MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES, 485APOS, 1998-06-11

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
485APOS, 1998-06-11

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As filed with the Securities and Exchange Commission on June 11, 1998
File No. 33-14190
File No. 811-5149

================================================================================
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. 18 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
[X]
Amendment No. 20 [X]
(Check appropriate box or boxes.)

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

Merrill Lynch Funds For Institutions Series
(Exact name of registrant as specified in charter)

One Financial Center
Boston, Massachusetts 02111
(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number, including Area Code) (617) 357-1460

Robert W. Crook
One Financial Center
Boston, Massachusetts 02111
(Name and address of agent for service)
Copies to:

Philip L. Kirstein, Esq. Leonard B. Mackey, Jr., Esq.
FUND ASSET MANAGEMENT, L.P. ROGERS & WELLS
P.O. Box 9011 200 Park Avenue
Princeton, New Jersey 08543-9011 New York, New York 10166

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

It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) 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

SECURITIES REGISTERED

Shares of beneficial interest of Merrill Lynch Premier Institutional Fund;
shares of beneficial interest of Merrill Lynch Institutional Fund; shares of
beneficial interest of Merrill Lynch Rated Institutional Fund; shares of
beneficial interest of Merrill Lynch Government Fund; shares of beneficial
interest of Merrill Lynch Treasury Fund; shares of beneficial interest of
Merrill Lynch Institutional Tax-Exempt Fund.

<PAGE>

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
MERRILL LYNCH PREMIER INSTITUTIONAL FUND

CROSS REFERENCE SHEET

PART B
Item 10. Cover Page ........................................ Cover Page
Item 11. Table of Contents ................................. Table of Contents
Item 12. General Information and History ................... General Information
Item 13. Investment Objectives and Policies ................ Investment Objective and Policies
Item 14. Management of the Fund ............................ Management of the Trust
Item 15. Control Persons and Principal Holders
of Securities .................................... Management of the Trust; General Information
Item 16. Investment Advisory and Other Services ............ Management of the Trust; Investment Advisory and
Other Services
Item 17. Brokerage Allocation and Other Practices .......... Portfolio Transactions
Item 18. Capital Stock and Other Securities ................ General Information
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered ......................... Net Asset Value; Distributor
Item 20. Tax Status ........................................ Taxes
Item 21. Underwriters ...................................... Distributor
Item 22. Calculation of Performance Data ................... Yield Information
Item 23. Financial Statements .............................. Financial Statements
</TABLE>

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.
- --------
*Item inapplicable or answer negative.

<PAGE>

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
MERRILL LYNCH INSTITUTIONAL FUND

CROSS REFERENCE SHEET

<TABLE>
<S> <C> <C>
Form N-1A Item Prospectus Caption
- -------------- ------------------
PART A
Item 1. Cover Page ........................................ Cover Page
Item 2. Synopsis .......................................... Fee Table
Item 3. Condensed Financial Information ................... Financial Highlights; Yield Information
Item 4. General Description of Registrant ................. The Institutional Fund and Its Objectives; Investors
For Whom The Funds Are Designed
Item 5. Management of the Fund ............................ Management; Investment Adviser; Portfolio
Transactions; Additional Information
Item 5A. Management's Discussion of Fund
Performance ...................................... *
Item 6. Capital Stock and Other Securities ................ Cover Page; Dividends; Taxes; Additional Information
Item 7. Purchase of Securities Being Offered .............. Purchase of Shares; Distributor; Net Asset Value
Item 8. Redemption or Repurchase .......................... Redemptions
Item 9. Pending Legal Proceedings ......................... *
PART B
Item 10. Cover Page ........................................ Cover Page
Item 11. Table of Contents ................................. Table of Contents
Item 12. General Information and History ................... General Information
Item 13. Investment Objectives and Policies ................ Investment Objective and Policies
Item 14. Management of the Fund ............................ Management of the Trust
Item 15. Control Persons and Principal Holders
of Securities .................................... Management of the Trust; General Information
Item 16. Investment Advisory and Other Services ............ Management of the Trust; Investment Advisory and
Other Services
Item 17. Brokerage Allocation and Other Practices .......... Portfolio Transactions
Item 18. Capital Stock and Other Securities ................ General Information
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered ......................... Net Asset Value; Distributor
Item 20. Tax Status ........................................ Taxes
Item 21. Underwriters ...................................... Distributor
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>

- --------
*Item inapplicable or answer negative.
<PAGE>

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
MERRILL LYNCH RATED INSTITUTIONAL FUND

CROSS REFERENCE SHEET

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>

- --------
*Item inapplicable or answer negative.
<PAGE>

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
MERRILL LYNCH GOVERNMENT FUND

CROSS REFERENCE SHEET

<TABLE>
<S> <C> <C>
Form N-1A Item Prospectus Caption
- -------------- ------------------
PART A
Item 1. Cover Page ......................................... Cover Page
Item 2. Synopsis ........................................... Fee Table
Item 3. Condensed Financial Information .................... Financial Highlights; Yield Information The
Government Fund and Its Objectives;
Item 4. General Description of Registrant .................. Investors For Whom The Funds Are Designed
Item 5. Management of the Fund ............................. Management; Investment Adviser; Portfolio
Transactions; Additional Information
Item 5A. Management's Discussion of Fund
Performance ....................................... *
Item 6. Capital Stock and Other Securities ................. Cover Page; Dividends; Taxes; Additional Information
Item 7. Purchase of Securities Being Offered ............... Purchase of Shares; Distributor; Net Asset Value
Item 8. Redemption or Repurchase ........................... Redemptions
Item 9. Pending Legal Proceedings .......................... *

PART B
Item 10. Cover Page ......................................... Cover Page
Item 11. Table of Contents .................................. Table of Contents
Item 12. General Information and History .................... General Information
Item 13. Investment Objectives and Policies ................. Investment Objective and Policies
Item 14. Management of the Fund ............................. Management of the Trust
Item 15. Control Persons and Principal Holders
of Securities ..................................... Management of the Trust; General Information
Item 16. Investment Advisory and Other Services ............. Management of the Trust; Investment Advisory and
Other Services
Item 17. Brokerage Allocation and Other Practices. .......... Portfolio Transactions
Item 18. Capital Stock and Other Securities ................. General Information
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered .......................... Net Asset Value; Distributor
Item 20. Tax Status ......................................... Taxes
Item 21. Underwriters ....................................... Distributor
Item 22. Calculation of Performance Data .................... Yield Information
Item 23. Financial Statements ............................... Financial Statements
</TABLE>

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.
- --------
*Item inapplicable or answer negative.
<PAGE>

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
MERRILL LYNCH TREASURY FUND

CROSS REFERENCE SHEET

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES
MERRILL LYNCH INSTITUTIONAL TAX-EXEMPT FUND

CROSS REFERENCE SHEET

PART B
Item 10. Cover Page ........................................ Cover Page
Item 11. Table of Contents ................................. Table of Contents
Item 12. General Information and History ................... General Information
Item 13. Investment Objectives and Policies ................ Investment Objective and Policies
Item 14. Management of the Fund ............................ Management of the Trust
Item 15. Control Persons and Principal Holders
of Securities .................................... Management of the Trust; General Information
Item 16. Investment Advisory and Other Services ............ Management of the Trust; Investment Advisory and
Other Services
Item 17. Brokerage Allocation and Other Practices .......... Portfolio Transactions
Item 18. Capital Stock and Other Securities ................ General Information
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered ......................... Net Asset Value; Distributor
Item 20. Tax Status ........................................ Taxes; Special Tax Consideration
Item 21. Underwriters ...................................... Distributor
Item 22. Calculation of Performance Data ................... Yield Information
Item 23. Financial Statements .............................. Financial Statements
</TABLE>

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.
- --------
*Item inapplicable or answer negative.

<PAGE>

Merrill Lynch Premier Institutional Fund
Merrill Lynch Institutional Fund
Merrill Lynch Rated Institutional Fund
Merrill Lynch Government Fund
Merrill Lynch Treasury Fund
Merrill Lynch Institutional Tax-Exempt Fund

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

This document consists of the Prospectuses of Merrill Lynch Premier
Institutional Fund, Merrill Lynch Institutional Fund, Merrill Lynch Rated
Institutional Fund, Merrill Lynch Government Fund, Merrill Lynch Treasury Fund
and Merrill Lynch Institutional Tax-Exempt Fund and an Appendix which
constitutes part of each Prospectus. A Table of Contents may be found on page 1
of each Prospectus.

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

Merrill Lynch Premier Institutional Fund (the "Premier Institutional
Fund"), Merrill Lynch Institutional Fund (the "Institutional Fund"), Merrill
Lynch Rated Institutional Fund (the "Rated Institutional Fund") and, with the
Premier Institutional Fund and the Institutional Fund, the "Institutional
Funds"), Merrill Lynch Government Fund (the "Government Fund"), Merrill Lynch
Treasury Fund (the "Treasury Fund") and Merrill Lynch Institutional Tax-Exempt
Fund (the "Tax-Exempt Fund") are separate series of Merrill Lynch Funds For
Institutions Series (the "Trust"). The Institutional Funds are no-load money
funds whose objectives are maximum current income consistent with liquidity and
the maintenance of a portfolio of high quality short-term "money market"
instruments. The Government Fund and the Treasury Fund are no-load money funds
seeking current income consistent with liquidity and security of principal. The
Government Fund invests in a portfolio of securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. The Treasury Fund invests in
a portfolio of U.S. Treasury securities. The Tax-Exempt Fund is a no-load money
fund whose objectives are to seek current income exempt from Federal income
taxes, preservation of capital and liquidity available from investing in a
diversified portfolio of short-term, high quality Tax-Exempt Securities. Each
Fund seeks to maintain a constant $1.00 net asset value per share, although this
cannot be assured. An investment in a Fund is neither insured nor guaranteed by
the U.S. Government.

The investment adviser of each Fund is Fund Asset Management, L.P. ("FAM"),
a subsidiary of Merrill Lynch & Co., Inc., a publicly held corporation. The
distributor of each Fund is Merrill Lynch Funds Distributor, Inc. ("MLFD"), an
indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.

Each Fund is designed primarily for institutions as an economical and
convenient means for the investment of short-term funds. Such institutions
include banks and trust companies, corporations, investment banks and brokers,
insurance companies, investment counsellors, pension funds, employee benefit
plans, law firms, trusts, estates, and educational, religious and charitable
institutions. Fund shares are sold and redeemed twice on each business day at
net asset value without any sales or redemption charge. All net income is
declared as dividends daily. Dividends are paid monthly and automatically
reinvested in additional shares or, at the option of the shareholder, paid in
cash. Purchase orders where payment is to be made by Federal Funds wire must be
submitted to MLFD in Boston by telephone and payment must be remitted by Federal
Funds wire directly to State Street Bank and Trust Company. While other forms of
payment will also be accepted, purchases of shares will not be effected until
Federal Funds are available. See "Purchase of Shares," page A-3.

<PAGE>

PROSPECTUS
June 11, 1998

Merrill Lynch Premier Institutional Fund
of Merrill Lynch Funds For Institutions Series

One Financial Center For general information and purchases call
Boston, Massachusetts 02111 617-357-1460 or toll free 800-225-1576

The Premier Institutional Fund is a no-load money fund whose objectives are
maximum current income consistent with liquidity and the maintenance of a
portfolio of high quality short-term "money market" instruments. The Premier
Institutional Fund is a series of Merrill Lynch Funds For Institutions Series
(the "Trust"), a diversified, open-end management investment company. The
Premier Institutional Fund seeks to maintain a constant $1.00 net asset value
per share, although this cannot be assured. An investment in the Premier
Institutional Fund is neither insured nor guaranteed by the U.S. Government. For
more information on the Fund's investment objectives, please see "The Premier
Institutional Fund and Its Objectives," page 4.

----------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------------------------

The Prospectus sets forth in concise form the information about the Premier
Institutional Fund that a prospective investor should know before investing in
the Premier Institutional Fund. Investors should read and retain this Prospectus
for future reference. Additional information about the Premier Institutional
Fund has been filed with the Securities and Exchange Commission (the
"Commission") in a Statement of Additional Information and is available upon
request and without charge. Investors and prospective investors may obtain a
copy of the Statement of Additional Information, which is dated June 11, 1998,
by writing to or calling Merrill Lynch Premier Institutional Fund at the above
address and telephone numbers. The Commission maintains a web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information about the Fund. The
Statement of Additional Information has been incorporated by reference into this
Prospectus.

The minimum initial purchase for the Premier Institutional Fund is
$10,000,000 per account.

TABLE OF CONTENTS

<TABLE>
<S> <C>
Page
------
Fee Table ............................ 2
Financial Highlights ................. 3
Yield Information .................... 4
The Premier Institutional Fund and Its
Objectives ........................ 4
Investment Adviser ................... 7
Appendix
Investors for Whom the Funds are
Designed ......................... A-1
Investment Adviser .................. A-2
Distributor ......................... A-2
</TABLE>

<TABLE>
<S> <C>
Page
----
Management ..................... A-3
Purchase of Shares ............. A-3
Redemptions .................... A-6
Dividends ...................... A-8
Net Asset Value ................ A-9
Taxes .......................... A-10
Portfolio Transactions ......... A-10
Exchange Privilege ............. A-11
Additional Information ......... A-12
Account Application ............ A-19

</TABLE>

<PAGE>

FEE TABLE

<TABLE>
<CAPTION>
Premier
Institutional
Fund
--------------
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases ................. None
Deferred Sales Charge ..................................... None
Sales Charge Imposed on Dividend Reinvestments ............ None
Redemption Fee ............................................ None
Exchange Fee .............................................. None

Annual Fund Operating Expenses (as a percentage of average net assets)
Investment Advisory Fees (net of fee waiver) .............. .15%
Other Expenses
Dividend and Transfer Agency Fees ........................ .00%
Other Fees and Expenses .................................. .03%
----
Total Other Expenses .................................... .03%
----
Total Fund Operating Expenses (net of fee waiver) ......... .18%
====
</TABLE>

- --------

Example:

<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period
of:
--------------------------------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment assuming (1) an operating expense ratio of .18%,
(2) a 5% annual return throughout the period and (3)
redemption at the end of the period ....................... $2 $6 $10 $23
</TABLE>

The foregoing fee table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Premier Institutional Fund will
bear directly or indirectly. The Example set forth above assumes reinvestment of
all dividends and distributions and uses a five percent annual rate of return as
mandated by Securities and Exchange Commission regulations. The actual rate of
return on the Fund's shares will vary, and may be more or less than five
percent. The Example should not be considered a representation of past or future
expenses, and actual expenses may be more or less than those assumed for
purposes of the Example. For a more detailed description of such costs and
expenses, see "Investment Adviser," "Distributor," "Purchase of Shares" and
"Redemptions."

Premier Institutional Fund

2
<PAGE>

FINANCIAL HIGHLIGHTS

The financial information in the table below has been audited by Deloitte &
Touche LLP, independent auditors. Financial statements for the fiscal year ended
April 30, 1998, and the independent auditors' report thereon are included in the
Statement of Additional Information. Further information about the performance
of the Premier Institutional Fund is contained in the Trust's most recent annual
report to shareholders which may be obtained, without charge, by calling or
writing the Premier Institutional Fund at the telephone number or address on the
front cover of this Prospectus.

The following per share data and ratios for the Premier Institutional Fund
have been derived from information provided in the Fund's audited financial
statements.

<TABLE>
<CAPTION>
For the Period
Year January 27, 1997
Ended (commencement of operations)
April 30, 1998 to April 30, 1997
---------------- -----------------------------
<S> <C> <C>
Net Asset Value, beginning of period ....................................... $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ..................................................... .055 .014
Less Distributions:
Dividends from net investment income ...................................... (.055) (.014)
----------- ----------
Net Asset Value, end of period ............................................. $ 1.00 $ 1.00
=========== ==========
Total Return ............................................................... 5.69% 1.40%(2)
Ratios/Supplemental Data:
Net Assets, end of period (000) ........................................... $6,644,523 $2,823,196
Ratio of expenses to average net assets (before waiver) ................... .18% .18%(1)
Ratio of expenses to average net assets (after waiver) .................... -- .17%(1)
Ratio of net investment income, including realized and unrealized gains and
losses, to average net assets (before waiver) ........................... 5.55% 5.26%(1)
Ratio of net investment income, including realized and unrealized gains and
losses, to average net assets (after waiver) ............................ -- 5.27%(1)
</TABLE>

- --------

(1) On an annualized basis

(2) Cumulative total return

Premier Institutional Fund

3
<PAGE>

YIELD INFORMATION

Set forth below is yield information as to the net annualized and
compounded yield for the seven-day period ended April 30, 1998.

<TABLE>
<S> <C>
Annualized Yield:
Including gains and losses ........................... 5.51%
Excluding gains and losses ........................... 5.51%
Compounded Annualized Yield ............................ 5.66%
Average Maturity of Portfolio at End of Period ......... 73 days
</TABLE>

The yield on Premier Institutional 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 Premier Institutional Fund of future yields or rates of
return on its shares. The Premier Institutional Fund's yield will be affected by
changes in interest rates on money market securities, average portfolio
maturity, the types and quality of portfolio securities held, and operating
expenses.

On occasion, the Premier Institutional Fund may compare its yield to (i)
the IBC's First Tier-Institutional Funds Only Average, an average compiled by
IBC'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 IndexTM for money market accounts
offered by the 100 leading banks and thrift institutions in the 10 largest
standard metropolitan statistical areas, (iii) yield data published by Lipper
Analytical Services, Inc., (iv) the yield on an investment in 90-day Treasury
bills on a rolling basis, assuming quarterly compounding, or (v) performance
data contained in publications such as Morningstar Publications, Inc., Money
Magazine, U.S. News & World Report, Business Week, CDA Investment Technology,
Inc., IBC's Money Fund Report, Forbes and Fortune. As with yield quotations,
yield comparisons should not be considered indicative of the Fund's yield or
relative performance for any future period.

THE PREMIER INSTITUTIONAL FUND AND ITS OBJECTIVES

The Premier Institutional Fund is a no-load money fund whose objectives are
maximum current income consistent with liquidity and the maintenance of a
portfolio of high quality short-term "money market" instruments. The Premier
Institutional Fund enables investors to invest short-term cash reserves in a
portfolio of high quality "money market" securities. Premier Institutional Fund
shares are sold and redeemed on each business day at the net asset value next
determined after an order is received, and there is no sales or redemption
charge. There can be no assurance that the objectives of the Premier
Institutional Fund will be attained.

The Premier Institutional Fund will attempt to accomplish its objectives of
maximum current income consistent with liquidity and the maintenance of a
portfolio of high quality "money market" instruments by investing 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 weighted average maturity of the Premier Institutional
Fund's portfolio will be 90 days or less.

The following is a description of the types of short-term "money market"
instruments in which the Premier Institutional Fund will principally invest:

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

Premier Institutional Fund

4
<PAGE>

(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 Premier Institutional Fund will only invest in short-term obligations
that (1) have been rated in the highest rating category for short-term debt
obligations by at least two nationally recognized statistical rating
organizations ("NRSRO"); (2) have been rated in the highest rating category by a
single NRSRO if only one NRSRO has rated the security; (3) have been issued by
an issuer rated in the highest rating category by an NRSRO with respect to a
class of debt obligations that is comparable in priority and security with the
investment; or (4) if not rated, will be of comparable quality as determined by
the Trustees of the Trust. Currently, there are six NRSROs: Duff & Phelps Credit
Rating Co., Fitch Investors Service, Inc., IBCA Limited and its affiliate IBCA,
Inc., Moody's Investors Service, Inc., Standard & Poor's Rating Group and
Thomson BankWatch, Inc.

Rule 2a-7 of the Securities and Exchange Commission presently limits
investments by the Premier Institutional 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 that
1%. In addition, Rule 2a-7 requires that not more than 5% of the Premier
Institutional Fund's total assets be invested in Second Tier Securities (as
defined in the Rule). As a matter of operating policy, the Premier Institutional
Fund will not invest in Second Tier Securities.

The following is a description of some of the investments or investment
practices in which the Premier Institutional 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 Premier Institutional 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. The U.S. Government is not obligated to provide financial
support to any of the above.

Repurchase Agreements: The Premier Institutional Fund may enter into
repurchase agreements. A repurchase agreement is an instrument under which
the purchaser (i.e., the Premier Institutional 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 Premier Institutional 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 Premier
Institutional 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 Premier
Institutional Fund but only to constitute collateral for the seller's

Premier Institutional Fund

5
<PAGE>

obligation to pay the repurchase price, and, in the event of a default by
the seller, the Premier Institutional Fund may suffer time delays and incur
costs or losses in connection with the disposition of the collateral.

Reverse Repurchase Agreements: The Premier Institutional Fund may enter
into reverse repurchase agreements which involve the sale of money market
securities held by the Premier Institutional 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
Premier Institutional 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 Premier
Institutional Fund does not consider entering into reverse repurchase
agreements to constitute borrowing money for purposes of the Fund's
investment restrictions set forth in the Statement of Additional
Information.

Lending of Portfolio Securities: The Premier Institutional 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 Premier Institutional Fund will receive income on
the loaned securities and either receives a fee or earns interest on any
investments made with cash collateral and thereby increases its yield.

Commercial Paper and Other Short-Term Obligations: The Premier
Institutional 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 Premier Institutional 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 value of the
security on the delivery date may be more or less than its purchase or sale
price. The Premier Institutional 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 Premier
Institutional 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 Premier Institutional 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 Premier Institutional Fund may suffer time
delays and incur costs or possible losses in connection with the
disposition of the collateral.

Investment Restrictions. The Premier Institutional 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 Premier Institutional
Fund's outstanding voting securities.

Premier Institutional Fund

6
<PAGE>

Among the more significant restrictions, the Premier Institutional Fund may not
(1) Invest more than 25% of its assets, taken at market value, in the securities
of issuers in any particular industry (excluding securities issued by the U.S.
Government and its agencies and instrumentalities; securities issued by any
state of the U.S. or any political subdivision thereof; instruments issued by
domestic banks; and for purposes of this restriction, issuers of asset-backed
and mortgage-backed securities will not be considered to be in any particular
industry); (2) borrow money, except that the Premier Institutional Fund may
borrow from banks (as defined in the Investment Company Act) in amounts of up to
331/3% 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 and other short-term
obligations, bank money instruments and repurchase agreements are not deemed the
making of a loan and that the Premier Institutional Fund may lend its portfolio
securities in accordance with applicable law and the guidelines set forth herein
and in the Statement of Additional Information.

INVESTMENT ADVISER

The investment adviser to the Premier Institutional Fund is Fund Asset
Management, L.P. ("FAM"), a subsidiary of Merrill Lynch & Co., Inc., a publicly
held corporation.

FAM, subject to the general supervision of the Trust's Board of Trustees,
renders investment advice to the Premier Institutional Fund and is responsible
for the overall management of the Premier Institutional Fund's business affairs.
For its services, FAM will receive a monthly fee payable by the Premier
Institutional Fund at the annual rate of .15% of the Fund's average daily net
assets. For the fiscal year ended April 30, 1998, FAM received investment
advisory fees of $8,073,755 or .15% of the Premier Institutional Fund's average
daily net assets. During the fiscal year ended April 30, 1998, the Premier
Institutional Fund's total expenses were $9,627,769 or .18% of its average daily
net assets.

Premier Institutional Fund

7
<PAGE>

[This page intentionally left blank]
<PAGE>

PROSPECTUS
June 11, 1998

Merrill Lynch Institutional Fund
of Merrill Lynch Funds For Institutions Series

One Financial Center For general information and purchases call
Boston, Massachusetts 02111 617-357-1460 or toll free 800-225-1576

The Institutional Fund is a no-load money fund whose objectives are maximum
current income consistent with liquidity and the maintenance of a portfolio of
high quality short-term "money market" instruments. The Institutional Fund is a
series of Merrill Lynch Funds For Institutions Series (the "Trust"), a
diversified, open-end management investment company. The Institutional Fund
seeks to maintain a constant $1.00 net asset value per share, although this
cannot be assured. An investment in the Institutional Fund is neither insured
nor guaranteed by the U.S. Government. For more information on the Fund's
investment objectives, please see "The Institutional Fund and Its Objectives,"
page 4.

----------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------------------------

The Prospectus sets forth in concise form the information about the
Institutional Fund that a prospective investor should know before investing in
the Institutional Fund. Investors should read and retain this Prospectus for
future reference. Additional information about the Institutional Fund has been
filed with the Securities and Exchange Commission (the "Commission") in a
Statement of Additional Information and is available upon request and without
charge. Investors and prospective investors may obtain a copy of the Statement
of Additional Information, which is dated June 11, 1998, by writing to or
calling Merrill Lynch Institutional Fund at the above address and telephone
numbers. The Commission maintains a web site (http://www.sec.gov) that contains
the Statement of Additional Information, material incorporated by reference and
other information about the Fund. The Statement of Additional Information has
been incorporated by reference into this Prospectus.

The minimum initial purchase for the Institutional Fund is $25,000 per
investor.

TABLE OF CONTENTS

<TABLE>
<S> <C>
Page
------
Fee Table ......................................... 2
Financial Highlights .............................. 3
Yield Information ................................. 4
The Institutional Fund and Its Objectives ......... 4
Investment Adviser ................................ 7
Appendix
Investors for Whom the Funds are
Designed ...................................... A-1
Investment Adviser ............................... A-2
Distributor ...................................... A-2
</TABLE>

<TABLE>
<S> <C>
Page
----
Management .......................... A-3
Purchase of Shares .................. A-3
Redemptions ......................... A-6
Dividends ........................... A-8
Net Asset Value ..................... A-9
Taxes ............................... A-10
Portfolio Transactions .............. A-10
Exchange Privilege .................. A-11
Additional Information .............. A-12
Account Application ................. A-19
Authorization for Redemption by Check
Form ............................. A-21
</TABLE>

<PAGE>

FEE TABLE

<TABLE>
<CAPTION>
Institutional
Fund
--------------
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases .......................... None
Deferred Sales Charge .............................................. None
Sales Charge Imposed on Dividend Reinvestments ..................... None
Redemption Fee ..................................................... None
Exchange Fee ....................................................... None
Annual Fund Operating Expenses (as a percentage of average net assets)
Investment Advisory Fees (net of fee waiver) ....................... .20%*
Other Expenses .....................................................
Dividend and Transfer Agency Fees ................................. .02%
Other Fees and Expenses ........................................... .03%
--------
Total Other Expenses ............................................. .05%
--------
Total Fund Operating Expenses (net of fee waiver) .................. .25%*
========
</TABLE>

- --------
* The Fund's Investment Adviser has agreed to waive a portion of its fee so
that the effective annual fee will be .20% of the Fund's average daily net
assets. If the Investment Adviser had not agreed to waive a portion of the
investment advisory fee, the Investment Advisory Fees would be .33% of
average daily net assets and Total Fund Operating Expenses would be .38% of
average daily net assets. The Investment Adviser may discontinue the waiver
of investment advisory fees in whole or in part without notice at any time.

Example:

<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period
of:
--------------------------------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment assuming (1) an operating expense ratio of .25%,
(2) a 5% annual return throughout the period and (3)
redemption at the end of the period ....................... $3 $8 $14 $32
</TABLE>

The foregoing fee table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Institutional Fund will bear
directly or indirectly. The Example set forth above assumes reinvestment of all
dividends and distributions and uses a five percent annual rate of return as
mandated by Securities and Exchange Commission regulations. The actual rate of
return on the Institutional Fund's shares will vary, and may be more or less
than five percent. The Example should not be considered a representation of past
or future expenses, and actual expenses may be more or less than those assumed
for purposes of the Example. For a more detailed description of such costs and
expenses, see "Investment Adviser," "Distributor," "Purchase of Shares" and
"Redemptions."

Institutional Fund

2
<PAGE>

FINANCIAL HIGHLIGHTS

The financial information in the table below has been audited by Deloitte &
Touche LLP, independent auditors. Financial statements for the fiscal year ended
April 30, 1998, and the independent auditors' report thereon are included in the
Statement of Additional Information. Further information about the performance
of the Institutional Fund is contained in the Trust's most recent annual report
to shareholders which may be obtained, without charge, by calling or writing the
Institutional Fund at the telephone number or address on the front cover of this
Prospectus.

The following per share data and ratios for the Institutional Fund have
been derived from information provided in the Fund's audited financial
statements.

<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net Asset Value, beginning of year .. $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ............... .054 .052 .056
Net realized and unrealized gain on
investments ........................ -- -- --
----------- ---------- ----------
Total from investment operations .... .054 .052 .056
Less Distributions:
Dividends from net investment income. (.054) (.052) (.056)
----------- ---------- ----------
Net Asset Value, end of year ........ $ 1.00 $ 1.00 $ 1.00
=========== ========== ==========
Total Return ........................ 5.57% 5.34% 5.81%
Ratios/Supplemental Data:
Net Assets, end of year (000) ...... $7,372,425 $6,197,878 $7,615,126
Ratio of operating expenses to
average net assets (before waiver). .38% .38% .37%
Ratio of operating expenses to
average net assets (after waiver) . .25% .25% .24%
Ratio of net investment income,
including realized and unrealized
gains and losses, to average net
assets (before waiver) ............ 5.34% 5.12% 5.42%
Ratio of net investment income,
including realized and unrealized
gains and losses to average net
assets (after waiver) ............. 5.47% 5.25% 5.55%

<CAPTION>
Year Ended April 30,
-----------------------------------------------------------
1995 1994 1993 1992
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of year .. $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ............... .050 .031 .033 .050
Net realized and unrealized gain on
investments ........................ -- -- .001 --
---------- --------- ----------- ---------
Total from investment operations .... .050 .031 .034 .050
Less Distributions:
Dividends from net investment income. (.050) (.031) (.034) (.050)
---------- --------- ----------- ---------
Net Asset Value, end of year ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= =========== =========
Total Return ........................ 5.11% 3.20% 3.46% 5.12%
Ratios/Supplemental Data:
Net Assets, end of year (000) ...... $6,580,086 $3,775,121 $4,712,639 $2,156,878
Ratio of operating expenses to
average net assets (before waiver). .37% .37% .38% .40%
Ratio of operating expenses to
average net assets (after waiver) . .24% .24% .26% --
Ratio of net investment income,
including realized and unrealized
gains and losses, to average net
assets (before waiver) ............ 5.00% 2.91% 3.29% 4.99%
Ratio of net investment income,
including realized and unrealized
gains and losses to average net
assets (after waiver) ............. 5.13% 3.04% 3.41% --
</TABLE>

Institutional Fund

3
<PAGE>

<TABLE>
<CAPTION>
Five Months
Year Ended April 30, Ended April 30, Year Ended November 30,
---------------------- ----------------- -----------------------------
1991 1990 1989 1988
---------------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of year ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income .................... .074 .033 .088 .070
Net realized and unrealized gain on
investments ............................. -- -- -- --
---------- ---------- ---------- ----------
Total from investment operations ......... .074 .033 .088 .070
Less Distributions:
Dividends from net investment income...... (.074) (.033) (.088) (.070)
---------- ---------- ---------- ----------
Net Asset Value, end of year ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total Return ............................. 7.67% 8.11%* 9.16% 7.25%
Ratios/Supplemental Data:
Net Assets, end of year (000) $2,622,402 $1,732,563 $1,800,019 $1,258,741
Ratio of operating expenses to
average net assets (before waiver) ...... .42% .45%* .46% .45%
Ratio of operating expenses to
average net assets (after waiver) ....... -- -- -- --
Ratio of net investment income,
including realized and unrealized
gains and losses, to average net
assets (before waiver) ................. 7.35% 7.99%* 8.83% 6.92%
Ratio of net investment income,
including realized and unrealized
gains and losses to average net
assets (after waiver) ................... -- -- -- -- --
</TABLE>

- --------

(*) On an annualized basis.

Institutional Fund

4
<PAGE>

YIELD INFORMATION

Set forth below is yield information as to the net annualized and
compounded yield for the seven-day period ended April 30, 1998.

<TABLE>
<S> <C>
Annualized Yield:
Including gains and losses ........................... 5.44%
Excluding gains and losses ........................... 5.44%
Compounded Annualized Yield ............................ 5.59%
Average Maturity of Portfolio at End of Period ......... 75 days
</TABLE>

The yield on Institutional 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 Institutional Fund of future yields or rates of return on
its shares. The Institutional 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.

On occasion, the Institutional Fund may compare its yield to (i) the IBC's
First Tier-Institutional Funds Only Average, an average compiled by IBC'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 IndexTM for money market accounts offered by the 100
leading banks and thrift institutions in the 10 largest standard metropolitan
statistical areas, (iii) yield data published by Lipper Analytical Services,
Inc., (iv) the yield on an investment in 90-day Treasury bills on a rolling
basis, assuming quarterly compounding, or (v) performance data contained in
publications such as Morningstar Publications, Inc., Money Magazine, U.S. News &
World Report, Business Week, CDA Investment Technology, Inc., IBC's Money Fund
Report, Forbes and Fortune. As with yield quotations, yield comparisons should
not be considered indicative of the Institutional Fund's yield or relative
performance for any future period.

THE INSTITUTIONAL FUND AND ITS OBJECTIVES

The Institutional Fund is a no-load money fund whose objectives are maximum
current income consistent with liquidity and the maintenance of a portfolio of
high quality short-term "money market" instruments. The Institutional Fund
enables investors to invest short-term cash reserves in a portfolio of high
quality "money market" securities. Institutional Fund shares are sold and
redeemed on each business day at the net asset value next determined after an
order is received, and there is no sales or redemption charge. There can be no
assurance that the objectives of the Institutional Fund will be attained.

The Institutional Fund will attempt to accomplish its objectives of maximum
current income consistent with liquidity and the maintenance of a portfolio of
high quality "money market" instruments by investing 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 weighted average maturity of the Institutional Fund's portfolio will be
90 days or less.

The following is a description of the types of short-term "money market"
instruments in which the Institutional Fund will principally invest:

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

Institutional Fund

5
<PAGE>

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

Rule 2a-7 of the Securities and Exchange Commission presently limits
investments by the Institutional 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 Institutional Fund's
total assets be invested in Second Tier Securities (as defined in the Rule). As
a matter of operating policy, the Institutional Fund will not invest in Second
Tier Securities.

The following is a description of some of the investments or investment
practices in which the Institutional 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 Institutional Fund also
invests in instruments 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. The U.S. Government is not obligated
to provide financial support to any of the above.

Repurchase Agreements: The Institutional Fund may enter into repurchase
agreements. A repurchase agreement is an instrument under which the
purchaser (i.e., the Institutional 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 Institutional 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 Institutional 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 Institutional Fund

Institutional Fund

6
<PAGE>

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
Institutional Fund may suffer time delays and incur costs or losses in
connection with the disposition of the collateral.

Reverse Repurchase Agreements: The Institutional Fund may enter into
reverse repurchase agreements which involve the sale of money market
securities held by the Institutional 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 Institutional
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 Institutional Fund does not
consider entering into reverse repurchase agreements to constitute
borrowing money for purposes of the Fund's investment restrictions set
forth in the Statement of Additional Information.

Lending of Portfolio Securities: The Institutional 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 Institutional Fund receives income on the loaned
securities and either receives a fee or earns interest on any investments
made with cash collateral and thereby increases its yield. Management of
the Institutional Fund does not consider the lending of portfolio
securities to constitute loans for purposes of the Fund's investment
restrictions set forth in the Statement of Additional Information.

Commercial Paper and Other Short-Term Obligations: The Institutional 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 Institutional 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 value of the
security on the delivery date may be more or less than its purchase or sale
price. The Institutional 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 Institutional 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
Institutional 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 Institutional Fund may suffer time delays and
incur costs or possible losses in connection with such transactions.

Investment Restrictions. The Institutional Fund has adopted a number of
restrictions and policies relating to the investment of its assets and
activities, which are fundamental policies and may not be changed without the

Institutional Fund

7
<PAGE>

approval of the holders of a majority of the Institutional Fund's outstanding
voting securities. Among the more significant restrictions, the Institutional
Fund may not (1) invest more than 25% of its total assets in the securities of
issuers in any particular industry (other than U.S. Government securities,
Government agency securities or domestic bank money instruments); purchase the
securities of any one issuer, other than the U.S. Government, if immediately
after such purchase more than 5% of the value of its total assets would be
invested in such issuer, except that up to 25% of the value of the Institutional
Fund's total assets may be invested without regard to this limitation; or (3)
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
Institutional Fund's assets in such repurchase agreements.

INVESTMENT ADVISER

The investment adviser to the Institutional Fund is Fund Asset Management,
L.P. ("FAM"), a subsidiary of Merrill Lynch & Co., Inc., a publicly held
corporation.

FAM, subject to the general supervision of the Trust's Board of Trustees,
renders investment advice to the Institutional Fund and is responsible for the
overall management of the Institutional Fund's business affairs. For the fiscal
year ended April 30, 1998, FAM was entitled to receive investment advisory fees
of $21,807,793 or .33% of the Institutional Fund's average daily net assets. FAM
has agreed to waive a portion of its fee so that the effective annual fee
payable by the Institutional Fund to FAM will be at the annual rate of .20% of
the Fund's average daily net assets. During the fiscal year ended April 30,
1998, such waiver amounted to $8,619,014 or .13% of the Institutional Fund's
average daily net assets. FAM therefore received $13,188,779 or .20% of the
Fund's average daily net assets during the fiscal year ended April 30, 1998. FAM
may discontinue waiver of the fee in whole or in part at any time without
notice. During the fiscal year ended April 30, 1998, the Institutional Fund's
total expenses were $16,501,786 or .25% of its average daily net assets. If FAM
had not waived a portion of its fee, the Institutional Fund's total expenses
would have been $25,120,800 or .38% of its average daily net assets during the
fiscal year ended April 30, 1998.

Institutional Fund

8
<PAGE>

PROSPECTUS
June 11, 1998

Merrill Lynch Rated Institutional Fund
of Merrill Lynch Funds For Institutions Series

One Financial Center For general information and purchases call
Boston, Massachusetts 02111 617-357-1460 or toll free 800-225-1576

The Rated Institutional Fund is a no-load money fund whose objectives are
maximum current income consistent with liquidity and the maintenance of a
portfolio of high quality short-term "money market" instruments. The Rated
Institutional Fund is a series of Merrill Lynch Funds For Institutions Series
(the "Trust"), a diversified, open-end management investment company. The Rated
Institutional Fund seeks to maintain a constant $1.00 net asset value per share,
although this cannot be assured. An investment in the Rated Institutional Fund
is neither insured nor guaranteed by the U.S. Government. For more information
on the Fund's investment objectives, please see "The Rated Institutional Fund
and Its Objectives," page 3.

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

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.

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

The Prospectus sets forth in concise form the information about the Rated
Institutional Fund that a prospective investor should know before investing in
the Rated Institutional Fund. Investors should read and retain this Prospectus
for future reference. Additional information about the Rated Institutional Fund
has been filed with the Securities and Exchange Commission the "Commission" in a
Statement of Additional Information and is available upon request and without
charge. Investors and prospective investors may obtain a copy of the Statement
of Additional Information, which is dated June 11, 1998, by writing to or
calling Merrill Lynch Rated Institutional Fund at the above address and
telephone numbers. The Commission maintains a web site (http://www.sec.gov) that
contains the Statement of Additional Information, material incorporated by
reference and other information about the Fund. The Statement of Additional
Information has been incorporated by reference into this Prospectus.

The minimum initial purchase for the Rated Institutional Fund is $1,000,000
per investor.

TABLE OF CONTENTS

<TABLE>
<S> <C>
Page
----
Fee Table .......................... 2
Yield Information .................. 3
The Rated Institutional Fund and Its
Objectives ...................... 3
Investment Adviser ................. 6
Appendix
Investors for Whom the Funds are
Designed ....................... A-1
Investment Adviser ................ A-2
Distributor ....................... A-2
</TABLE>

<PAGE>

FEE TABLE

<TABLE>
<CAPTION>
Rated
Institutional
Fund
--------------
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases .............. None
Deferred Sales Charge .................................. None
Sales Charge Imposed on Dividend Reinvestments ......... None
Redemption Fee ......................................... None
Exchange Fee ........................................... None

Annual Fund Operating Expenses (as a percentage of average net assets)
Investment Advisory Fees ............................... .20%
Other Expenses*
Dividend and Transfer Agency Fees ..................... .01%
Other Fees and Expenses ............................... .04%*
---
Total Other Expenses ................................... .05%
---
Total Fund Operating Expenses .......................... .25%*
===
</TABLE>

- --------
* Based on estimated amounts for the current fiscal year.

Example:

<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period
of:
--------------------------------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment assuming (1) an operating expense ratio of .25%,
(2) a 5% annual return throughout the period and (3)
redemption at the end of the period ....................... $3 $8 $14 $32
</TABLE>

The foregoing fee table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Rated Institutional Fund will
bear directly or indirectly. The Example set forth above assumes reinvestment of
all dividends and distributions and uses a five percent annual rate of return as
mandated by Securities and Exchange Commission regulations. The actual rate of
return on the Fund's shares will vary, and may be more or less than five
percent. The Example should not be considered a representation of past or future
expenses, and actual expenses may be more or less than those assumed for
purposes of the Example. For a more detailed description of such costs and
expenses, see "Investment Adviser," "Distributor," "Purchase of Shares" and
"Redemptions."

Rated Institutional Fund

2
<PAGE>

YIELD INFORMATION

The yield on Rated Institutional 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 Rated Institutional Fund of future yields or rates of
return on its shares. The Rated Institutional Fund's yield will be affected by
changes in interest rates on money market securities, average portfolio
maturity, the types and quality of portfolio securities held, and operating
expenses.

On occasion, the Rated Institutional Fund may compare its yield to (i) the
IBC's First Tier-Institutional Funds Only Average, an average compiled by IBC'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 IndexTM for money market accounts offered by the 100
leading banks and thrift institutions in the 10 largest standard metropolitan
statistical areas, (iii) yield data published by Lipper Analytical Services,
Inc., (iv) the yield on an investment in 90-day Treasury bills on a rolling
basis, assuming quarterly compounding, or (v) performance data contained in
publications such as Morningstar Publications Inc., Money Magazine, U.S. News &
World Report, Business Week, CDA Investment Technology, Inc., IBC's Money Fund
Report, Forbes and Fortune. As with yield quotations, yield comparisons should
not be considered indicative of the Fund's yield or relative performance for any
future period.

THE RATED INSTITUTIONAL FUND AND ITS OBJECTIVES

The Rated Institutional Fund is a no-load money fund whose objectives are
maximum current income consistent with liquidity and the maintenance of a
portfolio of high quality short-term "money market" instruments. The Rated
Institutional Fund enables investors to invest short-term cash reserves in a
portfolio of high quality "money market" securities. Rated Institutional Fund
shares are sold and redeemed on each business day at the net asset value next
determined after an order is received, and there is no sales or redemption
charge. There can be no assurance that the objectives of the Rated Institutional
Fund will be attained.

The Rated Institutional Fund will attempt to accomplish its objectives of
maximum current income consistent with liquidity and the maintenance of a
portfolio of high quality "money market" instruments by investing 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 Rated Institutional Fund will maintain a rating from one or more
nationally recognized statistical rating organizations ("NRSRO") that provide
ratings on money market funds. There can be no assurance that the Fund will
maintain any particular rating from any particular "NRSRO".

The dollar weighted average maturity of the Rated Institutional Fund's
portfolio will not exceed 90 days; however the Fund may seek to maintain a
dollar weighted average maturity that does not exceed a period of less than 90
days to the extent necessary to achieve a particular rating.

The following is a description of the types of short-term "money market"
instruments in which the Rated Institutional Fund will principally invest:

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

Rated Institutional Fund

3
<PAGE>

(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 Rated Institutional Fund will only invest in short-term obligations
that (1) have been rated in the highest rating category for short-term debt
obligations by at least two NRSROs, (2) have been rated in the highest rating
category by a single NRSRO if only one NRSRO has rated the security, (3) have
been issued by an issuer rated in the highest rating category by an NRSRO with
respect to a class of debt obligations that is comparable in priority and
security with the investment, or (4) if not rated, will be of comparable quality
as determined by the Trustees of the Trust. Currently there are six NRSROs:
Standard & Poor's Rating Group, Duff & Phelps Credit Rating Co., Fitch Investors
Service, Inc., IBCA Limited and its affiliate IBCA, Inc., Moody's Investors
Service, Inc., and Thomson BankWatch, Inc.

Rule 2a-7 of the Securities and Exchange Commission presently limits
investments by the Rated Institutional Fund in securities issued by any one
issuer (other than the U.S. Government, its agencies or instrumentalities or
securities guaranteed by a non-controlled person of the issuer) 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 that 1%. In
addition, Rule 2a-7 requires that not more than 5% of the Rated Institutional
Fund's total assets be invested in Second Tier Securities (as defined in the
Rule). As a matter of operating policy, the Rated Institutional Fund will not
invest in Second Tier Securities. Rule 2a-7 currently limits investments by the
Fund in securities guaranteed by a non-controlled person of the issuer to no
more than 10% of a Fund's total assets in respect of 75% of the Fund's total
assets.

The following is a description of some of the investments or investment
practices in which the Rated Institutional 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 Rated Institutional Fund
also invests in instruments 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. The U.S. Government is not obligated to provide financial
support to any of the above.

Repurchase Agreements: The Rated Institutional Fund may enter into
repurchase agreements. A repurchase agreement is an instrument under which
the purchaser (i.e., the Rated Institutional 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 Rated Institutional 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 Rated
Institutional 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 Rated
Institutional 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 Rated Institutional Fund may suffer time delays and incur
costs or losses in connection with the disposition of the collateral.

Rated Institutional Fund

4
<PAGE>

Reverse Repurchase Agreements: The Rated Institutional Fund may enter
into reverse repurchase agreements which involve the sale of money market
securities held by the Rated Institutional 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
Rated Institutional Fund will maintain a segregated custodial account
containing U.S. Government or other appropriate liquid securities having a
value equal to the repurchase price.

Lending of Portfolio Securities: The Rated Institutional 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 Rated Institutional Fund receives income on the
loaned securities and either receives a fee or earns interest on any
investments made with cash collateral and thereby increases its yield.

Commercial Paper and Other Short-Term Obligations: The Rated
Institutional 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 Rated Institutional 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 value of the
security on the delivery date may be more or less than its purchase or sale
price. The Rated Institutional 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 Rated
Institutional 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 Rated Institutional 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 Rated
Institutional Fund may suffer time delays and incur costs or possible losses in
connection with such transactions.

Investment Restrictions. The Rated Institutional 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 Rated Institutional Fund's
outstanding voting securities. Among the more significant restrictions, the
Rated Institutional Fund may not (1) invest more than 25% of its assets, taken
at market value, in the securities of issuers in any particular industry
(excluding securities issued by the U.S. Government and its agencies and
instrumentalities; instruments issued by domestic banks; and for purposes of
this restriction, issuers of asset-backed and mortgage-backed securities will
not be considered to be in any particular

Rated Institutional Fund

5
<PAGE>

industry); (2) borrow money, except that the Rated Institutional Fund may borrow
from banks (as defined in the Investment Company Act) in amounts of up to 331/3%
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 and other short-term obligations, bank
money instruments and repurchase agreements are not deemed the making of a loan
and that the Rated Institutional Fund may lend its portfolio securities in
accordance with applicable law and the guidelines set forth herein and in the
Statement of Additional Information.

INVESTMENT ADVISER

The investment adviser to the Rated Institutional Fund is Fund Asset
Management, L.P. ("FAM"), a subsidiary of Merrill Lynch & Co., Inc., a publicly
held corporation.

FAM, subject to the general supervision of the Trust's Board of Trustees,
renders investment advice to the Rated Institutional Fund and is responsible for
the overall management of the Rated Institutional Fund's business affairs. FAM
is entitled to receive an investment advisory fee at the annual rate of 0.20% of
the Rated Institutional Fund's average daily net assets.

Rated Institutional Fund

6
<PAGE>

PROSPECTUS
June 11, 1998

Merrill Lynch Government Fund
of Merrill Lynch Funds For Institutions Series

One Financial Center For general information and purchases call
Boston, Massachusetts 02111 617-357-1460 or toll free 800-225-1576

The Government Fund is a no-load money fund whose objectives are to seek
current income consistent with liquidity and security of principal by investing
in a portfolio of securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Government Fund is a series of Merrill Lynch
Funds For Institutions Series (the "Trust"), a diversified, open-end management
investment company. The Government Fund seeks to maintain a constant $1.00 net
asset value per share, although this cannot be assured. An investment in the
Government Fund is neither insured nor guaranteed by the U.S. Government. For
more information on the Fund's investment objectives, please see "The Government
Fund and Its Objectives," page 4.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

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

This Prospectus sets forth in concise form the information about the
Government Fund that a prospective investor should know before investing in the
Government Fund. Investors should read and retain this Prospectus for future
reference. Additional information about the Government Fund has been filed with
the Securities and Exchange Commission (The "Commission") in a Statement of
Additional Information and is available upon request and without charge.
Investors and prospective investors may obtain a copy of the Statement of
Additional Information, which is dated June 11, 1998, by writing to or calling
Merrill Lynch Government Fund at the above address and telephone numbers. The
Commission maintains a web site (http://www.sec.gov) that contains the Statement
of Additional Information, material incorporated by reference and other
information about the Fund. The Statement of Additional Information has been
incorporated by reference into this Prospectus.

The minimum initial purchase for the Government Fund is $25,000 per
investor.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
------
<S> <C>
Fee Table ............................ 2
Financial Highlights ................. 3
Yield Information .................... 4
The Government Fund and Its
Objectives ........................ 4
Investment Adviser ................... 6
Appendix
Investors for Whom the Funds are
Designed ......................... A-1
Investment Adviser .................. A-2
Distributor ......................... A-2
</TABLE>

<TABLE>
<CAPTION>
Page
----
<S> <C>
Management .......................... A-3
Purchase of Shares .................. A-3
Redemptions ......................... A-6
Dividends ........................... A-8
Net Asset Value ..................... A-9
Taxes ............................... A-10
Portfolio Transactions .............. A-10
Exchange Privilege .................. A-11
Additional Information .............. A-12
Account Application ................. A-19
Authorization for Redemption by Check
Form ............................. A-21

</TABLE>

<PAGE>

FEE TABLE

<TABLE>
<CAPTION>
Government
Fund
-----------
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases ................. None
Deferred Sales Charge ..................................... None
Sales Charge Imposed on Dividend Reinvestments ............ None
Redemption Fee ............................................ None
Exchange Fee .............................................. None

Annual Fund Operating Expenses (as a percentage of average net assets)
Investment Advisory Fees (net of fee waiver) .............. .20%*
Other Expenses
Dividend and Transfer Agency Fees ........................ .01%
Other Fees and Expenses .................................. .04%
-------
Total Other Expenses .................................... .05%
-------
Total Fund Operating Expenses (net of fee waiver) ......... .25%*
=======
</TABLE>

- --------

* The Fund's Investment Adviser has agreed to waive a portion of its fee so
that the effective annual fee will be .20% of the Fund's average daily net
assets. If the Investment Adviser had not agreed to waive a portion of the
investment advisory fee, the Investment Advisory Fees would be .32% of
average daily net assets and Total Fund Operating Expenses would be .37% of
average daily net assets. The Investment Adviser may discontinue the waiver
of investment advisory fees in whole or in part without notice at any time.

Example:

<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period
of:
--------------------------------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment assuming (1) an operating expense ratio of .25%,
(2) a 5% annual return throughout the period and (3)
redemption at the end of the period ....................... $3 $8 $14 $32
</TABLE>

The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Government Fund will bear
directly or indirectly. The Example set forth above assumes reinvestment of all
dividends and distributions and uses a five percent annual rate of return as
mandated by Securities and Exchange Commission regulations. The actual rate of
return on the Government Fund's shares will vary, and may be more or less than
five percent. The Example should not be considered a representation of past or
future expenses, and actual expenses may be more or less than those assumed for
purposes of the Example. For a more detailed description of such costs and
expenses, see "Investment Adviser," "Distributor," "Purchase of Shares" and
"Redemptions."

Government Fund

2
<PAGE>

FINANCIAL HIGHLIGHTS

The financial information in the table below has been audited by Deloitte &
Touche LLP, independent auditors. Financial statements for the fiscal year ended
April 30, 1998, and the independent auditors' report thereon are included in the
Statement of Additional Information. Further information about the performance
of the Government Fund is contained in the Trust's most recent annual report to
shareholders which may be obtained, without charge, by calling or writing the
Government Fund at the telephone number or address on the front cover of this
Prospectus.

The following per share data and ratios for the Government Fund have been
derived from information provided in the Fund's audited financial statements.

<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net Asset Value, beginning of year ... $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ................ .053 .052 .055
Net realized and unrealized gain on
investments ......................... -- -- --
---------- ---------- ----------
Total from investment operations ..... .053 .052 .055
Less Distributions:
Dividends from net investment income.. (.053) (.052) (.055)
---------- ---------- ----------
Net Asset Value, end of year ......... $ 1.00 $ 1.00 $ 1.00
========== ========== ==========
Total Return ......................... 5.48% 5.31% 5.67%
Ratios/Supplemental Data:
Net Assets, end of period (000) ...... $2,114,592 $2,017,399 $1,643,625
Ratio of expenses to average net
assets (before waiver) ............. .37% .38% .38%
Ratio of expenses to average net
assets (after waiver) .............. .25% .26% .26%
Ratio of net investment income,
including realized and unrealized
gains and losses, to average net
assets (before waiver) ............. 5.24% 5.07% 5.37%
Ratio of net investment income,
including realized and unrealized
gains and losses to average net
assets (after waiver) .............. 5.36% 5.19% 5.49%

<CAPTION>
Year Ended April 30,
-----------------------------------------------------------
1995 1994 1993 1992
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of year ... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ................ .049 .030 .030 .047
Net realized and unrealized gain on
investments ......................... -- -- .001 .002
---------- ---------- ---------- ----------
Total from investment operations ..... .049 .030 .031 .049
Less Distributions:
Dividends from net investment income.. (.049) (.030) (.031) (.049)
---------- ---------- ---------- ----------
Net Asset Value, end of year ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total Return ......................... 4.99% 3.06% 3.19% 5.05%
Ratios/Supplemental Data:
Net Assets, end of period (000) ...... $1,601,085 $1,533,478 $1,355,044 $1,358,150
Ratio of expenses to average net
assets (before waiver) ............. .37% .38% .39% .41%
Ratio of expenses to average net
assets (after waiver) .............. .24% .32% -- --
Ratio of net investment income,
including realized and unrealized
gains and losses, to average net
assets (before waiver) ............. 4.82% 2.83% 3.19% 4.93%
Ratio of net investment income,
including realized and unrealized
gains and losses to average net
assets (after waiver) .............. 4.95% 2.89% -- --
</TABLE>

Government Fund

3
<PAGE>

<TABLE>
<CAPTION>
Eight
Months
Year Ended April 30, Ended Year Ended August 31,
---------------------- April 30, ----------------------------------
1991 1990 1989 1988
---------------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of year ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ...................... .070 .052 .083 .061
Net realized and unrealized gain on
investments ............................... .001 -- -- .001
---------- ---------- ---------- ----------
Total from investment operations ........... .071 . 052 .083 .062
Less Distributions:
Dividends from net investment income........ (.071) (.052) (.083) (.062)
---------- ---------- ---------- ----------
Net Asset Value, end of year ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total Return ............................... 7.38% 8.15%* 8.65% 6.43%
Ratios/Supplemental Data:
Net Assets, end of period (000) ........... $1,438,197 $1,270,277 $1,409,819 $1,469,766
Ratio of expenses to average net
assets (before waiver) .................... .44% .46%* .46% .46%
Ratio of expenses to average net
assets (after waiver) ..................... -- -- -- --
Ratio of net investment income,
including realized and unrealized
gains and losses, to average net
assets (before waiver) ................... 7.11% 7.97%* 8.31% 6.23%
Ratio of net investment income,
including realized and unrealized
gains and losses to average net
assets (after waiver) ..................... -- -- -- --
</TABLE>

- --------

* On an annualized basis.

Government Fund

4
<PAGE>

YIELD INFORMATION

Set forth below is yield information as to the net annualized and
compounded yield for the seven-day period ended April 30, 1998.

<TABLE>
<S> <C>
Annualized Yield:
Including gains and losses ........................... 5.29%
Excluding gains and losses ........................... 5.29%
Compounded Annualized Yield ............................ 5.43%
Average Maturity of Portfolio at End of Period ......... 58 days
</TABLE>

The yield on Government 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 Government Fund of future yields or rates of return on its
shares. The Government 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.

On occasion, the Government Fund may compare its yield to (i) the IBC's
Government Only Institutional Only Average, an average compiled by IBC'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 IndexTM for money market accounts offered by the 100
leading banks and thrift institutions in the 10 largest standard metropolitan
statistical areas, (iii) yield data published by Lipper Analytical Services,
Inc., (iv) the yield on an investment in 90-day Treasury bills on a rolling
basis, assuming quarterly compounding, or (v) performance data contained in
publications such as Morningstar Publications, Inc., Money Magazine, U.S. News &
World Report, Business Week, CDA Investment Technology, Inc., IBC's Money Fund
Report, Forbes and Fortune. As with yield quotations, yield comparisons should
not be considered indicative of the Government Fund's yield or relative
performance for any future period.

THE GOVERNMENT FUND AND ITS OBJECTIVES

The Government Fund is a no-load money fund whose objectives are to seek
current income consistent with liquidity and security of principal by investing
in a portfolio of securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government securities"). The Government
Fund enables investors to invest short-term cash reserves in a portfolio of U.S.
Government securities. Government Fund shares are sold and redeemed on each
business day at net asset value, and there is no sales or redemption charge.
There can be no assurance that the objectives of the Government Fund will be
attained.

The Government Fund will attempt to accomplish its investment objectives by
investing in a portfolio of U.S. Government securities, with remaining
maturities not exceeding 762 days (25 months). The dollar weighted average
maturity of the Government Fund's portfolio will be 90 days or less.

Securities of the type included in the Government Fund's portfolio have
historically had lower rates of return than commercial obligations but have
involved little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period of a shareholder's investment in the Government Fund.

The types of securities in which the Government Fund may invest include the
following:

Government Securities: Certain Government securities, including U.S.
Treasury bills, notes and bonds and securities of the Government National
Mortgage Association and the Federal Housing Administration, are

Government Fund

5
<PAGE>

issued or guaranteed by the U.S. Government and supported by the full faith
and credit of the United States. Other U.S. Government securities are
issued or guaranteed by federal agencies or government-sponsored
enterprises and are not direct obligations of the United States but involve
sponsorship or guarantees by Government agencies or enterprises. These
obligations include securities that are supported by the right of the
issuer to borrow from the Treasury, such as obligations of Federal Home
Loan Banks, and securities that are supported only by the credit of the
instrumentality, such as Federal National Mortgage Association bonds. The
Government Fund may also invest in securities issued by U.S. government
instrumentalities that are international organizations designated or
supported by multiple governments, such as the International Bank for
Reconstruction and Development. Because the U.S. Government is not
obligated to provide support to its instrumentalities, the Fund will invest
in obligations issued by these instrumentalities where the Investment
Adviser believes that the credit risk with respect to the issuers is
minimal.

Repurchase Agreements: The Government Fund may invest in obligations which
are subject to repurchase agreements. A repurchase agreement is an
instrument under which the purchaser (i.e., the Government 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.
This results in a fixed rate of return insulated from market fluctuations
during that period. As a matter of operating policy, the Government 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 Government Fund's net assets in such repurchase agreements. If a
repurchase agreement is construed to be a collateralized loan, the
underlying securities will not be considered to be owned by the Government
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
Government Fund may suffer time delays and incur costs or losses in
connection with the disposition of the collateral.

Reverse Repurchase Agreements: The Government Fund may enter into reverse
repurchase agreements which involve the sale of portfolio securities held
by the Government 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 Government 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 Government Fund does not consider entering into reverse
repurchase agreements to constitute borrowing money for purposes of the
Fund's investment restrictions set forth in the Statement of Additional
Information.

Lending of Portfolio Securities: The Government 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 Government Fund will receive income on the loaned
securities and either receives a fee or earns interest on any investments
made with cash collateral and thereby increases its yield. Management of
the Government Fund does not consider the lending of portfolio securities
to constitute loans for purposes of the Fund's investment restrictions set
forth in the Statement of Additional Information.

Forward Commitments: The Government Fund may purchase and sell U.S.
Government securities on a when-issued basis or forward commitment basis,
and it may purchase or sell such securities for delayed delivery. These
transactions occur when securities are purchased or sold by the Government
Fund with payment and delivery taking place in the future to secure what is
considered an advantageous yield and price to the Government Fund at the
time of entering into the transaction. The value of the security on the
delivery date

Government Fund

6
<PAGE>

may be more or less than its purchase or sale price. If management of the
Government Fund deems it appropriate to do so, the Government Fund may
dispose of a commitment prior to settlement. There can, of course, be no
assurance that the judgments upon which these practices are based will be
accurate, and it is possible that in consequence of these practices the
Government Fund would be required to pay on a settlement date more than the
market value of the purchased securities at that time, or that the
Government Fund would incur a loss by disposing of a commitment on terms
less favorable than those of its original purchase. The Government Fund
will maintain a segregated account with its custodian of cash or U.S.
Government securities in an aggregate amount equal to the amount of its
commitments in connection with such purchase transactions.

"Stripped Coupon" Securities: The Government Fund may invest in direct
obligations of the U.S. Government by purchasing component parts of U.S.
Treasury bonds through the acquisition of deposit receipts which evidence
ownership of direct interest in such component parts of such bonds.

Investment Restrictions. The Government 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 Government Fund's outstanding
voting securities. Among the more significant restrictions, the Government Fund
may not (1) borrow money except from banks for temporary purposes and in an
amount not exceeding 10% of the value of its total net assets, or mortgage,
pledge or hypothecate its assets except in connection with any such borrowing
and in amounts not in excess of the dollar amounts borrowed. (As a matter of
operating policy, the Government Fund will not invest in securities if
outstanding borrowings exceed 5% of the net asset value.)

INVESTMENT ADVISER

The investment adviser to the Government Fund is Fund Asset Management,
L.P. ("FAM"), a subsidiary of Merrill Lynch & Co., Inc., a publicly held
corporation.

FAM, subject to the general supervision of the Trust's Board of Trustees
and in conformance with the stated policies of the Government Fund, renders
investment advice to the Government Fund and is responsible for the overall
management of the Government Fund's business affairs. For the fiscal year ended
April 30, 1998, FAM was entitled to receive investment advisory fees of
$6,330,489 or .32% of the Government Fund's average daily net assets. FAM has
agreed to waive a portion of its fee so that the effective annual fee payable by
the Government Fund to FAM will be at the annual rate of .20% of the Fund's
average daily net assets. During the fiscal year ended April 30, 1998, such
waiver amounted to $2,369,204 or .12% of the Government Fund's average daily net
assets. FAM therefore received $3,961,285 or .20% of the Government Fund's
average daily net assets for the fiscal year ended April 30, 1998. FAM may
discontinue waiver of the fee in whole or in part at any time without notice.
During the fiscal year ended April 30, 1998, the Government Fund's total
expenses were $4,986,047 or .25% of its average daily net assets. If FAM had not
waived a portion of its fee, the Government Fund's total expenses would have
been $7,355,251 or 37% of its average daily net assets during the fiscal year
ended April 30, 1998.

Government Fund

7
<PAGE>

PROSPECTUS
June 11, 1998

Merrill Lynch Treasury Fund
of Merrill Lynch Funds For Institutions Series

One Financial Center For general information and purchases call
Boston, Massachusetts 02111 617-357-1460 or toll free 800-225-1576

The Treasury Fund is a no-load money fund whose objectives are to seek
current income consistent with liquidity and security of principal. The Fund
will attempt to achieve its investment objectives by investing in a portfolio of
U.S. Treasury securities. The Treasury Fund is a series of Merrill Lynch Funds
For Institutions Series (the "Trust"), a diversified, open-end management
investment company. The Treasury Fund seeks to maintain a constant $1.00 net
asset value per share, although this cannot be assured. An investment in the
Treasury Fund is neither insured nor guaranteed by the U.S. Government. For more
information on the Fund's investment objectives, please see "The Treasury Fund
and Its Objectives," page 4.

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

The Prospectus sets forth in concise form the information about the
Treasury Fund that a prospective investor should know before investing in the
Treasury Fund. Investors should read and retain this Prospectus for future
reference. Additional information about the Treasury Fund has been filed with
the Securities and Exchange Commission (the "Commission") in a Statement of
Additional Information and is available upon request and without charge.
Investors and prospective investors may obtain a copy of the Statement of
Additional Information, which is dated June 11, 1998 by writing to or calling
Merrill Lynch Treasury Fund at the above address and telephone numbers. The
Commission maintains a web site (http://www.sec.gov) that contains the Statement
of Additional Information, material incorporated by reference and other
information about the Fund. The Statement of Additional Information has been
incorporated by reference into this Prospectus.

The minimum initial purchase for the Treasury Fund is $25,000 per investor.

TABLE OF CONTENTS

Fee Table .................................... 2
Financial Highlights ......................... 3
Yield Information ............................ 4
The Treasury Fund and Its Objectives ......... 4
Investment Adviser ........................... 5
Appendix
Investors for Whom the Funds are
Designed ................................. A-1
Investment Adviser .......................... A-2
Distributor .................................. A-2
</TABLE>

<TABLE>
<CAPTION>
Page
----
<S> <C>
Management ................................ A-3
Purchase of Shares ........................ A-3
Redemptions ............................... A-6
Dividends ................................. A-8
Net Asset Value ........................... A-9
Taxes ..................................... A-10
Portfolio Transactions .................... A-10
Exchange Privilege ........................ A-11
Additional Information .................... A-12
Account Application ....................... A-19
Authorization for Redemption by Check Form. A-21
</TABLE>

<PAGE>

FEE TABLE

<TABLE>
<CAPTION>
Treasury
Fund
-----------
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases .......................... None
Deferred Sales Charge .............................................. None
Sales Charge Imposed on Dividend Reinvestments ..................... None
Redemption Fee ..................................................... None
Exchange Fee ....................................................... None
Annual Fund Operating Expenses (as a percentage of average net assets)
Investment Advisory Fees (net of fee waiver) ....................... .20%*
Other Expenses
Dividend and Transfer Agency Fees ................................. .02%
Other Fees and Expenses ........................................... .04%
----
Total Other Expenses ............................................. .06%
----
Total Fund Operating Expenses (net of fee waiver) .................. .26%*
====
</TABLE>

- --------

* The Fund's Investment Adviser has agreed to waive a portion of its fee so
that the effective annual fee will be .20% of the Fund's average daily net
assets. If the Investment Adviser had not agreed to waive a portion of the
investment advisory fee, the Investment Advisory Fees would be .35% of
average daily net assets and Total Fund Operating Expenses would be .41% of
average daily net assets. The Investment Adviser may discontinue the waiver
of investment advisory fees in whole or in part without notice at any time.

Example:

<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period
of:
--------------------------------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment assuming (1) an operating expense ratio of .26%,
(2) a 5% annual return throughout the period and (3)
redemption at the end of the period ....................... $3 $8 $15 $33
</TABLE>

The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Treasury Fund will bear
directly or indirectly. The Example set forth above assumes reinvestment of all
dividends and distributions and uses a five percent annual rate of return as
mandated by Securities and Exchange Commission regulations. The actual rate of
return on the Treasury Fund's shares will vary, and may be more or less than
five percent. The Example should not be considered a representation of past or
future expenses, and actual expenses may be more or less than those assumed for
purposes of the Example. For a more detailed description of such costs and
expenses, see "Investment Adviser," "Distributor," "Purchase of Shares" and
"Redemptions."

Treasury Fund

2
<PAGE>

FINANCIAL HIGHLIGHTS

The financial information in the table below has been audited by Deloitte &
Touche LLP, independent auditors. Financial statements for the fiscal year ended
April 30, 1998, and the independent auditors' report thereon are included in the
Statement of Additional Information. Further information about the performance
of the Treasury Fund is contained in the Trust's most recent annual report to
shareholders which may be obtained, without charge, by calling or writing the
Treasury Fund at the telephone number or address on the front cover of this
Prospectus.

The following per share data and ratios for the Treasury Fund have been
derived from information provided in the Fund's audited financial statements.

<TABLE>
<CAPTION>
Year Ended April 30,
-------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net Asset Value, beginning of year ....................... $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ................................... .051 .049
Net realized and unrealized gain on investments ......... -- --
-------- --------
Total from investment operations ........................ .051 .049
Less Distributions:
Dividends from net investment income .................... (.051) (.049)
-------- --------
Net Asset Value, end of year ............................. $ 1.00 $ 1.00
======== ========
Total Return ............................................. 5.24% 5.08%
Ratios/Supplemental Data:
Net Assets, end of year (000) ........................... $759,197 $611,844
Ratio of expenses to average net assets (before
waiver) ................................................. .41% .42%
Ratio of expenses to average net assets (after
waiver) ................................................. .26% .27%
Ratio of net investment income, including realized
and unrealized gains and losses, to average net
assets (before waiver) .................................. 5.11% 4.85%
Ratio of net investment income, including realized
and unrealized gains and losses, to average net
assets (after waiver) ................................... 5.26% 5.00%

<CAPTION>
Year Ended April 30,
---------------------------------------------------
1996 1995 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of year ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ................................... .052 .045 .027 .028
Net realized and unrealized gain on investments ......... -- -- -- .001
-------- -------- -------- --------
Total from investment operations ........................ .052 .045 .027 .029
Less Distributions:
Dividends from net investment income .................... (.052) (.045) (.027) (.029)
-------- -------- -------- --------
Net Asset Value, end of year ............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Return ............................................. 5.37% 4.68% 2.82% 2.97%
Ratios/Supplemental Data:
Net Assets, end of year (000) ........................... $514,123 $342,844 $266,953 $359,318
Ratio of expenses to average net assets (before
waiver) ................................................. .41% .44% .45% .45%
Ratio of expenses to average net assets (after
waiver) ................................................. .26% .29% .39% --
Ratio of net investment income, including realized
and unrealized gains and losses, to average net
assets (before waiver) .................................. 5.09% 4.58% 2.67% 2.93%
Ratio of net investment income, including realized
and unrealized gains and losses, to average net
assets (after waiver) ................................... 5.24% 4.73% 2.73% --
</TABLE>

Treasury Fund

3
<PAGE>

<TABLE>
<CAPTION>
Period From
Year Ended April 30, December 18,
--------------------------- 1989-to
1992 1991 April 30, 1990
------------ ------------ ---------------
<S> <C> <C> <C>
Net Asset Value, beginning of year ............................... $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ........................................... .045 .066 .028
Net realized and unrealized gain on investments ................. .002 .003 --
-------- -------- -------
Total from investment operations ................................ .047 .069 .028
Less Distributions:
Dividends from net investment income ............................ (.047) (.069) (.028)
-------- -------- -------
Net Asset Value, end of year ..................................... $ 1.00 $ 1.00 $ 1.00
======== ======== =======
Total Return ..................................................... 4.79% 7.17% 7,75%*
Ratios/Supplemental Data:
Net Assets, end of year (000) ................................... $320,686 $391,643 $64,392
Ratio of expenses to average net assets (before waiver) ......... .46% .50% .88%*
Ratio of expenses to average net assets (after waiver) .......... -- .47% .51%*
Ratio of net investment income, including realized and unrealized
gains and losses, to average net assets (before waiver) ......... 4.69% 6.63% 7.79%*
Ratio of net investment income, including realized and unrealized
gains and losses, to average net assets (after waiver) .......... -- 6.66% 8.16%*
</TABLE>

- --------
* On an annualized basis.

- - Commencement of operations.

Treasury Fund

4
<PAGE>

YIELD INFORMATION

Set forth below is yield information as to the net annualized and
compounded yield for the seven-day period ended April 30, 1998.

<TABLE>
<S> <C>
Annualized Yield:
Including gains and losses ........................... 5.13%
Excluding gains and losses ........................... 5.11%
Compounded Annualized Yield ............................ 5.24%
Average Maturity of Portfolio at End of Period ......... 60 days
</TABLE>

The yield on Treasury 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 Treasury Fund of future yields or rates of return on its
shares. The Treasury 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.

On occasion, the Treasury Fund may compare its yield to (i) the IBC's 100%
U.S. Treasury Funds Average, an average compiled by IBC'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 accounts offered by the 100 leading banks
and thrift institutions in the 10 largest standard metropolitan statistical
areas, (iii) yield data published by Lipper Analytical Services, Inc., (iv) the
yield on an investment in 90-day Treasury bills on a rolling basis, assuming
quarterly compounding, or (v) performance data contained in publications such as
Morningstar Publications, Inc., Money Magazine, U.S. News & World Report,
Business Week, CDA Investment Technology, Inc., IBC's Money Fund Report, Forbes
and Fortune. As with yield quotations, yield comparisons should not be
considered indicative of the Treasury Fund's yield or relative performance for
any future period.

THE TREASURY FUND AND ITS OBJECTIVES

The Treasury Fund is a no-load money fund whose objectives are to seek
current income consistent with liquidity and security of principal. The Treasury
Fund enables investors to invest short-term cash reserves in a portfolio of
direct obligations of the U.S. Treasury. Treasury Fund shares are sold and
redeemed on each business day at net asset value next determined after an order
is received, and there is no sales or redemption charge. There can be no
assurance that the objectives of the Treasury Fund will be attained.

The Treasury Fund will attempt to accomplish its investment objectives by
investing in a portfolio of U.S. Treasury securities with remaining maturities
not exceeding 762 days (25 months). The dollar weighted average maturity of the
Treasury Fund's portfolio will be 90 days or less.

Securities of the type included in the Treasury Fund's portfolio have
historically had lower rates of return than commercial obligations but have
involved little risk of loss of principal if held to maturity. However, due to
fluctuation in interest rates, the market value of such securities may vary
during the period of a shareholder's investment in the Treasury Fund.

The types of securities in which the Treasury Fund may invest include the
following:

U.S. Treasury Securities: The Treasury Fund will invest in Treasury bills,
notes and other direct obligations of the U.S. Treasury.

Treasury Fund

5
<PAGE>

Forward Commitments: The Treasury Fund may purchase and sell U.S. Treasury
securities on a when-issued or forward commitment basis and it may purchase
or sell such securities for delayed delivery. These transactions occur when
securities are purchased or sold by the Treasury Fund with payment and
delivery taking place in the future to secure what is considered an
advantageous yield and price to the Treasury Fund at the time of entering
into the transaction. The value of the security on the delivery date may be
more or less than its purchase or sale price. If management of the Treasury
Fund deems it appropriate to do so, the Treasury Fund may dispose of a
commitment prior to settlement. There can, of course, be no assurance that
the judgments upon which these practices are based will be accurate, and it
is possible that in consequence of these practices the Treasury Fund would
be required to pay on a settlement date more than the market value of the
purchased securities at that time, or that the Treasury Fund would incur a
loss by disposing of a commitment on terms less favorable than those of its
original purchase. The Treasury Fund will maintain a segregated account
with its custodian of cash or U.S. Government securities in an aggregate
amount equal to the amount of its commitments in connection with such
purchase transactions.

Repurchase Agreements: The Treasury Fund may invest up to 10% of its total
assets in obligations subject to repurchase agreements. This limitation on
the Treasury Fund's investment in obligations subject to repurchase
agreements may adversely affect the Treasury Fund's yield under certain
market conditions.

A repurchase agreement is an instrument under which the purchaser (i.e.,
the Treasury 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. This results in a fixed rate of return
insulated from market fluctuations during such period. Repurchase
agreements usually are for short periods, such as under one week. If a
repurchase agreement is construed to be a collateralized loan, the
underlying securities will not be considered to be owned by the Treasury
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
Treasury Fund may suffer time delays and incur costs or losses in
connection with the disposition of the collateral.

Investment Restrictions. The Treasury 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 Treasury Fund's
outstanding voting securities. Among the more significant restrictions, the
Treasury Fund may not (1) enter into repurchase agreements if immediately
thereafter more than 10% of the value of its total assets would be invested
in repurchase agreements and (2) borrow money except from banks for
temporary purposes and in an amount not exceeding 10% of the value of its
total net assets, or mortgage, pledge or hypothecate its assets except in
connection with any such borrowing and in amounts not in excess of the
dollar amounts borrowed. (As a matter of operating policy, the Treasury
Fund will not invest in securities if outstanding borrowings exceed 5% of
net asset value.)

INVESTMENT ADVISER

The investment adviser to the Treasury Fund is Fund Asset Management, L.P.
("FAM"), a subsidiary of Merrill Lynch & Co., Inc., a publicly held corporation.

FAM, subject to the general supervision of the Trust's Board of Trustees
and in conformance with the stated policies of the Treasury Fund, renders
investment advice to the Treasury Fund and is responsible for the overall
management of the Treasury Fund's business affairs. For the fiscal year ended
April 30, 1998, FAM was entitled to receive investment advisory fees of
$2,294,733 or .35% of the Treasury Fund's average daily net assets. FAM

Treasury Fund

6
<PAGE>

has agreed to waive a portion of its fee so that the effective annual fee
payable by the Treasury Fund to FAM will be at the annual rate of .20% of the
Fund's average daily net assets. During the fiscal year ended April 30, 1998,
such waiver amounted to $974,269 or .15% of the Treasury Fund's average net
assets. FAM therefore received $1,320,464 or .20% of the Fund's average daily
net assets for the fiscal year ended April 30, 1998. FAM may discontinue waiver
of the fee in whole or in part at any time without notice. During the fiscal
year ended April 30, 1998, the Treasury Fund's total expenses were $1,703,082
or .26% of its average daily net assets. If FAM had not waived a portion of its
fee, the Treasury Fund's total expenses would have been $2,677,351 or .41% of
its average daily net assets during the fiscal year ended April 30, 1998.

Treasury Fund

7
<PAGE>

PROSPECTUS
June 11, 1998

Merrill Lynch Institutional Tax-Exempt Fund
of Merrill Lynch Funds For Institutions Series

One Financial Center For general information and purchases call
Boston, Massachusetts 02111-2646 617-357-1460 or toll free 800-225-1576

The Tax-Exempt Fund is a no-load money fund whose objectives are to seek
current income exempt from Federal income taxes, preservation of capital and
liquidity available from investing in a diversified portfolio of short-term,
high quality Tax-Exempt Securities. The Tax-Exempt Fund is a series of Merrill
Lynch Funds For Institutions Series (the "Trust"), a diversified, open-end
management investment company. The Tax-Exempt Fund seeks to maintain a constant
$1.00 net asset value per share, although this cannot be assured. An investment
in the Tax-Exempt Fund is neither insured nor guaranteed by the U.S. Government.
For more information on the Fund's investment objectives, please see "The
Tax-Exempt Fund and Its Objectives," page 4.

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

The Prospectus sets forth in concise form the information about the
Tax-Exempt Fund that a prospective investor should know before investing in the
Tax-Exempt Fund. Investors should read and retain this Prospectus for future
reference. Additional information about the Tax-Exempt Fund has been filed with
the Securities and Exchange Commission (the "Commission") in a Statement of
Additional Information and is available upon request and without charge.
Investors and prospective investors may obtain a copy of the Statement of
Additional Information, which is dated June 11, 1998, by writing to or calling
Merrill Lynch Institutional Tax-Exempt Fund at the above address and telephone
numbers. The Commission maintains a web site (http://www.sec.gov) that contains
the statement of Additional Information, material incorporated by reference and
other information about the Fund. The Statement of Additional Information has
been incorporated by reference into this Prospectus.

The minimum initial purchase for the Tax-Exempt Fund is $25,000 per
investor.

TABLE OF CONTENTS

<TABLE>
<S> <C>
Page
------
Fee Table ............................ 2
Financial Highlights ................. 3
Yield Information .................... 4
The Tax-Exempt Fund and Its
Objectives ....................... 4
Investment Adviser ................... 8
Special Tax Considerations ........... 9
Appendix
Investors for Whom the Funds are
Designed ......................... A-1
Investment Adviser .................. A-2
</TABLE>

<TABLE>
<S> <C>
Page
----
Distributor ......................... A-2
Management .......................... A-3
Purchase of Shares .................. A-3
Redemptions ......................... A-6
Dividends ........................... A-8
Net Asset Value ..................... A-9
Taxes ............................... A-10
Portfolio Transactions .............. A-10
Exchange Privilege .................. A-11
Additional Information .............. A-12
Account Application ................. A-19
Authorization for Redemption by Check
Form ............................ A-21
</TABLE>

<PAGE>

FEE TABLE

<TABLE>
<CAPTION>
Tax-Exempt
Fund
-----------
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases ................. None
Deferred Sales Charge ..................................... None
Sales Charge Imposed on Dividend Reinvestments ............ None
Redemption Fee ............................................ None
Exchange Fee .............................................. None

Annual Fund Operating Expenses (as a percentage of average net assets)
Investment Advisory Fees (net of fee waiver) .............. .20%*
Other Expenses ............................................
Dividend and Transfer Agency Fees ........................ .01%
Other Fees and Expenses .................................. .03%
-------
Total Other Expenses .................................... .04%
-------
Total Fund Operating Expenses (net of fee waiver) ......... .24%
=======
</TABLE>

- --------

* The Fund's Investment Adviser has agreed to waive a portion of its fee so
that the effective annual fee will be .20% of the Fund's average daily net
assets. If the Investment Adviser had not agreed to waive a portion of the
management fee, the Investment Advisory Fees would have been .45% of average
daily net assets and Total Fund Operating Expenses would be .49% of average
daily net assets. The Investment Adviser may discontinue the waiver of
investment advisory fees in whole or in part without notice at any time.

Example:

<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period
of:
--------------------------------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment assuming (1) an operating expense ratio of .24%,
(2) a 5% annual return throughout the period and (3)
redemption at the end of the period ....................... $2 $8 $14 $31
</TABLE>

The foregoing fee table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Tax-Exempt Fund will bear
directly or indirectly. The Example set forth above assumes reinvestment of all
dividends and distributions and uses a five percent annual rate of return as
mandated by Securities and Exchange Commission regulations. The actual rate of
return on the Tax-Exempt Fund's shares will vary, and may be more or less than
five percent. The Example should not be considered a representation of past or
future expenses, and actual expenses may be more or less than those assumed for
purposes of the Example. For a more detailed description of such costs and
expenses, see "Investment Adviser," "Distributor," "Purchase of Shares" and
"Redemptions."

Institutional Tax-Exempt Fund

2
<PAGE>

FINANCIAL HIGHLIGHTS

The financial information in the table below has been audited by Deloitte &
Touche LLP, independent auditors. Financial statements for the fiscal year ended
April 30, 1998 and the independent auditors' report thereon are included in the
Statement of Additional Information. Further information about the performance
of the Tax-Exempt Fund is contained in the Trust's most recent annual report to
shareholders which may be obtained, without charge, by calling or writing the
Tax-Exempt Fund at the telephone number or address on the front cover of this
Prospectus.

The following per share data and ratios for the Tax-Exempt Fund have been
derived from information provided in the Fund's audited financial statements.

<TABLE>
<CAPTION>
Five
Months
Ended
Year Ended April 30, April 30,
------------------------------------------------------- -------------
1998 1997 1996 1995 1994
-------------- -------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income....... .04 .03 .04 .03 .01
Less dividends from net
investment income ......... (.04) (.03) (.04) ( .03) ( .01)
---------- ---------- -------- -------- -------
Net Asset Value, end of
period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ======== ======== =======
Total Return ............... 3.59% 3.41% 3.68% 3.20% 2.14%*
Ratios/Supplemental Data:
Net Assets, end of
period (000) .............. $1,804,442 $1,003,655 $667,205 $403,903 $390,375
Ratio of expenses to
average net assets
(before waiver) ........... .49% .52% .54% .56% .59%*
Ratio of expenses to
average net assets
(after waiver) ............ .24% .27% .29% .31% .34%*
Ratio of net investment
income to average net
assets (before
waiver) ................... 3.28% 3.12% 3.35% 2.90% 1.92%*
Ratio of net investment
income to average net
assets (after waiver) ..... 3.53% 3.37% 3.60% 3.15% 2.17%*

<CAPTION>
Year Ended November 30,
-----------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income....... .02 .03 .04 .05 .05 .04
Less dividends from net
investment income ......... (.02) ( .03) (.04) (.05) (.05) (.04)
---------- -------- -------- -------- -------- --------
Net Asset Value, end of
period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ======== ======== ======== ======== ========
Total Return ............... 2.14% 2.74% 4.33% 5.55% 6.16% 4.86%
Ratios/Supplemental Data:
Net Assets, end of
period (000) .............. $ 278,697 $329,254 $377,154 $310,344 $281,839 $375,209
Ratio of expenses to
average net assets
(before waiver) ........... .62% .61% .61% .63% .63% .59%
Ratio of expenses to
average net assets
(after waiver) ............ .45% .53% .54% .56% .55% .52%
Ratio of net investment
income to average net
assets (before
waiver) ................... 1.96% 2.67% 4.21% 5.36% 5.92% 4.62%
Ratio of net investment
income to average net
assets (after waiver) ..... 2.13% 2.75% 4.28% 5.43% 6.00% 4.69%
</TABLE>

- --------
* On an annualized basis.

Institutional Tax-Exempt Fund

3
<PAGE>

YIELD INFORMATION

Set forth below is yield information as to the net annualized and
compounded yield for the seven-day period ended April 30, 1998.

<TABLE>
<S> <C>
Annualized Yield:
Including gains and losses ........................... 3.90%
Excluding gains and losses ........................... 3.90%
Compounded Annualized Yield ............................ 3.98%
Average Maturity of Portfolio at End of Period ......... 42 days
</TABLE>

The yield on Tax-Exempt 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 Tax-Exempt Fund of future yields or rates of return on its
shares. The Tax-Exempt 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.

On occasion, the Tax-Exempt Fund may compare its yield to (i) the IBC's
Tax-Free Fund Average, an average compiled by IBC'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
IndexTM for money market accounts offered by the 100 leading banks and thrift
institutions in the 10 largest standard metropolitan statistical areas, (iii)
yield data published by Lipper Analytical Services, Inc., (iv) the yield on an
investment in 90-day Treasury bills on a rolling basis, assuming quarterly
compounding, or (v) performance data contained in publications such as
Morningstar Publications, Inc., Money Magazine, U.S. News & World Report,
Business Week, CDA Investment Technology, Inc., Forbes and Fortune. As with
yield quotations, yield comparisons should not be considered indicative of the
Tax-Exempt Fund's yield or relative performance for any future period.

THE TAX-EXEMPT FUND AND ITS OBJECTIVES

The Tax-Exempt Fund is a no-load money fund whose objectives are to seek
current income exempt from Federal income taxes, preservation of capital and
liquidity available from investing in a diversified portfolio of short-term,
high-quality Tax-Exempt Securities. The Tax-Exempt Fund enables investors to
invest short-term cash reserves in a portfolio of high-quality tax-exempt "money
market" securities. Tax-Exempt Fund shares are sold and redeemed on each
business day at the net asset value next determined after an order is received,
and there is no sales or redemption charge. There can be no assurance that the
objectives of the Tax-Exempt Fund will be attained.

The Tax-Exempt Fund will attempt to accomplish its objectives of seeking
current income exempt from Federal income taxes, preservation of capital and
liquidity by investing in a diversified portfolio of obligations issued by or on
behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest from which is exempt from Federal income tax
(such obligations are herein referred to as "Tax-Exempt Securities"). The two
principal classifications of Tax-Exempt Securities are "general obligation" and
"revenue" bonds. The investment objectives of the Tax-Exempt Fund described
above in this paragraph are a fundamental policy of the Tax-Exempt Fund and may
not be changed without a vote of a majority of the outstanding shares of the
Tax-Exempt Fund. There can be no assurance that the objectives of the Tax-Exempt
Fund will be attained. The Tax-Exempt Fund may not purchase any securities other
than Tax-Exempt Securities, and, as a matter of operating policy, the Tax-Exempt
Fund under normal circumstances will

Institutional Tax-Exempt Fund

4
<PAGE>

invest at least 80% of its assets in Tax-Exempt Securities which are not subject
to the alternative minimum tax described under "Special Tax Considerations".

The Tax-Exempt Fund will seek to achieve its objectives by investing
exclusively in securities with maturities not exceeding 397 days (13 months),
principally including:

(i) obligations issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest from
which is exempt from Federal income tax and which are rated AAA or AA by
Standard & Poor's Rating Group ("S&P") or by Fitch Investors Services, Inc.
("Fitch"), or Aaa or Aa by Moody's Investors Service, Inc. ("Moody's") and
unrated Tax-Exempt Securities which, in the judgment of the Trustees of the
Trust, have as nearly as possible the same characteristics and quality as
bonds having the above ratings;

(ii) municipal notes (tax anticipation notes, bond anticipation notes and
revenue anticipation notes) rated MIG-1 or MIG-2 by Moody's, SP-1 or SP-2
on the short-term debt-rating scale of S&P, or F-1 or F-2 by Fitch or, if
the notes are not rated, are obligations which, in the judgment of the
trustees of the Trust, are of a quality equivalent to obligations rated
MIG-1 or MIG-2 or SP-1 or SP-2 or F-1 or F-2;

(iii) variable rate demand notes and participations therein;

(iv) short-term tax-exempt commercial paper obligations (short-term
unsecured promissory notes issued to finance short-term credit needs) which
are rated at least A-1 by S&P, Prime-1 by Moody's or their equivalents as
determined by the Trustees of the Trust; and

(v) floating rate tax-exempt demand notes on which the Fund may demand
payment from the issuer at par value plus accrued interest on short notice.

The Appendix to this Prospectus and Appendix B to the Statement of
Additional Information sets forth a description of the above rating symbols. The
Tax-Exempt Fund presently contemplates that it will not invest more than 25% of
its total assets in Tax-Exempt Securities whose issuers are located in the same
state. The Tax-Exempt Fund does not intend to invest more than 25% of its total
assets in industrial development bonds where the entities supplying the revenues
from which the bonds are to be paid are in the same industry. Preservation of
capital is a prime investment objective of the Tax-Exempt Fund, and, while the
types of short-term Tax-Exempt Securities in which the Tax-Exempt Fund invests
are not completely risk free, the Tax-Exempt Fund believes that securities
having the rating characteristics described above have a lower principal risk
than lower rated obligations and generally have a lower principal risk than
longer term obligations which entail the risk of changing conditions over a
longer period of time.

Certain of the instruments in which the Tax-Exempt Fund invests, including
variable rate demand notes ("VRDNs") and derivative or synthetic municipal
instruments ("Derivative Products"), effectively provide the Tax-Exempt Fund
with economic interests in long-term municipal bonds, coupled with rights to
demand payment of the principal amounts of such instruments from designated
counterparties. Under Securities and Exchange Commission rules, the Tax-Exempt
Fund treats these instruments as having maturities shorter than the stated
maturity dates of the notes, in the case of VRDNs, or the long-term bonds
underlying Derivative Products (the "Underlying Bonds"). Such maturities are
sufficiently short-term to allow such instruments to qualify as eligible
investments for money market funds such as the Tax-Exempt Fund. A demand right
is dependent on the financial ability of the counterparty, which is typically a
bank, broker-dealer or other financial institution, to purchase the instrument
at its principal amount. In addition, the right of the Tax-Exempt Fund to demand
payment from a counterparty may be subject to certain conditions, including the
creditworthiness of the instrument or the Underlying

Institutional Tax-Exempt Fund

5
<PAGE>

Bond. If a counterparty is unable to purchase the instrument or, because of
conditions on the right of the Tax-Exempt Fund to demand payment, the
counterparty is not obligated to purchase the instrument on demand, the
Tax-Exempt Fund may be required to dispose of the instrument or the Underlying
Bond in the open market, which may be at a price which adversely affects the
Tax-Exempt Fund's net asset value.

VRDNs and participation interests in VRDNs held by a financial institution
("Participating VRDNs") are tax-exempt obligations which utilize a floating or
variable interest rate adjustment formula and provide an unconditional right of
demand to receive payment of the unpaid principal balance plus accrued interest
on a short-notice period. The interest rates are adjustable at periodic
intervals to some prevailing market rate for similar investments, such
adjustment formula being calculated to maintain the market value of the VRDN at
approximately the par value of the VRDN upon the adjustment date. The
adjustments are frequently based upon the Public Securities Association (PSA)
Index or some other appropriate interest rate adjustment index. Because of the
interest rate adjustment formula on VRDNs (including Participating VRDNs), VRDNs
are not comparable to fixed rate securities. The Tax-Exempt Fund's yield on
VRDNs will decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined. On the
other hand, during periods when prevailing interest rates have increased, the
Tax-Exempt Fund's yield on VRDNs will increase and its shareholders will have a
reduced risk of capital depreciation. See the Statement of Additional
Information for further information regarding VRDNs.

The Tax-Exempt Fund may invest in a variety of Derivative Products.
Derivative Products are typically structured by a bank, broker-dealer or other
financial institution. A Derivative Product generally consists of a trust or
partnership through which the Tax-Exempt Fund holds an interest in one or more
Underlying Bonds coupled with a conditional right to sell ("put") the Fund's
interest in the Underlying Bonds at par plus accrued interest to a financial
institution (a "Liquidity Provider"). Typically, a Derivative Product is
structured as a trust or partnership which provides for pass-through tax-exempt
income. There are currently three principal types of derivative structures: (1)
"Tender Option Bonds", which are instruments which grant the holder thereof the
right to put an Underlying Bond at par plus accrued interest at specified
intervals to a Liquidity Provider; (2) "Swap Products", in which the trust or
partnership swaps the payments due on an Underlying Bond with a swap
counterparty who agrees to pay a floating municipal money market interest rate;
and (3) "Partnerships", which allocate to the partners income, expenses, capital
gains and losses in accordance with a governing partnership agreement. The
Tax-Exempt Fund may also invest in other forms of Derivative Products.

Investments in Derivative Products raise certain tax, legal, regulatory and
accounting issues which may not be presented by investments in other Tax-Exempt
Securities. There is some risk that certain issues could be resolved in a manner
which could adversely impact the performance of the Tax-Exempt Fund. For
example, the tax-exempt treatment of the interest paid to holders of Derivative
Products is premised on the legal conclusion that the holders of such Derivative
Products have an ownership interest in the Underlying Bonds. While the Fund
receives an opinion of legal counsel to the effect that the income from each
Derivative Product is tax-exempt to the same extent as the Underlying Bond, the
Internal Revenue Service (the "IRS") has not issued a ruling on this subject.
Were the IRS to issue an adverse ruling, there is a risk that the interest paid
on such Derivative Products would be deemed taxable.

The Tax-Exempt Fund may purchase and sell tax-exempt securities on a
when-issued basis or forward commitment basis, and it may purchase or sell
such securities for delayed delivery. These transactions occur when
securities are purchased or sold by the Tax-Exempt Fund with payment and
delivery taking place in the future to secure what is considered an
advantageous yield and price to the Tax-Exempt Fund at the time of entering
into the transaction. The value of the security on the delivery date may be
more or less than its purchase price. If management of the Tax-Exempt Fund
deems it appropriate to do so, the Tax-Exempt Fund may dispose of a
commitment prior to settlement. There can, of course, be no assurance that
the judgments upon which these practices are based will be accurate, and it
is possible

Institutional Tax-Exempt Fund

6
<PAGE>

that in consequence of these practices the Tax-Exempt Fund would be required to
pay on a settlement date more than the market value of the purchased securities
at that time, or the Tax-Exempt Fund would incur a loss by disposing of a
commitment on terms less favorable than those of its original purchase. The
Tax-Exempt Fund will maintain a segregated account with its custodian of cash or
tax-exempt securities in an aggregate amount equal to the amount of its
commitments in connection with such purchase transactions.

Management of the Tax-Exempt Fund will endeavor to be as fully invested as
reasonably practicable to maximize the yield on the Tax-Exempt Fund's
portfolio. However, because the Tax-Exempt Fund does not intend to realize
taxable investment income, it will not invest in taxable short-term money
market securities (other than securities subject to the alternative minimum tax
described under "Special Tax Considerations"). Accordingly, there may be times
when the Tax-Exempt Fund has uninvested cash resulting from an influx of cash
due to large purchases of shares or maturities of portfolio securities or
resulting from the need to maintain a reserve for redemptions. The yield on the
portfolio could also be negatively affected from time to time by the lack of
availability of short-term, high-quality Tax-Exempt Securities. The Tax-Exempt
Fund reserves the right to suspend or otherwise limit sales of its shares if,
as a result of difficulties in acquiring portfolio securities, it is determined
that it is not in the interests of the Tax-Exempt Fund's shareholders to issue
additional shares. See "Purchase of Shares."

As is described in the Statement of Additional Information, the Tax-Exempt
Fund has the authority, subject to certain conditions, to purchase securities
with puts.

As indicated under "Redemptions," payments of proceeds upon redemption of
shares generally will be made on the same day as a redemption request in proper
form is received. Tax-Exempt Securities generally do not trade on the basis of
same-day settlements. As a result, the Fund may be required to maintain cash
reserves or incur temporary bank borrowings so that it can make such redemption
payments. This will reduce the Tax-Exempt Fund's yield. The Trustees will
re-examine the Tax-Exempt Fund's policy of making redemption payments on the
date redemption orders are received if that policy has a significant impact on
the Tax-Exempt Fund's yield; however, redemption payments will in any case be
made within seven days of the date of redemption unless the Tax-Exempt Fund is
permitted to suspend payments for a period longer than seven days under the
circumstances described in the Appendix to this Prospectus under "Redemptions."

Maturity and Quality Standards

As a money market fund, the Tax-Exempt Fund is required to meet certain
maturity and quality standards as set forth below.

Short-Term Maturity Standards. All of the investments of the Tax-Exempt
Fund will be in securities with remaining maturities of 397 days (13 months) or
less. The dollar weighted average maturity of the Tax-Exempt Fund's portfolio
will be 90 days or less. The maturities of VRDNs (including Participating
VRDNs) are deemed to be the longer of (i) the notice period required before the
Tax-Exempt Fund is entitled to receive payment of the principal amount of the
VRDN on demand or (ii) the period remaining until the VRDN's next interest rate
adjustment. If not redeemed by the Tax-Exempt Fund through the demand feature,
VRDNs mature on a specified date which may range up to thirty years from the
date of issuance.

Quality Standards. The Tax-Exempt Fund's portfolio investments in
Tax-Exempt Securities will be limited to those obligations which are rated, or
issued by issuers who have been rated, in one of the two highest rating
categories for short-term municipal debt obligations by a nationally recognized
statistical rating organization (an "NRSRO") or, if not rated, will be of
comparable quality as determined by the trustees of the Trust. The Tax-Exempt
Fund's investments in Tax-Exempt Securities (which must have maturities at the
date of purchase of 397 days (13 months) or less) will be

Institutional Tax-Exempt Fund

7
<PAGE>

in issuers who have received from the requisite NRSROs a rating, with respect
to a class of short-term debt obligations that is comparable in priority and
security with the investment, in one of the two highest rating categories for
short-term obligations or, if not rated, will be of comparable quality as
determined by the Trustees of the Trust. Currently, there are three NRSROs
which rate municipal obligations: Fitch, Moody's and S&P. Certain tax-exempt
obligations (primarily VRDNs and Participating VRDNs) may be entitled to the
benefit of letters of credit or similar credit enhancements issued by financial
institutions and, in such instances, the Board of Trustees and the Investment
Adviser will take into account the obligation of the financial institution in
assessing the quality of such instruments. The Tax-Exempt Fund also may
purchase other types of tax-exempt instruments if, in the opinion of the
Trustees of the Trust, such obligations are equivalent to securities having the
ratings described above.

Investment Restrictions

The Tax-Exempt 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 Tax-Exempt Fund's outstanding shares.

Among the more significant restrictions, the Tax-Exempt Fund may not: (1)
purchase any securities other than Tax-Exempt Securities referred to under "The
Tax-Exempt Fund and Its Objectives"; (2) invest more than 5% of its total
assets (taken at value at the time of each investment) in the securities of any
one issuer except that such restriction shall not apply to securities backed by
the U.S. Government or its agencies or instrumentalities; (3) borrow amounts in
excess of 20% of its total assets taken at market value (including the amount
borrowed), and then only from banks as a temporary measure for extraordinary or
emergency purposes (the Tax-Exempt Fund will not purchase securities while
borrowings are outstanding); (4) mortgage, pledge, hypothecate or in any manner
transfer as security for indebtedness any securities owned or held by the
Tax-Exempt Fund except as may be necessary in connection with borrowings
mentioned in (3) above, and then such mortgaging, pledging or hypothecating may
not exceed 10% of its total assets, taken at value; or (5) invest in securities
with legal or contractual restrictions on resale or for which no readily
available market exists if, regarding all such securities, more than 10% of its
total assets (taken at market value) would be invested in such securities.

Because of the affiliation of Merrill Lynch & Co., Inc. with the
Tax-Exempt Fund, the Tax-Exempt Fund is prohibited from engaging in certain
transactions involving Merrill Lynch & Co., Inc., or subsidiaries thereof,
unless such transactions are conducted pursuant to the terms of an exemptive
order which has been issued by the Securities and Exchange Commission. See
"Portfolio Transactions" in the Appendix to this Prospectus.

INVESTMENT ADVISER

The investment adviser to the Tax-Exempt Fund is Fund Asset Management,
L.P. ("FAM"), a subsidiary of Merrill Lynch & Co., Inc., a publicly held
corporation.

FAM, subject to the general supervision of the Trust's Board of Trustees,
renders investment advice to the Tax-Exempt Fund and is responsible for the
overall management of the Tax-Exempt Fund's business affairs. For the fiscal
year ended April 30, 1998, FAM was entitled to receive investment advisory fees
of $6,881,461 or .45% of the Tax-Exempt Fund's average daily net assets. FAM
has agreed to waive a portion of its fee so that the effective annual fee
payable by the Tax-Exempt Fund to FAM will be at the annual rate of .20% of the
Fund's average daily net assets. During the fiscal year ended April 30, 1998,
such waiver amounted to $3,810,001 or .25% of the Tax-Exempt Fund's average
daily net assets. FAM therefore received $3,071,460 or .20% of the Fund's
average daily net assets for the fiscal year ended April 30, 1998. FAM may
discontinue waiver of the fee in whole or in part at

Institutional Tax-Exempt Fund

8
<PAGE>

any time without notice. During the fiscal year ended April 30, 1998, the
Tax-Exempt Fund's total expenses were $3,759,532 or .24% of its average daily
net assets. If FAM had not waived a portion of its fee, the Tax-Exempt Fund's
total expenses would have been $7,569,533 or .49% of its average daily net
assets during the fiscal year ended April 30, 1998.

SPECIAL TAX CONSIDERATIONS

Federal

The Tax-Exempt Fund has elected to qualify to pay "exempt-interest"
dividends as defined in the Internal Revenue Code of 1986, as amended (the
"Code"). If it so qualifies, dividends or any part thereof (other than any
capital gain distributions) paid by the Tax-Exempt Fund which are attributable
to interest on tax-exempt obligations and which are designated by the
Tax-Exempt Fund as exempt-interest dividends in a written notice mailed to the
Tax-Exempt Fund's shareholders within 60 days after the close of its taxable
year may be treated by shareholders for all purposes as items of interest
excludable from their gross income under Section 103(a) of the Code. The
recipient of tax-exempt income is required to report such income on his or her
federal income tax return solely for informational purposes. However,
shareholders are advised to consult their tax advisers with respect to whether
exempt-interest dividends are excludable under Section 103(a) of the Code if
such shareholders would be treated as "substantial users" under Section
147(a)(1) of the Code with respect to some or all of the tax-exempt obligations
held by the Tax-Exempt Fund. The Code provides that interest on indebtedness
incurred or continued to purchase or carry shares of the Tax-Exempt Fund is not
deductible to the extent attributable to exempt interest dividends. Also, any
losses realized by individuals who dispose of shares of the Tax-Exempt Fund
within six months of their purchase are disallowed to the extent of any
exempt-interest dividends received with respect to such shares.

Individual shareholders of the Tax-Exempt Fund may be subject to
alternative minimum tax to the extent the Tax-Exempt Fund holds "private
activity" bonds. The Tax-Exempt Fund expects that it will hold private activity
bonds; however, an individual shareholder filing a joint return who does not
have any tax preference items subject to the alternative minimum tax other than
income received from the Tax-Exempt Fund derived from private activity bonds
would have to receive more than $45,000 of such income from the Tax-Exempt Fund
before becoming subject to the alternative minimum tax.

Exempt-interest dividends paid by the Tax-Exempt Fund, whether or not
attributable to private activity bonds, may increase a corporate shareholder's
alternative minimum taxable income. In addition, the payment of exempt-interest
dividends may increase a corporate shareholder's liability for the
environmental tax imposed on a corporation's alternative minimum taxable income
(computed without regard to either the alternative tax net operating loss
deduction or the environmental tax deduction). The environmental tax, which is
imposed at a rate of $12 per $10,000 (0.12%) of alternative minimum taxable
income in excess of $2,000,000, is imposed even if the corporation is not
required to pay an alternative minimum tax because the corporation's regular
income tax liability exceeds its minimum tax liability.

The Tax-Exempt Fund may realize capital gains, which will constitute
taxable income. Distributions of the Tax-Exempt Fund's net realized short-term
capital gains will be taxable to shareholders as ordinary income. In order to
avoid taxation on its net long-term capital gains, the Tax-Exempt Fund may
elect to distribute "capital gain dividends" to its shareholders. Any
distributions designated as capital gain dividends, i.e., as being made from
the Tax-Exempt Fund's net long-term capital gains in a written notice furnished
annually to shareholders are taxable to shareholders as long-term capital
gains, regardless of the shareholders' holding period of shares of the Tax-

Institutional Tax-Exempt Fund

9
<PAGE>

Exempt Fund. As of April 30, 1998, the Tax-Exempt Fund had net capital loss
carry-overs of $248,451, of which $90,891 expire in 2001, $17,520 expire in
2002 and $140,040 expire in 2003.

State and Local

Depending upon the extent of the Tax-Exempt Fund's activities in those
states and localities in which its offices are maintained or in which its
agents or independent contractors are located, the Tax-Exempt Fund may be
subject to the tax laws of such states or localities. In addition, the
exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any state
or local taxing authority. The laws of individual states and local taxing
authorities vary with respect to the taxation of such interest income, and each
holder of shares of the Tax-Exempt Fund is advised to consult his own tax
adviser in that regard. The Tax-Exempt Fund will report annually the percentage
of interest income it received during the preceding year on tax-exempt
obligations, indicating, on a state-by-state basis, the source of such income.

The Appendix and the Statement of Additional Information describes the
effect of other provisions of the Code on the Tax-Exempt Fund and its
shareholders.

----------------
Shareholders are urged to consult their attorneys or tax advisers
regarding specific questions as to federal, state or local taxes.

Institutional Tax-Exempt Fund

<PAGE>

APPENDIX

This Appendix constitutes part of the Prospectuses of Merrill Lynch
Premier Institutional Fund (the "Premier Institutional Fund"), Merrill Lynch
Institutional Fund (the "Institutional Fund"), Merrill Lynch Rated
Institutional Fund (the "Rated Institutional Fund"), Merrill Lynch Government
Fund (the "Government Fund"), Merrill Lynch Treasury Fund (the "Treasury Fund")
and Merrill Lynch Institutional Tax-Exempt Fund (the "Tax-Exempt Fund")
(collectively, the "Funds"). Unless otherwise indicated, the information set
forth herein is applicable to each of the Funds.

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

INVESTORS FOR WHOM THE FUNDS ARE DESIGNED

Each of the Funds is designed primarily for institutions as an economical
and convenient means for the investment of short-term funds which they hold for
their own account or hold or manage for others. Such institutions include banks
and trust companies, savings institutions, corporations, investment banks and
brokers, insurance companies, investment counsellors, pension funds, employee
benefit plans, law firms, trusts, estates and educational, religious and
charitable institutions.

Each Fund offers the economic advantages of block purchases of securities
and diversification. Securities of the types in which the Funds invest are not
generally available in denominations of less than $10,000. A higher yield may
also be available when such securities are bought directly from the issuer in
amounts of $1,000,000 or more. Likewise, when buying U.S. Government and
taxable and tax-exempt money market obligations from a dealer rather than the
issuer, the spread between the bid and asked price or the commission tends to
decrease as the size of the transaction increases, thereby increasing the
yield. The Funds also offer the investor the opportunity to participate in a
more diversified maturity schedule than the size of its portfolio might
otherwise permit.

Investment in the Funds may relieve the investor of many of the
administrative problems usually associated with the direct purchase of U.S.
Government and taxable and tax-exempt money market obligations, such as
scheduling maturities and reinvestments, safekeeping of securities, surveying
the market for the best price at which to buy and sell, and separate principal
and income recordkeeping. Furthermore, purchasers meeting the requirements for
the expedited redemption procedure have the convenience of receiving the
proceeds from the redemption of their shares the same day or the next business
day; therefore, at times when yields on longer term U.S. Government and money
market obligations are higher than yields on shorter term obligations,
ownership of Fund shares will allow an investor with a need for a short-term
call on funds to earn a higher yield than would be possible from investing
directly in such obligations. All such benefits will be reduced to the extent
of the Fund's expenses (see "Investment Adviser," "Distributor" and
"Management") and during any periods when interest rates are higher for U.S.
Government and taxable and tax-exempt money market obligations with shorter
maturities than the weighted average maturity date of the Fund's portfolio
securities.

In general, if interest rates decline, then the yield to shareholders will
also decline. An increase in interest rates will generally reduce the value of
each Fund's investments and a decline in interest rates will generally increase
the value. If there are unusually heavy redemption requests because of changes
in interest rates or for any other reason, a Fund may have to sell a portion of
its investment portfolio at a time when it may be disadvantageous to do so.
Selling portfolio securities under these circumstances may result in a lower
net asset value per share for investors. However, in these circumstances each
Fund is permitted to borrow amounts up to 10% of the value of its net assets,
and the Funds believe that such borrowings would help mitigate any adverse
effects and would make the sale of their portfolio securities unlikely.

A-1
<PAGE>

INVESTMENT ADVISER

The investment adviser to each Fund is Fund Asset Management, L.P.
("FAM"), a subsidiary of Merrill Lynch & Co., Inc., a publicly held
corporation. The principal business address of FAM is 800 Scudders Mill Road,
Plainsboro, New Jersey (mailing address: P.O. Box 9011, Princeton, New Jersey
08543-9011), and the principal business address of Merrill Lynch & Co., Inc. is
World Financial Center, North Tower, 250 Vesey Street, New York, New York
10281-1209.

FAM and its sister company, Merrill Lynch Asset Management, L.P. ("MLAM"),
together act as the manager or adviser for over 170 other registered investment
companies. FAM has access to the expertise of its affiliates, Merrill Lynch
Government Securities, Inc. ("GSI") and Merrill Lynch Money Markets, Inc.
("MLMM"). In terms of dollar values of trading, GSI and MLMM are two of the
largest dealers in U.S. Government securities, U.S. Government agency
securities and certain other money market securities, acting both as primary
dealers and secondary market traders. In addition, the total securities and
economic research facilities of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") are available to FAM. MLAM also offers portfolio
management and portfolio analysis services to individuals and institutions. As
of May 31, 1998, FAM and MLAM had a total of approximately $310 billion in
investment company and other portfolio assets under management, including
assets of certain affiliates.

Securities held by the Funds may also be held by other funds for which FAM
or MLAM acts as the manager or adviser or by investment advisory clients of
MLAM. If purchases or sales of securities for a Fund or other funds for which
FAM or MLAM acts as the manager or adviser or for their other advisory clients
arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the respective funds and
clients in a manner deemed equitable to all. To the extent the transactions on
behalf of more than one client of FAM 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.

DISTRIBUTOR

The principal underwriter and distributor of shares of the Funds is
Merrill Lynch Funds Distributor, Inc. ("MLFD"), an indirect subsidiary of
Merrill Lynch & Co., Inc. The principal business address of MLFD is 800
Scudders Mill Road, Plainsboro, New Jersey (mailing address: P.O. Box 9081,
Princeton, New Jersey 08543-9081). MLFD makes a continuous offering of the
Funds' shares and bears the costs and expenses of printing and distributing any
copies of any prospectuses and annual and interim reports of the Funds (after
such items have been prepared and set in type) which are used in connection
with the offering of shares to selected dealers or investors, and the cost and
expenses of preparing, printing and distributing any other literature used by
MLFD or furnished by it for use by selected dealers in connection with the
offering of the shares for sale to the public. There will be no fee payable by
the Funds in these services. There is no sales or redemption charge.

A-2
<PAGE>

MANAGEMENT

The Trustees of the Trust consist of seven individuals, five of whom are
not "interested persons" of the Trust as defined in the Investment Company Act
of 1940. The Trustees are responsible for the overall supervision of the
operations of the Funds and perform the various duties imposed on the trustees
of investment companies by the Investment Company Act of 1940. The Board of
Trustees elects officers annually.

The Trustees of the Trust are:

*Robert W. Crook--Senior Vice President of MLAM and MLFD.

A. Bruce Brackenridge--Retired Group Executive of J.P. Morgan & Co., Inc.
and Morgan Guaranty Trust Company.

Charles C. Cabot, Jr.--Partner in the law firm of Sullivan & Worcester.

James T. Flynn--Retired Chief Financial Officer of J.P. Morgan & Co., Inc.

*Terry K. Glenn--Executive Vice President of MLAM and FAM and President
and Director of MLFD.

Todd Goodwin--General Partner, Gibbons, Goodwin, Van Amerongen.

George W. Holbrook, Jr.--Managing Partner of Bradley Resources Company.

W. Carl Kester--Professor, Business Administration, Harvard University
Graduate School of Business Administration.
- --------
* Interested person as defined in the Investment Company Act of 1940.

As described under the caption "Investment Adviser," FAM has assumed
responsibility for the actual management of the business affairs of the Funds,
subject to the general supervision of the Trust's Board of Trustees. The
responsibility for making decisions to buy, sell or hold a particular security
rests with FAM. FAM performs certain of the other administrative services and
provides all the office space, facilities, equipment and necessary personnel
for portfolio management of the Funds. Each Trustee who is not an officer or
employee of Merrill Lynch & Co., Inc. or its subsidiaries will be paid $36,000
annually in his capacity as trustee of the Trust, and all Trustees will be
reimbursed for any expenses incurred in attending meetings of the Board of
Trustees of the Trust or of any committee thereof. No officer or employee of
Merrill Lynch & Co., Inc. or its subsidiaries will receive any compensation
from any Fund for acting as a trustee or officer of the Fund. The Trust has no
employees other than its officers, all of whom are compensated by FAM or MLFD.

PURCHASE OF SHARES

Each Fund's shares are sold without a sales charge on a continuous basis.
Each Fund will effect orders to purchase shares on every day that both the New
York Stock Exchange (the "Exchange") and the Federal Reserve Bank of Boston are
open for business (a "Business Day") at the net asset value per share (the "Net
Asset Value") determined that day. Net Asset Value will be determined each
Business Day for the Tax-Exempt and the Treasury Funds at the close of trading
on the Exchange (4:00 p.m. Boston time). Net asset value per share for the
Premier Institutional, the Institutional, the Rated Institutional and the
Government Funds will be determined daily as of 5:00 p.m. (Boston time). On any
day that the Exchange closes early or that the Public Securities Association
("PSA") recommends that the securities markets close early, the times for which
orders become effective may be advanced (see "Net Asset Value"). It is
anticipated, although it cannot be assured, that the net asset value of each of
the Funds will remain constant at $1.00 per share. A purchase order does not
become effective until Federal Funds are received

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by State Street Bank and Trust Company ("State Street Bank" or the "Bank") or
other forms of payment are converted by the Bank (at a charge to the investor)
into Federal Funds

The Funds strongly recommend the use of Federal Funds to purchase shares
because, while other forms of payment described below will also be accepted,
purchase orders do not become effective until Federal Funds are made available.

The minimum initial purchase of shares for each of the Institutional,
Government, Treasury and Tax-Exempt Funds is $25,000. The minimum initial
purchase for the Rated Institutional Fund is $1,000,000. The minimum initial
purchase for the Premier Institutional Fund is $10,000,000. Subsequent
purchases may be made in amounts as little as $1,000. However, subsequent
purchases of shares of the Premier Institutional Fund by an investor whose
account balance in the Premier Institutional Fund has fallen below $10,000,000
will only be accepted if, after such purchase, such investor's accrued balance
will be at least $10,000,000.

Investors are required to maintain a minimum balance of $5,000 in each
account maintained with an applicable Fund other that the Premier Institutional
Fund. If an account balance in such Fund falls below $5,000, an investor's
shares in the applicable Fund may be redeemed. If an investor's average account
balance in the Premier Institutional Fund falls below $10,000,000 for any
30-day period, such investor's shares in the Premier Institutional Fund will be
exchanged for shares of the Institutional Fund unless the investor has elected
in its Account Application to have the shares redeemed with the proceeds of the
redemption paid to the investor See "Redemptions."

Purchase by Federal Funds Wire
Federal Funds are monies credited to a bank's account with a Federal
Reserve Bank. To purchase shares of any Fund by wiring Federal Funds, the
investor must first telephone MLFD, Boston (617-357-1460 or toll-free 800-
225-1576) to receive a wire order number. On the telephone the following
information will be requested by MLFD: name of investor, address, tax
identification number, dividend distribution election, amount being wired and
wiring bank. Instructions should then be given by the investor to its bank to
wire transfer Federal Funds to State Street Bank and Trust Company-Boston,
Attention: Merrill Group, Credit (Name of Fund), Wire Order Number: (Assigned
by Fund) and the investor's name and account number.

The Funds have procedures to facilitate the purchase of shares by Federal
Funds Wire as described below (It should be noted, however, that these
procedures may be modified on days on which the Exchange closes early or the
PSA recommends that the securities markets close early):

Tax-Exempt Fund--If an order is received by the Fund by 12:00 Noon (Boston
time) and Federal Funds are received by State Street Bank prior to the close of
the Federal Funds wire on that same day, the order will be effected that day as
of 12:00 Noon (Boston time) and dividends will be earned that day. If an order
is received after 12:00 Noon (Boston time) but before the regular close of the
Exchange at 4:00 p.m. (Boston time), it will become effective on that day, but
dividends will not be earned until the next Business Day.

Treasury Fund--If an order is received by the Fund by 2:00 p.m. (Boston
time) and Federal Funds are received by State Street Bank prior to the close of
the Federal Funds wire on that same day, the order will be effected that day as
of 2:00 p.m. (Boston time) and dividends will be earned that day. If an order
is received after 2:00 p.m. (Boston time) but before the regular close of the
Exchange at 4:00 p.m. (Boston time), it will become effective on that day, but
dividends will not be earned until the next Business Day.

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Premier Institutional, Institutional, Rated Institutional and Government
Funds--If an order is received and accepted by the applicable Fund by 5:00 p.m.
(Boston time) and Federal Funds are received by State Street Bank prior to the
close of the Federal Funds wire on the same day, the order will be effected as
of 5:00 p.m. (Boston time) and dividends will be earned that day. If an order is
received after 5:00 p.m. (Boston time) it will not become effective, and
dividends will not be earned, until the next Business Day.

Each Fund Reserves the Right to Reject Any Order for Fund Shares

Purchase Through FACTS

Business organizations (such as corporations, partnerships or business
trusts) may purchase shares of the Funds through the Merrill Lynch Financial
Assets Control Tracking System ("FACTS"). FACTS is a program designed to help
businesses manage their cash flow and earn money market returns through
investment in the Funds. FACTS utilizes the Automated Clearing House system
("ACH") to transfer funds electronically between the corporate investor's local
bank and the Funds.

The purchase of shares of the Funds through FACTS may be arranged by
completing a FACTS Account Application, which can be obtained by calling
617-357-1460 or toll-free 800-225-1576 and returning it to Merrill Lynch Funds
Distributor, Inc. in Boston. After the application is received, an announcement
card will be sent to the organization supplying it with an account number and
advising it that, after 15 days from the printed date on the card, the
organization may begin using ACH for purchasing Fund shares.

After this waiting period, an authorized representative of the
organization may call the Funds' FACTS toll-free number (800-343-3446) by 4:00
p.m. (Boston time), identify the organization by name and account number, and
tell the FACTS operator how much cash the organization wishes to invest in the
applicable Fund from its local corporate checking account. On the morning of
the following business day funds will automatically be transferred to a Fund
via ACH. Dividends will be paid by the Fund on the day funds are transferred.

Purchase by Check or Federal Reserve Draft

Purchase orders for which remittance is to be made by check or Federal
Reserve Draft must be submitted directly by mail to State Street Bank and Trust
Company, P.O. Box 8500, Boston, Massachusetts 02266-8500, together with payment
for the purchase price of such shares and, in the case of a new account, a
completed Account Application (see page A-19). Such orders will become
effective on the day the remittance is converted into Federal Funds, and shares
will be purchased at the net asset value next determined after such conversion.
Checks and Federal Reserve Drafts should be made payable to the order of
Merrill Lynch Premier Institutional Fund, Merrill Lynch Institutional Fund,
Merrill Lynch Rated Institutional Fund, Merrill Lynch Government Fund, Merrill
Lynch Treasury Fund or Merrill Lynch Institutional Tax-Exempt Fund, as
applicable. Money transmitted by check normally will be converted into Federal
Funds within two business days following receipt. Certified checks are not
necessary, but checks are accepted subject to collection at full face value in
United States funds and must be drawn on a United States bank. In the event
that the purchase price for shares of a Fund is paid by Federal Funds in the
form of a Federal Reserve Draft, Federal Funds will be available to the Fund on
the next business day and the investor's order will be effected on such day.
During the period of time prior to the conversion into Federal Funds, an
investor's money will not be invested and, therefore, will not be earning
dividends.

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General
All funds will be fully invested in full and fractional shares. To
minimize recordkeeping by banks and other institutions purchasing shares on
behalf of separate accounts, arrangements can be made through MLFD, Boston, to
have State Street Bank provide subaccounting services. All underlying
subaccounts are subject to each Fund's minimum balance requirements.

The issuance of shares of a Fund is recorded on the books of the Fund,
and, to avoid additional operating costs and for investor convenience, stock
certificates will not be issued unless expressly requested in writing by a
shareholder. Certificates will not be issued for fractional shares. State
Street Bank, the transfer agent, will send to each shareholder of record a
monthly statement and a statement of shares of the Fund(s) owned after each
purchase or redemption transaction relating to such shareholder.

Boston banks are closed on certain holidays on which the New York Stock
Exchange is open. These holidays are Columbus Day (the 2nd Monday in October)
and Veterans Day (November 11). Investors are not able to purchase shares by
wiring Federal Funds on such holidays because State Street Bank is not open to
receive such funds on behalf of the Funds. Investors whose checks are received
on the business day prior to a holiday, or, in the case of the Tax-Exempt or
Treasury Funds, whose order is received after the close of trading (including
early closing of trading) on the Exchange on the business day prior to a
holiday, will have the proceeds of the check or order invested in shares of the
applicable Fund as of the first time that shares in that Fund may be purchased
on the next day on which State Street Bank is open for business. In addition,
investors in the Tax-Exempt Fund or Treasury Fund whose order is received after
12:00 noon (Boston time) or 2:00 p.m. (Boston time), respectively, but prior to
the close (including early closing of trading) on the Exchange on the business
day prior to a holiday will have the proceeds of any wire received on the same
day invested in shares of the applicable Fund as of the close of trading on the
Exchange on that day, but will not begin earning dividends on the investment
until the next day on which State Street Bank is open for business. Also,
investors will not be able to have redemption proceeds wired to their banks on
these Boston bank holidays. The Funds' offices will be open, however, and all
phones will be operative. The Funds' staff will be available to take orders for
next day purchases and redemptions, or answer any questions investors may have.

REDEMPTIONS

Upon receipt by State Street Bank of a proper redemption request
(indicating the name of the Fund and the dollar amount of shares to be
redeemed), each Fund will redeem its shares on every day that both the New York
Stock Exchange (the "Exchange") and the Federal Reserve Bank of Boston are open
for business (a "Business Day") at the net asset value per share determined that
day. Net asset value per share is determined daily for the Tax-Exempt and
Treasury Funds at the close of trading on the Exchange (4:00 p.m. Boston time).
Net asset value is determined daily for the Premier Institutional,
Institutional, Rated Institutional and Government Funds as of 5:00 p.m. (Boston
time). If the Exchange closes trading prior to the times established above, or
the Public Securities Association (the "PSA") recommends that the securities
markets close early, times for which orders to redeem shares will be accepted
may be advanced. See "Net Asset Value." Shareholders may use either the ordinary
or, if they elect, the expedited redemption procedure described below. If in
utilizing any of the redemption procedures the shareholder redeems all shares
owned, his or her dividends accrued for the month to date will be simultaneously
remitted by check. Redemption requests received with respect to the Premier
Institutional, Institutional, Rated Institutional and Government Funds will be
effected that day but the shareholder will not receive a dividend that day.
Shares purchased other than by a Federal Funds wire or bank wire may not be
redeemed by

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the expedited procedure or the checking account redemption plan until 15
calendar days after the purchase of such shares but may be redeemed pursuant to
the ordinary redemption procedure during such period.

Due to the relatively high cost of maintaining small investment accounts,
each of the Institutional Fund, Rated Institutional Fund, Government Fund,
Treasury Fund and Tax-Exempt Fund reserves the right to redeem shares, at a
redemption price as determined in accordance with the preceding paragraph, if
at any time the total investment in a shareholder's account does not have a
value of at least $5,000. Shareholders of such Funds will be notified that the
value of their account is less than $5,000 and will be allowed 60 days to make
an additional investment into their account before the redemption is processed.
If an investor's average account balance in the Premier Institutional Fund
falls below $10,000,000 for any 30-day period, the Premier Institutional Fund
shall be authorized to exchange such investor's shares for shares of the
Institutional Fund unless such investor has elected in its Account Application
to have shares redeemed with the proceeds of redemption paid to the investor.
In either case, the shareholder will be notified of the exchange or redemption.

Expedited Redemption Procedure

Shareholders meeting the requirements stated below may initiate redemptions
by submitting their redemption requests by telephone to State Street Bank
(toll-free 800-225-5150, in Massachusetts 800-972-5555) or mail (P.O. Box 8500,
Boston, Massachusetts 02266-8500) (without signature guarantee) and have the
proceeds sent by a Federal Funds wire to a previously designated bank or trust
company account. The minimum amount to be wired is $1,000. A redemption request
received prior to 12:00 Noon (Boston time) for the Tax-Exempt Fund or prior to
2:00 p.m. (Boston time) for the Treasury Fund will not earn a dividend on the
day the request is received and payment will be made in Federal Funds wired on
the same business day. Shareholders of the Premier Institutional, Institutional,
the Rated Institutional and Government Funds will not earn a dividend on the day
the redemption request is received. With regards to expedited redemption orders
received prior to 5:00 p.m. (Boston time) for each of the Premier Institutional,
Institutional, the Rated Institutional, and the Government Funds, proceeds from
such redemptions will be wired out that same day. It is important to note that
redemption orders placed later in the day--especially between 3:30 p.m. (Boston
time) and 5:00 p.m. (Boston time)--will be processed by the Fund and a wire will
be initiated by State Street Bank but payment may be delayed if the Federal
Reserve Bank of Boston is experiencing delays in transfers of funds. After a
redemption order has been processed by the Fund and a redemption wire has been
initiated by State Street Bank, neither entity will assume any responsibility
for the performance of the shareholder's receiving bank, or any of its
intermedaries.

To utilize the expedited redemption procedure, all shares must be held in
non-certificate form in the shareholder's account. In addition, an Account
Application (page A-19) with the expedited payment authorization section
properly completed must be on file with State Street Bank before an expedited
redemption request is submitted. This form requires a shareholder to designate
the bank or trust company account to which its redemption proceeds should be
sent. Any change in the bank or trust company account designated to receive the
proceeds must be submitted in proper form on a new Account Application with
signature guaranteed. In making a telephone redemption request, a shareholder
must provide the shareholder's name and account number, the dollar amount of
the shares to be redeemed and the name of the bank to which the redemption
proceeds should be sent. If the information provided by the shareholder does
not correspond to the information on the application, the transaction will not
be approved. If, because of unusual circumstances, a shareholder is unable to
contact State Street Bank at the telephone numbers listed above to make an
expedited redemption request, he or she may contact MLFD or his or her Merrill
Lynch Financial Consultant to effect such a redemption, or request redemption
in writing as described under "Ordinary Redemption Procedure" below.

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Ordinary Redemption Procedure
If this method of redemption is used, the shareholder may submit his
redemption request in writing to State Street Bank and Trust Company, P.O. Box
8500, Boston, Massachusetts 02266-8500. A Fund will make payment for shares
redeemed pursuant to the ordinary redemption procedure by check sent to the
shareholder at the address on such shareholder's Account Application. Such
checks will normally be sent out within one business day, but in no event more
than seven days after receipt of the redemption request in proper form. If
certificates have been issued representing the shares to be redeemed, prior to
effecting a redemption with respect to such shares State Street Bank must have
received such certificates. A shareholder's signature must be guaranteed by an
"eligible guarantor institution" as such term is defined by Rule 17Ad-15 of the
Securities Exchange Act of 1934, the existence and validity of which may be
verified by State Street Bank through the use of industry publications. A
notary public is not an acceptable guarantor. In certain instances, State
Street Bank may request additional documentation which it believes necessary to
insure proper authorization such as, but not limited to, trust instruments,
death certificates, appointment of executor or administrator, or certificates
of corporate authority. Shareholders having questions regarding proper
documentation should contact State Street Bank (toll-free 800-225-5150, in
Massachusetts 800-972-5555).

Checking Account Redemption Plan
State Street Bank will establish a checking account for any shareholder of
the Institutional Fund, the Government Fund, the Treasury Fund and the
Tax-Exempt Fund at the shareholder's request. Shareholders of the Premier
Institutional Fund and the Rated Institutional Fund will not be able to utilize
a checking account for redemptions. Checks drawn on this account can be made
payable to the order of any person in any amount not less than $500. The payee
of the check may cash or deposit it like any other check drawn on a bank. When
such a check is presented to State Street Bank for payment, the Bank will
present the check to the applicable Fund as authority to redeem a sufficient
number of shares in the shareholder's account to cover the amount of the check.
This enables the shareholder to continue earning daily income dividends until
the check is cleared. Canceled checks will be returned to the shareholder by
the Bank.

Shareholders will be subject to the Bank's rules and regulations governing
such checking accounts including the right of the Bank not to honor checks in
amounts exceeding the value of the shareholder's account at the time the check
is presented for payment. Also, the Bank may not honor checks drawn against
shares purchased, other than by Federal Funds wire, until 15 days after the
purchase of such shares. The Bank and the Funds offering this checking account
privilege have reserved the right to modify or terminate this checking account
privilege upon 30 days' notice to participating shareholders. Shareholders
wishing to consider this method of redemption should complete the Authorization
for Redemption by Check Form and Signature Card which appear on pages A-21 and
A-22 of this Prospectus.

Redemption through FACTS
Those shareholders who participate in the FACTS program may redeem shares
of a Fund through any of the methods described above.

DIVIDENDS

Each Fund intends to declare all, or substantially all, of its net income
as dividends daily. Dividends are paid monthly and automatically reinvested in
additional Fund shares at net asset value and credited to the shareholder's
account or, at the shareholder's option, paid in cash.

Each Fund's net income for dividend purposes is determined daily. On days
on which the Exchange and the Federal Reserve Bank of Boston are open for
business, such determination will be made immediately prior to the

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determination of net asset value at the close of trading on the Exchange for the
Tax-Exempt and Treasury Funds, and as of 5:00 p.m. for the Premier Institutional
Fund, Institutional Fund, the Rated Institutional Fund and the Government Fund.
Immediately after such determination, each Fund will declare a dividend payable
to shareholders of record either: (a) at 12:00 Noon (Boston time) for the
Tax-Exempt Fund, 2:00 p.m. (Boston time) for the Treasury Fund and 5:00 p.m.
(Boston time) for the Premier Institutional Fund, the Institutional Fund, the
Rated Institutional Fund and the Government Fund on days which the Exchange and
the Federal Reserve Bank of Boston are open for business, and do not close
early, or if the Exchange closes early or the PSA recommends that the securities
market close early, at such early closing time or (b) at the previous close of
trading on the Exchange on days on which the Exchange or the Federal Reserve
Bank of Boston is not open for business.

Each Fund intends to use its best efforts to maintain its net asset value
at $1.00 per share, although this cannot be assured.

Shareholders may receive their dividends in cash monthly by completing the
appropriate section of the Account Application (page A-19). Such cash
distributions will be paid by check within seven days after the end of each
month. The election to receive cash distributions may be made at the time of
purchase of Fund shares or at any time subsequent thereto by giving written
notice to State Street Bank. To be effective with respect to a particular
monthly dividend, such written notice must be received by State Street Bank at
least seven days prior to the end of the month. Dividends and distributions
made by the Funds are taxable to shareholders whether distributed in cash or
reinvested in additional shares. See "Taxes."

NET ASSET VALUE

The net asset value per share for purposes of pricing orders for both the
purchase and the redemption of Fund shares is determined daily on days that both
the Exchange and the Federal Reserve Bank of Boston are open for business and do
not close early. On any day the Exchange closes early, net asset value per share
of each Fund for such purposes will be determined 15 minutes after the early
close of trading. On any day that the PSA recommends an early close, the time
for determination of net asset value of the Funds, will be 15 minutes following
the time that each Fund determines, in its discretion, to cease accepting orders
for purchases and redemptions of shares. On days that both the Exchange and the
Federal Reserve Bank of Boston are open for full days of trading and the PSA
does not recommend that the securities markets close early, net asset value is
determined as of 5:00 p.m. (Boston time) for the Premier Institutional,
Institutional, the Rated Institutional and Government Funds. Net asset value is
determined on days that both the Exchange and the Federal Reserve Bank of Boston
are open for business for full days of trading for the Tax-Exempt Fund and for
the Treasury Fund at the close of trading on the Exchange (4:00 p.m. Boston
time). The net asset value of the Premier Institutional Fund, Institutional
Fund, Rated Institutional Fund, Government Fund and Treasury Fund is determined
pursuant to the "penny rounding" method by adding the fair value of all
securities and other assets in the portfolio, deducting the portfolio's
liabilities, dividing by the number of shares outstanding and rounding the
result to the nearest whole cent. In determining fair value, securities held by
the Premier Institutional Fund, Institutional Fund, Rated Institutional Fund,
Government Fund and Treasury Fund with a remaining maturity of 60 days or less
will be valued on an amortized cost basis, and securities with a remaining
maturity of greater than 60 days for which market quotations are readily
available are valued at market value. Other securities held by the Premier
Institutional Fund, Institutional Fund, Rated Institutional Fund, Government
Fund and Treasury Fund are valued at their fair value as determined in good
faith by or under the direction of the Trust's Board of Trustees. The Tax-Exempt
Fund relies on a rule of the Securities and Exchange Commission pursuant to
which the valuation of its portfolio securities is based upon their amortized

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cost. This method involves valuing a security 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 security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Tax-Exempt Fund would receive if it sold the
securities.

TAXES

Each Fund in the past has elected the special tax treatment afforded
regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"). Each Fund believes that it has qualified for such
treatment and intends to continue to qualify therefor. If a Fund so qualifies,
in any fiscal year with respect to which it distributes at least 90% of its
investment company taxable income, the Fund (but not its shareholders) will be
relieved of federal income tax liability on the amount distributed. Each Fund
contemplates declaring as dividends 100% of its net investment income. See
"Dividends." If in any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income and gains will be taxed to that
Fund at corporate rates. Taxable dividends and distributions will be taxable to
shareholders as ordinary income or long-term capital gains, whether received in
cash or reinvested in additional shares of a Fund. State Street Bank, the
transfer agent, will send each shareholder a monthly dividend statement which
will include the amount of dividends paid and will identify whether such
dividends represent ordinary income or long-term capital gains. In general,
taxable dividends paid by the Funds will be treated as ordinary income.

Investments by the Premier Institutional Fund, the Institutional Fund and
the Rated Institutional Fund in certain Eurodollar and Yankeedollar obligations
may be subject to foreign withholding taxes. See "The Premier Institutional
Fund and Its Objectives," "The Institutional Fund and Its Objectives," and "the
Rated Institutional Fund and Its Objectives."

The Statement of Additional Information for each Fund describes the effect
on other provisions of the Code on the Fund and its shareholders. The
Prospectus for the Tax-Exempt Fund describes certain special tax attributes of
that Fund as a result of its investment in tax-exempt securities.

Certain states exempt from state income taxation dividends paid by
regulated investment companies which are derived in whole or in part from
interest on U.S. Government obligations. State law varies as to whether
dividend income attributable to U.S. Government obligations is exempt from
state income tax. Each Fund intends to provide shareholders annually with
information relating to that Fund's income and assets necessary to permit
shareholders to determine whether and to what extent their dividend income from
the Fund is exempt from their state's income tax.

Investors are urged to consult their attorneys or tax advisors regarding
specific questions as to federal, state or local taxes.

PORTFOLIO TRANSACTIONS

The Funds have no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policy
established by the Trustees of the Trust, the Investment Adviser is primarily
responsible for each Fund's portfolio decisions and the placing of the Fund's
portfolio transactions. In placing orders, it is the policy of the Funds 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

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<PAGE>

and operational facilities, the firm's risk in positioning the securities
involved, and the provision of supplemental investment research by the firm.
While the Investment Adviser generally seeks reasonably competitive spreads or
commissions, the Funds will not necessarily be paying the lowest spread or
commission available. The Fund's policy of investing in securities with short
maturities will result in high portfolio turnover.

The U.S. Government obligations and money market securities in which the
Funds invest are traded primarily in the over-the-counter market. Where
possible, the Funds 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 are acting as
principals for their own account. On occasion, securities may be purchased
directly from the issuer. U.S. Government obligations and taxable and
tax-exempt money market securities are generally traded on a net basis and do
not normally involve either brokerage commissions or transfer taxes. The cost
of executing the Funds' portfolio transactions will consist primarily of dealer
spreads and underwriting commissions.

The Premier Institutional Fund, Institutional Fund, Rated Institutional
Fund, Government Fund and Treasury Fund may conduct principal transactions with
certain affiliates, including Merrill Lynch Government Securities, Inc.,
Merrill Lynch Money Markets, Inc., and Merrill Lynch, subject to a number of
conditions imposed in an exemptive order issued by the Securities and Exchange
Commission. Similarly, the Tax-Exempt Fund may conduct principal transactions
with its affiliate, Merrill Lynch, subject to a number of conditions imposed in
an exemptive order issued by the Securities and Exchange Commission. In
addition, affiliated persons of the Funds may serve as their brokers in
over-the-counter transactions conducted on an agency basis. The Funds may also
purchase securities from underwriting syndicates of which Merrill Lynch is a
member under certain conditions in accordance with the provisions of a rule
adopted under the Investment Company Act of 1940.

The Trustees of the Trust have considered the possibilities of recapturing
for the benefit of the Funds expenses of possible portfolio transactions, such
as dealer spreads and underwriting commissions, by conducting such portfolio
transactions through affiliated entities, including Merrill Lynch. 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.

EXCHANGE PRIVILEGE

Shareholders of a Fund may exchange their shares for shares of any other
Fund of the Trust on the basis described below. To qualify for the Exchange
Privilege, a shareholder must exchange shares with a current value of at least
$1,000. Under the Exchange Privilege, each of the Funds offers to exchange its
shares for shares of any other Fund, on the basis of relative net asset value
per share. Since all of the Funds are no-load funds and seek to maintain a
constant $1.00 net asset value per share, it is expected that any exchange with
a Fund would be on a share-for-share basis. If in utilizing the Exchange
Privilege the shareholder exchanges all his shares of a Fund, all dividends
accrued on such shares for the month to date will be invested in shares of the
Fund into which the exchange is being made. An exchange between Funds pursuant
to the Exchange Privilege is treated as a sale for federal income tax purposes
and, depending upon the circumstances, a short- or long-term capital gain or
loss may be realized.

To exercise the Exchange Privilege, shareholders should contact MLFD,
Boston, or their Merrill Lynch Financial Consultants, who will advise the
applicable Fund of the exchange. A shareholder may make exchanges by telephone,
provided that (i) he has elected the telephone exchange option on the Account
Application, (ii) the registration of the account for the new Fund will be the
same as for the existing Fund, and (iii) the shares to be exchanged are not in
certificate form. To make exchanges by telephone, a shareholder should call
MLFD at 617-357-1460 or toll-free 800-225-1576. The shareholder should identify
himself by name and account number

A-11
<PAGE>

and give the name of the fund into which he wishes to make the exchange, the
name of the Fund and the number of shares he wishes to exchange. The
shareholder also may write to State Street Bank requesting that the exchange be
effected. Such letter must be signed exactly as the account is registered with
signature(s) guaranteed by a commercial bank which is a member of the FDIC or
by a trust company or a member firm of a domestic securities exchange. The
Funds reserve the right to require a properly completed Exchange Application.

Investors in certain other Merrill Lynch funds which impose a contingent
deferred sales load on redemption of shares ("deferred load funds") may
exchange shares of such funds for shares of the Funds, subject to the minimum
initial investment requirements for each of the Funds, without paying the
contingent deferred sales load normally applicable to such redemptions. Shares
of the Funds which were acquired as a result of such an exchange may, in turn,
be exchanged back into a participating deferred load fund, in which event the
holding period for shares of the deferred load fund will be aggregated with the
previous deferred load fund holding periods for purposes of calculating the
contingent deferred sales load. The holding period for shares of the Fund so
acquired will not, however, be taken into account in calculating the contingent
deferred sales load. Furthermore, if shares of the Fund which were acquired as
a result of an exchange for shares of a deferred load fund are subsequently
redeemed or exchanged for shares of a fund other than a deferred load fund, the
shareholder will thereupon be charged the contingent deferred sales load that
would otherwise have been payable upon the exchange of shares of the deferred
load fund for shares of the applicable Fund.

These exchange privileges may be modified or terminated at any time.

ADDITIONAL INFORMATION

Yield Information
The Funds may from time to time include information regarding their
respective yields in advertisements or information furnished to present or
prospective shareholders. Yield will be computed by annualizing net investment
income dividends for a given period and dividing by the average public offering
price. Each Fund's yield will vary from time to time depending upon market
conditions, the securities comprising the Fund's portfolio, and the Fund's
operating expenses. Yield should also be considered relative to changes in the
net asset value of the Fund's shares and the Fund's investment and dividend
payment policies.

Description of Shares of the Trust
The Declaration of Trust of the Trust provides that the Trust may be
comprised of separate series (a "Series") each of which will consist of a
separate portfolio which will issue a separate class of shares. Each of the
Funds is a Series of the Trust. The Trustees of the Trust 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 of a
single class. All shares of the Trust have equal voting rights, except that
only shares of a particular Series are entitled to vote on matters concerning
only that Series, and each issued and outstanding share is entitled to one vote
and to participate equally in dividends and distributions declared by a
particular Series of the Trust, as the case may be, and in net assets of that
Series upon liquidation or dissolution remaining after satisfaction of
outstanding liabilities. In the event a Series is unable to meet its
obligations, the remaining Series would assume the unsatisfied obligations of
that Series. The shares of the Trust, when issued, will be fully paid and
non-assessable by the Trust, have no preference, preemptive, conversion or
similar rights, and be freely transferable. Holders of shares of the Trust are
entitled to redeem their shares as set forth under "Redemptions." 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

A-12
<PAGE>

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. Shareholders'
meetings will only be held in connection with matters with respect to which
shareholder approval is required under the Investment Company Act of 1940.
Therefore, there will normally be no meetings of shareholders for the purpose
of electing trustees unless and until such time as less than a majority of the
trustees holding office have been elected by shareholders of the Trust, at
which time the trustees then in office will call a shareholders' meeting for
the election of trustees. Shareholders may, in accordance with the applicable
Declaration of Trust, cause a meeting of shareholders to be held for the
purpose of voting on the removal of trustees. No amendment may be made to the
Declaration of Trust without the affirmative vote of a majority of the
outstanding shares of the Trust.

Custodian and Transfer Agent
State Street Bank and Trust Company, P.O. Box 8500, Boston, Massachusetts
02266-8500, is the Funds' Custodian, Transfer Agent and Dividend Disbursing
Agent.

Counsel and Independent Auditors
Rogers & Wells, LLP, counsel to the Trust, passes upon legal matters for
the Trust in connection with the shares offered by this Prospectus. Deloitte &
Touche LLP are the independent auditors of the Trust.

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
Group ("S&P"). Issues within this category are further redefined with
designations 1, 2 and 3 to indicate the relative degree of safety; A1, the
highest of the three, indicates the degree of safety is either overwhelming or
very strong; A2 indicates that capacity for timely repayment is strong; and, A3
indicates a satisfactory capacity for timely repayment.

Moody's Investors Service ("Moody's") employs the designations of Prime-1,
Prime-2 and Prime-3 to indicate the relative capacity of the rated issuers to
repay punctually. Prime-1 issues have a superior capacity for repayment.
Prime-2 issues have a strong capacity for repayment, but to a lesser degree
than Prime-1. Prime-3 issues have an acceptable capacity for repayment.

Commercial paper rated A-1+ by IBCA Limited or its affiliate IBCA Inc.
(together, "IBCA") are obligations supported by the highest capacity for timely
repayment. Commercial paper rated A-1 has a very strong capacity for timely
repayment. Commercial paper rated A-2 has a strong capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.

Fitch Investors Services, Inc. ("Fitch") employs the rating F-1+ to
indicate issues regarded as having the strongest degree of assurance for timely
payment. The rating F-1 reflects an assurance of timely payment only slightly
less in degree than issues rated F-1+, while the rating F-2 indicates a
satisfactory degree of assurance for timely payment, although the margin of
safety is not as great as indicated by the F-1+ and F-1 categories.

Duff & Phelps Credit Ratings 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.

Thomson Bankwatch, Inc. ("BankWatch") employs the rating TBW-1 with
respect to the highest category of commercial paper and bank money instruments.
A rating of TBW-1 indicates the degree of safety regarding timely

A-13
<PAGE>

repayment of principal and interest is very strong. A rating of TBW-2 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 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 the margins of
protection may not be as large or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities. Moody's applies
numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa
through B in its corporate bond rating system. The modifier 1 indicates that
the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.

Bonds rated AAA by IBCA are obligations for which there is the lowest
expectation of investment risk. Capacity for timely repayment of principal and
interest is substantial such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk significantly.
Bonds rated AA are obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk, albeit not very significantly.

Bonds rated AAA by Fitch are considered to be investment grade and of the
highest 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.

Companies rated A by BankWatch possess exceptionally strong balance sheets
and earnings records, translating into excellent reputations and unquestioned
access to their natural money markets. If weakness or vulnerability exists in
any aspect of such a company's business, it is entirely mitigated by the
strength of the organization. Companies rated A/B by BankWatch are financially
very solid with favorable track records and no readily apparent weaknesses.
Their overall risk profiles, while low, are not quite as favorable as for
companies in the highest rating category.

Ratings of Tax-Exempt Securities and Short-Term Tax-Exempt Obligations
Set forth below are descriptions of the two highest ratings of Moody's,
S&P and Fitch for Tax-Exempt Securities and short-term tax-exempt obligations.
Ratings for commercial paper have been included since certain of the
obligations which the Tax-Exempt Fund is authorized to purchase have
characteristics of commercial paper and have been rated as such by Moody's and
S&P.

Descriptions of Moody's Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an

A-14
<PAGE>

exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities 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.

Short-term Notes: The two highest ratings of Moody's for short-term notes
are MIG-1 and MIG-2; MIG-1 denotes "best quality, enjoying strong protection
from established cash flows"; MIG-2 denotes "high quality" with "ample margins
of protection."

Variable Rate Demand Obligations: Moody's has separate rating categories
for variable rate demand obligations ("VRDOs"). VRDOs will receive two ratings.
The first rating, depending on the maturity of the VRDO, will be assigned
either a bond or MIG rating which represents an evaluation of the risk
associated with scheduled principal and interest payments. The second rating,
designated as "VMIG," represents an evaluation of the degree of risk associated
with the demand feature. The VRDO demand feature ratings symbols are:

VMIG 1: strong protection by established cash flows, superior liquidity
support, demonstrated access to the market for refinancing.

VMIG 2: ample margins of protection, high quality.

VMIG 3: favorable quality, liquidity and cash flow protection may be
narrow, market access for refinancing may be less well established.

VMIG 4: adequate quality, not predominantly speculative but there is
risk.

Commercial Paper: The highest rating of Moody's for commercial paper is
Prime-1. Issuers rated Prime-1 are judged to be of the highest quality. Their
short-term debt obligations carry the smallest degree of investment risk.
Margins of support for current indebtedness are large or stable with cash flow
and asset protection well assured. Currently liquidity provides ample coverage
of near-term liabilities and unused alternative financing arrangements are
generally available. While protective elements may change over the intermediate
or long term, such changes are most unlikely to impair the fundamentally strong
position of short-term obligations.

Description of S&P Ratings
AAA--This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.

AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.

Short-Term Notes: S&P has a separate rating category with respect to
certain municipal note issues with a maturity of less than three years. The
note ratings and symbols are:

SP-1 A very strong, or strong, capacity to pay principal and interest.
Issues that possess overwhelming safety characteristics will be given a "+"
designation.

SP-2 A satisfactory capacity to pay principal and interest.

A-15
<PAGE>

SP-3 A speculative capacity to pay principal and interest.

S&P may continue to rate note issues with a maturity greater than three
years in accordance with the same rating scale currently employed for municipal
bond ratings.

Commercial Paper: S&P highest rating for commercial paper is A-1. This
designation indicates the degree of safety regarding timely payment as either
overwhelming or very strong. Those issues determined to have overwhelming
safety characteristics will be designated with a plus (+) sign designation.

Description of Fitch's Ratings
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. The
ratings take into consideration special features of the issue, its relationship
to other obligations of the issuer, the current financial condition and
operative performance of the issuer and of any guarantor, as well as the
political and economic environment that might affect the issuer's future
financial strength and credit quality. Bonds that have the same rating are of
similar but not necessarily identical credit quality since the rating
categories do not fully reflect small differences in the degrees of credit
risk.

Fitch employs the rating F-1+ to indicate short-term debt issues regarded
as having the strongest degree of assurance for timely payment. The rating F-1
reflects an assurance of timely payment only slightly less in degree than
issues rated F-1+. The rating F-2 indicates a satisfactory degree of assurance
for timely payment, although the margin of safety is not as great as indicated
by the F-1+ and F-1 categories.

Reports to Shareholders
The fiscal year of the Trust ends on April 30 of each year. The Trust
issues to its shareholders semi-annual reports containing unaudited financial
statements and annual reports containing audited financial statements.

Additional Information

This Prospectus does not contain all the information included in the
Registration Statement filed with the Securities and Exchange Commission under
the Securities Act of 1933 with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The Statement of
Additional Information, dated June 10, 1998, which forms a part of the
Registration Statement, is incorporated by reference into this Prospectus. The
Statement of Additional Information may be obtained without charge as provided
on the cover page of this Prospectus. The Registration Statements including the
exhibits filed therewith may be examined at the office of the Securities and
Exchange Commission in Washington, D.C.

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

The Trust was organized as an unincorporated business trust under the laws
of Massachusetts on May 7, 1987, and commenced operations on December 18, 1989
with only one series, Merrill Lynch Treasury Fund. Two additional series of the
Trust, Merrill Lynch Institutional Fund and Merrill Lynch Government Fund,
commenced operations as separate Series of the Trust effective August 31, 1990.
An additional series of the Trust, Merrill Lynch Institutional Tax-Exempt Fund,
commenced operations as a separate Series of the Trust effective February 18,
1994. A fifth additional series of the Trust, Merrill Lynch Premier
Institutional Fund, commenced operations on January 27, 1997. A sixth
additional series of the Trust, Merrill Lynch Rated Institutional Fund,
commenced operations on

A-16
<PAGE>

June 10, 1998. The executive offices of the Trust are located at One Financial
Center, Boston, Massachusetts 02111 (telephone 617-357-1460 or toll-free
800-225-1576).

The Declaration of Trust establishing the Trust, dated May 7, 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 "Merrill Lynch Funds For Institutions Series" 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 may be held to any personal liability, nor may resort by law to their
private property for the satisfaction of any obligation or claim or otherwise
in connection with the affairs of the Trust but only the Trust Property shall
be liable. The Trust issues shares in one or more series. All persons dealing
with the Trust must look solely to the property of the applicable series of the
Trust for the enforcement of any claims against it.

A-17
<PAGE>

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A-18
<PAGE>

ACCOUNT APPLICATION (check one)

<TABLE>
<S> <C> <C> <C> <C>
[ ] MERRILL LYNCH PREMIER INSTITUTIONAL FUND [ ] MERRILL LYNCH TREASURY FUND
[ ] MERRILL LYNCH INSTITUTIONAL FUND [ ] MERRILL LYNCH INSTITUTIONAL
[ ] MERRILL LYNCH RATED INSTITUTIONAL FUND TAX-EXEMPT FUND
[ ] MERRILL LYNCH GOVERNMENT FUND

Mail to: STATE STREET BANK AND TRUST COMPANY, P.O. Box 8500, Boston, Massachusetts 02266-8500
- ---------------------------------------------------------------------------------------------
REGISTRATION: The account should be registered as follows:
INITIAL INVESTMENT:--Minimum $25,000 (Merrill
Lynch Premier Institutional Fund Minimum $10,000,000
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| and Merrill Lynch Rated Institutional Fund $1,000,000)
Name of Account [ ] The account has been opened by
wire on _____________ (Date) and the account no.
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| assigned is_____________________________
[ ] Please establish an account with
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| the enclosed check for $--------
payable to Merrill Lynch Institutional Fund,
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Merrill Lynch Premium Institutional Fund, Merrill
Street Lynch Rated Institutional Fund, Merrill Lynch
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Government Fund, Merrill Lynch Treasury
City State Zip Fund or Merrill Lynch Street Institutional
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Tax-Exempt Fund, as applicable.
Occupation |_|_|_|-|_|_|-|_|_|_|_|
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Soc. Sec. No. (Individual)
|_|_|_|_|_|_|_|_|_|_|_|
Name of Employer Tax ID No. (Corporate)
( )
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| -------------------------------------
Street Area code Telephone
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
City State Zip Citizen of
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| [ ] U.S.
[ ] Other (please
specify) ______________________________

[ ] Under the Federal income tax law, you are subject to
certain penalties as well as withholding of tax at a
31% rate if you do not provide a correct number.
MONTHLY CASH DIVIDENDS
[ ] Check this box if dividends are to be paid monthly in cash. Otherwise dividends will be reinvested
automatically in additional shares of the Fund.
- ---------------------------------------------------------------------------------------------
CHECK REDEMPTION PRIVILEGE (See page A-8) NOT AVAILABLE FOR MERRILL LYNCH
PREMIER INSTITUTIONAL FUND OR MERRILL LYNCH RATED INSTITUTIONAL FUND
[ ] Check this box and complete Authorization for Redemption by Check Form and
Signature Card on pages A-21 and A-22.
- ---------------------------------------------------------------------------------------------
TELEPHONE EXCHANGE PRIVILEGE (See page A-12)

YES NO I (We) hereby authorize telephone instructions to withdraw amounts
[ ] [ ] from my (our) Fund account and exchange for shares of Merrill Lynch [
Premier Institutional Fund, Merrill Lynch Institutional Fund, Merrill
Lynch Rated Institutional Fund, Merrill Lynch Government Fund,
Merrill Lynch Treasury Fund, and/or Merrill Lynch Institutional
Tax-Exempt Fund, subject to the requirements described in the
Prospectus.
- ---------------------------------------------------------------------------------------------
EXPEDITED REDEMPTION PAYMENTS Redemption proceeds will be sent to the bank or
(See page A-7) trust company listed below, for credit to the
If desired check investor's account. If the investor wishes to send
[ ] redemption proceeds to more than one such institution, an
and complete the rest of additional application must be submitted for each
this section institution. The investor hereby authorizes State Street
Bank to honor telephone or written instructions, without a
signature guarantee, for redemption of Fund shares. State
Street Bank's records of such instructions will be binding
on all parties and State Street Bank and the Fund will not
be liable for any loss, expense or cost arising out of
such transactions, unless the Fund or State Street Bank
fail to employ reasonable procedures to confirm that
instructions communicated by telephone are genuine.
Enclose a specimen of your check or deposit slip (marked "VOID") for the bank account listed below.

To facilitate the wiring of your redemption proceeds the indicated bank should be a commercial bank.

Name of Bank: ___________________________________ Bank Account No. _____________________________

Address of Bank: _______________________________________________________________________________
Street City State Zip
Name on Account: _______________________________________________________________________________

- ---------------------------------------------------------------------------------------------
PREMIER INSTITUTIONAL FUND EXCHANGE FOR ACCOUNTS WITH AVERAGE BALANCE OF LESS
THAN $10,000,000 (see page A-7). Unless I (we) have checked the box below, I
(we) hereby authorize the exchange of my (our) shares of Merrill Lynch Premier
Institutional Fund for a corresponding number of shares of Merrill Lynch
Institutional Fund if during any 30-day period my (our) average account
balance in Merrill Lynch Premier Insittutional Fund is less than $10,000,000.
If I (we) check the box below, then, under such circumstances, I (we) hereby
authorize the redemption of all of my (our) shares of Merrill Lynch Premier
Institutional Fund and the payment of the proceeds of any such redemption to
me (us) at the address indicated above. [ ]
- ---------------------------------------------------------------------------------------------
CERTIFICATION: By the execution of this Application, the investor represents
and warrants that the investor has full right, power and authority to invest
in the Fund, and the person or persons signing on behalf of the investor
represent and warrant that they are duly authorized to sign this Application
and to purchase or redeem shares of the Fund on behalf of the investor. The
investor hereby affirms that he has received a current Fund Prospectus.

The undersigned hereby certifies under penalty of perjury that (1) the above
Social Security Number or Taxpayer Identification Number is correct and that
(2) he is not subject to backup withholding because (a) he is exempt from
backup withholding, OR (b) he has not been notified by the Internal Revenue
Service that he is subject to backup withholding as a result of a failure to
report all interest or dividends, OR (c) the IRS has notified him that he is
no longer subject to backup withholding.

Certification Instructions--You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding due
to underreporting of interest or dividends. The undersigned authorizes the
furnishing of this certification to other Merrill Lynch sponsored mutual
funds.

- ------------------------------------ ------------------------------------
Signature Title (Corporate Account only)

- ------------------------------------ ------------------------------------
Signature Title (Corporate Account only)
</TABLE>

A-19
<PAGE>

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A-20
<PAGE>

AUTHORIZATION FOR REDEMPTION BY CHECK

Merrill Lynch Institutional Fund, Merrill Lynch Government Fund,
Merrill Lynch Treasury Fund
and/or Merrill Lynch Institutional Tax-Exempt Fund

INSTRUCTIONS:
INDIVIDUAL ACCOUNT: Complete Steps 1, 3, 4 and 5.
INSTITUTIONAL ACCOUNT: Complete All Steps.

STEP 1--Fill in account title and address. (This information must be identical
to the registration of the shareholder account in the Fund). Also fill in your
shareholder account number, if known.
STEP 2--Institutions should enter type of organization, (i.e., Corporation,
Trust, Partnership, etc.)
STEP 3--Print name(s) in section (a) and sign in section (b). Officers of
organizations should give their titles.
STEP 4--Have your signature(s) guaranteed by an eligible guarantor institution.
STEP 5--Fill in account title and affix authorized signature(s). (Only
registered shareholder's signatures allowed for single name or joint accounts.
Corporate accounts may have multiple signatures.)
Mail completed form along with the signature card to:
State Street Bank and Trust Co., P.O. Box 8500, Boston, MA 02266-8500.

<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
STEP 1 At the undersigned's request, State Street Bank and Trust Company (the "Bank") has established a
Insert Account checking account for the undersigned. When a check is presented on the undersigned's checking account
Number if Known for payment, the Bank will present the check to the Fund as authority to redeem a sufficient number of
shares in the undersigned's shareholder account with the Fund to cover the amount of the check. Checks
may not be for less than $500. The Fund is hereby authorized and directed to accept and act upon checks
presented to it by the Bank and to redeem a sufficient number of shares for which certificates have not
been issued in the undersigned's shareholder account with the Fund and forward the proceeds of such
redemption to the Bank. The undersigned understands and agrees that shares purchased by check
(including certified or cashier's check) within 15 calendar days prior to presentation of such check
will not be redeemed and any check drawn to redeem such shares will be returned marked
"Uncollected Funds." The undersigned further understands and agrees that the Fund and/or its agents
will not be liable for any loss, expense or cost arising out of check redemptions other than for its
negligence or willful misconduct. The undersigned will be subject to the Bank's rules and regulations
governing such checking accounts, including the right of the Bank not to honor checks in amounts
exceeding the value of the undersigned's shareholder account at the time the check is presented for
payment. The Fund and the Bank have reserved the right to change, modify or terminate this checking
account privilege at any time.

Account Name(s): ____________________________________________________________________________________
STEPS 2, 3 & 4
on Reverse Side Address: ____________________________________________________________________________________________

Account No. (if assigned): __________________________________________________________________________
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

STEP 5 Merrill Lynch Institutional Fund Account No.
Merrill Lynch Government Fund __________________
Merrill Lynch Treasury Fund
Merrill Lynch Institutional Tax-Exempt Fund

State Street Bank and Trust Company

SIGNATURE CARD
---------------------------------------------------------------
Account Name(s) as Registered

---------------------------------------------------------------
Authorized Signature(s) (a) Print or type full name (b) Sign below

1. 1.
------------------------------------------------------------------------------
2. 2.
------------------------------------------------------------------------------
3. 3.
------------------------------------------------------------------------------
4. 4.
------------------------------------------------------------------------------

[ ] Check if all signatures are required

[ ] Check if only one signature is required

[ ] Check if combination of signatures is required and specify number ____________
DATE
</TABLE>

SUBJECT TO CONDITIONS ON REVERSE SIDE

A-21
<PAGE>

<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
STEP 2 We hereby certify that each of the persons listed in Step 3 has been
If other than duly elected and is now legally holding the office set opposite his name.
an individual, We further certify that the said _____________ is duly organized and
insert type of existing and has the power to take the action called for by this Continuing
organization Redemption Authorization.
(corporation, We further certify that the signatures on the signature card which is
trust, etc.) submitted with this Application and is incorporated into this Agreement as
if set forth herein, are authentic and represent individuals with legal
capacity to sign on behalf of the above.
- ----------------------------------------------------------------------------------------------------------------------------------
STEP 3 We further certify and agree that the above certifications,
Names and authorizations and appointments in this document will continue until
Signatures State Street Bank and Trust Company receives actual written notice of
any change thereof.

(a) Please print or type full names and titles: (b) Sign below:

---------------------------------------------- --------------------
(Individual, President, Trustee, (Signature)
General Partner or Representative)

---------------------------------------------- --------------------
(If joint account, insert the name (Signature)
of joint account)

---------------------------------------------- --------------------
(Secretary of Corporation) (Signature)
(The President or Vice President and Secretary or Assistant Secretary of
a corporation must sign.)
- ----------------------------------------------------------------------------------------------------------------------------------
STEP 4 Signature(s) Guaranteed: ______________________________________________
Banker or (Name of Guarantor Institution)
Broker Signs
By: ______________________________________________________________
(Authorized Signature)
- ----------------------------------------------------------------------------------------------------------------------------------
This completed authorization must be received by State Street Bank and Trust Company before redemption
requests by check will be honored. Any amendment or modification of the above information will require
that a new Authorization Form be completed and submitted and may require the execution of new
signature cards.
</TABLE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Merrill Lynch Government Fund
Merrill Lynch Treasury Fund
Merrill Lynch Institutional Tax-Exempt Fund

The Payment of funds is authorized by the signature(s) appearing on the reverse
side.

If this card is signed by more than one person, all checks will require all
signatures appearing on the reverse side unless a lesser number is indicated.
If no indication is given, all checks will require all signatures. Each
signatory guarantees the genuineness of the other signatures.

The bank is hereby appointed agent by the person(s) (the "Depositor(s)")
signing this card and, as agent, is authorized and directed to present checks
drawn on this checking account to the Fund or its transfer agent as requests to
redeem shares of the Fund registered in the name of the Depositor(s) in the
amounts of such checks and to deposit the proceeds of such redemptions in this
checking account. The Bank will be liable only for its own negligence.

The Depositor(s) agrees to be subject to the rules and regulations of the Bank
pertaining to this checking account as amended from time to time. The Bank
reserves the right to change, modify or terminate this checking account and
authorization at any time.

A-22
<PAGE>

================================================================================

ADMINISTRATOR & DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
One Financial Center
Boston, Massachusetts 02111

INVESTMENT ADVISER
Fund Asset Management, L.P.
P.O. Box 9011
Princeton, New Jersey 08543-9011

CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 8500
Boston, Massachusetts 02266-8500

LEGAL COUNSEL
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166

AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110-1617

No person has been authorized to give any information or to make any
representations, other than those contained in these Prospectuses and in the
Statements of Additional Information, in connection with the offer made by
these Prospectuses, and, if given or made, such other information or
representations must not be relied upon as having been authorized by any Fund
or its Distributor. These Prospectuses do not constitute an offer to sell or a
solicitation of an offer to buy by any Fund or by the Distributor in any State
in which such offer to sell or solicitation of any offer to buy may not
lawfully be made.

================================================================================

Prospectuses

Merrill Lynch
Funds For Institutions Series
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund

Merrill Lynch Institutional Fund
Merrill Lynch Rated Institutional Fund
Merrill Lynch Government Fund
Merrill Lynch Treasury Fund
Merrill Lynch Institutional
Tax-Exempt Fund

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund, Merrill Lynch Institutional Fund,
Merrill Lynch Rated Institutional Fund, Merrill Lynch Government Fund,
Merrill Lynch Treasury Fund and Merrill Lynch Institutional Tax-Exempt Fund
are separate series of Merrill Lynch Funds For Institutions Series, which is
organized as a Massachusetts business trust. None of the Funds is a bank,
nor does it offer fiduciary or trust services. Shares of the Funds are not
equivalent to a bank account. While the Funds attempt to maintain a stable
net asset value of $1.00 per share, there can be no assurance that they will
be able to do so. The shares of the Funds are neither insured nor guaranteed
by any government agency and are not subject to the protection of the
Securities Investor Protection Corporation.
- --------------------------------------------------------------------------------

June 11, 1998

Distributor
Merrill Lynch
Funds Distributor, Inc.

These Prospectuses should be retained
for future reference.

================================================================================

<PAGE>

This document consists of the Statements of Additional Information of
Merrill Lynch Premier Institutional Fund (the "Premier Institutional Fund"),
Merrill Lynch Institutional Fund (the "Institutional Fund"), Merrill Lynch
Rated Institutional Fund (the "Rated Institutional Fund" and, with the Premier
Institutional Fund and the Institutional Fund, the "Institutional Funds"),
Merrill Lynch Government Fund (the "Government Fund"), Merrill Lynch Treasury
Fund (the "Treasury Fund") and Merrill Lynch Institutional Tax-Exempt Fund (the
"Tax-Exempt Fund") (collectively, the "Funds") and an Appendix A which
constitutes part of each Fund's Statement of Additional Information. A table of
contents may be found on page 1 of each Statement of Additional Information.

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

The Institutional Funds are no-load money funds whose objectives are
maximum current income consistent with liquidity and the maintenance of a
portfolio of high quality short-term "money market" instruments. The Government
Fund and the Treasury Fund are no-load money funds seeking current income
consistent with liquidity and security of principal. The Government Fund
invests in a portfolio of securities issued or guaranteed by the U.S.
Government, its agencies or its instrumentalities. The Treasury Fund invests in
a portfolio of U.S. Treasury securities. The Tax-Exempt Fund is a no-load money
fund seeking current income exempt from federal income taxes, preservation of
capital and liquidity available from investing in a diversified portfolio of
short-term, high quality Tax-Exempt Securities.

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------

Merrill Lynch Premier Institutional Fund
of Merrill Lynch Funds For Institutions Series

One Financial Center, Boston, Massachusetts 02111

For general information and purchases call 617-357-1460 or toll free
800-225-1576

Merrill Lynch Premier Institutional Fund is a no-load money fund whose
objectives are maximum current income consistent with liquidity and the
maintenance of a portfolio of high quality short-term "money market"
instruments. The Premier Institutional Fund is designed primarily for
institutions as an economical and convenient means for the investment of
short-term funds. The Premier Institutional Fund is a separate series of
Merrill Lynch Funds For Institutions Series (the "Trust"), a diversified,
open-end management investment company.

The Statement of Additional Information of the Premier Institutional Fund
is not a prospectus and should be read in conjunction with the Prospectus of
the Premier Institutional Fund (the "Prospectus") which has been filed with the
Securities and Exchange Commission and is available upon oral or written
request without charge. Copies of the Prospectus can be obtained by calling or
by writing the Premier Institutional Fund at the above telephone number or
address. This Statement of Additional Information has been incorporated by
reference into the Prospectus.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Objectives and Policies ............................ 2
Independent Auditors' Report .................................. 6
Audited Financial Statements for the Year Ended April 30, 1998 7
Appendix A:
Management of the Trust ...................................... A-1
Investment Advisory and Other Services ....................... A-4
Portfolio Transactions ....................................... A-7
Net Asset Value .............................................. A-8
Dividends .................................................... A-9
Taxes ........................................................ A-11
Federal ..................................................... A-11
Massachusetts Income Tax .................................... A-13
Other Taxes ................................................. A-13
Distributor .................................................. A-13
Yield Information ............................................ A-14
General Information .......................................... A-15
</TABLE>

The date of this Statement of Additional Information and the Prospectus is
June 11, 1998.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Reference is made to "The Premier Institutional Fund and Its Objectives"
in the Prospectus for a discussion of the investment objectives and policies of
the Premier Institutional Fund.

All investments of the Premier Institutional 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 Premier Institutional
Fund portfolio will be 90 days or less.

The Premier Institutional 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 Premier Institutional Fund may be subject to the risks
associated with the holding of such property overseas. Any such obligations of
the Premier Institutional Fund held overseas will be held by foreign branches
of the custodian for the Premier Institutional Fund's portfolio securities or
by other U.S. or foreign banks under subcustodian arrangements complying with
the requirements of the Investment Company Act of 1940.

Fund Asset Management, L.P. ("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 Premier Institutional 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 Premier Institutional 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
the highest rating category for short-term debt obligations by at least two
nationally recognized statistical rating organizations ("NRSRO"); (2) have been
rated in the highest rating category by a single NRSRO if only one NRSRO has
rated the security; (3) have been issued by an issuer rated in the highest
rating category by an NRSRO with respect to a class of debt obligations that is
comparable in priority and security with the investment; or (4) if not rated,
will be of comparable quality as determined by the Trustees of the Trust.
Currently there are six NRSROs: Duff & Phelps Credit Ratings Co., Fitch
Investors Services, Inc., IBCA Limited and its affiliate IBCA Inc., Moody's
Investors Service, Inc., Standard & Poor's Ratings Group and Thomson Bankwatch,
Inc.

See the section of the Prospectus captioned "Additional
Information-Commercial Paper, Bank Money Instrument and Bond Ratings."

Premier Institutional Fund
2
<PAGE>

The Premier Institutional 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 Premier Institutional 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 a
nationally recognized statistical rating organization, as described above.

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 Premier Institutional Fund as described in the Prospectus.
The purchase of the underlying securities will be recorded on the date the
Premier Institutional 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 Premier Institutional Fund will be
established with State Street Bank and Trust Company, the Premier Institutional
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 Premier
Institutional Fund may dispose of a commitment prior to settlement. Risks
relating to these trading practices are briefly described in the Prospectus.

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

(1) Invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding securities
issued by the U.S. Government and its agencies and instrumentalities;
securities issued by any state of the U.S. or any political subdivision
thereof; instruments issued by domestic banks; and for purposes of this
restriction, issuers of asset-backed and mortgage-backed securities will
not be considered to be in any particular industry).

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

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

(4) Purchase or sell real estate, except that, to the extent permitted by
applicable law, the Premier Institutional Fund may invest in securities
directly or indirectly secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein.

Premier Institutional Fund
3
<PAGE>

(5) Borrow money, except that (i) the Premier Institutional Fund may
borrow from banks (as defined in the Investment Company Act) in amounts up
to 331/3% of its total assets (including the amount borrowed), (ii) the
Premier Institutional Fund may borrow up to an additional 5% of its total
assets for temporary purposes, (iii) the Premier Institutional Fund may
obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities, and (iv) the Premier
Institutional 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 Premier Institutional Fund may not pledge
its assets other than to secure such borrowings or to the extent permitted
by the Premier Institutional 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 hedging transactions, short sales,
when-issued, reverse repurchase and forward commitment transactions and
similar investment strategies.

(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 Premier Institutional 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
Premier Institutional 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 Premier Institutional Fund may do so in accordance with
applicable law and the Premier Institutional 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 Premier Institutional Fund has adopted non-fundamental
restrictions which may be changed by the Board of Trustees without approval of
the Premier Institutional Fund's shareholders. Under the non-fundamental
investment restrictions, the Premier Institutional 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 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 the Fund's shares are owned by
another investment company that is part of the same group of investment
companies as the Fund.

b. Invest in securities which cannot be readily resold because of legal
or contractual restrictions or which cannot otherwise be marketed, redeemed
or put to the issuer or 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 which mature within seven days or
securities which the Board of Trustees of the Trust has otherwise
determined to be liquid pursuant to applicable law.

c. Nothwithstanding fundamental investment restriction (5) 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.

Premier Institutional Fund
4
<PAGE>

Lending of Portfolio Securities. Subject to investment restriction (6)
above, the Premier Institutional 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 Premier Institutional Fund. Such loans will be terminable at any
time. The Premier Institutional Fund will have the right to regain record
ownership of loaned securities to exercise beneficial rights. The Premier
Institutional Fund may pay reasonable fees in connection with the arranging of
such loans.

As a matter of operating policy, the Trustees of the Trust have determined
that the Premier Institutional Fund will not write put or call options.

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.

Premier Institutional Fund
5
<PAGE>

- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------

To the Trustees and Shareholders of

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES:

We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Merrill Lynch Funds For Institutions
Series (the "Trust"), consisting of Merrill Lynch Premier Institutional Fund,
Merrill Lynch Institutional Fund, Merrill Lynch Government Fund, Merrill Lynch
Treasury Fund, and Merrill Lynch Institutional Tax-Exempt Fund (the "Funds"),
as of April 30, 1998, the related statements of operations for the year then
ended, and the statements of changes in net assets and the financial highlights
for each of the respective periods then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
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 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 the securities owned at
April 30, 1998, by correspondence with the custodian and brokers. 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 each of the
respective Funds of Merrill Lynch Funds For Institutions Series at April 30,
1998, the results of their operations, the changes in their net assets, and
their financial highlights for each of the respective periods presented in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 28, 1998

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments
April 30, 1998

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $10,000,000 U.S. Treasury Notes .................. 5.50% 03/31/00 $ 9,960,937
Government & 3,750,000 Federal Home Loan Banks .............. 6.40 06/03/99 3,768,900
Agency 7,960,000 Federal Home Loan Banks .............. 6.15 07/09/99 7,987,653
Issues -- 2.9% 11,000,000 Federal Home Loan Banks .............. 5.99 08/11/99 11,020,779
25,000,000 Federal Home Loan Banks .............. 5.86 01/20/00 25,023,500
10,000,000 Federal Home Loan Banks .............. 5.67 01/20/00 9,980,000
15,000,000 Federal Home Loan Banks .............. 5.75 03/16/00 14,985,000
20,000,000 Federal Home Loan Banks .............. 5.87 03/17/00 20,021,000
7,000,000 Federal Home Loan Mortgage Corp....... 6.10 09/10/99 7,024,864
15,000,000 Federal Home Loan Mortgage Corp....... 5.98 11/24/99 15,030,000
10,000,000 Federal National Mortgage Assoc. ..... 5.72 08/28/98 9,999,990
10,000,000 Federal National Mortgage Assoc. ..... 5.95 08/05/99 10,013,350
4,700,000 Federal National Mortgage Assoc. ..... 5.88 08/10/99 4,702,547
10,000,000 Federal National Mortgage Assoc. ..... 5.98 09/23/99 10,021,850
21,000,000 Student Loan Marketing Assoc. ........ 6.00 12/16/99 21,069,300
13,450,000 Student Loan Marketing Assoc. ........ 5.81 01/27/00 13,452,959
- --------------------------------------------------------------------------------------------------------------
Total U.S. Government & Agency
Issues (Cost $193,749,719) ........... 194,062,629
- --------------------------------------------------------------------------------------------------------------
U.S. 63,800,000 Federal Home Loan Banks .............. 5.54 10/20/98 63,791,251
Government 75,000,000 Federal Home Loan Banks .............. 5.51 03/26/99 74,966,199
Agency 50,000,000 Federal Home Loan Banks .............. 5.51 04/01/99 49,977,055
Issues -- 59,000,000 Federal National Mortgage Assoc. ..... 5.54 10/20/98 58,987,878
Variable 85,000,000 Federal National Mortgage Assoc. ..... 5.46 01/21/99 84,969,144
Rate -- 11.0% 31,000,000 Federal National Mortgage Assoc. ..... 5.46 03/03/99 30,988,305
50,000,000 Federal National Mortgage Assoc. ..... 5.54 04/09/99 49,976,507
10,000,000 Federal National Mortgage Assoc. ..... 5.32 07/26/99 9,979,133
18,000,000 Federal National Mortgage Assoc. ..... 5.32 09/22/99 17,955,620
48,000,000 Federal National Mortgage Assoc. ..... 5.57 10/27/99 47,966,340
24,000,000 Student Loan Marketing Assoc. ........ 5.54 11/25/98 23,994,711
30,000,000 Student Loan Marketing Assoc. ........ 5.59 08/02/99 29,907,577
50,000,000 Student Loan Marketing Assoc. ........ 5.47 01/12/00 49,984,343
60,000,000 Student Loan Marketing Assoc. ........ 5.54 02/02/00 59,974,672
76,000,000 Student Loan Marketing Assoc. ........ 5.52 02/04/00 75,967,818
- --------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency
Issues -- Variable Rate
(Cost $729,386,553) .................. 729,386,553
- --------------------------------------------------------------------------------------------------------------
</TABLE>

Premier Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Certificates of $ 25,000,000 Bank of America N.T. & S.A. .......... 5.60% 01/12/99 $ 24,949,062
Deposit -- 5.3% 25,000,000 Bankers Trust Company ................ 5.55 02/24/99 24,934,793
50,000,000 Bankers Trust Company ................ 5.66 02/26/99 49,912,869
25,000,000 Bankers Trust Company ................ 5.65 03/19/99 24,946,978
25,000,000 Bankers Trust Company ................ 5.68 04/06/99 24,945,592
23,000,000 Chase Manhattan Bank ................. 5.87 07/21/98 23,000,359
20,000,000 Morgan Guaranty Trust Co. of NY ...... 5.80 07/28/98 19,997,593
40,000,000 Morgan Guaranty Trust Co. of NY ...... 5.77 10/07/98 39,981,411
50,000,000 Morgan Guaranty Trust Co. of NY ...... 5.55 02/02/99 49,871,502
68,000,000 World Savings Bank, FSB .............. 5.59 05/06/98 68,000,086
- --------------------------------------------------------------------------------------------------------------
Total Certificates of Deposit
(Cost $350,928,950) .................. 350,540,245
- --------------------------------------------------------------------------------------------------------------
Certificates of 100,000,000 Bankers Trust Company ................ 5.57 02/19/99 99,941,603
Deposit -- 75,000,000 Bankers Trust Company ................ 5.57 03/18/99 74,974,111
Variable 25,000,000 National City Bank, Kentucky ......... 5.55 01/20/99 24,990,959
Rate -- 3.0%
- --------------------------------------------------------------------------------------------------------------
Total Certificates of Deposit
Variable Rate --
(Cost $199,906,673) .................. 199,906,673
- --------------------------------------------------------------------------------------------------------------
Euro 25,000,000 Bayerische Hypotheken-und
Certificates of Wechsel-Bank AG, London ............. 5.66 04/07/99 24,941,182
Deposit -- 0.4%
- --------------------------------------------------------------------------------------------------------------
Total Euro Certificates of Deposit
(Cost $25,002,041) ................... 24,941,182
- --------------------------------------------------------------------------------------------------------------
Yankee 15,000,000 ABN-AMRO Bank N.V., NY ............... 5.77 07/27/98 14,997,092
Certificates of 50,000,000 Bank of Nova Scotia, Portland ........ 5.89 08/27/98 50,006,901
Deposit -- 10.6% 24,000,000 Bayerische Landesbank
Girozentrale, NY .................... 5.64 03/15/99 23,945,588
28,000,000 Canadian Imperial Bank of
Commerce, NY ........................ 5.55 02/10/99 27,923,297
50,000,000 Commerzbank AG, NY ................... 5.54 02/02/99 49,860,429
38,000,000 Deutsche Bank AG, NY ................. 5.94 10/22/98 38,012,634
50,000,000 Deutsche Bank AG, NY ................. 5.67 03/26/99 49,903,183
20,000,000 Generale Bank S.A./N.V., NY .......... 5.81 07/31/98 19,998,124
15,000,000 Landesbank Hessen-Thuringen
Girozentrale, NY .................... 6.00 06/09/98 14,999,234
100,000,000 Norinchukin Bank, NY ................. 5.77 07/01/98 99,961,887
</TABLE>

Premier Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yankee $50,000,000 Societe Generale, NY .................... 5.84% 07/24/98 $ 49,998,241
Certificates of 23,000,000 Societe Generale, NY .................... 5.87 10/05/98 22,998,548
Deposit 25,000,000 Societe Generale, NY .................... 5.55 02/09/99 24,931,575
(continued)
25,000,000 Societe Generale, NY .................... 5.58 02/10/99 24,937,117
50,000,000 Societe Generale, NY .................... 5.68 03/22/99 49,906,185
25,000,000 Societe Generale, NY .................... 5.73 03/30/99 24,964,936
50,000,000 Societe Generale, NY .................... 5.80 03/31/99 49,960,725
25,000,000 Westpac Banking Corp., NY ............... 5.64 04/09/99 24,934,523
34,000,000 Westpac Banking Corp., NY ............... 5.73 04/23/99 33,940,273
10,000,000 Swiss Bank Corporation, NY .............. 5.86 07/17/98 9,999,947
- ----------------------------------------------------------------------------------------------------------------
Total Yankee Certificates of
Deposit (Cost $706,784,891) ............. 706,180,439
- ----------------------------------------------------------------------------------------------------------------
Yankee 35,000,000 Credit Suisse First Boston Inc., NY ..... 5.71 12/11/98 35,000,000
Certificates of 10,000,000 Royal Bank of Canada, NY ................ 5.37 06/30/98 9,998,730
Deposit -- 50,000,000 Societe Generale, NY .................... 5.59 01/19/99 49,986,000
Variable
Rate -- 1.4%
- ----------------------------------------------------------------------------------------------------------------
Total Yankee Certificates of
Deposit -- Variable Rate
(Cost $94,981,328) ...................... 94,984,730
- ----------------------------------------------------------------------------------------------------------------
Bank Notes -- 2.2% 20,000,000 Bank of America N.T. & S.A. ............. 5.93 06/24/98 19,997,738
20,000,000 First National Bank of Chicago .......... 6.02 06/11/98 19,999,142
10,000,000 First Tennessee Bank, N.A. .............. 6.10 05/15/98 9,999,977
20,000,000 First Tennessee Bank, N.A. .............. 5.75 01/22/99 19,960,000
25,000,000 Huntington National Bank, N.A. .......... 5.89 09/18/98 24,982,048
35,000,000 KeyBank National Association ............ 5.90 09/17/98 34,975,948
15,000,000 Northern Trust Company .................. 5.95 06/24/98 14,998,939
- ----------------------------------------------------------------------------------------------------------------
Total Bank Notes --
(Cost $144,984,637) ..................... 144,913,792
- ----------------------------------------------------------------------------------------------------------------
Bank Notes -- 50,000,000 American Express Centurion Bank ......... 5.62 10/16/98 50,000,000
Variable 39,000,000 American Express Centurion Bank ......... 5.61 03/19/99 39,000,000
Rate -- 9.5% 60,000,000 BankBoston, N.A. ........................ 5.40 10/06/98 59,986,050
22,000,000 Bank of America N.T. & S.A. ............. 5.36 06/30/98 21,997,100
37,500,000 Comerica Bank, Detroit .................. 5.60 02/02/99 37,489,012
23,500,000 Comerica Bank, Detroit .................. 5.56 02/09/99 23,491,176
50,000,000 FCC National Bank, Wilmington ........... 5.41 05/08/98 49,999,626
15,000,000 First Bank System, Inc. ................. 5.80 10/21/98 15,012,465
</TABLE>

Premier Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bank Notes -- $ 20,000,000 First Tennessee Bank N.A.,
Variable Memphis .............................. 5.51% 02/08/99 $ 19,993,960
Rate 25,000,000 First Tennessee Bank N.A.,
(continued) Memphis .............................. 5.51 02/18/99 24,992,264
15,000,000 Huntington National Bank
(Columbus) ........................... 5.55 01/20/99 14,994,684
15,000,000 Huntington National Bank
(Columbus) ........................... 5.55 01/22/99 14,994,534
15,000,000 KeyBank National Association .......... 5.35 05/06/98 14,999,900
20,000,000 KeyBank National Association .......... 5.35 05/19/98 19,999,569
29,500,000 KeyBank National Association .......... 5.33 08/20/98 29,493,438
23,000,000 KeyBank National Association .......... 5.33 08/28/98 22,994,930
124,400,000 PNC Bank, N.A. ........................ 5.60 10/01/98 124,364,755
15,000,000 SouthTrust Bank, N.A. ................. 5.56 09/11/98 14,997,260
35,000,000 SouthTrust Bank, N.A. ................. 5.65 10/06/98 34,995,565
- --------------------------------------------------------------------------------------------------------------
Total Bank Notes -- Variable Rate
(Cost $633,796,288) ................... 633,796,288
- --------------------------------------------------------------------------------------------------------------
Corporate 25,000,000 Abbey National Treasury Services
Notes -- 4.1% PLC .................................. 5.50 02/02/99 24,933,989
11,000,000 Bank of Scotland, Treasury Services
PLC .................................. 5.95 06/18/98 10,999,308
25,000,000 Beta Finance Inc. ..................... 6.15 05/19/98 25,000,000
25,000,000 Beta Finance Inc. ..................... 6.00 06/25/98 25,000,000
6,869,217 Chase Manhattan Auto Owner Trust
1998-A ............................... 5.55 03/12/99 6,866,470
20,700,156 Ford Credit Auto Owner Trust
1998-A ............................... 5.55 02/16/99 20,696,016
23,250,000 General Motors Acceptance Corp. ....... 5.88 09/21/98 23,255,580
12,661,000 General Motors Acceptance Corp. ....... 7.75 01/15/99 12,820,402
10,000,000 IBM Credit Corp. ...................... 5.87 08/13/98 10,002,000
25,000,000 International Lease Finance Corp. ..... 5.50 01/15/99 24,937,000
5,000,000 International Lease Finance Corp. ..... 6.44 05/03/99 5,024,600
8,400,000 KFW International Finance Inc. ........ 9.38 07/15/98 8,457,876
15,154,033 Newcourt Receivables Asset Trust
1997-1 ............................... 5.82 12/21/98 15,156,402
13,436,330 Premier Auto Trust 1998-1 ............. 5.55 11/06/98 13,437,378
14,810,677 Premier Auto Trust 1998-2 ............. 5.61 12/06/98 14,814,143
</TABLE>

Premier Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corporate $ 20,000,000 Republic Mase Australia Ltd. ........ 5.95% 06/30/98 $ 20,010,000
Notes 10,000,000 Shearson Lehman Brothers
(continued) Holdings Inc. ..................... 6.13 06/30/98 10,004,600
- ------------------------------------------------------------------------------------------------------------
Total Corporate Notes
(Cost $271,511,757) ................. 271,415,764
- ------------------------------------------------------------------------------------------------------------
Corporate 30,000,000 Abbey National Treasury Services
Notes -- PLC ................................ 5.33 06/09/98 29,997,859
Variable 50,000,000 American Honda Finance Corp. ........ 5.62 04/08/99 49,982,500
Rate -- 13.7%
20,000,000 Bear Stearns Companies Inc. ......... 5.49 06/04/98 19,999,855
50,000,000 Bear Stearns Companies Inc. ......... 5.49 06/08/98 50,000,000
30,000,000 Bear Stearns Companies Inc. ......... 5.63 08/24/98 30,000,000
70,000,000 Bear Stearns Companies Inc. ......... 5.64 12/11/98 70,000,000
50,000,000 Bear Stearns Companies Inc. ......... 5.57 02/16/99 50,000,000
30,000,000 Bear Stearns Companies Inc. ......... 5.62 03/02/99 30,000,000
20,000,000 Chrysler Financial Corp. ............ 5.66 03/11/99 20,003,332
10,000,000 Chrysler Financial Corp. ............ 5.64 03/11/99 10,001,241
7,900,000 CIT Group Holdings Inc. ............. 5.58 08/17/98 7,897,969
27,700,000 CIT Group Holdings Inc. ............. 5.59 09/30/98 27,689,977
25,000,000 CIT Group Holdings Inc. ............. 5.56 04/19/99 24,985,844
20,000,000 Credit Suisse First Boston Inc. ..... 5.44 05/04/99 20,000,000
25,000,000 Ford Motor Credit Co. ............... 5.71 01/08/99 25,000,000
25,000,000 General Motors Acceptance Corp. ..... 5.46 05/15/98 25,000,415
100,000,000 General Motors Acceptance Corp. ..... 5.60 07/28/98 99,983,704
55,000,000 General Motors Acceptance Corp. ..... 5.55 02/24/99 54,995,740
22,000,000 General Motors Acceptance Corp. ..... 5.70 02/27/01 22,000,000
20,000,000 Goldman Sachs Group L.P. ............ 5.76 02/01/99 20,010,000
15,000,000 Goldman Sachs Group L.P. ............ 5.66 05/11/99 15,001,800
15,000,000 Lehman Brothers Holdings Inc. ....... 5.65 10/16/98 15,000,000
26,891,672 LABS Trust Series 1997-6 Senior
Notes .............................. 5.66 10/21/98 26,891,673
50,000,000 Morgan (J.P.) & Co., Inc. ........... 5.58 02/24/99 49,984,176
40,000,000 Morgan Stanley, Dean Witter,
Discover & Co. ..................... 5.62 10/26/98 40,000,000
25,000,000 Morgan Stanley, Dean Witter,
Discover & Co. ..................... 5.62 11/20/98 25,000,000
</TABLE>

Premier Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corporate $ 25,000,000 Morgan Stanley, Dean Witter,
Notes -- Discover & Co. ......................... 5.76% 12/10/98 $ 25,021,435
Variable 23,000,000 Morgan Stanley, Dean Witter,
Rate Discover & Co. ......................... 5.61 01/15/99 22,994,020
(continued)
- --------------------------------------------------------------------------------------------------------------
Total Corporate Notes -- Variable
Rate (Cost $907,462,558) ................ 907,441,540
- --------------------------------------------------------------------------------------------------------------
Master Notes -- 280,000,000 Goldman Sachs Group L.P. ................ 5.58 05/29/98 280,000,000
Variable 15,000,000 Goldman Sachs Group L.P. ................ 5.53 01/08/99 15,000,000
Rate -- 9.8% 30,000,000 Jackson National Life Insurance Co. ..... 5.72 05/01/98 30,000,000
169,900,000 Morgan (J.P.) & Co., Inc. ............... 5.58 01/12/99 169,900,000
125,000,000 Lehman Brothers Holdings Inc. ........... 5.59 10/14/98 125,000,000
20,000,000 Travelers Insurance Company (The) ....... 5.72 01/21/99 20,000,000
10,000,000 Travelers Insurance Company (The) ....... 5.72 02/01/99 10,000,000
- --------------------------------------------------------------------------------------------------------------
Total Master Notes -- Variable
Rate (Cost $649,900,000) ................ 649,900,000
- --------------------------------------------------------------------------------------------------------------
Commercial 50,000,000 Apreco Inc. ............................. 5.53 06/08/98 49,708,139
Paper -- 21.8% 36,125,000 Banner Receivables Corp. ................ 5.83 05/01/98 36,125,000
25,351,000 Banner Receivables Corp. ................ 5.80 05/11/98 25,310,157
39,562,000 Banner Receivables Corp. ................ 5.62 05/29/98 39,389,070
30,000,000 Broadway Capital Corp. .................. 5.80 05/11/98 29,951,667
30,071,000 Broadway Capital Corp. .................. 5.63 05/13/98 30,014,567
13,800,000 Chrysler Financial Corp. ................ 5.55 05/22/98 13,755,322
59,500,000 Chrysler Financial Corp. ................ 5.56 05/26/98 59,270,264
25,700,000 CSW Credit Inc. ......................... 5.47 05/05/98 25,684,380
100,000,000 Countrywide Home Loans Inc. ............. 5.62 05/01/98 100,000,000
25,000,000 Credit Suisse First Boston Inc. ......... 5.48 05/07/98 24,977,167
50,000,000 Den Norske Bank ASA ..................... 5.52 07/07/98 49,483,542
29,000,000 FCTR, Inc. .............................. 5.55 05/12/98 28,950,821
21,000,000 FCTR, Inc. .............................. 5.55 05/27/98 20,915,825
42,550,000 Finova Capital Corp. .................... 5.48 05/21/98 42,420,459
45,000,000 Finova Capital Corp. .................... 5.54 06/04/98 44,764,550
15,000,000 Finova Capital Corp. .................... 5.53 06/18/98 14,889,400
25,000,000 Finova Capital Corp. .................... 5.53 06/23/98 24,796,465
25,000,000 Greenwich Funding Corp. ................. 5.48 05/07/98 24,977,167
21,375,000 Greenwich Funding Corp. ................. 5.50 07/15/98 21,127,852
15,000,000 Lehman Brothers Holdings Inc. ........... 5.47 05/05/98 14,990,883
30,000,000 Lehman Brothers Holdings Inc. ........... 5.50 05/14/98 29,940,417
</TABLE>

Premier Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $25,000,000 Lehman Brothers Holdings Inc. ......... 5.50% 07/09/98 $ 24,734,062
Paper 25,000,000 Lehman Brothers Holdings Inc. ......... 5.52 07/14/98 24,714,792
(continued)
80,551,000 Lexington Parker Capital Co., LLC ..... 5.56 05/12/98 80,414,153
23,965,000 Lexington Parker Capital Co., LLC ..... 5.47 05/21/98 23,892,173
76,338,000 Lexington Parker Capital Co., LLC ..... 5.56 06/05/98 75,925,351
30,000,000 Lexington Parker Capital Co., LLC ..... 5.50 07/22/98 29,620,750
42,938,000 Mont Blanc Capital Corp. .............. 5.56 05/06/98 42,904,842
25,000,000 Nomura Holding America Inc. ........... 5.78 05/14/98 24,947,819
25,000,000 Nomura Holding America Inc. ........... 5.78 05/15/98 24,943,805
25,000,000 Nomura Holding America Inc. ........... 5.77 05/29/98 24,887,805
25,000,000 Nomura Holding America Inc. ........... 5.75 06/05/98 24,860,243
65,831,000 Old Line Funding Corp. ................ 5.54 05/21/98 65,628,387
75,000,000 Salomon Smith Barney Holdings Inc. 5.55 05/04/98 74,965,312
50,000,000 Salomon Smith Barney Holdings Inc. 5.48 07/16/98 49,414,167
17,000,000 Three Rivers Funding Corp. ............ 5.53 05/11/98 16,973,886
50,000,000 Three Rivers Funding Corp. ............ 5.52 05/19/98 49,862,000
40,000,000 Twin Towers Inc. ...................... 5.49 07/10/98 39,568,333
- --------------------------------------------------------------------------------------------------------------
Total Commercial Paper
(Cost $1,449,725,422) ................. 1,449,700,994
- --------------------------------------------------------------------------------------------------------------
</TABLE>

Premier Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Repurchase $100,000,000 Fuji Securities Inc.,
Agreements** purchased on 04/30/98 .................... 5.58% 05/01/98 $ 100,000,000
-- 5.0%
150,000,000 Nikko Securities Co. International, Inc.,
purchased on 04/30/98 .................... 5.58 05/01/98 150,000,000
75,000,000 Nomura Securities International, Inc.,
purchased on 04/30/98 .................... 5.55 05/01/98 75,000,000
7,900,000 State Street Bank & Trust,
purchased on 04/30/98 .................... 5.43 05/01/98 7,900,000
- ---------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $332,900,000) ....................... 332,900,000
- ---------------------------------------------------------------------------------------------------------------------
Total Investments -- 100.7%
(Cost $6,691,020,817) ..................... 6,690,070,829
- ---------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other
Assets -- (0.7%) .......................... (45,548,196)
- ---------------------------------------------------------------------------------------------------------------------
Net Assets -- Equivalent to $1.00
Per Share on 6,645,472,621
Shares of Beneficial Interest
Outstanding -- 100.0% ..................... $6,644,522,633
=====================================================================================================================
</TABLE>

Note-Costs for federal income tax purposes are the same as those shown above.
At April 30, 1998, net unrealized depreciation amounted to $949,988 and is
comprised of $442,645 in appreciation and $1,392,633 in depreciation.

*Commercial Paper and some U.S. Government and Agency Issues are traded on a
discount basis; the interest rate shown is the discount rate paid at the time
of purchase by the Fund. Other securities bear interest at the rates shown,
payable at fixed dates or upon maturity; the rates shown are the rates in
effect at April 30, 1998. For variable rate instruments, the next date on which
the interest rate is to be adjusted is deemed the maturity date for valuation.

**Repurchase Agreements are fully collaterized by U.S. Government and Agency
Obligations.

Premier Institutional Fund

See Notes to Financial Statements.

14
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Statement of Assets and Liabilities
April 30, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Assets:
Total investments at value (identified cost $6,691,020,817) (Note 1a)............... $6,690,070,829
Cash ............................................................................... 4,538,703
Interest receivable ................................................................ 49,709,450
Receivable for investments sold .................................................... 5,000,000
Prepaid expense .................................................................... 556,241
--------------
Total assets .................................................................... 6,749,875,223
--------------
Liabilities:
Advisory fee payable (Note 2) ...................................................... 819,955
Payable for investments purchased .................................................. 100,003,356
Dividends payable .................................................................. 4,453,390
Accrued expenses ................................................................... 75,889
--------------
Total liabilities ............................................................... 105,352,590
--------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price, based
on 6,645,472,621 shares of beneficial interest outstanding) ....................... $6,644,522,633
==============
</TABLE>

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Statement of Operations
For the Year Ended April 30, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Investment Income:
Interest and discount earned (Note 1d) .......................... $307,743,412
------------
Expenses:
Investment advisory fee (Note 2) ................................ 8,073,755
Registration fees ............................................... 986,541
Accounting and custodian services ............................... 295,327
Legal and audit fees ............................................ 61,933
Dividend and transfer agency fees ............................... 53,927
Trustees' fees (Note 5) ......................................... 48,867
Amortization of organization expenses ........................... 43,298
Printing and shareholder reports ................................ 40,483
Insurance ....................................................... 14,010
Miscellaneous ................................................... 9,628
------------
Total expense .............................................. 9,627,769
------------
Net investment income ...................................... 298,115,643
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions ...... $ 558,082
Net unrealized depreciation of investments .......... (13,174)
---------
Net realized and unrealized gain from investments ............ 544,908
------------
Net Increase in Net Assets Resulting From Operations ............ $298,660,551
============
</TABLE>

Premier Institutional Fund

See Notes to Financial Statements.

15
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Changes in Net Assets

Year For the Period
Ended January 27, 1997*
April 30, 1998 to April 30, 1997
---------------- ------------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income .................................... $ 298,115,643 $ 37,708,510
Net realized gain from investment transactions ........... 558,082 248,533
Net unrealized depreciation of investments ............... (13,174) (936,814)
-------------- --------------
Net increase in net assets resulting from operations ..... 298,660,551 37,020,229
Total declared as dividends to shareholders (Note 4) ..... (298,673,725) (37,957,043)
Capital share transactions (Note 3) ...................... 3,821,339,552 2,824,033,069
-------------- --------------
Net increase in net assets ............................... 3,821,326,378 2,823,096,255
Net Assets:
Beginning of period (Note 3) ............................. 2,823,196,255 100,000
-------------- --------------
End of period ............................................ $6,644,522,633 $2,823,196,255
============== ==============
</TABLE>

- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Year For the Period
Ended January 27, 1997*
April 30, 1998 to April 30, 1997
---------------- ------------------
<S> <C> <C>
Net Asset Value, beginning of period .............................. $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ............................................ .055 .014
Less Distributions:
Dividends from net investment income ............................. (.055) (.014)
---------- ------------
Net Asset Value, end of period .................................... $ 1.00 $ 1.00
========== ============
Total Return ...................................................... 5.69% 1.40%(2)
Ratios/Supplemental Data:
Net Assets, end of period (000) .................................. $6,644,523 $2,823,196
Ratio of expenses to average net assets (before waiver) .......... .18% .18%(1)
Ratio of expenses to average net assets (after waiver) ........... -- .17%(1)
Ratio of net investment income, including realized and unrealized
gains and losses, to average net assets (before waiver) ......... 5.55% 5.26%(1)
Ratio of net investment income, including realized and unrealized
gains and losses, to average net assets (after waiver) .......... -- 5.27%(1)
</TABLE>

* Commencement of operations
(1) On an annualized basis
(2) Cumulative total return

Premier Institutional Fund

See Notes to Financial Statements.

16
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements
- --------------------------------------------------------------------------------

1. Significant Accounting Policies

Merrill Lynch Funds For Institutions Series (the "Trust") was organized as a
Massachusetts business trust on May 7, 1987, and is registered under the
Investment Company Act of 1940 as a diversified, open-end management company.
On January 27, 1997, Merrill Lynch Premier Institutional Fund commenced
operations as a separate series of the Trust. On February 18, 1994 Merrill
Lynch Institutional Tax-Exempt Fund was reorganized as a separate series of the
Trust. The Trust has a fiscal year end of April 30. The following is a summary
of significant accounting policies consistently followed by the Trust in
conformity with generally accepted accounting principles.

(a) The value of the Premier Institutional, Institutional, Government and
Treasury Fund portfolio securities is determined on the basis of fair value as
determined in good faith by the Trustees of the Trust. In determining fair
value, securities for which market quotations are readily available are valued
at market value. Other securities, if any, are valued at their fair value in
the best judgment of Fund Asset Management, L.P., ("FAM") under procedures
established by, and under the supervision of, the Trustees. Securities with
remaining maturities of 60 days or less are valued by use of the amortized cost
method. Institutional Tax-Exempt Fund's portfolio securities are carried at
amortized cost which approximates market value.

For the purpose of valuation, the maturity of a variable rate demand
instrument is deemed to be the next coupon date on which the interest rate is
to be adjusted. In the case of a floating rate instrument, the remaining
maturity is deemed to be the demand notice payment period.

(b) It is the Trust'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.

(d) Security transactions are accounted for on the date the securities are
purchased or sold (the trade date). Interest income (after adjustment for
amortization of premium or accretion of discount) is recorded as earned.

(e) Deferred organization expenses are amortized over a period not exceeding
five years. Prepaid registration fees are charged to income as the related
shares are sold.

(f) Repurchase agreements--The Premier Institutional Fund, the Institutional
Fund and the Government Fund invest in U.S. Government & Agency securities
pursuant to repurchase agreements with member banks of the Federal Reserve
System or primary dealers in U.S. Government securities. Under such agreements,
the bank or primary dealer agrees to repurchase the security at a mutually
agreed upon time and price. The Trust takes possession of the underlying
securities, marks to market such securities daily and, if necessary, receives
additional securities to ensure that the contract is adequately collateralized.

(g) During the year ended April 30, 1998, Merrill Lynch Institutional
Tax-Exempt Fund reclassified amounts to reflect a decrease of $8,254 in both
accumulated capital losses and undistributed net investment income as a result
of a permanent difference arising from different treatments of market discount
for book and tax purposes.

2. Investment Advisory Fees and Other
Transactions with Affiliates

Fund Asset Management, L.P., a subsidiary of Merrill Lynch & Co., Inc.,
provides investment advisory and corporate administrative services to the Trust
for a fee, subject to certain limitations, at the following annual rates:

17
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Funds For Institutions Series
Notes to Financial Statements -- Continued
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Percentage of Average Daily Net Assets
------------------------------------------
Premier Institutional .15%
Fund .......................
Institutional Fund ......... .40% up to and including $250,000,000
plus .375% over $250,000,000 up to and
including $500,000,000
plus .35% over $500,000,000 up to and
including $750,000,000
plus .325% over $750,000,000
Government Fund
and Treasury Fund .35% up to and including $500,000,000
plus .335% over $500,000,000 up to and
including $750,000,000
plus .32% over $750,000,000 up to and
including $1,000,000,000
plus .30% over $1,000,000,000
Institutional
Tax-Exempt Fund .45% up to and including $1,500,000,000
plus .425% over $1,500,000,000 up to and
including $2,000,000,000
plus .40% over $2,000,000,000
</TABLE>

FAM has agreed to waive a portion of its advisory fees for the Institutional,
Government, Treasury and Tax-Exempt Funds. The effective fee payable to FAM
will be at the annual rate of 0.20% of each Fund's average daily net assets.
FAM may discontinue waiver of the fee in whole or in part at any time without
notice.

For the year ended April 30, 1998, FAM waived a portion of its fees amounting
to $8,619,014 for the Institutional Fund, $2,369,204 for the Government Fund,
$974,269 for the Treasury Fund and $3,810,001 for the Institutional Tax-Exempt
Fund.

All officers and certain trustees of the Trust are affiliated with Merrill
Lynch & Co., Inc.

3. Shares of Beneficial Interest

The Declaration of Trust permits the Trustees to issue an unlimited number of
shares of beneficial interest in the Premier Institutional Fund, Institutional
Fund, Government Fund and Treasury Fund ($.01 par value) and Institutional
Tax-Exempt Fund ($.10 par value) of a single class. At April 30, 1998, capital
paid-in aggregated $6,645,472,621 for Premier Institutional Fund,
$7,373,694,806 for Institutional Fund, $2,114,794,326 for Government Fund,
$758,257,032 for Treasury Fund and $1,804,571,031 for Institutional Tax-Exempt
Fund. Transactions in shares at a constant net asset value of $1.00 per share
were as follows:

<TABLE>
<CAPTION>
Year Ended Period Ended
April 30, April 30,
Premier Institutional Fund 1998 1997
- --------------------------------------- ---------------- -----------------
<S> <C> <C>
Shares sold ........................... 80,884,136,647 12,237,737,259
Shares issued to shareholders
in reinvestment of dividends ......... 239,118,722 32,118,561
-------------- --------------
Total ............................... 81,123,255,369 12,269,855,820
Shares redeemed ....................... 77,301,915,817 9,445,822,751
-------------- --------------
Net increase ........................ 3,821,339,552 2,824,033,069
============== ==============
</TABLE>

Prior to January 27, 1997 (commencement of operations) there were 100,000
shares of beneficial interest outstanding which were owned by FAM.

<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------
Institutional Fund 1998 1997
- --------------------------------------- ---------------- -------------------
<S> <C> <C>
Shares sold ........................... 42,976,137,621 67,124,483,921
Shares issued to shareholders
in reinvestment of dividends ......... 314,438,784 323,268,144
-------------- --------------
Total ............................... 43,290,576,405 67,447,752,065
Shares redeemed ....................... 42,118,189,627 68,867,606,220
-------------- --------------
Net increase (decrease) ............. 1,172,386,778 (1,419,854,155)
============== ==============
</TABLE>

<TABLE>
<CAPTION>
Year Ended April 30,
------------------------------------
Government Fund 1998 1997
- --------------------------------------- ---------------- -----------------
<S> <C> <C>
Shares sold ........................... 11,216,903,849 13,658,666,165
Shares issued to shareholders
in reinvestment of dividends ......... 100,120,146 92,067,429
-------------- --------------
Total ............................... 11,317,023,995 13,750,733,594
Shares redeemed ....................... 11,220,047,484 13,376,732,157
-------------- --------------
Net increase ........................ 96,976,511 374,001,437
============== ==============
</TABLE>

<TABLE>
<CAPTION>
Year Ended April 30,
-----------------------------------
Treasury Fund 1998 1997
- --------------------------------------- ---------------- ----------------
<S> <C> <C>
Shares sold ........................... 4,496,611,001 3,277,418,270
Shares issued to shareholders
in reinvestment of dividends ......... 31,614,356 27,446,045
------------- -------------
Total ............................... 4,528,225,357 3,304,864,315
Shares redeemed ....................... 4,381,758,509 3,207,207,792
------------- -------------
Net increase ........................ 146,466,848 97,656,523
============= =============
</TABLE>

18
<PAGE>

<TABLE>
<CAPTION>
Year Ended April 30,
----------------------------------
Institutional
Tax-Exempt Fund 1998 1997
- ----------------------------------- --------------- ----------------
<S> <C> <C>
Shares sold ....................... 9,422,006,794 5,129,231,992
Shares issued to shareholders
in reinvestment of dividends ..... 50,969,555 26,648,229
------------- -------------
Total ........................... 9,472,976,349 5,155,880,221
Shares redeemed ................... 8,672,182,936 4,819,426,973
------------- -------------
Net increase .................... 800,793,413 336,453,248
============= =============
</TABLE>

4. Distributions

The Funds declare dividends daily, pay dividends monthly and automatically
reinvest such dividends in additional Fund shares at net asset value, unless
shareholders request payment in cash. Dividends for the Premier Institutional,
Institutional, Government and Treasury Funds are declared from the total of net
investment income, plus or minus realized gains or losses, if any, on
investments.

Dividends for the Institutional Tax-Exempt Fund are declared from net
investment incomeexcluding discounts earned other than original issue
discounts. Net realized capital gains, if any, are normally distributed
annually, after deducting prior years' loss carryovers. The Fund may distribute
capital gains more frequently than annually in order to maintain the Fund's net
asset value at $1.00 per share.

At April 30, 1998, the Institutional Tax-Exempt Fund had net capital loss
carryovers of $248,451 of which $90,891 expire in the year 2001, $17,520 expire
in 2002 and $140,040 expire in 2003.

5. Trustees' Fees

Each Trustee who is not affiliated with the Trust or its adviser is paid an
annual fee of $30,000 by the Trust. Trustees' fees are allocated among the five
series of the Trust based on the net assets under management.

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------

Merrill Lynch Institutional Fund
of Merrill Lynch Funds For Institutions Series

One Financial Center, Boston, Massachusetts 02111

For general information and purchases call 617-357-1460 or toll free
800-225-1576

Merrill Lynch Institutional Fund is a no-load money fund whose objectives
are maximum current income consistent with liquidity and the maintenance of a
portfolio of high quality short-term "money market" instruments. The
Institutional Fund is designed primarily for institutions as an economical and
convenient means for the investment of short-term funds. The Institutional Fund
is a separate series of Merrill Lynch Funds For Institutions Series (the
"Trust"), a diversified, open-end management investment company.

The Statement of Additional Information of the Institutional Fund is not a
prospectus and should be read in conjunction with the Prospectus of the
Institutional Fund (the "Prospectus") which has been filed with the Securities
and Exchange Commission and is available upon oral or written request without
charge. Copies of the Prospectus can be obtained by calling or by writing the
Institutional Fund at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Objectives and Policies ................................... 2
Independent Auditors' Report ......................................... 5
Audited Financial Statements for the Fiscal Year Ended April 30, 1998 6
Appendix A:
Management of the Trust ............................................. A-1
Investment Advisory and Other Services .............................. A-4
Portfolio Transactions .............................................. A-7
Net Asset Value ..................................................... A-8
Dividends ........................................................... A-9
Taxes ............................................................... A-11
Federal ............................................................ A-11
Massachusetts Income Tax ........................................... A-13
Other Taxes ........................................................ A-13
Distributor ......................................................... A-13
Yield Information ................................................... A-14
General Information ................................................. A-15
</TABLE>

The date of this Statement of Additional Information and the Prospectus is
June 11, 1998.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Reference is made to "The Institutional Fund and Its Objectives" in the
Prospectus for a discussion of the investment objectives and policies of the
Institutional Fund.

All investments of the Institutional 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 weighted average maturity of the Institutional Fund's portfolio will be
90 days or less.

The Institutional 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 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 Institutional Fund may
be subject to the risks associated with the holding of such property overseas.
Any such obligations of the Institutional Fund held overseas will be held by
foreign branches of the custodian for the Institutional Fund's portfolio
securities or by other U.S. or foreign banks under subcustodian arrangements
complying with the requirements of the Investment Company Act of 1940.

Fund Asset Management, L.P. ("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 Institutional 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 Institutional 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
the highest rating category for short-term debt obligations by at least two
nationally recognized statistical rating organizations ("NRSRO"); (2) have been
rated in the highest rating category by a single NRSRO if only one NRSRO has
rated the security; (3) have been issued by an issuer rated in the highest
rating category by an NRSRO with respect to a class of debt obligations that is
comparable in priority and security with the investment; or (4) if not rated,
will be of comparable quality as determined by the Trustees of the Trust.
Currently there are six NRSROs: Duff & Phelps Credit Ratings Co., Fitch
Investors Services, Inc., IBCA Limited and its affiliate IBCA Inc., Moody's
Investors Service, Inc., Standard & Poor's Ratings Group and Thomson Bankwatch,
Inc. See the section of the Prospectus captioned "Additional
Information-Commercial Paper, Bank Money Instrument and Bond Ratings."

The Institutional 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

Institutional Fund
2
<PAGE>

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 Institutional 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 a nationally
recognized statistical rating organization, as described above.

Variable amount master notes, 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 at any time 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 Institutional Fund as described in the Prospectus. The
purchase of the underlying securities will be recorded on the date the
Institutional Fund enters into the commitment and the value of the security
will thereafter be reflected in the calculation of the Institutional Fund's net
asset value. A separate account of the Institutional Fund will be established
with State Street Bank and Trust Company, the Institutional 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 Institutional Fund may dispose of
a commitment prior to settlement. Risks relating to these trading practices are
briefly described in the Prospectus.

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

(1) Purchase common stocks or other voting securities, preferred stocks,
warrants, other equity securities, securities with legal or contractual
restrictions on resale, state bonds or municipal bonds (for purposes of
this restriction, instruments, such as variable amount master notes or
funding agreements, which permit the Fund to resell the instruments to the
issuer (or another creditworthy party) or to require repayment of the
instrument by the issuer upon notice will not be considered to have legal
or contractual restrictions on resale).

(2) Make loans, except through the purchase of debt obligations in
accordance with the Institutional Fund's investment objective and policies.

(3) Borrow money, except from banks for extraordinary or emergency
purposes and then only in amounts up to 10% of the value of the
Institutional Fund's net assets, taken at cost, at the time the borrowing
is made. This borrowing provision is included solely to facilitate the
orderly sale of portfolio securities to accommodate abnormally heavy
redemption requests if they should occur and is not for investment
purposes. (As a matter of operating policy, the Institutional Fund will not
purchase securities when outstanding borrowings exceed 5% of the
Institutional Fund's asset value.)

(4) Mortgage, pledge or hypothecate any assets except in an amount of up
to 15% of the value of the Institutional Fund's net assets, taken at cost,
but only to secure borrowings for extraordinary or emergency purposes.

Institutional Fund
3
<PAGE>

(5) Purchase or sell real estate, real estate investment trust
securities, commodities, commodity contracts or oil and gas interests.

(6) Acquire securities of other investment companies.

(7) Act as an underwriter of securities.

(8) Purchase securities or margin, make short sales of securities or
maintain a short position.

As a matter of operating policy, the Trustees of the Trust have determined
that the Institutional Fund will not write put or call options.

For purposes of the 25% limitation on investment or 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.

Institutional Fund
4
<PAGE>

- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------

To the Trustees and Shareholders of

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES:

DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 28, 1998

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments
April 30, 1998

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $ 5,000,000 U.S. Treasury Notes ................... 5.75% 09/30/99 $ 5,003,906
Government & 5,000,000 U.S. Treasury Notes ................... 5.63 10/31/99 4,993,750
Agency 10,000,000 U.S. Treasury Notes ................... 5.63 12/31/99 9,985,938
Issues -- 5.6% 20,000,000 U.S. Treasury Notes ................... 5.38 01/31/00 19,887,500
10,000,000 Federal Home Loan Banks ............... 6.15 07/09/99 10,034,740
20,000,000 Federal Home Loan Banks ............... 5.99 08/11/99 20,037,780
25,000,000 Federal Home Loan Banks ............... 5.86 01/20/00 25,023,500
10,000,000 Federal Home Loan Banks ............... 5.75 03/16/00 9,990,000
20,000,000 Federal Home Loan Banks ............... 5.87 03/17/00 20,021,000
10,000,000 Federal Home Loan Mortgage Corp........ 6.10 09/10/99 10,035,520
17,300,000 Federal Home Loan Mortgage Corp........ 5.98 11/10/99 17,346,848
15,000,000 Federal Home Loan Mortgage Corp........ 5.98 11/24/99 15,030,000
25,000,000 Federal Home Loan Mortgage Corp........ 5.61 03/12/99 24,968,900
15,000,000 Federal National Mortgage Assoc. ...... 5.95 08/05/99 15,020,025
8,000,000 Federal National Mortgage Assoc. ...... 5.88 08/10/99 8,004,336
10,000,000 Federal National Mortgage Assoc. ...... 5.98 09/23/99 10,021,850
15,000,000 Federal National Mortgage Assoc. ...... 5.72 08/28/98 14,999,985
20,550,000 Student Loan Marketing Assoc. ......... 6.00 12/16/99 20,617,815
50,000,000 Federal National Mortgage Assoc. D/N 5.28 05/28/98 49,802,000
25,000,000 Federal National Mortgage Assoc. D/N 5.46 07/06/98 24,750,667
38,000,000 Federal National Mortgage Assoc. D/N 5.22 02/26/99 36,281,123
25,000,000 Federal National Mortgage Assoc. D/N 5.27 04/09/99 23,720,896
17,000,000 International Bank for Reconstruction
& Development D/N .................... 5.18 05/15/98 16,965,754
- -----------------------------------------------------------------------------------------------------------------
Total U.S. Government & Agency
Issues (Cost $412,428,191) ............ 412,543,833
- -----------------------------------------------------------------------------------------------------------------
U.S. 60,300,000 Federal Home Loan Banks ............... 5.54 10/20/98 60,291,731
Government 75,000,000 Federal Home Loan Banks ............... 5.51 03/26/99 74,966,199
Agency 50,000,000 Federal Home Loan Banks ............... 5.51 04/01/99 49,977,055
Issues -- 56,000,000 Federal National Mortgage Assoc. ...... 5.54 10/20/98 55,988,494
Variable 50,000,000 Federal National Mortgage Assoc. ...... 5.60 11/03/98 49,982,164
Rate -- 10.2% 75,000,000 Federal National Mortgage Assoc. ...... 5.46 01/21/99 74,972,774
100,000,000 Federal National Mortgage Assoc. ...... 5.46 03/03/99 99,962,274
50,000,000 Federal National Mortgage Assoc. ...... 5.54 04/09/99 49,976,507
40,000,000 Federal National Mortgage Assoc. ...... 5.32 09/22/99 39,901,378
44,000,000 Federal National Mortgage Assoc. ...... 5.57 10/27/99 43,969,146
</TABLE>

Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $59,000,000 Student Loan Marketing Assoc. ........ 5.26% 08/20/98 $ 58,986,726
Government 55,000,000 Student Loan Marketing Assoc. ........ 5.47 01/12/00 54,982,777
Agency 40,000,000 Student Loan Marketing Assoc. ........ 5.54 02/02/00 39,983,115
Issues --
Variable
Rate
(continued)
- -----------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency
Issues -- Variable Rate
(Cost $753,940,340) .................. 753,940,340
- -----------------------------------------------------------------------------------------------------------------
Certificates of 25,000,000 Bank of America N.T. & S.A. .......... 5.60 01/12/99 24,949,062
Deposit -- 2.8% 35,000,000 Chase Manhattan Bank ................. 5.87 07/21/98 35,000,546
30,000,000 Morgan Guaranty Trust Co. of NY ...... 5.80 07/28/98 29,996,389
40,000,000 Morgan Guaranty Trust Co. of NY ...... 5.77 10/07/98 39,981,411
25,000,000 Morgan Guaranty Trust Co. of NY ...... 5.55 02/02/99 24,935,751
50,000,000 World Savings Bank, FSB .............. 5.59 05/06/98 50,000,063
- -----------------------------------------------------------------------------------------------------------------
Total Certificates of Deposit
(Cost $204,975,337) .................. 204,863,222
- -----------------------------------------------------------------------------------------------------------------
Euro 20,000,000 Bank of Scotland, London ............. 5.93 09/17/98 20,004,481
Certificates of 55,000,000 Barclays Bank PLC, London ............ 6.09 06/12/98 55,008,174
Deposit -- 2.1% 25,000,000 Bayerische Hypotheken-und
Wechsel-Bank AG ..................... 5.66 04/07/99 24,941,182
55,000,000 Westdeutsche Landesbank
Girozentrale, London ................ 5.83 08/03/98 54,994,556
- -----------------------------------------------------------------------------------------------------------------
Total Euro Certificates of Deposit
(Cost $155,010,944) .................. 154,948,393
- -----------------------------------------------------------------------------------------------------------------
Yankee 60,000,000 ABN-AMRO Bank N.V., NY ............... 5.77 07/27/98 59,988,367
Certificates of 25,000,000 ABN-AMRO Bank N.V., NY ............... 5.77 07/28/98 24,995,260
Deposit -- 9.7% 30,000,000 ABN-AMRO Bank N.V., NY ............... 5.85 08/07/98 29,998,887
10,000,000 Barclays Bank PLC, NY ................ 5.94 06/30/98 10,000,614
20,000,000 Barclays Bank PLC, NY ................ 5.72 10/09/98 19,986,108
35,000,000 Barclays Bank PLC, NY ................ 5.94 10/23/98 35,011,857
25,000,000 Barclays Bank PLC, NY ................ 5.71 04/16/99 24,949,652
35,000,000 Canadian Imperial Bank of
Commerce, NY ........................ 5.79 10/06/98 34,986,597
78,000,000 Canadian Imperial Bank of
Commerce, NY ........................ 5.55 02/10/99 77,786,327
</TABLE>

Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yankee $ 50,000,000 Canadian Imperial Bank of
Certificates of Commerce, NY ........................... 5.74% 04/01/99 $ 49,912,559
Deposit 69,000,000 Credit Suisse First Boston Inc., NY ..... 5.74 01/07/99 68,918,808
(continued) 25,000,000 Credit Suisse First Boston Inc., NY ..... 5.60 01/29/99 24,946,769
50,000,000 Credit Suisse First Boston Inc., NY ..... 5.72 03/29/99 49,814,737
20,000,000 Deutsche Bank AG, NY .................... 5.90 08/17/98 20,002,446
50,000,000 Deutsche Bank AG, NY .................... 5.62 02/26/99 49,889,052
25,000,000 Deutsche Bank AG, NY .................... 5.70 03/30/99 24,957,298
25,000,000 Deutsche Bank AG, NY .................... 5.73 04/15/99 24,955,289
20,000,000 Landesbank Hessen-Thuringen
Girozentrale, NY ....................... 6.00 06/09/98 19,998,979
25,000,000 Norddeutsche Landesbank
Girozentrale, NY ....................... 5.72 04/16/99 24,953,091
15,000,000 Swiss Bank Corporation, NY .............. 5.86 07/17/98 14,999,920
25,000,000 Westeutsche Landesbank
Girozentrale, NY ....................... 5.78 07/31/98 24,995,865
- -----------------------------------------------------------------------------------------------------------------
Total Yankee Certificates of
Deposit (Cost $716,824,981) ............. 716,048,482
- -----------------------------------------------------------------------------------------------------------------
Yankee 35,000,000 Credit Suisse First Boston Inc., NY ..... 5.71 12/11/98 35,000,000
Certificates of 80,000,000 Norddeutsche Landesbank
Deposit -- Girozentrale, NY ....................... 5.59 02/02/99 79,970,700
Variable 35,000,000 Royal Bank of Canada, Canada ............ 5.37 06/30/98 34,995,554
Rate -- 2.0%
- -----------------------------------------------------------------------------------------------------------------
Total Yankee Certificates of
Deposit -- Variable Rate
(Cost $149,966,254) ..................... 149,966,254
- -----------------------------------------------------------------------------------------------------------------
Time 200,000,000 SunTrust Bank, Atlanta .................. 5.50 05/01/98 200,000,000
Deposits -- 2.7%
- -----------------------------------------------------------------------------------------------------------------
Total Time Deposits
(Cost $200,000,000) ..................... 200,000,000
- -----------------------------------------------------------------------------------------------------------------
Bank 26,000,000 Bank of America N.T. & S.A. ............. 5.93 06/24/98 25,997,059
Notes -- 4.9% 15,000,000 FCC National Bank, Wilmington ........... 5.70 01/07/99 14,965,969
25,000,000 First National Bank of Chicago .......... 6.02 06/11/98 24,998,927
25,000,000 First National Bank of Chicago .......... 5.89 08/26/98 24,981,605
10,000,000 First National Bank of Chicago .......... 5.87 08/28/98 9,992,119
30,000,000 First National Bank of Chicago .......... 5.63 03/16/99 29,903,848
20,000,000 First Tennessee Bank, N.A. .............. 6.10 05/15/98 19,999,955
</TABLE>

Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bank Notes $ 23,000,000 First Tennessee Bank, N.A. ............. 5.75% 01/22/99 $ 22,954,000
(continued) 5,000,000 First Tennessee Bank, N.A. ............. 5.82 04/30/99 4,991,847
50,000,000 Fleet National Bank, RI ................ 5.57 03/19/99 49,976,322
25,000,000 Huntington National Bank (Columbus) 5.60 01/29/99 24,926,309
21,800,000 Lasalle National Bank, Chicago ......... 5.75 10/08/98 21,803,887
20,000,000 Lasalle National Bank, Chicago ......... 5.55 02/22/99 19,872,807
25,000,000 National City Bank, Indiana ............ 5.57 02/05/99 24,990,743
25,000,000 National City Bank, Kentucky ........... 5.55 01/20/99 24,990,959
15,000,000 Northern Trust Company ................. 5.95 06/24/98 14,998,939
- -----------------------------------------------------------------------------------------------------------------
Total Bank Notes
(Cost $360,711,718) .................... 360,345,295
- -----------------------------------------------------------------------------------------------------------------
Bank Notes -- 38,000,000 Bank of America N.T. & S.A. ............ 5.36 06/30/98 37,994,990
Variable 40,000,000 Comerica Bank, Detroit ................. 5.60 02/02/99 39,988,280
Rate -- 8.4% 29,000,000 Comerica Bank, Detroit ................. 5.56 02/09/99 28,989,110
66,000,000 FCC National Bank ...................... 5.55 02/23/99 65,963,358
34,000,000 First National Bank of Chicago ......... 5.55 02/23/99 33,981,124
25,000,000 First Tennessee Bank N.A., Memphis 5.51 02/18/99 24,992,264
16,000,000 Huntington National Bank (Columbus) 5.55 01/20/99 15,994,329
40,000,000 Huntington National Bank (Columbus) 5.55 01/22/99 39,985,425
26,000,000 KeyBank National Association ........... 5.35 05/06/98 25,999,827
40,000,000 KeyBank National Association ........... 5.35 05/19/98 39,999,138
44,400,000 KeyBank National Association ........... 5.33 08/20/98 44,390,124
50,000,000 KeyBank National Association ........... 5.33 08/28/98 49,988,979
137,000,000 PNC Bank, Pittsburgh, NA ............... 5.60 10/01/98 136,961,185
35,000,000 SouthTrust Bank, Alabama, N.A. ......... 5.54 04/21/99 34,983,320
- -----------------------------------------------------------------------------------------------------------------
Total Bank Notes -- Variable Rate
(Cost $620,211,453) .................... 620,211,453
- -----------------------------------------------------------------------------------------------------------------
Corporate 6,869,217 Chase Manhattan Auto Owner Trust
Notes -- 1.8% 1998-A ................................ 5.55 03/12/99 6,866,470
28,832,360 Ford Credit Auto Owner Trust
1998-A ................................ 5.55 02/16/99 28,826,594
13,382,782 Newcourt Receivables Asset Trust
1997-1 ................................ 5.82 12/21/98 13,384,875
12,747,287 Premier Auto Trust 1998-1 .............. 5.55 11/06/98 12,748,282
16,255,623 Premier Auto Trust 1998-2 .............. 5.61 12/06/98 16,259,427
50,000,000 Republic Mase Australia Ltd. ........... 5.95 06/30/98 50,025,000
- -----------------------------------------------------------------------------------------------------------------
Total Corporate Notes
(Cost $128,088,041) .................... 128,110,648
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corporate $100,000,000 Abbey National Treasury Services PLC 5.33% 06/09/98 $ 99,992,864
Notes 78,000,000 Chase Manhattan Corp. ................... 5.60 03/25/99 77,993,124
Variable 12,500,000 CIT Group Holdings Inc. ................. 5.58 08/17/98 12,496,786
Rate -- 7.2% 17,500,000 CIT Group Holdings Inc. ................. 5.57 03/22/99 17,492,397
50,000,000 CIT Group Holdings Inc. ................. 5.56 04/19/99 49,971,688
25,000,000 Ford Motor Credit Co. ................... 5.71 01/08/99 25,000,000
19,000,000 General Motors Acceptance Corp. ......... 5.70 02/27/01 19,000,000
17,000,000 Goldman Sachs Group L.P. ................ 5.66 05/11/99 17,002,040
25,000,000 Lehman Brothers Holdings Inc. ........... 5.65 10/16/98 25,000,000
30,477,229 LABS Trust Series 1997-6 Senior
Notes .................................. 5.66 10/21/98 30,477,229
29,092,208 LABS Trust Series 1997-7 Senior
Notes .................................. 5.66 12/22/98 29,092,208
25,000,000 Morgan Stanley, Dean Witter,
Discover & Co. ......................... 5.66 11/20/98 25,000,000
52,000,000 Morgan Stanley, Dean Witter,
Discover & Co. ......................... 5.62 12/24/98 52,000,000
24,000,000 Morgan Stanley, Dean Witter,
Discover & Co. ......................... 5.84 02/05/99 24,043,451
25,000,000 Republic Mase Australia Ltd. ............ 5.49 02/17/99 24,988,440
- -----------------------------------------------------------------------------------------------------------------
Total Corporate Notes -- Variable
Rate (Cost $529,548,187) ................ 529,550,227
- -----------------------------------------------------------------------------------------------------------------
Master Notes -- 300,000,000 Goldman Sachs Group L.P. ................ 5.58 05/29/98 300,000,000
Variable 20,000,000 Goldman Sachs Group L.P. ................ 5.53 01/08/99 20,000,000
Rate -- 8.5% 181,000,000 Morgan (J.P.) & Co., Inc. ............... 5.58 01/12/99 181,000,000
125,000,000 Lehman Brothers Holdings Inc. ........... 5.59 10/14/98 125,000,000
- -----------------------------------------------------------------------------------------------------------------
Total Master Notes -- Variable
Rate (Cost $626,000,000) ................ 626,000,000
- -----------------------------------------------------------------------------------------------------------------
Commercial 83,673,000 Alpine Securitization Corp. ............. 5.53 05/14/98 83,505,910
Paper -- 30.9% 11,000,000 American Honda Finance Corp. ............ 5.52 05/11/98 10,983,133
39,000,000 American Honda Finance Corp. ............ 5.52 05/21/98 38,880,400
25,000,000 Apreco Inc. ............................. 5.49 05/14/98 24,950,438
50,000,000 Apreco Inc. ............................. 5.53 06/04/98 49,738,861
50,000,000 Atlantic Asset Securitization Corp. ..... 5.53 05/18/98 49,869,431
15,400,000 Chrysler Financial Corp. ................ 5.55 05/22/98 15,350,143
25,000,000 Corporate Receivables Corp. ............. 5.47 05/20/98 24,927,826
100,000,000 Countrywide Home Loans, Inc. ............ 5.57 05/27/98 99,597,722
24,000,000 Credit Suisse First Boston Inc. ......... 5.51 07/14/98 23,726,200
</TABLE>

Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $35,000,000 Daimler-Benz North America Corp. ...... 5.51% 07/06/98 $34,643,875
Paper 50,000,000 Den Norske Bank ASA ................... 5.51 07/02/98 49,522,083
(continued) 83,000,000 Diageo Capital PLC .................... 5.52 06/30/98 82,232,250
25,000,000 Finova Capital Corp. .................. 5.60 05/04/98 24,988,333
50,000,000 Finova Capital Corp. .................. 5.52 06/18/98 49,632,000
30,000,000 Finova Capital Corp. .................. 5.52 08/05/98 29,556,000
35,000,000 Ford Credit Europe PLC ................ 5.51 07/02/98 34,665,458
15,000,000 Ford Credit Europe PLC ................ 5.51 07/10/98 14,838,125
25,000,000 General Motors Acceptance Corp. ....... 5.69 06/02/98 24,873,556
65,000,000 General Motors Corp. .................. 5.53 05/26/98 64,750,382
25,000,000 Greenwich Funding Corp. ............... 5.48 05/07/98 24,977,167
30,270,000 Greenwich Funding Corp. ............... 5.51 06/12/98 30,075,414
50,000,000 Lehman Brothers Holdings Inc. ......... 5.50 05/12/98 49,915,972
50,000,000 Lehman Brothers Holdings Inc. ......... 5.52 05/19/98 49,862,000
25,000,000 Lehman Brothers Holdings Inc. ......... 5.50 07/09/98 24,734,063
50,000,000 Lehman Brothers Holdings Inc. ......... 5.52 07/14/98 49,429,583
45,000,000 Lexington Parker Capital Company, LLC.. 5.47 05/18/98 44,883,763
20,000,000 Lexington Parker Capital Company, LLC.. 5.47 05/28/98 19,917,950
26,500,000 Lexington Parker Capital Company, LLC.. 5.52 05/29/98 26,386,227
50,000,000 Lexington Parker Capital Company, LLC.. 5.56 06/05/98 49,729,722
49,667,000 Lexington Parker Capital Company, LLC.. 5.54 06/09/98 49,368,915
50,733,000 Lexington Parker Capital Company, LLC.. 5.48 07/10/98 50,185,506
35,819,000 Mont Blanc Capital Corp. .............. 5.53 05/22/98 35,703,454
75,000,000 Morgan (J.P.) & Co., Inc. ............. 5.35 07/13/98 74,155,937
40,784,000 Old Line Funding Corp. ................ 5.57 05/18/98 40,676,727
50,000,000 Old Line Funding Corp. ................ 5.54 05/21/98 49,846,111
50,000,000 Old Line Funding Corp. ................ 5.54 05/26/98 49,807,639
21,248,000 Park Avenue Receivables Corp. ......... 5.57 05/01/98 21,248,000
66,040,000 Park Avenue Receivables Corp. ......... 5.51 07/01/98 65,418,949
50,000,000 Republic Industries Funding Corp. ..... 5.56 05/05/98 49,969,111
49,341,000 Republic Industries Funding Corp. ..... 5.53 05/29/98 49,128,778
35,000,000 Republic Industries Funding Corp. ..... 5.52 06/12/98 34,774,600
25,000,000 Salomon Smith Barney Holdings Inc...... 5.55 05/04/98 24,988,438
</TABLE>

Institutional Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $ 50,000,000 Salomon Smith Barney Holdings Inc........ 5.47% 05/07/98 $ 49,954,417
Paper 50,000,000 Salomon Smith Barney Holdings Inc........ 5.48 07/16/98 49,414,167
(continued) 100,000,000 Salomon Smith Barney Holdings Inc........ 5.49 07/22/98 98,735,833
33,000,000 Three Rivers Funding Corp. .............. 5.53 05/11/98 32,949,308
16,352,000 Three Rivers Funding Corp. .............. 5.52 05/13/98 16,321,912
25,648,000 Three Rivers Funding Corp. .............. 5.53 05/22/98 25,565,264
52,412,000 Twin Towers Inc. ........................ 5.49 07/10/98 51,846,387
100,769,000 Windmill Funding Corp. .................. 5.56 05/15/98 100,551,115
56,642,000 Windmill Funding Corp. .................. 5.53 05/15/98 56,520,188
- -----------------------------------------------------------------------------------------------------------------
Total Commercial Paper
(Cost $2,278,367,303) ................... 2,278,274,743
- -----------------------------------------------------------------------------------------------------------------
Repurchase 100,000,000 Fuji Securities Inc.,
Agreements** -- purchased on 04/30/98 .................. 5.58 05/01/98 100,000,000
2.4% 25,000,000 Nomura Securities International, Inc.,
purchased on 04/30/98 .................. 5.55 05/01/98 25,000,000
50,000,000 State Street Bank & Trust,
purchased on 04/30/98 .................. 5.43 05/01/98 50,000,000
- -----------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $175,000,000) ..................... 175,000,000
- -----------------------------------------------------------------------------------------------------------------
Total Investments--99.2%
(Cost $7,311,072,749) ................... 7,309,802,890
- -----------------------------------------------------------------------------------------------------------------
Other Assets Less
Liabilities--0.8% ....................... 62,622,057
- -----------------------------------------------------------------------------------------------------------------
Net Assets--Equivalent to $1.00
Per Share on 7,373,694,806
Shares of Beneficial Interest
Outstanding--100.0% ..................... $7,372,424,947
=================================================================================================================
</TABLE>

Note -- Costs for federal income tax purposes are the same as those shown
above. At April 30, 1998, net unrealized depreciation amounted to $1,269,859
and is comprised of $527,895 in appreciation and $1,797,754 in depreciation.

**Repurchase Agreements are fully collaterized by U.S. Government and Agency
Obligations.

D/N-Discount Notes

Institutional Fund

See Notes to Financial Statements.

12
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Statement of Assets and Liabilities
April 30, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Assets:
Total investments at value (identified cost $7,311,072,749) (Note 1a)............... $7,309,802,890
Cash ............................................................................... 5,179,369
Interest receivable ................................................................ 56,396,446
Receivable for investments sold .................................................... 5,370,000
Prepaid expense .................................................................... 13,516
--------------
Total assets .................................................................... 7,376,762,221
--------------
Liabilities:
Advisory fee payable (Note 2) ...................................................... 1,222,101
Dividends payable .................................................................. 2,666,315
Accrued expenses ................................................................... 448,858
--------------
Total liabilities ............................................................... 4,337,274
--------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price, based
on 7,373,694,806 shares of beneficial interest outstanding) ....................... $7,372,424,947
==============
</TABLE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Statement of Operations
For the Year Ended April 30, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Investment Income:
Interest and discount earned (Note 1d) ................................ $374,545,277
------------
Expenses:
Investment advisory fee (Note 2) ....................... $21,807,793
Registration fees ...................................... 1,572,201
Dividend and transfer agency fees ...................... 1,027,971
Accounting and custodian services ...................... 415,352
Legal and audit fees ................................... 113,043
Trustees' fees (Note 5) ................................ 63,663
Printing and shareholder reports ....................... 59,469
Insurance .............................................. 30,756
Miscellaneous .......................................... 30,552
-----------
Total expense ..................................... 25,120,800
Waived investment advisory fee (Note 2) ................ (8,619,014) 16,501,786
----------- ------------
Net investment income ............................................ 358,043,491
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions ......... 235,380
Net unrealized appreciation of investments ............. 2,160,230
-----------
Net realized and unrealized gain from investments .................. 2,395,610
------------
Net Increase in Net Assets Resulting From Operations .................. $360,439,101
============
</TABLE>

Institutional Fund

See Notes to Financial Statements.

13
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Year Ended April 30,
------------------------
1998 1997
----------------- -------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income ........................................ $ 358,043,491 $ 380,650,526
Net realized gain from investment transactions ............... 235,380 874,595
Net unrealized appreciation of investments ................... 2,160,230 2,606,218
-------------- ----------------
Net increase in net assets resulting from operations ......... 360,439,101 384,131,339
Total declared as dividends to shareholders (Note 4) ......... (358,278,871) (381,525,121)
Capital share transactions (Note 3) .......................... 1,172,386,778 (1,419,854,155)
-------------- ----------------
Net increase (decrease) in net assets ........................ 1,174,547,008 (1,417,247,937)
Net Assets:
Beginning of year ............................................ 6,197,877,939 7,615,125,876
-------------- ----------------
End of year .................................................. $7,372,424,947 $ 6,197,877,939
============== ================
</TABLE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Fund
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------------------------------
1998 1997 1996 1995 1994
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ........................ .054 .052 .056 .050 .031
Less Distributions:
Dividends from net investment income ......... (.054) (.052) (.056) (.050) (.031)
---------- ---------- ---------- ---------- ----------
Net Asset Value, end of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Return .................................. 5.57% 5.34% 5.81% 5.11% 3.20%
Ratios/Supplemental Data:
Net Assets, end of period (000) .............. $7,372,425 $6,197,878 $7,615,126 $6,580,086 $3,775,121
Ratio of expenses to average net assets
(before waiver) ............................. .38% .38% .37% .37% .37%
Ratio of expenses to average net assets
(after waiver) .............................. .25% .25% .24% .24% .24%
Ratio of net investment income, including
realized and unrealized gains and losses, to
average net assets (before waiver) .......... 5.34% 5.12% 5.42% 5.00% 2.91%
Ratio of net investment income, including
realized and unrealized gains and losses, to
average net assets (after waiver) ........... 5.47% 5.25% 5.55% 5.13% 3.04%
</TABLE>

Institutional Fund

See Notes to Financial Statements

14
<PAGE>

1. Significant Accounting Policies

(e) Deferred organization expenses are amortized over a period not exceeding
five years. Prepaid registration fees are charged to income as the related
shares are sold.

2. Investment Advisory Fees and Other
Transactions with Affiliates

15
<PAGE>

All officers and certain trustees of the Trust are affiliated with Merrill
Lynch & Co., Inc.

3. Shares of Beneficial Interest

Prior to January 27, 1997 (commencement of operations) there were 100,000
shares of beneficial interest outstanding which were owned by FAM.

16
<PAGE>

4. Distributions

At April 30, 1998, the Institutional Tax-Exempt Fund had net capital loss
carryovers of $248,451 of which $90,891 expire in the year 2001, $17,520 expire
in 2002 and $140,040 expire in 2003.

5. Trustees' Fees

17
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------

Merrill Lynch Rated Institutional Fund
of Merrill Lynch Funds For Institutions Series

One Financial Center, Boston, Massachusetts 02111

For general information and purchases call 617-357-1460 or toll free
800-225-1576

Merrill Lynch Rated Institutional Fund is a no-load money fund whose
objectives are maximum current income consistent with liquidity and the
maintenance of a portfolio of high quality short-term "money market"
instruments. The Rated Institutional Fund is designed primarily for
institutions as an economical and convenient means for the investment of
short-term funds. The Rated Institutional Fund is a separate series of Merrill
Lynch Funds For Institutions Series (the "Trust"), a diversified, open-end
management investment company.

The Statement of Additional Information of the Rated Institutional Fund is
not a prospectus and should be read in conjunction with the Prospectus of the
Rated Institutional Fund (the "Prospectus") which has been filed with the
Securities and Exchange Commission and is available upon oral or written
request without charge. Copies of the Prospectus can be obtained by calling or
by writing the Rated Institutional Fund at the above telephone number or
address. This Statement of Additional Information has been incorporated by
reference into the Prospectus.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Objectives and Policies .............. 2
Appendix A:
Management of the Trust ......................... A-1
Investment Advisory and Other Services .......... A-4
Portfolio Transactions .......................... A-7
Net Asset Value ................................. A-8
Dividends ....................................... A-9
Taxes ........................................... A-11
Federal ......................................... A-11
Massachusetts Income Tax ........................ A-13
Other Taxes ..................................... A-13
Distributor ..................................... A-13
Yield Information ............................... A-14
General Information ............................. A-15
</TABLE>

The date of this Statement of Additional Information and the Prospectus is
June 11, 1998.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Reference is made to "The Rated Institutional Fund and Its Objectives" in
the Prospectus for a discussion of the investment objectives and policies of
the Rated Institutional Fund.

All investments of the Rated Institutional 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 Rated Institutional 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 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
Rated Institutional Fund may be subject to the risks associated with the
holding of such property overseas. Any such obligations of the Rated
Institutional Fund held overseas will be held by foreign branches of the
custodian for the Rated Institutional Fund's portfolio securities or by other
U.S. or foreign banks under subcustodian arrangements complying with the
requirements of the Investment Company Act of 1940.

Fund Asset Management, L.P. ("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 Rated Institutional 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 Rated Institutional 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
the highest rating category for short-term debt obligations by at least two
nationally recognized statistical rating organizations ("NRSRO"), (2) have been
rated in the highest rating category by a single NSRO if only one NRSRO has
rated the security, (3) have been issued by an issuer rated in the highest
rating category by an NRSRO with respect to a class of debt obligations that is
comparable in priority and security with the investment, or (4) if not rated,
will be of comparable quality as determined by the Trustees of the Trust.
Currently there are six NRSROs: Standard & Poor's Ratings Group, Duff & Phelps
Credit Ratings Co., Fitch Investors Services, Inc., IBCA Limited and its
affiliate IBCA Inc., Moody's Investors Service, Inc., and Thomson Bankwatch,
Inc. See the section of the Prospectus captioned "Additional
Information--Commercial Paper, Bank Money Instrument and Bond Ratings."

The Rated Institutional 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

Rated Institutional Fund
2
<PAGE>

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 Rated Institutional 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 a nationally
recognized statistical rating organization, as described above.

Forward or firm commitments for the purchase or sale of securities may be
entered into by the Rated Institutional Fund as described in the Prospectus.
The purchase of the underlying securities will be recorded on the date the
Rated Institutional Fund enters into the commitment and the value of the
security will thereafter be reflected in the calculation of the Rated
Institutional Fund's net asset value. A separate account of the Rated
Institutional Fund will be established with State Street Bank and Trust
Company, the Rated Institutional 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 Rated Institutional Fund may dispose of a commitment prior to
settlement. Risks relating to these trading practices are briefly described in
the Prospectus.

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

(1) Invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding securities
issued by the U.S. Government and its agencies and instrumentalities; and
instruments issued by domestic banks; and for purposes of this restriction,
issuers of asset-backed and mortgage-backed securities will not be
considered to be in an industry).

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

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

(4) Purchase or sell real estate, except that, to the extent permitted by
applicable law, the Rated Institutional Fund may invest in securities
directly or indirectly secured by real estate or interests therein or
issued by companies which invest in real estate or interests, therein.

(5) Borrow money, except that (i) the Rated Institutional Fund may borrow
from banks (as defined in the Investment Company Act) in amounts up to
331/3% of its total assets (including the amount borrowed),

Rated Institutional Fund
3
<PAGE>

(ii) the Rated Institutional Fund may borrow up to an additional 5% of its
total assets for temporary purposes, (iii) the Rated Institutional Fund may
obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities, and (iv) the Rated
Institutional 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 Rated Institutional Fund may not pledge its
assets other than to secure such borrowings or to the extent permitted by
the Rated Institutional 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 hedging transactions, short sales,
when-issued, reverse repurchase and forward commitment transactions and
similar investment strategies.

(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
instrument shall not be deemed to be the making of a loan, and except
further that the Rated Institutional 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
Rated Institutional 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 Rated Institutional Fund may do so in accordance with
applicable law and the Rated Institutional 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 Rated Institutional Fund has adopted non-fundamental
restrictions which may be changed by the Board of Trustees without approval of
the Rated Institutional Fund's shareholders. Under the nonfundamental
investment restrictions, the Rated Institutional Fund may not:

c. Notwithstanding fundamental investment restriction (5) 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.

Rated Institutional Fund
4
<PAGE>

Lending of Portfolio Securities. Subject to investment restriction (6)
above, the Rated Institutional 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 Rated Institutional Fund. Such loans will be terminable at any
time. The Rated Institutional Fund will have the right to regain record
ownership of loaned securities to exercise beneficial rights. The Rated
Institutional Fund may pay reasonable fees in connection with the arranging of
such loans.

As a matter of operating policy, the Trustees of the Trust have determined
that the Rated Institutional Fund will not write put or call options.

Rated Institutional Fund
5
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------

Merrill Lynch Government Fund
of Merrill Lynch Funds For Institutions Series

One Financial Center, Boston, Massachusetts 02111

For general information and purchases call 617-357-1460 or toll free
800-225-1576

Merrill Lynch Government Fund is a no-load money fund whose objectives are
to seek current income consistent with liquidity and security of principal by
investing in a portfolio of securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The Government Fund is a series
of Merrill Lynch Funds For Institutions Series (the "Trust"), a diversified,
open-end management investment company.

The Statement of Additional Information of the Government Fund is not a
prospectus and should be read in conjunction with the Prospectus of the
Government Fund (the "Prospectus") which has been filed with the Securities and
Exchange Commission and is available upon oral or written request without
charge. Copies of the Prospectus can be obtained by calling or by writing the
Government Fund at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Objectives and Policies ................................... 2
Independent Auditors' Report ......................................... 4
Audited Financial Statements for the Fiscal Year Ended April 30, 1998 5
Appendix A:
Management of the Trust ............................................. A-1
Investment Advisory and Other Services .............................. A-4
Portfolio Transactions .............................................. A-7
Net Asset Value ..................................................... A-8
Dividends ........................................................... A-9
Taxes ............................................................... A-11
Federal ............................................................ A-11
Massachusetts Income Tax ........................................... A-13
Other Taxes ........................................................ A-13
Distributor ......................................................... A-13
Yield Information ................................................... A-14
General Information ................................................. A-15
</TABLE>

The date of this Statement of Additional Information and the Prospectus is
June 11, 1998.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Reference is made to "The Government Fund and Its Objectives" in the
Prospectus for a discussion of the investment objectives and policies of the
Government Fund. Subject to the investment restrictions described below, the
Government Fund's investment objectives can be changed without shareholder
approval.

All investments of the Government Fund will be in securities with
remaining maturities not exceeding 762 days (25 months). The dollar weighted
average maturity of the Government Fund's portfolio will be 90 days or less.

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

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

(1) Purchase securities other than U.S. Treasury bills, notes and other
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, some of which may be subject to repurchase agreements.
There is no limit on the amount of its assets which may be invested in the
securities of any one issuer of such obligations;

(2) Act as an underwriter of securities;

(3) Make loans, except that the Government Fund may purchase or hold debt
obligations in accordance with its investment objectives and policies, may
enter into repurchase agreements for such securities, and may lend its
portfolio securities against collateral consisting of cash, or securities
issued or guaranteed by the U.S. Government or its agencies, which is equal
at all times to at least 100% of the value of the securities loaned. There
is no investment restriction on the amount of portfolio securities that may
be loaned, except that payments received on such loans, including amounts
received during the loan on account of interest on the securities loaned,
will not (together with all non-qualifying income) exceed 10% of the
Government Fund's annual gross income (without offset for realized capital
gains) unless, in the opinion of counsel to the Government Fund, such
amounts are qualifying income under federal income tax provisions
applicable to regulated investment companies; and

(4) Purchase securities on margin or make short sales of securities.

Government Fund
2
<PAGE>

As a matter of operating policy, the Trustees of the Trust have determined
that the Government Fund will not write put or call options.

Collateral received by the Government Fund to secure loans of its
portfolio securities will be marked to market on a daily basis.

Government Fund
3
<PAGE>

- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------

To the Trustees and Shareholders of

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES:

DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 28, 1998

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Schedule of Investments
April 30, 1998

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $ 45,000,000 Federal Farm Credit Banks ............ 5.90% 06/02/98 $ 45,013,849
Government 20,000,000 Federal Farm Credit Banks ............ 5.60 10/01/98 19,987,080
Agency 25,000,000 Federal Farm Credit Banks ............ 5.65 01/04/99 24,977,500
Issues -- 53.7% 10,000,000 Federal Home Loan Banks .............. 5.91 06/11/98 10,004,912
25,000,000 Federal Home Loan Banks .............. 5.80 06/12/98 24,997,411
15,900,000 Federal Home Loan Banks .............. 5.63 06/15/98 15,899,882
10,000,000 Federal Home Loan Banks .............. 5.90 06/19/98 9,999,973
20,250,000 Federal Home Loan Banks .............. 5.80 12/18/98 20,257,290
7,000,000 Federal Home Loan Banks .............. 5.45 02/19/99 6,981,800
10,000,000 Federal Home Loan Banks .............. 5.56 03/25/99 9,984,200
50,000,000 Federal Home Loan Banks .............. 5.63 04/09/99 49,943,000
5,000,000 Federal Home Loan Banks .............. 5.86 01/20/00 5,004,700
10,000,000 Federal Home Loan Banks .............. 5.77 01/27/00 9,996,000
5,000,000 Federal Home Loan Banks .............. 5.75 03/16/00 4,995,000
5,845,000 Federal Home Loan Banks .............. 5.87 03/17/00 5,851,137
10,000,000 Federal Home Loan Banks .............. 5.87 04/20/00 10,011,600
5,000,000 Federal Home Loan Mortgage Corp. 5.69 08/21/98 4,999,285
10,000,000 Federal Home Loan Mortgage Corp. 5.00 12/15/98 9,955,000
10,000,000 Federal National Mortgage Assoc. ..... 5.68 07/31/98 9,997,920
10,000,000 Federal National Mortgage Assoc. ..... 5.38 02/12/99 9,968,600
20,000,000 Federal National Mortgage Assoc. ..... 5.52 03/26/99 19,961,320
2,200,000 Federal National Mortgage Assoc. ..... 5.88 08/10/99 2,201,192
5,550,000 Federal National Mortgage Assoc. ..... 6.00 10/26/99 5,566,411
13,900,000 Student Loan Marketing Assoc ......... 5.85 06/10/98 13,898,942
21,110,000 Student Loan Marketing Assoc ......... 5.40 02/10/99 21,047,092
25,000,000 Federal Farm Credit Banks D/N ........ 5.43 05/15/98 24,947,208
18,000,000 Federal Home Loan Banks D/N .......... 5.35 05/26/98 17,933,125
2,524,000 Federal Home Loan Banks D/N .......... 5.34 06/30/98 2,501,158
10,500,000 Federal Home Loan Banks D/N .......... 5.36 07/31/98 10,355,613
3,000,000 Federal Home Loan Banks D/N .......... 5.39 09/04/98 2,943,090
2,503,000 Federal Home Loan Banks D/N .......... 5.39 09/11/98 2,452,880
22,000,000 Federal Home Loan Mortgage Corp. D/N.. 5.40 05/04/98 21,990,100
60,000,000 Federal Home Loan Mortgage Corp. D/N.. 5.41 05/08/98 59,936,883
116,000,000 Federal Home Loan Mortgage Corp. D/N.. 5.41 05/13/98 115,790,813
75,000,000 Federal Home Loan Mortgage Corp. D/N.. 5.45 05/15/98 74,841,042
</TABLE>

Government Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Interest Maturity Value
Face Amount Rate* Date (Note 1a)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $ 10,500,000 Federal Home Loan Mortgage Corp. D/N ... 5.44% 05/18/98 $ 10,473,027
Government
Agency 50,000,000 Federal Home Loan Mortgage Corp. D/N ... 5.41 05/20/98 49,857,236
Issues (continued) 31,986,000 Federal Home Loan Mortgage Corp. D/N ... 5.44 05/20/98 31,894,165
50,000,000 Federal Home Loan Mortgage Corp. D/N ... 5.44 05/22/98 49,841,333
50,000,000 Federal Home Loan Mortgage Corp. D/N ... 5.42 06/19/98 49,631,139
1,000,000 Federal Home Loan Mortgage Corp. D/N ... 5.39 06/30/98 990,950
20,000,000 Federal National Mortgage Assoc. D/N 5.40 05/06/98 19,985,000
25,000,000 Federal National Mortgage Assoc. D/N 5.46 05/07/98 24,977,250
50,000,000 Federal National Mortgage Assoc. D/N 5.41 05/08/98 49,947,403
9,087,000 Federal National Mortgage Assoc. D/N 5.44 05/18/98 9,063,657
50,000,000 Federal National Mortgage Assoc. D/N 5.43 05/18/98 49,871,792
35,000,000 Federal National Mortgage Assoc. D/N 5.41 06/12/98 34,779,092
25,000,000 Federal National Mortgage Assoc. D/N 5.32 10/23/98 24,341,320
25,000,000 Federal National Mortgage Assoc. D/N 5.25 01/27/99 23,979,986
- -------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency Issues
(Cost $1,135,028,255) ................... 1,134,826,358
- -------------------------------------------------------------------------------------------------------------------
U.S. 40,000,000 Federal Farm Credit Banks ............... 5.54 01/14/99 39,990,441
Government 50,000,000 Federal Home Loan Banks ................. 5.45 08/04/98 49,986,192
Agency 20,000,000 Federal Home Loan Banks ................. 5.51 09/16/98 19,994,832
Issues -- 3,000,000 Federal Home Loan Mortgage Corp. 6.00 05/13/98 3,000,000
Variable 50,000,000 Federal Home Loan Mortgage Corp. 5.49 01/26/99 49,974,369
Rate -- 17.3% 13,000,000 Federal National Mortgage Assoc. ........ 6.00 05/14/98 13,000,000
100,000,000 Federal National Mortgage Assoc. ........ 5.41 07/30/98 99,971,342
20,000,000 Federal National Mortgage Assoc. ........ 5.46 03/03/99 19,992,455
10,000,000 Student Loan Marketing Assoc. ........... 5.42 05/21/98 9,999,457
25,000,000 Student Loan Marketing Assoc. ........... 5.51 10/06/98 24,993,182
25,000,000 Student Loan Marketing Assoc. ........... 5.47 01/12/00 24,992,172
10,000,000 Student Loan Marketing Assoc. ........... 5.52 02/04/00 9,995,766
- -------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agency
Issues -- Variable Rate
(Cost $365,890,208) ..................... 365,890,208
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

Government Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Schedule of Investments -- Continued
April 30, 1998

Note--Costs for federal income tax purposes are the same as those shown above.
At April 30, 1998, unrealized depreciation amounted to $201,897 and is
comprised of $69,038 of appreciation and $270,935 in depreciation.

*Repurchase Agreements bear interest payable at fixed dates or upon maturity.
U.S. Government and Agency Issues are purchased on a discount basis; the
interest rate shown is the discount paid at the time of purchase by the Fund.
Other U.S. Government and Agency Issues bear interest at the rates shown,
payable at fixed dates or upon maturity; the rates shown are the rates in
effect at April 30, 1998. For variable rate instruments, the next date on which
the interest rate is to be adjusted is deemed the maturity date for valuation.

**Repurchase Agreements are fully collateralized by U.S. Government and Agency
Obligations.

D/N--Discount Notes

Government Fund

See Notes to Financial Statements.

7
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Statement of Assets and Liabilities
April 30, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Assets:
Investments in securities subject to repurchase agreements ......... $ 595,293,000
Investments in other marketable securities ......................... 1,500,716,566
-------------
Total investments at value (identified cost $2,096,211,463) (Note 1a)............. $2,096,009,566
Cash ............................................................... 12,931,898
Interest receivable ................................................ 6,613,612
Prepaid expense .................................................... 4,431
--------------
Total assets .................................................... 2,115,559,507
--------------
Liabilities:
Advisory fee payable (Note 2) ...................................... 353,550
Accrued expenses ................................................... 152,128
Dividends payable .................................................. 461,400
--------------
Total liabilities ............................................... 967,078
--------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price,
based on 2,114,794,326 shares of beneficial interest outstanding) .................. $2,114,592,429
==============
</TABLE>

- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Statement of Operations
April 30, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Investment Income:
Interest and discount earned (Note 1d) ................................. $ 110,719,788
--------------
Expenses:
Investment advisory fee (Note 2) ....................... $ 6,330,489
Registration fees ...................................... 353,429
Dividend and transfer agency fees ...................... 301,079
Accounting and custodian services ...................... 182,278
Legal and audit fees ................................... 134,059
Trustees' fees (Note 5) ................................ 18,363
Printing and shareholder reports ....................... 16,328
Insurance .............................................. 10,011
Miscellaneous .......................................... 9,215
------------
Total expense ..................................... 7,355,251
Waived investment advisory fee (Note 2) ................ (2,369,204) 4,986,047
------------ --------------
Net investment income ............................................. 105,733,741
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions ......... 113,052
Net unrealized appreciation of investments ............. 216,971
------------
Net realized and unrealized gain from investments ................... 330,023
--------------
Net Increase in Net Assets Resulting From Operations ................... $ 106,063,764
==============
</TABLE>

Government Fund

See Notes to Financial Statements.

8
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Year Ended April 30,
------------------------
1998 1997
----------------- ------------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income ......................................... $ 105,733,741 $ 97,235,269
Net realized gain from investment transactions ................ 113,052 199,811
Net unrealized appreciation (depreciation) of investments ..... 216,971 (227,150)
-------------- --------------
Net increase in net assets resulting from operations .......... 106,063,764 97,207,930
Total declared as dividends to shareholders (Note 4) .......... (105,846,793) (97,435,080)
Capital share transactions (Note 3) ........................... 96,976,511 374,001,437
-------------- --------------
Net increase in net assets .................................... 97,193,482 373,774,287
Net Assets:
Beginning of year ............................................. 2,017,398,947 1,643,624,660
-------------- --------------
End of year ................................................... $2,114,592,429 $2,017,398,947
============== ==============
</TABLE>

- --------------------------------------------------------------------------------
Merrill Lynch Government Fund
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------------------------------
1998 1997 1996 1995 1994
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income ........................ .053 .052 .055 .049 .030
Less Distributions:
Dividends from net investment income ......... (.053) (.052) (.055) (.049) (.030)
---------- ---------- ---------- ---------- ----------
Net Asset Value, end of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Return .................................. 5.48% 5.31% 5.67% 4.99% 3.06%
Ratios/Supplemental Data:
Net Assets, end of period (000) .............. $2,114,592 $2,017,399 $1,643,625 $1,601,085 $1,533,478
Ratio of expenses to average net assets
(before waiver) ............................. .37% .38% .38% .37% .38%
Ratio of expenses to average net assets
(after waiver) .............................. .25% .26% .26% .24% .32%
Ratio of net investment income, to average net
assets (before waiver) ...................... 5.24% 5.07% 5.37% 4.82% 2.83%
Ratio of net investment income, to average net
assets (after waiver) ....................... 5.36% 5.19% 5.49% 4.95% 2.89%
</TABLE>

Government Fund

See Notes to Financial Statements.

<PAGE>

1. Significant Accounting Policies

(e) Deferred organization expenses are amortized over a period not exceeding
five years. Prepaid registration fees are charged to income as the related
shares are sold.

2. Investment Advisory Fees and Other
Transactions with Affiliates

10
<PAGE>

All officers and certain trustees of the Trust are affiliated with Merrill
Lynch & Co., Inc.

3. Shares of Beneficial Interest

Prior to January 27, 1997 (commencement of operations) there were 100,000
shares of beneficial interest outstanding which were owned by FAM.

11
<PAGE>

4. Distributions

At April 30, 1998, the Institutional Tax-Exempt Fund had net capital loss
carryovers of $248,451 of which $90,891 expire in the year 2001, $17,520 expire
in 2002 and $140,040 expire in 2003.

5. Trustees' Fees

12
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------

Merrill Lynch Treasury Fund
of Merrill Lynch Funds For Institutions Series

One Financial Center, Boston, Massachusetts 02111

For general information and purchases call 617-357-1460 or toll free
800-225-1576

Merrill Lynch Treasury Fund is a no-load money fund whose objectives are
to seek current income consistent with liquidity and security of principal. The
Treasury Fund will attempt to achieve its investment objectives by investing in
a portfolio of U.S. Treasury securities. The Treasury Fund is a series of
Merrill Lynch Funds For Institutions Series (the "Trust"), a diversified,
open-end management investment company.

The Statement of Additional Information of the Treasury Fund is not a
prospectus and should be read in conjunction with the Prospectus of the
Treasury Fund (the "Prospectus") which has been filed with the Securities and
Exchange Commission and is available upon oral or written request without
charge. Copies of the Prospectus can be obtained by calling or by writing the
Treasury Fund at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Objectives and Policies ........................... 2
Independent Auditors' Report ................................. 4
Financial Statements for the Fiscal Year ended April 30, 1998 5
Appendix A:
Management of the Trust ..................................... A-1
Investment Advisory and Other Services ...................... A-4
Portfolio Transactions ...................................... A-7
Net Asset Value ............................................. A-8
Dividends ................................................... A-9
Taxes ....................................................... A-11
Federal .................................................... A-11
Massachusetts Income Tax ................................... A-13
Other Taxes ................................................ A-13
Distributor .................................................. A-13
Yield Information ............................................ A-14
General Information .......................................... A-15
</TABLE>

The date of this Statement of Additional Information and the Prospectus is
June 11, 1998.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Reference is made to "The Treasury Fund and Its Objectives" in the
Prospectus for a discussion of the investment objectives and policies of the
Treasury Fund. Subject to the investment restrictions described below, the
Treasury Fund's investment objectives can be changed without shareholder
approval.

All investments of the Treasury Fund will be in securities with remaining
maturities not exceeding 762 days (25 months). The dollar weighted average
maturity of the Treasury Fund's portfolio will be 90 days or less.

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

The Treasury Fund may invest up to 10% of its total assets in obligations
subject to repurchase agreements. The Treasury Fund will not acquire repurchase
agreements if, as a result thereof, more than 10% of the value of its total
assets would be invested in repurchase agreements.

The limitation on the Treasury Fund's investment in obligations subject to
repurchase agreements may adversely affect the Treasury Fund's yield, since the
Treasury Fund earns a fee for entering into a repurchase agreement which
increases the effective yield of the obligations underlying the repurchase
agreement. The adverse effect of this limitation on the Treasury Fund's yield
will be greater during periods in which yields on shorter term securities are
higher than yields on longer term securities.

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

(1) Purchase securities other than U.S. Treasury bills, notes, and other
obligations issued or guaranteed by the U.S. Government, some of which may
be subject to repurchase agreements. There is no limit on the amount of its
assets which may be invested in the securities of any one issuer of such
obligations;

(2) Act as an underwriter of securities;

(3) Make loans, except that the Treasury Fund may purchase or hold debt
obligations in accordance with its investment objectives and policies, may
enter into repurchase agreements for such securities, and may lend its
portfolio securities against collateral consisting of cash, or securities
issued or guaranteed by the U.S. Government or its agencies, which is equal
at all times to at least 100% of the value of the securities loaned. There
is no investment restriction on the amount of portfolio securities that may
be loaned, except that payments received on such loans, including amounts
received during the loan on account of interest on the

Treasury Fund
2
<PAGE>

securities loaned, will not (together with all non-qualifying income)
exceed 10% of the Treasury Fund's annual gross income (without offset for
realized capital gains) unless, in the opinion of counsel to the Fund, such
amounts are qualifying income under Federal income tax provisions
applicable to regulated investment companies; and

(4) Purchase securities on margin or make short sales of securities.

Even though the above restrictions would permit investment in securities
issued or guaranteed by U.S. Government agencies, the trustees, as a matter of
investment policy, have determined that the Treasury Fund will not purchase any
securities other than direct obligations of the U.S. Treasury. As a matter of
operating policy, the Trustees of the Trust have determined that the Treasury
Fund will not write put or call options.

Treasury Fund
3

<PAGE>

- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------

To the Trustees and Shareholders of

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES:

DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 28, 1998

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Schedule of Investments
April 30, 1998

Note--Costs for federal income tax purposes are the same as those shown above.
At April 30, 1998, net unrealized appreciation amounted to $939,826 and is
comprised of $948,333 in appreciation and $8,507 in depreciation.

*U.S. Treasury Bills are purchased on a discount basis; the interest rate shown
is the discount paid at the time of purchase by the Fund.
U.S. Treasury Notes bear interest payable at fixed dates or upon maturity.

Treasury Fund

See Notes to Financial Statements.

5
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Statement of Assets and Liabilities
April 30, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Assets:
Total investments at value (identified cost $743,874,141) (Note 1a).................... $744,813,967
Cash .................................................................................. 345,735
Interest receivable ................................................................... 14,452,318
Prepaid expense ....................................................................... 1,391
------------
Total assets ....................................................................... 759,613,411
------------
Liabilities:
Advisory fee payable (Note 2) ......................................................... 130,871
Dividends payable ..................................................................... 231,138
Accrued expenses ...................................................................... 54,544
------------
Total liabilities ................................................................. 416,553
------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price, based on
758,257,032 shares of beneficial interest outstanding) ............................... $759,196,858
============
</TABLE>

- --------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Statement of Operations
April 30, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Investment Income:
Interest and discount earned (Note 1d) ............................... $35,145,485
-----------
Expenses:
Investment advisory fee (Note 2) ....................... $2,294,733
Registration fees ...................................... 166,174
Dividend and transfer agency fees ...................... 100,281
Accounting and custodian services ...................... 82,870
Legal and audit fees ................................... 12,789
Printing and shareholder reports ....................... 6,891
Trustees' fees (Note 5) ................................ 6,569
Insurance .............................................. 3,284
Miscellaneous .......................................... 3,760
----------
Total expense ..................................... 2,677,351
Waived investment advisory fee (Note 2) ................ (974,269) 1,703,082
---------- -----------
Net investment income ........................................... 33,442,403
Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions ......... 384,816
Net unrealized appreciation of investments ............. 886,152
----------
Net realized and unrealized gain from investments ................. 1,270,968
-----------
Net Increase in Net Assets Resulting From Operations ................. $34,713,371
===========
</TABLE>

Treasury Fund

See Notes to Financial Statements.

6
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Year Ended April 30,
------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income ........................................ $ 33,442,403 $ 28,318,554
Net realized gain from investment transactions ............... 384,816 209,801
Net unrealized appreciation of investments ................... 886,152 63,853
------------- -------------
Net increase in net assets resulting from operations ......... 34,713,371 28,592,208
Total declared as dividends to shareholders (Note 4) ......... (33,827,219) (28,528,355)
Capital share transactions (Note 3) .......................... 146,466,848 97,656,523
------------- -------------
Net increase in net assets ................................... 147,353,000 97,720,376
Net Assets:
Beginning of year ............................................ 611,843,858 514,123,482
------------- -------------
End of year .................................................. $ 759,196,858 $ 611,843,858
============= =============
</TABLE>

- --------------------------------------------------------------------------------
Merrill Lynch Treasury Fund
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income .......................... .051 .049 .052 .045 .027
Less Distributions:
Dividends from net investment income ........... (.051) (.049) (.052) (.045) (.027)
-------- -------- -------- -------- --------
Net Asset Value, end of period .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return .................................... 5.24% 5.08% 5.37% 4.68% 2.82%
Ratios/Supplemental Data:
Net Assets, end of period (000) ................ $759,197 $611,844 $514,123 $342,844 $266,953
Ratio of expenses to average net assets
(before waiver) ............................... .41% .42% .41% .44% .45%
Ratio of expenses to average net assets
(after waiver) ................................ .26% .27% .26% .29% .39%
Ratio of net investment income, including
realized and unrealized gains and losses,
to average net assets (before waiver) ......... 5.11% 4.85% 5.09% 4.58% 2.67%
Ratio of net investment income, including
realized and unrealized gains and losses,
to average net assets (after waiver) .......... 5.26% 5.00% 5.24% 4.73% 2.73%
</TABLE>

Treasury Fund

See Notes to Financial Statements.

<PAGE>

1. Significant Accounting Policies

(e) Deferred organization expenses are amortized over a period not exceeding
five years. Prepaid registration fees are charged to income as the related
shares are sold.

2. Investment Advisory Fees and Other
Transactions with Affiliates

8
<PAGE>

All officers and certain trustees of the Trust are affiliated with Merrill
Lynch & Co., Inc.

3. Shares of Beneficial Interest

Prior to January 27, 1997 (commencement of operations) there were 100,000
shares of beneficial interest outstanding which were owned by FAM.

9
<PAGE>

4. Distributions

At April 30, 1998, the Institutional Tax-Exempt Fund had net capital loss
carryovers of $248,451 of which $90,891 expire in the year 2001, $17,520 expire
in 2002 and $140,040 expire in 2003.

5. Trustees' Fees

10
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------

Merrill Lynch Institutional Tax-Exempt Fund
of Merrill Lynch Funds For Institutions Series

One Financial Center, Boston, Massachusetts 02111

For general information and purchases call 617-357-1460 or toll free
800-225-1576

Merrill Lynch Institutional Tax-Exempt Fund is a no-load money fund whose
objectives are to seek current income exempt from federal income taxes,
preservation of capital and liquidity available from investing in a diversified
portfolio of short-term, high quality Tax-Exempt Securities. The Tax-Exempt
Fund is designed primarily for institutions as an economical and convenient
means for the investment of short-term funds. The Tax-Exempt Fund is a separate
series of Merrill Lynch Funds For Institutions Series (the "Trust"), a
diversified, open-end management investment company.

The Statement of Additional Information of the Tax-Exempt Fund is not a
prospectus and should be read in conjunction with the Prospectus of the
Tax-Exempt Fund (the "Prospectus") which has been filed with the Securities and
Exchange Commission and is available upon oral or written request without
charge. Copies of the Prospectus can be obtained by calling or by writing the
Tax-Exempt Fund at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Investment Objectives and Policies ................................... 2
Investment Restrictions .............................................. 3
Independent Auditors' Report ......................................... 5
Audited Financial Statements for the Fiscal Year Ended April 30, 1998 6
Appendix A:
Management of the Trust ............................................. A-1
Investment Advisory and Other Services .............................. A-4
Portfolio Transactions .............................................. A-7
Net Asset Value ..................................................... A-8
Dividends ........................................................... A-9
Taxes ............................................................... A-11
Federal ............................................................ A-11
Massachusetts Income Tax ........................................... A-13
Other Taxes ........................................................ A-13
Distributor ......................................................... A-13
Yield Information ................................................... A-14
General Information ................................................. A-15
Appendix B:
Information Concerning Tax-Exempt Securities ....................... B-1
</TABLE>

The date of this Statement of Additional Information and the Prospectus is
June 11, 1998.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Reference is made to "The Tax-Exempt Fund and Its Objectives" in the
Prospectus for a discussion of the investment objectives and policies of the
Tax-Exempt Fund.

All of the investments of the Tax-Exempt Fund will be in securities with
remaining maturities of up to 397 days (13 months). The dollar weighted average
maturity of the Tax-Exempt Fund's portfolio will be 90 days or less. The
Tax-Exempt Fund can be expected to offer a lower yield than longer-term
municipal bond funds since Tax-Exempt Securities (see Appendix B for a
description of Tax-Exempt Securities) with longer maturities tend to produce
higher yields. Interest rates in the short-term Tax-Exempt Securities market
also may fluctuate more widely from time to time than interest rates in the
long-term municipal bond market. However, because of the shorter maturities,
the market value of the Tax-Exempt Securities held by the Tax-Exempt Fund can
be expected to fluctuate less in value as a result of changes in interest
rates.

The Tax-Exempt Fund may also invest in short-term municipal notes,
variable rate demand notes ("VRDNs"), participation interests in VRDNs held by
a financial institution ("Participating VRDNs"), short-term tax-exempt
commercial paper obligations and floating rate tax-exempt demand notes. See
Appendix B for a discussion of the above investment instruments.

VRDNs are tax-exempt obligations which contain a floating or variable
interest rate adjustment formula and an unconditional right of demand to
receive payment of the unpaid balance plus accrued interest upon a short notice
period. The interest rates are adjustable at periodic intervals to some
prevailing market rate for similar investments, such adjustment formula being
calculated to maintain the market value of the VRDN at approximately the par
value of the VRDN upon the adjustment date. The adjustments are frequently
based upon the prime rate of a bank or some other appropriate interest rate
adjustment index.

The maturity of VRDNs (including Participating VRDNs) are deemed to be the
longer of (i) the notice period required before the Tax-Exempt Fund is entitled
to receive payment of the principal amount of the VRDN upon demand or (ii) the
period remaining until the VRDN's next interest rate adjustment. If not
redeemed by the Tax-Exempt Fund through the demand feature, VRDNs mature on a
specified date which may range up to thirty years from the date of issuance.
The Tax-Exempt Fund will not invest more than 20% of its total assets in
Participating VRDNs.

Certain tax-exempt instruments (primarily VRDNs and Participating VRDNs)
may be entitled to the benefit of standby letters of credit or similar
commitments issued by banks and, in such instances, the Trustees of the Trust
will take into account the obligation of the bank in assessing the quality of
such instrument. The Tax-Exempt Fund may also purchase other types of
tax-exempt instruments if, in the opinion of the Trustees of the Trust, such
obligations are equivalent to securities having the ratings described in the
Appendix to the Prospectus.

The performance of the Tax-Exempt Fund will be affected by general changes
in interest rates on short-term Tax-Exempt Securities. Such changes will affect
the yield on the Tax-Exempt Fund's subsequent investments, will result in
increases or decreases in the value of the obligations then held by the
Tax-Exempt Fund and will thereby affect the rate of return on the shares of the
Tax-Exempt Fund. If interest rates have increased since the time a security was
purchased, the value of that security will generally decrease. The impact on
value is lessened by the short-term maturities of the investment of the
Tax-Exempt Fund. Short-term securities tend to fluctuate less in value due to
changes in interest rates than do longer term securities. Preservation of
capital is a prime investment objective of the Tax-Exempt Fund, and, while the
types of short-term Tax-Exempt Securities in which the Tax-Exempt Fund

Tax-Exempt Fund

2
<PAGE>

invests are not completely risk free, the Tax-Exempt Fund believes that
securities having the rating characteristics described above have a lower
principal risk than lower rated obligations and generally have a lower
principal risk than longer term obligations which entail the risk of changing
conditions over a longer period of time.

As indicated under "Redemptions" in the Prospectus, payments of proceeds
upon redemption of shares generally will be made on the same day the redemption
request is received. Tax-Exempt Securities generally do not trade on the basis
of same-day settlements. As a result, the Tax-Exempt Fund may be required to
maintain cash reserves or incur temporary bank borrowings so that it can make
such redemption payments. This will reduce the Tax-Exempt Fund's yield. The
Trustees of the Trust will re-examine the Tax-Exempt Fund's policy of making
redemption payments on the date redemption orders are received if that policy
has a significant impact on the Tax Exempt Fund's yield.

Purchase of Tax-Exempt Securities on a when-issued basis. Tax-Exempt
Securities may at times be purchased or sold on a delayed delivery basis or a
when-issued basis. These transactions arise when securities are purchased or
sold by the Tax-Exempt Fund with payment and delivery taking place in the
future, often a month or more after the purchase. The payment obligation and
the interest rate are each fixed at the time the buyer enters into the
commitment. During the period between the making of the commitment and delivery
of the securities, the Tax-Exempt Fund will not earn any income on the
securities subject to the commitment, but will be exposed to changes in the
market value of such securities. The Tax-Exempt Fund will only make commitments
to purchase such securities with the intention of actually acquiring the
securities, but the Tax-Exempt Fund may sell these securities prior to
settlement date if it is deemed advisable. Purchasing Tax-Exempt Securities on
a when-issued basis involves the risk that the yield available in the market
when delivery takes place may actually be higher than those obtained in the
transaction itself; if yields so increase, the value of the when-issued
obligation will generally decrease. The Tax-Exempt Fund will maintain a
separate account at its custodian bank consisting of cash or liquid Tax-Exempt
Securities (valued on a daily basis) equal at all times to the amount of the
when-issued commitment.

Purchase of securities with puts. The Tax-Exempt Fund has authority to
purchase securities at a price which would result in a yield to maturity lower
than that generally offered by the seller at the time of purchase when it can
simultaneously acquire the right to sell the securities back to the seller at
an agreed upon price at any time during a stated period or on a certain date.
Such a right is generally denoted as a "put." The Tax-Exempt Fund does not
currently intend to enter into such transactions but reserves the right to do
so in the future. No transactions will be entered into for the Tax-Exempt Fund
unless the Trustees of the Trust have approved the proposed terms of such
transactions and such terms are set forth in a subsequent prospectus which has
been declared effective by the Securities and Exchange Commission. In addition,
the Tax-Exempt Fund may be required to obtain an exemptive order from the
Securities and Exchange Commission permitting it to acquire puts. The right to
engage in such transactions is a fundamental policy of the Tax-Exempt Fund,
which may only be changed by shareholder vote.

INVESTMENT RESTRICTIONS

In addition to those restrictions and policies set forth in "Investment
Restrictions" in the Prospectus, the Tax-Exempt Fund has adopted the following
restrictions and policies relating to the investment of its assets and its
activities. These are fundamental policies and may not be changed without the
approval of the holders of a majority of the Tax-Exempt Fund's outstanding
shares (for this purpose a majority of the shares means the lesser of (i) 67%
of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares).

Tax-Exempt Fund

3
<PAGE>

The Tax-Exempt Fund may not: (1) make investments for the purpose of
exercising control or management; (2) purchase securities of other investment
companies, except in connection with a merger, consolidation, acquisition or
reorganization; (3) purchase or sell real estate (provided that such
restriction shall not apply to tax-exempt securities secured by real estate or
interests therein or issued by companies which invest in real estate or
interests therein), commodities or commodity contracts, interests in oil, gas
or other mineral exploration or development programs; (4) make loans to other
persons, provided that the Tax-Exempt Fund may purchase a portion of an issue
of tax-exempt securities (the acquisition of a portion of an issue of
tax-exempt securities or bonds, debentures or other debt securities which are
not publicly distributed is considered to be the making of a loan under the
Investment Company Act of 1940); (5) act as an underwriter of securities,
except to the extent that the Tax-Exempt Fund may technically be deemed an
underwriter when engaged in the activities described in (4) above or insofar as
the Tax-Exempt Fund may be deemed an underwriter under the Securities Act of
1933 in selling portfolio securities; (6) invest more than 5% of its total
assets (taken at market value at the time of each investment) in industrial
revenue bonds where the entity supplying the revenues from which the issue is
to be paid, including predecessors, has a record of less than three years of
continuous operation; (7) purchase any securities on margin, except for use of
short-term credit necessary for clearance of purchases and sales of portfolio
securities; or (8) make short sales of securities or maintain a short position
or invest in put call, straddle or spread options; provided, however, that the
Tax-Exempt Fund shall have the authority to purchase tax-exempt securities
subject to put options as set forth under "Investment Objectives and Policies"
above.

For purposes of the restriction on the Tax-Exempt Fund's investing more
than 5% of its total assets in the securities of any one issuer except
securities backed by the U.S. Government or its agencies or instrumentalities
(as more fully set forth in "Investment Restrictions" in the Prospectus), the
Tax-Exempt Fund will regard each state and each political subdivision, agency
or instrumentality of such state and each multistate agency of which such state
is a member and each public authority which issues securities on behalf of a
private entity as a separate issuer, except that if the security is backed only
by the assets and revenues of an entity other than the issuer then the entity
with the ultimate responsibility for the payment of interest and principal may
be regarded as the sole issuer.

With respect to the restriction on the Tax-Exempt Fund's borrowing amounts
in excess of 20% of its total assets, as more fully set forth in "Investment
Restrictions" in the Prospectus, it should be noted that usually only
"leveraged" investment companies may borrow in excess of 5% of their assets;
however, the Tax-Exempt Fund will not borrow to increase income but only to
meet redemption requests which might otherwise require untimely dispositions of
portfolio securities. Interest paid on such borrowings will reduce net income.

Tax-Exempt Fund

<PAGE>

- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------

To the Trustees and Shareholders of

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES:

DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 28, 1998

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments
April 30, 1998

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona -- $13,000,000 Maricopa County, Arizona PCR (El Paso Electric Co.
2.7% Project) VRDN 4.05% due 07/01/2014 (a) ................... $ 13,000,000
Salt River Project of Arizona, Agricultural Improvement
& Electrical Systems Revenue CP:
25,000,000 3.55% due 07/13/1998 ..................................... 25,000,000
11,100,000 3.65% due 09/01/1998 ..................................... 11,100,000
- ------------------------------------------------------------------------------------------------------
Colorado -- 11,695,000 Denver, Colorado City & County Airport Revenue
1.4% (Municipal Securities Trust Receipts--SGA 18)
VRDN 4.20% due 11/15/2025 (a) ............................ 11,695,000
7,000,000 Fort Morgan, Colorado Waterworks & Distribution
Enterprise Water Revenue VRDN 4.30% due
12/01/2017 (a) ........................................... 7,000,000
6,000,000 Montrose, Colorado IDR (Scaled Manufacturing Inc.)
VRDN 4.40% due 12/01/2005 (a) ............................ 6,000,000
- ------------------------------------------------------------------------------------------------------
District of 12,350,000 District of Columbia (Municipal Securities Trust
Columbia -- Receipts--SGA 62) DDN 4.25%
5.0% due 06/01/2017 (a) ....................................... 12,350,000
District of Columbia General Fund Recovery DDN:
32,200,000 (Series B-2) 4.35% due 06/01/2003 (a) .................... 32,200,000
37,200,000 (Series B-3) 4.35% due 06/01/2003 (a) .................... 37,200,000
9,200,000 District of Columbia Housing Finance Agency Mortgage
Revenue FXRDN 4.05% due 09/01/1998 ....................... 9,200,000
- ------------------------------------------------------------------------------------------------------
Florida -- 18,885,000 Broward County, Florida Professional Sports Facilities
9.7% Tax Revenue (Municipal Securities Trust Receipts--
SGA 38) VRDN 4.20% due 09/01/2021 (a) .................... 18,885,000
Florida Local Government Finance Authority Revenue
(Pooled Loan Note-Series A) CP:
15,000,000 3.60% due 07/29/1998 ..................................... 15,000,000
25,000,000 3.70% due 09/01/1998 ..................................... 25,000,000
24,265,000 Florida State Board of Education Capital Outlay
(Municipal Securities Trust Receipts--SGA 67)
DDN 4.25% due 06/01/2022 (a) ............................. 24,265,000
10,700,000 Jacksonville, Florida Electric Authority Revenue CP
3.70% due 05/21/1998 ..................................... 10,700,000
4,800,000 Lee County, Florida IDA Revenue (Raymond Building
Supply Corp.) VRDN 4.38% due 04/01/2017 (a) .............. 4,800,000
8,900,000 Sarasota County, Florida Health Facilities Authority
Hospital Revenue (Sarasota Memorial Hospital) CP
3.70% due 05/22/1998 ..................................... 8,900,196
Sunshine State Governmental Financing Commission
Revenue (Series B) CP:
29,500,000 3.55% due 05/01/1998 ..................................... 29,500,000
</TABLE>

Tax-Exempt Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Florida $10,000,000 3.65% due 05/08/1998 ...................................... $ 10,000,000
(continued) 10,000,000 3.60% due 07/13/1998 ...................................... 10,000,000
17,800,000 Tampa, Florida Sports Authority Revenue (Municipal
Securities Trust Receipts--SGA 61) DDN 4.25%
due 01/01/2027 (a) ........................................ 17,800,000
- --------------------------------------------------------------------------------------------------------
Georgia -- 6,860,000 Albany & Dougherty County, Georgia Hospital Authority
4.0% Revenue (Phoebe Putney Memorial Hospital) VRDN
4.30% due 09/01/2026 (a) .................................. 6,860,000
5,400,000 Atlanta, Georgia Urban Residential Finance Authority M/F
Revenue (New Community East Lake Project) VRDN
4.20% due 11/01/2028 (a) .................................. 5,400,000
6,900,000 Atlanta, Georgia Urban Residential Finance Authority
Revenue (The Park at Lakewood) VRDN 4.20% due
11/01/2022 (a) ............................................ 6,900,000
40,000,000 Burke County, Georgia Development Authority PCR CP
3.60% due 07/09/1998 ...................................... 40,000,000
1,000,000 Columbus, Georgia Development Authority IDR (Georgia
Packaging Inc.) VRDN 4.40% due 01/01/2012 (a) ............. 1,000,000
2,570,000 Eagles Tax-Exempt Trust--Georgia Residential Finance
Authority (Single Family) FXRDN 3.90%
due 06/01/1998 ............................................ 2,570,000
9,000,000 La Grange, Georgia Development Authority IDR (Reltec
Corp. Project) VRDN 4.30% due 12/01/2021 (a) .............. 9,000,000
- --------------------------------------------------------------------------------------------------------
Idaho -- 3,840,000 Madison, Idaho Economic Development Corp. IDR (Floyd
0.2% Wilcox & Sons, Inc. Project) VRDN 4.38%
due 08/01/2012 (a) ........................................ 3,840,000
- --------------------------------------------------------------------------------------------------------
Illinois -- 4,300,000 Chicago, Illinois IDR (Enterprise Center Project) VRDN
7.9% 4.38% due 06/01/2022 (a) .................................. 4,300,000
6,700,000 Chicago, Illinois Solid Waste Disposal Facilities Revenue
(Groot Industries Inc.) VRDN 4.40% due 12/01/2015 (a) ..... 6,700,000
3,325,000 Des Plaines, Illinois IDR (East Golf Road LLC Project)
VRDN 4.40% due 05/01/2017 (a) ............................. 3,325,000
3,300,000 Elgin, Illinois IDR (Starro Precision Products Inc.) VRDN
4.45% due 06/01/2025 (a) .................................. 3,300,000
2,300,000 Geneva, Illinois IDR (Continental Envelope Corp. Project)
VRDN 4.40% due 09/01/2006 (a) ............................. 2,300,000
8,000,000 Illinois Health Facilities Authority Revenue (Evanston
Hospital Corp. Project) CP 3.85% due 02/01/1999 ........... 8,000,000
14,000,000 Illinois Health Facilities Authority Revenue (Resurrection
Health Care Systems) DDN 4.25% due 05/01/2011 (a) ......... 14,000,000
9,700,000 Illinois Health Facilities Authority Revenue (Northwestern
Memorial Hospital) DDN 4.25% due 08/15/2025 (a) ........... 9,700,000
</TABLE>

Tax-Exempt Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Illinois $ 7,300,000 Illinois Health Facilities Authority Revenue
(continued) (Riverside Health Systems--Series B) VRDN
4.15% due 11/15/2016 (a) ..................................... $ 7,300,000
5,000,000 Illinois Health Facilities Authority Revenue (Pekin
Memorial Hospital) VRDN 4.20% due 08/15/2017 (a) ............. 5,000,000
10,000,000 Illinois Health Facilities Authority Revenue (Friendship
Village--Series B) VRDN 4.20% due 12/01/2020 (a) ............. 10,000,000
19,000,000 Illinois Health Facilities Authority Revenue (Little
Company of Mary Hospital & Health Care) VRDN
4.20% due 08/15/2021 (a) ..................................... 19,000,000
Illinois Housing Development Authority Revenue
(Homeowner Mortgage) FXRDN:
8,250,000 (Series B-1) 4.10% due 07/07/1998 ............................ 8,250,000
15,215,000 (Series B-2) 4.15% due 07/07/1998 ............................ 15,215,000
1,055,000 (Series B) 3.85% due 04/29/1999 .............................. 1,053,485
6,160,000 (Series B-2) 3.85% due 04/29/1999 ............................ 6,151,154
2,000,000 Illinois State Development Finance Authority
(CPR/Downers Grove Partnership) IDR VRDN 4.30%
due 12/01/2005 (a) ........................................... 2,000,000
1,700,000 Illinois State Development Finance Authority IDR (Revcor
Inc. Project) VRDN 4.25% due 06/01/2008 (a) .................. 1,700,000
3,245,000 Illinois State Development Finance Authority IDR
(Rockford College Project) VRDN 4.25% due
02/01/2001 (a) ............................................... 3,245,000
3,500,000 Illinois State Development Finance Authority IDR
(Design Automotive LLC Project) VRDN 4.40% due
06/01/2011 (a) ............................................... 3,500,000
2,500,000 Illinois State Educational Facilities Authority Revenue
(Art Institute of Chicago) VRDN 4.20% due
03/01/2027 (a) ............................................... 2,500,000
2,675,000 Peoria, Illinois IDR (CDC Realty L.P. Project) VRDN
4.25% due 12/01/2014 (a) ..................................... 2,675,000
4,000,000 Upper Illinois River Valley Authority, Solid Waste Disposal
Revenue (Exolon-Esk Co. Project) VRDN 4.30% due
12/01/2021 (a) ............................................... 4,000,000
- ----------------------------------------------------------------------------------------------------------
Indiana -- 6,660,000 Anderson, Indiana EDR (Applecreek Commons L.P.)
4.6% VRDN 4.30% due 12/01/2027 (a) ................................ 6,660,000
2,945,000 Bloomington, Indiana EDR (Bloomington Square Project)
VRDN 4.15% due 12/01/2008 (a) ................................ 2,945,000
2,500,000 Connersville, Indiana EDR (Inland Southern Corp.
Project) VRDN 4.35% due 02/01/2012 (a) ....................... 2,500,000
4,600,000 Elkhart County, Indiana EDR (Patriot Homes Inc. Project)
VRDN 4.38% due 08/01/2012 (a) ................................ 4,600,000
</TABLE>

Tax-Exempt Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Indiana $ 3,000,000 Greencastle, Indiana IDR (Crown Equipment Corp.
(continued) Project) VRDN 4.35% due 02/01/2011 (a) .................. $ 3,000,000
840,000 Greendale, Indiana EDR (Pripak Inc. Project) VRDN
4.35% due 12/01/2003 (a) ................................ 840,000
11,300,000 Indianapolis, Indiana Gas Utility Revenue CP 3.60% due
07/09/1998 .............................................. 11,300,000
2,600,000 Indiana State Development Finance Authority EDR
(Hart Housing Group Inc. Project) VRDN 4.38% due
06/01/2011 (a) .......................................... 2,600,000
3,300,000 Indiana State Development Finance Authority EDR
(Haulin Trailers Project) VRDN 4.40% due
12/01/2017 (a) .......................................... 3,300,000
2,245,000 Indiana State Development Finance Authority IDR
(Centurion Industries Inc. Project) VRDN 4.35% due
10/01/2005 (a) .......................................... 2,245,000
4,745,000 Indiana State Educational Facilities Authority Revenue
(Wesleyan University Project) VRDN 4.20% due
12/01/2015 (a) .......................................... 4,745,000
12,900,000 Indiana State Health Facilities Financing Authority
Revenue (Capital Access Designation Project) VRDN
4.15% due 04/01/2013 (a) ................................ 12,900,000
5,000,000 Indiana State Health Facilities Financing Authority
Revenue (Hartsfield Village Project) VRDN 4.15% due
08/15/2027 (a) .......................................... 5,000,000
12,000,000 Jasper County, Indiana PCR (Northern Indiana Public
Service Co.) DDN 4.25% due 04/01/2019 (a) ............... 12,000,000
2,000,000 Muncie, Indiana IDR (Diamond Plastics Corp. Project)
VRDN 4.25% due 10/01/2006 (a) ........................... 2,000,000
1,725,000 New Castle, Indiana EDR (Barden Homes Indiana Inc.)
VRDN 4.25% due 08/01/2010 (a) ........................... 1,725,000
2,385,000 Saint Joseph County, Indiana Hospital Authority (Madison
Center Inc. Project) VRDN 4.23% due 03/04/2015 (a) ...... 2,385,000
2,000,000 Westfield, Indiana IDR (Standard Locknut Inc. Project)
VRDN 4.25% due 02/01/2002 (a) ........................... 2,000,000
- -----------------------------------------------------------------------------------------------------
Kansas -- 32,000,000 Butler County, Kansas Solid Waste Disposal &
1.8% Cogeneration Revenue (Texaco Refining & Marketing)
DDN 4.40% due 08/01/2024 (a) ............................ 32,000,000
1,150,000 Spring Hill, Kansas IDR (Abrasive Engineering Project)
VRDN 4.25% due 10/01/2016 (a) ........................... 1,150,000
- -----------------------------------------------------------------------------------------------------
Kentucky -- 3,500,000 Graves County, Kentucky IDR (Seaboard Farms
3.7% Kentucky Inc. Project) VRDN 4.35% due
12/01/2012 (a) .......................................... 3,500,000
</TABLE>

Tax-Exempt Fund

See Notes to Financial Statements.

9
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kentucky Jefferson County, Kentucky Industrial Building Revenue
(continued) (Thomas Development Project) VRDN:
$ 1,800,000 4.35% due 04/10/2010 (a) .................................. $ 1,800,000
1,090,000 4.35% due 10/01/2011 (a) .................................. 1,090,000
Kentucky Area Development Districts Financing Trust Lease
Program Revenue (Calloway County Fire District) VRDN:
3,675,000 (Series D-1) 4.23% due 12/01/2031 (a) ..................... 3,675,000
490,000 (Series D-2) 4.23% due 12/01/2031 (a) ..................... 490,000
3,810,000 (Series F-1) 4.23% due 12/01/2031 (a) ..................... 3,810,000
490,000 (Series F-2) 4.23% due 12/01/2031 (a) ..................... 490,000
Kentucky Area Development Districts Financing Trust Lease
Program Revenue (Lyon County Fire District) VRDN:
4,410,000 (Series G-1) 4.23% due 12/01/2031 (a) ..................... 4,410,000
490,000 (Series G-2) 4.23% due 12/01/2031 (a) ..................... 490,000
4,410,000 (Series I-1) 4.23% due 12/01/2031 (a) ..................... 4,410,000
490,000 (Series I-2) 4.23% due 12/01/2031 (a) ..................... 490,000
Kentucky Area Development Districts Financing Trust Lease
Program Revenue (Symsonia County Fire District) VRDN:
4,410,000 (Series H-1) 4.23% due 12/01/2031 (a) ..................... 4,410,000
490,000 (Series H-2) 4.23% due 12/01/2031 (a) ..................... 490,000
1,300,000 Kentucky Economic Development Finance Authority
Revenue (Sisters of Charity) DDN 4.20% due
11/01/2020 (a) ............................................ 1,300,000
9,835,000 Kentucky Economic Development Finance Authority
Hospital Facilities Revenue (St. Elizabeth's Medical
Center Inc.) VRDN 4.30% due 05/01/2017 (a) ................ 9,835,000
19,500,000 Kentucky State Pollution Abatement and Water Resource
Finance Authority PCR (Toyota Motor) DDN 4.75% due
08/13/2006 (a) ............................................ 19,500,000
5,500,000 Middletown, Kentucky Revenue (Christian Academy Project)
VRDN 4.15% due 07/01/2022 (a) ............................. 5,500,000
- -------------------------------------------------------------------------------------------------------
Louisiana -- Calcasieu Parish Inc., Louisiana IDB Revenue (Citgo
3.1% Petroleum Corp. Project) DDN:
8,600,000 4.40% due 12/01/2024 (a) .................................. 8,600,000
6,500,000 4.40% due 03/01/2025 (a) .................................. 6,500,000
40,030,000 Saint James Parish, Louisiana PCR (Texaco Project) CP
3.65% due 05/12/1998 ...................................... 40,030,000
- -------------------------------------------------------------------------------------------------------
Maine -- 2,530,000 Gray, Maine Revenue (Advance Realty Project) VRDN
0.6% 4.40% due 10/11/2011 (a) .................................. 2,530,000
2,130,000 Lewiston, Maine Revenue (Geiger Brothers Project) VRDN
3.90% due 09/01/2004 (a) .................................. 2,130,000
</TABLE>

Tax-Exempt Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maine $ 4,155,000 Millinocket, Maine IDB Revenue (Gardner Chipmills
(continued) Project) VRDN 4.38% due 03/01/2005 (a) ................. $ 4,155,000
1,800,000 Saco, Maine IDR (First Light Technology Project) VRDN
4.38% due 04/01/2007 (a) ............................... 1,800,000
- -------------------------------------------------------------------------------------------------------
Maryland -- 1,400,000 Anne Arundel County, Maryland EDR (Atlas Container
1.3% Corp. Project) VRDN 4.40% due 04/01/2006 (a) ........... 1,400,000
10,000,000 Gaithersburg, Maryland EDR (Asbury Methodist) VRDN
4.20% due 07/01/2027 (a) ............................... 10,000,000
2,500,000 Maryland State Health & Higher Educational Facilities
Authority Revenue (Helix Health Hospital) VRDN
4.05% due 07/01/2026 (a) ............................... 2,500,000
10,000,000 Montgomery County, Maryland CP 3.70% due
05/06/1998 ............................................. 10,000,000
- -------------------------------------------------------------------------------------------------------
Massachusetts -- 8,670,875 Amesbury, Massachusetts BAN 4.25% due 10/01/1998 ........ 8,678,548
6.6% 3,000,000 Amesbury, Massachusetts BAN 4.20% due 10/01/1998 ........ 3,003,650
7,659,000 Beverly, Massachusetts BAN 3.90% due 09/24/1998 ......... 7,663,733
5,000,000 Central Berkshire Regional School District BAN 4.04%
due 07/15/1998 ......................................... 5,001,383
4,600,000 Fitchburg, Massachusetts RAN 4.25% due 06/30/1998 ....... 4,602,220
9,000,000 Hamilton-Wenham, Massachusetts Regional School
District BAN 4.30% due 05/21/1998 ...................... 9,001,279
14,230,000 Massachusetts State GO (Tender Option) FXRDN 3.70%
due 05/27/1998 ......................................... 14,230,000
13,000,000 Massachusetts State Health & Educational Facilities
Authority Revenue (Boston University--Series H) CP
3.70% due 05/05/1998 ................................... 13,000,000
6,850,000 Massachusetts State Industrial Finance Agency IDR
(Lightlife Foods Inc.) VRDN 4.05% due 12/01/2018 (a) 6,850,000
7,600,000 Norton, Massachusetts BAN 4.30% due 09/15/1998 .......... 7,612,512
16,000,000 Pioneer Valley Transit Authority RAN 4.25% due
08/07/1998 ............................................. 16,012,794
10,000,000 Springfield, Massachusetts BAN 4.25% due 11/20/1998 ..... 10,021,425
13,800,000 Triton, Massachusetts Regional School District BAN
4.00% due 04/16/1999 ................................... 13,831,759
- -------------------------------------------------------------------------------------------------------
Michigan -- 23,425,000 Michigan State Building Authority Revenue CP 3.80%
2.2% due 05/07/1998 ......................................... 23,425,000
15,700,000 Michigan State Strategic Fund Limited Obligation
Revenue (Consumers Power Co. Project) DDN 4.25%
due 06/15/2010 (a) ..................................... 15,700,000
- -------------------------------------------------------------------------------------------------------
</TABLE>

Tax-Exempt Fund

See Notes to Financial Statements.

11
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mississippi -- Mississippi State Hospital Equipment & Facilities
1.1% Authority Revenue (North Mississippi Health
Services) CP:
$ 8,000,000 (Series 1) 3.60% due 08/13/1998 ........................... $ 8,000,000
12,000,000 (Series 1) 3.65% due 08/13/1998 ........................... 12,000,000
- ----------------------------------------------------------------------------------------------------------
Missouri -- 1,075,000 Jefferson County, Missouri IDA Revenue (Sinclair & Rush
1.8% Inc. Project) VRDN 4.25% due 11/01/2001 (a) ............... 1,075,000
2,475,000 Missouri State Development Finance Board IDR
(Filtration Group Inc.) VRDN 4.40% due
03/01/2012 (a) ............................................ 2,475,000
18,000,000 Missouri State Health & Educational Facilities Authority
Revenue (Medical Research Facilities) VRDN 4.15%
due 04/01/2038 (a) ........................................ 18,000,000
8,000,000 Missouri State Housing Development Commission
Mortgage Revenue (Series C) FXRDN 3.90% due
04/01/1999 ................................................ 8,000,000
2,100,000 Sikeston, Missouri IDA Revenue (Heritage American
Homes LP/North Ridge Homes Inc. Project) VRDN
4.38% due 07/01/2009 (a) .................................. 2,100,000
- ----------------------------------------------------------------------------------------------------------
New 6,000,000 Littleton, New Hampshire BAN 4.00% due 07/30/1998 .......... 6,004,404
Hampshire -- 9,830,000 New Hampshire Higher Educational & Health Facilities
1.6% Authority Revenue (Dartmouth Educational Loan Corp.)
FXRDN 4.05% due 06/01/1998 ................................ 9,830,000
1,180,000 New Hampshire State Business Finance Authority
Revenue (Freed's Bakery Inc. Project) VRDN 4.38%
due 05/02/2011 (a) ........................................ 1,180,000
2,700,000 New Hampshire State Business Finance Authority
Revenue (Hydra LLC Inc.) VRDN 4.40% due
11/01/2006 (a) ............................................ 2,700,000
6,400,000 New Hampshire State Business Finance Authority
Revenue (Montgomery Wire Corp.) VRDN 4.40% due
02/01/2014 (a) ............................................ 6,400,000
3,000,000 Portsmouth, New Hampshire TAN 4.00% due
06/30/1998 ................................................ 3,002,194
- ----------------------------------------------------------------------------------------------------------
New Jersey -- 18,720,000 Jersey City, New Jersey GO 4.25% due 01/15/1999 ............ 18,761,425
1.0%
- ----------------------------------------------------------------------------------------------------------
New Mexico -- New Mexico Mortgage Finance Authority (Single Family
0.5% Mortgage) FXRDN:
1,625,000 3.85% due 10/15/1998 ...................................... 1,625,000
7,000,000 3.90% due 10/15/1998 ...................................... 7,000,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>

Tax-Exempt Fund

See Notes to Financial Statements.

12
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York -- $15,200,000 New York City, New York (Series D) VRDN 4.00% due
3.0% 02/01/2021 (a) ........................................... $15,200,000
8,705,000 New York, New York (Municipal Securities Trust
Receipts--SGA 63) DDN 4.25% due 02/15/2026 (a) ........... 8,705,000
30,000,000 New York City, New York Municipal Water Finance Authority
& Sewer Systems Revenue (Municipal Securities Trust
Receipts--SGB 26) VRDN 4.25% due 06/15/2029 (a) .......... 30,000,000
- ------------------------------------------------------------------------------------------------------
Ohio -- 5,000,000 Cincinnati, Ohio City School District TAN 4.08% due
8.6% 12/31/1998 ............................................... 5,015,516
14,575,000 Cleveland, Ohio City School District RAN/VRDN 4.25% due
06/01/2004 (a) ........................................... 14,575,000
3,500,000 Eagles Tax-Exempt Trust--Ohio Water Development
Authority (Ohio Edison) VRDN 4.20% due 07/01/2015 (a) 3,500,000
15,000,000 Eagles Tax-Exempt Trust--Cleveland Water FXRDN 3.60%
due 10/01/1998 ........................................... 15,000,000
5,305,000 Franklin County, Ohio M/F Revenue (Community
Housing Network) VRDN 4.20% due 03/01/2027 (a) ........... 5,305,000
8,750,000 Hamilton County, Ohio Hospital Facilities Revenue
(Children's Hospital Medical Center) VRDN 4.20% due
05/15/2017 (a) ........................................... 8,750,000
12,000,000 Lorain County, Ohio Hospital Revenue (Catholic Health
Care) CP 3.65% due 07/28/1998 ............................ 12,000,000
5,000,000 Lorain County, Ohio Independent Living Facilities Revenue
(Elyria United Methodist Project) VRDN 4.20% due
06/01/2022 (a) ........................................... 5,000,000
4,470,000 Lucas-Beacon Place Housing Development Corp. M/F
Revenue (Beacon Place Apartments Project) FXRDN
3.70% due 09/15/1998 ..................................... 4,470,000
Mahoning County, Ohio Health Care Facilities Revenue
(Shepherd of the Valley Lutheran Home & Retirement
Center) VRDN:
7,130,000 4.15% due 09/01/2020 (a) ................................. 7,130,000
3,450,000 4.15% due 09/01/2022 (a) ................................. 3,450,000
5,675,000 Mahoning County, Ohio Health Care Facilities Revenue
(Shepherds Woods Project) VRDN 4.20% due
09/01/2022 (a) ........................................... 5,675,000
3,500,000 Mentor, Ohio IDR (Risch Investments LTP/ Roll-Kraft Inc.
Project) VRDN 4.25% due 08/01/2017 (a) ................... 3,500,000
14,000,000 Middleburg Heights, Ohio Hospital Revenue (Southwest
General Health) VRDN 4.15% due 08/15/2022 (a) ............ 14,000,000
7,500,000 Montgomery County, Ohio M/F Housing Revenue
(Timber Creek Village Apartments) FXRDN 3.80% due
03/01/2028 ............................................... 7,500,000
</TABLE>

Tax-Exempt Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ohio $10,000,000 Montgomery County, Ohio Revenue (Miami Hospital--
(continued) Series B) CP 3.65% due 08/20/1998 ...................... $10,000,000
6,400,000 Ohio State Environmental Improvement Revenue (Mead
Corp. Project) DDN 4.30% due 03/01/2023 (a) ............ 6,400,000
1,205,000 Ohio State Higher Educational Facilities Commission
Revenue (Ashland University Project) VRDN 4.20%
due 09/01/2001 (a) ..................................... 1,205,000
12,000,000 Ohio State Solid Waste Revenue (BP Exploration & Oil
Project) DDN 4.35% due 02/01/2033 (a) .................. 12,000,000
4,585,000 Ottawa County, Ohio IDR (Adrian Sand & Stone Inc.
Project) VRDN 4.35% due 10/01/2008 (a) ................. 4,585,000
6,191,900 Wilmington, Ohio City School District BAN 4.30% due
09/08/1998 ............................................. 6,204,879
- ------------------------------------------------------------------------------------------------------
Oklahoma -- 5,000,000 Muskogee, Oklahoma Industrial PCR (Oklahoma Gas &
0.3% Electric Co.) VRDN 4.45% due 01/01/2025 (a) ............ 5,000,000
- ------------------------------------------------------------------------------------------------------
Pennsylvania -- 1,200,000 Allegheny County, Pennsylvania IDA Revenue (Parkway
7.8% Center Mall Project) VRDN 4.15% due 05/01/2009 (a) ..... 1,200,000
24,660,000 Dauphin County, Pennsylvania General Authority
Revenue (School District Pooled Financing) VRDN 4.25%
due 09/01/2032 (a) ..................................... 24,660,000
15,000,000 Emmaus, Pennsylvania General Authority Local
Government Revenue VRDN 4.10% due 12/01/2028 (a) ....... 15,000,000
17,500,000 Harrisburg, Pennsylvania Authority Revenue (Pooled
Financing Fund) VRDN 4.25% due 07/01/2021 (a) .......... 17,500,000
10,000,000 Lancaster, Pennsylvania Hospital Authority Revenue
(Masonic Homes Project) VRDN 4.20% due
07/01/2027 (a) ......................................... 10,000,000
Montgomery County, Pennsylvania Higher Education &
Health Authority Revenue (Higher Education & Health
Loan) VRDN:
22,960,000 4.20% due 06/01/2021 (a) ............................... 22,960,000
4,800,000 4.20% due 08/01/2021 (a) ............................... 4,800,000
2,800,000 Montgomery County, Pennsylvania Higher Education &
Health Authority Revenue (Philadelphia Presbytery)
VRDN 4.20% due 07/01/2025 (a) .......................... 2,800,000
16,455,000 Pennsylvania State GO (Tender Option) VRDN 4.25%
due 04/15/2002 (a) ..................................... 16,455,000
5,000,000 Philadelphia, Pennsylvania TRAN 4.50% due
06/30/1998 ............................................. 5,003,950
21,000,000 Philadelphia, Pennsylvania School District TRAN 4.50%
due 06/30/1998 ......................................... 21,016,592
- ------------------------------------------------------------------------------------------------------
</TABLE>
Tax-Exempt Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rhode Island -- $ 5,000,000 Bristol-Warren, Rhode Island Regional School District
1.3% BAN 4.25% due 07/16/1998 ................................. $ 5,002,495
3,800,000 Central Falls, Rhode Island BAN 4.25% due 09/24/1998 ...... 3,802,180
6,900,000 Cumberland, Rhode Island (Series 1) BAN 4.25% due
08/06/1998 ............................................... 6,906,243
2,500,000 Rhode Island State Industrial Facilities Corporation IDR
(Capital Development Corp. Project) VRDN 3.80% due
11/01/2005 (a) ........................................... 2,500,000
5,000,000 Rhode Island State Resource Recovery Corp. (Landfill
Lease) GO 4.25% due 07/31/1998 ........................... 5,003,600
- ----------------------------------------------------------------------------------------------------------
South 560,000 South Carolina Economic Development Authority IDR
Carolina -- (Trimite Powders Inc. Project) FXRDN 4.13% due
1.1% 09/01/1998 ............................................... 560,000
18,632,000 South Carolina State Public Service Authority Electrical
Systems Revenue CP 3.65% due 09/10/1998 .................. 18,632,000
- ----------------------------------------------------------------------------------------------------------
Tennessee -- 24,500,000 Clarksville, Tennessee Public Building Authority Revenue
2.9% (Pooled Financing) VRDN 4.10% due 11/01/2027 (a) ......... 24,500,000
4,000,000 Coffee County, Tennessee Industrial Board Inc. IDR
(Hillsdale Tool & Manufacturing Co. Project) VRDN
4.35% due 06/01/2017 (a) ................................. 4,000,000
9,500,000 Memphis & Shelby County, Tennessee Industrial Board
PCR (Birmingham Steel Corp. Project) VRDN 4.35%
due 10/01/2026 (a) ....................................... 9,500,000
7,000,000 Montgomery County, Tennessee Public Building Authority
(Pooled Financing Revenue) VRDN 4.10% due
07/01/2015 (a) ........................................... 7,000,000
4,300,000 Nashville & Davidson County, Tennessee IDB Revenue
(Gibson Guitar Project) VRDN 4.40% due
03/01/2011 (a) ........................................... 4,300,000
2,700,000 Nashville & Davidson County, Tennessee IDB Revenue
(Hickory M/F Housing Revenue) VRDN 4.20% due
06/01/2015 (a) ........................................... 2,700,000
- ----------------------------------------------------------------------------------------------------------
Texas -- Gulf Coast IDA Solid Waste Disposal Revenue (Citgo
6.3% Petroleum Corp. Project) DDN:
11,500,000 4.40% due 05/01/2025 (a) ................................. 11,500,000
21,300,000 4.40% due 04/01/2026 (a) ................................. 21,300,000
6,300,000 Harris County, Texas Health Facilities Development Corp.
Revenue (Buckner Retirement Services Project) VRDN
4.15% due 08/15/2026 (a) ................................. 6,300,000
1,625,000 Montgomery County, Texas IDA Revenue (Sawyer
Research Products Inc.) VRDN 4.38% due
02/04/2015 (a) ........................................... 1,625,000
</TABLE>

Tax-Exempt Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Texas $ 4,800,000 Port Corpus Christi, Texas IDC Sewer & Solid Waste
(continued) Disposal Revenue (Citgo Petroleum Corp. Project) DDN
4.40% due 04/01/2026 (a) ................................. $ 4,800,000
24,300,000 San Antonio, Texas Electric & Gas Revenue CP 3.70%
due 05/01/1998 ........................................... 24,300,000
San Antonio, Texas Water Revenue (Municipal Securities
Trust Receipts) VRDN:
10,430,000 (SGA 41) 4.20% due 05/15/2021 (a) ........................ 10,430,000
9,115,000 (SGA 42) 4.20% due 05/15/2026 (a) ........................ 9,115,000
25,000,000 Texas Municipal Power Agency Revenue CP 3.75% due
07/20/1998 ............................................... 25,000,000
- ----------------------------------------------------------------------------------------------------------
Utah -- 8,400,000 Intermountain Power Agency Power Supply Revenue CP
1.3% 3.65% due 09/11/1998 ..................................... 8,400,000
15,000,000 Intermountain Power Agency Power Supply Revenue
(Series F) FXRDN 3.45% due 09/15/1998 .................... 15,000,000
- ----------------------------------------------------------------------------------------------------------
Vermont -- 2,400,000 Vermont IDA Revenue (Burlington Project) VRDN 4.20%
0.1% due 12/01/2011 (a) ....................................... 2,400,000
- ----------------------------------------------------------------------------------------------------------
Virginia -- 2,100,000 Brunswick County, Virginia IDA Exempt Facilities
0.1% Revenue (Aegis Waste Solutions Inc.) VRDN 4.20%
due 01/01/2017 (a) ....................................... 2,100,000
- ----------------------------------------------------------------------------------------------------------
Washington -- 6,200,000 King County, Washington (Municipal Securities Trust
0.5% Receipts--SGA 19) VRDN 4.20% due 01/01/2027 (a) .......... 6,200,000
3,000,000 Pierce County, Washington Housing Authority Revenue
(Eagles Watch Project) VRDN 4.13%
due 09/01/2020 (a) ....................................... 3,000,000
- ----------------------------------------------------------------------------------------------------------
West Virginia -- 4,700,000 Preston County, West Virginia IDR (Allegheny Wood
0.5% Products Inc. Project) VRDN 4.25% due 12/01/2007 (a) 4,700,000
3,400,000 Randolph County, West Virginia IDR (Allegheny Wood
Products Inc. Project) VRDN 4.25% due 12/01/2007 (a) 3,400,000
- ----------------------------------------------------------------------------------------------------------
Wisconsin -- 1,360,000 Appleton, Wisconsin IDR (Valley Packaging Industries
2.2% Inc. Project) VRDN 4.15% due 02/01/2011 (a) .............. 1,360,000
3,700,000 Ashland, Wisconsin School District TRAN 4.10% due
08/28/1998 ............................................... 3,701,156
4,900,000 D.C. Everest School District TRAN 4.13% due
08/27/1998 ............................................... 4,901,356
Deerfield, Wisconsin IDR (Interpane Coatings Project)
VRDN:
1,300,000 4.20% due 05/01/2003 (a) ................................. 1,300,000
1,945,000 4.35% due 05/01/2003 (a) ................................. 1,945,000
1,800,000 Elkhorn, Wisconsin School District TRAN 4.25% due
08/27/1998 ............................................... 1,801,111
</TABLE>

Tax-Exempt Fund

See Notes to Financial Statements.

16
<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Schedule of Investments -- Continued
April 30, 1998

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Value
Face Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wisconsin $ 6,200,000 Franklin, Wisconsin School District TRAN 4.25% due
(continued) 08/28/1998 ............................................ $ 6,204,851
2,440,000 Milwaukee, Wisconsin Redevelopment Authority
Revenue (Jensar Corp. Project) VRDN 4.40% due
03/01/2007 (a) ........................................ 2,440,000
3,200,000 Neenah, Wisconsin Joint School District TRAN 4.15%
due 08/31/1998 ........................................ 3,202,187
1,125,000 Oshkosh, Wisconsin IDR (Automatic Handling Inc.)
VRDN 4.35% due 06/01/2006 (a) ......................... 1,125,000
500,000 Plymouth, Wisconsin IDR (Great Lakes Cheese Inc.
Project) VRDN 4.25% due 08/01/2024 (a) ................ 500,000
5,000,000 Sturtevant, Wisconsin IDR (Andis Co. Project-Series A)
VRDN 4.25% due 12/01/2016 (a) ......................... 5,000,000
1,500,000 Tomah, Wisconsin School District TRAN 4.15% due
09/23/1998 ............................................ 1,500,854
3,500,000 Two Rivers, Wisconsin Public School District TRAN
4.15% due 09/30/1998 .................................. 3,501,397
2,000,000 Two Rivers, Wisconsin Public School District BAN 4.05%
due 01/11/1999 ........................................ 2,001,382
- ------------------------------------------------------------------------------------------------------
Wyoming -- Laramie County, Wyoming IDR (Cheyenne Light Fuel &
1.8% Power Co.) VRDN:
3,500,000 4.35% due 09/01/2021 (a) .............................. 3,500,000
5,000,000 4.35% due 03/01/2027 (a) .............................. 5,000,000
24,200,000 Sweetwater County, Wyoming PCR (Idaho Power Co.
Project - Series B) DDN 4.30% due 07/15/2026 (a) ...... 24,200,000
- ------------------------------------------------------------------------------------------------------
Total Investments (Cost $1,779,123,910) -- 98.6% ...... 1,779,123,910
- ------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.4% .................. 25,317,699
- ------------------------------------------------------------------------------------------------------
Net Assets -- Equivalent to $1.00 Per Share on
1,804,571,031 Shares of Beneficial Interest
Outstanding -- 100.0% .................................. $1,804,441,609
======================================================================================================
</TABLE>
(a) The interest rate is subject to change periodically based on a certain
index. The rates shown are those in effect at April 30, 1998. For variable rate
demand instruments, the next coupon date on which the interest is to be
adjusted is deemed the maturity date for valuation.

Note--Cost for federal income tax purposes is the same as that shown above.
- --------------------------------------------------------------------------------
Portfolio Abbreviations for Merrill Lynch Institutional Tax-Exempt Fund

<TABLE>
<S> <C>
BAN Bond Anticipation Notes
CP Commercial Paper
DDN Daily Demand Notes
EDR Economic Development Revenue
FXRDN Fixed Rate Demand Notes
GO General Obligation
IDA Industrial Development Authority
IDB Industrial Development Board
IDC Industrial Development Corporation
IDR Industrial Development Revenue
M/F Multi-Family
PCR Pollution Control Revenue
RAN Revenue Anticipation Notes
TAN Tax Anticipation Notes
TRAN Tax Revenue Anticipation Notes
VRDN Variable Rate Demand Notes
</TABLE>

Tax-Exempt Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Statement of Assets and Liabilities
April 30, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Assets:
Investments, at amortized cost and value (Note 1a) ................................ $1,779,123,910
Cash .............................................................................. 1,264,577
Interest receivable ............................................................... 13,013,795
Receivable for investments sold ................................................... 11,480,000
Prepaid expense ................................................................... 2,189
--------------
Total assets ................................................................... 1,804,884,471
--------------
Liabilities:
Advisory fee payable (Note 2) ..................................................... 307,043
Accrued expenses .................................................................. 72,132
Dividends payable ................................................................. 63,687
--------------
Total liabilities .............................................................. 442,862
--------------
Net Assets: (Equivalent to $1.00 per share, offering and redemption price, based on
1,804,571,031 shares of beneficial interest outstanding) ......................... $1,804,441,609
==============
</TABLE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Statement of Operations
April 30, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Investment Income:
Interest and discount earned (Note 1d) .......................... $57,940,736
-----------
Expenses:
Investment advisory fee (Note 2) ................ $ 6,881,461
Registration fees ............................... 295,362
Dividend and transfer agency fees ............... 180,485
Accounting and custodian services ............... 145,562
Legal and audit fees ............................ 29,623
Trustees' fees (Note 5) ......................... 14,418
Printing and shareholder reports ................ 12,272
Insurance ....................................... 4,981
Miscellaneous ................................... 5,369
------------
Total expense .............................. 7,569,533
Waived investment advisory fee (Note 2) ......... (3,810,001) 3,759,532
------------ -----------
Net investment income ...................................... 54,181,204
Net realized loss from investment transactions .................. (15,572)
-----------
Net Increase in Net Assets Resulting From Operations ............ $54,165,632
===========
</TABLE>

Tax-Exempt Fund

See Notes to Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Year Ended April 30,
---------------------------------------
1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income ........................................... $ 54,181,204 $ 27,969,532
Net realized loss from investment transactions .................. (15,572) (2,657)
-------------- --------------
Net increase in net assets resulting from operations ............ 54,165,632 27,966,875
Total declared as dividends to shareholders (Note 4) ............ (54,172,922) (27,969,332)
Capital share transactions (Note 3) ............................. 800,793,413 336,453,248
-------------- --------------
Net increase in net assets ...................................... 800,786,123 336,450,791
Net Assets:
Beginning of period ............................................. 1,003,655,486 667,204,695
-------------- --------------
End of period, including undistributed net investment income of
$134,601 and $134,573 and accumulated capital losses of $264,023
and $256,705 respectively (Note 1g and Note 4)................... $1,804,441,609 $1,003,655,486
============== ==============
</TABLE>

- --------------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund
Financial Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Five Months Year
- -------------------------------------------------------------------------------------------------------- Ended Ended
Year Ended April 30, April 30, November 30,
- -------------------------------------------------------------------------------------------------------- ------------- -------------
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income ............................ .04 .03 .04 .03 .01 .02
Dividends from net investment income ............. (.04) (.03) (.04) (.03) (.01) (.02)
---------- ---------- -------- -------- ---------- --------
Net Asset Value, end of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ======== ======== ========== ========
Total Return ...................................... 3.59% 3.41% 3.68% 3.20% 2.14%(1) 2.14%
Ratios/Supplemental Data:
Net Assets, end of period (000) .................. $1,804,442 $1,003,655 $667,205 $403,903 $390,375 $278,697
Ratio of expenses to average net assets
(before waiver) ................................. .49% .52% .54% .56% .59%(1) .62%
Ratio of expenses to average net assets
(after waiver) .................................. .24% .27% .29% .31% .34%(1) .45%
Ratio of net investment income, to average net
assets (before waiver) .......................... 3.28% 3.12% 3.35% 2.90% 1.92%(1) 1.96%
Ratio of net investment income, to average net
assets (after waiver) ........................... 3.53% 3.37% 3.60% 3.15% 2.17%(1) 2.13%
</TABLE>

(1) On an annualized basis

Tax-Exempt Fund

See Notes to Financial Statements.

19
<PAGE>

1. Significant Accounting Policies

(e) Deferred organization expenses are amortized over a period not exceeding
five years. Prepaid registration fees are charged to income as the related
shares are sold.

2. Investment Advisory Fees and Other
Transactions with Affiliates

20
<PAGE>

All officers and certain trustees of the Trust are affiliated with Merrill
Lynch & Co., Inc.

3. Shares of Beneficial Interest

Prior to January 27, 1997 (commencement of operations) there were 100,000
shares of beneficial interest outstanding which were owned by FAM.

21
<PAGE>

4. Distributions

At April 30, 1998, the Institutional Tax-Exempt Fund had net capital loss
carryovers of $248,451 of which $90,891 expire in the year 2001, $17,520 expire
in 2002 and $140,040 expire in 2003.

5. Trustees' Fees

22
<PAGE>

APPENDIX A

This Appendix constitutes part of the Statements of Additional Information
of Merrill Lynch Premier Institutional Fund (the "Premier Institutional Fund"),
Merrill Lynch Institutional Fund (the "Institutional Fund"), Merrill Lynch
Rated Institutional Fund (the "Rated Institutional Fund"), Merrill Lynch
Government Fund (the "Government Fund"), Merrill Lynch Treasury Fund (the
"Treasury Fund") and Merrill Lynch Institutional Tax-Exempt Fund (the
"Tax-Exempt Fund") (collectively, the "Funds"). Each of the Funds is a separate
series of Merrill Lynch Funds For Institutions Series (the "Trust"). Unless
otherwise indicated, the information set forth herein is applicable to each of
the Funds.

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

MANAGEMENT OF THE TRUST

The Trustees and executive officers of the Trust and their ages and
principal occupations for at least the last five years are set forth below.

ROBERT W. CROOK (62)--President and Trustee(1)(2)(3)--Senior Vice
President of Merrill Lynch Asset Management, L.P. ("MLAM") and of Merrill Lynch
Funds Distributor, Inc. ("MLFD") since 1990 and Vice President of MLAM and MLFD
prior thereto.

A. BRUCE BRACKENRIDGE (67)--Trustee(2)--9 Elm Lane, Bronxville, New York
10708. Group Executive of J.P. Morgan & Co., Inc. (banking) and Morgan Guaranty
Trust Company from 1979 to 1991 and an employee of J.P. Morgan in various
capacities from 1952 to 1991.

CHARLES C. CABOT, JR. (67)--Trustee(2)--One Post Office Square, Boston,
Massachusetts 02109. Partner of the law firm Sullivan & Worcester and
associated with that firm since 1966.

JAMES T. FLYNN (58)--Trustee(2)--340 East 72nd Street, New York, New York
10021. Chief Financial Officer of J.P. Morgan & Co., Inc. from 1990 to 1995 and
an employee of J.P. Morgan in various capacities from 1967 to 1995.

TERRY K. GLENN (57)--Trustee(1)(2)(4)--Executive Vice President of Fund
Asset Management, L.P. ("FAM") and MLAM since 1983; Executive Vice President
and Director of Princeton Services, Inc. since 1993; President of MLFD since
1986 and Director thereof since 1991; President of Princeton Administrators,
L.P. since 1988.

TODD GOODWIN (66)--Trustee--General Partner of Gibbons, Goodwin, van
Amerongen (investment banking firm) since 1984; Director of Wells Aluminum Co.
(aluminum extrusions), The Rival Company (electrical appliance manufacturer),
U.S. Energy Systems (independent power producer) and Johns Manville Corporation
(building materials).

GEORGE W. HOLBROOK, JR. (66)--Trustee(2)--107 John Street, Southport,
Connecticut 06490. Managing Partner of Bradley Resources Company (private
investment company) and associated with that firm and its predecessors since
1953; Director of Canyon Resources Corporation (mineral exploration company);
and Thoratec Laboratories Corporation (medical device manufacturer).

W. CARL KESTER (46)--Trustee(2)--Harvard Business School, Morgan Hall 393,
Soldiers Field, Boston, Massachusetts 02163. James R. Williston Professor of
Business Administration of Harvard University Graduate School of Business since
1997, having been MBA Class of 1958 Professor of Business Administration of
Harvard University Graduate School of Business Administration since 1981;
Independent Consultant since 1978.

A-1
<PAGE>

WILLIAM M. BREEN (43)--Senior Vice President, Chief Financial Officer and
Treasurer(2)(3)--Vice President of MLAM since 1993 and Vice President of MLFD
since 1990 and Assistant Vice President of MLFD prior thereto.

MICHAEL J. BRADY (39)--Senior Vice President(2)(3)--Vice President of MLAM
since 1993 and Vice President of MLFD since 1990 and an employee of MLFD prior
thereto.

JAMES J. FATSEAS (42)--Senior Vice President(2)(3)--Vice President of MLAM
since 1993 and Vice President of MLFD since 1990 and Assistant Vice President
of MLFD prior thereto.

KEVIN MCKENNA (41)--Senior Vice President(2)(4)--Vice President of MLAM
since 1997 and associated therewith since 1981.

JOSEPH T. MONAGLE, JR. (49)--Senior Vice President(2)(4)--Senior Vice
President of the Investment Adviser and MLAM since 1990; Department Head of the
Global Fixed Income Division of the Investment Adviser and MLAM since 1997;
Senior Vice President of Princeton Services since 1993.

WILLIAM WASEL (39)--Senior Vice President(2)(3)--Vice President of MLAM
since 1993 and Vice President of MLFD since 1990 and Assistant Vice President
of MLFD prior thereto.

P. MICHAEL WALSH (30)--Vice President--Vice President of MLAM since 1993
and associated therewith since 1991.

KAREN D. YOUNG (33)--Vice President(2)(3)--Employee of MLFD since 1982.

DONALD C. BURKE (37)--Vice President(2)(4)--Vice President and Director of
Taxation of MLAM since 1990.

ANN CATLIN (37)--Senior Vice President(2)(3)--Employee of MLFD since 1986.

DIANA FRANKLAND (62)--Vice President(2)(3)--Employee of MLFD since 1979.

VINCENT R. GIORDANO (53)--Senior Vice President(2)(4)--Senior Vice
President of FAM and MLAM since 1984 and Vice President since 1980; Portfolio
Manager of FAM since 1977.

PETER HAYES (38)--Vice President(2)(4)--Vice President of MLAM since 1988;
Portfolio Manager of FAM since 1987; Vice President of Shawmut Bank, N.A. from
1984 to 1987.

KEVIN SCHIATTA (43)--Vice President(2)(4)--Vice President of MLAM since
1985.

GERALD M. RICHARD (48)--Vice President(2)(4)--Senior Vice President and
Treasurer of MLAM and FAM since 1984; Vice President of MLFD since 1981;
Treasurer of MLFD since 1989 and Senior Vice President and Treasurer of
Princeton Administrators, Inc. since 1988.

MARK E. MAGUIRE (38)--Senior Vice President(2)(3)--Assistant Vice
President of MLFD since 1990.

JOHN NG (43)--Vice President(2)(4)--Vice President of MLAM since 1984;
Assistant Vice President of MLAM from 1981 to 1984.

BARRY F.X. SMITH (32)--Senior Vice President(2)(3)--Employee of MLFD since
1987.

DIANNE MCDONOUGH (36)--Vice President(2)(3)--Employee of MLFD since 1983.

ERIC P. LAREAU (28)--Vice President(2)(3)--Employee of MLFD since 1992.

A-2
<PAGE>

PHILLIP S. GILLESPIE (34)--Secretary(1)(4)--Attorney associated with the
Investment Adviser and MLAM since 1998. Prior to 1998, Mr. Gillespie was
Assistant General Counsel of Chancellor LGT Asset Management, Inc. and from
1993 to 1997 was a Senior Counsel and Attorney in the Division of Investment
Management and the Office of General Counsel at the U.S. Securities and
Exchange Commission.

PETER THOMPSON (31)--Vice President--Employee of MLFD since 1996; Prior
employee of Colonial Investment Services since 1993.

PATRICIA A. SCHENA (40)--Vice President and Assistant
Secretary(2)(3)--Assistant Vice President of MLFD since 1990, and an employee
of MLFD since 1980.

- --------
(1) Interested person, as defined in the Investment Company Act of 1940.

(2) The officers of the Funds are officers of certain other investment
companies for which the Investment Adviser or MLAM acts as investment
adviser.

(3) One Financial Center, Boston, MA 02111

(4) P.O. Box 9011, Princeton, NJ 08543-9011

The following table sets forth for the fiscal year ended April 30, 1998,
compensation paid by the Trust to the disinterested Trustees and for the
calendar year ended December 31, 1997, the aggregate compensation paid by all
investment companies advised by the Investment Adviser and its affiliate, MLAM
("MLAM/FAM Advised Funds"), to the disinterested Trustees.

<TABLE>
<CAPTION>
Aggregate Compensation from
Trust and
Pension or Retirement FAM/MLAM Advised
Compensation Benefits Accrued as Part Funds Paid to
Name of Trustee From the Trust of Trust Expense Trustees(1)
- ---------------------------- ---------------- -------------------------- ----------------------------
<S> <C> <C> <C>
A. Bruce Brackenridge(1) $25,500 None $36,000
Charles C. Cabot, Jr.(1) $25,500 None $36,000
James T. Flynn(1) $19,500 None $36,000
George W. Holbrook, Jr.(1) $25,500 None $36,000
W. Carl Kester(1) $25,500 None $36,000
</TABLE>

- --------

(1) In addition to the Fund, the Trustees serve on other FAM/MLAM Advised Funds
as follows: Mr. Breckenridge (2) registered investment companies
consisting of (6) portfolios; Mr. Cabot (2) registered investment
companies consisting of (6) portfolios; Mr. Flynn (2) registered
investment companies consisting of (6) portfolios; Mr. Holbrook (2)
registered investing companies consisting of (6) portfolios; and Mr.
Kester (2) registered investment companies consisting of (6) portfolios.

The Trustees have an Audit and Nominating Committee, the members of which
are Messrs. Brackenridge, Cabot, Flynn, Goodwin, Kester and Holbrook.

Each Trustee who is not an officer or employee of Merrill Lynch & Co.,
Inc. or its subsidiaries will be paid $36,000 annually in his capacity as a
trustee of the Trust, and all Trustees will be reimbursed for any expenses
incurred in attending meetings of the Board of Trustees of the Trust or of any
committee thereof. No officer or employee of Merrill Lynch & Co., Inc. or its
subsidiaries will receive any compensation from any Fund for acting as a
trustee or officer of the Trust.

A-3
<PAGE>

As a result of the responsibilities assumed by MLFD and FAM under the
Distribution Agreement and the Advisory Agreement, respectively (described
below and under "Distributor" and "Investment Advisory and Other Services"),
the Funds themselves have no employees other than their officers, all of whom
will be compensated by FAM or MLFD.

The officers and interested Trustees of the Trust owned on June 8, 1998
an aggregate of less than 1% of the outstanding shares of any Fund. On that
date the officers and interested Trustees of the Trust owned an aggregate of
less than 1/4 of 1% of the outstanding Common Stock of Merrill Lynch & Co.,
Inc.

As of June 8, 1998, the following were the only shareholders of record of
5% or more of the outstanding shares of any Fund: Schwan's Financial Service
LLC, 115 W. College Dr., Marshall, MN 56258-1747, owning 33,863,037.0800 shares
of beneficial interest of Merrill Lynch Treasury Fund representing 5.16% of the
Fund, MCI Communications, 1801 Pennsylvania Ave., N.W., Washington, D.C.
20006-3606, owning 689,208,198.0000 shares of beneficial interest of Merrill
Lynch Premier Institutional Fund representing 9.67% of the Fund and Fund Asset
Management LP, P.O. Box 9011, Princeton, NJ 08543-9011, owning 100,000.0000
shares of beneficial interest of Merrill Lynch Rated Institutional Fund
representing 100% of the Fund.

INVESTMENT ADVISORY AND OTHER SERVICES

The investment adviser to each of the Funds is Fund Asset Management, L.P.
("FAM" or the "Investment Adviser"), a subsidiary of Merrill Lynch & Co., Inc.,
a publicly held corporation. The principal business address of FAM is 800
Scudders Mill Road, Plainsboro, New Jersey (mailing address: P.O. Box 9011,
Princeton, New Jersey 08543-9011), and the principal business address of
Merrill Lynch & Co., Inc. is World Financial Center, North Tower, 250 Vesey
Street, New York, New York 10281.

Pursuant to the terms of a separate Investment Advisory Agreement for each
Fund, FAM, subject to the general supervision of the Board of Trustees of the
Trust and in conformance with the stated policies of the applicable Fund,
renders investment supervisory and corporate administrative services to the
Fund. In this regard, it is the responsibility of FAM to make investment
decisions for each Fund and to place the purchase and sale orders for the
Funds' portfolio transactions. In addition, FAM performs, or supervises the
performance of, administrative services in connection with each Fund, including
(i) supervising all aspects of the Fund's administration and operations,
including processing services related to the purchase and redemption of Fund
shares, the general handling of shareholder relations, and portfolio
management; (ii) providing the Fund, at FAM's expense, with the services of
persons competent to perform such administrative and clerical functions as are
necessary in order to provide effective administration of the Fund; and (iii)
providing the Fund, at FAM's expense, with adequate office space and related
services. FAM may arrange for the provision of these administrative services
and functions by Merrill Lynch Funds Distributor, Inc. ("MLFD") or another
affiliate of Merrill Lynch & Co., Inc. Each Fund's accounting records are
maintained, at the Fund's expense, by its Custodian, State Street Bank and
Trust Company.

As compensation for the services rendered by FAM under the Investment
Advisory Agreements, each Fund pays FAM a fee, computed daily and payable
monthly, at the following annual rates:

<TABLE>
<CAPTION>
Percentage of Average Daily Net Assets
---------------------------------------------------------
<S> <C>
Premier Institutional Fund .......... 15%
Institutional Fund .................. .40% up to and including $250,000,000 plus .375% over
$250,000,000 up to and including $500,000,000 plus
.35% over $500,000,000 up to and including
$750,000,000 plus .325% over $750,000,000
Rated Institutional Fund ............ .20%
</TABLE>

A-4
<PAGE>

<TABLE>
<CAPTION>
Percentage of Average Daily Net Assets
------------------------------------------------------
<S> <C>
Government Fund and Treasury Fund ......... .35% up to and including $500,000,000 plus .335% over
$500,000,000 up to and including $750,000,000 plus
.32% over $750,000,000 up to and including
$1,000,000,000 plus .30% over $1,000,000,000
Tax-Exempt Fund ........................... .45% up to and including $1,500,000,000 plus .425%
over $1,500,000,000 up to and including
$2,000,000,000 plus .40% over $2,000,000,000
</TABLE>

Premier Institutional Fund. During its initial offering period, FAM agreed
to waive a portion of its advisory fee for the Premier Institutional Fund. For
the period beginning January 27, 1997 (commencement of operations) to April 30,
1997, the effective fee payable to FAM was .14% of the Fund's average daily net
assets. FAM may discontinue waiver of the fee in whole or in part at any time
without notice. For the period beginning January 27, 1997 (commencement of
operations) to April 30, 1997, the total advisory fees payable by the Premier
Institutional Fund to the Investment Adviser aggregated $1,053,985. The
Investment Adviser voluntarily waived $45,574 of the advisory fees payable for
the period beginning January 27, 1997 (commencement of operations) to April 30,
1997. For the fiscal year ended April 30, 1998, the total advisory fees payable
by the Premier Institutional Fund to the Investment Adviser aggregated
$8,073,755.

Institutional Fund. Effective July 6, 1992, FAM has agreed to waive a
portion of its advisory fee so that the effective fee payable to FAM will be at
the annual rate of .20% of the Fund's average daily net assets. FAM may
discontinue waiver of the fee in whole or in part at any time without notice.
For the fiscal years ended April 30, 1998, April 30, 1997 and April 30, 1996,
the total advisory fees payable by the Institutional Fund to the Investment
Adviser aggregated $21,807,793, $24,155,920 and $26,191,407, respectively. The
Investment Adviser voluntarily waived $8,619,014, $9,522,140 and $10,263,924 of
the advisory fees payable for the fiscal years ended April 30, 1998, April 30,
1997 and April 30, 1996, respectively.

Government Fund. Effective December 1, 1993, FAM has agreed to waive a
portion of its advisory fee so that the effective fee payable to FAM will be at
an annual rate of .20% of the Fund's average daily net assets. FAM may
discontinue waiver of the fee in whole or in part at any time without notice.
For the fiscal years ended April 30, 1998, April 30, 1997 and April 30, 1996,
the total advisory fees payable by the Government Fund to the Investment
Adviser aggregated $6,330,489, $6,007,440 and $5,423,149, respectively. The
Investment Adviser voluntarily waived $2,369,204, $2,261,521 and $2,066,757 of
the advisory fees payable for the fiscal years ended April 30, 1998, April 30,
1997 and April 30, 1996, respectively.

Treasury Fund. Effective December 1, 1993, FAM has agreed to waive a
portion of its advisory fee so that the effective fee payable to FAM will be at
an annual rate of .20% of the Fund's average daily net assets. FAM may
discontinue waiver of the fee in whole or in part at any time without notice.
For the fiscal years ended April 30, 1998, April 30, 1997 and April 30, 1996,
the total advisory fees payable by the Treasury Fund to the Investment Adviser
aggregated $2,294,733, $1,991,236 and $1,792,930, respectively. The Investment
Adviser voluntarily waived $974,269, $846,551 and $765,429 of the advisory fees
payable for the fiscal years ended April 30, 1998, April 30, 1997 and April 30,
1996, respectively.

Tax-Exempt Fund. Effective December 1, 1993, FAM agreed to waive a portion
of its advisory fee so that the effective fee payable to FAM will be at an
annual rate of .20% of the Fund's average daily net assets. FAM may discontinue
waiver of the fee in whole or in part at any time without notice. Previously
effective February

A-5
<PAGE>

8, 1993, FAM had voluntarily agreed to waive a portion of its advisory fee so
that the effective fee payable to FAM would be at an annual rate of .26% of the
Fund's average daily net assets. For the fiscal years ended April 30, 1998,
April 30, 1997 and April 30, 1996, the total advisory fees payable by the
Tax-Exempt Fund to the Investment Adviser aggregated $6,881,461, $3,731,200 and
$2,109,495, respectively. The Investment Adviser voluntarily waived $3,810,001,
$2,072,889 and $1,171,941 of the advisory fees payable for the fiscal years
ended April 30, 1998, April 30, 1997 and April 30, 1996, respectively.

Each Investment Advisory Agreement obligates the Investment Adviser to
provide advisory, administrative and management services, to furnish office
space and facilities for management of the affairs of the applicable Fund, to
pay all compensation of, and furnish office space for, officers and employees
of the Fund, as well as the fees of all Trustees of the Fund who are affiliated
persons of Merrill Lynch & Co., Inc. or any of its subsidiaries. Each Fund pays
all other expenses incurred in its operation and a portion of the Trust's
general administrative expenses allocated on the basis of the asset size of the
respective Funds. Expenses that will be borne directly by each Fund include
trustees' fees, redemption expenses, expenses of portfolio transactions,
shareholder servicing costs, expenses of registering its shares under federal
and state securities laws, pricing costs (including the daily calculation of
net asset value), interest, certain taxes, charges of the custodian and
transfer agent and other expenses attributable to a particular Fund. Expenses
which will be allocated on the basis of size of the respective Funds include
trustees' fees, legal expenses, auditing services, costs of printing proxies,
stock certificates, shareholder reports and prospectuses and statements of
additional information (except to the extent paid by MLFD), Securities and
Exchange Commission fees, accounting costs and other expenses properly payable
by the Trust and allocable on the basis of size of the respective Funds.
Depending upon the nature of the lawsuit, litigation costs may be directly
applicable to a Fund or allocated on the basis of the size of the respective
Funds. The Board of Trustees of the Trust has determined that this is an
appropriate method of allocation of expenses.

As required by each Distribution Agreement, the Distributor will pay
certain of the expenses incurred in connection with the offering of shares of
the respective Fund. After the prospectuses and periodic reports have been
prepared and set in type, the Distributor will pay for the printing and
distribution of copies thereof used in connection with a Fund offering to
investors. The Distributor will also pay for other supplementary sales
literature.

Each Investment Advisory Agreement will terminate automatically upon its
assignment and is terminable at any time without penalty by the Board of
Trustees of the Trust or by a vote of a majority of the applicable Fund's
outstanding voting shares on 60 days' written notice to FAM, or by FAM on 90
days' written notice to the applicable Fund.

The investment advisory services of FAM to the Funds are not exclusive
under the terms of the Investment Advisory Agreements and FAM is also free to,
and does, render such services to others. FAM and MLAM together act as the
manager or adviser for over 90 investment companies.

State Street Bank and Trust Company, P.O. Box 8500, Boston, Massachusetts
02266-8500, is each Fund's Custodian, Transfer Agent and Dividend Disbursing
Agent. It also maintains each Fund's accounting records.

Rogers & Wells LLP, counsel to the Trust, passes upon legal matters for
the Funds in connection with the shares offered by the Prospectuses.

Deloitte & Touche LLP are the independent auditors of the Trust.

PORTFOLIO TRANSACTIONS

The securities in which the Funds invest are traded primarily in the
over-the-counter market. Where possible, the Funds will deal directly with the
dealers who make a market in the securities involved except in those

A-6
<PAGE>

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. The securities in which
the Funds invest are generally traded on a net basis and do not normally
involve either brokerage commissions or transfer taxes. The cost of executing
the Funds' portfolio transactions will consist primarily of dealer spreads and
underwriting commissions. Under the Investment Company Act of 1940, persons
affiliated with the Funds are prohibited from dealing with the Funds as a
principal in the purchase and sale of securities unless an exemptive order
allowing such transactions is obtained from the Securities and Exchange
Commission. Since over-the-counter transactions are usually principal
transactions, affiliated persons of the Funds, including Merrill Lynch
Government Securities, Inc. ("GSI"), Merrill Lynch Money Markets, Inc. ("MLMM")
and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), may
not serve as the Funds' dealer in connection with such transactions except
pursuant to an exemptive order such as that described below. However,
affiliated persons of the Funds may serve as their broker in over-the-counter
transactions conducted on an agency basis. The Funds may purchase securities
from an underwriting syndicate of which Merrill Lynch is a member under certain
conditions in accordance with the provisions of a rule adopted under the
Investment Company Act of 1940.

The Securities and Exchange Commission has issued an exemptive order which
permits the Premier Institutional Fund, Institutional Fund, Rated Institutional
Fund, Government Fund and Treasury Fund to conduct principal transactions with
GSI, MLMM and Merrill Lynch in U.S. Government and Government agency
securities, and certain other money market securities, subject to a number of
conditions, including conditions designed to insure that the prices to these
Funds available from GSI, MLMM and Merrill Lynch are at least as favorable as
those available from other sources. GSI and MLMM have informed the Premier
Institutional Fund, Institutional Fund, Rated Institutional Fund, Government
Fund and Treasury Fund that they will in no way, at any time, attempt to
influence or control the activities of these Funds or the Investment Adviser in
placing such principal transactions. The exemptive order allows GSI, MLMM and
Merrill Lynch to receive a dealer spread on any transaction with the Premier
Institutional Fund, Institutional Fund, Rated Institutional Fund, Government
Fund and Treasury Fund no greater than their customary dealer spread for
transactions of the type involved.

The Securities and Exchange Commission has issued an exemptive order
permitting the Tax-Exempt Fund to conduct principal transactions with Merrill
Lynch in municipal securities with remaining maturities of one year or less
which have received one of the two highest ratings from at least one of the
nationally recognized rating agencies, subject to a number of conditions,
including conditions designed to insure that the prices to the Tax-Exempt Fund
available from Merrill Lynch are equal to or better than that available from
other sources. Merrill Lynch has informed the Tax-Exempt Fund that it will in
no way at any time attempt to influence or control the activities of the
Tax-Exempt Fund or the Investment Adviser in placing such principal
transactions. The exemptive order allows Merrill Lynch to receive a dealer
spread on any transaction with the Tax-Exempt Fund no greater than their
customary dealer spreads for transactions of the type involved.

Premier Institutional Fund. For the period beginning January 27, 1997
(commencement of operations) to April 30, 1997, the Premier Institutional Fund
engaged in no such transactions. During the fiscal year ended April 30, 1998,
the Premier Institutional Fund engaged in 62 transactions involving
approximately $2.45 billion.

Institutional Fund. During the fiscal year ended April 30, 1997, the
Institutional Fund engaged in 94 such transactions involving approximately $4.5
billion. During the fiscal year ended April 30, 1998, the Institutional Fund
engaged in 35 such transactions involving approximately $1.33 billion.

Government Fund. During the fiscal year ended April 30, 1997, the
Government Fund engaged in 24 such transactions involving approximately $720.2
million. During the fiscal year ended April 30, 1998, the Government Fund
engaged in 8 such transactions involving approximately $235.0 million.

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Treasury Fund. During the fiscal year ended April 30, 1997, the Treasury
Fund engaged in no such transactions. During the fiscal year ended April 30,
1998, the Treasury Fund engaged in 5 such transactions involving approximately
$56.0 million.

Tax-Exempt Fund. During the fiscal year ended April 30, 1997, the
Tax-Exempt Fund engaged in one principal transactions with Merrill Lynch
involving approximately $10.6 million. During the fiscal year ended April 30,
1998, the Tax-Exempt Fund engaged in no such transactions.

The Funds have no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policy
established by the Trustees and officers of the Trust, the Investment Adviser
is primarily responsible for each Fund's portfolio decisions and for placing
each Fund's portfolio transactions. In placing orders, it is the policy of the
Funds 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,
the firm's risk in positioning the securities involved and the firm's provision
of supplemental investment research (such as economic data and market
forecasts). Information so received will be in addition to and not in lieu of
the services required to be performed by the Investment Adviser under its
Investment Advisory Agreements with the Funds, and the expenses of the
Investment Adviser will not necessarily be reduced as a result of the receipt
of such supplemental information. In some cases, the Investment Adviser may use
such supplemental research in providing investment advice to its other
investment advisory accounts. While the Investment Adviser generally seeks
reasonable competitive spreads or commissions, the Funds will not necessarily
be paying the lowest spread or commission available. The Funds' policy of
investing in securities with short maturities will result in high portfolio
turnover.

NET ASSET VALUE

The net asset value of the Premier Institutional Fund, Institutional Fund,
Rated Institutional Fund, Government Fund and Treasury Fund is determined
pursuant to the "penny rounding" method by adding the fair value of all
securities and other assets in the portfolio, deducting the portfolio's
liabilities, dividing by the number of shares outstanding and rounding the
result to the nearest whole cent. Securities held by the Premier Institutional
Fund, Institutional Fund, Rated Institutional Fund, Government Fund and
Treasury Fund with a remaining maturity of 60 days or less will be valued on an
amortized cost basis, and securities with a remaining maturity of greater than
60 days for which market quotations are readily available are valued on a
current market basis. Other securities held by the Premier Institutional Fund,
Institutional Fund, Rated Institutional Fund, Government Fund and Treasury Fund
are valued at their fair value as determined in good faith by or under the
direction of the Trust's Board of Trustees. The Tax-Exempt Fund relies on a
rule of the Securities and Exchange Commission pursuant to which the valuation
of its portfolio securities is based upon their amortized cost. This method
involves valuing a security 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 security.

In accordance with the Securities and Exchange Commission rule applicable
to the valuation of its portfolio securities and consistent with certain of the
Funds' operating policies, each Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase instruments having remaining
maturities of up to 762 days (25 months) in the case of U.S. Government
securities and 397 days (13 months) in the case of all other securities
(including Tax-Exempt Securities invested in by the Tax-Exempt Fund) and invest
only in securities determined by the Trustees to be of high quality with
minimal credit risks. For purposes of calculating the Tax-Exempt Fund's

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dollar-weighted average portfolio maturity, the remaining maturity of a VRDN
(including a Participating VRDN, is deemed to be the longer of (i) the notice
period required before the Tax-Exempt Fund is entitled to receive payment of
the principal amount of the VRDN upon demand, or (ii) the period required until
the VRDN's next interest rate adjustment. In addition, the Trustees have
established procedures designed to stabilize, to the extent reasonably
possible, each 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
pursuant to the penny rounding method, in the case of the Premier Institutional
Fund, Institutional Fund, Rated Institutional Fund, Government Fund and
Treasury Fund, or pursuant to the amortized cost method, in the case of the
Tax-Exempt Fund, will be reported to the Trustees by FAM. 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
affected Fund will take such corrective action as it regards as necessary and
appropriate, including 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 by using
available market quotations. In addition, each of the Treasury Fund and the
Tax-Exempt Fund may reduce the number of its outstanding shares by having each
shareholder proportionately contribute shares to the Fund's capital. If the
number of outstanding shares of the Treasury Fund or the Tax-Exempt Fund is
reduced in order to maintain a constant net asset value of $1.00 per share, the
shareholders will contribute proportionately to the Fund's capital the number
of shares which represent the difference between valuation pursuant to the
penny rounding method, in the case of the Treasury Fund, or the amortized cost
method, in the case of the Tax-Exempt Fund, and the market valuation of the
portfolio. Each shareholder will be deemed to have agreed to such contribution
by his investment in the Treasury Fund or the Tax-Exempt Fund.

Since the net income of each Fund is determined and declared as a dividend
immediately prior to each time the net asset value of the Fund is determined,
the net asset value per share of each Fund normally remains at $1.00 per share
immediately after each such dividend declaration. Any increase in the value of
a shareholder's investment in any Fund, representing the reinvestment of
dividend income, is reflected by an increase in the number of shares in his
account and any decrease in the value of a shareholder's investment is
reflected by a decrease in the number of shares in his account.

DIVIDENDS

All, or substantially all, of each Fund's net income is declared as
dividends daily. Dividends are paid monthly and automatically reinvested in
additional Fund shares at net asset value and credited to the shareholder's
account or, at the shareholder's option, paid in cash.

Each Fund's net income for dividend purposes is determined daily. On days
on which the New York Stock Exchange and the Federal Reserve Bank of Boston are
open for business, such determination will be made immediately prior to the
determination of net asset value as of the close of business on the New York
Stock Exchange (4:00 p.m. Boston time) for the Tax-Exempt and Treasury Funds,
and as of 5:00 p.m. (Boston time) for the Premier Institutional Fund,
Institutional Fund, the Rated Institutional Fund and the Government Fund.
Immediately after such determination, each Fund will declare a dividend payable
to shareholders of record either: (a) at 12:00 Noon (Boston time) for the
Tax-Exempt Fund, 2:00 p.m. (Boston time) for the Treasury Fund, or 5:00 p.m.
(Boston time) for the Premier Institutional Fund, Institutional Fund, the Rated
Institutional Fund and the Government Fund on days on which the New York Stock
Exchange and the Federal Reserve Bank of Boston are open for business and do not
close early, or if the Exchange closes early or the PSA recommends that the
securities markets close early, at such closing time or (b) at the previous
close of business on the New York Stock Exchange

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on days on which the New York Stock Exchange or the Federal Reserve Bank of
Boston is not open for business. Net income of the Premier Institutional Fund,
Institutional Fund, Rated Institutional Fund, Government Fund and Treasury Fund
(from the time of the immediately preceding determination thereof) will consist
of (i) interest accrued or discount earned (including both original issue and
market discount), (ii) plus or minus all realized gains and losses, if any, on
the portfolio securities of the Fund, (iii) less the estimated expenses of the
Fund (including the fee payable to FAM applicable to that dividend period). If
an order to purchase shares of the Tax-Exempt Fund is received after 12:00 Noon
(Boston Time), or after 2:00 p.m. (Boston Time) for the Treasury Fund, and prior
to the close of the Exchange (including early closings), the order will become
effective on that day, but dividends will not be earned until the next Business
Day. For the Premier Institutional, the Institutional, the Rated Institutional
or the Government Funds, if an order is received after 5:00 p.m. (Boston Time)
it will not become effective, and dividends will not be earned, until the next
Business Day.

Net income of the Tax-Exempt Fund (from the time of the immediately
preceding determination thereof) consists of interest accrued and/or original
issue discount earned, less amortization of premiums and the estimated expenses
of the Tax-Exempt Fund (including the fees payable to FAM applicable to that
dividend period). The amount of discount or premium on portfolio securities is
fixed at the time of their purchase and consists of the difference between the
purchase price for such securities and the principal amount of such securities.
Realized gains and losses are reflected in the Tax-Exempt Fund's net asset
value and are not included in income.

Each Fund intends to use its best efforts to maintain its net asset value
at $1.00 per share. As a result of a significant expense or realized or
unrealized loss, it is possible that a Fund's net asset value may fall below
$1.00 per share.

Should any Fund incur or anticipate any unusual or unexpected significant
expense or loss which would affect disproportionately that Fund's income for a
particular period, the Trustees would at that time consider whether to adhere
to the present dividend policy described or to revise it in the light of the
then prevailing circumstances in order to ameliorate to the extent possible the
disproportionate effect of such expense or loss on then existing shareholders.
Such expenses or losses may nevertheless result in a shareholder's receiving no
dividends for the period during which he held his shares and in his receiving
upon redemption a price per share lower than that which he paid.

Shareholders may receive their dividends in cash monthly by completing the
appropriate section of the Account Application contained in the Prospectus for
the applicable Fund. Such distributions will be paid by check within seven days
after the end of each month. The election to receive cash distributions may be
made at the time of purchase of Fund shares or at any time subsequent thereto
by giving written notice to State Street Bank. To be effective with respect to
a particular monthly dividend, such written notice must be received by State
Street Bank at least seven days prior to the end of the month. Dividends and
distributions are taxable to shareholders whether distributed in cash or
reinvested in additional shares. See "Taxes."

State Street Bank, the Transfer Agent, will send each shareholder a
monthly statement showing the total number of shares owned as of the last
business day of the month, as well as the current month's and year to date
dividends paid in terms of total cash distributed and, for those shareholders
who have dividends reinvested, the number of shares acquired through the
reinvestment dividends.

TAXES

Federal
General. Each Fund intends to qualify for tax treatment as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). If in any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income will be taxed to that Fund at
corporate rates.

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Some shareholders may be subject to a 31% withholding on reportable
dividends, capital gains distributions and redemption payments ("backup
withholding"). Generally, non-corporate shareholders for whom a taxpayer
identification number is not on file with the applicable Fund or who, to the
Fund's knowledge, have furnished an incorrect number will be subject to backup
withholding. When establishing an account, an investor must certify under
penalties of perjury that such number is correct and that he is not subject to
backup withholding.

The Code imposes a 4% nondeductible excise tax on a regulated investment
company, such as a Fund, if it does not distribute to its shareholders during
the calendar year an amount equal to at least 98% of the Fund's net investment
income, with certain adjustments, for such calendar year, plus at least 98% of
the Fund's capital gain net income for the one-year period ending, as a general
rule, by October 31 of such calendar year.

For this purpose, any income or gain retained by a Fund that is subject to
corporate income tax will be treated as having been distributed at year-end. In
addition, an amount equal to any undistributed net investment income or capital
gain net income from the previous calendar year must also be distributed to
avoid the excise tax. The excise tax is imposed on the amount by which a Fund
does not meet the foregoing distribution requirements. While each Fund intends
to make distributions in the manner necessary to avoid imposition of the 4%
excise tax, there can be no assurance that sufficient amounts of taxable income
and gain will be distributed to avoid imposition of the tax. The excise tax
will not generally apply to the tax-exempt income of a regulated investment
company such as the Tax-Exempt Fund that pays exempt-interest dividends.

Any dividend declared by any Fund in October, November or December of any
year and made payable to shareholders of record on a specified date in that
month will be deemed to be received by such shareholders on December 31 of such
year and to be paid by a Fund not later than December 31 of that year if
actually paid during the following January. Accordingly, these dividends will
be taxable to shareholders in the year declared and not in the year in which
shareholders actually receive the dividend.

Premier Institutional Fund, Institutional Fund, Rated Institutional Fund,
Government Fund and Treasury Fund. Dividends will be taxable to shareholders of
the Premier Institutional Fund, Institutional Fund, Government Fund and
Treasury Fund as ordinary income, except for (a) such portion as may exceed a
shareholder's ratable share of the applicable Fund's earnings and profits as
determined for tax purposes (which may differ from net income for book
purposes), which excess will be applied against and reduce the shareholder's
cost or other tax basis for his shares and (b) amounts representing
distributions of realized net long-term capital gains, if any. If the amount
described in (a) above were to exceed the shareholder's cost or other tax basis
for his shares, the excess over such basis would be treated as gain from the
sale or exchange of such shares. Dividends and distributions are taxable as
described herein, whether received in cash or reinvested in additional shares
of the applicable Fund.

Tax-Exempt Fund. The Tax-Exempt Fund has elected to qualify to pay
"exempt-interest" dividends as defined in Section 852(b)(5) of the Code. Under
that section if, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets consists of obligations exempt from Federal
income tax ("tax-exempt obligations"), pursuant to Section 103(a) of the Code
(relating to obligations of a state, territory, or a possession of the United
States, or any political subdivision of any of the foregoing, or of the
District of Columbia), the Tax-Exempt Fund will be qualified to pay
exempt-interest dividends to its shareholders. Exempt-interest dividends are
dividends or any part thereof (other than any short- or long-term capital gain
distributions) paid by the Tax-Exempt Fund which are attributable to interest
on tax-exempt obligations and designated by the Fund as exempt-interest
dividends in a written notice mailed to the Fund's shareholders within 60 days
after the close of its taxable year. The percentage of the total dividends paid
by the Tax-Exempt Fund during any taxable year which qualifies as
exempt-interest dividends will be the same for all shareholders receiving
dividends during that year. Exempt-interest dividends may

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be treated by shareholders for all purposes as items of interest excludable
from their gross income under Section 103(a) of the Code. However, a
shareholder is advised to consult his tax adviser with respect to whether
exempt-interest dividends retain the exclusion under Section 103(a) if such
shareholder would be treated as a "substantial user" under Section 147(a)(1)
with respect to some or all of the tax-exempt obligations held by the
Tax-Exempt Fund.

Distributions of the Tax-Exempt Fund's net realized short-term capital
gains will be taxable to shareholders as ordinary income. In order to avoid
taxation on its net long-term capital gains, the Tax-Exempt Fund may elect to
distribute "capital gain dividends" to its shareholders. Any distributions
designated as capital gain dividends, i.e., as being made from the Tax-Exempt
Fund's net long-term capital gains in a written notice furnished annually to
shareholders are taxable to shareholders as long-term capital gains, regardless
of the shareholders' holding period of shares of the Tax-Exempt Fund. To the
extent the Tax-Exempt Fund has taxable income, expenses of the Fund will be
allocated between the taxable income and the tax-exempt income on a
proportional basis. Since the Tax-Exempt Fund will not invest in the stock of
domestic corporations, shareholders of the Tax-Exempt Fund will not be entitled
to the dividends-received deduction for corporations. The Code provides that
interest on indebtedness incurred or continued to purchase or carry shares of
the Tax-Exempt Fund is not deductible to the extent attributable to
exempt-interest dividends.

Not later than 60 days after the end of each fiscal year of the Tax-Exempt
Fund, the Fund will send to its shareholders the written notice required by the
Code designating the amount of its dividends that constitutes exempt-interest
dividends, the amount of the dividends and distributions which is ordinary
taxable income and the amount of distributions which is taxable to shareholders
as long-term capital gain.

The Code requires that every person required to file a tax return must
disclose on that return the amount of exempt-interest dividends received from
the Tax-Exempt Fund during the taxable year. The disclosure of this amount is
for informational purposes only. In addition, the Code provides that with
respect to a shareholder who receives exempt-interest dividends on shares held
for less than six months, any loss on the sale or exchange of such shares will,
to the extent of the amount of such exempt-interest dividends, be disallowed.

The Code also provides that interest income with respect to certain
tax-exempt bonds, known as private activity bonds, is a preference item for
purposes of the corporate and individual alternative minimum tax. To the extent
that the Tax-Exempt Fund invests in private activity bonds, shareholders of the
Fund will have preference items attributable to their proportionate shares of
the interest income received by the Fund from such bonds. Interest income from
tax-exempt bonds held by the Fund would increase the alternative minimum
taxable income of corporate shareholders for purposes of this computation.

Massachusetts Income Tax
Under present Massachusetts law, a Fund will not be subject to any
Massachusetts income taxation during any fiscal year in which such Fund
qualifies as a Massachusetts business trust. A Fund might be subject to
Massachusetts income taxes for any taxable year in which it did not so qualify.

Other Taxes
In those states and localities which have income tax laws, the treatment
of shareholders of the Funds under such laws may differ from their treatment
under the Federal income tax laws. Under state or local law, distributions of
net investment income may be taxable to shareholders as dividend income even
though a portion of such distributions may be derived from interest on U.S.
Government obligations which, if realized directly, would be exempt from such
income taxes. Shareholders are advised to consult their tax advisors concerning
the application of state and local taxes.

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DISTRIBUTOR

The Trust has entered into a Distribution Agreement with respect to each
Fund (the "Distribution Agreements") with Merrill Lynch Funds Distributor, Inc.
("MLFD"), an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.
Pursuant to the terms of each Distribution Agreement, MLFD serves as the
principal underwriter and distributor of the applicable Fund's shares, and in
that capacity makes a continuous offering of that Fund's shares and bears the
costs and expenses of printing and distributing any copies of any prospectuses
and annual and interim reports of the Fund (after such items have been prepared
and set in type) which are used in connection with the offering of shares to
selected dealers or investors, and the costs and expenses of preparing,
printing and distributing any other literature used by MLFD or furnished by it
for use by selected dealers in connection with the offering of the shares for
sale to the public. There will be no fee payable by any Fund pursuant to the
Distribution Agreements. There is no sales or redemption charge. The
continuance of the Distribution Agreements must be approved in the same manner
as the Investment Advisory Agreements, and each Distribution Agreement will
terminate automatically if assigned by either party thereto and is terminable
at any time without penalty by the Board of Trustees of the Trust or by vote of
a majority of the applicable Fund's outstanding shares on 60 days' written
notice to MLFD and by MLFD on 90 days' written notice to the Trust.

The Trust had adopted a Distribution and Shareholder Servicing Plan (the
"Plans") with respect to each Fund, other than the Premier Institutional Fund
and the Rated Institutional Fund, pursuant to Rule 12b-1 under the Investment
Company Act of 1940, pursuant to which FAM is permitted to use a portion of the
advisory fee compensation it receives from any such Fund to promote the
distribution of that Fund's shares and to enhance the provision of shareholder
services; however, the Plans were terminated as of June 8, 1998. Each Plan was
approved by a majority of (i) the Trustees of the Trust, and (ii) the Trustees
of the Trust who are not interested persons of the Trust, and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan (the "Rule 12b-1 Trustees"), a majority of whom
cast their votes in person at a meeting called for the purpose of voting on the
Plan. Each Plan permitted FAM to pay a fee to MLFD. The amount of the fees paid
to MLFD was determined by FAM in its sole discretion. Payments under a Fund's
Plan are not made directly by the Fund. From amounts received by it under each
Plan, MLFD was authorized to make payments to securities dealers with which
MLFD had entered into selected dealer agreements. No Fund was required or
permitted under its Plan to make payments over and above the amount of the
investment advisory fee to promote the sale of its shares; its Plan merely
permitted the reallocation of a portion of the advisory fee FAM receives from
that Fund to pay for distribution-related activities. Since payments to
securities dealers under the Plans must come from FAM's investment advisory fee
or its past profits, no Fund experienced any adverse impact on its yield
because of its Plan.

MLFD could also use a portion of the fee it receives under a Plan to
compensate administrators who perform administrative services that otherwise
would be performed by FAM or its agent. These services may include providing
office space, equipment, telephone facilities and various support personnel as
may be required on an ongoing basis, maintaining shareholders' accounts and
records, processing purchase and redemption transactions and furnishing other
services to the applicable Fund as the Fund may reasonably request. FAM also
intended to reimburse MLFD for payments it makes to institutions which enter
into servicing arrangements with MLFD in accordance with the terms of the
Plans.

Rule 12b-1 requires each Fund having a Plan to preserve copies of any
plan, agreement or report made under the Rule for a period of not less than six
years from the date of the plan, agreement or report, the first two of which
must be maintained in an easily accessible place. The Rule also provides that
the minutes of the meeting of the Trust's board at which a decision is made to
use a Fund's assets for distribution must describe the factors considered

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and the basis for the decision and that such minutes must be preserved for a
period of at least six years from the date of such report.

For the fiscal year ended April 30, 1998, the fees paid to MLFD under the
Plan totalled $3,183,307 or .05% of the Institutional Fund's average daily net
assets, all of which was paid to MLFD for providing distribution-related
services in connection with Fund shares.

For the fiscal year ended April 30, 1998, the fees paid to MLFD under the
Plan totalled $980,733 or .05% of the Government Fund's average daily net
assets, all of which was paid to MLFD for providing distribution-related
services in connection with Government Fund shares.

For the fiscal year ended April 30, 1998, the fees paid to MLFD under the
Plan totalled $388,984 or .06% of the Treasury Fund's average daily net assets,
all of which was paid to MLFD for providing distribution-related services in
connection with Treasury Fund shares.

For the fiscal year ended April 30, 1998, the fees paid to MLFD under the
Plan totalled $1,024,648 or .07% of the Tax-Exempt Fund's average daily net
assets, all of which was paid to MLFD for providing distribution-related
services in connection with Fund shares.

YIELD INFORMATION

Each Fund normally computes its annualized yield by determining the net
change for a seven-day base period, exclusive of capital changes, in the value
of a hypothetical pre-existing account having a balance of one share at the
beginning of the period, dividing the net change in account value by the value
of the account at the beginning of the base period to obtain the base period
return, and multiplying the base period return by 365 and then dividing by
seven with the resulting yield figure carried to at least the nearest hundredth
of one percent. Under this calculation, the yield does not reflect realized and
unrealized gains and losses on portfolio securities. The Securities and
Exchange Commission also permits the calculation of a standardized effective or
compounded yield. This is computed by compounding the unannualized base period
return which is done by adding one to the base period

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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 or unrealized gains or losses on portfolio securities.

The yield on shares of each Fund normally will fluctuate on a daily basis.
Therefore, the yield for any given past period is not an indication or
representation by the applicable Fund of future yields or rates of return on
its shares. The yield is affected by changes in interest rates on short-term
securities, average portfolio maturity, the types and quality of portfolio
securities held, and operating expenses.

GENERAL INFORMATION

The Prospectuses and the Statements of Additional Information do not
contain all the information set forth in the Registration Statements and the
exhibits relating thereto, which the Trust has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, to which reference is hereby made.

The Declaration of Trust establishing the Trust, 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
"Merrill Lynch Funds For Institutions Series" 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 may be held to
any personal liability, nor may resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Trust but only property of the Trust shall be liable. The Trust
issues shares in one or more series. All persons dealing with the Trust must
look solely to the property of the applicable series of the Trust for the
enforcement of any claims against it.

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APPENDIX B

INFORMATION CONCERNING TAX-EXEMPT SECURITIES

Description of Tax-Exempt Securities
Tax-Exempt Securities include debt obligations issued to obtain funds for
various public purposes, including construction of a wide range of public
facilities, refunding of outstanding obligations and obtaining funds for
general operating expenses and loans to other public institutions and
facilities. In addition, certain types of industrial development bonds are
issued by or on behalf of public authorities to finance various facilities
operated for private profit, including pollution control facilities. Such
obligations are included within the term Tax-Exempt Securities if the interest
paid thereon is exempt from federal income tax. Tax-Exempt Securities also
include short-term tax-exempt municipal obligations such as tax anticipation
notes, bond anticipation notes and revenue anticipation notes, which are sold
as interim financing in anticipation of tax collections, bond sales and revenue
receipts, respectively. The Tax-Exempt Fund may also invest in short-term
tax-exempt commercial paper obligations, which are short-term unsecured
promissory notes issued to finance short-term credit needs, and floating rate
tax-exempt demand notes on which the Tax-Exempt Fund may demand payment from
the issuer at par value plus accrued interest on short notice (typically three
to seven days). In addition, the Tax-Exempt Fund may invest in variable rate
demand notes and participations therein (see "Variable Rate Demand Notes"
below).

The two principal classifications of Tax-Exempt Securities are "general
obligation" and "revenue" or "special obligation" bonds. General obligation
bonds are secured by the issuer's pledge of its faith, credit and taxing power
for the payment of principal and interest. Revenue or special obligation bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific revenue source such as from the user of the facility being
financed. Industrial development bonds are in most cases revenue bonds and do
not generally constitute the pledge of the credit or taxing power of the issuer
of such bonds. The payment of the principal of and interest on such industrial
revenue bonds depends solely on the ability of the user of the property
financed by the bonds to meet its financial obligations and the pledge, if any,
of real and personal property so financed as security for such payment. The
portfolio may also include "moral obligation" bonds which are normally issued
by special purpose public authorities. If an issuer of moral obligation bonds
is unable to meet its debt service obligations from current revenues, it may
draw on a reserve fund, the restoration of which is a moral commitment but not
a legal obligation of the state or municipality which created the issuer.

Yields on Tax-Exempt Securities are dependent on a variety of factors,
including the general condition of the money market and of the municipal bond
market, the size of a particular offering, the maturity of the obligation, and
the rating of the issue. The ability of the Tax-Exempt Fund to achieve its
investment objective is also dependent on the continuing ability of the issuers
of the Tax-Exempt Securities in which the Tax-Exempt Fund invests to meet their
obligations for the payment of interest and principal when due. There are
variations in the risks involved in the holding of Tax-Exempt Securities, both
within a particular classification and between classifications, depending on
numerous factors. Furthermore, the rights of holders of Tax-Exempt Securities
and the obligations of the issuers of Tax-Exempt Securities may be subject to
applicable bankruptcy, insolvency and similar laws and court decisions
affecting the rights of creditors generally, and such laws, if any, which may
be enacted by Congress or state legislatures affecting specifically the rights
of holders of Tax-Exempt Securities.

From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on Tax-Exempt Securities. Similar proposals may be introduced in

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the future. If such proposals were enacted, the ability of the Fund to pay
"exempt-interest" dividends would be adversely affected and the Tax-Exempt Fund
would reevaluate its investment objective and policies and consider changes in
its structure. See "Taxes" in the Prospectus and Statement of Additional
Information.

Variable Rate Demand Notes

Variable rate demand notes ("VRDNs") are tax-exempt obligations upon which
interest is payable at a floating or variable rate and upon which payment of
the unpaid principal balance plus accrued interest may be demanded at any time
upon a short notice period. The interest rate on a VRDN is adjusted at periodic
intervals pursuant to an adjustment formula which is based on some prevailing
market rate for similar investments and which is designed to maintain the
market value of the VRDN on each adjustment date at approximately the par value
of the VRDN. The adjustments are frequently based upon the prime rate of a bank
or some other appropriate interest rate adjustment index. The right of demand
may be either against the issuer or a third party (typically a bank pursuant to
an irrevocable letter of credit or guaranty arrangement).

The Tax-Exempt Fund may also invest in VRDNs in the form of participation
interests ("Participating VRDNs") in variable rate tax-exempt obligations held
by a financial institution, typically a commercial bank ("institutions").
Participating VRDNs provide the Tax-Exempt Fund with a specified undivided
interest (up to 100%) of the underlying obligations and the right to demand
payment of the unpaid principal balance plus accrued interest on the
Participating VRDNs from the institution upon a specified number of days'
notice, presently not to exceed seven days. In addition, the Participating VRDN
is backed by an irrevocable letter of credit or similar commitment of the
institution. The Tax-Exempt Fund has an undivided interest in the underlying
obligation and thus participates on the same basis as the institution in such
obligation except that the institution typically retains fees out of the
interest paid on the obligation for servicing the obligation, providing the
letter of credit and issuing the repurchase commitment.

The Tax-Exempt Fund has been advised by its counsel to the effect that the
interest received on Participating VRDNs will be treated as interest from
tax-exempt obligations as long as the Fund does not invest more than a limited
amount (not more than 20%) of its total assets in such investments and certain
other conditions are met. The Tax-Exempt Fund will not make any such
investments until its Trustees have authorized such investments. It is
contemplated that if the trustees authorize such investments, the Tax-Exempt
Fund will not invest more than a limited amount of its total assets in
Participating VRDNs.

Purchase of Securities with Rights to Put the Securities

As described under "Investment Objectives and Policies" in the Statement
of Additional Information, the Tax-Exempt Fund reserves the right to engage in
put transactions. Set forth below is a description of certain characteristics
of the put transactions the Tax-Exempt Fund is permitted to enter into.

The right to put the securities to a counterparty depends on the
counterparty's ability to pay for the securities at the time the put is
exercised. The Tax-Exempt Fund would limit its put transactions to institutions
which the Investment Adviser believes present minimum credit risk, and the Fund
would use its best efforts to determine initially and to continue to monitor
the financial strength of counterparties because adequate current financial
information may not be available. In the event that any counterparty is unable
to honor a put for financial reasons, the Tax-Exempt Fund would be a general
creditor (i.e., on a parity with all other unsecured creditors) of the
counterparty. Furthermore, particular provisions of the contract between the
Tax-Exempt Fund and the counterparty may excuse the counterparty from
repurchasing the securities; for example, a change in the published rating of
the underlying municipal securities or any similar event that has an adverse
effect on the issuer's credit or a provision

B-2
<PAGE>

in the contract that the put will not be exercised except in certain special
cases, for example, to maintain portfolio liquidity. The Tax-Exempt Fund could,
however, at any time sell the underlying portfolio security in the open market
or wait until the portfolio security matures, at which time it should realize
the full par value of the security. If the Tax-Exempt Fund were to engage in
such transactions at this time, it would engage in such transactions with banks
and, to the extent permitted by applicable law, with broker-dealers.

It also should be noted that while the market for put options in
tax-exempt securities to sellers of Tax-Exempt securities has developed over
time, there can be no representation about the future state of the market,
i.e., the number of banks or dealers that might be willing to sell securities
to the Tax-Exempt Fund with a right for the Fund to put the securities back to
the seller, the spread between the price of the security if sold without the
right to put and with the right to put, the valuation of securities subject to
such puts and the value to be ascribed to the put itself, if any, and whether
and on what terms the Tax-Exempt Fund can renew any put options. The municipal
securities purchased which are subject to such a put may be sold to third
persons at any time, even though the put is outstanding, but the put itself
will generally not be marketable or otherwise assignable. Therefore, the put
would have value only to the Tax-Exempt Fund. Sale of the securities to third
parties or lapse of time with the put unexercised will terminate the right to
put the securities to the seller. Prior to the expiration of any put option,
the Fund could seek to negotiate terms for the extension of such an option. If
such a renewal cannot be negotiated on terms satisfactory to the Tax-Exempt
Fund, the Fund could sell the portfolio security. The maturity of the
underlying security will generally be different from that of the put. There
will be no limit on the percentage of portfolio securities that the Fund may
purchase subject to a put for its portfolio. The Tax-Exempt Fund has not
determined the circumstances under which it will enter into put transactions or
what will be deemed to be the maturity of securities subject to puts for
purposes of calculating the weighted average maturity of its portfolio.

B-3
<PAGE>

================================================================================

ADMINISTRATOR & DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
One Financial Center
Boston, Massachusetts 02111

INVESTMENT ADVISER
Fund Asset Management, L.P.
P.O. Box 9011
Princeton, New Jersey 08543-9011

CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 8500
Boston, Massachusetts 02266-8500

LEGAL COUNSEL
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166

AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110-1617

No person has been authorized to give any information or to make any
representations, other than those contained in the Prospectuses and in these
Statements of Additional Information, in connection with the offer made by the
Prospectuses, and, if given or made, such other information or representations
must not be relied upon as having been authorized by any Fund or its
Distributor. The Prospectuses and these Statements of Additional Information do
not constitute an offer to sell or a solicitation of an offer to buy by any
Fund or by the Distributor in any State in which such offer to sell or
solicitation of any offer to buy may not lawfully be made.

================================================================================

Statements of Additional Information

Merrill Lynch
Funds For Institutions Series
- --------------------------------------------------------------------------------
Merrill Lynch Premier Institutional Fund

Merrill Lynch Institutional Fund
Merrill Lynch Rated Institutional Fund
Merrill Lynch Government Fund
Merrill Lynch Treasury Fund
Merrill Lynch Institutional
Tax-Exempt Fund

June 11, 1998

Distributor
Merrill Lynch
Funds Distributor, Inc.

These Statements of Additional Information should
be retained for future reference.

================================================================================

<PAGE>

Merrill Lynch Funds For Institution Series

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Contained in Part A:
Financial Highlights:

<TABLE>
<S> <C>
--Premier Institutional Fund--for the period January 27, 1997 (commencement of
operations) to April 30, 1998
--Institutional Fund--for the ten year period ended April 30, 1998
--Government Fund--for the ten year period ended April 30, 1998
--Treasury Fund--for the period December 18, 1989 (commencement of operations)
through April 30, 1998
--Tax-Exempt Fund--for the ten year period ended April 30, 1998
Contained in Part B:
--Schedules of Investments for Premier Institutional Fund, Institutional Fund, Government
Fund, Treasury Fund and Tax-Exempt Fund as of April 30, 1998
--Statements of Assets and Liabilities for Premier Institutional Fund, Institutional Fund,
Government Fund, Treasury Fund and Tax-Exempt Fund as of April 30, 1998
--Statements of Operations for Institutional Fund, Government Fund, Treasury Fund and
Tax-Exempt Fund, for the year ended April 30, 1998
--Statement of Operations for Premier Institutional Fund for the period January 27, 1998
(commencement of operations) to April 30, 1998
--Statements of Changes in Net Assets for Institutional Fund, Government Fund, Treasury
Fund and Tax-Exempt Fund, for the two years ended April 30, 1998
--Statement of Changes in Net Assets for Premier Institutional for the period January 27,
1997 (commencement of operations) to April 30, 1998
--Financial Highlights for Premier Institutional Fund for the period January 27, 1997
(commencement of operations) to April 30, 1998
--Financial Highlights for Institutional Fund, Government Fund, Treasury Fund and Tax-
Exempt Fund, for each of the periods in the five year periods ended April 30, 1998
--Notes to Financial Statements
</TABLE>

(b) Exhibits:

<TABLE>
<CAPTION>
Exhibit
Number Description
- ----------- -----------
<S> <C>
1(a) --Declaration of Trust, as amended, with Form of Amendment dated December 11, 1989
(incorporated by reference to Exhibit 1 to Registrant's Registration Statement on Form
N-1A (File No. 33-14190))
1(b) --Establishment and Designation of Merrill Lynch Institutional Fund and Merrill Lynch
Government Fund as separate series of Merrill Lynch Funds For Institutions Series, dated
June 18, 1990 (incorporated by reference to Exhibit 1(b) to Post-Effective Amendment
No. 6 to Registrant's Registration Statement on Form N-1A (File No. 33-14190))
1(c) --Establishment and Designation of Merrill Lynch Institutional Tax-Exempt Fund as a
separate series of Merrill Lynch Funds for Institutions Series, dated February 16, 1994
(incorporated by reference to Exhibit 1(c) to Post-Effective Amendment No. 10 of
Registrant's Registration Statement on Form N-14 (File No. 33-14190))
1(d) --Establishment and Designation of Merrill Lynch Premier Institutional Fund as a separate
series of Merrill Lynch Funds For Institutions Series, dated December 9, 1996
(incorporated by reference to Exhibit 1(d) to Post-Effective Amendment No. 15 to
Registrant's Registration Statement Form N-1A (File No. 33-14190))
1(e) --Establishment and Designation of Merrill Lynch Rated Institutional Fund as a separate
series of Merrill Lynch Funds for Institutions Series, dated June 8, 1998*
2 --By-Laws of Registrant (incorporated by reference to Exhibit 2 to Registrant's Registration
Statement on Form N-1A (File No. 33-14190))
3 --None
</TABLE>

C-1
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
- ---------- -----------
<S> <C>
4 --Form of Share Certificate (incorporated by reference to Exhibit 4 to Post-Effective
Amendment No. 3 to Registrant's Registration Statement to Form N-1A
(File No. 33-14190))
5(a) --Form of Investment Advisory Agreement for Merrill Lynch Treasury Fund (incorporated
by reference to Exhibit 5 to Registrant's Registration Statement on Form N-1A
(File No. 33-14190))
5(b) --Investment Advisory Agreement for Merrill Lynch Institutional Fund (incorporated by
reference to Exhibit 5(b) to Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A (File No. 33-14190))
5(c) --Investment Advisory Agreement for Merrill Lynch Government Fund (incorporated by
reference to Exhibit 5(c) to Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A (File No. 33-14190))
5(d) --Investment Advisory Agreement for Merrill Lynch Institutional Tax-Exempt Fund
(incorporated by reference to Exhibit 5(d) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (File No. 33-14190))
5(e) --Investment Advisory Agreement for Merrill Lynch Premier Institutional Fund
(incorporated by reference to Exhibit 5(e) to Post-Effective Amendment No. 15 to
Registrant's Registration Statement on Form N-1A (File No. 33-14190))
5(f) --Investment Advisory Agreement for Merrill Lynch Rated Institutional Fund*
6(a) --Distribution Agreement for Merrill Lynch Treasury Fund (incorporated by reference to
Exhibit 6(a) to Registrant's Registration Statement on Form N-1A (File No. 33-14190))
6(b) --Form of Selected Dealer Agreement for Merrill Lynch Treasury Fund (incorporated
by reference to Exhibit 6(b) to Registrant's Registration Statement on Form N-1A
(File No. 33-14190))
6(c) --Form of Distribution Agreement for Merrill Lynch Institutional Fund (incorporated by
reference to Exhibit 6(c) to Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A (File No. 33-14190))
6(d) --Form of Distribution Agreement for Merrill Lynch Government Fund (incorporated by
reference to Exhibit 6(d) to Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A (File No. 33-14190))
6(e) --Form of Distribution Agreement for Merrill Lynch Institutional Tax-Exempt Fund
(incorporated by reference to Exhibit 6(e) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (File No. 33-14190))
6(f) --Distribution Agreement for Merrill Lynch Premier Institutional Fund (incorporated by
reference to Exhibit 6(f) to Post-Effective Amendment No. 15 to Registrant's Registration
Statement on Form N-1A (File No. 33-14190))
6(g) --Distribution Agreement for Merrill Lynch Rated Institutional Fund*
7 --None
8 --Form of Custodian Agreement (incorporated by reference to Exhibit 8 to Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 33-14190))
9(a) --Form of Transfer Agency, and Dividend Disbursing Agreement (incorporated by reference
to Exhibit 9(a) to Pre-Effective Amendment No. 1 to Registrant's Registration Statement
on Form N-1A (File No. 33-14190))
9(b) --Form of Agreement relating to the use of the "Merrill Lynch" name (incorporated
by reference to Exhibit 9(b) to Registrant's Registration Statement on Form N-1A
(File No. 33-14190))
9(c) --Agreement and Plan of Reorganization of Merrill Lynch Institutional Fund Inc. and
Merrill Lynch Government Fund Inc., respectively (incorporated by reference to Exhibit
9(c) to Post-Effective Amendment No. 5 to Registrant's Registration Statement on Form
N-1A (File No. 33-14190))
9(d) --Agreement and Plan of Reorganization of Merrill Lynch Institutional Tax-Exempt Fund
(incorporated by reference to Exhibit 10(a) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (File No. 33-14190))
10(a) --Opinion of Counsel (filed with 24f-2 Notice on June 20, 1997)
</TABLE>

C-2
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
- ----------- -----------
<S> <C>
10(b) --Opinion and Consent of Special Massachusetts Counsel (incorporated by reference to
Exhibit 11(b) to Registrant's Registration Statement on Form N-1A (File No. 33-14190))
11 --Consent of Independent Auditors*
12 --None
13 --None
14 --None
15(a) --Form of Distribution and Shareholder Servicing Plan pursuant to Rule 12b-1 and related
Shareholder Servicing Agreement for Merrill Lynch Treasury Fund (incorporated
by reference to Exhibit 15 to Registrant's Registration Statement on Form N-1A
(File No. 33-14190))
15(b) --Distribution and Shareholder Servicing Plan pursuant to Rule 12b-1 and related
Shareholder Servicing Agreement for Merrill Lynch Institutional Fund (incorporated by
reference to Exhibit 15(b) to Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A (File No. 33-14190))
15(c) --Distribution and Shareholder Servicing Plan pursuant to Rule 12b-1 and related
Shareholder Servicing Agreement for Merrill Lynch Government Fund (incorporated by
reference to Exhibit 15(c) to Post-Effective Amendment No. 5 to Registrant's Registration
Statement on Form N-1A (File No. 33-14190))
15(d) --Distribution and Shareholder Servicing Plan pursuant to Rule 12b-1 and related
Shareholder Servicing Agreement for Merrill Lynch Institutional Tax-Exempt Fund
(incorporated by reference to Exhibit 15(d) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (File No. 33-14190))
16 --None
17(a) --Power of Attorney of W. Carl Kester (incorporated by reference to Exhibit 17(a) to
Post-Effective Amendment No. 14 to Registrant's Registration Statement on Form N-1A
(File No. 33-14190))
17(b) --Power of Attorney of James T. Flynn (incorporated by reference to Exhibit 17(b) to
Post-Effective Amendment No. 14 to Registrant's Registration Statement on Form N-1A
(File No. 33-14190))
18(a) --Financial Data Schedule for shares of the Merrill Lynch Premier Institutional Fund
18(b) --Financial Data Schedule for shares of the Merrill Lynch Institutional Fund
18(c) --Financial Data Schedule for shares of the Merrill Lynch Government Fund
18(d) --Financial Data Schedule for shares of the Merrill Lynch Treasury Fund
18(e) --Financial Data Schedule for shares of the Merrill Lynch Tax-Exempt Fund
</TABLE>

--------

*Filed herewith.

Item 25. Persons Controlled by or Under Common Control with Registrant.
Registrant does not control any other person, nor is the Registrant under
common control with any other person.

Item 26. Numbers of Holders of Securities.

<TABLE>
<CAPTION>
Number of
Holders at
Title of Class June 1, 1998
- ------------------------------------------------------------------------------------------ -------------
<S> <C>
Shares of beneficial interest of Merrill Lynch Premier Institutional Fund, par value
$0.01 per share .......................................................................... 433
Shares of beneficial interest of Merrill Lynch Institutional Fund, par value $0.01 per 39,609
share
Shares of beneficial interest of Merrill Lynch Rated Institutional Fund, par value $0.01
per share .............................................................................. 1
Shares of beneficial interest of Merrill Lynch Government Fund, par value $0.01 per share. 12,265
Shares of beneficial interest of Merrill Lynch Treasury Fund, par value $0.01 per share... 1,718
Shares of beneficial interest of Merrill Lynch Institutional Tax-Exempt Fund, par value
$0.10 per share .......................................................................... 7,163
</TABLE>

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

Item 27. Indemnification.
Reference is made to Section 5.3 of Registrant's Declaration of Trust.

C-3
<PAGE>

Insofar as the conditional advancing of indemnification monies 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 that 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 of 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.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant 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 in connection with the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or controlling
person in connection with 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 Adviser.

Fund Asset Management, L.P. ("FAM" or the "Investment Adviser"), acts as
the investment adviser for the following other 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., Financial Institutions Series Trust,
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 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 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., 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 Florida Insured Fund, Inc., MuniHoldings New York
Insured Fund, Inc., MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund
II, Inc., Munivest California Insured Fund, Inc., MuniVest Florida Fund,
MuniVest Michigan Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York
Insured 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 Insured Fund II, Inc., MuniYield Michigan Insured Fund., Inc.,
MuniYield New Jersey Fund, Inc., MuniYield New Jersey Insured Fund, Inc.,
MuniYield New York Insured Fund, Inc., MuniYield New York Insured Fund II,
Inc., MuniYield New York Insured Fund III, Inc., MuniYield Pennsylvania Fund,
MuniYield Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High
Income Portfolio, Inc., Taurus MuniCalifornia Holdings, Inc., Taurus MuniNew
York Holdings, Inc. and Worldwide DollarVest Fund, Inc.

Merrill Lynch Asset Management, L.P. ("MLAM" or the "Investment Adviser"),
an affiliate of FAM, acts as the investment adviser for the following open-end
registered 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 Developing
Capital Markets Fund, Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch
EuroFund, Merrill Lynch Fundamental Growth Fund, Inc., Merrill Lynch Fund for
Tomorrow, 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 SmallCap Fund, Inc., Merrill Lynch Global Technology 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

C-4
<PAGE>

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.A. Government Reserves, Merrill Lynch U.S. Treasury Money
Fund, 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 the following closed-end registered investment
companies: Merrill Lynch High Income Municipal Bond Fund, Inc., and Merrill
Lynch Senior Floating Rate 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 Advisory Trust. The address of each of these
investment companies is P.O. Box 9011, Princeton, New Jersey 08543-9011, except
that the address of Merrill Lynch Funds For Institutions Series is One
Financial Center, Boston, Massachusetts, 02111. The address of the Investment
Adviser, MLAM, Princeton Services, Inc. ("Princeton Services") and Princeton
Administrator, L.P. is also P.O. Box 9011, Princeton, NJ 08543-9011. The
address of Merrill Lynch Funds Distributor, Inc. ("MLFD") is 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 10281-1209. The address of Merrill Lynch Financial Data Services, Inc.
("MLFDS") is 4800 Deer Lake Drvie East, Jacksonville, Florida 32246-6484.

Set forth below is a list of each officer and director of FAM indicating
each business, profession, vocation or employment of a substantial nature in
which each such person has been engaged since November 30, 1987 for his or her
or its own account or in the capacity of director, officer, partner or trustee.
In addition, Messrs. Zeikel, Glenn and Richard hold the same positions with
substantially all of the investment companies described in the preceding
paragraph and Messrs. Giordano, Harvey and Monagle are directors or officers of
one or more of such companies. Messrs. Zeikel and Richard also hold the same
positions with all or substantially all of the investment companies advised by
MLAM as they do with the Investment Adviser. Messrs. Harvey and Monagle are
directors or officers of one or more of such companies.

<TABLE>
<CAPTION>
Positions with Other Substantial Business, Profession,
Name Investment Adviser Vocation or Employment
- ------------------------------------ --------------------------- ---------------------------------------------------
<S> <C> <C>
ML & Co ............................ Limited Partner Financial Services Holding Company; Limited
Partner of MLAM

Fund Asset Management, Inc ......... Limited Partner Investment Advisory Services

Princeton Services, Inc. ........... General Partner General Partner of MLAM
("Princeton Services")

Arthur Zeikel ...................... Chairman Chairman of MLAM; President of the Investment
Adviser and MLAM from 1977 to 1997; Chairman
and Director of Princeton Services; President
of Princeton Services from 1993 to 1997;
Executive Vice 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 and Director of Princeton
and Director Services; President and Director of MLFD;
Director of Merrill Lynch Financial Data
Services, Inc. ("MLFDS"); President of
Princeton Administrators, L.P.

Vincent R. Giordano ................ Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services

Elizabeth Griffin .................. Senior Vice President Senior Vice President of MLAM

Norman R. Harvey ................... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services

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 of MLAM; Senior Vice President,
Secretary General Counsel, Director and Secretary of
Princeton Services; Director of MLFD

Ronald M. Kloss .................... Senior Vice President and Senior Vice President and Controller of MLAM;
Controller Senior Vice President and Controller of
Princeton Services

Debra W. Landsman-Yaros ............ Senior Vice President Senior Vice President of MLAM

Joseph T. Monagle, Jr .............. Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
</TABLE>

C-5
<PAGE>

<TABLE>
<CAPTION>
Positions with Other Substantial Business, Profession,
Name Investment Adviser Vocation or Employment
- --------------------------- --------------------------- -------------------------------------------------
<S> <C> <C>
Michael L. Quinn .......... Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services; Managing
Director and First Vice President of Merrill
Lynch from 1989 to 1995.

Richard L. Reller ......... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services

Gerald M. Richard ......... Senior Vice President and Senior Vice President and Treasurer of MLAM;
Treasurer Senior Vice President and Treasurer of Princeton
Services; Vice President and Treasurer of MLFD

Gregory D. Upah ........... Senior Vice President Senior Vice President of MLAM

Ronald L. Welburn ......... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services

Anthony Wiseman ........... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
</TABLE>

Item 29. Principal Underwriters.

(a) MLFD acts as the principal underwriter for the Registrant and 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 Treasury Fund, CMA Money Fund, CMA Multi-State Municipal Series Trust, CMA
Tax-Exempt Fund, The Corporate Fund Accumulation Program, Inc., and The
Municipal Fund Accumulation Program, Inc. MLFD also acts as principal
underwriter for the following registered closed-end funds: 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
MLFD. The principal business address of each such person is P.O. Box 9081,
Princeton, New Jersey 08543-9081, except that the address of Messrs. Crook,
Aldrich, Brady, Breen, Fatseas and Wasel is One Financial Center, Boston,
Massachusetts 02111.

<TABLE>
<CAPTION>
Positions with Offices Position and Offices
Name with Underwriter with Registrant
- --------------------------------- ------------------------ -----------------------------------------------
<S> <C> <C>
Terry K. Glenn .................. President Trustee

Arthur Zeikel ................... Director None

Philip Kirstein ................. Director None

William E. Aldrich .............. Senior Vice President Executive Vice President

Robert W. Crook ................. Senior Vice President President and Trustee

Michael G. Clark ................ Vice President None

Gerald M. Richard ............... Vice President and Vice President
Treasurer

Michelle T. Lau ................. Vice President None

Salvatore Venezia ............... Vice President None

Michael J. Brady ................ Vice President Senior Vice President

William M. Breen ................ Vice President Senior Vice President, Chief Financial Officer
and Treasurer

James T. Fatseas ................ Vice President Senior Vice President

William Wasel ................... Vice President Senior Vice President

Debra W. Landsman-Yaros ......... Vice President None

Robert Harris ................... Secretary None
</TABLE>

Item 30. Location of Accounts and Records.

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
will be maintained at the offices of the Registrant and its Custodian and
Transfer Agent.

Item 31. Management Services.

Other than as set forth under the caption "Management" in the Prospectus
constituting Part A of the Registration Statement and under the caption
"Investment Advisory and Other Services" in the Statement of Additional
Information constituting Part B of the Registration Statement, Registrant is
not a party to any management-related service contract.

C-6
<PAGE>

Item 32. Undertakings.
None.

C-7
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the County of Suffolk and Commonwealth of
Massachusetts, on the 11th day of June, 1998.

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES

By /s/ ROBERT W. CROOK
---------------------------
Robert W. Crook, President

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registrant's Registration Statement has been signed below by the
following persons in the capacities indicated and on the dates indicated.

<TABLE>
<S> <C> <C>
Signature Title Date
--------- ----- ----

/s/ ROBERT W. CROOK President and Trustee June 11, 1998
- --------------------------------- (Principal Executive Officer)
Robert W. Crook

/s/ WILLIAM M. BREEN Chief Financial Officer June 11, 1998
- --------------------------------- (Principal Financial and
William M. Breen Accounting Officer)

*
- ---------------------------------
A. Bruce Brackenridge Trustee

*
- ---------------------------------
Charles C. Cabot, Jr. Trustee

*
- ---------------------------------
James T. Flynn Trustee

*
- ---------------------------------
Terry K. Glenn Trustee

*
- ---------------------------------
George W. Holbrook, Jr. Trustee

*
- ---------------------------------
W. Carl Kester Trustee

- ---------------------------------
Todd Goodwin Trustee

/s/ ROBERT W. CROOK June 11, 1998
- ---------------------------------
*By Robert W. Crook
Attorney-in-fact
</TABLE>

C-8

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES

Establishment and Designation

Merrill Lynch RATED INSTITUTIONAL Fund

The undersigned, being a majority of the Trustees of Merrill Lynch
Funds for Institutions Series, a Massachusetts business trust (the "Trust"),
acting pursuant to Section 6.9 of the Declaration of Trust dated May 7, 1987
(the "Declaration") of the Trust, do hereby divide the shares of beneficial
interest of the Trust, par value $.01 per share (the "Shares"), to create a
separate Series, within the meaning of said Section 6.9, as follows:

1. The Series is designated the "Merrill Lynch Rated Institutional
Fund" (referred to herein as the "Fund").

2. Shares of the Fund shall be entitled to all of the rights and
preferences accorded to Shares under the Declaration.

3. The purchase price of Shares of the Fund, the method of
determination of net asset value of the Fund, the price, terms and
manner of redemption of Shares of the Fund, and the relative
dividend rights of holders of Shares of the Fund shall be
established by the Trustees of the Trust in accordance with the
provisions of the Declaration and shall be set forth in the
currently effective prospectus and statement of additional
information relating to shares of the Fund, as amended from time to
time, under the Securities Act of 1933, as amended.

<PAGE>

IN WITNESS WHEREOF, the undersigned have signed this instrument in
duplicate original counterparts and have caused a duplicate original to be
lodged among the records of the Trust this eighth day of June, 1998.

- ----------------------------------- -------------------------------------
A. Bruce Brackenridge Charles C. Cabot, Jr.

- ----------------------------------- -------------------------------------
Robert W. Crook James T. Flynn

- ----------------------------------- -------------------------------------
Terry K. Glenn Todd Goodwin

- ----------------------------------- -------------------------------------
George W. Holbrook, Jr. W. Carl Kester

The Declaration of Trust establishing Merrill Lynch Funds For
Institutions Series, dated May 7, 1987, a copy of which, together with all
amendment thereto (the "Declaration"), is on file in the office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Merrill Lynch
Funds For Institutions Series" 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 Merrill Lynch Funds For Institutions
Series shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said Trust but the Trust Property only shall be
liable.

<PAGE>

COMMONWEALTH OF MASSACHUSETTS

COUNTY OF SUFFOLK ss.:

Before me, _________________________, a Notary Public in and for the County
of Suffolk, Commonwealth of Massachusetts, personally appeared this day A. Bruce
Brackenridge, Charles C. Cabot, Jr., Robert W. Crook, James T. Flynn, Terry K.
Glenn, Todd Goodwin, George W. Holbrook, Jr. and W. Carl Kester, known to me to
be the same persons whose names are affixed to the foregoing instrument, and who
acknowledged to me that they executed the same as their free and voluntary act,
and

WITNESS my hand and notarial seal this eighth day of June, 1998.

-----------------------------
Notary Public in and for said
County and Commonwealth

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made as of this (_____) day of June, 1998 by and between MERRILL
LYNCH MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES, a Massachusetts business
trust (the "Trust"), with respect to MERRILL LYNCH RATED INSTITUTIONAL FUND, a
series of the Trust (the "Fund"), and FUND ASSET MANAGEMENT, L.P., a Delaware
corporation (the "Adviser");

W I T N E S S E T H: WHEREAS, the Trust is engaged in business as a
diversified open-end management investment company and is registered as such
under the Investment Company Act of 1940 (the "1940 Act");

WHEREAS, the Adviser is engaged principally in rendering advisory services
and is registered as an investment adviser under the Investment Advisers Act of
1940; and

WHEREAS, the Trust desires to retain the Adviser to render investment
supervisory and corporate administrative services to the Fund in the manner and
on the terms hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Adviser hereby agree as follows:

ARTICLE 1. Duties of the Adviser. The Trust hereby employs the Adviser to
act as the manager and investment adviser of the Fund and to furnish, or to
arrange for affiliates to furnish, the Fund with investment advisory and
administrative service and to administer its affairs, subject to the supervision
of the Board of Trustees of the Trust for the period and on the terms and
conditions set forth in this Agreement. The Adviser hereby accepts such
employment and agrees during such period, at its own expense, to render the
services and to assume the obligations herein set forth for the compensation
provided for herein. The Adviser shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.

(a) Investment Advisory Services. In acting as investment adviser to the
Fund, the Adviser shall regularly provide the Fund with such investment
research, advice and supervision as the latter may from time to time consider
necessary for the proper supervision of its assets and shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held in the various securities in which the Fund may
invest, subject always to the restrictions of the Trust's Declaration of Trust
and By-Laws, as amended from time to time, the provisions of the 1940 Act, and
the statements relating to the Fund's investment objectives, investment policies
and investment restrictions as the same are set forth in the currently effective
Prospectus and Statement of Additional Information of the Fund under the
Securities Act of 1933 (the "Prospectus"). Should the Board of Trustees of the
Trust at any time, however, make any definite determination as to investment
policy and notify the Adviser thereof in writing, the Adviser shall be bound by
such determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Adviser shall
take, on behalf of the Fund, all actions which it deems necessary to implement
the investment policies determined as provided above, and in particular to place
all orders for the purchase or sale of portfolio securities for the Fund's
account with brokers or dealers selected by it, and to that end, the Investment
Adviser is authorized as the Agent of the Fund to give instructions to the
Custodian of the Fund as to deliveries of securities and payments of cash for
the account of the Fund. In connection with the selection of such brokers or
dealers and the placing of such orders, the Adviser is directed at all times to
seek to obtain execution and prices within the policy guidelines determined by
the Board of Trustees and set forth in the Prospectus. Subject to this
requirement and the provisions of the 1940 Act, the Securities Exchange Act of
1934, and other applicable provisions of law, nothing shall prohibit the Adviser
from selecting brokers or dealers with which it or the Trust is affiliated if
permitted by applicable law or regulation.

<PAGE>

(b) Administrative Services. In addition to the performance of investment
advisory services, the Adviser shall perform, or supervise the performance of,
administrative services in connection with the management of the Fund, including
processing share orders, administering shareholder accounts and handling
shareholder relations. In this connection, the Adviser agrees to (i) assist in
supervising all aspects of the Fund's operations, including the coordination of
all matters relating to the functions of the custodian, transfer agent, other
shareholder service agents, accountants, attorneys and other parties performing
services or operational functions for the Fund, (ii) provide the Fund, at the
Adviser's expense, with the services of persons competent to perform such
administrative and clerical functions as are necessary in order to provide,
effective administration of the Fund, and (iii) provide the Fund, at the
Adviser's expense, with adequate office space and related services necessary for
its operations as contemplated in this Agreement. The Trust agrees that the
Adviser may arrange for the provision of services and the performance of
functions referred to in this subsection (b) by Merrill Lynch Funds Distributor,
Inc., or other affiliates of Merrill Lynch & Co., Inc.

(c) Notice Upon Change in Partners of Investment Adviser. The Investment
Adviser is a limited partnership and its limited partner is Merrill Lynch & Co.,
Inc. and its general partner is Princeton Services, Inc. The Investment Adviser
will notify the Fund of any change in the membership of the partnership within a
reasonable time after such change.

ARTICLE 2. Allocation of Charges and Expenses.

(a) The Adviser. The Adviser assumes and shall pay for maintaining the
staff and personnel, and shall at its own expense provide the equipment, office
space and facilities necessary to perform its obligations under this Agreement,
and shall pay all compensation of officers of the Trust and of all Trustees of
the Trust who are affiliated persons of Merrill Lynch & Co., Inc. or its
subsidiaries.

(b) The Trust. The Trust assumes and shall pay all expenses of the Fund,
including, without limitation: organizational costs, taxes, shareholder
servicing costs, expenses for legal and auditing services, costs of printing
proxies, stock certificates, shareholder reports and prospectuses and statements
of additional information (except to the extent paid by the Distributor),
charges of the Custodian and Transfer Agent, expenses of portfolio transactions,
expenses of redemption of shares, Securities and Exchange Commission fees,
expenses of registering the shares under federal and state securities laws, fees
and expenses of directors who are not affiliated persons of Merrill Lynch & Co.,
Inc. or its subsidiaries, accounting and pricing costs (including the daily
calculation or net asset value), insurance, interest, brokerage costs,
litigation and other extraordinary or non-recurring expenses, and other expenses
properly payable by the Trust. It is also understood that the Fund will
reimburse the Adviser for its costs in providing accounting services to the
Fund. The Distributor will pay certain of the expenses of the Fund in connection
with the continuous offering of Fund shares.

ARTICLE 3. Compensation of the Adviser. For the services rendered, the
facilities furnished and expenses assumed by the Adviser, the Trust shall pay
the Adviser at the end of each calendar month a fee at an annual rate of 0.20%
of the average daily value of the net assets of the Fund, as determined and
computed in accordance with the description of the determination of net asset
value contained in the Prospectus. During any period when the determination of
net asset value is suspended by the Board of Trustees of the Trust, the net
asset value as of the last business day prior to such suspension shall for this
purpose be deemed to be the net asset value at the close of each succeeding
business day until it is again determined.

ARTICLE 4. Limitation of Liability of Trustees, Shareholders, Officers,
Employees and Agents. The Declaration of Trust establishing the Trust, dated May
7, 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 "Merrill Lynch Funds For Institutions
Series" 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 may be held to any personal liability, nor may
resort be had to their private property for the satisfaction of any obligation
or claim or otherwise in connection with the affairs of said Trust but the Trust
Property only shall be liable.

<PAGE>

ARTICLE 5. Limitation of Liability of the Adviser. The Adviser shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Trust in connection with any investment policy or the purchase, sale or
redemption of any securities on the recommendation of the Adviser. Nothing
herein contained shall be construed to protect the Adviser against any liability
to the Trust or its security holders to which the Adviser shall otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence in the
performance of its duties on behalf of the Trust, reckless disregard of the
Adviser's obligations and duties under this Agreement or the violation of any
applicable law. As used in this Article 5, the term "Adviser" shall include any
affiliates of the Adviser performing services for the Trust contemplated hereby
and directors, officers and employees of the Adviser and such affiliates.

ARTICLE 6. Activities of the Adviser. The services of the Adviser under
this Agreement are not to be deemed exclusive, and the Adviser and its
affiliates shall be free to render similar services to others so long as its
services hereunder are not impaired thereby. It is understood that trustees,
officers, employees and shareholders of the Trust are or may become interested
in the Adviser and its affiliates, as directors, officers, employees or
shareholders or otherwise of the Adviser and are or may become similarly
interested in the Trust, and that the Adviser and its affiliates are or may
become interested in the Trust as shareholder or otherwise.

ARTICLE 7. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until June __, 2000 and thereafter, but only so long as such continuance
is specifically approved at least annually by (i) the Board of Trustees of the
Trust, or by the vote of a majority of the outstanding voting securities of the
Fund, and (ii) by the vote of a majority of those Trustees who are not parties
to this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval.

This Agreement may be terminated at any time, without the payment of any
penalty, by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund on sixty days' notice to the Adviser,
or by the Adviser, on sixty days' written notice to the Trust. This Agreement
shall automatically terminate in the event of its assignment.

ARTICLE 8. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the vote of a
majority of the outstanding voting securities of the Fund, and (ii) the vote of
a majority of those Trustees of the Trust who are not parties to this Agreement
or interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval.

ARTICLE 9. Definition of Certain Terms. The terms "vote of a majority of
the outstanding voting securities", "assignment", "interested person" and
"affiliated person", when used in this Agreement, shall have the respective
meanings specified in the 1940 Act.

ARTICLE 10. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the 1940 Act. To the
extent that the applicable law of the State of New York, or any of the
provisions herein, conflicts with the applicable provisions of the 1940 Act, the
latter shall control.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.

MERRILL LYNCH FUNDS FOR INSTITUTIONS SERIES

By
----------------------------------------
Name:
Title:

Attest:

By
------------------
Name:
Title:

FUND ASSET MANAGEMENT, L.P.

By: Princeton Services, Inc.,
General Partner

By
----------------------------------------
Name:
Title:

Attest:

By
-------------------
Name:
Title:

DISTRIBUTION AGREEMENT

AGREEMENT made as of this _______ day of June, 1998 between MERRILL LYNCH
FUNDS FOR INSTITUTIONS SERIES, a Massachusetts business trust (the "Trust"),
with respect to MERRILL LYNCH RATED INSTITUTIONAL FUND, a series of the Trust
(the "Fund"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation
(the "Distributor");

W I T N E S S E T H:

WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a diversified open-end investment
company and it is affirmatively in the interest of the Trust to offer its shares
for sale, continuously; and

WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and

WHEREAS, the Trust and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the shares of the
Fund after the effectiveness of the registration statement covering the shares
of the Fund filed under the Securities Act of 1933, as amended (the "Securities
Act").

NOW, THEREFORE, the parties agree as follows:

Section 1. Appointment of the Distributor. The Trust hereby appoints the
Distributor as the principal underwriter and distributor of the Fund to sell
shares of the Fund to the public, and the Distributor hereby accept such
appointment. The Trust, during the term of this Agreement, shall sell its shares
to the Distributor upon the terms and conditions set forth below.

Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Trust to act as principal underwriter and
distributor, except that:

(a) The Trust may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of its shares with
respect to areas other than the United States as to which the Distributor may
have expressly waived in writing its right to act as such. If such designation
is deemed exclusive, the right of the Distributor under this Agreement to sell
shares in the areas so designated shall terminate, but this Agreement shall
remain otherwise in full effect until terminated in accordance with the other
provisions hereof.

(b) The exclusive right granted to the Distributor to purchase shares from
the Trust shall not apply to shares of the Trust issued in connection with the
merger or consolidation of any other investment company or personal holding
company with the Trust or the Fund or the acquisition by purchase or otherwise
of all (or substantially all) the assets or the outstanding shares of any such
company by the Trust or the Fund.

(c) Such exclusive right shall not apply to shares issued by the Trust
pursuant to reinvestment of dividends, capital gains distributions or otherwise
pursuant to its daily reinvestment program.

Section 3. Purchase of Shares from the Trust.

(a) The Distributor shall have the right to buy from the Trust the shares
needed, but not more than the shares needed (except for clerical errors in
transmission), to fill unconditional orders for shares of the Fund placed with
the Distributor by investors or securities dealers. The price which the
Distributor shall pay for the shares so purchased from the Trust shall be the
net asset value, determined as set forth in Section 3(d) hereof, used in
determining the public offering price on which such orders were based.

<PAGE>

(b) The shares are to be resold by the Distributor to investors at the
public offering price, as set forth in Section 3(c) hereof, or to securities
dealers having agreements with the Distributor upon the terms and conditions set
forth in Section 7 hereof.

(c) The public offering price of the shares, i.e., the price per share at
which the Distributor or selected dealers may sell shares to the public, shall
be the public offering price as set forth in the currently effective prospectus
of the Fund under the Securities Act (the "Prospectus", which term for purposes
of this Agreement shall be deemed to include the Fund's Statement of Additional
Information) relating to such shares, but not to exceed the net asset value. If
the resulting public offering price does not equal an even cent, the public
offering price may be adjusted to the nearest cent. All payments to the Trust
hereunder shall be made in the manner set forth in Section 3(f).

(d) The net asset value per share of the Fund for purposes of pricing
orders for both the purchase and the redemption of Fund shares shall be
determined at the times and on the days set forth in the Prospectus of the Fund.
The net asset value shall be determined by adding the value of all securities
and other assets in the portfolio, deducting its liabilities and dividing by the
number of shares outstanding.

(e) The Trust shall have the right to suspend the sale of shares of the
Fund at times when redemption is suspended pursuant to the conditions set forth
in Section 4(b) hereof. The Trust shall also have the right to suspend the sale
of shares of the Fund if trading on the New York Stock Exchange shall have been
suspended, if a banking moratorium shall have been declared by Federal,
Massachusetts, or New York authorities, or if there shall have been some other
extraordinary event, which, in the judgment of the Trust, makes it impracticable
to sell the shares.

(f) The Trust, or any agent of the Trust, designated in writing by it,
shall be promptly advised of all purchase orders for shares received by the
Distributor. Procedures may be established whereby purchase orders are presented
directly to the Trust or its designated agent upon the condition that in such
cases it shall be deemed that the issuance of the shares to be purchased is made
pursuant to Section 3 hereof. Any order may be rejected by the Trust or the
Distributor; provided, however, that neither will arbitrarily or without
reasonable cause refuse to accept or confirm orders for the purchase of shares.
The Trust (or its agent) will confirm orders upon their receipt, and will make
appropriate book entries pursuant to the instructions of the Distributor.
Purchase orders are effective when Federal Funds become available to the Trust.
The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Trust (or its agent).

Section 4. Redemption or Repurchase of Shares by the Fund.

(a) Any of the outstanding shares may be tendered for redemption or
repurchase at any time, and the Trust shall redeem or repurchase the shares so
tendered in accordance with its obligations and rights as set forth in its
Declaration of Trust, as amended from time to time, and in accordance with the
applicable provisions set forth in the most current prospectus of the Fund. The
price to be paid to redeem or repurchase the shares shall be equal to the net
asset value calculated in accordance with the provisions of Section 3(d) hereof.
All payments by the Trust hereunder shall be made in the manner set forth below.
The Trust shall pay the total amount of the redemption price as defined in the
above paragraph pursuant to the instructions of the Distributor and in
accordance with the terms set forth in the Prospectus.

(b) The Trust reserves the right to reject any order for repurchase
through a securities dealer, but the right to redeem shares, or to receive
payment with respect to any such redemption, upon the presentation of properly
submitted redemption requests in accordance with the procedures set forth in the
Prospectus, may only be suspended for any period during which trading on the New
York Stock Exchange is restricted as determined by the Securities and Exchange
Commission or such Exchange is closed (other than customary weekend and holiday
closings), for any period during which an emergency exists as defined by the
Securities and Exchange Commission as a result of which disposal of portfolio
securities or determination of the net asset value of the Fund is not reasonably
practicable, and for such other periods as the Securities and Exchange
Commission may by order permit for the protection of shareholders of the Fund.

<PAGE>

Section 5. Duties of the Trust.

(a) The Trust shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of shares of the Fund, and
this shall include one certified copy, upon request by the Distributor, of all
financial statements prepared for the Trust with respect to the Fund by
independent public accountants. The Trust shall make available to the
Distributor such number of copies of the most current prospectus of the Fund as
the Distributor shall reasonably request.

(b) The Board of Trustees shall take, from time to time, all necessary
action to fix the number of the Fund's authorized shares and such steps as may
be necessary to register the same under the Securities Act to the extent that
there will be available for sale such number of shares as the Distributor
reasonably may be expected to sell.

(c) The Trust shall use its best efforts to qualify and maintain the
qualification of an appropriate number of the Fund's shares for sale under the
securities laws of such states as the Distributor and the Trust may approve. Any
such qualification may be withheld, terminated or withdrawn by the Trust at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Trust. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Trust in connection with such
qualifications.

(d) The Trust will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.

Section 6. Duties of the Distributor.

(a) The Distributor shall devote reasonable time and effort to effect
sales of shares of the Fund, but shall not be obligated to sell any specific
number of shares. The services of the Distributor to the Trust hereunder are not
to be deemed exclusive and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other investment companies
so long as the performance of its obligations hereunder is not impaired thereby.

(b) In selling the shares of the Fund, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all federal and
state laws and regulations and the regulations of the National Association of
Securities Dealers, Inc. (the "NASD") relating to the sale of such securities.
Neither the Distributor nor any selected dealer nor any other person is
authorized by the Trust to give any information or to make any representations,
other than those contained in the registration statement or related prospectus
or any sales literature specifically approved by the Trust.

(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Trust, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.

(d) The Distributor shall receive amounts from Fund Asset Management,
L.P., the Fund's Investment Adviser, for payment to third parties for providing
support services to the Fund. These services may include providing office space,
equipment, telephone facilities and various personnel as is necessary or
beneficial to establish and maintain shareholders' accounts and records, process
purchase and redemption transactions, answer routine client inquiries regarding
the Fund, and provide such other services to the Fund as the Fund may reasonably
request.

<PAGE>

Section 7. Selected Dealer Agreements.

(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of shares; provided that the form of selected dealer agreement shall be
approved by the Trust. Shares sold to selected dealers shall be for resale by
such dealers only in accordance with the provisions of the prospectus.

(b) Within the United States, the Distributor shall offer and sell shares
only to such selected dealers as are members in good standing of the NASD.

Section 8. Payments of Expenses.

(a) The Trust shall bear all costs and expenses of the Fund, including
fees and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).

(b) After the prospectuses, statements of additional information, and
annual and interim reports have been prepared and set in type, the Distributor
shall bear the costs and expenses of printing and distributing any copies
thereof which are to be used in connection with the offering of shares to
selected dealers or investors. The Distributor shall bear the costs and expenses
of preparing, printing and distributing any other literature used by the
Distributor or furnished by it for use by selected dealers in connection with
the offering of the shares for sale to the public. Any expenses of advertising
incurred in connection with such offering will be the obligation of the Adviser.

(c) The Trust shall bear the cost or expenses (other than auditing
expenses) of qualification of the shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Trust as a broker or
dealer, in such states of the United States or other jurisdictions as shall be
selected by the Trust and the Distributor pursuant to Section 5(c) hereof and
the cost and expenses payable to each such state for continuing qualification
therein until the Trust decides to discontinue such qualification pursuant to
Section 5(c) hereof.

Section 9. Indemnification.

(a) The Trust shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any shares, which may be based upon the Securities Act, or on
any other statute or at common law, on the ground that the registration
statement or related Prospectus, as from time to time amended and supplemented,
or the annual or interim reports to shareholders of the Fund, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, unless such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Trust in connection therewith by
or on behalf of the Distributor; provided, however, that in no case (i) is the
indemnity of the Trust in favor of the Distributor and any such controlling
persons to be deemed to protect such Distributor or any such controlling persons
thereof against any liability to the Trust or the Fund's security holders to
which the Distributor or any such controlling persons would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement, or (ii) is the Trust to be liable
under its indemnity agreement contained in this subsection (a) with respect to
any claim made against the Distributor or such controlling persons, unless the
Distributor or such controlling person, as the case may be, shall have notified
the Trust in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received

<PAGE>

notice of such service on any designated agent), but failure to notify the Trust
of any such claim shall not relieve it from any liability which it may have to
the person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Trust will be entitled to
participate at its own expense in the defense of any suit brought to enforce any
such liability, but if the Trust elects to assume the defense, such defense
shall be conducted by counsel chosen by it and satisfactory to the Distributor
or such controlling person or persons, defendant or defendants in the suit. In
the event the Trust elects to assume the defense in any such suit and retain
such counsel, the Distributor or such controlling person or persons, defendant
or defendants in the suit, shall bear the fees and expenses of any additional
counsel retained by them but, in case the Trust does not elect to assume the
defense of any such suit, it will reimburse the Distributor or such controlling
person or persons, defendant or defendants in the suit, for the reasonable fees
and expenses of any counsel retained by them. The Trust shall promptly notify
the Distributor of the commencement of any litigation or proceedings against it
or any of its officers or directors in connection with the issuance or sale of
any of the shares.

(b) The Distributor shall indemnify and hold harmless the Trust and each
of its Trustees and officers and each person, if any, who controls the Trust
against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section 9, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Trust in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
Prospectus, as from time to time amended, or the annual or interim reports to
shareholders. In case any action shall be brought against the Trust or any
person so indemnified, in respect of which indemnity may be sought against the
Distributor, the Distributor shall have the rights and duties given to the
Trust, and the Trust and each person so indemnified shall have the rights and
duties given to the Distributor by the provisions of subsection (a) of this
Section 9.

Section 10. Term of Agreement. This Agreement shall commence on the date
of its execution. Unless sooner terminated in accordance with the other
provisions hereof, this Agreement shall continue in effect from year to year
hereafter, but only so long as such continuance is specifically approved at
least annually by (i) the vote of a majority of the Board of Trustees who are
not parties to this Agreement or interested persons (within the meaning of the
Investment Company Act) of the Trust or the Distributor, cast in person at a
meeting called for the purpose of voting on such approval, and (ii) either the
Board of Trustees of the Trust or a vote of a majority (within the meaning of
the Investment Company Act) of the outstanding voting securities of the Fund.

Section 11. Termination and Assignment.

(a) This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Trustees, by vote of a majority of the outstanding
voting securities of the Fund, or by the Distributor, on sixty days' written
notice to the other party.

(b) This Agreement shall not be assignable by either party hereto and in
the event of assignment (as defined in the Investment Company Act) this
Agreement shall automatically terminate forthwith.

Section 12. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Board of
Trustees or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Trustees of the Trust who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.

Section 13. Notices. Any notice required or permitted to be given
hereunder by either party to the other shall be deemed sufficiently given if
sent by registered mail, postage prepaid, addressed by the party giving such
notice to the other party at the last address furnished by such other party to
the party giving notice, and unless and until changed pursuant to the foregoing
provisions hereof addressed, if to the Fund at One Financial Center, Boston,
Massachusetts 02111, and if to the Distributor at One Financial Center, Boston,
Massachusetts 02111.

<PAGE>

Section 14. Governing Law. This Agreement is to the extent applicable
governed and construed in accordance with the laws of the State of New York.

Section 15. Limitation of Liability of Trustees, Shareholders, Officers,
Employees and Agents.

The Declaration of Trust establishing the Trust, dated May 7, 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 "Merrill Lynch Funds For Institutions Series" 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 may be held to any personal liability, nor may resort be had to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said Trust but the Trust Property only shall be
liable.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By:
----------------------------------
Name:
Title:

MERRILL LYNCH FUNDS FOR INSTITUTIONS
SERIES

By:
----------------------------------
Name:
Title:

EXHIBIT 11

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Post-Effective Amendment No. 18 to Registration
Statement No. 33-14190 of Merrill Lynch Funds For Institutions Series of our
report dated May 28, 1998 appearing in the Statements of Additional Information
of Merrill Lynch Premier Institutional Fund, Merrill Lynch Institutional Fund,
Merrill Lynch Government Fund, Merrill Lynch Treasury Fund, and Merrill Lynch
Institutional Tax-Exempt Fund of Merrill Lynch Funds For Institutions Series,
which are a part of such Registration Statement, and to the reference to us
under the heading "Financial Highlights" appearing in the Prospectuses of
Merrill Lynch Premier Institutional Fund, Merrill Lynch Institutional Fund,
Merrill Lynch Government Fund, Merrill Lynch Treasury Fund, and Merrill Lynch
Institutional Tax-Exempt Fund of Merrill Lynch Funds For Institutions Series,
which are a part of such Registration Statement.

/s/ Deloitte & Touche LLP

Boston, Massachusetts
June 9, 1998