SUMMIT
CASH RESERVES
FUND
Financial Institutions
Series Trust
FUND LOGO
Annual Report
May 31, 1999
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance, which will fluctuate. An
investment in the Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other Government agency.
Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the
Fund. Statements and other information herein are as dated and are
subject to change.
Summit Cash Reserves Fund
Financial Institutions Series Trust
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Summit Cash Reserves Fund
May 31, 1999
DEAR SHAREHOLDER
For the year ended May 31, 1999, Summit Cash Reserves Fund's Class A
Shares had a net annualized yield of 5.57%. Since inception (October
9, 1998) through May 31, 1999, the Fund's Class B Shares had a net
annualized yield of 4.08%.
For the six-month period ended May 31, 1999, Summit Cash Reserves
Fund's Class A and Class B Shares had a net annualized yield of
4.80% and 4.03%, respectively. The Fund's 7-day yield as of May 31,
1999 was 4.51% for Class A Shares and 3.71% for Class B Shares.
The average portfolio maturity for Summit Cash Reserves Fund at May
31, 1999 was 69 days, compared to 60 days as of November 30, 1998.
The Environment
There were some conflicting signals regarding the future direction
of the US economy during the six months ended May 31, 1999. However,
on balance the economic outlook continued to be positive. The US
economic expansion is ongoing, especially in the consumer sector.
Economic growth is not occurring at inflationary rates, although the
Organization of Petroleum Exporting Countries (OPEC) successfully
engineered a near-term increase in the price of crude oil. Against
this backdrop, the US Federal Reserve Board kept monetary policy on
hold, although it recently moved toward a tightening bias. Outside
of the United States, signs of growth are less apparent in other
major industrial economies. Although the crisis in Yugoslavia has
raised serious geopolitical concerns, it was not a significant
factor in the economic or investment outlook. In Japan, there are
not yet clear signs that Japan's economy is improving. There were
growing signs of improvement in some emerging economies (most
notably South Korea and Mexico), although concerns remain for others
(such as Brazil and Argentina).
In the US capital markets, long-term interest rates rose during the
six-month period. Although the spread between yields on Treasury
securities and corporate issues of similar maturities has narrowed
somewhat, it remains wide by historic standards. While the US stock
market exhibited greater price volatility, its advances broadened
beyond relatively few growth stocks to the previously languishing
cyclical sectors.
Throughout the six-month period ended May 31, 1999, we maintained a
constructive view on the market. More recently, we reduced the
Fund's average days to maturity to prepare for a tightening of
monetary policy. This move proved correct as the Federal Reserve
Board raised the Federal Funds rate by 0.25% on June 30, 1999.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Trustee
(Carlo J. Giannini)
Carlo J. Giannini
Vice President and Portfolio Manager
July 13, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on Summit Cash Reserves Fund's Board
of Trustees. We are pleased to announce that Terry K. Glenn has been
elected President and Trustee of the Fund. Mr. Glenn has held the
position of Executive Vice President of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Trustees in
wishing him well in his retirement from Merrill Lynch and are
pleased that he will continue as a member of the Fund's Board of
Trustees.
Summit Cash Reserves Fund
May 31, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
Bank Notes--1.8%
First Union $ 2,000 5.02 %++ 11/16/99 $ 2,000
National Bank
NationsBank NA 2,000 4.92++ 3/16/00 2,000
Total Bank Notes
(Cost--$4,000) 4,000
Certificates of Deposit--European--0.5%
Abbey National 1,000 4.931++ 11/01/99 1,000
Treasury Services
Plc, London
Total Certificates of Deposit--European
(Cost--$1,000) 1,000
Certificates of Deposit--Yankee--8.0%
Bank Austria, NY 3,000 5.20 5/08/00 2,991
Bayerische Hypo-und 2,000 5.15 3/23/00 1,995
Vereinsbank AG, NY
Commerzbank 2,000 5.085 2/17/00 1,994
AG, NY 2,000 5.17 3/31/00 1,995
Societe 2,000 5.16 2/22/00 1,995
Generale, NY 2,000 5.18 2/28/00 1,995
2,000 5.29 3/03/00 1,997
UBS AG, NY 3,000 5.18 3/15/00 2,993
Total Certificates of Deposit--Yankee
(Cost--$17,993) 17,955
Commercial Paper--72.5%
Alpine Securitization 4,000 4.82 6/11/99 3,995
Corporation
American Express 3,100 4.82 6/07/99 3,098
Credit Corporation
Amsterdam 6,900 4.84 6/24/99 6,879
Funding Corp.
BankAmerica 3,000 4.79 10/05/99 2,950
Corporation
Bear Stearns 5,000 4.84 7/12/99 4,972
Companies, Inc.
CXC Incorporated 7,000 4.84 7/09/99 6,964
Edison Asset 7,673 4.84 7/16/99 7,626
Securitization, LLC 3,000 4.83 8/06/99 2,973
Eureka 2,000 4.87 7/28/99 1,985
Securitization Inc.
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
Commercial Paper (concluded)
Export $ 9,605 4.95 % 6/01/99 $ 9,605
Development Corp.
Falcon Asset 2,025 4.90 6/01/99 2,025
Securitization Corp.
Finova Capital 5,500 4.83 6/04/99 5,498
Corp. 3,500 4.84 6/04/99 3,498
1,700 4.87 9/24/99 1,673
Fleet Funding Corp. 10,000 4.81 6/16/99 9,980
Goldman Sachs 5,000 4.88 6/21/99 4,986
Group, Inc.
Grand Funding 10,000 4.83 7/09/99 9,949
Corp.
International 5,051 4.83 7/16/99 5,020
Securitization Corp. 5,000 4.82 8/06/99 4,955
Knight-Ridder, Inc. 6,000 4.83 7/13/99 5,966
Lehman Brothers 3,000 5.04 6/08/99 2,997
Holdings Inc.
Mont Blanc Capital 5,681 4.87 6/04/99 5,679
Corp.
Park Avenue 5,000 4.82 7/19/99 4,967
Receivables Corp. 5,000 4.83 7/22/99 4,965
Rio Tinto 2,000 4.84 6/25/99 1,994
America Inc.
Thames Asset Global 6,059 4.83 7/15/99 6,023
Securitization
Tulip Funding Corp. 4,000 4.83 7/14/99 3,977
6,000 4.85 7/14/99 5,965
Unifunding, Inc. 5,000 4.82 7/21/99 4,966
5,000 4.80 8/05/99 4,956
Variable Funding 11,000 4.86 6/18/99 10,975
Capital Corp.
Total Commercial Paper (Cost--$162,066) 162,061
Corporate Notes--8.1%
The CIT Group 2,000 4.905++ 5/30/00 1,999
Holdings, Inc.
Citicorp 3,000 5.248++ 11/23/99 3,003
Ford Motor Credit 2,456 7.50 11/15/99 2,504
Company 1,500 7.50 4/06/00 1,524
1,000 4.95++ 5/05/00 1,000
General Electric 3,000 4.95++ 5/12/00 3,000
Capital Corp.
Summit Cash Reserves Fund
May 31, 1999
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
Corporate Notes (concluded)
General Motors $ 1,000 6.05 % 10/04/99 $ 1,003
Acceptance Corp. 1,000 8.40 10/15/99 1,011
2,000 4.975++ 2/03/00 2,000
Wells Fargo & Co. 1,000 5.225 4/10/00 997
Total Corporate Notes
(Cost--$18,024) 18,041
Funding Agreements--0.5%
Jackson National 1,000 4.991++ 2/01/00 1,000
Life Insurance Co.
Total Funding Agreements
(Cost--$1,000) 1,000
Medium-Term Notes--1.7%
Deutsche-Bank 1,000 5.397++++ 2/01/00 965
AG, NY
Ford Motor Credit 2,500 6.375++ 4/03/00 2,515
Company
Toronto-Dominion 300 6.50 3/27/00 302
Bank, NY
Total Medium-Term Notes
(Cost--$3,785) 3,782
US Government, Agency & Instrumentality
Obligations--Discount--3.3%
Federal Farm 1,262 4.35 7/30/99 1,252
Credit Banks 304 4.45 9/03/99 300
1,660 4.25 10/12/99 1,630
Face Interest Maturity Value
Issue Amount Rate* Date (Note 1a)
US Government, Agency & Instrumentality
Obligations--Discount (concluded)
Federal Home $ 3,690 4.67 % 8/13/99 $ 3,654
Loan Mortgage
Corporation
Federal National 375 4.25 9/16/99 370
Mortgage 117 4.25 10/01/99 115
Association
Total US Government, Agency & Instrumentality
Obligations--Discount (Cost--$7,328) 7,321
US Government, Agency & Instrumentality
Obligations--Non-Discount--1.3%
Federal Home Loan 1,000 4.87++ 11/16/99 1,000
Banks
Student Loan 2,000 5.271++ 2/14/00 1,999
Marketing
Association
Total US Government, Agency & Instrumentality
Obligations--Non-Discount (Cost--$2,999) 2,999
Repurchase Agreements**--3.3%
Face
Amount Issue
$7,469 PaineWebber Inc., purchased on 5/28/99
to yield 4.82% to 6/01/99 7,469
Total Repurchase Agreements (Cost--$7,469) 7,469
Total Investments (Cost--$225,664)--101.0% 225,628
Liabilities in Excess of Other Assets--(1.0%) (2,298)
--------
Net Assets--100.0% $223,330
========
[FN]
*Commercial Paper and certain US Government & Agency Obligations are
traded on a discount basis; the interest rates shown reflect the
discount rates paid at the time of purchase by the Fund. Other
securities bear interest at the rates shown, payable at fixed dates
through maturity. The interest rates on variable rate securities are
adjusted periodically based on appropriate indexes. The interest
rates shown are the rates in effect at May 31, 1999.
**Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
++Variable Rate Notes.
++++Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
See Notes to Financial Statements.
Summit Cash Reserves Fund
May 31, 1999
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets and Liabilities as of May 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$225,664,194*)
(Notes 1a & 1e) $225,628,080
Receivables:
Beneficial interest sold $ 566,429
Interest 361,171 927,600
------------
Prepaid registration fees and other assets (Note 1d) 114,216
------------
Total assets 226,669,896
------------
Liabilities: Payables:
Beneficial interest redeemed 2,789,700
Dividends and distributions to shareholders (Note 1f) 101,538
Distributor (Note 2) 96,761
Investment adviser (Note 2) 54,274 3,042,273
------------
Accrued expenses and other liabilities 297,513
------------
Total liabilities 3,339,786
------------
Net Assets: Net assets $223,330,110
============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 5,652,199
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 16,684,423
Paid-in capital in excess of par 201,029,602
Unrealized depreciation on investments--net (36,114)
------------
Net assets $223,330,110
============
Net Asset Class A--Based on net assets of $56,511,868 and 56,521,993
Value: shares of beneficial interest outstanding $ 1.00
============
Class B--Based on net assets of $166,818,242 and 166,844,231
shares of beneficial interest outstanding $ 1.00
============
<FN>
*Cost for Federal income tax purposes. As of May 31, 1999, net
unrealized depreciation for Federal income tax purposes amounted to
$36,114, of which $23,425 related to appreciated securities and
$59,539 related to depreciated securities.
See Notes to Financial Statements.
</TABLE>
Summit Cash Reserves Fund
May 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
May 31, 1999
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 5,314,646
(Note 1c):
Expenses: Distribution fees--Class B (Note 2)* $ 585,314
Investment advisory fees (Note 2) 522,703
Registration fees (Note 1d) 81,638
Accounting services (Note 2) 64,596
Transfer agent fees--Class B (Note 2)* 31,202
Transfer agent fees--Class A (Note 2) 21,751
Professional fees 19,786
Printing and shareholder reports 19,050
Custodian fees 17,757
Trustees' fees and expenses 6,403
Other 46,357
------------
Total expenses before reimbursement 1,416,557
Reimbursement of expenses (Note 2) (471,974)
------------
Total expenses after reimbursement 944,583
------------
Investment income--net 4,370,063
------------
Realized & Realized gain on investments--net 480
Unrealized Change in unrealized depreciation on investments--net (36,114)
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 4,334,429
(Note 1c): ============
<FN>
*Class B Shares commenced operations on October 9, 1998.
See Notes to Financial Statements.
</TABLE>
Summit Cash Reserves Fund
May 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
May 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 4,370,063 $ 13,040
Realized gain on investments--net 480 --
Change in unrealized depreciation on investments--net (36,114) --
------------ ------------
Net increase in net assets resulting from operations 4,334,429 13,040
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (1,258,531) (13,040)
Shareholders Class B* (3,111,532) --
(Note 1f): Realized gain on investments--net:
Class A (120) --
Class B* (360) --
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (4,370,543) (13,040)
------------ ------------
Beneficial Net increase in net assets derived from beneficial
Interest interest transactions 223,113,472 13,013
Transactions ------------ ------------
(Note 3):
Net Assets: Total increase in net assets 223,077,358 13,013
Beginning of year 252,752 239,739
------------ ------------
End of year $223,330,110 $ 252,752
============ ============
<FN>
*Class B Shares commenced operations on October 9, 1998.
See Notes to Financial Statements.
</TABLE>
Summit Cash Reserves Fund
May 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended May 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .0556 .0531 .0432 .0476 .0444
Realized and unrealized gain (loss) on
investments--net (.0004) -- .0001 (.0011) .0014
-------- -------- -------- -------- --------
Total from investment operations .0552 .0531 .0433 .0465 .0458
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.0556) (.0531) (.0431) (.0476) (.0444)
Realized gain on investments--net --+++ -- -- --+++ (.0001)
-------- -------- -------- -------- --------
Total dividends and distributions (.0556) (.0531) (.0431) (.0476) (.0445)
-------- -------- -------- -------- --------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total investment return 5.71% 5.36% 4.40% 4.95% 4.51%
======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .34% .00% 1.38% 1.13% .98%
Net Assets: ======== ======== ======== ======== ========
Expenses 1.04% 72.77% 1.97% 1.13% .98%
======== ======== ======== ======== ========
Investment income and realized gain on
investments--net 4.75% 5.30% 4.18% 4.83% 4.35%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 56,512 $ 253 $ 240 $ 34,865 $ 89,119
Data: ======== ======== ======== ======== ========
<CAPTION>
Class B
For the
Period
The following per share data and ratios have been derived Oct. 9,
from information provided in the financial statements. 1998++ to
May 31,
Increase (Decrease) in Net Asset Value: 1999
<S> <S> <C>
Per Share Net asset value, beginning of period $ 1.00
Operating --------
Performance: Investment income--net .0260
Realized and unrealized loss on investments--net (.0002)
--------
Total from investment operations .0258
--------
Less dividends and distributions:
Investment income--net (.0260)
Realized gain on investments--net --+++
--------
Total dividends and distributions (.0260)
--------
Net asset value, end of period $ 1.00
========
Total investment return 4.12%*
========
Ratios to Average Expenses, net of reimbursement 1.10%*
Net Assets: ========
Expenses 1.46%*
========
Investment income and realized gain on investments--net 3.99%*
========
Supplemental Net assets, end of period (in thousands) $166,818
Data: ========
<FN>
*Annualized.
++Commencement of operations.
+++Amount is less than $.0001 per share.
See Notes to Financial Statements.
</TABLE>
Summit Cash Reserves Fund
May 31, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Summit Cash Reserves Fund (the "Fund") is a separate fund offering a
separate class of shares of Financial Institutions Series Trust (the
"Trust"). The Trust is registered under the Investment Company Act
of 1940 as a diversified, open-end management investment company
which comprises a series of separate portfolios offering a separate
class of shares to select groups of purchasers. The Fund is
currently the only operating series of the Trust. The Fund's
financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of
management accruals and estimates. Effective October 9, 1998, the
Fund's existing class of shares was designated Class A Shares and
the Fund began offering Class B Shares. Both classes of shares have
equal voting, dividend, liquidation and other rights, except that
only shares of the respective classes are entitled to vote on
matters concerning only that class and Class B Shares bear certain
expenses related to the distribution of such shares. The following
is a summary of significant accounting policies followed by the
Fund.
(a) Valuation of investments--Portfolio securities with remaining
maturities of greater than sixty days are valued at the most recent
bid price or yield equivalent as obtained from dealers that make
markets in such securities. As securities transition from sixty-one
to sixty days to maturity, the difference between the valuation
existing on the sixty-first day before maturity and maturity value
is amortized on a straight-line basis to maturity. Securities
maturing sixty days or less from their date of acquisition are
valued at amortized cost, which approximates market value. For the
purposes of valuation, the maturity of a variable rate security is
deemed to be the next coupon date on which the interest rate is to
be adjusted. Other investments for which market quotations are not
readily available are valued at their fair value as determined in
good faith by or under the direction of the Fund's Board of
Trustees.
(b) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required.
(c) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
premium and discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(e) Repurchase agreements--The Fund invests in money market
securities pursuant to repurchase agreements. Under such agreements,
the counterparty agrees to repurchase the security at a mutually
agreed upon time and price. The Fund takes possession of the
underlying securities, marks to market such securities and, if
necessary, receives additional securities daily to ensure that the
contract is fully collateralized.
(f) Dividends and distributions to shareholders--The Fund declares
dividends daily and reinvests monthly such dividends (net of non-
resident alien tax and back-up withholding tax) in additional fund
shares at net asset value. Dividends and distributions are declared
from the total of net investment income and net realized gain or
loss on investments.
2. Investment Advisory and Administrative
Agreements:
The Fund has entered into an Investment Management Agreement with
Fund Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has entered into a Distribution Agreement
and Distribution Plan with Princeton Funds Distributor, Inc. ("PFD"
or the "Distributor"), which is a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
Summit Cash Reserves Fund
May 31, 1999
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities and equipment to
provide such services to the Fund. FAM also performs certain
administrative services necessary for the operation of the Trust and
the Fund. For such services, FAM receives a fee from the Fund at the
end of each month at the annual rate of 0.50% of the average daily
net assets of the Fund. For the year ended May 31, 1999, FAM earned
fees of $522,703, of which $361,294 was waived. FAM also reimbursed
the Fund for additional expenses of $110,680.
Pursuant to the Distribution Plan adopted by the Fund in accordance
with Rule 12b-1 under the investment Company Act of 1940, the Fund
pays the Distributor an ongoing distribution fee accrued daily and
paid monthly at the annual rate of 0.75% of the Fund's average daily
net assets attributable to Class B Shares. This fee may be used to
help defray the expenses associated with marketing activities and
services related to Class B Shares.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, PFD, FDS, and/or ML & Co.
3. Shares of Beneficial Interest:
Net increase in net assets derived from beneficial interest
transactions were $223,113,472 and $13,013 for the years ended May
31, 1999 and May 31, 1998, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended May 31, 1999 Shares Amount
Shares sold 294,469,397 $ 294,469,397
Shares issued to share-
holders in reinvestment
of dividends and
distributions 948,339 948,339
------------ -------------
Total issued 295,417,736 295,417,736
Shares redeemed (239,148,496) (239,148,496)
------------ -------------
Net increase 56,269,240 $ 56,269,240
============ =============
Class A Shares for the Year Dollar
Ended May 31, 1998 Shares Amount
Shares issued to share-
holders in reinvestment
of dividends 13,013 $ 13,013
------------ -------------
Net increase 13,013 $ 13,013
============ =============
Class B Shares for the Period
October 9, 1998++ to Dollar
May 31, 1999 Shares Amount
Shares sold 380,085,530 $ 380,085,530
Shares issued to share-
holders in reinvestment
of dividends and
distributions 2,716,668 2,716,668
------------ -------------
Total issued 382,802,198 382,802,198
Shares redeemed (215,957,966) (215,957,966)
------------ -------------
Net increase 166,844,232 $ 166,844,232
============ =============
[FN]
++Prior to October 9, 1998 (commencement of operations), the Fund
issued 10,000 shares to MLAM for $10,000.
4. Capital Loss Carryforward:
At May 31, 1999, the Fund had a net capital loss carryforward of
approximately $5,000, of which $4,000 expires in 2004 and $1,000
expires in 2005. This amount will be available to offset like
amounts of any future taxable gains.
Summit Cash Reserves Fund
May 31, 1999
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Summit Cash Reserves Fund of Financial
Institutions Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Summit Cash
Reserves Fund of Financial Institutions Series Trust as of May 31,
1999, the related statements of operations for the year then ended
and changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the
years in the five-year period then ended. These financial statements
and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at May 31,
1999 by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Summit Cash Reserves Fund of Financial Institutions Series Trust as
of May 31, 1999, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
July 13, 1999
</AUDIT-REPORT>
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
Joe Grills, Trustee
Walter Mintz, Trustee
Robert S. Salomon Jr., Trustee
Melvin R. Seiden, Trustee
Stephen B. Swensrud, Trustee
Arthur Zeikel, Trustee
Kevin J. McKenna, Senior Vice President
Joseph T. Monagle, Jr., Senior Vice President
Carlo J. Giannini, Vice President
Donald C. Burke, Vice President and Treasurer
Robert Harris, Secretary
Gerald M. Richard, Treasurer of Summit Cash Reserves Fund has
recently retired. His colleagues at Merrill Lynch Asset Management,
L.P. join the Fund's Board of Trustees in wishing Mr. Richard well
in his retirement.
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 221-7210
Summit Cash Reserves Fund
May 31, 1999
IMPORTANT TAX INFORMATION (unaudited)
None of the ordinary income distributions paid daily by the Summit
Cash Reserves Fund of the Financial Institutions Series Trust during
the fiscal year ended May 31, 1999 qualify for the dividends
received deduction for corporations. Additionally, there were no
long-term capital gains distributions paid during the year.
The law varies in each state as to whether and what percentage of
dividend income attributable to Federal obligations is exempt from
state income tax. We recommend that you consult your tax adviser to
determine if any portion of the dividends you received is exempt
from state income tax.
Listed at right are the percentages of total assets of the Fund
invested in Federal obligations as of the end of each quarter of the
fiscal year.
Percentage
of Federal
For the Quarter Ended Obligations*
August 31, 1998 69.52%
November 30, 1998 5.77%
February 28, 1999 2.82%
May 31, 1999 2.73%
[FN]
*For purposes of this calculation, Federal obligations include US
Treasury Notes, US Treasury Bills, and US Treasury Bonds. Also
included are obligations issued by the following agencies: Banks for
Cooperatives, Federal Intermediate Credit Banks, Federal Land Banks,
Federal Home Loan Banks, and the Student Loan Marketing Association.
Repurchase agreements are not included in this calculation.
Of the Fund's ordinary income dividends paid during the fiscal year
ended May 31, 1999, 4.09% was attributable to Federal obligations.
In calculating the foregoing percentage, expenses of the Fund have
been allocated on a pro rata basis.
Please retain this information for your records.
