<PAGE> 1
VANGUARD NEW YORK
TAX-EXEMPT FUNDS
VANGUARD NEW YORK TAX-EXEMPT
MONEY MARKET FUND
VANGUARD NEW YORK INSURED LONG-TERM
TAX-EXEMPT FUND
[PHOTO]
ANNUAL REPORT
NOVEMBER 30, 1998
[THE VANGUARD GROUP LOGO]
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AT VANGUARD, WE BELIEVE THAT TRADITION MATTERS
Our 8,000 crew members embrace the traditional values on which our success is
built, including integrity, hard work, thrift, teamwork, and fair dealing on
behalf of our clients.
This year, our report cover pays homage to three anniversaries, each of great
significance to The Vanguard Group:
- - The 200th anniversary of the Battle of the Nile, which commenced on August 1,
1798. HMS Vanguard, the victorious British flagship at the Nile, is our
namesake. And its motto--"Leading the way"--serves as a guiding principle for
our company.
- - The 100th birthday, on July 23, of Walter L. Morgan, founder of Wellington
Fund, the oldest member of what became The Vanguard Group. Mr. Morgan was
friend and mentor to Vanguard founder John C. Bogle, and helped to shape the
standards and business principles that Mr. Bogle laid down for Vanguard at its
beginning nearly 25 years ago: a stress on balanced, diversified investments;
insistence on fair dealing and candor with clients; and a focus on long-term
investing. To our great regret, Mr. Morgan died on September 2.
- - The 70th anniversary, on December 28, of the incorporation of Vanguard
Wellington Fund. It was the nation's first balanced mutual fund, and is one of
only a handful of funds created in the 1920s that are still in operation.
Although Vanguard constantly tackles new challenges, adopts new technology,
and develops new services, we treasure the traditions and values that set us
apart in a crowded, competitive industry. And we salute our shareholders,
whose support and trust we strive to earn each and every day.
[PHOTO]
CONTENTS
A MESSAGE TO
OUR SHAREHOLDERS
1
THE MARKETS IN
PERSPECTIVE
7
REPORT FROM
THE ADVISER
9
PERFORMANCE SUMMARIES
11
FUND PROFILES
13
FINANCIAL STATEMENTS
16
REPORT OF
INDEPENDENT ACCOUNTANTS
31
All comparative mutual fund data
are from Lipper or Morningstar,
unless otherwise noted.
<PAGE> 3
DEAR SHAREHOLDER,
[PHOTO] [PHOTO]
John J. Brennan John C. Bogle
Chairman & CEO Senior Chairman
Interest rates declined on balance during the twelve months ended November 30,
1998--the fiscal year for the Vanguard New York Tax-Exempt Funds providing a
significant boost to prices of tax-exempt municipal bonds. In this bond-friendly
environment of lower rates and tame inflation, our New York Insured Long-Term
Tax-Exempt Fund provided an excellent total return of +7.7% that surpassed the
return of its average peer by a full percentage point. Our New York Tax-Exempt
Money Market Fund's return of +3.3% also outdistanced that of its competitors.
The table at right presents each fund's twelve-month return along with
its income and capital components. The total return (capital change plus
reinvested dividends) of the Insured Long-Term Tax-Exempt Fund is based on a
change in net asset value from $11.05 per share on November 30, 1997, to $11.30
per share on November 30, 1998, adjusted for dividends totaling $0.564 per share
paid from net investment income and a distribution of $0.017 per share paid from
net realized capital gains. The Money Market Fund's net asset value remained at
$1 per share, as was expected but not guaranteed. At the end of the fiscal year,
the Insured Long-Term Fund's yield stood at 4.41%, the Money Market Fund's yield
at 2.97%.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
COMPONENTS OF TOTAL RETURNS
FISCAL YEAR ENDED NOVEMBER 30, 1998
-----------------------------------
NEW YORK
TAX-EXEMPT FUND INCOME CAPITAL TOTAL
- ----------------------------------------------------------------
<S> <C> <C> <C>
Money Market +3.3% 0.0% +3.3%
(SEC 7-Day Annualized
Yield: 2.97%)
Insured Long-Term +5.3 +2.4 +7.7
- ----------------------------------------------------------------
</TABLE>
FINANCIAL MARKETS IN REVIEW
During the twelve months ended November 30, investors fretted over a variety of
developments both here and abroad, from the debt problems of foreign governments
to a huge hedge-fund bailout to growing concern about corporate profits.
Overall, the uncertainty made for a tumultuous, but ultimately rewarding, period
in the equity markets and a fine fiscal year for bonds.
The yield of the benchmark 30-year U.S. Treasury bond fell about 100
basis points on balance, ending the period at 5.06% after bottoming out at 4.72%
in early October. During the autumn, the Federal Reserve Board trimmed
short-term rates three times in seven weeks by a total of 0.75 percentage point,
citing the strain of international woes on the U.S. economy. The economy
continued to exhibit steady growth (about 3% during the period), and inflation
remained low. Consumer prices were up just 1.5% for the fiscal year.
Of course, as interest rates drop, bond prices rise. That meant
outstanding returns for bonds during the fiscal year, particularly for
longer-maturity issues, which benefit most from interest-rate declines. The
Lehman Brothers Long U.S. Treasury Bond Index earned a total return of +15.7%,
with its +7.2% income return augmented by an +8.5% capital return.
Yields on high-grade long-term municipal bonds did not fall as far as
those for Treasury securities. Top-rated long-term municipal bonds ended the
fiscal year with a
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<PAGE> 4
yield of 4.89%, down from 5.25% at the end of November 1997. Yields on top-grade
(MIG-1) 3-month notes, which are more sensitive than longer-term issues to
changes in short-term interest rates, declined on balance to 2.95%, from 3.80% a
year earlier. For the twelve months, the Lehman 10 Year Municipal Bond Index, a
good measure of the long-term municipal market, returned +8.1%--an outstanding
return considering the tax advantages of municipal bonds and the extremely low
inflation rate.
The U.S. stock market, meanwhile, weathered a severe summer storm that
drove the broad market down nearly 20% and clipped more than 40% from the value
of many smaller stocks. A swift recovery ensued during the final three months of
the fiscal year, and for the twelve months, the Standard & Poor's 500 Composite
Stock Price Index was up +23.7%.
The 1998 fiscal year will likely be remembered as a period of
extraordinary relative value in the municipal bond market. On November 30,
yields on long-term U.S. Treasuries and long-term municipal bonds were nearly
identical--a truly remarkable occurrence, given that income from state-specific
municipal bond funds is exempt from federal, state, and local taxes for state
residents. The yield convergence has been the result of several factors.
Treasury bonds benefited from both an easing of inflation fears and a "flight to
quality" by foreign investors--particularly from Asia--who bought Treasury
securities to protect themselves from declines in their currencies versus the
U.S. dollar. Meanwhile, new Treasury issuance dropped--thanks to the federal
budget surplus--and issuance of new municipal bonds soared, dampening prices a
bit and keeping yields high in relation to Treasuries.
Throughout the summer and into the fall, yields of long-term municipal
bonds were equal to about 98% of the yield on comparable Treasuries, and on
several occasions muni yields matched or even slightly exceeded Treasury yields.
To be sure, this phenomenon is temporary, but it made municipal bonds as
valuable in relation to Treasuries as they've ever been. Historically, municipal
bonds have offered a yield equal to about 84% of the yield on Treasury bonds.
It's always important to view the performance of bonds in the proper
perspective, especially after a year when declining interest rates pushed
returns higher. As you may recall, during the past two fiscal years bond prices
received only a small capital boost. Just four years ago, in 1994, interest
rates rose sharply and bond prices plunged, providing a painful lesson about the
volatility of bond-fund returns. It is also important for investors to
understand that the ever-present fluctuations in the bond market tend to offset
each other over longer periods, leaving the rate of interest income as the
dominant long-term source of bond returns.
FISCAL 1998 PERFORMANCE OVERVIEW
The +7.7% return of the Vanguard New York Insured Long-Term Tax-Exempt Fund
topped the +6.6% return of the average New York municipal bond fund and was just
a hair behind the +7.8% return of the unmanaged Lehman Municipal Bond Index.
This index, which includes municipal bonds from across the country, is a
notoriously tough competitor because it does not incur the "real world"
operating expenses and transaction costs that all mutual funds must bear. Though
the majority of our total return came from interest income, the fund earned a
capital return of +2.4% that reflected the interest-rate decline. The Tax-Exempt
Money Market Fund provided a total return of +3.3%, outpacing the +2.9% return
of its average peer.
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THE MUNICIPAL BOND TAX ADVANTAGE
For New York residents, the income earned by our funds is exempt from state,
local, and federal income taxes. At current yields, that means that investors in
long-term tax-exempt bonds who are taxed at the highest marginal tax rate can
earn an astounding 65% more after-tax income than they could in a comparable
long-term U.S. Treasury bond fund. Our Tax-Exempt Money Market Fund also offers
New York residents a distinct advantage over U.S. Treasury securities with
similar maturities. On November 30, the yield of MIG-1 notes was 11% higher than
the after-tax yield of 90-day U.S. Treasury bills. To look at this another way,
a yield of 5.1% on a tax-exempt long-term bond would be the equivalent of an
8.4% taxable yield for New York taxpayers subject to the highest tax rates. For
a tax-exempt short-term yield of 3.0%, the taxable equivalent would be 5.0%.
These remarkable advantages are illustrated in the table below, which
compares the annual net income earned on U.S. Treasury and tax-exempt securities
as of November 30, 1998, assuming a $100,000 investment.
Of course, in terms of credit quality, state-specific municipal bond
funds, by definition, don't match up to U.S. Treasury bond funds, whose
securities are backed by the full faith and credit of the U.S. government. Also,
single-state municipal bond funds lack geographic diversification. Private
insurance on the bonds in our Long-Term Tax-Exempt Fund, however, substantially
mitigates these additional credit risks. Though the insurance does not provide
protection against fluctuations in the fund's value, it guarantees full payment
of interest and principal for our bond holdings.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
ILLUSTRATION OF INCOME FROM A
HYPOTHETICAL $100,000 INVESTMENT
- ----------------------------------------------------------------------
SHORT-TERM LONG-TERM
- ----------------------------------------------------------------------
<S> <C> <C>
Taxable gross income $4,500 $5,100
Less taxes (39.6%) (1,800) (2,000)
Net after-tax income 2,700 3,100
- ----------------------------------------------------------------------
Tax-exempt income $3,000 $5,100
- ----------------------------------------------------------------------
Tax-exempt income advantage $ 300 $2,000
- ----------------------------------------------------------------------
Percentage advantage 11% 65%
- ----------------------------------------------------------------------
</TABLE>
This illustration assumes current yields (as of November 30, 1998) of 5.1% for
long-term U.S. Treasury bonds, 4.5% for U.S. Treasury bills, 5.1% for long-term
municipals, and 3.0% for short-term municipals. The tax adjustment assumes a
typical itemized tax return based on a federal tax rate of 39.6%. Income from
U.S. Treasury securities is not subject to state taxes; local taxes are not
considered. The illustration is not intended to represent future results.
Portfolio insurance generally is not available for short-term securities,
so our investment adviser, Vanguard Fixed Income Group, is responsible for
preserving the principal of the Tax-Exempt Money Market Fund--a responsibility
the group fulfilled admirably. We remind you that money market investments are
not guaranteed by the Federal Deposit Insurance Corporation, which insures bank
accounts and certificates of deposit.
LONG-TERM PERFORMANCE OVERVIEW
The Vanguard New York Insured Long-Term Tax-Exempt Fund was launched more than
twelve years ago to provide New York investors with a high level of tax-exempt
income. The table on the next page compares the performance of the Insured
Long-Term Fund over the past ten years with that of its average peer mutual
fund. For the record, it compares, as well, the performance of our Tax-Exempt
Money Market Fund since its inception on September 3, 1997. The table on page 4
also presents the current value of a
3
<PAGE> 6
hypothetical $10,000 investment made ten years ago in the Insured Long-Term Fund
(and at the inception of our Money Market Fund). The Insured Long-Term Fund's
edge over its competitors during the decade amounted to $1,674, or almost 17% of
the original investment.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998*
----------------------------------------------------------------
FINAL VALUE
AVERAGE OF A $10,000
ANNUAL RATE INITIAL INVESTMENT**
--------------------- -------------------------------------
AVERAGE AVERAGE
NEW YORK VANGUARD COMPETING VANGUARD COMPETING VANGUARD
TAX-EXEMPT FUND FUND FUND FUND FUND ADVANTAGE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market +3.3% +3.0% $10,414 $10,377 $ 37
- ------------------------------------------------------------------------------------
Insured Long-Term +8.4 +7.5 22,335 20,661 1,674
- ------------------------------------------------------------------------------------
</TABLE>
*For the Money Market Fund, annualized return since inception on September 3,
1997; for the Insured Long-Term Fund, annualized ten-year return.
**Assuming reinvestment of all income dividends and capital gains distributions.
Our advantage is explained, in part, by our much lower expenses, a factor
that helps us toward our goal of providing returns that exceed those of
competitive norms. Our expense ratios (annual expenses as a percentage of
average net assets) were about 0.20%, far below both the 1.03% charged by the
average long-term state tax-exempt fund and the 0.53% charged by the average
state tax-exempt money market fund. We believe this powerful advantage is
sustainable. Another reason for our success is the skillful management of
Vanguard Fixed Income Group, which has helped guide our funds to their superior
record while maintaining the highest investment quality in the industry.
We emphasize that the longer-term returns shown above are higher than
investors should expect with interest rates at current levels. Our Insured
Long-Term Fund's returns have been boosted by capital appreciation due to
generally declining interest rates during the decade. But interest rates cannot
decline forever. Investors looking for a realistic forecast of future returns on
long-term bonds should not regard past returns as a guide. The best indicator of
the average future return on long-term bonds--and it is not a perfect
predictor--is the current yield on those bonds.
IN SUMMARY
The excellent returns earned by bonds over the past twelve months--as well as
over the past decade--should not lull investors into a false sense of security
about the safety of bonds or the reliability of returns. Bond returns will
inevitably revert to their historical (lower) averages, possibly with little or
no warning.
We believe that the specific risks of bonds, and the general risks of
investing, can be managed by a balanced investment program that includes stock
funds, bond funds, and money market funds suited to an individual's objectives,
time horizon, tolerance for risk, and financial situation. Once you have such a
program, you should be prepared to stick with it through good times and bad.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
December 18, 1998
4
<PAGE> 7
NOTE: You'll observe that we have made minor changes in the names of the
Vanguard New York Tax-Exempt Funds. We replaced the word "Tax-Free" with
"Tax-Exempt" and replaced "Portfolio" with "Fund" as part of a broader effort to
clarify the names in our fund lineup.
NOTICE TO SHAREHOLDERS
At a special meeting on July 24, 1998, shareholders of Vanguard New York
Tax-Exempt Funds overwhelmingly approved six proposals. The proposals and voting
results were:
1. REORGANIZATION INTO A DELAWARE BUSINESS TRUST. Based on the funds' assets at
the time of the vote, this change will reduce the amount of state taxes paid
each year by some Vanguard funds. The Vanguard New York Tax-Exempt Funds will
not realize any tax savings as a result of the change, but the funds will
benefit from the efficiency of being organized the same way as all other
Vanguard funds. Approved by 96.94% of the shares voted, as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------
FOR AGAINST ABSTAIN
--------------------------------------------------------------------
<S> <C> <C>
235,929,293 2,754,205 4,695,426
--------------------------------------------------------------------
</TABLE>
2a. INVESTMENT LIMITATION CHANGES--INTERFUND LENDING PROGRAM. This change
permits the New York Tax-Exempt Funds to participate in Vanguard's interfund
lending program, which allows funds to loan money to each other if--and only
if--it makes good financial sense to do so on both sides of the transaction. The
interfund lending program won't be an integral part of the funds' investment
programs; it is a contingency arrangement for managing unusual cash flows.
Approved as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
NEW YORK TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 165,841,737 4,674,668 5,189,124 94.39%
-------------------------------------------------------------------------------------------------
Insured Long-Term 60,327,517 3,966,534 3,379,344 89.15%
-------------------------------------------------------------------------------------------------
</TABLE>
2b. INVESTMENT LIMITATION CHANGES--BORROWING MONEY AND PLEDGING ASSETS. This
change sets standard limits of 15% of net assets on the amount of money Vanguard
funds can borrow from all sources and on the amount of assets that can be
pledged to secure any loans. Approved as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
NEW YORK TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 160,234,448 11,258,259 4,212,823 91.20%
-------------------------------------------------------------------------------------------------
Insured Long-Term 58,593,041 5,565,537 3,514,817 86.58%
-------------------------------------------------------------------------------------------------
</TABLE>
(continued on next page)
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2c. INVESTMENT LIMITATION CHANGES--INVESTMENTS IN SECURITIES OWNED BY
AFFILIATES. This change eliminates the funds' policy of avoiding investments in
securities that are owned in certain amounts by Trustees, officers, and key
advisory personnel. This policy was well-intentioned but wrongly focused and
unnecessary in light of the funds' Code of Ethics and other regulatory
protections against conflicts of interest on the part of fund management.
Approved as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
NEW YORK TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 161,732,709 9,420,292 4,552,528 92.05%
-------------------------------------------------------------------------------------------------
Insured Long-Term 59,808,304 4,371,699 3,493,391 88.38%
-------------------------------------------------------------------------------------------------
</TABLE>
2d. INVESTMENT LIMITATION CHANGES--BONDS SECURED BY INTERESTS IN OIL, GAS, OR
MINERAL PROGRAMS. This change amends a policy prohibiting investments in
interests in oil, gas, or other mineral exploration or development programs.
While the funds still cannot invest directly in oil, gas, or mineral programs,
the change clarifies that the funds can invest in bonds and money market
instruments secured by interests in these programs. Approved as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
NEW YORK TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 159,076,993 11,744,461 4,884,075 90.54%
-------------------------------------------------------------------------------------------------
Insured Long-Term 58,947,248 4,761,598 3,964,548 87.11%
-------------------------------------------------------------------------------------------------
</TABLE>
2g. INVESTMENT LIMITATION CHANGES--INVESTMENTS IN INDUSTRIAL REVENUE BONDS. This
change eliminates a policy imposing special restrictions on investments in
industrial revenue and development bonds. The change allows the funds to invest
in industrial revenue and development bonds without limit, subject to their
usual stringent quality and maturity guidelines. Approved as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
NEW YORK TAX-EXEMPT FUND FOR AGAINST ABSTAIN APPROVED BY
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 162,843,556 8,261,359 4,600,615 92.68%
-------------------------------------------------------------------------------------------------
Insured Long-Term 59,211,315 4,419,106 4,042,973 87.50%
-------------------------------------------------------------------------------------------------
</TABLE>
6
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[PHOTO]
THE MARKETS IN PERSPECTIVE
YEAR ENDED NOVEMBER 30, 1998
U.S. financial markets produced solid overall gains during the fiscal year ended
November 30. The S&P 500 Index gained 23.7% for the 12-month period, overcoming
a sharp summer setback. Bond prices rose as interest rates declined. Returns
from overseas stock markets varied widely, with big gains in Europe and losses
in most other markets.
U.S. STOCK MARKETS
The stock market's gains during the fiscal year were concentrated in
large-capitalization growth stocks. Within the S&P 500 Index, the growth stocks
rose 33.7%, while the value stocks were up 13.2%. The market's overall bias
toward large-caps showed starkly in the contrast between the S&P 500 and other
indexes. While the S&P 500 was rising 23.7%, the rest of the market returned a
paltry 2.6%, as measured by the Wilshire 4500 Equity Index. Small-cap stocks, as
represented by the Russell 2000 Index, did even worse--a negative return of
6.6%.
The market's ascent was not without incident, even for large-cap stocks.
After rising strongly to a record high on July 17, the S&P 500 fell by 19.2%
during the following six weeks, just shy of the 20% mark generally considered
the boundary distinguishing a bear market from a mere "correction." Declines
were certifiably bearish for smaller stocks, however.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
AVERAGE ANNUALIZED RETURNS
PERIODS ENDED NOVEMBER 30, 1998
---------------------------------
1 YEAR 3 YEARS 5 YEARS
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
S&P 500 Index 23.7% 26.7% 23.0%
Russell 2000 Index -6.6 10.3 11.3
MSCI EAFE Index 16.8 9.3 10.2
- ------------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index 9.5% 7.7% 7.3%
Lehman 10 Year Municipal Bond Index 8.1 6.9 6.8
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 8.1 6.9 6.8
- ------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.5% 2.2% 2.4%
- ------------------------------------------------------------------------------
</TABLE>
The July-August tumble in stock prices reflected a number of factors that
collectively raised the anxiety level for many investors. Among these were
deteriorating corporate earnings reports and forecasts, Russia's default on its
debts, and a continuance of economic weakness in Asia. The persistence of Asia's
economic troubles--which first surfaced in mid-1997--began to slow the economic
expansions in the United States and Europe.
The rebound in stocks late in the fiscal year occurred even though
several sources of uncertainty remained, including doubts about global economic
growth and reductions in securities analysts' forecasts of future corporate
earnings. Stock prices got considerable help from the decline in interest rates.
(Low inflation and low interest rates help stock prices by raising the estimated
value of future dividends and earnings.)
Three forces clearly shaped the performance of industry sectors. They
could be summarized as faith (the buoyant confidence of consumers), fear
(related to the effects of economic troubles abroad), and fortresses (companies
somewhat protected from competition).
7
<PAGE> 10
In contrast to the cautious stance of investors during fiscal 1998, U.S.
consumers threw caution to the wind. Feeling flush because of plentiful jobs
(the nation's unemployment rate was 4.4% at fiscal year-end) and rising wages,
consumers spent a record proportion of their income. Not surprisingly, then, two
big gainers among sectors of the S&P 500 Index were consumer discretionary
firms, such as retailers (+26%) and consumer staples (+22%).
Fear was a factor in the lagging returns in industry groups considered to
be vulnerable to slowing global growth, falling commodity prices, and tougher
price competition from foreign suppliers. Among these--all traditional value
sectors--were firms in the "other energy" category (-37%); chemical and other
materials & processing firms (essentially a zero return); and makers of producer
durables such as airplanes and machinery (+2%). Conversely, utilities did well
(+35%) in part because they are seen as relatively insulated from foreign
competition or economic woes. Fortresses are companies perceived as relatively
safe from competitors because of patented products or brands. Such companies led
the year's best-performing sectors: technology (+49%) and health care (+43%).
U.S. BOND MARKETS
Interest rates declined during the fiscal year, especially for U.S. Treasury
securities, which benefited from heightened aversion to risk among investors and
from a slight decrease in supply, thanks to a $70 billion federal budget
surplus. The Federal Reserve Board had the flexibility to cut short-term rates
in three quarter-point steps in the autumn because inflation was remarkably
tame--consumer prices rose just 1.5% for our fiscal year.
In this bond-friendly environment, yields on long-term Treasury issues
fell by roughly 100 basis points (1 percentage point), with the 30-year Treasury
bond ending the fiscal year at 5.06%. Lower rates mean higher prices for bonds,
and the Lehman Brothers Long U.S. Treasury Bond Index earned a total return of
15.7%, an astounding margin of some 14 percentage points over the inflation
rate.
Reflecting investors' flight to quality and worries about slowing
economic growth, prices fell for high-yield "junk" bonds. Even high-quality
corporate bonds and mortgage-backed securities did not rise in price as far as
Treasury securities. Mortgage bonds tend to lag Treasuries during periods when
falling rates lead to greater refinancing activity by homeowners, resulting in
unwanted prepayments of principal. The Lehman Aggregate Bond Index, which
comprises high-quality corporate and mortgage-backed bonds as well as
Treasuries, and has an intermediate-term average maturity, earned 9.5%.
Yields on long-term municipal bonds declined only modestly during the
fiscal year, and by November 30 were only slightly lower than yields on
comparable Treasury securities. This was striking because the interest on
municipals is exempt from federal income tax.
INTERNATIONAL STOCK MARKETS
Europe's stock markets outdistanced even the S&P 500 Index, but Asian and Latin
American markets were generally down during the fiscal year. As a group,
European stocks earned 27.8% in U.S.-dollar terms. Europe's bull market was
fueled by continuing economic growth, lower interest rates, increased corporate
merger activity, and optimism about the effects of the euro, a common currency
due to be adopted in 1999 by 11 nations.
Japan's stock market continued to suffer from the effects of a severe
recession and a shaky banking system. Stocks in Tokyo fell 4.5% in U.S.-dollar
terms. Elsewhere in Asia, returns were mixed, ranging from a rebound of 21% in
South Korea, through Australia's 11% gain, to big losses in Indonesia (-52%),
Malaysia (-42%), New Zealand (-25%), and Singapore (-18%). Losses were steep
throughout Latin America, including Mexico (-32%), Venezuela (-59%), Brazil
(-20%), and Chile (-22%).
8
<PAGE> 11
[PHOTO]
REPORT FROM THE ADVISER
During the fiscal year ended November 30, nervous global investors flocked to
the safety of U.S. Treasury securities. The "flight to quality" began with the
collapse of Asian markets early in the year, then spread throughout the emerging
economies of the world. With each round of negative world events, U.S. Treasury
yields fell as investors bid up bond prices. In contrast to the volatility on
world financial markets, sailing was smooth for the U.S. economy, which produced
stable growth and low inflation. The Federal Reserve Board initially was
reluctant to lower short-term interest rates in the face of the fundamental
strength of the domestic economy; however, signs of international economic
calamity loomed ever larger, threatening future U.S. growth. By the second half
of our fiscal year, it was clear that domestic export-sensitive sectors were
slowing, and stock market volatility increased. The Fed then cut short-term
interest rates by a total of three-quarters of a percentage point. To date, the
Fed's action has helped calm the fears of a worldwide credit crunch and stemmed
investors' flight from risk. We will have to wait and see whether the worst is
over for global markets.
As one would expect, municipal bond yields fell in sympathy with the
decline in Treasury yields. However, a large supply of new tax-exempt bonds
muted the price increases. Consequently, municipal bonds underperformed their
Treasury bond counterparts. During the fiscal year, the benchmark 30-year U.S.
Treasury bond yield declined nearly 1 percentage point (from 6.05% to 5.06%). In
contrast, the yield on an AAA-rated tax-exempt bond of similar maturity declined
only three-tenths of 1 percent (from roughly 5.2% to 4.9%), and produced
commensurately less price appreciation.
As noted, the supply of new tax-exempt bonds grew dramatically during our
fiscal year. Two factors led to this increase in municipal debt. First, as
interest rates declined, municipalities rushed to issue new bonds that would
refinance their older, higher-coupon debt. Second, the financial strength of
many states and localities improved as robust economic performance boosted tax
revenues. This increased financial sustenance allowed many issuers to fund new
capital projects with tax-exempt debt. In all, tax-exempt issuance for the year
was up 27% to $278 billion in new bonds.
This abundance of new bonds offers unique value to investors in
longer-term municipal issues. As of our fiscal year-end, the yield on a
high-quality, long-maturity municipal bond was equal to an unusually high 96.8%
of the yield on a comparable U.S. Treasury security. At certain points during
the fiscal period, AAA-rated insured municipal bonds actually offered yields
higher than Treasury bonds, a situation not seen since 1986. For investors in
the maximum federal tax bracket (39.6%), high-grade municipal bonds offer about
3 percentage points in additional taxable-equivalent yield over comparable U.S.
Treasuries. Our state tax-exempt funds further boost after-tax returns by
providing income exempt from state tax. In the past, municipal bond yields have
not stayed high relative to Treasury bonds for
9
<PAGE> 12
long. However, because of the persistence of global uncertainty and its
beneficial effect on prices of Treasury bonds, it's hard to predict when
municipal yields will return to more-normal levels. In the meantime, longer-term
municipal bonds are a steal.
The high credit quality of the Vanguard New York Tax-Exempt Funds played
an important role in our strong performance relative to peers. Early in our
fiscal year, demand was quite strong for the higher yields of uninsured bonds
and those of speculative-grade credit quality. Market participants disregarded
the added credit risk they were assuming. Demand for lower-quality securities
was so high that investors accepted ever-smaller yield premiums for assuming the
extra credit risk, and yield spreads between bonds of different quality
tightened. But the bankruptcy of a major hospital group in Pennsylvania in
summer 1998 caused many bondholders to reconsider the relationship between yield
and credit quality.
Investors in Vanguard's insured single-state tax-exempt funds receive
additional credit protection. Although this municipal bond insurance does not
protect against changes in market value, it does guarantee the timely payment of
principal and interest. Our single-state tax-exempt funds are able to offer the
dual benefits of high credit quality and attractive yields year after year
because of our low expenses. Our emphasis on high credit quality should allow
our shareholders to sleep comfortably.
Over time, the simple combination of a disciplined risk approach with low
expenses has proven to be a powerful force for maximizing total return for
shareholders. Our continued focus on these basics produced the desired results
in fiscal 1998.
Yields on 1-year tax-exempt money market instruments fell 76 basis points
(0.76 percentage point) during the second half of our fiscal year, even though
summer is traditionally a season for heavy municipal borrowing. Over the full 12
months, the decline was 82 basis points, leaving the yield on the benchmark
1-year MIG-1 note at 2.99% on November 30. By comparison, the yield on 1-year
U.S. Treasury bills fell 92 basis points during the second half and 99 basis
points for the full year, closing with a yield of 4.50%. The plunge in
short-term yields was fueled by the global "flight to quality" and by the Fed's
75-basis-point cut in the federal funds rate. At fiscal year-end, the yield on
1-year MIG-1 notes therefore was equal to 66.4% of the yield on comparable
Treasury bills. Though this ratio is less favorable than that for yields of
long-term municipal bonds in relation to those of Treasury bonds, municipal
money markets still offer value for investors in the highest tax brackets.
As the new year begins, the New York Tax-Exempt Money Market Fund is
positioned to take advantage of its dual strengths of conservative,
quality-oriented management and low expenses. We believe these attributes will,
over time, generate superior risk-adjusted returns.
Ian A. MacKinnon, Managing Director
Pamela Wisehaupt Tynan, Principal
Reid O. Smith, Principal
John M. Carbone, Principal
Danine A. Mueller, Principal
Christopher M. Ryon, Principal
Kathryn Allen, Principal
Vanguard Fixed Income Group
December 10, 1998
INVESTMENT PHILOSOPHY
The adviser believes that each fund, while operating within stated maturity and
stringent quality targets, can achieve a high level of current income that is
exempt from federal and New York income taxes by investing in insured and
high-quality uninsured securities issued by New York state, county, and
municipal governments.
10
<PAGE> 13
PERFORMANCE SUMMARY
NEW YORK TAX-EXEMPT MONEY MARKET FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that returns
can fluctuate widely. An investment in a money market fund is neither insured
nor guaranteed by the U.S. government, and there is no assurance that the fund
will be able to maintain a stable net asset value of $1 per share.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: SEPTEMBER 3, 1997-NOVEMBER 30, 1998
- -------------------------------------------------------------
NEW YORK TAX-EXEMPT AVERAGE
MONEY MARKET FUND FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 0.0% 0.8% 0.8% 0.8%
1998 0.0% 3.3% 3.3% 2.9%
- -------------------------------------------------------------
</TABLE>
*Average New York Tax-Exempt Money Market Fund.
See Financial Highlights table on page 26 for dividend information since the
fund's inception.
SEC 7-Day Annualized Yield (11/30/1998): 2.97%
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: SEPTEMBER 3, 1997-NOVEMBER 30, 1998
- ----------------------------------------------------------------
NEW YORK TAX-EXEMPT AVERAGE NEW YORK TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND
<S> <C> <C>
9/4/01 10000 10000
1997 11 10084 10084
1998 02 10166 10157
1998 05 10251 10235
1998 08 10334 10307
1998 11 10414 10377
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998
------------------------------- FINAL VALUE OF A
1 YEAR SINCE INCEPTION $10,000 INVESTMENT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York Tax-Exempt Money Market Fund 3.27% 3.32% $10,414
Average New York Tax-Exempt Money Market Fund 2.91 3.03 10,377
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1998*
- --------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION --------------------------------
DATE 1 YEAR CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New York Tax-Exempt Money Market Fund 9/3/1997 3.34% 0.00% 3.36% 3.36%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
11
<PAGE> 14
PERFORMANCE SUMMARY
NEW YORK INSURED LONG-TERM TAX-EXEMPT FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely, so an investment in the fund could
lose money.
<TABLE>
<CAPTION>
TOTAL INVESTMENT RETURNS: APRIL 7, 1986-NOVEMBER 30, 1998
- ---------------------------------------------------------
NEW YORK INSURED
LONG-TERM TAX-EXEMPT FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
<S> <C> <C> <C> <C>
1986 0.8% 4.3% 5.1% 5.0%
1987 -12.0 6.2 -5.8 -0.2
1988 4.4 7.2 11.6 10.6
1989 5.1 7.2 12.3 11.0
1990 -0.7 6.7 6.0 7.7
1991 3.9 7.0 10.9 10.3
1992 4.1 6.5 10.6 10.0
1993 6.4 6.0 12.4 11.1
1994 -11.5 5.1 -6.4 -5.2
1995 13.5 6.4 19.9 18.9
1996 0.4 5.4 5.8 5.9
1997 0.9 5.5 6.4 7.2
1998 2.4 5.3 7.7 7.8
- ---------------------------------------------------------
</TABLE>
*Lehman Municipal Bond Index.
See Financial Highlights table on page 27 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
CUMULATIVE PERFORMANCE: NOVEMBER 30, 1988-NOVEMBER 30, 1998
- -----------------------------------------------------------------------
NEW YORK INSURED AVERAGE NEW YORK
LONG-TERM TAX-EXEMPT INSURED TAX-EXEMPT LEHMAN MUNICIPAL
FUND FUND BOND INDEX
<S> <C> <C> <C>
1988 11 10000 10000 10000
1989 02 10277 10177 10194
1989 05 10816 10643 10627
1989 08 10905 10798 10811
1989 11 11226 10994 11101
1990 02 11247 11059 11239
1990 05 11396 11186 11404
1990 08 11390 11295 11505
1990 11 11899 11622 11956
1991 02 12218 11888 12275
1991 05 12554 12222 12554
1991 08 12893 12690 12861
1991 11 13192 12869 13182
1992 02 13560 13151 13500
1992 05 13893 13448 13786
1992 08 14404 14093 14296
1992 11 14595 14162 14504
1993 02 15686 14998 15358
1993 05 15800 15093 15435
1993 08 16368 15859 16041
1993 11 16408 15802 16111
1994 02 16477 15799 16208
1994 05 16142 15368 15817
1994 08 16321 15716 16069
1994 11 15363 14694 15270
1995 02 16918 15940 16519
1995 05 17593 16586 17263
1995 08 17700 16870 17495
1995 11 18421 17542 18157
1996 02 18633 17516 18345
1996 05 18265 17076 18052
1996 08 18614 17615 18412
1996 11 19496 18351 19224
1997 02 19521 18170 19355
1997 05 19733 18288 19547
1997 08 20270 18975 20115
1997 11 20736 19388 20603
1998 02 21276 19571 21125
1998 05 21514 19733 21380
1998 08 22041 20393 21855
1998 11 22335 20661 22202
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1998
------------------------------- FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York Insured Long-Term Tax-Exempt Fund 7.69% 6.36% 8.37% $22,335
Average New York Insured Tax-Exempt Fund 6.57 5.51 7.53 20,661
Lehman Municipal Bond Index 7.76 6.62 8.30 22,202
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1998*
- -------------------------------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION -----------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New York Insured Long-Term
Tax-Exempt Fund 4/7/1986 8.79% 6.16% 2.32% 6.12% 8.44%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
12
<PAGE> 15
FUND PROFILE
NEW YORK TAX-EXEMPT MONEY MARKET FUND
This Profile provides a snapshot of the fund's characteristics as of November
30, 1998. Key elements of this Profile are defined on page 14.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------
<S> <C>
Yield 3.0%
Average Maturity 64 days
Average Quality MIG-1
Expense Ratio 0.19%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
MIG-1/SP-1+ 66.1%
A-1/P-1 31.7
AAA/AA 2.2
A 0.0
- -------------------------------------------------------
Total 100.0%
</TABLE>
13
<PAGE> 16
AVERAGE COUPON. The average interest rate paid on the securities held by a fund.
It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond fund's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the fund's duration by the change in rates. If interest rates
rise by one percentage point, the share price of a fund with an average duration
of five years would decline by about 5%. If rates decrease by a percentage
point, the fund's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a fund reach
maturity (or are called) and are repaid. In general, the longer the average
maturity, the more a fund's share price will fluctuate in response to changes in
market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's securities holdings by credit-rating agencies. The
agencies make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities.
BETA. A measure of the magnitude of a fund's past share-price fluctuations in
relation to the ups and downs of the overall market (or appropriate market
index). The market (or index) is assigned a beta of 1.00, so a fund with a beta
of 1.20 would have seen its share price rise or fall by 12% when the overall
market rose or fell by 10%.
CASH RESERVES. The percentage of a fund's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing securities. This
figure does not include cash invested in futures contracts to simulate bond
investment.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a fund's securities by credit
rating can help in gauging the risk that returns could be affected by defaults
or other credit problems.
DISTRIBUTION BY MATURITY. An indicator of interest-rate risk. In general, the
higher the concentration of longer-maturity issues, the more a fund's share
price will fluctuate in response to changes in interest rates.
EXPENSE RATIO. The percentage of a fund's average net assets used to pay its
annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
INVESTMENT FOCUS. This grid indicates the focus of a fund in terms of two
attributes: average maturity (short, medium, or long) and average credit quality
(high, medium, or low).
NUMBER OF ISSUES. An indicator of diversification. The more separate issues a
fund holds, the less susceptible it is to a price decline stemming from the
problems of a particular issue.
R-SQUARED. A measure of how much of a fund's past returns can be explained by
the returns from the overall market (or its benchmark index). If a fund's total
return were precisely synchronized with the overall market's return, its
R-squared would be 1.00. If a fund's returns bore no relationship to the
market's returns, its R-squared would be 0.
YIELD. A snapshot of a fund's interest income. The yield, expressed as a
percentage of the fund's net asset value, is based on income earned over the
past 30 days (7 days for money market funds) and is annualized, or projected
forward for the coming year.
YIELD TO MATURITY. The rate of return an investor would receive if the
securities held by a fund were held to their maturity dates.
14
<PAGE> 17
FUND PROFILE
NEW YORK INSURED LONG-TERM TAX-EXEMPT FUND
This Profile provides a snapshot of the fund's characteristics as of November
30, 1998, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 14.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ----------------------------------------------------------
NEW YORK INSURED LEHMAN
LONG-TERM INDEX*
- ----------------------------------------------------------
<S> <C> <C>
Number of Issues 224 47,383
Yield 4.4% 4.4%
Yield to Maturity 4.5% --
Average Coupon 5.4% 5.5%
Average Maturity 8.7 years 13.5 years
Average Quality AAA AA+
Average Duration 6.4 years 7.2 years
Expense Ratio 0.21% --
Cash Reserves 1.4% --
</TABLE>
*Lehman Municipal Bond Index.
INVESTMENT FOCUS
- -------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ----------------------------------------------------------
NEW YORK INSURED LEHMAN
LONG-TERM INDEX*
- ----------------------------------------------------------
<S> <C> <C>
R-Squared 0.98 1.00
Beta 1.12 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -------------------------------------------------------
<S> <C>
AAA 99.8%
AA 0.2
A 0.0
BBB 0.0
BB 0.0
B 0.0
Not Rated 0.0
- -------------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- ------------------------------------------------------
<S> <C>
Under 1 Year 5.6%
1-5 Years 19.4
5-10 Years 25.0
10-20 Years 40.4
20-30 Years 9.6
Over 30 Years 0.0
- ------------------------------------------------------
Total 100.0%
</TABLE>
15
<PAGE> 18
FINANCIAL STATEMENTS
NOVEMBER 30, 1998
[PHOTO]
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's municipal bond holdings,
including each security's market value on the last day of the reporting period
and information on credit enhancements (insurance or letters of credit).
Securities are grouped and subtotaled according to their insured or noninsured
status. Other assets are added to, and liabilities are subtracted from, the
value of Total Municipal Bonds to calculate the fund's Net Assets. Finally, Net
Assets are divided by the outstanding shares of the fund to arrive at its share
price, or Net Asset Value (NAV) Per Share.
At the end of the Statement of Net Assets, you will find a table
displaying the composition of the fund's net assets on both a dollar and
per-share basis. Undistributed Net Investment Income is usually zero because the
fund distributes its net income to shareholders as a dividend each day. Any
realized gains must be distributed annually, so the bulk of net assets consists
of Paid in Capital (money invested by shareholders). The balance shown for
Accumulated Net Realized Gains usually approximates the amount available to
distribute to shareholders as taxable capital gains as of the statement date,
but may differ because certain investments or transactions may be treated
differently for financial statement and tax purposes. Any Accumulated Net
Realized Losses, and any cumulative excess of distributions over net realized
gains, will appear as negative balances. Unrealized Appreciation (Depreciation)
is the difference between the value of the fund's investments and their cost,
and reflects the gains (losses) that would be realized if the fund were to sell
all of its investments at their statement-date values.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW YORK TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (98.8%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Babylon NY IDA Resource Recovery Bonds VRDO 2.75% 12/2/1998 (3) $ 8,000 $ 8,000
Battery Park City NY Auth. 7.70% 5/1/1999 (Prere.) 5,000 5,181
Connetquot Central School Dist. of Islip Suffolk County NY TAN 3.75% 6/29/1999 12,300 12,326
East Hampton NY Union Free School Dist. TAN 3.90% 6/29/1999 6,000 6,011
Erie County NY Water Auth. Rev. VRDO 2.75% 12/2/1998 (2) 8,400 8,400
Erie County NY Water RAN 4.00% 10/13/1999 4,000 4,034
Half Hollow Hills NY TAN 3.90% 6/25/1999 2,500 2,504
Harrison, Village of Westchester County NY GO 4.25% 12/17/1998 4,048 4,049
Ithaca NY BAN 4.00% 1/22/1999 10,971 10,975
Jericho NY Union Free School Dist. TAN 3.90% 6/29/1999 2,000 2,003
Long Island NY Power Auth. Rev. CP 3.00% 4/8/1999 LOC 7,000 7,000
Long Island NY Power Auth. Rev. VRDO 3.00% 12/2/1998 LOC 8,600 8,600
Long Island NY Power Auth. Rev. VRDO 3.25% 12/2/1998 LOC 8,200 8,200
Metropolitan Transit Auth. of New York TOB VRDO
(Commuter Fac. Rev.) 3.30% 12/3/1998 (3)+ 10,620 10,620
Monroe County NY GO 3.40% 4/14/1999 14,500 14,500
Muni. Assistance Corp. for New York City NY GO 5.00% 7/1/1999 12,000 12,111
Muni. Assistance Corp. for New York City NY VRDO 2.70% 12/2/1998 LOC 12,100 12,100
New York City NY Cultural Resources VRDO
(Solomon R. Guggenheim Foundation) 3.20% 12/2/1998 LOC 9,625 9,625
New York City NY Custodial Receipt TOB VRDO 3.35% 12/3/1998 (3)+ 2,275 2,275
New York City NY Transitional Finance Auth. Future Tax Rev. VRDO 3.30% 12/2/1998 15,900 15,900
New York City NY GO VRDO 2.90% 12/2/1998 LOC 26,300 26,300
New York City NY GO VRDO 2.95% 12/2/1998 LOC 3,000 3,000
New York City NY GO VRDO 3.10% 12/2/1998 LOC 900 900
New York City NY GO VRDO 3.35% 12/2/1998 LOC 3,100 3,100
New York City NY GO VRDO 3.35% 12/2/1998 (1) 2,700 2,700
New York City NY Health and Hosp. Corp. Rev. VRDO 2.90% 12/2/1998 LOC 10,800 10,800
New York City NY Health and Hosp. Corp. Rev. VRDO 2.95% 12/2/1998 LOC 7,700 7,700
New York City NY IDA Dev. VRDO (National Audubon Society) 3.20% 12/2/1998 LOC 8,900 8,900
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York City NY Muni. Water Finance Auth. CP 3.10% 12/9/1998 LOC $ 3,200 $ 3,200
New York City NY Muni. Water Finance Auth. CP 3.35% 1/21/1999 LOC 10,000 10,000
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. VRDO 3.25% 12/2/1998 (3) 9,000 9,000
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. VRDO 3.30% 12/2/1998 (3) 15,000 15,000
New York Metro. Transp. Auth. Fac. CP 3.05% 3/8/1999 LOC 5,000 5,000
New York Metro. Transp. Auth. Fac. CP 3.05% 3/9/1999 LOC 5,000 5,000
New York Metro. Transp. Auth. Fac. CP 3.10% 2/12/1999 LOC 5,000 5,000
New York State Dormitory Auth. CP (Sloan Kettering Cancer Center) 2.85% 3/8/1999 LOC 4,000 4,000
New York State Dormitory Auth. TOB VRDO (City Univ. of New York) 3.30% 12/3/1998 (1)+ 4,000 4,000
New York State Dormitory Auth. TOB VRDO (Mental Health Services) 3.30% 12/3/1998 (1)+ 5,065 5,065
New York State Dormitory Auth. VRDO (Cornell Univ.) 3.30% 12/2/1998 12,100 12,100
New York State Dormitory Auth. VRDO (Foundling Charities Corp.) 3.05% 12/2/1998 LOC 11,275 11,275
New York State Dormitory Auth. VRDO (Rockefeller Univ.) 2.80% 12/2/1998 23,000 23,000
New York State Environmental Fac. Corp. TOB VRDO 3.30% 12/3/1998 (1)+ 5,000 5,000
New York State Local Govt. Assistance Corp. TOB VRDO 3.30% 12/3/1998 (2)+ 2,000 2,000
New York State Local Govt. Assistance Corp. VRDO 2.65% 12/2/1998 LOC 13,000 13,000
New York State Local Govt. Assistance Corp. VRDO 2.70% 12/2/1998 LOC 6,900 6,900
New York State Power Auth. CP 3.00% 2/22/1999 7,400 7,400
New York State Power Auth. CP 3.10% 2/22/1999 10,000 10,000
New York State Thruway Auth. TOB VRDO 3.30% 12/3/1998 (3)+ 5,420 5,420
Onondaga County NY BAN 4.25% 5/21/1999 4,850 4,862
Oyster Bay NY BAN 4.00% 4/30/1999 3,630 3,635
Oyster Bay NY GO 4.05% 12/1/1998 1,575 1,575
Port Washington Union Free School Dist. Nassau County NY TAN 3.90% 6/24/1999 5,000 5,008
Putnam County NY GO TAN 3.30% 8/31/1999 7,000 7,013
Rockland County NY BAN 4.00% 3/4/1999 6,400 6,408
Roslyn NY Union Free School Dist. TAN 3.90% 6/29/1999 3,000 3,005
Syosset NY Central School Dist. TAN 3.90% 6/28/1999 13,500 13,526
Triborough Bridge & Tunnel Auth. NY TOB VRDO 3.25% 12/3/1998 (3)+ 8,740 8,740
Westchester County NY GO 4.625% 11/15/1999 9,475 9,636
Westchester County NY Health Care Corp. CP 3.10% 12/14/1998 15,000 15,000
Westchester County NY Health Care Corp. CP 3.10% 12/18/1998 5,000 5,000
OUTSIDE NEW YORK:
Puerto Rico Govt. Dev. Bank VRDO 2.90% 12/2/1998 (1) 2,300 2,300
Puerto Rico Highway & Transp. Auth. Rev. VRDO 2.90% 12/2/1998 LOC 2,800 2,800
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $477,682) 477,682
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
NEW YORK TAX-EXEMPT MONEY MARKET FUND (000)
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.2%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Other Assets--Note B $ 7,833
Liabilities (2,051)
---------
5,782
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------------------
Applicable to 483,467,502 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $483,464
===================================================================================================================================
NET ASSET VALUE PER SHARE $1.00
===================================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
+Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At November 30, 1998, the aggregate
value of these securities was $43,120,000, representing 8.9% of net assets.
For key to abbreviations and other references, see page 23.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1998, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $483,467 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (3) --
Unrealized Appreciation -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $483,464 $1.00
===================================================================================================================================
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW YORK INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (98.6%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ISSUER INSURED (85.7%)
Albany County NY GO 5.00% 10/1/2005 (3) $ 2,000 $ 2,116
Albany County NY GO 5.00% 10/1/2012 (3) 4,400 4,629
Albany County NY GO 7.00% 1/15/2005 (2) 1,250 1,322
Albany NY Muni. Water Finance Auth. 7.50% 12/1/2017 (1) 2,080 2,129
Battery Park City NY Auth. 5.50% 11/1/2026 (2) 11,750 12,431
Broome County NY Public Safety Fac. Project 5.25% 4/1/2015 (1) 3,000 3,069
Buffalo & Erie County NY Toll Bridge Auth. 6.00% 1/1/2015 (1) 4,500 4,923
Buffalo NY General Improvement 6.75% 3/1/2006 (1) 1,815 1,971
Buffalo NY General Improvement 6.75% 3/1/2007 (1) 390 424
Buffalo NY General Improvement 6.75% 3/1/2009 (1) 410 445
Buffalo NY General Improvement 6.75% 3/1/2010 (1) 380 413
Buffalo NY General Improvement 6.75% 3/1/2011 (1) 385 418
Buffalo NY Muni. Water Finance Auth. 5.75% 7/1/2019 (4) 8,500 9,334
Buffalo NY Sewer Auth. System Rev. 5.00% 7/1/2012 (3) 5,675 5,761
Buffalo NY Sewer Auth. System Rev. 5.25% 7/1/2008 (3) 3,500 3,646
Duchess County NY Resource Recovery Solid Waste System 7.50% 1/1/2009 (3) 2,000 2,128
Erie County NY GO 6.10% 1/15/2006 (3) 1,865 2,089
Erie County NY GO 6.125% 1/15/2007 (3) 1,660 1,879
Erie County NY Water Auth. Rev. 0.00% 12/1/2005 (2) 3,000 2,255
Erie County NY Water Auth. Rev. 0.00% 12/1/2006 (2) 6,915 4,982
Erie County NY Water Auth. Rev. 6.00% 12/1/2008 (2) 1,600 1,784
Town of Hempstead NY GO 5.50% 8/1/2011 (3) 2,450 2,641
Town of Hempstead NY GO 5.625% 2/1/2012 (3) 1,490 1,621
Town of Hempstead NY GO 5.625% 2/1/2013 (3) 1,170 1,268
Huntington NY GO 5.50% 4/1/2013 (3) 3,400 3,620
Huntington NY GO 6.70% 2/1/2011 (3) 310 376
Long Island NY Power Auth. Electric System Rev. 5.00% 12/1/2018 (4) 6,000 6,021
Long Island NY Power Auth. Electric System Rev. 5.125% 12/1/2022 (4) 66,675 66,876
Metro. Transit Auth. of New York (Commuter Fac. Rev.) 5.00% 7/1/2017 (2) 5,000 5,024
Metro. Transit Auth. of New York (Commuter Fac. Rev.) 5.30% 7/1/2022 (3) 17,475 17,973
Metro. Transit Auth. of New York (Commuter Fac. Rev.) 5.50% 7/1/2017 (2) 11,585 12,235
Metro. Transit Auth. of New York (Commuter Fac. Rev.) 5.625% 7/1/2015 (4) 5,000 5,315
Metro. Transit Auth. of New York (Commuter Fac. Rev.) 5.70% 7/1/2017 (1) 7,000 7,565
Metro. Transit Auth. of New York (Commuter Fac. Rev.) 6.25% 7/1/2022 (1) 3,000 3,305
Metro. Transit Auth. of New York (Dedicated Petroleum Tax) 5.25% 4/1/2021 (1) 7,900 8,077
Metro. Transit Auth. of New York (Dedicated Petroleum Tax) 5.25% 4/1/2026 (1) 40,560 41,467
Metro. Transit Auth. of New York (Dedicated Petroleum Tax) 6.00% 4/1/2020 (1) 25,000 28,903
Metro. Transit Auth. of New York (Transp. Fac. Rev.) 5.70% 7/1/2017 (1) 5,500 5,944
Metro. Transit Auth. of New York (Transp. Fac. Rev.) 6.00% 7/1/2011 (2) 2,000 2,071
Metro. Transit Auth. of New York (Transp. Fac. Rev.) 7.00% 7/1/2009 (2) 19,050 23,169
Monroe County NY GO (Woodbury Central School Dist.) 5.625% 5/15/2010 (1) 1,000 1,098
Monroe County NY GO (Woodbury Central School Dist.) 5.625% 5/15/2011 (1) 1,000 1,095
Monroe County NY GO (Woodbury Central School Dist.) 5.625% 5/15/2012 (1) 1,000 1,090
Monroe County NY GO (Woodbury Central School Dist.) 5.625% 5/15/2013 (1) 1,425 1,547
Monroe County NY GO (Woodbury Central School Dist.) 5.625% 5/15/2014 (1) 1,000 1,081
Montgomery, Ostego, Scholoharie Counties NY Solid Waste 5.25% 1/1/2014 (1) 1,640 1,693
Mount Sinai NY Union Free School Dist. 6.20% 2/15/2014 (2) 1,050 1,227
Nassau County NY Combined Sewer Dist. GO 4.80% 10/1/2005 (3) 1,760 1,837
Nassau County NY Combined Sewer Dist. GO 5.00% 10/1/2007 (3) 1,715 1,815
Nassau County NY Combined Sewer Dist. GO 5.00% 5/1/2009 (3) 3,210 3,380
Nassau County NY Combined Sewer Dist. GO 5.00% 5/1/2010 (3) 2,875 3,023
Nassau County NY Combined Sewer Dist. GO 5.00% 5/1/2011 (3) 1,770 1,857
Nassau County NY Combined Sewer Dist. GO 5.00% 5/1/2012 (3) 1,760 1,839
Nassau County NY Combined Sewer Dist. GO 5.35% 7/1/2008 (1) 4,730 5,128
Nassau County NY Combined Sewer Dist. GO 5.35% 1/15/2009 (1) 3,505 3,786
Nassau County NY Combined Sewer Dist. GO 5.35% 7/1/2009 (1) 4,635 5,021
Nassau County NY Combined Sewer Dist. GO 5.875% 8/1/2012 (3) 825 901
Nassau County NY Combined Sewer Dist. GO 6.20% 5/15/2007 (1) 840 917
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW YORK INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nassau County NY Combined Sewer Dist. GO 6.20% 5/15/2008 (1) $ 835 $ 911
Nassau County NY Combined Sewer Dist. GO 6.25% 5/15/2009 (1) 825 902
Nassau County NY Combined Sewer Dist. GO 6.25% 5/15/2010 (1) 820 894
Nassau County NY GO 5.125% 3/1/2013 (2) 5,860 6,129
Nassau County NY GO 5.125% 3/1/2014 (2) 5,900 6,144
Nassau County NY GO 5.50% 7/15/2007 (1) 1,270 1,352
Nassau County NY GO 5.50% 7/15/2008 (1) 1,300 1,387
Nassau County NY GO 5.50% 7/15/2009 (1) 1,325 1,409
Nassau County NY GO 5.50% 7/15/2010 (1) 1,345 1,429
Nassau County NY GO 5.50% 7/15/2011 (1) 1,370 1,453
Nassau County NY GO 5.70% 8/1/2011 (3) 2,000 2,205
Nassau County NY GO 5.75% 2/1/2011 (1) 1,100 1,189
New York City NY Cultural Resources
(American Museum of Natural History) 5.60% 4/1/2018 (1) 2,635 2,808
New York City NY Cultural Resources
(American Museum of Natural History) 5.65% 4/1/2022 (1) 5,000 5,330
New York City NY Cultural Resources
(American Museum of Natural History) 5.70% 4/1/2016 (1) 12,730 13,753
New York City NY Cultural Resources (Museum of Modern Art) 5.40% 1/1/2006 (2) 720 768
New York City NY Cultural Resources (Museum of Modern Art) 5.40% 1/1/2006 (2)(ETM) 85 91
New York City NY Cultural Resources (Museum of Modern Art) 5.40% 1/1/2012 (2) 3,400 3,584
New York City NY Cultural Resources (Museum of Modern Art) 5.50% 1/1/2007 (2) 805 860
New York City NY Cultural Resources (Museum of Modern Art) 5.50% 1/1/2007 (2)(ETM) 35 38
New York City NY Cultural Resources (Museum of Modern Art) 5.50% 1/1/2016 (2) 2,000 2,122
New York City NY GO 5.75% 8/1/2002 (3)(Prere.) 280 303
New York City NY GO 5.75% 8/1/2009 (3) 3,970 4,258
New York City NY GO 6.625% 8/1/2002 (1)(Prere.) 495 550
New York City NY GO 6.625% 8/1/2013 (1) 180 198
New York City NY GO 6.95% 8/15/2004 (1)(Prere.) 1,460 1,697
New York City NY GO 7.10% 2/1/2009 (1) 600 666
New York City NY GO VRDO 3.35% 12/2/1998 (1) 3,230 3,230
New York City NY Health & Hosp. Corp. 5.625% 2/15/2013 (2) 23,400 25,093
New York City NY IDA (USTA Project) 6.375% 11/15/2014 (4) 2,000 2,253
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. 5.00% 6/15/2021 (3) 5,395 5,366
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. 5.125% 6/15/2022 (2) 11,000 11,028
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. 5.35% 6/15/2013 (1) 5,300 5,522
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. 5.875% 6/15/2012 (2) 20,000 22,700
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. 5.875% 6/15/2013 (2) 20,000 22,659
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. VRDO 3.25% 12/2/1998 (3) 4,000 4,000
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. VRDO 3.30% 12/2/1998 (3) 3,062 3,062
New York State Dormitory Auth. (Barnard College) 5.25% 7/1/2026 (2) 4,370 4,470
New York State Dormitory Auth. (City Univ. of New York) 6.25% 7/1/2019 (1) 4,485 5,012
New York State Dormitory Auth. (City Univ. of New York) 7.00% 7/1/2000 (3)(Prere.) 6,140 6,596
New York State Dormitory Auth. (City Univ. of New York) 7.00% 7/1/2014 (3) 14,560 15,536
New York State Dormitory Auth. (Colgate Univ.) 6.50% 7/1/2001 (1)(Prere.) 1,350 1,470
New York State Dormitory Auth. (Columbia Presbyterian Hosp.) 5.50% 2/15/2007 (2) 3,500 3,798
New York State Dormitory Auth. (Fordham Univ.) 5.00% 7/1/2028 (1) 11,125 11,056
New York State Dormitory Auth. (Fordham Univ.) 5.50% 7/1/2023 (3) 10,150 10,630
New York State Dormitory Auth. (Fordham Univ.) 5.75% 7/1/2015 (3) 1,500 1,609
New York State Dormitory Auth. (Fordham Univ.) 7.20% 7/1/2015 (2) 710 760
New York State Dormitory Auth. (FHA Hosp. & Nursing Home) 5.00% 2/15/2025 (2) 3,410 3,390
New York State Dormitory Auth. (FHA Hosp. & Presbyterian) 5.50% 2/1/2010 (2) 6,330 6,892
New York State Dormitory Auth. (Iona College) 5.25% 7/1/2008 (1) 1,000 1,072
New York State Dormitory Auth. (Iona College) 5.35% 7/1/2009 (1) 1,000 1,072
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York State Dormitory Auth. (Jewish Medical Center) 5.00% 7/1/2018 (1) $10,000 $ 10,008
New York State Dormitory Auth. (Mental Health Services) 5.00% 2/15/2023 (1) 5,000 4,972
New York State Dormitory Auth. (Montefiore Medical Center) 5.25% 2/1/2015 (2) 42,750 44,038
New York State Dormitory Auth. (Mt. Sinai School of Medicine) 6.75% 7/1/2015 (1) 7,245 7,879
New York State Dormitory Auth. (New York Medical College) 5.00% 7/1/2021 (1) 21,980 21,861
New York State Dormitory Auth. (New York Univ.) 6.00% 7/1/2015 (3) 32,165 34,392
New York State Dormitory Auth. (New School for Social Research) 5.625% 7/1/2016 (1) 2,260 2,441
New York State Dormitory Auth. (North Shore Univ. Hosp.) 5.20% 11/1/2017 (1) 30,170 30,804
New York State Dormitory Auth. (Pace) 5.625% 7/1/2017 (1) 11,185 12,049
New York State Dormitory Auth. (Rensselaer Polytech. Institute) 6.50% 7/1/2006 (3) 3,000 3,254
New York State Dormitory Auth. (Rochester Institute of Technology) 5.25% 7/1/2022 (1) 3,000 3,068
New York State Dormitory Auth. (Rochester Institute of Technology) 5.30% 7/1/2017 (1) 6,275 6,518
New York State Dormitory Auth. (School Districts Program) 6.00% 7/1/2015 (3) 2,675 2,765
New York State Dormitory Auth. (Siena College) 6.00% 7/1/2011 (1) 1,500 1,627
New York State Dormitory Auth. (Sloan Kettering Cancer Center) 5.75% 7/1/2019 (1) 9,700 10,761
New York State Dormitory Auth. (Sloan Kettering Cancer Center) 5.75% 7/1/2020 (1) 7,500 8,429
New York State Dormitory Auth. (State Univ.) 5.75% 7/1/2008 (2) 3,335 3,725
New York State Dormitory Auth. (State Univ.) 6.00% 5/15/2000 (2)(Prere.) 1,825 1,893
New York State Dormitory Auth. (State Univ.) 6.00% 7/1/2009 (2) 1,590 1,816
New York State Dormitory Auth. (St. John's Univ.) 5.25% 7/1/2020 (1) 11,170 11,442
New York State Dormitory Auth. (St. John's Univ.) 5.60% 7/1/2016 (1) 7,000 7,495
New York State Dormitory Auth. (St. John's Univ.) 5.70% 7/1/2026 (1) 9,230 9,922
New York State Dormitory Auth. (St. Joseph's Hosp.) 5.25% 7/1/2018 (1) 6,700 6,842
New York State Dormitory Auth. (St. Vincent Hosp. Medical Center) 5.80% 8/1/2025 (2) 4,250 4,520
New York State Dormitory Auth. (Union College) 5.75% 7/1/2010 (3) 1,800 1,936
New York State Dormitory Auth. (Univ. of Rochester) 5.00% 7/1/2017 (1) 2,000 2,000
New York State Dormitory Auth. (Vassar Brothers Hosp.) 5.25% 7/1/2017 (4) 8,025 8,221
New York State Dormitory Auth. (Vassar Brothers Hosp.) 5.375% 7/1/2025 (4) 7,000 7,275
New York State Energy Research & Dev. Auth. PCR
(Niagara Mohawk) 5.15% 11/1/2025 (2) 5,000 5,017
New York State Energy Research & Dev. Auth. PCR
(Niagara Mohawk) 6.625% 10/1/2013 (3) 10,000 10,878
New York State Environmental Fac. Water PCR 5.50% 6/15/2009 (1) 10,000 10,897
New York State Local Govt. Assistance Corp. Rev. 5.00% 4/1/2014 (3) 13,370 13,669
New York State Local Govt. Assistance Corp. Rev. 5.00% 4/1/2021 (1) 6,325 6,291
New York State Local Govt. Assistance Corp. Rev. 5.25% 4/1/2015 (2) 8,000 8,317
New York State Local Govt. Assistance Corp. Rev. 5.375% 4/1/2019 (1) 3,000 3,119
New York State Medical Care Fac. Finance Agency
(Mental Health Services) 5.50% 8/15/2021 (3)+ 8,000 8,171
New York State Medical Care Fac. Finance Agency
(Mental Health Services) 6.00% 8/15/2015 (1) 15,000 16,348
New York State Medical Care Fac. Finance Agency
(Mental Health Services) 6.375% 8/15/2010 (3) 6,100 6,633
New York State Medical Care Fac. Finance Agency
(Mental Health Services) 7.40% 2/15/1999 (1)(Prere.) 430 442
New York State Medical Care Fac. Finance Agency
(Mental Health Services) 7.40% 8/15/2007 (1) 460 473
New York State Medical Care Fac. Finance Agency
(Sisters of Charity-Buffalo) 6.625% 11/1/2018 (2) 5,500 5,977
New York State Thruway Auth. Rev. 5.00% 1/1/2020 (1) 5,055 5,042
New York State Thruway Auth. Rev. (Highway & Bridge Trust Fund) 5.25% 4/1/2015 (2) 10,000 10,371
New York State Thruway Auth. Rev. (Highway & Bridge Trust Fund) 5.30% 4/1/2010 (1) 3,775 4,005
New York State Thruway Auth. Rev. (Highway & Bridge Trust Fund) 5.50% 4/1/2015 (1) 12,480 13,152
New York State Thruway Auth. Rev. (Highway & Bridge Trust Fund) 5.80% 4/1/2010 (2) 14,215 15,533
New York State Thruway Auth. Rev. (Highway & Bridge Trust Fund) 5.80% 4/1/2011 (2) 8,635 9,431
New York State Thruway Auth. Rev. (Highway & Bridge Trust Fund) 6.00% 4/1/2009 (3) 5,000 5,585
New York State Thruway Auth. Rev. (Service Contract) 5.75% 4/1/2013 (1) 4,000 4,420
New York State Urban Dev. Corp. 5.375% 1/1/2012 (1) 21,375 22,372
New York State Urban Dev. Corp. 5.50% 4/1/2016 (1) 13,350 14,066
Niagara Falls NY Bridge Comm. 5.25% 10/1/2015 (3) 5,000 5,323
Niagara Falls NY Bridge Comm. 6.25% 10/1/2020 (3) 8,685 10,350
Niagara Falls NY Bridge Comm. 6.25% 10/1/2021 (3) 9,230 11,030
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW YORK INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North Hempstead NY GO 6.30% 4/1/2008 (3) $ 2,055 $ 2,384
North Hempstead NY GO 6.40% 4/1/2010 (3) 1,500 1,774
North Hempstead NY GO 6.40% 4/1/2011 (3) 2,075 2,462
North Hempstead NY Solid Waste Auth. 5.00% 2/1/2012 (1) 3,370 3,451
Smithtown NY GO 5.25% 4/1/2006 (1) 1,000 1,063
Smithtown NY GO 5.45% 4/1/2008 (1) 400 426
Suffolk County NY GO 5.00% 4/1/2006 (1) 2,255 2,347
Suffolk County NY GO 5.00% 7/15/2006 (3) 1,000 1,043
Suffolk County NY GO 5.10% 7/15/2007 (3) 1,280 1,337
Suffolk County NY GO 5.20% 7/15/2008 (3) 1,100 1,151
Suffolk County NY Water Auth. 5.25% 6/1/2010 (2)(ETM) 3,790 4,114
Suffolk County NY Water Auth. 5.25% 6/1/2011 (2)(ETM) 2,380 2,573
Suffolk County NY Water Auth. 5.25% 6/1/2012 (2)(ETM) 4,290 4,617
Suffolk County NY Water Auth. 5.25% 6/1/2017 (2) 1,695 1,786
Suffolk County NY Water Auth. 5.75% 6/1/2002 (2)(Prere.) 1,100 1,192
Suffolk County NY Water Auth. 5.75% 6/1/2013 (2) 7,340 7,891
Triborough Bridge & Tunnel Auth. NY 5.00% 1/1/2016 (4) 9,000 9,068
Triborough Bridge & Tunnel Auth. NY 5.50% 1/1/2017 (2) 3,745 3,823
City of Yonkers NY School Dist. GO 5.60% 8/1/2009 (3) 535 582
City of Yonkers NY School Dist. GO 5.70% 8/1/2010 (3) 545 596
OUTSIDE NEW YORK:
Puerto Rico Electric Power Auth. Rev. 5.25% 7/1/2015 (4) 5,000 5,248
Puerto Rico GO 5.00% 7/1/2017 (1) 11,475 11,687
Puerto Rico GO 5.00% 7/1/2018 (1) 2,650 2,697
Puerto Rico Govt. Dev. Bank VRDO 2.90% 12/2/1998 (1) 24,900 24,900
Puerto Rico Infrastructure Financing Auth. Rev. 5.00% 7/1/2021 (2) 16,935 16,963
-----------
1,204,700
-----------
PORTFOLIO INSURED (0.1%)
New York State Energy Research & Dev.
(Niagara Mohawk Power Corp.) 8.875% 11/1/2025 (3) 1,100 1,113
-----------
SECONDARY MARKET INSURED (8.1%)
Muni. Assistance Corp. for New York City NY 6.00% 7/1/2008 (3) 22,350 23,561
New York City NY Muni. Water Finance Auth.
Water & Sewer System Rev. 5.00% 6/15/2017 (3) 4,000 4,000
New York City NY GO 5.25% 8/1/2021 (3) 7,855 8,035
New York State Dormitory Auth. (City Univ. of New York) 5.75% 7/1/2009 (3) 3,750 4,205
New York State Dormitory Auth. (City Univ. of New York) 5.75% 7/1/2011 (3) 5,950 6,683
New York State Dormitory Auth. (Cornell Univ.) 7.25% 7/1/2012 (1) 1,175 1,261
New York State Dormitory Auth. (State Univ.) 6.00% 5/15/2017 (2) 3,775 3,893
New York State Dormitory Auth. (Univ. System) 5.25% 7/1/2017 (1) 14,900 15,303
New York State Medical Care Fac. Finance Agency 5.25% 2/15/2019 (3) 16,230 16,472
New York State Medical Care Fac. Finance Agency
(Mental Health Services) 5.375% 2/15/2014 (1) 5,000 5,223
Port Auth. of New York & New Jersey 6.50% 1/15/2026 (1) 1,500 1,599
Triborough Bridge & Tunnel Auth. NY 5.50% 1/1/2019 (2) 4,000 4,004
Triborough Bridge & Tunnel Auth. NY 6.00% 1/1/2012 (1) 7,805 8,945
Triborough Bridge & Tunnel Auth. NY 6.75% 1/1/2009 (2) 3,000 3,594
Triborough Bridge & Tunnel Auth. NY 6.875% 1/1/2015 (3) 7,000 7,542
-----------
114,320
-----------
NONINSURED (4.7%)
Long Island NY Power Auth. Electric System Rev. VRDO 3.00% 12/2/1998 1,400 1,400
Long Island NY Power Auth. Electric System Rev. VRDO 3.20% 12/2/1998 2,600 2,600
Muni. Assistance Corp. for New York City NY VRDO 2.70% 12/2/1998 4,200 4,200
New York City NY GO VRDO 2.90% 12/2/1998 LOC 5,300 5,300
New York City NY GO VRDO 2.95% 12/2/1998 LOC 300 300
New York City NY GO VRDO 3.30% 12/2/1998 LOC 3,100 3,100
New York City NY Health & Hosp. Corp. Rev. VRDO (Health System) 2.90% 12/2/1998 1,200 1,200
New York State Dormitory Auth. (Columbia Univ.) 5.75% 7/1/2015 11,965 12,499
New York State Dormitory Auth. (Rockefeller Univ.) 5.00% 7/1/2015 1,100 1,121
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York State Dormitory Auth. (Rockefeller Univ.) 5.00% 7/1/2018 $ 4,555 $ 4,603
New York State Environmental Fac. Water PCR 5.55% 7/15/2009 2,000 2,180
New York State Local Govt. Assistance Corp. VRDO 2.70% 12/2/1998 15,300 15,300
New York State Local Govt. Assistance Corp. VRDO 2.90% 12/2/1998 LOC 900 900
Onondaga County NY Public Improvements 5.875% 2/15/2008 2,475 2,778
Westchester County NY GO 6.70% 11/1/2008 3,250 3,924
Westchester County NY GO 6.70% 11/1/2009 3,645 4,436
-----------
65,841
-----------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,297,595) 1,385,974
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.4%)
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 26,163
Liabilities (6,203)
-----------
19,960
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -----------------------------------------------------------------------------------------------------------------------------------
Applicable to 124,425,806 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,405,934
===================================================================================================================================
NET ASSET VALUE PER SHARE $11.30
===================================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
+Securities with a value of $6,231,000 have been segregated as initial margin
for open futures contracts.
For key to abbreviations and other references, see below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1998, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,307,722 $10.51
Undistributed Net Investment Income -- --
Accumulated Net Realized Gains--Note E 11,401 .09
Unrealized Appreciation (Depreciation)--Notes E and F
Investment Securities 88,379 .71
Futures Contracts (1,568) (.01)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,405,934 $11.30
===================================================================================================================================
</TABLE>
KEY TO ABBREVIATIONS
BAN--Bond Anticipation Note.
CP--Commercial Paper.
GO--General Obligation Bond.
IDA--Industrial Development Authority Bond.
PCR--Pollution Control Revenue Bond.
RAN--Revenue Anticipation Note.
TAN--Tax Anticipation Note.
TOB--Tender Option Bond.
VRDO--Variable Rate Demand Obligation.
(ETM)--Escrowed to Maturity.
(Prere.)--Prerefunded.
Scheduled principal and interest payments are guaranteed by:
(1) MBIA (Municipal Bond Insurance Association).
(2) AMBAC (Ambac Assurance Corporation).
(3) FGIC (Financial Guaranty Insurance Company).
(4) FSA (Financial Security Assurance).
The insurance does not guarantee the market value of the municipal bonds.
LOC--Scheduled principal and interest payments are guaranteed by bank letter of
credit.
23
<PAGE> 26
STATEMENT OF OPERATIONS
This Statement shows interest earned by each fund during the reporting period,
and details the operating expenses charged to the fund. These expenses directly
reduce the amount of investment income available to pay to shareholders as
tax-exempt income dividends. This Statement also shows any Net Gain (Loss)
realized on the sale of investments, and the increase or decrease in the
Unrealized Appreciation (Depreciation) on investments during the period. If a
fund invested in futures contracts during the period, the results of these
investments are shown separately.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NEW YORK
NEW YORK INSURED
TAX-EXEMPT LONG-TERM
MONEY MARKET TAX-EXEMPT
FUND FUND
-----------------------------
YEAR ENDED NOVEMBER 30, 1998
-----------------------------
(000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INCOME
Interest $11,141 $66,523
-----------------------------
Total Income 11,141 66,523
-----------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 36 160
Management and Administrative 513 2,138
Marketing and Distribution 74 309
Insurance Expense -- 4
Custodian Fees 6 16
Auditing Fees 8 8
Shareholders' Reports 1 26
Annual Meeting and Proxy Costs -- 3
Trustees' Fees and Expenses -- 2
-----------------------------
Total Expenses 638 2,666
Expenses Paid Indirectly--Note C (6) (138)
-----------------------------
Net Expenses 632 2,528
- -----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 10,509 63,995
- -----------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold (2) 15,806
Futures Contracts -- (2,201)
- -----------------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) (2) 13,605
- -----------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities -- 17,657
Futures Contracts -- (1,626)
- -----------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- 16,031
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,507 $93,631
===================================================================================================================================
</TABLE>
24
<PAGE> 27
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each fund's total net assets changed during the two
most recent reporting periods. The Operations section summarizes information
detailed in the Statement of Operations. Because the fund distributes its income
to shareholders each day, the amounts of Distributions--Net Investment Income
generally equal the net income earned as shown under the Operations section. The
amounts of Distributions--Realized Capital Gain may not match the capital gains
shown in the Operations section, because distributions are determined on a tax
basis and may be made in a period different from the one in which the gains were
realized on the financial statements. The Capital Share Transactions section
shows the amount shareholders invested in the fund, either by purchasing shares
or by reinvesting distributions, and the amounts redeemed. The corresponding
numbers of Shares Issued and Redeemed are shown at the end of the Statement.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
NEW YORK INSURED LONG-TERM
NEW YORK TAX-EXEMPT TAX-EXEMPT FUND
MONEY MARKET FUND ----------------------------
------------------------------ YEAR ENDED NOVEMBER 30,
YEAR ENDED SEP, 3* TO ----------------------------
NOV. 30, 1998 NOV. 30, 1997 1998 1997
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 10,509 $ 635 $ 63,995 $ 53,818
Realized Net Gain (Loss) (2) (1) 13,605 200
Change in Unrealized Appreciation (Depreciation) -- -- 16,031 11,461
-----------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 10,507 634 93,631 65,479
-----------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (10,509) (635) (63,995) (53,818)
Realized Capital Gain -- -- (1,756) (3,537)
-----------------------------------------------------------------
Total Distributions (10,509) (635) (65,751) (57,355)
-----------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 641,396 160,750 412,179 299,846
Issued in Lieu of Cash Distributions 10,102 607 48,283 41,951
Redeemed (315,991) (13,397) (215,824) (175,804)
-----------------------------------------------------------------
Net Increase from Capital Share Transactions 335,507 147,960 244,638 165,993
- --------------------------------------------------------------------------------------------------------------------------
Total Increase 335,505 147,959 272,518 174,117
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 147,959 -- 1,133,416 959,299
-----------------------------------------------------------------
End of Period $483,464 $147,959 $1,405,934 $1,133,416
==========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 641,396 160,750 36,807 27,602
Issued in Lieu of Cash Distributions 10,102 607 4,309 3,857
Redeemed (315,991) (13,397) (19,284) (16,191)
-----------------------------------------------------------------
Net Increase in Shares Outstanding 335,507 147,960 21,832 15,268
==========================================================================================================================
</TABLE>
*Commencement of operations.
25
<PAGE> 28
FINANCIAL HIGHLIGHTS
This table summarizes each fund's investment results and distributions to
shareholders on a per-share basis. It also presents the fund's Total Return and
shows net investment income and expenses as percentages of average net assets.
These data will help you assess: the variability of the fund's net income and
total returns from year to year; the relative contributions of net income and
capital gains to the fund's total return; how much it costs to operate the fund;
and the extent to which the fund tends to distribute capital gains.
The table also shows the Portfolio Turnover Rate, a measure of trading
activity. A turnover rate of 100% means that the average security is held in the
fund for one year. Money market funds are not required to report a Portfolio
Turnover Rate.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
NEW YORK TAX-EXEMPT
MONEY MARKET FUND
YEAR ENDED SEP, 3* TO
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD NOV. 30, 1998 NOV. 30, 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .032 .008
Net Realized and Unrealized Gain (Loss) on Investments -- --
-------------------------------
Total from Investment Operations .032 .008
-------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.032) (.008)
Distributions from Realized Capital Gains -- --
-------------------------------
Total Distributions (.032) (.008)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
==========================================================================================================================
TOTAL RETURN 3.27% 0.84%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $483 $148
Ratio of Total Expenses to Average Net Assets 0.19% 0.20%**
Ratio of Net Investment Income to Average Net Assets 3.19% 3.52%**
==========================================================================================================================
</TABLE>
*Commencement of operations.
**Annualized.
26
<PAGE> 29
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NEW YORK INSURED LONG-TERM TAX-EXEMPT FUND
YEAR ENDED NOVEMBER 30,
-------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.05 $10.99 $11.01 $ 9.70 $10.97
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .564 .572 .569 .581 .588
Net Realized and Unrealized Gain (Loss) on Investments .267 .101 .045 1.310 (1.258)
-------------------------------------------------------------
Total from Investment Operations .831 .673 .614 1.891 (.670)
-------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.564) (.572) (.569) (.581) (.588)
Distributions from Realized Capital Gains (.017) (.041) (.065) -- (.012)
-------------------------------------------------------------
Total Distributions (.581) (.613) (.634) (.581) (.600)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.30 $11.05 $10.99 $11.01 $ 9.70
==================================================================================================================================
TOTAL RETURN 7.69% 6.36% 5.84% 19.90% -6.37%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,406 $1,133 $959 $859 $695
Ratio of Total Expenses to Average Net Assets 0.21% 0.20% 0.20% 0.22% 0.22%
Ratio of Net Investment Income to Average Net Assets 5.03% 5.26% 5.28% 5.51% 5.60%
Portfolio Turnover Rate 17% 6% 5% 10% 20%
==================================================================================================================================
</TABLE>
27
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
Vanguard New York Tax-Exempt Funds comprises the New York Tax-Exempt Money
Market and New York Insured Long-Term Tax-Exempt Funds, each of which is
registered under the Investment Company Act of 1940 as an open-end investment
company, or mutual fund. Each fund invests in debt instruments of municipal
issuers whose ability to meet their obligations may be affected by economic and
political developments in the state of New York.
A. The following significant accounting policies conform to generally
accepted accounting principles for mutual funds. The funds consistently follow
such policies in preparing their financial statements.
1. SECURITY VALUATION: Tax-Exempt Money Market Fund: Investment
securities are valued at amortized cost, which approximates market value.
Insured Long-Term Tax-Exempt Fund: Bonds, and temporary cash investments
acquired over 60 days to maturity, are valued using the latest bid prices or
using valuations based on a matrix system (which considers such factors as
security prices, yields, maturities, and ratings), both as furnished by
independent pricing services. Other temporary cash investments are valued at
amortized cost, which approximates market value. Securities for which market
quotations are not readily available are valued by methods deemed by the Board
of Trustees to represent fair value.
2. FEDERAL INCOME TAXES: Each fund intends to continue to qualify as a
regulated investment company and distribute all of its income. Accordingly, no
provision for federal income taxes is required in the financial statements.
3. FUTURES CONTRACTS: The Insured Long-Term Tax-Exempt Fund may use
Municipal Bond Index, U.S. Treasury Bond, and U.S. Treasury Note futures
contracts, with the objectives of enhancing returns, managing interest-rate
risk, maintaining liquidity, diversifying credit risk, and minimizing
transaction costs. The fund may purchase or sell futures contracts instead of
bonds to take advantage of pricing differentials between the futures contracts
and the underlying bonds. The fund may also seek to take advantage of price
differences among bond market sectors by simultaneously buying futures (or
bonds) of one market sector and selling futures (or bonds) of another sector.
Futures contracts may also be used to simulate a fully invested position in the
underlying bonds while maintaining a cash balance for liquidity. The primary
risks associated with the use of futures contracts are imperfect correlation
between changes in market values of bonds held by the fund and the prices of
futures contracts, and the possibility of an illiquid market.
Futures contracts are valued based upon their quoted daily settlement
prices. The aggregate principal amounts of the contracts are not recorded in the
financial statements. Fluctuations in the value of the contracts are recorded in
the Statement of Net Assets as an asset (liability) and in the Statement of
Operations as unrealized appreciation (depreciation) until the contracts are
closed, when they are recorded as realized futures gains (losses).
4. DISTRIBUTIONS: Distributions from net investment income are declared
daily and paid on the first business day of the following month. Annual
distributions from realized capital gains, if any, are recorded on the
ex-dividend date.
5. OTHER: Security transactions are accounted for on the date securities
are bought or sold. Costs used to determine realized gains (losses) on the sale
of investment securities are those of the specific securities sold. Premiums and
original issue discounts are amortized and accreted, respectively, to interest
income over the lives of the respective securities.
28
<PAGE> 31
B. The Vanguard Group furnishes at cost investment advisory, corporate
management, administrative, marketing, and distribution services. The costs of
such services are allocated to the fund under methods approved by the Board of
Trustees. Each fund has committed to provide up to 0.40% of its net assets in
capital contributions to Vanguard. At November 30, 1998, the fund had
contributed capital to Vanguard (included in Other Assets) of:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
CAPITAL CONTRIBUTED PERCENTAGE PERCENTAGE
TO VANGUARD OF FUND OF VANGUARD'S
NEW YORK TAX-EXEMPT FUND (000) NET ASSETS CAPITALIZATION
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market $ 84 0.02% 0.12%
Insured Long-Term 259 0.02 0.37
-----------------------------------------------------------------------------------------
</TABLE>
The funds' Trustees and officers are also Directors and officers of Vanguard.
C. The funds' investment adviser may direct new issue purchases, subject to
obtaining the best price and execution, to underwriters who have agreed to
rebate or credit to the funds part of the underwriting fees generated. Such
rebates or credits are used solely to reduce the funds' administrative expenses.
The funds' custodian bank has also agreed to reduce its fees when the funds
maintain cash on deposit in the non-interest-bearing custody account. For the
year ended November 30, 1998, directed brokerage and custodian fee offset
arrangements reduced expenses by:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
EXPENSE REDUCTION
(000) TOTAL EXPENSE
------------------------- REDUCTION AS A
DIRECTED CUSTODIAN PERCENTAGE OF
NEW YORK TAX-EXEMPT FUND BROKERAGE FEES AVERAGE NET ASSETS
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market -- $ 6 --
Insured Long-Term $122 16 0.01%
---------------------------------------------------------------------------------
</TABLE>
D. During the year ended November 30, 1998, the Insured Long-Term Tax-Exempt
Fund purchased $435,794,000 of investment securities and sold $200,631,000 of
investment securities, other than temporary cash investments.
E. Capital gain distributions are determined on a tax basis and may differ
from realized capital gains for financial reporting purposes due to differences
in the timing of realization of gains. The Insured Long-Term Tax-Exempt Fund had
realized losses totaling $1,548,000 through November 30, 1998, which are
deferred for tax purposes and reduce the amount of unrealized appreciation on
investment securities for tax purposes (see Note F). For federal income tax
purposes, the Insured Long-Term Tax-Exempt Fund had a gain of $11,381,000
available for distribution at November 30, 1998.
29
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (continued)
F. At November 30, 1998, net unrealized appreciation of Insured Long-Term
Tax-Exempt Fund investment securities for federal income tax purposes was
$86,831,000, consisting of unrealized gains of $87,196,000 on securities that
had risen in value since their purchase and $365,000 in unrealized losses on
securities that had fallen in value since their purchase.
At November 30, 1998, the aggregate settlement value of open futures contracts
expiring through March 1999 and the related unrealized appreciation
(depreciation) were:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
(000)
-------------------------------
AGGREGATE UNREALIZED
NEW YORK TAX-EXEMPT FUND/ NUMBER OF LONG SETTLEMENT APPRECIATION
FUTURES CONTRACTS (SHORT) CONTRACTS VALUE (DEPRECIATION)
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Insured Long-Term/
Municipal Bond Index 160 $20,235 $ 312
U.S. Treasury Bond (555) 72,039 (2,024)
U.S. Treasury Note (125) 14,889 144
---------------------------------------------------------------------------------------
</TABLE>
Net unrealized depreciation on open futures contracts is required to be treated
as realized loss for tax purposes.
30
<PAGE> 33
REPORT OF INDEPENDENT
ACCOUNTANTS
[PHOTO]
To the Shareholders and Trustees of
Vanguard New York Tax-Exempt Funds
In our opinion, the accompanying statements of net assets 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
New York Tax-Exempt Money Market Fund and New York Insured Long-Term Tax-Exempt
Fund (constituting Vanguard New York Tax-Exempt Funds, hereafter referred to as
the "Funds") at November 30, 1998, the results of each of their operations for
the year then ended and the changes in each of their net assets and the
financial highlights for each of the periods 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 Funds' 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 November 30, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
January 6, 1999
31
<PAGE> 34
SPECIAL 1998 TAX INFORMATION (UNAUDITED) FOR VANGUARD NEW YORK TAX-EXEMPT FUNDS
This information for the fiscal year ended November 30, 1998, is included
pursuant to provisions of the Internal Revenue Code.
The Insured Long-Term Tax-Exempt Fund distributed $1,756,000 as capital
gain dividends (from net long-term capital gains) to shareholders in December
1997. Of the $1,756,000 capital gain dividends, the fund designates $1,164,000
as a 20% rate gain distribution.
Each fund designates 100% of its income dividends as exempt-interest
dividends.
32
<PAGE> 35
TRUSTEES AND OFFICERS
JOHN C. BOGLE
Founder, Senior Chairman of the Board, and Director/Trustee of The Vanguard
Group, Inc., and each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN
Chairman of the Board, Chief Executive Officer, and Director/Trustee of The
Vanguard Group, Inc., and each of the investment companies in The Vanguard
Group.
BARBARA BARNES HAUPTFUHRER
Director of The Great Atlantic and Pacific Tea Co., IKON Office Solutions, Inc.,
Raytheon Co., Knight-Ridder, Inc., Massachusetts Mutual Life Insurance Co., and
Ladies Professional Golf Association; Trustee Emerita of Wellesley College.
JOANN HEFFERNAN HEISEN
Vice President, Chief Information Officer, and a member of the Executive
Committee of Johnson & Johnson; Director of Johnson & Johnson-Merck Consumer
Pharmaceuticals Co., Women First HealthCare, Inc., Recording for the Blind and
Dyslexic, The Medical Center at Princeton, and Women's Research and Education
Institute.
BURTON G. MALKIEL
Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Banco Bilbao Gestinova, Baker Fentress &
Co., The Jeffrey Co., and Southern New England Telecommunications Co.
ALFRED M. RANKIN, JR.
Chairman, President, and Chief Executive Officer of NACCO Industries, Inc.;
Director of NACCO Industries, The BFGoodrich Co., and The Standard Products Co.
JOHN C. SAWHILL
President and Chief Executive Officer of The Nature Conservancy; formerly,
Director and Senior Partner of McKinsey & Co. and President of New York
University; Director of Pacific Gas and Electric Co., Procter & Gamble Co.,
NACCO Industries, and Newfield Exploration Co.
JAMES O. WELCH, JR.
Retired Chairman of Nabisco Brands, Inc.; retired Vice Chairman and Director of
RJR Nabisco; Director of TECO Energy, Inc., and Kmart Corp.
J. LAWRENCE WILSON
Chairman and Chief Executive Officer of Rohm & Haas Co.; Director of Cummins
Engine Co. and The Mead Corp.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY
Secretary; Managing Director and Secretary of The Vanguard Group, Inc.;
Secretary of each of the investment companies in The Vanguard Group.
THOMAS J. HIGGINS
Treasurer; Principal of The Vanguard Group, Inc.; Treasurer of each of the
investment companies in The Vanguard Group.
KAREN E. WEST
Controller; Principal of The Vanguard Group, Inc.; Controller of each of the
investment companies in The Vanguard Group.
OTHER VANGUARD OFFICERS
R. GREGORY BARTON
Managing Director, Legal Department.
ROBERT A. DISTEFANO
Managing Director, Information Technology.
JAMES H. GATELY
Managing Director, Individual Investor Group.
KATHLEEN C. GUBANICH
Managing Director, Human Resources.
IAN A. MACKINNON
Managing Director, Fixed Income Group.
F. WILLIAM MCNABB, III
Managing Director, Institutional Investor Group.
MICHAEL S. MILLER
Managing Director, Planning and Development.
RALPH K. PACKARD
Managing Director and Chief Financial Officer.
GEORGE U. SAUTER
Managing Director, Core Management Group.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. Frank Russell
Company is the owner of trademarks and copyrights relating to the
Russell Indexes. "Wilshire 4500" and "Wilshire 5000" are
trademarks of Wilshire Associates.
<PAGE> 36
VANGUARD
MILESTONES
[GRAPHIC]
The Vanguard Group is
named for HMS Vanguard,
Admiral Horatio Nelson's flagship
at the Battle of the Nile on
August 1, 1798. Our founder,
John C. Bogle, chose the name
after reading Nelson's inspiring
tribute to his fleet: "Nothing could
withstand the squadron . . .
with the judgment of the captains,
together with their valour, and that
of the officers and men of every
description, it was absolutely irresistible."
[GRAPHIC]
Walter L. Morgan, founder of
Wellington Fund, the nation's
first balanced mutual fund
and forerunner of today's family
of some 100 Vanguard funds,
celebrated his 100th birthday on
July 23, 1998. Mr. Morgan,
a true investment pioneer, died
six weeks later on September 2.
[GRAPHIC]
Wellington Fund,
The Vanguard Group's oldest fund,
was incorporated by Mr. Morgan
70 years ago, on December 28, 1928.
The fund was named after
the Duke of Wellington,
whose forces defeated
Napoleon Bonaparte at the
Battle of Waterloo in 1815.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
www.vanguard.com
[email protected]
All Vanguard funds are offered by prospectus only. Prospectuses contain more
complete information on advisory fees, distribution charges, and other expenses
and should be read carefully before you invest or send money. Prospectuses can
be obtained directly from The Vanguard Group.
Q760-01/21/1999
(C) 1999 Vanguard Marketing Corporation, Distributor. All rights reserved.
