MERRILL LYNCH
AMERICAS INCOME
FUND, INC.
FUND LOGO
Quarterly Report
September 30, 1998
The Fund has the ability to leverage to seek to provide shareholders
with a potentially higher rate of return. However, leveraging may
exaggerate changes in the net asset value of the Fund's shares and
in the yield on the Fund's portfolio.
Investing in emerging market securities involves a number of risk
factors and special considerations, including restrictions on
foreign investments and on repatriation of capital invested in
emerging markets, currency fluctuations, and potential price
volatility and less liquidity of securities traded in emerging
markets. In addition, there may be less publicly available
information about the issuers of securities, and such issuers may
not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those to which US companies
are subject. Therefore, the Fund is designed as a long-term
investment for investors capable of assuming the risks of investing
in emerging markets. The Fund should be considered as a vehicle for
diversi-fication and not as a complete investment program. Please
refer to the prospectus for details.
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.
Merrill Lynch
Americas Income Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH AMERICAS INCOME FUND, INC.
The Benefits and
Risks of
Leveraging
The Fund is authorized to borrow money from banks in an amount up to
33 1/3% of the Fund's total assets (including the amount borrowed),
less all liabilities and indebtedness other than the bank borrowing.
The Fund is also authorized to borrow an additional 5% of its total
assets without regard to this limitation for temporary purposes.
Borrowings by the Fund create an opportunity for greater total
return but, at the same time, increase exposure to capital risk. For
example, leveraging may exaggerate changes in the net asset value of
Fund shares and in the yield on the Fund's portfolio. Although the
principal of such borrowings will be fixed, the Fund's assets may
change in value during the time the borrowings are outstanding.
Borrowing will create interest expenses for the Fund that can exceed
the income from the assets retained. To the extent the income
derived from securities purchased with borrowed funds exceeds the
interest the Fund will have to pay, the Fund's net income will be
greater than if borrowing were not used. Conversely, if the income
from the assets retained with borrowed funds is not sufficient to
cover the cost of borrowing, the net income of the Fund will be
less than if borrowing were not used, and therefore the amount
available for distribution to shareholders as dividends will be
reduced.
Merrill Lynch Americas Income Fund, Inc., September 30, 1998
DEAR SHAREHOLDER
Investment Environment
In our last report to shareholders, we were cautiously constructive
in emerging market bonds, attentive to country fundamentals and to
changing Group of Seven Industrialized Nations (G-7) market
conditions. However, during the three-month period ended September
30, 1998, significant changes in the global economic environment and
in capital markets dynamics have been precipitated by the slow,
unclear actions of Japan in resolving its banking and economic
crises, a sharp correction in the US equity markets, and the Russian
debt and currency devaluation. The Fund's Class A, Class B, Class C
and Class D Shares declined 32.39%, 32.49%, 32.50% and 32.52%,
respectively, for the quarter ended September 30, 1998. (For
complete performance information, including average annual total
returns, see pages 4 and 5 of this report to shareholders.)
The large losses that investors encountered in Russia reverberated
throughout the global capital markets. The resulting global market
dislocations greatly increased volatility and increased liquidity
and risk premiums dramatically. These effects were accentuated in
emerging market economies, given their greater dependency on
financing from external markets and the higher vulnerability of
their economies. Such developments greatly increased short-term
risks which, in our opinion, currently outweigh intermediate-term
and longer-term investment considerations and prompted us to raise
liquidity and seek to limit market risk.
During the three months ended September 30, 1998, Russia and Brazil
remained the focus of emerging markets among investors given their
vulnerabilities and importance. In Russia, the International
Monetary Fund (IMF) package that we expected materialized. This
package provided a short period of investor optimism and a window of
opportunity for the Russian government to implement much-needed
fiscal reform. However, investors' optimism was short-lived as the
Russian government failed in its legislative efforts to implement
the agreed-upon fiscal reforms. Lack of investor demand impeded
rollover of domestic debt and created pressures in the Russian
ruble. The subsequent inaction by G-7 countries and multilateral
institutions to further support that economy led to the default of
local currency debt, devaluation of the ruble and a moratorium on
forward contracts.
On August 17, 1998, Russia abandoned all efforts to maintain the
value of its currency, allowing the ruble to float freely downward.
Authorities also decreed the cessation of interest and amortization
payments on its local ruble debt, and announced their intention to
restructure it into longer-term obligations. The terms of that
restructuring have yet to be made public. Although our investments
in Russia are not denominated in rubles, they declined in value as
investor sentiment turned sharply negative regarding Russia's
prospects. The aftermath of the Russian-initiated restructuring may
have long-lasting effects in the risk premiums paid by countries
with improving fundamentals, delaying their gains, and may result in
the backtracking in reforms in other countries where these have not
yet been sufficiently consolidated. In Russia, these events brought
the downfall of the incumbent Prime Minister and his cabinet and
opened a new set of uncertainties in that country as to the general
direction of its macroeconomic policy, its commitment to free market
policies, and ability and willingness to service its foreign
currency debt.
In Brazil, after the close of the reporting period, President
Cardoso was re-elected, as expected. The Brazilian government
utilized the cushion of large international reserves, privatization
receipts and higher local interest rates to absorb the impact of the
global capital market volatility. Bond investors remain expectant on
the post-election economic and fiscal package, its approval by the
Brazilian congress and an IMF-led financial support package, and
their effectiveness in avoiding a currency crisis and in reducing
crippling levels of domestic interest rates.
Enjoying high international reserves as compared to monetary
aggregates and facing regional and presidential elections this year,
Venezuela reasserted its commitment to avoid a currency devaluation.
This happened despite the large impact that lower international oil
prices have had on Venezuela's fiscal deficit and external accounts.
Venezuela also strengthened its banking system with higher
participation of foreign institutions and more stringent regulation.
However, public discontent with the government fueled the candidacy
of Mr. Chavez, who maintained his lead throughout the year. This has
increased the political component for Venezuela's credit risk. After
the presidential elections, a currency devaluation is widely
expected by many investors.
Argentina and Mexico, both of which have small fiscal deficits and
manageable external accounts, have suffered smaller impacts during
the three-month period ended September 30, 1998. Argentina has
strengthened its financial sector, led mostly by international
banks, and did not experience a loss of foreign reserves. Mexico has
repeatedly pared its government budget to reflect lower revenues
from dropping oil prices and absorbed the impact of the crisis
through higher interest rates and currency weakness, keeping
reserves almost intact at about US$30 billion.
Given the increased risks in emerging market economies and the
ongoing global deleveraging process, the flight to quality by
investors worldwide is of great concern. These factors--along with
the forecast reduction in economic growth for both developed and
emerging countries around the world--will result in lower private
capital flows into emerging economies, which will only be partially
replaced by inflows from the IMF or other official sources. While
Latin America appears committed to defending its economic progress
through macroeconomic policy, the political and economic dynamics in
Brazil, the magnitude of the market turbulence and the region's
dependence on international capital markets warrant our continued
close vigilance of short-term risks to these economies, while
keeping in mind the high-potential, longer-term returns implied by
these depressed asset prices.
Portfolio Matters
At the close of the three-month period ended September 30, 1998, our
Brazilian exposure had increased to 16.17% of total assets and
represented our largest investment allocation. We invested in
sovereign debt, as well as industrial issues. Our allocation to the
private sector was to companies such as Globo Communicacoes e
Participacoes S.A. (media and cable sectors) and Espirito Santo
Centrais (a utility company). Our Russian exposure was 4.87% of
total assets at September 30, 1998, and was mainly composed of
Russian principal loans (these loans are issued by VnesheconomBank,
a government agency of the Russian Federation). Russian principal
loans have the largest outstanding and the highest liquidity of all
Russian debt. In the Russian private sector, our allocation was in
short-term bonds of SBS-AGRO Finance B.V., maturing in the year
2000. The price of these bonds collapsed on the announcement of the
local currency debt default and ruble devaluation. In Venezuela, we
increased our allocation to 16.57% of total assets where we were
invested in global funds.
Subsequent to the close of the quarter ended September 30, 1998, we
proceeded to reduce our positions in Brazil and Russia, raise cash
levels, invest in the US Treasury market, and seek to retain the
most liquid bond positions as a result of the events in Russia and
the deleveraging in global markets.
In Conclusion
We thank you for your investment in Merrill Lynch Americas Income
Fund, Inc., and we look forward to reviewing our outlook and
strategy with you again in our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Paolo Valle)
Paolo Valle
Senior Vice President and
Portfolio Manager
November 17, 1998
Merrill Lynch Americas Income Fund, Inc., September 30, 1998
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. However, in the case of certain
eligible investors, the shares 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 approximately 10 years. (There is no initial
sales charge for automatic share conversions.)
* 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. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. 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.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/98 -39.04% -41.48%
Inception (10/21/94) through 9/30/98 - 0.05 - 1.08
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/98 -39.33% -40.98%
Five Years Ended 9/30/98 - 0.85 - 0.85
Inception (8/27/93) through 9/30/98 - 0.77 - 0.77
[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 9/30/98 -39.37% -39.78%
Inception (10/21/94) through 9/30/98 - 0.91 - 0.91
[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 9/30/98 -39.12% -41.56%
Five Years Ended 9/30/98 - 0.39 - 1.20
Inception (8/27/93) through 9/30/98 - 0.29 - 1.09
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results*
<CAPTION>
Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 9/30/98
<S> <C> <C> <C> <C>
ML Americas Income Fund Class A Shares -39.04% -32.39% -0.19% 12.89%
ML Americas Income Fund Class B Shares -39.33 -32.49 -3.87 12.65
ML Americas Income Fund Class C Shares -39.37 -32.50 -3.54 12.59
ML Americas Income Fund Class D Shares -39.12 -32.52 -1.48 12.67
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The
Fund's inception periods are Class A & Class C Shares, from 10/21/94
to 9/30/98 and Class B & Class D Shares, from 8/27/93 to 9/30/98.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Face Interest Maturity Percent of
COUNTRY Industry Amount Bonds Rate Date Value Net Assets
<S> <S> <S> <C> <S> <C> <C> <C> <C>
Argentina Sovereign US$ 2,500,000 Argentina Global Bonds 9.75% 9/19/2027 $ 2,037,500 4.4%
Government
Obligations
Total Bonds in Argentina (Cost--$1,702,500) 2,037,500 4.4
Brazil Industrials 1,000,000 MRS Logistica S.A. 10.625 8/15/2005 420,000 0.9
Telecommunications 3,462,000 Globo Communicacoes e
Participacoes S.A. 10.625 12/05/2008 1,765,620 3.8
Utilities--Electric 3,579,000 Espirito Santo Centrais 10.00 7/15/2007 2,022,135 4.3
Total Bonds in Brazil (Cost--$7,606,800) 4,207,755 9.0
China Transportation 1,000,000 Cathay International
Limited 13.00 4/15/2008 580,000 1.2
Total Bonds in China (Cost--$1,000,000) 580,000 1.2
Colombia Sovereign 3,000,000 Republic of Colombia,
Government Global Bonds 8.625 4/01/2008 2,100,000 4.5
Obligations
Total Bonds in Colombia (Cost--$2,829,000) 2,100,000 4.5
Mexico Industrials 3,268,000 Petroleos Mexicanos 9.50 9/15/2027 2,549,040 5.5
Total Bonds in Mexico (Cost--$3,304,765) 2,549,040 5.5
</TABLE>
Merrill Lynch Americas Income Fund, Inc., September 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Face Interest Maturity Percent of
COUNTRY Industry Amount Bonds Rate Date Value Net Assets
<S> <S> <S> <C> <S> <C> <C> <C> <C>
Russia Financial US$ 2,000,000 SBS-AGRO Finance B.V. (a) 10.25% 7/21/2000 $ 60,000 0.1%
Services
Sovereign 535,073 VnesheconomBank--Government
Government National Bank, Floating Rate,
Obligations Interest Accrual Note++ (a) 6.625 12/15/2015 45,481 0.1
29,650,000 VnesheconomBank--Government
National Bank, Floating Rate,
Principal Loan++(a) 6.625 12/15/2020 1,699,428 3.7
------------ ------
1,744,909 3.8
Total Bonds in Russia (Cost--$16,609,321) 1,804,909 3.9
Venezuela Sovereign 12,500,000 Republic of Venezuela,
Government Global Bonds 9.25 9/15/2027 6,937,500 14.9
Obligations
Total Bonds in Venezuela (Cost--$9,342,813) 6,937,500 14.9
Total Investments in Bonds (Cost--$42,395,199) 20,216,704 43.4
<CAPTION>
Brady Bonds*
<S> <S> <C> <S> <C> <C> <C> <C>
Argentina Sovereign 2,000,000 Republic of Argentina,
Government Par 'L' Bonds 5.75 3/31/2023 1,342,500 2.9
Obligations
Total Brady Bonds in Argentina (Cost--$1,245,000) 1,342,500 2.9
Brazil Sovereign 4,060,735 Republic of Brazil, Floating
Government Rate 'C' Bonds++ 8.00 4/15/2014 2,416,137 5.2
Obligations
Total Brady Bonds in Brazil (Cost--$2,405,195) 2,416,137 5.2
Ecuador Sovereign 3,960,810 Republic of Ecuador, Floating
Government Rate Global Bearer Bonds, PDI 6.625 2/27/2015 1,307,067 2.8
Obligations
Total Brady Bonds in Ecuador (Cost--$1,465,500) 1,307,067 2.8
Mexico Sovereign 7,500,000 United Mexican States,
Government Par 'B' Bonds 6.25 12/31/2019 5,587,500 12.0
Obligations
Total Brady Bonds in Mexico (Cost--$5,812,500) 5,587,500 12.0
Peru Sovereign 2,820,000 Republic of Peru, Front-
Government Loaded Interest Rate
Obligations Reduction Bonds 3.25 3/07/2017 1,297,200 2.8
Total Brady Bonds in Peru (Cost--$1,713,008) 1,297,200 2.8
Total Investments in Brady Bonds
(Cost--$12,641,203) 11,950,404 25.7
<CAPTION>
Short-Term Securities
<S> <S> <S> <C> <S> <C> <C> <C> <C>
Mexico Foreign MXP 20,246,060 Mexican Cetes 20.75 2/11/1999 1,751,919 3.8
Government
Obligations**
Total Short-Term Securities in Mexico
(Cost--$2,210,959) 1,751,919 3.8
United US Government US$ 8,446,000 Federal Home Loan Bank 5.10 10/01/1998 8,446,000 18.1
States & Agency 7,500,000 US Treasury Bills 4.315 4/01/1999 7,335,818 15.8
Obligations**
Total Short-Term Securities in the
United States (Cost--$15,782,390) 15,781,818 33.9
Total Investments in Short-Term
Securities (Cost--$17,993,349) 17,533,737 37.7
Total Investments (Cost--$73,029,751) 49,700,845 106.8
Liabilities in Excess of Other Assets (3,170,555) (6.8)
Net Assets $ 46,530,290 100.0%
============= ======
Net Asset Value: Class A--Based on net assets of $2,896,144 and
541,486 shares outstanding $ 5.35
=============
Class B--Based on net assets of $34,506,724 and
6,466,725 shares outstanding $ 5.34
=============
Class C--Based on net assets of $1,860,968 and
348,756 shares outstanding $ 5.34
=============
Class D--Based on net assets of $7,266,454 and
1,362,550 shares outstanding $ 5.33
=============
<FN>
++Represents a pay-in-kind security which may pay interest in
additional shares/face.
*Brady Bonds are securities which have been issued to refinance
commercial bank loans and other debt. The risk associated with these
instruments is the amount of any uncollateralized principal or
interest payments since there is a high default rate of commercial
bank loans by countries issuing these securities.
**Certain Foreign Government and US Government & Agency Obligations
are traded on a discount basis; the interest rates shown reflect the
discount rates paid at the time of purchase by the Fund.
(a)Due to uncertainty of financial and economic conditions in
Russia, effective September 30, 1998, interest accrual ceased.
</TABLE>
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
Paolo H. Valle, Senior Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Barbara G. Fraser, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
