MERRILL LYNCH
SHORT-TERM
GLOBAL INCOME
FUND, INC.
FUND LOGO
Quarterly Report
July 31, 1995
This report is not authorized for use as an offer of sale
or a solicitation of an offer to buy shares of the Fund
unless accompanied or preceded by the Fund's current
prospectus. Past performance results shown in this report
should not be considered a representation of future
performance. Investment return and principal value
of shares will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
<PAGE>
Merrill Lynch
Short-Term Global
Income Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH SHORT-TERM GLOBAL INCOME FUND, INC.
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Joseph T. Monagle, Jr., Senior Vice President
Alex V. Bouzakis, Vice President
Donald C. Burke, Vice President
Edward F. Gobora, Vice President
David B. Walter, Vice President
Stephen Yardley, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Chase Manhattan Bank, N.A.
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, New York 11245
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
During the quarter ended July 31, 1995, as global fixed-income
prices firmed, we remained conservatively positioned in the higher-
yielding dollar-bloc markets. In the dollar-bloc countries, the Fund
purchased government securities with maturities of two years or less
as positive yield curves proved attractive. Of special note, Merrill
Lynch Short-Term Global Income Fund, Inc. increased its exposure to
Canada and Australia as yield spreads widened to over 200 basis
points (2.00%) versus comparable maturity US securities. In the
European bloc, we reduced the Fund's exposure following the
Bundesbank's latest reduction in the discount rate to 4.00%.
On the currency front, the US dollar finally entered a period of
consolidation after sharp moves lower against the Deutschemark and
the yen earlier in 1995. We will continue to hedge our foreign
currency exposure into US dollars to take advantage of attractive
interest rate differentials and improving US dollar fundamentals.
Market Review
At the beginning of the July quarter, the Bundesbank surprised
investors and submitted to foreign exchange pressures on March 30,
1995 by reducing the discount rate by 50 basis points to 4.00% and
the repurchase rate by 0.35% to 4.50%. The Bundesbank justified its
decision to lower interest rates on the basis of favorable
developments in money supply and the change in the policy
environment caused by the strength of the Deutschemark. Belgium,
Holland, Austria, and Switzerland also cut interest rates in a
coordinated move with Germany. These central bank interest rate
reductions helped firm bond markets in general.
An important political aspect emerged in France as Jacques Chirac
won the French presidency election on May 7, 1995, ending the 14-
year socialist tenure of Francois Mitterand. For the first time
since 1974, a Gaullist will be in power. Chirac reiterated that
reducing unemployment would be the main goal of the new presidency
and reaffirmed his wish for France to move towards European union.
Chirac chose Alain Juppe as the new prime minister and Alain Madelin
as the new economic and finance minister. Following the appointments
to his cabinet, Chirac met with German Chancellor Kohl and stressed
the importance of future German-French relations.
<PAGE>
In Italy, dramatic pension reform proposals and proposed budget
deficit reductions helped firm both currency and bond markets. The
increase in the discount rate to 9% in May also displayed the
central bank resolve on the inflationary front. We anticipate
continued strength in both the Italian bond and currency markets.
With regard to credit quality, Standard and Poor's announced on May
3, 1995 that it had upgraded Ireland's long-term currency debt to AA
from AA-. The upgrade was in response to good economic management.
The Irish Finance Minister, Ruairi Quinn, said the positive change
in Ireland's debt rating will add to the attractiveness of
government securities and to the continued confidence of the
international community in the Irish economy. In addition, Moody's
Investors Service, Inc. lowered its long-term rating on Canada's
domestic currency debt from Aaa to Aa1 and its rating on Canada's
foreign currency debt from Aa1 to Aa2. Moody's expressed concern
over Canada's deficit problems, the feasibility of new budget
reforms and the volatility in financial markets which were
heightened by the crisis in Mexico. Canadian currency and bonds
weakened following the announcement, but quickly retraced to higher
prices as the downgrades were factored into the markets.
In the Americas, the Mexican government announced a fiscal austerity
package which called for large tax increases and extensive cuts in
government spending. The package should help restore confidence in
the country and the peso. Concurrently, the US fixed-income markets
continued to rally as a lack of inflation expectations and subdued
economic growth prospects allowed short-term US Treasury securities
to trade below 6%. In addition, deficit reduction proposals in
Washington supported fixed-income buying.
On the currency front, the US dollar consolidated in April and May
after sharp moves lower against the Deutschemark and yen. Ongoing
trade tensions and the failure of the latest Japanese economic
package helped push the US dollar/Japanese yen to a record level of
79.75. Deutschemark strength within Europe was attributed to
political uncertainty in several countries, including Spain, Italy
and France which, in turn, caused instability in the exchange rate
mechanism.
The Japanese government's emergency "yen package" announced on April
14, 1995, which included a 75 basis point cut in the official
discount rate, was implemented in an effort to reduce Japan's
current account surplus, increase imports, stimulate the economy and
revitalize financial markets. The major focus of the newly initiated
economic measures was to halt the trend of yen appreciation and
mitigate the damage it inflicted on Japan's economy.
<PAGE>
On May 11, 1995, the Clinton administration announced a two-part
action in response to Japanese trade barriers in the auto sector. In
retaliation for the perceived discriminatory trade practices by
Japan, the US started the sanction process under section 301 of the
Trade Act and filed a complaint to the new World Trade Organization
regarding autos and autoparts. The United States targeted 13
Japanese luxury car models for punitive tariffs of 100% if Japan
failed to open its market by the end of June. The two countries
subsequently reached an agreement that was announced on June 28,
1995.
The world's leading central banks surprised the foreign exchange
markets on May 31, 1995 by intervening to sup-port the US dollar.
The Federal Reserve Board was joined by other members of the Group
of Ten Industrialized Nations, including the Bank of Japan and the
Bundesbank, in its defense of the US currency. The United States
wanted to demonstrate that it was not using exchange rates to coerce
Japan into a trade agreement. The aggressive intervention was in
response to a document from the Group of Seven Industrialized
Nations (G-7) on April 25, 1995 stating that the finance ministers
and governors of the G-7 agreed that an orderly reversal of recent
currency movements was desirable. In June, the US dollar depreciated
versus the Deutschemark and stabilized against the yen. Participants
at the G-7 meeting on June 15, 1995 agreed to cooperate closely in
the foreign exchange markets and reiterated the belief that the US
dollar's current rate was not justified by underlying economic
fundamentals and orderly reversals were desirable. They also agreed
to set up an emergency financing mechanism to prevent another
financial crisis such as the Mexican situation earlier this year. To
address the rising value of the yen, the domestic weak economy and
the growing trade surplus with the United States, the Japanese
government revealed an economic stimulus package on June 27, 1995.
Japanese authorities will be investigating the use of public funds
to write off bad loans. In addition, to support the stock market,
the government discussed the possibility of suspending the dividend
tax which would allow companies to buy their own shares.
European unification was addressed at a summit in Cannes, France,
where debates focused on European Monetary Union (EMU) and members
maintained that the 1999 target date for EMU implementation was
uncertain. Political tensions, instability in the foreign exchange
markets, and economic weakness in some countries contributed to the
delay in reaching the original target date of 1997.
In Conclusion
Looking ahead, we anticipate interest rates may trend higher as
global economic growth and inflation criteria force central banks to
become cautious over the near term. We also believe the US dollar is
in a "bottoming" process as budget deficit reduction and other
economic fundamentals should be moving into favor of the US dollar
in the period ahead.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Alex V. Bouzakis)
Alex V. Bouzakis
Vice President and
Senior Portfolio Manager
(Edward F. Gobora)
Edward F. Gobora
Vice President and Portfolio Manager
(David B. Walter)
David B. Walter
Vice President and Portfolio Manager
(Stephen Yardley)
Stephen Yardley
Vice President and Portfolio Manager
August 18, 1995
<PAGE>
PERFORMANCE DATA
About Fund
Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors, as
detailed in the Fund's prospectus. If you were a Class A shareholder
prior to October 21, 1994, your Class A Shares were redesignated to
Class D Shares on October 21, 1994, which, in the case of certain
eligible investors, were simultaneously exchanged for Class A
Shares.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after 10 years.
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
Performance data for the Fund's Class B and Class D Shares are
presented in the "Recent Performance Results," "Average Annual Total
Return" and "Performance Summary" tables below and on pages 5 and 6.
Data for Class A and Class C Shares are also presented in the
"Recent Performance Results" and "Aggregate Total Return" tables
below and on page 5.
<PAGE>
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class B and Class D
Shares for the 12-month and 3-month periods ended July 31, 1995 and
for Class A and Class C Shares for the since inception and 3-month
periods ended July 31, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
None of the past results shown should be considered a 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. 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.
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
7/31/95 4/30/95 7/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $7.89 $7.89 $8.11 -2.71% 0.00%
Class B Shares* 7.88 7.88 8.18 -3.67 0.00
Class C Shares* 7.70 7.76 8.11 -5.06 -0.77
Class D Shares* 7.88 7.88 8.18 -3.67 0.00
Class A Shares--Total Return* +2.51(1) +1.83(2)
Class B Shares--Total Return* +2.09(3) +1.50(4)
Class C Shares--Total Return* -1.11(5) +0.55(6)
Class D Shares--Total Return* +2.76(7) +1.77(8)
Class A Shares--Standardized 30-day Yield 5.34%
Class B Shares--Standardized 30-day Yield 4.78%
Class C Shares--Standardized 30-day Yield 4.03%
Class D Shares--Standardized 30-day Yield 5.11%
<PAGE>
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Investment results shown for Class A and Class C Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.395 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.134 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.463 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.118 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.309 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.103 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.505 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.129 per share ordinary
income dividends.
</TABLE>
Average Annual
Total Return
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/95 +1.79% -2.04%
Inception (8/3/90) through 6/30/95 +2.40 +2.40
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/95 +2.21% -1.88%
Inception (8/3/90) through 6/30/95 +2.95 +2.10
[FN]
*Maximum sales charge is 4%. On 10/21/94, Class A Shares were
redesignated to Class D Shares.
**Assuming maximum sales charge.
<PAGE>
Aggregate
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (10/21/94) through 6/30/95 +1.73% -2.34%
[FN]
*Maximum sales charge is 4%. On 10/21/94, Class A Shares were
redesignated to Class D Shares.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94) through 6/30/95 -1.62% -2.57%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<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
1994 8.63 7.89 -- 0.463 -3.30
1/1/95--7/31/95 7.89 7.88 -- 0.259 +3.32
------
Total $3.279
Cumulative total return as of 7/31/95: +12.98%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance
Summary--
Class D 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
1994 8.64 7.89 -- 0.506 -2.91
1/1/95--7/31/95 7.89 7.88 -- 0.282 +3.75
------
Total $3.525
Cumulative total return as of 7/31/95: +16.20%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
***As a result of the implementation of the Merrill Lynch Select
Pricing SM System, Class A Shares of the Fund outstanding prior to
October 21, 1994 were redesignated to Class D Shares.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Maturity Interest Percent of
COUNTRIES Face Amount Date Issue Rate++ Value Net Assets
<S> <S> <C> <C> <S> <C> <C> <C>
Australia A$ 32,330,000 3/01/96 New South Wales Treasury Corp. (3) 8.50% $ 23,982,181 4.98%
67,300,000 5/14/97 Queensland Treasury Corp. (3) 8.00 49,591,464 10.30
Total Investments in Australia
(Cost--$72,743,530) 73,573,645 15.28
Canada C$ 41,870,000 2/08/96 Canadian Treasury Bill (1) 8.27 29,440,321 6.11
65,050,000 3/07/96 Canadian Treasury Bill (1) 7.98 45,335,722 9.42
17,290,000 12/13/95 Providence of Ontario Treasury Bill (3) 7.05 12,298,474 2.56
14,560,000 12/27/95 Providence of Ontario Treasury Bill (3) 7.05 10,320,821 2.14
Total Investments in Canada
(Cost--$96,577,697) 97,395,338 20.23
France Ffr 68,370,000 10/19/95 French Treasury Bill (1) 7.27 14,108,686 2.93
Total Investments in France
(Cost--$13,791,025) 14,108,686 2.93
Ireland Iep 13,700,000 7/30/96 Irish Gilt (1) 9.00 22,944,622 4.76
Total Investments in Ireland
(Cost--$22,412,463) 22,944,622 4.76
Italy Lit 28,700,000,000 10/01/96 Buoni Poliennali del Tesoro (Italian
Government Bonds) (1) 9.00 17,715,938 3.68
Total Investments in Italy
(Cost--$17,394,979) 17,715,938 3.68
New NZ$ 124,985,000 11/15/95 New Zealand Government Bonds (1) 8.00 83,971,680 17.44
Zealand 12,827,000 8/02/95 New Zealand Treasury Bill (1) 8.85 8,652,006 1.79
Total Investments in New Zealand
(Cost--$85,514,010) 92,623,686 19.23
<PAGE>
Spain Pta 4,628,000,000 11/30/96 Bonos del Estado (Spanish Government
Bonds) (1) 10.55 39,020,010 8.10
Total Investments in Spain
(Cost--$35,871,935) 39,020,010 8.10
United Pound 13,400,000 12/30/96 General Electric Capital Corp. (2) 8.25 21,667,828 4.50
Kingdom Sterling
Total Investments in the
United Kingdom (Cost--$21,729,235) 21,667,828 4.50
United US$ 25,119,000 8/17/95 Caisse des Depots et Consignations (2) 5.72 25,055,142 5.20
States 24,513,659 8/01/95 Lehman Brothers, Repurchase Agreement*
purchased on 7/31/95 (2) 5.80 24,513,659 5.09
25,000,000 8/03/95 PaineWebber Inc., Repurchase Agreement*
purchased on 7/27/95 (2) 5.70 25,000,000 5.19
24,000,000 8/01/95 Schweizerischer Bankverein SBC (Swiss
Bank), Repurchase Agreement* purchased
on 7/31/95 (2) 5.82 24,000,000 4.99
Total Investments in the United States
(Cost--$98,568,801) 98,568,801 20.47
Total Investments (Cost--$464,603,675) 477,618,554 99.18
Unrealized Depreciation on Forward Foreign Exchange Contracts++++ (2,222,090) (0.46)
Other Assets Less Liabilities 6,151,204 1.28
------------ -------
Net Assets $481,547,668 100.00%
============ =======
Net Asset Value: Class A--Based on net assets of $54,552 and 6,915
shares outstanding $ 7.89
============
Class B--Based on net assets of $451,370,647 and
57,268,744 shares outstanding $ 7.88
============
Class C--Based on net assets of $3,155 and 410 shares
outstanding $ 7.70
============
Class D--Based on net assets of $30,119,314 and
3,820,315 shares outstanding $ 7.88
============
<PAGE>
<FN>
Corresponding industry groups for securities (percent of net
assets):
(1) Sovereign Government Obligations--54.23%
(2) Financial Services--24.97%
(3) Sovereign/Regional Government Obligations--Agency--19.98%
*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, 1995.
++++Forward Foreign Exchange Contracts as of July 31, 1995 are as follows:
Unrealized
Expiration Appreciation
Date (Depreciation)
Foreign Currency Purchased
C$ 73,131,935 August 1995 $ (384,324)
DM 38,506,713 August 1995 248,659
Pound 3,126,791 August 1995 11,941
Sterling
Total (US$ Commitment--$86,326,781) $ (123,724)
-----------
<PAGE>
Foreign Currency Sold
A$ 99,991,442 September 1995 $(1,504,407)
C$ 175,700,002 August 1995 (202,842)
DM 40,584,139 September 1995 36,246
Ffr 65,848,928 August 1995 (326,142)
Iep 13,660,964 August 1995 (18,155)
Pound 17,561,323 August 1995 (431,592)
Sterling
Lit 28,189,376,270 August 1995 (370,899)
NZ$ 130,625,943 August 1995 448,113
Pta 4,869,344,688 September 1995 82,526
YEN 1,596,054,400 August 1995 188,786
Total (US$ Commitment--$458,050,096) $(2,098,366)
-----------
Total Unrealized Depreciation--Net, on
Forward Foreign Exchange Contracts $(2,222,090)
===========
</TABLE>
