MERRILL LYNCH
SHORT-TERM
GLOBAL INCOME
FUND, INC.
FUND LOGO
Semi-Annual Report
June 30, 2000
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
Printed on post-consumer recycled paper
MERRILL LYNCH SHORT-TERM GLOBAL INCOME FUND, INC.
Officers and
Directors
Terry K. Glenn, President and Director
Charles C. Reilly, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, Director
Joseph T. Monagle Jr., Senior Vice President
Edward F. Gobora, Vice President
Donald C. Burke, Vice President and Treasurer
Allan J. Oster, Secretary
Custodian
The Chase Manhattan Bank N.A.
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, NY 11245
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Barbara G. Fraser, Secretary of Merrill Lynch Short-Term Global
Income Fund, Inc. has recently retired. The Fund's Board of
Directors wishes Ms. Fraser well in her retirement.
Merrill Lynch Short-Term Global Income Fund, Inc., June 30, 2000
DEAR SHAREHOLDER
Performance Review
During the six months ended June 30, 2000, short-term global fixed
yields rose while we remained conservatively positioned in high-
quality, low duration securities. Our foreign exchange exposure was
generally hedged back into the US dollar. Our hedging strategies
helped to reduce volatility in the Fund's net asset values, as the
higher-yielding international bonds in the Fund enhanced our level
of current income. The Fund outperformed the unmanaged Salomon Three-
Month Eurodeposit Index for the year-to-date. For the six-month
period ended June 30, 2000, the Fund's Class A, Class B, Class C and
Class D Shares had total returns of +3.37%, +2.84%, +2.83% and
+2.98%, respectively, while the Index returned +3.13%. (Fund results
shown do not reflect sales charges and would be lower if sales
charges were included. Complete performance information can be found
on pages 4 and 5 of this report.)
Market Review
During 2000, the Federal Reserve Board raised the Federal Funds rate
by 1.00% to 6.50%. The Federal Open Market Committee (FOMC) adjusted
interest rates in an effort to slow the fast pace of the economy.
Growth in the United States for the first quarter was 5.5%. The
major factors influencing gross domestic product (GDP) were gains in
productivity and private consumption. An increase in consumer demand
and oil prices added to a Consumer Price Index (CPI) of 3.1%.
Reduced fears of persistent US growth lowered expectations of
further aggressive increases in interest rates by the FOMC. Two-year
US Government notes reached a high of 6.90% in May, then quickly
recovered most of its losses, ending June at a yield of 6.36%.
Since the start of the year, the European Central Bank (ECB) raised
the Refinance Rate 1.25% to 4.25%. These moves were intended to
reduce the risks to price stability caused by the euro's weakness
and signs of strength in the economies throughout the Euro area.
Accelerating export expansion and strong domestic demand contributed
to Eurozone growth of 3.2% for the first quarter. Consumer prices in
May were slightly below the ECB's target ceiling of 2.0%. The
inflation rate of 1.9% was largely influenced by higher energy
prices. A series of tightenings in official rates and expectations
of a pickup in economic activity caused German two-year sovereign
yields to move higher, closing the period at 4.95%.
In Japan, the Liberal Democratic Party's Secretary General Yoshiro
Mori was confirmed as the new Prime Minister following Keizo
Obuchi's illness and eventual death. He is expected to continue with
Prime Minister Obuchi's economic policies. An upturn in private
demand and a significant increase in exports were the catalysts for
GDP of 2.4% for the first quarter of 2000. Although the March Tankan
Report showed a slight improvement in the economic outlook, the Bank
of Japan (BOJ) left monetary policy unchanged. A rise in energy and
import prices caused the rate of inflation to move slightly above
0%. Rising levels of government debt and anticipation of a modest
recovery in Japan caused yields in the short end of the Japanese
government bond market to trend higher to 0.44%.
The primary focus in foreign exchange this year has been the slide
in the value of the European single currency, which posted new lows
against the US dollar, Japanese yen and British pound. The ECB's
unsuccessful verbal intervention, an uncompetitive labor market and
the outperformance of the US economic expansion added to the euro's
troubles. After appreciating to 102.78 at the end of the Japanese
fiscal year in March, the yen weakened to 106.12 by the end of June.
Interest rate differentials and fears of BOJ intervention had a
negative impact on the yen's value versus the US dollar.
An increase in supply temporarily pushed the price of crude oil
below $24 per barrel. At the end of March, the Organization of
Petroleum Exporting Countries (OPEC) sanctioned a lift in the
production ceiling in order to lower the cost of oil. These measures
may not have the desired effect, in light of low supply and rising
worldwide demand for crude oil. Gold has suffered as central banks
continue to liquidate their reserves. The values of many base
metals, such as aluminum and lead, have recently declined. Going
forward, a reduction in inventories and the global recovery could
have a favorable impact on base metal prices.
Economic Outlook
The Federal Reserve Board seems determined to increase its key
interest rates to further reduce the speed of the US economic
expansion. The FOMC could make an upward adjustment in monetary
policy by 0.25% as early as August. A decline in consumer
confidence, a reduction in the wealth effect and smaller employment
gains could cause US GDP to move down toward 4.0% for the second
quarter. Tight labor markets and rising import prices could keep the
inflation rate above 3.0%.
Interest rates could move higher in the Eurozone as a result of an
increase in price pressures and in support of the euro. European
policymakers could tighten monetary policy over the next quarter.
Historically high business confidence, a steady fall in unemployment
and an improving export sector could contribute to growth in the
Euro area.
The BOJ may wait for more evidence of a sustainable recovery before
it adjusts interest rates higher. The central bank may proceed with
the strategy of preparing the financial markets for the eventual end
to their extremely accommodative monetary policy. Consumer spending
and housing investment could help GDP stay positive in the last half
of 2000. Deflationary fears could subside, assuming CPI gradually
increases throughout the year as a result of upward movement in
wages and wholesale prices.
During the past six months, we added duration to our South African
and New Zealand positions. Attractive yields, an increase in
commodity prices and a rebound in the economy could support New
Zealand assets. The major risk to South Africa is the social unrest
in Zimbabwe. As the political tension subsides in the region,
attractive yields could support the South African bond market. The
Polish zloty was allowed to freely float against all other
currencies in April. The anticipated change in the Polish currency
regime caused the zloty to appreciate versus the euro. After a
significant rally in the zloty against the euro, we sold covered
call options to generate income to partially offset the cost of
hedging.
Currency Outlook
The currency markets over the next few months are likely to be
dominated by movements in monetary policy, equity market performance
and the willingness of the ECB to support the euro. The improving
outlook for the countries within the European Monetary Union,
expectations of higher interest rates and the threat of concerted
intervention could cause the euro to stabilize. Japanese authorities
could remain committed to taking the necessary steps to prevent any
yen overvaluation. A worsening US trade deficit, a more positive
assessment of the Japanese economy and indications the BOJ may soon
end its zero interest rate policy could limit any appreciation of
the US dollar versus the yen.
Portfolio Strategy
Given our current outlook for continued upward pressure on short-
term yields and expectations of higher official interest rates, we
anticipate limiting our duration exposure. On June 30, 2000, we held
sovereign, agency and corporate issues denominated in the Canadian
dollar, Greek drachma, New Zealand dollar, Polish zloty, South
African rand, British pound and US dollar. We expect to continue to
follow a conservative approach in managing our currency positions.
In order to seek to protect the Fund from extreme foreign exchange
volatility, we anticipate using a variety of hedging strategies to
protect our downside risk.
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 and strategy with you again in our next report to
shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Edward F. Gobora)
Edward F. Gobora
Senior Portfolio Manager
August 10, 2000
Merrill Lynch Short-Term Global Income Fund, Inc., June 30, 2000
PERFORMANCE DATA
About Fund
Performance
Investors are 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. However, in the case of certain
eligible investors, the shares 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 approximately 10 years. (There is no initial
sales charge for automatic share conversions.)
* 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).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "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. The Fund's Investment Adviser voluntarily waived a
portion of its management fee. Without such waiver, the Fund's
performance would have been lower.
<TABLE>
Recent
Performance
Results*
<CAPTION>
6 Month 12 Month Since Inception Standardized
As of June 30, 2000 Total Return Total Return Total Return 30-Day Yield
<S> <C> <C> <C> <C>
ML Short-Term Global Income Fund, Inc. Class A Shares +3.37% +6.78% +34.14% 4.18%
ML Short-Term Global Income Fund, Inc. Class B Shares +2.84 +5.13 +39.83 3.56
ML Short-Term Global Income Fund, Inc. Class C Shares +2.83 +4.99 +22.73 3.53
ML Short-Term Global Income Fund, Inc. Class D Shares +2.98 +5.71 +47.53 3.94
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The
Fund's since inception periods arefrom 10/21/94 for Class A & Class
C Shares and from 8/03/90 for Class B & Class D Shares.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/00 +6.78% +2.51%
Five Years Ended 6/30/00 +5.69 +4.83
Inception (10/21/94) through 6/30/00 +5.29 +4.54
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/00 +5.13% +1.13%
Five Years Ended 6/30/00 +4.48 +4.48
Inception (8/03/90) through 6/30/00 +3.44 +3.44
*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 6/30/00 +4.99% +3.99%
Five Years Ended 6/30/00 +4.52 +4.52
Inception (10/21/94) through 6/30/00 +3.66 +3.66
*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 6/30/00 +5.71% +1.48%
Five Years Ended 6/30/00 +5.05 +4.19
Inception (8/03/90) through 6/30/00 +4.00 +3.57
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Short-Term Global Income Fund, Inc., June 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Face Maturity Interest Percent of
COUNTRY Amount Date Issue Rate++ Value Net Assets
<S> <S> <C> <C> <S> <C> <C> <C>
Australia NZ$ 4,700,000 2/12/2001 New South Wales Treasury Corporation (1) 5.21 % $ 2,183,773 2.7%
5,870,000 12/18/2000 Toyota Finance Australia (2) 7.25 2,753,188 3.5
Total Investments in Australia (Cost--$5,626,893) 4,936,961 6.2
Austria US$ 1,700,000 2/05/2001 Deutsche Bank Finance NV (2) 6.375 1,695,104 2.1
Total Investments in Austria (Cost--$1,701,020) 1,695,104 2.1
Canada 2,600,000 1/30/2001 Canadian Government Bond (1) 5.50 2,577,432 3.2
C$ 8,750,000 9/15/2000 European Investment Bank (2) 6.625 5,915,046 7.5
US$ 2,994,000 2/28/2001 Ontario Province (1) 8.50 3,015,314 3.8
4,300,000 1/14/2001 Shell Canada Ltd. (4) 8.875 4,341,409 5.5
Total Investments in Canada (Cost--$15,955,686) 15,849,201 20.0
Germany ZAR 2,150,000 8/01/2000 LB Rheinland-Pfalz Giro (2) 14.75 317,363 0.4
Total Investments in Germany (Cost--$335,238) 317,363 0.4
Ireland GRD 390,000,000 11/17/2000 Deutsche Bank Ireland (2) 9.125 1,112,304 1.4
Total Investments in Ireland (Cost--$1,114,095) 1,112,304 1.4
New Zealand NZ$ 7,300,000 9/26/2000 Federal National Mortgage Association (3) 7.00 3,436,909 4.3
Total Investments in New Zealand
(Cost--$3,783,071) 3,436,909 4.3
Poland PLN 10,676,000 1/25/2001 European Bank Reconstruction and
Development (2) 10.50 2,334,992 3.0
Total Investments in Poland
(Cost--$2,445,586) 2,334,992 3.0
South ZAR 2,280,000 11/06/2000 General Electric Capital Corp. (5) 14.75 339,562 0.4
Africa
Total Investments in South Africa
(Cost--$341,387) 339,562 0.4
Sweden US$ 4,400,000 10/16/2000 Swedish Export Credit (2) 6.25 4,390,056 5.5
Total Investments in Sweden (Cost--$4,445,760) 4,390,056 5.5
United Pound 2,570,000 7/14/2000 International Bank Reconstruction and
Kingdom Sterling Development (2) 6.875 3,890,614 4.9
ZAR 3,490,000 9/25/2000 International Bank Reconstruction and
Development (2) 14.125 517,338 0.7
Total Investments in the United Kingdom
(Cost--$4,762,939) 4,407,952 5.6
United US$ 1,700,000 1/15/2001 Associates Corporation NA (2) 5.85 1,688,151 2.1
States 3,900,000 7/07/2000 BBL North America Funding Corp. (2) 6.52 3,897,175 4.9
3,500,000 7/17/2000 Deutsche Bank AG, (2) 6.54 3,491,098 4.4
2,450,000 7/25/2000 Dresdner Bank AG, (2) 6.56 2,440,178 3.1
3,400,000 11/15/2001 Federal Home Loan Mortgage Association (3) 7.05 3,385,652 4.3
4,000,000 7/18/2000 Federal Home Loan Mortgage Corporation (3) 6.41 3,989,317 5.0
3,187,000 7/20/2000 Federal National Mortgage Association (3) 6.47 3,177,263 4.0
2,433,000 7/03/2000 General Motors Acceptance Corp. (5) 7.13 2,433,000 3.1
3,400,000 3/15/2001 NationsBank Corp. (2) 5.75 3,365,796 4.2
2,000,000 7/19/2000 Newell Company (5) 6.59 1,994,142 2.5
4,000,000 7/05/2000 Pfizer Inc. (5) 6.49 3,998,558 5.0
4,300,000 1/31/2002 US Treasury Notes (3) 6.375 4,293,292 5.4
Total Investments in the United States
(Cost--$38,180,252) 38,153,622 48.0
OPTIONS Nominal Value
PURCHASED Covered by Options
Currency Call 2,362,117 Euro Dollar, expiring July 2000 at PLN 4.28 16,393 0.0
Options 1,168,058 Euro Dollar, expiring August 2000 at GRD 345 12 0.0
Purchased 1,316,000 US Dollar, expiring July 2000 at ZAR 7.08 1,330 0.0
Currency Put 3,560,000 US Dollar, expiring July 2000 at EUR .97 3,560 0.0
Options
Purchased
Total Options Purchased (Premiums Paid--$55,498) 21,295 0.0
Total Investments (Cost--$78,747,425) 76,995,321 96.9
Unrealized Depreciation on Forward Foreign Exchange Contracts++++ (12,271) (0.0)
Other Assets Less Liabilities 2,446,742 3.1
------------- ------
Net Assets $ 79,429,792 100.0%
============= ======
Corresponding industry groups for securities (percent of net
assets):
(1)Sovereign Government Obligations--9.7%
(2)Financial Services--47.7%
(3)Sovereign/Regional Government Obligations--Agency--23.0%
(4)Petroleum Company--5.5%
(5)Financial Company--11.0%
++Commercial Paper and certain US Treasury and Foreign Treasury
Obligations are traded on a discount basis; the interest rates shown
reflect the yield-to-maturity at the time of purchase by the Fund.
Other securities bear interest at the rates shown, payable at the
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 June 30, 2000.
++++Forward foreign exchange contracts as of June 30, 2000 were as
follows:
Unrealized
Foreign Currency Expiration Appreciation
Sold Date (Depreciation)
C$ 9,184,918 August 2000 $ 25,015
Euro 2,548,275 July 2000 (41,397)
Euro 1,200,000 August 2000 41,958
Pound 2,229,058 August 2000 (10,019)
Sterling
NZ$ 15,766,697 July 2000 (27,828)
-----------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net
(US$ Commitment--$20,595,275) $ (12,271)
===========
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Short-Term Global Income Fund, Inc., June 30, 2000
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of June 30, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$78,691,927) $ 76,974,026
Options purchased, at value (premiums paid--$55,498) 21,295
Cash 3,490,118
Foreign cash 816,395
Receivables:
Interest $ 1,919,240
Forward foreign exchange contracts 40,583 1,959,823
------------
Prepaid registration fees 167,731
------------
Total assets 83,429,388
------------
Liabilities: Unrealized depreciation on forward foreign exchange contracts 12,271
Payables:
Capital shares redeemed 152,757
Dividends to shareholders 105,389
Distributor 49,561
Investment adviser 30,747
Forward foreign exchange contracts 754 339,208
------------
Accrued expenses and other liabilities 3,648,117
------------
Total liabilities 3,999,596
------------
Net Assets: Net assets $ 79,429,792
============
Net Assets Class A Shares of Common Stock, $.10 par value, 1,000,000,000
Consist of: shares authorized $ 86
Class B Shares of Common Stock, $.10 par value, 1,000,000,000
shares authorized 931,883
Class C Shares of Common Stock, $.10 par value, 300,000,000
shares authorized 1,076
Class D Shares of Common Stock, $.10 par value, 300,000,000
shares authorized 95,867
Paid-in capital in excess of par 93,784,028
Accumulated realized capital losses on investments and foreign
currency transactions--net (13,555,269)
Unrealized depreciation on investments and foreign currency
transactions--net (1,827,879)
------------
Net assets $ 79,429,792
============
Net Asset Class A--Based on net assets of $6,738 and 856 shares outstanding $ 7.87
Value: ============
Class B--Based on net assets of $71,938,631 and 9,318,835
shares outstanding $ 7.72
============
Class C--Based on net assets of $81,893 and 10,758 shares
outstanding $ 7.61
============
Class D--Based on net assets of $7,402,530 and 958,665 shares
outstanding $ 7.72
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended June 30, 2000
<S> <S> <C> <C>
Investment Interest and discount earned $ 2,882,869
Income:
Expenses: Account maintenance and distribution fees--Class B $ 289,116
Investment advisory fees 233,774
Transfer agent fees--Class B 103,266
Accounting services 53,933
Professional fees 38,402
Printing and shareholder reports 28,792
Registration fees 26,823
Directors' fees and expenses 11,735
Account maintenance fees--Class D 9,742
Custodian fees 9,092
Transfer agent fees--Class D 8,639
Account maintenance and distribution fees--Class C 313
Pricing fees 106
Transfer agent fees--Class C 98
Transfer agent fees--Class A 41
Other 2,783
------------
Total expenses before reimbursement 816,655
Reimbursement of expenses (21,252)
------------
Total expenses after reimbursement 795,403
------------
Investment income--net 2,087,466
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net (175,139)
(Loss) on Foreign currency transactions--net 1,158,998 983,859
Investments & ------------
Foreign Currency Change in unrealized depreciation on:
Transactions--Net: Investments--net (777,107)
Foreign currency transactions--net 73,287 (703,820)
------------ ------------
Net Increase in Net Assets Resulting from Operations $ 2,367,505
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Short-Term Global Income Fund, Inc., June 30, 2000
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
June 30, Dec. 31,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 2,087,466 $ 4,476,898
Realized gain on investments and foreign currency transactions
--net 983,859 739,857
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net (703,820) (1,149,927)
------------ ------------
Net increase in net assets resulting from operations 2,367,505 4,066,828
------------ ------------
Dividends to Investment income--net:
Shareholders: Class A (1,084) (673)
Class B (1,873,706) (4,056,637)
Class C (1,890) (439)
Class D (210,786) (419,149)
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders (2,087,466) (4,476,898)
------------ ------------
Capital Share Net decrease in net assets derived from capital share
Transactions: transactions (11,880,511) (29,537,953)
------------ ------------
Net Assets: Total decrease in net assets (11,600,472) (29,948,023)
Beginning of period 91,030,264 120,978,287
------------ ------------
End of period $ 79,429,792 $ 91,030,264
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996++
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 7.83 $ 7.80 $ 7.76 $ 7.89 $ 7.91
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .22 .39 .38 .42 .54
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .04 .03 .04 (.13) (.06)
-------- -------- -------- -------- --------
Total from investment operations .26 .42 .42 .29 .48
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.22) (.39) (.37) (.39) (.44)
Return of capital--net -- -- (.01) (.03) (.06)
-------- -------- -------- -------- --------
Total dividends and distributions (.22) (.39) (.38) (.42) (.50)
-------- -------- -------- -------- --------
Net asset value, end of period $ 7.87 $ 7.83 $ 7.80 $ 7.76 $ 7.89
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.37%+++ 5.51% 5.49% 3.77% 6.29%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.08%* 1.13% -- -- --
Net Assets: ======== ======== ======== ======== ========
Expenses 1.13%* 1.14% .84% .76% .95%
======== ======== ======== ======== ========
Investment income--net 5.53%* 4.78% 4.75% 5.39% 6.45%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 7 $ 60 $ 7 $ 18 $ 3
Data: ======== ======== ======== ======== ========
Portfolio turnover 20.26% 67.22% 174.18% 278.81% 349.34%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Short-Term Global Income Fund, Inc., June 30, 2000
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
Class B
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996++
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 7.69 $ 7.72 $ 7.69 $ 7.81 $ 7.90
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .19 .32 .31 .35 .44
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .03 (.03) .03 (.12) (.09)
-------- -------- -------- -------- --------
Total from investment operations .22 .29 .34 .23 .35
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.19) (.32) (.30) (.32) (.38)
Return of capital--net -- -- (.01) (.03) (.06)
-------- -------- -------- -------- --------
Total dividends and distributions (.19) (.32) (.31) (.35) (.44)
-------- -------- -------- -------- --------
Net asset value, end of period $ 7.72 $ 7.69 $ 7.72 $ 7.69 $ 7.81
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 2.84%+++ 3.87% 4.52% 3.08% 4.52%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.92%* 1.91% -- -- --
Net Assets: ======== ======== ======== ======== ========
Expenses 1.97%* 1.93% 1.65% 1.62% 1.74%
======== ======== ======== ======== ========
Investment income--net 4.85%* 4.17% 3.99% 4.59% 5.62%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 71,939 $ 83,085 $110,989 $160,096 $239,419
Data: ======== ======== ======== ======== ========
Portfolio turnover 20.26% 67.22% 174.18% 287.81% 349.34%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
Class C
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996++
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 7.58 $ 7.61 $ 7.58 $ 7.67 $ 7.72
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .18 .30 .29 .35 .38
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .03 (.03) .03 (.09) (.01)
-------- -------- -------- -------- --------
Total from investment operations .21 .27 .32 .26 .37
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.18) (.30) (.28) (.32) (.37)
Return of capital--net -- -- (.01) (.03) (.05)
-------- -------- -------- -------- --------
Total dividends and distributions (.18) (.30) (.29) (.35) (.42)
-------- -------- -------- -------- --------
Net asset value, end of period $ 7.61 $ 7.58 $ 7.61 $ 7.58 $ 7.67
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 2.83%+++ 3.64% 4.37% 3.42% 4.93%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.96%* 2.08% -- -- --
Net Assets: ======== ======== ======== ======== ========
Expenses 2.01%* 2.10% 1.76% 1.60% 1.73%
======== ======== ======== ======== ========
Investment income--net 4.82%* 4.01% 3.94% 4.46% 5.23%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 82 $ 14 $ 17 $ 344 $ 155
Data: ======== ======== ======== ======== ========
Portfolio turnover 20.26% 67.22% 174.18% 287.81% 349.34%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Short-Term Global Income Fund, Inc., June 30, 2000
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class D
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996++
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 7.70 $ 7.72 $ 7.70 $ 7.81 $ 7.90
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .21 .37 .35 .40 .48
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .02 (.02) .02 (.11) (.09)
-------- -------- -------- -------- --------
Total from investment operations .23 .35 .37 .29 .39
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.21) (.37) (.34) (.37) (.42)
Return of capital--net -- -- (.01) (.03) (.06)
-------- -------- -------- -------- --------
Total dividends and distributions (.21) (.37) (.35) (.40) (.48)
-------- -------- -------- -------- --------
Net asset value, end of period $ 7.72 $ 7.70 $ 7.72 $ 7.70 $ 7.81
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 2.98%+++ 4.57% 4.96% 3.77% 5.09%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.37%* 1.36% -- -- --
Net Assets: ======== ======== ======== ======== ========
Expenses 1.42%* 1.38% 1.10% 1.08% 1.20%
======== ======== ======== ======== ========
Investment income--net 5.39%* 4.73% 4.54% 5.13% 6.13%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 7,402 $ 7,871 $ 9,965 $ 13,225 $ 17,948
Data: ======== ======== ======== ======== ========
Portfolio turnover 20.26% 67.22% 174.18% 287.81% 349.34%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
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's
financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. These
unaudited financial statements reflect all adjustments, that are, in
the opinion of management, necessary to a fair statement of the
results for the interim period presented. All such adjustments are
of a normal, recurring nature. 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 significant
accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities that 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. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as
the primary market. Options written or purchased are valued at the
last sale price in the case of exchange-traded options. In the case
of options traded in the over-the-counter market, valuation is the
last asked price (options written) or the last bid price (options
purchased). 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. If the seller defaults and the fair value of the
collateral declines, liquidation of the collateral by the Fund may
be delayed or limited.
(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 investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. Losses may arise due to
changes in the value of the contract or if the counterparty does not
perform under the contract.
* 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.
Merrill Lynch Short-Term Global Income Fund, Inc., June 30, 2000
NOTES TO FINANCIAL STATEMENTS (continued)
* 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.
* 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.
* 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
payments 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 be 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.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Investment Managers, L.P. ("MLIM"). The general
partner of MLIM 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 FAM Distributors,
Inc. ("FAMD" or the "Distributor"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLIM 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: .55%
of the Fund's average daily net assets not exceeding $2 billion;
.525% of average daily net assets in excess of $2 billion but not
exceeding $4 billion; .50% of average daily net assets in excess of
$4 billion but not exceeding $6 billion; .475% of average daily net
assets in excess of $6 billion but not exceeding $10 billion; .45%
of average daily net assets in excess of $10 billion but not
exceeding $15 billion; and .425% of average daily net assets in
excess of $15 billion. For the six months ended June 30, 2000, MLIM
earned fees of $233,774, of which $21,252 was voluntarily waived.
MLIM has entered into a Sub-Advisory Agreement with Merrill Lynch
Investment Managers U.K., Ltd. ("MLIM U.K."), an affiliate of MLIM,
pursuant to which MLIM pays MLIM U.K. a fee in an amount to be
determined from time to time by MLIM and MLIM U.K. but in no event
in excess of the amount that MLIM actually receives. For the six
months ended June 30, 2000, MLIM paid MLIM U.K. a fee of $19,318
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 .25% .50%
Class C .25% .55%
Class D .25% --
Pursuant to a subagreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("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 six months ended June 30, 2000, FAMD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class D Shares as follows:
FAMD MLPF&S
Class D $48 $758
For the six months ended June 30, 2000, MLPF&S received contingent
deferred sales charges of $16,266 and $52 relating to transactions
in Class B and Class C Shares, respectively.
For the six months ended June 30, 2000, Merrill Lynch Security
Pricing Service, an affiliate of MLPF&S, earned $124 for providing
security price quotations to compute the Fund's net asset value.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLIM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLIM, PSI, FDS, FAMD, MLIM U.K., and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended June 30, 2000 were $20,149,113 and
$9,658,090, respectively.
Net realized gains (losses) for the six months ended June 30, 2000
and net unrealized losses as of June 30, 2000, were as follows:
Realized
Gains Unrealized
(Losses) Losses
Investments:
Long-term $ (168,586) $ (1,717,901)
Short-term 88 --
Options purchased (6,641) --
------------ ------------
Total investments (175,139) (1,717,901)
------------ ------------
Currency transactions:
Options written 9,032 --
Options purchased (190,281) (34,203)
Forward foreign exchange
contracts 2,276,267 (12,271)
Foreign currency
transactions (936,020) (63,504)
------------ ------------
Total currency transactions 1,158,998 (109,978)
------------ ------------
Total $ 983,859 $ (1,827,879)
============ ============
As of June 30, 2000, net unrealized depreciation for Federal income
tax purposes aggregated $1,717,901, of which $44,019 related to
appreciated securities and $1,761,920 related to depreciated
securities. At June 30, 2000, the aggregate cost of investments for
Federal income tax purposes was $78,691,927.
Transactions in options written for the six months ended June 30,
2000, were as follows:
Nominal Value
Covered by Premiums
Put Options Written Written Options Received
Outstanding put options written,
beginning of period -- --
Options written 3,408,266 $ 9,032
Options expired (3,408,266) (9,032)
------------ ------------
Outstanding put options written,
end of period -- $ --
============ ============
Merrill Lynch Short-Term Global Income Fund, Inc., June 30, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $11,880,511 and $29,537,953 for the six months ended June 30,
2000 and for the year ended December 31, 1999, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Six Months Dollar
Ended June 30, 2000 Shares Amount
Shares sold 200,270 $ 1,572,209
Shares issued to shareholders in
reinvestment of dividends 55 429
------------ ------------
Total issued 200,325 1,572,638
Shares redeemed (207,154) (1,626,213)
------------ ------------
Net decrease (6,829) $ (53,575)
============ ============
Class A Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
Shares sold 11,121 $ 86,990
Shares issued to shareholders in
reinvestment of dividends 49 381
------------ ------------
Total issued 11,170 87,371
Shares redeemed (4,326) (33,725)
------------ ------------
Net increase 6,844 $ 53,646
============ ============
Class B Shares for the Six Months Dollar
Ended June 30, 2000 Shares Amount
Shares sold 44,027 $ 339,252
Shares issued to shareholders in
reinvestment of dividends 121,140 933,763
------------ ------------
Total issued 165,167 1,273,015
Automatic conversion of shares (31,482) (242,505)
Shares redeemed (1,613,567) (12,431,670)
------------ ------------
Net decrease (1,479,882) $(11,401,160)
============ ============
Class B Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
Shares sold 887,097 $ 6,869,129
Shares issued to shareholders in
reinvestment of dividends 271,086 2,087,239
------------ ------------
Total issued 1,158,183 8,956,368
Automatic conversion of shares (45,242) (348,398)
Shares redeemed (4,692,713) (36,135,499)
------------ ------------
Net decrease (3,579,772) $(27,527,529)
============ ============
Class C Shares for the Six Months Dollar
Ended June 30, 2000 Shares Amount
Shares sold 10,640 $ 80,771
Shares issued to shareholders in
reinvestment of dividends 182 1,381
------------ ------------
Total issued 10,822 82,152
Shares redeemed (1,874) (14,222)
------------ ------------
Net increase 8,948 $ 67,930
============ ============
Class C Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
Shares sold 1,322 $ 10,009
Shares issued to shareholders in
reinvestment of dividends 43 329
------------ ------------
Total issued 1,365 10,338
Shares redeemed (1,815) (13,787)
------------ ------------
Net decrease (450) $ (3,449)
============ ============
Class D Shares for the Six Months Dollar
Ended June 30, 2000 Shares Amount
Shares sold 45,352 $ 349,309
Shares issued to shareholders in
reinvestment of dividends 16,188 124,780
Automatic conversion of shares 31,455 242,505
------------ ------------
Total issued 92,995 716,594
Shares redeemed (157,149) (1,210,300)
------------ ------------
Net decrease (64,154) $ (493,706)
============ ============
Class D Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
Shares sold 45,769 $ 355,609
Shares issued to shareholders in
reinvestment of dividends 32,399 249,526
Automatic conversion of shares 45,229 348,398
------------ ------------
Total issued 123,397 953,533
Shares redeemed (391,177) (3,014,154)
------------ ------------
Net decrease (267,780) $ (2,060,621)
============ ============
5. Short-Term Borrowings:
On December 3, 1999, the Fund, along with certain other funds
managed by MLIM, entered into a one-year, unsecured $1,000,000,000
credit agreement with The Bank of New York and certain other
institutions party thereto. The funds may borrow money for temporary
or emergency purposes to fund shareholder redemptions. The agreement
bears interest at the Federal Funds rate plus .50%. The Fund did not
borrow from the facility during the six months ended June 30, 2000.
6. Capital Loss Carryforward:
At December 31, 1999, the Fund had a capital loss carryforward of
approximately $14,906,000, of which $10,816,000 expires in 2001,
$1,042,000 expires in 2002, $490,000 expires in 2003, $1,015,000
expires in 2004, $1,289,000 expires in 2005, $143,000 expires in
2006 and $111,000 expires in 2007. This amount will be available to
offset like amounts of any future taxable gains. Expired capital
loss carryforward in the amount of $32,232,090 has been reclassified
to paid-in capital in excess of par.
</TABLE>
