<PAGE>
[LOGO OF UST APPEARS HERE]
MASTER FUNDS, INC.
MASTER TAX-EXEMPT
Management Investment Companies FUNDS, INC.
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Money Fund For initial purchase information, current
Government Money Fund prices, yield and performance information
Treasury Money Fund and existing account information,call (800)
Short-Term Tax-Exempt Fund 446-1012.
(From overseas, call (617) 557-8280.)
73 Tremont Street
Boston, Massachusetts 02108-3913
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This Prospectus describes the Money Fund, Government Money Fund and Treasury
Money Fund, three separate diversified portfolios offered to investors by UST
Master Funds, Inc. ("Master Fund") and the Short-Term Tax-Exempt Fund, a di-
versified portfolio offered by UST Master Tax-Exempt Funds, Inc. ("Master Tax-
Exempt Fund" and, collectively with Master Fund, the "Companies"). Master Fund
and Master Tax-Exempt Fund are open-end, management investment companies. Each
portfolio (individually, a "Fund" and collectively, the "Funds") has its own
investment objective and policies:
MONEY FUND'S investment objective is to seek as high a level of current in-
come as is consistent with liquidity and stability of principal. The Fund will
generally invest in money market instruments, including bank obligations, com-
mercial paper and U.S. Government obligations.
GOVERNMENT MONEY FUND'S investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund will generally invest in short-term obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and repurchase agree-
ments collateralized by such obligations.
TREASURY MONEY FUND'S investment objective is to seek current income with li-
quidity and stability of principal. The Fund invests primarily in direct
short-term obligations of the U.S. Treasury and certain agencies or instrumen-
talities of the U.S. Government with a view toward providing interest income
that is generally considered exempt from state and local income taxes. Under
normal market conditions, at least 65% of the Fund's total assets will be in-
vested in direct U.S. Treasury obligations. The Fund will not enter into re-
purchase agreements.
SHORT-TERM TAX-EXEMPT FUND'S investment objective is to seek a moderate level
of current interest income exempt from Federal income taxes consistent with
stability of principal. The Fund (hereinafter referred to as the "Short-Term
Fund") will invest substantially all of its assets in high-quality short-term
Municipal Securities.
Each of the Funds is sponsored and distributed by Edgewood Services, Inc. and
advised by United States Trust Company of New York ("Investment Adviser" or
"U.S. Trust").
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should consider before investing. Investors should read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated August 1, 1995 and containing additional information about
the Funds has been filed with the Securities and Exchange Commission. The cur-
rent Statement of Additional Information is available to investors without
charge by writing to the address shown above or by calling (800) 446-1012. The
Statement of Additional Information, as it may be supplemented from time to
time, is incorporated by reference in its entirety into this Prospectus.
SHARES IN THE FUNDS ("SHARES") ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARAN-
TEED OR ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, ITS PARENT OR
AFFILIATES AND THE SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY OR OBLI-
GATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY. THE FUNDS SEEK TO MAINTAIN THEIR NET ASSET VALUE PER SHARE AT $1.00
FOR PURPOSES OF PURCHASES AND REDEMPTIONS, ALTHOUGH THERE CAN BE NO ASSURANCE
THAT THEY WILL DO SO ON A CONTINUOUS BASIS. INVESTMENT IN THE FUNDS INVOLVES
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
August 1, 1995
<PAGE>
EXPENSE SUMMARY
<TABLE>
<CAPTION>
GOVERNMENT TREASURY
MONEY MONEY MONEY SHORT-TERM
FUND FUND FUND FUND
----- ---------- -------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load on Purchases
(as a percentage of offering price)..... None None None None
Sales Load on Reinvested Dividends....... None None None None
Deferred Sales Load...................... None None None None
Redemption Fees/1/....................... None None None None
Exchange Fees............................ None None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees (after fee waivers)/2/..... .22% .22% .28% .22%
12b-1 Fees............................... None None None None
Other Operating Expenses
Administrative Servicing Fee............ .03% .03% .02% .03%
Other Expenses.......................... .24% .25% .25% .24%
----- ----- ----- ----
Total Operating Expenses (after fee
waivers)/2/............................. .49% .50% .55% .49%
===== ===== ===== ====
</TABLE>
-------
1. The Funds' transfer agent imposes a direct $8.00 charge on each wire redemp-
tion by noninstitutional (i.e. individual) investors which is not reflected
in the expense ratios presented herein. Shareholder organizations may charge
their customers transaction fees in connection with redemptions. See "Re-
demption Procedures."
2. The Investment Adviser and Administrators may from time to time voluntarily
waive part of their respective fees, which waivers may be terminated at any
time. Until further notice, the Investment Adviser and/or Administrators in-
tend to voluntarily waive fees in an amount equal to the Administrative Ser-
vicing Fee. Without such fee waivers, "Advisory Fees" would be .25%, .25%,
.30% and .25% and "Total Operating Expenses" would be .52%, .53%, .57% and
.52% for the Money, Government Money, Treasury Money and Short-Term Funds,
respectively.
2
<PAGE>
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption of your investment at the end of the
following periods.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Fund...................................... $ 5 $16 $27 $62
Government Money Fund........................... 5 16 28 63
Treasury Money Fund............................. 6 18 31 69
Short-Term Fund................................. 5 16 27 62
</TABLE>
The foregoing expense summary and example are intended to assist the investor
in understanding the costs and expenses that an investor in Shares of the Funds
will bear directly or indirectly. The expense summary sets forth advisory and
other expenses payable with respect to Shares of the Funds for the fiscal year
ended March 31, 1995. For more complete descriptions of the Funds' operating
expenses, see "Management of the Funds" in this Prospectus and the financial
statements and notes incorporated by reference in the Statement of Additional
Information.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE
GREATER OR LOWER THAN THOSE SHOWN IN THE EXPENSE SUMMARY AND EXAMPLE.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables include selected data for a Share outstanding throughout
each period and other performance information derived from the financial state-
ments included in Master Fund's and Master Tax-Exempt Fund's Annual Reports to
Shareholders for the fiscal year ended March 31, 1995 (the "Financial State-
ments"). The information contained in the Financial Highlights for each period
has been audited by Ernst & Young LLP, Master Fund's and Master Tax-Exempt
Fund's independent auditors. The following tables should be read in conjunction
with the Financial Statements and notes thereto.
MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986/1/
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Income From
Investment
Operations
Net Investment
Income......... 0.04494 0.02780 0.03234 0.05165 0.07589 0.08454 0.07698 0.06260 0.06123 0.06824
Net Gains or
(Losses) on
Securities
(both realized
and
unrealized).... 0.00002 0.00000 0.00000 0.00017 0.00001 0.00000 0.00000 0.00000 0.00000 0.00000
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total From
Investment
Operations..... 0.04496 0.02780 0.03234 0.05182 0.07590 0.08454 0.07698 0.06260 0.06123 0.06824
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Less
Distributions
Dividends From
Net Investment
Income......... (0.04496) (0.02780) (0.03234) (0.05165) (0.07589) (0.08454) (0.07698) (0.06260) (0.06123) (0.06824)
Distributions
From Net
Realized Gain
on Investments. 0.00000 0.00000 0.00000 (0.00019) 0.00000 0.00000 0.00000 0.00000 (0.00001) 0.00000
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total
Distributions.. (0.04496) (0.02780) (0.03234) (0.05184) (0.07589) (0.08454) (0.07698) (0.06260) (0.06124) (0.06905)
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net Asset Value,
End of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Total Return..... 4.59% 2.82% 3.25% 5.19% 7.64% 8.71% 7.76% 6.28% 6.30% 7.04%
Ratios/Supplemental
Data
Net Assets, End
of Period
(in millions).. $ 824.58 $ 736.08 $ 784.02 $ 574.27 $ 471.32 $ 432.37 $ 369.69 $ 321.27 $ 373.38 $ 174.21
Ratio of Net
Operating
Expenses to
Average Net
Assets......... 0.49% 0.51% 0.51% 0.51% 0.52% 0.55% 0.56% 0.55% 0.56% 0.60%/2/
Ratio of Gross
Operating
Expenses to
Average Net
Assets......... 0.52% 0.51% 0.51% 0.51% 0.52% 0.55% 0.56% 0.55% 0.56% 0.74%/2/
Ratio of Net
Income to
Average Net
Assets......... 4.49% 2.78% 3.21% 5.11% 7.56% 8.42% 7.71% 6.25% 6.05% 7.41%/2/
</TABLE>
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1.Inception date of the Fund was May 3, 1985.
2. Annualized.
4
<PAGE>
GOVERNMENT MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986/1/
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Income From
Investment
Operations
Net Investment
Income......... 0.04397 0.02736 0.03205 0.05069 0.07379 0.08379 0.07498 0.06111 0.05941 0.06560
Net Gains or
(Losses) on
Securities
(both realized
and
unrealized).... 0.00000 0.00000 0.00000 0.00002 0.00008 0.00000 0.00000 (0.00002) 0.00000 0.00000
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total From
Investment
Operations..... 0.04397 0.02736 0.03205 0.05071 0.07387 0.08379 0.07498 0.06109 0.05941 0.06560
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Less
Distributions
Dividends From
Net Investment
Income......... (0.04397) (0.02736) (0.03205) (0.05069) (0.07379) (0.08379) (0.07498) (0.06111) (0.05941) (0.06560)
Distributions
From Net
Realized Gain
on Investments. 0.00000 0.00000 0.00000 (0.00005) (0.00005) (0.00001) 0.00000 (0.00023) (0.00016) 0.00000
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total
Distributions.. (0.04397) (0.02736) (0.03205) (0.05074) (0.07384) (0.08380) (0.07498) (0.06134) (0.05957) (0.06686)
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net Asset Value,
End of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Total Return..... 4.49% 2.77% 3.20% 5.09% 7.31% 8.30% 7.49% 6.44% 6.11% 6.92%
Ratios/Supplemental
Data
Net Assets, End
of Period
(in millions).. $ 725.77 $1,034.94 $ 710.49 $ 740.69 $ 700.22 $ 392.02 $ 241.13 $ 198.32 $ 191.51 $ 63.16
Ratio of Net
Operating
Expenses to
Average Net
Assets......... 0.50% 0.50% 0.50% 0.50% 0.50% 0.57% 0.57% 0.56% 0.56% 0.62%/2/
Ratio of Gross
Operating
Expenses to
Average Net
Assets......... 0.53% 0.50% 0.50% 0.50% 0.50% 0.57% 0.57% 0.56% 0.56% 0.77%/2/
Ratio of Net
Income to
Average Net
Assets......... 4.38% 2.74% 3.20% 5.09% 7.31% 8.30% 7.49% 6.10% 5.81% 7.26%/2/
</TABLE>
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NOTES:
1.Inception date of the Fund was May 8, 1985.
2.Annualized.
5
<PAGE>
SHORT-TERM TAX-EXEMPT FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986/1/
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Income From
Investment
Operations
Net Investment
Income......... 0.02825 0.01938 0.02395 0.03849 0.05292 0.05808 0.05348 0.04572 0.04233 0.04171
Net Gains or
(Losses) on
Securities
(both realized
and
unrealized).... 0.00000 0.00000 0.00000 0.00000 (0.00001) 0.00000 0.00000 0.00000 0.00000 0.00000
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total From
Investment
Operations..... 0.02825 0.01938 0.02395 0.03849 0.05291 0.05808 0.05348 0.04572 0.04233 0.04171
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Less
Distributions
Dividends From
Net Investment
Income......... (0.02825) (0.01938) (0.02395) (0.03849) (0.05292) (0.05808) (0.05348) (0.04572) (0.04233) (0.04171)
Distributions
From Net
Realized Gain
on Investments. 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total
Distributions.. (0.02825) (0.01938) (0.02395) (0.03849) (0.05292) (0.05808) (0.05348) (0.04572) (0.04233) (0.04238)
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net Asset Value,
End of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Total Return..... 2.86% 1.96% 2.42% 3.92% 5.42% 5.97% 5.48% 4.67% 4.32% 4.99%
Ratios/Supplemental
Data
Net Assets, End
of Period
(in millions).. $ 814.89 $ 694.58 $ 659.33 $ 666.35 $ 662.34 $ 600.06 $ 525.30 $ 580.98 $ 561.08 $ 296.73
Ratio of Net
Operating
Expenses to
Average Net
Assets......... 0.49% 0.52% 0.52% 0.52% 0.53% 0.55% 0.53% 0.52% 0.54% 0.64%/2/
Ratio of Gross
Operating
Expenses to
Average Net
Assets......... 0.52% 0.52% 0.52% 0.52% 0.53% 0.55% 0.53% 0.52% 0.54% 0.75%/2/
Ratio of Net
Income to
Average Net
Assets......... 2.85% 1.94% 2.39% 3.84% 5.28% 5.79% 5.33% 4.58% 4.18% 5.28%/2/
</TABLE>
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NOTES:
1. Inception date of the Fund was May 24, 1985.
2. Annualized.
6
<PAGE>
TREASURY MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------
1995 1994 1993 1992 1991/1/
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Income From Investment
Operations
Net Investment Income. 0.04165 0.02590 0.02987 0.04731 0.00782
Net Gains or (Losses)
on Securities
(both realized and
unrealized).......... 0.00000 0.00000 0.00000 0.00036 0.00001
--------- --------- --------- --------- ---------
Total From Investment
Operations........... 0.04165 0.02590 0.02987 0.04767 0.00783
--------- --------- --------- --------- ---------
Less Distributions
Dividends From Net
Investment Income.... (0.04165) (0.02590) (0.02987) (0.04731) (0.00782)
Distributions From Net
Realized Gain on
Investments.......... 0.00000 0.00000 (0.00030) (0.00011) 0.00000
--------- --------- --------- --------- ---------
Total Distributions... (0.04165) (0.02590) (0.03017) (0.04742) (0.00782)
--------- --------- --------- --------- ---------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return............ 4.25% 2.62% 3.06% 4.85% 0.78%
Ratios/Supplemental Data
Net Assets, End of
Period (in millions). $ 196.93 $ 254.68 $ 227.79 $ 172.29 $ 110.37
Ratio of Net Operating
Expenses to Average
Net Assets........... 0.55% 0.58% 0.58% 0.52% 0.09%/2/
Ratio of Gross
Operating Expenses to
Average Net Assets... 0.57% 0.58% 0.58% 0.57% 0.60%/2/
Ratio of Net Income to
Average Net Assets... 4.09% 2.59% 2.97% 4.60% 5.98%/2/
</TABLE>
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NOTES:
1. Inception date of the Fund was February 13, 1991.
2. Annualized.
7
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Investment Adviser uses its best efforts to achieve the investment objec-
tive of each Fund, although its achievement cannot be assured. The investment
objective of each Fund may not be changed without a vote of the holders of a
majority of the particular Fund's outstanding Shares (as defined under "Miscel-
laneous"). Except as noted below in "Investment Limitations," the investment
policies of each Fund may be changed without a vote of the holders of a major-
ity of the outstanding Shares of such Fund.
Each Fund uses the amortized cost method to value securities in its portfolio
and has a dollar-weighted portfolio maturity not exceeding 90 days.
MONEY FUND
The Money Fund's investment objective is to seek as high a level of current
income as is consistent with liquidity and stability of principal. The Fund
will generally invest in money market instruments, such as bank certificates of
deposit, bankers' acceptances, commercial paper (including variable and float-
ing rate instruments) and corporate bonds with remaining maturities of 13
months or less, as well as obligations issued or guaranteed by the U.S. Govern-
ment, its agencies or instrumentalities and repurchase agreements collateral-
ized by such obligations. Additional information about the Fund's policies and
portfolio instruments is set forth below under "Portfolio Instruments and Other
Investment Information."
GOVERNMENT MONEY FUND
The Government Money Fund's investment objective is to seek as high a level of
current income as is consistent with liquidity and stability of principal. The
Fund will invest in obligations with remaining maturities of 13 months or less
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements collateralized by such obligations. See "Portfolio
Instruments and Other Investment Information" for information on other portfo-
lio instruments in which the Fund may invest.
TREASURY MONEY FUND
The Treasury Money Fund's investment objective is to seek current income with
liquidity and stability of principal. The Fund invests primarily in direct ob-
ligations of the U.S. Treasury with remaining maturities of 13 months or less,
such as Treasury bills and notes. Under normal market conditions, the Fund will
invest at least 65% of its total assets in direct U.S. Treasury obligations.
The Fund may also from time to time invest in obligations with remaining matu-
rities of 13 months or less issued or guaranteed as to principal and interest
by certain agencies or instrumentalities of the U.S. Government, such as the
Farm Credit System Financial Assistance Corporation, Federal Financing Bank,
General Services Administration, Federal Home Loan Banks, Farm Credit System,
Tennessee Valley Authority and the Student Loan Marketing Association. Income
on direct investments in U.S. Treasury securities and obligations of the afore-
mentioned agencies and instrumentalities is generally not subject to state and
local income taxes by reason of Federal law. In addition, the Fund's dividends
from income that is attributable to such investments will also be exempt in
most states from state and local income taxes. Shareholders in a particular
state should determine through consultation with their own tax advisors whether
and to what extent dividends payable by the Treasury Money Fund from its in-
vestments will be considered by the state to have retained exempt status, and
whether the Fund's capital gain and other income, if any, when distributed will
be subject to the state's income tax. See "Taxes--State and Local." The Trea-
sury Money Fund will not enter into repurchase agreements.
SHORT-TERM FUND
The Short-Term Fund's investment objective is to seek a moderate level of cur-
rent interest income exempt from Federal income taxes consistent with stability
of principal. The Fund will invest substantially all of its assets in high-
quality debt obligations exempt from Federal income tax issued by or on behalf
of states, territories, and possessions of the United
8
<PAGE>
States, the District of Columbia, and their authorities, agencies, instrumen-
talities, and political subdivisions ("Municipal Securities"). Portfolio secu-
rities in the Fund will generally have remaining maturities of not more than
13 months. (See "Portfolio Instruments and Other Investment Information.")
The Short-Term Fund is designed for investors in relatively high tax brackets
who are seeking a moderate amount of tax-free income with stability of princi-
pal and less price volatility than would normally be associated with interme-
diate-term and long-term Municipal Securities.
The Short-Term Fund invests in Municipal Securities which are determined by
the Investment Adviser to present minimal credit risks. As a matter of funda-
mental policy, except during temporary defensive periods, the Fund will main-
tain at least 80% of its assets in tax-exempt obligations. (This policy may
not be changed with respect to the Fund without the vote of the holders of a
majority of its outstanding Shares). However, from time to time on a temporary
defensive basis due to market conditions, the Short-Term Fund may hold
uninvested cash reserves or invest in taxable obligations in such proportions
as, in the opinion of the Investment Adviser, prevailing market or economic
conditions may warrant. Uninvested cash reserves will not earn income. Should
the Fund invest in taxable obligations, it would purchase: (i) obligations of
the U.S. Treasury; (ii) obligations of agencies and instrumentalities of the
U.S. Government; (iii) money market instruments such as certificates of depos-
it, commercial paper, and bankers' acceptances; (iv) repurchase agreements
collateralized by U.S. Government obligations or other money market instru-
ments; or (v) securities issued by other investment companies that invest in
high-quality, short-term securities.
The Short-Term Fund may also invest from time to time in "private activity
bonds" (see "Types of Municipal Securities" below), the interest on which is
treated as a specific tax preference item under the Federal alternative mini-
mum tax. Investments in such securities, however, will not exceed under normal
market conditions 20% of the Fund's total assets when added together with any
taxable investments by the Fund.
Although the Short-Term Fund does not presently intend to do so on a regular
basis, it may invest more than 25% of its assets in Municipal Securities the
interest on which is paid solely from revenues of similar projects, if such
investment is deemed necessary or appropriate by the Investment Adviser. To
the extent that the Fund's assets are concentrated in Municipal Securities
payable from revenues on similar projects, the Fund will be subject to the pe-
culiar risks presented by such projects to a greater extent than it would be
if the Fund's assets were not so concentrated.
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION
GOVERNMENT OBLIGATIONS
Government obligations acquired by the Money, Government Money, Treasury
Money and Short-Term Funds include obligations issued or guaranteed by the
U.S. Government, its agencies and instrumentalities. Such investments may in-
clude obligations issued by the Farm Credit System Financial Assistance Corpo-
ration, the Federal Financing Bank, the General Services Administration, Fed-
eral Home Loan Banks, the Tennessee Valley Authority and the Student Loan Mar-
keting Association. Obligations of certain agencies and instrumentalities of
the U.S. Government are supported by the full faith and credit of the U.S.
Treasury; others are supported by the right of the issuer to borrow from the
Treasury; others are supported by the discretionary authority of the U.S. Gov-
ernment to purchase the agency's obligations; still others are supported only
by the credit of the instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-sponsored in-
strumentalities if it is not obligated to do so by law. Obligations of such
instrumentalities will be purchased only when the Investment Adviser believes
that the credit risk with respect to the instrumentality is minimal.
9
<PAGE>
Securities issued or guaranteed by the U.S. Government have historically in-
volved little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns shares of a Fund.
As stated above, the Treasury Money Fund will purchase primarily direct obli-
gations of the U.S. Treasury and obligations of those agencies or instrumental-
ities of the U.S. Government interest income from which is generally not sub-
ject to state and local income taxes.
MONEY MARKET INSTRUMENTS
"Money market instruments" that may be purchased by the Money, Government Mon-
ey, and Short-Term Funds in accordance with their investment objectives and
policies stated above include, among other things, bank obligations, commercial
paper and corporate bonds with remaining maturities of 13 months or less.
Bank obligations include bankers' acceptances, negotiable certificates of de-
posit, and non-negotiable time deposits earning a specified return and issued
by a U.S. bank which is a member of the Federal Reserve System or insured by
the Bank Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"),
or by a savings and loan association or savings bank which is insured by the
Savings Association Insurance Fund of FDIC. Bank obligations acquired by the
Money Fund may also include U.S. dollar-denominated obligations of foreign
branches of U.S. banks and obligations of domestic branches of foreign banks.
Investments in bank obligations are limited to the obligations of financial in-
stitutions having more than $2 billion in total assets at the time of purchase.
Investments in bank obligations of foreign branches of domestic financial in-
stitutions or of domestic branches of foreign banks are limited so that no more
than 5% of the value of the Fund's total assets may be invested in any one
branch, and that no more than 20% of the Fund's total assets at the time of
purchase may be invested in the aggregate in such obligations. Investments in
non-negotiable time deposits are limited to no more than 5% of the value of a
Fund's total assets at time of purchase, and are further subject to the overall
10% limit on illiquid securities.
Investments in obligations of foreign branches of U.S. banks and of U.S.
branches of foreign banks may subject the Money Fund to additional investment
risks, including future political and economic developments, the possible impo-
sition of withholding taxes on interest income, possible seizure or national-
ization of foreign deposits, the possible establishment of exchange controls,
or the adoption of other foreign governmental restrictions which might ad-
versely affect the payment of principal and interest on such obligations. In
addition, foreign branches of U.S. banks and U.S. branches of foreign banks may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those applicable to do-
mestic branches of U.S. banks. Investments in the obligations of U.S. branches
of foreign banks or foreign branches of U.S. banks will be made only when the
Investment Adviser believes that the credit risk with respect to the instrument
is minimal.
VARIABLE AND FLOATING RATE INSTRUMENTS
Commercial paper may include variable and floating rate instruments. While
there may be no active secondary market with respect to a particular instrument
purchased by a Fund, the Fund may, from time to time as specified in the in-
strument, demand payment of the principal of the instrument or may resell the
instrument to a third party. The absence of an active secondary market, howev-
er, could make it difficult for a Fund to dispose of the instrument if the is-
suer defaulted on its payment obligation or during periods that the Fund is not
entitled to exercise its demand rights, and the Fund could, for this or other
reasons, suffer a loss with respect to such instrument. While the Funds will in
general invest only in securities that mature within 13 months of date of pur-
chase,
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they may invest in variable and floating rate instruments which have nominal
maturities in excess of 13 months if such instruments have demand features that
comply with conditions established by the Securities and Exchange Commission
("SEC") (see "Additional Information on Portfolio Instruments--Variable and
Floating Rate Instruments" in the Statement of Additional Information).
Some of the instruments purchased by the Government Money and Treasury Money
Funds may also be issued as variable and floating rate instruments. However,
since they are issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, they may have a more active secondary market.
QUALITY OF INVESTMENTS
The Funds may only invest in: (i) securities in the two highest rating catego-
ries of an NRSRO, provided that if they are rated by more than one Nationally
Recognized Statistical Rating Organization ("NRSRO"), at least one other NRSRO
rates them in one of its two highest categories; and (ii) unrated securities
determined to be of comparable quality at the time of purchase (collectively,
"Eligible Securities"). Except for the Short-Term Fund, a Fund may not invest
more than 5% of its assets in Eligible Securities that are not "First Tier Se-
curities" (as defined below under "Diversification Requirements"). The rating
symbols of the NRSROs which the Fund may use are described in the Appendix to
the Statement of Additional Information.
REPURCHASE AGREEMENTS
The Money, Government Money and Short-Term Funds may agree to purchase portfo-
lio securities subject to the seller's agreement to repurchase them at a mutu-
ally agreed upon date and price ("repurchase agreements"). A Fund will enter
into repurchase agreements only with financial institutions that are deemed to
be creditworthy by the Investment Adviser, pursuant to guidelines established
by the Boards of Directors. No Fund will enter into repurchase agreements with
the Investment Adviser or any of its affiliates. Repurchase agreements with re-
maining maturities in excess of seven days will be considered illiquid securi-
ties and will be subject to the 10% limit applicable to such securities (see
"Investment Limitations" in the Statement of Additional Information).
The seller under a repurchase agreement will be required to maintain the value
of the securities which are subject to the agreement and held by a Fund at not
less than the repurchase price. Default or bankruptcy of the seller would, how-
ever, expose a 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.
Income on the repurchase agreements will be taxable.
SECURITIES LENDING
To increase return on their portfolio securities, the Money Fund and Govern-
ment Money Fund may lend their portfolio securities to broker/dealers pursuant
to agreements requiring the loans to be continuously secured by collateral
equal at all times in value to at least the market value of the securities
loaned. Collateral for such loans may include cash, securities of the U.S. Gov-
ernment, its agencies or instrumentalities, or an irrevocable letter of credit
issued by a bank which meets the investment standards of these Funds, or any
combination thereof. Such loans will not be made if, as a result, the aggregate
of all outstanding loans of a Fund exceeds 30% of the value of its total as-
sets. There may be risks of delay in receiving additional collateral or in re-
covering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Investment Adviser to be of good standing and
when, in the Investment Adviser's judgment, the income to be earned from the
loan justifies the attendant risks.
INVESTMENT COMPANY SECURITIES
In connection with the management of their daily cash positions, the Funds may
invest in securities
11
<PAGE>
issued by other investment companies which invest in high-quality, short-term
securities and which determine their net asset value per share based on the
amortized cost or penny-rounding method. The Short-Term Fund will invest in
securities of investment companies only if such companies invest primarily in
high-quality, short-term Municipal Securities. The Government Money and Trea-
sury Money Funds intend to limit their acquisition of shares of other invest-
ment companies to those companies which are themselves permitted to invest
only in securities which may be acquired by the respective Funds. Securities
of other investment companies will be acquired by a Fund within the limits
prescribed by the Investment Company Act of 1940 (the "1940 Act"). Each Fund
currently intends to limit its investments so that, as determined immediately
after a securities purchase is made: (a) not more than 5% of the value of its
total assets will be invested in the securities of any one investment company;
(b) not more than 10% of the value of its total assets will be invested in the
aggregate in securities of investment companies as a group; and (c) not more
than 3% of the outstanding voting stock of any one investment company will be
owned by the Fund. In addition to the advisory fees and other expenses a Fund
bears directly in connection with its own operations, as a shareholder of an-
other investment company, a Fund would bear its pro rata portion of the other
investment company's advisory fees and other expenses. As such, the Fund's
shareholders would indirectly bear the expenses of the Fund and the other in-
vestment company, some or all of which would be duplicative. Any change by the
Funds in the future with respect to their policies concerning investments in
securities issued by other investment companies will be made only in accor-
dance with the requirements of the 1940 Act.
TYPES OF MUNICIPAL SECURITIES
The two principal classifications of Municipal Securities which may be held
by the Short-Term Fund are "general obligation" securities and "revenue" secu-
rities. General obligation securities are secured by the issuer's pledge of
its full faith, credit, and taxing power for the payment of principal and in-
terest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the pro-
ceeds of a special excise tax or other specific revenue source such as the
user of the facility being financed. Private activity obligations are in most
cases revenue securities and are not payable from the unrestricted revenues of
the issuer. Consequently, the credit quality of private activity revenue obli-
gations is usually directly related to the credit standing of the corporate
user of the facility involved.
The Short-Term Fund's portfolio may also include "moral obligation" securi-
ties, which are normally issued by special-purpose public authorities. If the
issuer of moral obligation securities is unable to meet its debt service obli-
gations from current revenues, it may draw on a reserve fund the restoration
of which is a moral commitment but not a legal obligation of the state or mu-
nicipality which created the issuer. There is no limitation on the amount of
moral obligation securities that may be held by the Fund.
The Short-Term Fund may also purchase custodial receipts evidencing the right
to receive either the principal amount or the periodic interest payments or
both with respect to specific underlying Municipal Securities. In general,
such "stripped" Municipal Securities are offered at a substantial discount in
relation to the principal and/or interest payments which the holders of the
receipt will receive. To the extent that such discount does not produce a
yield to maturity for the investor that exceeds the original tax-exempt yield
on the underlying Municipal Security, such yield will be exempt from Federal
income tax for such investor to the same extent as interest on the underlying
Municipal Security. The Short-Term Fund intends to purchase custodial receipts
and "stripped" Municipal Securities only when the yield thereon will be, as
described above, exempt from Federal income tax to the same extent as interest
on the underlying Municipal Securities. "Stripped" Municipal Securities are
considered illiquid securities subject to the Fund's 10% restriction on in-
vestments in illiquid securities.
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<PAGE>
WHEN-ISSUED AND FORWARD TRANSACTIONS AND STAND-BY COMMITMENTS
The Funds may purchase eligible securities on a "when-issued" basis and may
purchase or sell such securities on a "forward commitment" basis. These trans-
actions involve a commitment by a Fund to purchase or sell particular securi-
ties with payment and delivery taking place in the future beyond the normal
settlement date at a stated price and yield. Securities purchased on a "for-
ward commitment" or "when-issued" basis are recorded as an asset and are sub-
ject to changes in value based upon changes in the general level of interest
rates. Absent unusual market conditions, "forward commitments" and "when-
issued" purchases will not exceed 25% of the value of a Fund's total assets,
and the length of such commitments will not exceed 45 days. The Funds do not
intend to engage in "when-issued" purchases or "forward commitments" for spec-
ulative purposes, but only in furtherance of their investment objectives.
In addition, the Short-Term Fund may acquire "stand-by commitments" with re-
spect to Municipal Securities held by it. Under a "stand-by commitment," a
dealer agrees to purchase at the Fund's option specified Municipal Securities
at a specified price. The Short-Term Fund will acquire "stand-by commitments"
solely to facilitate portfolio liquidity and does not intend to exercise its
rights thereunder for trading purposes. "Stand-by commitments" acquired by the
Short-Term Fund would be valued at zero in determining the Fund's net asset
value. Further information concerning "stand-by commitments" is contained in
the Statement of Additional Information under "Additional Information on Port-
folio Instruments."
ILLIQUID SECURITIES
No fund will knowingly invest more than 10% of the value of its net assets in
securities that are illiquid. Each Fund may purchase securities which are not
registered under the Securities Act of 1933 (the "Act") but which can be sold
to "qualified institutional buyers" in accordance with Rule 144A under the
Act. Any such security will not be considered illiquid so long as it is deter-
mined by the Investment Adviser, acting under guidelines approved and moni-
tored by the Board, that an adequate trading market exists for that security.
This investment practice could have the effect of increasing the level of il-
liquidity in a Fund during any period that qualified institutional buyers be-
come uninterested in purchasing these restricted securities.
DIVERSIFICATION REQUIREMENTS
Each Fund other than the Short-Term Fund will limit its purchases of any one
issuer's securities (other than U.S. Government obligations and customary de-
mand deposits) to 5% of the Fund's total assets, except that it may invest
more than 5% (but no more than 25%) of its total assets in "First Tier Securi-
ties" of one issuer for a period of up to three business days. First Tier Se-
curities include: (i) securities in the highest rating category by the only
NRSRO rating them, (ii) securities in the highest rating category of at least
two NRSROs, if more than one NRSRO has rated them, (iii) securities that have
no short-term rating, but have been issued by an issuer that has other out-
standing short-term obligations that have been rated in accordance with (i) or
(ii) above and are comparable in priority and security to such securities, and
(iv) certain unrated securities that have been determined to be of comparable
quality to such securities. In addition, each Fund other than the Short-Term
Fund will limit its purchases of "Second Tier Securities" (Eligible Securities
that are not First Tier Securities) of one issuer to the greater of 1% of its
total assets or $1 million.
INVESTMENT LIMITATIONS
The investment limitations set forth below are matters of fundamental policy
and may not be changed with respect to a Fund without the vote of the holders
of a majority of the Fund's outstanding Shares (as defined under "Miscellane-
ous").
13
<PAGE>
No Fund may:
1. Purchase securities of any one issuer, other than U.S. Government obliga-
tions, if immediately after such purchase more than 5% of the value of its
total assets would be invested in the securities of such issuer, except that
up to 25% of the value of its total assets may be invested without regard to
this 5% limitation; and
2. Borrow money except from banks for temporary purposes, and then in
amounts not in excess of 10% of the value of its total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets except in con-
nection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed and 10% of the value of its total assets at the
time of such borrowing. (This borrowing provision is included solely to fa-
cilitate the orderly sale of portfolio securities to accommodate abnormally
heavy redemption requests and is not for leverage purposes.) A Fund will not
purchase portfolio securities while borrowings in excess of 5% of its total
assets are outstanding.
The Treasury Money Fund may not:
Purchase securities other than obligations issued or guaranteed by the U.S.
Treasury or an agency or instrumentality of the U.S. Government and securities
issued by investment companies that invest in such obligations.
* * *
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in value of a
Fund's portfolio securities will not constitute a violation of such limita-
tion.
In Investment Limitation No. 1 above: (a) a security is considered to be is-
sued by the governmental entity or entities whose assets and revenues back the
security, or, with respect to a private activity bond that is backed only by
the assets and revenues of a non-governmental user, such non-governmental us-
er; (b) in certain circumstances, the guarantor of a guaranteed security may
also be considered to be an issuer in connection with such guarantee; and (c)
securities issued or guaranteed by the United States Government, its agencies
or instrumentalities (including securities backed by the full faith and credit
of the United States) are deemed to be U.S. Government obligations.
The Funds are subject to additional investment limitations which are deemed
matters of their fundamental policies and, as such, may not be changed without
a requisite shareholder vote. Among such limitations are a prohibition on con-
centrating investments in a particular industry or group of industries and a
policy of limiting investments in illiquid securities to 10% of a Fund's as-
sets. For a full description of the Funds' additional fundamental investment
limitations, see the Statement of Additional Information.
PRICING OF SHARES
The net asset value of each Fund is determined and the Shares of each Fund
are priced for purchases and redemptions as of 1:00 p.m. (Eastern Time) and
the close of regular trading hours on the New York Stock Exchange (the "Ex-
change"), currently 4:00 p.m. (Eastern Time). Net asset value and pricing for
each Fund are determined on each day the Exchange and the Investment Adviser
are open for trading ("Business Day"). Currently, the holidays which the Funds
observe are New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas. Net asset value per Share for purposes of
pricing sales and redemptions is calculated by dividing the value of all secu-
rities and other assets belonging to a Fund, less the liabilities charged to
the Fund, by the number of its outstanding Shares. The assets in each Fund are
valued by the Funds' administrators based upon the amortized cost method.
14
<PAGE>
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in each Fund are continuously offered for sale by the Companies' spon-
sor and distributor, Edgewood Services, Inc. (the "Distributor"), a wholly-
owned subsidiary of Federated Investors. The Distributor is a registered
broker/dealer. Its principal offices are at Federated Investors Tower, 1001
Liberty Avenue, Pittsburgh, PA 15222-3779.
PURCHASE OF SHARES
Shares in each Fund are offered without any purchase or redemption charge im-
posed by the Companies. The Distributor has established several procedures for
purchasing Shares in order to accommodate different types of investors.
Shares may be purchased directly by individuals ("Direct Investors") or by in-
stitutions ("Institutional Investors" and, collectively with Direct Investors,
"Investors"). Shares may also be purchased by customers ("Customers") of the
Investment Adviser, its affiliates and correspondent banks, and other institu-
tions ("Shareholder Organizations") that have entered into shareholder servic-
ing agreements with one of the Companies. A Shareholder Organization may elect
to hold of record Shares for its Customers and to record beneficial ownership
of Shares on the account statements provided by it to its Customers. If it does
so, it is the Shareholder Organization's responsibility to transmit to the Dis-
tributor all purchase orders for its Customers and to transmit, on a timely ba-
sis, payment for such orders to Mutual Funds Service Company ("MFSC"), the
Funds' sub-transfer agent, in accordance with the procedures agreed to by the
Shareholder Organization and the Distributor. Confirmations of all such Cus-
tomer purchases and redemptions will be sent by MFSC to the particular Share-
holder Organization. As an alternative, a Shareholder Organization may elect to
establish its Customers' accounts of record with MFSC. In this event, even if
the Shareholder Organization continues to place its Customers' purchase and re-
demption orders with the Funds, MFSC will send confirmations of such transac-
tions and periodic account statements directly to Customers. A Shareholder Or-
ganization may also elect to establish its Customers as record holders.
The Companies enter into shareholder servicing agreements with Shareholder Or-
ganizations which agree to provide their Customers various shareholder adminis-
trative services with respect to their Shares (hereinafter referred to as
"Service Organizations"). See "Management of the Funds--Service Organizations."
Customers wishing to purchase Shares through their Shareholder Organization
should contact such entity directly for appropriate instructions. (For a list
of Shareholder Organizations in your area, call (800) 446-1012.) An investor
purchasing Shares through a registered investment adviser or certified finan-
cial planner may incur transaction charges in connection with such purchases.
Such investors should contact their registered investment adviser or certified
financial planner for further information on transaction fees. Investors may
also purchase Shares directly in accordance with procedures described below un-
der "Purchase Procedures."
PURCHASE PROCEDURES
General
Direct Investors may purchase Shares by completing the Application for pur-
chase of Shares accompanying this Prospectus and mailing it, together with a
check payable to UST Master Funds, to:
UST Master Funds
c/o Mutual Funds Service Company
P.O. Box 2798
Boston, MA 02208-2798
15
<PAGE>
Subsequent investments in an existing account in any Fund may be made at any
time by sending to the above address a check payable to UST Master Funds along
with: (a) the detachable form that regularly accompanies the confirmation of a
prior transaction; (b) a subsequent order form which may be obtained from MFSC;
or (c) a letter stating the amount of the investment, the name of the Fund and
the account number in which the investment is to be made. Institutional Invest-
ors may purchase Shares by transmitting their purchase orders to MFSC by tele-
phone at (800) 446-1012 or by terminal access. Institutional Investors must pay
for Shares with Federal funds or funds immediately available to MFSC.
Purchases by Wire
Investors may also purchase Shares by wiring Federal funds to MFSC. Prior to
making an initial investment by wire, an Investor must telephone MFSC at (800)
446-1012 (from overseas, call (617) 557-8280) for instructions. Federal funds
and registration instructions should be wired through the Federal Reserve Sys-
tem to:
United States Trust Company of New York
ABA #021001318
UST Funds, Account No. 2901447
For further credit to:
Wire Control Number
UST Master Funds
Account Registration (including account number)
Investors making initial investments by wire must promptly complete the Appli-
cation accompanying this Prospectus and forward it to MFSC. Redemptions by In-
vestors will not be processed until the completed Application for purchase of
Shares has been received by MFSC and accepted by the Distributor. Investors
making subsequent investments by wire should follow the above instructions.
Other Purchase Information
Except as provided in "Investor Programs" below, the minimum initial invest-
ment by an Investor or initial aggregate investment by a Shareholder Organiza-
tion investing on behalf of its Customers is $500 per Fund. The minimum subse-
quent investment for both types of investors is $50 per Fund. Customers may
agree with a particular Shareholder Organization to make a minimum purchase
with respect to their accounts. Depending upon the terms of the particular ac-
count, Shareholder Organizations may charge a Customer's account fees for auto-
matic investment and other cash management services provided. The Companies re-
serve the right to reject any purchase order, in whole or in part, or to waive
any minimum investment requirements.
REDEMPTION PROCEDURES
Customers of Shareholder Organizations holding Shares of record may redeem all
or part of their investments in the Funds in accordance with procedures gov-
erning their accounts at the Shareholder Organizations. It is the responsibil-
ity of the Shareholder Organizations to transmit redemption orders to MFSC and
credit such Customer accounts with the redemption proceeds on a timely basis.
Redemption orders for Institutional Investors must be transmitted to MFSC by
telephone at (800) 446-1012 or by terminal access. No charge for wiring redemp-
tion payments to Shareholder Organizations or Institutional Investors is im-
posed by the Companies, although Shareholder Organizations may charge a Custom-
er's account for wiring redemption proceeds. Information relating to such re-
demption services and charges, if any, is available from the Shareholder Orga-
nizations. An investor redeeming Shares through a registered investment adviser
or certified financial planner may incur transaction charges in connection with
such redemptions. Such investors should contact their registered investment ad-
viser or certified financial planner for further information on transaction
fees. Investors may redeem all or part of their Shares in accordance with any
of the procedures described below (these procedures also apply to Customers of
Shareholder Organizations for whom individual accounts have been established
with MFSC).
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<PAGE>
Redemption by Mail
Shares may be redeemed by a Direct Investor by submitting a written request
for redemption to:
UST Master Funds
c/o Mutual Funds Service Company
P.O. Box 2798
Boston, MA 02208-2798
A written redemption request to MFSC must (i) state the number of Shares to be
redeemed, (ii) identify the shareholder account number and tax identification
number, and (iii) be signed by each registered owner exactly as the Shares are
registered. If the Shares to be redeemed were issued in certificate form, the
certificates must be endorsed for transfer (or accompanied by a duly executed
stock power) and must be submitted to MFSC together with the redemption re-
quest. A redemption request for an amount in excess of $50,000 per account, or
for any amount if the proceeds are to be sent elsewhere than the address of
record, must be accompanied by signature guarantees from an eligible guarantor
institution approved by MFSC in accordance with its Standards, Procedures and
Guidelines for the Acceptance of Signature Guarantees ("Signature Guarantee
Guidelines"). Eligible guarantor institutions generally include banks,
broker/dealers, credit unions, national securities exchanges, registered secu-
rities associations, clearing agencies and savings associations. All eligible
guarantor institutions must participate in the Securities Transfer Agents Me-
dallion Program ("STAMP") in order to be approved by MFSC pursuant to the Sig-
nature Guarantee Guidelines. Copies of the Signature Guarantee Guidelines and
information on STAMP can be obtained from MFSC at (800) 446-1012 or at the ad-
dress given above. MFSC may require additional supporting documents for redemp-
tions made by corporations, executors, administrators, trustees and guardians.
A redemption request will not be deemed to be properly received until MFSC re-
ceives all required documents in proper form. Payment for Shares redeemed will
ordinarily be made by mail within five Business Days after proper receipt by
MFSC of the redemption request. Questions with respect to the proper form for
redemption requests should be directed to MFSC at (800) 446-1012 (from over-
seas, call (617) 557-8280).
Redemption by Wire or Telephone
Direct Investors who have so indicated on the Application, or have subse-
quently arranged in writing to do so, may redeem Shares by instructing MFSC by
wire or telephone to wire the redemption proceeds directly to the Direct In-
vestor's account at any commercial bank in the United States. Direct Investors
who are shareholders of record may also redeem Shares by instructing MFSC by
telephone to mail a check for redemption proceeds of $500 or more to the share-
holder of record at his or her address of record. Institutional Investors may
also have their Shares redeemed by wire by instructing MFSC by telephone at
(800) 446-1012 or by terminal access. Only redemptions of $500 or more will be
wired to a Direct Investor's account. An $8.00 fee for each wire redemption by
a Direct Investor is deducted by MFSC from the proceeds of the redemption. The
redemption proceeds for Direct Investors must be paid to the same bank and ac-
count as designated on the Application or in written instructions subsequently
received by MFSC.
Investors may request that Shares be redeemed and redemption proceeds wired on
the same day if telephone redemption instructions are received by 1:00 p.m.
(Eastern Time) on the day of redemption. Shares redeemed and wired on the same
day will not receive the dividend declared on the day of redemption. Redemption
requests made after 1:00 p.m. (Eastern Time) will receive the dividend declared
on the day of redemption, and redemption proceeds will be wired the following
Business Day. To request redemption of Shares by wire, Direct Investors should
call MFSC at (800) 446-1012 (from overseas, call (617) 557-8280).
In order to arrange for redemption by wire or telephone after an account has
been opened or to change the bank or account designated to receive redemption
17
<PAGE>
proceeds, a Direct Investor must send a written request to the Companies, c/o
MFSC, at the address listed above under "Redemption by Mail." Such request
must be signed by the Direct Investor, with signature guaranteed (see "Redemp-
tion by Mail" above, for details regarding signature guarantees). Further doc-
umentation may be requested.
MFSC and the Distributor reserve the right to refuse a wire or telephone re-
demption if it is believed advisable to do so. Procedures for redeeming Shares
by wire or telephone may be modified or terminated at any time by the Compa-
nies, MFSC or the Distributor. THE COMPANIES, MFSC AND THE DISTRIBUTOR WILL
NOT BE LIABLE FOR ANY LOSS, LIABILITY, COST OR EXPENSE FOR ACTING UPON TELE-
PHONE INSTRUCTIONS THAT ARE REASONABLY BELIEVED TO BE GENUINE. IN ATTEMPTING
TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENUINE, THE COMPANIES WILL USE
SUCH PROCEDURES AS ARE CONSIDERED REASONABLE, INCLUDING RECORDING THOSE IN-
STRUCTIONS AND REQUESTING INFORMATION AS TO ACCOUNT REGISTRATION.
During periods of substantial economic or market change, telephone redemp-
tions may be difficult to complete. If an Investor is unable to contact MFSC
by telephone, the Investor may also deliver the redemption request to MFSC in
writing at the address noted above under "How to Purchase and Redeem Shares--
Redemption by Mail."
Redemption by Check
Except as described in "Investor Programs" below, Direct Investors in the
Funds may redeem Shares, without charge, by check drawn on the Direct Invest-
or's particular Fund account. Checks may be made payable to the order of any
person or organization designated by the Direct Investor and must be for
amounts of $500 or more. Direct Investors will continue to earn dividends on
the Shares to be redeemed until the check clears at United States Trust Com-
pany of New York.
Checks are supplied free of charge, and additional checks are sent to Direct
Investors upon request. Checks will be sent only to the registered owner at
the address of record. Direct Investors who want the option of redeeming
Shares by check must indicate this in the Application for purchase of Shares
and must submit a signature card with signatures guaranteed with such Applica-
tion. The signature card is included in the Application for the purchase of
Shares contained in this Prospectus. In order to arrange for redemption by
check after an account has been opened, a written request must be sent to the
Companies, c/o MFSC, at the address listed above under "Redemption by Mail"
and must be accompanied by a signature card with signatures guaranteed (see
"Redemption by Mail" above, for details regarding signature guarantees).
Stop payment instructions with respect to checks may be given to the Compa-
nies by calling (800) 446-1012 (from overseas, call (617) 557-8280). If there
are insufficient Shares in the Direct Investor's account with the Fund to
cover the amount of the redemption check, the check will be returned marked
"insufficient funds," and MFSC will charge a fee of $25.00 to the account.
Checks may not be used to close an account.
If any portion of the Shares to be redeemed represents an investment made by
personal check, the Companies and MFSC reserve the right not to honor the re-
demption until MFSC is reasonably satisfied that the check has been collected
in accordance with the applicable banking regulations which may take up to 15
days. A Direct Investor who anticipates the need for more immediate access to
his or her investment should purchase Shares by Federal funds or bank wire or
by certified or cashier's check. Banks normally impose a charge in connection
with the use of bank wires, as well as certified checks, cashier's checks and
Federal funds. If a Direct Investor's purchase check is not collected, the
purchase will be cancelled and MFSC will charge a fee of $25.00 to the Direct
Investor's account.
Other Redemption Information
Except as provided in "Investor Programs" below, Investors may be required to
redeem Shares in a Fund upon 60 days' written notice if due to investor re-
demptions the balance in the particular account with respect
18
<PAGE>
to the Fund remains below $500. If a Customer has agreed with a particular
Shareholder Organization to maintain a minimum balance in his or her account at
the institution with respect to Shares of a Fund, and the balance in such ac-
count falls below that minimum, the Customer may be obliged by the Shareholder
Organization to redeem all or part of his or her Shares to the extent necessary
to maintain the required minimum balance.
The Companies may also redeem Shares involuntarily or make payment for redemp-
tion in securities if it appears appropriate to do so in light of the Compa-
nies' responsibilities under the Investment Company Act of 1940.
EFFECTIVE TIME OF PURCHASES AND REDEMPTIONS
Purchase orders for Shares which are received and accepted no later than 1:00
p.m. (Eastern Time) on any Business Day will be effective as of 1:00 p.m. and
will receive the dividend declared on the day of purchase as long as MFSC re-
ceives payment in Federal funds prior to the close of regular trading hours on
the Exchange (currently 4:00 p.m., Eastern Time). Purchase orders received and
accepted after 1:00 p.m. (Eastern Time) and prior to 4:00 p.m. (Eastern Time),
on any Business Day for which payment in Federal funds has been received by
4:00 p.m. (Eastern Time), will be effective as of 4:00 p.m., and will begin re-
ceiving dividends the following day. Purchase orders for Shares made by Direct
Investors are not effective until the amount to be invested has been converted
to Federal funds. In those cases in which a Direct Investor pays for Shares by
check, Federal funds will generally become available two Business Days after a
purchase order is received. In certain circumstances, the Companies may not re-
quire that amounts invested by Shareholder Organizations on behalf of their
Customers or by Institutional Investors be converted into Federal funds. Re-
demption orders are executed at the net asset value per Share next determined
after receipt of the order.
INVESTOR PROGRAMS
EXCHANGE PRIVILEGE
Investors and Customers of Shareholder Organizations may, after appropriate
prior authorization and without an exchange fee imposed by the Companies, ex-
change Shares in a Fund having a value of at least $500 for Shares of any other
portfolio offered by the Companies, provided that such other shares may legally
be sold in the state of the Investor's residence.
Master Fund currently offers, in addition to the Money Fund, Government Money
Fund and Treasury Money Fund, 17 diversified portfolios:
Short-Term Government Securities Fund, a fund seeking a high level of cur-
rent income by investing principally in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and repurchase agree-
ments collateralized by such obligations, and having a dollar-weighted aver-
age portfolio maturity of 1 to 3 years;
Intermediate-Term Managed Income Fund, a fund seeking a high level of cur-
rent interest income by investing principally in investment grade or better
debt obligations and money market instruments, and having a dollar-weighted
average portfolio maturity of 3 to 10 years;
Managed Income Fund, a fund seeking higher current income through invest-
ments in investment grade debt obligations, U.S. Government obligations and
money market instruments;
Equity Fund, a fund seeking primarily long-term capital appreciation through
investments in a diversified portfolio of primarily equity securities;
Income and Growth Fund, a fund investing substantially in equity securities
in seeking to provide moderate current income and to achieve capital appreci-
ation as a secondary objective;
Long-Term Supply of Energy Fund, a fund seeking long-term capital apprecia-
tion by investing in companies benefitting from the availability, develop-
19
<PAGE>
ment and delivery of secure hydrocarbon and other energy sources;
Productivity Enhancers Fund, a fund seeking long-term capital appreciation
by investing in companies benefitting from their roles as innovators, devel-
opers and suppliers of goods and services which enhance service and manufac-
turing productivity or companies that are most effective at obtaining and ap-
plying productivity enhancement developments;
Environmentally-Related Products and Services Fund, a fund seeking long-term
capital appreciation by investing in companies benefitting from their provi-
sion of products, technologies and services related to conservation, protec-
tion and restoration of the environment;
Aging of America Fund, a fund seeking long-term capital appreciation by in-
vesting in companies benefitting from the changes occurring in the demo-
graphic structure of the U.S. population, particularly of its growing popula-
tion of individuals over the age of 40;
Communication and Entertainment Fund, a fund seeking long-term capital ap-
preciation by investing in companies benefitting from the technological and
international transformation of the communications and entertainment indus-
tries, particularly the convergence of information, communication and enter-
tainment media;
Business and Industrial Restructuring Fund, a fund seeking long-term capital
appreciation by investing in companies benefitting from their restructuring
or redeployment of assets and operations in order to become more competitive
or profitable;
Global Competitors Fund, a fund seeking long-term capital appreciation by
investing in U.S.-based companies benefitting from their position as effec-
tive and strong competitors on a global basis;
Early Life Cycle Fund, a fund seeking long-term capital appreciation by in-
vesting in smaller companies in the earlier stages of their development or
larger or more mature companies engaged in new and higher growth potential
operations;
International Fund, a fund seeking total return derived primarily from in-
vestments in foreign equity securities;
Emerging Americas Fund, a fund seeking long-term capital appreciation
through investments in companies and securities of governments based in all
countries in the Western Hemisphere, except the U.S.;
Pacific/Asia Fund, a fund seeking long-term capital appreciation through in-
vestments in companies and securities of governments based in Asia and on the
Asian side of the Pacific Ocean; and
Pan European Fund, a fund seeking long-term capital appreciation through in-
vestments in companies and securities of governments located in Europe.
Master Tax-Exempt Fund currently offers, in addition to the Short-Term Fund,
4 other portfolios:
Short-Term Tax-Exempt Securities Fund, a diversified fund seeking a high
level of current interest income exempt from Federal income taxes through in-
vestments in municipal obligations and having a dollar-weighted average port-
folio maturity of 1 to 3 years;
Intermediate-Term Tax-Exempt Fund, a diversified fund seeking a high level
of current income exempt from Federal income taxes through investments in mu-
nicipal obligations and having a dollar-weighted average portfolio maturity
of three to ten years;
Long-Term Tax-Exempt Fund, a diversified fund attempting to maximize over
time current income exempt from Federal income taxes, investing primarily in
municipal obligations and having a dollar-weighted average portfolio maturity
of 10 to 30 years; and
New York Intermediate-Term Tax-Exempt Fund, a non-diversified fund designed
to provide New York investors with a high level of current income exempt from
Federal and, to the extent possible, New York
20
<PAGE>
state and New York City income taxes; this fund invests primarily in New York
municipal obligations and has a dollar-weighted average portfolio maturity of
three to ten years.
An exchange involves a redemption of all or a portion of the Shares in a Fund
and the investment of the redemption proceeds in shares of another portfolio of
the Companies. The redemption will be made at the per Share net asset value of
the Shares being redeemed next determined after the exchange request is re-
ceived. The Shares of the portfolio to be acquired will be purchased at the per
share net asset value of those shares (plus any applicable sales load) next de-
termined after acceptance of the exchange request.
Investors may find the exchange privilege useful if their investment objec-
tives or market outlook should change after they invest in a Fund. For further
information regarding exchange privileges, shareholders should call (800) 446-
1012 (from overseas, call (617) 557-8280). Investors exercising the exchange
privilege with the other portfolios of the Companies should request and review
the prospectuses of such funds. Such prospectuses may be obtained by calling
the numbers listed above. The Companies may modify or terminate the exchange
program at any time upon 60 days' written notice to shareholders, and may re-
ject any exchange request in the amount exceeding $100,000. In order to prevent
abuse of this privilege to the disadvantage of other shareholders, Master Fund
and Master Tax-Exempt Fund reserve the right to limit the number of exchange
requests of Investors and Customers of Shareholder Organizations to no more
than six per year. THE COMPANIES, MFSC AND THE DISTRIBUTOR ARE NOT RESPONSIBLE
FOR THE AUTHENTICITY OF EXCHANGE REQUESTS RECEIVED BY TELEPHONE THAT ARE REA-
SONABLY BELIEVED TO BE GENUINE. IN ATTEMPTING TO CONFIRM THAT TELEPHONE IN-
STRUCTIONS ARE GENUINE, THE COMPANIES WILL USE SUCH PROCEDURES AS ARE CONSID-
ERED REASONABLE, INCLUDING RECORDING THOSE INSTRUCTIONS AND REQUESTING INFORMA-
TION AS TO ACCOUNT REGISTRATION.
SYSTEMATIC WITHDRAWAL PLAN
An Investor who owns Shares of a Fund with a value of $10,000 or more may es-
tablish a Systematic Withdrawal Plan. The Investor may request a declining-bal-
ance withdrawal, a fixed-dollar withdrawal, a fixed-share withdrawal, or a
fixed-percentage withdrawal (based on the current value of Shares in the ac-
count) on a monthly, quarterly, semi-annual or annual basis. To initiate the
Systematic Withdrawal Plan, an investor must complete the Supplemental Applica-
tion contained in this Prospectus and mail it to MFSC at the address given
above. Further information on establishing a Systematic Withdrawal Plan may be
obtained by calling (800) 446-1012 (from overseas, call (617) 557-8280).
Shareholder Organizations may, at their discretion, establish similar system-
atic withdrawal plans with respect to the Shares held by their Customers. In-
formation about such plans and the applicable procedures may be obtained by
Customers directly from their institutions.
RETIREMENT PLANS
Shares are available for purchase by Investors in connection with the follow-
ing tax- deferred prototype retirement plans offered by United States Trust
Company of New York:
IRAs (including "rollovers" from existing retirement plans) for individu-
als and their spouses;
Profit Sharing and Money-Purchase Plans for corporations and self-employed
individuals and their partners to benefit themselves and their employees;
and
Keogh Plans for self-employed individuals.
Investors investing in the Funds pursuant to Profit Sharing and Money-Purchase
Plans and Keogh Plans are not subject to the minimum investment and forced re-
demption provisions described above. The minimum initial investment for IRAs is
$250 per
21
<PAGE>
Fund and the minimum subsequent investment is $50 per Fund. Detailed informa-
tion concerning eligibility, service fees and other matters related to these
plans can be obtained by calling (800) 446-1012 (from overseas, call (617) 557-
8280). Customers of Shareholder Organizations may purchase Shares of the Funds
pursuant to retirement plans if such plans are offered by their Shareholder Or-
ganizations.
AUTOMATIC INVESTMENT PROGRAM
The Automatic Investment Program permits Investors to purchase Shares (minimum
of $50 per Fund per transaction) at regular intervals selected by the Investor.
The minimum initial investment for an Automatic Investment Program account is
$50 per Fund. Provided the Investor's financial institution allows automatic
withdrawals, Shares are purchased by transferring funds from an Investor's
checking, bank money market or NOW account designated by the Investor. At the
Investor's option, the account designated will be debited in the specified
amount, and Shares will be purchased, once a month, on either the first or fif-
teenth day, or twice a month, on both days.
To establish an Automatic Investment account, an Investor must complete the
Supplemental Application contained in this Prospectus and mail it to MFSC. An
Investor may cancel his participation in this Program or change the amount of
purchase at any time by mailing written notification to MFSC, P.O. Box 2798,
Boston, MA 02208-2798 and notification will be effective three Business Days
following receipt. The Companies may modify or terminate this privilege at any
time or charge a service fee, although no such fee currently is contemplated.
DIVIDENDS AND DISTRIBUTIONS
The net investment income of the Funds is declared daily as a dividend to the
persons who are shareholders of the respective Funds immediately after the
1:00 p.m. pricing of Shares on the day of declaration. All such dividends are
paid within ten days after the end of each month or within seven days after the
redemption of all of a shareholder's Shares of a Fund. For dividend purposes, a
Fund's investment income is reduced by accrued expenses directly attributable
to that Fund and the general expenses of the Companies prorated to that Fund on
the basis of its relative net assets. Net realized capital gains, if any, are
distributed at least annually.
All dividends and distributions paid on Shares held of record by the Invest-
ment Adviser and its affiliates or correspondent banks will be paid in cash.
Direct and Institutional Investors and Customers of other Shareholder Organiza-
tions will receive dividends and distributions in additional Shares of the Fund
on which the dividend is paid or the distribution made (as determined on the
payable date), unless they have requested in writing (received by MFSC at the
Companies' address prior to the payment date) to receive dividends and distri-
butions in cash. Reinvested dividends and distributions receive the same tax
treatment as those paid in cash.
TAXES
FEDERAL
Each of the Funds qualified for their last taxable year as a "regulated in-
vestment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Each Fund expects to so qualify in future years. Such qualification
generally relieves a Fund of liability for Federal income taxes to the extent
its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code requires, among
other things, that a Fund distribute to its shareholders an amount equal to at
least the sum of 90% of its investment company taxable income and 90% of its
exempt-interest income (if any) net of certain deductions for each taxable
year. In general, a Fund's investment company taxable income will be its tax-
able income (including interest) subject to certain adjustments and excluding
22
<PAGE>
the excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. The taxable Funds intend to
distribute substantially all of their investment company taxable income each
year. Such dividends will be taxable as ordinary income to Fund shareholders
who are not currently exempt from Federal income taxes, whether such income is
received in cash or reinvested in additional Shares. (Federal income taxes for
distributions to IRAs and qualifying pension plans are deferred under the
Code.) Because all of each Fund's net investment income is expected to be de-
rived from earned interest, it is anticipated that no part of any distributions
will be eligible for the dividends received deduction for corporations.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to
have been received by shareholders and paid by a Fund on December 31 of such
year in the event such dividends are actually paid during January of the fol-
lowing year.
The Short-Term Fund: The Short-Term Fund's policy is to pay dividends each
year equal to at least the sum of 90% of its net exempt-interest income and 90%
of its investment company taxable income, if any. Dividends derived from ex-
empt-interest income ("exempt-interest dividends") may be treated by the Fund's
shareholders as items of interest excludable from their gross income under Sec-
tion 103(a) of the Code, unless, under the circumstances applicable to the par-
ticular shareholder, exclusion would be disallowed. (See Statement of Addi-
tional Information under "Additional Information Concerning Taxes.")
If the Short-Term Fund should hold certain "private activity bonds" issued af-
ter August 7, 1986, the portion of dividends paid by the Fund which are attrib-
utable to interest on such bonds must be included in a shareholder's Federal
alternative minimum taxable income, as an item of tax preference, for the pur-
pose of determining liability (if any) for the 26% to 28% alternative minimum
tax for individuals and the 20% alternative minimum tax and the environmental
tax applicable to corporations. Corporate shareholders must also take all ex-
empt-interest dividends into account in determining certain adjustments for
Federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed at the rate of .12% on the excess of
the corporation's modified Federal alternative minimum taxable income over $2
million. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the tax-
ability of such benefits.
Dividends payable by the Short-Term Fund which are derived from taxable income
or from long-term or short-term capital gains will be subject to Federal income
tax, whether such dividends are paid in the form of cash or additional Shares.
STATE AND LOCAL
The Treasury Money Fund is structured to provide shareholders, to the extent
permissible by Federal and state law, with income that is exempt or excluded
from taxation at the state and local level. Most states--by statute, judicial
decision or administrative action--have taken the position that dividends of a
regulated investment company such as the Treasury Money Fund that are attribut-
able to interest on obligations of the U.S. Treasury and certain U.S. Govern-
ment agencies and instrumentalities (including those authorized for purchase by
the Fund) are the functional equivalent of interest from such obligations and
are, therefore, exempt from state and local income taxes. As a result, substan-
tially all dividends paid by the Treasury Money Fund to shareholders residing
in those states will be exempt or excluded from state income tax.
Nevertheless in some jurisdictions, exempt-interest dividends and other dis-
tributions paid by the Short-Term Fund may be taxable to shareholders under
23
<PAGE>
state or local law as dividend income, even though all or a portion of such
distributions is derived from interest on tax-exempt obligations which, if re-
alized directly, would be exempt from such income taxes.
MISCELLANEOUS
The foregoing summarizes some of the important tax considerations generally
affecting the Funds and their shareholders and is not intended as a substitute
for careful tax planning. Accordingly, potential investors in the Funds should
consult their tax advisers with specific reference to their own tax situa-
tions. Shareholders will be advised annually as to the Federal income tax con-
sequences of distributions made each year.
MANAGEMENT OF THE FUNDS
The business and affairs of the Funds are managed under the direction of the
Companies' Boards of Directors. The Statement of Additional Information con-
tains the names of and general background information concerning the Compa-
nies' directors.
INVESTMENT ADVISER
United States Trust Company of New York serves as the Investment Adviser to
each Fund. U.S. Trust is a state-chartered bank and trust company. The Invest-
ment Adviser provides trust and banking services to individuals, corporations,
and institutions both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate
trust and agency banking, and personal and corporate banking. The Investment
Adviser is a member bank of the Federal Reserve System and the Federal Deposit
Insurance Corporation and is one of the twelve members of the New York Clear-
ing House Association.
On December 31, 1994, the Investment Adviser's Asset Management Group had ap-
proximately $33 billion in assets under management. The Investment Adviser,
which has its principal offices at 114 W. 47th Street, New York, New York
10036, is a subsidiary of U.S. Trust Corporation, a registered bank holding
company.
The Investment Adviser manages each Fund, makes decisions with respect to and
places orders for all purchases and sales of its portfolio securities, and
maintains records relating to such purchases and sales. For the services pro-
vided and expenses assumed pursuant to its Investment Advisory Agreements, the
Investment Adviser is entitled to a fee, computed daily and paid monthly, at
the annual rate of .25% of the average daily net assets of each of the Money,
Government Money and Short-Term Funds. For the services provided and expenses
assumed with respect to the Treasury Money Fund, the Investment Adviser is en-
titled to a fee, computed daily and paid monthly, at the annual rate of .30%
of the Fund's average daily net assets. For the fiscal year ended March 31,
1995, the Investment Adviser received an advisory fee at the effective annual
rates of .22%, .22%, .22% and .28% of the average daily net assets of the Mon-
ey, Government Money, Short-Term and Treasury Money Funds, respectively. For
the same period, the Investment Adviser waived advisory fees at the effective
annual rate of .03%, .03%, .03% and .02% of the average daily net assets of
the Money, Government Money, Short-Term and Treasury Money Fund, respectively.
From time to time, the Investment Adviser may waive (either voluntarily or
pursuant to applicable state expense limitations) all or a portion of the ad-
visory fees payable to it by a Fund, which waiver may be terminated at any
time. See "Management of the Funds--Service Organizations" for additional in-
formation on fee waivers.
ADMINISTRATORS
MFSC and Federated Administrative Services serve as the Funds' administrators
(the "Administrators") and provide them with general administrative and opera-
tional assistance. The Administrators also serve as
24
<PAGE>
administrators of the other portfolios of the Companies, which are also advised
by the Investment Adviser and distributed by the Distributor. For the services
provided to all portfolios of both Companies (except the International, Emerg-
ing Americas, Pacific/Asia and Pan European Funds of Master Fund), the Adminis-
trators are entitled jointly to annual fees, computed daily and paid monthly,
based on the combined aggregate average daily net assets of the Companies (ex-
cluding the International, Emerging Americas, Pacific/Asia and Pan European
Funds) as follows:
<TABLE>
<CAPTION>
COMBINED AGGREGATE AVERAGE DAILY
NET ASSETS OF BOTH COMPANIES
(EXCLUDING THE INTERNATIONAL,
EMERGING AMERICAS, PACIFIC/ASIA
AND PAN EUROPEAN FUNDS) ANNUAL FEE
-------------------------------- ----------
<S> <C>
first $200 million.................................................. .200%
next $200 million................................................... .175%
over $400 million................................................... .150%
</TABLE>
Administration fees payable to the Administrators by each portfolio of the
Companies are allocated in proportion to their relative average daily net as-
sets at the time of determination. From time to time, the Administrators may
waive (either voluntarily or pursuant to applicable state expense limitations)
all or a portion of the administration fee payable to them by a Fund, which
waivers may be terminated at any time. See "Management of the Funds--Service
Organizations" for additional information on fee waivers. For the fiscal year
ended March 31, 1995, MFSC and Concord Holding Corporation, the former co-ad-
ministrator, received an aggregate administration fee (under the same compensa-
tion arrangements noted above) at the effective annual rate of .154% of the av-
erage daily net assets of each of the Money, Government Money, Treasury Money
and Short-Term Funds, respectively.
SERVICE ORGANIZATIONS
Each Company will enter into an agreement ("Servicing Agreement") with each
Service Organization requiring it to provide administrative support services to
its Customers beneficially owning Shares. As a consideration for the adminis-
trative services provided to Customers, a Fund will pay the Service Organiza-
tion an administrative service fee at the annual rate of up to .40% of the av-
erage daily net asset value of its Shares held by the Service Organization's
Customers. Such services, which are described more fully in the Statement of
Additional Information under "Management of the Funds--Service Organizations,"
may include assisting in processing purchase, exchange and redemption requests;
transmitting and receiving funds in connection with Customer orders to pur-
chase, exchange or redeem Shares; and providing periodic statements. Under the
terms of the Servicing Agreement, Service Organizations will be required to
provide to Customers a schedule of any fees that they may charge in connection
with a Customer's investment. Until further notice, the Investment Adviser and
Administrators have voluntarily agreed to waive fees payable by a Fund in an
amount equal to administrative service fees payable by that Fund.
BANKING LAWS
Banking laws and regulations currently prohibit a bank holding company regis-
tered under the Federal Bank Holding Company Act of 1956 or any bank or non-
bank affiliate thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and prohibit banks generally from issuing, underwriting, selling or distribut-
ing securities such as Shares of the Funds, but such banking laws and regula-
tions do not prohibit such a holding company or affiliate or banks generally
from acting as investment adviser, transfer agent, or custodian to such an in-
vestment company, or from purchasing shares of such company for and upon the
order of customers. The Investment Adviser, MFSC and certain Shareholder Orga-
nizations may be subject to such banking laws and regulations. State securities
laws may differ from the interpretations of Federal law discussed in this para-
graph and banks and financial institutions may be required to register as deal-
ers pursuant to state law.
25
<PAGE>
Should legislative, judicial, or administrative action prohibit or restrict
the activities of the Investment Adviser or other Shareholder Organizations in
connection with purchases of Fund Shares, the Investment Adviser and such
Shareholder Organizations might be required to alter materially or discontinue
the investment services offered by them to Customers. It is not anticipated,
however, that any resulting change in the Funds' method of operations would af-
fect their net asset values per Share or result in financial loss to any share-
holder.
DESCRIPTION OF CAPITAL STOCK
Master Fund was organized as a Maryland corporation on August 2, 1984. Cur-
rently, Master Fund has authorized capital of 35 billion shares of Common
Stock, $.001 par value per share, classified into 34 series of shares repre-
senting interests in 20 investment portfolios. Master Fund's Charter authorizes
the Board of Directors to classify or reclassify any class of shares of Master
Fund into one or more classes or series. Shares of Class A, Class B and Class G
represent interests in the Money Fund, Government Money Fund and Treasury Money
Fund Funds, respectively.
Master Tax-Exempt Fund was organized as a Maryland corporation on August 8,
1984. Currently, Master Tax-Exempt Fund has authorized capital of 14 billion
shares of Common Stock, $.001 par value per share, classified into 5 classes of
shares representing 5 investment portfolios currently being offered. Master
Tax-Exempt Fund's Charter authorizes the Board of Directors to classify or re-
classify any class of shares of Master Tax-Exempt Fund into one or more classes
or series. Shares of Class A Common Stock represent interests in the Short-Term
Fund's Shares.
Each Share represents an equal proportionate interest in the particular Fund
with other shares of the same class, and is entitled to such dividends and dis-
tributions out of the income earned on the assets belonging to such Fund as are
declared in the discretion of the Companies' Boards of Directors.
Shareholders are entitled to one vote for each full share held, and fractional
votes for fractional shares held, and will vote in the aggregate and not by
class, except as otherwise expressly required by law.
Certificates for Shares will not be issued unless expressly requested in writ-
ing to MFSC and will not be issued for fractional Shares.
As of July 11, 1995, U.S. Trust held of record substantially all of the Shares
in the Funds as agent or custodian for its customers, but did not own such
Shares beneficially because it did not have voting or investment discretion
with respect to such Shares.
CUSTODIAN AND TRANSFER AGENT
United States Trust Company of New York serves as the custodian of the Funds'
assets and as their transfer and dividend disbursing agent. Communications to
the custodian and transfer agent should be directed to United States Trust Com-
pany of New York, Mutual Funds Service Division, 770 Broadway, New York, New
York 10003-9598.
U.S. Trust has also entered into a sub-transfer agency arrangement with MFSC,
73 Tremont Street, Boston, Massachusetts 02108-3913, pursuant to which MFSC
provides certain transfer agent, dividend disbursement and registrar services
to the Funds.
YIELD INFORMATION
From time to time, in advertisements or in reports to shareholders, the yields
of the Funds may be quoted and compared to those of other mutual funds with
similar investment objectives and to other relevant indexes or to rankings pre-
pared by independent services or other financial or industry publications that
monitor the performance of mutual funds. For
26
<PAGE>
example, the yields of the Funds may be compared to the applicable averages
compiled by Donoghue's Money Fund Report, a widely recognized independent pub-
lication that monitors the performance of money market funds. The yields of the
taxable Funds may also be compared to the average yields reported by the Bank
Rate Monitor for money market deposit accounts offered by the 50 leading banks
and thrift institutions in the top five standard metropolitan statistical
areas.
Yield data as reported in national financial publications including, but not
limited to, Money Magazine, Forbes, Barron's, The Wall Street Journal and The
New York Times, or in publications of a local or regional nature, may also be
used in comparing the Funds' yields.
Each Fund may advertise its Shares seven-day yield which refers to the income
generated over a particular seven-day period identified in the advertisement by
an investment in the Fund. This income is annualized, i.e., the income during a
particular week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The Funds may also advertise the
"effective yields" of Shares which are calculated similarly but, when
annualized, income is assumed to be reinvested, thereby making the effective
yields slightly higher because of the compounding effect of the assumed rein-
vestment.
In addition, the Short-Term Fund may from time to time advertise the "tax-
equivalent yields" of Shares to demonstrate the level of taxable yield neces-
sary to produce an after-tax yield equivalent to that achieved by the Fund.
This yield is computed by increasing the yields of the Fund's Shares (calcu-
lated as above) by the amount necessary to reflect the payment of Federal in-
come taxes at a stated tax rate.
Yields will fluctuate and any quotation of yield should not be considered as
representative of a Fund's future performance. Since yields fluctuate, yield
data cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts and similar investment alternatives which often pro-
vide an agreed or guaranteed fixed yield for a stated period of time. Share-
holders should remember that yield is generally a function of the kind and
quality of the instruments held in a portfolio, portfolio maturity, operating
expenses, and market conditions. Any fees charged by Shareholder Organizations
with respect to accounts of Customers that have invested in Shares will not be
included in calculations of yield.
MISCELLANEOUS
Shareholders will receive unaudited semiannual reports describing the Funds'
investment operations and annual financial statements audited by the Funds' in-
dependent auditors.
The staff of the SEC has expressed the view that the use of this combined Pro-
spectus for the Funds may subject the Funds to liability for losses arising out
of any statement or omission regarding a particular Fund. The Companies do not
believe, however, that such risk is significant under the circumstances.
As used in this Prospectus, a "vote of the holders of a majority of the out-
standing shares" of a Company or a particular Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental in-
vestment policy, the affirmative vote of the lesser of (a) more than 50% of the
outstanding Shares of such Company or such Fund, or (b) 67% or more of the
Shares of such Company or such Fund present at a meeting if more than 50% of
the outstanding Shares of such Company or such Fund are represented at the
meeting in person or by proxy.
Inquiries regarding any of the Funds may be directed to the Distributor at the
address listed under "Distributor."
27
<PAGE>
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION
OPENING YOUR ACCOUNT:
Complete the Application(s) and mail to: FOR OVERNIGHT DELIVERY: send to:
UST Master Funds UST Master Funds
c/o Mutual Fund Service Company c/o Mutual Funds Service Company--
P.O. Box 2798 Transfer Agent
Boston, MA 02208-2798 73 Tremont Street
Boston, MA 02108-3913
Please enclose with the Application(s) your check made payable to the "UST
Master Funds" in the amount of your investment.
For direct wire purchases please refer to the section of the Prospectus enti-
tled "How to Purchase and Redeem Shares--Purchase Procedures."
MINIMUM INVESTMENTS:
Except as provided in the Prospectus, the minimum initial investment is $500
per Fund; subsequent investments must be in the minimum amount of $50 per Fund.
Investments may be made in excess of these minimums.
REDEMPTIONS:
Shares can be redeemed in any amount and at any time in accordance with pro-
cedures described in the Prospectus. In the case of shares recently purchased
by check, redemption proceeds will not be made available until the transfer
agent is reasonably assured that the check has been collected in accordance
with applicable banking regulations.
Certain legal documents will be required from corporations or other organiza-
tions, executors and trustees, or if redemption is requested by anyone other
than the shareholder of record. Written redemption requests in excess of
$50,000 per account must be accompanied by signature guarantees.
SIGNATURES: Please be sure to sign the Application(s).
If the shares are registered in the name of:
- an individual, the individual should sign.
- joint tenants, both tenants should sign.
- a custodian for a minor, the custodian should sign.
- a corporation or other organization, an authorized officer should sign
(please indicate corporate office or title).*
- a trustee or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity).*
* A corporate resolution or appropriate certificate may be required.
QUESTIONS:
If you have any questions regarding the Application or redemption require-
ments, please contact the transfer agent at (800) 446-1012 between 9:00 a.m.
and 5:00 p.m. (Eastern Time).
28
<PAGE>
[LOGO OF UST MUTUAL FUNDS SERVICE COMPANY
MASTER FUNDS CLIENT SERVICES
APPEARS HERE] P.O. Box 2798
Boston, MA 02208-2798
(800) 446-1012 NEW ACCOUNT APPLICATION
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
ACCOUNT REGISTRATION
-----------------------------------------------------------------------------
[_] Individual [_] Joint Tenants [_] Trust [_] Gift/Transfer to Minor
[_] Other ____________
Note: Joint tenant registration will be as "joint tenants
with right of survivorship" unless otherwise specified. Trust
registrations should specify name of the trust, trustee(s),
beneficiary(ies), and the date of the trust instrument.
Registration for Uniform Gifts/Transfers to Minors should be
in the name of one custodian and one minor and include the
state under which the custodianship is created (using the
minor's Social Security Number ("SSN")). For IRA accounts a
different application is required.
------------------------------ -----------------------------
Name(s) (please print) Social Security # or Taxpayer
Indentification #
( )
------------------------------ -----------------------------
Name Telephone #
------------------------------
Address
[_] U.S. Citizen
------------------------------ [_] Other (specify)____________
City/State/Zip
-----------------------------------------------------------------------------
FUND SELECTION (THE MINIMUM INITIAL AND SUBSEQUENT INVESTMENT IS $500 PER
FUND AND $50 PER FUND, RESPECTIVELY. MAKE CHECKS PAYABLE TO "UST MASTER
FUNDS.")
-----------------------------------------------------------------------------
INITIAL INVESTMENT
[_] Money Fund $ ____________ 803
[_] Short-Term Tax-Exempt Fund $ ____________ 806
[_] Government Money Fund $ ____________ 804
[_] Treasury Money Fund $ ____________ 811
TOTAL INITIAL INVESTMENT: $ ____________
NOTE: If investing by wire, you must obtain a Bank Wire Control Number. To
do so, please call (800) 446-1012 and ask for the Wire Desk.
A. BY MAIL: Enclosed is a check in the amount of $ ____ payable to "UST
Master Funds."
B. BY WIRE: A bank wire in the amount of $ ______ has been sent to the
Fund from
------------------ ---------------------
Name of Bank Wire Control Number
CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and
dividend distributions will be reinvested in additional
shares unless appropriate boxes below are checked:
All dividends are to be [_] reinvested [_] paid in cash
All capital gains are to be [_] reinvested [_] paid in cash
-----------------------------------------------------------------------------
ACCOUNT PRIVILEGES
-----------------------------------------------------------------------------
TELEPHONE EXCHANGE AND REDEMPTION
[_] I/We appoint MFSC as my/our agent to act upon instructions received by
telephone in order to effect the telephone exchange and redemption
privileges. I/We hereby ratify any instructions given pursuant to this
authorization and agree that Master Fund, Master Tax-Exempt Fund, MFSC and
their directors, officers and employees will not be liable for any loss,
liability, cost or expense for acting upon instructions believed to be
genuine and in accordance with the procedures described in the then current
Prospectus. To the extent that Master Fund and Master Tax-Exempt Fund fail
to use reasonable procedures as a basis for their belief, they or their
service contractors may be liable for instructions that prove to be
fraudulent or unauthorized.
I/We further acknowledge that it is my/our responsibility to read the
Prospectus of any Fund into which I/we exchange.
[_] I/We do not wish to have the ability to exercise telephone redemption
and exchange privileges. I/We further understand that all exchange and
redemption requests must be in writing.
SPECIAL PURCHASE AND REDEMPTION PLANS
I/We have completed and attached the Supplemental Application for:
[_] Automatic Investment Plan
[_] Systematic Withdrawal Plan
AUTHORITY TO TRANSMIT REDEMPTION PROCEEDS TO PRE-DESIGNATED ACCOUNT.
I/We hereby authorize MFSC to act upon instructions received by telephone to
withdraw $500 or more from my/our account in the UST Master Funds and to
wire the amount withdrawn to the following commercial bank account. I/We
understand that MFSC charges an $8.00 fee for each wire redemption, which
will be deducted from the proceeds of the redemption.
Title on Bank Account*____________________________________________________
Name of Bank _____________________________________________________________
Bank A.B.A. Number____________________ Account Number ____________________
Bank Address _____________________________________________________________
City/State/Zip ___________________________________________________________
(attach voided check here)
A corporation, trust or partnership must also submit a "Corporate
Resolution" (or "Certificate of Partnership") indicating the names and
titles of officers authorized to act on its behalf.
* TITLE ON BANK AND FUND ACCOUNT MUST BE IDENTICAL.
<PAGE>
--------------------------------------------------------------------------------
CHECK WRITING PRIVILEGE
--------------------------------------------------------------------------------
[_] I/We wish to take advantage of the check writing privilege
and have signed and attached the Check Writing Signature
Card to this application.
[_] I/We do not wish to take advantage of the check writing
privilege at this time, but I/we may elect to do so at a
later date.
SIGNATURE CARD SIGNATURE REQUIREMENTS. If the shares are
registered in the name of:
. AN INDIVIDUAL, the individual must sign the Card.
. JOINT ACCOUNT, both individuals must sign the Card.
. INSTITUTIONAL ACCOUNT, an officer must sign the Card
indicating corporate, trust or partnership office or title.
. TRUST ACCOUNT, trustee or other fiduciary must sign the
Card indicating capacity.
. CUSTODIAN FOR MINOR, custodian must sign the Card.
--------------------------------------------------------------------------------
AGREEMENTS AND SIGNATURES
--------------------------------------------------------------------------------
By signing this application, I/we hereby certify under
penalty of perjury that the information on this application
is complete and correct and that as required by Federal law:
[_] I/We certify that (1) the number(s) shown on this form
is/are the correct taxpayer identification number(s) and (2)
I/we are not subject to backup withholding either because
I/we have not been notified by the Internal Revenue Service
that I/we are subject to backup withholding, or the IRS has
notified me/us that I am/we are no longer subject to backup
withholding. (NOTE: IF ANY OR ALL OF PART 2 IS NOT TRUE,
PLEASE STRIKE OUT THAT PART BEFORE SIGNING.)
[_] If no taxpayer identification number ("TIN") or SSN has
been provided above, I/we have applied, or intend to apply,
to the IRS or the Social Security Administration for a TIN or
a SSN, and I/we understand that if I/we do not provide this
number to MFSC within 60 days of the date of this
application, or if I/we fail to furnish my/our correct SSN or
TIN, I/we may be subject to a penalty and a 31% backup
withholding on distributions and redemption proceeds. (Please
provide this number on Form W-9. You may request the form by
calling MFSC at the number listed above).
I/We represent that I am/we are of legal age and capacity to
purchase shares of the UST Master Funds. I/We have received,
read and carefully reviewed a copy of the appropriate Fund's
current Prospectus and agree to its terms and by signing
below I/we acknowledge that neither the Fund nor the
Distributor is a bank and that Fund shares are not deposits
or obligations of, or guaranteed or endorsed by, United
States Trust Company of New York, its parent or affiliates
and Fund Shares are not federally insured by, guaranteed by
or obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other governmental agency; that
while the Funds seek to maintain their net asset value per
share at $1.00 for purposes of purchases and redemptions,
there can be no assurance that they will be able to do so on
a continuous basis; and investment in the Funds involves
investment risk, including the possible loss of the principal
amount invested.
X ___________________________ Date __________________________
Owner Signature
X ___________________________ Date __________________________
Co-Owner Signature
Sign exactly as name(s) of registered owner(s) appear(s) above
(including legal title if signing for a corporation, trust
custodial account, etc.)
--------------------------------------------------------------------------------
FOR USE BY AUTHORIZED AGENT (BROKER/DEALER) ONLY
--------------------------------------------------------------------------------
We hereby submit this application for the purchase of shares
in accordance with the terms of our selling agreement with
Edgewood Services Inc., and with the Prospectus and Statement
of Additional Information of each Fund purchased.
----------------------------- -------------------------------
Investment Dealer's Name Source of Business Code
----------------------------- -------------------------------
Main Office Address Branch Number
----------------------------- -------------------------------
Representative's Number Representative's Name
----------------------------- -------------------------------
Branch Address Telephone
----------------------------- -------------------------------
Investment Dealer's Title
Authorized Signature
<PAGE>
CHECK WRITING SIGNATURE CARD UST MASTER FUNDS
By signing on the reverse, I/we hereby appoint as agent United States Trust
Company of New York ("U.S. Trust") and, as such agent, U.S. Trust is hereby
authorized and directed, upon presentment of check(s), to request the
redemption of shares of the applicable Fund registered in my/our name(s) in
the amount of such check(s) drawn on my/our Fund account. I/We further
authorize Mutual Funds Service Company ("MFSC"), the transfer agent, to accept
and execute instructions relating to this check writing privilege. I/We agree
that U.S. Trust and MFSC, acting as agents on my/our behalf in connection with
the foregoing check writing privileges, shall be liable only for their own
willful misfeasance, bad faith or gross negligence.
I/We acknowledge that this check writing arrangement is subject to the
applicable terms and restrictions, including charges, set forth in the current
Prospectus for each Fund with respect to which I/we have arranged to redeem
Fund shares by check writing. I/We understand and agree to be bound and
subject to U.S. Trust's rules, regulations and associated laws governing check
collection, as amended from time to time.
Stop payment instructions must be given to MFSC by calling toll-free (800)
446-1012.
To take advantage of the check writing privilege, please complete the
Signature Card on the reverse. Each person signing below guarantees the
genuineness of the other's signature. You will receive a supply of checks
approximately 3 weeks after this application is processed.
<PAGE>
Account Number ______________________ FUND
__________________ ______________ ___ [_] Money Fund [_] Short-Term
Last Name First M.I. Tax-Exempt Fund
__________________ ______________ ___ [_] Government [_] Treasury
Last Name First M.I. Money Fund Money Fund
By signing this Signature Card, the
undersigned agree(s) that the UST
Master Funds check writing privileges
will be subject to the instructions and
rules of Master Fund, Master Tax-Exempt
Fund and U.S. Trust, as now in effect and
as amended from time to time, as they
pertain to the use of redemption checks.
(Please use black ink) [_] Check here if both signatures
required on checks.
______________________________________ [_] Check here if only one signature
Signature required on checks.
______________________________________ If neither box is checked, all
Joint Signature checks will require both signatures.
UST MASTER FUNDS
<PAGE>
[LOGO OF UST MUTUAL FUNDS SERVICE COMPANY
MASTER FUNDS CLIENT SERVICES SUPPLEMENTAL APPLICATION
APPEARS HERE] P.O. Box 2798 SPECIAL INVESTMENT AND
Boston, MA 02208-2798 WITHDRAWAL OPTIONS
(800) 446-1012
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
ACCOUNT REGISTRATION PLEASE SUPPLY THE FOLLOWING INFORMATION EXACTLY AS IT
APPEARS ON THE FUND'S RECORD.
-----------------------------------------------------------------------------
Fund Name __________________ Account Number _________________
Owner Name _________________ Social Security or Taxpayer ID
Street Address _____________ Number _________________________
Resident City, State, Zip Code __________
of [_] U.S. [_] Other ____ [_] Check here if this is a change of address
-----------------------------------------------------------------------------
DISTRIBUTION OPTIONS (DIVIDENDS AND CAPITAL GAINS WILL BE REINVESTED
UNLESS OTHERWISE INDICATED)
-----------------------------------------------------------------------------
A. CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and dividend
distributions will be reinvested in additional shares unless appropriate
boxes below are checked: All dividends are to be [_] reinvested
[_] paid in cash
All capital gains are to be [_] reinvested
[_] paid in cash
B. PAYMENT ORDER: Complete only if distribution checks are to be payable
to another party. Make distribution checks payable to:
Name of Your Bank ______________
Name _______________________ Bank Account Number ____________
Address ____________________ Address of Bank ________________
City, State, Zip Code ________________________________________
C. DISTRIBUTIONS REINVESTED-CROSS FUNDS: Permits all distributions from
one Fund to be automatically reinvested into another identically-
registered UST Master Fund. (NOTE: You may NOT open a new Fund account
with this option.) Transfer all distributions earned:
From: ______________________ Account No. ____________________
(Fund)
To: ________________________ Account No. ____________________
(Fund)
-----------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN [_] YES [_] NO
-----------------------------------------------------------------------------
I/We hereby authorize MFSC to debit my/our personal checking account on
the designated dates in order to purchase shares in the Fund indicated at
the top of this application at the applicable public offering price
determined on that day.
[_] Monthly on the 1st day [_] Monthly on the 15th day [_] Monthly on both
the 1st and 15th
days
Amount of each debit (minimum $50 per Fund) $ ________________
NOTE: A Bank Authorization Form (below) and a voided personal check must
accompany the Automatic Investment Plan application.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
UST MASTER FUNDS
CLIENT SERVICES AUTOMATIC INVESTMENT PLAN
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
BANK AUTHORIZATION
-----------------------------------------------------------------------------
----------------------- ------------------------ --------------------------
Bank Name Bank Address Bank Account Number
I/We authorize you, the above named bank, to debit my/our
account for amounts drawn by MFSC, acting as my agent for the
purchase of Fund shares. I/We agree that your rights in
respect to each withdrawal shall be the same as if it were a
check drawn upon you and signed by me/us. This authority
shall remain in effect until revoked in writing and received
by you. I/We agree that you shall incur no liability when
honoring debits, except a loss due to payments drawn against
insufficient funds. I/We further agree that you will incur no
liability to me if you dishonor any such withdrawal. This
will be so even though such dishonor results in the
cancellation of that purchase.
---------------------------- --------------------------------
Account Holder's Name Joint Account Holder's Name
X ---------------- --------- X ------------------ -----------
Signature Date Signature Date
<PAGE>
--------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN [_] YES [_] NO NOT AVAILABLE FOR IRA'S
--------------------------------------------------------------------------------
AVAILABLE TO SHAREHOLDERS WITH ACCOUNT BALANCES OF $10,000 OR MORE.
I/We hereby authorize MFSC to redeem the necessary number of shares from
my/our UST Master Fund Account on the designated dates in order to make the
following periodic payments:
[_] Monthly on the 24th day [_] Quarterly on the 24th day of
January, April, July and October
[_] Other______
(This request for participation in the Plan must be received by the 18th day
of the month in which you wish withdrawals to begin.)
Amount of each check ($100 minimum) $______________________
Please make check payable to: Recipient ________________________
(To be completed only if redemption
proceeds to be paid to other than Street Address ___________________
account holder of record or mailed
to address other than address of City, State, Zip Code ____________
record)
NOTE: If recipient of checks is not the registered shareholder, signature(s)
----
below must be guaranteed. A corporation, trust or partnership must also submit
a "Corporate Resolution" (or "Certification of Partnership") indicating the
names and titles of officers authorized to act on its behalf.
--------------------------------------------------------------------------------
AGREEMENT AND SIGNATURES
--------------------------------------------------------------------------------
The investor(s) certifies and agrees that the certifications, authorizations,
directions and restrictions contained herein will continue until MFSC receives
written notice of any change or revocation. Any change in these instructions
must be in writing with all signatures guaranteed (if applicable).
Date ______________________
X X
--------------------------------------- -------------------------------------
Signature Signature
--------------------------------------- -------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
X X
--------------------------------------- -------------------------------------
Signature Signature
--------------------------------------- -------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
*ELIGIBLE GUARANTORS: An Eligible Guarantor institution is a bank, trust
company, broker, dealer, municipal or government securities broker or dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association, provided that such institution is a
participant in STAMP, the Securities Transfer Agents Medallion Program.
--------------------------------------------------------------------------------
<PAGE>
[LOGO OF
UST MASTER FUNDS, INC.
A Management Investment Company APPEARS HERE]
-------------------------------------------------------------------------------
Fixed-Income Funds For initial purchase information, current
prices, yield and performance information
73 Tremont Street and existing account information, call
Boston, Massachusetts 02108-3913 (800) 446-1012. (From overseas, call
(617) 557-8280.)
-------------------------------------------------------------------------------
This Prospectus describes three separate portfolios offered to investors by
UST Master Funds, Inc. ("Master Fund"), an open-end management investment com-
pany. This Prospectus describes the fixed-income portfolios. Each portfolio
(individually, a "Fund" and collectively, the "Funds") has its own investment
objective and policies as follows:
SHORT-TERM GOVERNMENT SECURITIES FUND'S investment objective is to seek a
high level of current income consistent with stability of principal by invest-
ing principally in obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and repurchase agreements collateralized by
such obligations. As a result, the interest income on such investments gener-
ally should be exempt from state and local personal income taxes in most
states. The Fund will generally have a dollar-weighted average portfolio matu-
rity of one to three years.
INTERMEDIATE-TERM MANAGED INCOME FUND'S investment objective is to seek as
high a level of current interest income consistent with relative stability of
principal by investing principally in investment grade or better debt obliga-
tions and money market instruments. The Fund will ordinarily have a dollar-
weighted average portfolio maturity of three to ten years.
MANAGED INCOME FUND'S investment objective is to seek higher current income
consistent with what is believed to be prudent risk of capital. Subject to
this investment objective, the Fund's investment adviser will consider the to-
tal rate of return on portfolio securities in managing the Fund. Under normal
market or economic conditions, the Fund will invest a majority of its assets
in investment grade debt obligations and money market instruments.
Each of the Funds is sponsored and distributed by Edgewood Services, Inc. and
advised by United States Trust Company of New York (the "Investment Adviser"
or "U.S. Trust").
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should consider before investing. Investors should read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated August 1, 1995 and containing additional information about
the Funds has been filed with the Securities and Exchange Commission. The cur-
rent Statement of Additional Information is available to investors without
charge by writing to Master Fund at its address shown above or by calling
(800) 446-1012. The Statement of Additional Information, as it may be supple-
mented from time to time, is incorporated by reference in its entirety into
this Prospectus.
SHARES IN THE FUNDS ("SHARES") ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARAN-
TEED OR ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, ITS PARENT AND
AFFILIATES AND THE SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGA-
TIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
August 1, 1995
<PAGE>
PROSPECTUS SUMMARY
UST MASTER FUNDS, INC. is an investment company offering various diversified
investment portfolios with differing objectives and policies. Founded in 1984,
Master Fund currently offers 20 Funds with combined assets of approximately
$2.5 billion. See "Description of Capital Stock."
INVESTMENT ADVISER: United States Trust Company of New York serves as the
Funds' investment adviser. U.S. Trust is a trust company offering a variety of
specialized financial and fiduciary services to high-net worth individuals, in-
stitutions and corporations. Master Fund offers investors access to U.S.
Trust's services. See "Management of the Funds--Investment Adviser."
INVESTMENT OBJECTIVES AND POLICIES: Generally, the Short-Term Government Se-
curities Fund is a diversified investment portfolio which invests principally
in obligations issued or guaranteed by the U.S. Government, its agencies or in-
strumentalities and the Intermediate-Term Managed Income and Managed Income
Funds are diversified investment portfolios which invest principally in invest-
ment grade or better debt obligations. The Funds' investment objectives and
policies are summarized on the cover and explained in greater detail later in
this Prospectus. See "Investment Objectives and Policies," "Portfolio Instru-
ments and Other Investment Information" and "Investment Limitations."
HOW TO INVEST: The Funds' shares are offered at their public offering price,
i.e., their net asset value per share plus a sales load which is subject to
substantial reductions for large purchases and programs for accumulation. The
sales load is not applicable to investors making their investments through a
variety of institutions, such as U.S. Trust, other banks and trust companies.
See "How to Purchase and Redeem Shares."
The minimum initial investment is $500 per Fund, and the minimum subsequent
investment is $50 per Fund. The easiest way to invest is to complete the ac-
count application which accompanies this Prospectus and to send it with a check
to the address noted on the application. Investors may also invest by wire and
through investment dealers or institutional investors with appropriate sales
agreements with Master Fund. See "How to Purchase and Redeem Shares."
HOW TO REDEEM: Redemptions may be requested directly from Master Fund by
mail, wire or telephone. Investors investing through another institution should
request redemptions through their Shareholder Organization. See "How to Pur-
chase and Redeem Shares."
INVESTMENT RISKS AND CHARACTERISTICS: Generally, each Fund is affected di-
rectly by credit markets and fluctuations in interest rates. Although each Fund
generally seeks to invest for the long term, each Fund may engage in short-term
trading of portfolio securities. A high rate of portfolio turnover may involve
correspondingly greater transaction costs which must be borne directly by a
Fund and ultimately by its shareholders. Investments in non-investment grade
obligations may subject the Intermediate-Term Managed Income and Managed Income
Funds to increased risk of loss upon default. Such securities are generally
unsecured, are often subordinated debt and are often issued by entities with
high levels of indebtedness and that are more sensitive to adverse economic
conditions. Investments in the obligations of foreign issuers may subject the
Intermediate-Term Managed Income and Managed Income Funds to additional invest-
ment risks, including fluctuations in foreign exchange rates, future political
and economic developments and the possible imposition of exchange controls or
other foreign governmental laws or restrictions. See "Investment Policies Com-
mon to Intermediate-Term Managed Income and Managed Income Funds--Risk Fac-
tors." Investment in the Funds should not be considered a complete investment
program.
2
<PAGE>
EXPENSE SUMMARY
<TABLE>
<CAPTION>
SHORT-TERM INTERMEDIATE- MANAGED
GOVERNMENT TERM MANAGED INCOME
SECURITIES FUND INCOME FUND FUND
--------------- ------------- -------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load on Purchases
(as percentage of offering price)....... 4.50% 4.50% 4.50%
Sales Load on Reinvested Dividends....... None None None
Deferred Sales Load...................... None None None
Redemption Fee/1/........................ None None None
Exchange Fees............................ None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees (after fee waivers)/2/..... .25% .33% .63%
12b-1 Fees............................... None None None
Other Operating Expenses
Administrative Servicing Fee........... .02% .02% .02%
Other Expenses......................... .34% .31% .35%
----- ----- -----
Total Operating Expenses (after fee
waivers)/2/............................. .61% .66% 1.00%
===== ===== =====
</TABLE>
-------
1. The Funds' transfer agent imposes a direct $8.00 charge on each wire re-
demption by noninstitutional (i.e. individual) investors which is not re-
flected in the expense ratios presented herein. Shareholder organizations
may charge their customers transaction fees in connection with redemptions.
See "Redemption Procedures."
2. The Investment Adviser and Administrators may from time to time voluntarily
waive part of their respective fees, which waivers may be terminated at any
time. Until further notice, the Investment Adviser and/or Administrators
intend to voluntarily waive fees in an amount equal to the Administrative
Servicing Fee; and to further waive fees and reimburse expenses to the ex-
tent necessary for the Short-Term Government Securities and Intermediate-
Term Managed Income Funds to maintain annual expense ratios of not more
than .62% and .72%, respectively. Without such fee waivers, "Other Ex-
penses" would be .35% for the Short-Term Government Securities Fund and
"Advisory Fees" would be .30%, .35% and .75% and "Total Operating Expenses"
would be .67%, .68% and 1.12% for the Short-Term Government Securities, In-
termediate-Term Managed Income and Managed Income Funds, respectively.
3
<PAGE>
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption of your investment at the end of the
following periods:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Short-Term Government Securities Fund........... $51 $64 $77 $118
Intermediate-Term Managed Income Fund........... 51 65 80 124
Managed Income Fund............................. 55 75 98 162
</TABLE>
The foregoing expense summary and example (based on the maximum sales load
payable on the Shares of the Funds) are intended to assist the investor in un-
derstanding the costs and expenses that an investor in Shares of the Funds will
bear directly or indirectly. The expense summary sets forth advisory and other
expenses payable with respect to Shares of the Funds for the fiscal year ended
March 31, 1995. For more complete descriptions of the Funds' operating ex-
penses, see "Management of the Funds" in this Prospectus and the financial
statements and notes incorporated by reference in the Statement of Additional
Information.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE
GREATER OR LOWER THAN THOSE SHOWN IN THE EXPENSE SUMMARY AND EXAMPLE.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables include selected data for a Share outstanding throughout
each period and other performance information derived from the financial state-
ments included in Master Fund's Annual Report to Shareholders for the year
ended March 31, 1995 (the "Financial Statements"). The information contained in
the Financial Highlights for each period has been audited by Ernst & Young LLP,
Master Fund's independent auditors. The following tables should be read in con-
junction with the Financial Statements and notes thereto. More information
about the performance of each Fund is also contained in the Annual Report to
Shareholders which may be obtained from Master Fund without charge by calling
the number on the front cover of this Prospectus.
SHORT-TERM GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
-------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
------ ------ -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 6.93 $ 7.06 $ 7.00
------ ------ ------
Income From Investment Operations
Net Investment Income...................... 0.33 0.24 0.06
Net Gains or (Losses) on Securities (both
realized and unrealized).................. (0.04) (0.09) 0.06
------ ------ ------
Total From Investment Operations........... 0.29 0.15 0.12
------ ------ ------
Less Distributions
Dividends From Net Investment Income....... (0.33) (0.24) (0.06)
Dividends From Net Realized Gain on Invest-
ments..................................... 0.00 (0.02) 0.00
Distributions in Excess of Net Realized
Gain on Investments....................... 0.00 (0.02) 0.00
------ ------ ------
Total Distributions........................ (0.33) (0.28) (0.06)
------ ------ ------
Net Asset Value, End of Period............... $ 6.89 $ 6.93 $ 7.06
====== ====== ======
Total Return/2/.............................. 4.30% 2.12% 1.70%
Ratios/Supplemental Data
Net Assets, End of Period (in millions).... $25.22 $25.23 $13.37
Ratio of Net Operating Expenses to Average
Net Assets................................ 0.61% 0.62% 0.62%/3/
Ratio of Gross Operating Expenses to Aver-
age Net Assets............................ 0.67% 0.65% 0.82%/3/
Ratio of Net Income to Average Net Assets.. 4.80% 3.42% 3.62%/3/
Portfolio Turnover Rate.................... 198.0% 267.0% 93.0%/3/
</TABLE>
-------
NOTES:
1.Inception date of the Fund was December 31, 1992.
2.Total return data does not reflect the sales load payable on purchases of
Shares.
3.Annualized.
5
<PAGE>
INTERMEDIATE-TERM MANAGED INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 6.83 $ 7.19 $ 7.00
---------- ---------- ------
Income From Investment Operations
Net Investment Income.............. 0.39 0.31 0.08
Net Gains or (Losses) on Securities
(both realized and unrealized).... (0.07) (0.27) 0.19
---------- ---------- ------
Total From Investment Operations... 0.32 0.04 0.27
---------- ---------- ------
Less Distributions
Dividends From Net Investment
Income............................ (0.39) (0.31) (0.08)
Dividends From Net Realized Gain on
Investments....................... 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments...... (0.01) (0.09) 0.00
---------- ---------- ------
Total Distributions................ (0.40) (0.40) (0.08)
---------- ---------- ------
Net Asset Value, End of Period....... $ 6.75 $ 6.83 $ 7.19
========== ========== ======
Total Return/2/...................... 4.95% 0.45% 3.86%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $ 47.93 $ 42.56 $19.48
Ratio of Net Operating Expenses to
Average Net Assets................ 0.66% 0.69% 0.72%/3/
Ratio of Gross Operating Expenses
to Average Net Assets............. 0.68% 0.69% 0.98%/3/
Ratio of Net Income to Average Net
Assets............................ 5.91% 4.31% 4.69%/3/
Portfolio Turnover Rate............ 682.0% 385.0% 66.00%/3/
</TABLE>
-------
NOTES:
1.Inception date of the Fund was December 31, 1992.
2.Total return data does not reflect the sales load payable on purchases of
Shares.
3.Annualized.
6
<PAGE>
MANAGED INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986/1/
------ ------- ------- ------ ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of period.... $ 8.57 $ 9.64 $ 9.15 $ 9.12 $ 8.77 $ 8.51 $ 8.61 $ 9.01 $ 8.62 $ 8.00
------ ------- ------- ------ ------ ------ ------- ------ ------ ------
Income From Investment
Operations
Net Investment Income.. 0.51 0.47 0.58 0.65 0.67 0.69 0.66 0.67 0.69 0.14
Net Gains or (Losses)
on Securities (both
realized and
unrealized)........... (0.18) (0.26) 0.79 0.27 0.44 0.32 (0.06) (0.08) 0.79 0.57
------ ------- ------- ------ ------ ------ ------- ------ ------ ------
Total From Investment
Operations............ 0.33 0.21 1.37 0.92 1.11 1.01 0.60 0.59 1.48 0.71
------ ------- ------- ------ ------ ------ ------- ------ ------ ------
Less Distributions
Dividends From Net
Investment Income..... (0.51) (0.47) (0.58) (0.65) (0.67) (0.69) (0.66) (0.67) (0.75) (0.09)
Dividends From Net
Realized Gain on
Investments........... 0.00 (0.31) (0.30) (0.24) (0.09) (0.06) (0.04) (0.32) (0.34) 0.00
Distributions in Excess
of Net Realized Gain
on Investments........ 0.00 (0.50) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------ ------- ------- ------ ------ ------ ------- ------ ------ ------
Total Distributions.... (0.51) (1.28) (0.88) (0.89) (0.76) (0.75) (0.70) (0.99) (1.09) (0.09)
------ ------- ------- ------ ------ ------ ------- ------ ------ ------
Net Asset Value, End of
Period................. $ 8.39 $ 8.57 $ 9.64 $ 9.15 $ 9.12 $ 8.77 $ 8.51 $ 8.61 $ 9.01 $ 8.62
====== ======= ======= ====== ====== ====== ======= ====== ====== ======
Total Return/2/......... 4.06% 1.73% 15.74% 10.36% 13.37% 12.03% 7.18% 7.20% 18.46% 8.93%
Ratios/Supplemental Data
Net Assets, End of
Period (in millions).. $86.02 $110.90 $108.94 $96.32 $52.74 $38.75 $ 19.53 $12.67 $11.53 $ 2.48
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.00% 0.90% 0.89% 1.05% 1.11% 1.13% 1.07% 0.86% 0.81% 0.94%/3/
Ratio of Gross
Operating Expenses to
Average Net Assets.... 1.12% 1.06% 1.04% 1.05% 1.11% 1.14% 1.24% 1.32% 1.38% 3.34%/3/
Ratio of Net Income to
Average Net Assets.... 6.09% 4.89% 6.19% 6.97% 7.57% 7.73% 7.69% 7.76% 7.72% 8.01%/3/
Portfolio Turnover
Rate.................. 492.0% 459.0% 455.0% 369.0% 342.0% 350.0% 1226.0% 576.0% 751.0% 265.0%/3/
</TABLE>
-------
NOTES:
1. Inception date of the Fund was January 9, 1986.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
7
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Investment Adviser will use its best efforts to achieve the investment
objective of each Fund, although their achievement cannot be assured. The in-
vestment objective of each Fund may not be changed without a vote of the hold-
ers of a majority of the particular Fund's outstanding Shares (as defined un-
der "Miscellaneous"). Except as noted below and in "Investment Limitations,"
the investment policies of each Fund may be changed without the vote of the
holders of a majority of the outstanding Shares of such Fund.
SHORT-TERM GOVERNMENT SECURITIES FUND
The Short-Term Government Securities Fund's investment objective is to seek a
high level of current income consistent with stability of principal by invest-
ing principally in obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and repurchase agreements collateralized by
such obligations. As a result, the interest income on such investments gener-
ally should be exempt from state and local personal income taxes in most
states. In all states this tax exemption is passed through to the Fund's
shareholders. The Fund will generally have a dollar-weighted average portfolio
maturity of one to three years. Changes in interest rates will affect the
value of the portfolio investments held by the Short-Term Government Securi-
ties Fund. As a result, investment in the Short-Term Government Securities
Fund should not be considered a complete investment program. Additional infor-
mation about the Fund's policies and portfolio instruments is set forth below
under "Portfolio Instruments and Other Investment Information."
INTERMEDIATE-TERM MANAGED INCOME FUND
The Intermediate-Term Managed Income Fund's investment objective is to seek
as high a level of current interest income as is consistent with relative sta-
bility of principal. The Fund will have a dollar-weighted average portfolio
maturity of three to ten years.
MANAGED INCOME FUND
The Managed Income Fund's investment objective is to seek high current income
consistent with what is believed to be prudent risk of capital. Subject to
this investment objective, the Investment Adviser will consider the market
value appreciation of portfolio securities in managing the Fund. The Managed
Income Fund's dollar-weighted average portfolio maturity will vary from time
to time in light of current market and economic conditions, the comparative
yields on instruments with different maturities and other factors.
INVESTMENT POLICIES COMMON TO INTERMEDIATE-TERM MANAGED INCOME AND MANAGED
INCOME FUNDS
The Intermediate-Term Managed Income and Managed Income Funds may invest in
the following types of securities: corporate debt obligations such as bonds,
debentures, obligations convertible into common stocks and money market in-
struments; preferred stocks; and obligations issued or guaranteed by the U.S.
Government and its agencies or instrumentalities. The Intermediate-Term Man-
aged Income and Managed Income Funds are also permitted to enter into repur-
chase agreements. The Intermediate-Term Managed Income and Managed Income
Funds may, from time to time, invest in debt obligations exempt from Federal
income tax issued by or on behalf of states, territories and possessions of
the United States, the District of Columbia and their authorities, agencies,
instrumentalities and political subdivisions ("Municipal Bonds"). The purchase
of Municipal Bonds may be advantageous when, as a result of prevailing econom-
ic, regulatory or other circumstances, the performance of such securities, on
a pre-tax basis, is comparable to that of corporate or U.S. Government debt
obligations.
Under normal market conditions, at least 75% of the Intermediate-Term Managed
Income and Managed Income Fund's total assets will be invested in investment-
grade debt obligations rated within the four highest ratings of Standard &
Poor's Ratings Group ("S&P") or Moody's Investor Service, Inc. ("Moody's") (or
in unrated obligations considered to be of investment grade by the Investment
Adviser) and in U.S. Government obligations and money mar-
8
<PAGE>
ket instruments of the types listed below under "Money Market Instruments."
When, in the opinion of the Investment Adviser, a defensive investment posture
is warranted, the Funds may invest temporarily and without limitation in high
quality, short-term money market instruments.
Unrated securities will be considered of investment grade if deemed by the In-
vestment Adviser to be comparable in quality to instruments so rated, or if
other outstanding obligations of the issuers of such securities are rated
"Baa/BBB" or better. It should be noted that obligations rated in the lowest of
the top four ratings ("Baa" by Moody's or "BBB" by S&P) are considered to have
some speculative characteristics and are more sensitive to economic change than
higher rated bonds.
The Intermediate-Term Managed Income and Managed Income Funds may invest up to
25% of their respective total assets in: preferred stocks; dollar-denominated
debt obligations of foreign issuers, including foreign corporations and foreign
governments; and dollar-denominated debt obligations of U.S. companies issued
outside the United States (see additional limitation on investments in obliga-
tions of foreign branches of U.S. banks and U.S. branches of foreign banks un-
der "Money Market Instruments" below). The Intermediate-Term Managed Income and
Managed Income Funds may invest up to 10% and 25% of their respective total as-
sets in obligations rated below the four highest ratings of S&P or Moody's
(commonly called "junk bonds") with no minimum rating required. The Intermedi-
ate-Term Managed Income and Managed Income Funds will not invest in common
stocks, and any common stocks received through conversion of convertible debt
obligations will be sold in an orderly manner as soon as possible. Changes in
interest rates will affect the value of the portfolio investments held by the
Intermediate-Term Managed Income and Managed Income Funds.
RISK FACTORS
Investments in the obligations of foreign issuers may subject the Intermedi-
ate-Term Managed Income and Managed Income Funds to additional investment risks
including fluctuations in foreign exchange rates, future political and economic
developments and the possible imposition of exchange controls or other foreign
governmental laws or restrictions. In addition, with respect to certain coun-
tries, there is the possibility of expropriation of assets, confiscatory taxa-
tion, political or social instability or diplomatic developments which could
adversely affect investments in those countries. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing and financial re-
porting standards and requirements comparable to or as uniform as those of
U.S.-based companies. Foreign securities markets, while growing in volume,
have, for the most part, substantially less volume than U.S. markets, and secu-
rities of many foreign companies are less liquid and their prices more volatile
than securities of comparable U.S.-based companies. Transaction costs on for-
eign securities markets are generally higher than in the United States. There
is generally less government supervision and regulation of foreign exchanges,
brokers and issuers than there is in the United States. The Intermediate-Term
Managed Income and Managed Income Funds might have greater difficulty taking
appropriate legal action in a foreign court. Interest payable on a Fund's for-
eign portfolio securities may be subject to foreign withholding taxes. To the
extent such taxes are not offset by credits or deductions allowed to investors
under the Federal income tax provisions, they may reduce the net return to the
shareholders.
The Intermediate-Term Managed Income and Managed Income Funds' investments in
obligations rated below the four highest ratings of S&P and Moody's have dif-
ferent risks than investments in securities that are rated "investment grade."
Risk of loss upon default by the borrower is significantly greater because low-
er-rated securities are generally unsecured and are often subordinated to other
creditors of the issuer, and because the issuers frequently
9
<PAGE>
have high levels of indebtedness and are more sensitive to adverse economic
conditions, such as recessions, individual corporate developments and increas-
ing interest rates than are investment grade issuers. As a result, the market
price of such securities, and the net asset value of the Funds' Shares, may be
particularly volatile.
Additional risks associated with lower-rated fixed-income securities are (a)
the relative youth and growth of the market for such securities, (b) the rela-
tively low trading market liquidity for the securities, (c) the impact that
legislation may have on the high-yield bond market (and, in turn, on the
Funds' net asset value and investment practices), (d) the operation of manda-
tory sinking fund or call/redemption provisions during periods of declining
interest rates whereby the Funds may be required to reinvest premature redemp-
tion proceeds in lower yielding portfolio securities, and (e) the creditwor-
thiness of the issuers of such securities. During an economic downturn or sub-
stantial period of rising interest rates, highly-leveraged issuers may experi-
ence financial stress which would adversely affect their ability to service
their principal and interest payment obligations, to meet projected business
goals and to obtain additional financing. An economic downturn could also dis-
rupt the market for lower-rated bonds generally and adversely affect the value
of outstanding bonds and the ability of the issuers to repay principal and in-
terest. If the issuer of a lower-rated security held by the Intermediate-Term
Managed Income and Managed Income Funds defaulted, the Fund could incur addi-
tional expenses to seek recovery. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may also decrease the values and
liquidity of lower-rated securities held by the Fund, especially in a thinly
traded market. Finally, the Funds' trading in fixed-income securities to
achieve capital appreciation entails risks that capital losses rather than
gains will result. As a result, investment in the Intermediate-Term Managed
Income and Managed Income Funds should not be considered a complete investment
program.
Debt obligations rated "BB," "B" or "CCC" by S&P are regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" represents the
lowest degree of speculation and "CCC" the highest degree of speculation.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions. The rating "CC" is typically applied to debt subordinated to se-
nior debt that is assigned an actual or implied "CCC" rating. The rating "C"
is typically applied to debt subordinated to senior debt which is assigned an
actual or implied "CCC-" debt rating, and may be used to cover a situation
where a bankruptcy petition has been filed, but debt service payments are con-
tinued. The rating "CI" is reserved for income bonds on which no interest is
being paid. Debt obligations rated "D" are in default, and payments of inter-
est and/or repayment of principal is in arrears. The ratings from "AA" through
"CCC" are sometimes modified by the addition of a plus or minus sign to show
relative standing within the major rating categories. Moody's has a similar
classification scheme for non-investment grade debt obligations. Debt obliga-
tions rated "Ba," "B," "Caa," "Ca" and "C" provide questionable protection of
interest and principal. The rating "Ba" indicates that a debt obligation has
some speculative characteristics. The rating "B" indicates a general lack of
characteristics of desirable investment. Debt obligations rated "Caa" are of
poor quality, while debt obligations rated "Ca" are considered highly specula-
tive. "C" represents the lowest rated class of debt obligations. Moody's ap-
plies numerical modifiers 1, 2 and 3 in each generic classification from "Aa"
to "B" in its bond rating system. The modifier "1" indicates that a security
ranks in the higher end of its rating category; the modifier "2" reflects a
mid-range ranking; and the modifier "3" indicates that the security ranks at
the lower end of its generic rating category.
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION
MONEY MARKET INSTRUMENTS
Money market instruments that may be purchased by the Intermediate-Term Man-
aged Income and
10
<PAGE>
Managed Income Funds in accordance with their investment objectives and poli-
cies stated above include, among other things, bank obligations, commercial pa-
per and corporate bonds with remaining maturities of 13 months or less.
Bank obligations include bankers' acceptances, negotiable certificates of de-
posit, and non-negotiable time deposits earning a specified return and issued
by a U.S. bank which is a member of the Federal Reserve System or insured by
the Bank Insurance Fund of the Federal Deposit Insurance Corporation, or by a
savings and loan association or savings bank which is insured by the Savings
Association Insurance Fund of the Federal Deposit Insurance Corporation. Bank
obligations acquired by a Fund may also include U.S. dollar-denominated obliga-
tions of foreign branches of U.S. banks and obligations of domestic branches of
foreign banks. Investments in bank obligations of foreign branches of domestic
financial institutions or of domestic branches of foreign banks are limited so
that no more than 5% of the value of the Managed Income Fund's total assets
will be invested in obligations of any one foreign or domestic branch and no
more than 20% of the Fund's total assets at the time of purchase will be in-
vested in the aggregate in such obligations. Investments in time deposits are
limited to no more than 5% of the value of a Fund's total assets at time of
purchase.
Investments by the Funds in commercial paper will consist of issues that are
rated "A-2" or better by S&P or "Prime-2" or better by Moody's. In addition,
each Fund may acquire unrated commercial paper that is determined by the In-
vestment Adviser at the time of purchase to be of comparable quality to rated
instruments that may be acquired by the particular Fund.
Commercial paper may include variable and floating rate instruments. While
there may be no active secondary market with respect to a particular instrument
purchased by a Fund, a Fund may, from time to time as specified in the instru-
ment, demand payment of the principal of the instrument or may resell the in-
strument to a third party. The absence of an active secondary market, however,
could make it difficult for the Fund to dispose of the instrument if the issuer
defaulted on its payment obligation or during periods that the Fund is not en-
titled to exercise its demand rights, and the Fund could, for this or other
reasons, suffer a loss with respect to such instrument.
GOVERNMENT OBLIGATIONS
Government obligations acquired by the Funds include obligations issued or
guaranteed by the U.S. Government, its agencies and instrumentalities. Such in-
vestments may include obligations issued by the Farm Credit System Financial
Assistance Corporation, the Federal Financing Bank, the General Services Admin-
istration, Federal Home Loan Banks, the Tennessee Valley Authority and the Stu-
dent Loan Marketing Association. Obligations of certain agencies and instrumen-
talities of the U.S. Government are supported by the full faith and credit of
the U.S. Treasury; others are supported by the right of the issuer to borrow
from the Treasury; others are supported by the discretionary authority of the
U.S. Government to purchase the agency's obligations; still others are sup-
ported only by the credit of the instrumentality. No assurance can be given
that the U.S. Government would provide financial support to U.S. Government-
sponsored instrumentalities if it is not obligated to do so by law. Obligations
of such instrumentalities will be purchased only when the Investment Adviser
believes that the credit risk with respect to the instrumentality is minimal.
The Statement of Additional Information contains further information on the
various types of U.S. Government obligations.
Securities issued or guaranteed by the U.S. Government have historically in-
volved little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns shares of a Fund.
REPURCHASE AGREEMENTS
As stated above, each Fund may agree to purchase portfolio securities subject
to the seller's agreement
11
<PAGE>
to repurchase them at a mutually agreed upon date and price ("repurchase
agreements"). Each Fund will enter into repurchase agreements only with finan-
cial institutions such as banks or broker/dealers which are deemed to be
creditworthy by the Investment Adviser under guidelines approved by Master
Fund's Board of Directors. No Fund will enter into repurchase agreements with
the Investment Adviser or its affiliates. Repurchase agreements with remaining
maturities in excess of seven days will be considered illiquid securities sub-
ject to the 10% limit described in Investment Limitation No. 5 below.
The seller under a repurchase agreement will be required to maintain the
value of the obligations subject to the agreement at not less than the repur-
chase price. Default or bankruptcy of the seller would, however, expose a Fund
to possible delay in connection with the disposition of the underlying securi-
ties or loss to the extent that proceeds from a sale of the underlying securi-
ties were less than the repurchase price under the agreement. Income on the
repurchase agreements will be taxable.
INVESTMENT COMPANY SECURITIES
The Funds may also invest in securities issued by other investment companies
which invest in high-quality, short-term securities and which determine their
net asset value per share based on the amortized cost or penny-rounding meth-
od. In addition to the advisory fees and other expenses a Fund bears directly
in connection with its own operations, as a shareholder of another investment
company, a Fund would bear its pro rata portion of the other investment
company's advisory fees and other expenses. As such, the Fund's shareholders
would indirectly bear the expenses of the Fund and the other investment compa-
ny, some or all of which would be duplicative. Such securities will be ac-
quired by the Funds within the limits prescribed by the Investment Company Act
of 1940 (the "1940 Act") which include, subject to certain exceptions, a pro-
hibition against a Fund investing more than 10% of the value of its total as-
sets in such securities.
WHEN-ISSUED AND FORWARD TRANSACTIONS AND STAND-BY COMMITMENTS
Each of the Funds may purchase eligible securities on a "when-issued" basis
and may purchase or sell securities on a "forward commitment" basis. These
transactions involve a commitment by a Fund to purchase or sell particular se-
curities with payment and delivery taking place in the future, beyond the nor-
mal settlement date, at a stated price and yield. Securities purchased on a
"forward commitment" or "when-issued" basis are recorded as an asset and are
subject to changes in value based upon changes in the general level of inter-
est rates. It is expected that forward commitments and "when-issued" purchases
will not exceed 25% of the value of a Fund's total assets absent unusual mar-
ket conditions, and that the length of such commitments will not exceed 45
days. The Funds do not intend to engage in "when-issued" purchases and forward
commitments for speculative purposes, but only in furtherance of their invest-
ment objectives.
In addition, the Intermediate-Term Managed Income and Managed Income Funds
may acquire "stand-by commitments" with respect to Municipal Bonds held by
them. Under a "stand-by commitment," a dealer agrees to purchase at a Fund's
option specified Municipal Bonds at a specified price. The Intermediate-Term
Managed Income and Managed Income Funds will acquire "stand-by commitments"
solely to facilitate portfolio liquidity and do not intend to exercise their
rights thereunder for trading purposes. "Stand-by commitments" acquired by a
Fund would be valued at zero in determining the Fund's net asset value.
TYPES OF MUNICIPAL BONDS
The two principal classifications of Municipal Bonds which may be held by the
Intermediate-Term Managed Income and Managed Income Funds are "general obliga-
tion" securities and "revenue" securities. General obligation securities are
secured by the issuer's pledge of its full faith, credit, and taxing power for
the payment of principal and interest. Revenue securities are payable only
from the revenues
12
<PAGE>
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise tax or other specific revenue source such
as the user of the facility being financed. Private activity bonds held by the
Funds are in most cases revenue securities and are not payable from the unre-
stricted revenues of the issuer. Consequently, the credit quality of private
activity revenue bonds is usually directly related to the credit standing of
the corporate user of the facility involved.
The Intermediate-Term Managed Income and Managed Income Funds' portfolios may
also include "moral obligation" securities, which are normally issued by spe-
cial-purpose public authorities. If the issuer of moral obligation securities
is unable to meet its debt service obligations from current revenues, it may
draw on a reserve fund, the restoration of which is a moral commitment, but not
a legal obligation of the state or municipality which created the issuer. There
is no limitation on the amount of moral obligation securities that may be held
by the Intermediate-Term Managed Income and Managed Income Funds. The Invest-
ment Adviser will consider investments in Municipal Bonds for the Intermediate-
Term Managed Income and Managed Income Funds when the Investment Adviser be-
lieves that the total return on such securities is attractive relative to that
of taxable securities.
FUTURES CONTRACTS
The Funds may enter into interest rate futures contracts as a hedge against
changes in market conditions. An interest rate futures contract represents a
firm commitment by which two parties agree to take or make delivery of fixed-
income securities on the last trading date of the contract and the price at
which the futures contract is originally struck.
The Funds will not engage in transactions in futures contracts for specula-
tion, but only as a hedge against changes in market values of securities which
they hold or intend to purchase where the transactions are intended to reduce
risks inherent in the management of the Funds. Each Fund may engage in futures
contracts only to the extent permitted by the Commodity Futures Trading Commis-
sion ("CFTC") and the Securities and Exchange Commission ("SEC"). As of the
date of this Prospectus, each Fund intends to limit its hedging transactions in
futures contracts so that, immediately after any such transaction, the aggre-
gate initial margin that is required to be posted by the Fund under the rules
of the exchange on which the futures contract is traded does not exceed 5% of
the Fund's total assets, after taking into account any unrealized profits and
unrealized losses on the Fund's open contracts.
When investing in futures contracts, the Funds must satisfy certain asset seg-
regation requirements to ensure that the use of futures is unleveraged. When a
Fund takes a long position in a futures contract, it must maintain a segregated
account containing cash and/or certain liquid assets equal to the purchase
price of the contract, less any margin or deposit. When a Fund takes a short
position in a futures contract, the Fund must maintain a segregated account
containing cash and/or certain liquid assets in an amount equal to the market
value of the securities underlying such contract (less any margin or deposit),
which amount must be at least equal to the market price at which the short po-
sition was established. Asset segregation requirements are not applicable when
a Fund "covers" a futures position generally by entering into an offsetting po-
sition.
Transactions by a Fund in futures contracts may subject the Fund to a number
of risks. Successful use of futures by a Fund is subject to the ability of the
Investment Adviser to anticipate correctly movements in the direction of the
market. In addition, there may be an imperfect correlation, or no correlation
at all, between movements in the price of the futures contracts and movements
in the price of the instruments being hedged. Further, there is no assurance
that a liquid market will exist for any particular futures contract at any par-
ticular time. Consequently, a Fund may realize a loss on a futures transaction
that is not offset by a favorable movement in the price of securities which it
holds or intends to purchase or may be unable to close a futures position in
the event of adverse price movements.
13
<PAGE>
SECURITIES LENDING
To increase return on its portfolio securities, each Fund may lend its portfo-
lio securities to broker/dealers pursuant to agreements requiring the loans to
be continuously secured by collateral equal at all times in value to at least
the market value of the securities loaned. Collateral for such loans may in-
clude cash, securities of the U.S. Government, its agencies or instrumentali-
ties, or an irrevocable letter of credit issued by a bank which meets the in-
vestment standards of a Fund, or any combination thereof. Such loans will not
be made if, as a result, the aggregate of all outstanding loans of a Fund ex-
ceeds 30% of the value of its total assets. There may be risks of delay in re-
ceiving additional collateral or in recovering the securities loaned or even a
loss of rights in the collateral should the borrower of the securities fail fi-
nancially. However, loans are made only to borrowers deemed by the Investment
Adviser to be of good standing and when, in the Investment Adviser's judgment,
the income to be earned from the loan justifies the attendant risks.
ILLIQUID SECURITIES
No Fund will knowingly invest more than 10% of the value of its net assets in
securities that are illiquid. Each Fund may purchase securities which are not
registered under the Securities Act of 1933 (the "Act") but which can be sold
to "qualified institutional buyers" in accordance with Rule 144A under the Act.
Any such security will not be considered illiquid so long as it is determined
by the Investment Adviser, acting under guidelines approved and monitored by
the Board, that an adequate trading market exists for that security. This in-
vestment practice could have the effect of increasing the level of illiquidity
in a Fund during any period that qualified institutional buyers become uninter-
ested in purchasing these restricted securities.
PORTFOLIO TURNOVER
Although each Fund generally seeks to invest for the long term, each Fund may
sell a portfolio investment immediately after its acquisition if the Investment
Adviser believes that such a disposition is consistent with a Fund's investment
objective. Portfolio investments may be sold for a variety of reasons, such as
a more favorable investment opportunity or other circumstances bearing on the
desirability of continuing to hold the investments. A high rate of portfolio
turnover may involve correspondingly greater transaction costs, which must be
borne directly by a Fund and ultimately by its shareholders. Portfolio turnover
will not be a limiting factor in making portfolio decisions. Each Fund's port-
folio turnover rate is not expected to exceed 400%. High portfolio turnover may
result in the realization of substantial net capital gains. To the extent that
net short-term capital gains are realized, any distributions resulting from
such gains are considered ordinary income for Federal income tax purposes. (See
"Financial Highlights" and "Taxes--Federal.")
INVESTMENT LIMITATIONS
The investment limitations enumerated below are matters of fundamental policy
and may not be changed without the vote of the holders of a majority of a
Fund's outstanding Shares (as defined under "Miscellaneous").
A Fund may not:
1. Purchase securities of any one issuer, other than U.S. Government obliga-
tions, if immediately after such purchase more than 5% of the value of its
total assets would be invested in the securities of such issuer, except that
up to 25% of the value of its total assets may be invested without regard to
this 5% limitation;
2. Borrow money except from banks for temporary purposes, and then in
amounts not in excess of 10% of the value of its total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets except in con-
nection with any such borrowing and in amounts not in excess of the
14
<PAGE>
lesser of the dollar amounts borrowed and 10% of the value of its total as-
sets at the time of such borrowing, provided that each Fund may enter into
futures contracts and futures options. (This borrowing provision is included
solely to facilitate the orderly sale of portfolio securities to accommodate
abnormally heavy redemption requests and is not for leverage purposes.) A
Fund will not purchase portfolio securities while borrowings in excess of 5%
of its total assets are outstanding;
3. Purchase any securities which would cause more than 25% of the value of
its total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the
same industry, provided that (a) with respect to the Managed Income Fund,
there is no limitation with respect to securities issued or guaranteed by the
U.S. Government or domestic bank obligations, (b) with respect to the Short-
Term Government Securities and Intermediate-Term Managed Income Funds, there
is no limitation with respect to securities issued or guaranteed by the U.S.
Government and (c) neither all finance companies, as a group, nor all utility
companies, as a group, are considered a single industry for purposes of this
policy; and
4. Make loans, except that (i) the Fund may purchase or hold debt securities
in accordance with its investment objective and policies, and may enter into
repurchase agreements with respect to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, and (ii) each Fund may
lend portfolio securities in an amount not exceeding 30% of its total assets.
In addition, the Managed Income Fund may not:
5. Knowingly invest more than 10% of the value of its total assets in illiq-
uid securities, including repurchase agreements with remaining maturities in
excess of seven days, restricted securities, and other securities for which
market quotations are not readily available; and
6. Invest in obligations of foreign branches of financial institutions or in
domestic branches of foreign banks if immediately after such purchase (i)
more than 5% of the value of its total assets would be invested in obliga-
tions of any one foreign branch of the financial institution or domestic
branch of a foreign bank; or (ii) more than 20% of its total assets would be
invested in foreign branches of financial institutions or in domestic
branches of foreign banks.
* * *
In addition to the investment limitations described above, as a matter of
fundamental policy for each Fund, which may not be changed without the vote of
the holders of a majority of the Fund's outstanding shares, a Fund may not in-
vest in the securities of any single issuer if, as a result, the Fund holds
more than 10% of the outstanding voting securities of such issuer.
In Investment Limitation No. 1 above: (a) a security is considered to be is-
sued by the governmental entity or entities whose assets and revenues back the
security, or, with respect to a private activity bond that is backed only by
the assets and revenues of a non-governmental user, such non-governmental us-
er; (b) in certain circumstances, the guarantor of a guaranteed security may
also be considered to be an issuer in connection with such guarantee; and (c)
securities issued or guaranteed by the United States Government, its agencies
or instrumentalities (including securities backed by the full faith and credit
of the United States) are deemed to be U.S. Government obligations.
The Short-Term Government Securities and Intermediate-Term Managed Income
Funds may not knowingly invest more than 10% of the value of their respective
total assets in illiquid securities, including repurchase agreements with re-
maining maturities in excess of seven days, restricted securities and other
securities for which market quotations are not readily available. This invest-
ment policy may be changed by Master Fund's Board of Directors upon reasonable
notice to shareholders.
15
<PAGE>
The Managed Income Fund will not invest more than 25% of the value of its to-
tal assets in domestic bank obligations.
With respect to all investment policies, if a percentage limitation is satis-
fied at the time of investment, a later increase or decrease in such percent-
age resulting from a change in the value of a Fund's portfolio securities will
not constitute a violation of such limitation.
In order to permit the sale of Shares in certain states, Master Fund may make
commitments that are more restrictive than the investment policies and limita-
tions described above. Should Master Fund determine that any such commitment
is no longer in the Funds' best interests, it will revoke the commitment by
terminating sales of Shares to investors residing in the state involved.
PRICING OF SHARES
The net asset value of each Fund's Shares is determined and priced for pur-
chases and redemptions at the close of regular trading hours on the New York
Stock Exchange (the "Exchange"), currently 4:00 p.m. (Eastern Time). Net asset
value and pricing for each Fund's Shares are determined on each day the Ex-
change and the Investment Adviser are open for trading ("Business Day"). Cur-
rently, the holidays which Master Fund observes are New Year's Day, Martin Lu-
ther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas.
Net asset value per share for purposes of pricing sales and redemptions is
calculated by dividing the value of all securities and other assets allocable
to a Fund, less the liabilities charged to the Fund, by the number of its out-
standing Shares.
Assets in the Funds which are traded on a recognized stock exchange are val-
ued at the last sale price on the securities exchange on which such securities
are primarily traded or at the last sale price on the national securities mar-
ket. Securities traded on only over-the-counter markets are valued on the ba-
sis of closing over-the-counter bid prices. Securities for which there were no
transactions are valued at the average of the most recent bid and asked pric-
es. A futures contract is valued at the last sales price quoted on the princi-
pal exchange or board of trade on which such contract is traded, or in the ab-
sence of a sale, the mean between the last bid and asked prices. Restricted
securities, securities for which market quotations are not readily available,
and other assets are valued at fair value pursuant to guidelines adopted by
the Board of Directors. Absent unusual circumstances, portfolio securities ma-
turing in 60 days or less are normally valued at amortized cost. The net asset
value of Shares in the Funds will fluctuate as the market value of their port-
folio securities changes in response to changing market rates of interest and
other factors.
Portfolio securities held by the 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 event subsequent to the time when
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. Investments in foreign
debt securities having a maturity of 60 days or less are valued based upon the
amortized cost method. 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 guidelines adopted by the Board of Directors.
For valuation purposes, quotations of foreign securities in foreign currency
are converted to U.S. dollars equivalent at the prevailing market rate on the
day of conversion. Some of the securities acquired by the Funds may be traded
on foreign ex-
16
<PAGE>
changes or over-the-counter markets on days which are not Business Days. In
such cases, the net asset value of the Shares may be significantly affected on
days when investors can neither purchase nor redeem a Fund's Shares.
The Funds' administrators have undertaken to price the securities in the
Funds' portfolios and may use one or more pricing services to value certain
portfolio securities in the Funds where the prices provided are believed to
reflect the fair market value of such securities. The methods used by the
pricing services and the valuations so established will be reviewed by the ad-
ministrators under the general supervision of the Board of Directors.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in each Fund are continuously offered for sale by Master Fund's spon-
sor and distributor, Edgewood Services, Inc. (the "Distributor"), a wholly-
owned subsidiary of Federated Investors. The Distributor is a registered
broker/dealer. Its principal offices are at Federated Investors Tower, 1001
Liberty Avenue, Pittsburgh, PA 15222-3779.
PURCHASE OF SHARES
The Distributor has established several procedures for purchasing Shares in
order to accommodate different types of investors.
Shares may be purchased directly by individuals ("Direct Investors") or by
institutions ("Institutional Investors" and, collectively with Direct Invest-
ors, "Investors"). Shares may also be purchased by customers ("Customers") of
the Investment Adviser, its affiliates and correspondent banks, and other in-
stitutions ("Shareholder Organizations") that have entered into shareholder
servicing agreements with Master Fund. A Shareholder Organization may elect to
hold of record Shares for its Customers and to record beneficial ownership of
Shares on the account statements provided by it to its Customers. If it does
so, it is the Shareholder Organization's responsibility to transmit to the
Distributor all purchase orders for its Customers and to transmit, on a timely
basis, payment for such orders to Mutual Funds Service Company ("MFSC"), the
Funds' sub-transfer agent, in accordance with the procedures agreed to by the
Shareholder Organization and the Distributor. Confirmations of all such Cus-
tomer purchases and redemptions will be sent by MFSC to the particular Share-
holder Organization. As an alternative, a Shareholder Organization may elect
to establish its Customers' accounts of record with MFSC. In this event, even
if the Shareholder Organization continues to place its Customers' purchase and
redemption orders with the Funds, MFSC will send confirmations of such trans-
actions and periodic account statements directly to Customers. A Shareholder
Organization may also elect to establish its Customers as record holders.
Master Fund enters into shareholder servicing agreements with Shareholder Or-
ganizations which agree to provide their Customers various shareholder admin-
istrative services with respect to their Shares (hereinafter referred to as
"Service Organizations"). Shares in the Funds bear the expense of fees payable
to Service Organizations for such services. See "Management of the Funds--
Service Organizations."
Customers wishing to purchase Shares through their Shareholder Organization
should contact such entity directly for appropriate instructions. (For a list
of Shareholder Organizations in your area, call (800) 446-1012.) An investor
purchasing Shares through a registered investment adviser or certified finan-
cial planner may incur transaction charges in connection with such purchases.
Such investors should contact their registered investment adviser or certified
financial planner for further information on transaction fees. Investors may
also purchase Shares directly in accordance with procedures described below
under "Purchase Procedures."
17
<PAGE>
PUBLIC OFFERING PRICE
The public offering price for Shares of each Fund is the sum of the net asset
value of the Shares purchased plus a sales load according to the table below:
<TABLE>
<CAPTION>
REALLOWANCE TO
TOTAL SALES CHARGE DEALER
------------------------------ --------------
AS A % OF AS A % OF AS A % OF
OFFERING PRICE NET ASSET OFFERING PRICE
PER SHARE VALUE PER SHARE PER SHARE
-------------- --------------- --------------
<S> <C> <C> <C>
Amount of Transaction
---------------------
Less than $50,000................. 4.50% 4.71% 4.00%
$50,000 to $99,999................ 4.00 4.17 3.50
$100,000 to $249,999.............. 3.50 3.63 3.00
$250,000 to $499,999.............. 3.00 3.09 2.50
$500,000 to $999,999.............. 2.00 2.05 1.50
$1,000,000 to $1,999,999.......... 1.00 1.00 .50
$2,000,000 and over............... .50 .50 .25
</TABLE>
The reallowance to dealers may be changed from time to time but will remain
the same for all such dealers.
At various times the Distributor may implement programs under which a dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
under which the Distributor will reallow to any dealer that sponsors sales con-
tests or recognition programs conforming to criteria established by the Dis-
tributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on the sales generated
by the dealer at the public offering price during such programs. Also, the Dis-
tributor in its discretion may from time to time, pursuant to objective crite-
ria established by the Distributor, pay fees to qualifying dealers for certain
services or activities which are primarily intended to result in sales of
Shares of the Funds. If any such program is made available to any dealer, it
will be made available to all dealers on the same terms and conditions. Pay-
ments made under such programs will be made by the Distributor out of its own
assets and not out of the assets of the Funds. These programs will not change
the price of Shares or the amount that the Funds will receive from such sales.
The sales load described above will not be applicable to: (a) purchases of
Shares by customers of the Investment Adviser or its affiliates; (b) trust,
agency or custodial accounts opened through the trust department of a bank,
trust company or thrift institution, provided that appropriate notification of
such status is given at the time of investment; (c) companies, corporations and
partnerships (excluding full service broker/dealers and financial planners,
registered investment advisers and depository institutions not covered by the
exemptions in (d) and (e) below); (d) financial planners and registered invest-
ment advisers not affiliated with or clearing purchases through full service
broker/dealers; (e) purchases of Shares by depository institutions for their
own account as principal; (f) exchange transactions (described below under "In-
vestor Programs-Exchange Privilege") where the Shares being exchanged were ac-
quired in connection with the distribution of assets held in trust, agency or
custodial accounts maintained with the trust department of a bank; (g) corpo-
rate/ business retirement plans (such as 401(k), 403(b)(7), 457 and Keogh ac-
counts) sponsored by the Distributor and IRA accounts sponsored by the Invest-
ment Adviser; (h) company-sponsored employee pension or retirement plans making
direct investments in the Funds; (i) purchases of Shares by officers, trustees,
directors, employees, former employees and retirees of Master Fund, UST Master
Tax-Exempt Funds, Inc. ("Master Tax-Exempt Fund"), the Investment Adviser, the
Distributor or of any direct or indirect affiliate of any of them; (j) pur-
chases of Shares by all beneficial shareholders of Master Fund or Master Tax-
Exempt Fund as of May 22, 1989; (k) purchases of Shares by investment advisers
registered under the Investment Advisers Act of 1940 for their customers
through an omnibus account established with United States Trust Company of New
York; (l) purchases of Shares by directors, officers and employees of brokers
and dealers selling shares pursuant to a selling agreement with Master Fund and
Master Tax-Exempt Fund; (m) purchases of shares by investors who are members of
affinity groups serviced by USAffinity Investments Limited Partnership; and (n)
customers of
18
<PAGE>
certain financial institutions who purchase Shares through a registered repre-
sentative of UST Financial Services Corp. on the premises of their financial
institutions. In addition, no sales load is charged on the reinvestment of
dividends or distributions or in connection with certain share exchange trans-
actions. Investors who have previously redeemed shares in an "Eligible Fund"
(as defined below) on which a sales load has been paid also have a one-time
privilege of purchasing shares of another "Eligible Fund" at net asset value
without a sales charge, provided that such privilege will apply only to pur-
chases made within 30 calendar days from the date of redemption and only with
respect to the amount of the redemption. These exemptions to the imposition of
a sales load are due to the nature of the investors and/or reduced sales ef-
fort that will be needed in obtaining investments.
Quantity Discounts
An investor in the Funds may be entitled to reduced sales charges through
Rights of Accumulation, a Letter of Intent or a combination of investments, as
described below, even if the investor does not wish to make an investment of a
size that would normally qualify for a quantity discount.
In order to obtain quantity discount benefits, an investor must notify MFSC
at the time of purchase that he or she would like to take advantage of any of
the discount plans described below. Upon such notification, the investor will
receive the lowest applicable sales charge. Quantity discounts may be modified
or terminated at any time and are subject to confirmation of an investor's
holdings through a check of appropriate records. For more information about
quantity discounts, please call (800) 446-1012 or contact your Shareholder Or-
ganization.
Rights of Accumulation. A reduced sales load applies to any purchase of
shares of any portfolio of Master Fund and Master Tax-Exempt Fund that is sold
with a sales load ("Eligible Fund") where an investor's then current aggregate
investment is $50,000 or more. "Aggregate investment" means the total of: (a)
the dollar amount of the then current purchase of shares of an Eligible Fund
and (b) the value (based on current net asset value) of previously purchased
and beneficially owned shares of any Eligible Fund on which a sales load has
been paid. If, for example, an investor beneficially owns shares of one or
more Eligible Funds with an aggregate current value of $49,000 on which a
sales load has been paid and subsequently purchases shares of an Eligible Fund
having current value of $1,000, the load applicable to the subsequent purchase
would be reduced to 4.00% of the offering price. Similarly, with respect to
each subsequent investment, all shares of Eligible Funds that are beneficially
owned by the investor at the time of investment may be combined to determine
the applicable sales load.
Letter of Intent. By completing the Letter of Intent included as part of the
New Account Application, an investor becomes eligible for the reduced sales
load applicable to the total number of Eligible Fund shares purchased in a 13-
month period pursuant to the terms and under the conditions set forth below
and in the Letter of Intent. To compute the applicable sales load, the offer-
ing price of shares of an Eligible Fund on which a sales load has been paid,
beneficially owned by an investor on the date of submission of the Letter of
Intent, may be used as a credit toward completion of the Letter of Intent.
However, the reduced sales load will be applied only to new purchases.
MFSC will hold in escrow shares equal to 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if an investor does not
purchase the full amount indicated in the Letter of Intent. The escrow will be
released when an investor fulfills the terms of the Letter of Intent by pur-
chasing the specified amount. If purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect an investor's total pur-
chases. If total purchases are less than the amount specified, an investor
will be requested to remit an amount equal to the difference between the sales
load actually paid and the sales load applicable to the total purchases. If
such remittance is not received within 20 days, MFSC, as attorney-in-
19
<PAGE>
fact pursuant to the terms of the Letter of Intent and at the Distributor's di-
rection, will redeem an appropriate number of shares held in escrow to realize
the difference. Signing a Letter of Intent does not bind an investor to pur-
chase the full amount indicated at the sales load in effect at the time of
signing, but an investor must complete the intended purchase in accordance with
the terms of the Letter of Intent to obtain the reduced sales load. To apply,
an investor must indicate his or her intention to do so under a Letter of In-
tent at the time of purchase.
Qualification for Discounts. For purposes of applying the Rights of Accumula-
tion and Letter of Intent privileges described above, the scale of sales loads
applies to the combined purchases made by any individual and/or spouse purchas-
ing securities for his, her or their own account or for the account of any mi-
nor children, or the aggregate investments of a trustee or custodian of any
qualified pension or profit sharing plan or IRA established (or the aggregate
investment of a trustee or other fiduciary) for the benefit of the persons
listed above.
PURCHASE PROCEDURES
General
Direct Investors may purchase Shares by completing the Application for pur-
chase of Shares accompanying this Prospectus and mailing it, together with a
check payable to UST Master Funds, to:
UST Master Funds
c/o Mutual Funds Service Company
P.O. Box 2798
Boston, MA 02208-2798
Subsequent investments in an existing account in any Fund may be made at any
time by sending to the above address a check payable to UST Master Funds along
with: (a) the detachable form that regularly accompanies the confirmation of a
prior transaction; (b) a subsequent order form which may be obtained from MFSC;
or (c) a letter stating the amount of the investment, the name of the Fund and
the account number in which the investment is to be made. Institutional Invest-
ors may purchase Shares by transmitting their purchase orders to MFSC by tele-
phone at (800) 446-1012 or by terminal access. Institutional Investors must pay
for Shares with Federal funds or funds immediately available to MFSC.
Purchases by Wire
Investors may also purchase Shares by wiring Federal funds to MFSC. Prior to
making an initial investment by wire, an Investor must telephone MFSC at (800)
446-1012 (from overseas, call (617) 557-8280) for instructions. Federal funds
and registration instructions should be wired through the Federal Reserve Sys-
tem to:
United States Trust Company of New York
ABA #021001318
UST Funds, Account No. 2901447
For further credit to:
UST Master Funds
Wire Control Number
Account Registration (including account number)
Investors making initial investments by wire must promptly complete the Appli-
cation accompanying this Prospectus and forward it to MFSC. Redemptions by In-
vestors will not be processed until the completed Application for purchase of
Shares has been received by MFSC and accepted by the Distributor. Investors
making subsequent investments by wire should follow the above instructions.
Other Purchase Information
Except as provided in "Investor Programs" below, the minimum initial invest-
ment by an Investor or initial aggregate investment by a Shareholder Organiza-
tion investing on behalf of its Customers is $500 per Fund. The minimum subse-
quent investment for both types of investors is $50 per Fund. Customers may
agree with a particular Shareholder Organization to make a minimum purchase
with respect to their accounts. Depending upon the terms of the particular
20
<PAGE>
account, Shareholder Organizations may charge a Customer's account fees for au-
tomatic investment and other cash management services provided. Master Fund re-
serves the right to reject any purchase order, in whole or in part, or to waive
any minimum investment requirements.
REDEMPTION PROCEDURES
Customers of Shareholder Organizations holding Shares of record may redeem all
or part of their investments in the Funds in accordance with procedures gov-
erning their accounts at the Shareholder Organizations. It is the responsibil-
ity of the Shareholder Organizations to transmit redemption orders to MFSC and
credit such Customer accounts with the redemption proceeds on a timely basis.
Redemption orders for Institutional Investors must be transmitted to MFSC by
telephone at (800) 446-1012 or by terminal access. No charge for wiring redemp-
tion payments to Shareholder Organizations or Institutional Investors is im-
posed by Master Fund, although Shareholder Organizations may charge a Custom-
er's account for wiring redemption proceeds. Information relating to such re-
demption services and charges, if any, is available from the Shareholder Orga-
nizations. An investor redeeming Shares through a registered investment adviser
or certified financial planner may incur transaction charges in connection with
such redemptions. Such investors should contact their registered investment ad-
viser or certified financial planner for further information on transaction
fees. Investors may redeem all or part of their Shares in accordance with any
of the procedures described below (these procedures also apply to Customers of
Shareholder Organizations for whom individual accounts have been established
with MFSC).
Redemption by Mail
Shares may be redeemed by a Direct Investor by submitting a written request
for redemption to:
UST Master Funds
c/o Mutual Funds Service Company
P.O. Box 2798
Boston, MA 02208-2798
A written redemption request to MFSC must (i) state the number of Shares to be
redeemed, (ii) identify the shareholder account number and tax identification
number, and (iii) be signed by each registered owner exactly as the Shares are
registered. If the Shares to be redeemed were issued in certificate form, the
certificates must be endorsed for transfer (or accompanied by a duly executed
stock power) and must be submitted to MFSC together with the redemption re-
quest. A redemption request for an amount in excess of $50,000 per account, or
for any amount if the proceeds are to be sent elsewhere than the address of
record, must be accompanied by signature guarantees from any eligible guarantor
institution approved by MFSC in accordance with its Standards, Procedures and
Guidelines for the Acceptance of Signature Guarantees ("Signature Guarantee
Guidelines"). Eligible guarantor institutions generally include banks,
broker/dealers, credit unions, national securities exchanges, registered secu-
rities associations, clearing agencies and savings associations. All eligible
guarantor institutions must participate in the Securities Transfer Agents Me-
dallion Program ("STAMP") in order to be approved by MFSC pursuant to the Sig-
nature Guarantee Guidelines. Copies of the Signature Guarantee Guidelines and
information on STAMP can be obtained from MFSC at (800) 446-1012 or at the ad-
dress given above. MFSC may require additional supporting documents for redemp-
tions made by corporations, executors, administrators, trustees and guardians.
A redemption request will not be deemed to be properly received until MFSC re-
ceives all required documents in proper form. Payment for Shares redeemed will
ordinarily be made by mail within five Business Days after proper receipt by
MFSC of the redemption request. Questions with respect to the proper form for
redemption requests should be directed to MFSC at (800) 446-1012 (from over-
seas, call (617) 557-8280).
Redemption by Wire or Telephone
Direct Investors who have so indicated on the Application, or have subse-
quently arranged in writing to
21
<PAGE>
do so, may redeem Shares by instructing MFSC by wire or telephone to wire the
redemption proceeds directly to the Direct Investor's account at any commercial
bank in the United States. Direct Investors who are shareholders of record may
also redeem Shares by instructing MFSC by telephone to mail a check for redemp-
tion proceeds of $500 or more to the shareholder of record at his or her ad-
dress of record. Institutional Investors may also redeem Shares by instructing
MFSC by telephone at (800) 446-1012 or by terminal access. Only redemptions of
$500 or more will be wired to a Direct Investor's account. An $8.00 fee for
each wire redemption by a Direct Investor is deducted by MFSC from the proceeds
of the redemption. The redemption proceeds for Direct Investors must be paid to
the same bank and account as designated on the Application or in written in-
structions subsequently received by MFSC.
In order to arrange for redemption by wire or telephone after an account has
been opened or to change the bank or account designated to receive redemption
proceeds, a Direct Investor must send a written request to Master Fund, c/o
MFSC, at the address listed above under "Redemption by Mail." Such requests
must be signed by the Direct Investor, with signatures guaranteed (see "Redemp-
tion by Mail" above, for details regarding signature guarantees). Further docu-
mentation may be requested.
MFSC and the Distributor reserve the right to refuse a wire or telephone re-
demption if it is believed advisable to do so. Procedures for redeeming Shares
by wire or telephone may be modified or terminated at any time by Master Fund,
MFSC or the Distributor. MASTER FUND, MFSC AND THE DISTRIBUTOR WILL NOT BE LIA-
BLE FOR ANY LOSS, LIABILITY, COST OR EXPENSE FOR ACTING UPON TELEPHONE INSTRUC-
TIONS THAT ARE REASONABLY BELIEVED TO BE GENUINE. IN ATTEMPTING TO CONFIRM THAT
TELEPHONE INSTRUCTIONS ARE GENUINE, MASTER FUND WILL USE SUCH PROCEDURES AS ARE
CONSIDERED REASONABLE, INCLUDING RECORDING THOSE INSTRUCTIONS AND REQUESTING
INFORMATION AS TO ACCOUNT REGISTRATION.
If any portion of the Shares to be redeemed represents an investment made by
personal check, Master Fund and MFSC reserve the right not to honor the redemp-
tion until MFSC is reasonably satisfied that the check has been collected in
accordance with the applicable banking regulations which may take up to 15
days. A Direct Investor who anticipates the need for more immediate access to
his or her investment should purchase Shares by Federal funds or bank wire or
by certified or cashier's check. Banks normally impose a charge in connection
with the use of bank wires, as well as certified checks, cashier's checks and
Federal funds. If a Direct Investor's purchase check is not collected, the pur-
chase will be cancelled and MFSC will charge a fee of $25.00 to the Direct In-
vestor's account.
During periods of substantial economic or market change, telephone redemptions
may be difficult to complete. If an Investor is unable to contact MFSC by tele-
phone, the Investor may also deliver the redemption request to MFSC in writing
at the address noted above under "How to Purchase and Redeem Shares--Redemption
by Mail."
Other Redemption Information
Except as described in "Investor Programs" below, Investors may be required to
redeem Shares in a Fund after 60 days' written notice if due to investor re-
demptions the balance in the particular account with respect to the Fund re-
mains below $500. If a Customer has agreed with a particular Shareholder Organ-
ization to maintain a minimum balance in his or her account at the institution
with respect to Shares of a Fund, and the balance in such account falls below
that minimum, the Customer may be obliged by the Shareholder Organization to
redeem all or part of his or her Shares to the extent necessary to maintain the
required minimum balance.
GENERAL
Purchase and redemption orders for Shares which are received and accepted
prior to the close of regular trading hours on the Exchange (currently 4:00
p.m., Eastern Time) on any Business Day are priced according to the net asset
value determined on that day.
22
<PAGE>
Purchase orders received and accepted after the close of regular trading hours
on the Exchange are priced at the net asset value per Share determined on the
next Business Day.
INVESTOR PROGRAMS
EXCHANGE PRIVILEGE
Investors and Customers of Shareholder Organizations may, after appropriate
prior authorization and without an exchange fee imposed by Master Fund, ex-
change Shares in any Fund having a value of at least $500 for Shares of any
other portfolio offered by Master Fund or Master Tax-Exempt Fund, provided that
such other shares may legally be sold in the state of the Investor's residence.
Master Fund currently offers, in addition to the Short-Term Government Securi-
ties, Intermediate-Term Managed Income and Managed Income Funds, seventeen ad-
ditional portfolios as follows:
Money Fund, a money market fund seeking as high a level of current income as
is consistent with liquidity and stability of principal through investments
in high-quality money market instruments maturing within 13 months;
Government Money Fund, a money market fund seeking as high a level of cur-
rent income as is consistent with liquidity and stability of principal
through investments in obligations issued or guaranteed by the U.S. Govern-
ment, its agencies and instrumentalities and repurchase agreements collater-
alized by such obligations;
Treasury Money Fund, a money market fund seeking current income generally
exempt from state and local income taxes through investments in direct short-
term obligations issued by the U.S. Treasury and certain agencies or instru-
mentalities of the U.S. Government;
Equity Fund, a fund seeking long-term capital appreciation through invest-
ments in a diversified portfolio primarily of equity securities;
Income and Growth Fund, a fund investing substantially in equity securities
in seeking to provide moderate current income and to achieve capital appreci-
ation as a secondary objective;
Long-Term Supply of Energy Fund, a fund seeking long-term capital apprecia-
tion by investing in companies benefitting from the availability, development
and delivery of secure hydrocarbon and other energy sources;
Productivity Enhancers Fund, a fund seeking long-term capital appreciation
by investing in companies benefitting from their roles as innovators, devel-
opers and suppliers of goods and services which enhance service and manufac-
turing productivity or companies that are most effective at obtaining and ap-
plying productivity enhancement developments;
Environmentally-Related Products and Services Fund, a fund seeking long-term
capital appreciation by investing in companies benefitting from their provi-
sion of products, technologies and services related to conservation, protec-
tion and restoration of the environment;
Aging of America Fund, a fund seeking long-term capital appreciation by in-
vesting in companies benefitting from the changes occurring in the demo-
graphic structure of the U.S. population, particularly of its growing popula-
tion of individuals over the age of 40;
Communication and Entertainment Fund, a fund seeking long-term capital ap-
preciation by investing in companies benefitting from the technological and
international transformation of the communications and entertainment indus-
tries, particularly the convergence of information, communication and enter-
tainment media;
Business and Industrial Restructuring Fund, a fund seeking long-term capital
appreciation by investing in companies benefitting from their restructuring
or redeployment of assets and operations in order to become more competitive
or profitable;
Global Competitors Fund, a fund seeking long-term capital appreciation by
investing in U.S.-based
23
<PAGE>
companies benefitting from their position as effective and strong competitors
on a global basis;
Early Life Cycle Fund, a fund seeking long-term capital appreciation by in-
vesting in smaller companies in the earlier stages of their development or
larger or more mature companies engaged in new and higher growth potential
operations;
International Fund, a fund seeking total return derived primarily from in-
vestments in foreign equity securities;
Emerging Americas Fund, a fund seeking long-term capital appreciation
through investments in companies and securities of governments based in all
countries in the Western Hemisphere, except the U.S.;
Pacific/Asia Fund, a fund seeking long-term capital appreciation through in-
vestments in companies and securities of governments based in Asia and on the
Asian side of the Pacific Ocean; and
Pan European Fund, a fund seeking long-term capital appreciation through in-
vestments in companies and securities of governments located in Europe.
Master Tax-Exempt Fund currently offers five portfolios as follows:
Short-Term Tax-Exempt Fund, a diversified tax-exempt money market fund seek-
ing a moderate level of current interest income exempt from Federal income
taxes through investing primarily in high-quality municipal obligations ma-
turing within 13 months;
Short-Term Tax-Exempt Securities Fund, a diversified fund seeking a high
level of current interest income exempt from Federal income taxes through in-
vestments in municipal obligations and having a dollar-weighted average port-
folio maturity of 1 to 3 years;
Intermediate-Term Tax-Exempt Fund, a diversified fund seeking a high level
of current income exempt from Federal income taxes through investments in mu-
nicipal obligations and having a dollar-weighted average portfolio maturity
of 3 to 10 years;
Long-Term Tax-Exempt Fund, a diversified fund seeking to maximize over time
current income exempt from Federal income taxes, investing primarily in mu-
nicipal obligations and having a dollar-weighted average maturity of 10 to 30
years; and
New York Intermediate-Term Tax-Exempt Fund, a non-diversified fund designed
to provide New York investors with a high level of current income exempt from
Federal and, to the extent possible, New York state and New York City income
taxes; this fund invests primarily in New York municipal obligations and has
a dollar-weighted average portfolio maturity of three to ten years.
An exchange involves a redemption of all or a portion of the Shares in a Fund
and the investment of the redemption proceeds in shares of another portfolio of
Master Fund or Master Tax-Exempt Fund. The redemption will be made at the per
Share net asset value of the Shares being redeemed next determined after the
exchange request is received. The Shares of the portfolio to be acquired will
be purchased at the per share net asset value of those shares (plus any appli-
cable sales load) next determined after acceptance of the exchange request. No
sales load will be payable on shares to be acquired through an exchange to the
extent that a sales load was previously paid on the Shares being exchanged.
Investors may find the exchange privilege useful if their investment objec-
tives or market outlook should change after they invest in a Fund. For further
information regarding exchange privileges, shareholders should call (800) 446-
1012 (from overseas, call at (617) 557-8280). Investors exercising the exchange
privilege with the other portfolios of Master Fund or Master Tax-Exempt Fund
should request and review the prospectuses of such funds. Such prospectuses may
be obtained by calling the telephone numbers listed above. Master Fund may mod-
ify or terminate the exchange program at any time upon 60 days' written notice
to shareholders, and may reject any exchange request. In order to prevent abuse
of this priv-
24
<PAGE>
ilege to the disadvantage of other shareholders, Master Fund and Master Tax-Ex-
empt Fund reserve the right to limit the number of exchange requests of Invest-
ors and Customers of Shareholder Organizations to no more than six per year.
MASTER FUND, MFSC AND THE DISTRIBUTOR ARE NOT RESPONSIBLE FOR THE AUTHENTICITY
OF EXCHANGE REQUESTS RECEIVED BY TELEPHONE THAT ARE REASONABLY BELIEVED TO BE
GENUINE. IN ATTEMPTING TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENUINE, MAS-
TER FUND WILL USE SUCH PROCEDURES AS ARE CONSIDERED REASONABLE, INCLUDING RE-
CORDING THOSE INSTRUCTIONS AND REQUESTING INFORMATION AS TO ACCOUNT REGISTRA-
TION.
For Federal income tax purposes, an exchange of Shares is a taxable event and,
accordingly, a capital gain or loss may be realized by an investor. Before mak-
ing an exchange, an investor should consult a tax or other financial adviser to
determine tax consequences.
SYSTEMATIC WITHDRAWAL PLAN
An Investor who owns Shares of a Fund with a value of $10,000 or more may es-
tablish a Systematic Withdrawal Plan. The Investor may request a declining-bal-
ance withdrawal, a fixed-dollar withdrawal, a fixed-share withdrawal, or a
fixed-percentage withdrawal (based on the current value of Shares in the ac-
count) on a monthly, quarterly, semi-annual or annual basis. To initiate the
Systematic Withdrawal Plan, an investor must complete the Supplemental Applica-
tion contained in this Prospectus and mail it to MFSC at the address given
above. Further information on establishing a Systematic Withdrawal Plan may be
obtained by calling (800) 446-1012 (from overseas, call (617) 557-8280).
Shareholder Organizations may, at their discretion, establish similar system-
atic withdrawal plans with respect to the Shares held by their Customers. In-
formation about such plans and the applicable procedures may be obtained by
Customers directly from their institutions.
RETIREMENT PLANS
Shares are available for purchase by Investors in connection with the follow-
ing tax-deferred prototype retirement plans offered by United States Trust Com-
pany of New York:
IRAs (including "rollovers" from existing retirement plans) for individuals
and their spouses;
Profit Sharing and Money-Purchase Plans for corporations and self-employed
individuals and their partners to benefit themselves and their employees; and
Keogh Plans for self-employed individuals.
Investors investing in the Funds pursuant to Profit Sharing and Money-Purchase
Plans and Keogh Plans are not subject to the minimum investment and forced re-
demption provisions described above. The minimum initial investment for IRAs is
$250 per Fund and the minimum subsequent investment is $50 per Fund. Detailed
information concerning eligibility, service fees and other matters related to
these plans can be obtained by calling (800) 446-1012 (from overseas, call
(617) 557-8280). Customers of Shareholder Organizations may purchase Shares of
the Funds pursuant to retirement plans if such plans are offered by their
Shareholder Organizations.
AUTOMATIC INVESTMENT PROGRAM
The Automatic Investment Program permits Investors to purchase Shares (minimum
of $50 per Fund per transaction) at regular intervals selected by the Investor.
The minimum initial investment for an Automatic Investment Program account is
$50 per Fund. Provided the Investor's financial institution allows automatic
withdrawals, Shares are purchased by transferring funds from an Investor's
checking, bank money market or NOW account designated by the Investor. At the
Investor's option, the account designated will be debited in the specified
amount, and Shares will be purchased, once a month, on either the first or fif-
teenth day, or twice a month, on both days.
25
<PAGE>
The Automatic Investment Program is one means by which an Investor may use
"Dollar Cost Averaging" in making investments. Instead of trying to time market
performance, a fixed dollar amount is invested in Shares at predetermined in-
tervals. This may help Investors to reduce their average cost per share because
the agreed upon fixed investment amount allows more Shares to be purchased dur-
ing periods of lower share prices and fewer Shares during periods of higher
prices. In order to be effective, Dollar Cost Averaging should usually be fol-
lowed on a sustained, consistent basis. Investors should be aware, however,
that Shares bought using Dollar Cost Averaging are purchased without regard to
their price on the day of investment or to market trends. In addition, while
Investors may find Dollar Cost Averaging to be beneficial, it will not prevent
a loss if an Investor ultimately redeems his Shares at a price which is lower
than their purchase price.
To establish an Automatic Investment account permitting Investors to use the
Dollar Cost Averaging investment method described above, an Investor must com-
plete the Supplemental Application contained in this Prospectus and mail it to
MFSC. An Investor may cancel his participation in this Program or change the
amount of purchase at any time by mailing written notification to MFSC, P.O.
Box 2798, Boston, MA 02208-2798 and notification will be effective three Busi-
ness Days following receipt. Master Fund may modify or terminate this privilege
at any time or charge a service fee, although no such fee currently is contem-
plated. An Investor may also implement the Dollar Cost Averaging method on his
own initiative or through other entities.
DIVIDENDS AND DISTRIBUTIONS
Each Fund's net income for dividend purposes consists of (i) all accrued in-
come, whether taxable or tax-exempt, plus discount earned on the Fund's assets,
less (ii) amortization of premium on such assets, accrued expenses directly at-
tributable to the Fund, and the general expenses or the expenses common to more
than one Fund (e.g., legal, administrative, accounting, and Directors' fees)
prorated to each Fund on the basis of its relative net assets.
The net investment income of the Funds is declared daily as a dividend to the
persons who are shareholders of the respective Funds at the opening of business
on the day of declaration. All such dividends are paid within ten days after
the end of each month or within seven days after the redemption of all of a
shareholder's Shares of a Fund. Net realized capital gains are distributed at
least annually.
All dividends and distributions paid on Shares held of record by the Invest-
ment Adviser and its affiliates or correspondent banks will be paid in cash.
Direct and Institutional Investors and Customers of other Shareholder Organiza-
tions will receive dividends and distributions in additional Shares of the Fund
on which the dividend or distribution is paid (as determined on the payable
date), unless they have requested in writing (received by MFSC at Master Fund's
address prior to the payment date) to receive dividends and distributions in
cash. Reinvested dividends and distributions receive the same tax treatment as
those paid in cash.
TAXES
FEDERAL
Each of the Funds qualified for its last taxable year as a "regulated invest-
ment company" under the Internal Revenue Code of 1986, as amended (the "Code").
Each Fund expects to so qualify in future years. Such qualification generally
relieves a Fund of liability for Federal income taxes to the extent its earn-
ings are distributed in accordance with the Code.
Qualification as a regulated investment company requires, among other things,
that a Fund distribute to its shareholders an amount equal to at least the sum
of 90% of its investment company taxable income and 90% of its exempt-interest
income (if any), net of certain deductions for each taxable year. In
26
<PAGE>
general, a Fund's investment company taxable income will be its taxable income
(including interest) subject to certain adjustments and excluding the excess of
any net long-term capital gain for the taxable year over the net short-term
capital loss, if any, for such year. Each Fund intends to distribute substan-
tially all of its investment company taxable income each year. Such dividends
will be taxable as ordinary income to a Fund's shareholders who are not cur-
rently exempt from Federal income taxes, whether such income is received in
cash or reinvested in additional Shares. (Federal income taxes for distribu-
tions to IRAs and qualified pension plans are deferred under the Code.) The
dividends received deduction for corporations will apply to such distributions
to the extent of the total qualifying dividends received by a Fund from domes-
tic corporations for the taxable year. It is anticipated that only a small part
(if any) of the dividends paid by a Fund will be eligible for the dividends re-
ceived deduction.
Distribution by a Fund of the excess of its net long- term capital gain over
its net short-term capital loss is taxable to shareholders as long-term capital
gain, regardless of how long the shareholder has held the Shares and whether
such gains are received in cash or reinvested in additional Shares. Such dis-
tributions are not eligible for the dividends received deduction.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to
have been received by shareholders and paid by a Fund on December 31 of such
year in the event such dividends are actually paid during January of the fol-
lowing year.
An investor considering buying Shares of a Fund on or just before the record
date of a dividend should be aware that the amount of the forthcoming dividend
payment, although in effect a return of capital, will be taxable to them.
A taxable gain or loss may be realized by a shareholder upon his redemption,
transfer or exchange of Shares depending upon the tax basis of such Shares and
their price at the time of redemption, transfer or exchange. If a shareholder
holds Shares for six months or less and during that time receives a capital
gain dividend on those Shares, any loss recognized on the sale or exchange of
those Shares will be treated as a long-term capital loss to the extent of the
capital gain dividend. Generally, a shareholder may include sales charges in-
curred upon the purchase of Shares in his tax basis for such Shares for the
purpose of determining gain or loss on a redemption, transfer or exchange of
such Shares. However, if the shareholder effects an exchange of such Shares for
Shares of another Fund within 90 days of the purchase and is able to reduce the
sales charges applicable to the new Shares (by virtue of the exchange privi-
lege), the amount equal to reduction may not be included in the tax basis of
the shareholder's exchanged Shares, but may be included (subject to the limita-
tion) in the tax basis of the new Shares.
The foregoing summarizes some of the important tax considerations generally
affecting the Funds and their shareholders and is not intended as a substitute
for careful tax planning. Accordingly, potential investors in the Funds should
consult their tax advisers with specific reference to their own tax situations.
Shareholders will be advised at least annually as to the Federal income tax
consequences of distributions made each year.
STATE AND LOCAL
Purchasers are advised to consult their tax advisers concerning the applica-
tion of state and local taxes, which may have different consequences from those
of the Federal income tax law described above.
MANAGEMENT OF THE FUNDS
The business and affairs of the Funds are managed under the direction of Mas-
ter Fund's Board of Directors. The Statement of Additional Information contains
the names of and general background information concerning Master Fund's direc-
tors.
27
<PAGE>
INVESTMENT ADVISER
United States Trust Company of New York serves as the Investment Adviser to
each Fund. U.S. Trust is a state-chartered bank and trust company. The Invest-
ment Adviser provides trust and banking services to individuals, corporations,
and institutions both nationally and internationally, including investment man-
agement, estate and trust administration, financial planning, corporate trust
and agency banking, and personal and corporate banking. The Investment Adviser
is a member bank of the Federal Reserve System and the Federal Deposit Insur-
ance Corporation and is one of the twelve members of the New York Clearing
House Association.
On December 31, 1994, the Investment Adviser's Asset Management Group had ap-
proximately $33 billion in assets under management. The Investment Adviser,
which has its principal offices at 114 W. 47th Street, New York, New York
10036, is a subsidiary of U.S. Trust Corporation, a registered bank holding
company.
The Investment Adviser manages each Fund, makes decisions with respect to and
places orders for all purchases and sales of each Fund's portfolio securities,
and maintains records relating to such purchases and sales.
The Short-Term Government Securities Fund's portfolio manager, Charles E.
Rabus, is the person primarily responsible for the day-to-day management of the
Fund's investment portfolio. Mr. Rabus, a Vice President and Fixed Income Port-
folio Manager of U.S. Trust, has been with U.S. Trust since 1987 and has been
the Fund's portfolio manager since its inception.
The Intermediate-Term Managed Income and Managed Income Funds' portfolio man-
ager, Henry M. Milkewicz, is the person primarily responsible for the day-to-
day management of the Funds' investment portfolios. Mr. Milkewicz, a Senior
Vice President and Senior Fixed Income Portfolio Manager of U.S. Trust, has
been with U.S. Trust since 1986 and has been the Intermediate-Term Managed In-
come Fund's portfolio manager since its inception and the Managed Income Fund's
portfolio manager since 1986.
For the services provided and expenses assumed pursuant to its Investment Ad-
visory Agreements, the Investment Adviser is entitled to be paid a fee, com-
puted daily and paid monthly, at the annual rates of .30% of the average daily
net assets of the Short-Term Government Securities Fund, .35% of the average
daily net assets of the Intermediate-Term Managed Income Fund, and .75% of the
average daily net assets of the Managed Income Fund. The advisory fee rate pay-
able by the Managed Income Fund is higher than the rate payable by most mutual
funds. The Board of Directors believes based on information supplied to it by
the Investment Adviser that this fee is comparable to the rate paid by many
other funds with similar investment objectives and policies and is appropriate
for the Fund in light of its investment objective and policies. For the fiscal
year ended March 31, 1995, the Investment Adviser received advisory fees at the
effective annual rates of .25%, .33% and .63% of the average daily net assets
of the Short-Term Government Securities, Intermediate-Term Managed Income and
Managed Income Funds, respectively. For that same period, the Investment Ad-
viser waived advisory fees at the effective annual rates of .05%, .02% and .12%
of the average daily net assets of the Short-Term Government Securities, Inter-
mediate-Term Managed Income and Managed Income Funds, respectively.
From time to time, the Investment Adviser may waive (either voluntarily or
pursuant to applicable state expense limitations) all or a portion of the advi-
sory fees payable to it by a Fund, which waiver may be terminated at any time.
See "Management of the Funds--Service Organizations" for additional information
on fee waivers.
28
<PAGE>
ADMINISTRATORS
MFSC and Federated Administrative Services serve as the Funds' administrators
(the "Administrators") and provide them with general administrative and opera-
tional assistance. The Administrators also serve as administrators of the
other portfolios of Master Fund and Master Tax-Exempt Fund, which are also ad-
vised by the Investment Adviser and distributed by the Distributor. For the
services provided to all portfolios of Master Fund (except the International,
Emerging Americas, Pacific/Asia and Pan European Funds) and Master Tax-Exempt
Fund, the Administrators are entitled jointly to annual fees, computed daily
and paid monthly, based on the combined aggregate average daily net assets of
the two companies (excluding the International, Emerging Americas,
Pacific/Asia and Pan European Funds) as follows:
<TABLE>
<CAPTION>
COMBINED AGGREGATE AVERAGE DAILY
NET ASSETS OF MASTER FUND
(EXCLUDING THE INTERNATIONAL, EMERGING AMERICAS,
PACIFIC/ASIA AND PAN EUROPEAN FUNDS)
AND MASTER TAX-EXEMPT FUND ANNUAL FEE
------------------------------------------------ ----------
<S> <C>
first $200 million................................................... .200%
next $200 million.................................................... .175%
over $400 million.................................................... .150%
</TABLE>
Administration fees payable to the Administrators by each portfolio of Master
Fund and Master Tax-Exempt Fund are determined in proportion to their relative
average daily net assets at the time of determination. From time to time, the
Administrators may waive (either voluntarily or pursuant to applicable state
expense limitations) all or a portion of the administration fee payable to
them by a Fund, which waivers may be terminated at any time. See "Management
of the Funds--Service Organizations" for additional information on fee waiv-
ers. For the fiscal year ended March 31, 1995, MFSC and Concord Holding Corpo-
ration ("Concord"), the former co-administrator, received an aggregate admin-
istration fee (under the same compensation arrangements noted above) at the
effective annual rate of .154% of the average daily net assets of each of the
Short-Term Government Securities, Intermediate-Term Managed Income and Managed
Income Funds, respectively. For the same period MFSC and Concord waived admin-
istration fees at the effective annual rate of .010% of the average daily net
assets of the Short-Term Government Securities Fund.
SERVICE ORGANIZATIONS
Master Fund will enter into an agreement ("Servicing Agreement") with each
Service Organization requiring it to provide administrative support services
to its Customers beneficially owning Shares. As a consideration for the admin-
istrative services provided to Customers, a Fund will pay the Service Organi-
zation 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 Organization's
Customers. Such services, which are described more fully in the Statement of
Additional Information under "Management of the Funds-Service Organizations,"
may include assisting in processing purchase, exchange and redemption re-
quests; transmitting and receiving funds in connection with Customer orders to
purchase, exchange or redeem Shares; and providing periodic statements. Under
the terms of the Servicing Agreement, Service Organizations will be required
to provide to Customers a schedule of any fees that they may charge in connec-
tion with a Customer's investment. Until further notice, the Investment Ad-
viser and Administrators have voluntarily agreed to waive fees payable by a
Fund in an amount equal to administrative service fees payable by that Fund.
BANKING LAWS
Banking laws and regulations currently prohibit a bank holding company regis-
tered under the Federal Bank Holding Company Act of 1956 or any bank or non-
bank affiliate thereof from sponsoring, organizing or controlling a regis-
tered, open-end investment company continuously engaged in the issuance of its
shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as
29
<PAGE>
Shares of the Funds, but such banking laws and regulations do not prohibit such
a holding company or affiliate or banks generally from acting as investment ad-
viser, transfer agent, or custodian to such an investment company, or from pur-
chasing shares of such company for and upon the order of customers. The Invest-
ment Adviser, MFSC and certain Shareholder Organizations may be subject to such
banking laws and regulations. State securities laws may differ from the inter-
pretations of Federal law discussed in this paragraph and banks and financial
institutions may be required to register as dealers pursuant to state law.
Should legislative, judicial, or administrative action prohibit or restrict
the activities of the Investment Adviser or other Shareholder Organizations in
connection with purchases of Fund Shares, the Investment Adviser and such
Shareholder Organizations might be required to alter materially or discontinue
the investment services offered by them to Customers. It is not anticipated,
however, that any resulting change in the Funds' method of operations would af-
fect their net asset values per Share or result in financial loss to any share-
holder.
DESCRIPTION OF CAPITAL STOCK
Master Fund was organized as a Maryland corporation on August 2, 1984. Cur-
rently, Master Fund has authorized capital of 35 billion shares of Common
Stock, $.001 par value per share, classified into 34 series of shares repre-
senting interests in 20 investment portfolios. Master Fund's Charter authorizes
the Board of Directors to classify or reclassify any class of shares of Master
Fund into one or more classes or series. Shares of Class D, Class S and Class T
Common Stock represent interests in the Managed Income, Short-Term Government
Securities and Intermediate-Term Managed Income Funds, respectively.
Each Share represents an equal proportionate interest in the particular Fund
with other shares of the Fund, and is entitled to such dividends and distribu-
tions out of the income earned on the assets belonging to such Fund as are de-
clared in the discretion of Master Fund's Board of Directors.
Shareholders are entitled to one vote for each full Share held, and fractional
votes for fractional Shares held, and will vote in the aggregate and not by
class, except as otherwise expressly required by law.
Certificates for Shares will not be issued unless expressly requested in writ-
ing to MFSC and will not be issued for fractional Shares.
As of July 11, 1995, U.S. Trust held of record substantially all of the Shares
in the Funds as agent or custodian for its customers, but did not own such
Shares beneficially because it did not have voting or investment discretion
with respect to such Shares.
CUSTODIAN AND TRANSFER AGENT
United States Trust Company of New York serves as the custodian of the Funds'
assets and as their transfer and dividend disbursing agent. Communications to
the custodian and transfer agent should be directed to United States Trust Com-
pany of New York, Mutual Funds Service Division, 770 Broadway, New York, New
York 10003-9598.
U.S. Trust has entered into an International Custodian Agreement with Morgan
Stanley Trust Company, 1 Pierrepont Plaza, Brooklyn, NY 11201, providing for
the custody of foreign securities held by the Funds.
U.S. Trust has also entered into a sub-transfer agency arrangement with MFSC,
73 Tremont Street, Boston, Massachusetts 02108-3913, pursuant to which MFSC
provides certain transfer agent, dividend disbursement and registrar services
to the Funds.
30
<PAGE>
PERFORMANCE AND YIELD INFORMATION
From time to time, in advertisements or in reports to shareholders, the per-
formance and yields of the Funds may be quoted and compared to those of other
mutual funds with similar investment objectives and to other relevant indexes
or to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
performance of a Fund may be compared to data prepared by Lipper Analytical
Services, Inc., a widely recognized independent service which monitors the per-
formance of mutual funds.
Performance and yield data as reported in national financial publications, in-
cluding but not limited to Money Magazine, Forbes, Barron's, The Wall Street
Journal and The New York Times, or in publications of a local or regional na-
ture, may also be used in comparing the performance and yields of the Funds.
Each Fund may advertise its effective yield which is calculated by dividing
its average daily net investment income per Share during a 30-day (or one
month) base period identified in the advertisement by its maximum offering
price per Share on the last day of the period, and annualizing the result on a
semiannual basis.
From time to time, each Fund may advertise its performance by using "average
annual total return" over various periods of time. Such total return figure re-
flects the average percentage change in the value of an investment in a Fund
from the beginning date of the measuring period to the end of the measuring pe-
riod. Average total return figures will be given for the most recent one-year
period and may be given for other periods as well (such as from the commence-
ment of a Fund's operations, or on a year-by-year basis). Each Fund may also
use aggregate total return figures for various periods, representing the cumu-
lative change in the value of an investment in the Fund for the specific peri-
od. Both methods of calculating total return assume that dividends and capital
gain distributions made by a Fund during the period are reinvested in Fund
Shares and also reflect the maximum sales load charged by the Fund.
Performance and yields will fluctuate and any quotation of performance and
yield should not be considered as representative of a Fund's future perfor-
mance. Since yields fluctuate, yield data cannot necessarily be used to compare
an investment in the Funds with bank deposits, savings accounts and similar in-
vestment alternatives which often provide an agreed or guaranteed fixed yield
for a stated period of time. Shareholders should remember that the performance
and yield are generally functions of the kind and quality of the instruments
held in a portfolio, portfolio maturity, operating expenses, and market condi-
tions. Any fees charged by the Shareholder Organizations with respect to ac-
counts of Customers that have invested in Shares will not be included in calcu-
lations of yield and performance.
MISCELLANEOUS
Shareholders will receive unaudited semiannual reports describing the Funds'
investment operations and annual financial statements audited by the Funds' in-
dependent auditors.
As used in this Prospectus, a "vote of the holders of a majority of the out-
standing shares" of Master Fund or a particular Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental in-
vestment policy, the affirmative vote of the lesser of (a) more than 50% of the
outstanding shares of Master Fund or such Fund, or (b) 67% or more of the
shares of Master Fund or such Fund present at a meeting if more than 50% of the
outstanding shares of Master Fund or such Fund are represented at the meeting
in person or by proxy.
Inquiries regarding any of the Funds may be directed to the Distributor at the
address listed under "Distributor."
31
<PAGE>
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION
OPENING YOUR ACCOUNT:
Complete the Application(s) and mail to:
UST Master Funds
c/o Mutual Funds Service Company
P.O. Box 2798
Boston, MA 02208-2798
FOR OVERNIGHT DELIVERY: send to:
UST Master Funds c/o Mutual Funds
Service Company--Transfer Agent
73 Tremont Street
Boston, MA 02108-3913
Please enclose with the Application(s) your check made payable to the "UST
Master Funds" in the amount of your investment.
For direct wire purchases please refer to the section of the Prospectus enti-
tled "How to Purchase and Redeem Shares--Purchase Procedures."
MINIMUM INVESTMENTS:
Except as provided in the Prospectus, the minimum initial investment is $500
per Fund; subsequent investments must be in the minimum amount of $50 per Fund.
Investments may be made in excess of these minimums.
REDEMPTIONS:
Shares can be redeemed in any amount and at any time in accordance with pro-
cedures described in the Prospectus. In the case of shares recently purchased
by check, redemption proceeds will not be made available until the transfer
agent is reasonably assured that the check has been collected in accordance
with applicable banking regulations.
Certain legal documents will be required from corporations or other organiza-
tions, executors and trustees, or if redemption is requested by anyone other
than the shareholder of record. Written redemption requests in excess of
$50,000 per account must be accompanied by signature guarantees.
SIGNATURES: Please be sure to sign the Application(s).
If the shares are registered in the name of:
- an individual, the individual should sign.
- joint tenants, both tenants should sign.
- a custodian for a minor, the custodian should sign.
- a corporation or other organization, an authorized officer should sign
(please indicate corporate office or title).*
- a trustee or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity).*
* A corporate resolution or appropriate certificate may be required.
QUESTIONS:
If you have any questions regarding the Application or redemption require-
ments, please contact the transfer agent at (800) 446-1012 between 9:00 a.m.
and 5:00 p.m. (Eastern Time).
32
<PAGE>
--------------------------------------------------------------------------------
[LOGO OF UST MUTUAL FUNDS SERVICE COMPANY
MASTER FUNDS CLIENT SERVICES NEW ACCOUNT APPLICATION
APPEARS HERE] P.O. Box 2798
Boston, MA 02208-2798
(800) 446-1012
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
ACCOUNT REGISTRATION
-----------------------------------------------------------------------------
[_] Individual [_] Joint Tenants [_] Trust [_] Gift/Transfer to Minor
[_] Other
Note: Joint tenant registration will be as "joint tenants with right of
survivorship" unless otherwise specified. Trust registrations should
specify name of the trust, trustee(s), beneficiary(ies), and the date of
the trust instrument. Registration for Uniform Gifts/Transfers to Minors
should be in the name of one custodian and one minor and include the state
under which the custodianship is created (using the minor's Social Security
Number ("SSN")). For IRA accounts a different application is required.
______________________________ ______________________________________
Name(s) (please print) Social Security # or Taxpayer
Identification #
______________________________
Name
( )
______________________________ ______________________________________
Address Telephone #
______________________________
City/State/Zip [_] U.S. Citizen [_] Other (specify)
-----------------------------------------------------------------------------
FUND SELECTION (THE MINIMUM INITIAL AND SUBSEQUENT INVESTMENT IS $500 PER
FUND AND $50 PER FUND, RESPECTIVELY. MAKE CHECKS PAYABLE TO "UST MASTER
FUNDS.")
-----------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INITIAL INVESTMENT INITIAL INVESTMENT
[_] Short-Term Government [_] Intermediate-Term Managed
Securities Fund $ ____________ 823 Income Fund $ ____________ 824
[_] Managed Income Fund $ ____________ 805 [_] Other _________________ $ ____________
TOTAL INITIAL INVESTMENT: $ ____________
</TABLE>
NOTE: If investing by A. BY MAIL: Enclosed is a check in the amount of
wire, you must obtain $ ____ payable to "UST Master Funds."
a Bank Wire Control
Number. To do so, please B. BY WIRE: A bank wire in the amount of $____
call (800 446-1012 has been sent to the Fund from
and ask for the Wire ______________________ _____________________
Desk. Name of Bank Wire Control Number
CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and dividend
distributions will be reinvested in additional shares unless appropriate
boxes below are checked:
All dividends are to be [_] reinvested [_] paid in cash
All capital gains are to be [_] reinvested [_] paid in cash
-----------------------------------------------------------------------------
ACCOUNT PRIVILEGES
-----------------------------------------------------------------------------
TELEPHONE EXCHANGE AND REDEMPTION
[_] I/We appoint MFSC as my/our agent to act upon instructions received by
telephone in order to effect the telephone exchange and redemption
privileges. I/We hereby ratify any instructions given pursuant to this
authorization and agree that Master Fund, Master Tax-Exempt Fund, MFSC and
their directors, officers and employees will not be liable for any loss,
liability, cost or expense for acting upon instructions believed to be
genuine and in accordance with the procedures described in the then current
Prospectus. To the extent that Master Fund and Master Tax-Exempt Fund fail
to use reasonable procedures as a basis for their belief, they or their
service contractors may be liable for instructions that prove to be
fraudulent or unauthorized.
I/We further acknowledge that it is my/our responsibility to read the
Prospectus of any Fund into which I/we exchange.
[_] I/We do not wish to have the ability to exercise telephone redemption
and exchange privileges. I/We further understand that all exchange and
redemption requests must be in writing.
SPECIAL PURCHASE AND REDEMPTION PLANS
I/We have completed and attached the Supplemental Application for:
[_] Automatic Investment Plan
[_] Systematic Withdrawal Plan
AUTHORITY TO TRANSMIT REDEMPTION PROCEEDS TO PRE-DESIGNATED ACCOUNT.
I/We hereby authorize MFSC to act upon instructions received by telephone to
withdraw $500 or more from my/our account in the UST Master Funds and to
wire the amount withdrawn to the following commercial bank account. I/We
understand that MFSC charges an $8.00 fee for each wire redemption, which
will be deducted from the proceeds of the redemption.
Title on Bank Account*____________________________________________________
Name of Bank _____________________________________________________________
Bank A.B.A. Number __________ Account Number ___________________________
Bank Address _____________________________________________________________
City/State/Zip ___________________________________________________________
(attach voided check here)
A corporation, trust or partnership must also submit a "Corporate
Resolution" (or "Certificate of Partnership") indicating the names and
titles of officers authorized to act on its behalf.
* TITLE ON BANK AND FUND ACCOUNT MUST BE IDENTICAL.
<PAGE>
------------------------------------------------------------------------------
RIGHTS OF ACCUMULATION
------------------------------------------------------------------------------
To qualify for Rights of Accumulation, you must complete this section,
listing all of your accounts including those in your spouse's name, joint
accounts and accounts held for your minor children. If you need more space,
please attach a separate sheet.
[_] I/We qualify for the Rights of Accumulation sales charge discount
described in the Prospectus and Statement of Additional Information.
[_] I/We own shares of more than one Fund distributed by Edgewood Services,
Inc. Listed below are the numbers of each of my/our Shareholder Accounts.
[_] The registration of some of my/our shares differs from that shown on this
application. Listed below are the account number(s) and full
registration(s) in each case.
LIST OF OTHER UST MASTER FUND ACCOUNTS:
____________________________________ _______________________________________
____________________________________ _______________________________________
____________________________________ _______________________________________
ACCOUNT NUMBER ACCOUNT REGISTRATIONS
------------------------------------------------------------------------------
LETTER OF INTENT
------------------------------------------------------------------------------
[_] I agree to the Letter of Intent provisions set forth in the Prospectus.
Although I am not obligated to purchase, and Master Fund is not obligated to
sell, I intend to invest, over a 13-month period beginning on , 19 ,
an aggregate amount in Eligible Funds of Master Fund and Master Tax-Exempt
Fund at least equal to (check appropriate box):
[_] $50,000 [_] $100,000 [_] $250,000
[_] $500,000 [_] $1,000,000 [_] $2,000,0000
By signing this application, I hereby authorize MFSC to redeem an appropriate
number of shares held in escrow to pay any additional sales loads payable in
the event that I do not fulfill the terms of this Letter of Intent.
------------------------------------------------------------------------------
AGREEMENTS AND SIGNATURES
------------------------------------------------------------------------------
By signing this application, I/we hereby certify under penalty of perjury
that the information on this application is complete and correct and that as
required by Federal law:
[_] I/We certify that (1) the number(s) shown on this form is/are the correct
taxpayer identification number(s) and (2) I/we are not subject to backup
withholding either because I/we have not been notified by the Internal
Revenue Service that I/we are subject to backup withholding, or the IRS has
notified me/us that I am/we are no longer subject to backup withholding.
(NOTE: IF ANY OR ALL OF PART 2 IS NOT TRUE, PLEASE STRIKE OUT THAT PART
BEFORE SIGNING.)
[_] If no taxpayer identification number ("TIN") or SSN has been provided
above, I/we have applied, or intend to apply, to the IRS or the Social
Security Administration for a TIN or a SSN, and I/we understand that if I/we
do not provide this number to MFSC within 60 days of the date of this
application, or if I/we fail to furnish my/our correct SSN or TIN, I/we may
be subject to a penalty and a 31% backup withholding on distributions and
redemption proceeds. (Please provide this number on Form W-9. You may request
the form by calling MFSC at the number listed above).
I/We represent that I am/we are of legal age and capacity to purchase shares
of the UST Master Funds. I/We have received, read and carefully reviewed a
copy of the appropriate Fund's current Prospectus and agree to its terms and
by signing below I/we acknowledge that neither the Fund nor the Distributor
is a bank and that Fund Shares are not deposits or obligations of, or
guaranteed or endorsed by, United States Trust Company of New York, its
parent and affiliates and the Shares are not federally insured by, guaranteed
by, obligations of or otherwise supported by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
governmental agency; and that an investment in the Funds involves investment
risks, including possible loss of principal amount invested.
X __________________________________ Date _________________________________
Owner Signature
X __________________________________ Date _________________________________
Co-Owner Signature
Sign exactly as name(s) of registered owner(s) appear(s) above (including
legal title if signing for a corporation, trust custodial account, etc.).
------------------------------------------------------------------------------
FOR USE BY AUTHORIZED AGENT (BROKER/DEALER) ONLY
------------------------------------------------------------------------------
We hereby submit this application for the purchase of shares in accordance
with the terms of our selling agreement with Edgewood Services, Inc., and
with the Prospectus and Statement of Additional Information of each Fund
purchased. We agree to notify MFSC of any purchases made under the Letter
of Intent or Rights of Accumulation.
___________________________________ ______________________________________
Investment Dealer's Name Source of Business Code
___________________________________ ______________________________________
Main Office Address Branch Number
___________________________________ ______________________________________
Representative's Number Representative's Name
___________________________________ ______________________________________
Branch Address Telephone
___________________________________ ______________________________________
Investment Dealer's Authorized Title
Signature
<PAGE>
[LOGO OF UST MUTUAL FUNDS SERVICE COMPANY
MASTER FUNDS CLIENT SERVICES SUPPLEMENTAL APPLICATION
APPEARS HERE] P.O. Box 2798 SPECIAL INVESTMENT AND
Boston, MA 02208-2798 WITHDRAWAL OPTIONS
(800) 446-1012
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
ACCOUNT REGISTRATION PLEASE SUPPLY THE FOLLOWING INFORMATION EXACTLY AS IT
APPEARS ON THE FUND'S RECORD.
-----------------------------------------------------------------------------
Fund Name __________________ Account Number _________________
Owner Name _________________ Social Security or Taxpayer ID
Street Address _____________ Number _________________________
Resident City, State, Zip Code __________
of [_] U.S. [_] Other ____ [_] Check here if this is a change of address
-----------------------------------------------------------------------------
DISTRIBUTION OPTIONS (DIVIDENDS AND CAPITAL GAINS WILL BE REINVESTED
UNLESS OTHERWISE INDICATED)
-----------------------------------------------------------------------------
A. CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and dividend
distributions will be reinvested in additional shares unless appropriate
boxes below are checked: All dividends are to be [_] reinvested
[_] paid in cash
All capital gains are to be [_] reinvested
[_] paid in cash
B. PAYMENT ORDER: Complete only if distribution checks are to be payable
to another party. Make distribution checks payable to:
Name of Your Bank ______________
Name _______________________ Bank Account Number ____________
Address ____________________ Address of Bank ________________
City, State, Zip Code ________________________________________
C. DISTRIBUTIONS REINVESTED-CROSS FUNDS: Permits all distributions from
one Fund to be automatically reinvested into another identically-
registered UST Master Fund. (NOTE: You may NOT open a new Fund account
with this option.) Transfer all distributions earned:
From: ______________________ Account No. ____________________
(Fund)
To: ________________________ Account No. ____________________
(Fund)
-----------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN [_] YES [_] NO
-----------------------------------------------------------------------------
I/We hereby authorize MFSC to debit my/our personal checking account on
the designated dates in order to purchase shares in the Fund indicated at
the top of this application at the applicable public offering price
determined on that day.
[_] Monthly on the 1st day [_] Monthly on the 15th day [_] Monthly on both
the 1st and 15th
days
Amount of each debit (minimum $50 per Fund) $ ________________
NOTE: A Bank Authorization Form (below) and a voided personal check must
accompany the Automatic Investment Plan application.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
UST MASTER FUNDS
CLIENT SERVICES AUTOMATIC INVESTMENT PLAN
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
BANK AUTHORIZATION
-----------------------------------------------------------------------------
----------------------- ------------------------ --------------------------
Bank Name Bank Address Bank Account Number
I/We authorize you, the above named bank, to debit my/our
account for amounts drawn by MFSC, acting as my agent for the
purchase of Fund shares. I/We agree that your rights in
respect to each withdrawal shall be the same as if it were a
check drawn upon you and signed by me/us. This authority
shall remain in effect until revoked in writing and received
by you. I/We agree that you shall incur no liability when
honoring debits, except a loss due to payments drawn against
insufficient funds. I/We further agree that you will incur no
liability to me if you dishonor any such withdrawal. This
will be so even though such dishonor results in the
cancellation of that purchase.
---------------------------- --------------------------------
Account Holder's Name Joint Account Holder's Name
X ---------------- --------- X ------------------ -----------
Signature Date Signature Date
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN [_] YES [_] NO NOT AVAILABLE FOR IRA'S
--------------------------------------------------------------------------------
AVAILABLE TO SHAREHOLDERS WITH ACCOUNT BALANCES OF $10,000 OR MORE.
I/We hereby authorize MFSC to redeem the necessary number of shares from
my/our UST Master Fund Account on the designated dates in order to make the
following periodic payments:
[_] Monthly on the 24th day [_] Quarterly on the 24th day of
January, April, July and October
[_] Other______
(This request for participation in the Plan must be received by the 18th day
of the month in which you wish withdrawals to begin.)
Amount of each check ($100 minimum) $______________________
Please make check payable to: Recipient ________________________
(To be completed only if redemption
proceeds to be paid to other than Street Address ___________________
account holder of record or mailed
to address other than address of City, State, Zip Code ____________
record)
NOTE: If recipient of checks is not the registered shareholder, signature(s)
----
below must be guaranteed. A corporation, trust or partnership must also submit
a "Corporate Resolution" (or "Certification of Partnership") indicating the
names and titles of officers authorized to act on its behalf.
--------------------------------------------------------------------------------
AGREEMENT AND SIGNATURES
--------------------------------------------------------------------------------
The investor(s) certifies and agrees that the certifications, authorizations,
directions and restrictions contained herein will continue until MFSC receives
written notice of any change or revocation. Any change in these instructions
must be in writing with all signatures guaranteed (if applicable).
Date ______________________
X X
--------------------------------------- -------------------------------------
Signature Signature
--------------------------------------- -------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
X X
--------------------------------------- -------------------------------------
Signature Signature
--------------------------------------- -------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
*ELIGIBLE GUARANTORS: An Eligible Guarantor institution is a bank, trust
company, broker, dealer, municipal or government securities broker or dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association, provided that such institution is a
participant in STAMP, the Securities Transfer Agents Medallion Program.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY......................................................... 2
EXPENSE SUMMARY............................................................ 3
FINANCIAL HIGHLIGHTS....................................................... 5
INVESTMENT OBJECTIVES AND POLICIES......................................... 8
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION..................... 10
INVESTMENT LIMITATIONS..................................................... 14
PRICING OF SHARES.......................................................... 16
HOW TO PURCHASE AND REDEEM SHARES.......................................... 17
INVESTOR PROGRAMS.......................................................... 23
DIVIDENDS AND DISTRIBUTIONS................................................ 26
TAXES...................................................................... 26
MANAGEMENT OF THE FUNDS.................................................... 27
DESCRIPTION OF CAPITAL STOCK............................................... 30
CUSTODIAN AND TRANSFER AGENT............................................... 30
PERFORMANCE AND YIELD INFORMATION.......................................... 31
MISCELLANEOUS.............................................................. 31
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION................................... 32
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF ADDI-
TIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OF-
FERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REP-
RESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY MASTER FUND
OR BY ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY MAS-
TER FUND OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
USTFXIP895
[LOGO OF UST MASTER FUNDS, INC.]
MASTER FUNDS, INC.
SHORT-TERM GOVERNMENT
SECURITIES FUND
INTERMEDIATE-TERM MANAGED
INCOME FUND
MANAGED INCOME FUND
Prospectus
August 1, 1995
<PAGE>
[LOGO OF UST
APPEARS HERE]
A Management Investment Company MASTER FUNDS,
INC.
-------------------------------------------------------------------------------
Equity Funds For initial purchase information, current
prices, performance information and existing
account information, call (800) 446-1012.
(From overseas, call (617) 557-8280.)
73 Tremont Street
Boston, MA 02108-3913
-------------------------------------------------------------------------------
This Prospectus describes several separate portfolios offered to investors by
UST Master Funds, Inc. ("Master Fund"), an open-end, management investment
company. Each portfolio (individually, a "Fund" and collectively, the "Funds")
has its own investment objective and policies as follows:
EQUITY FUND seeks long-term capital appreciation by investing in companies
believed by the Investment Adviser to represent good long-term values not cur-
rently recognized in the market prices of their securities.
INCOME AND GROWTH FUND seeks moderate current income with capital apprecia-
tion as a secondary goal by investing in common stock, preferred stock and se-
curities convertible into common stock.
LONG-TERM SUPPLY OF ENERGY FUND seeks long-term capital appreciation by in-
vesting in companies which the Investment Adviser believes will benefit from
the availability, development and delivery of secure hydrocarbon and other en-
ergy sources.
PRODUCTIVITY ENHANCERS FUND seeks long-term capital appreciation by investing
in companies which the Investment Adviser believes will benefit from their
roles as innovators, developers and suppliers of goods and services which en-
hance service and manufacturing productivity or companies that are most effec-
tive at obtaining and applying productivity enhancement developments.
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND seeks long-term capital
appreciation by investing in companies which the Investment Adviser believes
will benefit from their provision of products, technologies and services re-
lated to conservation, protection and restoration of the environment.
AGING OF AMERICA FUND seeks long-term capital appreciation by investing in
companies which the Investment Adviser believes will benefit from the changes
occurring in the demographic structure of the U.S. population, particularly
its growing population of individuals over the age of 40.
COMMUNICATION AND ENTERTAINMENT FUND seeks long-term capital appreciation by
investing in companies which the Investment Adviser believes will benefit from
the technological and international transformation of the communications and
entertainment industries, particularly the convergence of information, commu-
nication and entertainment media.
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND seeks long-term capital apprecia-
tion by investing in companies which the Investment Adviser believes will ben-
efit from their restructuring or redeployment of assets and operations in or-
der to become more competitive or profitable.
GLOBAL COMPETITORS FUND seeks long-term capital appreciation by investing
primarily in U.S.-based companies which the Investment Adviser believes will
benefit from their position as effective and strong competitors on a global
basis.
EARLY LIFE CYCLE FUND seeks long-term capital appreciation by investing in
smaller companies in the earlier stages of their development or larger or more
mature companies engaged in new and higher growth potential operations.
Each of the Funds is sponsored and distributed by Edgewood Services, Inc. and
advised by United States Trust Company of New York (the "Investment Adviser"
or "U.S. Trust").
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should consider before investing. Investors should read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated August 1, 1995 and containing additional information about
the Funds has been filed with the Securities and Exchange Commission. The cur-
rent Statement of Additional Information is available to investors without
charge by writing to Master Fund at its address shown above or by calling
(800) 446-1012. The Statement of Additional Information, as it may be supple-
mented from time to time, is incorporated by reference in its entirety into
this Prospectus.
SHARES IN THE FUNDS ("SHARES") ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARAN-
TEED OR ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, ITS PARENT OR
AFFILIATES AND THE SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGA-
TIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
August 1, 1995
<PAGE>
PROSPECTUS SUMMARY
UST MASTER FUNDS, INC. is an investment company offering various diversified
investment portfolios with differing objectives and policies. Founded in 1984,
Master Fund currently offers 20 Funds with combined assets of approximately
$2.5 billion. See "Description of Capital Stock."
INVESTMENT ADVISER: United States Trust Company of New York ("U.S. Trust")
serves as the Funds' investment adviser. U.S. Trust offers a variety of spe-
cialized financial and fiduciary services to high-net worth individuals, insti-
tutions and corporations. Master Fund offers investors access to U.S. Trust's
services. See "Management of the Funds--Investment Adviser."
INVESTMENT OBJECTIVES AND POLICIES: Generally, each Fund is a diversified in-
vestment portfolio which invests in equity securities. The Income and Growth
Fund also may invest significantly in bonds. The Funds' investment objectives
and policies are summarized on the cover and explained in greater detail later
in this Prospectus. See "Investment Objectives and Policies," "Portfolio In-
struments and Other Investment Information," and "Investment Limitations."
HOW TO INVEST: The Funds' Shares are offered at their public offering price,
i.e., their net asset value plus a sales load which is subject to substantial
reductions for large purchases and programs for accumulation. The sales load is
not applicable to investors making their investments through a variety of in-
stitutions, such as U.S. Trust, other banks and trust companies. See "How to
Purchase and Redeem Shares."
The minimum to start an account is $500 per Fund, with a minimum of $50 per
Fund for subsequent investments. The easiest way to invest is to complete the
account application which accompanies this Prospectus and to send it with a
check to the address noted on the application. Investors may also invest by
wire and through investment dealers or institutional investors with appropriate
sales agreements with Master Fund. See "How to Purchase and Redeem Shares."
HOW TO REDEEM: Redemptions may be requested directly from Master Fund by
mail, wire or telephone. Investors investing through another institution should
request redemptions through their Shareholder Organization. See "How to Pur-
chase and Redeem Shares."
INVESTMENT RISKS AND CHARACTERISTICS: Generally, each Fund is subject to mar-
ket and industry risk. Market risk is the possibility that stock prices will
decline over short or even extended periods. The stock markets tend to be cy-
clical, with periods of generally rising prices and periods of generally de-
clining prices. These cycles will affect the values of each Fund. In addition,
the Long-Term Supply of Energy Fund will normally concentrate its investments
in the crude oil, petroleum and natural gas industry. This Fund will be suscep-
tible to industry risk, the possibility that a particular group of stocks will
decline in price due to industry-specific developments. Because the Funds may
invest in securities of foreign issuers, they are subject to the risks of fluc-
tuations of the value of foreign currency relative to the U.S. dollar and other
risks associated with such investments. Because the Income and Growth Fund also
invests in bonds and other fixed-income securities, it will also be affected
directly by fluctuations in interest rates and the credit markets. Investments
in non-investment grade obligations may subject the Income and Growth Fund to
increased risk of loss upon default. Such securities are generally unsecured,
are often subordinated debt and are often issued by entities with high levels
of indebtedness and that are more sensitive to adverse economic conditions. Al-
though each Fund generally seeks to invest for the long term, each Fund may en-
gage in short-term trading of portfolio securities. A high rate of portfolio
turnover may involve correspondingly greater transaction costs which must be
borne directly by a Fund and ultimately by its shareholders. Investment in the
Funds should not be considered a complete investment program. See "Investment
Objectives and Policies."
2
<PAGE>
EXPENSE SUMMARY
<TABLE>
<CAPTION>
LONG-TERM PRODUCTIVITY ENVIRONMENTALLY-
EQUITY INCOME AND SUPPLY OF ENHANCERS RELATED PRODUCTS
FUND GROWTH FUND ENERGY FUND FUND AND SERVICES FUND
-------- ----------------- -------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load (as a
percentage of offering
price)................. 4.50% 4.50% 4.50% 4.50% 4.50%
Sales Load on Reinvested
Dividends.............. None None None None None
Deferred Sales Load..... None None None None None
Redemption Fees/1/...... None None None None None
Exchange Fees........... None None None None None
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF AV-
ERAGE NET ASSETS)
Advisory Fees (after fee
waivers)/2/............ .72% .72% .42% .47% 0%
12b-1 Fees.............. None None None None None
Other Operating Expenses
Administrative Servic-
ing Fee............... .03% .03% .03% .03% .04%
Other Expenses/2/ (af-
ter fee waivers)...... .30% .31% .53% .49% .95%
----- ----- ----- ----- -----
Total Operating Expenses
(after fee waivers)/2/
....................... 1.05% 1.06% .98% .99% .99%
===== ===== ===== ===== =====
<CAPTION>
BUSINESS
AGING OF COMMUNICATION AND INDUSTRIAL GLOBAL
AMERICA AND ENTERTAINMENT RESTRUCTURING COMPETITORS EARLY LIFE
FUND FUND FUND FUND CYCLE FUND
-------- ----------------- -------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load (as a
percentage of offering
price)................. 4.50% 4.50% 4.50% 4.50% 4.50%
Sales Load on Reinvested
Dividends.............. None None None None None
Deferred Sales Load..... None None None None None
Redemption Fees/1/ ..... None None None None None
Exchange Fees........... None None None None None
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF AV-
ERAGE NET ASSETS)
Advisory Fees (after fee
waivers)/2/ ........... .44% .53% .52% .50% .52%
12b-1 Fees.............. None None None None None
Other Operating Expenses
Administrative Servic-
ing Fee............... .03% .03% .02% .02% .05%
Other Expenses/2/ (af-
ter fee waivers)...... .52% .42% .44% .45% .39%
----- ----- ----- ----- -----
Total Operating Expenses
(after fee waivers)/2/
....................... .99% .98% .98% .97% .96%
===== ===== ===== ===== =====
</TABLE>
-------
1. The Fund's transfer agent imposes a direct $8.00 charge on each wire redemp-
tion by noninstitutional (i.e. individual) investors which is not reflected
in the expense ratios presented herein. Shareholder organizations may charge
their customers transaction fees in connection with redemptions. See "Re-
demption Procedures."
2. The Investment Adviser and Administrators may, from time to time, voluntar-
ily waive part of their respective fees, which waivers may be terminated at
any time. Until further notice, the Investment Adviser and/or Administrators
intend to voluntarily waive fees in an amount equal to the Administrative
Servicing Fee; and to further waive fees and reimburse expenses to the ex-
tent necessary for Shares of each of the Long-Term Supply of Energy, Produc-
tivity Enhancers, Environmentally-Related Products and Services, Aging of
America, Communication and Entertainment, Business and Industrial Restruc-
turing, Global Competitors and Early Life Cycle Funds (collectively, the
"Theme Funds"), respectively, to maintain an annual expense ratio of not
more than .99%. Without such fee waivers, "Advisory Fees" would be .75%,
.75%, .60%, .60%, .60%, .60%, .60%, .60%, .60% and .60%, and "Total Operat-
ing Expenses" would be 1.08%, 1.09%, 1.35%, 1.21%, 2.42%, 1.26%, 1.06%,
1.08%, 1.18% and 1.04% for the Equity, Income and Growth, Long-Term Supply
of Energy, Productivity Enhancers, Environmentally-Related Products and
Services, Aging of America, Communication and Entertainment, Business and
Industrial Restructuring, Global Competitors and Early Life Cycle Funds, re-
spectively, and "Other Expenses" would be .72%, .58%, 1.78%, .63%, .43%,
.46% and .56% for the Long-Term Supply of Energy, Productivity Enhancers,
Environmentally-Related Products and Services, Aging of America, Communica-
tion and Entertainment, Business and Industrial Restructuring and Global
Competitors Funds, respectively.
3
<PAGE>
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual returns and (2) redemption of your investment at the end of the
following periods:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity Fund.................................... $55 $77 $100 $167
Income and Growth Fund......................... 55 77 101 169
Long-Term Supply of Energy Fund................ 55 75 97 160
Productivity Enhancers Fund.................... 55 75 97 161
Environmentally-Related Products and Services
Fund.......................................... 55 75 97 161
Aging of America Fund.......................... 55 75 97 161
Communication and Entertainment Fund........... 55 75 97 160
Business and Industrial Restructuring Fund..... 55 75 97 160
Global Competitors Fund........................ 54 75 96 159
Early Life Cycle Fund.......................... 54 74 96 158
</TABLE>
The foregoing expense summary and example (based on the maximum sales load
payable on the Shares) are intended to assist investors in understanding the
costs and expenses that an investor in Shares of the Funds will bear directly
or indirectly. The expense summary sets forth advisory and other expenses pay-
able with respect to Shares of the Funds for the fiscal year ended March 31,
1995. For more complete descriptions of the Funds' operating expenses, see
"Management of the Funds" in this Prospectus and the financial statements and
notes incorporated by reference in the Statement of Additional Information.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE
GREATER OR LOWER THAN THOSE SHOWN IN THE EXPENSE SUMMARY AND EXAMPLE.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables include selected data for a Share outstanding throughout
each period and other performance information derived from the financial
statements included in Master Fund's Annual Report to Shareholders for
the year ended March 31, 1995 (the "Financial Statements"). The information
contained in the Financial Highlights for each period has been audited by Ernst
& Young LLP, Master Fund's independent auditors. The following tables should be
read in conjunction with the Financial Statements and notes thereto. More
information about the performance of each Fund is also contained in the Annual
Report to Shareholders which may be obtained from Master Fund without charge by
calling the number on the front cover of this Prospectus.
EQUITY FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986/1/
------- ------- ------- ------ ------ ------ ------ -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 19.17 $ 18.77 $ 16.28 $14.13 $13.87 $13.22 $11.32 $ 13.56 $12.35 $ 8.00
------- ------- ------- ------ ------ ------ ------ -------- ------ ------
Income From Investment
Operations
Net Investment Income.. 0.07 0.05 0.08 0.13 0.28 0.34 0.19 0.15 0.18 0.18
Net Gains or (Losses)
on Securities (both
realized and
unrealized)........... 2.67 1.16 3.01 2.23 0.39 1.26 1.88 (1.63) 1.86 4.31
------- ------- ------- ------ ------ ------ ------ -------- ------ ------
Total From Investment
Operations............ 2.74 1.21 3.09 2.36 0.67 1.60 2.07 (1.48) 2.04 4.49
------- ------- ------- ------ ------ ------ ------ -------- ------ ------
Less Distributions
Dividends From Net
Investment Income..... (0.04) (0.08) (0.09) (0.21) (0.23) (0.34) (0.17) (0.14) (0.18) (0.14)
Dividends in Excess of
Net Investment Income. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions From Net
Realized Gain on
Investments and
Options............... (0.47) (0.39) (0.51) 0.00 (0.18) (0.61) 0.00 (0.62) (0.65) 0.00
Distributions in Excess
of Net Realized Gain
on Investments and
Options............... 0.00 (0.34) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------ ------ ------ ------ -------- ------ ------
Total Distributions.... (0.51) (0.81) (0.60) (0.21) (0.41) (0.95) (0.17) (0.76) (0.83) (0.14)
------- ------- ------- ------ ------ ------ ------ -------- ------ ------
Net Asset Value, End of
Period................. $ 21.40 $ 19.17 $ 18.77 $16.28 $14.13 $13.87 $13.22 $ 11.32 $13.56 $12.35
======= ======= ======= ====== ====== ====== ====== ======== ====== ======
Total Return/2/ ........ 14.65% 6.54% 19.26% 16.87% 5.11% 11.98% 18.52% (11.24)% 17.61% 56.74%
Ratios/Supplemental Data
Net Assets, End of
Period
(in millions)......... $137.42 $122.26 $106.14 $71.62 $29.87 $25.98 $17.61 $ 13.58 $13.40 $ 5.58
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.05% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.21% 0.90%/3/
Ratio of Gross
Operating Expenses to
Average Net Assets.... 1.08% 1.14% 1.08% 1.15% 1.23% 1.22% 1.16% 1.16% 1.30% 2.74%/3/
Ratio of Net Investment
Income to Average
Net Assets............ 0.36% 0.25% 0.51% 0.87% 2.21% 2.45% 1.62% 1.26% 1.53% 2.63%/3/
Portfolio Turnover
Rate.................. 23.0% 17.0% 24.0% 20.0% 41.0% 53.0% 46.0% 67.0% 86.0% 207.0%/3/
</TABLE>
-------
NOTES:
1. Inception date of the Fund was April 25, 1985.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
5
<PAGE>
INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987/1/
------ ------ ------ ------ ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $11.94 $11.45 $ 9.10 $ 8.36 $ 8.84 $ 9.09 $ 8.12 $ 8.95 $ 8.00
------ ------ ------ ------ ------- ------ ------ ------- ------
Income From Investment
Operations
Net Investment Income.. 0.38 0.31 0.27 0.30 0.29 0.40 0.28 0.44 0.06
Net Gains or (Losses)
on Securities
(both realized and
unrealized)........... 0.26 0.46 2.43 0.72 (0.43) 0.19 1.15 (0.93) 0.89
------ ------ ------ ------ ------- ------ ------ ------- ------
Total From Investment
Operations............ 0.64 0.77 2.70 1.02 (0.14) 0.59 1.43 (0.49) 0.95
------ ------ ------ ------ ------- ------ ------ ------- ------
Less Distributions
Dividends From Net
Investment Income..... (0.35) (0.27) (0.35) (0.28) (0.34) (0.39) (0.46) (0.21) 0.00
Dividends in Excess of
Net Investment Income. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions From Net
Realized Gain on
Investments and
Options............... (0.41) (0.01) 0.00 0.00 0.00 (0.45) 0.00 (0.13) 0.00
Distributions in Excess
of Net Realized Gain
on Investments and
Options............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------- ------ ------ ------- ------
Total Distributions.... (0.76) (0.28) (0.35) (0.28) (0.34) (0.84) (0.46) (0.34) 0.00
------ ------ ------ ------ ------- ------ ------ ------- ------
Net Asset Value, End of
Period................. $11.82 $11.94 $11.45 $ 9.10 $ 8.36 $ 8.84 $ 9.09 $ 8.12 $ 8.95
====== ====== ====== ====== ======= ====== ====== ======= ======
Total Return/2/......... 5.74% 6.69% 30.45% 12.42% (1.30%) 6.14% 18.36% (5.43%) 11.88%
Ratios/Supplemental Data
Net Assets, End of
Period (in millions).. $99.93 $96.68 $51.30 $23.25 $ 19.59 $23.66 $14.62 $ 6.66 $ 3.71
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.06% 1.17% 1.15% 1.23% 1.28% 1.24% 1.22% 1.27% 1.13%/3/
Ratio of Gross
Operating Expenses to
Average Net Assets.... 1.09% 1.17% 1.15% 1.23% 1.28% 1.24% 1.22% 1.27% 1.84%/3/
Ratio of Net Investment
Income to Average Net
Assets................ 3.31% 2.77% 2.76% 3.52% 3.64% 4.47% 4.09% 6.20% 4.25%/3/
Portfolio Turnover
Rate.................. 36.0% 28.0% 28.0% 81.0% 148.0% 29.0% 24.0% 27.0% 7.0%/3/
</TABLE>
-------
NOTES:
1. Inception date of the Fund was January 6, 1987.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
6
<PAGE>
LONG-TERM SUPPLY OF ENERGY FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.. $ 7.70 $ 7.81 $ 7.00
--------- ---------- ------
Income From Investment Operations
Net Investment Income............... 0.09 0.08 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized)..... 0.24 (0.12) 0.80
--------- ---------- ------
Total From Investment Operations.... 0.33 (0.04) 0.81
--------- ---------- ------
Less Distributions
Dividends From Net Investment
Income............................. (0.10) (0.07) 0.00
Dividends in Excess of Net
Investment Income.................. 0.00 0.00 0.00
Distributions From Net Realized Gain
on Investments and Options......... (0.01) 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options............................ 0.00 0.00 0.00
--------- ---------- ------
Total Distributions................. (0.11) (0.07) 0.00
--------- ---------- ------
Net Asset Value, End of Period........ $ 7.92 $ 7.70 $ 7.81
========= ========== ======
Total Return/2/....................... 4.28% (0.57)% 11.57%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions).......................... $ 15.81 $ 6.83 $ 1.46
Ratio Net Operating of Expenses to
Average Net
Assets............................. 0.98% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses to
Average Net
Assets............................. 1.35% 2.03% 7.03%/3/
Ratio of Net Investment Income to
Average Net Assets................. 1.18% 1.21% 1.69%/3/
Portfolio Turnover Rate............. 31.0% 6.0% 0.0%/3/
</TABLE>
-------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
7
<PAGE>
PRODUCTIVITY ENHANCERS FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.. $ 7.88 $ 6.94 $ 7.00
---------- --------- -------
Income From Investment Operations
Net Investment Income............... (0.01) 0.00 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized)..... 0.35 0.96 (0.07)
---------- --------- -------
Total From Investment Operations.... 0.34 0.96 (0.06)
---------- --------- -------
Less Distributions
Dividends From Net Investment
Income............................. 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income.................. 0.00 (0.02) 0.00
Distributions From Net Realized Gain
on Investments and Options......... (0.10) 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options............................ 0.00 0.00 0.00
---------- --------- -------
Total Distributions................. (0.10) (0.02) 0.00
---------- --------- -------
Net Asset Value, End of Period........ $ 8.12 $ 7.88 $ 6.94
========== ========= =======
Total Return/2/....................... 4.45% 13.81% (0.86)%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions).......................... $ 18.27 $ 15.70 $ 3.37
Ratio of Net Operating Expenses to
Average Net
Assets............................. 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses to
Average Net Assets................. 1.21% 1.49% 4.23%/3/
Ratio of Net Investment
Income/(Loss) to Average Net
Assets............................. (0.10)% 0.01% 1.29%/3/
Portfolio Turnover Rate............. 276.0% 198.0% 183.0%/3/
</TABLE>
-------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
8
<PAGE>
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.. $ 6.24 $ 6.95 $ 7.00
--------- ---------- -------
Income From Investment Operations
Net Investment Loss................. (0.01) 0.00 0.00
Net Gains or (Losses) on Securities
(both realized and unrealized)..... (0.01) (0.71) (0.05)
--------- ---------- -------
Total From Investment Operations.... (0.02) (0.71) (0.05)
--------- ---------- -------
Less Distributions
Dividends From Net Investment
Income............................. 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income.................. (0.01) 0.00 0.00
Distributions From Net Realized Gain
on Investments and Options......... 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options............................ 0.00 0.00 0.00
--------- ---------- -------
Total Distributions................. (0.01) 0.00 0.00
--------- ---------- -------
Net Asset Value, End of Period........ $ 6.21 $ 6.24 $ 6.95
========= ========== =======
Total Return/2/....................... (0.27)% (10.15)% (0.71)%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions).......................... $ 4.36 $ 4.53 $ 2.45
Ratio of Net Operating Expenses to
Average Net Assets................. 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses to
Average Net Assets................. 2.42% 2.20% 2.83%/3/
Ratio of Net Investment
Income/(Loss) to Average Net
Assets............................. (0.10)% (0.07)% 0.32%/3/
Portfolio Turnover Rate............. 61.0% 28.0% 0.0%/3/
</TABLE>
-------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
9
<PAGE>
AGING OF AMERICA FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.. $ 6.99 $ 7.01 $7.00
--------- ---------- -----
Income From Investment Operations
Net Investment Income............... 0.04 0.03 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized)..... 0.85 (0.02) 0.00
--------- ---------- -----
Total From Investment Operations.... 0.89 0.01 0.01
--------- ---------- -----
Less Distributions
Dividends From Net Investment
Income............................. (0.04) (0.03) 0.00
Dividends in Excess of Net
Investment Income.................. 0.00 0.00 0.00
Distributions From Net Realized Gain
on Investments and Options......... 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options............................ 0.00 0.00 0.00
--------- ---------- -----
Total Distributions................. (0.04) (0.03) 0.00
--------- ---------- -----
Net Asset Value, End of Period........ $ 7.84 $ 6.99 $7.01
========= ========== =====
Total Return/2/....................... 12.80% 0.13% 0.14%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions).......................... $ 22.17 $ 10.58 $2.39
Ratio of Net Operating Expenses to
Average Net
Assets............................. 0.99% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses to
Average Net Assets................. 1.26% 1.82% 3.87%/3/
Ratio of Net Investment Income to
Average Net Assets................. 0.63% 0.59% 0.77%/3/
Portfolio Turnover Rate............. 14.0% 24.0% 14.0%/3/
</TABLE>
-------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
10
<PAGE>
COMMUNICATION AND ENTERTAINMENT FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 8.75 $ 7.61 $7.00
---------- ---------- -----
Income From Investment Operations
Net Investment Income.............. 0.04 0.02 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 1.06 1.52 0.60
---------- ---------- -----
Total From Investment Operations... 1.10 1.54 0.61
---------- ---------- -----
Less Distributions
Dividends From Net Investment
Income............................ (0.04) (0.03) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.17) (0.37) 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00
---------- ---------- -----
Total Distributions................ (0.21) (0.40) 0.00
---------- ---------- -----
Net Asset Value, End of Period....... $ 9.64 $ 8.75 $7.61
========== ========== =====
Total Return/2/...................... 12.87% 20.07% 8.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $ 29.91 $ 21.02 $5.79
Ratio of Net Operating Expenses to
Average Net
Assets............................ 0.98% 0.98% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets............. 1.06% 1.16% 2.20%/3/
Ratio of Net Investment Income to
Average Net Assets................ 0.46% 0.29% 1.06%/3/
Portfolio Turnover Rate............ 56.0% 60.0% 25.0%/3/
</TABLE>
-------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
11
<PAGE>
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 9.64 $ 7.71 $ 7.00
---------- ---------- ------
Income From Investment Operations
Net Investment Income.............. 0.07 0.06 0.02
Net Gains or (Losses) on Securities
(both realized and unrealized).... 1.02 1.96 0.69
---------- ---------- ------
Total From Investment Operations... 1.09 2.02 0.71
---------- ---------- ------
Less Distributions
Dividends From Net Investment
Income............................ (0.06) (0.07) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.12) (0.02) 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00
---------- ---------- ------
Total Distributions................ (0.18) (0.09) 0.00
---------- ---------- ------
Net Asset Value, End of Period....... $ 10.55 $ 9.64 $ 7.71
========== ========== ======
Total Return/2/...................... 11.49% 26.40% 10.14%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $ 30.18 $ 14.44 $ 1.94
Ratio of Net Operating Expenses to
Average Net
Assets............................ 0.98% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets............. 1.08% 1.73% 5.85%3
Ratio of Net Investment Income to
Average Net Assets................ 0.83% 0.77% 2.48%/3/
Portfolio Turnover Rate............ 82.0% 75.0% 9.0%/3/
</TABLE>
-------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
12
<PAGE>
GLOBAL COMPETITORS FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 7.69 $ 7.28 $7.00
---------- ---------- -----
Income From Investment Operations
Net Investment Income.............. 0.07 0.05 0.01
Net Gains or (Losses) on Securities
(both realized and unrealized).... 0.90 0.41 0.27
---------- ---------- -----
Total From Investment Operations... 0.97 0.46 0.28
---------- ---------- -----
Less Distributions
Dividends from Net Investment
Income............................ (0.07) (0.05) 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00
Distributions from Net Realized
Gain on Investments and Options... 0.00 0.00 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00
---------- ---------- -----
Total Distributions................ (0.07) (0.05) 0.00
---------- ---------- -----
Net Asset Value, End of Period....... $ 8.59 $ 7.69 $7.28
========== ========== =====
Total Return/2/...................... 12.73% 6.29% 4.00%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $ 25.50 $ 10.06 $2.04
Ratio of Net Operating Expenses to
Average Net Assets................ 0.97% 0.99% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets............. 1.18% 1.72% 3.97%/3/
Ratio of Net Investment Income to
Average Net Assets................ 1.04% 0.81% 0.82%/3/
Portfolio Turnover Rate............ 29.0% 19.0% 0.0%
</TABLE>
-------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
13
<PAGE>
EARLY LIFE CYCLE FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period. $ 8.66 $ 7.40 $7.00
---------- ---------- -----
Income From Investment Operations
Net Investment Income.............. (0.02) (0.01) 0.00
Net Gains or (Losses) on Securities
(both realized and unrealized).... 1.31 1.36 0.40
---------- ---------- -----
Total From Investment Operations... 1.29 1.35 0.40
---------- ---------- -----
Less Distributions
Dividends From Net Investment
Income............................ 0.00 0.00 0.00
Dividends in Excess of Net
Investment Income................. 0.00 0.00 0.00
Distributions From Net Realized
Gain on Investments and Options... (0.18) (0.09) 0.00
Distributions in Excess of Net
Realized Gain on Investments and
Options........................... 0.00 0.00 0.00
---------- ---------- -----
Total Distributions................ (0.18) (0.09) 0.00
---------- ---------- -----
Net Asset Value, End of Period....... $ 9.77 $ 8.66 $7.40
========== ========== =====
Total Return/2/...................... 15.16% 18.27% 5.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)......................... $ 47.78 $ 24.95 $5.51
Ratio of Net Operating Expenses to
Average Net Assets................ 0.96% 0.95% 0.99%/3/
Ratio of Gross Operating Expenses
to Average Net Assets............. 1.04% 1.15% 2.70%/3/
Ratio of Net Investment
Income/(Loss) to Average Net
Assets............................ (0.23)% (0.25)% 0.12%/3/
Portfolio Turnover Rate............ 42.0% 20.0% 4.0%/3/
</TABLE>
-------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
14
<PAGE>
U.S. TRUST'S INVESTMENT PHILOSOPHY AND STRATEGIES
U.S. Trust offers a variety of specialized fiduciary and financial services to
high-net worth individuals, institutions and corporations. As one of the larg-
est institutions of its type, U.S. Trust prides itself in offering an attentive
and high level of service to each of its clients. The UST Master Funds offer
individual investors access to U.S. Trust's services.
Philosophy. In managing investments for the Funds, U.S. Trust follows a long-
term investment philosophy which generally does not change with the short-term
variability of financial markets or fundamental conditions. U.S. Trust's ap-
proach begins with the conviction that all worthwhile investments are grounded
in value. The Investment Adviser believes that an investor can identify funda-
mental values that eventually should be reflected in market prices. U.S. Trust
believes that over time, a disciplined search for fundamental value will
achieve better results than attempting to take advantage of short-term price
movements.
Implementation of this long-term value philosophy consists of searching for,
identifying and obtaining the benefits of present or future investment values.
For example, such values may be found in a company's future earnings potential
or in its existing resources and assets. Accordingly, U.S. Trust in managing
investments for the Funds is constantly engaged in assessing, comparing and
judging the worth of companies, particularly in comparison to the price the
markets place on such companies' shares.
Strategies. In order to translate its investment philosophy into more specific
guidance for selection of investments, the Investment Adviser uses three spe-
cific strategies. These strategies, while identified separately, may overlap so
that more than one may be applied in an investment decision.
U.S. Trust's "PROBLEM/OPPORTUNITY STRATEGY" seeks to identify industries and
companies with the capabilities to provide solutions to or benefit from complex
problems such as the changing demo-graphics and aging of the U.S. population or
the need to enhance industrial productivity. U.S. Trust's second strategy is a
"TRANSACTION VALUE" comparison of a company's real underlying asset value with
the market price of its shares and with the sale prices for similar assets
changing ownership in public market transactions. Differences between a
company's real asset value and the price of its shares often are corrected over
time by restructuring of the assets or by market recognition of their value.
U.S. Trust's third strategy involves identifying "EARLY LIFE CYCLE" companies
whose products are in their earlier stages of development or that seek to ex-
ploit new markets. Frequently such companies are smaller companies, but early
life cycle companies may also include larger established companies with new
products or markets for existing products. The Investment Adviser believes that
over time the value of such companies should be recognized in the market.
Themes. To complete U.S. Trust's investment philosophy, the three portfolio
strategies discussed above are applied in concert with several "longer-term in-
vestment themes" to identify investment opportunities. The Investment Adviser
believes these longer-term themes represent strong and inexorable trends. The
Investment Adviser also believes that understanding the instigation, catalysts
and effects of these longer-term trends should help to identify companies that
are beneficiaries of these trends.
INVESTMENT OBJECTIVES AND POLICIES
The Investment Adviser will use its best efforts to achieve the investment ob-
jective of each Fund, although their achievement cannot be assured. The invest-
ment objective of each Fund is "fundamental", meaning that it may not be
changed without a vote of the holders of a majority of the particular Fund's
outstanding shares (as defined under "Miscellaneous"). Except as noted below in
"Investment Limitations,"
15
<PAGE>
the investment policies of each Fund may be changed without a vote of the
holders of a majority of the outstanding shares of such Fund.
EQUITY FUND
The Equity Fund's investment objective is to seek long-term capital apprecia-
tion. The Equity Fund invests in companies which the Investment Adviser be-
lieves have value currently not recognized in the market prices of the compa-
nies' securities. The Investment Adviser uses the investment philosophy,
strategies and themes discussed above to identify such investment values and
to diversify the Fund's investments over a variety of industries and types of
companies. See "Investment Policies Common to the Equity Fund and the Theme
Funds" for a discussion of various investment policies applicable to the Eq-
uity Fund.
THEME FUNDS
Eight Theme Funds are offered having the common investment objective of long-
term capital appreciation. As noted above, these Theme Funds are based on
themes identified and followed by the Investment Adviser. Each Theme Fund's
key policies are discussed below. Additional policies common to all Theme
Funds are discussed after this section.
LONG-TERM SUPPLY OF ENERGY FUND--invests in companies which the Investment
Adviser believes will benefit from the availability, development and delivery
of secure hydrocarbon and other energy sources. Such companies include those
engaged in the following types of activities: the production, transmission,
marketing, control or measurement of energy or fuels; providing products or
services to companies engaged in such activities; energy-related research, ex-
perimentation and consulting; and environmental activities such as pollution
control and energy conservation. Included in such companies are oil and gas
production and pipeline companies; drilling and drilling service companies;
electric and gas utilities; and other energy resource companies such as coal
producers and newer resources such as geothermal and solar energy producers.
Normally, at least 25% of the Fund's assets will be invested in the crude oil,
petroleum and natural gas industry. However, less than that amount may be so
invested if there have been changes in governmental regulations, world eco-
nomic and political events, exploration or production spending; or supply, de-
mand or prices of crude oil, petroleum, natural gas or other energy sources,
and in the Investment Adviser's opinion, such changes would have an adverse
affect on the securities of companies in that industry. Under normal condi-
tions, at least 65% of the Fund's total assets will be invested in companies
of the type described in this paragraph.
Among the characteristics the Investment Adviser currently looks for in en-
ergy and energy-related investments are companies or energy sources which the
Investment Adviser believes are:
- dedicated to producing supplies of energy at economically acceptable cost;
- located in politically and economically stable or "secure" areas, i.e, sub-
ject only to minimal risk of disruption for political or ideological rea-
sons, or by economic "warfare" or systemic economic weakness;
- available in continuous, sufficient quantity to be reliable and economically
significant;
- involved in energy which is easily and economically transportable and dis-
tributable to where it is consumed.
PRODUCTIVITY ENHANCERS FUND--invests in companies which the Investment Ad-
viser believes will benefit from their roles as innovators, developers and
suppliers of goods and services which enhance service and manufacturing pro-
ductivity or companies that are most effective at obtaining and applying pro-
ductivity enhancement developments. The essential criteria for such products
and services is that they have the ability to increase a user's productivity,
e.g., enable the user to generate equal or greater economic value at lower to-
tal unit cost than alternatives or provide measurable improvement of produc-
tivity by the provider or the user. Such companies may include but are not
limited to production automation manufacturers, computer hardware and software
producers and distributors, communications and mobile telephone providers,
16
<PAGE>
and companies involved with cost control, asset redeployment and downsizing
activities and enhancing the utilization of technology. Under normal condi-
tions, at least 65% of the Fund's total assets will be invested in companies
of the type described in this paragraph.
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND--invests in companies
which the Investment Adviser believes will benefit from their provision of
products, technologies and services related to conservation, protection and
restoration of the environment. Such companies may include but are not limited
to companies engaged in waste management and pollution control, prevention and
cleanup activities. The Fund is not intended to be an "environmentally cor-
rect" fund and may invest in companies without regard to whether they are en-
gaged in operations harmful to the environment. Under normal conditions, at
least 65% of the Fund's total assets will be invested in companies of the type
described in this paragraph.
The Fund may also invest a portion of its assets in securities of companies
that offer products and services used by individuals in response to ecological
concerns and concerns relating to their social environment. Such investments
may include, without limitation, securities of companies that produce protec-
tive clothing, sunscreens and personal security products.
AGING OF AMERICA FUND--invests in companies which the Investment Adviser be-
lieves will benefit from the changes occurring in the demographic structure of
the U.S. population, particularly its growing proportion of individuals over
the age of 40. In analyzing companies for this Fund, the Investment Adviser
considers carefully the ongoing changes in the mean and median ages of the
U.S. population and the resulting effects on the lifestyles and day-to-day
economic actions of the population as a whole. Companies currently positioned
to benefit from such changes include health care, pharmaceutical, biotechnol-
ogy and similar health-related firms. In addition, certain clothing, financial
services, entertainment, real estate and housing, food and beverage and other
types of companies may be positioned to benefit from the demographic changes.
Under normal conditions, at least 65% of the Fund's total assets will be in-
vested in companies of the type described in this paragraph.
COMMUNICATION AND ENTERTAINMENT FUND--invests in companies which the Invest-
ment Adviser believes will benefit from the technological and international
transformation of the communications and entertainment industries, particu-
larly the convergence of information, communication and entertainment media.
Such companies may include those engaged in the development, production, sale
and distribution of products or services in the broadcast, radio and televi-
sion, leisure, entertainment, amusement, publishing, telecommunications serv-
ices and equipment, and tele- phone utilities industries. In analyzing compa-
nies for investment, the Investment Adviser may focus on firms which the In-
vestment Adviser believes are innovators of or will benefit from the melding
of computer, communications and entertainment technologies. Under normal con-
ditions, at least 65% of the Fund's total assets will be invested in companies
of the type described in this paragraph.
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND--invests in companies which the
Investment Adviser believes will benefit from their restructuring or redeploy-
ment of assets and operations in order to become more competitive or profit-
able. Such companies may include those involved in prospective mergers, con-
solidations, liquidations, spin-offs, financial restructurings and reorganiza-
tions. The business activities of such companies are not limited in any way.
Under normal conditions, at least 65% of the Fund's total assets will be in-
vested in companies of the type described in this paragraph. The Investment
Adviser's focus is to find companies whose restructuring activities offer sig-
nificant value and investment potential. For example, several years ago
leveraged buy-outs and mergers were prominent trends, while currently a great
deal of value enhancing activity is occurring as companies deleverage or re-
duce their debt burdens in order to increase profitability. There is risk in
these
17
<PAGE>
types of investments. For example, should a company be unsuccessful in reduc-
ing its debt, it may be forced into default on its debt, increasing its debt
or bankruptcy.
GLOBAL COMPETITORS FUND--invests primarily in U.S.-based companies which the
Investment Adviser believes will benefit from their position as effective and
strong competitors on a global basis. Such companies are characterized by
their ability to supply something unique or of greater value, or to deliver
goods and services more efficiently or reliably. These companies develop and
implement international marketing strategies for their goods and services. The
range of businesses encompassed by this policy is broad and, by way of exam-
ple, may include companies engaged in soft drink production and sales, cloth-
ing manufacturers, tobacco product producers, precision instrument and aero-
space providers, and a variety of communications systems, biotechnology and
high technology suppliers. While the Fund will invest primarily in U.S.-based
companies with such features, up to 20% of the Fund's assets may be invested
in non-U.S.-based global competitors. The Fund will not engage in currency
hedging in an attempt to anticipate currency fluctuations with respect to any
such foreign investments. Under normal conditions, the Fund will invest in se-
curities of issuers from at least three countries and at least 65% of the
Fund's total assets will be invested in companies of the type described in
this paragraph.
EARLY LIFE CYCLE FUND--invests primarily in smaller companies which are in
the earlier stages of their development or larger or more mature companies en-
gaged in new and higher growth potential operations. An early life cycle com-
pany is one which is early in its development as a company, yet has demon-
strated or is expected to achieve substantial long-term earnings growth. More
mature or larger, established companies may also be positioned for accelerat-
ing earnings because of rejuvenated management, new products, new markets for
existing products or structural changes in the economy. In selecting companies
for investment, the Investment Adviser looks for innovative companies whose
potential has not yet been fully recognized by the securities markets. Under
normal conditions, at least 65% of the Fund's total assets will be invested in
companies with capitalization of $1 billion or less. The risk and venture ori-
ented nature of such companies naturally entails greater risk for investors
when contrasted with investing in more established companies.
INVESTMENT POLICIES COMMON TO THE EQUITY FUND AND THE THEME FUNDS
Under normal market and economic conditions, the Equity and each Theme Fund
will invest at least 65% of its total assets in common stock, preferred stock
and securities convertible into common stock. Normally, up to 35% of each such
Fund's total assets may be invested in other securities and instruments in-
cluding, e.g., other investment-grade debt securities, warrants, options, and
futures instruments as described in more detail below. During temporary defen-
sive periods or when the Investment Adviser believes that suitable stocks or
convertible securities are unavailable, each Fund may hold cash or invest some
or all of its assets in U.S. Government securities, high-quality money market
instruments and repurchase agreements collateralized by the foregoing obliga-
tions.
In managing the Equity and Theme Funds, the Investment Adviser seeks to pur-
chase securities having value currently not recognized in the market price of
a security, consistent with the strategies discussed above.
Portfolio holdings will include common stocks of companies having capitaliza-
tions of varying amounts, and all Funds will invest in the securities of high
growth, small companies where the Investment Adviser expects earnings and the
price of the securities to grow at an above-average rate. As discussed above,
the Early Life Cycle Fund emphasizes such companies. Certain securities owned
by the Equity and Theme Funds may be traded only in the over-the-counter mar-
ket or on a regional securities exchange,
18
<PAGE>
may be listed only in the quotation service commonly known as the "pink
sheets," and may not be traded every day or in the volume typical of trading on
a national securities exchange. As a result, there may be a greater fluctuation
in the value of a Fund's Shares, and a Fund may be required, in order to meet
redemptions or for other reasons, to sell these securities at a discount from
market prices, to sell during periods when such disposition is not desirable,
or to make many small sales over a period of time.
The Equity and Theme Funds may invest in the securities of foreign issuers.
The Funds may invest indirectly in the securities of foreign issuers through
sponsored and unsponsored American Depository Receipts ("ADRs"). ADRs represent
receipts typically issued by a U.S. bank or trust company which evidence owner-
ship of underlying securities of foreign issuers. Investments in unsponsored
ADRs involve additional risk because financial information based on generally
accepted accounting principles ("GAAP") may not be available for the foreign
issuers of the underlying securities. ADRs may not necessarily be denominated
in the same currency as the underlying securities into which they may be con-
verted.
INCOME AND GROWTH FUND
The Income and Growth Fund has two investment objectives. Its primary invest-
ment objective is to seek to provide moderate current income and then, as a
secondary objective, to achieve capital appreciation from its investments. In
attempting to achieve these two objectives, the Income and Growth Fund invests,
during normal market and economic conditions, a substantial portion of its as-
sets in common stock, preferred stock and securities convertible into common
stock. The Fund's investments in equity securities will be income-oriented, and
it is expected that a portion of its assets will be invested on a regular basis
in debt obligations.
The Fund may invest in the securities of foreign issuers. The Fund may also
invest indirectly in the securities of foreign issuers through sponsored and
unsponsored ADRs. For information on ADRs, see "Investment Policies Common to
the Equity Fund and the Theme Funds."
In managing the equity portion of the Income and Growth Fund, the Investment
Adviser will generally select securities that are expected to pay dividends and
other distributions which will result in moderate current income when added to
the income from the Fund's non-equity investments. As a general matter, the In-
vestment Adviser will use the three strategies described above in "U.S. Trust's
Investment Philosophy and Strategies"--problem/opportunity, transaction value,
and early life cycle. In applying these strategies, however, the Investment Ad-
viser will place greater emphasis on the current and anticipated income of par-
ticular securities and lesser emphasis on the potential for capital apprecia-
tion. As a result, the Income and Growth Fund can be expected to have a rela-
tively smaller proportion of its assets invested in common shares of early life
cycle companies than the Equity Fund or other Theme Funds. The Investment Ad-
viser may also purchase equity securities for the Income and Growth Fund from
time to time without regard to the strategies outlined above if it determines
that the purchase is in furtherance of the Fund's investment objectives.
Debt obligations may be acquired by the Income and Growth Fund to produce in-
come and (under certain conditions) capital appreciation, and may include both
convertible and non-convertible corporate and government bonds, debentures,
money market instruments, repurchase agreements collateralized by U.S. Govern-
ment obligations, and other types of instruments listed in the next paragraph.
Except as stated below, investments in debt obligations will be limited to
those that are considered to be investment grade-i.e., debt obligations classi-
fied within the four highest ratings of Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Group ("S&P") or, if unrated, which
are determined by the Investment Adviser to be of comparable quality. However,
the Investment Adviser may at any time ac-
19
<PAGE>
quire other, non-investment grade obligations when it believes that their in-
vestment characteristics make them desirable acquisitions for the Income and
Growth Fund in light of its investment objectives and current portfolio mix, so
long as, under normal market and economic conditions, no more than 5% of the
Fund's total assets are invested in non-investment grade debt obligations. Not-
withstanding the foregoing, the Fund may invest up to 35% of its total assets
in non-investment grade convertible debt obligations. Non-investment grade ob-
ligations (those that are rated "Ba" or lower by Moody's and, at the same time,
"BB" or lower by S&P or unrated obligations), commonly referred to as "junk
bonds", have speculative characteristics. Risks associated with lower-rated
debt securities are (a) the relative youth and growth of the market for such
securities, (b) the sensitivity of such securities to interest rate and eco-
nomic changes, (c) the lower degree of protection of principal and interest
payments, (d) the relatively low trading market liquidity for the securities,
(e) the impact that legislation may have on the high yield bond market (and, in
turn, on the Fund's net asset value and investment practices), and (f) the
creditworthiness of the issuers of such securities. During an economic downturn
or substantial period of rising interest rates, highly leveraged issuers may
experience financial stress which would adversely effect their ability to serv-
ice their principal and interest payment obligations, to meet projected busi-
ness goals and to obtain additional financing. An economic downturn could also
disrupt the market for lower-rated bonds and adversely effect the value of out-
standing bonds and the ability of the issuers to repay principal and interest.
If the issuer of a debt obligation held by the Fund defaulted, the Fund could
incur additional expenses to seek recovery. Adverse publicity and investor per-
ceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower-rated securities held by the Fund, especially in
a thinly traded market.
Debt obligations rated "BB," "B" or "CCC" by S&P are regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" represents the
lowest degree of speculation and "CCC" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse condi-
tions. The rating "CC" is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating. The rating "C" is typically
applied to debt subordinated to senior debt which is assigned an actual or im-
plied "CCC-" debt rating, and may be used to cover a situation where a bank-
ruptcy petition has been filed, but debt service payments are continued. The
rating "CI" is reserved for income bonds on which no interest is being paid.
Debt obligations rated "D" are in default, and payments of interest and/or re-
payment of principal is in arrears. The ratings from "AA" through "CCC" are
sometimes modified by the addition of a plus or minus sign to show relative
standing within the major rating categories. Moody's has a similar classifica-
tion scheme for non-investment grade debt obligations. Debt obligations rated
"Ba," "B," "Caa," "Ca" and "C" provide questionable protection of interest and
principal. The rating "Ba" indicates that a debt obligation has some specula-
tive characteristics. The rating "B" indicates a general lack of characteris-
tics of desirable investment. Debt obligations rated "Caa" are of poor quality,
while debt obligations rated "Ca" are considered highly speculative. "C" repre-
sents the lowest rated class of debt obligations. Moody's applies numerical
modifiers 1, 2 and 3 in each generic classification from "Aa" to "B" in its
bond rating system. The modifier "1" indicates that a security ranks in the
higher end of its rating category; the modifier "2" reflects a mid-range rank-
ing; and the modifier "3" indicates that the security ranks at the lower end of
its generic rating category.
In addition, the Income and Growth Fund may invest up to 10% of its total as-
sets in other types of instruments, including warrants, options and other
rights to purchase securities; liquidating trust re-
20
<PAGE>
ceipts; limited partnership interests; certificates of beneficial ownership;
creditor claims; and loan participations. Such instruments may represent owner-
ship or creditor interests in a wide range of assets or businesses, and may be
acquired by the Income and Growth Fund for either income purposes (as would
normally be the case with instruments such as liquidating trust receipts) or
capital appreciation (as would be the case with warrants and options). In cer-
tain instances, there may be no established market for such instruments. The
Income and Growth Fund will, however, at no time invest more than 10% of the
value of its net assets in securities that are illiquid or for which market
quotations are not readily available. Further, certain of these instruments may
have speculative characteristics. For example, certain instruments may be is-
sued by companies that are insolvent or have otherwise defaulted on their debt
obligations. Such companies may be involved in bankruptcy reorganization pro-
ceedings. Warrants and options acquired by the Income and Growth Fund are sub-
ject to the possible loss of the entire premium paid by the Fund if the market
price of the underlying security falls below the exercise price. The Investment
Adviser will purchase such obligations only when it determines that the poten-
tial return justifies the attendant risks. The investment features of the fore-
going instruments and investment risks involving their acquisition are
described further in the Statement of Additional Information. Additionally,
some of the instruments described above may not be "securities" or may not pro-
duce qualifying income for purposes of the provisions of the Internal Revenue
Code of 1986, as amended, applicable to investment companies. See "Taxes--Fed-
eral" below for a discussion of such provisions.
RISK FACTORS
Each Fund is subject to market risk, interest rate risk and in some cases in-
dustry risk. Market risk is the possibility that stock prices will decline over
short or even extended periods. The stock markets tend to be cyclical, with pe-
riods of generally rising prices and periods of generally declining prices.
These cycles will affect the values of each Fund. In addition, the prices of
bonds and other debt instruments generally fluctuate inversely with interest
rate changes. Factors affecting debt securities will affect all of the Funds'
debt holdings.
The Long-Term Supply of Energy Fund will normally concentrate its investments
in the crude oil, petroleum and natural gas industry. Accordingly, it will be
susceptible to industry risk, the possibility that a particular group of stocks
will decline in price due to industry-specific developments.
Energy-related investments are affected generally by supply, demand, and other
competitive factors for the companies' specific products and services. They are
also affected by unpredictable factors such as the supply and demand for oil,
gas, electricity and other energy sources, prices of such energy sources, ex-
ploration and production spending, governmental regulation, and world economic
and political events. In addition, utilities firms in the energy field are sub-
ject to a variety of factors affecting the public utilities industries, includ-
ing: difficulty obtaining adequate returns on invested capital which are typi-
cally subject to the control and scrutiny of public service commissions; re-
strictions on operations and increased costs and delays as a result of environ-
mental considerations; costs of and ability to secure financing for large con-
struction and development projects; difficulties in obtaining secure energy re-
sources; the uncertain effects of conservation efforts; and a variety of issues
concerning financing, governmental approval and environmental aspects of nu-
clear power facilities.
Environmentally-related investments are affected generally by issues and un-
certainties impacting the specialty chemicals, engineering and construction,
machinery and pollution control industries. Such factors include the supply,
demand, and other normal competitive factors for the various portfolio compa-
nies' products and services. The environmental products and services industry
generally has been affected positively by legislation resulting in stricter
governmental regulations and enforcement policies for both commercial and gov-
ernmental generators of waste, as
21
<PAGE>
well as by specific expenditures for cleanup efforts. Chemical products are af-
fected, for example, by product obsolescence and competition; the handling of
hazardous chemicals and products; and the potential for calamitous accidents.
In addition to supply and demand factors, engineering, construction and machin-
ery companies are affected by changes in interest rates and governmental spend-
ing and financing of public works and cleanup projects. Finally, all of these
types of companies are heavily affected by regulation of various governments,
including the federal Environmental Protection Agency and its state counter-
parts. As regulations are developed and enforced, such companies may be re-
quired to alter or cease production of a product or service or to agree to re-
strictions on their operations.
Companies in the various communications and entertainment industries encounter
intense competition, short product life cycles and rapidly changing consumer
tastes. In addition, companies in the telecommunications and utilities indus-
tries are subject to heavy governmental regulation.
Small companies may have limited product lines, markets, or financial re-
sources, or may be dependent upon a small management group, and their securi-
ties may be subject to more abrupt or erratic market movements than larger,
more established companies, both because their securities typically are traded
in lower volume and because the issuers typically are subject to a greater de-
gree to changes in their earnings and prospects.
All Funds may invest in the securities of foreign issuers. Investments in for-
eign securities involve certain risks not ordinarily associated with invest-
ments in domestic securities. Such risks include fluctuations in foreign ex-
change rates, future political and economic developments, and the possible im-
position of exchange controls or other foreign governmental laws or restric-
tions. In addition, with respect to certain countries there is the possibility
of expropriation of assets, confiscatory taxation, political or social insta-
bility or diplomatic developments which could adversely affect investments in
those countries. There may be less publicly available information about a for-
eign company than about a U.S. company, and foreign companies may not be sub-
ject to accounting, auditing and financial reporting standards and requirements
comparable to or as uniform as those of U.S.-based companies. Foreign securi-
ties markets, while growing in volume, have, for the most part, substantially
less volume than U.S. markets, and securities of many foreign companies are
less liquid and their prices more volatile than securities of comparable U.S.-
based companies. Transaction costs on foreign securities markets are generally
higher than in the United States. There is generally less government supervi-
sion and regulation of foreign exchanges, brokers and issuers than there is in
the United States and a Fund might have greater difficulty taking appropriate
legal action in a foreign court. Dividends and interest payable on a Fund's
foreign portfolio securities may be subject to foreign withholding taxes. To
the extent such taxes are not offset by credits or deductions allowed to in-
vestors under the Federal income tax provisions, they may reduce the net return
to the shareholders.
The Funds should not be considered a complete investment program. In view of
the specialized nature of their investment activities, investment in the Equity
and Theme Funds' shares may be suitable only for those investors who can invest
without concern for current income and are financially able to assume risk in
search of long-term capital gains.
Securities of companies discussed in this section may be more volatile than
the overall market.
PORTFOLIO INSTRUMENTS AND OTHER
INVESTMENT INFORMATION
MONEY MARKET INSTRUMENTS
All Funds may invest in "money market instruments," which include, among other
things, bank obligations, commercial paper and corporate bonds with remaining
maturities of 13 months or less.
Bank obligations include bankers' acceptances, negotiable certificates of de-
posit, and non-negotiable
22
<PAGE>
time deposits earning a specified return and issued by a U.S. bank which is a
member of the Federal Reserve System or insured by the Bank Insurance Fund of
the Federal Deposit Insurance Corporation ("FDIC"), or by a savings and loan
association or savings bank which is insured by the Savings Association Insur-
ance Fund of the FDIC. Bank obligations also include U.S. dollar-denominated
obligations of foreign branches of U.S. banks and obligations of domestic
branches of foreign banks. Investments in bank obligations of foreign branches
of domestic financial institutions or of domestic branches of foreign banks are
limited so that no more than 5% of the value of a Fund's total assets may be
invested in any one branch, and no more than 20% of a particular Fund's total
assets at the time of purchase may be invested in the aggregate in such obliga-
tions (see investment limitation No. 5 below under "Investment Limitations").
Investments in time deposits are limited to no more than 5% of the value of a
Fund's total assets at the time of purchase.
Investments by the Funds in commercial paper will consist of issues that are
rated "A-2" or better by S&P or "Prime-2" or better by Moody's. In addition,
each Fund may acquire unrated commercial paper that is determined by the In-
vestment Adviser at the time of purchase to be of comparable quality to rated
instruments that may be acquired by the particular Fund.
Commercial paper may include variable and floating rate instruments. While
there may be no active secondary market with respect to a particular instrument
purchased by a Fund, the Fund may, from time to time as specified in the in-
strument, demand payment of the principal of the instrument or may resell the
instrument to a third party. The absence of an active secondary market, howev-
er, could make it difficult for a Fund to dispose of the instrument if the is-
suer defaulted on its payment obligation or during periods that the Fund is not
entitled to exercise its demand rights, and the Fund could, for this or other
reasons, suffer a loss with respect to such instrument. Any security which can-
not be disposed of within seven days without taking a reduced price will be
considered an illiquid security subject to the 10% limitation discussed below
under "Investment Limitations."
GOVERNMENT OBLIGATIONS
All Funds may invest in U.S. Government obligations, including U.S. Treasury
Bills and the obligations of Federal Home Loan Banks, Federal Farm Credit
Banks, Federal Land Banks, the Federal Housing Administration, the Farmers Home
Administration, the Export-Import Bank of the United States, the Small Business
Administration, the Government National Mortgage Association, the Federal Na-
tional Mortgage Association, the General Services Administration, the Student
Loan Marketing Association, the Central Bank for Cooperatives, the Federal Home
Loan Mortgage Corporation, the Federal Intermediate Credit Banks and the Mari-
time Administration.
REPURCHASE AGREEMENTS
In order to effectively manage their cash holdings, the Funds may enter into
repurchase agreements. Each Fund will enter into repurchase agreements only
with financial institutions that are deemed to be creditworthy by the Invest-
ment Adviser, pursuant to guidelines established by Master Fund's Board of
Directors. No Fund will enter into repurchase agreements with the Investment
Adviser or any of its affiliates. Repurchase agreements with remaining maturi-
ties in excess of seven days will be considered illiquid securities and will be
subject to the 10% limit described in Investment Limitation No. 6 below.
The seller under a repurchase agreement will be required to maintain the value
of the securities which are subject to the agreement and held by a Fund at not
less than the repurchase price. Default or bankruptcy of the seller would, how-
ever, expose a 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.
23
<PAGE>
SECURITIES LENDING
To increase return on its portfolio securities, each Fund may lend its portfo-
lio securities to broker/dealers pursuant to agreements requiring the loans to
be continuously secured by collateral equal at all times in value to at least
the market value of the securities loaned. Collateral for such loans may in-
clude cash, securities of the U.S. Government, its agencies or instrumentali-
ties, or an irrevocable letter of credit issued by a bank, or any combination
thereof. Such loans will not be made if, as a result, the aggregate of all out-
standing loans of a Fund exceeds 30% of the value of its total assets. There
may be risks of delay in receiving additional collateral or in recovering the
securities loaned or even a loss of rights in the collateral should the bor-
rower of the securities fail financially. However, loans are made only to bor-
rowers deemed by the Investment Adviser to be of good standing and when, in the
Investment Adviser's judgment, the income to be earned from the loan justifies
the attendant risks.
OPTIONS
To further increase return on their portfolio securities in accordance with
their respective investment objectives and policies, the Funds may enter into
option transactions as described below.
The Income and Growth and Theme Funds may purchase put and call options listed
on a national securities exchange and issued by the Options Clearing Corpora-
tion in an amount not exceeding 5% of a Fund's net assets, as described further
in the Statement of Additional Information. Such options may relate to particu-
lar securities or to various stock or bond indices. Purchasing options is a
specialized investment technique which entails a substantial risk of a complete
loss of the amounts paid as premiums to the writer of the options.
In addition, each Fund may engage in writing covered call options (options on
securities owned by the particular Fund) and enter into closing purchase trans-
actions with respect to such options. Such options must be listed on a national
securities exchange and issued by the Options Clearing Corporation. The aggre-
gate value of the securities subject to options written by each Fund may not
exceed 25% of the value of its net assets. By writing a covered call option, a
Fund forgoes the opportunity to profit from an increase in the market price of
the underlying security above the exercise price except insofar as the premium
represents such a profit, and it will not be able to sell the underlying secu-
rity until the option expires or is exercised or the Fund effects a closing
purchase transaction by purchasing an option of the same series. The use of
covered call options is not a primary investment technique of the Funds and
such options will normally be written on underlying securities as to which the
Investment Adviser does not anticipate significant short-term capital apprecia-
tion. Additional information on option practices, including particular risks
thereof, is provided in the Funds' Statement of Additional Information.
FUTURES CONTRACTS
The Theme Funds may also enter into interest rate futures contracts, other
types of financial futures contracts and related futures options, as well as
any index or foreign market futures which are available on recognized exchanges
or in other established financial markets.
The Theme Funds will not engage in futures transactions for speculation, but
only as a hedge against changes in market values of securities which a Fund
holds or intends to purchase. The Theme Funds will engage in futures transac-
tions only to the extent permitted by the Commodity Futures Trading Commission
("CFTC") and the Securities and Exchange Commission ("SEC"). When investing in
futures contracts, the Funds must satisfy certain asset segregation require-
ments to ensure that the use of futures is unleveraged. When a Fund takes a
long position in a futures contract, it must maintain a segregated account con-
taining cash and/or certain liquid assets
24
<PAGE>
equal to the purchase price of the contract, less any margin or deposit. When a
Fund takes a short position in a futures contract, the Fund must maintain a
segregated account containing cash and/or certain liquid assets in an amount
equal to the market value of the securities underlying such contract (less any
margin or deposit), which amount must be at least equal to the market price at
which the short position was established. Asset segregation requirements are
not applicable when a Fund "covers" an options or futures position generally by
entering into an offsetting position. Each Fund will limit its hedging transac-
tions in futures contracts and related options so that, immediately after any
such transaction, the aggregate initial margin that is required to be posted by
the Fund under the rules of the exchange on which the futures contract (or
futures option) is traded, plus any premiums paid by the Fund on its open
futures options positions, does not exceed 5% of the Fund's total assets, after
taking into account any unrealized profits and unrealized losses on the Fund's
open contracts (and excluding the amount that a futures option is "in-the-mon-
ey" at the time of purchase). An option to buy a futures contract is "in-the-
money" if the then-current purchase price of the underlying futures contract
exceeds the exercise or strike price; an option to sell a futures contract is
"in-the-money" if the exercise or strike price exceeds the then-current pur-
chase price of the contract that is the subject of the option. In addition, the
use of futures contracts is further restricted to the extent that no more than
10% of a Fund's total assets may be hedged.
Transactions in futures as a hedging device may subject a Fund to a number of
risks. Successful use of futures by a Fund is subject to the ability of the In-
vestment Adviser to correctly anticipate movements in the direction of the mar-
ket. In addition, there may be an imperfect correlation, or no correlation at
all, between movements in the price of the futures contracts (or options) and
movements in the price of the instruments being hedged. Further, there is no
assurance that a liquid market will exist for any particular futures contract
(or option) at any particular time. Consequently, a Fund may realize a loss on
a futures transaction that is not offset by a favorable movement in the price
of securities which it holds or intends to purchase or may be unable to close a
futures position in the event of adverse price movements.
INVESTMENT COMPANY SECURITIES
In connection with the management of its daily cash positions, each Fund may
invest in securities issued by other investment companies which invest in high-
quality, short-term debt securities and which determine their net asset value
per share based on the amortized cost or penny-rounding method. The Income and
Growth Fund may also purchase securities of unit investment trusts registered
with the SEC as investment companies. In addition to the advisory fees and
other expenses a Fund bears directly in connection with its own operations, as
a shareholder of another investment company, a Fund would bear its pro rata
portion of the other investment company's advisory fees and other expenses. As
such, the Fund's shareholders would indirectly bear the expenses of the Fund
and the other investment company, some or all of which would be duplicative.
Such securities will be acquired by each Fund within the limits prescribed by
the Investment Company Act of 1940 (the "1940 Act") which include, subject to
certain exceptions, a prohibition against a Fund investing more than 10% of the
value of its total assets in such securities.
WHEN-ISSUED AND FORWARD TRANSACTIONS
Each Fund may purchase eligible securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. These transactions
involve a commitment by a Fund to purchase or sell particular securities with
payment and delivery taking place in the future, beyond the normal settlement
date, at a stated price and yield. Securities purchased on a "forward commit-
ment" or "when-issued" basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. It
is expected that forward commitments and "when-issued" purchases will not
25
<PAGE>
exceed 25% of the value of a Fund's total assets absent unusual market condi-
tions, and that the length of such commitments will not exceed 45 days. The
Funds do not intend to engage in "when-issued" purchases and forward commit-
ments for speculative purposes, but only in furtherance of their investment ob-
jectives.
ILLIQUID SECURITIES
No Fund will knowingly invest more than 10% of the value of its net assets in
securities that are illiquid. Each Fund may purchase securities which are not
registered under the Securities Act of 1933 (the "Act") but which can be sold
to "qualified institutional buyers" in accordance with Rule 144A under the Act.
Any such security will not be considered illiquid so long as it is determined
by the Investment Adviser, acting under guidelines approved and monitored by
the Board, that an adequate trading market exists for that security. This in-
vestment practice could have the effect of increasing the level of illiquidity
in a Fund during any period that qualified institutional buyers become uninter-
ested in purchasing these restricted securities.
PORTFOLIO TURNOVER
Each Fund may sell a portfolio investment immediately after its acquisition if
the Investment Adviser believes that such a disposition is consistent with the
investment objective of the particular Fund. Portfolio investments may be sold
for a variety of reasons, such as a more favorable investment opportunity or
other circumstances bearing on the desirability of continuing to hold such in-
vestments. A high rate of portfolio turnover may involve correspondingly
greater brokerage commission expenses and other transaction costs, which must
be borne directly by a Fund and ultimately by its shareholders. High portfolio
turnover may result in the realization of substantial net capital gains. To the
extent net short-term capital gains are realized, any distributions resulting
from such gains are considered ordinary income for Federal income tax purposes.
(See "Financial Highlights" and "Taxes--Federal").
INVESTMENT LIMITATIONS
The investment limitations enumerated below are matters of fundamental policy
and may not be changed with respect to a Fund without the vote of the holders
of a majority of a Fund's outstanding shares (as defined under "Miscellane-
ous").
A Fund may not:
1. Purchase securities of any one issuer, other than U.S. Government obliga-
tions, if immediately after such purchase more than 5% of the value of its
total assets would be invested in the securities of such issuer, except that
up to 25% of the value of its total assets may be invested without regard to
this 5% limitation;
2. Borrow money except from banks for temporary purposes, and then in
amounts not in excess of 10% of the value of its total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets except in con-
nection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed and 10% of the value of its total assets at the
time of such borrowing. (This borrowing provision is included solely to fa-
cilitate the orderly sale of portfolio securities to accommodate abnormally
heavy redemption requests and is not for leverage purposes.) A Fund will not
purchase portfolio securities while borrowings in excess of 5% of its total
assets are outstanding. Optioned stock held in escrow is not deemed to be a
pledge; and
3. Make loans, except that (i) each Fund may purchase or hold debt securi-
ties in accordance with its investment objective and policies, and may enter
into repurchase agreements with respect to obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, (ii) each Fund may
lend portfolio securities in an amount
26
<PAGE>
not exceeding 30% of its total assets, and (iii) the Income and Growth Fund
may purchase or hold creditor claims, loan participations and other instru-
ments in accordance with its investment objectives and policies.
Each Fund other than the Long-Term Supply of Energy Fund may not:
4. Purchase any securities which would cause more than 25% of the value of
its total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the
same industry, provided that (a) with respect to the Equity and Income and
Growth Funds, there is no limitation with respect to securities issued or
guaranteed by the U.S. Government or domestic bank obligations, (b) with re-
spect to each Theme Fund, there is no limitation with respect to securities
issued or guaranteed by the U.S. Government, and (c) neither all finance com-
panies, as a group, nor all utility companies, as a group, are considered a
single industry for purposes of this policy.
Each of the Equity and Income and Growth Funds may not:
5. Invest in obligations of foreign branches of financial institutions or in
domestic branches of foreign banks, if immediately after such purchase (i)
more than 5% of the value of its total assets would be invested in obliga-
tions of any one foreign branch of the financial institution or domestic
branch of a foreign bank; or (ii) more than 20% of its total assets would be
invested in foreign branches of financial institutions or in domestic
branches of foreign banks; and
6. Knowingly invest more than 10% of the value of its total assets in illiq-
uid securities, including repurchase agreements with remaining maturities in
excess of seven days, restricted securities, and other securities for which
market quotations are not readily available.
* * *
In addition to the investment limitations described above, no Fund may invest
in the securities of any single issuer if, as a result, the Fund holds more
than 10% of the outstanding voting securities of such issuer.
The Theme Funds may not invest in obligations of foreign branches of financial
institutions or in domestic branches of foreign banks if immediately after such
purchase (i) more than 5% of the value of their respective total assets would
be invested in obligations of any one foreign branch of the financial institu-
tion or domestic branch of a foreign bank; or (ii) more than 20% of their re-
spective total assets would be invested in foreign branches of financial insti-
tutions or in domestic branches of foreign banks. The Theme Funds may not know-
ingly invest more than 10% of the value of their respective total assets in il-
liquid securities, including repurchase agreements with remaining maturities in
excess of seven days, restricted securities and other securities for which mar-
ket quotations are not readily available. These investment policies may be
changed by Master Fund's Board of Directors upon reasonable notice to share-
holders.
The Equity and Income and Growth Funds will not invest more than 25% of the
value of their respective total assets in domestic bank obligations.
With respect to all investment policies, if a percentage limitation is satis-
fied at the time of investment, a later increase or decrease in such percentage
resulting from a change in value of a Fund's portfolio securities will not con-
stitute a violation of such limitation.
PRICING OF SHARES
The net asset value of each Fund is determined and the Shares of each Fund are
priced at the close of regular trading hours on the New York Stock Exchange
(the "Exchange"), currently 4:00 p.m. (Eastern Time). Net asset value and pric-
ing for each Fund
27
<PAGE>
are determined on each day the Exchange and the Investment Adviser are open for
trading ("Business Day"). Currently, the holidays which the Funds observe are
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Me-
morial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiv-
ing Day and Christmas. A Fund's net asset value per Share for purposes of pric-
ing sales and redemptions is calculated by dividing the value of all securities
and other assets allocable to its Shares, less the liabilities allocable to its
Shares, by the number of its outstanding Shares.
Assets in the Funds which are traded on a recognized domestic stock exchange
are valued at the last sale price on the securities exchange on which such se-
curities are primarily traded or at the last sale price on the national securi-
ties market. Securities traded only on over-the-counter markets are valued 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 and asked
prices. An option or futures contract is valued at the last sales price quoted
on the principal exchange or board of trade on which such option or contract is
traded, or in the absence of a sale, the mean between the last bid and asked
prices. Restricted securities, securities for which market quotations are not
readily available, and other assets are valued at fair value, pursuant to
guidelines adopted by Master Fund's Board of Directors.
Portfolio securities which are primarily traded on foreign securities ex-
changes are generally valued at the preceding closing values of such securities
on their respective exchanges, except that when an event subsequent to the time
where 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. Investments in
debt securities having a maturity of 60 days or less are valued based upon the
amortized cost method. All other foreign securities are valued at the last cur-
rent bid quotation if market quotations are available, or at fair value as de-
termined in accordance with guidelines adopted by the Board of Directors. For
valuation purposes, quotations of foreign securities in foreign currency are
converted to U.S. dollars equivalent at the prevailing market rate on the day
of conversion. Some of the securities acquired by the Funds may be traded on
foreign exchanges or over-the-counter markets on days which are not Business
Days. In such cases, the net asset value of the Shares may be significantly af-
fected on days when investors can neither purchase nor redeem a Fund's Shares.
Master Fund's administrators have undertaken to price the securities in the
Funds' portfolios, and may use one or more independent pricing services in con-
nection with this service.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in each Fund are continuously offered for sale by Master Fund's sponsor
and distributor, Edgewood Services, Inc. (the "Distributor"), a wholly-owned
subsidiary of Federated Investors. The Distributor is a registered
broker/dealer. Its principal offices are at Federated Investors Tower, 1001
Liberty Avenue, Pittsburgh, PA 15222-3779.
PURCHASE OF SHARES
The Distributor has established several procedures for purchasing Shares in
order to accommodate different types of investors.
Shares may be purchased directly by individuals ("Direct Investors") or by in-
stitutions ("Institutional Investors" and, collectively with Direct Investors,
"Investors"). Shares may also be purchased by customers ("Customers") of the
Investment Adviser, its
28
<PAGE>
affiliates and correspondent banks, and other institutions ("Shareholder Orga-
nizations") that have entered into shareholder servicing agreements with Master
Fund. A Shareholder Organization may elect to hold of record Shares for its
Customers and to record beneficial ownership of Shares on the account state-
ments provided by it to its Customers. If it does so, it is the Shareholder Or-
ganization's responsibility to transmit to the Distributor all purchase orders
for its Customers and to transmit, on a timely basis, payment for such orders
to Mutual Funds Service Company ("MFSC"), the Funds' sub-transfer agent, in ac-
cordance with the procedures agreed to by the Shareholder Organization and the
Distributor. Confirmations of all such Customer purchases and redemptions will
be sent by MFSC to the particular Shareholder Organization. As an alternative,
a Shareholder Organization may elect to establish its Customers' accounts of
record with MFSC. In this event, even if the Shareholder Organization continues
to place its Customers' purchase and redemption orders with the Funds, MFSC
will send confirmations of such transactions and periodic account statements
directly to Customers. A Shareholder Organization may also elect to establish
its Customers as record holders.
Master Fund enters into shareholder servicing agreements with Shareholder Or-
ganizations which agree to provide their Customers various shareholder adminis-
trative services with respect to their Shares (hereinafter referred to as
"Service Organizations"). Shares in the Funds bear the expense of fees payable
to Service Organizations for such services. See "Management of the Funds--Serv-
ice Organizations."
Customers wishing to purchase Shares through their Shareholder Organization
should contact such entity directly for appropriate instructions. (For a list
of Shareholder Organizations in your area, call (800) 446-1012.) An investor
purchasing Shares through a registered investment adviser or certified finan-
cial planner may incur transaction charges in connection with such purchases.
Such investors should contact their registered investment adviser or certified
finan-
cial planner for further information on transaction fees. Investors may also
purchase Shares directly in accordance with procedures described below under
"Purchase Procedures."
PUBLIC OFFERING PRICE
The public offering price for Shares of each Fund is the sum of the net asset
value of the Shares purchased plus a sales load according to the table below:
<TABLE>
<CAPTION>
TOTAL SALES CHARGES REALLOWANCE TO DEALERS
------------------------------ ----------------------
AS A % OF AS A % OF AS A % OF
OFFERING PRICE NET ASSET OFFERING PRICE
AMOUNT OF TRANSACTION PER SHARE VALUE PER SHARE PER SHARE
--------------------- -------------- --------------- ----------------------
<S> <C> <C> <C>
Less than $50,000....... 4.50% 4.71% 4.00%
$50,000 to $99,999...... 4.00 4.17 3.50
$100,000 to $249,999.... 3.50 3.63 3.00
$250,000 to $499,999.... 3.00 3.09 2.50
$500,000 to $999,999.... 2.00 2.05 1.50
$1,000,000 to
$1,999,999............. 1.00 1.00 .50
$2,000,000 and over..... .50 .50 .25
</TABLE>
The reallowance to dealers may be changed from time to time but will remain
the same for all such dealers.
At various times the Distributor may implement programs under which a dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
under which the Distributor will reallow to any dealer that sponsors sales con-
tests or recognition programs conforming to criteria established by the Dis-
tributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on the sales generated
by the dealer at the public offering price during such programs. Also, the Dis-
tributor in its discretion may from time to time, pursuant to objective crite-
ria established by the Distributor, pay fees to qualifying
29
<PAGE>
dealers for certain services or activities which are primarily intended to re-
sult in sales of Shares of the Funds. If any such program is made available to
any dealer, it will be made available to all dealers on the same terms and con-
ditions. Payments made under such programs will be made by the Distributor out
of its own assets and not out of the assets of the Funds. These programs will
not change the price of Shares or the amount that the Funds will receive from
such sales.
The sales load described above will not be applicable to: (a) purchases of
Shares by customers of the Investment Adviser or its affiliates; (b) trust,
agency or custodial accounts opened through the trust department of a bank,
trust company or thrift institution, provided that appropriate notification of
such status is given at the time of investment; (c) companies, corporations and
partnerships (excluding full service broker/dealers and financial planners,
registered investment advisers and depository institutions not covered by the
exemptions in (d) and (e) below); (d) financial planners and registered invest-
ment advisers not affiliated with or clearing purchases through full service
broker/dealers; (e) purchases of Shares by depository institutions for their
own account as principal; (f) exchange transactions (described below under "In-
vestor Programs--Exchange Privilege") where the Shares being exchanged were ac-
quired in connection with the distribution of assets held in trust, agency or
custodial accounts maintained with the trust department of a bank; (g) corpo-
rate/ business retirement plans (such as 401(k), 403(b)(7), 457 and Keogh ac-
counts) sponsored by the Distributor and IRA accounts sponsored by the Invest-
ment Adviser; (h) company-sponsored employee pension or retirement plans making
direct investments in the Funds; (i) purchases of Shares by officers, trustees,
directors, employees, former employees and retirees of Master Fund, UST Master
Tax-Exempt Funds, Inc. ("Master Tax-Exempt Fund"), the Investment Adviser, the
Distributor or of any direct or indirect affiliate of any of them; (j) pur-
chases of Shares by all beneficial shareholders of Master Fund or Master Tax-
Exempt Fund as of May 22, 1989; (k) purchases of Shares by investment advisers
registered under the Investment Advisers Act of 1940 for their customers
through an omnibus account established with United States Trust Company of New
York; (l) purchases of Shares by directors, officers and employees of brokers
and dealers selling shares pursuant to a selling agreement with Master Fund and
Master Tax-Exempt Fund; (m) purchases of shares by investors who are members of
affinity groups serviced by USAffinity Investments Limited Partnership; and (n)
customers of certain financial institutions who purchase Shares through a reg-
istered representative of UST Financial Services Corp. on the premises of their
financial institutions. In addition, no sales load is charged on the reinvest-
ment of dividends or distributions or in connection with certain share exchange
transactions. Investors who have previously redeemed shares in an "Eligible
Fund" (as defined below) on which a sales load has been paid also have a one-
time privilege of purchasing shares of another "Eligible Fund" at net asset
value without a sales charge, provided that such privilege will apply only to
purchases made within 30 calendar days from the date of redemption and only
with respect to the amount of the redemption. These exemptions to the imposi-
tion of a sales load are due to the nature of the investors and/or reduced
sales effort that will be needed in obtaining investments.
QUANTITY DISCOUNTS
An investor in the Funds may be entitled to reduced sales charges through
Rights of Accumulation, a Letter of Intent or a combination of investments, as
described below, even if the investor does not wish to make an investment of a
size that would normally qualify for a quantity discount.
In order to obtain quantity discount benefits, an investor must notify MFSC at
the time of purchase that he or she would like to take advantage of any of the
discount plans described below. Upon such notification, the investor will re-
ceive the lowest applicable sales charge. Quantity discounts may be modified or
30
<PAGE>
terminated at any time and are subject to confirmation of an investor's hold-
ings through a check of appropriate records. For more information about quan-
tity discounts, please call (800) 446-1012 or contact your Shareholder Organi-
zation.
Rights of Accumulation. A reduced sales load applies to any purchase of shares
of any portfolio of Master Fund and Master Tax-Exempt Fund that is sold with a
sales load ("Eligible Fund") where an investor's then current aggregate invest-
ment is $50,000 or more. "Aggregate investment" means the total of: (a) the
dollar amount of the then current purchase of shares of an Eligible Fund and
(b) the value (based on current net asset value) of previously purchased and
beneficially owned shares of any Eligible Fund on which a sales load has been
paid. If, for example, an investor beneficially owns shares of one or more Eli-
gible Funds with an aggregate current value of $49,000 on which a sales load
has been paid and subsequently purchases shares of an Eligible Fund having a
current value of $1,000, the load applicable to the subsequent purchase would
be reduced to 4.00% of the offering price. Similarly, with respect to each sub-
sequent investment, all shares of Eligible Funds that are beneficially owned by
the investor at the time of investment may be combined to determine the appli-
cable sales load.
Letter of Intent. By completing the Letter of Intent included as part of the
New Account Application, an investor becomes eligible for the reduced sales
load applicable to the total number of Eligible Fund shares purchased in a 13-
month period pursuant to the terms and under the conditions set forth below and
in the Letter of Intent. To compute the applicable sales load, the offering
price of shares of an Eligible Fund on which a sales load has been paid, bene-
ficially owned by an investor on the date of submission of the Letter of In-
tent, may be used as a credit toward completion of the Letter of Intent. Howev-
er, the reduced sales load will be applied only to new purchases.
MFSC will hold in escrow shares equal to 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if an investor does not
purchase the full amount indicated in the Letter of Intent. The escrow will be
released when an investor fulfills the terms of the Letter of Intent by pur-
chasing the specified amount. If purchases qualify for a further sales load re-
duction, the sales load will be adjusted to reflect an investor's total pur-
chases. If total purchases are less than the amount specified, an investor will
be requested to remit an amount equal to the difference between the sales load
actually paid and the sales load applicable to the total purchases. If such re-
mittance is not received within 20 days, MFSC, as attorney-in-fact pursuant to
the terms of the Letter of Intent and at the Distributor's direction, will re-
deem an appropriate number of shares held in escrow to realize the difference.
Signing a Letter of Intent does not bind an investor to purchase the full
amount indicated at the sales load in effect at the time of signing, but an in-
vestor must complete the intended purchase in accordance with the terms of the
Letter of Intent to obtain the reduced sales load. To apply, an investor must
indicate his or her intention to do so under a Letter of Intent at the time of
purchase.
Qualification for Discounts. For purposes of applying the Rights of Accumula-
tion and Letter of Intent privileges described above, the scale of sales loads
applies to the combined purchases made by any individual and/or spouse purchas-
ing securities for his, her or their own account or for the account of any mi-
nor children, or the aggregate investments of a trustee or custodian of any
qualified pension or profit sharing plan or IRA established (or the aggregate
investment of a trustee or other fiduciary) for the benefit of the persons
listed above.
PURCHASE PROCEDURES
General
Direct Investors may purchase Shares by completing the Application for pur-
chase of Shares accompanying this Prospectus and mailing it, together with a
check payable to UST Master Funds, to:
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UST Master Funds
c/o Mutual Funds Service Company
P.O. Box 2798
Boston, MA 02208-2798
Subsequent investments in an existing account in any Fund may be made at any
time by sending to the above address a check payable to UST Master Funds along
with: (a) the detachable form that regularly accompanies the confirmation of a
prior transaction; (b) a subsequent order form which may be obtained from MFSC;
or (c) a letter stating the amount of the investment, the name of the Fund and
the account number in which the investment is to be made. Institutional Invest-
ors may purchase Shares by transmitting their purchase orders to MFSC by tele-
phone at (800) 446-1012 or by terminal access. Institutional Investors must pay
for Shares with Federal funds or funds immediately available to MFSC.
Purchases by Wire
Investors may also purchase Shares by wiring Federal funds to MFSC. Prior to
making an initial investment by wire, an Investor must telephone MFSC at (800)
446-1012 (from overseas, call (617) 557-8280) for instructions. Federal funds
and registration instructions should be wired through the Federal Reserve Sys-
tem to:
United States Trust Company of New York
ABA #021001318
UST Funds, Account No. 2901447
For further credit to:
UST Master Funds
Wire Control Number
Account Registration (including account number)
Investors making initial investments by wire must promptly complete the Appli-
cation accompanying this Prospectus and forward it to MFSC. Redemptions by In-
vestors will not be processed until the completed Application for purchase of
Shares has been received by MFSC and accepted by the Distributor. Investors
making subsequent investments by wire should follow the above instructions.
OTHER PURCHASE INFORMATION
Except as provided in "Investor Programs" below, the minimum initial invest-
ment by an Investor or initial aggregate investment by a Shareholder Organiza-
tion investing on behalf of its Customers is $500 per Fund. The minimum subse-
quent investment for both types of investors is $50 per Fund. Customers may
agree with a particular Shareholder Organization to make a minimum purchase
with respect to their accounts. Depending upon the terms of the particular ac-
count, Shareholder Organizations may charge a Customer's account fees for auto-
matic investment and other cash management services provided. Master Fund re-
serves the right to reject any purchase order, in whole or in part, or to waive
any minimum investment requirements.
REDEMPTION PROCEDURES
Customers of Shareholder Organizations holding Shares of record may redeem all
or part of their investments in the Funds in accordance with procedures gov-
erning their accounts at the Shareholder Organizations. It is the responsibil-
ity of the Shareholder Organizations to transmit redemption orders to MFSC and
credit such Customer accounts with the redemption proceeds on a timely basis.
Redemption orders for Institutional Investors must be transmitted to MFSC by
telephone at (800) 446-1012 or by terminal access. No charge for wiring redemp-
tion payments to Shareholder Organizations or Institutional Investors is im-
posed by Master Fund, although Shareholder Organizations may charge a Custom-
er's account for wiring redemption proceeds. Information relating to such re-
demption services and charges, if any, is available from the Shareholder Orga-
nizations. An investor redeeming Shares through a registered investment adviser
or certified financial planner may incur transaction charges in connection with
such re
32
<PAGE>
demptions. Such investors should contact their registered investment adviser
or certified financial planner for further information on transaction fees.
Investors may redeem all or part of their Shares in accordance with any of the
procedures described below (these procedures also apply to Customers of Share-
holder Organizations for whom individual accounts have been established with
MFSC).
REDEMPTION BY MAIL
Shares may be redeemed by a Direct Investor by submitting a written request
for redemption to:
UST Master Funds
c/o Mutual Funds Service Company
P.O. Box 2798
Boston, MA 02208-2798
A written redemption request to MFSC must (i) state the number of Shares to
be redeemed, (ii) identify the shareholder account number and tax identifica-
tion number, and (iii) be signed by each registered owner exactly as the
Shares are registered. If the Shares to be redeemed were issued in certificate
form, the certificates must be endorsed for transfer (or accompanied by a duly
executed stock power) and must be submitted to MFSC together with the redemp-
tion request. A redemption request for an amount in excess of $50,000 per ac-
count, or for any amount if the proceeds are to be sent elsewhere than the ad-
dress of record, must be accompanied by signature guarantees from any eligible
guarantor institution approved by MFSC in accordance with its Standards, Pro-
cedures and Guidelines for the Acceptance of Signature Guarantees ("Signature
Guarantee Guidelines"). Eligible guarantor institutions generally include
banks, broker/dealers, credit unions, national securities exchanges, regis-
tered securities associations, clearing agencies and savings associations. All
eligible guarantor institutions must participate in the Securities Transfer
Agents Medallion Program ("STAMP") in order to be approved by MFSC pursuant to
the Signature Guarantee Guidelines. Copies of the Signature Guarantee Guide-
lines and information on STAMP can be obtained from MFSC at (800) 446-1012 or
at the address given above. MFSC may require additional supporting documents
for redemptions made by corporations, executors, administrators, trustees and
guardians. A redemption request will not be deemed to be properly received un-
til MFSC receives all required documents in proper form. Payment for Shares
redeemed will ordinarily be made by mail within five Business Days after
proper receipt by MFSC of the redemption request. Questions with respect to
the proper form for redemption requests should be directed to MFSC at (800)
446-1012 (from overseas, call (617) 557-8280).
REDEMPTION BY WIRE OR TELEPHONE
Direct Investors who have so indicated on the Application, or have subse-
quently arranged in writing to do so, may redeem Shares by instructing MFSC by
wire or telephone to wire the redemption proceeds directly to the Direct In-
vestor's account at any commercial bank in the United States. Direct Investors
who are shareholders of record may also redeem Shares by instructing MFSC by
telephone to mail a check for redemption proceeds of $500 or more to the
shareholder of record at his or her address of record. Institutional Investors
may also redeem Shares by instructing MFSC by telephone at (800) 446-1012 or
by terminal access. Only redemptions of $500 or more will be wired to a Direct
Investor's account. An $8.00 fee for each wire redemption by a Direct Investor
is deducted by MFSC from the proceeds of the redemption. The redemption pro-
ceeds for Direct Investors must be paid to the same bank and account as desig-
nated on the Application or in written instructions subsequently received by
MFSC.
In order to arrange for redemption by wire or telephone after an account has
been opened or to change the bank or account designated to receive redemption
proceeds, a Direct Investor must send a written request to Master Fund, c/o
MFSC, at the address listed above under "Redemption by Mail." Such requests
33
<PAGE>
must be signed by the Direct Investor, with signatures guaranteed (see "Redemp-
tion by Mail" above, for details regarding signature guarantees). Further docu-
mentation may be requested.
MFSC and the Distributor reserve the right to re- fuse a wire or telephone re-
demption if it is believed advisable to do so. Procedures for redeeming Shares
by wire or telephone may be modified or terminated at any time by Master Fund,
MFSC or the Distributor. MASTER FUND, MFSC, AND THE DISTRIBUTOR WILL NOT BE LI-
ABLE FOR ANY LOSS, LIABILITY, COST OR EXPENSE FOR ACTING UPON TELEPHONE IN-
STRUCTIONS THAT ARE REASONABLY BELIEVED TO BE GENUINE. IN ATTEMPTING TO CONFIRM
THAT TELEPHONE INSTRUCTIONS ARE GENUINE, MASTER FUND WILL USE SUCH PROCEDURES
AS ARE CONSIDERED REASONABLE, INCLUDING RECORDING THOSE INSTRUCTIONS AND RE-
QUESTING INFORMATION AS TO ACCOUNT REGISTRATION.
If any portion of the Shares to be redeemed represents an investment made by
personal check, Master Fund and MFSC reserve the right not to honor the redemp-
tion until MFSC is reasonably satisfied that the check has been collected in
accordance with the applicable banking regulations which may take up to 15
days. A Direct Investor who anticipates the need for more immediate access to
his or her investment should purchase Shares by Federal funds or bank wire or
by certified or cashier's check. Banks normally impose a charge in connection
with the use of bank wires, as well as certified checks, cashier's checks and
Federal funds. If a Direct Investor's purchase check is not collected, the pur-
chase will be cancelled and MFSC will charge a fee of $25.00 to the Direct In-
vestor's account.
During periods of substantial economic or market change, telephone redemptions
may be difficult to complete. If an Investor is unable to contact MFSC by tele-
phone, the Investor may also deliver the redemption request to MFSC in writing
at the address noted above under "How to Purchase and Redeem Shares--Redemption
by Mail."
OTHER REDEMPTION INFORMATION
Except as described in "Investor Programs" below, Investors may be required to
redeem Shares in a Fund after 60 days' written notice if due to investor re-
demptions the balance in the particular account with respect to the Fund re-
mains below $500. If a Customer has agreed with a particular Shareholder Organ-
ization to maintain a minimum balance in his or her account at the institution
with respect to Shares of a Fund, and the balance in such account falls below
that minimum, the Customer may be obliged by the Shareholder Organization to
redeem all or part of his or her Shares to the extent necessary to maintain the
required minimum balance.
GENERAL
Purchase and redemption orders for Shares which are received and accepted
prior to the close of regular trading hours on the Exchange (currently 4:00
p.m., Eastern Time) on any Business Day are priced according to the net asset
value determined on that day. Purchase orders received and accepted after the
close of regular trading hours on the Exchange are priced at the net asset
value per Share determined on the next Business Day.
INVESTOR PROGRAMS
EXCHANGE PRIVILEGE
Investors and Customers of Shareholder Organizations may, after appropriate
prior authorization and without an exchange fee imposed by Master Fund, ex-
change Shares in a Fund having a value of at least $500 for Shares of any other
portfolio offered by Master Fund or Master Tax-Exempt Fund, provided that such
other shares may legally be sold in the state of the Investor's residence.
Master Fund currently offers, in addition to the Equity, Theme and Income and
Growth Funds, several additional portfolios as follows:
Money Fund, a money market fund seeking as high a level of current income as
is consistent with liquidity and stability of principal through investments
in high-quality money market investments maturing within 13 months;
34
<PAGE>
Government Money Fund, a money market fund seeking as high a level of cur-
rent income as is consistent with liquidity and stability of principal
through investments in obligations issued or guaranteed by the U.S. Govern-
ment, its agencies or instrumentalities and repurchase agreements collateral-
ized by such obligations;
Treasury Money Fund, a money market fund seeking current income generally
exempt from state and local income taxes through investments in direct short-
term obligations issued by the U.S. Treasury and certain agencies or instru-
mentalities of the U.S. Government;
Short-Term Government Securities Fund, a fund seeking a high level of cur-
rent income by investing principally in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and repurchase agree-
ments collateralized by such obligations, and having a dollar-weighted aver-
age portfolio maturity of 1 to 3 years;
Intermediate-Term Managed Income Fund, a fund seeking a high level of cur-
rent interest income by investing principally in investment grade or better
debt obligations and money market instruments, and having a dollar-weighted
average portfolio maturity of 3 to 10 years;
Managed Income Fund, a fund seeking higher current income through invest-
ments in investment grade debt obligations, U.S. Government obligations and
money market instruments;
International Fund, a fund seeking total return derived primarily from in-
vestments in foreign equity securities;
Emerging Americas Fund, a fund seeking long-term capital appreciation
through investments in companies and securities of governments based in all
countries in the Western Hemisphere, except the U.S.;
Pacific/Asia Fund, a fund seeking long-term capital appreciation through in-
vestments in companies and securities of governments based in Asia and on the
Asian side of the Pacific Ocean; and
Pan European Fund, a fund seeking long-term capital appreciation through in-
vestments in companies and securities of governments located in Europe.
Master Tax-Exempt Fund currently offers five portfolios as follows:
Short-Term Tax-Exempt Fund, a diversified tax-exempt money market fund seek-
ing a moderate level of current interest income exempt from Federal income
taxes through investing primarily in high-quality municipal obligations ma-
turing within 13 months;
Short-Term Tax-Exempt Securities Fund, a diversified fund seeking a high
level of current interest income exempt from Federal income taxes through in-
vestments in municipal obligations and having a dollar-weighted average port-
folio maturity of 1 to 3 years;
Intermediate-Term Tax-Exempt Fund, a diversified fund seeking a high level
of current income exempt from Federal income taxes through investments in mu-
nicipal obligations and having a dollar-weighted average portfolio maturity
of 3 to 10 years;
Long-Term Tax-Exempt Fund, a diversified fund seeking to maximize over time
current income exempt from Federal income taxes, investing primarily in mu-
nicipal obligations and having a dollar-weighted average maturity of 10 to 30
years; and
New York Intermediate-Term Tax-Exempt Fund, a non- diversified fund designed
to provide New York investors with a high level of current income exempt from
Federal and, to the extent possible, New York state and New York City income
taxes; this fund invests primarily in New York municipal obligations and has
a dollar-weighted average portfolio maturity of three to ten years.
An exchange involves a redemption of all or a portion of the Shares in a Fund
and the investment of the
35
<PAGE>
redemption proceeds in shares of another portfolio of Master Fund or Master
Tax-Exempt Fund. The redemption will be made at the per Share net asset value
of the Shares being redeemed next determined after the exchange request is re-
ceived. The shares of the portfolio to be acquired will be purchased at the
per share net asset value of those shares (plus any applicable sales load)
next determined after acceptance of the exchange request. No sales load will
be payable on shares to be acquired through an exchange to the extent that a
sales load was previously paid on the Shares being exchanged.
Investors may find the exchange privilege useful if their investment objec-
tives or market outlook should change after they invest in a Fund. For further
information regarding exchange privileges, shareholders should call (800) 446-
1012 (from overseas, call (617) 557-8280). Investors exercising the exchange
privilege with the other portfolios of Master Fund or Master Tax-Exempt Fund
should request and review the prospectuses of such funds. Such prospectuses
may be obtained by calling the numbers listed above. Master Fund may modify or
terminate the exchange program at any time upon 60 days' written notice to
shareholders, and may reject any exchange request. In order to prevent abuse
of this privilege to the disadvantage of other shareholders, Master Fund and
Master Tax-Exempt Fund reserve the right to limit the number of exchange re-
quests of Investors and Customers of Shareholder Organizations to no more than
six per year. Master Fund, MFSC and the Distributor are not responsible for
the authenticity of exchange requests received by telephone that are reasona-
bly believed to be genuine. In attempting to confirm that telephone instruc-
tions are genuine, Master Fund will use such procedures as are considered rea-
sonable, including recording those instructions and requesting information as
to account registration.
For Federal income tax purposes, an exchange of Shares is a taxable event
and, accordingly, a capital gain or loss may be realized by an investor. Be-
fore making an exchange, an investor should consult a tax or other financial
adviser to determine tax consequences.
SYSTEMATIC WITHDRAWAL PLAN
An Investor who owns Shares of a Fund with a value of $10,000 or more may es-
tablish a Systematic Withdrawal Plan. The Investor may request a declining-
balance withdrawal, a fixed-dollar withdrawal, a fixed-share withdrawal, or a
fixed-percentage withdrawal (based on the current value of Shares in the ac-
count) on a monthly, quarterly, semi-annual or annual basis. To initiate the
Systematic Withdrawal Plan, an investor must complete the Supplemental Appli-
cation contained in this Prospectus and mail it to MFSC at the address given
above. Further information on establishing a Systematic Withdrawal Plan may be
obtained by calling (800) 446-1012 (from overseas, call (617) 557-8280.)
Shareholder Organizations may, at their discretion, establish similar system-
atic withdrawal plans with respect to the Shares held by their Customers. In-
formation about such plans and the applicable procedures may be obtained by
Customers directly from their institutions.
RETIREMENT PLANS
Shares are available for purchase by Investors in connection with the follow-
ing tax-deferred prototype retirement plans offered by United States Trust
Company of New York:
IRAs (including "rollovers" from existing retirement plans) for individuals
and their spouses;
Profit Sharing and Money-Purchase Plans for corporations and self-employed
individuals and their partners to benefit themselves and their employees; and
Keogh Plans for self-employed individuals.
Investors investing in the Funds pursuant to Profit Sharing and Money-Pur-
chase Plans and Keogh Plans
36
<PAGE>
are not subject to the minimum investment and forced redemption provisions de-
scribed above. The minimum initial investment for IRAs is $250 per Fund and the
minimum subsequent investment is $50 per Fund. Detailed information concerning
eligibility, service fees and other matters related to these plans can be ob-
tained by calling (800) 446-1012 (from overseas, call (617) 557-8280). Custom-
ers of Shareholder Organizations may purchase Shares of the Funds pursuant to
retirement plans if such plans are offered by their Shareholder Organizations.
AUTOMATIC INVESTMENT PROGRAM
The Automatic Investment Program permits Investors to purchase Shares (minimum
of $50 per Fund per transaction) at regular intervals selected by the Investor.
The minimum initial investment for an Automatic Investment Program account is
$50 per Fund. Provided the Investor's financial institution allows automatic
withdrawals, Shares are purchased by transferring funds from an Investor's
checking, bank money market or NOW account designated by the Investor. At the
Investor's option, the account designated will be debited in the specified
amount, and Shares will be purchased, once a month, on either the first or fif-
teenth day, or twice a month, on both days.
The Automatic Investment Program is one means by which an Investor may use
"Dollar Cost Averaging" in making investments. Instead of trying to time market
performance, a fixed dollar amount is invested in Shares at predetermined in-
tervals. This may help Investors to reduce their average cost per share because
the agreed upon fixed investment amount allows more Shares to be purchased dur-
ing periods of lower share prices and fewer Shares during periods of higher
prices. In order to be effective, Dollar Cost Averaging should usually be fol-
lowed on a sustained, consistent basis. Investors should be aware, however,
that Shares bought using Dollar Cost Averaging are purchased without regard to
their price on the day of investment or to market trends. In addition, while
Investors may find Dollar Cost Averaging to be beneficial, it will not prevent
a loss if an Investor ultimately redeems his Shares at a price which is lower
than their purchase price.
To establish an Automatic Investment account permitting Investors to use the
Dollar Cost Averaging investment method described above, an Investor must com-
plete the Supplemental Application contained in this Prospectus and mail it to
MFSC. An Investor may cancel his participation in this Program or change the
amount of purchase at any time by mailing written notification to MFSC, P.O.
Box 2798, Boston, MA 02208-2798 and notification will be effective three Busi-
ness Days following receipt. Master Fund may modify or terminate this privilege
at any time or charge a service fee, although no such fee currently is contem-
plated. An Investor may also implement the Dollar Cost Averaging method on his
own initiative or through other entities.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the net investment income of the Funds are declared and paid
quarterly. For dividend purposes, a Fund's investment income is reduced by ac-
crued expenses directly attributable to that Fund and the general expenses of
Master Fund prorated to that Fund on the basis of its relative net assets. A
Fund's net investment income available for distribution to the holders of
Shares will be reduced by the amount of other expenses allocated to such se-
ries. Net realized capital gains are distributed at least annually. Dividends
and distributions will reduce the net asset value of each of the Funds by the
amount of the dividend or distribution. All dividends and distributions paid on
Shares held of record by the Investment Adviser and its affiliates or corre-
spondent banks will be paid in cash. Direct and Institutional Investors and
Customers of other Shareholder Organizations will receive dividends and distri-
butions in additional Shares of the Fund on which the dividend or distribution
is paid (as determined on the payable date), unless they have requested in
writing (received by MFSC at Master Fund's address prior to the payment
37
<PAGE>
date) to receive dividends and distributions in cash. Reinvested dividends and
distributions receive the same tax treatment as those paid in cash.
TAXES
FEDERAL
Each of the Funds qualified for its last taxable year as a "regulated invest-
ment company" under the Internal Revenue Code of 1986, as amended (the "Code").
Each Fund expects to so qualify in future years. Such qualification generally
relieves a Fund of liability for Federal income taxes to the extent its earn-
ings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code requires, among
other things, that a Fund distribute to its shareholders an amount equal to at
least 90% of its investment company taxable income for each taxable year. In
general, a Fund's investment company taxable income will be its income (includ-
ing dividends and interest), subject to certain adjustments and excluding the
excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. Each Fund intends to distribute
substantially all of its investment company taxable income each year. Such div-
idends will be taxable as ordinary income to Fund shareholders who are not cur-
rently exempt from Federal income taxes, whether such income is received in
cash or reinvested in additional Shares. (Federal income taxes for distribu-
tions to IRAs and qualified pension plans are deferred under the Code.) The
dividends received deduction for corporations will apply to such ordinary in-
come distributions to the extent of the total qualifying dividends received by
a Fund from domestic corporations for the taxable year.
Distribution by a Fund of the excess of its net long- term capital gain over
its net short-term capital loss is taxable to shareholders as long-term capital
gain, regardless of how long the shareholders have held their Shares and
whether such gains are received in cash or reinvested in additional Shares.
Such distributions are not eligible for the dividends received deduction.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to
have been received by shareholders and paid by a Fund on December 31 of such
year in the event such dividends are actually paid during January of the fol-
lowing year.
An investor considering buying Shares of a Fund on or just before the record
date of a dividend should be aware that the amount of the forthcoming dividend
payment, although in effect a return of capital, will be taxable to them.
A taxable gain or loss may be realized by a shareholder upon his redemption,
transfer or exchange of Shares depending upon the tax basis of such Shares and
their price at the time of redemption, transfer or exchange. If a shareholder
holds Shares for six months or less and during that time receives a capital
gain dividend on those Shares, any loss recognized on the sale or exchange of
those Shares will be treated as a long-term capital loss to the extent of the
capital gain dividend. Generally, a shareholder may include sales charges in-
curred upon the purchase of Shares in his tax basis for such Shares for the
purpose of determining gain or loss on a redemption, transfer or exchange of
such Shares. However, if the shareholder effects an exchange of such Shares for
Shares of another Fund within 90 days of the purchase and is able to reduce the
sales charges applicable to the new Shares (by virtue of the exchange privi-
lege), the amount equal to such reduction may not be included in the tax basis
of the shareholder's exchanged Shares, but may be included (subject to the same
limitation) in the tax basis of the new Shares.
Qualification as a regulated investment company under the Code also requires
that each Fund satisfy certain requirements with respect to the source of its
income for a taxable year. At least 90% of the gross income of each Fund must
be derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities or foreign cur-
rencies, and other income (including, but not limited to, gains from options,
38
<PAGE>
futures, or forward contracts) derived with respect to the Fund's business of
investing in such stock, securities or currencies. The Treasury Department may
by regulation exclude from qualifying income foreign currency gains which are
not directly related to a Fund's principal business of investing in stock or
securities, or options and futures with respect to stock or securities. Any in-
come derived by a Fund from a partnership or trust is treated as derived with
respect to the Fund's business of investing in stock, securities or currencies
only to the extent that such income is attributable to items of income which
would have been qualifying income if realized by the Fund in the same manner as
by the partnership or trust. Some of the investments that the Income and Growth
Fund may make (such as liquidating trust receipts and creditor claims) may not
be securities or may not produce qualifying income. Therefore, it may be neces-
sary for the Investment Adviser to restrict the investments of that Fund to en-
sure that non-qualifying income does not exceed 10% of that Fund's total gross
income for a taxable year.
The foregoing summarizes some of the important tax considerations generally
affecting the Funds and their shareholders and is not intended as a substitute
for careful tax planning. Accordingly, potential investors in the Funds should
consult their tax advisers with specific reference to their own tax situations.
Shareholders will be advised annually as to the Federal income tax consequences
of distributions made each year.
STATE AND LOCAL
Purchasers are advised to consult their tax advisers concerning the applica-
tion of state and local taxes, which may have different consequences from those
of the Federal income tax law described above.
MANAGEMENT OF THE FUNDS
The business and affairs of the Funds are managed under the direction of Mas-
ter Fund's Board of Directors. The Statement of Additional Information
contains the names of and general background information concerning Master
Fund's directors.
INVESTMENT ADVISER
United States Trust Company of New York serves as the Investment Adviser to
each Fund. U.S. Trust is a state-chartered bank and trust company. The Invest-
ment Adviser provides trust and banking services to individuals, corporations,
and institutions both nationally and internationally, including investment man-
agement, estate and trust administration, financial planning, corporate trust
and agency banking, and personal and corporate banking. The Investment Adviser
is a member bank of the Federal Reserve System and the Federal Deposit Insur-
ance Corporation and is one of the twelve members of the New York Clearing
House Association.
On December 31, 1994, the Investment Adviser's Asset Management Group had ap-
proximately $33 billion in assets under management. The Investment Adviser,
which has its principal offices at 114 W. 47th Street, New York, New York
10036, is a subsidiary of U.S. Trust Corporation, a registered bank holding
company.
The Investment Adviser manages each Fund, makes decisions with respect to and
places orders for all purchases and sales of its portfolio securities, and
maintains records relating to such purchases and sales.
The Equity Fund's portfolio manager, David A. Tillson, is the person primarily
responsible for the day-to-day management of the Fund's investment portfolio.
Mr. Tillson, a Senior Vice President and Senior Portfolio Manager, has been
with U.S. Trust since 1993, and has been the Fund's portfolio manager since De-
cember 1994. Prior to joining U.S. Trust, Mr. Tillson was the founder and Pres-
ident of TDA Capital Management Company, and a Senior Vice President of Matrix
Asset Advisors until 1993. He was also a Vice President and Senior Portfolio
Manager with V C S & O Asset Management until 1990.
39
<PAGE>
The Income and Growth and Long-Term Supply of Energy Funds' portfolio manager,
Richard L. Bayles, is the person primarily responsible for the day-to-day man-
agement of the Funds' investment portfolios. Mr. Bayles, a Senior Vice Presi-
dent and Senior Portfolio Manager of U.S. Trust, has been with U.S. Trust since
1990 and has been the Income and Growth Fund's portfolio manager since 1990 and
the Long-Term Supply of Energy Fund's portfolio manager since its inception.
Prior to his reassociation with U.S. Trust, Mr. Bayles was a Managing Director
at John W. Bristol and Company, an investment advisory firm, from 1987 to 1990.
The Productivity Enhancers Fund's portfolio manager, Ronald C. Steele, is the
person primarily responsible for the day-to-day management of the Fund's in-
vestment portfolio. Mr. Steele, a Senior Vice President and Senior Portfolio
Manager of U.S. Trust, has been the Fund's portfolio manager since its incep-
tion.
The Environmentally-Related Products and Services Fund's portfolio manager,
Victor Sapuppo, is the person primarily responsible for the day-to-day manage-
ment of the Fund's investment portfolio. Mr. Sapuppo, Vice President and Senior
Portfolio Manager of the Personal Equity and Balanced Investment Division of
U.S. Trust, has been with U.S. Trust since 1962 and has been the Fund's portfo-
lio manager since its inception.
The Aging of America Fund's portfolio manager, Roger F. Schaefer, is the per-
son primarily responsible for the day-to-day management of the Fund's invest-
ment portfolio. Mr. Schaefer, a Vice President and Senior Portfolio Manager of
U.S. Trust, has been with U.S. Trust since 1970 and has been the Fund's portfo-
lio manager since its inception.
The Communication and Entertainment Fund's portfolio manager, John J.
Apruzzese, is the person primarily responsible for the day-to-day management of
the Fund's investment portfolio. Mr. Apruzzese, a Senior Vice President, De-
partment Manager and Senior Portfolio Manager of U.S. Trust, has been with U.S.
Trust since 1984 and has been the Fund's portfolio manager since its inception.
The Business and Industrial Restructuring Fund's portfolio manager, David J.
Williams, is the person primarily responsible for the day-to-day management of
the Fund's investment portfolio. Mr. Williams, Senior Vice President, Depart-
ment Manager and Senior Portfolio Manager of the Personal Equity and Balanced
Investment Division of U.S. Trust, has been with U.S. Trust since 1987 and has
been the Fund's portfolio manager since its inception.
The Global Competitors Fund's portfolio manager, Wendy S. Popowich, is the
person primarily responsible for the day-to-day management of the Fund's in-
vestment portfolio. Ms. Popowich, a Vice President and Portfolio Manager of the
Personal Investment Division of U.S. Trust, has been with U.S. Trust since 1983
and has been the Fund's portfolio manager since its inception.
The Early Life Cycle Fund's portfolio manager, Timothy W. Evnin, is the person
primarily responsible for the day-to-day management of the Fund's investment
portfolio. Mr. Evnin, a Vice President and Portfolio Manager of U.S. Trust, has
been with U.S. Trust since 1987 and has been the Fund's portfolio manager since
its inception.
For the services provided and expenses assumed pursuant to its Investment Ad-
visory Agreements, the Investment Adviser is entitled to be paid a fee, com-
puted daily and paid monthly, at the annual rate of: .75% of the average daily
net assets of the Equity and the Income and Growth Funds; and .60% of the aver-
age daily net assets of each Theme Fund. The advisory fee rates payable by the
Equity and Income and Growth Funds are higher than the rates payable by most
mutual funds. The Board of Directors believes, based on information supplied to
it by the Investment Adviser, that this fee is comparable to the rate paid by
many other funds with similar investment objectives and policies and is appro-
priate for the Funds in
40
<PAGE>
light of their investment objectives and policies. For the fiscal year ended
March 31, 1995, the Investment Adviser received an advisory fee at the effec-
tive an-
nual rates of .72%, .72%, .42%, .47%, 0%, .44%, .53%, .52%, .50% and .52% of
the average daily net assets of the Equity, Income and Growth, Long-Term Sup-
ply of Energy, Productivity Enhancers, Environmentally-Related Products and
Services, Aging of America, Communication and Entertainment, Business and In-
dustrial Restructuring, Global Competitors and Early Life Cycle Funds, respec-
tively. For the same period, the Investment Adviser waived advisory fees at
the effective annual rates of .03%, .03%, .18%, .13%, .60%, .16%, .07%, .08%,
.10% and .08% of the average daily net assets of the Equity, Income and
Growth, Long-Term Supply of Energy, Productivity Enhancers, Environmentally-
Related Products and Services, Aging of America, Communication and Entertain-
ment, Business and Industrial Restructuring, Global Competitors and Early Life
Cycle Funds, respectively.
From time to time, the Investment Adviser may waive (either voluntarily or
pursuant to applicable state expense limitations) all or a portion of the ad-
visory fees payable to it by a Fund, which waiver may be terminated at any
time. See "Management of the Funds--Service Organizations" for additional in-
formation on fee waivers.
ADMINISTRATORS
MFSC and Federated Administrative Services serve as the Funds' administrators
(the "Administrators") and provide them with general administrative and opera-
tional assistance. The Administrators also serve as administrators of the
other portfolios of Master Fund and Master Tax-Exempt Fund, which are also ad-
vised by the Investment Adviser and distributed by the Distributor. For the
services provided to all portfolios of Master Fund (except the International,
Emerging Americas, Pacific/Asia and Pan European Funds) and Master Tax-Exempt
Fund, the Administrators are entitled jointly to annual fees, computed daily
and paid monthly, based on the combined aggregate average daily net assets of
the two companies (excluding the International, Emerging Americas,
Pacific/Asia and Pan European Funds) as follows:
<TABLE>
<CAPTION>
COMBINED AGGREGATE AVERAGE DAILY
NET ASSETS OF MASTER FUND
(EXCLUDING THE INTERNATIONAL, EMERGING AMERICAS,
PACIFIC/ASIA AND PAN EUROPEAN FUNDS) ANNUAL
AND MASTER TAX-EXEMPT FUND FEE
------------------------------------------------ ------
<S> <C>
first $200 million....................................................... .200%
next $200 million........................................................ .175%
over $400 million........................................................ .150%
</TABLE>
Administration fees payable to the Administrators by each portfolio of the
two investment companies are determined in proportion to their relative aver-
age daily net assets at the time of determination. From time to time, the Ad-
ministrators may waive (either voluntarily or pursuant to applicable state ex-
pense limitations) all or a portion of the administration fee payable to them
by a Fund, which waivers may be terminated at any time. See "Management of the
Funds--Service Organizations" for additional information on fee waivers. For
the fiscal year ended March 31, 1995, MFSC and Concord Holding Corporation,
the former co-administrator, received an aggregate administration fee (under
the same compensation arrangements noted above) at the effective annual rates
of .154%, .154%, .171%, .154%, .124%, .155%, .154%, .154%, .155% and .154% of
the average daily net assets of the Equity, Income and Growth, Long-Term Sup-
ply of Energy, Productivity Enhancers, Environmentally-Related Products and
Services, Aging of America, Communication and Entertainment, Business and In-
dustrial Restructuring, Global Competitors and Early Life Cycle Funds, respec-
tively. For the same period, MFSC And Concord waived fees at the effective an-
nual rates of .192%, .090%, .829%, .115%, .009%, .026%, and .106% of the aver-
age daily net assets of the Long-Term Supply of Energy, Productivity
Enhancers, Environmentally-Related Products and Services, Aging of America,
Communication and Entertainment, Business and Industrial Restructuring and
Global Competitors Funds, respectively.
41
<PAGE>
SERVICE ORGANIZATIONS
Master Fund will enter into an agreement ("Servicing Agreement") with each
Service Organization requiring it to provide administrative support services to
its Customers beneficially owning Shares. As a consideration for the adminis-
trative services provided to Customers, a Fund will pay the Service Organiza-
tion an administrative service fee at the annual rate of up to .40% of the av-
erage daily net asset value of its Shares held by the Service Organization's
Customers. Such services, which are described more fully in the Statement of
Additional Information under "Management of the Funds--Service Organizations,"
may include assisting in processing purchase, exchange and redemption requests;
transmitting and receiving funds in connection with Customer orders to pur-
chase, exchange or redeem Shares; and providing periodic statements. Under the
terms of the Servicing Agreement, Service Organizations will be required to
provide to Customers a schedule of any fees that they may charge in connection
with a Customer's investment. Until further notice, the Investment Adviser and
Administrators have voluntarily agreed to waive fees payable by a Fund in an
amount equal to administrative service fees payable by that Fund.
BANKING LAWS
Banking laws and regulations currently prohibit a bank holding company regis-
tered under the Federal Bank Holding Company Act of 1956 or any bank or non-
bank affiliate thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and prohibit banks generally from issuing, underwriting, selling or distribut-
ing securities such as Shares of the Funds, but such banking laws and regula-
tions do not prohibit such a holding company or affiliate or banks generally
from acting as investment adviser, transfer agent, or custodian to such an in-
vestment company, or from purchasing shares of such company for and upon the
order of customers. The Investment Adviser, MFSC and certain Shareholder Orga-
nizations may be subject to such banking laws and regulations. State securities
laws may differ from the interpretations of Federal law discussed in this para-
graph and banks and financial institutions may be required to register as deal-
ers pursuant to state law.
Should legislative, judicial, or administrative action prohibit or restrict
the activities of the Investment Adviser or other Shareholder Organizations in
connection with purchases of Fund Shares, the Investment Adviser and such
Shareholder Organizations might be required to alter materially or discontinue
the investment services offered by them to Customers. It is not anticipated,
however, that any resulting change in the Funds' method of operations would af-
fect their net asset values per Share or result in financial loss to any share-
holder.
DESCRIPTION OF CAPITAL STOCK
UST Master Funds, Inc. was organized as a Maryland corporation on August 2,
1984. Currently, Master Fund has authorized capital of 35 billion shares of
Common Stock, $.001 par value per share, classified into 34 series of shares
representing interests in 20 investment portfolios. This Prospectus describes
the Equity, Income and Growth, Early Life Cycle, Long-Term Supply of Energy,
Productivity Enhancers, Environmentally-Related Products and Services, Aging of
America, Communication and Entertainment, Business and Industrial Restructuring
and Global Competitors Funds.
Each share in a Fund represents an equal proportionate interest in the partic-
ular Fund with other shares of the same class, and is entitled to such divi-
dends and distributions out of the income earned on the assets belonging to
such Fund as are declared in the discretion of Master Fund's Board of Direc-
tors. Master Fund's Charter authorizes the Board of Directors to classify or
reclassify any class of shares into one or more additional classes or series.
Master Fund's shareholders are entitled to one vote for each full share held
and fractional votes for frac-
42
<PAGE>
tional shares held and will vote in the aggregate and not by class, except as
otherwise expressly required by law.
Certificates for Shares will not be issued unless expressly requested in writ-
ing to MFSC and will not be issued for fractional Shares.
As of July 11, 1995, U.S. Trust held of record substantially all of the Shares
in the Funds as agent or custodian for its customers, but did not own such
Shares beneficially because it did not have voting or investment discretion
with respect to such Shares.
CUSTODIAN AND TRANSFER AGENT
United States Trust Company of New York serves as the custodian of the Funds'
assets and as their transfer and dividend disbursing agent. Communications to
the custodian and transfer agent should be directed to United States Trust Com-
pany of New York, Mutual Funds Service Division, 770 Broadway, New York, New
York 10003-9598.
U.S. Trust has entered into an International Custodian Agreement with Morgan
Stanley Trust Company, 1 Pierrepont Plaza, Brooklyn, NY 11201, providing for
the custody of foreign securities held by the Funds.
U.S. Trust has also entered into a sub-transfer agency arrangement with MFSC,
73 Tremont Street, Boston, Massachusetts 02108-3913, pursuant to which MFSC
provides certain transfer agent, dividend disbursement and registrar services
to the Funds.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders, the per-
formance of the Shares of the Funds may be quoted and compared to that of other
mutual funds with similar investment objectives and to stock or other relevant
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For exam-
ple, the performance of a Fund may be compared to data prepared by Lipper Ana-
lytical Services, Inc., a widely recognized independent service which monitors
the performance of mutual funds. The performance of the Equity and Theme Funds
may be also compared to the Standard & Poor's 500 Stock Index ("S&P 500"), an
index of unmanaged groups of common stocks, the Consumer Price Index, or the
Dow Jones Industrial Average, a recognized unmanaged index of common stocks of
30 industrial companies listed on the New York Stock Exchange.
Performance data as reported in national financial publications, including but
not limited to Money Magazine, Forbes, Barron's, The Wall Street Journal and
The New York Times, or in publications of a local or regional nature, may also
be used in comparing the performance of the Funds.
From time to time, each Fund may advertise its performance by using "average
annual total return" over various periods of time. Such total return figure re-
flects the average percentage change in the value of an investment in a Fund
from the beginning date of the measuring period to the end of the measuring pe-
riod. Average total return figures will be given for the most recent one-year
period, and may be given for other periods as well (such as from the commence
ment of a Fund's operations, or on a year-by-year basis). Each Fund may also
use aggregate total return figures for various periods, representing the cumu-
lative change in the value of an investment in the Fund for the specific peri-
od. Both methods of calculating total return assume that dividends and capital
gain distributions made by a Fund during the period are reinvested in Fund
Shares and also reflect the maximum sales load charged by the Fund.
Performance will fluctuate and any quotation of performance should not be con-
sidered as representative of a Fund's future performance. Shareholders
43
<PAGE>
should remember that performance is generally a function of the kind and qual-
ity of the instruments held in a portfolio, operating expenses, and market con-
ditions. Any fees charged by Shareholder Organizations with respect to accounts
of Customers that have invested in Shares will not be included in calculations
of performance.
MISCELLANEOUS
Shareholders will receive unaudited semiannual reports describing the Funds'
investment operations and annual financial statements audited by the Funds' in-
dependent auditors.
As used in this Prospectus, a "vote of the holders of a majority of the out-
standing shares" of Master Fund or a particular Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental in-
vestment policy, the affirmative vote of the lesser of (a) more than 50% of the
outstanding shares of Master Fund or such Fund, or (b) 67% or more of the
shares of Master Fund or such Fund present at a meeting if more than 50% of the
outstanding shares of Master Fund or such Fund are represented at the meeting
in person or by proxy.
Inquiries regarding any of the Funds may be directed to the Distributor at the
address listed under "Distributor."
44
<PAGE>
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION
OPENING YOUR ACCOUNT:
Complete the Application(s) and mail to:
FOR OVERNIGHT DELIVERY: send to:
UST Master Funds UST Master Funds
c/o Mutual Funds Service Company c/o Mutual Funds Service Company--
P.O. Box 2798 Transfer Agent
Boston, MA 02208-2798 73 Tremont Street
Boston, MA 02108-3913
Please enclose with the Application(s) your check made payable to the "UST
Master Funds" in the amount of your investment.
For direct wire purchases please refer to the section of the Prospectus enti-
tled "How to Purchase and Redeem Shares--Purchase Procedures."
MINIMUM INVESTMENTS:
Except as provided in the Prospectus, the minimum initial investment is $500
per Fund; subsequent investments must be in the minimum amount of $50 per Fund.
Investments may be made in excess of these minimums.
REDEMPTIONS:
Shares can be redeemed in any amount and at any time in accordance with pro-
cedures described in the Prospectus. In the case of shares recently purchased
by check, redemption proceeds will not be made available until the transfer
agent is reasonably assured that the check has been collected in accordance
with applicable banking regulations.
Certain legal documents will be required from corporations or other organiza-
tions, executors and trustees, or if redemption is requested by anyone other
than the shareholder of record. Written redemption requests in excess of
$50,000 per account must be accompanied by signature guarantees.
SIGNATURES: Please be sure to sign the Application(s).
If the shares are registered in the name of:
- an individual, the individual should sign.
- joint tenants, both tenants should sign.
- a custodian for a minor, the custodian should sign.
- a corporation or other organization, an authorized officer should sign
(please indicate corporate office or title).*
- a trustee or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity).*
* A corporate resolution or appropriate certificate may be required.
QUESTIONS:
If you have any questions regarding the Application or redemption require-
ments, please contact the transfer agent at (800) 446-1012 between 9:00 a.m.
and 5:00 p.m. (Eastern Time).
45
<PAGE>
-----------------------------------------------------------------------------
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[LOGO OF
UST MASTER MUTUAL FUNDS SERVICE COMPANY
FUNDS CLIENT SERVICES
APPEARS P.O. Box 2798
HERE] Boston, MA 02208-2798
(800) 446-1012 NEW ACCOUNT APPLICATION
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
ACCOUNT REGISTRATION
-----------------------------------------------------------------------------
[_] Individual [_] Joint Tenants [_] Trust [_] Gift/Transfer to Minor
[_] Other________________________
Note: Joint tenant registration will be as "joint tenants with right of
survivorship" unless otherwise specified. Trust registrations should specify
name of the trust, trustee(s), beneficiary(ies), and the date of the trust
instrument. Registration for Uniform Gifts/Transfers to Minors should be in
the name of one custodian and one minor and include the state under which
the custodianship is created (using the minor's Social Security Number
("SSN")). For IRA accounts a different application is required.
------------------------------ -----------------------------
Name(s) (please print) Social Security # or Taxpayer
Indentification #
( )
------------------------------ -----------------------------
Name Telephone #
------------------------------
Address
------------------------------ [_] U.S. Citizen
City/State/Zip [_] Other (specify)__________
-----------------------------------------------------------------------------
FUND SELECTION (THE MINIMUM INITIAL AND SUBSEQUENT INVESTMENT IS $500 PER
FUND AND $50 PER FUND, RESPECTIVELY. MAKE CHECKS PAYABLE TO "UST MASTER
FUNDS.")
-----------------------------------------------------------------------------
FUND INITIAL INVESTMENT
[_] Equity Fund $ ____________ 800
[_] Income and Growth Fund $ ____________ 801
[_] Long-Term Energy Fund $ ____________ 813
[_] Productivity Enhancers Fund $ ____________ 814
[_] Environmental Fund $ ____________ 815
[_] Aging of America Fund $ ____________ 816
[_] Communication & Entertainment Fund $ ____________ 817
[_] Business & Industrial Restructuring Fund $ ____________ 818
[_] Global Competitors Fund $ ____________ 819
[_] Early Life Cycle Fund $ ____________ 812
[_] Other $ ____________
TOTAL INITIAL INVESTMENT: $ ____________
NOTE: If investing by wire, you must obtain a Bank Wire Control Number. To
do so, please call (800) 446-1012 and ask for the Wire Desk.
A. BY MAIL: Enclosed is a check in the amount of $ ____ payable to "UST
Master Funds."
B. BY WIRE: A bank wire in the amount of $ ________ has been sent to the
Fund from
------------------ ---------------------
Name of Bank Wire Control Number
CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and dividend
distributions will be reinvested in additional shares unless appropriate
boxes below are checked:
All dividends are to be [_] reinvested [_] paid in cash
All capital gains are to be [_] reinvested [_] paid in cash
-----------------------------------------------------------------------------
ACCOUNT PRIVILEGES
-----------------------------------------------------------------------------
TELEPHONE EXCHANGE AND REDEMPTION
[_] I/We appoint MFSC as my/our agent to act upon instructions received by
telephone in order to effect the telephone exchange and redemption
privileges. I/We hereby ratify any instructions given pursuant to this
authorization and agree that Master Fund, Master Tax-Exempt Fund, MFSC and
their directors, officers and employees will not be liable for any loss,
liability, cost or expense for acting upon instructions believed to be
genuine and in accordance with the procedures described in the then current
Prospectus. To the extent that Master Fund and Master Tax-Exempt Fund fail
to use reasonable procedures as a basis for their belief, they or their
service contractors may be liable for instructions that prove to be
fraudulent or unauthorized.
I/We further acknowledge that it is my/our responsibility to read the
Prospectus of any Fund into which I/we exchange.
[_] I/We do not wish to have the ability to exercise telephone redemption
and exchange privileges. I/We further understand that all exchange and
redemption requests must be in writing.
SPECIAL PURCHASE AND REDEMPTION PLANS
I/We have completed and attached the Supplemental Application for:
[_] Automatic Investment Plan
[_] Systematic Withdrawal Plan
AUTHORITY TO TRANSMIT REDEMPTION PROCEEDS TO PRE-DESIGNATED ACCOUNT.
I/We hereby authorize MFSC to act upon instructions received by telephone to
withdraw $500 or more from my/our account in the UST Master Funds and to
wire the amount withdrawn to the following commercial bank account. I/We
understand that MFSC charges an $8.00 fee for each wire redemption, which
will be deducted from the proceeds of the redemption.
Title on Bank Account*____________________________________________________
Name of Bank _____________________________________________________________
Bank A.B.A. Number____________________ Account Number ___________________
Bank Address _____________________________________________________________
City/State/Zip ___________________________________________________________
(attach voided check here)
A corporation, trust or partnership must also submit a "Corporate
Resolution" (or "Certificate of Partnership") indicating the names and
titles of officers authorized to act on its behalf.
* TITLE ON BANK AND FUND ACCOUNT MUST BE IDENTICAL.
<PAGE>
------------------------------------------------------------------
------------------------------------------------------------------
RIGHTS OF ACCUMULATION
------------------------------------------------------------------
To qualify for Rights of Accumulation, you must complete this
section, listing all of your accounts including those in your
spouse's name, joint accounts and accounts held for your
minor children. If you need more space, please attach a
separate sheet.
[_] I/We qualify for the Rights of Accumulation sales charge
discount described in the Prospectus and Statement of
Additional Information.
[_] I/We own shares of more than one Fund distributed by
Edgewood Services, Inc. Listed below are the numbers of
each of my/our Shareholder Accounts.
[_] The registration of some of my/our shares differs from that
shown on this application. Listed below are the account
number(s) and full registration(s) in each case.
LIST OF OTHER UST MASTER FUND ACCOUNTS:
______________________ _______________________________________
______________________ _______________________________________
______________________ _______________________________________
ACCOUNT NUMBER ACCOUNT REGISTRATIONS
------------------------------------------------------------------
LETTER OF INTENT
------------------------------------------------------------------
[_] I agree to the Letter of Intent provisions set forth in
the Prospectus. Although I am not obligated to purchase, and
Master Fund is not obligated to sell, I intend to invest,
over a 13-month period beginning on , 19 , an aggregate
amount in Eligible Funds of Master Fund and Master Tax-Exempt
Fund at least equal to (check appropriate box):
[_] $50,000 [_] $100,000 [_] $250,000 [_] $500,000
[_] $1,000,000 [_] $2,000,000
By signing this application, I hereby authorize MFSC to
redeem an appropriate number of shares held in escrow to pay
any additional sales loads payable in the event that I do not
fulfill the terms of this Letter of Intent.
------------------------------------------------------------------
AGREEMENT AND SIGNATURES
------------------------------------------------------------------
By signing this application, I/we hereby certify under
penalty of perjury that the information on this application
is complete and correct and that as required by Federal law:
[_] I/We certify that (1) the number(s) shown on this form
is/are the correct taxpayer identification number(s) and (2)
I/we are not subject to backup withholding either because
I/we have not been notified by the Internal Revenue Service
that I/we are subject to backup withholding, or the IRS has
notified me/us that I am/we are no longer subject to backup
withholding. (NOTE: IF ANY OR ALL OF PART 2 IS NOT TRUE,
PLEASE STRIKE OUT THAT PART BEFORE SIGNING.)
[_] If no taxpayer identification number ("TIN") or SSN has
been provided above, I/we have applied, or intend to apply,
to the IRS or the Social Security Administration for a TIN or
a SSN, and I/we understand that if I/we do not provide this
number to MFSC within 60 days of the date of this
application, or if I/we fail to furnish my/our correct SSN or
TIN, I/we may be subject to a penalty and a 31% backup
withholding on distributions and redemption proceeds. (Please
provide this number on Form W-9. You may request the form by
calling MFSC at the number listed above).
I/We represent that I am/we are of legal age and capacity to
purchase shares of the UST Master Funds. I/We have received,
read and carefully reviewed a copy of the appropriate Fund's
current Prospectus and agree to its terms and by signing
below I/we acknowledge that neither the Fund nor the
Distributor is a bank and that Fund Shares are not deposits
or obligations of, or guaranteed or endorsed by, United
States Trust Company of New York, its parent and affiliates
and the Shares are not federally insured by, guaranteed by,
obligations of or otherwise supported by the U.S. Government,
the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other governmental agency; and that an
investment in the Funds involves investment risks, including
possible loss of principal amount invested.
X ___________________________ Date __________________________
Owner Signature
X ___________________________ Date __________________________
Co-Owner Signature
Sign exactly as name(s) of registered owner(s) appear(s) above
(including legal title if signing for a corporation, trust
custodial account, etc.).
------------------------------------------------------------------
FOR USE BY AUTHORIZED AGENT (BROKER/DEALER) ONLY
------------------------------------------------------------------
We hereby submit this application for the purchase of shares
in accordance with the terms of our selling agreement with
Edgewood Services, Inc., and with the Prospectus and
Statement of Additional Information of each Fund purchased.
We agree to notify MFSC of any purchases made under the
Letter of Intent or Rights of Accumulation.
----------------------------- -------------------------------
Investment Dealer's Name Source of Business Code
----------------------------- -------------------------------
Main Office Address Branch Number
----------------------------- -------------------------------
Representative's Number Representative's Name
----------------------------- -------------------------------
Branch Address Telephone
----------------------------- -------------------------------
Investment Dealer's Title
Authorized Signature
<PAGE>
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-----------------------------------------------------------------------------
[LOGO OF MUTUAL FUNDS SERVICE COMPANY
MASTER CLIENT SERVICES
FUNDS P.O. Box 2798
APPEARS Boston, MA 02208-2798
HERE] (800) 446-1012 SUPPLEMENTAL APPLICATION
SPECIAL INVESTMENT AND WITHDRAWAL OPTIONS
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
ACCOUNT REGISTRATION PLEASE SUPPLY THE FOLLOWING INFORMATION EXACTLY AS IT
APPEARS ON THE FUND'S RECORD.
-----------------------------------------------------------------------------
Fund Name ________________________________________________________________
Owner Name _______________________________________________________________
Street Address ___________________________________________________________
Resident of [_] U.S. [_] Other _________________________________________
Account Number ___________________________________________________________
Social Security or Taxpayer ID Number ____________________________________
City, State, Zip Code ____________________________________________________
[_] Check here if this is a change of address
-----------------------------------------------------------------------------
DISTRIBUTION OPTIONS (DIVIDENDS AND CAPITAL GAINS WILL BE REINVESTED
UNLESS OTHERWISE INDICATED)
-----------------------------------------------------------------------------
A. CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and dividend
distributions will be reinvested in additional shares unless appropriate
boxes below are checked:
All dividends are to be [_] reinvested [_] paid in cash
All capital gains are to be [_] reinvested [_] paid in cash
B. PAYMENT ORDER: Complete only if distribution checks are to be payable
to another party. Make distribution checks payable to:
Name of Your Bank ______________
Name _______________________ Bank Account Number ____________
Address ____________________ Address of Bank ________________
City, State, Zip Code ________________________________________
C. DISTRIBUTIONS REINVESTED-CROSS FUNDS: Permits all distributions from
one Fund to be automatically reinvested into another identically-
registered UST Master Fund. (NOTE: You may NOT open a new Fund account
with this option.) Transfer all distributions earned:
From: ______________________ Account No. ____________________
(Fund)
To: ________________________ Account No. ____________________
(Fund)
-----------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN [_] YES [_] NO
-----------------------------------------------------------------------------
I/We hereby authorize MFSC to debit my/our personal checking account on
the designated dates in order to purchase shares in the Fund indicated at
the top of this application at the applicable public offering price
determined on that day.
[_] Monthly on the 1st day [_] Monthly on the 15th day
[_] Monthly on both the 1st and 15th days
Amount of each debit (minimum $50 per Fund) $ ________________________
NOTE: A Bank Authorization Form (below) and a voided personal check must
accompany the Automatic Investment Plan application.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
UST MASTER FUNDS
CLIENT SERVICES AUTOMATIC INVESTMENT PLAN
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BANK AUTHORIZATION
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---------------------- -------------------------------- -------------------
Bank Name Bank Address Bank Account Number
I/We authorize you, the above named bank, to debit my/our
account for amounts drawn by MFSC, acting as my agent for the
purchase of Fund shares. I/We agree that your rights in
respect to each withdrawal shall be the same as if it were a
check drawn upon you and signed by me/us. This authority
shall remain in effect until revoked in writing and received
by you. I/We agree that you shall incur no liability when
honoring debits, except a loss due to payments drawn against
insufficient funds. I/We further agree that you will incur no
liability to me if you dishonor any such withdrawal. This
will be so even though such dishonor results in the
cancellation of that purchase.
---------------------------- --------------------------------
Account Holder's Name Joint Account Holder's Name
X ____________________ ___________ X ____________________ ___________
Signature Date Signature Date
<PAGE>
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SYSTEMATIC WITHDRAWAL PLAN [_] YES [_] NO NOT AVAILABLE FOR IRA'S
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AVAILABLE TO SHAREHOLDERS WITH ACCOUNT BALANCES OF $10,000 OR
MORE.
I/We hereby authorize MFSC to redeem the necessary number of
shares from my/our UST Master Fund Account on the designated
dates in order to make the following periodic payments:
[_] Monthly on the 24th day
[_] Quarterly on the 24th day of January, April, July and October
[_] Other_____________________
(This request for participation in the Plan must be received
by the 18th day of the month in which you wish withdrawals to
begin.)
Amount of each check ($100 minimum) $_______________________
Please make check payable to: (To be completed only if redemption
proceeds to be paid to other than account holder of record or mailed
to address other than address of record)
Recipient __________________________________________________________
Street Address _____________________________________________________
City, State, Zip Code ______________________________________________
NOTE: If recipient of checks is not the registered
shareholder, signature(s) below must be guaranteed. A
corporation, trust or partnership must also submit a
"Corporate Resolution" (or "Certification of Partnership")
indicating the names and titles of officers authorized to act
on its behalf.
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AGREEMENT AND SIGNATURES
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The investor(s) certifies and agrees that the certifications,
authorizations, directions and restrictions contained herein
will continue until MFSC receives written notice of any
change or revocation. Any change in these instructions must
be in writing with all signatures guaranteed (if applicable).
Date ______________________
X X
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Signature Signature
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Signature Guarantee* (if applicable)
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Signature Guarantee* (if applicable)
X X
------------------------------- -----------------------------
Signature Signature
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Signature Guarantee* (if applicable)
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Signature Guarantee* (if applicable)
*ELIGIBLE GUARANTORS: An Eligible Guarantor institution is a
bank, trust company, broker, dealer, municipal or government
securities broker or dealer, credit union, national
securities exchange, registered securities association,
clearing agency or savings association, provided that such
institution is a participant in STAMP, the Securities
Transfer Agents Medallion Program.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY......................................................... 2
EXPENSE SUMMARY............................................................ 3
FINANCIAL HIGHLIGHTS....................................................... 5
U.S. TRUST'S INVESTMENT PHILOSOPHY AND STRATEGIES.......................... 15
INVESTMENT OBJECTIVES AND POLICIES......................................... 15
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION..................... 22
INVESTMENT LIMITATIONS..................................................... 26
PRICING OF SHARES.......................................................... 27
HOW TO PURCHASE AND REDEEM SHARES.......................................... 28
INVESTOR PROGRAMS.......................................................... 34
DIVIDENDS AND DISTRIBUTIONS................................................ 37
TAXES...................................................................... 38
MANAGEMENT OF THE FUNDS.................................................... 39
DESCRIPTION OF CAPITAL STOCK............................................... 42
CUSTODIAN AND TRANSFER AGENT............................................... 43
PERFORMANCE INFORMATION.................................................... 43
MISCELLANEOUS.............................................................. 44
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION................................... 45
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF AD-
DITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY MASTER
FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
MASTER FUND OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
USTEQP895
LOGO
MASTER FUNDS, INC.
EQUITY FUND
INCOME AND GROWTH FUND
LONG-TERM SUPPLY OF ENERGY FUND
PRODUCTIVITY ENHANCERS FUND
ENVIRONMENTALLY-RELATED PRODUCTS AND SERVICES FUND
AGING OF AMERICA FUND
COMMUNICATION AND ENTERTAINMENT FUND
BUSINESS AND INDUSTRIAL RESTRUCTURING FUND
GLOBAL COMPETITORS FUND
EARLY LIFE CYCLE FUND
Prospectus
August 1, 1995
<PAGE>
[LOGO OF UST APPEARS HERE]
MASTER FUNDS, INC.
A Management Investment Company
--------------------------------------------------------------------------------
International Funds For initial purchase information, current prices,
performance information and existing account informa-
73 Tremont Street tion, call (800) 446-1012. (From overseas, call (617)
Boston, MA 02108-3913 557-8280.)
--------------------------------------------------------------------------------
This Prospectus describes several separate portfolios offered to investors by
UST Master Funds, Inc. ("Master Fund"), an open-end, management investment com-
pany. Each portfolio (each a "Fund" and collectively the "Funds") has its own
investment objective and policies as follows:
INTERNATIONAL FUND seeks total return on its assets through capital apprecia-
tion and income derived primarily from investments in a diversified portfolio
of marketable foreign equity securities.
EMERGING AMERICAS FUND seeks long-term capital appreciation through invest-
ments in companies and securities of governments based in all countries in the
Western Hemisphere, except the U.S.
PACIFIC/ASIA FUND seeks long-term capital appreciation through investments in
companies and securities of governments based in all countries in Asia and on
the Asian side of the Pacific Ocean.
PAN EUROPEAN FUND seeks long-term capital appreciation through investments in
companies and securities of governments based in Europe.
Master Fund is sponsored and distributed by Edgewood Services, Inc. and ad-
vised by United States Trust Company of New York (the "Investment Adviser" or
"U.S. Trust").
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should consider before investing. Investors should read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated August 1, 1995 and containing additional information about
the Funds has been filed with the Securities and Exchange Commission. The cur-
rent Statement of Additional Information is available to investors without
charge by writing to Master Fund at its address shown above or by calling (800)
446-1012. The Statement of Additional Information, as it may be supplemented
from time to time, is incorporated by reference in its entirety into this Pro-
spectus.
SHARES OF THE FUNDS ("SHARES") ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARAN-
TEED OR ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, ITS PARENT OR AF-
FILIATES AND THE SHARES ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGA-
TIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT IN-
SURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGEN-
CY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
August 1, 1995
<PAGE>
PROSPECTUS SUMMARY
UST MASTER FUNDS, INC. is an investment company offering various diversified
investment portfolios with differing objectives and policies. Founded in 1984,
Master Fund currently offers 20 Funds with combined assets of approximately
$2.5 billion. See "Description of Capital Stock."
INVESTMENT ADVISER: United States Trust Company of New York serves as the
Funds' investment adviser. U.S. Trust is a trust company offering a variety of
specialized financial and fiduciary services to high-net worth individuals, in-
stitutions and corporations. Master Fund offers investors access to U.S.
Trust's services. The International and Pan European Funds receive sub-advisory
services from Foreign and Colonial Asset Management ("FACAM"), and the Emerging
Americas and Pacific/Asia Funds receive sub-advisory services from Foreign &
Colonial Emerging Markets Limited ("FCEML"). FACAM and FCEML are U.S. Trust af-
filiates. See "Management of the Funds--Investment Adviser."
INVESTMENT OBJECTIVES AND POLICIES: Generally, each Fund is a diversified in-
vestment portfolio which invests principally in the equity securities of for-
eign companies. The Funds also may invest in warrants, convertible securities,
bonds and other securities of foreign companies and governments. The Funds' in-
vestment objectives and policies are summarized on the cover and explained in
greater detail later in this Prospectus. See "Investment Objectives and Poli-
cies," "Portfolio Instruments and Other Information" and "Investment Limita-
tions."
HOW TO INVEST: The Funds' Shares are offered at their public offering price,
i.e., their net asset value plus a sales load which is subject to substantial
reductions for large purchases and programs for accumulation. The sales load is
not applicable to investors making their investments through a variety of in-
stitutions, such as U.S. Trust, other banks and trust companies. See "How to
Purchase and Redeem Shares."
The minimum to start an account is $500 per Fund, with a minimum of $50 per
Fund for subsequent investments. The easiest way to invest is to complete the
account application which accompanies this Prospectus and to send it with a
check to the address noted on the application. Investors may also invest by
wire and through investment dealers or institutional investors with appropriate
sales agreements with Master Fund. See "How to Purchase and Redeem Shares."
HOW TO REDEEM: Redemptions may be requested directly from Master Fund by
mail, wire or telephone. Investors investing through another institution should
request redemptions through their Shareholder Organization. See "How to Pur-
chase and Redeem Shares."
INVESTMENT RISKS AND CHARACTERISTICS: Generally, each Fund is subject to mar-
ket risk and currency risk. Market risk is the possibility that stock prices
will decline over short or even extended periods. Stock markets tend to be cy-
clical, with periods of generally rising prices and periods of generally de-
clining prices. These cycles will affect the values of each Fund. In addition,
since the Funds invest in foreign securities, the Funds are subject to the
risks of fluctuations of the value of foreign currencies relative to the U.S.
dollar and other risks associated with such investments. Finally, while the In-
ternational Fund diversifies its investments in a variety of companies and
countries, the Emerging Americas, Pacific/Asia and Pan European Funds (collec-
tively, the "Regional Funds") focus their investment activities in their desig-
nated regions. As a result each Regional Fund is susceptible to regional eco-
nomic, market, political and other more localized risks. Although each Fund
generally seeks to invest for the long term, each Fund may engage in short-term
trading of portfolio securities. A high rate of portfolio turnover may involve
correspondingly greater transaction costs which must be borne directly by a
Fund and ultimately by its shareholders. Investments in the Funds should not be
considered a complete investment program. See "Investment Objectives and Poli-
cies--Risk Factors" and "Portfolio Instruments and Other Investment Informa-
tion."
2
<PAGE>
EXPENSE SUMMARY
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING AMERICAS PACIFIC/ASIA PAN EUROPEAN
FUND FUND FUND FUND
------------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load
(as a percentage of
offering price)........ 4.50% 4.50% 4.50% 4.50%
Sales Load on Reinvested
Dividends.............. None None None None
Deferred Sales Load..... None None None None
Redemption Fees/1/...... None None None None
Exchange Fees........... None None None None
ANNUAL FUND OPERATING
EXPENSES
(AS A PERCENTAGE OF AV-
ERAGE NET ASSETS)
Advisory Fees (after fee
waivers)/2/............ .94% .93% .95% .94%
12b-1 Fees.............. None None None None
Other Operating Expenses
Administrative Servic-
ing Fee............... .06% .06% .05% .06%
Other Expenses......... .47% .51% .47% .51%
----- ----- ----- -----
Total Operating Expenses
(after fee waivers)/2/. 1.47% 1.50% 1.47% 1.51%
===== ===== ===== =====
</TABLE>
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/1/The Fund's transfer agent imposes a direct $8.00 charge on each wire redemp-
tion by noninstitutional (i.e. individual) investors which is not reflected
in the expense ratios presented herein. Shareholder organizations may charge
their customers transaction fees in connection with redemptions. See "Redemp-
tion Procedures."
/2/The Investment Adviser and Administrators may, from time to time, voluntarily
waive a portion of their respective fees which waivers may be terminated at
any time. Until further notice, the Investment Adviser and/or Administrators
intend to voluntarily waive fees in an amount equal to the Administrative
Servicing Fee; and to further waive fees and reimburse expenses to the extent
necessary for Shares of the Emerging Americas, Pacific/Asia and Pan European
Funds to maintain an annual expense ratio of not more than 1.67%. Without
such fee waivers, "Advisory Fees" would be 1.00%, 1.00%, 1.00% and 1.00% and
"Total Operating Expenses" would be 1.53%, 1.57%, 1.52%, and 1.57% for each
of the International, Emerging Americas, Pacific/Asia and Pan European Funds.
3
<PAGE>
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual returns and (2) redemption of your investment at the end of the
following periods:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
International Fund.............................. $59 $89 $122 $213
Emerging Americas Fund.......................... 60 90 123 216
Pacific/Asia Fund............................... 59 89 122 213
Pan European Fund............................... 60 91 124 217
</TABLE>
The foregoing expense summary and example (based on the maximum sales load
payable on the Shares) are intended to assist investors in understanding the
costs and expenses that an investor in Shares of the Funds will bear directly
or indirectly. The expense summary sets forth advisory and other expenses pay-
able with respect to Shares of the Funds for the fiscal year ended March 31,
1995. For more complete descriptions of the Funds' operating expenses, see
"Management of the Funds" in this Prospectus and the financial statements and
notes incorporated by reference in the Statement of Additional Information.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE
GREATER OR LOWER THAN THOSE SHOWN IN THE EXPENSE SUMMARY AND EXAMPLE.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables include selected data for a Share outstanding throughout
each period and other performance information derived from the financial state-
ments included in Master Fund's Annual Report to Shareholders for the year
ended March 31, 1995 (the "Financial Statements"). The information contained in
the Financial Highlights for each period has been audited by Ernst & Young LLP,
Master Fund's independent auditors. The following tables should be read in con-
junction with the Financial Statements and notes thereto. More information
about the performance of each Fund is also contained in the Annual Report to
Shareholders which may be obtained from Master Fund without charge by calling
the number on the front cover of this Prospectus.
INTERNATIONAL FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988/1/
------- ------ ------ ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of period......... $ 10.44 $ 8.66 $ 8.27 $ 8.75 $ 9.84 $ 8.61 $ 7.85 $ 8.00
------- ------ ------ ------- ------- ------ ------ -------
Income From Investment
Operations
Net Investment Income.. 0.10 0.05 0.15 0.08 0.13 0.15 0.05 0.05
Net Gains or (Losses)
on Securities (both
realized and
unrealized)........... (0.29) 1.88 0.25 (0.45) (0.64) 1.47 0.77 (0.16)
------- ------ ------ ------- ------- ------ ------ -------
Total From Investment
Operations............ (0.19) 1.93 0.40 (0.37) (0.51) 1.62 0.82 (0.11)
------- ------ ------ ------- ------- ------ ------ -------
Less Distributions
Dividends From Net
Investment Income..... 0.00 (0.02) (0.01) (0.11) (0.11) (0.16) (0.06) (0.03)
Dividends in Excess of
Net Investment Income. (0.11) (0.12) 0.00 0.00 0.00 0.00 0.00 0.00
Distributions From Net
Realized Gain on
Investments........... (0.32) (0.01) 0.00 0.00 (0.47) (0.23) 0.00 (0.01)
Distributions in Excess
of Net Realized Gain
on Investments........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------ ------ ------- ------- ------ ------ -------
Total Distributions.... (0.43) (0.15) (0.01) (0.11) (0.58) (0.39) (0.06) (0.04)
------- ------ ------ ------- ------- ------ ------ -------
Net Asset Value, End of
Period................. $ 9.82 $10.44 $ 8.66 $ 8.27 $ 8.75 $ 9.84 $ 8.61 $ 7.85
======= ====== ====== ======= ======= ====== ====== =======
Total Return/2/......... (1.93)% 22.34% 4.85% (4.35)% (5.20)% 18.91% 10.59% (1.28)%
Ratios/Supplemental Data
Net Assets, End of Pe-
riod (in millions).... $ 64.05 $55.74 $30.37 $ 46.92 $ 31.87 $21.49 $13.01 $ 8.56
Ratio of Net Operating
Expenses to Average
Net Assets............ 1.47% 1.53% 1.50% 1.52% 1.61% 1.34% 1.28% 1.09%/3/
Ratio of Gross Operat-
ing Expenses to Aver-
age Net Assets........ 1.53% 1.53% 1.50% 1.52% 1.61% 1.58% 1.93% 2.81%/3/
Ratio of Net Investment
Income to Average Net
Assets................ 0.71% 0.18% 1.27% 0.94% 1.57% 1.55% 0.75% 1.13%/3/
Portfolio Turnover
Rate.................. 66.0% 64.0% 31.0% 32.0% 47.0% 50.0% 80.0% 55.0%/3/
</TABLE>
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NOTES:
1. Inception date of the Fund was July 21, 1987.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
5
<PAGE>
EMERGING AMERICAS FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of pe-
riod............................. $ 9.30 $ 7.12 $ 7.00
---------- --------- -------
Income From Investment Operations
Net Investment Income........... 0.01 0.05 0.00
Net Gains or (Losses) on
Securities (both realized and
unrealized).................... (2.56) 2.24 0.12
---------- --------- -------
Total From Investment Opera-
tions.......................... (2.55) 2.29 0.12
---------- --------- -------
Less Distributions
Dividends From Net Investment
Income......................... 0.00 (0.03) 0.00
Dividends in Excess of Net In-
vestment Income................ (0.17) (0.02) 0.00
Distributions From Net Realized
Gain on Investments............ 0.00 (0.06) 0.00
Distributions in Excess of Net
Realized Gain on Investments... (0.72) 0.00 0.00
---------- --------- -------
Total Distributions............. (0.89) (0.11) 0.00
---------- --------- -------
Net Asset Value, End of Period.... $ 5.86 $ 9.30 $ 7.12
========== ========= =======
Total Return/2/................... (30.47)% 32.25% 1.71%
Ratios/Supplemental Data
Net Assets, End of Period (in
millions)...................... $ 27.34 $ 39.28 $ 3.83
Ratio of Net Operating Expenses
to Average Net Assets.......... 1.50% 1.49% 1.67%/3/
Ratio of Gross Operating
Expenses to Average Net Assets. 1.57% 1.71% 2.56%/3/
Ratio of Net Investment
Income/(Loss) to Average Net
Assets......................... 0.06% 0.29% (0.04)%/3/
Portfolio Turnover Rate......... 69.0% 51.0% 76.0%/3/
</TABLE>
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NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
6
<PAGE>
PACIFIC/ASIA FUND
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
--------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
------- ------ -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of period........ $ 10.04 $ 7.54 $ 7.00
------- ------ ------
Income From Investment Operations
Net Investment Income..................... 0.08 0.08 0.00
Net Gains or (Losses) on Securities (both
realized and unrealized)................. (0.58) 2.81 0.54
------- ------ ------
Total From Investment Operations.......... (0.50) 2.89 0.54
------- ------ ------
Less Distributions
Dividends From Net Investment Income...... (0.03) (0.05) 0.00
Dividends in Excess of Net Investment In-
come..................................... (0.23) (0.06) 0.00
Distributions From Net Realized Gain on
Investments.............................. (0.83) (0.28) 0.00
Distributions in Excess of Net Realized
Gain on Investment....................... 0.00 0.00 0.00
------- ------ ------
Total Distributions....................... (1.09) (0.39) 0.00
------- ------ ------
Net Asset Value, End of Period.............. $ 8.45 $10.04 $ 7.54
======= ====== ======
Total Return/2/............................. (5.89)% 38.11% 7.71%
Ratios/Supplemental Data
Net Assets, End of Period (in millions)... $ 47.62 $53.03 $ 9.67
Ratio of Net Operating Expenses to Average
Net Assets............................... 1.47% 1.53% 1.67%/3/
Ratio of Gross Operating Expenses to Aver-
age Net Assets........................... 1.52% 1.77% 2.00%/3/
Ratio of Net Investment Income to Average
Net Assets............................... 0.85% 0.54% 0.27%/3/
Portfolio Turnover Rate................... 69.0% 68.0% 1.0%/3/
</TABLE>
-------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
7
<PAGE>
PAN EUROPEAN FUND
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------- PERIOD ENDED
1995 1994 MARCH 31, 1993/1/
---------- ---------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of period. $ 8.03 $ 7.34 $ 7.00
---------- ---------- -------
Income From Investment Operations
Net Investment Income.............. 0.09 0.03 0.00
Net Gains or (Losses) on Securities
(both realized and unrealized).... 0.25 0.70 0.34
---------- ---------- -------
Total From Investment Operations... 0.34 0.73 0.34
---------- ---------- -------
Less Distributions
Dividends From Net Investment In-
come.............................. (0.09) 0.00 0.00
Dividends in Excess of Net Invest-
ment Income....................... 0.00 (0.04) 0.00
Distributions From Net Realized
Gain on Investments............... (0.09) 0.00 0.00
Distributions in Excess of Net Re-
alized Gain on Investment......... 0.00 0.00 0.00
---------- ---------- -------
Total Distributions................ (0.18) (0.04) 0.00
---------- ---------- -------
Net Asset Value, End of Period....... $ 8.19 $ 8.03 $ 7.34
========== ========== =======
Total Return/2/...................... 4.33% 10.05% 4.86%
Ratios/Supplemental Data
Net Assets, End of Period (in mil-
lions)............................ $ 39.98 $ 36.68 $ 3.80
Ratio of Net Operating Expenses to
Average Net Assets................ 1.51% 1.61% 1.67%/3/
Ratio of Gross Operating to Average
Net Assets........................ 1.57% 1.72% 3.13%/3/
Ratio of Net Investment
Income/(Loss) to Average Net As-
sets.............................. 1.11% 0.06% (0.33%)/3/
Portfolio Turnover Rate............ 47.0% 30.0% 9.0%/3/
</TABLE>
-------
NOTES:
1. Inception date of the Fund was December 31, 1992.
2. Total return data does not reflect the sales load payable on purchases of
Shares.
3. Annualized.
8
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Investment Adviser will use its best efforts to achieve the investment
objectives of each Fund, although their achievement cannot be assured. The in-
vestment objective of each Fund is "fundamental", meaning that it may not be
changed without a vote of the holders of a majority of the particular Fund's
outstanding shares (as defined under "Miscellaneous"). Except as noted below
in "Investment Limitations," the investment policies of each Fund may be
changed without a vote of the holders of a majority of the outstanding shares
of such Fund.
INTERNATIONAL FUND
The International Fund's investment objective is to seek total return on its
assets through capital appreciation and income derived primarily from invest-
ments in a diversified portfolio of marketable foreign equity securities.
In seeking to achieve this investment objective, the International Fund will
invest primarily in equity securities of foreign issuers who will, in the
opinion of Foreign and Colonial Asset Management, the Fund's sub-adviser (the
"Sub-Adviser" or "FACAM") and the Investment Adviser, benefit from global eco-
nomic trends, promising technologies or products and specific country opportu-
nities resulting from changing geo-political, economic or currency relation-
ships. In making investment decisions, the Sub-Adviser and Investment Adviser
will seek to identify values not recognized in the market price of a security.
The primary emphasis will be on the achievement of a higher total return fo-
cusing, as circumstances warrant, solely on either growth of capital or gener-
ation of current income or any combination thereof.
The International Fund does not intend to have, at any time, a specified per-
centage of its assets invested either for growth or for income, and all or any
portion of its assets may be allocated among these two components based on the
Investment Adviser's and Sub-Adviser's analysis of the prevailing market con-
ditions. Although the Fund will seek to realize its investment objective pri-
marily through investments in foreign equity securities, it may, from time to
time, assume a defensive position by allocating all or any portion of its as-
sets to foreign debt obligations. In determining investment strategy and allo-
cating investments, the Sub-Adviser and Investment Adviser will continuously
analyze a broad range of international equity and fixed-income securities in
order to assess the level of return, and degree of risk, that can be expected
from each type of investment and from each market.
The International Fund's investments will generally be diversified among geo-
graphic regions and countries. While there are no prescribed limits on geo-
graphic distribution, the Fund will normally include in its portfolio securi-
ties of issuers collectively having their principal business in no fewer than
three foreign countries. The Fund's assets may be invested in securities of
issuers located in the Pacific Basin (e.g. Japan, Hong Kong, Singapore, Malay-
sia), Europe, Australia, Latin America and Canada. The Fund may also, from
time to time, invest in other regions, seeking to capitalize on investment op-
portunities emerging in other parts of the world.
REGIONAL FUNDS:
The investment objective of each Regional Fund is long-term capital apprecia-
tion. In seeking to achieve this investment objective, each Regional Fund will
invest primarily in equity securities of foreign issuers who will, in the
opinion of the particular Fund's Sub-Adviser and the Investment Adviser, bene-
fit from global and regional economic trends, promising technologies or prod-
ucts and specific country and regional opportunities resulting from changing
geo-political, economic or currency relationships. In making investment deci-
sions, the particular Fund's Sub-Adviser and the Investment Adviser will seek
to identify values not recognized in the market price of a security.
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Although each Regional Fund will seek to realize its investment objective
primarily through investments in foreign equity and government securities, it
may, from time to time, assume a defensive position by allocating all or any
portion of its assets to U.S. Government or foreign debt obligations. The Re-
gional Funds will limit their investments in foreign debt obligations to those
rated within the top three ratings by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Group ("S&P") or, if unrated, deter-
mined by the Investment Advisory or the sub-adviser to be of comparable quali-
ty. No Regional Fund currently expects to invest more than 25% of its total
assets in the securities issued by any single foreign government. Any such in-
vestment would subject the particular Regional Fund to the risks presented by
investing in securities of such foreign government to a greater extent than it
would if that Fund's assets were not so concentrated. In determining invest-
ment strategy and allocating investments, the particular Fund's Sub-Adviser
and the Investment Adviser will continuously analyze a broad range of interna-
tional equity and fixed-income securities in order to assess the level of re-
turn, and degree of risk, that can be expected from each type of investment
and from each market.
Under normal circumstances, each Regional Fund will invest at least 65% of
its total assets in securities of issuers based in its targeted region. A com-
pany is "based in" a region if it derives more than half of its assets, reve-
nues or profits from such region. The Regional Funds and their targeted re-
gions are as follows:
EMERGING AMERICAS FUND. The Emerging Americas Fund invests primarily in secu-
rities of companies and governments based in all countries of the Western
Hemisphere except the U.S. Currently, the Investment Adviser believes that
such countries may include Canada, Mexico, the Bahamas, Costa Rica, Venezuela,
Colombia, Peru, Brazil, Argentina and Chile. Under normal conditions, the Fund
will invest at least 65% of its total assets in securities of issuers based in
Western Hemisphere countries other than Canada. The Fund may also invest in
Brady Bonds, which are securities issued in various currencies (primarily the
dollar) that have been created through the exchange of existing commercial
bank loans to Latin American public and private entities for new bonds in con-
nection with debt restructurings under a debt restructuring plan announced by
former U.S. Secretary of the Treasury Nicholas F. Brady (the "Brady Plan").
Brady Bonds have been issued only recently and for that reason do not have a
long payment history. Brady Bonds may be collateralized or uncollateralized,
are issued in various currencies (primarily the dollar) and are actively
traded in the over-the-counter secondary market for Latin American debt in-
struments. Brady Bonds are neither issued nor guaranteed by the U.S. Govern-
ment. Additional information on Brady Bonds is included in the Statement of
Additional Information.
PACIFIC/ASIA FUND. The Pacific/Asia Fund invests primarily in securities of
companies and governments based in Asia and on the Asian side of the Pacific
Ocean. Currently, the Investment Adviser believes that such countries may in-
clude Australia, New Zealand, Hong Kong, India, Japan, Indonesia, the Philip-
pines, Malaysia, Singapore, Taiwan, China, Thailand, South Korea, Sri Lanka
and Pakistan.
PAN EUROPEAN FUND. The Pan European Fund invests primarily in securities of
companies and governments based in Europe. Currently, the Investment Adviser
believes that such countries may include Ireland, the United Kingdom, Norway,
Sweden, Finland, Holland, Belgium, Luxembourg, France, Portugal, Spain, Den-
mark, Germany, Poland, Czech Republic, Slovakia, Hungary, Switzerland, Aus-
tria, Greece, Turkey and Italy. As other formerly communist and Eastern Euro-
pean countries become economically viable, investments may be made there as
well.
INVESTMENT POLICIES COMMON TO ALL FUNDS
Under normal market and economic conditions, at least 75% of each Fund's as-
sets will be invested in
10
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foreign securities. Foreign securities include common stock, preferred stock,
securities convertible into common stock, warrants, bonds, notes and other debt
obligations issued by foreign entities, as well as shares of U.S. registered
investment companies that invest primarily in foreign securities. Foreign debt
securities purchased by a Fund may include obligations issued in the
Eurocurrency markets and obligations of foreign governments and their political
subdivisions. In addition, each Fund may invest in U.S. Government obligations,
including the when-issued securities of such issuers, and obligations issued by
U.S. companies which are either denominated in foreign currency and sold abroad
or, if denominated in U.S. dollars, payment on which is determined by reference
to some other foreign currency.
Each Fund may invest indirectly in the securities of foreign issuers through
sponsored and unsponsored American Depository Receipts ("ADRs") and European
Depository Receipts ("EDRs"). Investments in unsponsored ADRs involve addi-
tional risk because financial information based on generally accepted account-
ing principles ("GAAP") may not be available for the foreign issuers of the un-
derlying securities. ADRs and EDRs may not necessarily be denominated in the
same currency as the underlying securities into which they may be converted.
Under unusual economic and market conditions, each Fund may restrict the secu-
rities markets in which its assets are invested and may invest all or a major
portion of its assets in U.S. Government obligations or in U.S. dollar-denomi-
nated securities of U.S. companies. Up to 25% of each Fund's assets may also be
held on a continuous basis in cash or invested in U.S. money market instruments
(see below under "Money Market Instruments") to meet redemption requests or to
take advantage of emerging investment opportunities. To the extent described
below under "Portfolio Instruments and Other Investment Information," each Fund
may purchase shares of other investment companies and may engage in repurchase
agreements, securities lending, forward currency contracts and futures con-
tracts, options on futures and covered call options.
Convertible and non-convertible debt securities purchased by each Fund will be
rated "investment grade," or, if unrated, deemed by the particular Sub-Adviser
and the Investment Adviser to be comparable to securities rated "investment
grade," by Moody's or S&P. Debt obligations rated in the lowest of the top four
"investment grade" ratings ("Baa" by Moody's and "BBB" by S&P) are considered
to have some speculative characteristics and may be more sensitive to adverse
economic change than higher rated securities. Each Fund will sell in an orderly
fashion as soon as possible any convertible and non-convertible debt securities
it holds if they are downgraded below "Baa" by Moody's or below "BBB" by S&P.
Foreign securities are generally unrated. In purchasing foreign equity securi-
ties, the particular Fund's Sub-Adviser will look generally to established for-
eign companies. Each Fund may purchase securities both on recognized stock ex-
changes and in over-the-counter markets. Most of the Funds' portfolio transac-
tions will be effected in the primary trading market for the given security.
Each Fund also may invest up to 5% of its total assets in gold bullion. Invest-
ments in gold will not produce dividends or interest income, and the Funds can
look only to price appreciation for a return on such investments.
RISK FACTORS
Generally. Each Fund is subject to market risk, interest rate risks and the
risks of investing in foreign securities. Market risk is the possibility that
stock prices will decline over short or even extended periods. The stock mar-
kets tend to be cyclical, with periods of generally rising prices and periods
of generally declining prices. These cycles will affect the values of each
Fund. In addition, to the extent that the Funds invest in fixed-income securi-
ties, their holdings of debt securities are sensitive to changes in interest
rates and the interest rate environment. Generally, the prices of bonds and
debt securities fluctuate inversely with interest rate changes.
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<PAGE>
Investments in securities of foreign issuers involve certain risks not ordi-
narily associated with investments in securities of domestic issuers. Such
risks include fluctuations in foreign exchange rates, future political and
economic developments, and the possible imposition of exchange controls or
other foreign governmental laws or restrictions. Since each Fund will invest
heavily in securities denominated or quoted in currencies other than the U.S.
dollar, changes in foreign currency exchange rates will, to the extent a Fund
does not adequately hedge against such fluctuations, affect the value of secu-
rities in the portfolio and the unrealized appreciation or depreciation of in-
vestments so far as U.S. investors are concerned. In addition, with respect to
certain countries, there is the possibility of expropriation of assets, con-
fiscatory taxation, political or social instability or diplomatic developments
which could adversely affect investments in those countries.
There may be less publicly available information about a foreign company than
about a U.S. company, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to or
as uniform as those of U.S.-based companies. Foreign securities markets, while
growing in volume, have, for the most part, substantially less volume than
U.S. markets, and securities of many foreign companies are less liquid and
their prices more volatile than securities of comparable U.S.-based companies.
Transaction costs on foreign securities markets are generally higher than in
the United States. There is generally less government supervision and regula-
tion of foreign exchanges, brokers and issuers than there is in the U.S. The
Funds might have greater difficulty taking appropriate legal action in a for-
eign court than in a U.S. court.
Dividends and interest payable on a Fund's foreign portfolio securities may
be subject to foreign withholding taxes. To the extent such taxes are not off-
set by credits or deductions allowed to investors under the Federal income tax
provisions--see "Taxes--Federal"--they may reduce the net return to the Fund's
shareholders. Investors should also understand that the expense ratio of the
Funds can be expected to be higher than those of funds investing in domestic
securities. The costs attributable to investing abroad are usually higher for
several reasons, such as the higher cost of investment research, higher cost
of custody of foreign securities, higher commissions paid on comparable trans-
actions on foreign markets and additional costs arising from delays in settle-
ments of transactions involving foreign securities.
Emerging Americas Fund. The Latin American economies have experienced consid-
erable difficulties in the past decade. Although there have been significant
improvements in recent years, the Latin American economies continue to experi-
ence significant problems, including high inflation rates and high interest
rates. Inflation and rapid fluctuations in inflation rates have had and may
continue to have very negative effects on the economies and securities markets
of certain Latin American countries. The emergence of the Latin American econ-
omies and securities markets will require continued economic and fiscal disci-
pline which has been lacking at times in the past, as well as stable political
and social conditions. There is no assurance that economic initiatives will be
successful. Recovery may also be influenced by international economic condi-
tions, particularly those in the United States, and by world prices for oil
and other commodities.
Pan European Fund. Political and economic developments in Europe, especially
as they relate to changes in the structure of the European Economic Community
and the anticipated development of a unified common market, may have profound
effects upon the value of a large segment of the Fund's investment portfolio.
For example, continued progress in the evolution of a unified European common
market may be slowed by unanticipated political or social events and may,
therefore, adversely affect the value of certain of the securities held by the
Fund. In addition, Germany is currently experiencing significant economic
stress associated with its recent unification. These pressures
12
<PAGE>
are affecting other European countries to varying degrees and have caused con-
siderable currency volatility within the European monetary system.
Pacific/Asia Fund. The extent of economic development, political stability
and market depth of different countries in the Pacific/Asia region varies
widely. Certain countries in the region are either comparatively underdevel-
oped or are in the process of becoming developed, and investments in the secu-
rities of issuers in such countries typically involve greater potential for
gain or loss than investments in securities of issuers in more developed coun-
tries. Certain countries in the region also depend to a large degree upon ex-
ports of primary commodities and, therefore, are vulnerable to changes in com-
modity prices which, in turn, may be affected by a variety of factors. The
Fund may be particularly sensitive to changes in the economies of certain
countries in the Pacific/Asia region resulting from any reversal of economic
liberalization, political unrest or the imposition of sanctions by the United
States or other countries.
Latin America, Eastern Europe and the Pacific/Asia Region. Certain of the
risks associated with international investments are heightened with respect to
investments in developing countries and fledgling democracies in Latin Ameri-
ca, Eastern Europe and the Pacific/Asia region. The risks of expropriation,
nationalization and social, political and economic instability are greater in
those countries than in more developed capital markets. In addition, the de-
veloping countries and emerging democracies in those regions may have econo-
mies based on only a few industries and small securities markets with a low
volume of trading. Certain countries may also impose substantial restrictions
on investments in their capital markets by foreign entities, including re-
strictions on investments in issuers of industries deemed sensitive to rele-
vant national interests. These factors may limit the investment opportunities
available to the Funds and result in a lack of liquidity and a high price vol-
atility with respect to securities of issuers from the developing countries
and emerging democracies in those regions.
Countries in Latin America, Eastern Europe and the Pacific/Asia region may
also impose restrictions on the Funds' ability to repatriate investment income
or capital. Even where there is no outright restriction on repatriation of in-
vestment income or capital, the mechanics of repatriation may affect certain
aspects of the operations of the Funds. For example, funds may be withdrawn
from the People's Republic of China only in U.S. or Hong Kong dollars and only
at an exchange rate established by the government once each week.
Some of the currencies of developing countries and emerging democracies in
Latin America, Eastern Europe and the Pacific/Asia region have experienced de-
valuations relative to the U.S. dollar, and major adjustments have been made
periodically in certain of such currencies. Certain countries in these regions
face serious exchange constraints.
Lastly, governments of many developing countries and emerging democracies in
Latin America, Eastern Europe and the Pacific/Asia region exercise substantial
influence over many aspects of the private sector. In some countries, the gov-
ernment owns or controls many companies, including the largest in the country.
As such, government actions in the future could have a significant effect on
economic conditions in developing countries and emerging democracies in these
regions, which could affect private sector companies, a Fund and the value of
a Fund's portfolio securities. Furthermore, certain countries in Latin Ameri-
ca, Eastern Europe and the Pacific/Asia region are among the largest debtors
to commercial banks and foreign governments. Trading in debt obligations is-
sued or guaranteed by those governments or their agencies and instrumentali-
ties involves a high degree of risk.
* * *
Because of the Funds' investment policies and the considerations discussed
above, investments in Shares of the Funds may not be appropriate for all in-
vestors and should not be considered a complete investment program.
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<PAGE>
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION
MONEY MARKET INSTRUMENTS
"Money market instruments" which may be purchased by each Fund in accordance
with its policies set forth above include, among other things, bank obliga-
tions, commercial paper and corporate bonds with remaining maturities of 13
months or less.
Bank obligations include bankers' acceptances, negotiable certificates of de-
posit, and non-negotiable time deposits earning a specified return and issued
by a U.S. bank which is a member of the Federal Reserve System or insured by
the Bank Insurance Fund of the Federal Deposit Insurance Corporation, or by a
savings and loan association or savings bank which is insured by the Savings
Association Insurance Fund of the Federal Deposit Insurance Corporation. Bank
obligations also include U.S. dollar-denominated obligations of foreign
branches of U.S. banks and obligations of domestic branches of foreign banks.
Investments in time deposits are limited to no more than 5% of the value of a
Fund's total assets at time of purchase.
Investments by a Fund in commercial paper will consist of issues that are
rated "A-2" or better by S&P or "Prime-2" by Moody's. In addition, each Fund
may acquire unrated commercial paper and corporate bonds that are determined by
the Investment Adviser at the time of purchase to be of comparable quality to
rated instruments that may be acquired by each Fund.
Commercial paper may include variable and floating rate instruments. While
there may be no active secondary market with respect to a particular instrument
purchased by a Fund, each Fund may, from time to time as specified in the in-
strument, demand payment of the principal of the instrument or may resell the
instrument to a third party. The absence of an active secondary market, howev-
er, could make it difficult for a Fund to dispose of the instrument if the is-
suer defaulted on its payment obligation or during periods when a Fund is not
entitled to exercise its demand rights, and a Fund could, for this or other
reasons, suffer a loss with respect to such instrument.
REPURCHASE AGREEMENTS
In order to effectively manage its cash holdings, each Fund may enter into re-
purchase agreements. The Funds will enter into repurchase agreements only with
financial institutions that are deemed to be creditworthy by the Investment Ad-
viser, pursuant to guidelines established by Master Fund's Board of Directors.
The Funds will not enter into repurchase agreements with the Investment Adviser
or Sub-Advisers or any of their affiliates. Repurchase agreements with remain-
ing maturities in excess of seven days will be considered illiquid securities
and will be subject to the 10% limit described in Investment Limitation No. 5
below.
The seller under a repurchase agreement will be required to maintain the value
of the securities which are subject to the agreement and held by a Fund at not
less than the repurchase price. Default or bankruptcy of the seller would, how-
ever, expose a 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.
SECURITIES LENDING
To increase return on its portfolio securities, each Fund may lend its portfo-
lio securities to broker/ dealers pursuant to agreements requiring the loans to
be continuously secured by collateral equal at all times in value to at least
the market value of the securities loaned. Collateral for such loans may in-
clude cash, securities of the U.S. Government, its agencies or instrumentali-
ties, or an irrevocable letter of credit issued by a bank, or any combination
thereof. Such loans will not be made if, as a result, the aggregate of all out-
standing loans of a Fund exceeds 30% of the value of its total assets. There
may be risks of delay in
14
<PAGE>
receiving additional collateral or in recovering the securities loaned or even
a loss of rights in the collateral should the borrower of the securities fail
financially. However, loans are made only to borrowers deemed by the Investment
Adviser to be of good standing when, in the Investment Adviser's judgment, the
income to be earned from the loan justifies the attendant risks.
FORWARD CURRENCY TRANSACTIONS
Each Fund will conduct its currency exchange transactions either on a spot
(i.e. cash) basis at the rate prevailing in the currency exchange markets, or
by entering into forward currency contracts. A forward foreign currency con-
tract involves an obligation to purchase or sell a specific currency for a set
price at a future date. In this respect, forward currency contracts are similar
to foreign currency futures contracts described below; however, unlike futures
contracts, which are traded on recognized commodities exchanges, forward cur-
rency contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. Also,
forward currency contracts usually involve delivery of the currency involved
instead of cash payment as in the case of futures contracts.
A Fund's participation in forward currency contracts will be limited to hedg-
ing involving either specific transactions or portfolio positions. Transaction
hedging involves the purchase or sale of foreign currency with respect to spe-
cific receivables or payables of the Fund generally arising in connection with
the purchase or sale of its portfolio securities. The purpose of transaction
hedging is to "lock in" the U.S. dollar equivalent price of such specific secu-
rities. Position hedging is the sale of foreign currency with respect to port-
folio security positions denominated or quoted in that currency. The Funds will
not speculate in foreign currency exchange transactions. Transaction and
position hedging will not be limited to an overall percentage of a Fund's as-
sets, but will be employed as necessary to correspond to particular transac-
tions or positions. A Fund may not hedge its currency positions to an extent
greater than the aggregate market value (at the time of entering into the for-
ward contract) of the securities held in its portfolio denominated, quoted in,
or currently convertible into that particular currency. When the Funds engage
in forward currency transactions, certain asset segregation requirements must
be satisfied. When a Fund takes a long position in a forward currency contract,
it must maintain a segregated account containing cash and/or certain liquid as-
sets equal to the purchase price of the contract, less any margin or deposit.
When a Fund takes a short position in a forward currency contract, the Fund
must maintain a segregated account containing cash and/or certain liquid assets
in an amount equal to the market value of the currency underlying such contract
(less any margin or deposit), which amount must be at least equal to the market
price at which the short position was established. Asset segregation require-
ments are not applicable when a Fund "covers" a forward currency position gen-
erally by entering into an offsetting position. Additional information on for-
ward currency transactions, including a discussion of risks involved in such
transactions (which are similar to those described below under "Futures Con-
tracts"), is included in the Statement of Additional Information.
FUTURES CONTRACTS
Each Fund may also enter into interest rate futures contracts, other types of
financial futures contracts (such as foreign currency futures contracts, which
are similar to forward currency contracts described above) and related futures
options, as well as any index or foreign market futures which are available on
recognized exchanges or in other established financial markets.
The Funds will not engage in futures transactions for speculation, but only as
a hedge against changes in market values of securities which a Fund holds or
intends to purchase. The Funds will engage in futures
15
<PAGE>
transactions only to the extent permitted by the Commodity Futures Trading
Commission ("CFTC") and the Securities and Exchange Commission ("SEC"). When
investing in futures contracts, the Funds must satisfy certain asset segrega-
tion requirements to ensure that the use of futures is unleveraged. When a
Fund takes a long position in a futures contract, it must maintain a segre-
gated account containing cash and/or certain liquid assets equal to the pur-
chase price of the contract, less any margin or deposit. When a Fund takes a
short position in a futures contract, the Fund must maintain a segregated ac-
count containing cash and/or certain liquid assets in an amount equal to the
market value of the securities underlying such contract (less any margin or
deposit), which amount must be at least equal to the market price at which the
short position was established. Asset segregation requirements are not appli-
cable when a Fund "covers" an options or futures position generally by enter-
ing into an offsetting position. Each Fund will limit its hedging transactions
in futures contracts and related options so that, immediately after any such
transaction, the aggregate initial margin that is required to be posted by a
Fund under the rules of the exchange on which the futures contract (or futures
option) is traded, plus any premiums paid by such Fund on its open futures op-
tions positions, does not exceed 5% of such Fund's total assets, after taking
into account any unrealized profits and unrealized losses on the Fund's open
contracts (and excluding the amount that a futures option is "in-the-money" at
the time of purchase). An option to buy a futures contract is "in-the-money"
if the then-current purchase price of the underlying futures contract exceeds
the exercise or strike price; an option to sell a futures contract is "in-the-
money" if the exercise or strike price exceeds the then-current purchase price
of the contract that is the subject of the option.
Transactions in futures as a hedging device may subject a Fund to a number of
risks. Successful use of futures by a Fund is subject to the ability of the
Investment Adviser and Sub-Adviser to correctly anticipate movements in the
direction of the market. In addition, there may be an imperfect correlation,
or no correlation at all, between movements in the price of the futures con-
tracts (or options) and movements in the price of the instruments being
hedged. Further, there is no assurance that a liquid market will exist for any
particular futures contract (or option) at any particular time. Consequently,
a Fund may realize a loss on a futures transaction that is not offset by a fa-
vorable movement in the price of securities which it holds or intends to pur-
chase or may be unable to close a futures position in the event of adverse
price movements.
COVERED CALL OPTIONS
To further increase return on its portfolio securities in accordance with its
investment objective and policies, each Fund may engage in writing covered
call options (options on securities owned by such Fund) and enter into closing
purchase transactions with respect to such options. Such options must be
listed on a national securities exchange and issued by the Options Clearing
Corporation or be traded on foreign exchanges. The aggregate value of the se-
curities subject to options written by the Fund may not exceed 25% of the
value of its net assets. By writing a covered call option, a Fund forgoes the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price except insofar as the premium represents
such a profit, and it will not be able to sell the underlying security until
the option expires or is exercised or the Fund effects a closing purchase
transaction by purchasing an option of the same series. The use of covered
call options is not a primary investment technique of the Funds and such op-
tions will normally be written on underlying securities as to which the In-
vestment Adviser and Sub-Adviser do not anticipate significant short-term cap-
ital appreciation. Additional information on option-writing practices, includ-
ing particular risks thereof, is provided in the Statement of Additional In-
formation.
INVESTMENT COMPANY SECURITIES
In connection with the management of its daily cash positions, each Fund may
invest in securities issued by
16
<PAGE>
other investment companies which invest in high-quality, short-term debt secu-
rities and which determine their net asset value per share based on the amor-
tized cost or penny-rounding method. Each Fund may also purchase shares of in-
vestment companies investing primarily in foreign securities, including so
called "country funds" which have portfolios consisting exclusively of securi-
ties of issuers located in one foreign country. The Regional Funds will limit
their investments in such country funds to those funds which invest in the ap-
propriate regions in light of a Regional Fund's policies. Securities of other
investment companies will be acquired by a Fund within the strict limits pre-
scribed by the Investment Company Act of 1940 (the "1940 Act"). In addition to
the advisory fees and other expenses each Fund bears directly in connection
with its own operations, as a shareholder of another investment company, each
Fund would bear its pro rata portion of the other investment company's advisory
fees and other expenses. As such, a Fund's shareholders would indirectly bear
the expenses of the Fund and the other investment company, some or all of which
would be duplicative.
WHEN-ISSUED AND FORWARD TRANSACTIONS
Each Fund may purchase eligible securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. These transactions
involve a commitment by a Fund to purchase or sell particular securities with
payment and delivery taking place in the future, beyond the normal settlement
date, at a stated price and yield. Securities purchased on a "forward commit-
ment" or "when-issued" basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. It
is expected that forward commitments and "when-issued" purchases will not ex-
ceed 25% of the value of a Fund's total assets absent unusual market condi-
tions, and that the length of such commitments will not exceed 45 days. The
Funds do not intend to engage in "when-issued" purchases and forward commit-
ments for speculative purposes, but only in furtherance of their investment ob-
jectives.
ILLIQUID SECURITIES
No Fund will knowingly invest more than 10% of the value of its net assets in
securities that are illiquid. Each Fund may purchase securities which are not
registered under the Securities Act of 1933 (the "Act") but which can be sold
to "qualified institutional buyers" in accordance with Rule 144A under the Act.
Any such security will not be considered illiquid so long as it is determined
by the Investment Adviser, acting under guidelines approved and monitored by
the Board, that an adequate trading market exists for that security. This in-
vestment practice could have the effect of increasing the level of illiquidity
in a Fund during any period that qualified institutional buyers become uninter-
ested in purchasing these restricted securities.
PORTFOLIO TURNOVER
Each Fund may sell a portfolio investment immediately after its acquisition if
the Investment Adviser and Sub-Adviser believe that such a disposition is con-
sistent with attaining the investment objective of the particular Fund. Portfo-
lio investments may be sold for a variety of reasons, such as a more favorable
investment opportunity or other circumstances bearing on the desirability of
continuing to hold such investments. A high rate of portfolio turnover may in-
volve correspondingly greater brokerage commission expenses and other transac-
tion costs, which must be borne directly by the Fund and ultimately by its
shareholders. High portfolio turnover may result in the realization of substan-
tial net capital gains. (See "Financial Highlights" and "Taxes--Federal").
INVESTMENT LIMITATIONS
The investment limitations enumerated below are matters of fundamental policy
and may not be changed with respect to a Fund without the vote of the holders
of a majority of its outstanding shares (as defined under "Miscellaneous").
17
<PAGE>
A Fund may not:
1. Purchase securities of any one issuer, other than U.S. Government obliga-
tions, if immediately after such purchase more than 5% of the value of its
total assets would be invested in the securities of such issuer, except that
up to 25% of the value of its total assets may be invested without regard to
this 5% limitation;
2. Borrow money, except from banks for temporary purposes, and then in
amounts not in excess of 10% of the value of its total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets except in con-
nection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed and 10% of the value of its total assets at the
time of such borrowing. (This borrowing provision is included solely to fa-
cilitate the orderly sale of portfolio securities to accommodate abnormally
heavy redemption requests and is not for leverage purposes.) The Fund will
not purchase portfolio securities while borrowings in excess of 5% of its to-
tal assets are outstanding. Optioned stock held in escrow is not deemed to be
a pledge;
3. Purchase any securities which would cause more than 25% of the value of
its total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the
same industry, provided that (a) with respect to the International Fund,
there is no limitation with respect to securities issued or guaranteed by the
U.S. Government or domestic bank obligations, (b) with respect to the Emerg-
ing Americas, Pacific/Asia and Pan European Funds, there is no limitation
with respect to securities issued or guaranteed by the U.S. Government, and
(c) neither all finance companies, as a group, nor all utility companies, as
a group, are considered a single industry for purposes of this policy; and
4. Make loans, except that (i) a Fund may purchase or hold debt securities
in accordance with its investment objective and policies, and may enter into
repurchase agreements with respect to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, and (ii) a Fund may lend
portfolio securities in an amount not exceeding 30% of its total assets.
The International Fund may not:
5. Knowingly invest more than 10% of the value of its total assets in illiq-
uid securities, including repurchase agreements with remaining maturities in
excess of seven days, restricted securities, and other securities for which
market quotations are not readily available.
* * *
In addition to the investment limitations described above, as a matter of fun-
damental policy for each Fund which may not be changed without the vote of the
holders of a majority of the Fund's outstanding shares, a Fund may not invest
in the securities of any single issuer if, as a result, the Fund holds more
than 10% of the outstanding voting securities of such issuer.
The Emerging Americas, Pan European and Pacific/Asia Funds may not knowingly
invest more than 10% of the value of their respective total assets in illiquid
securities, including repurchase agreements with remaining maturities in excess
of seven days, restricted securities and other securities for which market quo-
tations are not readily available. This investment policy may be changed by
Master Fund's Board of Directors upon reasonable notice to shareholders.
The International Fund will not invest more than 25% of the value of its total
assets in domestic bank obligations.
With respect to all investment policies, if a percentage limitation is satis-
fied at the time of investment, a later increase or decrease in such percentage
result-
18
<PAGE>
ing from a change in value of a Fund's portfolio securities will not consti-
tute a violation of such limitation.
PRICING OF SHARES
The net asset value of each Fund is determined and its Shares are priced at
the close of regular trading hours on the New York Stock Exchange (the "Ex-
change"), currently 4:00 p.m. (Eastern Time). Net asset value and pricing for
each Fund are determined on each day the Exchange and the Investment Adviser
and Sub-Adviser are open for trading ("Business Day"). Currently, the holidays
which the Funds observe are: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Co-
lumbus Day, Veterans Day, Thanksgiving Day and Christmas. A Fund's net asset
value per Share for purposes of pricing sales and redemptions is calculated by
dividing the value of all securities and other assets allocable to its Shares,
less the liabilities allocable to its Shares, by the number of its outstanding
Shares.
The Funds' portfolio securities which are primarily traded on a domestic ex-
change are valued at the last sale price on that exchange or, if there is no
recent sale, at the last current bid quotation. Portfolio securities which are
primarily traded on foreign securities exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges, ex-
cept that when an event subsequent to the time when 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 pri-
mary market for such security. Investments in foreign debt securities having a
maturity of 60 days or less are valued based upon the amortized cost method.
An option, futures or foreign currency futures contract is valued at the last
sales price quoted on the principal exchange or board of trade on which such
option or contract is traded, or in the absence of a sale, the mean between
the last bid and asked prices. A forward currency contract is valued based on
the last published forward currency rate which reflects the duration of the
contract and the value of the underlying currency. All other foreign securi-
ties are valued at the last current bid quotation if market quotations are
available, or at fair value as determined in accordance with guidelines
adopted by the Board of Directors. For valuation purposes, quotations of for-
eign securities in foreign currency are converted to U.S. dollars equivalent
at the prevailing market rate on the day of conversion.
Some of the securities acquired by the Funds may be traded on foreign ex-
changes or over-the-counter markets on days which are not Business Days. In
such cases, the net asset value of the Shares may be significantly affected on
days when investors can neither purchase nor redeem a Fund's Shares.
Master Fund's administrators have undertaken to price the securities in each
Fund's portfolio, and may use one or more independent pricing services in con-
nection with this service.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in each Fund are continuously offered for sale by Master Fund's spon-
sor and distributor, Edgewood Services, Inc. (the "Distributor"), a wholly-
owned subsidiary of Federated Investors. The Distributor is a registered
broker/dealer. Its principal offices are at Federated Investors Tower, 1001
Liberty Avenue, Pittsburgh, PA 15222-3779.
PURCHASE OF SHARES
The Distributor has established several procedures for purchasing Shares in
order to accommodate different types of investors.
19
<PAGE>
Shares may be purchased directly by individuals ("Direct Investors") or by in-
stitutions ("Institutional Investors" and, collectively with Direct Investors,
"Investors"). Shares may also be purchased by customers ("Customers") of the
Investment Adviser, its affiliates and correspondent banks, and other institu-
tions ("Shareholder Organizations") that have entered into shareholder servic-
ing agreements with Master Fund. A Shareholder Organization may elect to hold
of record Shares for its Customers and to record beneficial ownership of Shares
on the account statements provided by it to its Customers. If it does so, it is
the Shareholder Organization's responsibility to transmit to the Distributor
all purchase orders for its Customers and to transmit, on a timely basis, pay-
ment for such orders to Mutual Funds Service Company ("MFSC"), the Funds' sub-
transfer agent, in accordance with the procedures agreed to by the Shareholder
Organization and the Distributor. Confirmations of all such Customer purchases
and redemptions will be sent by MFSC to the particular Shareholder Organiza-
tion. As an alternative, a Shareholder Organization may elect to establish its
Customers' accounts of record with MFSC. In this event, even if the Shareholder
Organization continues to place its Customers' purchase and redemption orders
with the Funds, MFSC will send confirmations of such transactions and periodic
account statements directly to Customers. A Shareholder Organization may also
elect to establish its Customers as record holders.
Master Fund enters into Shareholder servicing agreements with Shareholder Or-
ganizations which agree to provide their Customers various shareholder adminis-
trative services with respect to their Shares (hereinafter referred to as
"Service Organizations"). Shares in the Funds bear the expenses of fees payable
to Service Organizations for such services. See "Management of the Funds--Serv-
ice Organizations."
Customers wishing to purchase Shares through their Shareholder Organization
should contact such entity directly for appropriate instructions. (For a list
of Shareholder Organizations in your area, call (800) 446-1012.) An investor
purchasing Shares through a registered investment adviser or certified finan-
cial planner may incur transaction charges in connection with such purchases.
Such investors should contact their registered investment adviser or certified
financial planner for further information on transaction fees. Investors may
also purchase Shares directly in accordance with procedures described below un-
der "Purchase Procedures."
PUBLIC OFFERING PRICE
The public offering price for Shares of each Fund is the sum of the net asset
value of the Shares purchased plus a sales load according to the table below:
<TABLE>
<CAPTION>
REALLOWANCE
TOTAL SALES CHARGES TO DEALERS
------------------------------ --------------
AS A % OF AS A % OF AS A % OF
OFFERING PRICE NET ASSET OFFERING PRICE
AMOUNT OF TRANSACTION PER SHARE VALUE PER SHARE PER SHARE
--------------------- -------------- --------------- --------------
<S> <C> <C> <C>
Less than $50,000................. 4.50% 4.71% 4.00%
$50,000 to $99,999................ 4.00 4.17 3.50
$100,000 to $249,999.............. 3.50 3.63 3.00
$250,000 to $499,999.............. 3.00 3.09 2.50
$500,000 to $999,999.............. 2.00 2.05 1.50
$1,000,000 to $1,999,999.......... 1.00 1.00 .50
$2,000,000 and over............... .50 .50 .25
</TABLE>
The reallowance to dealers may be changed from time to time but will remain
the same for all such dealers.
At various times the Distributor may implement programs under which a dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
under which the Distributor will reallow to any dealer that sponsors sales con-
tests or recognition programs conforming to criteria established by the Dis-
tributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on the sales generated
by the dealer at the public offering price during such programs. Also, the Dis-
tributor in its discretion may from time to time, pursuant to objective crite-
ria established by the Distributor, pay fees to qualifying dealers for certain
services or activities which are pri-
20
<PAGE>
marily intended to result in sales of Shares of the Funds. If any such program
is made available to any dealer, it will be made available to all dealers on
the same terms and conditions. Payments made under such programs will be made
by the Distributor out of its own assets and not out of the assets of the
Funds. These programs will not change the price of Shares or the amount that
the Funds will receive from such sales.
The sales load described above will not be applicable to: (a) purchases of
Shares by customers of the Investment Adviser or its affiliates; (b) trust,
agency or custodial accounts opened through the trust department of a bank,
trust company or thrift institution, provided that appropriate notification of
such status is given at the time of investment; (c) companies, corporations and
partnerships (excluding full service broker/dealers and financial planners,
registered investment advisers and depository institutions not covered by the
exemptions in (d) and (e) below); (d) financial planners and registered invest-
ment advisers not affiliated with or clearing purchases through full service
broker/dealers; (e) purchases of Shares by depository institutions for their
own account as principal; (f) exchange transactions (described below under "In-
vestor Programs--Exchange Privilege") where the Shares being exchanged were ac-
quired in connection with the distribution of assets held in trust, agency or
custodial accounts maintained with the trust department of a bank; (g) corpo-
rate/ business retirement plans (such as 401(k), 403(b)(7), 457 and Keogh ac-
counts) sponsored by the Distributor and IRA accounts sponsored by the Invest-
ment Adviser; (h) company-sponsored employee pension or retirement plans making
direct investments in the Funds; (i) purchases of Shares by officers, trustees,
directors, employees, former employees and retirees of Master Fund, UST Master
Tax-Exempt Funds, Inc. ("Master Tax-Exempt Fund"), the Investment Adviser, the
Distributor or of any direct or indirect affiliate of any of them; (j) pur-
chases of Shares by all beneficial shareholders of Master Fund or Master Tax-
Exempt Fund as of May 22, 1989; (k) purchases of Shares by investment advisers
registered under the Investment Advisers Act of 1940 for their customers
through an omnibus account established with United States Trust Company of New
York; (l) purchases of Shares by directors, officers and employees of brokers
and dealers selling shares pursuant to a selling agreement with Master Fund and
Master Tax-Exempt Fund; (m) purchases of shares by investors who are members of
affinity groups serviced by USAffinity Investments Limited Partnership; and (n)
customers of certain financial institutions who purchase Shares through a reg-
istered representative of UST Financial Services Corp. on the premises of their
financial institutions. In addition, no sales load is charged on the reinvest-
ment of dividends or distributions or in connection with certain share exchange
transactions. Investors who have previously redeemed shares in an "Eligible
Fund" (as defined below) on which a sales load has been paid also have a one-
time privilege of purchasing shares of another "Eligible Fund" at net asset
value without a sales charge, provided that such privilege will apply only to
purchases made within 30 calendar days from the date of redemption and only
with respect to the amount of the redemption. These exemptions to the imposi-
tion of a sales load are due to the nature of the investors and/or reduced
sales effort that will be needed in obtaining investments.
Quantity Discounts
An investor in the Funds may be entitled to reduced sales charges through
Rights of Accumulation, a Letter of Intent or a combination of investments, as
described below, even if the investor does not wish to make an investment of a
size that would normally qualify for a quantity discount.
In order to obtain quantity discount benefits, an investor must notify MFSC at
the time of purchase that he or she would like to take advantage of any of the
discount plans described below. Upon such notification, the investor will re-
ceive the lowest applicable sales charge. Quantity discounts may be modified or
terminated at any time and are subject to confirma-
21
<PAGE>
tion of an investor's holdings through a check of appropriate records. For more
information about quantity discounts, please call (800) 446-1012 or contact
your Shareholder Organization.
Rights of Accumulation. A reduced sales load applies to any purchase of shares
of any portfolio of Master Fund and Master Tax-Exempt Fund that is sold with a
sales load ("Eligible Fund") where an investor's then current aggregate invest-
ment is $50,000 or more. "Aggregate investment" means the total of: (a) the
dollar amount of the then current purchase of shares of an Eligible Fund and
(b) the value (based on current net asset value) of previously purchased and
beneficially owned shares of any Eligible Fund on which a sales load has been
paid. If, for example, an investor beneficially owns shares of one or more Eli-
gible Funds with an aggregate current value of $49,000 on which a sales load
has been paid and subsequently purchases shares of an Eligible Fund having cur-
rent value of $1,000, the load applicable to the subsequent purchase would be
reduced to 4.00% of the offering price. Similarly, with respect to each subse-
quent investment, all shares of Eligible Funds that are beneficially owned by
the investor at the time of investment may be combined to determine the appli-
cable sales load.
Letter of Intent. By completing the Letter of Intent included as part of the
New Account Application, an investor becomes eligible for the reduced sales
load applicable to the total number of Eligible Fund shares purchased in a 13-
month period pursuant to the terms and under the conditions set forth below and
in the Letter of Intent. To compute the applicable sales load, the offering
price of shares of an Eligible Fund on which a sales load has been paid, bene-
ficially owned by an investor on the date of submission of the Letter of In-
tent, may be used as a credit toward completion of the Letter of Intent. Howev-
er, the reduced sales load will be applied only to new purchases.
MFSC will hold in escrow shares equal to 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if an investor does not
purchase the full amount indicated in the Letter of Intent. The escrow will be
released when an investor fulfills the terms of the Letter of Intent by pur-
chasing the specified amount. If purchases qualify for a further sales load re-
duction, the sales load will be adjusted to reflect an investor's total pur-
chases. If total purchases are less than the amount specified, an investor will
be requested to remit an amount equal to the difference between the sales load
actually paid and the sales load applicable to the total purchases. If such re-
mittance is not received within 20 days, MFSC, as attorney-in-fact pursuant to
the terms of the Letter of Intent and at the Distributor's direction, will re-
deem an appropriate number of shares held in escrow to realize the difference.
Signing a Letter of Intent does not bind an investor to purchase the full
amount indicated at the sales load in effect at the time of signing, but an in-
vestor must complete the intended purchase in accordance with the terms of the
Letter of Intent to obtain the reduced sales load. To apply, an investor must
indicate his or her intention to do so under a Letter of Intent at the time of
purchase.
Qualification for Discounts. For purposes of applying the Rights of Accumula-
tion and Letter of Intent privileges described above, the scale of sales loads
applies to the combined purchases made by any individual and/or spouse purchas-
ing securities for his, her or their own account or for the account of any mi-
nor children, or the aggregate investments of a trustee or custodian of any
qualified pension or profit sharing plan or IRA established (or the aggregate
investment of a trustee or other fiduciary) for the benefit of the persons
listed above.
PURCHASE PROCEDURES
General
Direct Investors may purchase Shares by completing the Application for pur-
chase of Shares accompa-
22
<PAGE>
nying this Prospectus and mailing it, together with a check payable to UST
Master Funds, to:
UST Master Funds
c/o Mutual Funds Service Company
P.O. Box 2798
Boston, MA 02208-2798
Subsequent investments in an existing account in any Fund may be made at any
time by sending to the above address a check payable to UST Master Funds along
with: (a) the detachable form that regularly accompanies the confirmation of a
prior transaction; (b) a subsequent order form which may be obtained from
MFSC; or (c) a letter stating the amount of the investment, the name of the
Fund and the account number in which the investment is to be made. Institu-
tional Investors may purchase Shares by transmitting their purchase orders to
MFSC by telephone at (800) 446-1012 or by terminal access. Institutional In-
vestors must pay for Shares with Federal funds or funds immediately available
to MFSC.
Purchases by Wire
Investors may also purchase Shares by wiring Federal funds to MFSC. Prior to
making an initial investment by wire, an Investor must telephone MFSC at (800)
446-1012 (from overseas, call (617) 557-8280) for instructions. Federal funds
and registration instructions should be wired through the Federal Reserve Sys-
tem to:
United States Trust Company of New York
ABA #021001318
UST Funds, Account No. 2901447
For further credit to:
UST Master Funds
Wire Control Number
Account Registration
(including account number)
Investors making initial investments by wire must promptly complete the Ap-
plication accompanying this Prospectus and forward it to MFSC. Redemptions by
Investors will not be processed until the completed Application for purchase
of Shares has been received by MFSC and accepted by the Distributor. Investors
making subsequent investments by wire should follow the above instructions.
Other Purchase Information
Except as provided in "Investor Programs" below, the minimum initial invest-
ment by an Investor or initial aggregate investment by a Shareholder Organiza-
tion investing on behalf of its Customers is $500 per Fund. The minimum subse-
quent investment for both types of investors is $50 per Fund. Customers may
agree with a particular Shareholder Organization to make a minimum purchase
with respect to their accounts. Depending upon the terms of the particular ac-
count, Shareholder Organizations may charge a Customer's account fees for au-
tomatic investment and other cash management services provided. Master Fund
reserves the right to reject any purchase order, in whole or in part, or to
waive any minimum investment requirements.
REDEMPTION PROCEDURES
Customers of Shareholder Organizations holding Shares of record may redeem
all or part of their investments in the Funds in accordance with procedures
governing their accounts at the Shareholder Organizations. It is the responsi-
bility of the Shareholder Organizations to transmit redemption orders to MFSC
and credit such Customer accounts with the redemption proceeds on a timely ba-
sis. Redemption orders for Institutional Investors must be transmitted to MFSC
by telephone at (800) 446-1012 or by terminal access. No charge for wiring re-
demption payments to Shareholder Organizations or Institutional Investors is
imposed by Master Fund, although Shareholder Organizations may charge a Cus-
tomer's account for wiring redemption proceeds. Information relating to such
redemption services and charges, if any, is available from the Shareholder Or-
ganizations. An investor redeeming Shares through a registered investment ad-
viser or cer-
23
<PAGE>
tified financial planner may incur transaction charges in connection with such
redemptions. Such investors should contact their registered investment adviser
or certified financial planner for further information on transaction fees. In-
vestors may redeem all or part of their Shares in accordance with any of the
procedures described below (these procedures also apply to Customers of Share-
holder Organizations for whom individual accounts have been established with
MFSC).
Redemption by Mail
Shares may be redeemed by a Direct Investor by submitting a written request
for redemption to:
UST Master Funds
c/o Mutual Funds Service Company
P.O. Box 2798
Boston, MA 02208-2798
A written redemption request to MFSC must (i) state the number of Shares to be
redeemed, (ii) identify the shareholder account number and tax identification
number, and (iii) be signed by each registered owner exactly as the Shares are
registered. If the Shares to be redeemed were issued in certificate form, the
certificates must be endorsed for transfer (or accompanied by a duly executed
stock power) and must be submitted to MFSC together with the redemption re-
quest. A redemption request for an amount in excess of $50,000 per account, or
for any amount if the proceeds are to be sent elsewhere than the address of
record, must be accompanied by signature guarantees from any eligible guarantor
institution approved by MFSC in accordance with its Standards, Procedures and
Guidelines for the Acceptance of Signature Guarantees ("Signature Guarantee
Guidelines"). Eligible guarantor institutions generally include banks,
broker/dealers, credit unions, national securities exchanges, registered secu-
rities associations, clearing agencies and savings associations. All eligible
guarantor institutions must participate in the Securities Transfer Agents Me-
dallion Program ("STAMP") in order to be approved by MFSC pursuant to the Sig-
nature Guarantee Guidelines. Copies of the Signature Guarantee Guidelines and
information on STAMP can be obtained from MFSC at (800) 446-1012 or at the ad-
dress given above. MFSC may require additional supporting documents for redemp-
tions made by corporations, executors, administrators, trustees and guardians.
A redemption request will not be deemed to be properly received until MFSC re-
ceives all required documents in proper form. Payment for Shares redeemed will
ordinarily be made by mail within five Business Days after proper receipt by
MFSC of the redemption request. Questions with respect to the proper form for
redemption requests should be directed to MFSC at (800) 446-1012 (from over-
seas, call (617) 557-8280).
Redemption by Wire or Telephone
Direct Investors who have so indicated on the Application, or have subse-
quently arranged in writing to do so, may redeem Shares by instructing MFSC by
wire or telephone to wire the redemption proceeds directly to the Direct In-
vestor's account at any commercial bank in the United States. Direct Investors
who are shareholders of record may also redeem Shares by instructing MFSC by
telephone to mail a check for redemption proceeds of $500 or more to the share-
holder of record at his or her address of record. Institutional Investors may
also redeem Shares by instructing MFSC by telephone at (800) 446-1012 or by
terminal access. Only redemptions of $500 or more will be wired to a Direct In-
vestor's account. An $8.00 fee for each wire redemption by a Direct Investor is
deducted by MFSC from the proceeds of the redemption. The redemption proceeds
for Direct Investors must be paid to the same bank and account as designated on
the Application or in written instructions subsequently received by MFSC.
In order to arrange for redemption by wire or telephone after an account has
been opened or to change the bank or account designated to receive redemption
24
<PAGE>
proceeds, a Direct Investor must send a written request to Master Fund, c/o
MFSC, at the address listed above under "Redemption by Mail." Such requests
must be signed by the Direct Investor, with signatures guaranteed (see "Redemp-
tion by Mail" above, for details regarding signature guarantees). Further docu-
mentation may be requested.
MFSC and the Distributor reserve the right to refuse a wire or telephone re-
demption if it is believed advisable to do so. Procedures for redeeming Shares
by wire or telephone may be modified or terminated at any time by Master Fund,
MFSC or the Distributor. MASTER FUND, MFSC AND THE DISTRIBUTOR WILL NOT BE LIA-
BLE FOR ANY LOSS, LIABILITY, COST OR EXPENSE FOR ACTING UPON TELEPHONE INSTRUC-
TIONS THAT ARE REASONABLY BELIEVED TO BE GENUINE. IN ATTEMPTING TO CONFIRM THAT
TELEPHONE INSTRUCTIONS ARE GENUINE, MASTER FUND WILL USE SUCH PROCEDURES AS ARE
CONSIDERED REASONABLE, INCLUDING RECORDING THOSE INSTRUCTIONS AND REQUESTING
INFORMATION AS TO ACCOUNT REGISTRATION.
If any portion of the Shares to be redeemed represents an investment made by
personal check, Master Fund and MFSC reserve the right not to honor the redemp-
tion until MFSC is reasonably satisfied that the check has been collected in
accordance with the applicable banking regulations which may take up to 15
days. A Direct Investor who anticipates the need for more immediate access to
his or her investment should purchase Shares by Federal funds or bank wire or
by certified or cashier's check. Banks normally impose a charge in connection
with the use of bank wires, as well as certified checks, cashier's checks and
Federal funds. If a Direct Investor's purchase check is not collected, the pur-
chase will be cancelled and MFSC will charge a fee of $25.00 to the Direct In-
vestor's account.
During periods of substantial economic or market change, telephone redemptions
may be difficult to complete. If an investor is unable to contact MFSC by tele-
phone, the Investor may also deliver the redemption request to MFSC in writing
at the address noted above under "How to Purchase and Redeem Shares--Redemption
by Mail."
Other Redemption Information
Except as described in "Investor Programs" below, Investors may be required to
redeem Shares in a Fund after 60 days' written notice if due to investor re-
demptions the balance in the particular account with respect to the Fund re-
mains below $500. If a Customer has agreed with a particular Shareholder Organ-
ization to maintain a minimum balance in his or her account at the institution
with respect to Shares of a Fund, and the balance in such account falls below
that minimum, the Customer may be obliged by the Shareholder Organization to
redeem all or part of his or her Shares to the extent necessary to maintain the
required minimum balance.
GENERAL
Purchase and redemption orders for Shares which are received and accepted
prior to the close of regular trading hours on the Exchange (currently 4:00
p.m., Eastern Time) on any Business Day are priced according to the net asset
value determined on that day. Purchase orders for Shares received and accepted
after the close of regular trading hours on the Exchange are priced at the net
asset value per Share determined on the next Business Day.
INVESTOR PROGRAMS
EXCHANGE PRIVILEGE
Investors and Customers of Shareholder Organizations may, after appropriate
prior authorization and without an exchange fee imposed by the Master Fund, ex-
change Shares in a Fund having a value of at least $500 for Shares of any other
portfolio offered by Master Fund or Master Tax-Exempt Fund, provided that such
other shares may legally be sold in the state of the Investor's residence.
Master Fund currently offers, in addition to the International Fund and Re-
gional Funds, 16 additional portfolios as follows:
Money Fund, a money market fund seeking as high a level of current income as
is consistent with li-
25
<PAGE>
quidity and stability of principal through investments in high-quality money
market instruments maturing within 13 months;
Government Money Fund, a money market fund seeking as high a level of cur-
rent income as is consistent with liquidity and stability of principal
through investments in obligations issued or guaranteed by the U.S. Govern-
ment, its agencies or instrumentalities and repurchase agreements collateral-
ized by such obligations;
Treasury Money Fund, a money market fund seeking current income generally
exempt from state and local income taxes through investments in direct short-
term obligations issued by the U.S. Treasury and certain agencies or instru-
mentalities of the U.S. Government;
Short-Term Government Securities Fund, a fund seeking a high level of cur-
rent income by investing principally in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and repurchase agree-
ments collateralized by such obligations, and having a dollar-weighted aver-
age portfolio maturity of 1 to 3 years;
Intermediate-Term Managed Income Fund, a fund seeking a high level of cur-
rent interest income by investing principally in investment grade or better
debt obligations and money market instruments, and having a dollar-weighted
average portfolio maturity of 3 to 10 years;
Managed Income Fund, a fund seeking higher current income through invest-
ments in investment grade debt obligations, U.S. Government obligations and
money market instruments;
Equity Fund, a fund seeking primarily long-term capital appreciation through
investments in a diversified portfolio of primarily equity securities;
Income and Growth Fund, a fund investing substantially in equity securities
in seeking to provide moderate current income and to achieve capital appreci-
ation as a secondary objective;
Long-Term Supply of Energy Fund, a fund seeking long-term capital apprecia-
tion by investing in companies benefitting from the availability, development
and delivery of secure hydrocarbon and other energy sources;
Productivity Enhancers Fund, a fund seeking long-term capital appreciation
by investing in companies benefitting from their roles as innovators, devel-
opers and suppliers of goods and services which enhance service and manufac-
turing productivity or companies that are most effective at obtaining and ap-
plying productivity enhancement developments;
Environmentally-Related Products and Services Fund, a fund seeking long-term
capital appreciation by investing in companies benefitting from their provi-
sion of products, technologies and services related to conservation, protec-
tion and restoration of the environment;
Aging of America Fund, a fund seeking long-term capital appreciation by in-
vesting in companies benefitting from the changes occurring in the demo-
graphic structure of the U.S. population, particularly of its growing popula-
tion of individuals over the age of 40;
Communication and Entertainment Fund, a fund seeking long-term capital ap-
preciation by investing in companies benefitting from the technological and
international transformation of the communications and entertainment indus-
tries, particularly the convergence of information, communication and enter-
tainment media;
Business and Industrial Restructuring Fund, a fund seeking long-term capital
appreciation by investing in companies benefitting from their restructuring
or redeployment of assets and operations in order to become more competitive
or profitable;
Global Competitors Fund, a fund seeking long-term capital appreciation by
investing in U.S.-based companies benefitting from their position as effec-
tive and strong competitors on a global basis; and
Early Life Cycle Fund, a fund seeking long-term capital appreciation by in-
vesting in smaller companies in the earlier stages of their development or
larger or more mature companies engaged in new and higher growth potential
operations.
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Master Tax-Exempt Fund currently offers five portfolios as follows:
Short-Term Tax-Exempt Fund, a diversified tax-exempt money market fund seek-
ing a moderate level of current interest income exempt from Federal income
taxes through investing primarily in high-quality municipal obligations ma-
turing within 13 months;
Short-Term Tax-Exempt Securities Fund, a diversified fund seeking a high
level of current interest income exempt from Federal income taxes through in-
vestments in municipal obligations and having a dollar-weighted average port-
folio maturity of 1 to 3 years;
Intermediate-Term Tax-Exempt Fund, a diversified fund seeking a high level
of current income exempt from Federal income taxes through investments in mu-
nicipal obligations and having a dollar-weighted average portfolio maturity
of three to ten years;
Long-Term Tax-Exempt Fund, a diversified fund seeking to maximize over time
current income exempt from Federal income taxes, investing primarily in mu-
nicipal obligations and having a dollar-weighted average portfolio maturity
of 10 to 30 years; and
New York Intermediate-Term Tax-Exempt Fund, a nondiversified fund designed
to provide New York investors with a high level of current income exempt from
Federal and, to the extent possible, New York state and New York City income
taxes; this fund invests primarily in New York municipal obligations and has
a dollar-weighted average portfolio maturity of three to ten years.
An exchange involves a redemption of all or a portion of the Shares in a Fund
and the investment of the redemption proceeds in shares of another portfolio
of Master Fund or Master Tax-Exempt Fund. The redemption will be made at the
per Share net asset value of the Shares being redeemed next determined after
the exchange request is received. The shares of the portfolio to be acquired
will be purchased at the per share net asset value of those shares (plus any
applicable sales load) next determined after acceptance of the exchange re-
quest. No sales load will be payable on shares to be acquired through an ex-
change to the extent that a sales load was previously paid on the Shares being
exchanged.
Investors may find the exchange privilege useful if their investment objec-
tives or market outlook should change after they invest in a Fund. For further
information regarding exchange privileges, shareholders should call (800) 446-
1012 (from overseas, call ((617) 557-8280). Investors exercising the exchange
privilege with the other portfolios of Master Fund or Master Tax-Exempt Fund
should request and review the prospectuses of such funds. Such prospectuses
may be obtained by calling the numbers listed above. Master Fund may modify or
terminate the exchange program at any time upon 60 days written notice to
shareholders, and may reject any exchange request. In order to prevent abuse
of this privilege to the disadvantage of other shareholders, Master Fund and
Master Tax-Exempt Fund reserve the right to limit the number of exchange re-
quests of Investors and Customers of Shareholder Organizations to no more than
six per year. MASTER FUND, MFSC AND THE DISTRIBUTOR ARE NOT RESPONSIBLE FOR
THE AUTHENTICITY OF EXCHANGE REQUESTS RECEIVED BY TELEPHONE THAT ARE REASONA-
BLY BELIEVED TO BE GENUINE. IN ATTEMPTING TO CONFIRM THAT TELEPHONE INSTRUC-
TIONS ARE GENUINE, MASTER FUND WILL USE SUCH PROCEDURES AS ARE CONSIDERED REA-
SONABLE, INCLUDING RECORDING THOSE INSTRUCTIONS AND REQUESTING INFORMATION AS
TO ACCOUNT REGISTRATION.
For Federal income tax purposes, an exchange of Shares is a taxable event
and, accordingly, a capital gain or loss may be realized by an investor. Be-
fore making an exchange, an investor should consult a tax or other financial
adviser to determine tax consequences.
SYSTEMATIC WITHDRAWAL PLAN
An Investor who owns Shares of a Fund with a value of $10,000 or more may es-
tablish a Systematic Withdrawal Plan. The Investor may request a declining-
balance withdrawal, a fixed-dollar withdrawal, a fixed-share withdrawal, or a
fixed-percentage withdrawal (based on the current value of Shares in the
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account) on a monthly, quarterly, semi-annual or annual basis. To initiate the
Systematic Withdrawal Plan, an investor must complete the Supplemental Applica-
tion contained in this Prospectus and mail it to MFSC at the address given
above. Further information on establishing a Systematic Withdrawal Plan may be
obtained by calling (800) 446-1012 (from overseas, call (617) 557-8280).
Shareholder Organizations may, at their discretion, establish similar system-
atic withdrawal plans with respect to the Shares held by their Customers. In-
formation about such plans and the applicable procedures may be obtained by
Customers directly from their institutions.
RETIREMENT PLANS
Shares are available for purchase by Investors in connection with the follow-
ing tax-deferred prototype retirement plans offered by United States Trust Com-
pany of New York:
IRAs (including "rollovers" from existing retirement plans) for individuals
and their spouses;
Profit Sharing and Money-Purchase Plans for corporations and self-employed
individuals and their partners to benefit themselves and their employees; and
Keogh Plans for self-employed individuals.
Investors investing in the Funds pursuant to Profit Sharing and Money-Purchase
Plans and Keogh Plans are not subject to the minimum investment and forced re-
demption provisions described above. The minimum initial investment for IRAs is
$250 per Fund and the minimum subsequent investment is $50 per Fund. Detailed
information concerning eligibility, service fees and other matters related to
these plans can be obtained by calling (800) 446-1012 (from overseas, call
(617) 557-8280). Customers of Shareholder Organizations may purchase Shares of
the Funds pursuant to retirement plans if such plans are offered by their
Shareholder Organizations.
AUTOMATIC INVESTMENT PROGRAM
The Automatic Investment Program permits Investors to purchase Shares (minimum
of $50 per Fund per transaction) at regular intervals selected by the Investor.
The minimum initial investment for an Automatic Investment Program account is
$50 per Fund. Provided the Investor's financial institution allows automatic
withdrawals, Shares are purchased by transferring funds from an Investor's
checking, bank money market or NOW account designated by the Investor. At the
Investor's option, the account designated will be debited in the specified
amount, and Shares will be purchased, once a month, on either the first or fif-
teenth day, or twice a month, on both days.
The Automatic Investment Program is one means by which an Investor may use
"Dollar Cost Averaging" in making investments. Instead of trying to time market
performance, a fixed dollar amount is invested in Shares at predetermined in-
tervals. This may help Investors to reduce their average cost per share because
the agreed upon fixed investment amount allows more Shares to be purchased dur-
ing periods of lower share prices and fewer Shares during periods of higher
prices. In order to be effective, Dollar Cost Averaging should usually be fol-
lowed on a sustained, consistent basis. Investors should be aware, however,
that Shares bought using Dollar Cost Averaging are purchased without regard to
their price on the day of investment or to market trends. In addition, while
Investors may find Dollar Cost Averaging to be beneficial, it will not prevent
a loss if an Investor ultimately redeems his Shares at a price which is lower
than their purchase price.
To establish an Automatic Investment account permitting Investors to use the
Dollar Cost Averaging investment method described above, an Investor must com-
plete the Supplemental Application contained in this Prospectus and mail it to
MFSC. An Investor may cancel his participation in this Program
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<PAGE>
or change the amount of purchase at any time by mailing written notification to
MFSC, P.O. Box 2798, Boston, MA 02208-2798 and notification will be effective
three Business Days following receipt. Master Fund may modify or terminate this
privilege at any time or charge a service fee, although no such fee currently
is contemplated. An Investor may also implement the Dollar Cost Averaging
method on his own initiative or through other entities.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the net income of each Fund are declared and paid semi-annual-
ly. For dividend purposes, a Fund's investment income is reduced by accrued ex-
penses directly attributable to that Fund and the general expenses of Master
Fund prorated to that Fund on the basis of its relative net assets. A Fund's
net investment income available for distribution to the holders of Shares will
be reduced by the amount of other expenses allocated to such series. Net real-
ized capital gains are distributed at least annually. Dividends and distribu-
tions will reduce the net asset value of a Fund by the amount of the dividend
or distribution. All dividends and distributions paid on Shares held of record
by the Investment Adviser and its affiliates or correspondent banks will be
paid in cash. Direct and Institutional Investors and Customers of other Share-
holder Organizations will receive dividends and distributions in additional
Shares (as determined on the payable date), unless they have requested in writ-
ing (received by MFSC at Master Fund's address prior to the payment date) to
receive dividends and distributions in cash. Reinvested dividends and distribu-
tions receive the same tax treatment as those paid in cash.
TAXES
FEDERAL
Each of the Funds qualified for its last taxable year as a "regulated invest-
ment company" under the Internal Revenue Code of 1986, as amended (the "Code").
Each Fund expects to so qualify in future years. Such qualification generally
relieves a Fund of liability for Federal income taxes to the extent its earn-
ings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code requires, among
other things, that a Fund distribute to its shareholders at least 90% of its
investment company taxable income for each taxable year. In general, a Fund's
investment company taxable income will be its taxable income (including divi-
dends, interest and short-term capital gains), subject to certain adjustments
and excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year. Each Fund intends
to distribute substantially all of its investment company income each year.
Such dividends will be taxable as ordinary income to a Fund's shareholders who
are not currently exempt from Federal income taxes, whether such income is re-
ceived in cash or reinvested in additional Shares. (Federal income taxes for
distributions to IRAs and qualified pension plans are deferred under the Code.)
It is anticipated that none of the dividends paid by a Fund will be eligible
for the dividends received deduction for corporations.
Distributions by a Fund of the excess of its net long-term capital gain over
its short-term capital loss are taxable to shareholders as long-term capital
gain, regardless of how long the shareholders have held their Shares and
whether such gains are received in cash or reinvested in additional Shares.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to
have been received by shareholders and paid by a Fund on December 31 of such
year in the event such dividends are actually paid during January of the fol-
lowing year.
An investor considering buying Shares of a Fund on or just before the record
date of a dividend should be aware that the amount of the forthcoming dividend
payment, although in effect a return of capital, will be taxable to them.
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A taxable gain or loss may be realized by a shareholder upon his redemption,
transfer or exchange of Shares, depending upon the tax basis of such Shares and
their price at the time of redemption, transfer or exchange. If a shareholder
holds Shares for six months or less and during that time receives a capital
gain dividend on those Shares, any loss recognized on the sale or exchange of
those Shares will be treated as a long-term capital loss to the extent of the
capital gain dividend. Generally, a shareholder may include sales charges in-
curred upon the purchase of Shares in his tax basis for such Shares for the
purpose of determining gain or loss on a redemption, transfer or exchange of
such Shares. However, if the shareholder effects an exchange of Shares of a
Fund for shares of another portfolio of Master Fund or Master Tax-Exempt Fund
within 90 days of the purchase and is able to reduce the sales charges applica-
ble to the new shares (by virtue of the exchange privilege), the amount equal
to such reduction may not be included in the tax basis of the shareholder's ex-
changed Shares, but may be included (subject to the same limitation) in the tax
basis of the new shares.
It is expected that dividends and certain interest income earned by each Fund
from foreign securities will be subject to foreign withholding taxes or other
taxes. So long as more than 50% of the value of a Fund's total assets at the
close of any taxable year consists of equity or debt securities of foreign cor-
porations, such Fund may elect, for U.S. Federal income tax purposes, to treat
certain foreign taxes paid by it, including generally any withholding taxes and
other foreign income taxes, as paid by its shareholders. A Fund may make this
election. As a consequence, the amount of such foreign taxes paid by a Fund
will be included in its shareholders' income pro rata (in addition to taxable
distributions actually received by them), and each shareholder will be entitled
either (a) to credit their proportionate amounts of such taxes against their
U.S. Federal income tax liabilities or (b) if they itemize their deductions, to
deduct such proportionate amounts from their U.S. taxable income.
Qualification as a regulated investment company under the Code also requires
that a Fund satisfy certain requirements with respect to the source of its in-
come for a taxable year. At least 90% of the gross income of a Fund must be de-
rived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities or foreign cur-
rencies, and other income (including, but not limited to, gains from options,
futures, or forward contracts) derived with respect to the Fund's business of
investing in such stock, securities or currencies. The Treasury Department may
by regulation exclude from qualifying income foreign currency gains which are
not directly related to a Fund's principal business of investing in stock or
securities, or options and futures with respect to stock or securities. Some of
the investments that a Fund may make (such as gold bullion) may not be securi-
ties or may not produce qualifying income. Therefore, it may be necessary for
the Investment Adviser and Sub-Adviser to restrict the investments of a Fund to
ensure that non-qualifying income does not exceed 10% of such Fund's total
gross income for a taxable year.
The foregoing summarizes some of the important tax considerations generally
affecting the Funds and their shareholders and is not intended as a substitute
for careful tax planning. Accordingly, potential investors in the Funds should
consult their tax advisers with specific reference to their own tax situations.
Shareholders will be advised annually as to the Federal income tax consequences
of distributions made each year.
STATE AND LOCAL
Purchasers are advised to consult their tax advisers concerning the applica-
tion of state and local taxes, which may have different consequences from those
of the Federal income tax law described above.
MANAGEMENT OF THE FUNDS
The business and affairs of the Funds are managed under the direction of Mas-
ter Fund's Board of Directors. The Statement of Additional Information con-
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<PAGE>
tains the names of and general background information concerning Master Fund's
directors.
INVESTMENT ADVISER AND SUB-ADVISERS
United States Trust Company of New York serves as the Investment Adviser to
the Funds. U.S. Trust is a state-chartered bank and trust company. The Invest-
ment Adviser provides trust and banking services to individuals, corporations,
and institutions both nationally and internationally, including investment man-
agement, estate and trust administration, financial planning, corporate trust
and agency banking, and personal and corporate banking. The Investment Adviser
is a member bank of the Federal Reserve System and the Federal Deposit Insur-
ance Corporation and is one of the twelve members of the New York Clearing
House Association.
On December 31, 1994, the Investment Adviser's Asset Management Group had ap-
proximately $33 billion in assets under management. The Investment Adviser,
which has its principal offices at 114 W. 47th Street, New York, New York
10036, is a subsidiary of U.S. Trust Corporation, a registered bank holding
company.
Foreign and Colonial Asset Management ("FACAM") (an SEC-registered investment
adviser) provides sub-advisory services to the International and Pan European
Funds. FACAM, a New York general partnership with offices at Exchange House,
Primrose Street, London EC2A2NY, is an investment management joint venture cre-
ated in 1982 by F&C Overseas Limited ("FCOC") and UST Overseas Corporation
("USTOC"), an indirect wholly owned subsidiary of the Investment Adviser. FCOC
and USTOC are general partners of FACAM with equal capital contribution. FCOC,
a private English company, is a wholly owned subsidiary of F&C Management, Ltd.
F&C Management, Ltd. is 50% owned by five U.K. investment trusts: F&C Invest-
ment Trust Plc, F&C Pacific Investment Trust Plc, F&C Smaller Companies Invest-
ment Trusts Plc, F&C Enterprise Trust Plc and F&C Eurotrust Plc. The remaining
50% of F&C Management, Ltd. is owned by Bayerische Hypotheken und Wechsel Bank
AG of Munich, Germany. FACAM currently manages and advises several commingled
funds with assets in excess of $9 billion at the end of 1994.
Under the current sub-advisory agreements FCEML (collectively with FACAM, the
"Sub-Advisers") provides sub-advisory services to the Emerging Americas and
Pacific/Asia Funds. FCEML was founded in 1987, and is a joint venture among F&C
Management, Ltd., the parent of FACAM, Banco de Investimentos Garantia ("Ban-
co"), a Brazilian investment bank headquartered in Sao Paulo, Brazil, and man-
agement of FCEML. Banco is owned by private investors. FCEML's offices are at
Exchange House, Primrose Street, London EC2A2NY.
The Sub-Advisers provide a continuous investment program for the Funds for
which they act as sub-adviser, including investment research and management
with respect to all foreign securities and investments of the Funds. The Sub-
Advisers prepare, subject to the Investment Adviser's approval, lists of recom-
mended countries and determine what securities and other investments will be
purchased, retained or sold for each Fund for which they act as sub-adviser.
The Investment Adviser advises the Sub-Advisers with respect to U.S. economic
factors and trends, assists and consults with the Sub-Advisers in connection
with the particular Fund's continuous investment program, places orders with
respect to purchases and sales of U.S. issuers, manages the particular Fund's
short-term cash in cooperation with the particular Sub-Adviser, monitors the
Sub- Advisers' investment procedures and periodically reviews, evaluates and
reports to Master Fund's Board of Directors concerning the Sub-Advisers' per-
formance.
All investment decisions for the International, Emerging Americas,
Pacific/Asia and Pan European Funds are made by committee and no persons are
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<PAGE>
primarily responsible for making recommendations to that committee.
For the services provided and expenses assumed pursuant to its Investment Ad-
visory Agreements, the Investment Adviser is entitled to be paid a fee, com-
puted daily and paid monthly, at the annual rate of 1% of the average daily net
assets of each Fund. Although the advisory fee rate payable by the Funds is
higher than the rates payable by most mutual funds, Master Fund believes it is
comparable to the rate paid by many other funds with similar investment objec-
tives and policies and is appropriate for the Funds in light of their invest-
ment objective and policies. FACAM is entitled to receive from the Investment
Adviser a fee, computed and paid quarterly, at the annual rate of .70% of the
average daily net assets of each of the International and Pan European Funds.
FCEML is entitled to receive from the Investment Adviser a fee, computed and
paid quarterly, at the annual rates of .50% and .70% of the average daily net
assets of the Emerging Americas and Pacific/Asia Funds, respectively.
For the fiscal year ended March 31, 1995, the Investment Adviser received an
advisory fee after waivers at the effective annual rates of .94%, .93%, .95%
and .94% of the average daily net assets of the International, Emerging Ameri-
cas, Pacific/Asia and Pan European Funds, respectively. For the same period,
the Investment Adviser waived advisory fees at the effective annual rates of
.06%, .07% .05% and .06% of the average daily net assets of the International,
Emerging Americas, Pacific/Asia and Pan European Funds, respectively. For the
same period, FACAM received a sub-advisory fee from the Investment Adviser at
the effective annual rates of .70% and .70% of the average daily net assets of
the International and Pan European Funds, respectively. For the fiscal year
ended March 31, 1995, FCEML received a sub-advisory fee from the Investment Ad-
viser at the effective annual rates of .50% and .70% of the average daily net
assets of the Emerging Americas and Pacific/Asia Funds, respectively.
From time to time, the Investment Adviser and Sub-Advisers may waive (either
voluntarily or pursuant to applicable state expense limitations) all or a por-
tion of the advisory fees payable with respect to a Fund, which waivers may be
terminated at any time. See "Management of the Funds--Service Organizations"
for additional information on fee waivers.
ADMINISTRATORS
MFSC and Federated Administrative Services serve as the Funds' administrators
(the "Administrators") and provide them with general administrative and opera-
tional assistance. For the services provided to the Funds, the Administrators
are jointly entitled to a fee, computed daily and paid monthly, at the annual
rate of .20% of the average daily net assets of each Fund. From time to time,
the Administrators may waive (either voluntarily or pursuant to applicable
state expense limitations) all or a portion of the administration fee payable
to them by a Fund, which waivers may be terminated at any time. See "Management
of the Funds--Service Organizations" for additional information on fee waivers.
For the fiscal year ended March 31, 1995, MFSC and Concord Holding Corporation,
the Funds' former co-administrator, received an aggregate administration fee
(under the compensation arrangements noted above) at the effective annual rate
of .20% of the average daily net assets of each of the International, Emerging
Americas, Pacific/Asia and Pan European Funds.
SERVICE ORGANIZATIONS
Master Fund will enter into an agreement ("Servicing Agreement") with each
Service Organization requiring it to provide administrative support services to
its Customers beneficially owning Shares. As a consideration for the adminis-
trative services provided to Customers, a Fund will pay the Service Organiza-
tion an administrative service fee at the annual rate of up to .40% of the av-
erage daily net asset value of its
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Shares held by the Service Organization's Customers. Such services, which are
described more fully in the Statement of Additional Information under "Manage-
ment of the Funds--Service Organizations," 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. Under the terms of the Servicing Agreement,
Service Organizations will be required to provide to Customers a schedule of
any fees that they may charge in connection with a Customer's investment. Un-
til further notice, the Investment Adviser and Administrators have voluntarily
agreed to waive fees payable by a Fund in an amount equal to administrative
service fees payable by that Fund.
BANKING LAWS
Banking laws and regulations currently prohibit a bank holding company regis-
tered under the Federal Bank Holding Company Act of 1956 or any bank or non-
bank affiliate thereof from sponsoring, organizing or controlling a regis-
tered, open-end investment company continuously engaged in the issuance of its
shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Shares of the Funds, but such banking laws and
regulations do not prohibit such a holding company or affiliate or banks gen-
erally from acting as investment adviser, transfer agent, or custodian to such
an investment company, or from purchasing shares of such company for and upon
the order of customers. The Investment Adviser, MFSC and certain Shareholder
Organizations may be subject to such banking laws and regulations. State secu-
rities laws may differ from the interpretations of Federal law discussed in
this paragraph and banks and financial institutions may be required to regis-
ter as dealers pursuant to state law.
Should legislative, judicial, or administrative action prohibit or restrict
the activities of the Investment Adviser or other Shareholder Organizations in
connection with purchases of Fund Shares, the Investment Adviser and such
Shareholder Organizations might be required to alter materially or discontinue
the investment services offered by them to Customers. It is not anticipated,
however, that any resulting change in the Funds' method of operations would
affect their net asset values per Share or result in financial loss to any
shareholder.
DESCRIPTION OF CAPITAL STOCK
Master Fund was organized as a Maryland corporation on August 2, 1984. Cur-
rently, Master Fund has authorized capital of 35 billion shares of Common
Stock, $.001 par value per share, classified into 34 series of shares repre-
senting interests in 20 investment portfolios. This Prospectus describes the
International, Emerging Americas, Pacific/Asia and Pan European Funds.
Each share in a Fund represents an equal proportionate interest in the par-
ticular Fund with other shares of the same class, and is entitled to such div-
idends and distributions out of the income earned on the assets belonging to
such Fund as are declared in the discretion of Master Fund's Board of Direc-
tors. Master Fund's Charter authorizes the Board of Directors to classify or
reclassify any class of shares into one or more additional classes or series.
Master Fund's shareholders are entitled to one vote for each full share held
and fractional votes for fractional shares held, and will vote in the aggre-
gate and not by class, except as otherwise expressly required by law.
Certificates for Shares will not be issued unless expressly requested in
writing to MFSC and will not be issued for fractional Shares.
As of July 11, 1995, U.S. Trust held of record substantially all of the
Shares in the Funds as agent or custodian for its customers, but did not own
such Shares beneficially because it did not have voting or investment discre-
tion with respect to such Shares.
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<PAGE>
CUSTODIAN AND TRANSFER AGENT
United States Trust Company of New York serves as the custodian of the Funds'
assets and as their transfer and dividend disbursing agent. Communications to
the custodian and transfer agent should be directed to United States Trust Com-
pany of New York, Mutual Funds Service Division, 770 Broadway, New York, New
York 10003-9598.
U.S. Trust has entered into an International Custodian Agreement with Morgan
Stanley Trust Company, 1 Pierrepont Plaza, Brooklyn, NY 11201, providing for
the custody of foreign securities held by the Funds.
U.S. Trust has also entered into a sub-transfer agency arrangement with MFSC,
73 Tremont Street, Boston, Massachusetts 02108-3913, pursuant to which MFSC
provides certain transfer agent, dividend disbursement and registrar services
to the Funds.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders, the per-
formance of the Shares of the Funds may be quoted and compared to that of other
mutual funds with similar investment objectives and to stock or other relevant
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For exam-
ple, the performance of a Fund may be compared to data prepared by Lipper Ana-
lytical Services, Inc., a widely recognized independent service which monitors
the performance of mutual funds. The performance of a Fund may also be compared
to the Europe, Australia, and Far East Index ("EAFE") and the Financial Times
Index, unmanaged standard foreign securities indexes.
Performance data as reported in national financial publications, including but
not limited to Money Magazine, Forbes, Barron's, The Wall Street Journal and
The New York Times, or in publications of a local or regional nature, may also
be used in comparing the performance of the Funds.
From time to time, each Fund may advertise its performance by using "average
annual total return" over various periods of time. Such total return figure re-
flects the average percentage change in the value of an investment in a Fund
from the beginning date of the measuring period to the end of the measuring pe-
riod. Average total return figures will be given for the most recent one-year
period, and may be given for other periods as well (such as from the commence-
ment of a Fund's operations, or on a year-by-year basis). Each Fund may also
use aggregate total return figures for various periods, representing the cumu-
lative change in the value of an investment in the Fund for the specific peri-
od. Both methods of calculating total return assume that dividends and capital
gain distributions made by a Fund during the period are reinvested in Fund
Shares and also reflect the maximum sales load charged by the Fund.
Performance will fluctuate and any quotation of performance should not be con-
sidered as representative of a Fund's future performance. Shareholders should
remember that performance is generally a function of the kind and quality of
the instrument held in a portfolio, operating expenses, and market conditions.
Any fees charged by Shareholder Organizations with respect to accounts of Cus-
tomers that have invested in Shares will not be included in calculations of
performance.
MISCELLANEOUS
Shareholders will receive unaudited semiannual reports describing the Funds'
investment operations and annual financial statements audited by the Funds' in-
dependent auditors.
As used in this Prospectus, a "vote of the holders of a majority of the out-
standing shares" of Master Fund or a particular Fund means, with respect to the
approval of an investment advisory agreement or a change in a fundamental in-
vestment policy, the affirmative vote of the lesser of (a) more than 50% of the
34
<PAGE>
outstanding shares of Master Fund or such Fund, or (b) 67% or more of the
shares of Master Fund or such Fund present at a meeting if more than 50% of
the outstanding shares of Master Fund or the Fund are represented at the meet-
ing in person or by proxy.
Inquiries regarding any of the Funds may be directed to the Distributor at
the address listed under "Distributor."
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INSTRUCTIONS FOR NEW ACCOUNT APPLICATION
OPENING YOUR ACCOUNT:
Complete the Application(s) and mail to: FOR OVERNIGHT DELIVERY: send to:
UST Master Funds UST Master Funds c/o Mutual Funds
c/o Mutual Funds Service Company Service Company--Transfer Agent 73
P.O. Box 2798 Tremont Street Boston, MA 02108-3913
Boston, MA 02208-2798
Please enclose with the Application(s) your check made payable to the "UST
Master Funds" in the amount of your investment.
For direct wire purchases please refer to the section of the Prospectus
entitled "How to Purchase and Redeem Shares--Purchase Procedures."
MINIMUM INVESTMENTS:
Except as provided in the Prospectus, the minimum initial investment is $500
per Fund; subsequent investments must be in the minimum amount of $50 per Fund.
Investments may be made in excess of these minimums.
REDEMPTIONS:
Shares can be redeemed in any amount and at any time in accordance with
procedures described in the Prospectus. In the case of shares recently
purchased by check, redemption proceeds will not be made available until the
transfer agent is reasonably assured that the check has been collected in
accordance with applicable banking regulations.
Certain legal documents will be required from corporations or other
organizations, executors and trustees, or if redemption is requested by anyone
other than the shareholder of record. Written redemption requests in excess of
$50,000 per account must be accompanied by signature guarantees.
SIGNATURES: Please be sure to sign the Application(s).
If the shares are registered in the name of:
- an individual, the individual should sign.
- joint tenants, both tenants should sign.
- a custodian for a minor, the custodian should sign.
- a corporation or other organization, an authorized officer should sign
(please indicate corporate office or title).*
- a trustee or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity).*
*A corporate resolution or appropriate certificate may be required.
QUESTIONS:
If you have any questions regarding the Application or redemption
requirements, please contact the transfer agent at (800) 446-1012 between 9:00
a.m. and 5:00 p.m. (Eastern Time).
36
<PAGE>
--------------------------------------------------------------------------------
MUTUAL FUNDS SERVICE COMPANY
[LOGO OF UST CLIENT SERVICES
MASTER FUNDS P.O. Box 2798
APPEARS HERE] Boston, MA 02208-2798 NEW ACCOUNT APPLICATION
(800) 446-1012
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
ACCOUNT REGISTRATION
-------------------------------------------------------------------------------
[_] Individual [_] Joint Tenants [_] Trust [_] Gift/Transfer to Minor
[_] Other
Note: Joint tenant registration will be as "joint tenants with right of
survivorship" unless otherwise specified. Trust registrations should specify
name of the trust, trustee(s), beneficiary(ies), and the date of the trust
instrument. Registration for Uniform Gifts/Transfers to Minors should be in the
name of one custodian and one minor and include the state under which the
custodianship is created (using the minor's Social Security Number ("SSN")). For
IRA accounts a different application is required.
------------------------------ -----------------------------------------------
Name(s) (please print) Social Security # or Taxpayer Identification #
( )
------------------------------ -----------------------------------------------
Name Telephone #
------------------------------
Address
------------------------------ [_] U.S. Citizen [_] Other (specify) _________
City/State/Zip
--------------------------------------------------------------------------------
FUND SELECTION (THE MINIMUM INITIAL AND SUBSEQUENT INVESTMENT IS $500 PER FUND
AND $50 PER FUND, RESPECTIVELY. MAKE CHECKS PAYABLE TO "UST MASTER FUNDS.")
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
INITIAL INVESTMENT INITIAL INVESTMENT
[_] International Fund $ ________________ 802 [_] Emerging Americas Fund $ ________________ 822
[_] Pan European Fund $ ________________ 821 [_] Other $ ________________
[_] Pacific/Asia Fund $ ________________ 820 TOTAL INITIAL INVESTMENT: $ ________________
</TABLE>
NOTE: If investing by wire, you A. BY MAIL: Enclosed is a check in the amount
must obtain a Bank Wire Control of $ ____ payable to "UST Master Funds."
Number. To do so, please call B. BY WIRE: A bank wire in the amount
(800) 446-1012 and ask for the of $ _________ has been sent to the Fund
Wire Desk. from ______________ _________________________
Name of Bank Wire Control Number
CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and dividend
distributions will be reinvested in additional shares unless appropriate boxes
below are checked:
All dividends are to be [_] reinvested [_] paid in cash
All capital gains are to be [_] reinvested [_] paid in cash
--------------------------------------------------------------------------------
ACCOUNT PRIVILEGES
--------------------------------------------------------------------------------
TELEPHONE EXCHANGE AND REDEMPTION
[_] I/We appoint MFSC as my/our agent to act upon instructions received by
telephone in order to effect the telephone exchange and redemption privilages.
I/We hereby ratify any instructions given pursuant to this authorization and
agree that Master Fund, Master Tax-Exempt Fund, MFSC and their directors,
officers and employees will not be liable for any loss, liability, cost or
expense for acting upon instructions believed to be genuine and in accordance
with the procedures described in the then current Prospectus. To the extent that
Master Fund and Master Tax-Exempt Fund fail to use reasonable procedures as a
basis for their belief, they or their service contractors may be liable for
instructions that prove to be fraudulent or unauthorized.
I/We further acknowledge that it is my/our responsibility to read the Prospectus
of any Fund into which I/we exchange.
[_] I/We do not wish to have the ability to exercise telephone redemption and
exchange privileges. I/We further understand that all exchange and redemption
requests must be in writing.
SPECIAL PURCHASE AND REDEMPTION PLANS
I/We have completed and attached the Supplemental Application for:
[_] Automatic Investment Plan
[_] Systematic Withdrawal Plan
AUTHORITY TO TRANSMIT REDEMPTION PROCEEDS TO PRE-DESIGNATED ACCOUNT.
I/We hereby authorize MFSC to act upon instructions received by telephone to
withdraw $500 or more from my/our account in the UST Master Funds and to wire
the amount withdrawn to the following commercial bank account. I/We understand
that MFSC charges an $8.00 fee for each wire redemption, which will be deducted
from the proceeds of the redemption.
Title on Bank Account*__________________________________________________________
Name of Bank ___________________________________________________________________
Bank A.B.A. Number ___________________ Account Number _________________________
Bank Address ___________________________________________________________________
City/State/Zip _________________________________________________________________
(attach voided check here)
A corporation, trust or partnership must also submit a "Corporate Resolution"
(or "Certificate of Partnership") indicating the names and titles of officers
authorized to act on its behalf.
* TITLE ON BANK AND FUND ACCOUNT MUST BE IDENTICAL.
--------------------------------------------------------------------------------
<PAGE>
-------------------------------------------------------------------------------
------------------------------------------------------------------
RIGHTS OF ACCUMULATION
------------------------------------------------------------------
To qualify for Rights of Accumulation, you must complete this
section, listing all of your accounts including those in your
spouse's name, joint accounts and accounts held for your
minor children. If you need more space, please attach a
separate sheet.
[_] I/We qualify for the Rights of Accumulation sales charge
discount described in the Prospectus and Statement of
Additional Information.
[_] I/We own shares of more than one Fund distributed by
Edgewood Service, Inc. Listed below are the numbers of each
of my/our Shareholder Accounts.
[_] The registration of some of my/our shares differs from that
shown on this application. Listed below are the account
number(s) and full registration(s) in each case.
LIST OF OTHER UST MASTER FUND ACCOUNTS:
______________________ _______________________________________
______________________ _______________________________________
______________________ _______________________________________
ACCOUNT NUMBER ACCOUNT REGISTRATIONS
------------------------------------------------------------------
LETTER OF INTENT
------------------------------------------------------------------
[_] I agree to the Letter of Intent provisions set forth in the Prospectus.
Although I am not obligated to purchase, and Master Fund is not obligated
to sell, I intend to invest, over a 13-month period beginning on , 19 ,
an aggregate amount in Eligible Funds of Master Fund and Master Tax-
Exempt Fund at least equal to (check appropriate box):
[_] $50,000 [_] $100,000 [_] $250,000 [_] $500,000 [_] $1,000,000
[_] $2,000,000
By signing this application, I hereby authorize MFSC to redeem an
appropriate number of shares held in escrow to pay any additional sales
loads payable in the event that I do not fulfill the terms of this Letter
of Intent.
------------------------------------------------------------------
AGREEMENTS AND SIGNATURES
------------------------------------------------------------------
By signing this application, I/we hereby certify under penalty of perjury that
the information on this application is complete and correct and that as
required by Federal law:
[_] I/We certify that (1) the number(s) shown on this form is/are the correct
taxpayer identification number(s) and (2) I/we are not subject to backup
withholding either because I/we have not been notified by the Internal Revenue
Service that I/we are subject to backup withholding, or the IRS has notified
me/us that I am/we are no longer subject to backup withholding. (NOTE: IF ANY
OR ALL OF PART 2 IS NOT TRUE, PLEASE STRIKE OUT THAT PART BEFORE SIGNING.)
[_] If no taxpayer identification number ("TIN") or SSN has been provided
above, I/we have applied, or intend to apply, to the IRS or the Social Security
Administration for a TIN or a SSN, and I/we understand that if I/we do not
provide this number to MFSC within 60 days of the date of this application, or
if I/we fail to furnish my/our correct SSN or TIN, I/we may be subject to a
penalty and a 31% backup withholding on distributions and redemption proceeds.
(Please provide this number on Form W-9. You may request the form by calling
MFSC at the number listed above).
I/We represent that I am/we are of legal age and capacity to purchase shares of
the UST Master Funds. I/We have received, read and carefully reviewed a copy of
the appropriate Fund's current Prospectus and agree to its terms and by signing
below I/we acknowledge that neither the Fund nor the Distributor is a bank and
that Fund Shares are not deposits or obligations of, or guaranteed or endorsed
by, United States Trust Company of New York, its parent and affiliates and the
Shares are not federally insured by, guaranteed by, obligations of or otherwise
supported by the U.S. Government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other governmental agency; and that an
investment in the Funds involves investment risks, including possible loss of
principal amount invested.
X ___________________________ Date __________________________
Owner Signature
X ___________________________ Date __________________________
Co-Owner Signature
Sign exactly as name(s) of registered owner(s) appear(s) above (including legal
title if signing for a corporation, trust custodial account, etc.).
------------------------------------------------------------------
FOR USE BY AUTHORIZED AGENT (BROKER/DEALER) ONLY
------------------------------------------------------------------
We hereby submit this application for the purchase of shares in accordance with
the terms of our selling agreement with Edgewood Services, Inc., and with the
Prospectus and Statement of Additional Information of each Fund purchased. We
agree to notify MFSC of any purchases made under the Letter of Intent or Rights
of Accumulation.
------------------------------------------- -------------------------------
Investment Dealer's Name Source of Business Code
------------------------------------------- -------------------------------
Main Office Address Branch Number
------------------------------------------- -------------------------------
Representative's Number Representative's Name
------------------------------------------- -------------------------------
Branch Address Telephone
------------------------------------------- -------------------------------
Investment Dealer's Title
Authorized Signature
<PAGE>
--------------------------------------------------------------------------------
MUTUAL FUNDS SERVICE COMPANY
[LOGO OF UST CLIENT SERVICES SUPPLEMENTAL APPLICATION
MASTER FUNDS P.O. Box 2798 SPECIAL INVESTMENT AND
APPEARS HERE] Boston, MA 02208-2798 WITHDRAWAL OPTIONS
(800) 446-1012
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ACCOUNT REGISTRATION PLEASE SUPPLY THE FOLLOWING INFORMATION EXACTLY AS IT
APPEARS ON THE FUND'S RECORD.
--------------------------------------------------------------------------------
Fund Name _________________________ Account Number _____________________________
Owner Name ________________________ Social Security or Taxpayer ID Number_______
Street Address ____________________ City, State, Zip Code ______________________
Resident of [_] U.S. [_] Other ___ [_] Check here if this is a change of
address
--------------------------------------------------------------------------------
DISTRIBUTION OPTIONS (DIVIDENDS AND CAPITAL GAINS WILL BE REINVESTED
UNLESS OTHERWISE INDICATED)
--------------------------------------------------------------------------------
A. CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS: All capital gain and dividend
distributions will be reinvested in additional shares unless appropriate boxes
below are checked: All dividends are to be [_] reinvested [_] paid in cash
All capital gains are to be [_] reinvested [_] paid in cash
B. PAYMENT ORDER: Complete only if distribution checks are to be payable to
another party. Make distribution checks payable to:
Name of Your Bank __________________________
Name _____________________________ Bank Account Number ________________________
Address __________________________ Address of Bank ____________________________
City, State, Zip Code __________________________________________________________
C. DISTRIBUTIONS REINVESTED-CROSS FUNDS: Permits all distributions from
one Fund to be automatically reinvested into another identically-registered
UST Master Fund. (NOTE: You may NOT open a new Fund account with this option.)
Transfer all distributions earned:
From: ____________________________ Account No. ________________________________
(Fund) Account No. ________________________________
To: ______________________________
(Fund)
--------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN [_] YES [_] NO
--------------------------------------------------------------------------------
I/We hereby authorize MFSC to debit my/our personal checking account on the
designated dates in order to purchase shares in the Fund indicated at the top
of this application at the applicable public offering price determined on that
day.
[_] Monthly on the 1st day [_] Monthly on the 15th day
[_] Monthly on both the 1st and 15th days
Amount of each debit (minimum $50 per Fund) $ ________________________
NOTE: A Bank Authorization Form (below) and a voided personal check must
accompany the Automatic Investment Plan application.
--------------------------------------------------------------------------------
UST MASTER FUNDS
CLIENT SERVICES AUTOMATIC INVESTMENT PLAN
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BANK AUTHORIZATION
--------------------------------------------------------------------------------
---------------------------- ------------------------ --------------------------
Bank Name Bank Address Bank Account Number
I/We authorize you, the above named bank, to debit my/our account for amounts
drawn by MFSC, acting as my agent for the purchase of Fund shares. I/We agree
that your rights in respect to each withdrawal shall be the same as if it were a
check drawn upon you and signed by me/us. This authority shall remain in effect
until revoked in writing and received by you. I/We agree that you shall incur no
liability when honoring debits, except a loss due to payments drawn against
insufficient funds. I/We further agree that you will incur no liability to me if
you dishonor any such withdrawal. This will be so even though such dishonor
results in the cancellation of that purchase.
-------------------------------------- ----------------------------------------
Account Holder's Name Joint Account Holder's Name
X ______________________ _____________ X ________________________ _____________
Signature Date Signature Date
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN [_] YES [_] NO NOT AVAILABLE FOR IRA'S
--------------------------------------------------------------------------------
AVAILABLE TO SHAREHOLDERS WITH ACCOUNT BALANCES OF $10,000 OR MORE.
I/We hereby authorize MFSC to redeem the necessary number of shares from
my/our UST Master Fund Account on the designated dates in order to make the
following periodic payments:
[_] Monthly on the 24th day [_] Quarterly on the 24th day of January, April,
July and October [_] Other________________________________________________
(This request for participation in the Plan must be received by the 18th day of
the month in which you wish withdrawals to begin.)
Amount of each check ($100 minimum) $_________________________
Please make check payable to: Recipient ___________________________
(To be completed only if redemption
proceeds to be paid to other than Street Address ______________________
account holder of record or mailed
to address other than address of record) City, State, Zip Code _______________
NOTE: If recipient of checks is not the registered shareholder, signature(s)
below must be guaranteed. A corporation, trust or partnership must also submit a
"Corporate Resolution" (or "Certification of Partnership") indicating the names
and titles of officers authorized to act on its behalf.
--------------------------------------------------------------------------------
AGREEMENT AND SIGNATURES
--------------------------------------------------------------------------------
The investor(s) certifies and agrees that the certifications, authorizations,
directions and restrictions contained herein will continue until MFSC receives
written notice of any change or revocation. Any change in these instructions
must be in writing with all signatures guaranteed (if applicable).
Date ______________________
X X
---------------------------------------- ---------------------------------------
Signature Signature
---------------------------------------- ---------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
X X
---------------------------------------- ---------------------------------------
Signature Signature
---------------------------------------- ---------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
*ELIGIBLE GUARANTORS: An Eligible Guarantor institution is a bank, trust
company, broker, dealer, municipal or government securities broker or dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association, provided that such institution is a
participant in STAMP, the Securities Transfer Agents Medallion Program.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY......................................................... 2
EXPENSE SUMMARY............................................................ 3
FINANCIAL HIGHLIGHTS....................................................... 5
INVESTMENT OBJECTIVES AND POLICIES......................................... 9
PORTFOLIO INSTRUMENTS AND OTHER INVESTMENT INFORMATION..................... 14
INVESTMENT LIMITATIONS..................................................... 17
PRICING OF SHARES.......................................................... 19
HOW TO PURCHASE AND REDEEM SHARES.......................................... 19
INVESTOR PROGRAMS.......................................................... 25
DIVIDENDS AND DISTRIBUTIONS................................................ 29
TAXES...................................................................... 29
MANAGEMENT OF THE FUNDS.................................................... 30
DESCRIPTION OF CAPITAL STOCK............................................... 33
CUSTODIAN AND TRANSFER AGENT............................................... 34
PERFORMANCE INFORMATION.................................................... 34
MISCELLANEOUS.............................................................. 34
INSTRUCTIONS FOR NEW ACCOUNT APPLICATION................................... 36
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' STATEMENT OF ADDI-
TIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY MASTER
FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
MASTER FUND OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
USTINLP895
[LOGO OF UST APPEARS HERE]
MASTER FUNDS, INC.
INTERNATIONAL FUND
EMERGING AMERICAS FUND
PACIFIC/ASIA FUND
PAN EUROPEAN FUND
Prospectus August 1, 1995
