<PAGE> 1
VANGUARD
NEW JERSEY
TAX-EXEMPT FUNDS
VANGUARD NEW JERSEY TAX-EXEMPT
MONEY MARKET FUND
VANGUARD NEW JERSEY INSURED LONG-TERM
TAX-EXEMPT FUND
[PHOTO]
SEMIANNUAL
REPORT
MAY 31, 1999
[THE VANGUARD GROUP LOGO]
<PAGE> 2
AT VANGUARD, WE BELIEVE THAT TRADITION MATTERS
Our 9,000 crew members embrace the traditional values on which our success is
built, including integrity, hard work, thrift, teamwork, and fair dealing on
behalf of our clients.
Our report cover pays homage to three anniversaries, each of great significance
to The Vanguard Group:
- - The 200th anniversary of the Battle of the Nile, which commenced on August 1,
1798. HMS Vanguard, the victorious British flagship at the Nile, is our
namesake. And its motto--"Leading the way"--serves as a guiding principle
for our company.
- - The 100th birthday, on July 23, 1998, of Walter L. Morgan, founder of
Wellington Fund, the oldest member of what became The Vanguard Group. Mr.
Morgan was friend and mentor to Vanguard founder John C. Bogle, and helped to
shape the standards and business principles that Mr. Bogle laid down for
Vanguard at its beginning nearly 25 years ago: a stress on balanced,
diversified investments; insistence on fair dealing and candor with clients;
and a focus on long-term investing. To our great regret, Mr. Morgan died on
September 2, 1998.
- - The 70th anniversary, on December 28, 1998, of the incorporation of Vanguard
Wellington Fund. It is the nation's oldest balanced mutual fund, and one of
only a handful of funds created in the 1920s that are still in operation.
Although Vanguard constantly tackles new challenges, adopts new technology, and
develops new services, we treasure the traditions and values that set us apart
in a crowded, competitive industry. And we salute our shareholders, whose
support and trust we strive to earn each and every day.
[PHOTO]
CONTENTS
A MESSAGE TO
OUR SHAREHOLDERS
1
THE MARKETS IN
PERSPECTIVE
4
REPORT FROM
THE ADVISER
6
FUND PROFILES
8
PERFORMANCE SUMMARIES
11
FINANCIAL STATEMENTS
12
FOR AN UPDATE ON OUR YEAR 2000
PREPAREDNESS, SEE PAGE 27.
All comparative mutual fund data
are from Lipper or Morningstar,
unless otherwise noted.
<PAGE> 3
DEAR SHAREHOLDER,
[PHOTO] [PHOTO]
John J. Brennan John C. Bogle
Chairman & CEO Senior Chairman
During the first half of the Vanguard New Jersey Tax- Exempt Funds' 1999 fiscal
year, municipal bond prices dipped in the face of rising interest rates. These
lower prices offset most of the interest income earned by tax-exempt securities
during the six months ended May 31, 1999, and resulted in relatively modest
total returns on municipal bonds for the period.
In this environment, our Insured Long-Term Tax-Exempt Fund earned a
six-month total return (capital change plus reinvested dividends) of +1.1%, and
our Tax-Exempt Money Market Fund earned +1.4%. The adjacent table presents the
half-year returns for both funds, along with those of their average peers. As
you can see, the returns of our funds outpaced those of similar mutual funds.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
TOTAL RETURNS
SIX MONTHS ENDED
MAY 31, 1999
- ----------------------------------------------------------------
<S> <C>
VANGUARD NEW JERSEY TAX-EXEMPT
MONEY MARKET FUND +1.4%
(SEC 7-Day Annualized Yield: 2.90%)
Average New Jersey Tax-Exempt
Money Market Fund +1.2
- ----------------------------------------------------------------
VANGUARD NEW JERSEY INSURED LONG-TERM
TAX-EXEMPT FUND +1.1%
Average New Jersey Tax-Exempt
Bond Fund +0.2
- ----------------------------------------------------------------
</TABLE>
The total return of the Insured Long-Term Tax-Exempt Fund is based on a
decrease in net asset value from $11.98 per share on November 30, 1998, to
$11.76 per share on May 31, 1999, and is adjusted for dividends totaling $0.294
per share paid from net investment income and a distribution of $0.052 per
share paid from net realized capital gains. The Tax-Exempt Money Market Fund's
net asset value remained at $1.00 per share, as is expected but not guaranteed.
On May 31, the Insured Long-Term Fund's yield stood at 4.46%, and the Money
Market Fund's yield was at 2.90%.
For New Jersey residents, income earned by our funds is exempt from
federal and New Jersey State income taxes, but may be subject to local taxes
and the Alternative Minimum Tax.
THE PERIOD IN REVIEW
The U.S. economy steamed ahead during the half-year as consumers continued
spending at a breakneck pace and the manufacturing sector showed signs of
recovering from last fall's woes. Economic growth expanded at an annual rate of
4.3% during the first three months of 1999, while both unemployment and
inflation remained low. The Wilshire 5000 Equity Index, which tracks the entire
U.S. stock market, gained +13.2% for the six months.
While the strong growth pace was regarded enthusiastically by the stock
market, it was hardly welcome news in the bond market, where investors feared
that higher inflation would result from an overheated economy. These concerns
drove interest rates higher and bond prices lower. The yield of the benchmark
30-year U.S. Treasury bond climbed from its starting point of 5.06% on November
30, 1998, to 5.83% on May 31--a significant increase of 77 basis points. At the
shorter end of the bond spectrum, the yield of 3-month Treasury bills rose by
15 basis points to close the period at 4.63%.
1
<PAGE> 4
Though yields of municipal bonds also rose, the climb was not as steep as
for Treasuries. Yields on high-grade long-term municipal bonds ended the
half-year at 5.16%, up from 4.89% when the period began. Yields on top-grade
(MIG-1) 3-month notes rose on balance to 3.15% from 2.95% six months earlier.
Municipal bonds continue to offer excellent value relative to U.S.
Treasuries, although they are not quite as attractive as they were six months
ago. On May 31, the yield of a high-grade, long-term municipal bond was equal
to about 89% of the yield of the 30-year U.S. Treasury, whose interest is
subject to federal income tax. This proportion has historically been about 84%.
Early in the period, however, it was about 97%, largely because Treasury yields
had been driven lower by heavy buying from investors who fled riskier
securities.
PERFORMANCE OVERVIEW
Our Tax-Exempt Money Market Fund's six-month return of +1.4% topped the +1.2%
return of the average New Jersey tax-exempt money market fund. Our margin over
our average peer can be explained by our much lower expenses.
The +1.1% total return achieved by the Insured Long-Term Tax-Exempt Fund
consisted of a +2.5% income return and a price decline of -1.4%, which
reflected the rise in interest rates. The fund's performance was better than
the +0.2% return of the average New Jersey municipal bond fund and even topped
the +0.8% return of the Lehman Brothers Municipal Bond Index. Our
outperformance of the Lehman index is notable because the index exists outside
the "real world" of operating expenses and transaction costs and therefore is a
tough standard for all state tax-exempt funds.
Of course, interest rate fluctuations--up and down--are to be expected.
In our letter to you six months ago, we explained that declining interest rates
gave a boost to bond prices, resulting in an excellent fiscal 1998 total return
of +7.6% for the Insured Long-Term Fund. Over time, however, the effects of
rate variations tend to be offsetting, leaving the rate of interest income as
the chief source of long-term bond returns.
A six-month period is too short to provide a complete picture of a bond
fund's return. This is because only half of the year's interest income is
accounted for, while the price changes engendered by shifts in interest rates
are fully reflected. Consequently, investors should consider a full year's
interest income as part of a semiannual review. During the twelve months ended
May 31, 1999, our Insured Long-Term Fund earned a total return of +4.7%,
consisting of an income return of +5.0% and a negative capital return of -0.3%.
Our low costs play a critical role in our success. Our funds have
annualized expense ratios (expenses as a percentage of average net assets) of
about 0.20%, compared with 1.01% charged by the average long-term New Jersey
tax-exempt bond fund and 0.65% for the average New Jersey tax-exempt money
market fund. Costs matter because they are deducted from the income earned by
the fund. Therefore, lower operating expenses mean that a higher percentage of
the gross interest income is passed along to shareholders.
Also instrumental in our long-term success is the skillful management of
Vanguard Fixed Income Group, which selects the securities for our funds. Our
Insured Long-Term Fund invests predominantly in bonds that carry private
insurance guaranteeing the payment of principal and interest in the event that
a bond issuer defaults on its debt obligations. Though these securities offer
slightly lower gross yields than noninsured bonds, our low costs historically
have made up the difference--and then some. This cost advantage has allowed our
fund to provide net returns that are fully competitive with those of
uninsured--and thus, lower-quality--municipal bond portfolios.
2
<PAGE> 5
IN SUMMARY
The swift rise in interest rates over the past several months is not an
aberration but rather a normal, if unpleasant, part of the cyclicality of the
financial markets. The variable nature of both bond and stock markets is the
reason we continuously counsel shareholders to hold balanced portfolios
suitable to their goals, time horizon for investing, and tolerance for risk.
Building such a program and then sticking with it through good times and bad is
a prudent, and ultimately rewarding, method of confronting the ever-present
volatility of the financial markets.
We look forward to reporting to you on the full 1999 fiscal year six
months hence.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Senior Chairman Chairman and
Chief Executive Officer
June 14, 1999
3
<PAGE> 6
THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED MAY 31, 1999
[PHOTO]
Sentiment shifted on the world's financial markets during the six months ended
May 31, 1999. The period began amid lingering anxiety over the state of the
world economy. Japan was in recession, economic growth was only sluggish in
Europe, and many developing nations were crisis-ridden. The United States was
just about the sole bright spot.
However, as the period progressed and reports showed rapid growth in U.S.
business activity, there was an evident reduction in anxiety. Midway through
the period, leadership in the U.S. stock market shifted away from a relatively
narrow group of large growth stocks regarded as relatively recession-proof and
toward cyclical stocks that had been depressed by fears of recession and by
falling demand from overseas markets. As confidence in global economic growth
grew, interest rates rose and bond prices declined in the United States due to
expectations that the Federal Reserve Board would raise interest rates to ward
off a potential surge in inflation. Internationally, however, a growing
conviction that the worst was over led to solid gains for stock markets in
Japan and several emerging markets.
U.S. STOCK MARKETS
Stock prices climbed during the half-year, reflecting the healthy domestic
economy and investors' confidence in future growth of corporate profits. The
overall market, as measured by the Wilshire 5000 Index, rose 13.2% during the
period, while the S&P 500 Index, a barometer for large-capitalization stocks,
gained 12.6%.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
TOTAL RETURNS
PERIODS ENDED MAY 31, 1999
------------------------------
6 MONTHS 1 YEAR 5 YEARS*
- ---------------------------------------------------------------------------------------------------
STOCKS
<S> <C> <C> <C>
S&P 500 Index 12.6% 21.0% 25.9%
Russell 2000 Index 11.0 -2.7 13.6
Wilshire 5000 Index 13.2 17.7 23.8
MSCI EAFE Index 4.2 4.7 8.0
- ---------------------------------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index -0.8% 4.4% 7.8%
Lehman 10 Year Municipal Bond Index 0.4 4.6 7.2
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 2.2 4.8 5.2
- ---------------------------------------------------------------------------------------------------
OTHER
Consumer Price Index 1.3% 2.1% 2.4%
- ---------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
During the early part of the semiannual period, stock investors favored
large-cap growth stocks--a group perceived as less subject to harm during an
economic downturn. In the United States, the Federal Reserve had already cut
short-term rates by a total of 0.75 percentage point in the autumn. Foreign
central banks continued cutting rates into the new year to combat sluggish
economic conditions in Europe, Asia, and Latin America. Late in the semiannual
period, U.S. investors were rewarded for their earlier optimism with a series
of surprisingly strong gains in corporate earnings--a record percentage of
companies in the S&P 500 reported earnings that beat analysts' estimates.
4
<PAGE> 7
Throughout the period, U.S. consumers provided support for the global
economy: Spending by consumers continued to set records, and American
households on average spent nearly every dollar of income they earned. The
upbeat mood stemmed from a bright employment picture (unemployment hovered near
30-year lows) and rising incomes.
Improved prospects for global economic growth propelled several formerly
lackluster areas of the stock market, particularly commodity-related companies
and "cyclical" companies such as machinery, chemical, and paper manufacturers.
Higher oil prices, boosted by firmer demand and by agreement among
oil-producing nations to limit production, revived the "other energy" and
integrated-oils sectors, which gained about 36% and 16%, respectively.
Technology stocks, up 26% for the six months, were the market's leaders, but
most of the sector's gains came during the first three months of the period.
Consumer-staples companies, beset by tough price competition and hurt by the
stronger U.S. dollar in Europe, were the worst-performing group in the
half-year, down about 7%.
U.S. BOND MARKETS
For bond investors, the powerful economic expansion evident during the
half-year was too much of a good thing. Although the inflation rate did not get
out of hand--consumer prices rose 1.3% during the six months and were up 2.1%
for the twelve months ended May 31--investors were worried that low
unemployment (4.2% of the labor force in May) would trigger an acceleration in
wages and push up prices.
Yields on U.S. Treasury bonds, which had fallen during the summer and
early fall of 1998 as investors flocked to what they regarded as a haven from
instability in other markets, rose by three-quarters of a percentage point or
more. The yield of the 30-year Treasury bond rose 77 basis points, to 5.83% on
May 31 from 5.06% on November 30, 1998. The yield of the 10-year Treasury rose
91 basis points, to 5.62% from 4.71%. Short-term rates didn't rise as far:
Yields on 3-month T-bills were up on balance by only 15 basis points, to 4.63%
on May 31. Bond prices, which move in the opposite direction from interest
rates, fell. The Lehman Aggregate Bond Index, a benchmark for investment-grade
taxable bonds, declined 0.8% on a total-return basis, as bond prices declined
an average of 3.8%, outweighing the 3.0% in interest income for the period.
Municipal bonds suffered only modest price declines and outperformed
Treasury securities during the period--a switch from the previous six months,
when Treasuries were the strongest segment of the bond market.
INTERNATIONAL STOCK MARKETS
Most overseas stock markets generated positive returns during the six months,
despite lingering economic weakness in Asia and sluggish growth in most of
Europe's developed economies. However, the strong rise in the value of the U.S.
dollar against European currencies negated most of the advances in that region
for U.S. investors. Emerging markets generally rebounded strongly, having
suffered steep losses in 1997 and 1998.
Overall, the developed markets outside the United States gained 4.2% in
U.S.-dollar terms, as measured by the Morgan Stanley Capital International
Europe, Australasia, Far East (EAFE) Index. The biggest increases were in the
Pacific region and in emerging markets, where investors saw hopeful signs of
economic recovery. The MSCI Pacific Index rose 14.2% in U.S.-dollar terms,
despite a continuing recession in Japan. The MSCI Select Emerging Markets Free
Index climbed 19.0%. European stocks were up a scant 0.3% in dollar terms, as
gains of about 8% in local currencies were diminished by the dollar's rise
against the euro--a common currency adopted by 11 nations--and other regional
currencies.
5
<PAGE> 8
REPORT FROM THE ADVISER
[PHOTO]
During the fiscal half-year ended May 31, 1999, interest rates rose as
investors became worried that the strong growth of the U.S. economy might lead
to an acceleration in the inflation rate. As the period progressed, the U.S.
economy's growth rate slowed, but remained strong.
On the inflation front, investors' fears seemed misplaced until May, when
the Consumer Price Index came in above expectations. Soon after, the Federal
Reserve Board announced that it had adopted a bias toward a tighter monetary
policy, meaning that it was more likely to raise interest rates in the coming
months than to lower them. A decision to raise short-term interest rates would,
if taken, be aimed at slowing growth and heading off increases in inflation.
The Fed's announcement marked the first time the agency had told the public
immediately about its adoption of a policy bias, rather than releasing the
information at a later date. As we reached the midpoint of our fiscal year,
interest rates were hovering around their highest levels of the period, and
market participants were waiting to see whether inflation and growth statistics
would prompt the Fed to act on its tightening bias.
Municipal bonds outperformed U.S. Treasury bonds with equivalent
maturities during the half-year. The benchmark 30-year U.S. Treasury bond's
yield increased by 77 basis points, from 5.06% on November 30, 1998, to 5.83%
on May 31, 1999. The yield of a 30-year AAA-rated general obligation municipal
bond increased 27 basis points, from 4.89% to 5.16%, over the same period. The
municipal bond market's strong relative performance can be explained by two
factors. First, municipal bond yields at the start of the 1999 fiscal year were
very attractive compared with Treasury yields. The global forces that had
compelled investors to seek the safety of Treasuries during summer 1998 did not
carry over to the municipal market, which consequently underperformed
Treasuries last fiscal year. This set the stage for municipals' superior
performance in the ensuing six months. Second, there was a 24% decline in the
issuance of municipal bonds during the first five months of calendar year 1999
compared with the same period a year earlier.
THE INSURED LONG-TERM TAX-EXEMPT FUND
The supply of newly issued municipals varied widely by state. In New Jersey,
new bond issuance declined by about 10% compared with 1998. The supply of new
bonds declined for two reasons, both related to higher interest rates. First,
as rates rose, many issuers were no longer able to refinance older,
higher-coupon bonds by issuing new bonds at lower rates. Second, higher
interest rates made borrowing less attractive to bond issuers.
All in all, municipal bonds had a strong half-year compared with other
types of bonds. Even so, high-quality, long-term municipals continue to be
attractive investments, with yields as of May 31, 1999, equivalent to a
relatively high 89% of the yield on long-term U.S. Treasury bonds. Given that
interest on municipal bonds is generally exempt from federal income tax,
6
<PAGE> 9
while interest on Treasuries and corporate bonds is not, municipals provide a
better after-tax yield than any taxable bond of similar credit quality.
Going forward, new municipal bond issuance is expected to remain low
through year-end. Also, as the outlook for growth and inflation becomes
clearer, the Fed should give more direction to the market. At the least, this
should reduce uncertainty and bring some comfort to the bond markets.
The Vanguard New Jersey Tax-Exempt Funds' low operating costs and high
credit quality should stand our shareholders in good stead during this year's
turbulent bond markets.
THE TAX-EXEMPT MONEY MARKET FUND
The economy's strength and the resulting threat of inflation were foremost on
investors' minds throughout the first half of the fiscal year. Consequently,
the yield on 1-year U.S. Treasury bills increased 47 basis points to finish the
half-year at 4.97%. Municipal securities with similar maturities experienced a
19-basis-point increase in yields, to 3.18% as of May 31, 1999. We believe the
strength of the U.S. economy is tempered by continued economic uncertainty
abroad, so our fund remains in a neutral position in terms of its average
maturity. In addition to fundamental economic forces, cash flows had a
significant impact on short-term municipal securities.
During the second quarter of the period, the annual onset of redemptions
by shareholders paying income tax liabilities contributed to the increase in
yields on short-term tax-exempt securities. In all, holders of state-specific
money market portfolios redeemed a net total of some $2.6 billion, or 4.4% of
assets, during the tax season, according to IBC Financial Data. As mutual funds
sold securities to meet these redemptions, the temporary oversupply of
short-term securities, coupled with a general rise in short-term interest rates
during late April and May, caused rates to rise significantly. Your management
used this opportunity to position the fund to benefit from the recent economic
trends, to further diversify its holdings, and to enhance its overall credit
quality.
Ian A. MacKinnon, Managing Director
Pamela Wisehaupt Tynan, Principal
Reid O. Smith, Principal
John M. Carbone, Principal
Danine A. Mueller, Principal
Christopher M. Ryon, Principal
Kathryn Allen, Principal
Vanguard Fixed Income Group
June 11, 1999
INVESTMENT PHILOSOPHY
The adviser believes that each fund, while operating within stated maturity and
stringent quality targets, can achieve a high level of current income that is
exempt from federal and New Jersey income taxes by investing in insured and
high-quality uninsured securities issued by New Jersey state, county, and
municipal governments.
7
<PAGE> 10
FUND PROFILE
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND
This Profile provides a snapshot of the fund's characteristics as of May 31,
1999. Key elements of this Profile are defined on page 9.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- ------------------------------------------
<S> <C>
Yield 2.9%
Average Maturity 57 days
Average Quality MIG-1
Expense Ratio 0.20%*
</TABLE>
*Annualized.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- ----------------------------------------------
<S> <C>
MIG-1/SP-1+ 78.1%
A-1/P-1 20.8
AAA/AA 0.7
A 0.4
- ----------------------------------------------
Total 100.0%
</TABLE>
8
<PAGE> 11
AVERAGE COUPON. The average interest rate paid on the securities held by a
fund. It is expressed as a percentage of face value.
AVERAGE DURATION. An estimate of how much a bond fund's share price will
fluctuate in response to a change in interest rates. To see how the price could
shift, multiply the fund's duration by the change in rates. If interest rates
rise by one percentage point, the share price of a fund with an average
duration of five years would decline by about 5%. If rates decrease by a
percentage point, the fund's share price would rise by 5%.
AVERAGE MATURITY. The average length of time until bonds held by a fund reach
maturity (or are called) and are repaid. In general, the longer the average
maturity, the more a fund's share price will fluctuate in response to changes
in market interest rates.
AVERAGE QUALITY. An indicator of credit risk, this figure is the average of the
ratings assigned to a fund's securities holdings by credit-rating agencies. The
agencies make their judgment after appraising an issuer's ability to meet its
obligations. Quality is graded on a scale, with Aaa or AAA indicating the most
creditworthy bond issuers and A-1 or MIG-1 indicating the most creditworthy
issuers of money market securities.
BETA. A measure of the magnitude of a fund's past share-price fluctuations in
relation to the ups and downs of the overall market (or appropriate market
index). The market (or index) is assigned a beta of 1.00, so a fund with a beta
of 1.20 would have seen its share price rise or fall by 12% when the overall
market rose or fell by 10%.
CASH RESERVES. The percentage of a fund's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing securities. This
figure does not include cash invested in futures contracts to simulate bond
investment.
DISTRIBUTION BY CREDIT QUALITY. This breakdown of a fund's securities by credit
rating can help in gauging the risk that returns could be affected by defaults
or other credit problems.
DISTRIBUTION BY MATURITY. An indicator of interest-rate risk. In general, the
higher the concentration of longer-maturity issues, the more a fund's share
price will fluctuate in response to changes in interest rates.
EXPENSE RATIO. The percentage of a fund's average net assets used to pay its
annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
INVESTMENT FOCUS. This grid indicates the focus of a fund in terms of two
attributes: average maturity (short, medium, or long) and average credit
quality (high, medium, or low).
NUMBER OF ISSUES. An indicator of diversification. The more separate issues a
fund holds, the less susceptible it is to a price decline stemming from the
problems of a particular issue.
R-SQUARED. A measure of how much of a fund's past returns can be explained by
the returns from the overall market (or its benchmark index). If a fund's total
return were precisely synchronized with the overall market's return, its
R-squared would be 1.00. If a fund's returns bore no relationship to the
market's returns, its R-squared would be 0.
YIELD. A snapshot of a fund's interest income. The yield, expressed as a
percentage of the fund's net asset value, is based on income earned over the
past 30 days (7 days for money market funds) and is annualized, or projected
forward for the coming year.
YIELD TO MATURITY. The rate of return an investor would receive if the
securities held by a fund were held to their maturity dates.
9
<PAGE> 12
FUND PROFILE
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND
This Profile provides a snapshot of the fund's characteristics as of May 31,
1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 9.
<TABLE>
<CAPTION>
FINANCIAL ATTRIBUTES
- --------------------------------------------------
NEW JERSEY INSURED LEHMAN
LONG-TERM INDEX*
- --------------------------------------------------
<S> <C> <C>
Number of Issues 217 49,905
Yield 4.5% --
Yield to Maturity 4.7% --
Average Coupon 5.2% 5.5%
Average Maturity 10.9 years 13.2 years
Average Quality AAA AA+
Average Duration 7.4 years 7.2 years
Expense Ratio 0.21%** --
Cash Reserves 0.0% --
</TABLE>
*Lehman Municipal Bond Index.
**Annualized.
INVESTMENT FOCUS
- --------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
VOLATILITY MEASURES
- --------------------------------------------------
NEW JERSEY INSURED LEHMAN
LONG-TERM INDEX*
- --------------------------------------------------
<S> <C> <C>
R-Squared 0.97 1.00
Beta 1.02 1.00
</TABLE>
*Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
DISTRIBUTION BY CREDIT QUALITY (% OF PORTFOLIO)
- --------------------------------------------------
<S> <C>
AAA 95.3%
AA 4.7
A 0.0
BBB 0.0
BB 0.0
B 0.0
- --------------------------------------------------
Total 100.0%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION BY MATURITY (% OF PORTFOLIO)
- --------------------------------------------------
<S> <C>
UNDER 1 YEAR 3.6%
1-5 Years 16.1
5-10 Years 31.2
10-20 Years 34.1
20-30 Years 13.8
Over 30 Years 1.2
- --------------------------------------------------
Total 100.0%
</TABLE>
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<PAGE> 13
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the funds. Note that income
returns can fluctuate widely, as can the share price of the New Jersey Insured
Long-Term Tax-Exempt Fund. An investment in a money market fund is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund.
<TABLE>
<CAPTION>
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND
TOTAL INVESTMENT RETURNS: FEBRUARY 3, 1988-MAY 31, 1999
- -----------------------------------------------------------------------------
NEW JERSEY TAX-EXEMPT AVERAGE
MONEY MARKET FUND 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
1998 0.0 3.2 3.2 2.8
1999** 0.0 1.4 1.4 1.2
- -----------------------------------------------------------------------------
</TABLE>
*Average New Jersey Tax-Exempt Money Market Fund.
**Six months ended May 31, 1999.
See Financial Highlights table on page 23 for
dividend information for the past five years.
SEC 7-Day Annualized Yield (5/31/1999): 2.90%
<TABLE>
<CAPTION>
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND
TOTAL INVESTMENT RETURNS: FEBRUARY 3, 1988-MAY 31, 1999
- -----------------------------------------------------------------------------
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND
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
1998 2.3 5.3 7.6 7.8
1999** -1.4 2.5 1.1 0.8
- -----------------------------------------------------------------------------
</TABLE>
*Lehman Municipal Bond Index.
**Six months ended May 31, 1999.
See Financial Highlights table on page 24 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 1999*
- ---------------------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New Jersey Tax-Exempt
Money Market Fund 2/3/1988 3.02% 3.20% 0.00% 3.66% 3.66%
New Jersey Insured Long-Term
Tax-Exempt Fund 2/3/1988 6.47 7.22 2.03 6.02 8.05
- ---------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
11
<PAGE> 14
FINANCIAL STATEMENTS
MAY 31, 1999 (UNAUDITED)
[PHOTO]
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's municipal bond holdings,
including each security's market value on the last day of the reporting period
and information on credit enhancements (insurance or letters of credit). Other
assets are added to, and liabilities are subtracted from, the value of Total
Municipal Bonds to calculate the fund's Net Assets. Finally, Net Assets are
divided by the outstanding shares of the fund to arrive at its share price, or
Net Asset Value (NAV) Per Share.
At the end of the Statement of Net Assets, you will find a table
displaying the composition of the fund's net assets on both a dollar and
per-share basis. Undistributed Net Investment Income is usually zero because
the fund distributes its net income to shareholders as a dividend each day. Any
realized gains must be distributed annually, so the bulk of net assets consists
of Paid in Capital (money invested by shareholders). The balance shown for
Accumulated Net Realized Gains usually approximates the amount available to
distribute to shareholders as taxable capital gains as of the statement date,
but may differ because certain investments or transactions may be treated
differently for financial statement and tax purposes. Any Accumulated Net
Realized Losses, and any cumulative excess of distributions over net realized
gains, will appear as negative balances. Unrealized Appreciation (Depreciation)
is the difference between the value of the fund's investments and their cost,
and reflects the gains (losses) that would be realized if the fund were to sell
all of its investments at their statement-date values.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.5%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bernards Township NJ BAN 3.50% 5/19/2000 $ 5,651 $ 5,665
Bernardsville NJ BAN 3.35% 7/14/1999 7,494 7,497
Bloomfield Township NJ BAN 3.24% 9/30/1999 8,500 8,501
Bridgewater NJ BAN 3.50% 9/3/1999 4,820 4,825
Burlington County NJ BAN 3.25% 2/9/2000 4,000 4,009
Burlington County NJ BAN 3.25% 3/10/2000 4,728 4,737
Cape May County NJ BAN 3.50% 3/24/2000 4,900 4,912
Chatham Township NJ BAN 3.25% 2/17/2000 10,948 10,976
Cherry Hill Township NJ BAN 3.75% 10/13/1999 44,522 44,647
Clifton NJ TAN 3.40% 2/11/2000 4,100 4,110
East Brunswick Township NJ BAN 3.50% 1/6/2000 11,932 11,974
East Windsor Township NJ BAN 3.25% 7/15/1999 4,731 4,732
Essex County NJ Improvement Auth. Pooled Govt. Loan VRDO 2.95% 6/2/1999 LOC 27,150 27,150
Essex Fells NJ BAN 3.25% 9/10/1999 4,690 4,693
Glen Ridge NJ TAN 3.625% 2/24/2000 5,000 5,015
Gloucester County NJ PCR VRDO (Mobil Oil Refining Corp. Project) 3.00% 6/2/1999 20,200 20,200
Linden City NJ BAN 3.75% 6/16/1999 3,000 3,000
Mercer County NJ BAN 3.25% 12/22/1999 25,000 25,044
Middlesex County NJ Improvement Auth. Lease Rev.
(Raritan Center Overpass Project) 4.75% 8/1/1999 3,600 3,611
Monmouth County NJ VRDO
(Improvement Auth. Pooled Govt. Loan Program) 3.10% 6/2/1999 LOC 48,300 48,300
Montgomery Township NJ BAN 3.25% 2/9/2000 4,655 4,666
Morris County NJ BAN 3.60% 9/29/1999 36,342 36,389
Morris County NJ BAN 6.00% 7/15/1999 2,193 2,199
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 3.10% 7/12/1999 LOC 11,000 11,000
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 3.10% 7/14/1999 LOC 7,800 7,800
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 3.10% 8/9/1999 LOC $ 5,000 $ 5,000
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 3.10% 8/11/1999 LOC 7,900 7,900
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 3.15% 8/10/1999 LOC 8,200 8,200
New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 3.05% 7/15/1999 LOC 8,100 8,100
New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 3.15% 6/7/1999 LOC 24,700 24,700
New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 3.15% 8/9/1999 LOC 16,900 16,900
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(NJ Natural Gas Project) 2.95% 6/2/1999 (2) LOC 6,345 6,345
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(NJ Natural Gas Project) 3.00% 6/2/1999 (2) LOC 7,500 7,500
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(NJ Natural Gas Project) 3.20% 6/2/1999 (2) LOC 4,310 4,310
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(NJ Natural Gas Project) 3.25% 6/2/1999 (2) LOC 11,900 11,900
New Jersey Econ. Dev. Auth. PCR VRDO (Exxon Project) 3.05% 6/2/1999 12,600 12,600
New Jersey Econ. Dev. Auth. PCR VRDO
(Public Service Electric & Gas Co.) 3.00% 6/2/1999 (1) LOC 16,420 16,420
New Jersey Econ. Dev. Auth. VRDO (Lawrence School Project) 2.95% 6/3/1999 LOC 24,100 24,100
New Jersey Econ. Dev. Auth. VRDO (Natural Gas Fac.-NUI Corp.) 3.25% 6/2/1999 (2) LOC 26,900 26,900
New Jersey Econ. Dev. Auth. VRDO (United States Golf Association) 3.10% 6/3/1999 LOC 2,400 2,400
New Jersey Econ. Dev. Auth. Water Fac. TOB VRDO
(NJ American Water Co. Project) 3.32% 6/3/1999 (3) + 4,850 4,850
New Jersey Econ. Dev. Auth. Water Fac. VRDO
(Elizabethtown Water Co. Project) 3.10% 6/2/1999 (2) LOC 19,500 19,500
New Jersey Econ. Dev. Auth. Water Fac. VRDO
(Elizabethtown Water Co. Project) 3.15% 6/2/1999 (2) LOC 13,600 13,600
New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co.) 3.35% 6/2/1999 (2) LOC 3,500 3,500
New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co.) 3.40% 6/2/1999 (2) LOC 9,500 9,500
New Jersey Educ. Fac. Auth. Rev. VRDO (College of New Jersey) 3.17% 6/3/1999 (2) LOC 12,000 12,000
New Jersey GO 7.00% 4/1/2000 3,935 4,059
New Jersey Health Care Fac. Finance Auth. VRDO
(Holy Name Hosp.) 3.05% 6/3/1999 LOC 8,500 8,500
New Jersey Health Care Fac. Finance Auth. VRDO
(Hosp. Capital Asset Pooled Program) 3.00% 6/3/1999 LOC 53,100 53,100
New Jersey Sports & Exposition Auth. Rev. 6.10% 1/1/2000 (ETM) 5,540 5,637
New Jersey Sports & Exposition Auth. Rev. VRDO 3.00% 6/3/1999 (1) LOC 47,120 47,120
New Jersey TRAN CP 2.95% 6/14/1999 12,000 12,000
New Jersey TRAN CP 3.05% 6/7/1999 13,600 13,600
New Jersey TRAN CP 3.25% 6/10/1999 18,000 18,000
New Jersey Transp. Trust Fund Auth. 4.25% 6/15/2000 19,450 19,666
New Jersey Transp. Trust Fund Auth. 4.40% 6/15/1999 (ETM) 6,000 6,003
New Jersey Transp. Trust Fund Auth. TOB VRDO 3.27% 6/3/1999 + 14,495 14,495
New Jersey Transp. Trust Fund Auth. TOB VRDO 3.30% 6/3/1999 + 8,495 8,495
New Jersey Turnpike Auth. Rev. VRDO 3.05% 6/2/1999 (3) LOC 138,350 138,350
Ocean County NJ GO 4.50% 6/1/1999 2,000 2,000
Paramus Borough NJ BAN 3.61% 8/13/1999 9,943 9,943
Port Auth. of New York & New Jersey CP 3.10% 6/21/1999 7,205 7,205
Port Auth. of New York & New Jersey CP 3.35% 6/10/1999 13,790 13,790
Port Auth. of New York & New Jersey CP 3.40% 6/7/1999 3,985 3,985
Port Auth. of New York & New Jersey CP 3.40% 6/10/1999 9,600 9,600
Port Auth. of New York & New Jersey Rev. 3.60% 8/1/1999 6,000 6,000
Port Auth. of New York & New Jersey Rev. 4.00% 10/1/1999 5,000 5,018
Princeton Township NJ BAN 3.75% 8/13/1999 7,000 7,003
Princeton Township NJ BAN 3.90% 9/2/1999 2,200 2,205
Princeton Univ. NJ CP 3.05% 8/24/1999 10,200 10,200
Princeton Univ. NJ CP 3.15% 6/23/1999 3,000 3,000
Princeton Univ. NJ CP 3.20% 7/21/1999 12,000 12,000
Randolph Township NJ BAN 3.75% 9/3/1999 3,413 3,415
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rockaway Township NJ BAN 3.90% 7/28/1999 $ 5,030 $ 5,033
Saddle Brook Township NJ BAN 3.25% 2/9/2000 2,782 2,786
Salem County NJ PCR Finance Auth. CP (PECO Project) 3.10% 7/12/1999 LOC 3,400 3,400
Salem County NJ PCR Finance Auth. CP (PECO Project) 3.10% 8/6/1999 LOC 6,600 6,600
Salem County NJ PCR VRDO (Atlantic City Electric Co.) 3.00% 6/2/1999 (1) LOC 9,900 9,900
Salem County NJ PCR VRDO (Atlantic City Electric Co.) 3.10% 6/2/1999 (1) LOC 1,000 1,000
Salem County NJ PCR VRDO (Public Service Electric & Gas) 3.20% 6/2/1999 (1) LOC 2,000 2,000
Scotch Plains Township NJ BAN 4.25% 6/10/1999 4,400 4,401
Somerset County NJ Finance Auth. PCR VRDO
(American Cyanamid Co. Project) 2.90% 6/2/1999 12,500 12,500
South New Jersey Transp. Auth. BAN 2.95% 11/3/1999 25,000 25,000
Tewksbury Township NJ BAN 3.65% 8/11/1999 8,340 8,351
Union County NJ BAN 3.25% 6/30/1999 19,417 19,421
Union County NJ PCR VRDO (Exxon Project) 2.75% 6/2/1999 23,600 23,600
Union County NJ PCR VRDO (Exxon Project) 3.25% 6/2/1999 6,000 6,000
West Orange Township NJ BAN 3.75% 6/23/1999 4,397 4,397
OUTSIDE NEW JERSEY:
Puerto Rico Electric Power Auth. TOB VRDO 3.12% 6/3/1999 (4) + 7,175 7,175
Puerto Rico Govt. Dev. Bank VRDO 3.00% 6/2/1999 (1) LOC 33,855 33,855
Puerto Rico Highway & Transp. Auth. TOB VRDO 3.12% 6/3/1999 (1) + 13,045 13,045
Puerto Rico Highway & Transp. Auth. VRDO 3.00% 6/2/1999 LOC 4,575 4,575
Puerto Rico Industrial Medical & Environmental
Fac. Fin. Auth. PCR PUT (Abbott Laboratories Project) 2.90% 3/1/2000 + 8,750 8,750
Puerto Rico Infrastructure Finance Auth. TOB VRDO 3.12% 6/3/1999 (2) + 6,240 6,240
Puerto Rico TRAN 3.50% 7/30/1999 10,000 10,010
- -------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,224,305) 1,224,305
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.5%)
- -------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 14,010
Liabilities (7,799)
---------
6,211
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 1,230,514,188 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,230,516
=========================================================================================================================
NET ASSET VALUE PER SHARE $1.00
=========================================================================================================================
</TABLE>
* See Note A in Notes to Financial Statements.
+ Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. At May 31, 1999, the aggregate
value of these securities was $63,050,000, representing 5.1% of net assets.
For key to abbreviations and other references, see page 20.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AT MAY 31, 1999, NET ASSETS CONSISTED OF:
- ------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,230,530 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (14) --
Unrealized Appreciation -- --
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,230,516 $1.00
========================================================================================================================
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (100.7%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ISSUER INSURED (86.3%)
Atlantic City NJ Board of Educ. GO 6.00% 12/1/2012 (4) $ 4,600 $ 5,139
Atlantic City NJ Board of Educ. GO 6.10% 12/1/2015 (4) 2,000 2,262
Atlantic County NJ COP 6.00% 3/1/2014 (3) 3,685 4,119
Atlantic County NJ COP 6.00% 3/1/2015 (3) 1,480 1,652
Atlantic County NJ COP 7.40% 3/1/2010 (3) 1,755 2,147
Atlantic County NJ COP 7.40% 3/1/2011 (3) 4,025 4,959
Atlantic County NJ Util. Auth. Sewer Rev. 5.85% 1/15/2015 (2) 3,000 3,178
Bayshore NJ Regional Sewer Auth. Rev. 5.40% 5/1/2012 (1) 500 516
Bergen County NJ Util. Auth. Water PCR 5.50% 6/15/2002 (3)(Prere.) 15,750 16,495
Brick Township NJ Muni. Util. Auth. Rev. 5.00% 12/1/2016 (3) 11,150 11,086
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2004 (3) 8,345 6,648
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2005 (3) 18,545 14,054
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2006 (3) 18,545 13,350
Cape May County NJ Muni. Util. Auth. Rev. 5.75% 1/1/2016 (1) 14,975 15,613
Cape May County NJ PCR (Atlantic City Electric) 6.80% 3/1/2021 (1) 15,400 18,885
Cherry Hill Township NJ School Dist. 4.70% 2/15/2012 (4) 2,320 2,304
Cherry Hill Township NJ School Dist. 4.70% 2/15/2013 (4) 2,325 2,301
Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.40% 1/1/2013 (3) 9,000 9,330
Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.50% 1/1/2026 (3) 35,600 36,829
Elizabeth City NJ GO 6.60% 8/1/2001 (1)(Prere.) 8,750 9,437
Essex County NJ Improvement Auth. Lease Rev. 5.50% 12/1/2008 (2) 2,560 2,700
Essex County NJ Improvement Auth. Lease Rev. 5.50% 12/1/2013 (2) 7,500 7,850
Essex County NJ Util. Auth. Solid Waste Rev. 0.00% 4/1/2010 (4) 2,000 1,173
Essex County NJ Util. Auth. Solid Waste Rev. 4.875% 4/1/2018 (4) 4,000 3,882
Essex County NJ Util. Auth. Solid Waste Rev. 5.00% 4/1/2022 (4) 4,000 3,925
Essex County NJ Util. Auth. Solid Waste Rev. 5.60% 4/1/2016 (4) 2,200 2,406
Evesham NJ Muni. Util. Auth. Rev. 7.00% 7/1/2010 (1) 1,700 1,761
Evesham NJ Muni. Util. Auth. Rev. 7.00% 7/1/2015 (1) 450 466
Gloucester County NJ Util. Auth. Sewer Rev. 5.40% 1/1/2016 (1) 3,410 3,489
Gloucester Township NJ GO 5.75% 7/15/2010 (2) 2,880 3,147
Gloucester Township NJ Muni. Util. Auth. Rev. 5.65% 3/1/2018 (2) 2,755 2,964
Hamilton Township NJ Muni. Util. Auth. Rev. 6.00% 8/15/2002 (3)(Prere.) 1,000 1,082
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2003 (1) 3,800 3,205
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2004 (1) 3,750 3,018
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2005 (1) 3,805 2,917
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2006 (1) 2,000 1,458
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 6.25% 8/1/2013 (1) + 9,590 10,997
Hudson County NJ Correctional Fac. COP 6.50% 12/1/2011 (1) 9,000 9,685
Hudson County NJ GO 6.55% 7/1/2007 (3) 1,300 1,484
Hudson County NJ GO 6.55% 7/1/2009 (3) 635 736
Hudson County NJ Improvement Auth. Lease Rev. 6.00% 12/1/2002 (3)(Prere.) 6,525 7,098
Irvington Township NJ GO 0.00% 8/1/2007 (1) 1,000 692
Irvington Township NJ GO 0.00% 8/1/2009 (1) 2,580 1,603
Irvington Township NJ GO 0.00% 8/1/2010 (1) 2,080 1,218
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2011 (3) 2,625 2,664
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2019 (3) 3,000 2,985
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2021 (3) 3,500 3,471
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2022 (3) 4,000 3,961
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2023 (3) 4,000 3,955
Middlesex County NJ COP
(Civil Square II Redevelopment Associates) 5.125% 6/15/2016 (1) 3,805 3,824
Middlesex County NJ Import Auth. Util. Systems Rev.
(Perth Amboy Project) 0.00% 9/1/2015 (2) 2,000 872
Middlesex County NJ Import Auth. Util. Systems Rev.
(Perth Amboy Project) 0.00% 9/1/2016 (2) 3,000 1,233
Middlesex County NJ Import Auth. Util. Systems Rev.
(Perth Amboy Project) 0.00% 9/1/2018 (2) 4,550 1,671
Middlesex County NJ Util. Auth. Sewer Rev. 5.125% 12/1/2016 (3) 4,550 4,581
Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 3/15/2010 (2) 2,740 2,846
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 9/15/2010 (2) $ 1,790 $ 1,859
Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 12/1/2010 (3) 3,145 3,295
Middlesex County NJ Util. Auth. Sewer Rev. 5.375% 9/15/2015 (2) 3,775 3,875
Middlesex County NJ Util. Auth. Sewer Rev. 6.50% 3/15/2001 (3)(Prere.) 6,300 6,724
Monmouth County NJ Improvement Auth. Rev. Governmental Loan 5.40% 12/1/2012 (1) 2,505 2,614
Monmouth County NJ Improvement Auth. Rev.
(Howell Township Board of Ed.) 5.80% 7/15/2017 (2) 1,180 1,259
Mount Laurel Township NJ Muni. Util. Auth. Util. System Rev. 6.00% 7/1/2015 (1) 4,250 4,542
New Brunswick NJ Housing & Urban Dev. Rev. 5.75% 7/1/2002 (1)(Prere.) 13,200 14,147
New Brunswick NJ Housing & Urban Dev. Rev. 5.75% 7/1/2024 (1) 440 456
New Brunswick NJ Housing & Urban Dev. Rev. 6.00% 7/1/2002 (1)(Prere.) 5,805 6,263
New Brunswick NJ Housing & Urban Dev. Rev. 6.00% 7/1/2012 (1) 195 208
New Jersey Econ. Dev. Auth. Lease Rev.
(Bergen County Administration Complex) 5.50% 11/15/2012 (1) 4,375 4,568
New Jersey Econ. Dev. Auth. Lease Rev.
(Bergen County Administration Complex) 5.625% 11/15/2014 (1) 4,870 5,120
New Jersey Econ. Dev. Auth. Lease Rev.
(Bergen County Administration Complex) 5.75% 11/15/2016 (1) 5,440 5,757
New Jersey Econ. Dev. Auth. Lease Rev.
(Bergen County Administration Complex) 5.75% 11/15/2018 (1) 6,080 6,416
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(NJ Natural Gas Project) 3.00% 6/2/1999 (2) 4,000 4,000
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(NJ Natural Gas Project) 3.20% 6/2/1999 (2) 5,900 5,900
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(NJ Natural Gas Project) 3.25% 6/2/1999 (2) 2,000 2,000
New Jersey Econ. Dev. Auth. Rev. (Hillcrest Health Service) 0.00% 1/1/2012 (2) 2,500 1,339
New Jersey Econ. Dev. Auth. Rev. (Hillcrest Health Service) 0.00% 1/1/2013 (2) 3,000 1,519
New Jersey Econ. Dev. Auth. Rev. (Market Transition) 5.80% 7/1/2007 (1) 1,000 1,085
New Jersey Econ. Dev. Auth. Rev. (Market Transition) 5.80% 7/1/2009 (1) 7,250 7,863
New Jersey Econ. Dev. Auth. Rev. (Market Transition) 5.875% 7/1/2011 (1) 23,175 25,156
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2008 (1) 2,305 1,515
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2011 (1) 4,650 2,574
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2012 (1) 4,550 2,377
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2013 (1) 4,500 2,222
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2014 (1) 4,210 1,963
New Jersey Econ. Dev. Auth. Rev. PCR VRDO
(Public Service Electric & Gas Co.) 3.00% 6/2/1999 (1) 1,900 1,900
New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co.) 3.45% 6/2/1999 (2) 3,500 3,500
New Jersey Educ. Fac. Auth. Rev. (Drew Univ.) 5.00% 7/1/2017 (1) 2,500 2,485
New Jersey Educ. Fac. Auth. Rev. (Drew Univ.) 5.25% 7/1/2013 (1) 2,500 2,571
New Jersey Educ. Fac. Auth. Rev. (Kean College) 6.60% 7/1/2001 (1)(Prere.) 3,700 3,982
New Jersey Educ. Fac. Auth. Rev. (NJ Institute of Technology) 6.00% 7/1/2024 (1) 1,500 1,601
New Jersey Educ. Fac. Auth. Rev. (Rider College) 6.20% 7/1/2017 (2) 4,000 4,313
New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.25% 7/1/2010 (2) ++ 2,500 2,618
New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.25% 7/1/2012 (2) ++ 1,275 1,326
New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.60% 7/1/2016 (1) 1,765 1,846
New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.625% 7/1/2019 (1) 3,625 3,793
New Jersey Educ. Fac. Auth. Rev. (Trenton State College) 6.00% 7/1/2012 (2) 3,005 3,216
New Jersey Health Care Fac. Auth. Rev.
(Burdette Tomlin Memorial Hosp.) 6.50% 7/1/2012 (3) 1,500 1,600
New Jersey Health Care Fac. Auth. Rev.
(Community Medical Center/Kimball Medical Center/
Kensington Manor Care Center) 5.00% 7/1/2010 (4) 4,695 4,758
New Jersey Health Care Fac. Auth. Rev.
(Community Medical Center/Kimball Medical Center/
Kensington Manor Care Center) 5.25% 7/1/2009 (4) 5,500 5,736
New Jersey Health Care Fac. Auth. Rev.
(Community Medical Center/Kimball Medical Center/
Kensington Manor Care Center) 5.25% 7/1/2012 (4) 1,500 1,533
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey Health Care Fac. Auth. Rev.
(Community Medical Center/Kimball Medical Center/
Kensington Manor Care Center) 7.00% 7/1/2020 (1) $ 2,850 $ 3,001
New Jersey Health Care Fac. Auth. Rev.
(Hackensack Univ. Medical Center) 5.00% 1/1/2028 (1) 21,860 21,307
New Jersey Health Care Fac. Auth. Rev.
(Hackensack Univ. Medical Center) 5.375% 1/1/2013 (1) 2,355 2,423
New Jersey Health Care Fac. Auth. Rev.
(Hackensack Univ. Medical Center) 5.375% 1/1/2014 (1) 2,965 3,046
New Jersey Health Care Fac. Auth. Rev. (Holy Name Hosp.) 5.25% 7/1/2020 (2) 4,100 4,119
New Jersey Health Care Fac. Auth. Rev.
(Jersey Shore Medical Center) 6.20% 7/1/2013 (2) 3,130 3,420
New Jersey Health Care Fac. Auth. Rev.
(Jersey Shore Medical Center) 6.20% 7/1/2014 (2) 3,075 3,367
New Jersey Health Care Fac. Auth. Rev.
(Jersey Shore Medical Center) 6.25% 7/1/2016 (2) 2,000 2,187
New Jersey Health Care Fac. Auth. Rev. (Memorial Health Alliance) 6.25% 7/1/2000 (3)(Prere.) 8,000 8,246
New Jersey Health Care Fac. Auth. Rev. (Mercer Medical Center) 6.50% 7/1/2010 (1) 6,000 6,398
New Jersey Health Care Fac. Auth. Rev. (Mountainside Hosp.) 5.35% 7/1/2007 (1) 3,215 3,366
New Jersey Health Care Fac. Auth. Rev.
(Muhlenburg Medical Center) 8.00% 7/1/2018 (2) 750 768
New Jersey Health Care Fac. Auth. Rev.
(Newark Beth Israel Medical Center) 6.00% 7/1/2004 (4) 8,500 9,377
New Jersey Health Care Fac. Auth. Rev. (Riverside Medical Center) 6.25% 7/1/2010 (2) 2,935 3,314
New Jersey Health Care Fac. Auth. Rev.
(Society of the Valley Hosp.) 6.625% 7/1/2010 (1) 2,750 2,812
New Jersey Health Care Fac. Auth. Rev.
(St. Barnabas Health Care) 0.00% 7/1/2021 (1) 3,000 944
New Jersey Health Care Fac. Auth. Rev.
(St. Barnabas Health Care) 4.75% 7/1/2028 (1) 14,000 12,981
New Jersey Health Care Fac. Auth. Rev.
(St. Barnabas Health Care) 5.00% 7/1/2024 (1) 8,000 7,832
New Jersey Health Care Fac. Auth. Rev.
(St. Barnabas Health Care) 5.25% 7/1/2016 (1) 5,550 5,590
New Jersey Health Care Fac. Auth. Rev.
(St. Clare's Riverside Medical Center) 5.75% 7/1/2014 (1) 8,500 9,033
New Jersey Health Care Fac. Auth. Rev. (Virtua Health) 5.25% 7/1/2014 (4) 20,000 20,259
New Jersey Health Care Fac. Auth. Rev.
(West Jersey Health System) 6.00% 7/1/2002 (1)(Prere.) 5,175 5,583
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 4.95% 6/1/2010 (2) 6,325 6,356
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.05% 6/1/2011 (2) 5,100 5,130
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.05% 6/1/2012 (1) 1,500 1,501
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.10% 6/1/2013 (1) 2,255 2,257
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.125% 6/1/2014 (1) 1,300 1,301
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.15% 6/1/2012 (2) 5,250 5,300
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.20% 6/1/2013 (2) 8,240 8,336
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.25% 6/1/2018 (1) 705 707
New Jersey Sports & Exposition Auth. Rev. 5.50% 3/1/2017 (1) 5,755 6,077
New Jersey Transp. Trust Fund Auth. Rev. 5.50% 6/15/2013 (1) 3,000 3,133
New Jersey Transp. Trust Fund Auth. Rev. 6.00% 6/15/2011 (1) 31,280 34,386
New Jersey Turnpike Auth. Rev. 6.50% 1/1/2013 (1) 20,000 23,234
New Jersey Turnpike Auth. Rev. VRDO 3.05% 6/2/1999 (3) LOC 3,800 3,800
New Jersey Water Supply Auth. Delaware &
Raritan Water System Rev. 5.375% 11/1/2010 (1) 2,230 2,327
New Jersey Water Supply Auth. Delaware &
Raritan Water System Rev. 5.375% 11/1/2011 (1) 2,345 2,427
New Jersey Water Supply Auth. Delaware &
Raritan Water System Rev. 5.375% 11/1/2013 (1) 2,600 2,676
Newark NJ GO 5.50% 10/1/2008 (2) 1,660 1,780
North Bergen Township NJ GO 8.00% 8/15/2006 (4) 1,885 2,300
North Brunswick Township NJ Board of Educ. GO 5.50% 2/1/2008 (3) 1,915 2,051
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North Brunswick Township NJ Board of Educ. GO 5.50% 2/1/2009 (3) $ 2,030 $ 2,162
North Brunswick Township NJ GO 5.50% 5/15/2013 (3) 1,390 1,459
North Hudson NJ Sewer Auth. Rev. 5.125% 8/1/2008 (3) 2,000 2,089
North Hudson NJ Sewer Auth. Rev. 5.125% 8/1/2022 (3) 23,950 23,900
North Hudson NJ Sewer Auth. Rev. 5.25% 8/1/2016 (3) 14,360 14,557
North Jersey Water Dist. Rev. (Wanaque South Project) 6.00% 7/1/2012 (1) 10,125 10,942
Ocean County NJ Util. Auth. Waste Water Rev. 5.00% 1/1/2014 (3) 2,000 2,000
Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/2018 (3) 4,000 4,200
Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/2018 (3)(ETM) 2,500 2,927
Ocean Township NJ Muni. Util. Auth. Rev. 6.00% 8/1/2017 (1) 3,975 4,420
Old Bridge Township NJ Muni. Util. Auth. Rev. 6.25% 11/1/2016 (3) 1,400 1,520
Old Bridge Township NJ Muni. Util. Auth. Rev. 6.40% 11/1/2009 (3) 3,000 3,281
Passaic Valley NJ Sewer Comm. Rev. 5.75% 12/1/2008 (2) 4,450 4,772
Passaic Valley NJ Sewer Comm. Rev. 5.75% 12/1/2013 (2) 4,000 4,260
Plainfield NJ GO 6.25% 7/15/2007 (2) 6,930 7,496
Port Auth. of New York & New Jersey Rev. 5.125% 11/15/2012 (3) 2,500 2,527
Port Auth. of New York & New Jersey Rev. 5.125% 11/15/2013 (3) 5,735 5,777
Port Auth. of New York & New Jersey Rev. 5.125% 11/15/2014 (3) 6,025 6,048
Rutgers State Univ. NJ 5.00% 5/1/2023 (3) 3,260 3,197
Rutgers State Univ. NJ 5.125% 5/1/2020 (3) 3,835 3,832
Salem County NJ PCR VRDO (Public Service Electric & Gas) 3.20% 6/2/1999 (1) 4,500 4,500
South Brunswick Township NJ Board of Educ. GO 5.25% 8/1/2020 (3) 3,535 3,575
South Brunswick Township NJ Board of Educ. GO 5.25% 8/1/2022 (3) 4,630 4,682
South Brunswick Township NJ Board of Educ. GO 5.50% 8/1/2024 (3) 2,500 2,586
South Brunswick Township NJ Board of Educ. GO 6.40% 8/1/2005 (3)(Prere.) 4,520 5,066
South Jersey Transp. Auth. NJ Transp. System Rev. 5.00% 11/1/2029 (2) 13,850 13,470
South Jersey Transp. Auth. NJ Transp. System Rev. 5.25% 11/1/2012 (2) 2,000 2,072
South Jersey Transp. Auth. NJ Transp. System Rev. 5.25% 11/1/2013 (2) 4,000 4,122
South Jersey Transp. Auth. NJ Transp. System Rev. 5.25% 11/1/2014 (2) 4,375 4,487
South Jersey Transp. Auth. NJ Transp. System Rev. 5.90% 11/1/2006 (1) 3,435 3,702
South Jersey Transp. Auth. NJ Transp. System Rev. 5.90% 11/1/2007 (1) 2,545 2,743
South Jersey Transp. Auth. NJ Transp. System Rev. 6.00% 11/1/2012 (1) 5,250 5,645
Stafford NJ Muni. Util. Auth. Water & Sewer Rev. 5.50% 6/1/2011 (3) 3,100 3,314
Sussex County NJ Muni. Util. Auth. Solid Waste Rev. 5.75% 12/1/2009 (1) 19,820 21,189
Sussex County NJ Muni. Util. Auth. Waste Water Rev. 5.25% 12/1/2008 (1) 1,150 1,198
Union County NJ Improvement Auth. Rev. (Plainfield Board of Educ.) 5.80% 8/1/2020 (3) 4,000 4,426
Union County NJ Util. Auth. Ogden Martin Rev. 5.25% 6/1/2006 (2) 5,375 5,622
Union County NJ Util. Auth. Ogden Martin Rev. 5.375% 6/1/2011 (2) 8,375 8,646
Union County NJ Util. Auth. Ogden Martin Rev. 5.375% 6/1/2012 (2) 8,995 9,255
Union County NJ Util. Auth. Ogden Martin Rev. 5.375% 6/1/2013 (2) 9,445 9,694
OUTSIDE NEW JERSEY:
Guam Govt. Ltd. Obligation Infrastructure Improvement Rev. 5.125% 11/1/2011 (2) 3,400 3,501
Puerto Rico Electric Power Auth. Rev. 5.25% 7/1/2017 (1) 3,200 3,247
Puerto Rico GO 5.00% 7/1/2018 (1) 11,500 11,388
Puerto Rico GO 5.00% 7/1/2024 (1) 5,660 5,525
Puerto Rico Infrastrusture Finance Auth. Special Tax Rev. 5.00% 7/1/2021 (2) 8,000 7,822
Puerto Rico Infrastrusture Finance Auth. Special Tax Rev. 5.00% 7/1/2028 (2) 14,600 14,185
Puerto Rico Public Building Auth. Rev. 0.00% 7/1/2002 (3) 4,000 3,548
Puerto Rico Public Building Auth. Rev. 5.00% 7/1/2027 (2) 25,810 25,088
-----------
1,024,833
-----------
SECONDARY MARKET INSURED (7.8%)
Atlantic County NJ Util. Auth. Sewer Rev. 6.875% 1/1/2012 (2)(ETM) 3,000 3,434
New Jersey Building Auth. Rev. 5.00% 6/15/2012 (4) 10,000 10,126
New Jersey Highway Auth. Rev. (Garden State Parkway) 6.00% 1/1/2016 (2) 5,000 5,211
New Jersey Highway Auth. Rev. (Garden State Parkway) 6.20% 1/1/2010 (2) 20,000 22,409
New Jersey Sports & Exposition Auth. Rev. 6.50% 3/1/2013 (1) 10,000 11,579
New Jersey Turnpike Auth. Rev. 6.50% 1/1/2016 (1) 23,270 27,247
Port Auth. of New York & New Jersey Rev. 5.375% 7/15/2022 (3) 5,000 5,096
Port Auth. of New York & New Jersey Rev. 6.875% 1/1/2025 (2) 3,200 3,296
Univ. of Medicine & Dentistry NJ Rev. 6.50% 12/1/2012 (1) 4,000 4,679
-----------
93,077
-----------
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NONINSURED (6.6%)
Burlington County NJ Bridge Comm. Rev. 5.30% 10/1/2013 $ 9,500 $ 9,857
Cherry Hill Township NJ GO 6.30% 6/1/2012 3,745 4,038
Mercer County NJ Improvement Auth. Library System Rev. 6.00% 12/1/2003 (Prere.) 1,000 1,100
Mercer County NJ Improvement Auth. Solid Waste Rev. 5.375% 9/15/2012 11,120 11,551
Mercer County NJ Improvement Auth. Special Services
School Dist. Rev. 5.75% 12/15/2008 1,165 1,278
Mercer County NJ Improvement Auth. Special Services
School Dist. Rev. 5.95% 12/15/2012 4,895 5,446
Monmouth County NJ Improvement Auth. (Correctional Fac.) 6.40% 8/1/2001 (Prere.) 1,850 1,988
Monmouth County NJ Improvement Auth.
Pooled Govt. Loan Program VRDO 3.10% 6/2/1999 LOC 1,700 1,700
New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 3.15% 6/10/1999 LOC 3,800 3,800
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(NJ Natural Gas Project) 3.00% 6/2/1999 (2) 1,500 1,500
New Jersey Econ. Dev. Auth. Rev. VRDO (Hoffman-La Roche Project) 3.30% 6/2/1999 LOC 4,700 4,700
New Jersey Econ. Dev. Auth. Rev. VRDO (Russell Berrie) 3.10% 6/2/1999 LOC 3,000 3,000
New Jersey Environmental Infrastructure Trust Waste Water Rev. 5.00% 9/1/2009 1,955 2,023
New Jersey GO 5.00% 3/1/2011 7,875 8,014
New Jersey TRAN CP 3.05% 6/9/1999 6,400 6,399
Ocean County NJ Util. Auth. Waste Water Rev. 6.30% 1/1/2013 2,215 2,461
Ocean County NJ Util. Auth. Waste Water Rev. 6.35% 1/1/2014 2,360 2,628
Ocean County NJ Util. Auth. Waste Water Rev. 6.35% 1/1/2015 2,515 2,800
Rutgers State Univ. NJ GO 6.40% 5/1/2013 3,000 3,435
-----------
77,718
-----------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,134,579) 1,195,628
- -------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.7%)
- -------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 32,383
Payables for Investment Securities Purchased (37,560)
Other Liabilities (3,514)
-----------
(8,691)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------------------------------------------
Applicable to 100,953,382 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,186,937
=========================================================================================================================
NET ASSET VALUE PER SHARE $11.76
=========================================================================================================================
</TABLE>
* See Note A in Notes to Financial Statements.
+ Securities with a value of $2,408,000 have been segregated as initial margin
for open futures contracts.
++ Security purchased on a when-issued or delayed delivery basis for which the
fund has not taken delivery as of May 31, 1999.
For key to abbreviations and other references, see page 20.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AT MAY 31, 1999, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital $1,124,863 $11.14
Undistributed Net Investment Income -- --
Accumulated Net Realized Gains--Note E 676 .01
Unrealized Appreciation--Notes E and F
Investment Securities 61,049 .61
Futures Contracts 349 --
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,186,937 $11.76
=========================================================================================================================
</TABLE>
19
<PAGE> 22
KEY TO ABBREVIATIONS
BAN--Bond Anticipation Note.
COP--Certificate of Participation.
CP--Commercial Paper.
GO--General Obligation Bond.
PCR--Pollution Control Revenue Bond.
PUT--Put Option Obligation.
TAN--Tax Anticipation Note.
TOB--Tender Option Bond.
TRAN--Tax Revenue Anticipation Note.
VRDO--Variable Rate Demand Obligation.
(ETM)--Escrowed to Maturity.
(Prere.)--Prerefunded.
Scheduled principal and interest payments are guaranteed by:
(1) MBIA (Municipal Bond Insurance Association).
(2) AMBAC (Ambac Assurance Corporation).
(3) FGIC (Financial Guaranty Insurance Company).
(4) FSA (Financial Security Assurance).
The insurance does not guarantee the market value of the municipal bonds.
LOC--Scheduled principal and interest payments are guaranteed by bank letter of
credit.
20
<PAGE> 23
STATEMENT OF OPERATIONS
This Statement shows interest earned by each fund during the reporting period,
and details the operating expenses charged to the fund. These expenses directly
reduce the amount of investment income available to pay to shareholders as
tax-exempt income dividends. This Statement also shows any Net Gain (Loss)
realized on the sale of investments, and the increase or decrease in the
Unrealized Appreciation (Depreciation) on investments during the period. If a
fund invested in futures contracts during the period, the results of these
investments are shown separately.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NEW JERSEY
NEW JERSEY INSURED
TAX-EXEMPT LONG-TERM
MONEY MARKET TAX-EXEMPT
FUND FUND
-------------------------------
SIX MONTHS ENDED MAY 31, 1999
-------------------------------
(000) (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
INCOME
Interest $17,702 $29,695
-------------------------------
Total Income 17,702 29,695
-------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 72 68
Management and Administrative 967 991
Marketing and Distribution 160 108
Custodian Fees 8 6
Auditing Fees 4 4
Shareholders' Reports 8 8
Trustees' Fees and Expenses 1 1
-------------------------------
Total Expenses 1,220 1,186
Expenses Paid Indirectly--Note C (8) (33)
-------------------------------
Net Expenses 1,212 1,153
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 16,490 28,542
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN
Investment Securities Sold 16 1,031
Futures Contracts -- 2,678
- ------------------------------------------------------------------------------------------------------------------------
REALIZED NET GAIN 16 3,709
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities -- (22,642)
Futures Contracts -- 1,250
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- (21,392)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $16,506 $10,859
========================================================================================================================
</TABLE>
21
<PAGE> 24
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how each fund's total net assets changed during the two
most recent reporting periods. The Operations section summarizes information
detailed in the Statement of Operations. Because the fund distributes its income
to shareholders each day, the amounts of Distributions-- Net Investment Income
generally equal the net income earned as shown under the Operations section. The
amounts of Distributions--Realized Capital Gain may not match the capital gains
shown in the Operations section, because distributions are determined on a tax
basis and may be made in a period different from the one in which the gains were
realized on the financial statements. The Capital Share Transactions section
shows the amount shareholders invested in the fund, either by purchasing shares
or by reinvesting distributions, and the amounts redeemed. The corresponding
numbers of Shares Issued and Redeemed are shown at the end of the Statement.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NEW JERSEY NEW JERSEY
TAX-EXEMPT INSURED LONG-TERM
MONEY MARKET FUND TAX-EXEMPT FUND
------------------------------- --------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, 1999 NOV. 30, 1998 MAY 31, 1999 NOV. 30, 1998
(000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 16,490 $ 34,309 $ 28,542 $ 51,650
Realized Net Gain 16 -- 3,709 4,004
Change in Unrealized Appreciation (Depreciation) -- -- (21,392) 19,589
---------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 16,506 34,309 10,859 75,243
---------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (16,490) (34,309) (28,542) (51,650)
Realized Capital Gain -- -- (4,852) (888)
---------------------------------------------------------------------
Total Distributions (16,490) (34,309) (33,394) (52,538)
---------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 622,748 1,071,133 177,593 267,869
Issued in Lieu of Cash Distributions 15,722 32,698 25,736 39,729
Redeemed (587,241) (940,847) (105,723) (158,702)
---------------------------------------------------------------------
Net Increase from Capital Share Transactions 51,229 162,984 97,606 148,896
- -------------------------------------------------------------------------------------------------------------------------
Total Increase 51,245 162,984 75,071 171,601
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 1,179,271 1,016,287 1,111,866 940,265
---------------------------------------------------------------------
End of Period $1,230,516 $1,179,271 $1,186,937 $1,111,866
=========================================================================================================================
(1)Shares Issued (Redeemed)
Issued 622,748 1,071,133 14,889 22,569
Issued in Lieu of Cash Distributions 15,722 32,698 2,161 3,344
Redeemed (587,241) (940,847) (8,870) (13,384)
---------------------------------------------------------------------
Net Increase in Shares Outstanding 51,229 162,984 8,180 12,529
=========================================================================================================================
</TABLE>
22
<PAGE> 25
FINANCIAL HIGHLIGHTS
This table summarizes each fund's investment results and distributions to
shareholders on a per-share basis. It also presents the fund's Total Return and
shows net investment income and expenses as percentages of average net assets.
These data will help you assess: the variability of the fund's net income and
total returns from year to year; the relative contributions of net income and
capital gains to the fund's total return; how much it costs to operate the fund;
and the extent to which the fund tends to distribute capital gains.
The table also shows the Portfolio Turnover Rate, a measure of trading
activity. A turnover rate of 100% means that the average security is held in the
fund for one year. Money market funds are not required to report a Portfolio
Turnover Rate.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND
YEAR ENDED NOVEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------------------
THROUGHOUT EACH PERIOD MAY 31, 1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .014 .031 .033 .032 .035 .025
Net Realized and Unrealized Gain (Loss)
on Investments -- -- -- -- -- --
-----------------------------------------------------------------------
Total from Investment Operations .014 .031 .033 .032 .035 .025
-----------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.014) (.031) (.033) (.032) (.035) (.025)
Distributions from Realized Capital Gains -- -- -- -- -- --
-----------------------------------------------------------------------
Total Distributions (.014) (.031) (.033) (.032) (.035) (.025)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
========================================================================================================================
TOTAL RETURN 1.38% 3.18% 3.32% 3.22% 3.60% 2.49%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,231 $1,179 $1,016 $918 $859 $792
Ratio of Total Expenses to
Average Net Assets 0.20%* 0.20% 0.20% 0.20% 0.21% 0.21%
Ratio of Net Investment Income to
Average Net Assets 2.74%* 3.12% 3.27% 3.17% 3.53% 2.46%
========================================================================================================================
</TABLE>
*Annualized.
23
<PAGE> 26
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND
YEAR ENDED NOVEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -------------------------------------------------------------
THROUGHOUT EACH PERIOD MAY 31, 1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.98 $11.72 $11.64 $11.78 $10.40 $11.77
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .294 .599 .608 .616 .623 .622
Net Realized and Unrealized Gain (Loss)
on Investments (.168) .271 .112 (.082) 1.380 (1.307)
-------------------------------------------------------------------------
Total from Investment Operations .126 .870 .720 .534 2.003 (.685)
-------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.294) (.599) (.608) (.616) (.623) (.622)
Distributions from Realized Capital Gains (.052) (.011) (.032) (.058) -- (.063)
-------------------------------------------------------------------------
Total Distributions (.346) (.610) (.640) (.674) (.623) (.685)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.76 $11.98 $11.72 $11.64 $11.78 $10.40
========================================================================================================================
TOTAL RETURN 1.05% 7.59% 6.40% 4.75% 19.66% -6.10%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,187 $1,112 $940 $849 $796 $645
Ratio of Total Expenses to
Average Net Assets 0.21%* 0.20% 0.18% 0.20% 0.21% 0.21%
Ratio of Net Investment Income to
Average Net Assets 4.95%* 5.04% 5.26% 5.35% 5.50% 5.53%
Portfolio Turnover Rate 14%* 14% 13% 11% 7% 13%
========================================================================================================================
</TABLE>
*Annualized.
24
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS
Vanguard New Jersey Tax-Exempt Funds comprise the New Jersey Tax-Exempt Money
Market Fund and the New Jersey Insured Long-Term Tax-Exempt Fund, each of which
is registered under the Investment Company Act of 1940 as an open-end investment
company, or mutual fund. Each fund invests in debt instruments of municipal
issuers whose ability to meet their obligations may be affected by economic and
political developments in the state of New Jersey.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The funds consistently follow such
policies in preparing their financial statements.
1. SECURITY VALUATION: Tax-Exempt Money Market Fund: Investment securities
are valued at amortized cost, which approximates market value. Insured
Long-Term Tax-Exempt Fund: Bonds, and temporary cash investments acquired over
60 days to maturity, are valued using the latest bid prices or using valuations
based on a matrix system (which considers such factors as security prices,
yields, maturities, and ratings), both as furnished by independent pricing
services. Other temporary cash investments are valued at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available are valued by methods deemed by the Board of Trustees to
represent fair value.
2. FEDERAL INCOME TAXES: Each fund intends to continue to qualify as a
regulated investment company and distribute all of its income. Accordingly, no
provision for federal income taxes is required in the financial statements.
3. FUTURES CONTRACTS: The Insured Long-Term Tax-Exempt Fund may use
Municipal Bond Index, U.S. Treasury Bond, and U.S. Treasury Note futures
contracts, with the objectives of enhancing returns, managing interest rate
risk, maintaining liquidity, diversifying credit risk, and minimizing
transaction costs. The fund may purchase or sell futures contracts instead of
bonds to take advantage of pricing differentials between the futures contracts
and the underlying bonds. The fund may also seek to take advantage of price
differences among bond market sectors by simultaneously buying futures (or
bonds) of one market sector and selling futures (or bonds) of another sector.
Futures contracts may also be used to simulate a fully invested position in the
underlying bonds while maintaining a cash balance for liquidity. The primary
risks associated with the use of futures contracts are imperfect correlation
between changes in market values of bonds held by the fund and the prices of
futures contracts, and the possibility of an illiquid market.
Futures contracts are valued based upon their quoted daily settlement
prices. The aggregate principal amounts of the contracts are not recorded in
the financial statements. Fluctuations in the value of the contracts are
recorded in the Statement of Net Assets as an asset (liability) and in the
Statement of Operations as unrealized appreciation (depreciation) until the
contracts are closed, when they are recorded as realized futures gains
(losses).
4. DISTRIBUTIONS: 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 each fund under methods approved by the Board of
Trustees. Each fund has committed to provide up to
25
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (continued)
0.40% of its net assets in capital contributions to Vanguard. At May 31, 1999,
the funds had contributed capital to Vanguard (included in Other Assets) of:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
CAPITAL CONTRIBUTION PERCENTAGE PERCENTAGE OF
TO VANGUARD OF FUND VANGUARD'S
NEW JERSEY TAX-EXEMPT FUND (000) NET ASSETS CAPITALIZATION
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market $182 0.02% 0.3%
Insured Long-Term 182 0.02 0.3
- ----------------------------------------------------------------------------------------------
</TABLE>
The funds' Trustees and officers are also Directors and officers of Vanguard.
C. The funds' investment adviser may direct new issue purchases, subject to
obtaining the best price and execution, to underwriters who have agreed to
rebate or credit to the funds part of the underwriting fees generated. Such
rebates or credits are used solely to reduce the funds' management and
administrative expenses. The funds' custodian bank has also agreed to reduce
its fees when the funds maintain cash on deposit in their non-interest-bearing
custody accounts. For the six months ended May 31, 1999, these arrangements
reduced expenses by:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
EXPENSE REDUCTION
(000) TOTAL EXPENSE
----------------------------- REDUCTION AS A
MANAGEMENT AND CUSTODIAN PERCENTAGE OF
NEW JERSEY TAX-EXEMPT FUND ADMINISTRATIVE FEES AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market -- $8 --
Insured Long-Term $27 6 0.01%*
- ----------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
D. During the six months ended May 31, 1999, the Insured Long-Term
Tax-Exempt Fund purchased $128,540,000 of investment securities and sold
$75,510,000 of investment securities, other than temporary cash investments.
E. Capital gain distributions are determined on a tax basis and may differ
from realized capital gains for financial reporting purposes due to differences
in the timing of realization of gains. The Insured Long-Term Tax-Exempt Fund
had realized losses totaling $3,919,000 through November 30, 1998, which are
deferred for tax purposes and reduce the amount of unrealized appreciation on
investment securities for tax purposes (see Note F).
F. At May 31, 1999, net unrealized appreciation of Insured Long-Term
Tax-Exempt Fund investment securities for federal income tax purposes was
$57,130,000, consisting of unrealized gains of $60,226,000 on securities that
had risen in value since their purchase and $3,096,000 on securities that had
fallen in value since their purchase.
At May 31, 1999, the aggregate settlement value of open futures contracts
expiring in June 1999 and the related unrealized appreciation were:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
(000)
-----------------------------
AGGREGATE
NEW JERSEY TAX-EXEMPT FUND/ NUMBER OF SETTLEMENT UNREALIZED
FUTURES CONTRACTS SHORT CONTRACTS VALUE APPRECIATION
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Insured Long-Term/
U.S. Treasury Bond 125 $14,738 $349
- ----------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 29
NOTICE TO SHAREHOLDERS ABOUT Y2K
As is well known by now, the approaching calendar change to 2000 has posed a
challenge to many computer systems worldwide. Computers that are not modified
could interpret "00" as 1900 rather than 2000 and produce errors in
date-dependent calculations, including bond interest payments, stock trade
settlements, retirement benefits, and other financial transactions.
OUR APPROACH
Vanguard has taken this challenge seriously. We have had a Year 2000 Project
under way since 1996 to fulfill our responsibility to safeguard our business
relationships and the security of our investors' accounts.
Our internal systems are Year 2000-compliant. They have been renovated
and thoroughly tested and are ready for the date change. As for the external
systems that connect with ours, we have been working for many months with
clients, business partners, and providers of products and services to assess
their compliance. We have analyzed the external services we require and have
developed contingency plans--including provision for alternative providers
where appropriate.
On New Year's Day, our telephone centers will be staffed and ready for
shareholder calls. However, we expect the volume of inquiries over the New
Year's weekend to be high, and we encourage shareholders to check their
accounts via our website or automated telephone systems, which offer much
greater service capacity and efficiency. This will also help our live
representatives to provide a higher level of service to those with specific
transaction or other service-related needs.
WHAT YOU CAN DO
We assure you we will protect our shareholders' records, so account records
will not be lost. Nevertheless, keeping copies of current records is always
advisable. You should keep at least your third-quarter statement and any
confirmations you receive from us between October 1, 1999, and year-end.
If you are a registered user of Access Vanguard(TM) (www.vanguard.com),
you can retrieve this information through the secure "Your Accounts" section
and print copies for your files. If you are not registered for Access Vanguard
and wish to have this flexibility, you should register as soon as possible so
that you can receive your password and become familiar with this service before
the New Year's weekend. Likewise, you may need personal identification numbers
to use our automated telephone services: Vanguard Tele-Account(R) for
individual investors (1-800-662-6273) and The VOICE(TM) Network for
participants in employer-sponsored retirement plans (1-800-523-1188).
Our Year 2000 Project's primary goal from the start has been to prepare
our systems for business as usual on behalf of our shareholders into 2000 and
beyond. We remain confident we will meet that goal, and we look forward to
serving you in the years to come.
27
<PAGE> 30
THE VANGUARD FAMILY OF FUNDS
STOCK FUNDS
500 Index Fund
Aggressive Growth Fund
Capital Opportunity Fund
Convertible Securities Fund
Emerging Markets Stock
Index Fund
Energy Fund
Equity Income Fund
European Stock Index Fund
Explorer Fund
Extended Market Index Fund*
Global Equity Fund
Gold and Precious Metals Fund
Growth and Income Fund
Growth Index Fund*
Health Care Fund
Institutional Index Fund*
International Growth Fund
International Value Fund
Mid-Cap Index Fund*
Morgan Growth Fund
Pacific Stock Index Fund
PRIMECAP Fund
REIT Index Fund
Selected Value Fund
Small-Cap Growth Index Fund*
Small-Cap Index Fund*
Small-Cap Value Index Fund*
Tax-Managed Capital
Appreciation Fund*
Tax-Managed Growth and
Income Fund*
Tax-Managed Small-Cap Fund*
Total International Stock
Index Fund
Total Stock Market Index Fund*
U.S. Growth Fund
Utilities Income Fund
Value Index Fund*
Windsor Fund
Windsor II Fund
BALANCED FUNDS
Asset Allocation Fund
Balanced Index Fund
Global Asset Allocation Fund
LifeStrategy Conservative
Growth Fund
LifeStrategy Growth Fund
LifeStrategy Income Fund
LifeStrategy Moderate
Growth Fund
STAR Fund
Tax-Managed Balanced Fund
Wellesley Income Fund
Wellington Fund
BOND FUNDS
Admiral Intermediate-Term
Treasury Fund
Admiral Long-Term Treasury Fund
Admiral Short-Term Treasury Fund
GNMA Fund
High-Yield Corporate Fund
High-Yield Tax-Exempt Fund
Insured Long-Term Tax-Exempt
Fund
Intermediate-Term Bond
Index Fund
Intermediate-Term Corporate Fund
Intermediate-Term Tax-Exempt
Fund
Intermediate-Term Treasury Fund
Limited-Term Tax-Exempt Fund
Long-Term Bond Index Fund
Long-Term Corporate Fund
Long-Term Tax-Exempt Fund
Long-Term Treasury Fund
Preferred Stock Fund
Short-Term Bond Index Fund
Short-Term Corporate Fund*
Short-Term Federal Fund
Short-Term Tax-Exempt Fund
Short-Term Treasury Fund
State Tax-Exempt Bond Funds
(California, Florida,
Massachusetts, New Jersey,
New York, Ohio, Pennsylvania)
Total Bond Market Index Fund*
MONEY MARKET FUNDS
Admiral Treasury Money
Market Fund
Federal Money Market Fund
Prime Money Market Fund*
State Tax-Exempt Money Market
Funds (California, New Jersey,
New York, Ohio, Pennsylvania)
Tax-Exempt Money Market Fund
Treasury Money Market Fund
VARIABLE ANNUITY PLAN
Balanced Portfolio
Diversified Value Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Portfolio
High-Grade Bond Portfolio
High Yield Bond Portfolio
International Portfolio
Mid-Cap Index Portfolio
Money Market Portfolio
REIT Index Portfolio
Short-Term Corporate Portfolio
Small Company Growth Portfolio
*Offers Institutional Shares.
28
<PAGE> 31
TRUSTEES AND OFFICERS
JOHN C. BOGLE
Founder, Senior Chairman of the Board, and Director/Trustee of The Vanguard
Group, Inc., and each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN
Chairman of the Board, Chief Executive Officer, and Director/Trustee of The
Vanguard Group, Inc., and each of the investment companies in The Vanguard
Group.
JoANN HEFFERNAN HEISEN
Vice President, Chief Information Officer, and a member of the Executive
Committee of Johnson & Johnson; Director of Johnson & Johnson-Merck Consumer
Pharmaceuticals Co., Women First HealthCare, Inc., Recording for the Blind and
Dyslexic, The Medical Center at Princeton, and Women's Research and Education
Institute.
BURTON G. MALKIEL
Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Banco Bilbao Gestinova, Baker Fentress
& Co., The Jeffrey Co., and Southern New England Telecommunications Co.
ALFRED M. RANKIN, JR.
Chairman, President, and Chief Executive Officer of NACCO Industries, Inc.;
Director of NACCO Industries, The BFGoodrich Co., and The Standard Products Co.
JOHN C. SAWHILL
President and Chief Executive Officer of The Nature Conservancy; formerly,
Director and Senior Partner of McKinsey & Co. and President of New York
University; Director of Pacific Gas and Electric Co., Procter & Gamble Co.,
NACCO Industries, and Newfield Exploration Co.
JAMES O. WELCH, JR.
Retired Chairman of Nabisco Brands, Inc.; retired Vice Chairman and Director of
RJR Nabisco; Director of TECO Energy, Inc., and Kmart Corp.
J. LAWRENCE WILSON
Chairman and Chief Executive Officer of Rohm & Haas Co.; Director of Cummins
Engine Co. and The Mead Corp.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY
Secretary; Managing Director and Secretary of The Vanguard Group, Inc.;
Secretary of each of the investment companies in The Vanguard Group.
THOMAS J. HIGGINS
Treasurer; Principal of The Vanguard Group, Inc.; Treasurer of each of the
investment companies in The Vanguard Group.
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, Individual Investor Group.
IAN A. MacKINNON
Managing Director, Fixed Income Group.
F. WILLIAM McNABB, III
Managing Director, Institutional Investor Group.
MICHAEL S. MILLER
Managing Director, Planning and Development.
RALPH K. PACKARD
Managing Director and Chief Financial Officer.
GEORGE U. SAUTER
Managing Director, Core Management Group.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. Frank Russell Company
is the owner of trademarks and copyrights relating to the Russell Indexes.
"Wilshire 4500" and "Wilshire 5000" are trademarks of Wilshire Associates.
<PAGE> 32
VANGUARD
MILESTONES
[GRAPHIC]
The Vanguard Group is
named for HMS Vanguard,
Admiral Horatio Nelson's flagship
at the Battle of the Nile on
August 1, 1798. Our founder,
John C. Bogle, chose the name
after reading Nelson's inspiring
tribute to his fleet: "Nothing could
withstand the squadron . . .
with the judgment of the captains,
together with their valour, and that
of the officers and men of every
description, it was absolutely irresistible."
[GRAPHIC]
Walter L. Morgan, founder of
Wellington Fund, the nation's
oldest balanced mutual fund
and forerunner of today's family
of some 100 Vanguard funds,
celebrated his 100th birthday on
July 23, 1998. Mr. Morgan,
a true investment pioneer, died
six weeks later on September 2.
[GRAPHIC]
Wellington Fund,
The Vanguard Group's oldest fund,
was incorporated by Mr. Morgan
70 years ago, on December 28, 1928.
The fund was named after
the Duke of Wellington,
whose forces defeated
Napoleon Bonaparte at the
Battle of Waterloo in 1815.
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482-2600
WORLD WIDE WEB
www.vanguard.com
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
This report is intended for the funds' shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.
Q142-07/27/1999
(C) 1999 The Vanguard Group, Inc. All rights reserved.
Vanguard Marketing Corporation, Distributor.
