<PAGE>
[GRAPHIC]
The fund name is printed in the
upper left-hand corner. A picture of
the New York Stock Exchange building
is shown on half the cover diagonally.
A circle showing the "Z" and "X" from
the fund name is run together and is
centered.
QUARTERLY REPORT
DECEMBER 31, 1993
<PAGE>
- ----------------------------
- --------------------------
ZENIX INCOME FUND INC.
[LOGO]
February 21, 1993
<TABLE>
<S> <C>
DEAR
SHAREHOLDER: We are pleased to present the third quarter report of
the Zenix Income Fund Inc. for the period ended December
31, 1993. The Fund's primary objective is to deliver a
consistently high level of current income with total
return a secondary objective. To achieve these goals, we
use the consistent and developed strategy of investing
primarily in better quality, higher-yielding corporate
bonds that have the potential to receive an upgrade in
credit rating over the next one to three years. We have
also on occasion selectively added attractively-valued
convertible bonds, preferred stock and common stocks to
the portfolio to further enhance total return. By
emphasizing the improving credits in the high yield
market, we believe we can generate not only an
attractive current dividend yield for the shareholder
but some capital appreciation as well.
Although the Fund attempts to maintain a consistent
monthly dividend, we do not attempt to maximize yield
regardless of credit risk. We instead attempt to provide
a competitive dividend yield with superior total return
over a full economic cycle. Shown below are relevant
statistics for the Fund for the past 12 months.
</TABLE>
<PAGE>
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FINANCIAL DATA PER SHARE OF COMMON STOCK
<TABLE>
<S> <C> <C> <C> <C> <C>
Interest
Rate
NYSE Net Dividend On Money
Closing Asset Dividend Reinvestment Market
Price Value Paid Price Notes
January 31, 1993 $7.375 $6.58 $.0680 $6.65 3.050%
February 28, 1993 7.125 6.75 .0680 6.77 3.134
March 31, 1993 7.250 6.86 .0680 6.89 3.180
April 30, 1993 7.500 6.83 .0680 7.13 3.130
May 31, 1993 7.375 6.92 .0680 7.13 3.129
June 30, 1993 7.500 7.11 .0680 7.13 3.250
July 31, 1993 7.875 7.12 .0680 7.24 3.179
August 31, 1993 7.625 7.12 .0680 7.36 3.109
September 30, 1993 7.500 7.04 .0680 7.13 3.109
October 31, 1993 7.500 7.17 .0680 7.24 3.200
November 30, 1993 7.625 7.17 .0680 7.24 3.060
December 31, 1993 7.750 7.21 .0680 7.24 3.090
The reinvestment price is the greater of 98% of the net asset value ("NAV") per share or
95% of the current market price on valuation date if shares are issued. If the market
price is lower than NAV, shares are purchased in the market.
</TABLE>
<TABLE>
<S> <C>
Each registered shareholder is considered a participant
in the Fund's Dividend Reinvestment Plan, unless the
shareholder elects to receive all dividends and
distributions in cash, or unless the shareholder's
shares are registered in the name of a broker, bank or
nominee (other than Smith Barney Shearson Inc.) which
does not provide the service. Questions and
correspondence concerning the Dividend Reinvestment Plan
should be directed to The Shareholder Services Group,
Inc., P.O. Box 1376, Boston, Massachusetts 02104.
</TABLE>
2
- --------------------------------------------------------------------
<PAGE>
- ----------------------------
- --------------------------
<TABLE>
<S> <C>
In recent years, the Fund has benefited from the
combination of a relatively low cost leverage structure
and its high yielding investment portfolio which
enhanced overall total returns. The Fund's 1993 total
return of 27.32% on net asset value compares favorably
to the average total return for all closed-end high
yield funds of 25.38% (as reported by Lipper Analytical
Services, Inc., a major mutual fund performance
monitoring organization). The Fund's total return of
5.18% for the last three months lagged the high yield
closed-end fund average of 6.25%. We attribute this to
our higher-quality orientation and a relatively lighter
weighting in cyclical companies. We are in the process
of increasing the portfolio's cyclical representation.
While the Fund's leverage has had a beneficial impact on
performance, we are content with its current levels.
Rather than increasing the leverage, we are allowing an
additional cushion to build as the portfolio
appreciates. We believe this conservative approach
places the Fund in a more defensible position should a
correction occur in the financial markets during 1994.
At year-end 1993, the Fund had a leverage ratio of under
40%.
HIGH YIELD MARKET AND ECONOMIC OVERVIEW
The strong rally of the past year slowed to a more
moderate pace during the final three months of 1993. A
combination of heavy new issue supply pressures and
investor concern over the pace of the economic recovery
caused the market to generate relatively weaker, though
still attractive, results than in prior quarters. By the
beginning of December, when it became apparent that
fourth quarter economic growth was accelerating, the
high yield market began to generate improving results.
The lower quality sectors of the market as well as the
more
</TABLE>
3
- --------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------
<TABLE>
<S> <C>
cyclical companies generated the strongest returns for
the period. It appears that the dramatic decline in
interest rates over the past three years is finally
having a noticeable impact on economic growth in the
United States. We believe that the economy will gain
strength in 1994, and that a number of cyclical
industries will benefit the most and demonstrate the
greatest improvement in operating results.
INVESTMENT STRATEGY
Our primary investment strategy remains constant. We do
not try to speculate or chase higher risk,
higher-yielding issues. We instead look for improving
credits with the potential for rating upgrades. While it
is true that the lower quality issues recently have
generated stronger results, their performance over a
full market cycle generally has been far inferior to the
better quality issues we tend to emphasize in the
portfolio.
During the past six months we have continued to shift
the Fund's assets into more cyclical companies that are
benefiting from cost cutting and a competitive U.S.
dollar versus their foreign trading partners. The U.S.
manufacturing sector in general is much more competitive
today and we want to take advantage of that trend.
Specifically, our focus has been on the industrial
companies connected to the automobile and truck
manufacturing industries as well as residential home
builders and their suppliers. We have also selectively
added steel companies that are key suppliers to the auto
and appliance industries, textile and apparel producers,
paper and forest product companies and basic container
producers. Specific com-
panies would include Wheeling Pittsburgh Corporation,
Republic Engineered Steels, Westpoint Stevens, Inc.,
Domtar, Stelco and Gaylord Container Engineered, to name
a few. The portfolio has only a modest exposure to
retailers and other consumer-dependent companies because
of the intense competition in those industries. The
portfolio's only heavy retail exposure is in the
regional grocery chains that have strong market shares
in their territories.
</TABLE>
4
- --------------------------------------------------------------------
<PAGE>
- ----------------------------
- --------------------------
<TABLE>
<S> <C>
While we believe that the high yield market should
generate superior returns in 1994, we would be remiss if
we didn't also tell you that we expect that its total
return performance this year will be lower than in 1993.
It seems far more likely that the watchword will be
"earning the coupon" rather than earning the coupon plus
capital appreciation.
As we have since the Fund's inception in April 1988, we
will endeavor to achieve our primary goal of providing
shareholders with a consistently high level of current
income and, secondarily, achieving an attractive total
return. If you have any questions about your investment
in the Fund, please contact The Shareholder Services
Group, Inc. at (800) 331-1710. We appreciate your
continued support and look forward to reporting to you
in our annual report.
SINCERELY,
Heath B. McLendon John C. Bianchi
Chairman of the Vice President and
Board Investment Officer
and Investment
Officer
</TABLE>
5
- --------------------------------------------------------------------
<PAGE>
Portfolio of Investments
[LOGO] December 31, 1993 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--111.4%
PACKAGING AND CONTAINERS--13.4%
$ 925,000 Anchor Glass Container Corporation, Sr. Sub. Deb.,
9.875% due 12/15/2008............................... $ 957,375
Container Corporation of America, Sr. Sub. Deb.:
2,805,000 13.500% due 12/01/1999.............................. 3,124,069
1,495,000 14.000% due 12/01/2001.............................. 1,666,925
1,000,000 Gaylord Container Corporation, 11.50% due
05/15/2001.......................................... 1,068,750
2,249,000 Riverwood International Corporation, Sr. Sub. Notes,
11.250% due 06/15/2002.............................. 2,457,033
1,625,000 Silgan Holdings Inc., Sr. Disc. Deb., Step up Bond
due 06/15/96, 13.250% due 12/15/2002................ 1,259,375
1,050,000 Stone Container Corporation, Sr. Second Note,
10.250% due 12/15/2000.............................. 1,055,250
Sweetheart Cup Inc., Sr. Sub. Notes:
725,000 9.625% due 09/01/2000............................... 768,500
725,000 10.500% due 09/01/2003.............................. 764,875
$2,825,000 United States Can Company, Sr. Sub. Note, 13.500%
due 01/15/2002...................................... $ 3,255,812
------------
16,377,964
------------
BUILDING AND CONSTRUCTION--11.3%
American Standard Inc.:
4,000,000 Sr. Deb., 11.375% due 05/15/2004.................... 4,470,000
1,300,000 Sr. Sub. Discount, Step up Bond due 06/01/1988,
10.500% due 06/01/2005.............................. 880,750
1,350,000 CMI Industries, Sr. Sub Notes, 9.500% due
10/01/2003.......................................... 1,346,625
Hovnainan K Enterprises Inc.:
1,100,000 Sr. Sub. Notes, 9.750% due 06/01/2005............... 1,141,250
1,300,000 Guaranteed Note, 11.250% due 04/15/2002............. 1,420,250
875,000 Kaufman & Broad Home Corporation, Sr. Sub. Notes,
9.375% due 05/01/2003............................... 910,000
1,475,000 UDC Homes, Sr. Notes, 11.750%
due 04/30/2003...................................... 1,570,875
2,050,000 US Home Corporation, Sr. Notes, 9.750%
due 06/15/2003...................................... 2,142,250
------------
13,882,000
------------
</TABLE>
See Notes to Portfolio of Investments.
6
<PAGE>
Portfolio of Investments (Continued)
[LOGO] December 31, 1993 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
--------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
HEALTH CARE--9.9%
$ 800,000 Abbey Healthcare Group, Inc., Sr. Sub. Note, 9.500%
due 01/01/2002...................................... $ 820,000
500,000 Alco Health Distribution Corporation, Deb. Sr.,
11.250% due 07/15/2005.............................. 528,750
American Medical International Inc., Sr. Sub. Notes:
1,830,000 13.500% due 08/15/2001.............................. 2,143,387
825,000 9.500% due 04/15/2006............................... 862,125
1,675,000 Healthtrust Inc., The Hospital Company, Sub. Notes,
10.750%
due 05/01/2002...................................... 1,880,187
700,000 Hillhaven Corporation, Sr. Sub. Notes, 10.125% due
09/01/2001.......................................... 745,500
3,000,000 Hospital Corporation of America, Sr. Deb., 9.000%
due 03/15/2016...................................... 3,146,250
1,800,000 Ornda Healthcorp, Sr. Sub. Note, 12.250% due
05/15/2002.......................................... 2,025,000
------------
12,151,199
------------
HOTEL, CASINO AND GAMING--9.2%
1,300,000 Ballys Park Place Funding Inc., 1st Mortgage,
11.875% due 08/15/1999.............................. 1,407,250
$1,475,000 GNF Corporation, Guaranteed 1st Mortgage Note,
10.625% due 04/01/2003.............................. $ 1,423,375
555,000 Red Roof Inns, Inc., Sr. Note, 9.625% due
12/15/2003**........................................ 567,487
890,000 Santa Fe Hotel Inc., Unit Guaranteed, 11.000% due
12/15/2000.......................................... 916,700
775,000 Showboat Inc., Guaranteed 1st Mortgage, 9.250% due
05/01/2008.......................................... 794,375
1,275,000 Station Casinos Inc., Sr. Sub. Note, 9.625% due
06/01/2003.......................................... 1,294,125
1,825,000 Trump Plaza Funding Inc., 1st Mortgage Note, 10.875%
due 06/15/2001...................................... 1,820,438
3,006,000 Trump Taj Mahal Fund, Unit Building 1 Management,
(Pay-In-Kind), 11.350% due 11/15/1999............... 3,036,060
------------
11,259,810
------------
FOOD--7.3%
500,000 Americold Corporation, 1st Mortgage, Series B,
11.500% due 03/01/2005.............................. 503,750
1,100,000 Big V Supermarket Inc., Sr. Sub. Note, 11.000% due
02/15/2004**........................................ 1,106,875
</TABLE>
See Notes to Portfolio of Investments.
7
<PAGE>
Portfolio of Investments (Continued)
[LOGO] December 31, 1993 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
--------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
FOOD--(CONTINUED)
$1,075,000 Grand Union Corporation,
Sr. Note, 11.250% due 07/15/2000.................... $ 1,132,781
1,000,000 P & C Food Markets, Inc.,
Sr. Note, 11.500% due 10/15/2001.................... 1,135,000
Pathmark Stores, Inc.:
1,275,000 Sub. Note, 11.625% due 06/15/2002................... 1,408,875
1,250,000 Sr. Sub. Note, 9.625% due 05/01/2003................ 1,250,000
1,615,000 Penn Traffic Company, Sr.
Sub. Note, 9.625%
due 04/15/2005...................................... 1,681,619
700,000 PMI Acquisition Corporation, Sr. Sub. Note, 10.250%
due 09/01/2003...................................... 744,625
------------
8,963,525
------------
COMMUNICATION AND BROADCASTING--6.7%
475,000 Centennial Cellular Corporation, Sr. Note, 8.875%
due 11/01/2001...................................... 472,625
Continental Cablevision Inc.,
Sr. Sub. Note:
1,225,000 9.500% due 08/01/2013............................... 1,372,000
625,000 11.000% due 06/01/2007.............................. 734,375
3,500,000 Paging Network, Inc., Sr. Sub. Note, 11.750% due
05/15/2002.......................................... 3,963,750
$ 900,000 Rogers Cablesystems Ltd., Sr. Secured 2nd Priority
Deb., 10.125% due 09/01/2012........................ $ 1,026,000
625,000 Rogers Communications Inc., Sr. Deb., 10.875% due
04/15/2004.......................................... 696,875
------------
8,265,625
------------
INSURANCE--6.1%
1,200,000 Bankers Life Holding Corporation,
Sr. Sub. Note,
Series B, 13.000%
due 11/01/2002...................................... 1,431,000
2,100,000 Life Partners Group, Inc., Sr.
Sub. Note, 12.750%
due 07/15/2002...................................... 2,457,000
Reliance Group Holdings, Inc.,
Sr. Note:
1,450,000 9.000% due 11/15/2000............................... 1,469,938
2,000,000 9.750% due 11/15/2003............................... 2,070,000
------------
7,427,938
------------
CHEMICALS--5.8%
650,000 Buckeye Celluose Corporation, Sr. Note, 10.250%
due 05/15/2001...................................... 684,125
1,800,000 General Chemical Corporation, Sr. Secured Note,
14.000% due 11/01/1998.............................. 2,007,000
</TABLE>
See Notes to Portfolio of Investments.
8
<PAGE>
Portfolio of Investments (Continued)
[LOGO] December 31, 1993 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
--------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
CHEMICALS--(CONTINUED)
$1,100,000 Harris Chemical North American, Inc., 10.750% due
10/15/2003.......................................... $ 1,161,875
950,000 Methanex Corporation, Sr. Secured Note, 8.875% due
11/15/2001.......................................... 982,063
UCC Investors Holding Inc.:
550,000 Sr. Notes, 10.500% due 05/01/2002................... 599,500
1,500,000 Sr. Sub. Note, 11.000% due 05/01/2003............... 1,635,000
------------
7,069,563
------------
METALS AND MINING--5.0%
1,000,000 Essex Group Inc., Sr. Note, 10.000% due
05/01/2003.......................................... 1,015,000
700,000 Jorgensen, (Earle M.) Company,
Sr. Notes, 10.750%
due 03/01/2000...................................... 747,250
1,450,000 Republic Engineered Steels Mtg., 9.875%
due 12/15/2001...................................... 1,473,563
550,000 WCI Steel Inc.,
Sr. Note, 10.500% due 03/01/2002**.................. 574,750
2,300,000 Wheeling Pittsburgh Corporation,
Sr. Note, 9.375%
due 11/15/2003...................................... 2,380,500
------------
6,191,063
------------
ENERGY--4.2%
$1,350,000 Maxus Energy Corporation, 9.375% due 11/01/2003..... $ 1,329,750
2,440,000 Transco Energy Company, Note,
Sr. Notes, 11.250%
due 07/01/1999...................................... 2,769,400
975,000 Trident NGL Inc., Sub. Note, 10.250% due
04/15/2003.......................................... 1,027,406
------------
5,126,556
------------
PUBLISHING--4.1%
3,460,000 Anacomp Inc., Sr. Sub. Note, 15.000% due
11/01/2000.......................................... 3,991,975
1,950,000 Bell & Howell Holdings Company, Deb., Series A, Step
up Bond due 03/01/2000, 11.500% due 03/01/2005...... 1,084,687
------------
5,076,662
------------
AUTOMOBILE MANUFACTURING--3.9%
Chrysler Financial Corporation:
950,000 Note, 13.250%
due 10/15/1999...................................... 1,268,250
2,150,000 Sr. Notes, 12.750% due 11/01/1999................... 2,816,500
650,000 Fairfield MFG Inc., Sr. Sub. Note, 11.375% due
07/01/2001.......................................... 686,563
------------
4,771,313
------------
</TABLE>
See Notes to Portfolio of Investments.
9
<PAGE>
Portfolio of Investments (Continued)
[LOGO] December 31, 1993 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
--------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
PERSONAL CARE/COSMETICS--3.5%
$1,380,000 Revlon Consumer Products Corporation, Sr. Sub. Note,
10.500% due 02/15/2003.............................. $ 1,342,050
5,750,000 Revlon Worldwide Corporation, Sr. Secured Note, Zero
coupon due 03/15/1998............................... 2,946,875
------------
4,288,925
------------
CONSUMER DURABLES--3.3%
1,500,000 Coleman Holdings, Inc.,
Zero coupon due 05/27/1998.......................... 986,250
5,825,000 International Semi-Tech, Sr. Note, Step up Bond due
08/15/2000, 11.500% due 08/15/2003.................. 3,101,812
------------
4,088,062
------------
TRANSPORTATION--3.2%
1,625,000 South Pacific Transportation Company, 10.500% due
07/01/1999.......................................... 1,824,063
USAir Inc.:
675,000 Guaranteed Sr. Note, 10.000%
due 07/01/2003...................................... 648,000
550,000 A P/T Certificate Class 2, 9.625%
due 09/01/2003...................................... 548,625
900,000 Viking Star Shipping, Inc., 9.625% due 07/15/2003... 923,625
------------
3,944,313
------------
RETAIL--3.1%
$1,450,000 Barnes & Noble Inc., Sr. Sub. Note, 11.875% due
01/15/2003.......................................... $ 1,667,500
1,500,000 Bradlees Inc., Sr. Sub. Note, 11.000% due
08/01/2002.......................................... 1,621,875
525,000 Wickes Lumber Company, Sr. Sub. Note, 11.625%
due 12/15/2003...................................... 536,812
------------
3,826,187
------------
TEXTILES AND APPAREL--2.2%
650,000 J.P. Stevens & Company, Inc., Debenture, 9.000% due
03/01/2017.......................................... 650,000
2,000,000 Westpoint Stevens Inc., Sr. Sub., 9.375% due
12/15/2005.......................................... 2,035,000
------------
2,685,000
------------
PAPER AND FOREST PRODUCTS--1.9%
2,175,000 Fort Howard Corporation, Sub. Deb, 12.625% due
11/01/2000.......................................... 2,278,312
------------
LEISURE--1.9%
1,575,000 Gillett Holdings Inc., Sr. Sub. Note, 12.250% due
06/30/2002.......................................... 1,718,719
600,000 Remington Arms, Inc., New Sr. 9.500% due
12/01/2003**........................................ 610,500
------------
2,329,219
------------
</TABLE>
See Notes to Portfolio of Investments.
10
<PAGE>
Portfolio of Investments (Continued)
[LOGO] December 31, 1993 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
FINANCIAL SERVICES--1.6%
$ 750,000 Coldwell Banker Corporation, 10.250% due
06/30/2003**....................................... $ 795,000
1,100,000 Lomas Mortgage USA, Inc., Sr. Note, 10.250% due
10/01/2002......................................... 1,160,500
------------
1,955,500
------------
ELECTRIC UTILITY--1.2%
1,350,000 Midland Funding Corporation I, Sr. Secured Note,
Series C, 10.330% due 07/23/2002**................. 1,410,750
------------
SECURITY SERVICES--0.8%
1,000,000 ADT Operations Inc., Guaranteed Sr. Sub. Note,
9.250% due 08/01/2003.............................. 1,027,500
------------
CONGLOMERATE--0.7%
900,000 Federal Industries Ltd., CDA, Sr. Note, 10.250% due
06/15/2000......................................... 931,500
------------
AEROSPACE AND DEFENSE--0.6%
650,000 Tracor, Inc., Sr.
Sub. Notes, 10.875%
due 08/15/2001..................................... 684,125
------------
OIL AND GAS--0.5%
650,000 Giant Industries Inc., Guaranteed Sr. Sub. Note,
9.750% due 11/15/2003.............................. 667,875
------------
TOTAL CORPORATE BONDS AND NOTES (Cost
$129,533,979)...................................... 136,680,486
------------
SHARES
CONVERTIBLE PREFERRED STOCKS--6.6%
- -------------------------------------------------------------------------------
500 Dime Savings Bank, FSB, Preferred Exchangeable
10.500%............................................ $ 525,000
12,018 K-III Communications Corporation, Series A, Cnv.
Pfd. Exch. 11.625%................................. 1,231,864
22,450 Navistar International Corporation, Series G,
Convertible $6.00.................................. 1,201,075
106,750 Unisys Corporation, Series A, Cnv. Pfd. $3.75...... 5,164,031
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost
$7,704,130)........................................ 8,121,970
- -------------------------------------------------------------------------------
FACE
VALUE
- -------------------------------------------------------------------------------
COMMERCIAL PAPER--1.4%
- ------------------------------
(Cost $1,643,000)
- -------------------------------------------------------------------------------
$1,643,000 General Electric Capital Corporation, 2.700% due
01/03/1994......................................... 1,643,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $138,881,109*)................................ 119.4% $146,445,456
------------
</TABLE>
See Notes to Portfolio of Investments.
11
<PAGE>
Portfolio of Investments (Continued)
[LOGO] December 31, 1993 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
(NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (Net).................. (19.4)% $(23,795,539)
------- ------------
NET ASSETS.......................................... 100.0% $122,649,917
------- ------------
------- ------------
REDEMPTION VALUE OF 7.000% CUMULATIVE PREFERRED STOCK
(including accumulated undeclared dividend).................. 30,087,500
------------
NET ASSETS AVAILABLE FOR COMMON SHARES....................... $ 92,562,417
------------
------------
COMMON STOCK OUTSTANDING..................................... 12,843,400
------------
------------
NET ASSET VALUE PER SHARE OF COMMON STOCK.................... $7.21
----
----
</TABLE>
- ------------
*Aggregate cost for Federal tax purposes.
**Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration
to qualified institutional buyers.
See Notes to Portfolio of Investments.
12
<PAGE>
[LOGO] Notes to Portfolio of Investments
December 31, 1993 (Unaudited)
---------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Zenix Income Fund Inc. (the "Fund") is a diversified closed-end management
investment company organized as a Maryland corporation and is registered with
the Securities and Exchange Commission under the Investment Company Act of 1940,
as amended. The Fund commenced operations on April 27, 1988. The policies
described below are followed consistently by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
PORTFOLIO VALUATION: The net asset value of the Fund's Common Stock is
determined by The Boston Company Advisors, Inc. ("Boston Advisors") no less
frequently than the close of business on the Fund's last business day of each
week (generally Friday). It is determined by dividing the value of the net
assets available to Common Stock by the total number of shares of Common
Stock outstanding. For the purpose of determining the net asset value per
share of the Common Stock, the value of the Fund's net assets shall be deemed
to equal the value of the Fund's assets less (i) the Fund's liabilities
(including the outstanding principal amount and accrued interest on the
Senior Money Market Notes-TM- due 1995, (ii) the aggregate liquidation value
(i.e., $1,000 per outstanding share) of the 7.000% Cumulative Redeemable
Preferred Stock ("7.000% Cumulative Preferred Stock"), and (iii) the
aggregate unpaid dividends on the outstanding Cumulative Preferred Stock.
Portfolio securities that are actively traded in the over-the-counter market,
including listed securities for which the primary market is believed to be
over-the-counter, are valued at the mean between the most recently quoted bid
and asked prices provided by the principal market makers. Any security for
which the primary market is an exchange is valued at the last sale price on
such exchange on the day of valuation or, if there was no sale on such day,
at the last bid price quoted on such day. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Directors
of the Fund, including reference to valuations of other securities which are
considered comparable in quality, interest rate and maturity. Short-term
investments which mature in less than 60 days are valued at amortized cost,
unless this method is determined by the Board of Directors not to represent
fair value.
13
<PAGE>
[LOGO] Notes to Portfolio of Investments (Continued)
December 31, 1993 (Unaudited)
---------------------------------------------------------
Quarterly Results of Operations
- ---------------------------------------------------------
<TABLE>
<CAPTION>
NET REALIZED AND NET INCREASE
UNREALIZED GAIN/ (DECREASE)
IN NET ASSETS FROM
INVESTMENT NET INVESTMENT (LOSS)
INCOME INCOME ON INVESTMENTS OPERATIONS
------------------ ------------------ -------------------- -------------------
PER PER PER PER
QUARTER ENDED: TOTAL SHARE* TOTAL SHARE* TOTAL SHARE* TOTAL SHARE*
------------------------ ---------- ------ ---------- ------ ----------- ------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1991........... $3,977,508 $0.35 $3,159,003 $0.28 $ 4,630,179 $ 0.41 $ 7,789,182 $0.69
September 30, 1991...... 3,778,229 0.33 3,111,696 0.27 (1,624,708) (0.14) 1,486,988 0.13
December 31, 1991....... 4,034,248 0.34 3,270,263 0.28 2,221,574 0.19 5,491,837 0.47
March 31, 1992.......... 3,615,667 0.32 2,953,091 0.25 4,245,744 0.36 7,198,835 0.61
June 30, 1992........... 4,121,399 0.34 3,428,319 0.29 (1,090,652) (0.09) 2,337,667 0.20
September 30, 1992...... 3,665,498 0.31 3,002,571 0.25 2,480,165 0.21 5,482,736 0.46
December 31, 1992....... 3,770,298 0.31 3,077,594 0.25 (1,856,275) (0.15) 1,221,319 0.10
March 31, 1993.......... 3,922,025 0.32 3,490,697 0.28 6,602,503 0.54 10,093,200 0.82
June 30, 1993........... 3,786,446 0.30 3,149,795 0.25 3,243,982 0.26 6,393,777 0.51
September 30, 1993...... 3,745,471 0.29 3,200,066 0.25 (906,601) (0.07) 2,293,465 0.18
December 31, 1993....... 3,631,803 0.28 3,014,890 0.24 2,056,085 0.16 5,070,975 0.40
</TABLE>
- ------------
* Per share of Common Stock.
14
<PAGE>
DIRECTORS
Charles F. Barber
Allan J. Bloostein
Martin Brody
Dwight B. Crane
Heath B. McLendon
OFFICERS
Heath B. McLendon
CHAIRMAN OF THE BOARD
AND INVESTMENT OFFICER
Stephen J. Treadway
PRESIDENT
Richard P. Roelofs
EXECUTIVE VICE PRESIDENT
John C. Bianchi
VICE PRESIDENT AND
INVESTMENT OFFICER
Kenneth Egan
INVESTMENT OFFICER
Vincent Nave
TREASURER
Francis J. McNamara, III
SECRETARY
This report is sent to the shareholders of the
ZENIX INCOME FUND INC.
for their information. It is not a Prospectus,
circular or representation intended for use in the
purchase or sale of shares of the Fund or of any
securities mentioned in the report.
