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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1999
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. 3 |X|
(CHECK APPROPRIATE BOX OR BOXES)
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STATE STREET NAVIGATOR SECURITIES LENDING TRUST
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(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) 985-9686
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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:
JOSEPH J. MCBRIEN
STATE STREET BANK AND TRUST COMPANY
1776 HERITAGE DRIVE, AFB 4
N. QUINCY, MASSACHUSETTS 02171-2197
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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)
ITEM PART A HEADING
NO. ------ -------
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1. Front and Back Cover *
2. Risk/Return Summary: Investments, *
Risks and Performance
3. Risk/Return Summary: Fee Table *
4. Investment Objectives, Principal Investment Objectives, Principal
Investment Strategies and Related Investment Strategies and Related
Risks Risks
5. Management's Discussion of Fund *
Performance
6. Management, Organization, and Management, Organization, and
Capital Structure Capital Structure
7. Shareholder Information Shareholder Information
8. Distribution Arrangements Distribution Arrangements
9. Financial Highlights Information *
PART B HEADING
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10. Cover Page and Table of Contents Cover Page and Table of Contents
11. Fund History Fund History
12. Description of the Fund and Its Description of the Trust and Its
Investments and Risks Investments and Risks
13. Management of the Fund Management of the Trust
14. Control Persons and Principal Control Persons and Principal
Holders of Securities Holders of Securities
15. Investment Advisory and Other Investment Advisory and Other
Services Services
16. Brokerage Allocation and Other Brokerage Allocation and Other
Practices Practices
17. Capital Stock and Other Capital Stock and Other Securities
Securities
18. Purchase, Redemption and Pricing Purchase, Redemption and Pricing
of Shares of Shares
19. Taxation of the Fund Taxation of the Trust
20. Underwriters Not Applicable
21. Calculation of Performance Data Calculation of Performance Data
22. Financial Statements Financial Statements
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* PURSUANT TO GENERAL INSTRUCTION B(2)(b) OF FORM N-1A, A REGISTRATION STATEMENT
FILED UNDER ONLY THE INVESTMENT COMPANY ACT OF 1940 SHALL INCLUDE THE FACING
SHEET OF THE FORM, RESPONSES TO ALL ITEMS OF PARTS A (EXCEPT ITEMS 1,2,3,5, AND
9), B, AND C (EXCEPT ITEMS 23(e) AND (i)-(k)), AND THE REQUIRED SIGNATURE.
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PART A
ITEM 1. FRONT AND BACK COVER PAGES
Not Applicable.
ITEM 2. RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE
Not Applicable.
ITEM 3. RISK/RETURN SUMMARY: FEE TABLE
Not Applicable.
ITEM 4. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED
RISKS
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 ("Lender") 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 (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 has established three series of shares of beneficial interest
representing interests in three separate portfolios: State Street Navigator
Securities Lending Government Portfolio ("Government Portfolio"), State Street
Navigator Securities Lending Prime Portfolio ("Prime Portfolio") and State
Street Navigator Securities Lending Short-Term Bond Portfolio ("Short-Term
Portfolio") (each, a "Portfolio"). Government Portfolio and Short-Term Bond
Portfolio, however, are not yet operational.
The investment objectives, principal strategies and risks of each Portfolio
are described below. The investment objectives of each Portfolio may be changed
at any time by the Board of Trustees of the Trust 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.
OBJECTIVES AND STRATEGIES
GOVERNMENT PORTFOLIO. Government Portfolio seeks to:
- maximize current income to the extent consistent with the preservation
of capital and liquidity; and
- maintain a stable $1.00 per share net asset value by investing in
dollar denominated securities with remaining maturities of one year or
less.
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This Portfolio invests exclusively in:
- securities issued or backed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government Securities"); and
- repurchase agreements collateralized with U.S. Government Securities.
All investments will qualify as "eligible securities" within the meaning of
Rule 2a-7 under the Investment Company Act of 1940, as amended (the "1940 Act").
Government Portfolio seeks 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.
PRIME PORTFOLIO. Prime Portfolio will seek to:
- maximize current income to the extent consistent with the preservation
of capital and liquidity; and
- 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 principally invest in the following high quality U.S.
dollar-denominated instruments:
- U.S. Government Securities;
- 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);
- corporate debt obligations, including commercial paper of U.S. and
foreign companies;
- variable amount master demand notes;
- debt obligations of foreign governments and foreign government
subdivisions and their agencies and instrumentalities and supranational
organizations;
- repurchase agreements;
- mortgage-backed securities;
- asset-backed securities;
- floating-rate notes, medium term notes and master term notes; and
- 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. Prime 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.
SHORT-TERM BOND PORTFOLIO. Short-Term Bond Portfolio will seek to maximize
current income to the extent consistent with the preservation of capital and
liquidity.
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 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:
- U.S. dollar-denominated instruments in which Prime Portfolio may
invest;
- mortgage-backed and asset-backed securities;
- U.S. dollar-denominated corporate, governmental and supranational
debt obligations with maturities in excess of 13 months.
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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 Short-Term Bond
Portfolio, after giving effect to all duration shortening positions, will be
managed to be between one and one hundred twenty 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); 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 ("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.
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, 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.
DESCRIPTION OF PRINCIPAL SECURITY TYPES
Below is information about each Portfolio's principal investments techniques.
Each Portfolio may also use strategies and invest in securities described in the
Statement of Additional Information.
U.S. GOVERNMENT SECURITIES. U.S. Government include obligations issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the U.S.
Government. U.S. Government Securities may be backed by the full faith and
credit of the U.S. Treasury, the right to borrow from the U.S. Treasury or the
agency or instrumentality issuing or guaranteeing the security.
REPURCHASE AGREEMENTS. In a repurchase agreement, 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.
STRIPPED SECURITIES. Stripped securities 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 a custodian bank or investment brokerage firm.
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 variable and floating
rate instruments are ordinarily tied to a widely recognized interest rate, such
as the yield on 90-day
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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.
SECTION 4(2) COMMERCIAL PAPER (PRIME PORTFOLIO AND SHORT-TERM BOND PORTFOLIO
ONLY). Prime Portfolio and 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 is
restricted as to disposition under the federal securities laws and generally is
sold to institutional investors, such as Prime Portfolio and Short-Term Bond
Portfolio. 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 of the Trust) determines that
a liquid trading market exists for the securities.
ELIGIBLE DERIVATIVE INSTRUMENTS (SHORT-TERM BOND PORTFOLIO ONLY). 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.
Interest rates on variable and floating rate instruments are ordinarily tied
to 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.
WHEN-ISSUED TRANSACTIONS. The Portfolios may invest in securities prior to
their date of issuance. These securities may fall in value by the time they are
actually issued, which may be any time from a few days to over a year. No
Portfolio will invest more than 25% of its net assets in when-issued securities.
FORWARD COMMITMENTS (PRIME PORTFOLIO AND SHORT-TERM BOND PORTFOLIO ONLY).
Prime Portfolio and 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. 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.
VARIABLE AMOUNT MASTER DEMAND NOTES (PRIME PORTFOLIO AND SHORT-TERM BOND
PORTFOLIO ONLY). Prime Portfolio and 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
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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 (PRIME PORTFOLIO AND SHORT-TERM BOND
PORTFOLIO ONLY). Prime Portfolio and 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.
The price and yield of these securities typically assume that the
securities will be redeemed at a given time before maturity. When interest
rates fall substantially, these securities are generally redeemed early because
the underlying mortgages are often prepaid. In that case the Portfolio would
have to reinvest the money at a lower rate. In addition, the price or yield of
mortgage related securities may fall if they are redeemed later than expected.
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 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) (PRIME PORTFOLIO AND 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
to the same regulatory requirements that apply to domestic banks, such as loan
limitations, examinations and reserve, accounting, auditing, recordkeeping and
public reporting requirements.
RISK FACTORS
The Portfolios are subject to the following principal risks:
- (Government Portfolio and Prime Portfolio) The rate of income will vary
from day to day, depending on short-term interest rates.
- (Short-Term Bond Portfolio) In general, bond prices fall when interest
rates rise.
- Variable and floating rate securities exhibit greater price variations
than fixed-rate securities.
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- An investment in a Portfolio is not a deposit of State Street and is
not insured or guaranteed by the Federal Deposit Insurance Corporation
or any other governmental agency.
- Although Government Portfolio and Prime Portfolio seek to preserve a
stable net asset value of $1.00 per share, it is possible that an
investor may lose money by investing in these Portfolios. For example,
a major change in interest rates or a default on a security or a
repurchase agreement could cause the value of an investment to decline.
- Investments by Prime Portfolio and Short-Term Bond Portfolio in foreign
securities involve risks in addition to those of investing in U.S.
securities. Foreign securities are generally more volatile and less
liquid than U.S. securities, in part because of higher political and
economic risks and because there is less public information available
about foreign issuers.
- Prime Portfolio may invest more than 25% of its assets in the banking
industry. Concentrating in the banking industry may involve additional
risk. Banks are subject to extensive government regulation. They
largely depend on the availability and cost of capital funds for their
profitability, which can change significantly when interest rates
change,
- Each Portfolio may invest up to 25% of its total assets in zero coupon
securities called STRIPS, which are separately traded interest and
principal component parts of U.S. Treasury securities. The interest
only component is extremely sensitive to the rate of principal payment
on the underlying obligation. The market value of the principal only
component is generally volatile in response to changes in interest
rates.
The shares of the Trust have not been registered under the Securities Act of
1933 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 Trust's Master Trust Agreement and the Confidential Offering
Memorandum provided to shareholders.
ITEM 5. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Not Applicable.
ITEM 6. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
THE ADVISER
State Street, 225 Franklin Street, Boston, Massachusetts 02110, is the
investment adviser to the Portfolios. State Street is among the world's
largest providers of institutional custody services, with assets under
custody at December 31, 1998 of approximately $4.8 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. At December 31, 1998, State
Street had discretionary investment management authority with respect to
approximately $485 billion in assets.
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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 1998, State Street served as securities lending agent with respect
to loan transactions involving in excess of $102.7 billion on loan.
For the fiscal year ended December 31, 1998, the Prime Portfolio paid State
Street a fee equal to 0.0175% of its average daily net assets for State Street's
services as adviser. For the services it provides as adviser for Government
Portfolio, State Street is entitled to receive a fee equal on an annual basis to
0.0175% of the Portfolio's average daily net assets. For the services it
provides as adviser to Short-Term Bond Portfolio, State Street is entitled to a
fee equal on an annual basis to 0.05% of the Portfolio's average daily net
assets.
PORTFOLIO MANAGER
Maria F. Pino has been the portfolio manager of the Prime Portfolio since
February 1999. Ms. Pino joined State Street in May 1997 and is responsible
for managing securities lending portfolios. Previously, she spent four years
at Partners HealthCare System, Inc./Brigham and Women's Hospital managing
operating and special purpose funds invested in short-term fixed income and
money market securities and 10 years in the Pension Investment Division of
the Massachusetts State Treasurer's Office.
CAPITAL STOCK
Shares of the Trust are not registered under the Securities Act of 1933 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.
ITEM 7. SHAREHOLDER INFORMATION
Shares of each operating Portfolio are available for purchase on each day on
which State Street is open for business. State Street, in its capacity as
securities lending agent for the Lender, will effect all purchases on behalf of
a 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 Government Portfolio and 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.
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 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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Shares of each operating Portfolio may be redeemed on any day on which
State Street is open for business at the net asset value per share of the
Portfolio next determined after the redemption is communicated to the Trust.
State Street, in its capacity as lending agent for the Lender, will effect
all redemptions on behalf of a Lender.
The net asset value per share of each operating Portfolio is determined as of
5:00 p.m. New York City time.
DIVIDENDS AND DISTRIBUTIONS
Dividends on shares of each Portfolio will be declared daily from net
investment income and paid 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 federal excise tax on distributed
capital gains. The Portfolios do not expect to 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 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
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.
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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 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 8. DISTRIBUTION ARRANGEMENTS
Shares of Prime Portfolio are being offered to 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. 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.
ITEM 9. FINANICAL HIGHLIGHTS INFORMATION
Not applicable.
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PART B
ITEM 10. COVER PAGE AND TABLE OF CONTENTS
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, 1999
State Street 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 ("Government Portfolio"), State Street Navigator Securities
Lending Prime Portfolio ("Prime Portfolio") and State Street Navigator
Securities Lending Short-Term Bond Portfolio ("Short-Term Bond Portfolio")
(each, a "Portfolio"), contained in the Trust's Prospectus dated April 30, 1999.
As of the date hereof, Government Portfolio and Short-Term Bond Portfolio are
not operational. This Statement of Additional Information 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.
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TABLE OF CONTENTS
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Trust History B-3
Description Of The Trust And Its Investments And Risks B-3
Management Of The Trust B-10
Control Persons And Principal Holders Of Securities B-11
Investment Advisory And Other Services B-12
Brokerage Allocation And Other Practices B-13
Capital Stock And Other Securities B-14
Purchase, Redemption And Pricing Of Shares B-15
Taxation Of The Trust B-16
Underwriters B-18
Calculation Of Performance Data B-18
Financial Statements B-19
Ratings Of Debt Instruments Appendix A
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ITEM 11. TRUST HISTORY
Not applicable.
ITEM 12. DESCRIPTION OF THE TRUST AND ITS INVESTMENTS AND RISKS
Each Portfolio of the Trust is an open-end, diversified, management
investment company.
INVESTMENT POLICIES
The investment policies described below reflect the current practices of
the Portfolios, 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
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stripped by their holder, typically 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 (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 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
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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 it a greater potential
for the realization of capital gains, which are subject to federal income taxes.
FORWARD COMMITMENTS (PRIME PORTFOLIO AND SHORT-TERM BOND PORTFOLIO ONLY).
Each of Prime Portfolio and 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 (PRIME PORTFOLIO AND SHORT-TERM BOND PORTFOLIO
ONLY). Prime Portfolio and 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 Prime Portfolio
and Short-Term
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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.
VARIABLE AMOUNT MASTER DEMAND NOTES (PRIME PORTFOLIO AND SHORT-TERM BOND
PORTFOLIO ONLY). Prime Portfolio and 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 (PRIME PORTFOLIO AND SHORT-TERM
BOND PORTFOLIO ONLY). Prime Portfolio and 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 individual mortgagor actually makes
the payment. Because payments are made to certificate holders
regardless of whether payments are actually received on the underlying
loan,
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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 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
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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) (PRIME PORTFOLIO AND 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
to the same regulatory requirements that apply to domestic banks, such as loan
limitations, examinations and reserve, accounting, auditing, recordkeeping and
public reporting requirements.
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.
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-
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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.
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.
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ITEM 13. MANAGEMENT OF THE TRUST
The Board of Trustees of the Trust 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>
POSITION
NAME, ADDRESS AND AGE WITH THE TRUST PRINCIPAL OCCUPATION DURING THE PAST 5 YEARS
--------------------- -------------- --------------------------------------------
<S> <C> <C>
*Michael A. Jessee, (52) Trustee President and Chief Executive Officer of the Federal Home
One Financial Center, 20th Floor Loan Bank of Boston since June 5, 1989; Director of
Boston, Massachusetts 02110 Financial Institutions Retirement Fund; member of the
Policy Advisory Board, Joint Center for Housing Studies,
Harvard University.
George J. Sullivan, Jr., (56) Trustee President and Chief Executive Officer, Newfound Consultants
260 Franklin Street Inc. since 1997; Trustee, SEI group of mutual funds since
Boston, Massachusetts 02110 1996; General Partner, Teton Partners, L.P., 1991 to 1996;
member of the American Institute and Massachusetts Society
of CPAs.
Peter Tufano, (42) Trustee Professor of Business Administration, Harvard Business
Harvard Business School School since 1998; faculty, Harvard Business School since
Boston, Massachusetts 02163 1989.
Raymond P. Boulanger, (55) Secretary Partner, Goodwin, Procter & Hoar LLP
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Philip H. Newman, (46) Assistant Partner, Goodwin, Procter & Hoar LLP
Goodwin, Procter & Hoar LLP Secretary
Exchange Place
Boston, Massachusetts 02109
</TABLE>
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COMPENSATION
The following table describes the compensation received by the Trustees from
the Trust for the fiscal period ended December 31, 1998. During the fiscal
period ended December 31, 1998, the Trust paid an aggregate of $45,000 to all
Trustees.
TRUSTEE COMPENSATION TABLE
Pension or Estimated
Retirement Annual Total Compensation
Aggregate Benefit Accrued Benefits from Trust and
Compensation as Part of Trust upon Complex paid to
Trustee from Trust Expenses Retirement Trustees
------- ------------ -------- ---------- ---------
Michael A. *$15,000 None None *$15,000
Jessee
George J. *$15,000 None None *$15,000
Sullivan, Jr.
Peter Tufano *$15,000 None None *$15,000
* 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 14. 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.
PRINCIPAL SHAREHOLDERS
As of April 1, 1999, there were no shares outstanding for Government
Portfolio or Short-Term Bond Portfolio, and the following shareholders of record
owned 5% or more of the issued and outstanding shares of Prime Portfolio:
PERCENTAGE OF
SHAREHOLDER PRINCIPAL ADDRESS SHARES HELD
----------- ----------------- -----------
The Kaufmann Fund, Inc. 140 East 45th Street, 7.018%
43rd Floor
New York, NY 10017
Morgan Stanley Asset 1221 Avenue of the Americas, 10.039%
Management Pooled 22nd Floor
International Equity New York, NY 10020
Trust
Ontario Municipal One University Avenue, 6.451%
Employee's Retirement Suite 1000
Board Toronto, Ontario MFJ 2P1
The Trustees and officers of the Trust, as a group, own less than 1% of the
Trust's voting securities.
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ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES
SERVICE PROVIDERS
Most of the Portfolios' necessary day-to-day operations are performed by
service providers under contract to the Trust. The principal service providers
for the Portfolios are:
Investment Adviser, Custodian, State Street Bank and Trust Company
Transfer Agent and Administrator:
Independent Accountants: PricewaterhouseCoopers LLP
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
is a Massachusetts chartered trust company and a member of the Federal Reserve
System. State Street 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 period from
May 15, 1996 to December 31, 1996 were $195,582. The advisory fees for the
fiscal year ended December 31, 1997 and December 31, 1998 were $770,265 and
$1,274,890, respectively.
The contractual arrangements between the Trust and the Adviser were
approved 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 year to
year provided that the arrangements are approved by the Trustees, including a
majority of the Independent Trustees on an annual basis. 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 as of 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 Trust's Registration Statement and Confidential
Offering Memorandum; 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%.
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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.
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
PricewaterhouseCoopers LLP serves as the Trust's independent accountants for
each Portfolio of the Trust. PricewaterhouseCoopers 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 16. 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.
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
B-13
<PAGE>
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 17. 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.
Shares of 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.
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:
NAME COMMENCEMENT OF OPERATIONS
State Street Securities Lending May 15, 1996
Prime Portfolio
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, 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.
B-14
<PAGE>
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 18. PURCHASE, REDEMPTION AND PRICING OF SHARES
MANNER IN WHICH SHARES ARE OFFERED
Shares of 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
PRIME PORTFOLIO AND GOVERNMENT PORTFOLIO. Net asset value per share for the
shares of each of Prime Portfolio and 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.
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
B-15
<PAGE>
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.
SHORT-TERM BOND PORTFOLIO. Net asset value per share is calculated for
Short-Term Bond Portfolio as of the close of the regular trading session on the
New York Stock Exchange (generally 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 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 19. TAXATION OF THE TRUST
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
B-16
<PAGE>
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 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 20. UNDERWRITERS
Not Applicable.
ITEM 21. CALCULATION OF PERFORMANCE DATA
AVERAGE ANNUAL TOTAL RETURN
SHORT-TERM BOND PORTFOLIO. 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:
B-18
<PAGE>
[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
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
PRIME PORTFOLIO AND 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 Prime Portfolio for the
seven-day period ended December 31, 1998:
Current Yield 5.24%
Effective Yield 5.38%
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.
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:
B-18
<PAGE>
[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
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 22. FINANCIAL STATEMENTS
Following are Prime Portfolio's audited financial statements for the fiscal year
ended December 31, 1998, including the notes thereto and the report of
PricewaterhouseCoopers LLP thereon.
B-19
<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.
B-20
<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.
B-21
<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.
B-22
<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.
B-23
<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.
B-24
<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
B-25
<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
B-26
<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
B-27
<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
B-28
<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.
B-29
<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.
B-30
<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
B-31
<PAGE>
APPENDIX A
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.
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.
B-32
<PAGE>
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:
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:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
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.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
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.
B-33
<PAGE>
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.
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.
B-34
<PAGE>
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.
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.
B-35
<PAGE>
PART C
ITEM 23. EXHIBITS
The financial statements called for by this item are included in Part B and
listed in Item 22.
(a) 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").
(b) By-Laws incorporated by reference to the Registration
Statement filed on June 20, 1996.
(c) None.
(d) Investment Advisory Agreement between State Street Navigator
Securities Lending Trust and State Street Bank and Trust
Company incorporated by reference to the Registration
Statement filed on June 20, 1996.
(e) *
(f) Not Applicable.
(g) Custodian Agreement between State Street Navigator
Securities Lending Trust and State Street Bank and Trust
Company incorporated by reference to the Registration
Statement filed on June 20, 1996.
(h)(1) Transfer Agency Agreement between State Street Navigator
Securities Lending Trust and State Street Bank and Trust
Company incorporated by reference to the Registration
Statement filed on June 20, 1996.
(2) Administrative Services Agreement between State Street
Navigator Securities Lending Trust and State Street Bank and
Trust Company incorporated by reference to the Registration
Statement filed on June 20, 1996.
(i) *
(j) Consent of Independent Accountants.
(k) *
(l) None.
(m) Not Applicable.
(n) Financial Data Schedule.
(o) Not Applicable.
ITEM 24. 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 B.2.(b) of Form N-1A, a
registration statement or amendment filed under only the Investment Company
Act of 1940, shall include the facing sheet of the Form, responses to all
items of Parts A (except Items 1, 2, 3, 5 and 9), B and C (except Items
23(e) and (i) - (k)), and the required signature.
C-1
<PAGE>
ITEM 25. 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 194, 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 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 26. 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:
C-2
<PAGE>
POSITION
WITH BUSINESS AND OTHER POSITIONS
NAME ADVISOR WITHIN LAST TWO YEARS*
---- ------- ----------------------
Tenley E. Director Chairman, Western Resources Inc.
Albright, MD
Joseph A. Baute** Director Former Chairman, Markem Corporation
I. MacAlister Director Retired Chairman, President and CEO,
Booth Polaroid Corporation
Marshall N. Carter Chairman State Street Bank and Trust Company
and CEO
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. Director Chairman, President and CEO, Houghton
Darehshori Mifflin Company
Arthur L. Director Chairman and CEO, Ionics, Inc.
Goldstein
David P. Gruber Director Chairman and CEO, Wyman-Gordan Company
Charles F. Kaye Director President, Transportation Investments,
Inc.
John M. Kucharski Director Chairman, EG&G, Inc.
Charles R. Director Chairman and CEO, Arthur D. Little,
LaMantia Inc.
David B. Perini Director Chairman, Perini Corporation
Dennis J. Picard Director Chairman, Raytheon Company
Alfred Poe Director CEO, MenuDirect
Bernard W. Director President, Premier Group; National Director -
Reznicek Utility Marketing, Central States Indemnity
Company of Omaha
Dianna Chapman Director President, Wellesley College
Walsh
David A. Spina President State Street Bank and Trust Company
and COO
Robert E. Weissman Director Chairman and CEO, IMS Health
* Address of all individuals: State Street Corporation, 225 Franklin Street,
Boston, Massachusetts 02110.
**Retired from Board of State Street Corporation, April 1998.
C-3
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITERS
Not Applicable
ITEM 28. 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 29. MANAGEMENT SERVICES
None.
ITEM 30. UNDERTAKINGS
Not applicable.
C-4
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment No. 3 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 30th day of April, 1999.
STATE STREET NAVIGATOR SECURITIES LENDING TRUST
/s/ Joseph J. McBrien
- ----------------------
Joseph J. McBrien
Attorney-In-Fact
<PAGE>
EXHIBIT LIST
Exhibit No. Exhibit
----------- -------
99j. Consent of Independent
Accountants
99n. Financial Data Schedule
<PAGE>
EXHIBIT 99j
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Amendment No. 3 to the registration statement on
Form N-1A (the "Registration Statement") of our report dated February 19,
1999, relating to the financial statements and financial highlights of State
Street Navigator Securities Lending Prime Portfolio, a series of State Street
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, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001011008
<NAME> NAVIGATOR SECURITIES LENDING TRUST
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 6,742,508,111
<INVESTMENTS-AT-VALUE> 6,742,508,111
<RECEIVABLES> 50,858,790
<ASSETS-OTHER> 114,097
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,793,480,998
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,193,678
<TOTAL-LIABILITIES> 1,193,678
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,785,494,907
<SHARES-COMMON-STOCK> 6,792,287,194
<SHARES-COMMON-PRIOR> 5,591,412,802
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 126
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 6,792,287,320
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 407,045,340
<OTHER-INCOME> 0
<EXPENSES-NET> (2,314,738)
<NET-INVESTMENT-INCOME> 404,730,602
<REALIZED-GAINS-CURRENT> 1,771
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 404,732,373
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (404,730,602)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 46,918,705,958
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 45,717,831,566
<NET-CHANGE-IN-ASSETS> 1,200,876,163
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,645)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,274,890
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,314,738
<AVERAGE-NET-ASSETS> 7,285,024,589
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.06)
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<AVG-DEBT-PER-SHARE> 0
</TABLE>