<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File No. 811-05012
---------------------------------------------------------
CREDIT SUISSE ASSET MANAGEMENT INCOME FUND, INC.
---------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue, New York, New York 10017-3140
---------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Hal Liebes, Esq.
Credit Suisse Asset Management Income Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3140
Registrant's telephone number, including area code: (212) 875-3500
Date of fiscal year end: December 31
Date of reporting period: January 1, 2004 to June 30, 2004
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
<Page>
CREDIT SUISSE ASSET MANAGEMENT INCOME FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2004
<Page>
CREDIT SUISSE ASSET MANAGEMENT INCOME FUND, INC.
SEMIANNUAL REPORT - JUNE 30, 2004
Dear Shareholders: July 21, 2004
We are writing to report on Credit Suisse Asset Management Income Fund,
Inc. ("the Fund") for the fiscal half-year ended June 30, 2004 and to discuss
our investment strategy.
At June 30, 2004, the Fund's net asset value ("NAV") was $4.32, compared to
an NAV of $4.41 at December 31, 2003. The Fund's total return for the period
(based on NAV and assuming reinvestment of dividends of $0.21 per share) was
2.7%.
At June 30, 2004, $174.0 million of the Fund's assets was invested in high
yield debt securities; $30.9 million in emerging market debt securities; $1.0
million in investment-grade debt securities; $4.0 million in equity securities;
and the balance of $2.5 million in cash equivalents. Of the debt securities, the
largest concentration (47.3%) was invested in issues rated B.
THE MARKET: AN UP-AND-DOWN FIRST HALF FOR BONDS
Within the fixed income universe, the first six months of 2004 can be
divided into two roughly equal periods in which bond prices generally went up
and then went back down even more. When the dust finally settled, the broad U.S.
high yield market (as measured by the Citigroup High-Yield Market Index, or
CHYMI*) had gained 1.2%. Aggregate emerging debt markets (represented by J.P.
Morgan's Emerging Markets Bond Index Global**) lost 2.3%.
The link connecting the two periods was investors' perceptions about
whether the Federal Reserve would choose to raise interest rates and, if so, by
how much. The year began with optimism, as the U.S. economy continued to grow
briskly but in a way that was considered non-inflationary. The Fed issued its
own endorsement of this bond-friendly environment in the form of numerous public
statements to the effect that it was comfortable with rates where they were.
This honeymoon ended in early April, however, with the first of a number of
economic data reports suggesting that inflation might come roaring back, which
prompted fears that interest rates would have to rise. Sentiment worsened
further in response to surging oil prices and mounting violence in Iraq. Bond
yields rose throughout April and into mid-May. Markets tended to stabilize from
then until the end of June. By the time the Fed raised rates by a quarter-point
on June 30, its action was expected and investors appeared to feel that all
would not be gloom and doom.
HIGH YIELD. High yield bucked the bearish trend among fixed income sectors
in the second half of the period and held up fairly well. The key, in our view,
was that the economic climate, as reflected by a variety of indicators, stayed
supportive. As we see it, high yield investors chose to interpret the potential
for higher interest rates as an indication that the U.S. economy would remain
strong, which augured well for high yield issuers' ability to generate the
revenues and cash flow needed to service their debt.
Credit fundamentals were solid, furthermore, as default rates remained in a
downward trend and corporate balance sheets kept improving via gains in revenues
and cash flow.
EMERGING MARKETS. The shift in perceptions about U.S. interest rates in
April had a dramatic impact on emerging market debt (EMD). After significantly
outperforming both high yield and investment-grade securities through March, EMD
prices plunged uninterruptedly into mid-May and then rebounded a bit.
In our opinion, investors chose to sell so heavily because a potential
increase in U.S. interest rates could hurt EMD in two ways. First, rising U.S.
rates would likely push down prices--and, accordingly, raise yields--of U.S.
Treasury bonds, whose yields provide the basis for EMD valuations. Second,
higher U.S. rates would likely translate into higher borrowing costs for major
developing-nation issuers of U.S.$-denominated debt, most prominently Brazil.
PERFORMANCE: DRIVEN BY POSITIONING IN HIGH YIELD
The Fund's return in the fiscal half-year was more than double that of
broad high yield indices like CHYMI. We attribute this strong relative showing
to our positioning in five high yield industry sectors: gaming, oil & gas
producers, cable television, wireless telecommunications and automotive-related
businesses.
We enjoyed unusually favorable security selection in all of these and, with
the exception of automotive-related businesses, our above-benchmark allocation
served to magnify the healthy appreciation in the issues we held. An additional
plus in this context was that gaming and cable television were the two largest
industry exposures in the Fund's high yield portion.
On the negative side, we fared worst in emerging market debt and the
satellite communications high yield sector. Our defensive below-benchmark
positioning with regard to duration (i.e., a measure of sensitivity to interest
rates) in EMD was additive through mid-May, but proved counterproductive when
the EMD market rallied thereafter. Our lone satellite holding was a bond of a
company that lost an appeal of an adverse court ruling and chose to enter
bankruptcy protection.
OUTLOOK: STILL POSITIVE ON HIGH YIELD, CONSTRUCTIVE ON EMD
HIGH YIELD. Our outlook for the high yield market is still generally
positive. U.S. economic activity should stay solid, in our view. This, in turn,
should provide a firm underpinning for corporate profitability and
creditworthiness, which are two of the most important big-picture criteria used
by high yield investors.
Valuations still look reasonable to us. While we don't expect yield spreads
to tighten much from current levels, we don't see them widening significantly,
either. We continue to anticipate that the high yield market will resemble the
1992-96 period, which was characterized by relatively stable yield spreads and
the outperformance of single-B issues (which account for the biggest portion of
the Fund's high yield holdings).
2
<Page>
Relative to broad high yield indices like CHYMI, we are overweighting the
gaming, cable TV, energy, consumer products and food/beverage/bottling industry
sectors. We are underweighting diversified telecom providers, energy traders,
airlines and financial names.
EMERGING MARKETS. We are taking a constructive view on the near-term
prospects for emerging debt markets. Following their weak second quarter, we
believe that they could experience a period of comparative stability. This
conclusion is based on several factors: the absence of upcoming major events
such as national elections, which historically have tended to add uncertainty to
EMD market perceptions; our sense that U.S. Treasury yields may already reflect
much of the implications of higher U.S. interest rates; and the surfacing of
buyers willing to purchase EMD securities at what they consider to be attractive
valuations.
Compared to broad EMD indices, our largest country overweights are in
Russia and Venezuela. Our largest country underweights are in Turkey and Peru.
Regional allocations consist of a slightly overweight stance in Eastern/Central
Europe, a benchmark-neutral position in Asia, and a slight underweight in Latin
America.
We are pleased to announce the appointment of Michael E. Kenneally as a
Director, Chairman of the Board and Chief Executive Officer to the Fund. Mr.
Kenneally has been the Global Chief Executive Officer for CSAM since April 2003.
Prior to being with CSAM, Mr. Kenneally was President, Investment Manager and
Chief Investment Officer at Bank of America and Chairman and Chief Investment
Officer at Banc of America Capital Management. In appointing Mr. Kenneally, the
Fund took note of the requirement to have an independent chair and has asked Mr.
Kenneally to assume the Chairmanship only until such time when the fund selects
its independent Chairman. Nonetheless, the Fund is pleased to have such senior
investment leadership with this appointment.
We appreciate your investment in the Fund and would be pleased to respond
to your questions or comments. Any questions regarding net asset value,
performance, dividends, portfolio management or allocations should be directed
to Credit Suisse Asset Management, LLC at (800) 293-1232. All other inquiries
regarding account information, requests for the latest financial information or
other reports should be directed to the Fund's Shareholder Servicing Agent at
(800) 730-6001.
Sincerely Yours,
/s/ Richard J. Lindquist
Richard J. Lindquist
PRESIDENT AND CHIEF INVESTMENT OFFICER ***
/s/ Michael E. Kenneally
Michael E. Kenneally
DIRECTOR, CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER ****
HIGH YIELD BONDS ARE LOWER-QUALITY INSTRUMENTS ALSO KNOWN AS "JUNK" BONDS.
SUCH BONDS ENTAIL GREATER RISKS THAN THOSE FOUND IN HIGHER-RATED SECURITIES.
INTERNATIONAL INVESTING ENTAILS SPECIAL RISK CONSIDERATIONS, INCLUDING CURRENCY
FLUCTUATIONS, LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS, AND DIFFERENCES IN
ACCOUNTING METHODS; THESE RISKS ARE GENERALLY HEIGHTENED FOR EMERGING-MARKET
INVESTMENTS. THE FUND MAY INCLUDE A GREATER DEGREE OF RISK THAN OTHER FUNDS THAT
INVEST IN LARGER, MORE-DEVELOPED MARKETS.
IN ADDITION TO HISTORICAL INFORMATION, THIS REPORT CONTAINS FORWARD-LOOKING
STATEMENTS, WHICH MAY CONCERN, AMONG OTHER THINGS, DOMESTIC AND FOREIGN MARKET,
INDUSTRY AND ECONOMIC TRENDS AND DEVELOPMENTS AND GOVERNMENT REGULATION AND
THEIR POTENTIAL IMPACT ON THE FUND'S INVESTMENT PORTFOLIO. THESE STATEMENTS ARE
SUBJECT TO RISKS AND UNCERTAINTIES AND ACTUAL TRENDS, DEVELOPMENTS AND
REGULATIONS IN THE FUTURE AND THEIR IMPACT ON THE FUND COULD BE MATERIALLY
DIFFERENT FROM THOSE PROJECTED, ANTICIPATED OR IMPLIED. THE FUND HAS NO
OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS.
The information presented is for informational purposes only. This report
is not a recommendation to buy or sell or a solicitation of an offer to buy or
sell any securities or adopt any investment strategy. Readers are advised not to
infer or assume that any securities, companies, sectors or markets described
will be profitable. All opinions and views constitute judgments as of the date
of writing, and are subject to change at any time without notice.
* The Citigroup High-Yield Market Index is a broad-based, unmanaged index
of high yield securities that is compiled by Citigroup Global Markets Inc. Its
name was changed from the Salomon Smith Barney High-Yield Market Index effective
April 7, 2003. Investors cannot invest directly in an index.
** The J.P. Morgan Emerging Markets Bond Index Global is a comprehensive
index of emerging market debt securities. Launched in August 1999, it tracks the
total returns of U.S. dollar-denominated debt instruments for 27 emerging market
countries. Investors cannot invest directly in an index.
*** Richard J. Lindquist, who is a Managing Director of Credit Suisse Asset
Management, LLC ("CSAM"), is primarily responsible for management of the Fund's
assets. He has served in such capacity since November 21, 1996. Prior to that
date, he served as Vice President to the Fund, a position he assumed on August
15, 1989. Mr. Lindquist joined CSAM on May 1, 1995 as a result of CSAM's
acquisition of CS First Boston Investment Management Corporation ("CSFBIM").
Prior to joining CSAM and beginning in July, 1989, he held various offices at
CSFBIM. Mr. Lindquist also is President and Chief Investment Officer of Credit
Suisse High Yield Bond Fund, Inc. (NYSE: DHY).
**** Michael E. Kenneally, Chairman and Global Chief Executive Officer of
CSAM since April 2003; Chairman and Chief Investment Officer of Banc of America
Capital Management from 1998 to March 2003.
3
<Page>
TOP TEN HOLDINGS (unaudited)
(as a % of net assets as of 6/30/04)
<Table>
1. Ministry Finance of Russia Series V,
Debentures 3.00%, 5/14/08 2.1%
2. Westfed Holdings Sr. Debentures
15.50%, 9/15/99 1.6%
3. United Mexican States Series MTN,
Notes 6.375%, 1/16/13 1.6%
4. Federal Republic of Brazil Series 20 YR,
Bonds 8.00%, 4/15/14 1.4%
5. Federal Republic of Brazil
Unsubordinated 11.00%, 8/17/40 1.0%
6. Newark Group, Inc. Sr. Sub.
Notes 9.75%, 3/15/14 0.9%
7. Republic of Venezuela
Notes 10.75%, 9/19/13 0.9%
8. Russian Federation Series REGS,
Unsubordinated 5.00%, 3/31/30 0.9%
9. Hard Rock Hotel, Inc.
Notes 8.875%, 6/1/13 0.8%
10. Windsor Woodmont Black Hawk
Series B, First Mortgage
Notes 13.00%, 3/15/05 0.6%
</Table>
CREDIT QUALITY BREAKDOWN (unaudited)
(as a % of total investments as of 6/30/04)
<Table>
BBB/Baa 4.6%
BB/Ba 12.7
B/B 47.3
CCC/Caa 21.1
CC/Ca 4.0
N/R 7.2
-----
Subtotal 96.9
Time Deposit 1.2
Equities and Other 1.9
-----
Total 100.0%
=====
</Table>
4
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 2004
<Table>
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
DOMESTIC SECURITIES (83.0%)
CORPORATE OBLIGATIONS (81.1%)
AEROSPACE (0.3%)
BE Aerospace, Inc.
Series B, Sr. Sub. Notes
8.00%, 3/1/08 Caa3 $ 250 $ 233,750
(1) Condor Systems, Inc.
Series B, Gtd.
11.875%, 5/1/09 N/R 900 63,000
Sequa Corp.
Sr. Notes
9.00%, 8/1/09 B1 250 266,875
--------------
GROUP TOTAL 563,625
--------------
AIRLINES (0.3%)
American Airlines, Inc.
Series 01-2, Pass thru Certs
7.80%, 10/1/06 B1 550 503,216
Continental Airlines, Inc.
Series 991C, Pass thru Certs
6.954%, 8/2/09 B2 177 134,859
--------------
GROUP TOTAL 638,075
--------------
AUTOMOBILE MANUFACTURING/VEHICLE PARTS (2.5%)
(1) Aetna Industries, Inc.
Sr. Notes
11.875%, 10/1/06 N/R 1 32
(2) Autocam Corp.
Sr. Sub. Notes
10.875%, 6/15/14 B3 400 390,000
(2) Bombardier Recreational
Sr. Sub. Notes
8.375%, 12/15/13 B3 250 249,375
Cambridge Industries, Inc.
Sr. Sub. Notes
10.25%, 7/15/07 Aa2 775 7,746
Collins & Aikman
Products Corp.
Gtd.
11.50%, 4/15/06 B3 1,250 1,237,500
Holley Performance
Products, Inc.
Series B, Gtd.
12.25%, 9/15/07 Caa3 365 323,025
J.L. French Automotive
Castings, Inc.
Series B, Gtd.
11.50%, 6/1/09 Caa1 500 342,500
Metaldyne Corp.
Gtd.
11.00%, 6/15/12 Caa1 800 684,000
Motor Coach Industries
International, Inc.
Gtd.
11.25%, 5/1/09 Ca 1,121 509,827
Stanadyne Automotive Corp.
Series B, Gtd.
10.25%, 12/15/07 B3 700 703,500
Tenneco Automotive, Inc.:
Series B, Secured
10.25%, 7/15/13 B2 $ 350 $ 397,250
(2) Transportation Technologies
Industries, Inc.
Sr. Sub. Notes
12.50%, 3/31/10 Caa1 500 497,500
--------------
GROUP TOTAL 5,342,255
--------------
BANKING (0.2%)
Sovereign Bancorp, Inc.
Sr. Notes
10.50%, 11/15/06 Baa3 365 418,394
--------------
BROADBAND (0.8%)
Call Net Enterprises, Inc.
Yankee Gtd.
10.625%, 12/31/08 Caa3 400 400,000
Level 3
Communications, Inc.:
Sr. Discount Notes
10.50%, 12/1/08 Caa2 650 518,375
Sr. Notes
9.125%, 5/1/08 Caa2 500 398,750
(2) Level 3 Financing, Inc.
Sr. Notes
10.75%, 10/15/11 Caa2 250 221,875
Primus Telecommunications
Group, Inc.
Sr. Notes
8.00%, 1/15/14 B3 250 221,250
--------------
GROUP TOTAL 1,760,250
--------------
BROADCAST/OUTDOOR (1.0%)
Alliance Atlantis
Communications, Inc.
Yankee Sr. Sub. Notes
13.00%, 12/15/09 B1 500 552,500
Corus Entertainment, Inc.
Global Sr. Sub. Notes
8.75%, 3/1/12 B1 150 161,062
(2) Emmis Operating Co.
Sr. Subordinated
6.875%, 5/15/12 B2 250 246,250
Interep National Radio
Sales, Inc.
Series B, Gtd.
10.00%, 7/1/08 Caa2 250 208,750
(3) Paxson Communications
Corp.
Gtd.
0.00%, 1/15/09 Caa1 600 525,000
Sinclair Broadcast
Group, Inc.
Gtd.
8.75%, 12/15/11 B2 450 483,750
--------------
GROUP TOTAL 2,177,312
--------------
</Table>
The accompanying notes are an integral part of the financial statements.
5
<Page>
<Table>
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
BUILDING PRODUCTS (2.2%)
(2)(3) Associated Materials, Inc.
Sr. Discount Notes
0.00%, 3/1/14 Caa1 $ 750 $ 506,250
Atrium Companies, Inc.
Series B, Gtd.
10.50%, 5/1/09 B3 500 526,250
Building Materials Corp.:
Series B, Sr. Notes
7.75%, 7/15/05 B2 250 252,500
8.625%, 12/15/06 B2 900 911,250
Dayton Superior Corp.:
Gtd.
13.00%, 6/15/09 Caa2 720 630,000
Secured
10.75%, 9/15/08 B3 250 252,500
(2) Interface, Inc.
Sr. Sub. Notes
9.50%, 2/1/14 Caa3 400 400,000
(2) Ply Gem Indusries, Inc.
Sr. Sub. Notes
9.00%, 2/15/12 B3 400 410,000
Texas Industries, Inc.
Sr. Notes
10.25%, 6/15/11 B1 250 280,000
Werner Holdings Co., Inc.
Series A, Gtd.
10.00%, 11/15/07 B3 800 672,000
--------------
GROUP TOTAL 4,840,750
--------------
CABLE (7.2%)
(1) Adelphia
Communications Corp.
Series B, Sr. Notes
8.375%, 2/1/08 N/R 800 786,000
(2) Atlantic Broadband
Finance LLC.
Sr. Sub. Notes
9.375%, 1/15/14 Caa1 500 475,000
(1) Australis Holdings Pty. Ltd.
Yankee Sr. Secured
Discount Notes
15.00%, 11/1/02 N/R 4,600 115,000
CSC Holdings, Inc.:
Series B, Debentures
8.125%, 8/15/09 B1 150 156,750
Series B, Sr. Notes
7.625%, 4/1/11 B1 200 201,500
(2) Cablevision Systems
New York Group
Sr. Notes
8.00%, 4/15/12 B3 1,250 1,237,500
Century Communications
Corp.:
(3) Series B, Sr. Discount Notes
0.00%, 1/15/08 N/R 500 317,500
(3) Sr. Discount Notes
0.00%, 3/15/03 N/R 500 476,250
Sr. Notes
8.75%, 10/1/07 N/R 450 486,000
Charter Communications
Holdings LLC:
Sr. Discount Notes
9.92%, 4/1/11 Ca $ 1,200 $ 954,000
Sr. Notes
8.625%, 4/1/09 Ca 750 601,875
(2) 8.75%, 11/15/13 B3 500 481,250
10.25%, 1/15/10 Ca 1,050 871,500
(1) DIVA Systems Corp.
Series B, Sr. Discount Notes
12.625%, 3/1/08 N/R 3,014 195,910
(1) Frontiervision Holdings LP
Series B, Sr. Discount Notes
11.875%, 9/15/07 N/R 500 622,500
(3) Insight Communications
Co., Inc.
Sr. Discount Notes
0.00%, 2/15/11 Caa2 250 226,250
Insight Midwest/Insight
Capital:
Sr. Notes
9.75%, 10/1/09 B2 900 954,000
10.50%, 11/1/10 B2 500 547,500
Jones Intercable, Inc.
Sr. Notes
7.625%, 4/15/08 Baa3 450 496,569
Mediacom LLC/Capital
Corp.:
Series B, Sr. Notes
8.50%, 4/15/08 B2 871 879,710
Sr. Notes
7.875%, 2/15/11 B2 850 820,250
Northland Cable
Television, Inc.
Gtd.
10.25%, 11/15/07 Caa3 750 735,937
(1) Olympus Communications,
L.P./Olympus Capital
Corp.
Series B, Sr. Notes
10.625%, 11/15/06 N/R 1,042 1,298,592
Renaissance Media Group
LLC.
Gtd.
10.00%, 4/15/08 B3 953 986,355
Rogers Cablesystems, Inc.
Series B, Yankee Sr. Notes
10.00%, 3/15/05 Ba2 250 260,758
(2)(3) Telenet Group Holding NV
Discount Notes
0.00%, 6/15/14 Caa2 600 384,000
--------------
GROUP TOTAL 15,568,456
--------------
CAPITAL GOODS (1.3%)
(2) Case New Holland, Inc.
Sr. Notes
9.25%, 8/1/11 Ba3 250 369,250
(2) JII Holdings LLC.
Secured
13.00%, 4/1/07 Caa2 785 706,860
Motors & Gears, Inc.
Series D, Sr. Notes
10.75%, 11/15/06 Caa1 950 812,250
</Table>
The accompanying notes are an integral part of the financial statements.
6
<Page>
<Table>
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
Park-Ohio Industries, Inc.
Sr. Sub. Notes
9.25%, 12/1/07 Caa1 $ 500 $ 511,250
SPX Corp.
Sr. Notes
6.25%, 6/15/11 Ba3 350 342,125
--------------
GROUP TOTAL 2,741,735
--------------
CHEMICALS (4.2%)
Acetex Corp.
Global Sr. Notes
10.875%, 8/1/09 B2 400 440,000
Applied Extrusion
Technologies, Inc.
Series B, Gtd.
10.75%, 7/1/11 Caa3 400 262,000
Avecia Group plc
Global Gtd.
11.00%, 7/1/09 Caa3 700 535,500
(2) BCP Caylux Holdings
Sr. Sub. Notes
9.625%, 6/15/14 B3 400 416,500
Equistar Chemicals L.P./
Equistar Funding Corp.
Sr. Notes
10.625%, 5/1/11 B2 350 390,250
(2)(3) HMP Equity Holdings
Corp. Units
0.00%, 5/15/08 N/R 250 193,750
(3) Huntsman International
Holdings LLC.
Sr. Discount Notes
0.00%, 12/31/09 Caa2 250 123,750
Huntsman Co., LLC:
Gtd.
11.625%, 10/15/10 B2 500 555,000
(2) 11.50%, 7/15/12 B3 400 407,000
IMC Global, Inc.
Sr. Notes
10.875%, 8/1/13 B1 350 419,125
ISP Chemco, Inc.
Series B, Gtd.
10.25%, 7/1/11 B1 250 279,375
Lyondell Chemical Co.:
Gtd.
10.50%, 6/1/13 B1 850 924,375
Series B, Secured
9.875%, 5/1/07 B1 750 787,500
Millennium America, Inc.
Gtd.
9.25%, 6/15/08 B1 500 540,000
(2) Nalco Co.
Sr. Sub. Notes
8.875%, 11/15/13 Caa1 400 421,000
Polyone Corp.
Gtd.
10.625%, 5/15/10 B3 400 426,000
Radnor Holdings Corp.
Sr. Notes
11.00%, 3/15/10 Caa1 250 213,750
Resolution Performance
Products LLC.
Sr. Sub. Notes
13.50%, 11/15/10 Caa2 $ 500 $ 468,750
(2) Rhodia SA
Sr. Notes
10.25%, 6/1/10 B3 600 609,000
Terra Capital, Inc.
Secured
11.50%, 6/1/10 Caa1 550 605,000
--------------
GROUP TOTAL 9,017,625
--------------
COMPETITIVE LOCAL EXCHANGE CARRIER (0.8%)
Madison River Capital/
Madison River Finance
Sr. Notes
13.25%, 3/1/10 Caa2 871 920,554
Time Warner Telecom, LLC.
Sr. Notes
9.75%, 7/15/08 B3 850 799,000
--------------
GROUP TOTAL 1,719,554
--------------
CONSUMER PRODUCTS/TOBACCO (4.0%)
(2) Ames True Temper, Inc.
Sr. Sub. Notes
10.00%, 7/15/12 Caa1 600 604,500
(2) Amscan Holdings, Inc.
Sr. Sub. Notes
8.75%, 5/1/14 B3 300 296,250
DIMON, Inc.
Sr. Notes
7.75%, 6/1/13 Ba3 500 467,500
(1) Diamond Brands
Operating Corp.
Gtd.
10.125%, 4/15/08 N/R 2,000 20,000
General Binding Corp.
Gtd.
Sr. Sub. Notes
9.375%, 6/1/08 Caa1 700 727,125
Hockey Co./Sport Maska,
Inc.
Global Units
11.25%, 4/15/09 Ba3 300 358,500
(2) Interactive Health LLC.
Sr. Notes
7.25%, 4/1/11 B3 400 358,000
(3) Johnsondiversey Holdings,
Inc.
Discount Notes
0.00%, 5/15/13 B3 600 465,000
Jostens, Inc.
Sr. Sub. Notes
12.75%, 5/1/10 B3 900 1,008,000
(2) Leiner Health Products, Inc.
Sr. Sub. Notes
11.00%, 6/1/12 B3 250 259,375
PCA LLC/PCA Finance
Corp.
Sr. Notes
11.875%, 8/1/09 B3 650 702,000
</Table>
The accompanying notes are an integral part of the financial statements.
7
<Page>
<Table>
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
Playtex Products, Inc.
Gtd.
9.375%, 6/1/11 Caa2 $ 500 $ 488,750
(2) Prestige Brands, Inc.
Sr. Sub. Notes
9.25%, 4/15/12 Caa1 500 482,500
Rayovac Corp.
Sr. Sub. Notes
8.50%, 10/1/13 B3 250 263,750
Remington Arms Co., Inc.
Gtd.
10.50%, 2/1/11 B2 115 112,125
Revlon Consumer Products
Corp.
Gtd.
12.00%, 12/1/05 B2 775 871,875
(2) Samsonite Corp.
Sr. Sub. Notes
8.875%, 6/1/11 B3 250 260,000
(2) Sealy Mattress Co.
Sr. Sub. Notes
8.25%, 6/15/14 Caa1 400 404,000
United Industries Corp.
Series D, Gtd.
9.875%, 4/1/09 N/R 400 418,000
--------------
GROUP TOTAL 8,567,250
--------------
CONTAINERS (2.5%)
AEP Industries, Inc.
Sr. Sub. Notes
9.875%, 11/15/07 B3 650 669,500
Berry Plastics Corp.
Gtd.
10.75%, 7/15/12 B3 600 669,000
Crown Cork & Seal
Finance plc
Yankee Gtd.
7.00%, 12/15/06 B3 300 306,000
Crown Euro Holdings SA
Secured
9.50%, 3/1/11 B1 795 870,525
Graphic Packaging
International Corp.
Sr. Sub. Notes
9.50%, 8/15/13 B3 250 272,500
Owens-Illinois, Inc.
Sr. Notes
8.10%, 5/15/07 Caa1 950 983,250
Pliant Corp.
Gtd.
13.00%, 6/1/10 Caa1 900 810,000
(2) Solo Cup Co.
Sr. Sub. Notes
8.50%, 2/15/14 B3 500 467,500
U.S. Can Corp.
Gtd.
10.875%, 7/15/10 Caa1 250 257,500
--------------
GROUP TOTAL 5,305,775
--------------
DIVERSIFIED TELECOMMUNICATIONS (0.4%)
(2) Qwest Communications
International, Inc.
Sr. Notes
7.50%, 2/15/14 B3 $ 300 $ 272,250
Qwest Corp.
Notes
6.625%, 9/15/05 Ba3 500 512,500
--------------
GROUP TOTAL 784,750
--------------
ENERGY/OTHER (2.4%)
Dynegy Holdings, Inc.:
(2) Secured
10.125%, 7/15/13 B3 350 380,625
Sr. Notes
8.75%, 2/15/12 Caa2 600 573,000
El Paso CGP Co.:
Notes
6.375%, 2/1/09 Caa1 250 219,375
7.75%, 6/15/10 Caa1 250 226,875
El Paso Corp.
Sr. Notes
7.00%, 5/15/11 Caa1 500 440,000
El Paso Natural Gas
Series A, Sr. Notes
7.625%, 8/1/10 B1 250 257,500
El Paso Production
Holding Co.
Gtd.
7.75%, 6/1/13 B3 750 691,875
Frontier Oil Corp.
Sr. Notes
11.75%, 11/15/09 B2 1,000 1,097,500
(2) Gemstone Investors Ltd.
Gtd.
7.71%, 10/31/04 Caa1 350 354,375
Giant Industries, Inc.
Gtd.
11.00%, 5/15/12 N/R 186 208,320
Gulfterra Energy Partner
Gtd.
10.625%, 12/1/12 B1 100 119,500
Reliant Resources, Inc.
Secured
9.50%, 7/15/13 B1 500 541,250
--------------
GROUP TOTAL 5,110,195
--------------
FINANCE (1.8%)
(2) E*Trade Financial Corp.
Sr. Notes
8.00%, 6/15/11 B1 250 250,000
Westfed Holdings:
Sr. Debentures
(1) 15.50%, 9/15/99 N/R 2,000 3,500,000
(4) 25.00%, 8/22/09 N/R 108 107,578
--------------
GROUP TOTAL 3,857,578
--------------
</Table>
The accompanying notes are an integral part of the financial statements.
8
<Page>
<Table>
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
FOOD PROCESSORS/BEVERAGE/BOTTLING (2.1%)
Agrilink Foods, Inc.
Gtd.
11.875%, 11/1/08 B3 $ 124 $ 131,750
B&G Foods, Inc.
Series D, Gtd.
9.625%, 8/1/07 B3 700 715,750
Eagle Family Foods
Series B, Gtd.
8.75%, 1/15/08 Caa2 471 331,702
Land O'Lakes, Inc.
Sr. Notes
8.75%, 11/15/11 B3 800 740,000
(2) Le-Natures, Inc.
Sr. Sub. Notes
9.00%, 6/15/13 Caa1 250 260,000
National Wine & Spirits,
Inc.
Gtd.
10.125%, 1/15/09 B3 220 205,700
Premier International
Foods plc
Global Sr. Notes
12.00%, 9/1/09 B3 1,100 1,179,750
Swift & Co.:
Gtd.
10.125%, 10/1/09 B1 250 268,125
Sr. Sub. Notes
12.50%, 1/1/10 B2 300 322,500
(2) Wornick Co.
Secured
10.875%, 7/15/11 B2 400 411,000
--------------
GROUP TOTAL 4,566,277
--------------
GAMING (7.3%)
Ameristar Casinos, Inc.
Gtd.
10.75%, 2/15/09 B2 970 1,110,650
Argosy Gaming Co.:
Sr. Sub. Notes
9.00%, 9/1/11 B2 250 277,500
(2) 7.00%, 1/15/14 B3 250 245,000
(2) Aztar Corp.
Sr. Sub. Notes
7.875%, 6/15/14 Ba3 250 253,750
Boyd Gaming Corp.
Gtd.
9.25%, 8/1/09 Ba3 600 658,500
(2) Chukchansi Economic
Development Authority
Sr. Notes
14.50%, 6/15/09 N/R 1,000 1,245,000
Circus & Eldorado/Silver
Legacy Capital Corp.
First Mortgage Notes
10.125%, 3/1/12 B1 500 505,000
Coast Hotels & Casinos, Inc.
Gtd.
9.50%, 4/1/09 B2 700 738,500
Hard Rock Hotel, Inc.
Notes
8.875%, 6/1/13 B3 1,800 1,827,000
Horseshoe Gaming
Holdings Corp.
Series B, Gtd.
8.625%, 5/15/09 B2 $ 1,000 $ 1,047,500
(2) Inn of the Mountain Gods
Sr. Notes
12.00%, 11/15/10 Caa1 400 446,000
(2) Isle of Capri Casinos, Inc.
Sr. Sub. Notes
7.00%, 3/1/14 B2 350 326,375
MGM Mirage, Inc.
Gtd.
9.75%, 6/1/07 Ba2 100 109,750
Majestic Star Casino LLC.
Gtd.
9.50%, 10/15/10 B2 800 808,000
Mohegan Tribal Gaming
Authority
Sr. Notes
8.125%, 1/1/06 Ba2 950 1,007,000
Park Place Entertainment
Corp.:
Sr. Sub. Notes
7.875%, 12/15/05 Ba2 250 263,437
9.375%, 2/15/07 Ba2 500 544,375
(2) Peninsula Gaming LLC.
Gtd.
8.75%, 4/15/12 B2 500 491,250
Penn National Gaming,
Inc.
Series B, Gtd.
11.125%, 3/1/08 B2 850 939,250
Riviera Holdings Corp.
Gtd.
11.00%, 6/15/10 B2 700 768,250
Venetian Casino Resort LLC.
Gtd.
11.00%, 6/15/10 B3 180 208,800
(2) Waterford Gaming LLC.
Sr. Notes
8.625%, 9/15/12 B1 236 251,930
(1) Windsor Woodmont
Black Hawk
Series B, First Mortgage
Notes
13.00%, 3/15/05 N/R 1,450 1,377,500
Wynn Las Vegas LLC/
Wynn Las Vegas
Capital Corp.
Second Mortgage
12.00%, 11/1/10 B3 268 322,270
--------------
GROUP TOTAL 15,772,587
--------------
HEALTHCARE FACILITIES/SUPPLIES (1.5%)
Ardent Health Services
Sr. Sub. Notes
10.00%, 8/15/13 B3 250 268,750
(2) Beverly Enterprises, Inc.
Sr. Sub. Notes
7.875%, 6/15/14 B2 250 247,187
Concentra Operating Corp.
Gtd.
9.50%, 8/15/10 B3 250 267,500
</Table>
The accompanying notes are an integral part of the financial statements.
9
<Page>
<Table>
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
Fisher Scientific
International, Inc.
Sr. Sub. Notes
8.125%, 5/1/12 B2 $ 260 $ 279,500
Medquest, Inc.
Series B, Gtd.
11.875%, 8/15/12 B3 600 684,000
(2) Tenet Healthcare Corp.
Sr. Notes
9.875%, 7/1/14 B3 250 255,625
Triad Hospitals, Inc.
Sr. Sub. Notes
7.00%, 11/15/13 B3 1,000 955,000
Universal Hospital
Services, Inc.
Sr. Notes
10.125%, 11/1/11 B3 250 255,000
--------------
GROUP TOTAL 3,212,562
--------------
HOME BUILDERS (0.7%)
Tech Olympic USA, Inc.
Gtd.
9.00%, 7/1/10 Ba3 500 515,000
Toll Corp.
Sr. Sub. Notes
8.25%, 12/1/11 Ba2 250 272,500
WCI Communities, Inc.
Gtd.
10.625%, 2/15/11 Ba3 650 723,125
--------------
GROUP TOTAL 1,510,625
--------------
INDUSTRIAL (1.1%)
(2) Amsted Industries, Inc.
Sr. Notes
10.25%, 10/15/11 B3 250 272,500
Amtrol, Inc.
Sr. Sub. Notes
10.625%, 12/31/06 Caa3 600 484,500
GSI Group, Inc.
Gtd.
10.25%, 11/1/07 Caa1 468 420,750
(1) International Utility
Structures, Inc.:
Sub. Notes
13.00%, 2/1/08 N/R 924 4,620
Yankee Sr. Sub. Notes
10.75%, 2/1/08 N/R 800 168,000
(2) Polypore, Inc.
Sr. Sub. Notes
8.75%, 5/15/12 Caa1 400 419,000
Wolverine Tube, Inc.
Gtd.
10.50%, 4/1/09 B3 550 605,000
--------------
GROUP TOTAL 2,374,370
--------------
LEISURE (3.0%)
AMC Entertainment, Inc.:
Sr. Sub. Notes
9.875%, 2/1/12 Caa1 650 685,750
(2) 8.00%, 3/1/14 Caa1 400 384,000
(2) Affinity Group, Inc.
Sr. Sub. Notes
9.00%, 2/15/12 B3 $ 250 $ 257,500
Bally Total Fitness Holding
Corp.
Sr. Notes
10.50%, 7/15/11 B2 300 283,500
Bluegreen Corp.
Series B, Gtd.
10.50%, 4/1/08 B3 1,000 1,030,000
Booth Creek Ski Holdings,
Inc.
Series B, Gtd.
12.50%, 3/15/07 Caa1 1,147 1,155,602
Cinemark USA, Inc.:
(2)(3) Sr. Discount Notes
0.00%, 3/15/14 Caa1 400 263,000
Sr. Sub. Notes
9.00%, 2/1/13 B3 250 274,062
Intrawest Corp.:
Gtd.
10.50%, 2/1/10 B1 250 271,562
Sr. Notes
7.50%, 10/15/13 B1 250 245,625
Scientific Games Corp.
Series B, Gtd.
12.50%, 8/15/10 B2 691 806,743
Six Flags, Inc.:
Sr. Notes
9.75%, 4/15/13 B3 400 404,000
(2) 9.625%, 6/1/14 B3 500 500,000
--------------
GROUP TOTAL 6,561,344
--------------
LODGING (0.9%)
CapStar Hotel Co.
Sr. Sub. Notes
8.75%, 8/15/07 Caa1 250 255,625
Felcor Lodging LP
Gtd.
8.50%, 6/1/11 B1 425 440,938
HMH Properties, Inc.
Series B, Gtd.
7.875%, 8/1/08 Ba3 266 273,980
Host Marriot LP
Series I, Gtd.
9.50%, 1/15/07 Ba3 600 658,500
John Q. Hammons Hotel LP
Series B, First
Mortgage Notes
8.875%, 5/15/12 B2 300 327,000
--------------
GROUP TOTAL 1,956,043
--------------
METALS & MINING (1.8%)
AK Steel Corp.:
Gtd.
7.875%, 2/15/09 B3 250 235,000
7.75%, 6/15/12 B3 250 226,875
(2) Alpha Natural Resources
Gtd.
10.00%, 6/1/12 B3 500 525,000
</Table>
The accompanying notes are an integral part of the financial statements.
10
<Page>
<Table>
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
Earle M. Jorgensen Co.
Secured
9.75%, 6/1/12 B2 $ 500 $ 550,000
Gerdau Ameristeel Corp.
Sr. Notes
10.375%, 7/15/11 B2 250 280,000
(2) International Steel Group
Sr. Notes
6.50%, 4/15/14 Ba3 1,000 942,500
(2) Ispat Inland ULC
Secured
9.75%, 4/1/14 Caa1 400 414,000
Metallurg, Inc.
Series B, Gtd.
11.00%, 12/1/07 Ca 571 288,103
WCI Steel, Inc.
Series B, Sr. Notes
10.00%, 12/1/04 N/R 250 136,250
(2) Wise Metals Group LLC.
Secured
10.25%, 5/15/12 B2 250 257,500
--------------
GROUP TOTAL 3,855,228
--------------
OIL EQUIPMENT (0.4%)
Parker Drilling Co.
Series B, Gtd.
10.125%, 11/15/09 B2 900 954,000
--------------
PAPER & FOREST PRODUCTS (4.2%)
(2) Abitibi-Consolidated, Inc.
Notes
7.75%, 6/15/11 Ba2 250 250,874
(2) Appleton Papers, Inc.
Sr. Sub. Notes
9.75%, 6/15/14 B3 350 352,625
Blue Ridge Paper Product
Secured
9.50%, 12/15/08 B2 350 327,250
Caraustar Industries, Inc.
Gtd.
9.875%, 4/1/11 Caa1 434 434,000
(2) Cellu Tissue Holdings
Secured
9.75%, 3/15/10 B2 250 241,250
(1) Doman Industries Ltd.
Yankee Gtd.
12.00%, 7/1/04 N/R 300 361,500
Four M Corp.
Series B, Sr. Notes
12.00%, 6/1/06 B3 900 913,500
Georgia-Pacific Corp.
Gtd.
9.375%, 2/1/13 Ba2 1,000 1,150,000
JSG Funding plc
Global Sr. Notes
9.625%, 10/1/12 B3 500 550,000
(2) Newark Group, Inc.
Sr. Sub. Notes
9.75%, 3/15/14 Caa1 2,000 1,925,000
(2) Norkse Skog Canada Limited
Sr. Notes
7.375%, 3/1/14 Ba3 250 243,125
(2) Riverside Forest Products
Limited
Sr. Notes
7.875%, 3/1/14 B2 $ 400 $ 410,000
Stone Container Corp.
Sr. Notes
8.375%, 7/1/12 B2 600 630,000
Stone Container Finance Co.
Yankee Gtd.
11.50%, 8/15/06 B2 780 786,825
Tembec Industries, Inc.
Yankee Gtd.
8.625%, 6/30/09 Ba3 400 407,000
--------------
GROUP TOTAL 8,982,949
--------------
PUBLISHING (1.5%)
Dex Media East LLC.
Gtd.
12.125%, 11/15/12 Caa1 350 410,375
(2) Dex Media, Inc.:
(3) Discount Notes
0.00%, 11/15/13 Caa2 500 325,000
Notes
8.00%, 11/15/13 Caa2 250 241,250
Haights Cross Operating
Co.
Gtd.
11.75%, 8/15/11 Caa1 350 379,750
Houghton Mifflin Co.:
(3) Sr. Discount Notes
0.00%, 10/15/13 Caa1 250 134,063
Sr. Notes
8.25%, 2/1/11 B2 300 301,500
Liberty Group Publishing,
Inc.
Debentures
11.625%, 2/1/09 Caa2 900 893,250
(2) PRIMEDIA, Inc.
Sr. Notes
8.00%, 5/15/13 B3 350 330,750
(1)(4) Premier Graphics, Inc.
Gtd.
11.50%, 12/1/05 N/R 2,000 0
(2) Sheridan Acquisition CRP
Secured
10.25%, 8/15/11 B1 300 317,250
--------------
GROUP TOTAL 3,333,188
--------------
RESTAURANTS (1.9%)
Advantica Restaurant
Group, Inc.
Sr. Notes
11.25%, 1/15/08 Ca 500 485,000
American Restaurant
Group, Inc.
Series D, Gtd.
11.50%, 11/1/06 Caa2 993 650,415
Buffets, Inc.
Sr. Sub. Notes
11.25%, 7/15/10 B3 500 525,000
</Table>
The accompanying notes are an integral part of the financial statements.
11
<Page>
<Table>
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
CKE Restaurants, Inc.
Gtd.
9.125%, 5/1/09 B3 $ 350 $ 365,750
Carrols Corp.
Gtd.
9.50%, 12/1/08 B3 150 156,000
(2) El Pollo Loco, Inc.
Secured
9.25%, 12/15/09 B2 250 253,750
(2) Friendly Ice Cream Corp.
Sr. Notes
8.375%, 6/15/12 B2 350 341,250
O'Charley's, Inc.
Sr. Sub. Notes
9.00%, 11/1/13 Ba3 400 416,000
(4) Romacorp, Inc.
Sr. Notes
10.50%, 12/31/08 Ca 1,102 722,072
Sbarro, Inc.
Gtd.
11.00%, 9/15/09 Caa2 125 110,000
--------------
GROUP TOTAL 4,025,237
--------------
RETAIL - FOOD & DRUG (0.6%)
Great Atlantic & Pacific
Tea Company, Inc.
Sr. Notes
9.125%, 12/15/11 B3 400 342,000
Herbalife International, Inc.
Gtd.
11.75%, 7/15/10 B2 500 572,500
Roundy's, Inc.
Series B, Gtd.
8.875%, 6/15/12 B2 200 213,000
(2) Stater Brothers Holdings,
Inc.
Sr. Notes
8.125%, 6/15/12 B1 150 151,313
--------------
GROUP TOTAL 1,278,813
--------------
RETAIL STORES (1.5%)
Asbury Automotive
Group Co.
Gtd.
9.00%, 6/15/12 B3 400 410,000
(1) Flooring America, Inc.
Series B, Gtd.
9.25%, 10/15/07 N/R 703 70
Michaels Stores, Inc.
Sr. Notes
9.25%, 7/1/09 Ba1 400 440,000
NBTY, Inc.
Series B, Sr. Sub. Notes
8.625%, 9/15/07 B1 400 408,000
Nebraska Book Co., Inc.
Sr. Sub. Notes
8.625%, 3/15/12 Caa1 500 492,500
PEP Boys-Manny
Moe & Jack
Notes
7.00%, 6/1/05 B2 800 822,000
PETCO Animal Supplies,
Inc.
Sr. Sub. Notes
10.75%, 11/1/11 B2 $ 67 $ 75,375
Perry Ellis International, Inc.
Series B, Sr. Sub. Notes
8.875%, 9/15/13 B3 250 259,375
United Auto Group, Inc.
Gtd.
9.625%, 3/15/12 B3 250 275,000
--------------
GROUP TOTAL 3,182,320
--------------
SATELLITE (0.6%)
Echostar DBS Corp.
Sr. Notes
9.125%, 1/15/09 Ba3 195 214,744
PanAmSat Corp.
Gtd.
8.50%, 2/1/12 Ba3 500 570,000
(1) Pegasus Communications
Corp.
Series B, Sr. Notes
12.50%, 8/1/07 Ca 1,000 490,000
(1) Pegasus Satellite
Communications, Inc.
Sr. Discount Notes
13.50%, 3/1/07 C 250 21,250
--------------
GROUP TOTAL 1,295,994
--------------
SECONDARY OIL & GAS PRODUCERS (2.9%)
Belden & Blake Corp.
Series B, Gtd.
9.875%, 6/15/07 Caa2 250 256,875
Chesapeake Energy Corp.
Sr. Notes
6.875%, 1/15/16 Ba3 852 834,960
Continental Resources, Inc.
Gtd. Sr. Sub. Notes
10.25%, 8/1/08 Caa1 925 959,688
Forest Oil Corp.
Sr. Notes
8.00%, 6/15/08 Ba3 900 963,000
Paramount Resources Ltd.
Yankee Sr. Notes
8.875%, 7/15/14 B3 500 501,250
Pemex Project Funding
Master Trust
Gtd.
8.50%, 2/15/08 Baa1 45 49,725
Plains E&P Co.
Series B, Gtd.
8.75%, 7/1/12 Ba3 300 328,500
Pogo Producing Co.
Series B, Sr. Sub. Notes
8.25%, 4/15/11 Ba3 550 605,000
Vintage Petroleum, Inc.
Sr. Sub. Notes
7.875%, 5/15/11 B1 700 721,000
</Table>
The accompanying notes are an integral part of the financial statements.
12
<Page>
<Table>
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
(2) Whiting Petroleum Corp.
Sr. Sub. Notes
7.25%, 5/1/12 B2 $ 300 $ 298,500
Wiser Oil Co.
Gtd.
9.50%, 5/15/07 Caa3 800 814,000
--------------
GROUP TOTAL 6,332,498
--------------
SERVICES (5.0%)
APCOA, Inc.
Gtd.
9.25%, 3/15/08 Caa3 377 341,185
Advanstar
Communications, Inc.
Secured
10.75%, 8/15/10 B3 400 444,500
American Color Graphics
Notes
10.00%, 6/15/10 B3 800 718,000
Brand Services, Inc.
Gtd.
12.00%, 10/15/12 B3 600 687,000
(2) Buhrmann U.S., Inc.
Sr. Sub. Notes
8.25%, 7/1/14 B2 250 250,625
Diamond Triumph
Auto Glass, Inc.
Gtd.
9.25%, 4/1/08 B3 500 477,500
Great Lakes Dredge & Dock
Co.
Sr. Sub. Notes
7.75%, 12/15/13 N/R 400 340,000
IESI Corp.
Gtd.
10.25%, 6/15/12 B3 500 547,500
Integrated Electrical
Services, Inc.
Series C, Gtd.
9.375%, 2/1/09 B2 625 648,438
Iron Mountain, Inc.:
Gtd.
8.625%, 4/1/13 B3 500 532,500
7.75%, 1/15/15 B3 250 249,375
La Petite Academy, Inc.
Series B, Gtd.
10.00%, 5/15/08 Ca 1,300 968,500
(2) Language Line Holdings,
Inc.
Sr. Sub. Notes
11.125%, 6/15/12 Caa1 250 255,000
Morton's Restaurant Group,
Inc.
Secured
7.50%, 7/1/10 B2 300 280,500
Muzak LLC/Muzak
Finance Corp.:
Gtd.
9.875%, 3/15/09 Caa2 650 503,750
Sr. Notes
10.00%, 2/15/09 Caa1 300 265,500
National Beef Packing
Sr. Notes
10.50%, 8/1/11 B2 300 319,500
Quintiles Transnational
Corp.
Sr. Sub. Notes
10.00%, 10/1/13 B3 $ 250 $ 248,750
Rent-Way, Inc.
Secured
11.875%, 6/15/10 B3 500 551,250
Salton, Inc.
Sr. Sub. Notes
12.25%, 4/15/08 Ca 750 585,000
United Rentals
North America, Inc.:
Sr. Sub. Notes
7.75%, 11/15/13 B2 800 760,000
7.00%, 2/15/14 B2 1,000 895,000
--------------
GROUP TOTAL 10,869,373
--------------
TECHNOLOGY (2.5%)
AMI Semiconductor, Inc.
Gtd.
10.75%, 2/1/13 B3 163 191,118
Amkor Technology, Inc.:
Global Sr. Notes
9.25%, 2/15/08 B1 350 367,500
Sr. Notes
7.75%, 5/15/13 B1 500 476,250
Ampex Corp.
Secured
12.00%, 8/15/08 N/R 1,758 263,700
Avaya, Inc.
Secured
11.125%, 4/1/09 B1 162 190,350
(2) Celestica, Inc.
Sr. Sub. Notes
7.875%, 7/1/11 Ba3 300 307,500
Danka Business Systems plc
Sr. Notes
11.00%, 6/15/10 B2 250 261,250
(2) DigitalNet Holdings, Inc.
Sr. Notes
9.00%, 7/15/10 B2 162 173,745
(2) Itron, Inc.
Sr. Sub. Notes
7.75%, 5/15/12 B2 250 251,875
Lucent Technologies, Inc.:
Notes
7.25%, 7/15/06 Caa1 340 350,200
5.50%, 11/15/08 Caa1 550 522,500
Sanmina-SCI Corp.
Gtd.
10.375%, 1/15/10 Ba2 850 977,500
Unisys Corp.
Sr. Notes
7.875%, 4/1/08 Ba1 250 256,875
(2) Viasystems, Inc.
Sr. Sub. Notes
10.50%, 1/15/11 Caa2 200 211,000
Xerox Corp.
Sr. Notes
7.625%, 6/15/13 B1 550 565,125
--------------
GROUP TOTAL 5,366,488
--------------
</Table>
The accompanying notes are an integral part of the financial statements.
13
<Page>
<Table>
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
TEXTILE/APPAREL/SHOE MANUFACTURING (1.1%)
BGF Industries, Inc.
Series B, Sr. Sub. Notes
10.25%, 1/15/09 Ca $ 250 $ 232,500
Levi Strauss & Co.:
Notes
7.00%, 11/1/06 Ca 515 483,456
Sr. Notes
12.25%, 12/15/12 Ca 735 727,650
(2) Phillips Van-Heusen
Corp.
Sr. Notes
7.25%, 2/15/11 B2 400 404,000
Tropical Sportswear
International Corp.
Series A, Gtd.
11.00%, 6/15/08 Caa1 700 451,500
--------------
GROUP TOTAL 2,299,106
--------------
TOWERS (0.5%)
American Towers, Inc.
Gtd.
7.25%, 12/1/11 B3 500 503,750
Crown Castle International
Corp.
Series B, Sr. Notes
7.50%, 12/1/13 B3 400 400,000
(3) SBA Telecommunications
Corp.
Sr. Discount Notes
0.00%, 12/15/11 Caa1 300 223,500
--------------
GROUP TOTAL 1,127,250
--------------
TRANSPORTATION (1.0%)
(2) Atlantic Express
Transportation Units
12.00%, 4/15/08 B3 500 497,500
(2) Horizon Lines LLC.
Notes
9.00%, 11/1/12 B3 300 304,500
Sea Containers Ltd.
Series B, Yankee Sr. Notes
10.75%, 10/15/06 B3 700 735,875
(2) Ship Finance International
Ltd
Sr. Notes
8.50%, 12/15/13 B2 750 727,500
--------------
GROUP TOTAL 2,265,375
--------------
UTILITIES (3.5%)
AES Corp.:
Sr. Notes
9.50%, 6/1/09 B2 48 51,540
7.75%, 3/1/14 B2 400 386,500
Allegheny Energy Supply
Company, LLC.
Notes
7.80%, 3/15/11 B3 400 393,000
Aquila, Inc.
Sr. Notes
7.625%, 11/15/09 Caa1 400 372,000
CMS Energy Corp.:
Sr. Notes
7.50%, 1/15/09 B3 $ 700 $ 700,000
(2) 7.75%, 8/1/10 B3 250 250,000
Calpine Canada Energy
Finance LLC.
Gtd.
8.50%, 5/1/08 Caa1 317 210,805
Calpine Corp.:
(2) Secured
8.50%, 7/15/10 N/R 850 707,625
Sr. Notes
7.75%, 4/15/09 Caa1 800 512,000
(2)(5) Calpine Generating Co.
Secured
7.35%, 4/1/10 B2 800 768,000
Cogentrix Energy, Inc.
Series B, Gtd.
8.75%, 10/15/08 Ba3 900 933,750
Edison Mission Energy
Sr. Notes
7.73%, 6/15/09 B2 500 488,750
(2) Midwest Generation LLC.
Secured
8.75%, 5/1/34 B1 400 406,000
(1) Mirant Americas
Generation LLC.
Sr. Notes
7.625%, 5/1/06 N/R 500 381,250
(1)(2) Mirant Corp.
Sr. Notes
7.40%, 7/15/04 N/R 300 169,500
(2) NRG Energy, Inc.
Secured
8.00%, 12/15/13 B2 300 304,500
(2) Sierra Pacific Resources
Sr. Notes
8.625%, 3/15/14 B2 300 294,000
TNP Enterprises, Inc.
Series B, Sr. Sub. Notes
10.25%, 4/1/10 B2 250 260,000
--------------
GROUP TOTAL 7,589,220
--------------
WIRELESS (3.6%)
(3) Alamosa PCS Holdings, Inc.
Gtd.
0.00%, 2/15/10 N/R 800 696,000
American Cellular Corp.
Series B, Sr. Notes
10.00%, 8/1/11 B3 300 260,250
Centennial Cellular/
Communications
Gtd.
10.125%, 6/15/13 Caa1 400 415,000
Dobson Communications
Corp.
Sr. Notes
8.875%, 10/1/13 Caa1 300 229,500
(2) IPCS Escrow Co.
Sr. Notes
11.50%, 5/1/12 B3 250 257,500
</Table>
The accompanying notes are an integral part of the financial statements.
14
<Page>
<Table>
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
IWO Holdings, Inc.
Gtd.
14.00%, 1/15/11 Ca $ 550 $ 255,750
(2) Millicom International
Cellular S.A.
Sr. Notes
10.00%, 12/1/13 B3 500 510,000
Nextel Communications,
Inc.
Sr. Notes
7.375%, 8/1/15 B2 250 253,750
Nextel Partners, Inc.
Sr. Notes
8.125%, 7/1/11 Caa1 750 768,750
PTC International
Finance II SA
Yankee Gtd.
11.25%, 12/1/09 Ba3 500 545,000
Rural Cellular Corp.
Sr. Sub. Notes
9.75%, 1/15/10 Caa2 1,450 1,323,125
Triton PCS, Inc.
Gtd.
8.50%, 6/1/13 B2 750 712,500
(2) U.S. Unwired, Inc.
Secured
10.00%, 6/15/12 Caa1 400 406,000
Ubiquitel Operating Co.:
(3) Gtd.
0.00%, 4/15/10 Caa3 500 497,500
(2) Sr. Notes
9.875%, 3/1/11 Caa1 150 150,750
Western Wireless Corp.
Sr. Notes
9.25%, 7/15/13 Caa1 500 517,500
--------------
GROUP TOTAL 7,798,875
--------------
TOTAL CORPORATE OBLIGATIONS
(Cost $179,200,123) 174,923,301
--------------
<Caption>
SHARES/
UNITS
- --------------------------------------------------------------------------------------------------
COMMON STOCKS (1.6%)
BROADCAST/OUTDOOR (0.1%)
(6) Equinix, Inc. 5,567 188,944
------------
CABLE (0.0%)
(6) NTL, Inc. 155 8,931
------------
CAPITAL GOODS (0.0%)
(2)(6) Motels of America, Inc. 750 3,000
------------
CONTAINERS (0.0%)
(4)(6) Continental AFA
Dispensing Co. 20,689 98,273
------------
<Caption>
SHARES/ VALUE
UNITS (NOTE A-1)
- --------------------------------------------------------------------------------------------------
FINANCE (0.5%)
(6) Aurora Foods, Inc. 703 $ 984,008
(4)(6)(7) Westfed Holdings, Inc.
Class B (acquired 9/20/88, cost $510) 16,893 169
--------------
GROUP TOTAL 984,177
--------------
FOOD PROCESSORS/BEVERAGE/BOTTLING (0.0%)
(2)(6) Specialty Foods Corp. 52,500 525
--------------
HEALTHCARE FACILITIES/SUPPLIES (0.1%)
(6) Magellan Health Services, Inc. 7,623 254,989
--------------
INDUSTRIAL (0.1%)
(4)(6) Doskocil Manufacturing Co. 36,000 126,000
(4)(6) First Wave Marine, Inc. 2,105 13,156
--------------
GROUP TOTAL 139,156
--------------
PAPER & FOREST PRODUCTS (0.0%)
(6) Digitalglobe, Inc. 69,987 69,987
--------------
RETAIL - FOOD & DRUG (0.0%)
(4)(6) Archibald Candy Corp. 2,030 50,750
--------------
RETAIL STORES (0.1%)
(4)(6) Safelite Glass Corp.
Class B 18,064 90,320
(4)(6) Safelite Realty Corp. 1,219 12,190
--------------
GROUP TOTAL 102,510
--------------
SECONDARY OIL & GAS PRODUCERS (0.4%)
(4)(6) Southwest Royalties, Inc.
Class A 16,736 753,270
--------------
SERVICES (0.0%)
(6) Cenveo, Inc. 21,306 62,427
(2)(6) Mail Well, Inc. 10,652 31,210
--------------
GROUP TOTAL 93,637
--------------
TEXTILE/APPAREL/SHOE MANUFACTURING (0.2%)
(6) Advanced Glassfiber Yarns 139 3,962
(4)(6) HCI Direct, Inc.
Class A 18,578 92,890
(6) Safety Components International, Inc. 26,759 359,240
--------------
GROUP TOTAL 456,092
--------------
WIRELESS (0.1%)
(6) Dobson Communications Corp.
Class A 57,927 188,842
--------------
TOTAL COMMON STOCKS
(Cost $4,861,355) 3,393,083
--------------
PREFERRED STOCKS (0.3%)
CABLE (0.1%)
(6) Adelphia Communications Corp.
13% Cum. Exchangeable Series B 7,500 106,875
(4)(6) DIVA Systems Corp.
Series D 56,913 0
--------------
GROUP TOTAL 106,875
--------------
</Table>
The accompanying notes are an integral part of the financial statements.
15
<Page>
<Table>
<Caption>
SHARES/ VALUE
UNITS (NOTE A-1)
- --------------------------------------------------------------------------------------------------
FINANCE (0.0%)
(4)(6)(7) Westfed Holdings, Inc.
Class A (acquired 9/20/88-
6/18/93, cost $4,815,472) 57,005 $ 14,251
--------------
RESTAURANTS (0.0%)
(4)(6)(8) AmeriKing, Inc.
13% Cum. Exchangeable 40,375 0
--------------
WIRELESS (0.2%)
Dobson Communications Corp.
6% Conv. preferred 900 97,313
(6)(8) Rural Cellular Corp.
11.375% Sr. Exchangeable 426 361,035
--------------
GROUP TOTAL 458,348
--------------
TOTAL PREFERRED STOCKS
(Cost $7,262,984) 579,474
--------------
WARRANTS (0.0%)
(6) Advanced Glassfiber Yarns
expiring 5/4/10 115 1
(4)(6) Carrier1 International S.A.
expiring 2/19/09 300 0
(6) Colt Telecom Group Plc
expiring 12/31/06 400 9,932
(6) Dayton Superior Corp.
expiring 6/15/09 1,250 13
(2)(6) Decrane Aircraft Holdings
expiring 9/30/08 800 8
(4)(6) DIVA Systems Corp.:
expiring 3/1/08 11,655 0
expiring 5/15/06 2,315 0
(6) Loral Space & Communications
expiring 12/27/06 6,290 63
(6) Mikohn Gaming Corp.
expiring 8/15/08 3,000 9
(6) NTL, Inc.
expiring 1/13/11 4 26
(6) Pegasus Communications Corp.
expiring 1/1/07 250 3
(2)(6) Pliant Corp.
expiring 6/1/10 747 93
(4)(6) Safelite Glass Corp.:
Class A expiring 9/29/06 44,271 443
Class B expiring 9/29/07 29,514 295
(6) Star Choice Communications, Inc.
expiring 12/5/05 16,212 60,459
(4)(6) Windsor Woodmont Black Hawk
expiring 3/15/10 100 0
TOTAL WARRANTS
(Cost $86,133) 71,345
--------------
TOTAL DOMESTIC SECURITIES
(Cost $191,410,595) 178,967,203
--------------
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
FOREIGN SECURITIES (14.3%)
CORPORATE OBLIGATIONS (0.2%)
GERMANY (0.2%)
(2) Kabel Deutschland GmbH
Sr. Notes
10.625%, 7/1/14 B3 USD $ 350 $ 361,375
--------------
MALAYSIA (0.0%)
(2) Petronas Capital, Ltd.
Gtd.
7.00%, 5/22/12 Baa1 USD 50 54,615
--------------
TOTAL CORPORATE OBLIGATIONS
(Cost $402,309) 415,990
--------------
GOVERNMENT OBLIGATIONS (14.1%)
ARGENTINA (0.1%)
(5) Bocon PRO 1
Bonds
2.67%, 4/1/07 Ca ARP 152 3,412
Republic of Argentina
Series 2031, Global Bonds
12.00%, 6/19/31 Ca USD 1,060 283,550
--------------
GROUP TOTAL 286,962
--------------
BELIZE (0.3%)
Government of Belize
Global Bonds
9.50%, 8/15/12 Ba3 USD 815 663,597
--------------
BRAZIL (3.0%)
Federal Republic of Brazil:
Series 20YR, Bonds
8.00%, 4/15/14 B2 USD 3,190 2,929,861
Series 30YR, Collateralized
2.0625%, 4/15/24 B2 USD 1,680 1,335,165
Unsubordinated
11.00%, 8/17/40 B2 USD 2,350 2,217,812
--------------
GROUP TOTAL 6,482,838
--------------
BULGARIA (0.4%)
Republic of Bulgaria
Series RIAB, Bonds
2.00%, 7/28/11 Ba2 USD 940 940,263
--------------
COLOMBIA (0.5%)
Republic of Colombia:
Global Bonds
11.75%, 2/25/20 Ba2 USD 715 784,712
Series EMTN, Notes
11.50%, 5/31/11 Ba2 EUR 150 206,353
--------------
GROUP TOTAL 991,065
--------------
</Table>
The accompanying notes are an integral part of the financial statements.
16
<Page>
<Table>
<Caption>
FACE
MOODY'S AMOUNT VALUE
RATINGS (000) (NOTE A-1)
- --------------------------------------------------------------------------------------------------
GRENADA (0.3%)
Government of Grenada
Series REGS,
Unsubordinated
9.375%, 6/30/12 N/R USD $ 660 $ 706,878
--------------
MEXICO (2.7%)
United Mexican States:
Bonds
8.25%, 2/24/09 Baa2 USD 882 1,217,392
Series MTN, Notes
6.375%, 1/16/13 Baa2 USD 3,390 3,391,695
Series REGS, Sr.
Unsub. Notes
7.50%, 3/8/10 Baa2 EUR 935 1,266,463
--------------
GROUP TOTAL 5,875,550
--------------
PANAMA (0.2%)
Republic of Panama
Bonds
9.375%, 1/16/23 Ba1 USD 375 384,375
--------------
PHILIPPINES (0.6%)
Republic of Philippines
Bonds
8.375%, 2/15/11 Ba2 USD 1,315 1,305,138
--------------
RUSSIA (3.5%)
Ministry Finance of Russia:
Series V, Debentures
3.00%, 5/14/08 Ba2 USD 5,255 4,612,666
Series VI, Debentures
3.00%, 5/14/06 Ba1 USD 180 173,528
Russian Federation:
Series REGS,
Unsubordinated
5.00%, 3/31/30 Baa3 USD 2,030 1,858,465
Unsubordinated
11.00%, 7/24/18 Baa3 USD 785 993,025
--------------
GROUP TOTAL 7,637,684
--------------
TURKEY (0.8%)
Republic of Turkey:
Notes
11.50%, 1/23/12 B1 USD 405 455,625
Sr. Unsub. Notes
11.875%, 1/15/30 B1 USD 1,000 1,186,250
--------------
GROUP TOTAL 1,641,875
--------------
URUGUAY (0.3%)
Republic of Uruguay:
Notes
7.25%, 2/15/11 B3 USD 510 418,200
7.50%, 3/15/15 B3 USD 340 251,600
--------------
GROUP TOTAL 669,800
--------------
VENEZUELA (1.4%)
Republic of Venezuela:
Bonds
9.25%, 9/15/27 Caa1 USD $ 650 $ 550,063
Notes
10.75%, 9/19/13 Caa1 USD 1,930 1,905,875
Sr. Unsub.
11.00%, 3/5/08 Caa1 EUR 360 460,575
--------------
GROUP TOTAL 2,916,513
--------------
TOTAL GOVERNMENT OBLIGATIONS
(Cost $31,071,907) 30,502,538
--------------
TOTAL FOREIGN SECURITIES
(Cost $31,474,216) 30,918,528
--------------
TIME DEPOSIT (1.1%)
Bank One
(Grand Cayman)
0.52%, 7/1/04
(Cost $2,482,000) 2,482,000
--------------
TOTAL INVESTMENTS (98.4%)
(Cost $225,366,811) 212,367,731
--------------
OTHER ASSETS IN EXCESS OF LIABILITIES (1.6%)
3,391,998
--------------
NET ASSETS (100%)
Applicable to 49,895,588 issued and outstanding
$.001 par value shares (authorized 100,000,000
shares) $ 215,759,729
==============
</Table>
N/R--Not Rated
ARP--Argentine Peso
EUR--Euro Dollar
(1) Defaulted security.
(2) 144A Security. Certain conditions for public sale may exist. Total market
value of 144A securities owned at June 30, 2004 was $35,419,735 or 16.42% of
net assets.
(3) Step Bond--Coupon rate is low or zero for an initial period and then
increases to a higher coupon rate thereafter. Maturity date disclosed is the
ultimate maturity.
(4) Not readily marketable security; security is valued at fair value as
determined in good faith by the Board of Directors.
(5) Floating Rate--The interest rate changes on these instruments based upon a
designated base rate. The rates shown are those in effect at June 30, 2004.
(6) Non-income producing security.
(7) Restricted as to private and public resale. Total cost of restricted
securities at June 30, 2004 aggregated $4,815,982. Total market value of
restricted securities owned at June 30, 2004 was $14,420 or 0.01% of net
assets.
(8) Payment-in-kind preferred stocks. Market value includes accrued dividend.
The accompanying notes are an integral part of the financial statements.
17
<Page>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
<Table>
<Caption>
JUNE 30, 2004
- --------------------------------------------------------------------------------
ASSETS:
Investments at Value
(Cost $225,366,811) (Note 1-A) $ 212,367,731
Receivables:
Receivable for Investments Sold 709,736
Interest Receivable (Note 1-B) 4,599,267
Other Assets 35,685
- --------------------------------------------------------------------------------
Total Assets 217,712,419
- --------------------------------------------------------------------------------
LIABILITIES:
Investments Purchased 1,601,632
Unrealized Depreciation on Forward
Foreign Currency Contracts
(Note 1-H) 645
Investment Advisory Fees (Note 2) 257,799
Shareholders' Reports 35,687
Administrative Fees (Note 2) 20,037
Audit Fees 12,996
Legal Fees 11,475
Shareholders' Servicing Fees 4,210
Custodian Fees 4,207
Directors' Fees 4,002
- --------------------------------------------------------------------------------
Total Liabilities 1,952,690
- --------------------------------------------------------------------------------
NET ASSETS $ 215,759,729
===============
NET ASSETS CONSIST OF:
Capital Shares at $.001 Par Value $ 49,896
Capital Paid in Excess of Par Value 391,475,870
Distributions in Excess of Net
Investment Income (5,556,706)
Accumulated Net Realized Loss on
Investments and Foreign Currency
Contracts (157,209,997)
Unrealized Depreciation on
Investments, Foreign Currency
Contracts and Translations (12,999,334)
- --------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO 49,895,588 ISSUED
AND OUTSTANDING SHARES (AUTHORIZED
100,000,000 SHARES) $ 215,759,729
===============
NET ASSET VALUE PER SHARE $ 4.32
MARKET PRICE PER SHARE $ 4.16
================================================================================
</Table>
STATEMENT OF OPERATIONS (UNAUDITED)
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30, 2004
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest (Net of foreign taxes withheld
of $2,114) (Note 1-B) $ 9,805,187
Dividends (Note 1-B) 4,821
- --------------------------------------------------------------------------------
Total Income 9,810,008
- --------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees (Note 2) 533,029
Administrative Fees (Note 2) 53,303
Custodian Fees 46,709
Shareholders' Reports 36,438
Directors' Fees and Expenses 35,458
Legal Fees 30,090
Shareholders' Servicing Fees 29,291
Miscellaneous 22,639
Audit Fees 20,712
NYSE Fees 12,156
- --------------------------------------------------------------------------------
Total Expenses 819,825
- --------------------------------------------------------------------------------
Net Investment Income 8,990,183
- --------------------------------------------------------------------------------
Net Realized Gain on Investments and
Foreign Currency (Note 1-B) 1,001,083
- --------------------------------------------------------------------------------
CHANGE IN UNREALIZED DEPRECIATION
ON INVESTMENTS, FOREIGN CURRENCY
CONTRACTS AND TRANSLATIONS (3,616,968)
- --------------------------------------------------------------------------------
Net Realized Loss and Change in
Unrealized Appreciation (2,615,885)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 6,374,298
================================================================================
</Table>
The accompanying notes are an integral part of the financial statements.
18
<Page>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
SIX MONTHS
ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net Investment Income $ 8,990,183 $ 18,352,767
Net Realized Gain (Loss) on Investments and Foreign Currency 1,001,083 (5,436,579)
Change in Unrealized Appreciation (Depreciation) of Investments,
Foreign Currency Contract and Translations (3,616,968) 34,311,753
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 6,374,298 47,227,941
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income (10,478,074) (21,280,026)
Return of Capital -- (1,173,023)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions (10,478,074) (22,453,049)
- ---------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (4,103,776) 24,774,892
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 219,863,505 195,088,613
- ---------------------------------------------------------------------------------------------------------------------------
End of Period (including distributions in excess of net investment income of
($5,556,706) and ($4,068,815), respectively.) $ 215,759,729 $ 219,863,505
===========================================================================================================================
</Table>
The accompanying notes are an integral part of the financial statements.
19
<Page>
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
PER SHARE OPERATING JUNE 30, 2004 ------------------------------------------------------------------------------
PERFORMANCE: (UNAUDITED) 2003 2002 2001(2) 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $ 4.41 $ 3.91 $ 4.74 $ 5.70 $ 7.34 $ 7.77
- ---------------------------------------------------------------------------------------------------------------------------------
Offering Costs -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net Investment Income 0.18 0.37 0.42 0.61+ 0.67 0.75
Net Realized and Unrealized
Gain (Loss) on Investments
and Futures Contracts (0.06) 0.58 (0.55) (0.85) (1.55) (0.46)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.12 0.95 (0.13) (0.24) (0.88) 0.29
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income (0.21) (0.43) (0.62) (0.72) (0.76) (0.72)
Return of Capital -- (0.02) (0.08) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.21) (0.45) (0.70) (0.72) (0.76) (0.72)
- ---------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Asset Value due to
Shares Issued through
Rights Offering -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 4.32 $ 4.41 $ 3.91 $ 4.74 $ 5.70 $ 7.34
=================================================================================================================================
PER SHARE MARKET VALUE, END OF YEAR $ 4.16 $ 4.50 $ 3.88 $ 4.98 $ 5.56 $ 6.06
=================================================================================================================================
TOTAL INVESTMENT RETURN:
Net Asset Value (1) 2.67% 24.59% (5.26)% (6.04)% (12.37)% 4.50%
Market Value (3.11)% 28.11% (10.52)% 1.15% 3.55% (11.32)%
=================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
=================================================================================================================================
Net Assets, End of Year (Thousands) $ 215,760 $ 219,864 $ 195,089 $ 236,652 $ 197,817 $ 254,857
Ratio of Expenses to Average Net
Assets Including Expense Offsets 0.76%** 0.78% 0.79% 1.07% 0.78% 0.78%
Ratio of Expenses to Average
Net Assets 0.76%** 0.78% 0.79% 1.07% 0.78% 0.78%
Ratio of Net Investment Income to
Average Net Assets 8.28%** 8.83% 9.93% 11.66% 10.10% 9.90%
Portfolio Turnover Rate 37.1% 77.8% 61.1% 50.1%(3) 39.1% 43.5%
- ---------------------------------------------------------------------------------------------------------------------------------
<Caption>
YEAR ENDED DECEMBER 31,
PER SHARE OPERATING --------------------------------------------------------------------------
PERFORMANCE: 1998 1997 1996 1995~ 1994
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $ 8.44 $ 8.12 $ 8.63 $ 8.05 $ 9.00
- ------------------------------------------------------------------------------------------------------------------
Offering Costs -- -- (0.02) -- --
- ------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net Investment Income 0.71 0.69 0.75 0.86 0.83
Net Realized and Unrealized
Gain (Loss) on Investments
and Futures Contracts (0.66) 0.39 0.18 0.48 (1.06)
- ------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.05 1.08 0.93 1.34 (0.23)
- ------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income (0.72) (0.76) (0.90) (0.76) (0.72)
Return of Capital -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.72) (0.76) (0.90) (0.76) (0.72)
- ------------------------------------------------------------------------------------------------------------------
Decrease in Net Asset Value due to
Shares Issued through
Rights Offering -- -- (0.52) -- --
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 7.77 $ 8.44 $ 8.12 $ 8.63 $ 8.05
==================================================================================================================
PER SHARE MARKET VALUE, END OF YEAR $ 7.56 $ 8.75 $ 7.63 $ 7.88 $ 7.00
==================================================================================================================
TOTAL INVESTMENT RETURN:
Net Asset Value (1) 0.47% 14.03% 10.59%* 17.41% (2.67)%
Market Value (5.68)% 25.90% 10.05%* 24.34% (9.48)%
==================================================================================================================
RATIOS AND SUPPLEMENTAL DATA:
==================================================================================================================
Net Assets, End of Year (Thousands) $ 269,507 $ 291,959 $ 280,634 $ 210,441 $ 196,379
Ratio of Expenses to Average Net
Assets Including Expense Offsets 0.81% 0.84% 0.94% 0.92% 0.83%
Ratio of Expenses to Average
Net Assets 0.81% 0.84% 0.95% 0.92% 0.83%
Ratio of Net Investment Income to
Average Net Assets 8.59% 8.47% 9.23% 10.22% 9.75%
Portfolio Turnover Rate 84.7% 97.7% 81.0% 44.1% 70.6%
- ------------------------------------------------------------------------------------------------------------------
</Table>
~ Credit Suisse Asset Management, LLC, formerly known as BEA Associates
replaced CS First Boston Investment Management as the Fund's investment
adviser effective June 13, 1995.
* Adjusted for Rights Offering.
** Annualized.
+ Calculated using the average share method.
(1) Total investment return based on per share net asset value reflects the
effects of change in net asset value on the performance of the Fund during
each year, and assumes dividends and capital gains distributions, if any,
were reinvested. These percentages are not an indication of the performance
of a shareholder's investment in the Fund based on market value, due to
differences between the market price of the stock and the net asset value
of the Fund.
(2) As required, effective January 1, 2001 the Fund has adopted provisions of
AICPA Audit and Accounting Guide for Investment Companies and has begun
amortizing premium on debt securities. The effect of this change for the
year ended December 31, 2001 was a decrease to net investment income per
share by $0.004 and an increase to net realized and unrealized gains and
losses per share by $0.004 and a decrease to the net ratio of net
investment income to average net assets from 11.73% to 11.66%. Per share
ratios and supplemental data for prior periods have not been restated to
reflect this change.
(3) Due to the realignment of the Fund's portfolio in connection with the
combination with Credit Suisse Strategic Global Income Fund, Inc., the cost
of purchases of $30,040,944 and proceeds from sales of $37,801,151 have
been excluded from the Portfolio Turnover calculation.
Note: Current Year permanent book-tax differences, if any, are not included
in the calculation of net investment income per share.
The accompanying notes are an integral part of the financial statements.
20
<Page>
CREDIT SUISSE ASSET MANAGEMENT INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Credit Suisse Asset Management Income Fund, Inc. (the "Fund") was incorporated
on February 11, 1987 and is registered as a diversified, closed-end investment
company under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek current income through investment primarily in
debt securities.
On May 14, 2001, the Fund acquired substantially all of the assets and assumed
the liabilities of Credit Suisse Asset Management Strategic Global Income Fund,
Inc. ("CGF"). Pursuant to the terms of the agreement governing the acquisition,
the CGF shareholders, for each share of common stock of CGF held, became
entitled to receive an equivalent dollar amount of full shares of common stock
of the Fund. Based on the net asset values of the Fund and CGF as of May 11,
2001 ($5.49 and $6.96, respectively), the conversion ratio was 1.2681 shares of
the Fund for each share of CGF. Cash was paid in lieu of fractional shares. Net
assets of the Fund and CGF as of the acquisition date were $190,522,544 and
$83,383,448, including unrealized depreciation of $71,252,968 and $16,668,823,
respectively. Total net assets immediately after the acquisition were
$273,905,992. Based upon the opinion of Fund counsel, the acquisition qualified
as a tax-free reorganization for Federal income tax purposes, with no gain or
loss recognized by the Fund, CGF or their shareholders.
A. SECURITY VALUATION: The net asset value of the Fund is determined daily as of
the close of regular trading on the New York Stock Exchange, Inc. (the
"Exchange") on each day the Exchange is open for business. Debt securities with
a remaining maturity greater then 60 days are valued in accordance with the
price supplied by a pricing service, which may use a matrix, formula or other
objective method that takes into consideration market indices, yield curves and
other specific adjustments. Debt obligations that will mature in 60 days or less
are valued on the basis of amortized cost, which approximates market value,
unless it is determined that using this method would not represent fair value.
The Fund's equity investments are valued at market value, which is generally
determined using the closing price on the exchange or market on which the
security is primarily traded at the time of valuation ("Valuation Time"). If no
sales are reported, equity investments are generally valued at the most recent
bid quotation as of the Valuation Time or at the lowest asked quotation in the
case of a short sale of securities. Securities and other assets for which market
quotations are not readily available, or whose values have been materially
affected by events occurring before the Fund's Valuation Time but after the
close of the securities' primary markets, are valued at fair value as determined
in good faith by, or under the direction of, the Board of Directors under
procedures established by the Board of Directors. The Fund may utilize a service
provided by an independent third party which has been approved by the Board of
Directors to fair value certain securities.
The Fund may invest up to 10% of its total assets in securities which are not
readily marketable, including those which are restricted as to disposition under
securities law ("restricted securities") (excludes 144A securities). These
securities are valued pursuant to the valuation procedures noted above.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
accounted for on a trade date basis. Interest income is accrued as earned. The
Fund amortizes premium and accretes discount using the effective yield method.
Dividends are recorded on the ex-dividend date.
The costs of investments sold is determined by use of the specific
identification method for both financial reporting and income tax purposes.
Discount or premium on mortgage backed securities are recorded upon receipt of
principal payments on the underlying mortgage pools.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income are declared and paid monthly. Distributions of net realized capital
gains, if any, are declared and paid at least annually. However, to the extent
that a net realized capital gain can be reduced by a capital loss carryover,
such gain will not be distributed. Income and capital gains distributions are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles in the United States of America
("GAAP").
D. FEDERAL INCOME TAXES: No provision is made for federal taxes as it is the
Fund's intention to continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code of
1986, as amended, and make the requisite distributions to its shareholders which
will be sufficient to relieve it from federal income and excise taxes.
E. USE OF ESTIMATES: The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts
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of revenues and expenses during the reporting period. Actual results could
differ from these estimates.
F. SHORT-TERM INVESTMENTS: The Fund, together with other funds/portfolios
advised by Credit Suisse Asset Management, LLC ("CSAM"), an indirect
wholly-owned subsidiary of Credit Suisse Group, sweeps available cash into
either a short-term variable rate time deposit issued by Brown Brothers Harriman
& Co. ("BBH&Co.") Grand Cayman branch, the Fund's custodian, or with other
client approved, and highly rated banks. The short-term time deposit issued by
BBH&Co. is a variable rate account classified as a short-term investment.
G. DELAYED DELIVERY COMMITMENTS: The Fund may purchase or sell securities on a
when-issued or forward commitment basis. Payment and delivery may take place a
month or more after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for are
fixed at the time the transaction is negotiated.
H. FUTURES CONTRACTS: The Fund may enter into futures contracts to the extent
permitted by its investment policies and objectives. Upon entering into a
futures contract, the Fund is required to deposit cash or pledge U.S. Government
securities as initial margin. Subsequent payments, which are dependent on the
daily fluctuations in the value of the underlying instrument, are made or
received by the Fund each day (daily variation margin) and are recorded as
unrealized gains or losses until the contracts are closed. When the contracts
are closed, the Fund records a realized gain or loss equal to the difference
between the proceeds from (or cost of) the closing transactions and the Fund's
basis in the contracts. Risks of entering into futures contracts for hedging
purposes include the possibility that a change in the value of the contracts may
not correlate with the changes in the value of the underlying instruments. In
addition, the purchase of futures contracts involves the risk that the Fund
could lose more than the original margin deposit and subsequent payments
required for a futures transaction. At June 30, 2004, the Fund had no open
futures contracts.
I. FORWARD FOREIGN CURRENCY CONTRACTS: The Fund may enter into forward foreign
currency contracts for the purchase or sale of a specific foreign currency at a
fixed price on a future date. Risks may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency.
The Fund will enter into forward foreign currency contracts primarily for
hedging purposes. Forward foreign currency contracts are adjusted by the daily
exchange rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until the contract settlement
date, or an offsetting position is entered into. At June 30, 2004, the Fund had
the following open forward foreign currency contract:
<Table>
<Caption>
FOREIGN
FORWARD CURRENCY
FOREIGN TO BE UNREALIZED
CURRENCY EXPIRATION PURCHASED/ CONTRACT CONTRACT GAIN/
CONTRACTS DATE (SOLD) AMOUNT VALUE (LOSS)
- ----------------- ---------- ----------- ------------- ------------ ----------
European Economic
Unit 9/30/04 (2,580,000) $ (3,134,287) $ (3,134,932) $ (645)
</Table>
J. OTHER: The Fund may invest in securities of foreign countries and governments
which involve certain risks in addition to those inherent in domestic
investments. Such risks generally include, among others currency risks
(fluctuations in currency exchange rates), information risk (key information may
be inaccurate or unavailable) and political risk (expropriation, nationalization
or the imposition of capital or currency controls or punitive taxes). Other
risks of investing in foreign securities include liquidity and valuation risks.
The Fund may be subject to taxes imposed by countries in which it invests with
respect to its investments in issuers existing or operating in such countries.
Such taxes are generally based on income earned or repatriated and capital gains
realized on the sale of such investments. The Fund accrues such taxes when the
related income or gains are earned.
The Fund's investments in securities of issuers located in less developed
countries considered to be "emerging markets" involve risks in addition to those
generally applicable to foreign securities. Focusing on emerging (less
developed) markets involves higher levels of risk, including increased currency,
information, liquidity, market, political and valuation risks. Deficiencies in
regulatory oversight, market infrastructure, shareholder protections and company
laws could expose the Fund to operational and other risks as well. Some
countries may have restrictions that could limit the Fund's access to attractive
investment opportunities. Additionally, emerging markets often face serious
economic problems (such as high external debt, inflation and unemployment) that
could subject the portfolio to increased volatility or substantial declines in
value.
Lower-rated debt securities (commonly known as "junk bonds") possess speculative
characteristics and are subject to greater market fluctuations and risk of lost
income and principal than higher-rated debt securities for
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a variety of reasons. Also, during an economic downturn or substantial period of
rising interest rates, highly leveraged issuers may experience financial stress
which would adversely effect their ability to service their principal and
interest payment obligations, to meet projected business goals and to obtain
additional financing.
In addition, periods of economic uncertainty and changes can be expected to
result in increased volatility of market prices of lower-rated debt securities
and (to the extent a Fund invests in junk bonds) the Fund's net asset value.
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
CSAM serves as investment adviser for the Fund. For its investment advisory
services, CSAM is entitled to receive a fee from the Fund at a computed weekly
and paid quarterly rate as follows: 0.50% of the lower of the weekly stock price
(market value) of the Fund's outstanding shares or its average weekly net
assets.
For the six months ended June 30, 2004, investment advisory fees earned were
$533,029.
BBH&Co., provides administrative and custodial services to the Fund. Under the
Administration and Custody Agreements, BBH&Co. is paid a fee based on average
net assets.
For the six months ended June 30, 2004, BBH&Co. earned administrative service
fees (including out-of-pocket expenses) of $53,303.
Fleet National Bank provides transfer agent services to the Fund. Under the
Transfer Agent Agreement, Fleet National Bank is paid a fee based on the number
of accounts in the Fund per year. In addition, the Fund is charged certain
out-of-pocket expenses by Fleet National Bank.
Merrill Corporation ("Merrill"), an affiliate of CSAM, has been engaged by the
Fund to provide certain financial printing services. For the six months ended
June 30, 2004, Merrill was paid $38,178 for its services to the Fund.
NOTE 3. LINE OF CREDIT
The Fund, together with other funds/portfolios advised by CSAM (collectively,
the "Participating Funds"), participates in a $75 million committed, unsecured
line of credit facility ("Credit Facility") with Deutsche Bank, A.G. as
administrative agent and syndication agent and State Street Bank and Trust
Company as operations agent for temporary or emergency purposes. Under the terms
of the Credit Facility, the Participating Funds pay an aggregate commitment fee
at a rate of 0.10% per annum on the average unused amount of the Credit
Facility, which is allocated among the Participating Funds in such manner as is
determined by the governing Boards of the Participating Funds. In addition, the
Participating Funds pay interest on borrowings at the Federal Funds rate plus
0.50%. At June 30, 2004 and during the six months ended June 30, 2004, the Fund
had no borrowings under the Credit Facility.
NOTE 4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2004, there were no U.S. Government and Agency
Obligations, purchases and sales of investment securities (excluding short-term
investments) were as follows:
<Table>
<Caption>
INVESTMENT SECURITIES
---------------------
Purchases $ 78,769,571
Sales 79,374,859
</Table>
NOTE 5. FEDERAL INCOME TAXES
At June 30, 2004, the identified cost for federal income tax purposes, as well
as the gross unrealized appreciation from investments for those securities
having an excess of value over cost, gross unrealized depreciation from
investments for those securities having an excess of cost over value and the net
unrealized appreciation (depreciation) from investments were as follows;
$225,366,811, 13,074,219, (26,073,299) and $(12,999,080), respectively.
NOTE 6. OTHER
The Fund issued to its shareholders of record as of the close of business on
September 27, 1996 transferable Rights to subscribe for up to an aggregate of
10,160,570 shares of Common Stock of the Fund at a rate of one share of Common
Stock for three Rights held at the subscription price of $7.15 per share. During
October 1996, the Fund issued a total of 10,160,570 shares of Common Stock on
exercise of such Rights. Rights' offering costs of $550,000 were charged
directly against the proceeds of the Offering.
NOTE 7. CONTINGENCIES
In the normal course of business, the Fund may provide general indemnifications
pursuant to certain contracts and organizational documents. The Fund's maximum
exposure under these arrangements is dependent on future claims that may be made
against the Fund and, therefore, cannot be estimated; however, based on
experience, the risk of loss from such claims is considered remote.
23
<Page>
DESCRIPTION OF INVESTLINK(SM) PROGRAM
The InvestLink(SM) Program is sponsored and administered by Fleet National Bank,
not by Credit Suisse Asset Management Income Fund, Inc., (the "Fund"). Fleet
National Bank will act as program administrator (the "Program Administrator") of
the InvestLink(SM) Program (the "Program"). The purpose of the Program is to
provide interested investors with a simple and convenient way to invest funds
and reinvest dividends in shares of the Fund's common stock ("Shares") at
prevailing prices, with reduced brokerage commissions and fees.
An interested investor may join the Program at any time. Purchases of Shares
with funds from a participant's cash payment or automatic account deduction will
begin on the next day on which funds are invested. If a participant selects the
dividend reinvestment option, automatic investment of dividends generally will
begin with the next dividend payable after the Program Administrator receives
his enrollment form. Once in the Program, a person will remain a participant
until he terminates his participation or sells all Shares held in his Program
account, or his account is terminated by the Program Administrator. A
participant may change his investment options at any time by requesting a new
enrollment form and returning it to the Program Administrator.
A participant will be assessed certain charges in connection with his
participation in the Program. First-time investors will be subject to an initial
service charge which will be deducted from their initial cash deposit. All
optional cash deposit investments will be subject to a service charge. Sales
processed through the Program will have a service fee deducted from the net
proceeds, after brokerage commissions. In addition to the transaction charges
outlined above, participants will be assessed per share processing fees (which
include brokerage commissions.) Participants will not be charged any fee for
reinvesting dividends.
The number of Shares to be purchased for a participant depends on the amount of
his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
Program Administrator uses dividends and funds of participants to purchase
Shares of the Fund's common stock in the open market. Such purchases will be
made by participating brokers as agent for the participants using normal cash
settlement practices. All Shares purchased through the Program will be allocated
to participants as of the settlement date, which is usually three business days
from the purchase date. In all cases, transaction processing will occur within
30 days of the receipt of funds, except where temporary curtailment or
suspension of purchases is necessary to comply with applicable provisions of the
Federal Securities laws or when unusual market conditions make prudent
investment impracticable. In the event the Program Administrator is unable to
purchase Shares within 30 days of the receipt of funds, such funds will be
returned to the participants.
The average price of all Shares purchased by the Program Administrator with all
funds received during the time period from two business days preceding any
investment date up to the second business day preceding the next investment date
shall be the price per share allocable to a participant in connection with the
Shares purchased for his account with his funds or dividends received by the
Program Administrator during such time period. The average price of all Shares
sold by the Program Administrator pursuant to sell orders received during such
time period shall be the price per share allocable to a participant in
connection with the Shares sold for his account pursuant to his sell orders
received by the Program Administrator during such time period.
Fleet National Bank, as Program Administrator administers the Program for
participants, keeps records, sends statements of account to participants and
performs other duties relating to the Program. Each participant in the Program
will receive a statement of his account following each purchase of Shares. The
statements will also show the amount of dividends credited to such participant's
account (if applicable), as well as fees paid by the participant. In addition,
each participant will receive copies of the Fund's annual and semi-annual
reports to shareholders, proxy statements and, if applicable, dividend income
information for tax reporting purposes.
If the Fund is paying dividends on the Shares, a participant will receive
dividends through the Program for all Shares held on the dividend record date on
the basis of full and fractional Shares held in his account, and for all other
Shares of the Fund registered in his name. The Program Administrator will send
checks to the participants for the amounts of their dividends that are not to be
automatically reinvested at no cost to the participants.
Shares of the Fund purchased under the Program will be registered in the name of
the accounts of the respective participants. Unless requested, the Fund will not
issue to participants certificates for Shares of the Fund purchased under the
Program. The Program Administrator will hold the Shares in book-entry form until
a Program participant chooses to withdraw his Shares or terminate his
participation in the Program. The number of Shares purchased for a participant's
account under the Program
24
<Page>
will be shown on his statement of account. This feature protects against loss,
theft or destruction of stock certificates.
A participant may withdraw all or a portion of the Shares from his Program
account by notifying the Program Administrator. After receipt of a participant's
request, the Program Administrator will issue to such participant certificates
for the whole Shares of the Fund so withdrawn or, if requested by the
participant, sell the Shares for him and send him the proceeds, less applicable
brokerage commissions, fees, and transfer taxes, if any. If a participant
withdraws all full and fractional Shares in his Program account, his
participation in the Program will be terminated by the Program Administrator. In
no case will certificates for fractional Shares be issued. The Program
Administrator will convert any fractional Shares held by a participant at the
time of his withdrawal to cash.
Participation in any rights offering, dividend distribution or stock split will
be based upon both the Shares of the Fund registered in participants' names and
the Shares (including fractional Shares) credited to participants' Program
accounts. Any stock dividend or Shares resulting from stock splits with respect
to Shares of the Fund, both full and fractional, which participants hold in
their Program accounts and with respect to all Shares registered in their names
will be automatically credited to their accounts.
All Shares of the Fund (including any fractional share) credited to his account
under the Program will be voted as the participant directs. The participants
will be sent the proxy materials for the annual meetings of shareholders. When a
participant returns an executed proxy, all of such shares will be voted as
indicated. A participant may also elect to vote his Shares in person at the
Shareholders' meeting.
A participant will receive tax information annually for his personal records and
to help him prepare his U.S. federal income tax return. The automatic
reinvestment of dividends does not relieve him of any income tax which may be
payable on dividends. For further information as to tax consequences of
participation in the Program, participants should consult with their own tax
advisors.
The Program Administrator in administering the Program will not be liable for
any act done in good faith or for any good faith omission to act. However, the
Program Administrator will be liable for loss or damage due to error caused by
its negligence, bad faith or willful misconduct. Shares held in custody by the
Program Administrator are not subject to protection under the Securities
Investors Protection Act of 1970.
The participant should recognize that neither the Fund nor the Program
Administrator can provide any assurance of a profit or protection against loss
on any Shares purchased under the program. A participant's investment in Shares
held in his Program account is no different than his investment in directly held
Shares in this regard. The participant bears the risk of loss and the benefits
of gain from market price changes with respect to all his Shares. Neither the
Fund nor the Program Administrator can guarantee that Shares purchased under the
Program will, at any particular time, be worth more or less than their purchase
price. Each participant must make an independent investment decision based on
his own judgement and research.
While the Program Administrator hopes to continue the Program indefinitely, the
Program Administrator reserves the right to suspend or terminate the Program at
any time. It also reserves the right to make modifications to the Program.
Participants will be notified of any such suspension, termination or
modification in accordance with the terms and conditions of the Program. The
Program Administrator also reserves the right to terminate any participant's
participation in the Program at any time. Any question of interpretation arising
under the Program will be determined in good faith by the Program Administrator
and any such good faith determination will be final.
Any interested investor may participate in the Program. To participate in the
Program, an investor who is not already a registered owner of the Shares must
make an initial investment of at least $250.00. All other cash payments or bank
account deductions must be at least $100.00, up to a maximum of $100,000.00
annually. An interested investor may join the Program by reading the Program
description, completing and signing the enrollment form and returning it to the
Program Administrator. The enrollment form and information relating to the
Program (including terms and conditions) may be obtained by calling the Program
Administrator at one of the following telephone numbers: First Time Investors
(888) 697-8026. Current Shareholders (800) 730-6001. All correspondence
regarding the Program should be directed to: Fleet National Bank, InvestLink
Program, P.O. 43010, Providence, RI 02940-3010.
25
<Page>
GENERAL INFORMATION
The Fund is organized as a Maryland corporation. On July 27, 2001 the Fund's
Board of Directors adopted Articles Supplementary to the Fund's Articles of
Incorporation that are consistent with Title 3, Subtitle 8 of Maryland's General
Corporate Law ("MGCL"). The Articles Supplementary provide that: (1) the Board
be divided into three classes with staggered terms that expire at the 2004,
2005, and 2006 annual meetings, respectively: Class I--consisting of two current
directors, James S. Pasman, Jr. and William W. Priest, Jr., Class II--consisting
of one current director, Lawrence J. Fox, and Class III--consisting of one
current director, Enrique R. Arzac; (2) Directors may only be removed for cause
by a two-thirds vote of shareholders; and (3) the Directors can set the numbers
of Directors and fill Board vacancies for the remainder of the class term
(whether or not the term extends beyond the next annual meeting of
shareholders). In addition, the Board adopted corresponding amendments to the
Fund's By-Laws. This modification was made to more closely align the Fund's
corporate governance structure with that of Credit Suisse High Yield Bond Fund,
another closed-end registered investment management company whose Board of
Trustees comprises substantially the same individuals who serve as Directors of
the Fund. The Fund's Articles and By-Laws are on file with the SEC and are
accessible through the SEC's website (www.sec.gov) or may be obtained from the
Secretary of the Fund upon request.
SHAREHOLDER MEETING RESULTS
On April 22, 2004, the Annual Meeting of Shareholders of Credit Suisse Income
Fund the Fund was held and the following matter was approved:
(1) To elect a Director to the Board of Directors of the Fund.
<Table>
<Caption>
NAME OF DIRECTOR FOR WITHHELD
---------------- ---------- --------
Enrique R. Arzac 47,713,101 878,344
</Table>
In addition to the Director elected at the meeting, Joseph D. Gallagher,
Lawrence J. Fox, James S. Pasman, Jr. and William W. Priest, Jr. continued as
Directors of the Fund.
SUBSEQUENT EVENTS
Effective August 10, 2004, Joseph Gallagher resigned as Director, Chairman of
the Board and Chief Executive Officer of the Fund.
Effective August 10, 2004, Michael E. Kenneally was appointed Director, Chairman
of the Board and Chief Executive Officer of the Fund.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the CSAM Income Fund, Inc. may from time
to time purchase up to 10% of its capital stock in the open market.
26
<Page>
PRIVACY POLICY NOTE
IMPORTANT PRIVACY CHOICES FOR CONSUMERS
We are committed to maintaining the privacy of every current and prospective
customer. We recognize that you entrust important personal information to us,
and we wish to assure you that we take seriously our responsibilities in
protecting and safeguarding this information.
In connection with making available investment products and services to current
and potential customers, we may obtain nonpublic personal information about you.
This information may include your name, address, e-mail address, social security
number, account number, assets, income, financial situation, transaction history
and other personal information.
We may collect nonpublic information about you from the following sources:
- - Information we receive on applications, forms, questionnaires, web sites,
agreements or in the course of establishing or maintaining a customer
relationship; and
- - Information about your transactions with us, our affiliates, or others.
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except with your consent or as otherwise permitted
by law.
RESTRICT INFORMATION SHARING WITH AFFILIATES: In cases where we believe that
additional products and services may be of interest to you, we may share the
information described above with our affiliates unless you say "No."
/ / No, please do not share personal and financial information with your
affiliated companies. [If you check this box, you must send this notice back
to us with your name, address and account number to Credit Suisse Funds, 466
Lexington Avenue, New York, New York 10017.]
We may also disclose this information to firms that perform services on our
behalf. These agents and service providers are required to treat the information
confidentially and use it only for the purpose for which it is provided.
We restrict access to nonpublic personal information about you to those
employees, agents or other parties who need to know that information to provide
products or services to you or in connection with your investments with or
through us. We maintain physical, electronic and procedural safeguards that
comply with federal standards to guard your nonpublic personal information.
NOTE: THIS NOTICE IS PROVIDED TO CLIENTS AND PROSPECTIVE CLIENTS OF CREDIT
SUISSE ASSET MANAGEMENT, LLC ("CSAM"), CSAM CAPITAL INC., AND CREDIT SUISSE
ASSET MANAGEMENT SECURITIES, INC., AND SHAREHOLDERS AND PROSPECTIVE SHAREHOLDERS
IN CSAM SPONSORED AND ADVISED INVESTMENT COMPANIES, INCLUDING CREDIT SUISSE
FUNDS, AND OTHER CONSUMERS AND CUSTOMERS, AS APPLICABLE. THIS NOTICE IS NOT
INTENDED TO BE INCORPORATED IN ANY OFFERING MATERIALS BUT IS MERELY A STATEMENT
OF OUR CURRENT PRIVACY POLICY, AND MAY BE AMENDED FROM TIME TO TIME UPON NOTICE
TO YOU. THIS NOTICE IS DATED AS OF MAY 19, 2004.
27
<Page>
PROXY VOTING
The policies and procedures that the Fund uses to determine how to vote proxies
relating to its portfolio securities are available:
- - By calling 1-800-293-1232
- - On the Fund's website, www.csam.com/us
- - On the website of the Securities and Exchange Commission, http://www.sec.gov.
28
<Page>
4946-SAR-04
Credit Suisse Asset Management, LLC
Phone: 1-800-293-1232
www.csam.com/us
<Page>
CREDIT SUISSE ASSET MANAGEMENT INCOME FUND, INC.
466 LEXINGTON AVENUE
NEW YORK, NY 10017
OFFICERS AND DIRECTORS
Michael E. Kenneally
DIRECTOR, CHAIRMAN OF THE
BOARD AND CHIEF EXECUTIVE OFFICER
Enrique R. Arzac
DIRECTOR
Lawrence J. Fox
DIRECTOR
James S. Pasman, Jr.
DIRECTOR
William W. Priest, Jr.
DIRECTOR
Richard J. Lindquist
PRESIDENT AND CHIEF INVESTMENT
OFFICER
Hal Liebes
SENIOR VICE PRESIDENT
Michael A. Pignataro
CHIEF FINANCIAL OFFICER,
VICE PRESIDENT AND
SECRETARY
Maxine C. Evertz
ASSISTANT SECRETARY
Robert M. Rizza
TREASURER
INVESTMENT ADVISER
Credit Suisse Asset Management, LLC
466 Lexington Avenue
New York, New York 10017
Phone 1-800-293-1232
ADMINISTRATOR AND CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
SHAREHOLDER SERVICING AGENT
Fleet National Bank
(c/o EquiServe)
P.O. Box 43010
Providence, Rhode Island 02940-3010
Phone 1-800-730-6001
LEGAL COUNSEL
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
Two Commerce Square
Philadelphia, Pennsylvania 19103
<Page>
ITEM 2. CODE OF ETHICS.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 6. SCHEDULE OF INVESTMENTS.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors since the registrant
last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(g)
of Schedule 14A in its definitive proxy statement dated March 1, 2004.
ITEM 10. CONTROLS AND PROCEDURES.
(a) As of a date within 90 days from the filing date of this report, the
principal executive officer and principal financial officer concluded that the
registrant's disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940 (the "Act")) were effective based on
their evaluation of the disclosure controls and procedures required by Rule
30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934.
(b) There were no changes in registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the
registrant's second fiscal half-year that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Not applicable.
(a)(2) The certifications of the registrant as required by Rule 30a-2(a) under
the Act are exhibits to this report.
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(a)(3) Not applicable.
(b) The certifications of the registrant as required by Rule 30a-2(b) under
the Act are an exhibit to this report.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934 and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
CREDIT SUISSE ASSET MANAGEMENT INCOME FUND, INC.
/s/ Michael E. Kenneally
------------------------------------
Name: Michael E. Kenneally
Title: Chief Executive Officer
Date: September 1, 2004
Pursuant to the requirements of the Securities Exchange Act of
1934 and the Investment Company Act of 1940, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
/s/ Michael E. Kenneally
------------------------------------
Name: Michael E. Kenneally
Title: Chief Executive Officer
Date: September 1, 2004
/s/ Michael A. Pignataro
------------------------------------
Name: Michael A. Pignataro
Title: Chief Financial Officer
Date: September 1, 2004