<PAGE>
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DEAR SHAREHOLDERS:
We are pleased to provide this report for INA Investment Securities, Inc., (the
"Company"), covering the quarter ended September 30, 1996.
MARKET VOLATILITY MARKS THIRD QUARTER
During the third quarter of 1996, investors reacted strongly to an ambiguous
economic scenario, as news alternately suggested decelerating and accelerating
growth and provided mixed inflation signals. A quiescent Federal Reserve (Fed)
and muted inflation numbers helped the market rebound from intra-quarter lows.
The benchmark 30-year Treasury yields fluctuated within a range of approximately
6.75% to 7.25%, and ended the quarter little changed from beginning levels.
Corporate and high yield sectors continued their very strong performance. The
bond market, as measured by the Lehman Brothers Government/Corporate Bond Index,
returned 1.76% for the quarter.
PERFORMANCE
During the quarter, INA Investment Securities, Inc. outperformed its market
index by 0.44%, after deduction of expenses and reinvestment of dividends, based
on its net asset value. The Company owed its positive performance to its
significant positioning in the robust corporate and high yield sectors.
PORTFOLIO ACTIVITY
The portfolio remains fully invested. On September 30, 1996, corporate and
foreign bonds were approximately 66.6% of portfolio holdings, U.S.
government/agency securities 24.2% and cash equivalents and other assets 9.2%.
Per-share net asset value was $18.52, up from $18.44 on June 30, 1996.
FOURTH QUARTER DIVIDEND
A quarterly dividend distribution of 31 cents per share was declared Tuesday,
October 28, 1996 by the Directors of INA Investment Securities, Inc., payable
December 10. This represents a reduction from the 32 cent per share rate that
the Company paid in the third quarter of 1996 and the 33 cent rate paid
previously since the third quarter of 1992. These adjustments were necessitated
by the decline in net investment income in recent years. The decline in income
has resulted from the replacement of higher coupon bonds purchased for the
Company in earlier years by lower coupon issues, reflective of generally lower
interest rate levels, as the original bonds have matured or have been sold for
investment and credit reasons.
(continued on panel 4)
1
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FINANCIAL SUMMARY
For the Nine Months Ended September 30 (Unaudited)
(In Thousands)
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<TABLE>
<CAPTION>
1996 1995
--------- ------
<S> <C> <C>
Net investment income $4,580 $4,766
Net realized and unrealized gain(loss) $(4,584) $6,841
Per share:
Net investment income $0.96 $0.99
Dividends from net investment income 0.98 $0.99
Net asset value at end of period $18.52 $18.99
</TABLE>
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NET INVESTMENT INCOME PER SHARE
For the Nine Months Ended September 30 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
- ----- ----- ----- ----- -----
<C> <C> <C> <C> <C>
$0.96 $0.99 $1.05 $1.06 $1.12
</TABLE>
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STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In Thousands)
---------------
<S> <C>
ASSETS:
Investments at market value
(Cost $84,533,604) $85,988
Receivable for investments sold 1,502
Interest receivable 1,477
Investment for deferred compensation
(Cost $64,189) 77
Other 2
--------------
Total assets 89,046
--------------
LIABILITIES:
Deferred directors' fees payable 121
Accrued advisory fees payable 42
Other accrued expenses (including $41,398 due to affiliate) 139
--------------
Total liabilities 302
--------------
NET ASSETS $88,744
==============
NET ASSET VALUE PER SHARE
Applicable to 4,792,215 shares of $.10 par value capital stock
outstanding (12,000,000 shares authorized) $18.52
==============
</TABLE>
2
<PAGE>
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STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
For the Nine Months Ended September 30, 1996
(Unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $5,214
EXPENSES:
Investment advisory fees $354
Custodian fees 58
Administrative services 47
Transfer agent fees 42
Directors' fees 42
Shareholder reports 40
Auditing and legal fees 22
State taxes 19
Other 11 635
----- --------
NET INVESTMENT INCOME 4,579
NET REALIZED LOSS ON INVESTMENTS (1,857)
UNREALIZED DEPRECIATION OF INVESTMENTS (2,726)
--------
NET DECREASE IN NET ASSETS FROM OPERATIONS (4)
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME (4,696)
--------
NET DECREASE IN NET ASSETS (4,700)
NET ASSETS:
Beginning of period 93,444
--------
End of period (includes overdistributed net investment
income of $131,632) $88,744
========
</TABLE>
3
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OUTLOOK AND STRATEGY
We expect the market to react abruptly-though not always predictably-to
economic data that might influence the Fed's attitude on tightening credit
conditions. Any signs of an overheating economy or increasing inflation will
prompt investors to drive interest rates higher in anticipation of tightening by
the Fed. As data is scrutinized, choppy market conditions will once again
prevail.
The Company will maintain its overweighting in corporates and high yield credits
as long as the economy stays healthy and investor demand continues to be strong.
Should the economy show evidence of sustained above-trend growth, we will
modestly reduce the portfolio duration to preserve asset value.
Sincerely,
/s/ R. Bruce Albro
R. Bruce Albro, Chairman of the Board and President
INA Investment Securities, Inc.
INA Investment Securities, Inc. is a closed-end, diversified management
investment company that invests primarily in debt securities. The investment
adviser is CIGNA Investments, Inc., Hartford, Connecticut 06152.
Shareholders may elect to have dividends automatically reinvested in
additional shares of INA Investment Securities, Inc. by participating in the
Automatic Dividend Investment Plan. For a brochure describing this Plan or
general inquiries about your account, contact State Street Bank and Trust
Company, Stock Transfer Department, P.O. Box 8200, Boston, Massachusetts,
02266-8200, or call toll-free 1-800-426-5523.
4
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[CIGNA LOGO APPEARS HERE]
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INA Investment Securities, Inc.
Third Quarter Report
September 30, 1996
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[CIGNA LOGO APPEARS HERE]
---------------------------
BULK RATE
U.S. POSTAGE
PAID
SO. HACKENSACK, NJ
PERMIT 750
---------------------------
INA Investment Securities, Inc.
P.O. Box 13856
Philadelphia, PA 19101
Printed on recycled paper
542490
