FINANCIAL INSTITUTIONS SERIES TRUST, 485APOS, 1998-05-28

FINANCIAL INSTITUTIONS SERIES TRUST
485APOS, 1998-05-28

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 1998
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. 16 /X/
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 32
(CHECK APPROPRIATE BOX OR BOXES)

CASH RESERVES FUND
OF FINANCIAL INSTITUTIONS SERIES TRUST
(Exact name of Registrant as Specified in Charter)

800 Scudders Mill Road
Plainsboro, New Jersey 08536
(Address of Principal Executive Offices)

(609) 282-2800
(Registrant's Telephone Number, including Area Code)

Arthur Zeikel
Summit Cash Reserves Fund of
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:

Philip L. Kirstein, Esq. Counsel for the Trust:
FUND ASSET MANAGEMENT BROWN & WOOD LLP
P.O. Box 9011 One World Trade Center
Princeton, New Jersey 08543-9011 New York, N.Y. 10048
Attention: Thomas R. Smith, Jr.

As soon as practicable after the effective date of this Registration Statement.
Approximate Date of Proposed Public Offering

It is proposed that this filing will become effective (check appropriate box)

/ /Immediately upon filing pursuant to / / On (date) pursuant to paragraph (b)
paragraph (b)

/ /60 days after filing pursuant to /X/ On August 14, 1998 pursuant to
paragraph (a)(1) paragraph (a)(1)

/ /75 days after filing pursuant to / / On (date) pursuant to
paragraph (a)(2) paragraph (a)(2) of rule 485

/ / If appropriate, check the following box:

/ / This post-effective amendment designates a new effective date for a
previously filed post- effective amendment.

Title of Securities Being Registered: Shares of Beneficial Interest, par
value $.10 per share.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

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>
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 5A. Management's Discussion of Fund Not Applicable
Performance ............................
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 Not Applicable
of Securities ..........................
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;
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>

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 28, 1998

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY 7OT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

PROSPECTUS
MAY 28, 1998

SUMMIT CASH RESERVES FUND
FINANCIAL INSTITUTIONS SERIES TRUST

P.O. BOX 9011, PRINCETON, NEW JERSEY 08543 PHONE NO. (609) 282-2800

The investment objectives of the Summit Cash Reserves Fund (the "Money
Fund") are current income, preservation of capital and liquidity available
from investing in a diversified portfolio of short-term money market
securities. These securities will consist primarily 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. See "Investment
Objective and Policies." 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 monthly 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.

The Money Fund will offer two classes of shares designated Class A and
Class B (the "Shares"). The Shares will be available only upon exchange of
shares pursuant to the Exchange Program or pursuant to the exchange privilege
available to certain mutual funds advised by Merrill Lynch Asset Management,
L.P. ("MLAM") or its affiliate, Fund Asset Management, L.P. ("FAM" or the
"Investment Manager"). See "Exchange Privilege and Exchange Program." Class A
and Class B shares are offered at net asset value without any sales charge;
however Class B shares will be subject to an ongoing distribution fee and may
be subject to any applicable contingent deferred sales charge ("CDSC"). Shares
may be redeemed at any time at net asset value as described herein. See
"Purchase of Shares" and "Redemption of Shares."

Shares may be purchased from securities dealers that have entered into
selected dealer agreements with the Merrill Lynch Funds Distributor, Inc. (the
"Distributor") P.O. Box 9081, Princeton, New Jersey 08543-9081, Tel. No. (609)
282-2800, including Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"). See "Purchase of Shares."

- ----------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE 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 read carefully and retained for future reference. A statement
containing additional information about the Money Fund, dated May 28, 1998
(the "Statement of Additional Information"), has been filed with the
Securities and Exchange Commission (the "Commission") and can be obtained,
without charge, by calling or by writing the Money Fund at the above telephone
number or address. The Commission maintains a Web site (http://www.sec.gov)
that contains the Statement of Additional Information, material incorporated
by reference and other information regarding the Money Fund. The Statement of
Additional Information is hereby incorporated by reference into this
Prospectus.

FUND ASSET MANAGEMENT -- INVESTMENT MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR

FEE TABLE

ANNUAL MONEY FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS):

Class A(a) Class B(b)
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower)................. None None(e)
Management Fees................................................... 0.50% 0.50%
Rule 12b-1 Fees(a)................................................ None 0.75%
Other Expenses
Dividend and Transfer Agency Fees(b)........................ ___% ___.__%
Other....................................................... ___% ___.__%

Total Other Expenses........................................ ___% ___.__%

TOTAL MONEY FUND OPERATING EXPENSES(c)(d).......................... ___% ___.__%

=== ======
</TABLE>
- -------------

(a) See "Purchase of Shares -- Distribution Plan"-- page 9.

(b) See "Management of the Trust--Transfer Agency Services"--page 7.

(c) The Money Fund has no minimum initial or subsequent purchase
requirement. Therefore, there are likely to be a large number of Money
Fund accounts of relatively small asset size, and as a result, the total
operating expenses of the Money Fund may be higher than the expenses
incurred in other money market funds.

(d) Due to the gap in active operations and significant changes to the Money
Fund's expense structure, the financial performance of the Money Fund
will vary significantly from its historical performance.

(e) If holders of the Money Fund's Class B Shares redeem those shares
instead of exchanging back into the shares of the original fund from
which the exchange was occurred or another fund in the same fund
complex, CDSC payments, if any, will be assessed based upon the
combined holding period for the fund shares and the Money Fund Shares.
See "Exchange Privilege and Exchange Program", page 11.

EXAMPLE:

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 the Total Money Fund
Operating Expenses set forth
above and a 5% annual return
throughout the period.
Class A.......................... $____ $_____ $____ $____
Class B(a)....................... $____ $_____ $____ $____

An investor would pay the following
expenses on a $1,000 investment
assuming (i) the Total Money Fund
Operating Expenses set forth
above, (ii) a 5% annual return
throughout the period and (iii)
redemption at the end of the
period.
Class A.......................... $____ $_____ $____ $____
Class B(a)....................... $____ $_____ $____ $____
</TABLE>

- -------------
(a) If holders of the Money Fund's Class B Shares redeem those shares
instead of exchanging back into the shares of the original fund from
which the exchange was occurred or another fund in the same fund
complex, CDSC payments, if any, will be assessed based upon the
combined holding period for the fund shares and the Money Fund Shares.
See "Exchange Privilege and Exchange Program", page 11.

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 expenses set forth under "Other Expenses" for Class B
shares are based on estimated amounts through the end of the Money Fund's
first fiscal year of operations as a money market fund issuing multiple
classes of shares on an annualized basis. The Example set forth above assumes
reinvestment of all dividends and distributions and utilizes a 5% annual rate
of return as mandated by 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.

FINANCIAL HIGHLIGHTS

The financial information in the table below has been audited in
conjunction with the annual audits of the financial statements of the Money Fund
by Deloitte & Touche LLP, independent auditors. Financial statements for the
fiscal year ended May 31, 1998 and the independent auditors' report thereon are
included in the Statement of Additional Information. The following per share
data and ratios have been derived from information provided in the Money Fund's
audited financial statements. The information provided is for periods during
which the Money Fund issued only Class A shares.

FOR YEAR ENDED MAY 31,

-------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992
-------- ------------ ----------- ----------- ----------- ----------- ---------

<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset
Value:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
year............................ --------- --------- -------- -------- -------- --------

Investment Income - net......... .0432 .0476 .0444 .0254 .0262 .0464
Realized and realized gain
(loss) on investments - net.. .0001 (.0011) .0014 .0003 .0007 (.0001)
Total from Investment Operations .0433 .0465 .0458 .0257 .0269 .0463
Less dividends and distributions:
Investment income net........ (.0431) (.0476) (.0445) (.0257) (.0269) (.0463)
Realized gain on investment
net ........................ (.0431) (--**) (.0001) (.0003) (.0007)
Total dividends and distributions (.0431) (.0476) (.0445) (.0257) (.0269) (.0463)
Net asset value, end of year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========= ========= ======= ========= =========
Total investment return......... 4.32% 4.87% 4.52% 2.57% 2.74% 4.44%
===== ===== ===== ===== ===== =====
RATIOS TO AVERAGE NET ASSETS
Expenses, net of reimbursement.. 1.38% 1.13% .98% .90% .86% .79%
Expenses........................ 1.97% 1.13% .98% .90% .86% .79%
Investment income and realized
gain on investments-net......... 4.18% 4.83% 4.35% .2.54% 2.72% .4.48%
===== ===== ===== ====== ===== ======
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)...................... $ 240 $ 34,865 $ 89,119 $ 135,301 $ 156,677 $ 237,868
========= ======== ========== ========= ========= =========
</TABLE>

<TABLE>
<CAPTION>
(....cont.)

------------------------------------
1991 1990 1989
-- ---------- ---------- -----------

<S> <C> <C> <C>
Increase (Decrease) in Net Asset
Value:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year............................ $ 1.00 $ 1.00 $ 1.00
Investment Income - net......... .0684 .0811 .7099
Realized and realized gain
(loss) on investments - net... .0024 (.0003) .0002
Total from Investment Operations .0708 .0808 .0801
Less dividends and distributions:
Investment income net........ (.0708) (.0808) (0.799)
Realized gain on investment
net ......................... (.0024)* -- (.0002)*
Total dividends and distributions (.0708) (.0808) (.0801)
Net asset value, end of year.... $ 1.00 $ 1.00 $ 1.00
======== ========= =======
Total investment return......... 7.36% 8.42% 8.30%
===== ===== -----
RATIOS TO AVERAGE NET ASSETS
Expenses, net of reimbursement.. .85% .74% .82%
Expenses........................ .85% .74% .82%
Investment income and realized
gain on investments-net....... 7.14% 8.03% 7.98%
======= ====== ======
SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)...................... $ 374,212 $546,593 $637,424
========== ======== ========
</TABLE>

- -----------------------------
* Includes unrealized gain (loss) ** Amount is less than $.0001 per share.

YIELD INFORMATION

The yield of the Money Fund refers to the income generated by an
investment in the Money Fund over a stated seven-day period. This income is
then annualized; that is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period
and is shown as a percentage of the investment. The compounded annualized
yield is calculated similarly but, when annualized, the income earned by an
investment in the Money Fund is assumed to be reinvested. The compounded
annualized yield will be somewhat higher than the yield because of the effect
of the assumed reinvestment.

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
that 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.,
Morningstar Publications, Inc., Money Magazine, U.S. News & World Report,
Business Week, CDA Investment Technology, Inc., Forbes Magazine and Fortune
Magazine and (iv) the yield on an investment in 90-day Treasury bills on a
rolling basis, assuming quarterly compounding. As with other performance data,
yield comparisons should not be considered indicative 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 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 that 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 potential 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 that generally results 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 and in the case of Class B shares, Rule 12b-1 fees.

In managing the Money Fund, the Investment Manager will employ a number
of professional money management techniques, including varying the composition
of the Money Fund's investments and the average maturity of the portfolio
based on its assessment of the relative values of the various money market
securities and future interest rate patterns. The Investment Manager's
assessments will respond to changing economic and money market conditions and
to shifts in fiscal and monetary policy. The Investment Manager also will 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 differences.

The following is a description of the types of money market securities in
which the Money Fund may invest:

(i) U.S. Treasury bills, notes and other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities;

(ii) U.S. dollar-denominated obligations of U.S. and foreign
depository institutions, including, but not limited to, certificates of
deposit, bankers' acceptances, time deposits, bank notes, thrift notes
and deposit notes;

(iii) commercial paper and other short-term obligations issued by
corporations, partnerships, trusts or other entities, including U.S.
dollar-denominated obligations issued by foreign entities; and

(iv) other short-term obligations which in the opinion of the
Trustees of the Trust are of comparable credit quality.

The Money Fund will only invest in short-term obligations that (1) have
been rated in one of the two highest rating categories for short-term debt
obligations by a nationally recognized statistical rating organization
("NRSRO"); (2) have been issued by an issuer rated in one of the two highest
rating categories by an NRSRO with respect to a class of debt obligations that
is comparable in priority and security with the investment; or (3) if not
rated, will be of comparable quality as determined by the Trustees of the
Trust. Currently, there are five NRSROs: Duff & Phelps Credit Rating Co.,
Fitch IBCA, Inc., Moody's Investors Service, Inc., Standard & Poor's and
Thomson BankWatch, Inc.

Rule 2a-7 under the Investment Company Act of 1940, as amended (the
"Investment Company Act") presently 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 are not First Tier Securities
(as defined in the Rule), not more than 1%. In addition, Rule 2a-7 requires
that not more than 5% of the Money Fund's total assets be invested in Second
Tier Securities (as defined in the Rule). The Rule requires the Money Fund to
be diversified (as defined in the Rule) other than with respect to government
securities and securities subject to guarantee issued by a non-controlled
person (as defined in the Rule).

The following is a description of some of the investments or investment
practices in which the Money Fund may invest or engage:

Government Securities. U.S. Treasury bills and notes are supported
by the full faith and credit of the United States. The Money Fund also
will invest in debt securities issued by U.S. Government sponsored
enterprises, agencies and instrumentalities, including, but not limited
to, the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, the Student Loan Marketing Association, the Federal
Agricultural Mortgage Corporation, and the Federal Home Loan Bank. Such
securities may also include debt securities issued by international
organizations designated or supported by multiple governmental entities,
such as the International Bank for Reconstruction and Development.
Government agency securities are not direct obligations of the U.S.
Treasury but involve various forms of U.S. Government sponsorship or
guarantees.

Repurchase Agreements. The Money Fund may enter into repurchase
agreements. A repurchase agreement is an instrument under which the
purchaser (i.e., the Money Fund) acquires the obligation (debt security)
and the seller agrees, at the time of the sale, to repurchase the
obligation at a mutually agreed upon time and price, thereby determining
the yield during the purchaser's holding period. As a matter of operating
policy, the Money Fund will not enter into repurchase agreements with
more than seven days to maturity if it would result in the investment of
more than 10% of the value of the Money Fund's net assets in such
repurchase agreements. Repurchase agreements may be construed to be
collateralized loans by the purchaser to the seller secured by the
securities transferred to the purchaser. If a repurchase agreement is
construed to be a collateralized loan, the underlying securities will not
be considered to be owned by the Money Fund but only to constitute
collateral for the seller's obligation to pay the repurchase price, and,
in the event of a default by the seller, the Money Fund may suffer time
delays and incur costs or losses in connection with the disposition of
the collateral.

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 liquid securities having a value equal to the repurchase
price. Management of the Money Fund does not consider entering into
reverse repurchase agreements to constitute borrowing money for purposes
of the Money Fund's investment restrictions set forth in the Statement of
Additional Information.

Lending of Portfolio Securities. The Money Fund may lend portfolio
securities to brokers, dealers and financial institutions and receive
collateral in cash or securities issued or guaranteed by the U.S.
Government which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. During
the period of the loan, the Money Fund will receive income on the loaned
securities and either will receive a fee or earn interest on any
investments made with cash collateral, thereby increasing its yield.

Commercial Paper and Other Short-Term Obligations. The Money Fund
may purchase commercial paper (including variable amount master notes and
funding agreements), which refers to short-term 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 time of purchase. Short-term obligations issued by trusts
may include, but are not limited to, mortgage-related or asset-backed
debt instruments, including pass-through certificates such as
participations in, or Treasury bonds or notes backed by, pools of
mortgages, or credit card, automobile or other types of receivables. See
"Investment Objectives and Policies" in the Statement of Additional
Information for a discussion of these structured financings.

Bank Money Instruments. Obligations of depository institutions such
as certificates of deposit, including variable rate certificates of
deposit, bankers' acceptances, bank notes and time deposits.

Forward Commitments. The Money Fund may purchase and sell securities
on a when-issued basis or forward commitment basis, and it may purchase
or sell such securities for delayed delivery. The Money Fund will
maintain a segregated account with its custodian of liquid securities in
an aggregate amount equal to the amount of its commitments in connection
with such purchase transactions.

While the types of money market securities in which the Money Fund
invests generally are considered to have low principal risk, such securities
are not completely risk-free. There is a risk of the failure of issuers to
meet their principal and interest obligations. With respect to repurchase
agreements, reverse repurchase agreements and the lending of portfolio
securities by the Money Fund, 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 the disposition
of the collateral.

Investment Restrictions. The Money Fund has adopted a number of
restrictions and policies relating to the investment of its assets and its
activities, 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. Among the more significant restrictions, the Money Fund may not
(1) 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). For purposes of this
restriction, states, municipalities and their political subdivisions are not
considered part of any industry, and investments in mortgage-related or
asset-backed securities shall not be considered investments in the securities
of issuers in a particular industry; (2) borrow money, except that the Money
Fund may borrow from banks (as defined in the Investment Company Act) in
amounts up to 33<T074>% of its total assets (including the amount borrowed),
or for temporary purposes (up to an additional 5% of its total assets), or as
necessary for the clearance of securities transactions, or for the purchase of
securities on margin; or (3) make loans to other persons, except that the
purchase of debt instruments, U.S. Government securities, commercial paper
pass-through instruments, certificates of deposit, bankers' acceptances,
repurchase agreements or other similar instruments are not deemed the making
of a loan and that the Money Fund may lend its portfolio securities in
accordance with applicable law and the guidelines set forth herein and in the
Statement of Additional Information.

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 Investment Company
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 Investment Company Act.

The Trustees of the Trust are:

ARTHUR ZEIKEL*--Chairman of the Investment Manager and its affiliate,
MLAM; Chairman and Director of Princeton Services, Inc. ("Princeton
Services"); Executive Vice President of Merrill Lynch & Co., Inc. ("ML &
Co.").

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 Committees of the State
of New York Common Retirement Fund and Howard Hughes Medical Institute;
Director, Duke Management Company and Director, LaSalle Street Fund.

WALTER MINTZ--Special Limited Partner of Cumberland Associates
(investment partnership).

ROBERT S. SALOMON, JR.--Principal of STI Management (investment adviser).

MELVIN R. SEIDEN--President of Silbanc Properties, Ltd. (real estate,
investment and consulting).

STEPHEN B. SWENSRUD--Chairman of Fernwood Advisors (investment adviser);
Principal of Fernwood Associates (financial consultant).

MANAGEMENT AND ADVISORY ARRANGEMENTS

The Investment Manager acts as the manager of the Money Fund and provides
the Money Fund and the Trust with management and investment advisory services.
The Investment Manager is an affiliate of MLAM and is owned and controlled by
ML & Co., a financial services holding company and the parent of Merrill
Lynch. The Asset Management Group of ML & Co. (which includes the Investment
Manager) acts as the investment adviser for more than 100 registered
investment companies and provides investment advice to individual and
institutional accounts. As of March 1998, the Asset Management Group had a
total of approximately $487 billion in investment company and other portfolio
assets under management. This amount includes assets managed for certain
affiliates of the Investment Manager.

The Investment Management Agreement (the "Investment Management
Agreement") provides that, 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 performs
certain of the other administrative 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
management of the Money Fund.
_______________________
* Interested person, as defined in the investment Company Act, of the Trust.

Pursuant to the Investment Management Agreement, the Investment Manager
is entitled to receive compensation at the annual rate of 0.50% of average
daily net assets of the Money Fund.

The Investment Management Agreement obligates the Money Fund to pay
certain expenses incurred in its operations, including, among other things,
the investment management 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.

TRANSFER AGENCY SERVICES

Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent"), which
is a wholly-owned subsidiary of ML & Co., 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 at the rate of $11.00 per Class A shareholder account and
$14.00 per Class B shareholder account and is entitled to reimbursement from
the Money Fund for certain transaction charges and out-of-pocket expenses
incurred by it under the Transfer Agency Agreement. Additionally, a $0.20
monthly closed account charge will be assessed on all accounts which close
during the calendar year. Application of this fee will commence the month
following the month the account is closed. At the end of the calendar year, no
further fees will be due. For purposes of the Transfer Agency Agreement, the
term "account" includes a shareholder account maintained directly by the
Transfer Agent and any other account representing the beneficial interest of a
person in the relevant share class on a recordkeeping system, provided the
recordkeeping system is maintained by a subsidiary of ML & Co.

PURCHASE OF SHARES

The Money Fund will offer Class A and Class B shares, without a 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.

Class A and Class B shares will be offered only (i) pursuant to the
exchange program with certain non-money market open-end management investment
companies for which Merrill Lynch serves as selected dealer and which are not
advised by FAM or MLAM (the "Exchange Program") and (ii) pursuant to the
exchange privilege available to certain mutual funds advised by FAM or MLAM
("MLAM-advised funds"). See "Exchange Privilege and Exchange Program." 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 the
determination of net asset value (generally 4:00 P.M., New York time) on any
business day, the order will be effective on that day. Shares purchased will
begin accruing dividends on the day of purchase.

Class A shares will be offered without any front-end or deferred sales
charges and will bear no ongoing distribution fees.

DISTRIBUTION PLAN

The Money Fund has adopted a distribution plan pursuant to Rule 12b-1
under the Investment Company Act with respect to distribution fees paid by the
Money Fund to Merrill Lynch and other selected dealers with respect to the
Class B shares (the "Class B Distribution Plan"). The Class B Distribution
Plan provides that such distribution fee is accrued daily and paid monthly at
the annual rate of 0.75% of the Money Fund's average daily net assets
attributable to Class B shares. This distribution fee will be used to
compensate the Distributor for providing sales and promotional activities and
services relating to the sale, promotion and marketing of Class B shares of
the Fund and payment related to the furnishing of services to Class B
shareholders by sales and marketing personnel. Such expenditures may consist
of sales commissions to financial consultants for selling Class B shares
(including reimbursement to the parties who have paid such commissions),
compensation, sales incentives and payments to sales and marketing personnel,
and the payment of expenses incurred in their sales and promotional activities
including advertising expenditures, the costs of preparing and distributing
promotional materials and the costs of providing services to Class B
shareholders including assistance in connection with inquiries related to
shareholder accounts.

Payments under the Class B Distribution Plan will be based on a
percentage of average daily net assets attributable to the Class B shares
regardless of the amount of expenses incurred, and accordingly,
distribution-related revenues from the Class B Distribution Plan may be more
or less than distribution-related expenses. Information with respect to the
Class B distribution-related revenues and expenses will be presented to the
Trustees for their consideration in connection with their deliberations as to
the continuance of the Class B Distribution Plan.

The Trust has no obligation with respect to distribution-related expenses
incurred by the Distributor and Merrill Lynch or other selected dealers in
connection with Class B shares, and there is no assurance that the Trustees of
the Trust will approve the continuance of the Class B Distribution Plan from
year to year. However, the Distributor intends to seek annual continuation of
the Class B Distribution Plan. In their review of the Class B Distribution
Plan, the Trustees will be asked to take into consideration expenses incurred
in connection with the distribution of shares. The distribution fee received
with respect to Class B shares will not be used to subsidize the sale of Class
A shares. Payments of the distribution fee on Class B shares will terminate on
conversion of those Class B shares to Class A shares. See "Conversion of Class
B Shares to Class A Shares." The Distributor, 800 Scudders Mill Road,
Plainsboro, New Jersey 08536, acts as principal underwriter of the shares of
the Money Fund. MLFD is an affiliate of both the Investment Manager and of
Merrill Lynch.

CONVERSION OF CLASS B SHARES TO CLASS A SHARES

In the case of Class B Shares of the Money Fund acquired in an exchange
from Class B or Class C shares of a fund advised by FAM or its affiliate, MLAM
("MLAM-advised fund"), after approximately ten years (the "Conversion
Period"), the Class B shares will be converted automatically into Class A
shares of the Money Fund. Class A shares are not subject to the distribution
fee that is borne by Class B Shares. Automatic conversion of Class B shares
into Class A shares will occur at least once each month (or the "Conversion
Date") on the basis of their relative net asset values of the shares of the
two classes on the Conversion Date, without the imposition of any sales load,
fee or other charge. Conversion of Class B to Class A shares will not be
deemed a purchase or sale of the shares for Federal income tax purposes.

Under the Exchange Program (described below, see "Exchange Privilege and
Exchange Program"), if shares of a Participating Fund have a conversion
feature providing that shares of one class of the Participating Fund will be
exchanged automatically for shares of another class of the Participating Fund,
this conversion feature will carry over to Class B shares of the Money Fund
acquired in exchange for those Participating Fund shares. At the end of the
particular conversion period, if the shareholder still holds the Money Fund
Class B shares, such shares will be converted to Class A shares of the Money
Fund that are not subject to any ongoing distribution fee.

REDEMPTION OF SHARES

The Trust is required to redeem for cash all full and fractional shares
of the Money Fund. The redemption price in the case of Class A Shares is the
net asset value per share next determined after receipt by the Transfer Agent
of proper notice of redemption as described below. In the case of Class B
Shares, the redemption price is the net asset value less any applicable
contingent deferred sales charge ("CDSC"). If such notice is received by the
Transfer Agent prior to the determination of net asset value (generally 4:00
P.M., New York time) on any business day during which the New York Stock
Exchange ("NYSE") is open for business, the redemption will be effective on
such day and payment generally will be made on the next business day. If the
notice is received after the determination of net asset value has been made,
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
until the time of redemption.

METHODS OF REDEMPTION

Set forth below is information as to two methods pursuant to which
shareholders may redeem shares. In certain instances, the Transfer Agent may
require additional documents in connection with redemptions.

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 the determination of net asset value of the Money Fund
(generally 4:00 P.M., New York time) 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, Merrill Lynch
Financial Data Services, Inc., P.O. Box 45290, Jacksonville, Florida
32232-5290. Redemption requests delivered other than by mail should be
delivered to Merrill Lynch Financial Data Services, Inc., 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.

EXCHANGE PRIVILEGE AND EXCHANGE PROGRAM

EXCHANGE PRIVILEGE.

Class A shareholders of the Money Fund who acquired their Money Fund
Shares upon an exchange from Class A or Class D shares of certain MLAM-advised
funds will have an exchange privilege with Class A or Class D shares of
certain MLAM-advised funds. Shareholders may exchange Class A shares of the
Money Fund for Class A shares of one of the MLAM-advised funds if the
shareholder holds any Class A shares of that fund in the account in which the
exchange is to be made at the time of the exchange or is otherwise eligible to
purchase Class A shares of that fund. Class B shareholders of the Money Fund
who acquired their Money Fund Shares upon an exchange from Class B or Class C
shares of MLAM-advised funds will have an exchange privilege with Class B or
Class C shares of MLAM-advised funds. There is currently no limitation on the
number of times a shareholder may exercise the exchange privilege. The period
of time that Money Fund Class B shares are held will count toward satisfaction
of the CDSC and conversion periods applicable to Class B shares of the
MLAM-advised fund from which the exchange was made. The exchange privilege may
be modified or terminated at any time in accordance with the rules of the
Commission. Exercise of the exchange privilege is treated as a sale of the
exchanged shares and a purchase of the acquired shares for Federal income tax
purposes. For further information, see "Exchange Privilege and Exchange
Program" in the Statement of Additional Information.

EXCHANGE PROGRAM.

The Money Fund participates in the Exchange Program with certain
non-money market open-end management investment companies for which Merrill
Lynch serves as selected dealer, which are not advised by the Investment
Manager or MLAM, and not distributed by MLFD (each referred to as a
"Participating Fund"). The Exchange Program is available to investors who
purchase shares of a Participating Fund through Merrill Lynch. Pursuant to the
Exchange Program, exchanges may be made into Class A shares of the Money Fund
at net asset value without the imposition of a front-end sales load ("FESL")
or a CDSC. Shares of a Participating Fund that are subject to a FESL will be
exchanged for Class A shares of the Money Fund without the imposition of a
sales charge. The holder of such Class A shares may subsequently either
exchange back into the same shares of the Participating Fund without incurring
any FESL. The holder of Class A shares may alternatively exchange into shares
of another Participating Fund that is subject to a FESL. In that case the
Class A shareholder must remit an amount equal to the difference, if any,
between the FESL previously paid on the shares of the original Participating
Fund and the FESL payable at the time of the exchange on the shares of the new
Participating Fund.

The holder of Class B shares of the Money Fund may subsequently either
exchange back into the same class of shares of the Participating Fund from
which the exchange into the Money Fund occurred, or such class of shares of
another Participating Fund in the same mutual fund complex as the original
Participating Fund. If Shares are redeemed from the Money Fund and not
exchanged into shares of such a Participating Fund, a CDSC will be charged, to
the extent it would have been charged on a redemption of shares from the
original Participating Fund.

The Participating Funds may impose administrative and/or redemption fees
on an exchange transaction with the Money Fund pursuant to the Exchange
Program. There will be no sales charge on exchange transactions into the Money
Fund pursuant to the Exchange Program. The Exchange Program may be modified or
terminated at any time in accordance with the rules of the Commission. An
exchange of shares through the Exchange Program, like exercise of the exchange
privilege, is treated as a sale of the exchanged shares and a purchase of the
acquired shares for Federal income tax purposes.

A Participating Fund may modify or terminate the terms of its involvement
in the Exchange Program at any time in accordance with the rules of the
Commission. To effect an exchange under either the Exchange Program or the
exchange privilege, shareholders should contact their Merrill Lynch Financial
Consultant, who will advise the Money Fund of the exchange. Further
information regarding such exchanges is set forth under "Exchange Privilege
and Exchange Program" 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 ("OTC") 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 Investment Company 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 Commission. An affiliated
person of the Trust may serve as its broker in OTC transactions conducted on
an agency basis. The Commission has issued an exemptive order permitting the
Trust to conduct certain principal transactions with Merrill Lynch, Merrill
Lynch Government Securities Inc. and Merrill Lynch Money Markets Inc., subject
to certain terms and conditions.

ADDITIONAL INFORMATION

DIVIDENDS

Dividends will be declared daily and invested monthly in the form of
additional shares at net asset value. 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. Fluctuations in value
may be reflected in the number of outstanding shares in the shareholder's
account. See "Taxes."

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, on
each day during which the NYSE is open for business. Such determination is
made as of the close of business on the NYSE (generally 4:00 P.M., New York
time). The net asset value per share is determined pursuant to the
"penny-rounding" method by adding the fair value of all securities and other
assets in the portfolio including interest accrued but not yet received,
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. It is anticipated that net asset value will remain constant at
$1.00 per share, but no assurance can be offered in this regard. 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. This involves 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 value of
the instrument. Other securities held by the Money Fund will be valued at the
fair value as determined in good faith by or under direction of the Board of
Trustees.

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 with a direct account at the
Transfer Agent has an Investment Account and will receive quarterly reports
showing the activity in his or her account since the preceding statement. A
direct shareholder may ascertain the number of shares in his Investment
Account by telephoning the Transfer Agent at (800) MER-FUND, or (800-637-3863)
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.

TAXES

The following is a general summary of the treatment of regulated
investment companies ("RICs") and their shareholders under the Internal
Revenue Code of 1986, as amended (the "Code"). The Trust intends to continue
to qualify the Money Fund for the special tax treatment afforded RICs under
the Code. As long as it so qualifies, the Money Fund will not be subject to
Federal income tax on the part of its net ordinary income and net realized
capital gains that 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 or from an
excess of net short-term capital gains over net long-term capital losses
(together referred to hereafter as "ordinary income dividends") are taxable to
shareholders as ordinary income. Distributions made from an excess of net
long-term capital gains over net short-term capital losses ("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,
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). Recent legislation creates additional categories of capital
gain taxable at different rates. Generally not later than 60 days after the
close of its taxable year, the Money Fund will provide its shareholders with a
written notice designating the amounts of any ordinary income dividends or
capital gain dividends, as well as the amounts of capital gain dividends in
the different categories of capital gain referred to above.

Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Money Fund. 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 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 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.

If a shareholder exercises an exchange privilege within 90 days of
acquiring the shares, then the loss the shareholder can recognize on the
exchange will be reduced (or the gain increased) to the extent any sales
charge paid to the Fund on the exchanged shares reduces any sales charge the
shareholder would have owed upon purchase of the new shares in the absence of
the exchange privilege. Instead, such sales charge will be treated as an
amount paid for the new shares.

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, judicial 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.

YEAR 2000 ISSUES

Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the Year 2000 from the
Year 1900 (commonly known as the "Year 2000 Problem"). Like other investment
companies and financial and business organizations, the Money Fund could be
adversely affected if the computer systems used by the Investment Manager or
other Money Fund service providers do not properly address this problem prior
to January 1, 2000. The Investment Manager has established a dedicated group
to analyze these issues and to implement any systems modifications necessary
to prepare for the Year 2000. Currently, the Investment Manager does not
anticipate that the transition to the 21st century will have any material
impact on its ability to continue to service the Money Fund at current levels.
In addition, the Investment Manager has sought assurances from the Money
Fund's other service providers that they are taking all necessary steps to
ensure that their computer systems will accurately reflect the Year 2000, and
the Investment Manager will continue to monitor the situation. At this time,
however, no assurance can be given that the Money Fund's other service
providers have anticipated every step necessary to avoid any adverse effect on
the Money Fund attributable to the Year 2000 Problem.

ORGANIZATION OF THE TRUST

The Trust was organized on 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 on 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 or
classes 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,
$.10 par value per share, of different classes. Shareholder approval is not
required for the authorization of additional Series or classes of a Series of
the Trust. At the date of this Prospectus, the shares of the Money Fund are
divided into Class A and Class B shares. Class A and Class B shares represent
interests in the same assets of the Money Fund and are identical in all
respects, except that Class B shares bear certain expenses related to the
distribution of such shares and have exclusive voting rights with respect to
matters relating to Class B distribution expenditures. See "Purchase of
Shares." The Trustees of the Trust may classify and reclassify the shares of
the Trust into additional classes at a future date. 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 except that, as noted above, Class B
shares bear certain additional expenses. In the event a Series were unable to
meet its obligations, the remaining Series would assume the unsatisfied
obligations of that Series. The obligations and liabilities of a particular
Series are restricted to the assets of that Series and do not extend to the
assets of the Trust generally. 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 Investment Company 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.

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" (as defined in the Declaration)
only shall be liable.

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 in writing:

Merrill Lynch Financial Data Services, Inc.
P.O. Box 45290
Jacksonville, FL., 32232-5290

The written notification should include the shareholder's name, address,
tax identification number and Merrill Lynch, and/or mutual fund account
numbers. If you have any questions regarding this please call your Merrill
Lynch Financial Consultant or Merrill Lynch Financial Data Services, Inc. at
(800) 221-7210.

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.

--------------------

INVESTMENT MANAGER
Fund Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
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 08536
Mailing Address:
P.O. Box 9081
Princeton, New Jersey 08543-9081

CUSTODIAN
The Bank of New York
90 Washington Street
12th Floor
New York, New York 10286

TRANSFER AGENT
Merrill Lynch Financial Data Services, Inc.
Administrative Offices:
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45290
Jacksonville, Florida 32232-5290

INDEPENDENT AUDITORS

COUNSEL
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557

- ---------------------------------------- ----------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE Prospectus
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 SUMMIT CASH
ADMINISTRATOR OR THE DISTRIBUTOR. THIS RESERVES FUND
PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.

---------------------
TABLE OF CONTENTS

PAGE

Fee Table ............................2
Financial Highlights..................3
Yield Information ....................4
Investment Objectives and Policies....4
Management of the Trust..............7
Trustees..........................7
Management and Advisory
Arrangements.................8
Transfer Agency Services..........9
Purchase of Shares....................9
Distribution Plan.................9
Conversion of Class B Shares to
Class A Shares.................10 Principal Office of the Trust:
Redemption of Shares.................11 800 Scudders Mill Road
Methods of Redemption............11 Plainsboro, New Jersey 08536
Exchange Privilege and Exchange
Program .........................11
Exchange Privilege...............11 Mailing Address:
Exchange Program.................12 P.O. Box 9011
Portfolio Transactions...............13 Princeton, New Jersey 08543-9011
Additional Information...............13
Dividends........................13 This Prospectus should be
Determination of Net Asset Value.14 retained for future reference.
Shareholder Services.............14
Taxes............................14
Year 2000 Issues.................16
Organization of the Trust........16
Shareholder Reports..............17
Shareholder Inquiries............18

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 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. See "Investment Objectives and
Policies." The Fund seeks to maintain a constant $1.00 net asset value per
share, although this cannot be assured. An investment in the Fund is neither
insured nor guaranteed by the U.S. Government. Management of the Fund expects
that substantially all the assets of the Fund will be invested in securities
maturing in less than one year, but at times some portion may have longer
maturities not exceeding 762 days. The dollar weighted-average maturity of the
Fund's portfolio will not exceed 90 days. 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 Money Fund will offer two classes of shares designated as Class A and
Class B (the "Shares.). The Shares will be available only upon exchange of
shares pursuant to the Exchange Program or pursuant to the exchange privilege
available to certain mutual funds advised by Merrill Lynch Asset Management,
L.P. ("MLAM") or Fund Asset Management, L.P. ("FAM"). See "Exchange Privilege
and Exchange Program." Shares of the Money Fund are offered at their net asset
value without any sales charge; however, Class B shares will be subject to
ongoing distribution fees.

------------------------------

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 May 28, 1998 (the "Prospectus"), which has been filed with the
Securities and Exchange Commission (the "Commission") and can be obtained,
without charge, by calling or by writing the Money Fund at the above telephone
number or address. The Commission maintains a Web site (http://www.sec.gov)
that contains the Statement of Additional Information, material incorporated
by reference and other information regarding the Money Fund. This Statement of
Additional Information has been incorporated by reference into the Prospectus.

The date of this Statement of Additional Information is May 28, 1998.

----------------------

FUND ASSET MANAGEMENT -- INVESTMENT MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives of the Money Fund are 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.

All investments of the Money Fund will be in securities with remaining
maturities of up to 762 days (25 months) in the case of government securities
and 397 days (13 months) in the case of all other securities. The dollar
weighed average maturity of the Money Fund portfolio will be 90 days or less.

The Money Fund may invest in obligations issued by U.S. banks, foreign
branches or subsidiaries of U.S. banks or U.S. or foreign branches or
subsidiaries of foreign banks. Investment in obligations of foreign branches
or subsidiaries of U.S. banks or of foreign banks may involve different risks
from the risks of investing in obligations of U.S. banks. Such 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 and foreign banks may be subject to less stringent 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 or a foreign bank than about a U.S. bank, and such branches or
subsidiaries or banks may not be subject to the same accounting, auditing and
financial record keeping standards and requirements as U.S. banks. Evidence of
ownership of obligations of foreign branches or subsidiaries of U.S. banks or
of foreign banks may be held outside of the United States and the Money Fund
may be subject to the risks associated with the holding of such property
overseas. Any such obligations of the Money Fund held overseas will be held by
foreign branches of the custodian for the Money Fund's portfolio securities or
by other U.S. or foreign banks under subcustodian arrangements complying with
the requirements of the Investment Company Act.

FAM will consider the above factors in making investments in such
obligations and will not knowingly purchase obligations which, at the time of
purchase, are subject to exchange controls or withholding taxes. Generally,
the Money Fund will limit its investments in obligations of U.S. branches or
subsidiaries of foreign banks to obligations of banks organized in Canada,
France, Germany, Japan, the Netherlands, Switzerland, the United Kingdom and
other industrialized nations.

The Money Fund will only invest in short-term obligations (including
short-term, promissory notes issued by corporations, partnerships, trusts and
other entities, whether or not secured) that (1) have been rated in one of the
two highest rating categories for short-term debt obligations by a nationally
recognized statistical rating organization ("NRSRO"); (2) have been issued by
an issuer rated in one of the two highest rating categories by an NRSRO with
respect to a class of debt obligations that is comparable in priority and
security with the investment; or (3) if not rated, will be of comparable
quality as determined by the Trustee of the Trust. Currently there are five
NRSROs: Duff & Phelps Credit Ratings Co., Fitch IBCA Inc., Moody's Investors
Service, Inc., Standard & Poor's and Thomson BankWatch, Inc. See the Appendix
to this Statement of Additional Information.

The Money Fund may also invest in 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. Investments in
foreign entities in general involve the same risks as those described in
connection with investments in Eurodollar and Yankeedollar obligations.

As described in the Prospectus, the Money Fund may invest in
participations in, or bonds and notes backed by, pools of mortgages, or 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 an NRSRO.

Variable amount master notes and funding agreements described in the
Prospectus, permit a series of short-term borrowings under a single note. The
lender has the right to increase the amount under the note up to the full
amount provided by the note agreement. In addition the lender has the right to
reduce the amount of outstanding indebtedness.

Forward or firm commitments for the purchase or sale of securities may be
entered into by the Money Fund as described in the Prospectus. The purchase of
the underlying securities will be recorded on the date the Money Fund enters
into the commitment and the value of the security will thereafter be reflected
in the calculation of the Fund's net asset value. A separate account of the
Money Fund will be established with State Street Bank and Trust Company, the
Money Fund's custodian, consisting of cash or other liquid securities having a
market value at all times until the delivery at least equal to the amount of
the forward purchase commitment. As stated in the Prospectus, the Money Fund
may dispose of a commitment prior to settlement. Risks relating to these
trading practices are briefly described in the Prospectus.

INVESTMENT RESTRICTIONS

In addition to the investment restrictions set forth in the Prospectus,
the Fund Money has adopted the following investment restrictions, none of
which may be changed without the approval of a majority of the Money Fund's
outstanding shares, which for this purpose means the vote of (i) 67% or more
of the Money Fund's shares present at a meeting, if the holders of more than
50% of the outstanding shares of the Money Fund are present or represented by
proxy, or (ii) more than 50% of the Money Fund's outstanding shares, whichever
is less. The Money Fund may not:

(1) 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 investments). For purposes of this
restriction, states, municipalities and their political subdivisions are not
considered part of any industry, and investments in mortgage-related or
asset-backed securities shall not be considered investments in the securities
of issuers in a particular industry.

(2) Make investments for the purpose of exercising control or management.

(3) Underwrite securities of other issuers except insofar as the Money
Fund technically may be deemed an underwriter under the Securities Act of
1933, as amended (the "Securities Act"), in selling portfolio securities.

(4) Borrow money except that (i) the Money Fund may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its total
assets (including the amount borrowed), (ii) the Money Fund may borrow up to
an additional 5% of its total assets for temporary purposes, (iii) the Money
Fund may obtain such short-term credit as may be necessary for the clearance
of purchases and sales of portfolio securities, and (iv) the Money Fund may
purchase securities on margin to the extent permitted by applicable law. These
borrowing provisions shall not apply to reverse repurchase agreements as
described in the Prospectus and Statement of Additional Information. The Money
Fund may not pledge its assets other than to secure such borrowings or to the
extent permitted by the Money Fund's investment policies as set forth in its
Prospectus and Statement of Additional Information, as they may be amended
from time to time, in connection with when-issued, reverse repurchase and
forward commitment transactions and similar investment strategies.

(5) Purchase or sell real estate, except that, to the extent permitted by
applicable law, the Money Fund may invest in securities secured by real estate
or interests therein or securities issued by companies that invest in real
estate or interests therein and may hold and sell real estate acquired by the
Money Fund as a result of the ownership securities.

(6) Make loans to other persons, except that the acquisition of bonds,
debentures or other debt securities and investment in government obligations,
commercial paper, pass-through instruments, certificates of deposit, bankers'
acceptances, repurchase agreements or any similar instruments shall not be
deemed to be the making of a loan, and except further that the Money Fund may
lend its portfolio securities, provided that the lending of portfolio
securities may be made only in accordance with applicable law and the
guidelines set forth in the Money Fund's Prospectus and Statement of
Additional Information, as they may be amended from time to time.

(7) Issue senior securities to the extent such issuance would violate
applicable law.

(8) Purchase or sell commodities or contracts on commodities, except to
the extent that the Money Fund may do so in accordance with applicable law and
the Money Fund's Prospectus and Statement of Additional Information, as they
may be amended from time to time, and without registering as a commodity pool
operator under the Commodity Exchange Act.

In addition, the Money Fund has adopted non-fundamental restrictions
which may be changed by the Board of Trustees without approval of the Money
Fund's shareholders. Under the non-fundamental investment restrictions, the
Money Fund may not:

a. Purchase securities of other investment companies, except to the
extent such purchases are permitted by applicable law. As a matter of
policy, however, the Money Fund will not purchase shares of any
registered open-end investment company or registered unit investment
trust in reliance on Section 12(d)(1)(F) or (G) (the "fund of funds"
provisions) of the Investment Company Act, at any time its shares are
owned by another investment company that is part of the same group of
investment companies as the Money Fund.

b. Make short sales of securities or maintain a short position
except to the extent permitted by applicable law. The Money Fund
currently does not intend to engage in short sales.

c. Invest in securities which cannot be readily resold because of
legal or contractual restrictions, or which cannot otherwise be marketed,
redeemed, put to the issuer or to a third party, if at the time of
acquisition more than 10% of its total assets would be invested in such
securities. This restriction shall not apply to securities that mature
within seven days or securities that the Board of Trustees has otherwise
determined to be liquid pursuant to applicable law. Securities purchased
in accordance with Rule 144A under the Securities Act and certain
commercial paper that is exempt from registration pursuant to Section
4(2) of the Securities Act and determined to be liquid by the Board of
Trustees are not subject to the limitations set forth in this investment
restriction.

d. Notwithstanding fundamental investment restriction (4) above,
borrow amounts in excess of 5% of its total assets, taken at acquisition
cost or market value, whichever is lower, and then only from banks as a
temporary measure for extraordinary or emergency purposes. These
borrowing provisions shall not apply to reverse repurchase agreements as
described in the Prospectus and Statement of Additional Information.

Lending of Portfolio Securities. Subject to investment restriction (5)
above, the Money Fund may from time to time lend securities from its portfolio
to brokers, dealers and financial institutions and receive collateral in cash
or securities issued or guaranteed by the U.S. Government which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Such cash collateral will be invested
in short-term securities, the income from which will increase the return to
the Money Fund. Such loans will be terminable at any time. The Money Fund will
have the right to regain record ownership of loaned securities to exercise
beneficial rights. The Money Fund may pay reasonable fees in connection with
the arranging of such loans.

For purposes of the 25% limitation on investment in securities of issuers
in a particular industry, neither all utility companies (including telephone
companies) as a group nor all finance companies as a group will be considered
a single industry.

MANAGEMENT OF THE TRUST

TRUSTEES AND OFFICERS

Information about the Trustees, executive officers and portfolio manager
of the Trust, including their ages and their principal occupations for at
least the last five years is set forth below. Unless otherwise noted, the
address of the portfolio manager and of each Trustee and executive officer is
P.O. Box 9011, Princeton, New Jersey 08543-9011.

ARTHUR ZEIKEL (65)--President and Trustee (1)(2)--Chairman of the
Investment Manager (which term as used herein includes its corporate
predecessors) since 1997; Chairman of MLAM, which term as used herein includes
its corporate predecessors) since 1997; President of FAM and MLAM from 1977 to
1997, Chairman of Princeton Services, Inc. ("Princeton Services") since 1997,
and Director thereof since 1993; President of Princeton Services from 1993 to
1997; Executive Vice President of Merrill Lynch & Co., Inc. ("ML & Co.") since
1990.

JOE GRILLS (62)--Trustee (2)--P.O. Box 98, Rapidan, Virginia 22733.
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 Corporation ("IBM") and Chief
Investment Officer of 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 since 1993; Director, LaSalle Street Fund
since 1995; Director, Kimco Realty Corporation since 1997.

WALTER MINTZ (68)--Trustee (2)--1114 Avenue of the Americas, New York,
New York 10036. Special Limited Partner of Cumberland Associates (investment
partnership) since 1982.

ROBERT S. SALOMON, JR. (61)--Trustee (2)--106 Dolphin Cove Quay,
Stamford, Connecticut 06902. Principal of STI Management (investment adviser);
Chairman and CEO of Salomon Brothers Asset Management Inc. from 1992 until
1995; Chairman of Salomon Brothers equity mutual funds from 1992 until 1995;
Director of Stock Research and U.S. Equity Strategist at Salomon Brothers Inc.
from 1975 until 1991; Director, The Common Fund.

MELVIN R. SEIDEN (67)--Trustee (2)--780 Third Avenue, Suite 2502, New
York, New York 10017. Director 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 (64)--Trustee (2)--24 Federal Street, Suite 400,
Boston, Massachusetts 02110. Chairman of Fernwood Advisors (investment
adviser) since 1996; Principal of Fernwood Associates (financial consultants)
since 1975.

TERRY K. GLENN (57)--Executive Vice President (1)(2)--Executive Vice
President of the Investment Manager and MLAM since 1983; President of the
Distributor since 1986 and Director thereof since 1991; Executive Vice
President and Director of Princeton Services since 1993; President of
Princeton Administrators, L.P. since 1988.

JOSEPH T. MONAGLE, JR. (49)--Senior Vice President (1)(2)--Senior Vice
President of the Investment Manager and MLAM since 1990; Department Head of
the Global Fixed Income Division of the Manager and MLAM since 1997; Senior
Vice President of Princeton Services since 1993.

KEVIN MCKENNA (41)--Senior Vice President (1)(2)--First Vice President of
MLAM since 1997; Vice President of MLAM from 1985 to 1997.

DONALD C. BURKE (37)--Vice President (1)(2)--First Vice President of MLAM
since 1997; Vice President of MLAM from 1990 to 1997; Director of Taxation of
MLAM since 1990.

CARLO J. GIANNINI (54)--Vice President (1)(2)--Vice President of MLAM
since 1981.

GERALD M. RICHARD (48)--Treasurer (1)(2)--Senior Vice President and
Treasurer of the Investment Manager and MLAM since 1984; Vice President of the
Distributor since 1981 and Treasurer thereof since 1984; Senior Vice President
and Treasurer of Princeton Services since 1993.

ROBERT HARRIS (46)--Secretary (1)(2)--First Vice President of MLAM since
1997; Vice President of MLAM from 1984 to 1997 and attorney associated with
MLAM since 1980; Secretary of MLFD since 1982.

- ----------------------------
(1) Interested person, as defined in the Investment Company 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 April 30, 1998, the Trustees and officers of the Trust as a group (13
persons) owned an aggregate of less than 1% of the outstanding shares of
beneficial interest of the Trust. At such date, Mr. Zeikel, an officer and
Trustee of the Trust, and the other officers of the Trust, owned less than 1%
of the outstanding shares of common stock of ML & Co.

COMPENSATION OF TRUSTEES

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 ML & Co. or its
subsidiaries. The Trust pays each Trustee who is not affiliated with the
Investment Manager (each a "non-affiliated Trustee") a fee of [$1,500] per
year plus [$250] per meeting attended and actual out-of-pocket expenses
relating to attendance at such meetings. The Trust also compensates each
member of the Audit Committee, which consists of the non-affiliated Trustees,
an annual fee of [$1,500] per year 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.

The following table sets forth for the fiscal year ended May 31, 1998,
the compensation paid by the Trust to the non-affiliated Trustees and for the
calendar year ended December 31, 1997, the aggregate compensation paid by all
registered investment companies advised by the Investment Manager and its
affiliate, MLAM ("FAM/MLAM Advised Funds"), to the non-affiliated Trustees.

AGGREGATE
COMPENSATION
PENSION OR FROM TRUST AND
RETIREMENT OTHER FAM/MLAM
BENEFITS ADVISED FUNDS
NAME OF COMPENSATION ACCRUED AS PART PAID TO
TRUSTEE FROM THE TRUST (1) OF TRUST EXPENSES TRUSTEES(2)
<S> <C> <C> <C>
Joe Grills............... $5,000 None $171,500
Walter Mintz............. $5,000 None $159,500
Robert S. Salomon, Jr.... $5,000 None $159,500
Melvin R. Seiden......... $5,000 None $159,500
Stephen B. Swensrud...... $5,000 None $175,500
</TABLE>

(1) The amounts shown represent the fees payable if each Trustee attended the
four meetings of the Board and four meetings of the Audit Committee held
during the year. For the fiscal year ended May 31, 1998, the Trustees
waived both their annual and meeting attendance fees. At the date of this
Prospectus such waiver was still in effect, but may be rescinded by the
affirmative vote of a majority of the Trustees at any time.

(2) The Trustees serve on the boards of FAM/MLAM Advised Funds as follows:
Mr. Grills (21 registered investment companies consisting of 49
portfolios); Mr. Mintz (20 registered investment companies consisting of
39 portfolios); Mr. Salomon (20 registered investment companies
consisting of 39 portfolios); Mr. Seiden (20 registered investment
companies consisting of 39 portfolios) and Mr. Swensrud (23 registered
investment companies consisting of 54 portfolios).

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
performs, or arranges for affiliates to perform, pursuant to the Management
Agreement, the management and administrative services necessary for the
operation of the Trust and the Money Fund. The Investment Manager and its
affiliates will provide a variety of administrative and operational services
to shareholders of the Money Fund, including regulatory compliance processing
services related to the purchase and redemption of shares and the general
handling of shareholder relations. 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 Manager provides the Trust and the Money Fund with office
space, equipment and facilities and such other services as the Manager,
subject to supervision and review by the Trustees, shall from time to time
determine to be necessary to perform its obligations under the Management
Agreement.

Securities held by the Money Fund may also be held by, or be appropriate
investments for, other funds or clients (collectively referred to as
"clients") for which the Investment Manager or MLAM acts as an advisor or by
investment advisory clients of MLAM. Because of different investment
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 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 by the Investment Manager or MLAM. 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 its services to the Money Fund under the Investment
Management Agreement with the Trust, the Investment Manager is entitled to
receive a fee from the Money Fund at the end of each month at the annual rate
of 0.50% of average daily net assets of the Money Fund.

The Investment Management Agreement obligates the Investment Manager 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 ML & Co. or any of its subsidiaries. The Money Fund
pays all other expenses incurred in its operation and, if other Series should
be added, a portion of the Trust's general administrative expenses allocated
on the basis of the asset size of the respective Series. Expenses 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, the 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
non-affiliated 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 assessed to the specific series
to which the lawsuit relates 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
Agreements, the Distributor will pay certain of the expenses of each Series
incurred in connection with 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 by it in connection with the offering to
investors. The Distributor will also pay for other supplementary sales
literature. The Distributor will only be responsible for paying such expenses
as are directly related to the sale of Money Fund shares by such Distributor.

The Investment Manager is a limited partnership, the partners of which
are ML & Co. and Princeton Services. ML & Co. and Princeton Services are
"controlling persons" of the Investment Manager (as defined in the Investment
Company Act) because of their ownership of its voting securities or their
power to exercise a controlling influence over its management or policies.

Duration and Termination. Unless earlier terminated as described below,
the Investment Management Agreement will 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
Investment Company Act) of any such party. Such agreement terminates 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.

The Money Fund will offer two classes of shares designated Class A shares
and Class B shares (the "Shares"). Each Class A and Class B share of the Money
Fund represents identical interests in the investment portfolio of the Money
Fund and has the same rights, except that Class B shares bear the expenses of
the ongoing Class B distribution fees. Class B shares have exclusive voting
rights with respect to the Rule 12b-1 distribution plan adopted with respect
to such class pursuant to which distribution fees are paid. Each class has
exchange privileges. See "Exchange Privilege and Exchange Program."

The Money Fund has entered into a separate distribution agreement with
the Distributor in connection with the continuous offering of each class of
shares of the Money Fund (the "Distribution Agreements"). The Distribution
Agreements obligate the Distributor to pay certain expenses in connection with
the offering of each class of shares of the Money Fund. After the
prospectuses, statements of additional information and periodic reports have
been prepared, set in type and mailed to shareholders, the Distributor pays
for the printing and distribution of copies thereof used in connection with
the offering to dealers and investors. The Distributor also pays for other
supplementary sales literature and advertising costs. The Distribution
Agreements are subject to the same renewal requirements and termination
provisions as the Investment Management Agreement described above.

Class B Distribution Plan. Reference is made to "Purchase of
Shares--Distribution Plan" in the Prospectus for certain information with
respect to the distribution plan for Class B shares (the "Class B Distribution
Plan") with respect to the distribution fees paid by the Money Fund to Merrill
Lynch and other selected dealers with respect to such class.

Payments of the distribution fees are subject to the provisions of Rule
12b-1 under the Investment Company Act. Among other things, the Class B
Distribution Plan provides that Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), shall provide and the Trustees shall review
quarterly reports of the disbursement of the distribution fees paid by the
Money Fund. In their consideration of the Class B Plan, the Trustees must
consider all factors they deem relevant, including information as to the
benefits of the Class B Distribution Plan to the Money Fund and to the Class B
shareholders. The Class B Distribution Plan further provides that, so long as
the Plan remains in effect, the selection and nomination of Trustees who are
not "interested persons" of the Trust, as defined in the Investment Company
Act (the "Independent Trustees"), shall be committed to the discretion of the
Independent Trustees then in office. In approving the Class B Distribution
Plan in accordance with Rule 12b-1, the Independent Trustees concluded that
there is a reasonable likelihood that such Plan will benefit the Money Fund
and its Class B shareholders. The Class B Distribution Plan can be terminated
at any time, without penalty, by the vote of a majority of the Independent
Trustees or by the vote of the holders of a majority of the outstanding Class
B voting securities of the Money Fund. The Class B Distribution Plan cannot be
amended to increase materially the amount to be spent by the Money Fund
without the approval of the Class B shareholders, and all material amendments
are required to be approved by the vote of the Trustees, including a majority
of the Independent Trustees who have no direct or indirect financial interest
in such Distribution Plan, cast in person at a meeting called for that
purpose. Rule 12b-1 further requires that the Trust preserve copies of the
Class B Distribution Plan and any report made pursuant to such plan for a
period of not less than six years from the date of such Distribution Plan or
such report, the first two years in an easily accessible place.

Limitations on the Payment of Deferred Sales Charges. The maximum sales
charge rule in the Conduct of Rules of the National Association of Securities
Dealers, Inc. ("NASD") imposes a limitation on certain asset-based sales
charges such as the distribution fee borne by the Class B shares. As
applicable to the Class B shares, the maximum sales charge rule limits the
aggregate of distribution fee payments payable by the Money Fund to (1) 6.25%
of eligible gross sales of Class B shares (defined to exclude shares issued
pursuant to dividend reinvestments and exchanges), plus (2) interest on the
unpaid balance for Class B, at the prime rate plus 1% (the unpaid balance
being the maximum amount payable minus amounts received from the payment of
the distribution fee, except that maximum aggregate sales charges may be
increased to include sales charges of shares issued pursuant to the exchange
privilege, provided that such increase is deducted from the maximum aggregate
sales charges of the fund which redeemed the shares for the purpose of the
exchange).

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 ("NYSE") is closed, other than customary
weekend and holiday closings or (B) during which trading on the NYSE 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 value of the net assets of the Money Fund; or (3) for
such other periods as the 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 or her cost, depending on the market value of the
securities held by the Money Fund at such time and income earned. In the case
of Class B Shares, the redemption price will be reduced by any applicable
CDSC.

In the interest of economy and convenience and because of the operating
procedures of the Fund, certificates representing the Fund's shares will not
be physically issued. Shares will be maintained by the Fund on the register
maintained by the Transfer Agent, and the holders thereof will have the same
rights of ownership with respect to such shares as if certificates had been
issued.

EXCHANGE PRIVILEGE AND EXCHANGE PROGRAM

EXCHANGE PRIVILEGE

Class A shareholders of the Money Fund who acquired their Money Fund
Shares upon an exchange from Class A or Class D shares of certain mutual funds
advised by the Investment Manager or MLAM (collectively referred to as the
"MLAM-advised funds") will have an exchange privilege with Class A or Class D
shares of certain MLAM-advised funds. Shareholders may exchange Class A Shares
of the Money Fund for Class A shares of one of the MLAM-advised funds if the
shareholder holds any Class A shares of that fund in the account in which the
exchange is to be made at the time of the exchange or is otherwise eligible to
invest in Class A shares of such fund. Otherwise Class D shares will
automatically be purchased. An eligible Class A investor includes the
following: certain employer sponsored retirement or savings plans, including
eligible 401(k) plans, provided such plans meet the required minimum number of
eligible employees or required amount of assets advised by MLAM or any of its
affiliates, corporate warranty insurance reserve fund programs provided that
the program has $3 million or more initially invested in MLAM-advised funds,
participants in certain investment programs including TMASM Managed Trusts to
which Merrill Lynch Trust Company provides discretionary trustee services and
certain purchases made in connection with the Merrill Lynch Mutual Fund
Advisor (Merrill Lynch MFASM ) program; and ML & Co. and its subsidiaries and
their directors and employees and members of the Boards of MLAM-advised
investment companies, including the Money Fund.

Class B shareholders of the Money Fund who acquired their Money Fund
Shares upon an exchange from Class B or Class C shares of certain MLAM-advised
funds will have an exchange privilege with Class B or Class C shares of
certain MLAM-advised funds. When a stockholder exchanges Class B or Class C
shares of a MLAM-advised fund for Class B shares of the Money Fund, the period
of time that the stockholder holds the Money Fund Class B shares will count
towards satisfaction of the holding period requirement for purposes of
reducing the CDSC relating to those Class B or Class C shares. With respect to
exchanges of Class B shares of a MLAM-advised fund, the period of time the
Money Fund Class B shares are held will also count towards satisfaction of the
conversion period (the length of time until Class B shares are automatically
converted into Class D shares).

Shares with net asset value of at least $250 are required to qualify for
the exchange privilege and any shares utilized in an exchange must have been
held by the shareholder for at least 15 days. It is contemplated that the
exchange privilege may be applicable to other new mutual funds whose shares
are distributed by the Distributor.

Under the exchange privilege exchanges are made on the basis of relative
net asset values of the shares being exchanged. Shares issued pursuant to
dividend reinvestment are sold on a no-load basis in each of the MLAM-advised
funds. For purposes of the exchange privilege, dividend reinvestment shares
shall be deemed to have been sold with a sales charge equal to the shares
charge previously paid on the shares on which the dividend was paid. Based on
this formula an exchange of shares of the Money Fund for shares of a
MLAM-advised fund generally will require the payment of a sales charge equal
to the difference, if any, between the sales charge previously paid on the
shares originally exchanged for Money Fund Shares and the sales charge payable
at the time of the exchange on the shares of the MLAM-advised fund to be
acquired.

EXCHANGE PROGRAM

The Money Fund participates in an exchange program with certain non-money
market open-end management investment companies for which Merrill Lynch serves
as selected dealer which are not advised by the Investment Manager or MLAM,
and are not distributed by MLFD (each referred to as a "Participating Fund").
The exchange program is available to investors who purchase shares of a
Participating Fund through Merrill Lynch. Exchanges may be made into Class A
shares of the Money Fund at net asset value without the imposition of a
front-end sales load ("FESL") or a contingent deferred sales charge ("CDSC").
Shares of a Participating Fund that are subject to a FESL will be exchanged
for Class A Shares of the Money Fund without the imposition of a sales charge.
The holder of such Class A shares may subsequently either exchange back into
the same shares of the Participating Fund without incurring any FESL or
exchange into shares of another Participating Fund subject to a FESL in the
same fund complex as the original Participating Fund by remitting an amount
equal to the difference, if any, between the FESL previously paid on the
shares of the original Participating Fund and the FESL payable at the time of
the exchange on the shares of the new Participating Fund.

Exchanges may be made into Class B shares of the Money Fund at net asset
value without the imposition of a FESL. Shares of Participating Funds subject
to a CDSC will be exchanged for Class B shares of the Money Fund without the
payment of a CDSC that might otherwise be due on redemption of the
Participating Fund shares. The holder of Money Fund Class B shares may
subsequently either exchange back into the same shares of the Participating
Fund or exchange into shares of another Participating Fund in the same fund
complex as the original Participating Fund. Upon such exchange, the holder of
the Money Fund Class B shares will receive credit toward reduction of the CDSC
that would have been due on the Participating Fund shares for the time period
during which the Money Fund Class B shares were held. This period of time will
also count towards satisfaction of any conversion period applicable to the
Participating Fund shares. If holders of the Money Fund's Class B Shares
redeem those shares instead of exchanging back into the shares of the original
Participating Fund or another Participating Fund in the same fund complex,
CDSC payments, if any, will be assessed based upon the combined holding period
for the Participating Fund shares and the Money Fund Shares.

The Participating Funds may impose administrative and/or redemption fees
on an exchange transaction with the Money Fund. There will be no sales charge
on exchange transactions into the Money Fund.

Shares with a net asset value of at least $250 are required to qualify
for the exchange program into the Money Fund and any shares utilized in an
exchange must have been held by the shareholder for at least 15 days.

--------------------------------

Before effecting an exchange, shareholders of the Money Fund should
obtain a currently effective prospectus of the Participating Fund or
MLAM-advised fund into which the exchange is to be made for information
regarding the fund and for further details regarding such exchange.

To effect an exchange, shareholders should contact their Merrill Lynch
Financial Consultant, who will advise the Money Fund of the exchange, or write
to the Transfer Agent requesting that the exchange be effected. Shareholders
of Participating Funds and certain MLAM-advised funds with shares for which
certificates have not been issued may effect an exchange by wire through their
securities dealers. The exchange program or the exchange privilege may be
modified or terminated at any time in accordance with the rules of the
Commission. There is currently no limitation on the number of times a
shareholder may exercise the exchange privilege into the Money Fund; however,
the Money Fund reserves the right to limit the number of times an investor may
effect an exchange. Certain Participating Funds and MLAM-advised funds may
suspend the continuous offering of their shares at any time and thereafter may
resume such offering from time to time. The exchange program and the exchange
privilege are available only to U.S. shareholders in states where the exchange
legally may be made.

An exchange pursuant to the exchange privilege or pursuant to the
Exchange Program is treated as a sale of the exchanged shares and a purchase
of the new shares for Federal income tax purposes and depending on the
circumstances, a short or long-term capital gain or loss may be realized with
different long-term capital gains rates potentially applicable, if gain on the
sale is long-term. In addition, an exchanging shareholder of any of the funds
may be subject to backup withholding unless such shareholder certifies under
penalty of perjury that the taxpayer identification number on file with any
such fund is correct, and that he or she is not otherwise subject to backup
withholding. See "Taxes."

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 policies established by the Board of Trustees and officers 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 ("OTC") market. Bonds and debentures are
usually traded OTC 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. Such dealers usually act as principal for their own
accounts. On occasion, securities may be purchased directly from the issuer.
Money market securities in which the Money Fund invests 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 Investment Company 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 Commission. Since OTC transactions are
usually principal transactions, affiliated persons of the Trust, including
Merrill Lynch, Merrill Lynch Government Securities Inc. ("GSI") 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 OTC
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.

The 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, with GSI in U.S. Government securities and
U.S. Government agency securities and with a subsidiary of Merrill Lynch, GSI
("MMI"), 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
Merrill Lynch, GSI or MMI is equal to or better than that available from other
sources. GSI and MMI have informed the Trust 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 MMI, 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 MMI on transactions conducted
pursuant to the exemptive order described above could be offset against the
management and administrative fees payable by the Money Fund to the Investment
Manager. 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.

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, on each business day during which the New York Stock Exchange
("NYSE") is open for business. Such determination is made as of the, close of
business on the NYSE (generally 4:00 P.M., New York time). As a result of this
procedure, the net asset value is determined each business day except for days
on which the NYSE is closed. The NYSE is closed on New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. 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 OTC 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 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 Securities and U.S. Government agency securities, which may have
remaining maturities of up to 762 days (25 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 Investment 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 "penny-rounded" net asset value of
$1.00 per share, the shareholders will contribute proportionately to the Money
Fund's capital. Each shareholder will be deemed to have agreed to such
contribution by such shareholder's investment in the Money Fund.

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 the
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 gains and losses on portfolio securities. In accordance with
regulations adopted by the 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 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.

The yield on the Money Fund's 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 yield is affected by such factors as changes in interest rates on
securities, average portfolio maturity, the types and quality of portfolio
securities held and operating expenses. The yield on Money Fund shares for
various reasons may not be comparable to the yield on shares of other money
market funds or other investments.

TAXES

FEDERAL

Regulated Investment Companies. The following is a general summary of the
treatment of regulated investment companies ("RICs") and their shareholders
under the Internal Revenue Code (the "Code"). The Trust intends to continue to
qualify the Money Fund for the special tax treatment afforded RICs under the
Code. As long as 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 that 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 or from an
excess of net short-term capital gains over net long-term capital losses,
(together referred to hereafter as "ordinary income dividends") are taxable to
shareholders as ordinary income. Distributions made from an excess of net
long-term capital gains over net short-term capital losses ("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
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). Recent legislation creates additional categories of capital
gain taxable at different rates. Generally not later than 60 days after the
close of its taxable year, the Money Fund will provide its shareholders with a
written notice designating the amounts of any ordinary income dividends or
capital gain dividends, as well as the amounts of capital gain dividends in
the different categories of capital gain referred to above.

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.

Ordinary income dividends paid 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.

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.

The Code requires a 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. While the Money Fund intends to
distribute its income and capital gains in the manner necessary to minimize
imposition of the 4% excise tax, there can be no assurance that sufficient
amounts of the Money Fund's taxable income and capital gains will be
distributed to avoid entirely the imposition of the tax. In such event, the
Money Fund will be liable for the tax only on the amount by which it does not
meet the foregoing distribution requirements.

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, judicial or
administrative action either prospectively or retroactively.

Ordinary income dividends and capital gain dividends may also be subject
to state and local taxes.

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.

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
that 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 different classes 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. Shareholder
approval is not necessary for the authorization of additional Series or
classes of a Series of the Trust. At the date of this Statement of Additional
Information, the Money Fund is the only existing Series of the Trust, and
shares of the Money Fund are divided into Class A and Class B shares (although
no Class B shares have been issued). Class A and Class B shares represent an
interest in the same assets of the Money Fund and are identical in all
respects, except that Class B shares bear certain expenses related to the
distribution of such shares and have exclusive voting rights with respect to
matters relating to such distribution expenditures. The Board of Trustees of
the Trust may classify and reclassify shares of any Series into additional
classes at a future date. 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. 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 except under certain
limited circumstances set forth in the Declaration of Trust.

INVESTMENT ACCOUNT

Every direct shareholder has an Investment Account and will receive
quarterly reports showing the activity in his account since the preceding
statement. A shareholder may ascertain the number of shares in his Investment
Account by telephoning the Transfer Agent at 800-MER-FUND or (800-637-3863).
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 the 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.

CUSTODIAN

The Bank of New York (the "Custodian"), 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

Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent"), 4800
Deer Lake Drive East, Jacksonville, Florida 32246-6484, a subsidiary of ML &
Co., 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

________________________________, have been selected as the independent
auditors of the Money Fund. The selection of independent auditors is subject
to ratification by the independent Trustees of the Trust. The independent
auditors are responsible for auditing the financial statements of the Money
Fund.

LEGAL COUNSEL

Brown & Wood LLP, One World Trade Center, New York, New York 10048, is
counsel for the Trust.

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 of the information set
forth in the Registration Statement and the exhibits relating thereto, which
the Trust has filed with the 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.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

At April 30, 1998 all 251,623.610 outstanding shares of the Money Fund
were owned by the Investment Manager.

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.

APPENDIX

DESCRIPTION OF COMMERCIAL PAPER, BANK MONEY INSTRUMENTS
AND CORPORATE BOND RATINGS

COMMERCIAL PAPER AND BANK MONEY INSTRUMENTS

Commercial paper with the greatest capacity for timely payment is rated A
by Standard & Poor's Ratings Services ("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 that capacity for timely
repayment is strong.

Moody's Investors Service, Inc. ("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.

Fitch IBCA, Inc. ("Fitch") employs the rating F1+ to
indicate issues regarded as having the strongest degree of assurance for
timely payment. The rating F1 reflects an assurance of timely payment only
slightly less in degree than issues rated F1+, while the rating F2 indicates
a satisfactory degree of assurance for timely payment, although the margin of
safety is not as great as indicated by the F1+ and F1 categories.

Duff & Phelps Credit Rating Co. ("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.

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 a 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 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.

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 , 1998. 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
based on our audit..

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. 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 present fairly, in all material
respects, the financial position of Summit Cash Reserves Fund of Financial
Institutions Series Trust at , 1998 in conformity with generally accepted
accounting principles.

____________________, 1998

- ------------------------------------------ ---------------------------------

Statement of
Additional Information

TABLE OF CONTENTS

Page

Investment Objectives and Policies......1
Investment Restrictions...............2

Management of the Trust.................4 SUMMIT CASH
Trustees and Officers................4 RESERVES FUND
Compensation of Trustees.............6
Management and Advisory
Arrangements.......................6
Purchase of Shares......................8
Redemption of Shares....................9
Exchange Privilege and Exchange
Program..............................10
Exchange Privilege...................10
Exchange Program.....................11
Portfolio Transactions.................12
Determination of Net Assets............13
Yield Information......................14
Taxes..................................15
Federal............................15
General Information....................17
Description of Series..............17 Principal Office of the Trust:
Investment Account.................18 800 Scudders Mill Road
Custodian..........................18 Plainsboro, New Jersey 08536
Transfer Agent.....................18
Independent Auditors...............18 Mailing Address:
Legal Counsel......................18 P.O. Box 9011
Reports to Shareholders............19 Princeton, New Jersey 08543-9011
Additional Information.............19
Security Ownership of Certain
Beneficial Owners....................19
Appendix...............................20
Independent Auditors' Report...........22
Financial Statements...................23 May 28, 1998

Code #

- ----------------------------------------- --------------------------------

PART C. OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(A) FINANCIAL STATEMENTS:

Contained in Part A:
Financial Highlights for the ten-year period ended May 31, 1997

Contained in Part B:

Report of Independent Auditors

Schedule of Investments as of May 31, 1997
Statement of Assets and Liabilities as of May 31, 1997
Statement of Operations for the fiscal year ended May 31, 1997
Statement of Changes in Net Assets for each of the years in the
ten-year period ended May 31, 1997
Financial Highlights for each of the years in the ten-year period
ended May 31, 1997.

(B) EXHIBITS:

EXHIBIT NUMBER DESCRIPTION

1 (a) -- Declaration of Trust, dated July 10, 1987.(a)

(b) -- Instrument establishing Summit Cash Reserves Fund (the "Fund")
as a series of the Registrant.(a)
(c) -- Certificate of Amendment to Declaration of Trust and
Establishment and Designation of Classes.*
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.(b)
5 -- Investment Management Agreement between Registrant and Fund
Asset Management, L.P. relating to the Fund.*
6 (a) -- Form of Class A Shares Distribution Agreement relating to the
Fund (including form of Selected Dealers Agreement) between
Registrant and Merrill Lynch Funds Distributor, Inc.
("MLFD").*
(b) -- Form of Class B Shares Distribution Agreement relating to the
Fund (including form of Selected Dealers Agreement) between
Registrant and MLFD.*
7 -- None.
8 -- Custody Agreement between Registrant and The Bank of New York
relating to the Fund.(a)
9 -- Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement between Registrant and Merrill Lynch
Financial Data Services, Inc. relating to the Fund.(a)
10 -- None.
11 -- Consent of _____________________, independent auditors for the
Registrant.*
12 -- None.
13 -- Certificate of Fund Asset Management, L.P. relating to the
Fund.(a)
14 -- None.
15 (a) -- Form of Class B Shares Distribution Plan (including form of
Class B Shares Distribution Plan Sub-Agreement) relating to the
Fund.*
16 -- Schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 22.(a)
17 -- Financial Data Schedule.*
18 -- Plan Pursuant to Rule 18f-3.*

- -------------
(a) Refiled pursuant to the Electronic Data Gathering, Analysis and Retrieval
("EDGAR") phase in requirements.

(b) 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 Certificate of Amendment to the Declaration of Trust and
Establishment and Designation of Classes, which will be filed as Exhibit
1(c) 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.

* To be filed by amendment.

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.

NUMBER OF
HOLDERS AT
TITLE OF CLASS APRIL 30,1998

Shares of beneficial interest, par value $.10 per share 1

Note: The number of holders shown above includes holders of record plus
beneficial owners whose shares are held of record by Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch").

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 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 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. ("FAM" or the "Investment Manager") acts as
the investment adviser for the following open-end registered investment
companies: 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., Merrill Lynch Basic Value Fund,
Inc., Merrill Lynch California Municipal Series Trust, Merrill Lynch Corporate
Bond Fund, Inc., Merrill Lynch Emerging Tigers 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. and The Municipal Fund Accumulation Program, Inc.; and for the following
closed-end registered investment companies: Apex Municipal Fund, Inc.,
Corporate High Yield Fund, Inc., Corporate High Yield Fund II Inc., Corporate
High Yield Fund III, Inc., Debt Strategies Fund Inc., Debt Strategies Fund II,
Inc., Income Opportunities Fund 1999, Inc., Income Opportunities Fund 2000,
Inc., Merrill Lynch Municipal Strategy Fund, Inc., MuniAssets Fund, Inc.,
MuniEnhanced Fund, Inc., MuniHoldings California Insured Fund, Inc.,
MuniHoldings California Insured Fund II, Inc., MuniHoldings Florida Insured
Fund, MuniHoldings Florida Insured Fund II, MuniHoldings Fund, Inc.,
MuniHoldings Fund II, Inc., MuniHoldings New Jersey Insured Fund, Inc.,
MuniHoldings New York Fund, Inc., MuniHoldings New York Insured Fund, Inc.,
MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II Inc., MuniVest
Florida Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund,
Inc., MuniVest Pennsylvania Insured Fund, MuniYield Arizona Fund, 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 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 Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield
Quality Fund II Inc., Senior High Income Portfolio, 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
registered open-end investment companies: Merrill Lynch Adjustable Rate
Securities Fund, Inc., Merrill Lynch Americas Income Fund, Inc., Merrill Lynch
Asset Builder Program, Inc., Merrill Lynch Asset Growth Fund, Inc., Merrill
Lynch Asset Income Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill Lynch
Convertible 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 Growth Fund, Inc., Merrill Lynch Global Holdings, Inc., Merrill Lynch
Global Resources Trust, Merrill Lynch Global Small Cap Fund, Inc., Merrill
Lynch Global Utility Fund, Inc., Merrill Lynch Global Value Fund, Inc.,
Merrill Lynch Growth Fund, Inc., Merrill Lynch Healthcare Fund, Inc., Merrill
Lynch Intermediate Government Bond Fund, Merrill Lynch International Equity
Fund, Merrill Lynch Latin America Fund, Inc., Merrill Lynch Middle East/Africa
Fund, Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch Pacific Fund,
Inc., Merrill Lynch Ready Assets Trust, Merrill Lynch Real Estate Fund, Inc.,
Merrill Lynch Retirement Series Trust, 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., Merrill Lynch Variable Series Funds, Inc. and
Hotchkis and Wiley Funds (advised by Hotchkis and Wiley, a division of MLAM);
and for the following closed-end registered investment companies: Merrill
Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch Senior Floating
Rate Fund., Inc., and Merrill Lynch Municipal Strategy Fund, Inc. MLAM also
acts as sub-adviser to Merrill Lynch World Strategy Portfolio and Merrill
Lynch Basic Value Equity Portfolio, two investment portfolios of EQ Advisors
Trust.

The address of each of these investment companies is P.O. Box 9011,
Princeton, New Jersey 09543-9011, except that the address of Merrill Lynch
Funds for Institutions Series and Merrill Lynch Government Bond Intermediate
Fund is One Financial Center, 23rd Floor, Boston, Massachusetts 02111-2665.
The address of the Investment Manager, MLAM and Merrill Lynch Funds
Distributor, Inc. (the "Distributor") is also P.O. Box 9081, Princeton, New
Jersey 08543-9081. The address of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and Merrill Lynch & Co., Inc. ("ML & Co.") is
World Financial Center, North Tower, 250 Vesey Street, New York, New York
10281. The address of Merrill Lynch Financial Data Services, Inc. is 4800 Deer
Lake Drive East, Jacksonville, Florida 32246-6494.

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, 1995 for his or her or its own account or in the capacity of director,
officer, partner or trustee. In addition, Mr. Zeikel is President and Director
or Trustee, Mr. Richard is Treasurer and Mr. Glenn is Executive Vice President
of substantially all of the investment companies described in the first two
paragraphs of this Item 28 and also hold the positions with all or
substantially all of the registered investment companies advised by MLAM as
they do with those advised by the Investment Manager. Messrs. Giordano,
Harvey, Kirstein and Monagle are directors or officers of one or more of such
companies.

NAME POSITION WITH OTHER SUBSTANTIAL BUSINESS,
INVESTMENT MANAGER PROFESSION, VOCATION OR EMPLOYMENT

<S> <C> <C>
ML & Co................................. Limited Partner Financial Services Holding Company; Limited Partner
of MLAM
Princeton Services, Inc. ............... General Partner General Partner of MLAM
Arthur Zeikel........................... Chairman Chairman of MLAM; President of MLAM and the
Investment Manager from 1977 to 1997; Chairman
and Director of Princeton Services; President
of Princeton Services from 1993 to 1997;
Executive President of ML & Co.

Jeffrey M. Peek......................... President President of MLAM; President and Director of
Princeton Services; Executive Vice President
of ML & Co.; Managing Director and Co-Head of
the Investment Banking Division of Merrill
Lynch in 1997; Senior Vice President and
Director of the Global Securities and
Economics Division of Merrill Lynch from
1995-1997.
Terry K. Glenn.......................... Executive Vice President Executive Vice President of MLAM; Executive Vice
President and Director of Princeton
Services; President and Director of MLFD;
Director of MLFDS; President of
Princeton Administrators, L.P.
Linda L. Federici....................... 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 A. Griffin.................... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Norman R. Harvey........................ Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Michael J. Hennewinkel.................. 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 Secretary of MLAM; Senior Vice President,
General Counsel, Director and Secretary of
Princeton Services
Ronald M. Kloss......................... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Debra W. Landsman-Yaros................. Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services; Vice
President of MLFD
Joseph T. Monagle, Jr. ................. Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Michael L. Quinn........................ Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services; Managing
Director and First Vice President of Merrill
Lynch from 1989 until 1995

Richard L. Reller....................... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services; Director of
MLFD
Gerald M. Richard....................... Senior Vice President and Senior Vice President and Treasurer of MLAM; Senior
Treasurer Vice President and Treasurer of Princeton
Services; Vice President and Treasurer of MLFD
Gregory D. Upah......................... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Ronald L. Welburn....................... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
</TABLE>

ITEM 29. PRINCIPAL UNDERWRITERS

(a) MLFD acts as the principal underwriter for the Registrant, for each
of the open-end registered investment companies referred to in the first two
paragraphs of Item 28 except 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. and The Municipal
Fund Accumulation Program, Inc.; and MLFD also acts as the principal underwriter
for the following closed-end registered investment companies: Merrill Lynch High
Income Municipal Bond Fund, Inc. Merrill Lynch Municipal Strategy Fund, Inc. and
Merrill Lynch Senior Floating Rate 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 9081, Princeton, New Jersey 08543-9081, except that the address of Messrs.
Aldrich, Breen, Crook, Fatseas and Wasel is One Financial Center, 23rd Floor,
Boston, Massachusetts 02111-2665.

<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH DISTRIBUTOR WITH REGISTRANT
------------------------- ------------------------------------------- ------------------------

<S> <C> <C>
Terry K. Glenn President and Director Executive Vice President
Richard L. Reller Director None
Thomas J. Verage Director None
William E. Aldrich Senior Vice President None
Robert W. Crook Senior Vice President None
Michael J. Brady Vice President None
William M. Breen Vice President None
Michael G. Clark Vice President None
James T. Fatseas Vice President None
Debra W. Landsman-Yaros Vice President None
Michelle T. Lau Vice President None
Gerald M. Richard Vice President and Treasurer Treasurer
Salvatore Venezia Vice President None
William Wasel Vice President None
Robert Harris Secretary Secretary

</TABLE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules thereunder will be maintained at the
offices of the Registrant, 800 Scudders Mill Road, Plainsboro, New Jersey 08536
and the Transfer Agent, 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484.

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.

(a) Not applicable.

(b) Not applicable.

(c) Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT HAS DULY CAUSED THIS
POST-EFFECTIVE AMENDMENT TO THE 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 28TH DAY OF MAY, 1998.

FINANCIAL INSTITUTIONS SERIES TRUST

(Registrant)

By /s/ GERALD M. RICHARD
-------------------------------------------------
(Gerald M. Richard, Treasurer)

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.

SIGNATURE TITLE DATE
--------- ----- ----

ARTHUR ZEIKEL* President and Trustee May 28, 1998
- ------------------------- (Principal Executive Officer)
(Arthur Zeikel)

GERALD M. RICHARD* Treasurer (Principal Financial May 28, 1998
- ------------------------- and Accounting Officer)
(Gerald M. Richard

JOE GRILLS* Trustee May 28, 1998
- -------------------------
(Joe Grills)

WALTER MINTZ* Trustee May 28, 1998
- -------------------------
(Walter Mintz)

ROBERT S. SALOMON, JR.* Trustee May 28, 1998
- -------------------------
(Robert S. Salomon, Jr.)

MELVIN R. SEIDEN* Trustee May 28, 1998
- -------------------------
(Melvin R. Seiden)

STEPHEN B. SWENSRUD* Trustee May 28, 1998
- -------------------------
(Stephen B. Swensrud)

*By /s/ GERALD M. RICHARD May 28, 1998
- -------------------------
(Gerald M. Richard,
Attorney-in-Fact)

EXHIBIT INDEX

[TO BE INSERTED]

EXHIBIT 11

INDEPENDENT AUDITORS' CONSENT

Summit Cash Reserves Fund
of Financial Institutions Series Trust:

We consent to the use in Post-Effective Amendment No. 16 to Registration
Statement No. 2-78646 of our report dated _________, 1998 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.

May 28, 1998