Currency Insight Ltd (CIL

Reserve Currency Program)

Fund Investment Objectives

Currency Insight has developed a proprietary quantitative flow model which identifies the conditions in which investment flows into a particular currency have a high probability of turning negative. The model identifies these conditions by looking for breaks in the ascending price series for each currency pair. These breaks signal points where individual high coupon longs should be hedged. The model's code is constructed so as to hold the hedges for the minimum interval allowing a return to coupon harvesting as soon as possible. The Programme invests in a well diversified group of the highest yielding global currencies when investment flows into those currencies are either positive or neutral.Thus the default position for the strategy is to be long a basket of high coupon currencies by means of FX cash forwards. These holdings are funded using weakening G10 currencies. In neutral flow conditions revenue is generated by harvesting the coupon from each of the currencies in the basket and in positive flow conditions further profits are generated by means of currency appreciation. While the default position for the programme is to use the US Dollar as the funding currency, Currency Insight has developed an active switching model identifying which other G10 currencies are likely to weaken over the next few days/weeks. In the event that these G10 currencies are shown to be in a negative flow sequence and therefore likely to weaken, the model can initiate a funding switch into these weaker currencies.