<PAGE>
Semi-Annual
Report
[GRAPHIC]
June 30, 2000
(unaudited)
================================================================================
Pilgrim Mutual Funds
================================================================================
PILGRIM SILVER
FUND, INC.
----------------------------------------------
Investment Objective: Capital Appreciation
<PAGE>
Chairman's Message
-------------------------------------------------------------------------------
Dear Shareholders:
Welcome to the Pilgrim Mutual Funds family. We are pleased to present the
Semi-Annual Report for Pilgrim Silver Fund, Inc. (formerly Lexington Silver
Fund, Inc.).
On July 26, 2000, ReliaStar Financial Corp. ("ReliaStar") acquired Lexington
Management Corporation and all of its subsidiaries. In conjunction with the
acquisition, Pilgrim Investments, Inc., a subsidiary of ReliaStar, was
appointed to the role of Investment Adviser to the Fund. As a shareholder in
the Pilgrim family of funds, you now have access to more funds with varying
investment objectives. As a Lexington Fund shareholder as of July 26th, you
can now exchange into any Pilgrim Fund A shares without paying a sales load.
Our fund family has 41 varying types of mutual funds which provide more core
investment choices for the serious investor. We believe that the key to
success is matching quality core investments to the individual needs of
investors. Core investments are the foundation of every portfolio and the
basis of other important investment decisions. Pilgrim prides itself on
providing a family of core investments designed to help you reach your
financial goals. Our goal is for every investor to have a successful
investment experienceSM.
If you have any questions regarding your account, or any other Pilgrim Fund
you can access, please call us at 800-992-0180 or visit our website at
www.pilgrimfunds.com.
Sincerely,
/s/ Robert W. Stallings
Robert W. Stallings
Chairman and Chief Executive Officer
Pilgrim Group, Inc.
August, 2000
<PAGE>
Dear Shareholders:
-------------------------------------------------------------------------------
Silver bullion began the year on a positive note at $5.40 per ounce
reflecting over all global industrial activity, and the positive tone set by
the gold market. Nevertheless, this euphoria was dashed by successive interest
rate increases by the Federal Reserve Bank, calling into question the
substainability of U.S. economic expansion. Silver finished the first half at
$5.03 per ounce, having recovered slightly from an early June low of $4.90 per
ounce. For the six month period ending June 30, 2000, Pilgrim Silver Fund,
Inc. (formerly Lexington Silver Fund, Inc.) had a total return of (16.89)%*
compared to a total return of (14.65)% for the average gold-oriented mutual
fund monitored by Lipper, Inc.
Since silver is generally a byproduct of other metal production, copper,
zinc, or gold, the Fund is sensitive to the volatility of price movements in a
variety of global mining shares. As successive interest rate increases took
their toll on the economic outlook, the shares of copper, zinc, and other
metal producers saw their stock prices come under selling pressure,
subsequently bringing the Fund down with them.
As we have mentioned in other reports, the supply/demand balance remains
attractive for the silver market. Demand from industrial and photographic
users continues to grow but new mine supply is limited. Inventory draw-downs
have satisfied the difference, but this can only last for so long before
prices rise.
As you are aware, Lexington Global Asset Managers, Inc., the parent company
of Lexington Management Corporation was acquired by ReliaStar Financial Corp.
(NYSE:RLR) the parent company of Pilgrim Investments, Inc., an investment
management and mutual fund company with $17 billion of assets under
management.
On May 1, ReliaStar announced that it agreed to be acquired by ING Groep
N.V. ("ING Group") in a transaction that, subject to certain approvals, is
expected to close in the third quarter of this year. ING Group is a global
financial institution that is active in the field of insurance, banking, and
asset management in more that 60 countries.
We wish to thank you for your continued support.
Sincerely,
/s/ JAMES A. VAIL
James A. Vail
Portfolio Manager
August, 2000
*(15.54)%, (8.96)%, and (.41)% are the one, five, and since commencement
(01/02/92) average annual standard total returns, respectively, for the period
ended June 30, 2000. Prior to January 1992, the Fund was managed by a
different investment advisor. 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. 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. Total
return represents past performance and is not predictive of future results.
There is no guarantee that the Fund can achieve its objective.
1
<PAGE>
Pilgrim Silver Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares Security (Note 1)
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMON STOCKS: 67.3%
Australia: 6.0%
1,600,000 Aurora Gold, Ltd./1......................../.. $ 134,494
1,020,000 MIM Holdings, Ltd. ........................... 551,186
802,857 Pasminco, Ltd./1.........................../.. 429,026
-----------
1,114,706
-----------
Canada: 3.8%
50,000 Silver Standard Resources, Inc./1........../.. 64,844
300,000 Silver Standard Resources, Inc./1/,/2....../.. 404,948
350,000 Tiomin Resources, Inc./1/,/2.............../.. 162,992
75,000 Western Copper Holdings, Ltd./1............/.. 75,928
-----------
708,712
-----------
Mexico: 14.6%
290,056 Corporacion Industrial San Luis S.A./1...../.. 545,152
404,016 Grupo Mexico S.A. de C.V. .................... 1,136,953
645,000 Industrias Penoles S.A........................ 1,041,888
-----------
2,723,993
-----------
Peru: 7.3%
157,009 Compania de Minas Buenaventura S.A. "B"....... 1,368,128
-----------
Poland: 4.1%
51,000 KGHM Polska Miedz S.A. (GDR)/2............./.. 762,450
-----------
United Kingdom: 4.5%
375,000 Ivernia West plc/1/,/2...................../.. 246,955
9,000 Rio Tinto plc (ADR)........................... 587,250
-----------
834,205
-----------
United States: 27.0%
95,000 Apex Silver Mines, Ltd./1................../.. 944,062
250,600 Coeur D'Alene Mines Corporation/1........../.. 610,837
439,400 Hecla Mining Company/1...................../.. 494,325
143,500 Homestake Mining Company...................... 986,563
213,000 Meridian Gold, Inc./1....................../.. 1,304,625
25,000 Stillwater Mining Company/1................/.. 696,875
-----------
5,037,287
-----------
TOTAL COMMON STOCKS
(cost $20,753,357)............................ 12,549,481
-----------
PREFERRED STOCK: 6.4%
United States: 6.4%
99,000 Freeport McMoran Copper & Gold (cost
$2,081,958).................................. 1,188,000
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Value
Amount Security (Note 1)
-------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM INVESTMENT: 18.7%
U.S. Government Agency Obligation: 18.7%
$3,500,000 Federal Home Loan Bank, 6.48%, due 07/03/00 (cost
$3,498,740)..................................... $ 3,498,740
-----------
SILVER BULLION: 7.0%
259,613 fine ounces
(cost $1,453,281)/1........................../.. 1,305,852
-----------
TOTAL INVESTMENTS: 99.4%
(cost $27,787,336+) (Note 1).................... 18,542,073
Other assets in excess of liabilities: 0.6%...... 109,216
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $2.46 per share on 7,567,285
shares outstanding)............................. $18,651,289
===========
</TABLE>
--------
/1/ Non-income producing security.
/2/ Restricted security (Note 6).
ADR -- American Depository Receipt.
GDR -- Global Depository Receipt.
+ Aggregate cost for Federal income tax purposes is identical.
The Notes to Financial Statements are an integral part of this statement.
2
<PAGE>
Pilgrim Silver Fund, Inc.
Statement of Assets and Liabilities
June 30, 2000 (unaudited)
<TABLE>
<S> <C>
Assets
Investments, at value (cost $27,787,336) (Note 1)............... $ 18,542,073
Cash............................................................ 186,647
Due from Lexington Management Corporation (Note 2).............. 41,062
Receivable for shares sold...................................... 8,000
Dividends and interest receivable............................... 6,009
------------
Total Assets................................................. 18,783,791
------------
Liabilities
Payable for shares redeemed..................................... 2,486
Accrued expenses................................................ 130,016
------------
Total Liabilities............................................ 132,502
------------
Net Assets (equivalent to $2.46 per share on 7,567,285 shares
outstanding) (Note 3).......................................... $ 18,651,289
============
Net Assets consist of:
Capital stock -- authorized 1,000,000,000 shares, $.001 par
value per share................................................ $ 7,567
Additional paid-in-capital...................................... 38,743,946
Undistributed net investment income............................. 1,372
Accumulated net realized loss on investments and foreign
currency transactions.......................................... (10,856,333)
Unrealized depreciation of investments.......................... (9,245,263)
------------
Total Net Assets............................................. $ 18,651,289
============
</TABLE>
Pilgrim Silver Fund, Inc.
Statement of Operations
Six months ended June 30, 2000 (unaudited)
<TABLE>
<S> <C> <C>
Investment Income
Dividends............................................ $ 114,501
Interest............................................. 102,011
----------
216,512
Less: foreign tax expense............................ 6,014
----------
Total investment income.............................. $ 210,498
Expenses
Investment advisory fee (Note 2)..................... 108,898
Directors' fees and expenses......................... 97,615
Transfer agent and shareholder servicing expenses
(Note 2)............................................ 43,243
Professional fees.................................... 18,762
Printing and mailing expenses........................ 14,660
Custodian expenses................................... 12,495
Registration fees.................................... 11,580
Accounting expenses (Note 2)......................... 7,582
Computer processing fees............................. 4,662
Other expenses....................................... 9,672
----------
Total expenses....................................... 329,169
Less: expenses recovered under contract with
investment adviser (Note 2)......................... 56,822 272,347
---------- -----------
Net investment loss.................................. (61,849)
Realized and Unrealized Loss on Investments (Note 4)
Net realized loss on:
Investments.......................................... (1,099,169)
Foreign currency transactions........................ (1,598)
----------
Net realized loss.................................... (1,100,767)
Net change in unrealized depreciation of investments.. (2,757,650)
-----------
Net realized and unrealized loss...................... (3,858,417)
-----------
Decrease in Net Assets Resulting from Operations...... $(3,920,266)
===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
3
<PAGE>
Pilgrim Silver Fund, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 2000 Year ended
(unaudited) December 31, 1999
---------------- -----------------
<S> <C> <C>
Operations:
Net investment income (loss)................ $ (61,849) $ 127,538
Net realized loss from investments and
foreign currency transactions.............. (1,100,767) (641,588)
Net change in unrealized depreciation of
investments................................ (2,757,650) 2,489,979
----------- -----------
Net increase (decrease) in net assets
resulting from operations................ (3,920,266) 1,975,929
----------- -----------
Distributions to Shareholders: (Note 1)
Distributions to shareholders from net
investment income.......................... -- (63,027)
----------- -----------
Capital Share Transactions: (Note 3)
Proceeds from sale of shares................ 2,225,705 6,914,213
Reinvested dividends........................ -- 58,564
Cost of shares redeemed..................... (5,067,506) (9,032,468)
----------- -----------
Net decrease in net assets from capital
share transactions....................... (2,841,801) (2,059,691)
----------- -----------
Net decrease in net assets.................. (6,762,067) (146,789)
Net Assets:
Beginning of period......................... 25,413,356 25,560,145
----------- -----------
End of period (including undistributed net
investment income of $1,372 and $63,221 in
2000 and 1999, respectively) (Note 1)...... $18,651,289 $25,413,356
=========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
4
<PAGE>
Pilgrim Silver Fund, Inc.
Notes to Financial Statements
June 30, 2000 (unaudited) and December 31, 1999
1. Significant Accounting Policies
Pilgrim Silver Fund, Inc. (formerly Lexington 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. The Fund will seek to achieve its objective by investing at least
80% of its portfolio in securities of established silver-related companies and
silver bullion. The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements:
Investments Securities 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 prices. 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.
The Fund authorizes its custodian to place and maintain equity securities in a
segregated account of the Fund having a value equal to the aggregate amount of
the Fund's commitments under forward foreign currency contracts entered into
with respect to position hedges. There are no foreign currency contracts
outstanding at June 30, 2000.
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.
5
<PAGE>
Pilgrim Silver Fund, Inc.
Notes to Financial Statements
June 30, 2000 (unaudited) and December 31, 1999 (continued)
1. Significant Accounting Policies (continued)
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 December
31, 1999, reclassifications were made to the Fund's capital accounts to
reflect permanent book/tax differences and income and gains available for
distribution under income tax regulations. Net investment income, net realized
gains and net assets were not affected by this change.
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 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.
2. Investment Advisory Fee and Other Transactions with Affiliate
The Fund paid 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 2000, the
adviser has agreed to voluntarily limit the total expenses of the Fund
(including management fees, but excluding interest, taxes, brokerage
commissions and extraordinary expenses) to an annual rate of 2.50% of the
Fund's average daily net assets. Total reimbursement was $56,822 for the six
months ended June 30, 2000, and is set forth in the statement of operations.
The Fund reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs of $15,201, which were incurred by the Fund, but
paid by LMC.
3. Capital Stock
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Six months ended
June 30, 2000 Year ended
(unaudited) December 31, 1999
----------------------- -----------------------
Shares Amount Shares Amount
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold................. 804,509 $ 2,225,705 2,363,039 $ 6,914,213
Shares issued on
reinvestment of dividends.. -- -- 19,980 58,564
---------- ----------- ---------- -----------
804,509 2,225,705 2,383,019 6,972,777
Shares redeemed............. (1,835,313) (5,067,506) (3,155,876) (9,032,468)
---------- ----------- ---------- -----------
Net decrease................ (1,030,804) $(2,841,801) (772,857) $(2,059,691)
========== =========== ========== ===========
</TABLE>
4. Investment Transactions
The cost of purchases and proceeds from sales of securities for the six months
ended June 30, 2000, excluding short-term securities, were $1,355,556 and
$4,862,419, respectively.
6
<PAGE>
Pilgrim Silver Fund, Inc.
Notes to Financial Statements
June 30, 2000 (unaudited) and December 31, 1999 (continued)
4. Investment Transactions (continued)
At June 30, 2000, the aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost amounted to
$650,487 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $9,895,750.
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.
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. 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.
<TABLE>
<CAPTION>
Acquisition Market Percent of
Security Date Shares Value Net Assets
-------- ----------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Ivernia West plc..................... 04/14/00 375,000 $ 246,955 1.33%
KGHM Polska Miedz S.A. (GDR)......... 08/10/99 51,000 762,450 4.09
Silver Standard Resources, Inc....... 09/06/95 300,000 404,948 2.17
Tiomin Resources, Inc................ 09/28/95 350,000 162,992 0.87
---------- ----
$1,577,345 8.46%
========== ====
</TABLE>
7. Change in the Fund's Year-End
In 1998, the Fund changed its fiscal year-end from June 30th to December 31st.
This change was done to facilitate the administration of the Fund.
8. Subsequent Events
Effective on July 26, 2000, Lexington Global Asset Managers, Inc. was acquired
by ReliaStar Financial Corp. ("ReliaStar"). In conjunction with the
acquisition and following approval by the Fund's Board of Directors and
shareholders, Pilgrim Investments, Inc., an indirect, wholly owned subsidiary
of ReliaStar, was appointed to the role of investment adviser to the Fund
effective July 26, 2000. Pilgrim Securities, Inc., also an indirect, wholly
owned subsidiary of ReliaStar, was appointed distributor to the Fund on that
date as well.
7
<PAGE>
Pilgrim Silver Fund, Inc.
Notes to Financial Statements
June 30, 2000 (unaudited) and December 31, 1999 (continued)
8. Subsequent Events (continued)
On May 1, 2000, ReliaStar Financial Corp. (NYSE:RLR), the indirect parent
company of Pilgrim Investments, Inc., Adviser to the Funds, and Pilgrim
Securities, Inc., Distributor to the Funds, entered into an agreement under
which it will be acquired by ING Groep N.V. (NYSE:ING). ING Groep N.V. is a
global financial institution active in the field of insurance, banking, and
asset management in more than 60 countries, with almost 90,000 employees.
Completion of the acquisition is contingent upon, among other things, approval
by the Directors/Trustees of the Pilgrim Funds and certain shareholder and
regulatory approvals. The closing of the acquisition is expected to occur
during the third quarter of 2000.
8
<PAGE>
Pilgrim Silver Fund, Inc.
Financial Highlights
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Six month
Six months ended Year ended period ended Year ended June 30,
June 30, 2000 December 31, December 31, 1998 ---------------------------
(unaudited) 1999 (Note 7) 1998 1997 1996
---------------- ------------ ----------------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 2.96 $ 2.73 $ 3.26 $ 3.95 $ 4.46 $ 4.00
-------- ------- -------- -------- -------- -------
Income (loss) from
investment operations:
Net investment income
(loss)................ (0.01) 0.01 (0.01) (0.02) (0.04) (0.03)
Net realized and
unrealized gain (loss)
on investments and
foreign currencies.... (0.49) 0.23 (0.52) (0.66) (0.43) 0.51
-------- ------- -------- -------- -------- -------
Total income (loss) from
investment operations.. (0.50) 0.24 (0.53) (0.68) (0.47) 0.48
-------- ------- -------- -------- -------- -------
Less distributions:
Distributions from net
investment income..... -- (0.01) -- (0.01) (0.04) (0.02)
-------- ------- -------- -------- -------- -------
Net asset value, end of
period................. $ 2.46 $ 2.96 $ 2.73 $ 3.26 $ 3.95 $ 4.46
======== ======= ======== ======== ======== =======
Total return............ (33.97)%* 8.70% (16.26)% (17.32)% (10.76)% 12.02%
Ratio to average net
assets:
Expenses, before
reimbursement......... 3.02%* 2.11% 2.37%* 1.90% 1.96% 1.73%
Expenses, net of
reimbursement......... 2.50%* 2.11% 2.37%* 1.90% 1.96% 1.73%
Net investment income
(loss), before
reimbursement......... (1.09)%* 0.49% (0.61)%* (0.54)% (0.78)% (0.72)%
Net investment income
(loss)................ (0.57)%* 0.49% (0.61)%* (0.54)% (0.78)% (0.72)%
Portfolio turnover
rate................... 15.10%* 29.44% 5.68% 28.78% 18.76% 44.30%
Net assets, end of
period (000's
omitted)............... $18,651 $25,413 $25,560 $34,921 $42,035 $73,945
</TABLE>
--------
*Annualized.
9
<PAGE>
PILGRIM SILVER FUND, INC.
Investment Adviser All Shareholder requests for services of
Pilgrim Investments, Inc. any kind should be sent to:
40 North Central Avenue
Suite 1200
Phoenix, Arizona 85004-4408 Transfer Agent
Lexington Funds
c/o DST Systems, Inc.
Distributor P.O. Box 219368
Pilgrim Securities, Inc. Kansas City, Missouri 64121-6368
40 North Central Avenue
Suite 1200 Phoenix, Arizona 85004-4408 Or call toll free
Service and Sales: 1-800-526-0056
www.lexingtonfunds.com
This report has been prepared for the information of the shareholders of Pilgrim
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. LEX72-SAR6/00
The Lexington Funds PRSRT STD
Park 80 West - Plaza Two U.S. Postage
Saddle Brook, New Jersey 07663 Paid
Lexington
Management Corp
