Dear Shareholders:
- -------------------------------------------------------------------------------
Silver bullion began the year at $4.82 an ounce and then spurted to $5.33
in late February coinciding with the rally in gold bullion prices. Silver held
up longer than gold, however, before succumbing to selling pressures late in
March. The low of April 28 of $4.63 held until the end of the period with silver
bullion closing at $4.64 onJune 30. All told, silver bullion was down 3.73% for
the period. This was a considerably better performance than for gold bullion
which was down 11.54% for the period even though silver traditionally moves very
closely with gold and in a more volatile manner. Although silver, like gold, was
hurt by the strength in competing investments like the U.S. stock market and
also by heavy short selling by the commodity funds, unlike gold it was not
subject to fears of CentralBank selling since it no longer plays a significant
role as a reserve holding.
The Lexington Strategic Silver Fund finished the period with a decline of
10.82%.* While disappointing, the Fund's performance was far better than the
24.36% decline posted by the average gold oriented fund as measured by Lipper
Analytical Services, Inc., and in fact, was better than for any of the funds
monitored by that group.Helping the Fund was a substantial holding of silver
bullion. Also, giving the Fund a boost was a large holding inIndustrias Penoles,
a major Mexican silver producing company whose value began to be realized by the
investing public.
As we look ahead we continue to see strong underpinnings to the silver
market as a continued substantial excess of fabrication demand over mine
production pulls down silver inventories even further. Periods of price weakness
can be expected as these steadily diminishing inventories are from time to time
sold off, and as we are now seeing, these selloffs can be accompanied by trend
following short selling by the commodity and hedge funds. However, it is quite
clear that these inventories of silver bullion are steadily being fabricated
into goods that are less likely to be put back on the market as scrap. Should
the existing holders of the remaining bullion stock choose to maintain their
holdings, then a significant increase in the price of bullion will be necessary
for the market to clear. The Lexington Strategic Silver Fund is well-positioned
for such an eventuality.
Sincerely,
/s/ Robert W. Radsch /s/ Robert M. DeMichele
- ------------------------------- --------------------------------
Robert W. Radsch Robert M. DeMichele
Portfolio Manager President
August, 1997 August, 1997
1
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
LEXINGTON STRATEGIC SILVER FUND, INC.,
THE S&P 500 AND SILVER BULLION (LONDON (U.S. DOLLARS))
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED 6/30/97
_______________________________________________________________________________
Since Inception
Fund/Index Legend One Year Five Year (1/2/92)*
_______________________________________________________________________________
Lexington Strategic thick line (10.76%) 7.54% 8.23%
Silver Fund
_______________________________________________________________________________
S&P 500 single line 34.71% 19.78% 17.67%
_______________________________________________________________________________
Silver Bullion dotted line (6.17%) 4.85% 4.70%
_______________________________________________________________________________
The actual line graph appearing in the printed version of this shareholder
report cannot appear in this electronic filing due to formatting restrictions,
however a description of the line graph is as follows:
The vertical column of the graph represents dollar amounts beginning with $5,000
and ending with $25,000 in increments of $5,000. The horizontal line of the
graph represents 1/2/92, 6/30/92 and December 31st of each year beginning 1992
and ending 1997. The Fund's legend begins with $9,418, and the other two legends
begin with $10,000. As of 6/30/97, the dollar amounts ended at:
S&P 500 $24,474
Lexington Strategic 14,541
Silver Fund
Silver bullion 12,872
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, including the maximum sales charge (5.75%) made at its
inception, with a similar investment in the Standard & Poor's 500 Stock Index
("S&P 500"), and a direct investment in silver bullion. Results for the Fund and
the S&P 500 include the reinvestment of all dividend and capital gains
distributions. The price of silver is subject to substantial price fluctuations
over short periods of time and may be affected by unpredictable international
monetary and political policies.
*The original inception date for the Fund was August 30, 1984. Prior to January,
1992 the Fund was managed by a different investment advisor. Investment results
for periods prior to that date are not shown in the graph. The Per Share Income
and Capital Changes Table in the Fund's prospectus contains performance data
that relates to prior periods. Investment return and principal value of an
investment will fluctuate so that an investor's shares when redeemed may be
worth more or less than their original cost. Total return represents past
performance and is not predictive of future performance.
* -15.85%, 6.27% and 7.05% are the one year, five year and since commencement
(1/2/92) average annual standard total returns, respectively, for the period
ended June 30, 1997. Prior to January, 1992 the Fund was managed by a
different investment adviser. Investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than at their original cost. These calculations include the
maximum 5.75% initial sales charge and assume reinvestment of dividends and
capital gains at net asset value. Total return represents past performance and
is not predictive of future results.
2
<PAGE>
LEXINGTON STRATEGIC SILVER FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30, 1997
Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
SILVER BULLION: 18.2%
1,648,700 fine ounces (cost $9,076,876)2 $ 7,649,969
-----------
COMMON STOCKS: 75.4%
AUSTRALIA: 8.0%
1,200,000 Aurora Gold, Ltd.2 ...................... 1,699,059
920,000 MIM Holdings, Ltd. ....................... 1,350,856
150,000 Pasminco, Ltd. ........................... 302,280
-----------
3,352,195
-----------
MEXICO: 25.5%
461,056 Corporacion Industrial San Luis S.A. ..... 3,339,889
634,016 Grupo Mexico S.A. de C.V. ................ 2,379,199
1,045,000 Industrias Penoles S.A. .................. 4,978,996
-----------
10,698,084
-----------
NORTH AMERICA: 39.3%
100,000 Adrian Resources, Ltd.2 .................. 101,482
52,100 Agnico-Eagle Mines, Ltd. ................. 500,396
209,000 Argosy Mining Corporation1 ............... 115,979
100,000 Argosy Mining Corporation (Warrants)1,2 .. 72
167,000 Atna Resources, Ltd.1,2 .................. 423,686
83,500 Atna Resources, Ltd. (Warrants)1,2 ....... 61
89,100 Cambior, Inc. ............................ 1,013,999
515,000 Campbell Resources, Inc.1,2 .............. 317,312
90,000 Campbell Resources, Inc. (Warrants)1,2 ... 65
73,100 Coeur D'Alene Mines Corporation2 ......... 945,731
140,000 Eldorado Corporation, Ltd.1,2 ............ 548,002
50,000 Falconbridge, Ltd.1 ...................... 982,199
17,500 Franco Nevada Mining Corporation, Ltd. ... 878,452
300,000 Golden Queen Mining Company, Ltd.2 ....... 543,652
214,400 Hecla Mining Company2 .................... 1,152,400
138,000 Kinross Gold Corporation2 ................ 615,197
130,000 Metallica Resources, Inc.1,2 ............. 287,411
60,000 Minefinders Corporation Ltd.1,2 .......... 133,956
60,000 Pan American Silver Corporation2 ......... 365,334
285,000 Pan American Silver Corporation1,2 ....... 1,735,338
3
<PAGE>
LEXINGTON STRATEGIC SILVER FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30, 1997 (continued)
Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
NORTH AMERICA (continued)
250,000 Prime Resource Group, Inc. ............... $ 1,812,175
109,600 Romarco Minerals, Inc.2 .................. 301,894
300,000 Silver Standard Resources, Inc.1,2 ....... 1,032,939
500,000 Sunshine Mining &Refining2 ............... 343,750
50,000 Teck Corporation "B" ..................... 1,013,006
350,000 Tiomin Resources, Inc.1,2 ................ 634,261
262,500 Tiomin Resources, Inc. (Warrants)1,2 ..... 47,569
50,000 TVX Gold, Inc.2 .......................... 265,625
10,000 Valerie Gold Resources, Ltd.1,2 .......... 10,293
5,000 Valerie Gold Resources, Ltd.
(Warrants)1,2 .......................... 4
280,000 Williams Resources, Inc.2 ................ 436,372
-----------
$16,558,612
-----------
PERU: 2.6%
117,009 Cia De Minas Buenaventura "C" ............ 1,089,574
-----------
TOTAL COMMON STOCKS:
(Cost $28,488,327) ..................... 31,698,465
-----------
PREFERRED STOCK: 4.3%
99,000 Freeport McMoran Copper &Gold
(Cost $2,081,958) ..................... 1,806,750
-----------
TOTAL INVESTMENTS: 97.9%
(Cost $39,647,161+)(Note 1) ............ 41,155,184
Other assets in excess of
liabilities: 2.1% ...................... 880,031
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $3.95 per share on
10,650,444 shares outstanding) ...... $42,035,215
===========
1Restricted security (Note 6).
2Non-income producing security.
+Aggregate cost for Federal income tax purposes is identical.
The Notes to Financial Statements are an integral part of this statement.
4
<PAGE>
LEXINGTON STRATEGIC SILVER FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
ASSETS
Investments, at value (cost $39,647,161) (Note 1) ............ $ 41,155,184
Cash ......................................................... 1,070,633
Receivable for shares sold ................................... 1,206
Dividends and interest receivable ............................ 3,709
------------
Total Assets ............................................. $ 42,230,732
------------
LIABILITIES
Due to Lexington Management Corporation (Note 2) ............. 32,988
Payable for shares redeemed .................................. 56,086
Accrued expenses ............................................. 106,443
------------
Total Liabilities ........................................ 195,517
------------
NET ASSETS (equivalent to $3.95 per share on 10,650,444
shares outstanding) (Note 3) ............................... $ 42,035,215
============
NET ASSETS consist of:
Capital stock--authorized 1,000,000,000 shares,
$.001 par value per share .................................. $ 10,651
Additional paid in capital (Note 1) .......................... 51,924,397
Distributions in excess of net investment income ............. (1,792)
Accumulated net realized loss in investments and
foreign currency transactions (Notes 1 and 7) .............. (11,406,081)
Unrealized appreciation of investments and foreign
currency transactions (Note 1) ............................. 1,508,040
------------
TOTAL NET ASSETS ............................................. $ 42,035,215
============
NET ASSET VALUE, REDEMPTION PRICE PER SHARE .................. $3.95
=====
OFFERING PRICE PER SHARE (100/94.25 of $3.95
adjusted to the nearest cent) .............................. $4.19
=====
The Notes to Financial Statements are an integral part of this statement.
5
<PAGE>
LEXINGTON STRATEGIC SILVER FUND, INC.
STATEMENT OF OPERATIONS
Year ended June 30, 1997
INVESTMENT INCOME
Dividends ...................................... $ 506,488
Interest ....................................... 118,940
----------
625,428
Less: foreign tax expense ...................... 16,997
----------
Total investment income .................... $ 608,431
EXPENSES
INVESTMENT ADVISORY FEE
(Note 2) ................................... 462,896
Custodian expense ............................ 129,097
Transfer agent and shareholder
servicing expense (Note 2) ................. 170,282
Printing and mailing expenses ................ 74,826
Accounting expenses (Note 2) ................. 49,304
Professional fees ............................ 28,510
Registration fees ............................ 28,070
Directors' fees and expenses ................. 17,995
Computer processing fees ..................... 14,449
Amortization of deferred
reorganization costs
(Note 1) ................................. 6,523
Other expenses ............................... 30,857
----------
Total expenses ............................. 1,012,809
-----------
Net investment loss ...................... (404,378)
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 4)
NET REALIZED LOSS ON:
Investments ................................ (988,336)
Foreign currency
transactions ............................. (1,398)
----------
Net realized loss ...................... (989,734)
Net change in unrealized
appreciation on:
Investments ................................ (4,550,514)
Foreign currency translations
of other assets and
liabilities .............................. 156
----------
Net change in unrealized
appreciation ............................. (4,550,358)
-----------
Net realized and
unrealized loss ........................ (5,540,092)
-----------
DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS .............................. $(5,944,470)
===========
LEXINGTON STRATEGIC SILVER FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years ended June 30, 1997 and 1996
1997 1996
---------- ----------
Net investment loss .................... $ (404,378) $ (529,009)
Net realized gain/(loss) from
investment and foreign
currency transactions ................ (989,734) 4,707,888
Net change in unrealized
appreciation of
investments and foreign
currency translations ................ (4,550,358) 1,524,361
------------ ------------
Increase/(decrease) in net
assets resulting
from operations .................. (5,944,470) 5,703,240
Distributions to shareholders
in excess of net investment
income (Note 1) ...................... (373,424) (437,823)
Increase (decrease) from
capital share transactions
(Note 3) ............................. (25,591,713) 3,162,294
------------ ------------
Net increase (decrease) in
net assets ....................... (31,909,607) 8,427,711
NET ASSETS:
Beginning of period .................. 73,944,822 65,517,111
------------ ------------
End of period (including
distributions in excess of
net investment income of
$1,792 and $117,653,
respectively) ...................... $ 42,035,215 $ 73,944,822
============ ============
The Notes to Financial Statements are an integral part of these statements.
6
<PAGE>
LEXINGTON STRATEGIC SILVER FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Lexington Strategic Silver Fund, Inc. (the "Fund") is an open-end
non-diversified management investment company registered under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to seek to
maximize total return from long-term growth of capital and income principally by
investing in a portfolio at least 80% of which will be invested in the
securities of established silver-related companies throughout the world. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements:
INVESTMENTS Security transactions are accounted for on a trade date basis.
Realized gains and losses from investment transactions are reported on the
identified cost basis. Securities traded on a recognized stock exchange are
valued at the last sales price reported by the exchange on which the securities
are traded. If no sales price is recorded, the mean between the last bid and
asked prices is used. Securities traded on the over-the-counter market and
silver bullion are valued at the mean between the last current bid and asked
price. Short-term securities having a maturity of 60 days or less are stated at
amortized cost, which approximates market value. Securities for which market
quotations are not readily available and other assets are valued by Fund
management in good faith under the direction of the Fund's Board of Directors.
All investments quoted in foreign currencies are valued in U.S. dollars on the
basis of the foreign currency exchange rates prevailing at the close of
business. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income, adjusted for amortization of premiums and
accretion of discounts, is accrued as earned.
FOREIGN CURRENCY TRANSACTIONS Foreign currencies (and receivables and
payables denominated in foreign currencies) are translated into U.S. dollar
amounts at current exchange rates. Translation gains or losses resulting from
changes in exchange rates and realized gains and losses on the settlement of
foreign currency transactions are reported in the statement of operations. In
addition, the Fund may enter into forward foreign exchange contracts in order to
hedge against foreign currency risk in the purchase or sale of securities
denominated in foreign currency. The Fund may also enter into such contracts to
hedge against changes in foreign currency exchange rates on portfolio positions.
These contracts are marked to market daily, by recognizing the difference
between the contract exchange rate and the current market rate as unrealized
gains or losses. Realized gains or losses are recognized when contracts are
closed and are reported in the statement of operations. There were no forward
foreign currency exchange contracts outstanding at June 30, 1997.
FEDERAL INCOME TAXES It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to "regulated investment
companies" and to distribute all of its taxable income to its shareholders.
Therefore, no provision for Federal income taxes is required.
DISTRIBUTIONS Dividends from net investment income and net realized
capital gains are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. The character of income and gains to
be distributed are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. At June 30, 1997,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Net investment income, net realized gains and net assets
were not affected by this change.
DEFERRED REORGANIZATION EXPENSES Reorganization expenses aggregating
$65,512 have been fully amortized as of June 30, 1997.
7
<PAGE>
LEXINGTON STRATEGIC SILVER FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996 (continued)
USE OF ESTIMATES The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of 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.
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at an annual rate of 1.00% of the Fund's average daily net assets up to
$30 million and at an annual rate of 0.75% thereafter. For 1997, the investment
advisor has voluntarily agreed to reimburse the Fund if total annual expenses
(including management fees, but excluding interest, taxes, brokerage commissions
and extraordinary expenses) exceed 2.50% of the Fund's average daily net assets.
No reimbursement was required for the year ended June 30, 1997.
The Fund reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs of $124,130, which are incurred by the Fund, but
paid by LMC.
3. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Year ended Year ended
June 30, 1997 June 30, 1996
------------------------------ ------------------------------
Shares Amount Shares Amount
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold .................................... 6,348,384 $ 27,981,547 15,352,920 $71,243,731
Shares issued on reinvestment of dividends ..... 74,245 313,964 59,629 294,570
--------- ------------ ---------- ------------
6,422,629 28,295,511 15,412,549 71,538,301
Shares redeemed ................................ (12,351,927) (53,887,224) (15,223,380) (68,376,007)
--------- ------------ ---------- ------------
Net increase (decrease) .................... (5,929,298) $(25,591,713) 189,169 $ 3,162,294
========= ============ ========== ============
</TABLE>
4. PURCHASES AND SALES OF INVESTMENT SECURITIES
The cost of purchases and proceeds from sales of securities for the year ended
June 30, 1997, excluding short-term securities, were $9,136,692 and $33,282,827,
respectively.
At June 30, 1997, the aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost amounted to $8,069,419 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value amounted to $6,561,396.
5. INVESTMENT AND CONCENTRATION RISKS
The Fund makes significant investments in foreign securities and has an
investment objective of investing in securities of companies engaged in the
exploration, mining, processing, fabrication and distribution of silver. There
are certain risks involved in investing in foreign securities or concentrating
in specific industries that are in addition to the usual risks inherent in
domestic investments. These risks include those resulting from potentially
adverse political and economic developments as well as the possible imposition
of foreign exchange or other foreign governmental restrictions or laws, all of
which could affect the market and/or credit risk of the investments. In addition
to the risks described above, risks may arise from forward foreign currency
contracts as a result of the inability of counterparties to meet the terms of
their contracts.
8
<PAGE>
LEXINGTON STRATEGIC SILVER FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996 (continued)
6. RESTRICTED SECURITIES
The following securities were purchased under Rule 144A of the
Securities Act of 1933 or issued in private placements and, unless registered
under the Act or exempted from registration, may be sold only to qualified
institutional investors.
<TABLE>
<CAPTION>
Acquisition Average Cost Market % of Net
Security Date Shares Per Share Value Assets
--------- ------- ------ ------------ ------- --------
<S> <C> <C> <C> <C> <C>
Argosy Mining Corporation 5/24/96 200,000 $ 1.82 $ 115,979 0.28%
Argosy Mining Corporation (Warrants) 5/24/96 100,000 0.00 72 0.00%
Atna Resources, Ltd. 4/15/96 167,000 4.80 423,686 1.01%
Atna Resources, Ltd. (Warrants) 10/14/96 83,500 0.00 61 0.00%
CampbellResources, Inc. 10/25/96 515,000 1.25 317,312 0.75%
CampbellResources, Inc. (Warrants) 10/25/96 90,000 0.00 65 0.00%
Eldorado Corporation, Ltd. 2/22/96 140,000 5.37 548,002 1.30%
Falconbridge, Ltd. 3/20/96 50,000 17.13 982,199 2.34%
Metallica Resources, Inc. 3/20/96 287,411 3.68 287,411 0.68%
Minefinders Corporation, Ltd. 3/11/97 60,000 3.66 133,956 0.32%
Pan American Silver Corporation 3/21/96 285,000 5.17 1,735,338 4.13%
Silver Standard Resources 9/6/95 300,000 3.14 1,032,939 2.46%
Tiomin Resources, Inc. 9/28/95 350,000 1.44 634,261 1.51%
Tiomin Resources, Inc. (Warrants) 9/28/95 262,500 0.00 47,569 0.11%
Valerie Gold Resources, Ltd. 5/28/96 10,000 10.18 10,293 0.02%
Valerie Gold Resources, Ltd. (Warrants) 5/28/96 5,000 0.00 4 0.00%
--------- ------
$6,269,147 14.91%
========== ======
</TABLE>
Pursuant to guidelines adopted by the Fund's Board of Directors, these
unregistered securities have been deemed to be illiquid. The Fund currently
limits investment in illiquid securities to 15% of the Fund's net assets, at
market value, at the time of purchase.
6. FEDERAL INCOME TAXES--CAPITAL LOSS CARRYFORWARDS
Capital loss carryforwards available for federal income tax purposes as of June
30, 1997 are:
$1,093,937 expiring in 1998;
1,254,382 expiring in 1999;
3,106,844 expiring in 2000;
954,860 expiring in 2001;
1,911,797 expiring in 2002;
1,327,486 expiring in 2003; and,
1,756,775 expiring in 2005;
To the extent any future capital gains are offset by these losses, such gains
would not be distributed to shareholders.
7. TAX INFORMATION (UNAUDITED)
The percentage of investment company taxable income eligible for the dividends
received deduction available to certain corporate shareholders with respect to
the fiscal year ended June 30, 1997 is 23.05%.
9
<PAGE>
LEXINGTON STRATEGIC SILVER FUND, INC.
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year ended June 30,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $4.46 $4.00 $3.92 $3.52 $2.78
----- ----- ----- ----- -----
Income (loss) from investment operations:
Net investment (loss) ................................... (0.04) (0.03) (0.03) (0.02) (0.04)
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ......... (0.43) 0.51 0.11 0.42 0.78
----- ----- ----- ----- -----
Total income (loss) from investment operations ............ (0.47) 0.48 0.08 0.40 0.74
----- ----- ----- ----- -----
Less distributions:
Distributions in excess of net investment income ........ (0.04) (0.02) -- -- --
----- ----- ----- ----- -----
Net asset value, end of period ............................ $3.95 $4.46 $4.00 $3.92 $3.52
===== ===== ===== ===== =====
Total return* ............................................. (10.82%) 12.02% 2.04% 11.36% 26.62%
Ratio to average net assets:
Expenses, before reimbursement or waivers ............... 1.96% 1.73% 1.82% 1.84% 3.48%
Expenses, net of reimbursement or waivers ............... 1.96% 1.73% 1.82% 1.84% 2.60%
Net investment (loss), before reimbursement
or waivers ............................................ (0.78%) (0.72%) (0.83%) (0.82%) (2.48%)
Net investment (loss) ................................... (0.78%) (0.72%) (0.83%) (0.82%) (1.60%)
Portfolio turnover rate ................................... 18.76% 44.30% 44.22% 5.28% 18.58%
Average commission paid on equity
security transactions** ................................. $0.03 $0.02 -- -- --
Net assets, end of period (000's omitted) ................. $42,035 $73,945 $65,517 $49,499 $15,032
</TABLE>
* Sales load is not reflected in total return.
** In accordance with SEC disclosure guidelines, the average commissions are
calculated for the years beginning with June 1996 but not for prior
periods.
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Lexington Strategic Silver Fund, Inc.:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Strategic
Silver Fund, Inc. as of June 30, 1997, and the related statements of operations
for the year then ended, the statement of changes in net assets for each of the
years in the two-year period then ended and the financial highlights for each of
the years in the five-year 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 generally accepted auditing
standards. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997 by correspondence with the custodian. As to securities purchased and
sold, but not received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. 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
Lexington Strategic Silver Fund, Inc. as of June 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
August 1, 1997
11
<PAGE>
LEXINGTON STRATEGIC SILVER FUND, INC.
Investment Adviser
- -------------------------------------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
Distributor
- --------------------------------------------------------------------------------
LEXINGTON FUNDS DISTRIBUTOR, INC.
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
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ALL SHAREHOLDER REQUESTS FOR SERVICES OF
ANY KIND SHOULD BE SENT TO:
TRANSFER AGENT
- --------------------------------------------------------------------------------
STATE STREET BANK AND
TRUST COMPANY
c/o National Financial Data Services
1004 Baltimore
Kansas City, Missouri 64105
OR CALL TOLL FREE:
SERVICE AND SALES: 1-800-526-0056
24 HOUR ACCOUNT INFORMATION:
1-800-526-0052
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This report has been prepared for the information of the shareholders of
Lexington Strategic Silver Fund, Inc. and is authorized for distribution to the
public only if it is accompanied or preceded by a currently effective prospectus
which sets forth expenses and other material information.
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LEXINGTON
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LEXINGTON
STRATEGIC
SILVER
FUND, INC.
- --------------------------------------[ ]--------------------------------------
Seeks long-term
growth of capital
through investment
in established silver
related companies.
- --------------------------------------[ ]--------------------------------------
ANNUAL REPORT
JUNE 30, 1997
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