DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
Money market yields declined during the last quarter of 1998 as the Federal
Reserve lowered the Federal Funds rate on three separate occasions between
September and December. The targeted overnight money market interest rate closed
the year at 4.75% compared with 5.50% three months earlier. While Lexington
Money Market Trust returned 4.64%* for 1998 and 4.68% for 1997, the average
money market fund's yield fell from 4.90% in 1997 to 4.86% in 1998.
The second half of 1998 proved to be a difficult and challenging investment
environment. The need to insure safety and liquidity were key to the various
Federal Reserve easings. While the Federal Reserve's actions had an impact on
the very short end of the money market yield curve, there was virtually no
effect on the yield of longer money market securities. We do not anticipate
further Federal Reserve rate cuts in the early part of 1999. The stand pat
policy was demonstrated by the lack of action at the December 1998 Federal Open
Market Committee meeting and indicates that the Fed is on hold for now.
Moreover, barring a slowdown to below 2% growth, the Federal Reserve seems
inclined to remain on the sidelines well into 1999. Some even expect the Fed to
raise rates in the second half of the year if the domestic economy continues to
expand quite rapidly.
The consumer will continue to be the main engine of growth for the domestic
economy. Consumer confidence regained some lost ground during the fourth
quarter. The confident consumer will keep spending as long as the labor markets
remain strong and the stock market continues its impressive performance.
Additionally, many consumers recently refinanced their mortgages as lower rates
became available. A mortgage refinance is akin to a tax cut and, as such, puts
more money in the hands of the consumer.
On December 31, 1998, the average maturity of the Trust was 19 days compared
with 57 days for the typical money market fund. Since we do not anticipate a
change in the Federal Funds rate in the near future, we will continue to invest
daily maturities in shorter dated higher yielding securities. The Trust's
portfolio consists of 92% high-grade commercial paper supplemented by floating
rate demand notes.
We would like to thank our shareholders for their continued support and
appreciate your continued participation as a shareholder in the Trust.
Sincerely,
/s/ DENIS P. JAMISON /S/ROSEANN G. MCCARTHY /S/ ROBERT M. DEMICHELE
- -------------------- ---------------------- -----------------------
Denis P. Jamison Roseann G. McCarthy Robert M. DeMichele
Portfolio Manager Portfolio Manager President
February, 1999 February, 1999 February, 1999
* The average annual yield for the seven day period ended December 31, 1998 was
4.34%. Shares of the Trust are not insured or guaranteed by the U.S.
Government and there can be no assurance that the Trust 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, 1998
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL MATURITY ON DATE OF VALUE
AMOUNT SECURITY DATE PURCHASE (NOTE 1)
============== =================================================== ========== ============ =============
<S> <C> <C> <C> <C>
COMMERCIAL PAPER: 90.7%
$ 3,900,000 American Express Company .......................... 01/14/99 5.22% $ 3,892,803
4,000,000 American General Finance Corporation .............. 01/27/99 5.22 3,985,324
2,500,000 American Honda Finance Corporation ................ 01/29/99 5.22 2,490,142
1,500,000 American Honda Finance Corporation ................ 01/12/99 5.23 1,497,663
800,000 Bell Atlantic Network Funding, Inc. ............... 01/20/99 5.46 797,741
3,500,000 Bemis Company, Inc. ............................... 01/20/99 5.32 3,490,358
2,800,000 Block Financial Corporation ....................... 01/22/99 5.45 2,791,311
1,000,000 Block Financial Corporation ....................... 01/08/99 5.22 999,008
1,000,000 Central Illinois Light Company .................... 02/03/99 5.61 994,958
1,465,000 Central Illinois Light Company .................... 01/19/99 5.41 1,461,118
420,000 Central Illinois Light Company .................... 01/14/99 5.41 419,196
4,200,000 Chrysler Financial Company ........................ 02/11/99 5.39 4,174,935
4,000,000 CSC Enterprises ................................... 02/02/99 5.39 3,981,333
4,200,000 Deere and Company ................................. 01/15/99 5.42 4,191,343
1,000,000 Duke Capital Corporation .......................... 01/04/99 6.34 999,479
2,400,000 Ford Motor Credit Company ......................... 01/11/99 5.43 2,396,460
1,100,000 Ford Motor Credit Company ......................... 01/05/99 5.47 1,099,344
1,100,000 General Electric Capital Corporation .............. 02/10/99 5.37 1,093,608
1,000,000 General Electric Capital Corporation .............. 02/04/99 5.39 995,042
300,000 General Electric Capital Corporation .............. 01/11/99 5.41 299,558
1,500,000 General Motors Acceptance Corporation ............. 01/27/99 5.20 1,494,518
2,000,000 General Motors Acceptance Corporation ............. 01/20/99 5.27 1,994,564
4,000,000 IBM Corporation ................................... 01/19/99 5.36 3,989,500
4,000,000 Knight-Ridder, Inc. ............................... 01/13/99 5.61 3,992,667
4,000,000 Merrill Lynch and Company, Inc. ................... 01/28/99 5.24 3,984,700
254,000 Merrill Lynch and Company, Inc. ................... 01/15/99 5.22 253,497
4,300,000 Prudential Funding Corporation .................... 01/26/99 5.19 4,284,920
1,310,000 Procter and Gamble Company ........................ 01/22/99 5.13 1,306,164
3,000,000 Progress Capital Holdings, Inc. ................... 01/13/99 5.31 2,994,800
1,000,000 Progress Capital Holdings, Inc. ................... 01/13/99 5.30 998,270
1,400,000 Sears Roebuck Acceptance Corporation .............. 01/25/99 5.20 1,395,277
1,300,000 Sears Roebuck Acceptance Corporation .............. 01/11/99 5.43 1,298,086
3,000,000 USAA Capital Corporation .......................... 01/21/99 5.37 2,991,250
400,000 USAA Capital Corporation .......................... 01/21/99 5.32 398,844
3,200,000 Volkswagen of America, Inc. ....................... 01/04/99 5.33 3,198,600
2,700,000 Xerox Credit Corporation .......................... 01/12/99 5.36 2,695,669
-----------
TOTAL COMMERCIAL PAPER (cost $79,322,050).......... 79,322,050
-----------
</TABLE>
2
<PAGE>
LEXINGTON MONEY MARKET TRUST
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1998 (continued)
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL MATURITY ON DATE OF VALUE
AMOUNT SECURITY DATE PURCHASE (NOTE 1)
============== ======================================================= ========== ============ =============
<S> <C> <C> <C> <C>
ADJUSTABLE RATE NOTE: 8.2%
$ 3,200,000 Community Health System, Inc. Series A
First Union National Bank* ........................... 10/01/03 6.05% $ 3,200,000
4,000,000 Virginia State Housing Development Authority
Series C* ............................................ 01/01/47 6.00 4,000,000
-----------
TOTAL ADJUSTABLE RATE NOTE (cost $7,200,000)........... 7,200,000
-----------
TOTAL INVESTMENTS: 98.9%
(cost $86,522,050+) (Note 1).......................... 86,522,050
Other assets in excess of liabilities: 1.1% ........... 966,319
-----------
TOTAL NET ASSETS: 100.0% (equivalent to $1.00
per share on 87,488,369 shares outstanding) .......... $87,488,369
===========
</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, 1998
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $86,522,050) (Note 1) ....................................... $86,522,050
Cash .................................................................................... 82,980
Receivable for shares sold .............................................................. 1,267,478
Dividends and interest receivable ....................................................... 32,508
-----------
Total Assets ............................................................................ 87,905,016
-----------
LIABILITIES
Due to Lexington Management Corporation (Note 2) ........................................ 34,838
Payable for shares redeemed ............................................................. 283,206
Accrued expenses ........................................................................ 98,603
-----------
Total Liabilities ....................................................................... 416,647
-----------
NET ASSETS (equivalent to $1.00 per share on 87,488,369 shares outstanding)
(Note 3) .............................................................................. $87,488,369
===========
NET ASSETS consist of:
Shares of beneficial interest - $.10 par value per share ................................ $ 8,748,837
Additional paid-in capital - unlimited authorized shares of beneficial interest at no par
value .................................................................................. 78,739,532
-----------
TOTAL NET ASSETS ........................................................................ $87,488,369
===========
</TABLE>
LEXINGTON MONEY MARKET TRUST
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest income ....................................................... $5,067,649
EXPENSES
Investment advisory fee (Note 2) ................................... $ 455,434
Transfer agent and shareholder servicing expenses (Note 2) ......... 206,558
Accounting expenses (Note 2) ....................................... 83,150
Printing and mailing expenses ...................................... 59,720
Registration fees .................................................. 30,958
Professional fees .................................................. 30,415
Directors' fees and expenses ....................................... 20,984
Computer processing fees ........................................... 18,670
Custodian expenses ................................................. 16,060
Other expenses ..................................................... 37,129
---------
Total expenses .................................................... 959,078
Less: expenses recovered under contract with
investment adviser (Note 2) ...................................... (47,843) 911,235
--------- ----------
Net investment income ............................................. 4,156,414
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................... $4,156,414
==========
</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, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Net investment income .................................................... $ 4,156,414 $ 4,174,353
Distributions to shareholders from net investment income ................. (4,156,414) (4,174,353)
Decrease in net assets from capital share transactions (Note 3) .......... (7,660,816) (2,377,208)
------------ ------------
Net decrease in net assets ............................................... (7,660,816) (2,377,208)
NET ASSETS
Beginning of period .................................................... 95,149,185 97,526,393
------------ ------------
End of period .......................................................... $ 87,488,369 $ 95,149,185
============ ============
</TABLE>
LEXINGTON MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
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 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 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, 1998
amounted to $47,843 and is set forth in the statement of operations.
The Notes to Financial Statements are an integral part of these statements.
5
<PAGE>
LEXINGTON MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997 (continued)
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE (continued) The
Trust also reimburses LMC for certain expenses, including accounting and
shareholder servicing costs of $175,762 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
December 31, 1998 December 31, 1997
------------------- ------------------
<S> <C> <C>
Shares sold .................................... 88,962,867 116,527,395
Shares issued to shareholders on reinvestment of
dividends ..................................... 3,802,714 3,869,183
---------- -----------
92,765,581 120,396,578
Shares redeemed ................................ (100,426,397) (122,773,786)
------------ ------------
Net decrease ................................... (7,660,816) (2,377,208)
============ ============
</TABLE>
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, 1998,
this compensating balance amounted to $58,900 and is included in cash in the
statement of assets and liabilities.
5. TAX INFORMATION (UNAUDITED)
For the year ended December 31, 1998, the percentage of ordinary income
dividends paid by the Fund derived from agency and direct obligations of the
United States government were as follows:
U.S. Treasury............................... 0.10%
Federal Home Loan Bank...................... 1.94
- --------------------------------------------------------------------------------
LEXINGTON MONEY MARKET TRUST
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<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 ............................. 0.0455 0.0458 0.0441 0.0495 0.0330
Less distributions:
Distributions from net investment income .......... (0.0455) (0.0458) (0.0441) (0.0495) (0.0330)
-------- --------- --------- --------- ---------
Net asset value, end of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========= ========= ========= =========
Total return ....................................... 4.64* 4.68% 4.50% 5.06% 3.35%
Ratio to average net assets:
Expenses, before reimbursement or waivers ......... 1.05% 1.04% 1.04% 1.08% 1.02%
Expenses, net of reimbursement or waivers ......... 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income, before reimbursement
or waivers ....................................... 4.51% 4.55% 4.37% 4.87% 3.30%
Net investment income .............................. 4.56% 4.58% 4.41% 4.95% 3.32%
Net assets, end of period (000's omitted) .......... $ 87,488 $ 95,149 $ 97,526 $ 88,786 $111,805
</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, 1998, 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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998 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, 1998, 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 LLP
New York, New York
February 8, 1999
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
==============================
[GRAPHIC OMITTED]
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, 1998
The Lexington Group
of NO LOAD
Investment Companies
