Black Flag Capital

Black Flag Global Macro Fund, LLC

The fund’s core strategy consists of a market neutral currency arbitrage program that seeks to achieve 15% annualized returns for investors. The “core” strategy invests 3/4 of the assets under management (“AUM”) in a high yielding currency pair in an upward-trending environment to capture the yield carry. The other 1/4 of the AUM are left to discretionary trading of the US dollar against the major currencies. Our competitive edge in this investment product is our deep knowledge of the currency markets and which currency pairs are likely to be in trending and non-trending environments. On an unleveraged basis our risk/reward profile gears towards 1%-2% gains on a monthly basis with a risk of 0%-1% maximum drawdown. The maximum gearing we look to take on is two (2) times leverage. We would classify our strategy as a dedicated foreign exchange product. Our strategy is unique because it incorporates aspects of a “discretionary trading model” a “currency overlay model” and “interest rate arbitrage” products. We do not expect to change our strategy as a result of increased AUM over time. The strengths/weaknesses of our investment strategy: Strength: Dedicated strategy with well defined risk and profit objectives Weakness: Relies upon the manager’s ability to discern trending and non-trending environments. Our strategy performs best when the currency pairs we select for the trending portion of the portfolio do not fall more than 10% over a three-month period. The discretionary aspect of the fund relies on our ability to seek out trends. If we are incorrect, our performance will suffer. The selection process for currency pairs in our trending model is based on statistical volatility measures and our own subjective sense of where the currencies should be. This is based on Purchasing Power Parity, Interest Rate Differentials, Fundamentals, Technicals, Sentiment, etc.