Manager Commentary June 30, 2025

Whitney George

The following commentary covers the six-month period from January 1 - June 30, 2025, and is an excerpt from the Sprott Focus Trust 2025 Semi-Annual Report.

June 30, 2025

Dear Fellow Shareholders,

The first six months of 2025 proved turbulent yet ultimately rewarding for Sprott Focus Trust (FUND). While equity markets began the year on solid footing, an abrupt April-May drawdown sparked by tariff headlines and a spike in real interest rates tested conviction across all asset classes. FUND’s Net Asset Value (NAV) appreciated 3.67% and the shares produced a market price total return of 5.88% due to a modest reduction in the discount to NAV. This compares to a 5.75% return for the Russell 3000 Index, but with somewhat less volatility. At its worst, FUND suffered a 17% drawdown versus 21% for the benchmark index.

In our 2024 annual letter, we warned that we thought 2025 would prove to be a volatile year and that we were overdue for a correction. We also quoted J.P. Morgan’s Chief Strategist Michael Cembalest, who wrote: “Policies and statements from Trump nominees (both cabinet level and those not requiring Senate confirmation) indicate that they aim to ‘break’ something…Whatever the goals, I take them at their word: they are going to break something, I just don’t know what.” While we agreed with Cembalest, neither he, we, nor the markets expected the Trump administration to break everything. Deportations, large government layoffs, threats to cut funding to institutions, both public and private and massive tariffs have all been announced and, in some cases, implemented. All of this occurred during the administration’s first 100 days. Thus far, “Make America Great Again” (MAGA) has turned into “Sell America Down” (SAD). In our view, tariffs are potentially the most damaging of these initiatives due to their effects on the global economy. They are undeniably a tax, and large tax hikes have never been good for the economy. To paraphrase a widely shared meme we saw recently, “We’ve done this massive tariff thing three times in American history. All spaced 100 years apart because everyone who remembers the last one needs to be dead for the next to happen.” The last two major tariff regimes caused depressions, and we are skeptical that this time will be different.

Positioning & Portfolio Activity

During the first half of 2025, Sprott Focus Trust maintained its disciplined, value-oriented investment approach while navigating a complex macroeconomic environment marked by persistent inflationary pressures, commodity volatility and diverging global growth trajectories. As of June 30, 2025, the portfolio consisted of 30 equity holdings, down from 32 at year-end 2024, with net assets totaling approximately US$249 million.

FUND’s portfolio sector allocations remained relatively consistent, with Materials increasing slightly to 41.6% of assets (from 38.4%), continuing to serve as the primary driver of performance. This sector contributed over 800 basis points to portfolio returns, led by strong gains in Agnico Eagle Mines Limited, ASA Gold and Precious Metals Limited, and Alamos Gold Inc. These names benefited from a resurgence in precious metals prices amid heightened geopolitical tensions and central bank accumulation trends.

Financials also contributed positively, with Federated Hermes, Inc. and Artisan Partners Asset Management Inc. delivering stable income and capital appreciation. Conversely, the Energy and Real Estate sectors detracted from FUND’s performance in the first half, with Helmerich & Payne, Inc., Westlake Corporation and Kennedy-Wilson Holdings, Inc. among the top-five detractors. These underperformers were adversely impacted by weaker-than-expected earnings and sector-specific headwinds, including softening industrial demand and rising financing costs.

FUND’s cash levels were tactically reduced from 7.8% at year-end to 4.6% as of June 30, 2025, reflecting a more opportunistic deployment of capital into high-conviction ideas. The portfolio’s average market capitalization rose to $3.2 billion, and valuation metrics remained attractive with a weighted average P/E of 13.7x and weighted average P/B of 1.6x. U.S. exposure declined modestly to 65.1%, with increased allocations to international names such as Clarkson PLC and Société BIC, reflecting our global search for value.

Figure 3

Portfolio Diagnostics as of 6/30/2025

While the portfolio saw no entirely new security additions during the first half of 2025, it did experience two complete exits. Radius Recycling, Inc. was sold following the announcement of its acquisition by Toyota Tsusho America, Inc. a U.S. subsidiary of Toyota Tsusho Corporation. Under the terms of the agreement, Radius shareholders received $30.00 per share in cash, representing a 115% premium to the company’s closing price prior to announcement. The transaction closed on July 10, 2025. Radius had long been a strategic holding due to its leadership in metal recycling and circular economy initiatives, and the acquisition by a global industrial leader like Toyota Tsusho validates the long-term value embedded in the business.

The second exit was Seabridge Gold Inc., which was sold as part of a broader consolidation within our gold exposure sleeve. While Seabridge offers long-term optionality through its large undeveloped reserves, the lack of near-term catalysts and the capital intensity of its projects made it less compelling relative to other gold holdings in the portfolio that offer stronger free cash flow and dividend support.

These exits reflect our ongoing commitment to portfolio optimization and capital discipline. The absence of new names in the first half of the year underscores our selective approach in a market where valuations in many sectors remain elevated. Instead, we focused on increasing weights in existing high-conviction holdings, such as THOR Industries, Westlake Corporation and Helmerich & Payne, where we see favorable risk-reward dynamics. Looking ahead, we remain vigilant and patient, with dry powder available to capitalize on dislocations. Our emphasis continues to be on businesses with strong balance sheets, durable cash flows and shareholder-aligned management teams.

Performance Contributors and Detractors

Figure 4 shows which positions contributed and detracted the most from FUND’s aggregate performance for the six-month period ended June 30, 2025.

Figure 4

Top Contributors to Performance

The top contributor to FUND’s portfolio in the first half of 2025 was Agnico Eagle Mines Limited, delivering a total return of 53.2% and contributing 2.11% to the portfolio’s overall performance. This marks a continuation of its strong momentum, as it was also a top contributor in 2024. Agnico Eagle’s performance in H1 2025 was underpinned by robust operational execution and financial strength. In Q1 2025, the company reported record adjusted net income of $770 million and free cash flow of $594 million, driven by strong gold production of 873,794 ounces at competitive all-in sustaining costs of $1,183 per ounce. The company also made strategic progress on key development projects, including ramp development at East Gouldie and exploration at Upper Beaver and Hope Bay. With a near zero net debt position and a positive credit outlook from Moody’s, Agnico Eagle is well-positioned for continued growth and shareholder returns in a favorable gold price environment.

ASA Gold and Precious Metals Limited delivered a total return of 56.3% and contributed 1.25% to FUND’s overall portfolio performance in the first half of 2025. The company’s focus on precious metals, particularly gold, benefited from rising commodity prices amid global macroeconomic uncertainty. Furthermore, its portfolio composition is tilted toward smaller and medium-sized companies, which tend to benefit more from increasing precious metals prices.

OR Royalties Inc., an intermediate precious metals royalty company which holds 195 royalties, streams and precious metal offtakes, continued to be a strong contributor to FUND’s performance. In the first half of 2025, it delivered a total return of 42.7% and contributed 1.16% to overall portfolio performance. The company had strong Q1 financial results, including $54.9 million in royalty and stream revenues, $46.1 million in operating cash flow and net earnings of $25.6 million. CEO Jason Attew also highlighted sequentially improving gold equivalent ounce deliveries and several near-term catalysts, including the Cariboo project and Dalgaranga Royalty acceleration, as key drivers of growth. OR Royalties also continued to repay its revolving credit facility and in June was in a net cash position. Furthermore, a 20% dividend increase announced in Q2 2025 further signaled management’s confidence in future cash flows.

Alamos Gold Inc. was the fourth-largest contributor to FUND’s portfolio in the first half of 2025, delivering a total return of 44.3% and contributing 1.12% to performance. Alamos reported record 2024 production of 567,000 ounces, a 7% increase year-over-year, and released an updated life of mine plan for the Island Gold District, positioning it as one of Canada’s largest and lowestcost gold operations. The Island Gold District, bolstered by the integration of the Magino mine, produced 59,200 ounces in Q1 2025 alone, a 77% year-over-year increase. Additionally, Alamos expanded its global mineral reserves by 31%, driven by high-grade additions at Island Gold and the acquisition of Magino. These strategic moves, combined with a robust gold price environment and strong free cash flow generation, have significantly enhanced investor confidence and supported the stock’s strong performance.

Pan American Silver Corp. emerged as the fifth-highest contributor to FUND’s portfolio in the first half of 2025, generating a total return of 41.6% and adding 0.80% to overall portfolio performance. The stock’s strong performance was driven by robust financial results, including record mine operating earnings and free cash flow, supported by higher precious metals prices and disciplined cost control. In addition, Pan American announced a transformative $2.1 billion acquisition of MAG Silver Corp., securing a 44% stake in the high-grade Juanicipio mine. This strategic move is expected to significantly enhance the company’s silver production profile and long-term cash flow generation. With reaffirmed 2025 guidance and a strengthened asset base, investor sentiment has remained positive, helping to propel the stock’s strong performance during the period.

Top Detractors to Performance

Helmerich & Payne, Inc., which designs, fabricates and operates highperformance drilling rigs in conventional and unconventional plays around the world, was the largest detractor to FUND’s portfolio in the first half of 2025, with a total return of -51.6% and a -2.63% contribution to portfolio performance. Despite a stable operational base, the company faced headwinds including weaker-than-expected rig utilization and pricing pressure in its North American drilling segment. According to its fiscal Q1 and Q2 2025 earnings releases, Helmerich & Payne reported a softening in upstream capital spending and delays in international contract mobilizations. Additionally, investor sentiment was dampened by uncertainty surrounding its acquisition of KCA Deutag International Limited and broader energy market volatility.

Westlake Corporation, a global manufacturer and supplier of chemicals, polymers and building products, was a notable detractor from the portfolio in the first half of 2025, contributing -1.51% to portfolio performance with a total return of -33.0%. The stock’s decline was driven by a challenging operating environment, as highlighted in its Q1 2025 earnings report. The company posted a net loss of $40 million and a significant drop in EBITDA (earnings before interest, taxes, depreciation and amortization) to $288 million, down from $546 million in Q1 2024. Key headwinds included higher North American feedstock and energy costs while experiencing lower sales volume in the Performance & Essential Materials (PEM) segment due to higher planned turnarounds and unplanned plant outages. Despite these setbacks, Westlake’s Housing & Infrastructure Products segment showed resilience with 4% sequential sales volume growth, supported by strong demand in Compounds, Siding & Trim and Roofing. Looking ahead, we are optimistic about improved operating rates following the completion of major turnarounds and, the company’s strong balance sheet and strategic positioning to navigate ongoing macroeconomic uncertainty.

Kennedy-Wilson Holdings, Inc. returned -29.8% and a negative contribution to FUND’s performance of -1.18% in the first half of 2025. Despite this, the company, a global real estate investment firm specializing in multifamily, industrial and debt investments across the U.S., U.K. and Ireland, reported operational progress in 2025. It experienced a 4.3% increase in same-property multifamily net operating income in Q1 and over $1 billion in capital deployment. The firm’s investment management platform expanded to $9.1 billion in assets, and it continued to grow its rental housing footprint, now encompassing 65,000 units. However, investor sentiment remained cautious amid a Q1 net loss of $40.8 million and reduced adjusted EBITDA compared to the prior year. The company’s strategic focus on deleveraging and asset sales, including over $400 million in expected proceeds in 2025, should support future stabilization.

Marcus & Millichap, Inc., a leading national real estate services firm specializing in commercial real estate investment sales, financing and advisory services, returned -19.1% and contributed -0.56% to the portfolio’s performance during the period. Despite reporting a 12.3% year-over-year revenue increase in Q1 2025, driven by a 17.6% rise in total sales volume and a 25.7% increase in financing fees, the company posted a net loss of $4.4 million. The underperformance was due to persistent macroeconomic headwinds, including elevated debt costs, interest rate uncertainty and a wide bid-ask spread in the commercial real estate market. While we are optimistic about long-term growth given strong fundamentals and strategic investments in talent and technology, investor sentiment remained cautious amid concerns over inflation, policy shifts and geopolitical risks.

FRP Holdings, Inc. posted a total return of -12.2% and contributed -0.47% to FUND’s overall performance. The company, which specializes in real estate development and property management with a focus on industrial and commercial assets, faced headwinds amid a challenging environment for small-cap and real estate equities. The broader macroeconomic backdrop in H1 2025—characterized by rising interest rates and investor caution toward debt-reliant sectors—negatively impacted real estate firms like FRP. Despite these pressures, FRP continued to execute on its longterm development strategy. In Q1, the company reported a 31% increase in net income and a 10% rise in pro rata net operating income, driven by higher mining royalty and lending income, and improved joint venture performance. However, industrial net operating income declined due to a tenant default, and multifamily growth is expected to flatten. Despite short-term headwinds, the company is focused on long-term growth through new industrial and multifamily developments, aiming to double its industrial segment over five years and add $6 million in net operating income from 810 new multifamily units. The company continues to maintain a conservative balance sheet and a pipeline of industrial projects.

Outlook

We entered the year prepared for market volatility and, looking ahead, a continuation of more volatility is almost a certainty. While equity investors have become desensitized to tariff news, we know that some tariffs will be implemented, and their inflationary effects will show up with a lag barring a severe economic downturn.

The good news is that there is not much left on the Trump agenda to further shock the markets. The court system is just starting to challenge the legality of all these orders. And in four months, we begin a new election cycle in the U.S., which will force Congress to address the consequences of the Trump agenda. While we can’t rule out the possibility of a Constitutional Crisis in this process, it is likely not something the markets have discounted yet.

The Trump administration was able to get its Big Beautiful Bill passed which is projected to add more than $3 trillion in debt over the next 10 years. Long-term government bond buyers are becoming increasingly sensitive to credit quality and foreigners are repatriating capital in response to the hostile trade negotiations. This is forcing the U.S. Department of the Treasury to finance maturing and new debt at the short end with increased velocity. And the Federal Reserve’s independence at setting short-term interest rates is clearly under attack.

We continue to believe that FUND’s portfolio is well positioned for this uncertain environment. Our hard assets exposure should protect us from the strong possibility of the U.S. dollar devaluation and corresponding inflation that will be required to reprice our national debt. Furthermore, certain portfolio companies are returning capital to us through dividends and share buybacks as we do the same for FUND shareholders. In the first six months of 2025, we paid in dividends and bought back 986,122 shares.

As always, I would like to thank our Sprott team for their support. Ryan McIntyre has proven to be an exceptional addition to the portfolio management team and Basia Dworak, who runs the rest of our lives in the Darien office and frees our time to manage FUND. Matt Haynes has left Sprott to pursue his long-time passion for investing in deep value on a global basis at his own firm, 1949 Investments. We wish him well and think his timing is great.

Finally, we are thankful for our long-term patient investors, many of them family. We are excited about our prospects. As always, we would love to hear from you so please call us with comments, questions or concerns at 203.656.2430

Sincerely,

W. Whitney George,

Senior Portfolio Manager

July 27, 2025

The views expressed above reflect those of Mr. George as of the date stated above and do not necessarily represent the views of Sprott Asset Management USA, Inc. or any other person in the Sprott organization. Any such views are subject to change at any time based upon market or other conditions and Sprott disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for the Sprott Focus Trust are based on numerous factors, may not be relied on as an indication of trading intent on behalf of the Sprott Focus Trust.