The euphoria of the past year carried into the first quarter of 2014 only to be rudely interrupted by geopolitical events as Russia took over the Crimea. The hue and outcry was heard around the world and global markets were shaken by this event.

1. FIRST QUARTER 2014
RETROSPECTIVE AND PROSPECTIVE
Can You Bruise the Gin?
Russian transport trucks inside Crimea in Ukraine. (Image Source: CNN)
25 Adelaide Street East, Suite 1914
Toronto ON M5C 3A1

2. 25 Adelaide St. E., Suite 1914, Toronto, ON M5C 3A1 | 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 2014
RETROSPECTIVE AND PROSPECTIVE
Can You Bruise the Gin?
“Shaken and not stirred, please.”- James Bond, Dr. No (1958) by Ian Fleming
The euphoria of the past year carried into the first quarter of 2014 only to be rudely interrupted by
geopolitical events as Russia took over the Crimea. The hue and outcry was heard around the world and
global markets were shaken by this event.
In addition, market participants reacted negatively to the news that China’s economic growth rate was
unlikely to achieve the previously expected 7.5% target. European markets were the most effected by
the events in the Crimea as Europe has much closer economic ties with Russia particularly since much
of Europe is dependent on Russian oil and gas. Naturally, the Asian markets reacted negatively to the
news from China, but the fallout also affected resource rich economies like Canada and Australia. The
US markets were the most negatively impacted by a statement made by Janet Yellen, the new Chair of
the Federal Reserve Board, that interest rates would likely start their ascent by early 2015.
Canadian Dollar US Dollar
Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD
Toronto Stock
Exchange 6.1% 6.1%
S&P 500 5.9% 5.9% 1.8% 1.8%
MSCI EAFE* 4.0% 4.0% 0.0% 0.0%
91 Day T-Bill 0.2% 0.2%
DEX** 2.8% 2.8%
CDN/US dollar -3.9% -3.9%
* Europe, Asia and Far East Index
** Canadian Bond Universe Index

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Despite these jolts, returns to Canadian investors finished the quarter looking quite robust. Foreign
returns in particular improved, largely due to the decline in the value of the Canadian dollar.
The Toronto Stock Exchange Total Return Index finished the quarter up 6.1% almost 5% of which was
recorded in the first two months and a substantial portion of the remainder on the last trading day of the
quarter. The strength in the Canadian market can be attributed to Materials (+9.2%; driven in large part
by the precious metals sector), Energy (+8.7%) in reaction to the Crimean situation, Utilities(+7.5%) and
Health Care (+12.6%; note that Health Care is a much smaller component of the index).
The S&P 500 Index managed to finish the quarter with a 1.8% total return. It was a bumpy ride in the
US as the quarter started with the index declining 3.5% in January, recovering 4.6% in February and
adding another 0.8% in March. March was the most tumultuous period as investors had to contend with
several issues: the inevitability of interest rates rising in the future, the redrawing of the European map
in spite of protestations and denunciations form political corners, as well as, come to terms with the
prospect of slightly lower growth in China and hence lower demand for American goods and services.
Note that the Dow Jones Industrial Average posted a negative 0.7% return in the quarter.
The Russian action in the Crimea caused many European markets to decline in March. However, with
the exception of the UK, most of the European markets posted positive returns in US dollars for the
Quarter. Several markets were surprisingly robust as several of the most problematic nations during the
financial crisis continued to make progress: Greece and Portugal both up 15.1%, Italy up 13.6% and
Ireland up 10.3%. The emerging markets were more affected by the slower Chinese growth prospects
and they declined 0.5% in the quarter.
So, what are we to make of these statistics as they pertain to investment strategy going forward?
Disruption and calamities are a necessary part of market adjustment in the continuum of price discovery.
While many connoisseurs argue the merits of the perfect martini and the merits of shaken versus stirred,
I believe that the evidence comes down in favour of shaken. While the gin may be partially oxidized in
this process and hence come out looking somewhat cloudy (bruised?), studies have shown that many
benefits accrue as well. At the University of Western Ontario, a study showed that the level of hydrogen
peroxide in a shaken martini was half that of a stirred martini. Hence, a shaken martini has more
antioxidants than a stirred one thus lessening the risk of cataracts, cardiovascular disease and stroke.
In periods of market euphoria, it may be prudent to take the advice of Mae West and “slip out of the rain
and into a dry martini”. Markets may well benefit from being shaken on occasion lest we suffer more
strokes like that of 2008. We will stay the course and seek securities that achieve desirable price levels
in these periods of disruption.

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FIRST QUARTER 2014 FIXED INCOME COMMENTARY
“There are two fools in every market: one asks too little, one asks too much.”- Russian proverb
After the lacklustre performance of the bond market in 2013, where the Canadian market lost 1.2%, the
first quarter saw a turnaround with the market making up for more than the whole previous year’s loss in
less than a month.
However all is not as it seems. Much of the rally can be ascribed to external factors. Wobbles in
emerging markets combined with political uncertainty developing in the Ukraine and Crimea resulted in
the usual flight to quality trade which provided a boost to North American bond markets.
Despite these external factors, which did not even rate a mention in the news release, the January
Federal Reserve Open Market Committee (FOMC) meeting concluded with a unanimous vote for a
continuation of a reduction in asset purchases, the now well known “taper”. Similarly, reference to
economic factors was largely positive, a message that overall would argue for higher rates in the longer
run.
The start of the Yellen era after her recent confirmation as the new Chair of the Federal Reserve started
with the higher than usual degree of parsing of her comments subsequent to the March FOMC meeting.
A new Chair’s initial comments are traditionally dissected to a higher than usual degree in order to try to
glean insights into their views.
Her comments regarding the reduction in the Fed’s ongoing purchase of securities and the likely
increase in interest rates were by no means news. Nevertheless, the markets’ eagle eye focused on her
words that interest rates may be rising six months after the asset purchases have been phased out. While
in its essence this wasn’t news, however the indication of the defined “six months” sent the market for a
tumble.
In our view this microscopic parsing of statements, while par for the course, is missing the point. The
Yellen era is unlikely to bring fundamental change to the policy direction of the Federal Reserve.
Having said this, the likely direction of interest rates is upwards, depending, as we had said before, on
external factors, be they economic or geopolitical.
The total return performance of the bond market as measured by the DEX Universe Index for the first
quarter was an increase of 2.8%. The benchmark ten-year Government of Canada bond yield decreased
by 0.3%, to 2.5%.

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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.
• Robert is a Chartered Investment Manager (CIM) candidate.
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