MERRILL LYNCH SHORT TERM GLOBAL INCOME FUND INC
N-30D, 1996-08-21
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MERRILL LYNCH
SHORT-TERM
GLOBAL INCOME
FUND, INC.








FUND LOGO








Semi-Annual Report

June 30, 1996





This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original
cost. Statements and other information herein are as dated and are
subject to change.
<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
<PAGE>
Custodian
The Chase Manhattan Bank, N.A.
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, New York 11245

Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863



DEAR SHAREHOLDER


At the beginning of the three-month period ended June 30, 1996, the
divergence between a declining US bond market and improving short-
term European markets intensified. Strong economic data in the
United States throughout April, as evidenced by gross domestic
product (GDP) growth of 2.3%, led to price declines in the US bond
market and reinforced the belief that the next move in interest
rates by the US Federal Reserve Board would be up. However, the
short-term end of European fixed-income markets traded well as the
Bundesbank finally delivered a much-awaited cut in the official
discount rate. Denmark, Sweden, Spain, France, Austria, Portugal,
the Netherlands, Belgium, Ireland and Canada also reduced interest
rates in April.

The Group of Seven Industrialized Nations (G7) met on April 21,
1996. General sentiment favored the gains in the US dollar over the
past year with US Treasury Secretary Rubin stating a strong US
dollar is in the interest of the United States. G7 members agreed to
continue to cooperate in the foreign exchange market and to reduce
imbalances. Subsequently, the US dollar continued its positive
trend.
<PAGE>
In Europe, European Union central bank governors and finance
ministers met during the month to discuss the relationship between
those countries not involved in the first round of European Monetary
Union (EMU) and those few that qualify. Concerns over limiting
exchange rate volatility after EMU were addressed. This was positive
for high-yielding markets such as Spain and Italy as currencies and
bond markets traded positively relative to core European currencies.
While on the political front, in Spain, an agreement was reached
between the Popular Party and the Catalan Coalition to form a
government. In Italy, the Centre Left party won the election in both
the Senate and Lower House but failed to gain an absolute majority
in the Lower House, requiring the support of the Communist party.
Romano Prodi has since been chosen to lead the new coalition
government. In both Italy and Spain, election results were favorable
for the financial markets and an end to the political uncertainty is
positive for underlying assets which will focus on the reduction of
the budget deficit and reentry to the Exchange Rate Mechanism (ERM).

During April, we continued to maintain bond positions in the high-
yielding countries of Spain, Italy, Australia and New Zealand, which
benefited the Fund's yield. Additionally, as Irish interest rates
dropped through those of the United Kingdom, we swapped our Irish
positions out of the portfolio.

In May, the US dollar made significant gains against the yen on
dampened expectations of an increase in Japanese interest rates and
comments from Japanese officials favoring a stronger dollar. In
addition, the dollar was supported as recent US economic indicators
did not present the opportunity for an adjustment to interest rates
at the May meeting of the Federal Open Market Committee. Financial
data will be carefully analyzed in the coming months as expectations
are for a tightening of monetary policy possibly at the August
meeting.

In the dollar bloc, Quebec Premier Lucien Bouchard decided against
snap elections which could have resulted in a mandate to hold
another referendum on sovereignty. A softer Canadian economy, lower
inflation and improved fiscal status have prompted speculation of a
reduction in interest rates; however, the Bank of Canada will most
likely wait for a stronger Canadian dollar before easing. The New
Zealand budget was released and was in line with investor
expectations. The government lowered its economic growth forecasts
and stated monetary policy will need to remain firm. The Australian
dollar reached levels not seen since 1990, reacting to yen weakness
during May.

In Europe, after the Centre Left party won the Italian elections in
April, President Oscar Scalfaro named Romano Prodi as Prime
Minister. Under his rule, the new government will focus on reentry
to the ERM and reducing the budget deficit. The Italian currency and
bond markets reacted favorably to the news. In addition, the Swiss
franc depreciated during the month in response to a correction in
its overvaluation relative to both the US dollar and the
Deutschemark and an unwinding of safe haven buying on the growing
belief criteria for European Unity will be met.
<PAGE>
As the second quarter of 1996 ended, first quarter GDP in Japan
showed the strongest growth in 23 years, encouraging investor
speculation of an increase in interest rates by the Bank of Japan
(BOJ). The quarterly Tankan Survey, while stronger than anticipated,
highlighted a slow correction of the Japanese economy. The BOJ
indicated the current pace of restoration is slow, and interest
rates would not be tightened until there is evidence of a sustained
recovery.

In Europe, as economic growth on the continent remained anemic,
central banks in the United Kingdom, France, Denmark, Spain, Sweden
and Finland eased interest rates again in the second quarter. The
Bundesbank left monetary policy unchanged, however, as German money
supply growth was stronger than expected.

With the Italian and Spanish bond markets turning in strong positive
performances, our positions in those high-yielding countries
benefited the Fund as did our high-yielding positions in Great
Britain, New Zealand and Australia. Our short duration in US money
market positions allowed those positions to maintain value in the
weak US bond environment.

On the currency front, the US dollar remained well bid as President
Boris Yeltsin won the first round in the Russian elections over
Communist leader Gennady Zyuganov. Yeltsin's failure to achieve 50%
of the vote led to a second round of voting in July, which Yeltsin
won. Yeltsin appointed opponent General Lebed as national security
adviser and head of the security council, ensuring his support in
the upcoming round of voting. In addition, the G7 met at the end of
June. Attendants did not reach firm conclusions about international
economic policies but welcomed the dollar's recovery, stating the
exchange rate movements were promising and positive. No agreement
was reached on the issue of the International Monetary Fund selling
a portion of its gold reserves to aid third world countries with
their debt repayment.

As the period concluded, the Reserve Bank of New Zealand (RBNZ) held
its semi-annual monetary policy meeting. The central bank stated
monetary conditions will remain tight for the next few quarters. The
RBNZ raised its inflation forecast for this year above the central
bank's target of 2%, with a decline to zero in subsequent years. The
announcement had little effect on the currency.

The best-performing market in June was Spain, followed by the United
Kingdom and Italy. Each of these markets was represented by
positions in the Fund which were held for the past several months.
Other strong markets for June included the United States and Canada,
which were added to the Fund's holdings during June.
<PAGE>
Looking forward, we anticipate the global monetary easing cycle to
be near conclusion. Therefore, we will continue monitoring the
Federal Reserve Board and economic data releases for any signs of
tightening by the US central bank. If the Federal Reserve Board
responds accordingly to strong growth factors in the US economy, the
US dollar should also continue to appreciate. However, if the
Federal Reserve Board delays, a dramatic decline of the dollar is
possible.

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 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






<PAGE>
(David B. Walter)
David B. Walter
Vice President and Portfolio Manager







(Stephen Yardley)
Stephen Yardley
Vice President and Portfolio Manager



July 31, 1996



PERFORMANCE DATA


About Fund
Performance


Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:

* Class A Shares incur a maximum initial sales charge (front-end load)
  of 4% and bear no ongoing distribution or account maintenance fees.
  Class A Shares are available only to eligible investors, as detailed
  in the Fund's prospectus. If you were a Class A shareholder prior to
  October 21, 1994, your Class A Shares were redesignated to Class D
  Shares on October 21, 1994, 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.
<PAGE>
* Class C Shares are subject to a distribution fee of 0.55% and an
  account maintenance fee of 0.25%. In addition, Class C Shares are
  subject to a 1% contingent deferred sales charge if redeemed within
  one year of purchase.

* Class D Shares incur a maximum initial sales charge of 4% and an
  account maintenance fee of 0.25% (but no distribution fee).

None of the past results shown should be considered a representation
of future performance. 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
                                                  6/30/96    3/31/96   6/30/95     % Change     % Change
<S>                                                <C>        <C>       <C>          <C>          <C>
Class A Shares*                                    $7.85      $7.86     $7.88        -0.38%       -0.13%
Class B Shares*                                     7.84       7.85      7.87        -0.38        -0.13
Class C Shares*                                     7.70       7.71      7.69        +0.13        -0.13
Class D Shares*                                     7.84       7.85      7.87        -0.38        -0.13
Class A Shares--Total Return*                                                        +6.59(1)     +1.48(2)
Class B Shares--Total Return*                                                        +5.74(3)     +1.28(4)
Class C Shares--Total Return*                                                        +6.03(5)     +1.23(6)
Class D Shares--Total Return*                                                        +6.32(7)     +1.41(8)
Class A Shares--Standardized 30-day Yield           5.13%
Class B Shares--Standardized 30-day Yield           4.58%
Class C Shares--Standardized 30-day Yield           4.58%
Class D Shares--Standardized 30-day Yield           4.90%

<FN>
  *Investment results shown do not reflect sales charges; results
   shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.532 per share ordinary
   income dividends.
(2)Percent change includes reinvestment of $0.126 per share ordinary
   income dividends.
(3)Percent change includes reinvestment of $0.470 per share ordinary
   income dividends.
(4)Percent change includes reinvestment of $0.110 per share ordinary
   income dividends.
(5)Percent change includes reinvestment of $0.442 per share ordinary
   income dividends.
(6)Percent change includes reinvestment of $0.104 per share ordinary
   income dividends.
(7)Percent change includes reinvestment of $0.512 per share ordinary
   income dividends.
(8)Percent change includes reinvestment of $0.121 per share ordinary
   income dividends.
</TABLE>
<PAGE>

<TABLE>
Performance
Summary--
Class A Shares***
<CAPTION>
                                Net Asset Value         Capital Gains
Period Covered               Beginning     Ending        Distributed      Dividends Paid*      % Change**
<S>                            <C>         <C>               <C>              <C>                 <C>
10/21/94--12/31/94             $8.11       $7.90             --               $0.103              -1.33%
1995                            7.90        7.91             --                0.537              +7.14
1/1/96--6/30/96                 7.91        7.85             --                0.247              +2.58
                                                                              ------
                                                                        Total $0.887

                                                           Cumulative total return as of 6/30/96: +8.44%**

<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>


<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
                                Net Asset Value         Capital Gains
Period Covered               Beginning     Ending        Distributed      Dividends Paid*      % Change**
<S>                           <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
1995                            7.89        7.90             --                0.474              +6.31
1/1/96--6/30/96                 7.90        7.84             --                0.218              +2.18
                                                                              ------
                                                                        Total $3.712

                                                          Cumulative total return as of 6/30/96: +18.78%**

<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>
Performance
Summary--
Class C Shares
<CAPTION>
                                Net Asset Value         Capital Gains
Period Covered               Beginning     Ending        Distributed      Dividends Paid*      % Change**
<S>                            <C>         <C>               <C>              <C>                 <C>
10/21/94--12/31/94             $8.11       $7.89             --               $0.079              -1.74%
1995                            7.89        7.72             --                0.435              +3.48
1/1/96--6/30/96                 7.72        7.70             --                0.207              +2.60
                                                                              ------
                                                                        Total $0.721

                                                           Cumulative total return as of 6/30/96: +4.31%**

<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)
<PAGE>
<TABLE>
Performance
Summary--
Class D Shares***
<CAPTION>

                                Net Asset Value         Capital Gains
Period Covered               Beginning     Ending        Distributed      Dividends Paid*      % Change**
<S>                           <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
1995                            7.89        7.90             --                0.517              +6.87
1/1/96--6/30/96                 7.90        7.84             --                0.238              +2.45
                                                                              ------
                                                                        Total $3.998

                                                          Cumulative total return as of 6/30/96: +22.63%**

<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>



Average Annual
Total Return


                                     % Return Without % Return With
                                       Sales Charge    Sales Charge**

Class A Shares*

Year Ended 6/30/96                         +6.59%         +2.33%
Inception (10/21/94) through 6/30/96       +4.90          +2.40

[FN]
 *Maximum sales charge is 4%.
**Assuming maximum sales charge.


                                        % Return        % Return
                                       Without CDSC    With CDSC**

Class B Shares*
<PAGE>
Year Ended 6/30/96                         +5.74%         +1.76%
Five Years Ended 6/30/96                   +2.23          +2.23
Inception (8/3/90) through 6/30/96         +2.95          +2.95

[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        % Return
                                       Without CDSC    With CDSC**

Class C Shares*

Year Ended 6/30/96                         +6.03%         +5.03%
Inception (10/21/94) through 6/30/96       +2.53          +2.53

[FN]
 *Maximum contingent deferred sales charge is 1% and is reduced to 0%
  after 1 year.
**Assuming payment of applicable contingent deferred sales charge.


                                     % Return Without % Return With
                                       Sales Charge    Sales Charge**

Class D Shares*

Year Ended 6/30/96                         +6.32%         +2.07%
Five Years Ended 6/30/96                   +2.74          +1.90
Inception (8/3/90) through 6/30/96         +3.51          +2.80

[FN]
 *Maximum sales charge is 4%.
**Assuming maximum sales charge.



<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
                      Face         Maturity                                               Interest      Value      Percent of
COUNTRIES            Amount          Date                      Issue                       Rate++     (Note 1a)    Net Assets
<S>          <S>    <C>             <S>        <S>                                         <C>       <C>               <C>          
Australia    A$     24,400,000      8/08/96    Australian Treasury Bill (3)                 7.53 %   $ 19,058,808       5.95%
                    18,200,000      5/14/97    Queensland Treasury Corp. (3)                8.00       14,346,290       4.48
                    12,800,000      9/03/96    Swiss Bank Corp., Time Deposit (2)           7.437      10,069,760       3.15

                                               Total Investments in Australia (Cost--$42,824,540)      43,474,858      13.58

<PAGE>
Canada       C$     18,200,000      3/15/98    Canadian Government Bond (1)                 6.00       13,340,712       4.17

                                               Total Investments in Canada (Cost--$13,301,281)         13,340,712       4.17


Germany      DM     10,000,000      7/17/96    Deutsche Bank AG, Time Deposit (2)           3.25        6,574,622       2.05

                                               Total Investments in Germany (Cost--$6,466,632)          6,574,622       2.05


Italy        Lit 4,990,000,000     10/14/97    ABB Finance Inc. (2)                        11.40        3,356,648       1.05
                 3,420,000,000      9/05/97    Abbey National Treasury Services PLC (2)    10.70        2,283,797       0.72
                 1,390,000,000     10/20/97    Abbey National Treasury Services PLC (2)    11.50          939,648       0.29
                25,000,000,000     10/01/96    Buoni Poliennali del Tesoro (Italian
                                               Government Bonds) (1)                        9.00       16,339,309       5.10
                 2,360,000,000      6/02/97    Council of Europe (1)                       11.40        1,578,771       0.49
                 1,255,000,000      5/27/97    Credit Suisse Finance (2)                   11.625         840,355       0.26

                                               Total Investments in Italy (Cost--$23,881,330)          25,338,528       7.91


New Zealand  NZ$    31,600,000     11/15/96    New Zealand Government Bonds (1)             9.00       21,546,058       6.73
                    40,921,000      9/11/96    New Zealand Treasury Bill (1)                9.74       27,494,473       8.59
                    17,000,000      6/18/97    New Zealand Treasury Bill (1)                9.51       10,608,415       3.31

                                               Total Investments in New Zealand (Cost--$59,378,093)    59,648,946      18.63


Spain        Pta 2,000,000,000      2/28/97    Bonos del Estado (Spanish
                                               Government Bonds) (1)                        9.00       15,769,411       4.93

                                               Total Investments in Spain (Cost--$16,014,575)          15,769,411       4.93


United       Pound  11,800,000     12/30/96    General Electric Capital
Kingdom      Sterling                          Corp. (2)                                    8.25       18,524,593       5.79
                     9,111,000      9/01/97    United Kingdom Gilt (1)                      8.75       14,580,830       4.55

                                               Total Investments in the United Kingdom
                                               (Cost--$33,282,914)                                     33,105,423      10.34

<PAGE>
United       US$    19,000,000      7/01/96    Chase Manhattan Bank, Repurchase
States                                           Agreement* purchased on 6/28/96 (2)        5.40       19,000,000       5.94
                    14,000,000      7/08/96    Greenwich Funding Corp., Commercial
                                               Paper (2)                                    5.40       13,985,300       4.37
                    19,000,000      7/01/96    HSBC Holdings PLC, Repurchase Agreement*
                                                 purchased on 6/28/96 (2)                   5.38       19,000,000       5.93
                    16,020,000      7/22/96    Korea Development Bank, Commercial
                                               Paper (2)                                    5.43       15,969,257       4.99
                    19,000,000      7/01/96    Morgan (J.P.) & Company, Inc.,
                                                 Repurchase Agreement*purchased on
                                                 6/28/96 (2)5.40                                       19,000,000       5.93
                    10,000,000      7/01/96    Morgan Stanley Group, Inc., Repurchase
                                                 Agreement* purchased on 6/28/96 (2)        5.30       10,000,000       3.12
</TABLE>


<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
                      Face         Maturity                                               Interest      Value      Percent of
COUNTRIES            Amount          Date                                Issue             Rate++     (Note 1a)    Net Assets
<S>          <S>    <C>             <S>        <S>                                          <C>      <C>              <C>
United       US$     1,900,000      7/15/96    Osterreiche Kontroll Bank (2)                8.25%    $  1,901,444       0.60%
States              15,000,000      7/01/96    Paine Webber Inc., Repurchase Agreement*
(concluded)                                      purchased on 6/18/96 (2)                   5.29       15,000,000       4.68
                     9,500,000      7/01/96    Swiss Bank Corp., Repurchase Agreement*
                                                 purchased on 6/28/96 (2)                   5.45        9,500,000       2.97

                                               Total Investments in the United States
                                               (Cost--$123,377,984)                                   123,356,001      38.53

                                               Total Investments (Cost--$318,527,349)                 320,608,501     100.14


                      Par        Expiration                                               Strike
                     Value          Date                                                   Price

Currency     US$     9,101,000    July 1996    Australian Dollar                          A$ .7950         (4,551)      0.00
Call Options 
Written

Currency Put         9,101,000    July 1996    Australian Dollar                          A$ .7850        (13,196)     (0.01)
Options Written
                                               Total Options Written (Premiums Received--$16,837)         (17,747)     (0.01)

             Total Investments, Net of Options Written (Cost--$318,510,512)                           320,590,754     100.13

             Unrealized Depreciation on Forward Foreign Exchange Contracts++++                         (1,495,558)      (.47)

             Other Assets Less Liabilities                                                              1,077,620        .34
                                                                                                     ------------     -------
             Net Assets                                                                              $320,172,816     100.00%
                                                                                                     ============     =======

            <FN>
             Corresponding industry groups for securities (percent of net
             assets):
             (1)Sovereign Government Obligations-- 37.87%
             (2)Financial Services--51.84%
             (3)Sovereign/Regional Government Obligations--Agency--10.43%
               *Repurchase Agreements are fully collateralized by US Government&
                Agency Obligations.
              ++Commercial Paper and certain 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 June 30, 1996.
<PAGE>
            ++++Forward foreign exchange contracts as of June 30, 1996 were as follows:
                
                                                                  Unrealized
                                                                 Appreciation
                                               Expiration       (Depreciation)
                                                  Date             (Note 1d)
                Foreign Currency Purchased

                A$            15,192,335       July 1996        $   (69,079)
                Pta        1,166,672,150       July 1996             (4,225)

                Total (US$ Commitment--$21,124,599)             $   (73,304)
                                                                -----------

                Foreign Currency Sold

                A$            57,952,645       July 1996        $  (132,480)
                C$            18,443,132       July 1996             27,816
                DM             9,711,873       July 1996            (21,710)
                Pound
                Sterling      21,603,967       July 1996           (509,594)
                Lit       40,037,275,825       July 1996           (356,220)
                NZ$           88,080,251       July 1996           (298,328)
                Pta        2,088,549,386       July 1996           (131,738)

                Total (US$ Commitment--$200,223,346)            $(1,422,254)
                                                                -----------

                Total Unrealized Depreciation--Net on
                Forward Foreign Exchange Contracts              $(1,495,558)
                                                                ===========

                See Notes to Financial Statements.
</TABLE>


<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<PAGE>
                    As of June 30, 1996
<S>                 <S>                                                                   <C>              <C>                  
Assets:             Investments, at value (identified cost--$318,527,349) (Note 1a)                        $ 320,608,501
                    Cash                                                                                           1,204
                    Receivables:
                      Interest                                                            $   3,451,682
                      Forward foreign exchange contracts (Note 1d)                              163,200
                      Capital shares sold                                                        56,231        3,671,113
                                                                                          -------------
                    Prepaid registration fees and other assets (Note 1g)                                         104,010
                                                                                                           -------------
                    Total assets                                                                             324,384,828
                                                                                                           -------------

Liabilities:        Options written, at value (premiums received--$16,837) (Notes 1a & 1d)                        17,747
                    Unrealized depreciation on forward foreign exchange contracts (Note 1d)                    1,495,558
                    Payables:
                      Capital shares redeemed                                                 1,107,449
                      Dividends to shareholders  (Note 1h)                                      481,303
                      Distributor (Note 2)                                                      178,906
                      Investment adviser (Note 2)                                               137,216
                      Forward foreign exchange contracts (Note 1d)                              135,985        2,040,859
                                                                                          -------------
                    Accrued expenses and other liabilities                                                       657,848
                                                                                                           -------------
                    Total liabilities                                                                          4,212,012
                                                                                                           -------------

Net Assets:         Net assets                                                                             $ 320,172,816
                                                                                                           =============

Net Assets          Class A Shares of Common Stock, $0.10 par value, 1,000,000,000
Consist of:         shares authorized                                                                      $         355
                    Class B Shares of Common Stock, $0.10 par value, 1,000,000,000
                    shares authorized                                                                          3,814,351
                    Class C Shares of Common Stock, $0.10 par value, 300,000,000
                    shares authorized                                                                                707
                    Class D Shares of Common Stock, $0.10 par value, 300,000,000
                    shares authorized                                                                            268,568
                    Paid-in capital in excess of par                                                         362,667,867
                    Accumulated realized capital losses on investments and foreign
                    currency transactions--net (Note 5)                                                      (47,196,856)
                    Unrealized appreciation on investments and foreign currency
                    transactions--net                                                                            617,824
                                                                                                           -------------
                    Net assets                                                                             $ 320,172,816
                                                                                                           =============
<PAGE>
Net Asset           Class A--Based on net assets of $27,852 and 3,550 shares
Value:                       outstanding                                                                   $        7.85
                                                                                                           =============
                    Class B--Based on net assets of $299,028,300 and 38,143,511
                             shares outstanding                                                            $        7.84
                                                                                                           =============
                    Class C--Based on net assets of $54,462 and 7,073 shares
                             outstanding                                                                   $        7.70
                                                                                                           =============
                    Class D--Based on net assets of $21,062,202 and 2,685,684 shares
                             outstanding                                                                   $        7.84
                                                                                                           =============


                    See Notes to Financial Statements.
</TABLE>


<TABLE>
STATEMENT OF OPERATIONS

                    For the Six Months Ended June 30, 1996
<S>                 <S>                                                                   <C>              <C>
Investment Income   Interest and discount earned (net of $88,995 foreign withholding tax)                  $  13,601,033
(Notes 1e & 1f):

Expenses:           Account maintenance and distribution fees--Class B (Note 2)                                1,237,166
                    Investment advisory fees (Note 2)                                                            968,767
                    Transfer agent fees--Class B (Note 2)                                                        417,479
                    Custodian fees                                                                               154,486
                    Printing and shareholder reports                                                              92,207
                    Accounting services (Note 2)                                                                  69,557
                    Professional fees                                                                             43,906
                    Registration fees (Note 1g)                                                                   35,261
                    Account maintenance fees--Class D (Note 2)                                                    27,894
                    Transfer agent fees--Class D (Note 2)                                                         24,078
                    Directors' fees and expenses                                                                  13,275
                    Account maintenance and distribution fees--Class C (Note 2)                                       58
                    Transfer agent fees--Class A (Note 2)                                                             41
                    Transfer agent fees--Class C (Note 2)                                                             26
                    Other                                                                                          8,133
                                                                                                           -------------
                    Total expenses                                                                             3,092,334
                                                                                                           -------------
                    Investment income--net                                                                    10,508,699
                                                                                                           -------------

Realized &          Realized loss from:
Unrealized Gain       Investments--net                                                    $  (1,048,856)
(Loss) on             Foreign currency transactions--net                                     (2,649,853)      (3,698,709)
Investments &                                                                             -------------
Foreign Currency    Change in unrealized appreciation/depreciation on:
Transactions--Net     Investments--net                                                        1,310,412
(Notes 1c, 1d,        Foreign currency transactions--net                                       (508,688)         801,724
1f & 3):                                                                                  -------------    -------------
                    Net realized and unrealized loss on investments and foreign
                    currency transactions                                                                     (2,896,985)
                                                                                                           -------------
                    Net Increase in Net Assets Resulting from Operations                                   $   7,611,714
                                                                                                           =============
<PAGE>
                    See Notes to Financial Statements.
</TABLE>


<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
                                                                                                             For the
                                                                                          For the Six        Period
                                                                                          Months Ended     Nov. 1, 1995
                                                                                             June 30,       to Dec. 31,
                    Increase (Decrease) in Net Assets:                                         1996            1995
<S>                 <S>                                                                   <C>              <C>           
Operations:         Investment income--net                                                $  10,508,699    $   4,308,676
                    Realized gain (loss) on investments and foreign currency
                    transactions--net                                                        (3,698,709)       2,259,658
                    Change in unrealized appreciation/depreciation on investments
                    and foreign currency transactions--net                                      801,724       (3,501,943)
                                                                                          -------------    -------------
                    Net increase in net assets resulting from operations                      7,611,714        3,066,391
                                                                                          -------------    -------------

Dividends to        Investment income--net:
Shareholders          Class A                                                                    (1,314)            (829)
(Note 1h):            Class B                                                                (9,786,232)      (4,016,322)
                      Class C                                                                      (410)          (1,650)
                      Class D                                                                  (720,743)        (289,875)
                                                                                          -------------    -------------
                    Net decrease in net assets resulting from dividends to
                    shareholders                                                            (10,508,699)      (4,308,676)
                                                                                          -------------    -------------

Capital Share       Net decrease in net assets derived from capital share
Transactions        transactions                                                            (77,397,460)     (23,220,490)
(Note 4):                                                                                 -------------    -------------

Net Assets:         Total decrease in net assets                                            (80,294,445)     (24,462,775)
                    Beginning of period                                                     400,467,261      424,930,036
                                                                                          -------------    -------------
                    End of period                                                         $ 320,172,816    $ 400,467,261
                                                                                          =============    =============

                    See Notes to Financial Statements.
</TABLE>

<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
                                                                                               Class A++++

                                                                                         For the                For the
                    The following per share data and ratios                   For the    Period       For the   Period,
                    have been derived from information                      Six Months   Nov. 1,       Year     Oct. 21
                    provided in the financial statements.                      Ended     1995 to       Ended   1994++ to
                                                                              June 30,   Dec. 31,     Oct. 31,  Oct. 31,
                    Increase (Decrease) in Net Asset Value:                     1996       1995         1995      1994
<S>                 <S>                                                       <C>        <C>         <C>        <C>      
Per Share           Net asset value, beginning of period                      $   7.91   $   7.93    $   8.11   $   8.11
Operating                                                                     --------   --------    --------   --------
Performance:        Investment income--net                                         .25        .09         .49        .01
                    Realized and unrealized loss on investments and
                    foreign currency transactions--net                            (.05)      (.02)       (.12)        --
                                                                              --------   --------    --------   --------
                    Total from investment operations                               .20        .07         .37        .01
                                                                              --------   --------    --------   --------
                    Less dividends:
                      Investment income--net                                      (.26)      (.09)       (.27)        --
                      Return of capital--net                                        --         --        (.28)      (.01)
                                                                              --------   --------    --------   --------
                    Total dividends                                               (.26)      (.09)       (.55)      (.01)
                                                                              --------   --------    --------   --------
                    Net asset value, end of period                            $   7.85   $   7.91    $   7.93   $   8.11
                                                                              ========   ========    ========   ========

Total Investment    Based on net asset value per share                           2.58%+++    .92%+++    4.62%       .12%+++
Return:**                                                                     ========   ========    ========   ========

Ratios to Average   Expenses                                                     1.00%*     1.02%*       .96%       .97%*
Net Assets:                                                                   ========   ========    ========   ========
                    Investment income--net                                       6.80%*     6.91%*      6.75%      6.28%*
                                                                              ========   ========    ========   ========

Supplemental        Net assets, end of period (in thousands)                  $     28   $     75    $     66   $     59
Data:                                                                         ========   ========    ========   ========
                    Portfolio turnover                                         220.96%     25.09%     312.13%    259.50%
                                                                              ========   ========    ========   ========


                                                                                    Class B
<PAGE>
                    The following per share data
                    and ratios have been derived       For        For the
                    from information provided        the Six       Period
                    in the financial statements.      Months      Nov. 1,
                                                      Ended       1995 to
                    Increase (Decrease) in Net       June 30,     Dec. 31,        For the Year Ended October 31,
                    Asset Value:                     1996++++     1995++++   1995++++    1994++++  1993        1992
<S>                 <S>                              <C>         <C>        <C>        <C>       <C>          <C>        
Per Share           Net asset value, beginning
Operating           of period                        $   7.90    $   7.93   $    8.10  $   8.65  $     8.85   $     9.84
Performance:                                         --------    --------   --------   --------  ----------   ----------
                    Investment income--net                .23         .08        .47        .50         .57          .72
                    Realized and unrealized
                    loss on investments and
                    foreign currency
                    transactions--net                    (.06)       (.03)      (.15)      (.58)       (.20)        (.99)
                                                     --------    --------   --------   --------  ----------   ----------
                    Total from investment
                    operations                            .17         .05        .32       (.08)        .37         (.27)
                                                     --------    --------   --------   --------  ----------   ----------
                    Less dividends:
                      Investment income--net             (.23)       (.08)      (.24)        --          --           --
                      Return of capital--net               --          --       (.25)      (.47)       (.57)        (.72)
                                                     --------    --------   --------   --------  ----------   ----------
                    Total dividends                      (.23)       (.08)      (.49)      (.47)       (.57)        (.72)
                                                     --------    --------   --------   --------  ----------   ----------
                    Net asset value, end of
                    period                           $   7.84    $   7.90   $   7.93   $   8.10  $     8.65   $     8.85
                                                     ========    ========   ========   ========  ==========   ==========

Total Investment    Based on net asset value
Return:**           per share                           2.18%+++     .66%+++   3.96%     (1.02%)      4.63%       (3.00%)
                                                     ========    ========   ========   ========  ==========   ==========

Ratios to Average   Expenses                            1.78%*      1.80%*     1.73%      1.52%       1.60%        1.50%
Net Assets:                                          ========    ========   ========   ========  ==========   ==========
                    Investment income--net              5.92%*      6.13%*     5.95%      5.68%       7.26%        7.60%
                                                     ========    ========   ========   ========  ==========   ==========

Supplemental        Net assets, end of period
Data:               (in thousands)                   $299,028    $376,049   $398,136   $750,750  $1,664,602   $3,182,520
                                                     ========    ========   ========   ========  ==========   ==========
                    Portfolio turnover                220.96%      25.09%    312.13%    259.50%     284.62%      120.77%
                                                     ========    ========   ========   ========  ==========   ==========


                                                                                                Class C++++
<PAGE>                                                                                          
                                                                                         For the                For the
                    The following per share data and ratios have been         For the    Period     For the     Period
                    derived from information provided in the financial       Six Months  Nov. 1,     Year       Oct. 21,
                    statements.                                                Ended     1995 to     Ended     1994++ to
                                                                              June 30,   Dec. 31,   Oct. 31,   Oct. 31,
                    Increase (Decrease) in Net Asset Value:                    1996        1995       1995       1994
<S>                 <S>                                                       <C>        <C>         <C>        <C>     
Per Share           Net asset value, beginning of period                      $   7.72   $   7.74    $   8.10   $   8.11
Operating                                                                     --------   --------    --------   --------
Performance:        Investment income--net                                         .10        .08         .35        .01
                    Realized and unrealized gain (loss) on investments
                    and foreign currency transactions--net                         .10       (.02)       (.28)      (.01)
                                                                              --------   --------    --------   --------
                    Total from investment operations                               .20        .06         .07         --
                                                                              --------   --------    --------   --------
                    Less dividends:
                      Investment income--net                                      (.22)      (.08)       (.21)        --
                      Return of capital--net                                        --         --        (.22)      (.01)
                                                                              --------   --------    --------   --------
                    Total dividends                                               (.22)      (.08)       (.43)      (.01)
                                                                              --------   --------    --------   --------
                    Net asset value, end of period                            $   7.70   $   7.72    $   7.74   $   8.10
                                                                              ========   ========    ========   ========

Total Investment    Based on net asset value per share                           2.60%+++    .78%+++     .89%       .00%+++
Return:**                                                                     ========   ========    ========   ========

Ratios to Average   Expenses                                                     1.94%*     1.83%*      1.83%      2.14%*
Net Assets:                                                                   ========   ========    ========   ========
                    Investment income--net                                       5.67%*     6.09%*      5.99%      5.63%*
                                                                              ========   ========    ========   ========

Supplemental        Net assets, end of period (in thousands)                  $     55   $    103    $    109   $      1
Data:                                                                         ========   ========    ========   ========
                    Portfolio turnover                                         220.96%     25.09%     312.13%    259.50%
                                                                              ========   ========    ========   ========

                <FN>
                   *Annualized.
                  **Total investment returns exclude the effect of sales loads.
                  ++Commencement of Operations.
                ++++Based on average shares outstanding during the period.
                 +++Aggregate total investment return.

                    See Notes to Financial Statements.
</TABLE>


<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
                                                                                   Class D

<PAGE>                                                     
                    The following per share data     For the      For the
                    and ratios have been derived       Six        Period
                    from information provided in      Months      Nov. 1,
                    the financial statements.         Ended       1995 to
                                                     June 30,     Dec. 31,        For the Year Ended October 31,
                    Increase (Decrease) in Net        1996++      1995++     1995++    1994++      1993         1992
                    Asset Value: 
<S>                 <S>                             <C>         <C>        <C>        <C>         <C>          <C>          
Per Share           Net asset value, beginning of
Operating           period                          $    7.90   $    7.93  $    8.11  $    8.66   $    8.85    $    9.85
Performance:                                        ---------   ---------  ---------  ---------   ---------    ---------
                    Investment income--net                .25         .09        .52        .54         .61          .77
                    Realized and unrealized loss
                    on investments and foreign
                    currency transactions--net           (.06)       (.03)      (.17)      (.58)       (.19)       (1.00)
                                                    ---------   ---------  ---------  ---------   ---------    ---------
                    Total from investment
                    operations                            .19         .06        .35       (.04)        .42         (.23)
                                                    ---------   ---------  ---------  ---------   ---------    ---------
                    Less dividends:
                      Investment income--net             (.25)       (.09)      (.26)        --          --           --
                      Return of capital--net               --          --       (.27)      (.51)       (.61)        (.77)
                                                    ---------   ---------  ---------  ---------   ---------    ---------
                    Total dividends                      (.25)       (.09)      (.53)      (.51)       (.61)        (.77)
                                                    ---------   ---------  ---------  ---------   ---------    ---------
                    Net asset value, end of
                    period                          $    7.84   $    7.90  $    7.93  $    8.11   $    8.66    $    8.85
                                                    =========   =========  =========  =========   =========    =========

Total Investment    Based on net asset value
Return:**           per share                           2.45%+++      .75+++   4.40%      (.51%)      5.28%       (2.60%)
                                                    =========   =========  =========  =========   =========    =========

Ratios to Average   Expenses                            1.25%*      1.27%*     1.20%      1.01%        .98%        1.00%
Net Assets:                                         =========   =========  =========  =========   =========    =========
                    Investment income--net              6.45%*      6.67%*     6.49%      6.19%       7.24%        8.11%
                                                    =========   =========  =========  =========   =========    =========

Supplemental        Net assets, end of period
Data:               (in thousands)                  $  21,062   $  24,240  $  26,619  $  48,879   $  99,037    $ 188,623
                                                    =========   =========  =========  =========   =========    =========
                    Portfolio turnover                220.96%      25.09%    312.13%    259.50%     284.62%      120.77%
                                                    =========   =========  =========  =========   =========    =========

                 <FN>
                   *Annualized.
                  **Total investment returns exclude the effect of sales loads.
                  ++Based on average shares outstanding during the period.
                 +++Aggregate total investment return.

                    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. These unaudited
financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a
normal recurring nature. The Fund offers four classes of shares
under the Merrill Lynch Select Pricing SM System. Shares of Class A
and Class D are sold with a front-end sales charge. Shares of Class
B and Class C may be subject to a contingent deferred sales charge.
All classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that
Class B, Class C and Class D Shares bear certain expenses related to
the account maintenance of such shares, and Class B and Class C
Shares also bear certain expenses related to the distribution of
such shares. Each class has exclusive voting rights with respect to
matters relating to its account maintenance and distribution
expenditures. The following is a summary of significant accounting
policies followed by the Fund.

(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. Options written are valued at the last sale
price in the case of exchange-traded options or, in the case of
options traded in the over-the-counter market, the last asked price.
Options purchased are valued at the last sale price in the case of
exchange-traded options or, in the case of options traded in the
over-the-counter market, the last bid price. Short-term securities
are valued at amortized cost, which approximates market value. Other
investments, including futures contracts and related options, are
stated at market value. Securities and assets for which market value
quotations are not available are valued at their fair value as
determined in good faith by or under the direction of the Fund's
Board of Directors.
<PAGE>
(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.

(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.

(d) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt and currency
markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.

* Forward foreign exchange contracts--The Fund is authorized to enter
into forward foreign exchange contracts as a hedge against either
specific transactions or portfolio positions. Such contracts are not
entered on the Fund's records. However, the effect on operations is
recorded from the date the Fund enters into such contracts. Premium
or discount is amortized over the life of the contracts.

* Foreign currency options and futures--The Fund may also purchase or
sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.

* Options--The Fund is authorized to purchase and write call and put
options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current value of the option written.

When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
paid or received (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
<PAGE>
Written and purchased options are non-income producing investments.

* Financial futures contracts--The Fund may purchase or sell financial
futures contracts and options on such futures contracts as a hedge
against adverse changes in the interest rate. A futures contract is
an agreement between two parties to buy and sell a security,
respectively, for a set price on a future date. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or 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.


NOTES TO FINANCIAL STATEMENTS (continued)


(e) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required. Under the applicable foreign tax law, a withholding tax
may by imposed on interest and capital gains at various rates.

(f) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.

(g) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.

(h) Dividends and distributions--Dividends from net investment
income, excluding transaction gains/losses, are declared daily and
paid monthly. Distributions of capital gains are recorded on the ex-
dividend dates.
<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"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.

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. MLAM has entered into a Sub-Advisory
Agreement (the "Agreement") with Merrill Lynch Asset Management
U.K., Ltd. ("MLAM U.K."), an affiliate of MLAM, pursuant to which
MLAM pays MLAM U.K. a fee for providing investment advisory services
to MLAM with respect to the Fund in an amount to be determined from
time to time by MLAM and MLAM U.K. but in no event in excess of the
amount that MLAM actually receives for providing services to the
Fund. For the six months ended June 30, 1996, MLAM paid MLAM U.K. a
fee of $88,828 pursuant to such Agreement. The most restrictive
annual expense limitation requires that MLAM 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.
MLAM'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.

Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
<PAGE>
                                       Account      Distribution
                                   Maintenance Fee      Fee

Class B                                 0.25%          0.50%
Class C                                 0.25%          0.55%
Class D                                 0.25%            --

Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.

For the six months ended June 30, 1996, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class D Shares as follows:

                                          MLFD          MLPF&S

Class D                                    $3            $32

For the six months ended June 30, 1996, MLPF&S received contingent
deferred sales charges of $54,808 relating to transactions in Class
B Shares.

Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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 MLAM, PSI, MLPF&S, MLFDS, MLFD, MLAM U.K., and/or ML &
Co.

3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended June 30, 1996 were $355,231,366 and
$414,104,587, respectively.

Net realized and unrealized gains (losses) as of June 30, 1996 were
as follows:
<PAGE>
                                     Realized     Unrealized
                                      Gains         Gains
                                     (Losses)      (Losses)
Investments:
  Long-term                      $ (3,144,797)  $  2,081,152
  Short-term                        2,061,816             --
  Options written                      34,125             --
                                 ------------   ------------
Total investments                  (1,048,856)     2,081,152
                                 ------------   ------------
Currency transactions:
  Options purchased                  (318,083)            --
  Options written                     406,324           (910)
  Forward foreign exchange
  contracts                        (2,831,369)    (1,495,558)
  Foreign currency transactions        93,275         33,140
                                 ------------   ------------
Total currency transactions        (2,649,853)    (1,463,328)
                                 ------------   ------------
Total                            $ (3,698,709)  $    617,824
                                 ============   ============

Transactions in call options written for the six months ended June
30, 1996 were as follows:

                                  Nominal Value
                                    Covered by     Premiums
                                 Written Options   Received
Outstanding call options
written at beginning of period             --             --
Options written                  $549,292,000   $    571,250
Options exercised                 (54,660,000)      (108,181)
Options expired                  (485,531,000)      (453,513)
                                 ------------   ------------
Outstanding call options 
written at end of period         $  9,101,000   $      9,556
                                 ============   ============

Transactions in put options written for the six months ended June
30, 1996 were as follows:

                                  Nominal Value
                                    Covered by     Premiums
Put Options Written              Written Options   Received

Outstanding put options
written at beginning of period             --             --
Options written                  $520,110,000   $    512,714
Options exercised                 (92,596,000)       (96,995)
Options expired                  (418,413,000)      (408,438)
                                 ------------   ------------
Outstanding put options 
written at end of period         $  9,101,000   $      7,281
                                 ============   ============
<PAGE>
As of June 30, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $2,081,152, of which $3,094,925 related to
appreciated securities and $1,013,773 related to depreciated
securities. At June 30, 1996, the aggregate cost of investments for
Federal income tax purposes was $318,527,349.

4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $77,397,460 and $23,220,490 for the six months ended June 30,
1996 and for the period November 1, 1995 to December 31, 1995,
respectively.

Transactions in capital shares for each class were as follows:


Class A Shares for the Six Months                  Dollar
Ended June 30, 1996                  Shares        Amount

Shares sold                               505   $      3,978
Shares issued to shareholders
in reinvestment of dividends              112            888
                                 ------------   ------------
Total issued                              617          4,866
Shares redeemed                        (6,619)       (52,285)
                                 ------------   ------------
Net decrease                           (6,002)  $    (47,419)
                                 ============   ============


NOTES TO FINANCIAL STATEMENTS (concluded)


Class A Shares for the Period                      Dollar
Nov. 1, 1995 to Dec. 31, 1995        Shares        Amount

Shares sold                             1,115   $      8,833
Shares issued to shareholders
in reinvestment of dividends              123            975
                                 ------------   ------------
Net increase                            1,238   $      9,808
                                 ============   ============


Class B Shares for the Six Months                  Dollar
Ended June 30, 1996                  Shares        Amount

Shares sold                           298,641   $  2,348,784
Shares issued to shareholders
in reinvestment of dividends          604,352      4,752,599
                                 ------------   ------------
Total issued                          902,993      7,101,383
Automatic conversion of shares       (182,653)    (1,434,681)
Shares redeemed                   (10,165,076)   (79,974,760)
                                 ------------   ------------
Net decrease                       (9,444,736)  $(74,308,058)
                                 ============   ============
<PAGE>

Class B Shares for the Period                      Dollar
Nov. 1, 1995 to Dec. 31, 1995        Shares        Amount

Shares sold                           620,889   $  4,905,975
Shares issued to shareholders
in reinvestment of dividends          398,231      3,149,817
                                 ------------   ------------
Total issued                        1,019,120      8,055,792
Automatic conversion of shares        (18,623)      (147,125)
Shares redeemed                    (3,644,789)   (28,831,450)
                                 ------------   ------------
Net decrease                       (2,644,292)  $(20,922,783)
                                 ============   ============


Class C Shares for the Six Months                  Dollar
Ended June 30, 1996                  Shares        Amount

Shares sold                             5,689   $     43,811
Shares issued to shareholders
in reinvestment of dividends               33            254
                                 ------------   ------------
Total issued                            5,722         44,065
Shares redeemed                       (11,957)       (92,313)
                                 ------------   ------------
Net decrease                           (6,235)  $    (48,248)
                                 ============   ============


Class C Shares for the Period                      Dollar
Nov. 1, 1995 to Dec. 31, 1995        Shares        Amount

Shares sold                            12,066   $     93,387
Shares issued to shareholders
in reinvestment of dividends              122            945
                                 ------------   ------------
Total issued                           12,188         94,332
Shares redeemed                       (12,969)      (100,120)
                                 ------------   ------------
Net decrease                             (781)  $     (5,788)
                                 ============   ============


Class D Shares for the Six Months                  Dollar
Ended June 30, 1996                   Shares        Amount

Shares sold                           526,380   $  4,158,333
Shares issued to shareholders in
reinvestment of dividends              48,973        385,086
Automatic conversion of shares        182,524      1,434,681
                                 ------------   ------------
Total issued          ..              757,877      5,978,100
Shares redeemed                    (1,138,822)    (8,971,835)
                                 ------------   ------------
Net decrease                         (380,945)  $ (2,993,735)
                                 ============   ============


Class D Shares for the Period                      Dollar
Nov. 1, 1995 to Dec. 31, 1995        Shares        Amount

Shares sold                            11,529   $     91,195
Shares issued to shareholders
in reinvestment of dividends           33,954        268,726
Automatic conversion of shares         18,623        147,125
                                 ------------   ------------
Total issued                           64,106        507,046
Shares redeemed                      (354,944)    (2,808,773)
                                 ------------   ------------
Net decrease                         (290,838)  $ (2,301,727)
                                 ============   ============

5. Capital Loss Carryforward:
At December 31, 1995, the Fund had a capital loss carryforward of
approximately $44,580,000, of which $32,232,000 expires in 1999,
$10,816,000 expires in 2001, $1,042,000 expires in 2002, and
$490,000 expires in 2003. This amount will be available to offset
like amounts of any future taxable gains.






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