DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
Money market yields were stable throughout 1996 albeit at a lower level
than in the prior year. The typical money market fund according to a major
rating service saw its yield shrink by sixty basis points year to year. The
Lexington Money Market Trust returned 4.50%* in 1996 compared with 5.05% in
1995. A modest improvement in money market yields is probable in the months
ahead.
Federal Reserve has kept a steady hand on monetary policy. It has changed
the Discount Rate only once in the last two years--a 25 basis point reduction to
5.0% last February in its rate on overnight bank loans. Its target for the
Federal Funds rate--now 5.25%--has been equally consistent. Given the
underpinning of these administered interest rates, it isn't surprising that open
market interest rates varied little in 1996. For example, the average return for
30-day top tier commercial paper (corporate IOU's) varied between 5.15% and
5.35% for all of 1996. (This excluded the usual wide yield swings at year-end).
Commercial paper is the principal investment of most money market mutual funds,
including the Lexington Money Market Trust.
Most economists forecast a twenty-five basis point hike in the Federal
Funds rate sometime during the March quarter. Their action would be in response
to the strong employment and economic growth reported in recent months. Clearly,
these factors increase the risk of higher inflation. It is generally thought,
however, that even a modest rise in interest rates will quickly cool off the
economy. For money market fund shareholders, a rise in the Federal Funds rate
will be reflected in the yield of their investment. Since the market offers
little additional return to buy longer dated money market instruments, we are
keeping the average maturity of the portfolio relatively low in anticipation of
the hike in short term interest rates.
While absolute returns for money market funds may look small, they are
generous by historical standards. Last year, the Trust's return exceeded the
rate of inflation (as measured by the Consumer Price Index) by 1.5%. Over the
last seventy years, the inflation adjusted rate of return for U.S. Treasury
bills has been about 0.5%. Since the long term prospect of inflation remains
benign, it isn't reasonable to expect any significant increase in money market
yields. The value which money market funds provide to a diversified investment
portfolio are in their price stability and liquidity. These are the primary
objectives of the Lexington Money Market Trust and our investments are
consistent with these goals.
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS HELD NOVEMBER 12, 1996 (unaudited)
Total Outstanding Shares as of September 10, 1996: 96,613,447
1.Trustees Elected: S.M.S. Chadha, Robert M.DeMichele,Beverly C. Duer, Barbara
R.Evans, Lawrence Kantor, Jerard F. Maher, Andrew M.McCosh, Donald B. Miller,
John G. Preston, Margaret W. Russell and Philip C. Smith
For All Nominees:47,337,997 Withheld Authority: 1,802,702
<TABLE>
<CAPTION>
VOTES VOTES
VOTES FOR AGAINST ABSTAINED
-------- ------- --------
<S> <C> <C> <C>
2. Selection of KPMG Peat Marwick LLP as Independent Auditors 46,657,027 192,438 2,291,234
</TABLE>
Sincerely,
/s/ Denis P. Jamison /s/ Robert M. DeMichele
------------------------ ------------------------
Denis P. Jamison Robert M. DeMichele
Portfolio Manager President
February, 1997 February, 1997
* The average annual yield for the seven day period ended December 31, 1996 was
4.50%. 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, 1996
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL MATURITY ON DATE OF VALUE
AMOUNT SECURITY DATE PURCHASE (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER: 91.5%
$3,400,000 Air Products and Chemicals, Inc. .................... 01/17/97 5.45% $ 3,391,945
1,500,000 American Express Credit Corporation ................. 01/06/97 6.09 1,498,750
4,500,000 Avnet, Inc. ......................................... 02/18/97 5.58 4,467,300
4,400,000 Bay States Gas Company .............................. 01/16/97 5.44 4,390,247
1,950,000 Bellsouth Telecommunications, Inc. .................. 02/14/97 5.47 1,937,249
3,000,000 Centric Funding Corporation ......................... 04/23/97 5.46 2,950,720
4,500,000 Englehard Corporation ............................... 02/24/97 5.46 4,464,023
1,400,000 Ford Motor Credit Corporation ....................... 01/10/97 5.44 1,398,142
1,400,000 Ford Motor Credit Corporation ....................... 01/15/97 5.43 1,397,109
600,000 Ford Motor Credit Corporation ....................... 01/15/97 5.44 598,760
1,100,000 Ford Motor Credit Corporation ....................... 01/29/97 5.44 1,095,457
3,300,000 General Electric Capital Corporation ................ 01/22/97 5.44 3,289,778
4,500,000 H.J. Heinz Company .................................. 01/10/97 5.47 4,493,970
4,100,000 IBMCredit Corporation ............................... 01/24/97 5.42 4,086,117
2,600,000 John Deere Capital Corporation ...................... 01/08/97 5.42 2,597,315
4,500,000 MetLife Funding, Inc. ............................... 01/13/97 5.44 4,492,050
4,000,000 Pacific Gas &Electric Company ....................... 01/28/97 5.63 3,983,440
4,000,000 PepsiCo, Inc. ....................................... 01/31/97 5.61 3,981,667
4,500,000 Prudential Funding Corporation ...................... 01/14/97 5.43 4,491,388
4,500,000 Southern California Edison Company .................. 01/10/97 5.41 4,494,038
4,450,000 USAA Capital Corporation ............................ 01/09/97 5.43 4,444,769
3,000,000 U.S. Central Credit Union ........................... 01/21/97 5.43 2,991,166
4,500,000 U.S. West Communications, Inc. ...................... 01/17/97 5.43 4,489,400
4,500,000 Vereinsbank Finance (Delaware), Inc. ................ 01/09/97 5.49 4,494,610
2,600,000 Washington Gas Light Company ........................ 01/13/97 5.42 2,595,398
2,300,000 Winn-Dixie Stores, Inc. ............................. 01/28/97 5.44 2,290,858
4,500,000 Xerox Corporation ................................... 01/23/97 5.43 4,485,425
----------
TOTAL COMMERCIAL PAPER (cost $89,291,091) 89,291,091
----------
ADJUSTABLE RATE NOTE: 3.7%
3.600,000 Community Health System, Inc. Series A
First Union National Bank* (cost $3,600,000) ........ 10/01/03 5.90 3,600,000
----------
U.S. GOVERNMENT OBLIGATION: 1.8%
1,800,000 Treasury Bills (cost $1,746,246) .................... 07/24/97 5.53 1,746,246
----------
</TABLE>
2
<PAGE>
LEXINGTON MONEY MARKET TRUST
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1996 (continued)
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL MATURITY ON DATE OF VALUE
AMOUNT SECURITY DATE PURCHASE (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------
OTHER U.S. GOVERNMENT OBLIGATIONS: 3.1%
<S> <C> <C> <C> <C> <C>
$3,000,000 Federal Home Loan Mortgage Corporation (cost $2,999,550) 01/02/97 5.49% $ 2,999,550
-----------
TOTAL INVESTMENTS: 100.1% (cost $97,636,887+) ....... 97,636,887
Liabilities in excess of other assets: (0.1%) ....... (110,494)
-----------
TOTAL NET ASSETS: 100.0% (equivalent to $1.00
per share on 97,526,393 shares outstanding) ......... $97,526,393
===========
</TABLE>
*Seven day demand Floating Rate Note.
+Aggregate cost for Federal income tax purposes is identical.
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, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments, at value (cost $97,636,887) (Note 1) $ 97,636,887
Cash (Note 4) ......................................................................... 184,491
Receivable for shares sold ............................................................ 245,843
Dividends and interest receivable ..................................................... 15,475
------------
Total Assets ........................................................... 98,082,696
------------
LIABILITIES
Due to Lexington Management Corporation (Note 2) ...................................... 49,106
Payable for shares redeemed ........................................................... 410,733
Accrued expenses ...................................................................... 96,464
------------
Total Liabilities 556,303
------------
NET ASSETS (equivalent to $1.00 per share on 97,526,393 shares outstanding)
(Note 3) ............................................................................ $ 97,526,393
============
NET ASSETS consist of:
Shares of beneficial interest--$.10 par value ......................................... $ 9,752,640
Additional paid-in capital ............................................................ 87,773,753
-----------
Total Net Assets ....................................................... $ 97,526,393
============
</TABLE>
LEXINGTON MONEY MARKET TRUST
STATEMENT OF OPERATIONS
Year ended December 31, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Interest income ........................................................ $ 5,251,888
EXPENSES
Investment advisory fee (Note 2) .................................. $485,139
Transfer agent and shareholder servicing expenses (Note 2) ........ 206,467
Printing and mailing expenses ..................................... 90,295
Accounting expenses (Note 2) ...................................... 69,205
Professional fees ................................................. 32,135
Registration fees ................................................. 27,580
Computer processing fees .......................................... 19,730
Directors' fees and expenses ...................................... 18,710
Custodian fees .................................................... 17,495
Other expenses .................................................... 40,575
-------
Total expenses .......................................... 1,007,331
Less: expenses recovered under contract with
investment adviser (Note 2) ........................... 35,109 972,222
------- ------------
Net investment income ................................... 4,279,666
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................... $ 4,279,666
============
</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, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
Net investment income ......................................................... $ 4,279,666 $ 4,692,894
Distribution to shareholders from net investment income ....................... (4,279,666) (4,692,894)
Increase (decrease) in net assets from share transactions (Note 3) ............ 8,740,435 (23,018,771)
----------- ------------
Net increase (decrease) in net assets ......................................... 8,740,435 (23,018,771)
NET ASSETS
Beginning of period ............................................ 88,785,958 111,804,729
----------- ------------
End of period .................................................. $97,526,393 $ 88,785,958
=========== ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
LEXINGTON MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
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:
INVESTMENTS 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 is required.
DISTRIBUTIONS Dividends are declared daily from the total of net
investment income and net realized gain (loss) on investments.
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 Trust pays an investment advisory fee to Lexington Management
Corporation ("LMC") at an annual rate of 0.50% of the Trust's average daily net
assets up to $500 million and 0.45% of its average daily net assets in excess of
$500 million. LMC is required, in accordance with the investment advisory
agreement, to reimburse the Trust for any expenses, including the investment
adviser's fee but excluding interest and taxes, in excess of 1.0% of the Trust's
average daily net assets. Reimbursement for the year ended December 31, 1996
amounted to $35,109 and is set forth in the statement of operations.
5
<PAGE>
LEXINGTON MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995 (continued)
The Trust also reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs of $147,240 which are incurred by the Trust, but
paid by LMC.
3. SHARES OF BENEFICIAL INTEREST
Transactions (at $1.00 per share) in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
1996 1995
----------- -----------
<S> <C> <C>
Shares sold ............................................... 159,959,288 171,612,305
Shares issued to shareholders
on reinvestment of dividends ............................ 3,877,797 4,309,282
----------- -----------
163,837,085 175,921,587
Shares redeemed ........................................... (155,096,650) (198,940,358)
----------- -----------
Net increase (decrease) ................................... 8,740,435 (23,018,771)
=========== ===========
</TABLE>
4. CASH
In order to facilitate the clearing process by check, the Trust maintains a
compensating balance with its transfer agent. At December 31, 1996, this
compensating balance amounted to $138,100 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>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994 1993 1992
---------- -------- -------- -------- --------
<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 .......................... 0.0441 0.0495 0.0330 0.0230 0.0299
Less distributions:
Distributions from net investment income ....... (0.0441) (0.0495) (0.0330) (0.0230) (0.0299)
------- ------- ------- ------- -------
Net asset value, end of period .................... $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
Total return ...................................... 4.50% 5.06% 3.35% 2.32% 3.03%
Ratio to average net assets:
Expenses, before reimbursement
or waivers ................................. 1.04% 1.08% 1.02% 1.00% 1.03%
Expenses, net of reimbursement
or waivers ................................. 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income,
before reimbursement or waivers ............ 4.37% 4.87% 3.30% 2.30% 2.99%
Net investment income, ....................... 4.41% 4.95% 3.32% 2.30% 3.02%
Net assets, end of period (000's omitted) ......... $97,526 $88,786 $111,805 $94,718 $111,453
</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, 1996, 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, 1996 by correspondence with the custodian. 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, 1996, 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 14, 1997
7
<PAGE>
LEXINGTON
- --------------------------------------------------------------------------------
[LOGO]
LEXINGTON
MONEY MARKET TRUST
---------------
Seeks a high level of current
income consistent with preservation
of capital and liquidity through
investments in interest bearing
short term money market
instruments.
---------------
ANNUAL REPORT
DECEMBER 31, 1996
The Lexington Group
of No Load
Investment Companies
- --------------------------------------------------------------------------------
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 o Account Balances o Exchanges o
Last Transactions o Total Return o 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.
