A Mid-Year Commentary From Irwin Michael: Sowing The Seeds for Outperformance Since the beginning of 2015 we have repositioned all five ABC portfolios. We materially reduced our resource exposure and significantly diversified our equity holdings in free cash flowing undervalued companies. In fact, our macro investment thesis formulated at that time included the following assumptions: a slow, but steady U.S. economic recovery moving ahead in fits and starts. Due to the slower pace of growth compared to previous economic cycles it was our opinion that this upturn could be elongated by several years a difficult oil & gas/mining recovery contending with oversupply issues a quite positive outlook on selective retailers selling basic necessities (groceries, consumers products, etc.), discretionary services (restaurants, housewares, etc.) and special situations with an aging North American population and, in particular, 60-70 year-old baby boomers, we planned to focus on well-placed, opportunistic healthcare companies which would provide essential, high demand services over the next 10-20 years with major advances in computers and research we believed that selective, free-cash flowing technology innovators would perform exceedingly well Bearing these forward-looking views in mind we reset our portfolios with attractive, dividend-paying, low-debt North American selections. Although the Canadian equity market does not provide investors with the vast diversification potential of the U.S. market we have purchased and favour the following Canadian common stocks: Com Dev International Telus Corporation Information Services Corp. Leon’s Furniture Loblaw Companies Stingray Digital Group Exco Technologies TransForce Inc. Uni-Select Inc. Despite the currency risk the U.S. equity market provides Canadian investors with numerous diversification opportunities. We have mitigated the U.S. dollar risk by hedging 80% of our ABC Funds American currency exposure with the Royal Bank of Canada. Since the start of 2015 we have purchased a number of attractive U.S. common stocks including: Foot Locker Inc. Gilead Sciences Google Inc. PepsiCo Inc. H+R Block Southwest Airlines SVB Financial Group Carriage Services Inc. The Cheesecake Factory Inc. Express Scripts Holdings Mentor Graphics Corp. Additionally, we have trimmed a number of our holdings on price strength but also we have purchased and subsequently sold a few American stocks including Big Lots Inc., Cooper Tire + Rubber Inc., Encore Wire Corp, and Flexsteel Industries, which reached our price targets. Last fall we bought three undervalued Canadian REITs: Pure Industrial REIT, InterRent REIT and Plaza Retail REIT and sold all three this past spring for a modest profit. Notwithstanding these numerous portfolio changes we have also purchased and continue to hold a number of undervalued equity laggards. In spite of their present underperformance we remain optimistic and intend to retain this group, which includes: Polaris Minerals, Las Vegas Sands, Superior Industries International, Zimmer Biomet Holdings, Waste Management Inc., American Express Co. and Amgen Inc. Clearly, there are numerous macro uncertainties overhanging the global equity markets such as Greece, decelerating Chinese economic growth, U.S. Federal Reserve intentions, weak Canadian dollar, etc. Nonetheless, we remain confident with our relatively liquid, diversified portfolios. We believe our extensive ABC Funds portfolio changes over the past six months have enabled us to sow the seeds for second half 2015 outperformance. Irwin A. Michael, President I.A. Michael Investment Counsel Ltd.