<PAGE> 1
---------------------------------------------------------------------------
SEMI-ANNUAL REPORT TO SHAREHOLDERS AUGUST 31, 1997
---------------------------------------------------------------------------
LOGO LOGO
A member of the NAVIGATOR GROUP of FUNDS A member of the NAVIGATOR GROUP
of FUNDS
---------------------------------------------------------------------------
<PAGE> 2
CHAIRMAN'S LETTER
October 13, 1997
Dear Shareholder:
We welcome the opportunity to be able to give you a summary update of
the events and trends that have affected the economy and the Navigator
Money Market Funds within the semi-annual period.
Throughout the first half of the Funds' current fiscal year, the best
economic news continued to be visible on the inflation front. For the
first eight months of 1997, the inflation rate, as measured by the
consumer price index, rose at an annual rate of 1.6%, which is the
slowest pace since 1986. The most current release by the Commerce
Department reported that second quarter 1997 Gross Domestic Product
(GDP) grew at an annual rate of 3.3%. The GDP is the broadest measure of
economic activity and the results show economic growth remains vigorous.
The U.S. economy is exhibiting solid and well balanced growth, with low
unemployment and low inflation.
However, can the economy continue to grow rapidly without inflation
rising? The Federal Open Market Committee (FOMC), which maneuvers
monetary policy, remains concerned that the low unemployment rate will
spark inflationary wage pressures and will quickly react to any signs of
inflation. While we have been surprised by how tame inflation has been,
we would not be surprised if the Federal Reserve extends its insurance
policy by raising interest rates at the November 12th or December 16th
FOMC meeting. Only a modest upward adjustment in policy would be
expected.
While the Federal Reserve policy bias is tilted toward tightening, our
Funds will continue to be managed with short maturity cycles, positioned
to provide liquidity and the possibility of higher rates ahead. We
continue to follow our time-tested philosophy of quality investing. In
this rate environment, more investment managers continue to find it
tempting to reduce investment standards in order to stretch for a few
more basis points of yield. We can assure you that is not the practice
of the Navigator Money Market or Navigator Tax-Free Money Market Funds.
Quality is something we have always taken and will continue to take very
seriously in our organization.
We appreciate the confidence of our shareholders in the results and
management style of the Navigator Money Market and Navigator Tax-Free
Money Market Funds. Fairfield was built on a quality tradition, and that
philosophy remains unchanged. Our commitment is to provide our
shareholders with high quality portfolios with minimal risk, while at
the same time delivering industry-competitive yields.
Sincerely,
[Robert J. Walker, Jr. Sig]
Robert J. Walker, Jr.
Chairman
1
<PAGE> 3
INVESTMENT REPORT
Navigator Money Market Fund
Market and Fund Specifics
M The investment strategy of the Navigator Money Market Fund has
consistently been safe and simple. The Fund's advisor will always focus
on providing a highly liquid portfolio to accommodate the daily cash
flow needs of our shareholders. The Fund concentrates on investments in
high quality commercial paper on the shorter end of the yield curve and
repurchase agreements with maturities ranging from one to seven days.
The advisor seeks to diversify the portfolio by taking advantage of
investment opportunities that occasionally present themselves in the
U.S. Government and Agency markets.
Each investment decision is tested for credit quality and liquidity.
Strong emphasis is placed on selecting securities of exceptional
investment merit. Low quality issues will never be in the portfolio and
the average maturity will not be extended to levels that produce more
risk than potential reward. We are proud of the fact that the Navigator
Money Market Fund continues to outperform the IBC/Donoghue First Tier
Institutions-Only average on a monthly basis and the yield advantage of
the Fund remains highly competitive when compared to funds with less
conservative investment philosophies.
Navigator Tax-Free Money Market Fund
Market and Fund Specifics
M In the latest semi-annual period, the Fund's advisor implemented a
structural change to the portfolio in which the average weighted
maturity was shortened while still providing a highly competitive yield
compared to its peers. In order to meet the demanding liquidity needs of
our shareholders, the Fund has substantially increased its holdings of
variable rate demand notes with daily and weekly put options. The Fund
has also been active in the tax-exempt commercial paper market in an
effort to balance the portfolio while locking in attractive yields and
improving overall Fund performance. We are very proud of the results we
have been achieving with the Navigator Tax-Free Money Market Fund.
Throughout the period, the Fund has consistently outperformed the
IBC/Donoghue Institutions-Only monthly average and was ranked 1st in
performance for the 7-day period ending August 18, 1997.
We continue to follow a prudent investment policy with the highest of
quality standards. The Fund continues to use only the highest quality
securities, acknowledging and respecting the standards of our
shareholders. During the period, the advisor has selectively added
several new issuers to the Fund's approved list. By doing so, the Fund
has been able to purchase quality securities even during periods of
limited supply in the marketplace.
2
<PAGE> 4
Navigator Money Market Fund
PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
Average Average
Monthly Compound Maturity
Month Yield Yield* (Month-end)
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
1997 March 5.26% 5.39% 23 days
April 5.34 5.48 23
May 5.43 5.57 35
June 5.46 5.60 16
July 5.43 5.57 24
August 5.44 5.58 34
--------------------- ------- ------- --------
Average Annualized
Yields and Maturity 5.39% 5.53% 26 days
======= ======= ========
</TABLE>
*Compound yields assume reinvestment of dividends.
MATURITY DIVERSIFICATION SCHEDULE
AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
Amount
(Amortized Cost) % of Portfolio % Cumulative
<S> <C> <C> <C> <C>
-------------------------------------------------------------------
One Day $ 28,800,000 23.1% 23.1%
2-7 days 5,091,000 4.1 27.2
8-30 days 41,143,726 33.0 60.2
31-60 days 22,859,456 18.4 78.6
61-90 days 19,778,744 15.9 94.5
Over 90 days 6,891,002 5.5 100.0
--------------- ------------
Total $ 124,563,928 100.0%
=============== ============
</TABLE>
3
<PAGE> 5
Navigator Tax-Free Money Market Fund
PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
Average Average
Monthly Compound Maturity
Month Yield Yield* (Month-end)
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------
1997 March 3.11% 3.16% 30 days
April 3.48 3.54 15
May 3.62 3.68 15
June 3.61 3.67 10
July 3.32 3.37 18
August 3.26 3.31 18
--------------------- ------ ------- --------
Average Annualized
Yields and Maturity 3.40% 3.46% 18 days
====== ======= ========
</TABLE>
*Compound yields assume reinvestment of dividends.
PORTFOLIO COMPOSITION
AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
Amount
(Face Value) % of Portfolio
<S> <C> <C> <C>
-----------------------------------------------------------------------
Floating Rate Securities:
Daily Liquidity $ 7,000,000 15.9%
7-Day Liquidity 18,300,000 41.4
Tax-Exempt Commercial Paper 18,850,000 42.7
----------- ------------
$44,150,000 100.0%
=========== ============
</TABLE>
PORTFOLIO QUALITY
AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
Moody's Ratings % of Portfolio
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------
"MIG-1/VMIG-1" Highest Quality Short-term Instruments 57.3%
"Prime-1" Highest Quality
Tax-Exempt Commercial Paper 42.7
------------
100.0%
============
</TABLE>
4
<PAGE> 6
FINANCIAL STATEMENTS
Statement of Net Assets
Navigator Money Market Fund
August 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
--------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER -- 73.05%
AUTOMOBILE MANUFACTURER -- 2.40%
$ 3,000,000 Ford Motor Credit Corp. ....................... 10/08/97 5.50% $ 2,983,042
-------------
TOTAL AUTOMOBILE MANUFACTURER.......................................... 2,983,042
--------------------------------------------------------------------------------------------------------
BEVERAGES -- 4.02%
5,000,000 Pepsico, Inc. ................................. 09/17/97 5.45% 4,987,889
-------------
TOTAL BEVERAGES........................................................ 4,987,889
--------------------------------------------------------------------------------------------------------
CONGLOMERATE -- 4.01%
5,000,000 General Electric Capital....................... 10/08/97 5.50% 4,971,736
-------------
TOTAL CONGLOMERATE..................................................... 4,971,736
--------------------------------------------------------------------------------------------------------
CONSUMER ELECTRONICS -- 8.98%
5,000,000 Motorola Credit Corp. ......................... 09/09/97 5.46% 4,993,933
6,169,000 Sharp Electronics.............................. 09/19/97 5.47% 6,152,124
-------------
TOTAL CONSUMER ELECTRONICS............................................. 11,146,057
--------------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES -- 3.17%
4,000,000 Hasbro, Inc. .................................. 12/12/97 5.50% 3,937,667
-------------
TOTAL CONSUMER NON-DURABLES............................................ 3,937,667
--------------------------------------------------------------------------------------------------------
FINANCE -- 4.01%
5,000,000 American Express Credit Corp. ................. 09/30/97 5.51% 4,977,807
-------------
TOTAL FINANCE.......................................................... 4,977,807
--------------------------------------------------------------------------------------------------------
FINANCE, CORPORATE RECEIVABLES -- 13.68%
5,000,000 Asset Securitization Cooperative............... 11/26/97 5.50% 4,934,306
7,000,000 Corporate Asset Funding........................ 10/07/97 5.48% 6,961,640
5,095,000 Preferred Receivables Funding Corp. ........... 09/24/97 5.54% 5,076,967
-------------
TOTAL FINANCE, CORPORATE RECEIVABLES................................... 16,972,913
--------------------------------------------------------------------------------------------------------
FINANCE, EQUIPMENT LEASES -- 4.78%
3,000,000 International Lease Finance.................... 10/22/97 5.48% 2,976,710
3,000,000 International Lease Finance.................... 12/12/97 5.49% 2,953,335
-------------
TOTAL FINANCE, EQUIPMENT LEASES........................................ 5,930,045
--------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES, DIVERSIFIED -- 7.98%
5,000,000 Associates Corp. of North America.............. 11/05/97 5.49% 4,950,438
5,000,000 John Deere Capital Corp. ...................... 11/05/97 5.48% 4,950,528
-------------
TOTAL FINANCIAL SERVICES, DIVERSIFIED.................................. 9,900,966
--------------------------------------------------------------------------------------------------------
INDUSTRIAL & COMMERCIAL SERVICES -- 4.00%
5,000,000 PHH............................................ 10/15/97 5.51% 4,966,328
-------------
TOTAL INDUSTRIAL & COMMERCIAL SERVICES................................. 4,966,328
--------------------------------------------------------------------------------------------------------
INSURANCE, FULL-LINE -- 4.01%
5,000,000 Prudential Funding............................. 09/30/97 5.49% 4,977,888
-------------
TOTAL INSURANCE, FULL-LINE............................................. 4,977,888
--------------------------------------------------------------------------------------------------------
MEDIA -- PUBLISHING -- 3.98%
5,000,000 McGraw-Hill.................................... 11/14/97 5.50% 4,943,472
-------------
TOTAL MEDIA - PUBLISHING............................................... 4,943,472
--------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT -- 4.01%
5,000,000 Xerox Credit Corp. ............................ 09/24/97 5.48% 4,982,494
-------------
TOTAL OFFICE EQUIPMENT................................................. 4,982,494
--------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 7
Statement of Net Assets (Cont.)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
--------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SECURITIES DEALER -- 4.02%
$ 5,000,000 Goldman Sachs Group L.P. ....................... 09/08/97 5.53% $ 4,994,624
------------
TOTAL SECURITIES DEALER................................................. 4,994,624
--------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER.................................................. 90,672,928
--------------------------------------------------------------------------------------------------------
MEDIUM TERM NOTES, FLOATING RATE -- 4.03%
5,000,000 Merrill Lynch & Co., Inc. ...................... 09/02/97* 5.77% 5,000,000
--------------------------------------------------------------------------------------------------------
TOTAL MEDIUM TERM NOTES, FLOATING RATE.................................. 5,000,000
--------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 23.29%
11,000 First Boston
(collateralized by
U.S. Treasury Bond,
par value $8,000, 11.250%,
due 02/15/15;
market value $11,441)......................... 09/02/97* 5.15% 11,000
70,000 Goldman Sachs
(collateralized by
U.S. Treasury Bond,
par value $56,000, 9.250%,
due 02/15/16;
market value $71,953)......................... 09/02/97* 5.33% 70,000
10,000 Merrill Lynch
(collateralized by
U.S. Treasury Bond,
par value $9,000, 8.125%,
due 08/15/19;
market value $10,221)......................... 09/02/97* 5.30% 10,000
28,800,000 Paine Webber
(collateralized by
U.S. Government Agency
Mortgage-backed Securities,
ranging in par value
from $5,000-$30,530,000,
4.140%-8.245%,
due 06/04/98-09/01/24;
total market value $29,638,942)............... 09/02/97* 5.62% 28,800,000
--------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS............................................. 28,891,000
========================================================================================================
TOTAL VALUE OF SECURITIES OWNED -- 100.37%
(which approximates cost for Federal income tax purposes)............... $124,563,928
EXCESS OF TOTAL LIABILITIES OVER OTHER ASSETS -- (0.37%)................ (464,851)
------------
NET ASSETS APPLICABLE TO 124,101,718 SHARES OUTSTANDING;
EQUIVALENT TO $1.00 PER SHARE -- 100.00%.............................. $124,099,077
============
</TABLE>
-------------------------------------
* = The interest rate shown for each
of these obligations is the rate
as of August 31, 1997 and the
maturity shown is the date of the
next interest rate adjustment.
See accompanying notes.
6
<PAGE> 8
FINANCIAL STATEMENTS
Statement of Net Assets
Navigator Tax-Free Money Market Fund
August 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
--------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS -- 99.21%
ALABAMA -- 5.28%
$ 2,350,000 Montgomery Ind Dev Board Poll Ctl & Solid Waste
Disp Rev Rfdg Bonds CP......................... 09/17/97 3.70% $ 2,350,000
-----------
TOTAL ALABAMA............................................................ 2,350,000
--------------------------------------------------------------------------------------------------------
GEORGIA -- 4.49%
2,000,000 DeKalb Cnty Housing Authority VRDO............... 09/03/97 3.35% 2,000,000
-----------
TOTAL GEORGIA............................................................ 2,000,000
--------------------------------------------------------------------------------------------------------
ILLINOIS -- 4.49%
2,000,000 Chicago-O'Hare International Airport VRDO........ 09/02/97 3.70% 2,000,000
-----------
TOTAL ILLINOIS........................................................... 2,000,000
--------------------------------------------------------------------------------------------------------
INDIANA -- 4.49%
2,000,000 Mount Vernon PCR Bonds CP........................ 09/10/97 3.70% 2,000,000
-----------
TOTAL INDIANA............................................................ 2,000,000
--------------------------------------------------------------------------------------------------------
MASSACHUSETTS -- 9.21%
3,000,000 Boston Wtr & Swr Commission Rev Bonds Senior
Series A VRDO.................................. 09/04/97 3.15% 3,000,000
1,100,000 Massachusetts Bay Transportation Auth CP......... 11/19/97 3.63% 1,100,000
-----------
TOTAL MASSACHUSETTS...................................................... 4,100,000
--------------------------------------------------------------------------------------------------------
MISSOURI -- 3.15%
1,400,000 Missouri St Hlth & Ed Facs Auth Hlth Facs Rev
Bonds CP....................................... 10/15/97 3.80% 1,400,000
-----------
TOTAL MISSOURI........................................................... 1,400,000
--------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE -- 6.07%
2,700,000 New Hampshire St MFHR Auth Bonds VRDO............ 09/03/97 3.35% 2,700,000
-----------
TOTAL NEW HAMPSHIRE...................................................... 2,700,000
--------------------------------------------------------------------------------------------------------
NEW YORK -- 5.62%
2,500,000 New York State Environmental Fac Corp. CP........ 09/09/97 3.70% 2,500,000
-----------
TOTAL NEW YORK........................................................... 2,500,000
--------------------------------------------------------------------------------------------------------
PENNSYLVANIA -- 19.55%
2,200,000 Beaver Cnty Industrial Development Auth CP....... 11/25/97 3.65% 2,200,000
1,800,000 Delaware Cnty IDA Solid Waste Rev Bonds Ser D
VRDO........................................... 09/03/97 3.25% 1,800,000
1,200,000 Delaware Cnty IDA Solid Waste Rev Bonds Ser C
VRDO........................................... 09/03/97 3.25% 1,200,000
1,500,000 Lackawanna Cnty IDA IDR Bonds VRDO............... 09/03/97 4.25% 1,500,000
2,000,000 Philadelphia, City of, Gas Works CP.............. 09/22/97 3.55% 2,000,000
-----------
TOTAL PENNSYLVANIA....................................................... 8,700,000
--------------------------------------------------------------------------------------------------------
TENNESSEE -- 2.25%
1,000,000 Memphis GO Bonds Ser A VRDO...................... 09/03/97 3.35% 1,000,000
-----------
TOTAL TENNESSEE.......................................................... 1,000,000
--------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 9
Statement of Net Assets (Cont.)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
--------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXAS -- 22.02%
$ 500,000 Harris Cnty (St. Luke's Episcopal Hospital) VRDO.. 09/02/97 3.70% $ 500,000
2,000,000 Harris Cnty (Methodist Health Care System) VRDO... 09/02/97 3.70% 2,000,000
1,500,000 Port of Corpus Christi Auth Nueces Cnty Marine
Term Rev Bonds VRDO............................. 09/03/97 3.40% 1,500,000
1,300,000 San Antonio, City of CP........................... 09/08/97 3.70% 1,300,000
2,000,000 Texas Dept of Housing Ser B CP.................... 10/23/97 3.75% 2,000,000
2,500,000 West Side Calhoun Cnty Dev Corp PCR Bonds VRDO.... 09/02/97 3.70% 2,500,000
-----------
TOTAL TEXAS............................................................... 9,800,000
--------------------------------------------------------------------------------------------------------
UTAH -- 6.97%
1,100,000 Emery Cnty Poll Ctl Ref Rfdg Bonds VRDO........... 09/03/97 3.35% 1,100,000
2,000,000 Utah, State of GO CP.............................. 09/08/97 3.50% 2,000,000
-----------
TOTAL UTAH................................................................ 3,100,000
--------------------------------------------------------------------------------------------------------
WASHINGTON -- 5.62%
2,500,000 Washington State GO Ser 1996B VRDO................ 09/03/97 3.25% 2,500,000
-----------
TOTAL WASHINGTON.......................................................... 2,500,000
--------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS..................................................... 44,150,000
========================================================================================================
TOTAL VALUE OF SECURITIES OWNED -- 99.21%
(which approximates cost for Federal income tax purposes)................. $44,150,000
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES -- 0.79%.................... 354,165
-----------
NET ASSETS APPLICABLE TO 44,545,923 SHARES OUTSTANDING;
EQUIVALENT TO $1.00 PER SHARE -- 100.00%................................ $44,504,165
===========
</TABLE>
-------------------------------------
CP = Commercial Paper
GO = General Obligation
IDA = Industrial Development Authority
IDR = Industrial Development Revenue
MFHR = Multi-Family Housing Revenue
PCR = Pollution Control Revenue
VRDO = Variable Rate Demand Obligation --
The rate shown for each of these
obligations is the rate as of
August 31, 1997 and the maturity
shown is the date of the next
interest rate adjustment.
See accompanying notes.
8
<PAGE> 10
Statement of Operations
Navigator Funds
For the Six-Month Period Ended August 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
MONEY TAX-FREE
MARKET MONEY
FUND MARKET
---------- --------
<S> <C> <C>
INVESTMENT INCOME:
Interest Income............................................... $4,395,487 $980,449
---------- --------
EXPENSES:
Investment Advisory Fees...................................... 156,462 66,574
Administrative Fees........................................... 78,231 26,630
Less Investment Advisory & Administration Fees
Waived by Management....................................... (142,693) (78,426)
Custodian and Transfer Agent Fees............................. 40,174 41,392
Professional Fees............................................. 6,072 9,424
Taxes -- Other than Income.................................... 1,875 196
Registration and Filing Fees.................................. 1,125 3,712
Insurance..................................................... 1,250 56
Miscellaneous................................................. 4,888 476
---------- --------
Total Expenses............................................. 147,384 70,034
---------- --------
NET INVESTMENT INCOME........................................... 4,248,103 910,415
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $4,248,103 $910,415
========== ========
</TABLE>
See accompanying notes.
9
<PAGE> 11
Statements of Changes in Net Assets
Navigator Money Market Fund
For the Six-Month Period Ended August 31, 1997
and for the Fiscal Year Ended February 28, 1997
<TABLE>
<CAPTION>
3/01/97 3/01/96
TO 8/31/97 TO 2/28/97
------------- -------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net Investment Income................................ $ 4,248,103 $ 9,196,342
Net Realized Loss on Securities Sold................. -- (412)
------------- -------------
Net Increase in Net Assets
Resulting from Operations......................... 4,248,103 9,195,930
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net Investment Income................................ (4,248,103) (9,196,342)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold............................ 377,130,569 707,669,816
Shares Issued to Shareholders Upon Reinvestment of
Dividends......................................... 135,891 542,212
Cost of Shares Repurchased........................... (433,385,807) (695,725,517)
------------- -------------
Net (Decrease) Increase in Net Assets Derived from
Capital Share Transactions........................ (56,119,347) 12,486,511
------------- -------------
NET (DECREASE) INCREASE IN NET ASSETS............. (56,119,347) 12,486,099
NET ASSETS:
Beginning of Period.................................. 180,218,424 167,732,325
------------- -------------
End of Period........................................ $ 124,099,077 $ 180,218,424
============= =============
</TABLE>
See accompanying notes.
10
<PAGE> 12
Statements of Changes in Net Assets
Navigator Tax-Free Money Market Fund
For the Six-Month Period Ended August 31, 1997
and for the Fiscal Year Ended February 28, 1997
<TABLE>
<CAPTION>
3/01/97 3/01/96
TO 8/31/97 TO 2/28/97
------------- -------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net Investment Income................................ $ 910,415 $ 2,161,969
Net Realized Loss on Securities Sold................. -- (14,528)
------------- -------------
Net Increase in Net Assets
Resulting from Operations......................... 910,415 2,147,441
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net Investment Income................................ (910,415) (2,161,969)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold............................ 170,860,492 382,617,881
Shares Issued to Shareholders
Upon Reinvestment of Dividends.................... 170,066 151,079
Cost of Shares Repurchased........................... (180,587,868) (423,508,388)
------------- -------------
Net Decrease in Net Assets Derived from Capital Share
Transactions...................................... (9,557,310) (40,739,428)
------------- -------------
NET DECREASE IN NET ASSETS........................ (9,557,310) (40,753,956)
NET ASSETS:
Beginning of Period.................................. 54,061,475 94,815,431
------------- -------------
End of Period........................................ $ 44,504,165 $ 54,061,475
============= =============
</TABLE>
See accompanying notes.
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
(Unaudited)
NOTE 1 -- ORGANIZATION
Navigator Money Market Fund -- Prime Obligations Portfolio ("Prime
Obligations") is a portfolio offered by Navigator Money Market Fund,
Inc. and Navigator Tax-Free Money Market Fund ("Tax-Free Money Market")
is a portfolio offered by Navigator Tax-Free Money Market Fund, Inc.
(each separately referred to as a "Fund" and collectively referred to as
the "Funds"). Navigator Money Market Fund, Inc. and Navigator Tax-Free
Money Market Fund, Inc. (each separately referred to as the "Company"
and collectively referred to as the "Companies"), are no-load,
diversified, open-end investment companies registered under the
Investment Company Act of 1940, as amended.
Shares of each Fund ("Shares") are sold by Fairfield Group, Inc.
("Fairfield") to Institutional investors ("Institutions") for the
investment of their own funds or funds for which they act in some
fiduciary capacity ("Customer Accounts"). Fund Shares may not be
purchased by individuals directly, but Institutional investors may
purchase Shares for Customer Accounts maintained for individuals.
Fairfield (the "Manager") acts as each Fund's Investment Advisor,
Administrator, and Distributor. Shares are sold and redeemed without any
purchase or redemption charge imposed by the Funds, although
Institutions may charge their Customer Accounts for services provided in
connection with the purchase or redemption of Shares.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
Interest income and expenses are recorded on an accrual basis. Interest
income includes, when applicable, the pro rata amortization of premiums
and discounts.
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Investment securities are valued at
amortized cost, which approximates market value. Realized gains and
losses are determined by using the specific identification method.
The fair value of securities for which prices cannot be determined using
established procedures will be valued in good faith by the Board of
Directors. No investments were so valued at August 31, 1997.
Net investment income, determined as gross income less expenses, is
declared as a dividend each day. Declared dividends are distributable to
shareholders monthly on the first business day of the next month.
Dividends payable at August 31, 1997 amounted to $672,567 and $162,045
for Prime Obligations and Tax-Free Money Market, respectively.
No provision for Federal income taxes is made because it is the
intention of the Funds to qualify as regulated investment companies
under the provisions of the Internal Revenue Code and to make requisite
distributions to shareholders which will relieve them from Federal
income and excise taxes.
For Federal income tax purposes, net realized capital losses generated
in the Funds may be carried forward and applied against future capital
gains. For Federal income tax purposes, Tax-Free Money Market had
accumulated capital losses at August 31, 1997 of $52,018, which may be
carried forward and applied against future capital gains. The capital
loss carryforward expires as follows: 1999 -- $5,069, 2001 -- $32,421
and 2004 -- $14,528.
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
at the date of the financial statements and the reported amounts of
increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates.
12
<PAGE> 14
NOTE 3 -- INVESTMENT ADVISORY AND ADMINISTRATIVE FEES
As Manager, Fairfield provides investment advisory and administrative
services to the Funds pursuant to Management Agreements dated April 17,
1993. Under the terms of the Agreement for Prime Obligations, the
Manager is entitled to receive an annual fee for investment advisory
services of .20% on the first $500 million of the average net assets of
the Fund; .15% on the next $1 billion; and .10% on average net assets in
excess of $1.5 billion. Under the Agreement for Tax-Free Money Market,
the Manager is entitled to receive an annual fee for investment advisory
services of .25% on the first $1 billion of the average net assets of
the Fund; .20% on the next $1 billion; and .15% on average net assets in
excess of $2 billion. Such fees are computed daily and paid monthly.
For Prime Obligations, the Manager is also entitled to receive an
administrative fee at the annual rate of .10% on the first $1.5 billion
of the average net assets of the Fund and .05% thereafter. For Tax-Free
Money Market, the Manager is entitled to receive an administrative fee
at the annual rate of .10% on the Fund's average net assets. Such fees
are computed daily and paid monthly.
For Prime Obligations, during the period ended August 31, 1997, the
management fees (investment advisory and administrative) earned by
Fairfield totaled $234,693. Of the investment advisory and
administrative fees earned, $142,693 was voluntarily waived by the
Manager in order to assist the Fund in maintaining a competitive expense
ratio. At August 31, 1997, Fairfield was owed $7,750 (after partial fee
waiver) for investment advisory services and $7,750 in administrative
fees.
For Tax-Free Money Market, during the period ended August 31, 1997, the
management fees (investment advisory and administrative) earned by
Fairfield totaled $93,204. Of the investment advisory and administrative
fees earned, $78,426 was voluntarily waived by the Manager in order to
assist the Fund in maintaining a competitive expense ratio. At August
31, 1997, Fairfield was owed $3,843 (after partial fee waiver) for
investment advisory services.
NOTE 4 -- CUSTODIAN AND TRANSFER AGENT FEES
Custodial services are provided to the Funds by CoreStates Bank, N.A.
FPS Services, Inc., is the Fund's Transfer Agent and, as such, provides
transfer agency, dividend disbursing, and bookkeeping services.
NOTE 5 -- OTHER TRANSACTIONS WITH AFFILIATES
Fairfield also serves as the Companies exclusive Distributor; however,
it receives no fees for providing distribution services.
Certain officers and directors of the Companies are also officers and
directors of Fairfield. Such officers and directors do not receive fees
from the Funds for serving as officers and directors to the Funds.
The Funds have paid legal fees to a law firm with which the Secretary of
the Companies is associated.
NOTE 6 -- REPURCHASE AGREEMENTS
The investment policies of Prime Obligations permit participation in
repurchase agreements. Collateral for such agreements is held by the
Fund's Custodian in the Federal Reserve's book-entry system. The Fund
monitors its repurchase agreements on a daily basis to ensure that the
market value of the collateral underlying the agreements is maintained
at not less than 100% of the repurchase price. In the event of default
of the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation.
Prime Obligations may participate in repurchase agreements arranged by
Fairfield for a fee not to exceed 1% of the purchase or sale price of
the transaction. During the period ended August 31, 1997, Fairfield
received $332 in fees with respect to such transactions.
13
<PAGE> 15
NOTE 7 -- CAPITAL SHARES
At August 31, 1997, Prime Obligations had 2 billion shares of $.001 par
value common stock authorized with respect to the Fund. Transactions in
capital shares of the Fund during the periods indicated were as follows:
<TABLE>
<CAPTION>
3/01/97 3/01/96
TO 8/31/97 TO 2/28/97
------------ ------------
(UNAUDITED)
<S> <C> <C>
Shares sold............................................... 377,130,569 707,669,816
Shares issued upon reinvestment of dividends.............. 135,891 542,212
Shares repurchased........................................ (433,385,807) (695,725,517)
------------ ------------
Net (decrease) increase................................... (56,119,347) 12,486,511
Outstanding at beginning of period........................ 180,221,065 167,734,554
------------ ------------
Outstanding at end of period.............................. 124,101,718 180,221,065
============ ============
</TABLE>
At August 31, 1997, Tax-Free Money Market had 2 billion shares of $.001
par value common stock authorized with respect to the Fund. Transactions
in capital shares of the Fund during the periods indicated were as
follows:
<TABLE>
<CAPTION>
3/01/97 3/01/96
TO 8/31/97 TO 2/28/97
------------ ------------
(UNAUDITED)
<S> <C> <C>
Shares sold............................................... 170,860,492 382,617,881
Shares issued upon reinvestment of dividends.............. 170,066 151,079
Shares repurchased........................................ (180,587,868) (423,508,388)
------------ ------------
Net decrease.............................................. (9,557,310) (40,739,428)
Outstanding at beginning of period........................ 54,103,233 94,842,661
------------ ------------
Outstanding at end of period.............................. 44,545,923 54,103,233
============ ============
</TABLE>
NOTE 8 -- INVESTMENT COMPOSITION
Tax-Free Money Market invests in securities which may include revenue,
general, and escrowed obligations. At August 31, 1997, the revenue
sources by purpose were as follows:
<TABLE>
<CAPTION>
% OF PORTFOLIO
INVESTMENTS
-------------
<S> <C>
Revenue Bonds:
Pollution Control......................................................... 21%
Industrial Development.................................................... 15
Housing Facilities........................................................ 15
Transportation............................................................ 12
Health Care Facilities.................................................... 9
Water & Sewer Utility..................................................... 9
Gas Utility............................................................... 4
General Obligations......................................................... 15
-----------
100%
===========
</TABLE>
14
<PAGE> 16
NOTE 9 -- FINANCIAL HIGHLIGHTS
Financial highlights for a share of Prime Obligations outstanding
throughout the periods indicated were as follows:
<TABLE>
<CAPTION>
3/01/97 3/01/96 6/01/95 6/01/94 6/01/93 6/01/92
TO TO TO TO TO TO
8/31/97 2/28/97 2/29/96 5/31/95 5/31/94 5/31/93
-------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- --------
Income from
Investment Operations:
Net Investment Income........ 0.0281 0.0523 0.0413 0.0501 0.0314 0.0323
-------- -------- -------- -------- -------- --------
Distributions:
From Net Investment Income..... (0.0272) (0.0523) (0.0413) (0.0501) (0.0314) (0.0323)
-------- -------- -------- -------- -------- --------
Net Asset Value,
end of period.................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ========
Total Return..................... 5.53%(a) 5.37% 4.21%(b) 5.19% 3.18% 3.28%
Net Assets,
end of period (in thousands)... $124,099 $180,218 $167,732 $238,109 $341,136 $417,114
Ratios and Supplemental Data:
Ratio of Expenses to Average
Net Assets................... 0.19%(a) 0.17% 0.25%(a) 0.28% 0.27% 0.26%
Ratio of Expenses to Average
Net Assets, excluding
Fee Waivers.................. 0.37%(a) 0.41% 0.55%(a) 0.43% 0.42% 0.41%
Ratio of Net Investment Income
to Average
Net Assets................... 5.43%(a) 5.23% 5.51%(a) 5.01% 3.14% 3.23%
Ratio of Net Investment
Income to Average Net
Assets, excluding Fee Waivers... 5.25%(a) 4.99% 5.21%(a) 4.86% 2.99% 3.08%
</TABLE>
----------------------
(a) Annualized
(b) Not Annualized
15
<PAGE> 17
NOTE 9 -- FINANCIAL HIGHLIGHTS (CONT.)
Financial highlights for a share of the Tax-Free Money Market
outstanding throughout the periods indicated were as follows:
<TABLE>
<CAPTION>
03/01/97 03/01/96 03/01/95 03/01/94 03/01/93 03/01/92
TO TO TO TO TO TO
08/31/97 02/28/97 02/29/96 02/28/95 02/28/94 02/28/93
--------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- --------
Income from
Investment Operations:
Net Investment Income........ 0.0184 0.0312 0.0353 0.0286 0.0227 0.0273
Net Loss on Securities (both
realized and unrealized)... -- (0.0002) -- (0.0003) -- --
-------- -------- -------- -------- -------- --------
Total Income from
Investment Operations... 0.0184 0.0310 0.0353 0.0283 0.0227 0.0273
-------- -------- -------- -------- -------- --------
Distributions:
From Net Investment Income... (0.0171) (0.0312) (0.0353) (0.0286) (0.0227) (0.0273)
-------- -------- -------- -------- -------- --------
Net Asset Value,
end of period.................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ========
Total Return..................... 3.46%(a) 3.17% 3.59% 2.94% 2.29% 2.76%
Net Assets,
end of period (in thousands)... $ 44,504 $ 54,061 $ 94,815 $107,357 $152,273 $202,245
Ratios and Supplemental Data:
Ratio of Expenses to Average
Net Assets................... 0.26%(a) 0.33% 0.31% 0.29% 0.28% 0.23%
Ratio of Expenses to Average
Net Assets, excluding
Fee Waivers.................. 0.56%(a) 0.58% 0.51% 0.49% 0.48% 0.43%
Ratio of Net Investment Income
to Average
Net Assets................... 3.42%(a) 3.12% 3.53% 2.86% 2.27% 2.73%
Ratio of Net Investment
Income to Average Net
Assets, excluding Fee Waivers... 3.12%(a) 2.87% 3.33% 2.66% 2.07% 2.53%
</TABLE>
----------------------
(a) Annualized
16
<PAGE> 18
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<PAGE> 19
INVESTMENT ADVISER,
ADMINISTRATOR,
AND DISTRIBUTOR
Fairfield Group, Inc.
Horsham, PA 19044
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
Philadelphia, PA 19103
AUDITORS
Ernst & Young LLP
Philadelphia, PA 19103
DIRECTORS
Robert J. Walker, Jr.
Richard G. Gilmore
Jan J. Wieckowski
Robert E. Keith
OFFICERS
Robert J. Walker, Jr.,
President
Gerard J. Wills,
Treasurer
Robert J. Clark,
Assistant Treasurer
James W. Jennings,
Secretary
LOGO LOGO
200 Gibraltar Road
Horsham, PA 19044
1-800-441-3885
