Are the good times here to stay or are we hearing the Sirens’ call? Since 2008, investors have been on an odyssey. Gradually, stock markets have managed to recover from the disastrous carnage precipitated by the financial crisis of 2007 and 2008. It has been an uneven path back to current market levels as there have been many occasions when it appeared that the fragile recovery would be stymied by bickering politicians, slowing emerging economies, deflationary pressures, regulatory zeal, civil unrest in the Middle East, over spent consumers, etc

1. FOURTH QUARTER 2013
RETROSPECTIVE AND PROSPECTIVE
Beware the Sirens’ Song
25 Adelaide Street East, Suite 1914
Toronto ON M5C 3A1

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 valuedriven 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.
25 Adelaide St. E., Suite 1914, Toronto, ON M5C 3A1 | Phone: 416.607.6642 | www. SprungInvestment. com | P a g e | 2

3. FOURTH QUARTER 2013
RETROSPECTIVE AND PROSPECTIVE
Beware the Sirens’ Song
“Square in your ship’s path are Sirens, crying beauty to bewitch men coasting by; woe to the innocent
who hear that sound.” – Homer, The Odyssey
2013 was a stellar year for equity returns!
Are the good times here to stay or are we hearing the Sirens’ call? Since 2008, investors have been on
an odyssey. Gradually, stock markets have managed to recover from the disastrous carnage precipitated
by the financial crisis of 2007 and 2008. It has been an uneven path back to current market levels as
there have been many occasions when it appeared that the fragile recovery would be stymied by
bickering politicians, slowing emerging economies, deflationary pressures, regulatory zeal, civil unrest
in the Middle East, over spent consumers, etc.
While many of these concerns continue to exist, investors have suppressed their fears and renewed their
faith in equities. North American debt markets produced the first negative return in close to fifteen
years, further enhancing the appeal of positive equity performance. In contrast, note that sovereign
Greek debt was one of the best performing global asset classes up by some 48%. Sovereign debt in
Ireland, Italy and Spain also recorded positive returns for the year yet these four countries were at the
epicentre of the financial crisis.
Canadian Dollar
Q1
Q2
Toronto Stock
Exchange
S&P 500
MSCI EAFE*
91 Day T-Bill
DEX**
CDN/US dollar
3.3%
13.2%
6.8%
0.2%
0.7%
-4.1%
6.5%
1.3%
0.2%
-2.4%
Q3
Q4
6.2%
3.1%
8.7%
0.3%
0.1%
7.3%
13.9%
8.6%
0.2%
0.4%
US Dollar
YTD
Q1
Q2
13.0%
41.7%
27.8%
1.0%
-1.2%
Q3
Q4
YTD
10.6% 2.9% 5.2% 10.5% 32.4%
4.4% -2.1% 10.9% 5.4% 19.4%
-2.2% -3.2%
2.2% -3.3% -6.5%
* Europe, Asia and Far East Index
** Canadian Bond Universe Index
25 Adelaide St. E., Suite 1914, Toronto, ON M5C 3A1 | Phone: 416.607.6642 | www. SprungInvestment. com | P a g e | 3

4. The question going forward is whether this renewed enthusiasm for equities, particularly in the US, is
justified by the underlying economic fundamentals, or have valuations been inflated on hope and
speculation?
The S&P 500 Index measured a total return for the year of 32.4% of which dividends accounted for
2.8%. Together, earnings and dividends accounted for about 9.5% of the increase in the Total Return
Index, implying that about 23% of the increase is a result of multiple expansion. (The Price to Earnings
Ratio, P/E, is a measure of how much investors will pay for $1.00 of earnings). If you assume that
market multiples were quite depressed at the beginning of the year and that the prospects for the US
economy have improved substantially, then such a multiple expansion may well be justified. Over the
year, evidence of improving employment prospects, greater consumer spending capacity, more stable
housing markets, greater manufacturing and services output, and, indications of better political crossparty cooperation would all tend to support multiple expansion. To the extent that intransient budget
deficits remain, deflationary concerns persist, political harmony may prove illusive and global trade
uncertainties could derail the recovery, less of a case can be made for this multiple expansion. Over the
year, The S&P 500 earnings multiple has expanded from 13X to around 16X. While 13X is on the low
side of historical norms, 16X is close to the norm and possibly slightly high. Utilizing longer term
multiples based on moving averages, the current level of the S&P 500 leaves little room for positive
surprises.
In Canada, dividends accounted for 3.4% of the total return. Earnings growth in Canada was modestly
negative due to the drag from the Materials and Energy sectors. While this was largely offset by the
yield, roughly 11.8% of the 13.0% increase in the Index was due to the multiple expansion from 13X to
just under 15X at present. The more robust growth in the US could well have accounted for the 6.5%
decline in the value of the Canadian dollar relative to its US counterpart. Historically, the valuation
level in the Canadian market is not indicative of being either cheap or expensive. An argument could be
made that continued growth in the US economy, greater economic stability in Europe and steady growth
in the developing economies will result in greater demand for resources that could result in a closing of
the valuation gap.
2013 was a year in which multiples expanded globally in anticipation of growing economic recovery.
This is not surprising given the shocks of 2007 and 2008. We are witnessing the realignment of
expectations as economies recover from a critical to a more stable state. Setbacks are likely, as such
recoveries are complex and subject to surprises.
All of this speculation could be disrupted by an unforeseen geo-political calamity. As always, we will
continue to focus on the fundamentals and valuations of companies through the analysis of their
respective valuations and operations. Certainly, macroeconomic calamities will have their effect, but in
the longer term, solid financially sound firms will ultimately prosper and their share price will reflect
their strengths.
As markets have improved, we have witnessed an accelerating shift to greater equity exposure. The
question is; is this shift based on fact or are investors being seduced by the Sirens call?
25 Adelaide St. E., Suite 1914, Toronto, ON M5C 3A1 | Phone: 416.607.6642 | www. SprungInvestment. com | P a g e | 4

5. FOURTH QUARTER 2013 FIXED INCOME COMMENTARY
“Deficits mean future tax increases, pure and simple.”- Ron Paul
As in the third quarter, when the Federal Reserve (Fed) declined to reduce its securities purchases, a
process referred to as the “taper”, fixed income markets continued their slow grind towards higher rates
during the rest of the year.
The decision by the Fed to pass on the taper sent confusing signals to the market. Given the level of
market expectations, and the apparent improvements in economic statistics, this lack of action brought
into focus the question; is the economy too weak to accommodate the taper?
The lack of action can partially be explained by the modest employment growth and continuing low
inflation measures that could be indicative of deflationary forces. Both of these factors suggest that a
substantive reduction in stimulus might still be premature.
Late in the fourth quarter, the Fed finally decided to act despite the forgoing uncertainty. As it was
largely viewed as a symbolic move to announce future reductions in the debt repurchase program,
investors did react positively.
In Canada there were whispers, echoed by the Organization for Economic Development (OECD), about
the likelihood of increases in interest rates. Overall this threat of rising rates did not come as too much of
a surprise to market participants as interest rates had already been observed to be slowly increasing.
Higher rates resulted in an overall decline in the broad bond index over the course of the year.
The Bank of Canada was concerned with the conflicting pressures of below target inflation rates
combined with high consumer debt levels that were spurred by low interest rates. Faced with this
conundrum it is likely that the Bank of Canada will, for the time being, remain cautiously on the
sidelines by not changing the trend setting overnight lending rate. They would prefer to allow the market
to bid up interest rates in the same slow, gradual manner as it has done so far.
Unless the unlikely event of a catastrophic downturn in equity markets and/or the world economies slide
back into recession, the likely scenario for the bond market on both sides of the border will remain one
of rising interest rates, albeit at a modest pace. In light of this, we continue to remain defensive,
investing in short-term, high quality, liquid securities.
The total return performance of the bond market as measured by the DEX Universe Index for the fourth
quarter was a marginal increase of 0.4%. The benchmark ten-year Government of Canada bond yield
increased by 0.3%, to 2.8%. Overall for the year the DEX index declined by 1.2% with the yield of the
ten-year Government of Canada bond increasing by 1.0%.
25 Adelaide St. E., Suite 1914, Toronto, ON M5C 3A1 | Phone: 416.607.6642 | www. SprungInvestment. com | P a g e | 5

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:
Twitter https://twitter.com/SprungInvest Twitter handle @SprungInvest
Facebook http://www.facebook.com/SprungInvestment
Linkedin http://www.linkedin.com/company/1699967
Google+ https://plus.google.com/+Sprunginvestment/
See Michael on BNN http://www.sprunginvestment.com/videos/
25 Adelaide St. E., Suite 1914, Toronto, ON M5C 3A1 | Phone: 416.607.6642 | www. SprungInvestment. com | P a g e | 6