[LOGO OF LINCOLN FINANCIAL GROUP]
Lincoln National
Money Market Fund, Inc.
Annual Report
December 31, 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
Report of Ernst & Young LLP, Independent Auditors
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Lincoln National Money Market Fund, Inc.
Managed by: [LOGO OF LINCOLN FINANCIAL GROUP]
The fund had a return of 4.6% for the 1999 fiscal year while its benchmark, the
Salomon Brothers 90 day T-Bill Index*, returned 4.7% for the same period.
With improving foreign economies coupled with strong domestic economic growth,
the central bank raised short-term interest rates three times in 1999 for a
total of 0.75%. The three interest-rate increases were mostly intended to undo
the rate cuts it made last year in the wake of a financial market crisis caused
by Russia's devaluing the ruble and defaulting on its debt. The last rate hike
of the year was on November 16 when the rate was increased 0.25% to 5.50%. As
expected by the market, due to Y2K concerns and market liquidity, the Fed Funds
target was maintained at 5.50% for the remainder of the year.
The fourth quarter presented some interesting market dynamics as companies were
willing to pay up to get their borrowing completed early. Many investors also
maintained a sizable overnight cash position in preparation for unforeseen
liquidity needs. With so much cash rolling overnight, the Fed Funds rate traded
well below its target during December, 5.30% vs. 5.50%. During the last few days
of the year product dried up and we saw overnight investments as low as 2.00%,
the exact opposite of what normally occurs at year-end.
Jil Schoeff Lindholm
Results represent past performance and should not be considered representative
of future results. Source of comparison data: Federal Reserve statistical
release
* Salomon Brothers 90 Day T-Bill Index - Measures the return on short term
securities. An investor cannot invest directly in the above index/indexes,
which is/are unmanaged.
Money Market Fund 1
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Lincoln National
Money Market Fund, Inc.
Statement of Net Assets
December 31, 1999
Investments:
Par Market
Money Market Instruments: Amount Value
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Automobile & Auto Parts: 12.9%
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Daimler Chrysler North America
5.82% 3/31/00 $10,000,000 $ 9,854,500
General Motors Acceptance Corporation
5.93% 2/17/00 6,700,000 6,648,130
5.84% 2/25/00 3,502,000 3,470,754
Volkswagen of America
5.92% 1/18/00 3,294,000 3,284,791
5.72% 1/31/00 7,000,000 6,966,633
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30,224,808
Banking, Finance & Insurance: 69.4%
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American Express Centurion
5.17% 5/8/00 7,500,000 7,500,000
American Honda Finance
5.94% 1/24/00 6,900,000 6,900,000
Associates Corporation NA
4.00% 1/3/00 6,400,000 6,400,000
Bank of Scotland
5.97% 6/1/00 5,000,000 5,000,000
Citicorp Medium Term Note Series F
6.51% 8/2/00 10,000,000 9,998,197
Equitable Life Assurance Society
6.25% 3/20/00 3,000,000 3,000,000
6.23% 3/20/00 7,000,000 7,000,000
General Electric Capital Corporation
6.40% 2/2/00 6,000,00 5,965,867
General Electric Capital Corporation
Series MTNA
5.84% 3/30/00 5,000,000 4,996,810
General Electric Company
4.43% 1/3/00 7,000,000 7,000,000
GTE Funding
6.28% 2/16/00 7,600,000 7,539,014
International Lease Finance
5.80% 2/23/00 10,000,00 9,914,611
Marsh USA
5.75% 6/16/00 2,000,000 1,946,653
5.52% 4/25/00 8,000,000 7,858,934
Merrill Lynch
5.85% 3/13/00 10,000,000 9,883,000
M & I Bank Southern Wisconsin
6.36% 10/26/00 10,000,000 10,000,000
Moat Funding
6.32% 1/14/00 4,000,000 3,990,871
6.25% 1/14/00 6,000,000 5,986,458
Morgan (J.P.)
6.04% 2/8/00 10,000,000 9,936,244
PNC Bank
5.35% 7/12/00 10,000,000 9,992,119
Prudential Insurance Company of America
6.15% 5/1/00 10,000,000 10,000,000
US Bancorp
6.46% 6/21/00 8,000,000 8,000,000
Wilmington Trust
6.00% 8/23/00 4,000,000 4,000,000
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162,808,778
Leisure, Lodging & Entertainment: 1.2%
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Disney
5.86% 1/26/00 3,000,000 2,987,792
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Telecommunications: 16.2%
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Alltel
5.65% 1/28/00 5,100,000 5,100,000
5.60% 1/31/00 5,000,000 5,000,000
AT & T
6.14% 7/13/00 8,000,000 7,998,299
Par Market
Telecommunications (Cont.) Amount Value
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Motorola
5.82% 2/14/00 $10,000,000 $ 9,928,867
Southern California Edison
6.58% 10/25/00 10,000,000 10,000,000
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38,027,166
Total Money Market Instruments: 99.7%
(Cost $234,048,544) 234,048,544
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Other Assets over Liabilities: 0.3% 627,469
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Net Assets: 100.0%
(Equivalent to $10.000 per share
based on 23,467,601 shares issued
and outstanding) $234,676,013
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Components of Net Assets at December 31, 1999:
Common Stock, par value $.01 per share,
50,000,000 authorized shares $ 234,676
Paid in capital in excess of par value
of shares issued 234,441,337
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Total Net Assets $234,676,013
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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
Year ended December 31, 1999
Investment income:
Interest $ 9,449,340
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Total investment income 9,449,340
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Expenses:
Management fees 859,855
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Accounting fees 96,048
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Printing and postage 46,700
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Custody fees 14,602
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Directors fees 4,200
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Other 40,269
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1,061,674
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Less expenses paid indirectly (7,097)
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Total expenses 1,054,577
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Net investment income 8,394,763
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Net realized gain on investment transactions:
Net realized gain on:
Investment transactions 814
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Net realized gain on investment transactions 814
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Net increase in net assets
resulting from operations $8,395,577
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Statements of Changes in Net Assets
Year ended Year ended
12/31/99 12/31/98
Changes from operations:
Net investment income $ 8,394,763 $ 5,350,196
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Net realized gain on investment transactions 814 2,902
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Net increase in net assets
resulting from operations 8,395,577 5,353,098
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Distributions to shareholders from:
Net investment income (8,395,577) (5,353,098)
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Total distributions to shareholders (8,395,577) (5,353,098)
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Net increase in net assets
resulting from capital share transactions 97,614,208 47,835,173
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Total increase in net assets 97,614,208 47,835,173
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Net Assets, at beginning of year 137,061,805 89,226,632
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Net Assets, at end of year $234,676,013 $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 year)
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.000 $10.000 $10.000 $10.000 $10.000
Income from investment operations:
Net investment income 0.468 0.497 0.501 0.505 0.570
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Total from investment operations 0.468 0.497 0.501 0.505 0.570
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Less dividends and distributions:
Dividends from net investment income (0.468) (0.497) (0.501) (0.505) (0.570)
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Total dividends and distributions (0.468) (0.497) (0.501) (0.505) (0.570)
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Net asset value, end of year $ 10.000 $ 10.000 $10.000 $10.000 $10.000
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Total Return 4.62% 5.10% 5.13% 5.07% 5.67%
Ratios and supplemental data:
Ratio of expenses to average net assets 0.59% 0.58% 0.59% 0.57% 0.52%
Ratio of net investment income
to average net assets 4.68% 4.97% 5.01% 5.07% 5.67%
Net assets, end of year (000 omitted) $234,676 $137,062 $89,227 $90,358 $75,319
</TABLE>
See accompanying notes to financial statements.
Money Market Fund 4
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Lincoln National Money Market Fund, Inc.
Notes to Financial Statements
December 31, 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
Security Valuation: Money market instruments having less than 60 days to
maturity are valued 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 custodial fees when
the Fund maintains a prescribed amount of cash on deposit in certain
non-interest bearing accounts. For the year ended December 31, 1999, the
custodial fees offset arrangements amounted to $7,097.
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 year
ended December 31, 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 69.4% of net assets at December 31, 1999. The ability of these
entities to meet their
Money Market Fund 5
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obligations may be affected by economic conditions
related to the industry.
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Notes to Financial Statements - (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
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Shares Amount Shares Amount Shares Amount Shares Amount
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended
December 31, 1999: 36,689,072 $366,890,725 839,558 $8,395,577 (27,767,209) ($277,672,094) 9,761,421 $97,614,208
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 from net investment income daily.
Distributions of net realized gains, if any, are declared and distributed
annually.
Money Market Fund 6
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Lincoln National Money Market Fund, Inc.
Report of Ernst & Young LLP, Independent Auditors
To the Shareholders and Board of Directors
Lincoln National Money Market Fund, Inc.
We have audited the accompanying statement of net assets of Lincoln National
Money Market Fund, Inc. (the "Fund") as of December 31, 1999, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund'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 auditing standards generally accepted
in the United States. 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, 1999, by correspondence with
the Fund's 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
Lincoln National Money Market Fund, Inc. at December 31, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and its financial highlights for each
of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 4, 2000
Money Market Fund 7
