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
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Date of fiscal year end: November 30
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Date of reporting period: May 31, 2007
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ITEM 1. REPORT TO STOCKHOLDERS.
[LOGO, OCM GOLD FUND]
SEMI-ANNUAL REPORT
MAY 31, 2007
Dear Fellow Shareholders:
Signs of stress in the credit markets brought on by the over issuance of credit
to marginal borrowers is beginning to ripple through financial markets. The Bank
for International Settlements (BIS) warns in its recent annual report that years
of loose monetary policy has fostered a dangerous credit bubble, leaving the
global economy vulnerable to a 1930s style economic downturn. Meanwhile,
open-ended dollar buying has been dealt a blow as China pronounced its intention
to diversify the country's foreign exchange reserves while Kuwait made the
decision to move away from pegging its currency to the US dollar. For many,
gold's historic monetary characteristics will only be appreciated once gold has
risen to heights in dollar terms that presently are dismissed as complete folly,
much like foretelling gold's ascent from $35 to over $800 in the 1970's. We
believe one of the most important periods for owning gold related assets as part
of a disciplined diversified portfolio is upon us.
The consolidation in the gold market that began after the run-up in gold prices
to $730 an ounce in May of 2006 continued into the first half of 2007 as gold
prices ranged from $608 to $685, closing June 30th at $650, up 2.36% from
year-end. For the fiscal period ending May 31st covered in the financials of
this report, your Fund posted a negative return of 2.65% (excluding sales
charges). The investment strategy of the OCM Gold Fund of owning a cross section
of the gold mining industry consisting of senior producers to exploration and
development companies allowed it to outpace the Philadelphia Gold and Silver
Index(XAU), which had a negative return of 5.71% over the same period.
GOLD PRICE, DOLLAR PER OUNCE, LONDON PM FIX
[The following table was represented as a line chart in the printed material.]
4-Jan-00 281.50
3-Jul-00 287.65
2-Jan-01 271.10
1-Aug-01 267.35
1-Feb-02 283.90
2-Sep-02 312.00
3-Mar-03 345.50
1-Oct-03 383.50
1-Apr-04 427.25
1-Nov-04 428.85
3-May-05 427.90
1-Nov-05 459.50
1-Jun-06 625.00
1-Dec-06 648.75
2-Jul-07 654.75
Source: Global Insight
- 1 -
MARKET OVERVIEW
The bursting of the speculative housing bubble in the U.S. is beginning to play
out in the credit markets as subprime mortgage defaults accelerate forcing the
downgrade of structured debt products backed by mortgages. Holders of
Collateralized Debt Obligations (CDOs) and Collateralized Mortgage Obligations
(CMOs) have found themselves questioning the value of the securities as models
established for pricing the securities differ dramatically from what the market
is willing to pay. Two Bear Stearns hedge funds specializing in structured debt
became worthless in June, prompting fears damage from the housing downturn is
starting to spread. With over $2 trillion in adjustable rate mortgages prepared
to reset at higher interest rates along with the re-rating of the highly
illiquid CDOs, fears of widespread financial damage are understandable.
The Bank for International Settlements (BIS) voiced its concerns in its recent
annual report citing mass issuance of structured credit instruments, soaring
levels of household debt, extreme appetite for risk shown by investors and
entrenched imbalances in the world currency system as posing risk to a financial
system where assets were "priced to perfection." Further stating, "Behind each
set of concerns lurks the common factor of highly accommodating financial
conditions. Tail events affecting the global economy might at some point have
much higher costs than is commonly supposed." Concluding its report with,
"Virtually nobody foresaw the Great Depression of the 1930s, or the crises which
affected Japan and southeast Asia in the early and late 1990s. In fact, each
downturn was preceded by a period of non-inflationary growth exuberant enough to
lead many commentators to suggest that a `new era' had arrived."
The policy response over the last 20 years has been to meet each economic shock
with vigorous monetary easing. With the potential for fallout from gratuitous
lending policies of the last few years spreading, market participants are
increasingly aware the Federal Reserve is unlikely to tighten monetary policy
for fear of setting off a cascading sequence of defaults. The Fed finds itself
fighting the effects of past monetary easing that failed to allow malinvestment
to unwind and permitted leverage to escalate while not being able to address
inflationary pressures with much more than lip service. Consequently, the US
dollar is coming under renewed downward pressure as dollar holders question the
viability of the dollar as a long-term store of value.
Putting further downward pressure on the dollar is the decision by the Chinese
and other countries to diversify foreign exchange reserves away from the U.S.
dollar. In March, China's Central Bank Governor Zhou Xiaochuan stated China
would stop accumulating U.S. dollars in its foreign exchange reserves which had
grown to $1.3 trillion. With the current account and budget deficits requiring
$3 billion per day, any decision by central banks to stop holding additional
dollars has a negative consequence for the dollar. Additionally, in May Kuwait
announced it was no longer pegging its currency to the U.S. dollar citing rising
inflation. In order to maintain the desired value of its currency, Kuwait has
had to acquire more dollars through the printing of additional Kuwaiti dinar,
which in turn, has fueled rising inflation within the country. Kuwait's dilemma
is not alone in the Gulf region as broad money supply growth is running at
annual rate of 20% in an effort to absorb dollars. Kuwait's split from the
dollar begs the question, is the rest of the world far behind?
A few of the other factors that are supportive of higher gold prices include:
o Ongoing geopolitical tensions in the Middle East favor gold as an
alternative asset.
o Annual gold supplies are constrained due to declining gold
production caused by lack of major new discoveries and the long lead
time to bring new mines into production.
- 2 -
o Sales by signatories to the Central Bank Gold Selling Agreement
appear set to come up 100 tonnes short of the 500 tonne annual quota
for the second year in a row.
o Introduction of exchange traded funds (ETF's) in Asia and other
parts of the world is expanding the demand side of the gold market.
o Increased purchasing power by a rising middle class in India and
China is propelling consumer demand for gold in Asia.
o Gold remains relatively "cheap" versus a number of historic metrics,
such as the Dow Jones/Gold ratio, which stood at 21.09 on June 30th.
The average over the last 100 years has been 10 ounces to buy one
unit of the Dow Jones.
o Bull market cycles for gold have historically lasted 12 to 20 years,
the current cycle is entering its sixth year.
FUND INVESTMENT STRATEGY
Your Fund employs an active management style that allocates the portfolio over
four sub sectors in the gold mining 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 performing
grass roots exploration to companies developing known ore deposits for
production. It is our belief that investment flows into the gold sector shift
from one sub-sector to the next as a bull market trend in gold matures. Further
consideration is paid to political risk as mining operations have migrated to
some of the more inhospitable locations in the world.
Over the past two years, rising production costs have hindered the gold mining
industry from expanding operating margins and therefore exhibiting the earnings
and cash flow leverage to rising gold prices necessary to attract investor
interest and higher valuations. It is our opinion this trend is about to reverse
with gold prices significantly outpacing production cost inflation. Companies
with large production bases, such as Gold Fields and Newmont Mining, stand to
benefit appreciably in such a scenario.
The insatiable appetite for gold reserves by the major mining companies and the
desire of intermediates and junior gold producers to grow translates into
ongoing merger and acquisition activity. In the first half of the year,
Cumberland Resources was acquired by fellow Canadian company, Agnico Eagle Mines
in a share swap. Agnico Eagle remains one of the Fund's top holdings in the
mid-tier sector for its low geopolitical risk, strength of management and
production growth profile. In late June, Yamana Gold made an ambitious
unsolicited bid for fellow mid-tier gold producer Meridian Gold that faces a
certain uphill battle as investors grow weary of companies attempting to grow by
acquisition with little regard for dilution.
Although exploration and development companies tend to carry a higher level of
risk, we remain focused on the group as the sector offering the potential for
the greatest creation of shareholder value through discovery, reserve growth and
takeover premiums. Our strategy is to search out companies with talented
management and known deposits that we believe have the potential to expand
further. Additionally, your Fund's approach is to take minor positions in a
relatively large number of companies in order to spread out the risk and enhance
overall returns. A couple of recent additions to the portfolio over the past six
months include, Detour Gold, Mansfield Minerals and Geologix Explorations.
- 3 -
CONCLUDING REMARKS
John Maynard Keynes once wrote: "The situation is serious when enterprise
becomes a bubble on a whirlpool of speculation." The world has been awash in
liquidity with greater investor risk appetite providing the impetus for
increased speculative activity by private equity and hedge funds. Only recently
have some corners of the market begun to question credit quality and reassess
risk. In our opinion, widespread deterioration of credit quality will be met
with advancing gold prices as investors signify growing distrust of financial
instruments and seek out alternatives to preserve wealth.
We appreciate your shareholding and confidence in the OCM Gold Fund and we look
forward to meeting the investment objective of preserving your purchasing power.
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
Portfolio Manager Assistant Portfolio Manager
July 24, 2007
- 4 -
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - MAY 31, 2007
(UNAUDITED)
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS 92.3%
MAJOR GOLD PRODUCERS 34.8%
20,000 AngloGold Ashanti Ltd. ADR ....................... $ 834,400
60,000 Barrick Gold Corp. ............................... 1,747,800
10,000 Freeport-McMoRan Copper & Gold, Inc. ............. 787,000
270,000 Gold Fields Ltd. ADR ............................. 4,676,400
686,250 Goldcorp, Inc. ................................... 16,531,762
225,000 Harmony Gold Mining Co., Ltd. ADR* ............... 3,359,250
430,645 Kinross Gold Corp.* .............................. 5,744,804
32,200 Lihir Gold Ltd. ADR* ............................. 848,148
107,333 Lihir Gold Ltd.* ................................. 278,060
124,994 Newmont Mining Corp. ............................. 5,084,756
------------
39,892,380
------------
INTERMEDIATE/MID-TIER GOLD PRODUCERS 22.6%
161,860 Agnico-Eagle Mines Ltd. .......................... 5,877,136
100,000 Gammon Lake Resources, Inc.* ..................... 1,310,448
430,000 Eldorado Gold Corp.* ............................. 2,457,488
504,800 IAMGOLD Corp. .................................... 3,679,992
150,000 Meridian Gold, Inc.* ............................. 3,847,500
500,000 Oxiana Ltd. ...................................... 1,353,253
140,000 Randgold Resources Ltd. ADR ...................... 3,281,600
299,500 Yamana Gold, Inc. ................................ 4,028,275
------------
25,835,692
------------
JUNIOR GOLD PRODUCERS 9.7%
599,000 Alhambra Resources Ltd.* ......................... 784,398
250,000 Aurizon Mines Ltd. ............................... 820,000
400,000 Capstone Mining Corp.* ........................... 939,108
1,000,000 Claude Resources, Inc.* .......................... 1,365,635
150,000 Glencairn Gold Corp. ............................. 85,586
457,000 Golden Cycle Gold Corp.* ......................... 3,032,195
359,000 Golden Star Resources Ltd.* ...................... 1,407,280
300,000 Red Back Mining, Inc.* ........................... 1,428,304
250,000 Sino Gold Mining Ltd. ............................ 1,241,516
------------
11,104,022
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EXPLORATION AND DEVELOPMENT COMPANIES 15.1%
200,000 African Gold Group, Inc.* ........................ 248,807
200,000 Amarillo Gold Corp.* ............................. 261,903
187,500 Anatolia Minerals Development Ltd.* .............. 1,069,825
58,200 Aquiline Resources, Inc.* ........................ 492,667
75,000 Aurora Energy Resources, Inc.* ................... 1,258,535
250,000 Australian Solomons Gold Ltd.* ................... 275,933
500,000 Birim Goldfields, Inc.* .......................... 233,842
700,000 Brazauro Resources Corp.* ........................ 471,425
100,000 Detour Gold Corp. ................................ 532,223
100,000 Fronteer Development Group, Inc.* ................ 1,200,075
300,000 Fury Exploration Ltd. * .......................... 274,998
215,600 Geologix Exploration* ............................ 362,997
300,000 Grayd Resource Corp. * ........................... 232,906
244,900 Guyana Goldfields, Inc.* ......................... 2,125,781
450,000 MAG Silver Corp. ................................. 4,356,468
287,500 Majestic Gold Corp. *+ ........................... 113,752
125,000 Mansfield Minerals, Inc.* ........................ 408,054
250,000 Maximus Ventures Ltd.* ........................... 68,983
106,500 Metallica Resources, Inc.* ....................... 504,059
200,000 Radius Gold, Inc.* ............................... 115,985
300,000 Sabina Silver Corp.* ............................. 740,810
300,000 Selkirk Metals Corp.* ............................ 319,895
750,000 StrataGold Corp.* ................................ 505,098
207,700 Sunridge Gold Corp.* ............................. 446,834
200,000 Western Goldfields, Inc.* ........................ 391,200
200,000 YGC Resources Ltd. *+. ........................... 281,171
------------
17,294,226
------------
OTHER 4.5%
206,812 Altius Minerals Corp.* ........................... 2,495,440
229,200 International Royalty Corp. ...................... 1,631,477
40,000 Royal Gold, Inc. ................................. 1,077,600
------------
5,204,517
------------
See notes to financial statements.
- 5 -
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - MAY 31, 2007 (CONTINUED)
(UNAUDITED)
SHARES VALUE
- -------------------------------------------------------------------------------
PRIMARY SILVER PRODUCERS 5.6%
40,000 Apex Silver Mines Ltd.* .......................... $ 820,000
100,000 Coeur d'Alene Mines Corp.* ....................... 361,000
150,000 Fortuna Silver Mines, Inc. ....................... 434,945
100,000 Hecla Mining Co.* ................................ 800,000
48,075 Pan American Silver Corp.* ....................... 1,335,542
293,332 Silverstone Resources Corp.* ..................... 765,500
100,000 Silver Wheaton Corp. * ........................... 1,143,953
700,000 US Silver Corp. * ................................ 700,589
------------
6,361,529
------------
TOTAL COMMON STOCKS
(cost $40,222,456) ............................... 105,692,366
------------
EXCHANGE TRADED FUNDS 4.8%
9,000 iShares Silver Trust* ............................ 1,204,470
65,000 Streettracks Gold Trust* ......................... 4,260,100
------------
TOTAL EXCHANGE TRADED FUNDS
(cost $ 3,931,360) ............................... 5,464,570
------------
WARRANTS 1.4%
125,000 Australian Solomons Gold Ltd.*
Exercise Price 1.71 CAD, Exp. 8/28/2008 ........ 39,168
1 Canyon Resources Corp.*+#^
Exercise Price $2.16, Exp. 6/1/2007 ............ --
89,000 Endeavour Mining Capital Corp.*
Exercise Price 5.50 CAD, Exp. 11/10/2008 ....... 407,913
75,000 Fortuna Silver Mines, Inc.*+#
Exercise Price $1.85, Exp. 3/23/2008 ........... 87,691
150,000 Fury Exploration Ltd.*+#
Exercise Price 1.25 CAD, Exp. 9/20/2008 ........ --
75,000 Glencairn Gold Corp.*
Exercise Price $1.25, Exp. 11/26/2008 .......... 8,418
1,500 Goldcorp, Inc.*
Exercise Price $40.55, Exp. 6/09/2011 .......... 14,460
50,000 Kinross Gold Corp.*
Exercise Price 1.90 CAD, Exp. 10/27/2007 ....... 206,248
143,750 Majestic Gold Corp.*+#
Exercise Price 0.60 CAD, Exp. 5/3/2009 ......... --
35,000 Nevsun Resources*+#
Exercise Price 10.00 CAD, Exp. 12/18/2008 ...... --
24,038 Pan American Silver Corp.*
Exercise Price 12.00 CAD, Exp. 2/20/2008 ....... 405,617
250,000 Silver Wheaton Corp.*
Exercise price 4.00 CAD, Exp. 8/5/2009 ......... 390,515
66,665 Silverstone Resource Corp.*+#
Exercise Price 1.80 CAD, Exp. 6/8/2007 ......... 61,733
100,000 YGC Resources Ltd.*+#
Exercise Price 3.00 CAD, Exp. 5/25/2012 ........ --
------------
TOTAL WARRANTS
(cost $85,797) ................................... 1,621,763
------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 1.7%
$1,932,707 UMB Money Market Fiduciary ....................... 1,932,707
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,932,707) ................................ 1,932,707
------------
TOTAL INVESTMENTS
(cost $46,172,320) ................... 100.2% 114,711,406
LIABILITIES LESS OTHER ASSETS ....................... (0.2)% (192,240)
------------
NET ASSETS .......................................... 100.0% $114,519,166
============
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
- -------------------------------------------------------------------------------
Canyon Resources Corp. 55,556
See notes to financial statements.
- 6 -
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - MAY 31, 2007 (CONTINUED)
(UNAUDITED)
At May 31, 2007, restricted securities totaled $394,923 or 0.3% of net assets
and consisted of the following securities:
MAY 31, 2007
CARRYING VALUE ACQUISITION
ISSUER PER UNIT COST DATE
- --------------------------------------------------------------------------------
Majestic Gold Corp. 0.3957 CAD 0.0363 CAD 5/03/07
Majestic Gold Corp. Warrants
Exercise Price 0.60 CAD, Exp. 5/3/2009 0.6000 CAD -- 5/03/07
YGC Resources Ltd. 1.4059 CAD 1.6664 CAD 5/25/07
YGC Resources Ltd. Warrants
Exercise Price 3.00 CAD, Exp. 5/25/201 23.0000 CAD -- 5/25/07
- --------------------------------------------------------------------------------
SUMMARY OF INVESTMENTS BY COUNTRY
PERCENT OF
COUNTRY MARKET VALUE INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
Australia $ 3,187,930 2.8%
Canada 77,504,070 67.5
Cayman Islands 1,227,913 1.1
New Guinea 848,148 0.7
Jersey 3,281,600 2.9
South Africa 8,870,050 7.7
United States(1) 19,791,695 17.3
- --------------------------------------------------------------------------------
TOTAL $114,711,406 100.0%
- --------------------------------------------------------------------------------
1 Includes short-term securities.
See notes to financial statements.
- 7 -
OCM GOLD FUND
STATEMENT OF ASSETS AND LIABILITIES - MAY 31, 2007
(UNAUDITED)
ASSETS:
Investments in unaffiliated issuers, at value (cost $46,172,320) ........................................ $ 114,711,406
Receivable for investments shares sold .................................................................. 389,110
Interest and dividends receivable ....................................................................... 17,135
Receivable for fund shares sold ......................................................................... 128,453
Prepaid expenses and other assets ....................................................................... 12,100
-------------
Total assets .......................................................................................... 115,258,204
-------------
LIABILITIES:
Due to investment adviser ............................................................................... 85,418
Payable for securities purchased ........................................................................ 354,073
Accrued distribution fees ............................................................................... 242,467
Accrued expenses and other liabilities .................................................................. 57,080
-------------
Total liabilities ..................................................................................... 739,038
-------------
Net Assets ............................................................................................ $ 114,519,166
=============
NET ASSETS CONSIST OF:
Shares of beneficial interest, no par value; unlimited shares authorized ................................ $ 44,031,600
Undistributed net investment loss ....................................................................... (1,850,280)
Undistributed net realized gain on investments and foreign currency transactions ........................ 3,798,701
Net unrealized appreciation on investments and foreign currency translations ............................ 68,539,145
-------------
Net Assets ............................................................................................ $ 114,519,166
=============
CALCULATION OF MAXIMUM OFFERING PRICE:
Net asset value and redemption price per share .......................................................... $ 18.09
Maximum sales charge (4.50% of offering price) .......................................................... 0.85
-------------
Offering price to public ................................................................................ $ 18.94
-------------
Shares outstanding ...................................................................................... 6,331,500
=============
See notes to financial statements.
- 8 -
OCM GOLD FUND
STATEMENT OF OPERATIONS - SIX MONTHS ENDED MAY 31, 2007
(UNAUDITED)
INVESTMENT INCOME:
Interest ................................................................................................ $ 33,810
Dividends (net of foreign withholding taxes of $20,603) ................................................. 235,112
-------------
Total investment income ............................................................................... 268,922
-------------
EXPENSES:
Investment advisory fees ................................................................................ 494,895
Distribution fees ....................................................................................... 482,331
Fund administration and accounting fees ................................................................. 68,094
Transfer agent fees and expenses ........................................................................ 43,492
Professional fees ....................................................................................... 29,310
Federal and state registration fees ..................................................................... 8,745
Custody fees ............................................................................................ 8,031
Reports to shareholders ................................................................................. 5,681
Trustees' fees .......................................................................................... 3,988
Other expenses .......................................................................................... 12,030
-------------
Total expenses ........................................................................................ 1,156,597
-------------
Net investment loss ................................................................................... (887,675)
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments and foreign currency transactions ...................................... 3,926,084
Net change in unrealized appreciation/depreciation on investments and foreign currency translations ..... (6,208,399)
-------------
Net loss on investments ................................................................................. (2,282,315)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................................... $ (3,169,990)
=============
See notes to financial statements.
- 9 -
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
MAY 31, 2007 NOV. 30,
(UNAUDITED) 2006
---------------- -------------
OPERATIONS:
Net investment loss .................................................................... $ (887,675) $ (1,702,906)
Net realized gain on investments and foreign currency transactions ..................... 3,926,084 11,517,598
Net change in unrealized appreciation/depreciation on investments
and foreign currency translations .................................................... (6,208,399) 35,751,792
------------- -------------
Net increase (decrease) in net assets resulting from operations ........................ (3,169,990) 45,566,484
------------- -------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Distributions paid from net realized gains ............................................. (10,048,572) --
------------- -------------
Total distributions .................................................................... (10,048,572) --
------------- -------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold .......................................................... 5,537,756 11,755,811
Distributions reinvested ............................................................... 8,876,117 --
Payment for shares redeemed(1) ......................................................... (6,432,435) (16,093,563)
------------- -------------
Net increase (decrease) in net assets from fund share transactions ..................... 7,981,438 (4,337,752)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................................................. (5,237,124) 41,228,732
NET ASSETS, BEGINNING OF PERIOD .......................................................... 119,756,290 78,527,558
------------- -------------
NET ASSETS, END OF PERIOD ................................................................ $ 114,519,166 $ 119,756,290
============= =============
UNDISTRIBUTED NET INVESTMENT LOSS ........................................................ $ (1,850,280) $ (962,605)
============= =============
TRANSACTIONS IN SHARES:
Shares sold ............................................................................ 305,857 668,319
Shares issued on reinvestment of distributions ......................................... 510,122 --
Shares redeemed ........................................................................ (342,959) (921,283)
------------- -------------
Net increase (decrease) in shares outstanding .......................................... 473,020 (252,964)
============= =============
1 Net of redemption fees of $1,467 and $4,526 for the six months ended May
31, 2007, and year ended November 30, 2006, respectively.
See notes to financial statements.
- 10 -
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2007
(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. 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 may differ from the characterization for federal income
tax purposes due to differences in the recognition of income, expense or
gain/loss 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.
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 six months ended May 31,
2007, the Fund received $1,467 in redemption fees.
- 11 -
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2007 (CONTINUED)
(UNAUDITED)
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 is to
evaluating 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 is
evaluating 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 - MAY 31, 2007 (CONTINUED)
(UNAUDITED)
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 May 31, 2007 are reflected in the Statement of
Operations. At May 31, 2007, $242,467 of Distribution 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 six-month ended May 31, 2007
were $5,796,385 and $9,032,336 respectively. There were no purchases or sales of
U.S. government obligations.
NOTE 6. FEDERAL INCOME TAX INFORMATION
At May 31, 2007, 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 .......................... $48,204,630
===========
Unrealized appreciation ...................... $67,508,638
Unrealized depreciation ...................... (1,001,862)
-----------
Net unrealized appreciation on investments ... $66,506,776
===========
The difference between cost amounts for financial statement and federal
income tax purposes is due primarily to investments in passive foreign
investment companies ("PFIC's").
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 ..................... 10,048,519
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.
-13 -
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2007 (CONTINUED)
(UNAUDITED)
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 six months ended May 31, 2007, the Fund was advised that
the Distributor received $13,273 of sales charges from sales of the Fund's
shares.
NOTE 8. CONCENTRATION OF RISK
Investing in foreign securities involves certain risks not necessarily
found in U.S. markets. These include risks associated with adverse changes in
economic, political, regulatory and other conditions, changes in currency
exchange rates, exchange control regulations, expropriation of assets or
nationalization, imposition of withholding taxes on dividend or interest
payments or capital gains, and possible difficulty in obtaining and enforcing
judgments against foreign entities. Further, issuers of foreign securities are
subject to different, and often less comprehensive, accounting, reporting and
disclosure requirements than domestic issuers.
As the Fund concentrates its investments in the gold mining industry, a
development adversely affecting the industry (for example, changes in the mining
laws which increases production costs 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
SIX MONTHS
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 2007 NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
(UNAUDITED) 2006 2005 2004 2003 2002
-------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
Net asset value, beginning of period .............. $ 20.44 $ 12.85 $ 12.76 $ 14.46 $ 7.53 $ 4.71
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ............................... (0.27) (0.29) (0.18) (0.18) (0.12) (0.09)
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions ........................... (0.34) 7.88 0.69 (1.30) 7.05 2.91
-------- -------- -------- -------- -------- --------
Total from investment operations .................. (0.61) 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 .............. (1.74) -- (0.31) (0.21) -- --
-------- -------- -------- -------- -------- --------
Total distributions ............................... (1.74) -- (0.42) (0.22) -- --
-------- -------- -------- -------- -------- --------
Net asset value, end of period .................... $ 18.09 $ 20.44 $ 12.85 $ 12.76 $ 14.46 $ 7.53
======== ======== ======== ======== ======== ========
TOTAL RETURN* ..................................... (2.65)%(1) 59.07% 4.34% (10.31)% 92.03% 59.87%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) ................ $114,519 $119,756 $ 78,528 $ 80,202 $ 84,230 $ 35,109
Ratio of expenses to average net assets:
Net of waivers and reimbursements ............... 2.04%(2) 2.07% 2.24% 2.15% 2.39% 2.66%
Before waivers and reimbursements ............... 2.04%(2) 2.07% 2.24% 2.17% 2.39% 2.66%
Ratio of net investment loss to average net assets:
Net of waivers and reimbursements ............... (1.56)%(2) (1.64)% (1.51)% (1.58)% (1.42)% (1.46)%
Before waivers and reimbursements ............... (1.56)%(2) (1.64)% (1.51)% (1.60)% (1.42)% (1.46)%
Portfolio turnover rate ........................... 9%(1) 20% 5% 12% 17% 32%
- ----------
* Assumes no sales charge.
1 Not Annualized.
2 Annualized.
See notes to financial statements.
- 15 -
OCM GOLD FUND
EXPENSE EXAMPLE - FOR THE SIX MONTHS ENDED MAY 31, 2007
(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, 2006 to May 31,
2007 (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, 2006 MAY 31, 2007 MAY 31, 2007*
---------------- ------------ -------------
Actual $1,000.00 $973.50 $10.03
Hypothetical (5% return
before expenses) 1,000.00 $1,014.84 10.24
- ----------
* Expenses are equal to the Fund's annualized expense ratio of 2.04% for the
period, multiplied by the average account value over the period,
multiplied by 182/365 (to reflect the one-half year period).
- 16 -
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.]
Major Gold Producers 35.0%
Intermediate/Mid-Tier Gold Producers 22.6%
Junior Gold Producers 9.7%
Exploration and Development Companies 15.2%
Other 4.9%
Exchange Traded Funds 4.8%
Primary Silver Producers 6.3%
Cash and Other Assets 1.5%
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.
- 17 -
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.
(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: August 3, 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: August 3, 2007
By: /s/ Jacklyn Orrell
------------------------
Jacklyn Orrell
Secretary and Treasurer
Date: August 3, 2007