TO / DESTINATAIRE : Board of Directors

FROM / EXPÉDITEUR : Doug Alexander

CC: Scott Simmons Senior Management Team

DATE : 6/1/2012

RE / OBJET : 2012 Investment Committee – June 2012

June 2012 Investment Committee Update

The Investment Committee has met twice since the last Board meeting. Our April 27 meeting was a regularly scheduled quarterly meeting to review the portfolio performance. At that time a number of questions were raised about the risk profile of the portfolio and an additional meeting was held on May 31.

The investment portfolio generates cash distributions which are used to fund our operating programs. We have a budget of $1,173,058 for cash distributions. In addition we expect to generate capital gains and losses throughout the year based on the performance of the markets. The following table summarizes our actual results to April 30 versus plan:

Cash Distributions Realized gains/(losses)

Unrealized gains/(losses) Total

Actual Budget Actual Budget Actual Budget Actual Budget 6 months to

April 30 2.20% 2.25% (0.15%) $0 (0.93%) 0.5% 1.12% 2.75%

Full Year

forecast to October 31

4.21% 4.40% Unknown $0 Unknown 1.0% 4.21%* 5.40%

*Full year total return dependent upon performance of equity markets which have been extremely volatile in the current year

The cash distributions versus budget have tracked very closely to expectations. The calendar year end distribution some funds provide is where we have lagged. These distributions will not impact the remainder of the year.

Our combined capital loss for the year (realized & unrealized) is currently at 1.08% compared to a decline in the TSX of approximately 5.5% over the same period. The committee also tracks portfolio results versus a weighted average benchmark that resembles the asset mix of our portfolio. The returns of the portfolio have tracked very closely to this benchmark.

The investment environment is difficult at the moment with very low interest rates and economic uncertainty in many parts of the world. The investment committee undertook a review of the portfolio to try to obtain a better understanding of the risks to the capital in the portfolio if interest rates were to rise or if the stock markets declined. In addition we wanted to determine if there were any risks of concentration in either certain types of investments or in certain geographic areas. Westcourt Capital Corporation presented a very helpful report which is attached as an appendix. At the May 31 meeting we struck a sub-committee who will review the report and will make recommendations to the Investment Committee. This work will be performed by the middle of June. I expect the sub-committee will consider some portfolio changes to reduce some of our longer term fixed income or yield investments as well as reduce our Canadian concentration. It is within the mandate of the Committee to implement these changes, but the Board should be aware of the pending actions.

We still have some work to do to complete our mandate review and work plan. I believe this is best done as an iterative process as the project that is underway is helping us properly identify our objectives and risk tolerances.

Beginning Value (Dec '06) 37,805,874

Performance From Investments 5,195,290

Withdrawals (17,326,092)

Market Value 25,675,072

Book Value 26,739,350

Unrealized Gain/(Loss) (1,064,279)

Performance Actual Budget Forecast Benchmark*

GC FYTD 1.12% 2.75%

3 Months 1.16% 1.35% 0.61%

12 Months -2.82% 5.40% 5.21% -3.03%

Fiscal 2011 2.07% 0.21%

Fiscal 2010 9.20% 9.40%

5 year avg 3.13% 3.92%

Golf Canada

Quarterly Portfolio Summary

Period Ending May 25, 2012

Investment Summary

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

Dec-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11

Invested Value

Market Value

Book Value

United States

8.7%

International

9.6%

Geographic Breakdown

Cash & Equivalents,

10.2% - $2,617,557

Asset Mix

Asset Mix Guidelines: Compliant Non-Compliant

Equity Composition not to exceed 70%

Investment Guidelines:

Individual Debt Securities to be rated "BBB" or better

Maximum of 15% of FI portfolio in BBB-rated securities

Maximum of 2% of FI portfolio in any single BBB-rated issue

No single investment in public company debt to exceed 10% of the market value of the total portfolio

No single investment in public company equity to exceed 10% of the market value of the portfolio

Equity investment is restricted to public company securities only

Minimum Threshhold for MV of invested assets (Investments & Other income generating properties) > $25M Currently $28,088,068

*Benchmark Definition: Weighted average of TSX Composite Index (PH&N Div Inc, Brandes Sionna, O'Leary, Picton Mahoney), DEX ST Bond Index (PH&N ST B&M, PH&N MPT, RBC Savings),

60% TSX Comp/40% DEX Universe Bond Index (Acuity Pooled, MICs), MSCI World (Capital Int'l, Cundill Value)

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

Dec-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11

Invested Value

Market Value

Book Value

Canada

81.7%

United States

8.7%

International

9.6%

Geographic Breakdown

Equity,

39.9% - $10,239,245

Fixed Income,

49.9% - $12,818,375

Cash & Equivalents,

10.2% - $2,617,557

Asset Mix

Current 31-Oct-11 Current 1 Year 3 Year Calendar YTD Projected Current Estimated 2011

SECURITY Quantity Price Price Total Return Total Return Total Return 2012 Yield Yield Payout Current MV Book Value Unrealized G/(L)

PH&N ST Bond & Mortgage Fund 673,284.97 10.22 10.23 3.70% 4.40% 0.50% 3.15% 3.13% 216,797.39$ 6,885$ 6,764$ 120$

PH&N Dividend Income Fund 29,118.06 73.95 72.72 -1.00% 14.70% 6.50% 4.36% 0.02 93,847.38$ 2,118$ 2,220$ (103)$

PH&N Mortgage Pension Trust 291,372.75 10.77 10.80 6.19% 6.29% 1.50% 4.27% 4.44% 134,032.00$ 3,148$ 3,047$ 101$

Horizon's Enhanced Income Equity 126,337.00 8.25 7.23 -12.09% 13.45% 2.71% 10.40% 18.26% 108,446.00$ 913$ 1,039$ (126)$

Acuity Pooled High Income 118,820.30 17.16 15.94 -7.48% 9.65% 0.01% 7.65% 8.28% 155,944.23$ 1,894$ 2,507$ (613)$

Arrow High Yield Fund 132,740.59 7.76 7.425 -2.20% 9.60% 1.05% 7.44% 8.08% 76,716.00$ 986$ 1,030$ (45)$

Capital International 113,616.10 11.14 11.66 -0.08% 11.46% 6.22% 0.00% 0.00% -$ 1,325$ 1,535$ (210)$

BMO Guardian CDN Diversified 84,992.47 11.97 12.30 2.31% 13.50% 3.80% 3.50% 3.41% 35,579.00$ 1,045$ 1,018$ 28$

MacKenzie Cundill Value 143,782.59 10.67 9.96 5.31% 9.17% -0.42% 0.00% 0.00% -$ 1,432$ 1,492$ (60)$

Picton Mahoney Market Neutral 108,045.62 18.39 18.88 3.01% 4.67% 1.45% 0.00% 0.00% -$ 2,040$ 2,000$ 40$

O'Leary Global Infrastructure Yield Fund 148,499.01 9.54 9.54 -1.30% 0.00% 4.92% 6.23% 6.29% 88,237.00$ 1,416$ 1,586$ (170)$

Mortgage Investment Corporations 2,500,000.00 1.00 0.99 8.20% 8.20% 3.30% 7.99% 8.41% 199,689.32$ 2,473$ 2,500$ (27)$

-

Weighted Average 1.51% 7.13% 2.03% 4.27% 1,109,288.33$ 25,675.07$ 26,739.4$ (1,064)$

1Selected return data represents returns on current holdings and does not reflect actual returns achieved by the Golf Canada investment portfolio

SECURITY May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13

PH&N ST Bond & Mortgage Fund - 53,862.80 - - 53,862.80 - - 53,863.00 - - 53,863.00 -

PH&N Dividend Income Fund - 13,103.13 - - 13,103.13 - - 13,103.00 - - 13,103.00 -

12 Month Rolling Forecasted Distribution (Not including December Year End Distributions)

Golf Canada

Fund Data

Period Ending May 25, 2012

Quantity & Price Data Selected Return Data1

Unrealized Gain/Loss Position (000's)

PH&N Dividend Income Fund - 13,103.13 - - 13,103.13 - - 13,103.00 - - 13,103.00 -

PH&N Mortgage Pension Trust - 33,508.00 - - 33,508.00 - - 33,508.00 - - 33,508.00 -

Horizon's Enhanced Income Equity 8,416.00 8,416.00 8,416.00 8,416.00 8,416.00 8,416.00 8,416.00 8,416.00 8,416.00 8,416.00 8,416.00 8,416.00

Acuity Pooled High Income 12,984.00 13,050.00 13,100.00 13,150.00 13,200.00 13,300.00 13,000.00 13,000.00 13,000.00 13,050.00 13,100.00 13,150.00

Arrow High Yield Fund 6,594.00 6,640.00 6,685.00 6,730.00 6,775.00 6,825.00 6,865.00 6,905.00 6,905.00 6,905.00 6,905.00 6,905.00

Capital International - - - - - - - - - - - -

BMO Guardian CDN Diversified 2,966.00 2,980.00 2,985.00 2,990.00 2,995.00 3,000.00 3,010.00 3,020.00 3,030.00 3,040.00 3,050.00 3,060.00

MacKenzie Cundill Value - - - - - - - - - - - -

Picton Mahoney Market Neutral - - - - - - - - - - - -

O'Leary Global Infrastructure Yield Fund 7,388.00 7,400.00 7,430.00 7,460.00 7,490.00 7,530.00 7,565.00 7,605.00 7,645.00 7,685.00 7,725.00 7,770.00

Mortgage Investment Corporations 16,240.00 16,250.00 16,250.00 16,250.00 16,250.00 16,250.00 16,250.00 16,250.00 16,250.00 16,250.00 16,250.00 16,250.00

Monthly Total 54,588.00$ 155,209.92$ 54,866.00$ 54,996.00$ 155,599.92$ 55,321.00$ 55,106.00$ 155,670.00$ 55,246.00$ 55,346.00$ 155,920.00$ 55,551.00$

Cummulative Total 54,588.00$ 209,797.92$ 264,663.92$ 319,659.92$ 475,259.85$ 530,580.85$ 585,686.85$ 741,356.85$ 796,602.85$ 851,948.85$ 1,007,868.85$ 1,063,419.85$

Cash & Fixed Cash & Fixed

SECURITY Equivalents Income Equity Equivalents Income Equity

PH&N ST Bond & Mortgage Fund 26.30% 73.70% 0.00% 1,811$ 5,074$ -$

PH&N Dividend Income Fund 7.14% 0.00% 92.86% 151$ -$ 1,966$

PH&N Mortgage Pension Trust 10.55% 89.45% 0.00% 332$ 2,816$ -$

Horizon's Enhanced Income Equity 1.00% 0.00% 99.00% 9$ -$ 904$

Acuity Pooled High Income 1.50% 35.20% 63.30% 28$ 667$ 1,199$

Arrow High Yield Fund 0.00% 100.00% 0.00% -$ 986$ -$

Capital International 7.60% 0.00% 92.40% 101$ -$ 1,224$

BMO Guardian CDN Diversified 0.29% 24.06% 75.66% 3$ 252$ 791$

MacKenzie Cundill Value 5.80% 0.00% 94.20% 83$ -$ 1,349$

Picton Mahoney Market Neutral 0.00% 0.00% 100.00% -$ -$ 2,040$

O'Leary Global Infrastructure Yield Fund 7.01% 38.95% 54.04% 99$ 552$ 765$

Golf Canada

Fund Data

Period Ending May 25, 2012

Asset Mix % Asset Mix $

O'Leary Global Infrastructure Yield Fund 7.01% 38.95% 54.04% 99$ 552$ 765$

Mortgage Investment Corporations 0.00% 100.00% 0.00% -$ 2,473$ -$

Weighted Average 10.19% 49.93% 39.88% 2,618$ 12,818$ 10,239$

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Golf Canada Portfolio Review: Westcourt Capital Corporation

As at March 31, 2012

INTRODUCTION

We were asked to conduct a basic review of the Golf Canada Portfolio to get a more detailed understanding of the true risk

exposure of the portfolio as it is currently constructed. We were also asked to make some suggestions of areas where the

portfolio may be improved. To do this, we analyzed the portfolio’s volatility, asset mix, and geographic exposure. We also

reviewed the correlation between the portfolio’s investments and analyzed underlying investment’s sensitivity to significant

movements in interest rates and the equity markets.

Current Portfolio

Fund Fund Type % of Portfolio

Annualized Standard Deviation

Risk Classification

PH&N Short Term Bond & Mortgage Short Term Fixed Inc. 26.2% 2.10% Low

PH&N Dividend Income Cdn. Dividend & Equity Inc. 8.5% 15.21% Medium

PH&N Mortgage Pension Trust Short Term Fixed Inc. 11.9% 1.22% Low

Horizon AlphaPro Enhance Income Equity Cdn. Dividend & Equity Inc. 3.7% 17.19% Medium

Acuity Pooled High Income Cdn. Dividend & Equity Inc. 7.7% 12.01% Medium

Arrow High Yield Fund Alternative Strategies 3.8% 5.91% Medium

Capital International Global Equity Global Equity 5.1% 13.51% Medium

BMO GDN Cdn Diversified Monthly Income Cdn. Equity Balanced 4.0% 9.60% Medium

Cundill Value Global Equity 6.3% 16.63% Medium

Picton Mahoney Market Neutral Alternative Strategies 7.8% 4.99% Medium

O'Leary Global Infrastructure Yield Fund Global Equity 5.5% 7.02% Medium

MICs Alternative Strategies 9.5% 0.07% Medium

In reviewing the portfolio as a whole, we have determined that the historic annualized standard deviation for the portfolio

was 4.92%. Based on our review, it is estimated that the annual returns of the portfolio should range between -5% and

14% in 95% of the periods. On a monthly basis, we estimate that the monthly returns should range between -2.5% and 3.2%

based on our estimates of the expected risk reward characteristics of the portfolio.

2

BREAKDOWN BY FUND TYPE

Based on our review of the holdings, it is our opinion that the portfolio is a medium risk portfolio. It has approximately

40% of the portfolio exposed to equity investments, 12% in conservative hedge fund strategies, 10% in Mortgage

Investment Corporations and the balance exposed to short term bonds.

BREAKDOWN BY RISK CATEGORY

Based on our review of the risk classifications of the underlying funds, there is an approximate 60/40 split between medium

and low risk investments.

Alternative Strategies

MICs

Cdn Dividend & Equity Income

Cdn Balanced

Low

Medium

3

BREAKDOWN BY ASSET CLASS

(based on most recent asset mixes available from underlying funds)

The portfolio is well diversified. The largest exposure in the portfolio is to short term bonds, which are generally considered

to be low risk investments. The next largest exposure in the portfolio is to the Canadian equity focused funds and then the

global equity funds.

The Canadian equity holdings are conservative, dividend focused funds. The global exposure is generally medium risk. Of

note, the Cundill Value Fund has been experiencing an increase in its volatility over the past few quarters. Part of this can

be attributed to the fund’s concentrated portfolio and distinct deep value style. We have become concerned of late

regarding this uptick and volatility and have been monitoring the fund more closely in recent months.

GEOGRAPHIC EXPOSURE

(based on most recent geographic information from underlying funds)

Cash

Bonds

Cdn Equity

US Equity

Foreign Equity

Mortgages

Canada

US

Europe

Asia

Other

4

CORRELATION

Correlation measures the degree of similarity between the return streams of two investments. It is measured by the

correlation coefficient which will range between -1 and +1. A correlation of +1 means that the two investments move in an

identical fashion, while -1 means they move in the exact opposite direction. Correlation measures directionality of the

movements, not the magnitude of the movements. Ideally, a portfolio should be constructed of a mix of funds which exhibit

low or negative correlation to one another.

Within this portfolio, there are a number of funds which are highly correlated to others in the portfolio. Funds which have

exhibited high levels of correlation to others in the portfolio include Capital International Global Equity, O’Leary Global

Infrastructure, BMO Guardian Canadian Diversified Monthly Income Fund and the Acuity Pooled Income Fund. By having

too many funds which are highly correlated, the diversification benefits can be negatively impacted.

INTEREST RATE SENSITIVITY

As of February 29, 2012, 28% of the portfolio was invested in fixed income investments. A brief summary of the interest

rate sensitivity of the funds impacted follows:

Yield to Maturity

Average Term to Maturity (years)

Modified Duration (years)

Estimated Impact of a

0.50% increase in

Rates

Estimated Impact of a

1.0% increase in interest

rates

PH&N Short Term Bond & Mortgage 2.0% 2.2 2.0 -1.00% -2.00%

PH&N Mortgage Pension Trust 3.6% 3.8 3.0 -1.50% -3.00%

Estimated Impact of 0.50% increase -0.44%

Estimated Impact of 1.00% increase -0.88%

The fixed income funds are focused very much on the short term end of the yield curve. Therefore, the impact of an

increase in interest rates will be relatively low. Based on our review, using average term and modified duration information

provided to us by RBC Global Asset Management, it is estimated that for a 0.50% increase in interest rates, the overall

1

PH&N Short Term Bond & Mortgage 1 2

PH&N Dividend Income Fund 2 -0.0236 3

PH&N Mortgage Pension Trust (Proxy) 3 0.2659 -0.1144 4

AlphaPro Enh. Inc. Equity (Proxy) 4 -0.0188 0.8759 -0.0622 5

Acuity Pooled High Income Fund 5 0.0197 0.7618 -0.1214 0.9130 6

Arrow High Yield Fund 6 -0.2200 0.3828 -0.2139 0.3714 0.4717 7

Capital International - Global Equity 7 0.1287 0.7888 -0.0180 0.6718 0.6820 0.2241 8

BMO GDN Cdn Div. Monthly Income 8 0.0210 0.8508 -0.1539 0.8227 0.8153 0.4856 0.7507 9

Mac Cundill Value Fund 9 -0.0805 0.8075 -0.1347 0.7104 0.6850 0.3366 0.8460 0.7047 10

Picton Mahoney Market Neutral 10 0.1562 0.0821 0.0170 0.1803 0.2453 -0.0517 0.1693 0.0020 0.0333 11

O'Leary Global Infrastructure Yield 11 -0.2376 0.7899 -0.1159 0.6903 0.7117 0.6513 0.8883 0.8631 0.8054 0.3072 12

MIC Portfolio 12 0.1131 -0.0738 0.1686 -0.1178 -0.0792 0.1032 0.0693 -0.1471 -0.0197 0.1750 -0.1647

5

impact to the portfolio will be a loss of 0.44%. For an increase in rates of 1.0%, the impact to the portfolio is estimated to be

-0.88%.

Given the nature of the investment strategies employed in the Arrow High Yield Fund, we do not have sufficient information

to determine how the fund will behave in a rising rate environment.

EQUITY MARKET SENSITIVITY

To test the potential impact of a sharp market decline on the funds in the portfolio, using the Modern Portfolio Statistics

provided by Morningstar, we determined how much each fund would be expected to drop in the event of a sharp market

drop. We assumed a 500 point and 1000 point drop in the S&P/TSX Composite Index, and a comparable percentage decline

in the MSCI World Index, which is the applicable benchmark for the global equity funds in the portfolio.

As of February 29, 2012, approximately 24% of the portfolio is invested in Canadian equity funds. A brief summary of the

funds’ sensitivity to a decline in equity markets is outlined below:

3 Year Alpha

3 Year Beta Estimated Impact of 500 point decline

Estimated Impact of

1000 point decline

PH&N Dividend Income 3.84% 0.81 0.51% -2.82%

Acuity Pooled High Income -0.93% 1.07 -5.33% -9.73%

BMO GDN Cdn Div. Monthly Income 0.57% 0.77 -2.59% -5.76%

Estimated Impact of a 500 Point Decline -0.47%

Estimated Impact of a 1000 Point Decline -1.21%

The Portfolio also holds a position in the Horizons AlphaPro Enhance Income Equity Fund. This fund was launched in May

2011. As a result, it does not have sufficient track record on which to determine the potential impact. The return of the ETF

is expected to be comprised of two separate components; the return of the underlying stocks and the premium income

collected from the covered call writing program.

For the equity return component, we would expect that it will perform in a manner that is similar to the S&P/TSX 60 Index.

Using that as a proxy, we find the following expected impact for the equity portion of the ETF to be:

3 Year Alpha

3 Year Beta Estimated Impact of 500 point decline

Estimated Impact of

1000 point decline

iShares S&P/TSX 60 Index -2.36% 1.00 -6.47% -10.58%

Estimated Impact to Portfolio of 500 Point Decline -0.24%

Estimated Impact to Portfolio of 1000 Point Decline -0.39%

If we look at the return of the Horizons Enhanced Income Fund, including reinvested dividends, for the period ending April

30, 2012, it posted a loss of -11.86%. During the same time period, the S&P/TSX 60 was down by 10%. It would therefore

appear that the covered call premium income did not offset losses to the extent we had expected. After further review, we

have determined that the premiums did in fact add significantly to the returns, but that the 30 equally-weighted sticks in

the HEX pool underperformed the TSX 60 by a significant margin over the period in question. Because the “other 30” stocks

6

that are included in the TSX 60 but not in HEX include many gold producers, it is not unexpected that from time to time the

HEX equity holdings and the TSX 60 will perform quite differently.

The portfolio held approximately 17% in global equity funds as of February 29. A brief summary of the funds’ sensitivity to a

decline in the MSCI World Index follows:

3 Year Alpha

3 Year Beta Estimated Impact of a

4.1% decline

Estimated Impact of an 8.2% decline

Capital International Global Equity 1.38% 1.05 -2.94% -7.25%

Cundill Value -2.43% 1.31 -7.81% -13.20%

Estimated Impact to Portfolio of 4.1% Decline -0.65%

Estimated Impact to Portfolio of 8.2% Decline -1.21%

The portfolio holds a 5.5% in the O’Leary Global Infrastructure Yield Fund. The fund was launched in December 2009. As

such, it does not have sufficient track record on which to determine the potential impact in the event of a market decline.

ALTERNATIVE STRATEGIES

Given the nature of the investment strategies employed by the various alternative strategy managers in the portfolio, we do

not feel that we have sufficient confidence in the available information to conduct a similar review.

RECOMMENDATIONS

Upon completion of our review, there are a number of items which we would suggest be addressed in an effort to improve

the portfolio.

1. Clarification of the investments investment objective, return target, and risk tolerance – Before any significant

changes to the portfolio can be made, investment objectives and constraints must be clearly articulated. This

involves discussing capital preservation, liquidity, return objectives and palatable volatility parameters. Once this is

fully understood, we can move towards making further suggestions.

2. Lower the correlation profile – Regardless of the objectives of the portfolio, there are a number of underlying

investments which are highly correlated to other investments in the portfolio. Specifically, the PH&N Dividend

Income Fund, the BMO Guardian Monthly Dividend Fund and the O’Leary Global Infrastructure Income Fund all

exhibit relatively high levels of correlation within the portfolio. Given the high correlation, the portfolio may not be

experiencing the full availability of diversification benefits as would occur with funds which have exhibited lower

levels of correlation.

3. Review of Individual Fund Holdings – Within the portfolio, there are some funds which are of concern. In addition

to those mentioned above because of the higher correlation, we are also keenly watching the Mackenzie Cundill

Value Fund. In the past 6 to 12 months, we have noticed that the volatility profile of the fund has been increasing.

7

This is cause for concern, particularly given the fund’s value mandate, which has historically been less volatile than a

growth mandate.

4. Geographic Diversification – the portfolio is very heavily weighted in Canada. As a result, the fund may be more

risky than it could be if the geographic diversification was greater.

We look forward to discussing this with you at our next meeting,

David Kaufman, LL.B., CAIA, President

David Paterson, CFA, Director of Risk and Research