MERRILL LYNCH
SHORT-TERM
GLOBAL INCOME
FUND, INC.
FUND LOGO
Quarterly Report
January 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.
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
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
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
During the January quarter, as global fixed-income prices firmed, we
remained conservatively positioned with the majority of the Fund's
bond purchases under two years in final maturity. For the dollar-
bloc countries, our primary investment vehicle was money market
securities as our view of rising short-term interest rates proved
correct. In the European bloc, we reduced the Fund's bond exposure
as unexpected economic growth placed the European central banks "on
hold" with regard to monetary policy easings. These strategies
helped to moderate the effect of a convergence between dollar bloc
and European interest rates.
<PAGE>
At the beginning of the three-month period, the US dollar
strengthened against the Deutschemark. The US dollar/Deutschemark
opened at 1.4950 in early November and went to a high of 1.5715 on
the last day of November, while the US dollar/yen opened at 96.50
and moved to its historic low of 96.10 before closing at 99.00. The
US dollar rose as a result of widening of interest rate
differentials in favor of the US dollar and expectations that the
mid-November rate hike of 75 basis points would not be the last
increase in rates in the next few months. Most of the data on
economic activity was very strong and above expectations during the
month. In addition, on November 2, 1994, intervention by the Federal
Reserve Board in support of the US dollar against the Deutschemark
and yen helped to improve confidence in the US currency. The
intervention dispelled any lingering fears that the US
Administration is prepared to resume its weaker dollar policy.
Of special note during the January quarter, several countries in
Europe voted on European Union (EU) membership. Sweden voted to join
the EU in a referendum on November 13, 1994. The result should
bolster the credibility of the Swedish government's economic policy.
Norway's decision to reject EU membership unsettled the Scandinavian
markets. German Chancellor Kohl stated that the opportunity to join
the EU will remain available to Norway in the future. This statement
helped the markets recover much of their losses.
November's release of German money supply and inflation data
dampened speculation of an early interest rate hike from the
Bundesbank and created a "wait and see" environment for European
bonds. In Italy, Prime Minister Berlosconi's political position was
eroded by his party's poor showing in recent local elections and
renewed investigations into his financial affairs, creating doubt
over his ability to push through fiscal policy. These factors
created pressure in both the Italian bond and currency market.
In December, the US dollar collapsed in response to rumors about the
Mexican Central Bank selling dollars to support the peso. The
European Monetary System (EMS) saw a stronger Deutschemark against a
number of major European currencies, such as the Italian lira and
the French franc. This strength was more attributable to recent
political turmoil than economic developments. The most volatile
currency in December was the Mexican peso. The peso devalued in
response to concerns over inflation and prospects of a poor current
account.
Orange County, California's disastrous involvement in leverage and
derivative products came to an end on December 6, 1994 when the
county and its investment funds filed for bankruptcy under Chapter 9
of the Federal Bankruptcy Code. The US market ended December,
however, on a stronger note as domestic economic growth and
inflationary expectations declined.
<PAGE>
On December 6, 1994, Quebec Premier Jacques Parizeau drafted a bill
(An Act on Sovereignty of Quebec) which, if ratified in the upcoming
referendum, will become Quebec's declaration of independence. This
unsettled the Canadian market throughout the month. In the United
Kingdom, the Bank of England increased the base lending rate by 50
basis points to 6.25% on December 7. This move was largely
anticipated. Comments by Governor George, following the large upward
revisions in gross domestic product growth, suggest he would favor
further tightening if the economy does not slow on its own accord.
In the Pacific Basin, the Reserve Bank of Australia (RBA) tightened
monetary policy on December 14, 1994, lifting cash rates by 100 basis
points to 7.5%. This was the third increase in interest rates in the
present economic cycle. This tightening should further stress the
prudent anti-inflation resolve of the RBA. In general, as global
central banks continued to establish monetary credibility by keeping
monetary policy relatively tight, global bond markets traded firmly
during the month.
Mexico's unexpected actions in the last two weeks of 1994, first
raising the weak edge of the new peso band and then allowing the new
peso to float freely two days later, reflected a miscalculation on
the part of Mexican government officials on the importance of
maintaining foreign investor confidence.
In January, central banks continued to show their resolve as the
Bank of Spain increased its key ten-day repurchase agreement rate by
65 basis points to 8% on January 4, 1995. The monetary authorities
attributed the rate hike to concerns about inflation, money and
financial market trends. On January 5, 1995, Moody's Investors
Service, Inc. downgraded Sweden's long-term foreign currency debt to
Aa3 from Aa2. The major factor in the decision to downgrade Sweden
was the heavy burden of public-sector debt that impedes the
authorities' flexibility in managing macroeconomic policy. The
downgrading was not a shock to the market, but it did weaken the
Swedish currency and bond market.
In North America, the Canadian dollar hit a nine-year low of 1.4268
in January. The Canadian dollar was battered by a lack of confidence
in North American currencies because of the Mexican peso crisis.
Canada has also been plagued by political uncertainty, large budget
deficits and other structural problems which have created
nervousness in the market. The bond market, however, firmed as US
interest rates appear to have peaked for the near term.
On January 17, 1995, a major earthquake hit Kobe, Japan. The area
affected by the earthquake accounts for about 20% of Japan's
industrial production. Damage to factories, infrastructure, and
transport will reduce output from that area of Japan. The earthquake
is likely to weaken the economy and reinforce the market view that
any tightening in monetary policy will not come before the second
half of the year.
<PAGE>
At the end of January, the US Congress expressed concerns regarding
the Mexican financial crisis but seemed unwilling to support a
Clinton aid plan. In the face of crumbling support, President
Clinton abandoned his $40 billion aid package to Mexico and set up a
new aid program. The President invoked his executive power to
guarantee a $47.5 billion aid package to Mexico and enlisted the
help of the International Monetary Fund and the Bank of
International Settlements. After this decision, the Mexican
currency, debt and stock markets all rallied. This package was
sufficient to temporarily resolve Mexico's liquidity problem and
more important, restore investor confidence.
In Conclusion
Looking ahead, we expect to remain conservatively positioned as bond
yields, though attractive relative to current inflation, may not as
yet have peaked for this cycle. In addition, we will remain hedged
into US dollars to reduce portfolio volatility and to take advantage
of interest rate differentials in favor of the United States.
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
(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
<PAGE>
February 27, 1995
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 "Performance Summary", "Recent Performance Results"
and "Average Annual Total Return" tables on pages 4, 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.
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 January 31, 1995
and for Class A and Class C Shares for the since inception and 3-
month periods ended January 31, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
<PAGE>
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
1/31/95 10/31/94 1/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $7.92 $8.11 $8.11 -2.34% -2.34%
Class B Shares* 7.91 8.10 8.64 -8.45 -2.35
Class C Shares* 7.91 8.10 8.11 -2.47 -2.35
Class D Shares* 7.91 8.11 8.64 -8.45 -2.47
Class A Shares--Total Return* -0.52(1) -0.64(1)
Class B Shares--Total Return* -3.16(2) -0.78(3)
Class C Shares--Total Return* -1.01(4) -1.01(4)
Class D Shares--Total Return* -2.66(5) -0.77(6)
Class A Shares--Standardized 30-day Yield 6.29%
Class B Shares--Standardized 30-day Yield 5.61%
Class C Shares--Standardized 30-day Yield 5.36%
Class D Shares--Standardized 30-day Yield 5.93%
<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 $0.128 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.460 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.116 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.098 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.503 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.127 per share ordinary
income dividends.
</TABLE>
<PAGE>
Average Annual
Total Return
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/94 -3.30% -6.94%
Inception (8/3/90) through 12/31/94 +2.04 +2.04
[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 12/31/94 -2.91% -6.79%
Inception (8/3/90) through 12/31/94 +2.60 +1.66
[FN]
*Maximum sales charge is 4%. On 10/21/94, Class A Shares were
redesignated to Class D Shares.
**Assuming maximum sales charge.
Aggregate
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (10/21/94) through 12/31/94 -1.33% -5.28%
[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 12/31/94 -1.74% -2.72%
<PAGE>
[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--1/31/95 7.89 7.91 -- 0.022 + 0.79
------
Total $3.042
Cumulative total return as of 1/31/95: +10.21%**
<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--1/31/95 7.89 7.91 -- 0.024 + 0.81
------
Total $3.267
Cumulative total return as of 1/31/95: +12.91%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
***As a result of the implementation of the Merrill Lynch Select
Pricing SM System, Class A Shares of the Fund outstanding prior to
October 21, 1994 have been redesignated to Class D Shares.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Maturity Interest Percent of
COUNTRIES Face Amount Date Issue Rate++ Value Net Assets
<S> <S> <C> <C> <S> <C> <S> <C>
Australia A$ 12,100,000 3/01/96 New South Wales Treasury Corp. (3) 8.50 % $ 9,036,696 1.41%
43,800,000 10/15/96 South Australia Government Finance
Authority (2) 12.50 34,353,019 5.37
Total Investments in Australia
(Cost--$44,196,788) 43,389,715 6.78
Canada C$ 60,346,000 2/01/96 Canadian Government Bonds (1) 6.00 41,829,483 6.53
62,300,000 3/15/96 Canadian Government Bonds (1) 4.75 42,461,972 6.63
Total Investments in Canada
(Cost--$86,606,807) 84,291,455 13.16
Ireland Iep 13,700,000 7/30/96 Irish Gilt (1) 9.00 21,665,651 3.39
Total Investments in Ireland
(Cost--$22,412,463) 21,665,651 3.39
Italy Lit 28,700,000,000 10/01/96 Buoni Poliennali del Tesoro
(Italian Government Bond) (1) 9.00 17,349,259 2.71
Total Investments in Italy
(Cost--$17,394,979) 17,349,259 2.71
Mexico MxP 9,100,000 3/23/95 Tesobonos (3) 18.00 8,968,232 1.40
Total Investments in Mexico
(Cost--$8,880,511) 8,968,232 1.40
<PAGE>
New Zealand NZ$ 76,485,000 11/15/95 New Zealand Government Bonds (1) 8.00 48,335,090 7.55
Total Investments in New Zealand
(Cost--$44,692,900) 48,335,090 7.55
Spain Pta 4,486,000,000 2/28/97 Bonos del Estado (Spanish Government
Bonds) (1) 9.00 32,592,827 5.09
Total Investments in Spain
(Cost--$34,521,366) 32,592,827 5.09
United Pound 13,380,000 11/15/96 United Kingdom Gilt (1) 10.00 21,880,314 3.42
Kingdom Sterling 16,000,000 9/01/97 United Kingdom Gilt (1) 8.75 25,588,100 4.00
Total Investments in the United Kingdom
(Cost--$46,797,272) 47,468,414 7.42
United States US$ 31,000,000 2/01/95 First Boston Corp. (The), Repurchase
Agreement* purchased on 1/31/95 (2) 5.75 31,000,000 4.84
31,894,030 2/01/95 Lehman Brothers, Repurchase Agreement*
purchased on 1/31/95 (2) 5.75 31,894,030 4.98
31,900,000 3/31/96 US Treasury Notes (1) 7.75 32,149,219 5.02
91,400,000 5/15/96 US Treasury Notes (1) 7.375 91,699,883 14.33
118,300,000 7/15/96 US Treasury Notes (1) 7.875 119,446,090 18.66
Total Investments in the United States
(Cost--$305,226,264) 306,189,222 47.83
Total Investments (Cost--$610,729,350) 610,249,865 95.33
Unrealized Appreciation on Forward Foreign Exchange Contracts++++ 2,052,282 0.32
Other Assets Less Liabilities 27,833,728 4.35
------------ -------
Net Assets $640,135,875 100.00%
============ =======
Net Asset Value: Class A--Based on net assets of $31,946 and
4,033 shares outstanding $ 7.92
============
Class B--Based on net assets of $600,000,458 and
75,873,855 shares outstanding $ 7.91
============
Class C--Based on net assets of $130,688 and
16,521 shares outstanding $ 7.91
============
Class D--Based on net assets of $39,972,783 and
5,053,380 shares outstanding $ 7.91
============
<PAGE>
<FN>
Corresponding industry groups for securities (percent of net assets):
(1) Sovereign Government Obligations--77.33%
(2) Financial Services--15.19%
(3) Sovereign/Regional Government Obligations--Agency--2.81%
*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
January 31, 1995.
++++Forward foreign exchange contracts as of January 31, 1995 were as follows:
Unrealized
Expiration Appreciation
Date (Depreciation)
Foreign Currency Purchased
A$ 16,886,544 February 1995 $ 24,857
C$ 41,609,159 February 1995 269,980
DM 122,923,579 February 1995 (94,307)
Pound Sterling 4,100,000 February 1995 194,016
Lit 56,845,091,270 February 1995 248,192
Pta 4,144,913,273 February 1995 359,337
Yen 326,310,710 February 1995 5,707
Total (US$ Commitment--$198,329,744) $1,007,782
----------
Foreign Currency Sold
A$ 60,134,199 March 1995 $ 610,282
C$ 126,059,194 February 1995 100,206
DM 164,749,337 February 1995 (63,923)
Iep 14,277,464 February 1995 (238,648)
Pound Sterling 17,567,993 February 1995 (103,943)
Lit 84,952,808,598 February 1995 358,822
NZ$ 59,161,648 February 1995 281,550
Pta 8,778,125,991 February 1995 134,212
Yen 1,232,388,600 February 1995 (34,058)
Total (US$ Commitment--$463,345,560) $1,044,500
----------
Total Unrealized Appreciation--Net on
Forward Foreign Exchange Contracts $2,052,282
==========
</TABLE>
