N-Q 1 d45262dnq.htm SPROTT FOCUS TRUST INC. SPROTT FOCUS TRUST INC.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS

OF REGISTERED MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 812-14437

 

 

SPROTT FOCUS TRUST, INC.

(Exact name of Registrant as specified in charter)

 

 

Royal Bank Plaza, South Tower

200 Bay Street, Suite 2700

Toronto, Ontario, Canada M5J2J1

(Address of principal executive offices)(Zip Code)

 

 

Bibb L. Strench, Esq.

Seward & Kissel LLP

901 K Street NW

Washington, DC 20001

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: 416-943-4065

Date of fiscal year end: December 31, 2015

Date of reporting period: September 30, 2015

 

 

 


Item 1. Schedule of Investments. – The schedules of investments for the period ended September 30, 2015, are filed herewith.


Sprott Focus Trust (formerly, Royce Focus Trust)

September 30, 2015 (unaudited)

 

Schedule of Investments

COMMON STOCKS - 95.1%

 

     SHARES      VALUE  

CONSUMER DISCRETIONARY - 15.6%

     

AUTOMOBILES - 2.5%

     

Thor Industries, Inc.

     80,000       $ 4,144,000   
     

 

 

 

HOUSEHOLD DURABLES - 3.9%

     

Century Communities, Inc.1

     180,000         3,573,000   

Garmin Ltd.2

     80,000         2,870,400   
     

 

 

 
        6,443,400   
     

 

 

 

SPECIALTY RETAIL - 8.3%

     

Buckle, Inc. (The)2

     110,000         4,066,700   

Chico’s FAS, Inc.

     150,000         2,359,500   

GameStop Corp. Cl. A2

     180,000         7,417,800   
     

 

 

 
        13,844,000   
     

 

 

 

TEXTILES, APPAREL & LUXURY GOODS - 0.9%

     

Coach, Inc.

     50,000         1,446,500   
     

 

 

 

Total (Cost $22,937,736)

  

     25,877,900   
     

 

 

 

CONSUMER STAPLES - 13.9%

     

FOOD PRODUCTS - 12.3%

     

Cal-Maine Foods, Inc.2

     140,000         7,645,400   

Industrias Bachoco SAB de CV ADR2

     95,000         5,804,500   

Sanderson Farms, Inc.2

     100,000         6,857,000   
     

 

 

 
        20,306,900   
     

 

 

 

PERSONAL PRODUCTS - 1.6%

     

Nu Skin Enterprises, Inc. Cl. A2

     65,000         2,683,200   
     

 

 

 

Total (Cost $17,506,368)

  

     22,990,100   
     

 

 

 

ENERGY - 9.1%

     

ENERGY EQUIPMENT & SERVICES - 7.1%

     

Helmerich & Payne, Inc.2

     50,000         2,363,000   

Pason Systems, Inc.2

     290,000         4,076,733   

TGS Nopec Geophysical Co. ASA2

     190,000         3,512,024   

Unit Corp.1

     150,000         1,689,000   
     

 

 

 
        11,640,757   
     

 

 

 

OIL, GAS & CONSUMABLE FUELS - 2.0%

     

Exxon Mobil Corp.

     45,000         3,345,750   
     

 

 

 

Total (Cost $19,449,717)

  

     14,986,507   
     

 

 

 

FINANCIALS - 17.0%

     

CAPITAL MARKETS - 9.8%

     

Ashmore Group plc2

     1,000,000         3,737,104   

Franklin Resources, Inc.

     180,000         6,706,800   

Sprott, Inc.2,3

     1,750,000         3,107,906   

Value Partners Group Ltd.

     2,850,000         2,717,727   
     

 

 

 
        16,269,537   
     

 

 

 

DIVERSIFIED FINANCIAL SERVICES - 2.0%

     

Berkshire Hathaway, Inc. Cl. B1

     25,000         3,260,000   
     

 

 

 

REAL ESTATE MANAGEMENT & DEVELOPMENT - 5.2%

     

FRP Holdings, Inc.1

     85,000         2,561,900   

Kennedy-Wilson Holdings, Inc.

     270,000         5,985,900   
     

 

 

 
        8,547,800   
     

 

 

 

Total (Cost $26,603,300)

  

     28,077,337   
     

 

 

 


HEALTH CARE - 2.2%

     

BIOTECHNOLOGY - 2.2%

     

Myriad Genetics, Inc.1,2

     95,000       $ 3,560,600   
     

 

 

 

Total (Cost $2,380,049)

        3,560,600   
     

 

 

 

INDUSTRIALS - 2.8%

     

CONSTRUCTION & ENGINEERING - 1.3%

     

Jacobs Engineering Group, Inc.1

     60,000         2,245,800   
     

 

 

 

MARINE - 1.5%

     

Clarkson plc

     80,000         2,469,495   
     

 

 

 

Total (Cost $4,914,769)

        4,715,295   
     

 

 

 

INFORMATION TECHNOLOGY - 18.5%

     

COMPUTERS & PERIPHERALS - 10.4%

     

Apple, Inc.

     65,000         7,169,500   

SanDisk Corp.

     45,000         2,444,850   

Western Digital Corp.

     95,000         7,546,800   
     

 

 

 
        17,161,150   
     

 

 

 

INTERNET SOFTWARE & SERVICES - 0.5%

     

GoldMoney, Inc.1,2

     350,000         773,698   
     

 

 

 

SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 7.6%

     

Cirrus Logic, Inc.1

     210,000         6,617,100   

MKS Instruments, Inc.

     180,000         6,035,400   
     

 

 

 
        12,652,500   
     

 

 

 

Total (Cost $21,682,872)

        30,587,348   
     

 

 

 

MATERIALS - 16.0%

     

CHEMICALS - 4.0%

     

Mosaic Co. (The)

     70,000         2,177,700   

Westlake Chemical Corp.

     85,000         4,410,650   
     

 

 

 
        6,588,350   
     

 

 

 

METALS & MINING - 12.0%

     

Alamos Gold, Inc. Cl. A

     150,000         555,264   

Franco-Nevada Corp.

     50,000         2,201,000   

Fresnillo plc

     230,000         2,061,848   

Globe Specialty Metals, Inc.

     300,000         3,639,000   

Hochschild Mining plc1,2

     1,500,000         1,591,153   

Major Drilling Group International, Inc.

     350,000         1,167,104   

Pan American Silver Corp.2

     200,000         1,270,000   

Randgold Resources Ltd. ADR

     40,000         2,363,600   

Reliance Steel & Aluminum Co.

     50,000         2,700,500   

Seabridge Gold, Inc.1

     400,000         2,320,000   
     

 

 

 
        19,869,469   
     

 

 

 

Total (Cost $33,814,788)

        26,457,819   
     

 

 

 

TOTAL COMMON STOCKS (Cost $149,289,599)

        157,252,906   
     

 

 

 

REPURCHASE AGREEMENT - 5.7%

     

Fixed Income Clearing Corporation, 0.00% dated 9/30/15, due 10/1/15, maturity value $9,379,000 (collateralized by a U.S. Treasury Note, 2.00% due 10/31/21, valued at $9,569,781)

        9,379,000   
     

 

 

 

Total (Cost $9,379,000)

        9,379,000   
     

 

 

 


SECURITIES LENDING COLLATERAL - 26.5%

     

State Street Navigator Securities Lending Prime Portfolio4

     43,907,152       $ 43,907,152   
     

 

 

 

Total (Cost $43,907,152)

  

     43,907,152   
     

 

 

 

TOTAL INVESTMENTS - 127.3% (Cost $202,575,751)

  

     210,539,058   
     

 

 

 

LIABILITIES LESS CASH AND OTHER ASSETS - (27.3)%

  

     (45,191,450
     

 

 

 

NET ASSETS - 100.0%

  

   $ 165,347,608   
     

 

 

 

 

1  Non-Income producing.
2  All or a portion of this security is out on loan.
3  Affiliated issuer.
4  Represents an investment of securities lending cash collateral.

TAX INFORMATION: The cost of total investments for Federal income tax purposes was $202,575,751. At September 30, 2015, net unrealized appreciation for all securities was $7,963,307, consisting of aggregate gross unrealized appreciation of $27,045,444 and aggregate gross unrealized depreciation of $19,082,137.

Valuation of Investments:

Securities are valued as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on the valuation date. Securities that trade on an exchange, and securities traded on Nasdaq’s Electronic Bulletin Board, are valued at their last reported sales price or Nasdaq official closing price taken from the primary market in which each security trades or, if no sale is reported for such day, at their highest bid price. Other over-the-counter securities for which market quotations are readily available are valued at their highest bid price, except in the case of some bonds and other fixed income securities which may be valued by reference to other securities with comparable ratings, interest rates and maturities, using established independent pricing services. The Fund values its non-U.S. dollar denominated securities in U.S. dollars daily at the prevailing foreign currency exchange rates as quoted by a major bank. Securities for which market quotations are not readily available are valued at their fair value in accordance with the provisions of the 1940 Act, under procedures approved by the Fund’s Board of Directors, and are reported as Level 3 securities. As a general principle, the fair value of a security is the amount which the Fund might reasonably expect to receive for the security upon its current sale. However, in light of the judgment involved in fair valuations, there can be no assurance that a fair value assigned to a particular security will be the amount which the Fund might be able to receive upon its current sale. In addition, if, between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. The Fund uses an independent pricing service to provide fair value estimates for relevant non-U.S. equity securities on days when the U.S. market volatility exceeds a certain threshold. This pricing service uses proprietary correlations it has developed between the movement of prices of non-U.S. equity securities and indices of U.S.-traded securities, futures contracts and other indications to estimate the fair value of relevant non-U.S. securities. When fair value pricing is employed, the prices of securities used by the Fund may differ from quoted or published prices for the same security. Investments in money market funds are valued at net asset value per share.

Various inputs are used in determining the value of the Fund’s investments, as noted above. These inputs are summarized in the three broad levels below:

Level 1 – quoted prices in active markets for identical securities.

Level 2 – other significant observable inputs (including quoted prices for similar securities, foreign securities that may be fair valued and repurchase agreements).

Level 3 – significant unobservable inputs (including last trade price before trading was suspended, or at a discount thereto for lack of marketability or otherwise, market price information regarding other securities, information received from the company and/or published documents, including SEC filings and financial statements, or other publicly available information).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.


The following is a summary of the Fund’s investments as of September 30, 2015 based on the inputs used to value them. For a detailed breakout of common stocks by sector classification, please refer to the Schedule of Investments.

 

     Level 1      Level 2      Level 3      Total  

Common Stocks

   $ 141,163,555       $ 16,089,351       $ —         $ 157,252,906   

Cash Equivalents

     —           9,379,000         —           9,379,000   

Securities Lending Collateral

     43,907,152         —           —           43,907,152   

Repurchase Agreements:

The Fund may enter into repurchase agreements with institutions that the Fund’s investment adviser has determined are creditworthy. The Fund restricts repurchase agreements to maturities of no more than seven days. Securities pledged as collateral for repurchase agreements, which are held until maturity of the repurchase agreements, are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). Repurchase agreements could involve certain risks in the event of default or insolvency of the counter-party, including possible delays or restrictions upon the ability of the Fund to dispose of its underlying securities.

Investments in Affiliated Issuers:

The Fund may engage in certain transactions involving affiliates. The table below shows the investment activities involving affiliates during the reporting period:

 

Affiliated Issuer

   Balance of
Shares
Held at
12/31/2014
     Gross
Purchases
     Gross
Sales
     Balance of
Shares
Held at
9/30/2015
     Dividend
Income for
period from
3/6/2015 to
9/30/2015(1)
     Value of
shares at
9/30/2015
 

Sprott, Inc. (2)

     1,750,000         —           —           1,750,000       $ 104,977       $ 3,107,906   

 

(1)  Sprott Asset Management LP became the investment adviser of the Fund on March 6, 2015.
(2)  Sprott, Inc. was not an affiliate as of December 31, 2014.

Lending of Portfolio Securities:

The Fund, using State Street Bank and Trust Company (“State Street”) as its lending agent, may loan securities to qualified brokers and dealers in exchange for negotiated lenders’ fees. The Fund receives cash collateral, which may be invested by the lending agent in short-term instruments, in an amount at least equal to 102% (for loans of U.S. securities) or 105% (for loans of non-U.S. securities) of the market value of the loaned securities at the inception of each loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. As of September 30, 2015, the cash collateral received by the Fund was invested in the State Street Navigator Securities Lending Prime Portfolio, which is a 1940 Act money market fund. To the extent that advisory or other fees paid by the State Street Navigator Securities Lending Prime Portfolio are for the same or similar services as fees paid by the Fund, there will be a layering of fees, which would increase expenses and decrease returns. Information regarding the value of the securities loaned and the value of the collateral at period end is included in the Schedule of Investments. The Fund could experience a delay in recovering its securities, a possible loss of income or value and record realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. These loans involve the risk of delay in receiving additional collateral in the event that the collateral decreases below the value of the securities loaned and the risks of the loss of rights in the collateral should the borrower of the securities experience financial difficulties.


As of September 30, 2015, the Fund had outstanding loans of securities to certain approved brokers for which the Fund received collateral:

 

Market Value of Loaned
Securities

     Market Value of Cash
Collateral
     Market Value of Non Cash
Collateral
 
  $              44,376,821       $ 43,907,152       $ 944,002   

Other information regarding the Fund is available in the Fund’s most recent Report to Stockholders. This information is available through Sprott Asset Management’s website www.sprott.com and on the Securities and Exchange Commission’s website (www.sec.gov).


Item 2. Controls and Procedures.

 

  (a) The Registrant’s Principal Executive Officer and Principal Financial Officer concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c))), were effective based on the evaluation of Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this report.

 

  (b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d)) that occurred during the Registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 3. Exhibits.

Certification of the Principal Executive Officer and Principal Financial Officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is attached hereto as Exhibit 99CERT.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

   SPROTT FOCUS TRUST, INC.   
By   

/s/ Scott Colbourne

  
  

Scott Colbourne

President

(Principal Executive Officer and

Principal Financial Officer)

  
Date    November 12, 2015   

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

By (Signature and Title) /s/ Scott Colbourne                                              
  

Scott Colbourne

President

(Principal Executive Officer and

Principal Financial Officer)

  
Date    November 12, 2015