<PAGE>
- --------------------------------------------------------------------------------
NAVIGATOR SECURITIES LENDING
PRIME PORTFOLIO
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
(UNAUDITED)
JUNE 30, 1997
<PAGE>
- --------------------------------------------------------------------------------
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
SEMI-ANNUAL REPORT AS OF JUNE 30, 1997
- --------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
The Navigator Prime Portfolio (the "Fund") is a special purpose money market
fund. 100% of Fund balances are derived from securities lending. Due to the
unique characteristics of securities lending balances, the Fund has been
managed consistently with the objective of providing liquidity and preserving
capital, while investing in high quality instruments and offering competitive
returns.
Concerns in the marketplace that first quarter economic activity may have been
stronger than previously anticipated, coupled with a falling unemployment rate,
was obviously a concern to the Federal Reserve. In order to keep such economic
growth from fueling a similar growth on inflation, the Fed raised short term
interest rates at its regularly scheduled March meeting.
At his semi-annual Humphrey-Hawkins testimony before congress, Fed Chairman
Greenspan speculated that productivity might have increased in part, due to
heavy investment in technology in recent years. The implication was that the
economy might be able to grow faster and operate at higher levels of resource
utilization without the significant risk of an uptick in inflation.
Economic activity in the second quarter appears to have been markedly less
robust, with little or no sign of developing inflationary pressures.
Additionally, unpredictable weather patterns, resulting in significant
snowfalls, freezing temperatures, and other weather related workflow
disruptions, appear to have contributed greatly to the diminished Q2
productivity levels.
Our investment strategy for the fund closely mirrored the behavior of the market
during the first half of the year. By managing the Fund to a shorter duration
target in the first quarter, the Fund was able to readjust very quickly to the
higher rate environment brought on by the March Fed tightening. Conversely,
with the slower Q2 growth creating the perception of a more benign central bank,
the curve began to flatten as expectations for additional Fed tightenings
appeared to become more remote. As a result, we were able to modestly extend
the Fund's duration without subjecting the Fund to inappropriate levels of
duration or market risk. This extension was consistent with similar
repositioning moves made by other funds tracked in Donoghues' first tier
institutional category. The Fund continued to take advantage of seasonal
corporate issuance at quarter end. This has historically provided opportunities
in both fixed and floating rate securities as securities dealers looking to
boost their league table standings in corporate debt issuance tend to be more
concessionary on their offering prices.
We will continue to manage the Fund to meet objectives of offering competitive
returns, adequate liquidity and a stable net asset value.
Robert P. Fort
Portfolio Manager
August 26, 1997
1
<PAGE>
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
SCHEDULE OF INVESTORS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Name of Issuer Interest Maturity Principal
and Title of Issue Rate Date Amount Value+
------------------ -------- -------- --------- ------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - 35.51%
AUTOMOTIVE - 5.08%
Daimler Benz North America 5.630% 07/07/1997 $ 47,000,000 $ 46,955,898
Daimler Benz North America 5.630% 08/05/1997 15,000,000 14,917,896
Daimler Benz North America 5.620% 08/06/1997 75,000,000 74,578,500
Daimler Benz North America 5.580% 11/14/1997 60,000,000 58,735,200
--------------
195,187,494
--------------
BANK FOREIGN - 2.20%
Commonwealth Bank Australia 5.390% 07/31/1997 35,000,000 34,842,792
Den Denske Corp. 5.570% 07/23/1997 50,000,000 49,829,805
--------------
84,672,597
--------------
BANK MULTINATIONAL - 4.49%
Chase Manhattan Corporation 5.620% 07/21/1997 100,000,000 99,687,778
Chase Manhattan Corporation 5.610% 12/09/1997 75,000,000 73,118,312
--------------
172,806,090
--------------
FINANCE CAPTIVE - 13.76%
Ford Motor Credit Company 5.600% 07/10/1997 25,000,000 24,965,000
Ford Motor Credit Company 5.520% 07/18/1997 100,000,000 99,739,333
General Motors Acceptance Corp. 5.600% 08/04/1997 75,000,000 74,603,333
General Motors Acceptance Corp. 5.590% 09/16/1997 30,000,000 29,641,308
General Motors Acceptance Corp. 5.820% 11/03/1997 25,000,000 24,494,792
GTE Corp. 5.600% 07/24/1997 52,000,000 51,813,956
GTE Corp. 5.600% 09/11/1997 75,000,000 74,160,000
Sears Roebuck Acceptance Corp. 5.570% 07/21/1997 25,000,000 24,922,639
Sears Roebuck Acceptance Corp. 5.570% 07/22/1997 50,000,000 49,837,542
Sears Roebuck Acceptance Corp. 5.580% 07/29/1997 75,000,000 74,674,500
--------------
528,852,403
--------------
FINANCE NON-CAPTIVE DIVERSIFIED - 3.35%
General Electric Capital Corp. 5.380% 07/03/1997 50,000,000 49,985,056
General Electric Capital Corp. 5.550% 07/08/1997 30,000,000 29,967,625
General Electric Capital Corp. 5.700% 11/05/1997 25,000,000 24,497,292
General Electric Capital Corp. 5.710% 01/13/1998 25,000,000 24,222,805
--------------
128,672,778
--------------
SPECIALTY FINANCE - 5.19%
Delaware Funding Corp. 5.560% 07/21/1997 52,867,000 52,703,700
Delaware Funding Corp. 5.570% 07/24/1997 52,041,000 51,855,806
Delaware Funding Corp. 5.580% 07/25/1997 25,000,000 24,907,000
Delaware Funding Corp. 5.580% 08/13/1997 30,000,000 29,800,050
Delaware Funding Corp. 5.580% 09/16/1997 40,572,000 40,087,773
--------------
199,354,329
--------------
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
Name of Issuer Interest Maturity Principal
and Title of Issue Rate Date Amount Value+
------------------ -------- -------- --------- ------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - (CONTINUED)
TELECOMMUNICATIONS - 1.44%
MCI Communications 5.680% 09/08/1997 $ 56,000,000 $ 55,390,347
--------------
TOTAL COMMERCIAL PAPER - (Cost $1,364,936,038) 1,364,936,038
--------------
CORPORATE OBLIGATIONS - 29.46%
BANK FOREIGN - 4.03%
Abbey National Treasury Services 5.680% 10/27/1997 25,000,000 24,994,582
Abbey National Treasury Services 5.665% 02/13/1998 100,000,000 100,000,000
Westdeutsche Landesbank Giroz (a) 5.600% 03/06/1998 30,000,000 29,984,290
--------------
154,978,872
--------------
BANK MULTINATIONAL - 3.25%
Morgan Guaranty Trust Company of
New York (a) 5.687% 11/14/1997 75,000,000 74,979,628
Morgan Guaranty Trust Company of
New York (a) 5.630% 01/30/1998 50,000,000 49,988,625
--------------
124,968,253
--------------
BANK REGIONAL - 12.31%
Bank America Illinois 5.590% 08/14/1997 20,000,000 19,999,290
Comerica Bank (Detroit, Michigan) (a) 5.567% 08/19/1997 29,000,000 28,996,543
Comerica Bank (Detroit, Michigan) (a) 5.567% 09/23/1997 30,000,000 29,993,888
Comerica Bank (Detroit, Michigan) (a) 5.567% 10/24/1997 30,000,000 29,992,071
Comerica Bank (Detroit, Michigan) (a) 5.562% 11/20/1997 25,000,000 24,991,384
Comerica Bank (Detroit, Michigan) 5.805% 01/21/1998 25,000,000 24,993,982
Corestates Bank NA, Philadelphia (a) 5.657% 11/05/1997 25,000,000 25,000,000
Corestates Capital Corporation (a) 5.630% 08/01/1997 50,000,000 50,000,000
Fleet Financial Group Inc. 7.250% 10/15/1997 14,155,000 14,212,105
Key Bank of New York (a) 5.580% 08/20/1997 50,000,000 49,994,521
Key Bank of New York (a) 5.550% 09/04/1997 25,200,000 25,195,039
Key Bank of New York (a) 5.660% 01/05/1998 20,000,000 19,991,120
PNC Bank NA, Pittsburgh (a) 5.587% 09/03/1997 10,000,000 9,998,792
PNC Bank NA, Pittsburgh (a) 5.640% 10/01/1997 25,000,000 24,996,319
PNC Bank NA, Pittsburgh (a) 5.597% 12/11/1997 25,000,000 24,992,265
PNC Bank NA, Pittsburgh (a) 5.597% 01/09/1998 10,000,000 9,996,334
PNC Bank NA, Pittsburgh (a) 5.617% 02/20/1998 60,000,000 59,972,851
--------------
473,316,504
--------------
FINANCE CAPTIVE - 3.07%
Caterpillar Financial Services (a) 5.690% 01/12/1998 30,000,000 30,000,000
Ford Motor Credit Company 6.250% 02/26/1998 8,000,000 8,001,632
General Motors Acceptance Corp. 5.375% 03/09/1998 9,900,000 9,850,500
General Motors Acceptance Corp. (a) 5.770% 04/17/1998 35,000,000 35,006,678
IBM Credit Corp. 5.740% 08/14/1997 25,000,000 24,991,263
IBM Credit Corp. 5.650% 02/27/1998 10,000,000 9,997,029
--------------
117,847,102
--------------
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
Name of Issuer Interest Maturity Principal
and Title of Issue Rate Date Amount Value+
------------------ -------- -------- --------- ------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS - (CONTINUED)
FINANCE NON-CAPTIVE CONSUMER - 0.78%
Household Financial Corp. 6.013% 08/11/1997 $ 30,000,000 $ 30,006,449
--------------
FINANCE NON-CAPTIVE DIVERSIFIED - 3.42%
CIT Group Holdings, Inc. (a) 5.650% 08/11/1997 25,000,000 24,998,342
CIT Group Holdings, Inc. (a) 5.625% 09/17/1997 50,000,000 49,991,126
CIT Group Holdings, Inc. (a) 5.610% 01/28/1998 56,500,000 56,471,578
--------------
131,461,046
--------------
2A-7 TRUST - 2.60%
Restructured Asset Certificates With
Enhanced Returns (a) (b) 5.687% 12/15/1997 25,000,000 25,000,000
Tiers Trust (a) (b) 5.717% 10/15/1997 75,000,000 75,000,000
--------------
100,000,000
--------------
TOTAL CORPORATE OBLIGATIONS - (Cost $1,132,578,226) 1,132,578,226
--------------
CERTIFICATE OF DEPOSITS - 18.78%
BANK FOREIGN - 14.28%
Abbey National Treasury Services (a) 5.700% 08/18/1997 50,000,000 50,000,000
Bank of Scotland 5.545% 08/04/1997 50,000,000 50,000,689
Barclays Bank Plc (a) 5.620% 02/20/1998 6,000,000 5,995,732
Barclays Bank Plc (a) 5.600% 02/25/1998 35,000,000 34,984,322
Bayerische Vereinsbank AG 5.890% 11/17/1997 25,000,000 25,002,811
Canadian Imperial 5.700% 08/01/1997 25,000,000 25,000,859
Commerzbank New York 5.690% 07/15/1997 25,000,000 24,999,713
Creditanstalt Bankverein 5.580% 07/16/1997 50,000,000 50,000,000
Deutsche Bank AG 6.170% 05/22/1998 45,000,000 44,988,540
Rabobank Nederland N. V. 6.200% 04/10/1998 27,800,000 27,787,670
Societe Generale 5.630% 08/11/1997 50,000,000 50,000,000
Societe Generale 5.610% 08/22/1997 25,000,000 25,000,358
Svenska Handelsbanken, Inc. 5.970% 10/15/1997 10,000,000 10,000,572
Swedbank Sparbanken Svenge 5.590% 07/24/1997 75,000,000 75,000,000
Swedbank Sparbanken Svenge 5.690% 09/10/1997 50,000,000 50,000,000
--------------
548,761,266
--------------
BANK MULTINATIONAL - 1.30%
Morgan Guaranty Trust Company
of New York 5.815% 01/13/1998 50,000,000 49,985,869
--------------
BANK REGIONAL - 2.60%
United States National Bank Oregon 5.530% 07/10/1997 100,000,000 99,999,751
--------------
FINANCE CAPTIVE - 0.60%
General Motors Acceptance Corp. (a) 7.200% 01/29/1998 23,000,000 23,162,702
--------------
TOTAL CERTIFICATE OF DEPOSITS - (Cost $721,909,588) 721,909,588
--------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
Name of Issuer Interest Maturity Principal
and Title of Issue Rate Date Amount Value+
------------------ -------- -------- --------- ------
<S> <C> <C> <C> <C>
BANK NOTES - 11.71%
BANK FOREIGN - 1.30%
WESTPAC Banking Corp. (a) 5.660% 04/21/1998 $ 50,000,000 $ 49,984,285
--------------
BANK MULTINATIONAL - 4.56%
First National Bank of Boston 5.700% 08/14/1997 50,000,000 50,000,000
First National Bank of Chicago 5.700% 08/18/1997 50,000,000 50,000,000
First National Bank of Chicago 5.890% 11/13/1997 50,000,000 50,002,481
First National Bank of Chicago 6.140% 05/13/1998 25,000,000 24,992,844
--------------
174,995,325
--------------
BANK REGIONAL - 5.85%
Bank America Illinois 5.530% 11/21/1997 10,000,000 9,975,102
Branch Banking & Trust Co. (a) 5.650% 03/20/1998 25,000,000 24,993,023
Comerica Bank (Detroit, Michigan) (a) 5.635% 06/10/1998 25,000,000 24,987,291
Corestates Bank NA, Philadelphia (a) 5.648% 03/20/1998 40,000,000 40,000,000
First Bank NA 5.568% 07/15/1998 100,000,000 99,919,514
Key Bank of New York 6.150% 04/15/1998 25,000,000 24,981,192
--------------
224,856,122
--------------
TOTAL BANK NOTES - (Cost $449,835,732) 449,835,732
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 2.34%
AGENCY - 2.34%
Federal Farm Credit Banks (a) 5.550% 02/03/1998 90,000,000 89,965,890
--------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS - (Cost $89,965,890) 89,965,890
--------------
TIME DEPOSITS - 1.72%
BANK FOREIGN - 1.72%
Royal Bank of Canada 7.500% 07/01/1997 66,186,000 66,186,000
--------------
TOTAL TIME DEPOSITS - (Cost $66,186,000) 66,186,000
--------------
TOTAL INVESTMENTS -- 99.52% 3,825,411,474
OTHER ASSETS LESS LIABILITIES -- 0.48% 18,776,394
--------------
NET ASSETS -- 100.00% $3,844,187,868
--------------
--------------
</TABLE>
+ See note 2 to the financial statements.
(a) Floating Rate Note - Interest rate shown is rate in effect at June 30,
1997.
(b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may
be resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 1997, these securities amounted to
$100,000,000 or 2.6% of the Fund's net assets.
See Notes to Financial Statements.
5
<PAGE>
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at amortized cost . . . . . . . . . . . . . . . . . . . . . . $3,825,411,474
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 768
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,341,907
Receivable for investments sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,001,562
Deferred organization expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,607
Prepaid insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,268
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,776
--------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,854,997,362
--------------
LIABILITIES:
Payable for investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Payable for fund shares repurchased. . . . . . . . . . . . . . . . . . . . . . . . . . . 602,553
Administration fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,097
Advisory fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,621
Trustees fees payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,118
Custodian fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,394
Transfer agent fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,932
Other accrued expenses and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 34,779
--------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,809,494
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,844,187,868
--------------
--------------
NET ASSETS CONSIST OF:
Capital stock, $0.001 par value;
3,844,182,245 shares issued and outstanding. . . . . . . . . . . . . . . . . . . . . $ 3,844,182
Capital paid in excess of par. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,840,343,686
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,844,187,868
--------------
--------------
Net asset value, offering, and redemption price per share. . . . . . . . . . . . . . . . $ 1.00
--------------
--------------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30,1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $106,371,844
------------
EXPENSES:
Advisory fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333,379
Administration fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,089
Insurance expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,441
Custodian fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,371
Trustees fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,396
Transfer agent fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,753
Amortization of organization expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 19,420
Legal fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,875
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,909
Miscellaneous expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,480
------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 745,113
------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,626,731
------------
NET REALIZED GAIN ON INVESTMENTS
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,554
------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . $105,631,285
------------
------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTH FOR THE PERIOD
PERIOD ENDED MAY 15, 1996*
JUNE 30, 1997 THROUGH
(UNAUDITED) DECEMBER 31, 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 105,626,731 $ 61,100,394
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,554 1,322
---------------- ---------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . 105,631,285 61,101,716
---------------- ---------------
DISTRIBUTIONS FROM:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (105,626,731) (61,100,647)
---------------- ---------------
FROM FUND SHARE TRANSACTIONS (AT CONSTANT $1.00 PER SHARE):
Proceeds from shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,048,504,224 9,723,270,848
Issued to shareholders in reinvestment of dividends. . . . . . . . . . . . . . . . . . . 105,626,731 61,100,647
Cost of redemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,187,848,721) (6,906,481,384)
---------------- ---------------
Net increase in net assets from Fund share transactions. . . . . . . . . . . . . . . 966,282,234 2,877,890,111
---------------- ---------------
Net increase in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 966,286,788 2,877,891,180
NET ASSETS:
Beginning of period (1996: Initial Capital and Offering of Shares) . . . . . . . . . . . 2,877,901,080 9,900
---------------- ---------------
End of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,844,187,868 $ 2,877,901,080
---------------- ---------------
---------------- ---------------
</TABLE>
See Notes to Financial Statements.
* Commencement of investment operations.
8
<PAGE>
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTH FOR THE PERIOD
PERIOD ENDED MAY 15, 1996*
JUNE 30, 1997 THROUGH
(UNAUDITED) DECEMBER 31, 1996
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.000 $ 1.000
-------- --------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0275 0.0342
Distributions from net investment income . . . . . . . . . . . . . . . . . . . . . . (0.0275) (0.0342)
-------- --------
Net increase from investment operations. . . . . . . . . . . . . . . . . . . . . . . . . 0.0000 0.0000
-------- --------
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.000 $ 1.000
-------- --------
-------- --------
TOTAL INVESTMENT RETURN (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.78% 3.47%
RATIOS AND SUPPLEMENTAL DATA:
Ratio of expenses to average net assets. . . . . . . . . . . . . . . . . . . . . . . . . 0.04%(b) 0.06%(b)(c)
Ratio of net investment income to average net assets . . . . . . . . . . . . . . . . . . 5.54%(b) 5.47%(b)(c)
Net assets, end of period (in millions). . . . . . . . . . . . . . . . . . . . . . . . . $ 3,844 $ 2,878
</TABLE>
See Notes to Financial Statements.
* 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.
(b) Annualized.
(c) Net of administration waiver of expenses, amounting to less than 0.001% of
net assets for the period.
9
<PAGE>
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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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 Securities Lending Government Portfolio, Navigator Securities Lending
Prime Portfolio and Navigator Securities Lending Short-Term Bond Portfolio.
Currently, only Navigator Securities Lending 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.
Effective November 14, 1996, the name of the Fund was changed from Navigator
Prime Portfolio.
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 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
bankruptcy 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
Global Advisors, a subsidiary of 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.
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DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and pays
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.
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 agreed to waive a
portion of the fee for the first year of the Fund's operations.
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. TRUSTEE FEES
The Trust pays each trustee who is not an officer or employee of the Fund's
Investment Adviser or Administrator $3,750 for each meeting of the Board of
Trustees. Each trustee will be reimbursed for out of pocket and travel
expenses.
5. INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. A redemption by one or
more of the Fund's shareholders may cause the remaining shareholders to bear
proportionately higher operating expenses and otherwise affect the Fund's future
liquidity and investment operations.
6. BENEFICIAL INTEREST
At June 30, 1997, there were five shareholders who each owned over 5% of the
Fund's outstanding shares, amounting to 63% of total shares.
7. 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.
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TRUSTEES
Michael A. Jessee
George J. Sullivan Jr.
Peter Tufano
ADMINISTRATOR, CUSTODIAN, LEGAL COUNSEL AND TRANSFER AGENT
State Street Bank and Trust Company
Two Heritage Drive
North Quincy, MA 02171
INDEPENDENT AUDITORS
Price Waterhouse LLP
160 Federal St.
Boston, MA 02110
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
State Street Bank and Trust Company
Global Securities Lending
Two International Place
Boston, MA 02110
