<PAGE> 1
UST MASTER VARIABLE SERIES, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
EQUITY PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (NOTE 1)
------ ------------
<S> <C> <C>
COMMON STOCKS-101.40%
BIOTECHNOLOGY-3.87%
Medtronic, Inc. ..................................... 1,400 $ 78,225
-----------
BROADCAST - RADIO & TV-3.05%
Capital Cities ABC, Inc. ............................ 500 61,687
-----------
BROKERAGE-2.99%
Charles Schwab Corp. ................................ 3,000 60,375
-----------
CHEMICAL-3.95%
Idexx Laboratories, Inc.+ ........................... 1,700 79,900
-----------
COMMERCIAL SERVICES-3.38%
CUC International, Inc.+ ............................ 2,000 68,250
-----------
COMMUNICATION SERVICES-3.71%
America Online, Inc.+ ............................... 2,000 75,000
-----------
COMPUTER - PERIPHERALS-12.54%
Compaq Computer Corp.+ .............................. 1,300 62,400
EMC Corp/Mass.+ ..................................... 2,500 38,438
Microsoft Corp.+ .................................... 700 61,425
Sun Microsystems, Inc.+ ............................. 2,000 91,250
-----------
253,513
-----------
COMPUTER - SOFTWARE-15.90%
Cisco Systems, Inc.+ ................................ 1,100 82,088
First Data Corporation .............................. 1,110 74,231
Intuit, Inc.+ ....................................... 1,200 93,600
Netscape Communications Corporation+ ................ 100 13,900
Sybase, Inc.+ ....................................... 1,600 57,600
-----------
321,419
-----------
CONSUMER PRODUCTS-2.94%
Coca Cola Company ................................... 800 59,400
-----------
ELECTRONICS-6.80%
Intel Corp. ......................................... 1,100 62,425
Micron Technology Corp. ............................. 600 23,775
Motorola, Inc. ...................................... 900 51,300
-----------
137,500
-----------
ENTERTAINMENT & LEISURE-1.75%
The Walt Disney Co. ................................. 600 35,400
-----------
FINANCIAL SERVICES-6.36%
Citicorp ............................................ 1,000 67,250
Merrill Lynch & Co., Inc. ........................... 1,200 61,200
-----------
128,450
-----------
GOVERNMENT AGENCY-3.69%
Federal National Mortgage Association ............... 600 74,475
-----------
INSURANCE-4.21%
United Healthcare Corp. ............................. 1,300 85,150
-----------
PHARMACEUTICALS-3.43%
Pfizer, Inc. ........................................ 1,100 69,300
-----------
PUBLISHING & PRINTING-2.75%
News Corp., Ltd., ADR ............................... 2,600 55,575
-----------
RETAIL - SPECIALTY-12.10%
Autozone, Inc.+ ..................................... 2,200 63,525
Gillette Co. ........................................ 1,200 62,550
Home Depot, Inc. .................................... 1,400 67,025
Wal-Mart Stores, Inc. ............................... 2,300 51,462
-----------
244,562
-----------
TELECOMMUNICATION EQUIPMENT-7.98%
Ascend Communications, Inc.+ ....................... 1,350 109,519
Tellabs, Inc.+ ..................................... 1,400 51,800
-----------
161,319
-----------
TOTAL COMMON STOCKS
(COST $1,558,893) ................................. 2,049,500
-----------
PRINCIPAL
VALUE
---------
SHORT-TERM DEBT-0.49%
Associates Corp. of North America Master
Note Agreement, 5.708% ............................ $5,000 5,000
General Electric Co. Master Note
Agreement, 5.700% ................................. 5,000 5,000
-----------
10,000
-----------
TOTAL SHORT-TERM DEBT
(Cost $10,000) ..................................... 10,000
-----------
TOTAL INVESTMENTS
(Cost $1,568,893*) ................................. 101.89% 2,059,500
Other assets, less liabilities ...................... (1.89) (38,231)
------ -----------
TOTAL NET ASSETS .................................... 100.00% $ 2,021,269
====== ===========
</TABLE>
- ----------------
* Aggregate cost for Federal income tax purposes.
+ Non-income producing security.
See notes to financial statements.
1
<PAGE> 2
UST MASTER VARIABLE SERIES, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
EARLY LIFE CYCLE PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
COMMON STOCKS-94.71%
AEROSPACE-2.46%
BE Aerospace, Inc.+ ................................ 3,000 $ 31,875
--------
AUTOMOTIVE PARTS & ACCESSORIES-1.77%
Exide Corp. ........................................ 500 22,937
--------
BROADCAST - RADIO & TV-1.59%
Westcott Communications, Inc.+...................... 1,500 20,625
--------
COMPUTER - SOFTWARE-18.55%
Adobe Systems, Inc. ................................ 500 31,000
Activision, Inc.+................................... 1,600 17,600
Cerner Corporation+................................. 1,000 20,500
Informix Corp.+ .................................... 1,400 42,000
Intersolv, Inc.+.................................... 1,900 24,482
Phoenix Technologies, Ltd.+......................... 2,000 31,500
Pyxis Corporation+.................................. 1,800 26,325
Spectrum Holobyto, Inc.+............................ 2,200 14,300
System Software Associates, Inc .................... 1,500 32,625
--------
240,312
--------
CONSUMER PRODUCTS-3.60%
Goodmark Foods, Inc. ............................... 1,400 24,850
Pepsi-Cola Puerto Rico
Bottling Co., Class "B" ........................... 1,900 21,850
--------
46,700
--------
ELECTRONICS-12.65%
Allen Group, Inc. .................................. 900 20,137
Cyrix Corporation+ ................................. 400 9,200
Franklin Electronic Publishers, Inc.+ .............. 1,000 29,500
Perceptron, Inc.+ .................................. 1,800 40,050
Recoton Corporation+ ............................... 1,000 18,750
SDL, Inc.+ ......................................... 900 21,600
Teleflex, Inc. ..................................... 600 24,600
--------
163,837
--------
FINANCIAL SERVICES-7.41%
AmeriCredit Corp.+ ................................. 2,000 27,250
First American Corp., Tennessee .................... 800 37,900
National Auto Credit, Inc.+......................... 1,900 30,875
--------
96,025
--------
HOME APPLIANCE-1.48%
Juno Lighting, Inc. ................................ 1,200 19,200
--------
HOSPITAL SERVICES & SUPPLIES-4.21%
Allied Healthcare Products, Inc. ................... 1,300 20,800
Veterinary Centers of America+...................... 2,000 33,750
--------
54,550
--------
INSURANCE-6.27%
Capsure Holdings Corp.+............................. 2,000 $ 35,250
Home State Holdings, Inc.+.......................... 1,400 12,994
Integon Corp./Del................................... 1,600 33,000
--------
81,244
--------
MACHINERY-4.28%
ASYST Technologies, Inc.+........................... 700 24,675
Lindsay Manufacturing Co.+.......................... 800 30,800
--------
55,475
--------
MANUFACTURING-6.76%
Harmon Industries, Inc. ............................ 1,200 18,900
Recovery Engineering, Inc.+ ........................ 1,900 28,975
Stimsonite Corp.+ .................................. 2,000 19,000
TriMas Corp ........................................ 1,100 20,762
--------
87,637
--------
MEDICAL - BIOTECHNOLOGY-2.81%
Pharmacopeia, Inc.+ ................................ 1,500 36,375
--------
MEDICAL SUPPLIES-9.82%
Benson Eyecare Corp.+ .............................. 2,900 26,100
Physician Reliance Network, Inc.+ .................. 1,100 43,725
Sunrise Med, Inc.+ ................................. 700 12,950
Thermedics, Inc.+ .................................. 1,600 44,400
--------
127,175
--------
OIL - PRODUCTION-1.40%
Snyder Oil Corp. ................................... 1,500 18,188
--------
PHARMACEUTICALS-1.99%
Ligand Pharmaceuticals-Class B+..................... 2,400 25,800
--------
RETAIL - SPECIALTY-1.80%
Renters Choice, Inc.+.............................. 1,700 23,375
--------
STEEL & IRON-1.21%
Steel of West Virginia, Inc.+...................... 1,700 15,725
--------
TELECOMMUNICATION EQUIPMENT-1.58%
Metricom, Inc.+.................................... 1,500 20,438
--------
</TABLE>
- ------------
+Non-income producing security.
See notes to financial statements.
2
<PAGE> 3
UST MASTER VARIABLE SERIES, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS - (Continued)
EARLY LIFE CYCLE PORTFOLIO
December 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (NOTE 1)
------ ----------
<S> <C> <C>
COMMON STOCKS--Continued
TRANSPORTATION--3.07%
Air Express International.......................... 1,000 $ 23,000
Skywest, Inc....................................... 1,300 18,738
----------
39,738
----------
TOTAL COMMON STOCK
(Cost $1,091,484) ............................. 1,227,231
----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
VALUE (NOTE 1)
--------- --------
<S> <C> <C>
SHORT-TERM DEBT--6.33%
Associate Corp. of North America Master
Note Agreement, 5.708% ........................... $42,000 $ 42,000
General Electric Co. Master Note
Agreement, 5.700% ................................ 40,000 40,000
----------
82,000
----------
TOTAL SHORT-TERM DEBT
(Cost $82,000) .................................. 82,000
----------
TOTAL INVESTMENTS
(Cost $1,173,484*) .............................. 101.04% 1,309,231
Other assets, less liabilities .................... (1.04) (13,467)
------ ----------
TOTAL NET ASSETS .................................. 100.00% $1,295,764
====== ==========
</TABLE>
*Aggregate cost for Federal income tax purposes.
See notes to financial statements.
3
<PAGE> 4
UST MASTER VARIABLE SERIES, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
INTERMEDIATE-TERM MANAGED INCOME PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
NUMBER VALUE
OF SHARES (NOTE 1)
---------- ----------
<S> <C> <C>
REGISTERED INVESTMENT COMPANIES-2.83%
Fidelity Investments Money Market Fund
(Cost $30,264).................................. 30,264 $ 30,264
----------
<CAPTION>
PRINCIPAL
VALUE
---------
<S> <C> <C>
BONDS-94.07%
U.S. GOVERNMENT & AGENCY OBLIGATIONS-72.07%
Federal Home Loan Bank, 7.590%
due 05/20/04..................................... $100,000 111,231
Federal National Mortgage Assoc.
7.550%, due 06/10/04............................. 225,000 235,029
U.S. Treasury Note, 7.250%, due 02/15/98.......... 150,000 156,000
U.S. Treasury Note, 7.500%, due 10/31/99.......... 250,000 268,515
----------
770,775
----------
CORPORATE BONDS-22.00%
Abbot Labs Note, 5.600%, due 10/01/03 ............ 50,000 49,283
Bank of New York, Inc., 7.625%,
due 07/15/02 .................................... 50,000 54,149
Emerson Electric Co., 6.300%, due 11/01/05 ....... 50,000 51,420
Ford Motor Credit, 7.750%, due 03/15/05 .......... 50,000 55,278
J.C. Penney, Inc., 6.125%, due 11/15/03 .......... 25,000 25,091
----------
235,221
----------
TOTAL BONDS
(Cost $936,582) ............................... 1,005,996
----------
SHORT-TERM DEBT-9.35%
American Express Credit Corp., 5.616%,
due 01/03/96 .................................... 50,000 50,000
General Electric Capital Corp., 5.907%,
due 01/03/96 .................................... 50,000 50,000
----------
TOTAL SHORT-TERM DEBT
(Cost $100,000)................................ 100,000
----------
TOTAL INVESTMENTS
(Cost $1,066,846*)............................. 106.25% 1,136,260
Other assets, less liabilities.................... (6.25) (66,836)
-------- ----------
TOTAL NET ASSETS................................ 100.00% $1,069,424
======== ==========
</TABLE>
- ---------------------
*Aggregate cost for Federal income tax purposes.
See notes to financial statements.
4
<PAGE> 5
UST MASTER VARIABLE SERIES, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
MANAGED INCOME PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
NUMBER VALUE
OF SHARES (NOTE 1)
---------- -----------
<S> <C> <C>
REGISTERED INVESTMENT COMPANIES-1.40%
Fidelity Investments Money Market Fund
(Cost $14,940) .............................. 14,940 $ 14,940
-----------
<CAPTION>
PRINCIPAL
VALUE
---------
<S> <C> <C>
BONDS-101.27%
U.S. GOVERNMENT & AGENCY OBLIGATIONS-63.83%
Federal National Mortgage Assoc., 8.500%,
due 02/01/05 ................................ $ 100,000 108,997
Government National Mortgage Assoc.,
Pool #371224, 8.000%, due 01/15/24 .......... 496,469 516,949
U.S. Treasury Note, 7.500%, due 10/31/99 ..... 50,000 53,703
-----------
679,649
-----------
CORPORATE BONDS-37.44%
Bank of New York, Inc., 7.625%,
due 07/15/02 ................................ 50,000 54,149
Emerson Electric Co., 6.300%, due 11/01/05 ... 50,000 51,420
Ford Motor Credit, 7.750%, due 03/15/05....... 50,000 55,278
General Electric Capital Corp., 7.500%,
due 08/21/35 ................................ 50,000 56,580
J.C. Penney, Inc., 6.125%, due 11/15/03 ...... 50,000 50,181
McDonald's Corp., 7.050%, due 11/15/25 ....... 25,000 25,690
Northern Illinois Gas Co., 7.260%,
due 10/15/25 ................................ 50,000 51,935
Northern States Power, 7.125%,
due 07/01/25 ................................ 50,000 53,452
---------
398,685
---------
TOTAL BONDS
(Cost $1,016,866) .......................... 1,078,334
=========
SHORT-TERM DEBT-4.70%
Associates Corp. of North America
Master Note Agreement, 5.708% ............... 50,000 50,000
-----------
TOTAL SHORT-TERM DEBT
(Cost $50,000) ............................. 50,000
-----------
TOTAL INVESTMENTS
(Cost $1,081,806*) ......................... 107.37% 1,143,274
Other assets, less liabilities ............... (7.37) (78,473)
------ -----------
TOTAL NET ASSETS ........................... 100.00% $ 1,064,801
====== ===========
</TABLE>
*Aggregate cost for Federal income tax purposes.
See notes to financial statements.
5
<PAGE> 6
UST MASTER VARIABLE SERIES, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
INTERNATIONAL EQUITY PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (NOTE 1)
------ ---------
<S> <C> <C>
COMMON STOCKS-91.29%
ARGENTINA-2.02%
Telecorn Argentina, ADR ............................. 1,100 $ 52,388
----------
AUSTRALIA-3.74%
Australia & New Zealand Bank
Group, Ltd. ....................................... 13,000 61,021
Mayne Nickliss, Ltd. ................................ 8,000 35,706
----------
96,727
----------
BRAZIL-2.98%
Telecommunications Brasileiras, SA, ADR ............. 1,600 77,044
----------
FRANCE-6.88%
Cie Generale des Faux ............................... 455 45,488
Credit Local de France .............................. 500 40,079
Laferge-Coppee ...................................... 676 43,612
Total, SA "B" Shares ................................ 725 48,998
----------
178,177
----------
GERNANY-7.22%
Bayer, A.G. ......................................... 180 47,893
Mannesmann, A.G. .................................... 150 47,844
Preussag, A.G. ...................................... 140 39,519
Veba, A.G. .......................................... 1,200 41,481
----------
186,737
----------
HONG KONG-2.82%
Hutchinson Whampoa, Ltd. ............................ 12,000 73,100
----------
ITALY-2.19%
Fiat, SPA ........................................... 10,000 32,527
Telecom Italia, SPA ................................. 15,500 24,133
----------
56,660
----------
JAPAN-26.48%
Asahi Bank Limited .................................. 6,000 45,952
DDI Co. ............................................. 5 38,778
Honshu Paper Co., Ltd. .............................. 6,000 36,761
Isetan Co. .......................................... 2,000 32,961
Kajima Co. .......................................... 4,000 39,553
Marubeni Co. ........................................ 8,000 43,354
Matsushita Electric Industries ...................... 3,000 48,860
Mitsubishi Estate Co. ............................... 4,000 50,024
Mitsubishi Heavy Industries, Ltd. ................... 6,000 47,871
NKK Corporation ..................................... 16,000 43,121
Nippon Yusan ........................................ 7,000 40,649
Nomura Securities Corp., Ltd. ....................... 2,000 43,625
Ricch Co. ........................................... 4,000 43,819
Sakura Bank, Ltd. ................................... 3,000 38,099
Sumitomo Trust and Banking Co. ...................... 3,000 42,462
Tokyo Broadcasting Systems .......................... 3,000 49,442
----------
685,331
----------
MALAYSIA-1.66%
Telekorn Malaysia, Bhd .............................. 3,000 23,396
Tenaga Nasional, Bhd ................................ 5,000 19,694
----------
43,090
----------
NETHERLANDS-5.87%
Akzo Nobel NV ....................................... 400 46,316
Koninklijke Ahold NV ................................ 1,260 51,488
VNU-Verenigde Nederlandse
Uitgevbedre NV ..................................... 395 54,288
----------
152,092
----------
SINGAPORE-2.40%
Development Bank of Singapore ....................... 5,000 62,217
----------
SPAIN-3.78%
Corporacion Bancaria de Espana, S.A ................. 1,200 49,458
Telefonica de Espana, S.A ........................... 3,500 48,468
----------
97,926
----------
SWEDEN-3.46%
Astra AB, Class "A" ................................. 1,650 65,978
Stora Kopparberg .................................... 2,000 23,540
----------
89,518
----------
SWITZERLAND-6.83%
Alusuisse-Lonsa Holding A.G ......................... 80 63,549
Nestle, S.A ......................................... 45 49,904
Roche Holdings Genusscheine, NPV .................... 8 63,445
----------
176,898
----------
UNITED KINGDOM-12.96%
BTR, PLC ............................................ 9,000 45,978
British Telecommunications, PLC ..................... 7,000 38,478
General Electric, PLC ............................... 9,000 49,612
Land Securities, PLC ................................ 5,000 47,904
Marks & Spencer, PLC ................................ 7,000 48,913
Prudential Co. ...................................... 8,000 51,663
Shell Transport and Trading Co. ..................... 4,000 52,919
----------
335,357
----------
TOTAL COMMON STOCK
(Cost $2,057,793) ............................... 2,363,262
----------
</TABLE>
See notes to financial statements.
6
<PAGE> 7
UST MASTER VARIABLE SERIES, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS-(CONTINUED)
INTERNATIONAL EQUITY PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (NOTE 1)
-------- ----------
<S> <C> <C>
REGISTERED INVESTMENT COMPANIES-3.67%
CHILE-2.19%
Genesis Chile Fund, Ltd. ............................. 1,400 $ 56,700
SOUTH KOREA-1.48%
Schroder Korea Investment Fund ....................... 3,000 38,250
----------
TOTAL REGISTERED INVESTMENT
COMPANIES
(Cost $82,650) ................................... 94,950
----------
<CAPTION>
MARKET
PRINCIPAL VALUE
VALUE (NOTE 1)
--------- ---------
SHORT-TERM DEBT-6.56%
U.S. Treasury Bill, 5.494%, due 01/04/96 ............. $170,000 $ 169,941
----------
TOTAL SHORT-TERM DEBT
(Cost $169,941) ................................... 169,941
----------
TOTAL INVESTMENTS
(Cost $2,310,384*) ................................ 101.52% 2,628,153
Other assets, less liabilities ....................... (1.52) (39,323)
------ ----------
TOTAL NET ASSETS ................................... 100.00% $2,588,830
====== ==========
</TABLE>
SECTOR DIVERSIFICATION
<TABLE>
<CAPTION>
% OF NET MARKET
ASSETS VALUE
-------- ----------
<S> <C> <C>
Telecommunications ................................... 11.69 $ 302,685
Banking .............................................. 9.78 253,257
Real Estate .......................................... 6.62 171,027
U.S. Government Obligations .......................... 6.56 169,941
Manufacturing - Diversified .......................... 6.08 157,372
Chemicals & Plastics ................................. 5.41 140,161
Pharmaceuticals ...................................... 5.00 129,423
Utilities ............................................ 4.51 116,663
Oil & Gas - Integrated ............................... 3.94 101,917
Electronics .......................................... 3.80 98,472
Investment Companies ................................. 3.67 94,950
Financial Services ................................... 3.23 83,704
Engineering & Construction ........................... 3.20 82,907
Metals & Mining ...................................... 3.19 82,640
Retail Stores ........................................ 3.16 81,874
Transportation ....................................... 2.95 76,355
Forest Products & Paper .............................. 2.33 60,301
Publishing & Printing ................................ 2.10 54,288
Insurance ............................................ 1.99 51,553
Retail - Food & Drug ................................. 1.99 51,488
Food Processing ...................................... 1.93 49,904
Broadcast Media & Cable TV ........................... 1.91 49,442
Aerospace & Defense .................................. 1.85 47,871
Office Equipment ..................................... 1.69 43,819
Building Materials ................................... 1.68 43,612
Auto, Trucks & Parts ................................. 1.26 32,527
------ ----------
Total Investment Portfolio ........................... 101.52 2,628,153
Other Assets, less liabilities ....................... (1.52) (39,323)
------ ----------
Total Net Assets ..................................... 100.00 $2,588,830
</TABLE>
- -----------
* Aggregate cost for Federal income tax purposes.
See notes to financial statements.
7
<PAGE> 8
UST MASTER VARIABLE SERIES, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
INTERNATIONAL BOND PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
CURRENCY VALUE (NOTE 1)
-------- --------- --------
<S> <C> <C> <C>
FOREIGN DEBT-87.62%
CANADA-2.61%
Canada, Government, 9.000%,
due 12/01/04 .................. CAD 100,000 $ 82,783
----------
DENMARK-5.66%
Kingdom of Denmark, 7.000%,
due 12/15/04 .................. DKK 1,000,000 179,725
----------
FRANCE-23.12%
France O.A.T., 8.250%,
due 02/27/04 .................. FRF 500,000 113,408
France O.A.T., 8.500%,
due 03/15/02 .................. XEU 100,000 140,641
France O.A.T., 9.500%,
due 04/25/00 .................. XEU 100,000 144,003
France O.A.T., 5.500%,
due 04/25/04 .................. FRF 500,000 95,577
France O.A.T., 5.000%,
due 03/16/99 .................. XEU 100,000 125,593
France O.A.T., 8.500%,
due 04/25/23 .................. FRF 500,000 115,586
----------
734,808
----------
GERMANY-23.05%
Bayerische Hypo Bank, 6.000%,
due 10/28/99 .................. GBP 100,000 150,039
Bundes Deutschland, 6.250%,
due 01/04/24 .................. DEM 200,000 130,170
Bundes Deutschland, 7.500%,
due 11/11/04 .................. DEM 250,000 192,391
Dresdner Bank, 6.000%,
due 12/07/99 .................. GBP 100,000 150,039
Treuhandanstalt, 6.750%,
due 05/13/04 .................. DEM 150,000 109,953
----------
732,592
----------
ITALY-14.26%
Italy-Global Bond, 3.500%,
due 08/20/01 .................. JPY 20,000,000 203,099
Republic of Italy, 9.500%,
due 12/01/99 .................. ITL 250,000,000 154,438
Republic of Italy, 10.500%,
due 04/01/00 .................. ITL 150,000,000 95,443
----------
452,980
----------
JAPAN-11.02%
Asian Development Bank,
3.125%, due 06/29/05 .......... JPY 10,000,000 96,702
Kobe City, 9.500%,
due 10/20/04 .................. GBP 50,000 85,501
Metropolis of Tokyo, 7.875%,
due 10/13/04 .................. USD 150,000 168,000
----------
350,203
----------
SPAIN-3.53%
Spanish Government, 8.000%,
due 05/30/04 .................. ESP 15,000,000 112,083
----------
UNITED KINGDOM-4.37%
European Investment Bank, 6.000%,
due 11/26/04 .................. GBP 100,000 138,781
----------
TOTAL FOREIGN DEBT
(Cost $2,621,958) ........... 2,783,955
----------
SHORT-TERM DEBT-19.81%
U.S. Treasury Bill, 5.494%,
due 01/04/96 .................. USD 630,000 629,761
----------
TOTAL SHORT-TERM DEBT
(Cost $629,781) ............. 629,781
----------
TOTAL INVESTMENTS
(Cost $3,251,739*) .......... 107.43% 3,413,736
Other assets, less liabilities ............. (7.43) (236,264)
------ ----------
TOTAL NET ASSETS ......................... 100.00% $3,177,472
====== ==========
</TABLE>
Currency Legend
- ---------------
Canadian dollar ................ CAD
Danish krone ................... DKK
European currency units ........ XEU
French franc ................... FRF
Great British pound ............ GBP
German mark .................... DEM
Italian lira ................... ITL
Japanese yen ................... JPY
Spanish peseta ................. ESP
United States dollar ........... USD
- -----------
* Aggregate cost for Federal income tax purposes.
See notes to financial statements.
8
<PAGE> 9
UST MASTER VARIABLE SERIES, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
MONEY PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER MARKET
OF VALUE
SHARES (NOTE 1)
-------- ----------
<S> <C> <C>
REGISTERED INVESTMENT COMPANIES-2.42%
Dreyfus Treasury Prime Cash Management
Fund (Cost $25,440) .............................. 25,440 $ 25,440
----------
SHORT-TERM DEBT-97.38%
<CAPTION>
PRINCIPAL
VALUE
---------
U.S. GOVERNMENT & AGENCY OBLIGATIONS-92.62%
Federal National Mortgage Assoc., 5.450%,
due 01/17/96 ..................................... $200,000 $ 199,455
Federal Farm Cr. Bank, 5.530%, due 01/11/96 ....... 200,000 199,631
Federal Home Loan Bank, 5.650%,
due 01/08/96 ..................................... 200,000 199,718
Federal Home Loan Mtg. Corp., 5.550%,
due 01/16/96...................................... 125,000 124,672
U.S. Treasury Note, 5.500%, due 04/30/96 .......... 250,000 250,308
----------
973,784
----------
COMMERCIAL PAPER-4.76%
Ford Motor Credit Co., 5.740%,
due 01/08/98 ..................................... 50,000 50,000
----------
TOTAL SHORT-TERM DEBT
(Cost $1,023,784) ............................... 1,023,784
----------
TOTAL INVESTMENTS
(Cost $1,049,224*) .............................. 99.80% 1,049,224
Other assets, less liabilities .................... 0.20% 2,101
-------- ----------
TOTAL NET ASSETS ................................. 100.00% $1,051,325
======== ==========
</TABLE>
- ---------
*Aggregate cost for Federal income tax purposes
See notes to financial statements.
9
<PAGE> 10
WUST MASTER VARIABLE SERIES, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE-
EARLY TERM
LIFE MANAGED MANAGED INTERNATIONAL INTERNATIONAL
EQUITY CYCLE INCOME INCOME EQUITY BOND MONEY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ------------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at cost-see
accompanying portfolios ........... $1,568,893 $1,173,484 $1,066,846 $1,081,806 $2,310,384 $3,251,739 $1,049,224
========== ========== ========== ========== ========== ========== ==========
Investments, at value (Note 1) ..... $2,059,500 $1,309,231 $1,136,260 $1,143,274 $2,628,153 $3,413,736 $1,049.224
Cash and currencies................. 249 1,084 45 3,381 8,311
Receivable for investment income.... 368 817 13,600 15,518 11,365 71,562 2,652
Deferred organization costs
(Note 5) ......................... 11,601 11,601 11,601 11,601 11,601 11,601 11,601
--------- --------- --------- ---------- --------- ---------- ---------
Total Assets..................... 2,071,718 1,322,733 1,161,506 1,170,393 2,654,500 3,505,210 1,063,477
LIABILITIES:
NET payable for capital sharesz
redeemed........................... 1,137 238 93
Payable for dividends declared ..... 35,849 14,125 79,847 93,053 50,928 312,871 144
Accrued administrative fees ........ 328 207 136 137 618 823 83
Accrued expenses ................... 1,534 798 498 801 2,430 2,443 324
Organization costs payable
(Note 5) ......................... 11,601 11,601 11,601 11,601 11,601 11,601 11,601
---------- --------- ---------- ---------- ---------- ---------- ----------
Total Liabilities ................ 50,449 26,969 92,082 105,592 65,670 327,738 12,152
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS ......................... $2,021,269 $1,295,764 $1,069,424 $1,064,801 $2,588,830 $3,177,472 $1,051,325
========== ========== ========== ========== ========== ========== ==========
NET ASSETS consist of:
Accumulated net investment loss ... $ (9,768)
Accumulated net realized gain (loss)
from investments................... $ 10,268 $ 40,590 $ 3,323 (14,598) $ 4,880 $ (1)
Accumulated net realized gain (loss)
from foreign currency transactions (166) 10,669
(Note 1))..........................
Unrealized appreciation on
investments and translation of
assets and liabilities in foreign
currencies......................... 490,607 135,747 $ 69,414 61,468 317,747 161,913
Par value (Note 4).................. 139 110 100 100 229 300 1,051
Paid-in capital in excess of par
value.............................. 1,520,255 1,119,317 999,910 999,910 2,295,386 2,999,710 1,050,275
--------- ---------- ---------- ---------- ---------- ---------- ----------
Total Net Assets ................ $2,021,269 $1,295,764 $1,069,424 $1,064,801 $2,588,830 $3,177,472 $1,051,325
========== ========== ========== ========== ========== ========== ==========
Shares of Common Stock
Outstanding (par value $.001,
1,000,000,000 shares authorized) .. 139,043 110,303 100,001 100,001 229,277 300,001 1,051,326
========== ========== ========== ========= ========== ========== ==========
Net asset value, offering and
redemption price per share ........ $ 14.54 $ 11.75 $ 10.69 $ 10.65 $ 11.29 $ 10.59 $ 1.00
========== ========== ========== =========== ========== =========== ==========
</TABLE>
See notes to financial statements.
10
<PAGE> 11
UST MASTER VARIABLE SERIES, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 17, 1995 (COMMENCEMENT OF OPERATIONS) THROUGH
DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE-
EARLY TERM
LIFE MANAGED MANAGED INTERNATIONAL INTERNATIONAL
EQUITY CYCLE INCOME INCOME EQUITY BOND MONEY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income ..................... $ 3,902 $ 4,332 $ 73,367 $ 75,661 $ 11,482 $ 236,937 $ 57,401
Dividend Income ..................... 7,514 5,719 58,498
Less: Foreign taxes withheld ........ (5,870) (2,727)
--------- --------- --------- --------- --------- --------- ---------
TOTAL INCOME ...................... 11,416 10,051 73,367 75,661 64,110 234,210 57,401
--------- --------- --------- --------- --------- --------- ---------
EXPENSES:
Investment advisory fees (Note 2) ... 10,117 6,673 3,583 7,690 22,950 27,893 2,468
Administration fees (Note 2) ........ 2,698 2,224 1,536 1,538 6,885 9,298 987
Audit fees .......................... 6,277 5,367 5,013 5,022 11,198 15,153 4,880
Legal fees .......................... 8,297 6,449 5,812 5,821 13,056 17,592 5,595
Security valuation .................. 3,260 2,744 2,548 2,552 5,702 7,708 2,471
Custodian fees ...................... 1,883 2,480 1,430 1,523 2,643 2,894 3,991
Shareholder reports ................. 918 940 928 929 2,056 2,799 917
Directors' fees and expenses ........ 2,595 2,145 1,979 1,982 4,433 5,988 1,912
Amortization of deferred
organization costs (Note 5) ....... 2,721 2,721 2,721 2,721 2,721 2,721 2,721
Miscellaneous expenses .............. 148 133 125 126 282 379 123
Fees waived by Advisor
(Note 2) .......................... (10,117) (6,673) (3,583) (7,690) (22,950) (27,893) (2,468)
Expenses reimbursed by Advisor
(Note 2) .......................... (13,284) (14,194) (14,721) (11,448) (14,259) (21,143) (18,563)
--------- --------- --------- --------- --------- --------- ---------
TOTAL EXPENSES .................... 15,513 11,009 7,371 10,766 34,717 43,389 5,034
--------- --------- --------- --------- --------- --------- ---------
NET INVESTMENT INCOME (LOSS) .......... (4,097) (958) 65,996 64,895 29,393 190,821 52,367
--------- --------- --------- --------- --------- --------- ---------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY (Note 1):
Net realized gain (loss):
Security transactions ............. 50,214 55,673 13,851 31,481 (8,728) 99,003 (1)
Foreign currency transactions...... 5,731 38,596
--------- --------- --------- --------- --------- --------- ---------
Total net realized gain (loss) ........ 50,214 55,673 13,851 31,481 (2,997) 137,599 (1)
Change in unrealized
appreciation on investments
and translation of assets and
liabilities in foreign currencies ... 490,607 135,747 69,414 61,468 317,747 161,913
--------- --------- --------- --------- --------- --------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY .................... 540,821 191,420 83,265 92,949 314,750 299,512 (1)
--------- --------- --------- --------- --------- --------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........... $ 536,724 $ 190,462 $ 149,261 $ 157,844 $ 344,143 $ 490,333 $ 52,366
========= ========= ========= ========= ========= ========= =========
</TABLE>
See notes to financial statements.
11
<PAGE> 12
UST MASTER VARIABLE SERIES, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JANUARY 17, 1995 (COMMENCEMENT OF OPERATIONS) THROUGH
DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE-
EARLY TERM
LIFE MANAGED MANAGED INTERNATIONAL INTERNATIONAL
EQUITY CYCLE INCOME INCOME EQUITY BOND MONEY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income (loss) ....... $ (4,097) $ (958) $ 65,996 $ 64,895 $ 29,393 $ 190,821 $ 52,367
Net realized gain (loss) on
security transactions ............ 50,214 55,673 13,851 31,481 (8,728) 99,003 (1)
Net realized gain from foreign
currency transactions ............ 5,731 38,596
Change in unrealized appreciation
on investments and translation of
assets and liabilities in foreign
currencies during the year ....... 490,607 135,747 69,414 61,468 317,747 161,913
---------- ---------- ---------- ---------- ----------- ----------- ----------
Net increase in net assets
resulting from operations ........ 536,724 190,462 149,261 157,844 344,143 490,333 52,366
Distributions to shareholders:
From net investment income ....... (65,996) (64,895) (29,393) (190,821) (52,367)
In excess of net investment income . (10,343) (37,550)
From capital gains ................. (35,849) (14,125) (13,851) (28,158) (84,500)
In excess of capital gains ......... (11,192)
Increase in net assets from fund
share transactions (Note 4) ...... 1,520,384 1,119,417 1,000,000 1,000,000 2,295,605 3,000,000 1,051,316
---------- ---------- ---------- ---------- ----------- ----------- ----------
Net increase in net assets ......... 2,021,259 1,295,754 1,069,414 1,064,791 2,588,820 3,177,462 1,051,315
NET ASSETS:
Beginning of Period ................ 10 10 10 10 10 10 10
---------- ---------- ---------- ---------- ----------- ----------- ----------
End of Period ...................... $2,021,269 $1,295,764 $1,069,424 $1,064,801 $ 2,588,830 $ 3,177,472 $1,051,325
========== ========== ========== ========== =========== =========== ==========
Accumulated net investment
income (loss) .................... $ 0 $ 0 $ 0 $ 0 $ (9,934) $ 10,669 $ 0
========== ========== ========== ========== =========== =========== ==========
</TABLE>
See notes to financial statements.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
UST MASTER VARIABLE SERIES, INC.
DECEMBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
UST Master Variable Series, Inc. ("Master Variable Series") was incorporated
under the laws of the State of Maryland on April 29, 1994 and is registered
under the Investment Company Act of 1940 (the "Act"), as amended, as a open-end
management investment company. Master Variable Series was established to provide
a vehicle for the investment of assets of various separate accounts of Chubb
Life Insurance Company of America ("Chubb Life") and its affiliated life
insurance companies supporting variable annuity contracts. The Fund currently
has seven investment series, each issuing a separate series of shares (the
"Portfolios"): Equity Portfolio, Early Life Cycle Portfolio, Intermediate-Term
Managed Income Portfolio, Managed Income Portfolio, International Equity
Portfolio, International Bond Portfolio and Money Portfolio. Certain Portfolios
may not be available in all states. Shares of the Portfolios are not offered to
the general public but solely to separate accounts of Chubb Life and its
affiliated life insurance companies.
It is Master Variable Series' policy, to the extent possible, to maintain a
continuous net asset value per share of $1.00 with respect to the Money
Portfolio. The Money Portfolio has adopted certain investment portfolio,
valuation and dividend distribution policies to enable it to do so. However,
there can be no assurance that the net asset value per share of the Money
Portfolio will not vary. The net asset values per share of the other Portfolios
will fluctuate as the market values of their portfolio securities change in
response to market factors.
The following is a summary of significant accounting policies for the Equity
Portfolio, the Early Life Cycle Portfolio, the Intermediate-Term Managed Income
Portfolio, the Managed Income Portfolio, the International Equity Portfolio, the
International Bond Portfolio and the Money Portfolio:
(a) PORTFOLIO VALUATION:
Money Portfolio: 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.
Equity Portfolio, Early Life Cycle Portfolio, Intermediate-Term Managed Income
Portfolio, Managed Income Portfolio, International Equity Portfolio and
International Bond Portfolio: Investments in securities that are traded on a
domestic stock exchange are valued at the last sale price on the exchange on
which securities are primarily traded or at the last sale price on the national
securities market. Securities traded over-the-counter are valued each business
day on the basis of closing over-the-counter bid prices. Securities for which
there were no transactions are valued at the average of the most recent bid and
ask prices ( as calculated by an independent pricing service (the "Service")
based upon its evaluation of the market for such securities) when, in the
judgement of the Service, quoted bid prices for securities are readily available
and are representative of the bid side of the market.
Investment securities that are primarily traded on foreign securities exchanges
are generally valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the time a
value was so established is likely to have changed such value, then a fair value
of those securities will be determined by consideration of other factors under
the direction of the UST Master Variable Series' Board of Directors (the
"Board"). A security which is traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market on which the
security is traded. All other foreign securities are valued at the last current
bid quotation if market quotations are available, or at fair value as determined
in accordance with policies established by the Board of Directors. Investment
valuations, other assets and liabilities initially expressed in foreign
currencies are converted each business day into U.S. dollars based upon current
exchange rates. Purchases and sales of foreign investments and income and
expenses are converted into U.S. dollars based upon currency exchange rates
prevailing on the respective dates of such transactions. Gains and losses
attributable to foreign currency exchange rates are recorded for financial
statement purposes as net realized gains and losses on investments. That portion
of both realized and unrealized gains and losses on investments that results
from fluctuations in foreign currency exchange rates is not separately
disclosed.
Short-term debt instruments with remaining maturities of 60 days or less are
valued at amortized cost, which approximates market value. Securities and other
assets for which market quotations are not readily available are valued at fair
value pursuant to guidelines adopted by the Board.
13
<PAGE> 14
1. (a) PORTFOLIO VALUATION (CONTINUED):
Forward foreign currency exchange contracts: The International Equity and
International Bond Portfolios' participation in forward currency exchange
contracts will be limited to hedging involving either specific transactions or
portfolio positions. Transaction hedging involves the purchase or sale of
foreign currency with respect to specific receivables or payables of the
Portfolio generally arising in connection with the purchase or sale of its
portfolio securities. Risk may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts and
is generally limited to the amount of unrealized gain on the contracts, if any,
at the date of default. Risk may also arise from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. Contracts are
marked-to-market daily and the change in market value is recorded as unrealized
appreciation or depreciation. Realized gains or losses arising from such
transactions are included in net realized gains or losses from foreign currency
transactions.
(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, including where applicable, amortization of discount on
investments, is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date, except for certain dividends from foreign securities,
which are recorded as soon as the Portfolios become aware of the dividend.
(c) REPURCHASE AGREEMENTS:
Master Variable Series may purchase portfolio securities from financial
institutions deemed to be creditworthy by the investment adviser subject to the
seller's agreement to repurchase and Master Variable Series' agreement to resell
such securities at mutually agreed upon prices. Securities purchased subject to
such repurchase agreements are deposited with Master Variable Series' custodian
or sub-custodian or are maintained in the Federal Reserve/Treasury book-entry
system and must have, at all times, an aggregate market value greater than 100%
of the repurchase price (including accrued interest).
If the value of the underlying security, including accrued interest, falls below
the value of 100% of the repurchase price plus accrued interest, Master Variable
Series will require the seller to deposit the additional collateral by the next
business day. Default or bankruptcy of the seller may, however, expose the
applicable Portfolio of Master Variable Series to possible delay in connection
with the disposition of the underlying securities or loss to the extent that
proceeds from a sale of the underlying securities were less than the repurchase
price under the agreement.
(d) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income are declared and paid daily for the Money
Portfolio and declared and paid annually for the Equity Portfolio, the Early
Life Cycle Portfolio, the Intermediate-Term Managed Income Portfolio, the
Managed Income Portfolio, the International Equity Portfolio and the
International Bond Portfolio. 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 foreign currency
transactions, passive foreign investment companies and deferral of losses on
wash sales and post-October losses.
In order to avoid a Federal excise tax, each Portfolio is required to distribute
certain minimum amounts of net realized capital gains and net investment income
for the respective periods ending October 31 and December 31 in each calendar
year.
(e) FEDERAL TAXES:
It is the policy of Master Variable Series that each Portfolio intends 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.
14
<PAGE> 15
1. (e) FEDERAL TAXES (CONTINUED):
At December 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 for which there was an excess of tax
cost over value were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------
<S> <C> <C> <C>
Equity Portfolio .............................. $556,938 $ 66,331 $490,607
Early Life Cycle Portfolio .................... 238,204 102,457 135,747
Intermediate-Term Managed Income Portfolio .... 69,414 -- 69,414
Managed Income Portfolio ...................... 61,468 -- 61,468
International Equity Portfolio ................ 358,508 40,739 317,769
International Bond Portfolio .................. 183,652 21,655 161,997
</TABLE>
At December 31, 1995, the International Equity Portfolio had an unrealized
foreign currency loss of $22, and the International Bond Portfolio had an
unrealized foreign currency gain of $84. Also, the Money Portfolio had a
realized capital loss of $1, for Federal income tax purposes, which is available
to offset future realized capital gains, and expires in 2003.
In addition, during the period from November 1, 1995 through December 31, 1995,
the International Equity Portfolio incurred foreign currency losses of $166 and
capital losses of $14,598 that are treated for Federal income tax purposes as if
they had occurred on January 1, 1996. Accordingly, the Portfolio made
distributions, as required by Internal Revenue Code Regulations, in excess of
amounts recognized for financial reporting purposes.
The International Equity Portfolio had investments in passive foreign investment
companies during the period which were marked to market for Federal tax
purposes. Distributions of $9,768 were declared based upon this mark to market
adjustment, resulting in distributions in excess of net investment income for
financial statement purposes.
(f) EXPENSE ALLOCATION:
Expenses directly attributable to a Portfolio are charged to that Portfolio.
Other expenses are allocated to the respective Portfolios based on average net
assets.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS
United States Trust Company of New York ("U.S. Trust") serves as the investment
adviser to Master Variable Series. Foreign and Colonial Asset Management
("FACAM") serves as the sub-adviser to International Equity Portfolio and
International Bond Portfolio. For services provided and expenses assumed
pursuant to the Investment Advisory Agreement, the Investment Adviser is
entitled to be paid a fee, computed daily and paid monthly, at the annual rate
of: .75% of the average daily net assets of the Equity Portfolio; .60% of the
average daily net assets of the Early Life Cycle Portfolio; .35% of the average
daily net assets of the Intermediate-Term Managed Income Portfolio; .75% of the
average daily net assets of the Managed Income Portfolio; 1.00% of the average
daily net assets of the International Equity Portfolio; .90% of the average
daily net assets of the International Bond Portfolio; and .25% of the average
daily net assets of the Money Portfolio. FACAM is entitled to receive from U.S.
Trust (and not from the International Equity Portfolio or International Bond
Portfolio) an annual fee, computed and paid quarterly, at the annual rate of
.70% of the average daily net assets of the International Equity Portfolio and
International Bond Portfolio. From time to time, the Investment Adviser or
Sub-Adviser may waive (either voluntarily or pursuant to applicable state
expense limitations) all or a portion of the advisory fees payable to it by a
Portfolio and may also reimburse the Portfolio for a portion of other expenses,
which waiver may be terminated at any time.
15
<PAGE> 16
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS
(CONTINUED):
Chubb Investment Advisory Corporation serves as the Administrator for the Master
Variable Series and provides the Portfolios with general administrative and
operational assistance, including accounting services. For the services provided
to the portfolios of Master Variable Series, the Administrator is entitled to
annual fees, computed daily and paid monthly, based on the average daily net
assets of each Portfolio as follows:
<TABLE>
<CAPTION>
1ST $75 NEXT $75 OVER $150
MILLION MILLION MILLION
------- -------- ---------
<S> <C> <C> <C>
Equity Portfolio ................................ .20% .175% .15%
Early Life Cycle Portfolio ...................... .20% .175% .15%
Intermediate-Term Managed Income Portfolio ...... .15% .125%. .10%
Managed Income Portfolio ........................ .15% .125% .10%
International Equity Portfolio .................. .30% .275% .25%
International Bond Portfolio .................... .30% .275% .25%
Money Portfolio ................................. .10% .075% .05%
</TABLE>
Chubb Investment Advisory Corporation also serves as transfer and dividend
disbursing agent for Master Variable Series.
The Portfolios bear the expenses incurred in their operations, including annual
fees paid to the Administrator, and pay for brokerage fees and commissions in
connection with the purchase of portfolio securities. Until further notice, the
Investment Adviser intends to voluntarily waive investment advisory fees, and,
if necessary, reimburse Portfolio expenses (including Administrator fees), to
the extent necessary for each of the Portfolios to maintain annual expense
ratios of not more than 1.15% for the Equity Portfolio; 0.99% for the Early Life
Cycle Portfolio; 0.72% for the Intermediate-Term Managed Income Portfolio; 1.05%
for the Managed Income Portfolio; 1.50% for the International Equity Portfolio;
1.40% for the International Bond Portfolio; and 0.51% for the Money Portfolio.
For the period ended December 31, 1995, U.S. Trust has waived and reimbursed
expenses as set forth below:
<TABLE>
<S> <C>
Equity Portfolio ............................... $23,401
Early Life Cycle Portfolio ..................... 20,867
Intermediate-Term Managed Income Portfolio ..... 18,304
Managed Income Portfolio ....................... 19,138
International Equity Portfolio ................. 37,209
International Bond Portfolio ................... 49,036
Money Portfolio ................................ 21,031
</TABLE>
Each Director of Master Variable Series receives an annual fee of $3,000, plus a
meeting fee of $500 for each meeting attended, and is reimbursed for expenses
incurred for attending meetings. The Chairman receives an additional annual fee
of $2,000. Officers and directors, deemed to be affiliated or "interested
parties" under the Act, of the Master Variable Series and who are also
affiliated with the administrator receive no compensation from the Master
Variable Series for their services.
3. PURCHASE AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for the
portfolios aggregated:
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----
<S> <C> <C>
Equity Portfolio $1,745,798 $ 237,158
Early Life Cycle Portfolio 1,461,854 426,043
Intermediate-Term Managed Income Portfolio 2,052,129 1,132,319
Managed Income Portfolio 3,293,060 2,305,346
International Equity Portfolio 2,377,923 229,062
International Bond Portfolio 5,669,929 3,168,136
</TABLE>
16
<PAGE> 17
4. COMMON STOCK
Authorized capital for the Master Variable Series Portfolios is 1,000,000,000
shares. Each share has a par value of $.001 and represents an equal
proportionate interest in the particular Portfolio with other shares of the same
Portfolio, and is entitled to such dividends and distributions of taxable
earnings on the assets belonging to such Portfolio as are declared at the
discretion of the Master Variable Series Board of Directors.
<TABLE>
<CAPTION>
EQUITY PORTFOLIO
--------------------------
For the period January 17,
through December 31, 1995
--------------------------
Shares Dollars
------ -------
<S> <C> <C>
Sold .................................... 139,145 $1,521,837
Issued as reinvestment of dividends ..... -- --
Redeemed ................................ (103) (1,453)
------- ----------
Net Increase ............................ 139,042 $1,520,384
======= ==========
</TABLE>
<TABLE>
<CAPTION>
EARLY LIFE CYCLE PORTFOLIO
--------------------------
For the period January 17,
through December 31, 1995
--------------------------
Shares Dollars
------ -------
<S> <C> <C>
Sold .................................... 110,335 $1,119,800
Issued as reinvestment of dividends ..... -- --
Redeemed ................................ (33) (383)
------- ----------
Net Increase ............................ 110,302 $1,119,417
======= ==========
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM
MANAGED INCOME PORTFOLIO
--------------------------
For the period January 17,
through December 31, 1995
--------------------------
Shares Dollars
------ -------
<S> <C> <C>
Sold .................................... 100,000 $1,000,000
Issued as reinvestment of dividends ..... -- --
Redeemed ................................ -- --
------- ----------
Net Increase ............................ 100,000 $1,000,000
======= ==========
</TABLE>
<TABLE>
<CAPTION>
MANAGED INCOME PORTFOLIO
--------------------------
For the period January 17,
through December 31, 1995
--------------------------
Shares Dollars
------ -------
<S> <C> <C>
Sold .................................... 100,000 $1,000,000
Issued as reinvestment of dividends ..... -- --
Redeemed ................................ -- --
------- ----------
Net Increase ............................ 100,000 $1,000,000
======= ==========
</TABLE>
17
<PAGE> 18
4. COMMON STOCK (CONTINUED):
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
------------------------------
For the period January 17,
through December 31, 1995
------------------------------
Shares Dollars
------ -------
<S> <C> <C>
Sold .................................. 229,292 $2,295,775
Issued as reinvestment of dividends ... -- --
Redeemed .............................. (16) (170)
------- ----------
Net Increase .......................... 229,276 $2,295,605
======= ==========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL BOND PORTFOLIO
----------------------------
For the period January 17,
through December 31, 1995
----------------------------
Shares Dollars
------ -------
<S> <C> <C>
Sold .................................. 300,000 $3,000,000
Issued as reinvestment of dividends ... -- --
Redeemed .............................. -- --
------- ----------
Net Increase .......................... 300,000 $3,000,000
======= ==========
</TABLE>
<TABLE>
<CAPTION>
MONEY PORTFOLIO
--------------------------
For the period January 17,
through December 31, 1995
--------------------------
Shares Dollars
------ -------
<S> <C> <C>
Sold .................................. 1,350,009 $1,350,000
Issued as reinvestment of dividends ... 52,098 52,098
Redeemed .............................. (350,782) (350,782)
--------- ----------
Net Increase .......................... 1,051,325 $1,051,316
========= ==========
</TABLE>
5. ORGANIZATION COSTS
Costs in connection with the initial organization of the Portfolios, including
the fees for registering and qualifying their shares for distribution under
Federal and state securities regulations are being amortized on the
straight-line basis over a period of five years from the dates on which each
Portfolio commenced operations.
6. SUBSEQUENT EVENT
On February 9, 1996 the Board of Directors of the Master Variable Series
approved a resolution to deregister and dissolve the Master Variable Series
pursuant to the Investment Company Act of 1940 and Securities Act of 1933,
subject to Security and Exchange Commission and shareholder approval. The
deregistration and dissolution is expected to be completed in April 1996.
18
<PAGE> 19
UST MASTER VARIABLE SERIES, INC.
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
January 17, 1995 (Commencement of Operations) to December 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE-
EARLY TERM
LIFE MANAGED MANAGED INTERNATIONAL INTERNATIONAL
EQUITY CYCLE INCOME INCOME EQUITY BOND MONEY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ............................. $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) ..... (0.03) (0.01) 0.66 0.65 0.13 0.64 0.05
Net gains on securities (both
realized and unrealized) ......... 4.83 1.89 0.83 0.93 1.38 0.99
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations ..................... 4.80 1.88 1.49 1.58 1.51 1.63 0.05
---------- ---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income ................ (0.66) (0.65) (0.13) (0.64) (0.05)
Dividends in excess of net
investment income ................ (0.04) (0.12)
Dividends from capital
gains ............................ (0.26) (0.13) (0.14) (0.28) (0.28)
Dividends in excess of
capital gains ..................... (0.05)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions ................ (0.26) (0.13) (0.80) (0.93) (0.22) (1.04) (0.05)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period . ..... $ 14.54 $ 11.75 $ 10.69 $ 10.65 $ 11.29 $ 10.59 $ 1.00
========== ========== ========== ========== ========== ========== ==========
Total Return (B) ..................... 47.95% 18.75% 14.93% 15.78% 15.13% 16.34% 5.20%
Ratios to Average Net Assets:
(Annualized)
Expenses (C) ....................... 1.15% 0.99% 0.72% 1.05% 1.50% 1.40% 0.51%
Net investment income .............. (0.30%) (0.09%) 6.41% 6.29% 1.27% 6.12% 5.27%
Portfolio Turnover Rate .............. 17.01% 38.10% 120.78% 236.72% 9.71% 125.43% N/A
Net Assets, At End of Period ......... $2,021,269 $1,295,764 $1,069,424 $1,064,801 $2,588,830 $3,177,472 $1,051,325
</TABLE>
(A) The per share amounts which are shown have been computed based on the
average number of shares outstanding during the period.
(B) Total return assumes reinvestment of all dividends during the period and
does not reflect deduction of account fees and charges. Investment returns
and principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. The total return figures have not been
annualized.
(C) All advisory fees have been waived for the period and other expenses of the
Funds have been assumed in part by U.S. Trust Company of New York. Had the
fees not been waived and expenses not been assumed, the ratios of expenses
to average net assets would have been 2.87% for the Equity Portfolio, 2.85%
for the Early Life Cycle Portfolio, 2.50% for the Intermediate-Term Managed
Income Portfolio, 2.91% for the Managed Income Portfolio, 3.11% for the
International Equity Portfolio, 2.97% for the International Bond Portfolio
and 2.63% for the Money Portfolio. In addition, the ratios of net income
before waivers and assumptions to average net assets would have been (2.02%)
for the Equity Portfolio, (1.95%) for the Early Life Cycle Portfolio, 4.63%
for the Intermediate-Term Managed Income Portfolio, 4.43% for the Managed
Income Portfolio, (.34%) for the International Equity Portfolio, 4.55% for
the International Bond Portfolio and 3.15% for the Money Portfolio.
19
<PAGE> 20
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
UST Master Variable Series, Inc.
We have audited the accompanying statement of assets and liabilities of the UST
Master Variable Series, Inc. (the "Master Variable Series", comprising,
respectively, the Equity Portfolio, Early Life Cycle Portfolio,
Intermediate-Term Managed Income Portfolio, Managed Income Portfolio,
International Equity Portfolio, International Bond Portfolio and Money
Portfolio), including the related schedules of portfolio investments, as of
December 31, 1995, and the related statement of operations, statement of changes
in net assets, and the financial highlights for the period from January 17, 1995
(Commencement of Operations) to December 31, 1995. These financial statements
and financial highlights are the responsibility of the Master Variable Series'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1995 by
correspondence with the custodian. 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
audit provides 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 respective portfolios constituting the UST Master Variable Series, Inc.
at December 31, 1995, the results of their operations, the changes in their net
assets and the financial highlights for the period from January 17, 1995
(Commencement of Operations) to December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
-----------------------------
Ernst & Young LLP
Boston, Massachusetts
February 16, 1996
20
