<PAGE> 1
---------------------------------------------------------------------------
ANNUAL REPORT TO SHAREHOLDERS FEBRUARY 28, 1998
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[NAVIGATOR GROUP LOGO] [NAVIGATOR GROUP LOGO]
A member of the NAVIGATOR GROUP A member of the NAVIGATOR GROUP
of FUNDS of FUNDS
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<PAGE> 2
CHAIRMAN'S LETTER April 8, 1998
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 over the last year.
WHAT A YEAR!
Throughout 1997, the domestic financial markets benefited from strong
economic growth, falling unemployment, and a booming stock market all in
an environment of remarkably low inflation. For the year, the economy
expanded by 3.8 percent, topping 1996's 2.8 percent growth for the
strongest showing in nine years. Apart from a single tightening of
monetary policy in March, the Federal Reserve has held short term
interest rates steady. The future issue for the Federal Reserve
policymakers is whether times may be too good.
NAVIGATOR ON TRACK FOR "TECHNICAL AMENDMENTS" TO 2A-7
Recently, the Securities and Exchange Commission adopted the
long-awaited "Technical Amendments" to Rule 2a-7. Adoption of the
"Technical Revisions to the Rules and Forms Regulating Money Market
Funds" completes a series of rulemaking initiatives that began in 1990.
Our concern for safety and quality is amplified by the fact that we have
been and continue to be in conformity with the new rules and
regulations. Many of the new limitations will be non-events for the
Navigator Funds. Your Funds' advisor is pleased to see that the SEC
shares in the conservative investment philosophy practiced by Navigator
for over a decade.
SAFETY AND LIQUIDITY IS ALWAYS FIRST
We continue to follow our time-tested philosophy of quality investing.
In this rate environment, more investment managers continue to find it
tempting to lower investment standards to increase fund performance. 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.
THANK YOU!
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 tradition of quality, and
that philosophy remains unchanged. Our commitment is to provide our
shareholders with high quality portfolios that have minimal risk, and
industry-competitive yields will continue.
Sincerely,
/s/ Robert J. Walker, Jr.
Robert J. Walker, Jr.
Chairman
1
<PAGE> 3
INVESTMENT REPORT
Navigator Money Market Fund
Market and Fund Specifics
[ ] The investment strategy of the Navigator Money Market Fund has
consistently been safe and simple. The Fund's advisor will continue to
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 consistently seeks to diversify the portfolio
by taking advantage of investment opportunities that present themselves
in the U.S. Government and Agency markets. While the Federal Reserve
policy bias appears tilted toward tightening, our Fund will continue to
be managed with short maturity cycles, positioned to provide liquidity
and the possibility of higher rates ahead.
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 average 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
[ ] During the fiscal 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. During this period, the Fund's average weighted
maturity ranged between 10 and 40 days. While the average weighted
maturity of the fund is targeted between 15 and 30 days, an unusually
tight supply in the tax-free market drove some tax-free yields below 2
percent during the first two months of 1998. As tax-free yields were
driven unusually low, it became less advantageous to extend to longer
maturities as there was little yield advantage. Consequently, the Fund's
average weighted maturity was as low as 10 days during this two month
period. In addition to a shorter average maturity, the Fund has
substantially increased its holdings of variable rate demand notes with
daily and weekly put options in an effort to meet the demanding
liquidity needs of our shareholders. To balance out the portfolio and
improve overall Fund performance, the Fund also invests in tax-exempt
commercial paper with varying maturities. The Fund targets a portfolio
breakdown of 60 percent variable rate issues and 40 percent tax-exempt
commercial paper.
While maintaining the Fund's strong performance is always a top
priority, we also feel that sound credit quality is equally important.
That is why the Fund's investments are comprised primarily of AAA and AA
rated issues. Each issue, prior to purchase, is analyzed for its sound
structure and financial strength. Such analysis is ongoing to insure
that the strong credit quality of the Fund's investments is maintained.
In addition, the Fund's advisor maintains an extensive list of
pre-approved tax-exempt issuers. By doing so, the Fund has been able to
invest in quality securities even during periods of limited supply.
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
September 5.40 5.53 17
October 5.39 5.52 10
November 5.44 5.58 19
December 5.52 5.66 13
1998 January 5.47 5.61 11
February 5.42 5.56 13
--------------------- ------- ------- --------
Average Annualized
Yields and Maturity 5.42% 5.55% 20 days
======= ======= ========
</TABLE>
*Compound yields assume reinvestment of dividends.
MATURITY DIVERSIFICATION SCHEDULE
AS OF FEBRUARY 28, 1998
<TABLE>
<CAPTION>
Amount
(Amortized Cost) % of Portfolio % Cumulative
<S> <C> <C> <C> <C>
-------------------------------------------------------------------
1-7 days $ 84,582,201 62.3% 62.3%
8-30 days 36,421,952 26.8 89.1
31-60 days 9,936,838 7.3 96.4
61-90 days 4,934,750 3.6 100.0%
-------------- -------------
Total $135,875,741 100.0%
============== =============
</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
September 3.45 3.51 18
October 3.37 3.42 22
November 3.53 3.58 24
December 3.48 3.53 14
1998 January 3.24 3.29 11
February 2.98 3.02 14
--------------------- ----- ------ --------
Average Annualized
Yields and Maturity 3.37% 3.42% 17 days
===== ====== ========
</TABLE>
*Compound yields assume reinvestment of dividends.
PORTFOLIO COMPOSITION
AS OF FEBRUARY 28, 1998
<TABLE>
<CAPTION>
Amount
(Face Value) % of Portfolio
<S> <C> <C> <C>
-------------------------------------------------------------------------
Variable Rate Demand Obligations
Daily Liquidity $15,100,000 26.5%
7-Day Liquidity 17,300,000 30.4
Tax-Exempt Commercial Paper 24,600,000 43.1
----------- -------------
$57,000,000 100.0%
=========== =============
</TABLE>
PORTFOLIO QUALITY
AS OF FEBRUARY 28, 1998
<TABLE>
<CAPTION>
% of Portfolio
<S> <C> <C>
----------------------------------------------------------------------------------------
Highest Quality Short-term Instruments 56.9%
Highest Quality Tax-Exempt Commercial Paper 43.1
-------------
100.0%
=============
</TABLE>
4
<PAGE> 6
FINANCIAL STATEMENTS
Statement of Net Assets
Navigator Money Market Fund
February 28, 1998
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER -- 41.47%
AUTOMOBILE MANUFACTURER -- 3.66%
$ 5,000,000 Ford Motor Credit Corp. ....................... 04/08/98 5.49% $ 4,971,025
-------------
TOTAL AUTOMOBILE MANUFACTURER............................................ 4,971,025
-----------------------------------------------------------------------------------------------------------
CONGLOMERATE -- 3.68%
5,000,000 General Electric Capital....................... 03/06/98 5.47% 4,996,201
-------------
TOTAL CONGLOMERATE....................................................... 4,996,201
-----------------------------------------------------------------------------------------------------------
FINANCE, CORPORATE RECEIVABLES -- 11.01%
5,000,000 Asset Securitization Cooperative............... 04/15/98 5.47% 4,965,813
5,000,000 Corporate Asset Funding........................ 03/12/98 5.47% 4,991,643
5,000,000 Preferred Receivables Funding Corp. ........... 03/17/98 5.52% 4,987,733
-------------
TOTAL FINANCE, CORPORATE RECEIVABLES..................................... 14,945,189
-----------------------------------------------------------------------------------------------------------
FINANCE, EQUIPMENT LEASES -- 3.64%
5,000,000 International Lease Finance.................... 05/27/98 5.40% 4,934,750
-------------
TOTAL FINANCE, EQUIPMENT LEASES.......................................... 4,934,750
-----------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES, DIVERSIFIED -- 5.88%
4,000,000 Associates Corp. of North America.............. 03/25/98 5.47% 3,985,413
4,000,000 John Deere Capital Corp. ...................... 03/11/98 5.47% 3,993,922
-------------
TOTAL FINANCIAL SERVICES, DIVERSIFIED.................................... 7,979,335
-----------------------------------------------------------------------------------------------------------
INSURANCE, FULL-LINE -- 2.94%
4,000,000 Prudential Funding............................. 03/11/98 5.48% 3,993,911
-------------
TOTAL INSURANCE, FULL-LINE............................................... 3,993,911
-----------------------------------------------------------------------------------------------------------
MEDIA -- PUBLISHING -- 3.31%
4,500,000 McGraw-Hill.................................... 03/10/98 5.69% 4,493,599
-------------
TOTAL MEDIA -- PUBLISHING................................................ 4,493,599
-----------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT -- 3.67%
5,000,000 Xerox Credit Corp.............................. 03/18/98 5.47% 4,987,085
-------------
TOTAL OFFICE EQUIPMENT................................................... 4,987,085
-----------------------------------------------------------------------------------------------------------
SECURITIES DEALER -- 3.68%
5,000,000 Goldman Sachs Group L.P. ...................... 03/16/98 5.45% 4,988,646
-------------
TOTAL SECURITIES DEALER.................................................. 4,988,646
-----------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER................................................... 56,289,741
-----------------------------------------------------------------------------------------------------------
MEDIUM TERM NOTES, FLOATING RATE -- 7.37%
5,000,000 Bear Stearns Companies, Inc. .................. 03/02/98* 5.73% 5,000,000
5,000,000 Merrill Lynch & Co., Inc. ..................... 03/02/98* 5.74% 5,000,000
-------------
TOTAL MEDIUM TERM NOTES, FLOATING RATE................................... 10,000,000
-----------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 7
Statement of Net Assets (Cont.)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS -- 51.26%
$ 41,000 First Boston
(collateralized by U.S. Treasury Bond, par
value $29,000, 12.750%, due 11/15/10; market
value $42,106)............................... 03/02/98* 5.28% $ 41,000
20,285,000 Goldman Sachs
(collateralized by U.S. Treasury Bond, par
value $20,102,000, 6.250%, due 08/15/23;
market value $20,819,608).................... 03/02/98* 5.32% 20,285,000
20,010,000 Merrill Lynch
(collateralized by U.S. Treasury Bonds,
ranging in par value from
$3,594,000-$11,653,000, 8.125%-13.250%, due
05/15/14-08/15/19; total market value
$20,534,690)................................. 03/02/98* 5.30% 20,010,000
29,250,000 Paine Webber
(collateralized by U.S. Government Agency
Mortgage-backed Securities, ranging in par
value from $7,172,068-$22,687,524, due
02/01/27-02/01/37; total market value
$30,177,796)................................. 03/02/98* 5.67% 29,250,000
------------
TOTAL REPURCHASE AGREEMENTS............................................... 69,586,000
===========================================================================================================
TOTAL VALUE OF SECURITIES OWNED -- 100.10%
(which approximates cost for Federal income tax purposes)................. $135,875,741
EXCESS OF TOTAL LIABILITIES OVER OTHER ASSETS -- (.10%)................... (130,735)
------------
NET ASSETS APPLICABLE TO 135,747,647 SHARES OUTSTANDING;
EQUIVALENT TO $1.00 PER SHARE -- 100.00%................................ $135,745,006
============
</TABLE>
-------------------------------------
* = The interest rate shown for each
of these obligations is the rate
as of February 28, 1998 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
February 28, 1998
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS -- 98.67%
ALABAMA -- 3.46%
$1,000,000 Montgomery Ind Dev Board Poll Ctl & Solid Waste
Disp Rev Rfdg Bonds CP....................... 03/04/98.. 3.50%.. $ 1,000,000
1,000,000 Montgomery Ind Dev Board Poll Ctl & Solid Waste
Disp Rev Rfdg Bonds CP....................... 03/04/98 3.40% 1,000,000
-------------
TOTAL ALABAMA............................................................ 2,000,000
----------------------------------------------------------------------------------------------------------
ARIZONA -- 4.33%
2,500,000 Mesa Municipal Dev Corp Special Tax Updates
Bonds CP..................................... 03/06/98 3.55% 2,500,000
-------------
TOTAL ARIZONA............................................................ 2,500,000
----------------------------------------------------------------------------------------------------------
GEORGIA -- 3.46%
2,000,000 DeKalb Cnty Hsg Auth MFHR Rfdg Bonds VRDO...... 03/04/98 3.40% 2,000,000
-------------
TOTAL GEORGIA............................................................ 2,000,000
----------------------------------------------------------------------------------------------------------
ILLINOIS -- 5.19%
3,000,000 Chicago -- O'Hare International Airport Special
Facility Rev Bonds VRDO...................... 03/02/98 3.65% 3,000,000
-------------
TOTAL ILLINOIS........................................................... 3,000,000
----------------------------------------------------------------------------------------------------------
INDIANA -- 3.46%
2,000,000 Mount Vernon Poll Ctl & Solid Waste Disp Rev
Rfdg Bonds CP................................ 03/03/98 3.40% 2,000,000
-------------
TOTAL INDIANA............................................................ 2,000,000
----------------------------------------------------------------------------------------------------------
LOUISIANA -- 2.94%
1,700,000 Parish of East Baton Rouge PCR Rfdg Bonds
VRDO......................................... 03/02/98 3.65% 1,700,000
-------------
TOTAL LOUISIANA.......................................................... 1,700,000
----------------------------------------------------------------------------------------------------------
MASSACHUSETTS -- 6.92%
3,000,000 Boston Wtr & Swr Commission General Rev Bonds
Senior Series A VRDO......................... 03/05/98 3.00% 3,000,000
1,000,000 Massachusetts Bay Trans Auth Tax Exempt Notes
CP........................................... 03/05/98 3.35% 1,000,000
-------------
TOTAL MASSACHUSETTS...................................................... 4,000,000
----------------------------------------------------------------------------------------------------------
MISSOURI -- 4.50%
2,600,000 Missouri Health & Educational Fac Auth Health
Fac Rev Bonds CP............................. 03/06/98 3.10% 2,600,000
-------------
TOTAL MISSOURI........................................................... 2,600,000
----------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE -- 4.68%
2,700,000 New Hampshire HFC Auth MFHR Rfdg Bonds VRDO.... 03/04/98 3.50% 2,700,000
-------------
TOTAL NEW HAMPSHIRE...................................................... 2,700,000
----------------------------------------------------------------------------------------------------------
NEW MEXICO -- 4.33%
2,500,000 Hurley PCR Bonds VRDO.......................... 03/02/98 3.65% 2,500,000
-------------
TOTAL NEW MEXICO......................................................... 2,500,000
----------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 9
Statement of Net Assets (Cont.)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PENNSYLVANIA -- 19.91%
$2,500,000 Beaver Cnty IDA PCR Rfdg Bonds CP................. 03/05/98 3.40% $ 2,500,000
1,200,000 Delaware Cnty IDA Solid Waste Rev Bonds Series C
VRDO............................................ 03/04/98 3.20% 1,200,000
1,800,000 Delaware Cnty IDA Solid Waste Rev Bonds Series D
VRDO............................................ 03/04/98 3.20% 1,800,000
1,500,000 Lackawanna Cnty IDA Rev Bonds VRDO................ 03/04/98 4.25% 1,500,000
2,000,000 Philadelphia Auth For IDA Rev Bonds VRDO.......... 03/02/98 3.65% 2,000,000
500,000 Philadelphia Gas Works Rev Notes CP............... 03/03/98 3.45% 500,000
2,000,000 Philadelphia Gas Works Rev Notes CP............... 03/03/98 3.55% 2,000,000
-----------
TOTAL PENNSYLVANIA.......................................................... 11,500,000
-----------------------------------------------------------------------------------------------------------
TEXAS -- 20.60%
2,900,000 Harris Cnty HFDC Hospital Rev Bonds (Methodist
Health Care System) VRDO........................ 03/02/98 3.65% 2,900,000
1,500,000 Port of Corpus Christi Auth Nueces Cnty Marine
Terminal Rev Bonds VRDO......................... 03/04/98 3.25% 1,500,000
2,500,000 San Antonio Water System Notes CP................. 03/02/98 3.00% 2,500,000
2,000,000 Texas Dept of Hsg & Community Affairs Single-
family Mortgage Rev Rfdg Notes CP............... 07/08/98 3.60% 2,000,000
3,000,000 West Side Calhoun Cnty Dev Corp PCR Bonds VRDO.... 03/02/98 3.65% 3,000,000
-----------
TOTAL TEXAS................................................................. 11,900,000
-----------------------------------------------------------------------------------------------------------
UTAH -- 6.23%
1,100,000 Emery Cnty PCR Rfdg Bonds VRDO.................... 03/04/98 3.50% 1,100,000
2,500,000 Utah GO Highway Notes CP.......................... 03/12/98 3.50% 2,500,000
-----------
TOTAL UTAH.................................................................. 3,600,000
-----------------------------------------------------------------------------------------------------------
VIRGINIA -- 4.33%
2,500,000 Virginia GO BAN CP................................ 06/02/98 3.40% 2,500,000
-----------
TOTAL VIRGINIA.............................................................. 2,500,000
-----------------------------------------------------------------------------------------------------------
WASHINGTON -- 4.33%
2,500,000 Washington GO Bonds VRDO.......................... 03/04/98 3.35% 2,500,000
-----------
TOTAL WASHINGTON............................................................ 2,500,000
-----------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS....................................................... 57,000,000
===========================================================================================================
TOTAL VALUE OF SECURITIES OWNED -- 98.67%
(which approximates cost for Federal income tax purposes)................... $57,000,000
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES -- 1.33%...................... 770,879
-----------
NET ASSETS APPLICABLE TO 57,812,637 SHARES OUTSTANDING;
EQUIVALENT TO $1.00 PER SHARE -- 100.00%.................................. $57,770,879
===========
</TABLE>
-------------------------------------
BAN = Bond Anticipation Notes
CP = Commercial Paper
GO = General Obligation
HFC = Housing Finance
Commission/Corporation
HFDC = Health Facility Development
Corporation
IDA = Industrial Development Authority
MFHR = Multi-Family Housing Revenue
PCR = Pollution Control Revenue
VRDO = Variable Rate Demand
Obligation -- The interest rate
shown for each of these obligations
is the rate as of February 28, 1998
and the maturity shown is the date
of the next interest rate
adjustment.
See accompanying notes.
8
<PAGE> 10
Statements of Operations
Navigator Funds
For the Fiscal Year Ended February 28, 1998
<TABLE>
<CAPTION>
TAX-FREE
MONEY MONEY
MARKET MARKET
---------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Interest Income........................................... $8,095,821 $1,996,404
---------- ----------
EXPENSES:
Investment Advisory Fees.................................. 288,248 137,976
Administrative Fees....................................... 144,124 55,191
Less Investment Advisory & Administrative Fees
Waived by the Manager.................................. (284,614) (163,524)
Custodian and Transfer Agent Fees......................... 94,390 79,598
Professional Fees......................................... 27,447 19,922
Taxes -- Other than Income................................ 1,875 1,463
Registration and Filing Fees.............................. 1,125 5,522
Insurance................................................. 1,250 418
Printing.................................................. 18,520 418
Miscellaneous............................................. -- 3,135
---------- ----------
Total Expenses......................................... 292,365 140,119
---------- ----------
NET INVESTMENT INCOME....................................... 7,803,456 1,856,285
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $7,803,456 $1,856,285
========== ==========
</TABLE>
See accompanying notes.
9
<PAGE> 11
Statements of Changes in Net Assets
Navigator Money Market Fund
For the Fiscal Years Ended February 28, 1998 and 1997
<TABLE>
<CAPTION>
03/01/97 03/01/96
TO 02/28/98 TO 02/28/97
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net Investment Income................................ $ 7,803,456 $ 9,196,342
Net Realized Loss on Securities Sold................. -- (412)
------------- -------------
Net Increase in Net Assets Resulting from
Operations........................................ 7,803,456 9,195,930
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net Investment Income................................ (7,803,456) (9,196,342)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold............................ 632,762,514 707,669,816
Shares Issued to Shareholders
Upon Reinvestment of Dividends.................... 327,772 542,212
Cost of Shares Repurchased........................... (677,563,704) (695,725,517)
------------- -------------
Net (Decrease) Increase in Net Assets Derived from
Capital Share Transactions........................ (44,473,418) 12,486,511
------------- -------------
NET (DECREASE) INCREASE IN NET ASSETS................ (44,473,418) 12,486,099
NET ASSETS:
Beginning of Year.................................... 180,218,424 167,732,325
------------- -------------
End of Year.......................................... $ 135,745,006 $ 180,218,424
============= =============
</TABLE>
See accompanying notes.
10
<PAGE> 12
Statements of Changes in Net Assets
Navigator Tax-Free Money Market Fund
For the Fiscal Years Ended February 28, 1998 and 1997
<TABLE>
<CAPTION>
03/01/97 03/01/96
TO 02/28/98 TO 02/28/97
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net Investment Income................................ $ 1,856,285 $ 2,161,969
Net Realized Loss on Securities Sold................. -- (14,528)
------------- -------------
Net Increase in Net Assets
Resulting from Operations......................... 1,856,285 2,147,441
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net Investment Income................................ (1,856,285) (2,161,969)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold............................ 396,461,405 382,617,881
Shares Issued to Shareholders
Upon Reinvestment of Dividends.................... 369,005 151,079
Cost of Shares Repurchased........................... (393,121,006) (423,508,388)
------------- -------------
Net Increase (Decrease) in Net Assets Derived
from Capital Share Transactions................... 3,709,404 (40,739,428)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS................ 3,709,404 (40,753,956)
NET ASSETS:
Beginning of Year.................................... 54,061,475 94,815,431
------------- -------------
End of Year.......................................... $ 57,770,879 $ 54,061,475
============= =============
</TABLE>
See accompanying notes.
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
February 28, 1998
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 February 28, 1998.
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 February 28, 1998 amounted to $532,126 and $114,025
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, the Funds had accumulated capital
losses at February 28, 1998 of $3,118 and $52,018, which may be carried
forward and applied against future capital gains, for Prime Obligations
and Tax-Free Money Market, respectively. The capital loss carryforward
expires as follows: 2002 -- $2,706 and 2004 -- $412, for Prime
Obligations, and 2000 -- $5,069, 2002 -- $32,421, and 2004 -- $14,528 for
Tax-Free Money Market.
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.
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
12
<PAGE> 14
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 year ended February 28, 1998, the
management fees (investment advisory and administrative) earned by
Fairfield totaled $432,372. Of the investment advisory and administrative
fees earned, $284,614 was voluntarily waived by the Manager in order to
assist the Fund in maintaining a competitive expense ratio. At February
28, 1998, no amounts were owed to Fairfield (after partial fee waiver)
for investment advisory services or administrative fees.
For Tax-Free Money Market, during the year ended February 28, 1998, the
management fees (investment advisory and administrative) earned by
Fairfield totaled $193,167. Of the investment advisory and administrative
fees earned, $163,524 was voluntarily waived by the Manager in order to
assist the Fund in maintaining a competitive expense ratio. At February
28, 1998, Fairfield was owed $1,850 (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.
Prior to February 23, 1998, FPS Services, Inc. served as the Funds'
Transfer Agent, and, as such, provided transfer agency, dividend
disbursing, and bookkeeping services. Effective February 23, 1998, First
Data Investors Services, Inc. acquired FPS Services, Inc. and assumed the
role as the Funds' Transfer Agent.
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 year ended February 28, 1998, Fairfield received
$1,720 in fees with respect to such transactions.
13
<PAGE> 15
NOTE 7 -- CAPITAL SHARES
At February 28, 1998, 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 years indicated were as
follows:
<TABLE>
<CAPTION>
03/01/97 03/01/96
TO 02/28/98 TO 02/28/97
------------ ------------
<S> <C> <C>
Shares sold................................................ 632,762,514 707,669,816
Shares issued upon reinvestment of dividends............... 327,772 542,212
Shares repurchased......................................... (677,563,704) (695,725,517)
------------ ------------
Net (decrease) increase.................................... (44,473,418) 12,486,511
Outstanding at beginning of year........................... 180,221,065 167,734,554
------------ ------------
Outstanding at end of year................................. 135,747,647 180,221,065
============ ============
</TABLE>
At February 28, 1998, 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 years indicated
were as follows:
<TABLE>
<CAPTION>
03/01/97 03/01/96
TO 02/28/98 TO 02/28/97
------------ ------------
<S> <C> <C>
Shares sold................................................ 396,461,405 382,617,881
Shares issued upon reinvestment of dividends............... 369,005 151,079
Shares repurchased......................................... (393,121,006) (423,508,388)
------------ ------------
Net increase (decrease).................................... 3,709,404 (40,739,428)
Outstanding at beginning of year........................... 54,103,233 94,842,661
------------ ------------
Outstanding at end of year................................. 57,812,637 54,103,233
============ ============
</TABLE>
NOTE 8 -- INVESTMENT COMPOSITION
Tax-Free Money Market invests in securities which may include revenue,
general, and escrowed obligations. At February 28, 1998, the revenue
sources by purpose were as follows:
<TABLE>
<CAPTION>
% OF PORTFOLIO
INVESTMENTS
--------------
<S> <C>
Revenue Bonds:
Pollution Control and/or Solid Waste...................... 31%
Housing Facilities........................................ 12
Water & Sewer Utility..................................... 10
Transportation Facilities................................. 10
Health Care Facilities.................................... 10
Industrial Development.................................... 6
Gas Utility............................................... 4
General Obligations......................................... 13
Special Obligations......................................... 4
------------
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>
03/01/97 03/01/96 06/01/95 06/01/94 06/01/93
TO TO TO TO TO
02/28/98 02/28/97 02/29/96 05/31/95 05/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period..... $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net Investment Income................ 0.0541 0.0523 0.0413 0.0501 0.0314
Distributions:
From Net Investment Income............. (0.0541) (0.0523) (0.0413) (0.0501) (0.0314)
-------- -------- -------- -------- --------
Net Asset Value, end of period........... $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ========
Total Return............................. 5.55% 5.37% 4.21%(b) 5.19% 3.18%
Net Assets, end of period (in
thousands)............................. $135,745 $180,218 $167,732 $238,109 $341,136
Ratios and Supplemental Data:
Ratio of Expenses to Average Net
Assets............................... 0.20% 0.17% 0.25%(a) 0.28% 0.27%
Ratio of Expenses to Average Net
Assets, excluding Fee Waivers........ 0.40% 0.41% 0.55%(a) 0.43% 0.42%
Ratio of Net Investment Income to
Average Net Assets................... 5.41% 5.23% 5.51%(a) 5.01% 3.14%
Ratio of Net Investment Income to
Average Net Assets, excluding Fee
Waivers.............................. 5.21% 4.99% 5.21%(a) 4.86% 2.99%
</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 years indicated were as follows:
<TABLE>
<CAPTION>
03/01/97 03/01/96 03/01/95 03/01/94 03/01/93
TO TO TO TO TO
02/28/98 02/28/97 02/29/96 02/28/95 02/28/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year.............. $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- -------- --------
Income from Investment Operations:
Net Investment Income....................... 0.0337 0.0312 0.0353 0.0286 0.0227
Net Loss on Securities (both realized and
unrealized)............................... -- (0.0002) -- (0.0003) --
------- ------- ------- -------- --------
Total Income from Investment
Operations........................... 0.0337 0.0310 0.0353 0.0283 0.0227
------- ------- ------- -------- --------
Distributions:
From Net Investment Income.................... (0.0337) (0.0312) (0.0353) (0.0286) (0.0227)
------- ------- ------- -------- --------
Net Asset Value, end of year.................... $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======== ========
Total Return.................................... 3.42% 3.17% 3.59% 2.94% 2.29%
Net Assets, end of year (in thousands).......... $57,771 $54,061 $94,815 $107,357 $152,273
Ratios and Supplemental Data:
Ratio of Expenses to Average Net Assets....... 0.25% 0.33% 0.31% 0.29% 0.28%
Ratio of Expenses to Average Net Assets,
excluding Fee Waivers....................... 0.55% 0.58% 0.51% 0.49% 0.48%
Ratio of Net Investment Income to Average Net
Assets...................................... 3.36% 3.12% 3.53% 2.86% 2.27%
Ratio of Net Investment Income to Average Net
Assets, excluding Fee Waivers............... 3.06% 2.87% 3.33% 2.66% 2.07%
</TABLE>
16
<PAGE> 18
Report of Independent Auditors
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
NAVIGATOR MONEY MARKET FUND -- PRIME OBLIGATIONS PORTFOLIO
NAVIGATOR TAX-FREE MONEY MARKET FUND
We have audited the accompanying statements of net assets of Navigator
Money Market Fund -- Prime Obligations Portfolio and of Navigator
Tax-Free Money Market Fund as of February 28, 1998, and the related
statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five periods
presented therein. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of February 28,
1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Navigator Money Market Fund -- Prime Obligations
Portfolio and of Navigator Tax-Free Money Market Fund at February 28,
1998, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then
ended, and their financial highlights for each of the five periods
presented therein, in conformity with generally accepted accounting
principles.
[Ernst & Young Signature]
Philadelphia, Pennsylvania
April 8, 1998
17
<PAGE> 19
[This page intentionally left blank.]
<PAGE> 20
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
[Navigator Group LOGO] [Navigator Group LOGO]
200 Gibraltar Road
Horsham, PA 19044
1-800-441-3885
