<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
JUNE 30, 1994
<PAGE>
- ----------------------------
- --------------------------
ZENIX INCOME FUND INC.
[LOGO]
June 30, 1994
<TABLE>
<S> <C>
DEAR
SHAREHOLDER: The high yield market encountered continuing weakness
during the past seven months in concert with the general
correction in the bond and stock markets. Over the
course of the year, the market has begun to offer
reasonable value with yield spreads widening to over 400
basis points above comparable maturity treasury
securities from less than 300 basis points in January.
After being relatively more defensively postured
throughout the first quarter of 1994, having raised cash
reserves to between 5 and 7% of portfolio assets, we
have continued to reinvest back into the market in
attractively valued new issues as well as secondary
issues. We continue to limit our overall interest rate
risk by limiting overall portfolio average call adjusted
maturities to the 6 to 7 year range.
Because of our higher quality orientation relative to
our peer group, we ironically underperformed the mutual
fund averages over the first quarter and most of the
second quarter. We have found that upper tier high yield
bonds tend to have greater interest rate risk than lower
tier high yield bonds. However, over a full economic
cycle, the higher tier issues have materially
outperformed lower tier issues which possess much higher
default risk. Consequently, we remain committed to our
more conservative credit orientation which we believe
will generate more consistent performance results over
the full economic cycle.
</TABLE>
<PAGE>
- ----------------------------------------------------------------------------
<TABLE>
<S> <C>
Given the strengthening economy, we have continued to
place a heavy emphasis in the portfolio on economically
sensitive companies. We have continued to selectively
add bonds and preferred stock issues of paper and forest
products companies, general manufacturers, steel
producers, specialty chemical producers and auto/truck
parts suppliers. We have also concentrated on moving the
general portfolio from lower coupon issues to higher
coupon issues that will tend to be less sensitive to
general interest rate changes. We still believe the bulk
of the total returns in 1994 will be from coupon income
rather than from capital appreciation, as general
interest rates eventually settle into a defined trading
range.
As a result of the repositioning of the portfolio that
has occurred over the reporting period, the income
generated from the portfolio's investments has
increased. Consequently, the Fund's Board of Directors
has increased the portfolio's monthly dividend from
$0.068 per common share to $0.069 per common share,
effective as of the August dividend.
Additionally, at their June meeting, the Fund's Board of
Directors approved an amendment to the Fund's Dividend
Reinvestment Plan. Under the Plan, a shareholder can
elect to have dividends automatically reinvested in
shares of the Fund's common stock. If 98% of the net
asset value per share of the Fund's common stock at the
time of valuation for purposes of the dividend
distribution exceeds the market price of the stock, or
if the Fund declares a dividend or capital gains
distribution payable only in cash, the Plan's purchasing
agent will buy shares of the Fund's common stock in the
open market for the plan participants' accounts. Under
the current Plan, these purchases commence on the
dividend payment date. The Directors revised the Plan to
provide that the purchasing agent may commence purchases
of common shares on the open market as of record date in
anticipation of the dividend payment. It is hoped that
this will decrease the cost of the repurchased shares by
increasing the amount of time over which such purchases
will be made, so that purchases on the open
</TABLE>
2
- --------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------
<TABLE>
<S> <C>
market will not be compacted into a small window follow-
ing the payment date. This revision will be effective
upon the first dividend declaration after December 1,
1994.
We hope that you are pleased with your investment in the
portfolio. If you have any questions or comments con-
cerning your investment in the portfolio, please do not
hesitate to contact The Shareholders Services Group,
Inc. at (800) 331-1710.
</TABLE>
<TABLE>
<S> <C> <C>
SINCERELY,
Heath B. McLendon John C. Bianchi
Chairman of the Board Vice President and
and Investment Officer Investment Officer
August 1, 1994
</TABLE>
3
- --------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------
FINANCIAL DATA PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
Interest
Rate
On Senior
Money
NYSE Net Dividend Market
Record Pay Closing Asset Dividend Reinvestment Notes
Date Date Price* Value* Paid Price due 1995
<S> <C> <C> <C> <C> <C> <C>
7/23/93 7/31/93 $7.625 $7.14 $.0680 $7.24 $3.179
8/24/93 8/31/93 7.750 7.13 .0680 7.36 3.109
9/23/93 9/30/93 7.500 7.02 .0680 7.13 3.109
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
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.
* As of Record Date.
</TABLE>
4
- --------------------------------------------------------------------
<PAGE>
Portfolio of Investments
[LOGO] June 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
<S> <C> <C> <C>
----------------------------------------------------------------------------
CORPORATE BONDS AND
NOTES--115.8%
PACKAGING AND CONTAINERS--12.5%
Container Corporation of America:
$2,805,000 Sr. Sub. Note, 13.500% due 12/01/1999....... $ 3,085,500
1,750,000 Guaranteed Sr. Note, 11.250% due
05/01/2004.................................. 1,839,688
2,350,000 Gaylord Container Corporation, Sr. Note,
11.500% due 05/15/2001...................... 2,444,000
975,000 Silgan Holdings Inc., Sr. Disc. Deb., Zero
Coupon, due 12/15/2002...................... 749,531
2,450,000 Stone Container Corporation, Sr. Note,
12.625% due 07/15/1998...................... 2,312,187
725,000 Sweetheart Cup Inc., Sr. Sub. Note, 10.500%
due 09/01/2003.............................. 717,750
2,825,000 United States Can Company, Sr. Sub. Note,
13.500% due 01/15/2002...................... 3,156,938
------------
14,305,594
------------
HOTEL, CASINO AND GAMING--12.1%
1,300,000 Bally's Park Place Funding Inc., First
Mortgage Note, 11.875% due 08/15/1999....... 1,371,500
1,125,000 Boyd Gaming Corporation, Series B, Sr. Sub.
Note, 10.750% due 09/01/2003................ 1,127,812
$1,250,000 Empress River Casino, Sr. Note, 10.750% due
04/01/2002.................................. $ 1,229,687
1,475,000 GNF Corporation, First Mortgage Bond,
10.625% due 04/01/2003...................... 1,091,500
1,850,000 Lady Luck Gaming Corporation, First Mortgage
Note, 10.500% due 03/01/2001**.............. 1,678,875
890,000 Santa Fe Hotel Inc., Unit Guaranteed, First
Mortgage Note, 11.000% due 12/15/2000....... 872,200
2,650,000 Station Casinos Inc., Sr. Sub. Note, 9.625%
due 06/01/2003.............................. 2,438,000
1,825,000 Trump Plaza Funding Inc., First Mortgage
Note, 10.875% due 06/15/2001................ 1,542,125
3,054,901 Trump Taj Mahal Fund, Unit Building 1
Management, (Payment-in-kind), 11.50% due
11/15/1999.................................. 2,596,666
------------
13,948,365
------------
BUILDING AND CONSTRUCTION--10.1%
3,850,000 American Standard Inc., Sr. Deb., 11.75% due
05/15/2004.................................. 4,042,500
1,550,000 Greystone Homes Inc., Guaranteeed Sr. Sub.
Note, 10.750% due 03/01/2004**.............. 1,519,000
Hovnainan K. Enterprises Inc.:
1,100,000 Sr. Sub. Note, 9.750% due 06/01/2005........ 1,087,625
</TABLE>
See Notes to Portfolio of Investments.
5
<PAGE>
Portfolio of Investments (Continued)
[LOGO] June 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C> <C>
----------------------------------------------------------------------------
CORPORATE BONDS AND
NOTES--(CONTINUED)
BUILDING AND CONSTRUCTION--(CONTINUED)
$1,300,000 Guaranteed Note, 11.250% due 04/15/2002..... $ 1,391,000
900,000 Miles Homes Services Unit, Sr. Note, 12.000%
due 04/01/2001.............................. 904,500
1,275,000 UDC Homes, Sr. Note, 11.750% due
04/30/2003.................................. 1,249,500
1,575,000 US Home Corporation, Sr. Note, 9.750% due
06/15/2003.................................. 1,464,750
------------
11,658,875
------------
PAPER AND PRINTING--9.0%
1,730,000 Domtar Inc., Sr. Note, 12.000% due
04/15/2001.................................. 1,864,075
600,000 Indah Kiat International Financing Company,
B.V., Sr. Secured Note, 11.875% due
06/15/2002.................................. 606,000
1,685,000 Repap Wisc. Inc., 2nd Priority Sr. Note,
9.875% due 05/01/2006....................... 1,541,775
Riverwood International Corporation, Sr.
Sub. Note:
809,000 Series 1, 11.250% due 06/15/2002;........... 845,405
1,440,000 Series 2, 11.250% due 06/15/2002............ 1,490,400
$3,950,000 Stone Consolidated Corporation, Sr. Secured
Note, 10.250% due 12/15/2000................ $ 3,931,250
------------
10,278,905
------------
INSURANCE AND CONSUMER CREDIT COMPANIES--7.4%
750,000 Coldwell Banker Corporation, Sr. Sub. Notes,
10.250% due 06/30/2003**.................... 753,750
1,200,000 Bankers Life Holding Corporation, Sr. Sub.
Note, Series B, 13.000% due 11/01/2002...... 1,380,000
2,100,000 Life Partners Group, Inc., Sr. Sub. Note,
12.750% due 07/15/2002...................... 2,409,750
1,100,000 Lomas Mortgage USA, Inc., Sr. Note, 10.250%
due 10/01/2002.............................. 1,075,250
Reliance Group Holdings, Inc., Sr. Notes:
1,150,000 9.000% due 11/15/2000....................... 1,043,625
2,000,000 9.750% due 11/15/2003....................... 1,820,000
------------
8,482,375
------------
GROCERY AND CONVENIENCE STORES--7.4%
650,000 Big V Supermarket Inc., Sr. Sub. Note,
11.000% due 02/15/2004**.................... 609,375
775,000 Farm Fresh Inc., Sr. Note, Series A 12.250%
due 10/01/2000.............................. 764,344
</TABLE>
See Notes to Portfolio of Investments.
6
<PAGE>
Portfolio of Investments (Continued)
[LOGO] June 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C> <C>
----------------------------------------------------------------------------
CORPORATE BONDS AND
NOTES--(CONTINUED)
GROCERY AND CONVENIENCE STORES--(CONTINUED)
$1,990,000 Grand Union Company, Sr. Note, 11.250% due
07/15/2000.................................. $ 1,970,100
1,000,000 P & C Food Markets, Inc., Sr. Note, 11.500%
due 10/15/2001.............................. 1,077,500
Pathmark Stores, Inc.:
1,275,000 Sub. Note, 11.625% due 06/15/2002........... 1,313,250
1,250,000 Sr. Sub. Note, 9.625% due 05/01/2003........ 1,179,688
1,615,000 Penn Traffic Company, Sr. Sub. Note, 9.625%
due 04/15/2005.............................. 1,550,400
------------
8,464,657
------------
HEALTH CARE--6.9%
1,026,000 ALCO Health Distribution Corporation, Sr.
Deb., 11.250% due 07/15/2005................ 1,072,170
1,830,000 American Medical International Inc., Sr.
Sub. Note, 13.500% due 08/15/2001........... 2,061,037
900,000 Charter Medical Corporation, Sr. Sub Note,
11.250% due 04/15/2004**.................... 918,000
1,925,000 Healthtrust Inc., The Hospital Company, Sub.
Note, 10.750% due 05/01/2002................ 1,992,375
$1,800,000 Ornda Healthcorp, Sr. Sub Note, 12.250% due
05/15/2002.................................. $ 1,944,000
------------
7,987,582
------------
METALS AND MINING--6.8%
2,205,000 AK Steel Corporation, Sr. Note, 10.750% due
04/01/2004.................................. 2,227,050
1,000,000 Essex Group Inc., Sr. Note, 10.000% due
05/01/2003.................................. 980,000
1,150,000 Federal Industries Limited, CDA, Sr. Note,
10.250% due 06/15/2000...................... 1,115,500
700,000 Jorgensen, (Earle M.) Company, Sr. Note,
10.750% due 03/01/2000...................... 716,625
1,850,000 Republic Engineered Steels Manufacturing,
First Mortgage Note, 9.875% due
12/15/2001.................................. 1,782,938
1,000,000 Weirton Steel Corporation, Sr. Note, 11.500%
due 03/01/1998.............................. 1,035,000
------------
7,857,113
------------
CHEMICALS--4.9%
650,000 Buckeye Cellulose Corporation, Sr. Note,
10.250% due 05/15/2001...................... 637,812
900,000 Huntsman Corporation, First Mortgage Note,
11.000% due 04/15/2004...................... 927,000
2,100,000 NL Industries Inc., Sr. Secured Note,
11.750% due 10/15/2003...................... 2,168,250
</TABLE>
See Notes to Portfolio of Investments.
7
<PAGE>
Portfolio of Investments (Continued)
[LOGO] June 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C> <C>
----------------------------------------------------------------------------
CORPORATE BONDS AND
NOTES--(CONTINUED)
CHEMICALS--(CONTINUED)
$ 650,000 OSI Specialties Holding Company, Units,
11.500%due 04/15/2004....................... $ 392,438
1,500,000 UCC Investors Holding Inc., Sr. Sub. Notes,
11.000% due 05/01/2003...................... 1,552,500
------------
5,678,000
------------
OIL AND GAS--4.8%
875,000 Dual Drilling Company, Sr. Sub. Note, 9.875%
due 01/15/2004.............................. 824,688
1,150,000 Giant Industries Inc., Guaranteed Sr. Sub
Note, 9.750% due 11/15/2003................. 1,086,750
3,175,000 Mesa Capital Corporation, Secured Discount
Note, Step
up Bond, zero coupon
to 06/30/1995, 12.750% due 06/30/1998....... 2,897,188
675,000 Santa Fe Energy Resources Inc., Sr. Sub.
Note, 11.000% due 05/15/2004................ 691,031
------------
5,499,657
------------
CONSUMER DURABLES--4.6%
3,550,000 Colman Holdings, Inc., Zero coupon due
05/27/1998.................................. 2,396,250
$5,825,000 International Semi-Tech, Sr. Note, Step
up Bond, zero coupon
to 08/15/2000, 11.500% due 08/15/2003....... $ 2,941,625
------------
5,337,875
------------
T.V., CABLE AND RADIO BROADCASTING--4.5%
350,000 Continental Cablevision Inc., Sr. Sub. Note,
11.000% due 06/01/2007...................... 362,250
500,000 Jones Intercable Inc., Sr. Sub. Deb.,
11.500% due 07/15/2004...................... 530,000
525,000 Rogers Cablesystems Ltd., Sr. Secured 2nd
Priority Deb.,
10.125% due 09/01/2012...................... 525,000
CAD 1,275,000 Rogers Cablesystems Ltd., Sr. Deb.,
9.650% due 01/15/2014....................... 774,656
$ 625,000 Rogers Communications Inc., Sr. Deb.,
10.875% due 04/15/2004...................... 642,187
2,110,000 Videotron Holdings PLC, Sr. Discount Note,
11.125%*** due 07/01/2004................... 1,218,525
1,825,000 Viacom Inc., Sub. Deb. Exchangable, 8.000%
due 07/01/2006.............................. 1,177,125
------------
5,229,743
------------
TEXTILES AND LEATHER--3.6%
1,350,000 CMI Industries, Sr. Sub. Note, 9.500% due
10/01/2003.................................. 1,267,312
900,000 Dan River Inc., Sr. Sub. Note, 10.125% due
12/15/2003.................................. 823,500
</TABLE>
See Notes to Portfolio of Investments.
8
<PAGE>
Portfolio of Investments (Continued)
[LOGO] June 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C> <C>
----------------------------------------------------------------------------
CORPORATE BONDS AND
NOTES--(CONTINUED)
TEXTILES AND LEATHER--(CONTINUED)
$2,100,000 Hartmarx Corporation, Sr. Sub. Note, 10.875%
due 01/15/2002.............................. $ 2,063,250
------------
4,154,062
------------
RETAIL--3.6%
1,450,000 Barnes & Noble Inc., Sr. Sub. Note, 11.875%
due 01/15/2003.............................. 1,573,250
1,500,000 Bradlees Inc., Sr. Sub. Note, 11.000% due
08/01/2002.................................. 1,528,125
1,025,000 Wickes Lumber Company, Sr. Sub. Note,
11.625% due 12/15/2003...................... 1,050,625
------------
4,152,000
------------
AUTOMOBILE AND TRUCK
MANUFACTURING--3.6%
650,000 Fairfield Manufacturing Inc., Sr. Sub. Note,
11.75% due 07/01/2001....................... 653,250
1,675,000 Spx Corporation, Sr. Sub. Note, 11.750%, due
06/01/2002.................................. 1,721,062
1,650,000 Truck Components Inc., Sr. Note, Series A,
12.750% due 06/30/2001**.................... 1,707,750
------------
4,082,062
------------
PUBLISHING--3.5%
3,150,000 Bell & Howell Holdings Company, Deb., Series
A, Step
up Bond, zero coupon
to 03/01/2000, 11.500% due 03/01/2005....... 1,744,312
$1,300,000 Marvel III Holdings, Sr. Note, 9.125% due
02/15/1998**................................ $ 1,186,250
AUD 1,950,000 News America Holdings, Inc., Deb., 8.625%
due 02/07/2014.............................. 1,072,449
------------
4,003,011
------------
ELECTRONICS AND COMPUTERS--3.4%
$3,460,000 Anacomp Inc., Sr. Sub. Note, 15.000% due
11/01/2000.................................. 3,866,550
------------
LEISURE--2.7%
1,575,000 Gillett Holdings Inc., Sr. Sub. Note,
12.250% due 06/30/2002...................... 1,683,281
1,550,000 Remington Arms, Inc., Sr. Sub. Note, 10.500%
due 12/01/2003**............................ 1,406,625
------------
3,089,906
------------
PERSONAL CARE AND COSMETICS--2.7%
1,380,000 Revlon Consumer Products Corporation, Sr.
Sub. Note, 10.500% due 02/15/2003........... 1,186,800
4,450,000 Revlon Worldwide Corporation, Sr. Secured
Note, Zero coupon due 03/15/1998............ 1,891,250
------------
3,078,050
------------
COMMUNICATIONS--1.1%
450,000 Nextel Communication Inc., Sr. Note, Step up
Bond, zero coupon to 09/01/1998, 11.500% due
09/01/2003.................................. 281,250
</TABLE>
See Notes to Portfolio of Investments.
9
<PAGE>
Portfolio of Investments (Continued)
[LOGO] June 30, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C> <C>
----------------------------------------------------------------------------
CORPORATE BONDS AND
NOTES--(CONTINUED)
COMMUNICATIONS--(CONTINUED)
$1,550,000 Pagemart Inc., Unit Discount Note, Zero
Coupon due 11/01/2003....................... $ 992,000
------------
1,273,250
------------
AEROSPACE--0.6%
650,000 Tracor, Inc., Sr. Sub. Note, 10.875% due
08/15/2001.................................. 665,438
------------
TOTAL CORPORATE BONDS AND NOTES (Cost $135,413,417).......... 133,093,070
------------
SHARES
----------------------------------------------------------------------------
PREFERRED STOCK--0.9%
(COST $1,015,833)
----------------------------------------------------------------------------
29,500 National Intergroup Inc., Series A,
Preferred, $4.20 1,025,125
------------
----------------------------------------------------------------------------
CONVERTIBLE PREFERRED
STOCKS--3.0%
----------------------------------------------------------------------------
7,000 Geneva Steel Company, Convertible Preferred,
Series B, (Payment-in-kind), Exchangeable,
14%......................................... 903,000
12,727 K-III Communications Corporation, Series A,
Convertible Preferred, (Payment-in-kind),
Exchangeable, 11.625%**..................... 1,259,957
25,400 Navistar International Corporation, Series
G, Convertible Preferred $6.00.............. 1,282,700
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $3,513,620)......... $ 3,445,657
----------------------------------------------------------------------------
COMMERCIAL PAPER--1.7%
(COST $1,950,000)
----------------------------------------------------------------------------
$1,950,000 General Electric Capital Corporation, 4.000%
due 07/01/1994.............................. 1,950,000
------------
TOTAL INVESTMENTS
(Cost $141,892,870*)................................ 121.4 % 139,513,852
OTHER ASSETS AND LIABILITIES (Net).................. (21.4 )% (24,605,462)
------- ------------
NET ASSETS.......................................... 100.0 % $114,908,390
------- ------------
------- ------------
REDEMPTION VALUE OF 7.000% CUMULATIVE PREFERRED STOCK
(including accumulated undeclared dividend).................. 30,087,500
------------
------------
NET ASSETS AVAILABLE FOR COMMON SHARES....................... $ 84,820,890
------------
------------
COMMON STOCK OUTSTANDING..................................... 13,126,024
------------
------------
NET ASSET VALUE PER SHARE OF COMMON STOCK.................... $6.46
----
----
<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.
*** Annualized yield to maturity.
CAD Canadian dollars
AUD Australian dollars
</TABLE>
See Notes to Portfolio of Investments.
10
<PAGE>
[LOGO] Notes to Portfolio of Investments
June 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. 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
("Cumulative Preferred Stock"), and (iii) the aggregate and 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 Fund's Board of Directors not to represent fair value.
11
<PAGE>
[LOGO] Notes to Portfolio of Investments (Continued)
June 30, 1994 (Unaudited)
---------------------------------------------------------
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 date
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.
Quarterly Results of Operations
- ---------------------------------------------------------
<TABLE>
<CAPTION>
NET INCREASE
NET REALIZED AND (DECREASE)
UNREALIZED GAIN/ IN NET ASSETS
INVESTMENT NET INVESTMENT (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>
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
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 0.23 (3,899,320) (0.30) (787,854) (0.07)
</TABLE>
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* Per share of Common Stock.
12
<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 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.
