ZENIX INCOME FUND INC.
EDGAR DESCRIPTIONS
DESCRIPTION OF ART WORK ON REPORT COVER
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" centered.
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---
ZENIX
INCOME
FUND INC.
---
ANNUAL REPORT
MARCH 31, 1995
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[ZENIX INCOME FUND INC. LOGO]
March 31, 1995
DEAR SHAREHOLDER:
We are pleased to provide the Annual Report and Portfolio of Investments
for the Zenix Income Fund for the year ended March 31, 1995. Over the past
twelve months, the Fund paid common stock dividends totaling $0.8686 per share,
equivalent to an annualized distribution rate of 14.77% based on the March 31,
1995 net asset value of $5.88 per share and 13.10% based on its New York Stock
Exchange closing price of $6.63 per share. The Fund generated a positive total
return on net asset value of 7.83% for the past 3 months and 0.42% for the past
12 months. The Fund's three month performance compares favorably to the 5.78%
average total return for all closed-end high yield funds as reported by Lipper
Analytical Services, a major mutual fund performance tracking organization. The
Fund's three month performance was clearly enhanced not only by the decline in
interest rates in the first quarter of 1995, but also its leveraged structure.
The Fund's 12-month performance, which was below the closed-end high yield
mutual fund average of 2.45%, was negatively impacted by a combination of
factors, the most important of which was the significant rise in interest rates
in 1994. Significantly, we note that during the past fiscal year the Fund's
leveraged structure, while supportive of an above-average dividend yield,
amplified the decline in the Fund's net asset value throughout 1994's bond
market decline. This contributed to the Fund's modest annual performance
returns, as did the significant rise in general interest rates in the bond
market in reaction to the Federal Reserve's tightening of monetary policy. The
Fund did not hold any defaulting issues during the past 12 months.
We continue to believe that the increased earnings for common stock
shareholders, resulting from the Fund's
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Shown below is a table of relevant statistics regarding leverage, market
prices, net asset values and dividend payments over the past year.
FINANCIAL DATA PER SHARE OF COMMON STOCK (UNAUDITED)
<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>
4/22/94 4/29/94 $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
10/24/94 10/31/94 6.875 5.96 .0690 6.53 5.049
11/22/94 11/30/94 6.625 5.81 .0690 6.29 5.600
12/22/94 12/30/94 6.250 5.62 .1256 5.94 5.989
1/24/95 1/31/95 6.250 5.58 .0690 5.94 5.799
2/21/95 2/28/95 6.250 5.78 .0630 5.94 5.990
3/24/95 3/31/95 6.625 5.87 .0630 6.29 5.874
</TABLE>
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.
2
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leverage, outweigh the impact of the leverage on the Fund's per share Net Asset
Value during a period of increasing interest rates. Accordingly, we have been
negotiating a revolving credit facility to replace the Senior Money Market
Notes(TM) which will mature on May 18, 1995.
MARKET AND ECONOMIC OVERVIEW
Economic growth was moderate in the first quarter of 1995. The slowdown in
consumption expenditures in the fourth quarter of 1994 appeared to continue into
the first quarter of 1995. The retail sector of the economy appears softer, with
little pricing power on the part of most retail chains. Even the automobile
industry -- which enjoyed a very strong 1994 -- has encountered weaker sales
trends in 1995. As mentioned in our third quarter report to shareholders,
throughout 1994, individuals financed a large portion of their purchases with
debt. As a result, individuals' debt levels are back to their historical highs.
This is probably acting as a drag on consumption expenditures. The industrial
side of the economy, while strong, also appears to be moderating based upon
recent economic statistics on industrial production. The Federal Reserve's
ongoing fear has been that the high levels of employment and robust industrial
production could begin to move inflation rates unacceptably higher. In fact,
inflation has increased only slightly to the 3% range as evidenced by the recent
economic statistics concerning consumer and producer prices. We believe these
increases remain manageable and are already reflected in the general bond
markets. We are not expecting much higher inflation rates considering the
slowdown in economic growth as well as the dramatic strides made in overall
corporate productivity in the United States over the past 10 years. We still
believe that many companies are much more cost effective today and are
consequently less pressured to raise prices than in prior economic expansions.
However, an increase in inflation beyond the current range could cause the
Federal Reserve to further raise short-term interest rates.
PORTFOLIO STRATEGY
In the last half of 1994, the portfolio moved to a fully invested position
with an average maturity of between six and seven years. As we have become more
confident of a mar-
3
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ket upturn in 1995, we have begun to implement an investment strategy that
favors deeper discount securities which will provide greater price appreciation
during market rallies. The Fund's largest industry weightings have remained in
forest products, paper and containers, metals and mining, and general
manufacturing. We have been reducing our metals and mining and auto and truck
parts manufacturers positions given the slowdown in those particular industries.
We have been adding to our more defensive industry positions such as cable TV,
broadcasting, media and wireless telecommunications. Since we believe the high
yield market will continue to improve in 1995, we have remained close to fully
invested with an average maturity of between 5-7 years.
SUMMARY THOUGHTS
We believe that the current market rally has the potential to continue and
that high yield investments still offer reasonable value at current levels. We
remain confident that the Federal Reserve will succeed in controlling economic
growth and inflation, and think that short-term interest rates will have peaked
in the first quarter of 1995. This first quarter rally in the general bond
markets should hopefully mark the end of one of the worst bond market declines
in the past century.
We appreciate your past support during these difficult times and look
forward to achieving improving results over the course of 1995. While patience
may still be required as the financial markets remain volatile in 1995, we
believe that this patience will be rewarded as market conditions strengthen.
Should you have any questions about your investment in the Fund, please call The
Shareholder Services Group, Inc. at (800) 331-1710.
SINCERELY,
/s/ Heath B. McLendon /s/ John C. Bianchi
--------------------- -------------------
Heath B. McLendon John C. Bianchi
Chairman of the Board Vice President and
Investment Officer
May 4, 1995
4
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[Script ZF located in upper left hand corner representing ZENIX FUND]
Portfolio of Investments
March 31, 1995
================================================================================
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
- ---------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES--113.6%
- ---------------------------------
PAPER/FOREST PRODUCTS/PRINTING--10.9%
Domtar Inc.:
$ 3,290,000 Notes,
12.000% due
04/15/2001 .......... $ 3,619,000
1,000,000 Sr. Notes,
11.750% due
03/15/1999 .......... 1,073,750
Indah Kiat
International
Financing
Company,
B.V., Sr. Secured
Notes:
1,100,000 11.375% due
06/15/1999 .......... 1,086,250
2,000,000 11.875% due
06/15/2002 .......... 1,952,500
1,895,000 Repap
Wisconsin Inc.,
2nd Priority
Sr. Secured
Notes,
9.875% due
05/01/2006 .......... 1,733,925
1,440,000 Riverwood
International
Corporation,
Sr. Sub. Note,
Series 2,
11.250% due
06/15/2002 .......... 1,517,400
1,025,000 S.D. Warren
Company,
Sr. Sub Note,
12.000% due
12/15/2004** ........ 1,086,500
----------
12,069,325
----------
HOTEL/GAMING--10.4%
$ 2,500,000 Bally's Grand
Inc., First
Mortgage Note,
10.375% due
12/15/2003 .......... $ 2,362,500
1,750,000 Boyd Gaming
Corporation,
Sr. Sub. Note,
Series B.,
10.750% due
09/01/2003 .......... 1,706,250
1,250,000 Empress River
Casino, Sr. Note,
10.750% due
04/01/2002 .......... 1,218,750
2,275,000 GNF
Corporation,
First Mortgage
Bond,
10.625% due
04/01/2003 .......... 1,768,813
1,275,000 Station Casinos
Inc., Sr. Sub
Notes,
9.625% due
06/01/2003 .......... 1,122,000
1,325,000 Trump Plaza
Funding Inc.,
First Mortgage
Note,
10.875% due
06/15/2001 .......... 1,073,250
3,054,901 Trump Taj
Mahal Fund,
Unit Building 1
Management,
Deb., (Payment-
in-kind),
11.350% due
11/15/1999 .......... 2,302,632
----------
11,554,195
----------
</TABLE>
See Notes to Financial Statements.
5
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[Script ZF located in upper left hand corner representing ZENIX FUND]
Portfolio of Investments (Continued)
March 31, 1995
================================================================================
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C>
- ---------------------------------------------------
CORPORATE BONDS AND NOTES--(CONTINUED)
- --------------------------------------
BROADCASTING--TV, CABLE AND
RADIO--9.8%
$ 2,075,000 Bell CableMedia
PLC, Sr.
Discount Note,
Step up Bond,
Zero coupon to
07/15/1999,
11.950% due
07/15/2004 .......... $ 1,255,375
3,000,000 Cablevision
Systems
Corporation,
Sr. Sub. Deb.,
9.875% due
02/15/2013 .......... 2,883,750
3,125,000 Continental
Cablevision Inc.,
Sr. Sub. Deb.,
11.000% due
06/01/2007 .......... 3,328,125
Rogers
Cablesystems
Ltd.:
CAD 1,275,000 Sr. Deb.,
9.650% due
01/15/2014 .......... 747,293
$ 525,000 Sr. Secured 2nd
Priority Deb.,
10.125% due
09/01/2012 .......... 519,094
1,625,000 Rogers
Communications
Inc., Sr. Deb.,
10.875% due
04/15/2004 .......... 1,639,219
500,000 Young
Broadcasting
Inc., Sr. Sub.
Notes,
11.750% due
11/15/2004 .......... 533,750
----------
10,906,606
----------
METAL/MINING--8.9%
$ 1,675,000 AK Steel
Corporation,
Sr. Note,
10.750% due
04/01/2004 .......... $ 1,685,469
1,000,000 Armco Inc.,
Sr. Note,
11.375% due
10/15/1999 .......... 1,000,000
2,500,000 Federal
Industries
Limited, CDA,
Sr. Note,
10.250% due
06/15/2000 .......... 2,340,625
2,575,000 Kaiser
Aluminum &
Chemical
Corporation,
Sr. Sub. Note,
12.750% due
02/01/2003 .......... 2,661,906
700,000 Republic
Engineered
Steels
Manufacturing,
First Mortgage
Note,
9.875% due
12/15/2001 .......... 640,500
1,500,000 UCAR Global,
Sr. Secured Note,
12.000% due
01/15/2005** ........ 1,569,375
----------
9,897,875
----------
PACKAGING/CONTAINERS--8.1%
1,750,000 Container
Corporation of
America,
Sr. Note,
11.250% due
05/01/2004 .......... 1,837,500
</TABLE>
See Notes to Financial Statements.
6
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[Script ZF located in upper left hand corner representing ZENIX FUND]
Portfolio of Investments (Continued)
March 31, 1995
================================================================================
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
- ---------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES--(CONTINUED)
- --------------------------------------
PACKAGING/CONTAINERS--(CONTINUED)
$ 3,300,000 Gaylord
Container
Corporation,
Sr. Note,
11.500% due
05/15/2001 .......... $ 3,465,000
1,000,000 Stone Container
Corporation,
Sr. Note,
12.625% due
07/15/1998 .......... 1,075,000
2,405,000 United States
Can Company,
Sr. Sub. Note,
13.500% due
01/15/2002 .......... 2,639,488
-----------
9,016,988
-----------
BUILDING/CONSTRUCTION--6.7%
2,150,000 American
Standard Inc.,
Sr. Deb.,
11.375% due
05/15/2004 .......... 2,319,312
1,550,000 Greystone
Homes Inc.,
Sr. Note,
10.750% due
03/01/2004 .......... 1,338,812
1,300,000 Hovnanian K.
Enterprises Inc.,
Sub. Note,
11.250% due
04/15/2002 .......... 1,126,125
450,000 Miles Homes
Services Unit,
Sr. Note,
12.000% due
04/01/2001 .......... 314,437
1,275,000 UDC Homes,
Sr. Note,
11.750% due
04/30/2003 .......... 878,156
BUILDING/CONSTRUCTION--(CONTINUED)
$ 1,575,000 US Home
Corporation,
Sr. Note,
9.750% due
06/15/2003 .......... $ 1,464,750
-----------
7,441,592
-----------
HEALTH CARE/DRUGS/HOSPITAL
SUPPLIES--6.5%
900,000 Charter Medical
Corporation,
Sr. Sub. Note,
11.250% due
04/15/2004 .......... 945,000
1,725,000 Healthtrust Inc.,
The Hospital
Company,
Sub. Note,
10.750% due
05/01/2002 .......... 1,886,719
1,200,000 National
Medical
Enterprises, Sr.
Note,
10.125% due
03/01/2005 .......... 1,236,000
2,850,000 Ornda
Healthcorp,
Sr. Sub. Note,
12.250% due
05/15/2002 .......... 3,113,625
-----------
7,181,344
-----------
RETAIL--4.7%
1,450,000 Barnes & Noble
Inc., Sr. Sub.
Note,
11.875% due
01/15/2003 .......... 1,584,125
3,000,000 Bradlees Inc.,
Sr. Sub. Note,
11.000% due
08/01/2002 .......... 2,651,250
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
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[Script ZF located in upper left hand corner representing ZENIX FUND]
Portfolio of Investments (Continued)
March 31, 1995
================================================================================
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
- ---------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES--(CONTINUED)
- --------------------------------------
RETAIL--(CONTINUED)
$ 1,025,000 Wickes Lumber
Company, Sr.
Sub. Note,
11.625% due
12/15/2003 .......... $ 958,375
-----------
5,193,750
-----------
GROCERY/CONVENIENCE STORES--4.5%
Farm Fresh Inc.:
925,000 Sr. Note,
12.250% due
10/01/2000 .......... 864,875
775,000 Sr. Note, Series A,
12.250% due
10/01/2000 .......... 724,625
2,000,000 P & C Food
Markets, Inc.,
Sr. Note,
11.500% due
10/15/2001 .......... 2,107,500
1,275,000 Pathmark Stores,
Inc., Sub. Note,
11.625% due
06/15/2002 .......... 1,294,125
-----------
4,991,125
-----------
INSURANCE COMPANIES--4.4%
2,250,000 Bankers Life
Holding
Corporation,
Sr. Sub. Notes,
Series B,
13.000% due
11/01/2002 .......... 2,565,000
2,100,000 Life Partners
Group, Inc., Sr.
Sub. Note,
12.750% due
07/15/2002 .......... 2,289,000
-----------
4,854,000
-----------
LEISURE/AMUSEMENT/MOTION
PICTURES--4.3%
$ 2,550,000 Coleman
Holdings, Inc.,
Note, Zero
coupon due
05/27/1998 .......... $ 1,807,313
1,575,000 Gillett Holdings
Inc., Sr. Sub.
Note,
12.250% due
06/30/2002 .......... 1,622,250
1,550,000 Remington
Arms, Inc.,
Sr. Sub. Note,
10.000% due
12/01/2003** ........ 1,338,812
-----------
4,768,375
-----------
ELECTRONICS/COMPUTERS--4.1%
2,800,000 Anacomp Inc.,
Sr. Sub. Note,
15.000% due
11/01/2000 .......... 2,796,500
3,150,000 Bell & Howell
Holdings
Company,
Series A,
Sr. Discount
Note, Step up
Bond, Zero
coupon to
03/01/2000,
11.500% due
03/01/2005 .......... 1,697,063
-----------
4,493,563
-----------
TRANSPORTATION--3.6%
1,000,000 Gearbulk Holdings
Limited, Sr. Note,
11.250% due
12/01/2004 .......... 1,040,000
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
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[Script ZF located in upper left hand corner representing ZENIX FUND]
Portfolio of Investments (Continued)
March 31, 1995
================================================================================
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
- ---------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES--(CONTINUED)
- --------------------------------------
TRANSPORTATION--(CONTINUED)
$ 2,805,000 Sea Containers
Limited, Sr.
Sub. Deb.,
12.500% due
12/01/2004 .......... $ 3,008,363
-----------
4,048,363
-----------
CHEMICALS--3.5%
3,825,000 NL Industries
Inc., Sr. Secured
Note,
11.750% due
10/15/2003 .......... 3,930,188
-----------
TEXTILES/APPAREL--3.4%
1,350,000 CMI Industries,
Sr. Sub. Note,
9.500% due
10/01/2003 .......... 1,164,375
650,000 Dan River Inc.,
Sr. Sub. Note,
10.125% due
12/15/2003 .......... 619,937
2,100,000 Hartmarx
Corporation,
Sr. Sub. Note,
10.875% due
01/15/2002 .......... 1,984,500
-----------
3,768,812
-----------
AUTOMOBILE/AUTO PARTS/TRUCK
MANUFACTURING--3.4%
650,000 Fairfield
Manufacturing
Inc., Sr. Sub. Note,
11.375% due
07/01/2001 .......... 617,500
850,000 Harvard
Industries, Inc.,
Sr. Note,
12.000% due
07/15/2004 .......... 878,688
AUTOMOBILE/AUTO PARTS/TRUCK
MANUFACTURING--(CONTINUED)
$ 1,000,000 SPX Corporation,
Sr. Sub. Note,
11.750% due
06/01/2002 .......... $ 1,042,500
1,175,000 Truck
Components
Inc., Sr. Note,
Series A,
12.250% due
06/30/2001 .......... 1,214,656
-----------
3,753,344
-----------
OIL/NATURAL GAS--3.4%
1,150,000 Giant Industries
Inc., Sr. Sub.
Notes,
9.750% due
11/15/2003 .......... 1,055,125
2,057,000 Mesa Capital
Corporation,
Notes, Step up
Bond, Zero
coupon to
06/30/1995,
12.750% due
06/30/1998 .......... 1,974,720
675,000 Santa Fe Energy
Resources Inc.,
Sr. Sub. Deb.,
11.000% due
05/15/2004 .......... 694,406
-----------
3,724,251
-----------
TOBACCO--3.2%
3,700,000 Consolidated
Cigar, Sr.
Sub. Note,
10.500% due
03/01/2003 .......... 3,478,000
-----------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
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[Script ZF located in upper left hand corner representing ZENIX FUND]
Portfolio of Investments (Continued)
March 31, 1995
================================================================================
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
- ---------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES--(CONTINUED)
- --------------------------------------
PERSONAL CARE PRODUCTS/COSMETICS--2.7%
$ 3,130,000 Revlon
Consumer
Products
Corporation,
Sr. Sub. Note,
10.500% due
02/15/2003 .......... $ 2,942,200
-----------
CONSUMER DURABLE GOODS/HOME
FURNISHINGS--2.3%
5,825,000 International
Semi-Tech,
Sr. Note,
Step up Bond,
Zero coupon to
08/15/2000,
11.500% due
08/15/2003 .......... 2,577,562
-----------
TELEPHONE/COMMUNICATIONS--2.2%
3,600,000 Nextel
Communication
Inc., Sr. Discount
Notes, Step up
Bond, Zero
coupon to
02/15/1999,
9.750% due
08/15/2004 .......... 1,512,000
1,550,000 Pagemart Inc., Sr.
Discount Note,
Step up Bond,
Zero coupon to
11/01/1998,
12.250% due
11/01/2003 .......... 961,000
-----------
2,473,000
-----------
PUBLISHING--2.0%
$ 1,850,000 Marvel Holdings,
Inc., Sr. Secured
Note, Series B,
Zero coupon due
04/15/1998 .......... $ 1,172,437
AUD 1,950,000 News America
Holdings, Inc.,
Deb., 8.625% due
02/07/2014 .......... 1,079,159
-----------
2,251,596
-----------
AEROSPACE AND DEFENSE--0.6%
$ 650,000 Tracor, Inc., Sr.
Sub. Note,
10.875% due
08/15/2001 .......... 653,250
-----------
TOTAL
CORPORATE
BONDS AND
NOTES (Cost
$129,715,553) ....... 125,969,304
-----------
SHARES
- ---------------------------------------------------
PREFERRED STOCKS--3.1%
- ---------------------------------------------------
51,788 Foxmeyer
Health
Corporation,
Preferred,
Series A,
(Payment-in-
kind),
Exchangable,
4.200% .............. 1,819,053
7,000 Geneva Steel
Company,
Preferred,
Series B,
(Payment-in-
kind),
Exchangable,
14.000%+ ............ 749,000
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
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[Script ZF located in upper left hand corner representing ZENIX FUND]
Portfolio of Investments (Continued)
March 31, 1995
================================================================================
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
- ---------------------------------------------------
<S> <C>
PREFERRED STOCKS--(CONTINUED)
- -----------------------------
8,392 K-III
Communications
Corporation,
Preferred,
Series B,
(Payment-in-
kind),
Exchangable,
11.625% ............. $ 814,015
------------
TOTAL
PREFERRED
STOCKS (Cost
$3,373,439) ......... 3,382,068
------------
WARRANTS--0.0%
5,400 Miles Homes
Inc., Expire
04/01/1997+ ......... 2,700
7,130 Pagemart Inc.,
Expire
12/31/2003+ ......... 24,955
------------
TOTAL
WARRANTS
(Cost $32,064) ...... 27,655
------------
COMMERCIAL PAPER--2.1%
(Cost $2,361,000)
$ 2,361,000 General Electric
Capital
Corporation,
5.900% due
04/03/1995 .......... $2,361,000
------------
TOTAL INVESTMENTS
(Cost $135,482,056*) ....... 118.8% 131,740,027
SENIOR MONEY
MARKET NOTES
DUE 1995 (including ac-
crued interest) ............ (23.3) (25,837,898)
OTHER ASSETS AND
LIABILITIES (Net) .......... 4.5 5,019,435
----- ------------
NET ASSETS ................. 100.0% $110,921,564
===== ============
</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.
+ Non-income producing security.
CAD Canadian dollars
AUD Australian dollars
See Notes to Financial Statements.
11
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<TABLE>
[Script ZF located in upper left hand corner representing ZENIX FUND]
Statement of Assets and Liabilities
March 31, 1995
====================================================================================
ASSETS:
<S> <C> <C>
Investments, at value (Cost $135,482,056) (Note 1)
See accompanying schedule........................... $131,740,027
Interest receivable................................... 3,857,472
Receivable for investment securities sold............. 2,625,407
------------
Total Assets........................................ 138,222,906
LIABILITIES:
Senior Money Market NotesTM due 1995 (Note 4)......... $25,800,000
Payable for investment securities purchased........... 1,184,000
Investment advisory fee payable (Note 2).............. 57,741
Administration fee payable (Note 2)................... 23,096
Transfer agent fees payable (Note 2).................. 19,585
Custodian fees payable (Note 2)....................... 7,500
Due to custodian...................................... 2,804
Accrued Directors' fees and expenses (Note 2)......... 250
Accrued expenses and other payables................... 206,366
Total Liabilities -----------
27,301,342
------------
NET ASSETS............................................ $110,921,564
============
NET ASSETS AND REDEEMABLE PREFERRED STOCK
CONSIST OF:
7.00% Cumulative Preferred Stock (Note 5)............. $ 30,000,000
Undistributed net investment income................... 428,367
Accumulated net realized loss on investments sold..... (32,653,650)
Unrealized depreciation of investments................ (3,742,029)
Par value of Common Stock............................. 136,552
Paid-in capital in excess of par value................ 116,752,324
------------
Total Net Assets.................................... $110,921,564
============
PER SHARE
---------
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 (13,655,154 shares of Common Stock ----------- ------------
outstanding)........................................ $ 5.88 80,309,064
----------- ------------
TOTAL NET ASSETS...................................... $110,921,564
============
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
B19165.OUT
<TABLE>
[Script ZF located in upper left hand corner representing ZENIX FUND]
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1995
===============================================================================
<S> <C> <C>
INVESTMENT INCOME:
Interest......................................... $14,806,171
Dividends........................................ 189,813
-----------
Total Investment Income........................ 14,995,984
EXPENSES:
Interest expense (Note 4)........................ $ 1,276,298
Investment advisory fee (Note 2)................. 683,197
Administration fee (Note 2)...................... 263,668
Legal and audit fees............................. 78,229
Transfer agent fees (Note 2)..................... 77,195
Custodian fees (Note 2).......................... 43,995
Directors' fees and expenses (Note 2)............ 38,778
Other............................................ 147,561
-----------
Total Expenses................................. 2,608,921
-----------
NET INVESTMENT INCOME............................ 12,387,063
-----------
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (NOTES 1 AND 3):
Net realized loss on:
Securities transactions........................ (6,730,969)
Futures contracts.............................. (119,504)
Foreign currency transactions.................. (333)
-----------
Net realized loss on investments during
the year....................................... (6,850,806)
-----------
Net unrealized depreciation of investments
during the year................................ (3,705,897)
-----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS................................. (10,556,703)
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS................................ $ 1,830,360
============
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
B19165.OUT
<TABLE>
[Script ZF located in upper left hand corner representing ZENIX FUND]
Statement of Cash Flows
For the Year Ended March 31, 1995
==============================================================================================================
<S> <C> <C>
NET INCREASE IN CASH:
Cash flows from operating activities and investing activities:
Interest and dividends received.............................. $ 13,460,242
Operating expenses paid....................................... (1,356,395)
Interest payments on Senior Money Market Notes(TM)............ (1,259,040)
Proceeds from short-term securities, net...................... 3,067,000
Purchases of long-term investment securities and
purchased options.......................................... (110,961,600)
Proceeds from disposition of long-term investment
securities and purchased options........................... 106,439,476
Net proceeds from futures transactions....................... (119,504)
-------------
Net cash provided by operating and
investing activities:..................................... $ 9,270,179
Cash flows from financing activities:
Cash dividends paid on 7.00% Cumulative
Preferred Stock............................................. (2,100,000)
Cash dividends paid on Common Stock*......................... (7,146,909)
-------------
Net cash used by financing activities....................... (9,246,909)
------------
Net increase in cash........................................... 23,270
Cash--beginning of year........................................ (26,074)
------------
Cash--end of year.............................................. $ (2,804)
============
RECONCILIATION OF NET INCREASE IN NET
ASSETS TO NET CASH PROVIDED BY OPERATING
AND INVESTING ACTIVITIES:
Net increase in net assets resulting from operations........... $ 1,830,360
Amortization of premium on securities........................ 1,800,266
Decrease in investments...................................... 7,488,823
Decrease in receivable for investment securities sold........ 2,152,466
Decrease in dividends and interest receivable................ 84,383
Decrease in payable for investment securities purchased...... (4,079,604)
Decrease in accrued expenses and other payables.............. (6,515)
-------------
Total adjustments........................................... 7,439,819
------------
Net cash provided by operating and investing activities........ $ 9,270,179
============
</TABLE>
- -----------
*Non-cash financing activities include reinvestment of dividends of $4,383,794.
See Notes to Financial Statements.
14
<PAGE>
B19165.OUT
<TABLE>
[Script ZF located in upper left hand corner representing ZENIX FUND]
Statement of Changes in Net Assets
March 31, 1995
===========================================================================================================
YEAR ENDED YEAR ENDED
MARCH 31, 1995 MARCH 31, 1994
-------------- --------------
<S> <C> <C>
Net investment income....................................... $ 12,387,063 $ 12,968,431
Net realized gain/(loss) on securities
transactions, futures contracts and foreign
currency transactions during the year..................... (6,850,806) 9,187,169
Net unrealized depreciation of investments.
during the year........................................... (3,705,897) (11,077,338)
------------ ------------
Net increase in net assets resulting
from operations........................................... 1,830,360 11,078,262
Dividends paid from net investment income to:
9.67% Cumulative Preferred Stockholders................... -- (1,390,063)
7.00% Cumulative Preferred Stockholders................... (2,100,000) (1,575,000)
Common Stockholders....................................... (11,530,704) (10,349,911)
Net increase in net assets from Common Stock
transactions (Note 6)..................................... 4,383,794 3,988,030
------------ ------------
Net increase/(decrease) in net assets....................... (7,416,550) 1,751,318
NET ASSETS:
Beginning of year........................................... 118,338,114 116,586,796
------------ ------------
End of year (including undistributed
net investment income of $428,367 and
$1,672,341, respectively)................................. $110,921,564 $118,338,114
============ ============
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
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 year:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31,
1995 1994*
---------- ----------
<S> <C> <C>
Operating Performance:
Net asset value, beginning of year.............................. $ 6.76 $ 6.86
------- -------
Net investment income........................................... 0.93 1.02
Net realized and unrealized gain/(loss) on investments.......... (0.78) (0.13)
------- -------
Net increase/(decrease) in net asset value resulting from
investment operations......................................... 0.15 0.89
Underwriting commissions and offering costs on 7.00%
Cumulative Preferred Stock.................................... -- --
Distributions:
Dividends declared to 7.00% Preferred Stockholders.............. (0.16) (0.11)
Dividends declared to 9.67% Preferred Stockholders.............. -- (0.12)
Dividends paid from net investment income....................... (0.87) (0.82)
Change in accumulated undeclared dividends on
Preferred Stock............................................... -- 0.06
------- -------
Total from distributions........................................ (1.03) (0.99)
------- -------
Net asset value, end of year.................................... $ 5.88 $ 6.76
======= =======
Market value, end of year....................................... $ 6.63 $ 7.13
======= =======
Total investment return......................................... 6.41% 10.02%
======= =======
Ratios to average net assets available to Common Shareholders/
supplemental information:
Net assets, end of year (in 000's).............................. $80,309 $87,726
Net investment income........................................... 15.35% 14.38%
Interest expense................................................ 1.58% 0.92%
Other expense................................................... 1.65% 1.60%
Portfolio turnover rate......................................... 79% 102%
</TABLE>
- --------------
* The Fund commenced operations on April 27, 1988.
** Annualized
* Per share amounts have been calculated using the monthly average shares
method, which more appropriately presents the per share data for the year
ended March 31, 1994, since the use of the undistributed net investment
income method does not accord with results of operations.
See Notes to Financial Statements.
16
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Financial Highlights (Continued)
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1993 1992 1991 1990 1989*
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating Performance:
Net asset value, beginning of year.............................. $ 6.39 $ 5.58 $ 6.30 $ 8.71 $ 9.23
------- ------- ------- ------- -------
Net investment income........................................... 1.07 1.08 1.17 1.42 1.29
Net realized and unrealized gain/(loss) on investments.......... 0.51 0.82 (0.74) (2.37) (0.55)
------- ------- ------- ------- -------
Net increase/(decrease) in net asset value resulting from
investment operations......................................... 1.58 1.90 0.43 (0.95) 0.74
Underwriting commissions and offering costs on 7.00%
Cumulative Preferred Stock.................................... (0.05) -- -- -- --
Distributions:
Dividends declared to 7.00% Preferred Stockholders.............. -- -- -- -- --
Dividends declared to 9.67% Preferred Stockholders.............. (0.23) (0.24) (0.25) (0.26) (0.13)
Dividends paid from net investment income....................... (0.82) (0.85) (0.90) (1.20) (1.01)
Change in accumulated undeclared dividends on
Preferred Stock............................................... (0.01) -- -- -- (0.12)
------- ------- ------- ------- -------
Total from distributions........................................ (1.06) (1.09) (1.15) (1.46) (1.26)
------- ------- ------- ------- -------
Net asset value, end of year.................................... $ 6.86 $ 6.39 $ 5.58 $ 6.30 $ 8.71
======= ======= ======= ======= =======
Market value, end of year....................................... $ 7.25 $ 6.63 $ 5.50 $ 5.88 $ 9.50
======= ======= ======= ======= =======
Total investment return......................................... 24.02% 39.12% 10.58% (27.68)% 5.88%
======= ======= ======= ======= =======
Ratios to average net assets available to Common Shareholders/
supplemental information:
Net assets, end of year (in 000's).............................. $85,225 $75,818 $62,518 $69,213 $90,023
Net investment income........................................... 12.89% 14.16% 16.12% 15.11% 13.84%**
Interest expense................................................ 1.14% 2.10% 4.18% 5.16% 4.61%**
Other expense................................................... 1.99% 2.15% 2.47% 2.32% 2.04%**
Portfolio turnover rate......................................... 93% 86% 68% 81% 105%
</TABLE>
- --------------
* The Fund commenced operations on April 27, 1988.
** Annualized
* Per share amounts have been calculated using the monthly average shares
method, which more appropriately presents the per share data for the year
ended March 31, 1994, since the use of the undistributed net investment
income method does not accord with results of operations.
See Notes to Financial Statements.
17
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Financial Highlights (Continued)
================================================================================
The table below sets out information with respect to Preferred Stock and
Money Market Notes that are currently outstanding.
<TABLE>
<CAPTION>
TOTAL AMOUNT INVOLUNTARY AVERAGE MARKET
OUTSTANDING ASSET LIQUIDATING VALUE PER SHARE
EXCLUSIVE OF COVERAGE PREFERENCE (EXCLUDES BANK
TREASURY SECURITIES PER SHARE PER SHARE(2) LOANS)(2)(4)
------------------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
Year Ended $30,000,000 * $ 2,439 1,000 1,000
3/31/95 25,800,000 *** 527,555 100,000 100,000
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 Ended 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
</TABLE>
- --------------
* 7.00% Cumulative Preferred Stock, redeemable April 15, 2000.
** 9.67% Cumulative Preferred Stock, redeemed April 15, 1993.
*** Senior Money Market NotesTM 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.
See Notes to Financial Statements.
18
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Notes to Financial Statements
March 31, 1995
================================================================================
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 7.00%
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
19
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Notes to Financial Statements (Continued)
March 31, 1995
================================================================================
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.
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.
Futures contracts: The Fund may enter into futures contracts. The
Fund's futures transactions will be entered into for hedging purposes to
protect against a decline in the price of securities that the Fund owns, or
to protect the Fund against an increase in the price of securities it is
committed to purchase.
Upon entering into a futures contract, the Fund is required to deposit
with the broker an amount of cash or cash equivalents equal to a certain
percentage of the contract amount. This is known as the "initial margin."
Subsequent payments ("variation margin") are made or received by the Fund
each day, depending on the daily fluctuation of the value of the contract.
For financial statement purposes, an amount equal to the settlement
amount of the contract is included in its Statement of Assets and
Liabilities as an asset and as an equivalent liability. For long futures
positions, the asset is marked-to-market daily; for short futures
positions, the liability is marked-to-market daily. The daily changes in
the contract are recorded as unrealized gains or losses. The Fund
recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures
contracts as a hedging device. The change in value of futures contracts
primarily corresponds with the value of their underlying instruments, which
may not correlate with the change in value of the hedged investments. In
addition,
20
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Notes to Financial Statements (Continued)
March 31, 1995
================================================================================
there is the risk the Fund may not be able to enter into a closing
transaction because of an illiquid secondary market.
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
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
21
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Notes to Financial Statements (Continued)
March 31, 1995
================================================================================
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. Permanent
differences incurred during the Fund's fiscal year resulting from different
book and tax accounting for foreign currency have been reclassified to
undistributed net investment income at year end.
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.
22
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Notes to Financial Statements (Continued)
March 31, 1995
================================================================================
Cash flow information: Cash, as used in the Statement of Cash Flows,
is the amount reported as "Due to custodian" 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 Greenwich Street Advisors, 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 Notes(TM) 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
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.
23
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Notes to Financial Statements (Continued)
March 31, 1995
================================================================================
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 year ended March 31, 1995, cost of purchases and proceeds from
sales of securities, excluding U.S. government and short-term investments,
aggregated $106,467,258 and $103,975,655, respectively. At March 31, 1995,
aggregate gross unrealized appreciation for all securities in which there was an
excess of value over tax cost was $2,284,537, and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
value was $6,026,566.
4. SENIOR MONEY MARKET NOTESTM DUE 1995
The Fund issued Senior Money Market Notes(TM) under an indenture between
the Fund and Chemical Bank Corp., as trustee. At March 31, 1995, the Fund had an
outstanding Senior Money Market(TM) 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 year ended March 31,
1995, the interest rates ranged from 3.75% to 5.99% with an effective rate of
4.95%. Interest expense for the year ended March 31, 1995 was
$1,276,298.
24
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Notes to Financial Statements (Continued)
March 31, 1995
================================================================================
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 was paid to
Shearson Lehman Brothers, and before offering expenses of $223,475, amounted to
$29,550,000. At March 31, 1995, 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 March 31, 1995.
6. COMMON STOCK
At March 31, 1995, 250,000,000 shares of $.01 par value Common Stock were
authorized.
Common Stock transactions were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
MARCH 31, 1995 MARCH 31, 1994
------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Issued as reinvestment
of dividends from net
investment income................ 676,219 $4,383,794 547,199 $3,988,030
======= ========== ======= ==========
</TABLE>
7. CAPITAL LOSS CARRYFORWARD
As of March 31, 1995, the Fund had available for Federal tax purposes
unused capital loss carryforwards of $30,676,038. 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
4,872,861 03/31/2003
</TABLE>
In accordance with tax law, the Fund has elected to defer the recognition
of losses occurring between October 31 and March 31 until the first day of the
25
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Notes to Financial Statements (Continued)
March 31, 1995
================================================================================
following fiscal year. The amount of such deferral is $1,371 of currency losses
and $1,977,612 of capital losses. These losses for tax purposes will be deemed
to occur on April 1, 1995.
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.
10. SUBSEQUENT EVENT
On May 16, 1995 Zenix Income Fund Inc. entered into a $30,000,000 credit
facility with PNC Bank, National Association which will replace the Senior
Money Market Notes(TM) (as described in footnote 4). Moody's Investors Service
Inc. and Standard & Poor's have reconfirmed their respective aa3 and AA+
ratings of the Fund's 7% cumulative preferred stock.
26
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Notes to Financial Statements (Continued)
March 31, 1995
================================================================================
Quarterly Results of Operations (Unaudited)
- --------------------------------------------------------------------------------
<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>
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)
December 31, 1994 3,833,137 0.28 3,133,437 0.23 (4,508,973) (0.33) (1,375,536) (0.10)
March 31, 1995 3,651,680 0.27 2,926,309 0.22 3,514,541 0.26 6,440,850 0.48
</TABLE>
- --------------
* Per share of Common Stock
27
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Report of Independent Accountants
================================================================================
To the Shareholders and Board of Directors of
Zenix Income Fund Inc.:
We have audited the accompanying statement of assets and liabilities of
Zenix Income Fund Inc., including the schedule of portfolio investments, as of
March 31, 1995, the related statements of operations and cash flows for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended and the financial highlights for each of the six years in
the period ended March 31, 1995 and for the period from April 27, 1988
(commencement of operations) through March 31, 1989. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Zenix Income Fund Inc. as of March 31, 1995, the results of its operations and
cash flows for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the six years in the period ended March 31, 1995 and for the period from April
27, 1988 (commencement of operations) through March 31, 1989, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
May 12, 1995
28
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Tax Information (Unaudited)
Fiscal Year Ended March 31, 1995
================================================================================
The following tax information represents fiscal year end disclosures of
various tax benefits passed through to shareholders at calendar year end.
Of the distribution from ordinary income made by the Fund during the fiscal
year ended March 31, 1995, 1.27% represents the amount of each distribution
which will qualify for the dividend received deduction available to corporate
shareholders.
The above figures may differ from those cited elsewhere in this report due
to differences in the calculations of income and capital gains for Securities
and Exchange Commission (book) purposes and Internal Revenue Service (tax)
purposes.
29
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Additional Information (Unaudited)
================================================================================
PORTFOLIO MANAGEMENT
John C. Bianchi, who is Vice President and Investment Officer of the Fund,
is primarily responsible for management of the Fund's assets. Mr. Bianchi has
served the Fund in these capacities since the commencement of the Fund's
operations.
DIVIDEND REINVESTMENT PLAN
Under the Fund's Dividend Reinvestment Plan (the "Plan"), a shareholder
whose Common Stock is registered in his own name will have all distributions
reinvested automatically by The Shareholder Services Group, Inc. ("TSSG") as
agent under the Plan, unless the shareholder elects to receive cash.
Distributions with respect to shares registered in the name of a broker-dealer
or other nominee (that is, in "street name") will be reinvested by the broker or
nominee in additional Common Stock under the Plan, but only if the service is
provided by the broker or nominee, and the broker or nominee makes an election
on behalf of the shareholder to participate in the Plan. A shareholder who holds
Common Stock registered in the name of a broker or other nominee may not be able
to transfer the Common Stock to another broker or nominee and continue to
participate in the Plan. Investors who own Common Stock registered in street
name should consult their broker or nominee for details regarding reinvestment.
The number of shares of Common Stock distributed to participants in the
Plan in lieu of a cash dividend is determined in the following manner. Whenever
the market price of the Fund's Common Stock is equal to or exceeds 98% of net
asset value per share, participants will be issued shares of Common Stock valued
at the greater of (i) 98% of net asset value per share or (ii) 95% of the then
current market price. If 98% of net asset value per share of Common Stock at the
time of valuation exceeds the market price of the Common Stock, TSSG will buy
shares of the Fund's Common Stock on the open market, on the New York Stock
Exchange, Inc. or elsewhere, beginning on the payment date of the dividend or
distribution, until it has expended for such purchases all of the cash that
would otherwise be payable to the par-
30
<PAGE>
B19165.OUT
[Script ZF located in upper left hand corner representing ZENIX FUND]
Additional Information (Unaudited)
(Continued)
================================================================================
ticipants. The number of purchased shares that will then be credited to the
participant's accounts will be based on the average per share purchase price of
the shares so purchased, including brokerage commissions. If TSSG commences
purchases in the open market and the market price of the shares subsequently
exceeds 98% of net asset value before the completion of the purchases, TSSG will
attempt to terminate purchases in the open market and cause the Fund to issue
the remaining dividend or distribution in shares at 98% of net asset value per
share. In this case, the number of shares of Common Stock received by the
participant will be based on the weighted average of prices paid for shares
purchased in the open market and the price at which the Fund issues the
remaining shares.
Plan participants are not subject to any charge for reinvesting dividends
or capital gains distributions. Each Plan participant will, however, bear a
proportionate share of brokerage commissions incurred with respect to TSSG's
open market purchases of shares of Common Stock in connection with the
reinvestment of dividends or capital gains distributions. For the fiscal year
ending March 31, 1995, no such brokerage commissions were incurred.
The automatic reinvestment of dividends and capital gains distributions
will not relieve Plan participants of any income tax that may be payable on the
dividends or capital gains distributions. A participant in the Plan will be
treated for Federal income tax purposes as having received, on the dividend
payment date, a dividend or distribution in an amount equal to the cash that the
participant could have received instead of shares of Common Stock.
A shareholder may terminate participation in the Plan at any time by
notifying TSSG in writing. A termination will be effective immediately if notice
is received by TSSG not less than 10 days before any dividend or distribution
record date. Otherwise, the termination will be effective, and only with respect
to any subsequent dividends or distributions, on the first trading day after the
dividend or distribution has been credited to the participant's account in
additional shares of Common Stock of the Fund. Upon termination according to a
participant's instructions, TSSG will either (a) issue certificates for the
whole shares credited to a Plan account and a check representing any
31
<PAGE>
B19165.OUT
Additional Information (Unaudited)
(Continued)
================================================================================
fractional shares or (b) sell the shares in the market. There will be a $5.00
fee assessed for liquidation service, plus brokerage commissions, and TSSG is
authorized to sell a sufficient number of a participant's shares to cover such
amounts.
The Plan is described in more detail on pages 26-27 of the Fund's
Prospectus dated April 20, 1988. Information concerning the Plan may be obtained
from TSSG at 1-(800) 331-1710.
32
<PAGE>
B19165.OUT
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
Jessica Bibliowicz
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.
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 3
[NAME] Zenix Income Fund Inc.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] Mar-31-1995
[PERIOD-END] Mar-31-1995
[INVESTMENTS-AT-COST] 135,482,056
[INVESTMENTS-AT-VALUE] 131,740,027
[RECEIVABLES] 6,482,879
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 138,222,906
[PAYABLE-FOR-SECURITIES] 1,184,000
[SENIOR-LONG-TERM-DEBT] 25,800,000
[OTHER-ITEMS-LIABILITIES] 317,342
[TOTAL-LIABILITIES] 27,301,342
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 116,888,876
[SHARES-COMMON-STOCK] 13,655,154
[SHARES-COMMON-PRIOR] 12,978,935
[ACCUMULATED-NII-CURRENT] 428,367
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] (32,653,650)
[ACCUM-APPREC-OR-DEPREC] (3,742,029)
[NET-ASSETS] 110,921,564
[DIVIDEND-INCOME] 189,813
[INTEREST-INCOME] 14,806,171
[OTHER-INCOME] 0
[EXPENSES-NET] 2,608,921
[NET-INVESTMENT-INCOME] 12,387,063
[REALIZED-GAINS-CURRENT] (6,850,806)
[APPREC-INCREASE-CURRENT] (3,705,897)
[NET-CHANGE-FROM-OPS] 1,830,360
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 11,530,704
[DISTRIBUTIONS-OF-GAINS] 0
<DISTRIBUTION-OTHER> 2,100,000
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 676,219
[NET-CHANGE-IN-ASSETS] (7,416,550)
[ACCUMULATED-NII-PRIOR] 1,672,341
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] (25,803,177)
[GROSS-ADVISORY-FEES] 683,197
[INTEREST-EXPENSE] 1,276,298
[GROSS-EXPENSE] 2,608,921
[AVERAGE-NET-ASSETS] 136,503,063
[PER-SHARE-NAV-BEGIN] 6.76
[PER-SHARE-NII] 0.93
[PER-SHARE-GAIN-APPREC] (0.78)
[PER-SHARE-DIVIDEND] 0.87
[PER-SHARE-DISTRIBUTIONS] 0.16
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 5.88
[EXPENSE-RATIO] 1.65
[AVG-DEBT-OUTSTANDING] 25,800,000
[AVG-DEBT-PER-SHARE] 1.89
[ARTICLE] 6
[SERIES]
[NUMBER] 3
[NAME] Zenix Income Fund Inc.
</TABLE>
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] Mar-31-1995
[PERIOD-END] Mar-31-1995
[INVESTMENTS-AT-COST] 135,482,056
[INVESTMENTS-AT-VALUE] 131,740,027
[RECEIVABLES] 6,482,879
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 138,222,906
[PAYABLE-FOR-SECURITIES] 1,184,000
[SENIOR-LONG-TERM-DEBT] 25,800,000
[OTHER-ITEMS-LIABILITIES] 317,342
[TOTAL-LIABILITIES] 27,301,342
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 116,888,876
[SHARES-COMMON-STOCK] 13,655,154
[SHARES-COMMON-PRIOR] 12,978,935
[ACCUMULATED-NII-CURRENT] 428,367
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] (32,653,650)
[ACCUM-APPREC-OR-DEPREC] (3,742,029)
[NET-ASSETS] 110,921,564
[DIVIDEND-INCOME] 189,813
[INTEREST-INCOME] 14,806,171
[OTHER-INCOME] 0
[EXPENSES-NET] 2,608,921
[NET-INVESTMENT-INCOME] 12,387,063
[REALIZED-GAINS-CURRENT] (6,850,806)
[APPREC-INCREASE-CURRENT] (3,705,897)
[NET-CHANGE-FROM-OPS] 1,830,360
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 11,530,704
[DISTRIBUTIONS-OF-GAINS] 0
<DISTRIBUTION-OTHER> 2,100,000
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 676,219
[NET-CHANGE-IN-ASSETS] (7,416,550)
[ACCUMULATED-NII-PRIOR] 1,672,341
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] (25,803,177)
[GROSS-ADVISORY-FEES] 683,197
[INTEREST-EXPENSE] 1,276,298
[GROSS-EXPENSE] 2,608,921
[AVERAGE-NET-ASSETS] 136,503,063
[PER-SHARE-NAV-BEGIN] 6.76
[PER-SHARE-NII] 0.93
[PER-SHARE-GAIN-APPREC] (0.78)
[PER-SHARE-DIVIDEND] 0.87
[PER-SHARE-DISTRIBUTIONS] 0.16
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 5.88
[EXPENSE-RATIO] 1.65
[AVG-DEBT-OUTSTANDING] 25,800,000
[AVG-DEBT-PER-SHARE] 1.89
</TABLE>
