<PAGE>
- --------------------------------------------------------------------------------
1
DEAR SHAREHOLDERS:
We are pleased to provide this report for INA Investment Securities, Inc.
covering the year ended December 31, 1996.
MARKET REMAINS VOLATILE THROUGH
FOURTH QUARTER
During the fourth quarter of 1996, the bond market soared to its highest price
levels since March. The rally was aided by a pause in economic growth and by
lessened fears that the Federal Reserve would shift into a tightening mode. The
yield on the benchmark 30-year Treasury bond dropped from 6.92% to 6.31% in
early December. However, renewed concerns over economic resurgence drove yields
back up to 6.64% by the year-end. The bond market, as measured by the Lehman
Brothers Government/Corporate Bond Index, returned 3.06% during the quarter.
This strong performance brought full-year returns up to 2.90%. Bonds with the
greater yield advantage over Treasuries, tended to outperform, with the
non-investment grade "high yield" sector outpacing the rest of the market.
FUND PERFORMANCE
The Company returned 2.90% during the fourth quarter, after deduction of
expenses and reinvestment of dividends, based on the net asset value of its
underlying assets. Despite maintaining a neutral duration stance, the Company
enjoyed a modestly favorable result, thanks in large part to significant
positions in corporate and high-yield sectors. The Company returned 3.01% for
the full year, finishing 0.11% above its benchmark. Based on the per-share
market value of its shares as listed on the New York Stock Exchange, the Company
returned 0.28% for the year.
PORTFOLIO ACTIVITY
The portfolio remains fully invested. On December 31, 1996, corporate and
foreign bonds represented approximately 70.6% of portfolio holdings, U.S.
Government/agency securities stood at 22.2%. Cash and other assets accounted for
7.2% of the total. Per-share net asset value was $18.75, up from $18.52 on
September 30. A dividend of $0.31 was declared during the fourth quarter.
For more about the bond market, as well as details on our outlook and strategy,
please refer to the Management Discussion and Analysis section that follows.
Sincerely,
/s/ R. Bruce Albro
R. Bruce Albro,
Chairman of the Board and President
INA Investment Securities, Inc.
<PAGE>
- -------------------------------------------------------------------------------
INA INVESTMENT SECURITIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited)
2
1996 was a roller coaster ride of investor sentiment and interest rate
movement. The year began with a 5.95% rate on the benchmark 30-year Treasury
bond, reflecting recession worries and modest easing of monetary policy by the
Federal Reserve. As liquidity improved, growth accelerated and the market
abruptly changed its focus to concern over the "above-trend" growth and
incipient inflation. Yields reached 7.20% before easing economic data and benign
inflation numbers allowed yields to fall once more, closing the year at 6.64%.
Thanks to substantial liquidity in the markets and very positive technicals for
corporate bonds, spreads to Treasuries continued to firm up. Lower-rated spread
products-especially high-yield bonds-were the star performers. Significant
weighting in corporate bonds, including high-yield securities, helped INA
Investment Securities, Inc., achieve a full-year result of 3.01%, besting by
0.11% the 2.90% return of its benchmark, the Lehman Brothers
Government/Corporate Bond Index. The Company's result is after deduction of
expenses and reinvestment of dividends based on the net asset value of its
underlying assets. Based on the market value of its stock, adjusted for dividend
payments, the Company returned 0.28%.
The economy closed 1996 on a firm note. Now, if the business cycle shifts into
high gear in the first quarter of 1997, higher rates will prevail. While the
Federal Reserve has resisted taking action as long as inflation data has
remained favorable, any acceleration in the rate of inflation will rapidly lead
to tightening moves by the Fed.
The market continues to react abruptly to changing investor perceptions of
economic strength and the likelihood of a deviation in the Fed's policy.
Stirrings of unexpected economic strength caused the bond market to adjust
yields upward as 1996 closed. In the new year, economic data will once again be
carefully scrutinized for signs of continued acceleration and concomitant growth
in inflation.
The Company will continue to overweight corporate and high-yield sectors as
long as technicals remain favorable. If the economy begins to show signs of
sustained above-trend growth, we will reduce portfolio duration accordingly to
help preserve asset value.
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (Unaudited)
1/1/87 - 12/31/96
- ----------------------------------------------
AVERAGE ANNUAL RETURN
1 Year 5 Year 10 Year
Market Value 0.28% 6.37% 7.16%
Net Asset Value 3.01% 7.66% 8.31%
- ----------------------------------------------
Lehman Brothers
Point of INA Investment Gov't./Corp.
Measurement Securities, Inc. Bond Index
----------- ---------------- ----------
1/1/87 $10,000 $10,000
12/31/87 $9,484 $10,292
12/31/88 $10,480 $11,072
12/31/89 $11,615 $12,648
12/31/90 $11,260 $13,695
12/31/91 $14,661 $15,904
12/31/92 $15,450 $17,109
12/31/93 $17,645 $18,997
12/31/94 $16,174 $18,330
12/31/95 $19,906 $21,856
12/31/96 $19,962 $22,490
- --------------------------------------------------------------------------------
INA Investment Securities Inc.'s performance figures are historical and reflect
reinvestment of all dividends and capital gains distributions and changes in
the market value of its stock, or as shown separately in the box, changes in
its underlying net asset value. The Fund is a closed-end management investment
company which trades over the New York Stock Exchange under the ticker symbol
"IIS." Fund performance does not reflect exchange commissions payable upon the
purchase or sale of the Fund's stock. The Fund's investment return and
principal value will fluctuate so that an investor's shares, when sold, may be
worth more or less than their original cost. Past performance cannot guarantee
comparable future results. The Fund's return has been compared with the total
return performance of Lehman Brothers Government/Corporate Bond Index. This
index is a group of unmanaged securities widely regarded by investors to be
representative of the bond market in general. An investment cannot be made in
the index. Index results do not reflect brokerage charges or other investment
expenses.
<PAGE>
- -------------------------------------------------------------------------------
INA INVESTMENT SECURITIES, INC. INVESTMENTS IN SECURITIES December 31, 1996 3
MARKET
PRINCIPAL VALUE
(000) (000)
- ---------------------------------------------------------------------
LONG-TERM BONDS - 92.8%
CONSUMER AND RETAIL - 2.8%
Dayton Hudson Corp., 9.75%, 2002 $ 500 $ 565
Federated Department Stores, Inc., 8.5%, 2003 1,000 1,043
Herff Jones, Inc., 11.0%, 2005 (144A Security
acquired August, 1995 for $300,000)* 300 322
Smith's Food and Drug Centers, Inc., 11.25%, 2007 500 553
-------
2,483
-------
CONSUMER NON-CYCLICAL - 2.8%
Bard, C.R., Inc., 6.7%, 2026 1,000 977
MedPartners, Inc., 7.375%, 2006 1,000 1,003
Tenet Healthcare Corp., 9.625%, 2002 500 548
-------
2,528
-------
ENTERTAINMENT AND COMMUNICATIONS - 9.6%
Casino America, Inc.,12.5%, 2003 500 474
Century Communications Corp., 9.5%, 2005 500 513
Comtel Brasileira Ltd., 10.75%, 2004 (144A security
acquired Sept. 1996 for $500,000)* 500 514
Continental Cablevision, Inc., 8.3%, 2006 500 533
Rogers Communications, Inc., 10.875%, 2004 500 525
TKR Cable, Inc., 10.5%, 2007 500 526
Tele-Communications, Inc., 9.25%, 2002 500 530
360 Communications Co., 7.125%, 2003 1,400 1,383
Time Warner Entertainment Co., 10.15%, 2012 1,750 2,099
Total Access Communications Public Co., Ltd.,
7.625%, 2001 (144A security acquired
Oct., 1996 for $499,855)* 500 503
Vanguard Cellular System, Inc., 9.375%, 2006 500 508
Viacom International, Inc., 9.125%, 1999 500 511
-------
8,619
-------
FINANCIAL - 20.9%
Abbey National PLC, 7.35%, 2049 750 760
Associates Corporation of N.A., 9.7%, 1997 3,000 3,037
Case Equipment Loan Trust 1995-A, 5.5%, 2003 2,095 2,082
Corporacion Andina De Fome, 7.1%, 2003 200 200
First Union National Bank of Florida, 6.18%, 2036 1,000 945
MARKET
PRINCIPAL VALUE
(000) (000)
- -----------------------------------------------------------------------
First USA Bank, Wilmington, 5.85%, 2001 $1,000 $ 960
Fleet Mortgage Group, Inc., 6.5%, 2000 1,000 997
Heller Financial, Inc., 6.56%, 1999 1,000 1,006
Inter-American Development Bank, 8.875%, 2009 4,000 4,661
Middletown Trust, 10.875%, 1998 265 280
The Money Store Home Equity Loan Trust, 6.65%,
2017 960 947
Structured Coupon Receipts, (Stripped-Interest Only),
10.203%**, 1997 (144A security acquired June
1993, amortized cost $88,106)* 5,314 95
Structured Coupon Receipts, (Stripped-Interest Only),
10.207%**, 1997 (144A security acquired June
1993, amortized cost $30,261)* 2,310 29
United Post Office Investments, 7.75%, 1999 1,000 1,021
Western National Corp., 7.125%, 2004 1,000 1,011
World Financial Properties Tower, 6.95%, 2013
(144A security acquired Nov. 1996 for
$750,000)* 750 739
-------
18,770
-------
FOOD AND BEVERAGE - 3.1%
Bass America, Inc., 8.125%, 2002 1,500 1,594
ConAgra, Inc., 9.75%, 2021 1,000 1,232
-------
2,826
-------
FOREIGN GOVERNMENT - 1.1%
Mexico (United Mexican States), 7.56%, 2001 (144A
security acquired July, 1996 for $995,000)* 1,000 1,003
-------
INDUSTRIAL - 10.6%
AK Steel Corp., 9.125%, 2006 (144A security
acquired Sept. 1996 for $500,000)* 500 514
Air Products & Chemicals, Inc., 8.5%, 2006 2,000 2,159
Domtar, Inc., 8.75%, 2006 400 423
Fisher Scientific International, Inc., 7.125%, 2005 500 492
ICF Kaiser International, Inc., 13%, 2003 500 475
LaRoche Industries, Inc., 13.0%, 2004 500 542
Newport News Shipbuilding and Dry Dock Co.,
8.625%, 2006 (144A security acquired Nov.
1996 for $500,000)* 500 512
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- -------------------------------------------------------------------------------
INA INVESTMENT SECURITIES, INC. INVESTMENTS IN SECURITIES December 31, 1996
(Continued) 4
MARKET
PRINCIPAL VALUE
(000) (000)
- -------------------------------------------------------------------
NOVA Chemicals Ltd., 7.0%, 2026 (144A security
acquired August, 1996 for $1,000,000)* $1,000 $ 1,029
Riverwood International Corp., 10.25%, 2006 450 440
Smurfit Capital Funding PLC, 6.75%, 2005 1,000 974
Tjiwi Kimia International Finance, 13.25%, 2001 500 567
Waste Management, Inc., Zero Coupon, (Lyon),
2012 (Annual Put) 2,250 892
West Point Stevens, Inc., 9.375%, 2005 500 515
-------
9,534
-------
OIL & GAS - 6.4%
Gulf Canada Resources Ltd., 8.35%, 2006 1,000 1,037
Imexsa Export Trust, 10.125%, 2003 (144A security
acquired May, 1996 for $750,000)* 750 788
Louis Dreyfus National Gas Corp., 9.25%, 2004 1,000 1,080
Sonat, Inc.,
9.5%, 1999 1,000 1,068
9.0%, 2001 250 269
Transcontinental Gas Pipe Line Corp.,
9.125%, 2017 1,475 1,545
-------
5,787
-------
TRANSPORTATION - 5.2%
CSX Corp., 9.0%, 2006 2,300 2,590
Delta Air Lines, Inc., 10.14%, 2012 1,000 1,200
Hertz Corp., 7.0%, 2003 500 500
Japan Air Lines Co. Ltd., 11.0%, 1997 390 408
-------
4,698
-------
UTILITIES - 8.1%
Cajun Electric Power Co-op.,
8.92%, 2019 500 540
9.52%, 2019 1,000 1,082
Commonwealth Edison Co., 8.125%, 2007 2,000 2,039
El Paso Electric Co., 7.25%, 1999 500 499
Endesa-Chile Overseas Co., 7.2%, 2006 1,000 998
Public Service Company of Colorado, 8.125%, 2004 290 308
Salton Sea Funding Corp., 7.02%, 2000 1,000 1,007
Westingtonhouse Electric Corp., 8.375%, 2002 750 765
-------
7,238
-------
NUMBER OF
SHARES OR MARKET
PRINCIPAL VALUE
(000) (000)
- -------------------------------------------------------
U.S. Government & Agencies - 22.2%
Federal Farm Credit Banks, 6.2%, 2008 $ 350 $ 333
Federal National Mortgage Assoc.,
6.5%, 2008 1,102 1,090
6.5%, 2009 344 341
United States Treasury Bonds,
10.75%, 2005 1,370 1,758
12.0%, 2013 1,085 1,552
8.125%, 2019 1,965 2,273
8.5%, 2020 4,575 5,495
6.75%, 2026 840 846
United States Treasury Notes,
7.125%, 1999 10 10
7.5%, 1999 1,000 1,037
7.75%, 1999 415 434
5.5%, 2000 1,300 1,270
6.5%, 2001 1,845 1,865
7.875%, 2001 450 480
5.875, 2004 215 209
7.25%, 2004 425 447
6.5%, 2006 500 503
-------
19,943
-------
TOTAL LONG-TERM BONDS
(Cost $81,392,677) 83,429
-------
PREFERRED STOCK - 0.8%
(Cost $667,500)
Morgan Stanley Group, Inc. 15 694
-------
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- -------------------------------------------------------------------------------
INA INVESTMENT SECURITIES, INC. INVESTMENTS IN SECURITIES December 31, 1996
(Continued) 5
MARKET
PRINCIPAL VALUE
(000) (000)
- ----------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 4.6%
COMMERCIAL PAPER - 4.6%
American Express Credit Corp., 6.55%, 1/2/97 $3,761 $ 3,761
Ford Motor Credit Co., 6.00%, 1/2/97 359 359
-------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $4,120,000) 4,120
-------
TOTAL INVESTMENTS IN
SECURITIES - 98.2%
(Total Cost $86,180,177) 88,243
Cash and Other Assets Less Liabilities - 1.8% 1,622
-------
NET ASSETS - 100.0%
(equivalent to $18.75 per share based on
4,792,215 shares outstanding) $89,865
=======
* Indicates restricted security; the aggregate value of restricted securities
is $6,049,297 (aggregate cost $5,913,222) which is approximately 6.7% of net
assets. Valuations have been furnished by brokers trading in the securities
or a pricing service for all restricted securities.
** Effective yield as of purchase date.
- --------------------------------------------------
PORTFOLIO COMPOSITION (UNAUDITED)
December 31, 1996
QUALITY RATINGS* OF MARKET % OF
LONG-TERM BONDS VALUE MARKET
AND PREFERRED STOCK (000) VALUE
- -----------------------------------
Aaa/AAA $30,483 36.2%
Aa/AA 2,193 2.6%
A/A 12,180 14.5%
Baa/BBB 25,833 30.7%
Ba/BB 9,092 10.8%
B/B 4,342 5.2%
------- -------
$84,123 100.0%
======= =======
*The higher of Moody's or Standard & Poor Ratings.
- ---------------------------------------------------
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- -------------------------------------------------------------------------------
INA INVESTMENT SECURITIES, INC. 6
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
(IN THOUSANDS)
--------------
ASSETS:
Investments at market value
(Cost $86,180,177) $88,243
Cash 3
Interest receivable 1,746
Investment for deferred compensation plan
(Cost - $70,289) 81
Other 3
--------------
TOTAL ASSETS 90,076
--------------
LIABILITIES:
Deferred directors' fees payable 81
Accrued advisory fees payable 44
Other accrued expenses (including $1,810 due to
affiliate) 86
--------------
TOTAL LIABILITIES 211
--------------
NET ASSETS (equivalent to $18.75 per share based on
4,792,215 shares outstanding; 12,000,000 shares of
$.10 par value authorized) $89,865
==============
COMPONENTS OF NET ASSETS:
Paid-in capital $89,822
Overdistributed net investment income (49)
Unrealized appreciation of investments 2,074
Accumulated net realized loss (1,982)
--------------
NET ASSETS $89,865
==============
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
--------------
INVESTMENT INCOME
INCOME:
Interest $6,914
EXPENSES:
Investment advisory fees $472
Custodian fees 77
Administrative services 67
Transfer agent fees 51
Shareholder reports 48
Directors' fees 38
Auditing and legal fees 31
State taxes 21
Other 10 815
----- --------
NET INVESTMENT INCOME 6,099
--------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from investments (1,378)
Unrealized depreciation of investments (2,118)
--------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS (3,496)
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $2,603
========
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- -------------------------------------------------------------------------------
INA INVESTMENT SECURITIES, INC. 7
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED
DECEMBER 31,
-------------------
1996 1995
--------- ---------
(IN THOUSANDS)
-------------------
OPERATIONS:
Net investment income $6,099 $6,348
Net realized gain (loss) from investments (1,378) 1,556
Unrealized appreciation (depreciation) on
investments (2,118) 7,735
--------- ---------
Net increase in net assets from operations 2,603 15,639
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ($1.29 and
$1.32 per share, respectively) (6,182) (6,326)
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS (3,579) 9,313
NET ASSETS:
Beginning of period 93,444 84,131
--------- ---------
End of period (including overdistributed net
investment income of $48,985 and
$15,270, respectively) $89,865 $93,444
========= =========
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- -------------------------------------------------------------------------------
INA INVESTMENT SECURITIES, INC. 8
1. SIGNIFICANT ACCOUNTING POLICIES. INA Investment Securities, Inc. (the
"Company") is registered under the Investment Company Act of 1940, as amended,
as a diversified, closed-end management investment company. The Fund's objective
is to generate income and obtain capital appreciation by investing at least 85%
of its total assets in investment grade debt securities and preferred stocks.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Company in the
preparation of its financial statements.
A. SECURITY VALUATION - Debt securities traded in the over-the-counter market,
including listed securities whose primary markets are believed to be
over-the-counter, are valued on the basis of valuations furnished by brokers
trading the securities or a pricing service, which determines valuations for
normal, institutional-size trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders.
Short-term investments with remaining maturities of up to and including 60 days
are valued at amortized cost, which approximates market. Short-term investments
that mature in more than 60 days are valued at current market quotations. Other
securities and assets of the company are appraised at fair value as determined
in good faith by, or under the authority of, the Company's Board of Directors.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions
are accounted for on the trade date (date the order to buy or sell is executed).
Dividend income is recorded on the ex-dividend date, and interest income is
recorded on the accrual basis.
The Company does not amortize premiums or discounts for book purpose, except for
original issue discounts which are amortized over the life of the respective
securities. Securities gains or losses are determined on the basis of identified
cost.
C. FEDERAL TAXES - It is the Company's policy to continue to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income or capital gains, if any,
to its shareholders. Therefore, no Federal income or excise taxes have been
accrued.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions are
recorded by the Company on the ex-dividend date. The timing and characterization
of certain income and capital gains distributions are determined in accordance
with federal tax regulations which may differ from generally accepted accounting
principles. To the extent that such differences are permanent, a reclass to paid
in capital may be required.
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES. Investment
advisory fees were paid or accrued to CIGNA Investments, Inc. (CII), certain
officers and directors of which are affiliated with the Company. Such advisory
fees are based on an annual rate of 0.55% of the first $75 million of average
weekly net asset value and 0.4% thereafter.
The Company reimburses CII for a portion of the compensation and related
expenses of the Company's Treasurer and Secretary and certain persons who assist
in carrying out the responsibilities of those offices. For the year ended
December 31, 1996, the Company paid $67,017.
CII is an indirect, wholly-owned subsidiary of CIGNA Corporation.
3. DIRECTORS' FEES. Directors' fees represent remuneration paid or accrued to
directors who are
<PAGE>
- -------------------------------------------------------------------------------
INA INVESTMENT SECURITIES, INC. NOTES TO FINANCIAL STATEMENTS (Continued) 9
not employees of CIGNA Corporation or any of its affiliates. Directors may elect
to defer receipt of all or a portion of their fees which are invested in mutual
fund shares in accordance with a deferred compensation plan.
4. PURCHASES AND SALES OF SECURITIES. Purchases and sales of securities for
the year ended December 31, 1996 were as follows (excluding short-term
obligations):
PROCEEDS
COST OF FROM
SECURITIES SECURITIES
PURCHASED SOLD
----------- -----------
Bonds $37,444,001 $27,898,930
U.S. Government Obligations 36,775,430 48,085,924
Preferred Stock 667,500 -
----------- -----------
$74,886,931 $75,984,854
=========== ===========
As of December 31, 1996, the cost of securities for Federal income tax purposes
was $86,215,286. At December 31, 1996, unrealized appreciation for Federal
income tax purposes aggregated $2,027,820 of which $2,665,892 related to
appreciated securities and $638,072 related to depreciated securities.
5. CAPITAL LOSS CARRYOVER. At December 31, 1996, the Company had a capital loss
carryover for Federal income tax purposes of $1,947,232, $306,433 of which
expires in 2002 and $1,640,799 of which expires in 2004.
<PAGE>
- -------------------------------------------------------------------------------
INA Investment Securities, Inc. Notes to Financial Statements (Continued) 10
6. FINANCIAL HIGHLIGHTS. The following table includes data, ratios and
supplemental data for a share outstanding throughout each period and other
performance information:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $19.50 $17.56 $19.72 $18.75 $18.85
INCOME FROM INVESTMENT OPERATIONS
Net investment income (1) 1.27 1.32 1.39 1.39 1.49
Net realized and unrealized gain (loss) (0.73) 1.94 (2.00) 1.01 (0.11)
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.54 3.26 (0.61) 2.40 1.38
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income (1.29) (1.32) (1.35) (1.43) (1.48)
From capital gains - - (0.20) - -
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (1.29) (1.32) (1.55) (1.43) (1.48)
-------- -------- -------- -------- --------
Net asset value, end of period $18.75 $19.50 $17.56 $19.72 $18.75
======== ======== ======== ======== ========
Market value, end of period $16.13 $17.38 $15.25 $18.25 $17.25
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:
Per share market value 0.28% 23.07% (8.34)% 14.21% 5.39%
Per share net asset value (2) 3.01% 19.17% (3.13)% 13.03% 7.64%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $89,865 $93,444 $84,131 $94,482 $89,839
Ratio of operating expenses to average net assets 0.91% 1.00% 0.96% 0.96% 0.90%
Ratio of net investment income to average net assets 6.80% 7.10% 7.42% 7.03% 7.96%
Portfolio turnover 89% 158% 86% 159% 41%
(1) Net investment income per share has been calculated in accordance with SEC
requirements, with the exception that end of year accumulated
undistributed/(overdistributed) net investment income has not been adjusted
to reflect current year permanent differences between financial and tax
accounting.
(2) Total investment return based on per share net asset value reflects the
effects of changes in net asset value on the performance of the Company
during each year, and assumes distributions were reinvested at net asset
value. These percentages do not correspond with the performance of a
shareholder's investment in the Company based on market value since the
relationship between the market price of the stock and net asset value
varied during each period.
<PAGE>
- -------------------------------------------------------------------------------
INA INVESTMENT SECURITIES, INC. NOTES TO FINANCIAL STATEMENTS (Continued) 11
7. QUARTERLY RESULTS (UNAUDITED). The following is a summary of quarterly
results of operations (in thousands except for per share amounts):
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN (LOSS
INVESTMENT INCOME NET INVESTMENT INCOME ON INVESTMENTS NET ASSETS
PERIOD ENDED TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE INCR.(DECR.) PER SHARE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1995 $1,782 $.37 $1,567 $.33 $2,529 $.53 $2,515 $.52
June 30, 1995 1,821 .38 1,600 .33 3,603 .75 3,622 .76
September 30, 1995 1,820 .38 1,599 .33 709 .15 726 .15
December 31, 1995 1,813 .38 1,582 .33 2,450 .51 2,450 .51
March 31, 1996 1,798 .38 1,581 .33 (3,706) (.77) (3,706) (.77)
June 30, 1996 1,718 .36 1,510 .32 (1,300) (.27) (1,372) (.29)
September 30, 1996 1,695 .35 1,490 .31 422 .09 378 .08
December 31, 1996 1,703 .35 1,518 .31 1,088 .22 1,121 .23
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
12
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of INA Investment Securities, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of INA Investment Securities, Inc.
(the "Fund") at December 31, 1996, the results of its operations for the year
then ended, the changes in its net assets and the financial highlights for each
of the years indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1996 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 14, 1997
<PAGE>
- -------------------------------------------------------------------------------
13
1996 TAX INFORMATION (UNAUDITED)
During 1996, INA Investment Securities, Inc. declared ordinary income dividends
of $1.29 per share. There were no capital gain distributions. Dividends reported
to you on Form 1099, whether received as stock or cash, must be included in your
Federal income tax return and must be reported by the Company to the Internal
Revenue Service.
Approximately 21.7% of income for the year was derived from U.S. Government
Treasury Obligations, and 2.5% from U.S. Government Agency obligations.
AUTOMATIC DIVIDEND AND DISTRIBUTION INVESTMENT PLAN
Shareholders may elect to have all distributions of dividends and capital gains
automatically reinvested by State Street Bank and Trust Company (the "Dividend
Paying Agent") as plan agent under the Automatic Dividend and Distribution
Investment Plan (the "Plan"). Shareholders who do not elect to participate in
the Plan will receive all distributions from the Company in cash paid by check
mailed directly to the shareholder by the Dividend Paying Agent. Shareholders
may elect to participate in the Plan and to have all distributions of dividends
and capital gains automatically reinvested by sending written instructions to
the Dividend Paying Agent at the address set forth below.
If the Directors of the Company declare a dividend or determine to make a
capital gains distribution payable either in shares of the Company or in cash,
as shareholders may have elected, non-participants in the Plan will receive cash
and participants in the Plan will receive the equivalent in shares. If the
market price of the shares as of the close of business on the payment date for
the dividend or distribution is equal to or exceeds their net asset value as
determined as of the close of business on the payment date, participants will be
issued shares of the Company at a value equal to the higher of net asset value
or 95% of the market price. If net asset value exceeds the market price of the
shares at such time, or if the Company declares a dividend or other distribution
payable only in cash, the Dividend Paying Agent will, as agent for Plan
participants, buy shares in the open market, on the New York Stock Exchange or
elsewhere, for the participants' accounts. If, before the Dividend Paying Agent
has completed its purchases, the market price exceeds the net asset value of the
shares, the average per share purchase price paid by the Dividend Paying Agent
may exceed the net asset value of the shares, resulting in the acquisition of
fewer shares than if the dividend or distribution had been paid in shares issued
by the Company.
Participants in the Plan may withdraw from the Plan upon written notice to the
Dividend Paying Agent. When a participant withdraws from the Plan or upon
termination of the Plan as provided below, certificates for the whole shares
credited to his account under the Plan will be issued and a cash payment will be
made for any fraction of a share credited to such account.
The Dividend Paying Agent will maintain all shareholders' accounts in the Plan
and will furnish written confirmation of all transactions in the account,
including information needed by shareholders for tax records. Shares in the
account of each Plan participant (other than participants whose shares are
registered in the name of banks, brokers, nominees or other third parties) will
be held by the Dividend Paying Agent in the non-certificated form in the name
of the participant, and each shareholder's proxy will include those shares
purchased pursuant to the Plan.
<PAGE>
- -------------------------------------------------------------------------------
14
In the case of shareholders such as banks, brokers or nominees which hold shares
for others who are the beneficial owners, the Dividend Paying Agent will
administer the Plan on the basis of number of shares certified from time to time
by the record shareholders as representing the total amount registered in the
record shareholder's name and held for the account of beneficial owners who are
to participate in the Plan. Investors whose shares are held in the name of
banks, brokers or nominees should confirm with such entities that participation
in the Plan will be possible, and should be aware that they may be unable to
continue to participate in the Plan if their account is transferred to another
bank, broker or nominee. Those who do participate in the Plan may subsequently
elect not to participate by notifying such entities.
There is no charge to participants for reinvesting dividends or distributions,
except for certain brokerage commissions, as described below. The Dividend
Paying Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Company. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Dividend
Paying Agent's open market purchases in connection with the reinvestment of
dividends or distributions.
Participants in the Plan should be aware that they will realize capital gains
and income for tax purposes upon dividends and distributions although they will
not receive any payment of cash.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Company reserves the right to amend or terminate the Plan as applied to any
dividend or distribution paid subsequent to written notice of the change sent to
the participants in the Plan at least 90 days before the record date for such
dividend or distribution. The Plan also may be amended or terminated by the
Dividend Paying Agent on at least 90 days' written notice to participants in the
Plan. All correspondence concerning the Plan including requests for additional
information or an application brochure or general inquires about your account
should be directed to State Street Bank and Trust Company, Stock Transfer
Department, P.O. Box 8200, Boston, MA 02266-8200 or you may call toll-free
1-800-426-5523.
<PAGE>
- -------------------------------------------------------------------------------
INA INVESTMENT SECURITIES, INC. 15
<TABLE>
<CAPTION>
DIRECTORS OFFICERS
<S> <C> <C>
R. Bruce Albro Paul J. McDonald R. Bruce Albro
Senior Managing Director Senior Executive Vice President, Chairman of the Board and
CIGNA Investments, Inc. and Chief Financial Officer, President
Friendly Ice Cream Corporation
Hugh R. Beath Alfred A. Bingham III
Advisory Director, Arthur C. Reeds, III Vice President and Treasurer
AdMedia Corporate Advisors, Inc. President, CIGNA Investment
Management and CIGNA Lawrence S. Harris
Russell H. Jones Investments, Inc. Vice President
Vice President,
Kaman Corporation Jeffrey S. Winer
Vice President and Secretary
</TABLE>
- -------------------------------------------------------------------------------
INA Investment Securities is a closed-end, diversified management investment
company that invests primarily in debt securities. The investment adviser is
CIGNA Investments, Inc., Hartford, Connecticut 06152.
<PAGE>
[LOGO OF CIGNA APPEARS HERE]
INA Investment Securities, Inc.
P.O. Box 13856 [LOGO OF CIGNA APPEARS HERE]
Philadelphia, PA 19101
INA INVESTMENT SECURITIES, INC.
- --------------------
BULK RATE
U.S. POSTAGE
PAID
SO. HACKENSACK, NJ Annual Report
PERMIT 750
- --------------------
December 31, 1996
