[LOGO OF LINCOLN FINANCIAL GROUP]
Lincoln National
Money Market Fund, Inc.
Semi-Annual Report
June 30, 1999
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Lincoln National Money Market Fund, Inc.
Index
Commentary
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
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Lincoln National Money Market Fund, Inc.
Managed by: [LOGO OF LINCOLN FINANCIAL GROUP]
The Fund had a return of 2.2% for the first six months of 1999 while its
benchmark, the Salomon Brothers 90 day T-Bill Index, returned 2.2% for the same
period.
Even with a strong U.S. economy, the Federal Reserve was able to hold the Fed
Funds target at 4.75% for most of the first six months of the year as wage and
price inflation remained at low levels. While domestic demand was very strong, a
combination of fast rising productivity, a flood of goods from abroad, and more
intensive use of labor prevented the economy from overheating. The employment
cost index rose 0.4% in the first quarter, the smallest increase since the
government began tracking the figure in 1982.
On May 18, the Federal Open Market Committee announced a bias toward higher
borrowing costs after becoming concerned about the potential for a buildup of
inflationary imbalances that could undermine the favorable performance of the
economy. This change in posture was announced just days after the government
reported consumer prices rose in April by the largest amount in nine years. As
the market expected, the Federal Reserve policy makers raised the Fed Funds
target a quarter point to 5.0% on June 30.
Jil Schoeff Lindholm
Results represent past performance and should not be considered representative
of future results.
Source of comparison data: Federal Reserve statistical release
Money Market Fund 1
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Lincoln National
Money Market Fund, Inc.
Statement of Net Assets - Unaudited
June 30, 1999
Investments:
Par Market
Money Market Instruments: Amount Value
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Automobile & Auto Parts: 12.8%
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DaimlerChysler North America
4.88%, 7/9/99 $4,000,000 $ 3,995,751
4.89%, 7/26/99 4,000,000 3,986,611
General Motors Acceptance Corporation
5.00%, 9/29/99 5,600,000 5,531,120
Volkswagen of America
4.90%, 8/9/99 8,000,000 7,958,292
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21,471,774
Banking, Finance & Insurance: 66.8%
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Abbey National
4.95%, 11/9/99 7,000,000 7,000,000
American Express Centurion
4.91%, 5/8/00 7,500,000 7,500,000
American Honda Finance
4.92%, 7/7/99 1,000,000 999,183
5.00%, 7/27/99 1,100,000 1,100,000
5.08%, 10/27/99 6,000,000 6,000,000
Bank of Scotland
5.65%, 8/18/99 4,000,000 4,000,000
4.95%, 12/31/99 1,000,000 1,000,000
Citicorp
9.75%, 8/1/99 3,500,000 3,513,572
Equitable Life
5.05%, 3/20/00 7,000,000 7,000,000
First National Bank of Chicago
4.92%, 12/30/99 7,500,000 7,500,000
GTE Funding
5.15%, 7/19/99 1,000,000 997,435
Key Bank NA
5.00%, 9/23/99 5,000,000 4,999,716
Marsh USA
5.14%, 7/23/99 8,000,000 8,000,000
Moat Funding
4.98%, 7/6/99 4,000,000 3,997,244
4.99%, 7/14/99 2,156,000 2,152,138
5.22%, 7/27/99 2,000,000 1,992,489
Morgan (JP)
4.96%, 12/10/99 6,000,000 5,869,860
PNC Bank
4.82%, 8/3/99 5,000,000 4,999,699
Prudential Funding
4.86%, 7/12/99 4,500,000 4,493,400
Salomon Smith Barney
4.86%, 7/6/99 4,000,000 3,997,322
Suntrust Bank
5.16%, 7/12/99 7,000,000 6,988,985
UBS Finance
4.94%, 10/12/99 7,000,000 6,904,268
Wells Fargo
4.87%, 7/14/99 6,000,000 5,989,578
Wilmington Trust
5.07%, 11/24/99 5,000,000 5,000,000
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111,994,889
Building & Materials: 2.4%
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Flour Corporation
5.02%, 7/8/99 4,000,000 4,000,000
Energy: 7.2%
Consolidated Natural Gas
5.07%, 7/15/99 4,000,000 3,992,144
Halliburton
5.04%, 7/19/99 2,600,000 2,593,475
4.90%, 7/28/99 1,500,000 1,494,521
5.04%, 7/28/99 4,000,000 3,984,970
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12,065,110
Par Market
Amount Value
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Industrial Machinery: 4.8%
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Caterpillar
5.85%, 7/1/99 $8,000,000 $ 8,000,000
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Leisure, Lodging & Entertainment: 5.0%
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Disney
5.01%, 9/20/99 4,000,000 3,956,170
4.93%, 11/4/99 4,500,000 4,424,400
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8,380,570
Total Money Market Instruments: 99.0%
(Cost $165,912,343) 165,912,343
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Other Assets over Liabilities: 1.0% 1,615,513
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Net Assets: 100%
(Equivalent to $10.000 per share
based on 16,752,786 shares issued
and outstanding) $167,527,856
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Components of Net Assets at June 30, 1999:
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Common Stock, $.01 par value 50,000,000
authorized shares 167,528
Paid in capital in excess of par value
of shares issued 167,360,328
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Total Net Assets $167,527,856
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See accompanying notes to financial statements.
Money Market Fund 2
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Lincoln National Money Market Fund, Inc.
Statement of Operations - Unaudited
Six months ended June 30, 1999
Investment income:
Interest $3,958,519
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Total investment income 3,958,519
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Expenses:
Management fees 379,369
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Accounting fees 32,000
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Printing and postage 18,900
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Custody fees 7,153
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Directors fees 2,100
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Other 3,757
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443,279
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Less expenses paid indirectly (3,422)
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Total expenses 439,857
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Net investment income 3,518,662
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Net realized gain on investment transactions:
Net realized gain on:
Investment transactions 806
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Net realized gain on investment transactions 806
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Net increase in net assets
resulting from operations $3,519,468
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Statements of Changes in Net Assets
Six months
ended Year ended
6/30/99 12/31/98
(Unaudited)
------------------------------
Changes from operations:
Net investment income $ 3,518,662 $ 5,350,196
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Net realized gain on investments 806 2,902
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Net increase in net assets
resulting from operations 3,519,468 5,353,098
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Distributions to shareholders from:
Net investment income (3,519,468) (5,353,098)
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Total distributions to shareholders (3,519,468) (5,353,098)
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Net increase in net assets
resulting from capital share transactions 30,466,051 47,835,173
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Total increase in net assets 30,466,051 47,835,173
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Net Assets, at beginning of period 137,061,805 89,226,632
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Net Assets, at end of period $167,527,856 $137,061,805
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See accompanying notes to financial statements.
Money Market Fund 3
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Lincoln National Money Market Fund, Inc.
Financial Highlights
(Selected data for each capital share outstanding throughout each period)
<TABLE>
<CAPTION>
Six months
ended
6/30/99 Year ended December 31,
(Unaudited) 1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.000 $ 10.000 $10.000 $10.000 $10.000 $10.000
Income from investment operations:
Net investment income 0.220 0.497 0.501 0.505 0.570 0.381
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Total from investment operations 0.220 0.497 0.501 0.505 0.570 0.381
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Less dividends and distributions:
Dividends from net investment income (0.220) (0.497) (0.501) (0.505) (0.570) (0.381)
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Total dividends and distributions (0.220) (0.497) (0.501) (0.505) (0.570) (0.381)
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Net asset value, end of period $ 10.000 $10.000 $10.000 $10.000 $10.000 $10.000
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Total Return(1) 2.22% 5.10% 5.13% 5.07% 5.67% 3.82%
Ratios and supplemental data:
Ratio of expenses to average net assets 0.56%(2) 0.58% 0.59% 0.57% 0.52% 0.52%
Ratio of net investment income
to average net assets 4.47%(2) 4.97% 5.01% 5.07% 5.67% 3.82%
Net assets, end of period (000 omitted) $167,528 $137,062 $89,227 $90,358 $75,319 $77,177
</TABLE>
(1) Total return percentages in this table are calculated on the basis
prescribed by the Securities and Exchange Commission. These percentages are
based on the underlying mutual fund shares. The total return percentages in
the table are NOT calculated on the same basis as the performance
percentages in the letter at the front of this booklet (those percentages
are based upon the change in unit value).
(2) Annualized
See accompanying notes to financial statements.
Money Market Fund 4
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Lincoln National Money Market Fund, Inc.
Notes to Financial Statements - Unaudited
June 30, 1999
The Fund: Lincoln National Money Market Fund, Inc. (the "Fund") is registered as
an open-end, diversified management company under the Investment Company Act of
1940, as amended. The Fund's shares are sold only to The Lincoln National Life
Insurance Company and Lincoln Life & Annuity Company of New York (the
"Companies") for allocation to their variable annuity products and variable
universal life products.
The Fund's investment objective is to maximize current income consistent with
the preservation of capital. The Fund invests in short-term obligations issued
by U.S. corporations, the U.S. Government, and federally chartered banks and
U.S. branches of foreign banks.
1. Significant Accounting Policies
Investment Valuation: Portfolio securities are stated at amortized cost, which
approximates market value.
Investment Transactions and Investment Income: Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis and includes amortization of any premium and discount. Realized gains or
losses from investment transactions are reported on an identified cost basis.
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.
Expenses: The custodian bank of the Fund has agreed to waive its custodial fees
when the Fund maintains a prescribed amount of cash on deposit in certain
non-interest bearing accounts. For the six months ended June 30, 1999, the
custodial fees offset arrangements amounted to $3,422.
Taxes: The Fund has complied with the special provisions of the Internal Revenue
Code for regulated investment companies. As such, the Fund is not subject to
U.S. federal income taxes to the extent that it distributes all of its taxable
income for its fiscal year.
2. Management Fees and Other Transactions With Affiliates
Lincoln Investment Management Company (the "Advisor") and its affiliates manage
the Fund's investment portfolios and maintain its accounts and records. For
these services, the Advisor receives a management fee at an annual rate of .48%
of the first $200,000,000 of the average daily net assets of the Fund, .40% of
the next $200,000,000, and .30% of the average daily net assets of the Fund in
excess of $400,000,000.
Delaware Service Company ("Delaware"), an affiliate of the Advisor, provides
accounting services and other administration support to the Fund. For these
services, the Fund pays Delaware a monthly fee based on average net assets,
subject to certain minimums.
If the aggregate annual expenses of the Fund, including the management fee, but
excluding taxes, interest, brokerage commissions relating to the purchase or
sale of portfolio securities and extraordinary non-recurring expenses, exceed
1.50% of the average daily net assets of the Fund, the Advisor will reimburse
the Fund in the amount of such excess. No reimbursement was due for the six
months ended June 30, 1999.
Certain officers and directors of the Fund are also officers or directors of the
Companies and receive no compensation from the Fund. The compensation of
unaffiliated directors of the Fund is borne by the Fund.
3. Investments
The cost of investments for federal income tax purposes approximates cost for
book purposes.
4. Credit and Market Risks
The Fund had investments in securities issued by banks, including foreign banks,
foreign branches of domestic banks, and other financial institutions
representing 66.8% of net assets at June 30, 1999. The ability of these entities
to meet their obligations may be affected by economic conditions related to the
industry.
Money Market Fund 5
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Notes to Financial Statements - Unaudited - (Continued)
5. Summary of Changes From Capital Share Transactions
<TABLE>
<CAPTION>
Shares Issued Upon Net Increase
Capital Reinvestment of Capital Shares Resulting From Capital
Shares Sold Dividends Redeemed Share Transactions
Shares Amount Shares Amount Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six months ended
June 30, 1999 (unaudited): 18,982,057 $189,820,568 351,947 $3,519,468 (16,287,398) $(162,873,985) 3,046,606 $30,466,051
Year ended
December 31, 1998: 11,286,351 112,863,514 535,310 5,353,098 (7,038,144) (70,381,439) 4,783,517 47,835,173
</TABLE>
6. Distributions to Shareholders
The Fund declares and distributes dividends on net investment income daily.
Distributions of net realized gains, if any, are declared and distributed
annually.
Money Market Fund 6
