<PAGE>
- --------------------------------------------------------------------------------
1
DEAR SHAREHOLDER:
We are pleased to provide this report for INA Investment Securities, Inc. (the
"Company") covering the six months ended June 30, 1998.
MARKET ACTIVITY
Financial developments in Asia continued to take center stage during the second
quarter of 1998, acting as a counterpoint to robust economic activity in the
United States. Despite the first quarter's robust gross domestic product ("GDP")
growth and the Federal Reserve Board's ("Fed's") subsequent stated bias not to
tighten monetary policy, evidence of slowing domestic economic activity emerged
as the second quarter progressed. Not only had Asia not stabilized, but
financial conditions in Asia deteriorated further, Japan announced it was
officially in recession, and other geographic areas of financial and currency
instability, such as Russia and South Africa, worsened. The breadth of this
global weakness and its attendant deflationary influences caused commodity
prices to plummet, in many cases, to their lowest levels in a decade.
The fixed income markets finally concluded that North America and Europe were
not immune from the impact of economic conditions in Asia and the emerging
markets, and that these effects would likely keep the Fed's monetary policy on
hold. U.S. dollar assets, particularly Treasury bonds, rose sharply during the
quarter, as long Treasury yields fell 30 basis points. High-grade U.S. bonds
performed the best during the quarter in a classic flight to quality, followed
by Agencies, then Asset-Backed Securities. Lower quality credits underperformed
Treasuries in the second quarter, consistent with the flight to quality,
economic deceleration and eroding corporate profit margin themes.
The bond market returned a healthy 2.62% for the quarter, as measured by the
Lehman Brothers Government/Corporate Bond Index. The Treasury yield curve
continued to flatten, as longer-dated securities outperformed shorter ones.
FUND ACTIVITY
The portfolio remains fully invested. On June 30, 1998, domestic corporate bonds
were approximately 77.8% of portfolio holdings, foreign bonds 9.1%, U.S.
Government 11.7%, and cash and other assets 1.4%. Per share net asset value was
$19.26, up from $19.15 on March 31. A dividend of $.31 was declared during the
quarter.
PERFORMANCE
After deducting expenses and allowing for the reinvestment of dividends, based
on the net asset value of its underlying assets, the Company returned 2.21% and
3.82%, respectively, for the quarter and year-to-date. The Company returned
1.43% and 3.94%, respectively, for the quarter and year-to-date based on the
underlying market value of the shares listed on the New York Stock Exchange.
Fund performance was hampered by its substantial exposure to corporate bonds,
including high yield bonds, as well as modest exposure to emerging markets, all
of which underperformed Treasuries.
OUTLOOK
The long-lived expansion has been led in recent quarters by exports and business
investment. The consumer, who is experiencing full employment, personal income
growth, low inflation and low interest rates, has played a key role. Thus far in
1998, however, we have seen evidence of trade deterioration and early signs of
reduced capital spending. The General Motors strike will also have a negative
impact on second and third quarter reported GDP. It seems the most logical
course for the Fed, in this environment of global instability and domestic
uncertainty, is one of accommodation, not restraint, as long as no threat of
inflation emerges. As a result, we remain constructive on the outlook for U.S.
fixed income assets.
<PAGE>
- --------------------------------------------------------------------------------
2
Because U.S. economic growth continues to be positive, we continue to overweight
corporates, including high yield. Our generally favorable outlook for interest
rates and the potential for increased prepayment activity leaves us cautiously
neutral with respect to Mortgage-Backed Securities (MBS); however, we still see
attractive opportunities in commercial MBS. We are also opportunistically
purchasing highly rated taxable municipal securities, which provide a good yield
spread advantage over Treasuries, but less spread vulnerability than lower rated
corporates.
DIVIDEND REDUCTION
On July 28, an income dividend of $.29 per share was declared for the third
quarter of 1998 payable September 10. This amount represents a reduction from
the $.31 per share rate that the Company paid in the second quarter of 1998
which had been in effect since the fourth quarter of 1996. The dividend is
payable September 10 to shareholders of record on August 28.
This adjustment was 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.
Sincerely,
/s/ R. Bruce Albro
R. Bruce Albro
Chairman of the Board and President
INA INVESTMENT SECURITIES, INC.
<PAGE>
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INA INVESTMENT SECURITIES, INC. INVESTMENTS IN SECURITIES June 30, 1998
(Unaudited) 3
MARKET
PRINCIPAL VALUE
(000) (000)
- ----------------------------------------------------------------
LONG-TERM BONDS - 98.6%
CONSUMER AND RETAIL - 2.8%
Dayton Hudson Corp., 9.75%, 2002 $ 500 $ 563
Herff Jones, Inc., 11.0%, 2005 ( 144A
security acquired August, 1995 for
$300,000)* 300 327
May Department Stores Co., 10.625%, 2010 435 590
Penney (J.C.) Inc., 7.4%, 2037 1,000 1,115
---------
2,595
---------
CONSUMER NON-CYCLICAL - 2.1%
MedPartners, Inc., 6.875%, 2000 1,000 940
Tenet Healthcare Corp., 7.875%, 2003 1,000 1,018
---------
1,958
---------
ENTERTAINMENT AND COMMUNICATIONS - 10.9%
Casino America, Inc., 12.5%, 2003 500 565
Century Communications Corp., 9.5%, 2005 500 541
Disney (Walt) Co., 1.5%, 1999 2,000 1,891
Grupo Iusacell, S.A. de C.V., 10.0%, 2004
(144A security acquired July, 1997 for
$500,000)* 500 515
IXC Communications, Inc., 9.0%, 2008 (144A
security acquired April, 1998 for
$250,000) 250 251
Mirage Resorts, Inc., 6.75%, 2007 400 393
Price Communications Wireless, Inc.,
11.75%, 2007 500 553
Southwestern Bell Telephone Co.,
7.375%, 2027 1,000 1,042
TKR Cable, Inc., 10.5%, 2007 500 550
Tele-Communications, Inc., 9.25%, 2002 500 551
Time Warner Entertainment Co.,
10.15%, 2012 1,750 2,294
Total Access Communications Public Co., Ltd.,
7.625%, 2001 (144A security acquired
Oct., 1996 for $499,855)* 500 370
Vanguard Cellular System, Inc., 9.375%,
2006 500 525
---------
10,041
---------
FINANCIAL - 15.3%
Abbey National PLC, 7.35%, 2049 750 796
American General Finance Corp., 5.9%, 2003 900 893
Banco Nacional de Comercio Exterior, S.N.C.,
7.25%, 2004 500 468
Case Credit Medium-Term Note,
6.0%, 2001 800 798
MARKET
PRINCIPAL VALUE
(000) (000)
- ----------------------------------------------------------------
Chase Commercial Mtg. Securities Corp.,
6.56%, 2030 $ 600 $ 613
Corporacion Andina De Fome, 7.1%, 2003 200 202
First Union Lehman Bros. Bank, 6.56%,
2008 525 536
Fleet Mortgage Group, Inc., 6.5%, 2000 1,000 1,011
General Motors Acceptance Corp.,
6.75%, 2002 1,000 1,021
Heller Financial, Inc.,
6.56%, 1999 1,000 1,006
9.125%, 1999 500 515
Inter-American Development Bank,
8.875%, 2009 2,000 2,447
Merrill Lynch and Co., Inc., 7.26%, 2002 800 823
Middletown Trust, 10.875%, 1998 140 140
United Post Office Investments,
7.75%, 1999 1,000 1,012
Western National Corp., 7.125%, 2004 1,000 1,037
World Financial Properties Tower,
6.95%, 2013 (144A security acquired
Nov., 1996 for $750,000)* 750 779
---------
14,097
---------
FOOD AND BEVERAGE - 3.2%
Bass America, Inc., 8.125%, 2002 1,500 1,600
ConAgra, Inc., 9.75%, 2021 1,000 1,335
---------
2,935
---------
FOREIGN GOVERNMENT - .8%
Panama, (Republic of), 7.875%, 2002
(144A security acquired Feb., 1997 for
$754,725)* 750 735
---------
INDUSTRIAL - 8.9%
Air Products & Chemicals, Inc., 8.5%, 2006 2,000 2,216
Beckman Instruments, Inc., 7.1%, 2003
(144A security acquired Feb., 1998 for
$500,000)* 500 503
Domtar, Inc., 8.75%, 2006 400 421
Fisher Scientific International, Inc.,
7.125%, 2005 500 469
ICF Kaiser International, Inc., 13.0%,
2003 500 525
Laidlaw, Inc., 6.65%, 2004 1,300 1,320
Pindo Deli Finance Mauritius Ltd.,
10.75%, 2007 500 350
Smurfit Capital Funding PLC, 6.75%, 2005 1,000 1,003
Tjiwi Kimia International Finance,
13.25%, 2001 500 410
Waste Management, Inc., Zero Coupon,
(Lyon), 2012 (Annual Put) 2,250 984
---------
8,201
---------
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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INA INVESTMENT SECURITIES, INC. INVESTMENTS IN SECURITIES June 30, 1998
(Unaudited) (Continued) 4
MARKET
PRINCIPAL VALUE
(000) (000)
- ----------------------------------------------------------------
OIL & GAS - 5.7%
Coastal Corp., 6.5%, 2008 $ 1,000 $ 1,006
Gulf Canada Resources Ltd., 8.35%, 2006 1,000 1,073
Imexsa Export Trust, 10.125%, 2003
(144A security acquired May, 1996
for $750,000)* 750 765
Louis Dreyfus National Gas Corp.,
9.25%, 2004 1,000 1,095
Sonat, Inc.,
9.5%, 1999 1,000 1,037
9.0%, 2001 250 268
---------
5,244
---------
STRUCTURED SECURITIES - 11.0%
CitiCorp Mtg. Securities, Inc., 6.75%,
2028 1,000 994
Countrywide Home Loans, Inc., 6.75%, 2028 1,300 1,292
First Union National Bank of Florida,
6.18%, 2036 1,000 1,011
General Electric Capital Mtg. Services, Inc.,
6.5%, 2023 750 757
6.75%, 2028 1,000 1,017
GMAC Commercial Mtg. Securities, Inc.,
6.566%, 2007 1,000 1,023
Iroquois Trust, 6.752%, 2007 (144A security
acquired March, 1998 for $730,891)* 725 732
The Money Store Home Equity Loan Trust,
6.65%, 2017 747 750
Morgan (J.P.) Commercial Mtg. Finance Co.,
6.533%, 2030 600 611
Nomura Asset Securities Corp., 6.59%, 2030 950 974
Residential Asset Securitization Trust,
6.75%, 2028 1,000 1,001
---------
10,162
---------
TAXABLE MUNICIPALS - 15.2%
Dallas Texas Revenue, 6.625%, 2027 1,000 980
Energy Acquisition Corp., 6.19%, 2002 900 905
Huntsville Solid Waste, 5.85%, 2002 1,000 993
Mendocino Cty. CA Pension, 6.89%, 2006 2,070 2,166
New York State Power Authority Revenue,
6.11%, 2011 800 802
Oakland CA Pension Oblig., 6.38%, 2000 500 507
Oklahoma City Oklahoma Airport Trust,
6.55%, 2006 1,000 1,028
Phoenix AZ Civic Imp. Corp., 6.15%, 2005 500 500
MARKET
PRINCIPAL VALUE
(000) (000)
- ----------------------------------------------------------------
Phoenix AZ Civic Plaza Bldg., 6.75%, 2006 $ 700 $ 722
Public Service Company of Colorado,
8.125%, 2004 290 318
Residential Funding Mortgage Securities, Inc.,
6.75%, 2028 1,250 1,253
St. Louis MO Municipal Finance Corp.,
6.45%, 2007 800 812
Shreveport LA Certificate of Indebtedness,
6.23%, 2002 500 501
Trinity County Calif. Pension, 6.35%, 2012 1,000 978
Wilkes Barre, PA, 6.4%, 2009 1,500 1,516
---------
13,981
---------
TRANSPORTATION - 5.9%
AMR Corp., 9.2%, 2012 505 623
CSX Corp., 7.25%,
2027 800 864
Delta Air Lines, Inc.,
9.45%, 2006 1,000 1,125
10.14%, 2012 (144A security acquired
July, 1995 for $1,112,260)* 1,000 1,304
Hertz Corp., 7.0%, 2003 500 513
Kitty Hawk, Inc., 9.95%, 2004 500 518
Norfolk Southern Corp., 7.05%, 2037 500 531
---------
5,478
---------
UTILITIES - 5.1%
Cajun Electric Power Co-op.,
8.92%, 2019 500 524
9.52%, 2019 1,000 1,050
El Paso Electric Co., 7.25%, 1999 500 502
Endesa-Chile Overseas Co., 7.2%, 2006 1,000 974
Hyder PLC, 6.75%, 2004 (144A security
acquired Dec., 1997 for $749,205)* 750 759
Niagara Mohawk Power Corp., 7.625%, 2005 500 502
Salton Sea Funding Corp., 7.02%, 2000 402 405
---------
4,716
---------
U. S. GOVERNMENT - 11.7%
United States Treasury Bonds,
10.75%, 2005 370 481
12.0%, 2013 1,000 1,483
11.25%, 2015 2,130 3,413
6.5%, 2026 3,225 3,581
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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INA INVESTMENT SECURITIES, INC. INVESTMENTS IN SECURITIES June 30, 1998
(Unaudited) (Continued) 5
MARKET
PRINCIPAL VALUE
(000) (000)
- ----------------------------------------------------------------
United States Treasury Notes,
7.125%, 1999 $ 10 $ 10
6.625%, 2002 925 958
6.625%, 2002 215 223
5.875%, 2005 650 662
---------
10,811
---------
TOTAL LONG-TERM BONDS
(Cost - $88,164,039) 90,954
---------
SHORT-TERM OBLIGATIONS - 1.8%
COMMERCIAL PAPER - 1.8%
(Total Cost $1,700,000)
General Electric Capital Corp.,
6.0%, 7/1/98 $ 1,700 $ 1,700
---------
TOTAL INVESTMENTS IN SECURITIES - 100.4%
(Total Cost - $89,864,039) 92,654
Liabilities, Less Cash and Other Assets - (.4%) (371)
---------
NET ASSETS - 100.0%
(equivalent to $19.26 per share based on
4,792,215 shares outstanding) $92,283
=========
* Indicates restricted security; the aggregate value of restricted Securities
is $7,040,190 (aggregate cost $6,896,936) which is Approximately 7.6% of net
assets. Valuations have been furnished by Brokers trading in the securities
or a pricing service for all restricted Securities.
- -------------------------------------------------------------
PORTFOLIO COMPOSITION (UNAUDITED)
June 30, 1998
MARKET % OF
QUALITY RATINGS* OF VALUE MARKET
LONG-TERM BONDS (000) VALUE
- -------------------------------------------------------------
Aaa/AAA $36,965 40.6%
Aa/AA 5,270 5.8%
A/A 19,968 22.0%
Baa/BBB 13,798 15.2%
Ba/BB 8,933 9.8%
B/B 4,598 5.1%
Below B 410 0.4%
Not Rated 1,012 1.1%
--------- ----------
$90,954 100.0%
========= ==========
*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
JUNE 30, 1998 (Unaudited)
(IN THOUSANDS)
--------------
ASSETS:
Investments at market value
(Cost $89,864,039) $ 92,654
Cash 7
Receivable for investments sold 727
Interest receivable 1,665
Investment for directors' deferred compensation plan
(Cost - $106,773) 148
Other 1
------------
TOTAL ASSETS 95,202
------------
LIABILITIES:
Payable for investments purchased 2,630
Deferred directors' fees payable 148
Accrued advisory fees payable 42
Other accrued expenses (including $22,985
due to affiliate) 99
------------
TOTAL LIABILITIES 2,919
------------
NET ASSETS (equivalent to $19.26 per share
based on 4,792,215 shares outstanding;
12,000,000 shares of $.10 par value
authorized) $ 92,283
============
COMPONENTS OF NET ASSETS:
Paid-in capital $ 89,845
Overdistributed net investment income (105)
Unrealized appreciation of investments 2,831
Accumulated net realized loss (288)
------------
NET ASSETS $ 92,283
============
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (Unaudited)
(IN THOUSANDS)
--------------
INVESTMENT INCOME
INCOME:
Interest $ 3,320
EXPENSES:
Investment advisory fees $ 238
Custodian fees 40
Transfer agent fees 29
Shareholder reports 28
Administrative services 28
Auditing and legal fees 22
State taxes 13
Directors' fees 12
Other 9 419
-------- -----------
NET INVESTMENT INCOME 2,901
-----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain from investments 1,132
Unrealized depreciation of investments (604)
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 528
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 3,429
===========
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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INA INVESTMENT SECURITIES, INC. 7
STATEMENT OF CHANGES IN NET ASSETS
FOR THE
SIX MONTHS
ENDED FOR THE
JUNE 30, YEAR ENDED
1998 DECEMBER 31,
(UNAUDITED) 1997
------------- --------------
(IN THOUSANDS)
-----------------------------
OPERATIONS:
Net investment income $ 2,901 $ 5,850
Net realized gain from investments 1,132 692
Unrealized appreciation (depreciation)
on investments (604) 1,360
------------- --------------
Net increase in net assets
from operations 3,429 7,902
------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ($.66
and $1.24 per share, respectively) (2,971) (5,942)
------------- --------------
NET INCREASE IN NET ASSETS 458 1,960
NET ASSETS:
Beginning of period 91,825 89,865
------------- --------------
End of period (including overdistributed
net investment income of $104,861
and $35,191, respectively) $ 92,283 $ 91,825
============= ==============
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
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INA INVESTMENT SECURITIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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 Company'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 in 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 purposes, 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 on realized
income have been accrued.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions are
recorded by the Company on the ex-dividend date. Payments in excess of financial
accounting income due to differences between financial and tax accounting, to
meet the distribution requirements for tax basis income, are deducted from
paid-in capital when such differences are determined to be permanent.
2. INVESTMENT ADVISORY FEES 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 six months ended
June 30, 1998, the Company paid or accrued $28,357.
<PAGE>
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INA INVESTMENT SECURITIES, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Continued) 9
CII is an indirect, wholly-owned subsidiary of CIGNA Corporation.
3. DIRECTORS' FEES. Directors' fees represent remuneration paid or accrued to
directors who are 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
six months ended June 30, 1998 were as follows (excluding short-term
obligations):
PROCEEDS
COST OF FROM
SECURITIES SECURITIES
PURCHASED SOLD
--------------------- ---------------------
Bonds $ 26,653,957 $ 13,353,176
U.S. Government Obligations 21,316,022 33,820,649
--------------------- ---------------------
$ 47,969,979 $ 47,173,825
===================== =====================
As of June 30, 1998, the cost of securities for Federal Income tax purposes was
$89,864,039. At June 30, 1998, unrealized appreciation for Federal income tax
purposes aggregated $2,789,998 of which $3,523,761 related to appreciated
securities and $733,763 related to depreciated securities.
5. CAPITAL LOSS CARRYOVER. At December 31, 1997, the Company had a capital loss
carryover for Federal income tax purposes of $1,410,280, which expires in 2004.
Under current Federal tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following year.
<PAGE>
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INA INVESTMENT SECURITIES, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited)
(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>
- -------------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.16 $ 18.75 $ 19.50 $ 17.56 $ 19.72 $ 18.75
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (1) 0.61 1.22 1.27 1.32 1.39 1.39
Net realized and unrealized gain (loss) 0.11 0.43 (0.73) 1.94 (2.00) 1.01
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.72 1.65 0.54 3.26 (0.61) 2.40
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
From net investment income (0.62) (1.24) (1.29) (1.32) (1.35) (1.43)
From capital gains - - - - (0.20) -
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.62) (1.24) (1.29) (1.32) (1.55) (1.43)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 19.26 $ 19.16 $ 18.75 $ 19.50 $ 17.56 $ 19.72
====== ====== ====== ====== ====== ======
MARKET VALUE, END OF PERIOD $ 17.44 $ 17.38 $ 16.13 $ 17.38 $ 15.25 $ 18.25
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN:
Per share market value 3.94% 16.08% 0.28% 23.07% (8.34)% 14.21%
Per share net asset value (2) 3.82% 9.16% 3.01% 19.17% (3.13)% 13.03%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 92,283 $ 91,825 $ 89,865 $ 93,444 $ 84,131 $ 94,482
Ratio of operating expenses to average net
assets 0.46% 0.99% 0.91% 1.00% 0.96% 0.96%
Ratio of net investment income to average net
assets 3.14% 6.49% 6.80% 7.10% 7.42% 7.03%
Portfolio turnover 53% 80% 89% 158% 86% 159%
</TABLE>
(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 period, 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>
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INA INVESTMENT SECURITIES, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Continued) 11
7. QUARTERLY RESULTS (UNAUDITED). The following is a summary of quarterly
results of operations (in thousands except for per share amounts):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
INVESTMENT INCOME NET INVESTMENT INCOME ON INVESTMENTS INCR. (DECR.) IN NET ASSETS
PERIOD ENDED TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
March 31, 1997 1,718 .36 1,507 .32 (2,188) (.46) (2,166) (.45)
June 30, 1997 1,666 .35 1,461 .30 1,811 .38 1,786 .37
September 30, 1997 1,689 .35 1,482 .31 1,435 .30 1,432 .30
December 31, 1997 1,665 .35 1,400 .29 994 .21 908 .19
March 31, 1998 1,658 .35 1,447 .31 (255) (.04) (35) (.01)
June 30, 1998 1,662 .35 1,454 .30 (349) (.07) 493 .11
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
MATTERS SUBMITTED TO A VOTE OF SHAREHOLDERS
An Annual Meeting of the Shareholders of INA Investment Securities, Inc. (the
"Company") was held on Tuesday, April 28, 1998 at 1:00 p.m., Eastern Time.
Five Directors were elected by a vote of shareholders to serve as members of the
Board of the Company until the next Annual Meeting of Shareholders or until the
election and qualification of their successors. Shareholders of the Company
voted to elect the following Directors:
FOR VOTE WITHHELD
--- -------------
R. Bruce Albro 3,874,421.219 68,817.856
Hugh R. Beath 3,859,239.766 83,999.309
Russell H. Jones 3,873,473.283 69,765.792
Thomas C. Jones 3,877,074.757 66,164.579
Paul J. McDonald 3,864,380.757 78,858.318
The appointment of Price Waterhouse LLP to serve as independent accountants for
the fiscal year ending December 31, 1998 was ratified by a vote of shareholders
of the Company as follows:
FOR AGAINST ABSTAIN
--- ------- -------
3,874,678.120 32,721.812 35,839.143
There were no broker non-votes with respect to the matters submitted to a vote
of shareholders of the Company.
No other business was transacted at the meeting.
<PAGE>
[CIGNA TREE LOGO GRAPHIC APPEARS HERE]
INA Investment Securities, Inc.
P.O. Box 13856 [CIGNA TREE LOGO GRAPHIC APPEARS HERE]
Philadelphia, PA 19101
INA INVESTMENT SECURITIES, INC.
- --------------------
BULK RATE
U.S. POSTAGE
PAID
SO. HACKENSACK, NJ SEMIANNUAL REPORT
PERMIT 750
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JUNE 30, 1998
[CIGNA TREE LEAVES GRAPHIC APPEARS IN BACKGROUND OF COVER]
