<PAGE>
--------------------------------------------
UST
MASTER FUNDS, INC.
--------------------------------------------
FIXED INCOME PORTFOLIOS
ANNUAL REPORT
MARCH 31, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LETTER TO SHAREHOLDERS.................................................... 1
ADVISER'S FIXED INCOME MARKET REVIEW...................................... 2
ADVISER'S INVESTMENT REVIEWS..............................................
Short-Term Government Securities Fund.................................... 3
Intermediate-Term Managed Income Fund.................................... 4
Managed Income Fund...................................................... 5
STATEMENTS OF ASSETS AND LIABILITIES...................................... 6
STATEMENTS OF OPERATIONS.................................................. 8
STATEMENTS OF CHANGES IN NET ASSETS....................................... 9
FINANCIAL HIGHLIGHTS--SELECTED PER SHARE DATA AND RATIOS.................. 10
PORTFOLIOS OF INVESTMENTS
Treasury Money Fund...................................................... 12
Government Money Fund.................................................... 13
Money Fund............................................................... 14
Short-Term Government Securities Fund.................................... 15
Intermediate-Term Managed Income Fund.................................... 16
Managed Income Fund...................................................... 17
NOTES TO FINANCIAL STATEMENTS............................................. 18
INDEPENDENT AUDITORS' REPORT.............................................. 25
</TABLE>
For shareholder account information, current price and yield quotations, or to
make an initial purchase or obtain a prospectus, call the appropriate telephone
number listed below:
. SHAREHOLDER SERVICES 1-800-446-1012
. CURRENT PRICE AND YIELD INFORMATION 1-800-233-9180
. INITIAL PURCHASE AND PROSPECTUS INFORMATION 1-800-233-1136
This report must be preceded or accompanied by a current prospectus.
Prospectuses containing more complete information including charges and ex-
penses regarding UST Master Funds, Inc. and UST Master Tax-Exempt Funds, Inc.
may be obtained by contacting the Funds at 1-800-233-1136.
Investors should read the current prospectus carefully prior to investing or
sending money.
UST Master Funds, Inc. and UST Master Tax-Exempt Funds, Inc. are sponsored and
distributed by UST Distributors, Inc. (See Note 2 to financial statements.)
You may write to UST Master Funds, Inc. and UST Master Tax-Exempt Funds, Inc.
at the following address:
UST MASTER FUNDS, INC.
C/O MUTUAL FUNDS SERVICE COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, ITS PARENT AND AFFILIATES
AND SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN THE FUNDS INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. FUND SHARES ARE NOT
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report for the UST Master Funds, Inc. and
UST Master Tax-Exempt Funds, Inc. for the fiscal year ended March 31, 1995.
During this past year, we welcomed many new investors to the UST Master Funds
family. With $3.7 billion in assets in the twenty-five funds, we approach
fiscal year 1996 with optimism.
The UST Master Funds consist of ten domestic equity, four international
equity, seven fixed-income, and four money market funds. These funds have been
designed to provide a comprehensive range of investment choices and offer
shareholders an opportunity to allocate holdings according to personal
investment objectives.
Investment performance continued to be strong in several of our funds. In the
domestic equity areas, the Early Life Cycle Fund ranked thirty-eighth among 250
Small Company Growth Funds as reported by Lipper Analytical Services, Inc.* for
the one year period ended March 31, 1995. On the international front, the
Emerging Americas Fund rated second among 12 Latin American Funds reported by
Lipper. Leading the way for our fixed-income funds, the Long-Term Tax-Exempt
Fund ranked number one in a universe of 193 Lipper General Municipal Debt
Funds.** In the money market areas, Lipper rated the Money Fund and Short-Term
Tax-Exempt Fund among the top 25% in field of 248 Money Market Instrument Funds
and 121 Tax-Exempt Money Market Funds, respectively, for the same one year
period.***
UST Master Fund shareholders are serviced by a dedicated team of
professionals. We recognize the importance of excellent customer service and
are committed to meeting shareholder needs in a responsible and efficient
manner. We appreciate your participation in the funds and look forward to
serving you in the years to come.
(Sigcut)
Alfred C. Tannachion
Chairman of the Board and President
* Lipper Analytical Services, Inc. is an independent mutual fund performance
monitor whose rankings are based on total return excluding sales charge.
Past performance is not predictive of future performance.
** For the five year period ended March 31, 1995, the Long-Term Tax Exempt
Fund ranked number two in a universe of 93 Lipper General Municipal Debt
Funds.
*** Fund Shares are not issued or guaranteed by the U.S. Government and there
is no assurance that the money market funds will be able to maintain a
stable net asset value of $1 per share.
1
<PAGE>
UST MASTER FUNDS, INC.
ADVISER'S FIXED INCOME MARKET REVIEW
- --------------------------------------------------------------------------------
The most severe damage to the fixed-income markets occurred in the final
quarter of fiscal 1994, fueled by the Federal Reserve Board's two increases in
short-term rates to 3.5%. With mounting evidence that the economy was growing
faster than expected, the Fed's action was looked upon as a preemptive strike
against inflation.
Through most of the first half of the ensuing 1995 fiscal year, the fixed-
income markets drifted, suffering from pervasive fears of accelerating
inflation despite the string of additional Federal Reserve Board interest rate
hikes intended to bring about the "soft landing" for the U.S. economy.
In the fiscal third quarter--propelled by the new "de minimus" rule (a result
of the Revenue Reconciliation Act of 1993), rising rates and investor selling
out of mutual funds--the market dropped again. Toward the end of the fiscal
third quarter, the market began to recover, though tentatively, due in large
part to yields that were perceived to be too high, the short supply of
municipal bonds and a general perception that we were nearing the end of
Federal Reserve interventions.
At the beginning of the fiscal fourth quarter the market was anticipating
another rate increase and this had been priced into the forward yield curve.
The eventual 50 basis-point hike in February, rumblings from Washington that
this would be the last intervention (at least for the near term), and
widespread perceptions that the economy was slowing and that rates had overshot
on the upside caused the fixed-income markets to take off. As with the
precipitous sell-off of a year ago, the bond market achieved most of its gains
in the ensuing five-week period.
For now, the market has priced in economic slowdown and moderate inflation. Any
indications to the contrary could startle the market into a correction. The
wild card is the severely depreciated U.S. dollar, which the market has so far
ignored in favor of focusing on positive news on the domestic front. If the
dollar declines much further, market attention will eventually have to shift,
likely sparking a sell-off. Added to these concerns, prices are up sharply. As
a result, we have adopted a slightly more cautious approach--generally
shortening portfolios--pending resolution of these near-term concerns.
2
<PAGE>
UST MASTER FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
SHORT-TERM GOVERNMENT SECURITIES FUND
- -------------------------------------------------------------------------------
Fiscal 1995 proved to be an extraordinarily difficult year for the short end
of the fixed-income market. The two-year Treasury issue started the period
with a 5.18% yield and ended March 31, 1995 with a 6.78% yield. This movement
resulted in a 5.25% total return for the Treasury issue with an average 6.50%
coupon return and 2.25% principal loss. During the entire period, the Fund
moved between a neutral to short duration, reflecting our concerns about
Federal Reserve Board tightening. In fact, the Federal Reserve tightening
continued right into February 1995 with expectations for further moves
carrying into March. For the twelve months ended March 31, 1995, the Fund
posted a total return of 4.30%.*
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
SHORT-TERM GOVERNMENT SECURITIES FUND AND THE LEHMAN BROTHERS
1-3 YEAR GOVERNMENT BOND INDEX**
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Short-Term Government Securities Fund+
- --------------------------------------------------------------------------------
Average Annual Total Return Ended on 3/31/95
Reflects Maximum Sales Charge of 4.5%
- --------------------------------------------------------------------------------
1 year Since Inception (12/31/92)
- --------------------------------------------------------------------------------
<S> <C>
- -0.44% 1.51%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Short Term
Short Term Gov. Sec. Short Term Gov. Sec. Lehman Bros. Government Government
(reflects maximum sales charge) (exclusive of sales charge) 1-3 Yr. Bond Index Sec.
<S> <C> <C> <C>
12/31/92 9550 10000 10000
3/31/93 9712 10170 10220
6/30/93 9808 10270 10330
9/30/93 9935 10404 10470
12/31/93 9962 10432 10540
3/31/94 9918 10385 10490
6/30/94 9952 10421 10490
9/30/94 10054 10528 10590
12/31/94 10069 10543 10590
3/31/95 10344 10832 10950
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Short-Term
Government Securities Fund on 12/31/92 (inception date) to a $10,000
investment made in the Lehman Brothers 1-3 Year Government Bond Index on that
date. All dividends and capital gain distributions are reinvested.
The Fund's performance takes into account fees and expenses. The Lehman
Brothers 1-3 Year Government Bond Index is an unmanaged total return
performance benchmark composed of U.S. Government agencies and U.S. Treasury
securities with maturities of one to three years. The Index does not take into
account charges, fees and other expenses. Further information relating to Fund
performance is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lehman Brothers.
+ The Fund is currently waving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
3
<PAGE>
UST MASTER FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
INTERMEDIATE-TERM MANAGED INCOME FUND
- -------------------------------------------------------------------------------
Short-term interest rates moved higher during this reporting period due to
strong economic growth and the cyclical pressure associated with this type of
momentum. Long-term interest rates also moved higher during the first three
quarters of the fiscal year before dropping significantly lower in the fourth
fiscal quarter, as it became clear that the economy was finally slowing.
During this period, we maintained a very high grade investment portfolio with
an average life of approximately 7 1/4 years. The Fund recorded a total return
of 4.95%,* for the twelve months ended March 31, 1995, versus an average total
return excluding sales charge of 3.74% for funds in the Lipper Intermediate
Investment Grade Fund** category for the same period. Looking ahead, we will
continue to actively manage the portfolio utilizing investment grade
securities that fall within the Fund's maturity guidelines.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN INTERMEDIATE-TERM
MANAGED INCOME FUND AND THE LEHMAN BROTHERS INTERMEDIATE
GOVT/CORP BOND INDEX***
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Intermediate-Term Managed Income Fund+
- --------------------------------------------------------------------------------
Average Annual Total Return Ended on 3/31/95
Reflects Maximum Sales Charge of 4.5%
- --------------------------------------------------------------------------------
1 year Since Inception (12/31/92)
- --------------------------------------------------------------------------------
<S> <C>
0.26% 2.00%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Intermediate
Interm. Term Managed Interm. Term Managed Lehman Bros. Government/ Term
(reflects maximum sales charge) (exclusive of sales charge) Corporate Bond Index Managed
<S> <C> <C> <C>
12/31/92 9550 10000 10000
3/31/93 9918 10386 10400
6/30/93 10153 10632 10620
9/30/93 10419 10910 10860
12/31/93 10355 10844 10880
3/31/94 9963 10433 10660
6/30/94 9921 10389 10590
9/30/94 9940 10409 10680
12/31/94 9971 10441 10670
3/31/95 10456 10949 11140
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Intermediate-
Term Managed Income Fund on 12/31/92 (inception date) to a $10,000 investment
made in the Lehman Brothers Intermediate Govt/Corp Bond Index on that date.
All dividends and capital gain distributions are reinvested.
The Fund's performance takes into account fees and expenses. The Lehman
Brothers Intermediate Govt/Corp Bond Index is an unmanaged total return
performance benchmark composed of U.S. Government agencies and U.S. Treasury
securities and investment grade corporate debt, selected as representative of
the market with maturities of one to ten years. The Index does not take into
account charges, fees and other expenses. Further information relating to Fund
performance is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lipper Analytical Services, Inc.--Lipper is an independent mutual
fund performance monitor.
*** Source: Lehman Brothers.
+ The Fund is currently waving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
4
<PAGE>
UST MASTER FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
MANAGED INCOME FUND
- -------------------------------------------------------------------------------
Short-term interest rates moved higher during this reporting period due to
strong economic growth and the cyclical pressure associated with this type of
momentum. Long-term interest rates also moved higher during the first three
quarters of the fiscal year before dropping significantly lower in the fourth
fiscal quarter, as it became clear that the economy was finally slowing.
During this period, our portfolio's average life was about 12.5 years. Very
high-grade investment securities remained a portfolio hallmark. Despite this
high-grade characteristic, the Fund achieved a fiscal 1995 total return of
4.06%,* as compared to an average total return excluding sales charge of 3.36%
for funds in the Lipper Corporate Debt Fund** category for the same period.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN MANAGED INCOME
FUND AND THE LEHMAN BROTHERS GOVT/CORP BOND INDEX***
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Managed Income Fund+
- --------------------------------------------------------------------------------
Average Annual Total Return Ended on 3/31/95
Reflects Maximum Sales Charge of 4.5%
- --------------------------------------------------------------------------------
1 year 5 years Since Inception (1/9/86)
- --------------------------------------------------------------------------------
<S> <C> <C>
- -0.58% 7.91% 10.10%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Managed Income Managed Income Lehman Bros. Government/ Managed
(reflects maximum sales charge) (exclusive of sales charge) Corporate Bond Index Income
<S> <C> <C> <C>
1/9/86 9550 10000 10000
3/31/86 10399 10893 10850
3/31/87 12319 12904 11730
3/31/88 13206 13833 12250
3/31/89 14154 14826 12860
3/31/90 15856 16609 14370
3/31/91 17975 18829 16160
3/31/92 19837 20780 18000
3/31/93 22960 24050 20580
3/31/94 23357 24466 21140
3/31/95 24305 25459 22110
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST.
The above illustration compares a $10,000 investment made in Managed Income
Fund on 1/9/86 (inception date) to a $10,000 investment made in the Lehman
Brothers Govt/Corp Bond Index on that date. For comparative purposes, the
value of the Index on 12/31/85 is used as the beginning value on 1/9/86. All
dividends and capital gain distributions are reinvested.
The Fund's performance takes into account fees and expenses. The Lehman
Brothers Govt/Corp Bond Index is an unmanaged total return performance
benchmark comprised of U.S. Government agencies and U.S. Treasury securities
and investment grade corporate debt, selected as representative of the market.
The Index does not take into account charges, fees and other expenses. Further
information relating to Fund performance is contained in the Financial
Highlights section of the Prospectus and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lipper Analytical Services, Inc.--Lipper is an independent mutual
fund performance monitor.
*** Source: Lehman Brothers.
+ The fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
5
<PAGE>
UST MASTER FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE-
SHORT-TERM TERM
TREASURY GOVERNMENT GOVERNMENT MANAGED MANAGED
MONEY MONEY MONEY SECURITIES INCOME INCOME
FUND FUND FUND FUND FUND FUND
------------ ------------ ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at cost--
see accompanying
portfolios............ $196,980,122 $729,389,154 $828,625,792 $24,962,257 $50,948,669 $87,320,460
============ ============ ============ =========== =========== ===========
Investments, at value*
(Note 1).............. $196,980,122 $729,389,154 $828,625,792 $24,913,704 $49,590,435 $85,016,194
Interest receivable.... 27,748 238,136 65,075 436,458 567,201 1,419,321
Receivable for
investments sold...... -- -- -- 892,615 -- --
Receivable for fund
shares sold........... 898,822 713 812,638 -- 235 2,132
Prepaid expenses....... 5,929 23,809 29,383 927 1,765 4,292
Unamortized
organization costs
(Note 5).............. 10,070 -- -- 11,534 11,534 --
Other.................. -- 23,356 -- 42 23,789 13,125
------------ ------------ ------------ ----------- ----------- -----------
TOTAL ASSETS........... 197,922,691 729,675,168 829,532,888 26,255,280 50,194,959 86,455,064
LIABILITIES:
Payable for investments
purchased............. -- -- -- 889,832 1,981,440 --
Payable for dividends
declared.............. 821,588 3,471,320 3,871,290 114,789 229,153 327,421
Payable for fund shares
redeemed.............. 20,617 7,775 517,527 -- -- 5,697
Investment advisory and
custodian fees payable
(Note 2).............. 58,482 182,191 195,060 1,668 15,700 59,116
Administration fees and
shareholder servicing
fees payable
(Note 2).............. 27,182 100,976 111,530 3,586 6,778 14,351
Accrued expenses and
other payables........ 62,440 138,702 259,153 29,778 33,440 24,234
------------ ------------ ------------ ----------- ----------- -----------
TOTAL LIABILITIES...... 990,309 3,900,964 4,954,560 1,039,653 2,266,511 430,819
------------ ------------ ------------ ----------- ----------- -----------
NET ASSETS.............. $196,932,382 $725,774,204 $824,578,328 $25,215,627 $47,928,448 $86,024,245
============ ============ ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
UST MASTER FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES--(CONTINUED)
AS OF MARCH 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE-
SHORT-TERM TERM
TREASURY GOVERNMENT GOVERNMENT MANAGED MANAGED
MONEY MONEY MONEY SECURITIES INCOME INCOME
FUND FUND FUND FUND FUND FUND
------------ ------------ ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS consist of:
Undistributed/(distributions
in excess of) net
investment income
(Note 1)................... $ (55) $ -- $ -- $ -- $ 5,306 $ (11,365)
Accumulated net realized
loss on investments
(Note 1)................... (18,428) (60,856) (34,726) (475,308) (1,512,383) (6,257,298)
Unrealized depreciation on
investments................ -- -- -- (48,553) (1,358,234) (2,304,266)
Par value (Note 4).......... 196,951 725,865 824,777 3,657 7,095 10,251
Paid in capital in excess of
par value (Note 1)......... 196,753,914 725,109,195 823,788,277 25,735,831 50,786,664 94,586,923
------------ ------------ ------------ ----------- ----------- -----------
TOTAL NET ASSETS............. $196,932,382 $725,774,204 $824,578,328 $25,215,627 $47,928,448 $86,024,245
============ ============ ============ =========== =========== ===========
Shares of Common Stock
Outstanding................. 196,950,767 725,865,485 824,776,842 3,657,258 7,095,338 10,251,319
NET ASSET VALUE PER SHARE.... $1.00 $1.00 $1.00 $6.89 $6.75 $8.39
===== ===== ===== ===== ===== =====
</TABLE>
* Includes repurchase agreements aggregating $65,216,462 for Government Money
Fund and $79,685,063 for Money Fund.
See Notes to Financial Statements
7
<PAGE>
UST MASTER FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE-
SHORT-TERM TERM
TREASURY GOVERNMENT GOVERNMENT MANAGED MANAGED
MONEY MONEY MONEY SECURITIES INCOME INCOME
FUND FUND FUND FUND FUND FUND
----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income............. $11,143,372 $35,959,287 $39,570,565 $1,375,220 $2,836,557 $ 7,143,440
----------- ----------- ----------- ---------- ---------- -----------
EXPENSES:
Investment advisory fees
(Note 2)................... 719,625 1,838,665 1,985,957 76,344 151,138 756,921
Administration fees (Note
2)......................... 369,407 1,132,617 1,223,349 41,750 66,500 155,421
Administrative service fees. 45,717 174,408 204,060 4,466 8,274 28,171
Shareholder servicing agent
fees (Note 2).............. 9,236 15,303 34,732 4,918 9,265 37,548
Custodian fees (Note 2)..... 127,642 388,990 422,383 9,277 23,194 64,925
Registration and filing
fees....................... 13,922 16,300 17,440 10,195 11,917 13,887
Legal and audit fees........ 36,556 107,151 118,259 4,307 6,226 15,282
Directors' fees and expenses
(Note 2)................... 8,247 24,545 26,425 909 1,422 3,396
Shareholder reports......... 9,829 25,606 29,205 5,579 6,465 14,732
Amortization of organization
costs (Note 5)............. 10,581 -- -- 4,176 4,176 --
Miscellaneous expenses...... 17,268 164,379 53,359 9,474 3,629 37,664
Fees waived and reimbursed
by investment adviser and
administrators (Note 2).... (45,717) (174,408) (204,060) (16,942) (8,274) (123,050)
----------- ----------- ----------- ---------- ---------- -----------
TOTAL EXPENSES.............. 1,322,313 3,713,556 3,911,109 154,453 283,932 1,004,897
----------- ----------- ----------- ---------- ---------- -----------
NET INVESTMENT INCOME........ 9,821,059 32,245,731 35,659,456 1,220,767 2,552,625 6,138,543
----------- ----------- ----------- ---------- ---------- -----------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
(NOTE 1):
Net realized gain/(loss) on
security transactions...... 3,816 (49,433) (20,821) (419,685) (789,710) (3,676,167)
Change in unrealized
appreciation/(depreciation)
on investments during the
year....................... -- -- -- 248,742 322,607 590,805
----------- ----------- ----------- ---------- ---------- -----------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS. 3,816 (49,433) (20,821) (170,943) (467,103) (3,085,362)
----------- ----------- ----------- ---------- ---------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.. $ 9,824,875 $32,196,298 $35,638,635 $1,049,824 $2,085,522 $ 3,053,181
=========== =========== =========== ========== ========== ===========
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
UST MASTER FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE-
SHORT-TERM TERM
TREASURY GOVERNMENT GOVERNMENT MANAGED MANAGED
MONEY MONEY MONEY SECURITIES INCOME INCOME
FUND FUND FUND FUND FUND FUND
------------ -------------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1995
Net investment income....... $ 9,821,059 $ 32,245,731 $ 35,659,456 $ 1,220,767 $ 2,552,625 $ 6,138,543
Net realized gain/(loss) on
investments................ 3,816 (49,433) (20,821) (419,685) (789,710) (3,676,167)
Change in unrealized
appreciation/(depreciation)
on investments during the
year....................... -- -- -- 248,742 322,607 590,805
------------ -------------- ------------ ----------- ----------- ------------
Net increase in net assets
resulting from operations.. 9,824,875 32,196,298 35,638,635 1,049,824 2,085,522 3,053,181
Distributions to
shareholders:
From net investment income. (9,821,059) (32,245,731) (35,674,223) (1,220,767) (2,547,450) (6,113,843)
In excess of net investment
income.................... -- -- -- -- -- (11,365)
In excess of net realized
gain on investments....... -- -- -- -- (70,815) --
Increase/(decrease) in net
assets from fund share
transactions (Note 4)...... (57,754,795) (309,084,614) 88,536,475 153,493 5,897,045 (21,806,779)
------------ -------------- ------------ ----------- ----------- ------------
Net increase/(decrease) in
net assets................. (57,750,979) (309,134,047) 88,500,887 (17,450) 5,364,302 (24,878,806)
NET ASSETS:
Beginning of year.......... 254,683,361 1,034,908,251 736,077,441 25,233,077 42,564,146 110,903,051
------------ -------------- ------------ ----------- ----------- ------------
End of year (1)............ $196,932,382 $ 725,774,204 $824,578,328 $25,215,627 $47,928,448 $ 86,024,245
============ ============== ============ =========== =========== ============
YEAR ENDED MARCH 31, 1994
Net investment income....... $ 6,085,055 $ 21,120,155 $ 24,584,806 $ 689,406 $ 1,644,426 $ 5,431,933
Net realized gain/(loss) on
investments................ (2,720) 374 9,229 60,627 (84,048) 3,471,272
Change in unrealized
appreciation/(depreciation)
on investments during the
year....................... -- -- -- (381,684) (1,885,369) (7,305,225)
------------ -------------- ------------ ----------- ----------- ------------
Net increase/(decrease) in
net assets resulting from
operations................. 6,082,335 21,120,529 24,594,035 368,349 (324,991) 1,597,980
Distributions to
shareholders:
From net investment income. (6,085,055) (21,120,155) (24,584,806) (689,406) (1,644,426) (5,431,933)
From net realized gain on
investments............... -- -- -- (60,627) -- (3,471,272)
In excess of net realized
gain on investments....... -- -- -- (56,607) (564,445) (5,526,504)
Increase/(decrease) in net
assets from fund share
transactions (Note 4)...... 26,891,699 324,416,804 (47,947,380) 12,304,320 25,620,004 13,114,824
------------ -------------- ------------ ----------- ----------- ------------
Net increase/(decrease) in
net assets................. 26,888,979 324,417,178 (47,938,151) 11,866,029 23,086,142 283,095
NET ASSETS:
Beginning of year.......... 227,794,382 710,491,073 784,015,592 13,367,048 19,478,004 110,619,956
------------ -------------- ------------ ----------- ----------- ------------
End of year (2)............ $254,683,361 $1,034,908,251 $736,077,441 $25,233,077 $42,564,146 $110,903,051
============ ============== ============ =========== =========== ============
</TABLE>
(1) Including undistributed/(distributions in excess of) net investment income
of $(55) for Treasury Money Fund, $5,306 for Intermediate-Term Managed
Income Fund and $(11,365) for Managed Income Fund.
(2) Including undistributed/(distributions in excess of) net investment income
of $(55) for Treasury Money Fund, $14,767 for Money Fund and $(33,245) for
Managed Income Fund.
See Notes to Financial Statements.
9
<PAGE>
UST MASTER FUNDS, INC.
FINANCIAL HIGHLIGHTS--SELECTED PER SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
DISTRIBUTIONS
NET ASSET NET REALIZED TOTAL DIVIDENDS FROM NET
VALUE, NET AND UNREALIZED FROM FROM NET REALIZED
BEGINNING INVESTMENT GAIN/(LOSS) INVESTMENT INVESTMENT GAIN ON
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME INVESTMENTS
--------- ---------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
TREASURY MONEY FUND -- (2/13/91*)
Year Ended March 31,
1991................... $1.00 $0.00782 $0.00001 $0.00783 $(0.00782) $ 0.00000
1992................... 1.00 0.04731 0.00036 0.04767 (0.04731) (0.00011)
1993................... 1.00 0.02987 0.00000 0.02987 (0.02987) (0.00030)
1994................... 1.00 0.02590 0.00000 0.02590 (0.02590) 0.00000
1995................... 1.00 0.04165 0.00000 0.04165 (0.04165) 0.00000
GOVERNMENT MONEY FUND -- (5/8/85*)
Year Ended March 31,
1991................... $1.00 $0.07379 $0.00008 $0.07387 $(0.07379) $(0.00005)
1992................... 1.00 0.05069 0.00002 0.05071 (0.05069) (0.00005)
1993................... 1.00 0.03205 0.00000 0.03205 (0.03205) 0.00000
1994................... 1.00 0.02736 0.00000 0.02736 (0.02736) 0.00000
1995................... 1.00 0.04397 0.00000 0.04397 (0.04397) 0.00000
MONEY FUND -- (5/3/85*)
Year Ended March 31,
1991................... $1.00 $0.07589 $0.00001 $0.07590 $(0.07589) $ 0.00000
1992................... 1.00 0.05165 0.00017 0.05182 (0.05165) (0.00019)
1993................... 1.00 0.03234 0.00000 0.03234 (0.03234) 0.00000
1994................... 1.00 0.02780 0.00000 0.02780 (0.02780) 0.00000
1995................... 1.00 0.04494 0.00002 0.04496 (0.04496) 0.00000
SHORT-TERM GOVERNMENT SECURITIES FUND -- (12/31/92*)
Year Ended March 31,
1993................... $7.00 $ 0.06 $ 0.06 $ 0.12 $ (0.06) $ 0.00
1994................... 7.06 0.24 (0.09) 0.15 (0.24) (0.02)
1995................... 6.93 0.33 (0.04) 0.29 (0.33) 0.00
INTERMEDIATE-TERM MANAGED INCOME FUND -- (12/31/92*)
Year Ended March 31,
1993................... $7.00 $ 0.08 $ 0.19 $ 0.27 $ (0.08) $ 0.00
1994................... 7.19 0.31 (0.27) 0.04 (0.31) 0.00
1995................... 6.83 0.39 (0.07) 0.32 (0.39) (0.00)
MANAGED INCOME FUND -- (1/9/86*)
Year Ended March 31,
1991................... $8.77 $ 0.67 $ 0.44 $ 1.11 $ (0.67) $ (0.09)
1992................... 9.12 0.65 0.27 0.92 (0.65) (0.24)
1993................... 9.15 0.58 0.79 1.37 (0.58) (0.30)
1994................... 9.64 0.47 (0.26) 0.21 (0.47) (0.31)
1995................... 8.57 0.51 (0.18) 0.33 (0.51) 0.00
</TABLE>
* Commencement of operations.
** Annualized.
+ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
++ Total return data does not reflect sales load payable on purchase of fund
shares.
See Notes to Financial Statements.
10
<PAGE>
<TABLE>
<CAPTION>
RATIO OF RATIO OF RATIO OF
DISTRIBUTIONS NET GROSS NET
IN EXCESS OF NET ASSET NET ASSETS, OPERATING OPERATING INVESTMENT
NET REALIZED VALUE, END EXPENSES EXPENSES INCOME PORTFOLIO FEE
GAIN ON TOTAL END TOTAL OF PERIOD TO AVERAGE TO AVERAGE TO AVERAGE TURNOVER WAIVERS
INVESTMENTS DISTRIBUTIONS OF PERIOD RETURN++ (000'S) NET ASSETS NET ASSETS + NET ASSETS RATE (NOTE 2)
------------- ------------- --------- -------- ----------- ---------- ------------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $(0.00782) $1.00 0.78% $ 110,373 0.09%** 0.60%** 5.98%** -- $0.00067
0.00 (0.04742) 1.00 4.85% 172,293 0.52% 0.57% 4.60% -- 0.00048
0.00 (0.03017) 1.00 3.06% 227,794 0.58% 0.58% 2.97% -- 0.00000
0.00 (0.02590) 1.00 2.62% 254,683 0.58% 0.58% 2.59% -- 0.00001
0.00 (0.04165) 1.00 4.25% 196,932 0.55% 0.57% 4.09% -- 0.00019
$ 0.00 $(0.07384) $1.00 7.31% $ 700,222 0.50% 0.50% 7.31% -- $0.00000
0.00 (0.05074) 1.00 5.09% 740,689 0.50% 0.50% 5.09% -- 0.00000
0.00 (0.03205) 1.00 3.20% 710,491 0.50% 0.50% 3.20% -- 0.00000
0.00 (0.02736) 1.00 2.77% 1,034,908 0.50% 0.50% 2.74% -- 0.00003
0.00 (0.04397) 1.00 4.49% 725,774 0.50% 0.53% 4.38% -- 0.00024
$ 0.00 $(0.07589) $1.00 7.64% $ 471,323 0.52% 0.52% 7.56% -- $0.00000
0.00 (0.05184) 1.00 5.19% 574,274 0.51% 0.51% 5.11% -- 0.00000
0.00 (0.03234) 1.00 3.25% 784,016 0.51% 0.51% 3.21% -- 0.00000
0.00 (0.02780) 1.00 2.82% 736,077 0.51% 0.51% 2.78% -- 0.00002
0.00 (0.04496) 1.00 4.59% 824,578 0.49% 0.52% 4.49% -- 0.00026
$ 0.00 $ (0.06) $7.06 1.70% $ 13,367 0.62%** 0.82%** 3.62%** 93%** $ 0.00
(0.02) (0.28) 6.93 2.12% 25,233 0.62% 0.65% 3.42% 267% 0.00
0.00 (0.33) 6.89 4.30% 25,216 0.61% 0.67% 4.80% 198% 0.00
$ 0.00 $ (0.08) $7.19 3.86% $ 19,478 0.72%** 0.98%** 4.69%** 66%** $ 0.01
(0.09) (0.40) 6.83 0.45% 42,564 0.69% 0.69% 4.31% 385% 0.00
(0.01) (0.40) 6.75 4.95% 47,928 0.66% 0.68% 5.91% 682% 0.00
$ 0.00 $ (0.76) $9.12 13.37% $ 52,744 1.11% 1.11% 7.57% 342% $ 0.00
0.00 (0.89) 9.15 10.36% 99,956 1.05% 1.05% 6.97% 369% 0.00
0.00 (0.88) 9.64 15.74% 110,620 0.89% 1.04% 6.19% 455% 0.02
(0.50) (1.28) 8.57 1.73% 110,903 0.90% 1.06% 4.89% 459% 0.02
0.00 (0.51) 8.39 4.06% 86,024 1.00% 1.12% 6.09% 492% 0.01
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
UST MASTER FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
TREASURY MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 96.24%
Federal Home Loan Bank
$ 5,000,000 04/03/95............................. 5.90% $ 4,998,361
25,000,000 04/11/95............................. 5.90 24,959,028
U.S. Treasury Bills
25,000,000 04/06/95............................. 5.57 24,980,677
135,000,000 04/20/95............................. 5.74 134,591,341
------------
TOTAL U.S. GOVERNMENT
& AGENCY OBLIGATIONS
(Cost $189,529,407).................. 189,529,407
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 3.78%
$ 3,436,879 Dreyfus Treasury Cash Management
Fund............................... 5.84%+ $ 3,436,879
4,013,836 Fidelity U.S. Treasury Income Fund. 5.80+ 4,013,836
------------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $7,450,715).................. 7,450,715
------------
TOTAL INVESTMENTS
(Cost $196,980,122*)............................. 100.02% $196,980,122
OTHER ASSETS & LIABILITIES (NET)................. (0.02) (47,740)
------ ------------
NET ASSETS....................................... 100.00% $196,932,382
====== ============
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$196,983,828.
+ Coupon Rate.
See Notes to Financial Statements.
12
<PAGE>
UST MASTER FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
GOVERNMENT MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 91.51%
Federal Farm Credit Bank
$ 50,000,000 06/06/95................................. 6.28%+ $ 49,996,001
Federal Home Loan Bank
25,000,000 04/03/95................................. 6.25 24,991,319
150,000,000 04/10/95................................. 5.90 149,778,750
Federal Home Loan Mortgage Corporation
90,000,000 04/05/95................................. 5.91 89,940,900
50,000,000 04/13/95................................. 5.91 49,901,500
Federal National Mortgage Association
50,000,000 04/03/95................................. 5.90 49,983,611
200,000,000 04/05/95................................. 5.91 199,868,667
50,000,000 05/05/95................................. 6.10 49,711,944
------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (Cost $664,172,692).......... 664,172,692
------------
</TABLE>
<TABLE>
<CAPTION>
REPURCHASE AGREEMENT -- 8.99%
<C> <S> <C>
25,000,000 Agreement with Dean Witter Discover, 6.40% dated
03/31/95, to be repurchased at $25,017,778 on
04/03/95, collateralized by $16,181,350 Federal
Home Loan Bank, with various rates and maturity
dates, valued at $16,141,761; $9,476,190 Federal
Farm Credit Bank, due 9/16/96, valued at
$9,502,304........................................... 25,000,000
20,000,000 Agreement with Fuji Securities Inc., 6.35% dated
03/31/95, to be repurchased at $20,010,583 on
04/03/95, collateralized by $6,948,000 Federal
Home Loan Bank, with various rates and maturity
dates, valued at $6,943,407; $13,333,333 Federal
Home Loan Mortgage Corp., 6.84%, due 2/28/96,
valued at $13,453,467................................ 20,000,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
<C> <S> <C>
REPURCHASE AGREEMENTS--(CONTINUED)
$20,216,462 Agreement with Nomura Securities Inc., 6.35%
dated 03/31/95, to be repurchased at $20,323,441
on 04/03/95, collateralized by $5,152,903
Federal National Mortgage Association, with
various rates and maturity dates, valued at
$5,377,175; $8,283,057 Federal Home Loan Bank,
with various rates and maturity dates, valued at
$8,028,312; $2,471,445 Student Loan Mortgage
Association, with various rates and maturity
dates, valued at $2,497,355; $2,348,080 Federal
Home Loan Mortgage Corp., with various rates and
maturity dates, valued at $2,294,703; $2,067,102
Federal Farm Credit Bank, with various rates and
maturity dates, valued at $2,089,354; $445,603
Tennessee Valley Authority, 8.375%, due 10/1/99,
valued at $482,782.................................... $20,216,462
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $65,216,462).................................... 65,216,462
-----------
</TABLE>
<TABLE>
<CAPTION>
TOTAL INVESTMENTS
<S> <C> <C>
(Cost $729,389,154*)...................................... 100.50% $729,389,154
OTHER ASSETS & LIABILITIES (NET).......................... (0.50) (3,614,950)
------ ------------
NET ASSETS................................................ 100.00% $725,774,204
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
See Notes to Financial Statements.
13
<PAGE>
UST MASTER FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
MONEY FUND
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
--------- -------- -------- ------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 44.98%
$100,000,000 Federal Farm Credit Bank........ 5.90% 4/3/95 $ 99,967,222
121,000,000 Federal Home Loan Bank.......... 6.04 4/3/95 120,959,411
50,000,000 Federal Home Loan Bank.......... 5.94 4/5/95 49,967,000
50,000,000 Federal Home Loan Mortgage
Corporation..................... 6.15 4/3/95 49,982,917
50,000,000 Federal National Mortgage
Association..................... 5.90 4/3/95 49,983,611
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $370,860,161)............. 370,860,161
------------
COMMERCIAL PAPER -- 39.18%
35,000,000 American Express Credit
Corporation..................... 6.05 4/17/95 34,905,889
35,000,000 CIT Group Holdings Inc.......... 6.05 4/17/95 34,905,889
35,000,000 Ford Motor Credit Company....... 6.05 4/17/95 34,905,889
35,000,000 J.P. Morgan & Co., Inc.......... 5.97 4/17/95 34,907,133
35,000,000 Merrill Lynch & Company, Inc.... 6.05 4/17/95 34,905,889
35,000,000 New Center Asset Trust.......... 6.05 4/17/95 34,905,889
19,000,000 Phillip Morris Companies, Inc... 6.13 4/7/95 18,980,588
35,000,000 Pitney Bowes.................... 6.10 5/26/95 34,673,819
30,000,000 Prudential Funding.............. 6.01+ 4/6/95 30,000,000
30,000,000 UBS Finance..................... 6.25 4/3/95 29,989,583
------------
TOTAL COMMERCIAL PAPER (Cost
$323,080,568)................... 323,080,568
------------
BANK NOTES -- 6.67%
30,000,000 Southtrust Alabama.............. 6.13+ 6/30/95 30,000,000
25,000,000 Wachovia Bank................... 6.00+ 5/2/95 25,000,000
------------
TOTAL BANK NOTES (Cost
$55,000,000).................... 55,000,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
<C> <S> <C>
REPURCHASE AGREEMENTS -- 9.66%
$ 30,000,000 Agreement with Dean Witter Discover, 6.40%
dated 03/31/95, to be repurchased at
$30,016,000, on 04/03/95 collateralized by
$19,417,620 Federal Home Loan Bank, with
various rates and maturity dates, valued at
$19,370,112, $11,371,429 Federal Farm Credit
Bank, with various rates and maturity dates,
valued at $11,402,763............................... $30,000,000
30,000,000 Agreement with Fuji Securities Inc., 6.35%,
dated 03/31/95, to be repurchased at
$30,015,875, on 04/03/95 collateralized by
$20,000,000 Federal Home Loan Mortgage Corp.,
6.84%, due 2/28/96, valued at $20,180,200;
$10,422,000 Federal Home Loan Bank, with
various rates and maturity dates, valued at
$10,415,111......................................... 30,000,000
19,685,063 Agreement with Nomura Securities, 6.35% dated
03/31/95, to be repurchased at $19,695,480 on
04/03/95 collateralized by $5,017,468, Federal
National Mortgage Association, with various
rates and maturity dates, valued at $5,235,847;
$8,065,353 Federal Home Loan Bank, with various
rates and maturity dates, valued at $7,817,301;
$2,406,489 Student Loan Mortgage Association,
with various rates and maturity dates, valued
at $2,431,716; $2,286,365 Federal Home Loan
Mortgage Corporaton, with various rates and
maturity dates, valued at $2,234,391;
$2,012,773 Federal Farm Credit Bank, with
various rates and maturity dates, valued at
$2,034,438; $443,891 Tennessee Valley
Authority, with various rates and maturity
dates, valued at $470,093; $19,417,620 Federal
Home Loan Bank, with various rates and maturity
dates, valued at $19,370,112; $11,371,429
Federal Farm Credit Bank, with various rates
and maturity dates, valued at $11,402,763........... 19,685,063
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $79,685,063).................................. 79,685,063
-----------
</TABLE>
<TABLE>
<CAPTION>
TOTAL INVESTMENTS
<S> <C> <C>
(Cost $828,625,792*).................................... 100.49% $828,625,792
OTHER ASSETS & LIABILITIES (NET)........................ (0.49) (4,047,464)
------ ------------
NET ASSETS.............................................. 100.00% $824,578,328
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
See Notes to Financial Statements.
14
<PAGE>
UST MASTER FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
SHORT-TERM GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
--------- ------ -----------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 97.83%
$1,200,000 Student Loan Mortgage Association
03/03/98................................. 7.00% $ 1,198,908
U.S. Treasury Notes
13,400,000 04/30/96................................. 5.50 13,253,431
2,500,000 09/30/96................................. 6.50 2,492,968
2,500,000 08/15/97................................. 6.50 2,482,030
2,250,000 11/15/97................................. 7.38 2,275,312
415,000 10/31/99................................. 7.50 421,354
870,000 01/31/00................................. 7.75 892,565
1,650,000 02/29/00................................. 7.13 1,652,063
-----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $24,717,184)....................... 24,668,631
-----------
OTHER SHORT-TERM INVESTMENTS -- 0.97%
154,531 Dreyfus Treasury Cash Management Fund.... 6.04 154,531
90,542 Fidelity U.S. Treasury II Fund........... 6.02 90,542
-----------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $245,073).......................... 245,073
-----------
TOTAL INVESTMENTS
(Cost 24,962,257*)................................... 98.80% $24,913,704
OTHER ASSETS & LIABILITIES (NET)..................... 1.20 301,923
------ -----------
NET ASSETS........................................... 100.00% $25,215,627
====== ===========
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
See Notes to Financial Statements.
15
<PAGE>
UST MASTER FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
INTERMEDIATE-TERM MANAGED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
--------- ------ -------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 88.13%
$ 4,000,000 Federal Home Loan Mortgage
Corporation Discount Note.......... 5.95%+ 4/5/95 $ 3,997,355
122,252 Pool #218374....................... 10.50 7/1/02 127,264
2,000,000 Federal Home Loan Mortgage
Corporation/ Government National
Mortgage Association, Series 16
class PH........................... 6.75 4/25/21 1,818,420
Government National Mortgage
Association
270,981 Pool #195801....................... 8.50 1/15/17 274,793
362,801 Pool #195833....................... 8.50 4/15/17 367,905
270,625 Pool #212760....................... 8.50 4/15/17 274,433
139,975 Pool #334299....................... 8.00 5/15/23 138,751
4,728,611 Pool #366379....................... 6.50 12/15/23 4,273,506
1,962,626 Pool #367412....................... 6.00 11/15/23 1,709,335
2,912,041 Pool #376429....................... 6.50 3/15/24 2,631,772
2,000,000 Synthetic Off-the-Run Treasury,
Series 1994-1 ("SORT" represents
ownership in underlying U.S.
Treasury Strips)................... 6.00 2/15/09 1,741,716
5,000,000 U.S. Treasury Bond................. 9.38 2/15/06 5,765,625
1,000,000 U.S. Treasury Bond................. 7.25 5/15/16 966,875
400,000 U.S. Treasury Note................. 3.88 4/30/95 399,375
2,750,000 U.S. Treasury Note................. 7.25 2/15/98 2,774,062
300,000 U.S. Treasury Note................. 5.13 4/30/98 285,188
3,500,000 U.S. Treasury Note................. 7.00 4/15/99 3,501,092
4,000,000 U.S. Treasury Note................. 7.13 9/30/99 4,005,000
4,000,000 U.S. Treasury Note................. 7.50 10/31/99 4,061,248
2,000,000 U.S. Treasury Note................. 6.88 3/31/00 1,983,124
250,000 U.S. Treasury Note................. 6.25 2/15/03 235,469
1,000,000 U.S. Treasury Note................. 5.75 8/15/03 907,813
-----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $43,499,025)................. 42,240,121
-----------
CORPORATE BONDS -- 14.38%
2,000,000 Air Products & Chemicals........... 8.35 1/15/02 2,083,686
1,000,000 Eli Lilly.......................... 8.13 12/1/01 1,037,220
2,000,000 Ford Motor Credit Company.......... 8.20 2/15/02 2,042,608
2,000,000 Wachovia Corporation............... 6.38 2/1/09 1,726,786
-----------
TOTAL CORPORATE BONDS
(Cost $6,989,630).................. 6,890,300
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
--------- ------ --------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 0.96%
$188,088 Dreyfus Treasury Cash Management Fund.............. 6.04% $188,088
271,926 Fidelity U.S. Treasury II Fund..................... 6.02 271,926
--------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $460,014).................................... 460,014
--------
TOTAL INVESTMENTS
(Cost $50,948,669*).......................................... 103.47% $49,590,435
OTHER ASSETS & LIABILITIES
(NET)........................................................ (3.47) (1,661,987)
------ -----------
NET ASSETS.................................................... 100.00% $47,928,448
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$50,957,103.
+ Discount Rate.
See Notes to Financial Statements.
16
<PAGE>
UST MASTER FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
MANAGED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
----------- ------ -------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 79.15%
$ 1,000,000 Federal Home Loan Mortgage
Corporation........................ 5.95%+ 4/5/95 $ 999,669
5,000,000 Federal Home Loan Mortgage
Corporation........................ 7.71 6/21/04 4,950,375
10,000,000 Federal National Mortgage
Association........................ 7.55 6/10/04 9,829,800
14,795,423 Government National Mortgage
Association Pool #376533........... 7.50 6/15/24 14,286,904
9,980,179 Government National Mortgage
Association Pool #385985........... 8.50 12/15/24 10,120,580
5,000,000 Synthetic Off-the-Run Treasury,
Series 1994-1 ("SORT" represents
ownership in underlying U.S.
Treasury Strips)................... 6.00 2/15/09 4,354,290
3,000,000 U.S. Treasury Bond................. 9.38 2/15/06 3,459,375
9,500,000 U.S. Treasury Bond................. 7.25 5/15/16 9,185,313
5,000,000 U.S. Treasury Note................. 7.00 4/15/99 5,001,560
6,500,000 U.S. Treasury Note................. 5.75 8/15/03 5,900,784
-----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $68,435,265)................. 68,088,650
-----------
CORPORATE BONDS -- 19.56%
3,300,000 Abbott Laboratories................ 5.60 10/1/03 2,912,527
4,000,000 Central Illinois Public Service
Company............................ 7.50 7/1/07 3,888,300
5,000,000 Johnson & Johnson.................. 6.73 11/15/23 4,253,495
5,000,000 Wachovia Corporation............... 6.38 2/1/09 4,316,965
1,500,000 Wisconsin Electric Power Company... 7.25 8/1/04 1,454,357
-----------
TOTAL CORPORATE BONDS
(Cost $18,783,295)................. 16,825,644
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
----------- ------ -------- -----------
<C> <S> <C> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 0.12%
$ 74,300 Dreyfus Treasury Cash Management
Fund................................ 6.04% $ 74,300
27,600 Fidelity Cash Portfolio............. 6.02 27,600
-----------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $101,900)..................... 101,900
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $87,320,460*)........................................ 98.83% 85,016,194
OTHER ASSETS & LIABILITIES (NET)........................... 1.17 1,008,051
------ -----------
NET ASSETS................................................. 100.00% $86,024,245
====== ===========
</TABLE>
- --------
* For Federal tax purposes, the tax basis of investments aggregates
$87,669,665.
+ Discount Rate.
See Notes to Financial Statements.
17
<PAGE>
UST MASTER FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
UST Master Funds, Inc. ("Master Fund") was incorporated under the laws of the
State of Maryland on August 2, 1984 and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Master Fund currently offers shares in twenty managed investment portfolios,
each having its own investment objectives and policies.
The following is a summary of significant accounting policies for Treasury
Money Fund, Government Money Fund, Money Fund, Short-Term Government Securities
Fund, Intermediate-Term Managed Income Fund and Managed Income Fund (the
"Portfolios"). The financial statements for the remaining portfolios of Master
Fund and UST Master Tax-Exempt Funds, Inc. ("Master Tax-Exempt Fund") are
presented separately.
With regard to Treasury Money Fund, Government Money Fund and Money Fund, it
is Master Fund's policy, to the extent possible, to maintain a continuous net
asset value per share of $1.00. Each of these Portfolios has adopted certain
investment portfolio, valuation and dividend distribution policies to enable it
to do so. However, there can be no assurance that the net asset value per share
of these Portfolios will not vary. The net asset values of the shares in Short-
Term Government Securities Fund, Intermediate-Term Managed Income Fund and
Managed Income Fund will fluctuate as the market values of their portfolio
securities change in response to changing market rates of interest and other
factors.
(A) PORTFOLIO VALUATION:
Treasury Money Fund, Government Money Fund and Money Fund: Securities are
valued at amortized cost. Amortized cost valuation involves valuing an
instrument at its cost initially and, thereafter, assuming a constant
amortization to maturity of any discount or premium.
Short-Term Government Securities Fund, Intermediate-Term Managed Income
Fund and Managed Income Fund: Investments in securities that are traded on
a recognized stock exchange are valued at the last sale price on the
exchange on which such securities are primarily traded or at the last sale
price on the national securities market. Securities traded over-the-counter
are valued each business day on the basis of closing over-the-counter bid
prices. Securities for which there were no transactions are valued at the
average of the most recent bid prices (as calculated by an independent
pricing service (the "Service") based upon its evaluation of the market for
such securities) when, in the judgement of the Service, quoted bid prices
for securities are readily available and are representative of the bid side
of the market. Short-term debt instruments with remaining maturities of 60
days or less are valued at amortized cost, which approximates market value.
Securities and other assets for which market quotations are not readily
available are valued at fair value pursuant to guidelines adopted by Master
Fund's Board of Directors.
Portfolio securities held by Intermediate-Term Managed Income and Managed
Income Funds which are primarily traded on foreign securities exchanges are
generally valued at the preceding closing values of such securities on
their respective exchanges, except that when an
18
<PAGE>
occurrence subsequent to the time a value was so established is likely to
have changed such value, then the fair value of those securities will be
determined by consideration of other factors under the direction of the
Board of Directors. A security which is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security.
Investment in foreign debt securities having maturities of 60 days or
less are valued at amortized cost. All other foreign securities are valued
at the last current bid quotation if market quotations are available, or at
fair value as determined in accordance with policies established by the
Board of Directors. For valuation purposes, quotations of foreign
securities in foreign currency are converted to United States dollars
equivalent at the prevailing market rate on the day of conversion.
(B) SECURITY TRANSACTIONS AND INVESTMENT INCOME:
Security transactions are recorded on a trade date basis. Realized gains
and losses on investments sold are recorded on the basis of identified
cost. Interest income, adjusted for amortization of premiums and, when
appropriate, discounts on investments, is earned from settlement date and
is recorded on the accrual basis.
(C) REPURCHASE AGREEMENTS:
Master Fund may purchase portfolio securities from financial institutions
deemed to be creditworthy by the investment adviser subject to the seller's
agreement to repurchase and Master Fund's agreement to resell such
securities at mutually agreed upon prices. Securities purchased subject to
such repurchase agreements are deposited with Master Fund's custodian or
sub-custodian or are maintained in the Federal Reserve/Treasury book-entry
system and must have, at all times, an aggregate market value of not less
than 101% of the repurchase price (including accrued interest).
If the value of the underlying security, including accrued interest,
falls below the value of 101% of the repurchase price plus accrued
interest, Master Fund will require the seller to deposit additional
collateral by the next business day. Default or bankruptcy of the seller
may, however, expose the applicable Portfolio of Master Fund to possible
delay in connection with the disposition of the underlying securities or
loss to the extent that proceeds from a sale of the underlying securities
were less than the repurchase price under the agreement.
(D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Treasury Money Fund, Government Money Fund and Money Fund: Net investment
income dividends are declared daily and paid monthly. Net realized capital
gains, unless offset by any available capital loss carryforward, are
distributed to shareholders annually or more frequently to maintain a net
asset value of $1.00 per share.
Short-Term Government Securities Fund, Intermediate-Term Managed Income
Fund and Managed Income Fund: Dividends from net investment income are
declared daily and paid monthly. Net realized capital gains, unless offset
by any available capital loss carryforward, are distributed to shareholders
at least annually.
19
<PAGE>
Dividends and distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
deferral of losses on wash sales and post-October losses. During the year
ended March 31, 1995, certain amounts were reclassified between
undistributed/(distributions in excess of) net investment income and
accumulated net realized loss on investments.
In order to avoid a Federal excise tax, each Portfolio is required to
distribute certain minimum amounts of net realized capital gain and net
investment income for the respective periods ending October 31 and December
31 in each calendar year.
(E) FEDERAL TAXES:
It is the policy of Master Fund that each Portfolio continue to qualify
as a regulated investment company, if such qualification is in the best
interest of the shareholders, by complying with the requirements of the
Internal Revenue Code applicable to regulated investment companies, and by
distributing substantially all of its taxable earnings to its shareholders.
At March 31, 1995, the following Portfolios had approximate capital loss
carryforwards for Federal tax purposes available to offset future net
capital gains through the indicated expiration dates:
<TABLE>
<CAPTION>
EXPIRATION DATE MARCH 31,
----------------------------------
2000 2001 2002 2003 TOTAL
------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Treasury Money Fund........... -- -- $15,000 -- $ 15,000
Government Money Fund......... $ 1,000 $11,000 -- $ 48,000 60,000
Money Fund.................... -- 14,000 -- 21,000 35,000
Short-Term Government
Securities Fund.............. -- -- -- 444,000 444,000
Intermediate-Term Managed
Income Fund.................. 31,000 144,000 2,000 1,106,000 1,283,000
Managed Income Fund........... -- -- -- 4,985,000 4,985,000
</TABLE>
To the extent that such carryforwards are utilized, no capital gain
distributions will be made. During the year ended March 31, 1995, Treasury
Money Fund utilized capital loss carryforwards for Federal tax purposes
totaling approximately $3,000.
Net capital losses incurred after October 31 and within the taxable year
are deemed to arise on the first business day of a Portfolio's next taxable
year. Government Money Fund, Short-Term Government Securities Fund,
Intermediate-Term Managed Income Fund and Managed Income Fund incurred, and
expect to defer, net capital losses of approximately $1,000, $32,000,
$398,000 and $923,000, respectively, for the year ended March 31, 1995.
At March 31, 1995, aggregate gross unrealized appreciation for all
securities for which there was an excess of value over tax cost and
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over value were as follows:
20
<PAGE>
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ -------------- --------------
<S> <C> <C> <C>
Treasury Money Fund.............. -- $ (3,706) $ (3,706)
Short-Term Government Securities
Fund............................ $ 40,756 (89,309) (48,553)
Intermediate-Term Managed Income
Fund............................ 333,729 (1,700,397) (1,366,668)
Managed Income Fund.............. 217,261 (2,870,732) (2,653,471)
</TABLE>
(F) EXPENSE ALLOCATION:
Expenses directly attributable to a Portfolio are charged to that
Portfolio. Other expenses are allocated to the respective Portfolios based
on average net assets.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS
United States Trust Company of New York ("U.S. Trust") serves as the
investment adviser to Master Fund. For the services provided pursuant to the
Investment Advisory Agreements, U.S. Trust is entitled to receive a fee,
computed daily and paid monthly, at the annual rates of .25% of the average
daily net assets of Government Money Fund and Money Fund, .30% of the average
daily net assets of Treasury Money Fund and Short-Term Government Securities
Fund, .35% of the average daily net assets of Intermediate-Term Managed Income
Fund and .75% of the average daily net assets of Managed Income Fund.
Mutual Funds Service Company ("MFSC"), an affiliate of U.S. Trust, and
Concord Holding Corporation (the "Administrators") serve as administrators to
Master Fund. For the services provided to the Portfolios, the Administrators
are entitled jointly to annual fees, computed daily and paid monthly, based on
the combined aggregate average daily net assets of Master Fund (excluding
Master Fund's international equity portfolios) and Master Tax-Exempt Fund, an
affiliated investment company, as follows: .200% of the first $200 million,
.175% of the next $200 million, and .150% over $400 million. Administration
fees payable by each Portfolio of the two investment companies are determined
in proportion to the relative average daily net assets of the respective
Portfolios for the period. After such allocation has been made, the
Administrators are entitled jointly to an annual minimum fee of $18,000 and
$39,000 for the first and second full years, respectively, after the
commencement of operations and $50,000 for each full year thereafter, from
Short-Term Government Securities Fund and Intermediate-Term Managed Income
Fund.
On April 26, 1995, Master Fund's Board of Directors voted not to renew the
Fund's administration agreement with Concord Holding Corporation and the
Fund's distribution agreement with UST Distributors, a wholly-owned subsidiary
of Concord Holding Corporation after their July 31, 1995 expiration, and
authorized the Fund to enter into negotiations for a new co-administrator to
serve with MFSC, and a new distributor.
From time to time, as they may deem appropriate in their sole discretion, or
pursuant to applicable state expense limitations, U.S. Trust and the
Administrators may undertake to waive a portion or all of the fees payable to
them and also may reimburse the Portfolios for a portion of other expenses.
Until further notice to Master Fund, U.S. Trust and/or the Administrators
intend to voluntarily waive fees and reimburse expenses to the extent
necessary for Short-Term Government
21
<PAGE>
Securities Fund and Intermediate-Term Managed Income Fund to maintain an annual
expense ratio of not more than .62% and .72%, respectively. For the year ended
March 31, 1995, U.S. Trust voluntarily waived fees totalling $12,476 for Short-
Term Government Securities Fund.
In addition, currently, U.S. Trust is voluntarily limiting its investment
advisory fee to .65% of the average daily net assets for Managed Income Fund.
For the year ended March 31, 1995, U.S. Trust waived investment advisory fees
totaling $94,879.
Master Fund has also entered into shareholder servicing agreements with
various service organizations (which may include affiliates of U.S. Trust)
requiring them to provide administrative support services to their customers
owning shares of the Portfolios. As a consideration for the administrative
services provided by each service organization to its customers, each Portfolio
will pay the service organizations an administrative service fee at the annual
rate of up to .40% of the average daily net asset value of its shares held by
the service organizations' customers. Such services may include assisting in
processing purchase, exchange and redemption requests; transmitting and
receiving funds in connection with customer orders to purchase, exchange or
redeem shares; and providing periodic statements. Until further notice to
Master Fund, U.S. Trust and the Administrators have voluntarily agreed to waive
investment advisory and administration fees payable by each Portfolio in an
amount equal to the administrative service fees payable by such Portfolio. For
the year ended March 31, 1995, U.S. Trust and the Administrators waived
investment advisory and administration fees in amounts equal to the
administrative service fees for the Portfolios as set forth below:
<TABLE>
<CAPTION>
U.S. TRUST ADMINISTRATORS
---------- --------------
<S> <C> <C>
Treasury Money Fund............................. $ 45,366 $ 351
Government Money Fund........................... 173,321 1,087
Money Fund...................................... 204,060 --
Short-Term Government Securities Fund........... 1,832 2,634
Intermediate-Term Managed Income Fund........... 8,255 19
Managed Income Fund............................. 27,120 1,051
</TABLE>
Certain sales of Master Fund's shares are subject to a maximum sales charge
of 4 1/2% of the offering price. Shares in the Fund are sold on a continuous
basis by Master Fund's sponsor and distributor, UST Distributors, Inc.
Each Director of Master Fund receives an annual fee of $9,000, plus a meeting
fee of $1,500 for each meeting attended, and is reimbursed for expenses
incurred for attending meetings. The Chairman receives an additional annual fee
of $5,000. No person who is an officer, director or employee of U.S. Trust or
the Administrators, or of any parent or subsidiary thereof, who serves as an
officer, director or employee of Master Fund receives any compensation from
Master Fund.
U.S. Trust serves as custodian of Master Fund's assets and as shareholder
servicing and dividend disbursing agent. MFSC serves as sub-shareholder
servicing agent.
22
<PAGE>
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities, excluding short-term investments, for the
portfolios aggregated:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Short-Term Government Securities Fund................ $ 43,916,484 $ 38,677,273
Intermediate-Term Managed Income Fund................ 234,283,892 214,832,718
Managed Income Fund.................................. 421,773,999 398,369,068
</TABLE>
4. COMMON STOCK:
Master Fund currently offers twenty classes of shares, each representing
interests in one of twenty separate Portfolios. Authorized capital for each
Portfolio is as follows: 500 million shares each of Treasury Money Fund, Short-
Term Government Securities Fund and Intermediate-Term Managed Income Fund,
1,500 million shares each of Government Money Fund and Money Fund and 375
million shares of Managed Income Fund.
Each share has a par value of $.001 and represents an equal proportionate
interest in the particular Portfolio with other shares of the same Portfolio,
and is entitled to such dividends and distributions of taxable earnings on the
assets belonging to such Portfolio as are declared at the discretion of Master
Fund's Board of Directors. Since Treasury Money Fund, Government Money Fund and
Money Fund have sold, reinvested and redeemed shares only at a constant net
asset value of $1.00 per share, the number of shares represented by such sales,
reinvestments and redemptions is the same as the amounts shown below for such
transactions.
<TABLE>
<CAPTION>
TREASURY MONEY FUND
---------------------------------
YEAR ENDED YEAR ENDED
03/31/95 03/31/94
--------------- ----------------
<S> <C> <C>
Sold........................................ $ 1,799,954,618 $ 1,332,060,885
Issued as reinvestment of dividends......... 821,226 872,630
Redeemed.................................... (1,858,530,639) (1,306,041,816)
--------------- ----------------
Net Increase/(Decrease)..................... $ (57,754,795) $ 26,891,699
=============== ================
<CAPTION>
GOVERNMENT MONEY FUND
---------------------------------
YEAR ENDED YEAR ENDED
03/31/95 03/31/94
--------------- ----------------
<S> <C> <C>
Sold........................................ $ 7,717,589,470 $ 7,804,778,375
Issued in connection with USAffinity acqui-
sition (Note 6)............................ 3,793,021 --
Issued as reinvestment of dividends......... 2,308,837 1,762,403
Redeemed.................................... (8,032,775,942) (7,482,123,974)
--------------- ----------------
Net Increase/(Decrease)..................... $ (309,084,614) $ 324,416,804
=============== ================
<CAPTION>
MONEY FUND
---------------------------------
YEAR ENDED YEAR ENDED
03/31/95 03/31/94
--------------- ----------------
<S> <C> <C>
Sold........................................ $ 9,613,086,830 $ 12,638,207,443
Issued as reinvestment of dividends......... 1,141,513 525,571
Redeemed.................................... (9,525,691,868) (12,686,680,394)
--------------- ----------------
Net Increase/(Decrease)..................... $ 88,536,475 $ (47,947,380)
=============== ================
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT SECURITIES FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/95 03/31/94
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 1,490,831 $ 10,254,964 3,003,438 $ 21,184,811
Issued as reinvestment of
dividends................. 13,755 94,544 9,743 68,545
Redeemed................... (1,486,088) (10,196,015) (1,267,635) (8,949,036)
---------- ------------ ---------- ------------
Net Increase............... 18,498 $ 153,493 1,745,546 $ 12,304,320
========== ============ ========== ============
<CAPTION>
INTERMEDIATE-TERM MANAGED INCOME FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/95 03/31/94
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 2,850,920 $ 19,063,074 5,113,839 $ 37,117,206
Issued in connection with
USAffinity
acquisition (Note 6)...... 337,729 2,265,302 -- --
Issued as reinvestment of
dividends................. 26,709 178,294 14,123 101,436
Redeemed................... (2,348,448) (15,609,625) (1,607,474) (11,598,638)
---------- ------------ ---------- ------------
Net Increase............... 866,910 $ 5,897,045 3,520,488 $ 25,620,004
========== ============ ========== ============
<CAPTION>
MANAGED INCOME FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/95 03/31/94
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 2,677,985 $ 22,223,163 5,757,196 $ 54,572,792
Issued as reinvestment of
dividends................. 197,556 1,636,719 436,291 4,025,965
Redeemed................... (5,561,986) (45,666,661) (4,725,285) (45,483,933)
---------- ------------ ---------- ------------
Net Increase/(Decrease).... (2,686,445) $(21,806,779) 1,468,202 $ 13,114,824
========== ============ ========== ============
</TABLE>
5. ORGANIZATION COSTS
Master Fund has borne all costs in connection with the initial organization
of new portfolios, including the fees for registering and qualifying its shares
for distribution under Federal and state securities regulations. All such costs
are being amortized on the straight-line basis over periods of five years from
the dates on which each Portfolio commenced operations.
6. ASSET ACQUISITION
On March 10, 1995, Government Money Fund and Intermediate-Term Managed Income
Fund acquired all of the assets and liabilities, other than unamortized
organization costs, of the USAffinity Treasury Money Fund and the USAffinity
Government Income Fund, respectively, pursuant to a plan of reorganization
approved by Master Fund's Board of Directors on November 18, 1994, USAffinity
Fund's Board of Directors on December 28, 1994 and the USAffinity Fund's
shareholders on March 9, 1995. These transactions were accounted for as tax-
free exchanges of shares. On March 10, 1995, net assets of $3,793,021 were
transferred from USAffinity Treasury Money Fund into Government Money Fund in
exchange for 3,793,021 shares of Government Money Fund and net assets of
$2,265,302 were transferred from USAffinity Government Income Fund into
Intermediate-Term Managed Income Fund in exchange for 337,729 shares of
Intermediate-Term Managed Income Fund.
24
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders
and Board of Directors
UST Master Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Treasury Money, Government
Money, Money, Short-Term Government Securities, Intermediate-Term Managed
Income and Managed Income Portfolios (six of the portfolios constituting the
UST Master Funds, Inc.) as of March 31, 1995, 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 periods indicated therein. 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 verification by examination of securities
owned as of March 31, 1995, confirmation by correspondence with the custodian
and brokers, or other appropriate auditing procedures where replies from
brokers were not received. 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 each
of the above mentioned Portfolios of UST Master Funds, Inc. at March 31, 1995,
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 financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
May 19, 1995
25
<PAGE>
USTFXIA395
