-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UpfegHej1VEYbtvtr/hE/znWQCFStqcveh8x/QN5QIXLsd2RZNu7U/bBfSqwmUx+ soH6onc2z9hBi5Ld1ejTRQ== 0000049975-98-000008.txt : 19980831 0000049975-98-000008.hdr.sgml : 19980831 ACCESSION NUMBER: 0000049975-98-000008 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980828 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INA INVESTMENT SECURITIES INC CENTRAL INDEX KEY: 0000049975 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 231886274 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-02299 FILM NUMBER: 98700160 BUSINESS ADDRESS: STREET 1: 950 WINTER STREET STREET 2: SUITE 1200 CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 860.726.3700 MAIL ADDRESS: STREET 1: S 217 900 COTTAGE GROVE ROAD CITY: HARTFORD STATE: CT ZIP: 06152-2217 FORMER COMPANY: FORMER CONFORMED NAME: INA INCOME & CONVERTIBLE FUND DATE OF NAME CHANGE: 19730426 N-30D 1 INA INVESTMENT SECURITIES, INC. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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:
- ------------------------------------------------------------------------------------------------------------------------- (UNAUDITED) SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, 1998 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------- 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%
(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. - -------------------------------------------------------------------------------- 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):
- ------------------------------------------------------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------------------------------------------------------- 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 - --------------------------------------------------------------------------------------------------------------------------------
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. [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 - -------------------- JUNE 30, 1998 [CIGNA TREE LEAVES GRAPHIC APPEARS IN BACKGROUND OF COVER] -----END PRIVACY-ENHANCED MESSAGE-----