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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1998
1940 ACT FILE NO. 811-07567
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 |X|
AMENDMENT NO. 2 |X|
(CHECK APPROPRIATE BOX OR BOXES)
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STATE STREET NAVIGATOR SECURITIES LENDING TRUST
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(FORMERLY NAVIGATOR SECURITIES LENDING TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO INTERNATIONAL PLACE, 31ST FLOOR, BOSTON, MASSACHUSETTS 02110
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 664-2500
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PHILIP H. NEWMAN, ASSISTANT SECRETARY
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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COPY TO:
M. BRADLEY JACOBS
STATE STREET BANK AND TRUST COMPANY
TWO INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
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STATE STREET NAVIGATOR SECURITIES LENDING TRUST
CONTENTS OF REGISTRATION STATEMENT
THIS REGISTRATION STATEMENT CONSISTS OF THE FOLLOWING PAPERS AND DOCUMENTS:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
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CROSS REFERENCE SHEET
(REGISTRATION STATEMENT ON FORM N-1A)
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FORM N-1A ITEM NO. PROSPECTUS
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PART A HEADING
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<S> <C> <C>
1. Cover Page *
2. Synopsis *
3. Condensed Financial Information *
4. General Description of Registrant General Description of Registrant
5. Management of the Trust Management of the Trust
5A. Management's Discussion of Fund Performance *
6. Capital Stock and Other Securities Capital Stock and Other Securities
7. Purchase of Securities Being Offered Purchase of Securities Being Offered
8. Redemption or Repurchase Redemption or Repurchase
9. Pending Legal Proceedings Not Applicable
PART B HEADING
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information and History
13. Investment Objectives and Policies Investment Objectives and Policies
14. Management of the Registrant Management of the Registrant
15. Control Persons and Principal Holders of Control Persons and Principal Holders of
Securities Securities
16. Investment Advisory and Other Services Investment Advisory and Other Services
17. Brokerage Allocation and Other Practices Brokerage Allocation and Other Practices
18. Capital Stock and Other Securities Capital Stock and Other Securities
19. Purchase, Redemption and Pricing of Purchase, Redemption and Pricing of
Securities Being Offered Securities Being Offered
20. Tax Status Tax Status
21. Underwriters Not Applicable
22. Calculation of Performance Data Calculation of Performance Data
23. Financial Statements Financial Statements
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* PURSUANT TO GENERAL INSTRUCTION F4 OF FORM N-1A, A REGISTRATION STATEMENT
FILED UNDER ONLY THE INVESTMENT COMPANY ACT OF 1940 SHALL CONSIST OF THE FACING
SHEET OF THE FORM, RESPONSES TO ALL ITEMS OF PARTS A AND B EXCEPT ITEMS 1, 2, 3
AND 5A OF PART A THEREOF, RESPONSES TO ALL ITEMS OF PART C EXCEPT ITEMS
24(b)(6), 24(b)(10), 24(b)(11), 24(b)(12) AND 24(b)(16), REQUIRED SIGNATURES,
AND ALL OTHER DOCUMENTS THAT ARE REQUIRED OR WHICH THE REGISTRANT MAY FILE AS
PART OF THE REGISTRATION STATEMENT.
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PART A
ITEM 1. COVER PAGE
Not Applicable.
ITEM 2. SYNOPSIS
Not Applicable.
ITEM 3. CONDENSED FINANCIAL INFORMATION
Not Applicable.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT
State Street Bank and Trust Company ("State Street") has established a
securities lending program for its clients. Each client that participates in the
securities lending program as a lender (each, a "Lender" and collectively, the
"Lenders") enters into a securities lending authorization agreement with State
Street. Under such agreement, State Street is authorized to invest the cash
collateral securing loans of securities of each Lender in a variety of
investments. State Street Navigator Securities Lending Trust (formerly Navigator
Securities Lending Trust) (the "Trust") has been established primarily for the
investment and reinvestment of cash collateral on behalf of Lenders
participating in State Street's securities lending program.
The Trust is an open-end management investment company registered with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended (the "1940 Act"). It is an association with transferable shares
organized pursuant to a Master Trust Agreement, dated June 15, 1995 (the "Master
Trust Agreement"), under the laws of the Commonwealth of Massachusetts (commonly
referred to as a Massachusetts business trust). The Trust has established three
series of shares of beneficial interest representing interests in three separate
portfolios: State Street Navigator Securities Lending Government Portfolio
(formerly Navigator Securities Lending Government Portfolio), State Street
Navigator Securities Lending Prime Portfolio (formerly Navigator Securities
Lending Prime Portfolio) and State Street Navigator Securities Lending Short-
Term Bond Portfolio (formerly Navigator Securities Lending Short-Term Bond
Portfolio) (each, a "Portfolio" and collectively, the "Portfolios"). State
Street Navigator Securities Lending Government Portfolio and State Street
Navigator Securities Lending Short-Term Bond Portfolio, however, are not yet
operational. Each Portfolio is diversified within the meaning of the 1940 Act.
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Shares of State Street Navigator Securities Lending Prime Portfolio are
being offered to the Lenders in connection with State Street's securities
lending program. Shares of that Portfolio are sold on a private placement basis
in accordance with Regulation D under the Securities Act of 1933, as amended
(the "1933 Act"). Shares of the Trust are sold directly by the Trust without a
distributor and are not subject to a sales load or redemption fee; assets of the
Trust are not subject to a Rule 12b-1 fee.
THE PORTFOLIOS
Set forth below is a summary of the investment objectives and policies of
each Portfolio. The investment objectives of each Portfolio may be changed at
any time by the Board of Trustees of the Trust (the "Board of Trustees" or the
"Trustees") upon at least 30 days' prior written notice to shareholders of the
Portfolio. See the Statement of Additional Information for a description of each
Portfolio's investment restrictions.
STATE STREET NAVIGATOR SECURITIES LENDING GOVERNMENT PORTFOLIO. State Street
Navigator Securities Lending Government Portfolio will seek to (i) maximize
current income to the extent consistent with the preservation of capital and
liquidity and (ii) maintain a stable $1.00 per share net asset value by
investing in dollar denominated securities with remaining maturities of one year
or less. This Portfolio will invest exclusively in securities issued or backed
by the U.S. Government or its agencies or instrumentalities ("U.S. Government
Securities") and in repurchase agreements collateralized with U.S. Government
Securities. All investments will qualify as "eligible securities" within the
meaning of Rule 2a-7 under the 1940 Act. State Street Navigator Securities
Lending Government Portfolio will seek to maintain a stable net asset value per
share of $1.00 by valuing its portfolio using the amortized cost method and will
comply with the requirements of Rule 2a-7 under the 1940 Act.
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO. State Street
Navigator Securities Lending Prime Portfolio will seek to (i) maximize current
income to the extent consistent with the preservation of capital and liquidity
and (ii) maintain a stable $1.00 per share net asset value by investing in
dollar denominated securities with remaining maturities of one year or less.
This Portfolio will invest in a variety of high quality U.S. dollar-denominated
instruments, including (a) U.S. Government Securities; (b) instruments of U.S.
and foreign banks, including certificates of deposit, banker's acceptances and
time deposits (including Eurodollar certificates of deposit, Eurodollar time
deposits and Yankee certificates of deposit); (c) corporate debt obligations,
including commercial paper of U.S. and foreign companies; (d) variable amount
master demand notes; (e) debt obligations of foreign governments and foreign
government subdivisions and their agencies and instrumentalities and
supranational organizations; (f) repurchase agreements; (g) mortgage-backed
securities; (h) asset-backed securities; (i) floating-rate notes, medium term
notes and master term notes; and (j) shares of other money market funds and
similar commingled investment funds. All investments will qualify as "eligible
securities" within the meaning of Rule 2a-7 under the 1940 Act. State Street
Navigator Securities Lending Prime Portfolio will seek to maintain a stable net
asset value
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per share of $1.00 by valuing its portfolio using the amortized cost method and
will comply with the requirements of Rule 2a-7 under the 1940 Act.
STATE STREET NAVIGATOR SECURITIES LENDING SHORT-TERM BOND PORTFOLIO. State
Street Navigator Securities Lending Short-Term Bond Portfolio will seek to
maximize current income to the extent consistent with the preservation of
capital and liquidity. State Street Navigator Securities Lending Short-Term Bond
Portfolio, however, will not seek to maintain a stable net asset value per
share. Accordingly, the investment return and principal value of an investment
in State Street Navigator Securities Lending Short-Term Bond Portfolio will
fluctuate and an investor's shares, when redeemed, may be worth more or less
than their original cost. This Portfolio will invest in the same U.S. dollar-
denominated instruments in which State Street Navigator Securities Lending Prime
Portfolio invests. In addition, State Street Navigator Securities Lending Short-
Term Bond Portfolio may invest in mortgage-backed and asset-backed securities
and other U.S. dollar-denominated corporate, governmental and supranational debt
obligations with maturities in excess of 13 months, subject to certain quality
and duration requirements established for the Portfolio. State Street Navigator
Securities Lending Short-Term Bond Portfolio may invest in forward contracts,
futures, options and swap agreements for the purpose of modifying the average
effective duration of the portfolio and creating synthetic floating-rate
securities. At the time of purchase, the maximum effective duration of any
security will not exceed five years. The average effective duration of State
Street Navigator Securities Lending Short-Term Bond Portfolio, after giving
effect to all duration shortening positions, will be managed to be between one
and 120 days. At the time of purchase, (i) all securities with remaining
maturities of 13 months or less will qualify as "first tier securities" within
the meaning of Rule 2a-7(a)(6) under the 1940 Act; and (ii) all securities with
remaining maturities in excess of 13 months will (a) be rated "A" or better by
at least two nationally recognized statistical rating organizations (each, an
"NRSRO"), or (b) if rated by only one NRSRO, be rated "A" or better by such
NRSRO, or (c) if unrated, be determined by State Street to be of comparable
quality. The Portfolio will not acquire any security (other than a U.S.
Government Security) if, as a result thereof, such security would represent more
than five percent of the Portfolio's assets.
State Street Navigator Securities Lending Short-Term Bond Portfolio will not
seek to maintain a stable net asset value per share by means of the amortized
cost method. By means of managing the average effective duration of State Street
Navigator Securities Lending Short-Term Bond Portfolio, however, State Street
will seek to minimize fluctuations in the value of the Portfolio. Securities
with maturities of 60 days or less will be valued based upon the amortized cost
method. The value of all other securities will be determined based upon market
value or, in the absence of market value, at fair value as determined by the
Board of Trustees of the Trust.
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INVESTMENT POLICIES
The investment policies described below reflect the current practices of
each Portfolio, are not fundamental, and may be changed by the Board of Trustees
of the Trust without shareholder approval. To the extent consistent with each
Portfolio's investment objective and other stated policies and restrictions, and
unless otherwise indicated, each Portfolio may invest in the following
instruments and may use the following investment techniques:
U.S. GOVERNMENT SECURITIES. The types of U.S. Government securities in which
the Portfolios may at times invest include obligations issued or guaranteed by
U.S. Government agencies and instrumentalities that are supported by any of the
following: (i) the full faith and credit of the U.S. Treasury, (ii) the right of
the issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (iii) discretionary authority of the U.S. Government agency or
instrumentality or (iv) the credit of the instrumentality (examples of agencies
and instrumentalities are: Federal Land Banks, Federal Housing Administration,
Farmers Home Administration, Export-Import Bank of the United States, Central
Bank for Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan
Banks, General Services Administration, Maritime Administration, Tennessee
Valley Authority, Asian-American Development Bank, Student Loan Marketing
Association, International Bank for Reconstruction and Development and Federal
National Mortgage Association). No assurance can be given that in the future the
U.S. Government will provide financial support to such U.S. Government agencies
or instrumentalities described in (ii), (iii) and (iv), other than as set forth
above, since it is not obligated to do so by law.
REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase agreements,
whereby the Portfolio purchases securities from a financial institution that
agrees to repurchase the securities within a specified time (normally one day)
at the Portfolio's cost plus interest. A Portfolio will enter into repurchase
agreements only with financial institutions that State Street determines are
creditworthy in accordance with guidelines established by the Board of Trustees.
No Portfolio will invest more that 10% of its net assets (taken at current
market value) in repurchase agreements maturing in more than seven days. Should
the counterparty to a repurchase agreement transaction fail financially, the
Portfolio may experience delays in realizing on the collateral securing the
counterparty's obligations or a loss of rights in such collateral. Further, any
amounts realized upon the sale of collateral may be less than that necessary to
compensate the Portfolio fully. The Portfolio must take possession of collateral
either directly or through a third-party custodian. All repurchase transactions
must be collateralized at a minimum of 102% and counterparties are required to
deliver additional collateral in the event the market value of the collateral
falls below 102%.
STRIPPED SECURITIES. Each Portfolio may invest in stripped securities, which
are U.S. Treasury bonds and notes, the unmatured interest coupons of which have
been separated from the underlying obligation. Stripped securities are zero
coupon obligations that are normally issued at a discount from their face value.
A Portfolio may invest no more than 25% of its assets in stripped securities
that have been stripped by their holder, typically
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a custodian bank or investment brokerage firm. A number of securities firms and
banks have stripped the interest coupons and resold them in custodian receipt
programs with different names such as Treasury Income Growth Receipts ("TIGRS")
and Certificates of Accrual on Treasuries ("CATS"). The Trust intends to rely on
the opinions of counsel to the sellers of these certificates or other evidences
of ownership of U.S. Treasury obligations that, for Federal tax and securities
purposes, purchasers of such certificates most likely will be deemed the
beneficial holders of the underlying U.S. Government securities. Privately-
issued stripped securities such as TIGRS and CATS are not themselves guaranteed
by the U.S. Government, but the future payment of principal or interest on U.S.
Treasury obligations which they represent is so guaranteed.
ELIGIBLE DERIVATIVE INSTRUMENTS (STATE STREET NAVIGATOR SECURITIES LENDING
SHORT-TERM BOND PORTFOLIO ONLY). State Street Navigator Securities Lending
Short-Term Bond Portfolio may invest in forwards, futures, options and swap
agreements within the following parameters. Derivative instruments may be used
to create synthetic fixed income securities and to modify portfolio average
duration. Derivative positions within the Portfolio will be managed so that the
average effective duration remains below the 120 day upper limit specified for
the Portfolio. The total absolute value of the option adjusted duration dollars
of the derivative positions shall be less than or equal to 10% of the option
adjusted duration dollars of the underlying investment positions.
VARIABLE AND FLOATING RATE INSTRUMENTS. A floating rate security provides
for the automatic adjustment of its interest rate whenever a specified interest
rate changes. A variable rate security provides for the automatic establishment
of a new interest rate on set dates. Interest rates on these securities are
ordinarily tied to, and represent a percentage of, a widely recognized interest
rate, such as the yield on 90-day U.S. Treasury bills or the prime rate of a
specified bank. These rates may change as often as twice daily. Generally,
changes in interest rates will have a smaller effect on the market value of
variable and floating rate securities than on the market value of comparable
fixed income obligations. Thus, investing in variable and floating rate
securities generally affords less opportunity for capital appreciation and
depreciation than investing in comparable fixed income securities. State Street
Navigator Securities Lending Prime Portfolio may purchase variable and floating
rate non-U.S. Government securities that have a stated maturity in excess of 13
months only if the Portfolio has a right to demand payment of the principal of
the instrument at least once every thirteen months upon not more that 30 days'
notice.
Variable and floating rate instruments may include variable amount master
demand notes that permit the indebtedness thereunder to vary in addition to
providing for periodic adjustments in the interest rate. There may be no active
secondary market with respect to a particular variable or floating rate
instrument. Nevertheless, the periodic readjustments of their interest rates
tend to assure that their value to a Portfolio will approximate their par value.
Illiquid variable and floating rate instruments (instruments that are not
payable upon seven days' notice and do not have an active trading market) that
are acquired by a Portfolio are subject to a Portfolio's percentage limitations
regarding securities that are illiquid or not
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readily marketable. State Street will continuously monitor the creditworthiness
of issuers of variable and floating rate instruments in which the Trust invests
and their ability to repay principal and interest.
AFFILIATED BANK TRANSACTIONS. Pursuant to exemptive orders issued by the
Securities and Exchange Commission (the "SEC"), the Portfolios may engage in
certain transactions with banks that are, or may be considered to be, affiliated
persons of the Portfolios under the 1940 Act. Such transactions may be entered
into only pursuant to procedures established, and periodically reviewed by, the
Board of Trustees. These transactions may include purchases, as principal, of
short-term obligations of, and repurchase agreements with, the 50 largest U.S.
banks (measured by deposits); transactions in municipal securities; and
transactions in U.S. Government securities with affiliated banks that are
primary dealers in these securities.
WHEN-ISSUED TRANSACTIONS. New issues of securities are often offered on a
when-issued basis. This means that delivery and payment for the securities
normally will take place several days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be
received on securities purchased on a when-issued basis are each fixed at the
time the buyer enters into the commitment.
Each Portfolio will make commitments to purchase when-issued securities only
with the intention of actually acquiring the securities, but a Portfolio may
sell these securities or dispose of the commitment before the settlement date if
it is deemed advisable as a matter of investment strategy. Cash or marketable
high quality debt securities equal to the amount of the above commitments will
be segregated on each Portfolio's records. For the purpose of determining the
adequacy of these securities, the segregated securities will be valued at
market. If the market value of such securities declines, additional cash or
securities will be segregated on the Portfolio's records on a daily basis so
that the market value of the account will equal the amount of such commitments
by the Portfolio. No Portfolio will invest more than 25% of its net assets in
when-issued securities.
Securities purchased on a when-issued basis and the securities held by each
Portfolio are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value of
such securities will fluctuate inversely to changes in interest rates (i.e.,
they will appreciate in value when interest rates decline and decrease in value
when interest rates rise). Therefore, if in order to achieve higher interest
income a Portfolio remains substantially fully invested at the same time that it
has purchased securities on a "when-issued" basis, there will be a greater
possibility of fluctuation in the Portfolio's net asset value.
When payment for when-issued securities is due, each Portfolio will meet its
obligations from then-available cash flow, the sale of segregated securities,
the sale of other securities or, and although it would not normally be expected
to do so, from the sale of the when-issued securities themselves (which may have
a market value greater or less than the Portfolio's payment obligation). The
sale of securities to meet such obligations carries with
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it a greater potential for the realization of capital gains, which are subject
to federal income taxes.
FORWARD COMMITMENTS (STATE STREET NAVIGATOR SECURITIES LENDING PRIME
PORTFOLIO AND STATE STREET NAVIGATOR SECURITIES LENDING SHORT-TERM BOND
PORTFOLIO ONLY). Each of State Street Navigator Securities Lending Prime
Portfolio and State Street Navigator Securities Lending Short-Term Bond
Portfolio may contract to purchase securities for a fixed price at a future date
beyond the customary settlement time, provided that the forward commitment is
consistent with the Portfolio's ability to manage its investment portfolio,
maintain a stable net asset value and honor redemption requests. When effecting
such transactions, cash or liquid high quality debt obligations held by the
Portfolio of a dollar amount sufficient to make payment for the portfolio
securities to be purchased will be segregated on the Portfolio's records at the
trade date and maintained until the transaction is settled. The failure of the
other party to the transaction to complete the transaction may cause the
Portfolio to miss an advantageous price or yield. The Portfolio bears the risk
of price fluctuations during the period between the trade and settlement dates.
SECTION 4(2) COMMERCIAL PAPER (STATE STREET NAVIGATOR SECURITIES LENDING
PRIME PORTFOLIO AND STATE STREET NAVIGATOR SECURITIES LENDING SHORT-TERM BOND
PORTFOLIO ONLY). State Street Navigator Securities Lending Prime Portfolio and
State Street Navigator Securities Lending Short-Term Bond Portfolio may invest
in commercial paper issued in reliance on the so-called private placement
exemption from registration afforded by Section 4(2) of the 1933 Act ("Section
4(2) paper"). Section 4(2) paper is restricted as to disposition under the
federal securities laws and generally is sold to institutional investors, such
as State Street Navigator Securities Lending Prime Portfolio and State Street
Navigator Securities Lending Short-Term Bond Portfolio, that agree they are
purchasing the paper for investment and not with a view to distribution. Any
resale by the purchaser must be in an exempt transaction. Section 4(2) paper
normally is resold to other institutional investors through or with the
assistance of the issuer or investment dealers that make a market in Section
4(2) paper. Section 4(2) paper will not be subject to a Portfolio's 10%
limitation on illiquid securities, set forth below, where State Street (pursuant
to guidelines established by the Board of Trustees) determines that a liquid
trading market exists for the securities.
ILLIQUID SECURITIES. A Portfolio will not invest more than 10% of its net
assets in illiquid securities or securities that are not readily marketable,
including repurchase agreements and time deposits of more that seven days'
duration. The absence of a regular trading market for securities imposes
additional risks on investments in these securities. Illiquid securities may be
difficult to value and may often be disposed of only after considerable expense
and delay.
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VARIABLE AMOUNT MASTER DEMAND NOTES (STATE STREET NAVIGATOR SECURITIES
LENDING PRIME PORTFOLIO AND STATE STREET NAVIGATOR SECURITIES LENDING SHORT-TERM
BOND PORTFOLIO ONLY). State Street Navigator Securities Lending Prime Portfolio
and State Street Navigator Securities Lending Short-Term Bond Portfolio may
invest in variable amount master demand notes, which are unsecured obligations
that are redeemable upon demand and are typically unrated. These instruments are
issued pursuant to written agreements between their issuers and holders. The
agreements permit the holders to increase (subject to an agreed maximum) and the
holders and issuers to decrease the principal amount of the notes, and specify
that the rate of interest payable on the principal fluctuates according to an
agreed formula.
MORTGAGE-RELATED PASS-THROUGH SECURITIES (STATE STREET NAVIGATOR SECURITIES
LENDING PRIME PORTFOLIO AND STATE STREET NAVIGATOR SECURITIES LENDING SHORT-TERM
BOND PORTFOLIO ONLY). State Street Navigator Securities Lending Prime Portfolio
and State Street Navigator Securities Lending Short-Term Bond Portfolio may
invest in mortgage-related securities. Mortgage pass-through certificates are
issued by governmental, government-related and private organizations and are
backed by pools of mortgage loans. These mortgage loans are made by savings and
loan associations, mortgage bankers, commercial banks and other lenders to
residential home buyers throughout the United States. The securities are "pass-
through" securities because they provide investors with monthly payments of
principal and interest that, in effect, are a "pass-through" of the monthly
payments made by the individual borrowers on the underlying mortgage loans, net
of any fees paid to the issuer or guarantor of the pass-through certificates.
The principal governmental issuer of such securities is the Government National
Mortgage Association ("GNMA"), which is a wholly-owned U.S. Government
corporation within the Department of Housing and Urban Development. Government-
related issuers include the Federal Home Loan Mortgage Corporation ("FHLMC"), a
corporate instrumentality of the United States created pursuant to an act of
Congress, which is owned entirely by the Federal Home Loan Bank, and the Federal
National Mortgage Association ("FNMA"), a government sponsored corporation owned
entirely by private stockholders. Commercial banks, savings and loan
associations, private mortgage insurance companies, mortgage bankers and other
secondary market issuers also create pass-through pools of conventional
residential mortgage loans. Such issuers may be the originators of the
underlying mortgage loans as well as the guarantors of the mortgage-related
securities.
a. GNMA MORTGAGE PASS-THROUGH CERTIFICATES ("GINNIE
MAES"). Ginnie Maes represent an undivided interest in a pool of
mortgage loans that are insured by the Federal Housing
Administration or the Farmers Home Administration or guaranteed
by the Veterans Administration. Ginnie Maes entitle the holder to
receive all payments (including prepayments) of principal and
interest owed by the individual mortgagors, net of fees paid to
GNMA and to the issuer which assembles the loan pool and passes
through the monthly mortgage payments to the certificate holders
(typically, a mortgage banking firm), regardless of whether the
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individual mortgagor actually makes the payment. Because payments
are made to certificate holders regardless of whether payments
are actually received on the underlying loan, Ginnie Maes are of
the "modified pass-through" mortgage certificate type. GNMA is
authorized to guarantee the timely payment of principal and
interest on the Ginnie Maes as securities backed by an eligible
pool of mortgage loans. The GNMA guaranty is backed by the full
faith and credit of the United States, and GNMA has unlimited
authority to borrow funds from the U.S. Treasury to make payments
under the guaranty. The market for Ginnie Maes is highly liquid
because of the size of the market and the active participation in
the secondary market by securities dealers and a variety of
investors.
b. FHLMC MORTGAGE PARTICIPATION CERTIFICATES ("FREDDIE
MACS"). Freddie Macs represent interests in groups of specified
first lien residential conventional mortgage loans underwritten
and owned by FHLMC. Freddie Macs entitle the holder to timely
payment of interest, which is guaranteed by FHLMC. FHLMC
guarantees either ultimate collection or timely payment of all
principal payments on the underlying mortgage loans. In cases
where FHLMC has not guaranteed timely payment of principal, FHLMC
may remit the amount due on account of its guarantee of ultimate
payment of principal at any time after default on an underlying
loan, but in no event later than one year after it becomes
payable. Freddie Macs are not guaranteed by the United States or
by any of the Federal Home Loan Banks and do not constitute a
debt or obligation of the United States or of any Federal Home
Loan Bank. The secondary market for Freddie Macs is highly liquid
because of the size of the market and the active participation in
the secondary market by FHLMC, securities dealers and a variety
of investors.
c. FNMA GUARANTEED MORTGAGE PASS-THROUGH CERTIFICATES
("FANNIE MAES"). Fannie Maes represent an undivided interest in a
pool of conventional mortgage loans secured by first mortgages or
deeds of trust, on one-family to four-family residential
properties. FNMA is obligated to distribute scheduled monthly
installments of principal and interest on the loans in the pool,
whether or not received, plus full principal of any foreclosed or
otherwise liquidated loans. The obligation of FNMA under its
guaranty is solely the obligation of FNMA and is not backed by,
nor entitled to, the full faith and credit of the United States.
The market value of mortgage-related securities depends on, among other
things, the level of interest rates, the certificates' coupon rates and the
payment history of the underlying borrowers.
Although the mortgage loans in a pool underlying a mortgage pass-through
certificate will have maturities of up to 30 years, the average life of a
mortgage pass-through certificate will be substantially less because the loans
will be subject to normal principal amortization and also may be prepaid prior
to maturity. Prepayment rates vary widely and may be affected by changes in
mortgage interest rates. In periods of falling interest rates, the rate of
prepayment on higher interest mortgage rates tends to increase, thereby
shortening the actual average life of the mortgage pass-through certificate.
Conversely, when interest rates are rising, the
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rate of prepayment tends to decrease, thereby lengthening the average life of
the mortgage pass-through certificate. Accordingly, it is not possible to
predict accurately the average life of a particular pool. However, based on
current statistics, it is conventional to quote yields on mortgage pass-through
certificates based on the assumption that they have effective maturities of 12
years. Reinvestment of prepayments may occur at higher or lower rates than the
original yield on the certificates. Due to the prepayment feature and the need
to reinvest prepayments of principal at current rates, mortgage pass-through
certificates with underlying loans bearing interest rates in excess of the
market rate can be less effective than typical noncallable bonds with similar
maturities at "locking in" yields during periods of declining interest rates,
although they may have comparable risks of declining in value during periods of
rising interest rates.
ZERO COUPON SECURITIES. These securities are notes, bonds and debentures
that: (i) do not pay current interest and are issued at a substantial discount
from par value; (ii) have been stripped of their unmatured interest coupons and
receipts; or (iii) pay no interest until a stated date one or more years into
the future. These securities also include certificates representing interests in
such stripped coupons and receipts.
Because the Portfolios accrue taxable income from zero coupon securities
without receiving regular interest payments in cash, each Portfolio may be
required to sell portfolio securities in order to pay a dividend depending,
among other things, upon the number of shareholders who elect to receive
dividends in cash rather than reinvesting dividends in additional shares of the
Portfolio. Investing in these securities might also force the Portfolio to sell
portfolio securities to maintain portfolio liquidity.
Because a zero coupon security pays no interest to its holder during its
life or for a substantial period of time, it usually trades at a deep discount
from its face or par value and will be subject to greater fluctuations in market
value in response to changing interest rates than debt obligations of comparable
maturities that make regular distributions of interest.
EURODOLLAR CERTIFICATES OF DEPOSIT (ECDS), EURODOLLAR TIME DEPOSITS (ETDS)
AND YANKEE CERTIFICATES OF DEPOSIT (YCDS) (STATE STREET NAVIGATOR SECURITIES
LENDING PRIME PORTFOLIO AND STATE STREET NAVIGATOR SECURITIES LENDING SHORT-TERM
BOND PORTFOLIO ONLY). ECDs are U.S. dollar-denominated certificates of deposit
issued by foreign branches of domestic banks. ETDs are U.S. dollar denominated
time deposits in foreign branches of U.S. banks and foreign banks. YCDs are U.S.
dollar denominated certificates of deposit issued by U.S. branches of foreign
banks. Different risks than those associated with the obligations of domestic
banks may exist for ECDs, ETDs and YCDs because the banks issuing these
instruments, or their domestic or foreign branches, are not necessarily subject
A-10
<PAGE>
to the same regulatory requirements that apply to domestic banks, such as loan
limitations, examinations and reserve, accounting, auditing, recordkeeping and
public reporting requirements.
RATINGS OF DEBT INSTRUMENTS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") -- LONG TERM DEBT RATINGS. The
following is a description of Moody's debt instrument ratings.
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a midrange ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
STANDARD & POOR'S RATING GROUP ("S&P"). The ratings are based, in varying
degrees, on the following considerations: (i) the likelihood of default --
capacity and willingness of the obligor as to the timely payment of interest and
repayment of principal in accordance with the terms of the obligation; (ii) the
nature of and provisions of the obligation; and (iii) the protection afforded
by, and relative position of, the obligation in the event of bankruptcy,
reorganization, or other arrangement under the laws of bankruptcy and other laws
affecting creditors' rights.
AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
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AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
RATINGS OF COMMERCIAL PAPER
MOODY'S. Moody's short-term debt ratings are opinions of the ability of
issuers to repay punctually senior debt obligations. These obligations have an
original maturity not exceeding one year, unless explicitly noted. Moody's
employs the following three designations, all judged to be investment grade, to
indicate the relative repayment ability of rated issuers:
o Issuers rated Prime-1 (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
o Well-established access to a range of financial markets and assured sources
of alternate liquidity.
o Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
o Issuers rated Not Prime do not fall within any of the Prime rating
categories.
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<PAGE>
S&P. An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. Ratings are graded into several categories, ranging from A-1 for the
highest quality obligations to D for the lowest. These categories are as
follows:
A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are deemed with a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
FITCH'S INVESTORS SERVICE, INC. ("FITCH"). Commercial paper rated by Fitch
reflects Fitch's current appraisal of the degree of assurance of timely payment
of such debt. An appraisal results in the rating of an issuer's paper as F-1,
F-2, F-3, or F-4.
F-1 -- This designation indicates that the commercial paper is regarded as
having the strongest degree of assurance for timely payment.
F-2 -- Commercial paper issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than those issues rated F-1.
DUFF AND PHELPS, INC. Duff & Phelps' short-term ratings are consistent with
the rating criteria utilized by money market participants. The ratings apply to
all obligations with maturities of under one year, including commercial paper,
the uninsured portion of certificates of deposit, unsecured bank loans, master
notes, bankers acceptances, irrevocable letters of credit, and current
maturities of long-term debt. Asset-backed commercial paper is also rated
according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps' short-term ratings is the
refinement of the traditional '1' category. The majority of short-term debt
issuers carry the highest rating, yet quality differences exist within that
tier. As a consequence, Duff & Phelps has incorporated gradations of '1+' (one
plus) and '1-' (one minus) to assist investors in recognizing those differences.
A-13
<PAGE>
Duff 1+--Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free US Treasury short-term
obligations.
Duff 1--Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors are
minor.
Duff 1- -- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small.
Duff 2--Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
IBCA, INC. In addition to conducting a careful review of an institution's
reports and published figures, IBCA's analysts regularly visit the companies for
discussions with senior management. These meetings are fundamental to the
preparation of individual reports and ratings. To keep abreast of any changes
that may affect assessments, analysts maintain contact throughout the year with
the management of the companies they cover.
IBCA's analysts speak the languages of the countries they cover, which is
essential to maximize the value of their meetings with management and to
properly analyze a company's written materials. They also have a thorough
knowledge of the laws and accounting practices that govern the operations and
reporting of companies within the various countries.
Often, in order to ensure a full understanding of their position, companies
entrust IBCA with confidential data. While the data cannot be disclosed in
reports, they are taken into account when assigning ratings. Before dispatch to
subscribers, a draft of the report is submitted to each company to permit
correction of any factual errors and to enable clarification of issues raised.
IBCA's Rating Committees meet at regular intervals to review all ratings and
to ensure that individual ratings are assigned consistently for institutions in
all the countries covered. Following the Committee meeting, ratings are issued
directly to subscribers. At the same time, the company is informed of the
ratings as a manner of courtesy, but not for discussion.
Al+--Obligations supported by the highest capacity for timely repayment.
A1--Obligations supported by a very strong capacity for timely repayment.
A-14
<PAGE>
A2--Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.
RISK FACTORS
The shares of the Trust have not been registered under the 1933 Act and,
because they will be offered only to a limited number of qualified investors, it
is anticipated that they will be exempt from the registration provisions
thereof. Shares of the Trust may not be transferred or resold without
registration under the 1933 Act or pursuant to an exemption from such
registration. However, shares of the Trust may be redeemed in accordance with
the terms of the Master Trust Agreement and the Confidential Offering Memorandum
provided to shareholders.
Investments in shares of the Trust are neither insured nor guaranteed by the
government. There is no assurance that either State Street Navigator Securities
Lending Government Portfolio or State Street Navigator Securities Lending Prime
Portfolio Series of the Trust will maintain a stable net asset value of $1.00
per share. Shares in the Trust are not deposits or obligations of, or guaranteed
or endorsed by, State Street, and shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency, and involve investment risks including the possible loss of principal.
ITEM 5. MANAGEMENT OF THE TRUST
THE BOARD OF TRUSTEES
Under Massachusetts law, the Board of Trustees of the Trust has overall
responsibility for managing the Trust in good faith and in a manner that
represents the best interests of the Trust. This management responsibility may
be delegated. Accordingly, the Board of Trustees supervises the management,
activities and affairs of the Trust and has approved contracts with State Street
to provide day-to-day management required by the Trust.
THE ADVISER
The Trustees, including a majority of the Trustees that are not "interested
persons" of the Trust, as such term is defined in Section 2(a)(19) of the 1940
Act ("Independent Trustees"), have authorized State Street to serve as the
investment adviser, custodian, transfer agent and administrator of the Trust.
State Street is a Massachusetts-chartered trust company and a member of the
Federal Reserve System. It is a wholly owned subsidiary of State Street
Corporation, a publicly-held corporation and holding company registered under
the
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<PAGE>
Federal Bank Holding Company Act of 1956, as amended. State Street is among the
world's largest providers of institutional custody services, with assets under
custody at December 31, 1997 of approximately $3.9 trillion. State Street also
provides asset management services for numerous pension plans, foundations,
governmental plans and high net worth individuals, and serves as the investment
adviser or subadviser for several registered management investment companies,
including SSgA Funds (formerly The Seven Seas Series Funds). At December 31,
1997, State Street had discretionary investment management authority with
respect to approximately $390 billion in assets.
State Street, which was the first custodian bank to provide securities
lending services on a 24-hour basis through non-U.S. lending offices, currently
administers the world's largest securities lending program. On average, during
fiscal year 1997, State Street served as securities lending agent with respect
to loan transactions involving in excess of $91.6 billion on loan.
For the services it provides as adviser for State Street Navigator
Securities Lending Prime Portfolio and State Street Navigator Securities Lending
Government Portfolio, State Street will receive a fee equal on an annual basis
to 0.0175% of each Portfolio's average daily net assets. For the services it
provides as adviser to State Street Navigator Securities Lending Short-Term Bond
Portfolio, State Street will receive a fee equal on an annual basis to 0.05%.
For the services it provides as administrator for each Portfolio, State Street
will receive a fee equal on an annual basis to 0.035% of each Portfolio's
average daily net assets for the first $300 million, plus 0.02% of each
Portfolio's average daily net assets for the next $300 million and 0.005% of
each Portfolio's average daily net assets thereafter (with a minimum annual fee
of $125,000 per Portfolio). The contractual arrangements between the Trust and
State Street have been approved initially for a two-year term by the Trustees,
including a majority of the Independent Trustees, and will continue thereafter
from year to year provided that the arrangements are approved by the Trustees,
including a majority of the Independent Trustees. Shares of each Portfolio will
be registered with the Trust's transfer agent in the name of State Street, as
agent for each Lender, or the name of the Lender's custodian. State Street will
pass through to each beneficial owner all voting rights with respect to the
shares. No officer, director or employee of State Street will be an officer,
trustee or employee of the Trust, unless permitted by applicable law.
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<PAGE>
The name and title of the persons employed by State Street to manage the
day-to-day operations of State Street Navigator Securities Lending Prime
Portfolio, the length of time that each person has had such responsibility and
each person's business experience during the past five years are set forth
below:
<TABLE>
<CAPTION>
PORTFOLIO PRIMARY PORTFOLIO BUSINESS EXPERIENCE
MANAGER AND TITLE MANAGER SINCE DURING THE PAST FIVE YEARS
----------------- ------------- --------------------------
<S> <C> <C> <C>
Robert Fort, Portfolio Manager March 21, 1996 Portfolio Manager at the Dreyfus
Corp. through 3/96; State Street
from 3/96 to present
</TABLE>
TRUST EXPENSES
The Trust will pay all of its expenses other than those expressly assumed by
State Street. The principal expenses of the Trust are the fees for advisory
services, administration, custody and transfer agency services, all of which are
payable to State Street. Other expenses include: (i) amortization of deferred
organizational costs; (ii) taxes, if any; (iii) expenses for legal, auditing and
financial accounting services; (iv) expense of preparing (including typesetting,
printing and mailing) reports and notices to existing shareholders; (v) expense
of issuing and redeeming Trust shares; (vi) the fees, travel expenses and other
out-of-pocket expenses of Trustees who are not affiliated with State Street or
any of its affiliates; (vii) extraordinary expenses as may arise, including
expenses incurred in connection with litigation proceedings and claims and the
legal obligations of the Trust to indemnify its Trustees, shareholders and
agents; and (viii) other expenses properly payable by the Trust.
ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Not Applicable.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
ATTRIBUTES OF PORTFOLIO SHARES
The Trust issues a single class of shares divisible into an unlimited number
of portfolio series, each of which is a separate and distinct sub-trust of the
Trust. Each share of each sub-trust represents an equal proportionate interest
in that sub-trust, has a par value of $.001 per share and is entitled to such
dividends and distributions earned on assets belonging to such sub-trust as may
be declared by the Trustees. Shares of the Trust are fully paid and
non-assessable by the Trust and shareholders have no preemptive or appraisal
rights.
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<PAGE>
Each Trust share has one vote. Shareholders of the Trust have power to vote
only (i) for the election or removal of Trustees, (ii) with respect to contracts
as to which shareholder approval is required by the 1940 Act, (iii) with respect
to any termination or reorganization of the Trust, (iv) with respect to the
amendment of the Master Trust Agreement, (v) to the same extent as stockholders
of a Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or any sub-trust thereof or the
shareholders (provided, however, that a shareholder of a particular sub-trust
shall not be entitled to vote with respect to a derivative or class action on
behalf of any other sub-trust (or shareholder of any other sub-trust) of the
Trust and (vi) with respect to such additional matters relating to the Trust as
may be required by the 1940 Act, the Master Trust Agreement, the Trust's Bylaws
or as the Trustees may consider necessary or desirable.
No annual or regular meeting of shareholders is required. Special meetings
of shareholders may be called by the Trustees from time to time for the purpose
of taking action upon any matter requiring the vote or authority of the
shareholders as provided in the Master Trust Agreement or as deemed necessary or
desirable by the Trustees.
Shares of the Trust are not registered under the 1933 Act or the securities
law of any state and are sold in reliance upon an exemption from registration.
Shares may not be transferred or resold without registration under the 1933 Act,
except pursuant to an exemption from registration. However, shares may be
redeemed on any day on which State Street is open for business (a "Business
Day").
CONTROL PERSONS
None.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to State Street.
DIVIDENDS AND DISTRIBUTIONS
The Trustees intend to declare dividends daily on shares of each Portfolio
from net investment income and to pay such dividends as of the last business day
of each month. Distributions from net long-term capital gains, if any, will be
made at least annually. Generally, distributions will be declared and paid in
December, if required for a Portfolio to avoid imposition of a 4% federal excise
tax on distributed capital gains. It is anticipated that the Portfolios will not
realize any material long-term capital gains or losses. Income dividends and
capital gains distributions, if any, will be paid at their net asset value on
the payment date of the dividend or distribution. A shareholder's right to
receive dividends and distributions with respect to shares
A-18
<PAGE>
purchased commences on the effective date of the purchase of such shares and
continues through the day immediately preceding the effective date of redemption
of such shares.
TAX CONSEQUENCES
Each Portfolio intends to qualify as a regulated investment company ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a RIC, a Portfolio will not be subject to federal income taxes to
the extent it distributes its net investment income and capital gain net income
(capital gains in excess of capital losses) to shareholders. The Board of
Trustees intends to distribute each year substantially all of each Portfolio's
net investment income and capital gain net income. No Portfolio expects to be
subject to any state or local taxes.
Dividends from net investment income and distributions of net short-term
capital gains are taxable to shareholders as ordinary income under federal
income tax laws whether paid in cash or in additional shares. Distributions from
net long-term capital gains are taxable as long-term capital gains regardless of
the length of time a shareholder has held such shares.
Each Portfolio may purchase bonds at market discount (i.e., bonds with a
purchase price less than original issue price or adjusted issue price). If such
bonds are subsequently sold at a gain, then a portion of that gain equal to the
amount of market discount, which should have been accrued through the sale date,
will be taxable to shareholders as ordinary income.
Under federal law, the income derived from U.S. Government Securities is
exempt from state income taxes. All states that tax personal income permit
mutual funds to pass this tax exemption through to their shareholders under
certain circumstances. Income from repurchase agreements in which the underlying
securities are U.S. Government Securities does not receive this exempt
treatment.
The sale of Trust shares by a shareholder is a taxable event and may result
in capital gain or loss. A capital gain or loss may be realized from an ordinary
redemption of shares or an exchange of shares between two Portfolios. Any loss
incurred on a sale or exchange of Trust shares will be treated as a long-term
or short-term capital loss to the extent of capital gain dividends received with
respect to such shares depending upon the length of time such shares were held
by the shareholder.
Shareholders will be notified after each calendar year of the amount of
income dividends and net capital gains distributed and the percentage of a
Portfolio's income attributable to U.S. Government Securities. Each Portfolio is
required to withhold 31% of all taxable dividends, distributions and redemption
proceeds
A-19
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payable to any noncorporate shareholder that does not provide the Portfolio with
the shareholder's correct taxpayer identification number or certification that
the shareholder is not subject to backup withholding.
The foregoing discussion is only a summary of certain federal income tax
issues generally affecting each Portfolio and its shareholders. Circumstances
among investors may vary and each investor is encouraged to discuss an
investment in a Portfolio with such investor's tax adviser.
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED
Shares of each operating Portfolio are available for purchase on each
Business Day. Purchases are effected on behalf of a Lender by State Street, in
its capacity as securities lending agent for the Lender. All shares are
purchased at the net asset value per share of the Portfolio next determined
after the purchase is communicated to the Trust. Each of State Street Navigator
Securities Lending Government Portfolio and State Street Navigator Securities
Lending Prime Portfolio will seek to maintain a stable net asset value per share
of $1.00 by valuing its investment portfolio using the amortized cost method and
will comply with the requirements of Rule 2a-7 under the 1940 Act. State Street
Navigator Securities Lending Short-Term Bond Portfolio will not seek to maintain
a stable net asset value per share by means of the amortized cost method. By
means of managing the average effective duration of State Street Navigator
Securities Lending Short-Term Bond Portfolio, however, State Street will seek to
minimize fluctuations in the value of the Portfolio. Securities with maturities
of 60 days or less will be valued based upon the amortized cost method. The
value of all other securities will be determined based upon market value or, in
the absence of market value, at fair value as determined by the Board of
Trustees of the Trust.
ITEM 8. REDEMPTION OR REPURCHASE
Shares of each operating Portfolio may be redeemed on each Business Day at
the net asset value per share of the Portfolio next determined after the
redemption is communicated to the Trust. Redemptions are effected on behalf of a
Lender by State Street, in its capacity as lending agent for the Lender.
The net asset value per share of each operating Portfolio is determined as
of 5:00 p.m. New York City time.
ITEM 9. PENDING LEGAL PROCEEDINGS
None.
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<PAGE>
PART B
ITEM 10. COVER PAGE
STATE STREET NAVIGATOR SECURITIES LENDING TRUST
TWO INTERNATIONAL PLACE, 31ST FLOOR
BOSTON, MASSACHUSETTS 02110
(617) 664-2500
STATEMENT OF ADDITIONAL INFORMATION
STATE STREET NAVIGATOR SECURITIES LENDING GOVERNMENT PORTFOLIO
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
STATE STREET NAVIGATOR SECURITIES LENDING SHORT-TERM BOND PORTFOLIO
APRIL 30, 1998
State Street Navigator Securities Lending Trust (formerly Navigator
Securities Lending Trust) (the "Trust") is a registered open-end investment
company organized as a Massachusetts business trust offering shares of
beneficial interest in separate investment portfolios. In addition, each series
of the Trust is diversified as defined in the Investment Company Act of 1940, as
amended (the "1940 Act").
This Statement of Additional Information supplements information concerning
the Trust and its portfolios, State Street Navigator Securities Lending
Government Portfolio (formerly Navigator Securities Lending Government
Portfolio), State Street Navigator Securities Lending Prime Portfolio (formerly
Navigator Securities Lending Prime Portfolio) and State Street Navigator
Securities Lending Short-Term Bond Portfolio (formerly Navigator Securities
Lending Short-Term Bond Portfolio) (each, a "Portfolio" and collectively, the
"Portfolios"), contained in the Trust's Prospectus dated April 30, 1998. As of
the date hereof, State Street Navigator Securities Lending Government Portfolio
and State Street Navigator Securities Lending Short-Term Bond Portfolio are not
operational. This Statement is not a Prospectus and should be read in
conjunction with the Trust's Prospectus, which may be obtained by telephoning or
writing the Trust at the number or address shown above.
B-1
<PAGE>
ITEM 11. TABLE OF CONTENTS
PAGE
----
GENERAL INFORMATION AND HISTORY. . . . . . . . . . . . . . . . . B-2
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . B-3
MANAGEMENT OF THE REGISTRANT . . . . . . . . . . . . . . . . . . B-4
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. . . . . . . B-5
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . B-6
BROKERAGE ALLOCATION AND OTHER PRACTICES . . . . . . . . . . . . B-8
CAPITAL STOCK AND OTHER SECURITIES . . . . . . . . . . . . . . . B-9
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED . . B-10
TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12
UNDERWRITERS . . . . . . . . . . . . . . . . . . . . . . . . . . B-13
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . B-13
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . B-15
ITEM 12. GENERAL INFORMATION AND HISTORY
Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT RESTRICTIONS
The Trust has adopted the following fundamental investment policies, which,
with respect to a Portfolio, may not be changed without the approval of a
majority of the shareholders of the Portfolio. No Portfolio may:
1. Borrow money, except as a temporary measure for extraordinary or
emergency purposes or to facilitate redemptions (not for leveraging or
investment), provided that borrowing does not exceed an amount equal to
33 1/3% of the current value of the Portfolio's assets taken at market
value, less liabilities, other than borrowings. If at any time the
Portfolio's borrowings exceed this limitation due to a decline in net
assets, such borrowings will, within three days, be reduced to the extent
necessary to comply with this limitation. The Portfolio will not purchase
investments once borrowed funds (including reverse repurchase agreements)
exceed 5% of its total assets.
B-2
<PAGE>
2. Make loans to any person or firm; provided, however, that the making of
a loan shall not include (i) the acquisition for investment of bonds,
debentures, notes or other evidence of indebtedness which is publicly
distributed or of a type customarily purchased by institutional
investors, or (ii) the entering into repurchase agreements, and provided
further that a Portfolio may lend its portfolio securities to broker-
dealers or other institutional investors if the aggregate value of all
securities loaned does not exceed 33 1/3% of the value of the Portfolio's
total assets.
3. Engage in the business of underwriting securities issued by others,
except that a Portfolio will not be deemed to be an underwriter or to be
underwriting on account of the purchase or sale of securities subject to
legal or contractual restrictions on disposition.
4. Issue senior securities, except as permitted by its investment
objective, policies and restrictions, and except as permitted by the 1940
Act.
5. Invest 25% or more of the value of its total assets in securities of
companies primarily engaged in any one industry (other than the U.S.
Government, its agencies and instrumentalities); provided, however, that
concentration may occur as a result of changes in the market value of
portfolio securities. Foreign and domestic branches of U.S. banks and
U.S. branches of foreign banks are not considered a single industry for
purposes of this restriction.
6. With respect to 75% of its total assets, invest in securities of any
one issuer (other than securities issued by the U.S. Government, its
agencies and instrumentalities), if immediately thereafter and as a
result of such investment (i) the current market value of the Portfolio's
holdings in the securities of such issuer exceeds 5% of the value of the
Portfolio's assets or (ii) the Portfolio owns more than 10% of the
outstanding voting securities of the issuer.
7. Purchase or sell real estate or real estate mortgage loans; provided,
however, that a Portfolio may invest in securities secured by real estate
or interests therein or issued by companies which invest in real estate
or interests therein.
8. Invest in commodities, except that a Portfolio may purchase and sell
financial futures contracts and options thereon.
INVESTMENT POLICIES
See Item 4 in Part A for a description of the Trust's investment policies.
B-3
<PAGE>
PORTFOLIO TURNOVER
The portfolio turnover rate for each Portfolio is calculated by dividing the
lesser of purchases or sales of the Portfolio's securities for the particular
year, by the monthly average value of the Portfolio's securities owned during
the year. For purposes of determining the rate, all short-term securities,
including options, futures, forward contracts and repurchase agreements, are
excluded.
ITEM 14. MANAGEMENT OF THE REGISTRANT
BACKGROUND INFORMATION
The Board of Trustees is responsible for overseeing generally the operation
of the Portfolios. State Street serves as the Trust's adviser, custodian,
transfer agent and administrator.
The following table sets forth the name, address and age of the Trust's
Trustees and officers, their positions with the Trust and their present and
principal occupations during the past five years. An asterisk (*) indicates that
a Trustee is an "interested person" of the Trust, as defined in the 1940 Act.
<TABLE>
<CAPTION>
POSITION WITH THE PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE TRUST DURING PAST 5 YEARS
---------------------- ------ -------------------
<S> <C> <C> <C>
*Michael A. Jessee, (51) Trustee President and Chief Executive
One Financial Center, 20th Floor Officer of the Federal Home Loan
Boston, Massachusetts 02110 Bank of Boston since June 5, 1989;
Director of Financial Institutions
Retirement Fund; member of the
Policy Advisory Board, Joint
Center for Housing Studies,
Harvard University.
George J. Sullivan, Jr., (55) Trustee President and Chief Executive
260 Franklin Street Officer, Newfound Consultants Inc.
Boston, Massachusetts 02110 since 1997; Trustee, SEI group of
mutual funds since 1996; General
Partner, Teton Partners, L.P., 1991
to 1996; member of the American
Institute and Massachusetts Society
of CPAs.
Peter Tufano, (41) Trustee Associate Professor of Business
Graduate School Administration at Harvard Business
of Business Administration School since 1994.
Harvard University
Boston, Massachusetts 02168
Raymond P. Boulanger, (54) Secretary Partner, Goodwin, Procter & Hoar
Goodwin, Procter & Hoar LLP LLP
Exchange Place
Boston, Massachusetts 02109
B-4
<PAGE>
<CAPTION>
POSITION WITH THE PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE TRUST DURING PAST 5 YEARS
---------------------- ------ -------------------
<S> <C> <C> <C>
Philip H. Newman, (45) Assistant Secretary Partner, Goodwin, Procter & Hoar
Goodwin, Procter & Hoar LLP. LLP
Exchange Place
Boston, Massachusetts 02109
</TABLE>
COMPENSATION
The following table describes the compensation received by the Trustees from
the Trust for the fiscal period ended December 31, 1997. During the fiscal
period ended December 31, 1997, the Trust paid an aggregate of $45,000 to all
Trustees.
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
AGGREGATE PENSION OR ESTIMATED COMPENSATION
COMPENSATION RETIREMENT ANNUAL FROM
FROM BENEFIT ACCRUED AS BENEFITS INVESTMENT
INVESTMENT PART OF INVESTMENT UPON COMPANY PAID
TRUSTEE COMPANY COMPANY EXPENSES RETIREMENT TO TRUSTEES
------- ------- ----------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Michael A. Jessee *$15,000 None None *$15,000
George J. Sullivan, Jr *$15,000 None None *$15,000
Peter Tufano *$15,000 None None *$15,000
</TABLE>
*Each Trustee receives a fee of $3,750 for each meeting of the Board of Trustees
he attends and is reimbursed for expenses incurred in attending such meetings.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
CONTROLLING SHAREHOLDERS
In connection with State Street's securities lending program, State Street
holds certain collateral on behalf of its securities lending clients to secure
the return of loaned securities. Such collateral may be invested in Trust shares
from time to time. State Street, however, will pass through voting rights to its
securities lending clients that have a beneficial interest in a Portfolio.
Consequently, State Street will not be a controlling person of the Trust for
purposes of the 1940 Act.
B-5
<PAGE>
PRINCIPAL SHAREHOLDERS
As of April 1, 1998, there were no shares outstanding for State Street
Navigator Securities Lending Government Portfolio or State Street Navigator
Securities Lending Short-Term Bond Portfolio, and the following shareholders
owned of record 5% or more of the issued and outstanding shares of State Street
Navigator Securities Lending Prime Portfolio:
PERCENTAGE OF
SHAREHOLDER PRINCIPAL ADDRESS SHARES HELD
----------- ----------------- -----------
Caisse de depot et 1981 Avenue McGill College, 12.795%
Placement du Quebec Montreal, Quebec H3A 3C7
State of Michigan Department of Treasury 5.098%
Lottery 430 W. Allegan Street
Lansing, MI 48922
Morgan Stanley Asset 1221 Avenue of the Americas 10.081%
Management Pooled 22nd Floor
International FQ New York, NY 10020
Ontario Municipal One University Avenue 6.690%
Employees Retirement Suite 1000
Board Toronto, Ontario M5J 2P1
The Trustees and officers of the Trust, as a group, own less than 1% of the
Trust's voting securities.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
SERVICE PROVIDERS
Most of the Portfolios' necessary day-to-day operations are performed by
separate business organizations under contract to the Trust. The principal
service providers for the Portfolios are:
Investment Adviser, Custodian, State Street Bank and Trust
Transfer Agent and Administrator: Company
Independent Accountants: Price Waterhouse LLP
B-6
<PAGE>
ADVISER
State Street (or the "Adviser") serves as the investment adviser to the
Portfolios pursuant to an Advisory Agreement dated as of March 4, 1996
("Advisory Agreement") by and between State Street and the Trust. State Street
Bank and Trust Company is a wholly owned subsidiary of State Street Corporation,
a publicly held bank holding company. State Street's mailing address is 225
Franklin Street, Boston, MA 02110.
Under the Advisory Agreement, the Adviser directs each Portfolio's
investments in accordance with its investment objectives, policies and
limitations. For these services, the Portfolio pays a fee to the Adviser at the
rates stated in the Prospectus. The advisory fees for the fiscal year ended
December 31, 1997 were $770,265.
The contractual arrangements between the Trust and the Adviser have been
approved initially for a two-year term by the Trustees, including a majority of
the Trustees that are not "interested persons" of the Trust, as such term is
defined in Section 2(a)(19) of the 1940 Act ("Independent Trustees"), and will
continue thereafter from year to year provided that the arrangements are
approved by the Trustees, including a majority of the Independent Trustees. The
Agreement may be terminated without penalty by the Adviser upon 90 days' written
notice or by the Trust on behalf of each Portfolio, upon 60 days' written notice
and will terminate automatically upon its assignment.
ADMINISTRATOR
State Street (or the "Administrator") serves as the administrator of each
Portfolio pursuant to an Administration Agreement dated March 4, 1996
("Administration Agreement') by and between State Street and the Trust. Under
the Administration Agreement, the Administrator will, among other things: (i)
provide each Portfolio with administrative and clerical services, including the
maintenance of certain of the Portfolio's books and records; (ii) arrange the
periodic updating of the Portfolio's Prospectuses and any supplements thereto;
and (iii) provide proxy materials and reports to Portfolio shareholders and the
Securities and Exchange Commission (the "SEC"). For these services, the Trust
pays to the Administrator an annual fee based on the average daily net asset
value of the Trust. The fee will be calculated by multiplying the first $300
million of each Portfolio's average daily net assets by 0.035%, the next $300
million of each Portfolio's average daily net assets by 0.02% and any amounts
above $600 million of each Portfolio's average daily net assets by 0.005%.
The Administration Agreement has been approved initially for a two-year term
by the Trustees, and will continue from year to year unless terminated in
writing by either the Administrator or the Trust at the end of such period or
thereafter on 60 days' prior written notice given by either party to the other
party.
B-7
<PAGE>
CUSTODIAN AND TRANSFER AGENT
State Street serves as the custodian ("Custodian") and transfer agent
("Transfer Agent") for each Portfolio of the Trust. State Street also provides
the basic portfolio recordkeeping required by the Trust for regulatory and
financial reporting purposes.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as the Trust's independent accountants for each
Portfolio of the Trust. Price Waterhouse LLP is responsible for performing
annual audits of the financial statements and financial highlights in accordance
with generally accepted auditing standards, a review of federal tax returns,
and, pursuant to Rule 17f-2 of the 1940 Act, three security counts.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES
All portfolio transactions are placed on behalf of the Portfolios by the
Adviser. There is generally no stated commission in the purchase or sale of
securities traded in the over-the-counter markets, including most debt
securities and money market instruments. Rather, the price of such securities
includes an undisclosed commission in the form of a mark-up or mark-down. The
cost of securities purchased from underwriters includes an underwriting
commission or concession.
Subject to the arrangements and provisions described below, the selection of
a broker or dealer to execute portfolio transactions is usually made by the
Adviser. The Advisory Agreement provides, in substance and subject to specific
directions from the Trust's Board of Trustees, that in executing portfolio
transactions and selecting brokers or dealers, the principal objective is to
seek the best net price and execution for the Trust. Ordinarily, securities will
be purchased from primary markets, and the Adviser shall consider all factors it
deems relevant in assessing the best overall terms available for any
transaction, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, for the specific
transaction and other transactions on a continuing basis.
The Advisory Agreement authorizes the Adviser to select brokers or dealers
to execute a particular transaction, including principal transactions. Also, in
evaluating the best overall terms available, the Adviser may consider the
"brokerage and research services" (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934, as amended) provided to the Portfolios
and/or the Adviser (or its affiliates). The Adviser is authorized to cause the
Portfolios to pay a commission to a broker or dealer who provides such brokerage
and research services for executing a portfolio transaction which is in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction. The Adviser must determine in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided.
B-8
<PAGE>
The Trustees periodically review the Adviser's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Portfolios and review the prices paid by the Portfolios over
representative periods of time to determine if such prices are reasonable in
relation to the benefits provided to the Portfolios. Certain services received
by the Adviser attributable to a particular Portfolio transaction may benefit
one or more other accounts for which the Adviser exercises investment
discretion, or a Portfolio other than that for which the transaction was
effected. The Adviser's fees are not reduced by the Adviser's receipt of such
brokerage and research services.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES
The Trust was organized as a Massachusetts business trust on June 15, 1995
and operates under a Master Trust Agreement, dated June 15, 1995. The Trust is
authorized to issue shares of beneficial interest, par value $.001 per share,
which may be divided into one or more series, each of which evidences pro rata
ownership interest in a different investment portfolio. The Trustees may create
additional portfolio series at any time without shareholder approval. The shares
of each portfolio series may have such rights and preferences as the Trustees
may establish from time to time, including the right of redemption (including
the price, manner and terms of redemption), special and relative rights as to
dividends and distributions, liquidation rights, sinking or purchase fund
provisions, conversion rights and conditions under which any portfolio series
may have separate voting rights or no voting rights.
As of the date of this Statement of Additional Information, the Trust is
comprised of the following portfolio series, each of which commenced operations
on the date set forth opposite the Portfolio's name:
COMMENCEMENT OF
NAME OPERATIONS
---- ----------
State Street Navigator Securities Lending Prime Portfolio May 15, 1996
State Street Navigator Securities Lending Government *
Portfolio
State Street Navigator Securities Lending Short-Term *
Bond Portfolio
- --------------
* As of the date of this Statement of Additional Information, these Portfolios
have not commenced operations.
The Trust is authorized, without shareholder approval, to divide shares of
any series into two or more classes of shares, each class having such different
dividend, liquidation, voting and other rights as the Trustees may determine.
Any amendment to the Master Trust Agreement that would materially and
adversely affect shareholders of the Trust as a whole, or shareholders of a
particular portfolio series,
B-9
<PAGE>
must be approved by the holders of a majority of the shares of the Trust or the
portfolio series, respectively. All other amendments may be effected by the
Trust's Board of Trustees.
The Master Trust Agreement provides that shareholders shall not be subject
to any personal liability for the acts or obligations of a portfolio series and
that every written agreement, obligation, or other undertaking of a portfolio
series shall contain a provision to the effect that the shareholders are not
personally liable thereunder. If any present or past shareholder of any
portfolio series of the Trust is charged or held personally liable for any
obligation or liability of the Trust solely by reason of being or having been a
shareholder and not because of such shareholder's acts or omissions or for some
other reason, the portfolio series, upon request, shall assume the defense
against such charge and satisfy any judgment thereon, and the shareholder or
former shareholder shall be entitled out of the assets of such portfolio series
to be held harmless from and indemnified against all loss and expense arising
from such liability. Thus, the risk to shareholders of incurring financial loss
beyond their investments is limited to circumstances in which the portfolio
series itself would be unable to meet its obligations.
The Trust will not have an Annual Meeting of Shareholders. Special Meetings
may be convened: (i) by the Board of Trustees; (ii) upon written request to the
Board of Trustees by the holders of at least 10% of the outstanding shares; or
(iii) upon the Board of Trustee's failure to honor the shareholders' request
described above, by holders of at least 10% of the outstanding shares giving
notice of the special meeting to the shareholders.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
MANNER IN WHICH SHARES ARE OFFERED
Shares of State Street Navigator Securities Lending Prime Portfolio are
being offered to clients of State Street's securities lending program. Shares
are sold on a private placement basis in accordance with Regulation D under the
1933 Act, are sold directly by the Trust without a distributor and are not
subject to a sales load or redemption fee; assets of the Trust are not subject
to a Rule 12b-1 fee.
VALUATION OF FUND SHARES
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO AND STATE STREET
NAVIGATOR SECURITIES LENDING GOVERNMENT PORTFOLIO. Net asset value per share for
the shares of each of State Street Navigator Securities Lending Prime Portfolio
and State Street Navigator Securities Lending Government Portfolio is calculated
as of 5:00 p.m. New York City time on each day on which the Boston Federal
Reserve is open for business which excludes the following business holidays:
New Year's Day, Martin Luther King Jr. Day, President's Day, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and
Christmas Day.
B-10
<PAGE>
It is the policy of each of the Portfolios to use its best efforts to
maintain a constant price per share of $1.00, although there can be no assurance
that the $1.00 net asset value per share will be maintained. In accordance with
this effort and pursuant to Rule 2a-7 under the 1940 Act, each Portfolio uses
the amortized cost valuation method to value its portfolio instruments. This
method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium even though the
portfolio security may increase or decrease in market value generally in
response to changes in interest rates. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price a Portfolio would receive if
it sold the instrument.
The Trustees have established procedures reasonably designed to stabilize
each Portfolio's price per share at $1.00. These procedures include: (i) the
determination of the deviation from $1.00, if any, of each Portfolio's net asset
value using market values; (ii) periodic review by the Trustees of the amount of
and the methods used to calculate the deviation; and (iii) maintenance of
records of such determination. The Trustees will promptly consider what action,
if any, should be taken if such deviation exceeds 1/2 of one percent.
STATE STREET NAVIGATOR SECURITIES LENDING SHORT-TERM BOND PORTFOLIO. Net
asset value per share is calculated for State Street Navigator Securities
Lending Short-Term Bond Portfolio as of the close of the regular trading session
on the New York Stock Exchange (currently 4:00 p.m. Eastern time on each day on
which the New York Stock Exchange is open for business. Currently, the New York
Stock Exchange is open for trading every weekday except New Year's Day, Martin
Luther King Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day.
With the exceptions noted below, the Portfolio values its investment
portfolio at market value. This generally means that equity securities and fixed
income securities listed and traded principally on any national securities
exchange are valued on the basis of the last sale price or, lacking any sales,
at the closing bid price, on the primary exchange on which the security is
traded. United States equity and fixed-income securities traded principally
over-the-counter and options are valued on the basis of the last reported bid
price. Futures contracts are valued on the basis of the last reported sale
price.
Because many fixed income securities do not trade each day, last sale or bid
prices are frequently not available. Therefore, fixed income securities may be
valued using prices provided by a pricing service when such prices are
determined by the Custodian to reflect the market value of such securities.
International securities traded over-the-counter are valued on the basis of
best bid or official bid, as determined by the relevant securities exchange. In
the absence of a last sale
B-11
<PAGE>
or best or official bid price, such securities may be valued on the basis of
prices provided by a pricing service if those prices are believed to reflect the
market value of such securities.
The Portfolio values securities maturing within 60 days of the valuation
date at amortized cost unless the Board of Trustees determines that amortized
cost does not represent market value. This method involves valuing an instrument
at its cost and thereafter assuming a constant amortization to maturity of any
discount or premium, even though the portfolio security may increase or decrease
in market value generally in response to changes in interest rates. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Portfolio would receive if it sold the instrument.
ITEM 20. TAX STATUS
FEDERAL TAXES
Each Portfolio intends to qualify for treatment as a regulated investment
company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As a RIC, each Portfolio will not be liable for federal
income taxes on taxable net investment income and capital gain net income
(capital gains in excess of capital losses) that it distributes to its
shareholders, provided that the Portfolio distributes annually to its
shareholders at least 90% of its net investment income and net short-term
capital gain in excess of net long-term capital losses ("Distribution
Requirement"). For a Portfolio to qualify as a RIC it must abide by all of the
following requirements: (i) at least 90% of the Portfolio's gross income each
taxable year must be derived from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities or foreign currencies, or other income (including gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies ("Income Requirement"); (ii) at the
close of each quarter of the Portfolio's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RICS, and other securities, with such other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the total assets of the Portfolio and that does not represent more
than 10% of the outstanding voting securities of such issuer, and (iii) at the
close of each quarter of the Portfolio's taxable year, not more than 25% of the
market value of its total assets may be invested in the securities of any one
issuer or two or more issuers in the same industry and which are controlled by
the Portfolio (other than U.S. Government securities or the securities of other
RICs).
Each Portfolio will be subject to a nondeductible 4% excise tax to the
extent it fails to distribute by the end of any calendar year an amount at least
equal to the sum of: (a) 98% of its ordinary income for that year; (b) 98% of
its capital gain net income for the one-year period ending on October 31 of that
year; and (c) certain undistributed amounts from the preceding calendar year.
For this and other purposes, dividends declared in October, November or December
of any calendar year and made payable to shareholders of record in
B-12
<PAGE>
such month will be deemed to have been received on December 31 of such year if
the dividends are paid by the Portfolio subsequent to December 31 but prior to
February 1 of the following year.
If a shareholder receives a distribution taxable as long-term capital gain
with respect to shares of a Portfolio and redeems or exchanges the shares
without having held the shares for more than six months, then any loss on the
redemption or exchange will be treated as long-term capital loss to the extent
of the capital gain distribution.
STATE AND LOCAL TAXES
Depending upon the extent of each Portfolio's activities in states and
localities in which its offices are maintained, its agents or independent
contractors are located or it is otherwise deemed to be conducting business, the
Portfolio may be subject to the tax laws of such states or localities.
The foregoing discussion is only a summary of certain federal and state
income tax issues generally affecting the Portfolios and their shareholders.
Circumstances among investors may vary and each investor is encouraged to
discuss investments in the Portfolios with the investor's tax adviser.
ITEM 21. UNDERWRITERS
Not Applicable.
ITEM 22. CALCULATION OF PERFORMANCE DATA
AVERAGE ANNUAL TOTAL RETURN
STATE STREET NAVIGATOR SECURITIES LENDING SHORT-TERM BOND PORTFOLIO. State
Street Navigator Securities Lending Short-Term Bond Portfolio computes average
annual total return by using a standardized method of calculation required by
the SEC. Average annual total return is computed by finding the average annual
compounded rates of return on a hypothetical initial investment of $1,000 over
the one-, five- and ten-year periods (or the life of the Portfolio as
appropriate), that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
n
P (1+T)[ ]=ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a $1,000 payment
made at the beginning of the 1-, 5- and 10-year
periods at the end of the year or period
B-13
<PAGE>
The calculation assumes that all dividends and distributions of the
Portfolio are reinvested at the price calculated in the manner described in the
Prospectus on the dividend dates during the period, and includes all recurring
and nonrecurring fees that are charged to all shareholder accounts.
YIELD AND EFFECTIVE YIELD
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO AND STATE STREET
NAVIGATOR SECURITIES LENDING GOVERNMENT PORTFOLIO. The yield for each Portfolio
is calculated daily based upon the seven days ending on the date of calculation
("base period"). The yields are computed by determining the net change,
exclusive of capital changes and income other than investment income, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the base period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts and dividing the net change in the account
value by the value of the account at the beginning of the base period to obtain
the base period return, and then multiplying the base period return by (365/7)
with the resulting yield figure carried to the nearest hundredth of one percent.
An effective yield is computed by determining the net change, exclusive of
capital changes and income other than investment income, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account at
the beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula:
365/7
EFFECTIVE ~ YIELD=[(BASE ~ PERIOD RETURN+1)[ ]]-1
The following are the current and effective yields for State Street Navigator
Securities Lending Prime Portfolio for the seven-day period ended December 31,
1997:
<TABLE>
<CAPTION>
STATE STREET NAVIGATOR
SECURITIES LENDING PRIME
PORTFOLIO
<S> <C>
Current Yield. . . . . . . . . . . 5.73%
Effective Yield. . . . . . . . . . 5.89%
</TABLE>
The yields quoted are not indicative of future results. Yields will depend
on the type, quality, maturity, and interest rate of money market instruments
held by the Portfolios.
B-14
<PAGE>
STATE STREET NAVIGATOR SECURITIES LENDING SHORT-TERM BOND PORTFOLIO. Yields
are computed by using standardized methods of calculation required by the SEC.
Yields are calculated by dividing the net investment income per share earned
during a 30-day (or one month) period by the maximum offering price per share on
the last day of the period, according to the following formula:
6
YIELD = 2[(a-b+1)[ ]-1]
------------
cd
where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of
reimbursements);
c = average daily number of shares outstanding during
the period that were entitled to receive
dividends; and
d = the maximum offering price per share on the last
day of the period.
Any yield quoted by the Portfolio is not indicative of future results. Yields
will depend on the type, quality, maturity and interest rate of instruments held
by the Portfolio.
ITEM 23. FINANCIAL STATEMENTS
FOLLOWING ARE STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO'S
AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997,
INCLUDING THE NOTES THERETO AND THE REPORT OF PRICE WATERHOUSE LLP THEREON.
B-15
<PAGE>
<TABLE>
<CAPTION>
NAVIAGATOR SECURITIES LENDING PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
NAME OF ISSURER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST+
- ------------------ ---- ---- ------ ----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - 43.29%
ASSET BACKED SECURITIES CONSUMER - 4.54%
Monte Rosa Capital Corp. 5.840% 01/22/1998 $ 79,000,000 $ 78,730,873
Monte Rosa Capital Corp. 5.840% 01/26/1998 36,000,000 35,854,000
Monte Rosa Capital Corp. 5.830% 01/28/1998 100,000,000 99,562,750
Monte Rosa Capital Corp. 5.790% 02/10/1998 40,000,000 39,742,667
-------------
253,890,290
-------------
ASSET BACKED SECURITIES DIVERSIFIED - 7.88%
Asset Securitization Cooperative Corp. 5.800% 02/13/1998 50,000,000 49,653,611
Delaware Funding Corp. 5.650% 01/13/1998 12,381,000 12,357,682
Delaware Funding Corp. 5.640% 01/16/1998 38,301,000 38,210,993
Delaware Funding Corp. 5.950% 01/16/1998 50,000,000 49,876,042
Delaware Funding Corp. 5.680% 02/11/1998 33,004,000 32,790,501
Falcon Asset Securitization 5.880% 01/13/1998 19,675,000 19,636,437
Falcon Asset Securitization 5.980% 01/13/1998 17,565,000 17,529,987
Falcon Asset Securitization 5.750% 01/14/1998 37,700,000 37,621,720
Falcon Asset Securitization 5.980% 01/14/1998 5,740,000 5,727,605
Falcon Asset Securitization 5.750% 01/15/1998 23,375,000 23,322,731
Falcon Asset Securitization 5.750% 01/20/1998 31,275,000 31,180,089
Falcon Asset Securitization 5.850% 01/20/1998 20,000,000 19,938,250
Falcon Asset Securitization 6.000% 01/20/1998 18,975,000 18,914,912
Falcon Asset Securitization 6.100% 01/20/1998 50,000,000 49,839,028
Falcon Asset Securitization 5.745% 01/26/1998 34,370,000 34,232,878
-------------
440,832,466
-------------
AUTOMOTIVE - 2.37%
Daimler Benz North America 5.510% 01/22/1998 25,000,000 24,919,646
Daimler Benz North America 5.540% 02/26/1998 79,785,000 79,097,430
Daimler Benz North America 5.540% 03/12/1998 28,900,000 28,588,683
-------------
132,605,759
-------------
BANK FOREIGN - 10.64%
Abbey National North America 5.520% 03/16/1998 25,000,000 24,716,333
Den Danske Corp. 5.570% 01/06/1998 50,000,000 49,961,319
Den Danske Corp. 5.660% 03/05/1998 50,000,000 50,000,000
Den Danske Corp. 5.687% 04/02/1998 150,000,000 150,000,000
Nordbanken North America Inc. 5.580% 01/12/1998 50,000,000 49,914,750
Nordbanken North America, Inc. 5.770% 03/12/1998 73,217,000 72,395,546
Toronto Dominion Grand Cayman 6.750% 01/02/1998 100,000,000 100,000,000
Toronto Dominion Holdings 5.540% 02/06/1998 25,000,000 24,861,500
Woolwich Building 5.690% 06/09/1998 75,000,000 73,115,188
-------------
594,964,636
-------------
BANK REGIONAL - 0.18%
National City Corporation 5.720% 02/02/1998 10,000,000 9,949,156
-------------
</TABLE>
B-16
* See notes to the financial statements.
<PAGE>
<TABLE>
<CAPTION>
NAVIAGATOR SECURITIES LENDING PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
NAME OF ISSURER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST+
- ------------------ ---- ---- ------ ----
<S> <C> <C> <C> <C>
COMMERICAL PAPER - (CONTINUED)
FINANCE CAPTIVE - 11.57%
Ford Motor Credit Company 6.750% 01/02/1998 $100,000,000 $ 99,981,250
Ford Motor Credit Company 5.540% 01/09/1998 25,000,000 24,969,222
General Motors Acceptance Corp. 5.650% 01/23/1998 75,000,000 74,741,042
General Motors Acceptance Corp. 5.530% 02/05/1998 50,000,000 49,731,180
Grand Metro Capital Corp. 5.540% 01/07/1998 25,000,000 24,976,917
Grand Metro Capital Corp. 5.500% 03/31/1998 50,000,000 49,320,139
IBM Credit Corp. 5.530% 03/18/1998 75,000,000 74,124,417
Sears Roebuck Acceptance Corp. 5.650% 01/09/1998 50,000,000 49,937,222
Sears Roebuck Acceptance Corp. 5.560% 01/12/1998 50,000,000 49,915,055
Sears Roebuck Acceptance Corp. 5.950% 01/13/1998 50,000,000 49,900,833
Sears Roebuck Acceptance Corp. 5.950% 02/03/1998 50,000,000 49,727,292
Sears Roebuck Acceptance Corp. 5.600% 02/23/1998 50,000,000 49,587,778
-------------
646,912,347
-------------
FINANCE NON-CAPTIVE DIVERSIFIED - 3.92%
General Electric Capital Corp. 6.800% 01/02/1998 100,000,000 99,981,111
General Electric Capital Corp. 5.710% 01/13/1998 25,000,000 24,952,417
General Electric Capital Corp. 5.690% 02/11/1998 30,000,000 29,805,591
General Electric Capital Corp. 5.700% 03/11/1998 25,000,000 24,726,875
General Electric Capital Corp. 5.525% 03/13/1998 40,000,000 39,564,139
-------------
219,030,133
-------------
INSURANCE - 0.45%
Prudential Funding Corp. 5.560% 01/23/1998 25,000,000 24,915,056
-------------
SOVEREIGN - 1.74%
Caisse Des D' Amortissement
De La Depte Sociale 5.700% 06/11/1998 100,000,000 97,450,833
-------------
TOTAL COMMERCIAL PAPER 2,420,550,676
-------------
</TABLE>
B-17
* See notes to the financial statements.
<PAGE>
<TABLE>
<CAPTION>
NAVIAGATOR SECURITIES LENDING PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
NAME OF ISSURER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST+
- ------------------ ---- ---- ------ ----
<S> <C> <C> <C> <C>
BANK NOTES - 21.80%
BANK FOREIGN - 2.24%
Abbey National Treasury 5.875% 12/22/1998 $ 50,000,000 $ 50,008,090
National Australia Bank 5.735% 10/13/1998 25,000,000 24,985,988
WESTPAC Banking Corp. (a) 5.660% 04/21/1998 50,000,000 49,994,120
-------------
124,988,198
-------------
BANK MULTINATIONAL - 2.24%
BankBoston NA 5.610% 01/08/1998 100,000,000 100,000,000
First National Bank of Chicago 6.140% 05/13/1998 25,000,000 24,992,844
-------------
124,992,844
-------------
BANK REGIONAL - 16.51%
Branch Banking & Trust Company (a) 5.650% 03/20/1998 25,000,000 24,997,923
Branch Banking & Trust Company (a) 5.690% 12/16/1998 50,000,000 49,990,672
Comerica Bank (Detroit, Michigan) (a) 5.635% 06/10/1998 25,000,000 24,994,089
Comerica Bank (Detroit, Michigan) (a) 5.643% 11/09/1998 50,000,000 49,974,432
Corestates Bank NA, Philadelphia (a) 5.928% 03/20/1998 40,000,000 40,000,000
First Bank NA (a) 5.567% 07/15/1998 100,000,000 99,958,589
Key Bank of New York (a) 6.150% 04/15/1998 25,000,000 24,993,208
Key Bank of New York (a) 5.620% 08/20/1998 85,000,000 84,963,248
Key Bank of New York (a) 5.838% 09/23/1998 70,000,000 69,960,000
NationsBank NA (a) 5.781% 12/21/1998 50,000,000 49,965,029
Old Kent Bank Trust Company
Grand Rapids Michigan (a) 5.630% 10/14/1998 25,000,000 24,994,106
Old Kent Bank Trust Company
Grand Rapids Michigan (a) 5.650% 11/19/1998 50,000,000 49,982,797
PNC Bank NA, Pittsburgh (a) 6.120% 07/02/1998 40,000,000 39,982,087
PNC Bank NA, Pittsburgh (a) 5.620% 08/28/1998 40,000,000 39,987,153
PNC Bank NA, Pittsburgh (a) 5.600% 09/23/1998 40,000,000 39,980,165
United States Bank National Association (a) 5.830% 10/21/1998 52,000,000 51,969,407
United States Bank National Association (a) 5.830% 11/16/1998 37,000,000 36,974,882
Wells Fargo & Company (a) 5.771% 10/05/1998 50,000,000 49,976,441
Wells Fargo & Company (a) 5.761% 10/20/1998 70,000,000 69,960,085
-------------
923,604,313
-------------
FINANCE CAPTIVE - 0.36%
Ford Motor Credit Company (a) 5.700% 12/23/1998 20,000,000 19,992,470
-------------
FINANCE NON-CAPTIVE DIVERSIFIED - 0.45%
CIT Group Holdings, Inc. (a) 5.640% 11/30/1998 25,000,000 24,988,877
-------------
TOTAL BANK NOTES 1,218,566,702
-------------
</TABLE>
B-18
*See notes to the financial statements.
<PAGE>
<TABLE>
<CAPTION>
NAVIAGATOR SECURITIES LENDING PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
NAME OF ISSURER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST+
- ------------------ ---- ---- ------ ----
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSITS - 16.65%
BANK FOREIGN - 15.35%
Bank of Scotland 5.730% 03/18/1998 $ 27,000,000 $ 27,001,967
Barclays Bank Plc (a) 5.620% 02/20/1998 6,000,000 5,999,088
Barclays Bank Plc (a) 5.600% 02/25/1998 35,000,000 34,996,392
Barclays Bank Plc (a) 5.670% 12/16/1998 25,000,000 24,986,011
Bayerische Hypotheken-und Wechsel Bank 5.700% 01/12/1998 45,000,000 44,999,867
Bayerische Hypotheken-und Wechsel Bank 5.850% 08/07/1998 25,000,000 24,990,003
Bayerische Landesbank 5.860% 07/17/1998 26,500,000 26,504,704
Bayerische Landesbank 5.775% 07/27/1998 50,000,000 49,996,119
Bayerische Vereinsbank AG 5.680% 03/30/1998 100,000,000 100,000,000
Bayerische Vereinsbank AG 5.850% 12/18/1998 89,000,000 88,926,339
Canadian Imperial Bank Commerce 5.940% 10/23/1998 25,000,000 25,022,725
Canadian Imperial Bank Commerce 5.800% 03/31/1998 100,000,000 100,000,000
Deutsche Bank AG 6.170% 05/22/1998 45,000,000 44,995,028
Deutsche Bank AG 5.950% 06/16/1998 57,000,000 57,007,026
National Westminster Bank 5.770% 02/27/1998 70,000,000 70,000,000
Rabobank Nederland N. V. 6.200% 04/10/1998 27,800,000 27,795,687
Svenska Handelsbanken, Inc. 5.550% 01/16/1998 25,000,000 24,942,187
Union Bank Of Switzerland 5.840% 02/05/1998 50,000,000 50,006,300
Westdeutcshe Landesbank Giroz (a) 5.600% 03/06/1998 30,000,000 29,995,946
-------------
858,165,389
-------------
BANK MULTINATIONAL - 0.89%
Morgan Guaranty Trust Company of New
York (a) 5.815% 01/13/1998 50,000,000 49,999,135
-------------
FINANCE CAPTIVE - 0.41%
General Motors Acceptance Corp. 7.200% 01/29/1998 23,000,000 23,021,489
-------------
TOTAL CERTIFICATES OF DEPOSITS 931,186,013
-------------
CORPORATE OBLIGATIONS - 9.73%
BANK FOREIGN - 1.79%
Abbey National Treasury Services (a) 5.665% 02/13/1998 100,000,000 100,000,000
-------------
BANK MULTINATIONAL - 0.89%
Morgan Guaranty Trust Company
of New York 5.630% 01/30/1998 50,000,000 49,998,452
-------------
BANK REGIONAL - 2.06%
Comerica Bank (Detroit, Michigan) 5.805% 01/21/1998 25,000,000 24,999,410
Key Bank of New York 5.660% 01/05/1998 20,000,000 19,999,811
PNC Bank NA, Pittsburgh 5.566% 01/09/1998 10,000,000 9,999,847
PNC Bank NA, Pittsburgh (a) 5.617% 02/20/1998 60,000,000 59,994,199
-------------
114,993,267
-------------
</TABLE>
B-19
*See notes to the financial statements.
<PAGE>
<TABLE>
<CAPTION>
NAVIAGATOR SECURITIES LENDING PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
NAME OF ISSURER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST+
- ------------------ ---- ---- ------ ----
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS - (CONTINUED)
FINANCE CAPTIVE - 2.19%
Caterpillar Financial Services 5.690% 01/12/1998 $ 30,000,000 $ 30,000,000
Ford Motor Credit Company 6.250% 02/26/1998 8,000,000 8,000,381
General Motors Acceptance Corp. 5.375% 03/09/1998 9,900,000 9,850,500
General Motors Acceptance Corp. (a) 6.270% 04/17/1998 35,000,000 35,002,441
General Motors Acceptance Corp. (a) 5.786% 09/21/1998 30,000,000 29,975,546
IBM Credit Corp. 5.650% 02/27/1998 10,000,000 9,999,297
-------------
122,828,165
-------------
FINANCE NON-CAPTIVE DIVERSIFIED - 1.46%
Avco Financial Services Inc. (a) 5.815% 11/17/1998 25,000,000 25,000,000
CIT Group Holdings, Inc. (a) 5.610% 01/28/1998 56,500,000 56,496,363
-------------
81,496,363
-------------
INSURANCE - 1.34%
Tiers Trust (a) (b) 5.980% 10/15/2003 75,000,000 75,000,000
-------------
TOTAL CORPORATE OBLIGATIONS 544,316,247
-------------
TIME DEPOSITS - 9.63%
BANK MULTINATIONAL - 4.47%
Chase Bank 5.000% 01/02/1998 100,000,000 100,000,000
Chase Bank 6.250% 01/02/1998 150,000,000 150,000,000
-------------
250,000,000
-------------
BANK REGIONAL - 5.16%
First Union National Bank, Charlotte,
North Carolina 4.500% 01/02/1998 50,000,000 50,000,000
Pittsburgh National Bank Nassau 6.750% 01/02/1998 50,000,000 50,000,000
National City Bank Grand Cayman 5.000% 01/02/1998 88,194,000 88,194,000
Wachovia Bank & Trust 5.500% 01/02/1998 100,000,000 100,000,000
-------------
288,194,000
-------------
TOTAL TIME DEPOSITS 538,194,000
-------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 1.61%
AGENCY - 1.61%
Federal Farm Credit Banks (a) 5.550% 02/03/1998 90,000,000 89,994,813
-------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 89,994,813
-------------
</TABLE>
B-20
*See notes to the financial statements.
<PAGE>
<TABLE>
<CAPTION>
NAVIAGATOR SECURITIES LENDING PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
NAME OF ISSURER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST+
- ------------------ ---- ---- ------ ----
<S> <C> <C> <C> <C>
VARIABLE RATE MEDIUM TERM NOTES - 1.25%
BANK REGIONAL - 1.25%
NationsBank Corporation (a) 5.828% 12/01/1998 $ 40,000,000 $ 40,000,000
NationsBank Corporation (a) 5.887% 12/14/1998 30,000,000 30,000,000
-------------
TOTAL VARIABLE RATE MEDIUM TERM NOTES 70,000,000
-------------
TOTAL INVESTMENTS --103.96% 5,812,808,451
OTHER ASSETS LESS LIABILITIES --(3.96)% (221,397,294)
-------------
NET ASSETS -- 100.0% $5,591,411,157
-------------
-------------
</TABLE>
+ See note 2 to the financial statements.
(a) Floating Rate Note - Interest rate shown is rate in effect at December 31,
1997. Maturity date shown represents actual maturity date of security. The
effective maturity date determined by the next reset date falls within the
guidelines of Rule 2a-7.
(b) Pursuant to Rule 144A of the Securities Act of 1933, the security may be
resold in transactions exempt from registration, normally to qualified
institutional buyers. At December 31, 1997, this security amounted to
$75,000,000 or 1.34% of the Fund's net assets.
B-21
* See notes to the financial statements.
<PAGE>
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at amortized cost . . . . . . . . $5,812,808,451
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682
Interest receivable. . . . . . . . . . . . . . . . . . . . . 29,927,061
Deferred organization expense. . . . . . . . . . . . . . . . 131,865
Prepaid insurance. . . . . . . . . . . . . . . . . . . . . . 13,490
--------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . 5,842,881,549
--------------
LIABILITIES:
Payable for investments purchased. . . . . . . . . . . . . . 250,233,411
Dividend Payable . . . . . . . . . . . . . . . . . . . . . . 891,462
Advisory fee payable . . . . . . . . . . . . . . . . . . . . 156,972
Administration fee payable . . . . . . . . . . . . . . . . . 69,177
Custodian fee payable. . . . . . . . . . . . . . . . . . . . 31,057
Transfer agent fee payable . . . . . . . . . . . . . . . . . 27,917
Trustees fees payable. . . . . . . . . . . . . . . . . . . . 8,044
Other accrued expenses and liabilities . . . . . . . . . . . 52,352
--------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . 251,470,392
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $5,591,411,157
--------------
--------------
NET ASSETS CONSIST OF:
Capital stock, $0.001 par value;
5,591,412,802 shares issued and outstanding . . . . . . $5,591,413
Capital paid in excess of par. . . . . . . . . . . . . . . . 5,585,821,389
Accumulated net realized loss on investments . . . . . . . . (1,645)
--------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $5,591,411,157
--------------
--------------
Net asset value, offering, and redemption price per share. . $1.00
-----
-----
</TABLE>
B-22
* See notes to the financial statements.
<PAGE>
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . $249,120,173
------------
EXPENSES:
Advisory fee . . . . . . . . . . . . . . . . . . . . . . . . 770,265
Administration fee . . . . . . . . . . . . . . . . . . . . . 355,777
Custodian fee. . . . . . . . . . . . . . . . . . . . . . . . 153,783
Insurance expense. . . . . . . . . . . . . . . . . . . . . . 146,219
Transfer agent fee . . . . . . . . . . . . . . . . . . . . . 91,621
Trustees fees. . . . . . . . . . . . . . . . . . . . . . . . 40,823
Amortization of organization expenses. . . . . . . . . . . . 39,162
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . . . 28,900
Legal fee. . . . . . . . . . . . . . . . . . . . . . . . . . 19,972
Miscellaneous expense. . . . . . . . . . . . . . . . . . . . 3,329
------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . 1,649,851
------------
Net investment income. . . . . . . . . . . . . . . . . . . . 247,470,322
------------
NET REALIZED LOSS ON INVESTMENTS
Net realized loss on investments . . . . . . . . . . . . . . (2,714)
------------
Net increase in net assets resulting from operations . . . . $247,467,608
------------
------------
</TABLE>
B-23
*See notes to the financial statements.
<PAGE>
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY, 15 1996*
YEAR ENDED THROUGH
DECEMBER 31, 1997 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) in Net Assets:
FROM OPERATIONS:
Net investment income. . . . . . . . . . $247,470,322 $61,100,394
Net realized gain (loss) on investments (2,714) 1,322
--------------- ------------------
Net increase in net assets resulting
from operations . . . . . . . . . . 247,467,608 61,101,716
--------------- ------------------
DISTRIBUTIONS FROM:
Net investment income . . . . . . . (247,470,322) (61,100,647)
--------------- ------------------
Net decrease in net assets from
distributions . . . . . . . . . . . (247,470,322) (61,100,647)
--------------- ------------------
FROM FUND SHARE TRANSACTIONS (AT CONSTANT $1.00 PER SHARE):
Proceeds from shares sold. . . . . . . . 27,389,659,804 9,723,270,848
Issued to shareholders in reinvestment
of dividends. . . . . . . . . . . . 246,578,860 61,100,647
Cost of redemptions. . . . . . . . . . . (24,922,725,873) (6,906,481,384)
--------------- ------------------
Net increase in net assets from
Fund share transactions . . . . . . 2,713,512,791 2,877,890,111
--------------- ------------------
Net increase in net assets . . . . . . . 2,713,510,077 2,877,891,180
NET ASSETS:
Beginning of period (See Note 7) . . . . 2,877,901,080 9,900
--------------- ------------------
End of period. . . . . . . . . . . . . . $5,591,411,157 $2,877,901,080
--------------- ------------------
--------------- ------------------
</TABLE>
* Commencement of investment operationsNAVIGATOR SECURITIES LENDING PRIME
B-24
*See notes to the financial statements.
<PAGE>
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY, 15 1996*
YEAR ENDED THROUGH
DECEMBER 31, 1997 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period . . $1.000 $1.000
-------- --------
Net investment income . . . . . . . . . 0.0560 0.0342
Distributions from net investment income (0.0560) (0.0342)
-------- --------
Net asset value, end of period . . . . . $1.000 $1.000
-------- --------
-------- --------
TOTAL INVESTMENT RETURN (a). . . . . . . 5.75% 3.47%
RATIOS AND SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 0.04% 0.06%(b)(c)
Ratio of net investment income to
average net assets. . . . . . . . . 5.62% 5.47%(b)(c)
Net assets, end of period (in millions) $5,591 $2,878
</TABLE>
B-25
*See notes to the financial statements.
<PAGE>
NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 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 is 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 is not necessarily 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 are 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
B-26
<PAGE>
be creditworthy by the Adviser, State Street global Advisors, a division 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.
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.
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.
B-27
<PAGE>
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 is reimbursed for out of pocket and travel expenses.
5. INVESTMENT TRANSACTIONS
At December 31, 1997, the cost of investments for federal income tax purposes
was the same as the cost for financial reporting purposes.
6. BENEFICIAL INTEREST
At December 31, 1997, there were four shareholders who each owned over 5% of the
Fund's outstanding shares, amounting to 34% of total shares. 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.
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.
B-28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees
and Shareholders of the
Navigator Securities Lending
Prime Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Navigator Securities Lending
Prime Portfolio (the "Fund") at December 31, 1997, and the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1997 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, MA
February 12, 1998
B-29
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Financial Statements included in Part B of this
Registration Statement:
Audited Financial Statements for the period ended
December 31, 1997 as follows:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
(b) Exhibits:
1 Master Trust Agreement (Agreement and Declaration of
Trust), effective as of June 15, 1995, and amendments
thereto incorporated by reference to original registration
statement on Form N-1A (File No. 811-0756) filed on June 20,
1996 (the "Registration Statement").
2 By-Laws incorporated by reference to the Registration
Statement filed on June 20, 1996.
3 None.
4 None.
5 Investment Advisory Agreement between State Street Navigator
Securities Lending Trust (the "Trust") and State Street Bank
and Trust Company incorporated by reference to the
Registration Statement filed on June 20, 1996.
6 *
7 Not Applicable.
- ------------------------
* Pursuant to General Instruction F4 of Form N-1A, a registration
statement filed under only the Investment Company Act of 1940 shall
consist of the facing sheet of the Form, responses to all items of
Parts A and B except Items 1, 2, 3 and 5A of Part A thereof, responses
to all items of Part C except Items 24(b)(6), 24(b)(10), 24(b)(11),
24(b)(12) and 24(b)(16), required signatures, and all other documents
that are required or which the Registrant may file as part of the
registration statement.
C-1
<PAGE>
8 Custodian Agreement between State Street Navigator
Securities Lending Trust (the "Trust") and State Street Bank
and Trust Company incorporated by reference to the
Registration Statement filed on June 20, 1996.
9(a) Transfer Agency Agreement between State Street Navigator
Securities Lending Trust (the "Trust") and State Street Bank
and Trust Company incorporated by reference to the
Registration Statement filed on June 20, 1996.
9(b) Administrative Services Agreement between State Street
Navigator Securities Lending Trust (the "Trust") and State
Street Bank and Trust Company incorporated by reference to
the Registration Statement filed on June 20, 1996.
10 *
11 Consent of Independent Accountants.
12 *
13 None.
14 Not Applicable.
15 Not Applicable
16 *
17 Financial Data Schedule.
18 Not Applicable.
19 Certificate of Assistant Secretary incorporated by reference
to the Registration Statement filed on June 20, 1996.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is not directly or indirectly controlled by or under
common control with any person other than the Trustees. It does not
have any subsidiaries.
- -----------------------------
* Pursuant to General Instruction F4 of Form N-1A, a registration
statement filed under only the Investment Company Act of 1940 shall consist
of the facing sheet of the Form, responses to all items of Parts A and B
except Items 1, 2, 3 and 5A of Part A thereof, responses to all items of
Part C except Items 24(b)(6), 24(b)(10), 24(b)(11), 24(b)(12) and
24(b)(16), required signatures, and all other documents that are required
or which the Registrant may file as part of the registration statement.
C-2
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of April 1, 1998, the record holders of each class of
Registrant's securities were as follows:
Title of Class Number of Record Holders
State Street Navigator Securities
Lending Prime Portfolio 250
State Street Navigator Securities
Lending Government Portfolio None
State Street Navigator Securities
Lending Short-Term Bond Portfolio None
ITEM 27. INDEMNIFICATION
Under Article VI of the Registrant's Master Trust Agreement, the
Trust shall indemnify each of its Trustees and officers (including
persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest
as a shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person")) against all liabilities, including but not limited
to amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and expenses, including reasonable accountants'
and counsel fees, incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been
involved as a party or otherwise or with which such person may be or
may have been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director or trustee,
except with respect to any matter as to which it has been determined
that such Covered Person had acted with willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved
in the conduct of such Covered Person's office (such conduct referred
to hereafter as "Disabling Conduct"). A determination that the Covered
Person is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not
liable by reason of Disabling Conduct, (ii) dismissal of a court
action or an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee
was not liable by reason of Disabling Conduct by (a) a vote of a
majority of a quorum of Trustees who are neither "interested persons"
of the Trust as defined in section 2(a)(19) of the Investment Company
Act of 1940, as amended, nor parties to the proceeding, or (b) an
independent legal counsel in a written opinion.
Insofar as indemnification by the Registrant for liabilities
arising under the Securities Act of 1933, as amended (the "1933 Act"),
may be permitted to Trustees, officers, underwriters and controlling
persons of the Registrant, pursuant to Article VI of the Registrant's
Master Trust Agreement, or
C-3
<PAGE>
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
Trustee, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted against the
Registrant by such Trustee, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the 1933 Act and will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The Investment Management Area of State Street Bank and Trust
Company ("State Street") serves as adviser to the Registrant. State
Street, a Massachusetts trust company, currently manages large
institutional accounts and collective investment funds. The business,
profession, vocation or employment of a substantial nature that each
director or officer of the investment adviser is or has been, at any
time during the past two fiscal years, engaged for his own account or
in the capacity of director, officer, employee, partner or trustee, is
as follows:
POSITION BUSINESS AND OTHER
WITH POSITIONS WITHIN
NAME ADVISER LAST TWO YEARS*
---- ------- ---------------
Tenley E. Albright, MD. . . . Director Chairman, Western
Resources Inc.
Joseph A. Baute . . . . . . . Director Former Chairman and CEO,
Markem Corporation
I. MacAlister Booth . . . . . Director Retired Chairman,
President and CEO,
Polaroid Corporation
Marshall N. Carter. . . . . . Chairman State Street Bank and
and CEO Trust Company
James I. Cash, Jr . . . . . . Director The James E. Robison
Professor of Business
Administration, Harvard
Business School
Truman S. Casner. . . . . . . Director Partner, Ropes & Gray
Nader F. Darehshori . . . . . Director Chairman, President and
CEO, Houghton Mifflin
Company
Arthur L. Goldstein . . . . . Director Chairman and CEO, Ionics,
Inc.
Charles F. Kaye . . . . . . . Director President, Transportation
Investments, Inc.
C-4
<PAGE>
POSITION BUSINESS AND OTHER
WITH POSITIONS WITHIN
NAME ADVISER LAST TWO YEARS*
---- ------- ---------------
John M. Kucharski . . . . . . Director Chairman, President and
CEO, EG&G, Inc.
Charles R. LaMantia, MD . . . Director President and CEO, Arthur
D. Little, Inc.
David B. Perini . . . . . . . Director Chairman and President,
Perini Corporation
Dennis J. Picard. . . . . . . Director Chairman and CEO,
Raytheon Company
Alfred Poe. . . . . . . . . . Director Former President, Meal
Enhancement Group,
Campbell Soup Company
Bernard W. Reznicek . . . . . Director President, Premier Group;
Retired Chairman and
CEO, Boston Edison
Company
David A. Spina. . . . . . . . President and State Street Bank and
COO Trust Company
Robert E. Weissman. . . . . . Director President and CEO,
Cognizant Corporation
* Address of all individuals: State Street Corporation, 225 Franklin
Street, Boston, Massachusetts 02110
ITEM 29. PRINCIPAL UNDERWRITERS
Not Applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, records and documents required pursuant to Section
31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained in the physical possession of State Street,
the Registrant's investment adviser, administrator, custodian and
transfer agent, 225 Franklin Street, Boston, Massachusetts 02110.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
(a) . . . Not applicable.
(b) . . . Not applicable.
(c) . . . Not applicable.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment No. 21 to the
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Boston, and
Commonwealth of Massachusetts on the 29th day of April, 1998.
STATE STREET NAVIGATOR SECURITIES LENDING TRUST
/S/ M. Bradley Jacobs
----------------------
M. Bradley Jacobs, Attorney-In-Fact
C-6
<PAGE>
Exhibit List
EXHIBIT NO. EXHIBIT
- ----------- -------
11. Consent of Independent Accountants
17. Financial Data Schedule
C-7
<PAGE>
Exhibit 11.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 2 to the registration
statement on Form N-1A (the "Registration Statement") of out report dated
February 12, 1998, relating to the financial statements and financial highlights
of Navigator Securities Lending Prime Portfolio, a series of Navigator
Securities Lending Trust, which appears in such Statement of Additional
Information. We also consent to the references to us under the headings
"Financial Statements," "Service Providers," and "Independent Accountants" in
such Statement of Additional Information.
Price Waterhouse LLP
Boston, Massachusetts
April 30, 1998
C-8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001011008
<NAME> NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 5,812,808,451
<INVESTMENTS-AT-VALUE> 5,812,808,451
<RECEIVABLES> 29,927,061
<ASSETS-OTHER> 146,037
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,842,881,549
<PAYABLE-FOR-SECURITIES> 250,233,411
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,236,981
<TOTAL-LIABILITIES> 251,470,392
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,585,822,458
<SHARES-COMMON-STOCK> 5,585,822,458
<SHARES-COMMON-PRIOR> 2,877,900,011
<ACCUMULATED-NII-CURRENT> 247,470,322
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 5,591,411,157
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 249,120,173
<OTHER-INCOME> 0
<EXPENSES-NET> (1,649,851)
<NET-INVESTMENT-INCOME> 247,470,322
<REALIZED-GAINS-CURRENT> (2,714)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 247,467,608
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (247,470,322)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27,389,659,804
<NUMBER-OF-SHARES-REDEEMED> (24,922,725,873)
<SHARES-REINVESTED> 246,578,860
<NET-CHANGE-IN-ASSETS> 2,713,510,077
<ACCUMULATED-NII-PRIOR> 61,100,394
<ACCUMULATED-GAINS-PRIOR> 1,322
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 770,265
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,649,851
<AVERAGE-NET-ASSETS> 4,402,035,744
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.06)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
