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: May 31, 2006
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ITEM 1. REPORT TO STOCKHOLDERS.
[LOGO, OCM GOLD FUND]
SEMI-ANNUAL REPORT
(UNAUDITED)
MAY 31, 2006
Dear Fellow Shareholder:
The first six months of 2006 saw gold bullion prices briefly touch $730 an ounce
in early May before settling back to $613 on June 30th, up 19.6% from year end.
Economic and geopolitical concerns were the main catalysts to drive gold prices
higher over the first half of the year. However, we sense the gold market is in
an anticipatory state looking for an impending mark down of the US dollar
brought on by the lack of perceived maneuvering room in Federal Reserve monetary
policy to rein in inflationary pressures due to high levels of debt in the U.S.
economy. Overall, we remain convinced gold is in a long-term bull market that
has much further to go as speculative excesses and global economic imbalances
unwind. Ultimately, we believe confidence in central banking will wane and those
who have failed to recognize or understand gold's unique monetary attributes
will grow to appreciate them at much higher prices.
The robust gold price environment enabled your Fund to post comparatively strong
returns for the fiscal and calendar periods covered in this report. For the six
month fiscal period ending May 31st, your Fund gained 47.39% (+40.71% after
maximum sales charge) versus +25.01% for the Philadelphia Gold & Silver Index
(XAU), as your Fund's investment strategy of investing across all sectors of the
gold industry was rewarded as junior companies outperformed. For the calendar
period ending June 30th, your Fund posted a return of +28.02% (+22.28% after
maximum sales charge) versus +12.76% for the XAU. Of note, the S&P 500 index was
up 2.71% over the first six months of '06.
GOLD PRICE, US$ PER OUNCE, LONDON PM
[The following table was represented as a line chart in the printed material.]
Date US$
4-Jan-00 281.50
3-Jul-00 287.65
2-Jan-01 271.10
2-Jul-01 268.35
2-Jan-02 278.35
1-Jul-02 312.10
2-Jan-03 343.80
1-Jul-03 350.20
2-Jan-04 415.25
1-Jul-04 394.80
4-Jan-05 427.75
1-Jul-05 432.60
3-Jan-06 530.00
3-Jul-06 622.95
-1-
MARKET OVERVIEW
Fear of the conflict in the Middle East spreading outside of Iraq to include
Iran and possibly Syria underscore current geopolitical tensions and safe haven
buying of gold coming out of the Mid East. The United States has clearly put
Iran in its sights in response to Iran's nuclear ambitions and its reported
sponsorship of Shiite militias. In addition, the election of Hamas leadership in
Palestine has elevated tensions further in the region. Most importantly, the
United States' handling of events in the Mid East has expended enormous global
political capital and allowed both China and Russia to gain influence, loosening
the U.S. hold on the role as the main world political power which, in our
opinion, has negative implications for the US dollar.
Meanwhile, macro economic conditions in the United States continued to worsen.
The current account deficit, the main component of which is trade, deteriorated
over the first half of the year, reaching 7% of GDP. Taken together with the
fiscal deficit, the combined deficits now total 9% of GDP. Never in history has
a leading nation whose currency is the global standard had to rely so heavily on
foreign capital to maintain its standard of living. Unfortunately, American
households offer little relief as they have tapped both the equity and property
bubbles and have taken income-based savings rates into negative territory for
the first time since 1933. In order to correct the imbalances, the dollar will
need to decline significantly against its main trading partners in Asia and
Europe while turning off American households' appetite for consumer goods
through higher interest rates. A reduction in the American way of life that may
not be politically palatable.
Federal Reserve policy makers are faced with an additional dilemma. Inflationary
pressures brought on by global economic growth and years of monetary expansion
are worsening, calling the need for further interest rate hikes. At the same
time, the housing sector, which has been largely responsible for economic growth
in recent years (up to 60% of job growth by some estimates), is rolling over.
Higher interest rates will only put the nail in the coffin for the housing
industry. However, what is at stake is the credibility of the Federal Reserve
and new Fed Chairman Ben Bernanke and, of course, the dollar. It is a stare down
with profound implications. A pause in rate hikes means the Fed has flinched and
is willing to accept ongoing debasement of the currency. Conversely, further
rate hikes sink the economy, summoning the need for aggressive monetary
reflation efforts in order to fight the deflationary forces of a contracting
economy. The gold market appears poised to pounce in the event of either
scenario, in our opinion.
As investors seek to diversify away from being overweight dollar denominated
assets, the introduction of gold exchange traded funds (ETF's) has provided a
convenient vehicle for institutional and individual investors to access the
bullion market for the first time. In a little over a year a half, the World
Gold Council's sponsored Streettracks Gold ETF in the Untied States has amassed
387 tons of gold. Initiatives to introduce ETF's in other markets through out
Europe and Asia have begun, most notably, China and India.
On the central bank front, the German Bundesbank announced in March that it had
no plans to take up its allotment to sell 120 tons of gold under the Central
Bank Gold Selling Agreement that limits sales of gold to 500 tons annually by
its central bank signatories. The reluctance of the Bundesbank to cave-in to
political pressure within
-2-
Germany to sell gold is in contrast to France which succumbed to political
pressure to sell a portion of the country's gold holdings for social programs.
Presently, there does not appear to be enough announced sellers of gold to
fulfill this year's total allotment, which should, in our opinion, be viewed
positively by the gold market in the second half of the year.
Calls from within China to diversify its $875 billion in dollar holdings grew
more pronounced. In May, monetary committee member Yu Yongding issued the most
explicit call to date for Beijing to diversify its $875 billion of reserves into
gold to protect against a tumbling dollar. Meanwhile, Vladimir Putin, a frequent
critic of dollar hegemony, has ordered the Russian central bank to raise the
gold share of foreign reserves from 5 percent to 10 percent. The governor of the
United Arab Emirates central bank let it be known that it was interested in
acquiring additional gold reserves.
GOLD MINING SHARES
Operating margins for gold miners continued to show improvement in the first
half of the year as gold price appreciation outpaced ongoing cost pressures,
most notably higher fuel and chemical costs. With gold prices averaging $626 in
the second quarter, the gold industry is only now beginning to generate free
cash flow above ongoing capital and exploration expenses. Consequently, we
believe negative sentiment toward gold shares brought on by the industry's
failure to bring revenue from higher gold prices to the bottom line is set to
reverse and should attract additional investors to the sector.
During the first half of the year, intermediate sized gold producers with
growing production and reserve profiles performed well, most notably, Agnico
Eagle Mines, up 67 % as higher gold prices enhanced projected returns on the
company's development projects. While major gold producers continued to under
perform due to flat or declining gold production numbers, the junior sector saw
a heightened level of interest as higher gold prices brought into focus quality
assets of a number of smaller companies. Your Fund experienced spectacular
appreciation in a number of issues, of note, Cumberland Resources, up 118% as
the company advanced its three million ounce Meadowbank project in Canada toward
production. Additionally, junior gold producer Alhambra Resources was up 149% as
market participants began to recognize the value in the company's large
prospective land position in Kazakhstan. Due to the inherent liquidity
constraints with smaller cap companies in the junior sector, your Fund takes a
measured approach to allocation in the junior sector.
OUTLOOK
In the coming months, we expect the effects of higher interest rates and a
generally tighter monetary environment to weigh on the global economy. As the
economy contracts and an inevitable liquidity crisis ensues, we believe gold
will anticipate an aggressive fiscal and monetary policy response that has
become the modus operandi of policy makers in Washington to combat recessionary
forces and the fear of a cascading sequence of defaults. It should be pointed
out that in order for gold to reach its previous peak of $850/oz achieved in
1980, the gold price on an inflation adjusted basis would need to top $1700 an
ounce. It is our belief it will. Consequently, gold shares should outperform
other asset classes in such an environment, in our opinion.
-3-
If you feel you are not adequately positioned in gold related assets, we urge
you to do so now by adding to your position in the Fund.
We appreciate your shareholding and confidence in the OCM Gold Fund, and we look
forward to enhancing your investment objectives. If you have any questions
regarding the fund or gold, please contact your financial advisor or you may
contact us directly at 1-800-779-4681 or shareholder services at 1-800-628-9403.
Sincerely,
/s/ Gregory M. Orrell /s/ Timothy G. Church
Gregory M. Orrell Timothy G. Church
PRESIDENT AND PORTFOLIO MANAGER ASSISTANT PORTFOLIO MANAGER
JULY 25, 2006
SUMMARY OF GOLD POSITIVE FACTORS
SHORT-TERM
1. The "specs" and hedge funds prefer to be flat or long - not short
2. Producers will continue to de-hedge
3. Geopolitical factors (i.e. Iran's nuclear ambitions) are
demand-positive
MEDIUM TERM
1. Demand is undergoing a revolution because of:
a. Proliferation of gold investment products, including the new
ETF's
b. Development of new commodity markets in the Mid and Far East
c. Deregulation and restructuring of Asian gold markets
2. Supply is unlikely to rise significantly because:
a. Past weak gold prices curtailed exploration budgets
b. The central bank agreement limits gold sales
3. The US current account deficit requires further Dollar depreciation
4. US Dollar reserves are excessive and will likely be diversified
5. Previous stock market bubbles led to sharp gold price hikes (1934,
1971)
6. Geopolitical factors (i.e. Iran's nuclear ambitions) will continue
to boost gold demand
LONG-TERM
1. Monetary reflation is very likely because of:
a. Record debt levels in the Western economies
b. Soaring pension and medical liabilities of the "baby boomers"
c. A world-wide surplus of consumer goods and services (on
account of increased output in China and India) which
threatens to topple the world economy into deflation
2. The commodity price cycle is likely to be protracted because of
Chinese and Indian demand
3. Gold is "cheap" on many metrics, including inflation, oil prices and
the S&P500
4. Geopolitical factors (i.e. the "War on Terrorism") will remain
around for many years
Source: Martin Murebeeld & Associates
-4-
OCM GOLD FUND
SCHEDULE OF INVESTMENTS -- MAY 31, 2006
(UNAUDITED)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS 92.9%
MAJOR GOLD PRODUCERS 36.3%
20,000 AngloGold Ashanti Ltd. ADR ....................... $ 924,600
148,580 Barrick Gold Corp. ............................... 4,548,034
10,000 Freeport-McMoRan Copper & Gold, Inc. ............. 559,900
270,000 Gold Fields Ltd. ADR ............................. 5,915,700
437,500 Goldcorp, Inc. ................................... 13,413,750
225,000 Harmony Gold Mining Co. Ltd. ADR* ................ 3,226,500
275,000 Kinross Gold Corp. * ............................. 3,022,250
169,994 Newmont Mining Corp. ............................. 8,865,187
------------
40,475,921
------------
INTERMEDIATE/MID-TIER GOLD PRODUCERS 19.7%
134,110 Agnico-Eagle Mines Ltd. .......................... 4,473,910
350,000 Bema Gold Corp. *. ............................... 1,929,609
190,000 Cambior, Inc.* ................................... 608,000
200,000 DRDGOLD Ltd. ..................................... 310,000
125,000 Glamis Gold Ltd. * ............................... 4,795,000
425,000 IAMGOLD Corp. .................................... 4,007,750
100,000 Meridian Gold, Inc. * ............................ 3,125,000
140,000 Randgold Resources Ltd. ADR * .................... 2,745,400
------------
21,994,669
------------
JUNIOR GOLD PRODUCERS 16.0%
599,000 Alhambra Resources Ltd. * ........................ 1,430,854
256,250 Apollo Gold Corp. * .............................. 128,009
250,000 Aurizon Mines Ltd. * ............................. 725,000
1,400,000 Ballarat Goldfields NL* .......................... 327,078
300,000 Bendigo Mining Ltd.*. ............................ 454,443
400,000 Capstone Mining Corp.* ........................... 639,419
400,000 Central Asia Gold Ltd.* .......................... 146,205
1,000,000 Claude Resources, Inc. * ......................... 1,280,000
430,000 Eldorado Gold Corp. * ............................ 2,179,292
150,000 Glencairn Gold Corp. * ........................... 100,817
457,000 Golden Cycle Gold Corp.* ......................... 4,341,500
359,000 Golden Star Resources Ltd. * ..................... 1,080,590
150,000 Mexgold Resources, Inc.* ......................... 885,559
500,000 Oxiana Ltd. ...................................... 1,130,454
250,000 Sino Gold Ltd.* .................................. 942,045
202,500 Yamana Gold, Inc.* ............................... 2,069,550
------------
17,860,815
------------
EXPLORATION AND DEVELOPMENT COMPANIES 11.9%
200,000 Addwest Minerals International Ltd.*+ ............ --
200,000 African Gold Group, Inc.* ........................ 317,893
206,812 Altius Minerals Corp.* ........................... 1,296,097
200,000 Amarillo Gold Corp.* ............................. 59,946
125,000 Anatolia Minerals Development Ltd. * ............. 454,132
69,100 Aquiline Resources, Inc.* ........................ 200,835
75,000 Aurora Energy Resources, Inc.* ................... 275,885
500,000 Birim Goldfields, Inc. * ......................... 231,608
500,000 Columbia Metals Corp. Ltd. * ..................... 204,360
150,000 Cumberland Resources Ltd. * ...................... 640,500
150,000 Fortuna Silver Mines, Inc.* ...................... 226,839
125,000 Fronteer Development Group, Inc. * ............... 624,432
500,000 Geodex Minerals Ltd.* ............................ 140,781
294,900 Guyana Goldfields, Inc.*. ........................ 2,263,311
300,000 Mag Silver Corp. * ............................... 637,602
250,000 Maximus Ventures Ltd.* ........................... 90,827
106,500 Metallica Resources, Inc.* ....................... 338,556
150,000 Mundoro Mining, Inc.* ............................ 306,540
167,000 Northern Lion Gold Corp.* ........................ 91,008
450,000 Northland Resources, Inc.* ....................... 588,556
150,000 Orezone Resources, Inc.* ......................... 262,943
200,000 Radius Gold, Inc. * .............................. 127,157
300,000 Red Back Mining, Inc.* ........................... 986,376
300,000 Sabina Silver Corp.* ............................. 335,150
133,333 Silverstone Resources Corp.*+ .................... --
750,000 StrataGold Corp.* ................................ 844,687
207,700 Sunridge Gold Corp.* ............................. 462,184
100,000 Viceroy Exploration Ltd. * ....................... 799,273
122,500 Wolfden Resources, Inc. * ........................ 411,671
------------
13,219,149
------------
OTHER 6.0%
229,200 International Royalty Corp.* ..................... 938,866
400,000 Kimberley Diamond Co. NL* ........................ 412,993
40,000 Royal Gold, Inc. ................................. 1,131,200
65,000 Streettracks Gold Trust (ETF) * .................. 4,169,100
------------
6,652,159
------------
See notes to financial statements.
-5-
OCM GOLD FUND
SCHEDULE OF INVESTMENTS -- MAY 31, 2006 (CONTINUED)
(UNAUDITED)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
PRIMARY SILVER PRODUCERS 3.0%
40,000 Apex Silver Mines Ltd. * ......................... $ 558,000
100,000 Couer d'Alene Mines Corp. * ...................... 478,000
100,000 Hecla Mining Co. * ............................... 546,000
48,075 Pan American Silver Corp. * ...................... 925,695
100,000 Silver Wheaton Corp.* ............................ 890,000
------------
3,397,695
------------
TOTAL COMMON STOCKS
(cost $40,972,583) ............................... 103,600,408
------------
WARRANTS 2.1%
1 Anatolia Minerals Development Ltd.*#^
Exp. 12/15/2006 ............................... 85,150
1 Apollo Gold Corp. *#^
Exp. 12/23/2006 ............................... --
50,000 Bema Gold Corp. *
Exp. 10/27/2007 ............................... 197,094
1 Canyon Resources Corp. *#^
Exp. 06/01/2006 ............................... --
89,000 Endeavour Mining Capital Corp.*
Exp. 11/10/2008 ............................... 218,256
75,000 Fortuna Silver Mines, Inc. *#
Exp. 03/23/08 ................................. --
75,000 Glencairn Gold Corp.*
Exp. 11/26/2008 ............................... 22,820
150,000 Goldcorp, Inc.*
Exp. 5/30/2007 ................................ 947,888
150,000 Mag Silver Corp. *#
Exp. 6/21/2007 ................................ 134,877
35,000 Nevsun Resources Ltd.*#
Exp. 12/18/2008 ............................... --
110,000 Northgate Minerals Corp. *
Exp. 12/28/2006 ............................... 144,868
24,038 Pan American Silver Corp. *
Exp. 2/20/2008 ................................ 223,787
250,000 Silver Wheaton Corp.*
Exp. 8/5/2009 ................................. 320,164
66,666 Silverstone Resources Corp.*
Exp. 8/5/2009 ................................. --
TOTAL WARRANTS
(cost $110,472) .................................. 2,294,904
------------
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 5.2%
$ 5,851,389 UMB Bank Money Market Fiduciary, 3.40% ........... $ 5,851,389
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $5,851,389) ................................ 5,851,389
------------
TOTAL INVESTMENTS
(cost $46,934,444) ....................... 100.2% 111,746,701
LIABILITIES LESS OTHER ASSETS ........................... (0.2)% (258,425)
------------
NET ASSETS ............................................. 100.0% $111,488,276
============
- ----------
* 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
See notes to financial statements.
-6-
OCM GOLD FUND
SCHEDULE OF INVESTMENTS -- MAY 31, 2006 (CONTINUED)
(UNAUDITED)
At May 31, 2006, restricted securities totaled $220,027 or 0.20% of net assets
and consisted of the following securities:
MAY 31, 2006
CARRYING VALUE ACQUISITION
ISSUER PER UNIT COST DATE
- --------------------------------------------------------------------------------
Anatolia Minerals Development Ltd.
Warrants Exp. 12/15/2006 1.3624 -- 6/14/04
Apollo Gold Corp.
Warrants Exp. 12/23/2006 -- -- 12/23/02
Canyon Resources Corp.
Warrants Exp. 6/01/2006 -- -- 12/30/05
Fortuna Silver Mines
Warrants Exp. 3/23/2008 -- -- 3/22/06
Mag Silver Corp.
Warrants Exp. 6/21/2007 0.8992 -- 12/21/05
Nevsun Resources Ltd.
Warrants Exp. 12/18/2008 -- -- 12/18/03
- --------------------------------------------------------------------------------
SUMMARY OF INVESTMENTS BY COUNTRY
PERCENT OF
COUNTRY MARKET VALUE INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
Australia $ 3,413,218 3.0%
Canada 67,215,329 60.1%
Cayman Islands 776,256 0.7%
Jersey 2,745,400 2.5%
South Africa 10,376,800 9.3%
United States(1) 27,219,698 24.4%
- --------------------------------------------------------------------------------
TOTAL $111,746,701 100.0%
- --------------------------------------------------------------------------------
(1) Includes short-term securities.
See notes to financial statements.
-7-
OCM GOLD FUND
STATEMENT OF ASSETS AND LIABILITIES -- MAY 31, 2006
(UNAUDITED)
ASSETS:
Investments in unaffiliated issuers, at value (cost $46,934,444) .................... $ 111,746,701
Receivable for fund shares sold ..................................................... 50,765
Interest and dividends receivable ................................................... 34,823
Prepaid expenses and other assets ................................................... 8,236
-------------
Total assets ..................................................................... 111,840,525
=============
LIABILITIES:
Due to investment adviser ........................................................... 87,221
Accrued distribution fees ........................................................... 206,054
Accrued expenses and other liabilities .............................................. 58,974
-------------
Total liabilities ................................................................ 352,249
-------------
Net Assets ....................................................................... $ 111,488,276
=============
NET ASSETS CONSIST OF:
Shares of beneficial interest, no par value; unlimited shares authorized ............ $ 36,744,206
Undistributed net investment loss ................................................... (983,959)
Undistributed net realized gain on investments and foreign currency transactions .... 10,915,772
Net unrealized appreciation on investments and foreign currency translations ........ 64,812,257
-------------
Net Assets ....................................................................... $ 111,488,276
=============
CALCULATION OF MAXIMUM OFFERING PRICE:
Net asset value and redemption price per share(1) ................................... $ 18.94
Maximum sales charge (4.50% of offering price) ...................................... 0.89
-------------
Offering price to public ............................................................ $ 19.83
-------------
Shares outstanding .................................................................. 5,885,244
=============
- ----------
(1) A 1.50% redemption fee is imposed on redemptions of shares held less than
three months.
See notes to financial statements.
-8-
OCM GOLD FUND
STATEMENT OF OPERATIONS -- SIX MONTHS MAY 31, 2006
(UNAUDITED)
INVESTMENT INCOME:
Interest ............................................................................................... $ 75,037
Dividends (net of foreign withholding taxes of $13,045) ................................................ 139,813
------------
Total investment income ............................................................................. 214,850
------------
EXPENSES:
Investment advisory fees ............................................................................... 456,761
Distribution fees ...................................................................................... 430,469
Fund administration and accounting fees ................................................................ 60,772
Professional fees ...................................................................................... 37,051
Transfer agent fees and expenses ....................................................................... 28,586
Federal and state registration fees .................................................................... 17,100
Reports to shareholders ................................................................................ 8,810
Custody fees ........................................................................................... 5,747
Trustees' fees ......................................................................................... 1,917
Other expenses ......................................................................................... 20,107
------------
Total expenses ...................................................................................... 1,067,320
------------
Net investment loss ................................................................................. (852,470)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments and foreign currency transactions ..................................... 12,044,156
Net change in unrealized appreciation/depreciation on investments and foreign currency translations .... 25,816,505
------------
Net gain on investments ................................................................................ 37,860,661
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................................... $ 37,008,191
============
See notes to financial statements.
-9-
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
MAY 31, 2006 NOV. 30,
(UNAUDITED) 2005
------------- ------------
OPERATIONS:
Net investment loss ................................................... $ (852,470) $ (1,067,908)
Net realized gain on investments and foreign currency transactions .... 12,044,156 1,001,004
Net change in unrealized appreciation/depreciation on investments
and foreign currency translations .................................. 25,816,505 2,909,401
------------- ------------
Net increase in net assets resulting from operations .................. 37,008,191 $ 2,842,497
------------- ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Dividends from net investment income .................................. -- (650,813)
Distributions paid from net realized gains ............................ -- (1,947,756)
------------- ------------
Total distributions ................................................... -- (2,598,569)
------------- ------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold ......................................... 5,901,825 6,329,367
Distributions reinvested .............................................. -- 2,316,168
Payment for shares redeemed(1) ........................................ (9,949,298) (10,563,680)
------------- ------------
Net decrease in net assets from fund share transactions ............... (4,047,473) (1,918,145)
------------- ------------
TOTAL INCREASE IN NET ASSETS ............................................. 32,960,718 (1,674,217)
NET ASSETS, BEGINNING OF PERIOD .......................................... 78,527,558 80,201,775
------------- ------------
NET ASSETS, END OF PERIOD ................................................ $ 111,488,276 $ 78,527,558
============= ============
UNDISTRIBUTED NET INVESTMENT LOSS ........................................ $ (983,959) $ (131,494)
============= ============
TRANSACTIONS IN SHARES:
Shares sold ........................................................... 344,039 562,854
Shares issued on reinvestment of distributions ........................ -- 198,838
Shares redeemed ....................................................... (570,239) (936,797)
------------- ------------
Net decrease in shares outstanding .................................... (226,200) (175,105)
============= ============
- ----------
(1) Net of redemption fees of $3,251 and $3,068 for the six months ended May
31, 2006 and year ended November 30, 2005, respectively.
See notes to financial statements.
-10-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS -- MAY 31, 2006
(UNAUDITED)
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. 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 period ended May 31, 2006,
the Fund received $3,251 in redemption fees.
Guarantees and Indemnifications - In the normal course of business, the
Fund enters into 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.
-11-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS -- MAY 31, 2006 (CONTINUED)
(UNAUDITED)
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
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 six-month period ended May 31, 2006, OCM voluntarily agreed to
limit the total expenses of the Fund to an annual rate of 2.99% of average 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 six-month ended May 31, 2006
were $9,474,367 and $19,642,002, respectively. There were no purchases or sales
of U.S. government obligations.
NOTE 6. FEDERAL INCOME TAX INFORMATION
At May 31, 2006, 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 .......................... $47,470,562
===========
Unrealized appreciation ...................... $65,088,732
Unrealized depreciation ...................... (812,593)
-----------
Net unrealized appreciation on investments ... $64,276,139
===========
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.
-12-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS -- MAY 31, 2006 (CONTINUED)
(UNAUDITED)
The tax character of distributions paid during the fiscal years ended November
30, 2005 and November 30, 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 accumulated capital loss carry forward
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.
-13-
OCM GOLD FUND
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 2006 NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
(UNAUDITED) 2005 2004 2003 2002 2001
-------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
Net asset value, beginning of period .............. $ 12.85 $ 12.76 $ 14.46 $ 7.53 $ 4.71 $ 3.52
---------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ............................... (0.15) (0.18) (0.18) (0.12) (0.09) (0.04)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions ................................... 6.24 0.69 (1.30) 7.05 2.91 1.23
---------- -------- -------- -------- -------- --------
Total from investment operations .................. 6.09 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 period .................... $ 18.94 $ 12.85 $ 12.76 $ 14.46 $ 7.53 $ 4.71
========== ======== ======== ======== ======== ========
Total Return* ..................................... 47.39%(1) 4.34% (10.31)% 92.03% 59.87% 33.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .............. $ 111,488 $ 78,528 $ 80,202 $ 84,230 $ 35,109 $ 17,924
Ratio of expenses to average net assets:
Net of waivers and reimbursements .............. 2.11%(2) 2.24% 2.15% 2.39% 2.66% 2.60%
Before waivers and reimbursements .............. 2.11%(2) 2.24% 2.17% 2.39% 2.66% 2.60%
Ratio of net investment loss to average net assets:
Net of waivers and reimbursements .............. (1.68)%(2) (1.51)% (1.58)% (1.42)% (1.46)% (1.14)%
Before waivers and reimbursements .............. (1.68)%(2) (1.51)% (1.60)% (1.42)% (1.46)% (1.14)%
Portfolio turnover rate ........................... 10%(1) 5% 12% 17% 32% 5%
- ----------
* Assumes no sales charge.
(1) Not annualized.
(2) Annualized.
See notes to financial statements.
-14-
OCM GOLD FUND
EXPENSE EXAMPLE -- FOR THE SIX MONTHS ENDED MAY 31, 2006
(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 December 1, 2005 to May 31,
2006 (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
DECEMBER 1, 2005 MAY 31, 2006 MAY 31, 2006*
---------------- ------------ -------------
Actual $1,000.00 $1,473.90 $13.00
Hypothetical (5% return
before expenses) 1,000.00 1,014.49 10.58
- ----------
* Expenses are equal to the Fund's annualized expense ratio of 2.11% for the
period, multiplied by the average account value over the period,
multiplied by 182/365 (to reflect the one-half year period).
-15-
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.]
Primary Silver Producers 3.6%
Cash and Other Assets 5.0%
Major Gold Producers 36.3%
Intermediate/Mid-Tier Gold Producers 20.8%
Junior Gold Producers 16.2%
Exploration and Development Companies 11.9%
Other 6.2%
A description of the Fund's proxy voting policies and procedures and a
record of the Fund's proxy votes for the year ended June 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.
-16-
OCM Gold Fund
Distributed by:
Syndicated Capital, Inc.
1299 Ocean Avenue, Suite 210
Santa Monica, CA 90401
ITEM 2. CODE OF ETHICS.
Not applicable to semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable to semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable to semi-annual reports.
ITEM 6. SCHEDULE OF INVESTMENTS
The schedule 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.
(a) 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.
(b) Not applicable.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics - Not applicable.
(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.
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: August 3, 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: August 3, 2006
By: /s/ Jacklyn Orrell
---------------------
Jacklyn Orrell
Secretary and Treasurer
Date: August 3, 2006