<PAGE>
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Z E N I X
INCOME
FUND INC.
---
[LOGO]
The fund name is printed in the upper left-hand corner.
A picture of the New York Stock Exchange building is shown on
half the cover diagonally. A circle showing the "Z" and "X"
from the fund name is run together and is centered.
QUARTERLY REPORT
DECEMBER 31, 1994
<PAGE>
- ----------------------------
- --------------------------
ZENIX INCOME FUND INC.
[LOGO]
December 31, 1994
DEAR
SHAREHOLDER: We are pleased to provide the third quarter report for
Zenix Income Fund Inc. for the period ended December
31, 1994. Over the past three months, the Fund paid
dividends totaling $0.264 per share, equivalent to an
annualized distribution rate of 10.97%, excluding the
stub period dividend of $0.0566, based on the December
31, 1994 net asset value of $7.55 per share. This
equates to an annualized distribution rate of 13.52%
based on the Fund's New York Stock Exchange closing
price of $6.125 on that date. The Fund generated a
negative total return of 7.12% taking into account the
decline in the market price over the past 3 months.
The Fund was negatively impacted by a combination of
factors with the major one being the significant rise
in interest rates in 1994. In addition, the Fund's
leveraged structure, while supportive of an
above-average dividend yield, amplified the decline in
the Fund's net asset value. It should be noted,
however, that the Fund's negative performance was not
the result of holding any defaulting issues but, as
mentioned earlier, attributable to the significant
rise in interest rates in reaction to the Federal
Reserve's tightening of monetary policy. In this
environment, even relatively conservative,
intermediate-maturity (3-7 years) Treasuries
experienced a meaningful erosion in principal value
over the course of the past 12 months.
<PAGE>
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Shown below is a table of relevant statistics for the Fund
regarding leverage, market prices, net asset values and dividend
payments over the past year.
FINANCIAL DATA PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
INTEREST
RATE ON
SENIOR MON-
NYSE NET DIVIDEND EY MARKET
RECORD CLOSING ASSET DIVIDEND REINVESTED NOTES DUE
DATE PAY DATE PRICE* VALUE PAID PRICE 1995
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------- -------- ------- ----- ------- -------- ---------
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 4/29/94 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
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>
2
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<PAGE>
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MARKET AND ECONOMIC OVERVIEW
While the economic expansion remains on track, weaker than
expected retail sales in the final months of 1994 may be
evidence that consumer consumption is finally slowing.
Throughout 1994, individuals financed a large portion of their
purchases with debt, and as a result debt levels are back to
their historical highs. This may be starting to act as a drag on
consumption expenditures. The industrial side of the economy
remains strong, however, with factory capacity utilization at
relatively high levels. The Federal Reserve's fear is that
inflation rates may begin to move unacceptably higher given the
high level of employment and robust industrial production. The
relatively modest 2.7% increase in the Consumer Price Index for
1994 indicates that inflation has not increased. However, to
prevent the general economy from overheating with unacceptably
higher inflation rates, the Federal Reserve will most likely
raise short-term interest rates by another 100 basis points (one
percentage point) in the first half of 1995. This is in addition
to the 250 basis point (2.50 percentage points) increase in
short-term interest rates in 1994.
On the political front, the recent overpowering Republican
victories in Congress may mark a watershed in economic circles
as well. In addition to the expected changes in fiscal policy
where government may actually be downsized for the first time in
over 40 years, some market analysts believe that the recent
Republican victories will alter the relationship between the
U.S. Congress and the Federal Reserve Board. The Federal Reserve
in effect may be given stronger support to pursue a more
consistent anti-inflationary monetary policy which would be
welcomed by the bond market. In any event, we believe that the
Federal Reserve will succeed in controlling economic growth and
limiting inflationary pressures, which should allow interest
rates to once again move lower with corresponding appreciation
in bond prices. This interest rate decline may not occur for
another three to six months as economic growth
3
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<PAGE>
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and inflation shift to a more moderate trajectory. In the
meantime, we would not be surprised to see additional interest
rate increases on the part of the Federal Reserve to ensure a
continuation in the moderate inflation rates we have witnessed
over the past several years.
PORTFOLIO STRATEGY
Throughout 1994, we continued to shift the portfolio into
higher coupon, intermediate maturity (5-10 years) issues of the
relatively more economically-sensitive companies in order to
limit interest rate risk and to capitalize on the improving
economy. Our largest industry weightings remain in forest
products, paper and containers, metals and mining, and general
manufacturing. We have been very slowly reducing our gaming
exposure given the increasingly competitive conditions in that
industry. Since we believe the high yield market is in a
bottoming phase, we have moved to a relatively fully invested
position with an average maturity of between seven and eight
years. When we become more confident of a sustainable market
upturn in 1995, we will begin to invest in deeper discount
securities which will provide greater price appreciation
potential during market rallies.
SUMMARY THOUGHTS
We believe that the worst of the bond market correction is
behind us and that the high yield market offers reasonable value
at current levels. However, we also believe that the market may
not move higher in price until the Federal Reserve is closer to
completing its monetary tightening. We remain confident that the
Federal Reserve will succeed in controlling economic growth and
inflation, and that short-term interest rates will peak in the
first half of 1995. This could 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
4
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<PAGE>
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be required as the financial markets bottom in 1995, we believe
that 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,
[LOGO]
Heath B. McLendon John C. Bianchi, CFA
Chairman of the Board Vice President and
and Investment Officer Investment Officer
February 20, 1995
5
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<PAGE>
Portfolio of Investments
[LOGO]
a December 31, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
Face Value
Value (Note 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <C>
NOTES--94.2% -------------------------------------
PAPER/FOREST PRODUCTS/PRINTING--9.5%
Domtar Inc.:
$3,290,000 Notes,
12.000% due 04/15/2001.......................... $ 3,405,150
1,000,000 Sr. Notes,
11.750% due 03/15/1999.......................... 1,025,000
Indah Kiat International Financing Company,
B.V., Sr. Secured Notes:
1,100,000 11.375% due 06/15/1999.......................... 1,069,750
2,000,000 11.875% due 06/15/2002.......................... 1,955,000
1,895,000 Repap Wisconsin Inc., 2nd Priority Sr. Secured
Notes,
9.875% due 05/01/2006........................... 1,651,019
Riverwood International Corporation, Sr. Sub.
Notes:
809,000 Series 1,
11.250% due 06/15/2002.......................... 837,315
1,440,000 Series 2,
11.250% due 06/15/2002.......................... 1,490,400
1,025,000 S.D. Warren Company, Sr. Sub. Note,
12.000% due 12/15/2004**........................ 1,053,187
------------
12,486,821
------------
HOTEL/GAMING--7.1%
$1,125,000 Boyd Gaming Corporation, Sr. Sub. Note, Series
B,
10.750% due 09/01/2003.......................... $ 1,029,375
1,250,000 Empress River Casino, Sr. Note,
10.750% due 04/01/2002.......................... 1,143,750
1,775,000 GNF Corporation, First Mortgage Bond,
10.625% due 04/01/2003.......................... 1,171,500
890,000 Santa Fe Hotel Inc., Unit Guaranteed First
Mortgage Note,
11.000% due 12/15/2000.......................... 792,100
2,650,000 Station Casinos Inc., Sr. Sub. Notes,
9.625% due 06/01/2003........................... 2,212,750
1,325,000 Trump Plaza Funding Inc., First Mortgage Note,
10.875% due 06/15/2001.......................... 1,007,000
3,054,901 Trump Taj Mahal Fund, Unit Building 1
Management, Deb., (Payment-in-kind),
11.350% due 11/15/1999.......................... 2,031,509
------------
9,387,984
------------
</TABLE>
See Notes to Portfolio of Investments.
6
<PAGE>
Portfolio of Investments (Continued)
[LOGO]
a December 31, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
</TABLE>
CORPORATE BONDS AND NOTES--94.2%
- --(CONTINUED)
- -------------
<TABLE>
<C> <S> <C>
PACKAGING/CONTAINERS--7.1%
$1,750,000 Container Corporation of America, Sr. Note,
11.250% due 05/01/2004.......................... $ 1,793,750
3,300,000 Gaylord Container Corporation, Sr. Note,
11.500% due 05/15/2001.......................... 3,390,750
1,000,000 Stone Container Corporation, Sr. Note,
12.625% due 07/15/1998.......................... 1,050,000
2,825,000 United States Can Company, Sr. Sub. Note,
13.500% due 01/15/2002.......................... 3,086,313
------------
9,320,813
------------
BROADCASTING--TV, CABLE, AND RADIO--6.8%
475,000 American Media Operations Inc., Note,
11.625% due 11/15/2004.......................... 486,875
2,075,000 Bell CableMedia PLC, Sr. Discount Note, Step up
Bond, Zero coupon to 07/15/1999,
11.950% due 07/15/2004.......................... 1,110,125
BROADCASTING--TV, CABLE, AND RADIO--(CONTINUED)
$2,000,000 Cablevision Systems Corporation, Sr. Sub. Deb.,
9.875% due 02/15/2013........................... $ 1,810,000
3,125,000 Continental Cablevision Inc., Sr. Sub. Deb.,
11.000% due 06/01/2007.......................... 3,179,688
Rogers Cablesystems Ltd.:
CAD 1,275,000 Sr. Deb.,
9.650% due 01/15/2014........................... 758,956
$525,000 Sr. Secured 2nd Priority Deb.,
10.125% due 09/01/2012.......................... 504,656
625,000 Rogers Communications Inc., Sr. Deb.,
10.875% due 04/15/2004.......................... 632,812
500,000 Young Broadcasters Inc., Sr. Sub. Notes,
11.750% due 11/15/2004.......................... 508,750
------------
8,991,862
------------
HEALTH CARE/DRUGS/HOSPITAL SUPPLIES--6.4%
2,405,000 American Medical International Inc., Sr. Sub.
Note,
13.500% due 08/15/2001.......................... 2,633,475
</TABLE>
See Notes to Portfolio of Investments.
7
<PAGE>
Portfolio of Investments (Continued)
[LOGO]
a December 31, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
</TABLE>
CORPORATE BONDS AND NOTES--94.2%
- --(CONTINUED)
- -------------
<TABLE>
<C> <S> <C>
HEALTH CARE/DRUGS/HOSPITAL SUPPLIES--(CONTINUED)
$ 900,000 Charter Medical Corporation, Sr. Sub. Note,
11.250% due 04/15/2004.......................... $ 904,500
1,725,000 Healthtrust Inc., The Hospital Company, Sub.
Note,
10.750% due 05/01/2002.......................... 1,839,281
2,850,000 Ornda Healthcorp, Sr. Sub. Note,
12.250% due 05/15/2002.......................... 3,028,125
------------
8,405,381
------------
BUILDING/CONSTRUCTION--5.9%
2,775,000 American Standard Inc., Sr. Deb.,
11.375% due 05/15/2004.......................... 2,844,375
1,550,000 Greystone Homes Inc., Sr. Note,
10.750% due 03/01/2004.......................... 1,377,563
1,300,000 Hovnainan K. Enterprises Inc., Sub. Note,
11.250% due 04/15/2002.......................... 1,093,625
$ 450,000 Miles Homes Services Unit, Sr. Note,
12.000% due 04/01/2001.......................... $ 256,500
1,275,000 UDC Homes, Sr. Note,
11.750% due 04/30/2003.......................... 854,250
1,575,000 US Home Corporation, Sr. Note,
9.750% due 06/15/2003........................... 1,350,562
------------
7,776,875
------------
METALS/MINING--4.6%
1,675,000 AK Steel Corporation, Sr. Note,
10.750% due 04/01/2004.......................... 1,660,344
1,000,000 Armco Inc., Sr. Note,
11.375% due 10/15/1999.......................... 1,005,000
800,000 Essex Group Inc., Sr. Note,
10.000% due 05/01/2003.......................... 745,000
1,150,000 Federal Industries Ltd., CDA, Sr. Note, 10.250%
due 06/15/2000.................................. 1,078,125
</TABLE>
See Notes to Portfolio of Investments.
8
<PAGE>
Portfolio of Investments (Continued)
[LOGO]
a December 31, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
</TABLE>
CORPORATE BONDS AND NOTES--94.2%
- --(CONTINUED)
- -------------
<TABLE>
<C> <S> <C>
METALS/MINING--(CONTINUED)
$1,850,000 Republic Engineered Steels Manufacturing, First
Mortgage Note,
9.875% due 12/15/2001........................... $ 1,669,625
------------
6,158,094
------------
CHEMICALS--4.5%
650,000 Buckeye Celluose Corporation, Sr. Note,
10.250% due 05/15/2001.......................... 611,000
3,825,000 NL Industries Inc., Sr. Secured Note,
11.750% due 10/15/2003.......................... 3,834,563
1,500,000 UCC Investors Holding Inc., Sr. Sub. Note,
11.000% due 05/01/2003.......................... 1,488,750
------------
5,934,313
------------
ELECTRONICS/COMPUTERS--4.0%
3,460,000 Anacomp Inc., Sr. Sub. Note,
15.000% due 11/01/2000.......................... 3,654,625
$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.......................... $ 1,685,250
------------
5,339,875
------------
RETAIL--4.0%
1,450,000 Barnes & Noble Inc., Sr. Sub. Note,
11.875% due 01/15/2003.......................... 1,544,250
3,000,000 Bradlees Inc., Sr. Sub. Note,
11.000% due 08/01/2002.......................... 2,741,250
1,025,000 Wickes Lumber Company, Sr. Sub. Note,
11.625% due 12/15/2003.......................... 973,750
------------
5,259,250
------------
INSURANCE COMPANIES--3.6%
2,250,000 Bankers Life Holding Corporation, Sr. Sub.
Notes, Series B,
13.000% due 11/01/2002.......................... 2,508,750
</TABLE>
See Notes to Portfolio of Investments.
9
<PAGE>
Portfolio of Investments (Continued)
[LOGO]
a December 31, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
</TABLE>
CORPORATE BONDS AND NOTES--94.2%
- --(CONTINUED)
- -------------
<TABLE>
<C> <S> <C>
INSURANCE COMPANIES--(CONTINUED)
$2,100,000 Life Partners Group, Inc., Sr. Sub. Note,
12.750% due 07/15/2002.......................... $ 2,302,125
------------
4,810,875
------------
LEISURE/AMUSEMENT/MOTION PICTURES--3.6%
2,550,000 Coleman Holdings, Inc., Note,
Zero coupon due 05/27/1998...................... 1,727,625
1,575,000 Gillett Holdings Inc., Sr. Sub. Note,
12.250% due 06/30/2002.......................... 1,667,531
1,550,000 Remington Arms, Inc., Sr. Sub. Note,
10.500% due 12/01/2003**........................ 1,294,250
------------
4,689,406
------------
OIL/NATURAL GAS--3.4%
1,150,000 Giant Industries Inc., Sr. Sub. Notes,
9.750% due 11/15/2003........................... 1,058,000
3,175,000 Mesa Capital Corporation, Notes, Step up Bond,
Zero coupon to 06/30/1995,
12.750% due 06/30/1998.......................... 2,718,594
$675,000 Santa Fe Energy Resources Inc., Sr. Sub. Deb.,
11.000% due 05/15/2004.......................... $ 678,375
------------
4,454,969
------------
TEXTILES/APPAREL--3.0%
1,350,000 CMI Industries, Sr. Sub. Note,
9.500% due 10/01/2003........................... 1,125,562
900,000 Dan River Inc., Sr. Sub. Note,
10.125% due 12/15/2003.......................... 814,500
2,100,000 Hartmarx Corporation, Sr. Sub. Note,
10.875% due 01/15/2002.......................... 1,963,500
------------
3,903,562
------------
GROCERY/CONVENIENCE STORES--2.9%
650,000 Big V Supermarket Inc., Sr. Sub. Note,
11.000% due 02/15/2004.......................... 533,000
1,200,000 Farm Fresh Inc., Sr. Note, Series A,
12.250% due 10/01/2000.......................... 1,040,219
1,000,000 P&C Food Markets, Inc.,
Sr. Note,
11.500% due 10/15/2001.......................... 1,032,500
</TABLE>
See Notes to Portfolio of Investments.
10
<PAGE>
Portfolio of Investments (Continued)
[LOGO]
a December 31, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
</TABLE>
CORPORATE BONDS AND NOTES--94.2%
- --(CONTINUED)
- -------------
<TABLE>
<C> <S> <C>
GROCERY/CONVENIENCE STORES--(CONTINUED)
$1,275,000 Pathmark Stores, Inc., Sub. Note,
11.625% due 06/15/2002.......................... $ 1,231,969
------------
3,837,688
------------
AUTOMOBILE/AUTO PARTS/TRUCK MANUFACTURING--2.9%
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.......................... 862,750
1,675,000 SPX Corporation, Sr. Sub. Note,
11.750% due 06/01/2002.......................... 1,666,625
650,000 Truck Components Inc., Sr. Note, Series A,
12.250% due 06/30/2001.......................... 685,750
------------
3,832,625
------------
TOBACCO--2.5%
3,700,000 Consolidated Cigar, Sr. Sub. Note,
10.500% due 03/01/2003.......................... 3,348,500
------------
TELEPHONE/COMMUNICATIONS--2.2%
$5,450,000 Nextel Communication Inc., Sr. Discount Notes,
Step up Bond, Zero coupon to 02/15/1999,
9.750% due 08/15/2004........................... $ 1,934,750
1,550,000 Pagemart Inc., Sr. Discount
Note, Zero
Coupon due
11/01/2003...................................... 945,500
------------
2,880,250
------------
TRANSPORTATION--2.1%
2,805,000 Sea Containers Ltd., Sr. Sub. Deb.,
12.500% due 12/01/2004.......................... 2,840,063
------------
PERSONAL CARE PRODUCTS/COSMETICS--2.1%
3,130,000 Revlon Consumer Products Corporation, Sr. Sub.
Note,
10.500% due 02/15/2003.......................... 2,801,350
------------
CONSUMER DURABLE GOODS/HOME FURNISHINGS--2.0%
5,825,000 International Semi-Tech, Sr. Note, Step up Bond,
Zero coupon to 08/15/2000,
11.500% due 08/15/2003.......................... 2,621,250
------------
</TABLE>
See Notes to Portfolio of Investments.
11
<PAGE>
Portfolio of Investments (Continued)
[LOGO] December 31, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
</TABLE>
CORPORATE BONDS AND NOTES--94.2%
- --(CONTINUED)
- -------------
<TABLE>
<C> <S> <C>
PUBLISHING--1.7%
$1,300,000 Marvel III Holdings, Inc., Sr. Secured Note,
9.125% due 02/15/1998........................... $ 1,134,250
AUD 1,950,000 News America Holdings, Inc., Deb.,
8.625% due 02/07/2014........................... 1,137,582
------------
2,271,832
------------
RAIL/TRUCKING--1.1%
$1,375,000 Gearbulk Holdings Limited, Sr. Note,
11.250% due 12/01/2004.......................... 1,399,062
------------
FINANCE COMPANIES/CONSUMER CREDIT--0.7%
1,100,000 Lomas Mortgage USA, Inc., Sr. Note,
10.250% due 10/01/2002.......................... 924,000
------------
AEROSPACE AND DEFENSE--0.5%
650,000 Tracor, Inc., Sr. Sub Note,
10.875% due 08/15/2001.......................... 627,250
------------
TOTAL CORPORATE BONDS AND NOTES (Cost
$132,523,592)................................... 124,303,950
------------
CONVERTIBLE PREFERRED STOCKS--2.9%
- -------------------------------------------------------------------------------
51,789 Foxmeyer Health Corporation, Convertible
Preferred, Series A, (Payment-in-kind),
Exchangable, 4.200%............................. $ 1,683,132
7,000 Geneva Steel Company, Convertible Preferred,
Series B, (Payment-in-kind), Exchangable,
14.000%......................................... 784,000
13,477 K-III Communications Corporation, Series B,
Convertible Preferred, (Payment-in-kind),
Exchangable, 11.625%............................ 1,293,817
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $3,919,516)............................... 3,760,949
------------
WARRANTS--0.0%
5,400 Miles Homes Inc.,
Expire 04/01/1997............................... 2,700
</TABLE>
See Notes to Portfolio of Investments.
12
<PAGE>
Portfolio of Investments (Continued)
[LOGO] December 31, 1994 (Unaudited)
---------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
WARRANTS--(CONTINUED)
- -------------------------------------------------------------------------------
7,130 Pagemart Inc.,
Expire 12/31/2003............................... $ 32,085
<C> <S> <C>
------------
TOTAL WARRANTS
(Cost $38,589).................................. 34,785
------------
<CAPTION>
- -------------------------------------------------------------------------------
FACE
VALUE
- -------------------------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER--1.0%
<CAPTION>
- -------------------------------------------------------------------------------
<C> <S> <C>
(Cost $1,250,000)
<CAPTION>
- -------------------------------------------------------------------------------
<C> <S> <C>
$1,250,000 General Electric Capital Corporation,
4.250% due 01/03/1995........................... 1,250,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $137,731,697*).................................. 98.1 % 129,349,684
OTHER ASSETS AND
LIABILITIES (Net)..................................... 1.9 % 2,557,634
------ ------------
NET ASSETS............................................ 100.0 % $131,907,318
------ ------------
------ ------------
REDEMPTION VALUE OF 7.000% CUMULATIVE PREFERRED STOCK
(including accumulated undeclared dividends)................... $ 30,087,500
------------
------------
NET ASSETS AVAILABLE FOR COMMON SHARES......................... $101,819,818
------------
------------
COMMON STOCK OUTSTANDING....................................... 13,490,897
------------
------------
NET ASSET VALUE PER SHARE OF COMMON STOCK...................... $7.55
------------
------------
<FN>
- ------------
* Aggregate cost for Federal tax purposes.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration
to qualified institutional buyers.
CAD Canadian dollars
AUD Australian dollars
</TABLE>
See Notes to Portfolio of Investments.
13
<PAGE>
Notes to Portfolio of Investments
[LOGO] December 31, 1994 (Unaudited)
---------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Zenix Income Fund Inc. (the "Fund") is a diversified closed-end management
investment company organized as a Maryland corporation and is registered with
the Securities and Exchange Commission under the Investment Company Act of 1940,
as amended. The Fund commenced operations on April 27, 1988. The policies
described below are followed consistently by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
PORTFOLIO VALUATION: The net asset value of the Fund's Common Stock is
determined by The Boston Company Advisors, Inc. ("Boston Advisors") no less
frequently than the close of business on the Fund's last business day of each
week (generally Friday). It is determined by dividing the value of the net
assets available to Common Stock by the total number of shares of Common
Stock outstanding. For the purpose of determining the net asset value per
share of the Common Stock, the value of the Fund's net assets shall be deemed
to equal the value of the Fund's assets less (i) the Fund's liabilities
(including the outstanding principal amount and accrued interest on the
Senior Money Market Notes-TM- due 1995), (ii) the aggregate liquidation value
(i.e., $1,000 per outstanding share) of the 7.000% Cumulative Redeemable
Preferred Stock ("7.000% Cumulative Preferred Stock"), and (iii) the
aggregate and unpaid dividends on the outstanding 7.000% 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
14
<PAGE>
Notes to Portfolio of Investments (Continued)
[LOGO] December 31, 1994 (Unaudited)
---------------------------------------------------------
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.
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.
15
<PAGE>
Notes to Portfolio of Investments (Continued)
[LOGO] December 31, 1994 (Unaudited)
---------------------------------------------------------
Quarterly Results of Operations
- ---------------------------------------------------------
<TABLE>
<CAPTION>
NET INCREASE/
NET REALIZED (DECREASE)
AND UNREALIZED IN NET ASSETS
INVESTMENT NET INVESTMENT GAIN/(LOSS) FROM
INCOME INCOME ON INVESTMENTS OPERATIONS
---------------- ---------------- -------------------- --------------------
PER PER PER PER
QUARTER ENDED: TOTAL SHARE* TOTAL SHARE* TOTAL SHARE* TOTAL SHARE*
- -------------------- ---------- ----- ---------- ----- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 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) 2,293,465 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) (0.34) (1,375,536) (0.11)
<FN>
- ------------
* Per share of Common Stock.
</TABLE>
16
<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
John C. Bianchi
VICE PRESIDENT AND
INVESTMENT OFFICER
Kenneth A. Egan
INVESTMENT OFFICER
Lewis E. Daidone
SENIOR VICE PRESIDENT
AND 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.
