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, 2012
ITEM 1. REPORT TO STOCKHOLDERS.
[LOGO OMITTED]
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OCM GOLD FUND
=============
ANNUAL REPORT
NOVEMBER 30, 2012
Dear Fellow Shareholder:
The precious metals sector experienced a period of price consolidation in 2012.
For the fiscal year ending November 30, 2012, the OCM Gold Fund Investor Class
declined 20.27% (-23.85% after maximum sales load) while the Advisor Class NAV
declined 19.83% compared to -16.88% for the Philadelphia Gold and Silver Index
(XAU)(1) and 16.13% for the S&P 500 Index(1). The price of gold declined 1.15%
based on the London PM fix during the period. While your Fund's investment
strategy of owning major, intermediate/mid tier and junior gold producers along
with a smaller percentage of exploration and development stage companies failed
to outperform the XAU benchmark index over the past fiscal year due to the
relative poor performance of the smaller capitalized companies not included in
the XAU, the strategy has enabled the Fund to outperform the XAU over longer
time periods as shown in the chart at the end of this letter. The
underperformance of the XAU compared to the S&P 500 in fiscal 2012 was a
combination of cyclical factors, poor execution by managements of many gold
mining companies, and sectors of the S&P 500 finally rebounding from the effects
of the recent recession.
LONDON PM GOLD PRICE
1/2/2004 415.3
1/2/2005 422.2
1/2/2006 535.3
1/2/2007 609.5
1/2/2008 855.0
1/2/2009 874.5
1/2/2010 1,087.5
1/2/2011 1,367.0
1/2/2012 1,616.5
1/2/2013 1,648.0
Source: WGC, Global Insight
-1-
MARKET COMMENTARY
The sideways price action in gold over the past year coincided with central bank
balance sheets stagnating at 2011 levels, as evidenced by the Federal Reserve's
asset level hovering just under $3 trillion, despite accommodating rhetoric and
steps put in place for further Quantitative Easing (QE) during the year. It was
not until recently that the Fed's stepped-up $85 billion per month bond purchase
program pushed the Fed's balance sheet through $3 trillion. Central bank
liquidity tends to be favorable for gold prices and it would appear we are
poised for another round of aggressive global central bank liquidity to go on
top of the $8+ trillion central banks created from 2008 to 2010 to thwart the
deflationary pressures of the 2008 global financial crisis. The Fed's balance
sheet is now projected to approach $4 trillion by 2014.
Perhaps more significant, the Bank of Japan appears determined to devalue the
yen against the currencies of its main trading partners as it attempts to
revitalize its export markets. Japan's policies to devalue are being driven by
its worsening economic crisis as public works programs to halt two decades of
deflation have left public debt at 240% of gross domestic product, the highest
of any industrialized country. Its once large trade surplus has turned to a
trade deficit. In our opinion, the prospect of an all out "currency war" where
competitive devaluations are the order of the day would appear to be gaining a
foothold and would open the door, in our opinion, for aggressive central bank
purchases of gold as central bankers look to dump depreciating currencies at an
accelerated pace.
The desire to diversify out of paper currencies by central banks has been
quietly taking place over the past couple of years. According to the World Gold
Council, central bank gold purchases for 2012 are set to top 500 tons, up from
465 tons in 2011. The list of central banks buyers includes Russia, China,
Turkey, Mexico, South Korea and smaller central banks Kazakhstan, Ukraine and
Malaysia.
While a "currency war" would no doubt shake the markets current state of
complacency, there are other triggers that would prompt central banks into
action. The European crisis is far from being resolved, in our opinion, as
economic and social deterioration in Europe is ongoing. The European debt crisis
may yet find its way from Spain to Paris in a final stage and more profound
conclusion. China's credit bubble is showing signs of collapsing under its own
weight and would need to be addressed aggressively by the People's Bank of China
in the event of a U.S. style 2008 credit crisis. The recent tax hike in the U.S.
we believe will begin to negatively impact economic activity as 2013 plays out,
placing additional pressure on the Federal Reserve to monetize debt going
forward.
MINING SHARES
Shares of gold mining companies historically perform poorly in U.S. presidential
election years and 2012 was no exception. According to research by CIBC World
Markets, the XAU has declined in all presidential election years dating back to
1984. On the flip side, CIBC points out that in the years following U.S.
presidential elections from 1984 to 2008, the XAU has risen each year except one
- 1997. We believe the prospect for gold shares to follow the historic post
election year rise lies in the fact that market sentiment toward mining stocks
is at an extreme negative as measured by the XAU/Gold ratio, which sits at the
same level as the October 2008 low from which gold shares (XAU) rallied 155% in
the following 12 months.
-2-
Investors in shares of gold mining companies have been frustrated as market
sentiment toward mining shares has been hampered by overly optimistic guidance,
rising costs, poor capital allocation decisions and rising geopolitical risk.
While we see signs of investor capitulation in the shares of gold mining
companies, we also see evidence of fundamental change taking place within the
gold mining sector that addresses many of the issues concerning investors which
will set the stage for higher valuations. For example, companies have reduced
production and raised cost guidance to conservative levels that are readily
attainable in order to avoid negative surprises going forward. Cost pressures
are tapering off, which should help margins. Large scale projects have been
shelved and investor pressure on disciplined capital deployment has been taken
to account. Further, a number of mining companies have replaced CEO's due to
investor dissatisfaction, creating an environment of greater accountability to
shareholder interests by management.
Overall, we are pleased with the direction the gold mining industry is taking,
but we believe it is only a first step toward regaining investor confidence. An
additional step, in our opinion, would be for gold mining shares to compete with
the gold bullion exchange traded funds (ETFs) by establishing policies of
inventorying gold not needed to pay for operating expenses and dividends,
thereby establishing gold reserves above and below ground. We believe this would
potentially allow for gold mining companies to be the preferred gold asset for
many investors.
Our investment approach is to identify and own those mining companies that will
deliver shareholder value above the leverage afforded by the gold price. Your
Fund's largest holding is Goldcorp, Inc. where management is delivering on
bringing in a number of new low-cost mines with a predominantly North American
asset base. We are also not shying away from companies that have shown an
ability to create shareholder value by managing the risks in challenging
environments. Your Fund's second largest holding is Randgold Resources Ltd. ADR
which operates in West Africa and is building a mine in a joint venture with
AngloGold Ashanti Ltd. ADR. We have historically had a low turnover in the Fund
as we identify assets that we believe have long-term value creation.
CONCLUSION
We remain convinced ten years of negative real interest rates to combat the
fallout of previous policy failures is a mistaken policy in its own right and
has led to market distortions that are ripe for another financial crisis. In our
view, monetary policy is now boxed in by previous actions and any talk of
abstaining from additional liquidity or attempting to withdraw excess liquidity
from the banking system threatens to set-off unintended consequences. In the
event competitive devaluations take hold, excess reserves in the banking system
will be the fuel for igniting and fueling inflation. Through a process of
elimination, gold is being rediscovered as the monetary asset of choice for many
central banks and investors. Gold shares, in our opinion, are well positioned to
regain the interest of investors as they realize 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 28, 2013
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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, 2012
--------------------------------------------------------------------------------
Philadelphia Gold
OCMGX OCMGX and Silver Index
(without load) (with load) (XAU) S&P 500
--------------------------------------------------------------------------------
Six Months 11.54% 6.52% 11.53% 9.32%
--------------------------------------------------------------------------------
One Year (-20.27%) (-23.85%) (-16.88%) 16.13%
--------------------------------------------------------------------------------
3 Year Annualized 0.90% (-0.63%) (-1.21%) 11.25%
--------------------------------------------------------------------------------
5 Year Annualized 4.79% 3.83% 1.03% 1.34%
--------------------------------------------------------------------------------
10 Year Annualized 15.37% 14.84% 11.70% 6.36%
--------------------------------------------------------------------------------
Advisor Class Performance as of November 30, 2012
--------------------------------------------------------------------------------
Philadelphia Gold
and Silver Index
OCMAX (XAU) S&P 500
--------------------------------------------------------------------------------
Six Months 11.81% 11.53% 9.32%
--------------------------------------------------------------------------------
One Year (-19.83%) (-16.88%) 16.13%
--------------------------------------------------------------------------------
Since Inception Annualized* 4.64% 2.55% 9.74%
--------------------------------------------------------------------------------
--------
* 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 1.50% 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, 2012
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS 93.9%
MAJOR GOLD PRODUCERS 29.6%
210,000 AngloGold Ashanti Ltd. ADR ..........................$ 6,503,700
75,000 Barrick Gold Corp.................................... 2,589,750
270,000 Gold Fields Ltd. ADR ................................ 3,315,600
500,050 Goldcorp, Inc........................................ 19,351,935
500,000 Kinross Gold Corp.................................... 5,040,000
116,500 Newmont Mining Corp.................................. 5,485,985
-------------
42,286,970
-------------
INTERMEDIATE/MID-TIER GOLD PRODUCERS 39.8%
160,000 Agnico-Eagle Mines Ltd............................... 8,928,000
250,000 Alacer Gold Corp.* .................................. 1,137,565
121,250 AuRico Gold, Inc.*^ ................................. 958,184
50,000 AuRico Gold, Inc.* .................................. 394,000
500,000 Centerra Gold, Inc................................... 4,484,824
500,000 Eldorado Gold Corp................................... 7,240,000
100,000 Endeavour Mining Corp.* ............................. 211,406
500,000 IAMGOLD Corp......................................... 5,915,000
200,000 New Gold, Inc.* ..................................... 2,126,000
135,000 Randgold Resources Ltd. ADR ......................... 14,493,600
575,000 Yamana Gold, Inc..................................... 10,810,000
-------------
56,698,579
-------------
JUNIOR GOLD PRODUCERS 8.0%
200,000 Argonaut Gold Ltd.* ................................. 1,934,867
250,000 Aurizon Mines Ltd.* ................................. 910,000
500,000 B2Gold Corp.* ....................................... 1,741,582
120,000 CGA Mining Ltd.* .................................... 300,800
291,200 Claude Resources, Inc.* ............................. 167,095
305,500 Dundee Precious Metals, Inc.* ....................... 2,580,304
281,011 Kingsgate Consolidated Ltd........................... 1,425,261
250,000 Perseus Mining Ltd.* ................................ 591,433
610,000 San Gold Corp.* ..................................... 515,830
200,000 SEMAFO, Inc.......................................... 698,646
536,500 Wesdome Gold Mines Ltd.* ............................ 507,686
-------------
11,373,504
-------------
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
EXPLORATION AND DEVELOPMENT COMPANIES 5.5%
500,000 Amarillo Gold Corp.* ................................$ 498,314
2,190,000 Avala Resources Ltd.* ............................... 518,095
3,500,000 Indochine Mining Ltd.* .............................. 493,102
200,000 MAG Silver Corp.* ................................... 1,928,827
700,000 Millrock Resources, Inc.* ........................... 193,789
300,000 Sabina Silver Corp.* ................................ 830,523
400,000 Sutter Gold Mining, Inc.*# .......................... 121,407
4,600,040 Sutter Gold Mining, Inc.* ........................... 1,551,330
100,000 Tahoe Resources, Inc.* .............................. 1,780,842
-------------
7,916,229
-------------
PRIMARY SILVER PRODUCERS 7.0%
225,000 Fortuna Silver Mines, Inc.* ......................... 1,039,664
48,075 Pan American Silver Corp............................. 915,829
216,599 Silver Wheaton Corp.................................. 7,974,053
-------------
9,929,546
-------------
OTHER 4.0%
14,800 Franco-Nevada Corp................................... 837,626
60,000 Royal Gold, Inc...................................... 4,845,600
-------------
5,683,226
-------------
TOTAL COMMON STOCKS
(Cost $42,007,075) ........................................ 133,888,054
-------------
EXCHANGE TRADED FUND 6.0%
51,000 SPDR Gold Trust* .................................... 8,468,550
-------------
TOTAL EXCHANGE TRADED FUND
(Cost $2,254,710) ......................................... 8,468,550
-------------
See notes to financial statements.
-6-
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - NOVEMBER 30, 2012 (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
WARRANTS 0.0%
40,000 Primero Mining Corp.*
Exercise Price 8.00 CAD,
Exp. 7/20/2015 ....................................$ 52,348
-------------
TOTAL WARRANTS
(Cost $0) ................................................. 52,348
-------------
SHORT-TERM INVESTMENT 0.1%
191,997 UMB Money Market Fiduciary, 0.01% ................... 191,997
-------------
TOTAL SHORT-TERM INVESTMENT
(Cost $191,997) ........................................... 191,997
-------------
TOTAL INVESTMENTS
(Cost $44,453,782) .............100.0% 142,600,949
OTHER ASSETS LESS LIABILITIES .......... 0.0% 6,760
-------------
TOTAL NET ASSETS .......................100.0% $ 142,607,709
=============
--------
ADR - American Depository Receipts.
CAD - Canadian Dollars.
* Non-income producing security.
^ Denoted investment in AuRico Gold, Inc. is a Canadian security
traded on U.S. stock exchange.
# Security exempt from registration under Rule 144A promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), or
otherwise restricted. These securities generally may be resold only in
transactions exempt from registration under the Securities Act, normally
to certain 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, 2012 (CONTINUED)
SUMMARY OF INVESTMENTS BY COUNTRY
PERCENT OF
COUNTRY VALUE INVESTMENT SECURITIES
--------------------------------------------------------------------------------
Australia $ 2,810,596 2.0%
Canada 96,273,915 67.5
Cayman Islands 211,406 0.1
Jersey 14,493,600 10.2
South Africa 9,819,300 6.9
United States(1) 18,992,132 13.3
--------------------------------------------------------------------------------
TOTAL $ 142,600,949 100.0%
--------------------------------------------------------------------------------
(1) Includes short-term investments.
See notes to financial statements.
- 8 -
OCM GOLD FUND
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 2012
ASSETS:
Investments in unaffiliated issuers, at value (cost $44,453,782) $142,600,949
Interest and dividends receivable .............................. 83,953
Receivable from fund shares sold ............................... 440,254
Prepaid expenses and other assets .............................. 22,169
------------
Total assets ............................................. 143,147,325
------------
LIABILITIES:
Payable for fund shares redeemed ............................... 122,250
Due to investment adviser ...................................... 115,692
Accrued distribution fees ...................................... 223,428
Accrued Trustees' fees ......................................... 2,500
Accrued expenses and other liabilities ......................... 75,746
------------
Total liabilities ........................................ 539,616
------------
Net Assets ............................................... $142,607,709
============
NET ASSETS CONSIST OF:
Shares of beneficial interest, no par value:
unlimited shares authorized ................................... $ 45,332,671
Undistributed net investment loss .............................. (2,728,825)
Accumulated net realized gain on investments and
foreign currency transactions ................................. 1,856,544
Net unrealized appreciation on investments and
foreign currency translations ................................. 98,147,319
------------
Net Assets ............................................... $142,607,709
============
CALCULATION OF MAXIMUM OFFERING PRICE:
INVESTOR CLASS:
Net asset value and redemption price per share ............... $ 21.68
Maximum sales charge (4.50% of offering price) ............... 1.02
------------
Offering price to public ..................................... $ 22.70
------------
Shares outstanding ........................................... 5,778,239
============
ADVISOR CLASS:
Net asset value and redemption price per share ............... $ 22.00
------------
Shares outstanding ........................................... 787,318
============
Total Shares outstanding ..................................... 6,565,557
============
See notes to financial statements.
- 9 -
OCM GOLD FUND
STATEMENT OF OPERATIONS - YEAR ENDED NOVEMBER 30, 2012
INVESTMENT INCOME:
Interest ................................................ $ 52
Dividend (net of foreign withholding taxes of $178,765) 1,435,784
-------------
Total investment income ........................... 1,435,836
-------------
EXPENSES:
Investment advisory fees ................................ 1,340,521
Distribution fees - Investor Class ...................... 1,019,550
Distribution fees - Advisor Class ....................... 44,442
Fund administration and accounting fees ................. 217,234
Transfer agent fees and expenses ........................ 102,020
Professional fees ....................................... 54,698
Federal and state registration fees ..................... 41,719
Custody fees ............................................ 30,358
Chief Compliance Officer fees ........................... 24,823
Reports to shareholders ................................. 20,725
Trustees' fees .......................................... 10,000
Other expenses .......................................... 8,928
-------------
Total expenses .................................... 2,915,018
-------------
Net investment loss ............................... (1,479,182)
-------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain on investments and foreign
currency transactions .................................. 2,093,376
Net change in unrealized appreciation/depreciation
on investments and foreign currency translations ....... (38,727,762)
-------------
Net loss on investments ................................. (36,634,386)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... $ (38,113,568)
=============
See notes to financial statements.
- 10 -
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
NOV. 30, 2012 NOV. 30, 2011
------------- -------------
OPERATIONS:
Net investment loss ........................ $ (1,479,182) $ (1,864,122)
Net realized gain on investments and
foreign currency transactions ............. 2,093,376 7,685,694
Net change in unrealized
appreciation/depreciation on investments
and foreign currency translations ......... (38,727,762) (2,687,603)
------------ ------------
Net increase/(decrease) in net
assets resulting from operations .......... (38,113,568) 3,133,969
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
INVESTOR CLASS:
Distributions paid from net realized gains (6,333,877) (14,401,514)
------------ ------------
Total distributions from
Investor Class ............................ (6,333,877) (14,401,514)
------------ ------------
ADVISOR CLASS:
Distributions paid from net realized gains (788,733) (1,674,355)
------------ ------------
Total distributions from Advisor Class .... (788,733) (1,674,355)
------------ ------------
Total distributions ....................... (7,122,610) (16,075,869)
------------ ------------
FUND SHARE TRANSACTIONS:
INVESTOR CLASS:
Net proceeds from shares sold ............. 5,315,526 8,953,939
Distributions reinvested .................. 5,917,821 13,629,588
Payment for shares redeemed(1) ............ (13,826,436) (18,367,148)
------------ ------------
Net increase/(decrease) in net assets
from Investor Class share transactions ... (2,593,089) 4,216,379
------------ ------------
ADVISOR CLASS:
Net proceeds from shares sold ............. 2,548,075 2,008,485
Distributions reinvested .................. 628,170 1,471,590
Payment for shares redeemed(2) ............ (1,371,834) (2,310,133)
------------ ------------
Net increase in net assets from Advisor
Class share transactions ................. 1,804,411 1,169,942
------------ ------------
Net increase/(decrease) in net assets
from Fund share transactions ............. (788,678) 5,386,321
------------ ------------
TOTAL DECREASE IN NET ASSETS ................. (46,024,856) (7,555,579)
NET ASSETS, BEGINNING OF YEAR ................ 188,632,565 196,188,144
------------ ------------
NET ASSETS, END OF YEAR ...................... $142,607,709 $188,632,565
============ ============
See notes to financial statements.
- 11 -
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED YEAR ENDED
NOV. 30, 2012 NOV. 30, 2011
------------- -------------
ACCUMULATED NET INVESTMENT LOSS ................. $ (2,949,667) $ (2,892,149)
============ ============
TRANSACTIONS IN SHARES:
INVESTOR CLASS:
Shares sold .................................. 230,629 319,505
Shares issued on reinvestment of distributions 259,803 486,945
Shares redeemed .............................. (620,016) (656,541)
------------ ------------
Net increase/(decrease) in Investor
Class shares outstanding .................... (129,584) 149,909
============ ============
ADVISOR CLASS:
Shares sold .................................. 110,769 71,161
Shares issued on reinvestment of distributions 27,272 52,332
Shares redeemed .............................. (58,078) (81,229)
------------ ------------
Net increase in Advisor Class
shares outstanding .......................... 79,963 42,264
============ ============
Net increase/(decrease) in Fund
shares outstanding .......................... (49,621) 192,173
============ ============
--------
(1) Net of redemption fees of $1,371 for the year ended November 30, 2012 and
$7,770 for the year ended November 30, 2011, respectively.
(2) Net of redemption fees of $5,048 for the year ended November 30, 2012 and
$5,881 for the year ended November 30, 2011, respectively.
See notes to financial statements.
- 12 -
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2012
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, other than the NASDAQ Stock Market LLC, 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 Global Select Market, Global Market and
Capital Market 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, 2012 (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, 2012, in valuing the Fund's
assets:
------------------------------------------------------------------------------------------------
SECTOR LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
------------------------------------------------------------------------------------------------
COMMON STOCKS
------------------------------------------------------------------------------------------------
Major Gold Producers $ 42,286,970 $ -- $ -- $ 42,286,970
------------------------------------------------------------------------------------------------
Intermediate/Mid-Tier Gold Producers 56,698,579 -- -- 56,698,579
------------------------------------------------------------------------------------------------
Junior Gold Producers 11,373,504 -- -- 11,373,504
------------------------------------------------------------------------------------------------
Exploration and Development Companies 7,794,822 121,407 -- 7,916,229
------------------------------------------------------------------------------------------------
Primary Silver Producers 9,929,546 -- -- 9,929,546
------------------------------------------------------------------------------------------------
Other 5,683,226 -- -- 5,683,226
------------------------------------------------------------------------------------------------
EXCHANGE TRADED FUND 8,468,550 -- -- 8,468,550
------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 191,997 -- -- 191,997
------------------------------------------------------------------------------------------------
WARRANTS
------------------------------------------------------------------------------------------------
Junior Gold Producers 52,348 -- -- 52,348
------------------------------------------------------------------------------------------------
TOTAL $142,479,542 $ 121,407 $ -- $142,600,949
------------------------------------------------------------------------------------------------
The Fund held one Level 2 security at November 30, 2012, which was a
restricted security fair valued 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, 2012. There were no 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, 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 year ended November 30, 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.
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"
-14-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2012 (CONTINUED)
recognition threshold is measured to determine the amount of benefit to
recognize in the financial statements. The Fund policy is to classify interest
and penalties associated with underpayment of federal and state income taxes, if
any, as income tax expense on the Statement of Operations. As of November 30,
2012, the Fund did not have any interest or penalties associated with the
underpayment of any income taxes.
The Income Tax Statement requires management of the Fund to analyze all
open tax years, fiscal years 2009-2012 as defined by IRS statue of limitations
for all major jurisdictions, including federal tax authorities and certain state
tax authorities. As of and during the year ended November 30, 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 year ended November 30,
2012, the Investor Class and the Advisor Class received $1,371 and $5,048 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 year ended November 30, 2012. The Fund realized a loss of $206,423 on
the exercise, expiration or exchange of warrants during the year ended November
30, 2012 which is included within the "Net realized gain on investments and
foreign currency transactions" on the Statement of Operations. At November 30,
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 - NOVEMBER 30, 2012 (CONTINUED)
NOTE 3. INVESTMENT ADVISORY AGREEMENT AND AFFILIATED PARTIES
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.
The Fund does not compensate Trustees and Officers affiliated with OCM. For
the year ended November 30, 2012, the expenses accrued for Trustees who are not
affiliated with OCM are reported on the Statement of Operations. The Fund pays
the salary and related expenses of the Fund's Chief Compliance Officer. The
expenses accrued for the Chief Compliance Officer are reported on the Statement
of Operations.
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, 2012, the Investor Class and the Advisor Class incurred $1,019,550 and
$44,442, 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, 2012
were $2,046,638 and $9,598,637, respectively. There were no purchases or sales
of U.S. government obligations.
-16-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2012 (CONTINUED)
NOTE 6. FEDERAL INCOME TAX INFORMATION
At November 30, 2012, gross unrealized appreciation and depreciation of
investments owned by the Fund, based on cost for federal income tax purposes
were as follows:
Cost of investments .........................$ 45,538,469
=============
Unrealized appreciation .....................$ 100,901,517
Unrealized depreciation ..................... (3,839,037)
Unrealized appreciation on foreign currency . 152
-------------
Net unrealized appreciation on investments ..$ 97,062,632
=============
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, 2012 and 2011 was as follows:
2012 2011
----------- -----------
Ordinary income ............... $ -- $ --
Net long-term capital gains ... 7,122,610 16,075,869
----------- ------------
Total distributions ........... $ 7,122,610 $ 16,075,869
=========== ============
As of November 30, 2012 the components of accumulated earnings on a tax
basis were as follows:
Undistributed ordinary income ................. $ --
Undistributed long-term gains ................. 1,803,056
-----------
Tax accumulated earnings ...................... 1,803,056
Accumulated capital and other losses .......... (1,590,650)
Unrealized appreciation on investments ........ 97,062,632
-----------
Total accumulated earnings .................... $97,275,038
===========
OCM Gold Fund has $1,590,650 in qualified late-year losses, which are
deferred until fiscal year 2013 for tax purposes. Net late-year ordinary losses
incurred after December 31 and within the taxable year and net late-year
specified losses incurred after October 31 and within the taxable year are
deemed to arise on the first day of the Fund's next taxable year.
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 year where the RIC
incurs losses 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.
-17-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2012 (CONTINUED)
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. ILLIQUID SECURITIES
The Fund may invest up to 15% of net assets in securities for which there
is no readily available market ("illiquid securities"). The 15% limitation
includes securities whose disposition would be subject to legal restrictions
("restricted securities"). Illiquid and restricted securities often have a
market value lower than the market price of unrestricted securities of the same
issuer and are not readily marketable without some time delay. This could result
in the Fund being unable to realize a favorable price upon disposition of such
securities and in some cases might make disposition of such securities at the
time desired by the Fund impossible. At November 30, 2012, the Fund held
illiquid securities as indicated on the Schedule of Investments.
NOTE 9. 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
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
2012 2011 2010 2009 2008
-----------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each year)
Net asset value, beginning of year ............... $ 28.49 $ 30.53 $ 24.68 $ 12.35 $ 21.49
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss .............................. (0.25) (0.29) (0.43) (0.29) (0.31)
Net realized and unrealized gain/(loss) on
investments and foreign currency
transactions ................................... (5.48) 0.76 6.81 12.65 (7.41)
-------- -------- -------- -------- -------
Total from investment operations ................. (5.73) 0.47 6.38 12.36 (7.72)
-------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ............. -- -- -- -- --
Distribution from net realized gains ............. (1.08) (2.51) (0.53) (0.03) (1.42)
-------- -------- -------- -------- -------
Total distributions .............................. (1.08) (2.51) (0.53) (0.03) (1.42)
-------- -------- -------- -------- -------
Net asset value, end of year ..................... $ 21.68 $ 28.49 $ 30.53 $ 24.68 $ 12.35
======== ======== ======== ======== =======
TOTAL RETURN* .................................... (20.27)% 1.70% 26.70% 100.14% (38.55)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) ............... $125,286 $168,305 $175,802 $159,833 $78,652
Ratio of expenses to average net assets .......... 1.99% 1.73% 1.93% 1.94% 1.99%
Ratio of net investment loss to average net assets (1.04)% (1.03)% (1.57)% (1.59)% (1.58)%
Portfolio turnover rate .......................... 1% 5% 12% 6% 5%
--------
* Assumes no sales charge.
See notes to financial statements.
- 19 -
OCM GOLD FUND
FINANCIAL HIGHLIGHTS ADVISOR CLASS
FOR THE PERIOD
YEAR ENDED YEAR ENDED APRIL 1,
2010# -
NOV. 30, NOV. 30, NOV. 30,
2012 2011 2010
-------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
Net asset value, beginning of period ...... $ 28.74 $ 30.65 $ 22.24
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ....................... (0.12) (0.18) (0.13)
Net realized and unrealized gain/(loss) on
investments and foreign currency
transactions ............................ (5.54) 0.78 8.54
------- ------- -------
Total from investment operations .......... (5.66) 0.60 8.41
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ...... -- -- --
Distribution from net realized gains ...... (1.08) (2.51) --
------- ------- -------
Total distributions ....................... (1.08) (2.51) --
------- ------- -------
Net asset value, end of period ............ $ 22.00 $ 28.74 $ 30.65
======= ======= =======
TOTAL RETURN .............................. (19.83)% 2.15% 37.81%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...... $17,322 $20,328 $20,386
Ratio of expenses to average net assets ... 1.48% 1.30% 1.34%(2)
Ratio of net investment loss to average net
assets .................................. (0.52)% (0.60)% (0.98)%(2)
Portfolio turnover rate ................... 1% 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.
- 20 -
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,
2012, 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 audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of November 30, 2012, 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, 2012, 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 29, 2013
- 21 -
OCM GOLD FUND
EXPENSE EXAMPLE - FOR THE PERIOD ENDED NOVEMBER 30, 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 June 1, 2012 to November 30,
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
JUNE 1, NOVEMBER 30, NOVEMBER 30,
2012 2012 2012*
------------- -------------- --------------
INVESTOR CLASS
Actual $1,000.00 $1,115.40 $10.37
Hypothetical (5% return
before expenses) 1,000.00 1,015.19 9.88
ADVISOR CLASS
Actual 1,000.00 1,118.10 8.15
Hypothetical (5% return
before expenses) 1,000.00 1,017.30 7.77
--------
* Expenses are equal to the Investor Class' and Advisor Class' annualized
expense ratios of 1.96% and 1.54%, respectively, for the period,
multiplied by the average account value over the period, multiplied by
183/366 (to reflect the one-half year period).
- 22 -
OCM GOLD FUND
INVESTMENTS BY SECTOR - NOVEMBER 30, 2012 (UNAUDITED)
AS A PERCENTAGE OF NET ASSETS
PIE CHART OMITTED
Intermediate/Mid-Tier Told Producers 39.8%
Major Gold Producers 29.6%
Junior Gold Producers 8.0%
Primary Silver Producers 7.0%
Exchange Traded Fund 6.0%
Exploration and Development Companies 5.5%
Other 4.0%
Short-Term Investment 0.1%
A description of the Fund's proxy voting policies and procedures and a
record of the Fund's proxy votes for the year endedJune 30, 2012 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.
- 23 -
OCM GOLD FUND - INVESTOR CLASS
PERFORMANCE RESULTS - YEAR ENDED NOVEMBER 30, 2012 (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 -23.85% 16.13% -16.88%
5 year 3.83% 1.34% 1.03%
10 year 14.84% 6.36% 11.70%
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, 2002.
PHILADELPHIA
INVESTOR S&P 500(R) GOLD &
CLASS INDEX SILVER INDEX
-------- ---------- -------------
11/30/02 9,556 10,000 10,000
11/30/03 18,350 11,509 17,587
11/30/04 16,458 12,989 17,307
11/30/05 17,171 14,085 18,819
11/30/06 27,314 16,090 24,792
11/30/07 31,587 17,332 28,728
11/30/08 19,412 10,730 17,244
11/30/09 38,850 13,454 31,372
11/30/10 49,224 14,791 36,676
11/30/11 50,060 15,950 36,384
11/30/12 39,913 18,523 30,244
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 - ADVISOR CLASS
PERFORMANCE RESULTS - YEAR ENDED NOVEMBER 30, 2012 (UNAUDITED)
PHILADELPHIA
ADVISOR S&P 500(R) GOLD &
CLASS INDEX SILVER INDEX
------- ---------- --------------
1 year -19.83% 16.13% -16.88%
Since Inception 4.64% 9.74% 2.55%
on 4/1/10
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).
PHILADELPHIA
ADVISOR S&P 500(R) GOLD &
CLASS INDEX SILVER INDEX
------- ---------- --------------
4/01/10 10,000 10,000 10,000
11/30/10 13,781 10,234 12,970
11/30/11 14,078 11,036 12,867
11/30/12 11,286 12,816 10,696
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.
- 25 -
OCM GOLD FUND
ANNUAL RENEWAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED)
On October 18, 2012, the Board of Trustees of OCM Mutual Fund approved the
continuation of the Fund's investment advisory agreement with Orrell Capital
Management, Inc. (the "Adviser"). Prior to approving the continuation of the
agreement, the Board considered:
o the nature, extent and quality of the services provided by the Adviser
o the investment performance of the Fund
o the costs of the services to be provided and profits to be realized by
the Adviser from its relationship with the Fund
o the extent to which economies of scale would be realized as the Fund
grows and whether fee levels reflect those economies of scale
o the expense ratio of the Fund
In considering the nature, extent and quality of the services provided by
the Adviser, the Board considered an oral presentation by the Adviser describing
the portfolio management, shareholder communication, and regulatory compliance
services provided by the Adviser to the Fund. The Trustees concluded that the
Adviser appears to be 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
resulted in lower fee rates than those of comparable mutual funds.
LONG TERM CAPITAL GAINS DESIGNATION (UNAUDITED)
Pursuant to IRC 852(b)(3) of the Internal Revenue Code OCM Gold Fund hereby
designates $7,122,610 as long-term capital gains distributed during the year
ended November 30, 2012.
- 26 -
OCM GOLD FUND
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
The business and affairs of the Funds are managed under the direction of
the Board of Trustees. Information pertaining to the Trustees and Officers of
the Fund is set forth below. The Fund's Statement of Additional Information
includes additional information about Trustees and is available, without charge,
upon request by calling 1-800-779-4681.
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 59 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 52
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 Treasurer
Age 51
JACKLYN A. ORRELL*** Secretary One year Secretary of Orrell Capital Management, Inc. N/A
1536 Holmes Street, term since 1999.
Livermore, California 94550 Since 2004
Age 78
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 54 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.
-27-
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OCM Gold Fund
Distributed by:
Northern Lights Distributors, LLC
4020 South 147th Street
Omaha, NE 68137
0306-NLD-1/29/2013
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, 2012 November 30, 2011
Audit Fees $28,700 $28,000
Audit-Related Fees $0 $0
Tax Fees $4,500 $4,400
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, 2012 and 2011, 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 and Treasurer
Date: January 28, 2013
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 and Treasurer
Date: January 28, 2013