Geopolitical events continued to make headlines this quarter but did little to quell investors’ enthusiasm as markets continued to advance. Russia and the Ukraine managed to agree to a temporary ceasefire just as sectarian violence in Iraq exploded driving oil prices higher. China garnered attention with its hegemonic designs on the South China Sea much to the displeasure of Japan and Vietnam as well as pushing back on any pro-democracy desires in Hong Kong. In addition, Argentina once again threatens to default on its debt after losing a Supreme Court decision to creditors in the US.

1. SECOND QUARTER 2014
RETROSPECTIVE AND PROSPECTIVE
Cyclical Behaviour
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.

3. 25 Adelaide St. E., Suite 1914, Toronto, ON M5C 3A1 | Phone: 416.607.6642 | www. SprungInvestment. com | P a g e | 3
SECOND QUARTER 2014
RETROSPECTIVE AND PROSPECTIVE
Cyclical Behaviour
“What is right is not always popular and what is popular is not always right.”- Albert Einstein
“It is impossible to produce a superior performance unless you do something different from the
majority.”- Sir John Templeton
Geopolitical events continued to make headlines this quarter but did little to quell investors’ enthusiasm
as markets continued to advance. Russia and the Ukraine managed to agree to a temporary ceasefire just
as sectarian violence in Iraq exploded driving oil prices higher. China garnered attention with its
hegemonic designs on the South China Sea much to the displeasure of Japan and Vietnam as well as
pushing back on any pro-democracy desires in Hong Kong. In addition, Argentina once again threatens
to default on its debt after losing a Supreme Court decision to creditors in the US.
The impact of the events in Iraq and the Ukraine spiked investor enthusiasm for energy stocks in Canada
and the US. The industrial sector in Canada was also strong as the railroad stocks continued their ascent
as economic conditions improved. Materials also posted strong gains as mining stocks in both precious
and base metals performed well. Globally, investors’ confidence generally gained momentum with the
exception of Europe where fears of economic stagnation grew. It was a surprise when the first quarter
GDP estimate in the US was revised down to a dismal -2.8% following an initial estimate of -1.0% as a
result of severe weather and curtailed spending.
Canadian Dollar US Dollar
Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD
Toronto Stock
Exchange 6.1% 6.4% 12.9%
S&P 500 5.9% -1.4% 3.7% 1.8% 5.2% 7.1%
MSCI EAFE* 4.0% -0.6% 3.4% 0.0% 2.9% 3.0%
91 Day T-Bill 0.2% 0.2% 0.4%
DEX** 2.8% 2.0% 4.8%
CDN/US dollar -3.9% 3.5% -0.4%
* Europe, Asia and Far East Index
** Canadian Bond Universe Index

4. 25 Adelaide St. E., Suite 1914, Toronto, ON M5C 3A1 | Phone: 416.607.6642 | www. SprungInvestment. com | P a g e | 4
As North American markets achieve new highs, we note that it has been a nice ride for equity investors
since the depths of the market decline in 2008. In this context, it is prudent to exercise some degree of
caution in this environment, as markets tend not to continuously climb, as economies do not
continuously grow. We do not pretend to know when, or if, there is going to be a correction in the near
term. However, we see some signs that could potentially lead to a pullback.
Retail participation in the stock market has been accelerating over the past year. Overall, equities are
now overweight in investors’ portfolios particularly in Europe where fixed income offers little return.
There has been a noticeable recovery in the number of Initial Public Offerings (IPO’s) and merger
activity at the corporate level has also increased. The number of investors utilizing margin (debt) to
increase their equity exposure has also risen.
Propelled by the low interest rate environment, debt levels continue to soar in both the public and private
markets. Concerns about consumer debt levels in Canada and the UK have been met with ineffective
jawboning from the Canadian government and some restrictions on high ratio mortgages in the UK. In
Europe, deflationary fears have caused the central bank to move to negative rates in the hope of
maintaining positive growth in the economy through investment and spending. European authorities
fear of slipping into a prolonged deflationary period like that of Japan following such massive credit
expansion must be influencing their decisions. David Stockman, a former Director of the Office of
Management and Budget in the US, remarked: “How could any adult believe that a benchmark rate cut
of 10 basis points from an already microscopic level of 25 basis points, move the needle in an economy
with $60 trillion of public and private credit debt?”
This appetite for equities is occurring in a slow growth, low interest rate environment. In the US, GDP
forecasts for the year have been sharply curtailed following the drastic revision to the first quarter
estimate. Canada’s growth will be directly affected by the lower US growth. Low interest rates have
pushed investors towards higher risk equities particularly in the last year where smaller capitalized
securities have dramatically outperformed their larger brethren. Official inflation appears to be at low
levels to anyone who has lived through the last few decades, but the trend suggests some acceleration in
the last few quarters. From a valuation perspective, multiples are on the high side, although not
dramatically so as the profitability of companies has gone up. Despite the slow growth in sales during
this recovery, profits have improved largely as a result of tight cost control, share buybacks and more
limited capital expenditures.
So what should investors do in this environment?
Our view is that it would be prudent to take some profits in securities that have substantial capital gains.
When markets are going up it takes discipline to increase cash positions. Cash can provide a good
option to purchase good investments on any market setback. Despite attempts by governments to
eliminate the cyclicality in economic growth, it will persist. Do not lose sight of your longer term
investment objectives.

5. 25 Adelaide St. E., Suite 1914, Toronto, ON M5C 3A1 | Phone: 416.607.6642 | www. SprungInvestment. com | P a g e | 5
SECOND QUARTER 2014 FIXED INCOME COMMENTARY
“An economist’s guess is liable to be as good as anybody else’s.” ~ Will Rogers
The Canadian fixed income market continued to build on the performance of the previous quarter
despite the turbulent crosscurrents both in the geopolitical arena and global fixed income markets.
Globally, fixed income markets were being affected by contradictory policy initiatives in differing
jurisdictions. The European Central Bank (ECB) has been expressing concerns regarding the potential
for a deflationary cycle taking hold with glimmers similar to the Japanese experience that resulted in an
extended period of economic stagnation. They reacted by imposing a negative interest rate on banks
depositing funds with the ECB, thereby attempting to stimulate commercial bank lending as this would
be more attractive than paying to have money on deposit.
On the other hand, in the UK, Governor Carney warned that contrary to the European concerns of
deflation, perhaps inflationary pressures are starting to manifest themselves, which would imply the
necessity of an increase in rates sooner than expected. Of course, in the best tradition of central bankers,
he hedged his bets by noting that this would be “data dependent”.
In the US, musings by the Federal Reserve implied that while rates can be expected to stay low in the
near term, the reduction in their bond-buying program would be finished by year-end, after which
interest rate increases might occur within six months.
While these divergent concerns of interest rate direction were being discussed, the geopolitical climate
continued to deteriorate. Despite a ceasefire in the Ukraine, tensions continued to promote the regional
polarization of armed pro-Ukrainian and pro-Russian factions. This situation is perhaps further from a
permanent, peaceful solution than ever.
During the quarter, Iraq followed Syria’s lead into a sectarian vortex of instability. These conditions
prompted the US and Iran to put aside their decades old differences and hold talks in an attempt to
stabilize this situation. Unfortunately, it may be too late and expectations are that continued chaos will
reign. The fallout will continue to affect international oil and financial markets.
The current low interest rate environment had resulted in yield hungry investors chasing ever more risky
securities, which by virtue of the increased demand are yielding ever-lower returns. Clearly investors are
becoming more risk tolerant, or perhaps are able to delude themselves that “this time it is different”,
which generally is a recipe for unpleasant outcomes.
The total return performance of the bond market as measured by the DEX Universe Index for the second
quarter was an increase of 2.0%. The benchmark ten-year Government of Canada bond yield decreased
by 0.3%, to 2.2%.

6. 25 Adelaide St. E., Suite 1914, Toronto, ON M5C 3A1 | Phone: 416.607.6642 | www. SprungInvestment. com | P a g e | 6
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.
Stay connected with Sprung Investment Management:
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