foreign limited partners
should not be deemed to be engaged in a United States trade or business solely
by virtue of an investment as a limited partner in the Fund even if the Fund
enters into derivative transactions. These regulations are proposed to be
effective for taxable years beginning 30 days after the date final regulations
are published in the Federal Register. The Fund may, however elect to apply the
final regulations retroactively once they are finalized.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS BEFORE
DECIDING WHETHER TO INVEST.
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 and
subject to 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
-39-
<PAGE> 48
provisions of ERISA and Section 4975 of the Code.
The Publicly-Offered Security Exception applies if the equity is a security
that is:
1) "freely transferable" (determined based on the applicable facts and
circumstances);
2) part of a class of securities that is "widely held" (meaning that the
class of securities is owned by 100 or more investors independent of the
issuer and of each other); and
3) either (a) part of a class of securities registered under Section 12(b)
or 12(g) of the Securities Exchange Act of 1934, or (b) sold to the Plan
as part of a public offering pursuant to an effective registration
statement under the Securities Act of 1933 and the class of which such
security is a part is registered under the Securities Exchange Act of
1934 within 120 days (or such later time as may be allowed by the SEC)
after the end of the fiscal year of the issuer in which the offering of
such security occurred.
It appears that all of the conditions described above 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 clearing broker, any over-the-counter counterparties,
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 over-the-counter
counterparties 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.
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. Escrow balances will be credited with
interest at approximately the U.S. Treasury Bill rate.
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.;
Merrill Lynch, Pierce, Fenner & Smith Incorporated; 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.
-40-
<PAGE> 49
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 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.
-41-
<PAGE> 50
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 investment 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 the 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 maximum compensation to be paid to underwriters and related persons
regardless of the source of payment, including but not limited to wholesaling
salaries, bonus or sales incentives, sales commissions, expense reimbursements,
and continuing compensation to non-duly registered selling agents will not
exceed 10% of the initial gross proceeds of such units' initial sales price,
plus an additional 0.5% for bona fide due diligence fees. 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,
including any expense reimbursements, is estimated at $5,000,000, or 2% of the
proceeds.
Certain of the offering expenses paid by Campbell & Company might be deemed
to constitute costs properly allocated to the accounts of the selling agents.
Such costs will, for example, cover the expenses of producing a selling
brochure, organizing seminars to promote the Fund 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.
-42-
<PAGE> 51
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."
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.
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.
EXPERTS
The financial statements of the Fund as of December 31, 1999 and 1998, and
for the years ended December 31, 1999, 1998 and 1997, and the balance sheet of
Campbell & Company as of December 31, 1999, included in this prospectus, have
been audited by Arthur F. Bell, Jr. & Associates, L.L.C., independent auditors,
as stated in their reports appearing herein. Such audited 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, 2000 and for the three
months and six months ended June 30, 2000 and 1999, and the balance sheet of
Campbell & Company as of June 30, 2000 are unaudited. In the opinion of Campbell
& Company, such unaudited statements reflect all adjustments which were of a
normal and recurring nature, necessary for a fair presentation of financial
position and results of operations.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
-43-
<PAGE> 52
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
June 30, 2000 (unaudited) and December 31, 1999
(audited)................................................. 45
STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months and Six Months Ended June 30, 2000
and 1999.................................................. 46
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, 2000 and 1999........... 47
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
(UNAUDITED)
For the Six Months Ended June 30, 2000 and 1999........... 48
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)................... 49
INDEPENDENT AUDITOR'S REPORT................................ 53
STATEMENTS OF FINANCIAL CONDITION
December 31, 1999 and 1998................................ 54
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999, 1998 and 1997...... 55
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998 and 1997...... 56
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Years Ended December 31, 1999, 1998 and 1997...... 57
NOTES TO FINANCIAL STATEMENTS............................... 58
CAMPBELL & COMPANY, INC.
BALANCE SHEET
June 30, 2000 (Unaudited)................................. 63
NOTES TO BALANCE SHEET (UNAUDITED).......................... 64
INDEPENDENT AUDITOR'S REPORT................................ 68
BALANCE SHEET
December 31, 1999......................................... 69
NOTES TO BALANCE SHEET...................................... 70
</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.
-44-
<PAGE> 53
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
June 30, 2000 (Unaudited) and December 31, 1999 (Audited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Equity in broker trading accounts
Cash $ 44,300,144 $ 54,186,103
United States government securities 288,916,174 256,915,665
Unrealized gain on open futures contracts 13,749,307 16,512,156
------------ ------------
Deposits with broker 346,965,625 327,613,924
Cash and cash equivalents 46,951,709 33,978,199
United States government securities 136,035,439 129,150,061
Unrealized gain on open forward contracts 3,313,400 6,098,317
------------ ------------
Total assets $533,266,173 $496,840,501
============ ============
LIABILITIES
Accounts payable $ 210,297 $ 260,063
Brokerage fee 3,331,463 3,118,646
Offering costs payable 279,294 259,595
Redemptions payable 5,357,240 9,074,798
Subscription deposits 50,008 107,295
------------ ------------
Total liabilities 9,228,302 12,820,397
------------ ------------
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner -- 3,201.572 and 2,904.862 units
outstanding at
June 30, 2000 and December 31, 1999 5,686,056 5,040,488
Limited Partners -- 291,861.436 and 276,039.045 units
outstanding at
June 30, 2000 and December 31, 1999 518,351,815 478,979,616
------------ ------------
Total partners' capital (Net Asset Value) 524,037,871 484,020,104
------------ ------------
$533,266,173 $496,840,501
============ ============
</TABLE>
See accompanying notes.
-45-
<PAGE> 54
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2000 and 1999 and
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME
Futures trading gains (losses)
Realized $ 1,624,718 $12,008,887 $14,159,540 $ 394,982
Change in unrealized 9,325,842 12,115,832 (2,762,849) 18,897,333
----------- ----------- ----------- -----------
Gain from futures trading 10,950,560 24,124,719 11,396,691 19,292,315
----------- ----------- ----------- -----------
Forward trading gains (losses)
Realized 1,211,951 9,139,049 11,016,924 4,283,050
Change in unrealized 2,601,314 (3,757,172) (2,784,917) (305,396)
----------- ----------- ----------- -----------
Gain from forward trading 3,813,265 5,381,877 8,232,007 3,977,654
----------- ----------- ----------- -----------
Interest income 7,165,839 4,240,493 13,655,611 8,007,742
----------- ----------- ----------- -----------
Total income 21,929,664 33,747,089 33,284,309 31,277,711
----------- ----------- ----------- -----------
EXPENSES
Brokerage fee 9,733,055 7,700,321 19,374,534 14,366,452
Performance fee 0 1,024,532 27,869 1,024,532
Operating expenses 288,134 147,484 523,520 321,580
----------- ----------- ----------- -----------
Total expenses 10,021,189 8,872,337 19,925,923 15,712,564
----------- ----------- ----------- -----------
NET INCOME $11,908,475 $24,874,752 $13,358,386 $15,565,147
=========== =========== =========== ===========
NET INCOME PER GENERAL
AND LIMITED PARTNER UNIT
(based on weighted average number of
units outstanding during the period) $ 41.30 $ 105.44 $ 46.98 $ 69.00
=========== =========== =========== ===========
INCREASE IN NET ASSET VALUE PER
GENERAL AND LIMITED PARTNER UNIT $ 37.98 $ 101.99 $ 40.83 $ 52.33
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
-46-
<PAGE> 55
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
2000 1999
------------ -------------
<S> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net income $ 13,358,386 $ 15,565,147
Adjustments to reconcile net income to net cash (for)
operating activities
Net change in unrealized 5,547,766 (18,591,937)
Increase (decrease) in accounts payable and accrued
expenses 163,051 (535,031)
Net (purchases) of investments in United States
government securities (38,885,887) (146,090,868)
------------ -------------
Net cash (for) operating activities (19,816,684) (149,652,689)
------------ -------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Addition of units 65,645,865 79,843,496
Increase (decrease) in subscription deposits (57,287) 158,913
Redemption of units (37,331,105) (13,916,758)
Increase (decrease) in redemptions payable (3,717,558) 1,085,123
Offering costs charged (1,655,379) (1,335,036)
Increase in offering costs payable 19,699 51,962
------------ -------------
Net cash from financing activities 22,904,235 65,887,700
------------ -------------
Net increase (decrease) in cash and cash equivalents 3,087,551 (83,764,989)
CASH AND CASH EQUIVALENTS
Beginning of period 88,164,302 133,709,716
------------ -------------
End of period $ 91,251,853 $ 49,944,727
============ =============
End of period cash and cash equivalents consists of:
Cash in broker trading accounts $ 44,300,144 $ 16,166,563
------------ -------------
Cash and cash equivalents 46,951,709 33,778,164
------------ -------------
Total end of period cash and cash equivalents $ 91,251,853 $ 49,944,727
============ =============
</TABLE>
See accompanying notes.
-47-
<PAGE> 56
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Six Months Ended June 30, 2000 and 1999
(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, 2000
Balances at December
31, 1999 2,904.862 $5,040,488 276,039.045 $478,979,616 278,943.907 $484,020,104
Net income for the
six months ended
June 30, 2000 133,646 13,224,740 13,358,386
Additions 296.710 530,000 37,032.442 65,115,865 37,329.152 65,645,865
Redemptions 0.000 0 (21,210.051) (37,331,105) (21,210.051) (37,331,105)
Offering costs (18,078) (1,637,301) (1,655,379)
--------- ---------- ----------- ------------ ----------- ------------
Balances at June 30,
2000 3,201.572 $5,686,056 291,861.436 $518,351,815 295,063.008 $524,037,871
========= ========== =========== ============ =========== ============
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 income 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
========= ========== =========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE PER GENERAL AND LIMITED PARTNER UNIT
---------------------------------------------------------------------
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2000 1999 1999 1998
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
$1,776.02 $1,735.19 $1,713.64 $1,661.31
========= ========= ========= =========
</TABLE>
See accompanying notes.
-48-
<PAGE> 57
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 Fund
Campbell Strategic Allocation Fund, L.P. (the Fund) is a Delaware
limited partnership which operates as a commodity investment pool. The
Fund engages in the speculative trading of futures contracts and forward
contracts.
B. Regulation
As a registrant with the Securities and Exchange Commission, the Fund is
subject to the regulatory requirements under the Securities Acts of 1933
and 1934. As a commodity investment pool, the Fund 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 Fund executes transactions.
Additionally, the Fund is subject to the requirements of futures
commission merchants (brokers) and interbank market makers through which
the Fund trades.
C. Method of Reporting
The Fund's financial statements are presented in accordance with
generally accepted accounting principles, which require the use of
certain estimates made by the Fund'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 at 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. Cash and Cash Equivalents
Cash and cash equivalents includes cash and short-term time deposits
held at financial institutions.
E. Income Taxes
The Fund prepares calendar year U.S. and state information tax returns
and reports to the partners their allocable shares of the Fund's income,
expenses and trading gains or losses.
F. Offering Costs
Campbell & Company, Inc. (Campbell & Company) has incurred total costs
in connection with the initial and continuous offering of units of the
Fund (offering costs) of $13,393,707 through June 30, 2000, $8,402,729
of which has already been reimbursed to Campbell & Company by the Fund.
At June 30, 2000, the Fund reflects a liability in the statement of
financial condition for offering costs payable to Campbell & Company of
$279,294. The Fund's liability for offering costs is limited to the
maximum of total offering costs incurred by Campbell & Company 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 Fund is only liable for payment of offering costs
on a monthly basis as calculated based on the limitations stated above.
If the
-49-
<PAGE> 58
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(Unaudited)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
(CONTINUED)
Fund terminates prior to completion of payment of the calculated amounts
to Campbell & Company, Campbell & Company will not be entitled to any
additional payments, and the Fund will have no further obligation to
Campbell & Company.
The amount of monthly reimbursement due to Campbell & Company is charged
directly to partners' capital.
G. Foreign Currency Transactions
The Fund'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 Fund is Campbell & Company, which conducts and
manages the business of the Fund. Campbell & Company is also the commodity
trading advisor of the Fund. The Amended Agreement of Limited Partnership
provides that Campbell & Company may make withdrawals of its units, provided
that such withdrawals do not reduce Campbell & Company's aggregate percentage
interest in the Fund to less than 1% of the net aggregate contributions.
Campbell & Company 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 Fund. 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 Fund pays a monthly brokerage fee equal to 1/12 of 7.7% (7.7%
annualized) of month-end net assets. Campbell & Company 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 Campbell & Company
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, 2000
and 1999, the amounts paid directly to the broker amounted to $1,761,321 and
$1,306,041, respectively. During the three months ended June 30, 2000 and 1999,
the amounts paid directly to the broker amounted to $884,823 and $700,029,
respectively.
Campbell & Company is also paid a quarterly performance fee of 20% of the
Fund's aggregate cumulative appreciation in the Net Asset Value per unit,
exclusive of appreciation attributable to interest income.
NOTE 3. DEPOSITS WITH BROKER
The Fund 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 Fund earns interest income on its assets deposited with the
broker.
-50-
<PAGE> 59
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(Unaudited)
NOTE 4. OPERATING EXPENSES
Operating expenses of the Fund are limited by the Amended Agreement of
Limited Partnership to 0.5% per year of the average month-end Net Asset Value of
the Fund. Actual operating expenses were less than 0.5% (annualized) of average
month-end Net Asset Value for the three months and six months ended June 30,
2000 and 1999.
NOTE 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Fund are made by subscription agreement, subject to
acceptance by Campbell & Company. As of June 30, 2000 and December 31, 1999,
amounts received by the Fund from prospective limited partners who have not yet
been admitted to the Fund by Campbell & Company total $50,008 and $107,295,
respectively.
The Fund is not required to make distributions, but may do so at the sole
discretion of Campbell & Company. 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 Fund 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 Fund is exposed to both market risk, the risk arising from
changes in the market value of the contracts, and credit risk, the risk of
failure by another party to perform according to the terms of a contract.
Purchase and sale of futures contracts requires margin deposits with the
broker. Additional deposits may be necessary for any loss on contract value. The
Commodity Exchange Act requires a broker to segregate all customer transactions
and assets from such 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, 2000
and December 31, 1999 was $424,951,613 and $386,065,726, respectively, which
equals 81% and 80% of Net Asset Value, respectively.
The Fund 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 Fund has a substantial portion of its assets on deposit with financial
institutions. In the event of a financial institution's insolvency, recovery of
Fund assets on deposit may be limited to account insurance or other protection
afforded such deposits.
-51-
<PAGE> 60
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(Unaudited)
NOTE 6. TRADING ACTIVITIES AND RELATED RISKS -- (CONTINUED)
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Fund 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 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, 2000 DECEMBER 31, 1999 JUNE 30, 2000 DECEMBER 31, 1999
------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
Gross unrealized gains $21,765,208 $16,698,403 $ 13,643,053 $ 7,528,691
Gross unrealized (losses) (8,015,901) (186,247) (10,329,653) (1,430,374)
----------- ----------- ------------ -----------
Net unrealized gain $13,749,307 $16,512,156 $ 3,313,400 $ 6,098,317
=========== =========== ============ ===========
</TABLE>
Open contracts generally mature within three months; as of June 30, 2000,
the latest maturity date for open futures contracts is March 2001, and the
latest maturity date for open forward contracts is September 2000. However, the
Fund intends to close all contracts prior to maturity.
Campbell & Company has established procedures to actively monitor market
risk and minimize credit risk, although there can be no assurance that they
will, in fact, succeed in doing so. Campbell & Company'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%. Campbell & Company seeks to minimize credit risk
primarily by depositing and maintaining the Fund's assets at financial
institutions and brokers which Campbell & Company 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, 2000, the statements of
operations for the three months and six months ended June 30, 2000 and 1999, and
the statements of cash flows and changes in partners capital (Net Asset Value)
for the six months ended June 30, 2000 and 1999 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, 2000, the results of operations for the three months and
six months ended June 30, 2000 and 1999, and cash flows for the six months ended
June 30, 2000 and 1999.
-52-
<PAGE> 61
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, 1999 and 1998, and
the related statements of operations, cash flows and changes in partners'
capital (net asset value) for the years ended December 31, 1999, 1998 and 1997.
These financial statements are the responsibility of the Fund'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, 1999 and 1998, and the results of its
operations, cash flows and the changes in its net asset values for the years
ended December 31, 1999, 1998 and 1997, in conformity with generally accepted
accounting principles.
/s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Hunt Valley, Maryland
January 24, 2000
-53-
<PAGE> 62
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Equity in broker trading accounts
Cash $ 54,186,103 $ 88,830,060
United States government securities 256,915,665 114,491,286
Unrealized gain on open futures contracts 16,512,156 3,917,717
------------ ------------
Deposits with broker 327,613,924 207,239,063
Cash and cash equivalents 33,978,199 44,879,656
United States government securities 129,150,061 99,677,514
Unrealized gain (loss) on open forward contracts 6,098,317 (1,005,425)
------------ ------------
Total assets $496,840,501 $350,790,808
============ ============
LIABILITIES
Accounts payable $ 260,063 $ 222,124
Brokerage fee 3,118,646 2,164,020
Performance fee 0 1,985,393
Offering costs payable 259,595 185,312
Redemptions payable 9,074,798 2,260,525
Subscription deposits 107,295 16,786
------------ ------------
Total liabilities 12,820,397 6,834,160
------------ ------------
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner -- 2,904.862 and 2,096.643 units
outstanding at December 31, 1999 and 1998 5,040,488 3,483,174
Limited Partners -- 276,039.045 and 204,942.359 units
outstanding at December 31, 1999 and 1998 478,979,616 340,473,474
------------ ------------
Total partners' capital (Net Asset Value) 484,020,104 343,956,648
------------ ------------
$496,840,501 $350,790,808
============ ============
</TABLE>
See accompanying notes.
-54-
<PAGE> 63
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
INCOME
Futures trading gains (losses)
Realized $15,028,356 $53,795,803 $16,927,642
Change in unrealized 12,594,439 (4,649,349) 8,262,159
----------- ----------- -----------
Gain from futures trading 27,622,795 49,146,454 25,189,801
----------- ----------- -----------
Forward trading gains (losses)
Realized 4,085,047 8,873,435 7,406,539
Change in unrealized 7,103,742 (2,333,555) (339,743)
----------- ----------- -----------
Gain from forward trading 11,188,789 6,539,880 7,066,796
----------- ----------- -----------
Interest income 18,786,307 12,823,294 7,977,840
----------- ----------- -----------
Total income 57,597,891 68,509,628 40,234,437
----------- ----------- -----------
EXPENSES
Brokerage fee 31,758,700 21,002,047 12,288,681
Performance fee 1,780,671 6,303,339 3,565,668
Operating expenses 752,312 509,686 368,925
----------- ----------- -----------
Total expenses 34,291,683 27,815,072 16,223,274
----------- ----------- -----------
NET INCOME $23,306,208 $40,694,556 $24,011,163
=========== =========== ===========
NET INCOME PER GENERAL AND LIMITED PARTNER UNIT
(based on weighted average number of units
outstanding during the year) $ 95.52 $ 232.33 $ 208.78
=========== =========== ===========
INCREASE IN NET ASSET VALUE PER GENERAL AND
LIMITED PARTNER UNIT $ 73.88 $ 211.67 $ 181.48
=========== =========== ===========
</TABLE>
See accompanying notes.
-55-
<PAGE> 64
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net income $ 23,306,208 $ 40,694,556 $ 24,011,163
Adjustments to reconcile net income to net
cash (for) operating activities
Net change in unrealized (19,698,181) 6,982,904 (7,922,416)
Increase (decrease) in accounts payable
and accrued expenses (992,828) 314,669 1,193,491
Net (purchases) of investments in United
States government and agency securities (171,896,926) (49,038,541) (118,621,145)
------------- ------------ -------------
Net cash (for) operating activities (169,281,727) (1,046,412) (101,338,907)
------------- ------------ -------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Addition of units 158,931,214 117,408,144 96,000,283
Increase (decrease) in subscription deposits 90,509 (868,319) 752,069
Redemption of units (39,327,023) (24,906,260) (13,866,080)
Increase (decrease) in redemptions payable 6,814,273 (368,639) 2,052,048
Offering costs charged (2,846,943) (1,949,511) (1,172,450)
Increase in offering costs payable 74,283 62,527 66,158
------------- ------------ -------------
Net cash from financing activities 123,736,313 89,377,942 83,832,028
------------- ------------ -------------
Net increase (decrease) in cash and cash
equivalents (45,545,414) 88,331,530 (17,506,879)
CASH AND CASH EQUIVALENTS
Beginning of year 133,709,716 45,378,186 62,885,065
------------- ------------ -------------
End of year $ 88,164,302 $133,709,716 $ 45,378,186
============= ============ =============
End of year cash and cash equivalents consists
of:
Cash in broker trading accounts $ 54,186,103 $ 88,830,060 $ 17,401,415
Cash and cash equivalents 33,978,199 44,879,656 27,976,771
------------- ------------ -------------
Total end of year cash and cash
equivalents $ 88,164,302 $133,709,716 $ 45,378,186
============= ============ =============
</TABLE>
See accompanying notes.
-56-
<PAGE> 65
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
PARTNERS' CAPITAL
--------------------------------------------------------------------------------
GENERAL LIMITED TOTAL
---------------------- -------------------------- --------------------------
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT
--------- ---------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
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
Net income for the year
ended December 31, 1999 236,380 23,069,828 23,306,208
Additions 808.219 1,350,000 94,344.964 157,581,214 95,153.183 158,931,214
Redemptions 0.000 0 (23,248.278) (39,327,023) (23,248.278) (39,327,023)
Offering costs (29,066) (2,817,877) (2,846,943)
--------- ---------- ----------- ------------ ----------- ------------
Balances at December 31,
1999 2,904.862 $5,040,488 276,039.045 $478,979,616 278,943.907 $484,020,104
========= ========== =========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE PER
GENERAL AND LIMITED PARTNER UNIT
---------------------------------------------------------
DECEMBER 31,
---------------------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
$1,735.19 $1,661.31 $1,449.64
========= ========= =========
</TABLE>
See accompanying notes.
-57-
<PAGE> 66
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Fund
Campbell Strategic Allocation Fund, L.P. (the Fund) is a Delaware
limited partnership which operates as a commodity investment pool. The
Fund engages in the speculative trading of futures contracts and forward
contracts.
B. Regulation
As a registrant with the Securities and Exchange Commission, the Fund is
subject to the regulatory requirements under the Securities Acts of 1933
and 1934. As a commodity investment pool, the Fund 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 Fund executes transactions.
Additionally, the Fund is subject to the requirements of futures
commission merchants (brokers) and interbank market makers through which
the Fund trades.
C. Method of Reporting
The Fund's financial statements are presented in accordance with
generally accepted accounting principles, which require the use of
certain estimates made by the Fund'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 at 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. Cash and Cash Equivalents
Cash and cash equivalents includes cash and short-term time deposits
held at financial institutions.
E. Income Taxes
The Fund prepares calendar year U.S. and state information tax returns
and reports to the partners their allocable shares of the Fund's income,
expenses and trading gains or losses.
F. Offering Costs
Campbell & Company, Inc. (Campbell & Company) has incurred total costs
in connection with the initial and continuous offering of units of the
Fund (offering costs) of $11,391,315 through December 31, 1999,
$6,767,049 of which has already been reimbursed to Campbell & Company by
the Fund. At December 31, 1999, the Fund reflects a liability in the
statement of financial condition for offering costs payable to Campbell
& Company of $259,595. The Fund's liability for offering costs is
limited to the maximum of total offering costs incurred by Campbell &
Company 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 Fund is only liable for payment of offering
costs on a monthly basis as calculated based on the limitations stated
above. If the Fund terminates prior to completion of payment of the
calculated amounts to
-58-
<PAGE> 67
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
(CONTINUED)
Campbell & Company, Campbell & Company will not be entitled to any
additional payments, and the Fund will have no further obligation to
Campbell & Company.
The amount of monthly reimbursement due to Campbell & Company is charged
directly to partners' capital.
G. Foreign Currency Transactions
The Fund'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 Fund is Campbell & Company, which conducts and
manages the business of the Fund. Campbell & Company is also the commodity
trading advisor of the Fund. The Amended Agreement of Limited Partnership
provides that Campbell & Company may make withdrawals of its units, provided
that such withdrawals do not reduce Campbell & Company's aggregate percentage
interest in the Fund to less than 1% of the net aggregate contributions.
Campbell & Company 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 Fund. 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 Fund pays a monthly brokerage fee equal
to 1/12 of 7.7% (7.7% annualized) of month-end net assets. Campbell & Company
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 Campbell & Company 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 1999, 1998
and 1997, the amounts paid directly to the broker amounted to $2,887,155,
$1,909,277 and $1,366,757, respectively.
Campbell & Company is also paid a quarterly performance fee of 20% of the
Fund's aggregate cumulative appreciation in the Net Asset Value per unit,
exclusive of appreciation attributable to interest income.
NOTE 3. DEPOSITS WITH BROKER
The Fund deposits assets with a broker subject to Commodity Futures Trading
Commission regulations and various exchange and broker requirements. Margin
requirements are satisfied by the deposit of U.S. Treasury bills and cash with
such broker. The Fund earns interest income on its assets deposited with the
broker.
-59-
<PAGE> 68
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. OPERATING EXPENSES
Operating expenses of the Fund are limited by the Amended Agreement of
Limited Partnership to 0.5% per year of the average month-end Net Asset Value of
the Fund. Actual operating expenses were less than 0.5% of average month-end Net
Asset Value for the years ended December 31, 1999, 1998 and 1997.
NOTE 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Fund are made by subscription agreement, subject to
acceptance by Campbell & Company. As of December 31, 1999 and 1998, amounts
received by the Fund from prospective limited partners who have not yet been
admitted to the Fund by Campbell & Company total $107,295 and $16,786,
respectively.
The Fund is not required to make distributions, but may do so at the sole
discretion of Campbell & Company. 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 Fund 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 Fund 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,
1999 and 1998 was $386,065,726 and $214,168,800, respectively, which equals 80%
and 62% of Net Asset Value, respectively.
The Fund 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 Fund has a substantial portion of its assets on deposit with financial
institutions. In the event of a financial institution's insolvency, recovery of
Fund assets on deposit may be limited to account insurance or other protection
afforded such deposits. In the normal course of business, the Fund requires
collateral for repurchase agreements.
-60-
<PAGE> 69
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 Fund 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
1999, 1998 and 1997, and the related fair values as of December 31, 1999 and
1998 are as follows:
<TABLE>
<CAPTION>
FAIR VALUE AS OF
AVERAGE FAIR VALUE DECEMBER 31,
------------------------------------- -------------------------
1999 1998 1997 1999 1998
----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Futures contracts $11,770,000 $9,660,000 $4,110,000 $16,512,000 $ 3,918,000
Forward contracts 2,030,000 3,490,000 70,000 6,098,000 (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)
DECEMBER 31, DECEMBER 31,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross unrealized gains $16,698,403 $ 6,289,815 $ 7,528,691 $ 7,377,712
Gross unrealized (losses) (186,247) (2,372,098) (1,430,374) (8,383,137)
----------- ----------- ----------- -----------
Net unrealized gain (loss) $16,512,156 $ 3,917,717 $ 6,098,317 $(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 from forward
trading. Such trading results reflect the net gain arising from the Fund's
speculative trading of futures and forward contracts.
Open contracts generally mature within three months; as of December 31,
1999, the latest maturity date for open futures contracts is September 2000, and
the latest maturity date for open forward contracts is March 2000. However, the
Fund intends to close all contracts prior to maturity. At December 31, 1999 and
1998, the notional amount of open contracts is as follows:
<TABLE>
<CAPTION>
1999 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 $219,100,000 $ 429,900,000 $ 460,500,000 $148,700,000
- Short-term interest rates 0 1,089,900,000 305,900,000 307,900,000
- Stock indices 140,100,000 0 67,900,000 11,200,000
- Agricultural 0 5,500,000 2,000,000 8,700,000
- Metals 48,800,000 3,900,000 6,500,000 47,500,000
- Energy 84,300,000 17,200,000 0 17,100,000
Forward contracts (non-exchange
traded):
- Currencies 366,000,000 588,600,000 435,100,000 386,200,000
------------ -------------- -------------- ------------
$858,300,000 $2,135,000,000 $1,277,900,000 $927,300,000
============ ============== ============== ============
</TABLE>
-61-
<PAGE> 70
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. TRADING ACTIVITIES AND RELATED RISKS -- (CONTINUED)
The above amounts do not represent the Fund's risk of loss due to market
and credit risk, but rather represent the Fund's extent of involvement in
derivatives at the date of the statement of financial condition.
Campbell & Company has established procedures to actively monitor market
risk and minimize credit risk, although there can be no assurance that they
will, in fact, succeed in doing so. Campbell & Company'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%. Campbell & Company seeks to minimize credit risk
primarily by depositing and maintaining the Fund's assets at financial
institutions and brokers which Campbell & Company 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.
-62-
<PAGE> 71
CAMPBELL & COMPANY, INC.
BALANCE SHEET
June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $ 7,408,207
Deposit with foreign exchange dealer 2,872,875
Accounts receivable
Advisory and performance fees 4,526,646
Receivable from Campbell Strategic Allocation Fund,
L.P. 2,009,924
Other receivables 211,291
-----------
Total current assets 17,028,943
-----------
Property and equipment
Furniture and office equipment 2,553,238
Leasehold improvements 208,137
-----------
2,761,375
Less accumulated depreciation and amortization (1,671,803)
-----------
Total property and equipment 1,089,572
-----------
Other assets
Cash surrender value of life insurance, net of policy
loans of $181,925 189,450
Investments in commodity pools 5,991,629
Other 6,896,266
-----------
Total assets $31,195,860
===========
LIABILITIES
Current liabilities
Accounts payable and accrued expenses $ 5,752,160
Subordinated debt 10,000,000
-----------
Total liabilities 15,752,160
-----------
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 15,386,532
-----------
Total stockholders' equity 15,443,700
-----------
Total liabilities and stockholders' equity $31,195,860
===========
</TABLE>
THE INVESTOR WILL NOT RECEIVE ANY INTEREST IN THIS COMPANY.
See accompanying notes.
-63-
<PAGE> 72
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET
(UNAUDITED)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General
Campbell and Company, Inc. (the Company) is incorporated in Maryland and
earns fees as a Commodity Trading Advisor registered with and subject to
the regulations of the Commodity Futures Trading Commission, an agency
of the United States (U.S.) government, which regulates most aspects of
the commodity futures industry. It is also subject to the rules of the
National Futures Association, an industry self-regulatory organization.
The Company's balance sheet is presented in accordance with generally
accepted accounting principles. The preparation of the balance sheet in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the balance sheet. Actual results could
differ from those estimates, and such differences may be material to the
balance sheet.
B. Cash and Cash Equivalents
Cash and cash equivalents consist of cash and money market investments
readily convertible into cash. The Company maintains its cash and cash
equivalents with primarily one financial institution. At times, the
balance on deposit may be in excess of available federal deposit
insurance.
C. Revenue Recognition
Advisory fees accrue monthly based on a percentage of assets under
management. Performance fees may be earned by achieving defined
performance objectives. Performance fees are accrued when the conditions
of the applicable performance fee agreements are satisfied.
D. Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
is provided for over the estimated useful lives of the assets using
straight-line and accelerated methods. Such lives range from 3 to 39
years.
E. Investments in Commodity Pools
Investments in commodity pools are carried at their reported net asset
values at the balance sheet date.
F. Income Taxes
The Company has elected S corporation status under the Internal Revenue
Code, pursuant to which the Company does not pay U.S. or Maryland income
taxes. The Company is subject to state income taxes in certain states in
which it conducts business and adequate provision for such is provided
for in the balance sheet. The Company's taxable income is taxable to the
stockholders on an individual basis.
NOTE 2. DEPOSITS WITH FOREIGN EXCHANGE DEALER
The Company deposits assets with a foreign exchange dealer. In the event of
the foreign exchange dealer's insolvency, recovery of the Company's assets on
deposit may be limited.
-64-
<PAGE> 73
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 3. INVESTMENTS IN COMMODITY POOLS
Investments in commodity pools consist of the following as of June 30,
2000:
<TABLE>
<S> <C>
Campbell Strategic Allocation Fund, L.P. $5,686,055
Campbell Financial Futures Fund Limited Partnership 276,746
The Campbell Fund Trust 28,828
----------
Total $5,991,629
==========
</TABLE>
In addition to its investments in these commodity pools, the Company has
general partner or managing operator responsibilities with regards to the
following:
Campbell Strategic Allocation Fund, L.P.
The Company is the general partner and trading advisor of Campbell
Strategic Allocation Fund, L.P. (Strategic). As general partner, the Company
receives from Strategic a monthly brokerage fee and quarterly performance fee.
Such fees represented approximately 35% of the Company's revenues for the six
months ended June 30, 2000. Included in advisory and performance fees receivable
at June 30, 2000, is approximately $1,297,972 due from Strategic for such fees.
Summarized financial information with respect to Strategic as of June 30,
2000, is as follows:
<TABLE>
<S> <C>
BALANCE SHEET DATA
Assets $533,266,173
Liabilities (9,228,302)
------------
Net Asset Value $524,037,871
============
</TABLE>
The Company has committed to maintaining an investment in Strategic equal
to at least 1% of the net aggregate capital contributions of all partners. The
Company, as general partner, has contributed capital of $4,547,000 as of June
30, 2000 to Strategic. The Company is further bound by Strategic's Amended
Agreement of Limited Partnership to maintain net worth equal to at least 5% of
the capital contributed to all the limited partnerships for which the Company
acts as general partner. The minimum net worth shall in no case be less than
$50,000 nor shall net worth in excess of $1,000,000 be required.
As general partner, the Company incurs costs in connection with Strategic's
initial and continuous offerings. The Company reflects a receivable of $279,294
as of June 30, 2000 from Strategic for offering costs due to be reimbursed. This
amount is included in Receivable from Campbell Strategic Allocation Fund, L.P.
in the balance sheet. The remaining unreimbursed offering costs of $4,711,684 as
of June 30, 2000 are included in Other assets in the balance sheet. This amount
is carried on the Company's books as an asset, because of the probable future
economic benefit to be obtained from the eventual receipt from Strategic of
these reimbursements, even though Strategic is not liable for this amount at the
current time. The Company recognizes the newly recalculated amount due from
Strategic each month as a receivable, which reduces the balance remaining as an
Other asset. The Company analyzes the value of the remaining Other asset on its
balance sheet on a quarterly basis to ensure that the carrying value is an
accurate estimate of what the Company can expect to receive over time.
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, 2000, $3,876,242 in selling agent commissions
is subject to future reimbursement, of which $1,730,630 is included in
Receivable from Campbell Strategic Allocation Fund, L.P. and $2,145,612 is
included in Other assets in the balance sheet.
-65-
<PAGE> 74
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 3. 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, 2000 totaled $12,200,850.
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, 2000 totaled $25,586,996.
NOTE 4. TRADING ACTIVITIES AND RELATED RISKS
The commodity pools for which the Company is either the sole general
partner, co-general partner or managing operator engage in the speculative
trading of U.S. and foreign futures contracts and forward contracts
(collectively, "derivatives"). These derivatives include both financial and
non-financial contracts held as part of a diversified trading program. The
commodity pools are exposed to both market risk, the risk arising from changes
in the market value of the contracts, and credit risk, the risk of failure by
another party to perform according to the terms of a contract.
Purchase and sale of futures contracts requires margin deposits with the
broker. Additional deposits may be necessary for any loss on contract value. The
Commodity Exchange Act requires a broker to segregate all customer transactions
and assets from such broker's proprietary activities. A customer's cash and
other property (for example, U.S. Treasury bills) deposited with a broker are
considered commingled with all other customer funds subject to the broker's
segregation requirements. In the event of a broker's insolvency, recovery may be
limited to a pro rata share of segregated funds available. It is possible that
the recovered amount could be less than total cash and other property deposited.
The commodity pools also trade forward contracts in unregulated markets between
principals and assume the risk of loss from counterparty nonperformance.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the commodity pools and the Company, as general
partner or managing operator, are exposed to a market risk equal to the value of
derivatives purchased and unlimited liability on derivatives sold short.
The Company has established procedures to actively monitor the market risk
and minimize the credit risk of such commodity pools.
NOTE 5. SUBORDINATED DEBT
The Company entered into a working capital agreement with the stockholders
of the Company in February, 1997. The agreement provides for the issuance of
unsecured notes to the Company which allows for their subordination to any
future borrowings of the Company. Interest on any notes issued in accordance
with the agreement is payable annually at a rate of 8.0%. Any unpaid principal
balance is due on the tenth anniversary date of the commencement date of each
note, or if sooner, five years after a stockholder (a noteholder) ceases to be
in the employ of the Company. At June 30, 2000, $10,000,000 was outstanding
under this agreement.
-66-
<PAGE> 75
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 6. LEASE OBLIGATION
The Company leases office facilities under an agreement which provides for
minimum base annual rentals plus a proportionate share of operating expenses.
The lease expires September 30, 2008. The Company has the option to renew the
lease for an additional 60 months. Minimum base annual rentals through the
original lease term are as follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31
--------------------
<S> <C>
2001 $ 340,783
2002 347,654
2003 354,566
2004 361,601
2005 368,801
Thereafter 1,249,580
----------
Total base annual rentals $3,022,985
==========
</TABLE>
NOTE 7. PROFIT SHARING PLAN
The Company has established a qualified 401(k) savings and profit sharing
plan (the Plan) for the benefit of its employees. The Company is the plan
administrator and certain Company employees are trustees of the Plan. Under
terms of the Plan, employees may elect to defer a portion of their compensation.
The Company matches employee contributions up to a maximum of 3.75% of the
employees' compensation. The Company may also make optional additional
contributions to the Plan.
-67-
<PAGE> 76
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
Campbell & Company, Inc.
We have audited the accompanying balance sheet of Campbell & Company, Inc.
as of December 31, 1999. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Campbell & Company, Inc. as of
December 31, 1999, in conformity with generally accepted accounting principles.
/S/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Hunt Valley, Maryland
February 29, 2000
-68-
<PAGE> 77
CAMPBELL & COMPANY, INC.
BALANCE SHEET
December 31, 1999
<TABLE>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $20,021,171
Accounts receivable
Advisory and performance fees 3,567,069
Receivable from Campbell Strategic
Allocation Fund, L.P. 1,879,671
Other receivables 203,012
-----------
Total current assets 25,670,923
-----------
Property and equipment
Furniture and office equipment 2,264,405
Leasehold improvements 134,363
-----------
2,398,768
Less accumulated depreciation and amortization (1,429,606)
-----------
Total property and equipment 969,162
-----------
Other assets
Cash surrender value of life insurance, net of policy
loans of $181,925 189,450
Investments in commodity pools 5,333,658
Other 7,483,469
-----------
Total assets $39,646,662
===========
LIABILITIES
Current liabilities
Accounts payable and accrued expenses $10,321,183
Subordinated debt 6,500,000
-----------
Total liabilities 16,821,183
-----------
STOCKHOLDERS' EQUITY
Capital stock
Class A voting, no par, $100 stated value; 2,500 shares
authorized; 105 shares issued and outstanding 10,500
Additional paid-in capital 46,668
Retained earnings 22,768,311
-----------
Total stockholders' equity 22,825,479
-----------
Total liabilities and stockholders' equity $39,646,662
===========
</TABLE>
THE INVESTOR WILL NOT RECEIVE ANY INTEREST IN THIS COMPANY
See accompanying notes.
-69-
<PAGE> 78
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General
Campbell and Company, Inc. (the Company) is incorporated in Maryland and
earns fees as a Commodity Trading Advisor registered with and subject to
the regulations of the Commodity Futures Trading Commission, an agency
of the United States (U.S.) government, which regulates most aspects of
the commodity futures industry. It is also subject to the rules of the
National Futures Association, an industry self-regulatory organization.
The Company's balance sheet is presented in accordance with generally
accepted accounting principles. The preparation of the balance sheet in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the balance sheet. Actual results could
differ from those estimates, and such differences may be material to the
balance sheet.
B. Cash and Cash Equivalents
Cash and cash equivalents consist of cash and money market investments
readily convertible into cash. The Company maintains its cash and cash
equivalents with primarily one financial institution. At times, the
balance on deposit may be in excess of available federal deposit
insurance.
C. Revenue Recognition
Advisory and management fees accrue monthly based on a percentage of
assets under management. Performance fees may be earned by achieving
defined performance objectives. Performance fees are accrued when the
conditions of the applicable performance fee agreements are satisfied.
D. Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
is provided for over the estimated useful lives of the assets using
straight-line and accelerated methods. Such lives range from 3 to 39
years.
E. Investments in Commodity Pools
Investments in commodity pools are carried at their reported net asset
values at the balance sheet date.
F. Income Taxes
The Company has elected S corporation status under the Internal Revenue
Code, pursuant to which the Company does not pay U.S. or Maryland income
taxes. The Company is subject to state income taxes in certain states in
which it conducts business and adequate provision for such is provided
for in the balance sheet. The Company's taxable income is taxable to the
stockholders on an individual basis.
-70-
<PAGE> 79
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 2. INVESTMENTS IN COMMODITY POOLS
Investments in commodity pools consist of the following as of December 31,
1999:
<TABLE>
<S> <C>
Campbell Strategic Allocation Fund, L.P. $5,040,488
Campbell Financial Futures Fund Limited Partnership 265,419
The Campbell Fund Trust 27,751
----------
Total $5,333,658
==========
</TABLE>
In addition to its investments in these commodity pools, the Company has
General Partner or Managing Operator responsibilities with regards to the
following:
Campbell Strategic Allocation Fund, L.P.
The Company is the General Partner and trading 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.
Such fees represented approximately 35% of the Company's revenues for the year
ended December 31, 1999. Included in advisory and performance fees receivable at
December 31, 1999, is approximately $1,215,000 due from Strategic for such fees.
Summarized financial information with respect to Strategic as of and for
the year ended December 31, 1999 is as follows:
<TABLE>
<S> <C>
BALANCE SHEET DATA
Assets $496,840,501
Liabilities (12,820,397)
------------
Net Asset Value $484,020,104
============
</TABLE>
The Company has committed to maintaining an investment in Strategic equal
to at least 1% of the net aggregate capital contributions of all partners. The
Company, as General Partner, has contributed capital of $4,017,000 as of
December 31, 1999 to Strategic. The Company is further bound by Strategic's
Amended Agreement of Limited Partnership to maintain net worth equal to at least
5% of the capital contributed by all the limited partnerships for which the
Company acts as General Partner. The minimum net worth shall in no case be less
than $50,000 nor shall net worth in excess of $1,000,000 be required.
As General Partner, the Company incurs costs in connection with Strategic's
initial and continuous offerings. The Company reflects a receivable of $259,595
as of December 31, 1999 from Strategic for offering costs due to be reimbursed.
This amount is included in Receivable from Campbell Strategic Allocation Fund,
L.P. in the balance sheet. The remaining unreimbursed offering costs of
$4,364,671 as of December 31, 1999 are included in Other assets in the balance
sheet. This amount is carried on the Company's books as an asset, because of the
probable future economic benefit to be obtained from the eventual receipt from
Strategic of these reimbursements, even though Strategic is not liable for this
amount at the current time. The Company recognizes the newly recalculated amount
due from Strategic each month as a receivable, which reduces the balance
remaining as an Other asset. The Company analyzes the value of the remaining
Other asset on its balance sheet on a quarterly basis to ensure that the
carrying value is an accurate estimate of what the Company can expect to receive
over time.
The Company also pays, up-front, a 4% commission to selling agents for
Strategic. The Company is then reimbursed by Strategic for this cost, over
twelve months, through a brokerage fee which is based on the monthly net asset
value of Strategic. As of December 31, 1999, $4,701,904 in selling agent
-71-
<PAGE> 80
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 2. INVESTMENTS IN COMMODITY POOLS -- (CONTINUED)
commissions is subject to future reimbursement, of which $1,620,076 is included
in Receivable from Campbell Strategic Allocation Fund, L.P. and $3,081,828 is
included in Other assets in the balance sheet.
In the event Strategic terminates prior to the completion of any
reimbursement of the aforementioned costs, the Company will not be entitled to
any additional reimbursement from Strategic.
Campbell Financial Futures Fund Limited Partnership
The Company also acts as Co-General Partner of Campbell Financial Futures
Fund Limited Partnership (Financial Futures). The Net Asset Value of Financial
Futures as of December 31, 1999 totaled $10,318,940.
The Campbell Fund Trust
The Company is the Managing Operator of The Campbell Fund Trust (the
Trust). The Trustee of the Trust has delegated to the Managing Operator all of
the power and authority to manage the business affairs of the Trust. The Net
Asset Value of the Trust as of December 31, 1999 and 1998 totaled $17,008,375.
NOTE 3. TRADING ACTIVITIES AND RELATED RISKS
The commodity pools for which the Company is either the sole General
Partner, Co-General Partner or Managing Operator engage in the speculative
trading of U.S. and foreign futures contracts and forward contracts
(collectively, "derivatives"). These derivatives include both financial and
non-financial contracts held as part of a diversified trading program. The
commodity pools are exposed to both market risk, the risk arising from changes
in the market value of the contracts, and credit risk, the risk of failure by
another party to perform according to the terms of a contract.
Purchase and sale of futures contracts requires margin deposits with the
broker. Additional deposits may be necessary for any loss on contract value. The
Commodity Exchange Act requires a broker to segregate all customer transactions
and assets from such broker's proprietary activities. A customer's cash and
other property (for example, U.S. Treasury bills) deposited with a broker are
considered commingled with all other customer funds subject to the broker's
segregation requirements. In the event of a broker's insolvency, recovery may be
limited to a pro rata share of segregated funds available. It is possible that
the recovered amount could be less than total cash and other property deposited.
The commodity pools also trade forward contracts in unregulated markets between
principals and assume the risk of loss from counterparty nonperformance.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the commodity pools and the Company, as General
Partner or Managing Operator, are exposed to a market risk equal to the value of
derivatives purchased and unlimited liability on derivatives sold short.
The Company has established procedures to actively monitor the market risk
and minimize the credit risk of such commodity pools.
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
-72-
<PAGE> 81
CAMPBELL & COMPANY, INC.
NOTES TO BALANCE SHEET -- (CONTINUED)
NOTE 4. SUBORDINATED DEBT -- (CONTINUED)
stockholder (a noteholder) ceases to be in the employ of the Company. At
December 31, 1999, $6,500,000 was outstanding under this agreement.
NOTE 5. LEASE OBLIGATION
The Company leases office facilities under an agreement which provides for
minimum base annual rentals plus a proportionate share of operating expenses.
The lease expires September 30, 2008. The Company has the option to renew the
lease for an additional 60 months. Minimum base annual rentals through the
original lease term are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
-----------------------
<S> <C>
2000 $ 327,718
2001 344,190
2002 351,097
2003 358,061
2004 365,187
Thereafter 1,434,918
----------
Total base annual rentals $3,181,171
==========
</TABLE>
NOTE 6. PROFIT SHARING PLAN
The Company has established a qualified 401(k) savings and profit sharing
plan (the Plan) for the benefit of its employees. The Company is the plan
administrator and certain Company employees are trustees of the Plan. Under
terms of the Plan, employees may elect to defer a portion of their compensation.
The Company matches employee contributions up to a maximum of 3.75% of the
employees' compensation. The Company may also make optional additional
contributions to the Plan.
NOTE 7. SUBSEQUENT EVENT
In February 2000, the Company made distributions to its stockholders
aggregating approximately $20,800,000. Additionally, the stockholders made
advances to the Company in accordance with the working capital agreement
aggregating approximately $8,500,000, to provide for additional working capital.
-73-
<PAGE> 82
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
$220,000,000
UNITS OF LIMITED PARTNERSHIP INTEREST
------------------------
THIS IS A SPECULATIVE, LEVERAGED INVESTMENT WHICH INVOLVES THE RISK OF LOSS.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
SEE "THE RISKS YOU FACE" BEGINNING AT PAGE 6 IN PART ONE.
THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE
DOCUMENT AND A STATEMENT OF ADDITIONAL
INFORMATION. THESE PARTS ARE BOUND
TOGETHER, AND BOTH CONTAIN
IMPORTANT INFORMATION.
CAMPBELL & COMPANY, INC.
General Partner
October 27, 2000
------------------------
<PAGE> 83
(This page has been left blank intentionally.)
<PAGE> 84
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
------------------------
<TABLE>
<S> <C>
THE FUTURES, FORWARD AND SWAP MARKETS....................... 1
HISTORICAL PERSPECTIVE OF MANAGED FUTURES................... 3
INVESTMENT FACTORS.......................................... 4
VALUE OF DIVERSIFICATION -- MANAGED FUTURES INDUSTRY........ 6
VALUE OF DIVERSIFICATION -- CAMPBELL STRATEGIC ALLOCATION
FUND, L.P. ............................................... 9
SUPPLEMENTAL PERFORMANCE INFORMATION........................ 15
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>
i
<PAGE> 85
(This page has been left blank intentionally.)
<PAGE> 86
THE FUTURES, FORWARD AND SWAP MARKETS
FUTURES CONTRACTS
Futures contracts are standardized agreements traded on commodity exchanges
that call for the future delivery of the commodity or financial instrument at a
specified time and place. A futures trader that enters into a contract to take
delivery of the underlying commodity is "long" the contract, or has "bought" the
contract. A trader that is obligated to make delivery is "short" the contract or
has "sold" the contract. Actual delivery on the contract rarely occurs. Futures
traders usually offset (liquidate) their contract obligations by entering into
equal but offsetting futures positions. For example, a trader who is long one
September Treasury bond contract on the Chicago Board of Trade can offset the
obligation by entering into a short position in a September Treasury bond
contract on that exchange. Futures positions that have not yet been liquidated
are known as "open" contracts or positions.
Futures contracts are traded on a wide variety of commodities, including
agricultural products, metals, livestock products, government securities,
currencies and stock market indices. Options on futures contracts are also
traded on U.S. commodity exchanges. The 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 or cash settlement through banks or dealers pursuant to forward or swap
contracts. Currencies also can be traded pursuant to futures contracts on
organized futures exchanges; however, Campbell & Company will use the dealer
market in foreign exchange contracts for most of the Fund's trading in
currencies. Such dealers will act as "principals" in these transactions and will
include their profit in the price quoted on the contracts. Unlike futures
contracts, foreign exchange contracts are not standardized. In addition, the
forward market is largely unregulated. Forward contracts are not "cleared" or
guaranteed by a third party. Thus, the Fund is subject to the creditworthiness
of ABN AMRO Bank, N.V., Chicago Branch, the foreign exchange dealer with whom it
maintains all assets and positions relating to the Fund's forward contract
investments. There also is no daily settlement of unrealized gains or losses on
open foreign exchange contracts as there is with futures contracts on U.S.
exchanges.
SWAP TRANSACTIONS
The Fund may periodically enter into transactions in the forward or other
markets which could be characterized as swap transactions and which may involve
interest rates, currencies, securities interests, commodities and other items. A
swap transaction is an individually negotiated, non-standardized agreement
between two parties to exchange cash flows measured by different interest rates,
exchange rates, or prices, with payments calculated by reference to a principal
("notional") amount or quantity. Transactions in these markets present risks
similar to those in the futures, forward and options markets:
(1) the swap markets are generally not regulated by any United States or
foreign governmental authorities;
(2) there are generally no limitations on daily price moves in swap
transactions;
(3) speculative position limits are not applicable to swap transactions,
although the counterparties with which the Fund may deal may limit the
size or duration of positions available as a consequence of credit
considerations;
(4) participants in the swap markets are not required to make continuous
markets in swaps contracts; and
(5) the swap markets are "principal markets," in which performance with
respect to a swap contract is the responsibility only of the
counterparty with which the trader has entered into a contract (or its
guarantor, if any), and not of any exchange or clearinghouse. As a
result, the Fund will be subject to the risk of the inability of or
refusal to perform with respect to such contracts on the part of the
counterparties with which the Fund trades.
The CFTC has adopted Part 35 to its Rules which provides non-exclusive safe
harbor treat-
1
<PAGE> 87
ment from regulations under the Commodity Exchange Act as amended for swap
transactions which meet specified criteria, over which the CFTC will not
exercise its jurisdiction and regulate as futures or commodity option
transactions. Notwithstanding the CFTC's position, the CFTC or a court could
conclude in the future that certain swap transactions entered into by the Fund
constitute unauthorized futures or commodity option contracts subject to the
CFTC's jurisdiction or attempt to prohibit the Fund from engaging in such
transactions. If the Fund were restricted in its ability to trade in the swap
markets, the activities of Campbell & Company, to the extent that it trades in
such markets on behalf of the Fund, might be materially affected.
REGULATION
The U.S. futures markets are regulated under the Commodity Exchange Act,
which is administered by the CFTC, a federal agency created in 1974. The CFTC
licenses and regulates commodity exchanges, commodity pool operators, commodity
trading advisors and clearing firms which are referred to in the futures
industry as "futures commission merchants." Campbell & Company is licensed by
the CFTC as a commodity pool operator and commodity trading advisor. Futures
professionals are also regulated by the NFA, a self-regulatory organization for
the futures industry that supervises the dealings between futures professionals
and their customers. If the pertinent CFTC licenses or NFA memberships were to
lapse, be suspended or be revoked, Campbell & Company would be unable to act as
the 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. Trading in
foreign currency futures contracts may be less liquid and the Fund's trading
results may be adversely affected.
MARGIN
The Fund will use margin in its trading. In order to establish and maintain
a futures position, a trader must make a type of good-faith deposit with its
broker, known as "margin," of approximately 2%-10% of contract value. Minimum
margins are established for each futures contract by the exchange on which the
contract is traded. The exchanges alter their margin requirements from time to
time, sometimes significantly. For their protection, clearing brokers may
require higher margins from their customers than the exchange minimums. Margin
also is deposited in connection with forward contracts but is not required by
any applicable regulation.
There are two types of margin. "Initial" margin is the amount a trader is
required to deposit with its broker to open a futures position. The other type
of margin is "maintenance" margin. When the contract value of a trader's futures
position falls below a certain percentage, typically about 75%, of its value
when the trader established the position, the trader is required to deposit
additional margin in an amount equal to the loss in value.
2
<PAGE> 88
HISTORICAL PERSPECTIVE OF MANAGED FUTURES
MANAGED FUTURES INDUSTRY VOLUME BY MARKET SECTOR
[1980 PIE CHART]
<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>
[1999 PIE CHART]
<TABLE>
<CAPTION>
INTEREST RATES OTHER ENERGY CURRENCIES AGRICULTURE STOCK INDICES METALS
-------------- ----- ------ ---------- ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
50.3% 0.30% 15.70% 5.00% 15.30% 9.80% 3.60%
</TABLE>
The managed futures industry market sector distributions presented above
include both speculative and hedging transactions, as well as options on
futures. The charts were prepared by Campbell & Company using data obtained from
the Futures Industry Association. The charts show the change in market
concentration from 1980 to 1999. In 1980, the agricultural sector dominated most
managed futures allocations. However, by 1999, the agricultural sector made up
only a 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 1999
[BAR CHART]
<TABLE>
<S> <C>
80 $ 0.3
81 $ 0.3
82 $ 0.5
83 $ 0.5
84 $ 0.7
85 $ 1.0
86 $ 1.4
87 $ 2.6
88 $ 4.3
89 $ 5.2
90 $ 8.5
91 $11.4
92 $19.0
93 $22.6
94 $19.1
95 $22.8
96 $28.8
97 $34.9
98 $43.9
99 $43.9
</TABLE>
The managed futures industry has grown dramatically during the last two
decades. The chart was prepared by Campbell & Company and shows the industry
growth since 1980 using data obtained from Managed Account Reports.
3
<PAGE> 89
INVESTMENT FACTORS
THE ADVANTAGES OF NON-CORRELATION AND DIVERSIFICATION OF YOUR PORTFOLIO
The Nobel Prize for Economics in 1990 was awarded to Dr. Harry Markowitz
for demonstrating that the total return can increase, and/or risk can be
reduced, when portfolios have positively performing asset categories that are
essentially non-correlated. Even many seemingly diverse portfolios may actually
be quite correlated. For instance, over time, alternative investment classes
such as real estate investment vehicles and international stocks and bonds may
correlate closely with domestic equities as the global economy expands and
contracts.
Historically, managed futures investments have had very little correlation
to the stock and bond markets. Campbell & Company believes that the performance
of the 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 factors that 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 rising and
falling cash 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, forward and swap markets and funds investing in those
markets offer many structural advantages that make managed futures an efficient
way to participate in global markets.
PROFIT POTENTIAL
Futures and related contracts can easily be leveraged, which magnifies the
potential profit and loss. As a result of this leveraging, even a small movement
in the price of a contract can cause major losses.
100% INTEREST CREDIT
Unlike some alternative investment funds, the 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 world. This diversification is
available both geographically and across market sectors. For example, an
investor can trade interest rates, stock indices and currencies in several
countries around the world, as well as energy and metals. While the 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
4
<PAGE> 90
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 will allocate the Fund's capital to
more than 50 markets around the world 24 hours a day. Among the factors
considered for determining the portfolio mix are market volatility,
liquidity and trending characteristics.
- Capital Management. When proprietary risk/reward indicators reach
predetermined levels, Campbell & Company may increase or decrease
commitments in certain markets in an attempt to reduce performance
volatility.
- Multiple Systems. While Campbell & Company's approach is to find
emerging trends and follow them to conclusion, no one system is right all
of the time. Campbell & Company utilizes a multi-system strategy on
behalf of the Fund that divides capital among different trading systems
in an attempt to reduce performance volatility.
Campbell & Company received advisory fees in exchange for these services.
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 sufficient liquidity. Some
markets trade 24 hours on business days. While there can be cases where there
may be no buyer or seller for a particular contract, the Fund tries to select
markets for investment based upon, among other things, their perceived
liquidity. Exchanges impose limits on the amount that a futures price can move
in one day. Situations in which markets have moved the limit for several days in
a row have not been common, but do occur. See "The Risks You Face -- Your
Investment Could be Illiquid."
Generally, investors may redeem all or a portion of their units on a
monthly basis, subject to a declining redemption fee during the first year. 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.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]
5
<PAGE> 91
VALUE OF DIVERSIFICATION -- MANAGED FUTURES INDUSTRY
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
HISTORICAL CORRELATION
The chart below shows the historical correlation of the monthly returns of
the NASDAQ Composite Index, EAFE Index, Lehman Brothers Government Bond Index
and MAR Fund/Pool Qualified Universe Index 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* -- AUGUST 2000
[BAR GRAPH]
<TABLE>
<S> <C>
S&P 500 Index 1.00
NASDAQ Composite Index 0.67
Europe, Australasia, Far East Index 0.63
Lehman Bros. Govt. Bond Index 0.14
MAR Fund/Pool Qualified Universe Index 0.02
</TABLE>
This chart was prepared by Campbell & Company. See the glossary following this
section for information integral to this chart.
* MAR data was not available prior to 1980.
6
<PAGE> 92
VALUE OF DIVERSIFICATION -- 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 profitable months. Downside
volatility shows the volatility of only the unprofitable 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 comparable 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.
STANDARD DEVIATION OF MONTHLY RETURNS
JANUARY 1980* -- AUGUST 2000
[BAR GRAPH]
<TABLE>
<CAPTION>
LEHMAN GOVT.
MAR BOND S&P 500 EAFE NASDAQ
--- ------------ ------- ---- ------
<S> <C> <C> <C> <C> <C>
Overall Volatility 4.56% 2.39% 4.33% 5.00% 6.17%
Upside Volatility 3.73% 1.65% 2.70% 3.17% 4.01%
Downside Volatility -2.43% -1.33% -3.16% -3.22% -4.28%
</TABLE>
This chart was prepared by Campbell & Company. See the glossary following this
section for information integral to this chart.
* MAR data was not available prior to 1980.
7
<PAGE> 93
VALUE OF DIVERSIFICATION -- 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, S&P 500 Index, EAFE Index
and NASDAQ Composite Index since 1980. The MAR Index experienced a smaller peak
to valley decline than three out of the remaining 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* -- AUGUST 2000
[BAR GRAPH]
<TABLE>
<S> <C>
Lehman Bros. Govt. Bond Index (3/87-9/87) 7 Months -14%
MAR Fund/Pool Qualified Universe Index (4/86-12/86) 9 Months -28%
S&P 500 Index (9/87-11/87) 3 Months -30%
Europe, Australasia, Far East Index (1/90-9/90) 9 Months -32%
NASDAQ Composite Index (9/87-11/87) 3 Months -33%
</TABLE>
This chart was prepared by Campbell & Company. See the glossary following this
section for information integral to this chart.
* MAR data was not available prior to 1980.
8
<PAGE> 94
VALUE OF DIVERSIFICATION -- CAMPBELL STRATEGIC ALLOCATION FUND
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE EFFECT OF INCREASING ALLOCATIONS OF MANAGED FUTURES IN A PORTFOLIO
The chart below shows the effect of allocating increasing percentages of
the Fund into a portfolio consisting of stocks and bonds. Beginning with a
portfolio made up of 40% bonds and 60% stocks, the Fund was added in 5%
increments while the bond allocation was decreased by the same percentage. As
the allocation of the Fund increased up to approximately 10%, returns increased
and standard deviation, one measure of risk, was reduced. If more than 10% of
the Fund was introduced, returns continued to increase, but risk increased as
well. The foregoing chart does not constitute 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 increase in return by additional allocations
to the Fund in excess of the 10% allocation allowed represent only incremental
improvements to the overall portfolio. Prospective investors must keep in mind
that the benefits illustrated by the foregoing chart are only evident during
periods in which managed futures (represented by the Fund) outperform stocks or
bonds. There can be no assurance that the Fund will outperform stocks or bonds
during any particular investment cycle.
EFFECT OF ADDING CAMPBELL STRATEGIC ALLOCATION FUND TO A HYPOTHETICAL PORTFOLIO
CONTAINING STOCKS AND BONDS
APRIL 1994 -- AUGUST 2000
[LINE GRAPH]
<TABLE>
<CAPTION>
ANNUALIZED
COMPOUNDED STANDARD
ANNUAL DEVIATION OF
CSAF/BONDS/STOCKS RETURNS MONTHLY RETURNS
----------------- ------ ---------------
<S> <C> <C>
0%/40%/60% 17.61% 9.34%
5%/35%/60% 17.69% 9.27%
10%/30%/60% 17.77% 9.26%
15%/25%/60% 17.83% 9.31%
20%/20%/60% 17.89% 9.41%
25%/15%/60% 17.95% 9.58%
30%/10%/60% 17.99% 9.79%
35%/5%/60% 18.04% 10.06%
40%/0%/60% 18.07% 10.38%
</TABLE>
This chart, prepared by Campbell & Company, contains historical trading results
hypothetically blended. The stocks are represented by the S&P 500 Index and
bonds are represented by the Lehman Brothers Government Bond Index. See the
glossary following this section for information integral to this chart.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF
WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL
OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND
THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL
TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR
EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING
PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY
AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE
MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING
RESULTS.
9
<PAGE> 95
VALUE OF DIVERSIFICATION -- CAMPBELL STRATEGIC ALLOCATION FUND -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
CORRELATION OF MONTHLY RETURNS
The more similarly two markets behave, the higher their correlation.
Generally, asset allocation models attempt to reduce volatility by combining
instruments that behave differently from one another. The first chart shows the
correlation between the S&P 500 Index and various stock, bond and managed
futures indices. 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. Managed futures have historically had a lower
correlation with the S&P 500 Index than the S&P 500 Index has had with other
stock and bond indices. This does not mean that the Fund is a hedge for a stock
portfolio, but merely that the returns of each may be somewhat independent of
the other.
HISTORICAL CORRELATION OF MONTHLY RETURNS WITH THE S&P 500 INDEX
APRIL 1994 -- AUGUST 2000
BAR GRAPH
<TABLE>
<S> <C>
S&P 500 Index 1.00
Dow Jones Industrial Average 0.91
NASDAQ Composite Index 0.67
Europe, Australasia, Far East Index 0.63
Lehman Bros. Govt. Bond Index 0.14
Campbell Strategic Allocation Fund 0.05
Barclay CTA Index 0.02
MAR Fund/Pool Qualified Universe Index 0.02
</TABLE>
HISTORICAL CORRELATION OF MONTHLY RETURNS WITH CAMPBELL STRATEGIC ALLOCATION
FUND
APRIL 1994 -- AUGUST 2000
BAR GRAPH
<TABLE>
<S> <C>
Campbell Strategic Allocation Fund 1.00
MAR Fund/Pool Qualified Universe Index 0.81
Barclay CTA Index 0.76
Lehman Bros. Govt. Bond Index 0.22
Europe, Australasia, Far East Index 0.10
Dow Jones Industrial Average 0.06
S&P 500 Index 0.05
NASDAQ Composite Index -0.03
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
10
<PAGE> 96
VALUE OF DIVERSIFICATION -- CAMPBELL STRATEGIC ALLOCATION FUND -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
CORRELATION ANALYSIS
These charts show that, historically, the Fund's returns are not negatively
correlated with stocks and bonds, but rather perform independently from stocks
and bonds. As displayed below, in a small percentage of time, the Fund and
stocks and bonds have experienced losses simultaneously. In a larger percentage
of time, the Fund has had positive returns during periods when stocks and bonds
were also experiencing positive performance. However, in over 40% of the 77
months represented in these charts, performance of the Fund and stocks and bonds
have moved in opposite directions.
CORRELATION ANALYSIS BETWEEN CAMPBELL STRATEGIC ALLOCATION FUND
AND S&P 500 INDEX
APRIL 1994 -- AUGUST 2000
[PIE CHART]
<TABLE>
<CAPTION>
BOTH POS BOTH NEG OPPOSITE
-------- -------- --------
<S> <C> <C>
44% 14.00% 42.00%
</TABLE>
CORRELATION ANALYSIS BETWEEN CAMPBELL STRATEGIC ALLOCATION FUND
AND LEHMAN BROTHERS GOVERNMENT BOND INDEX
APRIL 1994 -- AUGUST 2000
[PIE CHART]
<TABLE>
<S> <C>
Both Pos|36% 36%
Both Neg|20% 20%
Opposite|44% 44%
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
11
<PAGE> 97
VALUE OF DIVERSIFICATION -- CAMPBELL STRATEGIC ALLOCATION FUND -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
VOLATILITY COMPARISON (APRIL 1994 -- AUGUST 2000)
A common measure of risk is standard deviation, which measures the
variability of returns around the average return for that specific investment.
Generally the higher the standard deviation, the higher the volatility or risk.
A comparison of overall volatility (measured by standard deviation) of monthly
returns for the Fund, EAFE Index, S&P 500 Index and NASDAQ Composite Index is
shown in the first chart below. Notice that the volatility for the Fund has been
declining in recent years, while that of some of the equity indices has been
rising. During the last three years, the Fund has had lower volatility than
equity indices. Past performance is not necessarily indicative of future
results, and there is no guarantee that such low volatility will persist into
the future. Upside volatility measures the volatility of only the profitable
months. Downside volatility measures the volatility of only the unprofitable
months. Investors are typically more concerned with downside volatility, which
is perhaps a better historical indicator of the risk of actually losing money.
The second chart compares the upside volatility for the Fund, the EAFE Index,
the S&P 500 Index and the NASDAQ Composite Index. The third chart compares
downside volatility for the Fund and the same indices. Campbell & Company
believes that prospective investors should note that the Fund has had less
downside volatility, in most cases, when compared to equity indices. Once again,
there is no guarantee that this low volatility will persist into the future.
OVERALL VOLATILITY
[BAR CHART]
<TABLE>
<CAPTION>
CSAF EAFE S&P 500 NASDAQ
---- ---- ------- ------
<S> <C> <C> <C> <C>
since inception (4/94) 4.18% 3.94% 4.00% 7.28%
last 60 mos. 4.07% 4.09% 4.36% 8.05%
last 36 mos. 3.37% 4.66% 4.78% 9.50%
last 24 mos. 2.76% 4.35% 4.29% 9.93%
last 12 mos. 2.48% 4.43% 4.54% 11.52%
</TABLE>
UPSIDE VOLATILITY
[BAR CHART]
<TABLE>
<CAPTION>
CSAF EAFE S&P 500 NASDAQ
---- ---- ------- ------
<S> <C> <C> <C> <C>
since inception (4/94) 2.86% 2.30% 2.21% 5.30%
last 60 mos. 2.88% 2.36% 2.33% 5.58%
last 36 mos. 2.08% 2.53% 2.19% 6.22%
last 24 mos. 1.53% 2.61% 1.99% 6.28%
last 12 mos. 0.98% 2.51% 2.61% 6.65%
</TABLE>
DOWNSIDE VOLATILITY
[BAR CHART]
<TABLE>
<CAPTION>
CSAF EAFE S&P 500 NASDAQ
---- ---- ------- ------
<S> <C> <C> <C> <C>
since inception (4/94) -1.87% -2.66% -2.78% -4.73%
last 60 mos. -1.84% -2.90% -2.97% -4.98%
last 36 mos. -1.85% -3.20% -3.28% -5.55%
last 24 mos. -1.60% -1.73% -1.14% -4.55%
last 12 mos. -1.21% -1.33% -1.14% -4.94%
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
12
<PAGE> 98
VALUE OF DIVERSIFICATION -- CAMPBELL STRATEGIC ALLOCATION FUND -- (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 EAFE Index, S&P 500 Index, the NASDAQ Composite Index and the Fund since the
Fund's inception in 1994.
WORST-CASE DECLINES
APRIL 1994 -- AUGUST 2000
[BAR GRAPH]
<TABLE>
<S> <C>
Europe, Australasia, Far East Index (8/98-9/98) 2 Months -15%
S&P 500 Index (7/98-8/98) 2 Months -15%
Campbell Strategic Allocation Fund (7/94-1/95) 7 Months -18%
NASDAQ Composite Index (3/00-5/00) 3 Months -26%
</TABLE>
This chart was prepared by Campbell & Company. See the glossary following this
section for information integral to this chart.
13
<PAGE> 99
VALUE OF DIVERSIFICATION -- CAMPBELL STRATEGIC ALLOCATION FUND -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
THE CHANGING INVESTMENT LANDSCAPE
The table below charts the annual rates of returns for various indices or
asset categories and illustrates that all sectors behave differently from year
to year. An index or asset category that is ranked at the top one year may be
ranked toward the bottom in subsequent years. The Fund is intended to be a
medium- to long-term investment. No one can predict which sectors are likely to
outperform the others during any specific period in the future.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
1994* 1995 1996 1997
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DJIA 5.47% NAS 39.92% CSAF 30.46% S&P 33.37%
S&P 5.31% S&P 37.58% DJIA 26.01% DJIA 22.65%
EAFE 3.00% DJIA 33.44% S&P 22.97% NAS 21.64%
BAR 2.17% LBBI 30.73% NAS 22.70% LBBI 14.91%
NAS 1.15% BAR 13.66% MAR 11.89% CSAF 14.31%
MAR 0.97% CSAF 9.99% BAR 9.13% BAR 10.88%
LBBI -1.14% MAR 9.66% EAFE 4.38% MAR 9.49%
CSAF -11.62% EAFE 9.42% LBBI -0.76% EAFE 0.24%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1998 1999 2000**
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NAS 50.79% NAS 84.55% LBBI 13.31%
S&P 28.55% EAFE 25.26% NAS 3.36%
EAFE 18.24% DJIA 25.19% S&P 3.30%
DJIA 16.10% S&P 20.95% CSAF 3.06%
CSAF 14.60% CSAF 4.45% MAR -1.35%
LBBI 13.48% MAR 1.48% DJIA -2.45%
BAR 6.99% BAR -1.20% BAR -4.59%
MAR 6.80% LBBI -8.71% EAFE -14.72%
-----------------------------------------------------------------------------------------
</TABLE>
CSAF = Campbell Strategic Allocation Fund, L.P.
BAR = Barclay CTA Index
MAR = MAR Fund/Pool Qualified Universe Index
EAFE = Europe, Australasia, Far East Index
S&P = S&P 500 Composite Index
LBBI = Lehman Brothers Government Bond Index
NAS = NASDAQ Composite Index
DJIA = Dow Jones Industrial Average
* April -- December 1994
** January -- August 2000
This chart was prepared by Campbell & Company. See the glossary following this
section for information integral to this chart.
14
<PAGE> 100
SUPPLEMENTAL PERFORMANCE
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ANNUAL RETURNS AND WORST DECLINES EACH YEAR
These charts illustrate the actual annual return for the represented fund
or index and the worst-case decline experienced within each year.
CAMPBELL STRATEGIC ALLOCATION FUND
APRIL 1994 -- AUGUST 2000
<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 4.45% -5.02%
00 3.06% -5.01%
</TABLE>
NASDAQ COMPOSITE INDEX
APRIL 1994 -- AUGUST 2000
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
94 1.15% -5.05%
95 39.92% -0.72%
96 22.70% -13.10%
97 21.64% -11.46%
98 50.79% -20.87%
99 84.55% -8.69%
00 3.36% -26.34%
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
15
<PAGE> 101
SUPPLEMENTAL PERFORMANCE -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ANNUAL RETURNS AND WORST DECLINES EACH YEAR -- (CONTINUED)
These charts illustrate the actual annual return for each of the
represented indices and the worst-case decline experienced within each year.
S&P 500 INDEX
APRIL 1994 -- AUGUST 2000
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
94 5.31% -3.88%
95 37.58% -0.36%
96 22.97% -4.42%
97 33.37% -5.60%
98 28.55% -15.38%
99 20.95% -6.25%
00 3.30% -7.00%
</TABLE>
EUROPE, AUSTRALASIA, FAR EAST INDEX (EAFE)
APRIL 1994 -- AUGUST 2000
<TABLE>
<CAPTION>
ANNUAL RETURN WORST DECLINE
------------- -------------
<S> <C> <C>
94 3.00% -5.10%
95 9.42% -4.95%
96 4.38% -4.55%
97 0.24% -11.16%
98 18.24% -15.31%
99 25.26% -5.26%
00 -14.72% -15.37%
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
16
<PAGE> 102
SUPPLEMENTAL PERFORMANCE -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ANNUAL RETURNS
This chart shows the value of an initial $10,000 investment in the Fund
from inception through August 2000.
CAMPBELL STRATEGIC ALLOCATION FUND
VALUE OF INITIAL $10,000 INVESTMENT
APRIL 1994 -- AUGUST 2000
<TABLE>
<CAPTION>
INCEPTION 1994 INITIAL $10,000 INVESTMENT
-----------------------------------------
<S> <C>
94 $ 8838.00
95 $ 9721.00
96 $12682.00
97 $14497.00
98 $16613.00
99 $17352.00
00 $17883.00
</TABLE>
<TABLE>
<CAPTION>
RATE OF RETURN
(COMPUTED ON A COMPOUNDED MONTHLY BASIS)
MONTH 2000 YTD 1999 1998 1997 1996 1995 1994
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 3.53% -5.02% 2.74% 4.52% 5.79% -4.67%
February -0.60% 1.67% -2.81% 2.03% -5.97% 4.21%
March -2.67% 0.46% 4.68% -2.47% 4.72% 8.77%
April -1.81% 5.33% -6.69% -3.60% 3.59% 1.13% 0.16%
May 2.15% -3.69% 4.07% -2.92% -2.18% -0.84% -2.42%
June 1.87% 4.81% 1.29% 2.48% 0.75% -1.77% 5.15%
July -2.07% -0.32% -4.00% 9.12% -0.78% -3.82% -3.94%
August 2.82% 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 3.29% 0.30% 4.46% -4.41% 5.35% -4.98%
Total 3.06% 4.45% 14.60% 14.31% 30.46% 9.99% -11.62%
</TABLE>
<TABLE>
<CAPTION>
COMPOUND ANNUAL RATES OF RETURN
APRIL 1994 -- AUGUST 2000
<S> <C>
12-month 3.84%
24-month 6.84%
36-month 11.16%
Since Inception 9.48%
</TABLE>
<TABLE>
<CAPTION>
STATISTICS
4/94 - 8/00
-----------
<S> <C>
Compounded Monthly Annual Rate of
Return 9.48%
Average Monthly Rate of Return .84%
Standard Deviation of Monthly Returns 4.18%
Annualized Standard Deviation 14.47%
Sharpe Ratio .31
Average Monthly Gain 3.66%
Average Monthly Loss (3.12)%
Number of Profitable Months 45
Number of Unprofitable Months 32
Average Duration of Decline (Months) 1.84
Average Recovery Period 2.84
</TABLE>
These charts were prepared by Campbell & Company. See the glossary following
this section for information integral to these charts.
17
<PAGE> 103
SUPPLEMENTAL PERFORMANCE -- (CONTINUED)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
CONSISTENCY
This table shows the number of profitable and unprofitable periods during
the life of the Fund. The Fund is intended to be a medium- to long-term
investment.
<TABLE>
<CAPTION>
NUMBER OF NUMBER NUMBER PERCENTAGE
APRIL 1994 -- AUGUST 2000 TIME PERIODS PROFITABLE UNPROFITABLE PROFITABLE
------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Total Months* 77 45 32 58.44%
Total Years 6 5 1 83.33%
12-Month Rolling Windows 66 58 8 87.88%
24-Month Rolling Windows 54 54 0 100.00%
36-Month Rolling Windows 42 42 0 100.00%
60-Month Rolling Windows 18 18 0 100.00%
* The average rate of return for total profitable months is approximately +4%
The average rate of return for total unprofitable months is approximately -3%
</TABLE>
This chart was prepared by Campbell & Company. See the glossary following this
section for information integral to this chart.
18
<PAGE> 104
GLOSSARY OF TERMS
BONDS
LEHMAN BROTHERS GOVERNMENT BOND INDEX*
Composed of bonds that are investment grade (as rated by Moody's or
Standard & Poor's). Issues must have at least one year to maturity. Total return
comprises price appreciation/depreciation and income as a percentage of the
original investment. Indexes are rebalanced monthly by market capitalization.
MANAGED FUTURES
BARCLAY COMMODITY TRADING ADVISOR (CTA) INDEX
Measures the composite performance of established CTAs (those with four or
more years of documented performance history). Once a CTA passes this four-year
hurdle mark, its subsequent performance is included in this non-weighted index.
CAMPBELL STRATEGIC ALLOCATION FUND
The Fund, which began trading in April 1994, is an actively managed account
with speculative trading profits as its objective. Performance information for
the Fund is net of all fees and commissions.
MAR FUND/POOL QUALIFIED UNIVERSE INDEX
A dollar weighted index that includes the performance of current as well as
retired public futures funds, private pools and offshore funds that have the
objective of speculative trading profits. The MAR Index is utilized as a broad
measure of overall managed futures returns, as compared to other indices that
measure the overall returns of stocks and bonds as separate asset classes. The
MAR Index is not the same as an investment in the 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.
STOCKS
DOW JONES INDUSTRIAL AVERAGE*
A price weighted average of 30 stocks selected by Dow Jones & Company.
Because it is price weighted (as opposed to capitalization weighted) the stocks
in the Index with the highest prices have the biggest effect on the performance
of the Index.
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST INDEX (EAFE)*
A cap weighted index that is designed to measure the investment returns of
developed economies outside of North America. The Index includes publicly traded
stocks from 21 countries that are divided into industry groups and then
representative stocks are selected from each industry group. In addition,
cross-ownership is tracked to ensure that the market weight given each company
is accurate.
NASDAQ COMPOSITE INDEX*
Measures all NASDAQ domestic and non-U.S. based common stocks listed on the
NASDAQ Stock Market (currently over 5,000 companies). The Index is market-value
weighted. This means that each company's security affects the Index in
proportion to its market value. The market value, the last sale price multiplied
by total shares outstanding, is calculated throughout the trading day, and is
related to the total value of the Index.
STANDARD & POOR'S 500 COMPOSITE STOCK INDEX (S&P 500 INDEX)*
The 500 stocks in the S&P 500 are chosen by Standard and Poor's based on
industry representation, liquidity and stability. The stocks in the S&P 500 are
not the 500 largest companies, rather the Index is designed to capture the
returns of many different sectors of the U.S. economy.
---------------
* Passive, unmanaged indices of equity and debt securities generally purchased
by investors with an investment objective of capital preservation, growth or
income.
19
<PAGE> 105
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.
A-1
<PAGE> 106
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.
A-2
<PAGE> 107
(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
A-3
<PAGE> 108
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.
A-12
<PAGE> 117
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
A-13
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<PAGE> 119
EXHIBIT B
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
REQUEST FOR REDEMPTION
Please send original to: ---------------------------
Campbell & Company, Inc. Limited Partner Number
Court Towers Building
210 West Pennsylvania Avenue
Suite 770 ---------------------------
Towson, Maryland 21204 Social Security Numbers/
Taxpayer ID Number
Dear Sir/Madam:
The undersigned hereby requests redemption, as defined in and subject to all
the terms and conditions of the 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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<PAGE> 121
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 Fund ("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 October 27, 2000 (the "prospectus"). The minimum subscription
is $10,000; $5,000 for eligible employee benefit plans and individual retirement
accounts ($5,000 and $2,000, respectively, for registered representatives of
NASD registered broker-dealers); additional units may be purchased with a
minimum investment of $1,000. Subscriptions must be accompanied by a check in
the full amount of the subscription and made payable to "Campbell 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 clearing 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.
C-1
<PAGE> 122
(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.
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.
</TABLE>
C-2
<PAGE> 123
<TABLE>
<C> <S>
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>
C-3
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<PAGE> 125
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 Sir/Madam:
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 on the reverse side (minimum $10,000; $5,000 in the
case of trustees or custodians of employee benefit plans or individual
retirement accounts) of this Subscription Agreement and Power of Attorney
Signature Page, at net asset value per unit as set forth in the prospectus of
the Fund dated October 27, 2000 (the "prospectus"). The undersigned's check
payable to "Campbell Strategic Allocation Fund, L.P.," in the full amount of the
undersigned's subscription (additions, in excess of the required minimum
investment, may be made with a minimum investment of $1,000, as described in the
prospectus), accompanies the Subscription Agreement and Power of Attorney
Signature Page. If this subscription is rejected, or if no units are sold, all
funds remitted by the undersigned herewith will be returned, together with any
interest actually earned thereon. If this subscription is accepted, subscribers
will earn additional units in lieu of interest earned on the undersigned's
subscription while held in escrow. The General Partner, 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 Fund, 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
D-1
<PAGE> 126
REVISED 10/27/00
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 October 27, 2000. 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
# ______________ - ______________ - ______________ # ______________ - ______________ - ____________________
Taxable Investors (check one):
[ ] Individual Ownership [ ] Tenants in Common [ ] Estate [ ] UGMA/UTM
[ ] Partnership* [ ] Joint Tenants with Right of [ ] Grantor or Other Revocable Trust* (Minor)
[ ] Corporation* Survivorship [ ] Trust other than a Grantor or Revocable
[ ] Community Property Trust*
Non-Taxable Investors (check one):
[ ] IRA [ ] Profit Sharing* [ ] Pension* [ ] Other
[ ] IRA Rollover [ ] Defined Benefit* [ ] SEP (specify)
</TABLE>
(*APPROPRIATE AUTHORIZATION DOCUMENTS MUST ACCOMPANY SUBSCRIPTION, I.E., TRUSTS,
PENSION, CORPORATE DOCUMENTS)
--------------------------------------------------------------------------------
<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
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 October 27, 2000. 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> <C> <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>
D-2
