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VANGUARD(R)
NEW JERSEY TAX-EXEMPT FUNDS
ANNUAL REPORT
NOVEMBER 30, 1999
[SHIP GRAPHIC]
[MEMBERS OF THE VANGUARD GROUP]
VANGUARD NEW JERSEY TAX-EXEMPT MONEY MARKET FUND
VANGUARD NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND
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DEAR SHAREHOLDERS:
TWO ROADS DIVERGED IN A WOOD, AND I--I TOOK THE ONE LESS TRAVELED BY, AND THAT
HAS MADE ALL THE DIFFERENCE.
I can think of no better words than those of Robert Frost to begin this special
letter to our shareholders, who have placed such extraordinary trust in me and
in Vanguard over the past quarter century. When the firm was founded 25 years
ago, we deliberately took a new road to managing a mutual fund enterprise.
Instead of having the funds controlled by an outside management company with its
own financial interests, the Vanguard funds--there were only 11 of them
then--would be controlled by their own shareholders and operate solely in their
financial interests. The outcome of our unprecedented decision was by no means
certain. We described it then as "The Vanguard Experiment."
Well, I guess it's fair to say it's an experiment no more. During the past 25
years, the assets we hold in stewardship for investors have grown from $1
billion to more than $500 billion, and I believe that our reputation for
integrity, fair-dealing, and sound investment principles is second to none in
this industry. Our staggering growth--which I never sought--has come in
important part as a result of the simple investment ideas and basic human values
that are the foundation of my personal philosophy. I have every confidence that
they will long endure at Vanguard, for they are the right ideas and right
values, unshakable and eternal.
While Emerson believed that "an institution is the lengthened shadow of one
man," Vanguard today is far greater than any individual. The Vanguard crew has
splendidly implemented and enthusiastically supported our founding ideas and
values, and deserves the credit for a vital role in forging our success over the
years. It is a dedicated crew of fine human beings, working together in an
organization that is well prepared to press on regardless long after I am gone.
Creating and leading this enterprise has been an exhilarating run. Through it
all, I've taken the kudos and the blows alike, enjoying every moment to the
fullest, and even getting a second chance at life with a heart transplant three
years ago. What more could a man ask?
While I shall no longer be serving on the Vanguard Board, I want to assure
you that I will remain vigorous and active in a newly created Vanguard unit,
researching the financial markets, writing, and speaking. I'll continue to focus
whatever intellectual power and ethical strength I possess on my mission to
assure that mutual fund investors everywhere receive a fair shake. In the spirit
of Robert Frost:
BUT I HAVE PROMISES TO KEEP, AND MILES TO GO BEFORE I SLEEP, AND MILES TO GO
BEFORE I SLEEP.
You have given me your loyalty and friendship over these long years,
and I deeply appreciate your thousands of letters of support. For my part, I
will continue to keep an eagle eye on your interests, for you deserve no less.
May God bless you all, always.
/S/
JCB
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CONTENTS
REPORT FROM THE CHAIRMAN .................1
THE MARKETS IN PERSPECTIVE ...............6
REPORT FROM THE ADVISER ..................8
PERFORMANCE SUMMARIES ...................10
FUND PROFILES ...........................12
FINANCIAL STATEMENTS ....................15
REPORT OF INDEPENDENT ACCOUNTANTS........30
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REPORT FROM THE CHAIRMAN
[PHOTO OF JOHN J. BRENNAN]
Concerns about higher inflation took hold of the bond market during the early
months of the Vanguard New Jersey Tax-Exempt Funds' 1999 fiscal year and never
loosened their grip. The resulting decline in prices made the 12 months ended
November 30 a difficult period for fixed-income investors. Our Insured Long-Term
Tax-Exempt Fund registered a total return of -1.3%, which was better than that
of its average peer, but just behind that of its unmanaged benchmark index. Our
Tax-Exempt Money Market fund earned a total return of 2.9%, a bit better than
the 2.5% return of the average New Jersey tax-exempt money market fund.
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TOTAL RETURNS
FISCAL YEAR ENDED
NOVEMBER 30, 1999
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VANGUARD NEW JERSEY TAX-EXEMPT
MONEY MARKET FUND 2.9%
(SEC 7-Day Annualized Yield: 3.34%)
Average New Jersey Tax-Exempt
Money Market Fund* 2.5
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VANGUARD NEW JERSEY INSURED
LONG-TERM TAX-EXEMPT FUND -1.3%
Average New Jersey Municipal
Debt Fund* -3.4
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*Derived from data provided by Lipper Inc.
The table at right presents each fund's 12-month return along with those of
our average mutual fund competitors. The total return (capital change plus
reinvested dividends) of our 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
$11.19 per share on November 30, 1999, and is adjusted for dividends totaling
$0.59 per share paid from net investment income and a distribution of $0.052 per
share paid from net realized capital gains. The Money Market Fund's net asset
value remained at $1 per share, as was expected but not guaranteed. At the end
of the fiscal year, the Insured Long-Term Fund's yield was 5.07%, up from 4.26%
a year earlier; the Money Market Fund's yield was 3.34%, up from 2.92%.
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 to the
alternative minimum tax.
FINANCIAL MARKETS IN REVIEW
The 12 months ended November 30 featured plenty of positive economic news, as
well as a good deal of apprehension over how long the good times can last
without touching off higher inflation. The U.S. economy expanded at an
inflation-adjusted rate of 4.3% from the third quarter of 1998 to the third
quarter of 1999, the nation's unemployment rate hovered near record-low levels,
and inflation barely stirred.
However, the nagging concern that inflation would soon accelerate resulted
in a steady rise in interest rates during the fiscal year. The rate increase
merely restrained the stock market, which managed an impressive advance, but
dealt a heavy blow to bond prices, which suffered their worst year since 1994.
The Federal Reserve Board went along with the uptrend in interest rates, hiking
its target for short-term interest rates by 25 basis points on three separate
occasions in an attempt to head off inflation it believes could result from
strong growth and tight labor markets.
Technology companies propelled the U.S. stock market higher, and the
Standard & Poor's 500 Index, which is dominated by large-capitalization stocks,
returned 20.9%--the
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index's fifth straight year of returns higher than 20%. The broad market, as
represented by the Wilshire 5000 Total Market Index, advanced an even higher
22.4%, but a large portion of the gain was concentrated in a relatively small
number of stocks. Many value-oriented stocks were left far behind.
The yield of the 30-year U.S. Treasury bond ended the fiscal year at 6.29%,
up 123 basis points (1.23 percentage points) from its starting point of 5.06% on
November 30, 1998. The yield of 3-month U.S. Treasury bills climbed to 5.30% on
balance, from 4.48%. Yields of high-quality, long-term municipal bonds climbed
nearly a full percentage point, from 4.89% when the period began to 5.87% on
November 30, 1999. Yields of top-grade (MIG-1) 3-month notes rose from 2.95% to
3.80%.
The Lehman Brothers 10 Year Municipal Bond Index, a good measure of the
long-term municipal market, recorded a return of -0.4% during our fiscal year.
Long-term bonds suffer more when interest rates are rising, just as they benefit
more from a decline in interest rates.
Municipal bonds performed well early in the 1999 fiscal year as new
issuance dropped off from 1998's near-record levels and yields remained high
relative to Treasuries. But their relative performance faltered later in the
period because many investors were attracted to corporate bonds.
At the end of the fiscal year, the spread between yields of long-term
Treasuries and long-term munis stood at just 42 basis points (0.42 percentage
point). This is an extremely narrow gap, given that the income from Treasuries
is subject to federal income taxes (but not state taxes), while income from a
state-specific municipal bond fund is fully exempt from federal and state taxes.
On November 30, the yield of a top-quality, long-term municipal bond was equal
to about 93% of the yield of the 30-year U.S. Treasury bond. Historically, the
ratio has been about 84%.
FISCAL 1999 PERFORMANCE OVERVIEW
The -1.3% return of the Vanguard New Jersey Insured Long-Term Tax-Exempt Fund
topped the -3.4% return of the average New Jersey municipal bond fund, which has
lower average credit quality than our fund but a similar average maturity. Our
return, however, was just behind the -1.1% return of the unmanaged Lehman
Municipal Bond Index. Though our fund earned an income return of 4.9%, a price
decline of -6.2% engendered by the rise in interest rates pulled our total
return into negative territory for the year. (The Performance Summary on page 11
presents a breakdown of the fund's returns into their income and capital
components dating to the fund's inception.) Our performance advantage over our
average peer was primarily the result of our lower costs. The Lehman index,
which includes municipal bonds from across the country, is a notoriously tough
competitor because it does not incur the "real world" operating expenses and
transaction costs that all mutual funds must bear.
The Tax-Exempt Money Market Fund provided a total return of 2.9%, outpacing
the 2.5% return of its average peer.
Though the rise in interest rates during the past 12 months was to blame
for the poor bond returns, a slide in rates just oneyear ago provided a boost to
bond prices and returns. The simple lesson is that interest rates rise and fall,
sometimes gradually and sometimes sharply. All bond investors should know that
over long periods, the ups and downs in interest rates tend to offset each
other, leaving a bond fund's interest income as the chief source of return. And
considering that interest paid on munis today is considerably higher than a year
ago, it would seem that tax-exempt securities have
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become more attractive. At a yield of about 5.1% compounded annually, money
doubles in a little more than 14 years, or more than two years sooner than at a
4.3% yield.
THE MUNICIPAL BOND TAX ADVANTAGE
For New Jersey residents, the income earned by our funds is exempt from federal,
state, and, in most cases, local taxes. At current yields, investors in
long-term municipal bonds who are taxed at the highest marginal tax rate (39.6%)
can earn an astounding 55% more after-tax income than they could in comparable
long-term U.S. Treasury bonds. Short-term municipal securities also offer an
advantage over taxable investments with similar maturities. On November 30, the
yield of MIG-1 notes was almost 20% higher than the after-tax yield of 90-day
U.S. Treasury bills. For New Jersey taxpayers subject to the highest tax rates,
a yield of 5.9% on a tax-exempt long-term bond is the equivalent of a 9.8%
taxable yield. For a tax-exempt short-term yield of 3.8%, the taxable equivalent
is 6.3%.
These remarkable advantages are illustrated in the table below, which
compares the annual net income earned on U.S. Treasury and tax-exempt securities
as of November 30, 1999, assuming a $100,000 investment.
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ILLUSTRATION OF INCOME FROM
A HYPOTHETICAL $100,000 INVESTMENT
-----------------------------------
SHORT-TERM LONG-TERM
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Taxable gross income $5,300 $6,300
Less taxes (39.6%) (2,100) (2,500)
Net after-tax income 3,200 3,800
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Tax-exempt income $3,800 $5,900
Tax-exempt income advantage $ 600 $2,100
Percentage advantage 19% 55%
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This illustration assumes current yields (as of November 30, 1999) of 6.3% for
long-term U.S. Treasury bonds, 5.3% for U.S. Treasury bills, 5.9% for long-term
municipals, and 3.8% for short-term municipals. The tax adjustment assumes a
typical itemized tax return based on a federal tax rate of 39.6%. Income from
U.S. Treasuries is not subject to state taxes; local taxes are not considered.
The illustration is not intended to represent future results.
There is an important distinction between state-specific municipal bond
funds and U.S. Treasury bonds. Treasury securities are backed by the full faith
and credit of the U.S. government and therefore have unmatched credit quality.
Also, municipal bond funds that confine their investments to a single state lack
the diversification that comes from spreading investments among various states,
which may be subject to different economic conditions and different risks.
Private insurance on the bonds in our Long-Term Tax-Exempt Fund, however, helps
to reduce these additional credit risks. Though the insurance does not provide
protection against fluctuations in the fund's value, it guarantees full payment
of interest and principal for our bond holdings.
This insurance, however, is not generally available for short-term
securities. As a result, our investment adviser, Vanguard's Fixed Income Group,
is responsible for preserving the principal value of the Tax-Exempt Money Market
Fund. Money market mutual funds are not guaranteed by the Federal Deposit
Insurance Corporation, which insures bank accounts and certificates of deposit.
LONG-TERM PERFORMANCE OVERVIEW
An annual review of any mutual fund should be accompanied by an examination of
the fund's longer-term record. The table on page 4 compares the performance of
our funds over the past decade with those of their average peer mutual funds. It
also presents
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the current value of hypothetical $10,000 investments made ten
years ago. As you can see, the Vanguard New Jersey Tax-Exempt Funds have
established fine records versus their competitors over the decade. Our advantage
over this period has amounted, in the case of the Insured Long-Term Fund, to
$1,133, or about 11% of the original investment.
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<CAPTION>
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TOTAL RETURNS
TEN YEARS ENDED NOVEMBER 30, 1999
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AVERAGE FINAL VALUE OF
ANNUAL A $10,000
RETURN INITIAL INVESTMENT*
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AVERAGE AVERAGE
NEW JERSEY VANGUARD COMPETING VANGUARD COMPETING VANGUARD
TAX-EXEMPT FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
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Money Market 3.4% 3.2% $14,014 $13,655 $ 359
Insured Long-Term 6.9 6.2 19,405 18,272 1,133
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*Assuming reinvestment of all income dividends and capital gains distributions.
A large part of our performance edge versus competitors over nearly a
decade can be explained by the same factor that explained our outperformance
during the 1999 fiscal year: cost. Our funds have expense ratios (annual
expenses as a percentage of average net assets) of about 0.20%--far below the
1.01% charged by the average long-term New Jersey tax-exempt fund and the 0.65%
charged by the average New Jersey tax-exempt money market fund. Because fund
operating costs are deducted directly from the income earned by a bond fund, our
funds have a significant edge in their quest to provide returns that are
superior to those of similar funds. The combination of our cost advantage and
skillful management by Vanguard's Fixed Income Group has benefited our
shareholders over the past decade, and we expect it to continue to do so in the
future.
IN SUMMARY
During a period when the stock market seems invulnerable, it's easy to overlook
the merits of bonds. However, bond funds must not be judged by how well their
returns stack up against those of stock funds in a particular period, but by
what they can add to a balanced investment program, namely, current income and
relative stability. The Vanguard New Jersey Tax-Exempt Funds can provide a high
level of after-tax income, particularly for those in high income tax brackets,
and especially compared with the income available from the stock market, whose
average dividend yield is less than 1.5%. And because the performance of bonds
often differs from that of equities, a commitment to bonds is a useful
diversifier that can help smooth the sometimes-volatile returns of stocks.
We advise investors to hold balanced portfolios of stock funds, bond funds,
and short-term reserves in proportions suitable to their own investment goals,
time horizon, and tolerance for risk. Once you have such a plan in place, we
advise you to stick with it through good times and bad.
/s/
John J. Brennan
Chairman and Chief Executive Officer
December 23, 1999
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A NOTE OF THANKS TO OUR FOUNDER
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As you may have read on the inside cover of our report, our founder, John C.
Bogle, is retiring December 31, 1999, as Senior Chairman of our Board after
nearly 25 years of devoted service to Vanguard and our shareholders. Vanguard
investors have Jack to thank for creating a truly mutual mutual fund company
that operates solely in the interest of its fund shareholders. And mutual fund
investors everywhere have benefited from his energetic efforts to improve this
industry. Finally, on a personal note, I am forever grateful to Jack for giving
me the opportunity to join this great company in 1982.
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THE MARKETS IN PERSPECTIVE
YEAR ENDED NOVEMBER 30, 1999
Strong economic expansion sent global stock markets charging higher but dealt a
blow to bond prices during the fiscal year ended November 30, 1999. The
powerhouse U.S. economy led the global growth parade, joined by Asian, European,
and Latin American economies that had slumped or stagnated in 1998.
Interest rates rose sharply as investors and monetary policymakers grew
increasingly worried that such strong economic growth would cause inflation to
surge. Although the rise in rates caused bond prices to fall, it only tempered
the stock market's advance.
U.S. STOCK MARKETS
Against the backdrop of a booming economy, U.S. companies reported solid
increases in earnings during the fiscal year. The nation's economic output
increased at an inflation-adjusted rate of 4.3%--a very rapid pace for such a
large, mature economy. Consumer spending, which accounts for roughly two-thirds
of economic activity, powered the expansion. Americans spent freely, encouraged
by rising wealth from a long bull market, a hot job market, and climbing
incomes.
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AVERAGE ANNUAL RETURNS
PERIODS ENDED NOVEMBER 30, 1999
-------------------------------
1 YEAR 3 YEARS 5 YEARS
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STOCKS
S&P 500 Index 20.9% 24.3% 27.5%
Russell 2000 Index 15.7 10.1 14.8
Wilshire 5000 Index 22.4 22.6 25.6
MSCI EAFE Index 21.4 12.3 11.4
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BONDS
Lehman Aggregate Bond Index 0.0% 5.6% 8.0%
Lehman 10 Year Municipal Bond Index -0.4 4.8 7.6
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 4.7 5.0 5.2
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OTHER
Consumer Price Index 2.6% 2.0% 2.4%
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The stock market, as measured by the Wilshire 5000 Index, gained 22.4%
overall. For a change, mid-capitalization and small-cap stocks outpaced their
large-cap brethren. The large-cap S&P 500 Index, which accounts for more than
75% of the U.S. stock market's total value, gained 20.9% during the year; the
rest of the market (as measured by the Wilshire 4500 Index) gained 29.0%.
Increasingly optimistic expectations for future corporate earnings more
than offset the negative effects of rising interest rates during fiscal 1999.
Higher rates often hurt stock prices because many investors use current rates to
discount the value of a stock's projected earnings and dividends. The higher the
interest rate, the more future earnings are discounted, and the less investors
will pay for the stock now.
Because of a remarkable surge in prices for technology stocks, growth
stocks again outperformed value stocks during the past year. Within the S&P 500
Index, growth stocks--characterized by high prices in relation to earnings, book
value, and dividends--recorded a 28.5% return, 16 percentage points above the
12.5% return for value stocks. The disparity was even greater in the small-cap
segment of the market; growth stocks within the small-cap Russell 2000 Index
gained 32.7%, while value stocks posted a -1.4% return.
Technology stocks within the S&P 500 Index gained 66%. QUALCOMM posted an
eye-popping 1,200% return, and a number of computer-related stocks doubled or
tripled in
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price, including Sun Microsystems (+257%), Apple Computer (+206%), Oracle
(+197%), Gateway (+172%), Texas Instruments (+152%), and Cisco Systems (+136%).
Big gains for wireless telecommunications and cable-TV stocks powered the
utilities category to an overall gain of nearly 28%. The producer-durables
group, which includes some technology-related manufacturers as well as aircraft
and equipment makers, gained 27%. Oil exploration and service firms in the
"other energy" category posted a 26% return, assisted by a jump in prices for
oil and natural gas.
The year's worst-performing sector was consumer staples (down nearly -12%).
This group suffered as severe price competition and a stronger dollar in Europe
crimped profits for many food and beverage makers, and the specter of litigation
costs caused tobacco stocks to slump. The auto & transportation group declined
- -2% overall, with airline stocks hurt by rising prices for jet fuel.
U.S. BOND MARKETS
Stock investors may cheer a fast-growing economy, but rapid growth tends to
worry bond investors. Early in the fiscal year, inflation seemed
dormant--plunging oil prices had taken commodity price indexes to the lowest
point in a quarter-century. But as the world economy began hitting on all
cylinders, the bond market feared that a minuscule U.S. unemployment rate,
rising commodity prices, and capacity constraints would cause inflation to
accelerate. Although oil prices were up nearly 150% during the fiscal year, the
overall price level, as measured by the Consumer Price Index, increased by a
moderate 2.6%.
The Federal Reserve Board, anticipating price pressures, abandoned its bias
toward easier monetary policy, and by mid-year was boosting interest rates to
try to throttle back the economic engines. The bond market was ahead of the
Fed--interest rates began rising sharply in February. By fiscal year-end, the
yield of 30-year U.S. Treasury bonds had risen 1.23 percentage points (123 basis
points) to 6.29%. The 10-year Treasury note's yield rose 148 basis points, from
4.71% to 6.19%. The rise in short-term rates was more restrained; 3-month
Treasury bill yields were up 82 basis points to 5.30% at fiscal year-end.
Bond prices fall when interest rates rise, and long-term bond prices are
most sensitive to changing rates. Long-term Treasury bond prices fell by more
than -13%, resulting in total returns of -8%. The Lehman Aggregate Bond Index, a
measure of the overall taxable bond market, which has an intermediate-term
structure on average, broke even on the year, as interest income of 6.2% was
offset by price declines. The damage to municipal bond prices was not as severe
as for Treasuries, and the intermediate-term Lehman 7 Year Municipal Bond Index
recorded a price decline of -3.7% and a total return of 0.5%.
INTERNATIONAL STOCK MARKETS
International markets had a strong year, with European stocks gaining 21.9% in
local-currency terms and Pacific-region stocks advancing 30.2%. However,
currency effects significantly altered the returns to U.S.-based investors. The
U.S. dollar rose in value against most European currencies but fell sharply
against the Japanese yen. As a result, returns from Europe plunged to 9.8% in
dollar terms while returns from the Pacific soared to 51.0%.
Overall, U.S. investors earned 21.4% in the major developed international
markets, as measured by the Morgan Stanley Capital International Europe,
Australasia, Far East (EAFE) Index. The bull markets in most nations stemmed
from renewed optimism that economic growth would continue to accelerate. Japan
and the rest of Asia, which were hit hardest by currency and economic crises in
1997 and 1998, saw the biggest stock gains.
Emerging markets, as measured by the Select Emerging Markets Free Index,
gained 37.1% in U.S.-dollar terms, as investors regained an appetite for the
considerable risks of smaller markets.
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REPORT FROM THE ADVISER
Interest rates rose during the 12 months ended November 30, 1999, the fiscal
year for the Vanguard New Jersey Tax-Exempt Funds. The rise was principally due
to investors' fears about the impact of the strong economy and the low
unemployment rate on inflation. In the past, these factors have caused inflation
to increase, and many investors expect that history will repeat itself at some
point. So far, employment costs and consumer price indexes have not risen
substantially, but each number is being closely watched for any upsurge. A
desire to head off inflation and concerns about the booming stock market led the
Federal Reserve Board to increase interest rates three times during the fiscal
year, raising the federal funds rate by a total of 0.75 percentage point.
As you might expect, yields of insured long-term municipal bonds rose along
with yields on U.S. Treasury bonds during fiscal 1999. During the first half of
the year, long-term insured municipals performed better than Treasury
securities; municipal yields increased by less than half as much as those for
long-term Treasuries. But the relative performance flip-flopped during the
second half, when yields on long-term municipals increased almost 11/2 times as
much as those on long Treasuries. Over the full fiscal year, the yield on the
benchmark 30-year U.S. Treasury bond rose by 1.23 percentage points (from 5.06%
to 6.29%), while the yield of a similar AAA-rated municipal bond rose by nearly
1 percentage point (from 4.89% to 5.87%).
Two factors account for the first-half outperformance of insured municipal
bonds and for their later underperformance. First, as the fiscal year began in
December 1998, insured municipal bonds were especially attractive to investors,
because the AAA-rated insured municipal's tax-exempt yield of 4.9% was equal to
97% of the yield of a 30-year Treasury. For an investor in the top marginal tax
bracket of 39.6%, that 4.9% yield was equivalent to an 8.1% yield on a taxable
bond. By May 31, the middle of our fiscal year, the long-term insured
municipal's yield was about 89% as high as the 30-year Treasury's yield, making
insured municipal bonds somewhat less alluring. The second factor was that in
the second half of the fiscal year, corporate bond yields had become quite
attractive, providing stiff competition for the bond investor's dollar. During
this period the corporate bond market encountered the same type of supply
imbalance that the municipal market had seen in fiscal 1998, as corporations
rushed bond issues to market to complete their financing before the end of the
century. The result was attractively high yields on corporate debt, which
enticed some large institutional buyers away from the municipal market. At
year-end, yields on long-term insured municipal bonds had risen in relation to
those on Treasuries, and 30-year munis offered yields equal to 94% of yields on
30-year Treasuries.
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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.
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The municipal market was aided by the fact that the supply of new issues
was lower during 1999 than in 1998. Through November, issuance of municipal
securities in 1999 amounted to $207 billion, down more than 20% from the same
period in 1998. The main reason for the decline was a 53% decrease in the
issuance of refunding bonds, whose proceeds are
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used to pay off older, higher-coupon bonds. Because of the rise in interest
rates, refunding issues generally did not make fiscal sense during 1999. As the
economy continued to expand, the supply of bonds issued for new projects was
unchanged from 1998.
THE INSURED LONG-TERM TAX-EXEMPT FUND
Prices of long-term bonds typically are hurt most by rising interest rates. As a
result, the New Jersey Insured Long-Term Tax-Exempt Fund suffered a price
decline of -6.2% and posted a negative return of -1.3% for fiscal 1999. A
negative return is not good news, of course, but our result was considerably
better than the -3.4% total return for the average New Jersey municipal bond
fund.
Across all bond maturities, we seek to find the best values for each level
of interest rate risk. This strategy helped in a year of rising interest rates.
Our focus on keeping expenses low is helpful at all times and is critical in
delivering above-average tax-exempt income, since expenses are deducted directly
from a bond fund's interest income. Our emphasis on keeping the funds invested
in high-quality securities benefits our shareholders by reducing credit risk.
The overall effect of combining low costs and high quality is to provide both
superior yields and low credit risk.
THE TAX-EXEMPT MONEY MARKET FUND
The Tax-Exempt Money Market Fund logged a 2.9% return during fiscal 1999, ahead
of the 2.5% return for the average New Jersey tax-exempt money market fund. The
rise in interest rates during the period was slightly less pronounced for
tax-exempt money market instruments than for long-term bonds. After rising 19
basis points during the first half of the fiscal year, yields on 1-year
municipals rose 69 basis points during the second half, which is traditionally a
time of heavy borrowing by municipalities. The benchmark 1-year MIG-1 note
closed the fiscal year with a yield of 3.87%, up 88 basis points from the 2.99%
yield a year earlier. Yields on the 1-year U.S. Treasury bill, meanwhile, rose
by 118 basis points for the year to 5.68%, after a second-half jump of 71 basis
points. On balance, short-term tax-exempt securities became slightly more
attractive relative to Treasury securities: The ratio of the yield on 1-year
MIG-1 notes to that on 1-year Treasury bills rose from 66.4% to 68.1% during the
year.
As we begin fiscal year 2000, the Tax-Exempt Money Market Fund is
positioned to take advantage of its dual strengths of conservative,
quality-oriented management and low operating expenses. We believe these
strengths will continue to generate superior risk-adjusted returns for our
shareholders.
Ian A. MacKinnon, Managing Director
Christopher M. Ryon, Principal
Pamela Wisehaupt Tynan, Principal
Reid O. Smith, Principal
Kathryn Allen, Principal
Vanguard Fixed Income Group
December 13, 1999
9
<PAGE>
PERFORMANCE SUMMARY
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note that annual
returns can fluctuate widely. 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.
TOTAL INVESTMENT RETURNS: FEBRUARY 3, 1988-NOVEMBER 30, 1999
- ------------------------------------------------------------
NEW JERSEY TAX-EXEMPT AVERAGE
MONEY MARKET FUND FUND*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ------------------------------------------------------------
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 2.9 2.9 2.5
- ------------------------------------------------------------
SEC 7-Day Annualized Yield (11/30/1999): 3.34%
- ------------------------------------------------------------
*Average New Jersey Tax-Exempt Money Market Fund.
See Financial Highlights table on page 26 for dividend information for the past
five years.
CUMULATIVE PERFORMANCE: NOVEMBER 30, 1989-NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
198911 10000 10000
199002 10143 10143
199005 10291 10291
199008 10433 10433
199011 10579 10581
199102 10713 10712
199105 10832 10837
199108 10945 10937
199111 11060 11053
199202 11156 11143
199205 11244 11231
199208 11320 11285
199211 11396 11358
199302 11464 11418
199305 11530 11480
199308 11594 11522
199311 11661 11585
199402 11721 11639
199405 11789 11703
199408 11861 11753
199411 11951 11840
199502 12054 11933
199505 12169 12044
199508 12273 12123
199511 12381 12226
199602 12482 12317
199605 12582 12414
199608 12679 12485
199611 12780 12579
199702 12880 12672
199705 12987 12773
199708 13094 12852
199711 13204 12954
199802 13308 13051
199805 13419 13152
199808 13522 13225
199811 13624 13319
199902 13715 13403
199905 13811 13492
199908 13908 13556
199911 14014 13655
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1999
-------------------------------
FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey Tax-Exempt Money Market Fund 2.86% 3.24% 3.43% $14,014
Average New Jersey Tax-Exempt
Money Market Fund* 2.52 2.89 3.16 13,655
- -------------------------------------------------------------------------------------------
*Derived from data provided by Lipper Inc.
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 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 2.83% 3.23% 0.00% 3.48% 3.48%
- --------------------------------------------------------------------------------------------------
</TABLE>
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
10
<PAGE>
PERFORMANCE SUMMARY
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
TOTAL INVESTMENT RETURNS: FEBRUARY 3, 1988-NOVEMBER 30, 1999
- ------------------------------------------------------------
NEW JERSEY INSURED
LONG-TERM TAX-EXEMPT FUND LEHMAN*
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ------------------------------------------------------------
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 -6.2 4.9 -1.3 -1.1
- ------------------------------------------------------------
*Lehman Municipal Bond Index.
See Financial Highlights table on page 27 for dividend and capital gains
information for the past five years.
CUMULATIVE PERFORMANCE: NOVEMBER 30, 1989-NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
198911 10000 10000 10000
199002 9997 10040 10124
199005 10187 10218 10273
199008 10217 10260 10363
199011 10767 10738 10770
199102 11101 11028 11057
199105 11331 11294 11308
199108 11557 11551 11585
199111 11736 11814 11875
199202 12046 12120 12161
199205 12298 12392 12418
199208 12797 12827 12878
199211 12967 12972 13065
199302 13920 13865 13835
199305 14051 13896 13904
199308 14583 14428 14449
199311 14592 14492 14513
199402 14672 14615 14600
199405 14315 14101 14248
199408 14540 14230 14475
199411 13701 13424 13755
199502 15077 14615 14881
199505 15680 15246 15551
199508 15755 15250 15759
199511 16395 15844 16356
199602 16538 15999 16525
199605 16219 15765 16261
199608 16527 15959 16585
199611 17173 16600 17317
199702 17269 16707 17435
199705 17443 16917 17608
199708 17888 17265 18119
199711 18273 17669 18559
199802 18725 18113 19029
199805 18968 18369 19259
199808 19389 18650 19687
199811 19661 18908 19999
199902 19938 19058 20199
199905 19867 19048 20159
199908 19441 18439 19785
199911 19405 18272 19785
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1999
-------------------------------
FINAL VALUE OF A
1 YEAR 5 YEARS 10 YEARS $10,000 INVESTMENT
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey Insured Long-Term Tax-Exempt Fund -1.31% 7.21% 6.85% $19,405
Average New Jersey Municipal Fund* -3.36 6.36 6.21 18,272
Lehman Municipal Bond Index -1.07 7.54 7.06 19,785
- ---------------------------------------------------------------------------------------------------
*Derived from data provided by Lipper Inc.
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED SEPTEMBER 30, 1999*
- ---------------------------------------------------------------
10 YEARS
INCEPTION ------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------
New Jersey Tax-Exempt
Money Market Fund 2/3/1988 -1.23% 6.34% 1.33% 5.88% 7.21%
- --------------------------------------------------------------------------------
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
11
<PAGE>
FUND PROFILE
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND
This Profile provides a snapshot of the fund's characteristics as of November
30, 1999. Key elements of this Profile are defined on page 13.
FINANCIAL ATTRIBUTES
- --------------------------------
Yield 3.3%
Average Maturity 61 days
Average Quality MIG-1
Expense Ratio 0.20%
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
- --------------------------------
MIG-1/SP-1+ 73.0%
A-1/P-1 24.0
AAA/AA 2.6
A 0.4
- --------------------------------
Total 100.0%
12
<PAGE>
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.
13
<PAGE>
FUND PROFILE
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND
This Profile provides a snapshot of the fund's characteristics as of November
30, 1999, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 13.
FINANCIAL ATTRIBUTES
- --------------------------------------------
NEW JERSEY INSURED LEHMAN
LONG-TERM INDEX*
- --------------------------------------------
Number of Issues 238 52,144
Yield 5.1% --
Yield to Maturity 5.2% --
Average Coupon 5.2% 5.5%
Average Maturity 11.6 years 13.0 years
Average Quality AAA AA+
Average Duration 7.6 years 7.5 years
Expense Ratio 0.19% --
Cash Reserves 0.6% --
*Lehman Municipal Bond Index.
INVESTMENT FOCUS
- -------------------------------
[grid]
AVERAGE MATURITY LONG
CREDIT QUALTIY HIGH
VOLATILITY MEASURES
- --------------------------------------------
NEW JERSEY INSURED LEHMAN
LONG-TERM INDEX*
- --------------------------------------------
R-Squared 0.98 1.00
Beta 1.05 1.00
*Lehman Municipal Bond Index.
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
- --------------------------------------------
AAA 95.1%
AA 4.9
A 0.0
BBB 0.0
BB 0.0
B 0.0
- --------------------------------------------
Total 100.0%
DISTRIBUTION BY MATURITY
(% OF PORTFOLIO)
- --------------------------------------------
Under 1 Year 7.0%
1-5 Years 12.7
5-10 Years 25.9
10-20 Years 38.6
20-30 Years 15.8
Over 30 Years 0.0
- --------------------------------------------
Total 100.0%
14
<PAGE>
FINANCIAL STATEMENTS
NOVEMBER 30, 1999
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 (99.4%)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Avalon Borough NJ BAN 3.50% 5/26/2000 7,150 7,157
Bernards Township NJ BAN 3.40% 5/19/2000 5,651 5,657
Bernards Township NJ BAN 4.00% 9/7/2000 4,560 4,573
Burlington County NJ BAN 3.25% 2/9/2000 4,000 4,003
Burlington County NJ BAN 3.25% 3/10/2000 4,728 4,731
Burlington County NJ BAN 4.25% 11/3/2000 8,930 8,965
Cape May County NJ BAN 3.50% 3/24/2000 4,900 4,905
Chatham Township NJ BAN 3.25% 2/17/2000 10,948 10,956
Cherry Hill Township NJ BAN 4.25% 10/12/2000 26,186 26,330
Cherry Hill Township NJ TAN 5.125% 7/15/2000 1,110 1,121
Clifton NJ TAN 3.40% 2/11/2000 4,100 4,103
East Brunswick Township NJ BAN 3.50% 1/6/2000 11,932 11,939
Edison Township NJ BAN 4.00% 12/29/1999 4,734 4,736
Essex County NJ Improvement Auth. Pooled Govt. Loan VRDO 3.55% 12/8/1999 LOC 32,20 32,200
Glen Ridge NJ TAN 3.625% 2/24/2000 5,000 5,005
Gloucester County NJ PCR VRDO (Mobil Oil Refining Corp. Project)3.55% 12/8/1999 20,200 20,200
Mercer County NJ BAN 3.25% 12/22/1999 42,526 42,530
Monmouth County NJ VRDO
(Improvement Auth. Pooled Govt. Loan Program) 3.55% 12/8/1999 LOC 20,915 20,915
Montgomery Township NJ BAN 3.25% 2/9/2000 4,655 4,658
Morris County NJ General Improvement GO 4.50% 8/15/2000 2,000 2,012
Morris County NJ GO BAN 4.25% 9/22/2000 41,419 41,645
New Jersey Building Auth. Rev. TOB VRDO 3.92% 1/1/2000 (1)+ 10,000 10,000
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 3.65% 3/8/2000 LOC 7,800 7,800
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 3.65% 4/10/2000 LOC 7,200 7,200
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 3.70% 2/17/2000 LOC 14,000 14,000
15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 3.55% 3/7/2000 LOC 24,700 24,700
New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 3.65% 4/10/2000 LOC 4,100 4,100
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(NJ Natural Gas Project) 3.80% 12/8/1999 (2) 8,100 8,100
New Jersey Econ. Dev. Auth. PCR VRDO (Exxon Project) 3.45% 12/2/1999 11,000 11,000
New Jersey Econ. Dev. Auth. PCR VRDO
(Public Service Electric & Gas Co.) 3.55% 12/8/1999 (1) 21,420 21,420
New Jersey Econ. Dev. Auth. VRDO (Lawrence School Project) 3.20% 12/2/1999 24,100 24,100
New Jersey Econ. Dev. Auth. VRDO (Natural Gas Fac. NUI Corp.) 3.60% 12/2/1999 (2) 32,700 32,700
New Jersey Econ. Dev. Auth. VRDO
(United States Golf Association) 3.80% 12/2/1999 LOC 2,400 2,400
New Jersey Econ. Dev. Auth. Water Fac. TOB VRDO
(NJ American Water Co. Project) 3.93% 12/2/1999 (3)+ 4,850 4,850
New Jersey Econ. Dev. Auth. Water Fac. VRDO
(Elizabethtown Water Co. Project) 3.70% 12/8/1999 (2) 19,500 19,500
New Jersey Econ. Dev. Auth. Water Fac. VRDO
(Elizabethtown Water Co. Project) 3.80% 12/8/1999 (2) 13,600 13,600
New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co.) 3.60% 12/2/1999 (2) 2,700 2,700
New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co. 3.85% 12/2/1999 (2) 6,500 6,500
New Jersey Econ. Dev. Transp. Project TOB VRDO
(NJ Transit Corp. Light Rail Transit System Project) 3.88% 12/2/1999 (3)+ 7,465 7,465
New Jersey Educ. Fac. Auth. Rev. (Higher Educ. Technology) 4.25% 9/1/2000 3,000 3,018
New Jersey Educ. Fac. Auth. Rev. VRDO (College of New Jersey) 3.75% 12/2/1999 (2) 28,300 28,300
New Jersey GO 5.10% 2/15/2000 6,600 6,619
New Jersey GO 7.00% 4/1/2000 3,935 3,985
New Jersey Health Care Fac. Finance Auth.
(Meridian Health System) 4.00% 7/1/2000 (4) 3,010 3,020
New Jersey Health Care Fac. Finance Auth. (St. Elizabeth Hosp.) 8.25% 7/1/2000 (Prere. ) 5,460 5,708
New Jersey Health Care Fac. Finance Auth. VRDO (Holy Name Hosp.)3.70% 12/2/1999 LOC 8,200 8,200
New Jersey Health Care Fac. Finance Auth. VRDO
(Hosp. Capital Asset Pooled Program) 3.65% 12/2/1999 LOC 53,100 53,100
New Jersey Health Care Fac. Finance Auth. VRDO
(Princeton Medical Center) 3.70% 12/2/1999 LOC 5,000 5,000
New Jersey Sports & Exposition Auth. Rev. 6.10% 1/1/2000 (ETM) 5,540 5,554
New Jersey Sports & Exposition Auth. Rev. VRDO 3.85% 12/2/1999 (1) 48,835 48,835
New Jersey TRAN CP 3.65% 12/3/1999 8,000 8,000
New Jersey TRAN CP 3.65% 12/7/1999 5,000 5,000
New Jersey TRAN CP 3.90% 2/23/2000 10,000 10,000
New Jersey Transp. Trust Fund Auth. 4.25% 6/15/2000 20,800 20,918
New Jersey Transp. Trust Fund Auth. 4.50% 6/15/2000 (ETM) 8,500 8,555
New Jersey Transp. Trust Fund Auth. 5.00% 6/15/2000 19,115 19,297
New Jersey Transp. Trust Fund Auth. 6.00% 6/15/2000 5,000 5,074
New Jersey Transp. Trust Fund Auth. TOB VRDO 3.84% 12/2/1999 + 14,495 14,495
New Jersey Transp. Trust Fund Auth. TOB VRDO 3.84% 12/2/1999 (3) + 14,600 14,600
New Jersey Transp. Trust Fund Auth. TOB VRDO 3.88% 12/2/1999 (1) + 13,490 13,490
New Jersey Turnpike Auth. Rev. VRDO 3.65% 12/8/1999 (3) LOC 209,350 209,350
Nutley NJ BAN 4.00% 7/28/2000 4,840 4,858
Pequannock Township NJ BAN 4.35% 11/3/2000 6,170 6,198
Port Auth. of New York & New Jersey CP 3.60% 12/6/1999 10,405 10,405
Port Auth. of New York & New Jersey CP 3.60% 12/8/1999 9,200 9,200
Port Auth. of New York & New Jersey CP 3.65% 3/9/2000 15,300 15,300
Port Auth. of New York & New Jersey CP 3.70% 3/24/2000 5,800 5,800
Port Auth. of New York & New Jersey CP 3.75% 4/11/2000 2,500 2,500
Port Auth. of New York & New Jersey CP 3.85% 2/24/2000 6,480 6,480
Princeton Univ. NJ CP 3.30% 12/10/1999 4,800 4,800
Princeton Univ. NJ CP 3.40% 12/10/1999 1,800 1,800
Princeton Univ. NJ CP 3.50% 12/9/1999 10,000 10,000
Princeton Univ. NJ CP 3.60% 4/12/2000 10,200 10,200
Princeton Univ. NJ CP 3.70% 2/22/2000 14,600 14,600
Rockaway Township NJ BAN 4.00% 7/27/2000 8,385 8,415
Saddle Brook Township NJ BAN 3.25% 2/9/2000 2,782 2,783
Salem County NJ PCR Finance Auth. CP (PECO Project) 3.60% 4/11/2000 LOC 19,000 19,000
Salem County NJ PCR VRDO (Atlantic City Electric Co. 3.75% 12/8/1999 (1) 9,900 9,900
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salem County NJ PCR VRDO (Atlantic City Electric Co.) 3.85% 12/8/1999 (1) 1,000 1,000
Salem County NJ PCR VRDO (Public Service Electric & Gas) 3.80% 12/8/1999 (1) 6,500 6,500
Scotch Plains Township NJ BAN 3.75% 6/9/2000 4,841 4,854
Somerset County NJ Industrial Pollution Control Fin. Auth. PCR VRDO
(American Cyanamid Co. Project) 3.70% 12/8/1999 12,300 12,300
Union County NJ PCR VRDO (Exxon Project) 3.10% 12/2/1999 22,100 22,100
Union County NJ PCR VRDO (Exxon Project) 3.15% 12/2/1999 20,700 20,700
West Orange NJ BAN 4.00% 6/22/2000 5,163 5,182
OUTSIDE NEW JERSEY:
Puerto Rico Govt. Dev. Bank CP 3.60% 12/15/1999 10,000 10,000
Puerto Rico Govt. Dev. Bank CP 3.65% 12/14/1999 10,000 10,000
Puerto Rico Govt. Dev. Bank VRDO 3.60% 12/8/1999 (1) 1,700 1,700
Puerto Rico Highway & Transp. Auth. TOB VRDO 3.71% 12/2/1999 (1)+ 7,740 7,740
Puerto Rico Highway & Transp. Auth. TOB VRDO 3.71% 12/2/1999 (3)+ 5,305 5,305
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 3.71% 12/2/1999 (2)+ 6,515 6,515
- --------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,255,479) 1,255,479
- --------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.6%)
- --------------------------------------------------------------------------------------------------------------
Other Assets--Note B 18,584
Liabilities (11,041)
----------
- --------------------------------------------------------------------------------------------------------------
7,543
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------------------------
Applicable to 1,263,021,050 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,263,022
==============================================================================================================
NET ASSET VALUE PER SHARE $1.00
==============================================================================================================
*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 buyers. At November 30, 1999, the aggregate value of
these securities was $93,210,000, representing 7.4% of net assets.
For key to abbreviations and other references, see page 23.
- --------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------
Paid in Capital $1,263,037 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (15) --
Unrealized Appreciation -- --
==============================================================================================================
NET ASSETS $1,263,022 $1.00
==============================================================================================================
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.4%)
- --------------------------------------------------------------------------------------------------------------
ISSUER INSURED (85.7%)
<S> <C> <C> <C> <C>
Atlantic City NJ Board of Educ. GO 6.00% 12/1/2012 (4) 4,600 4,927
Atlantic City NJ Board of Educ. GO 6.10% 12/1/2015 (4) 2,000 2,122
Atlantic County NJ COP 6.00% 3/1/2014 (3) 3,685 3,891
Atlantic County NJ COP 6.00% 3/1/2015 (3) 1,480 1,552
Atlantic County NJ COP 7.40% 3/1/2010 (3) 1,755 2,071
Atlantic County NJ COP 7.40% 3/1/2011 (3) 4,025 4,779
Atlantic County NJ Util. Auth. Sewer Rev. 5.85% 1/15/2015 (2) 3,000 3,033
Bayshore NJ Regional Sewer Auth. Rev. 5.40% 5/1/2012 (1) 500 501
Bergen County NJ Util. Auth. Water PCR 5.50% 6/15/2002 (3)(Prere.)15,750 16,169
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2004 (3) 8,345 6,636
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2005 (3) 18,545 13,974
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2006 (3) 18,545 13,216
Cape May County NJ Muni. Util. Auth. Rev. 5.75% 1/1/2016 (1) 14,975 15,020
Cape May County NJ PCR (Atlantic City Electric) 6.80% 3/1/2021 (1) 15,400 17,347
Cherry Hill Township NJ School Dist. 4.70% 2/15/2012 (4) 2,000 1,884
Cherry Hill Township NJ School Dist. 4.70% 2/15/2013 (4) 2,125 1,971
Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.40% 1/1/2013 (3) 9,000 8,974
Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.50% 1/1/2026 (3) 31,385 29,762
Elizabeth City NJ GO 6.60% 8/1/2001 (1)(Prere.) 8,525 9,001
Elizabeth City NJ GO 6.60% 8/1/2006 (1)(Prere.) 225 237
Essex County NJ Improvement Auth. Lease Rev. 5.50% 12/1/2008 (2) 2,560 2,631
Essex County NJ Improvement Auth. Lease Rev. 5.50% 12/1/2013 (2) 7,500 7,542
Essex County NJ Improvement Auth. VRDO
(County Asset Sale Project) 3.75% 12/8/1999 (2) 8,100 8,100
Essex County NJ Util. Auth. Solid Waste Rev. 0.00% 4/1/2010 (4) 1,000 574
Essex County NJ Util. Auth. Solid Waste Rev. 4.875% 4/1/2018 (4) 4,000 3,540
Essex County NJ Util. Auth. Solid Waste Rev. 5.00% 4/1/2022 (4) 4,000 3,565
Essex County NJ Util. Auth. Solid Waste Rev. 5.60% 4/1/2016 (4) 2,200 2,328
Evesham NJ Muni. Util. Auth. Rev. 7.00% 7/1/2010 (1) 1,700 1,727
Evesham NJ Muni. Util. Auth. Rev. 7.00% 7/1/2015 (1) 450 457
Gloucester Township NJ GO 5.75% 7/15/2010 (2) 2,880 3,041
Gloucester Township NJ Muni. Util. Auth. Rev. 5.65% 3/1/2018 (2) 2,755 2,752
Hamilton Township NJ Muni. Util. Auth. Rev. 6.00% 8/15/2002 (3)(Prere.) 1,000 1,059
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2003 (1) 3,800 3,202
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2004 (1) 3,750 3,002
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2006 (1) 2,000 1,437
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 6.25% 8/1/2013 (1) 9,590 10,457
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2005 (1) 3,805 2,888
Hudson County NJ Correctional Fac. COP 6.50% 12/1/2011 (1) 9,000 9,474
Hudson County NJ GO 6.55% 7/1/2007 (3) 1,300 1,427
Hudson County NJ GO 6.55% 7/1/2009 (3) 635 703
Hudson County NJ Improvement Auth. Lease Rev. 6.00% 12/1/2002 (3)(Prere.) 6,525 6,934
Irvington Township NJ GO 0.00% 8/1/2007 (1) 1,000 679
Irvington Township NJ GO 0.00% 8/1/2009 (1) 2,580 1,557
Irvington Township NJ GO 0.00% 8/1/2010 (1) 2,080 1,183
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2011 (3) 2,625 2,589
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2019 (3) 3,000 2,733
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2021 (3) 2,500 2,254
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2022 (3) 4,000 3,593
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2023 (3) 4,000 3,579
Middlesex County NJ COP
(Civil Square III Redevelopment Associates) 5.125% 6/15/2016 (1) 3,805 3,569
Middlesex County NJ Import Auth. Util. Systems Rev.
(Perth Amboy Project) 0.00% 9/1/2015 (2) 2,000 806
Middlesex County NJ Import Auth. Util. Systems Rev.
(Perth Amboy Project) 0.00% 9/1/2016 (2) 3,000 1,131
Middlesex County NJ Import Auth. Util. Systems Rev.
(Perth Amboy Project) 0.00% 9/1/2018 (2) 4,550 1,499
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FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Middlesex County NJ Util. Auth. Sewer Rev. 5.125% 12/1/2016 (3) 4,550 4,263
Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 12/1/2010 (3) 3,145 3,169
Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 3/15/2010 (2) 2,740 2,757
Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 9/15/2010 (2) 1,790 1,801
Middlesex County NJ Util. Auth. Sewer Rev. 5.375% 9/15/2015 (2) 3,775 3,679
Middlesex County NJ Util. Auth. Sewer Rev. 6.50% 3/15/2001 (3)(Prere.) 6,300 6,600
Monmouth County NJ Improvement Auth. Rev.
(Howell Township Board of Ed.) 5.80% 7/15/2017 (2) 1,180 1,185
Monmouth County NJ Improvement Auth. Rev. Governmental Loan 5.40% 12/1/2012 (1) 2,505 2,525
Mount Laurel Township NJ Muni. Util. Auth. Util. System Rev. 6.00% 7/1/2015 (1) 4,250 4,410
New Brunswick NJ Housing & Urban Dev. Rev. 5.75% 7/1/2002 (1)(Prere.)13,200 13,863
New Brunswick NJ Housing & Urban Dev. Rev. 5.75% 7/1/2024 (1) 440 436
New Brunswick NJ Housing & Urban Dev. Rev. 6.00% 7/1/2002 (1)(Prere.) 5,805 6,132
New Brunswick NJ Housing & Urban Dev. Rev. 6.00% 7/1/2012 (1) 195 202
New Jersey Econ. Dev. Auth. Lease Rev.
(Bergen County Administration Complex) 5.50% 11/15/2012 (1) 4,375 4,414
New Jersey Econ. Dev. Auth. Lease Rev.
(Bergen County Administration Complex) 5.625% 11/15/2014 (1) 4,870 4,884
New Jersey Econ. Dev. Auth. Lease Rev.
(Bergen County Administration Complex) 5.75% 11/15/2016 (1) 5,440 5,444
New Jersey Econ. Dev. Auth. Lease Rev.
(Bergen County Administration Complex) 5.75% 11/15/2018 (1) 6,080 6,018
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(NJ Natural Gas Project) 3.80% 12/8/1999 (2) 3,900 3,900
New Jersey Econ. Dev. Auth. Rev. (Hillcrest Health Service) 0.00% 1/1/2012 (2) 2,500 1,284
New Jersey Econ. Dev. Auth. Rev. (Hillcrest Health Service) 0.00% 1/1/2013 (2) 3,000 1,440
New Jersey Econ. Dev. Auth. Rev. (Market Transition) 5.80% 7/1/2007 (1) 1,000 1,049
New Jersey Econ. Dev. Auth. Rev. (Market Transition) 5.80% 7/1/2009 (1) 7,250 7,535
New Jersey Econ. Dev. Auth. Rev. (Market Transition) 5.875% 7/1/2011 (1) 23,175 23,997
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2008 (1) 2,305 1,476
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2011 (1) 4,650 2,483
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2012 (1) 4,550 2,273
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2013 (1) 4,500 2,100
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2014 (1) 4,210 1,831
New Jersey Econ. Dev. Auth. Rev. PCR VRDO
(Public Service Electric & Gas Co.) 3.55% 12/8/1999 (1) 3,300 3,300
New Jersey Econ. Dev. Auth. VRDO (Natural Gas Fac. NUI Corp.) 3.60% 12/2/1999 (2) 500 500
New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co. 3.85% 12/2/1999 (2) 900 900
New Jersey Econ. Dev. Transp. Project
(NJ Transit Corp. Light Rail Transit System Project) 5.875% 5/1/2015 (4) 3,465 3,534
New Jersey Econ. Dev. Transp. Project
(NJ Transit Corp. Light Rail Transit System Project) 6.00% 5/1/2016 (4) 4,000 4,098
New Jersey Educ. Fac. Auth. Rev. (Drew Univ.) 5.00% 7/1/2017 (1) 2,500 2,294
New Jersey Educ. Fac. Auth. Rev. (Drew Univ.) 5.25% 7/1/2013 (1) 2,500 2,462
New Jersey Educ. Fac. Auth. Rev. (Higher Educ. Technology) 5.875% 9/1/2007 (2) 5,890 6,248
New Jersey Educ. Fac. Auth. Rev. (Higher Educ. Technology) 5.875% 9/1/2008 (2) 6,165 6,539
New Jersey Educ. Fac. Auth. Rev. (Kean College) 6.60% 7/1/2001 (1)(Prere.) 3,700 3,902
New Jersey Educ. Fac. Auth. Rev. (NJ Institute of Technology) 6.00% 7/1/2024 (1) 1,500 1,513
New Jersey Educ. Fac. Auth. Rev. (Rider College) 6.20% 7/1/2017 (2) 4,000 4,148
New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.25% 7/1/2010 (2) 2,500 2,518
New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.25% 7/1/2012 (2) 1,275 1,265
New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.60% 7/1/2016 (1) 1,765 1,748
New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.625% 7/1/2019 (1) 3,625 3,543
New Jersey Educ. Fac. Auth. Rev. (Trenton State College) 6.00% 7/1/2012 (2) 3,005 3,124
New Jersey Health Care Fac. Auth. Rev.
(Burdette Tomlin Memorial Hosp.) 6.50% 7/1/2001 (3)(Prere.) 1,285 1,352
New Jersey Health Care Fac. Auth. Rev.
(Burdette Tomlin Memorial Hosp.) 6.50% 7/1/2012 (3) 215 225
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 4,623
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FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND 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) 5.25% 7/1/2009 (4) 5,500 5,558
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 1,484
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 2,945
New Jersey Health Care Fac. Auth. Rev.
(Hackensack Univ. Medical Center) 5.00% 1/1/2028 (1) 21,860 19,041
New Jersey Health Care Fac. Auth. Rev.
(Hackensack Univ. Medical Center) 5.375% 1/1/2013 (1) 2,355 2,332
New Jersey Health Care Fac. Auth. Rev.
(Hackensack Univ. Medical Center) 5.375% 1/1/2014 (1) 2,965 2,909
New Jersey Health Care Fac. Auth. Rev. (Holy Name Hosp.) 5.25% 7/1/2020 (2) 4,100 3,798
New Jersey Health Care Fac. Auth. Rev.
(Jersey Shore Medical Center) 6.20% 7/1/2004 (2)(Prere.) 1,785 1,925
New Jersey Health Care Fac. Auth. Rev.
(Jersey Shore Medical Center) 6.20% 7/1/2004 (2)(Prere.) 1,755 1,892
New Jersey Health Care Fac. Auth. Rev.
(Jersey Shore Medical Center) 6.20% 7/1/2013 (2) 1,345 1,418
New Jersey Health Care Fac. Auth. Rev.
(Jersey Shore Medical Center) 6.20% 7/1/2014 (2) 1,320 1,391
New Jersey Health Care Fac. Auth. Rev.
(Jersey Shore Medical Center) 6.25% 7/1/2004 (2)(Prere. 1,140 1,231
New Jersey Health Care Fac. Auth. Rev.
(Jersey Shore Medical Center) 6.25% 7/1/2016 (2) 860 909
New Jersey Health Care Fac. Auth. Rev.
(Memorial Health Alliance) 6.25% 7/1/2000 (3)(Prere. 8,000 8,107
New Jersey Health Care Fac. Auth. Rev. (Mercer Medical Center) 6.50% 7/1/2010 (1) 6,000 6,278
New Jersey Health Care Fac. Auth. Rev.
(Meridian Health System Obligated Group) 5.25% 7/1/2029 (4) 13,450 12,181
New Jersey Health Care Fac. Auth. Rev.
(Meridian Health System Obligated Group) 5.625% 7/1/2013 (4) 7,355 7,451
New Jersey Health Care Fac. Auth. Rev.
(Mountainside Hosp.) 5.35% 7/1/2007 (1) 3,215 3,274
New Jersey Health Care Fac. Auth. Rev.
(Muhlenburg Medical Center) 8.00% 7/1/2018 (2) 750 760
New Jersey Health Care Fac. Auth. Rev.
(Newark Beth Israel Medical Center) 6.00% 7/1/2004 (4) 8,500 9,110
New Jersey Health Care Fac. Auth. Rev.
(Riverside Medical Center) 6.25% 7/1/2010 (2) 2,935 3,208
New Jersey Health Care Fac. Auth. Rev.
(Society of the Valley Hosp.) 6.625% 7/1/2010 (1) 2,750 2,810
New Jersey Health Care Fac. Auth. Rev.
(West Jersey Health System) 6.00% 7/1/2002 (1)(Prere.) 5,175 5,466
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Barnabas Health Care) 4.75% 7/1/2028 (1) 14,000 11,604
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Barnabas Health Care) 5.25% 7/1/2013 (1) 3,000 2,946
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Barnabas Health Care) 5.25% 7/1/2016 (1) 5,550 5,290
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Barnabus Health Care) 0.00% 7/1/2021 (1) 3,000 820
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Barnabas Health Care) 5.00% 7/1/2024 (1) 5,500 4,868
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Clares Riverside Medical Center) 5.75% 7/1/2014 (1) 8,500 8,574
New Jersey Health Care Fac. Finance Auth. Rev. (Virtua Health) 5.25% 7/1/2014 (4) 20,000 19,385
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 4.95% 6/1/2010 (2) 6,325 6,107
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.05% 6/1/2011 (2) 5,100 4,932
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.05% 6/1/2012 (1) 1,500 1,454
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.10% 6/1/2013 (1) 2,255 2,174
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FACE MARKET
COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.125% 6/1/2014 (1) 1,300 1,242
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.15% 6/1/2012 (2) 5,250 5,067
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.20% 6/1/2013 (2) 8,240 7,903
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.25% 6/1/2018 (1) 705 658
New Jersey Housing & Mortgage Finance Agency (Home Buyer Rev. 5.40% 10/1/2020 (1) 2,500 2,472
New Jersey Sports & Exposition Auth. Rev. 5.50% 3/1/2017 (1) 5,755 5,673
New Jersey Sports & Exposition Auth. Rev. VRDO 3.85% 12/2/1999 (1)LOC 8,600 8,600
New Jersey Transp. Trust Fund Auth. Rev. 5.50% 6/15/2013 (1) 3,000 3,011
New Jersey Transp. Trust Fund Auth. Rev. 6.00% 6/15/2011 (1) 31,280 32,783
New Jersey Turnpike Auth. Rev. 6.50% 1/1/2013 (1) 20,000 22,124
New Jersey Water Supply Auth. Delaware &
Raritan Water System Rev. 5.375% 11/1/2010 (1) 2,230 2,256
New Jersey Water Supply Auth. Delaware &
Raritan Water System Rev. 5.375% 11/1/2011 (1) 2,345 2,358
New Jersey Water Supply Auth. Delaware &
Raritan Water System Rev. 5.375% 11/1/2013 (1) 2,600 2,569
Newark NJ GO 5.50% 10/1/2008 (2) 1,660 1,717
North Bergen Township NJ GO 8.00% 8/15/2006 (4) 1,885 2,224
North Brunswick Township NJ Board of Educ. GO 5.50% 2/1/2008 (3) 1,915 1,978
North Brunswick Township NJ Board of Educ. GO 5.50% 2/1/2009 (3) 2,030 2,086
North Brunswick Township NJ GO 5.50% 5/15/2013 (3) 1,390 1,397
North Hudson NJ Sewer Auth. Rev. 5.125% 8/1/2008 (3) 2,000 2,017
North Hudson NJ Sewer Auth. Rev. 5.125% 8/1/2022 (3) 4,000 3,662
North Hudson NJ Sewer Auth. Rev. 5.25% 8/1/2016 (3) 14,360 13,684
North Jersey Water Dist. Rev. (Wanaque South Project) 6.00% 7/1/2012 (1) 10,125 10,518
Ocean County NJ Util. Auth. Waste Water Rev. 5.00% 1/1/2014 (3) 2,000 1,905
Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/2018 (3) 4,000 4,110
Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/2018 (3)(ETM) 2,500 2,742
Ocean Township NJ Muni. Util. Auth. Rev. 6.00% 8/1/2017 (1) 3,975 4,115
Old Bridge Township NJ Muni. Util. Auth. Rev. 6.25% 11/1/2016 (3) 1,400 1,472
Old Bridge Township NJ Muni. Util. Auth. Rev. 6.40% 11/1/2009 (3) 3,000 3,202
Passaic Valley NJ Sewer Comm. Rev. 5.75% 12/1/2008 (2) 4,450 4,602
Passaic Valley NJ Sewer Comm. Rev. 5.75% 12/1/2013 (2) 4,000 4,064
Plainfield NJ GO 6.25% 7/15/2007 (2) 6,930 7,330
Port Auth. of New York & New Jersey Rev. 5.125% 11/15/2012 (3) 2,500 2,439
Port Auth. of New York & New Jersey Rev. 5.125% 11/15/2013 (3) 5,735 5,538
Port Auth. of New York & New Jersey Rev. 5.125% 11/15/2014 (3) 6,025 5,749
Port Auth. of New York & New Jersey Rev. 5.875% 9/15/2015 (3) 10,000 10,133
Ramapo College NJ 5.625% 7/1/2019 (1) 2,105 2,069
Rutgers State Univ. NJ 5.00% 5/1/2023 (3) 3,000 2,684
Rutgers State Univ. NJ 5.125% 5/1/2020 (3) 3,835 3,527
South Brunswick Township NJ Board of Educ. GO 5.25% 8/1/2020 (3) 3,535 3,302
South Brunswick Township NJ Board of Educ. GO 5.25% 8/1/2022 (3) 4,630 4,311
South Brunswick Township NJ Board of Educ. GO 5.50% 8/1/2024 (3) 2,500 2,399
South Brunswick Township NJ Board of Educ. GO 6.40% 8/1/2005 (3)(Prere.) 2,205 2,389
South Brunswick Township NJ Board of Educ. GO 6.40% 8/1/2005 (3)(Prere.) 2,315 2,509
South Jersey Transp. Auth. NJ Transp. System Rev. 5.00% 11/1/2029 (2) 13,850 12,160
South Jersey Transp. Auth. NJ Transp. System Rev. 5.25% 11/1/2012 (2) 2,000 1,985
South Jersey Transp. Auth. NJ Transp. System Rev. 5.25% 11/1/2013 (2) 4,000 3,930
South Jersey Transp. Auth. NJ Transp. System Rev. 5.25% 11/1/2014 (2) 4,375 4,256
South Jersey Transp. Auth. NJ Transp. System Rev. 5.90% 11/1/2002 (1)(Prere. 1,965 2,081
South Jersey Transp. Auth. NJ Transp. System Rev. 5.90% 11/1/2002 (1)(Prere.) 1,455 1,541
South Jersey Transp. Auth. NJ Transp. System Rev. 5.90% 11/1/2006 (1) 1,470 1,539
South Jersey Transp. Auth. NJ Transp. System Rev. 5.90% 11/1/2007 (1) 1,090 1,137
South Jersey Transp. Auth. NJ Transp. System Rev. 6.00% 11/1/2002 (1)(Prere.) 3,005 3,190
South Jersey Transp. Auth. NJ Transp. System Rev. 6.00% 1/1/2012 (1) 2,245 2,340
Stafford NJ Muni. Util. Auth. Water & Sewer Rev. 5.50% 6/1/2011 (3) 3,100 3,201
Sussex County NJ Muni. Util. Auth. Solid Waste Rev. 5.75% 2/1/2009 (1) 19,820 20,409
Sussex County NJ Muni. Util. Auth. Waste Water Rev. 5.25% 12/1/2008 (1) 1,150 1,165
Union County NJ Improvement Auth. Rev.
(Plainfield Board of Educ.) 5.80% 8/1/2020 (3) 4,000 4,268
Union County NJ Utilities Auth. Ogden Martin Rev. 5.25% 6/1/2006 (2) 5,375 5,491
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FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Union County NJ Utilities Auth. Ogden Martin Rev. 5.375% 6/1/2011 (2) 8,375 8,438
Union County NJ Utilities Auth. Ogden Martin Rev. 5.375% 6/1/2012 (2) 8,995 8,991
Union County NJ Utilities Auth. Ogden Martin Rev. 5.375% 6/1/2013 (2) 9,445 9,351
Vernon Township NJ School Dist. 5.25% 12/1/2014 (3) + 1,200 1,172
Vernon Township NJ School Dist. 5.30% 12/1/2015 (3) + 1,200 1,165
Vernon Township NJ School Dist. 5.375% 12/1/2016 (3) + 1,200 1,166
Vernon Township NJ School Dist. 5.375% 12/1/2017 (3) + 1,200 1,158
Vernon Township NJ School Dist. 5.375% 12/1/2018 (3) + 1,200 1,150
West Orange NJ Board of Educ. COP 5.625% 10/1/2019 (1) + 2,500 2,452
West Orange NJ Board of Educ. COP 5.625% 10/1/2029 (1) + 2,000 1,931
West Orange NJ Board of Educ. COP 6.00% 10/1/2024 (1) + 1,000 1,013
OUTSIDE NEW JERSEY:
Guam Govt. Ltd. Obligation Infrastructure Improvement Rev. 5.125% 11/1/2011 (2) 3,400 3,383
Puerto Rico Electric Power Auth. Power Rev. 5.25% 7/1/2017 (1) 3,200 3,062
Puerto Rico GO 5.00% 7/1/2018 (1) 11,500 10,535
Puerto Rico GO 5.00% 7/1/2024 (1) 2,910 2,583
Puerto Rico Govt. Dev. Bank VRDO 3.60% 12/8/1999 (1) 13,600 13,600
Puerto Rico Infrastrusture Finance Auth. Special Tax Rev. 5.00% 7/1/2021 (2) 8,000 7,181
Puerto Rico Infrastrusture Finance Auth. Special Tax Rev. 5.00% 7/1/2028 (2) 12,600 11,047
Puerto Rico Public Building Auth. Rev. 0.00% 7/1/2002 (3) 4,000 3,577
----------
989,935
----------
SECONDARY MARKET INSURED (7.7%)
Atlantic County NJ Util. Auth. Sewer Rev. 6.875% 1/1/2012 (2)(ETM) 3,000 3,310
New Jersey Building Auth. Rev. 5.00% 6/15/2012 (4) 10,000 9,736
New Jersey Highway Auth. Rev. (Garden State Parkway) 6.00% 1/1/2016 (2) 5,000 5,035
New Jersey Highway Auth. Rev. (Garden State Parkway) 6.20% 1/1/2010 (2) 20,000 21,668
New Jersey Sports & Exposition Auth. Rev. 6.50% 3/1/2013 (1) 10,000 11,082
New Jersey Turnpike Auth. Rev. 6.50% 1/1/2016 (1) 23,270 25,533
Port Auth. of New York & New Jersey Rev. 5.375% 7/15/2022 (3) 5,000 4,698
Port Auth. of New York & New Jersey Rev. 6.875% 1/1/2025 (2) 3,200 3,239
Univ. of Medicine & Dentistry NJ Rev. 6.50% 12/1/2012 (1) 4,000 4,483
----------
88,784
----------
NONINSURED (6.0%)
Burlington County NJ Bridge Comm. Rev. 5.30% 10/1/2013 9,500 9,422
Cherry Hill Township NJ GO 6.30% 6/1/2012 3,745 3,953
Mercer County NJ Improvement Auth. Library System Rev. 6.00% 12/1/2003 (Prere.) 1,000 1,070
Mercer County NJ Improvement Auth. Solid Waste Rev. 5.375% 9/15/2012 11,120 11,148
Mercer County NJ Improvement Auth. Special Services
School Dist. Rev. 5.75% 12/15/2008 1,165 1,228
Mercer County NJ Improvement Auth. Special Services
School Dist. Rev. 5.95% 12/15/2012 4,895 5,220
Monmouth County NJ Improvement Auth. (Correctional Fac.) 6.40% 8/1/2001(Prere.) 1,850 1,948
New Jersey Econ. Dev. Auth. VRDO (Hoffman-La Roche Project) 3.85% 12/2/1999 700 700
New Jersey Econ. Dev. Auth. VRDO (Russell Berrie) 3.65% 12/8/1999 3,000 3,000
New Jersey Environmental Infrastructure Trust Waste Water Rev. 5.00% 9/1/2009 1,955 1,950
New Jersey GO 5.00% 3/1/2011 7,875 7,748
New Jersey Transp. Trust Fund Auth. Rev. 5.75% 6/15/2020 5,000 4,988
Ocean County NJ Util. Auth. Waste Water Rev. 6.30% 1/1/2013 2,215 2,387
Ocean County NJ Util. Auth. Waste Water Rev. 6.35% 1/1/2014 2,360 2,548
Ocean County NJ Util. Auth. Waste Water Rev. 6.35% 1/1/2015 2,515 2,716
Port Auth of New York & New Jersey Rev. VRDO 3.65% 12/2/1999 5,900 5,900
Rutgers State Univ. NJ GO 6.40% 5/1/2013 3,000 3,279
----------
69,205
----------
- --------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,140,374) 1,147,924
- --------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
MARKET
VALUE*
(000)
- --------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.6%)
<S> <C>
- --------------------------------------------------------------------------------------------------------------
Other Assets--Note B 22,749
Liabilities (15,781)
----------
6,968
- --------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
- --------------------------------------------------------------------------------------------------------------
Applicable to 103,167,793 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,154,892
==============================================================================================================
NET ASSET VALUE PER SHARE $11.19
==============================================================================================================
*See Note A in Notes to Financial Statements.
+Security purchased on a when-issued or delayed delivery basis for which the
fund has not taken delivery as of November 30, 1999. For key to abbreviations
and other references, see below.
- --------------------------------------------------------------------------------------------------------------
AT NOVEMBER 30, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- --------------------------------------------------------------------------------------------------------------
Paid in Capital $1,150,168 $11.15
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains--Note E (2,826) (.03)
Unrealized Appreciation--Note F 7,550 .07
==============================================================================================================
NET ASSETS $1,154,892 $11.19
==============================================================================================================
</TABLE>
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.
TRAN--Tax Revenue Anticipation Note.
TOB--Tender Option Bond.
VRDO--Variable Rate Demand Obligation.
(ETM)--Escrowed to Maturity.
(Prere.)--Prerefunded.
Scheduled principal and interest payments are guaranteed by:
(1) MBIA (Municipal Bond Insurance Association).
(2) AMBAC (Ambac Assurance Corporation).
(3) FGIC (Financial Guaranty Insurance Company).
(4) FSA (Financial Security Assurance).
The insurance does not guarantee the market value of the municipal bonds.
LOC--Scheduled principal and interest payments are guaranteed by bank letter of
credit.
23
<PAGE>
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
----------------------------
YEAR ENDED NOVEMBER 30, 1999
----------------------------
(000) (000)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income
Interest 36,969 $60,994
----------------------------
Total Income 36,969 60,994
Expenses
The Vanguard Group--Note B
Investment Advisory Services 152 145
Management and Administrative 1,958 1,884
Marketing and Distribution 282 192
Custodian Fees 15 12
Auditing Fees 8 8
Shareholders' Reports 14 15
Trustees' Fees and Expenses 2 2
----------------------------
Total Expenses 2,431 2,258
Expenses Paid Indirectly--Note C (15) (53)
----------------------------
Net Expenses 2,416 2,205
- ------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 34,553 58,78
- ------------------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold 15 (3,053)
Futures Contracts -- 3,245
- ------------------------------------------------------------------------------------------
REALIZED NET GAIN 15 192
- ------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities -- (76,141)
Futures Contracts -- 901
- ------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- (75,240)
==========================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $34,568 $(16,259)
==========================================================================================
</TABLE>
25
<PAGE>
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
----------------- -----------------
YEAR ENDED NOVEMBER 30,
----------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
(000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income 34,553 34,309 58,789 51,650
Realized Net Gain 15 -- 192 4,004
Change in Unrealized Appreciation (Depreciation) -- -- (75,240) 19,589
- ---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 34,568 34,309 (16,259) 75,243
-----------------------------------------------------
DISTRIBUTIONS
Net Investment Income (34,553) (34,309) (58,789) (51,650)
Realized Capital Gain -- -- (4,837) (888)
-----------------------------------------------------
Total Distributions (34,553) (34,309) (63,626) (52,538)
-----------------------------------------------------
CAPITAL SHARE TRANSACTIONS1
Issued 1,136,944 1,071,133 306,834 267,869
Issued in Lieu of Cash Distributions 32,995 32,698 48,412 39,729
Redeemed (1,086,203) (940,847) (232,335) (158,702)
- ---------------------------------------------------------------------------------------------------------
Net Increase from Capital Share Transactions 83,736 162,984 122,911 148,896
- ---------------------------------------------------------------------------------------------------------
Total Increase 83,751 162,984 43,026 171,601
- ---------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Year 1,179,271 1,016,287 1,111,866 940,265
-----------------------------------------------------
End of Year $1,263,022 $1,179,271 $1,154,892 $1,111,866
=========================================================================================================
1Shares Issued (Redeemed)
Issued 1,136,944 1,071,133 26,241 22,569
Issued in Lieu of Cash Distributions 32,995 32,698 4,163 3,344
Redeemed (1,086,203) (940,847) (20,010) (13,384)
-----------------------------------------------------
Net Increase in Shares Outstanding 83,736 162,984 10,394 12,529
=========================================================================================================
</TABLE>
25
<PAGE>
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 THROUGHOUT EACH YEAR 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .028 .031 .033 .032 .035
Net Realized and Unrealized Gain (Loss)
on Investments -- -- -- -- --
------------------------------------------
Total from Investment Operations .028 .031 .033 .032 .035
------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.028) (.031) (.033) (.032) (.035)
Distributions from Realized Capital Gains -- -- -- -- --
------------------------------------------
Total Distributions (.028) (.031) (.033) (.032) (.035)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
==================================================================================================
TOTAL RETURN 2.86% 3.18% 3.32% 3.22% 3.60%
==================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,263 $1,179 $1,016 $918 $859
Ratio of Total Expenses to Average Net Assets 0.20% 0.20% 0.20% 0.20% 0.21%
Ratio of Net Investment Income to Average
Net Assets 2.82% 3.12% 3.27% 3.17% 3.53%
==================================================================================================
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND
YEAR ENDED NOVEMBER 30,
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $11.98 $11.72 $11.64 $11.78 $10.40
- --------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .590 .599 .608 .616 .623
Net Realized and Unrealized Gain (Loss)
on Investments (.738) .271 .112 (.082) 1.380
---------------------------------------------
Total from Investment Operations (.148) .870 .720 .534 2.00
---------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.590) (.599) (.608) (.616) (.623)
Distributions from Realized Capital Gains (.052) (.011) (.032) (.058 --
---------------------------------------------
Total Distributions (.642) (.610) (.640) (.674) (.623)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.19 $11.98 $11.72 $11.64 $11.78
==================================================================================================
TOTAL RETURN -1.31% 7.59% 6.40% 4.75% 19.66%
==================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $1,155 $1,112 $940 $849 $796
Ratio of Total Expenses to Average Net Assets 0.19% 0.20 0.18% 0.20% 0.21%
Ratio of Net Investment Income to
Average Net Assets 5.06% 5.04% 5.26% 5.35% 5.50%
Portfolio Turnover Rate 11% 14% 13% 11% 7%
==================================================================================================
</TABLE>
27
<PAGE>
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.
28
<PAGE>
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 0.40% of its net assets in
capital contributions to Vanguard. At November 30, 1999, the funds had
contributed capital to Vanguard (included in Other Assets) of:
- --------------------------------------------------------------------------------
CAPITAL CONTRIBUTION PERCENTAGE PERCENTAGE OF
TO VANGUARD OF FUND VANGUARD'S
NEW JERSEY TAX-EXEMPT FUND (000) NET ASSETS CAPITALIZATION
- --------------------------------------------------------------------------------
Money Market $260 0.02% 0.3%
Insured Long-Term 240 0.02 0.2
- --------------------------------------------------------------------------------
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 year ended November 30, 1999, these arrangements
reduced expenses by:
- --------------------------------------------------------------------------------
EXPENSE REDUCTION
(000)
--------------------------------------
MANAGEMENT AND CUSTODIAN
NEW JERSEY TAX-EXEMPT FUND ADMINISTRATIVE FEES
- --------------------------------------------------------------------------------
Money Market -- $15
Insured Long-Term $41 12
- --------------------------------------------------------------------------------
D. During the year ended November 30, 1999, the Insured Long-Term Tax-Exempt
Fund purchased $203,648,000 of investment securities and sold $125,913,000 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 $2,044,000 through November 30, 1999, which are
deferred for tax purposes and reduce the amount of unrealized appreciation on
investment securities for tax purposes (see Note F). At November 30, 1999, the
fund had available capital losses of $782,000 to offset future net capital gains
through November 30, 2007.
F. At November 30, 1999, net unrealized appreciation of Insured Long-Term
Tax-Exempt Fund investment securities for federal income tax purposes was
$5,506,000, consisting of unrealized gains of $32,815,000 on securities that had
risen in value since their purchase and $27,309,000 on securities that had
fallen in value since their purchase (see Note E).
29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Vanguard New Jersey Tax-Exempt Funds
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Vanguard New Jersey Tax-Exempt Money Market Fund and Vanguard New Jersey Insured
Long-Term Tax-Exempt Fund (constituting Vanguard New Jersey Tax-Exempt Funds,
hereafter referred to as the "Funds") at November 30, 1999, the results of each
of their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at November 30, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
January 6, 2000
30
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL 1999 TAX INFORMATION (UNAUDITED)
FOR VANGUARD NEW JERSEY TAX-EXEMPT FUNDS
This information for the fiscal year ended November 30, 1999, is included
pursuant to provisions of the Internal Revenue Code.
The Insured Long-Term Tax-Exempt Fund distributed $4,837,000 as capital
gain dividends (from net long-term capital gains) to shareholders in December
1998, all of which is designated as a 20% rate gain distribution.
Each fund designates 100% of its income dividends as exempt-interest
dividends.
- --------------------------------------------------------------------------------
31
<PAGE>
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 International 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.
For information about Vanguard funds and our variable annuity plan, including
charges and expenses, obtain a prospectus from The Vanguard Group, P.O. Box
2600, Valley Forge, PA 19482-2600. Read it carefully before you invest or send
money.
32
<PAGE>
THE PEOPLE WHO GOVERN YOUR FUND
The Trustees of your mutual fund are there to see that the fund is operated and
managed in your best interests since, as a shareholder, you are part owner of
the fund. Your fund Trustees also serve on the Board of Directors of The
Vanguard Group, which is owned by the funds and exists solely to provide
services to them on an at-cost basis.
The majority of Vanguard's board members are independent, meaning that they
have no affiliation with Vanguard or the funds they oversee, apart from the
sizable personal investments they have made as private individuals. They bring
distinguished backgrounds in business, academia, and public service to their
task of working with Vanguard officers to establish the policies and oversee the
activities of the funds.
Among board members' responsibilities are selecting investment advisers for
the funds; monitoring fund operations, performance, and costs; reviewing
contracts; nominating and selecting new Trustees/Directors; and electing
Vanguard officers.
The list below provides a brief description of each Trustee's
professional affiliations. Noted in parentheses is the year in which the Trustee
joined the Vanguard Board.
- --------------------------------------------------------------------------------
TRUSTEES
JOHN C. BOGLE (1967) 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 (1987) 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 (1998) Vice President, Chief Information Officer, and a
member of the Executive Committee of Johnson & Johnson; Director of Johnson &
JohnsonoMerck Consumer Pharmaceuticals Co., The Medical Center at Princeton, and
Women's Research and Education Institute.
BRUCE K. MACLAURY (1990) President Emeritus of The Brookings Institution;
Director of American Express Bank Ltd., The St. Paul Companies, Inc., and
National Steel Corp.
BURTON G. MALKIEL (1977) 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 Select Sector SPDR
Trust.
ALFRED M. RANKIN, JR. (1993) Chairman, President, Chief Executive Officer, and
Director of NACCO Industries, Inc.; Director of The BFGoodrich Co.
JOHN C. SAWHILL (1991) 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. (1971) 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 (1985) Retired Chairman 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.
VANGUARD MANAGING DIRECTORS
R. GREGORY BARTON Legal Department.
ROBERT A. DISTEFANO Information Technology.
JAMES H. GATELY Individual Investor Group.
KATHLEEN C. GUBANICH Human Resources.
IAN A. MACKINNON Fixed Income Group.
F. WILLIAM MCNABB, III Institutional Investor Group.
MICHAEL S. MILLER Planning and Development.
RALPH K. PACKARD Chief Financial Officer.
GEORGE U. SAUTER Core Management Group.
<PAGE>
ABOUT OUR COVER
Our cover art, depicting HMS Vanguard at sea, is a reproduction of Leading the
Way, a 1984 work created and copyrighted by noted naval artist Tom Freeman, of
Forest Hill, Maryland.
[SHIP]
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482-2600
All comparative mutual fund data are from Lipper Inc. or Morningstar, Inc.,
unless otherwise noted.
"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.
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 fund's shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.
Q140-01/27/2000
(C) 2000 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing
Corporation, Distributor.
