<PAGE>
-------------------------------
UST
MASTER FUNDS, INC.
-------------------------------
FIXED INCOME PORTFOLIOS
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LETTER TO SHAREHOLDERS.................................................... 1
STATEMENTS OF ASSETS AND LIABILITIES...................................... 2
STATEMENTS OF OPERATIONS.................................................. 3
STATEMENTS OF CHANGES IN NET ASSETS....................................... 4
FINANCIAL HIGHLIGHTS--SELECTED PER SHARE DATA AND RATIOS.................. 6
PORTFOLIOS OF INVESTMENTS
Treasury Money Fund...................................................... 8
Government Money Fund.................................................... 9
Money Fund............................................................... 10
Short-Term Government Securities Fund.................................... 11
Intermediate-Term Managed Income Fund.................................... 12
Managed Income Fund...................................................... 13
NOTES TO FINANCIAL STATEMENTS............................................. 14
</TABLE>
For shareholder account information, current price and yield quotations, or to
make an initial purchase or obtain a prospectus, call the appropriate telephone
number listed below:
. SHAREHOLDER SERVICES 1-800-446-1012
. CURRENT PRICE AND YIELD INFORMATION 1-800-233-9180
. INITIAL PURCHASE AND PROSPECTUS INFORMATION 1-800-233-1136
This report must be preceded or accompanied by a current prospectus.
Prospectuses containing more complete information including charges and ex-
penses regarding UST Master Funds, Inc. and UST Master Tax-Exempt Funds, Inc.
may be obtained by contacting the Funds at 1-800-233-1136.
Investors should read the current prospectus carefully prior to investing or
sending money.
UST Master Funds, Inc. and UST Master Tax-Exempt Funds, Inc. are sponsored and
distributed by Edgewood Services, Inc.
You may write to UST Master Funds, Inc. and UST Master Tax-Exempt Funds, Inc.
at the following address:
UST MASTER FUNDS, INC.
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, ITS PARENT AND AFFILIATES
AND SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN THE FUNDS INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. FUND SHARES ARE NOT
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
<PAGE>
LETTER TO SHAREHOLDERS
- -------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present UST Master Funds and UST Master Tax-Exempt Funds semi-
annual reports for the six months ended September 30, 1995.
The U.S. stock market continued to make strong gains for the period.
International markets remained difficult overall, though conditions are
looking up. Bond markets both home and abroad were somewhat volatile, yet the
spectacular gains of early 1995 were not eroded. While the general market has
been very favorable and some segments have been spectacular, the market also
continues to be variable and unforgiving to those companies which fail to meet
earnings expectations. In this environment, our outlook is somewhat cautious.
Much of the good news may already be in the markets, and further broad gains
will depend on continued good news about earnings and interest rates.
Investment performance continued to be strong in several of our equity and
fixed income funds. The Early Life Cycle Fund, with a return of 31.16%* ranked
105th among 288 Small Company Growth Funds ranked by Lipper Analytical
Services, Inc.** (Lipper) for the one year period ended September 30, 1995.
The Communication and Entertainment Fund returned 30.98%,* Global Competitors
returned 28.77%,* ranking 121st, and 184th, respectively, among 550 Growth
Funds ranked by Lipper for the same period. Among our fixed-income funds, The
Managed Income returned 16.98%* ranking 8th among 77 Corporate BBB Funds***
tracked by Lipper. The Intermediate-Term Managed Income Funds returned 14.61%*
ranking 13th among 144 Lipper Intermediate-Term Investment Grade Bond Funds.
Three Tax-Exempt funds turned in the best relative performance in our family
of funds during the one year period. Lipper ranked both the Long-Term Tax-
Exempt, 16.03%,* and the N.Y. Intermediate-Term Funds, 10.37%,* number 1 among
213 General Municipal Bond Funds,*** and 22 among N.Y. State Municipal Bond
Funds,*** respectively. The Intermediate-Term Tax Exempt Fund ranked 2nd among
111 Lipper Intermediate-Term Municipal Bond Funds*** with a return of 11.16%.*
With a diversified portfolio of professionally managed funds, we are prepared
to fulfill your investment needs. We appreciate your participation in UST
Master Funds and UST Master Tax-Exempt Funds and look forward to serving you
in the years to come.
Alfred C. Tannachion
Chairman of the Board and President
- --------
* Past performance is not predictive of future performance. Total return
represents the change during the period in a hypothetical account with
dividends reinvested, without taking into account the maximum initial
sales charge of 4.5%. Investment return and principal value will fluctuate
so that an investor's shares when redeemed, may be worth more or less than
their original cost.
The average annual total returns on 9/30/95, including the maximum 4.5%
sales charge for one year and since inception (12/31/92) were 25.25% and
20.50%, respectively, for Early Life Cycle Fund, 25.13% and 23.54%,
respectively, for Communication and Entertainment Fund, 22.96% and 12.77%,
respectively, for Global Competitors Fund and 9.49% and 4.86%, respectively,
for Intermediate-Term Managed Income Fund. The average annual total returns
on 9/30/95, including the maximum 4.5% sales charge for one year, five year
and since inception were 11.66%, 9.14% and 10.68%, respectively, for Managed
Income Fund (1/9/86 inception), 10.78%, 9.35% and 10.69%, respectively, for
Long Term Tax-Exempt Fund (2/5/86 inception), 5.38%, 6.01% and 6.05%,
respectively, for N.Y. Intermediate-Term Tax-Exempt Fund (5/31/90 inception)
and 6.10%, 7.14% and 7.95%, respectively, for Intermediate-Term Tax-Exempt
Fund (12/3/85 inception).
A portion of the tax-exempt funds' income may be subject to the Alternative
Minimum Tax and some investors may be subject to certain state and local
taxes.
Each fund is currently waiving certain fees. Had the funds not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
** Lipper Analytical Services, Inc. is an independent mutual fund performance
monitor whose rankings are based on total return excluding sales charges.
*** For the five year period ended 9/30/95, Lipper ranked Managed Income Fund
19 among 26 Corporate BBB Funds, Long-Term Tax-Exempt Fund 2 among 98
General Municpal Bond Funds, N.Y. Intermediate-Term Tax-Exempt Fund 5
among 5 N.Y. State Municipal Bond Funds and Intermediate-Term Tax-Exempt
Fund 5 among 32 Intermediate-Term Municipal Bond Funds.
1
<PAGE>
UST MASTER FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
AS OF SEPTEMBER 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE-
SHORT-TERM TERM
TREASURY GOVERNMENT GOVERNMENT MANAGED MANAGED
MONEY MONEY MONEY SECURITIES INCOME INCOME
FUND FUND FUND FUND FUND FUND
------------ ------------ ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at cost -- see
accompanying portfolios.... $197,347,890 $376,689,480 $359,958,314 $20,520,884 $60,485,379 $82,358,069
============ ============ ============ =========== =========== ===========
Investments, at value*
(Note 1)................... $197,347,890 $376,689,480 $359,958,314 $20,815,345 $61,010,438 $84,537,636
Interest receivable......... 60,716 6,964 50,234 368,113 873,278 939,209
Receivable for fund shares
sold....................... 1,000 10,399 21,394 198,463 217,471 23,554
Prepaid expenses............ 1,660 4,863 5,229 52 284 699
Unamortized organization
costs (Note 5)............. 4,736 -- -- 9,429 9,429 --
Receivable from Investment
Adviser (Note 2)........... -- -- -- 1,728 -- --
Other....................... -- 412 -- -- 517 295
------------ ------------ ------------ ----------- ----------- -----------
TOTAL ASSETS................ 197,416,002 376,712,118 360,035,171 21,393,130 62,111,417 85,501,393
LIABILITIES:
Payable for investments
purchased.................. -- -- -- 1,498,725 -- --
Payable for dividends
declared................... 779,784 1,638,724 1,935,240 86,907 287,365 317,956
Payable for fund shares
redeemed................... 100,000 115,911 1,140,849 9,998 32,429 901,289
Investment advisory fees
payable (Note 2)........... 47,542 66,526 70,453 -- 15,995 44,121
Administration fees and
shareholder servicing fees
payable (Note 2)........... 27,322 54,623 60,177 4,390 8,153 14,057
Accrued expenses and other
payables................... 56,793 120,273 211,817 21,108 27,137 31,843
------------ ------------ ------------ ----------- ----------- -----------
TOTAL LIABILITIES........... 1,011,441 1,996,057 3,418,536 1,621,128 371,079 1,309,266
------------ ------------ ------------ ----------- ----------- -----------
NET ASSETS................... $196,404,561 $374,716,061 $356,616,635 $19,772,002 $61,740,338 $84,192,127
============ ============ ============ =========== =========== ===========
NET ASSETS consist of:
Undistributed/(distributions
in excess of) net
investment income.......... $ (55) $ -- $ -- $ -- $ 7,401 $ 18,666
Accumulated net realized
loss on investments........ (18,392) (60,856) (55,222) (408,580) (657,772) (4,830,985)
Unrealized appreciation on
investments................ -- -- -- 294,461 525,059 2,179,567
Par value (Note 4).......... 196,423 374,808 356,835 2,819 8,660 9,377
Paid in capital in excess of
par value.................. 196,226,585 374,402,109 356,315,022 19,883,302 61,856,990 86,815,502
------------ ------------ ------------ ----------- ----------- -----------
TOTAL NET ASSETS............. $196,404,561 $374,716,061 $356,616,635 $19,772,002 $61,740,338 $84,192,127
============ ============ ============ =========== =========== ===========
Shares of Common Stock
Outstanding................. 196,422,910 374,807,309 356,835,521 2,818,300 8,660,051 9,377,058
NET ASSET VALUE PER SHARE.... $1.00 $1.00 $1.00 $7.02 $7.13 $8.98
===== ===== ===== ===== ===== =====
</TABLE>
* Includes repurchase agreements aggregating $16,800,313 for Government Money
Fund and $23,278,685 for Money Fund.
See Notes to Financial Statements.
2
<PAGE>
UST MASTER FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE-
SHORT-TERM TERM
TREASURY GOVERNMENT GOVERNMENT MANAGED MANAGED
MONEY MONEY MONEY SECURITIES INCOME INCOME
FUND FUND FUND FUND FUND FUND
---------- ----------- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income........ $6,144,218 $21,508,991 $24,457,267 $ 690,610 $1,891,337 $3,102,919
---------- ----------- ----------- ---------- ---------- ----------
EXPENSES:
Investment advisory
fees (Note 2)......... 321,109 896,862 1,017,527 32,301 96,178 321,128
Administration fees
(Note 2).............. 164,948 552,665 627,007 25,000 42,351 65,985
Administrative service
fees (Note 2)......... 23,439 116,249 143,324 8,423 10,117 22,760
Shareholder servicing
agent fees (Note 2)... 4,663 9,915 20,578 5,044 9,077 19,578
Custodian fees
(Note 2).............. 56,525 192,827 215,727 5,422 11,767 24,090
Registration and filing
fees.................. 4,569 7,507 1,601 6,819 5,396 5,239
Legal and audit fees... 14,550 55,847 44,484 1,978 3,699 8,944
Directors' fees and
expenses (Note 2)..... 3,571 12,853 14,171 458 814 1,509
Shareholder reports.... 3,190 11,568 7,567 1,827 3,722 9,153
Amortization of
organization costs
(Note 5).............. 5,334 -- -- 2,105 2,105 --
Miscellaneous expenses. 4,269 19,315 24,154 710 1,724 6,419
---------- ----------- ----------- ---------- ---------- ----------
TOTAL EXPENSES......... 606,167 1,875,608 2,116,140 90,087 186,950 484,805
Fees waived and
reimbursed by
investment adviser and
administrators
(Note 2).............. (23,439) (116,249) (143,324) (23,671) (10,117) (65,602)
---------- ----------- ----------- ---------- ---------- ----------
NET EXPENSES........... 582,728 1,759,359 1,972,816 66,416 176,833 419,203
---------- ----------- ----------- ---------- ---------- ----------
NET INVESTMENT INCOME... 5,561,490 19,749,632 22,484,451 624,194 1,714,504 2,683,716
---------- ----------- ----------- ---------- ---------- ----------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS (NOTE 1):
Net realized
gain/(loss) on
security transactions. 36 -- (20,496) 66,728 854,611 1,426,313
Change in unrealized
appreciation/
(depreciation) on
investments........... -- -- -- 343,014 1,883,293 4,483,833
---------- ----------- ----------- ---------- ---------- ----------
NET REALIZED AND
UNREALIZED GAIN/(LOSS)
ON INVESTMENTS........ 36 -- (20,496) 409,742 2,737,904 5,910,146
---------- ----------- ----------- ---------- ---------- ----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............ $5,561,526 $19,749,632 $22,463,955 $1,033,936 $4,452,408 $8,593,862
========== =========== =========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
UST MASTER FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE-
SHORT-TERM TERM
TREASURY GOVERNMENT GOVERNMENT MANAGED MANAGED
MONEY MONEY MONEY SECURITIES INCOME INCOME
FUND FUND FUND FUND FUND FUND
------------ ------------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
PERIOD ENDED SEPTEMBER
30, 1995
(UNAUDITED)
Net investment income....... $ 5,561,490 $ 19,749,632 $ 22,484,451 $ 624,194 $ 1,714,504 $ 2,683,716
Net realized gain/(loss) on
investments................ 36 -- (20,496) 66,728 854,611 1,426,313
Change in unrealized
appreciation/(depreciation)
on investments............. -- -- -- 343,014 1,883,293 4,483,833
------------ ------------- ------------ ----------- ----------- ------------
Net increase in net assets
resulting from operations.. 5,561,526 19,749,632 22,463,955 1,033,936 4,452,408 8,593,862
Distributions to
shareholders:
From net investment income. (5,561,490) (19,749,632) (22,484,451) (624,194) (1,712,409) (2,653,685)
Increase/(decrease) in net
assets from fund share
transactions (Note 4)...... (527,857) (351,058,143) (467,941,197) (5,853,367) 11,071,891 (7,772,295)
------------ ------------- ------------ ----------- ----------- ------------
Net increase/(decrease) in
net assets................. (527,821) (351,058,143) (467,961,693) (5,443,625) 13,811,890 (1,832,118)
NET ASSETS:
Beginning of period........ 196,932,382 725,774,204 824,578,328 25,215,627 47,928,448 86,024,245
------------ ------------- ------------ ----------- ----------- ------------
End of period (1).......... $196,404,561 $ 374,716,061 $356,616,635 $19,772,002 $61,740,338 $ 84,192,127
============ ============= ============ =========== =========== ============
YEAR ENDED MARCH 31, 1995
Net investment income....... $ 9,821,059 $ 32,245,731 $ 35,659,456 $ 1,220,767 $ 2,552,625 $ 6,138,543
Net realized gain/(loss)
on investments............. 3,816 (49,433) (20,821) (419,685) (789,710) (3,676,167)
Change in unrealized
appreciation/(depreciation)
on investments............. -- -- -- 248,742 322,607 590,805
------------ ------------- ------------ ----------- ----------- ------------
Net increase in net assets
resulting from operations.. 9,824,875 32,196,298 35,638,635 1,049,824 2,085,522 3,053,181
Distributions to
shareholders:
From net investment income. (9,821,059) (32,245,731) (35,674,223) (1,220,767) (2,547,450) (6,113,843)
In excess of net investment
income.................... -- -- -- -- -- (11,365)
In excess of net realized
gain on investments....... -- -- -- -- (70,815) --
Increase/(decrease) in net
assets from fund share
transactions (Note 4)...... (57,754,795) (309,084,614) 88,536,475 153,493 5,897,045 (21,806,779)
------------ ------------- ------------ ----------- ----------- ------------
Net increase/(decrease) in
net assets................. (57,750,979) (309,134,047) 88,500,887 (17,450) 5,364,302 (24,878,806)
NET ASSETS:
Beginning of year.......... 254,683,361 1,034,908,251 736,077,441 25,233,077 42,564,146 110,903,051
------------ ------------- ------------ ----------- ----------- ------------
End of year (2)............ $196,932,382 $ 725,774,204 $824,578,328 $25,215,627 $47,928,448 $ 86,024,245
============ ============= ============ =========== =========== ============
</TABLE>
(1) Including undistributed/(distributions in excess of) net investment income
of $(55) for Treasury Money Fund, $7,401 for Intermediate-Term Managed
Income Fund, and $18,666 for Managed Income Fund.
(2) Including undistributed/(distributions in excess of) net investment income
of $(55) for Treasury Money Fund, $5,306 for Intermediate-Term Managed
Income Fund and $(11,365) for Managed Income Fund.
See Notes to Financial Statements.
4
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
5
<PAGE>
UST MASTER FUNDS, INC.
FINANCIAL HIGHLIGHTS -- SELECTED PER SHARE DATA AND RATIOS
For a fund share outstanding throughout each year.
<TABLE>
<CAPTION>
DISTRIBUTIONS
NET ASSET NET REALIZED TOTAL DIVIDENDS FROM NET
VALUE, NET AND UNREALIZED FROM FROM NET REALIZED
BEGINNING INVESTMENT GAIN/(LOSS) INVESTMENT INVESTMENT GAIN ON
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME INVESTMENTS
--------- ---------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
TREASURY MONEY FUND -- (2/13/91*)
Year Ended March 31,
1991................... $1.00 $0.00782 $0.00001 $0.00783 $(0.00782) $ 0.00000
1992................... 1.00 0.04731 0.00036 0.04767 (0.04731) (0.00011)
1993................... 1.00 0.02987 0.00000 0.02987 (0.02987) (0.00030)
1994................... 1.00 0.02590 0.00000 0.02590 (0.02590) 0.00000
1995................... 1.00 0.04165 0.00000 0.04165 (0.04165) 0.00000
Period Ended September
30, 1995 (Unaudited).. 1.00 0.02600 0.00000 0.02600 (0.02600) 0.00000
GOVERNMENT MONEY FUND -- (5/8/85*)
Year Ended March 31,
1991................... $1.00 $0.07379 $0.00008 $0.07387 $(0.07379) $(0.00005)
1992................... 1.00 0.05069 0.00002 0.05071 (0.05069) (0.00005)
1993................... 1.00 0.03205 0.00000 0.03205 (0.03205) 0.00000
1994................... 1.00 0.02736 0.00000 0.02736 (0.02736) 0.00000
1995................... 1.00 0.04397 0.00000 0.04397 (0.04397) 0.00000
Period Ended September
30, 1995 (Unaudited).. 1.00 0.02744 0.00000 0.02744 (0.02744) 0.00000
MONEY FUND -- (5/3/85*)
Year Ended March 31,
1991................... $1.00 $0.07589 $0.00001 $0.07590 $(0.07589) $ 0.00000
1992................... 1.00 0.05165 0.00017 0.05182 (0.05165) (0.00019)
1993................... 1.00 0.03234 0.00000 0.03234 (0.03234) 0.00000
1994................... 1.00 0.02780 0.00000 0.02780 (0.02780) 0.00000
1995................... 1.00 0.04494 0.00002 0.04496 (0.04496) 0.00000
Period Ended September
30, 1995 (Unaudited).. 1.00 0.02755 0.00000 0.02755 (0.02755) 0.00000
SHORT-TERM GOVERNMENT SECURITIES FUND -- (12/31/92*)
Year Ended March 31,
1993................... $7.00 $ 0.06 $ 0.06 $ 0.12 $ (0.06) $ 0.00
1994................... 7.06 0.24 (0.09) 0.15 (0.24) (0.02)
1995................... 6.93 0.33 (0.04) 0.29 (0.33) 0.00
Period Ended September
30, 1995 (Unaudited).. 6.89 0.20 0.13 0.33 (0.20) 0.00
INTERMEDIATE-TERM MANAGED INCOME FUND -- (12/31/92*)
Year Ended March 31,
1993................... $7.00 $ 0.08 $ 0.19 $ 0.27 $ (0.08) $ 0.00
1994................... 7.19 0.31 (0.27) 0.04 (0.31) 0.00
1995................... 6.83 0.39 (0.07) 0.32 (0.39) 0.00
Period Ended September
30, 1995 (Unaudited).. 6.75 0.22 0.38 0.60 (0.22) 0.00
MANAGED INCOME FUND -- (1/9/86*)
Year Ended March 31,
1991................... $8.77 $ 0.67 $ 0.44 $ 1.11 $ (0.67) $ (0.09)
1992................... 9.12 0.65 0.27 0.92 (0.65) (0.24)
1993................... 9.15 0.58 0.79 1.37 (0.58) (0.30)
1994................... 9.64 0.47 (0.26) 0.21 (0.47) (0.31)
1995................... 8.57 0.51 (0.18) 0.33 (0.51) 0.00
Period Ended September
30, 1995 (Unaudited).. 8.39 0.27 0.59 0.86 (0.27) 0.00
</TABLE>
* Commencement of operations.
** Annualized.
+ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by investment adviser and administrators.
++ Total return data does not reflect sales load payable on purchase of fund
shares.
See Notes to Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
RATIO OF RATIO OF RATIO OF
DISTRIBUTIONS NET GROSS NET
IN EXCESS OF NET ASSET NET ASSETS OPERATING OPERATING INVESTMENT
NET REALIZED VALUE, END EXPENSES EXPENES INCOME PORTFOLIO FEE
GAIN ON TOTAL END TOTAL OF PERIOD TO AVERAGE TO AVERAGE TO AVERAGE TURNOVER WAIVERS
INVESTMENTS DISTRIBUTIONS OF PERIOD RETURN++ (000'S) NET ASSETS NET ASSETS + NET ASSETS RATE (NOTE 2)
------------- ------------- --------- -------- ---------- ---------- ------------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $(0.00782) $1.00 0.78% $ 110,373 0.09%** 0.60%** 5.98%** -- $0.00067
0.00 (0.04742) 1.00 4.85% 172,293 0.52% 0.57% 4.60% -- 0.00048
0.00 (0.03017) 1.00 3.06% 227,794 0.58% 0.58% 2.97% -- 0.00000
0.00 (0.02590) 1.00 2.62% 254,683 0.58% 0.58% 2.59% -- 0.00001
0.00 (0.04165) 1.00 4.25% 196,932 0.55% 0.57% 4.09% -- 0.00019
0.00 (0.02600) 1.00 2.63% 196,405 0.54%** 0.57%** 5.19%** -- 0.00011
$ 0.00 $(0.07384) $1.00 7.31% $ 700,222 0.50% 0.50% 7.31% -- $0.00000
0.00 (0.05074) 1.00 5.09% 740,689 0.50% 0.50% 5.09% -- 0.00000
0.00 (0.03205) 1.00 3.20% 710,491 0.50% 0.50% 3.20% -- 0.00000
0.00 (0.02736) 1.00 2.77% 1,034,908 0.50% 0.50% 2.74% -- 0.00003
0.00 (0.04397) 1.00 4.49% 725,774 0.50% 0.53% 4.38% -- 0.00024
0.00 (0.02744) 1.00 2.78% 374,716 0.49%** 0.52%** 5.49%** -- 0.00016
$ 0.00 $(0.07589) $1.00 7.64% $ 471,323 0.52% 0.52% 7.56% -- $0.00000
0.00 (0.05184) 1.00 5.19% 574,274 0.51% 0.51% 5.11% -- 0.00000
0.00 (0.03234) 1.00 3.25% 784,016 0.51% 0.51% 3.21% -- 0.00000
0.00 (0.02780) 1.00 2.82% 736,077 0.51% 0.51% 2.78% -- 0.00002
0.00 (0.04496) 1.00 4.59% 824,578 0.49% 0.52% 4.49% -- 0.00026
0.00 (0.02755) 1.00 2.79% 356,617 0.48%** 0.52%** 5.51%** -- 0.00018
$ 0.00 $ (0.06) $7.06 1.70% $ 13,367 0.62%** 0.82%** 3.62%** 93%** $ 0.00
(0.02) (0.28) 6.93 2.12% 25,233 0.62% 0.65% 3.42% 267% 0.00
0.00 (0.33) 6.89 4.30% 25,216 0.61% 0.67% 4.80% 198% 0.00
0.00 (0.20) 7.02 4.87% 19,772 0.62%** 0.84%** 5.79%** 56%** 0.01
$ 0.00 $ (0.08) $7.19 3.86% $ 19,478 0.72%** 0.98%** 4.69%** 66%** $ 0.01
(0.09) (0.40) 6.83 0.45% 42,564 0.69% 0.69% 4.31% 385% 0.00
(0.01) (0.40) 6.75 4.95% 47,928 0.66% 0.68% 5.91% 682% 0.00
0.00 (0.22) 7.13 8.96% 61,740 0.64%** 0.68%** 6.24%** 173%** 0.00
$ 0.00 $ (0.76) $9.12 13.37% $ 52,744 1.11% 1.11% 7.57% 342% $ 0.00
0.00 (0.89) 9.15 10.36% 99,956 1.05% 1.05% 6.97% 369% 0.00
0.00 (0.88) 9.64 15.74% 110,620 0.89% 1.04% 6.19% 455% 0.02
(0.50) (1.28) 8.57 1.73% 110,903 0.90% 1.06% 4.89% 459% 0.02
0.00 (0.51) 8.39 4.06% 86,024 1.00% 1.12% 6.09% 492% 0.01
0.00 (0.27) 8.98 10.38% 84,192 0.98%** 1.13%** 6.27%** 190%** 0.01
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
UST MASTER FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1995
TREASURY MONEY FUND (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 97.88%
Federal Farm Credit Bank
$ 2,000,000 10/13/95.............................. 5.63% $ 1,996,559
Federal Home Loan Bank
22,625,000 10/05/95.............................. 5.64 22,614,366
10,000,000 10/06/95.............................. 5.64 9,993,733
8,000,000 10/16/95.............................. 5.75 7,982,111
U.S. Treasury Bills
80,000,000 10/12/95.............................. 5.46 79,880,278
25,000,000 10/19/95.............................. 5.42 24,936,014
45,000,000 10/26/95.............................. 5.44 44,836,950
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $192,240,011)................... 192,240,011
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 2.60%
$ 4,763,629 Dreyfus Treasury Cash Management
Fund................................ 5.44%+ $ 4,763,629
344,250 Fidelity U.S. Treasury
Income Fund......................... 5.38+ 344,250
------------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $5,107,879)................... 5,107,879
------------
TOTAL INVESTMENTS
(Cost $197,347,890*)............................. 100.48% $197,347,890
OTHER ASSETS & LIABILITIES (NET)................. (0.48) (943,329)
------ ------------
NET ASSETS....................................... 100.00% $196,404,561
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+ Represents 7 day yield.
See Notes to Financial Statements.
8
<PAGE>
UST MASTER FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1995
GOVERNMENT MONEY FUND (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT VALUE
AMOUNT RATE (NOTE 1)
--------- -------- ------------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 96.04%
Federal Home Loan Bank
$ 10,000,000 10/02/95.................................. 6.30% $ 10,000,000
300,000,000 10/04/95.................................. 5.70 299,905,000
Student Loan Mortgage Association
50,000,000 10/04/95.................................. 5.70 49,984,167
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $359,889,167)....................... 359,889,167
------------
</TABLE>
<TABLE>
<CAPTION>
REPURCHASE AGREEMENTS -- 4.49%
<C> <S> <C>
10,000,000 Agreement with Dean Witter Discover, 6.50%
dated 09/29/95, to be repurchased at $10,005,417
on 10/02/95, collateralized by $10,166,000
Federal Farm Credit Bank, floating rate, due
09/03/96, valued at $10,214,133.................... 10,000,000
6,800,313 Agreement with Dillon Read & Company, 6.30% dated
09/29/95, to be repurchased at $6,803,883 on
10/02/95, collateralized by $4,058,812 U.S.
Treasury Bonds, 7.625%, due 11/15/22, valued at
$4,658,534 and $2,200,978 U.S. Treasury Notes, with
various rates and maturity dates, valued at
$2,298,813......................................... 6,800,313
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $16,800,313)................................. 16,800,313
----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost
$376,689,480*)... 100.53% $376,689,480
OTHER ASSETS &
LIABILITIES
(NET)............ (0.53) (1,973,419)
------ ------------
NET ASSETS....... 100.00% $374,716,061
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
See Notes to Financial Statements.
9
<PAGE>
UST MASTER FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1995
MONEY FUND (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL DISCOUNT MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
--------- -------- -------- ------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 19.62%
$20,000,000 Federal Home
Loan Bank........................ 6.30% 10/02/95 $ 20,000,000
50,000,000 Student Loan Marketing
Association...................... 5.70 10/04/95 49,984,166
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $69,984,166)............... 69,984,166
------------
COMMERCIAL PAPER -- 70.58%
15,000,000 AT&T Capital Corp................ 5.72 10/04/95 14,995,233
18,000,000 Asset Securitization Corp. ...... 5.72 10/18/95 17,954,240
15,000,000 Chevron Oil
Finance Co. ..................... 5.76+ 10/04/95 15,000,000
15,000,000 CIT Group Holdings, Inc.......... 5.76+ 10/10/95 15,000,000
15,000,000 Corporate Asset Funding Co....... 5.75 10/13/95 14,973,646
15,000,000 EI Dupont Nemour................. 5.70 10/03/95 14,997,625
20,000,000 Ford Motor
Credit Co. ...................... 5.74 10/04/95 19,993,623
18,000,000 Goldman Sachs & Co. ............. 5.72 10/20/95 17,948,520
20,000,000 Merrill Lynch & Co., Inc......... 5.72 11/03/95 19,898,311
15,000,000 Nestle Capital Corp.............. 5.72 10/05/95 14,992,850
18,000,000 New Center Asset Trust........... 5.77 10/11/95 17,974,035
18,000,000 Philip Morris Cos., Inc.......... 5.72 10/02/95 18,000,000
20,000,000 Prudential Funding............... 5.74 10/04/95 19,993,622
15,000,000 United Parcel Service, Inc....... 5.75 10/04/95 14,995,208
15,000,000 Wal-Mart Stores, Inc. ........... 5.72 10/11/95 14,978,550
------------
TOTAL COMMERCIAL PAPER
(Cost $251,695,463) 251,695,463
------------
BANK NOTE -- 4.21%
15,000,000 Wachovia Bank.................... 5.77+ 11/03/95 15,000,000
------------
TOTAL BANK NOTE (Cost
$15,000,000)..................... 15,000,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- ------------
<C> <S> <C>
REPURCHASE AGREEMENTS -- 6.53%
$15,000,000 Agreement with Dean Witter Discover, 6.50%, dated
09/29/95, to be repurchased at $15,008,125 on
10/02/95, collateralized by $15,249,000 Federal
Farm Credit Bank, floating rate, due 09/03/96,
valued at $15,321,200................................ $ 15,000,000
8,278,685 Agreement with Dillon Read & Company, 6.30%, dated
09/29/95, to be repurchased at $8,283,031 on
10/02/95, collateralized by $4,941,188 U.S. Treasury
Bonds, 7.625%, due 11/15/22, valued at $5,671,289 and
$2,679,222 U.S. Treasury Notes, with various rates
and maturity dates, valued at $2,798,568............. 8,278,685
------------
TOTAL REPURCHASE
AGREEMENTS
(Cost $23,278,685)................................... 23,278,685
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $359,958,314*)... 100.94% $359,958,314
OTHER ASSETS &
LIABILITIES (NET)...... (0.94) (3,341,679)
------ ------------
NET ASSETS............. 100.00% $356,616,635
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+ Coupon Rate.
See Notes to Financial Statements.
10
<PAGE>
UST MASTER FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1995
SHORT-TERM GOVERNMENT SECURITIES FUND (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
---------- ------ -----------
<C> <S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 97.48%
$1,200,000 Student Loan Mortgage Association
03/03/98...................................... 7.00% $ 1,232,890
U.S. Treasury Notes
5,260,000 04/30/96...................................... 5.50 5,258,354
2,500,000 09/30/96...................................... 6.50 2,519,532
2,500,000 08/15/97...................................... 6.50 2,527,342
2,250,000 11/15/97...................................... 7.50 2,314,688
415,000 10/31/99...................................... 7.38 437,176
870,000 01/31/00...................................... 7.75 926,550
1,740,000 05/31/00...................................... 6.25 1,755,768
790,000 07/31/00...................................... 6.13 793,209
1,500,000 09/30/00...................................... 6.13 1,508,437
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $18,971,485)............................ 19,273,946
-----------
OTHER SHORT-TERM INVESTMENT -- 7.80%
1,541,399 Dreyfus Government Cash Management Fund....... 5.83+ 1,541,399
-----------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $1,549,399)............................. 1,541,399
-----------
TOTAL INVESTMENTS
(Cost 20,520,884*)........................................ 105.28% $20,815,345
OTHER ASSETS & LIABILITIES (NET).......................... (5.28) (1,043,343)
------ -----------
NET ASSETS................................................ 100.00% $19,772,002
====== ===========
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+ Represents 7 day yield.
See Notes to Financial Statements.
11
<PAGE>
UST MASTER FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1995
INTERMEDIATE-TERM MANAGED INCOME FUND (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
---------- ------ -------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 77.56%
$ 103,559 Federal Home Loan Mortgage
Corporation Pool #218374............. 10.50% 7/01/02 $ 108,582
2,000,000 Federal Home Loan Mortgage
Corporation Series 16, Class PH...... 6.75 4/25/21 1,982,640
3,000,000 Federal National Mortgage
Association.......................... 7.25 6/01/05 3,074,913
5,000,000 Federal National Mortgage
Association.......................... 7.43 8/03/05 5,089,960
Government National Mortgage
Association
263,817 Pool #195801......................... 8.50 1/15/17 275,110
331,929 Pool #195833......................... 8.50 4/15/17 346,137
251,949 Pool #212760......................... 8.50 4/15/17 262,733
133,293 Pool #334299......................... 8.00 5/15/23 137,208
2,033,373 Pool #348190......................... 7.00 8/15/23 2,010,493
4,698,004 Pool #366379......................... 6.50 12/15/23 4,533,564
1,903,086 Pool #367412......................... 6.00 11/15/23 1,790,087
2,826,726 Pool #376429......................... 6.50 3/15/24 2,727,785
2,000,000 Synthetic Off-the-Run Treasury,
Series 1994-1 ("SORT" represents
ownership in underlying U.S. Treasury
Strips).............................. 6.00 2/15/09 1,915,502
2,750,000 U.S. Treasury Note................... 7.25 2/15/98 2,830,781
3,500,000 U.S. Treasury Note................... 7.00 4/15/99 3,614,842
4,000,000 U.S. Treasury Note................... 7.13 9/30/99 4,160,000
2,000,000 U.S. Treasury Note................... 6.00 10/15/99 2,001,874
4,000,000 U.S. Treasury Note................... 7.50 10/31/99 4,213,748
7,000,000 U.S. Treasury Note................... 5.75 8/15/03 6,811,875
-----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $47,398,267)................... 47,887,834
-----------
CORPORATE BONDS -- 16.61%
2,500,000 Anheuser-Busch Co., Inc. ............ 7.00 9/01/05 2,546,398
1,000,000 Eli Lilly............................ 8.13 12/01/01 1,084,225
2,750,000 Nabisco, Inc. ....................... 7.05 7/15/07 2,729,276
2,000,000 Northern Trust Co. .................. 6.70 9/15/05 1,987,044
2,000,000 Wachovia Corp. ...................... 6.38 2/01/09 1,909,802
-----------
TOTAL CORPORATE BONDS
(Cost $10,221,253)................... 10,256,745
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
---------- ------ -----------
<C> <S> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 4.64%
$1,449,559 Dreyfus Government Cash Management Fund....... 5.83%+ $ 1,449,559
1,416,300 Fidelity U.S. Treasury II Fund................ 5.72+ 1,416,300
-----------
TOTAL OTHER SHORT-TERM INVESTMENTS
(Cost $2,865,859)............................. 2,865,859
-----------
TOTAL INVESTMENTS
(Cost $60,485,379*)....................................... 98.81% $61,010,438
OTHER ASSETS & LIABILITIES (NET).......................... 1.19 729,900
------ -----------
NET ASSETS................................................ 100.00% $61,740,338
====== ===========
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+ Represents 7 day yield.
See Notes to Financial Statements.
12
<PAGE>
UST MASTER FUNDS, INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1995
MANAGED INCOME FUND (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY VALUE
AMOUNT RATE DATE (NOTE 1)
----------- ------ -------- -----------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 72.36%
Government National Mortgage
Association
$ 3,050,059 Pool #348190........................ 7.00% 8/15/23 $ 3,015,740
9,673,801 Pool #366782........................ 7.00 5/15/24 9,564,951
14,358,368 Pool #376533........................ 7.50 6/15/24 14,506,402
9,347,998 Pool #385985........................ 8.50 12/15/24 9,748,139
12,500,000 U.S. Treasury Bond.................. 7.25 5/15/16 13,382,813
11,000,000 U.S. Treasury Note.................. 5.75 8/15/03 10,704,375
-----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $58,917,810).................. 60,922,420
-----------
CORPORATE BONDS -- 26.27%
2,500,000 Anheuser-Busch Co., Inc............. 7.00 9/01/05 2,546,397
4,000,000 Central Illinois Public Service
Co. ................................ 7.50 7/01/07 4,168,120
3,950,000 General Electric Capital Services... 7.50 8/21/35 4,113,933
4,000,000 Nabisco, Inc. ...................... 7.05 7/15/07 3,969,856
1,000,000 Northern Trust Co. ................. 6.70 9/15/05 993,522
5,000,000 Wachovia Corp. ..................... 6.38 2/01/09 4,774,505
1,500,000 Wisconsin Electric Power Co. ....... 7.25 8/01/04 1,548,536
-----------
TOTAL CORPORATE BONDS
(Cost $21,939,912).................. 22,114,869
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL COUPON VALUE
AMOUNT RATE (NOTE 1)
------------ ------ -----------
<C> <S> <C> <C> <C>
OTHER SHORT-TERM INVESTMENTS -- 1.78%
$ 517,500 Dreyfus Government Cash Management
Fund................................... 5.83%+ $ 517,500
982,847 Fidelity U.S. Treasury II Fund......... 5.72+ 982,847
-----------
TOTAL OTHER SHORT-TERM
INVESTMENTS (Cost $1,500,347).......... 1,500,347
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost
$82,358,069*)........................................ 100.41% $84,537,636
OTHER ASSETS & LIABILITIES (NET)..................... (0.41) (345,509)
------ -----------
NET ASSETS........................................... 100.00% $84,192,127
====== ===========
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+ Represents 7 day yield.
See Notes to Financial Statements.
13
<PAGE>
UST MASTER FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
UST Master Funds, Inc. ("Master Fund") was incorporated under the laws of
the State of Maryland on August 2, 1984 and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
Master Fund currently offers shares in twenty managed investment portfolios,
each having its own investment objectives and policies.
The following is a summary of significant accounting policies for Treasury
Money Fund, Government Money Fund, Money Fund, Short-Term Government
Securities Fund, Intermediate-Term Managed Income Fund and Managed Income Fund
(the "Portfolios"). The financial statements for the remaining portfolios of
Master Fund and UST Master Tax-Exempt Funds, Inc. ("Master Tax-Exempt Fund")
are presented separately.
With regard to Treasury Money Fund, Government Money Fund and Money Fund, it
is Master Fund's policy, to the extent possible, to maintain a continuous net
asset value per share of $1.00. Each of these Portfolios has adopted certain
investment portfolio, valuation and dividend distribution policies to enable
it to do so. However, there can be no assurance that the net asset value per
share of these Portfolios will not vary. The net asset values of the shares in
Short-Term Government Securities Fund, Intermediate-Term Managed Income Fund
and Managed Income Fund will fluctuate as the market values of their portfolio
securities change in response to changing market rates of interest and other
factors.
(A) PORTFOLIO VALUATION:
Treasury Money Fund, Government Money Fund and Money Fund: Securities are
valued at amortized cost. Amortized cost valuation involves valuing an
instrument at its cost initially and, thereafter, assuming a constant
amortization to maturity of any discount or premium.
Short-Term Government Securities Fund, Intermediate-Term Managed Income
Fund and Managed Income Fund: Investments in securities that are traded on
a recognized stock exchange are valued at the last sale price on the
exchange on which such securities are primarily traded or at the last sale
price on the national securities market. Securities traded over-the-counter
are valued each business day on the basis of closing over-the-counter bid
prices. Securities for which there were no transactions are valued at the
average of the most recent bid prices (as calculated by an independent
pricing service (the "Service") based upon its evaluation of the market for
such securities) when, in the judgement of the Service, quoted bid prices
for securities are readily available and are representative of the bid side
of the market. Short-term debt instruments with remaining maturities of 60
days or less are valued at amortized cost, which approximates market value.
Securities and other assets for which market quotations are not readily
available are valued at fair value pursuant to guidelines adopted by Master
Fund's Board of Directors.
Portfolio securities held by Intermediate-Term Managed Income and Managed
Income Funds which are primarily traded on foreign securities exchanges are
generally valued at the preceding closing values of such securities on
their respective exchanges, except that when an occurrence
14
<PAGE>
subsequent to the time a value was so established is likely to have changed
such value, then the fair value of those securities will be determined by
consideration of other factors under the direction of the Board of
Directors. A security which is listed or traded on more than one exchange
is valued at the quotation on the exchange determined to be the primary
market for such security.
Investment in foreign debt securities having maturities of 60 days or
less are valued at amortized cost. All other foreign securities are valued
at the last current bid quotation if market quotations are available, or at
fair value as determined in accordance with policies established by the
Board of Directors. For valuation purposes, quotations of foreign
securities in foreign currency are converted to United States dollars
equivalent at the prevailing market rate on the day of conversion.
(B) SECURITY TRANSACTIONS AND INVESTMENT INCOME:
Security transactions are recorded on a trade date basis. Realized gains
and losses on investments sold are recorded on the basis of identified
cost. Interest income, adjusted for amortization of premiums and, when
appropriate, discounts on investments, is earned from settlement date and
is recorded on the accrual basis.
(C) REPURCHASE AGREEMENTS:
Master Fund may purchase portfolio securities from financial institutions
deemed to be creditworthy by the investment adviser subject to the seller's
agreement to repurchase and Master Fund's agreement to resell such
securities at mutually agreed upon prices. Securities purchased subject to
such repurchase agreements are deposited with Master Fund's custodian or
sub-custodian or are maintained in the Federal Reserve/Treasury book-entry
system and must have, at all times, an aggregate market value of not less
than 101% of the repurchase price (including accrued interest).
If the value of the underlying security, including accrued interest,
falls below the value of 101% of the repurchase price plus accrued
interest, Master Fund will require the seller to deposit additional
collateral by the next business day. Default or bankruptcy of the seller
may, however, expose the applicable Portfolio of Master Fund to possible
delay in connection with the disposition of the underlying securities or
loss to the extent that proceeds from a sale of the underlying securities
were less than the repurchase price under the agreement.
(D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Treasury Money Fund, Government Money Fund and Money Fund: Net investment
income dividends are declared daily and paid monthly. Net realized capital
gains, unless offset by any available capital loss carryforward, are
distributed to shareholders annually or more frequently to maintain a net
asset value of $1.00 per share.
Short-Term Government Securities Fund, Intermediate-Term Managed Income
Fund and Managed Income Fund: Dividends from net investment income are
declared daily and paid monthly. Net realized capital gains, unless offset
by any available capital loss carryforward, are distributed to shareholders
at least annually.
Dividends and distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
deferral of losses on wash sales and post-October losses.
15
<PAGE>
In order to avoid a Federal excise tax, each Portfolio is required to
distribute certain minimum amounts of net realized capital gain and net
investment income for the respective periods ending October 31 and December
31 in each calendar year.
(E) FEDERAL TAXES:
It is the policy of Master Fund that each Portfolio continue to qualify
as a regulated investment company, if such qualification is in the best
interest of the shareholders, by complying with the requirements of the
Internal Revenue Code applicable to regulated investment companies, and by
distributing substantially all of its taxable earnings to its shareholders.
At March 31, 1995, the following Portfolios had approximate capital loss
carryforwards for Federal tax purposes available to offset future net
capital gains through the indicated expiration dates:
<TABLE>
<CAPTION>
EXPIRATION DATE MARCH 31,
----------------------------------
2000 2001 2002 2003 TOTAL
------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Treasury Money Fund........... -- -- $15,000 -- $ 15,000
Government Money Fund......... $ 1,000 $11,000 -- $ 48,000 60,000
Money Fund.................... -- 14,000 -- 21,000 35,000
Short-Term Government
Securities Fund.............. -- -- -- 444,000 444,000
Intermediate-Term Managed
Income Fund.................. 31,000 144,000 2,000 1,106,000 1,283,000
Managed Income Fund........... -- -- -- 4,985,000 4,985,000
</TABLE>
To the extent that such carryforwards are utilized, no capital gain
distributions will be made.
Net capital losses incurred after October 31 and within the taxable year
are deemed to arise on the first business day of a Portfolio's next taxable
year. Government Money Fund, Short-Term Government Securities Fund,
Intermediate-Term Managed Income Fund and Managed Income Fund incurred, and
elected to defer, net capital losses of approximately $1,000, $32,000,
$398,000 and $923,000, respectively, for the year ended March 31, 1995.
At September 30, 1995, aggregate gross unrealized appreciation for all
securities for which there was an excess of value over tax cost and
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over value were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION (DEPRECIATION) APPRECIATION
------------ -------------- ------------
<S> <C> <C> <C>
Short-Term Government Securities
Fund............................. $ 294,461 -- $ 294,461
Intermediate-Term Managed Income
Fund............................. 1,027,841 $(502,782) 525,059
Managed Income Fund............... 2,483,303 (303,736) 2,179,567
</TABLE>
(F) EXPENSE ALLOCATION:
Expenses directly attributable to a Portfolio are charged to that
Portfolio. Other expenses are allocated to the respective Portfolios based
on average net assets.
16
<PAGE>
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS
United States Trust Company of New York ("U.S. Trust") serves as the
investment adviser to Master Fund. For the services provided pursuant to the
Investment Advisory Agreements, U.S. Trust is entitled to receive a fee,
computed daily and paid monthly, at the annual rates of .25% of the average
daily net assets of Government Money Fund and Money Fund, .30% of the average
daily net assets of Treasury Money Fund and Short-Term Government Securities
Fund, .35% of the average daily net assets of Intermediate-Term Managed Income
Fund and .75% of the average daily net assets of Managed Income Fund.
Effective September 1, 1995, Chase Global Funds Services Company ("CGFSC"),
formerly, Mutual Funds Service Company ("MFSC"), and Federated Administrative
Services ("Administrators") provide administrative services to Master Fund.
For the services provided to the Portfolios, the Administrators are entitled
jointly to annual fees, computed daily and paid monthly, based on the combined
aggregate average daily net assets of Master Fund (excluding Master Fund's
international equity portfolios) and Master Tax-Exempt Fund, an affiliated
investment company, as follows: .200% of the first $200 million, .175% of the
next $200 million, and .150% over $400 million. Administration fees payable by
each Portfolio of the two investment companies are determined in proportion to
the relative average daily net assets of the respective Portfolios for the
period paid. After such allocation had been made, the Administrators are
entitled jointly to an annual minimum fee of $18,000 and $39,000 for the first
and second full years, respectively, after they commenced operations, and
$50,000 for each full year thereafter, from Short-Term Government Securities
Fund and Intermediate-Term Managed Income Fund. Effective August 1, 1995
through August 31, 1995, MFSC and Federated Administrative Services served as
administrators to Master Fund and prior to August 1, 1995, MFSC and Concord
Holding Corporation served as administrators to Master Fund all under the same
terms, conditions and fees as stated above. For the period ended September 30,
1995, administration fees charged by MFSC were as follows:
<TABLE>
<S> <C>
Treasury Money Fund............................................... $128,402
Government Money Fund............................................. 463,545
Money Fund........................................................ 527,695
Short-Term Government Securities Fund............................. 13,051
Intermediate-Term Managed Income Fund............................. 32,158
Managed Income Fund............................................... 51,015
</TABLE>
From time to time, as they may deem appropriate in their sole discretion, or
pursuant to applicable state expense limitations, U.S. Trust and the
Administrators may undertake to waive a portion or all of the fees payable to
them and also may reimburse the Portfolios for a portion of other expenses.
Until further notice to Master Fund, U.S. Trust and/or the Administrators
intend to voluntarily waive fees and reimburse expenses to the extent
necessary for Short-Term Government Securities Fund and Intermediate-Term
Managed Income Fund to maintain an annual expense ratio of not more than .62%
and .72%, respectively. For the period ended September 30, 1995, U.S. Trust
voluntarily waived fees totalling $15,248 for Short-Term Government Securities
Fund.
In addition, currently, U.S. Trust is voluntarily limiting its investment
advisory fee to .65% of the average daily net assets for Managed Income Fund.
For the period ended September 30, 1995, U.S. Trust waived investment advisory
fees totaling $42,842.
17
<PAGE>
Master Fund has also entered into shareholder servicing agreements with
various service organizations (which may include affiliates of U.S. Trust)
requiring them to provide administrative support services to their customers
owning shares of the Portfolios. As a consideration for the administrative
services provided by each service organization to its customers, each
Portfolio will pay the service organizations an administrative service fee at
the annual rate of up to .40% of the average daily net asset value of its
shares held by the service organizations' customers. Such services may include
assisting in processing purchase, exchange and redemption requests;
transmitting and receiving funds in connection with customer orders to
purchase, exchange or redeem shares; and providing periodic statements. Until
further notice to Master Fund, U.S. Trust and the Administrators have
voluntarily agreed to waive investment advisory and administration fees
payable by each Portfolio in an amount equal to the administrative service
fees payable by such Portfolio. For the period ended September 30, 1995, U.S.
Trust and the Administrators waived investment advisory and administration
fees in amounts equal to the administrative service fees for the Portfolios as
set forth below:
<TABLE>
<CAPTION>
U.S. TRUST ADMINISTRATORS
---------- --------------
<S> <C> <C>
Treasury Money Fund............................. $ 23,439 $ --
Government Money Fund........................... 115,843 406
Money Fund...................................... 143,324 --
Short-Term Government Securities Fund........... 8,327 96
Intermediate-Term Managed Income Fund........... 9,079 1,038
Managed Income Fund............................. 22,199 561
</TABLE>
Effective August 1, 1995, Edgewood Services, Inc. (the "Distributor"), a
wholly-owned subsidiary of Federated Investors, replaced UST Distributors,
Inc. as the sponsor and distributor of the Master Funds. Certain sales of
Master Fund's shares are subject to a maximum sales charge of 4 1/2% of the
offering price. Shares of each portfolio are sold on a continual basis by the
Distributor.
Each Director of Master Fund receives an annual fee of $9,000, plus a
meeting fee of $1,500 for each meeting attended, and is reimbursed for
expenses incurred for attending meetings. The Chairman receives an additional
annual fee of $5,000. No person who is an officer, director or employee of
U.S. Trust or the Administrators, or of any parent or subsidiary thereof, who
serves as an officer, director or employee of Master Fund receives any
compensation from Master Fund.
U.S. Trust serves as the shareholder servicing and dividend disbursing agent
to Master Fund and effective September 1, 1995, CGFSC serves as sub-
shareholder servicing agent. Prior to September 1, 1995, MFSC served as the
sub-shareholder servicing agent. For the period ended September 30, 1995,
shareholder servicing fees charged by U.S. Trust and MFSC were as follows:
<TABLE>
<S> <C>
Treasury Money Fund.............................................. $ 3,850
Government Money Fund............................................ 8,223
Money Fund....................................................... 15,991
Short-Term Government Securities Fund............................ 2,453
Intermediate-Term Managed Income Fund............................ 7,570
Managed Income Fund.............................................. 15,439
</TABLE>
18
<PAGE>
Effective September 1, 1995, The Chase Manhattan Bank, N.A. ("Chase") serves
as custodian of Master Fund's assets. Prior to September 1, 1995, U.S. Trust
served as the custodian of Master Fund's assets. For the period ended
September 30, 1995, custody fees charged by U.S. Trust were as follows:
<TABLE>
<S> <C>
Treasury Money Fund............................................. $ 46,293
Government Money Fund........................................... 172,329
Money Fund...................................................... 193,819
Short-Term Government Securities Fund........................... 4,729
Intermediate-Term Managed Income Fund........................... 9,909
Managed Income Fund............................................. 20,050
</TABLE>
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities, excluding short-term investments, for the
portfolios aggregated:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Short-Term Government Securities Fund............ $ 5,658,854 $13,149,107
Intermediate-Term Managed Income Fund............ 54,088,539 43,426,694
Managed Income Fund.............................. 76,803,594 83,482,043
</TABLE>
4. COMMON STOCK:
Master Fund currently offers twenty classes of shares, each representing
interests in one of twenty separate Portfolios. Authorized capital for each
Portfolio is as follows: 500 million shares each of Treasury Money Fund,
Short-Term Government Securities Fund and Intermediate-Term Managed Income
Fund, 1,500 million shares each of Government Money Fund and Money Fund and
375 million shares of Managed Income Fund.
Each share has a par value of $.001 and represents an equal proportionate
interest in the particular Portfolio with other shares of the same Portfolio,
and is entitled to such dividends and distributions of taxable earnings on the
assets belonging to such Portfolio as are declared at the discretion of Master
Fund's Board of Directors. Since Treasury Money Fund, Government Money Fund
and Money Fund have sold, reinvested and redeemed shares only at a constant
net asset value of $1.00 per share, the number of shares represented by such
sales, reinvestments and redemptions is the same as the amounts shown below
for such transactions.
<TABLE>
<CAPTION>
TREASURY MONEY FUND
------------------------------
PERIOD ENDED YEAR ENDED
09/30/95 03/31/95
------------- ---------------
<S> <C> <C>
Sold........................................... $ 853,787,336 $ 1,799,954,618
Issued as reinvestment of dividends............ 487,232 821,226
Redeemed....................................... (854,802,425) (1,858,530,639)
------------- ---------------
Net Decrease................................... $ (527,857) $ (57,754,795)
============= ===============
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT MONEY FUND
--------------------------------
PERIOD ENDED YEAR ENDED
09/30/95 03/31/95
--------------- ---------------
<S> <C> <C>
Sold......................................... $ 3,563,932,405 $ 7,717,589,470
Issued in connection with USAffinity acquisi-
tion (Note 6)............................... -- 3,793,021
Issued as reinvestment of dividends.......... 1,110,590 2,308,837
Redeemed..................................... (3,916,101,138) (8,032,775,942)
--------------- ---------------
Net Decrease................................. $ (351,058,143) $ (309,084,614)
=============== ===============
<CAPTION>
MONEY FUND
--------------------------------
PERIOD ENDED YEAR ENDED
09/30/95 03/31/95
--------------- ---------------
<S> <C> <C>
Sold......................................... $ 4,232,004,263 $ 9,613,086,830
Issued as reinvestment of dividends.......... 769,344 1,141,513
Redeemed..................................... (4,700,714,804) (9,525,691,868)
--------------- ---------------
Net Increase/(Decrease)...................... $ (467,941,197) $ 88,536,475
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT SECURITIES FUND
------------------------------------------------
PERIOD ENDED YEAR ENDED
09/30/95 03/31/95
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sold......................... 793,142 $ 5,549,331 1,490,831 $10,254,964
Issued as reinvestment of
dividends................... 6,628 46,371 13,755 94,544
Redeemed..................... (1,638,728) (11,449,069) (1,486,088) (10,196,015)
---------- ----------- ---------- -----------
Net Increase/(Decrease)...... (838,958) $(5,853,367) 18,498 $ 153,493
========== =========== ========== ===========
<CAPTION>
INTERMEDIATE-TERM MANAGED INCOME FUND
------------------------------------------------
PERIOD ENDED YEAR ENDED
09/30/95 03/31/95
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sold......................... 2,247,770 $15,863,734 2,850,920 $19,063,074
Issued in connection with
USAffinity acquisition
(Note 6).................... -- -- 337,729 2,265,302
Issued as reinvestment of
dividends................... 22,966 161,820 26,709 178,294
Redeemed..................... (706,023) (4,953,663) (2,348,448) (15,609,625)
---------- ----------- ---------- -----------
Net Increase................. 1,564,713 $11,071,891 866,910 $ 5,897,045
========== =========== ========== ===========
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
MANAGED INCOME FUND
--------------------------------------------------
PERIOD ENDED YEAR ENDED
09/30/95 03/31/95
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 1,224,076 $ 10,766,426 2,677,985 $ 22,223,163
Issued as reinvestment of
dividends................. 84,589 747,680 197,556 1,636,719
Redeemed................... (2,182,926) (19,286,401) (5,561,986) (45,666,661)
---------- ------------ ---------- ------------
Net Decrease............... (874,261) $ (7,772,295) (2,686,445) $(21,806,779)
========== ============ ========== ============
</TABLE>
5. ORGANIZATION COSTS
Master Fund has borne all costs in connection with the initial organization
of new portfolios, including the fees for registering and qualifying its
shares for distribution under Federal and state securities regulations. All
such costs are being amortized on the straight-line basis over periods of five
years from the dates on which each Portfolio commenced operations.
6. ASSET ACQUISITION
On March 10, 1995, Government Money Fund acquired certain assets of
$3,793,021 (excluding unamortized organization costs) from USAffinity Treasury
Money Fund in a tax-free exchange of 3,793,021 shares of Government Money
Fund. Intermediate-Term Managed Income Fund acquired certain assets of
$2,265,302 (excluding unamortized organization costs) from USAffinity
Government Income Fund in a tax-free exchange of 337,729 shares of
Intermediate-Term Managed Income Fund.
21
<PAGE>
USTFXIS995
