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)
2600 Kitty Hawk Road
Suite 119
Livermore, CA 94551
(Address of principal executive offices) (Zip code)
Gregory M. Orrell
Orrell Capital Management, Inc
2600 Kitty Hawk Road
Suite 119
Livermore, CA 94551
(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, 2014
ITEM 1. REPORT TO STOCKHOLDERS.
-------------
OCM GOLD FUND
=============
ANNUAL REPORT
NOVEMBER 30, 2014
ANNUAL REPORT
NOVEMBER 30, 2014
Dear Fellow Shareholder:
After a promising start to the fiscal year, gold bullion priced in U.S. dollars
and shares of gold mining companies retreated in the face of robust U.S. equity
and bond markets. The historical negative correlation of gold assets to
financial assets reached levels not seen since the height of the technology
bubble in 2000, as illustrated by the S&P 500 and Philadelphia Gold and Silver
Share Index ratio (see chart gold mining companies are represented by the XAU).
For the fiscal year ended November 30, 2014, the OCM Gold Fund Investor Class
declined 11.49% (-15.47% after maximum sales load) while the Advisor Class
declined 10.74% for the period. In comparison, the Philadelphia Gold and Silver
Share Index (XAU)(1) posted a negative return of 19.90% over the same period,
whereas the S&P 500 Index(2) posted a positive return of 16.86%. The gold
bullion price (London PM fix) for the twelve month period was down 5.61%. Your
Fund's investment strategy of focusing on management teams exhibiting a track
record of delivering disciplined returns on capital allowed it to outperform the
XAU over the past fiscal year.
S&P/XAU Ratio
--------------
12/23/1983 1.464382
12/23/85 2.596111
12/23/87 2.276694
12/23/89 2.946719
12/23/91 5.468317
12/23/93 3.536123
12/23/95 5.114848
12/23/97 12.55813
12/23/99 21.61615
12/23/2001 20.95639
12/23/03 10.12495
12/23/05 9.74998
12/23/07 7.580035
12/23/09 6.627637
12/23/11 6.827002
12/23/13 21.14014
MARKET COMMENTARY
Suspicion may lurk, but confidence in central banking and financial instruments
persists as evidenced by the strong performance of global bond and equity
markets, specifically the U.S. market over the past year. Zero interest rate
policies and printing press money (quantitative easing or QE) has been the
catalyst for these rising asset prices. With the exception of Germany, central
bankers of the developed world are assuming, in our opinion, that rising asset
prices support the economy and lead to job creation and sustainable economic
growth. The problem, as we see it, is that policy makers and markets are casting
aside the risks and uncertainties associated with extreme monetary policies
creating the perception that QE has worked with limited fallout. This
unwarranted confidence, we believe, comes from the conviction that if economic
growth slows the remedy is simply another round of printing press money. The
result is that politicians defer to central bankers rather than
enacting politically challenging structural reforms to spur sustainable economic
growth, in our opinion.
With the exception of the U.S. dollar, gold appreciated versus all other
currencies in 2014. Slower global economic growth outside the U.S. has led to
competitive currency devaluations; the most notable being put forward by the
Bank of Japan as it embarks on a second major program of printing yen and
purchasing assets in order to stimulate its economy and fight deflation. The
gold price in terms of yen soared approximately 14% during calendar year 2014.
The European Central Bank (ECB) announced on January 22, 2015 that it would take
the QE baton, as Europe finds itself mired in a recession outside of Germany,
likely in part due to western sanctions against Russia for its Ukraine
involvement. ECB president, Mario Draghi, maintains he will do "whatever it
takes" to defend the euro and stimulate the economy and fight off deflationary
forces in Europe. With Greece apparently in need of another bailout, along with
the slowing European economy, and the euro steadily losing ground to the dollar
over the past year, euro holders apparently were fearing a major move by the ECB
to debase the currency. In our opinion, these fearful euro holders are correct,
and the $60 billion euro bond buying program announced on January 22, 2015 will
continue the euro's decline.
-1-
The Swiss National Bank (SNB) shocked markets on January 15, 2015, with the
announcement that it was discontinuing its support policy of pegging the euro to
the Swiss franc exchange rate. Faced with a tsunami of euros seeking shelter in
anticipation of the ECB bond buying program announcement, the SNB was left with
little choice but to remove the 1.20 Swiss franc to euro peg. The Swiss balance
sheet has grown from 100b francs to 525b francs since 2008 and there is little
room for further expansion and/or the appetite to stand in and be the "buyer of
last resort" of the euro. Ironically, six weeks earlier the SNB successfully
lobbied vehemently against a referendum put forward by a group of Swiss
nationals looking to stabilize the Swiss franc by requiring the SNB to hold 20%
of its assets in gold bullion. At the time, the SNB stated the proposal would
handcuff monetary policy, specifically implying the 1.20 peg to euro. The move
by the SNB echoes President Nixon's decision to close the gold window in 1971 or
lose all U.S. gold to foreign redemption. Gresham's law, "bad money drives out
good," appears to be in effect, in our opinion, as euros are set to become
plentiful and undervalued currency disappears from circulation making overvalued
money abundant.
The seemingly unending supply of cheap money provided by central banks globally
would suggest deflation should not be an issue, but rather inflation should be
the concern from excessive liquidity. Nonetheless, collapsing oil, iron ore and
now copper prices are exacerbating deflationary fears as slow to zero GDP growth
in Europe coupled with slower growth in BRIC countries (Brazil, Russia, India
and China) is countering U.S. economic growth that now appears challenged by a
contracting energy sector.
US DOLLAR/GOLD PRICE EURO/GOLD PRICE
---------------------- -----------------------
01/03/2011 1,405.5 01/03/2011 1,051.9
01/03/2012 1,598.0 01/03/2012 1,224.2
01/03/2013 1,679.5 01/03/2013 1,282.5
01/03/2014 1,234.5 01/03/2014 906.8
01/03/2015 1,172.0 01/03/2015 974.2
JAPANESE YEN/GOLD PRICE RUSSIAN RUBLE/GOLD PRICE
------------------------- ------------------------
01/03/2011 114,822.3 01/01/2009 26,557.8
01/03/2012 122,646.5 01/01/2010 32,965.9
01/03/2013 145,847.8 01/01/2011 42,990.0
01/03/2014 128,974.4 01/01/2012 49,180.3
01/03/2015 140,880.2 01/01/2013 50.633.3
01/01/2014 39,579.9
01/01/2015 72,360.0
-2-
The dilemma that has surfaced for central bankers is that the abundant
availability of low cost capital has led to expanded global supply of goods and
services greater than the global economy can absorb. A period of malinvestment
has taken place that appears to need a natural business cycle cleansing, not
additional printing press money to create more capacity. Policy makers
deflationary fears stem from the understanding that servicing debt with harder
to earn dollars in a deflationary environment dramatically increases credit and
default risk that may lead to systemic risk, especially in light of outstanding
global debt reaching $100 trillion, up 40% since 2008. Consequently, we hear the
mantra put forth by global central banks to create 2 percent inflation at
whatever measures and cost necessary. Perhaps it will come down to dropping
money out of the helicopter, as former Fed Chairman Ben Bernanke once
figuratively put forth as a possible policy response to deflation.
With monetary risks from central bank actions appearing elevated, geopolitical
risk levels are also high with tensions approaching cold war status following
western sanctions against Russia for its annexation of Crimea in Ukraine.
Russia's response to western sanctions includes circling the wagons by enacting
trade and military agreements with China and India and vowing to move off U.S.
dollar denominated trade with the intent of lessening the utilitarian value of
the dollar. This point is reinforced in a speech Vladimir Putin gave in Sochi on
October 24, 2014 in which he states, "Sanctions are already undermining the
foundations of world trade, the WTO rules and the principle of inviolability of
private property. . . [THE AMERICANS] NOW RISK LOSING TRUST AS THE LEADERS OF
GLOBALIZATION. [T]HE UNITED STATES PROSPERITY RESTS IN LARGE PART ON THE TRUST
OF INVESTORS AND FOREIGN HOLDERS OF DOLLARS AND U.S. SECURITIES. THIS TRUST IS
CLEARLY BEING UNDERMINED AND SIGNS OF DISAPPOINTMENT IN THE FRUITS OF
GLOBALIZATION ARE VISIBLE NOW IN MANY COUNTRIESE WE ALREADY SEE THAT MORE AND
MORE COUNTRIES ARE LOOKING FOR WAYS TO BECOME LESS DEPENDENT ON THE DOLLAR AND
ARE SETTING UP ALTERNATIVE FINANCIAL AND PAYMENTS SYSTEMS AND RESERVE
CURRENCIES. I THINK THAT OUR AMERICAN FRIENDS ARE QUITE SIMPLY CUTTING THE
BRANCH THEY ARE SITTING ON." Following Putin's comments, amid the precipitous
drop in oil prices in the later part of 2014, President Obama made subsequent
comments regarding lower oil prices having the desired effect of pressuring
Russian stability. In our opinion, given these actions and comments, it is clear
that a monetary war is at hand and gold may very well have an important role in
the end.
The major buyers of gold over the past year include China, India and Russia
leading to the absorption of western investment and spec selling of bullion.
Vaults in London reportedly lost 1500 tons of gold over the past 12 months. As
the drain of bullion from western vaults accelerates, a number of central banks
led by the Netherlands, Germany, Belgium and Austria, to name a few, are
exhibiting growing weariness as to the sanctity of reserves held abroad and have
begun, or are in the process of, repatriating gold reserves. Understanding the
leverage in the paper gold market to physical gold trading can range up to 90 to
1, the risk of being the last ounce with multiple pledges of ownership is
apparently one of the main concerns.
SHARES OF GOLD MINING COMPANIES
After two years of cost cutting campaigns, the gold mining companies are getting
further relief on two fronts, currencies and lower oil prices. Gold mining
companies with large open pit operations and/or operating in remote locations
that utilize diesel generators are seeing the biggest benefit from lower fuel
prices. Additionally, the strength in the U.S. dollar means decreased local
operating costs denominated in U.S. dollars in countries, such as Australia,
Canada and South Africa. Valuation on shares of gold mining companies from 2008
and 2012 were hampered by rising costs leading investors to become disillusioned
with the lack of earnings leverage to rising gold prices. With the tailwind of
lower operating costs and higher gold prices, it appears to us gold mining
shares are set to retrace some lost ground.
We are of the belief that the supply of newly mined gold is set to shrink
materially over the next decade even in the face of significantly higher gold
prices. There are two main factors impacting mine supply: (i) the long lead time
from discovery to production of seven to 20 years and (ii) the lack of new
deposits with acceptable after tax rates of return, despite the high level of
exploration expenditures over the past decade. Both of these factors punctuating
the scarcity value of gold. With increased options for investors to invest in
gold bullion through exchange traded funds (ETFs), gold mining companies are
being forced to be more than call options on the price of gold. The business
model must now be more disciplined with new mines allowing for repayment of
capital, shareholder participation in cash flow through dividends and providing
capital for the next generation of mines. In our opinion, the companies that
exhibit these characteristics will outperform bullion.
CONCLUSION
We are hard pressed to believe policy makers have a greater understanding of the
modern financial system and economy than they did in 2007 leading up to the 2008
financial crisis. In fact, an argument can be made that asset prices are more
distorted today than at any time in history due to central bank policies.
Therefore, our main thesis for owning and maintaining exposure to gold assets in
the face of the strong performance of U.S. equity and bond markets over the past
three years is a simple one: the risk that extreme monetary policies pursued by
global central bankers since 2008 to manage the global economy will end poorly
is exceptionally high. In turn, we believe there will be greater appreciation of
gold's monetary attributes should collateral damage take hold, most notably gold
is not someone else's liability and it is not easily reproduced like paper
currencies. In our opinion, the current depressed valuations for shares of gold
mining companies relative to the price of gold creates an opportunistic entry
point for investors looking to establish positions or rebalance their
portfolios.
We appreciate your shareholding and confidence in the OCM Gold Fund and we look
forward to our strategy meeting your long-term 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
Portfolio Manager
January 22, 2015
--------------------------------------------------------------------------------
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, 2014
--------------------------------------------------------------------------------
Philadelphia Gold
OCMGX OCMGX and Silver Index
(without load) (with load) (XAU)(1) S&P 500(2)
--------------------------------------------------------------------------------
Six Months (16.11)% (19.89)% (19.15)% 8.58%
--------------------------------------------------------------------------------
One Year (11.49)% (15.47)% (19.90)% 16.86%
--------------------------------------------------------------------------------
3 Year Annualized (27.96)% (29.06)% (29.79)% 20.93%
--------------------------------------------------------------------------------
5 Year Annualized (13.59)% (14.38)% (16.69)% 15.96%
--------------------------------------------------------------------------------
10 Year Annualized 1.29% 0.83% (3.13)% 8.06%
--------------------------------------------------------------------------------
Advisor Class Performance as of November 30, 2014
--------------------------------------------------------------------------------
Philadelphia Gold
and Silver Index
OCMAX (XAU)(1) S&P 500(2)
--------------------------------------------------------------------------------
Six Months (15.79)% (19.15)% 8.58%
--------------------------------------------------------------------------------
One Year (10.74)% (19.90)% 16.86%
--------------------------------------------------------------------------------
3 Year Annualized (27.50)% (29.79)% 20.93%
--------------------------------------------------------------------------------
Since Inception Annualized* (12.49)% (15.91)% 15.40%
--------------------------------------------------------------------------------
----------------
* 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 2.22% AND 1.69% 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, 2014
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
COMMON STOCKS 93.0%
MAJOR GOLD PRODUCERS 36.2%
127,250 Agnico-Eagle Mines Ltd. .............. $ 2,989,103
152,722 AngloGold Ashanti Ltd. ADR* .......... 1,307,300
400,000 Gold Fields Ltd. ADR ................. 1,640,000
430,000 Goldcorp, Inc. ....................... 8,445,200
308,200 Kinross Gold Corp.* .................. 862,960
100,000 Newmont Mining Corp. ................. 1,840,000
280,000 Sibanye Gold Ltd. ADR ................ 1,923,600
250,000 Yamana Gold, Inc. .................... 945,000
------------
19,953,163
------------
INTERMEDIATE/MID-TIER GOLD PRODUCERS 27.7%
250,000 Alacer Gold Corp. .................... 445,999
145,200 AuRico Gold, Inc. .................... 499,488
568,400 B2Gold Corp.* ........................ 924,551
450,000 Centerra Gold, Inc. .................. 2,050,284
360,833 Eldorado Gold Corp. .................. 2,262,423
900,000 Endeavour Mining Corp.* .............. 369,917
375,000 IAMGOLD Corp.* ....................... 791,250
122,500 Randgold Resources Ltd. ADR .......... 7,923,300
------------
15,267,212
------------
JUNIOR GOLD PRODUCERS 5.5%
100,000 Alamos Gold, Inc. .................... 686,000
240,000 Argonaut Gold Ltd.* .................. 384,084
300,000 Dundee Precious Metals, Inc.* ........ 747,704
50,000 Klondex Mines Ltd.* .................. 80,018
500,000 Mandalay Resources Corp. ............. 358,548
1,000,000 Wesdome Gold Mines Ltd.* ............. 760,822
------------
3,017,176
------------
EXPLORATION AND DEVELOPMENT COMPANIES 2.5%
500,000 Amarillo Gold Corp.* ................. 34,980
73,000 Avala Resources Ltd.* ................ 3,830
150,000 MAG Silver Corp.* .................... 949,716
5,600,040 Sutter Gold Mining, Inc.* ............ 391,783
------------
1,380,309
------------
PRIMARY SILVER PRODUCERS 11.9%
200,000 Fortuna Silver Mines, Inc.* .......... 780,061
210,000 Silver Wheaton Corp. ................. 4,146,742
5,600 Tahoe Resources, Inc.*^ .............. 89,432
100,000 Tahoe Resources, Inc.* ............... 1,554,001
------------
6,570,236
------------
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
OTHER 9.2%
10,200 Franco-Nevada Corp. .................. $ 510,204
14,800 Franco-Nevada Corp.^ ................. 740,453
60,000 Royal Gold, Inc. ..................... 3,820,800
------------
5,071,457
------------
TOTAL COMMON STOCKS
(Cost $28,252,130) ................... 51,259,553
------------
EXCHANGE TRADED FUND 7.2%
35,500 SPDR Gold Trust* ..................... 3,979,905
------------
TOTAL EXCHANGE TRADED FUND
(Cost $1,569,455) .................... 3,979,905
------------
WARRANTS 0.0%
75,000 Veris Gold Corp.*#
Exercise Price 1.95 CAD,
Exp. 12/18/2016 .................... --
------------
TOTAL WARRANTS
(Cost $0) ............................ --
------------
SHORT-TERM INVESTMENT 0.1%
64,723 UMB Money Market Fiduciary, 0.01% .... 64,723
------------
TOTAL SHORT-TERM INVESTMENT
(Cost $64,723) ....................... 64,723
------------
TOTAL INVESTMENTS
(Cost $29,886,308) ................... 100.3% 55,304,181
LIABILITIES LESS OTHER ASSETS ........ (0.3)% (157,362)
------------
TOTAL NET ASSETS ..................... 100.0% $55,146,819
============
---------------
ADR - American Depository Receipts.
CAD - Canadian Dollars.
* Non-income producing security.
^ Denoted investment is a Canadian security traded on U.S. stock exchange.
# The security is valued at fair value in accordance with procedures
established by the Fund's Board of Trustees.
See notes to financial statements.
-6-
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - NOVEMBER 30, 2014 (CONTINUED)
SUMMARY OF INVESTMENTS BY COUNTRY
PERCENT OF
COUNTRY VALUE INVESTMENT SECURITIES
--------------------------------------------------------------------------------
Canada $32,434,636 58.6%
Cayman Islands 369,917 0.7
Jersey 7,923,300 14.3
South Africa 4,870,900 8.8
United States(1) 9,705,428 17.6
--------------------------------------------------------------------------------
TOTAL $55,304,181 100.0%
--------------------------------------------------------------------------------
(1) Includes short-term investments.
See notes to financial statements.
-7-
OCM GOLD FUND
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 2014
ASSETS:
Investments in unaffiliated issuers,
at value (cost $29,886,308) .................... $ 55,304,181
Interest and dividends receivable ................ 32,853
Receivable for fund shares sold .................. 30,000
Prepaid expenses and other assets ................ 30,095
Total assets ................................... --------------------
55,397,129
LIABILITIES: ........................................ --------------------
Payable for fund shares redeemed ................. 6,090
Investment adviser fees .......................... 44,644
Accrued distribution fees ........................ 118,225
Accrued Trustees' fees ........................... 2,500
Accrued expenses and other liabilities ........... 78,851
--------------------
Total liabilities ............................. 250,310
--------------------
Net Assets .................................... $ 55,146,819
====================
NET ASSETS CONSIST OF:
Shares of beneficial interest, no par value:
unlimited shares authorized .................... $ 32,011,914
Undistributed net investment loss ................ (1,998,869)
Accumulated net realized loss on investments
and foreign currency transactions .............. (283,796)
Net unrealized appreciation on investments and
foreign currency translations .................. 25,417,570
--------------------
Net Assets .................................... $ 55,146,819
====================
CALCULATION OF MAXIMUM OFFERING PRICE:
INVESTOR CLASS:
Net asset value and redemption price per share $ 9.47
Maximum sales charge (4.50% of offering price) 0.45
--------------------
Offering price to public ................ $ 9.92
--------------------
Shares outstanding ............................ 4,031,352
====================
ADVISOR CLASS:
Net asset value and redemption price per share $ 9.76
--------------------
Shares outstanding ............................ 1,739,060
====================
Total shares outstanding ...................... 5,770,412
====================
See notes to financial statements.
-8-
OCM GOLD FUND
STATEMENT OF OPERATIONS - YEAR ENDED NOVEMBER 30, 2014
INVESTMENT INCOME:
Interest .............................................. $ 178
Dividend (net of foreign withholding taxes of $106,620) 753,779
------------------
Total investment income ............................. 753,957
------------------
EXPENSES:
Investment advisory fees .............................. 681,586
Distribution fees - Investor Class .................... 458,543
Distribution fees - Advisor Class ..................... 44,499
Fund administration and accounting fees ............... 127,953
Transfer agent fees and expenses ...................... 107,165
Professional fees ..................................... 68,607
Federal and state registration fees ................... 34,910
Chief Compliance Officer fees ......................... 27,129
Custody fees .......................................... 19,990
Reports to shareholders ............................... 17,197
Trustees' fees ........................................ 10,000
Other expenses ........................................ 9,329
------------------
Total expenses ..................................... 1,606,908
------------------
Net investment loss ................................ (852,951)
------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments and
foreign currency transactions ........................ (296,278)
Net change in unrealized depreciation on investments
and foreign currency translations ................... (6,550,961)
------------------
Net loss on investments ........................... (6,847,239)
------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS ............... $ (7,700,190)
==================
See notes to financial statements.
-9-
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR
ENDED ENDED
NOV. 30, NOV. 30,
2014 2013
------------ --------------
OPERATIONS:
Net investment loss .............................. $ (852,951) $ (708,463)
Net realized gain/(loss) on investments and
foreign currency transactions ................... (296,278) 3,273,721
Net change in unrealized appreciation/depreciation
on investments and foreign currency translations (6,550,961) (66,178,788)
------------ --------------
Net decrease in net assets from operations ....... (7,700,190) (63,613,530)
------------ --------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
INVESTOR CLASS:
Distributions paid from net realized gains .... (1,759,477) (2,269,221)
------------ --------------
Total distributions from Investor Class ....... (1,759,477) (2,269,221)
------------ --------------
ADVISOR CLASS:
Distributions paid from net realized gains .... (749,894) (324,079)
------------ --------------
Total distributions from Advisor Class ........ (749,894) (324,079)
------------ --------------
Total distributions ........................... (2,509,371) (2,593,300)
------------ --------------
FUND SHARE TRANSACTIONS:
INVESTOR CLASS:
Net proceeds from shares sold ................. 1,857,972 2,805,157
Distributions reinvested ...................... 1,647,220 2,094,448
Payment for shares redeemed (1) ............... (10,915,835) (20,515,001)
------------ --------------
Net decrease in net assets from
Investor Class share transactions ........... (7,410,643) (15,615,396)
------------ --------------
ADVISOR CLASS:
Net proceeds from shares sold ................. 12,167,338 4,587,915
Distributions reinvested ...................... 717,716 294,659
Payment for shares redeemed (2) ............... (4,353,883) (1,432,205)
------------ --------------
Net increase in net assets from
Advisor Class share transactions ........... 8,531,171 3,450,369
------------ --------------
Net increase/(decrease) in net assets
from Fund share transactions ............... 1,120,528 (12,165,027)
------------ --------------
TOTAL DECREASE IN NET ASSETS ........................ (9,089,033) (78,371,857)
NET ASSETS, BEGINNING OF PERIOD ..................... 64,235,852 142,607,709
------------ --------------
NET ASSETS, END OF PERIOD ........................... 55,146,819 64,235,852
============ ==============
ACCUMULATED NET INVESTMENT LOSS ..................... $ (1,998,869) $ (1,987,404)
============ ==============
See notes to financial statements.
-10-
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30,
2014 2013
-------------- -----------------
TRANSACTIONS IN SHARES:
INVESTOR CLASS:
Shares sold ..................................... 145,125 181,993
Shares issued on reinvestment of distributions 190,210 104,305
Shares redeemed ................................. (942,822) (1,425,698)
-------------- -----------------
Net decrease in Investor Class shares outstanding (607,487) (1,139,400)
============== =================
ADVISOR CLASS:
Shares sold ..................................... 952,396 338,942
Shares issued on reinvestment of distributions 80,522 14,451
Shares redeemed ................................. (338,760) (95,809)
-------------- -----------------
Net increase in Advisor Class shares outstanding 694,158 257,584
============== =================
Net increase/(decrease) in Fund shares outstanding 86,671 (881,816)
============== =================
----------------
(1) Net of redemption fees of $79 for the year ended November 30, 2014 and
$5,270 for the year ended November 30, 2013, respectively.
(2) Net of redemption fees of $14,467 for the year ended November 30, 2014
and $5,492 for the year ended November 30, 2013, respectively.
See notes to financial statements.
-11-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2014
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 Trust's 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)
-12-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2014 (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, 2014, in valuing the Fund's
assets:
SECTOR LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
--------------------------------------------------------------------------------------------------
COMMON STOCKS
--------------------------------------------------------------------------------------------------
Major Gold Producers $19,953,163 $ -- $ -- $19,953,163
-----------------------------------------------------------------------------------------------
Intermediate/Mid-Tier Gold Producers 15,267,212 -- -- 15,267,212
--------------------------------------------------------------------------------------------------
Junior Gold Producers 3,017,176 -- -- 3,017,176
--------------------------------------------------------------------------------------------------
Exploration and Development Companies 1,380,309 -- -- 1,380,309
--------------------------------------------------------------------------------------------------
Primary Silver Producers 6,570,236 -- -- 6,570,236
--------------------------------------------------------------------------------------------------
Other 5,071,457 -- -- 5,071,457
--------------------------------------------------------------------------------------------------
EXCHANGE TRADED FUND 3,979,905 -- -- 3,979,905
--------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 64,723 -- -- 64,723
--------------------------------------------------------------------------------------------------
WARRANTS
--------------------------------------------------------------------------------------------------
Junior Gold Producers -- -- -- --
--------------------------------------------------------------------------------------------------
TOTAL $55,304,181 $ -- $ -- $ 55,304,181
--------------------------------------------------------------------------------------------------
As of November 30, 2014 the Fund held Level 3 investments in Veris Gold
Corp. warrants, which were fair valued in accordance with procedures established
by and under the general supervision of the Trust's Board of Trustees. Veris
Gold Corp. filed for bankruptcy after Deutsche Bank declared it in default and
the company was unable to refinance debt; the warrants, therefore, were fair
valued at $0. At the beginning of the period, this security was classified as a
Level 1 and represents the only transfer between levels. The Fund recognizes
such transfers between levels at the end of the reporting period. There were no
Level 2 securities as of November 30, 2014.
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, 2014 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, 2014 are included within the realized and
unrealized gain/loss on investments section of the Statement of Operations.
-13-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2014 (CONTINUED)
FEDERAL INCOME TAXES - The Fund complies with and 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 to relieve it from all or substantially all federal income
taxes. Withholding taxes on foreign dividends have been provided for in
accordance with the Fund's understanding on the applicable country's tax rules
and rate.
ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES ("Income Tax Statement")
requires an evaluation of tax positions taken (or expected to be taken) in the
course of preparing a Fund's tax returns to determine whether these positions
meet a "more-likely-than-not" standard that, based on the technical merits, have
a more than fifty percent likelihood of being sustained by a taxing authority
upon examination. A tax position that meets the "more-likely-than-not"
recognition threshold is measured to determine the amount of benefit to
recognize in the financial statements. The Fund's 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,
2014, 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 2011-2014 as defined by IRS statute of limitations
for all major jurisdictions, including federal tax authorities and certain state
tax authorities. As of and during the year ended November 30, 2014, the Fund did
not have a liability for any unrecognized tax benefits. The Fund has no
examinations 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 shares of beneficial interest. For the year ended
November 30, 2014, the Investor Class and the Advisor Class received $79 and
$14,467 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.
-14-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2014 (CONTINUED)
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 or sell any
warrants during the year ended November 30, 2014. At November 30, 2014, 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.
NOTE 3. INVESTMENT ADVISORY AGREEMENT AND AFFILIATED PARTIES
The Fund has an investment advisory agreement with Orrell Capital
Management, Inc. ("OCM"). Under the agreement, the Fund pays OCM a fee computed
daily and payable monthly, at the following annual rates based upon average
daily net assets:
ASSETS FEE RATE
------ --------
$0 to $250 million ......................... 0.950%
$250 million to $500 million ............... 0.800%
$500 million to $1 billion ................. 0.700%
Over $1 billion ............................ 0.600%
The Fund does not compensate Trustees and Officers affiliated with OCM. For
the year ended November 30, 2014, 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 incurred 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, 2014, the Investor Class and the Advisor Class incurred $458,543 and
$44,499, 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, 2014
were $4,461,456 and $3,159,382, respectively. There were no purchases or sales
of U.S. government obligations.
-15-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2014 (CONTINUED)
NOTE 6. FEDERAL INCOME TAX INFORMATION
At November 30, 2014, 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 ............................. $ 31,079,765
==============
Unrealized appreciation. ........................ $ 29,686,587
Unrealized depreciation ......................... (5,462,171)
Unrealized depreciation on foreign currency ..... (303)
--------------
Net unrealized appreciation on investments ...... $ 24,224,113
==============
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, 2014 and 2013 was as follows:
2014 2013
------------ ------------
Ordinary income $ -- $ --
Net long-term capital gains 2,509,371 2,593,300
------------ ------------
Total distributions $ 2,509,371 $ 2,593,300
=========== ============
As of November 30, 2014 the components of accumulated earnings on a tax
basis were as follows:
Undistributed ordinary income $ --
Undistributed long-term gains --
------------
Tax accumulated earnings --
Accumulated capital and other losses (1,089,208)
Unrealized appreciation on investments 24,224,113
------------
Total accumulated earnings $ 23,134,905
============
The Fund has $757,628 in qualified late-year losses, which are deferred
until fiscal year 2015 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.
As of November 30, 2014, the Fund had $134,210 of post-October capital
losses, which are deferred until December 1, 2014. Net capital 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.
Under the Regulated Investment Company Modernization Act of 2010 (the
"Act"), the Fund will be permitted to carryforward capital losses incurred in
taxable years beginning after December 22, 2010 for an unlimited period.
However, any losses incurred during those post-enactment years will be required
to be utilized prior to the losses incurred in pre-enactment taxable years. As a
result of this ordering rule, pre-enactment capital loss carryforwards may be
more likely to expire unused. Additionally, post-enactment capital losses that
are carried forward will retain their character as either short-term or
long-term capital losses rather than being considered all short-term as under
previous law.
As of November 30, 2014, the Fund had $7,040 of accumulated short-term
capital loss carryforward and $190,330 of accumulated long-term capital loss
carryforward which are not subject to expiration. Capital loss carryovers are
available to offset future realized capital gains and thereby reduce further
taxable gain distributions.
-16-
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2014 (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.
-17-
OCM GOLD FUND
FINANCIAL HIGHLIGHTS INVESTOR CLASS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV 30,
2014 2013 2012 2011 2010
-------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
Net asset value, beginning of period ............. $ 11.26 $ 21.68 $ 28.49 $ 30.53 $ 24.68
---------- --------- --------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss .............................. (0.17)(1) (0.27) (0.25) (0.29) (0.43)
Net realized and unrealized gain/(loss)
on investments and foreign
currency transactions .......................... (1.17) (9.75) (5.48) 0.76 6.81
---------- --------- --------- ---------- ---------
Total from investment operations ................. (1.34) (10.02) (5.73) 0.47 6.38
---------- --------- --------- ---------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income ............. -- -- -- -- --
Distribution from net realized gains ............. (0.45) (0.40) (1.08) (2.51) (0.53)
---------- --------- --------- ---------- ---------
Total distributions .............................. (0.45) (0.40) (1.08) (2.51) (0.53)
Redemption fee proceeds .......................... --(2) --(2) --(2) --(2) --(2)
---------- --------- --------- ---------- ---------
Net asset value, end of year ..................... $ 9.47 $ 11.26 $ 21.68 $ 28.49 $ 30.53
========== ========= ========= ========== =========
TOTAL RETURN* .................................... (11.49)% (47.03)% (20.27)% 1.70% 26.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) ............... $ 38,177 $ 52,231 $ 125,286 $ 168,305 $ 175,802
Ratio of expenses to average net assets .......... 2.39% 2.22% 1.99% 1.73% 1.93%
Ratio of net investment loss to average net assets (1.34)% (0.85)% (1.04)% (1.03)% (1.57)%
Portfolio turnover rate .......................... 5% 8% 1% 5% 12%
----------------
* Assumes no sales charge.
(1) Based on average shares method.
(2) Amount represents less than $0.01 per share.
See notes to financial statements.
-18-
OCM GOLD FUND
FINANCIAL HIGHLIGHTS ADVISOR CLASS
FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED APR. 1, 2010#-
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV 30,
2014 2013 2012 2011 2010
-------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout each period)
Net asset value, beginning of period $ 11.49 $ 22.00 $ 28.74 $ 30.65 $ 22.24
--------- --------- --------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ................... (0.09)(1) (0.08) (0.12) (0.18) (0.13)
Net realized and unrealized gain/(loss)
on investments and foreign
currency transactions ............... (1.20) (10.03) (5.54) 0.78 8.54
--------- --------- --------- ---------- ---------
Total from investment operations ...... (1.29) (10.11) (5.66) 0.60 8.41
--------- --------- --------- ---------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- -- --
Distribution from net realized gains (0.45) (0.40) (1.08) (2.51) --
--------- --------- --------- ---------- ---------
Total distributions ................... (0.45) (0.40) (1.08) (2.51) --
--------- --------- --------- ---------- ---------
Redemption fee proceeds ............... 0.01 --(2) --(2) --(2) --(2)
--------- --------- --------- ---------- ---------
Net asset value, end of period ........ $ 9.76 $ 11.49 $ 22.00 $ 28.74 $ 30.65
========= ========= ========= ========== =========
TOTAL RETURN .......................... (10.74)% (46.75)% (19.83)% 2.15% 37.81%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) .... $ 16,970 $ 12,005 $ 17,322 $ 20,328 $ 20,386
Ratio of expenses to average net assets 1.79% 1.69% 1.48% 1.30% 1.34%(4)
Ratio of net investment loss to
average net assets .................. (0.74)% (0.31)% (0.52)% (0.60)% (0.98)%(4)
Portfolio turnover rate ............... 5% 8% 1% 5% 12%(3)
----------------
# Inception date of Advisor Class.
(1) Based on average shares method.
(2) Amount represents less than $0.01 per share.
(3) Not annualized for periods less than one year.
(4) Annualized for periods less than one year.
See notes to financial statements.
-19-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of OCM Gold Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of OCM Gold Fund (the "Fund"), as of November 30,
2014, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of November 30, 2014, by correspondence with the
custodian and brokers. We believe that our audits provide a rea-sonable 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, 2014, 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, 2015
-20-
OCM GOLD FUND
EXPENSE EXAMPLE - FOR THE PERIOD ENDED NOVEMBER 30, 2014 (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, 2014 to November 30,
2014 (the "period").
ACTUAL EXPENSES
The row titled "Actual" in the table below provides information about
actual account values and actual expenses. You may use this information,
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 appropriate line for your share class 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 row titled "Hypothetical" in the table below provides 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 table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges (loads) and redemption fees. Therefore, the hypothetical lines of
the table 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, 2014 NOVEMBER 30, 2014 NOVEMBER 30, 2014*
------------ ----------------- -----------------
INVESTOR CLASS
Actual $ 1,000.00 $ 838.90 $ 11.03
Hypothetical
(5% return before expenses) 1,000.00 1,013.00 12.08
ADVISOR CLASS
Actual 1,000.00 842.10 8.32
Hypothetical
(5% return before expenses) 1,000.00 1,015.97 9.10
--------------
* Expenses are equal to the Investor Class' and Advisor Class' annualized
expense ratios of 2.39% and 1.80%, respectively, for the period,
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
-21-
PIE CHART OMITTED
OCM GOLD FUND
INVESTMENTS BY SECTOR - NOVEMBER 30, 2014 (UNAUDITED)
AS A PERCENTAGE OF NET ASSETS
Major Gold Producers 36.1%
Intermediate/Mid-Tier Gold Producers 27.6%
Primary Silver Producers 11.9%
Other 9.2%
Exchange Traded Fund 7.2%
Junior Gold Producers 5.4%
Exploration and Development Companies 2.5%
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 ended June 30, 2014 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's proxy voting policies and procedures are also available on the Fund's
website at http://www.ocmgoldfund.com.
The Fund will file its complete schedule of investments with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms
N-Q will be available on the EDGAR database on the SEC's website at
http://www.sec.gov. These Forms may also be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. Information about the operation of the
Public Reference Room may be obtained by calling 1-800-SEC-0330.
-22-
OCM GOLD FUND - INVESTOR CLASS
PERFORMANCE RESULTS - YEAR ENDED NOVEMBER 30, 2014 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS
PHILADELPHIA
INVESTOR S&P 500(R) GOLD &
CLASS INDEX SILVER INDEX
------------- ------------- ----------------
1 year -11.49% 16.86% -19.90%
5 year -13.59% 15.96% -16.69%
10 year 1.29% 8.06% -3.13%
The graph below compares the change in value of a $10,000 investment in the
Investor Class of the OCM Gold Fund with the S&P 500(R) Index and the
Philadelphia Gold and Silver Index since November 30, 2004.
Philadelphia
Investor Class S&P 500(R) Gold & Silver
11/30/04 9,551 10,000 10,000
11/30/05 9,965 10,844 10,873
11/30/06 15,851 12,388 14,325
11/30/07 18,331 13,344 16,599
11/30/08 11,265 8,261 9,964
11/30/09 22,546 10,358 18,126
11/30/10 28,566 11,388 21,191
11/30/11 29,051 12,280 21,023
11/30/12 23,162 14,261 17,475
11/30/13 12,270 18,581 9,083
11/30/14 10,860 21,714 7,275
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.
-23-
OCM GOLD FUND - ADVISOR CLASS
PERFORMANCE RESULTS - PERIOD ENDED NOVEMBER 30, 2014 (UNAUDITED)
PHILADELPHIA
ADVISOR S&P 500(R) GOLD &
CLASS INDEX SILVER INDEX
------------- ------------ ----------------
1 year -10.74% 16.86% -19.90%
Since Inception on 4/1/10 -12.49% 15.40% -15.91%
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 Class S&P 500(R) Gold & Silver
4/1/10 10,000 10,000 10,000
11/30/10 13,781 10,234 12,970
11/30/11 14,078 11,036 12,867
11/30/2012 11,286 12,816 10,696
11/30/2013 6,010 16,699 5,559
11/30/2014 5,365 19,515 4,453
The returns shown include the reinvestment of all dividends and the maximum
sales load charge, but do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. Past
performance is not indicative of future results.
The Philadelphia Gold and Silver Index (XAU) is an unmanaged
capitilization-weighted index composed of 16 companies listed on U.S. exchanges
involved in the gold and silver mining industry. The index is generally
considered as representative of the gold and silver share market.
The S&P 500(R) Index is a broad unmanaged index generally considered as
representative of the U.S. equity market.
-24-
OCM GOLD FUND
ANNUAL RENEWAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED)
On October 21, 2014, 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. The Adviser provided information regarding and led
discussions of factors impacting the performance of the Fund, outlining current
market conditions and explaining the Adviser's expectations and strategies for
the future. The Trustees considered reasons for the negative performance of the
Fund (noting that the Fund had outperformed its benchmark index) and the steps
taken by the Adviser in an effort to improve the performance of the Fund. Based
on this information, the Trustees concluded, within the context of its full
deliberations, that the investment results that the Adviser had been able to
achieve for the Fund were sufficient to support renewal of the Investment
Advisory Agreement. 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 of 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 existing "breakpoints" embodied in the Investment Advisory
Agreement resulted in substantially 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 $2,509,371 as long-term capital gains distributed during the year
ended November 30, 2014.
-25-
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 DIRECTORSHIPS
OFFICE HELD BY
AND LENGTH TRUSTEE OR
POSITION(S) OF PRINCIPAL OCCUPATION(S) NOMINEE FOR
NAME, ADDRESS AND AGE HELD WITH FUND SERVICE DURING PAST 5 YEARS TRUSTEE
----------------------------------------------------------------------------------------------------------------
JOHN L. CRARY Trustee Indefinite Since 1999 Mr. Crary has been Scheid
2600 Kitty Hawk Rd. (Chairman of Since 2004 the managing member of Crary Enterprises, Vineyards,
Suite 119 the Board) LLC, a private investment company. Inc.
Livermore, California 94551 Since 1988 Mr. Crary has been an
Age 61 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
2600 Kitty Hawk Rd. Since 2005 Company, Inc., a beer distributor,
Suite 119 since 1999.
Livermore, California 94551
Age 54
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
2600 Kitty Hawk Rd. President, Since 2004 since 1991.
Suite 119 Treasurer
Livermore, California 94551
Age 53
MONICA L. BAUCKE Secretary One year Communications Manager of Orrell N/A
2600 Kitty Hawk Rd. term Capital Management, Inc. since 2014.
Suite 119 Since 2014
Livermore, California 94551
Age 44
JACOB M. LINDSETH Chief At Compliance Officer of Northern Lights N/A
2600 Kitty Hawk Rd. Compliance discretion Compliance Services, LLC (12/2011 - present);
Suite 119 Officer of the Board Staff Attorney for NorthStar Financial
Livermore, California 94551 Since 2014 Services Group, LLC (2007-2011).
Age 44
"* 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 is a trustee who is deemed to be an "interested
person" of the Fund, as defined in the Investment Company Act of 1940.
Gregory M. Orrell is an interested person of the Fund because of his
ownership in the Fund's investment adviser.
-26-
This page intentionally left blank.
This page intentionally left blank.
OCM Gold Fund
Distributed by:
Northern Lights Distributors, LLC
17605 Wright Street
Omaha, NE 68130 2062-NLD-1/23/2015
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, 2014 November 30, 2013
Audit Fees $30,500 $29,600
Audit-Related Fees $0 $0
Tax Fees $4,800 $4,650
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, 2014 and 2013, 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 officer has 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: February 4, 2015
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: February 4, 2015