A euphoric start to 2019! After a dismal end to last year, global stock markets rebounded in the first quarter making up much of the ground lost in the final quarter of 2018. The underpinnings of this sudden reversal in sentiment are less clear. There appears to be a disconnect between the direction of the stock markets and the direction of the global economies. Economists continue to moderate the outlook for future economic growth. The issues that vexed the markets in 2018 remain and in many cases, those issues have deteriorated even further.

1. FIRST QUARTER 2019
RETROSPECTIVE AND PROSPECTIVE
What a difference a quarter makes!
121 Richmond Street West, Suite 1101,
Toronto ON M5H 2K1

2. 121 Richmond Street West, Suite 1101, Toronto ON M5H 2K1| Phone: 416.607.6642 | www. SprungInvestment. com | P a g e | 2
Sprung Investment Management our focus is to create investment portfolios for our clients that
enable them to achieve their unique, long-term investment goals. In this endeavour, we strive to act
with the utmost integrity, utilising all of our analytical skills, knowledge and intuitions.
PRIVATE CLIENT FOCUS
Sprung Investment Management is an independent discretionary investment management firm that
serves the investment needs of high net worth private clients including business owners and
entrepreneurs, professionals, family trusts, estates, and private charitable foundations.
OUR PEOPLE
At Sprung Investment Management, the investment team collectively has over 120 years of diversified
investment experience. All of our principals hold the Chartered Financial Analyst designation and as
such adhere to the CFA Institute Code of Ethics. Each has made a commitment to continuing education.
RISK PERSPECTIVE
We understand that our clients have worked hard to get where they are and we appreciate that they don’t
want to lose it. As the chosen stewards of their investment assets, our risk management approach is to
preserve their capital by purchasing under-valued securities, with a margin of safety that we expect will
deliver income and capital appreciation over the long term.
PERFORMANCE
Sprung Investment Management has a track record of low volatility of returns since company inception
in June 2005. This has served our clients well over this relatively difficult investment period that
includes the bear market of 2007- 2008. Our performance numbers are available by request.
CLIENT SERVICE
At Sprung Investment Management, satisfying our client’s financial needs is our top priority. Each and
every client is special and receives individual attention and customized investment advice based on
his/her specific objectives and risk tolerance. Our principals are always available to speak directly to
clients.
INVESTMENT STYLE
In building equity portfolios, individual security selection is based on “bottom up” research that is value-
driven and often contrarian to current popular thinking. We assess quality and continuity of return on
equity, current price relative to intrinsic value, economic value added and quality of management.
Although our typical investment horizon is two to five years, we constantly evaluate our current
holdings against new opportunities that may offer better value. Our view is that a strong sell discipline is
a critical component to long-term investment success.
Our investment approach on the fixed income side is to conduct rigorous credit analysis in the context of
future economic and interest rate expectations.

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FIRST QUARTER 2019
RETROSPECTIVE AND PROSPECTIVE
What a difference a quarter makes!
“Markets are born in pessimism, mature on optimism and die of euphoria.” Sir John Templeton
A euphoric start to 2019!
After a dismal end to last year, global stock markets rebounded in the first quarter making up much of
the ground lost in the final quarter of 2018. The underpinnings of this sudden reversal in sentiment are
less clear. There appears to be a disconnect between the direction of the stock markets and the direction
of the global economies. Economists continue to moderate the outlook for future economic growth. The
issues that vexed the markets in 2018 remain and in many cases, those issues have deteriorated even
further.
Nevertheless, investor enthusiasm drove markets higher. In Canada, the S&P/TSX Total Return Index
advanced 13.3% in the first quarter of 2019. The US market advanced 13.6% in the quarter as measured
by the US dollar denominated S&P 500 Total Return Index. The S&P 400 MidCap Total Return Index
fared even better producing a 14.5% return in this quarter. Markets represented by the MSCI EAFE
Price Return index posted a positive 9.0% return as measured in US dollars or a 6.7% return in Canadian
dollars. The Canadian dollar appreciated 2.1% to its US counterpart in Q1.
Canadian Dollar US Dollar
Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD
Toronto Stock
Exchange 13.3% % % % 13.3%
S&P 500 11.2% % % % 11.2% 13.6% % % % 13.6%
MSCI EAFE* 6.7% % % % 6.7% 9.0% % % % 9.0%
91 Day T-Bill 0.4% % % % 0.4%
CUBI** 3.9% % % % 3.9%
CDN/US dollar 2.1% % % % 2.1%
* Europe, Asia and Far East Index
** Canadian Universe Bond Index
Stock markets have been robust since the lows of late December in spite of continual reductions in the
outlook for global economic growth. Over the past year, the sentiment has changed from expectations of
synchronized accelerating growth to expectations of synchronized decelerating growth.

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On a relative basis, the US economy has been more resilient as gains in wages and employment have
been reported. In the third quarter of 2018, the US economy was growing at a 3% rate. However, the
government shutdown will have a profound effect on the first quarter as it has been estimated that it
reduced daily GDP by as much as 1.5% per day that it continued. Over the next two months, first quarter
earnings will be closely observed as earnings growth will likely be diminished compared to last year
where earnings got a boost from the sharp reduction in tax rates. A large portion of the enhanced
earnings were distributed to shareholders by way of dividends and share buybacks as opposed to being
invested in capital expenditures to promote future growth.
The European economies have been less buoyant as trade wars are creating a drag on economic growth.
Germany has been the primary driver of economic activity but growth has been decelerating faster than
anticipated. Italy actually recorded a technical recession with two quarters of negative GDP growth.
Beyond the trade wars, Brexit is responsible for a great deal of uncertainty as factors such as the trade in
goods and services, the mobility of employment, and the direction of capital flows are all in question.
Each of the 27 remaining countries in the European Union all have varying exposures to these factors
with the UK.
The Chinese economy continues to expand at a rate faster than the developed economies, but its growth
is also decelerating and that is having a major impact on its trading partners. The trade war with the US
had an impact as well. Also, the Chinese economy has grown to the point where it is less dependant on
foreign flows as much more is produced locally. However, massive debt has accumulated in China
which creates a conundrum for authorities wishing to stimulate growth, or at least arrest the decline in
activity.
Japan continues to reel from slow growth and aging demographics and the other emerging economies
are feeling the effects of the slower global activity.
In Canada, conditions continue to deteriorate. Economic activity was expected to be strong at the
beginning of 2018 but came in at 1.8% for the year, well below the US at 2.9%. Consumer spending in
Canada was the weakest in six years. It is estimated the fourth quarter GDP growth was a meagre 0.4%
annual rate held up in part by rising inventory levels. The woes of the Canadian energy sector are well
known, but business investment is down overall. A survey conducted for the insolvency firm MNP Ltd.
indicated that 46% of Canadians estimate that they are $200 away from insolvency.
Global GDP growth slowed to a 3.6% annual rate last year and the OECD projects that 2019 growth will
slow even further to 3.3%. The response by central banks has been to do an about-face. Where rate
increases were anticipated last year when growth was viewed as accelerating, a more benign stance has
been adopted as rate increases, at least for the time being, are on hold.
Helicopter governments and their agencies have managed to postpone a recession for some time and
may do so for a while yet. Eventually, the capitalist forces of creative destruction will take hold and the
excesses of the past ten years will be dealt with.

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FIRST QUARTER 2019 FIXED INCOME COMMENTARY
"The knowledge jobs will go, the wisdom jobs will stay." ~ Anonymous
After the rapid decline in interest rates in the latter part of 2018’s fourth quarter, interest rates continued
to decline during the first quarter. Weaker than expected economic indicators resulted in central banks
on both sides of the US/Canadian border to refraining from interest rate increases at this time.
Furthermore, the statements from the central banks indicate an increased level of caution leading to a
lack of enthusiasm for further interest rates hikes, possibly for the rest of the year.
Short-term interest rates increased relative to longer ones resulting in ten-year rates flirting with an
inversion whereby short rates are higher than longer ones. An inverted yield curve is considered a classic
sign of a forthcoming recession.
Normally, central banks raise short term interest rates in order to cool inflationary pressures which
causes the yield curve inversion. This time is different as longer term interest rates have been declining,
arguably indicating that the market participants foresee lower rates going forward. Nevertheless, this
may also foretell a decline in economic activity….certainly, food for thought!
As the first quarter progressed, Brexit appeared to shift evermore towards “Wreck”-xit. Clearly, there is
no political consensus on any type of exit formula except for the statement that there has to be an
agreement with the EU before a withdrawal can occur. However, if no agreement can be forged, the
option of not leaving will be a decision for the EU to make.
No matter what the outcome, what is certain is that the political ill-will and the polarization in the
electorate will bedevil UK politics for a generation to come.
President Trump will get his opportunity to influence the direction of the Federal Reserve as there are
two vacancies on the seven member governing board. While clearly this may influence decision making
to some extent, we have noted on previous occasions that interest rate decisions are arrived at in a
consensus based decision making process. In light of this, it is unlikely that major swings in policy will
be forthcoming. Economic fundamentals will have a much larger impact than politics!
The total return performance of the bond market as measured by the FTSE TMX Canada Universe Bond
Index for the first quarter was an increase of 3.9%. 91-day Treasury bills returned 0.4% over the same
period.
The benchmark ten-year Government of Canada bond yield declined by 0.34% over the course of the
first quarter to end the period with a 1.6% yield. Over the same period the Canadian dollar appreciated
by 1.5 cents from 73.3 cents US to 74.8 cents US.

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Our Team
Michael Sprung, CFA: Chief Investment Officer
msprung@sprunginvestment.com
• Chief Investment Officer
• More than 30 years experience in Canadian Investment industry, overseeing portfolios up to $2.5B
• Senior level positions with YMG Capital Management, Goodman & Company, Ontario Teachers’ Pension Fund,
Ontario Hydro and Cassels Blaikie & Co.
• Frequent contributor to BNN-TV, Globe & Mail, National Post and Money Sense
Fred Palik, CFA: Vice President, Fixed Income
fpalik@sprunginvestment.com
• Extensive experience in fixed income management in a variety of senior positions, primarily in the insurance
and hospital sectors.
• Member of the Toronto CFA Society and the CFA Institute.
Lois O’Sullivan, CFA: Vice President
loiso@sprunginvestment.com
More that 25 years experience in investment management.
• Co-founder of Sprucegrove Investment Management, specializing in international markets.
• Senior level roles at Confed Investment Counselling and Confederation Life Insurance Company.
• Fellow of the Life Office Management Institute (FLMI), the Toronto CFA Society and the CFA Institute.
Joie P. Watts, CFA, FSCI: Vice President & Portfolio Manager
jpwatts@sprunginvestment.com
• Over 30 years of progressive experience in the securities and investment industry.
• Senior level roles at Burns Fry Limited, Merrill Lynch Canada and Nesbitt Thomson.
• Managing Director of Instinet Canada Limited for over 10 years
• CEO of Shorcan ATS Limited, a specialized marketplace for equity dealers trading as principal.
Robert D. Champion, MSEd: Vice President, Client Services
rchampion@sprunginvestment.com
• Joined Sprung Investments Management in 2012 after several years with Successful Investor Wealth
Management.
• Prior to that, he had a fifteen-year career in OEM industrial sales.
• Manager with investment-publishing division of MPL Communications in the 1980s and early 1990s. MPL
publish Investor’s Digest and Investment Reporter.
Stay connected with Sprung Investment Management:
Twitter @SprungInvest
Facebook http://www.facebook.com/SprungInvestment
Linkedin http://www.linkedin.com/company/1699967
See Michael on BNN Bloomberg’s Market Call http://www.sprunginvestment.com/videos/