FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
95 WALL STREET
NEW YORK, NY 10005
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FIRST
INVESTORS
INSURED
TAX EXEMPT
FUND, INC.
ANNUAL
REPORT
DECEMBER 31, 1997
Portfolio Manager's Letter
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
Dear Investor:
1997 was a very good year for the U.S. economy and financial markets.
The economy grew at an annual pace of 3.8%, with the unemployment rate
falling to its lowest level since the 1970's. Despite faster economic
growth, inflation, as measured by the Consumer Price Index, rose less
than 2%, its smallest increase in over ten years. Reflecting the
strong economy, the Federal budget deficit declined substantially and
had almost been eliminated by year-end. Against this backdrop, the
Federal Reserve held monetary policy steady after one small increase
in the benchmark Federal funds rate in March.
Although both the U.S. bond and stock markets suffered setbacks at
times during the year, the combination of moderate growth and low
inflation ultimately provided a rewarding environment for investors.
Long-term bond yields fell to their lowest level in two years, while
the broad stock market indices recorded their third consecutive year
of substantial gains. While many overseas markets were buffeted by the
economic crisis in Southeast Asia, U.S. markets remained relatively
stable or -- in the case of the bond market -- benefited from a
"flight to safety" as investors sought the security of the world's
largest and most efficient financial markets.
Long-term municipal bond yields ended 1997 near their lowest level
since the mid-1970's. Most of the decline in yields occurred during
the second half of the year as the bond market benefited from low
inflation in the U.S. and instability in Southeast Asia. Low yields
spurred issuance of $220 billion of municipal bonds during 1997, the
third largest volume of supply in the market's history. This supply
kept municipal bond yields higher than they might have been otherwise.
As a result, municipal bonds ended the year somewhat cheap relative to
taxable bonds, laying the groundwork for strong performance in 1998.
During 1997, First Investors Insured Tax Exempt Fund's Class A shares
had a total return of 8.3% on a net asset value basis, comparable to
the average return of 8.4% for insured municipal bond funds as
reported by Lipper Analytical Services, Inc. Class B shares returned
7.6% on a net asset value basis. For 1997, the Fund declared dividends
from investment income of 50.4 cents per share on Class A shares and
43.2 cents per share on Class B shares.
Fund performance during 1997 was driven primarily by three factors.
First, approximately 70% of the Fund's assets were invested in
noncallable bonds. Most municipal bonds are callable which means that
issuers can buy -- or call -- bonds from investors if interest rates
fall. This limits the price appreciation of callable bonds when
interest rates fall as they did in 1997. In contrast, noncallable
bonds have unlimited potential to increase in price. Our holdings of
noncallable bonds contributed significantly to the Fund's total
return. Second, the Fund remained substantially fully invested
throughout the year. This allowed the Fund to earn the highest amount
of income possible and provided the best opportunity to benefit on a
total return basis from falling interest rates. Third, the Fund's
duration (or interest rate sensitivity) increased during the year
which resulted in greater capital appreciation when the market rallied
during the last four months of the year.
Investors who buy bond funds -- whether for income or total return
-- should be aware that the value of their investment fluctuates as
interest rates change. For example, a 50 basis point (or .5%) increase
in yield on a twenty-year municipal bond results in roughly a 6%
decrease in that bond's price. In each of the last five years, twenty
year municipal bond yields have fluctuated by more than 50 basis
points. In addition, while the Fund's municipal bonds are insured as
to timely payment of principal and interest, the insurance does not
protect the bonds against changes in market value. Investors should be
aware of these risks and recognize that successful investing generally
requires a long-term commitment to the market.
Following 1997's strong performance, the outlook for U.S. financial
markets continues to be positive, although uncertainties do exist. In
particular, we believe that the economic problems in Southeast Asia
will slow growth in the U.S. However, it is unclear to what extent
growth will be slowed and, consequently, what the ultimate impact will
be on the financial markets. On a positive note, Southeast Asia's
problems should result in lower inflation worldwide. Uncertainty often
leads to volatile markets. During such times, investors are generally
best served by focusing on long-term objectives and maintaining a
disciplined approach to investing.
As always, we appreciate the opportunity to serve your investment
needs.
Sincerely,
/S/Clark D. Wagner
Clark D. Wagner
Chief Investment Officer
and Portfolio Manager
January 30, 1998
Cumulative Performance Information
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
Comparison of change in value of $10,000 investment in the First
Investors Insured Tax Exempt Fund, Inc. (Class A shares) and the
Lehman Brothers Municipal Bond Index.
The following table is the source data for the line chart which
appears at this point in the printed document. This table is not part
of the original printed document and is shown for reference only.
The same is also true for this descriptive paragraph.
TAX EXEMPT LEHMAN
JAN 1988 9,375 10,000
DEC 1988 9,581 10,150
DEC 1989 10,608 11,180
DEC 1990 11,511 12,386
DEC 1991 12,241 13,289
DEC 1992 13,496 14,903
DEC 1993 14,569 16,217
DEC 1994 16,009 18,207
DEC 1995 15,110 17,266
DEC 1996 17,530 20,303
DEC 1997 18,023 21,166
(INSET BOX IN CHART READS:)
As of December 31, 1997
Average Annual Total Return*
Class A Shares N.A.V. Only S.E.C. Standardized
One Year 8.27% 1.46%
Five Years 6.02% 4.66%
Ten Years 7.25% 6.67%
S.E.C. 30-Day Yield 3.54%
Class B Shares
One Year 7.62% 3.62%
Since Inception
(1/12/95) 7.94% 7.06%
S.E.C. 30-Day Yield 3.08%
The graph compares a $10,000 investment in the First Investors Insured
Tax Exempt Fund, Inc. (Class A shares) beginning 1/1/88 with a
theoretical investment in the Lehman Brothers Municipal Bond Index.
The Lehman Brothers Municipal Bond Index is a total return performance
benchmark for the long-term investment grade tax-exempt bond market.
Returns and attributes for the Index are calculated semi-monthly using
approximately 21,000 municipal bonds which are priced by Muller Data
Corp. The Index does not take into account fees and expenses or cost
of insurance of the bonds held by an insured tax-exempt bond fund. It
is not possible to invest directly in the Lehman Brothers Municipal
Bond Index. For purposes of the graph and the accompanying table,
unless otherwise indicated, it has been assumed that the maximum sales
charge was deducted from the initial $10,000 investment in the Fund
and all dividends and distributions were reinvested. Class B shares
performance may be greater than or less than that shown in the line
graph above for Class A shares based on differences in sales loads and
fees paid by shareholders investing in the different classes.
* Average Annual Total Return figures (for the period ended 12/31/97)
include the reinvestment of all dividends and distributions. "N.A.V.
Only" returns are calculated without sales charges. The Class A
"S.E.C. Standardized" returns shown are based on the maximum sales
charge of 6.25% (prior to 7/1/93 and 12/29/89, the maximum sales
charges were 6.9% and 7.25%, respectively). The Class B "S.E.C.
Standardized" returns are adjusted for the applicable deferred sales
charge (maximum of 4% in the first year). Results represent past
performance and do not indicate future results. Investment return
and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the
original cost. Lehman Brothers Municipal Bond Index figures from
Lehman Brothers, Inc. and all other figures from First Investors
Management Company, Inc.
<TABLE>
<CAPTION>
Portfolio of Investments
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
December 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS-- 98.4%
Alaska--.5%
$ 8,000M North Slope Boro, Alaska General Obligation 7.15% 6/30/2005** $ 5,690,000 $ 47
- -----------------------------------------------------------------------------------------------------------------------------
Arizona--.9%
8,550M Arizona State Municipal Financing Program Ctfs. of Partn. 7.7% 8/1/2010 10,740,937 90
- -----------------------------------------------------------------------------------------------------------------------------
California--5.6%
2,775M California Public Capital Improv. Fin. Auth. 8.1% 3/1/2018 2,851,035 24
12,770M California State Public Works Board Lease Rev. Dept. of Corrections
5% 12/1/2019 12,865,775 108
4,220M Long Beach Finance Authority 6% 11/1/2017 4,810,800 40
10,000M San Francisco City & County Redev. Agcy. 6 3/4% 7/1/2025 11,312,500 95
5,000M San Jose Redevelopment Agency Tax Allocation 6% 8/1/2015 5,675,000 47
Santa Clara County Financing Authority:
5,000M 7 3/4% 11/15/2010 6,456,250 54
8,900M 5 3/4% 11/15/2013 9,790,000 82
6,220M South Orange County Public Financing Authority 6 1/2% 8/15/2010 7,339,600 61
5,000M Walnut Valley Unified School District 7.2% 2/1/2016 6,237,500 52
- -----------------------------------------------------------------------------------------------------------------------------
67,338,460 563
- -----------------------------------------------------------------------------------------------------------------------------
Colorado--.5%
5,000M Denver City & County Airport Revenue 6% 11/15/2013 5,687,500 47
- -----------------------------------------------------------------------------------------------------------------------------
Connecticut--2.2%
Connecticut Special Tax Obligation Revenue:
13,500M 6 1/2% 10/1/2011 16,166,250 135
9,000M 6 1/8% 9/1/2012 10,383,750 87
- -----------------------------------------------------------------------------------------------------------------------------
26,550,000 222
- -----------------------------------------------------------------------------------------------------------------------------
Delaware--.6%
7,000M Delaware State Econ. Dev. Auth. Rev. Pollution Control 7.15% 7/1/2018 7,752,500 65
- -----------------------------------------------------------------------------------------------------------------------------
District of Columbia--2.6%
Washington D.C. General Obligation:
10,530M Series "C" 8% 6/1/1998* 10,920,347 91
5,800M Series "A" 6 1/2% 6/1/2009 6,763,322 57
13,255M Series "E" 6% 6/1/2012 14,074,291 118
- -----------------------------------------------------------------------------------------------------------------------------
31,757,960 266
- -----------------------------------------------------------------------------------------------------------------------------
Florida--3.0%
Escambia County Utilities Authority:
5,485M 6 1/4% 1/1/2012 6,348,887 53
5,360M 6 1/4% 1/1/2013 6,231,000 52
1,070M Florida Hsg. Fin. Agy. Residential Mtge. Rev. (Series 2) 8% 12/15/2016 1,101,019 9
10,000M Lakeland, Florida Electric & Water Revenue 6% 10/1/2012 11,375,000 95
4,500M Orlando Regional Healthcare 6 1/4% 10/1/2021 5,270,625 44
Sunrise Utilities System Revenue:
1,500M 10 1/4% 10/1/2000* 1,738,125 15
1,500M 10 3/4% 10/1/2000* 1,756,875 15
1,395M West Coast Regional Water Supply Auth. 10.4% 10/1/2010* 1,965,206 16
- -----------------------------------------------------------------------------------------------------------------------------
35,786,737 299
- -----------------------------------------------------------------------------------------------------------------------------
Georgia--7.1%
6,315M Fulton County Water & Sewer Revenue 6 3/8% 1/1/2014 7,435,912 62
Georgia Municipal Electric Authority Power Revenue:
5,000M 6 1/4% 1/1/2012 5,775,000 48
5,000M 7 1/4% 1/1/2024 6,618,750 56
Metropolitan Atlanta Rapid Transit Authority:
7,500M 6 3/4% 7/1/2004* 8,643,750 72
20,450M 6 1/4% 7/1/2011 23,543,063 197
28,605M 6% 7/1/2013 32,466,675 272
- -----------------------------------------------------------------------------------------------------------------------------
84,483,150 707
- -----------------------------------------------------------------------------------------------------------------------------
Hawaii--1.6%
Hawaii State General Obligation:
5,500M 6% 10/1/2009 6,170,505 52
6,000M 6% 10/1/2010 6,716,100 56
6,000M Honolulu General Obligation 5 3/4% 4/1/2012 6,562,980 55
- -----------------------------------------------------------------------------------------------------------------------------
19,449,585 163
- -----------------------------------------------------------------------------------------------------------------------------
Illinois--13.1%
Chicago Board of Education Lease Certificates:
5,000M 6% 1/1/2016 5,593,750 47
33,200M 6% 1/1/2020 37,391,500 313
Chicago General Obligation:
7,000M 6% 1/1/2010 7,665,000 64
16,660M 6 1/8% 1/1/2016 18,034,450 151
Chicago O'Hare International Airport Revenue:
14,570M 6 3/8% 1/1/2012 16,227,337 136
10,000M 6 3/8% 1/1/2015 11,050,000 92
3,340M Chicago Public Building Commission Building Revenue 7 3/4% 1/1/1999* 3,527,474 30
1,910M Des Plaines Hosp. Facs. (Holy Family Hosp.) 9 1/4% 1/1/2014 1,929,998 16
16,750M Illinois Development Finance Auth. Poll. Control Rev. 6 3/4% 3/1/2015 19,032,187 159
Illinois Development Finance Authority Rev. (Rockford School 205):
3,400M 6.55% 2/1/2009 3,978,000 33
5,000M 6.6% 2/1/2010 5,881,250 49
3,000M 6.65% 2/1/2011 3,543,750 30
Illinois Health Facilities Authority Revenue:
4,300M Bromenn Healthcare Project 8% 8/15/1998* 4,494,016 38
2,600M SSM Health Care Project Series "B" 8% 6/1/1998* 2,695,836 23
1,750M Lansing Sales Tax Rfdg. 7.7% 12/1/1998* 1,811,495 15
4,000M Regional Transportation Authority 7 3/4% 6/1/2019 5,450,000 45
Will County School District General Obligation:
3,600M 7% 12/1/2007 4,342,500 36
2,080M 7.05% 12/1/2008 2,542,800 21
1,175M 7.1% 12/1/2009 1,448,188 12
- -----------------------------------------------------------------------------------------------------------------------------
156,639,531 1,310
- -----------------------------------------------------------------------------------------------------------------------------
Indiana--.9%
4,070M Delaware County Hosp. Auth. (Ball Memorial Hosp.) 6 5/8% 8/1/2001* 4,471,912 37
4,010M Indiana Housing Fin. Auth. Single-Family Mtge. Rev. 7.6% 1/1/2016 4,250,600 36
2,000M Indiana State Edl. Facs. Auth. (Butler University) 8% 11/1/1998* 2,106,580 18
- -----------------------------------------------------------------------------------------------------------------------------
10,829,092 91
- -----------------------------------------------------------------------------------------------------------------------------
Louisiana--5.0%
Louisiana Public Facilities Authority Hospital Revenue:
2,350M Touro Infirmary 8% 6/1/1998* 2,436,621 20
2,400M Womens Hospital Foundation 8 1/8% 10/1/1998* 2,522,016 21
Louisiana Public Facilities Health & Ed. Capital Facilities:
5,690M CP Program 7.9% 12/1/2015 5,992,708 50
1,750M Our Lady of the Lake 8.2% 12/1/1998* 1,845,935 16
Louisiana State General Obligation:
8,050M 6.1% 5/1/2010 8,733,204 73
14,555M 6% 5/1/2012 15,687,088 131
14,000M 6% 5/1/2014 15,009,540 126
New Orleans Regional Transit Auth. Sales Tax Revenue:
5,000M 6.81% 12/1/2021** 1,400,000 12
10,000M 7.1% 12/1/2021** 2,800,000 23
3,000M Regional Transportation Authority Revenue 8% 12/1/2013 3,168,600 27
- -----------------------------------------------------------------------------------------------------------------------------
59,595,712 499
- -----------------------------------------------------------------------------------------------------------------------------
Massachusetts--8.0%
4,750M Boston General Obligation 7 3/8% 2/1/2000* 5,147,812 43
10,025M Boston, Mass. Water & Sewer 5 3/4% 11/1/2013 11,115,219 93
2,300M Mass. Bay Transportation Authority Ctfs. of Partn. 7.65% 8/1/2000* 2,544,375 21
Mass. Bay Transportation Authority Gen. Sys. Rev.:
9,080M 5.8% 3/1/2012 10,083,249 84
10,775M 5.8% 3/1/2013 11,961,866 100
10,000M 5 7/8% 3/1/2015 11,047,800 93
Mass. Health & Educational Facilities Authority:
2,300M Berkshire Health Systems 7.6% 10/1/1998* 2,409,986 20
1,500M Carney Hospital 7 3/4% 7/1/2000* 1,659,375 14
Mass. Housing Finance Agency:
6,610M 6% 12/1/2012 7,072,700 59
1,540M 7.7% 6/1/2017 1,600,168 13
20,550M Mass. State General Obligation 6% 8/1/2009 23,365,350 196
5,400M Mass. State Water Resource Authority 6% 8/1/2013 6,095,250 51
1,000M Palmer General Obligation 7.3% 3/1/2000* 1,086,250 9
- -----------------------------------------------------------------------------------------------------------------------------
95,189,400 796
- -----------------------------------------------------------------------------------------------------------------------------
Michigan--2.3%
10,000M Michigan State General Obligation 6 1/4% 11/1/2012 11,628,600 97
Michigan State Housing Development Auth. Single-Family Mtge. Rev.:
4,685M 7 1/2% 6/1/2015 4,913,394 41
2,500M 7.3% 12/1/2016 2,631,250 22
2,135M 7.7% 12/1/2016 2,223,069 19
4,500M Monroe County Econ. Dev. Corp. (Detroit Edison Co.) 6.95% 9/1/2022 5,737,500 48
- -----------------------------------------------------------------------------------------------------------------------------
27,133,813 227
- -----------------------------------------------------------------------------------------------------------------------------
Minnesota--.7%
1,295M Eden Prairie Multi-Family Housing 8% 7/1/2026 1,374,319 12
1,240M St. Paul Hsg. & Red. Auth. (Como-Lake Proj.) 7 1/2% 3/1/2026
(Defaulted) (Note 1A) 1,240,000 10
4,795M University of Minnesota Series "A" 5 3/4% 7/1/2017 5,262,512 44
- -----------------------------------------------------------------------------------------------------------------------------
7,876,831 66
- -----------------------------------------------------------------------------------------------------------------------------
Mississippi--.5%
4,475M Mississippi Hosp. Equip. & Facs. Auth. Rev. (Baptist Med. Ctr.)
7.6% 5/1/2000* 4,911,313 41
1,200M Mississippi Hsg. Fin. Corp. Single-Family Mtge. Rev. 7.8% 10/15/2016 1,228,224 10
- -----------------------------------------------------------------------------------------------------------------------------
6,139,537 51
- -----------------------------------------------------------------------------------------------------------------------------
Missouri--2.6%
1,640M Kansas City School District Bldg. Cap. Improvement 7.9% 2/1/1998* 1,677,523 14
Missouri State Health & Educational Facilities Authority:
BJC Health System Series "A":
6,840M 6 3/4% 5/15/2010 8,199,450 69
10,175M 6 3/4% 5/15/2011 12,197,281 102
10,000M Lester Cox 6.7% 9/1/2016** 3,750,000 31
5,245M SSM Health Care 6 1/4% 6/1/2007 5,749,831 48
- -----------------------------------------------------------------------------------------------------------------------------
31,574,085 264
- -----------------------------------------------------------------------------------------------------------------------------
Nevada--.2%
1,535M Nevada Housing Div. Single-Family Prog. 7.6% 10/1/2018 1,613,669 14
1,120M Reno Hosp. Rev. (St. Mary's Hospital) 7 3/4% 1/1/2000* 1,219,400 10
- -----------------------------------------------------------------------------------------------------------------------------
2,833,069 24
- -----------------------------------------------------------------------------------------------------------------------------
New Jersey--2.0%
4,440M New Jersey Health Care Facs. Fing. Auth. (AHS Hosp. Corp.)
6% 7/1/2013 4,967,250 42
New Jersey Housing & Mortgage Financing Revenue:
5,380M 7 1/2% 4/1/2015 5,669,175 48
8,400M 7 3/8% 10/1/2017 8,883,000 74
4,195M 8.1% 10/1/2017 4,338,847 36
- -----------------------------------------------------------------------------------------------------------------------------
23,858,272 200
- -----------------------------------------------------------------------------------------------------------------------------
New Mexico--.5%
1,000M Farmington Power Rev. Gen. Dev. 9 7/8% 7/1/2005* 1,326,250 11
New Mexico Mortgage Finance Authority, Single-Family Mortgage:
3,075M 8% 1/1/2017 3,165,866 27
945M 8 5/8% 7/1/2017 972,925 8
- -----------------------------------------------------------------------------------------------------------------------------
5,465,041 46
- -----------------------------------------------------------------------------------------------------------------------------
New York--9.6%
Metropolitan Transit Authority:
14,285M Commuter Facilities 5% 7/1/2016 14,124,294 118
Transit Facilities:
10,000M 8% 7/1/1998* 10,406,500 87
3,500M 7 1/2% 7/1/2000* 3,832,500 32
3,850M New York City General Obligation Series "A" 8% 8/1/98* 3,999,919 34
22,250M New York City Municipal Water Finance Auth. Rev. 6% 6/15/2021 25,448,438 213
4,500M New York State Dorm. Auth. Revs. City Univ. System 7 1/2% 7/1/2000* 4,950,000 42
New York State Dorm. Auth. Revs. State Univ. System:
2,780M 7 1/4% 5/15/2000* 3,033,675 25
11,300M 7 3/8% 5/15/2014 12,317,000 103
5,000M New York State General Obligation 6% 6/15/2011 5,396,750 45
6,500M New York State Housing Finance Agency Rev. 5 7/8% 11/1/2010 6,987,500 58
New York State Med. Care Facs. Fin. Agcy. Rev.:
1,985M Hosp. & Nursing 7.35% 2/15/2029 2,123,950 18
10,500M St. Luke's Hosp. 7.45% 2/15/2000* 11,418,750 96
4,000M New York State Urban Dev. Corp. 7 1/2% 1/1/2000* 4,340,000 36
5,840M Suffolk County, N.Y. Indl. Dev. Agcy. Southwest Sewer Sys.
6% 2/1/2008 6,570,000 55
- -----------------------------------------------------------------------------------------------------------------------------
114,949,276 962
- -----------------------------------------------------------------------------------------------------------------------------
North Carolina--1.7%
North Carolina Municipal Power Agency (Catawba):
8,950M 6% 1/1/2010 10,079,937 84
8,945M 6% 1/1/2011 10,051,944 84
- -----------------------------------------------------------------------------------------------------------------------------
20,131,881 168
- -----------------------------------------------------------------------------------------------------------------------------
North Dakota--1.1%
10,500M Mercer County Poll. Ctrl. Rev. (Basin Elec. Pwr. Coop.) 7.2% 6/30/2013 13,020,000 109
- -----------------------------------------------------------------------------------------------------------------------------
Ohio--.1%
1,435M Ohio State Air Quality Dev. Auth. (Ohio Power Co.) 7.4% 8/1/2009 1,521,100 13
- -----------------------------------------------------------------------------------------------------------------------------
Oklahoma--2.3%
Grand River Dam Authority Revenue:
9,000M 5 3/4% 6/1/2008 10,023,750 84
13,000M 6 1/4% 6/1/2011 15,096,250 126
885M Muskogee County Home Fin. Auth. Single-Family Mtge. 7.6% 12/1/2010 925,931 8
1,420M Tulsa County Home Fin. Auth. Single-Family Mtge. 7.35% 11/1/2010 1,512,300 13
- -----------------------------------------------------------------------------------------------------------------------------
27,558,231 231
- -----------------------------------------------------------------------------------------------------------------------------
Pennsylvania--1.9%
1,080M Allegheny County Rev. Fin. Auth. Mtge. Single-Family Mtge. 8% 6/1/2017 1,113,869 9
5,000M Pennsylvania State General Obligation 6 3/4% 11/15/2013 5,686,950 48
12,050M Pittsburgh Water & Sewer Authority 6 1/2% 9/1/2013 14,309,375 120
1,000M Sewickely Valley Hosp. Auth. (Sewickely Vy. Hosp.) 7 1/2% 10/1/1999* 1,076,250 9
- -----------------------------------------------------------------------------------------------------------------------------
22,186,444 186
- -----------------------------------------------------------------------------------------------------------------------------
Puerto Rico--1.4%
Puerto Rico Commonwealth Highway & Transportation Authority
Revenue:
4,500M 6 1/4% 7/1/2013 5,236,875 44
5,250M 6 1/4% 7/1/2015 6,149,063 51
5,000M 6% 7/1/2018 5,750,000 48
- -----------------------------------------------------------------------------------------------------------------------------
17,135,938 143
- -----------------------------------------------------------------------------------------------------------------------------
Rhode Island--.7%
5,000M Rhode Island Depositors Economic Protection Corp. Spl. Oblig.
5 3/4% 8/1/2014 5,425,000 45
Rhode Island Housing & Mortgage Finance Corp.:
1,000M 8 3/8% 10/1/2013 1,024,080 9
1,500M 8 3/8% 10/1/2016 1,536,120 13
- -----------------------------------------------------------------------------------------------------------------------------
7,985,200 67
- -----------------------------------------------------------------------------------------------------------------------------
South Dakota--.4%
3,855M South Dakota Health & Edl. Facs. Auth. (McKennan Hosp.) 7 5/8%
7/1/2006* 4,799,475 40
- -----------------------------------------------------------------------------------------------------------------------------
Texas--12.0%
Austin, Texas Utilities System Revenue:
9,400M Series "A" 7.8% 11/15/1998* 9,908,632 83
3,000M 8 5/8% 5/15/2002* 3,517,500 29
16,000M 6% 11/15/2013 18,120,000 152
30,465M 6.6% 5/15/2018** 10,624,669 89
29,410M 6.6% 5/15/2019** 9,668,538 81
5,000M Bexar County, Texas Health Facs. (Baptist Memorial) 6 3/4% 8/15/2004* 5,756,250 48
10,000M Brazos River Auth., Houston Light & Power Proj. 8.1% 5/1/2019 10,334,500 86
Harris County Toll Road Senior Lien:
8,375M Series "A" 6 1/2% 8/15/2002* 9,296,250 78
11,065M Series "A" 6 1/2% 8/15/2012 13,023,062 109
7,305M Series "A" 6 1/2% 8/15/2013 8,639,843 72
Houston Water Conveyance System Certificates of Participation:
2,250M 6 1/4% 12/15/2012 2,587,500 22
4,705M 6 1/4% 12/15/2013 5,410,750 45
4,950M 6 1/4% 12/15/2014 5,692,500 48
6,035M 6 1/4% 12/15/2015 6,940,250 58
1,500M Northeast Hospital Auth. Rev. (Northeast Med. Ctr. Hosp.)
8 1/8% 7/1/1998* 1,561,500 13
Rio Grande Valley Hlth. Fac. Dev. Corp. (Valley Baptist Med. Ctr.):
3,910M 8% 8/1/1998* 4,080,281 34
5,300M 6.4% 8/1/2012 5,724,000 48
San Antonio Electric & Gas Revenue:
3,000M 8% 2/1/1998* 3,068,610 26
1,850M 10 1/2% 2/1/1998* 1,895,399 16
1,800M Texas Health Facs. Dev. Corp. (Fort Worth Med. Ctr.) 8 1/8% 6/1/1998* 1,867,230 16
5,000M Texas Public Fin. Auth. 6.2% 2/1/2005 5,562,500 46
- -----------------------------------------------------------------------------------------------------------------------------
143,279,764 1,199
- -----------------------------------------------------------------------------------------------------------------------------
Utah--.7%
2,000M Provo, Utah Electric System Revenue 10 3/8% 9/15/2015 2,940,000 24
Salt Lake County Water Conservancy District Revenue:
3,800M 7% 10/1/2011** 1,928,500 16
3,800M 7% 10/1/2012** 1,781,250 15
3,760M 7% 10/1/2013** 1,649,700 14
- -----------------------------------------------------------------------------------------------------------------------------
8,299,450 69
- -----------------------------------------------------------------------------------------------------------------------------
Virginia--1.1%
11,000M Hanover County Indl. Dev. Auth. (Mem. Regl. Med. Ctr. Proj.)
6 3/8% 8/15/2018 12,897,500 108
- -----------------------------------------------------------------------------------------------------------------------------
Washington--1.7%
Washington Public Power Supply System:
5,000M Project No. 2 - 7 3/8% 7/1/2000* 5,481,250 46
4,960M Project No. 2 - 7 3/8% 1/1/2001* 5,499,400 46
934M Project Nos. 4 & 5 - 8 1/2% 7/1/2017 (Defaulted) (Note 1A) 934,080 8
5,000M Washington State General Obligation 6.4% 6/1/2017 5,883,300 49
1,980M Washington State Hsg. Fin. Comm. Single-Family Mtge. 7.7% 7/1/2016 2,088,900 17
- -----------------------------------------------------------------------------------------------------------------------------
19,886,930 166
- -----------------------------------------------------------------------------------------------------------------------------
Wisconsin--3.3%
12,000M Superior, Wisconsin Limited Obligation Rev. (Midwest Energy) 6.9%
8/1/2021 15,015,000 126
Wisconsin Housing & Economic Development Authority:
1,435M 7 1/2% 9/1/2017 1,497,781 12
4,145M 7.6% 9/1/2017 4,372,975 37
12,700M 7 3/4% 9/1/2017 13,382,625 112
1,545M Wisconsin Municipal Insurance Comm. Rev. 8.7% 4/1/1998* 1,585,927 13
Wisconsin State Health & Educational Facilities Authority Revenue:
2,000M Hospital Sisters Services Inc. 7 5/8% 11/15/1998* 2,103,460 18
1,500M Novus Health Group 8% 6/1/1998* 1,584,990 13
- -----------------------------------------------------------------------------------------------------------------------------
39,542,758 331
- -----------------------------------------------------------------------------------------------------------------------------
Total Value of Municipal Bonds (cost $1,053,211,744) 98.4% 1,175,565,159 9,835
Other Assets, Less Liabilities 1.6 19,709,469 165
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $1,195,274,628 $10,000
=============================================================================================================================
* Municipal Bonds which have been prerefunded are shown maturing at the prerefunded call date.
** Zero coupon bond issued at a discount. The interest rate shown represents the rate of discount on date purchased.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
December 31, 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in securities, at value (identified cost $1,053,211,744) (Note 1A) $1,175,565,159
Cash 1,153,927
Receivables:
Interest 20,484,158
Investment securities sold 1,075,000
Capital shares sold 217,537
Other assets 81,733
-----------------
Total Assets 1,198,577,514
-----------------
Liabilities
Payables:
Capital shares redeemed $1,234,438
Dividends payable 1,122,787
Accrued advisory fee 691,781
Accrued expenses 253,880
-----------------
Total Liabilities 3,302,886
-----------------
Net Assets (Note 4):
Class A (113,996,802 shares outstanding) 1,191,814,795
Class B (331,001 shares outstanding) 3,459,833 $1,195,274,628
------------------ ==================
Net Assets Consist of:
Capital paid in $1,080,698,230
Undistributed net investment income 318,239
Accumulated net realized loss on investment transactions (8,095,256)
Net unrealized appreciation in value of investments 122,353,415
-----------------
Total $1,195,274,628
==================
Net asset value and redemption price per share--Class A $10.45
======
Maximum offering price per share--Class A ($10.45/.9375)* $11.15
======
Net asset value and offering price per share--Class B (Note 4) $10.45
======
* On purchases of $25,000 or more, the sales charge is reduced.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
Year Ended December 31, 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Interest income $73,010,039
Expenses (Notes 1 and 3):
Advisory fee $ 8,394,852
Distribution plan expenses--Class A 3,481,392
Distribution plan expenses--Class B 32,852
Shareholder servicing costs 1,086,368
Bond insurance premiums 193,386
Custodian fees 106,379
Professional fees 75,095
Reports and notices to shareholders 63,965
Other expenses 350,755
-----------------
Total expenses 13,785,044
Less: Custodian fees paid indirectly (57,255)
-----------------
Net expenses 13,727,789
-----------------
Net investment income 59,282,250
Realized and Unrealized Gain on Investments (Note 2):
Net realized gain on investments 6,301,947
Net unrealized appreciation of investments 30,510,966
-----------------
Net gain on investments 36,812,913
-----------------
Net Increase in Net Assets Resulting from Operations $96,095,163
==================
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
- ------------------------------------------------------------------------------------------------------------------
Year Ended December 31 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 59,282,250 $ 65,345,832
Net realized gain (loss) on investments 6,301,947 (520,841)
Net unrealized appreciation (depreciation) of investments 30,510,966 (32,059,622)
------------------ -----------------
Net increase in net assets resulting from operations 96,095,163 32,765,369
------------------ -----------------
Dividends to Shareholders
Net investment income--Class A (59,425,389) (64,864,256)
Net investment income--Class B (139,453) (113,228)
------------------ -----------------
Total dividends (59,564,842) (64,977,484)
------------------ -----------------
Capital Share Transactions (a)
Class A:
Proceeds from shares sold 25,022,487 41,005,690
Value of dividends reinvested 45,619,578 50,176,505
Cost of shares redeemed (167,860,367) (179,154,717)
------------------ -----------------
(97,218,302) (87,972,522)
------------------ -----------------
Class B:
Proceeds from shares sold 784,544 1,664,703
Value of dividends reinvested 106,089 87,336
Cost of shares redeemed (581,697) (684,909)
------------------ -----------------
308,936 1,067,130
------------------ -----------------
Net decrease from capital share transactions (96,909,366) (86,905,392)
------------------ -----------------
Net decrease in net assets (60,379,045) (119,117,507)
Net Assets
Beginning of year 1,255,653,673 1,374,771,180
------------------ -----------------
End of year (including undistributed net investment income of
$318,239 and $600,831, respectively) $1,195,274,628 $1,255,653,673
================== ==================
(a)Capital Shares Issued and Redeemed
Class A:
Sold 2,452,421 4,066,223
Issued for dividends reinvested 4,476,197 4,977,355
Redeemed (16,510,382) (17,796,263)
------------------ -----------------
Net decrease in Class A shares outstanding (9,581,764) (8,752,685)
================== ==================
Class B:
Sold 77,307 166,049
Issued for dividends reinvested 10,406 8,669
Redeemed (57,234) (68,860)
------------------ -----------------
Net increase in Class B shares outstanding 30,479 105,858
================== ==================
See notes to financial statements
</TABLE>
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Notes to Financial Statements
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
1. Significant Accounting Policies -- The Fund is registered under the
Investment Company Act of 1940 (the "1940 Act") as a diversified,
open-end management investment company. The investment objective of
the Fund is to seek to provide a high level of interest income which
is exempt from federal income tax.
A. Security Valuation -- The municipal bonds in which the Fund invests
are traded primarily in the over-the-counter markets. Such securities
are valued daily at their fair value on the basis of valuations
provided by a pricing service approved by the Board of Directors. The
pricing service considers security type, rating, market condition and
yield data, as well as market quotations and prices provided by market
makers. "When Issued Securities" are reflected in the assets of the
Fund as of the date the securities are purchased.
The Fund's municipal bonds are insured as to payment of principal and
interest by the issuer or under insurance policies written by
independent insurance companies. The Fund may retain any insured
municipal bond which is in default in the payment of principal or
interest until the default has been cured, or the principal and
interest outstanding are paid by an insurer or the issuer of any
letter of credit or other guarantee supporting such municipal bond. In
such case, it is the Fund's policy to value the defaulted bond
daily based upon the value of a comparable bond which is insured
and not in default. In selecting a comparable bond, the Fund will
consider security type, rating, market condition and yield. The Fund
may invest up to 20% of its assets in portfolio securities not covered
by the insurance feature.
B. Federal Income Taxes -- It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute
exempt-interest dividends, by complying with the provisions available
to certain investment companies, as defined in the Internal Revenue
Code, and to make distributions of income and net realized capital
gains (in excess of any available capital loss carryovers), sufficient
to relieve it from all, or substantially all, federal income taxes. At
December 31, 1997, the Fund had capital loss carryovers of $8,095,256
of which $7,571,365 expires in 2002 and $523,891 expires in 2004.
C. Distributions to Shareholders -- Dividends from net investment
income are declared daily and paid monthly. Distributions from net
realized capital gains are normally declared and paid annually. Income
dividends and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for capital loss carryforwards.
D. Security Transactions and Investment Income -- Security
transactions are accounted for on the date the securities are
purchased or sold. Cost is determined, and gains and losses are based,
on the identified cost basis for both financial statement and federal
income tax purposes. Interest income is earned from settlement date
and recorded on the accrual basis. Estimated expenses are accrued
daily. The Fund's Custodian has provided credits in the amount of
$57,255, against custodian charges based on the uninvested cash
balances of the Fund.
E. Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the
reporting period. Actual results could differ from those estimates.
2. Securities Transactions -- For the year ended December 31, 1997,
purchases and sales of investment securities, other than short-term
notes, aggregated $156,459,413 and $262,839,973, respectively.
At December 31, 1997, the cost of investments for federal income tax
purposes was $1,053,211,744. Accumulated net unrealized appreciation
on investments was $122,353,415, consisting entirely of gross
unrealized appreciation.
3. Advisory Fee and Other Transactions With Affiliates -- Certain
officers and directors of the Fund are officers and directors of its
investment adviser, First Investors Management Company, Inc.
("FIMCO"), its underwriter, First Investors Corporation ("FIC") and/or
its transfer agent, Administrative Data Management Corp. ("ADM").
Officers and directors of the Fund received no remuneration from the
Fund for serving in such capacity. Their remuneration (together with
certain other expenses of the Fund) was paid by FIMCO or FIC.
Effective January 1, 1998, independent directors will be remunerated
by the Fund.
The Investment Advisory Agreement provides as compensation to FIMCO an
annual fee, payable monthly, at the rate of .75% of the first $250
million of the Fund's average daily net assets, declining by .03% on
each $250 million thereafter, down to .66% on average daily net assets
over $750 million.
For the year ended December 31, 1997, FIC, as underwriter, received
$465,427 in commissions, after allowing $35,092 to other dealers.
Shareholder servicing costs included $889,231 in transfer agent fees
paid to ADM.
Pursuant to Distribution Plans adopted under Rule 12b-1 of the 1940
Act, the Fund is authorized to pay FIC a fee up to .30% of the average
net assets of the Class A shares and 1% of the average net assets of
the Class B shares on an annualized basis each year, payable monthly.
For the year 1997, FIC was paid a fee of .29% of the average net
assets of the Class A shares. The fee consists of a distribution fee
and a service fee. The service fee is paid for the ongoing servicing
of clients who are shareholders of the Fund.
4. Capital -- The Fund sells two classes of shares, Class A and Class
B, each with a public offering price that reflects different sales
charges and expense levels. Class A shares are sold with an initial
sales charge of up to 6.25% of the amount invested and together with
the Class B shares are subject to 12b-1 fees as described in Note 3.
Class B shares are sold without an initial sales charge, but are
generally subject to a contingent deferred sales charge which declines
in steps from 4% to 0% over a six-year period. Class B shares
automatically convert into Class A shares after eight years. Realized
and unrealized gains or losses, investment income and expenses (other
than distribution plan fees) are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
Of the 500,000,000 shares originally authorized, the Fund has
designated 300,000,000 shares as Class A and 200,000,000 shares as
Class B.
<TABLE>
<CAPTION>
Financial Highlights
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
The following table sets forth the per share operating performance for a share of capital stock outstanding,
total return, ratios to average net assets and other supplemental data for each year indicated.
- -----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------------------------
Year Ended December 31 1997 1996 1995 1994 1993 1997 1996 1995*
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value, Beginning of Year $10.14 $10.37 $9.42 $10.56 $10.32 $10.13 $10.37 $9.48
------ ------ ------ ------ ------ ------ ------ -----
Income from Investment Operations
Net investment income .50 .51 .52 .56 .60 .43 .44 .44
Net realized and unrealized gain
(loss) on investments .31 (.23) .96 (1.15) .40 .32 (.24) .89
------ ------ ------ ------ ------ ------ ------ -----
Total from Investment Operations .81 .28 1.48 (.59) 1.00 .75 .20 1.33
------ ------ ------ ------ ------ ------ ------ -----
Less Distributions from:
Net investment income .50 .51 .53 .55 .61 .43 .44 .44
Net realized gains -- -- -- -- .15 -- -- --
------ ------ ------ ------ ------ ------ ------ -----
Total Distributions .50 .51 .53 .55 .76 .43 .44 .44
------ ------ ------ ------ ------ ------ ------ -----
Net Asset Value, End of Year $10.45 $10.14 $10.37 $9.42 $10.56 $10.45 $10.13 $10.37
====== ====== ====== ====== ====== ====== ====== ======
Total Return (%)+ 8.27 2.81 16.01 (5.61) 9.88 7.62 2.03 14.27
Ratios/Supplemental Data
Net Assets, End of Period
(in millions) $1,192 $1,253 $1,373 $1,302 $1,507 $3 $3 $2
Ratio to Average Net Assets: (%)
Expenses 1.14 1.14 1.14 1.18 1.15 1.85 1.83 1.88(a)
Net Investment Income 4.93 5.06 5.25 5.64 5.69 4.22 4.37 4.45(a)
Portfolio Turnover Rate (%) 13 21 37 57 58 13 21 37
* For the period 1/12/95 (date shares first offered) to 12/31/95
+ Calculated without sales charges
(a) Annualized
See notes to financial statements
</TABLE>
Independent Auditors' Report
To the Shareholders and Board of Directors of
First Investors Insured Tax Exempt Fund, Inc.
We have audited the accompanying statement of assets and liabilities
of First Investors Insured Tax Exempt Fund, Inc., including the
portfolio of investments, as of December 31, 1997, and the related
statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then
ended and financial highlights for the periods indicated thereon.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of First Investors Insured Tax Exempt Fund, Inc. at
December 31, 1997, and the results of its operations, changes in its
net assets and financial highlights for the periods indicated thereon,
in conformity with generally accepted accounting principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
January 30, 1998
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
Directors
James J. Coy (Emeritus)
Roger L. Grayson
Glenn O. Head
Kathryn S. Head
Rex R. Reed
Herbert Rubinstein
Nancy S. Schaenen
James M. Srygley
John T. Sullivan
Robert F. Wentworth
Officers
Glenn O. Head
President
Concetta Durso
Vice President and Secretary
Clark D. Wagner
Vice President
Joseph I. Benedek
Treasurer
Carol Lerner Brown
Assistant Secretary
Gregory R. Kingston
Assistant Treasurer
Mark S. Spencer
Assistant Treasurer
Shareholder Information
Investment Adviser
First Investors
Management Company, Inc.
95 Wall Street
New York, NY 10005
Underwriter
First Investors Corporation
95 Wall Street
New York, NY 10005
Custodian
The Bank of New York
48 Wall Street
New York, NY 10286
Transfer Agent
Administrative Data
Management Corp.
581 Main Street
Woodbridge, NJ 07095-1198
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036
Auditors
Tait, Weller & Baker
Eight Penn Center Plaza
Philadelphia, PA 19103
It is the Fund's practice to mail only one copy of its annual and
semi-annual reports to any address at which more than one shareholder
with the same last name has indicated that mail is to be delivered.
Additional copies of the reports will be mailed if requested by any
shareholder in writing or by calling 800-423-4026. The Fund will
ensure that separate reports are sent to any shareholder who
subsequently changes his or her mailing address.
This report is authorized for distribution only to existing
shareholders, and, if given to prospective shareholders, must be
accompanied or preceded by the Fund's prospectus.
