<PAGE> 1
VANGUARD
NEW JERSEY
TAX-FREE FUND
Semiannual Report
May 31, 1997
[THE VANGUARD GROUP LOGO]
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THE VANGUARD GROUP:
LINKING TRADITION AND INNOVATION
At Vanguard, we treasure our rich nautical heritage--even as we steer our
course toward the twenty-first century. Our Report cover reflects that blending
of tradition and innovation, of past, present, and future.
The montage includes a bronze medallion with a likeness of our namesake, HMS
Vanguard (Lord Nelson's flagship at The Battle of the Nile); a clock built
circa 1816 in Scotland, featuring a portrait of Nelson; and several views of
our recently completed campus, which is steeped in nautical imagery--from our
buildings named after Nelson's warships (Victory, Majestic, and Goliath are
three shown), to our artwork and ornamental compass rose.
CONTENTS
A Message To
Our Shareholders
1
The Markets
In Perspective
3
Report From
The Adviser
5
Performance
Summaries
7
Financial
Statements
8
Trustees And
Officers
INSIDE BACK COVER
All comparative mutual fund data
are from Lipper Analytical Services, Inc.
or Morningstar unless otherwise noted.
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[PHOTO]
DEAR SHAREHOLDER,
During the first half of Vanguard New Jersey Tax-Free Fund's 1997 fiscal year,
interest rates drifted unevenly upward as the surprising staying power of the
U.S. economy continued to stoke fears of higher inflation. While the general
rise in interest rates dampened municipal bond prices, interest income was
sufficient to give bonds a marginally positive total return for the six months
ended May 31, 1997. In this environment, the returns of our Insured Long-Term
Portfolio and our Money Market Portfolio outpaced the results of their
competitive fund groups. The adjacent table presents each Portfolio's six-month
return as well as those of the average competing mutual funds.
The total return (capital change plus reinvested dividends) of the
Insured Long-Term Portfolio is based on a change in net asset value from $11.64
per share on November 30, 1996, to $11.48 per share on May 31, 1997, adjusted
for dividends totaling $0.306 per share from net investment income and a
distribution of $0.032 from net realized capital gains.
<TABLE>
<CAPTION>
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TOTAL RETURNS
SIX MONTHS ENDED
MAY 31, 1997
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<S> <C>
INSURED LONG-TERM PORTFOLIO +1.6%
Average New Jersey Municipal Fund +1.4
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MONEY MARKET PORTFOLIO +1.6%
Average New Jersey Tax-Exempt
Money Market Fund +1.5
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</TABLE>
The Money Market Portfolio's net asset value remained at $1 per share.
This, of course, is what we expect, although a stable share price is by no
means guaranteed by us or by competing money market funds. The Portfolio's
annualized yield on May 31 stood at 3.49%, up from 3.23% six months earlier.
THE PERIOD IN REVIEW
The half-year was marked by swift reactions to each change in sentiment about
the strength of the U.S. economy and the possibility that inflation would
accelerate. In the taxable bond market, yields moved steadily higher during the
first four months of the period, only to retrace a few steps during the final
two months as concerns about inflation eased somewhat.
On balance, yields on longer-term U.S. Treasury securities ended the
period higher than they started. The yield on the benchmark 30-year U.S.
Treasury bond rose by 56 basis points (0.56 percentage point), from 6.35% on
November 30, 1996, to 6.91% on May 31, 1997. The yield on the 90-day U.S.
Treasury bill dipped slightly on balance, ending the period at 4.94%, down from
5.13% six months earlier, as the issuance of new T-bills declined significantly.
Municipal bonds withstood the interest rate increase better than their
taxable counterparts, thanks in part to a reduced supply of new issues during
the period. The yield on long-term municipal bonds edged up on balance from
5.45% to 5.55%. At the short end of the spectrum, yields on top-grade (MIG-1)
90-day municipal notes rose on balance from 3.55% at the end of November 1996 to
3.70% on May 31, 1997.
The +1.6% return of our Money Market Portfolio was slightly above the
+1.5% return of the average New Jersey tax-exempt money market mutual fund, an
advantage largely explained by our lower expenses.
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The +1.6% total return of the Insured Long-Term Portfolio during the
half-year consisted of a +2.7% income return and a capital decline of -1.1%,
reflecting bond price declines engendered by the modest increase in interest
rates. This return outpaced that of the average New Jersey municipal bond fund,
but fell behind the +1.7% return of the Lehman Municipal Bond Index. This
national Index is a tough standard for all state tax-free funds, existing, as
it does, outside the "real world" of operating expenses and transaction costs.
Though recent history shows the harm that rising interest rates can
inflict on long-term bonds, the extended view reminds us that falling interest
rates periodically have the opposite effect. In the end, these changes amount
over time to little more than "noise," leaving the rate of interest income as
the main source of our long-term returns.
Over these longer periods, our Portfolios are aided by our disciplined
management approach, as well as by our low expenses--durable advantages for our
shareholders that we expect to continue. The expense ratio (expenses as a
percentage of average net assets) for each of our Portfolios was 0.20% in fiscal
1996, compared with 0.99% charged by the average New Jersey long-term state
tax-free fund and 0.59% for the average New Jersey money market tax-exempt fund.
In our Insured Long-Term Portfolio, this cost advantage allows us to
offer a portfolio of bonds that carry private insurance guaranteeing the
payment of principal and interest in the event of an issuer's
default--insurance that obviously comes at a cost--while providing returns that
are fully competitive with those of uninsured municipal bond portfolios. Our
expense ratio advantage aided our performance during the brief semiannual
period, just as it has done over longer periods (+7.5% for the Portfolio versus
+7.3% for competing funds over the past twelve months, and an annualized +8.1%
return versus an annualized +7.5% since the Portfolio's February 1988
inception).
IN SUMMARY
It's worth noting that the mediocre performance of the U.S. bond market over
the past six months stands in stark contrast to that of the U.S. stock market,
which continued to steam ahead, gaining +13.1% (as measured by the Standard &
Poor's 500 Composite Stock Price Index).
While it may be difficult for bond investors to watch the big gap between
the recent returns of stocks and bonds, it is exactly this lack of correlation
between the asset classes that makes the creation and maintenance of a balanced
investment program of stock funds, bond funds, and money market funds a prudent
move for mutual fund investors. As that gap narrows--or opens in favor of bonds
over stocks, as it will from time to time--the true value of a balanced program
will be evident.
We look forward to reporting to you in further detail in our 1997 Annual
Report six months hence.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Chairman of the Board President
June 23, 1997
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THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED MAY 31, 1997
U.S. EQUITY MARKETS
With the economy continuing to exhibit strong growth and modest levels of
inflation, investors in U.S. common stocks were rewarded with solid gains
during the past six months. The best performers were primarily
larger-capitalization issues, although the small-company indexes finally
exhibited some strength in May. For example, during the last six months, the
Standard & Poor's 500 Composite Stock Price Index gained 13.1%, fueled by a 6.1%
boost in May. Reflecting the gains among smaller companies, the Russell 2000
Index posted an 8.4% increase for the six-month period, driven by an 11.1% jump
in May. It was particularly noteworthy that May's small-cap gains were led by a
15.0% surge among small growth stocks, the worst segment of the U.S. market
during the past 12 months.
Stocks benefited from the continued strength of corporate earnings,
which rose some 15% during the past year. The strength in earnings and the
expectation that income will increase at an attractive pace helped stocks to
continue to produce solid gains in the fiscal period, despite the 0.6% increase
in the yield of the 10-year U.S. Treasury bond over the past six months. What's
more, earnings have shown not only good strength but remarkable consistency in
beating the consensus forecasts of Wall Street analysts.
The strongest gains in the S&P 500 Index during the past six months
came from the technology sector (up 17.5%) and the consumer-staples sector (up
20.4%). By contrast, the more economically sensitive and less predictable
earnings of stocks in the materials & processing sector caused these issues to
lag the broad market, although, on an absolute basis, their 8.2% return over six
months is quite good.
<TABLE>
<CAPTION>
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TOTAL RETURNS
PERIODS ENDED MAY 31, 1997
---------------------------------------
6 MONTHS 1 YEAR 5 YEARS*
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<S> <C> <C> <C>
EQUITY
S&P 500 Index 13.1% 29.4% 18.4%
Russell 2000 Index 8.4 7.0 15.8
MSCI-EAFE Index 4.2 7.9 10.9
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FIXED-INCOME
Lehman Aggregate Bond Index 0.9% 8.3% 7.2%
Lehman 10-Year Municipal
Bond Index 1.7 8.2 7.5
Salomon 90-Day U.S. Treasury Bills 2.6 5.3 4.5
- -----------------------------------------------------------------------------
OTHER
Consumer Price Index 0.9% 2.2% 2.8%
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</TABLE>
*Average annual.
U.S. FIXED-INCOME MARKETS
The general rise in interest rates during the past six months reflects the
economy's underlying momentum. The 10-year U.S. Treasury's yield increased
from 6.04% at the end of November to 6.97% by the middle of April. Economic
reports released in the last several weeks of the period indicated a possible
slowing in economic growth, which reduced fears that inflation might accelerate
and helped interest rates fall to 6.66% by the end of May.
3
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Fueled by robust consumer spending, the U.S. economy expanded at a
strong 3.8% annual rate in the fourth quarter of 1996 and a remarkable 5.8% rate
in the first three months of 1997. The nation's unemployment rate, at 4.8% in
May, was the lowest in a generation. Strong economic growth and tight labor
markets often lead bond investors to expect an acceleration in inflation
because of increased demand for goods and services. Reflecting this
expectation, the Federal Reserve raised its federal funds interest rate target
by 0.25% on March 25 in a "preemptive" strike against mounting inflationary
pressures. Observed price increases have been subdued in recent months,
however. Wholesale prices have fallen in each of the first four months of 1997,
and so far this year consumer prices have risen at a slower pace than last
year.
Higher interest rates dampened returns for bond investors. The Lehman
Brothers Aggregate Bond Index gained 0.94% over the past six months, reflecting
an income return of 3.43% that was partially offset by a capital decline of
- -2.49%. During this period, investors who favored shorter-maturity and
lower-quality issues achieved somewhat better returns. Mortgage-backed
securities continued to perform well because refinancing activity has been
reduced to historically low levels as interest rates have risen. Municipal
issues also tended to perform better than their taxable counterparts.
INTERNATIONAL EQUITY MARKETS
International investors fared reasonably well over the past six months. As
measured by the broad Morgan Stanley Capital International-Europe, Australasia,
Far East Index, foreign markets gained 4.2%.
The period saw two major developments. First, the Japanese stock
market moved sharply higher in the spring, gaining 11% in May alone. Better tone
in the economy, plus strong earnings reported by export-oriented companies
benefiting from the weak yen, gave Japan a long-awaited boost. For the six
months, however, the Japanese market remained in negative territory (-5.5%). The
competitive benefits of a weak currency relative to the dollar extended to
Germany, where the export-driven capital goods and chemical manufacturers
gained; overall, the German market rose 12.4% during the six-month period.
Arguably the biggest news came from the French elections at the end of
May. The new government is considered to be less friendly toward the austerity
measures needed to meet the eligibility requirements for the European Monetary
Union (EMU) in 1999. The French elections also had a broad impact across the
continent. Although most investors appear to agree that the elections won't
jeopardize the continent's move toward the EMU, the timing and intensity of the
fiscal measures are now less certain. Market reaction to the new French
government was mixed. France lost -2.1% in May (in francs), while Germany gained
2.7% (in deutsche marks). For the six months, Europe gained 20.1% in local
currencies, which a strong dollar trimmed to 11.1% for U.S. investors.
4
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REPORT FROM THE ADVISER
Yields on tax-exempt securities rose slightly during the six months ended May
31, 1997, the first half of the fiscal year for Vanguard New Jersey Tax-Free
Fund.
THE INSURED LONG-TERM PORTFOLIO
Stronger than expected economic growth and concerns over inflation led to a
rise in interest rates during the half-year. In March, the Federal Reserve
Board responded by increasing the federal funds rate a quarter-point to 5.50%.
Yields on the benchmark 30-year U.S. Treasury bond rose 0.56 percentage point
to 6.91% during the six months, while yields on long-term, high-quality
municipal bonds increased a mere 0.10 percentage point to 5.55%.
The magnitude of the rise in rates was partially mitigated by strong
investor demand and reduced supply in the municipal market. Consequently,
yields of long-term, high-grade tax-exempt bonds rose less in relation to
yields on U.S. Treasury bonds, from a ratio of 86% last November 30 to 80% on
May 31. While the lack of supply helped the performance of municipal bonds
relative to Treasuries, it also resulted in a compression of the yield
differentials between higher- and lower-quality municipal securities. Over
the short term, such an environment is often advantageous to the price
performance of mutual funds holding lower-quality bonds. In contrast,
Vanguard's state tax-free Portfolios are insured and adhere to significantly
higher quality standards than the typical mutual fund. Nonetheless, the
Portfolios provided returns competitive with those of lower-quality competitors.
During the first fiscal half, we pursued two strategies to maximize
tax-exempt income and minimize risk. First, we lowered the effective maturities
of the Portfolios, which reduced their exposure to rising interest rates and
preserved principal. This was accomplished by offsetting our market exposure
through hedges in (i.e., sales of) Treasury futures contracts, while
maintaining our holdings of municipal bonds. Second, we overweighted our
holdings of intermediate-term bonds with maturities of 10-20 years.
Intermediate bonds currently offer the best relative value because they
generate 95% of the yield of long-term municipal bonds while providing less
price volatility. In combination, these strategies enabled us to reduce our
exposure to interest rate changes, maintain a high tax-exempt dividend stream,
and capitalize on the relative outperformance of municipal bonds.
Vanguard's investment objective is to provide consistent above-average
performance relative to our competitors. We accomplish this by combining a
disciplined management approach with a low expense ratio. Over the long term,
we believe this philosophy will continue to produce superior performance and a
durable tax-exempt dividend for our shareholders.
THE MONEY MARKET PORTFOLIO
In response to the Federal Reserve's tightening of monetary policy, yields on
municipal notes and U.S. Treasury bills moved higher during the first half of
the fiscal year. Yields on one-year municipal notes ended the period 32 basis
points (0.32 percentage point) higher, at 3.90%, while one-year Treasury bill
yields rose 42 basis points
INVESTMENT PHILOSOPHY
The Fund reflects a belief that it can achieve a high level of current income,
consistent with each Portfolio's stated maturity and stringent quality targets,
that is exempt from federal and New Jersey income taxes by investing in insured
and high-quality uninsured securities issued by state, county, and municipal
governments in New Jersey.
5
<PAGE> 8
to 5.77%. Due to the continued strength in the U.S. economy and the Fed's
response, our Money Market Portfolio adopted a more defensive posture by
shortening its average maturity. Shortening the Portfolio's maturity acts to
lessen its interest rate risk.
In addition to the Federal Reserve's activity, two other issues had a
significant impact on the short-term securities market.
The first was the proposal by the Securities and Exchange Commission
(SEC) of a series of technical amendments to Rule 2a-7 under the Investment
Company Act of 1940. This regulation governs certain risk characteristics of
money market funds. The SEC's proposed changes were designed to tighten the
regulations pertaining to money market funds and improve the likelihood that
the funds would maintain a stable net asset value. In light of these technical
amendments and the SEC's desire to incorporate comments from market
participants, compliance with the revised rule, adopted by the SEC in March
1996, has been suspended until at least the summer or fall of 1997. Some
competing funds that operate with lower quality standards than ours may need to
alter their management policies. However, the Vanguard tax-exempt money market
portfolios have always been managed in a conservative, quality-oriented manner.
Therefore we anticipate minimal impact when the regulations finally take
effect.
The second issue was the unusual volume of redemptions industrywide
during tax season. The seasonal outflow of portfolio assets is the result of
shareholders' paying personal income taxes from money market accounts.
According to IBC Donoghue's Money Fund Report, during the just-completed tax
season, tax-exempt money market funds lost 7.5% of assets to redemptions,
compared with only a 4% decline for the same period in 1996. As further evidence
of the magnitude of tax payments this year, the U.S. Treasury garnered a record
$211 billion through April, a 13% increase over the same period last year. As
market participants sold securities to fund shareholder redemptions, the result
was a temporary overabundance of supply in the short-term market. This excess
in turn caused a spike up in yields during late April and much of May. We used
this rise in yields as an opportunity to selectively purchase
securities--choosing those with maturity dates other than early July, when a
seasonal lack of supply is expected to push yields down. Additionally, we
further diversified and enhanced overall portfolio quality.
The second half of the fiscal year will require investors to remain
vigilant. Market participants will be asked to comply with new, more stringent
regulations and will face the prospect of further hikes in the federal funds
rate by the Federal Reserve Board.
Ian A. MacKinnon, Senior Vice President
Pamela Wisehaupt Tynan, Principal
Reid O. Smith, Principal
John M. Carbone, Principal
Danine A. Mueller, Principal
Christopher M. Ryon, Principal
Vanguard Fixed Income Group
June 11, 1997
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PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolios. 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>
INSURED LONG-TERM PORTFOLIO
TOTAL INVESTMENT RETURNS: FEBRUARY 3, 1988-MAY 31, 1997
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INSURED LONG-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
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<S> <C> <C> <C> <C>
1988 0.1% 5.9% 6.0% 5.3%
1989 4.4 7.4 11.8 11.0
1990 0.7 7.0 7.7 7.7
1991 2.3 6.7 9.0 10.3
1992 4.1 6.4 10.5 10.0
1993 6.6 5.9 12.5 11.1
1994 -11.2 5.1 -6.1 -5.2
1995 13.3 6.4 19.7 18.9
1996 -0.7 5.4 4.7 5.9
1997** -1.1 2.7 1.6 1.7
- ---------------------------------------------------------------
</TABLE>
*Lehman Municipal Bond Index.
**Six months ended May 31, 1997.
See Financial Highlights table on page 17 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
TOTAL INVESTMENT RETURNS: FEBRUARY 3, 1988-MAY 31, 1997
- ---------------------------------------------------------------
MONEY MARKET PORTFOLIO AVERAGE
FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
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<S> <C> <C> <C> <C>
1988 0.0% 4.2% 4.2% 4.3%
1989 0.0 6.3 6.3 6.4
1990 0.0 5.8 5.8 5.8
1991 0.0 4.5 4.5 4.5
1992 0.0 3.0 3.0 2.8
1993 0.0 2.3 2.3 2.0
1994 0.0 2.5 2.5 2.2
1995 0.0 3.6 3.6 3.3
1996 0.0 3.2 3.2 2.9
1997** 0.0 1.6 1.6 1.5
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</TABLE>
*Average New Jersey Tax-Exempt Money Market Fund.
**Six months ended May 31, 1997.
See Financial Highlights table on page 18 for dividend information for the past
five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1997*
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SINCE INCEPTION
INCEPTION ---------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
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<S> <C> <C> <C> <C> <C> <C>
Insured Long-Term Portfolio 2/3/88 4.86% 7.32% 1.68% 6.32% 8.00%
Money Market Portfolio 2/3/88 3.19 2.92 0.00 3.99 3.99
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</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
7
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[PHOTO]
FINANCIAL STATEMENTS
MAY 31, 1997 (unaudited)
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each Portfolio'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 Portfolio's Net
Assets. Finally, Net Assets are divided by the outstanding shares of the
Portfolio 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 Portfolio's net assets on both a dollar and
per-share basis. Undistributed Net Investment Income is usually zero because
the Portfolio 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 Portfolio's
investments and their cost, and reflects the gains (losses) that would be
realized if the Portfolio were to sell all of its investments at their
statement-date values.
<TABLE>
<CAPTION>
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FACE MARKET
MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO COUPON DATE (000) (000)
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MUNICIPAL BONDS (99.0%)
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<S> <C> <C> <C> <C>
ISSUER INSURED (81.9%)
Atlantic County NJ COP 6.00% 3/1/14 (3) $ 3,685 $ 3,926
Atlantic County NJ COP 6.00% 3/1/15 (3) 1,480 1,580
Atlantic County NJ COP 7.30% 3/1/05 (3) 2,000 2,312
Atlantic County NJ COP 7.30% 3/1/06 (3) 1,800 2,103
Atlantic County NJ COP 7.40% 3/1/10 (3) 1,755 2,095
Atlantic County NJ COP 7.40% 3/1/11 (3) 4,025 4,821
Atlantic County NJ Util. Auth. Sewer Rev. 5.85% 1/15/15 (2) 3,000 3,072
Bayshore NJ Regional Sewer Auth. 5.40% 5/1/12 (1) 500 501
Bergen County NJ Util. Auth. Water PCR 5.50% 12/15/15 (3) 15,750 15,763
Bergen County NJ Util. Auth. Water PCR 5.75% 12/15/05 (3) 2,000 2,120
Brick Township NJ Muni. Util. Auth. 5.00% 12/1/16 (3) 5,700 5,368
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/04 (3) 8,345 5,690
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/05 (3) 18,545 11,918
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/06 (3) 18,545 11,236
Camden County NJ Muni. Util. Auth. Sewer Rev. 8.25% 12/1/97 (3)(Prere.) 515 537
Camden County NJ Muni. Util. Auth. Sewer Rev. 8.25% 12/1/17 (3) 335 349
Cape May County NJ IDA (Atlantic City Electric) 6.80% 3/1/21 (1) 15,400 18,058
Cape May County NJ Muni. Util. Auth. 5.75% 1/1/16 (1) 14,975 15,111
Delaware River Port Auth. PA & NJ 5.40% 1/1/13 (3) 9,000 8,988
Delaware River Port Auth. PA & NJ 5.50% 1/1/26 (3) 26,600 26,036
Delaware River Port Auth. PA & NJ 6.50% 1/1/09 (2) 3,500 3,612
Delaware River Port Auth. PA & NJ 7.375% 1/1/07 (2) 9,500 10,086
Elizabeth City NJ Fiscal Year Adjustment Bonds 6.60% 8/1/06 (1) 8,750 9,506
Elizabeth City NJ GO 6.10% 8/15/07 (2) 5,000 5,447
Elizabeth City NJ GO 6.25% 8/15/08 (2) 2,100 2,291
Essex County NJ GO 4.875% 11/15/97 (2) 2,815 2,829
Essex County NJ Improvement Auth. Lease Rev. GO 5.25% 12/1/16 (2) 10,135 9,811
Essex County NJ Improvement Auth. Lease Rev. GO 5.35% 12/1/24 (2) 5,000 4,846
</TABLE>
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<TABLE>
<CAPTION>
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FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Essex County NJ Improvement Auth. Lease Rev. GO 5.50% 12/1/08 (2) $ 2,560 $ 2,642
Essex County NJ Improvement Auth. Lease Rev. GO 5.50% 12/1/13 (2) 7,500 7,551
Essex County NJ Improvement Auth. Lease Rev. GO 7.00% 12/1/04 (2)(Prere.) 9,525 10,979
Essex County NJ Util. Auth. 5.60% 4/1/16 (4) 2,200 2,190
Evesham NJ Muni. Util. Auth. 7.00% 7/1/10 (1) 1,700 1,808
Evesham NJ Muni. Util. Auth. 7.00% 7/1/15 (1) 450 479
Gloucester County NJ Util. Auth. Sewer Rev. 5.40% 1/1/16 (1) 3,410 3,355
Gloucester Township NJ GO 5.75% 7/15/10 (2) 2,880 3,024
Gloucester Township NJ Muni. Util. Auth. 5.65% 3/1/18 (2) 2,755 2,823
Hamilton Township NJ Muni. Util. Auth. 6.00% 8/15/17 (3) 1,000 1,031
Hoboken-Union City-Weehawken NJ Sewer Auth. 0.00% 8/1/03 (1) 3,800 2,827
Hoboken-Union City-Weehawken NJ Sewer Auth. 0.00% 8/1/04 (1) 3,750 2,641
Hoboken-Union City-Weehawken NJ Sewer Auth. 0.00% 8/1/05 (1) 3,805 2,536
Hoboken-Union City-Weehawken NJ Sewer Auth. 0.00% 8/1/06 (1) 2,000 1,261
Hoboken-Union City-Weehawken NJ Sewer Auth. 6.25% 8/1/13 (1)- 9,590 10,494
Hudson County NJ Correctional Fac. COP 6.30% 6/1/04 (1) 1,720 1,843
Hudson County NJ Correctional Fac. COP 6.30% 12/1/04 (1) 1,770 1,896
Hudson County NJ Correctional Fac. COP 6.50% 12/1/11 (1) 9,000 9,713
Hudson County NJ General Improvement GO 6.55% 7/1/04 (3) 1,300 1,437
Hudson County NJ General Improvement GO 6.55% 7/1/05 (3) 1,290 1,437
Hudson County NJ General Improvement GO 6.55% 7/1/06 (3) 700 785
Hudson County NJ General Improvement GO 6.55% 7/1/07 (3) 1,300 1,465
Hudson County NJ General Improvement GO 6.55% 7/1/09 (3) 635 717
Hudson County NJ Improvement Auth. Lease 6.00% 12/1/12 (3) 6,525 6,780
Irvington Township NJ GO 0.00% 8/1/07 (1) 1,000 600
Irvington Township NJ GO 0.00% 8/1/09 (1) 2,580 1,367
Irvington Township NJ GO 0.00% 8/1/10 (1) 2,080 1,035
Jersey City NJ Water Auth. GO 7.60% 10/1/12 (2) 700 723
Jersey City NJ Water Auth. GO 7.60% 10/1/13 (2) 700 723
Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 3/15/10 (2) 2,740 2,735
Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 9/15/10 (2) 1,790 1,787
Middlesex County NJ Util. Auth. Sewer Rev. 5.375% 9/15/15 (2) 3,775 3,755
Middlesex County NJ Util. Auth. Sewer Rev. 6.50% 3/15/01 (3)(Prere.) 6,300 6,838
Monmouth County NJ Improvement Auth. 5.40% 12/1/12 (1) 2,505 2,517
Mount Laurel Township NJ Muni. Util. Auth. 6.00% 7/1/15 (1) 4,250 4,386
New Brunswick NJ Housing & Urban Dev. 5.75% 7/1/24 (1) 13,640 13,702
New Brunswick NJ Housing & Urban Dev. 6.00% 7/1/12 (1) 6,000 6,238
New Jersey Econ. Dev. Auth. (Market Transition) 5.80% 7/1/07 (1) 1,000 1,059
New Jersey Econ. Dev. Auth. (Market Transition) 5.80% 7/1/09 (1) 5,500 5,702
New Jersey Econ. Dev. Auth. (Market Transition) 5.875% 7/1/11 (1) 23,175 24,032
New Jersey Econ. Dev. Auth. (Market Transition) 7.00% 7/1/04 (1) 1,745 1,958
New Jersey Econ. Dev. Auth. Water Fac. Rev. VRDO (United Water Co.) 3.80% 6/3/97 (2) 10,700 10,700
New Jersey Educ. Fac. Auth. (Higher Educ. Trust Fund) 5.125% 9/1/97 (2) 10,525 10,561
New Jersey Educ. Fac. Auth. (Higher Educ. Trust Fund) 5.125% 9/1/08 (2) 14,795 14,870
New Jersey Educ. Fac. Auth. (Kean College) 6.60% 7/1/21 (1) 3,700 3,992
New Jersey Educ. Fac. Auth. (NJ Institute of Technology) 6.00% 7/1/24 (1) 1,500 1,550
New Jersey Educ. Fac. Auth. (Rider College) 6.20% 7/1/17 (2) 4,000 4,198
New Jersey Educ. Fac. Auth. (Seton Hall Univ.) 5.60% 7/1/16 (1) 1,765 1,774
New Jersey Educ. Fac. Auth. (Trenton State College) 6.00% 7/1/12 (2) 3,005 3,124
New Jersey Health Care Fac. Auth. (Burdette Tomlin Memorial Hosp.) 6.50% 7/1/12 (3) 1,500 1,607
New Jersey Health Care Fac. Auth. (Community Medical Center) 7.00% 7/1/20 (1) 2,850 3,059
New Jersey Health Care Fac. Auth. (Helene Fuld Medical Center) 6.60% 7/1/21 (2) 4,080 4,376
New Jersey Health Care Fac. Auth. (Holy Name Hosp.) 5.25% 7/1/20 (2) 4,100 3,900
New Jersey Health Care Fac. Auth. (Memorial Health Alliance) 6.25% 7/1/10 (3) 8,000 8,227
New Jersey Health Care Fac. Auth. (Mercer Medical Center) 6.50% 7/1/10 (1) 6,000 6,424
New Jersey Health Care Fac. Auth. (Mountainside Hosp.) 5.35% 7/1/07 (1) 3,215 3,293
New Jersey Health Care Fac. Auth. (Muhlenberg Medical Center) 8.00% 7/1/18 (2) 750 793
New Jersey Health Care Fac. Auth. (Newark Beth Israel Medical Center) 6.00% 7/1/16 (4) 8,500 8,684
New Jersey Health Care Fac. Auth. (Riverview Medical Center) 6.25% 7/1/10 (2) 2,935 3,204
New Jersey Health Care Fac. Auth. (Shore Medical Center) 6.20% 7/1/13 (2) 3,130 3,300
New Jersey Health Care Fac. Auth. (Shore Medical Center) 6.20% 7/1/14 (2) 3,075 3,233
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO COUPON DATE (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey Health Care Fac. Auth. (Shore Medical Center) 6.25% 7/1/16 (2) $ 2,000 $ 2,107
New Jersey Health Care Fac. Auth. (Society of the Valley Hosp.) 6.625% 7/1/10 (1) 2,750 2,907
New Jersey Health Care Fac. Auth.
(St. Clare's Riverside Medical Center) 5.75% 7/1/14 (1) 7,500 7,606
New Jersey Health Care Fac. Auth. (West Jersey Health System) 6.00% 7/1/09 (1) 5,175 5,408
New Jersey Housing & Mortgage Finance Auth. 7.875% 10/1/17 (1) 450 465
New Jersey Sports & Exposition Auth. VRDO 3.65% 6/5/97 (1) 6,709 6,709
New Jersey Transp. Trust Fund 5.50% 6/15/11 (1) 5,000 5,061
New Jersey Transp. Trust Fund 5.50% 6/15/13 (1) 3,000 3,011
New Jersey Transp. Trust Fund 5.50% 6/15/15 (1) 4,420 4,430
New Jersey Transp. Trust Fund 6.00% 6/15/11 (1) 31,280 33,181
New Jersey Turnpike Auth. VRDO 3.70% 6/4/97 (3) LOC 18,000 18,000
New Jersey Turnpike Auth. 6.50% 1/1/13 (1) 20,000 22,387
Newark NJ General Improvement 5.30% 10/1/06 (2) 1,710 1,746
Newark NJ General Improvement 5.40% 10/1/07 (2) 1,685 1,742
Newark NJ General Improvement 5.50% 10/1/08 (2) 1,660 1,718
Newark NJ Water Util. 5.30% 10/1/06 (2) 2,625 2,681
North Bergen Township NJ GO 8.00% 8/15/06 (4) 1,885 2,309
North Hudson NJ Sewer Auth. 4.60% 8/1/01 (3) 2,050 2,049
North Hudson NJ Sewer Auth. 5.125% 8/1/08 (3) 2,000 2,007
North Hudson NJ Sewer Auth. 5.125% 8/1/22 (3) 7,000 6,608
North Hudson NJ Sewer Auth. 5.25% 8/1/16 (3) 14,360 13,904
North Jersey Water Dist. (Wanaque South Project) 6.00% 7/1/12 (1) 10,125 10,572
Ocean County NJ Util. Auth. Waste Water Rev. 5.00% 1/1/14 (3) 2,000 1,898
Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/18 (3) 4,000 4,255
Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/18 (3)(ETM) 2,500 2,800
Ocean County NJ Util. Auth. Waste Water Rev. 6.75% 1/1/13 (3) 14,810 15,143
Ocean Township NJ Muni. Util. Auth. 6.00% 8/1/17 (1) 3,975 4,276
Old Bridge Township NJ Muni. Util. Auth. 6.25% 11/1/16 (3) 1,400 1,482
Old Bridge Township NJ Muni. Util. Auth. 6.40% 11/1/09 (3) 3,000 3,261
Passaic Valley NJ Sewer Comm. 5.75% 12/1/08 (2) 4,450 4,620
Passaic Valley NJ Sewer Comm. 5.75% 12/1/13 (2) 4,000 4,058
Plainfield NJ GO 6.25% 7/15/07 (2) 6,930 7,474
South Brunswick Township NJ Board of Educ. 6.40% 8/1/22 (3) 2,205 2,341
South Brunswick Township NJ Board of Educ. 6.40% 8/1/23 (3) 2,315 2,458
South Jersey Transp. Auth. 5.90% 11/1/06 (1) 3,435 3,653
South Jersey Transp. Auth. 5.90% 11/1/07 (1) 2,545 2,698
South Jersey Transp. Auth. 6.00% 11/1/12 (1) 5,250 5,466
Stafford NJ Muni. Util. Auth. 5.50% 6/1/11 (3) 3,100 3,123
Sussex County NJ Muni. Util. Auth. Solid Waste Rev. 5.75% 12/1/09 (1) 19,820 20,478
Sussex County NJ Muni. Util. Auth. Waste Water 5.25% 12/1/08 (1) 1,150 1,163
Union County NJ (Plainfield Board of Educ.) 6.25% 8/1/05 (3) 695 758
Union County NJ (Plainfield Board of Educ.) 6.25% 8/1/06 (3) 740 811
Union County NJ (Plainfield Board of Educ.) 6.25% 8/1/07 (3) 785 864
OUTSIDE NEW JERSEY:
Puerto Rico Electric Power Auth. 6.50% 7/1/06 (1) 11,820 13,248
Puerto Rico Public Building Auth. 0.00% 7/1/02 (3) 4,000 3,174
---------
717,862
---------
SECONDARY MARKET INSURED (8.4%)
Atlantic County NJ Util. Auth. Sewer Rev. 6.875% 1/1/12 (2)(ETM) 3,000 3,311
New Jersey Highway Auth. (Garden State Parkway) 6.00% 1/1/16 (2) 5,000 5,106
New Jersey Highway Auth. (Garden State Parkway) 6.20% 1/1/10 (2) 20,000 21,810
New Jersey Sports & Exposition Auth. 6.50% 3/1/13 (1) 10,000 11,201
New Jersey Transp. Trust Fund 4.10% 6/15/97 (4)(ETM) 3,775 3,776
New Jersey Turnpike Auth. 6.50% 1/1/16 (1) 18,250 20,471
Port Auth. of New York & New Jersey 6.875% 1/1/25 (2) 3,200 3,391
Univ. of Medicine & Dentistry NJ 6.50% 12/1/12 (1) 4,000 4,499
---------
73,565
---------
NONINSURED (8.7%)
Burlington County NJ BAN 4.00% 3/12/98 1,956 1,959
Burlington County NJ Bridge Comm. 5.30% 10/1/13 9,500 9,479
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Burlington County NJ GO 4.875% 11/15/97 $ 1,200 $ 1,206
Cherry Hill Township NJ GO 6.30% 6/1/12 3,745 3,982
Mercer County NJ Improvement Auth. 5.75% 12/15/07 1,110 1,183
Mercer County NJ Improvement Auth. 5.75% 12/15/08 1,165 1,237
Mercer County NJ Improvement Auth. 5.95% 12/15/12 4,895 5,212
Mercer County NJ Improvement Auth. 6.00% 12/1/14 1,000 1,039
Mercer County NJ Improvement Auth. 5.375% 9/15/12 11,120 11,033
Monmouth County NJ Improvement Auth. GO (Correctional Fac.) 6.40% 8/1/11 1,850 1,974
Morris County NJ GO 6.00% 7/15/97 1,726 1,731
Morris County NJ GO (County College) 6.00% 7/15/97 199 200
New Jersey Econ. Dev. Auth. PCR VRDO (Exxon Project) 3.65% 6/3/97 300 300
New Jersey GO 5.00% 7/15/97 8,330 8,343
New Jersey Health Care Fac. Finance Auth. VRDO
(Hosp. Capital Assets Pooled Program) 3.65% 6/5/97 LOC 200 200
Ocean County NJ Util. Auth. Waste Water Rev. 6.00% 1/1/06 5,735 6,177
Ocean County NJ Util. Auth. Waste Water Rev. 6.30% 1/1/13 2,215 2,352
Ocean County NJ Util. Auth. Waste Water Rev. 6.35% 1/1/14 2,360 2,509
Ocean County NJ Util. Auth. Waste Water Rev. 6.35% 1/1/15 2,515 2,674
Port Auth. of New York & New Jersey VRDO 4.00% 6/3/97 2,000 2,000
Port Auth. of New York & New Jersey VRDO 4.10% 6/3/97 400 400
Rutgers State Univ. NJ 6.40% 5/1/13 3,000 3,328
Rutgers State Univ. NJ 7.90% 5/1/98 (Prere.) 1,140 1,204
Rutgers State Univ. NJ 8.00% 5/1/98 (Prere.) 1,250 1,321
OUTSIDE NEW JERSEY:
Puerto Rico Govt. Dev. Bank VRDO 3.55% 6/4/97 LOC 5,100 5,100
----------
76,143
----------
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $823,376) 867,570
- -------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.0%)
- -------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 19,255
Liabilities (10,397)
----------
8,858
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------------
Applicable to 76,316,764 outstanding shares of beneficial interest
(unlimited authorization--no par value) $876,428
===============================================================================================================================
NET ASSET VALUE PER SHARE $11.48
===============================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
- -Securities with a value of $2,298,000 have been segregated as initial margin
for open futures contracts.
For explanations of abbreviations and other references, see page 14.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AT MAY 31, 1997, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $832,478 $10.90
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains (225) --
Unrealized Appreciation (Depreciation)--Note E
Investment Securities 44,194 .58
Futures Contracts (19) --
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $876,428 $11.48
==============================================================================================================================
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (95.5%)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bedminster Township NJ BAN 4.00% 1/20/98 $ 900 $ 901
Bergen County NJ Util. Auth. 7.75% 3/1/5/98 (Prere.) 1,750 1,805
Burlington County NJ BAN 4.25% 6/13/97 20,500 20,503
Chatham Township NJ BAN 4.25% 4/17/98 7,539 7,558
Chatham Township NJ Special Emergency Notes 4.25% 4/17/98 48 49
Cherry Hill Township NJ BAN 4.25% 10/15/97 21,263 21,304
Clifton NJ BAN 4.00% 3/12/98 2,500 2,505
Clifton NJ TAN 4.25% 2/13/98 4,900 4,913
Cranbury Township NJ BAN 4.00% 3/11/98 2,800 2,805
East Brunswick Township NJ BAN 4.50% 11/3/97 2,950 2,959
Englewood NJ BAN 4.50% 7/17/97 5,177 5,180
Englewood NJ Notes 4.50% 7/17/97 3,100 3,102
Essex County NJ Improvement Auth. Pooled Govt. Loan VRDO 3.60% 6/4/97 LOC 28,750 28,750
Evesham Township NJ BAN 4.30% 9/25/97 9,896 9,905
Franklin Township NJ BAN 4.00% 6/2/97 1,900 1,900
Franklin Township NJ BAN 4.25% 5/29/98 1,266 1,270
Franklin Township NJ BAN 4.50% 8/21/97 3,496 3,501
Franklin Township NJ GO 5.20% 8/1/97 540 541
Gloucester County NJ PCR VRDO (Mobil Oil Refining Corp. Project) 3.55% 6/4/97 20,200 20,200
Hackensack City NJ BAN 4.00% 6/6/97 7,989 7,989
Hamilton Township NJ BAN 4.30% 9/25/97 2,000 2,002
Hillsborough Township NJ School District 5.30% 10/1/97 (4) 860 865
Lawrence Township NJ BAN 4.125% 11/6/97 3,945 3,950
Linden City NJ BAN 4.50% 6/19/97 3,000 3,001
Livingston Township NJ Auth. 3.78% 2/4/98 2,840 2,841
Mercer County NJ GO 5.00% 9/1/97 1,935 1,941
Mercer County NJ Improvement Auth. BAN
(County Courthouse Project) 3.90% 11/1/97 6,250 6,258
Middlesex County NJ BAN 4.00% 1/27/98 25,000 25,073
Middlesex County NJ TAN 4.00% 2/18/98 11,400 11,436
Middletown Township NJ GO 5.70% 8/1/97 1,575 1,580
Monmouth County NJ BAN 4.375% 8/28/97 3,000 3,004
Monmouth County NJ GO 5.00% 10/1/97 1,350 1,356
Monmouth County NJ VRDO
(Improvement Auth. Pooled Govt. Loan Program) 3.75% 6/4/97 LOC 40,000 40,000
Montgomery Township NJ BAN 4.00% 12/12/97 2,320 2,325
Montgomery Township NJ BAN 4.00% 2/12/98 10,235 10,240
Montgomery Township NJ BAN 4.625% 7/15/97 2,095 2,097
Montvale Borough NJ BAN 4.25% 5/15/98 3,232 3,239
Montville Township NJ BAN 4.40% 8/29/97 9,500 9,512
Morris County NJ BAN 3.98% 8/7/97 13,000 13,006
New Jersey Econ. Dev. Auth. CP (Chambers Cogeneration Project) 3.45% 8/18/97 4,400 4,400
New Jersey Econ. Dev. Auth. CP (Chambers Cogeneration Project) 3.95% 6/2/97 24,700 24,700
New Jersey Econ. Dev. Auth. CP (Logan Project) 3.40% 7/22/97 2,000 2,000
New Jersey Econ. Dev. Auth. CP (Logan Project) 3.60% 8/13/97 5,300 5,300
New Jersey Econ. Dev. Auth. CP (Logan Project) 3.65% 6/2/97 9,200 9,200
New Jersey Econ. Dev. Auth. CP (Logan Project) 3.65% 8/19/97 10,000 10,000
New Jersey Econ. Dev. Auth. PCR VRDO (Exxon Project) 3.65% 6/3/97 12,200 12,200
New Jersey Econ. Dev. Auth. PCR VRDO
(Public Service Electric & Gas Co.) 3.55% 6/4/97 (1) 29,220 29,220
New Jersey Econ. Dev. Auth. VRDO (Lawrence School Project) 3.70% 6/5/97 17,000 17,000
New Jersey Econ. Dev. Auth. VRDO (NJ Natural Gas Project) 3.80% 6/3/97 (2) 11,000 11,000
New Jersey Econ. Dev. Auth. VRDO (NJ Natural Gas Project) 4.05% 6/3/97 15,600 15,600
New Jersey Econ. Dev. Auth. VRDO (Toys R Us) 3.75% 6/3/97 LOC 2,000 2,000
New Jersey Econ. Dev. Auth. Water Fac. TOB VRDO
(NJ American Water Co. Project) 4.00% 6/5/97 (3) 4,850 4,850
New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co.) 3.75% 6/3/97 2,400 2,400
New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co.) 3.80% 6/3/97 43,800 43,800
New Jersey GO 4.50% 7/15/97 31,520 31,545
New Jersey GO TOB VRDO 3.85% 6/5/97 9,370 9,370
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New Jersey Governmental GO 5.80% 8/1/97 $ 2,000 $ 2,006
New Jersey Health Care Fac. Finance Auth. VRDO
(Hosp. Capital Asset Pooled Program) 3.65% 6/5/97 LOC 49,900 49,900
New Jersey Sports & Exposition Auth. VRDO 3.65% 6/5/97 (1) 40,441 40,441
New Jersey TRAN CP 3.90% 6/12/97 5,000 5,000
New Jersey Transp. Trust Fund 4.10% 6/15/97 3,700 3,701
New Jersey Turnpike Auth. VRDO 3.70% 6/4/97 (3) LOC 64,900 64,900
Ocean County NJ BAN 4.25% 6/20/97 10,000 10,002
Ocean County NJ General Improvement GO 5.65% 7/1/97 1,125 1,127
Passaic Valley NJ Sewer Comm. 7.10% 12/1/97 (Prere.) 2,595 2,692
Port Auth. of New York & New Jersey CP 3.50% 8/19/97 5,355 5,355
Port Auth. of New York & New Jersey CP 3.55% 8/20/97 6,110 6,110
Port Auth. of New York & New Jersey CP 3.60% 7/22/97 3,945 3,945
Port Auth. of New York & New Jersey CP 3.60% 7/25/97 4,745 4,745
Port Auth. of New York & New Jersey CP 3.65% 8/14/97 19,185 19,185
Port Auth. of New York & New Jersey CP 3.70% 8/13/97 4,200 4,200
Port Auth. of New York & New Jersey CP 3.75% 8/15/97 4,375 4,375
Port Auth. of New York & New Jersey CP 3.85% 7/18/97 8,025 8,025
Salem County NJ PCR CP (PECO Project) 3.65% 6/2/97 3,400 3,400
Salem County NJ PCR CP (PECO Project) 3.80% 7/18/97 5,000 5,000
Salem County NJ PCR VRDO (Public Service Electric & Gas Co.) 3.70% 6/4/97 6,500 6,500
Sayreville NJ BAN 4.00% 1/16/98 5,000 5,004
South Brunswick Township NJ BAN 4.50% 10/8/97 3,515 3,523
South Orange Village Township NJ BAN 4.25% 10/31/97 3,892 3,900
Southeast Morris County Muni. Util. Auth. RAN 4.25% 1/13/98 4,000 4,012
Union County NJ PCR VRDO (Exxon Project) 3.55% 6/3/97 7,300 7,300
Union County NJ PCR VRDO (Exxon Project) 3.95% 6/3/97 23,300 23,300
Upper Saddle River NJ BAN 4.00% 10/10/97 3,446 3,452
Washington Township NJ BAN 4.00% 12/12/97 4,280 4,288
Watchung NJ BAN 4.25% 5/15/98 6,745 6,764
West Orange Township NJ BAN 4.50% 6/25/97 1,469 1,469
West Windsor Township NJ BAN 4.50% 10/10/97 2,650 2,656
Wyckoff Township NJ BAN 3.95% 11/24/97 645 646
OUTSIDE NEW JERSEY:
Puerto Rico Govt. Dev. Bank VRDO 3.55% 6/4/97 LOC 59,150 59,150
Puerto Rico Highway & Transp. Auth. VRDO 3.55% 6/4/97 LOC 15,400 15,400
Puerto Rico Industrial Medical & Environmental
Fac. Auth. PCR PUT (Abbott Laboratories Project) 3.75% 3/1/98 6,250 6,250
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $923,674) 923,674
- -------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (4.5%)
- -------------------------------------------------------------------------------------------------------------------------------
Receivables for Investment Securities Sold 33,717
Other Assets--Note B 14,015
Liabilities (4,032)
----------
43,700
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------------
Applicable to 967,392,757 outstanding shares of beneficial interest
(unlimited authorization--no par value) $967,374
===============================================================================================================================
NET ASSET VALUE PER SHARE $1.00
===============================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
For explanations of abbreviations and other references, see page 14.
13
<PAGE> 16
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
MONEY MARKET PORTFOLIO (000) SHARE
- ------------------------------------------------------------------------------------------------------------------------------
AT MAY 31, 1997, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $967,409 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (35) --
Unrealized Appreciation -- --
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $967,374 $1.00
==============================================================================================================================
</TABLE>
KEY TO ABBREVIATIONS
BAN--Bond Anticipation Note.
COP--Certificate of Participation.
CP--Commercial Paper.
GO--General Obligation Bond.
IDA--Industrial Development Authority Bond.
IDR--Industrial Development Revenue Bond.
PCR--Pollution Control Revenue Bond.
PUT--Put Option Obligation.
RAN--Revenue Anticipation Note.
TAN--Tax Anticipation Note.
TOB--Tender Option Bond.
TRAN--Tax Revenue Anticipation Note.
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 Indemnity Corporation).
(3) FGIC (Financial Guaranty Insurance Company).
(4) FSA (Financial Security Assurance).
(5) BIGI (Bond Investors Guaranty Insurance).
(6) Connie Lee Inc.
(7) FHA (Federal Housing Authority).
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.
14
<PAGE> 17
STATEMENT OF OPERATIONS
This Statement shows interest earned by each Portfolio during the reporting
period, and details the operating expenses charged to the Portfolio. 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 Portfolio invested in futures contracts during the period, the results of
these investments are shown separately.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
INSURED MONEY
LONG-TERM MARKET
PORTFOLIO PORTFOLIO
--------------------------------
SIX MONTHS ENDED MAY 31, 1997
--------------------------------
(000) (000)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INCOME
Interest $23,554 $16,302
--------------------------------
Total Income 23,554 16,302
--------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 62 69
Management and Administrative 636 714
Marketing and Distribution 102 162
Custodian Fees 8 11
Auditing Fees 4 4
Shareholders' Reports 4 3
Annual Meeting and Proxy Costs 1 1
Trustees' Fees and Expenses 1 1
--------------------------------
Total Expenses 818 965
Expenses Paid Indirectly--Note C (8) (11)
--------------------------------
Net Expenses 810 954
- -----------------------------------------------------------------------------------------
NET INVESTMENT INCOME 22,744 15,348
- -----------------------------------------------------------------------------------------
REALIZED NET GAIN
Investment Securities Sold 459 17
Futures Contracts -- --
- -----------------------------------------------------------------------------------------
REALIZED NET GAIN 459 17
- -----------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities (9,736) --
Futures Contracts (19) --
- -----------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (9,755) --
- -----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $13,448 $15,365
=========================================================================================
</TABLE>
15
<PAGE> 18
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each Portfolio's total net assets changed during the
two most recent reporting periods. The Operations section summarizes
information that is detailed in the Statement of Operations. Because the
Portfolio 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 Portfolio, 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>
- ----------------------------------------------------------------------------------------------------------------------------------
INSURED LONG-TERM PORTFOLIO MONEY MARKET PORTFOLIO
------------------------------- ------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, 1997 NOV. 30, 1996 MAY 31, 1997 NOV. 30, 1996
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 22,744 $ 43,196 $ 15,348 $ 28,089
Realized Net Gain 459 2,070 17 --
Change in Unrealized Appreciation
(Depreciation) (9,755) (6,387) -- --
---------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 13,448 38,879 15,365 28,089
---------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (22,744) (43,196) (15,348) (28,089)
Realized Capital Gain (2,334) (3,940) -- --
---------------------------------------------------------------------------------
Total Distributions (25,078) (47,136) (15,348) (28,089)
---------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 106,152 174,160 467,403 780,375
Issued in Lieu of Cash Distributions 19,436 36,637 14,655 26,843
Redeemed (86,524) (149,600) (432,583) (748,471)
---------------------------------------------------------------------------------
Net Increase from
Capital Share Transactions 39,064 61,197 49,475 58,747
- ----------------------------------------------------------------------------------------------------------------------------------
Total Increase 27,434 52,940 49,492 58,747
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 848,994 796,054 917,882 859,135
---------------------------------------------------------------------------------
End of Period $876,428 $848,994 $967,374 $917,882
==================================================================================================================================
(1)Shares Issued (Redeemed)
Issued 9,273 15,151 467,403 780,375
Issued in Lieu of Cash Distributions 1,697 3,178 14,655 26,843
Redeemed (7,560) (13,024) (432,583) (748,471)
---------------------------------------------------------------------------------
Net Increase in Shares Outstanding 3,410 5,305 49,475 58,747
==================================================================================================================================
</TABLE>
16
<PAGE> 19
FINANCIAL HIGHLIGHTS
This table summarizes each Portfolio's investment results and distributions to
shareholders on a per-share basis. It also presents the Portfolio'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 Portfolio's
net income and total returns from year to year; the relative contributions of
net income and capital gains to the Portfolio's total return; how much it costs
to operate the Portfolio; and the extent to which the Portfolio 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
Portfolio for one year. Money market portfolios do not show a Portfolio
Turnover Rate because securities purchased with less than one year to maturity
are excluded from the calculation of turnover rates.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
INSURED LONG-TERM PORTFOLIO
YEAR ENDED NOVEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ----------------------------------------------------------------
THROUGHOUT EACH PERIOD MAY 31, 1997 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.64 $11.78 $10.40 $11.77 $11.18 $10.75
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .306 .616 .623 .622 .637 .659
Net Realized and Unrealized Gain (Loss)
on Investments (.128) (.082) 1.380 (1.307) .725 .438
--------------------------------------------------------------------------------
Total from Investment Operations .178 .534 2.003 (.685) 1.362 1.097
--------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.306) (.616) (.623) (.622) (.637) (.659)
Distributions from Realized Capital Gains (.032) (.058) -- (.063) (.135) (.008)
-------------------------------------------------------------------------------
Total Distributions (.338) (.674) (.623) (.685) (.772) (.667)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.48 $11.64 $11.78 $10.40 $11.77 $11.18
==================================================================================================================================
TOTAL RETURN 1.57% 4.75% 19.66% -6.10% 12.53% 10.48%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $876 $849 $796 $645 $748 $572
Ratio of Total Expenses to
Average Net Assets 0.19%* 0.20% 0.21% 0.21% 0.20% 0.25%
Ratio of Net Investment Income to
Average Net Assets 5.35%* 5.35% 5.50% 5.53% 5.47% 5.99%
Portfolio Turnover Rate 11%* 11% 7% 13% 12% 34%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
17
<PAGE> 20
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
YEAR ENDED NOVEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -----------------------------------------------------------------
THROUGHOUT EACH PERIOD MAY 31, 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .016 .032 .035 .025 .023 .030
Net Realized and Unrealized Gain (Loss)
on Investments -- -- -- -- -- --
---------------------------------------------------------------------------------
Total from Investment Operations .016 .032 .035 .025 .023 .030
---------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.016) (.032) (.035) (.025) (.023) (.030)
Distributions from Realized Capital Gains -- -- -- -- -- --
---------------------------------------------------------------------------------
Total Distributions (.016) (.032) (.035) (.025) (.023) (.030)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=================================================================================================================================
TOTAL RETURN 1.62% 3.22% 3.60% 2.49% 2.31% 3.04%
=================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $967 $918 $859 $792 $724 $627
Ratio of Total Expenses to
Average Net Assets 0.20%* 0.20% 0.21% 0.21% 0.20% 0.24%
Ratio of Net Investment Income to
Average Net Assets 3.23%* 3.17% 3.53% 2.46% 2.29% 2.98%
Portfolio Turnover Rate N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
18
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
Vanguard New Jersey Tax-Free Fund is registered under the Investment Company
Act of 1940 as an open-end investment company, or mutual fund, and comprises
the Insured Long-Term and Money Market Portfolios. Each Portfolio 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
Jersey.
A. The following significant accounting policies conform to generally
accepted accounting principles for mutual funds. The Fund consistently follows
such policies in preparing its financial statements.
1. SECURITY VALUATION: Money Market Portfolio: Investment securities
are valued at amortized cost, which approximates market value. Insured
Long-Term Portfolio: 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 credit ratings), both as furnished by independent
pricing services. Other temporary cash investments are valued at amortized
cost, which approximates market value.
2. FEDERAL INCOME TAXES: Each Portfolio 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 Portfolio 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 Portfolio may purchase or sell futures contracts instead
of bonds to take advantage of pricing differentials between the futures
contracts and the underlying bonds. The Portfolio 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
Portfolio 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. Capital gains 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.
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.
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. At May 31, 1997, the Fund had contributed capital aggregating
$147,000 to Vanguard (included in Other Assets), representing 0.7% of Vanguard's
capitalization. The Fund's trustees and officers are also directors and
officers of Vanguard.
19
<PAGE> 22
C. The Fund's custodian bank has agreed to reduce its fees when the Fund
maintains cash on deposit in the non-interest-bearing custody account. For the
six months ended May 31, 1997, custodian fee offset arrangements reduced
expenses of the Insured Long-Term and Money Market Portfolios by $8,000 and
$11,000, respectively.
D. During the six months ended May 31, 1997, the Insured Long-Term
Portfolio purchased $72,200,000 of investment securities and sold $43,311,000
of investment securities, other than temporary cash investments.
E. At May 31, 1997, net unrealized appreciation of Insured Long-Term
Portfolio investment securities for financial reporting and federal income tax
purposes was $44,194,000, consisting of unrealized gains of $44,455,000 on
securities that had risen in value since their purchase and $261,000 on
securities that had fallen in value since their purchase.
At May 31, 1997, the aggregate settlement value of open futures
contracts expiring in June 1997 and the related unrealized depreciation were:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(000)
-------------------------------
AGGREGATE
NUMBER OF SETTLEMENT UNREALIZED
PORTFOLIO/FUTURES CONTRACTS SHORT CONTRACTS VALUE DEPRECIATION
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Insured Long-Term/
U.S. Treasury Bond 190 $20,906 $(19)
- ------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
TRUSTEES AND OFFICERS
JOHN C. BOGLE, Chairman of the Board and Director of The Vanguard Group, Inc.
and of each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN, President, Chief Executive Officer, and Director of The
Vanguard Group, Inc. and of each of the investment companies
in The Vanguard Group.
ROBERT E. CAWTHORN, Chairman Emeritus and Director of Rhone-Poulenc Rorer,
Inc.; Managing Director of Global Health Care Partners/DLJ
Merchant Banking Partners; Director of Sun Company, Inc. and
Westinghouse Electric Corp.
Barbara Barnes Hauptfuhrer, Director of The Great Atlantic and Pacific Tea Co.,
Ikon Business Solutions, Inc., Raytheon Co., Knight-Ridder,
Inc., and Massachusetts Mutual Life Insurance Co.; Trustee
Emerita of Wellesley College.
BURTON G. MALKIEL, Chemical Bank Chairman's Professor of Economics, Princeton
University; Director of Prudential Insurance Co. of America,
Amdahl Corp., Baker Fentress & Co., The Jeffrey Co., and
Southern New England Communications 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., and NACCO
Industries.
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.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY, Secretary; Senior Vice President and
Secretary of The Vanguard Group, Inc.; Secretary of each of the
investment companies in The Vanguard Group.
RICHARD F. HYLAND, 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
ROBERT A. DISTEFANO, Senior Vice President, Information Technology.
JAMES H. GATELY, Senior Vice President, Individual Investor Group.
IAN A. MACKINNON, Senior Vice President, Fixed Income Group.
F. WILLIAM MCNABB III, Senior Vice President, Institutional Investor Group.
RALPH K. PACKARD, Senior Vice President and Chief Financial Officer
[THE VANGUARD GROUP LOGO]
Please send your comments to us at:
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
http://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 investing or sending money. Prospectuses
may be obtained directly from The Vanguard Group.
(C) 1997 Vanguard Marketing Corporation, Distributor
<PAGE> 24
THE VANGUARD FAMILY OF FUNDS
EQUITY AND BALANCED FUNDS
GROWTH AND INCOME FUNDS
Vanguard/Windsor Fund
Vanguard/Windsor II
Vanguard Equity Income Fund
Vanguard Growth and Income Portfolio
Vanguard Selected Value Portfolio
Vanguard/Trustees' Equity-U.S. Portfolio
Vanguard Convertible Securities Fund
BALANCED FUNDS
Vanguard/Wellington Fund
Vanguard/Wellesley Income Fund
Vanguard STAR Portfolio
Vanguard Asset Allocation Fund
Vanguard LifeStrategy Portfolios
GROWTH FUNDS
Vanguard/Morgan Growth Fund
Vanguard/PRIMECAP Fund
Vanguard U.S. Growth Portfolio
AGGRESSIVE GROWTH FUNDS
Vanguard Explorer Fund
Vanguard Specialized Portfolios
Vanguard Horizon Fund
INTERNATIONAL FUNDS
Vanguard International Growth Portfolio
Vanguard International Value Portfolio
INDEX FUNDS
Vanguard Index Trust
Vanguard Tax-Managed Fund
Vanguard Balanced Index Fund
Vanguard Bond Index Fund
Vanguard International Equity Index Fund
Vanguard Total International Portfolio
FIXED-INCOME FUNDS
MONEY MARKET FUNDS
Vanguard Money Market Reserves
Vanguard Treasury Money Market Portfolio
Vanguard Admiral Funds
INCOME FUNDS
Vanguard Fixed Income Securities Fund
Vanguard Admiral Funds
Vanguard Preferred Stock Fund
TAX-EXEMPT MONEY MARKET FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds
(CA, NJ, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds
(CA, FL, NJ, NY, OH, PA)
Q142-5/97
