<PAGE>
----------
Z E N I X
INCOME
FUND INC.
---
[LOGO]
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.
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1994
<PAGE>
- -------------------------
- ------------------------
ZENIX INCOME FUND INC.
[LOGO]
September 30, 1994
DEAR
SHAREHOLDER: We are pleased to provide the semi-annual report for
Zenix Income Fund Inc. for the six months ended
September 30, 1994. Over the past three months, the
Fund paid dividends from net investment income total-
ing $0.207 per share, equivalent to an annualized
distribution rate of 13.71% based on the September 30,
1994 net asset value of $6.04 per share and 12.03%
based on the New York Stock Exchange, Inc. closing
price of $6.88 per share. The Fund generated a
negative total return on net asset value of (7.67)%
for the past three months. The Fund's leveraged
structure, while supportive of an above-average
dividend yield, amplified the decline in the Fund's
net asset value per share. This negative performance
was not the result of holding any defaulting issues,
but instead was the result of a number of factors. The
major one was the significant rise in interest rates
in 1994 in reaction to the Federal Reserve's
tightening of monetary policy. Since the beginning of
1994, the Federal Reserve has raised short-term
interest rates by 175 basis points (1.75%) to prevent
the general economy from overheating and causing
inflation rates to increase dramatically. In this
environment, even relatively conservative intermediate
maturity (three-to seven-year) Treasuries have
experienced a meaningful erosion in principal value
over the course of the past nine months. We believe
that the Federal Reserve will succeed in limiting
inflationary pressures and that interest rates will
once again move lower with corresponding price
appreciation for bonds. This interest rate decline may
not occur for another three to six months as economic
growth and inflation shift to a more moderate path.
<PAGE>
--------------------------------------------------------------------
Shown in the following table are relevant statistics on the
Fund's net asset value, market share price and dividend history
over the past fiscal year.
FINANCIAL DATA PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
INTEREST
RATE
NYSE NET DIVIDEND ON MONEY
RECORD CLOSING ASSET DIVIDEND REINVESTED MARKET NOTES
DATE PAY DATE PRICE* VALUE PAID PRICE DUE 1995
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------- -------- ------- ----- ------- -------- ---------
10/22/93 10/31/93 $7.625 $7.17 $.0680 $7.24 3.090%
11/22/93 11/30/93 7.625 7.15 .0680 7.24 3.060
12/23/93 12/31/93 7.625 7.17 .0680 7.24 3.050
1/24/94 1/31/94 7.750 7.28 .0680 7.36 3.098
2/18/94 2/28/94 7.750 7.27 .0680 7.36 3.349
3/24/94 3/31/94 7.750 7.05 .0680 7.36 3.600
4/22/94 4/30/94 7.375 6.49 .0680 7.01 3.746
5/23/94 5/31/94 7.000 6.45 .0680 6.65 4.300
6/23/94 6/30/94 7.375 6.53 .0680 7.01 4.200
7/22/94 7/29/94 7.375 6.34 .0680 7.01 4.380
8/24/94 8/31/94 7.250 6.11 .0690 6.89 4.450
9/23/94 9/30/94 6.875 6.05 .0690 6.53 4.649
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.
<FN>
*As of Record Date.
</TABLE>
2
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<PAGE>
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PORTFOLIO STRATEGY
We have continued to shift the portfolio into higher coupon,
intermediate-maturity (five to ten year) issues of the
relatively more economically-sensitive companies in order to
limit overall interest rate risk and to capitalize on the
improving economy. Our largest industry weightings remain in
forest products, paper and containers, building/construction and
hotel/gaming. We have been slowly reducing our gaming exposure
given the increasingly competitive conditions in that industry.
Since we believe that the high yield market is in a bottoming
phase, we will look to move to a relatively fully invested
position in the fourth quarter with an average maturity of
between six and eight years. We firmly believe that the worst of
the bond market correction is behind us and are looking forward
to improving market conditions in 1995.
SUMMARY THOUGHTS
Our goal is to limit the Fund's net asset value erosion,
minimize downside price action and generate the most attractive
current yield attainable without incurring undue credit risk. In
this harsher environment, we believe this more defensive
strategy will generate superior results. We appreciate your past
support and look forward to satisfying your financial needs in
what should prove to be a more challenging environment.
SINCERELY,
Heath B. McLendon John C. Bianchi
Chairman of the Board Vice President and
and Investment Officer Investment Officer
November 21, 1994
3
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<PAGE>
Portfolio of Investments
[LOGO]
September 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS AND NOTES--109.4%
- --------------------------------------
BUILDING/CONSTRUCTION--10.0%
$3,850,000 American Standard Inc., Sr. Deb.,
11.375% due 05/15/2004............................. $ 4,109,875
1,550,000 Greystone Homes Inc.,
Sr. Note,
10.750% due 03/01/2004............................. 1,426,000
Hovnainan K. Enterprises Inc., Sub. Notes:
1,300,000 Guaranteed Note,
11.250% due 04/15/2002............................. 1,235,000
1,100,000 Sr. Sub. Note,
9.750% due 06/01/2005.............................. 935,000
900,000 Miles Homes Services Unit, Sr. Note,
12.000% due 04/01/2001............................. 819,000
1,275,000 UDC Homes, Sr. Note,
11.750% due 04/30/2003............................. 1,187,344
1,575,000 US Home Corporation, Sr. Note,
9.750% due 06/15/2003.............................. 1,417,500
------------
11,129,719
------------
PAPER/FOREST PRODUCTS/PRINTING--9.5%
Domtar Inc.:
$2,980,000 Notes,
12.00% due 04/15/2001.............................. $ 3,229,575
1,000,000 Sr. Notes,
11.750% due 03/15/1999............................. 1,070,000
Indah Kiat International Financing Company,
B.V., Sr. Secured Notes:
1,000,000 11.375% due 06/15/1999............................. 1,022,500
500,000 11.875% due 06/15/2002............................. 506,250
650,000 Malette Inc., Sr. Secured Notes,
12.250% due 07/15/2004............................. 669,500
1,895,000 Repap Wisconsin Inc., 2nd Priority Sr. Secured
Notes,
9.875% due 05/01/2006.............................. 1,677,075
Riverwood International Corporation, Sr. Sub.
Notes:
809,000 Series 1,
11.250% due 06/15/2002............................. 851,472
1,440,000 Series 2,
11.250% due 06/15/2002............................. 1,515,600
------------
10,541,972
------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Portfolio of Investments (Continued)
[LOGO]
September 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------
<C> <S> <C>
PACKAGING/CONTAINERS--9.2%
$1,750,000 Container Corporation
of America, Sr. Note,
11.250% due 05/01/2004............................. $ 1,837,500
3,300,000 Gaylord Container Corporation, Sr. Note,
11.500% due 05/15/2001............................. 3,407,250
1,000,000 Stone Container Corporation, Sr. Note,
12.625% due 07/15/1998............................. 1,050,000
725,000 Sweetheart Cup Inc., Sr. Sub. Note,
10.500% due 09/01/2003............................. 692,375
2,825,000 United States Can Company, Sr. Sub. Note,
13.500% due 01/15/2002............................. 3,160,469
------------
10,147,594
------------
HOTEL/GAMING--8.2%
1,125,000 Boyd Gaming Corporation, Series B, Sr. Sub. Note,
10.750% due 09/01/2003............................. 1,046,250
1,250,000 Empress River Casino, Sr. Note,
10.750% due 04/01/2002............................. 1,137,500
$1,475,000 GNF Corporation, First Mortgage Bond,
10.625% due 04/01/2003............................. $ 796,500
890,000 Santa Fe Hotel Inc., Unit Guaranteed, First
Mortgage Note,
11.000% due 12/15/2000............................. 796,550
2,650,000 Station Casinos Inc., Sr. Sub. Notes,
9.625% due 06/01/2003.............................. 2,285,625
1,325,000 Trump Plaza Funding Inc., First Mortgage Note,
10.875% due 06/15/2001............................. 944,062
3,054,901 Trump Taj Mahal Fund, Unit Building 1 Management,
Deb., (Payment-in-kind),
11.350% due 11/15/1999............................. 2,031,509
------------
9,037,996
------------
HEALTH CARE/DRUGS/HOSPITAL SUPPLIES--7.3%
713 ALCO Health Distribution Corporation,
Sr. Deb.,
11.250% due 07/15/2005............................. 709
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
Portfolio of Investments (Continued)
[LOGO]
September 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------
<C> <S> <C>
HEALTH CARE/DRUGS/HOSPITAL SUPPLIES--(CONTINUED)
$2,105,000 American Medical International Inc., Sr. Sub. Note,
13.500% due 08/15/2001............................. $ 2,347,075
900,000 Charter Medical Corporation,
Sr. Sub. Note,
11.250% due 04/15/2004**........................... 931,500
1,725,000 Healthtrust Inc., The Hospital Company, Sub. Note,
10.750% due 05/01/2002............................. 1,811,250
2,850,000 Ornda Healthcorp, Sr. Sub. Note,
12.250% due 05/15/2002............................. 3,021,000
------------
8,111,534
------------
RETAIL--5.0%
1,450,000 Barnes & Noble Inc., Sr. Sub. Note,
11.875% due 01/15/2003............................. 1,573,250
3,000,000 Bradlees Inc., Sr. Sub. Note,
11.000% due 08/01/2002............................. 2,970,000
$1,025,000 Wickes Lumber Company, Sr. Sub. Note,
11.625% due 12/15/2003............................. $ 1,040,375
------------
5,583,625
------------
CHEMICALS--5.0%
650,000 Buckeye Celluose Corporation,
Sr. Note,....................10.250% due 05/15/2001 630,500
1,150,000 Huntsman Corporation, First Mortgage Note,
11.000% due 04/15/2004............................. 1,201,750
2,100,000 NL Industries Inc., Sr. Secured Note,
11.750% due 10/15/2003............................. 2,173,500
1,500,000 UCC Investors Holding Inc., Sr. Sub. Note,
11.000% due 05/01/2003............................. 1,552,500
------------
5,558,250
------------
ELECTRONICS/COMPUTERS--4.9%
3,460,000 Anacomp Inc., Sr. Sub. Note,
15.000% due 11/01/2000............................. 3,857,900
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
Portfolio of Investments (Continued)
[LOGO]
September 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------
<C> <S> <C>
ELECTRONICS/COMPUTERS--(CONTINUED)
$3,150,000 Bell & Howell Holdings Company, Sr. Discount Note,
Series A, Step up Bond, Zero coupon to 03/01/2000,
11.500% due 03/01/2005............................. $ 1,606,500
------------
5,464,400
------------
GROCERY/CONVENIENCE STORES--4.9%
650,000 Big V Supermarket Inc., Sr. Sub. Note,
11.000% due 02/15/2004............................. 552,500
1,200,000 Farm Fresh Inc., Sr. Note, Series A,
12.250% due 10/01/2000............................. 1,056,000
1,190,000 Grand Union Company, Sr. Note,
11.250% due 07/15/2000............................. 1,082,900
1,000,000 P&C Food Markets, Inc., Sr. Note,
11.500% due 10/15/2001............................. 1,060,000
1,275,000 Pathmark Stores, Inc., Sub. Note,
11.625% due 06/15/2002............................. 1,259,063
$ 465,000 Penn Traffic Company, Sr. Sub. Note,
9.625% due 04/15/2005.............................. $ 423,150
------------
5,433,613
------------
LEISURE/AMUSEMENT/MOTION PICTURES--4.5%
3,050,000 Colman Holdings, Inc., Note, Zero coupon due
05/27/1988......................................... 2,058,750
1,575,000 Gillett Holdings Inc., Sr. Sub. Note,
12.250% due 06/30/2002............................. 1,669,500
1,550,000 Remington Arms, Inc., Sr. Sub. Note,
10.500% due 12/01/2003**........................... 1,294,250
------------
5,022,500
------------
INSURANCE COMPANIES--4.5%
2,250,000 Bankers Life Holding Corporation, Sr. Sub. Notes,
Series B,
13.000% due 11/01/2002............................. 2,587,500
2,100,000 Life Partners Group, Inc., Sr. Sub. Note,
12.750% due 07/15/2002............................. 2,352,000
------------
4,939,500
------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Portfolio of Investments (Continued)
[LOGO]
September 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------
<C> <S> <C>
BROADCASTING-TV, CABLE, AND RADIO--4.2%
$2,075,000 Bell CableMedia PLC, Sr. Discount Note, Step up
Bond, Zero coupon to 07/15/1999,
11.950% due 07/15/2004............................. $ 1,193,125
900,000 Continental Cablevision Inc., Sr. Sub. Deb.,
11.000% due 06/01/2007............................. 927,000
500,000 Jones Intercable Inc., Sr. Sub. Deb.,
11.500% due 07/15/2004............................. 531,250
Rogers Cablesystems Ltd:
CAD 1,275,000 Sr. Deb.,
9.650% due 01/15/2014.............................. 813,071
$ 525,000 Sr. Secured 2nd Priority Deb.,
10.125% due 09/01/2012............................. 517,125
625,000 Rogers Communications Inc., Sr. Deb.,
10.875% due 04/15/2004............................. 646,875
------------
4,628,446
------------
OIL/NATURAL GAS--4.1%
$1,150,000 Giant Industries Inc., Sr. Sub. Notes,
9.750% due 11/15/2003.............................. $ 1,073,813
3,175,000 Mesa Capital Corporation, Notes, Step up Bond, Zero
coupon to 06/30/1995,
12.750% due 06/30/1998............................. 2,805,906
675,000 Santa Fe Energy Resources Inc., Sr. Sub. Deb.,
11.000% due 05/15/2004............................. 688,500
------------
4,568,219
------------
METALS/MINING--3.8%
1,675,000 AK Steel Corporation, Sr. Note,
10.750% due 04/01/2004............................. 1,700,125
800,000 Essex Group Inc., Sr. Note,
10.000% due 05/01/2003............................. 776,000
1,850,000 Republic Engineered Steels Manufacturing, First
Mortgage Note,
9.875% due 12/15/2001.............................. 1,739,000
------------
4,215,125
------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Portfolio of Investments (Continued)
[LOGO]
September 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------
<C> <S> <C>
AUTOMOBILE/AUTO PARTS/TRUCK MANUFACTURING--3.6%
$ 650,000 Fairfield Manufacturing Inc., Sr. Sub. Note,
11.375% due 07/01/2001............................. $ 656,500
850,000 Harvard Industries, Inc., Sr. Note,
12.000% due 07/15/2004............................. 864,875
1,675,000 SPX Corporation, Sr. Sub. Note,
11.750% due 06/01/2002............................. 1,739,906
650,000 Truck Components Inc., Sr. Note, Series A,
12.250% due 06/30/2001............................. 690,625
------------
3,951,906
------------
TEXTILES/APPAREL--3.5%
1,350,000 CMI Industries, Sr. Sub. Note,
9.500% due 10/01/2003.............................. 1,137,375
900,000 Dan River Inc., Sr. Sub. Note,
10.125% due 12/15/2003............................. 828,000
2,100,000 Hartmarx Corporation, Sr. Sub. Note,
10.875% due 01/15/2002............................. 1,921,500
------------
3,886,875
------------
TELEPHONE/COMMUNICATIONS--3.3%
$5,450,000 Nextel Communication Inc., Sr. Discount Notes, Step
up Bond, Zero coupon to 02/15/1999,
9.750% due 08/15/2007.............................. $ 2,684,125
1,550,000 Pagemart Inc., Sr. Discount Note,
Zero coupon due 11/01/2003......................... 972,625
------------
3,656,750
------------
TRANSPORTATION--2.7%
2,805,000 Sea Containers Ltd., Sr. Sub. Deb.,
12.500% due 12/01/2004............................. 2,959,275
------------
CONSUMER DURABLE GOODS/HOME FURNISHINGS--2.5%
5,825,000 International Semi-Tech, Sr. Note, Step up Bond,
Zero coupon to 08/15/2000,
11.500% due 08/15/2003............................. 2,810,563
------------
TOBACCO--2.2%
2,700,000 Consolidated Cigar, Sr. Sub. Note,
10.500% due 03/01/2003............................. 2,396,250
------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Portfolio of Investments (Continued)
[LOGO]
September 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------
<C> <S> <C>
PERSONAL CARE PRODUCTS/ COSMETICS--2.0%
$1,380,000 Revlon Consumer Products Corporation, Sr. Sub.
Note,
10.500% due 02/15/2003............................. $ 1,200,600
2,200,000 Revlon Worldwide Corporation, Sr. Secured Note,
Zero coupon due 03/15/1998......................... 1,023,000
------------
2,223,600
------------
PUBLISHING--2.0%
1,300,000 Marvel III Holdings, Inc., Sr. Secured Note,
9.125% due 02/15/1998.............................. 1,144,000
AUD 1,950,000 News America Holdings, Inc., Deb.,
8.625% due 02/07/2014.............................. 1,057,497
------------
2,201,497
------------
DIVERSIFIED/CONGLOMERATE SERVICES--1.0%
$1,150,000 Federal Industries Ltd., CDA, Sr. Note,
10.250% due 06/15/2000............................. 1,104,000
------------
FINANCE COMPANIES/CONSUMER CREDIT--0.9%
1,100,000 Lomas Mortgage USA, Inc., Sr. Note,
10.250% due 10/01/2002............................. 1,001,000
------------
AEROSPACE AND DEFENSE--0.6%
$ 650,000 Tracor, Inc., Sr. Sub. Note,
10.875% due 08/15/2001............................. $ 646,750
------------
TOTAL CORPORATE BONDS AND NOTES (Cost
$126,244,761)...................................... 121,220,959
------------
<CAPTION>
SHARES
- -------------------------------------------------------------------------------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS--2.0%
<CAPTION>
- -------------------------------------------------------------------------------
<C> <S> <C>
7,000 Geneva Steel Company, Convertible Preferred, Series
B, (Payment-in-kind), Exchangeable, 14%............ 892,500
13,100 K-III Communications Corporation, Series B,
Convertible Preferred, (Payment-in-kind),
Exchangeable, 11.625%.............................. 1,283,474
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $2,170,162).................................. 2,175,974
------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Portfolio of Investments (Continued)
[LOGO] September 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
VALUE FACE VALUE
SHARES (NOTE 1) VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCK--1.6%
(Cost $1,705,073)
49,174 National Intergroup Inc., Series A, Preferred,
$4.20.............................................. $ 1,721,000
------------
WARRANTS--0.0%
10,800 Miles Homes Inc., Expire 04/01/1997................ 5,400
7,130 Pagemart Inc., Expire 12/31/2003................... 24,955
------------
TOTAL WARRANTS
(Cost $31,703)..................................... 30,355
------------
CONTRACTS
- -------------------------------------------------------------------------------
CALL OPTION PURCHASED--0.1%
(Cost $135,694)
299 U.S. Treasury Bonds Futures, December $101.00...... 79,422
------------
PUT OPTION PURCHASED--0.1%
(Cost $160,476)
368 U.S. Treasury Bonds Futures, December $97.00....... 115,000
------------
COMMERCIAL PAPER--7.5%
(Cost $8,287,000)
$8,287,000 General Electric Capital Corporation,
4.450% due 10/03/1994.............................. $ 8,287,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $138,734,869*).................................. 120.7 % 133,629,800
------------
SENIOR MONEY MARKET NOTES DUE 1995 (including accrued
interest)............................................. (23.4 ) (25,876,718)
OTHER ASSETS AND
LIABILITIES (Net)..................................... 2.7 3,006,704
------ ------------
NET ASSETS............................................ 100.0 % $110,759,786
------ ------------
------ ------------
<FN>
- ------------
* 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.
CAD Canadian dollars
AUD Australian dollars
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
Statement of Assets and Liabilities
[LOGO] September 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $138,734,869)
(Note 1)
See accompanying schedule.................... $133,629,800
Cash.......................................... 888
Interest receivable........................... 3,817,937
Receivable for investment securities sold..... 1,380,761
------------
Total Assets................................ 138,829,386
LIABILITIES:
Senior Money Market Notes-TM- due 1995 (Note
4)........................................... $25,800,000
Payable for investment securities purchased... 1,994,567
Investment advisory fee payable (Note 2)...... 56,059
Administration fee payable (Note 2)........... 22,424
Custodian fees payable (Note 2)............... 8,000
Accrued Directors' fees and expenses (Note
2)........................................... 7,000
Transfer agent fees payable (Note 2).......... 2,798
Accrued expenses and other payables........... 178,752
-----------
Total Liabilities........................... 28,069,600
------------
NET ASSETS.................................... $110,759,786
------------
------------
NET ASSETS AND REDEEMABLE PREFERRED STOCK
CONSIST OF:
7.00% Cumulative Preferred Stock (Note 5)..... $ 30,000,000
Undistributed net investment income........... 1,577,805
Accumulated net realized loss on investments
sold......................................... (30,296,511)
Unrealized depreciation of investments........ (5,105,069)
Par value of Common Stock..................... 132,785
Paid-in capital in excess of par value........ 114,450,776
------------
Total Net Assets............................ $110,759,786
------------
------------
<CAPTION>
PER SHARE
-----------
<S> <C> <C>
NET ASSET VALUE, AVAILABLE TO:
7.00% Cumulative Preferred Stock redemption
value........................................ $ 1,000.00 $ 30,000,000
----------- ------------
Cumulative undeclared dividends on 7.00%
Preferred Stock.............................. 20.42 612,500
----------- ------------
$ 1,020.42 30,612,500
----------- ------------
Common shares (13,278,509 shares of Common
Stock outstanding)........................... $ 6.04 80,147,286
----------- ------------
TOTAL NET ASSETS.............................. $110,759,786
------------
------------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
Statement of Operations
For the Six Months Ended
[LOGO] September 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest.............................................. $ 7,408,948
Dividends............................................. 102,219
-----------
Total Investment Income............................. 7,511,167
EXPENSES:
Interest expense...................................... $551,180
Investment advisory fee (Note 2)...................... 349,906
Administration fee (Note 2)........................... 130,352
Transfer agent fees (Note 2).......................... 42,854
Legal and audit fees.................................. 35,990
Custodian fees (Note 2)............................... 21,412
Directors' fees and expenses (Note 2)................. 14,591
Other................................................. 37,565
--------
Total Expenses...................................... 1,183,850
-----------
NET INVESTMENT INCOME................................. 6,327,317
-----------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS (NOTES 1 AND 3):
Net realized gain/(loss) on:
Securities transactions............................. (4,374,866)
Futures contracts................................... (119,504)
Foreign currency transactions....................... 1,036
-----------
Net realized loss on investments during the period.... (4,493,334)
-----------
Net unrealized depreciation of investments during the
period............................................... (5,068,937)
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS....... (9,562,271)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................................... $(3,234,954)
-----------
-----------
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Statement of Cash Flows
For the Six Months Ended
[LOGO] September 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<S> <C> <C>
NET INCREASE IN CASH:
Cash flows from operating and investing
activities:
Interest and dividends received................ $ 6,689,203
Operating expenses paid........................ (734,767)
Interest payments on Senior Money Market
Notes-TM-..................................... (495,102)
Purchases of short-term portfolio securities,
net........................................... (2,859,000)
Purchases of investment securities and
purchased options............................. (63,058,509)
Proceeds from disposition of investment
securities and purchased options.............. 64,948,615
Net proceeds from futures transactions and
forward foreign exchange contracts............ (120,104)
------------
Net cash provided by operating and investing
activities.................................. $ 4,370,336
Cash flows from financing activities:
Cash dividends paid on 7.00% Cumulative
Preferred Stock............................... (1,050,000)
Cash dividends paid on Common Stock*........... (3,293,374)
------------
Net cash used by financing activities........ (4,343,374)
-----------
Net increase in cash............................. 26,962
Cash--beginning of period........................ (26,074)
-----------
Cash--end of period.............................. $ 888
-----------
-----------
RECONCILIATION OF NET DECREASE IN NET
ASSETS TO NET CASH PROVIDED BY
OPERATING AND INVESTING ACTIVITIES:
Net decrease in net assets resulting from
operations...................................... $(3,234,954)
Accretion of discount on securities............ $ 945,882
Decrease in investments........................ 6,453,434
Decrease in receivable for investment
securities sold............................... 3,397,112
Decrease in payable for investment securities
purchased..................................... (3,269,037)
Decrease in dividends and interest
receivable.................................... 123,918
Decrease in accrued expenses and other
payables...................................... (46,019)
------------
Total adjustments............................ 7,605,290
-----------
Net cash provided by operating and investing
activities...................................... $ 4,370,336
-----------
-----------
<FN>
- ------------
* Non-cash financing activities include reinvestment of dividends of $2,078,479.
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
[LOGO] Statement of Changes in Net Assets
---------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1994 YEAR ENDED
(UNAUDITED) MARCH 31, 1994
------------------ --------------
<S> <C> <C>
Net investment income.................................. $ 6,327,317 $ 12,968,431
Net realized gain/(loss) on securities transactions,
future contracts, and foreign currency transactions
during the period.................................... (4,493,334) 9,187,169
Net unrealized depreciation of investments during the
period............................................... (5,068,937) (11,077,338)
------------------ --------------
Net increase/(decrease) in net assets resulting from
operations........................................... (3,234,954) 11,078,262
Dividends paid from net investment income to:
9.67% Cumulative Preferred Stockholders.............. -- (1,390,063)
7.00% Cumulative Preferred Stockholders.............. (1,050,000) (1,575,000)
Common Stockholders.................................. (5,371,853) (10,349,911)
Net increase in net assets from Common Stock
transactions (Note 6)................................ 2,078,479 3,988,030
------------------ --------------
Net increase/(decrease) in net assets.................. (7,578,328) 1,751,318
NET ASSETS:
Beginning of period.................................... 118,338,114 116,586,796
------------------ --------------
End of period (including undistributed net investment
income of $1,577,805 and $1,672,341, respectively)... $110,759,786 $118,338,114
------------------ --------------
------------------ --------------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
[LOGO] Financial Highlights
--------------------------------------------------------------
Contained below is per share operating performance data for a share of
common stock outstanding, total investment return, ratios to average net assets
and other supplemental information. This information has been derived from
information provided in the financial statements and market price data for the
Fund's shares.
For a Common Stock share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
SEPTEMBER 30, MARCH
1994 31,
(UNAUDITED) 1994#
------------- --------
<S> <C> <C>
Operating performance:
Net asset value, beginning of period......... $ 6.76 $ 6.86
------------- --------
Net investment income........................ 0.48 1.02
Net realized and unrealized gain/(loss) on
investments................................. (0.71) (0.13)
------------- --------
Net increase/(decrease) in net asset value
resulting from investment operations........ (0.23) 0.89
Underwriting commissions and offering costs
on 7.00% Cumulative Preferred Stock......... -- --
Distributions:
Dividends declared to 7.00% Preferred
Stockholders................................ (0.08) (0.11)
Dividends declared to 9.67% Preferred
Stockholders................................ -- (0.12)
Dividends paid from net investment income.... (0.41) (0.82)
Change in accumulated undeclared dividends on
Preferred Stock............................. -- 0.06
------------- --------
Total from distributions..................... (0.49) (0.99)
------------- --------
Net asset value, end of period............... $ 6.04 $ 6.76
------------- --------
Market value, end of period.................. $ 6.88 $ 7.13
------------- --------
Total investment return...................... (7.67)% 10.02%
------------- --------
------------- --------
Ratios to average net assets available to
Common Shareholders/ supplemental
information:
Net assets, end of period (in 000's)......... $80,147 $87,726
Net investment income........................ 15.15%** 14.38%
Interest expense............................. 1.32%** 0.92%
Other expense................................ 1.51%** 1.60%
Portfolio turnover rate...................... 45% 102%
<FN>
- ------------
* The Fund commenced operations on April 27, 1988.
** Annualized.
# Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for the year
ended March 31, 1994, since the use of the undistributed method does not
accord with results of operations.
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
[LOGO] Financial Highlights (Continued)
--------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED PERIOD
MARCH MARCH MARCH MARCH ENDED
31, 31, 31, 31, MARCH 31,
1993 1992 1991 1990 1989*
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
$ 6.39 $ 5.58 $ 6.30 $ 8.71 $ 9.23
-------- -------- -------- -------- ----------
1.07 1.08 1.17 1.42 1.29
0.51 0.82 (0.74) (2.37) (0.55)
-------- -------- -------- -------- ----------
1.58 1.90 0.43 (0.95) 0.74
(0.05) -- -- -- --
-- -- -- -- --
(0.23) (0.24) (0.25) (0.26) (0.13)
(0.82) (0.85) (0.90) (1.20) (1.01)
(0.01) -- -- -- (0.12)
-------- -------- -------- -------- ----------
(1.06) (1.09) (1.15) (1.46) (1.26)
-------- -------- -------- -------- ----------
$ 6.86 $ 6.39 $ 5.58 $ 6.30 $ 8.71
-------- -------- -------- -------- ----------
$ 7.25 $ 6.63 $ 5.50 $ 5.88 $ 9.50
-------- -------- -------- -------- ----------
24.02% 39.12% 10.58% (27.68)% 5.88%
-------- -------- -------- -------- ----------
-------- -------- -------- -------- ----------
$85,225 $75,818 $62,518 $69,213 $90,023
12.89% 14.16% 16.12% 15.11% 13.84%**
1.14% 2.10% 4.18% 5.16% 4.61%**
1.99% 2.15% 2.47% 2.32% 2.04%**
93% 86% 68% 81% 105%
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
[LOGO] Financial Highlights (Continued)
---------------------------------------------------------
The table below sets out information with respect to Preferred Stock and
Money Market Notes that are currently outstanding.
<TABLE>
<CAPTION>
AVERAGE
MARKET
TOTAL AMOUNT INVOLUNTARY VALUE PER
OUTSTANDING ASSET LIQUIDATING SHARE
EXCLUSIVE OF COVERAGE PREFERENCE (EXCLUDE BANK
TREASURY SECURITIES PER SHARE PER SHARE(2) LOANS)(2)(4)
---------------------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
Six Months Ended $30,000,000* $ 2,447 $ 1,000 $ 1,000
9/30/94 25,800,000*** 529,301 100,000 100,000
Year Ended 30,000,000* 2,583 1,000 1,000
3/31/94 25,800,000*** 558,675 100,000 100,000
Year Ended 30,000,000* 2,529 1,000 1,000
3/31/93 (3) 25,800,000*** 546,948 100,000 100,000
Year Ended 28,750,000** 2,413 1,000 1,000
3/31/92 25,800,000*** 510,240 100,000 100,000
Year Ended 28,750,000** 2,169 1,000 1,000
3/31/91 25,800,000*** 458,692 100,000 100,000
Year Ended 28,750,000** 2,097 1,000 1,000
3/31/90 35,500,000*** 379,585 100,000 100,000
Period of 28,750,000** 2,182 1,000 1,000
4/27/88 to 3/31/89 (1) 48,500,000*** 347,552 100,000 100,000
<FN>
- ---------
*7.00% Cumulative Preferred Stock, redeemable April 15, 2000.
**9.67% Cumulative Preferred Stock, redeemed April 15, 1993.
***Senior Money Market Notes-TM- due 1995.
(1) The Fund commenced operations on April 27, 1988.
(2) Excludes accrued interest or accumulated undeclared dividends.
(3) Excludes 9.67% Cumulative Preferred Stock for which the Fund had segregated
investments at March 31, 1993 to be used to redeem this issue plus
accumulated unpaid dividends on April 15, 1993 (Note 5).
(4) See Notes 4 and 5.
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
Notes to Financial Statements
[LOGO] September 30, 1994 (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 NotesTM due 1995), (ii) the aggregate liquidation value
(i.e., $1,000 per outstanding share) of the 7.00% Cumulative Redeemable
Preferred Stock ("7.00% Cumulative Preferred Stock") and (iii) accumulated
and unpaid dividends on the outstanding Cumulative Preferred Stock issue.
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,
19
<PAGE>
Notes to Financial Statements (Continued)
[LOGO] September 30, 1994 (Unaudited)
---------------------------------------------------------
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.
PAYMENT-IN-KIND BONDS: The Fund may invest in payment-in-kind ("PIK")
bonds. PIK bonds pay interest in cash or through the issuance of additional
bonds. PIK bonds are recorded at fair value on the ex-dividend date. PIK
bonds carry a risk in that unlike bonds which pay interest throughout the
period to maturity. The Fund will realize no cash until the cash payment
dates unless a portion of such securities is sold. If the issuer of a PIK
bond defaults, the Fund may obtain no return at all on its investment. Income
is recorded as earned on the accrual basis.
OPTIONS: Upon the purchase of a put option or a call option by the Fund,
the premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, the Fund will
realize a loss in the amount of the cost of the option. When the Fund enters
into a closing sale transaction, the Fund will realize a gain or loss
depending on whether the sales proceeds from the closing sale transaction are
greater or less than the cost of the option. When the Fund exercises a put
option, the proceeds from such sale will be decreased by the premium
originally paid. When the Fund exercises a call option, the cost of the
security which the Fund purchases upon exercise will be increased by the
premium originally paid. When purchased index options are exercised,
settlement is made in cash.
When the Fund writes a call option or a put option, an amount equal to the
premium received by the Fund is recorded as a liability, the value of which
is marked-to-market daily. When a written option expires, the Fund realizes a
gain equal to the amount of premium received. When the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or loss if the cost
of the closing purchase transaction exceeds the premium received when the
option was sold) without regard to any unrealized gain or loss on the
underlying security or index, and the liability related to such option is
eliminated. When a call option is exercised, the Fund realizes a gain or loss
from the sale of the underlying security and the proceeds from
20
<PAGE>
Notes to Financial Statements (Continued)
[LOGO] September 30, 1994 (Unaudited)
---------------------------------------------------------
such sale are increased by the premium originally received. When a put option
is exercised, the amount of the premium originally received will reduce the
cost of the security which the Fund purchased upon exercise. When written
index options are exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium
originally paid. The risk in writing a call option is that the Fund may
forego the opportunity of profit if the market value of the underlying
security or index increases and the option is exercised. The risk in writing
a put option is that the Fund may incur a loss if the market value of the
underlying security or index decreases and the option is exercised. In
addition, there is the risk the Fund may not be able to enter into a closing
transaction because of an illiquid secondary market.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded as of the trade date. Interest income is recorded on the accrual
basis. Realized gains and losses from securities sold are recorded on the
identified cost basis.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the
Fund, which may be changed by the Board of Directors, to pay dividends on a
monthly basis to holders of Common Stock from investment company taxable
income. The holders of the 7.00% Cumulative Preferred Stock shall be entitled
to receive dividends when, as and if declared by the Board of Directors of
the Fund out of funds legally available at 7.00% per annum, payable
semi-annually on June 15 and December 15. Distributions from net realized
gains to holders of Common Stock are declared and paid annually, after the
end of the fiscal year in which earned. To the extent that net realized
capital gains can be offset by capital loss carryforwards, it is the policy
of the Fund not to distribute such gains.
Income distributions and capital gain distributions on a Fund level are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due
to differing treatments of income and gains on various investment securities
held by the Fund, timing differences and differing characterization of
distributions made by the Fund as a whole.
21
<PAGE>
Notes to Financial Statements (Continued)
[LOGO] September 30, 1994 (Unaudited)
---------------------------------------------------------
FEDERAL INCOME TAXES: It is the policy of the Fund to qualify as a
regulated investment company, if such qualification is in the best interest
of its shareholders, by complying with the requirements of the Internal
Revenue Code applicable to regulated investment companies and by distributing
substantially all of its taxable income to its shareholders. Therefore, no
Federal income tax provision is required.
CASH FLOW INFORMATION: Cash, as used in the Statement of Cash Flows, is
the amount reported as "Cash" in the Statement of Assets and Liabilities. The
Fund issues and redeems its shares, invests in securities, and distributes
dividends from net investment income and net realized gains (which are either
paid in cash or reinvested at the discretion of shareholders). These
activities are reported in the Statement of Changes in Net Assets.
Information on cash payments is presented in the Statement of Cash Flows.
Accounting practices that do not affect reporting activities on a cash basis
include unrealized gain or loss on investment securities.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE
AND OTHER TRANSACTIONS
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with a division of Mutual Management Corp., which has been
transferred effective November 7, 1994 to Smith Barney Mutual Funds Management
Inc. ("SBMFM"). Mutual Management Corp. and SBMFM are both wholly owned
subsidiaries of Smith Barney Holdings Inc. ("Holdings"). Holdings is a wholly
owned subsidiary of The Travelers Inc. Under the Advisory Agreement, the Fund
pays SBMFM a monthly fee at the annual rate of 0.50% of the average weekly value
of the Fund's net assets (which, for purposes of determining such fee, shall
mean the average weekly value of the total assets of the Fund, minus the sum of
accrued liabilities of the Fund other than the outstanding principal amount of
the Senior Money Market NotesTM and accumulated dividends on the cumulative
preferred stock).
Prior to June 1, 1994, the Fund was party to an administration agreement with
Boston Advisors, an indirect wholly owned subsidiary of Mellon Bank
22
<PAGE>
Notes to Financial Statements (Continued)
[LOGO] September 30, 1994 (Unaudited)
---------------------------------------------------------
Corporation ("Mellon"). Under this agreement, the Fund paid a monthly fee at the
annual rate of 0.20% of the average weekly value of its net assets as defined
above.
On June 1, 1994, SBMFM (formerly known as "Smith, Barney Advisers, Inc."),
which is controlled by Holdings, succeeded Boston Advisors as the Fund's
administrator. The new administration agreement contains substantially the same
terms and conditions, including the level of fees, as the predecessor agreement.
On June 1, 1994, the Fund and SBMFM also entered into a sub-administration
agreement (the "Sub-Administration Agreement") with Boston Advisors. Under the
Sub-Administration Agreement, SBMFM pays Boston Advisors a portion of its
administration fee at a rate agreed upon from time to time between SBMFM and
Boston Advisors.
No director, officer or employee of Smith Barney Inc. ("Smith Barney"), or
its affiliates receives any compensation from the Fund for serving as an officer
or Director of the Fund. The Fund pays each Director who is not a director,
officer or employee of Smith Barney or any of its affiliates, $5,000 per annum
plus $500 per meeting attended and reimburses them for travel and out-of-pocket
expenses.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary of
Mellon, serves as the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, serves as the Fund's transfer agent.
3. SECURITIES TRANSACTIONS
For the six month ended September 30, 1994, cost of purchases and proceeds
from sales of securities, excluding U.S. government and short-term investments,
aggregated $59,493,302 and $61,549,215, respectively. At September 30, 1994,
aggregate gross unrealized appreciation for all securities in which there was an
excess of value over tax cost was $2,109,848, and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
value was $7,214,917.
23
<PAGE>
Notes to Financial Statements (Continued)
[LOGO] September 30, 1994 (Unaudited)
---------------------------------------------------------
4. SENIOR MONEY MARKET NOTESTM DUE 1995
The Fund issued Senior Money Market NotesTM under an indenture between the
Fund and Chemical Bank Corp., as trustee. At September 30, 1994, the Fund had an
outstanding Senior Money MarketTM Notes balance of $25,800,000. For each 28-day
interest period the interest rate is the applicable rate per annum as set by the
auction agent advising the Fund, and during the six months ended September 30,
1994, the interest rates ranged from 3.75% to 4.65% with an effective rate of
4.26%. Interest expense for the six months ended September 30, 1994 was
$551,180.
5. CUMULATIVE REDEEMABLE PREFERRED STOCK
On March 16, 1993 the Fund issued 30,000 shares of its 7.00% Cumulative
Preferred Stock, which will be redeemed as a whole on April 15, 2000 at a price
equal to $1,000 per share, plus accumulated and unpaid dividends. Proceeds to
the Fund, before deduction of underwriting commissions of $450,000 paid to
Shearson Lehman Brothers, and before offering expenses of $223,475, amounted to
$29,550,000. At September 30, 1994, 250,000 shares of $0.01 par value 7.00%
Cumulative Preferred Stock were authorized. Cumulative undeclared dividends on
the 7.00% Cumulative Preferred Stock amounted to $612,500 at September 30, 1994.
6. COMMON STOCK
At September 30, 1994, 250,000,000 shares of $.01 par value Common Stock were
authorized.
Common Stock transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1994 MARCH 31, 1994
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Issued as reinvestment of
dividends................. 299,574 $2,078,479 547,199 $3,988,030
------- ---------- ------- ----------
------- ---------- ------- ----------
</TABLE>
24
<PAGE>
Notes to Financial Statements (Continued)
[LOGO] September 30, 1994 (Unaudited)
---------------------------------------------------------
7. CAPITAL LOSS CARRYFORWARD
As of March 31, 1994, the Fund had available for Federal tax purposes unused
capital loss carryforwards of $25,803,177. This loss expires as follows:
<TABLE>
<CAPTION>
CARRYFORWARD EXPIRATION
AMOUNT DATE
----------- ----------
<S> <C>
$17,408,172 03/31/1999
8,395,005 03/31/2000
</TABLE>
8. ASSET MAINTENANCE REQUIREMENT
The Fund is required to maintain certain asset coverages with respect to the
Senior Money Market NotesTM (of at least 300%) and the Cumulative Preferred
Stock (of at least 200%). If the Fund fails to maintain these requirements as of
the last business day of a month and does not cure such failure by the last
business day of the following month, the Fund is required to redeem a specific
principal amount of the Senior Money Market NotesTM, or certain of the
Cumulative Preferred Stock, in order to meet these requirements. Additionally,
failure to meet the foregoing asset requirements would restrict the Fund's
ability to pay dividends.
9. CONCENTRATION OF CREDIT RISK
The Fund invests in securities offering high current income which generally
will be in the lower rating categories of recognized rating agencies. These
securities generally involve more credit risk than securities in the higher
rating categories. In addition, the trading market for high yield securities may
be relatively less liquid than the market for higher rated securities.
25
<PAGE>
Notes to Financial Statements (Continued)
[LOGO] September 30, 1994 (Unaudited)
---------------------------------------------------------
Quarterly Results of Operations
- ---------------------------------------------------------
<TABLE>
<CAPTION>
NET INCREASE/
NET REALIZED (DECREASE)
AND UNREALIZED IN NET ASSETS
INVESTMENT NET INVESTMENT GAIN/(LOSS) FROM
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>
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 2,613,982 0.21 5,763,777 0.46
September 30, 1993 3,745,471 0.29 3,200,066 0.25 (276,601) (0.02) 2,923,465 0.23
December 31, 1993 3,631,803 0.28 3,014,890 0.24 2,056,085 0.16 5,070,975 0.40
March 31, 1994 4,075,066 0.31 3,603,680 0.28 (6,283,635) (0.48) (2,679,955) (0.20)
June 30, 1994 3,739,209 0.29 3,111,466 0.24 (3,899,320) (0.29) (787,854) (0.06)
September 30, 1994 3,771,958 0.28 3,215,851 0.24 (5,662,951) (0.42) (2,447,100) (0.17)
<FN>
- ------------
* Per share of Common Stock.
</TABLE>
26
<PAGE>
DIRECTORS
Charles F. Barber
Allan J. Bloostein
Martin Brody
Dwight B. Crane
Robert A. Frankel
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 A. Egan
INVESTMENT OFFICER
Lewis E. Daidone
TREASURER
Christina T. Sydor
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.
