-----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, T7KbDF2JkOozFTIaUv/b9mN4uddrpAIjIHV47ObvXz9vpGpLMyuJqkATzi4rw47d hkp2hSrJwolfw6cNfqWAbg== 0000049975-99-000015.txt : 19991122 0000049975-99-000015.hdr.sgml : 19991122 ACCESSION NUMBER: 0000049975-99-000015 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIGNA INVESTMENT SECURITIES INC CENTRAL INDEX KEY: 0000049975 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 231886274 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: SEC FILE NUMBER: 811-02299 FILM NUMBER: 99761304 BUSINESS ADDRESS: STREET 1: 950 WINTER STREET STREET 2: SUITE 1200 CITY: WALTHAM STATE: MA ZIP: 02154 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-30B-2 1 THIRD QUARTER REPORT TO SHAREHOLDERS CIGNA Investment Securities, Inc. P.O. Box 13856 [CIGNA TREE LOGO GRAPHIC APPEARS HERE] Philadelphia, PA 19101 CIGNA INVESTMENT SECURITIES, INC. - -------------------- BULK RATE U.S. POSTAGE PAID SO. HACKENSACK, NJ THIRD QUARTER REPORT PERMIT 750 - -------------------- SEPTEMBER 30, 1999 [CIGNA TREE LEAVES GRAPHIC APPEARS IN BACKGROUND OF COVER] - -------------------------------------------------------------------------------- DEAR SHAREHOLDERS: We are pleased to provide this report for CIGNA Investment Securities, Inc. (the "Fund") (formerly INA Investment Securities, Inc.), covering the quarter ended September 30, 1999. MARKET ACTIVITY The third quarter proved to be a challenging period for world financial markets. Tightening monetary conditions, rising commodity prices, and a weaker U.S. dollar put downward pressure on most stock and bond markets worldwide. The U.S. Federal Reserve (the "Fed") raised the discount rate and federal funds rate, while long-term bond yields trended higher in most markets. Most notably, "credit spreads" ended the quarter wider, a reflection of decreased liquidity and rising defaults. PORTFOLIO ACTIVITY We believe that the level and slope of the yield curve is consistent with current economic conditions and with expectations about inflation and monetary policy. Accordingly, we have restructured the portfolio to be approximately duration neutral to the Index. The market is offering a very attractive yield premium on agency securities, which have AAA ratings, low credit risk, and acceptable liquidity. The yield premium on corporate and high yield bonds also has increased, but the increase is not commensurate with the deteriorating liquidity conditions and the greater risk at this stage in the business cycle. We correspondingly increased our allocation to the agency sector in the third quarter. In the domestic sector, negative corporate announcements no longer can be dismissed as "isolated events". As news of disappointments in performance has increased in frequency--a pattern that often occurs in the late stages of a business cycle--we have become more cautious. The Yankee sector, which consists of foreign bonds denominated in U.S. dollars, continues to be the strongest performer in the corporate index this year, reflecting the fact that the business cycles in Europe and Asia are in the early stages of recovery. We believe the Yankee sector will continue to outperform going forward, and therefore, have increased the weight in Yankees. Finally, we have substituted a number of high quality municipal bonds for corporates in the portfolio. Portfolio performance was favorably impacted by our overweight to higher quality, top tier credit card issuers. This sector performed well relative to other asset-backed securities sectors reflecting its higher liquidity and investors' general flight to quality. We expect to continue to emphasize credit cards during the fourth quarter of 1999. Domestic high yield bonds lagged the performance of other sectors of the fixed income markets during the quarter, though they have outperformed year-to-date. Yield spreads widened by 35 basis points, driven by investor concerns over higher default rates and the weak technical position of the market. Our exposure to the high yield sector was the primary reason for the portfolio's underformance relative to the Index this quarter. 1 - -------------------------------------------------------------------------------- CIGNA INVESTMENT SECURITIES, INC. FINANCIAL SUMMARY For the Nine Months Ended September 30 (Unaudited) (In Thousands) - -------------------------------------------------------------------------------- 1999 1998 ---- ---- Net investment income $4,228 $4,316 Net realized and unrealized gain (loss) (5,441) 1,662 Per share: Net investment income $0.88 $0.90 Dividends from net investment income $0.84 $0.91 Net asset value at end of period $18.15 $19.50 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME PER SHARE For the Nine Months Ended September 30 (Unaudited) - -------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 - ---- ---- ---- ---- ---- $0.88 $0.90 $0.93 $0.96 $0.99 - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES September 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- (IN THOUSANDS) -------------- ASSETS: Investments at market value (Cost - $88,350,607) $86,813 Receivable for investments sold 205 Interest receivable 1,483 Investment for Directors' deferred compensation plan 197 Other 2 ----------- Total assets 88,700 LIABILITIES: Payable for investments purchased 1,121 Deferred Directors' fees payable 197 Distribution payable 287 Accrued advisory fees payable 40 Other accrued expenses (including $10,765 due to affiliate) 89 ----------- Total liabilities 1,734 ----------- NET ASSETS $86,966 =========== NET ASSET VALUE PER SHARE Applicable to 4,792,215 shares of $.10 par value capital stock outstanding (12,000,000 shares authorized) $18.15 =========== 2 - ------------------------------------------------------- CIGNA INVESTMENT SECURITIES, INC. STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS For the Nine Months Ended September 30, 1999 (Unaudited) - ------------------------------------------------------- (IN THOUSANDS) -------------- INVESTMENT INCOME: Interest $4,816 EXPENSES: Investment advisory fees $352 Custodian fees 52 Transfer agent fees 51 Administrative services 40 Auditing and legal fees 30 Other 25 Directors' fees 19 State taxes 19 588 ------------ ----------------- Net Investment Income 4,228 Net realized loss on investments (1,655) Unrealized depreciation of investments (3,786) ----------------- Net Decrease in Net Assets from Operations (1,213) Distributions to shareholders from net investment income (4,023) ----------------- Net Decrease in Net Assets (5,236) NET ASSETS: Beginning of period 92,202 ----------------- End of period (includes undistributed net investment income of $150,702) $86,966 ================= 3 - -------------------------------------------------------------------------------- FUND PERFORMANCE After deducting expenses and allowing for the reinvestment of dividends, based on the net asset value of its underlying assets, the Fund returned 0.17% for the third quarter of 1999 and -1.30% year-to-date. The Lehman Brothers Government/Corporate Bond Index, which does not deduct expenses from performance, returned 0.54% for the quarter and -1.75% year-to-date. The Fund returned -0.63% and -7.19%, respectively, based on the underlying value of the shares listed on the New York Stock Exchange, assuming reinvestment of dividends. OUTLOOK At some point during the next three to six months, the Fed should be successful in its endeavor to slow the domestic economy, which would likely contribute to an easing in financial market pressures worldwide. High-grade U.S. fixed income markets appear to be best positioned for an environment of slower domestic economic growth, low inflation, and reduced credit demands from both the public and private sectors. SPECIAL MEETING OF SHAREHOLDERS The Fund is currently soliciting shareholder approval to make some changes to its investment objective and restrictions. We will update you on the results of this vote in our annual report. 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 CIGNA Investments, Inc. ("CII"), 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 and Trust Company, Stock Transfer Department, P.O. Box 8200, Boston, Massachusetts, 02266-8200, or call 1.800.426.5523. 4 -----END PRIVACY-ENHANCED MESSAGE-----