Lonestar West Inc. V.LSI

Sprott Small Cap Fund

[retiredcf]

Confirmation of Imhof's positive recommendation. GLTA

Performance Summary

• The Sprott Small Cap Equity Fund Series A (the “Fund”) increased by 8.0% this quarter, slightly ahead of the S&P/TSX SmallCap Total Return Index (“TRI”) and well ahead of the S&P/TSX Composite TRI of 6.2%.

Contributors to Performance

• Included top 10 holdings Canacol Energy (up 51%), Home Capital (up 30%), Autocanada (up 27%) and Sylogist (up 25%).
• Lonestar West, a new purchase this quarter, increased by 41% above the Fund’s cost price.
• Other contributors included Global Water Resources (up 109% off a low base due to much improved fundamentals), Silvercrest Mines (up 27%), Airboss and Enterprise Group (both up 23%).

Detractors from Performance

• While the stock prices of most junior gold stocks increased significantly during the quarter from very low levels at the end of June 2013, Galane Gold (down 40%) and Timmins Gold (down 25%) went against this general trend.
• Other weak performers were Mart Resources (down 19%) and Wi-Lan (down 18%).

Significant Transactions

• New holdings included Altus Group (inexpensive commercial real estate services group with strong cash flows and a good dividend yield), Lonestar West (fast growing hydrovac truck operator), Transat (international airline and tour operator with growing earnings, a strong balance sheet and fairly low valuation), Osisko Mining and Surge Energy.