Last quarter, we titled the Retrospective and Prospective “Foggy Weather”. While we would like to report that the fog has cleared, unfortunately that is not the case. Global markets proved to be very volatile in the first quarter of 2016. In the first few days of the year, the sell-off was precipitous as investors’ concerns grew over the state of the global economy, particularly with respect to China as indications of lower levels of manufacturing were released. Trading in China halted as market circuit breakers were triggered. The sell-off persisted for the first half of January, corrected in the latter half, only to reverse trend again in the first half of February. Investors struggled with conflicting economic news relating to the deteriorating fundamentals in the energy and mining sectors, increasing corporate layoff announcements yet better employment statistics. From mid-February on through to the end of the quarter, the global markets were more sanguine focused primarily on improving conditions in the US.

1. FIRST QUARTER 2016
RETROSPECTIVE AND PROSPECTIVE
Bull or Bear?
“Uncertainty is an uncomfortable position. But certainty is an absurd one.”- Voltaire
25 Adelaide Street East, Suite 500
Toronto, ON M5C 3A1

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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 2016
RETROSPECTIVE AND PROSPECTIVE
Bull or Bear?
“Uncertainty is an uncomfortable position. But certainty is an absurd one.”- Voltaire
“Predicting the present is nearly as hard as predicting the future.” –Louis Menand
Last quarter, we titled the Retrospective and Prospective “Foggy Weather”. While we would like to
report that the fog has cleared, unfortunately that is not the case.
Global markets proved to be very volatile in the first quarter of 2016. In the first few days of the year,
the sell-off was precipitous as investors’ concerns grew over the state of the global economy, particularly
with respect to China as indications of lower levels of manufacturing were released. Trading in China
halted as market circuit breakers were triggered. The sell-off persisted for the first half of January,
corrected in the latter half, only to reverse trend again in the first half of February. Investors struggled
with conflicting economic news relating to the deteriorating fundamentals in the energy and mining
sectors, increasing corporate layoff announcements yet better employment statistics. From mid-February
on through to the end of the quarter, the global markets were more sanguine focused primarily on
improving conditions in the US.
The first quarter managed to record some positive results overall, despite severe declines in some
sectors.
Canadian Dollar US Dollar
Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD
Toronto Stock
Exchange 4.5% 4.5%
S&P 500 -4.7% -4.7% 1.3% 1.3%
MSCI EAFE* -9.5% -9.5% -3.7% -3.7%
91 Day T-Bill 0.1% 0.1%
CUBI** 1.4% 1.4%
CDN/US dollar 6.7% 6.7%
* Europe, Asia and Far East Index
** Canadian Bond Universe Index

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At year-end 2015, the Federal Reserve in the US postured a more aggressive stance going into 2016.
Expectations were that there existed a strong possibility that interest rates would possibly be raised over
four increments in the coming year as the US economy was getting stronger and employment was
increasing. These facts appeared to be confirmed early in the quarter as estimates of 2015 GDP (Gross
Domestic Product) came in ahead of expectations at 2.4% compared with 2014’s 2.1%. However, the
quarter had not progressed very far when pronouncements from the Federal Reserve suggested a less
aggressive stance and pundits began to forecast more gradual rate increases with possibly only two
instances this year. This change in posture has caused some doubt about the strength of the US economy
but this change is possibly more related to the state of the global economy and the continued strength of
the US dollar.
In terms of geopolitical issues, the usual suspects continued to concern market participants. The issues
dealing with the Ukraine and Russia, the South China Sea, conflicts in the Middle East (particularly
Syria) and the massive refugee crisis in Europe were still very much in the news. Other unexpected
issues occurred starting with a political fight between Saudi Arabia and Iran that temporarily impacted
energy markets. North Korea claimed to have set off a hydrogen bomb although the rest of the world
suspects it was really a less powerful atomic bomb. Terrorist attacks in Brussels generated concerns over
the ability of authorities to coordinate efforts to protect the public. Surprisingly, the Brussels attack
seemed not to have a major impact on markets suggesting that investors are becoming inured to these
events.
The focus of investors was very much concentrated on the actions of the central banks this quarter. The
ECB (European Central Bank) reduced the deposit rate to –0.4% from 0.3%, cut its interest rate from
0.05% to 0 and the lending rate reduced to 0.25% from 0.30%. Non-bank corporate debt was added to
the ECB’s buying list and the Bank’s quantitative easing (QE) program was increased to 80 billion euros
per month from 60 billion. The annual QE program of an estimated 1.74 trillion euros is now larger that
the GDP’s of Italy and Spain. This action suggests conditions in Europe are not improving fast enough
and that the problems with Greece, Portugal, Italy and Spain may re-emerge. Furthermore, these
conditions bolster the side that wants Britain to leave the European Union; an event that would have
many repercussions both domestically in Britain and globally. Norway reduced its interest rate to 0.5%
from 0.75% sighting the possibility of negative rates while Hungary cut its overnight rate to –0.05%
from 0.1%. One bright spot in Europe is the German economy that posted a year over year 2.3%
increase in industrial production in February, the best in six years.
The Bank of Japan kept its overnight rate at –0.1% although the outlook for the economy was
downgraded as exports fell 4% in February and imports fell 14.2%.
China reduced its reserve requirements for the fifth time in a year in order to increase liquidity. Exports
in February were down 25.4% year over year while imports fell 13.8%. Concerns continue to grow with
respect to the shadow banking system in China and the huge leverage in the economy.
It is in this light that the Federal Reserve has taken a more cautious stance as concerns grow about global
growth and inflation. The US economy has thus far been resilient in the face of these global issues. Auto
production is running at 17.5 million units a year, which is a record. Consumer credit continues to
expand, albeit at lower rates than previously. Exports are beginning to feel the pinch of the high US

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dollar. Fourth Quarter GDP came in at 1.4%, better that the 1.0% expected. However, it is the state of the
global economy that has alarmed the Federal Reserve.
In Canada we are fortunate to be situated so close to the United States. This is becoming more evident in
the improving manufacturing sector; particularly auto parts; Canada’s largest export item.
Since the advance in the North American markets in mid-February, valuations in our view have become
a little stretched as prices have risen faster than earnings, and, the quality of those earnings has
deteriorated as more of the increases are stemming from cost cutting and share buybacks as opposed to
revenue growth and investments in assets. Therefore, we advise a cautious approach at this juncture.
This is becoming a stock pickers market where individual stock selection and valuation will be the
critical ingredients to successfully navigate the volatile times ahead.

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FIRST QUARTER 2016 FIXED INCOME COMMENTARY
“No man’s life, liberty, or property are safe while the legislature is in session.” ~ Mark Twain
North American fixed income prices moved higher in the first quarter as the low interest rate
environment continued. After the Federal Reserve’s December meeting, during which interest rates were
raised by 0.25%, investors were anticipating a gradual, but steady increase in interest rates over the
coming year in line with the improving economic picture in the United States.
This positive view was revised during the first quarter, when the Federal Reserve Open Market
Committee (FOMC) maintained its current 0.25% - 0.50% fed funds target rate. While the absence of a
change in rates was not totally unexpected, the commentary emanating from the March meeting
indicated that the Fed has become more cautious about rate increases. As a result, fixed income market
participants paused to re-evaluate their expectations.
This change in expectations, both from the Federal Reserve and investors, was predicated on weakening
global economic indicators and that an ever increasing number of central banks are continuing with their
Zero Interest Rate Policies (ZIRP) or Negative Interest Rate Policies (NIRP). This would indicate an
ongoing low inflation, low interest rate environment.
Once again Greek debt negotiations are coming to the forefront. The usual demands for debt forgiveness
are about to collide with German demands for full repayment. However, this time around Greece is on
the forefront of the refugee crisis and that may give the Greeks increased leverage on the political front.
This is a crisis that has eluded a unified European response, except for increasing attempts at
constraining the free movement of persons between countries by reintroducing “temporary” border
controls.
Similarly, there looms a possibility that Britain may exit from the European Union (Brexit); this will be
decided in a referendum in late June. Such an event would further increase the stress on the European
Union by indicating that an exit is possible and even desired by some. While this would not necessarily
lead to the dissolution of the union, nevertheless the future form of the union would likely be much
different that what was originally conceived.
The Canadian Federal Government’s recent budget announced plans to spend thirty billion this year,
with many more billions to come in subsequent years, without a elucidating clear plan for repayment.
However, if deficit financing is contemplated, the current low interest rate environment is as fortuitous
time as any. Currently the longest Government of Canada bond is a 48-year issue that is yielding 1.92%.
In light of this exceptionally low rate environment, the argument could be made that Governments
should borrow as much as possible for the longest term possible.
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 1.4%, while 91 day Treasury bills increased by 0.1% over
the same period. The benchmark ten-year Government of Canada bond yield declined by 0.2% to 1.2%
by quarter-end. Over the course of the quarter, the Canadian dollar improved by 4.7 cents from 72.3
cents US to 77.0 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:
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See Michael on BNN Market Call http://www.sprunginvestment.com/videos/