MERRILL
LYNCH
SHORT-TERM
GLOBAL
INCOME
FUND, INC.
Quarterly Report July 31, 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
DEAR SHAREHOLDER
On May 17, 1994, the US Federal Reserve Board raised the Federal
Funds rate and discount rate 50 basis points (0.50%), sparking a
minor rally in US Treasury securities and bringing a respite from
the bearish tone in global fixed-income markets. Another important
event for the bond markets during the month of May was a change in
investor perception about the path of economic growth in Germany
and Europe in general. This change coincided with statements by
Bundesbank President Hans Tietmeyer that were interpreted as meaning
the Bundesbank would not be inclined to reduce the discount rate
further in the near term. This and other Bundesbank statements ex-
pressing concern about the inflationary impact of continued high
money supply growth put European markets in a tailspin. The European
markets were also plagued by a continued lack of buying interest,
which culminated in the Bundesbank's canceling its four-year and
ten-year auctions. The lack of buyers was seen across Europe, with
nearly every auction putting pressure on its market.
<PAGE>
While bond prices fell, the US dollar also lost value after an
attempt in early May by central banks to support it. In defiance of
the bold 50 basis point rise in US short-term interest rates, the
US dollar sagged steadily against the Deutschemark. For the month,
the US dollar lost ground to most currencies, making gains only
against the yen and the weakest European currencies. May ended with
the global bond market searching for the bottom and investors sus-
pecting that the cyclical top of the bond market cycle might have
passed. Price action in May could be described as highly technical,
but the bearish sentiment driving the market lower had its roots in
expectations for economic recovery and fears about higher inflation.
In June, core European markets outperformed other European bond
markets, consistent with the performance displayed all this year
(peripheral market spreads widen in down markets and contract in
rallies). Spain suffered from investor reaction to the dramatic
defeat of the ruling Socialist Party in the EU and Andalusian elections,
and Italian bonds came under added pressure when concerns about the
budget deficit were sparked by a supreme court ruling that the
government must honor past commitments to adjust pensions for in-
flation.
A central force in the international bond markets in June was the
continued weakness of the US dollar, which put pressure on the
US Treasury market by raising fears of a defensive Federal Reserve
Board tightening. This led to higher yields abroad as most markets
continued to follow the direction of the US market. There was some
decoupling of markets during June, but global investors appeared
convinced that higher interest rates in the United States would
eventually lead to higher interest rates abroad.
Australia and New Zealand underperformed in June after strong
performances in May. Signs of stronger-than-expected economic growth
led to inflationary fears, causing bond market yields to rise. Heavy
new-issue supply, concern over fiscal policy, political uncertainty
associated with Quebec and an unstable currency resulted in under-
performance for Canada. Japan, a reliable performer over the past
three months, suffered a downturn primarily in response to concerns
about economic recovery and the election of Murayama, head of the
Social Democratic Party, as prime minister.
On a real yield basis, European bond markets became more attractive
in June, but investors remained on the sidelines, wondering when the
European markets would hit bottom. Concerns continued in Europe about
fiscal policies, financing needs, the rate of economic growth and
prospects for less accommodating monetary policies. As for the US
Treasury market, the focus remained on the US dollar, with investors
not willing to enter the market on a large scale without dollar
stability.
<PAGE>
July was marked by another bout of European currency problems, US
dollar volatility, fears of further Federal Reserve Board tightening,
domestic political traumas in Europe, inflationary fears in countries
further along in the economic cycle and evidence of slowing US gross
domestic product (GDP) growth. The month began with a mini-crisis in
European countries with large budget deficits and correspondingly high
levels of public debt as they experienced sell-offs in both currencies
and bond markets. The problem extended to most peripheral European
markets and to the French market as well.
Events in Europe were soon overshadowed by the sudden and significant
depreciation of the US dollar. As the dollar weakened, international
investors shifted funds out of dollar-denominated assets into European
assets, pushing prices higher across European markets. As primary
destinations for funds of investors seeking relief from the weakening
US dollar, German Bunds and UK gilts led the European markets higher.
However, Sweden was plagued by deficit problems that kept its bond
market from enjoying the better tone in Europe and depressed the
Finnish market. The New Zealand market also experienced weakness
after the resignation of a parliament member put the ruling party's
one-seat majority at risk.
In the third week of July, Federal Reserve Board Chairman Alan
Greenspan sent most of the world's bond markets reeling with his
Humphrey-Hawkins testimony. His message was that the possibility
still exists for further tightening and the Federal Reserve Board
will continue to be vigilant against inflation and will focus on
the value of the dollar. This testimony heightened fears of an
imminent interest rate hike not only to curtail inflation, but
also to support the US dollar, and pushed yield curves around the
globe higher and flatter. After the initial shock of Greenspan's
testimony, most bond markets stabilized in the final ten days of
July as summer vacations began to reduce investor participation.
This lower activity was reinforced by the Bundesbank's decision
to fix the repurchase rate at 4.85% for the four weeks during its
summer break. The lull in activity provided an opportunity for the
high-yielding markets to recover. Spain, Belgium, Denmark and France
all recouped at least some of their under-performance during the
month.
July closed on a positive note for most bond markets. Second quarter
US GDP data was considerably weaker than expected and helped to
diminish the prospects of an interest rate hike in the near term.
The US dollar lost approximately 0.2% to the Deutschemark and gained
approximately 1.6% against the yen.
<PAGE>
In Conclusion
Going forward, we will continue to conservatively position the port-
folio with respect to potential interest rate rises in the dollar-based
currencies. In addition, we remain aware of potential slowdowns in in-
terest rate cuts by the central banks in Europe that would result if
stronger economic growth were to take hold on the continent.
We thank you for your continued investment in Merrill Lynch Short-Term
Global Income Fund, Inc., and we look forward to reviewing our outlook
with you again in our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Joseph T. Monagle, Jr.)
Joseph T. Monagle, Jr.
Senior Vice President
(Alex V. Bouzakis)
Alex V. Bouzakis
Vice President
(Edward F. Gobora)
Edward F. Gobora
Vice President
(David B. Walter)
David B. Walter
Vice President
(Stephen Yardley)
Stephen Yardley
Vice President
<PAGE>
August 30, 1994
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>
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--7/31/94 8.64 8.18 -- 0.282 - 1.97
------
Total $3.019
Cumulative total return as of 7/31/94: +13.08%**
<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>
<PAGE>
<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--7/31/94 8.63 8.18 -- 0.259 - 2.13
------
Total $2.816
Cumulative total return as of 7/31/94: +10.66%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower
if sales charge was deducted.
</TABLE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
7/31/94 4/30/94 7/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $8.18 $8.37 $8.74 -6.41% -2.27%
Class B Shares 8.18 8.36 8.74 -6.41 -2.15
Class A Shares--Total Return -0.26(1) -0.79(2)
Class B Shares--Total Return -0.76(3) -0.80(4)
Class A Shares--Standardized 30-day Yield 6.28%
Class B Shares--Standardized 30-day Yield 5.93%
<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 $0.553 per share ordinary income dividends.
(2)Percent change includes reinvestment of $0.124 per share ordinary income dividends.
(3)Percent change includes reinvestment of $0.509 per share ordinary income dividends.
(4)Percent change includes reinvestment of $0.114 per share ordinary income dividends.
</TABLE>
<PAGE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/94 +0.33% -2.68%
Inception (8/3/90) through 6/30/94 +3.14 +2.34
[FN]
*Maximum sales charge is 3.0%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/94 -0.30% -3.11%
Inception (8/3/90) through 6/30/94 +2.55 +2.55
[FN]
*Maximum contingent deferred sales charge is 3.0% and
is reduced to 0% after 3 years.
**Assuming payment of applicable contingent deferred sales
charge.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Maturity Interest Percent of
COUNTRIES Face Amount Date Issue Rate++ Value Net Assets
<S> <S> <C> <C> <S> <C> <C> <C>
Australia A$ 33,900,000 3/01/96 New South Wales Treasury Corp. (3) 8.50% $ 25,288,760 2.55%
18,270,000 5/14/97 Queensland Treasury Corp. (3) 8.00 13,333,742 1.34
Total Investments in Australia (Cost--$38,826,973) 38,622,502 3.89
Belgium Bf 1,996,000,000 11/25/96 Belgium Government Bonds (1) 6.25 60,442,253 6.10
Total Investments in Belgium (Cost--$57,629,197) 60,442,253 6.10
<PAGE>
Canada C$ 60,346,000 2/01/96 Canadian Government Bonds (1) 6.00 42,437,400 4.28
62,300,000 3/15/96 Canadian Government Bonds (1) 4.75 42,873,797 4.32
22,850,000 8/01/96 Canadian Government Bonds (1) 6.50 16,019,307 1.62
Total Investments in Canada (Cost--$105,323,020) 101,330,504 10.22
Denmark Dkr 225,000,000 2/10/96 Government of Denmark (1) 6.00 35,561,433 3.59
Total Investments in Denmark (Cost--$33,628,979) 35,561,433 3.59
European ECU 14,620,000 4/25/96 French Government 'OAT' STRIPS (1) 6.00++++ 15,717,907 1.58
Currency 5,697,500 4/25/96 French Government 'OAT' STRIPS (1) 6.17++++ 6,125,361 0.62
Units 18,000,000 1/21/97 United Kingdom Government Bond (1) 5.25 20,764,220 2.09
Total Investments in European Currency Units
(Cost--$21,324,195) 42,607,488 4.29
France Ffr 110,000,000 4/25/96 French Government 'OAT' STRIPS (1) 5.668++++ 18,292,386 1.84
140,000,000 10/25/96 French Government 'OAT' STRIPS (1) 5.814++++ 22,459,976 2.26
Total Investments in France (Cost--$60,309,952) 40,752,362 4.10
Germany DM 32,100,000 3/20/97 Bundesobligation (1) 8.00 21,203,800 2.14
31,500,000 2/20/97 Bundesschatzanweisurgen (1) 6.50 20,126,654 2.03
Total Investments in Germany (Cost--$42,764,235) 41,330,454 4.17
Italy Lit 65,000,000,000 10/01/96 Buoni Poliennali del Tesoro (Italian
Government Bond) (1) 9.00 39,942,444 4.03
60,200,000,000 1/01/97 Buoni Poliennali del Tesoro (Italian
Government Bond) (1) 8.50 36,379,393 3.67
39,000,000,000 3/21/95 Cassaddi Risparmio Delle Provincie Lombarde (2) 7.96++++ 23,175,531 2.33
Total Investments in Italy (Cost--$100,058,468) 99,497,368 10.03
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Maturity Interest Percent of
COUNTRIES Face Amount Date Issue Rate++ Value Net Assets
<S> <S> <C> <C> <S> <C> <C> <C>
Mexico MxP 149,806,600 8/11/94 Mexican Cetes (1) 17.00++++% $43,765,211 4.41%
Total Investments in Mexico (Cost--$45,772,557) 43,765,211 4.41
<PAGE>
New Zealand NZ$ 63,985,000 11/15/95 New Zealand Government Bonds (1) 8.00 38,622,067 3.89%
13,210,000 12/21/94 New Zealand Treasury Bill (1) 6.31++++ 7,723,332 0.79
Total Investments in New Zealand
(Cost--$43,667,038) 46,345,399 4.68
Spain Pta 5,700,000,000 11/30/96 Bonos del Estado (Spanish Government Bonds) (1) 10.55 44,595,402 4.50
Total Investments in Spain (Cost--$43,363,193) 44,595,402 4.50
Sweden Skr 225,000,000 9/01/95 Government of Sweden (1) 11.50 29,773,475 3.00
231,700,000 1/23/97 Government of Sweden (1) 10.75 30,447,728 3.07
Total Investments in Sweden (Cost--$62,488,562) 60,221,203 6.07
United Pound 27,350,000 2/21/97 United Kingdom Exchequer (1) 10.50 44,744,985 4.51
Kingdom Sterling
Total Investments in the United Kingdom
(Cost--$44,964,250) 44,744,985 4.51
United US$ 56,000,000 8/01/94 First Boston Corp. (The), Repurchase Agreement*
States purchased on 7/29/94 (2) 4.15 56,000,000 5.65
57,087,284 8/01/94 Lehman Brothers, Repurchase Agreement* purchased
on 7/29/94 (2) 4.18 57,087,284 5.75
56,000,000 8/01/94 PaineWebber Inc., Repurchase Agreement* pur-
chased on 7/29/94 (2) 4.20 56,000,000 5.64
26,000,000 10/15/94 Plus Capital Co., Ltd. (2) 7.375 25,948,000 2.62
72,000,000 12/07/94 Plus Capital Co., Ltd. (2) 5.625 71,172,000 7.18
22,600,000 5/15/97 US Treasury Notes (1) 6.50 22,734,199 2.29
Total Investments in the United States
(Cost--$289,761,440) 288,941,483 29.13
Total Investments (Cost--$989,882,059) 988,758,047 99.69
<CAPTION>
Expiration Strike
Par Value Date Price
<S> <S> <C> <S> <S> <C> <C> <C>
Bond Call US$ 22,600,000 August 1994 US Treasury Notes, 6.50% due 5/15/97 100.625 (28,250) (0.01)
Options
Written Total Bond Call Options Written (Premiums
Received--$10,594) (28,250) (0.01)
<PAGE>
Currency and US$ 17,200,000 August 1994 Australian Dollar 0.745 (30,100) (0.01)
Bond Call Bf 1,550,000,000 August 1994 Belgium Government Bond, 6.25% due 11/15/96 99.650 (23,250) 0.00
Options DM 32,100,000 August 1994 Bundesobligation, 8.00% due 3/20/97 105.200 (12,134) 0.00
Written DM 31,500,000 August 1994 Bundesschatzanweisurgen, 6.50% due 2/20/97 102.241 (3,969) 0.00
Dkr 225,000,000 August 1994 Denmark Government Bond, 6.00% due 2/10/96 99.250 (21,600) 0.00
Ffr 140,000,000 August 1994 French Government 'OAT' STRIPS, 0.00% due
4/25/96 87.638 (10,360) 0.00
US$ 22,600,000 August 1994 German Mark 1.562 (6,780) 0.00
US$ 22,600,000 August 1994 German Mark 1.572 (49,720) (0.01)
DM 35,200,000 August 1994 Sterling Put/German Mark Call 2.398 (3,344) 0.00
Total Currency Call and Bond Options Written
(Premiums Received--$208,923) (161,257) (0.02)
Bond Put US$ 22,600,000 August 1994 US Treasury Notes, 6.50% due 5/15/97 99.625 (6,780) 0.00
Options
Written Total Bond Put Options Written (Premiums
Received--$7,062) (6,780) 0.00
Currency US$ 10,000,000 August 1994 Australian Dollar .735 (20,000) 0.00
and Bond 22,600,000 August 1994 German Mark 1.600 (24,860) 0.00
Put Options 22,600,000 August 1994 German Mark 1.612 (13,560) 0.00
Written 22,600,000 August 1994 German Mark 1.622 (27,120) 0.00
22,600,000 August 1994 New Zealand Dollar .597 (15,820) 0.00
Total Currency and Bond Put Options Written
(Premiums Received--$145,020) (101,360) 0.00
Total Options Written (Premium Received--$371,599) (297,647) (0.03)
Total Investments, Net of Options Written (Cost--$989,510,460) 988,460,400 99.66
Unrealized Depreciation on Forward Foreign Exchange Contracts++++++ (5,825,164) (0.59)
Other Assets Less Liabilities 9,194,878 0.93
------------ -------
Net Assets $991,830,114 100.00%
============ =======
<PAGE>
Net Asset Value: Class A--Based on net assets of $56,837,239 and
6,946,194 shares outstanding $ 8.18
============
Class B--Based on net assets of $934,992,875 and
114,296,153 shares outstanding $ 8.18
============
<FN>
Corresponding industry groups for securities (percent of net assets):
(1)Sovereign Government Obligations--66.63%
(2)Financial Services--29.17%
(3)Sovereign/Regional Government Obligations--Agency--3.89%
*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
July 31, 1994.
++++Represents the yield-to-maturity on this zero coupon issue.
++++++Forward Foreign Exchange Contracts as of July 31, 1994 are as follows:
Unrealized
Expiration Appreciation
Date (Depreciation)
Foreign Currency Purchased
A$ 53,011,723 August 1994 $ 446,996
Bf 335,764,153 August 1994 (276,959)
C$ 79,355,893 August 1994 (305,639)
DM 214,931,745 August 1994 (1,549,206)
Frf 46,326,465 August 1994 (73,069)
Pound Sterling 25,458,780 August 1994 76,891
Lit 44,561,395,160 August 1994 (6,519)
Pta 6,810,508,767 September 1994 (537,951)
Total (US$ Commitment--$312,216,434) $(2,225,456)
-----------
<PAGE>
Unrealized
Expiration Appreciation
Date (Depreciation)
Foreign Currency Sold
A$ 59,674,925 August 1994 $(741,345)
A$ 13,814,005 September 1994 (13,469)
Bf 1,922,393,186 August 1994 (1,202,840)
C$ 99,973,478 August 1994 (269,460)
C$ 16,024,155 September 1994 (30,070)
DM 258,627,738 August 1994 (2,104,975)
DM 114,201,003 September 1994 2,159,911
DM 36,206,330 October 1994 (27,965)
Dkr 205,931,048 August 1994 204,713
ECU 35,800,838 September 1994 655,534
Frf 277,574,240 August 1994 290,042
Pound Sterling 42,352,615 August 1994 (1,475,727)
Lit 157,767,290,058 August 1994 962,587
NZ$ 110,237,341 September 1994 (247,376)
Pta 8,029,112,020 August 1994 (2,144,166)
Pta 4,600,285,752 September 1994 235,657
Skr 479,382,109 August 1994 110,490
Yen 249,382,556 August 1994 38,751
Total (US$ Commitment--$969,757,632) $(3,599,708)
-----------
Total Unrealized Depreciation--Net on
Forward Foreign Exchange Contracts $(5,825,164)
===========
</TABLE>
