MERRILL LYNCH
SHORT-TERM
GLOBAL INCOME
FUND, INC.
FUND LOGO
Annual Report
October 31, 1995
This report is not authorized for use as an offer of sale
or a solicitation of an offer to buy shares of the Fund
unless accompanied or preceded by the Fund's current
prospectus. Past performance results shown in this report
should not be considered a representation of future
performance. Investment return and principal value
of shares will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
<PAGE>
Merrill Lynch
Short-Term Global
Income Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH SHORT-TERM GLOBAL INCOME FUND, INC.
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Joseph T. Monagle, Jr., Senior Vice President
Alex V. Bouzakis, Vice President
Donald C. Burke, Vice President
Edward F. Gobora, Vice President
David B. Walter, Vice President
Stephen Yardley, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Chase Manhattan Bank, N.A.
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, New York 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
Important Tax
Information
(unaudited)
Of the monthly cash distributions paid by Merrill Lynch Short-
Term Global Income Fund, Inc. during the period January 1995 through
October 31, 1995, 67.44% are characterized as a return of capital
distributions. The tax reporting treatment of a return of capital is
different from that of a taxable distribution. Rather than being included
in your current taxable income, a return of capital is non-taxable and
will reduce the cost basis in your shares of the Fund.
Additionally, 32.56% of the monthly cash distributions paid during the
period January 1995 through October 1995 represent income from foreign
sources.
Finally, the Fund incurred foreign taxes which it has elected to pass
through to its shareholders. Your share of the Fund's total foreign taxes
paid or withheld is 1.2588% multiplied by the January through October
cash distributions.
The foreign taxes paid or withheld represent taxes incurred by the Fund
on income received by the Fund from foreign sources. Foreign taxes paid
or withheld should be included as foreign source taxable income with an
offsetting deduction from gross income or as a credit for taxes paid to
foreign governments. You should consult your tax adviser regarding the
appropriate treatment of foreign taxes paid.
Please retain this information for your records.
<PAGE>
DEAR SHAREHOLDER
Fiscal Year in Review
During the year, as global fixed-income
prices firmed, we remained for the most
part conservatively positioned in the
higher-yielding dollar-bloc markets. In
particular, we increased the Fund's expo-
sure to Canada, Australia and New
Zealand as yield spreads remained attrac-
tive versus the United States. On the cur-
rency front, the US dollar finally entered
a period of consolidation after sharp
moves lower against the Deutschemark
and the yen in the early part of the year.
Looking ahead, we will continue to
hedge our foreign currency exposure
into US dollars to take advantage of
attractive interest rate differentials and
improving dollar fundamentals. This
strategy served to enhance the Fund's
performance throughout the fiscal year.
Market Review
In 1995, international bond markets
responded positively to lower short-term
international interest rates brought on
by central bank easings. As the US
market traded strongly, other European
markets followed, with higher-yielding
markets outperforming in general.
During September support for a stronger
US dollar from US and Japanese offi-
cials, a reduction of Japanese short-term
interest rates, central bank intervention
and a weak Tankan report from Japan
helped the US dollar break through the
psychological level of 100 yen per dollar.
In addition, the Bank of Japan (BOJ)
reduced its discount rate by 50 basis
points (0.50%) to 0.50% on September 8,
1995 while Japan's stimulus package was
presented on September 20. The finan-
cial package totaled 14.2 trillion yen,
and a majority of the plan focused on
public works projects.
<PAGE>
As expected several European banks
eased monetary policy in September,
continuing the easing trend initiated
earlier in the year. The Bundesbank
reduced its repurchase agreement rate
15 basis points to 4.15%, while the
Belgian National Bank adjusted two of its
key rates 20 basis points, decreasing the
central rate to 4.10% and the end-of-day
rate to 5.35%. In addition, Denmark,
Austria, Portugal, Switzerland and the
Netherlands also followed with similar
rate reductions.
The Italian bond market and currency
were supported as Italy's 1996 budget
was approved by the Cabinet and Senate.
The budget aims to reduce the deficit
by 32.5 trillion Italian lira, bringing the
deficit to 5.8% of gross domestic product
(GDP) from 7.4%. The 1996 French
budget was released on September 20.
The deficit target of 290 billion French
francs is a reduction from 322 billion
French francs in 1995.
European Union heads of state held an
informal summit on September 22 and
September 23 and an official meeting on
September 29 and September 30 to dis-
cuss European Monetary Union issues.
Several political leaders expressed con-
cern in the ability to meet the criteria of
the Maastricht Treaty and suggested
changing the timing of the Treaty, which
added short-term volatility to European
bond markets.
In October, several European central
banks continued to reduce key rates.
The Bundesbank again decreased its
repurchase agreement rate a total of
5 basis points to 4.03%. The Belgian
National Bank adjusted the end-of-day
rate 5 basis points to 5.30% and the
central rate to 4.05% from 4.10%, while
in Sweden the Riksbank set the discount
rate at 7.00% versus 7.50%. While this
does not represent a change to Swedish
monetary policy, as the rate is set based
on current yields of government bonds,
it does indicate Sweden's resolution to
be consistent with interest rate activity
in other European countries.
<PAGE>
Contrary to the other central banks,
however, the Bank of France (BOF)
tightened monetary policy on October 9
to stabilize its currency by increasing the
24-hour lending rate by 110 basis points
to 7.25%. The BOF replaced the 5-day--
10-day lending window with a 24-hour
rate to support the depreciating franc.
Later in the month, the central bank
reversed course and reduced the short-
term rate 25 basis points to 7.00% to
safeguard the franc against speculative
pressure. In addition, five million
French public sector workers protested
the proposed salary freeze in the 1996
budget by entering a general strike.
Prime Minister Juppe refused to increase
salaries of public sector employees to
help reduce the deficit to 290 billion
French francs, 3% of GDP, in 1996. The
strike affected public transportation,
schools and post offices and brought the
nation to a virtual standstill.
The European bond markets were influ-
enced by speculation that Sweden and
Finland might join the Exchange Rate
Mechanism (ERM) in the near future,
while rumors of Italy rejoining have sub-
sided. Next year will be critical in deter-
mining the participating countries for
European Unity though European bond
markets will undoubtedly be affected
during the entire process.
Political disruption remains the focus in
Italy. Justice Minister Mancuso was
accused of interfering in the corruption
investigations of Milan magistrates.
The Social Democratic Party wanted
Mancuso's resignation and the Justice
Minister refused to submit to pressure.
He lost a no-confidence vote and later
appealed the vote to the Constitutional
Court. President Scalafaro named Prime
Minister Dini Acting Justice Minister.
In addition, former Prime Minister
Berlusconi was indicted for bribery of
tax inspectors. While the trial is set for
January 17, 1996, he plans to retain his
leadership of the center-right Freedom
Alliance Party. Prime Minister Dini won
a vote of no confidence initiated by
Berlusconi. Initially, Dini had refused to
resign but later stated he would step
down after passage of the 1996 budget.
<PAGE>
On October 26, 1995, the Mexican peso
depreciated 6.2% to levels not seen since
March 9 when the currency reached a
record low of 7.45. Several factors con-
tributed to the peso's decline. Inflation
for the first half of the month increased
1.1%, 30% higher than anticipated. Also
contributing to the turbulence of the
Mexican currency was speculation that
the Pacto negotiations were meeting
with difficulties and the continued arrest
of political figures.
In Canada, on October 30, the Province
of Quebec voted against sovereignty
by a narrow margin of 50.6% to 49.4%.
Another attempt at independence could
occur in the next few years. Shortly
after the referendum, the Bank of Canada
(BOC) began what will most likely be a
gradual easing process to counter the
increasing interest rate trend which
began in June. The BOC lowered the target
bank for call loan rate to 5.75%--6.25%.
Representatives at the meeting of the
Group of Seven Industrialized Nations
(G-7) on October 7 and October 8 were
in agreement that they would welcome
further appreciation of the US dollar
and were pleased with the progress
already made. Much of the communique
was the same as the April 7 meeting.
The participants reiterated the commit-
ment to reduce imbalances and cooper-
ate closely in the foreign exchange
markets. They also concluded current
fiscal and monetary policies should con-
tinue and stressed the importance of
reducing fiscal deficits. G-7 nations are
unified in their position on the currency
markets and are prepared to intervene
in the foreign exchange market to main-
tain a stronger US dollar. However, no
definitive conclusions were reached as
to how much dollar appreciation the
G-7 would like to see.
<PAGE>
In the United States, bond markets con-
tinued their positive trend as budget
deficit reduction, stable inflation and
noninflationary economic growth pushed
interest rates to just under 6.40% yield
levels on the 30-year Treasury bond. This
positive trend may continue if develop-
ments in Washington regarding balanc-
ing the budget become reality. However,
we are aware of potential market disap-
pointment if Washington allows political
factors to take center stage in the
budget process.
In Conclusion
Looking ahead, we anticipate interest
rates to firm as global economic growth
and inflation criteria may force central
banks to become cautious over the near
term. We also believe the US dollar is in
a consolidation process as a budget defi-
cit reduction and other economic funda-
mentals point to a positive environment
for further dollar strength.
We thank you for your continued invest-
ment in Merrill Lynch Short-Term Global
Income Fund, Inc., and we look forward
to reviewing our outlook with you again
in our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Alex V. Bouzakis)
Alex V. Bouzakis
Vice President and
Senior Portfolio Manager
(Edward F. Gobora)
Edward F. Gobora
Vice President and Portfolio Manager
(David B. Walter)
David B. Walter
Vice President and Portfolio Manager
<PAGE>
(Stephen Yardley)
Stephen Yardley
Vice President and Portfolio Manager
December 6, 1995
PERFORMANCE DATA
About Fund
Performance
Since October 21, 1994, investors have been able to purchase
shares of the Fund through the Merrill Lynch Select Pricing SM
System, which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge
(front-end load) of 4% and bear no ongoing distribution or
account maintenance fees. Class A Shares are available only
to eligible investors, as detailed in the Fund's prospectus. If
you were a Class A shareholder prior to October 21, 1994,
your Class A Shares were redesignated to Class D Shares on
October 21, 1994, which, in the case of certain eligible
investors, were simultaneously exchanged for Class A Shares.
* Class B Shares are subject to a maximum contingent
deferred sales charge of 4% if redeemed during the first year,
decreasing 1% each year thereafter to 0% after the fourth year.
In addition, Class B Shares are subject to a distribution fee
of 0.50% and an account maintenance fee of 0.25%. These
shares automatically convert to Class D Shares after 10 years.
* Class C Shares are subject to a distribution fee of 0.55%
and an account maintenance fee of 0.25%. In addition, Class
C Shares are subject to a 1% contingent deferred sales charge
if redeemed within one year of purchase.
* Class D Shares incur a maximum initial sales charge of
4% and an account maintenance fee of 0.25% (but no
distribution fee).
<PAGE>
Performance data for all the Fund's shares are presented in
the "Total Return Based on a $10,000 Investment" graphs
below and on page 5, and the "Performance Summary" and
"Recent Performance Results" tables on pages 6 and 7. Data
for the Fund's Class B and Class D Shares are presented in
the "Average Annual Total Return" table on page 5. Data for
Class A and Class C Shares are also presented in the "Aggre-
gate Total Return" tables on page 5.
The "Recent Performance Results" table shows investment
results before the deduction of any sales charges for all of the
Fund's shares for the 12-month and 3-month periods ended
October 31, 1995. All data in this table assume imposition
of the actual total expenses incurred by each class of shares
during the relevant period.
None of the past results shown should be considered a repre-
sentation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Dividends paid to each class of shares will vary because of
the different levels of account maintenance, distribution and
transfer agency fees applicable to each class, which are
deducted from the income available to be paid to shareholders.
Total Return
Based on a
$10,000
Investment
A line graph depicting growth of an investment in the Fund's Class A
Shares and Class C Shares compared to the growth of an investment in
the ML Global Government Bond Index and the Salomon Brothers World
Government One--Three Year Bond Index. Beginning and ending values are:
10/21/94** 10/95
ML Short-Term Global Income Fund, Inc.++--
Class A Shares*+++ $ 9,600 $10,057
ML Short-Term Global Income Fund, Inc.++--
Class C Shares* $10,000 $10,093
ML Global Government Bond Index++++ $10,000 $10,957
Salomon Brothers World Government
One--Three Year Bond Index++++++ $10,000 $10,969
<PAGE>
A line graph depicting growth of an investment in the Fund's Class B
Shares and Class D Shares compared to the growth of an investment in
the ML Global Government Bond Index and the Salomon Brothers World
Government One--Three Year Bond Index. Beginning and ending values are:
8/3/90** 10/95
ML Short-Term Global Income Fund, Inc.++--
Class B Shares* $10,000 $11,552
ML Short-Term Global Income Fund, Inc.++--
Class D Shares*+++ $ 9,600 $11,408
ML Global Government Bond Index++++ $10,000 $16,013
Salomon Brothers World Government
One--Three Year Bond Index++++++ $10,000 $14,241
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++ML Short-Term Global Income Fund, Inc. invests, under normal
circumstances, in debt securities denominated in at least three
different currencies, including the US dollar.
++++This unmanaged Index is comprised of 189 global government
bonds maturing in one to three years.
++++++This unmanaged Index is comprised of global government
bonds maturing in one to three years hedged into US dollars.
+++Class A Shares were redesignated to Class D Shares
on October 21, 1994.
Aggregate
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (10/21/94) through 9/30/95 +4.06% -0.10%
<PAGE>
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94) through 9/30/95 +0.19% -0.76%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
Average Annual
Total Return
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/95 +3.18% -0.71%
Five Years Ended 9/30/95 +2.48 +2.48
Inception (8/3/90) through 9/30/95 +2.66 +2.66
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 9/30/95 +3.73% -0.42%
Five Years Ended 9/30/95 +3.04 +2.20
Inception (8/3/90) through 9/30/95 +3.22 +2.41
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $8.11 $7.90 -- $0.103 -1.33%
1/1/95--10/31/95 7.90 7.93 -- 0.425 +6.18
------
Total $0.528
Cumulative total return as of 10/31/95: +4.76%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable date, and do not include sales charge;
results would be lower if sales charge was included.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
8/3/90--12/31/90 $10.00 $9.93 -- $0.404 +3.40%
1991 9.93 9.68 -- 0.885 +6.63
1992 9.68 8.69 -- 0.687 -3.39
1993 8.69 8.63 -- 0.581 +6.15
1994 8.63 7.89 -- 0.463 -3.30
1/1/95--10/31/95 7.89 7.93 -- 0.375 +5.65
------
Total $3.395
Cumulative total return as of 10/31/95: +15.52%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable date, and do not reflect deduction of any
sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance
Summary--
Class C Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $8.11 $7.89 -- $0.079 -1.74%
1/1/95--10/31/95 7.89 7.74 -- 0.339 +2.73
------
Total $0.418
Cumulative total return as of 10/31/95: +0.93%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable date, and do not reflect deduction of any
sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance
Summary--
Class D Shares***
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
8/3/90--12/31/90 $10.00 $9.93 -- $0.436 +3.73%
1991 9.93 9.68 -- 0.941 +7.23
1992 9.68 8.70 -- 0.735 -2.79
1993 8.70 8.64 -- 0.625 +6.69
1994 8.64 7.89 -- 0.506 -2.91
1/1/95--10/31/95 7.89 7.93 -- 0.409 +6.10
------
Total $3.652
Cumulative total return as of 10/31/95: +18.83%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable date, and do not include sales charge;
results would be lower if sales charge was included.
***As a result of the implementation of the Merrill Lynch Select Pricing SM
System, Class A Shares of the Fund outstanding prior to October 21, 1994
were redesignated to Class D Shares.
</TABLE>
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
10/31/95 7/31/95 10/31/94 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $7.93 $7.89 $8.11 -2.22% +0.51%
Class B Shares* 7.93 7.88 8.10 -2.10 +0.63
Class C Shares* 7.74 7.70 8.10 -4.44 +0.52
Class D Shares* 7.93 7.88 8.11 -2.22 +0.63
Class A Shares--Total Return* +4.63(1) +2.19(2)
Class B Shares--Total Return* +4.00(3) +2.25(4)
Class C Shares--Total Return* +0.93(5) +2.07(6)
Class D Shares--Total Return* +4.43(7) +2.26(8)
Class A Shares--Standardized 30-day Yield 5.46%
Class B Shares--Standardized 30-day Yield 4.89%
Class C Shares--Standardized 30-day Yield 4.87%
Class D Shares--Standardized 30-day Yield 5.21%
<FN>
*Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.528 per share ordinary income
dividends.
(2)Percent change includes reinvestment of $0.132 per share ordinary income
dividends.
(3)Percent change includes reinvestment of $0.469 per share ordinary income
dividends.
(4)Percent change includes reinvestment of $0.117 per share ordinary income
dividends.
(5)Percent change includes reinvestment of $0.418 per share ordinary income
dividends.
(6)Percent change includes reinvestment of $0.109 per share ordinary income
dividends.
(7)Percent change includes reinvestment of $0.512 per share ordinary income
dividends.
(8)Percent change includes reinvestment of $0.127 per share ordinary income
dividends.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Maturity Interest Value Percent of
COUNTRIES Face Amount Date Issue Rate++ (Note 1a) Net Assets
<S> <S> <C> <C> <S> <C> <C> <C>
Australia A$ 65,220,000 7/15/96 Commonwealth Bank of Australia (3) 13.00% $ 51,489,914 12.12%
27,300,000 4/01/97 New South Wales Treasury Corp. (3) 12.50 22,049,398 5.19
Total Investments in Australia
(Cost--$73,718,883) 73,539,312 17.31
Canada C$ 10,870,000 2/08/96 Canadian Treasury Bill (1) 5.90 7,973,548 1.88
65,050,000 3/07/96 Canadian Treasury Bill (1) 5.82 47,491,107 11.18
14,590,000 12/13/95 Ontario Treasury Bill (3) 5.90 10,794,316 2.54
11,560,000 12/27/95 Ontario Treasury Bill (3) 5.90 8,537,252 2.01
Total Investments in Canada
(Cost--$72,535,006) 74,796,223 17.61
Ireland Iep 12,230,000 7/30/96 Irish Gilt (1) 9.00 20,265,025 4.77
Total Investments in Ireland
(Cost--$20,007,622) 20,265,025 4.77
Italy Lit 5,735,000,000 1/01/96 Buoni Poliennali del Tesoro (Italian
Government Bonds) (1) 12.00 3,592,439 0.84
25,000,000,000 10/01/96 Buoni Poliennali del Tesoro (Italian
Government Bonds) (1) 9.00 15,517,187 3.65
Total Investments in Italy
(Cost--$18,680,213) 19,109,626 4.49
New Zealand NZ$ 101,235,000 11/15/95 New Zealand Government Bonds (1) 8.00 66,796,292 15.72
21,500,000 2/07/96 New Zealand Treasury Bill (1) 8.18 13,904,944 3.27
Total Investments in New Zealand
(Cost--$77,448,259) 80,701,236 18.99
<PAGE>
Spain Pta 2,000,000,000 2/28/97 Bonos del Estado (Spanish Government
Bonds) (1) 9.00 16,213,202 3.82
Total Investments in Spain
(Cost--$16,014,575) 16,213,202 3.82
United Pound 11,800,000 12/30/96 General Electric Capital Corp. (2) 8.25 18,932,295 4.45
Kingdom Sterling
Total Investments in the United Kingdom
(Cost--$19,134,699) 18,932,295 4.45
United States US$ 15,000,000 11/01/95 CS First Boston Inc., Repurchase Agreement*
purchased on 10/31/95 (2) 5.77 15,000,000 3.53
24,000,000 11/01/95 Chemical Bank, Repurchase Agreement*
purchased on 10/31/95 (2) 5.85 24,000,000 5.65
21,857,000 11/01/95 Schweizerischer Bankverein SBC (Swiss Bank),
Repurchase Agreement* purchased on
10/31/95 (2) 5.85 21,857,000 5.14
34,790,000 1/15/96 US Treasury Note (1) 9.25 35,034,574 8.24
Total Investments in the United States
(Cost--$96,076,951) 95,891,574 22.56
Total Investments (Cost--$393,616,208) 399,448,493 94.00
Unrealized Depreciation on Forward Foreign Exchange Contracts++++ (2,496,027) (0.58)
Other Assets Less Liabilities 27,977,570 6.58
------------ -------
Net Assets $424,930,036 100.00%
============ =======
<FN>
Corresponding industry groups for securities (percent of net assets):
(1)Sovereign Government Obligations--53.37%
(2)Financial Services--18.77%
(3)Sovereign//Regional Government Obligations--Agency--21.86%
*Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
++Certain Commercial Paper, US Treasury and Foreign Treasury Obligations
are traded on a discount basis; the interest rates shown represent the yield-
to-maturity at the time of purchase by the Fund. Other securities bear
interest at the rates shown, payable at fixed dates or upon maturity.
Interest rates on floating rate securities are adjusted periodically based
on appropriate indexes; the interest rates shown are those in effect at
October 31, 1995.
<PAGE>
++++Forward Foreign Exchange Contracts as of October 31, 1995 were as follows:
<CAPTION>
Unrealized
Appreciation
Expiration (Depreciation)
Date (Note 1d)
Foreign Currency Purchased
<S> <C> <S> <C>
A$ 5,988,032 November 1995 $ 1,072
C$ 33,475,120 November 1995 83,753
DM 25,208,575 December 1995 (89,945)
Pta 729,952,329 November 1995 (28,064)
Yen 1,225,180,500 November 1995 (63,074)
Total (US$ Commitment--$65,606,843) $ (96,258)
-----------
Foreign Currency Sold
A$ 98,519,855 November 1995 $(1,135,836)
C$ 132,483,256 November 1995 (1,780,266)
DM 19,065,198 December 1995 61,294
Iep 11,521,867 December 1995 10,128
Pound Sterling 12,713,999 December 1995 (38,803)
Lit 30,351,652,811 November 1995 (49,038)
Pta 2,816,454,680 November 1995 273,522
NZ$ 115,559,244 November 1995 (20,390)
Yen 2,159,708,144 November 1995 279,620
Total (US$ Commitment--$363,082,723) $(2,399,769)
-----------
Total Unrealized Depreciation--Net on
Forward Foreign Exchange Contracts $(2,496,027)
===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of October 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$393,616,208) (Note 1a) $ 399,448,493
Receivables:
Securities sold $ 42,978,048
Interest 8,523,454
Capital shares sold 17,336
Forward foreign exchange contracts (Note 1d) 4,550 51,523,388
-------------
Prepaid registration fees and other assets (Note 1g) 151,065
-------------
Total assets 451,122,946
-------------
Liabilities: Unrealized depreciation on forward foreign exchange contracts (Note 1d) 2,496,027
Payables:
Custodian bank (Note 1j) 20,014,929
Capital shares redeemed 1,798,359
Dividends to shareholders (Note 1h) 905,859
Distributor (Note 2) 256,673
Investment adviser (Note 2) 196,575
Options purchased 21,036 23,193,431
-------------
Accrued expenses and other liabilities 503,452
-------------
Total liabilities 26,192,910
-------------
Net Assets: Net assets $ 424,930,036
=============
Net Assets Class A Shares of Common Stock, $0.10 par value, 1,000,000,000 shares authorized $ 831
Consist of: Class B Shares of Common Stock, $0.10 par value, 1,000,000,000 shares authorized 5,023,254
Class C Shares of Common Stock, $0.10 par value, 300,000,000 shares authorized 1,409
Class D Shares of Common Stock, $0.10 par value, 300,000,000 shares authorized 335,747
Paid-in capital in excess of par 460,340,204
Accumulated realized capital losses on investments and foreign currency
transactions--net (Note 6) (44,089,453)
Unrealized appreciation on investments and foreign currency transactions--net 3,318,044
-------------
Net assets $ 424,930,036
=============
<PAGE>
Net Asset Class A--Based on net assets of $65,956 and 8,314 shares outstanding $ 7.93
Value: =============
Class B--Based on net assets of $398,136,439 and 50,232,539 shares outstanding $ 7.93
=============
Class C--Based on net assets of $109,105 and 14,089 shares outstanding $ 7.74
=============
Class D--Based on net assets of $26,618,536 and 3,357,467 shares outstanding $ 7.93
=============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended October 31, 1995
<S> <S> <C> <C>
Investment Interest and discount earned (net of $324,751 foreign withholding tax) $ 43,978,138
Income
(Notes 1e &
1f):
Expenses: Account maintenance and distribution fees--Class B (Note 2) 4,024,963
Investment advisory fees (Note 2) 3,146,062
Transfer agent fees--Class B (Note 2) 1,382,709
Custodian fees 309,517
Printing and shareholder reports 253,800
Accounting services (Note 2) 176,648
Professional fees 117,949
Account maintenance fees--Class D (Note 2) 88,185
Registration fees (Note 1g) 81,084
Transfer agent fees--Class D (Note 2) 78,848
Directors' fees and expenses 38,959
Amortization of organization expenses (Note 1g) 13,334
Account maintenance and distribution fees--Class C (Note 2) 277
Transfer agent fees--Class C (Note 2) 99
Transfer agent fees--Class A (Note 2) 97
Other 21,822
-------------
Total expenses 9,734,353
-------------
Investment income--net 34,243,785
-------------
<PAGE>
Realized & Realized loss from:
Unrealized Investments--net $ (681,146)
Gain (Loss) Foreign currency transactions--net (16,607,434) (17,288,580)
on Invest- -------------
ments & Change in unrealized appreciation/depreciation on:
Foreign Investments--net (2,049,573)
Currency Foreign currency transactions--net 2,472,923 423,350
Transactions ------------- -------------
- --Net Net realized and unrealized loss on investments and foreign currency transactions (16,865,230)
(Notes 1c, -------------
1d, 1f & Net Decrease in Net Assets Resulting from Operations $ 17,378,555
3): =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 34,243,785 $ 72,659,344
Realized loss on investments and foreign currency transactions--net (17,288,580) (92,924,618)
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net 423,350 10,030,665
------------- --------------
Net increase (decrease) in net assets resulting from operations 17,378,555 (10,234,609)
------------- --------------
Dividends & Investment income--net:
Distribu- Class A (1,391) --
tions to Class B (15,511,689) --
Shareholders Class C (1,005) --
(Note 1h): Class D (1,111,053) --
Return of capital--net:
Class A (1,474) (58)
Class B (16,438,660) (68,086,994)
Class C (1,065) (1)
Class D (1,177,448) (4,572,291)
------------- --------------
Net decrease in net assets resulting from dividends to shareholders (34,243,785) (72,659,344)
------------- --------------
Capital Share Net decrease in net assets derived from capital share transactions (357,893,795) (881,055,998)
Transactions ------------- --------------
(Note 4):
<PAGE>
Net Assets: Total decrease in net assets (374,759,025) (963,949,951)
Beginning of year 799,689,061 1,763,639,012
------------- --------------
End of year $ 424,930,036 $ 799,689,061
============= ==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
For the
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Year Ended Oct. 21, 1994++
October 31, to Oct. 31,
Increase (Decrease) in Net Asset Value: 1995++++ 1994++++
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 8.11 $ 8.11
Operating ---------- ----------
Performance: Investment income--net .49 .01
Realized and unrealized loss on investments and foreign currency transactions--net (.12) --
---------- ----------
Total from investment operations .37 .01
---------- ----------
Less dividends and distributions:
Investment income--net (.27) --
Return of capital--net (.28) (.01)
---------- ----------
Total dividends and distributions (.55) (.01)
---------- ----------
Net asset value, end of period $ 7.93 $ 8.11
========== ==========
Total Based on net asset value per share 4.63% .12%+++
Investment ========== ==========
Return:**
Ratios to Expenses .96% .97%*
Average ========== ==========
Net Assets: Investment income--net 6.75% 6.28%*
========== ==========
Supplemental Net assets, end of period (in thousands) $ 66 $ 59
Data: ========== ==========
Portfolio turnover 312.13% 259.50%
========== ==========
<PAGE>
<CAPTION>
Class B
For the For the
The following per share data and ratios have been derived Period Period
from information provided in the financial statements. Dec. 28, 1990 Aug. 3, 1990++
For the Year Ended October 31, to Oct. 31, to Dec. 27,
Increase (Decrease) in Net Asset Value: 1995++++ 1994++++ 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.10 $ 8.65 $ 8.85 $ 9.84 $ 9.92 $ 10.00
Operating --------- --------- ---------- ---------- ---------- ----------
Performance: Investment income--net .47 .50 .57 .72 .77 .39
Realized and unrealized loss on
investments and foreign currency
transactions--net (.15) (.58) (.20) (.99) (.08) (.08)
--------- --------- ---------- ---------- ---------- ----------
Total from investment operations .32 (.08) .37 (.27) .69 .31
--------- --------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.24) -- -- -- (.77) (.39)
Return of capital--net (.25) (.47) (.57) (.72) -- --
--------- --------- ---------- ---------- ---------- ----------
Total dividends and distributions (.49) (.47) (.57) (.72) (.77) (.39)
--------- --------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 7.93 $ 8.10 $ 8.65 $ 8.85 $ 9.84 $ 9.92
========= ========= ========== ========== ========== ==========
Total Based on net asset value per share 4.00% (1.02%) 4.63% (3.00%) 6.93%+++ 3.40%+++
Investment ========= ========= ========== ========== ========== ==========
Return:**
Ratios to Expenses, excluding account
Average maintenance and distribution fees .98% .77% .79% .75% .77%* .76%*
Net Assets: ========= ========= ========== ========== ========== ==========
Expenses 1.73% 1.52% 1.60% 1.50% 1.52%* 1.51%*
========= ========= ========== ========== ========== ==========
Investment income--net 5.95% 5.68% 7.26% 7.60% 9.11%* 9.75%*
========= ========= ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 398,136 $ 750,750 $1,664,602 $3,182,520 $5,918,769 $2,796,301
========= ========= ========== ========== ========== ==========
Portfolio turnover 312.13% 259.50% 284.62% 120.77% 153.72% 19.40%
========= ========= ========== ========== ========== ==========
<FN>
++Commencement of Operations.
++++Based on average shares outstanding during the period.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class C
The following per share data and ratios have been derived For the For the Period
from information provided in the financial statements. Year Ended Oct. 21, 1994++
October 31, to Oct. 31,
Increase (Decrease) in Net Asset Value: 1995++++ 1994++++
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 8.10 $ 8.11
Operating ---------- ----------
Performance: Investment income--net .35 .01
Realized and unrealized loss on investments and foreign currency
transactions--net (.28) (.01)
---------- ----------
Total from investment operations .07 --
---------- ----------
Less dividends and distributions:
Investment income--net (.21) --
Return of capital--net (.22) (.01)
---------- ----------
Total dividends and distributions (.43) (.01)
---------- ----------
Net asset value, end of period $ 7.74 $ 8.10
========== ==========
Total Based on net asset value per share .93% .00%+++
Investment ========== ==========
Return:**
Ratios to Average Expenses, excluding account maintenance and distribution fees 1.03% 1.34%*
Net Assets: ========== ==========
Expenses 1.83% 2.14%*
========== ==========
Investment income--net 5.99% 5.63%*
========== ==========
Supplemental Net assets, end of period (in thousands) $ 109 $ 1
Data: ========== ==========
Portfolio turnover 312.13% 259.50%
========== ==========
<PAGE>
<CAPTION>
Class D
For the For the
The following per share data and ratios have been derived Period Period
from information provided in the financial statements. Dec. 28, 1990 Aug. 3, 1990++
For the Year Ended October 31, to Oct. 31, to Dec. 27,
Increase (Decrease) in Net Asset Value: 1995++++ 1994++++ 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.11 $ 8.66 $ 8.85 $ 9.85 $ 9.92 $ 10.00
Operating --------- --------- ---------- ---------- ---------- ----------
Performance: Investment income--net .52 .54 .61 .77 .82 .42
Realized and unrealized loss on
investments and foreign currency
transactions--net (.17) (.58) (.19) (1.00) (.07) (.08)
--------- --------- ---------- ---------- ---------- ----------
Total from investment operations .35 (.04) .42 (.23) .75 .34
--------- --------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.26) -- -- -- (.82) (.42)
Return of capital--net (.27) (.51) (.61) (.77) -- --
--------- --------- ---------- ---------- ---------- ----------
Total dividends and distributions (.53) (.51) (.61) (.77) (.82) (.42)
--------- --------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 7.93 $ 8.11 $ 8.66 $ 8.85 $ 9.85 $ 9.92
========= ========= ========== ========== ========== ==========
Total Based on net asset value per share 4.43% (.51%) 5.28% (2.60%) 7.53%+++ 3.73%+++
Investment ========= ========= ========== ========== ========== ==========
Return:**
Ratios to Expenses, excluding account
Average maintenance and distribution fees .95% .76% .73% .75% .76%* .75%*
Net Assets: ========= ========= ========== ========== ========== ==========
Expenses 1.20% 1.01% .98% 1.00% .96%* .75%*
========= ========= ========== ========== ========== ==========
Investment income--net 6.49% 6.19% 7.24% 8.11% 9.70%* 10.51%*
========= ========= ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 26,619 $ 48,879 $ 99,037 $ 188,623 $ 399,416 $ 211,006
========= ========= ========== ========== ========== ==========
Portfolio turnover 312.13% 259.50% 284.62% 120.77% 153.72% 19.40%
========= ========= ========== ========== ========== ==========
<FN>
++Commencement of Operations.
++++Based on average shares outstanding during the period.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Short-Term Global Income Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a non-
diversified, open-end management investment company. The Fund
offers four classes of shares under the Merrill Lynch Select Pricing SM
System. Shares of Class A and Class D are sold with a front-end sales
charge. Shares of Class B and Class C may be subject to a contingent
deferred sales charge. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear
certain expenses related to the account maintenance of such shares,
and Class B and Class C Shares also bear certain expenses related to
the distribution of such shares. Each class has exclusive voting
rights with respect to matters relating to its account maintenance
and distribution expenditures. The following is a summary of sig-
nificant accounting policies followed by the Fund.
(a) Valuation of securities--Securities traded in the over-the-counter
market are valued at the last available bid price or yield equivalents
obtained from one of more dealers in the over-the-counter market
prior to the time of valuation. Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the principal
market on which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any
sales, at the last available bid price. Options written are valued at
the last sale price in the case of exchange-traded options or, in the
case of options traded in the over-the-counter market, the last asked
price. Options purchased are valued at the last sale price in the
case of exchange-traded options or, in the case of options traded in
the over-the-counter market, the last bid price. Other investments,
including futures contracts and related options, are stated at market
value or otherwise at the fair value at which it is expected they may
be resold, as determined in good faith by or under the direction of
the Board of Directors. Securities and assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Fund's
Board of Directors.
(b) Repurchase agreements--The Fund invests in US Government
securities pursuant to repurchase agreements with a member bank
of the Federal Reserve System or a primary dealer in US Government
securities. Under such agreements, the bank or primary dealer
agrees to repurchase the security at a mutually agreed upon time
and price. The Fund takes possession of the underlying securities,
marks to market such securities and, if necessary, receives additions
to such securities daily to ensure that the contract is fully
collateralized.
<PAGE>
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing
when recognized. Assets and liabilities denominated in foreign
currencies are valued at the exchange rate at the end of the period.
Foreign currency transactions are the result of settling (realized)
or valuing (unrealized) asssets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) Derivative financial instruments--The Fund may engage in vari-
ous portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses
may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
NOTES TO FINANCIAL STATEMENTS (continued)
* Forward foreign exchange contracts--The Fund is authorized to
enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts
are not entered on the Fund's records. However, the effect on
operations is recorded from the date the Fund enters into such
contracts. Premium or discount is amortized over the life of the
contracts.
* Foreign currency options and futures--The Fund may also pur-
chase or sell listed or over-the-counter foreign currency options,
foreign currency futures and related options on foreign currency
futures as a short or long hedge against possible variations in
foreign exchange rates. Such transactions may be effected with
respect to hedges on non-US dollar denominated securities owned
by the Fund, sold by the Fund but not yet delivered, or committed
or anticipated to be purchased by the Fund.
* Options--The Fund is authorized to purchase and write call
and put options. When the Fund writes an option, an amount equal
to the premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current value of the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
paid or received (or gain or loss to the extent the cost of the closing
transaction is less than or greater than the premium paid or
received).
<PAGE>
Written and purchased options are non-income producing
investments.
* Financial futures contracts--The Fund may purchase or
sell financial futures contracts and options on such futures con-
tracts as a hedge against adverse changes in the interest rate. A
futures contract is an agreement between two parties to buy and
sell a security, respectively, for a set price on a future date. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund agrees
to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payment
are known as variation margin and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at
the time it was closed.
(e) Income taxes--It is the Fund's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated invest-
ment companies and to distribute all of its taxable income to its
shareholders. Therefore, no Federal income tax provision is required.
Under the applicable foreign tax law, a withholding tax may be
imposed on interest and capital gains at various rates.
(f) Security transactions and investment income--Security trans-
actions are recorded on the dates the transactions are entered into
(the trade dates). Interest income (including amortization of dis-
count) is recognized on the accrual basis. Realized gains and losses
on security transactions are determined on the identified cost basis.
(g) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense over a five-
year period. Prepaid registration fees are charged to expense as the
related shares are issued.
(h) Dividends and distributions--Dividends from net investment
income, excluding transaction gains/losses, are declared daily and
paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates. All or a portion of the ordinary income distributions
paid by the Fund during the fiscal year ended October 31, 1995 and
October 31, 1994 are characterized as a return of capital.
<PAGE>
(i) Reclassification--Generally accepted accounting principles require
that certain components of net assets be reclassified to reflect permanent
differences between financial reporting and tax purposes. Accordingly,
current year's permanent book/tax differences of $19,287,000 have been
reclassified from accumulated net realized capital losses and paid-in
capital in excess of par. These reclassifications have no effect on net
assets or net asset values per share.
(j) Custodian bank--The Fund recorded an amount payable to the Custodian
Bank reflecting an overnight overdraft which resulted from a failed trade
which settled the next day.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general
partner of MLAM is Princeton Services, Inc. ("PSI"), an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."),
which is the limited partner. The Fund has also entered into a
Distribution Agreement and Distribution Plans with Merrill Lynch
Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund. For
such services, the Fund pays a monthly fee based upon the average
daily value of the Fund's net assets, at the following annual
rates: 0.55% of the Fund's average daily net assets not exceeding
$2 billion; 0.525% of average daily net assets in excess of $2 billion
but not exceeding $4 billion; 0.50% of average daily net assets in
excess of $4 billion but not exceeding $6 billion; 0.475% of average
daily net assets in excess of $6 billion but not exceeding $10 billion;
0.45% of average daily net assets in excess of $10 billion but not
exceeding $15 billion; and 0.425% of average daily net assets in
excess of $15 billion. The most restrictive annual expense limitation
requires that MLAM reimburse the Fund to the extent the Fund's
expenses (excluding interest, taxes, distribution fees, brokerage
fees and commissions, and extraordinary items) exceed 2.5% of the
Fund's first $30 million of average daily net assets, 2.0% of the next
$70 million of average daily net assets, and 1.5% of the average daily
net assets in excess thereof. MLAM's obligation to reimburse the
Fund is limited to the amount of the investment advisory fee. No fee
payment will be made to the Investment Adviser during any fiscal
year which will cause such expenses to exceed expense limitations
at the time of such payment.
Pursuant to the distribution plans ("the Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
<PAGE>
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.50%
Class C 0.25% 0.55%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services
to Class B, Class C and Class D shareholders. The ongoing distribu-
tion fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and
Class C shareholders.
For the year ended October 31, 1995, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A -- --
Class D $330 $3,996
For the year ended October 31, 1995, MLPF&S received contin-
gent deferred sales charges of $469,456 and $15 relating to trans-
actions in Class B and Class C Shares, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1995 were $1,176,817,027 and
$1,481,540,024, respectively.
Net realized and unrealized gains (losses) as of October 31, 1995 were
as follows:
<PAGE>
Realized Unrealized
Gains (Losses) Gains (Losses)
Investments:
Long-term $ 9,216,672 $ 3,707,550
Short-term (9,959,677) 2,124,735
Options written 61,859 --
--------------- --------------
Total investments (681,146) 5,832,285
--------------- --------------
Currency transactions:
Options purchased (2,613,615) --
Options written 5,019,788 --
Forward foreign exchange contracts (13,284,248) (2,496,027)
Foreign currency transactions (5,729,359) (18,214)
--------------- --------------
Total currency transactions (16,607,434) (2,514,241)
--------------- --------------
Total $ (17,288,580) $ 3,318,044
=============== ==============
NOTES TO FINANCIAL STATEMENTS (concluded)
Transactions in call options written for the year ended October 31,
1995 were as follows:
Premiums
Par Value Received
Outstanding call options written at
beginning of year -- --
Options written $ 3,524,640,621 $ 4,093,196
Options exercised (584,265,000) (631,433)
Options expired (2,940,375,621) (3,461,763)
--------------- --------------
Outstanding call options written
at end of year $ -- $ --
=============== ==============
Transactions in put options written for the year ended October 31,
1995 were as follows:
<PAGE>
Premiums
Par Value Received
Outstanding put options written at
beginning of year $ 45,500,000 $ 37,510
Options written 5,199,717,695 7,887,892
Options exercised (790,735,000) (1,275,742)
Options expired (4,454,482,695) (6,649,660)
--------------- --------------
Outstanding put options written
at end of year $ -- $ --
=============== ==============
As of October 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $5,832,285, of which $6,399,638
related to appreciated securities and $567,353 related to depreci-
ated securities. At October 31, 1995, the aggregate cost of invest-
ments for Federal income tax purposes was $393,616,208.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $357,893,795 and $881,055,998 for the years ended October 31,
1995 and October 31, 1994, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 19,710 $ 156,702
Shares issued to shareholders in
reinvestment of dividends 306 2,424
-------------- -------------
Total issued 20,016 159,126
Shares redeemed (18,948) (150,761)
-------------- -------------
Net increase 1,068 $ 8,365
============== =============
Class A Shares for the Period Dollar
October 21, 1994++ to October 31, 1994 Shares Amount
Shares sold 14,261 $ 115,671
Shares redeemed (7,015) (56,902)
-------------- -------------
Net increase 7,246 $ 58,769
============== =============
[FN]
++Commencement of Operations.
<PAGE>
Class B Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 1,165,649 $ 8,282,644
Shares issued to shareholders in
reinvestment of dividends 2,111,691 16,712,284
-------------- -------------
Total issued 3,277,340 24,994,928
Automatic conversion of shares (44,087) (350,642)
Shares redeemed (45,649,821) (361,409,238)
-------------- -------------
Net decrease (42,416,568) $(336,764,952)
============== =============
Class B Shares for the Year Dollar
Ended October 31, 1994 Shares Amount
Shares sold 3,848,634 $ 32,411,047
Shares issued to shareholders in
reinvestment of dividends 4,300,343 36,195,588
-------------- -------------
Total issued 8,148,977 68,606,635
Shares redeemed (107,865,898) (904,426,466)
-------------- -------------
Net decrease (99,716,921) $(835,819,831)
============== =============
Class C Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 77,597 $ 607,611
Shares issued to shareholders in
reinvestment of dividends 10 76
-------------- -------------
Total issued 77,607 607,687
Shares redeemed (63,628) (499,869)
-------------- -------------
Net increase 13,979 $ 107,818
============== =============
Class C Shares for the Period
October 21, 1994++ to Dollar
October 31, 1994 Shares Amount
Shares sold 111 $ 900
Shares redeemed (1) (8)
-------------- -------------
Net increase 110 $ 892
============== =============
<PAGE>
[FN]
++Commencement of Operations.
Class D Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 141,026 $ 1,012,351
Shares issued to shareholders in
reinvestment of dividends 142,590 1,231,159
Automatic conversion of shares 44,065 350,642
-------------- -------------
Total issued 327,681 2,594,152
Shares redeemed (3,000,651) (23,839,178)
-------------- -------------
Net decrease (2,672,970) $ (21,245,026)
============== =============
Class D Shares for the Year Dollar
Ended October 31, 1994 Shares Amount
Shares sold 377,878 $ 3,322,360
Shares issued to shareholders in
reinvestment of dividends 303,155 2,425,102
-------------- -------------
Total issued 681,033 5,747,462
Shares redeemed (6,093,190) (51,043,291)
-------------- -------------
Net decrease (5,412,157) $ (45,295,829)
============== =============
As a result of the implementation of the Merrill Lynch Select Pricing
System SM, Class A Shares of the Fund outstanding prior to October 21,
1994, have been redesignated Class D Shares. There were 6,102,407
shares redesignated amounting to $59,847,781.
5. Commitments:
At October 31, 1995, the Fund had entered into foreign exchange
contracts under which it had agreed to sell various foreign currency
with an approximate value of $22,745,000.
6. Capital Loss Carryforward:
At October 31, 1995, the Fund had a capital loss carryforward of
approximately $44,089,000, of which $32,232,000 expires in 2000,
$10,815,000 expires in 2002, and $1,042,000 expires in 2003. This
amount will be available to offset like amounts of any future
taxable gains.
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Short-Term Global Income Fund, Inc.:
We have audited the accompanying statement of assets and liabili-
ties, including the schedule of investments, of Merrill Lynch Short-
Term Global Income Fund, Inc. as of October 31, 1995, the related
statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and
the financial highlights for the periods presented. These financial
statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on
these financial statements and the financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and per-
form the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned at October 31, 1995 by correspondence with the custodian,
and brokers. An audit also includes assessing the accounting princi-
ples 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
Merrill Lynch Short-Term Global Income Fund, Inc. as of October 31,
1995, the results of its operations, the changes in its net assets, and
the financial highlights for the respective stated periods in conform-
ity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 6, 1995
</AUDIT-REPORT>
<PAGE>
