1
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, 1999
------------------------------------------------
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
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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) (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 [ ]
Total number of Pages: 18
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following unaudited financial statements of Campbell Strategic Allocation
Fund, L.P. are included in Item 1:
Statements of Financial Condition as of September 30, 1999 and
December 31, 1998
Statements of Operations for the Three Months and
Nine Months Ended September 30, 1999 and 1998
Statements of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998
Statements of Changes in Partners' Capital for the Nine Months Ended
September 30, 1999 and 1998
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3
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
September 30, 1999 (Unaudited) and December 31, 1998 (Audited)
September 30, December 31,
1999 1998
------------- -------------
ASSETS
Equity in broker trading accounts
Cash $ 30,881,723 $ 88,830,060
United States government securities 255,401,651 114,491,286
Unrealized gain on open futures contracts 14,276,778 3,917,717
------------- -------------
Deposits with broker 300,560,152 207,239,063
Cash 32,960,232 44,879,656
United States government securities 129,240,814 99,677,514
Unrealized gain (loss) on open forward contracts 8,728,133 (1,005,425)
------------- -------------
Total assets $ 471,489,331 $ 350,790,808
============= =============
LIABILITIES
Accounts payable $ 196,719 $ 222,124
Brokerage fee 2,930,127 2,164,020
Performance fee 756,138 1,985,393
Offering costs payable 244,374 185,312
Redemptions payable 3,010,170 2,260,525
Subscription deposits 411,798 16,786
------------- -------------
Total liabilities 7,549,326 6,834,160
------------- -------------
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner - 2,750.443 and 2,096.643 units
outstanding at September 30, 1999 and 4,801,173 3,483,174
December 31,1998
Limited Partners - 263,026.040 and 204,942.359 units
outstanding at September 30, 1999 and
December 31, 1998 459,138,832 340,473,474
------------- -------------
Total partners' capital
(Net Asset Value) 463,940,005 343,956,648
------------- -------------
$ 471,489,331 $ 350,790,808
============= =============
See accompanying notes.
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CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF OPERATIONS
For the Three Months and Nine Months
Ended September 30, 1999 and 1998
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
INCOME
Futures trading gains (losses)
Realized $ 15,133,172 $ 10,678,426 $ 15,528,154 $ 26,666,162
Change in unrealized (8,538,272) 25,809,659 10,359,061 22,434,743
------------ ------------ ------------ ------------
Gain from futures trading 6,594,900 36,488,085 25,887,215 49,100,905
Forward trading gains (losses)
Realized (3,374,275) (12,651,292) 908,774 (9,074,793)
Change in unrealized 10,038,953 2,611,978 9,733,558 (766,829)
------------ ------------ ------------ ------------
Gain (loss) from forward
trading 6,664,678 (10,039,314) 10,642,332 (9,841,622)
Interest income 5,133,358 3,538,612 13,141,100 9,590,250
------------ ------------ ------------ ------------
Total income 18,392,936 29,987,383 49,670,647 48,849,533
------------ ------------ ------------ ------------
EXPENSES
Brokerage fee 8,455,263 5,478,314 22,821,715 14,691,213
Performance fee 756,138 2,440,760 1,780,670 4,272,499
Operating expenses 203,172 123,473 524,752 363,623
------------ ------------ ------------ ------------
Total expenses 9,414,573 8,042,547 25,127,137 19,327,335
------------ ------------ ------------ ------------
NET INCOME $ 8,978,363 $ 21,944,836 $ 24,543,510 $ 29,522,198
============ ============ ============ ============
NET INCOME PER GENERAL
AND LIMITED PARTNER UNIT
(based on weighted average
number of units outstanding
during the period) $ 35.52 $ 119.62 $ 104.60 $ 175.03
============ ============ ============ ============
INCREASE IN NET ASSET
VALUE PER GENERAL
AND LIMITED PARTNER UNIT $ 31.96 $ 114.62 $ 84.29 $ 155.41
============ ============ ============ ============
See accompanying notes.
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CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
1999 1998
---- ----
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net income $ 24,543,510 $ 29,522,198
Adjustments to reconcile net income to net cash for
operating activities
Net change in unrealized (20,092,619) (21,667,914)
Increase (decrease) in accounts payable and accrued expenses (488,553) 479,910
Net purchases of investments in United States government
and agency securities (170,473,665) (57,999,125)
------------- -------------
Net cash for operating activities (166,511,327) (49,664,931)
------------- -------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Addition of units 120,616,846 79,121,049
Increase (decrease) in subscription deposits 395,012 (880,104)
Redemption of units (23,108,841) (16,737,755)
Increase in redemptions payable 749,645 652,971
Offering costs charged (2,068,158) (1,393,575)
Increase in offering costs payable 59,062 49,509
------------- -------------
Net cash from financing activities 96,643,566 60,812,095
------------- -------------
Net increase (decrease) in cash (69,867,761) 11,147,164
CASH
Beginning of period 133,709,716 45,378,186
------------- -------------
End of period $ 63,841,955 $ 56,525,350
============= =============
End of period cash consist of:
Cash in broker trading accounts 30,881,723 13,587,364
Cash 32,960,232 42,937,986
------------- -------------
Total end of period cash $ 63,841,955 $ 56,525,350
============= =============
See accompanying notes.
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CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
Partners' Capital
---------------------------------------------------------------------------------------------
General Limited Total
------------------------ --------------------------- --------------------------
Units Amount Units Amount Units Amount
----- ------ ----- ------ ----- ------
NINE MONTHS ENDED
SEPTEMBER 30, 1999
Balances at
December 31, 1998 2,096.643 $ 3,483,174 204,942.359 $ 340,473,474 207,039.002 $ 343,956,648
Additions 653.800 1,090,000 71,840.603 119,526,846 72,494.403 120,616,846
Net income for the nine months
ended September 30, 1999 249,008 24,294,502 24,543,510
Redemptions 0.000 0 (13,756.922) (23,108,841) (13,756.922) (23,108,841)
Offering costs (21,009) (2,047,149) (2,068,158)
--------- ------------- ----------- ------------- ----------- --------------
Balances at
September 30, 1999 2,750.443 $ 4,801,173 263,026.040 $ 459,138,832 265,776.483 $ 463,940,005
========= ============= =========== ============= =========== =============
NINE MONTHS ENDED
SEPTEMBER 30, 1998
Balances at
December 31, 1997 1,473.323 $ 2,135,788 145,259.520 $ 210,573,931 146,732.843 $ 212,709,719
Additions 503.205 750,000 52,812.331 78,371,049 53,315.536 79,121,049
Net income for the nine months
ended September 30, 1998 300,849 29,221,349 29,522,198
Redemptions 0.000 0 (11,131.620) (16,737,755) (11,131.620) (16,737,755)
Offering costs (14,211) (1,379,364) (1,393,575)
--------- ------------- ----------- ------------- ----------- --------------
Balances at
September 30, 1998 1,976.528 $ 3,172,426 186,940.231 $ 300,049,210 188,916.759 $ 303,221,636
========= ============= =========== ============= =========== =============
Net Asset Value Per Unit
----------------------------------------------------------------------------------
September 30, December 31, September 30, December 31,
1999 1998 1998 1997
------------ ------------ ------------ -------------
$ 1,745.60 $ 1,661.31 $ 1,605.05 $ 1,449.64
========== ========== ========== ==========
See accompanying notes.
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CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Partnership
Campbell Strategic Allocation Fund, L.P. (the
Partnership) is a Delaware limited partnership which
operates as a commodity investment pool. The
Partnership's objective is the appreciation of its
assets through speculative trading of futures contracts
and other financial instruments.
B. Regulation
As a registrant with the Securities and Exchange
Commission, the Partnership is subject to the regulatory
requirements under the Securities Act of 1933 and the
Securities Exchange Act of 1934. As a commodity
investment pool, the Partnership is subject to the
regulations of the Commodity Futures Trading Commission,
an agency of the United States (U.S.) government which
regulates most aspects of the commodity futures
industry; rules of the National Futures Association, an
industry self-regulatory organization; and the
requirements of the various commodity exchanges where
the Partnership executes transactions. Additionally, the
Partnership is subject to the requirements of Futures
Commission Merchants (brokers) and interbank market
makers through which the Partnership trades.
C. Method of Reporting
The Partnership's financial statements are presented in
accordance with generally accepted accounting
principles, which require the use of certain estimates
made by the Partnership's management. Transactions are
accounted for on the trade date. Gains or losses are
realized when contracts are liquidated. Unrealized gains
and losses on open contracts (the difference between
contract purchase price and market price) are reported
in the statement of financial condition as a net gain or
loss, as there exists a right of offset of unrealized
gains or losses in accordance with Financial Accounting
Standards Board Interpretation No. 39 - "Offsetting of
Amounts Related to Certain Contracts." Any change in net
unrealized gain or loss from the preceding period is
reported in the statement of operations. United States
government securities are stated cost plus accrued
interest which approximate market value.
For purposes of both financial reporting and calculation
of redemption value, Net Asset Value per Unit is
calculated by dividing Net Asset Value by the number of
outstanding Units.
D. Income Taxes
The Partnership prepares calendar year U.S. and state
information tax returns and reports to the partners
their allocable shares of the Partnership's income,
expenses and trading gains or losses.
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CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
E. Offering Costs
The General Partner has incurred total costs in
connection with the initial and continuous offering of
Units of the Partnership (offering costs) of $10,276,575
through September 30, 1999, $6,003,485 of which has
already been reimbursed to the General Partner by the
Partnership. At September 30, 1999, the Partnership
reflects a liability in the statement of financial
condition for offering costs payable to the General
Partner of $244,374. The Partnership's liability for
offering costs is limited to the maximum of total
offering costs incurred by the General Partner or 2.5%
of the aggregate subscriptions accepted during the
initial and continuous offerings; this maximum is
further limited by 30 month pay-out schedules. The
Partnership is only liable for payment of offering costs
on a monthly basis as calculated based on the
limitations stated above. If the Partnership terminates
prior to completion of payment of the calculated amounts
to the General Partner, the General Partner will not be
entitled to any additional payments, and the Partnership
will have no further obligation to the General Partner.
The amount of monthly reimbursement due to the General
Partner is charged directly to partners' capital.
F. Foreign Currency Transactions
The Partnership's functional currency is the U.S.
dollar; however, it transacts business in currencies
other than the U.S. dollar. Assets and liabilities
denominated in currencies other than the U.S. dollar are
translated into U.S. dollars at the rates in effect at
the date of the statement of financial condition. Income
and expense items denominated in currencies other than
the U.S. dollar are translated into U.S. dollars at the
rates in effect during the period. Gains and losses
resulting from the translation to U.S. dollars are
reported in income currently.
Note 2. GENERAL PARTNER AND COMMODITY TRADING ADVISOR
The General Partner of the Partnership is Campbell & Company,
Inc., which conducts and manages the business of the Partnership.
The General Partner is also the commodity trading advisor of the
Partnership. The Amended Agreement of Limited Partnership
provides that the General Partner may make withdrawals of its
Units, provided that such withdrawals do not reduce the General
Partner's aggregate percentage interest in the Partnership to
less than 1% of the net aggregate contributions.
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CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 2. GENERAL PARTNER AND COMMODITY TRADING ADVISOR (CONTINUED)
The General Partner is required by the Amended Agreement of
Limited Partnership to maintain a net worth equal to at least 5%
of the capital contributed by all the limited partnerships for
which it acts as general partner, including the Partnership. The
minimum net worth shall in no case be less than $50,000 nor shall
net worth in excess of $1,000,000 be required.
The Partnership pays a monthly brokerage fee equal to 1/12 of
7.7% (7.7% annualized) of month-end net assets. The General
Partner receives 7% of this 7.7% fee, a portion (4%) of which is
used to compensate selling agents for ongoing services rendered
and a portion (3%) of which is retained by the General Partner
for trading and management services rendered. The remainder of
the brokerage fee (0.7%) is paid directly to the broker. During
the nine months ended September 30, 1999 and 1998, the amounts
paid directly to the broker amounted to $2,074,701 and
$1,335,565, respectively.
The General Partner is also paid a quarterly performance fee of
20% of the Partnership's aggregate cumulative appreciation in the
Net Asset Value per Unit, exclusive of appreciation attributable
to interest income.
Note 3. DEPOSITS WITH BROKER
The Partnership deposits funds with a broker subject to Commodity
Futures Trading Commission regulations and various exchange and
broker requirements. Margin requirements are satisfied by the
deposit of U.S. Treasury bills and cash with such broker. The
Partnership earns interest income on its assets deposited with
the broker.
Note 4. OPERATING EXPENSES
Operating expenses of the Partnership are limited by the Amended
Agreement of Limited Partnership to 0.5% per year of the average
month-end Net Asset Value of the Partnership. Actual operating
expenses were less than 0.5% of average month-end Net Asset Value
for nine months ended September 30, 1999 and 1998.
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Partnership are made by subscription
agreement, subject to acceptance by the General Partner. As of
September 30, 1999 and December 31, 1998, amounts received by the
Partnership from prospective limited partners who have not yet
been admitted to the Partnership by the General Partner total
$411,798 and $16,786, respectively.
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CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS (CONTINUED)
The Partnership is not required to make distributions, but may do
so at the sole discretion of the General Partner. A Limited
Partner may request and receive redemption of Units owned,
subject to restrictions in the Amended Agreement of Limited
Partnership. Redemption fees apply through the first twelve
month-ends following purchase as follows: 4% of Net Asset Value
per Unit redeemed through the third month-end, 3% of Net Asset
Value per Unit redeemed through the sixth month-end, 2% of Net
Asset Value per Unit redeemed through the ninth month-end and 1%
of Net Asset Value per Unit redeemed through the twelfth
month-end. After the twelfth month-end following purchase of a
Unit, no redemption fees apply.
Note 6. TRADING ACTIVITIES AND RELATED RISKS
The Partnership engages in the speculative trading of U.S. and
foreign futures contracts and forward contracts (collectively,
"derivatives"). These derivatives include both financial and
non-financial contracts held as part of a diversified trading
program. The Partnership is exposed to both market risk, the risk
arising from changes in the market value of the contracts, and
credit risk, the risk of failure by another party to perform
according to the terms of a contract.
Purchase and sale of futures contracts requires margin deposits
with the broker. The Commodity Exchange Act requires a broker to
segregate all customer transactions and assets from such broker's
proprietary activities. A customer's cash and other property (for
example, U.S. Treasury bills) deposited with a broker are
considered commingled with all other customer funds subject to
the broker's segregation requirements. In the event of a broker's
insolvency, recovery may be limited to a pro rata share of
segregated funds available. It is possible that the recovered
amount could be less than total cash and other property
deposited.
The amount of required margin and good faith deposits with the
broker and interbank market makers usually range from 10% to 30%
of Net Asset Value. The market value of securities held to
satisfy such requirements at September 30, 1999 and December 31,
1998 was $384,642,465 and $214,168,800, respectively, which
equals 83% and 62% of Net Asset Value, respectively.
The Partnership trades forward contracts in unregulated markets
between principals and assumes the risk of loss from counterparty
nonperformance. Accordingly, the risks associated with forward
contracts are generally greater than those associated with
exchange traded contracts because of the greater risk of
counterparty default. Additionally, the trading of forward
contracts typically involves delayed cash settlement.
The Partnership has a substantial portion of its assets on
deposit with financial institutions. In the event of a financial
institution's insolvency, recovery of Partnership assets on
deposit may be limited to account insurance or other protection
afforded such deposits. In the normal course of business, the
Partnership requires collateral for repurchase agreements.
For derivatives, risks arise from changes in the market value of
the contracts. Theoretically, the Partnership is exposed to a
market risk equal to the value of futures and forward contracts
purchased and unlimited liability on such contracts sold short.
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CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
The fair value of derivatives represents unrealized gains and
losses on open futures and forward contracts. The average fair
value of derivatives during the nine months ended September 30,
1999 and 1998 and the related fair values as of September 30,
1999 and December 31, 1998 are as follows:
Average Fair Value
As of September 30, Fair Value as of
---------------------- -----------------------------------------------
1999 1998 September 30, 1999 December 31, 1998
---- ---- ------------------ -----------------
Futures contracts $10,448,000 $ 7,768,000 $14,277,000 $ 3,918,000
Forward contracts 413,000 (567,000) 8,728,000 (1,005,000)
The unrealized gain (loss) on open futures and forward contracts
is comprised of the following:
Futures Contracts Forward Contracts
(exchange traded) (non-exchange traded)
----------------------------------------- -------------------------------------------
September 30, 1999 December 31, 1998 September 30, 1999 December 31, 1998
------------------ ----------------- ------------------ -----------------
Gross unrealized gains $19,093,251 $6,289,815 $ 17,355,354 $ 7,377,712
Gross unrealized losses (4,816,473) (2,372,098) (8,627,221) (8,383,137)
------------ ----------- ------------ -------------
Net unrealized gain (loss) $14,276,778 $3,917,717 $ 8,728,133 $ (1,005,425)
=========== ========== =========== =============
Net trading results from futures contracts are reflected in the
statement of operations and equal gain from futures trading less
the portion of the brokerage fee paid directly to the broker. Net
trading results from forward contracts are reflected in the
statement of operations as gain (loss) from forward trading. Such
trading results reflect the net gain (loss) arising from the
Partnership's speculative trading of futures and forward
contracts.
Open contracts generally mature within three months; as of
September 30, 1999 the latest maturity date for open futures
contracts is June 2000, and the latest maturity date for open
forward contracts is December 1999. However, the Partnership
intends to close all contracts prior to maturity. At September
30, 1999 and December 31, 1998, the notional amount of open
contracts is as follows:
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CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
September 30, 1999 December 31, 1998
------------------ -----------------
Contracts to Contracts to Contracts to Contracts to
Purchase Sell Purchase Sell
-------- ---- -------- ----
Futures contracts (exchange traded):
- Long-term interest rates $ 294,100,000 $ 711,800,000 $ 460,500,000 $ 148,700,000
- Short-term interest rates 461,600,000 1,283,700,000 305,900,000 307,900,000
- Stock indices 74,100,000 95,000,000 67,900,000 11,200,000
- Agricultural 200,000 4,100,000 2,000,000 8,700,000
- Metals 106,800,000 4,600,000 6,500,000 47,500,000
- Energy 68,900,000 0 0 17,100,000
Forward contracts (non-exchange traded):
- Currencies 930,300,000 565,500,000 435,100,000 386,200,000
-------------- -------------- -------------- --------------
$1,936,000,000 $2,664,700,000 $1,277,900,000 $ 927,300,000
============== ============== ============== ==============
The above amounts do not represent the Partnership's risk of loss
due to market and credit risk, but rather represent the
Partnership's extent of involvement in derivatives at the date of
the statement of financial condition.
The General Partner has established procedures to actively
monitor and minimize market and credit risk, although there can
be no assurance that they will, in fact, succeed in doing so. The
General Partner's basic market risk control procedures consist of
continuously monitoring open positions, diversification of the
portfolio and maintenance of a margin-to-equity ratio that rarely
exceeds 30%. The General Partner seeks to minimize credit risk
primarily by depositing and maintaining the Partnership's assets
at financial institutions and brokers which the General Partner
believes to be creditworthy. The Limited Partners bear the risk
of loss only to the extent of the market value of their
respective investments and, in certain specific circumstances,
distributions and redemptions received.
Note 7. INTERIM FINANCIAL STATEMENTS
The Statement of Financial Condition as of September 30, 1999,
the Statements of Operations for the three months and nine months
ended September 30, 1999 and 1998, the Statements of Cash Flows
for the nine months ended September 30, 1999 and 1998 and the
Statements of Changes in Partners' Capital (Net Asset Value) for
the nine months ended September 30, 1999 and 1998 are unaudited.
In the opinion of management, such financial statements reflect
all adjustments, which were of a normal and recurring nature,
necessary for a fair presentation of financial position as of
September 30, 1999 and the results of operations for the three
months and nine months ended September 30, 1999 and 1998.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
The offering of the Campbell Strategic Allocation Fund's (the "Fund") 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 $428,885,195 have
been accepted during the continuing offering period as of October 1, 1999.
Redemptions over the same time period total $77,970,648. 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 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 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.
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14
Results of Operations
The returns for the nine months ending September 30, 1999 and 1998 were 5.07%
and 10.72%, respectively. Of the 5.07% increase in 1999, approximately 8.55% was
due to trading gains (before commissions) and approximately 3.26% was due to
interest income, offset by approximately 6.74% in brokerage fees, performance
fees, operating costs and offering costs borne by the Fund. An analysis of the
8.55% trading gains by sector is as follows:
SECTOR % GAIN (LOSS)
- ------ -------------
Interest Rates 3.10%
Stock Indices (5.88)
Currencies 2.44
Metals .81
Agriculturals (.24)
Energy 8.32
----
8.55%
====
In January 1999, most markets the Fund trades in were trendless, yet volatile
enough to move it in and out of positions, incurring a string of relatively
small losses. The gain for February was earned primarily in the currency and
interest rate sectors. Short positions in U.S. treasury notes and bonds yielded
enough profits to compensate for the losses incurred in European interest rates,
which have been slower to turn from long to short. The yen was volatile, trading
both sharply higher and sharply lower against the U.S. dollar during February,
but it ended the month on a slide which appeared to have some momentum. On
balance the Fund's yen positions lost money during February, but short positions
in the European currencies, primarily the Swiss franc and the Euro, were solid
winners. In March, the currency and energy sectors provided positive returns.
The U.S. dollar continued to appreciate against the Euro and the Swiss franc,
while weaker yen was profitable against sterling, the Swiss franc, and the Euro.
All other portfolio sectors showed small losses for the month.
April produced profitable results for the Fund with gains in the currencies,
stock indicies, energy and metals sectors. The U.S. dollar continued its strong
upward trend against the Euro and Swiss franc which lead to the Fund's gains in
the currency sector. The Fund incurred losses in global interest rates where the
markets were too trendless to offer any real opportunity. In May, the energy and
metal sectors were down sharply causing losses on the Fund's long positions in
these two sectors contributing to our loss for the month. Profits on short
interest rate positions were offset by losses on long U.S. dollar and foreign
equity index positions. Interest rate positions
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15
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 the
July, every major trend failed and several markets turned sharply against us
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 indicies 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 cause gold prices to rise significantly. Our gold position
is small and we switched from short to long positions early enough to say flat
in this market.
The Fund is unaware of any (i) anticipated known demands, commitments or capital
expenditures; (ii) material trends, favorable or unfavorable, in its capital
resources; or (iii) trends or uncertainties that will have a material effect on
operations. From time to time, certain regulatory agencies have proposed
increased margin requirements on commodity futures contracts. Because the Fund
generally uses a small percentage of assets for margin, the Fund does not
believe that any increase in margin requirements, if adopted as proposed, will
have a material effect on the Fund's operations. Management cannot predict
whether the Fund's Net Asset Value per Unit will increase or decrease. Inflation
is not a significant factor in the Fund's operations, except to the extent that
inflation may affect futures' prices.
Off-Balance Sheet Risk
The Fund trades in futures and forward contracts and is therefore a party to
financial instruments with elements of off-balance sheet market and credit risk.
In entering into these contracts there exists a risk to the Fund (market risk)
that such contracts may be significantly influenced by market conditions, such
as interest rate volatility, resulting in such contracts being less valuable. If
the markets should move against all of the futures interests positions of the
Fund at the same time, and if the Fund's trading advisor was unable to offset
futures interests positions of the Fund, the Fund could lose all of its assets
and the Limited Partners would realize a 100% loss. Campbell & Company, Inc.,
the General Partner (who also acts as trading advisor), minimizes market risk
through real-time monitoring of open positions, diversification of the portfolio
and maintenance of a margin-to-equity ratio that rarely exceeds 30%.
In addition to market risk, in entering into futures and forward contracts there
is a risk to the Fund (credit risk) that a counterparty will not be able to meet
its obligations to the Fund. The counterparty of the Fund for futures contracts
traded in the United States and most foreign
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exchanges on which the Fund trades is the clearinghouse associated with such
exchange. In general, clearinghouses are backed by the membership of the
exchange and will act in the event of non-performance by one of its members or
one of its members' customers, and as such, should significantly reduce this
credit risk. In cases where the Fund trades on exchanges where the clearinghouse
is not backed by the membership (i.e. some foreign exchanges) or when the Fund
enters into off-exchange contracts (i.e. forward contracts) with a counterparty,
the sole recourse of the Fund will be the clearinghouse or the counterparty as
the case may be. Campbell & Company, Inc., in its business as a commodity
trading advisor and through its many relationships with brokers, monitors the
creditworthiness of the exchanges and the clearing members of the foreign
exchanges with which it does business for the Fund and other clients. With
respect to forward contract trading, the Fund trades with only those
counterparties which the General Partner has determined to be creditworthy. All
positions of the Fund are valued each day on a mark-to-market basis. While the
General Partner monitors the creditworthiness and risks involved in dealing on
the various exchanges and with counterparties, there can be no assurance that an
exchange or counterparty will be able to meet its obligations to the Fund.
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PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities
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.
None
There are no exhibits to this Form 10-Q.
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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.
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
(Registrant)
By: Campbell & Company, Inc.
General Partner
Date: November 11, 1999 By: /s/Theresa D. Livesey
-----------------------
Theresa D. Livesey
Chief Financial Officer/Treasurer/Director
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