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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, 1997.
MARKET ACTIVITY
Investors in the quarter reacted to a market environment of continued robust
growth with low inflation by driving bond market yields to near-term low levels.
The benchmark 30-year Treasury closed the third quarter at a yield of 6.40%,
down from 6.78% at last quarter-end and a period high of 7.10% during April. The
Treasury yield curve shifted downward as rates declined and flattened slightly.
Longer-term Treasury bonds outperformed shorter notes. There appears to be
little concern that the Federal Reserve (the "Fed") will tighten monetary
conditions anytime soon.
The bond market returned 3.50% for the third quarter, as measured by the Lehman
Brothers Government/Corporate Bond Index. Within the fixed income market, spread
product (including investment grade corporate bonds, high yield bonds and
mortgage-backed bonds) outperformed Treasuries.
INVESTMENTS
The Company remains fully invested. On September 30, 1997, corporate and foreign
bonds represented approximately 72.3% of Company holdings, U.S.
Government/agency securities 23.7%, and cash and other assets 4.0%. Per share
net asset value at September 30 was $18.97, up from $18.67 on June 30. A
dividend of $.31 was declared during the third quarter.
PERFORMANCE
After deducting expenses and allowing for the reinvestment of dividends, and
based on the net value of its underlying assets, the Company returned 3.29% for
the third quarter and 6.33% for the year to date. Index returns (which do not
reflect expense deductions) were modestly higher at 3.50% for the quarter and
6.34% year to date. During the third quarter, the Company's performance was
positively impacted by a substantial weighting in non-Treasury assets, including
an allocation to high-yield securities. Performance was somewhat hurt by an
asset duration that was slightly shorter than Index. The Company returned 6.69%
and 9.12%, respectively, for the quarter and year-to-date as reflected by the
change in the underlying market value of the shares listed on the New York Stock
Exchange and assuming reinvestment of dividends.
(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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1997 1996
---- ----
Net investment income $4,451 $4,580
Net realized and unrealized gain(loss) 1,058 (4,584)
Per share:
Net investment income $0.93 $0.96
Dividends from net investment income $0.93 $0.98
Net asset value at end of period $18.97 $18.52
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<TABLE>
<CAPTION>
NET INVESTMENT INCOME PER SHARE
For the Nine Months Ended September 30 (Unaudited)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
$0.93 $0.96 $0.99 $1.05 $1.06
</TABLE>
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STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997 (Unaudited)
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(IN THOUSANDS)
--------------
ASSETS:
Investments at market value
(Cost - $86,304,871) $88,999
Receivable for investments sold 1,081
Interest receivable 1,474
Investment for deferred compensation (Cost - $88,163) 105
Other 7
-----------
Total assets 91,666
-----------
LIABILITIES:
Payable for investments purchased 498
Deferred directors' fees payable 105
Accrued advisory fees payable 42
Other accrued expenses (including $14,705 due to affiliate) 104
-----------
Total liabilities 749
-----------
===========
NET ASSETS $90,917
===========
NET ASSET VALUE PER SHARE
Applicable to 4,792,215 shares of $.10 par value capital stock
outstanding (12,000,000 shares authorized) $18.97
===========
2
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS AND CHANGE IN NET ASSETS
For the Nine Months Ended September 30, 1997
(Unaudited)
- -----------------------------------------------------------------------------------------------------
(IN THOUSANDS)
--------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $5,073
EXPENSES:
Investment advisory fees $352
Custodian fees 55
Administrative services 49
Shareholder reports 38
Transfer agent fees 37
Auditing and legal fees 30
Directors' fees 24
State taxes 20
Other 17 622
------------ -----------------
NET INVESTMENT INCOME 4,451
NET REALIZED GAIN ON INVESTMENTS 422
UNREALIZED APPRECIATION OF INVESTMENTS 636
-----------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 5,509
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME (4,457)
-----------------
NET INCREASE IN NET ASSETS 1,052
NET ASSETS:
Beginning of period 89,865
-----------------
End of period (includes overdistributed net investment
income of $55,351) $90,917
=================
</TABLE>
3
<PAGE>
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OUTLOOK
Overall, the bond market should continue robust performance. With inflation low
and the Fed "on hold," positive sentiment prevails. At such elevated market
levels, however, some caution is appropriate. If a vigilant Fed becomes
uncomfortable with the degree of economic growth and its potential impact on
inflation, tightening of monetary conditions could result. This, in turn, could
bring about a negative market response. Any rise in rates should be short-lived.
The economy would respond by losing some of its momentum and inflation worries
would ebb. In the meantime, as long as the economy remains healthy, we expect to
maintain an overweighting in both investment-grade corporates and high-yield
bonds.
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 invest primarily in debt securities. The investment
adviser is CIGNA Investments, Inc., 900 Cottage Grove Road, 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 (the "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.
Effective December 1, 1997, State Street Bank and Trust Company will also allow
you, at no additional cost, to deposit with it, for safekeeping and in "book
entry form," any stock certificates for the Fund's shares you may have in your
possession. You may elect to have these shares held within or outside of the
Plan. Whether or not you participate in the Plan, you may elect by notice to
State Street to have State Street sell you book entry shares. State Street will
deduct from the sales proceeds $2.50 per transaction plus $.15 per share and
remit the balance of the proceeds to you.
4
<PAGE>
[TREE LOGO OF CIGNA APPEARS HERE]
INA Investment Securities, Inc.
P.O. Box 13856 [TREE LOGO OF CIGNA APPEARS HERE]
Philadelphia, PA 19101
INA INVESTMENT SECURITIES, INC.
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BULK RATE
U.S. POSTAGE
PAID
SO. HACKENSACK, NJ Third Quarter Report
PERMIT 750
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September 30, 1997
