UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________to______________
Commission File number: 0-22260
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
-------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 52-1823554
- ---------------------- ----------------------------------
(State of Organization) (IRS Employer Identification Number)
Court Towers Building
210 West Pennsylvania Avenue,
Baltimore, Maryland 21204
-------------------------
(Address of principal executive offices, including zip code)
(410) 296-3301
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2)
Yes [ ] No [X]
Total number of Pages: 29
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition as of September 30, 2004 (Unaudited)
and December 31, 2003 (Audited) 3
Condensed Schedule of Investments as of September 30, 2004 (Unaudited)
and December 31, 2003 (Audited) 4-5
Statements of Operations for the Three Months and Nine Months Ended
September 30, 2004 and 2003 (Unaudited) 6
Statements of Cash Flows for the Nine Months Ended
September 30, 2004 and 2003 (Unaudited) 7
Statements of Changes in Partners' Capital (Net Asset Value)
for the Nine Months Ended September 30, 2004 and 2003 (Unaudited) 8
Notes to Financial Statements (Unaudited) 9-14
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 15-21
Item 3. Quantitative and Qualitative Disclosure About Market Risk 21-27
Item 4. Controls and Procedures 27
PART II - OTHER INFORMATION 28
Item 6. Exhibits and Reports on Form 8-K 28
SIGNATURES
CERTIFICATIONS
-2-
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
September 30, 2004 (Unaudited) and December 31, 2003 (Audited)
September 30, December 31,
2004 2003
-------------- --------------
ASSETS
Equity in broker trading accounts
Cash $ 105,298,251 $ 189,245,425
United States government securities 1,747,814,905 1,024,483,288
Unrealized gain on open futures contracts 14,491,509 43,858,230
-------------- --------------
Deposits with broker 1,867,604,665 1,257,586,943
Cash and cash equivalents 363,907,035 627,405,479
United States government securities 1,399,454,262 899,206,764
Unrealized gain on open forward contracts 59,391,963 93,767,551
-------------- --------------
Total assets $3,690,357,925 $2,877,966,737
============== ==============
LIABILITIES
Accounts payable $ 671,178 $ 773,818
Brokerage fee 21,110,747 16,243,599
Commissions and other trading fees
on open contracts 602,111 373,638
Performance fee 0 16,492,232
Offering costs payable 2,118,671 1,387,938
Redemptions payable 18,285,610 14,594,887
Subscription deposits 450,010 0
-------------- --------------
Total liabilities 43,238,327 49,866,112
-------------- --------------
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner - 14,428.744 and 10,815.994 units
outstanding at September 30, 2004 and
December 31, 2003 37,146,801 28,460,882
Limited Partners - 1,402,205.131 and 1,063,947.539
units outstanding at September 30, 2004 and
December 31, 2003 3,609,972,797 2,799,639,743
-------------- --------------
Total partners' capital
(Net Asset Value) 3,647,119,598 2,828,100,625
-------------- --------------
$3,690,357,925 $2,877,966,737
============== ==============
See accompanying notes.
-3-
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
CONDENSED SCHEDULE OF INVESTMENTS
September 30, 2004
(Unaudited)
UNITED STATES GOVERNMENT SECURITIES
% OF NET
FACE VALUE MATURITY DATE DESCRIPTION VALUE ASSET VALUE
---------- ------------- ----------- ----- -----------
$1,700,000,000 10/06/04 U.S. Treasury Bills $1,699,702,003 46.60%
$ 450,000,000 10/14/04 U.S. Treasury Bills 449,795,997 12.33%
$ 400,000,000 12/16/04 U.S. Treasury Bills 398,640,445 10.93%
$ 200,000,000 10/28/04 U.S. Treasury Bills 199,791,500 5.48%
$ 200,000,000 11/04/04 U.S. Treasury Bills 199,729,889 5.48%
$ 200,000,000 11/18/04 U.S. Treasury Bills 199,609,333 5.47%
-------------- ----
TOTAL UNITED STATES GOVERNMENT SECURITIES
(COST, INCLUDING ACCRUED INTEREST, - $3,147,269,167) $3,147,269,167 86.29%
============== =====
LONG FUTURES CONTRACTS
% OF NET
DESCRIPTION VALUE ASSET VALUE
----------- ----- -----------
Energy $ 889,780 0.02 %
Metals 10,763,479 0.30 %
Stock index (8,353,489) (0.23)%
Short-term interest rates (729,198) (0.02)%
Long-term interest rates 27,849,942 0.76 %
------------ -----
TOTAL LONG FUTURES CONTRACTS $ 30,420,514 0.83 %
------------ -----
SHORT FUTURES CONTRACTS
% OF NET
DESCRIPTION VALUE ASSET VALUE
----------- ----- -----------
Energy $ (6,164,900) (0.17)%
Metals (8,870,173) (0.25)%
Stock index (839,162) (0.02)%
Short-term interest rates (54,770) (0.00)%
-------------- -----
TOTAL SHORT FUTURES CONTRACTS $ (15,929,005) (0.44)%
-------------- -----
TOTAL FUTURES CONTRACTS $ 14,491,509 0.39 %
============== =====
FORWARD CURRENCY CONTRACTS
% OF NET
DESCRIPTION VALUE ASSET VALUE
----------- ----- -----------
Various long forward currency contracts $ 174,614,445 4.79 %
Various short forward currency contracts (115,222,482) (3.16)%
-------------- ------
TOTAL FORWARD CURRENCY CONTRACTS $ 59,391,963 1.63 %
============== ======
See accompanying notes.
-4-
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
CONDENSED SCHEDULE OF INVESTMENTS
December 31, 2003
(Audited)
UNITED STATES GOVERNMENT SECURITIES
% OF NET
FACE VALUE MATURITY DATE DESCRIPTION VALUE ASSET VALUE
---------- ------------- ----------- ----- -----------
$1,050,000,000 1/08/04 U.S. Treasury Bills $1,049,820,260 37.12 %
$ 350,000,000 3/18/04 U.S. Treasury Bills 349,378,653 12.35 %
$ 200,000,000 1/29/04 U.S. Treasury Bills 199,860,000 7.07 %
$ 175,000,000 2/05/04 U.S. Treasury Bills 174,843,472 6.18 %
$ 150,000,000 2/26/04 U.S. Treasury Bills 149,787,667 5.30 %
-------------- -----
TOTAL UNITED STATES GOVERNMENT SECURITIES
(COST, INCLUDING ACCRUED INTEREST, - $1,923,690,052) $1,923,690,052 68.02 %
============== =====
LONG FUTURES CONTRACTS
% OF NET
DESCRIPTION VALUE ASSET VALUE
----------- ----- -----------
Energy $ 12,526,378 0.44 %
Metals 4,106,216 0.15 %
Stock index 34,144,656 1.21 %
Short-term interest rates 5,097,901 0.18 %
Long-term interest rates (8,943,827) (0.32)%
-------------- -----
TOTAL LONG FUTURES CONTRACTS $ 46,931,324 1.66 %
-------------- -----
SHORT FUTURES CONTRACTS
% OF NET
DESCRIPTION VALUE ASSET VALUE
----------- ----- -----------
Metals $ (354,021) (0.01)%
Short-term interest rates 183,300 0.00 %
Long-term interest rates (2,902,373) (0.10)%
-------------- -----
TOTAL SHORT FUTURES CONTRACTS $ (3,073,094) (0.11)%
-------------- -----
TOTAL FUTURES CONTRACTS $ 43,858,230 1.55 %
============== =====
FORWARD CURRENCY CONTRACTS
% OF NET
DESCRIPTION VALUE ASSET VALUE
----------- ----- -----------
Various long forward currency contracts $ 187,420,185 6.63 %
Various short forward currency contracts (93,652,634) (3.31)%
-------------- -----
TOTAL FORWARD CURRENCY CONTRACTS $ 93,767,551 3.32 %
============== =====
See accompanying notes.
-5-
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 2004 and 2003
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
------------- ------------ ------------- -------------
TRADING GAINS (LOSSES)
Futures trading gains (losses)
Realized $ (67,286,260) $(59,771,612) $ 183,216,522 $ 114,426,128
Change in unrealized 38,667,830 (34,945,149) (29,366,721) (82,276,261)
Brokerage commissions (1,643,945) (1,361,584) (4,928,906) (2,961,387)
------------- ------------ ------------- -------------
Gain (loss) from futures trading (30,262,375) (96,078,345) 148,920,895 29,188,480
------------- ------------ ------------- -------------
Forward and swap trading gains (losses)
Realized (164,500,572) (61,040,197) 25,221,010 173,975,041
Change in unrealized 112,072,767 94,186,903 (34,375,588) 88,210,528
Brokerage commissions (255,640) (219,624) (637,894) (809,495)
------------- ------------ ------------- -------------
Gain (loss) from forward and
swap trading (52,683,445) 32,927,082 (9,792,472) 261,376,074
------------- ------------ ------------- -------------
Total trading gains (losses) (82,945,820) (63,151,263) 139,128,423 290,564,554
------------- ------------ ------------- -------------
EXPENSES NET OF INTEREST INCOME
Income
Interest income 11,803,463 5,245,538 27,313,159 16,522,306
------------- ------------ ------------- -------------
Expenses
Brokerage fee 63,202,092 40,393,119 182,773,907 112,558,634
Performance fee 0 0 102,769,447 45,436,354
Operating expenses 736,120 587,069 2,079,829 1,786,038
------------- ------------ ------------- -------------
Total expenses 63,938,212 40,980,188 287,623,183 159,781,026
------------- ------------ ------------- -------------
Expenses net of interest income (52,134,749) (35,734,650) (260,310,024) (143,258,720)
------------- ------------ ------------- -------------
NET INCOME (LOSS) $(135,080,569) $(98,885,913) $(121,181,601) $ 147,305,834
============= ============ ============= =============
NET INCOME (LOSS) PER GENERAL
AND LIMITED PARTNER UNIT
(based on weighted average number of
units outstanding during the period) $ (98.46) $ (105.80) $ (96.52) $ 174.09
============= ============ ============= =============
INCREASE (DECREASE) IN NET
ASSET VALUE PER GENERAL
AND LIMITED PARTNER UNIT $ (102.60) $ (112.80) $ (56.87) $ 208.48
============= ============ ============= =============
See accompanying notes.
-6-
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2004 and 2003
(Unaudited)
2004 2003
--------------- -------------
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net income (loss) $ (121,181,601) $ 147,305,834
Adjustments to reconcile net income (loss) to net cash
(for) operating activities
Net change in unrealized 63,742,309 (5,934,267)
Increase (decrease) in accounts payable and
accrued expenses (11,499,251) 4,973,470
Net (purchases) of investments in United
States government securities (1,223,579,115) (646,036,884)
--------------- -------------
Net cash (for) operating activities (1,292,517,658) (499,691,847)
--------------- -------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Addition of units 1,120,275,862 767,570,216
Increase (decrease) in subscription deposits 450,010 (17,206,853)
Redemption of units (163,405,101) (104,290,738)
Increase in redemptions payable 3,690,723 644,910
Offering costs charged (16,670,187) (9,695,244)
Increase in offering costs payable 730,733 588,004
--------------- -------------
Net cash from financing activities 945,072,040 637,610,295
--------------- -------------
Net increase (decrease) in cash and cash equivalents (347,445,618) 137,918,448
CASH AND CASH EQUIVALENTS
Beginning of period 816,650,904 356,114,483
--------------- -------------
End of period $ 469,205,286 $ 494,032,931
=============== =============
End of period cash and cash equivalents consists of:
Cash in broker trading accounts $ 105,298,251 $ 107,424,008
Cash and cash equivalents 363,907,035 386,608,923
--------------- -------------
Total end of period cash and cash equivalents $ 469,205,286 $ 494,032,931
=============== =============
See accompanying notes.
-7-
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Nine Months Ended September 30, 2004 and 2003
(Unaudited)
Partners' Capital
------------------------------------------------------------------------------------------
General Limited Total
Units Amount Units Amount Units Amount
---------- ----------- ------------- -------------- ------------- --------------
NINE MONTHS ENDED SEPTEMBER 30, 2004
Balances at
December 31, 2003 10,815.994 $28,460,882 1,063,947.539 $2,799,639,743 1,074,763.533 $2,828,100,625
Net (loss) for the nine months
ended September 30, 2004 (1,258,890) (119,922,711) (121,181,601)
Additions 3,612.750 10,114,000 397,719.441 1,110,161,862 401,332.191 1,120,275,862
Redemptions 0.000 0 (59,461.849) (163,405,101) (59,461.849) (163,405,101)
Offering costs (169,191) (16,500,996) (16,670,187)
---------- ----------- ------------- -------------- ------------- --------------
Balances at
September 30, 2004 14,428.744 $37,146,801 1,402,205.131 $3,609,972,797 1,416,633.875 $3,647,119,598
========== =========== ============= ============== ============= ==============
NINE MONTHS ENDED SEPTEMBER 30, 2003
Balances at
December 31, 2002 7,262.904 $16,240,216 716,313.085 $1,601,708,976 723,575.989 $1,617,949,192
Net income for the nine months
ended September 30, 2003 1,477,899 145,827,935 147,305,834
Additions 2,732.542 6,813,502 304,805.148 760,756,714 307,537.690 767,570,216
Redemptions 0.000 0 (41,623.969) (104,290,738) (41,623.969) (104,290,738)
Offering costs (97,449) (9,597,795) (9,695,244)
---------- ----------- ------------- -------------- ------------- --------------
Balances at
September 30, 2003 9,995.446 $24,434,168 979,494.264 $2,394,405,092 989,489.710 $2,418,839,260
========= =========== =========== ============== ============= ==============
Net Asset Value Per General and Limited Partner Unit
---------------------------------------------------------------
September 30, December 31, September 30, December 31,
2004 2003 2003 2002
---- ---- ---- ----
$ 2,574.50 $2,631.37 $2,444.53 $2,236.05
========== ========= ========= =========
See accompanying notes.
-8-
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,
forward contracts and swap contracts.
B. Regulation
As a registrant with the Securities and Exchange Commission, the
Fund is subject to the regulatory requirements under the Securities
Act of 1933 and the Securities Exchange Act of 1934. As a commodity
investment pool, the 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 and other market makers
through which the Fund trades.
C. Method of Reporting
The Fund's financial statements are presented in accordance with
accounting principles generally accepted in the United States of
America, which require the use of certain estimates made by the
Fund's management. Investment 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 trade 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." The market value of futures (exchange-traded) contracts
is determined by the various futures exchanges, and reflects the
settlement price for each contract as of the close of the last
business day of the reporting period. The market value of swap and
forward (non-exchange traded) contracts is extrapolated on a forward
basis from the spot prices quoted as of 5:00 P.M. (E.T.) of the last
business day of the reporting period or based on the market value of
its exchange-traded equivalent. Any change in net unrealized gain or
loss from the preceding period is reported in the statement of
operations. Brokerage commissions include other trading fees and are
charged to expense when contracts are opened. 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.
-9-
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. Income Taxes
The Fund prepares calendar year U.S. and applicable 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 all costs
in connection with the initial and continuous offering of units of
the Fund (offering costs). 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. At September 30, 2004, the Fund
reflects a liability in the statement of financial condition for
offering costs payable to Campbell & Company of $2,118,671. The
amount of monthly reimbursement due to Campbell & Company is charged
directly to partners' capital.
If the 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. At September 30, 2004,
the amount of unreimbursed offering costs incurred by Campbell &
Company is $6,092,074.
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.
H. Reclassification
Certain amounts in the 2003 financial statements were reclassified
to conform with the 2004 presentation.
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.
-10-
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 2. GENERAL PARTNER AND COMMODITY TRADING ADVISOR (CONTINUED)
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%
annualized) of month-end net assets to Campbell & Company and
approximately $6 per round turn to the broker for execution and clearing
costs. From the 7% fee, a portion (4%) is used to compensate selling
agents for ongoing services rendered and a portion (3%) is retained by
Campbell & Company for trading and management services rendered. The
amount paid to the broker for execution and clearing costs is limited to
1/12 of 1% (1% annualized) of month-end net assets.
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.
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 nine months ended September 30, 2004 and 2003.
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Fund are made by subscription agreement, subject to
acceptance by Campbell & Company. As of September 30, 2004, amounts
received by the Fund from prospective limited partners who have not yet
been admitted to the Fund by Campbell & Company totaled $450,010. These
amounts were returned to prospective investors in October 2004.
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.
-11-
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 6. TRADING ACTIVITIES AND RELATED RISKS
The Fund engages in the speculative trading of U.S. and foreign futures
contracts, forward contracts and swap contracts (collectively,
"derivatives"). 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 and other market makers usually range from 10 to 30% of
Net Asset Value. The market value of securities held to satisfy such
requirements at September 30, 2004 and December 31, 2003 was
$3,147,269,167 and $1,923,690,052, respectively, which equals 86% and
68% of Net Asset Value, respectively. The cash deposited with interbank
and other market makers included in cash and cash equivalents at
September 30, 2004 and December 31, 2003 was $294,236,185 and
$535,480,647, respectively, which equals 8% and 19% of Net Asset Value,
respectively.
The Fund trades forward and swap contracts in unregulated markets
between principals and assumes the risk of loss from counterparty
nonperformance. Accordingly, the risks associated with forward and swap
contracts are generally greater than those associated with exchange
traded contracts because of the greater risk of counterparty default.
Additionally, the trading of forward and swap 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.
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 notional contract value of futures, forward and swap contracts
purchased and unlimited liability on such contracts sold short.
-12-
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
The unrealized gain (loss) on open futures, forward and swap contracts
is comprised of the following:
Futures Contracts Forward and Swap Contracts
(exchange traded) (non-exchange traded)
September 30, December 31, September 30, December 31,
2004 2003 2004 2003
------------ ------------ ------------- -------------
Gross unrealized gains $ 46,918,605 $ 59,494,849 $ 177,926,936 $ 200,933,202
Gross unrealized losses (32,427,096) (15,636,619) (118,534,973) (107,165,651)
------------ ------------ ------------- -------------
Net unrealized gain $ 14,491,509 $ 43,858,230 $ 59,391,963 $ 93,767,551
============ ============ ============= =============
Open contracts generally mature within three months; as of September 30,
2004, the latest maturity date for open futures contracts is June 2005,
and the latest maturity date for open forward and swap contracts is
December 2004. 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
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 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 September 30, 2004, including
the September 30, 2004 condensed schedule of investments, the statements
of operations for the three months and nine months ended September 30,
2004 and 2003, and the statements of cash flows and changes in partners'
capital (Net Asset Value) for the nine months ended September 30, 2004
and 2003 are unaudited. In the opinion of management, such financial
statements reflect all adjustments, which were of a normal and recurring
nature, necessary for a fair presentation of financial position as of
September 30, 2004, and the results of operations for the three months
and nine months ended September 30, 2004 and 2003, and cash flows for
the nine months ended September 30, 2004 and 2003.
-13-
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 8. FINANCIAL HIGHLIGHTS
The following information presents per unit operating performance data
and other supplemental financial data for the three months and nine
months ended September 30, 2004 and 2003. This information has been
derived from information presented in the financial statements.
Three months ended Nine months ended
September 30, September 30,
2004 2003 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
PER UNIT PERFORMANCE
(for a unit outstanding throughout the entire period)
Net asset value per unit at beginning of period $2,677.10 $2,557.33 $2,631.37 $2,236.05
--------- --------- --------- ---------
Income (loss) from operations:
Total trading gains (losses) (1) (59.97) (70.54) 163.74 389.24
Expenses net of interest income (1) (38.00) (38.23) (207.33) (169.30)
--------- --------- --------- ---------
Total income (loss) from operations (97.97) (108.77) (43.59) 219.94
--------- --------- --------- ---------
Offering costs (1) (4.63) (4.03) (13.28) (11.46)
--------- --------- --------- ---------
Net asset value per unit at end of period $2,574.50 $2,444.53 $2,574.50 $2,444.53
========= ========= ========= =========
TOTAL RETURN (3) (3.83)% (4.41)% (2.16)% 9.32%
========= ========= ========= =========
SUPPLEMENTAL DATA
Ratios to average net asset value:
Expenses prior to performance fee (4) (7.05)% (7.03)% (7.11)% (7.18)%
Performance fee (3) 0.00 % 0.00 % (2.96)% (2.14)%
--------- --------- --------- ---------
Total expenses (7.05)% (7.03)% (10.07)% (9.32)%
========= ========= ========= =========
Expenses net of interest income (2), (4) (5.75)% (6.13)% (6.06)% (6.14)%
========= ========= ========= =========
Total returns are calculated based on the change in value of a unit
during the period. An individual partner's total returns and ratios may
vary from the above total returns and ratios based on the timing of
additions and redemptions.
- ----------
(1) Expenses net of interest income per unit and offering costs per unit are
calculated by dividing the expenses net of interest income and offering
costs by the average number of units outstanding during the period.
Total trading gains (losses) is a balancing amount necessary to
reconcile the change in net asset value per unit with the other per unit
information.
(2) Excludes performance fees.
(3) Not annualized.
(4) Annualized.
-14-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
The offering of Campbell Strategic Allocation Fund L.P.'s (the "Fund") Units of
Limited Partnership Interest commenced on January 12, 1994, and the initial
offering period terminated, with the receipt of the required minimum aggregate
subscription amount, 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 $3,749,204,833 have
been accepted during the continuing offering period as of September 30, 2004.
Redemptions over the same time period total $637,158,811. The Fund commenced
operations on April 18, 1994.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 financial
statements and the reported amounts of income and expense during the reporting
period. Management believes that the estimates utilized in preparing the
financial statements are reasonable and prudent; however, actual results could
differ from those estimates. The Fund's significant accounting policies are
described in detail in Note 1 of the Financial Statements.
The Fund records all investments at fair value in its financial statements, with
changes in fair value reported as a component of realized and change in
unrealized trading gain (loss) in the Statements of Operations. Generally, fair
values are based on market prices; however, in certain circumstances, estimates
are involved in determining fair value in the absence of an active market
closing price (e.g. swap and forward contracts which are traded in the
inter-bank market).
Capital Resources
The Fund will raise additional capital only through the sale of Units offered
pursuant to the continuing offering, and does not intend to raise any capital
through borrowing. Due to the nature of the Fund's business, it will make no
capital expenditures and will have no capital assets, which are not operating
capital or assets.
Liquidity
Most United States commodity exchanges limit fluctuations in commodity futures
contracts prices during a single day by regulations referred to as "daily price
fluctuation limits" or "daily limits". During a single trading day, no trades
may be executed at prices beyond the daily limit. Once the price of a futures
contract has reached the daily limit for that day, positions in that contract
can neither be taken nor liquidated. Commodity futures prices have occasionally
moved 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
-15-
exceed the margin initially committed to such trades. In addition, even if
commodity futures prices have not moved the daily limit, the Fund may not be
able to execute futures trades at favorable prices, if little trading in such
contracts is taking place. Other than these limitations on liquidity, which are
inherent in the Fund's commodity futures trading operations, the Fund's assets
are expected to be highly liquid.
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 futures 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, forward and swap 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 required
margin for futures contracts and held by the futures broker, although the amount
committed may vary significantly. Such assets are maintained in the form of cash
or U.S. Treasury bills in segregated accounts with the futures 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 40% to 80% of the Fund's assets
will normally be invested in cash equivalents, such as U.S. Treasury bills, and
held by the futures broker or the over-the-counter counterparties.
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.
Results of Operations
The returns for the nine months ending September 30, 2004 and 2003 were (2.16)%
and 9.32%, respectively.
2004
For the 2004 year-to-date decrease of (2.16)%, approximately 5.99% was due to
trading gains (before commissions) and approximately 0.79% was due to interest
income, offset by approximately 8.94% due to brokerage fees, performance fees,
and operating and offering costs borne by the Fund. An analysis of the 5.99%
trading gains by sector is as follows:
-16-
SECTOR % GAIN (LOSS)
- ------ -------------
Interest Rates 8.13%
Energy 1.53
Currencies 0.90
Metals (0.30)
Stock Indices (4.27)
-----
5.99%
=====
The year began with the Fund posting a positive return in January despite
significant volatility throughout the month. The weak U.S. Dollar continued to
drive most global markets, including many that had no apparent or direct
connection to the Dollar, and in circumstances such as this, subtle shifts in
perception can have a disproportionate impact on prices. The Dollar traded lower
throughout the month, which was profitable for the Fund's currency positions.
Much of the gain reversed late in the month when markets reacted violently when
the Federal Open Market Committee (FOMC) slightly restated its short-term
interest rate bias. The interest rate sector was slightly positive despite also
having suffered a reversal of earlier gains following the FOMC announcement. The
stock index and metals sectors had small losses for the month.
The Fund had a strong positive return in February as the trends that were in
place at the end of January persisted. The continued concern over the record
U.S. budget deficit and current account imbalance kept downward pressure on the
U.S. Dollar and resulted in strong gains in the currency sector. The weak Dollar
in return reinforced several related trends, including the continued rise in
energy prices, resulting in positive returns in the energy sector. The interest
rates sector was also profitable for the month as European interest rate
instruments traded higher.
All of the gain for the month of March came from the interest rate sector as
U.S. Treasuries continued to trade higher, while a weakening U.S. Dollar also
contributed solid returns. The energy sector was moderately positive, while the
equity index sector was moderately negative.
In April, interest rates finally reversed course and started to head higher in
response to a perceived change in stance by the U.S. Federal Reserve. In the
days that followed, most major market trends also reversed. Fixed income
instruments sold off hard and the U.S. Dollar rallied, while precious and base
metals and many other physical commodities traded sharply lower. The equities
markets also fell. Only the continued rise in energy prices provided modest
gains for the Fund in April.
May was a difficult month for systematic trend following strategies and the Fund
finished the month with slightly negative performance. Crude oil set record high
prices during the month, which led to gains for the Fund in the energy sector.
Most fixed income and currency contracts experienced a classic whipsaw. They
began the month with the continuation of April's reversals, but ended the month
with a strong rally. Equity prices continued to weaken in the face of higher
energy prices and global political uncertainty, which led to losses in the stock
indices sector.
-17-
June was another month of choppy, range-bound trading, which resulted in
negative performance for the Fund in all sectors. The market impact of unfolding
events in Iraq had diminished greatly, and many traders were reluctant to take
positions ahead of the Federal Reserve Bank's June 30 interest rate
announcement. Absent any other significant news, the markets remained trendless
and did not provide the opportunities needed to produce positive returns.
July was a slightly negative month as most markets the Fund traded continued to
oscillate in relatively narrow ranges. Interest rate instruments traded lower
and then rallied on weaker than expected economic statistics, while equity
indices rallied and then declined amid broad earnings disappointments. The U.S.
dollar traded in a narrow range. The only sector to show any real life was the
energy sector, where in classic whipsaw fashion the Fund exited most of its long
positions just before crude oil prices rallied to all-time highs.
August performance was negative as most financial markets continued to be bound
by the ranges which had been in place previously. Fixed income instruments
rallied profitably during the month, but these gains were quickly offset by
losses in the currency sector as the U.S. Dollar strengthened. Small losses
resulted from stock index trading as a six-week downtrend reversed sharply,
mirroring the rise and fall of crude oil prices. The Fund's exposure to the
highly volatile energy sector was minor as a result of filters that kept the
Fund out of that sector.
The losses for the Fund continued in September as listless market conditions
persisted. While U.S. Dollar and interest rate instruments traded in narrow
ranges, the Fund managed small profits in these sectors. These gains were
largely offset by losses in the Fund's small positions in the volatile energy
sector. The largest losses for the month came from the equity index positions as
positive economic reports late in the month caused stocks to rally towards
90-day highs.
2003
The return for the nine months ending September 30, 2003 was 9.32%. Of the 9.32%
increase, approximately 16.69% was due to trading gains (before commissions) and
approximately 0.78% was due to interest income, offset by approximately 8.15%
due to brokerage fees, performance fees, operating cost and offering costs borne
by the Fund. An analysis of the 16.69% trading gains by sector is as follows:
SECTOR % GAIN (LOSS)
- ------ -------------
Currencies 13.52%
Energy 1.95
Stock Indices 1.73
Interest Rates 0.08
Metals (0.59)
-----
16.69%
=====
-18-
The long-term trends that created opportunity for the Fund in 2002 continued in
January 2003, in which profits were earned in every sector. However, the
environment was one where a single event, the prospect of war with Iraq, was
driving the Fund's whole portfolio. While the Fund's systematic and disciplined
trading strategies continued to keep it engaged, leverage was subsequently
decreased to protect against significant losses which could result from
potential sharp and extended reversals in core positions.
The Fund was positive again in February with metals being the only negative
sector. Strong momentum in energy, fixed income, currencies and stock indices
continued, largely as a result of the troubled global geopolitical outlook. In
order to mitigate the risk of potential sharp reversals in trends, the Fund
maintained a lower-than-normal level of leverage during the month.
The long awaited market reversal occurred in March. Initially, energy, precious
metals and fixed income markets all sold off sharply, while equities and the
U.S. Dollar rallied. Several days into this correction, these markets all sold
off suddenly, as hopes of a quick victory in Iraq subsided. With significantly
reduced leverage, the losses the Fund sustained were relatively modest, giving
the Fund a positive first quarter.
In April, the Fund's leverage was returned to a more normal level, but the
portfolio was not fully engaged in many markets due to the lack of strong
trends. Many markets had calmed significantly at this time, but uncertainty was
still prevalent in global markets due to the many unresolved geopolitical
issues. A strong performance in the currencies sector was partially offset by
negative performances in the metals and stock index sectors.
In May, the uncertainty that remained in April dominated the markets the Fund
trades and led to another positive month. While corporate earnings looked
stronger, unemployment, overcapacity and the ongoing threat of terrorism still
loomed large over the global financial markets. The US dollar weakened further
against the other major currencies despite the concern expressed by the United
States' trade partners over the impact this would have on global trade. Interest
rates were the best performing sector for the Fund particularly at the long end
of the yield curve, where higher prices reflected lower rates. Currency
contracts were also strongly positive, while losses in the energy and stock
index sectors offset some of those gains.
Even with a negative result for June, the Fund finished the first half of 2003
with a double-digit return. Long-term interest rates lost value as yield curves
steepened, particularly the Japanese government bond. Short-term interest rates
and stock index sectors contributed very modest gains for the month, while all
other sectors contributed losses. While the global economy was looking better
than it had for several years, many substantive uncertainties remained.
The Fund's performance for July was negative due to significant price reversals
in the Fund's largest positions. The U.S. Dollar's strong rally caused losses in
the Fund's currency and cross rate sectors. In addition, the sudden sharp
sell-off in long-term bonds resulted in losses in the Fund's long positions.
These losses were partially offset by gains in the Fund's long equity index
positions as investor confidence grew in the economic recovery and the potential
for improved growth.
-19-
The stock indices sector was the best performing sector for the month of August
as the U.S. equity markets posted their sixth straight month of gains. Much of
this was attributed to improving consumer confidence, federal tax cuts and
increased defense spending. The energy sector contributed positive returns as
crude oil remained above the thirty-dollar level on continuing supply concerns.
Also, the Fund's short positions in the Japanese Government Bond provided a
significant portion of the month's gains.
In September, the currency sector was the only significantly positive sector as
short U.S. Dollar positions benefited from continued weakness in the U.S.
Dollar. After showing positive returns for most of the month, sudden reversals
in the fixed income, equity and energy markets washed out the gains in the
currency sector and put the Fund's portfolio into negative territory late in the
month. The Fund finished the 3rd quarter with a negative return, but was
positive through September.
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
interests positions of the Fund at the same time, and if the Fund's trading
advisor was unable to offset futures interests positions of the Fund, the Fund
could lose all of its assets and the Limited Partners would realize a 100% loss.
Campbell & Company, Inc., the General Partner (who also acts as trading
advisor), minimizes market risk through real-time monitoring of open positions,
diversification of the portfolio and maintenance of a margin-to-equity ratio
that rarely exceeds 30%.
In addition to market risk, in entering into futures, 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 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 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 a 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.
-20-
DISCLOSURES ABOUT CERTAIN TRADING ACTIVITIES THAT INCLUDE NON-EXCHANGE TRADED
CONTRACTS ACCOUNTED FOR AT FAIR VALUE
The Fund invests in futures, swap and forward currency contracts. The market
value of futures (exchange-traded) contracts is determined by the various
futures exchanges, and reflects the settlement price for each contract as of the
close of the last business day of the reporting period. The market value of swap
and forward (non-exchange traded) contracts is extrapolated on a forward basis
from the spot prices quoted as of 5:00 P.M. (E.T.) of the last business day of
the reporting period or based on the market value of its exchange-traded
equivalent.
ITEM 3. 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 a
substantial amount 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"). Risk of ruin is defined
to be no more than a 5% chance of losing 20% or more on a monthly basis. 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.
-21-
Standard of Materiality
Materiality as used in this section, "Quantitative and Qualitative
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 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 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
-22-
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.
Value at Risk as calculated herein may not be comparable to similarly
titled measures used by others.
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 September 30, 2004 and
December 31, 2003 and the trading gains/losses by market category for the nine
months ended September 30, 2004 and the year ended December 31, 2003. All open
position trading risk exposures of the Fund have been included in calculating
the figures set forth below. As of September 30, 2004 and December 31, 2003, the
Fund's total capitalization was approximately $3.647 billion and $2.828 billion,
respectively.
SEPTEMBER 30, 2004
% OF TOTAL TRADING
MARKET SECTOR VALUE AT RISK CAPITALIZATION GAIN/(LOSS)*
- ------------- ------------- -------------- ------------
Currencies $121.42 million 3.33% 0.90 %
Interest Rates 105.36 million 2.89% 8.13 %
Stock Indices 76.99 million 2.11% (4.27)%
Metals 8.18 million 0.22% (0.30)%
Energy 5.39 million 0.15% 1.53 %
--------------- ---- -----
Total $317.34 million 8.70% 5.99 %
=============== ==== =====
* - Of the (2.16)% return for the nine months ended September 30, 2004,
approximately 5.99% was due to trading gains (before commissions) and
approximately 0.79% due to interest income, offset by approximately 8.94% due to
brokerage fees, performance fees and operating and offering costs borne by the
Fund.
-23-
DECEMBER 31, 2003
% OF TOTAL TRADING
MARKET SECTOR VALUE AT RISK CAPITALIZATION GAIN/(LOSS)*
- ------------- ------------- -------------- ------------
Currencies $123.33 million 4.36% 26.22 %
Interest Rates 91.50 million 3.23% (3.32)%
Stock Indices 83.05 million 2.94% 5.70 %
Energy 27.94 million 0.99% (0.80)%
Metals 0.73 million 0.03% (0.34)%
--------------- ----- -----
Total $326.55 million 11.55% 27.46%
=============== ===== =====
* - Of the 17.68% return for the year ended December 31, 2003, approximately
27.46% was due to trading gains (before commissions) and approximately 0.98% was
due to interest income, offset by approximately 10.76% due to brokerage fees,
performance fees and operating and offering costs borne by the Fund.
MATERIAL LIMITATIONS ON VALUE AT RISK AS AN ASSESSMENT OF MARKET RISK
The face value of the market sector instruments held by the Fund is
typically many times the applicable maintenance margin requirement (maintenance
margin requirements generally ranging between approximately 1% and 10% of
contract face value) as well as many times the capitalization of the Fund. The
magnitude of the Fund's open positions creates a "risk of ruin" not typically
found in most other investment vehicles. Because of the size of its positions,
certain market conditions -- unusual, but historically recurring from time to
time -- could cause the Fund to incur severe losses over a short period of time.
The foregoing Value at Risk 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 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 of 1933, as amended (the "Securities Act of 1933") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Securities
Exchange Act of 1934"). 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
-24-
market participants, increased regulation and many other factors could result in
material losses as well as in material changes to the risk exposures and the
risk management strategies of the Fund. There can be no assurance that the
Fund's current market exposure and/or risk management strategies will not change
materially or that any such strategies will be effective in either the short- or
long-term. Investors must be prepared to lose all or substantially all of their
investment in the Fund.
The following were the primary trading risk exposures of the Fund as of
September 30, 2004, by market sector.
Currencies
Exchange rate risk is a significant 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.
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. Additionally, the Fund takes
positions in the government debt of Switzerland and Australia. Campbell &
Company anticipates that these interest rates will remain a primary market
exposure of the Fund for the foreseeable future. A material change in long-term
or short-term interest rates could have a significant effect on the performance
of the Fund.
Stock Indices
The Fund's primary equity exposure is to equity price risk in the G-7
countries and several other countries (Hong Kong, Spain and Taiwan). The stock
index futures traded by the Fund are limited to futures on broadly based
indices. As of September 30, 2004, the Fund's primary exposures were in the S&P
500 (USA), Euro STOXX 50 (Europe), DAX (Germany), Hang Seng (Hong Kong) and FTSE
(UK), and Taiwan 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 and ongoing conflicts in
the Middle East. Oil and gas prices
-25-
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
copper, nickel and zinc. The risk allocation to the metal sector has not
exceeded 3% of the Fund's portfolio during the nine months ended September 30,
2004.
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE
The following were the only non-trading risk exposures of the Fund as of
September 30, 2004.
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 dollars (no less frequently than
twice a month, and more frequently if a particular foreign currency balance
becomes unusually large).
Treasury Bill Positions
The Fund's only market exposure in instruments held other than for trading
is in its Treasury Bill portfolio. The Fund holds Treasury Bills (interest
bearing and credit risk-free) with durations no longer than six months. Violent
fluctuations in prevailing interest rates could cause immaterial mark-to-market
losses on the Fund's Treasury Bills, although substantially all of these
short-term investments are held to maturity.
QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE
The means by which Campbell & Company attempts 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.
-26-
General
The Fund is unaware of any (i) anticipated known demands, commitments or
capital expenditures; (ii) material trends, favorable or unfavorable, in its
capital resources; or (iii) trends or uncertainties that will have a material
effect on operations. From time to time, certain regulatory agencies have
proposed increased margin requirements on futures contracts. Because the Fund
generally will use a small percentage of assets as margin, the Fund does not
believe that any increase in margin requirements, as proposed, will have a
material effect on the Fund's operations.
ITEM 4. CONTROLS AND PROCEDURES
Campbell & Company, Inc., the general partner of the Fund, with the
participation of the general partner's chief executive officer and chief
financial officer, has evaluated the effectiveness of the design and operation
of its disclosure controls and procedures (as defined in the Securities Exchange
Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Fund as of the end
of the period covered by this quarterly report. Based on their evaluation, the
chief executive officer and chief financial officer have concluded that these
disclosure controls and procedures are effective. There were no changes in the
general partner's internal control over financial reporting applicable to the
Fund identified in connection with the evaluation required by paragraph (d) of
Exchange Act Rules 13a-15 or 15d-15 that occurred during the last fiscal quarter
that have materially affected, or is reasonably likely to materially affect,
internal control over financial reporting applicable to the Fund.
-27-
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submissions of Matters to a vote of Security Holders.
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description of Document
31.01 Certification of Bruce L. Cleland, Chief
Executive Officer, pursuant to Rules 13a-14 and
15d-14 of the Securites Exchange Act of 1934.
31.02 Certification of Theresa D. Becks, Chief
Financial Officer, pursuant to Rules 13a-14 and
15d-14 of the Securites Exchange Act of 1934.
32.01 Certification of Bruce L. Cleland, Chief
Executive Officer, pursuant to 18 U.S.C. Section
1350, as enacted by Section 906 of The
Sarbanes-Oxley Act of 2002.
32.02 Certification of Theresa D. Becks, Chief
Financial Officer, pursuant to 18 U.S.C. Section
1350, as enacted by Section 906 of The
Sarbanes-Oxley Act of 2002.
(b) Reports of Form 8-K
None
-28-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 12th day of November 2004.
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
(Registrant)
By: Campbell & Company, Inc.
General Partner
By: /s/ Theresa D. Becks
--------------------------------------
Theresa D. Becks
Chief Financial Officer/Treasurer/Director
-29-
EXHIBIT INDEX
Exhibit Number Description of Document Page Number
- -------------- ----------------------- -----------
31.01 Certification by Chief Executive Officer E 2 - E 3
31.02 Certification by Chief Financial Officer E 4 - E 5
32.01 Certification by Chief Executive Officer E 6
32.02 Certification by Chief Financial Officer E 7
-E 1-