UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-04010
---------
OCM Mutual Fund
---------------
(Exact name of registrant as specified in charter)
1536 Holmes Street
Livermore, California 94550
(Address of principal executive offices) (Zip code)
Gregory M. Orrell
Orrell Capital Management, Inc
1536 Holmes Street
Livermore, California 94550
(Name and address of agent for service)
Registrant's telephone number, including area code: (925) 455-0802
--------------
Date of fiscal year end: November 30
-----------
Date of reporting period: November 30, 2005
-----------------
ITEM 1. REPORT TO STOCKHOLDERS.
[OCM GOLD FUND LOGO]
ANNUAL REPORT
NOVEMBER 30, 2005
"YOU HAVE TO CHOOSE (AS A VOTER) BETWEEN TRUSTING
TO THE NATURAL STABILITY OF GOLD AND THE NATURAL
STABILITY AND INTELLIGENCE OF THE MEMBERS OF THE
GOVERNMENT. AND WITH DUE RESPECT TO THESE
GENTLEMEN, I ADVISE YOU, AS LONG AS THE CAPITALIST
SYSTEM LASTS, TO VOTE FOR GOLD
George Bernard Shaw (1856-1950)
Dear Fellow Shareholder:
Gold as the ultimate form of money gained wider appreciation in 2005 amid
growing concern about the long-term prospects of both the euro and the US dollar
as reserve currencies. Gold bullion closed the year at $513 an ounce (final 2005
London fix), up 17.4% for the year. Your fund gained 25.99% (20.36% after max.
sales load) for the calendar year ending December 31st versus 30.56% for the
Philadelphia Gold & Silver Index (XAU). For the fiscal period ending November
30th, your fund gained 4.34% (-0.35% after max. sale load) versus 8.74% for the
XAU. For the past five year calendar period since the gold price bottomed in
2000, your fund has returned an average of 32.54% (31.30% after max sales load)
annually versus 21.77% for the XAU and 0.55% for the S&P 500. Your fund's
investment philosophy of maintaining positions in all categories of the gold
industry caused it to under-perform the XAU in the fiscal year ended 2005 as
junior exploration and development companies did not perform as well as the
major producers that constitute the majority of the XAU.
Despite the dollar gold price doubling over the past five years from extreme
oversold levels, we believe rising economic and geopolitical risks continue to
punctuate the importance of owning gold and gold related assets as part of a
diversified portfolio. Furthermore, it is our view the gold price will be a
multiple of its current level before the ongoing multi-year bull market cycle
has run it course as suspicion about the long-term value of both the U.S. dollar
and euro becomes more pronounced.
GOLD PRICE (LONDON PM FIX)
[The following table was represented as a line chart in the printed material.]
Jan-71 37.88 Jan-89 403.57
Jan-72 45.75 Jan-90 410.49
Jan-73 65.14 Jan-91 383.04
Jan-74 129.51 Jan-92 354.57
Jan-75 176.52 Jan-93 329.05
Jan-76 131.25 Jan-94 386.56
Jan-77 132.20 Jan-95 378.44
Jan-78 173.35 Jan-96 400.49
Jan-79 227.33 Jan-97 353.87
Jan-80 677.97 Jan-98 289.15
Jan-81 555.83 Jan-99 287.07
Jan-82 383.95 Jan-00 284.32
Jan-83 482.76 Jan-01 265.49
Jan-84 370.80 Jan-02 281.51
Jan-85 302.25 Jan-03 356.86
Jan-86 345.85 Jan-04 413.79
Jan-87 408.29 Jan-05 424.03
Jan-88 475.89 Dec-05 510.10
SOURCE WGC
-1-
In our opinion, the main factors that drove the gold price higher in 2005 will
most likely influence investor sentiment toward gold in 2006, namely:
o GEOPOLITICAL RISKS: The United States appears to have entered a
period of chronic war centered on terrorism and the Middle East.
While Iraq instability continues to plague the United States, Iran's
quest for nuclear technology and its desire to open a competing oil
exchange that settles accounts in euros rather than dollars have
placed it at odds with Washington. Historically, increased military
spending has undermined the value of the dollar; however, growing
contempt for American policies poses an equally troublesome threat
should foreigners decide against financing U.S. deficits.
o MACRO ECONOMIC CONCERNS: Global imbalances remain of paramount
concern. The ever-widening US current account deficit and budget
deficit are absorbing 80% of the world's savings. Presently 57% of
all US treasuries outstanding are owned by foreigners. China
recently reported that its population is saving 40% of its income,
whereas, the United States household savings rate ended the year in
negative territory for the first time since 1933. Additionally,
household debt as a percentage of disposable income is the highest
on record. The US current account deficit is running at 6.4% of GDP.
Historically, countries have suffered severe economic shocks when
current account deficits hit 5% of GDP. In a June 20th, 2005 speech
delivered in Canada, the managing director of the International
Monetary Fund (IMF), Rodrigo de Rato y Figaredo, warned in reference
to the large imbalances caused by US deficits, "WE RUN THE RISK OF
INVESTORS DRASTICALLY REDUCING THE FLOW OF CAPITAL INTO THE UNITED
STATES. IN THAT EVENT, THE DOLLAR COULD DEPRECIATE RAPIDLY, CURRENCY
AND CAPITAL MARKETS COULD BECOME DISORDERLY, AND INTEREST RATES
COULD RISE SHARPLY, POSING SERIOUS THREAT TO GLOBAL ECONOMIC
STABILITY."
TOTAL HOUSEHOLD DEBT OUTSTANDING ($BILLIONS)
[The following table was represented as a line chart in the printed material.]
Jan-1980 1305.832
Jan-1983 1570.702
Jan-1986 2293.852
Jan-1989 3075.825
Jan-1992 3800.199
Jan-1995 4569.415
Jan-1998 5536.893
Jan-2001 7035.363
Jan-2004 9324.852
Jul-2005 10959.54
SOURCE BRIDGEWATER
-2-
o GOLD REEMERGING AS PREEMINENT CURRENCY: At the height of the dot.com
bubble gold had been relegated to barbaric relic status as
confidence in financial assets reined supreme. As investors become a
bit more risk-averse, gold's unique monetary attributes of being
limited in supply and free of liabilities are becoming more
appreciated. The structural problems in the US economy highlighted
above have begun to dent confidence in the US dollar as a store of
value. Moreover, the euro fell from grace in May of last year when
constitutional referendums failed in France and the Netherlands on
the back of the stability pact that bound EU countries to fiscal
discipline being compromised. Additionally, cries from Italy to
float the lira again further damaged sentiment toward the euro and
brought into question the long-term viability of the non-sovereign
backed currency.
o NEW FEDERAL RESERVE CHAIRMAN, BEN BERNANKE: The appointment of Ben
Bernanke to replace Alan Greenspan as head of the Federal Reserve
puts in place an individual whose nickname, "Helicopter Ben", refers
to his now famous comment as a Federal Reserve Governor that if
necessary he would turn on the "printing press" and throw money out
of helicopters to fight deflation. Certainly not a comforting
thought for US dollar holders looking for a store of value. It is no
coincidence that the gold market headed higher upon Mr. Bernanke's
appointment. The market has a history of testing the skill set of
new Federal Reserve Chairmen. Mr. Bernake promises to be challenged
early on as foreigners possibly grow tiresome of the large current
account deficit and demand higher interest rates to support the
dollar.
o NEWLY MINED SUPPLY CONSTRAINTS: Despite higher prices, overall
global gold production in 2005 is expected to be flat year over
year. South African gold production is forecast to come in at 300
tonnes, down from 340 tonnes in 2004, the lowest level seen in 80
years. In the early 70's South Africa produced 1500 tonnes of gold
annually. High capital costs, lack of new discoveries and long-lead
times from discovery to production due to permitting and
environmental opposition are among the factors that will continue to
hamper newly mined gold supplies going forward.
o CENTRAL BANK ACTIVITY: At the London Bullion Market Association
(LBMA) Gold Conference held in Johannesburg in November of 2005,
three central banks (Argentina, Russia and South Africa) indicated
an interest in buying gold for reserves purposes. Importantly, on
January 6th, 2006 China announced plans to explore ways "to improve
the currency structure and asset structure of its foreign exchange
reserves. This news came on the heels of a December 26th report
issued by the economists at China Galaxy Securities that argued
China should increase its gold holdings from 600 to 2500 tonnes.
Martin Murenbeeld of Dundee Securities pointed out the most likely
scenario is for China to allocate part of its incoming dollar
reserves of $200 billion annually toward gold. A 10% allocation
would absorb 1000 tonnes of gold per year at $540. We believe
central bank selling of gold will continue to center on European
central banks, with a potential for a positive lift if signatories
to the Central Bank Selling Agreement fail to fulfill their quota to
sell 500 tonnes.
-3-
o ACCELERATING INVESTMENT AND CONSUMER DEMAND: The introduction of the
gold exchange traded funds (ETFs) over the last two years has
allowed access to the bullion market for a greater array of
participants than in the past as cumbersome custody arrangements are
no longer a hurdle for individual and institutional investors. As of
December 31st, the five ETFs trading around the world had on deposit
approximately 347 tonnes of gold. The rising middle class in
emerging economies in Asia, particularly China and India is leading
to increased demand for gold. China holds immense potential for
expansion of demand as current consumption amounts to about 0.16
grams per person annually compared to 0.80 grams per person in
Taiwan and 1.15 grams per person in Japan. In order to meet demand
trends, JP Morgan recently forecasted gold supply would need to
increase 50% by 2007 to balance the market.
GOLD MINING SHARES
The performance of gold mining shares overall improved markedly in the second
half of 2005, as gold price gains outpaced increased operating costs leading to
expansion of operating margins. In the first half of the year, gold industry
profits were squeezed by higher prices for fuel, steel, chemicals and other
input costs needed to produce an ounce of gold. With improved operating margins,
gold shares regained their option premium to the gold price. However, political
risk emanating out of Latin America became a focal point in the second half of
the year as a growing move to the left takes hold in the region led by
Venezuela's Hugo Chavez.
As has been the case the past couple of years, the end of the year proved to be
a busy period for mergers and acquisitions in the gold sector. The most notable
being the unsolicited bid by Barrick Gold and Goldcorp to takeover and split-up
fellow Canadian miner Placer Dome. When completed in early 2006, Barrick Gold
will become the largest gold producer in the world, supplanting Newmont Mining.
For Goldcorp, the acquisition of Placer's Canadian assets allows it to
consolidate its flagship Red Lake gold camp in Canada. Goldcorp also agreed to
purchase junior explorer, Virginia Gold in the fourth quarter in order to gain
access to one of the more promising discoveries over the past couple of years in
Canada, the Eleonore gold deposit.
Higher gold prices along with heightened interest from the senior companies in
the gold industry to look down the food chain to grow has helped jump start
share prices in the junior sector which have lagged badly over the past two
years. Growing and replacing reserves is an immense task for the major
producers. It is our view exploration and development companies in the gold
sector are on the verge of attracting significant additional capital as the
discovery of gold reserves becomes well rewarded in the marketplace. The
investment philosophy of your fund is to maintain positions in all categories of
the gold industry from major producers to junior exploration and development
companies in order to participate as money flows rotate into each sector of the
gold mining industry.
-4-
CONCLUSION
Confidence was once defined by former British Prime Minister Benjamin Disraeli
as "suspicion asleep". The rise in the gold price over the past five years
indicates some quarters are awakening to the inherent frailties of an
over-leveraged credit system. It is our view the pendulum of confidence has only
just begun to swing away from financial assets and that the bull market in gold
has much further to go before this cycle is over. One of the best historical
gauges of gold's purchasing power versus financial assets is the Dow Jones/Gold
ratio. At the end of 2005, the ratio stood at 20.87 ounces to buy one unit of
the Dow Jones down from its all time high of 44 - in 1999. Over the past 100
years the ratio average is ten ounces. Over that time span the ratio has been
under ten 66% of the time and under five 47% of the time. It should be pointed
out, following previous peaks in the ratio in 1929 and 1968, the ratio
eventually bottomed at one, the last time being 1980 when both the Dow and gold
met at 800.
DOW/JONES GOLD RATIO
[The following table was represented as a line chart in the printed material.]
Jan-1905 3.43 Jan-1959 17.24
Jan-1908 2.84 Jan-1962 20.34
Jan-1911 4.09 Jan-1965 25.71
Jan-1914 3.81 Jan-68 21.58
Jan-1917 4.52 Jan-71 23.30
Jan-1920 4.47 Jan-74 6.58
Jan-1923 5.04 Jan-77 7.15
Jan-1926 6.79 Jan-80 1.30
Jan-1929 14.53 Jan-83 2.20
Jan-1932 3.49 Jan-86 4.47
Jan-1935 2.89 Jan-89 5.79
Jan-1938 2.94 Jan-92 8.94
Jan-1941 3.52 Jan-95 10.13
Jan-1944 3.90 Jan-98 27.35
Jan-1947 5.11 Jan-01 40.63
Jan-1950 5.82 Jan-04 25.35
Jan-1953 8.12 Dec-05 21.01
Jan-1956 13.91
We appreciate your shareholding and confidence in the OCM Gold Fund, and we look
forward to meeting your investment objectives. If you have questions regarding
the fund or gold, please contact your financial advisor or you may contact us
directly at 1-800-779-4681.
Sincerely,
/s/ Gregory M. Orrell
Gregory M. Orrell
PRESIDENT AND PORTFOLIO MANAGER
-5-
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - NOVEMBER 30, 2005
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS 97.5%
MAJOR GOLD PRODUCERS 40.1%
169,500 AngloGold Ashanti Ltd. ADR ......................... $ 7,137,645
50,000 Barrick Gold Corp. ................................. 1,330,500
35,000 Cia de Minas Buenaventura ADR ...................... 980,700
10,000 Freeport-McMoRan Copper & Gold, Inc. ............... 521,100
270,000 Gold Fields Ltd. ADR ............................... 4,036,500
225,000 Harmony Gold Mining Co. Ltd. ADR* .................. 2,715,750
275,000 Kinross Gold Corp. * ............................... 2,073,500
179,994 Newmont Mining Corp. ............................... 8,301,323
200,000 Placer Dome, Inc. .................................. 4,388,000
-----------
31,485,018
-----------
INTERMEDIATE/MID-TIER GOLD PRODUCERS 29.6%
134,110 Agnico-Eagle Mines Ltd. ............................ 1,962,029
350,000 Bema Gold Corp. * .................................. 967,397
190,000 Cambior, Inc.* ..................................... 421,800
125,000 Glamis Gold Ltd. * ................................. 2,786,250
467,500 Goldcorp, Inc. ..................................... 9,499,600
425,000 IAMGOLD Corp. ...................................... 3,174,750
100,000 Meridian Gold, Inc. * .............................. 1,924,000
140,000 Randgold Resources Ltd. ADR * ...................... 2,203,600
350,000 Resolute Mining Ltd.* .............................. 319,925
-----------
23,259,351
-----------
JUNIOR GOLD PRODUCERS 8.8%
256,250 Apollo Gold Corp. * ................................ 48,241
400,000 Central Asia Gold Ltd.* ............................ 186,515
1,000,000 Claude Resources, Inc. * ........................... 830,000
150,000 Crystallex International Corp.* .................... 316,500
430,000 Eldorado Gold Corp. * .............................. 1,718,381
150,000 Glencairn Gold Corp. * ............................. 53,269
359,000 Golden Star Resources Ltd. * ....................... 814,930
131,300 Guinor Gold Corp.* ................................. 166,288
100,000 Mexgold Resources, Inc.* ........................... 312,340
400,000 Northgate Minerals Corp. * ......................... 609,276
500,000 Oxiana Ltd.* ....................................... 514,396
130,000 River Gold Mines Ltd. * ............................ 104,570
250,000 Sino Gold Ltd.* .................................... 521,797
150,000 Yamana Gold, Inc.* ................................. 717,000
-----------
6,913,503
-----------
EXPLORATION AND DEVELOPMENT COMPANIES 10.1%
200,000 Addwest Minerals International Ltd.*+ .............. $ --
206,812 Altius Minerals Corp.* ............................. 760,989
200,000 Amarillo Gold Corp.* ............................... 44,498
125,000 Anatolia Minerals Development Ltd. * ............... 162,588
219,100 Aquiline Resources, Inc.* .......................... 328,106
500,000 Birim Goldfields, Inc. * ........................... 164,727
200,000 Bolivar Gold Corp.* ................................ 501,455
300,000 Capstone Gold Corp.* ............................... 251,583
150,000 Cardero Resource Corp. * ........................... 577,614
87,500 Desert Sun Mining Corp.* ........................... 172,214
360,000 Erdene Gold, Inc. * ................................ 221,804
125,000 Fronteer Development Group, Inc. * ................. 417,166
500,000 Geodex Minerals Ltd.* .............................. 55,622
457,000 Golden Cycle Gold Corp.* ........................... 1,645,200
250,000 Maximus Ventures Ltd. * ............................ 24,602
106,500 Metallica Resources, Inc. * ........................ 198,674
150,000 Mundoro Mining, Inc.* .............................. 211,792
300,333 Northern Lion Gold Corp.* .......................... 61,680
300,000 Northland Resources Inc.* .......................... 138,627
150,000 Orezone Resources, Inc.* ........................... 256,717
200,000 Radius Gold, Inc. * ................................ 97,553
300,000 Red Back Mining, Inc.* ............................. 557,077
300,000 Sabina Silver Corp.* ............................... 225,911
207,700 Sunridge Gold Corp.* ............................... 188,398
100,000 Viceroy Exploration Ltd. * ......................... 319,185
122,500 Wolfden Resources, Inc. * .......................... 356,409
-----------
7,940,191
-----------
OTHER 7.1%
178,000 Endeavour Mining Capital Corp. ..................... 601,660
229,200 International Royalty Corp.* ....................... 723,728
40,000 Royal Gold, Inc. ................................... 1,040,800
65,000 Streettracks Gold Trust (ETF)* ..................... 3,191,500
-----------
5,557,688
-----------
PRIMARY SILVER PRODUCERS 1.8%
48,075 Pan American Silver Corp. * ........................ 907,114
100,000 Silver Wheaton Corp.* .............................. 532,000
-----------
1,439,114
-----------
TOTAL COMMON STOCKS
(cost $38,926,162) 76,594,865
-----------
See notes to financial statements.
-6-
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - NOVEMBER 30, 2005 (CONTINUED)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
WARRANTS 1.4%
1 Anatolia Minerals Development Ltd.*#^
Exp. 12/15/2006 .................................. $ --
1 Apollo Gold Corp.*#^
Exp. 12/23/2006 .................................. --
50,000 Bema Gold Corp.*
Exp. 10/27/2007 .................................. 70,597
50,000 Bolivar Gold Corp.*
Exp. 8/25/2008 ................................... 52,627
1 Canyon Resources Corp.*#^
Exp. 12/1/2005 ................................... --
1 Capstone Gold Corp.*#^
Exp. 1/26/2006 ................................... --
89,000 Endeavour Mining Capital Corp.*
Exp. 11/10/2008 .................................. 98,246
1 Geodex Minerals Ltd.*#^
Exp. 12/31/2005 .................................. --
75,000 Glencairn Gold Corp.*
Exp. 11/26/2008 .................................. 7,060
150,000 Goldcorp, Inc.*
Exp. 5/30/2007 ................................... 557,719
1 Mexgold Resources, Inc.*#^
Exp. 2/26/2006 ................................... 49,204
35,000 Nevsun Resources Ltd.*#
Exp. 12/18/2008 .................................. --
110,000 Northgate Minerals Corp.*
Exp. 12/28/2006 .................................. 18,826
1 Northland Resources, Inc.*#^
Exp. 4/29/2006 ................................... --
24,038 Pan American Silver Corp.*
Exp. 2/20/2008 ................................... 235,526
250,000 Silver Wheaton Corp.*^
Exp. 8/5/2009 .................................... 24,816
-----------
TOTAL WARRANTS
(cost $110,472) .................................... 1,114,621
-----------
PREFERRED STOCKS 0.6%
10,000 Freeport-McMoRan Copper & Gold, Inc. ............... 492,800
-----------
TOTAL PREFERRED STOCKS
(cost $169,900) .................................... 492,800
-----------
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 1.0%
$ 756,852 UMB Bank Money Market Fiduciary, 2.44% ............. $ 756,852
TOTAL SHORT-TERM INVESTMENTS
(cost $756,852) .................................... 756,852
TOTAL INVESTMENTS
(cost $39,963,386) ....................... 100.5% 78,959,138
LIABILITIES LESS OTHER ASSETS ......................... (0.5)% (431,580)
NET ASSETS ............................................ 100.0% $78,527,558
- ----------
* Non-income producing security.
+ Illiquid security. Security is valued at fair value in accordance with
procedures established by the Fund's Board of Trustees.
# Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended, or otherwise restricted. These securities may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. The securities are valued at fair value in accordance with procedures
established by the Fund's Board of Trustees.
ETF - Exchange-Traded Fund.
^ Upon exercise of this security, the Fund would receive multiple shares of the
underlying security as noted below:
SECURITY SHARES
--------------------------------------------------
Anatolia Minerals Development Ltd. 62,500
Apollo Gold Corp. 50,000
Canyon Resources Corp. 55,556
Capstone Gold Corp. 100,000
Geodex Minerals Ltd. 250,000
Mexgold Resources, Inc. 50,000
Northland Resources, Inc. 150,000
Silver Wheaton Corp. 50,000
See notes to financial statements.
- 7 -
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - NOVEMBER 30, 2005 (CONTINUED)
At November 30, 2005, restricted securities totaled $49,204 or 0.07% of net
assets and consisted of the following securities:
NOVEMBER 30, 2005
CARRYING VALUE ACQUISITION
ISSUER PER UNIT COST DATE
- --------------------------------------------------------------------------------
Anatolia Minerals Development Ltd.
Warrants Exp. 12/15/2006 -- -- 6/14/2004
Apollo Gold Corp.
Warrants Exp. 12/23/2006 -- -- 12/23/2002
Canyon Resources Corp.
Warrants Exp. 12/1/2005 -- -- 9/29/2003
Capstone Gold Corp.
Warrants Exp. 1/26/2006 -- -- 12/15/2003
Geodex Minerals Ltd.
Warrants Exp. 12/31/2005 -- -- 1/6/2004
Mexgold Resources, Inc.
Warrants Exp. 2/26/2006 0.9841 -- 2/13/2004
Nevsun Resources Ltd.
Warrants Exp. 12/18/2008 -- -- 12/18/2003
Northland Resources, Inc.
Warrants Exp. 4/29/2006 -- -- 4/29/2004
- --------------------------------------------------------------------------------
SUMMARY OF INVESTMENTS BY COUNTRY
PERCENT OF
COUNTRY MARKET VALUE INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
Australia $ 1,542,633 2.0%
Canada 43,692,829 55.3%
Cayman Islands 699,906 0.9%
Jersey 2,203,600 2.8%
Peru 980,700 1.2%
South Africa 13,889,895 17.6%
United States(1) 15,949,575 20.2%
- --------------------------------------------------------------------------------
TOTAL $78,959,138 100.0%
- --------------------------------------------------------------------------------
(1) Includes short-term securities
See notes to financial statements.
-8-
OCM GOLD FUND
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 2005
ASSETS:
Investments in securities, at value (cost $39,963,386) .................................... $78,959,138
Cash ...................................................................................... 31
Receivable for securities sold ............................................................ 64,027
Receivable for fund shares sold ........................................................... 57,756
Interest and dividends receivable ......................................................... 30,089
Prepaid expenses and other assets ......................................................... 11,685
-----------
Total assets ............................................................................ 79,122,726
-----------
LIABILITIES:
Payable for fund shares redeemed .......................................................... 336,005
Due to investment adviser ................................................................. 60,004
Accrued distribution fees ................................................................. 131,165
Accrued expenses and other liabilities .................................................... 67,994
-----------
Total liabilities ....................................................................... 595,168
-----------
Net Assets .............................................................................. $78,527,558
===========
NET ASSETS CONSIST OF:
Shares of beneficial interest, no par value; unlimited shares authorized .................. $40,791,654
Undistributed net investment loss ......................................................... (131,494)
Undistributed net realized gain (loss) on investments and foreign currency translation .... (1,128,354)
Net unrealized appreciation on investments and foreign currency translation ............... 38,995,752
-----------
Net Assets .............................................................................. $78,527,558
===========
CALCULATION OF MAXIMUM OFFERING PRICE:
Net asset value and redemption price per share(1) ......................................... $ 12.85
Maximum sales charge (4.50% of offering price) ............................................ 0.61
-----------
Offering price to public .................................................................. $ 13.46
-----------
Shares outstanding ........................................................................ 6,111,444
===========
(1) A 1.50% redemption fee is imposed on redemptions of shares held less than
three months.
See notes to financial statements.
-9-
OCM GOLD FUND
STATEMENT OF OPERATIONS - YEAR ENDED NOVEMBER 30, 2005
INVESTMENT INCOME:
Interest ............................................................ $ 27,843
Dividends (net of foreign withholding taxes of $41,230) ............. 490,671
-----------
Total investment income ........................................... 518,514
-----------
EXPENSES:
Investment advisory fees ............................................ 681,551
Distribution fees ................................................... 544,558
Professional fees ................................................... 85,657
Fund administration and accounting fees ............................. 84,977
Transfer agent fees and expenses .................................... 81,695
Federal and state registration fees ................................. 35,169
Reports to shareholders ............................................. 23,247
Custody fees ........................................................ 17,814
Trustees' fees ...................................................... 8,178
Other expenses ...................................................... 23,576
-----------
Total expenses .................................................... 1,586,422
-----------
Net investment loss ............................................... (1,067,908)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments and foreign currency translation ... 1,001,004
Net change in unrealized appreciation/depreciation on investments
and foreign currency translation .................................. 2,909,401
-----------
Net loss on investments ........................................... 3,910,405
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. $ 2,842,497
===========
See notes to financial statements.
-10-
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30,
2005 2004
------------ ------------
OPERATIONS:
Net investment loss .................................................... $ (1,067,908) $ (1,154,369)
Net realized gain on investments and foreign currency translation ...... 1,001,004 1,630,388
Net change in unrealized appreciation/depreciation on investments
and foreign currency translation ..................................... 2,909,401 (8,457,258)
------------ ------------
Net increase (decrease) in net assets resulting from operations ........ 2,842,497 (7,981,239)
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Dividends from net investment income ................................... (650,813) (84,374)
Distributions paid from net realized gains ............................. (1,947,756) (1,230,068)
------------ ------------
Total distributions .................................................... (2,598,569) (1,314,442)
------------ ------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold .......................................... 6,329,367 15,625,055
Distributions reinvested ............................................... 2,316,168 1,230,388
Payment for shares redeemed(1) ......................................... (10,563,680) (11,587,518)
------------ ------------
Net increase (decrease) in net assets from fund share transactions ..... (1,918,145) 5,267,925
------------ ------------
Total decrease in net assets ........................................... (1,674,217) (4,027,756)
NET ASSETS, BEGINNING OF YEAR ............................................ 80,201,775 84,229,531
------------ ------------
NET ASSETS, END OF YEAR .................................................. $ 78,527,558 $ 80,201,775
============ ============
UNDISTRIBUTED NET INVESTMENT LOSS ........................................ $ (131,494) $ (930,049)
============ ============
TRANSACTIONS IN SHARES:
Shares sold ............................................................ 562,854 1,306,325
Shares issued on reinvestment of distributions ......................... 198,838 88,517
Shares redeemed ........................................................ (936,797) (934,244)
------------ ------------
Net increase (decrease) in shares outstanding .......................... (175,105) 460,598
============ ============
- ----------
(1) Net of redemption fees of $3,068 and $6,706 for the years ended November 30,
2005 and 2004, respectively.
See notes to financial statements.
-11-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2005
NOTE 1. ORGANIZATION
OCM Mutual Fund (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The Trust
was organized as a Massachusetts business trust on January 6, 1984 and consists
of the OCM Gold Fund (the "Fund"). The investment objective for the Fund is
long-term growth of capital through investing primarily in equity securities of
domestic and foreign companies engaged in activities related to gold and
precious metals.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
Security Valuation - Portfolio securities that are listed on national
securities exchanges are valued at the last sale price as of the close of
business of such securities exchanges, or, in the absence of recorded sales, at
the average of readily available closing bid and ask prices on such exchanges.
NASDAQ National Market(R) and SmallCap(R) securities are valued at the NASDAQ
Official Closing Price ("NOCP"). If a NOCP is not issued for a given day, these
securities are valued at the average of readily available closing bid and asked
prices. Unlisted securities are valued at the average of the quoted bid and ask
prices in the over-the-counter market. Short-term investments which mature in
less than 60 days are valued at amortized cost (unless the Board of Trustees
determines that this method does not represent fair value). Short-term
investments which mature after 60 days are valued at market. Securities and
other assets for which market quotations are not readily available are valued at
fair value as determined in good faith by the investment adviser under
procedures established by and under the general supervision and responsibility
of the Trust's Board of Trustees. Further, if events occur that materially
affect the value of a security between the time trading ends on that particular
security and the close of the normal trading session of the New York Stock
Exchange, such as a material development regarding an investment in a foreign
security, the Fund may value the security at its fair value. For each investment
that is fair valued, the investment adviser considers, to the extent applicable,
various factors including, but not limited to, the type of security, the
financial condition of the company, comparable companies in the public market,
the nature and duration of the cause for a quotation not being readily available
and other relevant factors.
Foreign Currency - Investment securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollar amounts at the
date of valuation. Purchases and sales of investment securities and income and
expense items denominated in foreign currencies are translated into U.S. dollar
amounts on the respective dates of such transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net unrealized and realized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid.
Federal Income Taxes - It is the Fund's policy to comply with the
requirements of subchapter M of the Internal Revenue Code of 1986 applicable to
regulated investment companies and to distribute all of its taxable income to
shareholders. Therefore, no provision for income taxes has been recorded.
Securities Transactions and Investment Income - Securities transactions
are accounted for on a trade date basis. Realized gains and losses on sales of
securities are calculated on the identified cost basis. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrual
basis.
Distributions to Shareholders - Distributions to shareholders are recorded
on the ex-dividend date. The Fund declares and pays dividends of net investment
income, if any, annually and distributes net realized gains, if any, annually.
The amount and character of income and net realized gains to be distributed are
determined in accordance with federal income tax rules and regulations, which
may differ from accounting principles generally accepted in the United States of
America. To the extent that these differences are attributable to permanent book
and tax accounting differences, the components of net assets have been adjusted.
Redemption Fee - A 1.50% redemption fee is retained by the Fund to offset
transaction costs and other expenses associated with short-term investing. The
fee is imposed on redemptions or exchanges of shares held less than three months
from their purchase date. The Fund records the fee as a reduction of shares
redeemed and as a credit to paid-in-capital. For the year ended November 30,
2005, the Fund received $3,068 in redemption fees.
-12-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2005 (CONTINUED)
Guarantees and Indemnifications - In the normal course of business, the
Fund enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims against the Fund that have not yet
occurred. Based on experience, the Fund expects the risk of loss to be remote.
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
NOTE 3. INVESTMENT ADVISORY AGREEMENT
The Fund has an investment advisory agreement with Orrell Capital
Management, Inc. ("OCM"). Under the agreement, the Fund pays OCM a fee computed
daily and payable monthly, at the following annual rates based upon average
daily net assets:
ASSETS FEE RATE
------ --------
$0 to $50 million 1.000%
$50 million to $75 million 0.875%
$75 million to $100 million 0.750%
$100 million to $150 million 0.625%
$150 million to $250 million 0.500%
Over $250 million 0.375%
For the year ended November 30, 2005, OCM voluntarily agreed to limit the
total expenses of the Fund to an annual rate of 2.99% of average daily net
assets.
NOTE 4. DISTRIBUTION AGREEMENT AND PLAN
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended. The Plan authorizes
the Fund to reimburse the distributor for marketing expenses incurred in
distributing shares of each Fund, including the cost of printing sales material
and making payments to dealers of the Fund's shares, in any fiscal year, subject
to a limit of 0.99% of average daily net assets.
NOTE 5. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (excluding short-term
securities and U.S. government obligations) for the year ended November 30, 2005
were $3,593,719 and $7,318,140, respectively. There were no purchases or sales
of U.S. government obligations.
NOTE 6. FEDERAL INCOME TAX INFORMATION
At November 30, 2005, gross unrealized appreciation and depreciation of
investments owned by the Fund, based on cost for federal income tax purposes
were as follows:
Cost of investments $40,246,183
===========
Unrealized appreciation $40,145,831
Unrealized depreciation (1,432,876)
-----------
Net unrealized appreciation on investments $38,712,955
===========
The difference between cost amounts for financial statement and federal
income tax purposes is due primarily to timing differences in recognizing
certain gains and losses in security transactions.
Accordingly, at November 30, 2005, reclassifications were recorded to
decrease paid-in-capital by $1,241,295, decrease net investment loss by
$2,517,276 and decrease accumulated net realized gains on investments by
$1,275,981.
-13-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2005 (CONTINUED)
The tax character of distributions paid during the fiscal years ended
November 30, 2005 and 2004 was as follows:
2005 2004
---------- ----------
Ordinary income ................. $1,570,425 $ 84,374
Net long-term capital gains ..... 1,028,104 1,230,068
---------- ----------
Total distributions ............. $2,598,529 $1,314,442
========== ==========
As of November 30, 2005 the components of accumulated earnings on a tax
basis were as follows:
Undistributed ordinary income .............. $ --
Undistributed long-term gains .............. --
-----------
Tax accumulated earnings ................... --
Accumulated capital and other losses ....... (977,051)
Unrealized appreciation on investments ..... 38,712,955
-----------
Total accumulated earnings ................. $37,735,904
===========
At November 30, 2005, the Fund had an accumulated capital loss
carryforward of $701,986 which expires in the year 2013. To the extent that the
Fund realizes future net capital gains, those gains will be offset by any unused
capital loss carryforwards.
At November 30, 2005, the Fund had realized capital losses from
transactions between November 1, 2005 and November 30, 2005 of $275,065.
Post-October capital losses for tax purposes are deferred and will be recognized
in 2006 and are included in tax accumulated capital and other losses for the
Fund.
NOTE 7. OFFERING PRICE PER SHARE
A maximum front-end sales charge of 4.50% is imposed on purchases of the
Fund's shares. For the year ended November 30, 2005, the Fund was advised that
the Distributor received $22,142 of sales charges from sales of the Fund's
shares.
NOTE 8. CONCENTRATION OF RISK
Investing in foreign securities involves certain risks not necessarily
found in U.S. markets. These include risks associated with adverse changes in
economic, political, regulatory and other conditions, changes in currency
exchange rates, exchange control regulations, expropriation of assets or
nationalization, imposition of withholding taxes on dividend or interest
payments or capital gains, and possible difficulty in obtaining and enforcing
judgments against foreign entities. Further, issuers of foreign securities are
subject to different, and often less comprehensive, accounting, reporting and
disclosure requirements than domestic issuers.
As the Fund concentrates its investments in the gold mining industry, a
development adversely affecting the industry (for example, changes in the mining
laws which increases production costs) would have a greater adverse effect on
the Fund than it would if the Fund invested in a number of different industries.
-14-
OCM GOLD FUND
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
2005 2004 2003 2002 2001
---------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each year)
Net asset value, beginning of year .................... $ 12.76 $ 14.46 $ 7.53 $ 4.71 $ 3.52
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ................................... (0.18) (0.18) (0.12) (0.09) (0.04)
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions ............................... 0.69 (1.30) 7.05 2.91 1.23
---------- ---------- ---------- ---------- ----------
Total from investment operations ...................... 0.51 (1.48) 6.93 2.82 1.19
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.11) (0.01) -- -- --
Distribution from net realized gains .................. (0.31) (0.21) -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions ................................... (0.42) (0.22) -- -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year .......................... $ 12.85 $ 12.76 $ 14.46 $ 7.53 $ 4.71
========== ========== ========== ========== ==========
TOTAL RETURN* ......................................... 4.34% (10.31)% 92.03% 59.87% 33.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) .................... $ 78,528 $ 80,202 $ 84,230 $ 35,109 $ 17,924
Ratio of expenses to average net assets:
Net of waivers and reimbursements ................... 2.24% 2.15% 2.39% 2.66% 2.60%
Before waivers and reimbursements ................... 2.24% 2.17% 2.39% 2.66% 2.60%
Ratio of net investment loss to average net assets:
Net of waivers and reimbursements ................... (1.51)% (1.58)% (1.42)% (1.46)% (1.14)%
Before waivers and reimbursements ................... (1.51)% (1.60)% (1.42)% (1.46)% (1.14)%
Portfolio turnover rate ............................... 5% 12% 17% 32% 5%
- ----------
* Assumes no sales charge.
See notes to financial statements.
-15-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of OCM Mutual Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of OCM Gold Fund, (the portfolio constituting the
OCM Mutual Fund), (the "Fund"), as of November 30, 2005, and the related
statement of operations, statement of changes in net assets and financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit. The Fund's statement of changes in net assets and financial
highlights for the periods ended prior to November 30, 2005 were audited by
other auditors whose report, dated January 25, 2005, expressed an unqualified
opinion on those statements of changes in net assets and financial highlights.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of November 30, 2005, by correspondence with the Fund's
custodian and brokers. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of November 30, 2005, the results of its operations, changes in its net
assets and the financial highlights for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Milwaukee, Wisconsin
January 25, 2006
-16-
OCM GOLD FUND
EXPENSE EXAMPLE - FOR THE SIX MONTHS ENDED NOVEMBER 30, 2005 (UNAUDITED)
As a shareholder of the OCM Gold Fund (the "Fund"), you incur two types of
costs: (1) transaction costs, including sales charges (loads) on purchase
payments and redemption fees on certain redemptions; and (2) ongoing costs,
including management fees; distribution (12b-1) fees; and other Fund expenses.
This Example is intended to help you understand your ongoing costs (in dollars)
of investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period from June 1, 2005 to November 30,
2005 (the "period").
ACTUAL EXPENSES
The first line of the table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses you paid over
the period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 equals 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During the
Period" to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges (loads) and redemption fees. Therefore, the second line of the
table is useful in comparing the ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs could have been higher.
EXPENSES PAID DURING THE PERIOD
EXPENSES PAID
BEGINNING ENDING DURING THE
ACCOUNT VALUE ACCOUNT VALUE PERIOD ENDED
JUNE 1, 2005 NOVEMBER 30, 2005 NOVEMBER 30, 2005*
------------- ----------------- ------------------
Actual $1,000.00 $1,293.10 $12.18
Hypothetical (5% return
before expenses) 1,000.00 1,014.38 10.70
- ----------
* Expenses are equal to the Fund's annualized expense ratio of 2.12% for the
period, multiplied by the average account value over the period, multiplied
by 183/365 (to reflect the one-half year period).
-17-
OCM GOLD FUND
INVESTMENTS BY SECTOR (UNAUDITED)
AS A PERCENTAGE OF NET ASSETS
[The following table was represented as a pie chart in the printed material.]
Cash and Other Assets 2.5%
Major Gold Producers 40.1%
Intermediate/Mid-Tier Gold Producers 29.6%
Junior Gold Producers 8.8%
Exploration and Development Companies 10.1%
Other 7.1%
Primary Silver Producers 1.8%
A description of the Fund's proxy voting policies and procedures and a
record of the Fund's proxy votes for the year ended November 30, 2005 are
available without charge, upon request by calling toll free 1-800-779-4681 and
on the Securities and Exchange Commission's (SEC) website at http://www.sec.gov.
The Fund will file its complete schedule of investments with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms
N-Q will be available on the EDGAR database on the SEC's website at
http://www.sec.gov. These Forms may also be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. Information about the operation of the
Public Reference Room may be obtained by calling 1-800-SEC-0330.
-18-
OCM GOLD FUND
PERFORMANCE RESULTS - YEAR ENDED NOVEMBER 30, 2005 (UNAUDITED)
(ALL PERFORMANCE MEASUREMENTS REFLECT THE MAXIMUM SALES
LOAD CHARGES FOR EACH PERIOD SHOWN.)
AVERAGE ANNUAL TOTAL RETURNS VALUE ON 11/30/05
---------------------------- -----------------
1 year (0.35%) OCM Gold Fund $15,625
5 year 29.68% S&P 500(R) Index $19,718
Inception 5.10% Philadelphia Gold
& Silver Index $11,033
$10,000 INVESTMENT MADE 12/13/96
(DATE ORRELL CAPITAL MANAGEMENT, INC. BECAME INVESTMENT ADVISER)(1)
[The following table was represented as a line chart in the printed material.]
Philadelphia
OCM Gold S&P 500 Gold & Silver
12/13/96 9,550 10,000 10,000
11/30/97 5,878 13,340 6,037
11/30/98 5,751 16,496 6,096
11/30/99 5,485 19,943 5,864
11/30/00 4,065 19,102 4,218
11/30/01 5,439 16,767 4,783
11/30/02 8,695 13,998 5,863
11/30/03 16,697 16,111 10,310
11/30/04 14,976 18,182 10,146
11/30/05 15,625 19,718 11,033
The returns shown include the reinvestment of all dividends and the
maximum sales load charge, but do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
Past performance is not indicative of future results.
The Philadelphia gold and silver share index (XAU) is an unmanaged index
of 12 gold and silver shares listed on U.S. exchanges and is generally
considered as representative of the gold and silver share market.
The S&P 500(R) Index is a broad unmanaged index generally considered as
representative of the U.S. equity market.
- ----------
(1) Previous periods during which time the Fund was advised by another
investment adviser are not shown.
-19-
OCM GOLD FUND
ANNUAL RENEWAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED)
On October 20, 2005, the Board of Trustees of OCM Mutual Fund approved the
continuation of the Fund's investment advisory agreement with Orrell Capital
Management, Inc. (the "Adviser"). Prior to approving the continuation of the
agreement, the Board considered:
o the nature, extent and quality of the services provided by the
Adviser
o the investment performance of the Fund
o the costs of the services to be provided and profits to be realized
by the Adviser from its relationship with the Fund
o the extent to which economies of scale would be realized as the Fund
grows and whether fee levels reflect those economies of scale
o the expense ratio of the Fund
In considering the nature, extent and quality of the services provided by
the Adviser, the Board considered an oral presentation by the Adviser describing
the portfolio management, shareholder communication, and regulatory compliance
services provided by the Adviser to the Fund.
The Trustees concluded that the Adviser was providing essential services
to the Fund. The Trustees compared the performance of the Fund to benchmark
indices over various periods of time and concluded that the performance of the
Fund warranted the continuation of the Investment Advisory Agreement. The
Trustees noted that the Fund adhered to its investment style.
In concluding that the advisory fees payable by the Fund were reasonable,
the Trustees reviewed the profits realized by the Adviser, from its relationship
with the Fund and concluded that such profits were reasonable and not excessive.
As part of its analysis, the Board considered the value of the research the
Adviser received from broker-dealers executing securities transactions for the
Fund. The Trustees also reviewed reports comparing the expense ratio and
advisory fees paid by the Fund to those paid by other comparable mutual funds in
the same category and concluded that the advisory fees paid by the Fund and the
expense ratio of the Fund were in the range of comparable mutual funds.
The Trustees also considered whether the Investment Advisory Agreement fee
schedule should be adjusted for an increase in assets under management. They
concluded that the "breakpoints" embodied in the Investment Advisory Agreement
were appropriate.
OTHER TAX INFORMATION
For the year ended November 30, 2005, 5% of dividends paid from net
investment income qualifies for the dividend received deduction available to
corporate shareholders of the Fund. For shareholders in the Fund, 29.18% of
dividend income distributed for the year ended November 30, 2005 is designated
as qualified dividend income under the Jobs and Growth Relief Act of 2003. The
Fund hereby designates approximately $1,028,146, as capital gain dividends, for
the purpose of the dividends paid deduction.
-20-
OCM GOLD FUND
TRUSTEE AND OFFICER INFORMATION
INDEPENDENT TRUSTEES*
OTHER
TERM OF OFFICE DIRECTORSHIPS
POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) HELD BY
NAME, ADDRESS AND AGE HELD WITH FUND TIME SERVED DURING PAST 5 YEARS TRUSTEE
- --------------------------- -------------- -------------- ------------------------------------- -------------
JOHN L. CRARY Trustee Indefinite Since 1999 Mr. Crary has been the microHelix,
1536 Holmes Street, (Chairman of Since 2004 managing member of Crary Enterprises, Inc. and
Livermore, California 94550 the Board) LLC, a private investment company. Scheid
Age 52 Since 1988 Mr. Crary has been an Vineyards,
independent corporate financial Inc.
advisor and private investor in
various biotechnology, software and
other early stage business ventures.
Mr. Crary began his business career
as an investment banker with E.F.
Hutton & Company Inc.
DOUG WEBENBAUER Trustee Indefinite Chief Financial Officer of M.E. Fox & None
1536 Holmes Street, Since 2005 Company, Inc., a beer distributor,
Livermore, California 94550 since 1999.
Age 45
INTERESTED TRUSTEES AND OFFICERS**
OTHER
TERM OF OFFICE DIRECTORSHIPS
POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) HELD BY
NAME, ADDRESS AND AGE HELD WITH FUND TIME SERVED DURING PAST 5 YEARS TRUSTEE
- --------------------------- -------------- -------------- ----------------------------------------- -------------
GREGORY M. ORRELL Trustee, Indefinite President of Orrell Capital Management, None
1536 Holmes Street, President Since 2004 Inc. since 1991.
Livermore, California 94550
Age 44
JACKLYN A. ORRELL*** Secretary and One year term Secretary of Orrell Capital Management, N/A
1536 Holmes Street, Treasurer Since 2004 Inc. since 1999.
Livermore, California 94550
Age 71
ANDREW ROGERS Chief At discretion President, Fund Compliance Services, LLC N/A
1536 Holmes Street, Compliance of the Board since 2004; President, GemCom, LLC since
Livermore, California 94550 Officer Since 2004 2004; and Senior Vice President and
Age 36 Director of Administration, Gemini Fund
Services, LLC since 2001. Vice President,
JP Morgan Chase & Co. from 1998 to 2001.
- ----------
* "Independent" trustees are trustees who are not deemed to be "interested
persons" of the Fund as defined in the Investment Company Act of 1940.
** An "interested" trustee is a trustee who is deemed to be an "interested
person" of the Fund, as defined in the Investment Company Act of 1940.
Gregory M. Orrell is an interested person of the Fund because of his
ownership in the Fund's investment adviser.
*** Ms. Orrell is the mother of Gregory M. Orrell, the President and a trustee
of the Trust.
-21-
OCM Gold Fund
Distributed by:
Syndicated Capital, Inc.
1299 Ocean Avenue, Suite 210
Santa Monica, CA 90401
ITEM 2. CODE OF ETHICS.
The registrant, as of the end of the period covered by this report, has adopted
a code of ethics that applies to the Registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions, regardless of whether these individuals
are employed by the Registrant or a third party. A copy of this code of ethics
is attached hereto as Exhibit (a)
There have been no amendments to the Registrant's Code of Ethics during the
reporting period for this Form N-CSR. There have also been no waivers granted by
the Registrant to individuals covered by the Registrant's Code of Ethics during
the reporting period for this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Registrant's Board of Trustees has determined that it does not have an
"audit committee financial expert" serving on its audit committee. While the
Registrant believes that each of the members of its audit committee has
sufficient knowledge of accounting principles and financial statements to serve
on the audit committee, none has the requisite experience to qualify as an
"audit committee financial expert" as such item is defined by the Securities and
Exchange Commission.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The aggregate fees billed for each of the last two fiscal years for professional
services rendered by the principal accountant for the audit of the Registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
are listed below.
Fiscal year ended Fiscal year ended
November 30, 2005 November 30, 2004
Audit Fees $20,500 $87,500
Audit-Related Fees $0 $0
Tax Fees $3,500 $22,750
All Other Fees $0 $0
The Registrant's audit committee has adopted an Audit Committee Charter that
requires that the Audit Committee review the scope and plan of the registered
public accounting firm's annual and interim examinations, approve the services
(other than the annual audit) to be performed for the Registrant by the
independent public accountants and approve the fees and other compensation
payable to the independent accountants. During the fiscal years ended November
30, 2005 and 2004, all of the audit and non-audit services provided by the
Registrant's principal accountant were pre-approved by the audit committee.
(f) None.
(g) None.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
The schedules of investments in securities in unaffiliated issuers are included
as part of the reports to shareholders filed under Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS Not applicable.
ITEM 10. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
As of the end of the period covered by this report, the registrant had not
adopted any procedures by which shareholders may recommend nominees to the
registrant's Board of Directors.
ITEM 11. CONTROLS AND PROCEDURES.
The registrant's certifying officers have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-2 under the
Investment Company Act of 1940 (the "Act")) are effective in design and
operation and are sufficient to form the basis of the certifications required by
Rule 30a-2 under the Act, based on their evaluation of these disclosure controls
and procedures within 90 days of the filing date of this report on Form N-CSR.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics - Filed as an attachment to this filing.
(a)(2) Certification for each principal executive and principal financial
officer of the registrant as required by Rule 30a-2 under the Act (17 CFR
270.30a-2(a)) - Filed as an attachment to this filing.
(b) Certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) - Filed as an attachment to this filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
OCM Mutual Fund
By: /s/ Gregory M. Orrell
---------------------
Gregory M. Orrell
President
Date: February 8, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Gregory M. Orrell
---------------------
Gregory M. Orrell
President
Date: February 8, 2006
By: /s/ Jacklyn Orrell
Jacklyn Orrell
Secretary and Treasurer
Date: February 8, 2006