Dear Shareholders:
- --------------------------------------------------------------------------------
Lexington Money Market Trust, like other money market mutual funds,
generated an excellent real rate of return for its shareholders during 1995. The
Trust's 5%* yield far exceeded the 2.6% increase in prices, as measured by the
C.P.I. (twelve month rate of gain through November). Investors should expect,
however, that the nominal yield and real rate of return provided by money market
funds will decline this year.
The Federal Reserve controls short-term interest rates by managing the level
of bank reserves and determining the interest rate which banks charge each other
for overnight loans. In July, the Fed lowered this borrowing rate from 6% to
5.75% . They foresaw a slowing economy with little inflation and reasoned that a
cut in interest rates would give the economy a lift. The same factors encouraged
another cut in the Federal Funds rate to 5.5% in December. We look for more of
the same in the months ahead and rates are likely to fall to 5% by mid-year. If
we assume that inflation rises at a 3% annual rate over the next few quarters,
that decline would bring the spread between the targeted Federal Funds rate and
the rate of inflation into line with its average over the last forty years. We
think the risk in this forecast is for lower, not higher, short-term interest
rates.
Unfortunately, there is little we can do to forestall the impact of lower
money market rates on the Trust's yield.
The high probability of lower short-term interest rates is fully reflected
in the marketplace. Normally, investors are paid to accept the risk associated
with holding securities with longer maturities. That is not the case today. For
example, six-month and one-year U.S. Treasury bills currently yield 30 basis
points less than overnight loans backed by U.S. Treasury securities. In fact,
investors would need to buy U.S. Treasury notes with maturities in excess of
five years to earn a yield in excess of the Federal Funds rate. The return of
the Lexington Money Market Trust is likely to fall to 4% or less by mid-year.
We do not anticipate changing our investments to stretch for extra income.
Traditionally, we've kept the holdings of Lexington Money Market Trust simple.
The portfolio consists of high grade commercial paper supplemented with U.S.
Treasury and Agency securities and some floating-rate bonds which can be
redeemed at par upon seven days notice. The average maturity of the Trust rarely
tops 60 days. Liquidity and price stability are the primary goals of the Trust.
We thank our shareholders for their continued loyalty and support. If we can
be of further assistance in helping you meet your investment goals, please feel
free to call us.
Sincerely,
Denis P. Jamison Robert M. DeMichele
Portfolio Manager President
January, 1996 January, 1996
*The average annual yield for the seven day period ended December 31, 1995 was
4.79%. Shares of the Fund are not insured or guaranteed by the U.S. Government
and there can be no assurance that the Fund will be able to maintain a stable
net asset value of $1.00 per share.
1
<PAGE>
Lexington Money Market Trust
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1995
<TABLE>
<CAPTION>
Yield to
Maturity
Principal Maturity on Date of Value
Amount Security Date Purchase (Note 1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER: 90.0%
$4,000,000 Atlantic Richfield Company ................................ 01/24/96 5.70% $ 3,985,740
4,000,000 Avnet, Inc. ............................................... 01/23/96 5.75 3,986,189
4,000,000 Bellsouth Telecommunications, Inc. ........................ 02/08/96 5.77 3,976,144
4,000,000 Cargill, Inc. ............................................. 02/06/96 5.79 3,977,480
4,000,000 Columbia University ....................................... 01/12/96 5.83 3,993,033
4,100,000 Deutsche Bank Financial, Inc. ............................. 01/22/96 5.85 4,086,368
4,000,000 Echlin, Inc. .............................................. 01/29/96 5.86 3,982,235
4,000,000 Ford Motor Credit Corporation ............................. 01/18/96 5.91 3,989,044
4,100,000 General Electric Capital Corporation ...................... 01/02/96 5.99 4,099,328
2,000,000 Hercules, Inc. ............................................ 02/16/96 5.83 1,985,535
4,500,000 Indianapolis Power & Light Company ........................ 01/30/96 5.84 4,479,338
4,000,000 Interstate Power Company .................................. 01/26/96 5.88 3,984,028
4,000,000 J.C. Penney Funding, Inc. ................................. 01/31/96 5.82 3,981,067
4,000,000 Metlife Funding, Inc. ..................................... 01/19/96 5.80 3,988,680
3,900,000 Midamerican Energy Company ................................ 03/22/96 5.62 3,852,000
3,000,000 National Rural Utility Cooperative Finance Corporation .... 03/15/96 5.72 2,965,775
3,000,000 Prudential Funding Corporation ............................ 01/05/96 6.01 2,998,027
3,700,000 South Carolina Electric and Gas Company ................... 02/05/96 5.70 3,679,928
4,000,000 USAA Capital Corporation .................................. 02/14/96 5.74 3,972,622
4,000,000 Vereinsbank Financial, Inc. ............................... 01/23/96 5.84 3,986,067
4,000,000 Winn-Dixie Stores, Inc. ................................... 02/08/96 5.82 3,976,018
-----------
TOTAL COMMERCIAL PAPER (cost $79,924,646) ................. 79,924,646
-----------
ADJUSTABLE RATE NOTE: 4.5%
4,000,000 Community Health System, Inc. Series A
First Union National Bank* (cost $4,000,000) ............ 10/01/03 6.15 4,000,000
-----------
U.S. GOVERNMENT OBLIGATION: 0.7%
600,000 Treasury Bills (cost $589,223) ............................ 05/02/96 5.54 589,223
-----------
</TABLE>
2
<PAGE>
Lexington Money Market Trust
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1995 (continued)
<TABLE>
<CAPTION>
Yield to
Maturity
Principal Maturity on Date of Value
Amount Security Date Purchase (Note 1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER U.S. GOVERNMENT OBLIGATIONS: 4.9%
$1,800,000 Federal Home Loan Bank .................................... 02/13/96 5.72% $ 1,788,068
2,600,000 Federal Home Loan Mortgage Corporation .................... 02/05/96 5.73 2,585,895
-----------
TOTAL OTHER U.S. GOVERNMENT OBLIGATIONS
(cost $4,373,963) ....................................... 4,373,963
-----------
TOTAL INVESTMENTS: 100.1% (cost $88,887,832+) 88,887,832
Liabilities in excess of other assets: (0.1%) ............. (101,874)
-----------
TOTAL NET ASSETS: 100.0% (equivalent to
$1.00 per share on 88,785,958 shares outstanding) ....... $88,785,958
===========
*Seven day demand Floating Rate Note.
+Aggregate cost for Federal income tax purposes is identical.
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
3
<PAGE>
Lexington Money Market Trust
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<S> <C>
Assets
Investments, at value (cost $88,887,832) (Note 1) ............................ $ 88,887,832
Cash (Note 4) ................................................................ 204,111
Receivable for shares sold ................................................... 392,113
Interest receivable .......................................................... 47,791
------------
Total Assets ......................................................... 89,531,847
------------
Liabilities
Due to Lexington Management Corporation (Note 2) ............................. 52,483
Payable for shares redeemed .................................................. 599,920
Accrued expenses ............................................................. 93,486
------------
Total Liabilities .................................................... 745,889
------------
Net Assets (equivalent to $1.00 per share on 88,785,958 shares outstanding)
(Note 3) ................................................................... $ 88,785,958
============
Net Assets consist of:
Shares of beneficial interest-$.10 par value ................................. $ 8,878,596
Additional paid-in capital ................................................... 79,907,362
------------
Net Assets ........................................................... $ 88,785,958
============
</TABLE>
Lexington Money Market Trust
Statement of Operations
Year ended December 31, 1995
<TABLE>
<S> <C> <C>
Investment Income
Interest income .................................................... $ 5,641,637
Expenses
Investment advisory fee (Note 2) ............................... $473,889
Accounting and shareholder services expense (Note 2) ........... 162,060
Custodian and transfer agent expenses .......................... 160,235
Printing and mailing ........................................... 84,420
Directors' fees and expenses ................................... 11,270
Audit and Legal ................................................ 27,117
Registration fees .............................................. 32,330
Computer processing fees ....................................... 18,930
Other expenses ................................................. 51,760
---------
Total expenses ............................................. 1,022,011
Less: expenses recovered under contract with
investment adviser (Note 2) .............................. 73,268 948,743
--------- ------------
Net investment income ...................................... 4,692,894
------------
Increase in Net Assets Resulting from Operations ................... $ 4,692,894
============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
4
<PAGE>
Lexington Money Market Trust
Statements of Changes in Net Assets
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net investment income ................................................ $ 4,692,894 $ 3,344,928
Dividends to shareholders from net investment income ................. (4,692,894) (3,344,928)
Increase (decrease) in net assets from share transactions (Note 3) ... (23,018,771) 17,086,315
------------ ------------
Net increase (decrease) in net assets ................................ (23,018,771) 17,086,315
Net Assets
Beginning of period .............................................. 111,804,729 94,718,414
------------ ------------
End of period .................................................... $ 88,785,958 $111,804,729
============ ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
Lexington Money Market Trust
Notes to Financial Statements
December 31, 1995 and 1994
1. Significant Accounting Policies
Lexington Money Market Trust (the "Trust") is an open end diversified management
investment company registered under the Investment Company Act of 1940, as
amended. The Trust's investment objective is to seek a high level of current
income from short-term investments as is consistent with the preservation of
capital and liquidity. The following is a summary of significant accounting
policies followed by the Trust in the preparation of its financial statements:
Securities Security transactions are accounted for on a trade date basis.
Investments are valued at amortized cost, which approximates market value. Under
this valuation method, a portfolio instrument is valued at cost and any discount
or premium is amortized on a constant basis to the maturity of the instrument.
Interest income is accrued as earned.
Federal Income Taxes It is the Trust's intention 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 has been made.
Dividends Dividends are declared daily from net investment income and net
realized gain (loss) on investments.
2. Investment Advisory Fees and Other Transactions with Affiliate
The Trust pays an investment advisory fee to Lexington Management Corporation
(LMC) at the annual rate of 0.50% of that portion of the Trust's average daily
net assets up to $500 million and .45% of its average daily net assets in excess
of $500 million. LMC is required to reimburse the Trust for any expenses,
including the investment adviser's fee but excluding interest and taxes, in
excess of 1% of the Trust's average daily net assets. Reimbursement for the year
ended December 31, 1995 amounted to $73,268 and is set forth in the statement of
operations.
The Trust also reimburses LMC for certain expenses, including accounting and
shareholder servicing costs, which are incurred by the Trust but paid by LMC.
5
<PAGE>
Lexington Money Market Trust
Notes to Financial Statements
December 31, 1995 and 1994 (continued)
3. Shares of Beneficial Interest
Transactions (at $1.00 per share) in shares were as follows:
Year ended Year ended
December 31, December 31,
1995 1994
----------- -----------
Shares sold ........................... 171,612,305 205,550,508
Shares issued to shareholders
on reinvestment of dividends ........ 4,309,282 3,096,009
----------- -----------
175,921,587 208,646,517
Shares redeemed ....................... (198,940,358) (191,560,202)
----------- -----------
Net increase (decrease) ............... (23,018,771) 17,086,315
=========== ===========
4. Cash
In order to facilitate the clearing process for redemptions by check, the Trust
maintains a compensating balance with its transfer agent. At December 31, 1995,
this compensating balance amounted to $112,000 and is included in cash in the
statement of assets and liabilities.
----------------------
Lexington Money Market Trust
Financial Highlights
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income ..................... 0.0495 0.0330 0.0230 0.0299 0.0532
Less distributions:
Dividends from net investment income ...... (0.0495) (0.0330) (0.0230) (0.0299) (0.0532)
------- ------- ------- ------- -------
Net asset value, end of period .............. $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
Total return ................................ 5.06% 3.35% 2.32% 3.03% 5.45%
Ratio to average net assets:
Expenses, before reimbursement .......... 1.08% 1.02% 1.00% 1.03% 1.02%
Expenses, net of reimbursement .......... 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income,
before reimbursement .................. 4.87% 3.30% 2.30% 2.99% 5.35%
Net investment income,
including reimbursement ............... 4.95% 3.32% 2.30% 3.02% 5.37%
Net assets, end of period (000's omitted) ... $88,786 $111,805 $94,718 $111,453 $143,137
</TABLE>
6
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders
Lexington Money Market Trust:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Money Market
Trust as of December 31, 1995, the related statement of operations for the year
then ended, the statements 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 Trust'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
December 31, 1995 by correspondence with the custodian and brokers. 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 Money Market Trust as of December 31, 1995, 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
February 5, 1996
7
<PAGE>
Left Col.
Lexington
Money Market Trust
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
--------------------------------------------------
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
--------------------------------------------------
- --------------------------------------------------------------------------------
(800) 526-0052
"LEXLINE"
24 hour toll-free telephone access to your
Lexington Fund account
Price/Yield * Account Balances * Exchanges *
Last Transactions * Total Return * Duplicate Statements
- --------------------------------------------------------------------------------
This report has been prepared for the information of the shareholders of
Lexington Money Market Trust 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.
Right Col.
LEXINGTON
LEXINGTON
MONEY
MARKET
TRUST
(filled box)
Seeks a high level of current
income consistent with preservation
of capital and liquidity through
investments in interest bearing
short term money market
instruments.
(filled box)
ANNUAL REPORT
DECEMBER 31, 1995
The Lexington Group
of No Load
Investment Companies
