<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 1994
SECURITIES ACT FILE NO. 2-78646
INVESTMENT COMPANY ACT FILE NO. 811-3189
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 13 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 28 /X/
(Check appropriate box or boxes)
------------------------
SUMMIT CASH RESERVES FUND
OF FINANCIAL INSTITUTIONS SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C>
800 Scudders Mill Road
Plainsboro, New Jersey 08536
(Address of Principal Executive
Offices) (Zip Code)
</TABLE>
Registrant's Telephone Number, including Area Code (609) 282-2800
Arthur Zeikel
Financial Institutions Series Trust
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address: P.O. Box 9011, Princeton, New Jersey 08543-9011
(Name and Address of Agent for Service)
COPIES TO:
<TABLE>
<S> <C>
Philip L. Kirstein, Esq. Counsel for the Trust:
FUND ASSET MANAGEMENT, L.P. BROWN & WOOD
P.O. Box 9011 One World Trade Center
Princeton, New Jersey 08543-9011 New York, N.Y. 10048
Attention: Thomas R. Smith, Jr.
</TABLE>
It is proposed that this filing will become effective (check appropriate box)
/X/ immediately upon filing pursuant to paragraph (b), or
/ / on (date) pursuant to paragraph (b), or
/ / 60 days after filing pursuant to paragraph (a), or
/ / on (date) pursuant to paragraph (a), of Rule 485.
-------------------
The Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The notice required by such rule for the Registrant's most recent
fiscal year was filed on July 22, 1994.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT OF MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES SHARES BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT OFFERING PRICE* FEE
<S> <C> <C> <C> <C>
Shares of beneficial interest
(par value $.10 per share)... 578,552,259 $1.00 $290,000 $100
<FN>
*(1) The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940.
(2) The total amount of securities redeemed or repurchased during Registrant's
previous fiscal year was 578,262,259 shares of beneficial interest.
(3) None of the shares described in (2) above have been used for reduction
pursuant to Rule 24e-2(a) or Rule 24f-2(c) under the Investment Company Act
of 1940 in previous filings during Registrant's current fiscal year.
(4) 578,262,259 of the shares redeemed during Registrant's previous fiscal year
are being used for the reduction of the registration fee in this amendment
to the Registration Statement.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUMMIT CASH RESERVES FUND
FINANCIAL INSTITUTIONS SERIES TRUST
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ----------------------------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C>
PART A
Item 1. Cover Page...................................... Cover Page
Item 2. Synopsis........................................ Fee Table
Item 3. Condensed Financial Information................. Supplementary Financial Information; Yield
Information
Item 4. General Description of Registrant............... Investment Objectives and Policies; Additional
Information
Item 5. Management of the Fund.......................... Fee Table; Management of the Trust; Portfolio
Transactions; Inside Back Cover Page
Item 6. Capital Stock and Other Securities.............. Cover Page; Additional Information
Item 7. Purchase of Securities Being Offered............ Fee Table; Purchase of Shares; Additional
Information; Inside Back Cover Page
Item 8. Redemption or Repurchase........................ Fee Table; Redemption of Shares
Item 9. Pending Legal Proceedings....................... Not Applicable
PART B
Item 10. Cover Page...................................... Cover Page
Item 11. Table of Contents............................... Back Cover Page
Item 12. General Information and History................. Not Applicable
Item 13. Investment Objectives and Policies.............. Investment Objectives and Policies
Item 14. Management of the Fund.......................... Management of the Trust
Item 15. Control Persons and Principal Holders of
Securities...................................... Not Applicable
Item 16. Investment Advisory and Other Services.......... Management of the Trust; Purchase of Shares;
General Information
Item 17. Brokerage Allocation............................ Portfolio Transactions; Financial Statements
Item 18. Capital Stock and Other Securities.............. General Information--Description of Series and
Shares
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered................................... Purchase of Shares; Redemption of Shares;
Purchase and Redemption of Shares Through
Certain Retirement Plans; Determination of Net
Asset Value; Shareholder Services
Item 20. Tax Status...................................... Taxes
Item 21. Underwriters.................................... Purchase of Shares
Item 22. Calculation of Performance Data................. Yield Information
Item 23. Financial Statements............................ Financial Statements
PART C
Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C to this
Registration Statement.
</TABLE>
<PAGE>
PROSPECTUS
SEPTEMBER 28, 1994
SUMMIT CASH RESERVES FUND
FINANCIAL INSTITUTIONS SERIES TRUST
PO BOX 9011, PRINCETON, NEW JERSEY 08543-9011 PHONE NO. (609) 282-2800
The investment objectives of the Summit Cash Reserves Fund (the "Money
Fund") are to seek current income, preservation of capital and liquidity
available from investing in a diversified portfolio of short-term money market
securities. These securities will primarily consist of U.S. Government and
Government agency securities, bank certificates of deposit and bankers'
acceptances, commercial paper and repurchase agreements. For purposes of its
investment policies, the Money Fund defines short-term money market securities
as having a maturity of no more than 762 days (25 months) in the case of U.S.
Government and Government agency securities and no more than 397 days (13
months) in the case of all other securities. There can be no assurance that the
investment objectives of the Money Fund will be realized. The Money Fund is a
separate series of Financial Institutions Series Trust (the "Trust"), a no-load,
diversified, open-end investment company organized as a Massachusetts business
trust.
The net income of the Money Fund is declared as dividends daily and
reinvested daily in additional shares at net asset value. THE MONEY FUND SEEKS
TO MAINTAIN A CONSTANT $1.00 NET ASSET VALUE PER SHARE, ALTHOUGH THIS CANNOT BE
ASSURED. AN INVESTMENT IN THE MONEY FUND IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. In order to maintain a constant net asset value of $1.00
per share, the Money Fund may reduce the number of shares held by its
shareholders.
Shares of the Money Fund may be purchased at their net asset value without
any sales charge. The minimum initial purchase is $5,000 and subsequent
purchases generally must be $1,000 or more, except that lower minimums apply in
the case of purchases by certain retirement plans and for accounts advised by
banks and registered investment advisers. Shares may be redeemed at any time at
net asset value as described herein. See "Purchase of Shares" and "Redemption of
Shares."
Shares of the Money Fund are being offered by certain securities dealers
which have entered into securities clearing arrangements or have other business
relationships with Broadcort Capital Corp.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
This Prospectus is a concise statement of information about the Money Fund
that is relevant to making
an investment in the Money Fund. This Prospectus should be retained for future
reference. A statement containing additional information about the Money Fund,
dated September 28, 1994 (the "Statement of Additional Information"), has been
filed with the Securities and Exchange Commission and can be obtained, without
charge, by calling or by writing the Money Fund at the above telephone number or
address. The Statement of Additional Information is hereby incorporated by
reference into this Prospectus.
-------------------
FUND ASSET MANAGEMENT -- INVESTMENT MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
<PAGE>
FEE TABLE
<TABLE>
<S> <C> <C>
ANNUAL MONEY FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) FOR THE YEAR
ENDED MAY 31, 1994:
Management Fees.......................................................... 0.28%(a)
Administration Fees...................................................... 0.28%
Other Expenses
Dividend and Transfer Agency Fees..................... 0.18 (b)
Other................................................. 0.16%
---------
Total Other Expenses............................................. 0.34%
---------
TOTAL MONEY FUND OPERATING EXPENSES............................................ 0.90%
---------
---------
<FN>
- ---------
(a) See "Management of the Trust--Management and Advisory Arrangements"--page
9.
(b) See "Management of the Trust--Transfer Agency Services"--page 10.
</TABLE>
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR THE PERIOD OF:
--------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment assuming an operating expense ratio of 0.90%
and a 5% annual return throughout the period.............. $ 9 $ 29 $ 50 $111
</TABLE>
The foregoing Fee Table is intended to assist investors in understanding the
costs and expenses that a shareholder in the Money Fund will bear directly or
indirectly. The Example set forth above assumes reinvestment of all dividends
and distributions and utilizes a 5% annual rate of return as mandated by
Securities and Exchange Commission regulations. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RATE OF RETURN,
AND ACTUAL EXPENSES AND ANNUAL RATE OF RETURN MAY BE MORE OR LESS THAN THOSE
ASSUMED FOR PURPOSES OF THE EXAMPLE.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below has been examined in
conjunction with the annual audits of the financial statements of the Money Fund
by Deloitte & Touche LLP, independent auditors. Financial statements for the
year ended May 31, 1994 and the independent auditors' report thereon are
included in the Statement of Additional Information. Further information about
the performance of the Fund is contained in the Fund's most recent annual report
to shareholders which may be obtained, without charge, by calling or by writing
the Company at the telephone number or address on the front cover of this
Prospectus.
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value beginning
of year................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment
income--net........... .0254 .0262 .0464 .0684 .0811 .0799 .0640 .0564 .0710 .0928
Realized and unrealized
gain (loss) on
investments--net...... .0003 .0007 (.0001) .0024 (.0003) .0002 (.0006) .0002 .0006 .0026
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. .0257 .0269 .0463 .0708 .0808 .0801 .0634 .0566 .0716 .0954
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment
income--net........... (.0254) (.0262) (.0463) (.0684) (.0808) (.0799) (.0634) (.0564) (.0710) (.0928)
Realized gain on
investments--net...... (.0003) (.0007) -- (.0024)* -- (.0002)* -- (.0002)* (.0006)* (.0026)*
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions.......... (.0257) (.0269) (.0463) (.0708) (.0808) (.0801) (.0634) (.0566) (.0716) (.0954)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT
RETURN................. 2.57% 2.74% 4.44% 7.36% 8.42% 8.30% 6.49% 5.84% 7.44% 10.00%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET
ASSETS:
Expenses................. .90% .86% .79% .85% .74% .82% .79% .74% .79% .79%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Investment income and
realized gain (loss) on
investments--net....... 2.54% 2.72% 4.48% 7.14%* 8.03%* 7.98%* 6.33%* 5.65%* 7.14%* 9.44%*
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands)......... $135,301 $156,677 $237,868 $374,212 $546,593 $637,424 $707,716 $631,055 $641,216 $485,497
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<FN>
- ------------
* Includes unrealized gain (loss).
</TABLE>
3
<PAGE>
YIELD INFORMATION
Set forth below is yield information for the indicated seven-day periods,
computed to include and
exclude realized and unrealized gains and losses, and information as to the
compounded annualized yield, excluding gains and losses, for the same periods.
<TABLE>
<CAPTION>
SEVEN-DAY PERIOD ENDED
----------------------------------
MAY 31, 1994 AUGUST 31, 1994
--------------- -----------------
<S> <C> <C>
Annualized Yields:
Including gains and losses........................................... 3.43% 3.78 %
Excluding gains and losses........................................... 3.44 3.78
Compounded Annualized Yield.............................................. 3.50 3.85
Average maturity of portfolio at end of period........................... 50 days 49 days
</TABLE>
The yield on Money Fund shares normally will fluctuate on a daily basis.
Therefore, the yield for any given past period is not an indication or
representation by the Money Fund of future yields or rates of return on its
shares. The Money Fund's yield is affected by changes in interest rates on money
market securities, average portfolio maturity, the types and quality of
portfolio securities held, and operating expenses. Current yield information may
not provide a basis for comparison with bank deposits or other investments which
pay a fixed yield over a stated period of time.
On occasion, the Money Fund may compare its yield to (i) the industry
averages compiled by DONOGHUE'S MONEY FUND REPORT, a widely recognized
independent publication that monitors the performance of money market mutual
funds, (ii) the average yield reported by the BANK RATE MONITOR NATIONAL
INDEX-TM- for money market deposit accounts offered by the 100 leading banks and
thrift institutions in the ten largest standard metropolitan statistical areas,
(iii) yield data published by Lipper Analytical Services, Inc., (iv) the yield
on an investment in 91-day Treasury bills on a rolling basis, assuming quarterly
compounding, or (v) performance data published by Morningstar Publications,
Inc., MONEY MAGAZINE, U.S. NEWS & WORLD REPORT, BUSINESS WEEK, CDA Investment
Technology, Inc., FORBES MAGAZINE and FORTUNE MAGAZINE. As with yield
quotations, yield comparisons should not be considered representative of the
Money Fund's yield or relative performance for any future period.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Money Fund are to seek current income,
preservation of capital and liquidity available from investing in a diversified
portfolio of short-term money market securities. The investment objectives are
fundamental policies of the Money Fund which may not be changed without a vote
of the majority of the outstanding shares of the Money Fund.
Investment in the Money Fund offers several benefits. The Money Fund seeks
to provide as high a yield potential as is available, consistent with the
preservation of capital, from short-term money market securities utilizing
professional money market management, block purchases of securities and yield
improvement techniques. It provides high liquidity because of its redemption
features and seeks reduced risk resulting from diversification of assets. There
can be no assurance that the investment objectives of the Money Fund will be
realized. Certain expenses are borne by investors, including advisory and
management fees, administrative costs and operational costs.
4
<PAGE>
In managing the Money Fund, Fund Asset Management, L.P. (the "Investment
Manager") will employ a number of professional money management techniques,
including varying the composition of investments and the average maturity of the
portfolio based upon its assessment of the relative values of the various money
market securities and future interest rate patterns. These assessments will
respond to changing economic and money market conditions and to shifts in fiscal
and monetary policy. The Investment Manager will also seek to improve yield by
taking advantage of yield disparities that regularly occur in the money market.
For example, market conditions frequently result in similar securities trading
at different prices. Also, there are frequently differences in the yield between
the various types of money market securities. The Money Fund seeks to enhance
yield by purchasing and selling securities based on these yield disparities.
The following is a description of the types of money market securities in
which the Money Fund may invest:
UNITED STATES GOVERNMENT SECURITIES: Marketable securities issued by or
guaranteed as to principal and interest by the U.S. Government and supported
by the full faith and credit of the United States.
UNITED STATES GOVERNMENT AGENCY SECURITIES: Debt securities issued by
U.S. Government-sponsored enterprises, Federal agencies and certain
international institutions which are not direct obligations of the United
States but involve U.S. Government sponsorship or guarantees by U.S.
Government agencies or enterprises. The U.S. Government is not obligated to
provide financial support to these instrumentalities.
BANK MONEY INSTRUMENTS: Obligations of commercial banks, savings banks
or savings and loan associations such as certificates of deposit, including
variable rate certificates of deposit, time deposits, deposit notes, bank
notes and bankers' acceptances. The savings banks and savings and loan
associations must be organized and operating in the United States. The
obligations of commercial banks may be issued by U.S. banks, foreign
branches or subsidiaries of U.S. banks ("Eurodollar" obligations) or U.S.
branches of foreign banks ("Yankeedollar" obligations).
The Money Fund may invest in Eurodollar obligations which by their terms
are general obligations of the U.S. parent bank.
COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS: Commercial paper
(including variable amount master demand notes), which refers to short-term,
unsecured promissory notes issued by corporations, partnerships, trusts or
other entities to finance short-term credit needs, and non-convertible debt
securities (e.g., bonds and debentures) with no more than 397 days (13
months) remaining to maturity at the date of purchase. Short-term
obligations issued by trusts include mortgage-related or asset-backed debt
instruments, including pass-through certificates representing participations
in, or bonds and notes backed by, pools of mortgage, credit card, automobile
or other types of receivables. These structured financings will be supported
by sufficient collateral and other credit enhancements, including letters of
credit, insurance, reserve funds and guarantees by third parties, to enable
such instruments to obtain the requisite quality rating by a nationally
recognized statistical rating organization, as described below.
5
<PAGE>
FOREIGN BANK MONEY INSTRUMENTS: U.S. dollar-denominated obligations of
foreign depository institutions and their foreign branches and subsidiaries,
such as certificates of deposit, bankers' acceptances, time deposits and
deposit notes. The obligations of such foreign branches and subsidiaries may
be the general obligation of the parent bank or may be limited to the
issuing branch or subsidiary by the terms of the specific obligation or by
government regulation. Such investments will only be made if determined to
be of comparable quality to other investments permissible for the Money
Fund. The Money Fund will not invest more than 25% of its total assets
(taken at market value at the time of each investment) in these obligations.
FOREIGN SHORT-TERM DEBT INSTRUMENTS: U.S. dollar-denominated commercial
paper and other short-term obligations issued by foreign entities. Such
investments are subject to quality standards similar to those applicable to
investments in comparable obligations of domestic issuers.
The following is a description of other types of investments or investment
practices in which the Money Fund may invest or engage:
REPURCHASE AGREEMENTS: The Money Fund may invest in the money market
securities described above pursuant to repurchase agreements. Repurchase
agreements may be entered into only with a member bank of the Federal
Reserve System or a primary dealer in U.S. Government securities or an
affiliate thereof. Under such agreements, the bank or primary dealer agrees,
upon entering into the contract, to repurchase the security at a mutually
agreed upon time and price, thereby determining the yield during the term of
the agreement. This results in a fixed rate of return insulated from market
fluctuations during such period.
REVERSE REPURCHASE AGREEMENTS: The Money Fund may enter into reverse
repurchase agreements which involve the sale of money market securities held
by the Money Fund, with an agreement to repurchase the securities at an
agreed upon price, date and interest payment. During the time a reverse
repurchase agreement is outstanding, the Money Fund will maintain a
segregated custodial account containing U.S. Government or other appropriate
high-grade debt securities having a value equal to the repurchase price.
Preservation of capital is a prime investment objective of the Money Fund,
and, while the types of money market securities in which the Money Fund invests
are not completely risk free, such securities are generally considered to have
low principal risk. There is the risk of the failure of issuers to meet their
principal and interest obligations. Repurchase agreements may be construed to be
collateralized loans by the purchaser to the seller secured by the securities
transferred to the purchaser. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying
securities are not owned by the Money Fund but only constitute collateral for
the seller's obligation to pay the repurchase price. With respect to repurchase
agreements and reverse repurchase agreements, there is also the risk of the
failure of parties involved to repurchase at the agreed upon price or to return
the securities involved in such transactions, in which event the Money Fund may
suffer time delays and incur costs or possible losses in connection with such
transactions.
Bank money instruments in which the Money Fund invests must be issued by
depository institutions with total assets of at least $1 billion, except that up
to 10% of total assets (taken at market value) may be invested in certificates
of deposit of smaller institutions if such certificates of deposit are Federally
insured.
6
<PAGE>
Investments in Eurodollar and Yankeedollar obligations may not exceed 25% of
total assets. For purposes of this requirement, the Money Fund treats bank money
instruments issued by U.S. branches or subsidiaries of foreign banks as
obligations issued by domestic banks (not subject to the 25% limitation) if the
branch or subsidiary is subject to the same banking regulation as U.S. banks.
The Money Fund may invest in participations in, or bonds and notes backed
by, pools of mortgage, credit card, automobile or other types of receivables
with remaining maturities of no more than 397 days (13 months). These structured
financings will be supported by sufficient collateral and other credit
enhancements, including letters of credit, insurance, reserve funds and
guarantees by third parties, to enable such instruments to obtain the requisite
quality rating by a nationally recognized statistical rating organization, as
described below.
The Money Fund's investments in short-term corporate, partnership and trust
debt and bank money instruments will be rated, or will be issued by issuers who
have been rated, in one of the two highest rating categories for short-term debt
obligations by a nationally recognized statistical rating organization (an
"NRSRO") or, if not rated, will be of comparable quality as determined by the
Trustees of the Money Fund. The Money Fund's investments in corporate,
partnership and trust bonds and debentures (which must have maturities at the
date of purchase of 397 days (13 months) or less) will be in issuers who have
received from the requisite NRSROs a rating, with respect to a class of
short-term debt obligations that is comparable in priority and security with the
investment, in one of the two highest rating categories for short-term
obligations or, if not rated, will be of comparable quality as determined by the
Trustees of the Trust. Currently, there are six NRSROs: Duff & Phelps Inc.,
Fitch Investors Service, Inc., IBCA Limited and its affiliate IBCA Inc.,
Thompson Bankwatch, Inc., Moody's Investors Service, Inc., and Standard & Poor's
Corporation.
A recently adopted regulation of the Securities and Exchange Commission
limits investments by the Money Fund in securities issued by any one issuer
(other than the U.S. Government, its agencies or instrumentalities) ordinarily
to not more than 5% of its total assets, or in the event that such securities do
not have the highest rating, not more than 1% of its total assets. In addition,
such regulation requires that not more than 5% of the Money Fund's total assets
be invested in securities that do not have the highest rating or are not of
comparable quality to securities with the highest rating as determined by the
Trustees of the Money Fund.
The Money Fund may purchase money market securities on a forward commitment
basis at fixed purchase terms. The purchase of money market securities on a
forward commitment basis involves the risk that the yields available in the
market when the delivery takes place may actually be higher than those obtained
in the transaction itself; if yields increase, the value of the securities
purchased on a forward commitment basis will generally decrease. A separate
account of the Money Fund will be established with the Money Fund's Custodian
consisting of cash or liquid money market securities having a market value at
all times at least equal to the amount of the forward commitment.
For purposes of its investment policies, the Money Fund defines short-term
money market securities as having a maturity of no more than 762 days (25
months) in the case of U.S. Government and agency securities and no more than
397 days (13 months) in the case of all other securities. The dollar-weighted
average maturity of the Money Fund's portfolio will not exceed 90 days. During
the Money Fund's fiscal year ended May 31, 1994, the average maturity of its
portfolio ranged from 31 days to 89 days.
7
<PAGE>
INVESTMENT RESTRICTIONS. The Trust has adopted a number of restrictions
and policies relating to the investment of the assets and activities of the
Money Fund, which are fundamental policies and may not be changed without
the approval of the holders of a majority of the Money Fund's outstanding
voting securities as defined in the Investment Company Act of 1940 (the
"1940 Act"). Among the more significant restrictions, the Money Fund may
not: (1) purchase any securities other than (i) money market securities and
(ii) the other investments described under "Investment Objectives and
Policies"; (2) invest more than 25% of its total assets (taken at market
value at the time of each investment) in the securities of issuers in any
particular industry (other than U.S. Government securities, U.S. Government
agency securities or domestic bank money instruments); (3) purchase the
securities of any one issuer, other than the U.S. Government, its agencies
or instrumentalities, if immediately after such purchase, more than 5% of
the value of its total assets (taken at market value) would be invested in
such issuer, except that, with respect to 25% of the value of the Money
Fund's total assets, the Money Fund may invest up to 10% of its total assets
in bank money instruments or repurchase agreements with any one bank; (4)
purchase more than 10% of the outstanding securities of an issuer except
that such restriction shall not apply to U.S. Government or Government
agency securities, bank money instruments, and repurchase agreements; and
(5) enter into repurchase agreements if, as a result, more than 10% of the
Money Fund's net assets (taken at market value at the time of each
investment, together with any other investments deemed illiquid) would be
subject to repurchase agreements maturing in more than seven days.
MANAGEMENT OF THE TRUST
TRUSTEES
The Trustees of the Trust consist of six individuals, five of whom are not
"interested persons" of the Trust as defined in the 1940 Act. The Trustees of
the Trust are responsible for the overall supervision of the operations of the
Trust and perform the various duties imposed on the directors of investment
companies by the 1940 Act.
The Trustees of the Trust are:
ARTHUR ZEIKEL*--President and Chief Investment Officer of Fund Asset
Management, L.P. (the "Investment Manager"); President and Chief Investment
Officer of Merrill Lynch Asset Management, L.P. ("MLAM"); President and
Director of Princeton Services, Inc. ("Princeton Services"); Executive Vice
President of Merrill Lynch & Co., Inc. ("ML&Co."); Executive Vice President
of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"); and
Director of Merrill Lynch Funds Distributor, Inc. ("MLFD").
JOE GRILLS--Member of the Committee of Investment of Employee Benefit
Assets of the Financial Executives Institute ("CIEBA"); Member of CIEBA's
Executive Committee; Member of the Investment Advisory Committee of the
State of New York Common Retirement Fund; Director, Duke Management Company
and Winthrop Financial Associates (real estate management).
WALTER MINTZ--Special Limited Partner of Cumberland Associates
(investment partnership).
MELVIN R. SEIDEN--President of Silbanc Properties, Ltd. (real estate,
investment and consulting).
8
<PAGE>
STEPHEN B. SWENSRUD--Principal of Fernwood Associates (financial
consultants); Director, Hitchiner Manufacturing Company.
HARRY WOOLF--Member of the editorial board of INTERDISCIPLINARY SCIENCE
REVIEWS; Director, Alex. Brown Mutual Funds; Advanced Technology
Laboratories, Family Health International and SpaceLabs Medical (medical
equipment manufacturing and marketing).
- ---------
* Interested person, as defined in the 1940 Act, of the Trust.
MANAGEMENT AND ADVISORY ARRANGEMENTS
Fund Asset Management, L.P. (the "Investment Manager") and Broadcort Capital
Corp. (the "Administrator" or "Broadcort") provide advisory, management and
administrative services to the Money Fund pursuant to two separate agreements.
The Investment Manager performs management and investment advisory services for
the Money Fund and the Trust pursuant to an investment management agreement (the
"Investment Management Agreement"). The Administrator arranges for the
performance of certain administrative services for the Money Fund, primarily
shareholder services, pursuant to an administrative agreement (the
"Administrative Agreement").
The Investment Manager is an affiliate of MLAM and is owned and controlled
by ML&Co. The Investment Manager and MLAM act as investment advisers for more
than 100 registered investment companies. MLAM also offers portfolio management
and portfolio analysis services to individuals and institutions. As of August
31, 1994, the Investment Manager and MLAM had a total of approximately $165.7
billion in investment company and other portfolio assets under management,
including accounts of certain affiliates of the Investment Adviser.
Subject to the direction of the Trustees, the Investment Manager is
responsible for the actual management of the Money Fund and constantly reviews
the Money Fund's holdings in light of its own research analysis and that from
other relevant sources. The responsibility for making decisions to buy, sell or
hold a particular security rests with the Investment Manager. The Investment
Manager performs certain of the other management services necessary for the
operation of the Trust and the Money Fund, including regulatory compliance, and
provides all the office space, facilities, equipment and necessary personnel for
such services.
Pursuant to the Administrative Agreement with the Trust, the Administrator
has agreed to provide, and arrange for the performance of, administrative
services for the Money Fund and its shareholders. These services include matters
related to establishment and maintenance of shareholder accounts, processing
purchase and redemption requests, answering clients' inquiries regarding the
Money Fund and providing assistance with respect to various shareholder plans
offered by the Money Fund. These services shall be limited to administrative
services and shall not include investment advisory, promotional or sales
activities. The Administrative Agreement provides that the Administrator may
enter into sub-administrative agreements with various securities dealers to
provide certain of these services for their clients who have purchased Money
Fund shares through them.
Pursuant to the Investment Management Agreement and the Administrative
Agreement, respectively, the Investment Manager and Administrator each receive a
fee from the Money Fund at the end of each
9
<PAGE>
month at the annual rate of 0.275% of average daily net assets of the Money Fund
not exceeding $500 million and at the annual rate of 0.25% of such assets in
excess of $500 million. This fee is higher than that of most money market funds.
The Administrator may pay all or a portion of its administrative fee to the
securities dealers providing administrative services to the Money Fund's
shareholders. The amount of such payments will depend on the nature of the
services to be rendered pursuant to the sub-administrative arrangement with such
securities dealer and may be based on the average net assets of the accounts for
which such securities dealer provides services. For the fiscal year ended May
31, 1994, the fee paid by the Money Fund to the Investment Manager was $392,910
and the fee paid to the Administrator was $392,910 (based on average net assets
of approximately $141.7 million), and the effective fee rate was 0.28%.
The Investment Management Agreement and Administrative Agreement obligate
the Money Fund to pay certain expenses incurred in its operations, including,
among other things, the investment management and administrative fees, legal and
audit fees, unaffiliated Trustees' fees and expenses, registration fees,
custodian and transfer agency fees, accounting and pricing costs, and certain of
the costs of printing proxies, shareholder reports, prospectuses and statements
of additional information. Accounting services are provided to the Trust by the
Investment Manager, and the Trust reimburses the Investment Manager for its
costs in connection with such services. For the fiscal year ended May 31, 1994,
the amount of such reimbursement was $42,001.
During the fiscal year ended May 31, 1994, the ratio of total expenses to
average net assets was 0.90%.
TRANSFER AGENCY SERVICES
Financial Data Services, Inc. (the "Transfer Agent"), which is a
wholly-owned subsidiary of Merrill Lynch & Co., Inc., acts as the Money Fund's
transfer agent pursuant to a transfer agency, shareholder servicing agency and
proxy agency agreement (the "Transfer Agency Agreement"). Pursuant to the
Transfer Agency Agreement, the Transfer Agent is responsible for the issuance,
transfer and redemption of shares and the opening and maintenance of shareholder
accounts. Pursuant to the Transfer Agency Agreement, the Transfer Agent receives
a fee of $15.00 per shareholder account and is entitled to reimbursement for
out-of-pocket expenses incurred by it under the Transfer Agency Agreement. For
the fiscal year ended May 31, 1994, the total fee paid by the Trust to the
Transfer Agent pursuant to the Transfer Agency Agreement was $254,381.
PURCHASE OF SHARES
The Trust is offering shares of the Money Fund without sales charge at a
public offering price equal to the net asset value (normally $1.00 per share)
next determined after a purchase order becomes effective. Share purchase orders
are effective on the date Federal Funds become available to the Money Fund. If
Federal Funds are available to the Money Fund prior to 4:00 P.M. on any business
day, the order will be effective on that day. Shares purchased will begin
accruing dividends on the day following the date of purchase. The minimum
initial purchase is $5,000 and the minimum subsequent purchase is $1,000, except
that lower minimums apply as described below. Participants in the self-directed
retirement plans for which Merrill Lynch, Pierce, Fenner & Smith Incorporated
acts as passive custodian may invest in shares of the Money Fund without regard
to any minimum investment requirements as described under "Purchase and
Redemption of Shares Through Certain Retirement Plans" in the Statement of
Additional Information. The
10
<PAGE>
minimum initial purchase with respect to other Keogh, pension, profit sharing
and individual retirement plans is $250 and there is no minimum applicable with
respect to subsequent investments in connection with such plans. For accounts
advised by banks and registered investment advisers, the minimum initial
purchase is $300 and the minimum subsequent purchase is $100. Any order may be
rejected by the Distributor of the Money Fund.
Merrill Lynch Funds Distributor, Inc., an affiliate of both the Investment
Manager and of Merrill Lynch, acts as the Distributor of the shares of the Money
Fund. Shares may be purchased directly from securities dealers with whom the
Distributor has entered into selected dealer agreements. Dealer agreements will
be entered into with securities dealers that have securities clearing
arrangements or some other business relationship with Broadcort.
METHODS OF PAYMENT
PAYMENT THROUGH SECURITIES DEALERS. Investments in the Money Fund may be
made through securities dealers who have dealer arrangements with the
Distributor. In such a case, the dealer will transmit payment to the Money Fund
on behalf of the investor and will supply the Money Fund with the required
account information. If the investor can provide his dealer with immediately
available funds, the dealer will be able to transmit such funds to the Money
Fund in an expeditious manner. Since there is a five-day settlement period
applicable to the sale of most securities, delays may occur when an investor is
liquidating other investments for investment in the Money Fund.
PAYMENT BY WIRE. An expeditious method for existing shareholders to invest
in the Money Fund is through the transmittal of Federal Funds by wire to the
Transfer Agent. The Money Fund will not be responsible for delays in the wiring
system. To purchase shares by wiring Federal Funds, payments should be wired to
First Union Bank of Florida. Shareholders should give their financial
institutions the following wiring instructions: ABA #063000021, DDA
#2112600061186, Financial Data Services, Inc. The wire should be identified as
payment to Summit Cash Reserves Fund and should include the shareholder's name
and account number. Failure to submit the required information may delay
investment. Investors are urged to make payment by wire in Federal Funds.
PAYMENT TO THE TRANSFER AGENT. Existing shareholders may also invest in the
Money Fund by check which may be submitted directly by mail or otherwise to the
Transfer Agent. Such purchase orders which are sent by mail should be sent to
Financial Data Services, Inc., Transfer Agency Money Market Operations, P.O. Box
45290, Jacksonville, Florida 32232-5290. Purchase orders which are delivered by
hand must be delivered directly to Financial Data Services, Inc., Transfer
Agency Money Market Operations, 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484. Existing shareholders should enclose the detachable stub from a
monthly account statement or confirmation which they have received. Checks
should be made payable to Merrill Lynch Funds Distributor, Inc. Certified checks
are not necessary, but checks are accepted subject to collection at full face
value in United States funds and must be drawn in United States dollars on a
United States bank. Payments for the accounts of corporations, foundations and
other organizations may not be made by third party checks.
11
<PAGE>
REDEMPTION OF SHARES
The Trust is required to redeem for cash all full and fractional shares of
the Money Fund. The redemption price is the net asset value per share next
determined after receipt by the Transfer Agent of proper notice of redemption as
described in accordance with one of the procedures set forth below. If such
notice is received by the Transfer Agent by 4:00 P.M. on any day during which
the New York Stock Exchange or New York banks are open for business, the
redemption will be effective on such day and payment will be made on the next
business day. If the notice is received after 4:00 P.M., the redemption will be
effective on the next business day and payment will be made on the second
business day thereafter. Shareholders liquidating their holdings will receive
upon redemption all dividends declared and reinvested through the date of
redemption.
At various times the Trust may be requested to redeem shares of the Money
Fund for which good payment has not yet been received. The Trust may delay, or
cause to be delayed, the payment of redemption proceeds until such time as it or
its Transfer Agent has assured itself that good payment has been collected for
the purchase of such shares. In addition, the Trust reserves the right not to
honor redemption checks or requests for Federal Funds redemptions where the
Money Fund shares to be redeemed have been purchased by check within 10 days
prior to the date the redemption request is received by the Money Fund's
Transfer Agent unless the check used for investment has been cleared for payment
by the shareholder's bank.
METHODS OF REDEMPTION
Set forth below is information as to the five methods pursuant to which
shareholders may redeem shares. In certain instances, the Transfer Agent may
require additional documents in connection with redemptions.
REDEMPTION BY CHECK. Shareholders may redeem shares by check in an amount
not less than $500. At the shareholder's request, the Transfer Agent will
provide the shareholder with checks drawn on the custody account of the Money
Fund with its check-clearing bank, First Union National Bank of Florida. These
checks can be made payable to the order of any person in any amount not less
than $500. The payee of the check may cash or deposit the check. When such a
check is presented to the Transfer Agent for payment, the Transfer Agent will
present the check to the Trust as authority to redeem a sufficient number of
full and fractional shares in the shareholder's account to cover the amount of
the check. This enables the shareholder to continue earning daily dividends
until the check is cleared. Cancelled checks will be returned to the shareholder
by the Transfer Agent.
Shareholders will be subject to the Transfer Agent's rules and regulations
governing such checking accounts, including the right of the Transfer Agent not
to honor checks in amounts exceeding the value of the shareholder's account at
the time the check is presented for payment. The Trust or the Transfer Agent may
modify or terminate the redemption by check privilege at any time upon 30 days'
notice to participating shareholders. In order to be eligible for the redemption
by check privilege, purchasers should check the box under the caption "Check
Writing Privilege" on the Purchase Application. The Transfer Agent will then
send checks to the shareholder.
FEDERAL FUNDS REDEMPTION. Shareholders may also arrange to have redemption
proceeds of $5,000 or more wired in Federal Funds to a predesignated bank
account. In order to be eligible for Federal Funds
12
<PAGE>
redemption, the shareholder must designate on his Purchase Application the
domestic commercial bank and account number to receive the proceeds of his
redemption and must have his signature on the Purchase Application guaranteed.
The redemption request for Federal Funds redemption may be made by telephone,
wire or by letter (no signature guarantee required) to the Transfer Agent and,
if received by 4:00 P.M., the redemption proceeds will be wired to the
investor's predesignated bank account on the next business day. Shareholders may
effect notice of Federal Funds redemption by telephoning the Transfer Agent at
(800) 221-7210 toll-free. The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine; if it does not, the
Fund may be liable for any losses due to fraudulent or unauthorized
instructions. Among other things, redemption proceeds may only be wired into the
bank account designated on the Purchase Application. The investor must
independently verify this information at the time the redemption request is
made.
REPURCHASE THROUGH SECURITIES DEALERS. The Trust will repurchase shares of
the Money Fund through securities dealers. The Trust will normally accept orders
to repurchase shares by wire or telephone from dealers for their customers at
the net asset value next computed after receipt of the order from the dealer,
provided that such request for repurchase is received from the dealer prior to
4:00 P.M. on any business day. These repurchase arrangements are for the
convenience of shareholders and do not involve a charge by the Trust; however,
dealers may impose a charge on the shareholder for transmitting the notice of
repurchase to the Trust. The Trust reserves the right to reject any order for
repurchase through a securities dealer, but it may not reject properly submitted
requests for redemption as described below. The Trust will promptly notify any
shareholder of any rejection of a repurchase with respect to shares of the Money
Fund. For shareholders requesting repurchases through their securities dealer,
payment will be made by the Transfer Agent to the dealer.
REGULAR REDEMPTION. A shareholder may also redeem shares by submitting a
written notice of redemption directly to the Transfer Agent, Financial Data
Services, Inc., Transfer Agency Money Market Operations, P.O. Box 45290,
Jacksonville, Florida 32232-5290. Redemption requests delivered other than by
mail should be delivered to Financial Data Services, Inc., Transfer Agency Money
Market Operations, 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484.
Redemption requests should not be sent to the Trust. The notice requires the
signature of all persons in whose name the shares are registered, signed exactly
as their names appear on the Transfer Agent's register. The signatures on the
notice must be guaranteed by a national bank or other bank which is a member of
the Federal Reserve System (not a savings bank) or by a member firm of any
national or regional stock exchange. Notarized signatures are not sufficient.
AUTOMATIC REDEMPTION. Broadcort carries securities accounts and performs
clearing services for certain securities dealers selling shares of the Money
Fund. Broadcort has instituted an automatic redemption procedure applicable to
shareholders of the Money Fund whose securities accounts are carried and
serviced by Broadcort. This procedure, which is not applicable to margin
accounts, may be utilized by Broadcort to satisfy amounts due from the
shareholder as a result of purchases of securities or other transactions in the
shareholder's securities account. Under this procedure, unless the shareholder
notifies his securities dealer to the contrary, the shareholder's securities
account carried and serviced by Broadcort will be scanned each business day
prior to 4:00 P.M.; after application of any cash balances in the account, a
sufficient number of Money Fund shares may be redeemed at the 4:00 P.M. pricing
that day to satisfy any amounts for which the shareholder is obligated to make
payment to Broadcort. Redemptions will be effected on the business day
13
<PAGE>
preceding the date the shareholder is obligated to make such payment, and
Broadcort will receive the redemption proceeds on the day following the
redemption date. Shareholders will receive all dividends declared and reinvested
through the date of redemption.
-------------------
Due to the relatively high cost of maintaining accounts of less than $1,000,
the Trust reserves the right to redeem Money Fund shares in any account for
their then current value (which will be promptly paid to the shareholder) if at
any time the total investment does not have a value of at least $1,000, except
that the Trust may not involuntarily redeem Money Fund shares in accounts where
minimums lower than $1,000 are applicable. Shareholders will be notified that
the value of their account is less than $1,000 and allowed two months to make an
additional investment before the redemption is processed. In such event, the
$1,000 minimum on subsequent investments will not be applicable.
Shares are redeemable at the option of the Trust, if, in the opinion of the
Trust, ownership of the shares has or may become concentrated to an extent which
would cause the Trust to be deemed a personal holding company within the meaning
of the Internal Revenue Code.
SHAREHOLDER SERVICES
The Trust offers a number of shareholder services described below designed
to facilitate investment in shares of the Money Fund. Certain of such services
are not available to investors who place purchase orders for the Money Fund's
Shares through the Merrill Lynch Blueprint-SM- Program. Full details as to each
of such services and copies of the various plans described below can be obtained
from the Trust.
INVESTMENT ACCOUNT
Every shareholder has an Investment Account and will receive monthly reports
showing the activity in his account since the preceding statement. A shareholder
may make additions to his Investment Account at any time by purchasing shares at
the applicable public offering price through his securities dealer, by wire or
by mail directly to the Transfer Agent, acting as agent for his dealer. A
shareholder may ascertain the number of shares in his Investment Account by
telephoning the Transfer Agent at (800) 221-7210 toll-free. The Transfer Agent
will furnish this information only after the shareholder has specified the name,
address, account number and social security number of the registered owner or
owners.
ACCRUED MONTHLY PAYOUT PLAN
Shareholders desiring their dividends in cash may enroll in this plan and
receive monthly cash payments resulting from the redemption of the shares
received on dividend reinvestments during the month.
SYSTEMATIC WITHDRAWAL AND AUTOMATIC INVESTMENT PLANS
A shareholder may elect to receive systematic withdrawal checks from his
Investment Account on either a monthly or quarterly basis. Regular additions may
be made to an investor's Investment Account by pre-arranged charges to his
regular bank account at a minimum of $50 per month.
RETIREMENT PLANS
Merrill Lynch offers customers of securities dealers offering shares of the
Money Fund three types of self-directed retirement plans for which it acts as
passive custodian ("Retirement Plans"). Information
14
<PAGE>
concerning the establishment and maintenance of Retirement Plans and investments
by Retirement Plan accounts is contained in the Retirement Plan documents
available from the securities dealers offering Money Fund shares to their
customers. Information concerning purchases and redemptions of Money Fund shares
by participants in the Retirement Plans is set forth in the Statement of
Additional Information.
PORTFOLIO TRANSACTIONS
The money market securities in which the Money Fund invests are traded
primarily in the over-the-counter market. Where possible, the Money Fund will
deal with the dealers who make a market in the securities involved except in
those circumstances where better prices and execution are available elsewhere.
Such dealers usually are acting as principal for their own account. On occasion,
securities may be purchased directly from the issuer. Money market securities
generally are traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. The cost of executing portfolio securities
transactions of the Money Fund will primarily consist of dealer spreads and
underwriting commissions. Under the 1940 Act, persons affiliated with the Trust
are prohibited from dealing with the Trust as principal in the purchase and sale
of securities unless an exemptive order allowing such transactions is obtained
from the Securities and Exchange Commission. An affiliated person of the Trust
may serve as its broker in over-the-counter transactions conducted on an agency
basis. The Securities and Exchange Commission has issued an exemptive order
permitting the Trust to conduct certain principal transactions with Merrill
Lynch Government Securities Inc. and Merrill Lynch Money Markets Inc. subject to
certain terms and conditions. During the year ended May 31, 1994, the Money Fund
engaged in 12 such transactions aggregating approximately $22.8 million.
ADDITIONAL INFORMATION
DIVIDENDS
Dividends are declared and reinvested daily in the form of additional shares
at net asset value. Shareholders will receive statements monthly as to such
reinvestments. Shareholders liquidating their holdings will receive upon
redemption all dividends declared and reinvested through the date of redemption.
Since the net income (including realized gains and losses on the portfolio
assets) is declared as a dividend in shares each time the net income of the
Money Fund is determined, the net asset value per share of the Money Fund
normally remains constant at $1.00 per share.
Net income (from the time of the immediately preceding determination
thereof) consists of (i) interest accrued and/or discount earned (including both
original issue and market discount), (ii) plus or minus all realized gains and
losses on portfolio securities, (iii) less the estimated expenses of the Money
Fund applicable to that dividend period.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Money Fund is determined by the Investment
Manager once daily, immediately after the daily declaration of dividends, as of
4:00 P.M. on each day during which the New York Stock Exchange or New York banks
are open for business. The Money Fund will also determine its net asset value on
any day on which there is sufficient trading of its portfolio securities such
that the net asset value might be materially affected, but only if on such day
the Money Fund is required to sell and redeem shares. The net
15
<PAGE>
asset value is determined pursuant to the "penny-rounding" method by adding the
fair value of all securities and other assets in the portfolio, deducting the
portfolio's liabilities and dividing by the number of shares outstanding. The
result of this computation will be rounded to the nearest whole cent. Securities
with remaining maturities of greater than 60 days for which market quotations
are readily available will be valued at market value. Securities with remaining
maturities of 60 days or less will be valued on an amortized cost basis, I.E.,
by valuing the instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market values of the instrument. Other
securities held by the Money Fund will be valued at their fair value as
determined in good faith by or under direction of the Board of Trustees.
TAXES
The Trust intends to continue to qualify the Money Fund for the special tax
treatment afforded regulated investment companies ("RICs") under the Internal
Revenue Code of 1986, as amended (the "Code"). If it so qualifies, the Money
Fund (but not its shareholders) will not be subject to Federal income tax on the
part of its net ordinary income and net realized capital gains which it
distributes to shareholders. The Trust intends to cause the Money Fund to
distribute substantially all of such income.
Dividends paid by the Money Fund from its ordinary income and distributions
of the Money Fund's net realized short-term capital gains (together referred to
hereafter as "ordinary income dividends") are taxable to shareholders as
ordinary income. Distributions made from the Money Fund's net realized long-term
capital gains ("capital gain dividends") are taxable to shareholders as
long-term capital gains, regardless of the length of time the shareholder has
owned Money Fund shares. Distributions in excess of the Money Fund's earnings
and profits will first reduce the adjusted tax basis of a holder's shares and,
after such adjusted tax basis is reduced to zero, will constitute capital gains
to such holder (assuming the shares are held as a capital asset).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Money Fund. Not later than 60 days after the close of
its taxable year, the Trust will provide shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. Distributions by the Money Fund, whether from ordinary income or
capital gains, will not be eligible for the dividends received deduction allowed
to corporations under the Code. If the Money Fund pays a dividend in January
which was declared in the previous October, November or December to shareholders
of record on a specified date in one of such months, then such dividend will be
treated for tax purposes as being paid by the Money Fund and received by its
shareholders on December 31 of the year in which the dividend was declared.
If the value of assets held by the Money Fund declines, the Trustees may
authorize a reduction in the number of outstanding shares in shareholders'
accounts so as to preserve a net asset value of $1.00 per share. After such a
reduction, the basis of eliminated shares would be added to the basis of
shareholders' remaining Money Fund shares, and any shareholders disposing of
shares at that time may recognize a capital loss. Distributions, including
distributions reinvested in additional shares of the Money Fund, will
nonetheless be fully taxable, even if the number of shares in shareholders'
accounts has been reduced as described above.
Ordinary income dividends paid by the Money Fund to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% United States
withholding tax under existing provisions of the Code
16
<PAGE>
applicable to foreign individuals and entities unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Nonresident shareholders are urged to consult their own tax advisors concerning
the applicability of the United States withholding tax.
Dividends and interest received by the Money Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes.
Under certain provisions of the Code, some taxpayers may be subject to a 31%
withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Trust or who, to the Trust's knowledge, have
furnished an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that such
investor is not otherwise subject to backup withholding.
A loss realized on a sale or exchange of shares of the Money Fund will be
disallowed if other Money Fund shares are acquired (whether through the
automatic reinvestment of dividends or otherwise) within a 61-day period
beginning 30 days before and ending 30 days after the date that the shares are
disposed of. In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action either
prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state and
local taxes.
Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on United States Government obligations. State
law varies as to whether dividend income attributable to United States
Government obligations is exempt from state income tax.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in the
Money Fund.
ORGANIZATION OF THE TRUST
The Trust was organized July 10, 1987 under the laws of the Commonwealth of
Massachusetts. The Trust is a successor to a Massachusetts business trust of the
same name organized May 28, 1981. It is a no-load, diversified open-end
investment company which is comprised of separate series ("Series"), each of
which is a separate portfolio offering a separate class of shares to selected
groups of purchasers. The Declaration of Trust permits the Trustees to create an
unlimited number of Series and, with respect to each Series, to issue an
unlimited number of full and fractional shares of a single class. All shares
have equal voting rights, except that only shares of the respective Series are
entitled to vote on matters concerning only that Series. Each issued and
outstanding share is entitled to one vote and to participate equally in
dividends and distributions declared by the respective Series and in net assets
of such Series upon liquidation or dissolution remaining after satisfaction of
outstanding liabilities. In the event a Series were unable to meet
17
<PAGE>
its obligations, the remaining Series would assume the unsatisfied obligations
of that Series. The shares of each Series, when issued, will be fully-paid and
non-assessable by the Trust. At the date of this Prospectus, the Money Fund is
the only Series of the Trust.
The Declaration does not require that the Trust hold an annual meeting of
shareholders. However, the Trust will be required to call special meetings of
shareholders in accordance with the requirements of the 1940 Act to seek
approval of new management and advisory arrangements, of a material increase in
distribution fees or of a change in the fundamental policies, objectives or
restrictions of the Money Fund or the Trust. The Trust also would be required to
hold a special shareholders' meeting to elect new Trustees at such time as less
than a majority of the Trustees holding office have been elected by
shareholders. The Declaration provides that a shareholders' meeting may be
called for any reason at the request of 10% of the outstanding shares of any
Series of the Trust or by a majority of the Trustees. Except as set forth above,
the Trustees shall continue to hold office and appoint successor Trustees.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Money Fund at the address or
telephone number set forth on the cover page of this Prospectus.
SHAREHOLDER REPORTS
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
copies of each report and communication for all of the shareholder's related
accounts the shareholder should notify:
Financial Data Services, Inc.
Attn: TAMMO
P.O. Box 45290
Jacksonville, FL 32222-5290
The notification should include the shareholder's name, address, tax
identification number and Merrill Lynch, Pierce, Fenner & Smith Incorporated
and/or mutual fund account numbers. If you have any questions regarding this
please call your Merrill Lynch financial consultant or Financial Data Services,
Inc. at 800-221-7210.
-------------------
The Declaration of Trust establishing the Trust, dated July 10, 1987, a copy
of which, together with all amendments thereto (the "Declaration"), is on file
in the office of the Secretary of the Commonwealth of Massachusetts, provides
that the name "Financial Institutions Series Trust" refers to the Trustees under
the Declaration collectively as Trustees, but not as individuals or personally;
and no trustee, shareholder, officer, employee or agent of the Trust shall be
held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim of said Trust but the
"Trust Estate" only shall be liable.
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SUMMIT CASH RESERVES FUND Purchase Application
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<TABLE>
<S> <C>
INSTRUCTIONS Send this completed FINANCIAL DATA SERVICES, INC.,
form to: Transfer Agency Mutual Fund
Operations,
P.O. Box 45289, Jacksonville, Florida
32232-5289
</TABLE>
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1. TO REGISTER SHARES THE ACCOUNT SHOULD BE REGISTERED AS FOLLOWS:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Please print
except for
signatures) --------------------------------------------------------------------------------
Print Applicant's Name. For clarity, please skip a space between names.
------------------------------------
Social Security No. or Tax ID No.
------------------------------------------------------------------------------------------------
Print Joint Registrant's Name, if any. In case of joint registration, a joint tenancy with right
of survivorship will be presumed, unless otherwise indicated.
</TABLE>
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Street Address City State Zip Code
</TABLE>
<TABLE>
<S> <C>
- ------------------------------------------ ------------------------------------------------------------
Occupation Name and Address of Employer
------------------------------------------------------------
------------------------------------------------------------
Amount of Investment $
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
Please make any check payable to Merrill Lynch Funds
Distributor, Inc. Home Phone No. (Include Area Code) Business Phone No.
</TABLE>
- --------------------------------------------------------------------------------
2. CHECK REDEMPTION PRIVILEGE (SEE TERMS AND CONDITIONS IN THE PROSPECTUS AND
REVERSE SIDE)
<TABLE>
<S> <C>
/ / I hereby request and authorize Financial Data Services, Inc. (the
Check box "Transfer Agent") to honor checks drawn by me on my Summit Cash
(if desired) Reserves Fund (the "Money Fund") account subject to acceptance by
the Money Fund, with payment therefor to be made by redeeming
sufficient shares in my account without a signature guarantee.
The Transfer Agent and the Money Fund do hereby reserve all their
lawful rights for honoring checks drawn by me and for effecting
redemptions pursuant to the Check Redemption Privilege. I
understand that this election does not create a checking or other
bank account relationship between myself and the Transfer Agent
or the Money Fund and that the relationship between myself and
the Transfer Agent is that of shareholder-transfer agent.
FOR JOINT ACCOUNT: CHECK HERE WHETHER EITHER OWNER / / IS
AUTHORIZED, OR ALL OWNERS / / ARE REQUIRED TO SIGN CHECKS.
</TABLE>
- --------------------------------------------------------------------------------
3. FEDERAL FUNDS REDEMPTION (SEE TERMS AND CONDITIONS IN THE PROSPECTUS)
<TABLE>
<S> <C>
/ / The undersigned hereby authorizes and directs Financial Data
Check box Services, Inc. (the "Transfer Agent") to act on telephone,
(if desired) telegraphic or other instructions (without signature guarantee)
from any person representing himself to be either the investor or
any authorized representative of the investor, directing
redemption of shares in an amount of $5,000 or more of Summit
Cash Reserves Fund (the "Money Fund") held by the Transfer Agent
on behalf of the undersigned, and to transmit the proceeds by
wire only to the bank account designated below.
Any change in the bank account designated to receive redemption
proceeds shall require a signature guarantee. The investor(s)
understand and agree that the Money Fund and the Transfer Agent
reserve the right to refuse any instructions.
The Transfer Agent requires additional documentation from
corporations, partnerships, trustees and similar institutional
investors in addition to this authorization.
Absent its own negligence, including failure to employ reasonable
procedures to confirm the validity of telephoned instructions,
neither Summit Cash Reserves Fund nor Financial Data Services,
Inc. shall be liable for any redemption caused by unauthorized
instructions. Investors may effect notice of this type of
redemption by telephoning the Transfer Agent at the toll-free
number (800) 637-3863. Shares which are being repurchased through
securities dealers will not qualify for Federal Funds redemption.
</TABLE>
FILL OUT THE REST OF THIS SPACE ONLY IF THE ABOVE BOX IS CHECKED. IN ADDITION,
YOUR SIGNATURE(S) MUST BE GUARANTEED. YOUR BANK MUST BE A MEMBER OF THE FEDERAL
RESERVE OR HAVE A CORRESPONDENT BANKING RELATION WITH A BANK THAT DOES BELONG TO
THE FEDERAL RESERVE.
<TABLE>
<S> <C> <C> <C>
ENCLOSE A SPECIMEN COPY OF YOUR PERSONAL CHECK (MARKED "VOID")
FOR THE BANK IF YOUR BANK IS NOT A MEMBER OF THE FEDERAL RESERVE:
ACCOUNT LISTED BELOW.
--------------------------------------------------------------
IF YOUR BANK IS A MEMBER OF THE FEDERAL RESERVE: Correspondent Bank Name Bank Routing Code
- -------------------------------------------------------------- --------------------------------------------------------------
Your Bank Name Bank Routing Code Your Bank Name Bank Routing Code
- -------------------------------------------------------------- --------------------------------------------------------------
Your Account Name Your Account Number Your Account Name Your Account Number
- -------------------------------------------------------------- --------------------------------------------------------------
Address of Bank City State Zip Your Bank Address City State Zip
Code Code
</TABLE>
- --------------------------------------------------------------------------------
4. AUTOMATIC INVESTMENT PLAN PRIVILEGE (SEE TERMS AND CONDITIONS IN THE
STATEMENT OF ADDITIONAL INFORMATION)
/ / Check this box only if you wish to have an Authorization Form sent to you.
19
<PAGE>
- --------------------------------------------------------------------------------
5. SYSTEMATIC WITHDRAWAL PLAN (SEE TERMS AND CONDITIONS IN THE STATEMENT OF
ADDITIONAL INFORMATION)
Minimum Requirements: $10,000 for monthly disbursement, $5,000 for quarterly, of
shares in Summit Cash Reserves Fund at cost or current offering price. In
addition, your signature(s) must be guaranteed. This option is available only if
you do not check No. 6.
<TABLE>
<S> <C>
The undersigned hereby authorizes and directs Financial Data
Services, Inc.
on (check only one) payable to the order of (check only one)
/ / the 24th of each month / / the registered owner as indicated in item 1 hereinabove.
/ / March 24, June 24, September 24 and December 24 / / (other)
/ / to redeem a sufficient number of shares in my account Such check shall be mailed to (check only one)
to generate redemption proceeds of $ ; or / / the address indicated in item 1 herein above.
/ / to redeem % of the Shares in my account on such date / / the following name and address:
and pay the redemption proceeds by check ------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6. ACCRUED MONTHLY PAYOUT PLAN (SEE TERMS AND CONDITIONS IN THE STATEMENT OF
ADDITIONAL INFORMATION)
Check box The undersigned hereby authorizes and directs Financial Data
(if desired) Services, Inc. to redeem as of the last Friday of each month all
/ / shares purchased during such month through reinvestment of
dividends and distributions and send the proceeds to me.
- --------------------------------------------------------------------------------
7. OTHER INFORMATION
This application enables you to take advantage of any or all of the optional
services available to Summit Cash Reserves Fund shareholders and will update any
options in effect for your account.
If you select the Check Redemption Privilege, a supply of checks imprinted with
your name and shareholder account number will be sent to you in approximately 10
days. You should be certain that a sufficient number of shares are held by the
Transfer Agent for your account to cover the amount of any check drawn by you.
If insufficient shares are in the account, the check will be returned marked
insufficient funds. Since the dollar value of your account is constantly
changing, the total value of your account cannot be determined in advance and
the account cannot be entirely redeemed by check. If the Check Redemption
Privilege is being requested for an account in the name of a corporation or
other institution, the following additional documents must be submitted with
this authorization.
CORPORATION--"Certification of Corporate Resolution," indicating the names and
titles of officers authorized to write checks, must be signed by an officer
OTHER than one empowered to execute transactions, with his signature guaranteed
and with the corporate seal affixed.
PARTNERSHIPS--"Certificate of Partnership," naming the partners and the required
number that may act in accordance with the terms of the Partnership Agreement,
is to be executed by a general partner with his signature guaranteed.
TRUSTS--"Certification of Trustees," naming the trustees and the required number
that may act in accordance with the terms of the Trust Agreement, must be
executed by a certifying trustee with his signature guaranteed and under the
corporate seal.
If you are adding or reinstating the Federal Funds Redemption option, the
signature must be guaranteed in the space provided below. Your signature(s) must
be guaranteed by a commercial bank (not a savings bank) in New York City or one
having a New York City correspondent, or by a member firm of any national
securities exchange. (A Notary Public's seal does not constitute a signature
guarantee.)
- --------------------------------------------------------------------------------
8. SIGNATURES
Under penalty of perjury, I certify (1) that the number set forth above is my
correct Social Security No. or Taxpayer Identification No. and (2) that I am not
subject to backup withholding (as discussed in the Prospectus under "Additional
Information--Taxes") either because I have not been notified that I am subject
thereto as a result of a failure to report all interest or dividends, or the
Internal Revenue Service ("IRS") has notified me that I am no longer subject
thereto.
INSTRUCTIONS: You must strike out the language in (2) above if you have been
notified that you are subject to backup withholding due to underreporting and
you have not received a notice from the IRS that backup withholding has been
terminated.
By the execution of this Purchase Application, the investor represents and
warrants that the investor has full right, power and authority to make the
investment applied for pursuant to this Application, and the person or persons
signing on behalf of the investor represent and warrant that they are duly
authorized to sign this Application and to purchase or redeem shares of Summit
Cash Reserves Fund on behalf of the investor.
The investor hereby affirms that he has received a current Prospectus of Summit
Cash Reserves Fund and appoints Financial Data Services, Inc. as his agent to
receive dividends and distributions for their automatic reinvestment in
additional shares of Summit Cash Reserves Fund.
<TABLE>
<S> <C> <C>
Signature of Investor Date Signature of Joint Registrant, if any
</TABLE>
Signature(s) Guaranteed (only for those electing No. 3 or No. 5):
<TABLE>
<C> <S>
NOTE: The Guarantor must be either a
U.S. commercial bank (not a savings
bank) or a trust company in New York
By: City or one that is a correspondent of a
(Authorized Signatory) New York City commercial bank or trust
company, or a member of a national
securities exchange. (A notary public's
seal does not constitute a signature
guarantee.)
</TABLE>
- --------------------------------------------------------------------------------
9. FOR DEALERS AND ADVISERS
/ / Dealer / / Investment Adviser _____________________________________________
Name
________________________________________________________________________________
Street City State Zip
________________________________________________________________________________
If Dealer--Fill A/E's Name A/E's No. Customer Account Number
20
<PAGE>
INVESTMENT MANAGER
Fund Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
ADMINISTRATOR
Broadcort Capital Corp.
100 Church Street
New York, New York 10007
CUSTODIAN
The Bank of New York
90 Washington Street
12th Floor
New York, New York 10286
TRANSFER AGENT
Financial Data Services, Inc.
Administrative Offices:
Transfer Agency Money Market Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45290
Jacksonville, Florida 32232-5290
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
COUNSEL
Brown & Wood
One World Trade Center
New York, New York 10048-0557
<PAGE>
- -----------------------------------------
-----------------------------------------
- -----------------------------------------
-----------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST, THE INVESTMENT MANAGER, THE ADMINISTRATOR
OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Fee Table..................................... 2
Financial Highlights.......................... 3
Yield Information............................. 4
Investment Objectives and Policies............ 4
Management of the Trust....................... 8
Trustees.................................... 8
Management and Advisory Arrangements........ 9
Transfer Agency Services.................... 10
Purchase of Shares............................ 10
Redemption of Shares.......................... 12
Shareholder Services.......................... 14
Portfolio Transactions........................ 15
Additional Information........................ 15
Dividends................................... 15
Determination of Net Asset Value............ 15
Taxes....................................... 16
Organization of the Trust................... 17
Shareholder Inquiries....................... 18
Shareholder Reports......................... 18
Purchase Application.......................... 19
</TABLE>
Prospectus
- ------------------------
Summit Cash
Reserves Fund
FINANCIAL INSTITUTIONS SERIES TRUST
FINANCIAL INSTITUTIONS SERIES TRUST IS ORGANIZED AS A MASSACHUSETTS BUSINESS
TRUST. IT IS NOT A BANK NOR DOES IT OFFER FIDUCIARY OR TRUST SERVICES. SHARES
OF SUMMIT CASH RESERVES FUND ARE NOT EQUIVALENT TO A BANK ACCOUNT. AS WITH ANY
INVESTMENT IN SECURITIES, THE VALUE OF A SHAREHOLDER'S INVESTMENT IN THE MONEY
FUND MAY FLUCTUATE. A SHAREHOLDER'S INVESTMENT IN THE MONEY FUND IS NOT
INSURED BY ANY GOVERNMENT AGENCY.
Principal Office of the Trust:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
This Prospectus should be
retained for future reference.
September 28, 1994
- -----------------------------------------
-----------------------------------------
- -----------------------------------------
-----------------------------------------
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
SUMMIT CASH RESERVES FUND
FINANCIAL INSTITUTIONS SERIES TRUST
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 PHONE NUMBER (609) 282-2800
The investment objectives of the Summit Cash Reserves Fund (the "Money
Fund") are to seek current income, preservation of capital and liquidity
available from investing in a diversified portfolio of short-term money market
securities. These securities will primarily consist of U.S. Government and
Government agency securities, bank certificates of deposit and bankers'
acceptances, commercial paper and repurchase agreements. For purposes of its
investment policies, the Money Fund defines short-term money market securities
as having a maturity of no more than 762 days (25 months) in the case of U.S.
Government and Government agency securities and no more than 397 days (13
months) in the case of other securities. There can be no assurance that the
investment objectives of the Money Fund will be realized. The Money Fund is a
separate series of Financial Institutions Series Trust (the "Trust"), a no-load,
diversified, open-end investment company organized as a Massachusetts business
trust.
-------------------
Shares of the Money Fund are being offered by certain securities dealers
which have entered into securities clearing arrangements or have other business
relationships with Broadcort Capital Corp.
-------------------
This Statement of Additional Information of the Money Fund is not a
prospectus and should be read in conjunction with the Prospectus of the Money
Fund, dated September 28, 1994 (the "Prospectus"), which has been filed with the
Securities and Exchange Commission and can be obtained, without charge, by
calling or by writing the Money Fund at the above telephone number or address.
This Statement of Additional Information has been incorporated by reference into
the Prospectus.
-------------------
The date of this Statement of Additional Information is September 28, 1994.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Money Fund are to seek current income,
preservation of capital and liquidity available from investing in a diversified
portfolio of short-term money market securities. Reference is made to
"Investment Objectives and Policies" in the Prospectus for a discussion of the
investment objectives and policies of the Money Fund.
As discussed in the Prospectus, the Money Fund may invest in money market
securities pursuant to repurchase agreements. Repurchase agreements may be
entered into only with a member bank of the Federal Reserve System or primary
dealer in U.S. Government securities or an affiliate thereof. Under such
agreements, the bank or primary dealer agrees, upon entering into the contract,
to repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the term of the agreement. This results in a fixed
rate of return insulated from market fluctuations during such period. Such
agreements usually cover short periods, such as under one week. The Money Fund
will require the seller to provide additional collateral if the market value of
the securities falls below the repurchase price at any time during the term of
the repurchase agreement. In the event of a default by the seller, the Money
Fund ordinarily will retain ownership of the securities underlying the
repurchase agreement, and instead of a contractually fixed rate of return, the
rate of return to the Money Fund shall be dependent upon intervening
fluctuations of the market value of such securities and the accrued interest on
the securities. In such event, the Money Fund would have rights against the
seller for breach of contract with respect to any losses arising from market
fluctuations following the failure of the seller to perform. In certain
circumstances, repurchase agreements may be construed to be collateralized loans
by the purchaser to the seller secured by the securities transferred to the
purchaser. In the event of default by the seller under a repurchase agreement
construed to be a collateralized loan, the underlying securities are not owned
by the Money Fund but only constitute collateral for the seller's obligation to
pay the repurchase price. Therefore, the Money Fund may suffer time delays and
incur costs or possible losses in connection with the disposition of the
collateral. From time to time the Money Fund also may invest in money market
securities pursuant to purchase and sale contracts. While purchase and sale
contracts are similar to repurchase agreements, purchase and sale contracts are
structured so as to be in substance more like a purchase and sale of the
underlying security than is the case with repurchase agreements.
Also, as discussed in the Prospectus, the Money Fund may invest in
obligations issued by commercial and savings banks and savings and loan
associations. The obligations of commercial banks may be issued by U.S. banks,
foreign branches or subsidiaries of U.S. banks ("Eurodollar" obligations) or
U.S. branches of foreign banks ("Yankeedollar" obligations). Yankeedollar
obligations may be general obligations of the parent bank or may be limited to
the issuing branch by the terms of the specific obligations or by government
regulation.
Eurodollar and Yankeedollar obligations may involve additional investment
risks from the risks of obligations of U.S. banks. Such investment risks include
adverse political and economic developments, the possible imposition of
withholding taxes on interest income payable on such obligations, the possible
seizure or nationalization of foreign deposits and the possible establishment of
exchange controls or other foreign governmental laws or restrictions which might
adversely affect the payment of principal and interest. Generally the issuers of
such obligations are subject to fewer U.S. regulatory requirements than are
applicable to U.S. banks. Foreign branches or subsidiaries of U.S. banks may be
subject to less stringent
2
<PAGE>
reserve requirements than U.S. banks. U.S. branches or subsidiaries of foreign
banks are subject to the reserve requirements of the state in which they are
located. There may be less publicly available information about a U.S. branch or
subsidiary of a foreign bank than about a U.S. bank, and such branches or
subsidiaries may not be subject to the same accounting, auditing and financial
recordkeeping standards and requirements as U.S. banks. Evidence of ownership of
Eurodollar obligations may be held outside of the United States, and the Money
Fund may be subject to risks associated with the holding of such property
overseas. Eurodollar obligations of the Money Fund held overseas will be held by
foreign branches of the Money Fund's custodian for the Trust's portfolio
securities or by other U.S. or foreign banks under subcustodian arrangements
complying with the requirements of the Investment Company Act of 1940 (the "1940
Act").
The Investment Manager will carefully consider the above factors in making
investments in Yankeedollar obligations. Generally the Money Fund will limit its
Yankeedollar investments to obligations of banks organized in Canada, France,
Germany, Japan, the Netherlands, Switzerland, the United Kingdom and other
western industrialized nations.
The Money Fund's investments in short-term corporate, partnership or other
debt and bank money instruments will be rated, or will be issued by issuers who
have been rated, in one of the two highest rating categories for short-term debt
obligations by a nationally recognized statistical rating organization (an
"NRSRO") or, if not rated, will be of comparable quality as determined by the
Trustees of the Money Fund. The Money Fund's investments in corporate,
partnership and trust bonds and debentures (which must have maturities at the
date of purchase of 397 days (13 months) or less) will be in issuers who have
received from the requisite NRSROs a rating with respect to a class of
short-term debt obligations that is comparable in priority and security with the
investment in one of the two highest rating categories for short-term
obligations or if not rated, will be of comparable quality as determined by the
Trustees of the Money Fund. Currently, there are six NRSROs: Duff & Phelps Inc.,
Fitch Investors Service, Inc., IBCA Limited and its affiliate IBCA Inc.,
Thompson Bankwatch, Inc., Moody's Investors Service, Inc. and Standard & Poor's
Corporation. See "Appendix--Description of Commercial Paper, Bank Money
Instruments and Corporate Bond Ratings."
In addition to the investment restrictions set forth in the Prospectus, the
Trust has adopted the following restrictions and policies relating to the
investment of the assets and activities of the Money Fund, which are fundamental
policies and may not be changed without approval of the holders of a majority of
the Money Fund's outstanding voting securities (which for this purpose means the
lesser of (i) 67% of the shares represented at a meeting at which more than 50%
of the outstanding shares are represented or (ii) more than 50% of the
outstanding shares). The Money Fund may not (1) make investments for the purpose
of exercising control or management; (2) underwrite securities issued by other
persons; (3) purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization; (4)
purchase or sell real estate (other than money market securities secured by real
estate or interests therein or money market securities issued by companies which
invest in real estate or interests therein), commodities or commodity contracts,
interests in oil, gas or other mineral exploration or development programs; (5)
purchase any securities on margin, except for use of short-term credit necessary
for clearance of purchases and sales of portfolio securities; (6) make short
sales of securities or maintain a short position or write, purchase or sell
puts, calls, straddles, spreads or combinations thereof; (7) make loans to other
persons, provided that the Money Fund may purchase money market securities or
enter into repurchase
3
<PAGE>
agreements or purchase and sale contracts; (8) borrow amounts in excess of 20%
of its total assets, taken at market value (including the amount borrowed), and
then only from banks as a temporary measure for extraordinary or emergency
purposes (the borrowing provisions shall not apply to reverse repurchase
agreements). [Usually only "leveraged" investment companies may borrow in excess
of 5% of their assets; however, the Money Fund will not borrow to increase
income but only to meet redemption requests which might otherwise require
untimely dispositions of portfolio securities. The Money Fund will not purchase
securities while borrowings are outstanding. Interest paid on such borrowings
will reduce net income.]; (9) mortgage, pledge, hypothecate or in any manner
transfer as security for indebtedness any securities owned or held by the Money
Fund except as may be necessary in connection with borrowings referred to in
investment restriction (8) above, and then such mortgaging, pledging or
hypothecating may not exceed 10% of the Money Fund's net assets, taken at market
value; (10) invest in securities for which no readily available market exists if
more than 10% of its net assets (taken at market value) would be invested in
such securities; (11) invest in securities with legal or contractual
restrictions on resale (except for repurchase agreements, purchase and sale
contracts or variable amount master demand notes) or in securities of issuers
(other than Government agency securities) having a record, together with
predecessors, of less than three years of continuous operation if, regarding all
such securities, more than 5% of its net assets (taken at market value) would be
invested in such securities; (12) invest in securities or investments referred
to in investment restrictions (10) and (11) above and investment restriction (5)
in the Prospectus if, regarding all such securities and investments, more than
10% of the Money Fund's total assets (taken at market value) would be invested
in such securities or investment; and (13) enter into reverse repurchase
agreements if, as a result thereof, the Money Fund's obligations with respect to
reverse repurchase agreements would exceed one-third of its net assets (defined
to be total assets, taken at market value, less liabilities other than reverse
repurchase agreements).
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Trust and their principal
occupations for at least five years are set forth below. Unless otherwise noted,
the address of each trustee and executive officer is Box 9011, Princeton, New
Jersey 08543-9011.
ARTHUR ZEIKEL -- PRESIDENT AND TRUSTEE (1)(2) -- President and Chief
Investment Officer of Fund Asset Management, L.P. (the "Investment Manager") or
its predecessor since 1977; President of Merrill Lynch Asset Management, L.P.
("MLAM") or its predecessor since 1977 and Chief Investment Officer thereof
since 1976; President and Director of Princeton Services, Inc. ("Princeton
Services") since 1993; Executive Vice President of Merrill Lynch & Co., Inc.
since 1990; Executive Vice President of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") since 1990 and a Senior Vice President thereof
from 1985 to 1990; Director of Merrill Lynch Funds Distributor, Inc. ("MLFD" or
the "Distributor").
JOE GRILLS -- TRUSTEE (2) -- 183 Soundview Lane, New Canaan, Connecticut
06840. Member of the Committee of Investment of Employee Benefit Assets of the
Financial Executives Institute ("CIEBA") since 1986; member of CIEBA's Executive
Committee since 1988 and its Chairman from 1991 to 1992; Assistant Treasurer of
International Business Machines Incorporated ("IBM") and Chief Investment
Officer of
4
<PAGE>
IBM Retirement Funds from 1986 until 1993, Member of the Investment Advisory
Committee of the State of New York Common Retirement Fund; Director, Duke
Management Company and Winthrop Financial Associates (real estate management).
WALTER MINTZ -- TRUSTEE (2) -- 1114 Avenue of the Americas, New York, New
York 10036. Special Limited Partner of Cumberland Associates (investment
partnership).
MELVIN R. SEIDEN -- TRUSTEE (2) -- 780 Third Avenue, New York, New York
10017. President of Silbanc Properties, Ltd. (real estate, investment and
consulting) since 1987; Chairman and President of Seiden & de Cuevas, Inc.
(private investment firm) from 1964 to 1987.
STEPHEN B. SWENSRUD -- TRUSTEE (2) -- 24 Federal Street, Boston,
Massachusetts 02110. Principal of Fernwood Associates (financial consultants);
Director, Hitchiner Manufacturing Company.
HARRY WOOLF -- TRUSTEE (2) -- The Institute for Avanced Study, Olden Lane,
Princeton, New Jersey 08540. Member of the editorial board of INTERDISCIPLINARY
SCIENCE REVIEWS; Director, Alex. Brown Mutual Funds; Advanced Technology
Laboratories, Family Health International and Spacelabs Medical (medical
equipment manufacturing and marketing).
TERRY K. GLENN -- EXECUTIVE VICE PRESIDENT (1)(2) -- Executive Vice
President of the Investment Manager and MLAM or their predecessors since 1983;
Executive Vice President and Director of Princeton Services since 1993;
President of Merrill Lynch Funds Distributor, Inc. (the "Distributor") since
1986 and Director thereof since 1991; President of Princeton Administrators,
L.P. since 1988.
DONALD C. BURKE -- VICE PRESIDENT (1)(2) -- Vice President and Director of
Taxation of the Investment Manager or its predecessor since 1990; Vice President
and Director of Taxation of MLAM since 1990; employee of Deloitte & Touche LLP
from 1982 to 1990.
CARL GIANNINI -- VICE PRESIDENT (1) -- Vice President of MLAM or its
predecessor since 1981.
JOSEPH T. MONAGLE -- VICE PRESIDENT (1)(2) -- Senior Vice President of the
Investment Manager and MLAM or their predecessors since 1990 and Vice President
of MLAM or its predecessor from 1978 to 1990.
GERALD M. RICHARD -- TREASURER (1)(2) -- Senior Vice President and Treasurer
of the Investment Manager and MLAM or their predecessors since 1984; Senior Vice
President and Treasurer of Princeton Services since 1993; Treasurer of the
Distributor since 1984 and Vice President thereof since 1981.
ROBERT HARRIS -- SECRETARY (1)(2) -- Vice President of MLAM or its
predecessor since 1984 and attorney associated with MLAM or its predecessor
since 1980; Secretary of the Distributor since 1982.
- ---------
(1) Interested person, as defined in the 1940 Act, of the Trust.
(2) Such Trustee or officer is a director or officer of certain other investment
companies for which the Investment Manager or MLAM acts as investment
adviser.
At September 2, 1994, the Trustees and officers of the Trust as a group (12
persons) owned an aggregate of less than 1/4 of 1% of the outstanding shares of
beneficial interest of the Trust. At such date, Mr. Zeikel, a Trustee of the
Trust and the other officers of the Trust, owned less than 1/4 of 1% of the
outstanding shares of Common Stock of Merrill Lynch & Co., Inc.
5
<PAGE>
Pursuant to the terms of its Investment Management Agreement (the
"Investment Management Agreement") with the Trust, the Investment Manager pays
all compensation of officers and employees of the Trust as well as the fees of
all Trustees of the Trust who are affiliated persons of Merrill Lynch & Co.,
Inc. or its subsidiaries. Until calendar year 1994, the Trust paid each
unaffiliated Trustee a fee of $5,000 per year plus $500 per meeting attended and
actual out-of-pocket expenses relating to attendance at such meetings. The Trust
also paid each member of the Audit Committee, which consists of the unaffiliated
Trustees, an annual fee of $1,000 plus a fee of $250 for each meeting of the
Audit Committee attended which is held on a day on which the Board of Trustees
does not meet, together with all out-of-pocket expenses relating to attendance
at such meeting. As of calendar year 1994, the Trust has paid each unaffiliated
Trustee a fee of $2,600 per year plus $250 for each board meeting attended,
together with actual out-of-pocket expenses relating to attendance at such
meetings, and Audit Committee members $800 per year plus $150 for each Committee
meeting attended. For the fiscal year ended May 31, 1994, these fees and
expenses aggregated $36,709.
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to "Management of the Trust--Management and Advisory
Arrangements" in the Prospectus for certain information concerning management
and advisory arrangements of the Trust.
Subject to the direction of the Trustees, the Investment Manager is
responsible for the actual management of the Money Fund and constantly reviews
the Money Fund's holdings in light of its own research analysis and that from
other relevant sources. The responsibility for making decisions to buy, sell or
hold a particular security rests with the Investment Manager, subject to review
by the Trustees. The Investment Manager also performs certain of the other
management services necessary for the operation of the Trust and the Money Fund,
including regulatory compliance, and provides all the office space, facilities,
equipment and necessary personnel for such services.
Securities held by the Money Fund may also be held by other funds for which
the Investment Manager or MLAM acts as an advisor or by investment advisory
clients of MLAM. Securities may be held by, or be appropriate investments for,
the Money Fund as well as other clients of the Investment Manager or MLAM.
Because of different objectives or other factors, a particular security may be
bought for one or more clients when one or more clients are selling the same
security. If purchases or sales of securities for the Money Fund or other
advisory clients arise for consideration at or about the same time, transactions
in such securities will be made, insofar as feasible, for the respective funds
and clients in a manner deemed equitable to all. To the extent that transactions
on behalf of more than one client of the Investment Manager or MLAM during the
same period may increase the demand for securities being purchased or the supply
of securities being sold, there may be an adverse effect on price.
As compensation for their services to the Money Fund, the Investment Manager
and Broadcort Capital Corp., the administrator of the Money Fund (the
"Administrator" or "Broadcort"), each receive a fee from the Money Fund at the
end of each month at the annual rate of 0.275% of average daily net assets of
the Money Fund not exceeding $500 million and at the annual rate of 0.25% of
such assets in excess of $500 million. For the fiscal year ended May 31, 1991,
the fee paid by the Money Fund to the Investment Adviser was $1,077,540 and the
fee paid to the Administrator was $1,077,540. For the fiscal year ended May 31,
1992,
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the fee paid by the Money Fund to the Investment Adviser was $783,688 and the
fee paid to the Administrator was $783,688. For the fiscal year ended May 31,
1993, the fee paid by the Money Fund to the Investment Manager was $517,432 and
the fee paid to the Administrator was $517,432. For the fiscal year ended May
31, 1994, the fee paid by the Money Fund to the Investment Adviser was $392,910
and the fee paid to the Administrator was $392,910.
California imposes limitations on the expenses of the Money Fund. At the
date hereof, those limitations require that the Investment Manager reimburse the
Money Fund in any amount necessary to prevent such operating expenses (excluding
interest, taxes, distribution fees, brokerage fees and commissions and
extraordinary charges such as litigation costs) of the Money Fund from exceeding
in any fiscal year 2.5% of the Money Fund's first $30 million of average daily
net assets, 2.0% of the next $70 million of average daily net assets and 1.5% of
the remaining average daily net assets. No fee payment will be made to the
Investment Manager or the Administrator during the year which will cause such
expenses to exceed the pro rata expense limitation at the time of such payment.
The Investment Manager and Administrator will share equally with respect to any
reimbursements made pursuant to the expense limitations. No fee reimbursements
were made during the fiscal years ended May 31, 1991, 1992, 1993 or 1994
pursuant to these operating expense limitations.
The Investment Management Agreement and Administrative Agreement obligate
the Investment Manager and the Administrator, respectively, to provide advisory,
administrative and management services, to furnish office space and facilities
for management of the affairs of the Trust and the Money Fund and to pay all
compensation of and furnish office space for officers and employees of the
Trust, as well as the fees of all Trustees of the Trust who are affiliated
persons of Merrill Lynch & Co., Inc. or any of its subsidiaries. The Money Fund
pays all other expenses incurred in its operation and a portion of the Trust's
general administrative expenses allocated on the basis of the asset size of the
respective Series. Expenses that are borne directly by the Series include
redemption expenses, expenses of portfolio transactions, expenses of registering
the shares under Federal and state securities laws, pricing costs (including the
daily calculation of net asset
value), fees for legal and auditing services, expenses of printing proxies,
shareholder reports, prospectuses and statements of additional information
(except to the extent paid by the Distributor), charges of the Custodian and
Transfer Agent, Securities and Exchange Commission fees, interest, certain
taxes, and other expenses attributable to a particular Series. Expenses which
are allocated on the basis of asset size of the respective Series include fees
and expenses of unaffiliated Trustees, state franchise taxes and expenses
related to shareholder meetings, and other expenses properly payable by the
Trust. See "General Information--Description of Series and Shares." Depending
upon the nature of a lawsuit, litigation costs may be directly applicable to the
Series or allocated on the basis of the asset size of the respective Series. The
Trustees have determined that this is an appropriate method of allocation of
expenses. As required by the Distribution Agreement, the Distributor will pay
certain of the expenses of each Series incurred in connection with the offering
of shares of each Series; after the prospectuses, statements of additional
information and periodic reports have been prepared and set in type, the
Distributor will pay for the printing and distribution of copies thereof used in
connection with the offering to investors. The Distributor will also pay for
other supplementary sales literature.
The Investment Manager is a limited partnership, the partners of which are
Merrill Lynch & Co., Inc., Merrill Lynch Investment Management, Inc. and
Princeton Services, Inc.
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DURATION AND TERMINATION. Unless earlier terminated as described below, the
Investment Management Agreement and the Administrative Agreement will each
continue in effect from year to year if approved annually (a) by the Trustees of
the Trust or by a majority of the outstanding shares of the Money Fund and (b)
by a majority of the Trustees who are not parties to such contract or interested
persons (as defined in the 1940 Act) of any such party. Such agreements
terminate upon assignment and may be terminated without penalty on 60 days'
written notice at the option of either party thereto or by the vote of the
shareholders of the Money Fund.
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" in the Prospectus for certain
information as to the purchase of Money Fund shares.
Merrill Lynch Funds Distributor, Inc. (the "Distributor") acts as the
distributor of the shares of the Money Fund. Shares may be purchased directly
from securities dealers with whom the Distributor has entered into a selected
dealer agreement. Dealer agreements will be entered into with securities dealers
that have securities clearing arrangements or some other business relationship
with Broadcort.
The Distribution Agreement is renewable annually, and may be terminated upon
60 days' written notice by either party. Under such Agreement, after the
prospectuses, statements of additional information and periodic reports have
been prepared and set in type, the Distributor will pay for the printing and
distribution of copies thereof used in connection with the offering to dealers
and investors. The Distributor will also pay for other supplementary sales
literature.
It is the Money Fund's policy to be as fully invested as reasonably
practicable at all times to maximize the yield on the Money Fund's portfolio.
The money markets in which the Money Fund will purchase and sell portfolio
securities normally require immediate settlement of transactions in Federal
Funds. Federal Funds are a commercial bank's deposits in a Federal Reserve Bank
and can be transferred from one member bank's account to that of another member
bank on the same day and thus are considered to be immediately available funds.
ORDERS FOR THE PURCHASE OF MONEY FUND SHARES SHALL BECOME EFFECTIVE ON THE DAY
FEDERAL FUNDS BECOME AVAILABLE TO THE MONEY FUND AND THE SHARES BEING PURCHASED
WILL BE ISSUED AT THE NET ASSET VALUE PER SHARE NEXT DETERMINED. IF FEDERAL
FUNDS ARE AVAILABLE TO THE MONEY FUND PRIOR TO 4:00 P.M. ON ANY BUSINESS DAY,
THE ORDER WILL BE EFFECTIVE ON THAT DAY. SHARES PURCHASED WILL BEGIN ACCRUING
DIVIDENDS ON THE DAY FOLLOWING THE DATE OF PURCHASE.
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for certain
information as to the repurchase and redemption of Money Fund shares.
The right to receive payment with respect to any redemption may be suspended
by the Money Fund for a period of up to seven days. Suspensions of more than
seven days may not be made except (1) for any period (A) during which the New
York Stock Exchange is closed, other than customary weekend and holiday closings
or (B) during which trading on the New York Stock Exchange is restricted; (2)
for any period during which an emergency exists as a result of which (A)
disposal by the Trust of securities owned by the Money Fund is not reasonably
practicable or (B) it is not reasonably practicable for the Trust fairly to
determine the
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value of the net assets of the Money Fund; or (3) for such other periods as the
Securities and Exchange Commission may by order permit for the protection of
security holders of the Money Fund. The Commission shall by rules and
regulations determine the conditions under which (i) trading shall be deemed to
be restricted and (ii) an emergency shall be deemed to exist within the meaning
of clause (2) above.
The value of the shareholder's investment at the time of redemption may be
more or less than his cost, depending on the market value of the securities held
by the Money Fund at such time and income earned.
PURCHASE AND REDEMPTION OF SHARES
THROUGH CERTAIN RETIREMENT PLANS
Merrill Lynch offers customers of securities dealers offering shares of the
Money Fund three types of self-directed retirement plans for which it acts as
passive custodian ("Retirement Plans"). These plans are an individual retirement
account ("IRA"), The Merrill Lynch Tax-Deferred Basic-TM- Retirement Plan,
designed for sole proprietorships, partnerships and small corporations ("Basic
Plan") and a simplified employee pension plan ("SEP"). Information concerning
the establishment and maintenance of Retirement Plans and investments by
Retirement Plan accounts is contained in the Retirement Plan documents available
from the securities dealers offering Money Fund shares to their customers.
PURCHASE BY RETIREMENT PLANS
Special purchase procedures apply in the case of the Retirement Plans. There
is no minimum initial or subsequent purchase requirement with respect to
purchases of Money Fund shares by participants in the Retirement Plans. In
addition, participants in the Retirement Plans may elect to have cash balances
in their account automatically invested in the Money Fund.
Cash balances of participants who elect to have such funds automatically
invested in the Money Fund will be invested as follows. Cash balances arising
from the sale of securities held in the Retirement Plan account which do not
settle on the day of the transaction (such as most common and preferred stock
transactions) become available to the Money Fund and will be invested in shares
of the Money Fund on the business day following the day that proceeds with
respect thereto are received in the Retirement Plan account. Proceeds giving
rise to cash balances from the sale of securities held in the Retirement Plan
account settling on a same day basis and from principal repayments on debt
securities held in the account become available to the Money Fund and will be
invested in shares of the Money Fund on the next business day following receipt.
Cash balances arising from dividends or interest payments on securities held in
the Retirement Plan account or from a contribution to the Retirement Plan are
invested in shares of the Money Fund on the business day following the date the
payment is received in the Retirement Plan account. Cash balances of less than
$1.00 will not be invested and no return will be earned.
A participant in the IRA, Basic or SEP Retirement Plans who has not elected
to have cash balances automatically invested in shares of the Money Fund may
enter a manual purchase order through his securities dealer.
REDEMPTIONS BY RETIREMENT PLANS
Distributions from Retirement Plans to a participant prior to the time the
participant reaches age 59 1/2 may subject the participant to penalty taxes.
There are, however, no adverse tax consequences resulting from
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redemptions of shares of the Money Fund where the redemption proceeds remain in
the Retirement Plan account and are otherwise invested. Shareholders should
consult their tax adviser concerning tax consequences resulting from redemptions
of shares of the Money Fund.
The Money Fund has instituted an automatic redemption procedure for
participants in the Retirement Plans who have elected to have cash balances in
their accounts automatically invested in shares of the Money Fund. In the case
of such participants, unless directed otherwise, a sufficient number of shares
of the Money Fund will be redeemed to purchase other securities which the
participant has selected for investments in his Retirement Plan account.
Retirement Plan participants may redeem shares of the Money Fund by
submitting a written notice of redemption to their securities dealer.
Participants in IRA, Basic and SEP Retirement Plans should contact their
securities dealer to effect such redemptions. Redemption requests should not be
sent to the Trust. If inadvertently sent to the Trust, they will be forwarded to
the proper person. The notice must bear the signature of the person in whose
name the Retirement Plan is maintained, signed exactly as his name appears on
his Retirement Plan adoption agreement.
Retirement Plan participants considering transferring their retirement
accounts to another brokerage firm or financial institution should be aware that
if the firm to which the retirement account is to be transferred will not take
delivery of the shares of the Money Fund, a shareholder must either (a) redeem
the shares so that the cash proceeds can be transferred to the account at the
new firm or (b) continue to maintain a Retirement Plan account for those shares.
CONFIRMATIONS
All purchases and redemptions of Money Fund shares and dividend
reinvestments will be confirmed to participants in the IRA, Basic and SEP
Retirement Plans (rounded to the nearest share) in the statement which is sent
monthly to all participants in these Retirement Plans.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities of the Money Fund. Subject
to policy established by the Trustees of the Trust, the Investment Manager is
primarily responsible for the Money Fund's portfolio decisions and the placing
of the portfolio transactions. In placing orders, it is the policy of the Money
Fund to obtain the best net results taking into account such factors as price
(including the applicable dealer spread), the size, type and difficulty of the
transaction involved, the firm's general execution and operational facilities,
and the firm's risk in positioning the securities involved. While the Investment
Manager generally seeks reasonably competitive spreads or commissions, the Money
Fund will not necessarily be paying the lowest spread or commission available.
The Money Fund's policy of investing in securities with short maturities will
result in high portfolio turnover.
The money market securities in which the Money Fund invests are traded
primarily in the over-the-counter market. Bonds and debentures are usually
traded over-the-counter but may be traded on an exchange. Where possible, the
Money Fund will deal directly with the dealers who make a market in the
securities involved except in those circumstances where better prices and
execution are available elsewhere.
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Such dealers usually are acting as principal for their own account. On occasion,
securities may be purchased directly from the issuer. Money market securities
are generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. The cost of executing portfolio securities
transactions of the Money Fund will primarily consist of dealer spreads and
underwriting commissions. Under the 1940 Act, persons affiliated with the Trust
are prohibited from dealing with the Trust as a principal in the purchase and
sale of securities unless an exemptive order allowing such transactions is
obtained from the Securities and Exchange Commission. Since over-the-counter
transactions are usually principal transactions, affiliated persons of the
Trust, including Merrill Lynch Government Securities Inc. and Merrill Lynch
Money Markets Inc., may not serve the Money Fund as dealer in connection with
such transactions, except pursuant to the exemptive order described below.
However, affiliated persons of the Trust may serve as its broker in
over-the-counter transactions conducted on an agency basis. The Trust may not
purchase securities from any underwriting syndicate of which Merrill Lynch is a
member, except in accordance with applicable rules under the Investment Company
Act of 1940.
The Securities and Exchange Commission has issued an order permitting all
Merrill Lynch-sponsored money market funds, including Series of the Trust, to
conduct principal transactions with Merrill Lynch Government Securities Inc.
("GSI") in United States Government and Government agency securities and with a
subsidiary of GSI in certificates of deposit and other short-term bank money
instruments and commercial paper. This order contains a number of conditions,
including conditions designed to insure that the price to the Money Fund from
GSI or its subsidiary is equal to or better than that available from other
sources. GSI and its subsidiary have informed the Money Fund that they will in
no way, at any time, attempt to influence or control the activities of the Money
Fund or the Investment Manager in placing such principal transactions. The
exemptive order allows GSI or its subsidiary, Merrill Lynch Money Markets Inc.,
to receive a dealer spread on any transaction with the Money Fund no greater
than its customary dealer spread for transactions of the type involved.
Generally such spreads do not exceed 0.25% of the principal amount of the
securities involved.
The Trustees of the Trust have considered the possibilities of recapturing
for the benefit of the Money Fund expenses of possible portfolio transactions,
such as dealer spreads and underwriting commissions, by conducting such
portfolio transactions through affiliated entities. For example, dealer spreads
received by GSI or its subsidiary on transactions conducted pursuant to the
permissive order described above could be offset against the management and
administrative fees payable by the Money Fund to the Investment Manager and the
Administrator. After considering all factors deemed relevant, the Trustees made
a determination not to seek such recapture. The Trustees will reconsider this
matter from time to time. The Investment Manager has arranged for the Money
Fund's custodian to receive any tender offer solicitation fees on behalf of the
Money Fund payable with respect to portfolio securities of the Money Fund.
The Money Fund does not expect to use one particular dealer, but, subject to
obtaining the best price and execution, dealers who provide supplemental
investment research (such as information concerning money market securities,
economic data and market forecasts) to the Investment Manager may receive orders
for transactions by the Money Fund. Information so received will be in addition
to and not in lieu of the services required to be performed by the Investment
Manager under the Investment Management Agreement and the expenses of the
Investment Manager will not necessarily be reduced as a result of the receipt of
such supplemental information.
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DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Money Fund is determined by the
Investment Manager once daily, immediately after the daily declaration of
dividends, as of 4:00 P.M. on each day during which the New York Stock Exchange
or New York banks are open for business. The Money Fund will also determine its
net asset value on any day on which there is sufficient trading in its portfolio
securities that the net asset value might be materially affected, but only if on
any such day the Money Fund is required to sell or redeem shares. The net asset
value is determined pursuant to the "penny-rounding" method by adding the value
of all securities and other assets in the portfolio, deducting the portfolio's
liabilities, dividing by the number of shares outstanding and rounding the
result to the nearest whole cent.
The money market securities in which the Money Fund invests are traded
primarily in the over-the-counter markets. Except as set forth below, these
securities are valued at the most recent bid price or yield equivalent as
obtained from dealers that make markets in such securities. Assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees of
the Trust. Securities with a remaining maturity of 60 days or less are valued on
an amortized cost basis. Under this method of valuation, the security is
initially valued at cost on the date of purchase (or in the case of securities
purchased with more than 60 days remaining to maturity, the market value on the
61st day prior to maturity); and thereafter the Money Fund assumes a constant
proportionate amortization in value until maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. For purposes of valuation, the maturity of a variable rate
security is deemed to be the next date on which the interest rate is to be
adjusted.
In accordance with the Securities and Exchange Commission rule applicable to
the valuation of its portfolio securities, the Money Fund will maintain a
dollar-weighted portfolio maturity of 90 days or less and will purchase
instruments having remaining maturities of not more than 397 days (13 months),
with the exception of U.S. Government and U.S. Government agency securities,
which may have remaining maturities of up to 762 days (twenty-five months). The
Money Fund will invest only in securities determined by the Trustees to be of
high quality with minimal credit risks. In addition, the Trustees have
established procedures designed to stabilize, to the extent reasonably possible,
the Money Fund's price per share as computed for the purpose of sales and
redemptions at $1.00. Deviations of more than an insignificant amount between
the net asset value calculated using market quotations and that calculated on a
"penny-rounded" basis will be reported to the Trustees by the Manager. In the
event the Trustees determine that a deviation exists which may result in
material dilution or other unfair results to investors or existing shareholders,
the Money Fund will take such corrective action as it regards as necessary and
appropriate, including the reduction of the number of outstanding shares of the
Money Fund by having each shareholder proportionately contribute shares to the
Money Fund's capital; the sale of portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends; or establishing a net asset value per share solely by
using available market quotations. If the number of outstanding shares is
reduced in order to maintain a constant net asset value of $1.00 per share, the
shareholders will contribute proportionately to the Money Fund's capital the
number of shares which represent the difference between the "penny-rounded"
valuation and market valuation of the portfolio. Each shareholder will be deemed
to have agreed to such contribution by such shareholder's investment in the
Money Fund.
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Since the net income of the Money Fund (including realized gains and losses
on the portfolio securities) is declared as a dividend each time the net income
of the Money Fund is determined, the net asset value per share of the Money Fund
normally remains at $1.00 per share immediately after each determination and
dividend declaration. Any increase in the value of a shareholder's investment in
the Money Fund, representing the reinvestment of dividend income, is reflected
by an increase in the number of shares of the Money Fund in the account and any
decrease in the value of a shareholder's investment may be reflected by a
decrease in the number of shares in his account. See "Taxes."
YIELD INFORMATION
The Money Fund normally computes its annualized yield by determining the net
income for a seven-day base period for a hypothetical pre-existing account
having a balance of one share at the beginning of the base period, dividing the
net income by the net asset value of the account at the beginning of the base
period to obtain the base period return, multiplying the result by 365 and then
dividing by seven. Under this calculation, the yield reflects realized and
unrealized gains and losses on portfolio securities. In accordance with
regulations adopted by the Securities and Exchange Commission, the Money Fund is
required to disclose its annualized yield for certain seven-day base periods in
a standardized manner which does not take into consideration any realized or
unrealized gains or losses on portfolio securities. The Securities and Exchange
Commission also permits the calculation of a standardized effective or
compounded yield. This is computed by compounding the unannualized base period
return which is done by adding one to the base period return, raising the sum to
a power equal to 365 divided by seven, and subtracting one from the result. This
compounded yield calculation also excludes realized and unrealized gains or
losses on portfolio securities.
SHAREHOLDER SERVICES
The Trust offers a number of shareholder services described below designed
to facilitate investment in shares of the Money Fund. Full details as to each of
such services and copies of the various plans described below can be obtained
from the Trust.
INVESTMENT ACCOUNT
Every shareholder has an Investment Account and will receive monthly reports
showing the activity in his account since the preceding statement. A shareholder
may make additions to his Investment Account at any time by purchasing shares at
the applicable public offering price either through his securities dealer, by
wire or by mail directly to the Transfer Agent, acting as agent for his dealer.
A shareholder may ascertain the number of shares in his Investment Account by
telephoning the Transfer Agent at (800) 221-7210 toll-free. The Transfer Agent
will furnish this information only after the shareholder has specified the name,
address, account number and social security number of the registered owner or
owners.
In the interest of economy and convenience and because of the operating
procedures of the Trust, certificates representing the Money Fund shares will
not be physically issued. Shares of the Money Fund are maintained by the Trust
on its register maintained by the Transfer Agent and the holders thereof will
have the same rights and ownership with respect to such shares as if
certificates had been issued.
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AUTOMATIC INVESTMENT PLAN
The Trust offers an Automatic Investment Plan whereby the Transfer Agent is
authorized through preauthorized checks of $50 or more to charge the regular
bank account of the shareholder on a regular basis to provide systematic
additions to the Investment Account of such shareholder. See the Purchase
Application in the Prospectus. A shareholder's Automatic Investment Plan may be
terminated at any time without charge or penalty by the shareholder, the Trust,
the Transfer Agent or the Distributor.
ACCRUED MONTHLY PAYOUT PLAN
The dividends of the Money Fund are automatically reinvested in additional
shares of the Money Fund. Shareholders desiring cash payments may enroll in the
Accrued Monthly Payout Plan, under which shares equal in number to shares
credited through the automatic reinvestment of dividends and distributions
during each month are redeemed at the net asset value on the last Friday of such
month in order to meet the monthly distribution. Investors may open an Accrued
Monthly Payout Plan by completing the appropriate portion of the Purchase
Application in the Prospectus. A shareholder's Accrued Monthly Payout Plan may
be terminated at any time without charge or penalty by the shareholder, the
Trust, the Transfer Agent or the Distributor.
SYSTEMATIC WITHDRAWAL PLANS
A shareholder may elect to make systematic withdrawals from an Investment
Account on either a monthly or quarterly basis as provided below. Quarterly
withdrawals are available for shareholders who have acquired shares of the Money
Fund having a value, based upon cost or the current offering price, of $5,000 or
more, and monthly withdrawals for shareholders with shares with such a value of
$10,000 or more. The quarterly periods end on the 24th day of March, June,
September and December. See the Purchase Application in the Prospectus.
At the time of each withdrawal payment, sufficient shares are redeemed from
those on deposit in the shareholder's account to provide the withdrawal payment
specified by the shareholder. The shareholder may specify either a dollar amount
or a percentage of the value of his shares. Redemptions will be made at net
asset value as determined at the close of business on the New York Stock
Exchange on the 24th day of each month or the 24th day of the last month of each
quarter, whichever is applicable. A shareholder's Systematic Withdrawal Plan may
be terminated at any time, without charge or penalty, by the shareholder, the
Trust, the Transfer Agent or the Distributor. A shareholder may not elect to
make systematic withdrawals while he is enrolled in the Accrued Monthly Payout
Plan.
Withdrawal payments should not be considered as dividends, yield or income.
Withdrawals are sales of shares and may result in taxable gain or loss. If
periodic withdrawals continuously exceed reinvested dividends, the shareholder's
original investment will be correspondingly reduced. Shareholders are cautioned
not to designate withdrawal programs that result in an undue reduction of
principal. There are no minimums on amounts that may be systematically
withdrawn.
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TAXES
FEDERAL
The Trust intends to continue to qualify the Money Fund for the special tax
treatment afforded regulated investment companies ("RICs") under the Internal
Revenue Code of 1986, as amended (the "Code"). If it so qualifies, the Money
Fund (but not its shareholders) will not be subject to Federal income tax on the
part of its net ordinary income and net realized capital gains which it
distributes to shareholders. The Money Fund intends to distribute substantially
all of such income.
As discussed in the Money Fund's Prospectus, the Trust may establish other
series in addition to the Money Fund (together with the Fund, the "Series").
Each Series of the Trust is treated as a separate corporation for Federal income
tax purposes. Each Series therefore is considered to be a separate entity in
determining its treatment under the rules for RICs described in the Prospectus.
Losses in one Series do not offset gains in another Series, and the requirements
(other than certain organizational requirements) for qualifying for RIC status
are determined at the Series level rather than the Trust level.
Dividends paid by the Money Fund from its ordinary income, and distributions
of the Money Fund's net realized short-term capital gains (together referred to
hereafter as "ordinary income dividends") are taxable to shareholders as
ordinary income. Distributions made from the Money Fund's net realized long-term
capital gains ("capital gain dividends") are taxable to shareholders as
long-term capital gains, regardless of the length of time the shareholder has
owned Money Fund shares. Any loss upon the sale or exchange of Money Fund shares
held for six months or less, however, will be treated as long-term capital loss
to the extent of any capital gain dividends received by the shareholder.
Distributions in excess of the Money Fund's earnings and profits will first
reduce the adjusted tax basis of a holder's shares and, after such adjusted tax
basis is reduced to zero, will constitute capital gains to such holder (assuming
the shares are held as a capital asset).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Money Fund. Not later than 60 days after the close of
its taxable year, the Trust will provide shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. Distributions by the Money Fund, whether from ordinary income or
capital gains, will not be eligible for the dividends received deduction allowed
to corporations under the Code. If the Money Fund pays a dividend in January
which was declared in the previous October, November or December to shareholders
of record on a specified date in one of such months, then such dividend will be
treated for tax purposes as being paid by the Money Fund and received by its
shareholders on December 31 of the year in which the dividend was declared.
If the value of assets held by the Money Fund declines, the Trustees may
authorize a reduction in the number of outstanding shares in shareholder's
accounts so as to preserve a net asset value of $1.00 per share. After such a
reduction, the basis of eliminated shares would be added to the basis of
shareholders' remaining Money Fund shares, and any shareholders disposing of
shares at that time may recognize a capital loss. Distributions, including
distributions reinvested in additional shares of the Money Fund, will
nonetheless be fully taxable, even if the number of shares in shareholders'
accounts has been reduced as described above.
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Ordinary income dividends paid by the Money Fund to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% United States
withholding tax under existing provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law. Nonresident shareholders are
urged to consult their own tax advisers concerning the applicability of the
United States withholding tax.
Dividends and interest received by the Money Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Trust or who, to the Trust's knowledge, have
furnished an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that such
investor is not otherwise subject to backup withholding.
A loss realized on a sale or exchange of shares of the Money Fund will be
disallowed if other Money Fund shares are acquired (whether through the
automatic reinvestment of dividends or otherwise) within a 61-day period
beginning 30 days before and ending 30 days after the date that the shares are
disposed of. In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss.
The Code requires each RIC to pay a nondeductible 4% excise tax to the
extent the RIC does not distribute, during each calendar year, 98% of its
ordinary income, determined on a calendar year basis, and 98% of its capital
gains, determined, in general, on an October 31 year-end, plus certain
undistributed amounts from previous years. The Trust anticipates that the Money
Fund will make sufficient timely distributions to avoid imposition of the excise
tax.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and these Treasury
regulations are subject to change by legislative or administrative action either
prospectively or retroactively.
OTHER TAXES
Ordinary income dividends and capital gain dividends may also be subject to
state and local taxes.
Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on United States Government obligations. State
law varies as to whether dividend income attributable to United States
Government obligations is exempt from state income tax.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors should
also consider applicable foreign taxes in their evaluation of an investment in
the Money Fund.
16
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SERIES AND SHARES
The Declaration of Trust provides that the Trust shall be comprised of
separate Series ("Series") each of which will consist of a separate portfolio
which will issue a separate class of shares. The Trustees are authorized to
create an unlimited number of Series and, with respect to each Series, to issue
an unlimited number of full and fractional shares of beneficial interest, par
value $.10 per share, of a single class and to divide or combine the shares into
a greater or lesser number of shares without thereby changing the proportionate
beneficial interests in the Series. All shares have equal voting rights, except
that only shares of the respective Series are entitled to vote on matters
concerning only that Series. Shareholders are entitled to one vote for each full
share held and fractional votes for fractional shares held in the election of
Trustees and on other matters submitted to the vote of shareholders. Each issued
and outstanding share is entitled to participate equally in dividends and
distributions declared by the respective Series and in net assets of such Series
upon liquidation or dissolution remaining after satisfaction of outstanding
liabilities.
In the event a Series were unable to meet its obligations, the remaining
Series would assume the unsatisfied obligations of that Series. The shares of
each Series, when issued, will be fully paid and nonassessable, have no
preference, preemptive, conversion, exchange or similar rights, and are freely
transferable. Holders of shares of any Series are entitled to redeem their
shares as described elsewhere herein and in the Prospectus. Shares do not have
cumulative voting rights and the holders of more than 50% of the shares of the
Trust voting for the election of Trustees can elect all of the Trustees if they
choose to do so and in such event the holders of the remaining shares would not
be able to elect any Trustees. No amendment may be made to the Declaration of
Trust without the affirmative vote of a majority of the outstanding shares of
the Trust.
CUSTODIAN
The Bank of New York, 90 Washington Street, 12th Floor, New York, New York
10286, acts as custodian of the Money Fund's assets. The Custodian is
responsible for safeguarding and controlling the Money Fund's cash and
securities, handling the delivery of securities and collecting interest on the
Money Fund's investments.
TRANSFER AGENT
Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville,
Florida 32246-6484, a subsidiary of Merrill Lynch & Co., Inc., acts as the Money
Fund's transfer agent. The Transfer Agent is responsible for the issuance,
transfer and redemption of shares and the opening and maintenance of shareholder
accounts.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, have
been selected as the independent auditors of the Trust. The selection of
independent auditors is subject to ratification by the shareholders of the
Trust. The independent auditors are responsible for auditing the financial
statements of the Trust.
LEGAL COUNSEL
Brown & Wood, One World Trade Center, New York, New York 10048, is counsel
for the Trust.
17
<PAGE>
REPORTS TO SHAREHOLDERS
The fiscal year of the Trust ends on May 31 of each year. The Trust will
send to shareholders of the Money Fund at least semi-annually reports showing
its portfolio securities and other information. An annual report containing
financial statements audited by independent auditors will be sent to
shareholders each year.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information with respect to
the shares of the Money Fund do not contain all the information set forth in the
Registration Statement and the exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the 1940 Act, to which reference is hereby made.
Offerings of shares of separate Series of the Trust will be made by separate
prospectuses.
-------------------
The Declaration of Trust establishing the Trust, dated July 10, 1987, a copy
of which, together with all amendments thereto (the "Declaration"), is on file
in the office of the Secretary of the Commonwealth of Massachusetts, provides
that the name "Financial Institutions Series Trust" refers to the Trustees under
the Declaration collectively as Trustees, but not as individuals or personally;
and no Trustee, shareholder, officer, employee or agent of the Trust shall be
held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim of said Trust but the
"Trust Estate" only shall be liable.
18
<PAGE>
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER
AND CORPORATE BOND RATINGS
COMMERCIAL PAPER
Commercial paper with the greatest capacity for timely payment is rated A by
Standard & Poor's Corporation ("S&P"). Issues within this category are further
redefined with designations 1, 2 and 3 to indicate the relative degree of
safety; A-1, the highest of the three, indicates the degree of safety is either
overwhelming or very strong; A-2 indicates the capacity for timely repayment is
strong.
Moody's Investors Service ("Moody's") employs the designations of Prime-1,
Prime-2 and Prime-3 to indicate the relative capacity of the rated issuers to
repay punctually. Prime-1 issues have a superior capacity for repayment. Prime-2
issues have a strong capacity for repayment, but to a lesser degree than
Prime-1.
Commercial paper rated A.1+ by IBCA Limited or its affiliate IBCA Inc.
(together, "IBCA") are obligations supported by the highest capacity for timely
repayment. Commercial paper rated A.1 has a very strong capacity for timely
repayment. Commercial paper rated A.2 has a strong capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.
Fitch Investors Service, Inc. ("Fitch") employs the rating F-1+ to indicate
issues regarded as having the strongest degree of assurance for timely payment.
The rating F-1 reflects an assurance of timely payment only slightly less in
degree than issues rated F-1+, while the rating F-2 indicates a satisfactory
degree of assurance for timely payment, although the margin of safety is not as
great as indicated by the F-1+ and F-1 categories.
Duff & Phelps Corporation ("Duff & Phelps") employs the designation of Duff
1 with respect to top grade commercial paper and bank money instruments. Duff 1+
indicates the highest certainty of timely payment: short-term liquidity is
clearly outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations. Duff 1- indicates high certainty of timely payment. Duff 2
indicates good certainty of timely payment: liquidity factors and company
fundamentals are sound.
Thompson BankWatch, Inc. ("TBW") employs the designations TBW-1, TBW-2,
TBW-3 and TBW-4 as ratings for commercial paper, other senior short-term
obligations and deposit obligations of the entities to which the rating has been
assigned. TBW-1 is the highest category and indicates a very high degree of
likelihood that principal and interest will be paid on a timely basis. TBW-2 is
the second highest category and indicates that while the degree of safety
regarding timely repayment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated TBW-1.
19
<PAGE>
CORPORATE BONDS
Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and repay principal
and differ from the highest rated issues only in small degree.
Bonds rated Aaa by Moody's are judged to be of the best quality. Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. Bonds rated Aa are judged to be of high quality by all
standards. They are rated lower than the best bonds because margins of
protection may not be as large or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities. Moody's applies
numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa
through B in its corporate bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.
Bonds rated AAA by IBCA are obligations for which there is the lowest
expectation of investment risk. Capacity for timely repayment of principal and
interest is substantial such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk significantly.
Bonds rated AA are obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk, albeit not very significantly.
Bonds rated AAA by Fitch are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Bonds rated AAA by Duff & Phelps are deemed to be of the highest credit
quality: the risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt. AA indicates high credit quality: protection
factors are strong, and risk is modest but may vary slightly from time to time
because of economic conditions.
Bonds rated AAA by TBW are accorded the highest rating category which
indicates that the ability to repay principal and interest on a timely basis is
very high. AA is the second highest rating category and indicates a superior
ability to repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest rating category.
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
SUMMIT CASH RESERVES FUND OF
FINANCIAL INSTITUTIONS SERIES TRUST:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Summit Cash Reserves Fund of Financial
Institutions Series Trust as of May 31, 1994, the related statements of
operations for the year then ended and changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
the financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
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 the 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 at May 31,
1994 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
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Summit Cash Reserves
Fund of Financial Institutions Series Trust as of May 31, 1994, the results of
its operations, the changes in its net assets, and the financial highlights for
the respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
June 30, 1994
21
<PAGE>
Summit Cash Reserves Fund
Schedule of Investments as of May 31, 1994 (in Thousands)
<TABLE>
<CAPTION>
Issue Face Interest Maturity Value
Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Bank Notes--0.7%
PNC Bank, N.A. $1,000 3.40% 10/14/94 $ 995
Total Bank Notes
(Cost--$1,000) 995
Bankers' Acceptances--Yankee--7.4%
Dai-Ichi Kangyo 5,000 3.79 6/10/94 4,995
Bank, NY
Mitsubishi Bank, NY 5,000 4.00 6/20/94 4,989
Total Bankers' Acceptances--Yankee
(Cost--$9,984) 9,984
Commercial Paper--Discount--68.2%
ANZ (Delaware), Inc. 5,000 4.48 8/26/94 4,946
British Columbia, 5,000 4.10 7/26/94 4,967
Province of
Caisse Nationale des 5,000 4.43 8/23/94 4,948
Telecommunications
Cargill Inc. 5,000 4.47 8/10/94 4,956
Daimler-Benz North 5,000 4.46 8/22/94 4,948
America Corp.
Halifax Building Society 3,000 4.28 6/20/94 2,993
3,000 3.93 7/19/94 2,982
Hanson Finance PLC 5,000 4.48 8/25/94 4,947
Kredietbank North 2,000 3.95 7/18/94 1,989
America Finance Corp. 3,000 4.17 7/29/94 2,979
McKenna Triangle 2,500 4.40 7/19/94 2,485
National Corp. 2,000 4.45 8/18/94 1,980
<PAGE>
National Rural Utilities 5,000 4.28 6/21/94 4,987
Cooperative Finance
Corp.
NationsBank Corp. 5,000 4.48 8/23/94 4,948
New South Wales 1,000 4.27 6/23/94 997
Treasury Corp.
Nomura Holding 5,000 3.80 6/14/94 4,993
America, Inc.
PHH Corp. 5,000 4.25 6/21/94 4,988
Panasonic Finance, Inc. 1,400 3.85 6/06/94 1,399
Preferred Receivables 855 3.92 6/07/94 854
Funding Corp. 3,000 4.30 6/17/94 2,994
Province of Quebec 2,000 3.93 7/18/94 1,988
Issue Face Interest Maturity Value
Amount Rate* Date (Note 1a)
Commercial Paper--Discount (concluded)
Sheffield Receivables $5,000 4.28% 6/20/94 $ 4,988
Corp.
Toshiba America, Inc. 5,000 3.95 6/29/94 4,984
WCP Funding Inc. 3,000 4.32 6/15/94 2,995
Xerox Credit 3,000 4.30 6/17/94 2,994
Corporation 3,000 4.10 7/25/94 2,980
Total Commercial Paper--Discount (Cost--$92,215) 92,209
Master Notes++--6.7%
Goldman Sachs 5,000 4.07 9/01/94 5,000
Group, L.P.
Kingdom of Sweden 4,000 4.437 7/15/94 4,000
Total Master Notes
(Cost--$9,000) 9,000
<PAGE>
US Government, Agency & Instrumentality
Obligations--Discount--4.4%
US Treasury Bills 6,040 3.21 6/23/94 6,026
Total US Government, Agency & Instrumentality
Obligations--Discount (Cost--$6,028) 6,026
US Government, Agency & Instrumentality
Obligations--Non-Discount--13.5%
Federal Home 1,000 4.18 6/21/95 1,000
Loan Bank+ 1,000 4.18 12/28/95 1,000
1,000 4.21 6/17/96 1,000
Federal National 2,000 4.08 5/13/96 2,000
Mortgage 1,800 4.20 5/19/97 1,800
Association++ 1,000 4.25 5/14/98 1,000
US Treasury Notes 6,000 4.25 8/31/94 5,996
2,000 6.00 11/15/94 2,010
2,500 3.875 2/28/95 2,475
Total US Government, Agency & Instrumentality
Obligations--Non-Discount (Cost--$18,338) 18,281
Total Investments (Cost--$136,565)--100.9% 136,495
Liabilities in Excess of Other Assets--(0.9%) (1,194)
--------
Net Assets--100.0% $135,301
========
<FN>
*Bankers' Acceptances, Commercial Paper and certain US
Government, Agency & Instrumentality Obligations are traded on a
discount basis; the interest rates shown are the discount rates
paid at the time of purchase by the Fund. The interest rates on
variable rate securities are adjusted periodically based upon
the appropriate indexes. Other securities bear interest at the
rates shown, payable at fixed dates or upon maturity. The
interest rates shown are the rates in effect at May 31, 1994.
++Variable Rate Notes.
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
Summit Cash Reserves Fund
Statement of Assets and Liabilities as of May 31, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Assets:
Investments, at value (identified cost--$136,565,324*) (Notes 1a & 1e) $136,494,788
Cash 4,417
Receivables:
Interest $ 167,163
Beneficial interest sold 3,100 170,263
------------
Prepaid registration fees and other assets (Note 1d) 122,846
------------
Total assets 136,792,314
------------
Liabilities:
Payables:
Beneficial interest redeemed 1,311,680
Administrator (Note 2) 33,378
Investment adviser (Note 2) 33,378 1,378,436
------------
Accrued expenses and other liabilities 112,609
------------
Total liabilities 1,491,045
------------
Net Assets $135,301,269
============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares authorized $ 13,537,180
Paid-in capital in excess of par 121,834,625
Unrealized depreciation on investments--net (70,536)
------------
Net Assets--Equivalent to $1.00 per share based on 135,371,805 shares of beneficial
interest outstanding $135,301,269
============
<FN>
*Cost of Federal income tax purposes. As of May 31, 1994, net unrealized depreciation for Federal
income tax purposes amounted to $70,536, of which $357 related to appreciated securities and
$70,893 related to depreciated securities.
</TABLE>
See Notes to Financial Statements.
23
<PAGE>
Summit Cash Reserves Fund
Statement of Operations for the Year Ended May 31, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 4,878,240
Expenses:
Investment advisory fees (Note 2) $ 392,910
Administrative fees (Note 2) 392,910
Transfer agent fees (Note 2) 254,381
Professional fees 55,316
Printing and shareholder reports 42,752
Accounting services (Note 2) 42,001
Trustees' fees and expenses 36,709
Custodian fees 19,153
Registration fees (Note 1d) 15,249
Tax expense 9,917
Other 24,389
------------
Total expenses 1,285,687
------------
Investment income--net 3,592,553
Realized Gain on Investments--Net (Note 1c) 41,290
Change in Unrealized Depreciation on Investments--Net (61,245)
------------
Net Increase in Net Assets Resulting from Operations $ 3,572,598
============
</TABLE>
<TABLE>
<CAPTION>
Summit Cash Reserves Fund For the Year Ended May 31,
Statement of Changes in Net Assets 1994 1993
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income--net $ 3,592,553 $ 4,998,689
Realized gain on investments--net 41,290 138,080
Change in unrealized depreciation on investments--net (61,245) (2,061)
------------ ------------
Net increase in net assets resulting from operations 3,572,598 5,134,708
------------ ------------
Dividends & Distributions to Shareholders (Note 1f):
Investment income--net (3,592,553) (4,998,689)
Realized gain on investments--net (41,290) (138,080)
------------ ------------
Net decrease in net assets resulting from dividends and distributions to shareholders (3,633,843) (5,136,769)
------------ ------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 553,322,448 644,773,140
Net asset value of shares issued to shareholders in reinvestment of dividends (Note 1f) 3,625,745 5,121,386
------------ ------------
556,948,193 649,894,526
Cost of shares redeemed (578,262,259) (731,083,887)
------------ ------------
Net decrease in net assets derived from beneficial interest (21,314,066) (81,189,361)
------------ ------------
Net Assets:
Total decrease in net assets (21,375,311) (81,191,422)
Beginning of year 156,676,580 237,868,002
------------ ------------
End of year $135,301,269 $156,676,580
============ ============
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
<TABLE>
<CAPTION>
Summit Cash Reserves Fund For the Year Ended May 31,
Financial Highlights 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
The following per share data and ratios have been derived
from information provided in the financial statements.
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Investment income--net .0254 .0262 .0464 .0684 .0811
Realized and unrealized gain (loss) on investments--net .0003 .0007 (.0001) .0024 (.0003)
-------- -------- -------- -------- --------
Total from investment operations .0257 .0269 .0463 .0708 .0808
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.0254) (.0262) (.0463) (.0684) (.0808)
Realized gain on investments--net (.0003) (.0007) -- (.0024)* --
-------- -------- -------- -------- --------
Total dividends and distributions (.0257) (.0269) (.0463) (.0708) (.0808)
-------- -------- -------- -------- --------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Investment Return 2.57% 2.74% 4.44% 7.36% 8.42%
======== ======== ======== ======== ========
Ratios to Average Net Assets:
Expenses .90% .86% .79% .85% .74%
======== ======== ======== ======== ========
Investment income and realized gain on investments--net 2.54% 2.72% 4.48% 7.14%* 8.03%*
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of year (in thousands) $135,301 $156,677 $237,868 $374,212 $546,593
======== ======== ======== ======== ========
<FN>
*Includes unrealized gain (loss).
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
Summit Cash Reserves Fund
Notes to Financial Statements
1. Significant Accounting Policies:
Summit Cash Reserves Fund (the "Fund") is a separate fund
offering a separate class of shares of Financial Institutions
Series Trust (the "Trust"). The Trust is registered under the
Investment Company Act of 1940 as a diversified, open-end
management investment company which comprises a series of
separate portfolios offering a separate class of shares to
selected groups of purchasers. The Fund is currently the only
operating series of the Trust. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--The money market securities in
which the Fund invests are traded primarily in the over-the-
counter markets. Investments maturing more than sixty days after
the valuation date are valued at the most recent bid price or
yield equivalent as obtained from dealers that make markets in
such securities. When such securities are valued with sixty days
or less to maturity, the difference between the valuation
existing on the sixty-first day before maturity and maturity
value is amortized on a straight-line basis to maturity.
Investments maturing within sixty days from their date of
acquisition are valued at amortized cost, which approximates
market. Assets for which market quotations are not readily
available are valued at fair value as determined in good faith by
or under the direction of the Trustees of the Trust. For purposes
of valuation, the maturity of a variable rate security is deemed
to be the next coupon date on which the interest rate is to be
adjusted.
(b) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income
to its shareholders. Therefore, no Federal income tax provision
is required.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are
entered into (the trade dates). Interest income (including
amortization of premium and discount) is recognized on the
accrual basis. Realized gains and losses on security transactions
are determined on the identified cost basis.
(d) Prepaid registration fees--Prepaid registration fees are
charged to expense as the related shares are issued.
(e) Repurchase agreements--The Fund invests in US Government
securities pursuant to repurchase agreements with a member bank
of the Federal Reserve System or a primary dealer in US
Government securities. Under such agreements, the bank or primary
dealer agrees to repurchase the security at a mutually agreed
upon time and price. The Fund takes possession of the underlying
securities, marks to market such securities and, if necessary,
receives additional securities daily to ensure that the contract
is fully collateralized.
(f) Dividends to shareholders--The Fund declares dividends daily
and reinvests daily such dividends (net of non-resident alien tax
and back-up withholding tax) in additional fund shares at net
asset value. Dividends are
26
<PAGE>
declared from the total of net investment income and net
realized gain or loss on investments.
2. Investment Advisory and Administrative Agreements:
The Fund has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM" or "Investment Adviser") and
Broadcort Capital Corp. (the "Administrator"), a subsidiary of
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."). Effective
January 1, 1994, the investment advisory business of FAM was
reorganized from a corporation to a limited partnership. Both
prior to and after the reorganization, ultimate control of FAM
was vested with ML & Co. The general partner of FAM is Princeton
Services, Inc., an indirect wholly-owned subsidiary of ML & Co.
The limited partners are ML & Co. and Merrill Lynch Investment
Management, Inc. ("MLIM"), which is also an indirect wholly-owned
subsidiary of ML & Co.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund.
For such services, the Investment Adviser and the Administrator
each receive a fee from the Fund at the end of each month at the
annual rate of 0.275% of the average daily net assets of the Fund
not exceeding $500 million, and at the annual rate of 0.25% of
average daily net assets in excess of $500 million. Under their
respective agreements with the Fund, the Investment Adviser and
the Administrator are obligated to reimburse the Fund to the
extent the Fund's aggregate ordinary operating expenses
(excluding interest, taxes, brokerage fees and commissions, and
extraordinary charges such as litigation costs) exceed in any
fiscal year 2.5% of the Fund's first $30 million of average daily
net assets, 2.0% of the next $70 million of average daily net
assets, and 1.5% of the remaining average daily net assets. No
fee payment will be made to the Investment Adviser or
Administrator during the year which will cause such expenses to
exceed the pro rata expense limitation at the time of such
payment. The Investment Adviser and Administrator will share
equally with respect to any reimbursements made pursuant to the
expense limitations.
Merrill Lynch Funds Distributor, Inc. ("MLFD"), a wholly-owned
subsidiary of MLIM, is the Distributor of the shares of the Fund.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary
of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Trust are officers and/or
directors of FAM, MLIM, MLFD, FDS, MLPF&S, and/or ML & Co.
3. Shares of Beneficial Interest:
The number of shares purchased and redeemed during the periods
corresponds to the amounts included in the Statements of Changes
in Net Assets for net proceeds from sale of shares and cost of
shares redeemed, respectively, since shares are recorded at $1.00
per share.
27
<PAGE>
- -----------------------------------------
-----------------------------------------
- -----------------------------------------
-----------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Investment Objectives and Policies.......... 2
Management of the Trust..................... 4
Trustees and Officers..................... 4
Management and Advisory Arrangements...... 6
Purchase of Shares.......................... 8
Redemption of Shares........................ 8
Purchase and Redemption of Shares Through
Certain Retirement Plans.................. 9
Portfolio Transactions...................... 10
Determination of Net Asset Value............ 12
Yield Information........................... 13
Shareholder Services........................ 13
Taxes....................................... 15
General Information......................... 17
Description of Series and Shares.......... 17
Custodian................................. 17
Transfer Agent............................ 17
Independent Auditors...................... 17
Legal Counsel............................. 17
Reports to Shareholders................... 18
Additional Information.................... 18
Appendix.................................... 19
Independent Auditors' Report................ 21
Financial Statements........................ 22
</TABLE>
Statement of
Additional Information
[LOGO]
- ---------------------------------------
SUMMIT CASH
RESERVES FUND
FINANCIAL INSTITUTIONS SERIES TRUST
FINANCIAL INSTITUTIONS SERIES TRUST IS ORGANIZED AS A MASSACHUSETTS BUSINESS
TRUST. IT IS NOT A BANK NOR DOES IT OFFER FIDUCIARY OR TRUST SERVICES. SHARES
OF THE SUMMIT CASH RESERVES FUND ARE NOT EQUIVALENT TO A BANK ACCOUNT. AS WITH
ANY INVESTMENT IN SECURITIES, THE VALUE OF A SHAREHOLDER'S INVESTMENT IN THE
MONEY FUND MAY FLUCTUATE. A SHAREHOLDER'S INVESTMENT IN THE MONEY FUND IS NOT
INSURED BY ANY GOVERNMENT AGENCY.
Principal Office of the Trust:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
September 28, 1994
- -----------------------------------------
-----------------------------------------
- -----------------------------------------
-----------------------------------------
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS:
Contained in Part A:
Financial Highlights for each of the years in the ten-year period
ended May 31, 1994
Contained in Part B:
Schedule of Investments, May 31, 1994
Statement of Assets and Liabilities, May 31, 1994
Statement of Operations for the year ended May 31, 1994
Statement of Changes in Net Assets for the years ended May 31, 1994
and 1993
Financial Highlights for each of the years in the five-year period
ended May 31, 1994
(B) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- -------------------------------------------------------------------------------------------------
<C> <C> <S>
1(a) -- Declaration of Trust, dated July 10, 1987.(h)
(b) -- Instrument establishing Summit Cash Reserves Fund (the "Fund") as a series of the Registrant.(i)
2 -- By-Laws of Registrant.(a)
3 -- None.
4 -- Portions of the Declaration of Trust, Establishment and Designation and By-Laws of the Registrant
defining the rights of holders of the Fund as a series of the Registrant.(j)
5(a) -- Investment Management Agreement between Registrant and Fund Asset Management, Inc. relating to
Summit Cash Reserves Fund.(b)
(b) -- Administrative Agreement between Registrant and Broadcort Capital Corp. relating to Summit Cash
Reserves Fund.(c)
(c) -- Form of Sub-Administrative Agreement relating to Summit Cash Reserves Fund.(b)
6(a) -- Distribution Agreement between Registrant and Merrill Lynch Funds Distributor, Inc.(d)
(b) -- Form of Selected Dealers Agreement relating to Summit Cash Reserves Fund.(b)
7 -- None.
8 -- Custody Agreement between Registrant and The Bank of New York relating to Summit Cash Reserves
Fund.(b)
9 -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency Agreement between
Registrant and Merrill Lynch Financial Data Service, Inc. (now known as Financial Data Services,
Inc.) relating to Summit Cash Reserves Fund.(g)
10 -- Opinion of Brown & Wood, counsel to the Registrant.
11 -- Consent of Deloitte & Touche LLP, independent auditors for the Registrant.
12 -- None.
13 -- Certificate of Fund Asset Management, Inc. relating to Summit Cash Reserves Fund.(b)
14(a) -- Prototype Individual Retirement Account Plan, Simplified Employee Pension Plan and Corporate
Individual Retirement Account Plan available from Merrill Lynch, Pierce, Fenner & Smith
Incorporated.(e)
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <C> <S>
(b) -- Prototype Merrill Lynch Tax-Deferred Basic-TM- Retirement Plan available from Merrill Lynch,
Pierce, Fenner & Smith Incorporated.(f)
15 -- None.
16 -- Schedule for computation of each performance quotation provided in the Registration Statement in
response to Item 22.(h)
17 -- Financial Data Schedule
<FN>
- ---------
(a) Filed on May 28, 1981 as an exhibit to the Registrant's Registration
Statement under the Securities Act of 1933 on Form N-1 (File No. 2-72530)
in connection with The Overland Express Money Market Fund.
(b) Filed on November 12, 1982 as an exhibit to Pre-Effective Amendment No. 1
to Registrant's Registration Statement under the Securities Act of 1933 on
Form N-1 (File No. 2-78646) in connection with Summit Cash Reserves Fund.
(c) Filed on October 1, 1985 as an exhibit to Post-Effective Amendment No. 4 to
Registrant's Registration Statement under the Securities Act of 1933 on
Form N-1A (File No. 2-78646) in connection with Summit Cash Reserves Fund.
(d) Filed on June 4, 1982 as an exhibit to Registrant's Registration Statement
under the Securities Act of 1933 on Form N-1 (File No. 2-77895) in
connection with ISU Money Maximizer Fund.
(e) Incorporated by reference to Exhibit 14 to Pre-Effective Amendment No. 1 to
the Registration Statement under the Securities Act of 1933 on Form N-1
(File No. 2-74584) of Merrill Lynch Retirement Series Trust, filed on
January 26, 1982.
(f) Incorporated by reference to Exhibit 14 to Post-Effective Amendment No. 3
to the Registration Statement under the Securities Act of 1933 on Form N-1A
(File No. 2-74584) of Merrill Lynch Retirement Series Trust, filed on
December 19, 1983.
(g) Filed on September 30, 1987 as an exhibit to Post-Effective Amendment No. 6
to Registrant's Registration Statement on Form N-1A (File No. 2-78646) in
connection with Summit Cash Reserves Fund.
(h) Filed on July 29, 1988 as an exhibit to Post-Effective Amendment No. 7 to
Registrant's Registration Statement on Form N-1A (File No. 2-78646) in
connection with Summit Cash Reserves Fund.
(i) Filed on September 28, 1989 as an exhibit to Post-Effective Amendment No. 8
to Registrant's Registration Statement on Form N-1A (File No. 2-78646) in
connection with Summit Cash Reserves Fund.
(j) Reference is made to Article II, Section 2.3 and Articles V, VI, VIII, IX,
X and XI of the Registrant's Declaration of Trust, previously filed as
Exhibit 1(a) to the Registration Statement referred to in paragraph (a)
above; to the Certificates of Establishment and Designation establishing
the Fund as a series of the Registrant and establishing Class A and Class B
shares of beneficial interest of the Fund, which will be filed as Exhibits
1(c) and 1(d), respectively, to the Registration Statement; and to Articles
I, V and VI of the Registrant's By-Laws, previously filed as Exhibit 2 to
the Registration Statement referred to in paragraph (a) above.
</TABLE>
C-2
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Registrant is not controlled by or under common control with any person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF RECORD
HOLDERS AT
TITLE OF CLASS JULY 30, 1994
- ------------------------------------------------------------------------------------------ ---------------------
<S> <C>
Shares of beneficial interest, par value $.10 per share................................... 17
</TABLE>
ITEM 27. INDEMNIFICATION.
Section 5.3 of the Registrant's Declaration of Trust provides as follows:
"The Trust shall indemnify each of its Trustees, officers, employees,
and agents (including persons who serve at its request as directors,
officers or trustees of another organization in which it has any interest,
as a shareholder, creditor or otherwise) against all liabilities and
expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably incurred
by him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or
with which he may be threatened, while in office or thereafter, by reason of
his being or having been such a trustee, officer, employee or agent, except
with respect to any matter as to which he shall have been adjudicated to
have acted in bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties; provided, however, that as to any matter disposed
of by a compromise payment by such person, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to the
effect that if either the matter of willful misfeasance, gross negligence or
reckless disregard of duty, or the matter of good faith and reasonable
belief as to the best interests of the Trust, had been adjudicated, it would
have been adjudicated in favor of such person. The rights accruing to any
Person under these provisions shall not exclude any other rights to which he
may be lawfully entitled; provided that no Person may satisfy any right of
indemnity or reimbursement granted herein or in Section 5.1 [relating to no
personal liability of shareholders, Trustees, etc.] or to which he may be
otherwise entitled except out of the property of the Trust, and no
Shareholder shall be personally liable to any Person with respect to any
claim for indemnity or reimbursement or otherwise. The Trustee may make
advance payments in connection with indemnification under this Section 5.3,
provided that the indemnified person shall have given a written undertaking
to reimburse the Trust in the event it is subsequently determined that he is
not entitled to such indemnification."
Insofar as the conditional advancing or indemnification moneys for actions
based upon the Investment Company Act of 1940 may be concerned, such payments
will be made only on the following conditions: (i) the advances must be limited
to amounts used, or to be used, for the preparation or presentation of a defense
to the action, including costs connected with the preparation of a settlement;
(ii) advances may be made only upon receipt of a written promise by, or on
behalf of, the recipient to repay that amount of the advance which exceeds the
amount to which it is ultimately determined that he is entitled to receive from
the Registrant by reason of indemnification; and (iii)(a) such promise must be
secured by a surety bond, other suitable insurance or an equivalent form of
security which assures that any repayments may be obtained by
C-3
<PAGE>
the Registrant without delay or litigation, which bond, insurance or other form
of security must be provided by the recipient of the advance, or (b) a majority
of a quorum of the Registrant's disinterested, non-party Trustees, or an
independent legal counsel in a written opinion, shall determine, based upon a
review of readily available facts, that the recipient of the advance ultimately
will be found entitled to indemnification.
In Section 9 of the Distribution Agreement relating to the securities being
offered hereby, the Registrant agrees to indemnify the Distributor and each
person, if any, who controls the Distributor within the meaning of the
Securities Act of 1933 against certain types of civil liabilities arising in
connection with the Registration Statement or Prospectus.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Trustees, officers and controlling persons of the
Registrant and the principal underwriter pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer, or controlling
person of the Registrant and the principal underwriter in connection with the
successful defense of any action, suit or proceedings) is asserted by such
Trustee, officer or controlling person or the principal underwriter in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER.
Fund Asset Management, L.P. (the "Investment Manager") acts as the
investment adviser for the following companies: Apex Municipal Fund, Inc., CBA
Money Fund, CMA Government Securities Fund, CMA Money Fund, CMA Multi-State
Municipal Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, The Corporate
Fund Accumulation Program, Inc., Corporate High Yield Fund, Inc., Financial
Institutions Series Trust, Income Opportunities Fund 1999, Inc., Income
Opportunities Fund 2000, Inc., Merrill Lynch Basic Value Fund, Inc., Merrill
Lynch California Municipal Series Trust, Merrill Lynch Corporate Bond Fund,
Inc., Merrill Lynch Federal Securities Trust, Merrill Lynch Funds for
Institutions Series, Merrill Lynch Institutional Tax-Exempt Fund, Merrill Lynch
Multi-State Limited Maturity Municipal Series Trust, Merrill Lynch Multi-State
Municipal Series Trust, Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch
Phoenix Fund, Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch World
Income Fund, Inc., MuniAssets Fund, Inc., MuniBond Income Fund, Inc., The
Municipal Fund Accumulation Program, Inc., MuniEnhanced Fund, Inc., MuniInsured
Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest California
Insured Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc.,
MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund, Inc., MuniVest
Pennsylvania Insured Fund, MuniYield Arizona Fund, Inc., MuniYield Arizona Fund
II, Inc., MuniYield California Fund, Inc., MuniYield California Insured Fund,
Inc., MuniYield California Insured Fund II, Inc., MuniYield Florida Fund,
MuniYield Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund,
Inc., MuniYield Insured Fund II, Inc., MuniYield Michigan Fund, Inc., MuniYield
Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New
Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc., MuniYield New
York Insured Fund II, Inc., MuniYield New York Insured Fund III, Inc.,
C-4
<PAGE>
MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield Quality
Fund II, Inc., Senior High Income Portfolio, Inc., Senior High Income Portfolio
II, Inc., Taurus MuniCalifornia Holdings, Inc., Taurus MuniNewYork Holdings,
Inc. and Worldwide Dollar Vest Fund, Inc. Merrill Lynch Asset Management, L.P.,
("MLAM"), an affiliate of the Investment Adviser, acts as the investment adviser
for the following companies: Convertible Holdings, Inc., Merrill Lynch
Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas Income Fund, Inc.,
Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc.,
Merrill Lynch Balanced Fund for Investment and Retirement, Merrill Lynch Capital
Fund, Inc., Merrill Lynch Developing Capital Markets Fund, Inc., Merrill Lynch
Dragon Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch Fund For Tomorrow,
Inc., Merrill Lynch Fundamental Growth Fund, Inc., Merrill Lynch Global
Allocation Fund, Inc., Merrill Lynch Global Bond Fund for Investment and
Retirement, Merrill Lynch Global Convertible Fund, Inc., Merrill Lynch Global
Utility Fund, Inc., Merrill Lynch Growth Fund for Investment and Retirement,
Merrill Lynch Healthcare Fund, Inc., Merrill Lynch High Income Municipal Bond
Fund, Inc., Merrill Lynch Institutional Intermediate Fund, Merrill Lynch
International Equity Fund, Merrill Lynch Global Holdings, Inc., Merrill Lynch
Latin America Fund, Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch
Global Resources Trust, Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready
Assets Trust, Merrill Lynch Retirement Series Trust, Merrill Lynch Senior
Floating Rate Fund, Inc., Merrill Lynch Series Fund, Inc., Merrill Lynch
Short-Term Global Income Fund, Inc., Merrill Lynch Strategic Dividend Fund,
Merrill Lynch Technology Fund, Inc., Merrill Lynch U.S. Treasury Money Fund,
Merrill Lynch U.S.A. Government Reserves, Merrill Lynch Utility Income Fund,
Inc., and Merrill Lynch Variable Series Funds, Inc. The address of each of these
investment companies is P.O. Box 9011, Princeton, New Jersey 08543-9011, except
that the address of Merrill Lynch Funds for Institutions Series and Merrill
Lynch Institutional Intermediate Fund is One Financial Center, 15th Floor,
Boston, Massachusetts 02111-2646. The address of the Investment Manager, MLAM
and Merrill Lynch Funds Distributor, Inc. (the "Distributor") is also P.O. Box
9011, Princeton, New Jersey 08543-9011. The address of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") and Merrill Lynch & Co., Inc. ("ML
& Co.") is North Tower, World Financial Center, 250 Vesey Street, New York, New
York 10281. The address of Financial Data Services, Inc. is 4800 Deer Lake Drive
East, Jacksonville, Florida 32246-6484.
Set forth below is a list of each officer and partner of the Investment
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
June 1, 1992 for his or its own account or in the capacity of director, officer,
partner or trustee. In addition, Mr. Zeikel is President, Mr. Richard is
Treasurer and Mr. Glenn is Executive Vice President of substantially all of the
investment companies described in the preceding paragraph and also hold the same
positions with all or substantially all of the investment companies advised by
MLAM as they do with those advised by the Investment Manager. Messrs. Durnin,
Giordano, Harvey, Kirstein and Monagle and Ms. Griffin are directors or officers
of one or more of such companies.
<TABLE>
<CAPTION>
POSITION WITH OTHER SUBSTANTIAL BUSINESS,
NAME INVESTMENT MANAGER PROFESSION, VOCATION OR EMPLOYMENT
- --------------------------------- ---------------------------- ------------------------------------------------
<S> <C> <C>
ML & Co.......................... Limited Partner Financial Services Holding Company
Fund Asset Management, Inc....... Limited Partner Investment Advisory Services
Princeton Services, Inc.
("Princeton Services")......... General Partner General Partner of MLAM
</TABLE>
C-5
<PAGE>
<TABLE>
<S> <C> <C>
Arthur Zeikel.................... President President of MLAM; President and Director of
Princeton Services; Director of Merrill Lynch
Funds Distributor, Inc. ("MLFD"); Executive
Vice President of Merrill Lynch & Co., Inc.;
Executive Vice President of Merrill Lynch
Terry K. Glenn................... Executive Vice President Executive Vice President of MLAM; Vice President
and Director of Princeton Services; President
and Director of MLFD; President of Princeton
Administrators, Inc.
Bernard J. Durnin................ Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Vincent R. Giordano.............. Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Elizabeth Griffin................ Senior Vice President Senior Vice President of MLAM
Norman R. Harvey................. Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
N. John Hewitt................... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Philip L. Kirstein............... Senior Vice President, Senior Vice President, General Counsel and
General Counsel and Secretary of MLAM; Senior Vice President,
Secretary General Counsel, Director and Secretary of
Princeton Services; Director of MLFD
Ronald M. Kloss.................. Senior Vice President and Senior Vice President and Controller of MLAM;
Controller Senior Vice President and Controller of
Princeton Services
Stephen M. M. Miller............. Senior Vice President Executive Vice President of Princeton
Administration; Senior Vice President of
Princeton Services
Joseph T. Monagle................ Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Gerald M. Richard................ Senior Vice President and Senior Vice President and Treasurer of MLAM;
Treasurer Vice President and Treasurer of Princeton
Services; Vice President and Treasurer of MLFD
Richard L. Rufener............... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services; Vice
President of MLFD
Ronald L. Welburn................ Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Anthony Wiseman.................. Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
</TABLE>
C-6
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant, for each of
the open-end investment companies referred to in the first paragraph of Item 28
except Apex Municipal Fund, Inc., CBA Money Fund, CMA Government Securities
Fund, CMA Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt
Fund, CMA Treasury Fund, Convertible Holdings, Inc., The Corporate Fund
Accumulation Program, Inc., Income Opportunities Fund 1999, Inc., Income
Opportunities Fund 2000, Inc., MuniAssets Fund, Inc., MuniBond Income Fund,
Inc., The Municipal Fund Accumulation Program, Inc., MuniEnhanced Fund, Inc.,
MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest
California Insured Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured
Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund,
Inc., MuniVest Pennsylvania Fund, MuniYield Arizona Fund, MuniYield Arizona Fund
II, Inc., MuniYield California Fund, Inc., MuniYield California Insured Fund,
Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Fund,
Inc., MuniYield Insured Fund, Inc., MuniYield Insured Fund II, Inc., MuniYield
Michigan Fund, Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey
Fund, Inc., MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured
Fund, Inc., MuniYield New York Insured Fund II, Inc., MuniYield New York Insured
Fund III, Inc., MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc.,
MuniYield Quality Fund II, Inc., Senior High Income Portfolio, Inc., Senior High
Income Portfolio II, Inc., Taurus MuniCalifornia Holdings, Inc., Taurus
MuniNewYork Holdings, Inc., and Worldwide DollarVest Fund, Inc.
(b) Set forth below is information concerning each director and officer of
the Distributor. The principal business address of each such person is P.O. Box
9011, Princeton, New Jersey 08543-9011, except that the address of Messrs.
Crook, Aldrich, Breen, Graczyk, Fatseas and Wasel is One Financial Center,
Boston, Massachusetts 02111-2646.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH DISTRIBUTOR WITH REGISTRANT
- ----------------------------- ------------------------------------------- ----------------------------
<S> <C> <C>
Terry K. Glenn............... President and Director Executive Vice President
Arthur Zeikel................ Director President and Trustee
Philip L. Kirsten............ Director None
William E. Aldrich........... Senior Vice President None
Robert W. Crook.............. Senior Vice President None
Kevin Boman.................. Vice President None
Michael J. Brady............. Vice President None
William M. Breen............. Vice President None
Sharon Creveling............. Vice President and Assistant Treasurer None
Mark A. DeSario.............. Vice President None
James T. Fatseas............. Vice President None
Stanley Graczyk.............. Vice President None
Michelle T. Lau.............. Vice President None
Gerald M. Richard............ Vice President and Treasurer Treasurer
Richard L. Rufener........... Vice President None
Salvatore Venezia............ Vice President None
William Wasel................ Vice President None
Robert Harris................ Secretary Secretary
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH DISTRIBUTOR WITH REGISTRANT
- ----------------------------- ------------------------------------------- ----------------------------
<S> <C> <C>
Lisa Gobora.................. Assistant Vice President None
Susan Kibler................. Assistant Vice President None
Richard Romm................. Assistant Vice President None
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules thereunder will be
maintained at the offices of the Registrant and Financial Data Services, Inc.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption "Management of the
Trust--Management and Advisory Arrangements" in the Prospectus constituting Part
A and the Statement of Additional Information constituting Part B of the
Registration Statement, Registrant is not a party to any management-related
service contract.
ITEM 32. UNDERTAKINGS.
Not applicable.
C-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF
THE REQUIREMENTS FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT PURSUANT TO
RULE 485(B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE TOWNSHIP OF PLAINSBORO, AND STATE OF NEW JERSEY ON THE
27TH DAY OF SEPTEMBER, 1994.
FINANCIAL INSTITUTIONS SERIES TRUST
(Registrant)
By /s/ ARTHUR ZEIKEL
------------------------------------
(Arthur Zeikel, President)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------------------ --------------------------------- ----------------------
<C> <S> <C>
/s/ ARTHUR ZEIKEL
------------------------------------------- President and Trustee (Principal September 27, 1994
(Arthur Zeikel) Executive Officer)
/s/ GERALD M. RICHARD
------------------------------------------- Treasurer (Principal Financial September 27, 1994
(Gerald M. Richard) and Accounting Officer)
------------------------------------------- Trustee
(Joe Grills)
WALTER MINTZ*
------------------------------------------- Trustee
(Walter Mintz)
MELVIN R. SEIDEN*
------------------------------------------- Trustee
(Melvin R. Seiden)
STEPHEN B. SWENSRUD*
------------------------------------------- Trustee
(Stephen B. Swensrud)
HARRY WOOLF*
------------------------------------------- Trustee
(Harry Woolf)
*By /s/ ARTHUR ZEIKEL
------------------------------------------- September 27, 1994
(Arthur Zeikel, Attorney-in-Fact)
</TABLE>
C-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ---------- ------------------------------------------------------------ ----------
<C> <C> <S> <C>
10 -- Opinion of Brown & Wood, counsel to the Registrant.
11 -- Consent of Deloitte & Touche LLP, independent auditors for
the Registrant.
27 -- Financial Data Schedule
</TABLE>
<PAGE>
BROWN & WOOD
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048-0557
September 27, 1994
Summit Cash Reserves Fund
Financial Institutions Series Trust
P.O. Box 9011
Princeton, New Jersey 08543-9011
Dear Sirs:
This opinion is furnished in connection with the registration by Summit
Cash Reserves Fund (the "Fund"), a series of Financial Institutions Series
Trust, a Massachusetts business trust (the "Trust"), of 578,552,259 shares of
beneficial interest of the Fund, par value $.10 per share (the "Shares"), under
the Securities Act of 1933 pursuant to a registration statement on Form N-1A
(File No. 2-78646), as amended (the "Registration Statement").
As counsel for the Fund, we are familiar with the proceedings taken by it
in connection with the authorization, issuance and sale of the Shares. In
addition, we have examined and are familiar with the Declaration of Trust, as
amended, of the Trust, the By-laws of the Trust and such other documents as we
have deemed relevant to the matters referred to in this opinion.
Based on the foregoing, we are of the opinion that the Shares, upon
issuance and sale in the manner referred to in the Registration Statement for
consideration not less than the par value thereof, will be legally issued, fully
paid and non-assessable shares of beneficial interest of the Fund. Shareholders
<PAGE>
of the Fund may under certain circumstances be held personally liable for the
Fund's obligations.
In rendering this opinion, we have relied as to matters of Massachusetts
law upon an opinion of Bingham, Dana & Gould previously rendered to the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the prospectus and
statement of additional information constituting parts thereof.
Very truly yours,
/s/ BROWN & WOOD
<PAGE>
INDEPENDENT AUDITORS' CONSENT
Summit Cash Reserves Fund of
Financial Institutions Series Trust
We consent to the use in Post-Effective Amendment No. 13 to Registration
Statement No. 2-78646 of our report dated June 30, 1994 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Princeton, New Jersey
September 26, 1994
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<NAME> FINANCIAL INSTITUTIONS SERIES TRUST
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<NAME> SUMMIT CASH RESERVES FUND
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