Gregory M. Orrell
Orrell Capital Management, Inc
2600 Kitty Hawk Road
Suite 119
Livermore, CA 94551
(Name and address of agent for service)
ITEM 1. REPORT TO STOCKHOLDERS.
LOGO
OCM GOLD FUND
ANNUAL REPORT
NOVEMBER 30, 2013
Dear Fellow Shareholder:
The fiscal year ending November 30, 2013 was a difficult period for gold bullion
prices and gold mining companies, despite what we believe to be an era of
elevated risks associated with the unknown consequences of extreme monetary
policies pursued by central banks since the 2008 global financial crisis. During
the fiscal year, the price of gold bullion declined 27.40%, which was the
largest contributor to the OCM Gold Fund's performance. The OCM Gold Fund
Investor Class and Advisor Class declined 47.03% and 46.75%, respectively
(Investor Class declined 49.41% after maximum sales load), for the fiscal year.
In comparison, over the same period, the Philadelphia Gold and Silver Index
("XAU") declined 48.02% as shares of gold mining companies suffered across the
board due to their leverage to gold prices, while the S&P 500 Index was up
30.30%. Investor confidence appears to have been boosted by the belief the U.S.
economy had regained its economic foothold, prompting rotation out of defensive
positions in gold assets and into equities throughout the year.
Despite this negative narrative, we believe the rationale for owning gold assets
as protection against monetary policy decisions designed to promote currency
debasement remains a sound investment strategy, for the reasons discussed below.
GOLD PRICE CHART
12/1/2008 778.00
6/1/2009 981.80
12/1/2009 1,192.50
6/1/2010 1,227.80
12/1/2010 1,385.50
6/1/2011 1,533.80
12/1/2011 1,752.00
6/1/2012 1,606.00
12/1/2012 1,720.00
6/1/2013 1,402.50
12/1/2013 1,229.50
|
Source: WGC, Global Insight
1
MARKET COMMENTARY
The disappointing performance of gold and shares of gold mining companies over
the past year in the face of strong demand fundamentals for gold bullion and the
heightened uncertainty surrounding the future purchasing power of paper
currencies would appear, in our opinion, to be at odds with each other. As Asian
countries purchased record amounts of physical bullion in 2013, western market
participants sold gold in the futures market and liquidated positions in
Exchange Traded Funds ("ETFs") at an aggressive rate. Using the back-drop of the
Federal Reserve's signal to reduce its monthly bond purchases from $85 billion
per month ("tapering"), traders amassed large short positions in gold and
proceeded to force trades in the market to affect price. This activity ignores
the fact the Federal Reserve has leveraged its balance sheet from $500 billion
to $4 trillion since 2008, for which there is no precedent in the history of
central banking. In essence, we believe the gold market has been held captive
for the past year by talk and anticipation of the Federal Reserve's move to
"taper" its quantitative easing or money printing policy. The hubris of the
shorts was compounded by India's decision to impose 10% import duties on gold in
an attempt to address its growing current account deficit. Additionally, the
strong performance by U.S. equity markets encouraged capital flows to move with
the momentum of the markets which resulted in further downward pressure on gold
prices.
Countering the wave of selling activity was strong demand for gold bullion out
of Asia. Gold imports into China in 2013 more than doubled over 2012 to 1,158
tons, establishing China as the largest market for gold bullion, supplanting
India. China also ranks as the largest producer of gold with approximately 400
tons of gold mined per year. The negative narrative on gold failed to quell
demand for American gold coins as the U.S. Mint reported a 14% increase from
2012 levels and the purchase of silver coins climbed 33% to a record 44 million
ounces. Mints in Australia and Austria also reported working 24 hours per day to
meet demand for gold coins and refined products. Central banks continued to be
net purchasers of gold, with an estimated 350 tons purchased in 2013; led by
Russia with 79 tons and South Korea's purchase of 67 tons. The need to diversify
foreign exchange holdings was the stated reason for gold purchases by these
central banks. These examples of further diversification away from the U.S.
dollar underscore the threat facing the U.S. dollar as the world's reserve
currency, as the geopolitical and global economic landscape evolves. Moreover,
there is speculation that Saudi Arabia may abandon its policy of only accepting
U.S. dollars for oil and instead accept other currencies from its trading
partners, such as Chinese yuan, which is poised to overtake the United States as
Saudi Arabia's largest customer. This move could be a major shift for the value
of the U.S dollar.
One of the more puzzling developments in the gold market over the past year was
Germany's central bank (Bundesbank) decision to repatriate a portion of its gold
held in Paris and New York back to Germany. Bowing to political pressure, the
Bundesbank announced it would call back 674 tons or 20% of its gold reserves.
While pulling the gold back to within its borders is not that odd, the
announcement that it would take eight years to do it was. It begged the
question, why not just send a transport plane to New York and be done with it?
The Bundesbank's explanation that the gold needed to be refined into "good
delivery" form failed to quell speculation that the gold needed had been sold
and needed to be repurchased or that it had been lent out and it would take that
long to get the gold back. Combined with other anecdotal evidence, such as ABM
Amro's decision to not allow gold bullion accounts to receive physical delivery
of their gold combined with a rapid drawdown of COMEX (the primary market for
trading metals) warehouse inventories, the tightness of the physical bullion
market versus the paper gold market represented by futures contracts and other
paper instruments is gaining wider attention by the market.
2
It is our belief that the decrease in the gold price following Germany's
decision to repatriate its gold in mid-April of 2013 was an orchestrated event
by bullion banks and commercial interests to cover large short positions
established as the gold price rose to $1,900. Commercial interests have now
established sizable net long positions countered by record short positions
accumulated by speculative interests at a time of record negative sentiment
toward gold. Commercial net long positions now stand at levels not seen since
the end of 2008 when gold was trading at $875/ oz. prior to its two year assent
to record highs.
Overall, we believe investors will look back on this period as a mid-cycle
correction in a secular bull market, similar to the 1975-76 correction when gold
declined from $193.00 to $103.00 over an 18-month period prior to advancing to a
peak of $850 by 1980. It is not uncommon for secular bull markets to experience
mid-cycle corrections where investors lose belief and sentiment turns negative
prior to the biggest leg of the cycle. In our opinion, the premise for owning
gold assets does not dissipate with the Federal Reserve's move to lower its
monthly bond purchases. We believe it will become evident to the market that the
Federal Reserve will not be able to extricate itself from the extreme monetary
policies that the markets have come to rely on without serious adverse
deflationary repercussions to the global economy. While we understand consensus
opinion on Wall Street believes otherwise at the moment, it is our opinion it
will become clear that the policy of quantitative easing will continue
indefinitely with risks of accelerated currency debasement through inflation or
some other form. Once it is apparent the Federal Reserve is hand tied, we
believe investors in the West will once again appreciate the inherent monetary
value of gold and value of owning shares of gold mining companies.
SHARES OF GOLD MINING COMPANIES /INVESTMENT STRATEGY
The gold mining industry has gone through a period of self reflection as poor
share price performance and competition from ETF bullion products has led to a
chorus of investor criticism. The market, in effect, is bringing management to
task for its lack of discipline on deployment of capital and a growth of
production at all cost mentality. Consequently, we have seen significant
turnover in the senior management ranks of the large gold mining companies along
with boards of mining companies shelving high risk capital projects. Despite the
painful experience of the past couple of years for investors in shares of gold
mining companies, we are of the opinion that the stage is being set for a period
of revival of gold mining companies' share prices as gold mining companies get
back to sound business principles in order to achieve the desired earnings
leverage investors in shares of gold mining companies are looking for, along
with participation in cash flow through dividends. The more disciplined approach
to the gold mining business also means we likely have seen peak annual gold
production by the gold mining industry and this curtailment of new gold mining
projects could constrain future gold supply.
Our investment approach in the lower gold price environment has been to favor
companies with superior asset quality and a history of management execution,
such as Goldcorp, Inc. and Randgold Resources Ltd. ADR. We have eliminated
positions in mining companies that failed to deliver on forecasts along with
mining companies needing to access the capital markets. As a result, the Fund's
position in exploration and development companies has been pared back
significantly over the past year as the risk of massive shareholder dilution at
depressed share valuations outweighed the rewards in many cases, in our opinion.
We are also tracking with keen interest, through the Fund's shareholding in
AngloGold Ashanti Ltd. ADR, the development of new technology to be deployed in
2014 that will allow for continuous mechanized mining of the reefs in the South
African mines, which we believe has a chance to be a game changer in the
industry and lead to a positive re-rating of the South African gold miners.
3
CONCLUSION
The negative narrative that has accompanied the correction in the gold price
over the past two years has successfully frightened investors into selling gold
assets at a time when sovereign credit quality is deteriorating and the need to
debase currencies at an accelerated rate to meet future obligations risks the
future purchasing power of paper currencies. Further, we are convinced the
market is underestimating the potential for collateral damage in the equity and
bond markets from the extreme monetary policies that have been instituted since
2008. Consequently, we believe the rationale for owning gold assets as
protection against monetary policy decisions designed to promote currency
debasement remains a sound investment strategy.
We appreciate your shareholding and confidence in the OCM Gold Fund during this
challenging period 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 at
1-800-628-9403.
Sincerely,
/S/ GREGORY M. ORRELL
---------------------
Gregory M. Orrell
President and Portfolio Manager
January 27, 2014
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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 MOREABRUPT 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, 2013
Philadelphia Gold
OCMGX OCMGX and Silver Index
(without load) (with load) (XAU)(1) S&P 500(2)
--------------------------------------------------------------------------------
Six Months (17.14)% (20.87)% (18.44)% 11.91%
--------------------------------------------------------------------------------
One Year (47.03)% (49.41)% (48.02)% 30.30%
--------------------------------------------------------------------------------
3 Year Annualized (24.55)% (25.70)% (24.60)% 17.73%
--------------------------------------------------------------------------------
5 Year Annualized 1.72% 0.79% (1.83)% 17.60%
--------------------------------------------------------------------------------
10 Year Annualized 1.43% 0.96% (1.12)% 7.69%
--------------------------------------------------------------------------------
|
Advisor Class Performance as of November 30, 2013
Philadelphia Gold
and Silver Index
OCMAX (XAU)(1) S&P 500(2)
--------------------------------------------------------------------------------
Six Months (16.98)% (18.44)% 11.91%
--------------------------------------------------------------------------------
One Year (46.75)% (48.02)% 30.30%
--------------------------------------------------------------------------------
3 Year Annualized (24.17)% (24.60)% 17.73%
--------------------------------------------------------------------------------
Since Inception Annualized* (12.96)% (14.79)% 15.00%
--------------------------------------------------------------------------------
----------------
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* 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 1.99% AND 1.48% 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, 2013
---------------------------------------------------------------------
Shares Value
---------------------------------------------------------------------
COMMON STOCKS 87.6%
MAJOR GOLD PRODUCERS 28.1%
137,722 AngloGold Ashanti Ltd. ADR ................ $ 1,871,642
200,000 Gold Fields Ltd. ADR ...................... 802,000
450,050 Goldcorp, Inc. ............................ 10,108,123
258,200 Kinross Gold Corp. ........................ 1,216,122
107,961 Newmont Mining Corp. ...................... 2,680,672
280,000 Sibanye Gold Ltd. ADR ..................... 1,386,000
----------------
18,064,559
----------------
INTERMEDIATE/MID-TIER GOLD PRODUCERS 35.2%
127,250 Agnico-Eagle Mines Ltd. .................. 3,504,465
250,000 Alacer Gold Corp. ........................ 501,129
500,000 Centerra Gold, Inc. ...................... 1,496,330
360,833 Eldorado Gold Corp. ...................... 2,204,690
520,200 IAMGOLD Corp ............................. 2,268,072
149,900 New Gold, Inc.* .......................... 798,967
122,500 Randgold Resources Ltd. ADR .............. 8,666,875
348,250 Yamana Gold, Inc. ........................ 3,165,592
----------------
22,606,120
----------------
JUNIOR GOLD PRODUCERS 5.5%
175,000 Argonaut Gold Ltd.* ..................... 923,913
568,400 B2Gold Corp.* ........................... 1,187,510
100,000 Dundee Precious Metals, Inc.* ........... 301,148
500,000 Mandalay Resources Corp. ................ 376,435
1,281,500 Wesdome Gold Mines Ltd.* ................ 741,693
----------------
3,530,699
----------------
EXPLORATION AND DEVELOPMENT COMPANIES 5.4%
500,000 Amarillo Gold Corp.* ..................... 47,055
2,190,000 Avala Resources Ltd.* .................... 103,049
150,000 MAG Silver Corp.* ........................ 903,444
300,000 Sabina Silver Corp.* ..................... 163,749
5,000,040 Sutter Gold Mining, Inc.* ................ 399,966
100,000 Tahoe Resources, Inc.*^ .................. 1,765,481
5,600 Tahoe Resources, Inc.* ................... 99,568
----------------
3,482,312
----------------
PRIMARY SILVER PRODUCERS 7.9%
200,000 Fortuna Silver Mines, Inc.* ................ 671,937
210,000 Silver Wheaton Corp. ....................... 4,383,399
----------------
5,055,336
----------------
---------------------------------------------------------------------
Shares Value
---------------------------------------------------------------------
OTHER 5.5%
5,200 Franco-Nevada Corp. ...................... $ 209,820
14,800 Franco-Nevada Corp.^ ..................... 593,476
60,000 Royal Gold, Inc. ......................... 2,705,400
----------------
3,508,696
----------------
TOTAL COMMON STOCKS
(Cost $27,157,635) ....................... 56,247,722
----------------
EXCHANGE TRADED FUND 7.0%
37,500 SPDR Gold Trust* ........................... 4,526,250
----------------
TOTAL EXCHANGE TRADED FUND
(Cost $1,657,875) ........................ 4,526,250
----------------
WARRANTS 0.0%
75,000 Veris Gold Corp.*
Exercise Price 1.95 CAD,
Exp. 12/18/2016 ........................ 10,234
----------------
TOTAL WARRANTS
(Cost $0) ................................ 10,234
----------------
SHORT-TERM INVESTMENT 7.6%
4,857,306 UMB Money Market Fiduciary, 0.01% ........ 4,857,306
----------------
TOTAL SHORT-TERM INVESTMENT
(Cost $4,857,306) ........................ 4,857,306
----------------
TOTAL INVESTMENTS ........................... 102.2% 65,641,512
(Cost $33,672,816)
LIABILITIES LESS OTHER ASSETS ................ (2.2)% (1,405,660)
----------------
TOTAL NET ASSETS ............................ 100.0% $ 64,235,852
----------------
-----------
ADR - American Depository Receipts.
CAD - Canadian Dollars.
|
* Non-income producing security.
^ Denoted investment is a Canadian security traded on U.S. stock exchange.
See notes to financial statements.
6
OCM GOLD FUND
SCHEDULE OF INVESTMENTS - NOVEMBER 30, 2013 (CONTINUED)
SUMMARY OF INVESTMENTS BY COUNTRY
PERCENT OF
COUNTRY VALUE INVESTMENT SECURITIES
--------------------------------------------------------------------------------
Canada $38,145,367 58.1%
Jersey 8,666,875 13.2
South Africa 4,059,642 6.2
United States(1) 14,769,628 22.5
--------------------------------------------------------------------------------
TOTAL $65,641,512 100.0%
================================================================================
|
(1) Includes short-term investments.
See notes to financial statements.
7
OCM GOLD FUND
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 2013
ASSETS:
Investments in unaffiliated issuers, ................
at value (cost $33,672,816) ....................... $ 65,641,512
Investment securities sold .......................... 4,410,661
Interest and dividends receivable ................... 40,519
Receivable from fund shares sold .................... 5,000
Prepaid expenses and other assets ................... 21,301
--------------
Total assets ..................................... 70,118,993
--------------
LIABILITIES:
Investment securities purchased ..................... 4,336,088
Payable for fund shares redeemed .................... 1,271,051
Due to investment adviser ........................... 53,059
Accrued distribution fees ........................... 149,254
Accrued Trustees' fees .............................. 2,500
Accrued expenses and other liabilities .............. 71,189
--------------
Total liabilities ................................ 5,883,141
--------------
Net Assets ....................................... $ 64,235,852
==============
NET ASSETS CONSIST OF:
Shares of beneficial interest, no par value:
unlimited shares authorized ........................ $ 31,717,835
Undistributed net investment loss ................... (1,987,404)
Accumulated net realized gain on investments
and foreign currency transactions. ................. 2,536,890
Net unrealized appreciation on investments
and foreign currency translations .................. 31,968,531
--------------
Net Assets ....................................... $ 64,235,852
==============
CALCULATION OF MAXIMUM OFFERING PRICE:
INVESTOR CLASS:
Net asset value and redemption price per share $ 11.26
Maximum sales charge (4.50% of offering price) 0.53
--------------
Offering price to public ........................ $ 11.79
--------------
Shares outstanding .............................. 4,638,839
==============
ADVISOR CLASS: ......................................
Net asset value and redemption price per share ... $ 11.49
--------------
Shares outstanding ............................... 1,044,902
==============
Total Shares outstanding ......................... 5,683,741
==============
|
See notes to financial statements.
8
OCM GOLD FUND
STATEMENT OF OPERATIONS - YEAR ENDED NOVEMBER 30, 2013
INVESTMENT INCOME:
Interest ............................................... $ 80
Dividend (net of foreign withholding taxes of $197,832) 1,266,339
---------------
Total investment income ............................. 1,266,419
---------------
EXPENSES: .................................................
Investment advisory fees ............................... 876,851
Distribution fees - Investor Class ..................... 622,935
Distribution fees - Advisor Class ...................... 33,292
Fund administration and accounting fees ................ 146,760
Transfer agent fees and expenses ....................... 114,424
Professional fees ...................................... 53,505
Federal and state registration fees .................... 38,242
Custody fees ........................................... 25,621
Chief Compliance Officer fees .......................... 25,133
Reports to shareholders ................................ 18,350
Trustees' fees ......................................... 10,000
Other expenses ......................................... 9,769
---------------
Total expenses ...................................... 1,974,882
---------------
Net investment loss ................................. (708,463)
---------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain on investments and
foreign currency transactions ......................... 3,273,721
Net change in unrealized depreciation on investments
and foreign currency translations ..................... (66,178,788)
---------------
Net loss on investments ............................. (62,905,067)
---------------
NET DECREASE IN NET ASSETS FROM OPERATIONS ................ $ (63,613,530)
===============
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See notes to financial statements.
9
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR
ENDED ENDED
NOV. 30, NOV. 30,
2013 2012
------------ ------------
OPERATIONS:
Net investment loss ................................ $ (708,463) $ (1,479,182)
Net realized gain on investments and
foreign currency transactions ................... 3,273,721 2,093,376
Net change in unrealized depreciation on investments
and foreign currency translations ............... (66,178,788) (38,727,762)
------------ ------------
Net decrease in net assets resulting from operations (63,613,530) (38,113,568)
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
INVESTOR CLASS:
Distributions paid from net realized gains ...... (2,269,221) (6,333,877)
------------ ------------
Total distributions from Investor Class ......... (2,269,221) (6,333,877)
------------ ------------
ADVISOR CLASS:
Distributions paid from net realized gains ...... (324,079) (788,733)
------------ ------------
Total distributions from Advisor Class .......... (324,079) (788,733)
------------ ------------
Total distributions ............................. (2,593,300) (7,122,610)
------------ ------------
FUND SHARE TRANSACTIONS:
INVESTOR CLASS:
Net proceeds from shares sold ................... 2,805,157 5,315,526
Distributions reinvested ........................ 2,094,448 5,917,821
Payment for shares redeemed (1) ................. (20,515,001) (13,826,436)
------------ ------------
Net decrease in net assets from
Investor Class share transactions ............. (15,615,396) (2,593,089)
------------ ------------
ADVISOR CLASS:
Net proceeds from shares sold ................... 4,587,915 2,548,075
Distributions reinvested ........................ 294,659 628,170
Payment for shares redeemed (2) ................. (1,432,205) (1,371,834)
------------ ------------
Net increase in net assets from
Advisor Class share transactions .............. 3,450,369 1,804,411
------------ ------------
Net decrease in net assets from
Fund share transactions ....................... (12,165,027) (788,678)
------------ ------------
TOTAL DECREASE IN NET ASSETS .......................... (78,371,857) (46,024,856)
NET ASSETS, BEGINNING OF YEAR ......................... 142,607,709 188,632,565
------------ ------------
NET ASSETS, END OF YEAR ............................... $ 64,235,852 $142,607,709
============ ============
See notes to financial statements.
|
10
OCM GOLD FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30,
2013 2012
------------ ------------
ACCUMULATED NET INVESTMENT LOSS ....................... $ (1,987,404) $(2,728,825)
============ ===========
TRANSACTIONS IN SHARES:
INVESTOR CLASS:
Shares sold ..................................... 181,993 230,629
Shares issued on reinvestment of distributions 104,305 259,803
Shares redeemed ................................. (1,425,698) (620,016)
------------ ------------
Net decrease in Investor Class shares outstanding (1,139,400) (129,584)
============ ===========
ADVISOR CLASS:
Shares sold ..................................... 338,942 110,769
Shares issued on reinvestment of distributions 14,451 27,272
Shares redeemed ................................. (95,809) (58,078)
------------ ------------
Net increase in Advisor Class shares outstanding 257,584 79,963
============ ===========
Net decrease in Fund shares outstanding ......... (881,816) (49,621)
============ ===========
1 Net of redemption fees of $5,270 for the year ended November 30, 2013 and
$1,371 for the year ended November 30, 2012, respectively.
2 Net of redemption fees of $5,492 for the year ended November 30, 2013 and
$5,048 for the year ended November 30, 2012, respectively.
|
See notes to financial statements.
11
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2013
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).
12
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2013 (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, 2013, in valuing the Fund's
assets:
SECTOR LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
---------------------------------------------------------------------------------------
COMMON STOCKS
---------------------------------------------------------------------------------------
Major Gold Producers $18,064,559 $ -- $ -- $18,064,559
---------------------------------------------------------------------------------------
Intermediate/Mid-Tier Gold Producers 22,606,120 -- -- 22,606,120
---------------------------------------------------------------------------------------
Junior Gold Producers 3,530,699 -- -- 3,530,699
---------------------------------------------------------------------------------------
Exploration and Development Companies 3,482,312 -- -- 3,482,312
---------------------------------------------------------------------------------------
Primary Silver Producers 5,055,336 -- -- 5,055,336
---------------------------------------------------------------------------------------
Other 3,508,696 -- -- 3,508,696
---------------------------------------------------------------------------------------
EXCHANGE TRADED FUND 4,526,250 -- -- 4,526,250
---------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 4,857,306 -- -- 4,857,306
---------------------------------------------------------------------------------------
WARRANTS
---------------------------------------------------------------------------------------
Junior Gold Producers 10,234 -- -- 10,234
---------------------------------------------------------------------------------------
TOTAL $65,641,512 $ -- $ -- $65,641,512
---------------------------------------------------------------------------------------
|
There were no Level 2 or 3 securities as of November 30, 2013. The Fund
recognizes transfers between levels at the end of the reporting period. 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. At November 30, 2013, this
security was no longer restricted and was publicly traded and as such, was
considered a Level 1 security. This security represents the only transfer
between levels. The following is a reconciliation of transfers between Levels
for the Fund from November 30, 2012 to November 30, 2013, represented by
recognizing the November 30, 2013 market value of securities:
--------------------------------------------
Transfers into Level 1 $ 31,997
--------------------------------------------
Transfers out of Level 1 --
--------------------------------------------
NET TRANSFERS IN OF LEVEL 1 $ 31,997
--------------------------------------------
--------------------------------------------
Transfers into Level 2 $ --
--------------------------------------------
Transfers out of Level 2 (31,997)
--------------------------------------------
NET TRANSFERS OUT OF LEVEL 2 $(31,997)
--------------------------------------------
|
13
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2013 (CONTINUED)
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, 2013 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, 2013 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"
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,
2013, 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, fiscals years 2010-2013 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, 2013, 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 shares of beneficial interest. For the year ended
November 30, 2013, the Investor Class and the Advisor Class received $5,270 and
$5,492 in redemption fees, respectively. For the year ended November, 2013, the
Advisor class also had reversals of redemption fees from the prior fiscal year
in the amount of $3,574.
14
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2013 (CONTINUED)
GUARANTEES AND INDEMNIFICATIONS - In the normal course of business, the
Fund enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims against the Fund that have not yet
occurred. Based on experience, the Fund expects the risk of loss to be remote.
USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
DERIVATIVE INSTRUMENTS - Equity securities in the gold mining industry,
particularly the smaller companies, may occasionally issue warrants as part of
their capital structure. A warrant gives the holder the right to purchase the
underlying equity at the exercise price until the expiration date of the
warrant. The Fund may hold such warrants for exposure to smaller companies in
the portfolio or other reasons associated with the Fund's overall objective of
long-term growth, though warrants will typically not be a significant part of
the Fund's portfolio. The Fund's maximum risk in holding warrants is the loss of
the entire amount paid for the warrants. The Fund acquired one set of warrants
during the year ended November 30, 2013. The Fund realized a gain of $54,272 on
the sale of one set of warrants during the year ended November 30, 2013 which is
included within the "Net realized gain on investments and foreign currency
transactions" on the Statement of Operations. At November 30, 2013, 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, 2013, 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, 2013, the Investor Class and the Advisor Class accrued $622,935 and $33,292,
respectively, in expenses under the Plan.
15
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2013 (CONTINUED)
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, 2013
were $7,315,244 and $26,038,703, respectively. There were no purchases or sales
of U.S. government obligations.
NOTE 6. FEDERAL INCOME TAX INFORMATION
At November 30, 2013, 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 .............................. $34,906,111
-----------
Unrealized appreciation .......................... $32,964,055
Unrealized depreciation .......................... (2,228,654)
Unrealized appreciation on foreign currency ...... (165)
-----------
Net unrealized appreciation on
investments................................... $30,735,236
-----------
|
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, 2013 and 2012 was as follows:
2013 2012
----------- -----------
Ordinary income .................... $ -- $ --
Net long-term capital gains ........ 2,593,300 7,122,610
----------- -----------
Total distributions ................ $ 2,593,300 $ 7,122,610
=========== ===========
|
As of November 30, 2013 the components of accumulated earnings on a tax
basis were as follows:
Undistributed ordinary income ................ $ --
Undistributed long-term gains ................ 2,492,975
------------
Tax accumulated earnings ..................... 2,492,975
Accumulated capital and other losses ......... (710,194)
Unrealized appreciation on investments ....... 30,735,236
------------
Total accumulated earnings ................... $ 32,518,017
------------
|
The Fund has $710,194 in qualified late-year losses, which are deferred
until fiscal year 2014 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.
16
OCM GOLD FUND
NOTES TO FINANCIAL STATEMENTS - NOVEMBER 30, 2013 (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.
NOTE 9. NEW ACCOUNTING PRONOUNCEMENTS
In January 2013, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2013-01 CLARIFYING THE SCOPE OF
DISCLOSURES ABOUT OFFSETTING ASSETS AND LIABILITIES. This update gives
additional clarification to the FASB 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 2013-01
will have on the financial statement disclosures.
17
OCM GOLD FUND
FINANCIAL HIGHLIGHTS INVESTOR CLASS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
PER SHARE OPERATING PERFORMANCE 2013 2012 2011 2010 2009
---------------------------------------------------------------
(For a share outstanding throughout each year)
Net asset value, beginning of year .... $ 21.68 $ 28.49 $ 30.53 $ 24.68 $ 12.35
---------- --------- --------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ................... (0.27) (0.25) (0.29) (0.43) (0.29)
Net realized and unrealized
gain/(loss) on investments
and foreign currency transactions ... (9.75) (5.48) 0.76 6.81 12.65
---------- --------- --------- ---------- ---------
Total from investment operations ...... (10.02) (5.73) 0.47 6.38 12.36
---------- --------- --------- ---------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- -- --
Distribution from net realized gains (0.40) (1.08) (2.51) (0.53) (0.03)
---------- --------- --------- ---------- ---------
Total distributions ................... (0.40) (1.08) (2.51) (0.53) (0.03)
---------- --------- --------- ---------- ---------
Net asset value, end of year .......... $ 11.26 $ 21.68 $ 28.49 $ 30.53 $ 24.68
---------- --------- --------- ---------- ---------
TOTAL RETURN* ......................... (47.03)% (20.27)% 1.70% 26.70% 100.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) .... $ 52,231 $ 125,286 $ 168,305 $ 175,802 $ 159,833
Ratio of expenses to average net assets 2.22% 1.99% 1.73% 1.93% 1.94%
Ratio of net investment loss to
average net assets .................. (0.85)% (1.04)% (1.03)% (1.57)% (1.59)%
Portfolio turnover rate ............... 8% 1% 5% 12% 6%
* Assumes no sales charge.
|
See notes to financial statements.
18
OCM GOLD FUND
FINANCIAL HIGHLIGHTS ADVISOR CLASS
FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED APRIL 1, 2010#-
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
PER SHARE OPERATING PERFORMANCE 2013 2012 2011 2010
------------------------------------------------------
(For a share outstanding throughout each period)
Net asset value, beginning of period ........... $ 22.00 $ 28.74 $ 30.65 $ 22.24
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) ................... (0.08) (0.12) (0.18) (0.13)
Net realized and unrealized
gain/(loss) on investments
and foreign currency
transactions ................................. (10.03) (5.54) 0.78 8.54
--------- --------- --------- ---------
Total from investment operations ............... (10.11) (5.66) 0.60 8.41
--------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... -- -- -- --
Distribution from net realized gains ........... (0.40) (1.08) (2.51) --
--------- --------- --------- ---------
Total distributions ............................ (0.40) (1.08) (2.51) --
--------- --------- --------- ---------
Net asset value, end of period ................. $ 11.49 $ 22.00 $ 28.74 $ 30.65
--------- --------- -- ---------
TOTAL RETURN ................................... (46.75)% (19.83)% 2.15% 37.81%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ........... $ 12,005 $ 17,322 $ 20,328 $ 20,386
Ratio of expenses to average net assets ........ 1.69% 1.48% 1.30% 1.34%(2)
Ratio of net investment loss to
average net assets ........................... (0.31)% (0.52)% (0.60)% (0.98)%(2)
Portfolio turnover rate ........................ 8% 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.
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,
2013, 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, 2013, by correspondence with the
custodian and brokers. 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, 2013, 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 LLC
-------------------------
Milwaukee, Wisconsin
January 29, 2014
|
20
OCM GOLD FUND
EXPENSE EXAMPLE - FOR THE PERIOD ENDED NOVEMBER 30, 2013 (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, 2013 to November 30,
2013 (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 lines "Investor Class" and "Advisor Class" in the table 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 lines below
"Investor Class" and "Advisor Class" in 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, 2013 NOVEMBER 30, 2013 NOVEMBER 30, 2013*
------------ ----------------- -----------------
INVESTOR CLASS
Actual $ 1,000.00 $ 828.60 $ 10.03
Hypothetical (5% return
before expenses) 1,000.00 1,014.03 11.05
ADVISOR CLASS
Actual 1,000.00 830.20 7.99
Hypothetical (5% return
before expenses) 1,000.00 1,016.27 8.80
|
* Expenses are equal to the Investor Class' and Advisor Class' annualized
expense ratios of 2.19% and 1.74%, respectively, for the period, multiplied
by the average account value over the period, multiplied by 183/365 (to
reflect the one-half year period).
21
OCM GOLD FUND
INVESTMENTS BY SECTOR - NOVEMBER 30, 2013 (UNAUDITED)
AS A PERCENTAGE OF NET ASSETS
PIE CHART OMITTED
Intermediate/Mid-Tier Gold Producers 34.4%
Major Gold Producers 27.5%
Primary Silver Producers 7.7%
Short-Term Investment 7.4%
Exchange Traded Fund 6.9%
Other 5.4%
Exploration and Development Companies 5.3%
Junior Gold Producers 5.4%
|
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, 2013 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, 2013 (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 -49.41% 30.30% -48.02%
5 year 0.79% 17.60% -1.83%
10 year 0.96% 7.69% -1.12%
|
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, 2003.
Philadelphia
Investor Class S&P 500(R) Gold & Silver
11/30/03 9,551 10,000 10,000
11/30/04 8,566 11,286 9,841
11/30/05 8,937 12,239 10,700
11/30/06 14,216 13,981 14,097
11/30/07 16,440 15,060 16,335
11/30/08 10,103 9,323 9,805
11/30/09 20,221 11,690 17,838
11/30/10 25,620 12,852 20,854
11/30/11 26,055 13,859 20,688
11/30/12 20,774 16,094 17,197
11/30/13 11,005 20,970 8,938
|
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 - Year Ended November 30, 2013 (Unaudited)
PHILADELPHIA
ADVISOR S&P 500(R) GOLD &
CLASS INDEX SILVER INDEX
------------- ------------ ----------------
1 year -46.75% 30.30% -48.02%
Since Inception on 4/1/10 -12.96% 15.00% -14.79%
|
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
|
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 15, 2013, 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. 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 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 $2,593,300 as long-term capital gains distributed during the year
ended November 30, 2013.
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*
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 60 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 53
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 52
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 79
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 55 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.
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26
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OCM Gold Fund
Distributed by:
Northern Lights Distributors, LLC
17605 Wright Street
Omaha, NE 68130
0421-NLD-1/29/2014