Asanko Gold has brought into production the Nkran deposit in Ghana under the highly regarded management team led by Peter Breece. The company was the subject of a “short” report written last year by K2. The start up of the mine has gone relatively smoothly but given the continued innuendo from the report, management had an independent engineering firm verify the resource calculation. Following the report, the company reduced the reserves but was able to offset this by adding the same number of ounces from new discoveries in other satellite deposits. This quarter, Muddy Waters published their own “short” report on the company which sent the stock plummeting. The Muddy Waters report was a rehash of the K2 report, but given Muddy Waters significant and global reputation the stock fell significantly. We have gone through both “short” reports and given my long history with Peter Breece (from two previous investments), we continue to believe in the company. Although starting a mine is fraught with risk, Asanko is well positioned to continue improving results from the Nkran Mine and putting phase II into production. The company has strong, supportive shareholders and lenders and we expect the stock to recover its losses as Asanko continues to operate the mine and repay debt. We have added to the portfolio’s position close to the lows, and we continue to closely monitor the company’s results.

Dealnet Capital, reported a luck lustre quarter of loan originations. This happened in the face of Home Capitals disastrous announcement of not being able to finance their balance sheet. A few aggressive sellers drove the stock price to very low levels. In the next few weeks Mike Hilmer, Dealnet’s CEO is coming in to our offices to give us an update. Following this meeting, we will decide whether to sell or add to this position.

Leucrotta Exploration is a Montney focused oil and gas producer located in the Dawson area of N.E British Columbia. The company controls over 9000 gross acres and produces 3000 barrels of energy per day. The company continues to increase its acreage. In the quarter, the company raised $80 million at $2.25 / share in an over subscribed deal. The stock has weakened with the sector, and we continue to hold our position.

On the positive side, Yangarra Resources bucked the negative oil and gas trend in the quarter. The company is a junior oil and gas producer with operations in Central Alberta known as Willesden Green. They are focussed on the Cardium and have had huge success in evolving their completion method by drilling in the Bioturbated zone and using high intensity fracs. The results have been substantial with higher production rates and material increases in returns. The drilling in this area has boosted production considerably as the type curve has been significantly better than anticipated. We have trimmed the position into strength but continue to hold the name, as Yangarra is one of the few oil and gas producers showing significant growth in production and cash flow. The company is not widely held and continues to trade at a discount to its peers.

Tecsys Management is a company providing end to end integrated supply chain solutions that optimize warehouse management and health care distribution. Their systems are robust and scalable. With a four-year revenue growth rate of 14% per annum, the company is operating well. The company is focused on their successes in the Health Care vertical, where they are growing at a 30% CAGR. With a strong back log, we continue to hold Tecsys.

Shopify is a cloud based ecommerce platform company providing reliable, scalable software for online stores and retail “point of sale” systems for small to medium sized business. The company has been in hyper growth mode (growing over 50% year over year). In the past quarter, Shopify’s revenue was up 75% year over year. The company continues to thrive but is expensive, and we have reduced the position due to valuation.

Please find in the following chart the industry weights of the portfolio relative to the S&P TSX Small Cap index.Special Equity Pooled Fund: Portfolio Composition Q2 2017
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All and all I am disappointed with the performance in the second quarter but expect the back half of the year to be promising for our late cyclical positioning. As always, if there are any questions please do not hesitate to reach out,

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