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, 2006
ITEM 1. REPORT TO STOCKHOLDERS.
LOGO
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OCM GOLD FUND
=============
ANNUAL REPORT
NOVEMBER 30, 2006
Dear Fellow Shareholder:
A discernible shift in global sentiment away from the U.S. dollar and its role
as the world's reserve currency became increasingly evident in 2006. Gold prices
reached a high of $730 an ounce in May as foreigners sought to diversify
overweight US dollar denominated asset positions. Following the May high, gold
prices consolidated for the balance of the year, with London gold closing 2006
at $635.70, up 23.9% for the year. It is important to note that gold rose in
price against all major currencies over the course of the year, punctuating the
fact that gold is in a bull market and its role as the ultimate form of money is
being reasserted, albeit in stealth mode. We believe further depreciation of the
dollar, along with rising economic and geopolitical risks, will lead to further
appreciation of gold's monetary characteristics before the current bull market
in gold runs its course.
Your Fund performed well in calendar 2006, gaining 36.64% (+30.51% after maximum
sales charge) for the year, significantly outpacing the Philadelphia Gold &
Silver Index (XAU) which was up 12.58% in 2006. For the one year fiscal period
ending November 30th covered in this report, your fund gained 59.07% (+51.86%
after max. sales charge) versus 31.74% for the XAU. The XAU Index is dominated
by large cap senior producers which continued to underperform your Fund's
strategy of owning a cross section of the gold industry consisting of senior,
intermediate and junior producers, along with exploration and development
companies. By comparison, the Standard & Poor's 500 Index gained 15.80% for 2006
and up 14.23% for the period ending November 30th. It is interesting to point
out, since 2001 and the bursting of the Nasdaq bubble, your fund has a 5 year
average annual return of 33.64% (+32.42% after max. sales charge) versus 6.20%
for the S&P 500.
Gold price, US$ per ounce, London pm fix Gold price, Euro per ounce, London pm fix
CHART OMITTED CHART OMITTED
01/31/2000 $ 283.30 01/31/2000 289.25
09/29/2000 273.65 09/29/2000 311.28
05/31/2001 267.50 05/31/2001 316.37
01/31/2002 282.30 01/31/2002 327.84
09/30/2002 323.70 09/30/2002 327.43
05/30/2003 361.40 05/30/2003 306.87
01/30/2004 399.75 01/30/2004 322.67
09/30/2004 415.65 09/30/2004 334.66
06/30/2005 437.10 06/30/2005 361.05
02/28/2006 556.00 02/28/2006 466.35
10/31/2006 603.75 10/31/2006 473.03
Gold price, Yen per ounce, London pm fix Gold price, AUS$ per ounce, London pm fix
CHART OMITTED CHART OMITTED
01/31/2000 30,248 01/31/2000 $ 445.94
09/29/2000 29,628 09/29/2000 505.27
05/31/2001 31,731 05/31/2001 527.94
01/31/2002 37,684 01/31/2002 556.48
09/30/2002 39,219 09/30/2002 595.37
06/30/2003 41,510 05/30/2003 554.72
02/27/2004 43,191 01/30/2004 527.72
10/29/2004 45,189 09/30/2004 573.82
06/30/2005 48,435 05/31/2005 546.88
02/28/2006 64,399 01/31/2006 751.87
10/31/2006 70,732 09/29/2006 803.02
-1-
MARKET OVERVIEW
While gold may be a commodity, its unique monetary attributes set it apart. When
central banks look to diversify monetary holdings, they don't turn to oil or
base metals; they look to gold for its historic monetary role. Gold has been
money for over 3000 years because it is rare, universally attractive and easily
divisible. And unlike paper currencies, gold is not someone else's liability.
There is a popular notion in the marketplace that gold is inextricably linked to
oil and base metals, especially when those commodities suffer downdrafts in
price. Certainly short-term liquidity needs of hedge funds and commodity funds
have, from time to time, caused downward pressure on gold and gold shares over
the past year. This was clearly evident in August when a large hedge fund,
Amaranth Partners, suffered $6.5 billion in losses related to energy trades that
went awry. However, gold's monetary characteristics ultimately distinguishes
gold from other commodities as illustrated by gold's relative performance versus
oil and copper in the fourth quarter; gold up 6.1%, while oil down 7.2% and
copper down 17.2%.
There are a number of arguments put forth to explain the rise in commodity
prices over the past four years, most notably economic growth in China and India
and underinvestment in the mining sector during the financial asset bubble of
the late `90s. A further argument is that all hard assets are a refuge for
depreciating currencies. While there appears to be a real basis for higher
commodity prices, we believe the explosion of global liquidity to fight off the
deflationary effects of the bursting of the financial asset bubble is the root
of the commodity price advance. The recent decline in oil and copper and
softness in the housing sector may very well be a danger sign that an economic
storm is brewing. There are already signs the reckless reach for yield present
over the past few years is rearing its ugly head as sub-prime lenders announce
increasing default rates, forcing one large sub-prime lender, Ownit Mortgage
Solutions, to file for bankruptcy at the start of 2007. Should the trend
continue and deterioration of credit quality become more widespread, the Federal
Reserve must decide whether or not another large dose of liquidity would be
tolerated by US dollar holders without setting off a full-on panic out of the
dollar. However, failure to act could potentially initiate a devastating
sequence of defaults in the financial system, in our opinion. A no-win situation
may be close at hand for Federal Reserve policy makers, negatively impacting its
credibility and the value of the dollar.
A number of central banks have already grown weary of the dollar. According to
reports from the Bank of International Settlements (BIS), oil producing
countries led by Iran and Qatar reduced their dollar holdings in 2006, buying
euros, yen, and sterling. Iran also reported adding to its gold holdings.
Additionally, calls from within China to diversify its dollar holdings grew
louder as foreign currency reserves topped $1 trillion in 2006. In May, monetary
committee member Yu Yongding explicitly called for Beijing to increase China's
gold holdings in order to protect against a tumbling dollar. Moreover, Vladimir
Putin, a frequent critic of dollar hegemony, ordered the Russian central bank to
raise the allocation of gold from 5 percent to 10 percent of foreign reserves.
European Central Banks also exhibited a different attitude as demonstrated by
their failure to reach the 500 tonne annual quota established under the Central
Bank Gold Selling Agreement (CBGA). The CBGA signatories sold a total of 393
tonnes of gold in the one year period ending September 26th. Should Germany's
Bundesbank continue to resist political pressure to sell gold in order to fund
social programs, the quota is unlikely to be fulfilled in 2007 either. The
failure of the banks to meet the quota shows the banks are beginning to rethink
the role of gold in their portfolios versus adding more currencies.
Less supply of gold from central banks comes at a time when investment demand is
accelerating with the acceptance of the gold exchange traded funds (ETF's) as a
convenient means of owning gold bullion. The Streetracks
- 2 -
Gold ETF has amassed 400 tones of gold over the past two years. The World Gold
Council has initiatives to introduce ETF's in other markets throughout Europe
and Asia in 2007, most notably China and India. Meanwhile, newly mined supply is
proving to be inelastic to higher gold prices as global gold production is
estimated by Gold Fields Mineral Services to have declined 2% in 2006.
Historically, investment demand for gold rises as investors seek to protect
their wealth during periods of rising economic risks. The unprecedented US
current account deficit at 7% of GDP has created economic imbalances that will
need to be corrected, either by significantly depreciating the dollar, or
through turning off the American household's appetite for consumer goods. With
household debt levels at a record 90% of GDP and the US savings rate negative
for the first time since the 1930s, American households may be forced to curtail
spending with a far reaching impact on the global economy. Further, the downturn
in the housing market (estimated by some to be responsible for up to 60% of US
job growth since 2001) means households will be unable to tap home equity lines
at the rate they have in the past in order to maintain living standards
challenged by stagnant wage growth and inflation. We believe investors will seek
additional exposure to gold as a slowing US economy forces a revaluation of
financial risk globally with anticipation of a coordinated monetary ease by
central banks.
A further catalyst for gold investment demand over the past few years has been
the heightened level of geopolitical risk. The War on Terror in Iraq and
Afghanistan has lingered and now threatens to spread to Iran in an effort to
squelch Iran's nuclear ambitions. An attack on Iran by either the United States
or Israel will, in our opinion, be met with stiff resistance from a growing list
of countries that are outwardly opposing US foreign policies, led by Venezuela
and Russia. If such an event were to occur, we believe funding of US deficits at
favorable terms could become problematic as foreigners shun the dollar or demand
higher rates.
FUND INVESTMENT STRATEGY
Your Fund employs an active management style that allocates the portfolio over
four sub sectors in the gold industry based on size of production: senior (or
major), intermediate (or mid-tier) and junior producers. The fourth category is
exploration and development companies that range from companies doing grass
roots exploration to companies developing known ore deposits for production.
Further consideration is paid to political risk as mining operations tend to be
located in some of the more inhospitable locations in the world.
There were a couple of main themes that played out over the course of the year.
The large cap senior producers underperformed the gold price badly, most notably
Newmont Mining, down 15.9%. Declining production and rising costs due to the
mature nature of the operations were the main culprit. As a whole the majors are
finding themselves battling to stand in place as the Herculean effort of
replacing mined reserves of five to eight million ounces is proving difficult.
However, on the positive front a number of the seniors do have new mines coming
on-stream with lower projected operating costs to replace higher cost depleted
operations.
Merger and acquisition activity continues apace in the gold sector. A lack of
exploration in the low gold price environment of the late `90's has meant the
pipeline of new discoveries to bring into production is for the most part dry.
It takes approximately seven to eight years to bring a project from discovery to
production. Consequently, many companies are compelled to grow through
acquisition. Over the course of the year, Barrick Gold completed an acquisition
of its Canadian rival Placer Dome to become the world's largest gold producer.
In a move with which we did not agree, Goldcorp acquired fellow mid-tier
producer Glamis Gold. In our opinion, both companies would have been better
positioned to add incremental growth over the long-term by staying independent.
As a result of the merger, Goldcorp was the largest position in your Fund at
year-end.
- 3 -
In our opinion, mid-tier and junior producers with growing production profiles
will continue to outperform senior producers going forward in the current bull
market cycle. With smaller production bases, intermediate and junior companies
can more easily add meaningful value through accretive acquisitions and
discovery. The lack of new discoveries and the need to replace reserves by the
majors means that exploration and development companies have garnered enhanced
market attention. Your Fund's approach to exploration and development companies
is to take minor positions in a relatively large number of companies in order to
spread out the risk and enhance overall returns. Over the course of the past
year, notable successes were Mag Silver and Fronteer Development, up 438% and
294%, respectively.
CONCLUDING REMARKS
In our opinion, the move to diversify overweight dollar holdings is still in its
infancy as imbalances created by undisciplined economic policies unwind.
Responding to questions in November about its foreign currency reserves topping
$1 trillion, Chinese monetary policy committee member, Fan Gang, stated, "The
main responsibility for this imbalance lies with a US Treasury, which is
printing too much money." We believe gold prices will continue to outperform
financial assets for the foreseeable future, despite attempts by political and
economic establishments to trivialize gold's monetary significance. Advancing
gold prices will signify a growing distrust of financial instruments as
investors seek out alternatives to preserve wealth. It is our belief before the
current bull market cycle in gold has run its course; gold prices will surpass
all historic precedents.
We appreciate your shareholding and confidence in the OCM Gold Fund and we look
forward to meeting your investment objectives. Should you have any questions
regarding the Fund or gold, please contact your financial adviser or you may
contact us directly at 1-800-779-4681. For questions regarding your account
please contact 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
JANUARY 19, 2007
- 4 -
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - NOVEMBER 30, 2006
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS 97.2%
MAJOR GOLD PRODUCERS 38.8%
20,000 AngloGold Ashanti Ltd. ADR .................. $ 964,400
98,580 Barrick Gold Corp. .......................... 3,099,355
10,000 Freeport-McMoRan Copper & Gold, Inc. ........ 628,700
270,000 Gold Fields Ltd. ADR ........................ 5,165,100
686,250 Goldcorp, Inc. .............................. 21,390,412
225,000 Harmony Gold Mining Co., Ltd. ADR* .......... 3,816,000
275,000 Kinross Gold Corp.* ......................... 3,445,750
169,994 Newmont Mining Corp. ........................ 7,974,418
------------
46,484,135
------------
INTERMEDIATE/MID-TIER GOLD PRODUCERS 22.7%
134,110 Agnico-Eagle Mines Ltd. ..................... 5,891,452
350,000 Bema Gold Corp.* ............................ 1,903,240
100,000 Gammon Lake Resources, Inc.* ................ 1,523,643
504,800 IAMGOLD Corp. ............................... 4,835,984
150,000 Meridian Gold, Inc.* ........................ 4,620,000
500,000 Oxiana Ltd. ................................. 1,310,492
140,000 Randgold Resources Ltd. ADR* ................ 3,211,600
299,500 Yamana Gold, Inc. ........................... 3,845,580
------------
27,141,991
------------
JUNIOR GOLD PRODUCERS 10.7%
599,000 Alhambra Resources Ltd.* .................... 860,210
250,000 Aurizon Mines Ltd.* ......................... 837,500
400,000 Capstone Mining Corp.* ...................... 665,499
1,000,000 Claude Resources, Inc.* ..................... 1,409,807
430,000 Eldorado Gold Corp.* ........................ 2,447,461
150,000 Glencairn Gold Corp.* ....................... 72,242
457,000 Golden Cycle Gold Corp.* .................... 3,194,430
359,000 Golden Star Resources Ltd.* ................. 1,184,700
300,000 Red Back Mining, Inc.* ...................... 1,008,757
250,000 Sino Gold Ltd.* ............................. 1,144,707
------------
12,825,313
------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
EXPLORATION AND DEVELOPMENT COMPANIES 12.7%
200,000 Addwest Minerals International Ltd.* + ...... $ --
200,000 African Gold Group, Inc.* ................... 352,014
200,000 Amarillo Gold Corp.* ........................ 140,105
125,000 Anatolia Minerals Development Ltd. .......... 426,883
58,200 Aquiline Resources, Inc.* ................... 397,003
75,000 Aurora Energy Resources, Inc.* .............. 942,426
250,000 Australian Solomons Gold Ltd.* .............. 294,440
500,000 Birim Goldfields, Inc.* ..................... 227,671
700,000 Brazauro Resources Corp.* ................... 766,200
300,000 BrazMin Corp.* .............................. 249,562
61,300 Buffalo Gold Ltd.* .......................... 116,470
150,000 Cumberland Resources Ltd.* .................. 742,500
125,000 Fronteer Development Group, Inc.* ........... 1,116,462
300,000 Fury Exploration Ltd.* + .................... 189,142
500,000 Geodex Minerals Ltd.* ....................... 144,484
294,900 Guyana Goldfields, Inc.* .................... 2,866,366
60,000 Madison Minerals, Inc.* ..................... 49,387
300,000 MAG Silver Corp.* ........................... 1,260,946
250,000 Maximus Ventures Ltd.* ...................... 85,376
106,500 Metallica Resources, Inc.* .................. 446,703
267,300 Mundoro Mining, Inc.* ....................... 491,532
450,000 Northland Resources, Inc.* .................. 512,259
150,000 Orezone Resources, Inc.* .................... 227,233
85,750 Premier Gold Mines Ltd.* .................... 70,582
200,000 Radius Gold, Inc.* .......................... 94,571
300,000 Sabina Silver Corp.* ........................ 428,196
300,000 Selkirk Metals Corp.* ....................... 333,625
293,332 Silverstone Resources Corp.* ................ 449,502
750,000 StrataGold Corp.* ........................... 880,035
207,700 Sunridge Gold Corp.* ........................ 665,658
122,500 Wolfden Resources, Inc.* .................... 286,405
------------
15,253,738
------------
OTHER 3.5%
206,812 Altius Minerals Corp.* ...................... 1,769,311
229,200 International Royalty Corp.* ................ 1,123,923
40,000 Royal Gold, Inc. ............................ 1,274,400
------------
4,167,634
------------
See notes to financial statements.
- 5 -
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - NOVEMBER 30, 2006 (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS 4.6%
9,000 iShares Silver Trust* ....................... $ 1,257,120
65,000 Streettracks Gold Trust * ................... 4,185,350
------------
5,442,470
------------
PRIMARY SILVER PRODUCERS 4.2%
40,000 Apex Silver Mines Ltd.* ..................... 700,800
100,000 Coeur d'Alene Mines Corp.* .................. 545,000
100,000 First Majestic Silver Corp.* ................ 393,170
150,000 Fortuna Silver Mines, Inc.* ................. 295,534
100,000 Hecla Mining Co.* ........................... 697,000
48,075 Pan American Silver Corp.* .................. 1,244,393
100,000 Silver Wheaton Corp.* ....................... 1,173,380
------------
5,049,277
------------
TOTAL COMMON STOCKS
(cost $43,211,038) .......................... 116,364,558
------------
WARRANTS 1.6%
1 Anatolia Minerals Development Ltd.*+#^
Exercise Price 2.50 CAD, Exp. 76,620
12/15/2006
1 Apollo Gold Corp.*+#^
Exercise Price 3.25 CAD, Exp. --
12/23/2006
125,000 Australian Solomons Gold Ltd.*
Exercise Price 1.71 CAD, Exp. 49,256
8/28/2008
50,000 Bema Gold Corp.*
Exercise Price 1.90 CAD, Exp. 191,331
10/27/2007
1 Canyon Resources Corp.*+#^
Exercise Price $2.16, Exp. --
06/01/2007
89,000 Endeavour Mining Capital Corp.*
Exercise Price 5.50 CAD, Exp. 240,814
11/10/2008
75,000 Fortuna Silver Mines, Inc.*+#
Exercise Price 1.85 CAD, Exp. 26,270
3/23/2008
150,000 Fury Exploration Ltd.*+#
Exercise Price 1.25 CAD, Exp. --
9/20/2008
75,000 Glencairn Gold Corp.*
Exercise Price 1.25 CAD, Exp. 13,135
11/26/2008
1,500 Goldcorp, Inc.*
Exercise Price $40.55, Exp. 24,045
5/30/2007
150,000 MAG Silver Corp.*+#
Exercise Price 1.35 CAD, Exp. 453,152
6/21/2007
35,000 Nevsun Resources Ltd.*+#
Exercise Price 10.00 CAD, Exp. --
12/18/2008
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
WARRANTS (CONTINUED)
110,000 Northgate Minerals Corp.*
Exercise Price 3.00 CAD, Exp.12/28/20 $652,014
24,038 Pan American Silver Corp.*
Exercise Price 12.00 CAD, Exp. 2/20/2008 383,303
250,000 Silver Wheaton Corp.*
Exercise Price 4.00 CAD, Exp, 8/5/2009 422,504
66,665 Silverstone Resource Corp.*+#
Exercise Price 1.80 CAD, Exp. 6/8/2007 --
------------
TOTAL WARRANTS
(cost $338,442) ............................................ 1,932,444
------------
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 1.4%
$ 1,725,696 UMB Money Market Fiduciary, 3.7% ............ 1,725,696
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,725,696) .......................................... 1,725,696
------------
TOTAL INVESTMENTS
(cost $45,275,176) ................ 100.2 % 120,022,698
LIABILITIES LESS OTHER ASSETS ....... (0.2)% (266,408)
------------
NET ASSETS .......................... 100.0% $119,756,290
CAD - Canadian Dollars.
* 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 proce- dures established by the Fund's Board
of Trustees.
^ 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 - NOVEMBER 30, 2006 (CONTINUED)
At November 30, 2006, restricted securities totaled $189,142 or 0.16% of net
assets and consisted of the following securities:
NOVEMBER 30, 2006 AVERAGE
CARRYING VALUE COST ACQUISITION
ISSUER PER UNIT PER UNIT DATE
- --------------------------------------------------------------------------------
Fury Exploration Ltd. $ 0.6305 $ 0.7146 9/20/06
Fury Exploration Ltd.
Warrants Exercise Price 1.25 -- -- 9/20/06
CAD, Exp. 9/20/2008
- --------------------------------------------------------------------------------
SUMMARY OF INVESTMENTS BY COUNTRY
PERCENT OF
COUNTRY MARKET VALUE INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
Australia $ 2,798,895 2.3%
Canada 79,822,787 66.5
Cayman Islands 941,614 0.8
Jersey 3,211,600 2.7
South Africa 9,945,500 8.3
United States(1) 23,052,740 19.2
Virgin Islands 249,562 0.2
- --------------------------------------------------------------------------------
TOTAL $120,022,698 100.0%
- --------------------------------------------------------------------------------
1 Includes short-term securities.
See notes to financial statements.
- 7 -
OCM GOLD FUND
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 2006
ASSETS:
Investments in unaffiliated issuers,
at value (cost $45,275,176) ............................ $ 120,022,698
Cash ..................................................... 11
Receivable for investments shares sold ................... 219,256
Interest and dividends receivable ........................ 15,134
Receivable for fund shares sold .......................... 74,040
Prepaid expenses and other assets ........................ 13,586
-------------
Total assets ........................................... 120,344,725
-------------
LIABILITIES:
Due to investment adviser ................................ 209,332
Payable for securities purchased ......................... 76,012
Accrued distribution fees ................................ 79,536
Payable for fund shares redeemed ......................... 145,482
Accrued expenses and other liabilities ................... 78,073
-------------
Total liabilities ...................................... 588,435
-------------
Net Assets ............................................. $ 119,756,290
-------------
NET ASSETS CONSIST OF:
Shares of beneficial interest, no par value;
unlimited shares authorized ............................ $ 36,050,162
Undistributed net investment loss ........................ (962,605)
Undistributed net realized gain on investments
and foreign currency transactions ...................... 9,921,189
Net unrealized appreciation on investments
and foreign currency translations ...................... 74,747,544
-------------
Net Assets ............................................. $ 119,756,290
=============
CALCULATION OF MAXIMUM OFFERING PRICE:
Net asset value and redemption price per share(1) ........ $ 20.44
Maximum sales charge (4.50% of offering price) ........... 0.96
-------------
Offering price to public ................................. $ 21.40
-------------
Shares outstanding ....................................... 5,858,480
=============
- --------------
(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 - YEAR ENDED NOVEMBER 30, 2006
INVESTMENT INCOME:
Interest .................................................. $ 148,783
Dividends (net of foreign withholding
taxes of $23,439) ..................................... 305,438
------------
Total investment income ................................... 454,221
------------
EXPENSES:
Investment advisory fees .................................. 930,410
Distribution fees ......................................... 883,188
Fund administration and accounting fees ................... 124,685
Transfer agent fees and expenses .......................... 53,340
Professional fees ......................................... 45,779
Federal and state registration fees ....................... 25,677
Custody fees .............................................. 23,967
Reports to shareholders ................................... 22,701
Trustees' fees ............................................ 9,984
Other expenses ............................................ 37,396
------------
Total expenses .......................................... 2,157,127
------------
Net investment loss ..................................... (1,702,906)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments and
foreign currency transactions ........................... 11,517,598
Net change in unrealized appreciation/depreciation
on investments and foreign currency
translations ............................................ 35,751,792
------------
Net gain on investments ................................... 47,269,390
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $ 45,566,484
============
See notes to financial statements.
- 9 -
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30,
2006 2005
------------- -------------
OPERATIONS:
Net investment loss ................................ $ (1,702,906) $ (1,067,908)
Net realized gain on investments and
foreign currency transactions .................... 11,517,598 1,001,004
Net change in unrealized appreciation/depreciation
on investments and foreign currency translations . 35,751,792 2,909,401
------------- -------------
Net increase in net assets resulting from operations 45,566,484 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 ...................... 11,755,811 6,329,367
Distributions reinvested ........................... -- 2,316,168
Payment for shares redeemed(1) ..................... (16,093,563) (10,563,680)
------------- -------------
Net decrease in net assets from
fund share transactions .......................... (4,337,752) (1,918,145)
------------- -------------
TOTAL INCREASE/(DECREASE) IN NET ASSETS .............. 41,228,732 (1,674,217)
NET ASSETS, BEGINNING OF PERIOD ...................... 78,527,558 80,201,775
------------- -------------
NET ASSETS, END OF PERIOD ............................ $ 119,756,290 $ 78,527,558
============= =============
UNDISTRIBUTED NET INVESTMENT LOSS .................... $ (962,605) $ (131,494)
============= =============
TRANSACTIONS IN SHARES:
Shares sold ........................................ 668,319 562,854
Shares issued on reinvestment of
distributions .................................... -- 198,838
Shares redeemed .................................... (921,283) (936,797)
------------- -------------
Net decrease in shares outstanding ................. (252,964) (175,105)
============= =============
- --------------
(1) Net of redemption fees of $4,526 and $3,068 for the years ended November 30,
2006 and 2005, respectively.
See notes to financial statements.
- 10 -
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2006
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. Net unrealized foreign exchange gains and losses arise from changes in the
fair value of assets and liabilities, other than investments in securities at
fiscal year end, resulting from changes in exchange rates.
FEDERAL INCOME TAXES - The Fund intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and to make the requisite distributions of income to its shareholders
which will be sufficient to relieve it from all or substantially all federal
income taxes.
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 character of distributions made during the year from net
investment income or net realized gains November differ from the
characterization for federal income tax purposes due to differences in the
recognition of income, expense or gain items for financial statement and tax
purposes. To the extent that these differences are attributable to permanent
book and tax accounting differences, the components of net assets have been
adjusted.
On December 20, 2006 the Fund distributed $10,048,572 from long term
capital gains ($1.74 per share). The distribution was paid on December 21, 2006
to shareholders of record on December 20, 2006.
- 11 -
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2006 (CONTINUED)
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, 2006, the Fund received $4,526 in redemption fees.
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.
NEW ACCOUNTING PRONOUNCEMENTS - In June 2006, the Financial Accounting
Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented and disclosed
in the financial statements. FIN 48 requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Funds' tax returns
to determine whether the tax positions are "more-likely-than-not" of being
sustained by the applicable tax authority. To the extent that a tax benefit of a
position is not deemed to meet the more-likely-than-not threshold, the Fund
would report an income tax expense in the statement of operations. Adoption of
FIN 48 is required for fiscal years beginning after December 15, 2006 and is to
be applied to all open tax years as of the effective date. Management has
recently begun to evaluate the application of the Statement to the Funds, and is
not in a position at this time to evaluate the significance of its impact, if
any, on the Funds' financial statements.
In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 157, "Fair Value Measurements."
The Statement defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. The Statement establishes a fair
value hierarchy that distinguishes between (1) market participant assumptions
developed based on market data obtained from sources independent of the
reporting entity (observable inputs) and (2) the reporting entity's own
assumptions about market participant assumptions developed based on the best
information available in the circumstances (unobservable inputs). The Statement
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and is to be applied prospectively as of the beginning of the
fiscal year in which this Statement is initially applied. Management has
recently begun to evaluate the application of the Statement to the Funds, and is
not in a position at this time to evaluate the significance of its impact, if
any, on the Funds' financial statements.
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%
- 12 -
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2006 (CONTINUED)
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. Fees incurred by the Fund under
the Plan during the period ended November 30, 2006 are reflected in the
Statement of Operations. At November 30, 2006, $209,332 of Distributions Fees
were available for eligible 12b-1 expenses.
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, 2006
were $19,921,277 and $27,095,929, respectively. There were no purchases or sales
of U.S. government obligations.
NOTE 6. FEDERAL INCOME TAX INFORMATION
At November 30, 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 $46,244,483
===========
Unrealized appreciation $74,209,637
Unrealized depreciation (431,422)
-----------
Net unrealized appreciation on investments $73,778,215
===========
The difference between cost amounts for financial statement and federal
income tax purposes is due primarily to investments in passive foreign
investment companies ("PFICs").
The tax character of distributions paid during the fiscal years ended
November 30, 2006 and 2005 was as follows:
2006 2005
---- ----
Ordinary income $ -- $ 1,570,425
Net long-term capital gains -- 1,028,104
-------- ------------
Total distributions $ -- $ 2,598,529
======== ============
As of November 30, 2006 the components of accumulated earnings on a tax
basis were as follows:
Undistributed ordinary income $ --
Undistributed long-term gains 10,048,519
-----------
Tax accumulated earnings 10,048,159
Accumulated capital and other losses (120,628)
Unrealized appreciation on investments 73,778,215
-----------
Total accumulated earnings $83,706,106
===========
During the year ended November 30, 2006 the Fund utilized $699,244 of
its capital loss carryforwards.
At November 30, 2006, the Fund had realized capital losses from
transactions between November 1, 2006 and November 30, 2006 of $120,628.
Post-October capital losses for tax purposes are deferred and will be recognized
in 2007.
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, 2006, the Fund was advised
that the Distributor received $31,498 of sales charges from sales of the Fund's
shares.
- 13 -
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2006 (CONTINUED)
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 or a significant decrease in the market
price of gold) 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,
2006 2005 2004 2003 2002
---------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each year)
Net asset value, beginning of year ..... $ 12.85 $ 12.76 $ 14.46 $ 7.53 $ 4.71
---------- -------- -------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss .................... (0.29) (0.18) (0.18) (0.12) (0.09)
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions ................ 7.88 0.69 (1.30) 7.05 2.91
---------- -------- -------- --------- ---------
Total from investment operations ....... 7.59 0.51 (1.48) 6.93 2.82
---------- -------- -------- --------- ---------
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 ........... $ 20.44 $ 12.85 $ 12.76 $ 14.46 $ 7.53
========== ======== ======== ========= =========
TOTAL RETURN* .......................... 59.07% 4.34% (10.31)% 92.03% 59.87%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) ..... $ 119,756 $ 78,528 $ 80,202 $ 84,230 $ 35,109
Ratio of expenses to average net assets:
Net of waivers and reimbursements .... 2.07% 2.24% 2.15% 2.39% 2.66%
Before waivers and reimbursements .... 2.07% 2.24% 2.17% 2.39% 2.66%
Ratio of net investment loss
to average net assets:
Net of waivers and reimbursements .... (1.64)% (1.51)% (1.58)% (1.42)% (1.46)%
Before waivers and reimbursements .... (1.64)% (1.51)% (1.60)% (1.42)% (1.46)%
Portfolio turnover rate ................ 20% 5% 12% 17% 32%
- -------------
* 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 of OCM Gold
Fund (the "Fund"), including the schedule of investments, as of November 30,
2006, and the related statements of operations for the year then ended, and the
statements of changes in net assets and the financial highlights for the two
years 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
audits. The Fund's 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 the 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, 2006, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. 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, 2006, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for the
two years then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
Milwaukee, Wisconsin
January 16, 2007
- 16 -
OCM GOLD FUND
EXPENSE EXAMPLE - FOR THE YEAR ENDED NOVMEBER 30, 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 June 1, 2006 to
November 30, 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
JUNE 1, 2006 NOVEMBER 30, 2006 NOVEMBER 30, 2006*
------------ ----------------- ------------------
Actual $1,000.00 $1,079.20 $10.90
Hypothetical (5% return
before expenses) 1,000.00 1,014.52 10.56
- --------------
* Expenses are equal to the Fund's annualized expense ratio of 2.09% 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
PIE CHART OMITTED
Major Gold Producers 38.8%
Intermediate/Mid-Tier
Gold Producers 22.8%
Exploration and Development
Companies 13.2
Junior Gold Producers 10.8%
Primary Silver Producers 4.9%
Exchange Traded Funds 4.6%
Other 3.7%
Cash and Other Assets 1.2%
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, 2006 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, 2006 (UNAUDITED)
(ALL PERFORMANCE MEASUREMENTS REFLECT THE MAXIMUM
SALES LOAD CHARGES FOR EACH PERIOD SHOWN.)
AVERAGE ANNUAL TOTAL RETURNS VALUE ON 11/30/06
- ---------------------------- -----------------
1 year 51.86% OCM Gold Fund $ 24,853
5 year 33.43% S&P 500(R) Index $ 22,524
Since 12/13/96 9.57% Philadelphia Gold
(date Orrell Capital & Silver Index $ 14,534
Management, Inc.
became investment adviser)
$10,000 INVESTMENT MADE 12/13/96 (DATE ORRELL CAPITAL MANAGEMENT, INC.
BECAME INVESTMENT ADVISER)(1)
GRAPH OMITTED
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
11/30/06 24,853 22,524 14,534
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 24, 2006, 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 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, 2006, 0% 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, 0% of dividend
income distributed for the year ended November 30, 2006 is designated as
qualified dividend income under the Jobs and Growth Relief Act of 2003.
- 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 managing microHelix,
1536 Holmes Street, (Chairman of Since 2004 member of Crary Enterprises, LLC, a private Inc. and
Livermore, California 94550 the Board) investment company. Since 1988 Mr. Crary Scheid
Age 53 has been an independent corporate financial
advisor and private investor Vineyards,
in various biotechnology, software and other
early stage Inc. 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 46
INTERESTED TRUSTEES AND OFFICERS**
- ----------------------------------------------------------------------------------------------------------------------
OTHER
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, Inc. None
1536 Holmes Street, President Since 2004 since 1991.
Livermore, California 94550
Age 45
JACKLYN A. ORRELL*** Secretary and One year term Secretary of Orrell Capital Management, Inc. N/A
1536 Holmes Street, Treasurer Since 2004 since 1999.
Livermore, California 94550
Age 72
ANDREW ROGERS Chief At discretion Manager, Fund Compliance Services, LLC since N/A
1536 Holmes Street, Compliance of the Board 2004; President, GemCom, LLC since 2004;
Livermore, California 94550 Officer Since 2004 President and formerly Senior Vice President
Age 37 and Director of Administration, Gemini Fund
Services, LLC since 2001.
<FN>
- -------------
* "Independent" trustees are trustees who are not "interested persons" of the
Fund as defined in the Investment deemed to be 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 the President and a trustee of the
Trust. M. Orrell,
</FN>
- 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 Mr. Doug Webenbauer is an
audit committee financial expert serving on its audit committee and that Mr.
Webenbauer is independent.
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, 2006 November 30, 2005
Audit Fees $23,500 $20,500
Audit-Related Fees $0 $0
Tax Fees $3,675 $3,500
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, 2006 and 2005, 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 7, 2007
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 7, 2007
By: /S/ JACKLYN ORRELL
-------------------
Jacklyn Orrell
Secretary and Treasurer
Date: February 7, 2007