[LOGO OF LINCOLN FINANCIAL GROUP]
Lincoln National
Money Market Fund, Inc.
Semi-Annual Report
June 30, 2000
<PAGE>
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 2.7% (net of fees) for the first six months of 2000
while its benchmark, the Salomon Brothers 90 day T-Bill Index*, returned 2.8%
for the same period.
Government figures show that productivity growth in the last few years is almost
double the rate of the previous two decades. Productivity grew at an annual rate
of 1.4 percent from 1977 to 1995 while it increased to an annual rate of 2.5
percent over the last four years. Accelerating productivity gains mean the
economy can grow faster than previously thought without sparking inflation. The
economy's growth rate topped five percent the last two quarters of 1999 and the
first quarter of 2000, the first time we've had three consecutive quarters above
five percent since 1983-1984. Even though productivity growth has helped to keep
inflation in check, Federal Reserve Board (Fed) Chairman Alan Greenspan has
warned that the economy's rapid growth is shrinking the supply of available
workers, which could spark a surge in wages and lead to higher prices. Labor
represents about two-thirds of the cost of doing business.
In order to prevent the economy from over heating and to facilitate a soft
landing, the Federal Reserve Open Market Committee raised the fed funds target
by 100 basis points during the first half of the year. The Fed raised the
overnight bank-lending rate by half a point to 6.5 percent on May 16, the
highest level in nine years. The Fed hadn't raised rates by more than a quarter
percentage point at one time since February, 1995. In its statement, the Fed
said "increases in demand have remained in excess of even the rapid pace of
productivity-driven gains in potential supply, exerting continued pressures on
resources." The Fed chose not to raise rates at its June meeting as recent
reports suggest a cooling in housing, autos and retail sales. However, they
served notice that they still view inflation as the biggest threat facing the
economy.
At this time the market is pricing in a 25 basis point rate increase by
year-end. If another rate hike is necessary, the Fed will most likely move rates
at the August 22 meeting since it won't want to affect the political process by
moving rates close to the election. The Fund's average days to maturity have
been lengthened as attractive opportunities have been available and it appears
the Fed is close if not finished with its tightening.
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 - Unaudited
June 30, 2000
Investments:
Par Market
Money Market Instruments: Amount Value
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Automobile & Auto Parts: 4.9%
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Volkswagen of America
6.51%, 7/6/00 $10,000,000 $ 9,990,958
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Banking, Finance, & Insurance: 75.0%
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American Express Centurion
Series BKN1
6.60%, 5/9/01 8,000,000 8,000,000
American Honda Finance
6.76%, 6/22/01 10,000,000 10,000,000
Associates Corporation North America
6.85%, 7/3/00 5,000,000 5,000,000
Bank of America
6.65%, 11/7/00 9,400,000 9,176,006
Bank One NA Chicago Illinois
6.63%, 2/1/01 10,000,000 9,997,757
Bell Atlantic Financial Services
6.67%, 8/21/00 9,000,000 9,000,000
Citicorp Medium Term Note Series F
6.68%, 8/2/00 10,000,000 9,999,730
Corporate Asset Funding
6.56%, 8/7/00 5,000,000 4,966,289
Equitable Life Assurance
6.24%, 3/20/01 10,000,000 10,000,000
First Union National Bank Series
6.65%, 5/18/01 10,000,000 10,000,000
General Electric Capital
6.55%, 7/5/00 10,000,000 9,992,722
Goldman Sachs Group
6.60%, 8/15/00 6,200,000 6,148,850
International Lease Finance
6.62%, 7/5/00 8,400,000 8,400,000
Merrill Lynch
6.65%, 8/21/00 10,000,000 9,905,367
M & I Bank Southern Wisconsin
6.36%, 10/26/00 10,000,000 10,000,000
Morgan Guaranty Trust
6.80%, 4/16/01 10,000,000 9,999,711
PNC Bank
6.59%, 7/12/00 10,000,000 9,999,551
Wilmington Trust
6.00%, 8/23/00 4,000,000 4,000,000
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154,585,983
Cable Media, & Publishing: 2.8%
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Donnelly (R&R) Sons Company
6.50%, 7/24/00 5,700,000 5,675,783
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Energy: 4.9%
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Southern California Edison
6.75%, 10/25/00 10,000,000 10,000,000
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Food, Beverage, & Tobacco: 2.4%
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Sara Lee Corporation
6.59%, 7/19/00 5,000,000 5,000,000
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Metal & Mining: 4.9%
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Alcoa
6.60%, 7/18/00 10,000,000 10,000,000
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Par Market
Telecommunications: 4.9% Amount Value
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AT&T Corporation
6.64%, 6/14/01 $2,000,000 $ 1,999,241
6.24%, 7/13/00 8,000,000 7,999,895
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9,999,136
Total Money Market Instruments: 99.8%
(Cost $205,251,860) 205,251,860
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Other Assets Over Liabilities: 0.2% 488,278
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Net Assets: 100.0%
(Equivalent to $10.000 per share
based on 20,574,014 shares issued
outstanding) $205,740,138
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Components of Net Assets at June 30, 2000:
Common stock, par value $.01 per share,
50,000,000 authorized shares $205,740
Paid in capital in excess of par
value of shares issued 205,534,398
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Total Net Assets $205,740,138
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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, 2000
Investment income:
Interest $ 6,238,827
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Total investment income 6,238,827
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Expenses:
Management fees 496,351
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Accounting fees 53,823
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Printing and postage 25,963
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Legal fees 12,467
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Custody fees 5,099
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Directors fees 2,100
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Other 13,573
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609,376
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Less expenses paid indirectly (5,099)
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Total expenses 604,277
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Net investment income 5,634,550
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Net realized gain on investment transactions:
Net realized gain on:
Investment transactions 2,598
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Net realized gain on investment transactions 2,598
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Net increase in net assetsresulting from operations $5,637,148
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Statements of Changes in Net Assets
Six months
ended
6/30/00 Year ended
(Unaudited) 12/31/99
---------------------------------
Changes from operations:
Net investment income $ 5,634,550 $ 8,394,763
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Net realized gain on investment transactions 2,598 814
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Net increase in net assets
resulting from operations 5,637,148 8,395,577
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Distributions to shareholders from:
Net investment income (5,637,148) (8,395,577)
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Total distributions to shareholders (5,637,148) (8,395,577)
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Net increase (decrease) in net assets
resulting from capital share transactions (28,935,875) 97,614,208
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Total increase (decrease) in net assets (28,935,875) 97,614,208
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Net Assets, at beginning of period 234,676,013 137,061,805
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Net Assets, at end of period $205,740,138 $234,676,013
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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
6/30/00 Year ended December 31,
(Unaudited) 1999 1998 1997 1996 1995
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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 0.269 0.468 0.497 0.501 0.505 0.570
Total from investment operations 0.269 0.468 0.497 0.501 0.505 0.570
Less dividends and distributions:
Dividends from net investment income (0.269) (0.468) (0.497) (0.501) (0.505) (0.570)
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Total dividends and distributions (0.269) (0.468) (0.497) (0.501) (0.505) (0.570)
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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 2.73% 4.62% 5.10% 5.13% 5.07% 5.67%
Ratios and supplemental data:
Ratio of expenses to average net assets 0.57%(1) 0.59% 0.58% 0.59% 0.57% 0.52%
Ratio of net investment income
to average net assets 5.32%(1) 4.68% 4.97% 5.01% 5.07% 5.67%
Net assets, end of period (000 omitted) $205,740 $234,676 $137,062 $89,227 $90,358 $75,319
</TABLE>
(1) Annulized
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, 2000
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: Securities 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
accounting principles generally accepted in the United States 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, 2000, the
custodial fees offset arrangements amounted to $5,099.
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, 2000.
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 75.0% of net assets at June 30, 2000. 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 (Decrease)
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>
Six months ended
June 30, 2000
(Unaudited): 21,006,669 $210,066,693 563,548 $5,635,479 (24,463,804) $(244,638,047) (2,893,587) $(28,935,875)
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
</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
