<PAGE>
STATE STREET NAVIGATOR SECURITIES
LENDING PRIME PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
ANNUAL REPORT AS OF DECEMBER 31, 1998
- --------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
The State Street Navigator Securities Lending Prime Portfolio (the "Fund") is a
special purpose money market fund. 100% of Fund balances are derived from the
collateral received from securities lending. The Fund has been managed
consistently with the objective of providing liquidity and preserving capital
while investing in high quality instruments and offering competitive returns.
The economy remained remarkably strong in 1998 as GDP rose 3.9%, the same as
1997. After GDP rose 5.4% in the first quarter, economic problems in Russia,
Asia, and, to a lesser extent, South America led to a growing concern that the
U.S. economy would slow. This concern led the Federal Reserve to lower interest
rates three times, from 5.5% to 4.75%, during the second half of the year. This
action by the Federal Reserve was supported by economic data that suggested some
moderation in the expansion of economic activity from a brisk first quarter to
moderate growth during the summer months, largely due to smaller purchases of
U.S. exports by foreign buyers. The Federal Reserve felt that the decline in
net exports would likely continue to restrain demand and production. Growth in
employment had also slowed appreciably on balance during the summer months and
through most of the fall, although labor markets remained tight with the
unemployment rate falling from 4.5% to 4.3% by the end of the year. At their
final meeting in December, the Federal Reserve left interest rates unchanged.
This reflected its view that the international economic crisis had begun to
subside and that further decreases in the Federal Funds rate would not be needed
unless ongoing developments pointed to a more substantial decline in the growth
of economic activity. This view was supported as fourth quarter GDP rose a
surprisingly strong 5.6%.
The significant change in the economic environment from the first quarter of
1998 to the fourth quarter required a similar change in portfolio strategy.
While the Fund's overall duration did not change appreciably throughout the
year, we did maintain higher levels of short term liquidity as a result of the
major market crises in the latter part of the year. The resulting credit and
liquidity crises caused by problems in Russia, Brazil, and Asia, prompted the
Federal Reserve Bank to lower short term interest rates three times in rapid
succession in an effort to re-stabilize global markets. The Fund was able to
benefit from such rate reductions, having maintained its moderate duration
profile.
Traditionally the third and fourth quarters provide investment opportunities,
which can enhance portfolio returns. However, while providing a competitive
return is important, a great deal more emphasis was required on credit
evaluations. We frequently reviewed both the direct and indirect exposure to
trading counterparts with exposures to Asia, Russia, South America, and the
emerging markets in an effort to maintain the preservation of capital. While
liquidity was within the target range during the second half of 1998, we
continued to increase liquidity in the fourth quarter, positioning the portfolio
to meet unusual cash flow demand during the potentially volatile year-end.
We will continue to manage the Fund to meet objectives of offering competitive
returns, adequate liquidity and a stable net asset value.
Robert P. Fort
Portfolio Manager
February 2, 1999
1
<PAGE>
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST+
------------------ ---- ---- ------ ----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - 35.89%
ASSET BACKED SECURITIES DIVERSIFIED - 15.48%
Asset Securitization Cooperative Corp. 5.420% 01/14/1999 $ 28,550,000 $ 28,494,121
Asset Securitization Cooperative Corp. 5.410% 01/22/1999 30,000,000 29,905,325
Asset Securitization Cooperative Corp. 5.280% 02/12/1999 37,000,000 36,772,080
Asset Securitization Cooperative Corp. 5.080% 03/10/1999 25,000,000 24,760,111
Delaware Funding Corp. 5.450% 01/15/1999 14,000,000 13,970,328
Delaware Funding Corp. 5.170% 01/19/1999 50,000,000 49,870,750
Delaware Funding Corp. 5.220% 01/25/1999 29,880,000 29,776,017
Delaware Funding Corp. 5.330% 01/27/1999 65,000,000 64,749,786
Delaware Funding Corp. 5.550% 01/29/1999 51,029,000 50,808,725
Falcon Asset Securitization 5.170% 01/11/1999 22,050,000 22,018,334
Falcon Asset Securitization 5.500% 01/11/1999 37,670,000 37,612,449
Falcon Asset Securitization 5.450% 01/15/1999 20,000,000 19,957,611
Falcon Asset Securitization 5.500% 01/22/1999 28,140,000 28,049,717
Falcon Asset Securitization 5.330% 01/25/1999 9,000,000 8,968,020
Falcon Asset Securitization 5.250% 02/03/1999 44,750,000 44,534,641
Falcon Asset Securitization 5.350% 02/05/1999 30,000,000 29,843,958
Falcon Asset Securitization 5.410% 02/09/1999 40,000,000 39,765,567
Falcon Asset Securitization 5.250% 02/17/1999 11,000,000 10,924,604
Old Line Funding Corp. 5.520% 01/08/1999 70,000,000 69,924,867
Old Line Funding Corp. 5.500% 01/13/1999 11,000,000 10,979,833
Old Line Funding Corp. 5.450% 01/14/1999 45,000,000 44,911,438
Old Line Funding Corp. 5.520% 01/15/1999 25,000,000 24,946,333
Old Line Funding Corp. 5.420% 01/27/1999 25,000,000 24,902,139
Old Line Funding Corp. 5.400% 01/28/1999 35,504,000 35,360,209
Preferred Receivables Funding Corp. 5.570% 01/13/1999 59,115,000 59,005,243
Preferred Receivables Funding Corp. 5.440% 01/21/1999 30,000,000 29,909,333
Preferred Receivables Funding Corp. 5.350% 01/26/1999 20,000,000 19,925,695
Preferred Receivables Funding Corp. 5.250% 02/01/1999 35,000,000 34,841,771
Preferred Receivables Funding Corp. 5.250% 02/09/1999 26,630,000 26,478,542
Preferred Receivables Funding Corp. 5.250% 02/10/1999 20,000,000 19,883,333
Preferred Receivables Funding Corp. 5.200% 02/23/1999 50,000,000 49,617,222
Preferred Receivables Funding Corp. 5.200% 02/25/1999 29,875,000 29,637,660
---------------
1,051,105,762
---------------
BANK FOREIGN - 9.05%
Commonwealth Bank Australia 5.440% 02/26/1999 56,000,000 55,526,116
Den Danske Corp. 5.500% 01/06/1999 64,000,000 63,951,111
Den Danske Corp. 4.877% 06/14/1999 85,000,000 83,111,517
Nordbanken North America, Inc. 5.510% 01/27/1999 100,000,000 99,602,055
UBS Finance Delaware, Inc. 5.050% 01/15/1999 100,000,000 99,803,611
Unifunding, Inc. 5.260% 02/12/1999 75,000,000 74,539,750
Woolwich Building Society 5.120% 03/23/1999 140,000,000 138,387,200
---------------
614,921,360
---------------
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST+
------------------ ---- ---- ------ ----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - (CONTINUED)
BANK MULTINATIONAL - 3.53%
Chase Manhattan Corp. 4.980% 01/20/1999 $ 100,000,000 $ 99,737,167
Morgan JP & Co., Inc. 5.750% 03/10/1999 50,000,000 50,000,000
Morgan JP & Co., Inc.(a) 4.858% 09/15/1999 90,000,000 89,998,420
---------------
239,735,587
---------------
BEVERAGES - 1.18%
Coca Cola Enterprises, Inc. 5.170% 01/21/1999 50,000,000 49,856,389
Pepsico, Inc. 5.470% 01/15/1999 30,500,000 30,435,120
---------------
80,291,509
---------------
FINANCE CAPTIVE - 2.20%
Sears Roebuck Acceptance Corp. 5.530% 02/02/1999 50,000,000 49,754,222
Sears Roebuck Acceptance Corp. 5.500% 02/04/1999 50,000,000 49,740,278
Sears Roebuck Acceptance Corp. 5.500% 02/05/1999 50,000,000 49,732,639
---------------
149,227,139
---------------
FINANCE NON-CAPTIVE DIVERSIFIED - 4.45%
General Electric Capital Corp. 5.380% 01/26/1999 75,000,000 74,719,792
General Electric Capital Corp. 5.050% 03/10/1999 40,000,000 39,618,444
General Electric Capital Corp. 4.990% 04/21/1999 75,000,000 73,856,458
General Electric Capital Corp. 5.000% 04/28/1999 65,000,000 63,943,750
General Electric Capital Corp.(a) 4.860% 05/04/1999 50,000,000 50,000,000
---------------
302,138,444
---------------
TOTAL COMMERCIAL PAPER 2,437,419,801
---------------
CERTIFICATES OF DEPOSIT - 30.88%
BANK FOREIGN - 22.86%
Abbey National Treasury Services 5.510% 01/11/1999 50,000,000 50,000,672
Abbey National Treasury Services(a) 5.417% 02/17/1999 75,000,000 74,993,395
Abbey National Treasury Services 5.050% 11/12/1999 40,000,000 40,000,000
Bank of Montreal (Chicago) 5.045% 11/12/1999 45,000,000 44,986,894
Bank of Scotland(a) 5.455% 08/23/1999 77,000,000 76,965,982
Barclays Bank Plc 5.560% 02/25/1999 15,000,000 14,998,699
Barclays Bank Plc(a) 5.407% 06/01/1999 60,000,000 59,978,197
Bayerische Hypotheken-und Wechsel Bank 5.125% 01/04/1999 205,000,000 205,000,000
Bayerische Landesbank(a) 5.405% 05/10/1999 75,000,000 74,979,105
Bayerische Landesbank(a) 5.494% 06/29/1999 100,000,000 99,961,439
Bayerische Landesbank 5.650% 07/23/1999 15,000,000 14,991,420
Canadian Imperial Bank Commerce 5.120% 04/05/1999 85,000,000 85,000,000
Den Danske Corp.(a) 5.200% 02/17/1999 75,000,000 75,000,000
Den Danske Corp.(a) 5.465% 04/15/1999 50,000,000 49,997,199
Deutsche Bank AG 5.690% 01/07/1999 75,000,000 75,000,226
Deutsche Bank AG(a) 5.110% 02/10/1999 55,000,000 55,000,000
Deutsche Bank AG 5.740% 04/15/1999 50,000,000 49,995,224
Kredietbank N.V. 5.695% 01/07/1999 50,000,000 49,999,646
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST+
------------------ ---- ---- ------ ----
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - (CONTINUED)
BANK FOREIGN - (CONTINUED)
Norddeutsche Landes Bank 5.530% 02/11/1999 $ 50,000,000 $ 49,996,767
Royal Bank Canada(a) 5.545% 02/11/1999 50,000,000 49,995,900
Svenska Handelsbanken, Inc. 5.070% 02/01/1999 50,000,000 49,781,708
Svenska Handelsbanken, Inc. 5.820% 04/30/1999 50,000,000 49,989,083
Svenska Handelsbanken, Inc.(a) 5.163% 06/02/1999 30,000,000 29,990,712
Svenska Handelsbanken, Inc.(a) 5.445% 06/08/1999 50,000,000 49,984,048
Svenska Handelsbanken, Inc.(a) 5.442% 06/09/1999 8,000,000 7,997,431
Svenska Handelsbanken, Inc. 5.695% 07/30/1999 18,000,000 17,994,047
Swedbank Sparbanken Svenge 5.250% 01/05/1999 50,000,000 50,000,000
---------------
1,552,577,794
---------------
BANK MULTINATIONAL - 1.40%
Chase Manhattan Corp. 5.100% 01/19/1999 50,000,000 50,000,000
Chase Manhattan Corp. 5.720% 05/17/1999 45,000,000 44,987,159
---------------
94,987,159
---------------
BANK REGIONAL - 6.62%
Bank One Corp. 5.745% 05/17/1999 50,000,000 49,984,806
Corestates Bank NA(a) 5.519% 04/23/1999 50,000,000 50,000,000
Fleet National Bank(a) 4.815% 03/19/1999 50,000,000 49,993,823
Fleet National Bank(a) 4.860% 03/19/1999 80,000,000 79,990,941
Fleet National Bank 5.218% 10/22/1999 70,000,000 70,000,000
Fleet National Bank(a) 5.265% 11/04/1999 75,000,000 74,968,459
National City Bank(a) 5.440% 03/08/1999 25,000,000 24,997,328
National City Bank(a) 5.450% 03/08/1999 50,000,000 49,994,656
---------------
449,930,013
---------------
TOTAL CERTIFICATES OF DEPOSIT 2,097,494,966
---------------
BANK NOTES - 19.62%
BANK FOREIGN - 1.37%
Toronto Dominion Bank, New York Branch 5.710% 05/24/1999 45,000,000 44,984,811
Toronto Dominion Bank 5.030% 11/10/1999 28,000,000 27,990,738
WESTPAC Banking Corp. 5.730% 06/09/1999 20,000,000 19,994,160
---------------
92,969,709
---------------
BANK MULTINATIONAL - 3.31%
BankBoston NA(a) 5.068% 07/23/1999 20,000,000 19,993,423
BankBoston NA 5.269% 08/10/1999 50,000,000 49,983,833
First National Bank of Chicago 5.730% 05/07/1999 10,000,000 9,997,686
Morgan Guaranty Trust Company of New York 5.710% 01/08/1999 45,000,000 45,000,207
Morgan JP & Co., Inc.(a) 5.213% 04/05/1999 100,000,000 99,992,442
---------------
224,967,591
---------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST+
------------------ ---- ---- ------ ----
<S> <C> <C> <C> <C>
BANK NOTES - (CONTINUED)
BANK REGIONAL - 14.64%
Bank of Nova Scotia 5.070% 04/06/1999 $ 40,000,000 $ 40,000,000
Bank of Nova Scotia 5.055% 11/12/1999 40,000,000 39,990,015
Comerica Bank (Detroit, Michigan)(a) 5.531% 02/02/1999 80,000,000 79,997,257
Comerica Bank (Detroit, Michigan)(a) 5.109% 06/10/1999 50,000,000 49,984,947
Comerica Bank (Detroit, Michigan)(a) 5.445% 07/23/1999 15,000,000 14,993,409
First Union National Bank North Carolina(a) 5.437% 11/17/1999 80,000,000 80,000,000
Fleet National Bank(a) 4.800% 05/11/1999 25,000,000 24,993,917
Key Bank of New York(a) 4.860% 02/22/1999 100,000,000 99,990,963
Key Bank of New York(a) 4.635% 05/12/1999 50,000,000 49,988,515
Key Bank of New York(a) 5.435% 07/21/1999 70,000,000 69,971,089
NationsBank NA(a) 4.830% 07/19/1999 100,000,000 99,980,068
PNC Bank NA, Pittsburgh(a) 4.820% 01/29/1999 75,000,000 74,995,509
PNC Bank NA, Pittsburgh(a) 4.800% 05/21/1999 69,000,000 68,980,524
PNC Bank NA, Pittsburgh(a) 4.790% 06/11/1999 45,000,000 44,982,135
PNC Bank NA, Pittsburgh(a) 5.491% 07/02/1999 50,000,000 49,980,419
PNC Bank NA, Pittsburgh(a) 5.412% 08/16/1999 50,000,000 49,977,071
US Bancorp(a) 5.560% 10/08/1999 32,000,000 31,992,744
US Bancorp(a) 5.611% 11/02/1999 24,000,000 23,994,084
---------------
994,792,666
---------------
INSURANCE - 0.30%
USAA Capital Corp.(b) 6.570% 09/20/1999 20,000,000 20,187,912
---------------
TOTAL BANK NOTES 1,332,917,878
---------------
CORPORATE OBLIGATIONS - 7.81%
BANK FOREIGN - 2.21%
Abbey National Treasury Services 5.500% 02/02/1999 75,000,000 74,992,431
Abbey National Treasury Services(a) 4.785% 07/26/1999 75,000,000 74,964,217
---------------
149,956,648
---------------
BANK REGIONAL - 1.84%
Key Bank NA(a) 4.645% 04/16/1999 35,000,000 34,986,067
Wells Fargo & Company 4.900% 10/06/1999 90,000,000 89,973,526
---------------
124,959,593
---------------
ENTERTAINMENT - 0.74%
Walt Disney Co.(a) 4.865% 02/10/1999 50,000,000 49,998,660
---------------
FINANCE CAPTIVE - 0.22%
Caterpillar Financial Services(a) 5.220% 09/24/1999 15,000,000 14,998,907
---------------
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL AMORTIZED
AND TITLE OF ISSUE RATE DATE AMOUNT COST+
------------------ ---- ---- ------ ----
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS - (CONTINUED)
FINANCE NON-CAPTIVE DIVERSIFIED - 2.06%
Associates Corporation North America(a) 4.900% 01/04/1999 $ 100,000,000 $ 99,999,863
Household Finance Corp.(a) 5.398% 07/26/1999 40,000,000 40,000,000
---------------
139,999,863
---------------
INSURANCE - 0.74%
General American Life Insurance(a)(c) 5.729% 01/29/1999* 50,000,000 50,000,000
---------------
TOTAL CORPORATE OBLIGATIONS 529,913,671
---------------
TIME DEPOSITS - 3.38%
BANK REGIONAL - 3.38%
National City Bank 4.250% 01/04/1999 150,000,000 150,000,000
Sun Trust Banks Inc. 1.500% 01/04/1999 79,813,000 79,813,000
---------------
229,813,000
---------------
TOTAL TIME DEPOSITS 229,813,000
---------------
ASSET BACKED - 1.69%
FINANCE NON-CAPTIVE CONSUMER - 0.59%
Beneficial Corp.(a) 5.512% 02/16/1999 40,000,000 40,008,587
---------------
INSURANCE - 1.10%
Tiers Trust(a)(b) 5.565% 10/15/1999 75,000,000 74,940,208
---------------
TOTAL ASSET BACKED 114,948,795
---------------
TOTAL INVESTMENTS - 99.27% 6,742,508,111
OTHER ASSETS LESS LIABILITIES - 0.73% 49,779,209
---------------
NET ASSETS - 100.00% $ 6,792,287,320
---------------
---------------
</TABLE>
(a) Floating Rate Note - Interest rate shown is rate in effect at
December 31, 1998.
(b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may
be resold in transactions exempt from registration, normally to qualified
institutional buyers. At December 31, 1998, these securities amounted to
$95,128,120 or 1.40% of the Fund's net assets.
(c) Illiquid security restricted as to resale, represents 0.74% of the Fund's
net assets, with an acquisition date of December 30, 1998 and acquisition
cost of $50,000,000.
* Variable maturity date. Date shown is the date in effect at
December 31, 1998. The Fund has the ability to put the security back to
the issuer with 30 days' notice.
+ See note 2 to the financial statements.
See Notes to Financial Statements.
6
<PAGE>
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at amortized cost . . . . . . . . . . . . . . . . . . $ 6,742,508,111
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,858,790
Deferred organization expense. . . . . . . . . . . . . . . . . . . . . . . . . . 92,703
Prepaid insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,066
----------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,793,480,998
----------------
LIABILITIES:
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 976,168
Advisory fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,416
Administration fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,832
Custodian fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,531
Transfer agent fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,644
Other accrued expenses and liabilities . . . . . . . . . . . . . . . . . . . . . 23,087
----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,193,678
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,792,287,320
----------------
----------------
NET ASSETS CONSIST OF:
Capital stock, $0.001 par value;
6,792,287,194 shares issued and outstanding . . . . . . . . . . . . . . . . $ 6,792,287
Capital paid in excess of par. . . . . . . . . . . . . . . . . . . . . . . . . . 6,785,494,907
Accumulated net realized gain on investments . . . . . . . . . . . . . . . . . . 126
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,792,287,320
----------------
----------------
Net asset value, offering, and redemption price per share. . . . . . . . . . . . $ 1.00
----------------
----------------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 407,045,340
----------------
EXPENSES:
Advisory fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,274,890
Administration fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,450
Custodian fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,903
Transfer agent fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,901
Insurance expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,824
Legal fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,609
Amortization of organization expenses. . . . . . . . . . . . . . . . . . . . . . 39,162
Trustees fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,999
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Miscellaneous expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
----------------
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,314,738
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404,730,602
----------------
NET REALIZED GAIN ON INVESTMENTS
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . 1,771
----------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . $ 404,732,373
----------------
----------------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . $ 404,730,602 $ 247,470,322
Net realized gain (loss) on investments. . . . . . . . . . . . . . . . 1,771 (2,714)
----------------- -----------------
Net increase in net assets resulting from operations . . . . . . . . . 404,732,373 247,467,608
----------------- -----------------
DISTRIBUTIONS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . (404,730,602) (247,470,322)
----------------- -----------------
FROM FUND SHARE TRANSACTIONS (AT CONSTANT $1.00 PER SHARE):
Proceeds from shares sold. . . . . . . . . . . . . . . . . . . . . . . 46,918,705,958 27,389,659,804
Issued to shareholders in reinvestment of dividends. . . . . . . . . . - 246,578,860
Cost of redemptions. . . . . . . . . . . . . . . . . . . . . . . . . . (45,717,831,566) (24,922,725,873)
----------------- -----------------
Net increase in net assets from Fund share transactions . . . . . 1,200,874,392 2,713,512,791
----------------- -----------------
Net increase in net assets . . . . . . . . . . . . . . . . . . . . . . 1,200,876,163 2,713,510,077
NET ASSETS:
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . 5,591,411,157 2,877,901,080
----------------- -----------------
End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,792,287,320 $ 5,591,411,157
----------------- -----------------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 15, 1996*
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period . . . . . . . . . $ 1.000 $ 1.000 $ 1.000
---------- ---------- ----------
Net investment income. . . . . . . . . . . . . . . . 0.0556 0.0560 0.0342
Distributions from net investment income . . . . . . (0.0556) (0.0560) (0.0342)
---------- ---------- ----------
Net increase from investment operations. . . . . . . . 0.0000 0.0000 0.0000
---------- ---------- ----------
Net asset value, end of period . . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000
---------- ---------- ----------
---------- ---------- ----------
TOTAL INVESTMENT RETURN (a). . . . . . . . . . . . . . 5.70% 5.75% 3.47%
RATIOS AND SUPPLEMENTAL DATA:
Ratio of expenses to average net assets. . . . . . . . 0.03% 0.04% 0.06%(b)(c)
Ratio of net investment income to average net assets . 5.56% 5.62% 5.47%(b)(c)
Net assets, end of period (in millions). . . . . . . . $6,792 $5,591 $2,878
</TABLE>
* Commencement of investment operations.
(a) Total investment return is calculated assuming an initial investment made
at net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(b) Annualized.
(c) Net of administration waiver of expenses, amounting to less than 0.001% of
net assets for the period.
See Notes to Financial Statements
10
<PAGE>
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND FUND DESCRIPTION
The State Street 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:
State Street Navigator Securities Lending Government Portfolio, State Street
Navigator Securities Lending Prime Portfolio and State Street Navigator
Securities Lending Short-Term Bond Portfolio. Currently, only State Street
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.
Effective February 19, 1998, the name of the Trust was changed from Navigator
Securities Lending Trust and the name of the Fund was changed from Navigator
Securities Lending Prime Portfolio.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund:
SECURITY VALUATION: Investments are valued at amortized cost, which approximates
market value.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Securities transactions are
recorded on trade date. Realized gains and losses on sales of securities are
determined on the basis of identified cost. Interest income is recorded on the
accrual basis. Interest income is increased by accretion of discount and
reduced by amortization of premium.
REPURCHASE AGREEMENTS: A repurchase agreement customarily obligates the seller
at the time it sells securities to the Fund to repurchase the securities at a
mutually agreed upon price and time which, in the case of the Fund's
transactions, is within seven days. The total amount received by the Fund on
repurchase 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 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, and excise tax on income and capital gains.
11
<PAGE>
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.
TRANSFER AGENT FEE: Under the terms of the transfer agency agreement, the Fund
pays a monthly fee of $2,500 plus transaction costs.
4. TRUSTEES' 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, 1998, 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, 1998, there were three shareholders who each owned over 5% of
the Fund's outstanding shares, amounting to 18.51% 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.
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
State Street 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 State Street
Navigator Securities Lending Prime Portfolio (formerly, Navigator Securities
Lending Prime Portfolio) (the "Fund") at December 31, 1998, 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, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 19, 1999
<PAGE>
TRUSTEES
Michael A. Jessee
George J. Sullivan Jr.
Peter Tufano
ADMINISTRATOR, CUSTODIAN, LEGAL COUNSEL AND TRANSFER AGENT
State Street Bank and Trust Company
Two Heritage Drive
North Quincy, MA 02171
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal St.
Boston, MA 02110
LEGAL COUNSEL
Goodwin, Proctor & Hoar LLP
Exchange Place
Boston, MA 02109
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
STATE STREET NAVIGATOR SECURITIES LENDING PRIME PORTFOLIO
State Street Bank and Trust Company
Global Securities Lending
Two International Place
Boston, MA 02110
