<PAGE> 1
---------------------------------------------------------------------------
ANNUAL REPORT TO SHAREHOLDERS FEBRUARY 28, 1997
---------------------------------------------------------------------------
NAVIGATOR LOGO NAVIGATOR LOGO
A member of the NAVIGATOR GROUP A member of the NAVIGATOR GROUP
of FUNDS of FUNDS
---------------------------------------------------------------------------
<PAGE> 2
CHAIRMAN'S LETTER April 11, 1997
- We welcome this opportunity to be able to give you a summary update of
many of the events -- and trends -- that have affected the economy and
the Navigator Money Market Funds over the last year.
As the Funds' fiscal year began, the economy was exhibiting signs of
strength as non-farm payrolls were growing at a robust pace, business
inventories were strengthening, although not too briskly, inflation was
running below 3.0%, and consumer confidence was on the rise. This
environment offered market investors an opportunity to surpass the
previous years' outstanding returns. As the economy continued to expand,
a concern arose that inflationary expectations would increase, causing
the Federal Reserve to change course and to start tightening monetary
policy. During this time, the spot value of gold rose in excess of $400
an ounce, supporting these inflationary concerns.
Throughout the year, the Federal Open Market Committee, chaired by Mr.
Greenspan, maneuvered monetary policy over a tight course that appears
to have fostered a growing economy with few signs of inflation. As Wall
Street economists speculated that this manner of growth would generate
inflationary pressure, they were left guessing by the Fed's Chairman.
New home sales, viewed by many as a key barometer to the consumption
market, peaked late in the summer along with interest rates. Consumer
confidence remained strong during this period, as did personal income.
The Federal Reserve began to see signs of building wage pressures as
average hourly earnings ended the year on a high note. Not even Mr.
Greenspan's "irrational exuberance" comments in December were able to
slow a rocketing stock and recovering bond market. The economy posted
quarterly Gross Domestic Product figures ranging from 2.0% to 4.7% for
the year, producing an average of 3.2%.
Fourth Quarter 1996 saw a stronger economic picture from a number of
leading indicators -- both industrial production and consumer spending
increased. As a result, we believe that the Fed is likely to increase
short-term interest rates again by mid-year. Therefore, our Funds will
continue to be managed with short maturity cycles, laddered to prepare
for the probability 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 to stretch for a few more basis
points of yield. I can assure you that is not the practice with the
Navigator Money Market or Navigator Tax-Free Money Market Funds. Quality
is something we have always taken very seriously.
As you know, Fairfield was built on a quality tradition, and that
philosophy remains unchanged. We will continue the commitment to our
shareholders of providing very high quality portfolios that deliver
industry-competitive yields.
Thank you once again for your continued confidence in the Navigator
Money Market and Navigator Tax-Free Money Market Funds. Our commitment
of providing a competitive product with a minimal degree of risk remains
unchanged.
Sincerely,
/s/ Robert J. Walker, Jr.
Robert J. Walker, Jr.
Chairman
1
<PAGE> 3
INVESTMENT REPORT
Navigator Money Market Fund
Market and Fund Specifics
- Throughout the fiscal year, the Navigator Money Market Fund maintained
a shorter weighted average maturity compared to many of its peers. The
Fund's Advisor chose an investment strategy that focused on providing a
highly liquid portfolio to accommodate the daily cash flow needs of our
shareholders. The composition of the portfolio changed little during the
year. The Fund concentrated on investments in high quality commercial
paper on the shorter end of the yield curve while continuing to
diversify by taking advantage of opportunities that occasionally
presented themselves in the U.S. Government and Agency markets. With the
Federal Reserve currently biased toward raising interest rates, this
investment strategy has also positioned the Fund to quickly benefit from
any increase in interest rates. The Navigator Money Market Fund
continued to provide a highly competitive yield even when compared to
funds with less conservative investment philosophies.
Events of Importance
- The recent default by Mercury Finance on its commercial paper brought
to the surface risky investments by some money market funds. The Advisor
takes pride in the creditworthiness of the assets held by the Funds. All
commercial paper purchased by the Navigator Money Market Fund is rated
"A-1+ or A-1" by Standard & Poor's and "P-1" by Moody's, the highest
commercial paper quality ratings of both rating agencies. The Fund does
not, and will not, stretch to a third or fourth rating agency to obtain
a favorable rating to qualify an investment as "First Tier". The Fund's
objective remains to provide a high-quality investment portfolio.
2
<PAGE> 4
PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
Average Average
Monthly Compound Maturity
Month Yield Yield* (Month-end)
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------
1996 March 5.11% 5.23% 33 days
April 5.20 5.33 40
May 5.19 5.32 44
June 5.23 5.35 55
July 5.26 5.39 47
August 5.24 5.37 39
September 5.24 5.36 22
October 5.26 5.39 31
November 5.30 5.43 33
December 5.30 5.43 20
1997 January 5.30 5.43 25
February 5.25 5.38 30
--------------------- ------- ------- --------
Average Annualized
Yields and Maturity 5.24% 5.37% 35 days
======= ======= ========
</TABLE>
*Compound yields assume reinvestment of dividends.
MATURITY DIVERSIFICATION SCHEDULE
AS OF FEBRUARY 28, 1997
<TABLE>
<CAPTION>
Amount
(Amortized Cost) % of Portfolio % Cumulative
<S> <C> <C> <C>
-------------------------------------------------------------------
One Day $ 33,146,000 18.3% 18.3%
2-7 days 4,997,791 2.8 21.1
8-30 days 50,863,435 28.1 49.2
31-60 days 50,841,905 28.1 77.3
61-90 days 29,091,424 16.1 93.4
Over 90 days 11,971,921 6.6 100.0
--------------- ------------
Total $ 180,912,476 100.0%
=============== ============
</TABLE>
3
<PAGE> 5
INVESTMENT REPORT
Navigator Tax-Free Money Market Fund
Market and Fund Specifics
- The targeted federal funds rate remained unchanged throughout the
Fund's entire fiscal year, leaving the tax-exempt markets at the whim of
the usual technical pressures. Assets, which had been declining during
the first half of the year, stabilized during the second half.
Initially, this led to some volatility in the Fund's weighted average
maturity, ranging from a low of 23 days late last spring to a high of 67
days during the middle of last summer. For the most part, 30-50 days was
the norm. Tax-exempt rates rose early in the spring as the markets
anticipated that the next move by the Federal Reserve would be to
tighten interest rates. The summer months found falling yields as the
economy strengthened, bolstering revenues for municipalities and
reducing their interim borrowing needs. Supply returned to the market in
the latter half of the summer, pushing tax-exempt yields higher, and
this trend continued through the fall. The tax-exempt markets
experienced some gyrations during the winter months. The pressures that
usually appear at the end of December and into January were not as
pronounced as in past years. This resulted in rates bottoming much
sooner than expected, and at a higher level. Uncertainty over the timing
of an increase in taxable rates coupled with light new issue supply
weighed on the markets as February progressed, resulting in lower rates
and in market participants unwilling to extend.
As we look ahead, the Fed's recent tightening in the taxable markets has
had only a minimal impact on tax-exempt rates. Market participants are
focusing on the upcoming April tax date, and on the timing for the next
move to higher rates. With this scenario, the Fund's bias for its
weighted average maturity will be to the shorter-end of what was
experienced during the last year.
Events of Importance
- The Securities and Exchange Commission continues on its quest to amend
rule 2a-7, the rule that governs money fund investment parameters. Over
the coming months, the industry will be forced to slightly alter the way
business is done, through the implementation of the New 2a-7 Amendments.
Since these changes had been anticipated for some time, the industry has
had adequate time to review them thoroughly. We continue to maintain
that the industry will benefit from these changes, and that, for
organizations such as ours, these changes are merely a formality.
4
<PAGE> 6
PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
Average Average
Monthly Compound Maturity
Month Yield Yield* (Month-end)
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
1996 March 3.03% 3.07% 64 days
April 3.15 3.19 28
May 3.24 3.29 32
June 3.02 3.06 31
July 2.87 2.91 57
August 3.10 3.15 52
September 3.21 3.26 41
October 3.18 3.23 43
November 3.21 3.26 38
December 3.23 3.28 41
1997 January 3.11 3.16 39
February 3.13 3.18 34
--------------------- ------ ------ --------
Average Annualized
Yields and Maturity 3.12% 3.17% 42 days
====== ====== ========
</TABLE>
*Compound yields assume reinvestment of dividends.
PORTFOLIO COMPOSITION
AS OF FEBRUARY 28, 1997
<TABLE>
<CAPTION>
Amount
(Face Value) % of Portfolio
<S> <C> <C>
-----------------------------------------------------------------------
Floating Rate Securities:
Daily Liquidity $ 6,800,000 12.7%
7-Day Liquidity 19,775,000 36.9
Notes and Bonds 8,016,173 15.0
Tax-Exempt Commercial Paper 19,000,000 35.4
----------- ------------
$53,591,173 100.0%
=========== ============
</TABLE>
PORTFOLIO QUALITY
AS OF FEBRUARY 28, 1997
<TABLE>
<CAPTION>
Moody's Ratings % of Portfolio
<S> <C> <C>
--------------------------------------------------------------------------------------------
"MIG-1/VMIG-1" Highest Quality Short-term Instruments 53.6%
"Prime-1" Highest Quality
Tax-Exempt Commercial Paper 46.4
------------
100.0%
============
</TABLE>
5
<PAGE> 7
FINANCIAL STATEMENTS
Statement of Net Assets
Navigator Money Market Fund
February 28, 1997
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER --
76.44%
AUTOMOBILE
MANUFACTURER -- 3.87%
$5,000,000 Ford Motor Credit Corp................................ 03/31/97 5.24% $ 4,978,167
2,000,000 Ford Motor Credit Corp................................ 04/07/97 5.27% 1,989,167
-------------
TOTAL AUTOMOBILE MANUFACTURER................................................ 6,967,334
- -----------------------------------------------------------------------------------------------------------------------------------
CHEMICALS -- 4.97%
5,000,000 Dupont (E.I. de Nemours) & Co.......................... 03/24/97 5.27% 4,983,165
4,000,000 Dupont (E.I. de Nemours) & Co.......................... 04/09/97 5.26% 3,977,207
-------------
TOTAL CHEMICALS............................................................... 8,960,372
- ------------------------------------------------------------------------------------------------------------------------------------
CONGLOMERATE -- 4.40%
3,000,000 General Electric Capital............................... 03/31/97 5.27% 2,986,825
5,000,000 General Electric Capital............................... 05/07/97 5.31% 4,950,588
-------------
TOTAL CONGLOMERATE............................................................ 7,937,413
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER ELECTRONICS --
4.96%
5,000,000 Motorola Inc. ......................................... 05/14/97 5.24% 4,946,144
4,000,000 Sharp Electronics...................................... 03/21/97 5.35% 3,988,111
-------------
TOTAL CONSUMER ELECTRONICS.................................................... 8,934,255
- -----------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT --
1.66%
3,000,000 Walt Disney Company.................................... 04/09/97 5.26% 2,982,905
-------------
TOTAL ENTERTAINMENT............................................................ 2,982,905
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCE -- 2.75%
5,000,000 American Express Credit Corp.......................... 04/23/97 5.25% 4,961,354
-------------
TOTAL FINANCE..................................................................................... 4,961,354
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCE, CORPORATE
RECEIVABLES -- 10.08%
3,000,000 Asset Securitization Cooperative...................... 05/07/97 5.33% 2,970,241
3,000,000 Asset Securitization Cooperative...................... 05/16/97 5.30% 2,966,433
2,000,000 Asset Securitization Cooperative...................... 06/04/97 5.32% 1,971,922
6,000,000 Corporate Asset Funding............................... 03/17/97 5.27% 5,985,947
4,300,000 Preferred Receivables Funding Corp.................... 04/01/97 5.28% 4,280,449
-------------
TOTAL FINANCE, CORPORATE RECEIVABLES.......................................... 18,174,992
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCE, EQUIPMENT
LEASES -- 4.98%
4,000,000 International Lease Finance........................... 03/12/97 5.30% 3,993,522
3,000,000 International Lease Finance........................... 03/14/97 5.30% 2,994,258
2,000,000 International Lease Finance........................... 04/18/97 5.32% 1,985,813
-------------
TOTAL FINANCE, EQUIPMENT LEASES............................................... 8,973,593
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES,
DIVERSIFIED -- 8.28%
3,000,000 Associates Corp. of North America..................... 03/26/97 5.30% 2,988,958
5,000,000 Associates Corp. of North America..................... 03/31/97 5.30% 4,977,917
4,000,000 John Deere Capital Corp........ ...................... 03/26/97 5.33% 3,985,194
3,000,000 John Deere Capital Corp. ............................. 05/15/97 5.24% 2,967,250
-------------
TOTAL FINANCIAL SERVICES, DIVERSIFIED......................................... 14,919,319
- -----------------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS --
4.71%
5,000,000 Weyerhaeuser Company.................................. 03/04/97 5.30% 4,997,792
3,500,000 Weyerhaeuser Mortgage Company......................... 03/19/97 5.30% 3,490,725
-------------
TOTAL FOREST PRODUCTS......................................................... 8,488,517
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INSURANCE, FULL-LINE --
4.97%
$ 5,000,000 Prudential Funding............................. 03/26/97 5.23% $ 4,981,840
4,000,000 Prudential Funding............................. 04/15/97 5.29% 3,973,550
------------
TOTAL INSURANCE, FULL-LINE.............................................. 8,955,390
- -----------------------------------------------------------------------------------------------------------------------------------
MEDIA -- PUBLISHING --
5.37%
4,000,000 McGraw-Hill.................................... 03/25/97 5.26% 3,985,973
2,830,000 McGraw-Hill.................................... 03/31/97 5.26% 2,817,595
2,900,000 McGraw-Hill.................................... 04/30/97 5.25% 2,874,625
------------
TOTAL MEDIA -- PUBLISHING............................................... 9,678,193
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT --
4.98%
7,500,000 Xerox Credit Corp. ............................ 03/11/97 5.29% 7,488,979
1,500,000 Xerox Credit Corp. ............................ 05/12/97 5.28% 1,484,160
------------
TOTAL OFFICE EQUIPMENT.................................................. 8,973,139
- -----------------------------------------------------------------------------------------------------------------------------------
SECURITIES DEALERS --
10.46%
2,000,000 Bear Stearns Companies......................... 03/12/97 5.30% 1,996,761
2,000,000 Bear Stearns Companies......................... 05/21/97 5.30% 1,976,150
4,000,000 Goldman Sachs Group L.P. ...................... 04/09/97 5.33% 3,976,903
4,000,000 Goldman Sachs Group L.P. ...................... 05/15/97 5.30% 3,955,833
2,000,000 Merrill Lynch & Co., Inc. ..................... 04/15/97 5.35% 1,986,625
5,000,000 Morgan Stanley Group........................... 04/14/97 5.33% 4,967,428
------------
TOTAL SECURITIES DEALERS................................................ 18,859,700
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER.................................................. 137,766,476
- -----------------------------------------------------------------------------------------------------------------------------------
MEDIUM TERM NOTES,
FLOATING RATE -- 5.55%
5,000,000 Bear Stearns Companies, Inc. .................. 03/03/97* 5.48% 5,000,000
5,000,000 Merrill Lynch & Co.,Inc. ...................... 03/03/97* 5.45% 5,000,000
------------
TOTAL MEDIUM TERM NOTES, FLOATING RATE.................................. 10,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS --
18.39%
11,000 First Boston
(collateralized by U.S. Treasury Bond, par
value $9,000, 9.000%, due 11/15/18; market
value $11,240)............................... 03/03/97* 5.00% 11,000
145,000 Goldman Sachs
(collateralized by U.S. Treasury Bond, par
value $130,000, 8.125%, due 8/15/19; market
value $148,196).............................. 03/03/97* 5.12% 145,000
10,000 Merrill Lynch
(collateralized by U.S. Treasury Bond, par
value $8,000, 10.375%, due 11/15/09; market
value $10,316)............................... 03/03/97* 5.05% 10,000
</TABLE>
7
<PAGE> 9
Statement of Net Assets (Cont.)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
--------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 32,980,000 Paine Webber
(collateralized by U.S. Government Agency
Mortgage-backed Securities, ranging in par
value from $2,400-$16,305,000, 4.14%-9.50%,
due 6/01/97-3/01/27; total market value
$33,860,381)................................. 03/03/97* 5.41% $ 32,980,000
------------
TOTAL REPURCHASE AGREEMENTS............................................. 33,146,000
========================================================================================================
TOTAL VALUE OF SECURITIES OWNED -- 100.38%
(which approximates cost for Federal income tax purposes)............... $180,912,476
EXCESS OF TOTAL LIABILITIES OVER OTHER ASSETS -- (0.38%)................ (694,052)
------------
NET ASSETS APPLICABLE TO 180,221,065 SHARES OUTSTANDING;
EQUIVALENT TO $1.00 PER SHARE -- 100.00%.............................. $180,218,424
============
</TABLE>
-------------------------------------
* = The interest rate shown for each
of these obligations is the rate
as of February 28, 1997 and the
maturity shown is the date of the
next interest rate adjustment.
See accompanying notes.
8
<PAGE> 10
FINANCIAL STATEMENTS
Statement of Net Assets
Navigator Tax-Free Money Market Fund
February 28, 1997
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS --
99.13%
ALASKA -- 3.70%
$ 2,000,000 Valdez Marine Terminal Rev Bonds
(ARCO Transportation) Ser A CP.............. 05/15/97 3.45% $ 2,000,000
-------------
TOTAL ALASKA.......................................................... 2,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
COLORADO -- 5.56%
3,000,000 Colorado St General Fund Rev TRAN Ser A....... 06/27/97 4.50% 3,007,011
-------------
TOTAL COLORADO........................................................ 3,007,011
- -----------------------------------------------------------------------------------------------------------------------------------
LOUISIANA -- 1.85%
1,000,000 Parish of St. Charles PCR Bonds
(Shell Oil Co) Ser B VRDO................... 03/03/97 3.40% 1,000,000
-------------
TOTAL LOUISIANA....................................................... 1,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS -- 9.25%
3,000,000 Boston Wtr & Swr Commission Rev
Bonds Senior Series A VRDO.................. 03/06/97 3.10% 3,000,000
2,000,000 Massachusetts Health & Ed. Fac. Auth. Rev.
Bonds (Harvard University) Series L CP...... 05/13/97 3.50% 2,000,000
-------------
TOTAL MASSACHUSETTS................................................... 5,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
MINNESOTA -- 1.85%
1,000,000 Regents of the University of Minnesota
Certificates Ser B CP....................... 03/10/97 3.40% 1,000,000
-------------
TOTAL MINNESOTA....................................................... 1,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
MISSOURI -- 4.44%
2,400,000 Missouri St Hlth & Ed Facs Auth Hlth Facs
Rev Bonds (SSM Hlth) Ser C CP............... 03/18/97 3.35% 2,400,000
-------------
TOTAL MISSOURI........................................................ 2,400,000
- -----------------------------------------------------------------------------------------------------------------------------------
MONTANA -- 1.66%
900,000 Forsyth, Rosebud Cnty PCR Bonds
(Portland General Electric) Ser A VRDO...... 03/05/97 3.30% 900,000
-------------
TOTAL MONTANA......................................................... 900,000
- -----------------------------------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE -- 4.99%
2,700,000 New Hampshire St Hsg Fin Auth MFHR
Bonds (Eqr Bd Partnership) VRDO............. 03/05/97 3.35% 2,700,000
-------------
TOTAL NEW HAMPSHIRE................................................... 2,700,000
- -----------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA -- 23.14%
1,800,000 Delaware Cnty IDA Solid Waste Rev.
Bonds (Kimberly-Clark) Series D VRDO........ 03/05/97 3.30% 1,800,000
1,500,000 Geisinger Auth Hlth System Rev Bonds
(Geisinger) Ser B VRDO...................... 03/03/97 3.45% 1,500,000
1,700,000 Lackawanna Cnty IDA IDR Bonds
(National Book Company Inc.) VRDO........... 03/05/97 4.13% 1,700,000
2,500,000 Montgomery Cnty IDA PCR Rfdg Bonds
(PECO) Series A CP.......................... 04/10/97 3.40% 2,500,000
3,000,000 Philadelphia TRAN Ser A....................... 06/30/97 4.50% 3,005,254
2,000,000 Temple University of the Commonwealth
System of Hgr Ed -- Univ Fndg Oblig......... 05/20/97 4.63% 2,003,908
-------------
TOTAL PENNSYLVANIA.................................................... 12,509,162
- -----------------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA -- 3.70%
2,000,000 South Carolina Pub Svc Auth Rev Bonds
Tax Exempt CP............................... 03/13/97 3.25% 2,000,000
-------------
TOTAL SOUTH CAROLINA.................................................. 2,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 11
Statement of Net Assets (Cont.)
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT SECURITY DATE RATE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <S> <C> <C> <C>
TENNESSEE -- 1.85%
$ 1,000,000 Memphis GO Bonds Series A VRDO................. 03/05/97 3.30% $ 1,000,000
-------------
TOTAL TENNESSEE........................................................ 1,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
TEXAS -- 23.87%
2,100,000 Board of Regents, Texas A & M Univ Permanent
Univ Fund Sub Lien Notes Ser B CP............ 04/09/97 3.30% 2,100,000
2,300,000 Harris Cnty HFDC Hosp Rev Bonds
(St Lukes Epis Hosp) Ser B VRDO.............. 03/03/97 3.45% 2,300,000
2,000,000 Harris Cnty HFDC Hosp Rev Bonds
(Methodist Hosp) VRDO........................ 03/03/97 3.45% 2,000,000
2,000,000 Harris Cnty HFDC Rev Bonds
(Sisters of Charity) CP...................... 03/06/97 3.50% 2,000,000
2,000,000 Houston GO Series B CP......................... 05/08/97 3.50% 2,000,000
1,500,000 Port of Corpus Christi Auth. of Nueces Cnty
Marine Term Rev Bonds (Rey Met) VRDO......... 03/05/97 3.25% 1,500,000
1,000,000 Texas Muni Pwr Agy BAN CP...................... 05/14/97 3.40% 1,000,000
-------------
TOTAL TEXAS............................................................ 12,900,000
- -----------------------------------------------------------------------------------------------------------------------------------
WASHINGTON -- 8.65%
2,175,000 Washington HFC MFMR Rfdg. Bonds
Series B VRDO................................ 03/05/97 3.45% 2,175,000
2,500,000 Washington State GO Series 1996B VRDO.......... 03/05/97 3.25% 2,500,000
-------------
TOTAL WASHINGTON....................................................... 4,675,000
- -----------------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA --
4.62%
2,500,000 Pleasants Cnty Poll Ctl Rev Bonds
(American Cyanamid) VRDO..................... 03/05/97 3.45% 2,500,000
-------------
TOTAL WEST VIRGINIA.................................................... 2,500,000
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS.................................................. 53,591,173
===================================================================================================================================
TOTAL VALUE OF SECURITIES OWNED -- 99.13%
(which approximates cost for Federal income tax purposes).............. $ 53,591,173
EXCESS OF OTHER ASSETS OVER TOTAL LIABILITIES -- .87%.................. 470,302
-------------
NET ASSETS APPLICABLE TO 54,103,233 SHARES OUTSTANDING;
EQUIVALENT TO $1.00 PER SHARE -- 100.00%............................. $ 54,061,475
=============
</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
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
Obligation -- The rate shown for
each of these obligations is the
rate as of February 28, 1997 and
the maturity shown is the date of
the next interest rate adjustment.
See accompanying notes.
10
<PAGE> 12
Statements of Operations
Navigator Funds
For the Fiscal Year Ended February 28, 1997
<TABLE>
<CAPTION>
MONEY TAX-FREE
MARKET MONEY
FUND MARKET
---------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Interest Income............................................. $9,488,602 $2,393,792
---------- ----------
EXPENSES:
Investment Advisory Fees.................................... 351,362 173,384
Administrative Fees......................................... 175,681 69,354
Less Investment Advisory & Administration Fees
Waived by Management..................................... (423,822) (170,659)
Custodian and Transfer Agent Fees........................... 103,034 83,657
Professional Fees........................................... 23,971 27,104
Taxes -- Other than Income.................................. 16,780 15,500
Registration and Filing Fees................................ 10,125 8,030
Insurance................................................... 7,480 5,831
Miscellaneous............................................... 27,649 19,622
---------- ----------
Total Expenses........................................... 292,260 231,823
---------- ----------
NET INVESTMENT INCOME......................................... 9,196,342 2,161,969
Net Realized Loss on Securities Sold........................ (412) (14,528)
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $9,195,930 $2,147,441
========== ==========
</TABLE>
See accompanying notes.
11
<PAGE> 13
Statements of Changes in Net Assets
Navigator Money Market Fund
For the Fiscal Year Ended February 28, 1997
and the Nine-Month Period Ended February 29, 1996
<TABLE>
<CAPTION>
3/01/96 6/01/95
TO 2/28/97 TO 2/29/96
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net Investment Income................................ $ 9,196,342 $ 8,004,650
Net Realized Loss on Securities Sold................. (412) --
------------- -------------
Net Increase in Net Assets Resulting from
Operations........................................ 9,195,930 8,004,650
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net Investment Income................................ (9,196,342) (8,004,650)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold............................ 707,669,816 539,968,847
Shares Issued to Shareholders
Upon Reinvestment of Dividends.................... 542,212 151,635
Cost of Shares Repurchased........................... (695,725,517) (610,497,023)
------------- -------------
Net Increase (Decrease) in Net Assets Derived from
Capital Share Transactions........................ 12,486,511 (70,376,541)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS............. 12,486,099 (70,376,541)
NET ASSETS:
Beginning of Period.................................. 167,732,325 238,108,866
------------- -------------
End of Period........................................ $ 180,218,424 $ 167,732,325
============= =============
</TABLE>
See accompanying notes.
12
<PAGE> 14
Statements of Changes in Net Assets
Navigator Tax-Free Money Market Fund
For the Fiscal Years ended February 28, 1997
and February 29, 1996
<TABLE>
<CAPTION>
3/01/96 3/01/95
TO 2/28/97 TO 2/29/96
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net Investment Income................................ $ 2,161,969 $ 3,553,900
Net Realized (Loss) Gain on Securities Sold.......... (14,528) 2,352
------------- -------------
Net Increase in Net Assets
Resulting from Operations......................... 2,147,441 3,556,252
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net Investment Income................................ (2,161,969) (3,553,900)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold............................ 382,617,881 341,728,593
Shares Issued to Shareholders
Upon Reinvestment of Dividends.................... 151,079 183,353
Cost of Shares Repurchased........................... (423,508,388) (354,456,269)
------------- -------------
Net Decrease in Net Assets Derived
from Capital Share Transactions................... (40,739,428) (12,544,323)
------------- -------------
NET DECREASE IN NET ASSETS........................... (40,753,956) (12,541,971)
NET ASSETS:
Beginning of Period.................................. 94,815,431 107,357,402
------------- -------------
End of Period........................................ $ 54,061,475 $ 94,815,431
============= =============
</TABLE>
See accompanying notes.
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
February 28, 1997
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.
In 1996, Prime Obligations changed its fiscal year end from May 31 to
February 29.
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, 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 February 28, 1997 amounted to $794,914 and $102,845
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 Tax-Free Money Market, the realized loss for Federal income
tax purposes was $14,528 for the year ended February 28, 1997. For
Federal income tax purposes, the Fund had accumulated capital losses at
February 28, 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.
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
14
<PAGE> 16
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, 1997, the
management fees (investment advisory and administrative) earned by
Fairfield totaled $527,043. Of the investment advisory and administrative
fees earned, $423,822 was voluntarily waived by the Manager in order to
assist the Fund in maintaining a competitive expense ratio. At February
28, 1997, Fairfield was owed $7,000 (after partial fee waiver) for
investment advisory services and $7,000 (after partial fee waiver) in
administrative fees.
For Tax-Free Money Market, during the year ended February 28, 1997, the
management fees (investment advisory and administrative) earned by
Fairfield totaled $242,738. Of the investment advisory and administrative
fees earned, $170,659 was voluntarily waived by the Manager in order to
assist the Fund in maintaining a competitive expense ratio. At February
28, 1997, Fairfield was owed $2,117 (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 Funds' 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 year ended February 28, 1997, Fairfield received
$933 in fees with respect to such transactions.
15
<PAGE> 17
NOTE 7 -- CAPITAL SHARES
At February 28, 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>
3/01/96 6/01/95
TO 2/28/97 TO 2/29/96
------------ ------------
<S> <C> <C>
Shares sold................................................ 707,669,816 539,968,847
Shares issued upon reinvestment of dividends............... 542,212 151,635
Shares repurchased......................................... (695,725,517) (610,497,023)
------------ ------------
Net increase (decrease).................................... 12,486,511 (70,376,541)
Outstanding at beginning of period......................... 167,734,554 238,111,095
------------ ------------
Outstanding at end of period............................... 180,221,065 167,734,554
============ ============
</TABLE>
At February 28, 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>
3/01/96 3/01/95
TO 2/28/97 TO 2/29/96
------------ ------------
<S> <C> <C>
Shares sold................................................ 382,617,881 341,728,593
Shares issued upon reinvestment of dividends............... 151,079 183,353
Shares repurchased......................................... (423,508,388) (354,456,269)
------------ ------------
Net decrease............................................... (40,739,428) (12,544,323)
Outstanding at beginning of period......................... 94,842,661 107,386,984
------------ ------------
Outstanding at end of period............................... 54,103,233 94,842,661
============ ============
</TABLE>
NOTE 8 -- INVESTMENT COMPOSITION
Tax-Free Money Market invests in securities which may include revenue,
general, and escrowed obligations. At February 28, 1997, the revenue
sources by purpose were as follows:
<TABLE>
<CAPTION>
% OF PORTFOLIO
INVESTMENTS
-------------
<S> <C>
Revenue Bonds:
Health Care Facilities..................................................... 19%
Educational Facilities..................................................... 13
Industrial Development..................................................... 11
Pollution Control.......................................................... 11
Housing Facilities......................................................... 9
State Government........................................................... 6
Electric Utility........................................................... 4
Oil........................................................................ 4
General Obligations.......................................................... 23
-----------
100%
===========
</TABLE>
16
<PAGE> 18
NOTE 9 -- FINANCIAL HIGHLIGHTS
Financial highlights for a share of Prime Obligations outstanding
throughout the periods indicated were as follows:
<TABLE>
<CAPTION>
3/01/96 6/01/95 6/01/94 6/01/93 6/01/92
TO TO TO TO TO
2/28/97 2/29/96 5/31/95 5/31/94 5/31/93
-------- -------- -------- -------- --------
<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.................. .0523 .0413 .0501 .0314 .0323
Distributions:
From Net Investment Income............... (.0523) (.0413) (.0501) (.0314) (.0323)
-------- -------- -------- -------- --------
Net Asset Value,
end of period............................ $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ========
Total Return............................... 5.37% 4.21%(b) 5.19% 3.18% 3.28%
Net Assets,
end of period (in thousands)............. $180,218 $167,732 $238,109 $341,136 $417,114
Ratios and Supplemental Data:
Ratio of Expenses to Average
Net Assets............................. .17% .25%(a) .28% .27% .26%
Ratio of Expenses to Average
Net Assets, excluding Fee Waivers...... .41% .55%(a) .43% .42% .41%
Ratio of Net Investment
Income to Average Net Assets........... 5.23% 5.51%(a) 5.01% 3.14% 3.23%
Ratio of Net Investment
Income to Average Net Assets,
excluding Fee Waivers.................. 4.99% 5.21%(a) 4.86% 2.99% 3.08%
</TABLE>
----------------------
(a) Annualized
(b) Not Annualized
17
<PAGE> 19
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>
3/01/96 3/01/95 3/01/94 3/01/93 3/01/92
TO TO TO TO TO
2/28/97 2/29/96 3/28/95 2/28/94 2/28/93
------- ------- -------- -------- --------
<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.................... .0312 .0353 .0286 .0227 .0273
Net Loss on Securities
(both realized and unrealized)......... (.0002) -- (.0003) -- --
------- ------- -------- -------- --------
Total Income from
Investment Operations............. .0310 .0353 .0283 .0227 .0273
------- ------- -------- -------- --------
Distributions:
From Net Investment Income................. (.0312) (.0353) (.0286) (.0227) (.0273)
------- ------- -------- -------- --------
Net Asset Value,
end of period.............................. $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======== ======== ========
Total Return................................. 3.17% 3.59% 2.94% 2.29% 2.76%
Net Assets,
end of period (in thousands)............... $54,061 $94,815 $107,357 $152,273 $202,245
Ratios and Supplemental Data:
Ratio of Expenses to Average
Net Assets............................... .33% .31% .29% .28% .23%
Ratio of Expenses to Average
Net Assets, excluding Fee Waivers........ .58% .51% .49% .48% .43%
Ratio of Net Investment
Income to Average Net Assets............. 3.12% 3.53% 2.86% 2.27% 2.73%
Ratio of Net Investment
Income to Average Net Assets,
excluding Fee Waivers.................... 2.87% 3.33% 2.66% 2.07% 2.53%
</TABLE>
18
<PAGE> 20
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, 1997, and the related
statements of operations for the year then ended, the statements of
changes in net assets for each of the two periods presented therein, 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. Our procedures included
confirmation of securities owned as of February 28, 1997, 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,
1997, the results of their operations for the year then ended, the
changes in their net assets for each of the two periods presented
therein, and the financial highlights for each of the five periods
presented therein, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
April 11, 1997
19
<PAGE> 21
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