| TRADING ACTIVITIES AND RELATED RISKS | Note 10. TRADING ACTIVITIES AND RELATED RISKS The Trust engages in the speculative trading of U.S. and foreign futures contracts and forward currency contracts (collectively, "derivatives"). Specifically, the Trust trades a portfolio focused on financial futures, which are instruments designed to hedge changes in interest rates, currency exchange rates, stock index values, metals, energy and agriculture values. The Trust is exposed to both market risk, the risk arising from changes in the fair value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract. Market Risk For derivatives, risks arise from changes in the fair value of the contracts. Market movements result in frequent changes in the fair value of the Trust's open positions and, consequently, in its earnings and cash flow. The Trust'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 fair value of financial instruments and contracts, the diversification effects among the Trust's open positions and the liquidity of the markets in which it trades. Theoretically, the Trust is exposed to a market risk equal to the notional contract value of futures and forward currency contracts purchased and unlimited liability on such contracts sold short. See Note 1. C. for an explanation of how the Trust determines its valuation for derivatives as well as the netting of derivatives. The Trust adopted the provisions of ASC 815, Derivatives and Hedging, ("ASC 815"). ASC 815 provides enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments are accounted for, and how derivative instruments affect an entity's financial position, financial performance and cash flows. The following tables summarize quantitative information required by ASC 815. The fair value of the Trust's derivatives by instrument type, as well as the location of those instruments on the Statements of Financial Condition, as of June 30, 2015 and December 31, 2014 is as follows: Type of Instrument * Statements of Financial Condition Location Asset Derivatives at June 30, 2015 Fair Value Liability Derivatives at June 30, 2015 Fair Value Net Agriculture Contracts Net unrealized gain/loss on open futures contracts $ 4,038,134 $ (16,040,164 ) $ (12,002,030 ) Energy Contracts Net unrealized gain/loss on open futures contracts 240,059 (1,410,667 ) (1,170,608 ) Metal Contracts Net unrealized gain/loss on open futures contracts 14,413,446 (13,117,100 ) 1,296,346 Stock Indices Contracts Net unrealized gain/loss on open futures contracts 4,869,950 (9,510,734 ) (4,640,784 ) Short-Term Interest Rate Contracts Net unrealized gain/loss on open futures contracts 2,213,692 (518,506 ) 1,695,186 Long-Term Interest Rate Contracts Net unrealized gain/loss on open futures contracts 2,380,449 (5,708,451 ) (3,328,002 ) Forward Currency Contracts Net unrealized gain (loss) on open forward currency contracts 29,325,125 (39,098,483 ) (9,773,358 ) Totals $ 57,480,855 $ (85,404,105 ) $ (27,923,250 ) * Derivatives not designated as hedging instruments under ASC 815 Type of Instrument * Statements of Financial Condition Location Asset Derivatives at December 31, 2014 Fair Value Liability Derivatives at December 31, 2014 Fair Value Net Agriculture Contracts Net unrealized gain/loss on open futures contracts $ 2,437,817 $ (3,847,857 ) $ (1,410,040 ) Energy Contracts Net unrealized gain/loss on open futures contracts 4,487,874 (429,844 ) 4,058,030 Metal Contracts Net unrealized gain/loss on open futures contracts 4,750,075 (3,597,047 ) 1,153,028 Stock Indices Contracts Net unrealized gain/loss on open futures contracts 8,241,753 (6,968,720 ) 1,273,033 Short-Term Interest Rate Contracts Net unrealized gain/loss on open futures contracts 1,244,367 (508,131 ) 736,236 Long-Term Interest Rate Contracts Net unrealized gain/loss on open futures contracts 19,640,395 (223,190 ) 19,417,205 Forward Currency Contracts Net unrealized gain (loss) on open forward currency contracts 40,240,885 (25,603,265 ) 14,637,620 Totals $ 81,043,166 $ (41,178,054 ) $ 39,865,112 * Derivatives not designated as hedging instruments under ASC 815 The trading gains and losses of the Trust's derivatives by instrument type, as well as the location of those gains and losses on the Statements of Operations, for the periods ended June 30, 2015 and 2014 is as follows: Type of Instrument Trading Gains (Losses) for the Three Months Ended June 30, 2015 Trading Gains (Losses) for the Three Months Ended June 30, 2014 Agriculture Contracts $ (25,488,967 ) $ (2,157,719 ) Energy Contracts (24,273,764 ) (3,306,253 ) Metal Contracts (11,915,459 ) 1,541,064 Stock Indices Contracts (17,266,824 ) 18,439,489 Short-Term Interest Rate Contracts (541,943 ) (5,902,373 ) Long Term Interest Rate Contracts (38,559,267 ) 26,264,340 Forward Currency Contracts (14,247,407 ) (3,470,121 ) Total $ (132,293,631 ) $ 31,408,427 Type of Instrument Trading Gains (Losses) for the Six Months Ended June 30, 2015 Trading Gains (Losses) for the Six Months Ended June 30, 2014 Agriculture Contracts $ (20,189,072 ) $ (1,883,361 ) Energy Contracts (23,261,967 ) (17,136,078 ) Metal Contracts (14,957,583 ) (13,632,742 ) Stock Indices Contracts 5,141,005 (14,357,312 ) Short-Term Interest Rate Contracts (2,596,396 ) (8,153,339 ) Long Term Interest Rate Contracts (10,066,969 ) 30,067,400 Forward Currency Contracts 10,456,602 (15,050,807 ) Total $ (55,474,380 ) $ (40,146,239 ) Line Item in the Statement of Operations Trading Gains (Losses) for the Three Months Ended June 30, 2015 Trading Gains (Losses) for the Three Months Ended June 30, 2014 Futures trading gains (losses): Realized** $ (82,491,530 ) $ 27,241,848 Change in unrealized (35,554,694 ) 7,636,700 Forward currency trading gains (losses): Realized 15,213,709 (7,226,596 ) Change in unrealized (29,461,116 ) 3,756,475 Total $ (132,293,631 ) $ 31,408,427 Line Item in the Statement of Operations Trading Gains (Losses) for the Six Months Ended June 30, 2015 Trading Gains (Losses) for the Six Months Ended June 30, 2014 Futures trading gains (losses): Realized** $ (22,553,598 ) $ (21,692,838 ) Change in unrealized (43,377,384 ) (3,402,594 ) Forward currency trading gains (losses): Realized 34,867,580 (18,226,025 ) Change in unrealized (24,410,978 ) 3,175,218 Total $ (55,474,380 ) $ (40,146,239 ) ** Amounts differ from the amounts on the Statements of Operations as the amounts above do not include gains and losses on foreign currency cash balances at the futures broker. For the three months ended June 30, 2015 and 2014, the monthly average of futures contracts bought and sold was approximately 120,900 and 86,100, respectively, and the monthly average of notional value of forward currency contracts was $5,637,100,000 and $5,623,600,000, respectively For the six months ended June 30, 2015 and 2014, the monthly average of futures contracts bought and sold was approvimately 103,200 and 91,100, respectively, and the monthly average of notional value of forward currency contracts was $5,158,900,000 and $6,199,400,000, respectively. Open contracts generally mature within three months; as of June 30, 2015, the latest maturity date for open futures contracts is September 2016 and the latest maturity date for open forward currency contracts is September 2015. However, the Trust intends to close all futures and forward currency contracts prior to maturity. Credit Risk The Trust trades futures contracts on exchanges that require margin deposits with the futures broker. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a futures broker to segregate all customer transactions and assets from such futures broker's proprietary activities. A customer's cash and other property (for example, U.S. Treasury Bills) deposited with a futures broker are considered commingled with all other customer funds subject to the futures broker's segregation requirements. In the event of a futures 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 Trust trades forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty nonperformance. Accordingly, the risks associated with forward currency contracts are generally greater than those associated with exchange traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward currency contracts typically involves delayed cash settlement. Under the terms of the ISDA Agreement with RBS, upon the designation of an Event of Default, as defined in the ISDA Agreement, the non-defaulting party may set-off any sum or obligation owed by the defaulting party to the non-defaulting party against any sum or obligation owed by the non-defaulting party to the defaulting party. If any sum or obligation is unascertained, the non-defaulting party may in good faith estimate that sum or obligation and set-off in respect to that estimate, accounting to the other party when such sum or obligation is ascertained. Under the terms of each of the master netting agreement with UBS Securities and Goldman Sachs, upon occurrence of a default by the Trust, as defined in respective account documents, UBS Securities and Goldman Sachs have the right to close out any or all open contracts held in the Trust's account; sell any or all of the securities held; and borrow or buy any securities, contracts or other property for the Trust's account. The Trust would be liable for any deficiency in its account resulting from such transactions. The amount of required margin and good faith deposits with the futures broker and interbank market maker usually range from 10% to 30% of Net Asset Value. The fair value of securities held to satisfy such requirements at June 30, 2015 and December 31, 2014 was $200,748,456 and $145,098,244, respectively, which equals 22% and 19% of Net Asset Value, respectively. The cash deposited with the interbank market maker at June 30, 2015 and December 31, 2014 was $13,270,296 and $62,823, respectively, which equals 1% and 0% of Net Asset Value, respectively. These amounts are included in cash. Included in cash deposits with the broker and interbroker market maker at June 30, 2015 and December 31, 2014 was restricted cash for margin requirements of $32,798,642 and $7,319,383, respectively, which equals 4% and 1 % of Net Asset Value, respectively. Set forth below are tables which disclose both gross information and net information about instruments and transactions eligible for offset in the Statements of Financial Condition and instruments and transactions that are subject to an agreement similar to a master netting agreement as well as amounts related to financial collateral (including U.S. Treasury Bills and cash collateral) held at clearing brokers and counterparties. Margin reflected in the Collateral tables is limited to the net amount of unrealized loss at each counterparty. Actual margin amounts required at each counterparty are based on the notional amounts or the number of contracts outstanding and may exceed the margin presented in the Collateral tables. Offsetting of Derivative Assets As of June 30, 2015 Type of Instrument Counterparty Gross Amount of Recognized Assets Gross Amounts Offset in the Statements of Financial Condition Net Amount of Unrealized Gain Presented in the Statements of Financial Condition Futures contracts UBS Securities LLC $ 9,657,546 $ (9,657,546 ) $ 0 Futures contracts Goldman Sachs 18,498,184 (12,587,561 ) 5,910,623 Forward currency contracts Royal Bank of Scotland 29,325,125 (29,325,125 ) 0 Total derivatives $ 57,480,855 $ (51,570,232 ) $ 5,910,623 Derivatives Assets and Collateral Received by Counterparty As of June 30, 2015 Gross Amounts Not Offset in the Statements of Financial Condition Counterparty Net Amount of Unrealized Gain in the Statements of Financial Condition Financial Instruments Cash Collateral Received Net Amount UBS Securities LLC $ 0 $ 0 $ 0 $ 0 Goldman Sachs 5,910,623 0 0 5,910,623 Royal Bank of Scotland 0 0 0 0 Total $ 5,910,623 $ 0 $ 0 $ 5,910,623 Offsetting of Derivative Liabilities As of June 30, 2015 Type of Instrument Counterparty Gross Amount of Recognized Assets Gross Amounts Offset in the Statements of Financial Condition Net Amount of Unrealized Gain Presented in the Statements of Financial Condition Futures contracts UBS Securities LLC $ 33,718,061 $ (9,657,546 ) $ 24,060,515 Futures contracts Goldman Sachs 12,587,561 (12,587,561 ) 0 Forward currency contracts Royal Bank of Scotland 39,098,483 (29,325,125 ) 9,773,358 Total derivatives $ 85,404,105 $ (51,570,232 ) $ 33,833,873 Derivatives Liabilities and Collateral Pledged by Counterparty As of June 30, 2015 Gross Amounts Not Offset in the Statements of Financial Condition Counterparty Net Amount of Unrealized Loss in the Statements of Financial Condition Financial Instruments Cash Collateral Received Net Amount UBS Securities LLC $ 24,060,515 $ 0 $ (24,060,515 ) $ 0 Goldman Sachs 0 0 0 0 Royal Bank of Scotland 9,773,358 0 (9,773,358 ) 0 Total $ 33,833,873 $ 0 $ (33,833,873 ) $ 0 Offsetting of Derivative Assets As of December 31, 2014 Type of Instrument Counterparty Gross Amount of Recognized Assets Gross Amounts Offset in the Statements of Financial Condition Net Amount of Unrealized Gain Presented in the Statements of Financial Condition Futures contracts UBS Securities LLC $ 32,807,932 $ (7,988,622 ) $ 24,819,310 Futures contracts Goldman Sachs 7,994,349 (7,586,167 ) 408,182 Forward currency contracts Royal Bank of Scotland 40,240,885 (25,603,265 ) 14,637,620 Total derivatives $ 81,043,166 $ (41,178,054 ) $ 39,865,112 Derivatives Assets and Collateral Received by Counterparty As of December 31, 2014 Gross Amounts Not Offset in the Statements of Financial Condition Counterparty Net Amount of Unrealized Gain in the Statements of Financial Condition Financial Instruments Cash Collateral Received Net Amount UBS Securities LLC $ 24,819,310 $ 0 $ 0 $ 24,819,310 Goldman Sachs 408,182 0 0 408,182 Royal Bank of Scotland 14,637,620 0 0 14,637,620 Total $ 39,865,112 $ 0 $ 0 $ 39,865,112 Offsetting of Derivative Liabilities As of December 31, 2014 Type of Instrument Counterparty Gross Amount of Recognized Liabilities Gross Amounts Offset in the Statements of Financial Condition Net Amount of Unrealized Loss Presented in the Statements of Financial Condition Futures contracts UBS Securities LLC $ 7,988,622 $ (7,988,622 ) $ 0 Futures contracts Goldman Sachs 7,586,167 (7,586,167 ) 0 Forward currency contracts Royal Bank of Scotland 25,603,265 (25,603,265 ) 0 Total derivatives $ 41,178,054 $ (41,178,054 ) $ 0 Derivatives Liabilities and Collateral Pledged by Counterparty As of December 31, 2014 Gross Amounts Not Offset in the Statements of Financial Condition Counterparty Net Amount of Unrealized Loss in the Statements of Financial Condition Financial Instruments Cash Collateral Pledged Net Amount UBS Securities LLC $ 0 $ 0 $ 0 $ 0 Goldman Sachs 0 0 0 0 Royal Bank of Scotland 0 0 0 0 Total $ 0 $ 0 $ 0 $ 0 Campbell & Company has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it 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's attempt to manage the risk of the Trust'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 reducing position sizes dynamically in response to trading losses. Campbell & Company controls the risk of the Trust's non-trading fixed income instruments by limiting the duration of such instruments and requiring a minimum credit quality of the issuers of those instruments. Campbell & Company seeks to minimize credit risk primarily by depositing and maintaining the Trust's assets at financial institutions and brokers which Campbell & Company believes to be credit worthy. The unitholder bears 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. |
