-----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, R32SOHOadBr2k8WedhmbaqNhcYR98w6WEr4SzIk8GDtCb/GfYsbHoQJDar4hZhh4 1GAjsRtOMuUn813Sx6pdEQ== 0000950109-96-001330.txt : 19960305 0000950109-96-001330.hdr.sgml : 19960305 ACCESSION NUMBER: 0000950109-96-001330 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960304 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-30B-2 SEC ACT: 1940 Act SEC FILE NUMBER: 811-02299 FILM NUMBER: 96530707 BUSINESS ADDRESS: STREET 1: S 217 900 COTTAGE GROVE ROAD CITY: HARTFORD STATE: CT ZIP: 06152-2217 BUSINESS PHONE: 2157612907 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 ANNUAL REPORT - -------------------------------------------------------------------------------- DEAR SHAREHOLDER: 1 We are pleased to provide this annual report for INA Investment Securities, Inc. covering the year ended December 31, 1995. A BANNER YEAR FOR BONDS In 1995, the market by some measures put in its third best year in history. This performance was bolstered by moderate economic growth, decreasing inflation expectations and an increasingly friendly Federal Reserve (Fed). Yields on the benchmark 30-year Treasury opened the year close to 8%, with the Fed still in a tightening mode, but an almost continuous rally over the course of the year saw the market finish the year at 6%. Strong corporate profits and cash flows, plus a skyrocketing stock market, obviated the need to tap the fixed income market for corporate funds as much as in previous years. As credit fundamentals improved, demand for corporate issues increased faster than supply. Corporate yield spreads over Treasuries continued to narrow. As a result, the corporate sector outperformed Treasuries by a wide margin. As measured by the Lehman Brothers Government/Corporate Bond Index, bonds returned 4.66% for the quarter, which brought full-year returns to 19.24%. In addition, as rates declined, investors moved from mortgage-backed securities to corporates, again increasing demand. FUND PERFORMANCE While the Fund was not ideally positioned to take maximum advantage of the fall in rates as 1995 began, it was well prepared to benefit from the outstanding performance of corporate bonds. Assuming reinvestment of dividends and deduction of expenses, total return for the year was 19.17%, based on net asset value of the fund, and 23.07%, based on the per-share market value of the shares listed on the New York Stock Exchange. These results were aided by the strong performance of the corporate sector, as well as by specific name selection in the Fund. PORTFOLIO ACTIVITY The portfolio remains fully invested with a duration close to that of the previously mentioned Lehman Brothers Index. We continue to stress corporate holdings. On December 31, corporate and foreign bonds were approximately 65.6% of net assets, U.S. Government/Agency Securities 29.7%, and cash, short-term instruments and other assets 4.7%. Per-share net asset value was $19.50, an increase of $1.94 from $17.56 at the close of 1994. Dividends of $1.32 were declared during the year. OUTLOOK The market is likely to experience some choppy trading in 1996, as much of the "good news" has already been factored in at current market levels. It is likely that the Fed will remain accommodative as long as growth and inflation remain muted. STRATEGY Pending further developments, our strategy in 1996 will reflect that of late 1995. At most, we foresee modest restructuring based on interest rate projections. In addition, our strategy calls for continued substantial overweighting of corporate bonds, including high yield bonds, in order to maximize our yield advantage over Treasuries. This approach assumes continued economic growth and good corporate fundamentals; if either falters, we will readjust our weighting accordingly. We thank you for letting us serve your investment needs and look forward to our continued association. Sincerely, /s/ R. Bruce Albro R. Bruce Albro, Chairman INA Investment Securities, Inc. - -------------------------------------------------------------------------------- INA INVESTMENT SECURITIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS 2 (Unaudited) 1995 was a decent year for the economy, an excellent year for inflation and an outstanding year for bonds. Consensus forecasts of accelerating growth and in- flation were proven wrong, and the Fed was able to reverse course and ease rates twice before the end of the year. It thus achieved what many thought una- chievable: a "soft landing" of the economy. Long Treasury rates dropped nearly 200 basis points by year-end, as investors were increasingly buoyed by modest growth, lessened fears of inflation, an easing Fed and seemingly serious re- solve in Washington to balance the budget. At the same time, strong corporate cash flows and balance sheets, as well as record stock market levels, limited the need for corporate new issuance. Conse- quently, there was strong demand and reduced supply. Corporate bonds outperformed Treasuries by a wide margin, which contributed significantly to the Fund's strong performance in 1995. The Fund began the year with a defensive portfolio duration, which was lengthened as interest rates continued to fall. The primary focus was on maintaining a yield advantage over Treasuries. This was accomplished by staying overweighted relative to the Lehman Brothers Government/Corporate Bond Index in corporate bonds, and by maintaining a posi- tion in high yield bonds and (to a modest extent) in mortgage-backed securi- ties. This strategy succeeded, and will be continued as we enter 1996. INA In- vestment Securities returned 19.17% based on net assets for the year. The Leh- man Brothers Government/ Corporate Bond Index returned 19.24%. It appears that the market has already taken into account much of the good news we expect for bonds. The market will continue to react to news from Wash- ington, and will focus on economic releases to validate current market levels. We anticipate modest economic growth and inflation, which should allow the ac- commodative bent of the Fed to continue. Any signs of accelerating growth or inflation would swiftly change this positive scenario. - -------------------------------------------------------------------------------- [PERFORMANCE GRAPH APPEARS HERE]
--------------------------------------- AVERAGE ANNUAL RETURN 1 YEAR 5 YEAR 10 YEAR ------ ------ ------- Market Value 23.07% 12.07% 8.78% Net Asset Value 19.17% 10.62% 9.67% ---------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (Unaudited) 1/1/86 - 12/31/95
INA Lehman Brothers Point of Investment Government/ Measurement Securities, Inc. Corporate Index ----------- ---------------- --------------- 1/86 10000 10000 12/86 11669.800222268 11495.769230769 12/87 11067.700300852 11831.445692308 12/88 12230.151263161 12728.269275785 12/89 13554.788915118 14539.501993729 12/90 13139.667713941 15743.37275881 12/91 17108.58196405 18282.778784806 12/92 18030.145683211 19668.613416694 12/93 20591.614264214 21838.061476555 12/94 18875.205954427 21071.545518728 12/95 23229.888540486 25125.710876531
- -------------------------------------------------------------------------------- INA Investment Securities performance figures are historical and reflect rein- vestment of all dividends and capital gains distributions and changes in the market value of its stock, or as shown separately in the box, changes in its underlying net asset value. The Fund is a closed-end management investment com- pany which trades over the New York Stock Exchange under the ticker symbol "IIS." Fund performance does not reflect exchange commissions payable upon the purchase or sale of the Fund's stock. The Fund's investment return and princi- pal value will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Past performance cannot guarantee compa- rable future results. The Fund's return has been compared with the total return performance of Lehman Brothers Government/Corporate Bond Index. This index is a group of unmanaged securities widely regarded by investors to be representative of the bond market in general. An investment cannot be made in the index. Index results do not reflect brokerage charges or other investment expenses. - -------------------------------------------------------------------------------- INA INVESTMENT SECURITIES, INC. INVESTMENTS IN SECURITIES December 31, 1995 3
MARKET PRINCIPAL VALUE (000) (000) - ------------------------------------------------------------------------------- LONG-TERM BONDS - 95.3% CONSUMER AND RETAIL - 1.0% Dayton Hudson Corp., 9.75%, 2002 $ 500 $ 594 Herff Jones, Inc., 11.0%, 2005 (144A security acquired Aug. 1995 for $300,000)* 300 321 ------- 915 ------- CONSUMER NON-CYCLICAL - .6% Tenet Healthcare Corp., 9.625%, 2002 500 550 ------- ENTERTAINMENT AND COMMUNICATIONS - 9.6% Century Communications Corp., 9.5%, 2005 500 516 Continental Cablevision, Inc., 8.3%, 2006 (144A security acquired Dec. 1995 for $498,395)* 500 502 GTE Hawaiian Telephone, Inc., 9.0%, 2000 2,000 2,043 Grand Casino, Inc., 10.125%, 2003 250 262 News America Holdings, Inc., 9.25%, 2013 500 589 Paging Network, Inc., 10.125%, 2007 500 541 Rogers Communications, Inc., 10.875%, 2004 500 523 TKR Cable, Inc., 10.5%, 2007 500 595 Tele-Communications, Inc., 9.25%, 2002 1,000 1,136 Time Warner Entertainment Co., 7.25%, 2008 1,750 1,774 Viacom International, Inc., 9.125%, 1999 500 523 ------- 9,004 ------- FINANCIAL - 20.6% Associates Corp. of N.A., 9.7%, 1997 3,000 3,158 CCP Insurance, 10.5%, 2004 1,000 1,089 C.I.T. Group Holdings, Inc., 8.875%, 1996 2,000 2,028 Case Equipment Loan Trust 1995-A, 7.3%, 2002 1,938 1,978 First Bank of Puerto Rico, 7.625%, 2005 500 495 Fleet Finance Home Equity Trust, 7.3%, 2023 1,000 1,009 Fleet Mortgage Group, Inc., 6.5%, 2000 1,000 1,020 GPA Delaware Corp., 8.75%, 1998 500 470 Inter-American Development Bank, 8.875%, 2009 4,000 5,103 Malayan Banking Berhad, 7.125%, 2005 1,000 1,050 Middletown Trust, 10.875%, 1998 390 418 Structured Coupon Receipts, (Stripped-Interest Only), 10.203%**, 1997 (144A security acquired June 1993; amortized cost $267,174)* 5,314 310
MARKET PRINCIPAL VALUE (000) (000) - -------------------------------------------------------------------------------- 10.207%**, 1997 (144A security acquired June 1993; amortized cost $110,729)* $ 2,310 $ 121 Western National Corp., 7.125%, 2004 1,000 1,030 -------- 19,279 -------- FOOD AND BEVERAGE - 3.2% Bass America, Inc., 8.125%, 2002 1,500 1,671 ConAgra, Inc., 9.75%, 2021 1,000 1,302 -------- 2,973 -------- INDUSTRIAL - 8.3% Air Products & Chemicals, Inc., 8.5%, 2006 2,000 2,290 Colt Industries, Inc., 11.25%, 2015 506 536 Fisher Scientific International, Inc., 7.125%, 2005 500 501 ICF Kaiser International, Inc., 12.0%, 2003 500 470 LaRoche Inds., Inc., 13.0%, 2004 500 531 Magma Copper Co., 12.0%, 2001 500 557 Smurfit Capital Funding PLC, 6.75%, 2005 1,000 1,026 Tjiwi Kimia International Finance, 13.25%, 2001 500 536 Waste Management, Inc., Zero Coupon, 6.00%** (Lyon), 2012 2,250 833 West Point Stevens, Inc., 9.375%, 2005 500 494 -------- 7,774 -------- OIL & GAS - 4.8% Louis Dreyfus Nat. Gas Corp., 9.25%, 2004 1,000 1,070 Sonat, Inc., 9.5%, 1999 1,000 1,115 9.0%, 2001 250 281 Transcontinental Gas Pipe Line Corp., 6.21%***, 2000 500 501 9.125%, 2017 1,475 1,551 -------- 4,518 -------- TRANSPORTATION - 9.3% CSX Corp., 9.0%, 2006 2,300 2,741 CSX Transportation, Inc., 7.13%, 1996 1,500 1,520 Delta Air Lines, Inc., 10.14%, 20012 1,000 1,196
The Notes to Financial Statements are an integral part of these statements. - ------------------------------------------------------------------------------- INA INVESTMENT SECURITIES, INC. INVESTMENTS IN SECURITIES December 31, 1995 (Continued) 4
MARKET PRINCIPAL VALUE (000) (000) - ------------------------------------------------------------------------------- Hertz Corp., 9.625%, 1996 $ 2,000 $ 2,033 7.0%, 2003 500 515 Japan Air Lines Co. Ltd., 11.0%, 1997 580 637 ------- 8,642 ------- UTILITIES - 8.2% British Columbia Hydro and Power Authority, 15.0%, 2011 3,000 3,232 Commonwealth Edison Co., 8.125%, 2007 2,000 2,054 GG1B Funding Corp., 7.43%, 2011 985 981 L S Power Funding Corp., 7.19%, 2010 (144A security acquired June 1995 for $1,000,000)* 1,000 1,023 Public Service Co. Colorado, 8.125%, 2004 290 322 ------- 7,612 ------- U.S. GOVERNMENT & AGENCIES - 29.7% Federal Farm Credit Banks, 6.2%, 2008 350 356 Federal Home Loan Mortgage Corp., Series 1496, (PAC, Stripped-Interest Only), 12.194%**, 2019 3,600 556 Federal National Mortgage Assoc., 6.5%, 2008 1,246 1,252 6.5%, 2009 433 434 United States Treasury Bonds, 12.75%, 2010 1,300 1,980 8.5%, 2020 14,370 18,775 6.25%, 2023 325 334 United States Treasury Notes, 5.625%, 1998 600 605 5.625%, 2000 275 278 6.25%, 2000 750 776 7.75%, 2000 1,000 1,086 7.5%, 2001 750 826 7.875%, 2001 450 503 ------- 27,761 ------- TOTAL LONG-TERM BONDS (Cost - $84,839,087) 89,028 -------
MARKET PRINCIPAL VALUE (000) (000) - ----------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS - 3.0% COMMERCIAL PAPER - 3.0% (Total Cost - $2,796,000) Household Finance Corp., 5.65%, 1/2/96 $ 2,796 $ 2,796 ------- TOTAL INVESTMENTS IN SECURITIES - 98.3% (Total Cost - $87,635,087) 91,824 Cash, Less Liabilities and Other Assets - 1.7% 1,620 ------- NET ASSETS - 100.0% (equivalent to $19.50 per share based on 4,792,215 shares outstanding) $93,444 =======
* Indicates restricted security; the aggregate value of restricted securities is $2,277,487 (aggregate cost $2,176,298) which is approximately 2.4% of net assets. Valuations have been furnished by brokers trading in the securities or a pricing service for all restricted securities. ** Effective yield as of purchase date. *** Variable rate security. Rate disclosed is as of December 31, 1995. - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION (UNAUDITED) December 31, 1995
MARKET % OF QUALITY RATINGS* OF VALUE MARKET LONG-TERM BONDS (000) VALUE ------------------------------------- Aaa/AAA $35,911 40.3% Aa/AA 7,012 7.9 A/A 16,912 19.0 Baa/BBB 18,599 20.9 Ba/BB 6,694 7.5 B/B 3,430 3.9 Caa/CCC 470 0.5 ------- ----- $89,028 100.0% ======= =====
*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. 5 STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995
(IN THOUSANDS) -------------- ASSETS: Investments at market value (Cost - $87,635,087) $91,824 Interest receivable 1,839 Investment for deferred compensation plan (Cost - $52,579) 56 Other 3 ------- TOTAL ASSETS 93,722 ------- LIABILITIES: Deferred directors' fees payable 95 Accrued advisory fees payable 45 Other accrued expenses (including $16,425 due to affiliate) 138 ------- TOTAL LIABILITIES 278 ------- NET ASSETS (Equivalent to $19.50 per share based on 4,792,215 shares outstanding; 12,000,000 shares of $.10 par value autho- rized) $93,444 ======= COMPONENTS OF NET ASSETS: Paid in capital $89,810 Unrealized appreciation of investments 4,192 Distributions in excess of net investment income (15) Accumulated net realized loss (543) ------- NET ASSETS $93,444 =======
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS) -------------- INVESTMENT INCOME INCOME: Interest $ 7,236 EXPENSES: Investment advisory fees $ 470 Transfer agent fees 74 Shareholder reports 70 Administrative services 69 Custodian fees 66 Auditing and legal fees 50 Directors' fees 38 State taxes 37 Other 14 888 ----- -------- NET INVESTMENT INCOME 6,348 -------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain from investments 1,556 Unrealized appreciation of investments 7,735 -------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 9,291 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 15,639 ========
The Notes to Financial Statements are an integral part of these statements. - -------------------------------------------------------------------------------- INA INVESTMENT SECURITIES, INC. 6 STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, ----------------- 1995 1994 ------- -------- (IN THOUSANDS) ----------------- OPERATIONS: Net investment income $ 6,348 $ 6,646 Net realized gain (loss) from investments 1,556 (1,812) Unrealized appreciation (depreciation) on investments 7,735 (7,755) ------- -------- Net increase (decrease) in net assets from operations 15,639 (2,921) ------- -------- DISTRIBUTIONS TO SHAREHOLDERS: From net investment income ($1.32 and $1.35 per share, respectively) (6,326) (6,469) From net realized gain ($.2005 per share) -- (961) ------- -------- Total distributions to shareholders (6,326) (7,430) ------- -------- NET INCREASE (DECREASE) IN NET ASSETS 9,313 (10,351) NET ASSETS: Beginning of year 84,131 94,482 ------- -------- End of year (Including distributions in excess of net investment income of $15,270 and $21,576, respectively) $93,444 $ 84,131 ======= ========
The Notes to Financial Statements are an integral part of these statements. - ------------------------------------------------------------------------------- INA INVESTMENT SECURITIES, INC. NOTES TO FINANCIAL STATEMENTS 7 1. SIGNIFICANT ACCOUNTING POLICIES. INA Investment Securities, Inc. (the "Com- pany") is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The Fund'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 as- sumptions 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 Com- pany in the preparation of its financial statements. A. SECURITY VALUATION -- Debt securities traded in the over-the-counter mar- ket, 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 in- vestments that mature in more than 60 days are valued at current market quota- tions. 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 transac- tions 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 premi- ums 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. The cost for Federal income tax purposes is substantially the same. 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 have been accrued for. D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions are recorded by the Company on the ex-dividend date. The timing and character- ization of certain income and capital gains distributions are determined in accordance with federal tax regulations which may differ from generally ac- cepted accounting principles. To the extent that such differences are perma- nent, a reclass to paid in capital may be required. 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 ex- penses of the Company's Treasurer and Secretary and certain persons who assist in carrying out the responsibilities of those offices. For the year ended De- cember 31, 1995, the Company paid $68,925. CII is an indirect, wholly-owned subsidiary of CIGNA Corporation. - -------------------------------------------------------------------------------- INA INVESTMENT SECURITIES, INC. NOTES TO FINANCIAL STATEMENTS (Continued) 8 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 year ended December 31, 1995 were as follows (excluding short-term obliga- tions):
COST OF SECURITIES PROCEEDS FROM PURCHASED SECURITIES SOLD ------------------ --------------- Bonds $ 25,568,137 $ 20,678,046 U.S. Government Obligations 109,460,037 113,964,073 ------------ ------------ $135,028,174 $134,642,119 ============ ============
As of December 31, 1995, the cost of securities for Federal income purposes was $87,635,087. At December 31, 1995, unrealized appreciation for Federal income tax purposes aggregated $4,188,701 of which $5,590,155 related to appreciated securities and $1,401,454 related to depreciated securities. 5. CAPITAL LOSS CARRYOVER. At December 31, 1995, the Company had a capital loss carryover for Federal income tax purposes of $306,433 which expires in 2002. Under current tax law, capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following year. For the year ended December 31, 1995, the Company has elected to defer $236,694 of capital losses occurring between November 1, 1995 and December 31, 1995 under these rules. Such deferred losses will be treated as arising on the first day of the year ended December 31, 1996. - ------------------------------------------------------------------------------- INA INVESTMENT SECURITIES, INC. NOTES TO FINANCIAL STATEMENTS (Continued) 9 6. FINANCIAL HIGHLIGHTS. The following table includes data, ratios and supplemental data for a share outstanding throughout each period and other performance information: - -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------- PER SHARE OPERATING PERFOR- MANCE: NET ASSET VALUE, BEGINNING OF YEAR $ 17.56 $ 19.72 $ 18.75 $ 18.85 $ 17.25 INCOME FROM INVESTMENT OPER- ATIONS Net investment income (1) 1.32 1.39 1.39 1.49 1.51 Net realized and unrealized gain (loss) 1.94 (2.00) 1.01 (0.11) 1.61 ------- ------- ------- ------- ------- TOTAL FROM INVESTMENT OPERA- TIONS 3.26 (0.61) 2.40 1.38 3.12 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS: From net investment income (1.32) (1.35) (1.43) (1.48) (1.52) From capital gains -- (0.20) -- -- -- ------- ------- ------- ------- ------- TOTAL DISTRIBUTIONS (1.32) (1.55) (1.43) (1.48) (1.52) ------- ------- ------- ------- ------- NET ASSET VALUE, END OF YEAR $ 19.50 $ 17.56 $ 19.72 $ 18.75 $ 18.85 ======= ======= ======= ======= ======= MARKET VALUE, END OF YEAR $ 17.38 $ 15.25 $ 18.25 $ 17.25 $ 17.75 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN: Per share market value 23.07% (8.34)% 14.21% 5.39% 30.21% Per share net asset value (2) 19.17% (3.13)% 13.03% 7.64% 18.99% RATIOS AND SUPPLEMENTAL DA- TA: Net assets, end of period (000 omitted) $93,444 $84,131 $94,482 $89,839 $90,345 Ratio of operating expenses to average net assets 1.00% 0.96% 0.96% 0.90% 0.93% Ratio of net investment in- come to average net assets 7.10% 7.42% 7.03% 7.96% 8.49% Portfolio turnover 158% 86% 159% 41% 72%
(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 year, 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 (Continued) 10 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) PERIOD INVESTMENT INCOME NET INVESTMENT INCOME ON INVESTMENTS NET ASSETS ENDED TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE INCR. (DECR.) PER SHARE - --------------------------------------------------------------------------------------------------------------------- March 31, 1994 $1,796 $.37 $1,577 $.33 $(4,590) $(.96) $(4,594) $(.96) June 30, 1994 1,983 .41 1,774 .37 (2,251) (.47) (2,059) (.43) September 30, 1994 1,872 .39 1,659 .34 (1,252) (.26) (2,025) (.43) December 31, 1994 1,853 .39 1,636 .35 (1,474) (.31) (1,673) (.34) March 31, 1995 1,782 .37 1,567 .33 2,529 .53 2,515 .52 June 30, 1995 1,821 .38 1,600 .33 3,603 .75 3,622 .76 September 30, 1995 1,820 .38 1,599 .33 709 .15 726 .15 December 31, 1995 1,813 .38 1,582 .33 2,450 .51 2,450 .51
- -------------------------------------------------------------------------------- 11 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of INA Investment Securities, Inc. In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations, and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of INA Investment Securities, Inc. at December 31, 1995, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for each of the years indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 1995 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Boston, Massachusetts February 15, 1996 - -------------------------------------------------------------------------------- 12 1995 TAX INFORMATION (UNAUDITED) During 1995, the Company declared ordinary income dividends of $1.32 per share. There were no capital gain distributions. Dividends reported to you on Form 1099, whether received as stock or cash, must be included in your Federal in- come tax return and must be reported by the Company to the Internal Revenue Service. Approximately 25.0% of income for the year was derived from U.S. Government Treasury obligations, and 3.0% from U.S. Government Agency obligations. AUTOMATIC DIVIDEND AND DISTRIBUTION INVESTMENT PLAN Shareholders may elect to have all distributions of dividends and capital gains automatically reinvested by State Street Bank and Trust Company (the "Dividend Paying Agent") as plan agent under the Automatic State Street Bank and Trust Company (the "Plan"). Shareholders who do not elect to participate in the Plan will receive all distributions from the Company in cash paid by check mailed directly to the shareholder by the Dividend Paying Agent. Shareholders may elect to participate in the Plan and to have all distributions of dividends and capital gains automatically reinvested by sending written instructions to the Dividend Paying Agent at the address set forth below. If the Directors of the Company declare a dividend or determine to make a capi- tal gains distribution payable either in shares of the Company or in cash, as shareholders may have elected, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in shares. If the mar- ket price of the shares as of the close of business on the payment date for the dividend or distribution is equal to or exceeds their net asset value as deter- mined as of the close of business on the payment date, participants will be is- sued shares of the Company at a value equal to the higher of net asset value or 95% of the market price. If net asset value exceeds the market price of the shares at such time, or if the Company declares a dividend or other distribu- tion payable only in cash, the Dividend Paying Agent will, as agent for Plan participants, buy shares in the open market, on the New York Stock Exchange or elsewhere, for the participants' accounts. If, before the Dividend Paying Agent has completed its purchases, the market price exceeds the net asset value of the shares, the average per share purchase price paid by the Dividend Paying Agent may exceed the net asset value of the shares, resulting in the acquisi- tion of fewer shares than if the dividend or distribution had been paid in shares issued by the Company. Participants in the Plan may withdraw from the Plan upon written notice to the Dividend Paying Agent. When a participant withdraws from the Plan or upon ter- mination of the Plan as provided below, certificates for the whole shares cred- ited to his account under the Plan will be issued and a cash payment will be made for any fraction of a share credited to such account. The Dividend Paying Agent will maintain all shareholders' accounts in the Plan and will furnish written confirmation of all transactions in the account, in- cluding information needed by shareholders for tax records. Shares in the ac- count of each Plan participant (other than participants whose shares are regis- tered in the name of banks, brokers, nominees or other third parties) will be held by the Dividend Paying Agent in the non-certificated form in the name of the participant, and each shareholder's proxy will include those shares pur- chased pursuant to the Plan. - -------------------------------------------------------------------------------- 13 In the case of shareholders such as banks, brokers or nominees which hold shares for others who are the beneficial owners, the Dividend Paying Agent will administer the Plan on the basis of number of shares certified from time to time by the record shareholders as representing the total amount registered in the record shareholder's name and held for the account of beneficial owners who are to participate in the Plan. Investors whose shares are held in the name of banks, brokers or nominees should confirm with such entities that participation in the Plan will be possible, and should be aware that they may be unable to continue to participate in the Plan if their account is transferred to another bank, broker or nominee. Those who do participate in the Plan may subsequently elect not to participate by notifying such entities. There is no charge to participants for reinvesting dividends or distributions, except for certain brokerage commissions, as described below. The Dividend Pay- ing Agent's fees for the handling of the reinvestment of dividends and distri- butions will be paid by the Company. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Dividend Pay- ing Agent's open market purchases in connection with the reinvestment of divi- dends or distributions. Participants in the Plan should be aware that they will realize capital gains and income for tax purposes upon dividends and distributions although they will not receive any payment of cash. Experience under the Plan may indicate that changes are desirable. Accordingly, the Company reserves the right to amend or terminate the Plan as applied to any dividend or distribution paid subsequent to written notice of the change sent to the participants in the Plan at least 90 days before the record date for such dividend or distribution. The Plan also may be amended or terminated by the Dividend Paying Agent on at least 90 days' written notice to participants in the Plan. All correspondence concerning the Plan including requests for ad- ditional information or an application brochure or general inquires about your account should be directed to State Street Bank and Trust Company, Stock Trans- fer Department, P.O. Box 8200, Boston, MA 02266-8200 or you may call toll-free 1-800-426-5523. - -------------------------------------------------------------------------------- INA INVESTMENT SECURITIES, INC. DIRECTORS OFFICERS R. Bruce Albro Paul J. McDonald R. Bruce Albro Senior Managing Director Executive Vice President, Chairman of the CIGNA Investments, Inc. Finance and Chief Financial Board and President Officer, Hugh R. Beath Friendly Ice Cream Corporation Alfred A. Bingham III Managing Director, Vice President and AdMedia Corporate Advisor, Arthur C. Reeds III Treasurer Inc. President, CIGNA Investment Management and CIGNA Lawrence S. Harris Russell H. Jones Investments, Inc. Vice President Vice President, Kaman Corporation Jeffrey S. Winer Vice President and Secretary - -------------------------------------------------------------------------------- INA Investment Securities is a closed-end, diversified management investment company that invests primarily in debt securities. The investment adviser is CIGNA Investments, Inc., Hartford, Connecticut 06152. [LOGO OF CIGNA APPEARS HERE] --------------------- BULK RATE INA Investment Securities, Inc. U.S. POSTAGE P.O. Box 13856 PAID Philadelphia, PA 19101 SO. HACKENSACK, NJ PERMIT 750 --------------------- Printed on recycled paper [LOGO OF CIGNA APPEARS HERE] INA Investment Securities, Inc. Annual Report December 31, 1995 [ARTWORK APPEARS HERE] -----END PRIVACY-ENHANCED MESSAGE-----