SUMMIT
CASH RESERVES
FUND
Financial Institutions
Series Trust
FUND LOGO
Semi-Annual Report
November 30, 1996
Officers and Trustees
Arthur Zeikel, President and Trustee
Joe Grills, Trustee
Walter Mintz, Trustee
Robert S. Salomon Jr., Trustee
Melvin R. Seiden, Trustee
Stephen B. Swensrud, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Carlo J. Giannini, Vice President
Kevin J. McKenna, Vice President
Joseph T. Monagle, Vice President
Gerald M. Richard, Treasurer
Robert Harris, Secretary
<PAGE>
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 221-7210
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 considered 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. Statements and
other information herein are as dated and are subject to change.
Summit Cash
Reserves Fund
Financial Institutions
Series Trust
Box 9011
Princeton, NJ
08543-9011
DEAR SHAREHOLDER
For the six months ended November 30, 1996, Summit Cash Reserves
Fund paid shareholders a net annualized dividend of 4.58%. The
Fund's 7-day yield as of November 30, 1996 was 4.81%.
<PAGE>
The average portfolio maturity for Summit Cash Reserves Fund at
November 30, 1996 was 16 days, compared to 21 days as of May 31,
1996.
The Environment
Investor perceptions regarding the direction of the US economy
became increasingly positive over the course of the six-month period
ended November 30, 1996. The impetus for the shift in the investment
outlook was the mounting evidence that inflationary pressures were
still under control. This trend was underscored when the Federal
Reserve Board did not tighten monetary policy at its September 24,
1996 meeting. These developments, coupled with several economic data
releases that showed growth was at or below expectations, helped to
assuage investors' concerns about an overheating economy. Stock and
bond prices improved, with most broad-based stock market averages
reaching historic high levels. However, one factor potentially
overshadowing investor enthusiasm is the possibility that corporate
profits may have peaked for this economic cycle.
The US economy clearly has slowed from its strong growth rate during
the first half of 1996. Gross domestic product growth is slowing,
labor-cost pressures are subsiding and commodity prices are
dropping. Investors are also anticipating that President Clinton's
re-election, combined with continued Republican majorities in the
House of Representatives and the Senate, will prove positive for the
nation's budget deficit. As 1996 draws to a close, investors are
likely to continue to focus on the economy. Evidence of continued
growth at a non-inflationary pace would be positive for the US
capital markets. While we generally believed that monetary policy
would remain unchanged during the November period, the Fund
maintained a short average maturity in order to accommodate its
liquidity requirements.
The portfolio's composition at the end of the November period and as
of our last report is detailed as follows:
Issue 11/30/96 5/31/96
Certificates of Deposit-Yankee -- 2.9%
Commercial Paper-Discount -- 40.7
Corporate Notes -- 2.9
Repurchase Agreements -- 7.5
US Government, Agency
& Instrumentality
Obligations-Discount 103.0% 22.9
US Government, Agency
& Instrumentality
Obligations-Non-Discount -- 24.5
Liabilities in Excess of Other Assets (3.0) (1.4)
------ ------
Total 100.0% 100.0%
====== ======
<PAGE>
In Conclusion
As of the close of 1996 the vast majority of assets in Summit Cash
Reserves Fund has been redeemed as the result of a decision by
Broadcort Capital Corp. to offer different money market funds to its
clearing brokers. It is contemplated that certain changes may be
made to Summit Cash Reserves Fund to enable it to serve as the money
market vehicle for certain other programs.
We appreciate your continued support of 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 31, 1996
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
<S> <C> <C> <C> <C>
US Government, Agency & Instrumentality Obligations--Discount
Federal Home Loan Bank $ 120 5.20 % 12/09/96 $ 120
US Treasury Bills 264 5.125 12/19/96 263
Total US Government, Agency & Instrumentality Obligations--Discount (Cost--$383) 383
Total Investments (Cost--$383)--103.0% 383
Liabilities in Excess of Other Assets--(3.0%) (11)
-----
Net Assets--100.0% $ 372
=====
<FN>
*Certain US Government Agency Obligations are traded on a discount
basis; the interest rates shown are the discount rates paid at the
time of purchase by the Fund.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of November 30, 1996
<S> <S> <C>
Assets: Investments, at value (identified cost--$383,240*) (Notes 1a & 1e) $ 383,240
Cash 1,495
Investment adviser receivable (Note 2) 24,857
Prepaid registration fees and other assets (Note 1d) 104,797
------------
Total assets 514,389
------------
Liabilities: Beneficial interest redeemed payable 3,220
Accrued expenses and other liabilities 139,009
------------
Total liabilities 142,229
------------
Net Assets: Net assets $ 372,160
============
<PAGE>
Net Assets Shares of beneficial interest, $.10 par value, unlimited number of
Consist of: shares authorized $ 37,216
Paid-in capital in excess of par 334,944
------------
Net assets--Equivalent to $1.00 per share based on 372,160 shares
of beneficial interest outstanding $ 372,160
============
<FN>
*Cost for Federal income tax purposes.
See Notes to Financial Statements.
</TABLE>
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
November 30, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 602,708
(Note 1c):
Expenses: Professional fees $ 40,882
Registration fees (Note 1d) 36,126
Investment advisory fees (Note 2) 29,583
Administrative fees (Note 2) 29,583
Trustees' fees and expenses 16,518
Accounting services (Note 2) 16,057
Custodian fees 9,173
------------
Total expenses before reimbursement 177,922
Reimbursement of expenses (Note 2) (27,310)
------------
Total expenses after reimbursement 150,612
------------
Investment income--net 452,096
------------
Realized & Realized loss on investments--net (856)
Unrealized Gain Change in unrealized appreciation/depreciation on
(Loss) on investments--net 2,439
Investments--Net ------------
(Note 1c): Net Increase in Net Assets Resulting from Operations $ 453,679
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
November 30, May 31,
Increase (Decrease) in Net Assets: 1996 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 452,096 $ 3,393,414
Realized gain (loss) on investments--net (856) 244
Change in unrealized appreciation/depreciation on investments
--net 2,439 (75,867)
------------ ------------
Net increase in net assets resulting from operations 453,679 3,317,791
------------ ------------
Dividends & Investment income--net (451,240) (3,393,414)
Distributions to Realized gain on investments--net -- (244)
Shareholders ------------ ------------
(Note 1f): Net decrease in net assets resulting from dividends and
distributions to shareholders (451,240) (3,393,658)
------------ ------------
Beneficial Interest Net proceeds from sale of shares 68,682,695 307,144,408
Transactions Net asset value of shares issued to shareholders in
(Note 3): reinvestment of dividends and distributions (Note 1f) 446,551 3,383,655
------------ ------------
69,129,246 310,528,063
Cost of shares redeemed (103,624,331) (364,706,205)
------------ ------------
Net decrease in net assets derived from beneficial interest
transactions (34,495,085) (54,178,142)
------------ ------------
Net Assets: Total decrease in net assets (34,492,646) (54,254,009)
Beginning of period 34,864,806 89,118,815
------------ ------------
End of period $ 372,160 $ 34,864,806
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Nov. 30, For the Year Ended May 31,
Increase (Decrease) in Net Asset Value: 1996 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .0229 .0476 .0444 .0254 .0262
Realized and unrealized gain (loss) on
investments--net .0001 (.0011) .0014 .0003 .0007
-------- -------- -------- -------- --------
Total from investment operations .0230 .0465 .0458 .0257 .0269
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.0228) (.0476) (.0444) (.0254) (.0262)
Realized gain on investments--net -- --++ (.0001) (.0003) (.0007)
-------- -------- -------- -------- --------
Total dividends and distributions (.0228) (.0476) (.0445) (.0257) (.0269)
-------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total investment return 4.58%* 4.87% 4.52% 2.57% 2.74%
======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.40%* 1.13% .98% .90% .86%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.65%* 1.13% .98% .90% .86%
======== ======== ======== ======== ========
Investment income and realized gain
on investments--net 4.18%* 4.83% 4.35% 2.54% 2.72%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 372 $ 34,865 $ 89,119 $135,301 $156,677
Data: ======== ======== ======== ======== ========
<FN>
*Annualized.
++Amount is less than $.0001 per share.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
<PAGE>
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. These unaudited
financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a
normal recurring nature. 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.
(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.
<PAGE>
(f) Dividends and distributions to shareholders--The Fund declares
dividends daily and reinvests monthly such dividends (net of non-
resident alien tax and back-up withholding tax) in additional fund
shares at net asset value. Dividends and distributions are 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 and an
Administrative Agreement with Fund Asset Management, L.P. ("FAM" or
"Investment Adviser") and has entered into an Administrative
Agreement with Broadcort Capital Corporation (the "Administrator"),
a subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."). The general
partner of FAM is Princeton Services, Inc. ("PSI"), an indirect
wholly-owned subsidiary of ML & Co., which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities and equipment to
provide such services to the Fund. For such services, the Investment
Adviser receives 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. For the six
months ended November 30, 1996, FAM earned fees of $29,583, of which
$27,310 was voluntarily waived. FAM and Broadcort each provide
certain administrative services to the Fund pursuant to their
respective Administrative Agreements. Pursuant to these Agreements,
Broadcort receives fees at the same rate as FAM's management fee
with respect to assets Broadcort has introduced to the Fund. FAM
receives an identical fee based on other assets of the Fund.
Merrill Lynch Funds Distributor, Inc. ("MLFD"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc., is the Distributor of the
shares of the Fund.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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 Fund are officers and/or
directors of FAM, PSI, MLFD, MLFDS, and/or ML & Co.
<PAGE>
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.
4. Capital Loss Carryforward:
At May 31, 1996, the Fund had a net capital loss carryforward of
approximately $4,800, all of which expires in 2004. This amount will
be available to offset like amounts of any future taxable gains.
