<PAGE>
ZENIX
Income
Fund Inc.
[LOGO OF ZENIX]
Quarterly Report
June 30, 2000
<PAGE>
Zenix Income Fund Inc.
Dear Shareholder:
We are pleased to provide you with the quarterly report for the Zenix
Income Fund Inc. ("Fund") for the three months ended June 30, 2000. Any
discussion of the Fund's holdings is as of June 30, 2000 and the Fund's current
holdings may differ. Please refer to pages 5 through 17 for a list of the Fund's
holdings.
[PHOTO] [PHOTO]
HEATH B. JOHN C.
MCLENDON BIANCHI, CFA
Chairman Vice President and Investment Officer
During the past three months, the Fund distributed income dividends to common
shareholders totaling $0.16 per share. The table below details the annualized
distribution rate and the three-month total return for the Fund based on its
June 30, 2000 net asset value ("NAV") per share and the New York Stock Exchange
("NYSE") closing price(1).
Price Annualized Three-Month
Per Share Distribution Rate(2) Total Return(2)
----------- -------------------- ---------------
$4.80 (NAV) 13.50% (1.01)%
$4.75 (NYSE) 13.64% 10.80%
---------------
(1) The NAV is calculated by subtracting total liabilities and outstanding
preferred stock from the closing value of all securities held by the Fund
(plus all other assets) and dividing the result (total net assets to common
shareholders) by the total number of common shares outstanding. The NAV
fluctuates with the changes in the market price of the securities in which
the Fund has invested. However, the price at which an investor may buy or
sell shares of the Fund is at their market (NYSE) price as determined by
supply and demand.
(2) Total returns are based on changes in NAV or the market value,
respectively. Total returns assume the reinvestment of all dividends and/or
capital gains distributions in additional shares. Annualized distribution
rate is the Fund's current monthly income dividend rate, annualized, and
then divided by the NAV or the market value noted in this report. The
annualized distribution rate assumes a current monthly income dividend rate
to common shareholders of $0.054 for twelve months. This rate is as of July
31, 2000 and is subject to change. The important difference between a total
return and an annualized distribution rate is that the total return takes
into consideration a number of factors including the fluctuation of the NAV
or the market value during the period reported. The NAV fluctuation
includes the effects of unrealized appreciation or depreciation in the
Fund. Accordingly, since an annualized distribution rate only reflects the
current monthly income dividend rate annualized, it should not be used as
the sole indicator to judge the return you receive from your Fund's
investment. Past performance is not indicative of future results.
1
<PAGE>
Performance Update
The Fund generated a negative total return, based on NAV, of 1.01% for the past
three months. In comparison, the Lipper Inc. ("Lipper") peer group returned
negative 3.83% for the same time period. (Lipper is an independent mutual fund
performance tracking organization.) Please note that past performance is not an
indication of future results.
During the period, we generated relatively competitive performance in comparison
to our peer group, but unfortunately the Fund generated weak total returns on an
absolute basis. The Fund benefited from its overweight in the
telecommunications, energy (oil and natural gas), cable, media and technology
sectors. We attribute the Fund's negative performance to its overweight in
middle-quality B rated issues. However, we are pleased to report that there were
no defaults in the Fund's portfolio despite the overall increase in defaults in
the high-yield bond market.
Market and Economic Overview
The high-yield bond market rallied impressively in June as positive mutual fund
flows and more stable interest rates improved overall market sentiment. Most of
the major high-yield bond indices were up about 2.00% for the month of June, the
highest monthly return since late 1998. However, since the other sectors of the
bond market also rallied in June, spreads on high-yield bonds remained
relatively wide against U.S. Treasuries at over 650 basis points.(3) Not
surprisingly, the highest-quality, most liquid issues generated the strongest
results while the lower-quality end of the market continued to labor under
continued high default rates in the 5.00% range on an annualized basis.
The best-performing segment of the high-yield bond market during the period were
the highest-quality BB rated bonds. One of the most important aspects of the
high-yield bond market, B rated issues, generated a negative 1.60% total return
for the same time period. By far, the worst-performing credit segment of the
high-yield bond market were the lower quality CCC rated issues which delivered
negative total returns in the 4.50% to 5.00% range.
We believe that the high-yield bond market is discounting a potential economic
slowdown in the second half of this year given the Federal Reserve Board's
("Fed") multiple increases in short-term interest rates during the past year. In
addition, the lower-quality end of the high-yield bond market has continued to
be negatively impacted by meaningfully higher default rates.
The best-performing sectors of the high-yield bond market during the period were
energy (oil and natural gas), technology, telecommunications, cable, media and
------------
3 A basis point is 0.01% or one one-hundredth of a percent.
2
<PAGE>
operating utilities, which would fare better in an economic slowdown. The
worst-performing sectors included basic materials, capital goods manufacturing,
consumer related industries and transportation.
From a technical standpoint, the high-yield bond market witnessed much smaller
new issuance as most companies either postponed new issues or elected to seek
alternative forms of financing such as convertible bond offerings or bank loans.
For the first six months of 2000, new issues totaled roughly $25 billion, down
from about $58 billion last year. At the same time, a total of approximately $6
billion was withdrawn from open-end high-yield bond mutual funds.
Conclusion
Despite some adverse conditions, we are confident that the high-yield bond
market has discounted most of the negative sentiment concerning bond investing.
We continue to believe that investing in high-yield bonds may represent a
compelling opportunity for many long-term investors seeking income and total
return potential.
Our goal over the near term is to continue to reallocate cash reserves into the
more liquid issues that we believe offer the most upside price potential. We
remain positive on the total return prospects for the high-yield bond market.
Yet we realize that until the Fed completes its recent round of interest rate
increases, the overall performance of the bond markets may remain largely
unchanged. While we are confident that the Fed may be close to completing its
interest rate increases, it may decide to raise rates later in the year if
indications of a slowdown in the growth of the U.S. economy do not become
apparent.
And while the future is always uncertain, we remain confident that our patience
may be rewarded later on this year since we expect that the Fed will be
ultimately successful in limiting the amount of excess speculation in the
financial markets. Should you have any questions about your investment in the
Fund, please call PFPC Global Fund Services at (800) 331-1710. Thank you for
your continued confidence in our investment management approach.
Sincerely,
/s/ Heath B. McLendon /s/ John C. Bianchi
Heath B. McLendon John C. Bianchi, CFA
Chairman Vice President and Investment Officer
July 31, 2000
3
<PAGE>
Take Advantage of the Funds Dividend Reinvestment Plan!
Did you know that Fund investors who reinvest their dividends are taking
advantage of one of the most effective wealth-building tools available today?
Systematic investments put time to work for you through the strength of
compounding.
As an investor in the Fund, you can participate in its Dividend
Reinvestment Plan ("Plan"), a convenient, simple and efficient way to reinvest
your dividends and capital gains, if any, in additional shares of the Fund.
Below is a summary of how the Plan works.
Plan Summary
If you are a Plan participant who has not elected to receive your dividends
in the form of a cash payment then your dividends and capital gains
distributions will be reinvested automatically in additional shares of the Fund.
The number of common stock shares in the Fund you will receive in lieu of a
cash dividend is determined in the following manner. If the market price of the
common stock is equal to or higher than 98% of the net asset value per share
("NAV") on the determination date, you will be issued shares by the Fund at a
price reflecting 98% of the NAV, or 95% of the market price, whichever is
greater.
If the market price is less than 98% of the NAV at the time of valuation
(the close of business on the determination date), or if the Fund declares a
dividend or capital gains distribution payable only in cash, PFPC Global Fund
Services ("Plan Agent") will buy common stock for your account in the open
market.
If the Plan Agent begins to purchase additional shares in the open market
and the market price of the shares subsequently rises above 98% of the
previously determined NAV before the purchases are completed, the Plan Agent
will attempt to terminate purchases and have the Fund issue the remaining
dividend or distribution in shares at the greater of 98% of the previously
determined NAV or 95% of the market price. In that case, the number of Fund
shares you receive 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.
A more complete description of the current Plan appears in the section of
this report beginning on page 34. To find out more detailed information about
the Plan and about how you can participate, please call PFPC Global Fund
Services at (800) 331-1710.
4
<PAGE>
[LOGO OF ZENIX FUNDS]
Schedule of Investments
June 30, 2000 (unaudited)
================================================================================
Face
Amount++ Rating(a) Security Value
--------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES -- 92.6%
Aerospace -- 1.3%
BE Aerospace, Inc., Sr. Sub. Notes:
270,000 B 9.500% due 11/1/08 .............................$ 249,750
1,330,000 B Series B, 8.000% due 3/1/08 .................... 1,130,500
380,000 B- Dunlop Standard Aerospace Holdings,
Sr. Notes, 11.875% due 5/15/09 ................. 375,250
-----------
1,755,500
-----------
Airlines -- 1.0%
1,723,536 BB Airplanes Pass-Thru Trust, Corp.,
Asset-Backed Securities, Series 1, Class D,
10.875% due 3/15/19 ............................ 1,400,184
-----------
Aluminum -- 1.0%
Kaiser Aluminum & Chemical Corp., Sr. Sub. Notes:
1,170,000 B3* 12.750% due 2/1/03 ............................. 1,070,550
160,000 B1* Series B, 10.875% due 10/15/06 ................. 152,800
140,000 B1* Series D, 10.875% due 10/15/06 ................. 133,700
-----------
1,357,050
-----------
Apparel -- 0.9%
570,000 BB- Levi Strauss & Co., Sr. Sub. Notes, 7.000% due
11/1/06+ ....................................... 436,050
490,000 BBB- Tommy Hilfiger USA Inc., Sr. Notes, 6.850% due
6/1/08 ......................................... 316,050
525,000 B- Tropical Sportswear International Corp.,
Guaranteed Sr. Sub. Notes, Series A, 11.000%
due 6/15/08 .................................... 506,625
-----------
1,258,725
-----------
Auto Parts: Original Equipment Manufacture-- 0.9%
370,000 B Collins & Aikman Products Co., Sr. Sub. Notes,
11.500% due 4/15/06 ............................ 357,975
180,000 B Dura Operating Corp., Sr. Sub. Notes, 9.000% due
5/1/09 ......................................... 157,500
Hayes Lemmerz International, Inc., Sr. Sub.
Notes:
220,000 B 11.000% due 7/15/06 ............................ 217,250
620,000 B Series B, 8.250% due 12/15/08 .................. 527,000
-----------
1,259,725
-----------
Broadcasting -- 1.7%
130,000 B Capstar Broadcasting Corp., Sr. Discount Notes,
step bond to yield 11.002% due 2/1/09 .......... 120,250
Young Broadcasting Inc.:
475,000 B Guaranteed Sr. Sub. Notes, 11.750% due
11/15/04 ..................................... 485,688
1,655,000 B Sr. Sub. Notes, 10.125% due 2/15/05 ............ 1,638,450
-----------
2,244,388
-----------
See Notes to Financial Statements.
5
<PAGE>
[LOGO OF ZENIX FUNDS]
Schedule of Investments
June 30, 2000 (unaudited) (continued)
================================================================================
Face
Amount++ Rating(a) Security Value
--------------------------------------------------------------------------------
Building Materials -- 0.4%
Nortek, Inc.:
135,000 B+ Sr. Notes, Series B, 9.125% due 9/1/07 .........$ 125,550
395,000 B- Sr. Sub. Notes, 9.875% due 3/1/04 .............. 377,225
-----------
502,775
-----------
Building Products -- 0.4%
295,000 B Amatek Industries Property Ltd., Sr. Sub. Notes,
12.000% due 2/15/08 ............................ 271,400
385,000 B- Atrium Cos., Inc., Sr. Sub. Notes, 10.500% due
5/1/09 ......................................... 326,287
-----------
597,687
-----------
Cable Television -- 10.5%
Adelphia Communications Corp., Sr. Notes:
905,000 BB- 8.750% due 10/1/07 ............................. 825,812
820,000 B+ Series B, 8.375% due 2/1/08 .................... 728,775
180,000 CCC+ Cable Satisfaction International, Inc., Sr.
Notes, 12.750% due 3/1/10 ...................... 175,950
Century Communications Corp.:
255,000 BB- Sr. Discount Notes, Series B, zero coupon
bond to yield 10.646% due 1/15/08 ............ 105,825
130,000 BB- Sr. Notes, 9.750% due 2/15/02 .................. 130,650
Charter Communications Holdings LLC/Charter
Communications Capital Corp.:
1,460,000 B+ Sr. Discount Notes, step bond to yield
11.720% due 1/15/10 ........................ 837,675
1,215,000 B+ Sr. Notes, 8.625% due 4/1/09 ................. 1,073,756
1,000,000 BB- CSC Holdings, Inc., Sr. Sub. Debentures,
10.500% due 5/15/16 ............................ 1,067,500
495,000GBP B- Diamond Holdings PLC, Guaranteed Notes,
10.000% due 2/1/08 ............................. 700,898
345,000 B Echostar DBS Corp., Sr. Notes, 9.375% due 2/1/09 . 332,925
1,345,000 B- NTL Communications Corp.,
Sr. Notes, 11.500% due 10/1/08 ................. 1,345,000
775,000 BB- Rogers Cablesystems, Ltd., Guaranteed Sr.
Sub. Debentures, 11.000% due 12/1/15 ........... 840,875
1,250,000 B+ Telewest Communications PLC, Sr. Notes,
11.250% due 11/1/08 ............................ 1,256,250
3,220,000 B- United International Holdings, Inc., Sr.
Discount Notes, Series B, step bond to
yield 11.554% due 2/15/08 .................... 2,270,100
4,615,000 B United Pan-Europe Communications N.V., Sr.
Discount Notes, step bond to yield 12.500%
due 8/1/09 ................................... 2,342,112
-----------
14,034,103
-----------
See Notes to Financial Statements.
6
<PAGE>
[LOGO OF ZENIX FUNDS]
Schedule of Investments
June 30, 2000 (unaudited) (continued)
================================================================================
Face
Amount++ Rating(a) Security Value
--------------------------------------------------------------------------------
Casinos - Gambling -- 2.5%
105,000 BB- Circus Circus Enterprises, Inc., Sr. Sub.
Debentures, 7.625% due 7/15/13 .................$ 86,625
860,000 B Hollywood Casino Corp., Guaranteed Sr.
Sub. Notes, 11.250% due 5/1/07 ................. 883,650
11,375 NR Jazz Casino Co. LLC, Sr. Sub. Notes,
5.867% due 11/15/09 ............................ 1,991
470,000 B+ Station Casinos, Inc., Sr. Sub. Notes,
9.875% due 7/1/10+ ............................. 473,525
Sun International Hotels Ltd., Sr. Sub. Notes:
795,000 Ba3* 9.000% due 3/15/07 ............................. 739,350
770,000 Ba3* 8.625% due 12/15/07 ............................ 700,700
465,000 B- Venetian Casino Resort, LLC, Secured Notes,
12.250% due 11/15/04 ........................... 471,975
-----------
3,357,816
-----------
Chemicals - Major -- 1.4%
Huntsman Corp.:
3,700,000 B+ Sr. Discount Notes, zero coupon bond to yield
13.067% due 12/31/09 ......................... 1,239,500
645,000 B+ Sr. Sub. Notes, 10.125% due 7/1/09 ............. 653,063
-----------
1,892,563
-----------
Chemicals - Specialty -- 0.7%
220,000 B Avecia Group PLC, Sr. Notes, 11.000% due 7/1/09 .. 216,700
275,000EUR B+ Lyondell Chemical Co., Guaranteed Sr. Sub. Notes,
10.875% due 5/1/09 ............................. 508,725
510,000 B+ Ineos Acrylics Finance PLC, Sr. Notes,
10.250% due 5/15/10+ ........................... 271,523
-----------
996,948
-----------
Coal Mining -- 0.1%
960,000 Caa2* AEI Resources, Inc., Guaranteed Notes, 10.500%
due 12/15/05+ .................................. 196,800
-----------
Construction/AG Equipment/Trucks -- 0.2%
275,000 B Columbus McKinnon Corp., Guaranteed Sr.
Sub. Notes, 8.500% due 4/1/08 .................. 237,875
-----------
Consumer Specialties -- 0.4%
570,000 B Jostens, Inc., Sr. Sub. Notes, 12.750% due
5/1/10+ ........................................ 564,300
-----------
Containers - Packaging -- 1.9%
225,000 B BWAY Corp., Guaranteed Sr. Sub. Notes,
Series B, 10.250% due 4/15/07 .................. 217,125
See Notes to Financial Statements.
7
<PAGE>
[LOGO OF ZENIX FUNDS]
Schedule of Investments
June 30, 2000 (unaudited) (continued)
================================================================================
Face
Amount++ Rating(a) Security Value
--------------------------------------------------------------------------------
Containers - Packaging -- 1.9% (continued)
1,425,000 B Stone Container Finance Corp., Guaranteed Sr.
Notes, 11.500% due 8/15/06+ ....................$ 1,482,000
435,000 B- Sweetheart Cup Co. Inc., Sr. Sub. Notes,
10.500% due 9/1/03 ............................. 398,025
510,000 B- Tekni-Plex, Inc., Sr. Sub. Notes, 12.750% due
6/15/10+ ....................................... 512,550
-----------
2,609,700
-----------
Contract Drilling -- 2.3%
Parker Drilling Co.:
110,000 B- 5.500% due 8/1/04 (b) .......................... 90,613
1,165,000 B+ Sr. Notes, 9.750% due 11/15/06 ................. 1,132,963
655,000 BB Pride International, Inc., Sr. Notes,
10.000% due 6/1/09 ............................. 677,925
515,000 Ba3* R&B Falcon Corp., Sr. Notes, 12.250% due 3/15/06 . 563,925
555,000 BB- RBF Finance Co., Guaranteed Sr. Notes, 11.375%
due 3/15/09 .................................... 604,950
-----------
3,070,376
-----------
Discount Stores -- 0.7%
610,000 B+ Ames Department Stores, Inc., Sr. Notes,
10.000% due 4/15/06 ............................ 372,100
490,000 Baa3* Kmart Corp., Debentures, 12.500% due 3/1/05 ...... 536,550
-----------
908,650
-----------
Diversified Commercial Services -- 0.9%
1,000,000 B2* Intertek Finance PLC, Guaranteed Sr. Sub. Notes,
Series B, 10.250% due 11/1/06 .................. 825,000
500,000 B- Outsourcing Solutions Inc., Sr. Sub. Notes,
11.000% due 11/1/06 ............................ 437,500
-----------
1,262,500
-----------
Diversified Financial Services -- 0.3%
AMRESCO Inc., Sr. Sub. Notes, Series A:
600,000 CCC- 10.000% due 3/15/04 ............................ 306,000
135,000 CCC- 9.875% due 3/15/05 ............................. 68,850
-----------
374,850
-----------
Diversified Manufacturing -- 0.8%
175,000 B- Blount Inc., Sr. Sub. Notes, 13.000% due
8/1/09 ......................................... 179,375
700,000 B+ Park-Ohio Industries, Inc., Sr. Sub. Notes,
9.250% due 12/1/07 ............................. 619,500
285,000 B Polymer Group, Inc., Sr. Sub. Notes, Series B,
9.000% due 7/1/07 .............................. 243,675
-----------
1,042,550
-----------
See Notes to Financial Statements.
8
<PAGE>
[LOGO OF ZENIX FUNDS]
Schedule of Investments
June 30, 2000 (unaudited) (continued)
================================================================================
Face
Amount++ Rating(a) Security Value
--------------------------------------------------------------------------------
Drugs - Generic-- 1.1%
1,465,000 BB ICN Pharmaceuticals, Inc., Sr. Notes, Series B,
9.250% due 8/15/05 .............................$ 1,457,675
-----------
Electronic Components -- 1.0%
515,000 BB- Celestica International Inc., Sr. Sub. Notes,
10.500% due 12/31/06 ........................... 540,750
845,000 Ba3* Flextronics International Ltd., Sr. Sub. Notes,
9.875% due 7/1/10+ ............................. 855,562
-----------
1,396,312
-----------
Engineering & Construction -- 0.6%
165,000 B- American Plumbing & Mechanical, Inc., Sr. Sub.
Notes, 11.625% due 10/15/08 .................... 154,687
255,000 BB- Integrated Electrical Services, Inc., Sr. Sub.
Notes, 9.375% due 2/1/09 ....................... 207,825
430,000 B- Orius Capital Corp., Sr. Sub. Notes,
12.750% due 2/1/10+ ............................ 445,050
-----------
807,562
-----------
Environmental Services -- 3.1%
Allied Waste North America, Inc.:
510,000 BB- Guaranteed Sr. Notes, Series B, 7.875%
due 1/1/09 ................................... 437,325
2,475,000 B+ Sr. Sub. Notes, 10.000% due 8/1/09 @ ........... 2,079,000
315,000 B+ IT Group, Inc., Sr. Sub. Notes, 11.250%
due 4/1/09 ..................................... 283,500
1,020,000 CCC+ Metal Management, Inc., Guaranteed Sr. Sub.
Notes, 10.000% due 5/15/08 ..................... 566,100
740,000 B+ URS Corp., Sr. Sub. Notes, 12.250% due 5/1/09 .... 762,200
-----------
4,128,125
-----------
Finance Companies -- 0.2%
355,000 CCC+ Madison River Capital, Sr. Notes, 13.250%
due 3/1/10+ .................................... 321,275
-----------
Food Distributors -- 1.8%
385,000 B- Agrilink Foods Inc., Sr. Notes, 11.875%
due 11/1/08 .................................... 302,225
760,000 B2* Carrols Corp., Sr. Sub. Notes, 9.500%
due 12/1/08 .................................... 638,400
480,000 B2* International Home Foods, Inc., Guaranteed
Sr. Sub. Notes, 10.375% due 11/1/06 ............ 516,000
575,000 B- Premier International Foods PLC, Sr. Notes,
12.000% due 9/1/09+ ............................ 517,500
440,000 B SC International Services, Inc., Guaranteed
Sr. Sub. Notes, Series B, 9.250% due 9/1/07 .... 420,200
-----------
2,394,325
-----------
See Notes to Financial Statements.
9
<PAGE>
[LOGO OF ZENIX FUNDS]
Schedule of Investments
June 30, 2000 (unaudited) (continued)
================================================================================
Face
Amount++ Rating(a) Security Value
--------------------------------------------------------------------------------
Foods - Specialty/Candy -- 0.6%
850,000 B- B&G Foods, Inc., Guaranteed Sr. Sub. Notes,
9.625% due 8/1/07 ..............................$ 599,250
980,000 CCC+ Imperial Holly Corp., Guaranteed
Sr. Sub. Notes, 9.750% due 12/15/07 ............ 192,325
-----------
791,575
-----------
Forest Products -- 0.9%
660,000 B Ainsworth Lumber Co. Ltd., Sr.
Notes, 12.500% due 7/15/07 ..................... 658,350
565,000 B+ Millar Western Forest, Sr. Notes,
9.875% due 5/15/08 ............................. 531,100
-----------
1,189,450
-----------
Health Industry Services -- 0.3%
515,000 BBB HEALTHSOUTH Corp., Sr. Notes, 6.875%
due 6/15/05 .................................... 441,612
-----------
Home Building -- 1.0%
430,000 Ba1* D.R. Horton, Inc., Sr. Notes, 8.000%
due 2/1/09 ..................................... 376,250
930,000 BB+ Lennar Corp., Sr. Notes, 9.950% due
5/1/10+ ........................................ 920,700
-----------
1,296,950
-----------
Home Furnishings -- 0.3%
405,000 B Falcon Products, Inc., Sr. Sub. Notes,
11.375% due 6/15/09 ............................ 388,294
-----------
Hospital - Nursing Management -- 1.1%
1,520,000 Ba3* Fresenius Medical Care Capital Trust I, Trust
Preferred Securities, 9.000% due 12/1/06 ....... 1,447,800
-----------
Hotel - Resort -- 3.8%
2,375,000 B- Courtyard by Marriott II LP/Courtyard Finance
Co., Sr. Secured Notes, Series B, 10.750% due
2/1/08 @ ....................................... 2,333,437
1,275,000 BB HMH Properties, Inc., Sr. Notes, Series C, 8.450%
due 12/1/08 .................................... 1,187,344
Intrawest Corp., Sr. Notes:
685,000 B+ 9.750% due 8/15/08 ............................. 681,575
860,000 B+ 10.500% due 2/1/10 ............................. 881,500
-----------
5,083,856
-----------
Internet Services -- 4.9%
185,000 NR Colo.com, Sr. Notes, 13.875% due 3/15/10+ ........ 199,800
325,000 Caa2* Cybernet Internet Services International,
Inc., Sr. Notes, 14.000% due 7/1/09 ............ 164,125
See Notes to Financial Statements.
10
<PAGE>
[LOGO OF ZENIX FUNDS]
Schedule of Investments
June 30, 2000 (unaudited) (continued)
================================================================================
Face
Amount++ Rating(a) Security Value
--------------------------------------------------------------------------------
Internet Services -- 4.9% (continued)
Exodus Communications, Inc., Sr. Notes:
800,000 B 10.750% due 12/15/09......................... $ 776,000
690,000 B 11.625% due 7/15/10+......................... 695,175
PSINet Inc., Sr. Notes:
85,000 B- 11.500% due 11/1/08.......................... 80,325
2,350,000 B- 11.000% due 8/1/09........................... 2,185,500
835,000 B3* Rhythms NetConnections Inc., Sr. Notes,
14.000% due 2/15/10+......................... 609,550
Verio Inc., Sr. Notes:
360,000 B- 10.375% due 4/1/05........................... 379,800
380,000 B- 11.250% due 12/1/08.......................... 428,450
675,000 B- 10.625% due 11/15/09......................... 751,781
460,000 CCC+ WAM!NET Inc., Guaranteed Sr. Discount Notes,
Series B, step bond to yield 13.392%
due 3/1/05................................... 260,475
----------
6,530,981
----------
Leisure/Movies/Entertainment -- 1.1%
1,280,000 B- Premier Parks Inc., Sr. Discount Notes, step
bond to yield 11.416% due 4/1/08............. 875,200
640,000 B- SFX Entertainment, Inc., Sr. Sub. Notes,
Series B, 9.125% due 2/1/08.................. 646,400
----------
1,521,600
----------
Medical Specialties -- 0.6%
855,000 B- Hanger Orthopedic Group, Inc., Sr. Sub. Notes,
11.250% due 6/15/09.......................... 748,125
----------
Multi-Sector Companies -- 0.4%
535,000 B- Triarc Consumer Beverage, Sr. Sub. Notes,
10.250% due 2/15/09.......................... 520,288
----------
Newspapers -- 0.1%
145,000 B+ Garden State Newspapers, Inc., Sr. Sub. Notes,
8.625% due 7/1/11............................ 126,875
----------
Oil & Gas Production -- 4.0%
Belco Oil & Gas Corp., Sr. Sub. Notes:
250,000 B1* 10.500% due 4/1/06........................... 252,812
600,000 B1* 8.875% due 9/15/07........................... 558,000
Canadian Forest Oil Ltd., Guaranteed Sr. Sub.
Notes:
975,000 B 10.500% due 1/15/06.......................... 996,937
135,000 B 8.750% due 9/15/07........................... 127,575
See Notes to Financial Statements.
11
<PAGE>
[LOGO OF ZENIX FUNDS]
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 2000 (unaudited) (continued)
====================================================================================================
Face
Amount++ Rating(a) Security Value
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oil & Gas Production-- 4.0% (continued)
370,000 B Chesapeake Energy Corp., Sr. Notes, Series B,
9.625% due 5/1/05........................................ $ 360,750
250,000 B Houston Exploration Co., Sr. Sub. Notes, Series B,
8.625% due 1/1/08........................................ 233,750
1,140,000 B+ Nuevo Energy Co., Sr. Sub. Notes,
9.500% due 6/1/08........................................ 1,131,450
Plains Resources Inc., Sr. Sub. Notes:
345,000 B2* Series B, 10.250% due 3/15/06............................ 349,313
290,000 B2* Series E, 10.250% due 3/15/06+........................... 293,625
700,000 B Stone Energy Corp., Guaranteed Sr. Sub. Notes,
8.750% due 9/15/07....................................... 668,500
350,000 BB- Vintage Petroleum, Inc., Sr. Sub. Notes,
9.750% due 6/30/09....................................... 357,875
----------
5,330,587
----------
Oil & Gas Transmission -- 0.3%
365,000 BB- Leviathan Gas Pipeline Finance Corp., Sr. Sub. Notes,
10.375% due 6/1/09....................................... 370,475
----------
Oil Refining/Marketing -- 0.5%
1,140,000 B Clark USA Inc., Sr. Notes, Series B,
10.875% due 12/1/05...................................... 632,700
----------
Paper -- 1.9%
755,000 B Doman Industries Ltd., Sr. Notes, 8.750% due
3/15/04.................................................. 588,900
805,000 CCC+ Repap New Brunswick, Inc., Sr. Secured Notes,
10.625% due 4/15/05...................................... 712,425
Riverwood International Corp.:
345,000 B- Guaranteed Sr. Notes, 10.625% due 8/1/07................. 336,375
1,075,000 CCC+ Guaranteed Sr. Sub. Notes, 10.875% due 4/1/08............ 951,375
----------
2,589,075
----------
Pharmaceuticals - Other -- 0.8%
1,045,000 B King Pharmaceuticals, Inc., Sr. Sub. Notes,
10.750% due 2/15/09...................................... 1,081,575
----------
Photographic Products -- 0.3%
430,000 BB- Polaroid Corp., Sr. Notes, 11.500% due
2/15/06.................................................. 449,350
----------
Printing/Forms -- 0.3%
250,000/GBP/ B Polestar Corp. PLC, Sr. Notes, Series B,
10.500% due 5/30/08...................................... 359,549
----------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
[LOGO OF ZENIX FUNDS]
Schedule of Investments
June 30, 2000 (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount++ Rating(a) Security Value
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental/Leasing Companies -- 0.7%
360,000 BB- Avis Rent A Car, Inc., Sr. Sub. Notes,
11.000% due 5/1/09............................................ $ 377,100
United Rentals, Inc., Guaranteed Sr. Sub. Notes, Series B:
385,000 BB- 9.250% due 1/15/09............................................ 349,388
250,000 BB- 9.000% due 4/1/09............................................. 222,500
----------
948,988
----------
Retail - Other Specialty Stores -- 0.6%
1,000,000 B- Advance Stores Co., Inc., Guaranteed Sr. Sub. Notes,
Series B, 10.250% due 4/15/08................................. 830,000
----------
Savings & Loan Associations -- 2.2%
1,000,000 B2* Ocwen Capital Trust I, Guaranteed Capital Securities,
10.875% due 8/1/27............................................ 535,000
2,600,000 B+ Ocwen Financial Corp., Sr. Notes,
11.875% due 10/1/03 @......................................... 2,379,000
----------
2,914,000
----------
Semiconductors -- 1.4%
210,000 B1* Amkor Technology, Inc., Sr. Sub. Notes,
10.500% due 5/1/09............................................ 211,312
1,240,000 B Fairchild Semiconductor Corp., Sr. Sub. Notes,
10.125% due 3/15/07........................................... 1,258,600
440,000 B SCG Holding & Semiconductor Co., Sr. Notes,
12.000% due 8/1/09............................................ 471,900
----------
1,941,812
----------
Steel/Iron Ore -- 0.9%
1,320,000 B+ WCI Steel, Inc., Sr. Notes, 10.000% due 12/1/04................... 1,234,200
----------
Telecommunications - Other -- 13.1%
610,000 B+ Call-Net Enterprises, Inc., Sr. Notes, 9.375% due 5/15/09........ 378,200
325,000/EUR/ AA+ Esat Telecom Group PLC, Sr. Notes,
11.875% due 11/1/09........................................... 390,209
Esprit Telecom Group PLC, Sr. Notes:
700,000 B- 11.500% due 12/15/07.......................................... 500,500
600,000/DEM/ B- 11.500% due 12/15/07 @........................................ 222,015
400,000 B- 10.875% due 6/15/08........................................... 274,000
200,000/EUR/ B Flag Telecom Holdings Ltd., Sr. Notes,
11.625% due 3/30/10+.......................................... 175,423
Focal Communications Corp.:
340,000 B Sr. Discount Notes, Series B, step bond to yield
12.978% due 2/15/08...................................... 231,200
655,000 B Sr. Notes, 11.875% due 1/15/10+................................... 661,550
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
[LOGO OF ZENIX FUNDS]
Schedule of Investments
June 30, 2000 (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount++ Rating(a) Security Value
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Telecommunications - Other -- 13.1% (continued)
815,000 BB Global Crossing Holding Ltd., Sr. Notes,
9.500% due 11/15/09........................................... $ 790,550
650,000/EUR/ B Global TeleSystems Europe, Sr. Notes,
11.000% due 12/1/09+.......................................... 489,125
495,000 CCC+ GT Group Telecom Inc., Sr. Discount Notes, step
bond to yield 13.250% due 2/1/10+............................. 277,200
Hermes Europe Railtel B.V., Sr. Notes:
25,000 B 11.500% due 8/15/07........................................... 21,500
2,045,000 B 10.375% due 1/15/09........................................... 1,676,900
480,000 B- ICG Holdings, Inc., Sr. Discount Notes,
step bond to yield 13.119% due 9/15/05........................ 466,800
Jazztel PLC, Sr. Notes:
500,000/EUR/ CCC+ 13.250% due 12/15/09+......................................... 433,766
250,000/EUR/ CCC+ 14.000% due 7/15/10+.......................................... 242,046
KMC Telecom Holdings, Inc.:
805,000 CCC+ Sr. Discount Notes, step bond to yield
15.899% due 2/15/08........................................ 382,375
590,000 CCC+ Sr. Notes, 13.500% due 5/15/09................................ 522,150
Level 3 Communications, Inc.:
170,000 B Sr. Discount Notes, step bond to yield
12.875% due 3/15/10+....................................... 93,925
1,800,000/EUR/ B Sr. Notes, 11.250% due 3/15/10+............................... 1,690,967
815,000 B+ McLeodUSA Inc., Sr. Notes, 8.125% due 2/15/09................... 737,575
600,000 B- MGC Communications, Inc., Sr. Notes,
13.000% due 4/1/10+........................................... 567,000
NEXTLINK Communications, Inc.,
LLC/NEXTLINK Capital, Inc.:
1,240,000 B Sr. Discount Notes, step bond to yield
12.064% due 6/1/09..................................... 768,800
1,270,000 B Sr. Discount Notes, step bond to yield
12.478% due 12/1/09+................................... 736,600
440,000 B Sr. Notes, 12.500% due 4/15/06............................. 462,000
635,000 B Sr. Notes, 10.750% due 6/1/09.............................. 628,650
615,000 B- Tele1 Europe B.V., Sr. Notes, 13.000% due 5/15/09............... 627,300
Versa Tel Telecom International N.V., Sr. Notes:
265,000 B- 13.250% due 5/15/08........................................... 270,963
280,000/EUR/ B- 11.250% due 3/30/10+.......................................... 252,974
2,000,000 B- Viatel, Inc., Sr. Notes, 11.500% due 3/15/09.................... 1,560,000
1,200,000 B- World Access, Inc., Sr. Notes, Series B,
13.250% due 1/15/08........................................... 1,080,000
-----------
17,612,263
-----------
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
[LOGO OF ZENIX FUNDS]
Schedule of Investments
June 30, 2000 (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount++ Rating(a) Security Value
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Telephone - Cellular -- 8.6%
635,000 Caa1* AirGate PCS, Inc., Sr. Sub. Discount Notes,
step bond to yield 13.280% due 10/1/09......................... $ 361,950
995,000 CCC+ Alamosa PCS Holdings, Inc., Guaranteed Sr. Discount
Notes, step bond to yield 12.723% due 2/15/10.................. 522,375
700,000 B- Centennial Cellular Corp., Sr. Sub. Notes,
10.750% due 12/15/08........................................... 683,375
750,000/CAD/ B3* Clearnet Communications Inc., Sr. Discount Notes,
step bond to yield 10.400% due 5/15/08.......................... 318,890
Crown Castle International Corp.:
1,515,000 B Sr. Discount Notes, step bond to yield
11.059% due 5/15/11+....................................... 933,619
400,000 B Sr. Notes, 10.750% due 8/1/11...................................... 407,500
495,000 NR Dobson/Sygnet Communications Inc., Sr. Notes,
12.250% due 12/15/08............................................ 529,650
835,000 B- Microcell Telecommunications Inc., Sr. Discount Notes,
step bond to yield 11.756% due 6/1/09........................... 553,187
1,655,000 B- Millicom International Cellular S.A., Sr. Discount Notes,
step bond to yield 15.414% due 6/1/06........................... 1,415,025
Nextel Communications, Inc.:
475,000 B1* Sr. Notes, 9.375% due 11/15/09.................................. 456,000
930,000 B1* Sr. Redeemable Discount Notes, step bond to yield
10.837% due 9/15/07........................................ 734,700
2,755,000 B1* Sr. Serial Redeemable Discount Notes,
step bond to yield 10.980% due 2/15/08..................... 2,031,812
680,000 B- Spectrasite Holdings, Inc., Sr. Discount Notes,
step bond to yield 11.250% due 4/15/09.......................... 401,200
140,000 CCC+ TeleSystems International Wireless Inc., Sr. Discount Notes,
Series C, step bond to yield 17.204% due 11/1/07................ 84,700
680,000 B3* Triton PCS, Inc., Sr. Discount Notes,
step bond to yield 11.666% due 5/1/08........................... 496,400
VoiceStream Wireless Corp.:
415,000 B2* Sr. Discount Notes, step bond to yield
11.875% due 11/15/09....................................... 281,162
180,000 B2* Sr. Notes, 11.500% due 9/15/09+................................. 193,500
330,000 B2* Sr. Notes, Series A, 11.625% due 8/15/06........................ 358,050
Winstar Communications, Inc.:
375,000 B- Sr. Discount Notes, step bond to yield
15.033% due 4/15/10+....................................... 176,250
590,000 B- Sr. Notes, 12.750% due 4/15/10+................................. 553,125
-----------
11,492,470
-----------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
[LOGO OF ZENIX FUNDS]
Schedule of Investments
June 30, 2000 (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount++ Rating(a) Security Value
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Textiles-- 0.6%
800,000/DEM/ B3* Texon International PLC, Sr. Notes,
10.000% due 2/1/08 @.................................... $ 366,595
525,000 BB WestPoint Stevens Inc., Sr. Notes, 7.875% due 6/15/05...... 441,000
------------
807,595
------------
Transportation - Marine -- 0.2%
320,000 B- Oglebay Norton Co., Sr. Sub. Notes,
10.000% due 2/1/09...................................... 292,800
------------
Unregulated Power Generation-- 2.7%
AES Corp., Sr. Sub. Notes:
1,130,000 Ba3* 10.250% due 7/15/06..................................... 1,132,825
1,050,000 Ba1* 9.500% due 6/1/09....................................... 1,034,250
1,350,000 BB+ Calpine Corp., Sr. Notes, 10.500% due 5/15/06.............. 1,410,750
------------
3,577,825
------------
Wholesale Distributors -- 0.3%
335,000 B Buhrmann US Inc., Sr. Sub. Notes,
12.250% due 11/1/09..................................... 353,425
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost--$132,125,066)....................................... 124,336,434
------------
<CAPTION>
Shares Security Value
----------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 0.0%
Telecommunications - Other -- 0.0%
3,771 World Access, Inc. (Cost--$66,939)......................... 41,717
------------
WARRANTS# -- 0.5%
Broadcasting -- 0.1%
2,450 UIH Australia Pacific, Inc., Expire 5/15/06................ 73,500
------------
Cable Television -- 0.0%
180 Cable Satisfaction International, Expire 3/1/10............ 5,040
------------
Internet Services -- 0.2%
325 Cybernet Internet Services International, Inc.,
Expire 7/1/09+.......................................... 9,750
1,625 Splitrock Services, Inc., Expire 7/15/08................... 303,063
2,550 WAM!NET Inc., Expire 3/1/05................................ 29,644
------------
342,457
------------
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
[LOGO OF ZENIX FUNDS]
Schedule of Investments
June 30, 2000 (unaudited) (continued)
================================================================================
Shares Security Value
--------------------------------------------------------------------------------
Printing/Forms -- 0.0%
335 Merrill Corp., Expire 5/1/09................. $ 34
------------
Telecommunications - Other -- 0.1%
7,130 Pagemart, Inc., Expire 12/31/03.............. 57,040
1,300 RSL Communications, Ltd., Expire 11/15/06.... 59,638
------------
116,678
------------
Telephone - Cellular -- 0.1%
665 AirGate PCS, Inc., Expire 10/1/09............ 78,138
1,000 Iridium World Communications Ltd., Expire
7/15/05+................................... 10
------------
78,148
------------
TOTAL WARRANTS
(Cost--$275,280)............................. 615,857
------------
Face
Amount Security......................... Value
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT-- 6.9%
$9,208,000 Goldman, Sachs & Co., 6.450% due 7/3/00;
Proceeds at maturity --$9,212,949; (Fully
collateralized by U.S. Treasury Bills,
Notes and Bonds, 0.000% to 12.000% due
8/15/00 to 11/15/28; Market value --
$9,392,167) (Cost --$9,208,000)............ 9,208,000
------------
TOTAL INVESTMENTS -- 100%
(Cost --$141,675,285**)...................... $134,202,008
============
________________
++ Face amount denominated in U.S. dollars unless otherwise indicated.
(a) All ratings are by Standard & Poor's Ratings Service, except for those
which are identified by an asterisk (*), are rated by Moody's Investors
Service, Inc.
+ Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(b) Convertible bond exchangeable for 7,147 shares of common stock.
@ Security is segregated by Custodian for open purchase commitments.
# Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.
Currency abbreviations used in schedule:
----------------------------------------
CAD -- Canadian Dollar GBP -- British Pound
DEM -- German Mark EUR -- Euro
See page 18 for definitions of ratings.
See Notes to Financial Statements.
17
<PAGE>
[LOGO OF ZENIX FUNDS]
Bond Ratings (unaudited)
================================================================================
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "BBB" to
"CCC" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories.
AA Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differs from the highest rated issue only in
a small degree.
BBB Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than in higher rated categories.
BB, B and CCC Bonds rated BB, B and CCC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms
of the obligation. BB indicates the lowest degree of speculation
and CCC the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to
adverse conditions.
Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2 and 3
may be applied to each generic rating from "Ba" to "Caa," where 1 is the highest
and 3 the lowest ranking within its generic category.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
Baa -- Bonds rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period
of time may be small.
Caa -- Bonds rated "Caa" are of poor standing. Such issues may be in
default, or there may be present elements of danger may exist
with respect to principal or interest.
NR -- Indicates that the bond is not rated by either Standard &
Poor's or Moody's.
18
<PAGE>
[LOGO OF ZENIX FUNDS]
Statement of Assets and Liabilities
June 30, 2000 (unaudited)
================================================================================
ASSETS:
Investments, at value (Cost--$141,675,285) ................... $134,202,008
Cash .......................................................... 234
Dividends and interest receivable ............................. 2,971,106
Receivable for securities sold ................................ 2,060,049
Receivable for open forward foreign
currency contracts (Note 12) ................................ 4,958
------------
Total Assets .................................................. 139,238,355
------------
LIABILITIES:
Payable for securities purchased .............................. 1,507,960
Dividends payable ............................................. 231,563
Investment advisory fees payable .............................. 86,695
Administration fees payable ................................... 34,152
Payable for open forward foreign
currency contracts (Note 12) ................................ 11,241
Accrued expenses .............................................. 408,736
------------
Total Liabilities ............................................. 2,280,347
------------
Total Net Assets ................................................ $136,958,008
============
NET ASSETS:
Par value of capital shares ................................... $ 160,223
Capital paid in excess of par value ........................... 108,103,760
Auction Rate Cumulative Preferred Shares (Note 7) ............. 60,000,000
Overdistributed net investment income ......................... (377,067)
Accumulated net realized loss from security transactions ...... (23,446,319)
Net unrealized depreciation of investments and
foreign currencies........................................... (7,482,589)
------------
Total Net Assets .............................................. $136,958,008
============
NET ASSET VALUE, COMPRISED OF: Per Share
----------
Auction Rate Cumulative Preferred Shares
redemption value ................................... $25,000.00 $ 60,000,000
Undeclared dividends on Auction Rate Cumulative
Preferred Shares.................................... 12.95 31,077
---------- ------------
Total allocated to Auction Rate Cumulative
Preferred Shares.................................... $25,012.95 60,031,077
========== ------------
Common Stock (16,022,258 shares outstanding).......... $4.80 76,926,931
========== ------------
Total Net Assets...................................... $136,958,008
============
See Notes to Financial Statements.
19
<PAGE>
[LOGO OF ZENIX FUNDS]
Statement of Operations
For the Three Months Ended
June 30, 2000 (unaudited)
================================================================================
INVESTMENT INCOME:
Interest ....................................................... $ 3,841,098
Dividends ...................................................... 24,525
Less: Interest expense (Note 8) ................................ (74,617)
-------------
Total Investment Income ........................................ 3,791,006
-------------
EXPENSES:
Investment advisory fees (Note 2) .............................. 170,872
Administration fees (Note 2) ................................... 68,349
Shareholder communications ..................................... 43,981
Audit and legal ................................................ 23,463
Shareholder and system servicing fees .......................... 18,367
Listing fees ................................................... 8,089
Directors' fees ................................................ 7,746
Pricing ........................................................ 6,308
Custody ........................................................ 3,903
Other .......................................................... 9,329
-------------
Total Expenses ................................................. 360,407
-------------
Net Investment Income ............................................ 3,430,599
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES (NOTES 3 AND 12):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) ...... (3,865,546)
Foreign currency transactions ................................ 448,169
-------------
Net Realized Loss .............................................. (3,417,377)
-------------
Change in Net Unrealized Depreciation of
Investments and Foreign Currencies:
Beginning of period .......................................... (8,315,204)
End of period ................................................ (7,482,589)
-------------
Decrease in Net Unrealized Depreciation ........................ 832,615
-------------
Net Loss on Investments .......................................... (2,584,762)
-------------
Increase in Net Assets From Operations ........................... 845,837
=============
See Notes to Financial Statements.
20
<PAGE>
[LOGO OF ZENIX FUNDS]
Statements of Changes in Net Assets
For the Three Months Ended
June 30, 2000 (unaudited)
and the Year Ended March 31, 2000
================================================================================
June 30 March 31
------------- -------------
OPERATIONS:
Net investment income .......................... $ 3,430,599 $ 12,243,787
Net realized loss .............................. (3,417,377) (8,989,043)
(Increase) decrease in net
unrealized depreciation ...................... 832,615 (5,686,535)
------------- -------------
Increase (Decrease) in Net Assets
From Operations .............................. 845,837 (2,431,791)
------------- -------------
DISTRIBUTIONS PAID TO:
7.00% Cumulative Preferred Stock
Shareholders From Net Investment
Income ....................................... (713,417) (2,100,000)
Auction Rate Cumulative Preferred Shares
Shareholders From Net Investment Income ...... (814,248) --
Common Stock Shareholders From Net
Investment Income ............................ (2,590,109) (10,351,025)
------------- -------------
Decrease in Net Assets From
Distributions To Shareholders ................ (4,117,774) (12,451,025)
------------- -------------
FUND SHARE TRANSACTIONS (NOTE 9):
Issuance of Auction Rate Cumulative
Preferred Shares (net of underwriting
commissions and expenses of $865,000) ........ 59,135,000 --
Redemption of 7.00% Cumulative
Preferred Stock .............................. (30,000,000) --
Net asset value of shares issued for
reinvestment of dividends .................... 233,767 1,561,796
------------- -------------
Increase in Net Assets From
Fund Share Transactions ...................... 29,368,767 1,561,796
------------- -------------
Increase (Decrease) in Net Assets ................ 26,096,830 (13,321,020)
NET ASSETS:
Beginning of period ............................ 110,861,178 124,182,198
------------- -------------
End of period* ................................. $ 136,958,008 $ 110,861,178
============= =============
*Includes overdistributed
net investment income of: ..................... $(377,067) $(138,061)
============= =============
See Notes to Financial Statements.
21
<PAGE>
[LOGO OF ZENIX FUNDS]
<TABLE>
<CAPTION>
Statement of Cash Flows
For the Three Months Ended
June 30, 2000 (unaudited)
================================================================================
<S> <C> <C>
Cash Flows Provided by Operating
and Investing Activities:
Interest and dividends received ....................... $ 3,873,447
Operating expenses paid ............................... (111,937)
Purchases of short-term securities, net ............... 8,940,000
Purchases of long-term securities ..................... (31,341,480)
Proceeds from disposition of long-term securities ..... 23,647,309
------------
Net Cash Flows Provided By Operating
and Investing Activities ............................ $ 5,007,339
------------
Cash Flows Used By Financing Activities:
Redemption of Bank Loan ............................... (30,000,000)
Redemption of 7.00% Cumulative Preferred Stock ........ (30,000,000)
Issuance of Auction Rate Cumulative Preferred Shares .. 60,000,000
Cash dividends paid on 7.00% Cumulative
Preferred Stock...................................... (713,417)
Cash dividends paid on Auction Rate Cumulative
Preferred Shares .................................... (814,248)
Underwriting and issuance expenses related to
Auction Rate Cumulative Preferred Shares ............ (865,000)
Interest payments on bank loans ....................... (256,406)
Cash dividends paid on Common Stock* .................. (2,358,546)
-----------
Net Cash Flows Used By Financing Activities ........... (5,007,617)
------------
Net Decrease in Cash .................................... (278)
Cash,Beginning of Period ................................ $ 512
------------
Cash, End of Period ..................................... 234
============
RECONCILIATION OF DECREASE IN NET ASSETS
FROM OPERATIONS TO NET CASH PROVIDED
BY OPERATING AND INVESTING ACTIVITIES:
Increase in Net Assets From Operations .................. $ 845,837
Amortization of discount on securities ................ (666,948)
Decrease in investments ............................... 5,161,044
Increase in receivable for securities sold ............ (1,684,993)
Increase in payable for securities purchased .......... 489,066
Decrease in dividends and interest receivable ......... 158,103
Decrease in receivable for open forward foreign
currency contracts .................................. 382,143
Interest expense ...................................... 74,617
Increase in accrued expenses .......................... 248,470
-----------
Total Adjustments ..................................... 4,161,502
------------
Net Cash Flows Provided By Operating
and Investing Activities ................................ $ 5,007,339
============
</TABLE>
* Exclusive of dividend reinvestment of $233,767
See Notes to Financial Statements.
22
<PAGE>
[LOGO OF ZENIX FUNDS]
Notes to Financial Statements
(unaudited)
================================================================================
1. Significant Accounting Policies
Zenix Income Fund Inc. ("Fund"), a Maryland corporation, is registered
under the Investment Company Act of 1940, as amended, as a diversified,
closed-end management investment company.
The significant accounting policies followed by the Fund are: (a) security
transactions are accounted for on trade date; (b) securities 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 ask 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. 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 references to valuations of other securities which are considered
comparable in quality, interest rate and maturity; (c) securities maturing
within 60 days are valued at cost plus accreted discount, or minus amortized
premium, which approximates value; (d) the accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of securities, and income and expenses are translated at the rate of
exchange quoted on the respective date that such transactions are recorded.
Differences between income or expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank; (e) dividend income is recorded on
the ex-dividend date and interest income is recorded on an accrual basis; (f)
gains or losses on the sale of securities are calculated by using the specific
identification method; (g) dividends and distributions to shareholders are
recorded monthly by the Fund on the ex-dividend date for the shareholders of
Common Stock based on net investment income. The holders of the Auction Rate
Cumulative Preferred Shares shall be entitled to receive dividends in accordance
with an auction that will normally be held weekly
23
<PAGE>
[LOGO OF ZENIX FUNDS]
Notes to Financial Statements
(unaudited) (continued)
================================================================================
and out of funds legally available to shareholders; (h) the net asset value of
the Fund's Common Stock is determined 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
(1) the Fund's liabilities, (2) the aggregate liquidation value (i.e.,$25,000
per outstanding share) of the Auction Rate Cumulative Preferred Shares and (3)
accumulated and unpaid dividends on the outstanding Auction Rate Cumulative
Preferred Shares issue; (i) the Fund intends to comply with the requirements of
the Internal Revenue Code of 1986, as amended, pertaining to regulated
investment companies and to make distributions of taxable income sufficient to
relieve it from substantially all Federal income and excise taxes; (j) the
character of income and gains to be distributed is determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. At March 31, 2000, reclassifications were made to the Fund's capital
accounts to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations. Accordingly, a portion
of accumulated net realized losses amounting to $8,395,005 was reclassified to
paid-in capital. Net investment income, net realized gains and net assets were
not affected by this change; and (k) estimates and assumptions are required to
be made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
2. Advisory Agreement and Transactions with Affiliated Persons
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc., acts
as investment adviser to the Fund. The Fund pays SSBC a management fee
calculated at an annual rate of 0.50% of the average daily
24
<PAGE>
[LOGO OF ZENIX FUNDS]
Notes to Financial Statements
(unaudited) (continued)
================================================================================
net assets (defined as the average daily value of the total assets of the Fund
less total liabilities other than the outstanding principal amount of the Bank
loan). This fee is calculated daily and paid monthly.
SSBC also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets (defined
as the average daily value of the total assets of the Fund less total
liabilities other than the outstanding principal amount of the Bank loan). This
fee is calculated daily and paid monthly.
All officers and one Director of the Fund are employees of Salomon Smith
Barney Inc. ("SSB"), another subsidiary of SSBH.
3. Investments
During the three months ended June 30, 2000, the aggregate cost of
purchases and proceeds from sales of investments (including maturities, but
excluding short-term securities) were as follows:
--------------------------------------------------------------------------------
Purchases $31,826,546
--------------------------------------------------------------------------------
Sales 25,329,814
--------------------------------------------------------------------------------
At June 30, 2000, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
--------------------------------------------------------------------------------
Gross unrealized appreciation 2,401,612
Gross unrealized depreciation (9,874,889)
--------------------------------------------------------------------------------
Net unrealized depreciation (7,473,277)
--------------------------------------------------------------------------------
4. Cash Flow Information
The Fund invests in securities and distributes dividends from net
investment income and net realized gains. These activities are reported in the
Statements 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 gains or losses on
investment securities.
25
<PAGE>
[LOGO OF ZENIX FUNDS]
Notes to Financial Statements
(unaudited) (continued)
================================================================================
5. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day) at
an agreed upon higher repurchase price. The Fund requires continual maintenance
of the market value of the collateral in amounts at least equal to the
repurchase price.
6. 7.00% Cumulative Preferred Stock
On March 16, 1993, the Fund issued 30,000 shares of 7.00% Cumulative
Preferred Stock, which were redeemed in full on April 14, 2000, at a price equal
to $1,000 per share, plus accumulated dividends of $713,417.
7. Auction Rate Cumulative Preferred Shares
On April 14, 2000, the Fund issued 2,400 shares of Auction Rate Cumulative
Preferred Shares ("ARCPS"). The underwriting discount of $600,000 and offering
expenses of $265,000 associated with the ARCPS offering were recorded as a
reduction of the capital paid in excess of par value of common stock. The
ARCPS's dividends are cumulative at a rate determined at an auction, and the
dividend period will typically be seven days. Dividend rates ranged from 6.00%
to 6.55% for the period ended June 30, 2000.
The ARCPS is redeemable, under certain conditions by the Fund, or subject
to mandatory redemption (if the Fund is in default of certain coverage
requirements) at a redemption price equal to $25,000 per share plus accumulated
and unpaid dividends. The ARCPS has a liquidation preference of$25,000 per share
plus accumulated and unpaid dividends. The Fund is required to maintain certain
asset coverages with respect to the ARCPS under the Investment Company Act of
1940.
SSB also currently acts as a broker/dealer in connection with the auction
of ARCPS. After each auction, the auction agent will pay to each broker/dealer,
from monies the Fund provides, a participation fee at the annual rate of 0.25%
of the purchase price of ARCPS that the broker/dealer places at auction. For the
three months ended June 30, 2000, SSB earned approximately $30,000 as the
broker/dealer.
26
<PAGE>
[LOGO OF ZENIX FUNDS]
Notes to Financial Statements
(unaudited) (continued)
================================================================================
8. Bank Loan
For the three months ended June 30, 2000, interest expense related to the
loan totaled $74,617, the average dollar amount of the borrowing was $30,000,000
and the average interest rate was 6.40%. Interest on the loan was calculated at
LIBOR plus 40 basis points.
On April 14, 2000, the Fund's $35,000,000 line of credit with PNC Bank was
extinguished.
9. Common Stock
At June 30, 2000, the Fund had 250,000,000 shares of common stock
authorized with a par value of $0.01 per share.
Common stock transactions were as follows:
Three Months Ended Year Ended
June 30, 2000 March 31, 2000
------------------ --------------------
Shares Amount Shares Amount
--------------------------------------------------------------------------------
Shares issued on
reinvestment 50,974 $233,767 281,150 $1,561,796
--------------------------------------------------------------------------------
10. Capital Loss Carryforward
At March 31, 2000, the Fund had, for Federal income tax purposes, capital
loss carryforwards of approximately $15,655,000 available to offset future
realized capital gains, if any. To the extent that these carryforward losses are
used to offset capital gains, it is probable that the gains so offset will not
be distributed.
The amount and expiration of the carryforwards are indicated below.
Expiration occurs on March 31 of the year indicated:
2003 2004 2007 2008
--------------------------------------------------------------------------------
Carryforward Amounts $4,873,000 $2,291,000 $1,704,000 $6,787,000
--------------------------------------------------------------------------------
11. Asset Maintenance Requirement
The Fund is required to maintain certain asset coverages with respect to
the ARCPS of at least 200%. If the Fund fails to maintain these requirements
27
<PAGE>
[LOGO OF ZENIX FUNDS]
Notes to Financial Statements
(unaudited) (continued)
================================================================================
as of the last business day of the month and does not cure such failure by the
last business day of the following month, the Fund is required to redeem certain
of the ARCPS in order to meet these requirements. Additionally, failure to meet
the foregoing asset requirements would restrict the Fund's ability to pay
dividends.
12. Forward Foreign Currency Contracts
At June 30, 2000, the Fund had open forward foreign currency contracts as
described below. The Fund bears the market risk that arises from changes in
foreign currency exchange rates. The unrealized gain (loss) on the contracts is
reflected as follows:
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
================================================================================
To Buy:
Euro 250,000 $ 239,650 7/5/00 $ 4,000
--------------------------------------------------------------------------------
To Sell:
British Pound 695,375 1,056,587 12/22/00 (10,951)
Canadian Dollar 472,500 320,263 12/8/00 958
Euro 2,415,630 2,339,271 12/15/00 (290)
--------------------------------------------------------------------------------
(10,283)
--------------------------------------------------------------------------------
Net Unrealized Loss on Open Forward
Foreign Currency Contracts $ (6,283)
================================================================================
28
<PAGE>
[LOGO OF ZENIX FUNDS]
Financial Highlights
================================================================================
Contained below is per share operating performance data for a share of common
stock outstanding, total return and ratios to average net assets based on Common
Shares outstanding. This information has been derived from information provided
in the financial statements and market price data for the Fund's shares.
For a share of common stock outstanding throughout each year ended March 31,
except where noted:
<TABLE>
<CAPTION>
2000(1) 2000 1999
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ......................... $5.02 $5.96 $6.96
-------- -------- --------
Income (Loss) From Operations:
Net investment income ...................................... 0.24 0.78 0.82
Net realized and unrealized loss ........................... (0.20) (0.94) (0.97)
-------- -------- --------
Total Income (Loss) From Operations ........................ 0.04 (0.16) (0.15)
-------- -------- --------
Underwriting commission and expenses of issuance
of Auction Rate Cumulative Preferred Shares ................ (0.05) -- --
-------- -------- --------
Distributions Paid To:
7.00% Cumulative Preferred Stock Shareholders From
Net Investment Income .................................... (0.04) (0.13) (0.14)
-------- -------- --------
Auction Rate Cumulative Preferred Shares Shareholders
From Net Investment Income ............................... (0.05) -- --
Change in undeclared dividends on Auction Rate
Cumulative Preferred Shares .............................. 0.04 -- --
Common Stock Shareholders From
Net Investment Income .................................... (0.16) (0.65) (0.69)
Common Stock Shareholders From Capital ..................... -- -- (0.02)
-------- -------- --------
Total Distributions ........................................ (0.21) (0.78) (0.85)
-------- -------- --------
Net Asset Value, End of Period ............................... $4.80 $5.02 $5.96
======== ======== ========
Market Value, End of Period .................................. $4.75 $4.44 $5.88
======== ======== ========
Total Return, Based on Market Value* ......................... 10.80%++ (14.28)% (12.53)%
======== ======== ========
Total Return, Based on Net Asset Value* ...................... (1.01)%++ (4.43)% (4.38)%
======== ======== ========
Net Assets**, End of Period (000's) .......................... $76,927 $80,234 $93,561
======== ======== ========
Ratios to Average Net Assets Based on
Common Shares Outstanding***:
Net Investment Income ...................................... 17.78%+ 13.90% 12.99%
Interest Expense ........................................... 0.39+ 2.04 1.81
Other Expenses ............................................. 1.87+ 1.69 1.53
Portfolio Turnover Rate ...................................... 21% 79% 91%
</TABLE>
------------------------
(1) For the three months ended June 30, 2000 (unaudited).
* The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
** Exclusive of preferred shares outstanding and undeclared preferred
dividends.
*** Calculated on basis of average net assets of common shareholders. Ratios do
not reflect the effect of dividend payments to preferred shareholders.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
29
<PAGE>
[LOGO OF ZENIX FUNDS]
Financial Highlights (continued)
================================================================================
For a share of common stock outstanding throughout each year ended March 31:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year ................ $ 6.45 $ 6.31 $ 5.88
-------- ------- -------
Income From Operations:
Net investment income ........................... 0.87 0.92 0.86
Net realized and unrealized gain ................ 0.56 0.08 0.45
-------- ------- -------
Total Income From Operations .................... 1.43 1.00 1.31
-------- ------- -------
Distributions Paid To:
7.00% Cumulative Preferred Stock Shareholders
From Net Investment Income .................... (0.14) (0.14) (0.15)
Common Stock Shareholders From
Net Investment Income ......................... (0.78) (0.72) (0.73)
-------- ------- -------
Total Distributions ............................. (0.92) (0.86) (0.88)
-------- ------- -------
Net Asset Value, End of Year ...................... $ 6.96 $ 6.45 $ 6.31
======== ======= =======
Market Value, End of Year ......................... $ 7.50 $ 7.25 $ 7.00
======== ======= =======
Total Return, Based on Market Value* .............. 14.81% 15.55% 18.35%
======== ======= =======
Total Return, Based on Net Asset Value* ........... 19.75% 14.04% 20.01%
======== ======= =======
Net Assets**, End of Year (000's) ................. $105,861 95,034 90,318
======== ======= =======
Ratios to Average Net Assets Based on
Common Shares Outstanding***:
Net Investment Income ........................... 12.60% 14.35% 14.21%
Interest Expense ................................ 1.81 1.92 1.98
Other Expenses .................................. 1.51 1.59 1.65
Portfolio Turnover Rate ........................... 79% 101% 87%
</TABLE>
--------------
* The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
** Exclusive of preferred shares outstanding and undeclared preferred
dividends.
*** Calculated on basis of average net assets of common shareholders. Ratios do
not reflect the effect of dividend payments to preferred shareholders. The
amounts for 1997 and 1996 have been recalculated to reflect this
methodology.
30
<PAGE>
[LOGO OF ZENIX FUNDS]
Other Financial Information
(unaudited)
================================================================================
The table below sets out information with respect to Auction Rate
Cumulative Preferred Shares, 7.00% Cumulative Preferred Stock and Bank Credit
Facility:
<TABLE>
<CAPTION>
2000(1) 2000 1999 1998 1997 1996
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Auction Rate Cumulative
Preferred Shares(2)
Total amount
outstanding (000s) $ 60,000 -- -- -- -- --
Asset Coverage Per Share 56,240 -- -- -- -- --
Involuntary Liquidating
Preference Per Share 25,000 -- -- -- -- --
Average Market Value
Per Share(3) 25,000 -- -- -- -- --
7.00% Cumulative
Preferred Stock(4)
Total amount
outstanding (000s) -- $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ 30,000
Asset Coverage Per Share -- 2,340 2,560 2,760 2,580 2,490
Involuntary Liquidating
Preference Per Share -- 1,000 1,000 1,000 1,000 1,000
Average Market Value
Per Share(3) -- 1,000 1,000 1,000 1,000 1,000
PNC Bank Credit Facility(5)
Total Amount
Outstanding (000s) -- 30,000 30,000 30,000 30,000 30,000
Asset Coverage (000s) -- 140,200 153,600 165,900 154,800 149,400
</TABLE>
---------------
(1) As of June 30, 2000.
(2) On April 14, 2000, the Fund issued 2,400 shares of Auction Rate Cumulative
Preferred Shares at $25,000 a share.
(3) Excludes accrued interest or accumulated undeclared dividends.
(4) On April 14, 2000, the Fund redeemed in full its shares of 7.00% Cumulative
Preferred Stock.
(5) On April 14, 2000, the Fund's $35,000,000 line of credit with PNC Bank was
extinguished.
31
<PAGE>
[LOGO OF ZENIX FUNDS]
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, 1998 $3,578,838 $0.23 $3,185,558 $0.21 $ (1,919,184) $(0.13) $ 1,266,374 $0.08
September 30, 1998 3,511,518 0.23 3,123,106 0.20 (11,774,047) (0.76) (8,650,941) (0.56)
December 31, 1998 3,604,184 0.23 3,264,567 0.21 (233,303) (0.01) 3,031,264 0.20
March 31, 1999 3,514,767 0.22 3,135,099 0.20 (1,173,863) (0.07) 1,961,236 0.13
June 30, 1999 3,352,171 0.21 2,987,079 0.19 (4,365,869) (0.28) (1,378,790) (0.09)
September 30, 1999 3,397,175 0.21 3,038,845 0.19 (4,147,356) (0.26) (1,108,511) (0.07)
December 31, 1999 3,585,998 0.23 3,230,785 0.21 28,349 0.00 3,259,134) 0.21
March 31, 2000 3,400,371 0.21 2,987,078 0.19 (6,190,702) (0.40) (3,203,624) (0.21)
June 30, 2000 3,791,006 0.26 3,430,599 0.24 (2,584,762) (0.20) 845,837 0.04
</TABLE>
------------
* Per share of Common Stock.
32
<PAGE>
[LOGO OF ZENIX FUNDS]
Financial Data (unaudited)
================================================================================
For a share of common stock outstanding throughout each period:
<TABLE>
<CAPTION>
Dividend
Record Payable NYSE Net Asset Dividend Reinvestment
Date Date Closing Price Value* Paid Price
================================================================================
<S> <C> <C> <C> <C> <C>
4/21/98 4/24/98 $7.500 $6.95 $0.061 $7.125
5/26/98 5/29/98 7.500 6.89 0.061 7.125
6/23/98 6/26/98 7.625 6.82 0.061 7.244
7/28/98 7/31/98 7.438 6.85 0.061 7.066
8/25/98 8/28/98 6.563 6.54 0.061 6.409
9/22/98 9/25/98 6.375 6.02 0.058 6.056
10/27/98 10/30/98 6.625 5.61 0.058 6.294
11/23/98 11/27/98 6.625 6.07 0.058 6.294
12/21/98 12/24/98 6.125 5.98 0.058 5.860
1/26/99 1/29/99 6.063 6.06 0.058 5.938
2/23/99 2/26/99 6.063 5.98 0.058 5.859
3/23/99 3/26/99 5.875 5.97 0.056 5.850
4/27/99 4/30/99 5.750 6.07 0.056 5.910
5/25/99 5/28/99 5.938 5.87 0.056 5.750
6/22/99 6/25/99 5.875 5.69 0.054 5.580
7/27/99 7/30/99 5.938 5.68 0.054 5.641
8/24/99 8/27/99 5.750 5.51 0.054 5.463
9/21/99 9/24/99 5.375 5.42 0.054 5.312
10/26/99 10/29/99 4.938 5.34 0.054 5.200
11/22/99 11/26/99 5.000 5.42 0.054 4.880
12/27/99 12/30/99 4.500 5.43 0.054 4.630
1/25/00 1/28/00 4.625 5.30 0.054 4.690
2/22/00 2/25/00 4.500 5.27 0.054 4.480
3/28/00 3/31/00 4.438 5.11 0.054 4.556
4/25/00 4/28/00 4.563 4.88 0.054 4.661
5/23/00 5/26/00 4.563 4.68 0.054 4.586
6/27/00 6/30/00 4.750 4.80 0.054 4.714
================================================================================
</TABLE>
* As of record date
33
<PAGE>
[LOGO OF ZENIX FUNDS]
Dividend Reinvestment Plan
(unaudited)
================================================================================
Under the Fund's Dividend Reinvestment Plan (Plan), a shareholder whose
shares of Common Stock are registered in his own name will have all
distributions from the Fund reinvested automatically by PFPC Global Fund
Services ("PFPC") as purchasing 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 shares under the Plan, unless
the service is not provided by the broker or nominee or the shareholder elects
to receive distributions in cash. Investors who own common stock registered in
street name should consult their broker-dealers for details regarding
reinvestment. All distributions to shareholders who do not participate in the
Plan will be paid by check mailed directly to the record holder by or under the
direction of PFPC as dividend paying agent.
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. When the
market price of the common stock is equal to or exceeds 98% of the net asset
value per share of the Common Stock on the determination date (generally, the
record date for the distribution), Plan participants will be issued shares of
Common Stock by the Fund at a price equal to the greater of 98% of net asset
value or 95% of the market price of the Common Stock.
If the market price of the Common Stock is less than 98% of the net asset
value of the Common Stock at the time of valuation (which is the close of
business on the determination date), or if the Fund declares a dividend or
capital gains distribution payable only in cash, PFPC will buy common stock in
the open market, on the NYSE or elsewhere, for the participants' accounts. If
following the commencement of the purchases and before PFPC has completed its
purchases, the market price exceeds the net asset value of the Common Stock as
of the valuation time, PFPC will attempt to terminate purchases in the open
market and cause the Fund to issue the remaining portion of the dividend or
distribution in shares at a price equal to the greater of (a) 98% of net asset
value as of the valuation time or (b) 95% of the then current market price. In
this case, the number of shares received by a Plan
34
<PAGE>
[LOGO OF ZENIX FUNDS]
Dividend Reinvestment Plan
(unaudited) (continued)
================================================================================
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. To the extent PFPC is unable to stop open market purchases and
cause the fund to issue the remaining shares, the average per share purchase
price paid by PFPC may exceed the net asset value of the Common Stock as of the
valuation time, resulting in the acquisition of fewer shares than if the
dividend or capital gains distribution had been paid in Common Stock issued by
the Fund at such net asset value. PFPC will begin to purchase Common Stock on
the open market as soon as practicable after the determination date for the
dividend or capital gains distribution, but in no event shall such purchases
continue later than 30 days after the payment date for such dividend or
distribution, or the record date for a succeeding dividend or distribution,
except when necessary to comply with applicable provisions of the federal
securities laws.
PFPC maintains all shareholder accounts in the Plan and furnishes written
confirmations of all transactions in each account, including information needed
by a shareholder for personal and tax records. 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. Common stock in the account of each Plan participant will be held
by PFPC in uncertificated form in the name of the Plan participant.
Plan participants are subject to no charge for reinvesting dividends and
capital gains distributions under the Plan. PFPC's fees for handling the
reinvestment of dividends and capital gains distributions will be paid by the
Fund. No brokerage charges apply with respect to shares of Common Stock issued
directly by the Fund under the Plan. Each Plan participant will, however, bear a
proportionate share of any brokerage commissions actually incurred with respect
to any open market purchases made under the Plan.
Experience under the Plan may indicate that changes to it are desirable.
The Fund reserves the right to amend or terminate the Plan as applied to any
dividend or capital gains distribution paid subsequent to written notice of the
35
<PAGE>
[LOGO OF ZENIX FUNDS]
Dividend Reinvestment Plan
(unaudited) (continued)
================================================================================
change sent to participants at least 30 days before the record date for the
dividend or capital gains distribution. The Plan also may be amended or
terminated by PFPC, with the Fund's prior written consent, on at least 30 days'
written notice to Plan participants. All correspondence concerning the Plan
should be directed by mail to PFPC Global Fund Services, P.O. Box 8030, Boston,
Massachusetts 02266-8030 or by telephone at 1-800-331-1710.
----------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase
shares of its common stock in the open market.
36
<PAGE>
DIRECTORS
Allan J. Bloostein
Martin Brody
Dwight B. Crane
Robert A. Frankel
William R. Hutchinson
Heath B. McLendon
Charles F. Barber, Emeritus
OFFICERS
Heath B. McLendon
Chairman of the Board
Lewis E. Daidone
Senior Vice President and Treasurer
John C. Bianchi
Vice President and Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
This report is intended only for the shareholders of the
ZENIX Income Fund Inc.
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.
FD01153 8/00
