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, 2011
ITEM 1. REPORT TO STOCKHOLDERS.
LOGO
--------------
OCM GOLD FUND
==============
ANNUAL REPORT
NOVEMBER 30, 2011
Dear Fellow Shareholder:
For the fiscal year ending November 30, 2011, the OCM Gold Fund Investor Class
appreciated 1.70% (-2.88% after maximum sales load) while the Advisor Class
gained 2.15% compared to -0.79% for the Philadelphia Gold and Silver Index
(XAU)(1) and 7.83% for the S&P 500 Index(2). The price of gold rose 26.64% based
on the London PM fix during the period. The majority of your Fund is comprised
of shares of gold producers with a smaller percentage of exploration and mine
development companies. This strategy led to the Fund's outperformance of the XAU
for the fiscal year and has enabled the Fund to outperform the XAU over longer
time periods.
In our opinion, equities of gold mining companies failed to keep pace with gold
bullion as investors focused on the business risks associated with mining during
a period of general risk aversion in the capital markets. Further, talk of
deflationary forces taking root led to belief in some corners of the market that
gold prices may have reached a peak in the secular bull market. Consequently,
historic trading multiples of gold shares collapsed. We are unwavering in our
confidence however, that gold and gold mining shares will be the beneficiary of
increased capital flows going forward as currency debasement switches into
another gear in an effort to "paper over" liabilities amassed in the U.S. ,
European and Japanese economies.
MARKET COMMENTARY
Economic turmoil in Europe along with policy indecision in Washington set the
stage for gold's dramatic advance to record highs above $1,900 before settling
back to close the fiscal year at $1,752. Additionally, elevated geopolitical
tensions in the Middle East and the Japanese natural disaster added safe haven
buying in gold over the period. Cries of a bubble in gold were shouted by those
who have failed to fully grasp the degree of monetary debasement that has
transpired over the past decade, particularly since the U.S. credit crisis in
2008. It should also be noted that gold's rise to new highs lacked the euphoria
and widespread public participation typically associated with major market tops.
In our opinion, the bull market in gold will run its course when there is
resolution to the debt issues plaguing the U.S., Europe and Japan.
While policy makers and the market are hopeful economic growth will provide the
necessary relief to avert an unraveling of the global economy, we are less
optimistic considering the hurdles faced in both Europe and the U.S. We believe
the struggle to rollover maturing European sovereign debt signals a new phase of
the unwinding of the U.S. dollar credit cycle started in 2007. A phase, in our
opinion, that promises to expose contingent liabilities (where the default of
one entity causes a capital call on another) within the global financial system.
With $2.6 trillion of Euro bank and Euro sovereign debt maturing in 2012, the
question must be asked where is the rollover funding going to come from
considering Euro banks, who are the big holders of the debt, are being asked to
de-lever $3 to $5 trillion over the next three years? The European Central Bank
(ECB) answer appears to be in balance sheet expansion via a new matched lending
facility where technically insolvent Euro banks borrow and re-invest into bonds
of technically insolvent Euro sovereigns. It is the ECB version of Quantitative
Easing (QE) and in our opinion shows the ECB has started down the path of
attempting to "paper over" its debt dilemma. The steady rise in inter-bank
lending rates signals a quiet bank run taking place in Europe by those uneasy
with the prospect of European policy makers' ability to manage the crisis.
1
Capital flight has renewed the U.S. Dollar's status of perceived safety, even
though the U.S. is the largest net debtor nation. Contentious Washington
politics make finding a solution to the explosion of U.S. debt difficult to
imagine, in our eyes. Therefore, it must be kept in mind that there is no
historical precedence for a nation to be a net debtor and issuer of the world's
reserve currency at the same time. Increased central bank purchases of gold
during the fiscal year by China, Russia, Korea, Thailand, and Mexico, among
others, highlights the growing desire of central banks to hedge against
perceived long-term risk to the dollar as a store of value. The move by
Switzerland's central bank to devalue its currency through a QE program late in
2011 illustrates that no paper currency is a safe refuge in today's
interconnected global economy.
The bankruptcy of brokerage and commodities firm MF Global gave account holders
a firsthand experience in the meaning of contingent liabilities when they
learned the firm had dipped into client funds to use as collateral for its
leveraged bet on Euro zone bonds. Central bankers are fully aware defaults by
either a major bank or euro sovereign exposes the global financial system to a
daisy chain of previously unexpected calls on capital. Fear of the unknown, or
fear of the known as the case may be, will drive global central bankers to shy
away from letting market forces clear the decks of bad credits, in our opinion.
The remedy, as Federal Reserve Chairman Ben Bernanke most aptly pointed out in a
2002 speech about avoiding deflation, is the printing press. Understanding this
underscores the investment case for owning gold and gold assets.
According to a recent Bianco Research survey of central bank activity, "PRIOR TO
THE 2008 FINANCIAL CRISIS, THE EIGHT CENTRAL BANK BALANCE SHEETS WERE LESS THAN
15% THE SIZE OF WORLD STOCK MARKETS AND FALLING. IN THE IMMEDIATE AFTERMATH OF
LEHMAN BROTHERS' FAILURE, THESE EIGHT CENTRAL BANK BALANCE SHEETS SWELLED TO 37%
OF THE CAPITALIZATION OF THE WORLD STOCK MARKET. BUT KEEP IN MIND THAT THE LATE
2008/EARLY 2009 PEAK WAS DUE TO COLLAPSING STOCK MARKET VALUES COMBINED WITH
BALANCE SHEET EXPANSION VIA "LENDER OF LAST RESORT" LOANS. RECENTLY, THE EIGHT
CENTRAL BANK BALANCE SHEETS HAVE SPIKED BACK TO 33% OF WORLD STOCK MARKET
CAPITALIZATION. THIS HAS COME ABOUT NOT BY LENDER OF LAST RESORT LOANS, BUT
RATHER BY QE EXPANSION ... CENTRAL BANKS ARE RULING MARKETS TO A DEGREE THIS
GENERATION HAS NOT SEEN. COLLECTIVELY THEY ARE PRINTING MONEY TO A DEGREE NEVER
SEEN IN HUMAN HISTORY"
DATE U.S. DOLLAR - EURO GOLD PRICE
1/5/2001 267.4 281.0
1/4/2002 277.8 310.4
1/3/2003 344.5 330.7
1/2/2004 415.3 329.9
1/7/2005 422.2 323.6
1/6/2006 535.3 440.7
1/5/2007 609.5 469.1
1/4/2008 855.0 578.7
1/2/2009 874.5 627.6
1/8/2010 1,126.8 786.5
1/7/2011 1,367.0 1,053.0
1/6/2012 1,616.5 1,271.4
2
GOLD MINING SHARES / INVESTMENT STRATEGY
Although gold bullion performed well over the past fiscal year, the market
failed to reward shares of gold mining companies, despite increased cash flows
and dividends. We can point to several main factors for the poor performance of
the mining company shares: anxiety over the prospect of the European debt crisis
triggering a "Lehman Event" sent investors to the sidelines fearful a rush for
liquidity would send gold shares into a similar tailspin experienced in 2008;
market focus on the business risk of mining became more evident with the closing
of one of Agnico-Eagle Mines Ltd.'s Canadian operations due to ground
instability. Moreover, moves by gold producing countries Peru and Ghana to
increase taxes on gold mining added to the risk profile of increased taxation by
revenue starved governments. Additionally, management risk was highlighted by
Barrick Gold Corp. changing course in the eyes of the market by purchasing a
copper company. Also, large hedge funds invested in the gold space were rumored
to have experienced significant redemption pressure in the fourth quarter.
Whether true or not, short sellers and other hedge funds moved to get in front
of the trade.
Given the flight to safety in the capital markets, it is understandable
investors would gravitate toward bullion first. However, we believe the market
is currently mispricing business risk in shares of gold mining companies and the
negative sentiment toward these companies is overdone. It is our belief as gold
prices sustain current levels and move higher, the disappointments of 2011 will
give way to investors placing greater appreciation of mining company shares'
ability to provide returns through rising dividends and successful exploration
while also attributing higher values on mining company reserves and resources in
the ground. The historically wide divergence between the performance of gold
shares and bullion represents an extraordinary entry point for those investors
seeking gold asset exposure, in our opinion.
Your Fund outperformed the XAU for the fiscal year by concentrating on its
tiered approach of owning major, intermediate/mid-tier and junior gold producers
along with exploration and development companies. Two of the companies in the
exploration and development category, Grayd Resources Corp. and Peregrine Metals
Ltd., were acquired during the fiscal period by intermediate producers looking
to add development projects for growth. The most notable disappointment in the
portfolio over the period came from Agnico Eagle Mines Ltd., whose shares
suffered from the unforeseen mine mishap previously mentioned. Over the next
year, we see opportunities in miners that suffered operational hiccups in 2011,
but have reserves that are unencumbered. We are also seeking companies
demonstrating an ability to grow production and reserves on a per share basis.
On the exploration and development front, we are looking for assets that are
attractive additions to major and intermediate producers. Overall, we believe
the market has affirmed our investment approach to the gold business over the
long term.
CONCLUSION
We believe the unwinding of the U.S. Dollar credit cycle has reached the point
of the highest degree of risk for investors. With total credit market debt 310%
of GDP, we believe minor upticks in borrowing costs threaten to set off a
cascading sequence of defaults and thereby exposing contingent liabilities
throughout the global financial system. Central bank policy makers have no
choice but to print money in hopes of papering over the problem, in our opinion.
While the market might clamor for repeated rounds of QE, we see the prospect for
other market forces to short circuit the effort and force a complete
restructuring of the monetary system. We anticipate gold's main monetary
characteristic of not being someone else's liability to gain wider appreciation
as investors seek refuge from profligate central banks. Shares of mining
companies will benefit, in our opinion, as gold in the ground will be preferable
to money in the bank.
3
We appreciate your shareholding and confidence in the OCM Gold Fund and we look
forward to assisting you in 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
----------------------
Gregory M. Orrell
President and Portfolio Manager
January 25, 2012
_______________________________________________________________________________
INVESTING IN THE OCM GOLD FUND INVOLVES RISKS INCLUDING THE LOSS OF PRINCIPAL.
MANY OF THE COMPANIES IN WHICH THE FUND INVESTS ARE SMALLER CAPITALIZATION
COMPANIES WHICH MAY SUBJECT THE FUND TO GREATER RISK THAN SECURITIES OF LARGER,
MORE-ESTABLISHED COMPANIES, AS THEY OFTEN HAVE LIMITED PRODUCT LINES, MARKETS OR
FINANCIAL RESOURCES AND MAY BE SUBJECT TO MORE-ABRUPT MARKET MOVEMENTS. THE FUND
ALSO INVESTS IN SECURITIES OF GOLD AND PRECIOUS METALS WHICH MAY BE SUBJECT TO
GREATER PRICE FLUCTUATIONS OVER SHORT PERIODS OF TIME. THE FUND IS A
NON-DIVERSIFIED INVESTMENT COMPANY MEANING IT WILL INVEST IN FEWER SECURITIES
THAN DIVERSIFIED INVESTMENT COMPANIES AND ITS PERFORMANCE MAY BE MORE VOLATILE.
THE FUND CONTAINS INTERNATIONAL SECURITIES THAT MAY PROVIDE THE OPPORTUNITY FOR
GREATER RETURN BUT ALSO HAVE SPECIAL RISKS ASSOCIATED WITH FOREIGN INVESTING
INCLUDING FLUCTUATIONS IN CURRENCY, GOVERNMENT REGULATION, DIFFERENCES IN
ACCOUNTING STANDARDS AND LIQUIDITY.
4
Investor Class Performance as of November 30, 2011
--------------------------------------------------------------------------------
Philadelphia Gold
OCMGX OCMGX and Silver Index
(without load) (with load) (XAU) S&P 500
--------------------------------------------------------------------------------
Six Months 3.26% (-1.38%) 0.39% (-6.25%)
--------------------------------------------------------------------------------
One Year 1.70% (-2.88%) (-0.79%) 7.83%
--------------------------------------------------------------------------------
3 Year Annualized 37.13% 35.05% 28.26% 14.13%
--------------------------------------------------------------------------------
5 Year Annualized 12.88% 11.85% 7.97% (-0.18%)
--------------------------------------------------------------------------------
10 Year Annualized 23.68% 23.12% 16.13% 2.91%
--------------------------------------------------------------------------------
Advisor Class Performance as of November 30, 2011
--------------------------------------------------------------------------------
Philadelphia Gold
and Silver Index
OCMAX (XAU) S&P 500
--------------------------------------------------------------------------------
Six Months 3.46% 0.39% (-6.25%)
--------------------------------------------------------------------------------
One Year 2.15% (-0.79%) 7.83%
--------------------------------------------------------------------------------
Since Inception Annualized* 22.75% 16.31% 6.09%
--------------------------------------------------------------------------------
----------
* Inception: April 1, 2010
THE PERFORMANCE DATA QUOTED ABOVE REPRESENTS PAST PERFORMANCE. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED ABOVE. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE FUND'S TOTAL
ANNUAL OPERATING EXPENSES FOR THE OCM GOLD FUND INVESTOR CLASS AND ADVISOR CLASS
ARE 1.93% AND 1.34% RESPECTIVELY. PLEASE REVIEW THE FUND'S PROSPECTUS FOR MORE
INFORMATION REGARDING THE FUND'S FEES AND EXPENSES. FOR PERFORMANCE INFORMATION
CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL TOLL-FREE 800-628-9403. THE
RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS BUT DO NOT REFLECT THE
DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE
REDEMPTION OF FUND SHARES
----------
1 The Philadelphia Gold and Silver Index (XAU) is an unmanaged
capitalization-weighted index composed of 16 companies listed on U.S.
exchanges involved in the gold and silver mining industry. The index is
generally considered as representative of the gold and silver share market.
2 The S&P 500 Index, a registered trademark of McGraw-Hill Co., Inc. is a
market capitalization-weighted index of 500 widely held common stocks. You
cannot invest directly in an index.
5
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - NOVEMBER 30, 2011
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS 93.9%
MAJOR GOLD PRODUCERS 32.4%
225,000 AngloGold Ashanti Ltd. ADR .......................... $ 10,791,000
75,000 Barrick Gold Corp.................................... 3,966,000
270,000 Gold Fields Ltd. ADR ................................ 4,573,800
500,050 Goldcorp, Inc........................................ 26,847,685
500,000 Kinross Gold Corp.................................... 6,985,000
116,500 Newmont Mining Corp.................................. 8,024,520
------------
61,188,005
------------
INTERMEDIATE/MID-TIER GOLD PRODUCERS 36.9%
161,860 Agnico-Eagle Mines Ltd............................... 7,264,277
250,000 Alacer Gold Corp.* .................................. 2,892,298
91,250 AuRico Gold, Inc.* .................................. 914,334
500,000 Centerra Gold, Inc................................... 11,157,410
550,000 Eldorado Gold Corp................................... 9,933,000
504,800 IAMGOLD Corp......................................... 10,186,864
200,000 New Gold, Inc.* ..................................... 2,218,000
140,000 Randgold Resources Ltd. ADR ......................... 14,967,400
600,000 Yamana Gold, Inc..................................... 10,098,000
------------
69,631,583
------------
JUNIOR GOLD PRODUCERS 8.4%
227,000 Argonaut Gold Ltd.* ................................. 1,533,438
250,000 Aurizon Mines Ltd.* ................................. 1,525,000
500,000 B2Gold Corp.* ....................................... 1,789,304
291,200 Claude Resources, Inc.* ............................. 548,168
305,500 Dundee Precious Metals, Inc.* ....................... 2,812,535
281,011 Kingsgate Consolidated Ltd........................... 1,890,014
146,400 Nevsun Resources Ltd................................. 862,296
250,000 Perseus Mining Ltd.* ................................ 762,292
500,000 Petaquilla Minerals Ltd.* ........................... 343,154
150,000 Primero Mining Corp.* ............................... 519,143
610,000 San Gold Corp.* ..................................... 1,196,137
200,000 SEMAFO, Inc.* ....................................... 1,507,917
255,000 Wesdome Gold Mines Ltd............................... 462,523
------------
15,751,921
------------
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
EXPLORATION AND DEVELOPMENT COMPANIES 6.9%
500,000 Amarillo Gold Corp.* ................................ $ 637,286
240,000 Andina Minerals, Inc.* .............................. 204,716
400,000 Argentex Mining Corp.* .............................. 127,600
2,190,000 Avala Resources Ltd.* ............................... 2,469,239
331,725 Colt Resources, Inc.* ............................... 189,083
342,700 Edgewater Exploration Ltd.* ......................... 194,878
3,500,000 Indochine Mining Ltd.* .............................. 593,904
300,000 MAG Silver Corp.* ................................... 2,514,829
275,000 Malbex Resources, Inc.* ............................. 80,886
700,000 Millrock Resources, Inc.* ........................... 301,976
295,000 Ocean Park Ventures Corp.* .......................... 101,230
300,000 Rockhaven Resources Ltd.* ........................... 116,182
300,000 Sabina Silver Corp.* ................................ 1,182,411
350,000 South American Silver Corp.* ........................ 542,183
350,000 Strategic Metals Ltd.* .............................. 531,889
3,323,045 Sutter Gold Mining, Inc.* ........................... 602,739
100,000 Tahoe Resources, Inc.* .............................. 1,821,658
500,000 Torex Gold Resources, Inc.* ......................... 857,885
------------
13,070,574
------------
PRIMARY SILVER PRODUCERS 5.3%
225,000 Fortuna Silver Mines, Inc.* ......................... 1,522,134
48,075 Pan American Silver Corp............................. 1,243,700
216,599 Silver Wheaton Corp.................................. 7,290,400
------------
10,056,234
------------
OTHER 4.0%
100,000 Altius Minerals Corp.* .............................. 1,065,738
14,800 Franco-Nevada Corp................................... 626,709
65,000 Royal Gold, Inc...................................... 5,294,250
40,680 Stillwater Mining Co.* .............................. 443,819
------------
7,430,516
------------
TOTAL COMMON STOCKS
(Cost $47,064,758) ................................ 177,128,833
------------
See notes to financial statements.
6
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - NOVEMBER 30, 2011 (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
EXCHANGE TRADED FUND 5.0%
55,000 SPDR Gold Trust* .................................... $ 9,357,150
------------
TOTAL EXCHANGE TRADED FUND
(Cost $2,431,550) ................................. 9,357,150
------------
WARRANTS 0.1%
250,000 Amarillo Gold Corp.*+#
Exercise Price 2.00 CAD,
Exp. 10/29/2012 ..................................... --
33,000 Kinross Gold Corp.*
Exercise Price $21.29,
Exp. 9/17/2014 ...................................... 65,356
40,000 Primero Mining Corp.*
Exercise Price 8.00 CAD,
Exp. 7/20/2015 ...................................... 16,864
58,333 Silver Range Resources Ltd.*
Exercise Price 0.85 CAD,
Exp. 2/10/2013 ...................................... 25,165
100,000 Yukon-Nevada Gold Corp.*
Exercise Price 3.00 CAD,
Exp. 6/20/2012 ...................................... 1,225
------------
TOTAL WARRANTS
(Cost $223,327) ................................... 108,610
------------
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 1.3%
2,522,338 UMB Money Market Fiduciary, 0.01% ..................... $ 2,522,338
------------
TOTAL SHORT-TERM INVESTMENT
(Cost $2,522,338) ....................................... 2,522,338
------------
TOTAL INVESTMENTS
(Cost $52,241,973) .............100.3% 189,116,931
LIABILITIES LESS OTHER ASSETS ..........(0.3)% (484,366)
------------
TOTAL NET ASSETS .......................100.0% $188,632,565
============
ADR - American Depository Receipts.
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 procedures established by the Fund's Board of Trustees.
See notes to financial statements.
7
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - NOVEMBER 30, 2011 (CONTINUED)
SUMMARY OF INVESTMENTS BY COUNTRY
PERCENT OF
COUNTRY VALUE INVESTMENT SECURITIES
--------------------------------------------------------------------------------
Australia $ 3,246,210 1.7%
Canada 129,896,444 68.7
Jersey 14,967,400 7.9
South Africa 15,364,800 8.1
United States(1) 25,642,077 13.6
--------------------------------------------------------------------------------
TOTAL $189,116,931 100.0%
--------------------------------------------------------------------------------
(1) Includes short-term investments.
See notes to financial statements.
8
OCM GOLD FUND
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 2011
ASSETS:
Investments in unaffiliated issuers,
at value (cost $52,241,973) ...................... $ 189,116,931
Interest and dividends receivable .................. 73,636
Receivable from fund shares sold ................... 60,409
Prepaid expenses and other assets .................. 24,607
--------------
Total assets ...................................... 189,275,583
--------------
LIABILITIES:
Payable from fund shares redeemed .................. 195,208
Due to investment adviser .......................... 114,641
Accrued distribution fees .......................... 248,306
Accrued Trustees' fees ............................. 2,500
Accrued expenses and other liabilities ............. 82,363
--------------
Total liabilities ................................. 643,018
--------------
Net Assets ........................................ $ 188,632,565
==============
NET ASSETS CONSIST OF:
Shares of beneficial interest,
no par value: unlimited shares authorized ........ $ 47,769,476
Undistributed net investment loss .................. (2,892,149)
Accumulated net realized gain on investments
and foreign currency transactions ................ 6,880,157
Net unrealized appreciation on investments
and foreign currency translations ................ 136,875,081
--------------
Net Assets ........................................ $ 188,632,565
==============
CALCULATION OF MAXIMUM OFFERING PRICE:
INVESTOR CLASS:
Net asset value and redemption price per share .... $ 28.49
Maximum sales charge (4.50% of offering price) .... 1.34
--------------
Offering price to public .......................... $ 29.83
--------------
Shares outstanding
ADVISOR CLASS:
Net asset value and redemption price per share .... $ 28.74
--------------
Shares outstanding ................................ 707,355
==============
Total Shares outstanding .......................... 6,615,178
==============
See notes to financial statements.
9
OCM GOLD FUND
STATEMENT OF OPERATIONS - YEAR ENDED NOVEMBER 30, 2011
INVESTMENT INCOME:
Interest ................................................ $ 156
Dividend (net of foreign withholding taxes of $136,857) 1,320,602
-----------
Total investment income ................................ 1,320,758
-----------
EXPENSES:
Investment advisory fees ................................ 1,414,101
Distribution fees - Investor Class ...................... 1,146,165
Distribution fees - Advisor Class ....................... 49,316
Fund administration and accounting fees ................. 262,885
Transfer agent fees and expenses ........................ 105,010
Professional fees ....................................... 63,252
Federal and state registration fees ..................... 45,872
Custody fees ............................................ 34,480
Chief Compliance Officer fees ........................... 23,848
Reports to shareholders ................................. 21,198
Trustees' fees .......................................... 10,186
Other expenses .......................................... 8,567
-----------
Total expenses ......................................... 3,184,880
-----------
Net investment loss .................................... (1,864,122)
-----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain on investments and
foreign currency transactions .......................... 7,685,694
Net change in unrealized appreciation/depreciation
on investments and foreign currency translations ....... (2,687,603)
-----------
Net gain on investments ................................ 4,998,091
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... $ 3,133,969
===========
See notes to financial statements.
10
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30,
2011 2010
------------ ------------
OPERATIONS:
Net investment loss ................................ $ (1,864,122) $ (2,494,867)
Net realized gain on investments and
foreign currency transactions ..................... 7,685,694 16,484,021
Net change in unrealized appreciation/depreciation
on investments and foreign currency translations (2,687,603) 27,102,212
------------ ------------
Net increase in net assets resulting from operations 3,133,969 41,091,366
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
INVESTOR CLASS:
Distributions paid from net realized gains ........ (14,401,514) (3,437,477)
------------ ------------
Total distributions from Investor Class ........... (14,401,514) (3,437,477)
------------ ------------
ADVISOR CLASS:
Distributions paid from net realized gains ........ (1,674,355) --
------------ ------------
Total distributions from Advisor Class ............ (1,674,355) --
------------ ------------
Total distributions ............................... (16,075,869) (3,437,477)
------------ ------------
FUND SHARE TRANSACTIONS:
INVESTOR CLASS:
Net proceeds from shares sold ..................... 8,953,939 12,629,462
Distributions reinvested .......................... 13,629,588 3,215,985
Payment for shares redeemed(1) .................... (18,367,148) (33,353,842)
------------ ------------
Net increase/(decrease) in net assets from
Investor Class share transactions ................ 4,216,379 (17,508,395)
------------ ------------
ADVISOR CLASS(2):
Net proceeds from shares sold ..................... 2,008,485 16,668,622
Distributions reinvested .......................... 1,471,590 --
Payment for shares redeemed(3) .................... (2,310,133) (459,104)
------------ ------------
Net increase in net assets from Advisor Class
share transactions ............................... 1,169,942 16,209,518
------------ ------------
Net increase/(decrease) in net assets from
Fund share transactions .......................... 5,386,321 (1,298,877)
------------ ------------
TOTAL INCREASE/(DECREASE) IN NET ASSETS .............. (7,555,579) 36,355,012
NET ASSETS, BEGINNING OF YEAR ........................ 196,188,144 159,833,132
------------ ------------
NET ASSETS, END OF YEAR .............................. $188,632,565 $196,188,144
============ ============
See notes to financial statements.
11
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30,
2011 2010
------------ ------------
ACCUMULATED NET INVESTMENT LOSS ............................... $ (2,892,149) $ (1,766,791)
------------ ------------
TRANSACTIONS IN SHARES:
INVESTOR CLASS:
Shares sold ................................................ 319,505 503,451
Shares issued on reinvestment of distributions ............. 486,945 145,850
Shares redeemed ............................................ (656,541) (1,368,512)
------------ ------------
Net increase/(decrease) in Investor Class shares outstanding 149,909 (719,211)
============ ============
ADVISOR CLASS(2):
Shares sold ................................................ 71,161 680,567
Shares issued on reinvestment of distributions ............. 52,332 --
Shares redeemed ............................................ (81,229) (15,476)
------------ ------------
Net increase in Advisor Class shares outstanding ........... 42,264 665,091
============ ============
Net increase/(decrease) in Fund shares outstanding ......... 192,173 (54,120)
============ ============
---------
1 Net of redemption fees of $7,770 and $12,463, respectively.
2 Inception date of the Advisor Class was April 1, 2010.
3 Net of redemption fees of $5,881 and $289, respectively.
See notes to financial statements.
12
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2011
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.
Under FAIR VALUE MEASUREMENTS AND DISCLOSURES, various inputs are used in
determining the value of the Fund's investments. These inputs are summarized
into three broad levels as described below:
o Level 1 -- quoted prices in active markets for identical securities
o Level 2 -- other significant observable inputs (including quoted
prices for similar securities, interest rates, and evaluated quotation
obtained from pricing services)
o Level 3 -- significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
13
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2011 (CONTINUED)
The inputs or methodology used for valuing securities are not an indication
of the risk associated with investing in those securities. The following is a
summary of the inputs used, as of November 30, 2011, in valuing the Fund's
assets:
-------------------------------------------------------------------------------------------
SECTOR LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------------------------------------------------------------------------------------------
COMMON STOCKS
-------------------------------------------------------------------------------------------
Major Gold Producers $ 61,188,005 $ -- $ -- $ 61,188,005
-------------------------------------------------------------------------------------------
Intermediate/Mid-Tier Gold Producers 69,631,583 -- -- 69,631,583
-------------------------------------------------------------------------------------------
Junior Gold Producers 15,751,921 -- -- 15,751,921
-------------------------------------------------------------------------------------------
Exploration and Development Companies 13,070,574 -- -- 13,070,574
-------------------------------------------------------------------------------------------
Primary Silver Producers 10,056,234 -- -- 10,056,234
-------------------------------------------------------------------------------------------
Other 7,430,516 -- -- 7,430,516
-------------------------------------------------------------------------------------------
EXCHANGE TRADED FUND 9,357,150 -- -- 9,357,150
-------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 2,522,338 -- -- 2,522,338
-------------------------------------------------------------------------------------------
WARRANTS
-------------------------------------------------------------------------------------------
Major Gold Producers 65,356 -- -- 65,356
-------------------------------------------------------------------------------------------
Junior Gold Producers 18,089 -- -- 18,089
-------------------------------------------------------------------------------------------
Exploration and Development Companies 25,165 -- -- 25,165
-------------------------------------------------------------------------------------------
TOTAL $189,116,931 $ -- $ -- $189,116,931
-------------------------------------------------------------------------------------------
The Fund held one Level 2 security at November 30, 2011, which was a set of
warrants fair valued by the Adviser at zero, in accordance with procedures
established by and under the general supervision of the Trust's Board of
Trustees. There were no Level 3 securities as of November 30, 2011. There were
no significant transfers between each of the three levels. The Fund recognizes
such transfers between levels at the end of the reporting period.
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 for the year ended November
30, 2011 are included within the realized and unrealized gain/loss on
investments section of the Statement of Operations.
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 period end, resulting from changes in exchange rates. Such fluctuations
for the year ended November 30, 2011 are included within the realized and
unrealized gain/ loss on investments section of the Statement of Operations.
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.
14
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2011 (CONTINUED)
The ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES ("Income Tax Statement")
requires an evaluation of tax positions taken (or expected to be taken) in the
course of preparing a Fund's tax returns to determine whether these positions
meet a "more-likely-than-not" standard that, based on the technical merits, have
a more than fifty percent likelihood of being sustained by a taxing authority
upon examination. A tax position that meets the "more-likely-than-not"
recognition threshold is measured to determine the amount of benefit to
recognize in the financial statements. The Fund recognizes interest and
penalties, if any, related to unrecognized tax benefits as income tax expense in
the Statements of Operations.
The Income Tax Statement requires management of the Fund to analyze all
open tax years, fiscal years 2008-2011 as defined by IRS statute of limitations
for all major jurisdictions, including federal tax authorities and certain state
tax authorities. As of and during the year ended November 30, 2011, the Fund did
not have a liability for any unrecognized tax benefits. The Fund has no
examination in progress and is not aware of any tax positions for which it is
reasonably possible that the total amounts of unrecognized tax benefits will
significantly change in the next twelve months.
SHARE CLASSES - The Fund offers two classes of shares, Investor Class and
Advisor Class. The outstanding shares of the Fund on April 1, 2010 were renamed
"Investor Class shares." The Advisor Class shares commenced operations on April
1, 2010. The two classes represent interests in the same portfolio of
investments and have the same rights. Investor Class shares are subject to an
annual 12b-1 fee of up to 0.99% of the Fund's average daily net assets allocable
to Investor Class shares, whereas Advisor Class shares are subject to an annual
12b-1 fee of up to 0.25% of the Fund's average daily net assets allocable to
Advisor Class shares. Income, expenses (other than expenses attributable to a
specific class) and realized and unrealized gains and losses on investments are
allocated to each class of shares in proportion to their relative shares
outstanding.
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 - 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 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 year ended November 30,
2011, the Investor Class and the Advisor Class received $7,770 and $5,881 in
redemption fees, respectively.
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.
DERIVATIVE INSTRUMENTS - Equity securities in the gold mining industry,
particularly the smaller companies, may occasionally issue warrants as part of
their capital structure. A warrant gives the holder the right to purchase the
underlying equity at the exercise price until the expiration date of the
warrant. The Fund may hold such warrants for exposure to smaller companies in
the portfolio or other reasons associated with the Fund's overall objective of
long-term growth, though warrants will typically not be a significant part of
the Fund's portfolio. The Fund's maximum risk in holding warrants is the loss of
the entire amount paid for the warrants. The Fund acquired two warrants during
the year ended November 30, 2011, one of which was received as part of a
purchase of the same company's common stock and the other was received as part
of a corporate action. In addition, the expiration date of one warrant was
extended during the fiscal year ended November 30, 2011. At November 30, 2011,
the Fund held warrants as listed on the Schedule of Investments.
SUBSEQUENT EVENTS - Management has evaluated subsequent events and
determined there were no subsequent events that require recognition or
disclosure in the financial statements.
15
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2011 (CONTINUED)
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 $200 million ............. 0.500%
Over $200 million ........................ 0.375%
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 the Fund, including the cost of printing sales material
and making payments to dealers of the Fund's Investor Class and Advisor Class,
in any fiscal year, subject to limits of 0.99% and 0.25%, respectively, of the
average daily net assets of each respective class. For the year ended November
30, 2011, the Investor Class and the Advisor Class accrued $1,146,165 and
$49,316, respectively, in expenses under the Plan.
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, 2011
were $9,017,435 and $23,368,320, respectively. There were no purchases or sales
of U.S. government obligations.
NOTE 6. FEDERAL INCOME TAX INFORMATION
At November 30, 2011, gross unrealized appreciation and depreciation of
investments and foreign currency owned by the Fund, based on cost for federal
income tax purposes were as follows:
Cost of investments ............................. $ 55,361,561
============
Unrealized appreciation ......................... $137,131,171
Unrealized depreciation ......................... (3,375,801)
Unrealized appreciation on foreign currency ..... 123
------------
Net unrealized appreciation on investments ...... $133,755,493
============
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, 2011 and 2010 was as follows:
2011 2010
----------- -----------
Ordinary income ............... $ -- $ --
Net long-term capital gains ... 16,075,869 3,437,477
----------- -----------
Total distributions ........... $16,075,869 $ 3,437,477
=========== ===========
16
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2011 (CONTINUED)
As of November 30, 2011 the components of accumulated earnings on a tax
basis were as follows:
Undistributed ordinary income .............. $ --
Undistributed long-term gains .............. 7,107,596
-------------
Tax accumulated earnings ................... 7,107,596
Accumulated capital and other losses ....... --
Unrealized appreciation on investments ..... 133,755,493
------------
Total accumulated earnings ................. $140,863,089
============
On December 22, 2010, The Regulated Investment Company Modernization Act of
2010 (the "Modernization Act") was signed into law. The Modernization Act is the
first major piece of legislation affecting regulated investment companies
("RICs") since 1986 and it modernizes several of the federal income and excise
tax provisions related to RICs. Some highlights of the enacted provisions are as
follows: new capital losses may now be carried forward indefinitely, and retain
the character of the original loss. Under pre-enactment law, capital losses
could be carried forward for eight years, and carried forward as short-term
capital losses, irrespective of the character of the original loss.
The Modernization Act contains simplification provisions, which are aimed
at preventing disqualification of a RIC for "inadvertent" failures of the asset
diversification and/or qualifying income tests. Additionally, the Modernization
Act exempts RICs from the preferential dividend rule, and repealed the 60-day
designation requirement for certain types of pay-through income and gains.
Finally, the Modernization Act contains several provisions aimed at preserving
the character of distributions made by a RIC during the portion of its taxable
year ending after October 31 or December 31, reducing the circumstances under
which a RIC might be required to file amended Forms 1099 to restate previously
reported distributions.
The provisions related to the Modernization Act for qualification testing
are effective for the November 30, 2011 taxable year. The effective date for
changes in the treatment of capital losses is the November 30, 2012 taxable
year.
NOTE 7. 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.
NOTE 8. NEW ACCOUNTING PRONOUNCEMENT
In May 2011, the Financial Accounting Standards Board issued Accounting
Standards Update ("ASU") No. 2011-04 "Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs." ASU No. 2011-04
requires additional disclosures regarding fair value measurements. Effective for
fiscal years beginning after December 15, 2011, and for interim periods within
those fiscal years, entities will need to disclose the following:
1) the amounts of any transfers between Level 1 and Level 2 and the
reasons for those transfers; and
2) for Level 3 fair value measurements, quantitative information about
the significant unobservable inputs used, a description of the
entity's valuation processes, and a narrative description of the
sensitivity of the fair value measurement to changes in the
unobservable inputs and the interrelationship between inputs.
Management is currently evaluating the impact ASU No. 2011-04 will have on
the Fund's financial statement disclosures.
17
OCM GOLD FUND
FINANCIAL HIGHLIGHTS INVESTOR CLASS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
2011 2010 2009 2008 2007
-------- -------- -------- ------- --------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each year)
Net asset value, beginning of year .... $ 30.53 $ 24.68 $ 12.35 $ 21.49 $ 20.44
-------- -------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ................... (0.29) (0.43) (0.29) (0.31) (0.27)
Net realized and unrealized gain/(loss)
on investments and foreign
currency transactions ............... 0.76 6.81 12.65 (7.41) 3.06
-------- -------- -------- ------- --------
Total from investment operations ...... 0.47 6.38 12.36 (7.72) 2.79
-------- -------- -------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- -- --
Distribution from net realized gains (2.51) (0.53) (0.03) (1.42) (1.74)
-------- -------- -------- ------- --------
Total distributions ................... (2.51) (0.53) (0.03) (1.42) (1.74)
-------- -------- -------- ------- --------
Net asset value, end of year .......... $ 28.49 $ 30.53 $ 24.68 $ 12.35 $ 21.49
======== ======== ======== ======= ========
TOTAL RETURN* ......................... 1.70% 26.70% 100.14% (38.55)% 15.64%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) .... $168,305 $175,802 $159,833 $78,652 $136,241
Ratio of expenses to average net assets 1.73% 1.93% 1.94% 1.99% 1.93%
Ratio of net investment loss to
average net assets .................. (1.03)% (1.57) % (1.59) % (1.58)% (1.51)%
Portfolio turnover rate ............... 5% 12% 6% 5% 11%
------------
* Assumes no sales charge.
See notes to financial statements.
18
OCM GOLD FUND
FINANCIAL HIGHLIGHTS ADVISOR CLASS
FOR THE PERIOD
YEAR ENDED APRIL 1, 2010# -
NOV. 30, NOVEMBER 30,
2011 2010
-----------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
Net asset value, beginning of period ...... $ 30.65 $ 22.24
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ....................... (0.18) (0.13)
Net realized and unrealized gain/(loss)
on investments and foreign
currency transactions ................... 0.78 8.54
------- -------
Total from investment operations .......... 0.60 8.41
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ...... -- --
Distribution from net realized gains ...... (2.51) --
------- -------
Total distributions ....................... (2.51) --
------- -------
Net asset value, end of period ............ $ 28.74 $ 30.65
======= =======
TOTAL RETURN .............................. 2.15% 37.81%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...... $20,328 $20,386
Ratio of expenses to average net assets ... 1.30% 1.34%(2)
Ratio of net investment loss to
average net assets ...................... (0.60)% (0.98)%(2)
Portfolio turnover rate ................... 5% 12%(1)
------------
# Inception date of Advisor Class.
1 Not annualized for periods less than one year.
2 Annualized for periods less than one year.
See notes to financial statements.
19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of OCM Gold Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of OCM Gold Fund (the "Fund"), as of November 30,
2011, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
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.
We conducted our audits 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 audits 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, 2011, by correspondence with the
custodian. We believe that our audits provide 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, 2011, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
/s/ DELOITTE & TOUCHE LLP
-------------------------
Milwaukee, Wisconsin
January 26, 2012
20
OCM GOLD FUND
EXPENSE EXAMPLE - FOR THE PERIOD ENDED NOVEMBER 30, 2011 (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, 2011 to November 30,
2011 (the "period").
ACTUAL EXPENSES
The first lines of the tables below provide 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 periods.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the tables below provide information about hypothetical
account values and hypothetical expenses based on each class' actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each class' 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 classes of the Fund and other funds. To do so, compare these 5%
hypothetical examples with the 5% hypothetical examples that appear in the
shareholder reports of other funds.
Please note that the expenses shown in the tables 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
tables are 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, 2011 NOVEMBER 30, 2011 NOVEMBER 30, 2011*
------------- ----------------- ------------------
INVESTOR CLASS
Actual $1,000.00 $1,032.60 $8.30
Hypothetical (5% return
before expenses) 1,000.00 1,016.84 8.23
ADVISOR CLASS
Actual 1,000.00 1,034.60 6.65
Hypothetical (5% return
before expenses) 1,000.00 1,018.46 6.60
----------
* Expenses are equal to the Investor Class' and Advisor Class' annualized
expense ratios of 1.63% and 1.30%, respectively, for the period, multiplied
by the average account value over the period, multiplied by 183/365 (to
reflect the one-half year period).
21
OCM GOLD FUND
INVESTMENTS BY SECTOR - NOVEMBER 30, 2011 (UNAUDITED)
AS A PERCENTAGE OF NET ASSETS
Intermediate/Mid-Tier Gold Producers 36.9%
Major Gold Producers 32.5%
Junior Gold Producers 8.4%
Exploration and Development Companies 6.9%
Primary Silver Producers 5.3%
Exchange Traded Fund 5.0%
Other 4.0%
Cash and Other Assets 1.0%
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, 2011 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.
22
OCM GOLD FUND - INVESTOR CLASS
PERFORMANCE RESULTS - YEAR ENDED NOVEMBER 30, 2011 (UNAUDITED)
(ALL PERFORMANCE MEASUREMENTS REFLECT THE MAXIMUM SALES LOAD CHARGES
WHERE APPLICABLE FOR EACH PERIOD SHOWN.)
AVERAGE ANNUAL TOTAL RETURNS
PHILADELPHIA
INVESTOR S&P 500(R) GOLD &
CLASS INDEX SILVER INDEX
-------- ---------- -------------
1 year -2.88% 7.83% -0.79%
5 year 11.85% -0.18% 7.97%
10 year 23.12% 2.91% 16.13%
The graph below compares the change in value of a $10,000 investment in the
Investor Class of the OCM Gold Fund with the S&P 500(R) Index and the
Philadelphia Gold and Silver Index since November 30, 2001.
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 Index (XAU) is an unmanaged
capitilization-weighted index composed of 16 companies listed on U.S. exchanges
involved in the gold and silver mining industry. The index 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.
CHART OMITTED
INVESTOR S&P PHILADELPHIA
DATE CLASS 500(R) GOLD & SILVER
-------- -------- ------- --------------
11/30/01 9,554 10,000 10,000
11/30/02 15,274 8,349 12,256
11/30/03 29,331 9,608 21,554
11/30/04 26,306 10,844 21,212
11/30/05 27,446 11,759 23,064
11/30/06 43,658 13,433 30,385
11/30/07 50,488 14,470 35,209
11/30/08 31,027 8,958 21,134
11/30/09 62,098 11,232 38,449
11/30/10 78,679 12,349 44,950
11/30/11 80,015 13,316 44,592
23
OCM GOLD FUND - ADVISOR CLASS
PERFORMANCE RESULTS - YEAR ENDED NOVEMBER 30, 2011 (UNAUDITED)
PHILADELPHIA
ADVISOR S&P 500(R) GOLD &
CLASS INDEX SILVER INDEX
------- ---------- ------------
1 year 2.15% 7.83% -0.79%
Since Inception
on 4/1/10 22.75% 6.09% 16.31%
The graph below compares the change in value of a $10,000 investment in the
Advisor Class of the OCM Gold Fund with the S&P 500(R) Index and the
Philadelphia Gold and Silver Index since April 1, 2010 (inception date of
Advisor Class).
CHART OMITTED
INVESTOR S&P PHILADELPHIA
DATE CLASS 500(R) GOLD & SILVER
-------- -------- ------- --------------
4/1/10 10,000 10,000 10,000
11/30/10 13,781 10,234 12,970
11/30/11 14,078 11,036 12,867
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 Index (XAU) is an unmanaged
capitilization-weighted index composed of 16 companies listed on U.S. exchanges
involved in the gold and silver mining industry. The index 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.
24
OCM GOLD FUND
Annual Renewal of Investment Advisory Agreement (Unaudited)
On October 13, 2011, 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 nature, extent and quality of the services provided by the Adviser the
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 ratios of each class 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 ratios of each class 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.
LONG TERM CAPITAL GAINS DESIGNATION (UNAUDITED)
Pursuant to IRC 852(b)(3) of the Internal Revenue Code OCM Gold Fund hereby
designates $16,075,869 as long-term capital gains distributed during the year
ended November 30, 2011.
25
OCM GOLD FUND
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
INDEPENDENT TRUSTEES*
-------------------------------------------------------------------------------------------------------------------
OTHER
TERM OF HELD BY
OFFICE TRUSTEE OR
POSITION(S) AND LENGTH PRINCIPAL OCCUPATION(S) NOMINEE FOR
NAME, ADDRESS AND AGE HELD WITH FUND OF SERVICE DURING PAST 5 YEARS TRUSTEE
-------------------------------------------------------------------------------------------------------------------
JOHN L. CRARY Trustee Indefinite Since 1999 Mr. Crary has been Scheid
1536 Holmes Street, (Chairman of Since 2004 the managing member of Crary Enterprises, Vineyards,
Livermore, California 94550 the Board) LLC, a private investment company. Inc.
Age 58 Since 1988 Mr. Crary has been an
independent corporate financial advisor
and private investor in various biotechnology,
software and other early stage business
ventures. Mr. Crary began his business
career as an investment banker with E.F.
Hutton & Company Inc.
DOUG WEBENBAUER Trustee Indefinite Chief Financial Officer of M.E. Fox & None
1536 Holmes Street, Since 2005 Company, Inc., a beer distributor,
Livermore, California 94550 since 1999.
Age 51
INTERESTED TRUSTEES AND OFFICERS**
-------------------------------------------------------------------------------------------------------------------
OTHER
DIRECTORSHIPS
TERM OF HELD BY
OFFICE TRUSTEE OR
POSITION(S) AND LENGTH PRINCIPAL OCCUPATION(S) NOMINEE FOR
NAME, ADDRESS AND AGE HELD WITH FUND OF SERVICE 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 50
JACKLYN A. ORRELL*** Secretary and One year Secretary of Orrell Capital Management, Inc. N/A
1536 Holmes Street, Treasurer term since 1999.
Livermore, California 94550 Since 2004
Age 77
N. LYNN BOWLEY Chief At Compliance Officer of Northern Lights N/A
1536 Holmes Street, Compliance discretion Compliance Services, LLC (01/07 - present);
Livermore, California 94550 Officer of the Board Vice President of Investment Support
Age 53 Since October Services for Mutual of Omaha
2008 Companies (2002 - 2006).
------------
* "Independent" trustees are trustees who are not deemed to be "interested
persons" of the Fund as defined in the Investment Company Act of 1940.
** An "interested" trustee a trustee who is deemed to be an "interested
person" of the Fund, as defined in the is Investment Company Act of 1940.
Gregory M. Orrell is an interested person of the Fund because of his
ownership in the Fund's investment adviser.
*** Ms. Orrell is the mother of Gregory M. Orrell, the President and a trustee
of the Trust.
26
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OCM Gold Fund
Distributed by:
Northern Lights Distributors, LLC
4020 South 147th Street
Omaha, NE 68137 0180-NLD-1/27/2012
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 Sarbanes Oxley 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, 2011 November 30, 2010
Audit Fees $28,000 $27,500
Audit-Related Fees $0 $0
Tax Fees $4,400 $4,300
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, 2011 and 2010, 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: January 30, 2012
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: January 30, 2012
By: /s/ Jacklyn Orrell
-------------------
Jacklyn Orrell
Secretary and Treasurer
Date: January 30, 2012