G.I.

ALTERNATIVE INCOME STRATEGY NOV 2012
GI CAPITAL

G.I. Alternative Income Strategy
• • • The Alternative Income Strategy is an alternative to traditional bond funds, which although carry very low credit risk, currently have minimal return; and to equity funds that exhibit high volatility. The Alternative Income Strategy seeks to invest in alternative income strategies like private mortgages and asset backed loans that offer higher returns, while still providing reasonable security to cover the loans. The strategy’s objectives are to preserve capital, minimize volatility, have a low or zero correlation with stock and bond markets, and achieve an annualized return of 8-10% net of all fees.

PORTFOLIO PERFORMANCE FOR ALTERNATIVE INCOME STRATEGY
Ye a r 2010 2011 2012 0.63% 0.81% 0.68% 0.53% 1.33% 0.68% 0.91% 2.43% 0.72% 2.95% 1.91% 0.06% Jan Fe b Mar A pr May J un J ul 0.84% 1.26% 0.15% A ug 0.78% 0.93% 0.29% Sep 0.87% 0.90% 0.89% Oc t 0.80% 1.11% 0.57% N ov 0.83% 0.83% 0.53% Dec 0.54% 2.50% Tot a l 4.75% 14 . 5 9 % 10 . 4 1%

PROPERTY BY CLASSIFICATION 1% 32% 52% 9% Residential Hospitality Retail Mixed Use 6% Self Storage PROPERTY BY LOCATION AB 3% 16% 41% 22% 15% 2% BC ON QC MB USA
*Note: The property locations only apply to real estate holdings.

PORTFOLIO BREAKDOWN BY ALLOCATION
Percentage Weighting 6% 16% 12% 27% 15% 6% 20% 103% Loan To Value Ratio 44% 66% 72% N/A 48% N/A 0% 56% Av erage Expected Maturity (Months) 19 27 15 48 8 20 0 23 Av erage Expected Yield 7% 12% 11% 7% 13% 12% 0% 8.1%

Security Ty pe F irst Mortgage Subordinated F irst Second Mortgage Real Estate Equity Asset Backed Loans Distressed Debt Cash Total/Weighted AVG

*Note: The property classifications only apply to real estate holdings.

FEATURE INVESTMENT
US Grocery Anchored Retail, Real Estate Equity
This is an investment we originally bought in early 2011, with a follow on investment in the summer of 2012, and consists of a group of Grocery Store anchored community shopping centres in the US, originally in the Great Lakes Region, and subsequently expanding further down the east coast. These properties were a prime example of “distressed sellers” vs “distressed properties”. The properties in fact were in excess of 95% leased and performing well. However, given the distress and dislocation in the US real estate market over the last 5 years, many of these owners found themselves over leveraged and being forced to sell. Much of this problem had to do with lenders wanting their loans repaid, in order to shore up their own balance sheets, combined with the fact that there is very few, if any options for what had become high ratio mortgages. The valuation metrics at which we acquired these properties were solid: unlevered yields of ~10%, projected average cash flow per annum of ~18%, and going in cap rates of 10% (we have seen these properties trade in Canada at 5-6 caps). In addition, we have a very reputable asset manager who is effectively our partner on these assets.

SERVICE PROVIDERS
Custodian (for Fund) Administrator Legal Auditor Custodian (for Managed Accounts)

G.I. CAPITAL CORP.
240 Duncan Mill Rd Suite 806 Toronto, Ontario M3B 3S6

Mark Irwin, CFA 647-260-3388*223
mark.irwin@gicapital.ca

Jim Goren, CFA

647-260-3388*222

Bill Hallman, CFA

647-260-3388*228

Gino Scialdone

647-260-3388*229

jim.goren@gicapital.ca

bill.hallman@gicapital.ca

gino.scialdone@gicapital.ca

G.I. Capital Corp. (GI) is a wealth management firm specializing in developing customized investment solutions for its clients. We are a boutique firm focused on managing our client’s portfolios, offering a high level of research and service to a limited number of clients. Our client base consists of professionals, executives and business owners. Visit us at www.gicapital.ca This monthly update does not constitute or purport to constitute a complete description of the G.I. Capital Corp. Alternative Investment Strategy and is in all respects subject to the more detailed provisions found in the fund's declaration of trust. The Alternative Income Strategy is only available to GI clients who have engaged GI to manage their account under the alternative income 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.

Sign up to vote on this title
UsefulNot useful