Quay Capital Management Ltd.

Druid 2XL Futures Program

The Quay Druid Futures Program is a systematic trading model seeking to achieve consistent rates of return with low drawdowns and efficient use of capital. This efficient use of capital means an average margin to equity ratio of less than 5%. The program also seeks low correlation to traditional investments such as stocks and bonds and to established trend following methodologies. The strategy is also highly disciplined in that each position has a pre-determined exit point and risk is strictly quantified and controlled around these levels. The concept underlying the trading strategy is that certain momentum exists in markets moving away from trading ranges that have existed for a certain time period and with particular volatility levels. The measurement of these so-called momentum indicators is subject to complex scrutiny in the research process to ensure false signals are avoided. Once a trade signal has been generated position sizes are adjusted to allow for the current and historical volatility of the market. A consistent and pre-set portion of equity is then allocated to each trade by the imposition of initial and trailing stop loss levels. Each position is then managed on a real time basis and is monitored as a function of both price and time. It is part of the philosophy of the program that the momentum indicators have a limited return expectancy in terms of duration and capturing this duration leads to strong returns with low volatility. Once a trade is exited either in profit or loss it is not re-entered until a completely new signal is generated. The program only traded CFTC approved markets and where the liquidity of the contract is deemed sufficient to enable easy position entry and exit for the program. The current portfolio trades the following markets: Interest rate futures in US Bonds, UK Gilts, Euro Bonds, and Australian Bonds, and Currencies futures in Euro, US Dollar, Yen, Australian Dollar, Canadian Dollar, Swedish Krona and New Zealand Dollar.