SEC Form N-CSRS filed by Sprott Focus Trust Inc.

Semi-Annual Report

June 30, 2023

Beginning December 31, 2022, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of Sprott Focus Trust’s (“the Fund”) semi-annual and annual financial reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on www.sprottfocustrust.com and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor and your shares are held with our transfer agent, Computershare, you may log into your Investor Center account at www.computershare.com/investor and go to “Communication Preferences”. You may also call Computershare at 1.800.426.5523.

You may elect to receive all future reports in paper form at no cost to you. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call Computershare at 1.800.426.5523. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all closed-end funds you hold.

Table of Contents

Managed Distribution Policy

The Board of Directors of Sprott Focus Trust, Inc. (the “Fund”) has authorized a managed distribution policy (“MDP”). Under the MDP, the Fund pays quarterly distributions at an annual rate of 6% of the rolling average of the prior four quarter-end net asset values, with the fourth quarter distribution being the greater of this annualized rate or the distribution required by IRS regulations. With each distribution, the Fund will issue a notice to its stockholders and an accompanying press release that provides detailed information regarding the amount and composition of the distribution (including whether any portion of the distribution represents a return of capital) and other information required by the Fund’s MDP. You should not draw any conclusions about the Fund’s investment performance from the amount of distributions or from the terms of the Fund’s MDP. The Fund’s Board of Directors may amend or terminate the MDP at any time without prior notice to stockholders.

Sprott Focus Trust

Performance (Unaudited)

Market Price Average Total Returns
As of June 30, 2023 (%)

¹Not annualized; cumulative year-to-date.

²Royce & Associates, LLC served as investment adviser of the Fund from November 1, 1996 to March 6, 2015. After the close of business on March 6, 2015, and through to June 30, 2023, Sprott Asset Management LP and Sprott Asset Management USA Inc. was the investment adviser and investment sub-adviser, respectively, of the Fund. See SUBSEQUENT EVENTS.

³Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. The Russell 3000 Total Return Index measures the performance of the largest 3,000 U.S. companies. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

Past performance is no guarantee of future results. The Table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the sale of fund shares.

Important Performance and Risk Information

All performance information reflects past performance, is presented on a total return basis, net of the Fund’s investment advisory fee and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.sprottfocustrust.com. The market price of the Fund’s shares will fluctuate, so shares may be worth more or less than their original cost when sold.

The Fund is a closed-end registered investment company whose shares of common stock may trade at a discount to their net asset value. Shares of the Fund’s common stock are also subject to the market risks of investing in the underlying portfolio securities held by the Fund.

The Fund’s shares of common stock trade on the Nasdaq Select Market. Closed-end funds, unlike open-end funds, are not continuously offered. After the initial public offering, shares of closed-end funds are sold on the open market through a stock exchange. For additional information, contact your financial advisor or call 203.656.2430. Investment policies, management fees and other matters of interest to prospective investors may be found in the closed-end fund prospectus used in its initial public offering, as revised by subsequent stockholder reports.

Sprott Focus Trust

Manager’s Discussion of Fund Performance (Unaudited)

Whitney George

Dear Fellow Shareholders,

During the first half of 2023, Sprott Focus Trust (FUND) appreciated 3.30% on a Net Asset Value (NAV) basis and 2.92% on a market total return basis. While FUND’s performance was in the range of what we expected as we entered 2023, it compares poorly to the 16.17% appreciation for the benchmark Russell 3000 Total Return Index. We were surprised by the equity market’s rapid, yet very narrow rise in the face of rising interest rates, sticky inflation and unsettling political and financial headlines.

The equity market’s rise occurred predominately in the second quarter and was sparked by the promise of all things AI (artificial intelligence). In our view, the rush into just a few AI-focused technology companies has left the market generals dangerously ahead of their troops and given investors a distorted picture of the stock market’s general health. As of this writing, five companies comprise 24% of the entire S&P 500 Index: Apple, Microsoft, Google, Amazon and NVIDIA. These top five companies drove market performance, leaving 495 companies behind with relatively flat returns for the first half. If one looks further into the market’s concentration, the top 1% of all stocks in the Russell 3000 Index (30 names) comprise more than 40% of its weight. For reference, while there is no equal weight calculation for the Russell 3000 Index, the Russell 2000 Index equal weight return was 3.11% and the Russell 1000 equal weight return was 5.28% in the first half of 2023. It has been 50 years since so few securities have been so dominant. In the spring of 1973, five stocks also made up 24% of the S&P 500 Index. AT&T, Eastman Kodak, Exxon, General Motors and IBM were one decision investments by the end of an era known as the Nifty Fifty. What followed soon after was a vicious bear market in 1973 through 1974. While we are hopeful that the current imbalances will work themselves out through a broadening of the equity bull market, we are mindful of the less pleasant lessons of history.

In my annual letter to Sprott Inc. (the parent company of FUND’S investment advisor) shareholders, I expressed our view that the Federal Reserve (“Fed”) would keep interest rates higher for longer as it continues to fight inflation. I also noted that the Fed’s medicine would ultimately be more toxic than the disease because the forces driving inflation are structural and not easily defeated. Since March 2023, we have witnessed several examples of what we were expecting. Steadily rising interest rates and tightening liquidity conditions caused the collapse of Silicon Valley Bank and Signature Bank, the emergency UBS buyout of Credit Suisse Group AG and the FDIC regulator seizure of First Republic Bank and subsequent sale to JPMorgan Chase & Co. Together, these developments offered the clearest signs that one year into the Fed’s quantitative tightening program, the financial system is struggling to deal with higher interest rates. In response to the banking crisis, the Fed implemented new programs to insure deposits beyond the $250,000 level and allow banks to pledge their holdings in government bonds at maturity value rather than market value. The net effect was to reverse most of the quantitative tightening accomplished while creating a form of yield curve control.

Finally, we averted a first-ever default by the U.S. government in June by lifting the debt ceiling limit, which allows the government to continue borrowing to pay its bills until January 1, 2025. We expect this may turn

out to be permanent. Fiscal spending continues to ramp up to the point where government spending now represents 27% of the total economy (as measured by GDP, gross domestic product). Tax receipts continue to decline as deficits widen. In summary, we found little in 2023’s first half to justify the price earnings multiple expansion among a select group of mega-capitalization stocks that have been driving markets. While equity and fixed-income markets broadly shrugged off the banking stress and posted gains during the period, we believe leveraged commercial real estate and pension funding are two obvious areas that bear watching.

Portfolio Activity

The first half of 2023 was not a great environment for value-oriented stock buyers like us, as the rising share prices of many higher-quality companies propelled valuations above our disciplined buy targets. During the six months, we added only one new position and liquidated one small position. In May, we initiated an R&D (research and development) position in CF Industries Holdings, Inc. following a 45% decline from its August 2022 share price high due to the precipitous fall in the nitrogen fertilizer price CF Industries produces. Although there were fundamental reasons for the spike in nitrogen fertilizer prices before Russia invaded Ukraine in February 2022, the war’s impact on natural gas prices and the diminished supply availability made nitrogen fertilizer prices unsustainable. Extreme highs in commodity prices are sometimes followed by dramatic declines after supply and demand dynamics reverse the discrepancy. Market volatility related to short-term extreme situations can create wonderful buying opportunities in quality companies for disciplined value investors, as we believe is the case with CF Industries.

In short, fertilizers enhance plant growth, providing nutrients to supplement those found naturally in soil. There are three main types: nitrogen, which enhances leaf growth; phosphate, which helps root growth; and potash, which fosters stem growth and plant water movement. In terms of crop inputs, which also include seed and insecticide, nitrogen is by far the most important input to farmers, followed by seed and insecticide (phosphate and potash are least important when farm budgets are constrained by low crop prices). Nitrogen fertilizer is made using the Haber-Bosch process, developed over a century ago to create ammonia by heating and pressurizing nitrogen from the air combined with natural gas (methane). The resulting ammonia is processed further into nitrogen fertilizer in both liquid and granular forms. Urea is the most produced and consumed nitrogen fertilizer globally and a key product for CF Industries. Founded in 1946 as the Central Farmers Fertilizer Company, CF Industries today is the largest producer of ammonia in the world and among the largest nitrogen fertilizer producers, with nine manufacturing plants in the U.S., Canada and the UK. CF Industries achieves the lowest delivered cost per ton by leveraging its industry-leading asset utilization and productivity alongside an extensive multimode distribution network to lower logistics costs.

While low-cost producers like CF Industries typically mitigate the risk of a permanent capital loss during inevitable market downturns, profitability through the cycle is also greater than competitors, allowing for opportunities to gain market share and increase sustainable competitive advantages. With limited spare capacity for nitrogen supply and consistent and high-priority demand from farmers, we expect the price of nitrogen to remain well supported for at least the next three years. We believe CF

Sprott Focus Trust

Manager’s Discussion of Fund Performance (Unaudited)

Industries is best placed among industry players to reap the benefits of this multi-year setup. Furthermore, the company’s depressed valuation, significant free cash generation and nearly debt-free balance sheet should enable it to create significant shareholder value.

A small position in Lam Research Corporation, which we indicated a year ago that we had begun to nibble on, was sold as the share price rocketed away from our buy target amid the ebullience surrounding AI technology stocks in the first half of 2023.

Performance Contributors and Detractors

Figure 1

Figure 1 shows which positions contributed and detracted the most from FUND’s aggregate performance in the first half of 2023. Vishay Intertechnology was FUND’s top contributor for the six-month period, with the company share price gaining 37% despite a challenging near-term operating environment. Significant change is afoot as longtime CEO Dr. Gerald Paul retired and 32-year company veteran Joel Smejkal took the reins. Smejkal didn’t waste time articulating his vision for the new Vishay, explaining on the recent Q1 results call, “Under my leadership, we’re going to reorient Vishay from an operations-focused company to a customer- and market-focused company, from a cash flow management business to a P&L-driven company, while upholding our capital return policy, from a company that fulfills company orders to one that anticipates customer need and is ready to support, from a company focused on the present to one that is forward looking, and from a proficient organization to one that’s dynamic and rewards risk taking.” This describes about as abrupt a change in corporate culture as any we have witnessed over the years. Smejkal’s long and varied experience with Vishay, from engineering, marketing, sales, operations and business development, gives him a broad understanding of Vishay’s entire business from which to drive such a shift in orientation. While it will take time for tangible evidence of progress, the market seems to have rewarded Vishay’s shares with at least a modicum of expected future benefit. In addition, FUND’s steel holdings in Reliance Steel & Aluminum

and Nucor contributed meaningfully to performance in the first half, with company share prices gaining 35% and 25%, respectively. Reliance Steel & Aluminum, the largest metals service center and steel product distributor in North America, reported significantly stronger-than-normal recovery in shipments for the first quarter, especially in its largest end-market of non-residential construction. The company cited growing demand from new projects in public infrastructure, manufacturing and renewable energy as drivers of the strong recovery in shipments. We believe capital allocation has been equally stellar, as the company has eliminated nearly all its $2.1 billion in net debt since 12/31/2018 and repurchased more than 22% of its outstanding shares over the same period. These shareholder-friendly moves illustrate our confidence in Reliance Steel’s management and board to continue to prioritize shareholder value creation in the years to come. Nucor shares benefited from similar policy-driven dynamics present across the steel industry in non-residential construction, including infrastructure (e.g., Bipartisan Infrastructure Law), onshoring of manufacturing (e.g., CHIPS Act) and the energy transition (e.g., Inflation Reduction Act). While Nucor has not deleveraged to the same extent as others, it has built up a nearly $5 billion war chest of cash and has repurchased approximately 20% of its shares outstanding in the last five years, illustrating its proficiency in capital allocation and shareholder value creation.

Shares in Artisan Partners Asset Management returned 37% during the first six months of the year on the back of strong equity markets since more than 90% of its assets under management (AUM) are in equity strategies. Artisan Partners’ first quarter ending AUM of $138.5 billion was an 8% net improvement versus the end of the fourth quarter of 2022, primarily from market-related gains, offset slightly by modest net outflows of $1.2 billion. With the significant increase in interest rates, Artisan Partners’ management is excited about its nascent fixed-income strategies, which have been quietly building a peer-leading track record. The Artisan High Income Fund ranked fifth out of 338 in its Lipper High-Yield Category as of year-end 2022. Given the new interest rate regime globally, management believes its fixed-income business is at an inflection point, perhaps partially explaining the strength in its shares this year. Lastly, THOR Industries’ share price gained more than 37% in the first half, as strength in its European business offset weakness in North America. Recreational Vehicle (RV) sales in Europe increased 20% during the most recent quarter versus the same period one year ago, driven by a 22% increase in net price per unit, while unit shipments declined by a modest 2.5%. This resilient demand compared favorably to the North American segment, where Towable RV net sales were down 57% and Motorized RV net sales were down 24% over the same period. Shares in THOR Industries had already discounted the challenging environment, following a 50% decline from its March 2021 peak, while increased activity on RV dealer lots gave investors cause for optimism. In addition, Thor’s flexible business model enables it to quickly adapt to changing market conditions, which has helped THOR preserve margins in previous cyclical downturns in RV demand.

Helmerich & Payne was FUND’s top detractor during the period as HP shares fell more than 26%, detracting 1.17% from FUND’s overall performance. As the largest provider of super-spec drilling rigs to the oil and gas industry in the U.S., shares in Helmerich & Payne are often driven by the near-term outlook for drilling activity, which is influenced by the price of crude oil. Against the backdrop of tepid drill rig activity and lower oil and gas prices in 2023, Helmerich & Payne shares struggled to buck this trend. The

Sprott Focus Trust

Manager’s Discussion of Fund Performance (Unaudited)

company’s most recent financial results showed the strength of its business as Helmerich & Payne was able to generate prodigious free cash flow, pay both its regular and a special dividend, in addition to repurchasing more than 3% of its shares outstanding so far this fiscal year. Another of our energy-related service providers, Pason Systems, detracted from FUND’s performance as its shares declined more than 26% in the first half. This decline contradicts Pason Systems’ strong operating performance, as revenue per industry day hit a new record during the period due to increased adoption and pricing. While overall drilling activity in the U.S. has softened in recent months, the outlook for continued growth in drilling, based on basic supply and demand principles, is positive, according to company management. Factors influencing this optimism include significant draws from storage and the inventory of drilled but uncompleted wells (DUCs) below sustainable levels. These conditions cannot persist in perpetuity while oil demand exceeds pre-COVID-pandemic levels.

Shares in high-end casual and denim apparel retailer The Buckle, Inc. declined 17% in the first half of 2023, given the deteriorating outlook for consumer spending as fears of a recession drove shares of most retailers lower. Buckle’s most recent results showed a modest 8.5% decline in revenues and an associated 14% rise in inventories versus one year ago. However, the company’s large net cash balance sheet and deeply discounted valuation bolstered our confidence in Buckle’s management to navigate any potential slowdown. Shares in leading fresh shell egg producer Cal-Maine Foods, Inc. declined 11% as the extremely elevated price of eggs for much of 2022 continued to resume more normal levels, impacting analyst expectations for Cal-Maine’s operating results this year. Furthermore, as feed costs have remained elevated, the impact on operating margins could be quite negative. Cal-Maine’s net cash balance sheet should provide the company with the financial resources to consolidate smaller privately owned egg producers during the unfolding down cycle, as it has done very well over the years. Finally, shares in aviation aftermarket services and sales company AerSale Corporation detracted slightly from FUND’s performance as investors grew frustrated by the company’s pace of feedstock acquisitions, asset sales and the ongoing delay of Federal Aviation Administration (FAA) approval of its AerAware product. We believe that AerSale’s experienced and disciplined management is smart to exercise patience by not overpaying for feedstock acquisitions. Asset sales should pick up in the second half, and FAA approval of AerAware is expected imminently. The long-term growth opportunity from AerAware could transform its business, unlocking significant value as the technology is deployed.

Figure 2

As of June 30, 2023, FUND was invested in 34 equity positions and held 4.0% in cash and cash equivalents. Cash is a by-product of the opportunity set we perceive in markets today, and our low cash position reflects our confidence in the long-term prospects of the securities we own. As shown in Figure 2, the Materials sector was Fund’s greatest exposure at 36.3%. The long-term case for mining stocks in both precious and base metals continues. However, we are closely watching economic activity and the impact an unfolding slowdown will have on miners and drilling contractors. Energy and Financial Services, both at 15.3%, comprised the next-largest sector exposures. Eight of the previous period’s 10 largest positions remain, with the current top 10 holdings comprising 45.1% of net assets, slightly less than six months ago (46.2%).

Sprott Focus Trust

Manager’s Discussion of Fund Performance (Unaudited)

¹Geometric Average. This weighted calculation uses each portfolio holding’s market cap in a way designed to not skew the effect of very large or small holdings; instead, it aims to better identify the portfolio’s center, which management believes offers a more accurate measure of average market cap than a simple mean or median.

²Harmonic Average. This weighted calculation evaluates a portfolio as if it were a single stock and measures it overall. It compares the total market value of the portfolio to the portfolio’s share in the earnings or book value, as the case may be, of its underlying stocks.

³The Fund’s P/E ratio calculation excludes companies with zero or negative earnings.

Figure 3

Outlook

As of this writing, we are encouraged to see the general equity markets broadening out to benefit many of our holdings, but we remain cautious in the medium term. Inflation is moderating with some easy comparisons against last year’s numbers. Following the Fed’s most recent 0.25% rate hike (July 26), markets are likely convinced that we are at the end of the Fed’s rate hiking campaign. As mentioned in prior reports, we believe the current deflationary trend might be transitory due to inflation’s structural roots in deglobalization and decarbonization. But, we do agree that short-term interest rates may be peaking. Potential accidents beyond banks in commercial real estate and pension funding will continue to factor into monetary decisions. The higher interest costs on the U.S. government debt burden alone should be factored into future decisions as they significantly contribute to mounting deficits.

We are equally interested in the path of the U.S. dollar, which has been declining for nine months. For years, some have predicted the decline of the U.S. dollar’s global reserve status with nothing to prove the theory. There is now proof, given that more international trade deals are being conducted using non-U.S. dollar domestic currencies among the competing countries or trade blocks. A cheaper U.S. dollar will provide some debt relief for much of the world, including the U.S. However, it will keep inflation elevated, providing a tailwind for hard assets investments, an outcome we will welcome.

Despite the relatively sluggish start to 2023, we are very comfortable with FUND’s positioning at midyear. Our investments are financially secure with high operating leverage and many are trading at discounts to what we believe are their absolute values and significant bargains to market averages.

As always, many thanks to the Sprott Team for its daily support, particularly Matt Haynes for his contributions to this letter. And mostly, thank you to all our loyal and patient fellow shareholders.

Sincerely,

W. Whitney George

Senior Portfolio Manager

July 27, 2023

Sprott Focus Trust

Performance Review (Unaudited)

Important Performance and Risk Information

All performance information reflects past performance, is presented on a total return basis, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at www.sprottfocustrust.com. The market price of the Fund’s shares will fluctuate, so shares may be worth more or less than their original cost when sold. The Fund normally invests primarily in small-/mid-cap companies, which may involve considerably more risk than investing in larger-cap companies. The Fund also generally invests a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund’s overall value to decline to a greater degree. Regarding the “Top Contributors” and “Top Detractors” tables shown on page 3, the sum of all contributors to, and all detractors from, performance for all securities in the portfolio would approximate the Fund’s performance for 2023 to date.

Calendar Year Total Returns (%)

Past performance is no guarantee of future results. The Table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the sale of fund shares.

Sprott Focus Trust

History Since Inception (Unaudited)

The following table details the share accumulations by an initial investor in the Fund who reinvested all distributions and participated fully in primary subscriptions for each of the rights offerings. Full participation in distribution reinvestments and rights offerings can maximize the returns available to a long-term investor. The following table also sets forth the amount of any return of capital, if any, to shareholders during a fiscal year. This table should be read in conjunction with the Performance Review of the Fund.

¹The purchase price used for annual distribution totals is a weighted average of the distribution reinvestment prices for the year.

²Values are stated as of December 31 of the year indicated, after reinvestment of distributions, unless otherwise indicated.

³Includes a return of capital.

Sprott Focus Trust

Distribution Reinvestment and Cash Purchase Options (Unaudited)

Sprott Focus Trust

Schedule of InvestmentsJune 30, 2023 (Unaudited)​

See Notes to Financial Statements.

Sprott Focus Trust

Schedule of InvestmentsJune 30, 2023 (Unaudited)​

See Notes to Financial Statements.

Sprott Focus Trust

Statement of Assets and LiabilitiesJune 30, 2023 (Unaudited)​

See Notes to Financial Statements.

See Notes to Financial Statements.

Sprott Focus Trust

Statement of OperationsFor the Period January 1, 2023 Through June 30, 2023 (Unaudited)​

^(a)Net of foreign tax withholding in the amount of $92,705.

See Notes to Financial Statements.

Sprott Focus Trust

Statements of ChangesJune 30, 2023​

Sprott Focus Trust

Financial Highlights

This table is presented to show selected data for a share of Common Stock outstanding throughout each period, and to assist stockholders in evaluating the Fund’s performance for the periods presented.

^(a)Calculated using average shares outstanding during the period.

^(b)Represents less than $0.005.

^(c)The Net Asset Value Total Return is calculated assuming a purchase of Common Stock on the opening of the first business day and a sale on the closing of the last business day of each period using net asset value. Dividends and distributions are assumed for the purposes of this calculation to be reinvested at prices obtained under the Fund’s Distribution Reinvestment and Cash Purchase Plan. Market Value Total Return is calculated on the same basis, except that the Fund’s market value is used on the purchase and sale dates instead of net asset value.

^(d)Not annualized.

^(e)Annualized.

See Notes to Financial Statements.

Sprott Focus Trust

Notes to Financial Statements (Unaudited)June 30, 2023​

1. Organization

Sprott Focus Trust, Inc. (the “Fund”) is a diversified closed-end investment company incorporated under the laws of the State of Maryland. The Fund commenced operations on March 2, 1988, and Sprott Asset Management LP (the “Adviser”) has had investment management responsibility for the Fund from the close of business on March 6, 2015 through the date of this Report. See Subsequent Events. Royce & Associates, LLC was the Fund’s previous investment manager.

2. Summary of Significant Accounting Policies

The following is a summary of significant accounting policies consistently followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

At June 30, 2023, officers, employees of Sprott Inc. and its subsidiaries, Fund directors, and other affiliates owned approximately 48% of the Fund.

A. Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from these estimates.

B. Portfolio Valuation and Methodologies

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. All exchange traded securities are valued using the last trade or closing sale price from the primary publicly recognized exchange. If no current closing sale price is available, the mean of the closing bid and ask price is used. If no current day price quotation is available, the previous business day’s closing sale price is used. Investments in open-end mutual funds such as money market funds are valued at the closing NAV. Repurchase agreements are valued at contract amount plus accrued interest, which approximates market value. 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. If events (e.g., market volatility, company announcement or a natural disaster) occur that are expected to materially affect the value of the Fund’s investment, or in the event that it is determined that valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued in accordance with the Adviser’s policies and procedures as reflecting fair value (“Fair Value Policies and Procedures”). U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Board of Directors of the Fund (the “Board”) has approved the designation of the Adviser of the Fund as the valuation designee for the Fund. If a security’s market price is not readily available or does not otherwise accurately represent the fair value of the security, the security will be valued in accordance with the Fair Value Policies and Procedures as reflecting fair value. The Adviser has formed a committee (the “Valuation Committee”) to develop pricing policies and procedures and to oversee the pricing function for all financial instruments.

C. Fair Value Hierarchy

The fair valuation approaches that may be used by the Valuation Committee include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for fair valued investments, the Valuation Committee seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Valuation Committee deems relevant and consistent with the principles of fair value measurement.

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.

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

Sprott Focus Trust

Notes to Financial Statements (Unaudited)June 30, 2023​

The following is a summary of the Fund’s investments as of June 30, 2023 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.

There were no transfers between levels for investments held at the end of the period.

D. Investment Transactions and Related Investment Income

Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Non-cash dividend income is recorded at the fair market value of the securities received. Interest income is recorded on an accrual basis. Premium and discounts on debt securities are amortized using the effective yield-to-maturity method. Realized gains and losses from investment transactions are determined on the basis of identified cost for book and tax purposes.

Income received from foreign sources may result in withholding tax. Withholding taxes are accrued at the same time as the related income if the tax rate is fixed and known, unless a tax withheld is reclaimable from the local tax authorities in which case it is recorded as receivable. If the tax rate is not known or estimable, such expense or reclaim receivable is recorded when the net proceeds are received.

E. Expenses

The Fund incurs direct and indirect expenses. Expenses directly attributable to the Fund are charged to the Fund’s operations, while expenses applicable to more than one fund managed by the Adviser are allocated equitably.

F. Compensating Balance Credits

The Fund has an arrangement with its custodian bank, whereby a portion of the custodian’s fee is paid indirectly by credits earned on the Fund’s cash on deposit with the bank. This deposit arrangement is an alternative to purchasing overnight investments. Conversely, the Fund pays interest to the custodian on any cash overdrafts, to the extent they are not offset by credits earned (interest accrued) on positive cash balances. The amount of credits earned on the Fund’s cash on deposit amounted to $277 for the period ended June 30, 2023.

4. Taxes

As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, the Fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year.

5. Distributions

The Fund pays quarterly distributions on the Fund’s Common Stock at the annual rate of 6% of the rolling average of the prior four calendar quarter-end NAVs of the Fund’s Common Stock, with the fourth quarter distribution being the greater of 1.5% of the rolling average or the distribution required by IRS regulations. Distributions are recorded on ex-dividend date and to the extent that distributions are not paid from long-term capital gains, net investment income or net short-term capital gains, they will represent a return of capital. Distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. Permanent book and tax differences relating to stockholder distributions will result in reclassifications within the capital accounts. Undistributed net investment income may include temporary book and tax basis differences, which will reverse in a subsequent period. Any taxable income or gain remaining undistributed at fiscal year-end is distributed in the following year.

7. Investment Advisory Agreement

The Investment Advisory Agreement between the Adviser and the Fund provides for fees to be paid at an annual rate of 1.0% of the Fund’s average daily net assets. The Fund accrued and paid investment advisory fees totaling $ 1,276,624 to the Adviser for the period ended June 30, 2023. The Adviser, on behalf of the Fund, had entered into a Sub-Advisory Agreement with Sprott Asset Management USA Inc. (the “Sub-Adviser”), an affiliate of the Adviser. The Sub-Adviser did not receive a separate sub-advisory fee under the Sub-Advisory Agreement for the period ending June 30, 2023.

8. Purchases and Sales of Investment Securities

For the six months ended June 30, 2023, the costs of purchases and proceeds from sales of investment securities, other than short-term securities, amounted to $15,293,952 and $23,347,258, respectively.

Sprott Focus Trust

Notes to Financial Statements (Unaudited)June 30, 2023​

9. 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. Collateral for securities on loan is 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 June 30, 2023, the cash collateral received by the Fund was invested in the State Street Navigator Securities Lending Government Money Market Portfolio, which is a 1940 Act registered money market fund. To the extent that advisory or other fees paid by the State Street Navigator Securities Lending Government Money Market 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. When the Fund engages in securities lending, the Fund will retain a portion of the securities lending income and remit the remaining portion to State Street as securities lending agent as compensation for its services. Securities lending income is generally equal to the total of income earned from the reinvestment of cash collateral (and excludes collateral investment fees), and any fees or other payments to and from borrowers of securities. State Street bears all operational costs directly related to securities lending.

As of June 30, 2023, the Fund had outstanding loans of securities to certain approved brokers for which the Fund received collateral:

The following table presents financial instruments, net of the related collateral received by the Portfolio as of June 30, 2023.

^(a)Represents market value of loaned securities at period end.

^(b)The actual collateral received is greater than the amount shown here due to collateral requirements of the security lending agreement.

All securities on loan are classified as Common Stock in the Fund’s Schedule of Investments as of June 30, 2023, with a contractual maturity of overnight and continuous.

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.sprottfocustrust.com) and on the Securities and Exchange Commission’s website (www.sec.gov).

10. SUBSEQUENT EVENTS

The Fund has evaluated the need for disclosures and/or adjustments resulting from subsequent events that occurred between June 30, 2023 and the date the financial statements were issued.

Effective July 1, 2023, Sprott Asset Management USA Inc. replaced Sprott Asset Management LP as investment adviser to the Fund. Both companies are subsidiaries of Sprott Inc.

Sprott Focus Trust

Directors and Officers (Unaudited)

All Directors and Officers may be reached c/o Sprott Asset Management LP, 200 Bay Street, Suite 2600, Toronto, Ontario, Canada M5J 2J1.

¹Mr. George is an “interested person”, as defined in Section 2(a)(19) of the 1940 Act, of the Fund due to several relationships including his position as Chief Executive Officer of Sprott, Inc.

The Statement of Additional Information has additional information about the Fund’s Directors and is available without charge, upon request, by calling (203) 656-2430.

Sprott Focus Trust

Notes to Performance and Other Important Information (Unaudited)

Sprott Focus Trust

Notes to Performance and Other Important Information (Unaudited)

Sprott Focus Trust

APPENDIX

2023 19(a) Notices

Sprott Focus Trust

Board Review and Approval of Investment Advisory and Sub-Advisory Agreements

Board Approval of Investment Advisory Agreement for Sprott Focus Trust, Inc.

The Board of Directors (the “Board”) of Sprott Focus Trust, Inc. (the “Fund”) met in person at a regularly scheduled meeting on June 9, 2023, in Watch Hill, Rhode Island, for purposes of, among other things, considering whether it would be in the best interests of the Fund and its stockholders for the Board to approve the Amended Investment Advisory Agreement by and between the Fund and Sprott Asset Management USA, Inc. (the “Adviser”).

In connection with the Board’s review of the Agreement, the directors who were not “interested persons” of the Fund within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”) (collectively, the “Independent Directors”) requested, and the Adviser provided the Board with, information about a variety of matters, including, without limitation, the following information:

•nature, extent and quality of services to be provided by the Advisers, including background information on the qualifications and experience of key professional of the Adviser personnel that provide services to the Fund;

•investment performance of the Fund, including comparative performance information for registered investment companies similar to the Fund;

•fees charged to and expenses of the Fund, including comparative fee and expense information for registered investment companies similar to the Fund;

•costs of the services provided, and profits realized by the Advisers;

•and economies of scale.

In connection with the Board’s review of the Agreement, the Independent Directors considered the matters set forth above along with the following information:

•Whitney George’s long portfolio management tenure with the Fund and its historical investment performance;

•Mr. George’s significant ownership and, thus, stake in the Fund; and

•the Advisers’ experience in managing pooled investment vehicles and accounts.

At the June 9, 2023 meeting, the Board and the Independent Directors determined that the continuation of the Agreement was in the best interests of the Fund in light of the services, personnel, expenses and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment and approved them.

To reach this determination, the Board considered its duties under the 1940 Act as well as under the general principles of state law in reviewing and approving advisory contracts; the fiduciary duty of investment advisers with respect to advisory agreements and the receipt of investment advisory compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. To assist the Board in its evaluation of each of the Agreement, the Independent Directors received materials in advance of the Board meeting from the Adviser. The Independent Directors also met with Mr. George. The Board applied its business judgment to determine whether the arrangement by and between the Fund and the Adviser are reasonable business arrangements from the Fund’s perspective as well as from the perspective of its stockholders.

Nature, Extent and Quality of Services Provided

Sprott Asset Management USA, Inc.

The Board reviewed materials provided by the Adviser related to the proposed approval of the Advisory Agreement. The Board noted that the Adviser manages approximate $2.0 billion in assets of December 31, 2022 and provides investment management services on a discretionary basis to its clients, which include individuals and institutional with separately managed accounts.

The Board further noted that the Adviser and the predecessor investment adviser of the Fund were each wholly-owned subsidiaries of Sprott, Inc. and both entities shared personnel and resources as they were part of the same organization. The Board reviewed the credentials of the key investment personnel that would be responsible for servicing the Fund, noting that each had considerable experience in the asset management industry. The Board also noted the fact that the change from one adviser to an affiliated adviser would not affect the back office, outsourced vendors, or management of the Fund. The Board agreed that the Adviser’s services and ability to manage the Trust and the Fund had not materially changed with this internal corporate change. The Board reviewed the credentials of the key investment personnel that would be responsible for servicing the Fund, noting Mr. George’s long tenure as the portfolio manager, value investing experience and background information on qualification/experience of senior management. The Board discussed the services that would be provided to the Fund which included portfolio management, research, compliance and analysis. Additionally, the Board received satisfactory responses from the representatives of the Adviser with respect to whether the Adviser was involved in any lawsuits or pending regulatory

Sprott Focus Trust

Board Review and Approval of Investment Advisory and Sub-Advisory Agreements

actions. The Board reviewed the best-execution practices of the Adviser and discussed the various factors considered by the Adviser when selecting brokers. The Board concluded that based on the responses in this questionnaire and their experience with the Adviser, they could expect the Adviser to provide high quality service to the Funds and its shareholders.

Investment Performance

The Board observed that the Fund outperformed the peer group, Morningstar category and benchmark index for the 1-year and 3-year periods. The Board further noted that the Fund underperformed the benchmark index for the 5-year and since inception periods. The Board consider the Adviser’s explanations noting the performance differential over longer period is likely to be from the Fund’s disciplined valuation framework driving portfolio activity and the longstanding underperformance of similarly disciplined value strategies vs. growth-oriented strategies. After further discussion, the Board concluded that the Adviser had the potential to continue providing reasonable returns for the Fund.

Fees and Expenses

The Board noted that the Fund’s advisory fee of 1.00% was slightly below the peer group and Morningstar category medians. The Board reviewed the Fund’s net expense ratio of 1.14% and acknowledged it was below the peer group and Morningstar category averages and medians. After further discussion, the Board concluded that the advisory fee for the Fund was not unreasonable.

Profitability

The Board reviewed the profitability analysis provided by the Adviser and noted that the adviser realized a profit in managing the Fund. The Board acknowledged the effort required to maintain and manage the Fund’s complex investment program and determined the adviser’s profitability was not excessive.

Economies of Scale

The Board considered the existence of any economies of scale in the provision of services by the Advisers and whether those economies were shared with the Fund through breakpoints in its management fees or other means, such as expense caps or fee waivers. The Board noted that the assets of the Fund were too small to meaningfully consider economies of scale and the necessity of breakpoints. The Board concluded that the current fee structure for the Fund was reasonable and that no changes were currently necessary.

Conclusion

Having requested and received such information from the adviser as the Board believed to be reasonably necessary to evaluate the terms of the advisory agreement, and as assisted by the advice of counsel, the Board concluded that renewal of the advisory agreement was in the best interests of the Fund and its shareholders.

www.sprott.com