Sprott 2010 Flow-Through Limited Partnership
Investment Team
Allan Jacobs
Senior Portfolio Manager, Director of Small Cap InvestmentsAllan Jacobs
Senior Portfolio Manager, Director of Small Cap Investments
Allan Jacobs joined SAM in August 2007 as a Director of Small Cap Investments with focus on the Sprott Small Cap Funds. Prior to joining SAM , Allan was head of Canadian Small Cap equities at Sceptre Investment Counsel, a field he has specialized in for the past 20 years. He was also the Portfolio Manager of the Sceptre Equity Growth Fund, as well as Portfolio Manager of the Sceptre Canadian Equity Small Cap Pooled Fund and the Canadian small cap component of all other institutional portfolios. He managed the Sceptre Small Cap Opportunities Fund (a hedge fund), which was launched on January 31, 2007 (now called the Sprott Small Cap Hedge Fund). He was an integral part of the Canadian Equity team at Sceptre since 1993 and was appointed a Managing Director of Sceptre in 1996.
Allan was acknowledged for his achievements at Sceptre on several occasions. The Sceptre Equity Growth Fund was awarded the Best Canadian Small Cap Fund over one-, three-, five- and ten-year periods at the 2007 Canadian Lipper Fund Awards. The Sceptre Equity Growth Fund was also a finalist for the 2006 Small Capitalization Equity Fund of the Year and was chosen Canadian Equity Fund of the Year in 2005. Furthermore, Allan was chosen the 2006 Fund Manager of the Year at the Canadian Investment Awards. The Small Capitalization Canadian Equity Pooled Fund, also managed by Allan, was awarded Canadian Small Cap Pooled Fund of the Year.
The experience he brought to Sceptre in 1993 included his management of the largest equity fund in South Africa (a $5 billion fund for Old Mutual) and his four years at Canada Life Investment Management Limited as the portfolio manager of Small Cap Canadian equities.
Eric Nuttall
Portfolio ManagerEric Nuttall
Portfolio Manager
Eric Nuttall is a Portfolio Manager with Sprott Asset Management LP. He joined the firm in February 2003 as a research associate and was subsequently promoted to the position of research analyst in 2005, associate portfolio manager in 2008, and then to portfolio manager in January 2010.
Eric is lead portfolio manager of the Sprott Energy Fund, and also co-manages the Sprott 2010 Flow-Through Limited Partnership and the Sprott 2011 Flow-Through Limited Partnership with Allan Jacobs.
In addition to his responsibilities for those two funds, Eric supports the rest of the Sprott portfolio management team with identifying top performing oil and gas investment opportunities. Further, Eric contributes towards internal macro energy forecasts, and his insight into emerging unconventional plays has been covered in several financial publications such as The Wall Street Journal Asia and Barron's.
Eric graduated with high honors from Carleton University with an Honors Bachelor of International Business.
Fund Details
| Eligible for Registered Plans | No |
Sprott 2010 Flow-Through Limited Partnership Announces Completion of Rollover Transaction
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February 2012 Commentary
Following an excellent year for Flow-Through shares and limited partnerships in 2010, performance in 2011 was quite weak for resource stocks (particularly small caps) and consequently for Flow-Through L.P.'s.
Smaller cap resource stocks performed poorly in 2011, despite the fact that most commodity prices rose during the year e.g. gold and oil, which are the main issuers of Flow-Through shares in the mining and energy sectors respectively. Valuations fell dramatically during the year, as cash flows increased but stocks declined significantly.
The after-tax cost of a $25 unit for an Ontario taxpayer (at the highest marginal tax rate of 46.41%) was only $10.78 in 2010. Assuming only a 100% tax deduction, the after-tax cost would have been $13.40 per unit (at marginal tax rate of 46.41%). This reduced the breakeven NAV to approximately $14.00 per unit i.e. a 44% reduction in the unit value from $25 would result in an approximately break-even position after taxes. These calculations are actually conservative, in that they ignore the tax deductions to be received in later years relating to Fund issue costs and agency fees.
Sprott issued only one Flow-Through L.P. in each of 2010 and 2011. By managing the Fund actively throughout 2010, we were able to take advantage of selected new Flow-Through issues in the 4 th quarter of 2010 to improve and diversify the Fund's holdings. In addition, unit holders of Sprott 2010 Flow-Through L.P. ("the Fund") received net tax deductions (after capital gains tax) of 112% in 2010, as we sold 24% of the Fund's investments and re-invested in new Flow-Through L.P. issues. Mining tax credits also helped, to a lesser extent, to reduce the after-tax cost.
The Fund ranked 5 th out of 12 comparable funds for the period from inception until December 30, 2011. On an after-tax return basis, our L.P.'s ranking would be much higher due to the 112% net tax write-off which our unit holders received in 2010 (at 46.41% tax rate in Ontario). The benefit of this is not reflected in the net asset value per unit.
At February 3, 2012, the net asset value of the Fund was $19.37 per unit, which generated an after-tax return (assuming full capital gains tax) of 46.1% for an Ontario taxpayer at the highest marginal tax rate. This compares to an assumed return of only 17.5% if we had invested only 100% of the proceeds in Flow-Through shares and unit holders had received no mining tax credits.
The Fund's net assets totaled $37.5 million at December 30, 2011, with a weighted average market capitalization of $563 million. Mining stocks comprised 41% of the Fund, energy stocks 25% and cash holdings were 34% on December 30, 2011.
The Fund rolled over on a tax-deferred basis to the Sprott Resource Class mutual fund on February 3, 2012. This fund is managed by resource experts. Investors may switch on a tax-deferred basis into seven other Sprott corporate class funds (4 equity, 2 fixed income and 1 balanced).
For investors looking for another tax-advantaged investment, Sprott has filed a final prospectus dated January 27, 2012, offering units of a new Flow-Through Limited Partnership; the Sprott 2012 Flow-Through Limited Partnership should benefit over the next 2 years from the dramatic decline in small-to-mid cap resource stocks over the past year (despite rising commodity prices overall).