MERRILL LYNCH
SHORT-TERM
GLOBAL INCOME
FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Annual Report
December 31, 1997
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
Stephen Yardley, Vice President
Gerald M. Richard, Treasurer
Barbara G. Fraser, Secretary
Custodian
The Chase Manhattan Bank
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, NY 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch
Short-Term
Global Income
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #11634 -- 12/97
[RECYCLE LOGO] Printed on post-consumer recycled paper
MERRILL LYNCH SHORT-TERM GLOBAL INCOME FUND, INC.
Important Tax
Information
(unaudited)
Of the monthly cash distributions paid by the Merrill Lynch Short-
Term Global Income Fund, Inc. during the fiscal year ended December
31, 1997, 7.42% is characterized as 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, 10.87% of the Fund's monthly cash distributions paid
during the fiscal year ended December 31, 1997 was attributable to
Federal obligations. In calculating the foregoing percentage, Fund
expenses have been allocated on a pro rata basis.
The law varies in each state as to whether and what percentage of
dividend income attributable to Federal obligations is exempt from
state income tax. We recommend that you consult your tax adviser to
determine if any portion of the dividends you received is exempt
from state income tax.
Listed below are the percentages of total assets of the Fund
invested in Federal obligations as of the end of each quarter of the
fiscal year:
For the Percentage of
Quarter Ended Federal Obligations*
March 31, 1997 0%
June 30, 1997 26.91%
September 30, 1997 0%
December 31, 1997 2.28%
Finally, there were no long-term capital gains distributed by the
Fund during the taxable year ended December 31, 1997.
Please retain this information for your records.
* For purposes of this calculation, Federal obligations include US
Treasury notes, US Treasury bills and US Treasury bonds. Also
included are obligations issued by the following agencies: Banks
for Cooperatives, Federal Intermediate Credit Banks, Federal Land
Banks, Federal Home Loan Banks, and the Student Loan Marketing
Association. Repurchase agreements are not included in this
calculation.
Merrill Lynch Short-Term Global Income Fund, Inc., December 31, 1997
DEAR SHAREHOLDER
Fiscal Year in Review
During the fiscal year ended December 31, 1997, Merrill Lynch Short-
Term Global Fund, Inc. was overweighted in dollar bloc-bond markets,
since they were trading at more attractive yields than other bond
markets. In addition, we generally hedged the Fund's currency
exposures back to the US dollar. These strategies enhanced the
Fund's total returns in two ways. First, the US dollar remained
strong relative to other currencies despite increased volatility.
Second, the higher relative yields offered by the dollar bloc bond
markets enhanced income.
The strength of the US economy and interest rate differentials
favoring the US fixed-income market were significant fundamental
factors holding the dollar at higher levels against the majority of
global currencies. In addition, various comments by US Government
officials demonstrated the Clinton Administration's preference for a
stronger dollar.
Our fixed-income positions emphasized the short-term sectors of the
markets in which we were invested. Approximately 80% of the Fund's
net assets was invested in US bonds. In addition, we had exposures
to the relatively high-yielding markets of Italy, New Zealand, the
United Kingdom and Australia. We did not enter emerging Far Eastern
markets because we believed depreciating currencies would be likely
to force interest rates to higher levels prior to their reaching
equilibrium levels. We maintained fully hedged positions in Canada,
which created a strong income stream while limiting price
volatility. We primarily kept the Fund's bond positions at the
short-term area of the yield curves of higher-yielding countries.
Market Review
North America
The US Federal Reserve Board left short-term interest rates
unchanged in the second half of 1997. Investors expected the US
economy to moderate without further monetary restraint. In addition,
with the White House and Congress agreeing to balance the budget by
the year 2002, US bonds traded firmly throughout the year. Investors
focused on reduced debt issuance by the Government and the drag of
reduced public spending on the economy. The lack of any price
pressures on consumers and producers also supported US markets.
In Canada, the lack of price pressures did not restrain the Bank of
Canada from moving interest rates higher. With inflation remaining
below 2%, the central bank reacted to the economy growing at a 4%
rate year-on-year with new orders and shipments continuing at a
record pace. As the central bank moved interest rates higher, it
also warned investors of continuing tightening moves if the currency
depreciated further.
Europe
Most European bond markets remained firm with long-term interest
rates declining as inflation results continued to surprise on the
downside. In Europe, consumer prices rose at a rate below 2% on an
annualized basis and allowed longer-term bonds to remain firm.
Similar inflation results caused monetary policy easing by the
central banks of various countries such as France, Portugal, Italy
and Spain, where short-term borrowing rates were reduced. However,
as we ended December, European economies began to show signs of
sustainable economic growth. In addition, signs of inflationary
cycles bottoming have been evident in various Nordic countries, the
United Kingdom and Germany. Any evidence of inflation exceeding 2%
in Germany with continued weakness in the Deutschemark would be
likely to bring a prompt response by the Bundesbank. Investor
concerns became reality as the Bundesbank increased the repurchase
rate to 3.3% in October and the United Kingdom moved rates to 7.25%
in November. These actions were quickly forgotten as the Far East
currency crisis negatively affected global stock markets and drove
bond prices higher. Bond prices approached their yearly highs as we
ended the period.
Discussions in Italy focused on participation in the European
Monetary Union (EMU) and budgetary issues. Earlier in the year the
EMU statistical office approved Italy's tax computation, which
increased the government's chances of meeting the deficit/gross
domestic product (GDP) requirement necessary for EMU participation.
Various European leaders commented on Italy's prospects for EMU
entry, and the Italian government reaffirmed its commitment to
meeting EMU criteria. The Italian government's three-year economic
and financial plan is intended to reduce the deficit by an
additional 25 trillion Italian lira in 1998 and reduce the
deficit/GDP ratio to 2.8%. Following political debate, the budget
and preliminary agreement to reform pensions was agreed upon in
October.
The European Union Commission (EUC) forecast that 13 of the 15
member states would meet the Maastricht Treaty budget deficit
criteria in 1997, excluding Greece and Italy. However, it indicated
that Germany and France risk exceeding the 3% deficit/GDP target,
and forecast that Italy's deficit/GDP ratio would reach 3.9% in
1998. In addition, EUC Finance Ministers met to discuss the movement
toward a single European currency. Attendants agreed to announce the
Euro conversion rates at the time initial members are decided on in
the spring of 1998. While no method of determination was agreed
upon, preference was for existing European Rate Mechanism rates. It
was agreed the bilateral exchange rates would be defended.
Pacific Basin
During the year, the New Zealand currency declined as Federal
Reserve Board Governor Brash stated that the exchange rate had risen
to undesirable levels. In addition, the Australian currency was
under pressure as anticipation of continued interest rate declines
became prevalent. We reduced our exposure to both these countries
during the December quarter as spreads narrowed and the currencies
came under pressure.
The emerging Asian currency crisis continued with the currencies of
Thailand, Malaysia and Indonesia depreciating sharply. Investors
continued to look to these governments to implement the policy
reforms necessary to restore confidence. At the recent meeting of
the Group of Seven Industrialized Nations, attendants agreed to
monitor the recent developments in Southeast Asia and to assist
nations in need. This was soon followed by financing packages to
Indonesia, Thailand and South Korea. In general, we reduced the
Fund's exposure to Far Eastern countries, in an effort to insulate
the Fund from the currency turmoil.
Although the US dollar maintained its upward trend against the yen,
US officials expressed concern over the Japanese economy and its
trade imbalance. US Deputy Secretary Lawrence Summers stated that
Japan's increasing current account surplus was still cause for
concern and that investors remained worried about Japan's ability to
boost domestic demand. In addition, US Treasury Secretary Rubin
reiterated that a sustained increase in Japan's global trade surplus
was not in the best interest of Japan or the rest of the world and
that Japan must stimulate domestic demand. While difficulties in the
Asian region have contributed to the volatility of the Japanese
currency, it appears that the Japanese banking system and economy
will be adversely affected. This is likely to keep the Japanese yen
under pressure.
In Conclusion
We thank you for your continued investment 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,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/ALEX V. BOUZAKIS
Alex V. Bouzakis
Vice President and
Senior Portfolio Manager
/S/EDWARD F. GOBORA
Edward F. Gobora
Vice President and
Portfolio Manager
/S/STEPHEN YARDLEY
Stephen Yardley
Vice President and
Portfolio Manager
February 17, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select PricingSM System, which offers four pricing
alternatives:
[bullet] 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.
[bullet] 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
approximately 10 years. (There is no initial sales charge for
automatic share conversions.)
[bullet] 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.
[bullet] Class D Shares incur a maximum initial sales charge of
4% and an account maintenance fee of 0.25% (but no
distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date.
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.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/97 +3.77% -0.38%
Inception (10/21/94) through 12/31/97 +4.92 +3.59
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/97 +3.08% -0.86%
Five Years Ended 12/31/97 +3.29 +3.29
Inception (8/3/90) through 12/31/97 +3.08 +3.08
* Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
** Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/97 +3.42% +2.43%
Inception (10/21/94) through 12/31/97 +3.13 +3.13
* Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
** Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/97 +3.77% -0.38%
Five Years Ended 12/31/97 +3.84 +2.99
Inception (8/3/90) through 12/31/97 +3.66 +3.09
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
Total Return Based on a $10,000 Investment
[GRAPHIC OMITTED: LINE CHART OF TOTAL RETURN ON A $10,000 INVESTMENT -
CLASS A AND CLASS C SHARES]
A line graph depicting the growth of an investment in the Fund's Class
A Shares and Class C Shares compared to 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** 12/97
ML Short-Term Global
Income Fund, Inc.+--
Class A Shares* $9,600 $11,194
ML Short-Term Global
Income Fund, Inc.+--
Class C Shares* $10,000 $11,033
ML Global Government Bond Index++ $10,000 $11,465
Salomon Brothers World Government
One-Three Year Bond Index+++ $10,000 $12,734
[GRAPHIC OMITTED: LINE CHART OF TOTAL RETURN ON A $10,000 INVESTMENT -
CLASS B AND CLASS D SHARES]
A line graph depicting the growth of an investment in the Fund's Class
B Shares and Class D Shares compared to 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:
8/03/90** 12/97
ML Short-Term Global
Income Fund, Inc.+--
Class B Shares* $10,000 $12,524
ML Short-Term Global
Income Fund, Inc.+--
Class D Shares $9,600 $12,531
ML Global Government Bond Index++ $10,000 $16,757
Salomon Brothers World Government
One-Three Year Bond Index+++ $10,000 $16,532
* 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 market Index is comprised of 189 global government
bonds maturing in one to three years.
+++ This unmanaged market Index is comprised of 189 global government
bonds maturing in one to three years hedged into US dollars.
Performance data is as of October 31, 1994 for Class A and Class
C Shares and July 31, 1990 for Class B and Class D Shares.
<TABLE>
<CAPTION>
Performance
Summary --
Class A Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $8.11 $7.90 -- $0.103 -1.33%
1995 7.90 7.91 -- 0.537 +7.14
1996 7.91 7.89 -- 0.500 +6.29
1997 7.89 7.76 -- 0.419 +3.77
Total $1.559
Cumulative total return as of 12/31/97: +16.60%**
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales charge was included.
</TABLE>
<TABLE>
<CAPTION>
Performance
Summary --
Class B Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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
1995 7.89 7.90 -- 0.474 +6.31
1996 7.90 7.81 -- 0.438 +4.52
1997 7.81 7.69 -- 0.354 +3.08
Total $4.286
Cumulative total return as of 12/31/97: +25.24%**
* Figures may include short-term capital gains distributions.
** Figures do not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Performance
Summary --
Class C Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $8.11 $7.89 -- $0.079 -1.74%
1995 7.89 7.72 -- 0.435 +3.48
1996 7.72 7.67 -- 0.422 +4.93
1997 7.67 7.58 -- 0.346 +3.42
Total $1.282
Cumulative total return as of 12/31/97: +10.33%**
* Figures may include short-term capital gains distributions.
** Figures do not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Performance
Summary --
Class D Shares
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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
1995 7.89 7.90 -- 0.517 +6.87
1996 7.90 7.81 -- 0.480 +5.09
1997 7.81 7.70 -- 0.396 +3.77
Total $4.636
Cumulative total return as of 12/31/97: +30.52%**
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales charge was included.
</TABLE>
<TABLE>
<CAPTION>
Recent
Performance
Results
12 Month 3 Month
12/31/97 9/30/97 12/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $7.76 $7.77 $7.89 -1.65% -0.13%
Class B Shares* 7.69 7.70 7.81 -1.54 -0.13
Class C Shares* 7.58 7.59 7.67 -1.17 -0.13
Class D Shares* 7.70 7.70 7.81 -1.41 0.00
Class A Shares -- Total Return* +3.77(1) +1.17(2)
Class B Shares -- Total Return* +3.08(3) +0.97(4)
Class C Shares -- Total Return* +3.42(5) +0.96(6)
Class D Shares -- Total Return* +3.77(7) +1.24(8)
Class A Shares -- Standardized 30-day Yield 5.72%
Class B Shares -- Standardized 30-day Yield 5.13%
Class C Shares -- Standardized 30-day Yield 5.06%
Class D Shares -- Standardized 30-day Yield 5.45%
* 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 $0.419 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.113 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.354 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.095 per share ordinary income dividends.
(5) Percent change includes reinvestment of $0.346 per share ordinary income dividends.
(6) Percent change includes reinvestment of $0.093 per share ordinary income dividends.
(7) Percent change includes reinvestment of $0.396 per share ordinary income dividends.
(8) Percent change includes reinvestment of $0.107 per share ordinary income dividends.
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Short-Term Global Income Fund, Inc., December 31, 1997
SCHEDULE OF INVESTMENTS
Face Maturity Interest Value Percent of
COUNTRIES Amount Date Issue Rate+ (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Canada C$ 2,888,000 8/01/99 Government of Canada (1) 6.50% $2,056,169 1.19%
500,000 2/01/00 Government of Canada (1) 5.50 351,233 0.20
5,400,000 12/29/99 Kingdom of Sweden (1) 8.25 3,961,610 2.28
2,065,000 12/29/99 Toronto Dominion Australia (1) 6.25 1,454,634 0.84
----------- -------
Total Investments in Canada (Cost -- $7,914,704) 7,823,646 4.51
============ =======
Germany DM 4,500,000 5/15/00 Bundes Obligations (1) 5.875 2,586,724 1.49
8,296,635 1/06/98 Grand Cayman, Time Deposit (2) 3.25 4,612,317 2.65
4,653,457 1/13/98 Grand Cayman, Time Deposit (2) 3.50 2,586,979 1.49
----------- -------
Total Investments in Germany (Cost -- $9,816,887) 9,786,020 5.63
============ =======
Italy Lit 4,835,000,000 10/01/98 Buoni Poliennali del Tesoro
(Italian Government Bonds) (1) 9.00 2,806,388 1.62
----------- -------
Total Investments in Italy (Cost -- $2,903,089) 2,806,388 1.62
============ =======
New
Zealand NZ$ 15,135,000 1/07/98 New Zealand Treasury Bill (1) 9.00 8,774,145 5.05
----------- -------
Total Investments in New Zealand (Cost -- $9,475,170) 8,774,145 5.05
============ =======
United
Kingdom [POUND] 2,135,000 8/10/99 Abbey National PLC (2) 6.00 3,447,123 1.98
1,300,000 2/25/00 Daimler Benz UK (2) 7.00 2,117,100 1.22
----------- -------
Total Investments in the United Kingdom
(Cost -- $5,549,954) 5,564,223 3.20
============ =======
United
States US$ 8,000,000 1/14/98 Alpine Securitization Co. (2) 5.90 7,984,267 4.60
8,000,000 1/08/98 CXC Inc. (2) 5.70 7,992,400 4.60
8,000,000 1/06/98 Delaware Funding Corp. (2) 5.83 7,994,818 4.60
4,000,000 1/15/98 Federal Home Loan Banks (3) 5.58 3,991,940 2.30
3,000,000 1/14/98 Federal Home Loan Mortgage Corp. (3) 5.62 2,994,380 1.73
11,190,000 1/16/98 Federal National Mortgage Association (3) 5.70 11,165,196 6.43
20,000,000 3/06/98 Federal National Mortgage Association (3) 5.58 19,802,200 11.40
2,324,000 1/02/98 General Motors Acceptance Corp. (2) 6.75 2,324,000 1.34
5,126,000 12/03/98 Landesbank Rhein (2) 5.25 5,102,405 2.94
7,000,000 1/13/98 Lehman Brothers Holdings Inc. (2) 5.90 6,987,381 4.02
8,000,000 1/23/98 Monte Rosa Capital Corp. (2) 5.74 7,973,213 4.59
6,660,000 9/30/98 Novartis AG (2) 4.00 6,560,100 3.78
8,000,000 1/05/98 Old Line Funding Corp. (2) 5.73 7,996,180 4.60
7,000,000 1/15/98 Park Avenue Receivables Corp. (2) 5.75 6,985,465 4.02
7,000,000 1/14/98 Republic Industries, Inc. (2) 5.75 6,986,583 4.02
8,500,000 1/15/98 Three Rivers Funding (2) 6.00 8,481,583 4.88
8,000,000 1/12/98 Twin Towers Inc. (2) 5.82 7,987,067 4.60
8,000,000 1/29/98 Windmill Funding Corp. (2) 5.95 7,964,300 4.59
----------- -------
Total Investments in the United States
(Cost -- $137,263,896) 137,273,478 79.04
============ =======
Total Investments (Cost -- $172,923,700) 172,027,900 99.05
Unrealized Appreciation on Forward Foreign Exchange Contracts++ 400,326 0.23
Other Assets Less Liabilities 1,254,510 0.72
----------- -------
Net Assets $173,682,736 100.00%
============ =======
Corresponding industry groups for securities (percent of net assets):
(1) Sovereign Government Obligations -- 12.67%
(2) Financial Services -- 64.52%
(3) Sovereign/Regional Government Obligations -- Agency -- 21.86%
+ Commercial Paper and certain US Treasury and Foreign Treasury
Obligations are traded on a discount basis; the interest rates shown
represent the yield-to-maturity at the time of purchase by the Fund.
Other securities bear interest at the rates shown, payable at fixed
dates or upon maturity. Interest rates on floating rate securities are
adjusted periodically based on appropriate indexes; the interest
rates shown are those in effect at December 31, 1997.
++ Forward foreign exchange contracts as of December 31, 1997 were as follows:
Unrealized
Expiration Appreciation
Foreign Currency Purchased Date (Note 1d)
C$ 71,885 January 1998 $258
--------
Total (US$ Commitment -- $50,000) 258
--------
Foreign Currency Sold
C$ 12,285,073 January 1998 59,373
DM 17,573,644 January 1998 178,322
[POUND] 3,442,791 January 1998 16,105
Lit 5,531,001,399 January 1998 52,108
NZ$ 14,826,078 January 1998 94,160
--------
Total (US$ Commitment -- $36,137,894) 400,068
--------
Total Unrealized Appreciation on
Forward Foreign Exchange Contracts -- Net $400,326
========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Short-Term Global Income Fund, Inc., December 31, 1997
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $172,923,700) (Note 1a) $172,027,900
Unrealized appreciation on forward foreign exchange contracts
(Note 1d) 400,326
Cash 433
Foreign cash (Note 1c) 1,062,035
Receivables:
Capital shares sold $1,327,186
Interest 535,180 1,862,366
----------
Prepaid registration fees and other assets (Note 1g) 162,695
------------
Total assets 175,515,755
------------
Liabilities: Payables:
Capital shares redeemed 870,032
Dividends to shareholders (Note 1h) 443,574
Distributor (Note 2) 110,102
Investment adviser (Note 2) 85,087 1,508,795
----------
Accrued expenses and other liabilities 324,224
------------
Total liabilities 1,833,019
------------
Net Assets: Net assets $173,682,736
============
Net Assets Class A Shares of Common Stock, $0.10 par value,
Consist of: 1,000,000,000 shares authorized $226
Class B Shares of Common Stock, $0.10 par value,
1,000,000,000 shares authorized 2,080,623
Class C Shares of Common Stock, $0.10 par value,
300,000,000 shares authorized 4,539
Class D Shares of Common Stock, $0.10 par value,
300,000,000 shares authorized 171,821
Paid-in capital in excess of par 219,462,991
Accumulated realized capital losses on investments and
foreign currency transactions -- net (Note 5) (47,522,387)
Unrealized depreciation on investments and
foreign currency transactions -- net (515,077)
------------
Net assets $173,682,736
============
Net Asset Class A -- Based on net assets of $17,545 and 2,261 shares outstanding $7.76
============
Value: Class B -- Based on net assets of $160,096,310 and 20,806,225 shares outstanding $7.69
============
Class C -- Based on net assets of $344,060 and 45,390 shares outstanding $7.58
============
Class D -- Based on net assets of $13,224,821 and 1,718,210 shares outstanding $7.70
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
<S> <C> <C> <C>
Investment Income Interest and discount earned (net of $19,646 foreign withholding tax) $13,145,034
(Notes 1e & 1f):
Expenses: Account maintenance and distribution fees -- Class B (Note 2) 1,468,174
Investment advisory fees (Note 2) 1,164,296
Transfer agent fees -- Class B (Note 2) 245,664
Accounting services (Note 2) 105,556
Professional fees 86,434
Printing and shareholder reports 61,101
Registration fees (Note 1g) 60,905
Custodian fees 54,629
Account maintenance fees -- Class D (Note 2) 39,246
Directors' fees and expenses 36,670
Transfer agent fees -- Class D (Note 2) 13,013
Account maintenance and distribution fees -- Class C (Note 2) 1,840
Transfer agent fees -- Class C (Note 2) 193
Transfer agent fees -- Class A (Note 2) 3
Other 6,800
-------------
Total expenses 3,344,524
-------------
Investment income -- net 9,800,510
-------------
Realized & Realized loss from:
Unrealized Gain Investments -- net $(1,034,903)
(Loss) on Foreign currency transactions -- net (332,144) (1,367,047)
Investments & -------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions -- Net Investments -- net (2,872,230)
(Notes 1c, 1d, Foreign currency transactions -- net 782,244 (2,089,986)
1f & 3): ------------- -------------
Net realized and unrealized loss of investments and
foreign currency transactions (3,457,033)
=============
Net Increase in Net Assets Resulting from Operations $6,343,477
=============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Short-Term Global Income Fund, Inc., December 31, 1997
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>
Operations Investment income -- net $9,800,510 $18,315,692
Realized loss on investments and foreign currency transactions -- net (1,367,047) (5,717,284)
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions -- net (2,089,986) 1,758,809
------------- -------------
Net increase in net assets resulting from operations 6,343,477 14,357,217
------------- -------------
Dividends & Investment income -- net:
Distributions to Class A (262) (2,092)
Shareholders Class B (8,318,276) (14,841,426)
(Note 1h): Class C (9,502) (3,463)
Class D (745,677) (1,135,414)
Return of capital -- net:
Class A (21) (305)
Class B (666,283) (2,166,725)
Class C (761) (506)
Class D (59,728) (165,761)
------------- -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (9,800,510) (18,315,692)
------------- -------------
Capital Share Net decrease in net assets derived from
Transactions capital share transactions (80,385,611) (138,983,406)
(Note 4): ------------- -------------
Net Assets: Total decrease in net assets (83,842,644) (142,941,881)
Beginning of year 257,525,380 400,467,261
------------- -------------
End of year $173,682,736 $257,525,380
============= =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Class A
The following per share data and For the For the
ratios have been derived Period For the Period
from information provided in the For the Nov. 1, Year Oct. 21
financial statements. Year Ended 1995 to Ended 1994+ to
December 31, Dec. 31, Oct. 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1997 1996++ 1995++ 1995++ 1994++
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $7.89 $7.91 $7.93 $8.11 $8.11
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .42 .54 .09 .49 .01
Realized and unrealized loss on
investments and foreign currency
transactions -- net (.13) (.06) (.02) (.12) --
--------- --------- --------- --------- ---------
Total from investment operations .29 .48 .07 .37 .01
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.39) (.44) (.09) (.27) --
Return of capital -- net (.03) (.06) -- (.28) (.01)
--------- --------- --------- --------- ---------
Total dividends and distributions (.42) (.50) (.09) (.55) (.01)
--------- --------- --------- --------- ---------
Net asset value, end of period $7.76 $7.89 $7.91 $7.93 $8.11
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 3.77% 6.29% .92%++++ 4.62% .12%++++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .76% .95% 1.02%* .96% .97%*
Net Assets: ========= ========= ========= ========= =========
Investment income -- net 5.39% 6.45% 6.91%* 6.75% 6.28%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period
Data: (in thousands) $18 $3 $75 $66 $59
========= ========= ========= ========= =========
Portfolio turnover 287.81% 349.34% 25.09% 312.13% 259.50%
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Class B
The following per share data and For the
ratios have been derived Period
from information provided in the For the Nov. 1,
financial statements. Year Ended 1995 to For the Year
December 31, Dec. 31, Ended October 31,
Increase (Decrease) in Net Asset Value: 1997 1996++ 1995++ 1995++ 1994++
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $7.81 $7.90 $7.93 $8.10 $8.65
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .35 .44 .08 .47 .50
Realized and unrealized loss on
investments and foreign currency
transactions -- net (.12) (.09) (.03) (.15) (.58)
--------- --------- --------- --------- ---------
Total from investment operations .23 .35 .05 .32 (.08)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.32) (.38) (.08) (.24) --
Return of capital -- net (.03) (.06) -- (.25) (.47)
--------- --------- --------- --------- ---------
Total dividends and distributions (.35) (.44) (.08) (.49) (.47)
--------- --------- --------- --------- ---------
Net asset value, end of period $7.69 $7.81 $7.90 $7.93 $8.10
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 3.08% 4.52% .66%++++ 3.96% (1.02%)
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.62% 1.74% 1.80%* 1.73% 1.52%
Net Assets: ========= ========= ========= ========= =========
Investment income -- net 4.59% 5.62% 6.13%* 5.95% 5.68%
========= ========= ========= ========= =========
Supplemental Net assets, end of period
Data: (in thousands) $160,096 $239,419 $376,049 $398,136 $750,750
========= ========= ========= ========= =========
Portfolio turnover 287.81% 349.34% 25.09% 312.13% 259.50%
========= ========= ========= ========= =========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (concluded)
Class C
The following per share data and For the For the
ratios have been derived Period For the Period
from information provided in the For the Nov. 1, Year Oct. 21
financial statements. Year Ended 1995 to Ended 1994+ to
December 31, Dec. 31, Oct. 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1997 1996++ 1995++ 1995++ 1994++
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $7.67 $7.72 $7.74 $8.10 $8.11
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .35 .38 .08 .35 .01
Realized and unrealized loss on
investments and foreign currency
transactions -- net (.09) (.01) (.02) (.28) (.01)
--------- --------- --------- --------- ---------
Total from investment operations .26 .37 .06 .07 --
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.32) (.37) (.08) (.21) --
Return of capital -- net (.03) (.05) -- (.22) (.01)
--------- --------- --------- --------- ---------
Total dividends and distributions (.35) (.42) (.08) (.43) (.01)
--------- --------- --------- --------- ---------
Net asset value, end of period $7.58 $7.67 $7.72 $7.74 $8.10
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 3.42% 4.93% .78%++++ .89% .00%++++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.60% 1.73% 1.83%* 1.83% 2.14%*
Net Assets: ========= ========= ========= ========= =========
Investment income -- net 4.46% 5.23% 6.09%* 5.99% 5.63%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period
Data: (in thousands) $344 $155 $103 $109 $1
========= ========= ========= ========= =========
Portfolio turnover 287.81% 349.34% 25.09% 312.13% 259.50%
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Class D
The following per share data and For the
ratios have been derived Period
from information provided in the For the Nov. 1,
financial statements. Year Ended 1995 to For the Year
December 31, Dec. 31, Ended October 31,
Increase (Decrease) in Net Asset Value: 1997 1996++ 1995++ 1995++ 1994++
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $7.81 $7.90 $7.93 $8.11 $8.66
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .40 .48 .09 .52 .54
Realized and unrealized loss on
investments and foreign currency
transactions -- net (.11) (.09) (.03) (.17) (.58)
--------- --------- --------- --------- ---------
Total from investment operations .29 .39 .06 .35 (.04)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.37) (.42) (.09) (.26) --
Return of capital -- net (.03) (.06) -- (.27) (.51)
--------- --------- --------- --------- ---------
Total dividends and distributions (.40) (.48) (.09) (.53) (.51)
--------- --------- --------- --------- ---------
Net asset value, end of period $7.70 $7.81 $7.90 $7.93 $8.11
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 3.77% 5.09% .75%++++ 4.40% (.51%)
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.08% 1.20% 1.27%* 1.20% 1.01%
Net Assets: ========= ========= ========= ========= =========
Investment income -- net 5.13% 6.13% 6.67%* 6.49% 6.19%
========= ========= ========= ========= =========
Supplemental Net assets, end of period
Data (in thousands) $13,225 $17,948 $24,240 $26,619 $48,879
========= ========= ========= ========= =========
Portfolio turnover 287.81% 349.34% 25.09% 312.13% 259.50%
========= ========= ========= ========= =========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
Merrill Lynch Short-Term Global Income Fund, Inc., December 31, 1997
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 PricingSM
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 significant
accounting policies followed by the Fund.
(a) Valuation of investments -- Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
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. Securities traded in the over-the-counter
market are valued at the last available bid price prior to the time of
valuation. 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. Short-term securities are valued at
amortized cost, which approximates market value. Other investments,
including futures contracts and related options, are stated at market
value. Securities and assets for which market quotations are not
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.
(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) assets 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 various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt and currency markets.
Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
(bullet) 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.
(bullet) Foreign currency options and futures -- The Fund may also
purchase 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.
(bullet) 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 exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
(bullet) Financial futures contracts -- The Fund may purchase or sell
financial futures contracts and options on such futures contracts 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
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. Under the applicable foreign tax law, a withholding tax may
by imposed on interest and capital gains at various rates.
(f) Security transactions and investment income -- Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified cost
basis.
(g) Prepaid registration fees -- 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. A portion of the net investment income dividends paid
by the Fund for the years ended December 31, 1997 and December 31,
1996 are characterized as a return of capital.
(i) Reclassification -- Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of $726,793
have been reclassified between 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.
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. MLAM has entered into a Sub-Advisory Agreement with Merrill
Lynch Asset Management U.K., Ltd. ("MLAM U.K."), an affiliate of MLAM,
pursuant to which MLAM pays MLAM U.K. a fee in an amount to be
determined from time to time by MLAM and MLAM U.K. but in no event in
excess of the amount that MLAM actually receives. For the year ended
December 31, 1997, MLAM paid MLAM U.K. a fee of $105,912 pursuant to
such Agreement.
Pursuant to 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:
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 distribution 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 December 31, 1997, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the Fund's
Class D Shares as follows:
MLFD MLPF&S
Class D $51 $489
For the year ended December 31, 1997, MLPF&S received contingent
deferred sales charges of $81,011 relating to transactions in Class B
Shares.
For the year ended December 31, 1997, Merrill Lynch Security Pricing
Service, an affiliate of MLPF&S, earned $125 for providing security
price quotations to compute the Fund's net asset value.
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, MLFDS, MLFD, MLAM U.K., and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended December 31, 1997 were $177,524,006 and
$235,978,255, respectively.
Net realized and unrealized gains (losses) as of December 31, 1997
were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Investments:
Long-term $2,044,188 $(76,791)
Short-term (3,167,146) (819,009)
Options written 88,055 --
------------- ---------------
Total investments (1,034,903) (895,800)
------------- ---------------
Currency transactions:
Options purchased (250,766) --
Options written 241,028 --
Forward foreign exchange
contracts 6,149,485 400,326
Foreign currency transactions (6,471,891) (19,603)
------------- ---------------
Total currency transactions (332,144) (380,723)
------------- ---------------
Total $(1,367,047) $(515,077)
============= ===============
Transactions in options written for the year ended
December 31, 1997 were as follows:
Nominal Value
Covered by Premiums
Call Options Written Written Options Received
Outstanding call options
written at beginning of year -- --
Options written 771,289,660 $554,568
Options exercised (39,033,000) (56,140)
Options closed (9,066,000) (15,412)
Options expired (723,190,660) (483,016)
------------- --------------
Outstanding call options written
at end of year -- $--
============= ==============
Nominal Value
Covered by Premiums
Put Options Written Written Options Received
Outstanding put options
written at beginning of year 9,058,000 $6,341
Options written 577,883,763 367,165
Options exercised (76,776,000) (62,281)
Options expired (510,165,763) (311,225)
------------- --------------
Outstanding put options written
at end of year -- $--
============= ==============
As of December 31, 1997, net unrealized depreciation for Federal
income tax purposes aggregated $906,937, of which $126,135 related to
appreciated securities and $1,033,072 related to depreciated
securities. At December 31, 1997, the aggregate cost of investments
for Federal income tax purposes was $172,934,837.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$80,385,611 and $138,983,406, for the years ended December 31, 1997
and December 31, 1996, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended December 31, 1997 Shares Amount
Shares sold 2,790 $21,716
Shares issued to shareholders in
reinvestment of dividends
and distributions 37 259
------------- --------------
Total issued 2,827 21,975
Shares redeemed (906) (7,048)
------------- --------------
Net increase 1,921 $14,927
============= ==============
Class A Shares for the Year Dollar
Ended December 31, 1996 Shares Amount
Shares sold 13,395 $105,688
Shares issued to shareholders in
reinvestment of dividends
and distributions 207 831
------------- --------------
Total issued 13,602 106,519
Shares redeemed (22,814) (178,935)
------------- --------------
Net decrease (9,212) $(72,416)
============= ==============
Class B Shares for the Year Dollar
Ended December 31, 1997 Shares Amount
Shares sold 5,543,706 $42,750,438
Shares issued to shareholders in
reinvestment of dividends
and distributions 595,588 4,602,590
------------- --------------
Total issued 6,139,294 47,353,028
Automatic conversion of shares (143,168) (1,108,763)
Shares redeemed (15,839,751) (122,363,775)
------------- --------------
Net decrease (9,843,625) $(76,119,510)
============= ==============
Class B Shares for the Year Dollar
Ended December 31, 1996 Shares Amount
Shares sold 484,935 $3,805,839
Shares issued to shareholders in
reinvestment of dividends
and distributions 1,105,083 8,669,991
------------- --------------
Total issued 1,590,018 12,475,830
Automatic conversion of shares (253,004) (1,985,115)
Shares redeemed (18,275,411) (143,419,152)
------------- --------------
Net decrease (16,938,397) $(132,928,437)
============= ==============
Class C Shares for the Year Dollar
Ended December 31, 1997 Shares Amount
Shares sold 983,199 $7,428,596
Shares issued to shareholders in
reinvestment of dividends 378 3,167
------------- --------------
Total issued 983,577 7,431,763
Shares redeemed (958,440) (7,241,148)
------------- --------------
Net increase 25,137 $190,615
============= ==============
Class C Shares for the Year Dollar
Ended December 31, 1996 Shares Amount
Shares sold 18,676 $144,329
Shares issued to shareholders in
reinvestment of dividends
and distributions 226 1,217
------------- --------------
Total issued 18,902 145,546
Shares redeemed (11,957) (92,313)
------------- --------------
Net increase 6,945 $53,233
============= ==============
Class D Shares for the Year Dollar
Ended December 31, 1997 Shares Amount
Shares sold 76,707 $594,693
Shares issued to shareholders in
reinvestment of dividends 60,197 465,309
Automatic conversion of shares 143,133 1,108,763
------------- --------------
Total issued 280,037 2,168,765
Shares redeemed (858,738) (6,640,408)
------------- --------------
Net decrease (578,701) $(4,471,643)
============= ==============
Class D Shares for the Year Dollar
Ended December 31, 1996 Shares Amount
Shares sold 550,920 $4,350,585
Shares issued to shareholders in
reinvestment of dividends
and distributions 93,940 737,010
Automatic conversion of shares 252,835 1,985,115
------------- --------------
Total issued 897,695 7,072,710
Shares redeemed (1,667,413) (13,108,496)
------------- --------------
Net decrease (769,718) $(6,035,786)
============= ==============
5. Capital Loss Carryforward:
At December 31, 1997, the Fund had a capital loss carryforward of
approximately $46,971,000, of which $32,232,000 expires in 1999,
$10,816,000 expires in 2001, $1,042,000 expires in 2002, $490,000
expires in 2003, $1,015,000 expires in 2004 and $1,376,000 expires in
2005. This amount will be available to offset like amounts of any
future taxable gains.
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
liabilities, including the schedule of investments, of Merrill Lynch
Short-Term Global Income Fund, Inc. as of December 31, 1997,
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 perform the audit
to obtain reasonable assurance about whether the financial statements
and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned at December 31, 1997 by
correspondence with the custodian. 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
Merrill Lynch Short-Term Global Income Fund, Inc. as of December 31,
1997, the results of its operations, the changes in its net assets,
and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 19, 1998
