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________________________________________________________________________________
DEAR SHAREHOLDERS:
We are pleased to provide this report for CIGNA Investment Securities, Inc. (the
"Fund") covering the nine months ended September 30, 2000.
THE ECONOMY
Gross domestic product (GDP) growth appeared to slow significantly during the
third quarter, following robust growth during the first half of the year.
Surging energy prices, slower personal income growth, a build-up of excess
inventories at the retail level, and the lagged effect of the six Fed interest
rate hikes all contributed to the slowdown. We estimate that GDP expanded at
only a 2.5% annual rate during the quarter, less than half the 5.6% growth of
the second quarter and well below the 4.5% growth rate of the past five-year
period. Excluding energy, we estimate that the "core" rate of inflation averaged
approximately 2.5% during the quarter.
MARKET REVIEW
Domestic bonds again outperformed domestic equities during the quarter, as fixed
income markets benefited from widespread signs of economic slowdown, moderating
inflation, a strong U.S. dollar, and evidence that investors are becoming more
risk averse. The Lehman Brothers Aggregate Bond Index gained 3.01% in the
period, while the S&P 500 Index fell by 0.97% and the NASDAQ Composite Index
declined by 7.39%. For the full nine-month period, the Lehman Brothers Aggregate
Bond Index at 7.12 % was comfortably ahead of the 1.39 % loss for the S&P 500
Index.
STRATEGY
Our decision to underweight the U.S. Government Agency sector during the third
quarter had a negative impact on portfolio performance, as Agencies were one of
the leading performers in the Lehman Aggregate Index. Valuations have been
driven by politics, as congressional hearings were held regarding regulations
affecting Government-sponsored Agencies.
We continue to be overweight in our corporate bond allocation, but we took
advantage of some pricing opportunities and reduced our exposure in order to
reallocate some proceeds to mortgage-backed securities (MBS). Our small High
Yield weighting is a conservative, defensive weight.
We trimmed our emerging market debt exposure during the late part of the third
quarter, as the emerging markets approached tight year-to-date spread levels.
Going forward, we will be opportunistically looking to pick-up assets in those
emerging market countries we feel have stronger economic fundamentals and
upgrade potential such as Brazil, Mexico, and Russia.
(continued on panel 4)
1
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CIGNA INVESTMENT SECURITIES, INC.
FINANCIAL SUMMARY
For the Nine Months Ended September 30 (Unaudited)
(In Thousands)
--------------------------------------------------------------------------------
2000 1999
---- ----
Net investment income $4,196 $4,228
Net realized and unrealized gain (loss) 214 (5,441)
Per share:
Net investment income $0.88 $0.88
Dividends from net investment income $0.84 $0.84
Net asset value at end of period $17.87 $18.15
--------------------------------------------------------------------------------
NET INVESTMENT INCOME PER SHARE
For the Nine Months Ended September 30 (Unaudited)
--------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
$0.88 $0.88 $0.90 $0.93 $0.96
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
(IN THOUSANDS)
--------------
ASSETS:
Investments at market value
(Cost - $84,670) $ 84,385
Cash 5
Receivable for investments sold 4,000
Interest receivable 1,286
Investment for Directors' deferred compensation plan 177
------------
Total assets 89,853
------------
LIABILITIES:
Payable for investments purchased 3,946
Deferred Directors' fees payable 177
Accrued advisory fees payable 39
Other accrued expenses (including $3 due to affiliate) 74
------------
Total liabilities 4,237
------------
NET ASSETS $ 85,616
============
NET ASSET VALUE PER SHARE
Applicable to 4,792 shares of $0.10 par value capital stock
outstanding (12,000 shares authorized) $ 17.87
============
2
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________________________________________________________________________________
CIGNA INVESTMENT SECURITIES, INC.
STATEMENT OF OPERATIONS AND CHANGE IN NET ASSETS
For the Nine Months Ended September 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $4,791
EXPENSES:
Investment advisory fees $337
Custodian fees 60
Transfer agent 43
Shareholder reports 38
Administrative services 34
Auditing and legal fees 29
Directors' fees 20
State taxes 18
Other 16 595
------------ -----------------
NET INVESTMENT INCOME 4,196
NET REALIZED GAIN/LOSS:
Investments (2,096)
Futures 54
Currency transactions 54
UNREALIZED APPRECIATION/DEPRECIATION:
Investments 2,264
Futures (56)
Currency transactions (6)
-----------------
NET INCREASE IN NET ASSETS FROM OPERATIONS 4,410
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME (4,024)
-----------------
NET INCREASE IN NET ASSETS 386
NET ASSETS:
Beginning of period 85,230
-----------------
End of period (includes undistributed net investment
income of $282) $85,616
=================
</TABLE>
3
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________________________________________________________________________________
PERFORMANCE
The Fund returned 2.85% for the third quarter of 2000 (based on its underlying
net asset value) and 5.82% for the year-to-date. The Fund's share price returned
3.98% for the quarter and 13.64% for the year-to-date.
OUTLOOK
It is unlikely that the economy will return to the 5% growth pace of the
previous two-year period during the remainder of this economic expansion. The
rate of inflation appears to have stabilized at the 2 to 2.5 % level, and is
unlikely to move significantly higher without a resurgence in consumer spending.
Should the economy weaken unexpectedly, Government monetary and fiscal policies
are poised to move to a more stimulative phase.
Because of the growing dependence of economic activity on corporate earnings and
cash flow, the outlook for corporate profits is the single biggest risk to our
continued moderate and sustained economic expansion scenario.
As a broad generalization, U.S. economic fundamental conditions remain more
supportive of bonds relative to equities. Within fixed income markets,
high-grade non-government debt is likely to outperform the Treasury sector,
primarily a function of valuation. Both high-grade corporates and
mortgage-backed securities are priced at spreads that are well above normal
levels. They also provide investors with attractive inflation-adjusted current
income returns and opportunity for solid, longer-term capital gains.
Sincerely,
/s/ Richard H. Forde
Richard H. Forde
CHAIRMAN OF THE BOARD AND PRESIDENT
CIGNA INVESTMENT SECURITIES, INC.
CIGNA Investment Securities, Inc. is a closed-end, diversified management
investment company that invests primarily in debt securities. The investment
adviser is TimesSquare Capital Management, Inc., 900 Cottage Grove Road,
Hartford, Connecticut, 06152.
Shareholders may elect to have dividends automatically invested in additional
shares of CIGNA 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, Stock Transfer
Department, P.O. Box 8200, Boston, MA, 02266-8200, or call 1.800.426.5523.
4
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CIGNA Investment Securities, Inc. [CIGNA TREE LEAVES GRAPHIC APPEARS HERE]
P.O. Box 13856
Philadelphia, PA 19101
CIGNA INVESTMENT
SECURITIES, INC.
-------------------- ________________________________________
BULK RATE
U.S. POSTAGE THIRD QUARTER REPORT
PAID SEPTEMBER 30, 2000
SO. HACKENSACK, NJ
PERMIT 750
--------------------
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