<PAGE>
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NAVIGATOR SECURITIES LENDING TRUST
NAVIGATOR PRIME PORTFOLIO
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SEMI-ANNUAL REPORT
(UNAUDITED)
JUNE 30, 1996
<PAGE>
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NAVIGATOR SECURITIES LENDING TRUST
NAVIGATOR PRIME PORTFOLIO
SEMI-ANNUAL REPORT TO SHAREHOLDERS
- ---------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
Semi-Annual Report
as of June 30, 1996
The Navigator Prime Portfolio (the "Fund") is a special purpose money market
fund. As such, it is structured to meet the potentially volatile balances
attributed to the 100% securities lending composition of its participants.
The Fund was managed consistently with its objective of providing liquidity,
preservation of capital and high quality investments while offering
competitive returns.
The volatility in the marketplace during the inception of the Fund has
provided several investment opportunities. The evidence of continued growth
in the U.S. economy and inflationary pressure during the second quarter,
helped to move rates higher as the market anticipated a 25 basis point
tightening by the Federal Reserve at their August meeting. The forward rate
curve at the end of the second quarter, implied that the marketplace was
looking for several tightening moves by the Federal Reserve during the
following four quarters. However, with the release of the July unemployment
figures depicting a slowdown in employment and lower wages coupled with
weaker housing sales, the market sentiment has now changed. A neutral
policy by the Federal Reserve is currently expected until further evidence of
direction in the economy is provided.
The Fund's investments during this reporting period included floating rate
and fixed rate securities. Investment decisions were based on relative
values in the marketplace. Nearly one third of the Fund is invested in
floating rate securities using standard money market indexes, such as one-
and three-month LIBOR, three month Treasury Bills and the Federal Funds rate.
These securities offer higher rates of return relative to LIBOR than
comparable effective duration fixed rate securities. The average maturity of
the Fund was targeted close to the Donoghue's first tier institutional
category and was 45 days as of June 30, 1996.
Robert P. Fort
Portfolio Manager
1
<PAGE>
NAVIGATOR SECURITIES LENDING TRUST
NAVIGATOR PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
- ------------------ ---- ---- ------ -----
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--28.6%
Federal Farm Credit Banks 5.237% 05/22/1997 $ 30,000,000 $29,965,728
Federal Home Loan Banks 5.267% 05/23/1997 120,000,000 119,897,005
Federal National Mortgage Assn. 5.700% 05/19/1997 25,000,000 25,060,226
Federal National Mortgage Assn. 5.310% 06/10/1997 50,000,000 49,953,946
------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS--(Cost $224,876,905) 224,876,905
------------
COMMERCIAL PAPER--20.5%
AUTO AND TRUCKS-1.3%
Daimler Benz North America 5.280% 09/20/1996 10,000,000 9,881,200
------------
BANKING--2.5%
Den Danske Corp. 5.290% 07/15/1996 10,000,000 9,979,429
First National Bank of Chicago 5.650% 05/16/1997 10,000,000 9,992,465
------------
19,971,894
------------
ELECTRONICS--1.9%
General Electric Corp. 5.450% 07/01/1996 15,000,000 15,000,000
------------
FINANCIAL SERVICES--8.8%
Ford Motor Credit Corp. 5.290% 07/08/1996 15,000,000 14,984,572
General Motors Acceptance Corp. 5.340% 09/12/1996 10,000,000 9,891,717
Sigma Finance Corp. 5.300% 08/21/1996 10,000,000 9,924,918
Transamerica Finance Group 5.280% 09/20/1996 10,000,000 9,881,200
Woolwich Building Society 5.280% 08/30/1996 25,000,000 24,780,000
------------
69,462,407
------------
OFFICE/BUSINESS EQUIPMENT--3.8%
Xerox Corp. 5.280% 07/19/1996 15,000,000 14,960,400
Xerox Corp. 5.350% 08/14/1996 15,000,000 14,901,917
------------
29,862,317
------------
PUBLISHING/NEWSPAPER--2.2%
Gannett Inc. 5.330% 07/26/1996 17,000,000 16,937,076
------------
TOTAL COMMERCIAL PAPER--(Cost $161,114,894) 161,114,894
------------
TIME DEPOSITS--18.2%
BRANCHES OF FOREIGN BANKS--6.3%
Commerzbank Grand Caymen 5.250% 07/01/1996 20,000,000 20,000,000
Westdeutsche Landesbank 5.687% 07/01/1996 30,000,000 30,000,000
------------
50,000,000
------------
FINANCIAL/BANKS-COMMERCIAL--11.9%
Chemical Bank Nassau 5.375% 07/01/1996 30,000,000 30,000,000
Norwest Bank (Minnesota) 5.437% 07/01/1996 33,369,000 33,369,000
Suntrust 5.250% 07/01/1996 30,000,000 30,000,000
------------
93,369,000
------------
TOTAL TIME DEPOSITS--(Cost $143,369,000) 143,369,000
------------
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
NAVIGATOR SECURITIES LENDING TRUST
NAVIGATOR PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
- ------------------ ---- ---- ------ -----
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT--16.5%
FINANCIAL/BANKS-COMMERCIAL--9.5%
Bayerische HypoWechsel Bank 5.360% 08/19/1996 $ 25,000,000 $ 24,999,866
Bayerische Vereinsbank AG 5.330% 07/23/1996 25,000,000 25,000,000
Westpac Banking Yankee CD 5.380% 08/06/1996 25,000,000 25,000,425
------------
75,000,291
------------
FINANCIAL SERVICES--3.2%
Republic National Bank NY Eurodollar CD 5.320% 07/05/1996 25,000,000 25,000,000
------------
SAVINGS AND LOANS--3.8%
Abbey National Eurodollar CD 5.460% 11/20/1996 10,000,000 10,000,000
Abbey National Treasury Services 5.360% 08/15/1996 15,000,000 15,000,081
Bayerische Landesbank Eurodollar CD 5.470% 11/20/1996 5,000,000 5,000,191
------------
30,000,272
------------
TOTAL CERTIFICATES OF DEPOSIT--(Cost $130,000,563) 130,000,563
------------
CORPORATE OBLIGATIONS--16.0%
BANKING--13.2%
Bank America Illinois 5.700% 05/28/1997 7,000,000 6,985,252
Bank of Boston 5.53% 06/18/1997 15,000,000 14,997,107
Colorado National Bank 5.424% 01/15/1997 10,000,000 9,998,384
Comerica Bank (Detroit, Michigan) 5.750% 05/13/1997 25,000,000 24,984,466
Key Bank of Washington 5.320% 05/14/1997 10,000,000 9,990,594
NationsBank (Dallas, Texas) 5.644% 06/18/1997 11,550,000 11,559,548
PNC Bank NA 5.339% 05/13/1997 15,000,000 14,986,968
PNC Bank NA 5.330% 05/15/1997 10,000,000 9,992,365
------------
103,494,684
------------
FINANCIAL--2.8%
General Motors Acceptance Corp. 7.250% 05/19/1997 7,000,000 7,082,646
General Motors Acceptance Corp. 5.405% 06/06/1997 15,000,000 14,979,716
------------
22,062,362
------------
TOTAL CORPORATE OBLIGATIONS--(Cost $125,557,046) 125,557,046
------------
TOTAL INVESTMENTS--(Cost $784,918,408)--99.8% 784,918,408
OTHER ASSETS LESS LIABILITIES--0.2% 1,681,401
------------
NET ASSETS--100.0% $786,599,809
------------
------------
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
NAVIGATOR SECURITIES LENDING TRUST
NAVIGATOR PRIME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------------
ASSETS:
Investments in securities, at amortized cost $784,918,408
Cash 525
Interest receivable 2,077,929
Deferred organization expenses 138,001
Prepaid insurance 119,272
------------
Total Assets 787,254,135
------------
LIABILITIES:
Payable for fund shares repurchased 347,891
Administration fee payable 15,946
Custodian fee payable 7,748
Transfer agent fee payable 2,575
Other accrued expenses and liabilities 280,166
------------
Total Liabilities 654,326
------------
NET ASSETS $786,599,809
------------
------------
NET ASSETS CONSIST OF:
Capital stock, $0.001 par value;
786,599,584 shares issued and outstanding $786,600
Capital paid in excess of par 785,812,984
Accumulated net realized gain on investments 225
------------
NET ASSETS $786,599,809
------------
------------
Net asset value, offering, and redemption price per share $1.00
-----
-----
See Notes to Financial Statements.
4
<PAGE>
NAVIGATOR SECURITIES LENDING TRUST
NAVIGATOR PRIME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 15, 1996* THROUGH JUNE 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $4,489,129
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EXPENSES:
Insurance expense 21,728
Administration fee 21,695
Advisory fee 14,278
Directors fees 10,173
Custodian fee 7,748
Transfer agent fee 3,800
Amortization of organization expenses 3,648
Legal fee 3,364
Audit fee 990
----------
Total expenses before waiver 87,424
Expenses waived by the Administrator (5,749)
----------
Expenses, net of waiver 81,675
----------
Net investment income 4,407,454
Net realized gain on investments 225
----------
Net increase in net assets resulting from operations $4,407,679
----------
----------
* Commencement of investment operations.
See Notes to Financial Statements.
5
<PAGE>
NAVIGATOR SECURITIES LENDING TRUST
NAVIGATOR PRIME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MAY 15, 1996* THROUGH JUNE 30, 1996 (UNAUDITED)
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $4,407,454
Net realized gain on investments 225
-------------
Net increase in net assets resulting from operations 4,407,679
-------------
DISTRIBUTIONS FROM:
Net investment income (4,407,454)
-------------
FROM FUND SHARE TRANSACTIONS (AT CONSTANT $1.00 PER SHARE):
Proceeds from shares sold 1,268,984,736
Issued to shareholders in reinvestment of dividends 4,407,454
Cost of redemptions (486,802,506)
-------------
Net increase in net assets from Fund share transactions 786,589,684
-------------
Net increase in net assets 786,589,909
NET ASSETS:
Beginning of period (Initial Capital and
Offering of Shares) (Note 6) 9,900
-------------
End of period $786,599,809
-------------
-------------
* Commencement of investment operations.
See Notes to Financial Statements.
6
<PAGE>
NAVIGATOR SECURITIES LENDING TRUST
NAVIGATOR PRIME PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD MAY 15, 1996* THROUGH JUNE 30, 1996 (UNAUDITED)
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $1.000
-------
Net investment income 0.0067
Distributions from net investment income (0.0067)
-------
Net increase from investment operations 0.0000
-------
Net asset value, end of period $1.000
-------
-------
TOTAL INVESTMENT RETURN (a) 0.69%
RATIOS AND SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 0.10%(b)(c)
Ratio of net investment income to average net assets 5.42%(b)(c)
Net assets, end of period (in millions) $787
* Commencement of investment operations.
(a) Total investment return is calculated assuming an initial investment
made at net asset value at the beginning of the period, reinvestment of
all dividends and distributions at net asset value during the period,
and redemption on the last day of the period. Total investment return
for a period of less than one year is not annualized.
(b) Annualized.
(c) Net of administration waiver, amounting to less than 0.01% of net assets
for the period.
See Notes to Financial Statements.
7
<PAGE>
NAVIGATOR SECURITIES LENDING TRUST
NAVIGATOR PRIME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------------------------------
1. ORGANIZATION AND FUND DESCRIPTION
The Navigator Securities Lending Trust (the "Trust") was organized as a
Massachusetts business trust on June 15, 1995 and is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Trust has established three series of
shares of beneficial interest representing interests in three separate
portfolios: Navigator Government Portfolio, Navigator Prime Portfolio and
Navigator Short-Term Bond Portfolio. Currently, only Navigator Prime
Portfolio ("the Fund") has commenced operations. The Fund is a money market
pooled fund used as a vehicle for the investment of cash collateral received
in conjunction with securities loans under the Global Securities Lending
Program maintained by State Street Bank and Trust Company. The Fund's
objective is to maximize current income to the extent consistent with the
preservation of capital and liquidity. Participation in the Trust is limited
to participants in the Global Securities Lending Program.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund:
SECURITY VALUATION: Investments are valued at amortized cost, which
approximates market value.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Securities transactions
are recorded on trade date. Realized gains and losses on sales of securities
are determined on the basis of identified cost. Interest income is recorded
on the accrual basis. Interest income is increased by accretion of discount
and reduced by amortization of premium.
REPURCHASE AGREEMENTS: A repurchase agreement customarily obligates the
seller at the time it sells securities to the Fund to repurchase the
securities at a mutually agreed upon price and time which, in the case of the
Fund's transactions, is within seven days. The total amount received by the
Fund on repurchase would be calculated to exceed the price paid by the Fund,
reflecting an agreed upon market rate of interest for the period of time from
the trade date to the settlement date, and would not necessarily be related
to the interest rate on the underlying securities. The underlying securities
are ordinarily United States government securities, but may consist of other
securities in which the Fund is permitted to invest. Repurchase agreements
will be fully collateralized at all times. The use of repurchase agreements
involves certain risks. For example, if the seller of securities under a
repurchase agreement defaults on its obligation to repurchase the underlying
securities, as a result of its bankrupcy or otherwise, the Fund will seek to
dispose of such securities, which action could involve costs or delays. The
Fund may enter into repurchase agreements maturing within seven days with
domestic dealers, banks and other financial institutions deemed to be
creditworthy by the Adviser, State Street Bank and Trust Company.
ORGANIZATION EXPENSES: The Fund bears all costs in connection with its
organization. All such costs are being amortized using the straight line
method over a period of five years from commencement of the Fund's
operations.
FEDERAL INCOME TAXES: It is the policy of the Fund to distribute all of its
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. It
is also the intention of the Fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986. Therefore no provision has been made for federal taxes on income,
capital gains or unrealized appreciation of securities held and excise tax on
income and capital gains.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund intends to declare and
pay dividends daily from net investment income. Distributions from long-term
capital gains, if any, will be made at least annually. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principles.
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 disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
8
<PAGE>
3. FEES AND COMPENSATION PAID TO AFFILIATES
State Street Bank and Trust Company serves as the Fund's Administrator,
Adviser, Custodian, and Transfer Agent.
ADVISORY FEE: Under the terms of the investment advisory agreement, the Fund
pays an advisory fee at an annual rate of .0175% of the Fund's average daily
net assets.
ADMINISTRATION FEE: Under the terms of the administration agreement, the
Fund pays an annual administration fee equal to .035% of the Fund's average
daily net assets up to $300 million, .020% of the next $300 million and .005%
in excess of $600 million, subject to certain minimum requirements. The
minimum fee was waived for the first year of operations. The Administrator
has agreed to waive a portion of the fee for the first year of the Fund's
operations. For the period ended June 30, 1996, the Administrator waived
$5,749.
CUSTODIAN FEE: Under the terms of the custody agreement, the Fund pays an
annual accounting fee equal to $30,000 plus a custodian fee equal to .0025%
of the Fund's average daily net assets up to $1 billion, .0020% on the next
$9 billion, and .0015% in excess of $10 billion, plus transaction costs.
TRANSFER AGENT FEE: Under the terms of the transfer agency agreement, the
Fund pays a monthly fee of $2,500 plus transaction costs.
4. INVESTMENT TRANSACTIONS
At June 30, 1996, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes.
5. BENEFICIAL INTEREST
At June 30, 1996, there were two shareholders who each owned over 5% of the
Fund's outstanding shares, amounting to 95% of total shares.
6. INITIAL CAPITALIZATION AND OFFERING OF SHARES
During the period March 21, 1996 to May 15, 1996, the Fund had no operations
other than those related to organizational matters, including the initial
capital contribution of $9,900 and the issuance of 9,900 shares. There were
no additional transactions until regular investment operations commenced on
May 15, 1996.
9
