Investment Strategy

The Fund seeks to obtain capital appreciation of its assets principally through the utilization of a
nontraditional options trading strategy described as "split strike conversion", to which the Fund allocates
the predominant portion of its assets. Set forth below is a description of the "split strike conversion"
strategies (“SSC Investments”).

The establishment of a typical position entails (i) the purchase of a group or basket of equity securities
that are intended to highly correlate to the S&P 100 Index, (ii) the purchase of out-of-the-money S&P 100
Index put options with a notional value that approximately equals the market value of the basket of equity
securities, and (iii) the sale of out-of-the-money S&P 100 Index call options with a notional value that
approximately equals the market value of the basket of equity securities. An index call option is out-ofthe-money when its strike price is greater than the current price of the index; an index put option is outof-the-money when the strike price is lower than the current price of the index. The basket typically
consists of between 35 to 50 stocks in the S&P 100 Index.
The primary purpose of the long put options is to limit the market risk of the stock basket at the strike
price of the long puts. The primary purpose of the short call options is to largely finance the cost of the
put hedge and to increase the stand-still rate of return.
This position in its entirety could be characterized as a bull spread which, presuming the stock basket
highly correlates to the S&P 100 Index, is intended to work as follows: (i) it sets a floor value below
which further declines in the value of the stock basket is offset by gains in the put options, (ii) it sets a
ceiling value beyond which further gains in the stock basket are offset by increasing liability of the short
calls, and (iii) defines a range of potential market gain or loss, depending on how tightly the options collar
is struck.
The degree of bullishness of the strategy can be expressed at implementation by the selection of the strike
prices in the S&P 100 Index put and call options. The farther away the strike prices are from the price of
the S&P 100 Index, the more bullish the strategy.
The Split Strike Conversion strategy is implemented by Bernard L. Madoff Investment Securities LLC
(“BLM”), a broker-dealer registered with the Securities and Exchange Commission, through accounts
maintained by the Fund at that firm. The accounts are subject to certain guidelines which, among other
things, impose limitations on the minimum number of stocks in the basket, the minimum market


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capitalization of the equities in the basket, the minimum correlation of the basket against the S&P 100
Index, and the permissible range of option strike prices. Subject to the guidelines, BLM is authorized to
determine the price and timing of stock and option transactions in the account. The services of BLM and
its personnel are essential to the continued operation of the Fund, and its profitability, if any.
The options transactions executed for the benefit of the Fund may be effected in the over-the-counter
market or on a registered options exchange.
Other Investments
The Investment Manager, in its sole and exclusive discretion, may allocate a portion of the Fund's assets
(never to exceed, in the aggregate, 5% of the Fund's Net Asset Value, measured at the time of investment)
to alternative investment opportunities other than its “split strike conversion” investments (the "Non-SSC
Investments"). It is anticipated that the Non-SSC Investments will be allocated to new investment
vehicles managed by experienced management teams establishing themselves in new investment
businesses ("Emerging Managers"), with no single allocation exceeding $50 million, measured at the time
of investment. These arrangements may include "lock-up" provisions of varying durations of these assets
in such investments, subject to early release for breach of risk control or performance guidelines, or for
cause. FGBL and the Fund generally share in fees received by Emerging Managers from investors other
than the Fund. The Fund will pay fees with respect to the Emerging Managers at a rate that will not
exceed the Fund's rate of fees (in certain cases, this may be accomplished by FGBL subsidizing, from its
own moneys, the fees charged on these assets by Non-SSC Investment managers). Non-SSC Investments
may also include strategic allocations to experienced managers in established funds.
In certain circumstances, the Performance Fee may be reduced for particular calendar quarters for certain
Non-SSC Investment Losses. See "POTENTIAL CONFLICTS OF INTEREST" and "FEES,
COMPENSATION AND EXPENSES –Performance Fee".
In order to ensure that the Fund will not be subject to United States federal income taxation on trading
gains from the disposition of certain investments, it is expected that the Fund will not invest in any
"United States real property interest" (including, for example, certain interests in any U.S. Corporation
that is a "United States real property holding corporation"), as such terms are defined under the U.S.
Internal Revenue Code of 1986 (the "Code") and the Treasury Regulations promulgated thereunder. (See
"TAX CONSIDERATIONS AND EXCHANGE CONTROL.")
The Fund may invest some of its assets in short-term U.S. government obligations, certificates of deposit,
short-term high grade commercial paper and other money market instruments, including repurchase
agreements with respect to such obligations, money market mutual funds and short term bond funds. In
order to ensure that substantially all of the interest earned by the Fund will not be subject to United States
federal withholding taxes, any investment in an obligation of a U.S. person or entity (other than in
certificates of deposits in banks) primarily will be in an instrument (i) which is issued and purchased at a
discount from its face amount, which is not otherwise interest bearing, and which has a term of no more
than 183 days from the date of issuance or (ii) which is in registered form and which is issued after July
18, 1984. (See "TAX CONSIDERATIONS AND EXCHANGE CONTROL.")
Investment Restrictions
The Fund will observe the investment restrictions set forth in the Fund’s Articles of Association which
are summarized here:


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a) no more than 10% of the Net Asset Value of the Fund will be invested in the securities of any one
issuer (other than any government or governmental agency);
b) the Fund may not hold more than 10% of the issued securities of any one class of securities in any
issuer (other than any government or governmental agency);
c) no more than 10% of the gross assets of the Fund may be exposed to the creditworthiness or
solvency of a single counterparty (other than any government or governmental agency), in each
case calculated at the time of investment;
d) no more than 10% of the Net Asset Value of the Fund may be invested in securities of countries
where immediate repatriation rights are not available;
e) the Fund will not invest in the securities of any issuer if the directors and officers of the Fund and
the Investment Manager collectively own in excess of 5% of such securities;
f) the Fund will not take or seek to take legal or management control of the issuer of underlying
investments;
g) the Fund will adhere to the general principle of diversification in respect of all of its assets;
h) the Fund will not invest directly in real property;
i) the Fund will not make any loans (except to the extent that the acquisition of any investment in
securities or commodity interests described herein may constitute a loan) to any one issuer (other
than any government or governmental agency) except with the consent of the custodian of the
Fund’s assets; and
j) no more that 10% of the Net Asset Value of the Fund will be invested in physical commodities.
The investment restriction set out in (c) above will not apply to transactions with any counterparty which
advances full and appropriate collateral to the Fund in respect of such transactions.