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DEAR SHAREHOLDERS:
We are pleased to provide this report for INA Investment Securities, Inc. (the
"Company"), covering the quarter ended March 31, 1998.
MARKET ACTIVITY
Mixed economic data and uncertainty over the impact of the financil troubles in
Pacific Rim coutnries kept bond yields in a trading range. Yeilds on the
benchmark 30-year Treasury fell to under 5.70% -- the lowest level in five years
- --as events in Asia seemed to forestall any preemptive tightening of credit
conditions by the Federal Reserve. Subsequent concerns over continued rapid
growth in the U.S. economy moved 30-year bond rates back to year-end 1997 levels
by quarter-end.
On balance, the economic picture remained bright for continued growth.
Extraordinary strength in consumer spending and the housing sector, and
continued strong growth in capital spending, provided firm leadership in the
quarter. Meanwhile, consumer inflation remained under control, with most
indicators of inflation rising at less than a 2% annual rate. The unemployment
rate hovered around a 25-year low. In the public sector, the Federal Budget
deficit is approaching zero, and has already declined to its lowest level in
nearly 30 years. In short, for the seventh year of our economic expansion, the
U.S. economy remains remarkably healthy and in excellent balance.
The bond market managed a 1.52% gain for the quarter, as measured to the Lehman
Brothers Government/Corporate Bond Index. High yield bonds were the star
performers, with the median high yield mutual fund in the Morningstar Unvierse
returning 4%.
INVESTMENTS
The portfolio remains fully invested. On March 31, corporate and foreign bonds
were approximately 79.3% of portfolio holdings, U.S. government/agency
securities 17.7%, and cash and other assets 3.0%. Per share net asset value was
$19.15, down from $19.16 at December 31, 1997. A dividend of $0.31 per share was
declared during the first quarter.
PERFORMANCE
Based on the net asset value of its underlying assets, the Company returned
1.58% for the first quarter, after deducting expenses and allowing for the
reinvestment of dividends. This positive result was aided by a strong allocation
to the high yield sector. Based on the stock price of the shares listed on the
New York Stock Exchange and assuming reinvestment of dividends, the Company
returned 2.48% for the first quarter.
(CONTINUED ON PANEL 4)
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INA INVESTMENT SECURITIES, INC.
FINANCIAL SUMMARY
For the Three Months Ended March 31 (Unaudited)
(In Thousands)
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1998 1997
---- ----
Net investment income $1,447 $1,507
Net realized and unrealized gain(loss) 4 (2,188)
Per share:
Net investment income $0.30 $0.31
Dividends from net investment income $0.31 $0.31
Net asset value at end of period $19.15 $18.30
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NET INVESTMENT INCOME PER SHARE
For the Three Months Ended March 31 (Unaudited)
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1998 1997 1996 1995 1994
---- ---- ---- ---- ----
$0.30 $0.31 $0.33 $0.33 $0.33
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STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998 (Unaudited)
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(IN THOUSANDS)
--------------
ASSETS:
Investments at market value
(Cost - $88,089,620) $91,229
Interest receivable 1,488
Investment for Directors' deferred compensation plan 144
(Cost - $103,073)
Other 12
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Total assets 92,873
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LIABILITIES:
Payable for investments purchased 800
Deferred Directors' fees payable 144
Accrued advisory fees payable 44
Other accrued expenses (including $11,762 due to affiliate) 95
-----------
Total liabilities 1,083
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NET ASSETS $91,790
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NET ASSET VALUE PER SHARE
Applicable to 4,792,215 shares of $.10 par value
capital stock outstanding (12,000,000 shares authorized) $19.15
===========
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INA INVESTMENT SECURITIES, INC.
STATEMENT OF OPERATIONS AND CHANGE IN NET ASSETS
For the Three Months Ended March 31, 1998
(Unaudited)
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(IN THOUSANDS)
--------------
INVESTMENT INCOME:
Interest $1,657
EXPENSES:
Investment advisory fees $119
Custodian fees 22
Shareholder reports 14
Administrative services 13
Auditing and legal fees 13
Transfer agent fees 10
State taxes 7
Directors' fees 7
Other 6 211
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NET INVESTMENT INCOME 1,446
NET REALIZED GAIN ON INVESTMENTS 258
UNREALIZED DEPRECIATION OF INVESTMENTS (254)
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NET INCREASE IN NET ASSETS FROM OPERATIONS 1,450
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME (1,485)
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NET DECREASE IN NET ASSETS (35)
NET ASSETS:
Beginning of period 91,825
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End of period (includes overdistributed net investment
Income of $73,837) $91,790
=============
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OUTLOOK
As we look ahead to the remainder of 1998, the principal driving force in the
market is expected to be the Asian economic and financial crisis and its
implications for the U.S. We expect domestic economic growth to moderate as
Asian impacts continue to ripple through he economy. Inflation should also
remain depressed, leaving room for interest rates to decline modestly from
current levels. In this environment, we will continue to over-weight corporate
and high yield sectors, as well as make selected investments in mortgage-backed
and asset-backed securities as attractive opportunities present themselves.
Sincerely,
/s/ R. Bruce Albro
R. Bruce Albro
CHAIRMAN OF THE BOARD AND PRESIDENT
INA INVESTMENT SECURITIES, INC.
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[CIGNA TREE LOGO APPEARS HERE]
INA Investment Securities, Inc.
P.O. Box 13856 [CIGNA TREE LOGO APPEARS HERE]
Philadelphia, PA 19101
INA INVESTMENT SECURITIES, INC.
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BULK RATE
U.S. POSTAGE
PAID
SO. HACKENSACK, NJ FIRST QUARTER REPORT
PERMIT 750
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MARCH 31, 1998
