Sprott Resource Class
Eric Nuttall, Portfolio Manager
Paul Wong, Portfolio Manager
|Issue Price||$10.00 per Unit|
|Distributions||Ordinary Dividends Paid in December; Capital Gains Dividends Paid in February; Distributions are Reinvested Automatically|
SPR106 - FE (A)
|Nature of Securities||Shares of a Class of a Mutual Fund Corporation|
|Type of Fund||Resource Sector|
|Minimum Initial Investment||$1,000 CAD|
|Minimum Subsequent Investment||$25 CAD|
|Minimum Investment Term||90 days (2% penalty) Early Redemption Fees will not be charged for redemption of shares which were issued in connection with the roll-over of assets from Flow-Through Limited Partnerships managed by us.|
|Management Fee||2.5% annual - (A) 1.5% annual - (F)|
|Performance Fee||10% of excess over blended benchmark index|
|Eligible for Registered Plans||Yes|
|Investor Risk Tolerance||High|
Fund ObjectiveThe investment objective of the Fund is to seek to achieve long-term capital growth. The Fund invests primarily in equity and equity-related securities of companies in Canada and around the world that are involved directly or indirectly in the natural resource sector.
The Sprott Resource Class Series A (the “Fund”) fell by 8.0% during the quarter compared to the 4.0% decline of its blended benchmark of 50% S&P/TSX Capped Materials Total Return Index and 50% S&P/TSX Capped Energy Total Return Index.
The Fund’s broad allocation to energy stocks, materials stocks and cash was 63.6%, 29.56% and 6.8%, respectively, at the end of the quarter. While WTI crude oil advanced 6.5% in Canadian dollar terms during the quarter, energy share prices remained depressed as investors shunned Canadian oil stocks due to concerns revolving around lack of pipeline takeaway capacity and the longer-term trend of US oil production growth. While Fund holdings such as Tourmaline Oil Corp., Marathon Petroleum Corp. and Secure Energy Services have made positive contributions to performance, small-cap energy stocks endured heavy selling pressure as investors moved out of the sector.
Small-cap precious metals stocks suffered as inflationary fears subsided, resulting from news that additional US money printing programs would not be needed. The consequential sell-off in precious metals put further strain on junior miners and explorers which experienced augmented selling pressure.
The market has assigned a premium on liquidity and yield and, as a result, investment money flows have moved out of junior energy stocks which typically carry no yield. As the Fund is a vehicle for flow-through rollovers, its holdings will typically reside within the small-cap Canadian resource arena. Until gold and silver bullion resume their upward trend and Canadian energy stocks regain favour, small-cap resource stocks will likely experience lackluster returns. Yet their valuations remain so cheap that we believe long-term investors will be rewarded by maintaining an allocation.
The indicated rates of return for series A/class A securities of the Funds are based on the historical annual compounded total returns including changes in unit/share value and reinvestment of all distributions or dividends and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. This communication does not constitute an offer to sell or solicitation to purchase securities of the Funds.