<PAGE>
--------------------------------------------
UST
MASTER TAX-EXEMPT FUNDS, INC.
--------------------------------------------
TAX-EXEMPT FIXED INCOME PORTFOLIOS
ANNUAL REPORT
MARCH 31, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LETTER TO SHAREHOLDERS.................................................... 1
ADVISER'S FIXED INCOME MARKET REVIEW...................................... 2
ADVISER'S INVESTMENT REVIEWS
Short-Term Tax-Exempt Securities Fund.................................... 3
Intermediate-Term Tax-Exempt Fund........................................ 4
New York Intermediate-Term Tax-Exempt Fund............................... 5
Long-Term Tax-Exempt Fund................................................ 6
STATEMENTS OF ASSETS AND LIABILITIES...................................... 7
STATEMENTS OF OPERATIONS.................................................. 8
STATEMENTS OF CHANGES IN NET ASSETS....................................... 9
FINANCIAL HIGHLIGHTS -- SELECTED PER SHARE DATA AND RATIOS................ 10
PORTFOLIOS OF INVESTMENTS
Short-Term Tax-Exempt Fund............................................... 12
Short-Term Tax-Exempt Securities Fund.................................... 17
Intermediate-Term Tax-Exempt Fund........................................ 19
New York Intermediate-Term Tax-Exempt Fund............................... 21
Long-Term Tax-Exempt Fund................................................ 23
NOTES TO FINANCIAL STATEMENTS............................................. 24
INDEPENDENT AUDITORS' REPORT.............................................. 30
FEDERAL TAX INFORMATION................................................... 30
</TABLE>
For shareholder account information, current price and yield quotations, or to
make an initial purchase or obtain a prospectus, call the appropriate telephone
number listed below:
. SHAREHOLDER SERVICES 1-800-446-1012
. CURRENT PRICE AND YIELD INFORMATION 1-800-233-9180
. INITIAL PURCHASE AND PROSPECTUS INFORMATION 1-800-233-1136
This report must be preceded or accompanied by a current prospectus.
Prospectuses containing more complete information including charges and ex-
penses regarding UST Master Funds, Inc. and UST Master Tax-Exempt Funds, Inc.
may be obtained by contacting the Funds at 1-800-233-1136.
Investors should read the current prospectus carefully prior to investing or
sending money.
UST Master Funds, Inc. and UST Master Tax-Exempt Funds, Inc. are sponsored and
distributed by UST Distributors, Inc. (See Note 2 to Financial Statements).
You may write to UST Master Funds, Inc. and UST Master Tax-Exempt Funds, Inc.
at the following address:
UST MASTER FUNDS, INC.
C/O MUTUAL FUNDS SERVICE COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK, ITS PARENT AND AFFILIATES
AND SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN THE FUNDS INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. FUND SHARES ARE NOT
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report for the UST Master Funds, Inc. and
UST Master Tax-Exempt Funds, Inc. for the fiscal year ended March 31, 1995.
During this past year, we welcomed many new investors to the UST Master Funds
family. With $3.7 billion in assets in the twenty-five funds, we approach
fiscal year 1996 with optimism.
The UST Master Funds consist of ten domestic equity, four international
equity, seven fixed-income, and four money market funds. These funds have been
designed to provide a comprehensive range of investment choices and offer
shareholders an opportunity to allocate holdings according to personal
investment objectives.
Investment performance continued to be strong in several of our funds. In the
domestic equity areas, the Early Life Cycle Fund ranked thirty-eighth among 250
Small Company Growth Funds as reported by Lipper Analytical Services, Inc.* for
the one year period ended March 31, 1995. On the international front, the
Emerging Americas Fund rated second among 12 Latin American Funds reported by
Lipper. Leading the way for our fixed-income funds, the Long-Term Tax-Exempt
Fund ranked number one in a universe of 193 Lipper General Municipal Debt
Funds**. In the money market areas, Lipper rated the Money Fund and Short-Term
Tax-Exempt Fund among the top 25% in field of 248 Money Market Instrument Funds
and 121 Tax-Exempt Money Market Funds, respectively, for the same one year
period.***
UST Master Fund shareholders are serviced by a dedicated team of
professionals. We recognize the importance of excellent customer service and
are committed to meeting shareholder needs in a responsible and efficient
manner. We appreciate your participation in the funds and look forward to
serving you in the years to come.
(Sigcut)
Alfred C. Tannachion
Chairman of the Board and President
*Lipper Analytical Services, Inc. is an independent mutual fund performance
monitor whose rankings are based on total return excluding sales charge. Past
performance is not predictive of future performance.
**For the five year period ended March 31, 1995, the Long-Term Tax-Exempt Fund
ranked number two in a universe of 93 Lipper General Municipal Debt Funds.
***Fund Shares are not issued or guaranteed by the U.S. Government and there is
no assurance that the money market funds will be able to maintain a stable
net asset value of $1 per share.
1
<PAGE>
UST MASTER FUNDS, INC.
ADVISER'S FIXED INCOME MARKET REVIEW
- --------------------------------------------------------------------------------
The most severe damage to the fixed-income markets occurred in the final
quarter of fiscal 1994, fueled by the Federal Reserve Board's two increases in
short-term rates to 3.5%. With mounting evidence that the economy was growing
faster than expected, the Fed's action was looked upon as a preemptive strike
against inflation.
Through most of the first half of the ensuing 1995 fiscal year, the fixed-
income markets drifted, suffering from pervasive fears of accelerating
inflation despite the string of additional Federal Reserve Board interest rate
hikes intended to bring about the "soft landing" for the U.S. economy.
In the fiscal third quarter--propelled by the new "de minimus" rule (a result
of the Revenue Reconciliation Act of 1993), rising rates and investor selling
out of mutual funds--the market dropped again. Toward the end of the fiscal
third quarter, the market began to recover, though tentatively, due in large
part to yields that were perceived to be too high, the short supply of
municipal bonds and a general perception that we were nearing the end of
Federal Reserve interventions.
At the beginning of the fiscal fourth quarter the market was anticipating
another rate increase and this had been priced into the forward yield curve.
The eventual 50 basis-point hike in February, rumblings from Washington that
this would be the last intervention (at least for the near term), and
widespread perceptions that the economy was slowing and that rates had overshot
on the upside caused the fixed-income markets to take off. As with the
precipitous sell-off of a year ago, the bond market achieved most of its gains
in the ensuing five-week period.
For now, the market has priced in economic slowdown and moderate inflation. Any
indications to the contrary could startle the market into a correction. The
wild card is the severely depreciated U.S. dollar, which the market has so far
ignored in favor of focusing on positive news on the domestic front. If the
dollar declines much further, market attention will eventually have to shift,
likely sparking a sell-off. Added to these concerns, prices are up sharply. As
a result, we have adopted a slightly more cautious approach--generally
shortening portfolios--pending resolution of these near-term concerns.
2
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
SHORT-TERM TAX-EXEMPT SECURITIES FUND
- -------------------------------------------------------------------------------
We adopted a defensive strategy through the first half of the 1995 fiscal year
with a mix of longer-maturity bonds and cash. While this strategy proved
successful in fiscal 1994, it only allowed the Fund to tread water through the
first half of fiscal 1995. In the fiscal third quarter, we began to
restructure, maintaining an average maturity below three years as rates rose.
By the fiscal fourth quarter, we were employing a more traditional laddered
portfolio with a mix of very high quality general obligation bonds with
maturities ranging from one to five years with a three-year average, allowing
the Fund to provide a total return of 3.45%* for the fiscal year ended March
31, 1995.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN SHORT-TERM TAX-EXEMPT
SECURITIES FUND AND THE LEHMAN BROTHERS 3 YEAR MUNICIPAL BOND INDEX**
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Short-Term Tax-Exempt Securities Fund+
- --------------------------------------------------------------------------------
Average Annual Total Return Ended on 3/31/95
Reflects Maximum Sales Charge of 4.5%
- --------------------------------------------------------------------------------
1 year Since Inception (12/31/92)
- --------------------------------------------------------------------------------
<S> <C>
- -1.21% 1.32%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Short Term Tax Exempt Sec. Short Term Tax Exempt Sec. Lehman 3 Yr. Muni Bond Index ST Tax
(reflects maximum sales charge) (exclusive of sales charge) Exempt Sec.
<S> <C> <C> <C>
12/31/92 9550 10000 10000
3/31/93 9708 10165 10203
6/30/93 9844 10308 10356
9/30/93 9992 10463 10503
12/31/93 10074 10549 10622
3/31/94 9955 10425 10480
6/30/94 10023 10496 10590
9/30/94 10093 10569 10690
12/31/94 10044 10518 10700
3/31/95 10299 10784 11000
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST. A PORTION OF THE FUND'S INCOME MAY BE
SUBJECT TO THE ALTERNATIVE MINIMUM TAX AND SOME INVESTORS MAY BE SUBJECT TO
CERTAIN STATE AND LOCAL TAXES.
The above illustration compares a $10,000 investment made in Short-Term Tax-
Exempt Securities Fund on 12/31/92 (inception date) to a $10,000 investment
made in the Lehman Brothers 3 Year Municipal Bond Index on that date. All
dividends and capital gain distributions are reinvested.
The Fund's performance takes into account fees and expenses. The Lehman
Brothers 3 year Municipal Bond Index is an unmanaged total return performance
benchmark for investment-grade tax exempt bonds maturing in three years,
calculated by using municipal bonds selected as representative of the market.
The Index does not take into account charges, fees and other expenses. Further
information relating to Fund performance is contained in the Financial
Highlights section of the Prospectus and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lehman Brothers.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
3
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
INTERMEDIATE-TERM TAX-EXEMPT FUND
- -------------------------------------------------------------------------------
Throughout the first half of the 1995 fiscal year, given the rapid increase in
rates, we adopted a defensive approach, employing a barbell strategy--
maintaining up to 20% cash reserves and also buying longer (12- to 15-year)
maturity bonds--in an effort to keep income up as well as minimize risk. This
strategy proved successful through the first half. In the third quarter, as
this strategy began to hinder performance, we restructured, now utilizing more
of a traditional laddered portfolio--mostly non-callable bonds with maturities
of five to 12 years with a 10-year average. During the final quarter, this
strategy proved successful, as the Fund recorded a total return for the twelve
months ended March 31, 1995, of 6.34%*, ranking seventeenth, based on total
return excluding sales charge, of 93 funds in the Lipper Intermediate
Municipal Debt Fund category.** For the five years ended March 31, 1995, with
a total return of 42.90%*, the Fund ranked eleventh out of 31 funds in this
Lipper category. Throughout the final quarter, the Fund maintained a mix of
high-quality non-callable revenue bonds as well as high quality state general
obligation bonds. We also purchased a fair amount of deep discount bonds,
those most damaged by the "de minimis" rule, and these were responsible for
driving the Fund's positive performance toward year end.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
INTERMEDIATE-TERM TAX-EXEMPT FUND AND THE LEHMAN BROTHERS
5 YEAR MUNICIPAL G.O. BOND INDEX***
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Intermediate-Term Tax-Exempt Fund+
- --------------------------------------------------------------------------------
Average Annual Total Return Ended on 3/31/95
Reflects Maximum Sales Charge of 4.5%
- --------------------------------------------------------------------------------
1 year 5 years Since Inception (12/3/85)
- --------------------------------------------------------------------------------
<S> <C> <C>
1.52% 6.40% 7.69%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Intern Term Tax Ex. Intern Term Tax Ex. Lehman Brothers 5 Yr. G.O. Bond Index Intern Tax
(reflects maximum sales charge) (exclusive of sales charge) Tax Ex
<S> <C> <C> <C>
12/3/85 9550 10000 10000
3/31/86 10615 11119 10517
3/31/87 11689 12244 11588
3/31/88 12316 12901 12037
3/31/89 13003 13621 12265
3/31/90 13971 14635 13438
3/31/91 15178 15899 14653
3/31/92 16385 17163 15945
3/31/93 18302 19171 17577
3/31/94 18774 19666 18018
3/31/95 19964 20912 19100
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST. A PORTION OF THE FUND'S INCOME MAY BE
SUBJECT TO THE ALTERNATIVE MINIMUM TAX AND SOME INVESTORS MAY BE SUBJECT TO
CERTAIN STATE AND LOCAL TAXES.
The above illustration compares a $10,000 investment made in Intermediate-
Term Tax-Exempt Fund on 12/3/85 (inception date) to a $10,000 investment made
in the Lehman Brothers 5 Year Municipal G.O. Bond Index on that date. For
comparative purposes, the value of the Index on 11/30/85 is used as the
beginning value on 12/3/85. All dividends and capital gain distributions are
reinvested.
The Fund's performance takes into account fees and expenses. The Lehman
Brothers 5 Year Municipal G.O. Bond Index is an unmanaged total return
performance benchmark for investment-grade tax-exempt government obligation
bonds maturing in five years, calculated by using municipal bonds selected as
representative of the market. The Index does not take into account charges,
fees and other expenses. Further information relating to Fund performance is
contained in the Financial Highlights section of the Prospectus and elsewhere
in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lipper Analytical Services, Inc.--Lipper is an independent mutual
fund performance monitor.
*** Source: Lehman Brothers.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
4
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
NEW YORK INTERMEDIATE-TERM TAX-EXEMPT FUND
- -------------------------------------------------------------------------------
Through much of the first half of the 1995 fiscal year, we maintained a mix of
longer-maturity instruments and raised cash reserves, though slowly, given the
traditional difficulties associated with finding suitable New York issues.
After a dismal first quarter, the fund treaded water through the second. We
restructured during the third quarter, deploying cash reserves to buy discount
bonds and insured bonds. We also maintained an escrow of U.S. Treasury-backed
pre-refunded bonds given the real scarcity of high-quality merchandise in New
York State. This strategy proved successful in the fiscal fourth quarter as
the fund managed to report a total return of 6.05%* for the twelve months
ended March 31, 1995, ranking number two, based on total return excluding
sales charge, of 18 funds in the Lipper New York Intermediate Municipal Debt
Fund category.**
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN NEW YORK
INTERMEDIATE-TERM TAX-EXEMPT FUND AND THE LEHMAN BROTHERS
5 YEAR MUNICIPAL BOND INDEX***
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
New York Intermediate-Term Tax-Exempt Fund+
- --------------------------------------------------------------------------------
Average Annual Total Return Ended on 3/31/95
Reflects Maximum Sales Charge of 4.5%
- --------------------------------------------------------------------------------
1 year Since Inception (5/31/90)
- --------------------------------------------------------------------------------
<S> <C>
1.23% 5.60%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NY Intern Term Tax Ex NY Intern Term Tax Ex Lehman 5 Yr. Muni Bond Index NY Intern
(reflects maximum sales charge) (exclusive of sales charge) Term Tax Ex
<S> <C> <C> <C>
5/31/90 9550 10000 10000
9/30/90 9752 10216 10211
3/31/91 10267 10754 10797
9/30/91 10719 11228 11379
3/31/92 11028 11552 11775
9/30/92 11510 12057 12487
3/31/93 12050 12623 12997
9/30/93 12625 13225 13605
3/31/94 12276 12859 13382
9/30/94 12399 12988 13660
3/31/95 13019 13638 14150
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST. A PORTION OF THE FUND'S INCOME MAY BE
SUBJECT TO THE ALTERNATIVE MINIMUM TAX.
The above illustration compares a $10,000 investment made in New York
Intermediate-Term Tax-Exempt Fund on 5/31/90 (inception date) to a $10,000
investment made in the Lehman Brothers 5 Year Municipal Bond Index on that
date. All dividends and capital gain distributions are reinvested.
The Fund invests primarily in New York municipal securities and its
performance takes into account fees and expenses. The Lehman Brothers 5 Year
Municipal Bond Index is an unmanaged total return performance benchmark for
investment-grade tax exempt bonds maturing in five years, calculated by using
municipal bonds selected as representative of the market. The Index does not
take into account charges, fees and other expenses. Further information
relating to Fund performance is contained in the Financial Highlights section
of the Prospectus and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lipper Analytical Services, Inc.--Lipper is an independent mutual
fund performance monitor.
*** Source: Lehman Brothers.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
5
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
ADVISER'S INVESTMENT REVIEW
LONG-TERM TAX-EXEMPT FUND
- -------------------------------------------------------------------------------
Throughout the 1995 fiscal year, the Fund was invested in a diverse number of
high-quality "essential service" revenue bonds and high-quality state general
obligation bonds. At the start of the fiscal year, as interest rates were
already high, we adopted a defensive posture, shortening maturities,
maintaining up to 25% cash reserves. In the fiscal third quarter, as discount
bonds continued to drop in value, we restructured, deploying cash reserves to
purchase many of these deeply discounted, or "de minimized," bonds. In the
fourth quarter, as rates dropped, our aggressive positioning paid off. For the
one and five year periods ended March 31, 1995, the Fund reported total
returns of 11.01%* and 58.99%*, respectively, ranking it number one and two,
respectively, based on total return excluding sales charge, among 193 and 93,
funds, respectively, in the Lipper General Municipal Debt Fund category.**
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN LONG-TERM
TAX-EXEMPT FUND AND THE LEHMAN BROTHERS CURRENT MUNICIPAL BOND INDEX***
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Long-Term Tax-Exempt Fund+
- --------------------------------------------------------------------------------
Average Annual Total Return Ended on 3/31/95
Reflects Maximum Sales Charge of 4.5%
- --------------------------------------------------------------------------------
1 year 5 years Since Inception (2/5/86)
- --------------------------------------------------------------------------------
<S> <C> <C>
5.97% 8.69% 10.67%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Long Term Tax Exempt Long Term Tax Exempt Lehman 3 Yr. Muni Bond Index Long-Term Tax
(reflects maximum sales charge) (exclusive of sales charge) Exempt Sec.
<S> <C> <C> <C>
2/5/86 9550 10000 10000
3/31/86 10443 10939 10365
3/31/87 11848 12411 11442
3/31/88 13051 13671 11712
3/31/89 14374 15057 12505
3/31/90 15908 16663 13729
3/31/91 17516 18348 15037
3/31/92 19126 20034 16524
3/31/93 22253 23310 18683
3/31/94 22783 23865 18947
3/31/95 25291 26493 20111
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURNS
AND PRINCIPAL VALUES WILL VARY AND SHARES MAY BE WORTH MORE OR LESS AT
REDEMPTION THAN THEIR ORIGINAL COST. A PORTION OF THE FUND'S INCOME MAY BE
SUBJECT TO THE ALTERNATIVE MINIMUM TAX AND SOME INVESTORS MAY BE SUBJECT TO
CERTAIN STATE AND LOCAL TAXES.
The above illustration compares a $10,000 investment made in Long-Term Tax-
Exempt Fund on 2/5/86 (inception date) to a $10,000 investment made in the
Lehman Brothers Current Municipal Bond Index on that date. For comparative
purposes, the value of the Index on 1/31/86 is used as the beginning value on
2/5/86. All dividends and capital gain distributions are reinvested.
The Fund's performance takes into account fees and expenses. The Lehman
Brothers Current Municipal Bond Index is an unmanaged total return performance
benchmark for the long-term, investment-grade tax exempt bond market,
calculated by using municipal bonds selected as representative of the market.
The Index does not take into account charges, fees and other expenses. Further
information relating to Fund performance is contained in the Financial
Highlights section of the Prospectus and elsewhere in this report.
- --------
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge.
** Source: Lipper Analytical Services, Inc.--Lipper is an independent mutual
fund performance monitor.
*** Source: Lehman Brothers.
+ The Fund is currently waiving certain fees. Had the Fund not waived fees,
returns would have been lower. This voluntary waiver may be modified or
terminated at any time.
6
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
AS OF MARCH 31, 1995
<TABLE>
<CAPTION>
NEW YORK
SHORT-TERM INTERMEDIATE- INTERMEDIATE-
SHORT-TERM TAX-EXEMPT TERM TERM LONG-TERM
TAX-EXEMPT SECURITIES TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND FUND FUND FUND FUND
------------ ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at cost--
see accompanying
portfolios............ $811,049,142 $49,092,137 $237,225,653 $85,374,447 $75,152,212
============ =========== ============ =========== ===========
Investments, at value
(Note 1).............. $811,049,142 $49,442,977 $241,813,124 $86,481,122 $77,404,060
Cash................... -- 76 46 42 48
Interest receivable.... 5,854,570 849,688 4,147,816 1,102,573 1,435,276
Receivable for
investments sold...... 530,000 -- -- -- --
Receivable for fund
shares sold........... 595,237 108,993 924 59,995 512,439
Prepaid expenses....... 26,879 2,017 10,793 3,949 3,295
Unamortized
organization costs
(Note 5).............. -- 11,534 -- 1,448 --
Other assets........... -- -- -- -- 24,434
------------ ----------- ------------ ----------- -----------
TOTAL ASSETS........... 818,055,828 50,415,285 245,972,703 87,649,129 79,379,552
LIABILITIES:
Payable for investments
purchased............. -- 2,024,702 9,921,325 -- --
Payable for dividends
declared.............. 2,461,104 153,918 873,965 302,027 291,000
Payable for fund shares
redeemed.............. 7,445 -- -- 14,989 52,950
Investment advisory and
custodian fees payable
(Note 2).............. 198,714 11,702 72,103 41,887 34,378
Administration fees and
shareholder servicing
fees payable (Note 2). 114,840 6,854 32,312 12,193 12,602
Accrued expenses and
other payables........ 383,979 30,566 82,778 114,502 108,172
------------ ----------- ------------ ----------- -----------
TOTAL LIABILITIES...... 3,166,082 2,227,742 10,982,483 485,598 499,102
------------ ----------- ------------ ----------- -----------
NET ASSETS.............. $814,889,746 $48,187,543 $234,990,220 $87,163,531 $78,880,450
============ =========== ============ =========== ===========
NET ASSETS consist of:
Accumulated net
investment income..... $ -- $ -- $ -- $ -- $ 1,516
Distributions in excess
of net investment
income................ -- -- (137,774) -- --
Accumulated net
realized loss on
investments........... (65,614) (1,527,082) (11,147,017) (3,440,600) (2,275,126)
Unrealized appreciation
on investments........ -- 350,840 4,587,471 1,106,675 2,251,848
Par value (Note 4)..... 815,205 6,928 26,690 10,578 8,511
Paid in capital in
excess of par value... 814,140,155 49,356,857 241,660,850 89,486,878 78,893,701
------------ ----------- ------------ ----------- -----------
TOTAL NET ASSETS........ $814,889,746 $48,187,543 $234,990,220 $87,163,531 $78,880,450
============ =========== ============ =========== ===========
Shares of Common Stock
Outstanding............ 815,205,420 6,927,683 26,690,412 10,578,215 8,511,184
NET ASSET VALUE PER
SHARE.................. $1.00 $6.96 $8.80 $8.24 $9.27
===== ===== ===== ===== =====
</TABLE>
See Notes to Financial Statements
7
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
NEW YORK
SHORT-TERM INTERMEDIATE- INTERMEDIATE-
SHORT-TERM TAX-EXEMPT TERM TERM LONG-TERM
TAX-EXEMPT SECURITIES TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND FUND FUND FUND FUND
----------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income........ $25,912,627 $ 2,259,405 $ 12,377,126 $ 4,518,146 $ 4,533,367
----------- ----------- ------------ ----------- -----------
EXPENSES:
Investment advisory
fees (Note 2)......... 1,935,746 161,605 885,441 467,682 400,953
Administration fees
(Note 2).............. 1,193,896 83,153 390,069 144,046 123,494
Administrative service
fees (Note 2)......... 236,867 12,678 87,815 17,923 27,140
Shareholder servicing
agent fees (Note 2)... 27,149 8,720 22,940 10,090 24,872
Custodian fees (Note
2).................... 412,740 18,647 132,578 52,962 43,265
Registration and filing
fees.................. 13,274 14,199 14,156 111 16,514
Legal and audit fees... 122,202 8,482 36,458 15,294 14,297
Directors' fees and
expenses (Note 2)..... 49,992 3,308 15,946 6,250 5,303
Shareholder reports.... 22,278 7,584 20,158 16,793 6,339
Amortization of
organization costs
(Note 5).............. -- 4,176 -- 9,271 --
Miscellaneous expenses. 38,883 7,313 22,300 5,593 6,458
Fees waived by
investment adviser and
administrators (Note
2).................... (236,867) (12,678) (87,815) (17,923) (27,140)
----------- ----------- ------------ ----------- -----------
TOTAL EXPENSES......... 3,816,160 317,187 1,540,046 728,092 641,495
----------- ----------- ------------ ----------- -----------
NET INVESTMENT INCOME... 22,096,467 1,942,218 10,837,080 3,790,054 3,891,872
----------- ----------- ------------ ----------- -----------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS (NOTE 1):
Net realized
gain/(loss)
on security
transactions.......... 6,384 (1,527,080) (10,580,690) (3,440,595) (2,250,004)
Change in unrealized
appreciation/
(depreciation) on
investments during the
year.................. -- 1,273,807 14,115,147 4,729,153 5,825,370
----------- ----------- ------------ ----------- -----------
NET REALIZED AND
UNREALIZED GAIN/(LOSS)
ON INVESTMENTS......... 6,384 (253,273) 3,534,457 1,288,558 3,575,366
----------- ----------- ------------ ----------- -----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............. $22,102,851 $ 1,688,945 $ 14,371,537 $ 5,078,612 $ 7,467,238
=========== =========== ============ =========== ===========
</TABLE>
See Notes to Financial Statements
8
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NEW YORK
SHORT-TERM INTERMEDIATE- INTERMEDIATE-
SHORT-TERM TAX-EXEMPT TERM TERM LONG-TERM
TAX-EXEMPT SECURITIES TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND FUND FUND FUND FUND
------------ ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31,
1995
Net investment income... $ 22,096,467 $ 1,942,218 $ 10,837,080 $ 3,790,054 $ 3,891,872
Net realized gain/(loss)
on investments......... 6,384 (1,527,080) (10,580,690) (3,440,595) (2,250,004)
Change in unrealized
appreciation/
(depreciation) on
investments during the
year................... -- 1,273,807 14,115,147 4,729,153 5,825,370
------------ ----------- ------------ ------------ -----------
Net increase in net
assets resulting from
operations............. 22,102,851 1,688,945 14,371,537 5,078,612 7,467,238
Distributions to
shareholders:
From net investment
income................ (22,096,467) (1,942,218) (10,837,080) (3,790,054) (3,891,872)
From net realized gain
on investments........ -- (106,754) -- (1,095,691) (904,671)
Increase/(decrease) in
net assets from fund
share transactions
(Note 4)............... 120,302,035 (9,180,054) (66,805,438) (20,518,090) (5,941,615)
------------ ----------- ------------ ------------ -----------
Net increase/(decrease)
in net assets.......... 120,308,419 (9,540,081) (63,270,981) (20,325,223) (3,270,920)
NET ASSETS:
Beginning of year...... 694,581,327 57,727,624 298,261,201 107,488,754 82,151,370
------------ ----------- ------------ ------------ -----------
End of year (1)........ $814,889,746 $48,187,543 $234,990,220 $ 87,163,531 $78,880,450
============ =========== ============ ============ ===========
YEAR ENDED MARCH 31,
1994
Net investment income... $ 13,379,617 $ 1,426,311 $ 11,371,587 $ 3,616,324 $ 3,653,834
Net realized gain/(loss)
on investments......... (16,145) 461,427 8,221,845 2,488,056 4,196,495
Change in unrealized
appreciation/
(depreciation) on
investments during the
year................... -- (1,043,604) (12,416,644) (4,992,154) (5,732,952)
------------ ----------- ------------ ------------ -----------
Net increase in net
assets resulting from
operations............. 13,363,472 844,134 7,176,788 1,112,226 2,117,377
Distributions to
shareholders:
From net investment
income................ (13,379,617) (1,426,311) (11,371,587) (3,616,324) (3,653,834)
From net realized gain
on investments........ -- (354,675) (8,221,845) (2,488,056) (4,196,495)
In excess of net
realized gain on
investments........... -- -- (8,200,544) (880,183) (2,252,446)
Increase in net assets
from fund share
transactions (Note 4).. 35,270,415 30,066,867 33,561,668 25,111,929 4,616,920
------------ ----------- ------------ ------------ -----------
Net increase/(decrease)
in net assets.......... 35,254,270 29,130,015 12,944,480 19,239,592 (3,368,478)
NET ASSETS:
Beginning of year...... 659,327,057 28,597,609 285,316,721 88,249,162 85,519,848
------------ ----------- ------------ ------------ -----------
End of year (2)........ $694,581,327 $57,727,624 $298,261,201 $107,488,754 $82,151,370
============ =========== ============ ============ ===========
</TABLE>
(1) Including accumulated/(distributions in excess of) net investment income of
($137,774) for Intermediate-Term Tax-Exempt Fund and $1,516 for Long-Term
Tax-Exempt Fund.
(2) Including distributions in excess of net investment income of ($138,980)
for Intermediate-Term Tax-Exempt Fund.
See Notes to Financial Statements
9
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
FINANCIAL HIGHLIGHTS -- SELECTED PER SHARE DATA AND RATIOS
For a fund share outstanding throughout each year.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DIVIDENDS DISTRIBUTIONS
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT REALIZED GAIN
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME ON INVESTMENTS
--------- ---------- -------------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM TAX-EXEMPT FUND -- (5/24/85*)
Year Ended March 31,
1991................... $1.00 $0.05292 $(0.00001) $0.05291 $(0.05292) $0.00000
1992................... 1.00 0.03849 0.00000 0.03849 (0.03849) 0.00000
1993................... 1.00 0.02395 0.00000 0.02395 (0.02395) 0.00000
1994................... 1.00 0.01938 0.00000 0.01938 (0.01938) 0.00000
1995................... 1.00 0.02825 0.00000 0.02825 (0.02825) 0.00000
SHORT-TERM TAX-EXEMPT SECURITIES FUND -- (12/31/92*)
Year Ended March 31,
1993................... $7.00 $ 0.05 $ 0.07 $ 0.12 $ (0.05) $ 0.00
1994................... 7.07 0.21 (0.03) 0.18 (0.21) (0.05)
1995................... 6.99 0.25 (0.02) 0.23 (0.25) (0.01)
INTERMEDIATE-TERM TAX-EXEMPT FUND -- (12/3/85*)
Year Ended March 31,
1991................... $8.67 $ 0.56 $ 0.16 $ 0.72 $(0.56) $ 0.00
1992................... 8.83 0.49 0.19 0.68 (0.49) (0.07)
1993................... 8.95 0.42 0.59 1.01 (0.42) (0.30)
1994................... 9.24 0.34 (0.09) 0.25 (0.34) (0.26)
1995................... 8.64 0.37 0.16 0.53 (0.37) 0.00
N.Y. INTERMEDIATE-TERM TAX-EXEMPT FUND -- (5/31/90*)
Year Ended March 31,
1991................... $8.00 $ 0.39 $ 0.20 $ 0.59 $ (0.39) $ 0.00
1992................... 8.20 0.41 0.19 0.60 (0.41) (0.08)
1993................... 8.31 0.34 0.41 0.75 (0.34) (0.11)
1994................... 8.61 0.31 (0.13) 0.18 (0.31) (0.22)
1995................... 8.18 0.33 0.15 0.48 (0.33) (0.09)
LONG-TERM TAX-EXEMPT FUND -- (2/5/86*)
Year Ended March 31,
1991................... $8.87 $ 0.54 $ 0.33 $ 0.87 $ (0.54) $ (0.05)
1992................... 9.15 0.51 0.30 0.81 (0.51) (0.20)
1993................... 9.25 0.46 0.99 1.45 (0.46) (0.48)
1994................... 9.76 0.42 (0.12) 0.30 (0.42) (0.50)
1995................... 8.87 0.43 0.50 0.93 (0.43) (0.10)
</TABLE>
* Commencement of operations
** Annualized
+ Expense ratios before waiver of fees and reimbursement of expenses (if any)
by adviser and administrators.
++ Total return data does not reflect the sales load payable on purchases of
fund shares.
See Notes to Financial Statements
10
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTIONS RATIO OF NET RATIO OF GROSS RATIO OF NET
IN EXCESS OF NET ASSETS, OPERATING OPERATING INVESTMENT
NET REALIZED NET ASSET END OF EXPENSES EXPENSES INCOME PORTFOLIO FEE
GAIN ON TOTAL VALUE, END TOTAL PERIOD TO AVERAGE TO AVERAGE TO AVERAGE TURNOVER WAIVERS
INVESTMENTS DISTRIBUTIONS OF PERIOD RETURN++ (000) NET ASSETS NET ASSETS+ NET ASSETS RATE (NOTE 2)
- ------------- ------------- ---------- -------- ----------- ------------ -------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0.00000 $(0.05292) $1.00 5.42% $662,337 0.53% 0.53% 5.28% -- $0.00000
0.00000 (0.03849) 1.00 3.92% 666,351 0.52% 0.52% 3.84% -- 0.00000
0.00000 (0.02395) 1.00 2.42% 659,327 0.52% 0.52% 2.39% -- 0.00000
0.00000 (0.01938) 1.00 1.96% 694,581 0.52% 0.52% 1.94% -- 0.00003
0.00000 (0.02825) 1.00 2.86% 814,890 0.49% 0.52% 2.85% -- 0.00030
$ 0.00 $ (0.05) $7.07 1.65% $ 28,598 0.60%** 0.84%** 2.80%** -- $ 0.00
0.00 (0.26) 6.99 2.55% 57,728 0.59% 0.60% 2.94% 539% 0.00
0.00 (0.26) 6.96 3.45% 48,188 0.59% 0.61% 3.60% 565% 0.00
$ 0.00 $ (0.56) $8.83 8.64% $122,615 0.66% 0.66% 6.47% 216% $ 0.00
0.00 (0.56) 8.95 7.95% 223,201 0.64% 0.64% 5.48% 276% 0.00
0.00 (0.72) 9.24 11.70% 285,317 0.64% 0.64% 4.57% 429% 0.00
(0.25) (0.85) 8.64 2.58% 298,261 0.64% 0.64% 3.74% 379% 0.00
0.00 (0.37) 8.80 6.34% 234,990 0.61% 0.64% 4.28% 362% 0.00
$ 0.00 $ (0.39) $8.20 7.54% $ 25,883 0.86%** 0.86%** 5.72%** 105% $ 0.00
0.00 (0.49) 8.31 7.42% 52,238 0.88% 0.88% 4.82% 106% 0.00
0.00 (0.45) 8.61 9.27% 88,249 0.89% 0.89% 3.94% 339% 0.00
(0.08) (0.61) 8.18 1.87% 107,489 0.87% 0.87% 3.55% 326% 0.00
0.00 (0.42) 8.24 6.05% 87,164 0.78% 0.80% 4.06% 563% 0.00
$ 0.00 $ (0.59) $9.15 10.11% $ 38,040 0.86% 0.86% 6.01% 197% $ 0.00
0.00 (0.71) 9.25 9.19% 62,732 0.85% 0.85% 5.52% 218% 0.00
0.00 (0.94) 9.76 16.35% 85,520 0.86% 0.86% 4.73% 300% 0.00
(0.27) (1.19) 8.87 2.38% 82,151 0.85% 0.86% 4.25% 252% 0.00
0.00 (0.53) 9.27 11.01% 78,880 0.80% 0.83% 4.86% 214% 0.00
</TABLE>
See Notes to Financial Statements
11
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
SHORT-TERM TAX-EXEMPT FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENT SECURITIES -- 48.21%
$ 4,700,000 Dallas, Texas, Waterworks & Sewer System Bonds,
Series A,
3.750%, 05/10/1995.................................. $ 4,700,000
5,000,000 Dallas, Texas, Waterworks & Sewer System Revenue
Bonds,
3.800%, 04/03/1995.................................. 5,000,000
2,975,000 District of Columbia Aces, Georgetown University
Revenue Bonds, Series 1988-B,
4.300%, 04/01/2004+................................. 2,975,000
6,500,000 District of Columbia Aces, Georgetown University
Revenue Bonds, Series 1988-C,
4.300%, 04/01/2012+................................. 6,500,000
5,000,000 Gainesville, Florida, Utilities Systems Revenue
Bonds,
Series C,
3.850%, 05/10/1995.................................. 5,000,000
3,640,000 Gulf Coast Waste Disposal Authority, Texas, Water &
Pollution Control Revenue Bonds, Amoco Project,
4.750%, 07/15/2008+................................. 3,641,003
5,000,000 Hockley County, Texas, Industrial Development Corp.
Pollution Control Revenue Bonds,
Amoco Project,
3.900%, 11/01/2019+................................. 4,995,552
5,000,000 Houston, Texas, General Obligation Revenue Bonds,
Series A,
4.100%, 04/18/1995.................................. 5,000,000
13,400,000 Houston, Texas, General Obligation Revenue Bonds,
Series A,
4.150%, 04/01/1998+................................. 13,400,000
12,300,000 Houston, Texas, General Obligation Revenue Bonds,
Series B,
4.150%, 04/01/2014+................................. 12,300,000
8,000,000 Houston, Texas, Public Improvement Bonds, Series B,
4.150%, 04/01/2013+................................. 8,000,000
8,000,000 Indianapolis, Indiana, Local Public Improvement
Bonds, Series F,
5.250%, 07/14/1995.................................. 8,008,848
10,000,000 Massachusetts State General Obligation Notes, Series
A,
5.000%, 06/15/1995.................................. 10,012,433
11,500,000 Monroe County, New York, Bond Anticipation Notes,
Series C,
5.000%, 06/09/1995.................................. 11,510,600
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENT SECURITIES -- (CONTINUED)
$ 5,000,000 Montgomery, Alabama, Industrial Development Board,
Pollution Control Refunding Bonds,
GE Co. Project,
4.150%, 04/07/1995.................................. $ 5,000,000
6,000,000 New Jersey State General Obligation Bonds,
5.800%, 08/01/1995.................................. 6,020,318
7,000,000 New Jersey State Tax & Revenue Anticipation Notes,
5.000%, 06/15/1995.................................. 7,006,534
8,390,000 New York City, New York, Revenue Anticipation Notes,
Series A,
4.500%, 04/12/1995.................................. 8,390,301
14,150,000 Nueces River, Texas, Industrial Development
Authority, Pollution Control Refunding Revenue
Bonds, San Miguel Electric Coop,
4.200%, 04/10/1995.................................. 14,150,000
9,350,000 Nueces River, Texas, Industrial Development
Authority, Pollution Control Refunding Revenue
Bonds, San Miguel Electric Coop,
4.200%, 05/08/1995.................................. 9,350,000
6,740,000 Ohio State University Revenue Bonds, General
Receipts,
Series B,
4.100%, 12/01/2006+................................. 6,740,000
2,750,000 Ohio State University, Revenue Bonds, General
Receipts,
Series B,
4.150%, 12/01/2012+................................. 2,750,000
14,500,000 Oklahoma State Water Resources Board State Loan
Program Revenue Bonds, Series A,
4.500%, 09/01/2023++................................ 14,500,000
5,500,000 Omaha, Nebraska,
Public Power District,
3.600%, 04/03/1995.................................. 5,500,000
10,000,000 Omaha, Nebraska,
Public Power District,
4.150%, 07/21/1995.................................. 10,000,000
3,000,000 Pennsylvania State Tax Anticipation Notes, 1st
Series,
4.750%, 06/30/1995.................................. 3,000,570
11,775,000 Petersburg, Indiana, Pollution Control Refunding
Revenue Bonds, Indianapolis Power & Light Co.,
4.200%, 04/12/1995.................................. 11,775,000
</TABLE>
See Notes to Financial Statements
12
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
SHORT-TERM TAX-EXEMPT FUND--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENT SECURITIES -- (CONTINUED)
$12,000,000 Plaquemines, Louisiana,
Port Harbor and Terminal, Marine Terminal
Facilities, Electro-Coal Transfer Revenue Bonds,
Series D,
4.350%, 05/11/1995................................. $ 12,000,000
5,000,000 Putnam County, Florida, Pollution Control Revenue
Bonds, Seminole Electric Coop,
Series H-4,
4.300%, 03/15/2014++............................... 5,000,000
10,000,000 Putnam County, Florida, Development Authority,
Pollution Control Revenue Bonds, Seminole Electric
Coop, Series 1984-D,
4.250%, 12/15/2009++............................... 10,000,000
8,800,000 Salt River Project, Arizona, Agricultural
Improvement & Power District,
3.700%, 04/03/1995................................. 8,800,000
10,000,000 Salt River Project, Arizona, Agricultural
Improvement & Power District,
4.050%, 04/11/1995................................. 10,000,000
7,800,000 Salt River Project, Arizona, Agricultural
Improvement & Power District,
4.250%, 04/11/1995................................. 7,800,000
11,000,000 Salt River Project, Arizona, Agricultural
Improvement & Power District,
4.250%, 05/17/1995................................. 11,000,000
5,000,000 San Antonio, Texas, Electric & Gas Revenue Bonds,
Series A,
4.100%, 04/20/1995................................. 5,000,000
4,200,000 Sullivan, Indiana, Pollution Control Revenue Bonds,
Series 1985L-2,
4.050%, 04/10/1995................................. 4,200,000
3,500,000 Tennessee State Bond Anticipation Notes,
Series A,
4.100%, 05/01/1996+................................ 3,500,000
7,200,000 Tennessee State Local Development Authority, State
Loan Programs, Bond Anticipation Notes, Series A,
4.500%, 06/01/1995................................. 7,200,297
10,000,000 Texas State Public Finance Authority Revenue Bonds,
4.450%, 05/18/1995................................. 10,000,000
9,500,000 Texas State Tax
Anticipation Notes,
5.000%, 08/31/1995................................. 9,522,254
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENT SECURITIES -- (CONTINUED)
$21,000,000 Texas State Tax & Revenue Anticipation Notes,
5.000%, 08/31/1995................................. $ 21,074,934
2,715,000 Trimble County, Kentucky, Pollution Control Revenue
Bonds, Louisville Gas & Electric Co. Project,
Series A,
3.950%, 04/07/1995................................. 2,715,000
6,500,000 University of Minnesota,
4.100%, 04/06/1995................................. 6,500,000
21,000,000 University of Texas Permanent University Fund,
Series A,
3.900%, 05/01/1995................................. 21,000,000
5,000,000 University of Texas Permanent University Fund,
Series A,
3.750%, 05/11/1995................................. 5,000,000
5,000,000 University of Texas Permanent University Fund,
3.950%, 04/10/1995................................. 5,000,000
10,000,000 University of Texas Permanent University Fund,
4.200%, 04/11/1995................................. 10,000,000
7,000,000 Virginia State Housing Development Authority,
Commonwealth Mortgage Revenue Bonds, Series A,
Subseries A,
4.250%, 07/01/2017++............................... 7,000,000
1,500,000 Virginia State Housing Development Authority,
Commonwealth Mortgage Revenue Bonds, Series D,
3.900%, 07/01/2017++............................... 1,499,832
3,825,000 Wisconsin State Operating Notes, 4.500%,
06/15/1995......................................... 3,824,313
------------
392,862,789
------------
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- 51.32%
BANK OF NEW YORK
10,000,000 Ohio County, Kentucky, Pollution Control Revenue
Bonds,
Big Rivers Electric Corp.,
Series 1983,
4.450%, 06/01/2013+................................ 10,000,000
BANK OF NOVA SCOTIA
10,200,000 Gary, Indiana, Environmental Improvement Revenue
Bonds, U.S. Steel Corp. Project,
Series 1984,
3.850%, 07/15/2002+................................ 10,200,000
</TABLE>
See Notes to Financial Statements
13
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
SHORT-TERM TAX-EXEMPT FUND--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- (CONTINUED)
$ 3,400,000 New Hampshire State Industrial Development
Authority, Pollution Control Revenue Bonds, Bangor
Hydro-Electric Co. Project, Series 1983,
4.100%, 01/01/2009+................................ $ 3,400,000
BARCLAYS BANK
5,000,000 Beaver County, Pennsylvania, Industrial Development
Authority, Pollution Control Refunding Bonds,
Duquesne-Beaver Valley Project, Series C,
4.150%, 04/07/1995................................. 5,000,000
7,700,000 Bucks County, Pennsylvania, Industrial Development
Authority Revenue Bonds, Tru Realty--Toys R Us
Project,
3.800%, 12/01/2018+................................ 7,700,000
2,700,000 Jasper County, Indiana, Pollution Control Refunding
Revenue Bonds, Northern Indiana Public Service Co.,
Series A,
3.950%, 04/07/1995................................. 2,700,000
5,300,000 Kenton County, Kentucky, Industrial Building
Revenue Bonds, Redken Labs, Inc. Project, Series
1984,
3.850%, 12/01/2014+................................ 5,300,000
CANADIAN IMPERIAL BANK
8,320,000 District of Columbia, Tax & Revenue Anticipation
Notes, Series A, Subseries A-3,
6.250%, 09/30/1995................................. 8,373,856
4,500,000 Maricopa County, Arizona, Pollution Control
Refunding Revenue Bonds, Public Service Co., New
Mexico, Series A,
4.100%, 11/01/2022+................................ 4,500,000
CHASE MANHATTAN BANK
10,200,000 Plaquemines, Louisiana, Port Harbor and Terminal,
Marine Terminal Facilities, Electro-Coal Transfer
Revenue Bonds, Series A,
4.000%, 04/19/1995................................. 10,200,000
13,750,000 Plaquemines, Louisiana, Port Harbor and Terminal,
Marine Terminal Facilities, Electro-Coal Transfer
Revenue Bonds, Series B,
4.200%, 04/20/1995................................. 13,750,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- (CONTINUED)
$ 5,000,000 Plaquemines, Louisiana, Port Harbor and Terminal,
Marine Terminal Facilities, Electro-Coal Transfer
Revenue Bonds, Series C,
4.250%, 04/13/1995................................. $ 5,000,000
5,275,000 Plaquemines, Louisiana, Port Harbor and Terminal,
Marine Terminal Facilities, Electro-Coal Transfer
Revenue Bonds, Series C,
4.100%, 04/20/1995................................. 5,275,000
5,000,000 Plaquemines, Louisiana, Port Harbor and Terminal,
Marine Terminal Facilities, Electro-Coal Transfer
Revenue Bonds, Series C,
3.950%, 04/27/1995................................. 5,000,000
CITIBANK
6,000,000 Jasper County, Indiana, Pollution Control Refunding
Revenue Bonds, Northern Indiana Public Service Co.,
Series B,
3.950%, 04/10/1995................................. 6,000,000
7,000,000 Jasper County, Indiana, Pollution Control Refunding
Revenue Bonds, Northern Indiana Public Service Co.,
Series B,
4.050%, 04/10/1995................................. 7,000,000
4,500,000 Jasper County, Indiana, Pollution Control Refunding
Revenue Bonds, Northern Indiana Public Service Co.,
Series D,
4.150%, 04/06/1995................................. 4,500,000
CREDIT SUISSE
10,000,000 Burke County, Georgia, Industrial Development
Authority, Pollution Control Revenue Bonds,
Ogelthorpe Power Corp. Project, Series A,
4.150%, 05/12/1995................................. 10,000,000
5,435,000 Emery County, Utah, Pollution Control Refunding
Revenue Bonds, Pacificorp Project,
4.150%, 04/06/1995................................. 5,435,000
6,900,000 Garden City, Kansas, Industrial Development Revenue
Bonds, Inland Container Corp. Project, Temple
Series 1983,
3.750%, 01/01/2008+................................ 6,900,000
2,000,000 Jacksonville, Florida, Electric Authority Revenue
Bonds,
3.700%, 04/10/1995................................. 2,000,000
</TABLE>
See Notes to Financial Statements
14
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
SHORT-TERM TAX-EXEMPT FUND--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- (CONTINUED)
$ 5,500,000 Jacksonville, Florida, Electric Authority Revenue
Bonds,
Series D-1,
4.050%, 04/10/1995................................. $ 5,500,000
10,440,000 Marshall County, West Virginia, Pollution Control
Revenue Bonds, Mobay Chemical
Corp. Project,
3.850%, 12/01/2000+................................ 10,440,000
2,200,000 McIntosh, Alabama, Industrial Development Board,
Pollution Control Revenue Bonds, Ciba-Geigy Corp.
Project, Series 1986,
4.500%, 07/01/2004+................................ 2,200,000
2,200,000 South Louisiana Port Commission, Marine Terminal
Facilities Refunding Revenue Bonds, Occidental
Petroleum,
4.050%, 07/01/2021+................................ 2,200,000
DAI-ICHI KANGYO BANK
1,100,000 New York City, New York, General Obligation Bonds,
Subseries B-2,
4.300%, 08/15/2020+................................ 1,100,000
1,000,000 New York City, New York, General Obligation Bonds,
Subseries B-2,
4.300%, 08/15/2021+................................ 1,000,000
DEUTSCHE BANK
2,500,000 Gillette, Wyoming, Pollution Control Refunding
Revenue Bonds, Pacficorp Project, 3.850%,
05/09/1995......................................... 2,500,000
FIRST NATIONAL BANK OF CHICAGO
2,800,000 Illinois Health Facilities Authority Revenue Bonds,
Evangelical Hospitals Corp., Series A,
4.200%, 01/01/2016+................................ 2,800,000
FUJI BANK
8,100,000 Illinois Health Facilities Authority Revenue Bonds,
Healthcorp Affiliates, Series A,
4.200%, 11/01/2015+................................ 8,100,000
6,300,000 Illinois Health Facilities Authority Revenue Bonds,
Healthcorp Affiliates, Series B,
4.200%, 11/01/2015+................................ 6,300,000
9,100,000 Illinois Health Facilities Authority Revenue Bonds,
Ingalls Memorial Hospital, Series B,
4.200%, 01/01/2016+................................ 9,100,000
13,300,000 Oregon State General Obligation Bonds, Series 73G,
4.250%, 12/01/2018+................................ 13,300,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- (CONTINUED)
LLOYDS BANK
$ 4,045,000 Des Moines, Iowa, Private College Revenue Bonds,
University of Osteopathic Medicine & Health,
4.500%, 05/15/2015+................................ $ 4,045,000
MITSUBISHI BANK
6,900,000 Austin, Texas, Higher Education Authority Revenue
Bonds,
St. Edwards University Project, Series 1985,
4.250%, 08/01/2010+................................ 6,900,000
37,700,000 Connecticut State Special Assessment, Unemployment
Compensation Advanced Fund Revenue Bonds, Series B,
4.200%, 11/15/2001+................................ 37,700,000
MORGAN GUARANTY TRUST CO.
26,000,000 Baltimore, Maryland, Port Facilities Revenue Bonds,
Occidental Petroleum,
Series 1981,
3.750%, 10/14/2011+................................ 26,000,000
10,000,000 Chicago, Illinois, General Obligation Notes, Series
A,
4.600%, 10/31/1996................................. 10,000,000
2,585,000 Florida State Municipal Power Agency, Revenue
Bonds, Pooled Loan Project, Series A,
3.600%, 04/03/1995................................. 2,585,000
16,000,000 North Carolina Eastern
Municipal Power Agency,
Power Systems, Series B,
4.050%, 04/06/1995................................. 16,000,000
NATIONAL WESTMINSTER BANK
12,750,000 District of Columbia, Tax & Revenue Anticipation
Notes, Series A, Subseries A-1,
6.250%, 09/30/1995................................. 12,835,713
NORDDEUTSCHE LANDESBANK
9,900,000 Brazos, Texas, Harbor Industrial Development Corp.
Revenue Bonds, Badische Corp.,
3.850%, 12/01/2013+................................ 9,900,000
NORTHERN TRUST/HARRIS TRUST & SAVINGS BANK
1,300,000 Illinois Educational Facilities Authority Revenue
Bonds, Illinois Institute of Technology, Series A,
4.150%, 09/01/2025+................................ 1,300,000
</TABLE>
See Notes to Financial Statements
15
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
SHORT-TERM TAX-EXEMPT FUND--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- (CONTINUED)
SANWA BANK
$ 9,500,000 Indiana Health Facilities Financing Authority, St.
Anthony's Medical Center Project Revenue Bonds,
4.100%, 12/01/2014+................................. $ 9,500,000
4,600,000 Michigan State Job Development Authority Revenue
Bonds, Hitachi Metals International Project,
4.200%, 01/01/2004+................................. 4,600,000
2,100,000 New York City, New York, General Obligation Bonds,
Subseries B-3,
4.300%, 08/15/2017+................................. 2,100,000
SUMITOMO BANK
3,000,000 New York City, New York, General Obligation Bonds,
Subseries E-5,
4.500%, 08/01/2017+................................. 3,000,000
6,100,000 Wake County, North Carolina, Industrial Facilities &
Pollution Control Financing Authority Revenue Bonds,
Carolina Power & Light Co. Project,
Series 1985-B,
4.200%, 09/01/2015+................................. 6,100,000
11,500,000 Wake County, North Carolina, Industrial Facilities &
Pollution Control Financing Authority Revenue Bonds,
Carolina Power & Light Co. Project,
Series 1985-C,
4.200%, 10/01/2015+................................. 11,500,000
SWISS BANK
9,950,000 Austin, Texas, Utilities Systems Revenue Bonds,
3.900%, 05/01/1995.................................. 9,950,000
TORONTO DOMINION BANK
8,000,000 District of Columbia, Tax & Revenue Anticipation
Notes, Series A, Subseries A-2,
6.250%, 09/30/1995.................................. 8,055,834
12,000,000 Illinois Health Facilities Authority Revenue Bonds,
Franciscan Sisters Healthcare Corp. Project, Series
1985-B,
4.100%, 09/01/2015+................................. 12,000,000
UNION BANK OF SWITZERLAND
7,500,000 Converse County, Wyoming, Pollution Control
Refunding Revenue Bonds,
Pacificorp Project,
4.150%, 08/14/1995.................................. 7,500,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT CASH EQUIVALENTS --
BACKED BY LETTERS OF CREDIT -- (CONTINUED)
$ 1,000,000 Louisiana State Offshore Terminal Authority,
Deepwater Port Refunding Revenue Bonds, LOOP, Inc.,
1st Stage, Series A,
4.500%, 09/01/2008+................................ $ 1,000,000
5,000,000 Sweetwater County, Wyoming, Pollution Control
Refunding Revenue Bonds, Pacificorp Project, Series
A,
4.250%, 04/12/1995................................. 5,000,000
6,305,000 Sweetwater County, Wyoming, Pollution Control
Refunding Revenue Bonds, Pacificorp Project, Series
B,
4.150%, 08/11/1995................................. 6,305,000
WESTDEUTSCHE LANDESBANK
1,500,000 Suffolk County, New York,
Tax Anticipation Notes,
5.250%, 08/15/1995................................. 1,503,950
------------
418,154,353
------------
<CAPTION>
SHARES
-----------
<C> <S> <C>
OTHER INVESTMENTS -- 0.00%
32,000 Dreyfus Tax-Exempt Cash Management Fund............ 32,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $811,049,142*)....................................... 99.53% $811,049,142
OTHER ASSETS &
LIABILITIES (NET).......................................... 0.47 3,840,604
------ ------------
NET ASSETS................................................. 100.00% $814,889,746
====== ============
</TABLE>
- --------
* For Federal income tax purposes, the tax basis of investments aggregates
$811,057,709.
+ Variable rate demand bonds and notes are payable upon not more than seven
business days notice.
++ Variable rate put bonds and notes with demand features to mature within one
year.
Note:
These municipal securities meet the two highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Investment Adviser, under the supervision of the
Board of Directors, to be of comparable quality at the time of purchase to
rated instruments that may be acquired by the Fund.
At March 31, 1995, approximately, 51% of the net assets are invested in
municipal securities that have letter of credit enhancement features backing
them, which the Fund relies on. Without such features, these securities may
or may not meet the quality standards of securities purchased by the Fund.
At March 31, 1995, approximately, 24% of the net assets are invested in Texas
municipal securities. Economic changes affecting the state and certain of its
public bodies and municipalities may affect the ability of issuers to pay the
required principal and interest payments of the municipal securities.
See Notes to Financial Statements
16
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
SHORT-TERM TAX-EXEMPT SECURITIES FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- -----------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- 86.00%
$2,000,000 Alabama State Refunding General Obligation Bonds,
5.900%, 03/01/1999................................... $ 2,074,720
6,000,000 California State Revenue Anticipation Warrants,
Series C, (FGIC)
5.750%, 04/25/1996................................... 6,062,400
2,000,000 California State, General Obligation Bonds,
10.000%, 04/01/1998.................................. 2,276,600
1,000,000 Fairfax County, Virginia, General Obligation Bonds,
Series B,
5.000%, 06/01/2000................................... 1,005,350
1,515,000 Georgia State General Obligation Bonds, Series B,
6.300%, 03/01/1999................................... 1,599,613
2,000,000 Harris County, Texas,
Refunding Bonds,
5.750%, 10/01/1998................................... 2,056,020
1,000,000 Hawaii State Refunding General Obligation Bonds,
Series BV,
5.600%, 11/01/1998................................... 1,026,000
1,000,000 Hawaii State, General Obligation Bonds, Series CJ,
5.500%, 01/01/1999................................... 1,020,240
1,900,000 Illinois State Sales Tax Refunding Revenue Bonds,
Series Q,
5.300%, 06/15/2000................................... 1,917,024
1,000,000 Intermountain Power Agency, Utah, Power Supply
Refunding Revenue Bonds, Series B,
5.000%, 07/01/1997................................... 1,004,350
2,200,000 Minnesota State Public Improvement General Obligation
Bonds, Recreational Facilities Improvements,
5.600%, 10/01/1999................................... 2,266,880
2,200,000 Nevada State Highway Improvement, Motor Vehicle Fuel
Tax Revenue Bonds,
7.000%, 04/01/1999................................... 2,370,126
2,000,000 New Jersey State General Obligation Bonds,
6.250%, 09/15/1999................................... 2,112,580
2,000,000 New York State Environmental Facilities Corp.
Pollution Control Revenue Bonds, New York City
Municipal Water, Revolving Fund,
5.500%, 06/15/1999................................... 2,041,900
1,250,000 New York State Local Government Assistance Corp.
Revenue Bonds, Series A,
5.750%, 04/01/1998................................... 1,282,112
2,000,000 North Dakota State Student Loan Refunding Bonds,
Series A,
5.400%, 07/01/1996................................... 2,013,260
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- -----------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- (CONTINUED)
$2,000,000 Pennsylvania State General Obligation Bonds, Series
A,
5.700%, 11/15/1999................................... $ 2,070,360
1,000,000 Seattle, Washington, Municipal Light & Power Revenue
Bonds,
6.000%, 07/01/1998................................... 1,025,950
2,000,000 Tennessee State General Obligation Bonds, Series A,
5.000%, 03/01/1999................................... 2,016,880
2,000,000 Texas State Tax & Revenue Anticipation Notes,
5.000%, 08/31/1995................................... 2,007,316
2,135,000 Wisconsin State Public Improvements, Water Utility &
Highway Improvements, Series A,
5.750%, 05/01/2000................................... 2,192,496
-----------
41,442,177
-----------
TAX-EXEMPT SECURITIES -- BACKED BY LETTERS OF CREDIT -- 15.15%
FUJI BANK
1,100,000 Illinois Health Facilities Authority Revenue Bonds,
Ingalls Memorial Hospital, Series B,
4.200%, 01/01/2016+.................................. 1,100,000
MORGAN GUARANTY TRUST CO.
1,000,000 New York City, New York, General Obligation Bonds,
Subseries E-3,
4.400%, 08/01/2023+.................................. 1,000,000
SANWA BANK
2,000,000 Indiana Health Facilities Financing Authority, St.
Anthony's Medical Center Project Revenue Bonds,
4.100%, 12/01/2014+.................................. 2,000,000
TORONTO DOMINION BANK
2,200,000 Wisconsin State Health Facilities Authority Refunding
Revenue Bonds, Franciscan Health Care, Series A-2,
4.100%, 01/01/2016+.................................. 2,200,000
UNION BANK OF SWITZERLAND
1,000,000 Louisiana State Offshore Terminal Authority,
Deepwater Port Refunding Revenue Bonds, LOOP, Inc.,
1st Stage, Series A,
4.500%, 09/01/2008+.................................. 1,000,000
-----------
7,300,000
-----------
</TABLE>
See Notes to Financial Statements
17
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
SHORT-TERM TAX-EXEMPT SECURITIES FUND--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
---------- -----------
<C> <S> <C>
OTHER INVESTMENTS -- 1.45%
700,800 Dreyfus Tax-Exempt Cash Management Fund............... $ 700,800
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $49,092,137*)........................................ 102.60% $49,442,977
OTHER ASSETS &
LIABILITIES (NET).......................................... (2.60) (1,255,434)
------ -----------
NET ASSETS................................................. 100.00% $48,187,543
====== ===========
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+ Variable rate demand bonds and notes are payable upon not more than seven
business days notice.
FGIC--Financial Guaranty Insurance Corp.
Note:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Investment Adviser, under the supervision of the
Board of Directors, to be of comparable quality at the time of purchase to
rated instruments that may be acquired by the Fund.
At March 31, 1995, approximately, 15% of the net assets are invested in
municipal securities that have letter of credit enhancement features backing
them, which the Fund relies on. Without such features, these securities may
or may not meet the quality standards of securities purchased by the Fund.
At March 31, 1995, approximately, 17% of the net assets are invested in
California municipal securities. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers to pay the required principal and interest payments of the municipal
securities.
See Notes to Financial Statements
18
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
INTERMEDIATE-TERM TAX-EXEMPT FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- 76.62%
$10,000,000 California State Department of Water Refunding
Bonds,
Series L,
5.200%, 12/01/2007.................................. $ 9,561,100
10,000,000 California State Public Improvement General
Obligation Bonds, (FGIC)
7.500%, 11/01/2003.................................. 11,426,700
10,000,000 Chicago, Illinois, School Finance Authority, Series
A (MBIA),
4.800%, 06/01/2004.................................. 9,316,200
10,000,000 Connecticut State General Obligation Bonds, Series
D,
6.250%, 11/15/2009.................................. 10,312,600
10,000,000 Fairfax County, Virginia, Refunding General
Obligation Bonds, Series C,
5.250%, 05/01/2008.................................. 9,686,900
10,000,000 Georgia State General Obligation Bonds, Series C,
6.500%, 07/01/2004.................................. 10,982,500
10,000,000 Hawaii State Refunding General Obligation Bonds,
Series CI,
4.500%, 11/01/2005.................................. 9,167,600
10,000,000 Hawaii State General Obligation Bonds, Series CJ,
5.900%, 01/01/2006.................................. 10,328,300
10,000,000 King County, Washington, Refunding & General
Obligation Bonds, Series C,
4.300%, 06/01/2001.................................. 9,443,900
10,000,000 Los Angeles, California, Department of Water & Power
Electric Plant Revenue Bonds,
6.625%, 10/01/2031.................................. 10,900,900
10,000,000 Maryland State & Local Facilities Loan, Refunding
General Obligation Bonds, 3rd Series,
4.400%, 07/15/2004.................................. 9,214,400
10,000,000 Maryland State & Local Facilities, Public
Improvements Correctional Facilities,
3rd Series,
5.700%, 10/15/2006.................................. 10,278,900
10,000,000 Maryland State Department of Transportation,
Consolidated Transportation Bonds,
Second Issue,
4.375%, 12/15/2003.................................. 9,141,500
10,000,000 New Jersey State Refunding General Obligation Bonds,
Series D,
5.625%, 02/15/2005.................................. 10,258,300
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- ------------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- (CONTINUED)
$10,000,000 New Jersey State, Transportation Authority Revenue
Bonds,
Series A,
4.625%, 06/15/2002................................. $ 9,625,300
10,000,000 Puerto Rico Telephone Authority Revenue Bonds,
(AMBAC),
4.950%, 01/01/2003................................. 9,822,700
10,000,000 Texas State Refunding Bonds, Series A,
5.800%, 10/01/2004................................. 10,414,900
10,885,000 Wisconsin State Refunding General Obligation Bonds,
Series 5,
4.450%, 11/01/2002................................. 10,164,304
------------
180,047,004
------------
TAX-EXEMPT SECURITIES -- ESCROWED IN U.S. GOVERNMENTS -- 22.08%
10,000,000 Fairfax County, Virginia, Industrial Development
Authority Revenue Bonds, Fairfax Hospital System,
6.801%, 08/29/2023 (Prerefunded 08/15/2001)........ 11,082,400
10,000,000 Sacramento, California,
City Financing Authority Revenue Bonds,
6.700%, 11/01/2011 (Prerefunded 11/01/2001)........ 11,016,400
10,000,000 South Carolina State Public Service Authority
Revenue Bonds, Santee-Cooper Project, Series D,
(MBIA),
6.625%, 07/01/2031 (Prerefunded 07/01/2002)........ 11,011,000
18,000,000 Southern California Public Power Authority, Power
Project,
6.000%, 07/01/2018 (Prerefunded 07/01/2000)........ 18,778,320
------------
51,888,120
------------
TAX-EXEMPT SECURITIES -- BACKED BY LETTERS OF CREDIT -- 3.83%
SANWA BANK
9,000,000 Indiana Health Facilities Financing Authority, St.
Anthony's Medical Center Project Revenue Bonds,
4.100%, 12/01/2014+................................ 9,000,000
------------
</TABLE>
See Notes to Financial Statements
19
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
INTERMEDIATE-TERM TAX-EXEMPT FUND--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
----------- ------------
<C> <S> <C>
OTHER INVESTMENTS -- 0.37%
878,000 Dreyfus Tax-Exempt Cash Management Fund............. $ 878,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $237,225,653*)...................................... 102.90% $241,813,124
OTHER ASSETS &
LIABILITIES (NET)......................................... (2.90) (6,822,904)
------ ------------
NET ASSETS................................................ 100.00% $234,990,220
====== ============
</TABLE>
- --------
* Aggregate cost for Federal tax and book purposes.
+ Variable rate demand bonds and notes are payable upon not more than seven
business days notice.
AMBAC--American Municipal Bond Assurance Corp.
FGIC--Financial Guaranty Insurance Corp.
MBIA--Municipal Bond Insurance Assoc.
Note:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Investment Adviser, under the supervision of the
Board of Directors, to be of comparable quality at the time of purchase to
rated instruments that may be acquired by the Fund.
At March 31, 1995, approximately, 26% of the net assets are invested in
municipal securities that have letter of credit enhancement features or
escrows in U.S. Government securities backing them, which the Fund relies on.
Without such features, the securities may or may not meet the quality
standards of securities purchased by the Fund.
At March 31, 1995, approximately, 26% of the net assets are invested in
California municipal securities. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers to pay the required principal and interest payments of the municipal
securities.
See Notes to Financial Statements
20
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
NEW YORK INTERMEDIATE-TERM TAX-EXEMPT FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- -----------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- 83.52%
$4,000,000 Connecticut State General Obligation Bonds, Series A
5.300%, 03/15/2004................................... $ 4,002,720
2,000,000 Massachusetts State Consolidated Loan, Series A,
(MBIA)
5.375%, 02/01/2004................................... 2,009,620
3,825,000 Metropolitan Transportation Authority of New York
Commuter Facilities, Revenue Bonds, Series A, (MBIA),
7.000%, 07/01/2006................................... 4,335,561
3,000,000 Municipal Assistance Corp., City of New York, Series
C,
5.000%, 07/01/2006................................... 2,822,340
3,900,000 Nassau County, New York, Combined Sewer Districts
Refunding General Obligation Bonds, Series G, (MBIA),
5.100%, 01/15/2003................................... 3,850,431
5,000,000 New York City, New York, Municipal Water Finance
Authority, Water & Sewer System Revenue Bonds, Series
A,
4.850%, 06/15/1997................................... 4,992,400
4,000,000 New York City, New York, Municipal Water Finance
Authority, Water & Sewer System Revenue Bonds, Series
B, (AMBAC),
5.375%, 06/15/2007................................... 3,919,080
3,500,000 New York State Dormitory Authority, City University
System Revenue Bonds, Series A, (FGIC),
5.600%, 07/01/2004................................... 3,588,550
4,000,000 New York State Environmental Facilities Corp.,
Pollution Control Revenue Bonds, State Water
Revolving Fund,
5.700%, 06/15/2006................................... 4,059,200
4,000,000 New York State Local Government Assistance Corp.
Revenue Bonds, Series A,
5.400%, 04/01/2005................................... 3,990,840
4,000,000 New York State Medical Care Facilities Finance Agency
Revenue Bonds, FHA Mortgage, Series A, (AMBAC),
6.200%, 02/15/2005................................... 4,226,400
4,000,000 New York State Power Authority Revenue and General
Purpose Bonds, Series CC,
5.000%, 01/01/2007................................... 3,745,920
4,000,000 New York State Refunding General Obligation Bonds,
Series B, 5.500%, 08/15/2006......................... 3,989,680
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- -----------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- (CONTINUED)
$4,000,000 New York State Thruway
Authority General Revenue
Bonds, Series C, (FGIC)
5.400%, 01/01/2005........ $ 4,045,000
3,500,000 Niagara Falls, New York,
Bridge Commission Revenue
Bonds, Series B, (FGIC),
4.850%, 10/01/2004........ 3,373,510
3,000,000 Puerto Rico Telephone
Authority Revenue Bonds,
(AMBAC), 4.950%,
01/01/2003................ 2,946,810
5,000,000 Puerto Rico Telephone
Authority Revenue Bonds,
Reserve 1, (AMBAC),
5.050%, 01/01/2004........ 4,916,400
5,000,000 Suffolk County, New York,
Industrial Development
Agency, Southwest Sewer
Systems Revenue Bonds,
(FGIC),
4.700%, 02/01/2004........ 4,742,850
3,000,000 Triborough Bridge & Tunnel
Authority, New York,
Revenue and General
Purpose Bonds, Series Q,
6.750%, 01/01/2002........ 3,237,660
-----------
72,794,972
-----------
TAX-EXEMPT SECURITIES -- ESCROWED IN U.S.
GOVERNMENTS -- 12.11%
5,000,000 New York City, New York,
General Obligation Bonds,
Series C, Subseries C-1,
(AMBAC)
6.400%, 08/01/2004
(Prerefunded 08/01/2002).... 5,473,900
2,000,000 New York State Local
Government Assistance
Corp., Series B,
7.500%, 04/01/2020
(Prerefunded 04/01/2001).... 2,290,680
2,500,000 New York State Housing
Finance Agency, Special
Obligation Refunding
Bonds, New York City
Health Facilities, Series
A,
6.900%, 05/01/2003
(Escrowed to maturity).... 2,792,700
-----------
10,557,280
-----------
<CAPTION>
SHARES
----------
<C> <S> <C>
OTHER INVESTMENTS -- 3.59%
3,128,870 Provident Tax-Exempt New
York Money Fund........... 3,128,870
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $85,374,447*)......................................... 99.22% $86,481,122
OTHER ASSETS &
LIABILITIES (NET)........................................... 0.78 682,409
------ -----------
NET ASSETS.................................................. 100.00% $87,163,531
====== ===========
</TABLE>
See Notes to Financial Statements
21
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
NEW YORK INTERMEDIATE-TERM TAX-EXEMPT FUND--(CONTINUED)
- --------
* Aggregate cost for Federal tax and book purposes.
AMBAC --American Municipal Bond Assurance Corp.
FGIC --Financial Guaranty Insurance Corp.
MBIA --Municipal Bond Insurance Assoc.
Note:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Investment Adviser, under the supervision of the
Board of Directors, to be of comparable quality at the time of purchase to
rated instruments that may be acquired by the Fund.
At March 31, 1995, approximately, 12% of the net assets are invested in
municipal securities that have escrows in U.S. Government securities backing
them, which the Fund relies on. Without such features, these securities may
or may not meet the quality standards of securities purchased by the Fund.
At March 31, 1995, approximately, 80% of the net assets are invested in New
York municipal securities. Economic changes affecting the state and certain
of its public bodies and municipalities may affect the ability of issuers to
pay the required principal and interest payments of the municipal securities.
See Notes to Financial Statements
22
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
LONG-TERM TAX-EXEMPT FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- -----------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- 86.30%
$ 4,000,000 Fulton County, Georgia, School District General
Obligation Bonds, 5.625%, 01/01/2021................ $ 3,811,600
4,000,000 Hawaii State Refunding Bonds, Series CI,
4.500%, 11/01/2005.................................. 3,667,040
4,000,000 Illinois State General Obligation Bonds,
5.700%, 04/01/2018.................................. 3,789,400
4,000,000 Intermountain Power Agency, Utah, Power Supply
Refunding Revenue Bonds, Series A,
5.500%, 07/01/2020.................................. 3,649,360
1,500,000 Jackson County, Mississippi, Pollution Control
Refunding Revenue Bonds, Chevron Project, 3.000%,
12/01/2016+......................................... 1,500,000
4,000,000 King County, Washington, General Obligation &
Revenue Bonds, Series A,
6.250%, 01/01/2034.................................. 3,925,160
4,000,000 Maryland State Community Development Administration,
Department of Housing & Community Development
Refunding Revenue Bonds, Single Family Project, 1st
Series,
5.800%, 04/01/2009.................................. 3,921,240
10,000,000 Massachusetts State Housing Finance Agency Revenue
Bonds, Housing Projects, Series A, 6.300%,
10/01/2013.......................................... 9,989,200
4,000,000 New York City, New York, Municipal Water Finance
Authority, Water & Sewer Systems Revenue Bonds,
Series B,
5.625%, 06/15/2011.................................. 3,855,480
4,000,000 New York State Medical Care Facilities Finance
Agency Revenue Bonds, New York Hospital, FHA
Insured, Series A, (AMBAC) 6.500%, 08/15/2029....... 4,112,960
4,000,000 New York State Mortgage Agency Revenue Bonds, Series
41-A, 6.450%, 10/01/2014............................ 4,056,760
4,000,000 Orlando, Florida, Utilities Commission, Water &
Electric Revenue Bonds, Series A,
5.250%, 10/01/2023.................................. 3,587,720
4,000,000 San Antonio, Texas, Electric & Gas Refunding Revenue
Bonds, 5.000%, 02/01/2014........................... 3,568,560
4,000,000 Texas Water Development Board Revenue Bonds, State
Revolving Fund,
5.250%, 07/15/2015.................................. 3,624,200
4,000,000 Valdez, Alaska, Marine Terminal Refunding Revenue
Bonds, BP Pipeline, Inc. Project, Series B, 5.500%,
10/01/2028.......................................... 3,560,720
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- -----------
<C> <S> <C>
TAX-EXEMPT SECURITIES -- (CONTINUED)
$ 4,000,000 University of California Multi Purpose Projects
Refunding Revenue Bonds, Series C, (AMBAC),
5.250%, 09/01/2011.................................. $ 3,673,560
4,000,000 Washington State General Obligation Bonds, Series A,
5.750%, 09/01/2019.................................. 3,779,600
-----------
68,072,560
-----------
TAX-EXEMPT SECURITIES -- BACKED BY LETTERS OF CREDIT -- 8.87%
MORGAN GUARANTY TRUST CO.
3,500,000 New York City, New York, General Obligation Bonds,
Subseries E-3, 4.400%, 08/01/2023+.................. 3,500,000
SANWA BANK
3,500,000 Indiana Health Facilities Financing Authority, St.
Anthony's Medical Center Project Revenue Bonds,
4.100%, 12/01/2014+................................. 3,500,000
-----------
7,000,000
-----------
<CAPTION>
SHARES
-----------
<C> <S> <C>
OTHER INVESTMENTS -- 2.96%
2,276,600 Dreyfus Tax-Exempt Cash Management Fund............. 2,276,600
54,900 Shearson Tax-Exempt Municipal Fund.................. 54,900
-----------
2,331,500
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $75,152,212*)......................................... 98.13% $77,404,060
OTHER ASSETS &
LIABILITIES (NET)........................................... 1.87 1,476,390
------ -----------
NET ASSETS.................................................. 100.00% $78,880,450
====== ===========
</TABLE>
- --------
* For Federal income tax purposes, the tax basis of investments aggregate
$75,374,817.
+ Variable rate demand bonds and notes are payable upon not more than seven
business days notice.
AMBAC--American Municipal Bond Assurance Corp.
Note:
These municipal securities meet the three highest ratings assigned by Moody's
Investors Services, Inc. or Standard and Poor's Corporation or, where not
rated, are determined by the Investment Adviser, under the supervision of the
Board of Directors, to be of comparable quality at the time of purchase to
rated instruments that may be acquired by the Fund.
At March 31, 1995, approximately, 9% of the net assets are invested in
municipal securities that have letter of credit enhancement features backing
them, which the Fund relies on. Without such features, these securities may
or may not meet the quality standards of securities purchased by the Fund.
At March 31, 1995, approximately, 20% of the net assets are invested in New
York municipal securities. Economic changes affecting the state and certain
of its public bodies and municipalities may affect the ability of issuers to
pay the required principal and interest payments of the municipal securities.
See Notes to Financial Statements
23
<PAGE>
UST MASTER TAX-EXEMPT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
UST Master Tax-Exempt Funds, Inc. ("Master Tax-Exempt Fund") was incorporated
under the laws of the State of Maryland on August 8, 1984 and is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
Master Tax-Exempt Fund currently offers shares in five managed investment
portfolios, each having its own investment objectives and policies. The
financial statements for UST Master Funds, Inc. ("Master Fund") are presented
separately.
With regard to Short-Term Tax-Exempt Fund, it is Master Tax-Exempt Fund's
policy, to the extent possible, to maintain a continuous net asset value per
share of $1.00. The Portfolio has adopted certain investment, portfolio
valuation and dividend and distribution policies to enable it to do so.
However, there can be no assurance that the net asset value per share of the
Portfolio will not vary.
(A) PORTFOLIO VALUATION:
Short-Term Tax-Exempt 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 Tax-Exempt Securities Fund, Intermediate-Term Tax-Exempt Fund,
New York Intermediate-Term Tax-Exempt Fund and Long-Term Tax-Exempt
Fund: Securities are valued each business day as of the close of the New
York Stock Exchange after consultation with an independent pricing service
(the "Service"). 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, these investments are valued at the mean between the quoted bid
prices (as obtained by the Service from dealers in such securities) and ask
prices (as calculated by the Service based upon its evaluation of the market
for such securities). Short-term debt instruments with remaining maturities
of 60 days or less, and variable rate demand notes and securities with put
options exercisable within one year, 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 Tax-Exempt Fund's Board of Directors.
The net asset value of the shares in Short-Term Tax-Exempt Securities
Fund, Intermediate-Term Tax-Exempt Fund, New York Intermediate-Term Tax-
Exempt Fund, and Long-Term Tax-Exempt Fund will fluctuate as the market
values of their portfolio securities change in response to changing market
rates of interest and other factors.
(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.
24
<PAGE>
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Short-Term Tax-Exempt 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 Tax-Exempt Securities Fund, Intermediate-Term Tax-Exempt Fund,
New York Intermediate-Term Tax-Exempt Fund and Long-Term Tax-Exempt
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 recorded on the ex-dividend date.
Dividends and distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
deferral of losses on wash sales and post-October losses. During the year
ended March 31, 1995, amounts have been reclassified between undistributed
net investment income and accumulated net realized loss on investments.
In order to avoid a Federal excise tax, each Portfolio is required to
distribute certain minimum amounts of net realized capital gain and net
investment income for the respective periods ending October 31 and December
31 in each calendar year.
(D) FEDERAL TAXES:
It is the policy of Master Tax-Exempt 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 as follows:
<TABLE>
<CAPTION>
EXPIRATION DATE MARCH 31,
--------------------------------------------
1996 2001 2002 2003 TOTAL
------ ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Short-Term Tax-Exempt Fund..... $4,000 $22,000 $31,000 -- $ 57,000
Short-Term Tax-Exempt
Securities Fund............... -- -- -- $ 658,000 658,000
Intermediate Tax-Exempt Fund... -- -- -- 8,425,000 8,425,000
New York Intermediate-Term Tax-
Exempt Fund................... -- -- -- 2,617,000 2,617,000
Long-Term Tax-Exempt Fund...... -- -- -- 833,000 833,000
</TABLE>
To the extent that such carryforwards are utilized, no capital gains
distributions will be made.
During the year ended March 31, 1995, Short-Term Tax-Exempt Fund utilized
capital loss carryforwards for Federal tax purposes totaling approximately
$12,000.
Net capital losses incurred after October 31 and within the taxable year
are deemed to arise on the first business day of a Portfolio's next taxable
year. Short-Term Tax-Exempt Securities Fund, Intermediate-Term Tax-Exempt
Fund, New York Intermediate-Term Tax-Exempt Fund and Long-Term Tax-Exempt
Fund incurred, and elected to defer, net capital losses of approximately
$869,000, $2,722,000, $824,000 and $1,220,000 for the year ended March 31,
1995, respectively.
25
<PAGE>
At March 31, 1995, aggregate gross unrealized appreciation for all
securities for which there was an excess of value over tax cost and
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over value were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ -------------- --------------
<S> <C> <C> <C>
Short-Term Tax-Exempt Fund....... $ -- $ (8,567) $ (8,567)
Short-Term Tax-Exempt Securities
Fund............................ 351,440 (600) 350,840
Intermediate-Term Tax-Exempt
Fund............................ 6,604,740 (2,017,269) 4,587,471
New York Intermediate-Term Tax-
Exempt Fund..................... 1,452,730 (346,055) 1,106,675
Long-Term Tax-Exempt Fund........ 3,388,437 (1,359,194) 2,029,243
</TABLE>
(E) EXPENSE ALLOCATION:
Expenses directly attributable to a Portfolio are charged to that
Portfolio. Other expenses are allocated to the respective Portfolios based
on average net assets.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS
United States Trust Company of New York ("U.S. Trust") serves as the
investment adviser to Master Tax-Exempt 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 Short-Term Tax-Exempt Fund, .30% of the average
daily net assets of Short-Term Tax-Exempt Securities Fund, .35% of the average
daily net assets of Intermediate-Term Tax-Exempt Fund and .50% of the average
daily net assets of New York Intermediate-Term Tax-Exempt Fund and Long-Term
Tax-Exempt Fund.
Mutual Funds Service Company ("MFSC"), an affiliate of U.S. Trust, and
Concord Holding Corporation (the "Administrators") serve as administrators to
Master Tax-Exempt 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
Tax-Exempt Fund and Master Fund (excluding Master Fund's international equity
portfolios), 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 has been made,
the Administrators are entitled jointly to an annual minimum fee of $18,000 and
$39,000 for the first and second full years, respectively, after commencement
of operations and $50,000 for each full year thereafter from Short-Term Tax-
Exempt Securities Fund.
On April 26, 1995, Master Tax-Exempt Fund's Board of Directors voted not to
renew the Fund's administration agreement with Concord Holding Corporation and
the Fund's distribution agreement with UST Distributors, a wholly-owned
subsidiary of Concord Holding Corporation after their July 31, 1995 expiration,
and authorized the Fund to enter into negotiations for a new co-administrator
to serve with MFSC, and a new distributor.
From time to time, as they may deem appropriate in their sole discretion, or
pursuant to applicable state expense limitations, U.S. Trust and the
Administrators may undertake to waive a portion or all of the fees payable to
them and also may reimburse the Portfolios for a portion of other expenses.
Until further notice to Master Tax-Exempt Fund, U.S. Trust and/or the
Administrators
26
<PAGE>
intend to voluntarily waive fees and reimburse expenses to the extent necessary
for Short-Term Tax-Exempt Fund and Short-Term Tax-Exempt Securities Fund to
maintain an annual expense ratio of not more than .60%.
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 Tax-Exempt Fund, U.S. Trust and the Administrators have voluntarily
agreed to waive investment advisory and administration fees payable by each
Portfolio in an amount equal to the administrative service fees payable by such
Portfolio. For the year ended March 31, 1995 U.S. Trust and the Administrators
waived investment advisory and administration fees in amounts equal to the
administrative service fees for the Portfolios as set forth below:
<TABLE>
<CAPTION>
U.S. TRUST ADMINISTRATORS
---------- --------------
<S> <C> <C>
Short-Term Tax-Exempt Fund............................ $236,867 $ --
Short-Term Tax-Exempt Securities Fund................. 12,322 356
Intermediate-Term Tax-Exempt Fund..................... 84,360 3,455
New York Intermediate-Term Tax-Exempt Fund............ 17,901 22
Long-Term Tax-Exempt Fund............................. 26,819 321
</TABLE>
Certain sales of Master Tax-Exempt Fund's shares are subject to a maximum
sales charge of 4 1/2% of the offering price. Shares in each Portfolio are sold
on a continuous basis by Master Tax-Exempt Fund's sponsor and distributor, UST
Distributors, Inc.
Each Director of Master Tax-Exempt 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 Tax-Exempt Fund receives any
compensation from Master Tax-Exempt Fund.
U.S. Trust serves as custodian of Master Tax-Exempt Fund's assets and as
shareholder servicing and dividend disbursing agent. MFSC serves as sub-
shareholder servicing agent.
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales and maturities of securities, excluding short-term
investments, for the Portfolios aggregated:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Short-Term Tax-Exempt Securities Fund................. $182,455,849 $163,324,526
Intermediate-Term Tax-Exempt Fund..................... 718,174,611 700,496,843
New York Intermediate-Term Tax-Exempt Fund............ 395,599,573 388,277,440
Long-Term Tax-Exempt Fund............................. 140,318,625 140,904,417
</TABLE>
27
<PAGE>
4. COMMON STOCK:
Master Tax-Exempt Fund currently offers five classes of shares, each
representing interests in one of five separate Portfolios. Authorized capital
for each Portfolio is as follows: 1,500 million shares of Short-Term Tax-Exempt
Fund and 500 million shares each of Short-Term Tax-Exempt Securities Fund,
Intermediate-Term Tax-Exempt Fund, New York Intermediate-Term Tax-Exempt Fund
and Long-Term Tax-Exempt 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 and tax-exempt
earnings on the assets belonging to such Portfolio as are declared at the
discretion of Master Tax-Exempt Fund's Board of Directors. Since Short-Term
Tax-Exempt Fund has 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 amount shown below for such
transactions.
<TABLE>
<CAPTION>
SHORT-TERM TAX-EXEMPT FUND
--------------------------------
YEAR ENDED YEAR ENDED
03/31/95 03/31/94
--------------- ---------------
<S> <C> <C>
Sold.......................................... $ 3,360,809,326 $ 3,721,437,711
Issued as reinvestment of dividends........... 1,153,926 659,542
Redeemed...................................... (3,241,661,217) (3,686,826,838)
--------------- ---------------
Net Increase.................................. $ 120,302,035 $ 35,270,415
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM TAX-EXEMPT SECURITIES FUND
-----------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/95 03/31/94
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold.................... 5,191,784 $ 36,086,132 10,157,190 $ 72,307,507
Issued as reinvestment
of dividends........... 36,054 250,323 18,527 131,708
Redeemed................ (6,560,697) (45,516,509) (5,957,457) (42,372,348)
----------- ------------- ----------- ------------
Net Increase/(Decrease). (1,332,859) $ (9,180,054) 4,218,260 $ 30,066,867
=========== ============= =========== ============
<CAPTION>
INTERMEDIATE-TERM TAX-EXEMPT FUND
-----------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/95 03/31/94
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold.................... 8,364,943 $ 71,548,913 13,832,654 $127,534,858
Issued as reinvestment
of dividends........... 86,329 742,840 189,892 1,733,937
Redeemed................ (16,301,349) (139,097,191) (10,373,195) (95,707,127)
----------- ------------- ----------- ------------
Net Increase/(Decrease). (7,850,077) $ (66,805,438) 3,649,351 $ 33,561,668
=========== ============= =========== ============
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
NEW YORK INTERMEDIATE-TERM TAX-EXEMPT FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/95 03/31/94
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 5,744,893 $ 45,807,741 8,918,496 $ 77,308,806
Issued as reinvestment of
dividends................. 31,117 250,999 40,073 345,122
Redeemed................... (8,346,243) (66,576,830) (6,056,094) (52,541,999)
---------- ------------ ---------- ------------
Net Increase/(Decrease).... (2,570,233) $(20,518,090) 2,902,475 $ 25,111,929
========== ============ ========== ============
<CAPTION>
LONG-TERM TAX-EXEMPT FUND
--------------------------------------------------
YEAR ENDED YEAR ENDED
03/31/95 03/31/94
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold....................... 6,687,768 $ 58,879,514 3,141,993 $ 30,736,366
Issued in connection with
USAffinity Acquisition
(Note 6).................. 217,206 2,050,770 -- --
Issued as reinvestment of
dividends................. 59,438 522,710 119,391 1,158,371
Redeemed................... (7,715,183) (67,394,609) (2,765,433) (27,277,817)
---------- ------------ ---------- ------------
Net Increase/(Decrease).... (750,771) $ (5,941,615) 495,951 $ 4,616,920
========== ============ ========== ============
</TABLE>
5. ORGANIZATION COSTS:
Master Tax-Exempt 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, the Long-Term Tax-Exempt Fund acquired all of the assets
and liabilities, other than unamortized organization costs, of the USAffinity
Tax-Free Municipal Fund pursuant to a plan of reorganization approved by the
Master Tax-Exempt Fund's Board of Directors on November 18, 1994, the
USAffinity Fund's Board of Directors on December 28, 1994 and the USAffinity
Fund's shareholders on March 9, 1995. The transaction was accounted for as a
tax-free exchange of shares. On March 10, 1995, net assets of $2,050,770 were
transferred from USAffinity Tax-Free Municipal Fund into the Long-Term Tax-
Exempt Fund in exchange for 217,206 shares of the Long-Term Tax-Exempt Fund.
29
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders
and Board of Directors
UST Master Tax-Exempt Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Short-Term Tax-Exempt, Short-
Term Tax-Exempt Securities, Intermediate-Term Tax-Exempt, New York
Intermediate-Term Tax-Exempt and the Long-Term Tax-Exempt Portfolios (the five
portfolios constituting the UST Master Tax Exempt Funds, Inc.) as of March 31,
1995, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification by examination of securities
owned as of March 31, 1995 and confirmation by correspondence with the
custodian and brokers, or other appropriate auditing procedures where replies
from brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned Portfolios of UST Master Tax-Exempt Funds, Inc. at March
31, 1995, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended and
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 19, 1995
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED):
For the year ended March 31, 1995, the percentage of exempt interest
dividends paid and the designation of long-term capital gain are approximated
as follows:
<TABLE>
<CAPTION>
EXEMPT LONG-TERM
INTEREST DIVIDENDS CAPITAL GAIN
------------------- ------------
<S> <C> <C>
Short-Term Tax-Exempt Fund .................... 100% --
Short-Term Tax-Exempt Securities Fund ......... 100% --
Intermediate-Term Tax-Exempt Fund.............. 100% --
New York Intermediate-Term Tax-Exempt Fund..... 100% --
Long-Term Tax-Exempt Fund...................... 100% --
</TABLE>
USTEFXA395
30
