MERRILL
LYNCH
SHORT-TERM
GLOBAL
INCOME
FUND, INC.
Semi-Annual Report April 30, 1994
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.
Merrill Lynch
Short-Term Global
Income Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
MERRILL LYNCH SHORT-TERM GLOBAL INCOME FUND, INC.
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Joseph T. Monagle, Jr., Senior Vice President
Alex V. Bouzakis, Vice President
Donald C. Burke, Vice President
Edward F. Gobora, Vice President
David B. Walter, Vice President
Stephen Yardley, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Chase Manhattan Bank, N.A.
Global Securities Services
Chase Metro Tech Center
Brooklyn, New York 11245
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
DEAR SHAREHOLDER
In February, the global bond market rally reversed sharply. The
collapse followed the first increase in US interest rates since
1989, signaling the end of the four-year rally in the US fixed-
income market. Markets worldwide shuddered, and a selling spree
was soon underway. Even a 50 basis-point (0.50%) cut in the discount
rate by the Bundesbank was not enough to stop the losses. Contrary
to most expectations, the US dollar weakened against most currencies
in February. Inflationary concerns, signs of vigorous economic growth,
reduced debt burdens and the prospect of further Federal Reserve
Board tightening actions caused US bond prices to decline, leading
to a broad sell-off in global bond markets.
Global bond markets continued to weaken in March. Only Italy and
Japan posted positive price returns. The Italian market benefited
from the results of the general election. The Japanese market
showed a slight recovery from a sell-off where many corporate
investors took profits in time for the year-end balance sheet.
Overall, during March economic news coincided with troublesome
political events to unnerve international bond investors. Mounting
evidence of continued momentum in the US economy, strong growth
and increased inflationary concerns led the Federal Reserve
Board to raise short-term interest rates. Additionally, disturbing
international political developments led to increased volatility
in the major debt markets. The liquidation of long-term positions
by highly-leveraged international investors added to the turmoil.
The continued European bond market weakness was not catalyzed by
a sudden shift in economic fundamentals. Economic recovery in much
of Europe remains constrained by restrictive monetary and fiscal
policy. As a result, inflation remains subdued in the major European
economies. While a few of the European economies have begun to show
signs of emerging from lengthy recessions, foundations for a strong
rebound as yet have not been established.
The Mexican market responded to the February sell-off in world
markets with a widening of yield spreads across all instruments.
Following the assassination of Presidential candidate Luis
Donaldo Colosio on March 23, 1994, the Mexican capital markets
experienced a sell-off when they reopened on March 25. Mexican
equities took the brunt of the selling, and the peso weakened.
However, the panic selling that some had feared did not
materialize as investors awaited new developments. The peso did
not initially approach the top end of the official exchange rate
band, and the establishment of a $6 billion swap line by US
authorities to Mexico suggests that the central bank should be
able to prevent an official devaluation.
<PAGE>
The US dollar was weak throughout March. Italy's currency returns
were highest, followed by the German bloc and Japan. Currency
returns had a marked effect on total market returns.
April was another volatile month. Only the Japanese government
bond market experienced a decline in interest rates. The weaker
dollar led to positive returns in dollar terms in most markets.
Ireland, Italy and Japan had the best total returns in US dollar
terms. Investors looking for a divergence of European and US bond
markets were disappointed. Events in the US Treasury market continued
to influence European markets. However, it is important to note
that the North American yield curves flattened while European curves
generally steepened. In defiance of the fundamentals, the US dollar
weakened considerably against the Japanese and most European currencies,
especially toward April month-end.
So far 1994 has been marked by a sell-off in most local
government bond markets. Much of the negative performance has
been catalyzed by the bond market backup in the United States,
where strong economic growth, mounting inflationary concerns and
three rounds of Federal Reserve Board tightening have all served
to drive market rates up and increase volatility. With the
financial markets in a volatile, transitional phase, investors
are reassessing their views on exchange rates, growth and
inflation. We expect volatility to continue as markets react to
new information and investors to remain unwilling to commit large
risk capital. Over the next few months, markets could continue to
trade against fundamentals. However, we believe these fundamental
factors to be sufficiently strong to move these bond and currency
markets in a positive direction during the second half of 1994.
<PAGE>
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,
(Arthur Zeikel)
Arthur Zeikel
President
(Joseph T. Monagle, Jr.)
Joseph T. Monagle, Jr.
Senior Vice President
(Alex V. Bouzakis)
Alex V. Bouzakis
Vice President
(David B. Walter)
David B. Walter
Vice President
(Stephen Yardley)
Stephen Yardley
Vice President
June 8, 1994
<PAGE>
PERFORMANCE DATA
None of the past results shown should 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.
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
4/30/94 1/31/94 4/30/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $8.37 $8.64 $8.71 -3.90% -3.13%
Class B Shares 8.36 8.64 8.71 -4.02 -3.24
Class A Shares--Total Return +2.77(1) -1.73(2)
Class B Shares--Total Return +2.13(3) -1.97(4)
Class A Shares--Standardized 30-day Yield 5.32%
Class B Shares--Standardized 30-day Yield 4.99%
<FN>
*Investment results shown for the 3-month and 12-month periods
are before the deduction of any sales charges.
(1)Percent change includes reinvestment of $0.591 per share ordinary income dividends.
(2)Percent change includes reinvestment of $0.130 per share ordinary income dividends.
(3)Percent change includes reinvestment of $0.547 per share ordinary income dividends.
(4)Percent change includes reinvestment of $0.120 per share ordinary income dividends.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/94 +3.27% +0.17%
Inception (8/3/90) through 3/31/94 +3.61 +2.75
[FN]
*Maximum sales charge is 3.0%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/94 +2.87% -0.02%
Inception (8/3/90) through 3/31/94 +3.05 +2.84
[FN]
*Maximum contingent deferred sales charge is 3.0% and is reduced
to 0% after 3 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
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
1/1/94--4/30/94 8.64 8.37 -- 0.158 -1.19
------
Total $2.895
Cumulative total return as of 4/30/94: +13.98%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions at net
asset value on the payable date, and do not include sales charge; results would be
lower if sales charge was included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
8/3/90--12/31/90 $10.00 $9.93 -- $0.404 +3.40%
1991 9.93 9.68 -- 0.885 +6.63
1992 9.68 8.69 -- 0.687 -3.39
1993 8.69 8.63 -- 0.581 +6.15
1/1/94--4/30/94 8.63 8.36 -- 0.145 -1.34
------
Total $2.702
Cumulative total return as of 4/30/94: +11.55%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions at net asset
value on the payable date, and do not reflect deduction of any sales charge; results would
be lower if sales charge was deducted.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Maturity Interest Value Percent of
Face Amount Date Issue Rate++ (Note 1a) Net Assets
COUNTRIES
Australia
<S> <C> <C> <S> <C> <C> <C>
A$ 38,400,000 6/08/94 Australian Treasury Bill (1) 4.485%++++ $ 27,263,639 2.19%
67,500,000 3/14/95 Queensland Treasury Corp., Global Notes (3) 8.00 49,151,961 3.94
20,000,000 3/01/96 New South Wales Treasury Corp. (3) 8.50 14,663,392 1.17
Total Investments in Australia (Cost--$88,917,505) 91,078,992 7.30
<CAPTION>
Belgium
<S> <C> <C> <S> <C> <C> <C>
Bf 2,356,000,000 11/25/96 Belgium Government Bonds (1) 6.25 69,084,677 5.54
Total Investments in Belgium (Cost--$66,844,274) 69,084,677 5.54
<CAPTION>
Canada
<S> <C> <C> <S> <C> <C> <C>
C$ 60,346,000 2/01/96 Canadian Government Bonds (1) 6.00 42,880,181 3.44
62,300,000 3/15/96 Canadian Government Bonds (1) 4.75 43,285,192 3.47
22,850,000 8/01/96 Canadian Government Bonds (1) 6.50 16,297,791 1.30
Total Investments in Canada (Cost--$105,323,020) 102,463,164 8.21
<CAPTION>
Denmark
<S> <C> <C> <S> <C> <C> <C>
Dkr 347,350,000 2/10/96 Government of Denmark (1) 6.00 53,305,712 4.27
Total Investments in Denmark (Cost--$52,072,273) 53,305,712 4.27
<CAPTION>
European Currency Units
<S> <C> <C> <S> <C> <C> <C>
ECU 20,317,500 4/25/96 European Currency Unit French Government "OAT" (1) 6.282++++ 21,189,106 1.70
20,000,000 1/21/97 United Kingdom Government (1) 5.25 22,614,203 1.81
Total Investments in European Currency Units
(Cost--$42,545,422) 43,803,309 3.51
<PAGE>
<CAPTION>
France
<S> <C> <C> <S> <C> <C> <C>
Ffr 108,000,000 10/12/95 French Government "B-TAN" (1) 5.50 18,978,244 1.52
147,999,960 4/25/96 French Government "OAT" STRIPS (1) 5.668++++ 23,340,010 1.87
140,000,000 10/25/96 French Government "OAT" STRIPS (1) 5.814++++ 21,360,513 1.71
Total Investments in France (Cost--$64,163,282) 63,678,767 5.10
<CAPTION>
Germany
<S> <C> <C> <S> <C> <C> <C>
DM 22,300,000 3/20/96 German BKO (1) 8.50 14,145,532 1.13
Total Investments in Germany (Cost--$13,949,221) 14,145,532 1.13
<CAPTION>
Italy
<S> <C> <C> <S> <C> <C> <C>
Lit 93,600,000,000 10/01/96 Buoni Poliennali del Tesoro (Italian
Government Bond) (1) 9.00 122,256,392 9.81
10,000,000,000 1/01/97 Buoni Poliennali del Tesoro (Italian
Government Bond) (1) 8.50 6,260,214 0.50
Total Investments in Italy (Cost--$124,472,234) 128,516,606 10.31
<CAPTION>
Japan
<S> <C> <C> <S> <C> <C> <C>
Yen 4,700,000,000 9/12/94 Japan Treasury Bill (1) 2.04++++ 45,877,764 3.68
Total Investments in Japan (Cost--$44,669,004) 45,877,764 3.68
<CAPTION>
Mexico
<S> <C> <C> <S> <C> <C> <C>
MxP 8,771,320 6/30/94 Mexican Cetes (1) 14.50++++ 2,615,180 0.21
40,086,600 7/07/94 Mexican Cetes (1) 17.50++++ 11,851,424 0.95
52,247,210 7/28/94 Mexican Cetes (1) 17.00++++ 15,314,140 1.23
149,806,600 8/11/94 Mexican Cetes (1) 17.00++++ 43,635,035 3.50
Total Investments in Mexico (Cost--$76,443,379) 73,415,779 5.89
<CAPTION>
New Zealand
<S> <C> <C> <S> <C> <C> <C>
NZ$ 13,210,000 12/21/94 New Zealand Treasury Bill (1) 6.31++++ 7,311,958 0.59
63,985,000 11/15/95 New Zealand Government Bonds (1) 8.00 37,475,138 3.00
Total Investments in New Zealand (Cost--$43,567,050) 44,787,096 3.59
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Maturity Interest Value Percent of
Face Amount Date Issue Rate++ (Note 1a) Net Assets
COUNTRIES
Spain
<S> <C> <C> <S> <C> <C> <C>
Pta 2,100,000,000 7/15/95 Bonos del Estado (Spanish Government Bonds) (1) 11.40% $ 16,119,171 1.29%
7,000,000,000 11/30/96 Bonos del Estado (Spanish Government Bonds) (1) 10.55 54,212,435 4.35
3,000,000,000 2/28/97 Bonos del Estado (Spanish Government Bonds) (1) 9.00 22,483,346 1.80
Total Investments in Spain (Cost--$91,601,859) 92,814,952 7.44
<CAPTION>
Sweden
<S> <C> <C> <S> <C> <C> <C>
Skr 325,000,000 9/01/95 Government of Sweden (1) 11.50 44,425,865 3.56
231,700,000 1/23/97 Government of Sweden (1) 10.75 32,356,277 2.60
Total Investments in Sweden (Cost--$75,891,904) 76,782,142 6.16
<CAPTION>
United Kingdom
<S> <C> <C> <S> <C> <C> <C>
Pound 10,000,000 6/27/94 Swiss Bank Corp., Medium--Term Notes (2) 10.45 15,244,536 1.22
Ster- 18,000,000 11/15/96 UK Gilt (1) 10.00 29,212,987 2.34
ling 17,350,000 2/21/97 United Kingdom Treasury (1) 10.50 28,535,925 2.29
Total Investments in the United Kingdom
(Cost--$75,667,580) 72,993,448 5.85
<CAPTION>
United States
<S> <C> <C> <S> <C> <C> <C>
US$ 40,000,000 5/02/94 First Boston Corp. (The), Repurchase Agreement*
purchased on 4/29/94 (2) 3.55 40,000,000 3.21
29,975,449 5/02/94 Lehman Brothers, Repurchase Agreement* purchased
on 4/29/94 (2) 3.60 29,975,449 2.40
89,000,000 10/15/94 Plus Capital Co. (2) 7.375 88,777,500 7.12
72,000,000 12/07/94 Plus Capital Co. (2) 5.625 70,830,000 5.68
63,000,000 2/15/97 US Treasury Notes (1) 4.75 60,854,094 4.88
Total Investments in the United States
(Cost--$292,076,308) 290,437,043 23.29
<PAGE>
<CAPTION>
Expiration Strike
Par Value Date Price
Currency Put Options Purchased
<S> <C> <S> <S> <C> <C> <C>
US$ 22,500,000 May 1994 New Zealand Dollar 0.574 31,500 0.00
Total Currency Put Options Purchased (Cost--$31,500) 31,500 0.00
Total Investments (Cost--$1,258,235,815) 1,263,216,483 101.27
<CAPTION>
Currency Call Options Written
<S> <C> <S> <S> <C> <C> <C>
US$ 45,000,000 May 1994 Canadian Dollar 1.376 (18,000) 0.00
DM 38,200,000 May 1994 German Mark/Italian Lira 965.000 (28,807) 0.00
DM 37,800,000 May 1994 German Mark/Italian Lira 965.000 (13,683) 0.00
US$ 22,500,000 May 1994 New Zealand Dollar 0.579 (31,500) 0.00
Total Currency Call Options Written
(Premiums Received--$136,789) (91,990) 0.00
<CAPTION>
Currency Put Options Written
<S> <C> <S> <S> <C> <C> <C>
US$ 22,500,000 May 1994 Australian Dollar 0.706 (29,250) 0.00
22,500,000 May 1994 Australian Dollar 0.715 (90,000) (0.01)
22,500,000 May 1994 Canadian Dollar 1.380 (63,000) (0.01)
45,000,000 May 1994 German Mark 1.660 (38,250) 0.00
45,000,000 May 1994 German Mark 1.675 (29,250) 0.00
Total Currency Put Options Written
(Premiums Received--$221,625) (249,750) (0.02)
Total Currency Options Written (Premiums Received--$358,414) (341,740) (0.02)
Total Investments Net of Options Written (Cost--$1,257,877,401) 1,262,874,743 101.25
Unrealized Depreciation on Forward Foreign Exchange Contracts+++ (17,644,682) (1.41)
Other Assets Less Liabilities 2,097,418 0.16
-------------- -------
Net Assets $1,247,327,479 100.00%
============== =======
<PAGE>
<FN>
*Repurchase Agreements are fully collateralized by US Government & Agency Obligations.
++Certain Commercial Paper, US Treasury and Foreign Treasury Obligations are traded
on a discount basis; the interest rates shown represent the yield-to-maturity at the
time of purchase by the Fund. Other securities bear interest at the rates shown, payable
at fixed dates or upon maturity. Interest rates on floating rate securities are adjusted
periodically based on appropriate indexes. The interest rates shown are those in effect at
April 30, 1994.
++++Represents the yield-to-maturity on this zero coupon issue.
Corresponding industry groups for securities (percent of net
assets):
(1) Sovereign Government Obligations--76.53%
(2) Financial Services--19.63%
(3) Sovereign/Regional Government Obligations--Agency--5.11%
+++Forward Foreign Exchange Contracts as of April 30, 1994 are as
follows:
Unrealized
Appreciation
Expiration (Depreciation)
Date (Note 1c)
Foreign Currency Purchased
A$ 36,966,392 May 1994 $ 450,938
A$ 37,052,245 June 1994 469,600
C$ 164,093,995 May 1994 (436,322)
DM 409,059,474 May 1994 6,182,506
DM 22,420,240 June 1994 124,857
Dkr 46,931,044 May 1994 226,278
Fim 208,923,333 May 1994 1,188,339
NZ$ 220,964,759 May 1994 1,781,580
Pta 3,264,279,726 May 1994 529,727
Skr 336,379,667 May 1994 1,414,989
Yen 826,808,050 May 1994 110,277
Total (US$ Commitment--$676,625,142) $ 12,042,769
============
<PAGE>
Foreign Currency Sold
A$ 195,781,704 May 1994 $ (758,985)
A$ 5,219,450 June 1994 6,921
Bf 2,417,666,519 June 1994 (2,386,230)
C$ 97,790,876 May 1994 716,262
C$ 112,495,726 June 1994 (160,723)
DM 247,072,287 May 1994 (3,124,324)
DM 373,902,898 June 1994 (4,937,976)
Dkr 141,335,000 May 1994 (440,548)
Dkr 141,152,758 June 1994 (731,828)
ECU 37,753,713 May 1994 (787,286)
Fim 203,059,882 May 1994 (1,104,232)
Frf 376,703,798 May 1994 (1,156,148)
Pound 51,220,790 June 1994 (1,611,274)
Sterling
Lit 109,805,270,000 May 1994 (2,571,382)
Lit 56,301,720,405 June 1994 (1,019,327)
NZ$ 233,605,963 May 1994 (810,903)
Pta 12,027,672,877 May 1994 (2,218,331)
Pta 3,866,004,621 June 1994 (679,696)
Skr 654,058,526 May 1994 (2,635,149)
Skr 274,317,361 June 1994 (1,345,751)
yen 5,510,274,806 May 1994 (1,930,541)
Total (US$ Commitment--$1,534,200,364) $(29,687,451)
------------
Total Unrealized Depreciation--Net, on
Forward Foreign Exchange Contracts $(17,644,682)
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of April 30, 1994
<S> <S> <C> <C>
Assets: Investments purchased, at value (identified cost--$1,258,204,315) (Note 1a) $1,263,184,983
Options purchased, at value (cost--$31,500) (Notes 1a & 1c) 31,500
Foreign cash (Note 1c) 4,807,504
Receivables:
Interest $ 21,788,701
Securities sold 1,151,073
Forward foreign exchange contracts 556,659
Options written 429,254
Capital shares sold 237,853 24,163,540
--------------
Deferred organization expenses (Note 1h) 31,137
Prepaid registration fees and other assets (Note 1h) 138,238
--------------
Total assets 1,292,356,902
--------------
Liabilities: Options written, at value (premiums received--$358,414) (Notes 1a & 1d) 341,740
Unrealized depreciation on forward foreign exchange contracts (Note 1c) 17,644,682
Payables:
Capital shares redeemed 14,205,563
Securities purchased 7,985,309
Dividends to shareholders (Note 1i) 1,931,458
Forward foreign exchange contracts 1,180,851
Distributor (Note 2) 715,900
Investment adviser (Note 2) 546,694
Options purchased 171,000 26,736,775
--------------
Accrued expenses and other liabilities 306,226
--------------
Total liabilities 45,029,423
--------------
Net Assets: Net assets $1,247,327,479
==============
Net Assets Class A Shares of Common Stock, $.10 par value, 1,000,000,000 shares authorized $ 898,442
Consist of: Class B Shares of Common Stock, $.10 par value, 1,000,000,000 shares authorized 14,012,760
Paid-in capital in excess of par 1,343,755,068
Accumulated realized capital losses from investments and
foreign currency transactions--net (Note 5) (98,869,920)
Unrealized depreciation on investments and foreign currency transactions--net (12,468,871)
--------------
Net assets $1,247,327,479
==============
<PAGE>
Net Asset Class A--Based on net assets of $75,169,491 and 8,984,422 shares outstanding $ 8.37
Value: ==============
Class B--Based on net assets of $1,172,157,988 and 140,127,604
shares outstanding $ 8.36
==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended April 30, 1994
<S> <S> <C> <C>
Investment Income Interest and discount earned (net of $689,730 foreign withholding tax) $ 55,498,803
(Notes 1f & 1g):
Expenses: Distribution fees--Class B (Note 2) 5,396,309
Investment advisory fees (Note 2) 4,200,657
Transfer agent fees--Class B (Note 2) 587,882
Custodian fees 357,111
Maintenance fees--Class A (Note 2) 110,620
Printing and shareholder reports 49,172
Transfer agent fees--Class A (Note 2) 32,445
Professional fees 25,587
Registration fees (Note 1h) 20,136
Accounting services (Note 2) 11,570
Directors' fees and expenses 11,459
Amortization of organization expenses (Note 1h) 6,675
Other 10,457
--------------
Total expenses 10,820,080
--------------
Investment income--net 44,678,723
--------------
Realized & Realized loss from:
Unrealized Gain Investments--net $ (3,991,877)
(Loss) on Foreign currency transactions (39,644,534) (43,636,411)
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 22,395,054
(Notes 1c, 1g & 3): Foreign currency transactions (27,727,954) (5,332,900)
-------------- --------------
Net realized and unrealized loss on investments
and foreign currency transactions (48,969,311)
--------------
Net Decrease in Net Assets Resulting from Operations $ (4,290,588)
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: April 30, 1994 October 31, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 44,678,723 $ 160,519,519
Realized loss on investments and foreign currency transactions--net (43,636,411) (253,242,731)
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net (5,332,900) 188,784,948
-------------- --------------
Net increase (decrease) in net assets resulting from operations (4,290,588) 96,061,736
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (2,798,646) ( 9,820,087)
(Note 1i): Class B (41,880,077) (150,699,432)
-------------- --------------
Net decrease in net assets resulting from dividends to shareholders (44,678,723) (160,519,519)
-------------- --------------
Capital Share Net decrease in net assets derived from capital share transactions (467,342,222) (1,543,047,053)
Transactions -------------- --------------
(Note 4):
Net Assets: Total decrease in net assets (516,311,533) (1,607,504,836)
Beginning of period 1,763,639,012 3,371,143,848
-------------- --------------
End of period $1,247,327,479 $1,763,639,012
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
------------------------------------------------------------------
For the For the
Period Period
The following per share data and ratios have been derived For the Six For the Dec. 28, Aug. 3
from information provided in the financial statements. Months Ended Year Ended 1990 to 1990++ to
April 30, October 31, Oct. 31, Dec. 27,
Increase (Decrease) in Net Asset Value: 1994* 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.66 $ 8.85 $ 9.85 $ 9.92 $ 10.00
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .28 .61 .77 .82 .42
Realized and unrealized loss on investments
and foreign currency transactions--net (.30) (.19) (1.00) (.07) (.08)
---------- ---------- ---------- ---------- ----------
Total from investment operations (.02) .42 (.23) .75 .34
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Return of capital--net -- (.61) (.77) -- --
Investment income--net (.27) -- -- (.82) (.42)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.27) (.61) (.77) (.82) (.42)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 8.37 $ 8.66 $ 8.85 $ 9.85 $ 9.92
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (0.35%)++++ 5.28% (2.60%) 7.53%++++ 3.73%++++
Return:*** ========== ========== ========== ========== ==========
Ratios to Average Expenses, excluding maintenance fees .69%** .73% .75% .76%** .75%**
Net Assets: ========== ========== ========== ========== ==========
Expenses .94%** .98% 1.00% .96%** .75%**
========== ========== ========== ========== ==========
Investment income--net 6.32%** 7.24% 8.11% 9.70%** 10.51%**
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 75,169 $ 99,037 $ 188,623 $ 399,416 $ 211,006
Data: ========== ========== ========== ========== ==========
Portfolio turnover 258.18% 284.62% 120.77% 153.72% 19.40%
========== ========== ========== ========== ==========
<PAGE>
<CAPTION>
Class B
------------------------------------------------------------------
For the For the
Period Period
The following per share data and ratios have been derived For the Six For the Dec. 28, Aug. 3
from information provided in the financial statements. Months Ended Year Ended 1990 to 1990++ to
April 30, October 31, Oct. 31, Dec. 27,
Increase (Decrease) in Net Asset Value: 1994* 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.65 $ 8.85 $ 9.84 $ 9.92 $ 10.00
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .26 .57 .72 .77 .39
Realized and unrealized loss on investment
and foreign currency transactions--net (.30) (.20) (.99) (.08) (.08)
---------- ---------- ---------- ---------- ----------
Total from investment operations (.04) .37 (.27) .69 .31
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Return of capital--net -- (.57) (.72) -- --
Investment income--net (.25) -- -- (.77) (.39)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.25) (.57) (.72) (.77) (.39)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 8.36 $ 8.65 $ 8.85 $ 9.84 $ 9.92
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (0.60%)++++ 4.63% (3.00%) 6.93%++++ 3.40%++++
Return:*** ========== ========== ========== ========== ==========
Ratios to Average Expenses, excluding account maintenance
Net Assets: and distribution fees .70%** .79% .75% .77%** .76%**
========== ========== ========== ========== ==========
Expenses 1.45%** 1.60% 1.50% 1.52%** 1.51%**
========== ========== ========== ========== ==========
Investment income--net 5.82%** 7.26% 7.60% 9.11%** 9.75%**
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $1,172,158 $1,664,602 $3,182,520 $5,918,769 $2,796,301
Data: ========== ========== ========== ========== ==========
Portfolio turnover 258.18% 284.62% 120.77% 153.72% 19.40%
========== ========== ========== ========== ==========
<FN>
++Commencement of Operations.
++++Aggregate total investment return.
*Based on average shares outstanding during the period.
**Annualized.
***Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Short-Term Global Income Fund, Inc. (the "Fund")
is registered under the Investment Company Act of 1940 as a non-
diversified, open-end management investment company. The Fund
offers both Class A and Class B Shares. Class A Shares are sold
with a front-end sales charge. Class B Shares may be subject to a
contingent deferred sales charge. Both classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class A Shares bear the
expenses of the ongoing account maintenance fee and Class B
Shares bear certain expenses related to the account maintenance
and distribution of such shares and have exclusive voting rights
with respect to matters relating to such distribution
expenditures. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of securities--Securities traded in the over-the-
counter market are valued at the last available bid price or
yield equivalents obtained from one or more dealers in the over-
the-counter market prior to the time of valuation. Portfolio
securities which are traded on stock exchanges are valued at the
last sale price on the principal market on which such securities
are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid
price. Options traded on exchanges are valued at the last bid
price for options purchased and the last asked price as obtained
from one or more dealers for options written. Options traded in
the over-the-counter market are valued at the average of the last
asked price for options written and the average of the last bid
price as obtained from two or more dealers for options purchased.
Other investments, including futures contracts and related
options, are stated at market value or otherwise at the fair
value at which it is expected they may be resold, as determined
in good faith by or under the direction of the Board of
Directors. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in
good faith by or under the direction of the Fund's Board of
Directors.
(b) Repurchase agreements--The Fund invests in US Government
securities pursuant to repurchase agreements with a member bank
of the Federal Reserve System or a primary dealer in US
Government securities. Under such agreements, the bank or primary
dealer agrees to repurchase the security at a mutually agreed
upon time and price. The Fund takes possession of the underlying
securities, marks to market such securities and, if necessary,
receives additions to such securities daily to ensure that the
contract is fully collateralized.
<PAGE>
(c) Foreign currency transactions--Transactions denominated
in foreign currencies are recorded at the exchange rate
prevailing when recognized. Assets and liabilities denominated
in foreign currencies are valued at the exchange rate at the end
of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) such transactions
expressed in foreign currencies into US dollars. Realized and
unrealized gains or losses from investments include the effects
of foreign exchange rates on investments.
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.
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.
(d) Options--When the Fund sells 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 sold through an exercise of an
option, the related premium received is deducted from the basis
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 received (or gain or
loss to the extent the cost of the closing transaction is less
than or exceeds the premium received).
Written and purchased options are non-income producing
investments.
<PAGE>
(e) 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.
(f) 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.
(g) 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.
(h) Deferred organization expenses and prepaid registration
fees--Deferred organization expenses are charged to expense over
a five-year period. Prepaid registration fees are charged to
expense as the related shares are issued.
(i) 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.
<PAGE>
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"). Effective
January 1, 1994, the investment advisory business of MLAM was
reorganized from a corporation to a limited partnership. Both
prior to and after the reorganization, ultimate control of MLAM
was vested with Merrill Lynch & Co., Inc. ("ML & Co."). The
general partner of MLAM is Princeton Services, Inc., an indirect
wholly-owned subsidiary of ML & Co. The limited partners are ML &
Co. and Merrill Lynch Investment Management, Inc. ("MLIM"),
which is also an indirect wholly-owned subsidiary of ML & Co. The
Fund has also entered into a Distribution Agreement and
Distribution Plan with Merrill Lynch Funds Distributor, Inc.
("MLFD" or "Distributor"), a wholly-owned subsidiary of MLIM.
MLAM is responsible for the management of the Fund's portfolio
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund.
For such services, the Fund pays a monthly fee based upon the
average daily value of the Fund's net assets, at the following
annual rates: 0.55% of the Fund's average daily net assets not
exceeding $2 billion; 0.525% of average daily net assets in
excess of $2 billion but not exceeding $4 billion; 0.50% of
average daily net assets in excess of $4 billion but not
exceeding $6 billion; 0.475% of average daily net assets in
excess of $6 billion but not exceeding $10 billion; 0.45% of
average daily net assets in excess of $10 billion but not
exceeding $15 billion; and 0.425% of average daily net assets in
excess of $15 billion. The most restrictive annual expense
limitation requires that the Investment Adviser reimburse the
Fund to the extent the Fund's expenses (excluding interest,
taxes, distribution fees, brokerage fees and commissions, and
extraordinary items) exceed 2.5% of the Fund's first $30 million
of average daily net assets, 2.0% of the next $70 million of
average daily net assets, and 1.5% of the average daily net
assets in excess thereof. The Investment Adviser's obligation to
reimburse the Fund is limited to the amount of the investment
advisory fee. No fee payment will be made to the Investment
Adviser during any fiscal year which will cause such expenses to
exceed expense limitations at the time of such payment.
<PAGE>
The Fund has adopted separate Plans of Distribution (the
"Distribution Plans") in accordance with Rule 12b-1 under the
Investment Company Act of 1940 pursuant to which MLFD receives
from the Fund at the end of each month (a) an account maintenance
fee relating to Class A Shares, accrued daily and paid monthly,
at the annual rate of 0.25% of the average daily net assets of
the Fund attributable to Class A Shares in order to compensate
the Distributor and Merrill Lynch in connection with account
maintenance activities and (b) an account maintenance fee and a
distribution fee relating to Class B Shares, accrued daily and
paid monthly, at the annual rates of 0.25% and 0.50%,
respectively, of the average daily net assets of the Fund
attributable to Class B Shares in order to compensate the
Distributor and Merrill Lynch for providing account maintenance
and distribution services to the Fund, with the ongoing account
maintenance fee compensating the Distributor and Merrill Lynch
for providing account maintenance services to Class B
shareholders and with the ongoing distribution fee
compensating the Distributor and Merrill Lynch for providing
shareholder and distribution services, and bearing certain
distribution-related expenses of the Fund. For the six months ended
April 30, 1994, MLFD earned $110,620 and $5,396,309 for Class A
and Class B Shares, respectively, under the distribution plans,
all of which was paid to MLPF&S pursuant to the agreement.
NOTES TO FINANCIAL STATEMENTS (concluded)
For the six months ended April 30, 1994, MLFD earned under-
writing discounts of $838, and MLPF&S earned dealer concessions
of $7,902 on sales of Class A Shares of the Fund. MLPF&S also
received contingent deferred sales charges of $1,563,232 relating
to Class B Share transactions.
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 MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLIM, MLPF&S, FDS, MLFD, and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term
securities, for the six months ended April 30, 1994 were
$3,318,169,982 and $3,628,975,629, respectively.
Net realized and unrealized gains (losses) as of April 30, 1994
were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Investments:
Long-term $ (3,991,877) $ 4,980,668
Short-term -- --
--------------- ---------------
Total investments (3,991,877) 4,980,668
--------------- ---------------
Currency transactions:
Options written 6,383,771 16,674
Options purchased (64,125) --
Foreign currency transactions (31,546,471) 178,469
Forward foreign exchange contracts (14,417,709) (17,644,682)
--------------- ---------------
Total currency transactions (39,644,534) (17,449,539)
--------------- ---------------
Total $ (43,636,411) $ (12,468,871)
=============== ===============
Transactions in call options purchased for the six months ended
April 30, 1994 were as follows:
Call Options Purchased Par Value Premiums Paid
Outstanding call options purchased at
beginning of period -- --
Options purchased $ 225,000 $ 64,125
Options expired (225,000) (64,125)
--------------- ---------------
Outstanding call options purchased at
end of period $ -- $ --
=============== ===============
<PAGE>
Transactions in put options purchased for the six months ended
April 30, 1994 were as follows:
Put Options Purchased Par Value Premiums Paid
Outstanding put options purchased at
beginning of period -- --
Options purchased $ 25,500,000 $ 31,500
--------------- ---------------
Outstanding put options purchased at
end of period $ 25,550,000 $ 31,500
=============== ===============
Transactions in call options written for the six months ended
April 30, 1994 were as follows:
Par Value
Covered by Premiums
Call Options Written Written Options Received
Outstanding call options written at
beginning of period $ 112,433,062 $ 117,877
Options written 4,250,011,455 4,177,087
Options exercised (856,482,291) (976,821)
Options closed (3,362,462,226) (3,181,354)
--------------- ---------------
Outstanding call options written at
end of period $ 143,500,000 $ 136,789
=============== ===============
Transactions in put options written for the six months ended
April 30, 1994 were as follows:
Par Value
Covered by Premiums
Put Options Written Written Options Received
Outstanding put options written at
beginning of period $ 290,900,000 $ 451,290
Options written 8,935,758,207 9,886,457
Options exercised (1,332,332,333) (3,444,044)
Options closed (7,736,825,874) (6,672,078)
--------------- ---------------
Outstanding put options written at
end of period $ 157,500,000 $ 221,625
=============== ===============
<PAGE>
As of April 30, 1994, net unrealized appreciation for Federal
income tax purposes aggregated $4,980,668, of which $17,152,789
related to appreciated securities and $12,172,121 related to
depreciated securities. The aggregate cost of investments, plus
premiums paid for options purchased, less premiums received for
options written, at April 30, 1994 for Federal income tax
purposes was $1,258,204,315.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share
transactions was $467,342,222 and $1,543,047,053 for the six
months ended April 30, 1994 and the year ended October 31, 1993,
respectively.
Transactions in capital shares for Class A and Class B Shares
were as follows:
Class A Shares for the Six Months Dollar
Ended April 30, 1994 Shares Amount
Shares sold 200,806 $ 1,727,513
Shares issued to shareholders in
reinvestment of dividends
and distributions 188,386 1,612,366
--------------- ---------------
Total issued 389,192 3,339,879
Shares redeemed (2,847,364) (24,333,103)
--------------- ---------------
Net decrease (2,458,172) $ (20,993,224)
=============== ===============
Class A Shares for the Year Dollar
Ended October 31, 1993 Shares Amount
Shares sold 987,673 $ 8,606,847
Shares issued to shareholders in
reinvestment of dividends
and distributions 637,595 5,555,072
--------------- ---------------
Total issued 1,625,268 14,161,919
Shares redeemed (11,493,409) (100,105,091)
--------------- ---------------
Net decrease (9,868,141) $ (85,943,172)
=============== ===============
<PAGE>
Class B Shares for the Six Months Dollar
Ended April 30, 1994 Shares Amount
Shares sold 2,480,033 $ 21,153,599
Shares issued to shareholders in
reinvestment of dividends
and distributions 2,618,646 22,406,806
--------------- ---------------
Total issued 5,098,679 43,560,405
Shares redeemed (57,337,103) (489,909,403)
--------------- ---------------
Net decrease (52,238,424) $ (446,348,998)
=============== ===============
Class B Shares for the Year Dollar
Ended October 31, 1993 Shares Amount
Shares sold 7,412,975 $ 64,618,337
Shares issued to shareholders in
reinvestment of dividends
and distributions 9,259,655 80,642,973
--------------- ---------------
Total issued 16,672,630 145,261,310
Shares redeemed (183,937,694) (1,602,365,191)
--------------- ---------------
Net decrease (167,265,064) $(1,457,103,881)
=============== ===============
5. Commitments:
At April 30, 1994, the Fund had entered into forward foreign
exchange contracts under which it had agreed to purchase and
sell various foreign currencies with a value of approximately
$11,263,000 and $60,000, respectively.
6. Capital Loss Carryforward:
At October 31, 1993, the Fund had a capital loss carryforward of
approximately $32,232,000, all of which expires in 2000 and will
be available to offset like amounts of any future taxable gains.
