DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
Money market yields rose in 1997. The Lexington Money Market Trust returned
4.68%* in 1997 versus 4.50% in 1996.
The Federal Reserve has been dormant. Inflation is diminishing. The recent surge
in job creation is not alarming because of the absence of price increases. The
latest Producer Price Index for December showed a 0.1% decrease in the price of
goods. The year over year Producer Price Index is down 1.2%. Deflation, not
inflation, should be a concern.
The Asian crisis also has a hand in keeping the Federal Reserve on hold. The
situation in Asia is worsening despite the International Monetary Fund's (IMF)
efforts to pump liquidity into these economies. The Federal Reserve is a keeper
of the world's reserve currency and, as such, must help maintain liquidity in
times of global crisis. This should prompt a decrease in the short-term interest
rates in the coming months.
We are buying longer dated money market instruments. On December 31, 1997, the
portfolio consisted of 91.3% higher rated commercial paper, 3.5% variable rate
demand notes and 1.2% U.S. Treasury bills. At year end, the Trust's maturity was
32 days. We are increasing the maturity in anticipation of a decrease in short
term interest rates.
We wish to thank all our shareholders for their continued loyalty. The
management of the Trust will strive to earn your support.
Sincerely,
/s/ Denis P. Jamison /s/ Robert M. DeMichele
- ---------------------- ------------------------
Denis P. Jamison Robert M. DeMichele
Portfolio Manage President
February, 1998 February, 1998
* The average annual yield for the seven day period ended December 31, 1997 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>
<TABLE>
<CAPTION>
LEXINGTON MONEY MARKET TRUST
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1997
Yield to
Maturity
Principal Maturity on Date of Value
Amount Security Date Purchase (Note 1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER: 91.3 %
$3,500,000 American Telephone & Telegraph Corporation .............. 03/09/98 5.80% $ 3,463,197
4,300,000 Avnet, Inc. ............................................. 02/13/98 5.89 4,270,519
3,900,000 Bay State Gas Company ................................... 01/29/98 5.88 3,882,558
1,700,000 Central Illinios Light Company .......................... 01/26/98 5.96 1,693,095
1,362,000 Central Louisiana Electric Company ...................... 02/03/98 5.86 1,354,821
3,400,000 Commercial Credit Company ............................... 01/13/98 5.78 3,393,597
3,500,000 Deutsche Bank Financial Corporation ..................... 02/02/98 5.82 3,482,360
2,000,000 Ford Motor Credit Corporation ........................... 01/07/98 5.80 1,998,110
1,000,000 Ford Motor Credit Corporation ........................... 01/16/98 5.66 997,708
3,200,000 General Electric Capital Corporation .................... 01/30/98 5.76 3,185,745
650,000 General Electric Capital Corporation .................... 01/30/98 5.71 647,094
2,200,000 General Motors Acceptance Corporation ................... 03/03/98 5.90 2,178,603
1,100,000 General Motors Acceptance Corporation ................... 03/05/98 5.85 1,089,047
3,400,000 Goldman Sachs Group LP .................................. 01/15/98 5.92 3,392,331
3,000,000 H.J. Heinz Corporation .................................. 02/11/98 5.88 2,980,354
4,000,000 IBM Credit Corporation .................................. 01/14/98 5.79 3,991,824
4,500,000 Madison Gas and Electric Company ........................ 01/12/98 5.86 4,492,094
4,000,000 Merrill Lynch Company ................................... 01/12/98 5.75 3,993,180
4,000,000 MetLife Funding, Inc. ................................... 01/06/98 5.71 3,996,900
1,030,000 MidAmerican Energy Company .............................. 02/25/98 5.94 1,020,873
4,000,000 Morgan Stanley Dean Witter .............................. 02/18/98 5.90 3,969,333
3,800,000 National Rural Utilities Co-op Finance Corporation ...... 02/06/98 5.73 3,778,986
1,500,000 Nicor, Inc. ............................................. 02/02/98 5.87 1,492,360
2,300,000 PHH Corporation ......................................... 01/23/98 5.70 2,292,227
4,300,000 Prudential Funding Corporation .......................... 01/05/98 5.73 4,297,324
1,600,000 Schering Corporation .................................... 02/03/98 5.78 1,591,728
4,300,000 Southwestern Public Service ............................. 02/06/98 5.87 4,275,361
4,000,000 USAA Capital Corporation ................................ 02/24/98 5.85 3,965,740
2,100,000 Vereinsbank Finance Delaware, Inc. ...................... 01/26/98 5.81 2,091,731
3,600,000 Winn-Dixie Stores, Inc. ................................. 02/10/98 5.84 3,577,200
-----------
TOTAL COMMERCIAL PAPER (cost $86,836,000) ............... $86,836,000
-----------
ADJUSTABLE RATE NOTE: 3.5 %
3,300,000 Community Health System, Inc. Series A
First Union National Bank* (cost $3,300,000) ............ 10/01/03 6.15 3,300,000
-----------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
LEXINGTON MONEY MARKET TRUST
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1997 (continued)
Yield to
Maturity
Principal Maturity on Date of Value
Amount Security Date Purchase (Note 1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATION: 1.2 %
$1,200,000 U.S. Treasury Bill (cost $1,164,475) .................... 07/23/98 5.48% $ 1,164,475
-----------
U.S. GOVERNMENT AGENCY OBLIGATION: 3.1%
3,000,000 Federal Home Loan Bank Bond (cost $2,997,254) ..... 02/13/98 6.04 2,997,254
-----------
TOTAL INVESTMENTS: 99.1% (COST $ 94,297,729+) ........... 94,297,729
Other assets in excess of liabilities: 0.9 % ............ 851,456
-----------
TOTAL NET ASSETS: 100.0% (equivalent to $1.00
per share on 95,149,185 shares outstanding) ........... $95,149,185
===========
*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, 1997
ASSETS
Investments, at value (cost $94,297,729) (Note 1) .. $94,297,729
Cash ............................................... 132,136
Receivable for shares sold ......................... 1,882,993
Dividends and interest receivable .................. 76,315
-----------
Total Assets ................... 96,389,173
-----------
LIABILITIES
Due to Lexington Management Corporation (Note 2) ... 54,651
Payable for shares redeemed ........................ 1,095,371
Accrued expenses ................................... 89,966
-----------
Total Liabilities .............. 1,239,988
-----------
NET ASSETS (equivalent to $1.00 per share on
95,149,185 shares outstanding)(Note 3) ........... $95,149,185
===========
NET ASSETS consist of:
Shares of beneficial interest-- $.10 par value ..... $ 9,514,920
Additional paid in capital ......................... 85,634,265
-----------
Total Net Assets ............... $95,149,185
===========
<TABLE>
<CAPTION>
LEXINGTON MONEY MARKET TRUST
STATEMENT OF OPERATIONS
Year ended December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest income .............................................. $5,086,568
EXPENSES
Investment advisory fee (Note 2) ............................. $ 455,446
Transfer agent and shareholder servicing expense (Note 2) .. 195,165
Accounting expenses (Note 2) ............................... 70,485
Printing and mailing expense ............................... 62,965
Registration fees .......................................... 33,900
Professional fees .......................................... 23,650
Directors' fees and expenses ............................... 19,950
Computer processing fees ................................... 18,120
Custodian expense .......................................... 15,959
Other expenses ............................................. 48,098
--------
Total expenses ........................................... 943,738
Less: expenses recovered under contract with
investment adviser (Note 2) ............................ (31,523) 912,215
-------- ----------
Net investment income .................................... $4,174,353
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $4,174,353
==========
The Notes to FinancialStatements are an integral part of these statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
LEXINGTON MONEY MARKET TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
------------ ------------
<S> <C> <C>
Net investment income .................................. $ 4,174,353 $ 4,279,666
Distributions to shareholders from net investment income (4,174,353) (4,279,666)
Increase (decrease) in net assets from capital share
transactions (Note 3) ................................ (2,377,208) 8,740,435
------------ ------------
Net increase (decrease) in net assets .................. (2,377,208) 8,740,435
NET ASSETS
Beginning of period ..................... 97,526,393 88,785,958
------------ ------------
End of period ........................... $ 95,149,185 $ 97,526,393
============ ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
LEXINGTON MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
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.
DIVIDENDS 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 operatons 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 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, 1997 amounted to $31,523 and is set forth in the statement of operations.
5
<PAGE>
LEXINGTON MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996 (continued)
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE (CONTINUED)
The Trust reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs of $73,124 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:
Year ended Year ended
December 31, December 31,
1997 1996
------------ ------------
Shares sold .................... 116,527,395 159,959,288
Shares issued to shareholders
on reinvestment of dividends.. 3,869,183 3,877,797
------------ ------------
120,396,578 163,837,085
Shares redeemed ................ (122,773,786) (155,096,650)
------------ ------------
Net increase (decrease) ........ (2,377,208) 8,740,435
============ ============
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, 1997,
this compensating balance amounted to $118,900 and is included in cash in the
statement of assets and liabilities.
-----------------------
<TABLE>
<CAPTION>
LEXINGTON MONEY MARKET TRUST
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
Year ended December 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- -------- -------
<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 ............................ 0.0458 0.0441 0.0495 0.0330 0.0230
Less distributions:
Distributions from net investment income ............ (0.0458) (0.0441) (0.0495) (0.0330) (0.0230)
------- ------- ------- -------- -------
Net asset value, end of period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======== =======
Total return ........................................ 4.68% 4.50% 5.06% 3.35% 2.32%
Ratio to average net assets:
Expenses, before reimbursement
or waivers ................................... 1.04% 1.04% 1.08% 1.02% 1.00%
Expenses, net of reimbursement
or waivers ................................... 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income,
before reimbursement or waivers .............. 4.55% 4.37% 4.87% 3.30% 2.30%
Net investment income .......................... 4.58% 4.41% 4.95% 3.32% 2.30%
Net assets, end of period (000's omitted) ........... $95,149 $97,526 $88,786 $111,805 $94,718
</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, 1997, 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, 1997 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, 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
February 12, 1998
7
<PAGE>
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.
- --------------------------------------------------------------------------------
LEXINGTON
- --------------------------------------------------------------------------------
================================================================================
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, 1997
The Lexington Group
of No Load
Investment Companies
================================================================================
