During my Pre-alpha stage of development I spent a lot of time trying to animated my flag and use the animation within UDK, unfortunately UDK kept hitting errors and crashing and I could not find anyway pass this, Although I could spend more time looking into this I think at my current stage there are other assets, texture work which need more attention.
So I started thinking of way that I could fake some kind of movement of the flag as there are seen from a far that helps, I started looking at how I developed my water shader and how it works within UDK using various expressions such as Pannar to get the actual sense of movement.
Inside the material for my Flag asset I decided to re-use my normal map texture I used on my water shader for a ripple effect, using a very slow setting on the pannar this worked very well, I added a second normal map for more definition as the normal passes along the texture, Although this is not perfect I feel at this point in time it works and because I used my previous normal maps this has optimized my time that I would of spent trying to accomplish a full fledged animation.