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VANGUARD
NEW JERSEY
TAX-FREE FUND
Annual Report - November 30, 1997
[PHOTO]
[THE VANGUARD GROUP LOGO]
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OUR CREW MAKES THE DIFFERENCE
Throughout our history, The Vanguard Group has received considerable attention
as the low-cost provider of mutual funds. While such accolades are gratifying,
we are most proud, not of our low operating expenses or the billions of dollars
we manage, but of our sterling reputation created by the Vanguard crew.
We recognize that it is our crew members--more than 6,000 highly
motivated men and women--who form the cornerstone of our operations. As with
any cornerstone, we could not survive long--let alone prosper--without it.
That's why we chose this fiscal year's annual report to celebrate the spirit,
enthusiasm, and achievements of our crew. (We call those who work at Vanguard
crew members, not employees, because they operate as a team to accomplish our
mission of serving you, our clients.)
But while we prize the collective contributions of our crew, we also
take time to recognize the importance of the individual. Each calendar quarter,
we present our Award For Excellence to a handful of crew members who have
demonstrated particular excellence in the performance of their jobs and who
embody "The Vanguard Spirit." Our report cover shows only a few of the more
than 300 crew members who have received this distinction since 1984.
They, along with the rest of our valiant crew, look forward to serving
you in the years ahead.
[PHOTO] [PHOTO]
John C. Bogle John J. Brennan
Chairman President
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
A MESSAGE TO OUR SHAREHOLDERS . . . . . . . . . . . . 1
THE MARKETS IN PERSPECTIVE . . . . . . . . . . . . . 4
REPORT FROM THE ADVISER . . . . . . . . . . . . . . . 6
PERFORMANCE SUMMARIES . . . . . . . . . . . . . . . . 8
PORTFOLIO PROFILES . . . . . . . . . . . . . . . . . 10
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . 13
REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . 26
</TABLE>
All comparative mutual fund data are from Lipper Analytical Services, Inc., or
Morningstar unless otherwise noted.
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DEAR SHAREHOLDER,
During the twelve months ended November 30--Vanguard New Jersey
Tax-Free Fund's 1997 fiscal year--the prices of tax-exempt bonds edged higher,
reflecting a modest decline in long-term interest rates in the face of continued
mild inflation. Short-term interest rates, on the other hand, moved slightly
higher.
In this environment, the +3.3% return of our Money Market Portfolio
exceeded the 3.0% return of its peers, while the +6.4% return of our Insured
Long-Term Portfolio matched the return earned by its peers. The table at right
presents each Portfolio's twelve-month return, as well as its income and capital
components.
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 $11.72 per share on November 30, 1997,
adjusted for dividends totaling $0.608 per share from net investment income and
distributions totaling $0.032 per share from net realized capital gains. The
Money Market Portfolio's net asset value remained at $1 per share, as is
expected but not guaranteed. At the end of the fiscal year, the Insured
Long-Term Portfolio's yield stood at 4.70%, the Money Market Portfolio's yield
at 3.50%.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
COMPONENTS OF TOTAL RETURNS
FISCAL YEAR ENDED NOVEMBER 30, 1997
-------------------------------------
PORTFOLIO INCOME CAPITAL TOTAL
- ----------------------------------------------------------------
<S> <C> <C> <C>
Money Market +3.3% 0.0% +3.3%
Insured Long-Term +5.4 +1.0 +6.4
- ----------------------------------------------------------------
</TABLE>
FISCAL 1997 PERFORMANCE OVERVIEW
Steady economic growth teamed with low inflation to create a near-perfect
environment for investors over the past twelve months. Interest rates began the
period heading higher, a climb that was punctuated in March when the Federal
Reserve Board raised its target for short-term rates by 25 basis points.
However, that small increase was the only Fed action of the year. After peaking
in mid-April, the yield on the benchmark U.S. Treasury long-term bond headed
down to end the twelve months at 6.05%, more than one full percentage point
lower than its apex of 7.17% on April 14. Yields on high-grade, long-term
municipal bonds ended the period at 5.36%, down from 5.66% at the end of
November 1996. Yields on top-grade short-term (MIG-1) notes rose on balance to
3.80% from 3.55% a year earlier.
While the economic environment was kind to bonds, it truly worked
wonders for equities. Low inflation, continued strong growth in corporate
earnings, and a record level of consumer confidence combined to drive stocks
upward. Despite a severe shock in late October, the Standard & Poor's 500
Composite Stock Price Index posted a return of +28.5% for the fiscal year ended
November 30.
This year's generally placid interest-rate environment marked the
second straight year of relative tranquillity in the bond market. However, we
need not look far back for evidence that calm is by no means a constant in the
bond market. During fiscal 1995, bond prices soared as interest rates fell
sharply. Just the opposite was true during 1994, when the bond market suffered
one of its worst years ever. For bond fund investors, the important lesson is
that fluctuations in bond (and bond fund) prices, which can have a significant
impact on returns from year to year, tend to wash away over longer periods,
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<PAGE> 4
leaving the rate of interest income--the coupon--as the dominant source of long-
term returns.
The +6.4% annual total return for the New Jersey Insured Long-Term
Portfolio matched that of the average New Jersey municipal bond fund, but fell
behind the +7.2% return of the Lehman Brothers Municipal Bond Index. This "all-
state" Index is a tough standard for any single state tax-free fund, existing,
as it does, outside the real world of operating expenses and transaction costs.
Our total return received a slight boost from the price increase engendered by
the decline in interest rates, but the lion's share of our return during the
twelve months came from interest income. The +3.3% return of our Money Market
Portfolio, all of which came from interest income, outpaced the +3.0% return of
its average peer.
THE MUNICIPAL BOND TAX ADVANTAGE
For New Jersey residents, the income earned by our Portfolios is exempt from
state, local, and federal income taxes. Given these advantages, investors in the
New Jersey Insured Long-Term Portfolio who are taxed at the highest combined
federal-state marginal tax rate can earn 59% more after-tax income than they
could in a comparable long-term taxable bond fund. For similarly situated
investors in our Money Market Portfolio, the yield of MIG-1 notes at the end of
the fiscal year was 31% higher than the after-tax yield of three-month U.S.
Treasury bills. Put another way, a yield of 5.4% on a tax-exempt long-term
portfolio would be the equivalent of a 9.6% taxable yield to New Jersey
taxpayers subject to the highest tax rates. For a tax-exempt short-term yield of
3.8%, the taxable equivalent would be 6.7%. These advantages are truly
remarkable, as reflected in the table at left, which generally compares the
annual net income earned on tax-exempt and taxable securities as of November 30,
1997, assuming a $100,000 investment.
<TABLE>
<CAPTION>
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ILLUSTRATION OF INCOME ON A
HYPOTHETICAL $100,000 INVESTMENT
---------------------------------
SHORT-TERM LONG-TERM
- -------------------------------------------------------------------------
<S> <C> <C>
Taxable gross income $ 5,200 $ 6,100
Less taxes (43.5%) (2,300) (2,700)
Net after-tax income 2,900 3,400
- -------------------------------------------------------------------------
Tax-exempt income $3,800 $ 5,400
- -------------------------------------------------------------------------
Tax-exempt income advantage $ 900 $ 2,000
- -------------------------------------------------------------------------
Percentage advantage 31% 59%
- -------------------------------------------------------------------------
</TABLE>
The illustration assumes current yields (as of November 30, 1997) of 6.1% for
long-term U.S. Treasury bonds, 5.2% for U.S. Treasury bills, 5.4% for long-term
municipals, and 3.8% for short-term municipals. The tax adjustment assumes a
typical itemized tax return based on a federal tax rate of 39.6% and the top
state tax rate of 6.4%; local taxes are not considered. This illustration is not
intended to represent future results.
We emphasize that these examples ignore two important differences in
credit quality between state-specific municipal bond funds and U.S. Treasury
bond funds: (1) Treasuries are backed by the full faith and credit of the U.S.
government; and (2) state-specific municipal bond funds incur a significant risk
by concentrating assets in securities from a particular economic region.
For our Insured Long-Term Portfolio, the added credit risk is
substantially mitigated by private insurance, which in effect guarantees the
full payment of annual income and the return of principal at maturity for the
municipal bonds we hold.
Because portfolio insurance is generally not available for short-term
securities, the task of preserving principal in our Money Market Portfolio falls
to our investment adviser, Vanguard Fixed Income Group. This Group scrutinizes
the credit quality of our holdings,
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which on average have earned Moody's Investors Service's highest quality rating.
That said, we point out 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 accompanying table compares the longer-term performance of our Portfolios
with those of their average peer mutual funds. It also illustrates our
performance edge over our competitors--a difference we call the "Vanguard
Advantage."
Our expense-ratio advantage over our typical competitor plays a key
role in our performance advantage. Our Portfolios maintain expense ratios
(annual expenses as a percentage of average net assets) of about 0.20%, compared
with the 1.04% expense ratio of the average competitive long-term state tax-free
fund, and 0.60% for the average state tax-free money market fund. This cost
savings, which flows directly to our shareholders, has been available year after
year, and we expect it to continue to aid us in our goal of providing returns
that exceed those of our competitive norms. Vanguard Fixed Income Group plays a
key role too, managing the Portfolios ably and maintaining a level of investment
quality that we believe is without peer in the industry.
<TABLE>
<CAPTION>
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TOTAL RETURNS
FEBRUARY 3, 1988,* TO NOVEMBER 30, 1997
-------------------------------------------------------------------------
AVERAGE FINAL VALUE OF A
ANNUAL RATE $10,000 INITIAL INVESTMENT**
-------------------------------------------------------------------------
AVERAGE AVERAGE
VANGUARD COMPETING VANGUARD COMPETING VANGUARD
PORTFOLIO PORTFOLIO FUND PORTFOLIO FUND ADVANTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market +3.9% +3.8% $14,629 $14,373 $ 256
Insured Long-Term +8.2 +7.6 21,659 20,624 1,035
- ----------------------------------------------------------------------------------------------------
</TABLE>
*Fund inception.
**Assuming reinvestment of all income dividends and capital gains distributions.
Over the past several years--indeed, on balance for more than 15
years--bond investors have benefited from returns that are above historical
averages. Because long-term yields are at lower levels today than for most of
the recent past, it is virtually certain that returns for the next decade will
not match those of the past decade.
IN SUMMARY
Bond investors have enjoyed a long period of generally declining interest rates,
while stock investors have experienced a stretch that is nothing short of
remarkable. But a sensible investor understands that the financial markets are
not a one-way street. Risk is an ever-present element of investing, even when
the markets are providing generous rewards.
That said, the greatest risk is not investing in the first place. We
believe that a sound method for dealing with risk is to construct a balanced
investment program of stock funds, bond funds, and reserves, one that is suited
to your objectives, financial situation, tolerance for risk, and time horizon.
If you have such a program in place, you should be prepared to "stay the course"
toward your investment goals, no matter what lies ahead.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Chairman of the Board President
December 19, 1997
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<PAGE> 6
THE MARKETS IN PERSPECTIVE
Year Ended November 30, 1997
U.S. EQUITY MARKETS
The fiscal year ended November 30 tested investors' mettle on a number of
occasions, but most ended on a positive note. The increasingly global nature of
investing has rarely been more in evidence than it was over the period. Turmoil
in Southeast Asia raised serious questions about future growth in the region
and, significantly, called into question the earnings outlook for U.S. companies
with exposure there.
Over the 12 months, large-capitalization stocks continued their
advance, propelling the S&P 500 Index to a 28.5% gain. Small-cap stocks also
fared well, as illustrated by the 23.4% increase of the Russell 2000 Index.
These gains withstood a rocky October, when the sharp declines in Asian markets
led many investors to question their expectations regarding U.S. equities.
Although the domestic market dropped substantially--the Dow Jones Industrial
Average fell 554 points, or 7.2%, on October 27--it then rebounded smartly over
the next few days.
Among large-cap stocks, the financial services sector was again one
of the best performers, with an increase of 34.8% in fiscal 1997. Also
noteworthy was a November surge in utility stocks, which brought that sector's
12-month return up to 34.5%. Utilities, those seemingly perennial
cellar-dwellers, were boosted by a drop in interest rates and by a general
consensus that their valuations at last adequately reflected the risks
associated with the new competitive landscape. In the final quarter of the
fiscal year, utility stocks jumped 23.6%, roughly three times the return
generated by the S&P 500 Index (6.7%). In sharp contrast were a number of market
sectors that felt the brunt of the disarray in Asian economies and--while
showing positive gains for the year--turned in negative fourth fiscal quarters.
As the fiscal year ended, there were growing indications from technology and
manufacturing companies that the economic distress in Southeast Asia would
likely reduce their current and future earnings.
<TABLE>
<CAPTION>
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AVERAGE ANNUALIZED RETURNS
PERIODS ENDED NOVEMBER 30, 1997
--------------------------------------
1 YEAR 3 YEARS 5 YEARS
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY
S&P 500 Index 28.5% 31.1% 20.2%
Russell 2000 Index 23.4 22.7 16.8
MSCI EAFE Index -0.1 6.5 11.6
- ---------------------------------------------------------------------------------
FIXED INCOME
Lehman Aggregate Bond Index 7.6% 10.3% 7.6%
Lehman 10-Year Municipal Bond Index 7.1 10.3 7.5
Salomon Brothers Three-Month
U.S. Treasury Bill Index 5.2 5.4 4.7
- ---------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.8% 2.6% 2.6%
- ---------------------------------------------------------------------------------
</TABLE>
While small-company stocks failed to match the outsized advance of
the S&P 500 Index, their performance grew notably stronger in the second half of
the fiscal year. For the year, the Russell 2000 Index gained 23.4%. During the
second six months, the Russell 2000's 13.8% essentially matched the S&P 500's
13.6%. The improved performance of smaller companies cannot be attributed to any
single factor, but is, rather, due to a combination of attractive valuations and
good earnings.
4
<PAGE> 7
U.S. FIXED-INCOME MARKETS
Bonds were overshadowed by stocks for much of the year. Investors' returns from
bonds, however, were quite respectable. As the year progressed, investors grew
more confident that four seemingly strange bedfellows--strong economic growth,
reasonable inflation, low unemployment, and stable wage growth--would continue
to coexist peacefully. As a result, when interest rates dipped noticeably toward
the fiscal year's end, they fell furthest for issues with the longest
maturities. The yield on the 30-year U.S. Treasury bond closed the fiscal year
at 6.05%, compared to 6.35% on November 30, 1996. Falling rates flattened the
yield curve considerably: Only 0.85% separated the yield on Treasury bills from
the yield on the 30-year issue, down from a spread of 1.22% at the previous
fiscal year-end.
The positive effect of the yield drop on bond prices was apparent in
the 7.6% return of the Lehman Aggregate Bond Index, the broadest measure of
investment-grade issues. Investors in lower-quality securities fared even
better, as shown by the 12.6% gain of the Lehman High Yield Bond Index. The
strength of the economy, together with the lack of inflationary pressure,
produced an ideal environment for junk bonds.
INTERNATIONAL EQUITY MARKETS
Arguably, investors' greatest disappointments were in international
markets--and, of course, Asian markets in particular. During the fiscal year,
the Morgan Stanley Capital International (MSCI) Pacific Index declined by 26.3%
in U.S. dollar terms; the index fell 17.3% in the fourth quarter alone. Among
individual markets, the fiscal year saw sharp declines (in U.S. dollar terms) in
Japan, down 24.5%, including a 16.1% drop in the fourth quarter; Hong Kong, down
25%; Malaysia, down 68%; and Singapore, down 23%. The general slump in Asian
markets began in midsummer with currency devaluations by a number of countries.
Because the values of many of these currencies had been linked to the U.S.
dollar, their fall caused it to appreciate greatly--so much so that Asian
businesses soon found it difficult to purchase American-made products and to
repay dollar-denominated loans. This situation raised questions about how the
region's economic growth would be affected. Related worries focused on imprudent
aspects of various countries' financial systems and the probability of corporate
bankruptcies. In short, there was no place to hide.
By contrast, the European markets continued to provide U.S. investors
with solid returns, although they, too, stumbled in late October and recovered
in November. The MSCI Europe Index posted a gain of 21.8% for the 12 months. The
robust character of the European markets reflects strong corporate earnings and
optimism that the European Monetary Union will provide a solid framework for
future fiscal responsibility and economic growth.
5
<PAGE> 8
REPORT FROM THE ADVISER
Long-term tax-exempt bonds enjoyed a light tailwind in the 12 months
ended November 30, 1997, the fiscal year for Vanguard New Jersey Tax-Free Fund.
A slight decline in bond yields raised the prices of existing bonds, augmenting
returns from interest income. Yields on short-term tax-exempt securities rose
slightly on balance over the year.
THE INSURED LONG-TERM PORTFOLIO
For the Insured Long-Term Portfolio, fiscal 1997 was another period of positive
performance. As in the previous fiscal year, most of our return represented
coupon income derived from Portfolio holdings. Because of Vanguard's
characteristically low expense ratio--0.18% of average net assets in fiscal
1997--the vast majority of the gross interest collected by the Portfolio flows
through to shareholders.
During the fiscal year, yields on 30-year high-quality municipal
securities fell 0.20 percentage point, from 5.45% to 5.25%. In comparison, the
yield on the 30-year U.S. Treasury bond declined 0.30 percentage point, from
6.35% to 6.05%. Despite the relatively narrow difference between yields at the
beginning and end of the year, the path was far from direct.
During the first half of the year, robust expansion of the U.S.
economy and steady job growth caused concern among fixed-income investors that
inflation would accelerate. Yields rose, and in April the yield on the 30-year
Treasury bond peaked at 7.17%. However, inflation remained in check, and
investors came to welcome the economy's steady growth as sustainable without
upward price pressure. This led to a rally in bond prices after midyear. Later,
the bond market got an additional boost from a dramatic meltdown in Asian
currency and equity markets. This instability triggered a "flight to quality" in
which many investors bought U.S. Treasury securities, pushing yields even lower.
(A "flight to quality" is a movement of capital to the safest investments as
people seek to protect themselves from loss during an unsettling period in a
market.)
Two factors in the tax-exempt bond market have led to tightened yield
differentials between bond sectors. First, the current environment of low
interest rates has prompted many fixed-income investors to stretch for
additional yield by purchasing low-quality securities. This additional demand
has reduced the interest-rate premium that investors normally require before
they will buy bonds with poorer credit quality. Second, the increased use of
municipal bond insurance by issuers to boost the credit quality of their
securities reduced the availability of low-investment-grade securities. Today,
approximately 50% of all new municipal bond issues are insured and carry an AAA
rating.
The combination of increased demand for and diminished supply of
lower-quality securities has caused a dramatic decline in the yield spreads
between tax-exempt bonds of higher and lower credit quality. For example, at the
beginning of fiscal 1997, an investor
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could receive 0.75 percentage point of additional income for purchasing the
lowest-quality investment-grade municipal bond rather than the highest-quality
bond. By November 30, that spread had fallen to only 0.35 percentage point. We
do not expect a continued tightening of quality spreads, but we cannot predict
when spreads might widen. In the meantime, shareholders in the Insured Long-Term
Portfolio are getting the highest credit quality while giving up very little in
incremental yield.
Vanguard's low-cost structure proved its value during the fiscal year
as investors tended to stretch further for yield and reduced their credit
protection. The powerful advantage of our low expense ratio--0.18% versus 1.04%
for the average long-term state tax-free fund--allows more tax-exempt investment
income to flow directly to shareholders without requiring us to incur higher
credit risk. Cost has been especially important in recent years when income, not
capital change, has accounted for the majority of return for fixed-income
investments. Over the long-term, low expenses correlate directly with superior
portfolio performance.
In summary, we think that the current environment bodes well for
tax-exempt investors. With moderate economic growth and subdued inflation,
fixed-income investments offer a consistent, durable return, which provides an
important anchor to windward in a diversified portfolio. In this realm, the
Insured Long-Term Portfolio offers the advantages of low expenses, high credit
quality, and income that is exempt from both state and federal taxes. It is a
combination difficult to surpass.
THE MONEY MARKET PORTFOLIO
Yields on one-year, tax-exempt money market instruments remained essentially
unchanged during the second half of the fiscal year, despite the onset of
summer's busy municipal borrowing season. The benchmark one-year MIG-1 note
closed the fiscal year with a yield of 3.80%, up 0.25 percentage point from the
yield at the start of the period. By way of comparison, we note that the yield
on one-year U.S. Treasury bills rose only 0.14 percentage point on balance over
the fiscal year, finishing with a yield of 5.49%. This increase was marginal
despite an increase of 0.25 percentage point in the federal funds rate
engineered in March by the Federal Reserve Board's Open Market Committee. The
net result of these market movements was a more favorable environment for
municipal money market investors, as the ratio of one-year MIG-1 note yields to
yields on one-year Treasuries rose from 66.4% at the start of the fiscal year to
69.2% at its end.
The Money Market Portfolio is positioned neutrally as we begin the
new fiscal year. This strategy affords the Portfolio maximum flexibility in the
face of uncertainty, as the financial markets weigh the strength demonstrated by
the U.S. economy against the potential impact of continued economic turmoil in
Asia. What is certain, however, is that Vanguard New Jersey Tax-Free Fund will
continue to be managed conservatively with an emphasis on high quality. This
will allow the consistency and durability of Vanguard's low expenses to work on
behalf of our shareholders.
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
Vanguard Fixed Income Group
December 19, 1997
INVESTMENT PHILOSOPHY
The adviser believes that each Portfolio, while operating within stated maturity
and stringent quality targets, can achieve a high level of current income that
is exempt from federal and New Jersey income taxes by investing in insured and
high-quality uninsured securities issued by New Jersey state, county, and
municipal governments.
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PERFORMANCE SUMMARY
Money Market Portfolio
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the Portfolio. 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.
TOTAL INVESTMENT RETURNS: FEBRUARY 3, 1988-NOVEMBER 30, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
MONEY MARKET PORTFOLIO AVERAGE
FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------------
<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 3.3 3.3 3.0
- ---------------------------------------------------------------
</TABLE>
*Average New Jersey Tax-Exempt Money Market Fund.
See Financial Highlights table on page 22 for dividend information for the past
five years.
CUMULATIVE PERFORMANCE: FEBRUARY 3, 1988-NOVEMBER 30, 1997
- ----------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE NEW JERSEY
TAX-EXEMPT
MONEY MARKET PORTFOLIO MONEY MARKET FUND
<S> <C> <C>
2/3/88 10000 10000
1988 02 10031 10031
1988 05 10150 10150
1988 08 10278 10283
1988 11 10420 10430
1989 02 10573 10570
1989 05 10752 10761
1989 08 10917 10932
1989 11 11079 11095
1990 02 11237 11234
1990 05 11402 11409
1990 08 11559 11575
1990 11 11721 11740
1991 02 11869 11865
1991 05 12001 12014
1991 08 12127 12134
1991 11 12253 12263
1992 02 12360 12342
1992 05 12458 12451
1992 08 12541 12520
1992 11 12626 12602
1993 02 12702 12647
1993 05 12774 12728
1993 08 12845 12783
1993 11 12919 12854
1994 02 12986 12891
1994 05 13061 12975
1994 08 13141 13039
1994 11 13241 13136
1995 02 13355 13217
1995 05 13482 13352
1995 08 13598 13450
1995 11 13717 13565
1996 02 13829 13642
1996 05 13940 13762
1996 08 14047 13851
1996 11 14159 13957
1997 02 14270 14035
1997 05 14389 14161
1997 08 14507 14258
1997 11 14629 14373
</TABLE>
<TABLE>
<CAPTION>
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AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1997
-----------------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Portfolio 3.32% 2.99% 3.95% $14,629
Average New Jersey Tax-Exempt
Money Market Fund 2.98 2.66 3.76 14,373
- --------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1997*
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -----------------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market Portfolio 2/3/1988 3.29% 2.96% 0.00% 3.96% 3.96%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
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PERFORMANCE SUMMARY
Insured Long-Term Portfolio
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the Portfolio. Note, too, that
both share price and return can fluctuate widely so that an investment in the
Portfolio could lose money.
TOTAL INVESTMENT RETURNS: FEBRUARY 3, 1988-NOVEMBER 30, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
INSURED LONG-TERM PORTFOLIO LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ------------------------------------------------------------------------------------
<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 1.0 5.4 6.4 7.2
- ------------------------------------------------------------------------------------
</TABLE>
*Lehman Municipal Bond Index.
See Financial Highlights table on page 23 for dividend and capital gains
information for the past five years.
CUMULATIVE PERFORMANCE: FEBRUARY 3, 1988-NOVEMBER 30, 1997
- ------------------------------------------------------------
<TABLE>
<CAPTION>
INSURED LONG-TERM AVERAGE NEW JERSEY LEHMAN MUNICIPAL
PORTFOLIO MUNICIPAL FUND BOND INDEX
<S> <C> <C> <C>
2/3/88 10000 10000 10000
1988 02 10108 10107.929 10108
1988 05 9987 9849.1660176 10037
1988 08 10278 10148.580664535 10259
1988 11 10598 10505.810703927 10532
1989 02 10858 10743.242025835 10736
1989 05 11388 11183.081097615 11192
1989 08 11484 11321.751303226 11386
1989 11 11850 11611.588136588 11692
1990 02 11847 11658.034489134 11837
1990 05 12071 11849.226254756 12011
1990 08 12107 11904.917618154 12117
1990 11 12758 12465.639237969 12592
1991 02 13154 12788.499294232 12928
1991 05 13427 13108.211776588 13222
1991 08 13695 13451.646925134 13545
1991 11 13907 13739.512169332 13884
1992 02 14274 14065.138607746 14219
1992 05 14572 14388.636795724 14520
1992 08 15164 14929.649539243 15057
1992 11 15365 15087.903824359 15275
1993 02 16495 16071.635153707 16175
1993 05 16650 16158.421983537 16257
1993 08 17280 16816.069758267 16894
1993 11 17290 16831.204221049 16968
1994 02 17386 16896.845917512 17070
1994 05 16962 16334.180948458 16658
1994 08 17230 16585.727335065 16924
1994 11 16236 15588.925122227 16082
1995 02 17865 16896.835939982 17398
1995 05 18580 17571.019693987 18182
1995 08 18669 17694.016831845 18426
1995 11 19427 18378.775283238 19123
1996 02 19597 18509.264587749 19321
1996 05 19219 18177.948751628 19012
1996 08 19583 18506.969624033 19391
1996 11 20350 19245.397712031 20247
1997 02 20463 19332.002001736 20385
1997 05 20669 19505.990019751 20587
1997 08 21196 20022.898755275 21185
1997 11 21659 20624 21699
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1997
----------------------------------------
SINCE FINAL VALUE OF A
1 YEAR 5 YEARS INCEPTION $10,000 INVESTMENT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured Long-Term Portfolio 6.40% 7.10% 8.19% $21,659
Average New Jersey Municipal Fund 6.44 6.38 7.65 20,624
Lehman Municipal Bond Index 7.17 7.27 8.21 21,699
- -----------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1997*
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
SINCE INCEPTION
INCEPTION -----------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Insured Long-Term Portfolio 2/3/1988 8.20% 7.17% 1.95% 6.29% 8.24%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
9
<PAGE> 12
PORTFOLIO PROFILE
Money Market Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
November 30, 1997. Key elements of this Profile are defined on page 11.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ---------------------------------
<S> <C>
Yield 3.5%
Average Maturity 56 days
Average Quality MIG-1
Expense Ratio 0.20%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- ----------------------------------------------------
<S> <C>
MIG-1/SP-1+ 55.1%
A-1/P-1 20.4
AAA/AA 17.7
A 6.8
- ----------------------------------------------------
Total 100.0%
</TABLE>
10
<PAGE> 13
AVERAGE COUPON. The average interest rate paid on the securities held by a
portfolio. It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond portfolio's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the portfolio's duration by the change in rates. If interest
rates rise by one percentage point, the share price of a portfolio with an
average duration of five years would decline by about 5%. If rates decrease by a
percentage point, the portfolio's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a portfolio
reach maturity (or are called) and are repaid. In general, the longer the
average maturity, the more a portfolio'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 portfolio'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 SP-1 or MIG-1 indicating the most
creditworthy issuers of money market securities.
BETA. A measure of the magnitude of a portfolio'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 portfolio 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 portfolio'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 portfolio'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 portfolio's
share price will fluctuate in response to changes in interest rates.
EXPENSE RATIO. The percentage of a portfolio'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 portfolio 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
portfolio 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 portfolio's past returns can be explained
by the returns from the overall market (or its benchmark index). If a
portfolio's total return were precisely synchronized with the overall market's
return, its R-squared would be 1.00. If a portfolio's returns bore no
relationship to the market's returns, its R-squared would be 0.
YIELD. A snapshot of a portfolio's interest income. The yield, expressed as a
percentage of the portfolio'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 portfolio were held to their maturity dates.
11
<PAGE> 14
PORTFOLIO PROFILE
Insured Long-Term Portfolio
This Profile provides a snapshot of the Portfolio's characteristics as of
November 30, 1997, compared where appropriate to an unmanaged index. Key
elements of this Profile are defined on page 11.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ---------------------------------
<S> <C>
Number of Issues 179
Yield 4.7%
Yield to Maturity 4.8%
Average Coupon 5.4%
Average Maturity 9.4 years
Average Quality AAA
Average Duration 6.8 years
Expense Ratio 0.18%
Cash Reserves 0.8%
</TABLE>
INVESTMENT FOCUS
- ---------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- ------------------------------------------------
INSURED LONG-TERM LEHMAN
PORTFOLIO INDEX*
- ------------------------------------------------
<S> <C> <C>
R-Squared 0.97 1.00
Beta 1.12 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- -----------------------------------------------
<S> <C>
AAA 94.2%
AA 5.8
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 6.7%
1-5 Years 16.2
5-10 Years 42.4
10-20 Years 28.2
20-30 Years 6.5
Over 30 Years 0.0
- ----------------------------------------------
Total 100.0%
</TABLE>
12
<PAGE> 15
FINANCIAL STATEMENTS
November 30, 1997
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>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.4%)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bedminster Township NJ BAN 4.00% 1/20/1998 $ 900 S 900
Bergen County NJ Util. Auth. 7.75% 3/15/1998 (Prere.) 1,750 1,770
Chatham Township NJ BAN 4.25% 4/17/1998 7,539 7,547
Chatham Township NJ Special Emergency Notes 4.25% 4/17/1998 48 48
Cherry Hill Township NJ BAN 4.50% 10/14/1998 21,134 21,258
Clifton NJ BAN 4.00% 3/12/1998 2,500 2,502
Clifton NJ TAN 4.25% 2/13/1998 4,900 4,904
Cranbury Township NJ BAN 4.00% 3/11/1998 2,800 2,802
Englewood NJ BAN 4.25% 7/16/1998 5,107 5,120
Essex County NJ Improvement Auth. Pooled Govt. Loan VRDO 3.65% 12/3/1997 LOC 28,750 28,750
Fairfield Township NJ BAN 4.125% 3/24/1998 3,167 3,171
Florham Park Borough NJ BAN 4.25% 11/6/1998 3,506 3,522
Franklin Township NJ BAN 4.25% 5/29/1998 1,266 1,268
Gloucester County NJ PCR VRDO
(Mobil Oil Refining Corp. Project) 3.65% 12/3/1997 20,200 20,200
Hackensack City NJ BAN 4.00% 12/18/1997 6,178 6,178
Lawrence Township NJ BAN 4.25% 11/6/1998 8,410 8,445
Linden City NJ BAN 4.40% 6/17/1998 3,000 3,006
Livingston Township NJ Auth. 3.78% 2/4/1998 2,840 2,840
Mahwah Township NJ BAN 4.25% 8/21/1998 3,500 3,511
Mercer County NJ GO 4.25% 3/12/1998 18,070 18,095
Middlesex County NJ BAN 4.00% 1/27/1998 25,000 25,018
Middlesex County NJ TAN 4.00% 2/18/1998 11,400 11,411
Monmouth County NJ BAN 4.375% 8/27/1998 3,900 3,917
Monmouth County NJ GO 4.00% 8/1/1998 1,500 1,502
Monmouth County NJ GO (County College) 4.00% 8/1/1998 730 731
Monmouth County NJ VRDO
(Improvement Auth. Pooled Govt. Loan Program) 3.60% 12/3/1997 LOC 50,000 50,000
Montgomery Township NJ BAN 4.00% 12/12/1997 2,320 2,320
Montgomery Township NJ BAN 4.00% 2/12/1998 10,235 10,237
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
MONEY MARKET PORTFOLIO COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Montgomery Township NJ BAN 4.125% 7/14/1998 $ 2,095 $ 2,099
Montvale Borough NJ BAN 4.25% 5/15/1998 3,232 3,235
Morristown NJ BAN 4.25% 9/4/1998 6,000 6,016
Morris County NJ General Improvement GO 4.50% 8/15/1998 2,190 2,200
Morris County NJ GO (County College) 4.50% 8/15/1998 840 844
Mount Olive Township NJ BAN 4.125% 10/15/1998 5,624 5,639
New Jersey Econ. Dev. Auth. CP (Chambers Cogeneration Project) 3.55% 12/16/1997 LOC 29,100 29,100
New Jersey Econ. Dev. Auth. CP (Logan Project) 3.70% 12/3/1997 LOC 2,000 2,000
New Jersey Econ. Dev. Auth. CP (Logan Project) 3.55% 12/4/1997 LOC 5,300 5,300
New Jersey Econ. Dev. Auth. CP (Logan Project) 3.70% 2/20/1998 LOC 9,200 9,200
New Jersey Econ. Dev. Auth. CP (Logan Project) 3.65% 12/1/1997 LOC 10,000 10,000
New Jersey Econ. Dev. Auth. CP (Logan Project) 3.75% 1/22/1998 LOC 10,000 10,000
New Jersey Econ. Dev. Auth. Market Transition Fac. Rev. 4.80% 7/1/1998 (1) 5,985 6,019
New Jersey Econ. Dev. Auth. PCR VRDO (Exxon Project) 3.40% 12/2/1997 12,500 12,500
New Jersey Econ. Dev. Auth. PCR VRDO
(Public Service Electric & Gas Co.) 3.65% 12/3/1997 (1) 29,220 29,220
New Jersey Econ. Dev. Auth. PCR VRDO
(Public Service Electric & Gas Co.) 4.00% 12/3/1997 (1) 1,000 1,000
New Jersey Econ. Dev. Auth. VRDO (Lawrence School Project) 3.65% 12/4/1997 17,000 17,000
New Jersey Econ. Dev. Auth. VRDO (NJ Natural Gas Project) 3.65% 12/2/1997 (2) 11,000 11,000
New Jersey Econ. Dev. Auth. VRDO (NJ Natural Gas Project) 3.80% 12/2/1997 (2) 15,600 15,600
New Jersey Econ. Dev. Auth. VRDO (Toys R Us) 3.55% 12/2/1997 LOC 4,900 4,900
New Jersey Econ. Dev. Auth. Water Fac. VRDO
(Elizabethtown Water Co. Project) 3.70% 12/3/1997 (2) 16,600 16,600
New Jersey Econ. Dev. Auth. Water Fac. VRDO
(Elizabethtown Water Co. Project) 3.75% 12/3/1997 (2) 13,600 13,600
New Jersey Econ. Dev. Auth. Water Fac. VRDO
(NJ American Water Co. Project) 3.95% 12/3/1997 (2) 20,000 20,000
New Jersey Econ. Dev. Auth. Water Fac. TOB VRDO
(NJ American Water Co. Project) 4.05% 12/4/1997 (3) 4,850 4,850
New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co.) 3.55% 12/2/1997 (2) 5,300 5,300
New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co.) 3.65% 12/2/1997 (2) 38,700 38,700
New Jersey Education Fac. Auth Rev. (Princeton Univ.) 3.90% 7/1/1998 1,695 1,696
New Jersey GO 5.00% 7/15/1998 3,590 3,616
New Jersey Health Care Fac. Finance Auth. VRDO
(Hosp. Capital Asset Pooled Program) 3.70% 12/4/1997 LOC 49,900 49,900
New Jersey Sports & Exposition Auth. VRDO 3.70% 12/4/1997 (1) 41,660 41,660
New Jersey TRAN CP 3.70% 2/25/1998 10,000 10,000
New Jersey TRAN CP 3.75% 12/11/1997 5,000 5,000
New Jersey TRAN CP 3.75% 1/21/1998 10,000 10,000
New Jersey TRAN CP 3.75% 1/26/1998 7,000 7,000
New Jersey TRAN CP 3.80% 1/22/1998 10,000 10,000
New Jersey Transp. Trust Fund 5.50% 6/15/1998 1,400 1,412
New Jersey Turnpike Auth. VRDO 3.70% 12/3/1997 (3) LOC 97,800 97,800
Nutley Township NJ BAN 4.00% 7/31/1998 1,750 1,752
Ocean County NJ BAN 4.25% 6/19/1998 10,000 10,028
Passaic County NJ Util. Auth. 3.90% 8/4/1998 1,800 1,800
Passaic Valley NJ Sewer Comm. 7.10% 12/1/1997 (2)(Prere.) 2,595 2,647
Pequannock Township NJ BAN 4.25% 12/4/1998 ++ 4,285 4,305
Piscataway Township NJ BAN 4.25% 4/24/1998 7,250 7,262
Port Auth. of New York & New Jersey CP 3.70% 12/1/1997 11,790 11,790
Port Auth. of New York & New Jersey CP 3.70% 12/18/1997 4,375 4,375
Port Auth. of New York & New Jersey CP 3.70% 1/14/1998 3,590 3,590
Port Auth. of New York & New Jersey CP 3.75% 12/11/1997 5,080 5,080
Port Auth. of New York & New Jersey CP 3.75% 2/17/1998 22,445 22,445
Princeton Township NJ BAN 4.25% 8/14/1998 7,830 7,857
Rockaway Township NJ BAN 4.25% 7/28/1998 7,331 7,350
Salem County NJ PCR CP (PECO Project) 3.70% 12/3/1997 LOC 5,000 5,000
Salem County NJ PCR CP (PECO Project) 3.70% 2/20/1998 LOC 3,400 3,400
Salem County NJ PCR CP (PECO Project) 3.75% 1/22/1998 LOC 6,600 6,600
Salem County NJ PCR VRDO (Atlantic City Electric Co.) 3.70% 12/3/1997 (1) 5,500 5,500
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salem County NJ PCR VRDO (Atlantic City Electric Co.) 3.80% 12/3/1997 $ 1,000 $ 1,000
Salem County NJ PCR VRDO (Public Service Electric & Gas Co.) 4.10% 12/3/1997 (1) 6,500 6,500
Sayreville NJ BAN 4.00% 1/16/1998 5,000 5,001
South Brunswick Township NJ BAN 4.125% 10/8/1998 3,925 3,935
Southeast Morris County Muni. Util. Auth. RAN 4.25% 1/13/1998 4,000 4,002
Union County NJ PCR VRDO (Exxon Project) 3.60% 12/2/1997 31,900 31,900
Upper Saddle River NJ BAN 4.25% 7/24/1998 1,986 1,992
Washington Township NJ BAN 4.00% 12/12/1997 4,280 4,280
Watchung NJ BAN 4.25% 5/15/1998 6,745 6,754
OUTSIDE NEW JERSEY:
Puerto Rico Govt. Dev. Bank VRDO 3.80% 12/3/1997 LOC 49,050 49,050
Puerto Rico Highway & Transp. Auth. VRDO 3.65% 12/3/1997 LOC 7,300 7,300
Puerto Rico Industrial Medical & Environmental Fac. Auth. PCR PUT
(Abbott Laboratories Project) 3.75% 3/1/1998 6,250 6,250
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,009,724) 1,009,724
- ------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.6%)
- ------------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 13,588
Liabilities (7,025)
------------
6,563
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- ------------------------------------------------------------------------------------------------------------------------------
Applicable to 1,016,301,360 outstanding shares of beneficial interest
(unlimited authorization--no par value) $1,016,287
==============================================================================================================================
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 19.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1997, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,016,317 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses--Note E (30) --
Unrealized Appreciation -- --
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,016,287 $1.00
==========================================================================================================================
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO COUPON DATE (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.2%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ISSUER INSURED (82.4%)
Atlantic City NJ Board of Educ. GO 6.00% 12/1/2012 (4) $ 4,600 $ 5,113
Atlantic City NJ Board of Educ. GO 6.10% 12/1/2015 (4) 2,000 2,244
Atlantic County NJ COP 6.00% 3/1/2014 (3) 3,685 4,074
Atlantic County NJ COP 6.00% 3/1/2015 (3) 1,480 1,639
Atlantic County NJ COP 7.30% 3/1/2005 (3) 2,000 2,341
Atlantic County NJ COP 7.30% 3/1/2006 (3) 1,800 2,133
Atlantic County NJ COP 7.40% 3/1/2010 (3) 1,755 2,167
Atlantic County NJ COP 7.40% 3/1/2011 (3) 4,025 5,002
Atlantic County NJ Util. Auth. Sewer Rev. 5.85% 1/15/2015 (2) 3,000 3,145
Bayshore NJ Regional Sewer Auth. 5.40% 5/1/2012 (1) 500 512
Bergen County NJ Util. Auth. 6.20% 6/15/2005 (3) 5,665 6,276
Bergen County NJ Util. Auth. Water PCR 5.50% 12/15/2015 (3) 15,750 15,977
Bergen County NJ Util. Auth. Water PCR 5.75% 12/15/2005 (3) 2,000 2,170
Brick Township NJ Muni. Util. Auth. 5.00% 12/1/2016 (3) 5,700 5,584
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2004 (3) 8,345 6,040
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2005 (3) 18,545 12,700
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2006 (3) 18,545 11,992
Camden County NJ Muni. Util. Auth. Sewer Rev. 8.25% 12/1/1997 (3)(Prere.) 515 526
Camden County NJ Muni. Util. Auth. Sewer Rev. 8.25% 12/1/2017 (3) 335 342
Cape May County NJ IDA (Atlantic City Electric) 6.80% 3/1/2021 (1) 15,400 18,777
Cape May County NJ Muni. Util. Auth. 5.75% 1/1/2016 (1) 14,975 15,467
Delaware River Port Auth. PA & NJ 5.40% 1/1/2013 (3) 9,000 9,223
Delaware River Port Auth. PA & NJ 5.50% 1/1/2026 (3) 35,600 36,038
Delaware River Port Auth. PA & NJ 6.50% 1/1/2009 (2) 3,500 3,583
Delaware River Port Auth. PA & NJ 7.375% 1/1/2007 (2) 9,500 10,005
Elizabeth City NJ Fiscal Year Adjustment Bonds 6.60% 8/1/2006 (1) 8,750 9,586
Elizabeth City NJ GO 6.10% 8/15/2007 (2) 5,000 5,504
Elizabeth City NJ GO 6.25% 8/15/2008 (2) 2,100 2,334
Essex County NJ Improvement Auth. Lease Rev. GO 5.35% 12/1/2024 (2) 5,000 4,979
Essex County NJ Improvement Auth. Lease Rev. GO 5.50% 12/1/2008 (2) 2,560 2,692
Essex County NJ Improvement Auth. Lease Rev. GO 5.50% 12/1/2013 (2) 7,500 7,725
Essex County NJ Improvement Auth. Lease Rev. GO 7.00% 12/1/2004 (2)(Prere.) 9,525 11,120
Essex County NJ Util. Auth. 5.60% 4/1/2016 (4) 2,200 2,275
Evesham NJ Muni. Util. Auth. 7.00% 7/1/2010 (1) 1,700 1,811
Evesham NJ Muni. Util. Auth. 7.00% 7/1/2015 (1) 450 479
Gloucester County NJ Util. Auth. Sewer Rev. 5.40% 1/1/2016 (1) 3,410 3,454
Gloucester Township NJ GO 5.75% 7/15/2010 (2) 2,880 3,131
Gloucester Township NJ Muni. Util. Auth. 5.65% 3/1/2018 (2) 2,755 2,939
Hamilton Township NJ Muni. Util. Auth. 6.00% 8/15/2017 (3) 1,000 1,066
Hoboken-Union City-Weehawken NJ Sewer Auth. 0.00% 8/1/2003 (1) 3,800 2,970
Hoboken-Union City-Weehawken NJ Sewer Auth. 0.00% 8/1/2004 (1) 3,750 2,797
Hoboken-Union City-Weehawken NJ Sewer Auth. 0.00% 8/1/2005 (1) 3,805 2,696
Hoboken-Union City-Weehawken NJ Sewer Auth. 0.00% 8/1/2006 (1) 2,000 1,343
Hoboken-Union City-Weehawken NJ Sewer Auth. 6.25% 8/1/2013 (1)+ 9,590 10,915
Hudson County NJ Correctional Fac. COP 6.30% 6/1/2004 (1) 1,720 1,865
Hudson County NJ Correctional Fac. COP 6.30% 12/1/2004 (1) 1,770 1,920
Hudson County NJ Correctional Fac. COP 6.50% 12/1/2011 (1) 9,000 9,761
Hudson County NJ General Improvement GO 6.55% 7/1/2004 (3) 1,300 1,459
Hudson County NJ General Improvement GO 6.55% 7/1/2005 (3) 1,290 1,462
Hudson County NJ General Improvement GO 6.55% 7/1/2006 (3) 700 800
Hudson County NJ General Improvement GO 6.55% 7/1/2007 (3) 1,300 1,493
Hudson County NJ General Improvement GO 6.55% 7/1/2009 (3) 635 737
Hudson County NJ Improvement Auth. Lease 6.00% 12/1/2012 (3) 6,525 6,915
Irvington Township NJ GO 0.00% 8/1/2007 (1) 1,000 640
Irvington Township NJ GO 0.00% 8/1/2009 (1) 2,580 1,471
Irvington Township NJ GO 0.00% 8/1/2010 (1) 2,080 1,116
Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 3/15/2010 (2) 2,740 2,803
Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 9/15/2010 (2) 1,790 1,831
Middlesex County NJ Util. Auth. Sewer Rev. 5.375% 9/15/2015 (2) 3,775 3,839
Middlesex County NJ Util. Auth. Sewer Rev. 6.50% 3/15/2001 (3)(Prere.) 6,300 6,853
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Monmouth County NJ Improvement Auth. 5.40% 12/1/2012 (1) $ 2,505 $ 2,590
Mount Laurel Township NJ Muni. Util. Auth. 6.00% 7/1/2015 (1) 4,250 4,459
New Brunswick NJ Housing & Urban Dev. 5.75% 7/1/2024 (1) 13,640 14,046
New Brunswick NJ Housing & Urban Dev. 6.00% 7/1/2012 (1) 6,000 6,350
New Jersey Econ. Dev. Auth. (Market Transition) 5.80% 7/1/2007 (1) 1,000 1,079
New Jersey Econ. Dev. Auth. (Market Transition) 5.80% 7/1/2009 (1) 7,250 7,708
New Jersey Econ. Dev. Auth. (Market Transition) 5.875% 7/1/2011 (1) 23,175 24,659
New Jersey Econ. Dev. Auth. (Market Transition) 7.00% 7/1/2004 (1) 1,745 1,993
New Jersey Econ. Dev. Auth. Capital Appreciation
(Hillcrest Health Service) 0.00% 1/1/2012 (2) 2,500 1,226
New Jersey Econ. Dev. Auth. Capital Appreciation
(Hillcrest Health Service) 0.00% 1/1/2013 (2) 3,000 1,389
New Jersey Econ. Dev. Auth. Capital Appreciation
(St. Barnabas Project) 0.00% 7/1/2011 (1) 4,650 2,355
New Jersey Econ. Dev. Auth. Capital Appreciation
(St. Barnabas Project) 0.00% 7/1/2012 (1) 4,550 2,176
New Jersey Econ. Dev. Auth. Capital Appreciation
(St. Barnabas Project) 0.00% 7/1/2013 (1) 4,500 2,030
New Jersey Econ. Dev. Auth. Capital Appreciation
(St. Barnabas Project) 0.00% 7/1/2014 (1) 4,210 1,802
New Jersey Econ. Dev. Auth. Water Fac. Rev. VRDO (United Water Co.) 3.55% 12/2/1997 (2) 700 700
New Jersey Econ. Dev. Auth. Water Fac. Rev. VRDO (United Water Co.) 3.65% 12/2/1997 (2) 5,900 5,900
New Jersey Educ. Fac. Auth. (Higher Educ. Trust Fund) 5.125% 9/1/2008 (2) 14,795 15,211
New Jersey Educ. Fac. Auth. (Kean College) 6.60% 7/1/2021 (1) 3,700 4,024
New Jersey Educ. Fac. Auth. (NJ Institute of Technology) 6.00% 7/1/2024 (1) 1,500 1,598
New Jersey Educ. Fac. Auth. (Rider College) 6.20% 7/1/2017 (2) 4,000 4,318
New Jersey Educ. Fac. Auth. (Seton Hall Univ.) 5.60% 7/1/2016 (1) 1,765 1,821
New Jersey Educ. Fac. Auth. (Seton Hall Univ.) 5.625% 7/1/2019 (1) 3,625 3,722
New Jersey Educ. Fac. Auth. (Trenton State College) 6.00% 7/1/2012 (2) 3,005 3,180
New Jersey Health Care Fac. Auth. (Burdette Tomlin Memorial Hosp.) 6.50% 7/1/2012 (3) 1,500 1,621
New Jersey Health Care Fac. Auth. (Community Medical Center) 7.00% 7/1/2020 (1) 2,850 3,073
New Jersey Health Care Fac. Auth. (Helene Fuld Medical Center) 6.60% 7/1/2021 (2) 4,080 4,409
New Jersey Health Care Fac. Auth. (Holy Name Hosp.) 5.25% 7/1/2020 (2) 4,100 4,073
New Jersey Health Care Fac. Auth. (Memorial Health Alliance) 6.25% 7/1/2010 (3) 8,000 8,358
New Jersey Health Care Fac. Auth. (Mercer Medical Center) 6.50% 7/1/2010 (1) 6,000 6,485
New Jersey Health Care Fac. Auth. (Mountainside Hosp.) 5.35% 7/1/2007 (1) 3,215 3,355
New Jersey Health Care Fac. Auth. (Muhlenberg Medical Center) 8.00% 7/1/2018 (2) 750 781
New Jersey Health Care Fac. Auth.
(Newark Beth Israel Medical Center) 6.00% 7/1/2016 (4) 8,500 9,020
New Jersey Health Care Fac. Auth. (Riverview Medical Center) 6.25% 7/1/2010 (2) 2,935 3,307
New Jersey Health Care Fac. Auth. (Shore Medical Center) 6.20% 7/1/2013 (2) 3,130 3,384
New Jersey Health Care Fac. Auth. (Shore Medical Center) 6.20% 7/1/2014 (2) 3,075 3,314
New Jersey Health Care Fac. Auth. (Shore Medical Center) 6.25% 7/1/2016 (2) 2,000 2,157
New Jersey Health Care Fac. Auth. (Society of the Valley Hosp.) 6.625% 7/1/2010 (1) 2,750 2,894
New Jersey Health Care Fac. Auth.
(St. Clare's Riverside Medical Center) 5.75% 7/1/2014 (1) 8,500 8,844
New Jersey Health Care Fac. Auth. (West Jersey Health System) 6.00% 7/1/2009 (1) 5,175 5,511
New Jersey Housing & Mortgage Finance Auth. 7.875% 10/1/2017 (1) 450 464
New Jersey Transp. Trust Fund 5.50% 6/15/2011 (1) 5,000 5,203
New Jersey Transp. Trust Fund 5.50% 6/15/2013 (1) 3,000 3,094
New Jersey Transp. Trust Fund 6.00% 6/15/2011 (1) 31,280 34,247
New Jersey Turnpike Auth. 6.50% 1/1/2013 (1) 20,000 23,221
New Jersey Turnpike Auth. VRDO 3.70% 12/3/1997 (3) LOC 41,300 41,300
Newark NJ General Improvement 5.30% 10/1/2006 (2) 1,710 1,797
Newark NJ General Improvement 5.40% 10/1/2007 (2) 1,685 1,780
Newark NJ General Improvement 5.50% 10/1/2008 (2) 1,660 1,770
Newark NJ Water Util. 5.30% 10/1/2006 (2) 2,625 2,759
North Bergen Township NJ GO 8.00% 8/15/2006 (4) 1,885 2,344
North Brunswick Township NJ Board of Educ. 5.50% 2/1/2007 (3) 1,125 1,196
North Brunswick Township NJ Board of Educ. 5.50% 2/1/2008 (3) 1,915 2,030
North Brunswick Township NJ Board of Educ. 5.50% 2/1/2009 (3) 2,030 2,136
North Brunswick Township NJ Board of Educ. 6.25% 2/1/2006 (3) 1,015 1,132
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
INSURED LONG-TERM PORTFOLIO COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North Hudson NJ Sewer Auth. 4.60% 8/1/2001 (3) $ 2,050 $ 2,079
North Hudson NJ Sewer Auth. 5.125% 8/1/2008 (3) 2,000 2,059
North Hudson NJ Sewer Auth. 5.125% 8/1/2022 (3) 12,200 12,023
North Hudson NJ Sewer Auth. 5.25% 8/1/2016 (3) 14,360 14,441
North Jersey Water Dist. (Wanaque South Project) 6.00% 7/1/2012 (1) 10,125 10,790
Ocean County NJ Util. Auth. Waste Water Rev. 5.00% 1/1/2014 (3) 2,000 1,972
Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/2018 (3) 4,000 4,281
Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/2018 (3)(ETM) 2,500 2,877
Ocean Township NJ Muni. Util. Auth. 6.00% 8/1/2017 (1) 3,975 4,410
Old Bridge Township NJ Muni. Util. Auth. 6.25% 11/1/2016 (3) 1,400 1,524
Old Bridge Township NJ Muni. Util. Auth. 6.40% 11/1/2009 (3) 3,000 3,290
Passaic Valley NJ Sewer Comm. 5.75% 12/1/2008 (2) 4,450 4,702
Passaic Valley NJ Sewer Comm. 5.75% 12/1/2013 (2) 4,000 4,147
Plainfield NJ GO 6.25% 7/15/2007 (2) 6,930 7,547
South Brunswick Township NJ Board of Educ. 5.25% 8/1/2020 (3) 3,535 3,521
South Brunswick Township NJ Board of Educ. 5.25% 8/1/2022 (3) 4,630 4,611
South Brunswick Township NJ Board of Educ. 5.50% 8/1/2024 (3) 2,500 2,530
South Brunswick Township NJ Board of Educ. 6.40% 8/1/2005 (3)(Prere.) 2,205 2,476
South Brunswick Township NJ Board of Educ. 6.40% 8/1/2005 (3)(Prere.) 2,315 2,599
South Jersey Transp. Auth. 5.90% 11/1/2006 (1) 3,435 3,696
South Jersey Transp. Auth. 5.90% 11/1/2007 (1) 2,545 2,728
South Jersey Transp. Auth. 6.00% 11/1/2012 (1) 5,250 5,570
Stafford NJ Muni. Util. Auth. 5.50% 6/1/2011 (3) 3,100 3,292
Sussex County NJ Muni. Util. Auth. Solid Waste Rev. 5.75% 12/1/2009 (1) 19,820 20,869
Sussex County NJ Muni. Util. Auth. Waste Water 5.25% 12/1/2008 (1) 1,150 1,187
Union County NJ (Plainfield Board of Educ.) 5.80% 8/1/2020 (3) 4,000 4,188
Union County NJ (Plainfield Board of Educ.) 6.25% 8/1/2005 (3) 695 773
Union County NJ (Plainfield Board of Educ.) 6.25% 8/1/2006 (3) 740 828
Union County NJ (Plainfield Board of Educ.) 6.25% 8/1/2007 (3) 785 881
OUTSIDE NEW JERSEY:
Puerto Rico Electric Power Auth. 6.50% 7/1/2006 (1) 11,820 13,489
Puerto Rico Infrastructure Fin. Auth Special Tax 5.00% 7/1/2021 (2)++ 4,500 4,390
Puerto Rico Public Building Auth. 0.00% 7/1/2002 (3) 4,000 3,314
----------
774,330
----------
SECONDARY MARKET INSURED (8.2%)
Atlantic County NJ Util. Auth. Sewer Rev. 6.875% 1/1/2012 (2)(ETM) 3,000 3,401
New Jersey Highway Auth. (Garden State Parkway) 6.00% 1/1/2016 (2) 5,000 5,218
New Jersey Highway Auth. (Garden State Parkway) 6.20% 1/1/2010 (2) 20,000 22,506
New Jersey Sports & Exposition Auth. 6.50% 3/1/2013 (1) 10,000 11,622
New Jersey Turnpike Auth. 6.50% 1/1/2016 (1) 18,250 21,256
Port Auth. of New York & New Jersey 5.375% 7/15/2022 (3) 5,000 4,996
Port Auth. of New York & New Jersey 6.875% 1/1/2025 (2) 3,200 3,394
Univ. of Medicine & Dentistry NJ 6.50% 12/1/2012 (1) 4,000 4,665
----------
77,058
----------
NONINSURED (8.6%)
Burlington County NJ BAN 4.00% 3/12/1998 1,956 1,958
Burlington County NJ Bridge Comm. 5.30% 10/1/2013 9,500 9,701
Cherry Hill Township NJ GO 6.30% 6/1/2012 3,745 4,043
Mercer County NJ Improvement Auth. 5.375% 9/15/2012 11,120 11,417
Mercer County NJ Improvement Auth. 5.75% 12/15/2007 1,110 1,208
Mercer County NJ Improvement Auth. 5.75% 12/15/2008 1,165 1,274
Mercer County NJ Improvement Auth. 5.95% 12/15/2012 4,895 5,415
Mercer County NJ Improvement Auth. 6.00% 12/1/2014 1,000 1,063
Monmouth County NJ Improvement Auth. GO
(Capital Equipment Pooled Leases) 5.25% 10/1/1998 1,410 1,427
Monmouth County NJ Improvement Auth. GO (Correctional Fac.) 6.40% 8/1/2001 (Prere.) 1,850 2,018
New Jersey Environmental Infrastructure Trust Waste Water Rev. 5.00% 9/1/2006 1,735 1,793
New Jersey Environmental Infrastructure Trust Waste Water Rev. 5.00% 9/1/2008 1,930 1,972
New Jersey Environmental Infrastructure Trust Waste Water Rev. 5.00% 9/1/2009 1,955 1,981
New Jersey Health Care Fac. Finance Auth. VRDO
(Hosp. Capital Assets Pooled Program) 3.70% 12/4/1997 LOC 200 200
Ocean County NJ Util. Auth. Waste Water Rev. 6.00% 1/1/2006 5,735 6,292
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ocean County NJ Util. Auth. Waste Water Rev. 6.30% 1/1/2013 $2,215 $2,406
Ocean County NJ Util. Auth. Waste Water Rev. 6.35% 1/1/2014 2,360 2,563
Ocean County NJ Util. Auth. Waste Water Rev. 6.35% 1/1/2015 2,515 2,721
Port Auth. of New York & New Jersey VRDO 3.85% 12/2/1997 1,200 1,200
Rahway NJ BAN 4.12% 6/26/1998 2,424 2,426
Randolph Township NJ BAN 4.25% 9/4/1998 2,737 2,743
Rutgers State Univ. NJ 6.40% 5/1/2013 3,000 3,451
Rutgers State Univ. NJ 7.90% 5/1/1998 (Prere.) 1,140 1,182
Rutgers State Univ. NJ 8.00% 5/1/1998 (Prere.) 1,250 1,297
OUTSIDE NEW JERSEY:
Puerto Rico Govt. Dev. Bank VRDO 3.80% 12/3/1997 LOC 9,200 9,200
---------
80,951
---------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $869,098) 932,339
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.8%)
- -------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 19,275
Liabilities (11,349)
---------
7,926
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 80,244,545 outstanding shares of beneficial interest
(unlimited authorization--no par value) $940,265
=========================================================================================================================
NET ASSET VALUE PER SHARE $11.72
=========================================================================================================================
</TABLE>
*See Note A in Notes to Financial Statements.
+Securities with a value of $2,390,000 have been segregated as initial margin
for open futures contracts.
For explanations of abbreviations and other references, see below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1997, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $878,361 $10.95
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains--Note E (1,297) (.02)
Unrealized Appreciation (Depreciation)--Note F
Investment Securities 63,241 .79
Futures Contracts (40) --
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS $940,265 $11.72
==========================================================================================================================
</TABLE>
KEY TO ABBREVIATIONS
BAN--Bond Anticipation Note.
COP--Certificate of Participation.
CP--Commercial Paper.
GO--General Obligation Bond.
IDA--Industrial Development Authority 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.
++Security purchased on a when-issued or delayed delivery basis for which the
Portfolio has not taken delivery as of November 30, 1997.
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).
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.
19
<PAGE> 22
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>
- -------------------------------------------------------------------------------------------------------------------------
MONEY INSURED
MARKET LONG-TERM
PORTFOLIO PORTFOLIO
-------------------------------
YEAR ENDED NOVEMBER 30, 1997
-------------------------------
(000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INCOME
Interest $33,679 $47,851
------------------------------
Total Income 33,679 47,851
------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 144 130
Management and Administrative 1,401 1,179
Marketing and Distribution 312 197
Custodian Fees 19 14
Auditing Fees 7 7
Shareholders' Reports 13 13
Annual Meeting and Proxy Costs 4 4
Trustees' Fees and Expenses 2 2
------------------------------
Total Expenses 1,902 1,546
Expenses Paid Indirectly--Note C (19) (14)
------------------------------
Net Expenses 1,883 1,532
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 31,796 46,319
- -------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 22 1,905
Futures Contracts -- (2,518)
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) 22 (613)
- -------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities -- 9,311
Futures Contracts -- (40)
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- 9,271
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $31,818 $54,977
========================================================================================================================
</TABLE>
20
<PAGE> 23
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>
- -------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET INSURED LONG-TERM
PORTFOLIO PORTFOLIO
--------------------------------- -----------------------------
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------------------
1997 1996 1997 1996
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 31,796 $ 28,089 $ 46,319 $ 43,196
Realized Net Gain (Loss) 22 -- (613) 2,070
Change in Unrealized Appreciation (Depreciation) -- -- 9,271 (6,387)
---------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 31,818 28,089 54,977 38,879
---------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (31,796) (28,089) (46,319) (43,196)
Realized Capital Gain -- -- (2,334) (3,940)
---------------------------------------------------------------------
Total Distributions (31,796) (28,089) (48,653) (47,136)
---------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 888,898 780,375 209,139 174,160
Issued in Lieu of Cash Distributions 30,361 26,843 37,374 36,637
Redeemed (820,876) (748,471) (161,566) (149,600)
---------------------------------------------------------------------
Net Increase from Capital Share Transactions 98,383 58,747 84,947 61,197
- -------------------------------------------------------------------------------------------------------------------------------
Total Increase 98,405 58,747 91,271 52,940
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 917,882 859,135 848,994 796,054
---------------------------------------------------------------------
End of Year $1,016,287 $917,882 $940,265 $848,994
===============================================================================================================================
(1)Shares Issued (Redeemed)
Issued 888,898 780,375 18,101 15,151
Issued in Lieu of Cash Distributions 30,361 26,843 3,232 3,178
Redeemed (820,876) (748,471) (13,996) (13,024)
---------------------------------------------------------------------
Net Increase in Shares Outstanding 98,383 58,747 7,337 5,305
===============================================================================================================================
</TABLE>
21
<PAGE> 24
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 are not required to report
a Portfolio Turnover Rate.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .033 .032 .035 .025 .023
Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- --
-----------------------------------------------------------
Total from Investment Operations .033 .032 .035 .025 .023
-----------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.033) (.032) (.035) (.025) (.023)
Distributions from Realized Capital Gains -- -- -- -- --
-----------------------------------------------------------
Total Distributions (.033) (.032) (.035) (.025) (.023)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
=========================================================================================================================
TOTAL RETURN 3.32% 3.22% 3.60% 2.49% 2.31%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,016 $918 $859 $792 $724
Ratio of Total Expenses to Average Net Assets 0.20% 0.20% 0.21% 0.21% 0.20%
Ratio of Net Investment Income to Average Net Assets 3.27% 3.17% 3.53% 2.46% 2.29%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
INSURED LONG-TERM PORTFOLIO
YEAR ENDED NOVEMBER 30,
------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.64 $11.78 $10.40 $11.77 $11.18
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .608 .616 .623 .622 .637
Net Realized and Unrealized Gain (Loss) on Investments .112 (.082) 1.380 (1.307) .725
------------------------------------------------------------
Total from Investment Operations .720 .534 2.003 (.685) 1.362
------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.608) (.616) (.623) (.622) (.637)
Distributions from Realized Capital Gains (.032) (.058) -- (.063) (.135)
------------------------------------------------------------
Total Distributions (.640) (.674) (.623) (.685) (.772)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.72 $11.64 $11.78 $10.40 $11.77
=========================================================================================================================
TOTAL RETURN 6.40% 4.75% 19.66% -6.10% 12.53%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $940 $849 $796 $645 $748
Ratio of Total Expenses to Average Net Assets 0.18% 0.20% 0.21% 0.21% 0.20%
Ratio of Net Investment Income to Average Net Assets 5.26% 5.35% 5.50% 5.53% 5.47%
Portfolio Turnover Rate 13% 11% 7% 13% 12%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 26
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 Money Market and Insured Long-Term 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: Dividends 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.
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 November 30, 1997, the Fund had contributed capital aggregating
$131,000 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.
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
year ended November 30, 1997, custodian fee offset arrangements reduced
expenses of the Money Market and Insured Long-Term Portfolios by $19,000 and
$14,000, respectively.
24
<PAGE> 27
D. During the year ended November 30, 1997, the Insured Long-Term Portfolio
purchased $159,216,000 of investment securities and sold $107,695,000 of
investment securities, other than temporary cash investments.
E. 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. For federal income tax purposes, the
Portfolios had the following capital gains available for distribution at
November 30, 1997, or capital losses available to offset future capital gains:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
CAPITAL LOSS
-----------------------------------------
CAPITAL GAINS EXPIRATION
AVAILABLE FOR FISCAL YEAR(S)
DISTRIBUTION AMOUNT ENDING
PORTFOLIO (000) (000) NOVEMBER 30
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market -- $(30) 2002-2004
Insured Long-Term $899 -- --
- ---------------------------------------------------------------------------------------------------
</TABLE>
F. At November 30, 1997, net unrealized appreciation of Insured Long-Term
Portfolio investment securities for financial reporting and federal income tax
purposes was $63,241,000, consisting of unrealized gains of $63,259,000 on
securities that had risen in value since their purchase and $18,000 on
securities that had fallen in value since their purchase.
At November 30, 1997, the aggregate settlement value of open futures
contracts expiring in March 1998 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 155 $18,450 $(40)
- -----------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Trustees of
Vanguard New Jersey Tax-Free Fund
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
Money Market Portfolio and Insured Long-Term Portfolio (constituting Vanguard
New Jersey Tax-Free Fund, hereafter referred to as the "Fund") at November 30,
1997, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at November 30, 1997 by correspondence with the custodian and the
application of alternative auditing procedures where securities purchased had
not been settled, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
January 6, 1998
26
<PAGE> 29
SPECIAL 1997 TAX INFORMATION (UNAUDITED) FOR VANGUARD NEW JERSEY TAX-FREE FUND
This information for the fiscal year ended November 30, 1997, is included
pursuant to provisions of the Internal Revenue Code.
The Fund designates $899,000 as capital gain dividends (from net long-term
capital gains), which will be distributed in December 1997. All of the capital
gain dividends are designated as a 20% rate gain distribution.
Each Portfolio designates 100% of its income dividends as exempt-interest
dividends.
27
<PAGE> 30
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 Office Solutions,
Inc., Raytheon Co., Knight-Ridder, Inc., Massachusetts Mutual Life Insurance
Co., and Ladies Professional Golf Association; 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 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., 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. 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.
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
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 500," "S&P 500(R)," "Standard & Poor's(R)," "S&P(R)," 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> 31
VANGUARD FAMILY OF FUNDS
STOCK FUNDS
Convertible Securities Fund
Equity Income Fund
Explorer Fund
Growth and Income Portfolio
Horizon Fund
Aggressive Growth Portfolio
Capital Opportunity Portfolio
Global Equity Portfolio
Index Trust
500 Portfolio
Extended Market Portfolio
Growth Portfolio
Small Capitalization Stock
Portfolio
Total Stock Market Portfolio
Value Portfolio
Institutional Index Fund
International Equity Index Fund
Emerging Markets Portfolio
European Portfolio
Pacific Portfolio
International Growth Portfolio
International Value Portfolio
Morgan Growth Fund
PRIMECAP Fund
Selected Value Portfolio
Specialized Portfolios
Energy Portfolio
Gold & Precious Metals
Portfolio
Health Care Portfolio
REIT Index Portfolio
Utilities Income Portfolio
Tax-Managed Fund
Capital Appreciation
Portfolio
Growth and Income Portfolio
Total International Portfolio
Trustees' Equity Fund
U.S. Portfolio
U.S. Growth Portfolio
Windsor Fund
Windsor II
BALANCED FUNDS
Asset Allocation Fund
Balanced Index Fund
Horizon Fund
Global Asset Allocation
Portfolio
LifeStrategy Portfolios
Conservative Growth
Portfolio
Growth Portfolio
Income Portfolio
Moderate Growth Portfolio
STAR Portfolio
Tax-Managed Fund
Balanced Portfolio
Wellesley Income Fund
Wellington Fund
BOND FUNDS
Admiral Funds
Intermediate-Term U.S.
Treasury Portfolio
Long-Term U.S. Treasury
Portfolio
Short-Term U.S. Treasury
Portfolio
Bond Index Fund
Intermediate-Term Bond
Portfolio
Long-Term Bond Portfolio
Short-Term Bond Portfolio
Total Bond Market Portfolio
Fixed Income Securities Fund
GNMA Portfolio
High Yield Corporate Portfolio
Intermediate-Term Corporate
Portfolio
Intermediate-Term U.S.
Treasury Portfolio
Long-Term Corporate
Portfolio
Long-Term U.S. Treasury
Portfolio
Short-Term Corporate
Portfolio
Short-Term Federal Portfolio
Short-Term U.S. Treasury
Portfolio
Municipal Bond Fund
High-Yield Portfolio
Insured Long-Term Portfolio
Intermediate-Term Portfolio
Limited-Term Portfolio
Long-Term Portfolio
Short-Term Portfolio
Preferred Stock Fund
State Tax-Free Funds
(CA, FL, NJ, NY, OH, PA)
MONEY MARKET FUNDS
Admiral Funds
U.S. Treasury Money Market
Portfolio
Money Market Reserves
Federal Portfolio
Prime Portfolio
Municipal Bond Fund
Money Market Portfolio
Treasury Money Market Portfolio
State Tax-Free Funds
(CA, NJ, NY, OH, PA)
Q140-11/97
(C) 1998 Vanguard Marketing
Corporation, Distributor
[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.
