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G.I.ALTERNATIVE HEDGE STRATEGY JULY 2012GICAPITAL

G.I. Alternative Hedge Strategy Pool The Alternative Hedge Strategy is an alternative to traditional bond funds, which although carry very low credit risk, curre

have minimal return; and to equity funds that exhibit high volatility. The Alternative Hedge Strategy seeks to invest in alternative strategies like hedge funds, private equity, and real estate,

which offer higher returns, at a reasonable risk, while minimizing exposure to global stock and bond markets. The fundprovides access to sophisticated private investment vehicles traditionally reserved for large pension plans and the ultra hignet worth investors.

The strategys objectives are to preserve capital, minimize volatility, have a low or zero correlation with stock and bondmarkets, and achieve an annual return of 7-9% net of fees. The pool is a core holding across all of GIs managed accountPORTFOLIO PERFORMANCE FORALTERNATIVE HEDGE STRATEGY

Ye a r J a n Fe b M a r A pr M a y J u n J u l A u g S e p Oc t N o v D e c T ot a

2011 - 0.07% - 0 . 0

2012 0.31% - 0.16% 0.61% 0.19% 3.28% - 1.19% - 0.70% 2 . 3 0

STRATEGY COUNTRY DESCRIPTION

Securitized Fixed

IncomeUS

Long senior or mezzanine tranches of securitized bonds (RMBS, CMBS, CDOs, CLOs) through granul

analysis of underlying assets in the pool. Hedged through tactically shorting the ABX (RMBS Index),

High Yield Bond

Strategies

USPublically traded bonds that have fallen below 75% of their par value. High current yields and yield

maturity. Some hedging through shorts on equities and non-distressed bonds.

Private Distressed

DebtUS

Private placements into charged off consumer debt at a severe discount to face value (ie 1-2% of pa

value). Purchased from distressed banks trying to clean up their balance sheets.

Hedged Fixed

IncomeCAN High quality fixed income fund which has been hedged against a rise in interest rates.

Distressed Real

EstateUS

Private placements into real property with positive cash flows, purchased at significant discounts to

replacement cost.

This monthly update does not constitute or purport to constitute a complete description of the G.I. Capital Corp. Alternative Hedge Strategy and is in all respects subject to the more detailed provisions found in the fund's declaration of trust. The AlternativeHedge Strategy is only available to GI clients who have engaged GI to manage their account under the alternative income/hedge mandate as outlined in their investment policy statement. The returns above are net of all fees, other than management fees.The references to the target rates of return are provided for illustrative purposes only and there can be no assurance that the fund will be able to achieve the targeted rates of return.

INVESTMENT BY ASSET CLASS

5%26%

20%

7%

20%

22%

Distressed Real Estate

Hedged Fixed Income

High Yield Bond Strategies

Private Distressed Debt

Securitized Fixed Income

Cash

FEATURE INVESTMENT

Hedged Fixed Income Fund: This is a hedge fund strategy that owns high quality long maturity bonds, but has hedged out the duration risk, ie the risk

interest rates rising over time and depressing the value of the bonds, as yields rise. We like this strategy as it provides a solution some of the challen

facing investors in the current fixed income environment. With so much risk in the equity markets, investors have flocked to short term bonds, push

the prices up and the yields to maturity down. As a result short term investment grade bonds pay very little. On the other hand, longer term bonds

have very reasonable yields, a result of investors avoiding the longer end of the curve due to the duration risk. Being able to capture high coupons

high quality investment grade bonds while hedging out the risk of rising rates is a very attractive strategy in the current environment. In addition to

core strategy, the fund can also add additional alpha by tactically adjusting duration on a short term basis, depending on the prevailing investm

climate. In fact, they are able to position the fund with negative duration, meaning that the fund would profit from rates moving up, as opposed t

traditional bond portfolio that would lose value under that scenario. The expected return profile for this strategy is 7-8%/annum net.

MONTH PERFORMANCE BY STRATEGY

-0.85%

0.00%

1.00%

1.24%

0.29%

-0.89%

Other

Distressed Real Estate

Private Distressed Debt

Securitized Fixed Incom

High Yield Bond Strateg

Hedged Fixed Income