Trade tensions intensified in the second quarter of 2018. The US aggressively enacted more encompassing tariffs that were soon countered by their disgruntled trading partners. Investors reacted by retreating from the markets as fears of a trade war escalated. It is becoming increasingly evident that the US in no longer going to accept what it views as asymmetrical trade and military alliances as the status quo. This state of affairs has enormous implications for the US and its trading partners. Market participants must be prepared for a period of enhanced volatility as negotiations continue between the effected parties.

1. SECOND QUARTER 2018
RETROSPECTIVE AND PROSPECTIVE
Trade Machinations
10 King Street East, Suite 801
Toronto ON M5C 1C3

2. 10 King Street East, Suite 801, Toronto ON M5C 1C3| 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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SECOND QUARTER 2018
RETROSPECTIVE AND PROSPECTIVE
Trade Machinations
“What protectionism teaches us, is to do ourselves in time of peace what enemies seek to do to us in time
of war.” Henry George
“In the business world, the rear-view mirror is always clearer than the windshield.” Warren Buffett
Trade tensions intensified in the second quarter of 2018. The US aggressively enacted more
encompassing tariffs that were soon countered by their disgruntled trading partners. Investors reacted by
retreating from the markets as fears of a trade war escalated. It is becoming increasingly evident that the
US in no longer going to accept what it views as asymmetrical trade and military alliances as the status
quo. This state of affairs has enormous implications for the US and its trading partners. Market
participants must be prepared for a period of enhanced volatility as negotiations continue between the
effected parties.
In Canada, the S&P/TSX Total Return Index advanced 6.8% in the quarter led largely by the Energy
sector (up 15.8%) as investors reacted to greater tensions in the Middle East. The US market advanced
3.4% as measured by the US dollar denominated S&P 500 Total Return Index in the second quarter as
share buybacks alleviated much of the negative pressure stemming from retail selling. It is of note that
smaller capitalized stocks outperformed larger companies by a wide margin. The S&P SmallCap 600
gained 9% in the quarter. Chinese and other Emerging markets were mostly negative. The Canadian
dollar lost another 2.1% to its US counterpart.
Canadian Dollar US Dollar
Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD
Toronto Stock
Exchange -4.5% 6.8% 1.9%
S&P 500 1.7% 5.4% 7.2% -0.8% 3.4% 2.6%
MSCI EAFE* 0.0% -0.3% -0.3% -2.4% -2.2% -4.5%
91 Day T-Bill 0.3% 0.3% 0.6%
CUBI** 0.1% 0.5% 0.6%
CDN/US dollar -2.7% -2.1% -4.7%
* Europe, Asia and Far East Index
** Canadian Universe Bond Index
Until recently, markets shrugged off political and geopolitical developments. Even the potential of

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increasing barriers to trade failed to disrupt the positive market momentum. Market participants
generally seemed to perceive that the sabre rattling emanating from the US was a negotiating ploy that
would soon give way to “common sense” as new trade agreements would fall into place, maintaining the
status quo with few modifications.
The current world trading system evolved in the post war period. The US took on a leadership role as it
had the largest economy in the world and it needed to foster alliances during the cold war that followed
WWII. During this period the US covered most of the costs in establishing these alliances and everyone
benefited from the growth in economic trade that was precipitated. The US is now taking the stance that
the cold war has ended and global economies have grown to the point that other countries should bear
more of the costs implicit in these alliances. Furthermore, as trade has grown some inequities have
developed in terms of the flow of trade, the protection of intellectual property rights and non-tariff
barriers that have frustrated “fair” trade.
As the quarter progressed, the rhetoric emanating from the US became more vitriolic. The US enacted
more encompassing tariffs on goods from foreign sources. Other countries have responded in kind. The
real possibility of an out and out trade war has roiled global markets as investors begin to perceive the
damage these tariffs may cause to corporate earnings.
The global synchronized recovery also appears to be stumbling as the momentum in the Chinese and
European economies exhibit signs of slowing down. Tariffs and counter-tariffs are going to put the
brakes on even harder, leading to higher interest rates as investors demand greater compensation for
greater risk.
In the midst of all this trade chaos, the Federal Reserve continues to pursue a policy of tightening the
money supply through rising interest rates. This policy is progressing even in the face of rising deficits
in the US as the recent tax cuts take effect and government spending increases. Presumably, the US is
going to want to finance these deficits. Attracting capital from their major trading partners that they have
just enraged may prove difficult.
Despite these factors, the US market managed to post positive returns in the quarter on the back of
strong employment numbers and economic growth. However, it is interesting to note that mutual funds
in the US experienced US$52.9 billion in net outflows in the quarter; US$23.7 billion in June alone.
Perhaps the US$433.6 billion in share buybacks more than compensated for the exodus. US firms are
sitting on over US$2 trillion in cash. At this juncture, buybacks, mergers and acquisition activity and
dividends appear to be taking precedence over capital expenditures.
Canadian investors have been focused on the NAFTA negotiations during this period of escalating
tariffs. The US has made it clear that the world is changing and access to their market cannot be taken
for granted. The best outcome would be a world of more open trading with fewer barriers but that may
be hard to achieve with Canada where inter-provincial barriers are so ingrained.
Investors must concentrate on fundamentals during this period where volatility and uncertainty will
continue to vex markets.

5. 10 King Street East, Suite 801, Toronto ON M5C 1C3| Phone: 416.607.6642 | www. SprungInvestment. com | P a g e | 5
SECOND QUARTER 2018 FIXED INCOME COMMENTARY
"Every man lives by exchanging." ~ Adam Smith
The Federal Reserve continued on its path of cautiously raising interest rates, hiking the trend setting
Fed Funds target by a 0.25% to 2% in June. The Bank of Canada did not move at all during the quarter
despite Governor Poloz noting the improving economic climate. Leaving rates unchanged in Canada
thus allowing the Canadian dollar to weaken will offset to some degree the protectionist tariff measures
in the US.
The shape of the yield curve (described by the difference between the yields of two year bonds and
thirty year bonds) has flattened decisively over the quarter, continuing the trend in the first quarter. This
difference was at year-end 0.6%, 0.5% at the end of the first quarter and is now down to 0.3% at the end
of June.
Normally, rising short term interest rates against longer term yields is considered a harbinger of an
economic slowdown or recession. This is due to central banks raising short-term interest rates to "cool"
down an overheating economy thereby throttling back current economic growth. Market participants
would then expect lower rates in the future.
In the current environment while the economy is growing at a moderate pace, the rate increases have
less to do with an attempt to slow growth, but more to do with an attempt to drain liquidity from the
economy following the immense amount of stimulus that had been pumped into the world financial
markets subsequent to 2008 / 9 .
This process must be managed carefully due to the fact that a vigorous or speedy withdrawal of liquidity
could drive economies into a recession once again. It is hoped that liquidity levels will be brought back
to more normal levels so that the distortive effects of excessive "easy money" are corrected.
The total return performance of the bond market as measured by the FTSE TMX Canada Universe Bond
Index for the second quarter was a modest increase of 0.5% bringing the year-to-date return to 0.6%. 91-
day Treasury bills returned 0.3% and 0.6% over the same periods. The benchmark ten-year Government
of Canada bond yield increased by 0.09% over the course of the quarter three months of the year to end
with a 2.17% yield. Over the course of the same period the Canadian dollar depreciated further by 1.7
cents from 77.6 cents US to 75.9 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.
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