Summit Cash
Reserves Fund
FUND LOGO
Semi-Annual Report November 30, 1993
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be consid-
ered a representation of future performance, which will
fluctuate. The Fund seeks to maintain a consistent $1.00
net asset value per share, although this cannot be assured.
An investment in the Fund is neither insured nor guaranteed
by the US Government.
Summit Cash Reserves Fund
Financial Institutions Series Trust
Box 9011
Princeton, NJ 08543-9011
Summit Cash Reserves Fund
Dear Shareholder:
For the six months ended November 30, 1993, Summit Cash Reserves
Fund paid shareholders a net annualized dividend of 2.45%.* The
Fund's 7-day yield as of November 30 was 2.41% (excluding gains
and losses) and 2.41% (including gains and losses).
The Environment
The US economy began to show some signs of improvement during the
six months ended November 30, 1993, with little evidence of an
appreciable increase in the rate of inflation. The industrial
sector is demonstrating growing strength, yet capacity
utilization is still well below the levels associated with rising
inflation. Consumer spending has improved, but the labor market
remains soft. Despite the areas of economic weakness that
persist, concerns arose during the quarter that the rate of
business activity might increase inflationary pressures.
<PAGE>
Other developments during the period had significant long-term
implications for the US financial markets. Although Boris
Yeltsin's swift and apparently decisive victory over his hard-
line opponents in Russia created little immediate disruption in
the world financial markets, the future of political and economic
reform in the former Soviet Union is far from certain. Evidence
of greater progress toward a free-market economy and democratic
government in Russia would have more positive implications for
the US financial markets over the longer term. The outline for
proposed healthcare reform is also very important for the US
economy. As the various healthcare reform proposals are debated,
investors will focus on their potential effects on the Federal
budget, the US economy and the quality of healthcare delivery in
the United States. Finally, the ratification of the North
American Free Trade Agreement by the US Congress was important
not only for the prospect of expanding trade with Canada and
Mexico, but also as a positive influence on the recently
concluded round of negotiations on the General Agreement on
Tariffs and Trade. Further economic integration and growth
through trade liberalization would be positive for the capital
markets in the United States and around the world.
*Based on a constant investment throughout the period, with
dividends compounded daily, and reflecting a net return to the
investor after all expenses.
Portfolio Matters
Since our last report to shareholders, the yield curve has
flattened with intermediate-term and long-term interest rates
declining, while short-term interest rates increased slightly as
investors responded to increased economic activity accompanied by
little inflationary pressure. During this period, the Federal
Reserve Board maintained a steady monetary policy, with unchanged
Federal Funds and discount rates.
In June we responded to the May inflation data by reducing the
portfolio's average maturity. Although relatively modest by
historical standards, the data did raise the possibility of a
less accommodative monetary policy. The average life was reduced
to 60 days with purchases of 45-day--60-day commercial paper
replacing sales of longer-term US Treasury securities.
We maintained a cautious bias in July in part because of remarks
made by Chairman Alan Greenspan of the Federal Reserve Board
during his Humphrey-Hawkins testimony. The Chairman used his
presentation as a forum to express his inflation concerns and his
opinion that the economic recovery was advancing smartly.
However, by month-end the market stabilized in response to the
surprising announcements of weaker economic news and lower
inflationary data. In this more optimistic environment, we
extended the Fund's average life to the high 60-day range by
increasing holdings of 6-month securities to 12% of net assets.
<PAGE>
During August and September, investor sentiment returned to a
slow growth, low inflation scenario. The Fund continued to extend
maturities with purchases of two-year Treasury notes and one-year
bank notes, taking advantage of the steepness in the yield curve.
At the end of September, we had returned our average portfolio
maturity to the mid 80-day range.
The modest interest rate declines of August and September were
reversed in October with the economy exhibiting surprising
strength, led by robust growth in the housing and auto sectors.
These economic indicators, along with increased supply of
Treasury securities, were cause for concern. However, the market
remained relatively stable as inflation continued well in check.
During this period, the Fund maintained an average life between
75 days--85 days, owing to a steep yield curve and well-behaved
inflation.
The economic news in early November demonstrated hard evidence of
an economy that was building positive momentum. With most
expectations centered around 4.50% gross domestic product growth
in the fourth quarter, increased Treasury supply and the usual
year-end pressures, we made the decision to reduce the Fund's
average life by ten days. The Fund's average life reduction was
aided by the renewal of a variable rate master note and
additional purchases of agency floating rate notes.
Looking ahead, we remain cautious through year-end but more
optimistic into 1994. We appreciate your interest in Summit Cash
Reserves Fund, and we look forward to assisting you with your
financial needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Carlo J. Giannini)
Carlo J. Giannini
Vice President and Portfolio Manager
December 30, 1993
<TABLE>
Summit Cash Reserves Fund
Schedule of Investments as of November 30, 1993 (in Thousands)
<CAPTION>
Face Interest Maturity Value
Issue 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 $ 998
Total Bank Notes
(Cost--$999) 998
<PAGE>
Bankers' Acceptances--Yankee--4.0%
Sumitomo Bank, Ltd., NY 6,000 3.12 12/10/93 5,995
Total Bankers' Acceptances--Yankee
(Cost--$5,995) 5,995
Commercial Paper--Discount--68.2%
ABN-AMRO 3,000 3.30 1/12/94 2,988
NorthAmerica
Finance Inc.
Apreco, Inc. 3,000 3.33 2/03/94 2,982
B.B.V. Finance 4,000 3.09 12/17/93 3,994
(Delaware), Inc.
BNP U.S. Finance 2,000 3.30 1/04/94 1,994
Corporation
CIT Group Holdings, 6,000 3.25 1/14/94 5,975
Inc. (The)
CSW Credit, Inc. 2,000 3.12 12/10/93 1,998
1,500 3.11 12/13/93 1,498
CXC Inc. 5,000 3.35 2/11/94 4,966
Canadian Wheat Board 2,000 3.17 1/19/94 1,991
Central Hispano, N.A. 4,000 3.25 1/06/94 3,987
Capital Corp.
Ciesco L.P. 6,000 3.22 3/08/94 5,945
Corporate Receivables 4,000 3.35 1/11/94 3,984
Corp.
Emerson Electric 3,768 3.05 12/02/93 3,767
Company
Falcon Asset 4,000 3.10 12/09/93 3,997
Securitization Corp.
Hanson Finance 3,000 3.37 1/14/94 2,987
(UK) PLC 1,000 3.22 2/01/94 994
Hertz Funding Corp. 4,205 3.11 12/09/93 4,202
Hewlett-Packard 2,000 3.10 12/08/93 1,999
Company
<PAGE>
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
Commercial Paper--Discount (concluded)
International Lease $3,000 3.35% 1/24/94 $ 2,985
Finance
Kredietbank North 5,000 3.26 1/03/94 4,984
American Finance
Corp.
Leeds Permanent 1,000 3.38 2/07/94 994
Building Society
National Australia 2,000 3.15 12/23/93 1,996
Funding (Delaware), 3,000 3.37 1/10/94 2,988
Inc.
Nomura Holding 5,000 3.40 1/21/94 4,975
America, Inc.
Province of Ontario 3,000 3.20 12/20/93 2,995
Santander Finance 5,000 3.36 1/10/94 4,981
(Delaware), Inc.
Sanwa Business 6,500 3.12 12/23/93 6,487
Credit Corp.
Societe Generale 5,000 3.28 1/12/94 4,980
North America, Inc.
Wal-Mart Stores, Inc. 3,000 3.05 12/02/93 2,999
Total Commercial Paper--Discount
(Cost--$101,617) 101,612
Master Notes++--6.0%
Goldman Sachs 5,000 3.17 3/01/94 5,000
Group, L.P.
Kingdom of Sweden 4,000 3.1875 7/15/94 4,000
Total Master Notes
(Cost--$9,000) 9,000
US Government, Agency & Instrumentality
Obligations--Discount--6.1%
<PAGE>
US Treasury Bills 77 3.18 12/16/93 77
6,040 3.045 2/10/94 6,002
2,000 3.12 2/10/94 1,988
1,000 3.185 3/10/94 991
Total US Government, Agency & Instrumentality
Obligations--Discount (Cost--$9,058) 9,058
</TABLE>
<TABLE>
Summit Cash Reserves Fund
Schedule of Investments as of November 30, 1993 (concluded) (in
Thousands)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
US Government, Agency & Instrumentality
Obligations--Non-Discount--14.0%
Federal Home $1,000 3.43% 6/21/95 $ 1,000
Loan Bank++ 1,000 3.43 12/28/95 1,000
1,000 3.46 6/17/96 1,000
Federal National 2,000 3.33 5/13/96 2,000
Mortgage 1,800 3.45 5/19/97 1,800
Association++ 1,000 3.50 5/14/98 1,000
US Treasury Notes 1,000 5.00 6/30/94 1,009
7,000 4.25 8/31/94 7,033
2,000 4.25 1/31/95 2,010
3,000 3.875 2/28/95 3,001
Total US Government, Agency & Instrumentality
Obligations--Non-Discount (Cost--$20,871) 20,853
<CAPTION>
Face Value
Amount Issue (Note 1a)
<S> <C>
Repurchase Agreements**--3.3%
$4,965 UBS Securities Inc.,
purchased on 11/30/93 to yield 3.25%
to 12/01/93 $ 4,965
Total Repurchase Agreements
(Cost--$4,965) 4,965
Total Investments
(Cost--$152,505)--102.3% 152,481
<PAGE>
Liabilities in Excess of Other Assets--(2.3%) (3,437)
---------
Net Assets--100.0% $ 149,044
=========
<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 rate
on variable rate securities is 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 November
30, 1993.
**Repurchase Agreements are fully collateralized by US Government Obligations.
++Variable Rate Notes.
See Notes to Financial Statements.
</TABLE>
<TABLE>
Summit Cash Reserves Fund
<CAPTION>
Statement of Assets and Liabilities as of November 30, 1993
<S> <C> <C>
Assets:
Investments, at value (identified cost--$152,505,364*) (Notes 1a & 1e) $ 152,480,886
Cash 4,591
Receivables:
Interest $ 201,868
Beneficial interest sold 102,262 304,130
------------
Prepaid registration fees and other assets (Note 1d) 101,793
-------------
Total assets 152,891,400
-------------
Liabilities:
Payables:
Beneficial interest redeemed 3,611,480
Administrator (Note 2) 33,804
Investment adviser (Note 2) 33,804 3,679,088
------------
Accrued expenses and other liabilities 168,120
-------------
Total liabilities 3,847,208
-------------
Net Assets $ 149,044,192
=============
Net Assets Consist of:
Shares of beneficial interest, $.10 par value, unlimited number of shares authorized $ 14,906,867
Paid-in capital in excess of par 134,161,803
Unrealized depreciation on investments--net (24,478)
-------------
Net Assets--Equivalent to $1.00 per share based on shares of 149,068,670 beneficial
interest outstanding $ 149,044,192
=============
<PAGE>
<FN>
*Cost for Federal income tax purposes. As of November 30, 1993, net unrealized
depreciation for Federal income tax purposes amounted to $24,478, of which $4,341
related to appreciated securities and $28,819 related to depreciated securities.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Summit Cash Reserves Fund
<CAPTION>
Statement of Operations for the Six Months Ended November 30, 1993
<S> <C> <C>
Investment Income (Note 1c):
Interest and amortization of premium and discount earned $ 2,439,133
Expenses:
Investment advisory fees (Note 2) $ 202,497
Administrative fees (Note 2) 202,497
Transfer agent fees (Note 2) 135,283
Professional fees 33,727
Accounting services (Note 2) 22,861
Printing and shareholder reports 19,176
Trustees' fees and expenses 18,154
Registration fees (Note 1d) 17,966
Custodian fees 9,144
Other 19,218
------------
Total expenses 680,523
-------------
Investment income--net 1,758,610
Realized Gain on Investments--Net (Note 1c) 34,509
Change in Unrealized Depreciation on Investments--Net (15,187)
-------------
Net Increase in Net Assets Resulting from Operations $ 1,777,932
=============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Summit Cash Reserves Fund For the Six For the
Statements of Changes in Net Assets Months Ended Year Ended
Nov. 30, 1993 May 31, 1993
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income--net $ 1,758,610 $ 4,998,689
Realized gain on investments--net 34,509 138,080
Change in unrealized depreciation on investments--net (15,187) (2,061)
------------ -------------
Net increase in net assets resulting from operations 1,777,932 5,134,708
<PAGE> ------------ -------------
Dividends & Distributions to Shareholders (Note 1f):
Investment income--net (1,758,610) (4,998,689)
Realized gain on investments--net (34,509) (138,080)
------------ -------------
Net decrease in net assets resulting from dividends and distributions to shareholders (1,793,119) (5,136,769)
------------ -------------
Beneficial Interest Transactions (Note 3):
Net proceeds from sale of shares 300,255,776 644,773,140
Net asset value of shares issued to shareholders in reinvestment of dividends (Note 1f) 1,789,373 5,121,386
------------ -------------
302,045,149 649,894,526
Cost of shares redeemed (309,662,350) (731,083,887)
------------ -------------
Net decrease in net assets derived from beneficial interest transactions (7,617,201) (81,189,361)
------------ -------------
Net Assets:
Total decrease in net assets (7,632,388) (81,191,422)
Beginning of period 156,676,580 237,868,002
------------ -------------
End of period $149,044,192 $ 156,676,580
============ =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Summit Cash Reserves Fund For the Six
Financial Highlights Months Ended For the Year Ended May 31,
Nov. 30, 1993 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 period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Investment income--net .0122 .0262 .0464 .0684 .0811
Realized and unrealized gain (loss) on investments--net .0001 .0007 (.0001) .0024 (.0003)
-------- -------- -------- -------- --------
Total from investment operations .0123 .0269 .0463 .0708 .0808
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.0122) (.0262) (.0463) (.0684) (.0808)
Realized gain on investments--net (.0002) (.0007) -- (.0024)** --
-------- -------- -------- -------- --------
Total dividends and distributions (.0124) (.0269) (.0463) (.0708) (.0808)
-------- -------- -------- -------- --------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ========
Total Investment Return: 2.45%* 2.73% 4.43% 7.48% 8.39%
<PAGE> ======== ======== ======== ======== ========
Ratios to Average Net Assets:
Expenses .92%* .86% .79% .85% .74%
======== ======== ======== ======== ========
Investment income and realized gain on investments--net 2.44%* 2.72% 4.48% 7.14%** 8.03%**
======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands) $149,044 $156,677 $237,868 $374,212 $546,593
<FN> ======== ======== ======== ======== ========
* Annualized.
** Includes unrealized gain (loss).
See Notes to Financial Statements.
</TABLE>
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
investment management 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 value. 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.
<PAGE>
(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 declared from the total of net
investment income and net realized gain or loss on investments.
2. Investment Advisory and Administrative Agreements:
Fund Asset Management, Inc. ("FAMI"), a wholly-owned subsidiary
of Merrill Lynch Investment Management, Inc. ("MLIM"), an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc., and Broadcort
Capital Corp. (the "Administrator"), a subsidiary of Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of
Merrill Lynch & Co., Inc., have entered into agreements with the
Trust to provide advisory, management and administrative services
to the Fund. The Investment Adviser performs management and
investment advisory services for the Fund. The Administrator
arranges for the performance of certain administrative services
for the Fund, primarily shareholder services.
<PAGE>
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 Merrill Lynch & Co., Inc., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAMI at cost.
Certain officers and/or trustees of the Trust are officers and/or
directors of FAMI, MLIM, MLFD, FDS, MLPF&S, and/or Merrill Lynch
& Co., Inc.
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.
Officers and Trustees
Arthur Zeikel--President and Trustee
Walter Mintz--Trustee
Melvin R. Seiden--Trustee
Stephen B. Swensrud--Trustee
Harry Woolf--Trustee
Terry K. Glenn--Executive Vice President
Alex V. Bouzakis--Vice President
Donald C. Burke--Vice President
Carlo J. Giannini--Vice President
Kevin J. McKenna--Vice President
Joseph T. Monagle, Jr.--Vice President
Gerald M. Richard--Treasurer
Robert Harris--Secretary
<PAGE>
Custodian
The Bank of New York
110 Washington Street
New York, New York 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 221-7210
