UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-04010
OCM MUTUAL FUND
(Exact name of registrant as specified in charter)
1536 Holmes Street
Livermore, California 94550
(Address of principal executive offices) (Zip code)
Gregory M. Orrell
Orrell Capital Management, Inc
1536 Holmes Street
Livermore, California 94550
(Name and address of agent for service)
Registrant's telephone number, including area code: (925) 455-0802
Date of fiscal year end: November 30
Date of reporting period: May 31, 2012
ITEM 1. REPORT TO STOCKHOLDERS.
LOGO
-------------
OCM GOLD FUND
=============
SEMI-ANNUAL REPORT
MAY 31, 2012
(UNAUDITED)
Dear Fellow Shareholders:
The first six months of the fiscal period ending May 31, 2012 proved to be a
difficult period for shares of gold mining companies. The OCM Gold Fund Investor
Class declined 28.52% (-31.73% after maximum sales load) while the Advisor Class
was down 28.30% compared to -25.47% for the Philadelphia Gold and Silver Index
(XAU)1 and +6.23% for the S&P 500 Index2. The price of gold declined 10.77%
based on the London PM fix during the period. The majority of your Fund is
comprised of shares of major and intermediate/mid-tier gold producers with a
smaller percentage in junior gold producers and exploration and development
companies. This strategy has led to the Fund's outperformance of the XAU over
longer periods, but fell short over the past six months as smaller cap companies
underperformed their larger counterparts.
The gold market started the fiscal period with liquidation selling in December
as investors led by hedge funds sold their gold bullion to lock in profits for
the year. Since January, the gold market has been held captive by whether or not
the Federal Reserve would enact a third round of Quantitative Easing (QE) and
fear the crisis in Europe would lead to a rush for liquidity similar to 2008.
The disappointment of Fed Chairman Bernanke to not hint or employ another round
of QE triggered a series of selling bouts in the gold market. The encouraging
sign was the gold market withstood each selling episode without going below the
year-end gold price of $1,523. Investor sentiment was exhibited by the poor
performance of the gold mining shares which ended the period at extreme lows.
Despite record earnings, cash flows, and rising dividends, shares of most gold
mining companies have underperformed the gold price for an extended period of
time. The aversion to the business risk of mining appears to have gone too far,
in our opinion. Granted a number of companies have been their own worst enemy by
stumbling on overly optimistic production and cost guidance, and geopolitical
risk has also thrown a monkey wrench into the equation in some cases, but the
market has taken valuations based on the gold price to XAU ratio below the 2008
lows. The anomalous values offer a compelling proposition, in our opinion, to
investors looking for an entry point for exposure to the gold market or wishing
to add to existing gold share positions.
We believe the prolonged correction in gold and shares of gold mining companies
that began in September 2011 is reaching a conclusion. Continued negative real
interest rates, the worsening economic crisis in Europe, a global economy that
is sputtering, and the likelihood the Federal Reserve will lead a parade of
central banks in monetizing debt, points to the next phase of the bull market in
gold being possibly imminent, in our opinion. Bull markets have a way of taking
as few participants along for the ride as possible, and bull markets in gold are
especially trying. Gold mining shares, we believe, should outperform the bullion
price if market focus moves away from attention on mining business risks to the
strong fundamental value of the shares of gold mining companies and the inherent
leverage of the reserves in the ground.
-1-
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
JULY 24, 2012
Questions and Answers with Portfolio Manager Greg Orrell
Q: WHY SHOULD INVESTORS HOLD GOLD AND GOLD RELATED ASSETS IN THEIR PORTFOLIOS?
A: Investors should view gold assets as a tool against monetary debasement
caused by unsound monetary and fiscal policies. History tells us gold is one of
the best forms of money and that fiat currencies tend to fall victim to
political wills and end up losing purchasing power over time. The temptation to
debase currencies is far too great for some policy makers. In general, it is
more palatable to print money than raise taxes or endure austerity measures in
order to meet political promises. Such is the case now, in our opinion. Each
generation tends to re-learn monetary history and regain an appreciation for
gold's monetary characteristics, namely it cannot be created by a printing press
or computer keystroke and that it is not someone else's liability subject to
default. Though gold assets can tend to be volatile at times, it is my view gold
assets should be a core asset of any portfolio.
Q: WHAT FACTORS HAVE CAUSED THE PRICE OF GOLD TO FALL FROM ITS SEPTEMBER 2011
HIGH?
A: When gold prices quickly advanced to $1,900 last September, it was a
combination of global Central Banks stepping up gold purchases along with
political paralysis in Washington feeding momentum buying. What we have seen
since, in my view, is a constructive consolidation in the $1,500 to $1,700 price
level that has flushed out momentum buyers and weak holders. The main
influencing factors on the downside have been Central Banks slowing the pace of
gold purchases and the Federal Reserve putting off a third round of quantitative
easing (QE). India, the world's largest gold consumer, contributed to the slide
by imposing higher duties on gold in an effort to stabilize its balance of
payments. One additional factor, while not a guarantee of future performance,
the presidential election year cycle in the U.S. has historically been a
headwind for gold prices. Overall, the gold price has withstood multiple
attempts to trade lower which I believe points to exhaustion of selling
pressure.
-2-
Q: CONSIDERING THE GOLD PRICE IN U.S. DOLLARS HAS RISEN SIGNIFICANTLY OVER THE
PAST TEN YEARS, WHAT IS THE OUTLOOK FOR GOLD OVER THE NEXT 12 MONTHS?
A: The past ten years, in my opinion, has just been the opening act for gold
prices. Monetary debasement appears to be gathering momentum on a global basis.
Looking at Europe, it is dealing with a sovereign debt crisis that is engulfing
its banking system and bringing into question the future existence of the
European Union in many corners. Germany and France appear to not have the
capital to save their southern neighbors and nor does the European Central Bank
without a major debt monetization campaign. The strong political desire to
maintain the euro coupled with the realization that French and German banks are
in the crosshairs of the crisis would appear to pave the way for aggressive
money printing in Europe. The Bank of England and the Swiss National Bank are
already operating under open ended quantitative easing initiatives.
In the Far East, The Bank of Japan is monetizing debt as its total debt to GDP
has reached what we consider the danger point of 200%. Meanwhile, its
demographics have turned decidedly negative with more retirees requiring payouts
as the workforce contracts. China's economy has been the engine of growth for
the global economy and it is now slowing with cracks in the financial system
exposing pyramid financing schemes and malinvestment on an almost daily basis.
It is becoming clear China may need to monetize on a massive scale to
recapitalize its financial system and devalue its currency to support exports.
The events abroad, in our opinion, will draw the U.S. in and refocus the market
on our own financial quagmire and question the "safe haven" status of the
dollar. Sputtering growth and the fiscal cliff as it is being called should
provide plenty of cover for the Federal Reserve to reaccelerate expansion of its
balance sheet.
Should monetary debasement become a clear theme to the market and with sound
currency alternatives seemingly limited, over the next 12 months we see gold
heading toward new high territory.
Q: WHAT ARE THE PROSPECTS FOR A NEW MONETARY SYSTEM AND WOULD GOLD PLAY A ROLE?
A: If and when it becomes clear the Federal Reserve must continue to monetize
debt in a rising inflationary environment because there are no other buyers of
Treasuries, the market may realize the Fed is financing the expansion of
government. In our opinion, that would signal the need for a new monetary regime
to succeed the current dollar reserve system. The increasing appetite for gold
by central banks and the move by the Bank for International Settlements (BIS) to
make gold a tier one asset for banks on par with government securities signals
gold may have a role in any new monetary system. It is an event that could
happen quickly should it transpire.
-3-
Q: SHARES OF GOLD MINING COMPANIES HAVE HISTORICALLY EXHIBITED GREATER LEVERAGE
TO GOLD BULLION. HOWEVER, RECENTLY GOLD SHARES HAVE UNDERPERFORMED GOLD, WHAT IS
GOING ON WITH THE GOLD SHARES?
A: The performance of shares of gold mining companies certainly has been
disappointing over the past ten months. While a number of shares of gold mining
companies have seen margin expansion and increased dividend payouts, investors
have been hesitant to purchase gold shares in a falling gold price environment.
Further, investors have shied away from the business risk of mining as operating
costs have increased materially along with margin expansion over the past four
years. Geopolitical risk has also heightened with political instability in West
Africa and a wave of gold producing countries moving to increase taxes on mining
companies. Finally, the gold mining industry as a whole didn't help itself with
overly optimistic forecasts for growth of production in a market that was
clamoring for growth. With very few exceptions, gold mining companies have
failed to meet original guidance and have had to reduce forecasts to more
attainable goals. The lack of execution has played into the decline.
Q: WHAT IS YOUR OUTLOOK FOR SHARES OF GOLD MINING COMPANIES?
A: It is our belief that shares of gold mining companies are tremendously
undervalued based on most valuation metrics. Whether it is cash flow per share,
earnings per share, gold reserves per $1,000 invested, gold vs. XAU ratio, or
price to net asset value, we believe gold shares are historically cheap. At the
point sentiment in the gold market turns positive, we could see gold mining
shares come back in favor if investors understand earnings and cash flows for
the senior and intermediate producers are sustainable and not fleeting. The
market should once again appreciate the reserves mining companies have
established in the ground and the leverage inherent in those reserves. For those
investors who recognize the value opportunity in gold shares at present, they
stand to be well rewarded if valuations revert back to historic means.
Q: WHAT IS THE FUND'S INVESTMENT STRATEGY OVER THE NEXT 12 MONTHS?
A: We are presently overweighting major and intermediate/mid-tier gold producers
as those companies currently offer strong relative historic value. Further,
major and intermediate/mid-tier producers tend to be the first group to react to
changes in trend in the gold price. We are looking to add to selective junior
gold producers whose shares have been beaten up in the search for liquidity.
Exploration and development companies with ore bodies that represent attractive
acquisition targets for the major and intermediate/mid-tier producers are an
important component of the portfolio. Greenfield junior exploration companies
will continue to struggle with funding, so we are staying away from that sector
at present. We have no plans currently to add to our gold bullion position held
through an ETF, as shares of gold mining companies represent a more compelling
value alternative.
-4-
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.
Investor Class Performance as of May 31, 2012
--------------------------------------------------------------------------------
OCMGX OCMGX Philadelphia Gold S&P 500(2)
(without load) (with load) and Silver Index
(XAU)(1)
--------------------------------------------------------------------------------
Six Months (-28.52%) (-31.73%) (-25.47%) 6.23%
--------------------------------------------------------------------------------
One Year (-26.19%) (-29.51%) (-25.18%) (-0.41%)
--------------------------------------------------------------------------------
3 Year Annualized 3.42% 1.85% (-0.19%) 14.92%
--------------------------------------------------------------------------------
5 Year Annualized 6.12% 5.15% 3.01% (-0.92%)
--------------------------------------------------------------------------------
10 Year Annualized 12.41% 11.90% 7.49% 4.14%
--------------------------------------------------------------------------------
Advisor Class Performance as of May 31, 2012
--------------------------------------------------------------------------------
OCMAX Philadelphia Gold and S&P 500(2)
Silver Index (XAU)(1)
--------------------------------------------------------------------------------
Six Months (-28.30%) (-25.47%) 6.23%
--------------------------------------------------------------------------------
One Year (-25.82%) (-25.18%) (-0.41%)
--------------------------------------------------------------------------------
Since Inception 0.43% (-1.91%) 7.61%
--------------------------------------------------------------------------------
* 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.
-5-
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - MAY 31, 2012
(UNAUDITED)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS 94.0%
MAJOR GOLD PRODUCERS 32.1%
215,000 AngloGold Ashanti Ltd. ADR ...................... $ 7,752,900
75,000 Barrick Gold Corp................................ 2,929,500
270,000 Gold Fields Ltd. ADR ............................ 3,577,500
500,050 Goldcorp, Inc.................................... 18,116,811
500,000 Kinross Gold Corp................................ 3,985,000
116,500 Newmont Mining Corp.............................. 5,494,140
-------------
41,855,851
-------------
INTERMEDIATE/MID-TIER GOLD PRODUCERS 35.5%
161,860 Agnico-Eagle Mines Ltd........................... 6,043,852
250,000 Alacer Gold Corp.* .............................. 1,391,780
91,250 AuRico Gold, Inc.*^ ............................. 680,278
50,000 AuRico Gold, Inc.* .............................. 371,000
500,000 Centerra Gold, Inc............................... 5,223,411
500,000 Eldorado Gold Corp............................... 5,515,000
500,000 IAMGOLD Corp..................................... 5,335,000
200,000 New Gold, Inc.* ................................. 1,752,000
140,000 Randgold Resources Ltd. ADR ..................... 11,109,000
600,000 Yamana Gold, Inc................................. 8,742,000
-------------
46,163,321
-------------
JUNIOR GOLD PRODUCERS 8.5%
227,000 Argonaut Gold Ltd.* ............................. 1,791,209
250,000 Aurizon Mines Ltd.* ............................. 1,202,500
500,000 B2Gold Corp.* ................................... 1,505,543
120,000 CGA Mining Ltd.* ................................ 189,379
291,200 Claude Resources, Inc.* ......................... 183,260
305,500 Dundee Precious Metals, Inc.* ................... 1,863,436
281,011 Kingsgate Consolidated Ltd....................... 1,434,358
250,000 Perseus Mining Ltd.* ............................ 624,486
500,000 Petaquilla Minerals Ltd.* ....................... 198,480
610,000 San Gold Corp.* ................................. 844,556
200,000 SEMAFO, Inc...................................... 1,016,605
255,000 Wesdome Gold Mines Ltd.* ........................ 229,607
-------------
11,083,419
-------------
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
EXPLORATION AND DEVELOPMENT COMPANIES 8.7%
500,000 Amarillo Gold Corp.* ............................ $ 440,529
75,500 Andina Minerals, Inc.* .......................... 35,087
400,000 Argentex Mining Corp.* .......................... 144,000
2,190,000 Avala Resources Ltd.* ........................... 1,908,312
342,700 Edgewater Exploration Ltd.* ..................... 116,130
3,500,000 Indochine Mining Ltd.* .......................... 426,168
300,000 MAG Silver Corp.* ............................... 2,335,286
275,000 Malbex Resources, Inc.* ......................... 21,300
700,000 Millrock Resources, Inc.* ....................... 142,325
295,000 Ocean Park Ventures Corp.* ...................... 48,555
300,000 Sabina Silver Corp.* ............................ 662,245
350,000 South American Silver Corp.* .................... 474,416
350,000 Strategic Metals Ltd.* .......................... 307,692
4,600,040 Sutter Gold Mining, Inc.* ....................... 1,781,494
100,000 Tahoe Resources, Inc.* .......................... 1,624,631
500,000 Torex Gold Resources, Inc.* ..................... 885,898
-------------
11,354,068
-------------
PRIMARY SILVER PRODUCERS 5.6%
225,000 Fortuna Silver Mines, Inc.* ..................... 886,624
48,075 Pan American Silver Corp......................... 797,084
216,599 Silver Wheaton Corp.............................. 5,563,607
-------------
7,247,315
-------------
OTHER 3.6%
14,800 Franco-Nevada Corp................................ 622,321
60,000 Royal Gold, Inc................................... 4,058,400
-------------
4,680,721
-------------
TOTAL COMMON STOCKS
(Cost $45,605,731) .......................................... 122,384,695
-------------
See notes to financial statements.
-6-
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - MAY 31, 2012 (CONTINUED)
(UNAUDITED)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
EXCHANGE TRADED FUND 6.2%
53,500 SPDR Gold Trust* ................................ $ 8,111,670
-------------
TOTAL EXCHANGE TRADED FUND
(Cost $2,365,235) ........................................... 8,111,670
-------------
WARRANTS 0.0%
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 ................................ 15,336
40,000 Primero Mining Corp.*
Exercise Price 8.00 CAD,
Exp. 7/20/2015 ................................ 14,329
58,333 Silver Range Resources Ltd.*
Exercise Price 0.85 CAD,
Exp. 2/10/2013 ................................ 14,120
100,000 Yukon-Nevada Gold Corp.*
Exercise Price 3.00 CAD,
Exp. 6/20/2012 ................................ --
-------------
TOTAL WARRANTS
(Cost $223,327) ............................................. 43,785
-------------
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 0.2%
195,842 UMB Money Market Fiduciary, 0.01% ............... $ 195,842
-------------
TOTAL SHORT-TERM INVESTMENT
(Cost $195,842) ............................................. 195,842
-------------
TOTAL INVESTMENTS
(Cost $48,390,135) .................. 100.4% 130,735,992
LIABILITIES LESS OTHER ASSETS ......... (0.4)% (514,667)
-------------
TOTAL NET ASSETS ...................... 100.0% $ 130,221,325
=============
--------
ADR - American Depository Receipt.
CAD - Canadian Dollars.
* Non-income producing security.
^ Denoted investment in Aurico Gold, Inc. is a Canadian security traded on
U.S. stock exchange.
+ 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 - MAY 31, 2012 (CONTINUED)
(UNAUDITED)
SUMMARY OF INVESTMENTS BY COUNTRY
PERCENT OF
COUNTRY VALUE INVESTMENT SECURITIES
--------------------------------------------------------------------------------
AUSTRALIA $ 2,674,391 2.0%
CANADA 87,762,149 67.1
JERSEY 11,109,000 8.5
SOUTH AFRICA 11,330,400 8.7
UNITED STATES(1) 17,860,052 13.7
--------------------------------------------------------------------------------
TOTAL $130,735,992 100.0%
--------------------------------------------------------------------------------
(1) INCLUDES SHORT-TERM INVESTMENTS.
See notes to financial statements.
-8-
OCM GOLD FUND
STATEMENT OF ASSETS AND LIABILITIES - MAY 31, 2012
(UNAUDITED)
ASSETS:
Investments in unaffiliated issuers, at value
(cost $48,390,135) ................................. $130,735,992
Interest and dividends receivable .................. 100,781
Receivable from fund shares sold ................... 47,371
Prepaid expenses and other assets .................. 23,888
------------
Total assets ..................................... 130,908,032
------------
LIABILITIES:
Payable from fund shares redeemed .................. 244,274
Due to investment adviser .......................... 105,076
Accrued distribution fees .......................... 269,205
Accrued trustees' fees ............................. 2,144
Accrued expenses and other liabilities ............. 66,008
------------
Total liabilities ................................ 686,707
------------
Net assets ....................................... $130,221,325
------------
NET ASSETS CONSIST OF:
Shares of beneficial interest, no par value:
unlimited shares authorized ....................... $ 49,181,021
Undistributed net investment loss .................. (3,644,694)
Accumulated net realized gain on investments and
foreign currency transactions ..................... 2,339,427
Net unrealized appreciation on investments and
foreign currency translations ..................... 82,345,571
------------
Net assets ....................................... $130,221,325
============
CALCULATION OF MAXIMUM OFFERING PRICE:
INVESTOR CLASS:
Net asset value and redemption price per share ... $ 19.49
Maximum sales charge (4.50% Of offering price) ... 0.92
------------
Offering price to public ......................... $ 20.41
------------
Shares outstanding ............................... 5,889,330
============
ADVISOR CLASS:
Net asset value and redemption price per share ... $ 19.73
------------
Shares outstanding ............................... 781,358
============
Total shares outstanding ........................... 6,670,688
============
See notes to financial statements.
-9-
OCM GOLD FUND
STATEMENT OF OPERATIONS - SIX MONTHS ENDED MAY 31, 2012
(UNAUDITED)
INVESTMENT INCOME:
Interest ............................................... $ 33
Dividend (net of foreign withholding taxes of $82,152) 787,811
-------------
Total investment income .............................. 787,844
-------------
EXPENSES:
Investment advisory fees ............................... 656,655
Distribution fees - Investor Class ..................... 595,772
Distribution fees - Advisor Class ...................... 22,378
Fund administration and accounting fees ................ 112,851
Transfer agent fees and expenses ....................... 51,625
Professional fees ...................................... 30,677
Federal and state registration fees .................... 21,302
Custody fees ........................................... 17,309
Chief Compliance Officer fees .......................... 12,554
Reports to shareholders ................................ 9,743
Trustees' fees ......................................... 4,643
Other expenses ......................................... 4,880
-------------
Total expenses ....................................... 1,540,389
-------------
Net investment loss .................................. (752,545)
-------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain on investments and
foreign currency transactions ......................... 2,134,012
Net change in unrealized appreciation/depreciation
on investments and foreign currency translations ...... (54,529,510)
-------------
Net loss on investments .............................. (52,395,498)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $ (53,148,043)
=============
See notes to financial statements.
-10-
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
MAY 31, 2012 NOV. 30,
(UNAUDITED) 2011
---------------- ----------
OPERATIONS:
Net investment loss .............................................. $ (752,545) $ (1,864,122)
Net realized gain on investments and
foreign currency transactions ................................... 2,134,012 7,685,694
Net change in unrealized appreciation/depreciation
on investments and foreign currency translations ................ (54,529,510) (2,687,603)
------------ ------------
Net increase/(decrease) in net assets
resulting from operations ....................................... (53,148,043) 3,133,969
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
INVESTOR CLASS:
Distributions paid from net realized gains ..................... (5,940,145) (14,401,514)
------------ ------------
Total distributions from Investor Class ........................ (5,940,145) (14,401,514)
------------ ------------
ADVISOR CLASS:
Distributions paid from net realized gains ...................... (734,597) (1,674,355)
------------ ------------
Total distributions from Advisor Class ......................... (734,597) (1,674,355)
------------ ------------
Total distributions ............................................ (6,674,742) (16,075,869)
------------ ------------
FUND SHARE TRANSACTIONS:
INVESTOR CLASS:
Net proceeds from shares sold .................................. 2,693,045 8,953,939
Distributions reinvested ....................................... 5,551,213 13,629,588
Payment for shares redeemed(1) ................................. (8,644,382) (18,367,148)
------------ ------------
Net increase/(decrease) in net assets from
Investor Class share transactions ............................. (400,124) 4,216,379
------------ ------------
ADVISOR CLASS:
Net proceeds from shares sold .................................. 1,440,402 2,008,485
Distributions reinvested ....................................... 580,841 1,471,590
Payment for shares redeemed(2) ................................. (209,574) (2,310,133)
------------ ------------
Net increase in net assets from Advisor Class share transactions 1,811,669 1,169,942
------------ ------------
Net increase in net assets from Fund share transactions ........ 1,411,545 5,386,321
------------ ------------
TOTAL DECREASE IN NET ASSETS ....................................... (58,411,240) (7,555,579)
See notes to financial statements.
-11-
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SIX MONTHS ENDED YEAR ENDED
MAY 31, 2012 NOV. 30,
(UNAUDITED) 2011
---------------- ----------
NET ASSETS, BEGINNING OF PERIOD ............................... $188,632,565 $196,188,144
------------ ------------
NET ASSETS, END OF PERIOD ..................................... $130,221,325 $188,632,565
============ ============
ACCUMULATED NET INVESTMENT LOSS ............................... $ (3,644,694) $ (2,892,149)
============ ============
TRANSACTIONS IN SHARES:
INVESTOR CLASS:
Shares sold ................................................ 115,609 319,505
Shares issued on reinvestment of distributions ............. 244,979 486,945
Shares redeemed ............................................ (379,081) (656,541)
------------ ------------
Net increase/(decrease) in Investor Class shares outstanding (18,493) 149,909
============ ============
ADVISOR CLASS:
Shares sold ................................................ 58,296 71,161
Shares issued on reinvestment of distributions ............. 25,386 52,332
Shares redeemed ............................................ (9,679) (81,229)
------------ ------------
Net increase in Advisor Class shares outstanding ........... 74,003 42,264
============ ============
Net increase in Fund shares outstanding .................... 55,510 192,173
============ ============
--------
(1) Net of redemption fees of $1,091 and $7,770, respectively.
(2) Net of redemption fees of $1,619 and $5,881, respectively.
See notes to financial statements.
-12-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2012
(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.
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 - MAY 31, 2012 (CONTINUED)
(UNAUDITED)
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 May 31, 2012, in valuing the Fund's assets:
--------------------------------------------------------------------------------
SECTOR LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
--------------------------------------------------------------------------------
COMMON STOCKS
--------------------------------------------------------------------------------
Major Gold Producers $ 41,855,851 $ -- $ -- $ 41,855,851
--------------------------------------------------------------------------------
Intermediate/Mid-Tier
Gold Producers 46,163,321 -- -- 46,163,321
--------------------------------------------------------------------------------
Junior Gold Producers 11,083,419 -- -- 11,083,419
--------------------------------------------------------------------------------
Exploration and Development
Companies 11,354,068 -- -- 11,354,068
--------------------------------------------------------------------------------
Primary Silver Producers 7,247,315 -- -- 7,247,315
--------------------------------------------------------------------------------
Other 4,680,721 -- -- 4,680,721
--------------------------------------------------------------------------------
EXCHANGE TRADED FUND 8,111,670 -- -- 8,111,670
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 195,842 -- -- 195,842
--------------------------------------------------------------------------------
WARRANTS
--------------------------------------------------------------------------------
Major Gold Producers 15,336 -- -- 15,336
--------------------------------------------------------------------------------
Junior Gold Producers 14,329 -- -- 14,329
--------------------------------------------------------------------------------
Exploration and Development
Companies 14,120 -- -- 14,120
--------------------------------------------------------------------------------
TOTAL $130,735,992 $ -- $ -- $130,735,992
--------------------------------------------------------------------------------
The Fund held one Level 2 security at May 31, 2012, 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 May 31, 2012. 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 six months ended May
31, 2012 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 six months ended May 31, 2012 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 - MAY 31, 2012 (CONTINUED)
(UNAUDITED)
ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES (the "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 tax
positions taken in the prior three open tax years, if any, and tax positions
expected to be taken in the Funds' current tax year, defined by IRS statute of
limitations for all major jurisdictions, including federal tax authorities and
certain state tax authorities. As of and during the six months ended May 31,
2012, 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 six months ended May 31,
2012, the Investor Class and the Advisor Class received $1,091 and $1,619 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 did not acquire any warrants
during the six months ended May 31, 2012. At May 31, 2012, 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 - MAY 31, 2012 (CONTINUED)
(UNAUDITED)
NOTE 3. INVESTMENT ADVISORY AGREEMENT
The Fund has an investment advisory agreement with Orrell Capital
Management, Inc. ("OCM"). Under the current investment advisory agreement
approved by shareholders on March 16, 2012 and effective as of March 29, 2012,
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 $250 million ....................... 0.950%
$250 million to $500 million ............. 0.800%
$500 million to $1 billion ............... 0.700%
Over $1 billion .......................... 0.600%
Prior to March 29, 2012, the Fund paid 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%
As explained in a proxy statement sent to shareholders of record as of
January 12, 2012, the terms of the new investment advisory agreement are
substantially the same as the terms of the prior investment advisory agreement,
except for the increased investment advisory fee.
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 six months ended May
31, 2012, the Investor Class and the Advisor Class accrued $595,772 and $22,378,
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 six months ended May 31,
2012 were $1,275,650 and $4,936,028, respectively. There were no purchases or
sales of U.S. government obligations.
NOTE 6. FEDERAL INCOME TAX INFORMATION
At May 31, 2012, 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 ........................... $49,704,959
===========
Unrealized appreciation ....................... $86,912,003
Unrealized depreciation ....................... (5,880,970)
Unrealized appreciation/(depreciation)
on foreign currency ......................... (286)
-----------
Net unrealized appreciation on
investments and foreign currency ............ $81,030,747
===========
-16-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2012 (CONTINUED)
(UNAUDITED)
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
=========== ==========
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.
-17-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2012 (CONTINUED)
(UNAUDITED)
NOTE 8. NEW ACCOUNTING PRONOUNCEMENTS
In May 2011, the Financial Accounting Standards Board ("FASB") 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.
In December 2011, the FASB issued ASU No. 2011-11 Disclosures about
Offsetting Assets and Liabilities. The amendments in this ASU require an entity
to disclose information about offsetting and related arrangements to enable
users of its financial statements to understand the effect of those arrangements
on its financial position. The ASU is effective for annual reporting periods
beginning on or after January 1, 2013, and interim periods within those annual
periods. The guidance requires retrospective application for all comparative
periods presented. Management is currently evaluating the impact ASU 2011-11
will have on the financial statement disclosures.
-18-
OCM GOLD FUND
FINANCIAL HIGHLIGHTS INVESTOR CLASS
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
SIX MONTHS YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
ENDED NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
MAY 31, 2012 2011 2010 2009 2008 2007
(UNAUDITED)
--------------------------------------------------------------------------
Net asset value, beginning of period $ 28.49 $ 30.53 $ 24.68 $ 12.35 $ 21.49 $ 20.44
-------- -------- -------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ................ (0.09) (0.29) (0.43) (0.29) (0.31) (0.27)
Net realized and unrealized
gain/(loss) on investments
and foreign currency transactions (7.89) 0.76 6.81 12.65 (7.41) 3.06
-------- -------- -------- -------- ------- --------
Total from investment operations ... (7.98) 0.47 6.38 12.36 (7.72) 2.79
-------- -------- -------- -------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- -- -- --
Distribution from net realized gains (1.02) (2.51) (0.53) (0.03) (1.42) (1.74)
-------- -------- -------- -------- ------- --------
Total distributions ................ (1.02) (2.51) (0.53) (0.03) (1.42) (1.74)
-------- -------- -------- -------- ------- --------
Net asset value, end of period ..... $ 19.49 $ 28.49 $ 30.53 $ 24.68 $ 12.35 $ 21.49
======== ======== ======== ======== ======= ========
TOTAL RETURN* ...................... (28.52)%(1) 1.70% 26.70% 100.14% (38.55)% 15.64%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $114,802 $168,305 $175,802 $159,833 $78,652 $136,241
Ratio of expenses to average
net assets ....................... 2.02%(2) 1.73% 1.93% 1.94% 1.99% 1.93%
Ratio of net investment loss to
average net assets ............... (0.75)%(2) (1.03)% (1.57)% (1.59)% (1.58)% (1.51)%
Portfolio turnover rate ............ 1%(1) 5% 12% 6% 5% 11%
--------
* Assumes no sales charge.
(1) Not annualized for periods less than one year.
(2) Annualized for periods less than one year.
See notes to financial statements.
-19-
OCM GOLD FUND
FINANCIAL HIGHLIGHTS ADVISOR CLASS
SIX MONTHS YEAR ENDED FOR THE PERIOD
ENDED NOV. 30, APRIL 1, 2010#-
MAY 31, 2012 2011 NOV. 30,
(UNAUDITED) 2010
--------------------------------------------
Net asset value, beginning of period $ 28.74 $ 30.65 $ 22.24
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ................ (0.01) (0.18) (0.13)
Net realized and unrealized
gain/(loss) on investments
and foreign currency transactions (7.98) 0.78 8.54
-------- -------- --------
Total from investment operations ... (7.99) 0.60 8.41
-------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- --
Distribution from net realized gains (1.02) (2.51) --
-------- -------- --------
Total distributions ................ (1.02) (2.51) --
-------- -------- --------
Net asset value, end of period ..... $ 19.73 $ 28.74 $ 30.65
======== ======== ========
TOTAL RETURN* ...................... (28.30)%(1) 2.15% 37.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 15,419 $ 20,328 $ 20,386
Ratio of expenses to average
net assets ....................... 1.42%(2) 1.30% 1.34%
Ratio of net investment loss to
average net assets ............... (0.15)%(2) (0.60)% (0.98)%
Portfolio turnover rate ............ 1%(1) 5% 12%
--------
# 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.
-20-
OCM GOLD FUND
EXPENSE EXAMPLE - FOR THE PERIOD ENDED MAY 31, 2012
(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, 2011 to May 31,
2012 (the "period").
ACTUAL EXPENSES
The first line 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
DECEMBER 1, 2011 MAY 31, 2012 MAY 31, 2012*
---------------- ------------ -------------
INVESTOR CLASS
Actual $1,000.00 $ 714.80 $8.65
Hypothetical
(5% return before expenses) 1,000.00 1,014.92 10.16
ADVISOR CLASS
Actual 1,000.00 717.00 6.09
Hypothetical
(5% return before expenses) 1,000.00 1,017.91 7.16
-------
* Expenses are equal to the Investor Class' and Advisor Class' annualized
expense ratios of 2.02% and 1.42%, respectively, for the period, multiplied
by the average account value over the period, multiplied by 183/366 (to
reflect the one-half year period).
-21-
OCM GOLD FUND
OTHER INFORMATION
(UNAUDITED)
INVESTMENTS BY SECTOR - AS OF MAY 31, 2012
AS A PERCENTAGE OF TOTAL INVESTMENTS
PIE CHART OMITTED
Intermediate/Mid-Tier Gold Producers 35.3%
Major Gold Producers 32.0%
Junior Gold Producers 8.5%
Exploration and Development Companies 8.7%
Primary Silver Producers 5.5%
Exchange Traded Fund 6.2%
Other 3.6%
Short-Term Investment 0.2%
RESULTS OF SHAREHOLDER MEETING
A special meeting of shareholders of the Fund was held on March 16, 2012.
The matter voted on by the shareholders of record as of January 12, 2012 (the
"Record Date") was the approval of a new investment advisory agreement for the
Fund. The number of shares outstanding for the Fund as of the Record Date was
6,824,054.
With respect to the proposal to approve the new investment advisory
agreement for the Fund, the results of the vote were as follows:
FOR AGAINST ABSTAIN
--------- ------- -------
3,713,194 173,248 57,185
PROXY VOTING INFORMATION
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.
QUARTERLY FILINGS OF PORTFOLIO HOLDINGS
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-
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OCM Gold Fund
Distributed by:
Northern Lights Distributors, LLC
4020 South 147th Street
Omaha, NE 68137
1179-NLD-7/27/2012
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 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.
(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: July 27, 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: July 27, 2012
By: /s/ JACKLYN ORRELL
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Jacklyn Orrell
Secretary and Treasurer
Date: July 27, 2012