<PAGE> 1
---------------------------------------------------------------------------
ANNUAL REPORT TO SHAREHOLDERS FEBRUARY 28, 1995
---------------------------------------------------------------------------
[NAVIGATOR TAX-FREE MONEY MARKET FUND LOGO]
A MEMBER OF THE NAVIGATOR GROUP OF FUNDS
---------------------------------------------------------------------------
<PAGE> 2
PRESIDENT'S LETTER
April 20, 1995
Dear Shareholder:
*What a difference a year makes! At the beginning of the Fund's fiscal
year, the Federal Reserve targeted the Federal Funds rate at 3.25%; the
yield on the 1-year Treasury bill stood at 3.97%; and, the 30-year
Treasury Bond offered investors a yield of 6.67%. The Greenspan Fed
took to fighting inflationary expectations with a vengeance over the
last twelve months, resulting in yields on February 28, 1995 of 6.00%,
6.41% and 7.44%, respectively. While the Treasury bill and Treasury
bond yields are below their recent highs, the market's long-term
outlook for inflation is, at least momentarily, under control. Further
supporting the lower inflationary expectations, the spot price of gold
ended the fiscal year lower than it began. Industrial production and
capacity utilization; however, are operating at levels considered
inflationary by historical standards. The recent slowdown in the auto
and housing sectors appear to be confirming that the preemptive actions
by the Fed are achieving their goals. Meanwhile the domestic economy
continues to grow; the unemployment rate is one full percentage point
below its year-earlier level, and personal income has risen eleven of
the last twelve months ending in February.
The early December bankruptcy filing by the once financially prosperous
Orange County, California has proven to be the tip of the iceberg with
respect to instruments that derive at least a portion of their value
from other instruments. While the worst of the sudden price declines of
these derivative securities may be over, additional cases of financial
strain may return to the headlines in the months ahead as
municipalities' begin preparing their financial records for year-end
audit. We are pleased to inform you that the Navigator Tax-Exempt Money
Market Fund did not have any direct exposure to Orange County debt.
As many of you already know, Frank Bruzda has retired as Chairman of
the Navigator Funds. I would like to thank Frank for his contributions
to the Tax-Free Fund and to wish him well in his future endeavors.
Please be assured that our commitment to provide a high quality product
with an above average yield will continue in the years to come. Thank
you for your interest and continued support.
Sincerely,
/s/ R. J. WALKER
---------------------
Robert J. Walker, Jr.
President
1
<PAGE> 3
INVESTMENT REPORT
* The Fed's aggressive stance on the inflationary front resulted in
tax-exempt money market yields generally moving higher over the twelve
month period ending February 28, 1995. As an example, 90-day tax-exempt
commercial paper started the fiscal year offering investors a yield of
2.65% and rose steadily to the 4.25% area by calendar year-end. As the
markets began to accept the notion that runaway inflation was not
likely to occur, yields in this maturity sector declined. By the end of
the Fund's fiscal year, 4.10% was the norm. As mentioned in the
Chairman's Letter, the level of interest rates was not the sole concern
for tax-exempt investors. The Orange County debacle shook the markets
in a manner never before experienced. This after-shock, in combination
with the Federal Reserve's 275 basis point increase in the targeted
level for Fed Funds, had a substantial impact on all fixed income
securities. The overall, long-term impact of the Orange County
situation should be very positive for the municipal industry.
Investment responsibilities at the municipal level have been, or are
being, reviewed, and investors have become more conscious of credit
risk as well as of some of the potential factors that influence credit
risk.
In the latest semi-annual period, the Fund's weighted average maturity
ranged from a high of approximately 60 days to a low of 35 days. Early
in this period, the advisor implemented a structural change to the
portfolio in which the average maturity was permitted to shorten in
anticipation of two events: a tighter monetary policy by the Fed, and
technical pressures associated with December 31. Both events were
expected to result in higher yields in the tax-exempt money market
sector. Market participants were surprised by the bankruptcy filing by
Orange County and the flight to quality that resulted. At this mid-
December time, the Fund began a limited extension program that
attempted to avoid the pit-falls of tight supply that typically occur
during the month of January. This program accomplished this goal just
as the Fed hiked interest rates another 50 basis points in early
February.
Looking ahead, the April 15/17 tax date typically places upward
pressure on tax-exempt yields, and this year should not be any
different. Working against this upward bias is the fact that while many
market participants expect the Fed to increase rates one more time, the
general trend is no longer for higher rates, but for stable to
declining rates. This philosophy tends to reduce the inflation premium
that often gives longer maturities more attractive yields. As a result,
the risk is that very short maturity instruments may experience
marginal increases in yield, while issues whose maturities are in the
one-year sector may actually see their yield decline. Should the
perception of this "one-more tightening" scenario build, the Fund's
advisor would look to extend the average maturity. A weighted average
maturity of 50-60 days would appear to become desirable. As in the
past, we continue to mandate only the highest quality securities.
2
<PAGE> 4
PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
Average Average
Monthly Compound Maturity
Month Yield Yield* (Month-end)
<S> <C> <C> <C> <C>
------------------------------------------------------------------------
1994 March 2.20% 2.22% 37 days
April 2.33 2.36 41
May 2.60 2.64 53
June 2.47 2.50 51
July 2.45 2.48 58
August 2.81 2.85 49
September 3.02 3.06 58
October 3.03 3.07 48
November 3.27 3.32 37
December 3.69 3.75 48
1995 January 3.33 3.39 36
February 3.67 3.74 40
--------------------- ------ ------ --------
Average Annualized
Yields and Maturity 2.91% 2.95% 46 days
------ ------ --------
------ ------ --------
</TABLE>
*Compound yields assume reinvestment of dividends.
PORTFOLIO COMPOSITION
AS OF FEBRUARY 28, 1995
<TABLE>
<CAPTION>
Amount
(Face Value) % of Portfolio
<S> <C> <C>
------------------------------------------------------------------
Floating Rate Securities:
Daily Liquidity $ 8,100,000 7.9%
7-Day Liquidity 53,305,000 52.3
Notes and Bonds 16,250,000 16.0
Tax-Exempt Commercial Paper 14,470,000 14.2
Put Bonds 9,750,000 9.6
----------- --------
$101,875,000 100.0%
----------- --------
----------- --------
</TABLE>
PORTFOLIO QUALITY
AS OF FEBRUARY 28, 1995
<TABLE>
<CAPTION>
Moody's Ratings % of Portfolio
<S> <C> <C>
--------------------------------------------------------------------------------------
"MIG-1/VMIG-1" Highest Quality Short-term Instruments 37.4%
"Prime-1" Highest Quality
Tax-Exempt Commercial Paper 62.6
"Aaa" Best Quality Bonds 0.0
"Aa" High Quality Bonds 0.0
--------
100.0%
--------
--------
</TABLE>
3
<PAGE> 5
FINANCIAL STATEMENTS
Schedule of Investments
February 28, 1995
<TABLE>
<CAPTION>
PAR SECURITIES VALUE
---------- ------------------------------- ------------
<S> <C>
MUNICIPAL SECURITIES -- 94.92%
CALIFORNIA -- 2.79%
$ 3,000,000 California Higher Education
Loan Auth., Student Loan Rev.
Rfdg. Bonds,
3.90% Put due 07/01/95....... $ 3,000,000
-----------
TOTAL CALIFORNIA............... 3,000,000
---------------------------------------------------------
COLORADO -- 2.14%
2,300,000 Moffat County, PCR Rfdg. Bonds
(Colorado UTE Electric Assn.
Project),
4.15% VRDO due 03/01/95...... 2,300,000
-----------
TOTAL COLORADO................. 2,300,000
---------------------------------------------------------
FLORIDA -- 6.15%
3,000,000 Broward County HFA,
MFHR Bonds
(Landings of Inverrary),
4.00% VRDO due 03/02/95...... 3,000,000
1,500,000 Florida HFA, MFHR Bonds
(Country Club Apts.),
3.95% VRDO due 03/01/95...... 1,500,000
2,100,000 Florida HFA, MFHR Bonds
(Hampton Lakes Project),
4.15% VRDO due 03/01/95...... 2,100,000
-----------
TOTAL FLORIDA.................. 6,600,000
---------------------------------------------------------
ILLINOIS -- 1.21%
1,300,000 Illinois HFA, IDR Bonds
(Midwest Cambridge),
4.05% VRDO due 03/01/95...... 1,300,000
-----------
TOTAL ILLINOIS................. 1,300,000
---------------------------------------------------------
INDIANA -- 3.82%
4,100,000 Gary, Environmental Improvement
Rev.
Rfdg. Bonds
(USX),
4.15% VRDO due 03/15/95...... 4,100,000
-----------
TOTAL INDIANA.................. 4,100,000
---------------------------------------------------------
IOWA -- 0.93%
1,000,000 Waterloo, IA IDR Bonds
(Waterloo Civic Center
Hotel),
4.10% VRDO due 03/01/95...... 1,000,000
-----------
TOTAL IOWA..................... 1,000,000
---------------------------------------------------------
KANSAS -- 2.81%
2,020,000 Burlington, KS PCR Bonds
(Kansas Electric
Power/Natural Rural
Utilities),
4.10% CP due 05/11/95........ 2,020,000
<CAPTION>
PAR SECURITIES VALUE
---------- ------------------------------- ------------
<S> <C>
KANSAS -- (CONTINUED)
$ 1,000,000 Burlington, KS PCR Bonds
(Kansas Electric
Power/Natural Rural
Utilities),
4.10% CP due 05/11/95........ $ 1,000,000
-----------
TOTAL KANSAS................... 3,020,000
---------------------------------------------------------
LOUISIANA -- 1.12%
1,200,000 Louisiana Recovery District
Sales Tax Bonds,
3.75% VRDO due 03/01/95...... 1,200,000
-----------
TOTAL LOUISIANA................ 1,200,000
---------------------------------------------------------
MARYLAND -- 2.79%
3,000,000 Montgomery County, MD Housing
Opportunity Commission MFHR
Bonds (Falklands Apts.),
4.15% VRDO due 03/01/95...... 3,000,000
-----------
TOTAL MARYLAND................. 3,000,000
---------------------------------------------------------
MASSACHUSETTS -- 3.07%
1,300,000 Massachusetts Dedicated Income
Tax Bonds, Fiscal Recovery
Loan,
3.65% VRDO due 03/01/95...... 1,300,000
2,000,000 Massachusetts Industrial Fin.
Agency, PCR Rfdg. Bonds (New
England Power), 4.20% CP due
04/24/95..................... 2,000,000
-----------
TOTAL MASSACHUSETTS............ 3,300,000
---------------------------------------------------------
MISSOURI -- 6.52%
1,000,000 Missouri Environmental
Improvement & Energy
Resources Auth., PCR Bonds
(Union Electric),
3.75% Put due 06/01/95....... 1,000,000
4,500,000 Missouri Environmental
Improvement & Energy
Resources Auth., PCR Bonds
(Union Electric),
3.75% Put due 06/01/95....... 4,500,000
1,500,000 Missouri Environmental
Improvement & Energy
Resources Auth., PCR Bonds
(Monsanto),
4.05% VRDO due 03/01/95...... 1,500,000
-----------
TOTAL MISSOURI................. 7,000,000
---------------------------------------------------------
NEVADA -- 4.66%
5,000,000 Clark County, IDR Bonds
(Nevada Power),
4.70% VRDO due 03/01/95...... 5,000,000
-----------
TOTAL NEVADA................... 5,000,000
---------------------------------------------------------
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
PAR SECURITIES VALUE
---------- ------------------------------- ------------
<S> <C>
NEW JERSEY -- 3.73%
$ 4,000,000 New Jersey State TRANs, 5.00%
due 06/15/95................. $ 4,006,156
-----------
TOTAL NEW JERSEY............... 4,006,156
---------------------------------------------------------
NEW YORK -- 3.03%
3,250,000 Nassau County, BANs,
4.50% due 08/15/95........... 3,256,459
-----------
TOTAL NEW YORK................. 3,256,459
---------------------------------------------------------
PENNSYLVANIA -- 22.89%
55,000 Auth. for Improvements in
Municipalities, Allegheny
County, Hospital
Equip. Rev. Bonds,
4.00% VRDO due 03/01/95...... 55,000
2,000,000 Beaver County IDA, PCR
Rfdg. Bonds
(Duquesne Light),
4.05% VRDO due 03/01/95...... 2,000,000
2,100,000 Delaware County IDA, Solid
Waste Rev. Bonds
(Scott Paper),
4.10% VRDO due 03/01/95...... 2,100,000
1,800,000 Delaware County IDA, Solid
Waste Rev. Bonds
(Scott Paper),
4.05% VRDO due 03/01/95...... 1,800,000
2,000,000 Lackawanna County IDA, IDR
Bonds (National Book),
4.50% VRDO due 03/01/95...... 2,000,000
4,000,000 Montgomery County IDA, PCR
Rfdg. Bonds (PECO),
4.25% CP due 05/18/95........ 4,000,000
4,000,000 Pennsylvania State Tax
Anticipation Notes,
4.75% due 06/30/95........... 4,009,137
3,600,000 Pennsylvania Higher Education
Fac. Auth., Pooled Fin.
Rev. Bonds,
4.10% VRDO due 03/01/95...... 3,600,000
3,000,000 Philadelphia, TRANs,
4.75% due 06/15/95........... 3,007,565
2,000,000 Pennsylvania Higher Educational
University Funding Obligation
(Temple University),
4.50% due 05/24/95........... 2,003,102
-----------
TOTAL PENNSYLVANIA............. 24,574,804
---------------------------------------------------------
<CAPTION>
PAR SECURITIES VALUE
---------- ------------------------------- ------------
<S> <C>
SOUTH DAKOTA -- 4.01%
$ 4,300,000 Lawrence County, PCR Bonds
(Homestake Mining),
4.40% VRDO due 03/01/95...... $ 4,300,000
-----------
TOTAL SOUTH DAKOTA............. 4,300,000
---------------------------------------------------------
TEXAS -- 13.74%
2,200,000 Brazos River Auth. PCR
Rfdg. Bonds
(Monsanto),
4.05% VRDO due 03/01/95...... 2,200,000
2,450,000 Brazos River Harbor, Navigation
District, PCR Rfdg. Bonds
(Dow Chemical),
3.90% CP due 04/11/95........ 2,450,000
3,000,000 Brazos River Harbor, Navigation
District, Adj Tender PCR
Rfdg. Bonds
(Dow Chemical),
4.00% CP due 04/06/95........ 3,000,000
3,500,000 Harris County HFDC,
Rev. Bonds
(St. Lukes Episcopal
Hospital),
3.75% VRDO due 03/01/95...... 3,500,000
1,000,000 North Central HFDC, Hospital
Rev. Bonds
(Presbyterian Medical
Center),
3.80% VRDO due 03/01/95...... 1,000,000
1,100,000 North Central HFDC, Hospital
Rev. Bonds
(Presbyterian Medical
Center),
3.80% VRDO due 03/01/95...... 1,100,000
1,500,000 Port of Corpus Christi, Auth.
of Nueces County Marine Term
Rev. Bonds,
4.35% VRDO due 03/01/95...... 1,500,000
-----------
TOTAL TEXAS.................... 14,750,000
---------------------------------------------------------
VERMONT -- 1.17%
1,250,000 Vermont Education & Health
Building Fin. Agency, Adj.
Rate Rev. Bonds
(Middlebury College),
3.55% Put due 05/01/95....... 1,250,000
-----------
TOTAL VERMONT.................. 1,250,000
---------------------------------------------------------
</TABLE>
5
<PAGE> 7
Schedule of Investments (Cont.)
<TABLE>
<CAPTION>
PAR SECURITIES VALUE
---------- ------------------------------- ------------
<S> <C>
WASHINGTON -- 5.08%
$ 3,000,000 Port of Seattle, Industrial
Dev. Corp. Rev. Bonds,
(Sysco Food Service Project),
4.10% VRDO due 03/01/95...... $ 3,000,000
2,450,000 Washington HFC, MFMR
Rfdg. Bonds,
4.35% VRDO due 03/01/95...... 2,450,000
-----------
TOTAL WASHINGTON............... 5,450,000
---------------------------------------------------------
WEST VIRGINIA -- 3.26%
3,500,000 Pleasants County, PCR Bonds
(American Cyanamid),
4.20% VRDO due 03/01/95...... 3,500,000
-----------
TOTAL WEST VIRGINIA............ 3,500,000
---------------------------------------------------------
TOTAL MUNICIPAL SECURITIES..... 101,907,419
---------------------------------------------------------
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
-------------
<S> <C>
TOTAL INVESTMENTS -- 94.92% OF NET ASSETS
(cost $101,951,908).......................
$ 101,907,419
-------------
-------------
</TABLE>
------------------------
BAN = Bond Anticipation Notes
CP = Commercial Paper
HFA = Housing Finance Agency/Authority
HFC = Housing Finance Commission/Corporation
HFDC = Health Facility Development Corporation
IDA = Industrial Development Authority
IDR = Industrial Development Revenue
MFHR = Multi-Family Housing Revenue
MFMR = Multi-Family Mortgage Revenue
PCR = Pollution Control Revenue
TRAN = Tax and Revenue Anticipation Notes
VRDO = Variable Rate Demand Obligations -- The rate shown for
each of these obligations is the rate as of February 28,
1995 and the maturity shown is the date of the next
interest rate adjustment.
See accompanying notes.
6
<PAGE> 8
Statement of Assets and Liabilities
As of February 28, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at Market Value, (Cost $101,951,908)............... $101,907,419
Cash........................................................... 1,125,707
Interest Receivable............................................ 716,935
Receivable for Securities Sold................................. 4,000,000
------------
Total Assets................................................ 107,750,061
------------
LIABILITIES:
Accrued Expenses............................................... 72,594
Distributions Payable.......................................... 320,065
------------
Total Liabilities........................................... 392,659
------------
NET ASSET........................................................ $107,357,402
------------
NET ASSET VALUE & REDEMPTION PRICE PER SHARE..................... $1.00
------
------
</TABLE>
See accompanying notes.
7
<PAGE> 9
Statement of Operations
For the Year Ended February 28, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest....................................................... $3,982,401
----------
EXPENSES:
Investment Advisory Fees....................................... 316,517
Less Investment Advisory Fees Waived by Management............. (253,279)
Administrative Fees............................................ 126,473
Custodian and Transfer Agent Fees.............................. 76,235
Insurance...................................................... 9,980
Professional Fees.............................................. 36,175
Registration and Filing Fees................................... 11,920
Taxes -- other than Income..................................... 20,054
Miscellaneous.................................................. 26,280
----------
Total Expenses.............................................. 370,355
----------
NET INVESTMENT INCOME............................................ 3,612,046
Net Realized Gain (Loss) on Securities Sold.................... (32,421)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $3,579,625
----------
----------
</TABLE>
See accompanying notes.
8
<PAGE> 10
Statements of Changes in Net Assets
For the Years Ended February 28, 1994 and February 28, 1995
<TABLE>
<CAPTION>
3/01/94 3/01/93
TO 2/28/95 TO 2/28/94
------------ ------------
<S> <C> <C>
OPERATIONS:
Net Investment Income........................... $ 3,612,046 $ 3,972,140
Net Realized Gain (Loss) Securities Sold........ (32,421) 2,860
------------ ------------
Net Increase in Net Assets
Resulting from Operations.................... 3,579,625 3,975,000
------------ ------------
DIVIDENDS DISTRIBUTED FROM:
Net Investment Income........................... (3,612,046) (3,972,140)
Net Realized Gain............................... -- --
------------ ------------
Total Dividends Distributed..................... (3,612,046) (3,972,140)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold....................... 292,394,559 326,481,601
Net Asset Value of Shares Issued
upon Reinvestment of Dividends............... 7,912 47,121
Cost of Shares Repurchased...................... (337,285,543) (376,503,490)
------------ ------------
Net Decrease in Net Assets
Derived from Capital Share Transactions...... (44,883,072) (49,974,768)
------------ ------------
NET DECREASE IN NET ASSETS................... (44,915,493) (49,971,908)
NET ASSETS:
Beginning of Period............................. 152,272,895 202,244,803
------------ ------------
End of Period................................... $107,357,402 $152,272,895
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
9
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
February 28, 1995
NOTE 1 -- ORGANIZATION
Navigator Tax-Free Money Market Fund (the "Fund") is a portfolio
offered by Navigator Tax-Free Money Market Fund, Inc. (the "Company"),
a no-load, diversified, open-end investment company registered under
the Investment Company Act of 1940, as amended.
Shares of the Fund are sold by Fairfield Group, Inc. ("Fairfield"), the
Manager, only to banks and other institutional investors for the
investment of their own funds, or funds for which they act in a
fiduciary, agency, or custodial capacity.
As Manager of the Company, Fairfield serves as the Fund's Investment
Adviser, Administrator, and Distributor. Fairfield became a
wholly-owned subsidiary of Legg Mason, Inc. on April 20, 1993.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
Interest income and expenses are recorded on an accrual basis. Interest
income includes the pro rata amortization of premiums and discounts.
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). On February 28, 1995, the Fund had a
receivable for investment securities sold totalling $4,000,000.
Investment securities are valued at amortized cost, which approximates
market value. Realized gains and losses are determined by using the
specific identification method. The net realized capital loss of
$32,421 for the year ended February 28, 1995 resulted from sales of
securities with proceeds and costs of $396,020,466 and $396,052,887,
respectively.
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, 1995.
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, 1995 amounted to $320,065.
No provision for federal income taxes is made since it is the intention
of the Fund to qualify as a regulated investment company under the
provisions of the Internal Revenue Code and to make requisite
distributions to shareholders which will relieve it from Federal income
and excise taxes.
For federal income tax purposes, net realized capital losses generated
in the Fund may be carried forward and applied against future capital
gains.
NOTE 3 -- INVESTMENT ADVISORY AND ADMINISTRATIVE FEES
As Manager, Fairfield provides investment advisory and administrative
services to the Fund pursuant to a Management Agreement dated April 17,
1993. Under the terms of such Agreement, 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 fee is computed daily and paid monthly.
The Manager is also entitled to receive an administrative fee at the
annual rate of .10% on the Fund's average net assets. Such fee is
computed daily and paid monthly.
During the year ended February 28, 1995, the management fees
(investment advisory and administrative) earned by Fairfield totalled
$442,990. Of the investment advisory fees earned, $253,279 was
voluntarily waived by the Manager in order to assist the Fund in
maintaining a competitive expense ratio. At February 28, 1995,
Fairfield was owed $4,373 (after partial fee waiver) for investment
advisory services and $8,746 in administrative fees.
10
<PAGE> 12
NOTE 4 -- CUSTODIAN AND TRANSFER AGENT FEES
Custodial services are provided to the Fund by CoreStates Bank, N.A.
Fund/Plan 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 Company's exclusive Distributor; however,
it receives no fees for providing distribution services.
Certain officers and directors of the Company are also officers and
directors of Fairfield. Such officers and directors are paid no fees by
the Fund for serving as officers and directors.
The Fund has paid legal fees to a law firm with which the Secretary of
the Company is associated.
NOTE 6 -- CAPITAL SHARES
At February 28, 1995, there were 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>
3/01/94 3/01/93
TO 2/28/95 TO 2/28/94
------------ ------------
<S> <C> <C>
Shares sold......................................... 292,394,559 326,481,601
Shares issued upon reinvestment of dividends........ 7,912 47,121
Shares repurchased.................................. (337,285,543) (376,503,490)
------------ ------------
Net decrease........................................ (44,883,072) (49,974,768)
Outstanding at beginning of period.................. 152,270,056 202,244,824
------------ ------------
Outstanding at end of period........................ 107,386,984 152,270,056
------------ ------------
------------ ------------
</TABLE>
NOTE 7 -- INVESTMENT COMPOSITION
The Fund invests in securities which may include revenue, general, and
escrowed obligations. At February 28, 1995, the revenue sources by
purpose were as follows:
<TABLE>
<CAPTION>
% OF PORTFOLIO
INVESTMENTS
--------------
<S> <C>
Revenue Bonds:
Industrial Development........................................... 24%
Pollution Control................................................ 25
Housing Facilities............................................... 12
Educational Facilities........................................... 10
Health Care Facilities........................................... 5
Chemicals........................................................ 4
Other Revenue.................................................... 4
Local Government................................................. 3
General Obligations................................................ 12
Moral Obligations.................................................. 1
-----------
100%
-----------
-----------
</TABLE>
In addition, certain investments (3.2%) are covered by insurance issued
by several private insurers who guarantee the payment of interest and
principal at final maturity in the event of default. Such insurance,
however, does not guarantee the market value of the securities or the
value of the Fund's shares. None of these insurers individually insure
more than 3.2% of the insured investments in the portfolio.
11
<PAGE> 13
NOTE 8 -- FINANCIAL HIGHLIGHTS
Financial highlights for a share of the Fund outstanding
throughout the periods indicated were as follows:
<TABLE>
<CAPTION>
3/01/94 3/01/93 3/01/92 3/01/91 3/01/90 3/01/89
TO TO TO TO TO TO
2/28/95 2/28/94 2/28/93 2/29/92 2/28/91 2/28/90
------- ------- ------- ------- ------- -------
<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.......... .0286 .0227 .0273 .0407 .0558 .0613
Net Gain/Loss on Securities
(both realized
and unrealized).............. (.0003) -- -- .0001 -- --
------ ------ ------ ------ ------ ------
Total Income
from Investment
Operations................ .0283 .0227 .0273 .0408 .0558 .0613
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from
Net Investment Income........ (.0286) (.0227) (.0273) (.0407) (.0558) (.0613)
------ ------ ------ ------ ------ ------
Total Distributions........ (.0286) (.0227) (.0273) (.0407) (.0558) (.0613)
------ ------ ------ ------ ------ ------
Net Asset Value,
end of period.................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Total Return...................... 2.94% 2.29% 2.76% 4.15% 5.73% 6.31%
Net Assets,
end of period (000).............. $107,357 $152,273 $202,245 $227,249 $255,298 $300,001
Ratios and Supplemental Data:
Ratio of Expenses
to Average Net Assets.......... .29% .28% .23% .23% .22% .20%
Ratio of Expenses
to Average Net Assets,
excluding Fee Waivers.......... .49% .48% .43% .45% .44% .43%
Ratio of Net Investment Income
to Average Net Assets.......... 2.86% 2.27% 2.73% 4.07% 5.58% 6.13%
Ratio of Net Investment Income
to Average Net Assets,
excluding Fee Waivers.......... 2.66% 2.07% 2.53% 3.85% 5.36% 5.90%
------------------------------
*Commencement of Operations
(A)Annualized
<CAPTION>
3/01/88 3/01/87 3/27/86*
TO TO TO
2/28/89 2/29/88 2/28/87
------- ------- -------
<S> <C> <C> <C>
Net Asset Value,
beginning of period.............. $1.00 $1.00 $1.00
------ ------ ------
Income from
Investment Operations:
Net Investment Income.......... .0532 .0458 .0418
Net Gain/Loss on Securities
(both realized
and unrealized).............. -- -- --
------ ------ ------
Total Income
from Investment
Operations................ .0532 .0458 .0418
------ ------ ------
Less Distributions:
Dividends from
Net Investment Income........ (.0532) (.0458) (.0418)
------ ------ ------
Total Distributions........ (.0532) (.0458) (.0418)
------ ------ ------
Net Asset Value,
end of period.................... $1.00 $1.00 $1.00
------ ------ ------
------ ------ ------
Total Return...................... 5.45% 4.68% 4.71%(A)
Net Assets,
end of period (000).............. $200,396 $194,508 $143,806
Ratios and Supplemental Data:
Ratio of Expenses
to Average Net Assets.......... .18% .15% .10%(A)
Ratio of Expenses
to Average Net Assets,
excluding Fee Waivers.......... .45% .45% .58%(A)
Ratio of Net Investment Income
to Average Net Assets.......... 5.32% 4.58% 4.50%(A)
Ratio of Net Investment Income
to Average Net Assets,
excluding Fee Waivers.......... 5.05% 4.28% 4.02%(A)
------------------------------
*Commencement of Operations
(A)Annualized
</TABLE>
12
<PAGE> 14
Report of Independent Auditors
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
NAVIGATOR TAX-FREE MONEY MARKET FUND
We have audited the accompanying schedule of investments and statement
of assets and liabilities of the Navigator Tax-Free Money Market Fund
(the "Fund") as of February 28, 1995, and the related statement 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 eight years in the period then
ended and for the period March 27, 1986 (commencement of operations) to
February 28, 1987. These financial statements and financial highlights
are the responsibility of the Fund's 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. Our procedures included
confirmation of investments owned as of February 28, 1995, 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 the Navigator Tax-Free Money Market Fund at
February 28, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the eight
years in the period then ended and for the period March 27, 1986
(commencement of operations) to February 28, 1987, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
April 12, 1995
13
<PAGE> 15
INVESTMENT ADVISER,
ADMINISTRATOR,
AND DISTRIBUTOR
Fairfield Group, Inc.
Horsham, PA 19044
LEGAL COUNSEL
Morgan, Lewis & Bockius
Philadelphia, PA 19103
AUDITORS
Ernst & Young LLP
Philadelphia, PA 19103
DIRECTORS
Philip D. Croll
Jan J. Wieckowski
[NAVIGATOR TAX-FREE MONEY MARKET FUND LOGO]
200 Gibraltar Road
Horsham, PA 19044
1-800-441-3885
