VANGUARD(R) NEW JERSEY
TAX-EXEMPT FUNDS
Semiannual
May 31, 2000
Vanguard New Jersey
Tax-Exempt Money
Market Fund
Vanguard New Jersey
Insured Long-Term
Tax-Exempt Fund
[SHIP GRAPHIC]
[A MEMBER OF THE VANGUARD GROUP LOGO]
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HAVE THE PRINCIPLES OF INVESTING CHANGED?
In a world of frenetic change in business, technology, and the financial
markets, it is natural to wonder whether the basic principles of investing have
changed.
We don't think so.
The most successful investors over the coming decade will be those who
began the new century with a fundamental understanding of risk and who had the
discipline to stick with long-term investment programs.
Certainly, investors today confront a challenging, even unprecedented,
environment. Valuations of market indexes are at or near historic highs. The
strength and duration of the bull market in U.S. stocks have inflated people's
expectations and diminished their recognition of the market's considerable
risks. And the incredible divergence in stock returns--many technology-related
stocks gained 100% or more in 1999, yet prices fell for more than half of all
stocks--has made some investors question the idea of diversification.
And then there is the Internet. Undeniably, it is a powerful medium for
communications and transacting business. For investors, the Internet is a vast
source of information about investments, and online trading has made it
inexpensive and convenient to trade stocks and invest in mutual funds.
However, new tools do not guarantee good workmanship. Information is not
the same as wisdom. Indeed, much of the information, opinion, and rumor that
swirl about financial markets each day amounts to "noise" of no lasting
significance. And the fact that rapid-fire trading is easy does not make it
beneficial. Frequent trading is almost always counterpro-ductive because
costs--even at low commission rates--and taxes detract from the returns that the
markets provide. Sadly, many investors jump into a "hot" mutual fund just in
time to see it cool off. Meanwhile, long-term fund investors are hurt by
speculative trading activity because they bear part of the costs involved in
accommodating purchases and redemptions.
Vanguard believes that intelligent investors should resist short-term
thinking and focus instead on a few time-tested principles:
o Invest for the long term. Pursuing your long-term investment goals is more
like a marathon than a sprint.
o Diversify your investments with holdings in stocks, bonds, and cash
investments. Remember that, at any moment, some part of a diversified
portfolio will lag other parts, and be wary of taking on more risk by
"piling onto" the best-performing part of your holdings. Today's leader
could well be tomorrow's laggard.
o Step back from the daily frenzy of the markets; focus on your overall asset
allocation.
o Capture as much of the market's return as possible by minimizing costs and
taxes. Costs and taxes diminish long-term returns while doing nothing to
reduce the risks you incur as an investor.
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CONTENTS
Report From The Chairma.........1 Fund Profiles................8
The Markets In Perspective......4 Performance Summaries.......11
Report From The Adviser.........6 Financial Statements........12
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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 5000(R)" and "Wilshire 4500" are trademarks of Wilshire Associates
Incorporated.
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REPORT FROM THE CHAIRMAN
[PHOTO JOHN J. BRENNAN]
Interest rates for most municipal bonds ratcheted higher during the six
months ended May 31, 2000--the first half of Vanguard New Jersey Tax-Exempt
Funds' fiscal year--and bond prices generally declined. In this environment,
municipal bonds earned positive total returns, as price declines only partially
offset the interest income earned during the period.
For the half-year, our Insured Long-Term Tax-Exempt Fund earned a total
return (capital change plus reinvested dividends) of 1.0%, and our Tax-Exempt
Money Market Fund earned 1.7%. As you can see in the adjacent table, the returns
of both funds topped those of their average peers.
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TOTAL RETURNS
SIX MONTHS ENDED
MAY 31, 2000
---------------------------------------------------------------
VANGUARD NEW JERSEY TAX-EXEMPT
MONEY MARKET FUND 1.7%
(SEC 7-Day Annualized Yield: 3.88%)
Average New Jersey Tax-Exempt
Money Market Fund* 1.6
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VANGUARD NEW JERSEY INSURED
LONG-TERM TAX-EXEMPT FUND 1.0%
Average New Jersey Municipal
Debt Fund* 0.0
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*Derived from data provided by Lipper Inc.
The total return of the Insured Long-Term Tax-Exempt Fund is based on a
decrease in net asset value from $11.19 per share on November 30, 1999, to
$11.00 per share on May 31, 2000, and is adjusted for dividends totaling $0.302
per share paid from net investment income. The Tax-Exempt Money Market Fund's
net asset value remained at $1.00 per share, as was expected but not guaranteed.
For New Jersey residents, income earned by our funds is exempt from federal
and New Jersey income taxes, but may be subject to local taxes and to the
alternative minimum tax.
On May 31, the Insured Long-Term Fund's yield stood at 5.51%, up from 5.07%
at the end of November 1999; the Money Market Fund's yield was 3.88%, up from
3.34% six months earlier. For taxpayers in the highest federal income tax
bracket (39.6%), the taxable equivalent yields at the end of the period were
about 9.1% for the Insured Long-Term Fund and about 6.4% for the Money Market
Fund.
THE PERIOD IN REVIEW
The U.S. economy expanded impressively during the six months ended May 31, but
the terrific pace of economic growth stoked fears of higher inflation--and,
thus, higher interest rates. These fears put pressure on the prices of both
stocks and bonds, making it a volatile six months for stocks, particularly for
technology shares, and a generally lackluster half-year for bonds.
The Federal Reserve Board continued its campaign to head off inflation by
hiking its target for short-term interest rates by a full percentage point
during the half-year. The yield of the 10-year U.S. Treasury note rose only
slightly, to 6.27% on May 31 from 6.19% six months earlier, and the yield of
3-month Treasury bills rose by 32 basis points (0.32 percentage point) to close
the period at 5.62%. However, the yield of the benchmark 30-year Treasury bond
fell from 6.29% on November 30, 1999, to 6.01% on May 31, 2000. This decline
resulted from the decreasing supply of
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long-term Treasury debt--a development that drove prices higher and yields lower
for the longest-term Treasuries.
Yields of high-grade, long-term municipal bonds ended the half-year at
5.91%, up a tiny bit from 5.87% when the period began. Yields on top-grade
(MIG-1) 3-month notes rose 35 basis points to 4.15% on May 31.
Relative to U.S. Treasury bonds, longer-term municipal bonds are extremely
attractive, particularly for investors in higher income tax brackets. On May 31,
the yield of a high-grade, long-term municipal bond was equal to about 98% of
the yield of the 30-year U.S. Treasury bond, whose interest is subject to
federal income tax. The spread between long-term Treasury bonds and munis was
unusually thin because of the heavy demand for--and, thus, lower yields
of--long-term Treasuries. For securities with maturities of 10 years, the yield
of municipal bonds was equal to about 85% of the yield of Treasuries, a
proportion in line with the long-term historical rate.
The U.S. stock market advanced during the six months, though as the period
progressed investors' favor shifted toward value-oriented stocks and away from
growth shares. The Wilshire 5000 Total Market Index, a measure of the entire
U.S. stock market, gained 2.4% for the half-year. Among large-capitalization
stocks, the returns of value stocks outpaced those of growth-oriented shares by
nearly 2 percentage points (3.6% for the Standard & Poor's 500/BARRA Value
Index; 1.9% for the S&P 500/BARRA Growth Index). The split was especially
evident from March through May, when large value stocks gained 10.0% and large
growth stocks slipped -0.4%.
PERFORMANCE OVERVIEW
Vanguard New Jersey Tax-Exempt Money Market Fund earned 1.7% for the six months,
just ahead of the 1.6% return of our average peer. Our margin over our average
competitor can be attributed to our much lower expenses, which give us a
significant and sustainable advantage over funds that invest in similar
securities.
The 1.0% total return earned by the Insured Long-Term Tax-Exempt Fund
during the half-year exceeded the return achieved by our average peer and
matched that of the Lehman Brothers Municipal Bond Index, which exists outside
the real world of operating expenses and transaction costs.
Of course, a six-month return tells only part of the story of a bond fund's
performance. It's important to note that semiannual returns for bond funds
account for only half of the year's interest income, while prices fully and
immediately reflect movements in interest rates--rising when rates fall and
falling when rates rise. For perspective, it's important to consider a full
year's interest income when evaluating a bond fund. During the 12 months ended
May 31, 2000, our Insured Long-Term Tax-Exempt Fund recorded a negative total
return of -1.4%, consisting of an income return of 5.1% and a price decline of
-6.5%.
Also, keep in mind that rising interest rates, which cause bond prices to
fall, are not entirely bad news for fixed income investors. Money market yields
and returns quickly adjust higher. And for long-term bonds, a rise in interest
rates causes an immediate price decline, but the long-term effect can be
beneficial because there is more income to reinvest at higher yields.
Conversely, when interest rates drop, bond prices rise immediately, but over the
long haul, lower rates diminish the income earned on reinvested dividends.
Though bond prices can swing dramatically, over the long run it is interest
income that accounts for virtually all of a bond fund's total return. As such,
municipal bonds that now offer a yield of about 5.5% can provide a solid
long-term return, particularly if inflation remains at relatively low levels.
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A key ingredient in our success is our significant cost advantage over
similar funds. Our funds have annualized expense ratios (expenses as a
percentage of average net assets) of about 0.20%, compared with the 1.01%
charged by the average long-term New Jersey tax-exempt fund and the 0.66%
charged by the average New Jersey tax-exempt money market fund. For our
shareholders, the benefits of low costs are twofold. Our cost advantage provides
us with a head start in our quest to outperform our competitors. Lower costs
also allow our investment adviser, Vanguard Fixed Income Group, to select bonds
with higher credit quality than those chosen by our peers, without a sacrifice
in net yields.
For Vanguard New Jersey Insured Long-Term Tax-Exempt Fund, our adviser
invests primarily in bonds that carry private insurance guaranteeing the payment
of principal and interest in the event that a bond issuer defaults on its debt
obligations. Though these securities offer slightly lower gross yields than
noninsured bonds, our low costs historically have more than made up the
difference, allowing our fund to provide net returns that are fully competitive
with those of lower-quality municipal bond portfolios.
IN SUMMARY
The argument for holding bonds as well as stocks in a balanced portfolio is an
enduring one that is not based on past returns or projections of future returns.
Fixed income investments add to a portfolio's diversification, and interest
income is a valuable and durable component of total return that, when compounded
over long periods, plays an important role in accumulating wealth. For New
Jersey residents, the triple tax benefit of a New Jersey municipal bond fund can
be especially valuable.
History has taught us that investors who maintain balanced portfolios of
well-diversified stock funds, bond funds, and money market funds generally find
it easier to maintain their equilibrium in turbulent times. We urge you to base
your investment plans on your own goals, time horizon, and risk tolerance--and
then to stick with those plans over the long haul.
/S/
John J. Brennan
Chairman and Chief Executive Officer
June 14, 2000
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IN MEMORY
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It is with great sadness that I report the death of John C. Sawhill, an
independent trustee of the fund and a member of The Vanguard Group's board of
directors since 1991. John, an economist who was president and chief executive
officer of The Nature Conservancy, died on May 18 at age 63. He was a senior
lecturer at the Harvard Business School and had formerly served as president of
New York University and as deputy secretary of the U.S. Department of Energy
under President Jimmy Carter. John was a remarkable man who was full of energy,
vigor, and life. His experience and wisdom added a great deal to Vanguard, and
his death is a blow to everyone who knew and loved him. Though John's work on
behalf of our funds was often carried on behind the scenes, he was a dedicated
advocate for the best interests of our shareholders. He will be missed.
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THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED MAY 31, 2000
Strong crosscurrents pushed and tugged at financial markets during the six
months ended May 31, 2000. Positive influences included very strong economic
growth and rising corporate profits. Negative factors included tighter monetary
policy, higher inflation, and concerns about stock valuations.
Interest rates rose in most segments of the bond market, and bond prices
slipped. Stock prices rose slightly, on balance, although wide day-to-day price
swings were frequent.
Uncertainty in both the bond and stock markets centered on the surprising
performance of the U.S. economy, which grew at a torrid 7.3% pace in the final
three months of 1999 and at a still-robust 5.4% during the first quarter of
2000. With U.S. unemployment at around 4.0% of the workforce, the Federal
Reserve Board continued to be concerned that inflation would worsen unless the
economic expansion slowed. The Fed raised short-term interest rates by 0.25
percentage point in February and again in March, before boosting rates by 0.50
percentage point in mid-May. These boosts, following three
quarter-percentage-point increases in 1999, took the Fed's target for short-term
rates to 6.5%. By the end of May, some signs of slowing had emerged in the
economy, although it was not certain that the Fed had finished applying the
brakes.
Evidence on inflation was ambiguous. The Consumer Price Index increased
1.8% and 3.1%, respectively, for the six- and twelve-month periods ended May 31,
but much of the increase was due to higher energy and food prices. Core
inflation, which excludes those sectors, was up a less-scary 2.4% during the
twelve months ended May 31.
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TOTAL RETURNS
PERIODS ENDED MAY 31, 2000
-----------------------------------
6 MONTHS 1 YEAR 5 YEARS*
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STOCKS
S&P 500 Index 2.9% 10.5% 23.8%
Russell 2000 Index 5.5 9.9 13.5
Wilshire 5000 Index 2.4 10.7 22.3
MSCI EAFE Index 0.7 17.4 10.4
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BONDS
Lehman Aggregate Bond Index 1.4% 2.1% 6.0%
Lehman 10 Year Municipal Bond Index 0.7 -0.2 5.3
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 2.7 5.2 5.2
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OTHER
Consumer Price Index 1.8% 3.1% 2.4%
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*Annualized.
U.S. STOCK MARKETS
Optimism about long-term prospects for technology, media, and telecommunications
companies dominated the equity markets through the first three months of the
period. But sentiment shifted suddenly in mid-March, sending the tech and
telecom groups sharply lower. The tech-heavy Nasdaq Composite Index, for
example, registered a 41.1% return from November 30 through February 29, only to
give back most of the gains over the next three months. End result: a 2.4%
return for the six months ended May 31.
The overall stock market, as measured by the Wilshire 5000 Index, also
returned 2.4%. Value stocks, those characterized by above-average dividend
yields and below-average price/earnings and price/book value ratios, enjoyed a
resurgence beginning in mid-March.
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For the full six months, the value components of both the large-capitalization
S&P 500 Index and the small-cap Russell 2000 Index outperformed the indexes'
growth components.
Within the S&P 500, the half-year's best return was the 48% gain recorded
by "other energy" stocks, including oil-drilling and services companies that
benefited from a continuing rise in oil prices. The producer-durables sector
gained 18%, largely because of big gains for a number of manufacturers of
telecommunications gear and semiconductor testing and fabrication equipment.
Technology stocks, which now account for about one-quarter of the total stock
market's value, gained about 12% for the six months.
Poor performers included the utilities sector (-14% return), which was hurt
by downturns in several large telephone stocks, and many consumer staples (-9%)
and consumer-discretionary (-6%) companies. Prices fell steeply for a number of
high-profile retailers, beverage and food makers, tobacco companies, and
entertainment enterprises.
U.S. BOND MARKETS
The Federal Reserve's influence on interest rates is strongest for short-term
securities. Over the six months, the Fed pushed up the rate charged on overnight
loans between banks by 1 percentage point to 6.5%. Yields of 3-month U.S.
Treasury bills rose only one-third as far (0.32 percentage point, or 32 basis
points), to 5.62%. And long-term Treasury yields moved even less. The 10-year
Treasury note rose just 8 basis points to 6.27% as of May 31, and yields fell
for very long-term Treasury bonds due to a cutback in issuance of new bonds. As
a result of the shrinking supply of long-term bonds, the yield of the 30-year
Treasury bond declined 28 basis points--from 6.29% to 6.01%--during the
half-year.
Because short-term rates moved higher while long-term rates declined, there
was an unusual "inversion" in the yield curve. Instead of sloping upward--with
yields increasing along with the maturity of Treasury securities--the curve
sloped down. The 6.01% yield of 30-year Treasuries on May 31 was 70 basis points
below the 6.71% yield on 3-year Treasury notes.
Corporate and municipal bonds did not perform as well as Treasury
securities, and the yield curve for these sectors remained positive--yields of
long-term bonds remained higher than those of short-term securities. The Lehman
Aggregate Bond Index, a proxy for the overall taxable bond market, returned
1.4%, as a price decline of 2% offset most of the 3.4% income provided by bonds
during the half-year.
INTERNATIONAL STOCK MARKETS
A stronger U.S. dollar and weak Asian markets made the half-year a lackluster
one for U.S. investors in foreign stocks. Improving economic growth in most of
the world helped a number of markets in Europe, Asia, and Latin America to
produce good gains in their local currencies. However, the U.S. dollar increased
in value versus most currencies, significantly reducing the returns received by
dollar-based investors. (Conversely, when the dollar falls in value, returns
from abroad are enhanced for U.S. investors.)
The overall return in dollars from developed foreign markets was a scant
0.7%, as measured by the Morgan Stanley Capital International Europe,
Australasia, Far East (EAFE) Index. However, in local currencies, the EAFE Index
return for the six months was a very respectable 7.8%.
In Europe, where stocks benefited from a continuance of corporate
acquisitions, an average 12.8% gain in local-currency terms was reduced to 4.7%
for U.S. investors because of the dollar's strength. Stocks in the Pacific
region, which is dominated by Japan, returned -7.0% in dollars, as a -2.0%
return in local-currency terms was further diminished by the dollar's gains. The
Select Emerging Markets Free Index returned -2.8% in U.S. dollars.
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REPORT FROM THE ADVISER
The economy continued its robust expansion during the six months ended May 31,
2000, the first half of the fiscal year for Vanguard New Jersey Tax-Exempt
Funds. The unemployment rate fell as low as 3.9% and the economy grew at an
annual rate of more than 5% during the half-year.
A fear of inflation roiled the markets, as investors focused on rising
short-term rates. On three occasions the Federal Reserve Board increased the
federal funds rate to slow economic growth. In turn, this led to a noticeable
increase in stock market volatility. Throughout the tumult, the tax-exempt bond
market remained relatively calm. A typical long-term, high-quality municipal
bond started the period with a 5.87% yield and ended it with a barely changed
yield of 5.91%. Importantly, the transition from 1999 to 2000 went smoothly,
without negative effects for either the issuers of municipal bonds or the
financial markets.
Although other markets were volatile during the half-year, tax-exempt bonds
were a solid, if unglamorous, investment, and your funds continued to dutifully
turn out consistent tax-exempt dividends. Often the municipal securities market
lacks the dramatic allure of the stock market. However, tax-exempt securities
are a reliable workhorse for the total return of an investor's portfolio.
The Tax-Exempt Money Market Fund earned a tax-free return of 1.7% during
the half-year, while the Insured Long-Term Tax-Exempt Fund provided a 1.0%
return. Each fund outpaced the average return for its peer group of funds.
LOW DEMAND, LOW SUPPLY
During the half-year, few new investors entered the municipal bond market.
Indeed, most tax-exempt funds experienced net outflows of cash, as investors
redeemed shares to finance other purchases or to pay federal taxes. During this
time, the low demand for municipal bonds improved their value relative to
taxable bonds. As of May 31, a highly rated, long-term state general obligation
bond provided 98% of the income of a similar U.S. Treasury security, even though
interest paid on the municipal bond is generally exempt from federal income tax,
while interest on Treasuries is not. Investors in the top (39.6%) federal income
tax bracket, therefore, received 2.3 percentage points in additional yield,
after taxes, from high-quality, long-term muni bonds than from similar
Treasuries. Such attractive relative yields have rarely endured.
The supply of newly issued tax-exempt bonds so far in 2000 is a staggering
30% lower than last year. The stronger economy has boosted the finances of local
governments, so fewer issuers need to tap the credit markets. The drop in new
municipal bond issuance has supported prices for existing tax-exempt securities,
especially in states with relatively high taxes. However, the effects of reduced
supply have largely been offset by tepid demand for municipal bonds. At some
point, we can expect that muni bond prices will rise in relation to those of
taxable bonds and that the spread between yields of municipals and taxable bonds
will widen.
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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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MATURITY SPREADS NARROW, CREDIT SPREADS WIDEN
For municipal bonds, as for other fixed income investments, the spread in yields
between issues with short- and long-term maturities has narrowed. In the
tax-exempt market, the gap in yields between a 1-year bond and a 30-year bond is
only 1.4 percentage points, down from about 2.0 percentage points. In the
Treasury bond market, short-term yields are currently higher than yields for
long-term bonds. This is unusual, because investors typically require higher
yields to lend money for longer periods. The anomaly reflects the Federal
Reserve Board's raising of short-term rates and the fall in supply of long-term
Treasury bonds. Even if the Fed keeps raising interest rates, we expect yields
for tax-exempt bonds to maintain their usual upward-sloping curve, with yields
rising as maturities increase.
During the half-year, the spread between yields of high-quality municipal
bonds and yields of lower-quality bonds widened. This meant that lower-quality
bond prices lagged those of high-quality bonds and that investors were demanding
higher yields to take on higher credit risk. During the period, the extra income
paid by bonds with the lowest investment-grade rating (Baa/BBB) versus those
with the highest quality (AAA) increased from 0.50 to 0.75 percentage point.
This reversed the trend of recent years, when credit spreads narrowed to
historical lows as investors stretched for incrementally higher returns by
buying lower-quality bonds.
The trend toward wider credit-quality spreads began with bonds used to
finance hospitals and other health care facilities. Most health care providers
have credit ratings in the middle or lower tiers of investment-grade ratings.
Rising cost pressures and reductions in expense reimbursement from health
insurers have taken a toll. Investors are cautious and have demanded higher
yields to hold bonds from these issuers, a trend that has spilled over into all
lower-quality sectors. As you have come to expect, Vanguard has maintained a
steady commitment to higher-quality issues. We have sought to provide superior
income by keeping expenses low, so that more of the funds' gross income flows to
you, rather than by taking on increased credit risk. The market's recent focus
on credit quality has helped our performance relative to peer funds.
THE TAX-EXEMPT MONEY MARKET FUND
The yield on the 1-year U.S. Treasury bill rose 49 basis points to finish the
period at 6.17%. This rise was a direct result of the earlier-mentioned rate
hikes by the Fed. Yields on 1-year tax-exempt money market instruments rose 72
basis points during the six months. The benchmark 1-year MIG-1 tax-exempt note
closed the period with a yield of 4.59%. Short-term municipal securities became
more attractive relative to Treasuries: The ratio of yields of 1-year MIG-1
notes to those of 1-year Treasuries increased during the six months from 68.1%
to 74.4%. Contributing to the rise in yields for short-term municipals was a
surge in redemptions from tax-exempt money market funds during tax season, as
shareholders wrote checks to pay their federal tax liabilities.
Ian A. MacKinnon, Managing Director
Christopher M. Ryon, Principal
Pamela Wisehaupt Tynan, Principal
Christopher W. Alwine, Principal
Kathryn Allen, Principal
Vanguard Fixed Income Group
June 13, 2000
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FUND PROFILE
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND
This Profile provides a snapshot of the fund's characteristics as of May 31,
2000. Key elements of this Profile are defined on page 9.
DISTRIBUTION BY CREDIT QUALITY
FINANCIAL ATTRIBUTES (% OF PORTFOLIO)
----------------------------- -----------------------------------
Yield 3.9% MIG-1/SP-1+ 71.9%
Average Maturity 47 days A-1/P-1 25.6
Average Quality MIG-1 AAA/AA 2.5
Expense Ratio 0.18%* A 0.0
-----------------------------------
Total 100.0%
*Annualized.
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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.
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<PAGE>
FUND PROFILE
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND
This Profile provides a snapshot of the fund's characteristics as of May 31,
2000, compared where appropriate to an unmanaged index. Key elements of this
Profile are defined on page 9.
FINANCIAL ATTRIBUTES
---------------------------------------------------
NEW JERSEY INSURED LEHMAN
LONG-TERM INDEX*
---------------------------------------------------
Number of Issues 234 38,998
Yield 5.5% --
Yield to Maturity 5.5% --
Average Coupon 5.2% 5.5%
Average Maturity 12.5 years 13.4 years
Average Quality AAA AA+
Average Duration 8.1 years 7.5 years
Expense Ratio 0.18%** --
Cash Reserves 0.8% --
*Lehman Municipal Bond Index.
**Annualized.
INVESTMENT FOCUS
---------------------------------------------------
AVERAGE MATURITY LONG
CREDIT QUALITY HIGH
VOLATILITY MEASURES
---------------------------------------------------
NEW JERSEY INSURED LEHMAN
LONG-TERM INDEX*
---------------------------------------------------
R-Squared 0.98 1.00
Beta 1.09 1.00
*Lehman Municipal Bond Index.
DISTRIBUTION BY CREDIT QUALITY
(% OF PORTFOLIO)
---------------------------------------------------
AAA 95.5%
AA 4.5
A 0.0
BBB 0.0
BB 0.0
B 0.0
---------------------------------------------------
Total 100.0%
DISTRIBUTION BY MATURITY
(% OF PORTFOLIO)
---------------------------------------------------
Under 1 Year 6.2%
1-5 Years 12.7
5-10 Years 19.1
10-20 Years 43.3
20-30 Years 18.7
Over 30 Years 0.0
---------------------------------------------------
Total 100.0%
10
<PAGE>
PERFORMANCE SUMMARIES
All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the funds. 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. Note that income returns can fluctuate, as can the share
price of the New Jersey Insured Long-Term Tax-Exempt Fund. An investor's shares
in this fund, when redeemed, could be worth more or less than their original
cost.
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND
TOTAL INVESTMENT RETURNS: FEBRUARY 3, 1988-MAY 31, 2000
--------------------------------------------------------------------------------
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
2000** 0.0 1.7 1.7 1.6
--------------------------------------------------------------------------------
SEC 7-Day Annualized Yield (5/31/2000): 3.88%
--------------------------------------------------------------------------------
*Average New Jersey Tax-Exempt Money Market Fund; derived from data provided by
Lipper Inc.
**Six months ended May 31, 2000.
See Financial Highlights table on page 23 for dividend information for the past
five years.
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND
TOTAL INVESTMENT RETURNS: FEBRUARY 3, 1988-MAY 31, 2000
--------------------------------------------------------------------------------
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
2000** -1.7 2.7 1.0 1.0
--------------------------------------------------------------------------------
*Lehman Municipal Bond Index.
**Six months ended May 31, 2000.
See Financial Highlights table on page 24 for dividend and capital gains
information for the past five years.
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED MARCH 31, 2000*
--------------------------------------------------------------------------------
INCEPTION 10 YEARS
--------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
--------------------------------------------------------------------------------
New Jersey Tax-Exempt
Money Market Fund 2/3/1988 3.06% 3.22% 0.00% 3.35% 3.35%
New Jersey Insured Long-Term
Tax-Exempt Fund 2/3/1988 -0.12 5.55 1.30 5.81 7.11
--------------------------------------------------------------------------------
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
11
<PAGE>
FINANCIAL STATEMENTS
MAY 31, 2000 (UNAUDITED)
STATEMENT OF NET ASSETS
This Statement provides a detailed list of each fund's municipal bond holdings,
including each security's market value on the last day of the reporting period
and information on credit enhancements (insurance or letters of credit).
Securities are grouped and subtotaled according to their insured or noninsured
status. Other assets are added to, and liabilities are subtracted from, the
value of Total Municipal Bonds to calculate the fund's Net Assets. Finally, Net
Assets are divided by the outstanding shares of the fund to arrive at its share
price, or Net Asset Value (NAV) Per Share.
At the end of the Statement of Net Assets, you will find a table displaying
the composition of the fund's net assets on both a dollar and per-share basis.
Undistributed Net Investment Income is usually zero because the fund distributes
its net income to shareholders as a dividend each day. Any realized gains must
be distributed annually, so the bulk of net assets consists of Paid in Capital
(money invested by shareholders). The balance shown for Accumulated Net Realized
Gains usually approximates the amount available to distribute to shareholders as
taxable capital gains as of the statement date, but may differ because certain
investments or transactions may be treated differently for financial statement
and tax purposes. Any Accumulated Net Realized Losses, and any cumulative excess
of distributions over net realized gains, will appear as negative balances.
Unrealized Appreciation (Depreciation) is the difference between the value of
the fund's investments and their cost, and reflects the gains (losses) that
would be realized if the fund were to sell all of its investments at their
statement-date values.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
-----------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.0%)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Avalon NJ BAN 5.50% 5/25/2001 8,150 8,194
Bernards Township NJ BAN 4.00% 9/7/2000 4,560 4,565
Burlington County NJ BAN 4.25% 11/3/2000 8,930 8,946
Burlington County NJ BAN 4.65% 3/9/2001 4,545 4,563
Cherry Hill Township NJ BAN 4.25% 10/12/2000 26,186 26,247
Cherry Hill Township NJ TAN 5.125% 7/15/2000 1,110 1,112
Essex County NJ Improvement Auth. Pooled Govt. Loan VRDO 3.65% 6/7/2000 LOC 40,700 40,700
Essex County NJ Improvement Auth. VRDO
(County Asset Sale Project) 3.85% 6/7/2000 (2) 10,350 10,350
Fair Lawn NJ BAN 4.50% 12/15/2000 8,564 8,589
Freehold NJ Regional High School GO 5.00% 3/1/2001 2,640 2,657
Freehold NJ Regional High School GO TOB VRDO 4.15% 9/1/2000 (3) + 9,690 9,690
Gloucester County NJ PCR VRDO (Mobil Oil Refining Corp. Project) 3.65% 6/7/2000 20,200 20,200
Mendham NJ Board of Educ. BAN 4.25% 7/18/2000 6,791 6,793
Mercer County NJ BAN 4.30% 12/14/2000 41,953 42,058
Middlesex County NJ TAN 4.60% 2/22/2001 19,000 19,076
Middlesex County NJ Util. Auth. Sewer Rev. 6.50% 3/15/2001 (3)(Prere.) 6,300 6,538
Monmouth County NJ Improvement Auth. Rev. VRDO
(Pooled Govt. Loan Program) 3.90% 6/7/2000 LOC 37,765 37,765
Montgomery Township NJ BAN 4.75% 2/7/2001 4,405 4,423
Moorestown Township NJ BAN 5.50% 6/1/2001 4,000 4,030
Morris County NJ General Improvement GO 4.50% 8/15/2000 2,000 2,003
Morris County NJ GO BAN 4.25% 9/22/2000 41,419 41,506
New Jersey Building Auth. Rev. TOB VRDO 4.26% 6/8/2000 (1) + 10,000 10,000
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 3.80% 7/10/2000 LOC 7,800 7,800
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 4.15% 7/10/2000 LOC 13,500 13,500
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 4.45% 7/12/2000 LOC 3,200 3,200
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 4.50% 9/11/2000 LOC 11,200 11,200
New Jersey Econ. Dev. Auth. CP
(Chambers Cogeneration Limited Partnership Project) 4.55% 9/7/2000 LOC 11,000 11,000
New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 4.45% 7/12/2000 LOC 4,100 4,100
New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 4.55% 9/7/2000 LOC 25,900 25,900
New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 5.45% 6/12/2000 LOC 4,100 4,100
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(New Jersey Natural Gas Project) 4.05% 6/7/2000 (2) 8,100 8,100
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(New Jersey Natural Gas Project) 4.50% 6/2/2000 (2) LOC 3,400 3,400
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO (NUI Corp.)4.25% 6/2/2000 (2) 34,500 34,500
New Jersey Econ. Dev. Auth. PCR VRDO (Exxon Project) 3.75% 6/2/2000 12,000 12,000
New Jersey Econ. Dev. Auth. PCR VRDO
(Public Service Electric & Gas Co.) 3.65% 6/7/2000 (1) 21,420 21,420
New Jersey Econ. Dev. Auth. Rev. TOB VRDO
(New Jersey Transit Corp. Light Rail Transit System Project) 4.15% 6/8/2000 (4) + 7,465 7,465
New Jersey Econ. Dev. Auth. Rev. VRDO (Lawrence School Project) 4.00% 6/2/2000 24,100 24,100
New Jersey Econ. Dev. Auth. Rev. VRDO
(United States Golf Association) 4.20% 6/8/2000 LOC 2,400 2,400
New Jersey Econ. Dev. Auth. Water Fac. TOB VRDO
(New Jersey American Water Co. Project) 4.23% 6/8/2000 (3) + 4,850 4,850
New Jersey Econ. Dev. Auth. Water Fac. VRDO
(Elizabethtown Water Co. Project) 3.90% 6/7/2000 (2) 8,600 8,600
New Jersey Econ. Dev. Auth. Water Fac. VRDO
(Elizabethtown Water Co. Project) 4.00% 6/7/2000 (2) 22,500 22,500
New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co.) 4.50% 6/2/2000 (2) 200 200
New Jersey Educ. Fac. Auth. Rev. (Higher Educ. Technology) 4.25% 9/1/2000 3,000 3,006
New Jersey Educ. Fac. Auth. Rev. VRDO (College of New Jersey) 4.10% 6/8/2000 (2) 29,500 29,500
New Jersey Health Care Fac. Finance Auth. Rev.
(Kimball Medical Center) 8.00% 7/1/2000 (Prere.) 4,000 4,091
New Jersey Health Care Fac. Finance Auth. Rev.
(Meridian Health System) 4.00% 7/1/2000 (4) 3,010 3,011
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Elizabeth Hosp.) 8.25% 7/1/2000 (Prere.) 9,710 9,938
New Jersey Health Care Fac. Finance Auth. Rev. VRDO
(Holy Name Hosp.) 4.05% 6/8/2000 LOC 8,200 8,200
New Jersey Health Care Fac. Finance Auth. Rev. VRDO
(Hosp. Capital Asset Pooled Program) 4.05% 6/8/2000 LOC 65,100 65,100
New Jersey Health Care Fac. Finance Auth. Rev. VRDO
(Princeton Medical Center) 4.05% 6/8/2000 LOC 5,000 5,000
New Jersey Sports & Exposition Auth. Rev. VRDO 4.25% 6/8/2000 (1) 35,135 35,135
New Jersey TRAN CP 4.00% 6/6/2000 10,000 10,000
New Jersey TRAN CP 4.15% 6/15/2000 5,000 5,000
New Jersey TRAN CP 4.45% 6/15/2000 20,000 20,000
New Jersey Transp. Corp. COP TOB VRDO 4.18% 6/8/2000 + 4,995 4,995
New Jersey Transp. Trust Fund Auth. Rev. 4.25% 6/15/2000 20,800 20,808
New Jersey Transp. Trust Fund Auth. Rev. 4.50% 6/15/2000 (ETM) 8,500 8,504
New Jersey Transp. Trust Fund Auth. Rev. 5.00% 6/15/2000 19,115 19,128
New Jersey Transp. Trust Fund Auth. Rev. 6.00% 6/15/2000 5,000 5,005
New Jersey Transp. Trust Fund Auth. Rev. TOB VRDO 4.15% 6/8/2000 (1) + 14,515 14,515
New Jersey Transp. Trust Fund Auth. Rev. TOB VRDO 4.15% 6/8/2000 (4) + 19,200 19,200
New Jersey Transp. Trust Fund Auth. Rev. TOB VRDO 4.18% 6/8/2000 + 14,495 14,495
New Jersey Turnpike Auth. Rev. TOB VRDO 4.15% 6/8/2000 (1) + 29,340 29,340
New Jersey Turnpike Auth. Rev. TOB VRDO 4.20% 6/8/2000 (1) + 4,995 4,995
New Jersey Turnpike Auth. Rev. VRDO 3.80% 6/7/2000 (3) LOC 151,650 151,650
Nutley NJ BAN 4.00% 7/28/2000 4,840 4,844
Ocean City NJ BAN 4.35% 8/25/2000 8,000 8,005
Parsippany-Troy Hills Township NJ BAN 4.35% 12/8/2000 7,000 7,018
Pequannock Township NJ BAN 4.35% 11/3/2000 6,170 6,183
Port Auth. of New York & New Jersey CP 3.90% 6/13/2000 15,300 15,300
Port Auth. of New York & New Jersey CP 3.95% 6/8/2000 12,300 12,300
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Port Auth. of New York & New Jersey CP 4.15% 6/13/2000 6,000 6,000
Port Auth. of New York & New Jersey CP 4.37% 7/11/2000 6,065 6,065
Port Auth. of New York & New Jersey CP 4.70% 7/13/2000 11,140 11,140
Port Auth. of New York & New Jersey CP 5.40% 6/8/2000 8,960 8,960
Port Auth. of New York & New Jersey CP 5.60% 6/13/2000 9,220 9,220
Princeton Township NJ BAN 4.25% 12/15/2000 5,700 5,712
Princeton Univ. NJ CP 4.15% 6/9/2000 11,800 11,800
Princeton Univ. NJ CP 4.30% 7/19/2000 20,500 20,500
Princeton Univ. NJ CP 4.40% 7/12/2000 14,600 14,600
Princeton Univ. NJ CP 4.45% 7/18/2000 4,000 4,000
Rockaway Township NJ BAN 4.00% 7/27/2000 8,385 8,392
Saddle Brook Township NJ BAN 4.75% 2/8/2001 3,454 3,467
Salem County NJ Finance Auth. PCR CP (PECO Project) 5.45% 6/12/2000 LOC 19,000 19,000
Salem County NJ Finance Auth. PCR VRDO
(Atlantic City Electric Co.) 3.90% 6/7/2000 (1) 5,900 5,900
Salem County NJ Finance Auth. PCR VRDO
(Public Service Electric & Gas) 4.20% 6/7/2000 (1) 6,500 6,500
Scotch Plains Township NJ BAN 3.75% 6/9/2000 4,841 4,841
Somerset County NJ Industrial Pollution Control Finance Auth.
PCR VRDO (American Cyanamid Co. Project) 3.80% 6/7/2000 11,700 11,700
Union County NJ PCR VRDO (Exxon Project) 3.50% 6/2/2000 16,200 16,200
Union County NJ PCR VRDO (Exxon Project) 4.00% 6/2/2000 24,000 24,000
Vineland NJ BAN 5.50% 1/19/2001 18,500 18,574
West Orange NJ BAN 4.00% 6/22/2000 5,163 5,165
OUTSIDE NEW JERSEY:
Puerto Rico Govt. Dev. Bank VRDO 3.40% 6/7/2000 (1) 21,585 21,585
Puerto Rico Highway & Transp. Auth. TOB VRDO 3.90% 6/8/2000 (1) + 7,740 7,740
Puerto Rico Highway & Transp. Auth. TOB VRDO 3.90% 6/8/2000 (4) + 5.305 5,305
Puerto Rico Highway & Transp. Auth. VRDO 3.50% 6/7/2000 (2) 3,300 3,300
Puerto Rico Industrial Medical & Environmental Fac. Fin. Auth.
PCR PUT (Abbott Laboratories Project) 4.00% 3/1/2001 + 8,750 8,750
Puerto Rico Infrastructure Finance Auth. Special Tax Rev.TOB VRDO 3.90% 6/8/2000 (2) + 6,515 6,515
Puerto Rico TRAN 4.50% 7/30/2000 10,000 10,012
-----------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $1,379,549) 1,379,549
-----------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.0%)
-----------------------------------------------------------------------------------------------------------------------------
Other Assets--Note B 22,624
Liabilities (8,970)
-------
13,654
-----------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,393,198,366 outstanding $.001 par value shares of beneficial interest
(unlimited authorization) $1,393,203
=============================================================================================================================
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 may be sold in transactions exempt from registration, normally to
qualified institutional buyers. At May 31, 2000, the value of these securities
was $147,855,000, representing 10.6% of net assets.
For key to abbreviations and other references, see page 20.
</TABLE>
--------------------------------------------------------------------------------
AT MAY 31, 2000, NET ASSETS CONSISTED OF:
--------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
--------------------------------------------------------------------------------
Paid in Capital $1,393,214 $1.00
Undistributed Net Investment Income -- --
Accumulated Net Realized Losses (11) --
Unrealized Appreciation -- --
--------------------------------------------------------------------------------
NET ASSETS $1,393,203 $1.00
================================================================================
14
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
-----------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (99.2%)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ISSUER INSURED (85.5%)
Atlantic City NJ Board of Educ. GO 6.00% 12/1/2012 (4) 4,600 4,806
Atlantic City NJ Board of Educ. GO 6.10% 12/1/2015 (4) 2,000 2,095
Atlantic County NJ COP 6.00% 3/1/2014 (3) 3,685 3,814
Atlantic County NJ COP 6.00% 3/1/2015 (3) 1,480 1,527
Atlantic County NJ COP 7.40% 3/1/2010 (3) 1,755 2,009
Atlantic County NJ COP 7.40% 3/1/2011 (3) 4,025 4,626
Atlantic County NJ Util. Auth. Sewer Rev. 5.85% 1/15/2015 (2) 3,000 3,017
Bergen County NJ Util. Auth. Water PCR 5.50% 6/15/2002 (3)(Prere.) 5,000 5,053
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2004 (3) 8,345 6,690
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2005 (3) 18,545 14,077
Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2006 (3) 18,545 13,309
Cape May County NJ Muni. Util. Auth. Rev. 5.75% 1/1/2016 (1) 14,675 14,659
Cape May County NJ PCR (Atlantic City Electric) 6.80% 3/1/2021 (1) 15,400 17,159
Cherry Hill Township NJ School Dist. 4.70% 2/15/2012 (4) 2,000 1,829
Cherry Hill Township NJ School Dist. 4.70% 2/15/2013 (4) 2,125 1,923
Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.40% 1/1/2013 (3) 6,750 6,605
Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.50% 1/1/2026 (3) 31,385 29,461
Delaware River Port Auth. Pennsylvania & New Jersey Rev.
(Port Dist. Project) 5.625% 1/1/2026 (4) 5,000 4,807
Delaware River Port Auth. Pennsylvania & New Jersey Rev.
(Port Dist. Project) 5.75% 1/1/2022 (4) 10,000 9,818
Elizabeth City NJ GO 6.60% 8/1/2001 (1)(Prere.) 8,525 8,863
Elizabeth City NJ GO 6.60% 8/1/2006 (1) 225 234
Essex County NJ Improvement Auth. Lease Rev. 5.50% 12/1/2008 (2) 2,560 2,589
Essex County NJ Improvement Auth. Lease Rev. 5.50% 12/1/2013 (2) 5,150 5,111
Essex County NJ Improvement Auth. Lease Rev. 5.75% 10/1/2014 (3) 3,390 3,411
Essex County NJ Improvement Auth. Lease Rev. 5.75% 10/1/2015 (3) 5,090 5,101
Essex County NJ Util. Auth. Solid Waste Rev. 0.00% 4/1/2010 (4) 1,000 576
Essex County NJ Util. Auth. Solid Waste Rev. 4.875% 4/1/2018 (4) 4,000 3,495
Essex County NJ Util. Auth. Solid Waste Rev. 5.00% 4/1/2022 (4) 3,500 3,042
Essex County NJ Util. Auth. Solid Waste Rev. 5.60% 4/1/2006 (4) 2,200 2,279
Evesham NJ Muni. Util. Auth. Rev. 7.00% 7/1/2010 (1) 1,700 1,703
Evesham NJ Muni. Util. Auth. Rev. 7.00% 7/1/2015 (1) 450 451
Gloucester Township NJ GO 5.75% 7/15/2010 (2) 2,880 2,964
Gloucester Township NJ Muni. Util. Auth. Rev. 5.65% 3/1/2018 (2) 2,755 2,721
Hamilton Township NJ Muni. Util. Auth. Rev. 6.00% 8/15/2002 (3)(Prere.) 1,000 1,040
Higher Educ. Assistance Auth. of New Jersey Student Loan Rev. 6.00% 6/1/2013 (1) + 3,000 3,024
Higher Educ. Assistance Auth. of New Jersey Student Loan Rev. 6.00% 6/1/2015 (1) + 5,575 5,588
Higher Educ. Assistance Auth. of New Jersey Student Loan Rev. 6.10% 6/1/2016 (1) + 3,000 3,020
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2003 (1) 3,800 3,227
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2004 (1) 3,750 3,018
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2005 (1) 3,805 2,900
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2006 (1) 2,000 1,441
Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 6.25% 8/1/2013 (1) ++ 9,590 10,247
Hudson County NJ Correctional Fac. COP 6.50% 12/1/2011 (1) 9,000 9,313
Hudson County NJ GO 6.55% 7/1/2007 (3) 1,300 1,394
Hudson County NJ GO 6.55% 7/1/2009 (3) 635 687
Irvington Township NJ GO 0.00% 8/1/2007 (1) 1,000 680
Irvington Township NJ GO 0.00% 8/1/2009 (1) 2,580 1,559
Irvington Township NJ GO 0.00% 8/1/2010 (1) 2,080 1,184
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2011 (3) 2,625 2,527
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2019 (3) 3,000 2,673
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2021 (3) 2,500 2,199
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2022 (3) 4,000 3,503
Lenape NJ Regional High School Dist. GO 5.00% 4/1/2023 (3) 4,000 3,492
Middlesex County NJ COP
(Civil Square III Redevelopment Associates) 5.125% 6/15/2016 (1) 3,805 3,509
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Middlesex County NJ Import Auth. Util. Systems Rev.
(Perth Amboy Project) 0.00% 9/1/2015 (2) 2,000 818
Middlesex County NJ Import Auth. Util. Systems Rev.
(Perth Amboy Project) 0.00% 9/1/2016 (2) 3,000 1,148
Middlesex County NJ Import Auth. Util. Systems Rev.
(Perth Amboy Project) 0.00% 9/1/2018 (2) 4,550 1,522
Middlesex County NJ Util. Auth. Sewer Rev. 5.125% 12/1/2016 (3) 4,550 4,190
Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 3/15/2010 (2) 1,740 1,718
Middlesex County NJ Util. Auth. Sewer Rev. 5.375% 9/15/2015 (2) 3,775 3,632
Monmouth County NJ Improvement Auth. Rev.
(Howell Township Board of Educ.) 5.80% 7/15/2017 (2) 1,180 1,179
Mount Laurel Township NJ Muni. Util. Auth. Util. System Rev. 6.00% 7/1/2015 (1) 4,250 4,317
New Brunswick NJ Housing & Urban Dev. Rev. 5.75% 7/1/2002 (1)(Prere.) 13,200 13,634
New Brunswick NJ Housing & Urban Dev. Rev. 5.75% 7/1/2024 (1) 440 431
New Brunswick NJ Housing & Urban Dev. Rev. 6.00% 7/1/2012 (1) 195 198
New Jersey Econ. Dev. Auth. Lease Rev.
(Bergen County Administration Complex) 5.50% 11/15/2012 (1) 4,375 4,332
New Jersey Econ. Dev. Auth. Lease Rev.
(Bergen County Administration Complex) 5.625% 11/15/2014 (1) 4,870 4,820
New Jersey Econ. Dev. Auth. Lease Rev.
(Bergen County Administration Complex) 5.75% 11/15/2016 (1) 5,440 5,394
New Jersey Econ. Dev. Auth. Lease Rev.
(Bergen County Administration Complex) 5.75% 11/15/2018 (1) 6,080 5,965
New Jersey Econ. Dev. Auth. Market Transition Fac. Rev. 5.80% 7/1/2007 (1) 1,000 1,028
New Jersey Econ. Dev. Auth. Market Transition Fac. Rev. 5.80% 7/1/2009 (1) 7,250 7,410
New Jersey Econ. Dev. Auth. Market Transition Fac. Rev. 5.875% 7/1/2011 (1) 23,175 23,630
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(New Jersey Natural Gas Project) 4.05% 6/7/2000 (2) 7,800 7,800
New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO
(New Jersey Natural Gas Project) 4.50% 6/2/2000 (2) LOC 1,300 1,300
New Jersey Econ. Dev. Auth. Rev. (Hillcrest Health Service) 0.00% 1/1/2012 (2) 2,500 1,292
New Jersey Econ. Dev. Auth. Rev. (Hillcrest Health Service) 0.00% 1/1/2013 (2) 3,000 1,454
New Jersey Econ. Dev. Auth. Rev.
(New Jersey Transit Corp. Light Rail Transit System Project) 5.875% 5/1/2015 (4) 3,465 3,512
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2008 (1) 2,305 1,471
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2011 (1) 4,650 2,465
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2012 (1) 4,550 2,259
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2013 (1) 4,500 2,092
New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2014 (1) 4,210 1,856
New Jersey Econ. Dev. Auth. Water Fac. VRDO
(Elizabethtown Water Co. Project) 3.90% 6/7/2000 (2) 800 800
New Jersey Educ. Fac. Auth. Rev. (Drew Univ.) 5.00% 7/1/2017 (1) 2,500 2,250
New Jersey Educ. Fac. Auth. Rev. (Higher Educ. Technology) 5.875% 9/1/2007 (2) 5,890 6,109
New Jersey Educ. Fac. Auth. Rev. (Higher Educ. Technology) 5.875% 9/1/2008 (2) 6,165 6,395
New Jersey Educ. Fac. Auth. Rev. (Kean College) 6.60% 7/1/2001 (1)(Prere.) 3,700 3,843
New Jersey Educ. Fac. Auth. Rev.
(New Jersey Institute of Technology) 6.00% 7/1/2024 (1) 1,500 1,503
New Jersey Educ. Fac. Auth. Rev. (Ramapo College) 5.625% 7/1/2019 (1) 2,105 2,051
New Jersey Educ. Fac. Auth. Rev. (Rider College) 6.20% 7/1/2017 (2) 4,000 4,066
New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.25% 7/1/2010 (2) 1,500 1,486
New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.25% 7/1/2012 (2) 1,275 1,242
New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.60% 7/1/2016 (1) 1,000 981
New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.625% 7/1/2019 (1) 3,625 3,512
New Jersey Educ. Fac. Auth. Rev. (Trenton State College) 6.00% 7/1/2012 (2) 3,005 3,058
New Jersey Health Care Fac. Finance Auth. Rev.
(Burdette Tomlin Memorial Hosp.) 6.50% 7/1/2001 (3)(Prere.) 1,285 1,333
New Jersey Health Care Fac. Finance Auth. Rev.
(Burdette Tomlin Memorial Hosp.) 6.50% 7/1/2012 (3) 215 222
New Jersey Health Care Fac. Finance Auth. Rev.
(Community Medical Center/Kimball Medical Center/
Kensington Manor Care Center) 5.00% 7/1/2010 (4) 4,695 4,511
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey Health Care Fac. Finance Auth. Rev.
(Community Medical Center/Kimball Medical Center/
Kensington Manor Care Center) 5.25% 7/1/2009 (4) 5,500 5,422
New Jersey Health Care Fac. Finance Auth. Rev.
(Community Medical Center/Kimball Medical Center/
Kensington Manor Care Center) 5.25% 7/1/2012 (4) 1,500 1,445
New Jersey Health Care Fac. Finance Auth. Rev.
(Community Medical Center/Kimball Medical Center/
Kensington Manor Care Center) 7.00% 7/1/2020 (1) 2,850 2,912
New Jersey Health Care Fac. Finance Auth. Rev.
(Hackensack Univ. Medical Center) 5.00% 1/1/2028 (1) 21,860 18,515
New Jersey Health Care Fac. Finance Auth. Rev.
(Hackensack Univ. Medical Center) 5.375% 1/1/2013 (1) 2,355 2,285
New Jersey Health Care Fac. Finance Auth. Rev.
(Hackensack Univ. Medical Center) 5.375% 1/1/2014 (1) 2,965 2,856
New Jersey Health Care Fac. Finance Auth. Rev. (Holy Name Hosp.) 5.25% 7/1/2020 (2) 4,100 3,717
New Jersey Health Care Fac. Finance Auth. Rev.
(Jersey Shore Medical Center) 6.20% 7/1/2004 (2)(Prere.) 3,540 3,727
New Jersey Health Care Fac. Finance Auth. Rev.
(Jersey Shore Medical Center) 6.20% 7/1/2013 (2) 1,345 1,385
New Jersey Health Care Fac. Finance Auth. Rev.
(Jersey Shore Medical Center) 6.20% 7/1/2014 (2) 1,320 1,360
New Jersey Health Care Fac. Finance Auth. Rev.
(Jersey Shore Medical Center) 6.25% 7/1/2004 (2)(Prere.) 1,140 1,202
New Jersey Health Care Fac. Finance Auth. Rev.
(Jersey Shore Medical Center) 6.25% 7/1/2016 (2) 860 888
New Jersey Health Care Fac. Finance Auth. Rev.
(Memorial Health Alliance) 6.25% 7/1/2000 (3)(Prere.) 8,000 8,011
New Jersey Health Care Fac. Finance Auth. Rev.
(Mercer Medical Center) 6.50% 7/1/2010 (1) 6,000 6,175
New Jersey Health Care Fac. Finance Auth. Rev.
(Meridian Health System Obligated Group) 5.25% 7/1/2029 (4) 13,450 11,852
New Jersey Health Care Fac. Finance Auth. Rev.
(Meridian Health System Obligated Group) 5.625% 7/1/2013 (4) 7,355 7,304
New Jersey Health Care Fac. Finance Auth. Rev.
(Mountainside Hosp.) 5.35% 7/1/2007 (1) 3,215 3,219
New Jersey Health Care Fac. Finance Auth. Rev.
(Muhlenburg Medical Center) 8.00% 7/1/2018 (2) 750 752
New Jersey Health Care Fac. Finance Auth. Rev.
(Newark Beth Israel Medical Center) 6.00% 7/1/2004 (4) 8,500 8,888
New Jersey Health Care Fac. Finance Auth. Rev.
(Riverside Medical Center) 6.25% 7/1/2010 (2) 2,935 3,127
New Jersey Health Care Fac. Finance Auth. Rev.
(Society of the Valley Hosp.) 6.625% 7/1/2010 (1) 2,750 2,793
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Barnabas Health Care) 0.00% 7/1/2021(1) 3,000 818
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Barnabas Health Care) 4.75% 7/1/2028(1) 14,000 11,275
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Barnabas Health Care) 5.00% 7/1/2024(1) 5,500 4,704
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Barnabas Health Care) 5.25% 7/1/2013(1) 3,000 2,863
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Barnabas Health Care) 5.25% 7/1/2016(1) 5,550 5,167
New Jersey Health Care Fac. Finance Auth. Rev.
(St. Clares Riverside Medical Center) 5.75% 7/1/2014 (1) 8,500 8,491
New Jersey Health Care Fac. Finance Auth. Rev. (Virtua Health) 5.25% 7/1/2014 (4) 20,000 18,913
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 4.95% 6/1/2010 (2) 6,325 5,944
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.05% 6/1/2011 (2) 5,100 4,799
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.05% 6/1/2012 (1) 1,500 1,415
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.10% 6/1/2013 (1) 2,255 2,113
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
NEW JERSEY LONG-TERM TAX-EXEMPT FUND 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 1,207
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.15% 6/1/2012 (2) 5,250 4,933
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.20% 6/1/2013 (2) 8,240 7,695
New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.25% 6/1/2018 (1) 705 645
New Jersey Highway Auth. Rev. (Garden State Parkway) 5.60% 1/1/2017 (3) 7,535 7,391
New Jersey Housing & Mortgage Finance Agency Rev. (Home Buyer) 5.40% 10/1/2020 (1) 2,320 2,262
New Jersey Sports & Exposition Auth. Rev. 5.50% 3/1/2017 (1) 5,755 5,619
New Jersey Sports & Exposition Auth. Rev. VRDO 4.25% 6/8/2000 (1) 5,900 5,900
New Jersey Transp. Trust Fund Auth. Rev. 5.50% 6/15/2013 (1) 3,000 2,970
New Jersey Transp. Trust Fund Auth. Rev. 6.00% 6/15/2011 (1) 31,280 32,202
New Jersey Transp. Trust Fund Auth. Rev. 6.00% 6/15/2019 (1) 5,000 5,045
New Jersey Turnpike Auth. Rev. 5.375% 1/1/2020 (1) 5,000 4,697
New Jersey Turnpike Auth. Rev. 5.75% 1/1/2016 (1) 1,000 1,001
New Jersey Turnpike Auth. Rev. 6.50% 1/1/2013 (1) 20,000 21,684
New Jersey Water Supply Auth. Delaware &
Raritan Water System Rev. 5.375% 11/1/2010 (1) 2,230 2,206
New Jersey Water Supply Auth. Delaware &
Raritan Water System Rev. 5.375% 11/1/2011 (1) 2,345 2,305
New Jersey Water Supply Auth. Delaware &
Raritan Water System Rev. 5.375% 11/1/2013 (1) 2,600 2,514
Newark NJ GO 5.50% 10/1/2008 (2) 1,660 1,681
North Bergen Township NJ GO 8.00% 8/15/2006 (4) 1,885 2,162
North Brunswick Township NJ Board of Educ. GO 5.50% 2/1/2008 (3) 1,915 1,940
North Hudson NJ Sewer Auth. Rev. 5.125% 8/1/2008 (3) 2,000 1,974
North Hudson NJ Sewer Auth. Rev. 5.125% 8/1/2022 (3) 4,000 3,569
North Hudson NJ Sewer Auth. Rev. 5.25% 8/1/2016 (3) 14,360 13,466
North Jersey Water Dist. Rev. (Wanaque South Project) 6.00% 7/1/2012 (1) 10,125 10,346
Ocean County NJ Util. Auth. Waste Water Rev. 5.00% 1/1/2014 (3) 2,000 1,849
Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/2018 (3) 4,000 4,070
Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/2018 (3)(ETM) 2,500 2,714
Old Bridge Township NJ Muni. Util. Auth. Rev. 6.25% 11/1/2016 (3) 1,400 1,448
Old Bridge Township NJ Muni. Util. Auth. Rev. 6.40% 11/1/2009 (3) 3,000 3,139
Passaic Valley NJ Sewer Comm. Rev. 5.75% 12/1/2008 (2) 4,450 4,527
Passaic Valley NJ Sewer Comm. Rev. 5.75% 12/1/2013 (2) 4,000 4,027
Plainfield NJ Board of Educ. GO 5.00% 8/1/2020 (4) 4,620 4,083
Plainfield NJ GO 6.25% 7/15/2007 (2) 6,930 7,168
Port Auth. of New York & New Jersey Rev. 5.125% 11/15/2012 (3) 2,500 2,373
Port Auth. of New York & New Jersey Rev. 5.125% 11/15/2013 (3) 5,735 5,382
Port Auth. of New York & New Jersey Rev. 5.125% 11/15/2014 (3) 6,025 5,586
Port Auth. of New York & New Jersey Rev. 5.20% 7/15/2021 (2) 4,500 4,059
Port Auth. of New York & New Jersey Rev. 5.875% 9/15/2015 (3) 10,000 10,035
Rutgers State Univ. NJ Rev. 5.00% 5/1/2023 (3) 3,000 2,619
Rutgers State Univ. NJ Rev. 5.125% 5/1/2020 (3) 3,835 3,460
Salem County NJ Finance Auth. PCR VRDO
(Atlantic City Electric Co.) 4.00% 6/7/2000 (1) 3,000 3,000
South Brunswick Township NJ Board of Educ. GO 5.25% 8/1/2020 (3) 3,535 3,254
South Brunswick Township NJ Board of Educ. GO 5.25% 8/1/2022 (3) 4,630 4,228
South Brunswick Township NJ Board of Educ. GO 5.50% 8/1/2024 (3) 2,500 2,372
South Brunswick Township NJ Board of Educ. GO 6.40% 8/1/2005 (3)(Prere.) 2,205 2,330
South Jersey Transp. Auth. NJ Transp. System Rev. 5.00% 11/1/2029 (2) 13,850 11,862
South Jersey Transp. Auth. NJ Transp. System Rev. 5.25% 11/1/2013 (2) 4,000 3,858
South Jersey Transp. Auth. NJ Transp. System Rev. 5.25% 11/1/2014 (2) 4,375 4,183
South Jersey Transp. Auth. NJ Transp. System Rev. 5.90% 11/1/2006 (1) 1,470 1,514
South Jersey Transp. Auth. NJ Transp. System Rev. 5.90% 11/1/2007 (1) 1,090 1,120
South Jersey Transp. Auth. NJ Transp. System Rev. 6.00% 11/1/2002 (1)(Prere.) 3,005 3,126
South Jersey Transp. Auth. NJ Transp. System Rev. 6.00% 11/1/2012 (1) 2,245 2,287
Stafford NJ Muni. Util. Auth. Water & Sewer Rev. 5.50% 6/1/2011 (3) 3,100 3,113
Sussex County NJ Muni. Util. Auth. Solid Waste Rev. 5.75% 12/1/2009 (1) 19,820 20,117
Sussex County NJ Muni. Util. Auth. Waste Water Rev. 5.25% 12/1/2008 (1) 850 847
Union County NJ Improvement Auth. Rev. (Plainfield Board of Educ.)5.80% 8/1/2007 (3) 4,000 4,162
Union County NJ Util. Auth. Ogden Martin Rev. 5.25% 6/1/2006 (2) 5,375 5,356
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
FACE MARKET
MATURITY AMOUNT VALUE*
COUPON DATE (000) (000)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Union County NJ Util. Auth. Ogden Martin Rev. 5.375% 6/1/2011 (2) 8,375 8,195
Union County NJ Util. Auth. Ogden Martin Rev. 5.375% 6/1/2012 (2) 8,995 8,728
Union County NJ Util. Auth. Ogden Martin Rev. 5.375% 6/1/2013 (2) 9,445 9,090
Vernon Township NJ School Dist. 5.25% 12/1/2014 (3) 1,200 1,147
Vernon Township NJ School Dist. 5.30% 12/1/2015 (3) 1,200 1,147
Vernon Township NJ School Dist. 5.375% 12/1/2016 (3) 1,200 1,152
Vernon Township NJ School Dist. 5.375% 12/1/2017 (3) 1,200 1,143
Vernon Township NJ School Dist. 5.375% 12/1/2018 (3) 1,200 1,135
West Orange NJ Board of Educ. COP 5.625% 10/1/2019 (1) 2,500 2,435
West Orange NJ Board of Educ. COP 5.625% 10/1/2029 (1) 2,000 1,913
West Orange NJ Board of Educ. COP 6.00% 10/1/2024 (1) 1,000 1,005
OUTSIDE NEW JERSEY:
Guam Govt. Ltd. Obligation Infrastructure Improvement Rev. 5.125% 11/1/2011 (2) 3,400 3,299
Puerto Rico Electric Power Auth. Power Rev. 5.25% 7/1/2017 (1) 3,200 3,017
Puerto Rico GO 5.00% 7/1/2018 (1) 11,500 10,346
Puerto Rico GO 5.00% 7/1/2024 (1) 2,910 2,538
Puerto Rico Govt. Dev. Bank VRDO 3.40% 6/7/2000 (1) 3,400 3,400
Puerto Rico Highway & Transp. Auth. VRDO 3.50% 6/7/2000 (2) 100 100
Puerto Rico Infrastructure Finance Auth. Special Tax Rev. 5.00% 7/1/2021 (2) 8,000 7,058
Puerto Rico Infrastrusture Finance Auth. Special Tax Rev. 5.00% 7/1/2028 (2) 12,600 10,891
Puerto Rico Muni. Finance Agency 5.50% 8/1/2019 (4) 2,000 1,929
Puerto Rico Public Building Auth. Rev. 0.00% 7/1/2002 (3) 4,000 3,611
-------
946,576
-------
SECONDARY MARKET INSURED (8.4%)
Atlantic County NJ Util. Auth. Sewer Rev. 6.875% 1/1/2012 (2)(ETM) 3,000 3,224
New Jersey Building Auth. Rev. 5.00% 6/15/2012 (4) 10,000 9,496
New Jersey Highway Auth. Rev. (Garden State Parkway) 6.00% 1/1/2002 (2)(Prere) 470 478
New Jersey Highway Auth. Rev. (Garden State Parkway) 6.00% 1/1/2016 (2) 4,530 4,550
New Jersey Highway Auth. Rev. (Garden State Parkway) 6.20% 1/1/2010 (2) 20,000 21,184
New Jersey Sports & Exposition Auth. Rev. 6.50% 3/1/2013 (1) 10,000 10,827
New Jersey Turnpike Auth. Rev. 6.50% 1/1/2016 (1) 23,270 25,244
Port Auth. of New York & New Jersey Rev. 5.375% 7/15/2022 (3) 15,000 13,876
Univ. of Medicine & Dentistry New Jersey Rev. 6.50% 12/1/2012 (1) 4,000 4,373
-------
93,252
-------
NONINSURED (5.3%)
Burlington County NJ Bridge Comm. Rev. 5.30% 10/1/2013 9,500 9,222
Cherry Hill Township NJ GO 6.30% 6/1/2002 (Prere.) 2,635 2,748
Cherry Hill Township NJ GO 6.30% 6/1/2012 1,110 1,145
Mercer County NJ Improvement Auth. Library System Rev. 6.00% 12/1/2003 (Prere.) 1,000 1,046
Mercer County NJ Improvement Auth. Solid Waste Rev. 5.375% 9/15/2012 11,120 10,947
Mercer County NJ Improvement Auth. Special Services
School Dist. Rev. 5.75% 12/15/2008 1,165 1,201
Mercer County NJ Improvement Auth. Special Services
School Dist. Rev. 5.95% 12/15/2012 4,895 5,092
Monmouth County NJ Improvement Auth. Rev. (Correctional Fac.) 6.40% 8/1/2001 (Prere.) 1,850 1,920
New Jersey Econ. Dev. Auth. Rev. VRDO (Hoffman-La Roche Project) 4.45% 6/2/2000 LOC 7,700 7,700
New Jersey Econ. Dev. Auth. Rev. VRDO (Russell Berrie) 3.875% 6/7/2000 LOC 2,250 2,250
New Jersey Transp. Trust Fund Auth. Rev. 5.75% 6/15/2020 5,000 4,976
Ocean County NJ Util. Auth. Waste Water Rev. 6.30% 1/1/2005 (Prere.) 2,215 2,332
Ocean County NJ Util. Auth. Waste Water Rev. 6.35% 1/1/2005 (Prere.) 4,875 5,143
Rutgers State Univ. New Jersey GO 6.40% 5/1/2013 3,000 3,227
------
58,949
------
-----------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $1,112,359) 1,098,777
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
--------------------------------------------------------------------------------
MARKET
VALUE*
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND (000)
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.8%)
Other Assets--Note B $ 23,344
Liabilities (14,289)
--------
9,055
--------
--------------------------------------------------------------------------------
NET ASSETS (100%)
--------------------------------------------------------------------------------
Applicable to 100,697,211 outstanding $.001 par value shares of
beneficial interest (unlimited authorization) $1,107,832
================================================================================
NET ASSET VALUE PER SHARE $11.00
================================================================================
*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 May 31, 2000.
++Securities with a value of $2,244,000 have been segregated as initial margin
for open futures contracts. For key to abbreviations and other references, see
below.
--------------------------------------------------------------------------------
AT MAY 31, 2000, NET ASSETS CONSISTED OF:
--------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
--------------------------------------------------------------------------------
Paid in Capital $1,122,811 $11.15
Undistributed Net Investment Income -- --
Overdistributed Net Realized Gains (1,468) (.01)
Unrealized Appreciation (Depreciation)--Note F
Investment Securities (13,582) (.14)
Futures Contracts 71 --
--------------------------------------------------------------------------------
NET ASSETS $1,107,832 $11.00
================================================================================
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.
20
<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.
--------------------------------------------------------------------------------
NEW JERSEY
NEW JERSEY INSURED
TAX-EXEMPT LONG-TERM
MONEY MARKET TAX-EXEMPT
FUND FUND
------------------------------
SIX MONTHS ENDED MAY 31, 2000
------------------------------
(000) (000)
--------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Interest $24,016 $31,376
------------------------------
Total Income 24,016 31,376
------------------------------
EXPENSES
The Vanguard Group--Note B
Investment Advisory Services 76 67
Management and Administrative 963 816
Marketing and Distribution 131 85
Custodian Fees 8 6
Auditing Fees 4 4
Shareholders' Reports 7 8
Trustees' Fees and Expenses 1 1
------------------------------
Total Expenses 1,190 987
Expenses Paid Indirectly--Note C (8) (18)
------------------------------
Net Expenses 1,182 969
--------------------------------------------------------------------------------
NET INVESTMENT INCOME 22,834 30,407
--------------------------------------------------------------------------------
REALIZED NET GAIN
Investment Securities Sold 4 1,158
Futures Contracts -- 200
--------------------------------------------------------------------------------
REALIZED NET GAIN 4 1,358
--------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities -- (21,132)
Futures Contracts -- 71
--------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- (21,061)
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $22,838 $10,704
================================================================================
21
<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
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, 2000 NOV. 30, 1999 MAY 31, 2000 NOV. 30, 1999
(000) (000) (000) (000)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 22,834 $ 34,553 $ 30,407 $ 58,789
Realized Net Gain 4 15 1,358 192
Change in Unrealized Appreciation (Depreciation) -- -- (21,061) (75,240)
---------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 22,838 34,568 10,704 (16,259)
---------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (22,834) (34,553) (30,407) (58,789)
Realized Capital Gain -- -- -- (4,837)
---------------------------------------------------------
Total Distributions (22,834) (34,553) (30,407) (63,626)
---------------------------------------------------------
CAPITAL SHARE TRANSACTIONS1
Issued 807,982 1,136,944 135,356 306,834
Issued in Lieu of Cash Distributions 21,851 32,995 22,476 48,412
Redeemed (699,656) (1,086,203) (185,189) (232,335)
---------------------------------------------------------
Net Increase (Decrease) from
Capital Share Transactions 130,177 83,736 (27,357) 122,911
----------------------------------------------------------------------------------------------------------
Total Increase (Decrease) 130,181 83,751 (47,060) 43,026
----------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 1,263,022 1,179,271 1,154,892 1,111,866
End of Period $1,393,203 $1,263,022 $1,107,832 $1,154,892
==========================================================================================================
1Shares Issued (Redeemed)
Issued 807,982 1,136,944 12,209 26,241
Issued in Lieu of Cash Distributions 21,851 32,995 2,029 4,163
Redeemed (699,656) (1,086,203) (16,709) (20,010)
Net Increase (Decrease) in
Shares Outstanding 130,177 83,736 (2,471) 10,394
==========================================================================================================
</TABLE>
22
<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
FOR A SHARE OUTSTANDING SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
THROUGHOUT EACH PERIOD MAY 31, 2000 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .017 .028 .031 .033 .032 .035
Net Realized and Unrealized Gain (Loss)
on Investments -- -- -- -- -- --
Total from Investment Operations .017 .028 .031 .033 .032 .035
------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.017) (.028) (.031) (.033) (.032) (.035)
Distributions from Realized Capital Gains -- -- -- -- -- --
------------------------------------------------------------------
Total Distributions (.017) (.028) (.031) (.033) (.032) (.035)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
==========================================================================================================================
TOTAL RETURN 1.75% 2.86% 3.18% 3.32% 3.22% 3.60%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,393 $1,263 $1,179 $1,016 $918 $859
Ratio of Total Expenses to
Average Net Assets 0.18%* 0.20% 0.20% 0.20% 0.20% 0.21%
Ratio of Net Investment Income to
Average Net Assets 3.46%* 2.82% 3.12% 3.27% 3.17% 3.53%
==========================================================================================================================
</TABLE>
*Annualized.
23
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND
YEAR ENDED NOVEMBER 30,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED ---------------------------------------------
THROUGHOUT EACH PERIOD MAY 31, 2000 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.19 $11.98 $11.72 $11.64 $11.78 $10.40
--------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .302 .590 .599 .608 .616 .623
Net Realized and Unrealized Gain (Loss)
on Investments (.190) (.738) .271 .112 (.082) 1.380
------------------------------------------------------------------
Total from Investment Operations .112 (.148) .870 .720 .534 2.003
------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.302) (.590) (.599) (.608) (.616) (.623)
Distributions from Realized Capital Gains -- (.052) (.011) (.032) (.058) --
------------------------------------------------------------------
Total Distributions (.302) (.642) (.610) (.640) (.674) (.623)
--------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.00 $11.19 $11.98 $11.72 $11.64 $11.78
==========================================================================================================================
TOTAL RETURN 1.01% -1.31% 7.59% 6.40% 4.75% 19.66%
==========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $1,108 $1,155 $1,112 $940 $849 $796
Ratio of Total Expenses to
Average Net Assets 0.18%* 0.19% 0.20% 0.18% 0.20% 0.21%
Ratio of Net Investment Income to
Average Net Assets 5.43%* 5.06% 5.04% 5.26% 5.35% 5.50%
Portfolio Turnover Rate 13%* 11% 14% 13% 11% 7%
==========================================================================================================================
</TABLE>
*Annualized.
24
<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.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
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 May 31, 2000, 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 $261 0.02% 0.3%
Insured Long-Term 217 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 six months ended May 31, 2000, these arrangements
reduced expenses by:
--------------------------------------------------------------------------------
EXPENSE REDUCTION
(000)
--------------------------------------
MANAGEMENT AND CUSTODIAN
NEW JERSEY TAX-EXEMPT FUND ADMINISTRATIVE FEES
--------------------------------------------------------------------------------
Money Market -- $8
Insured Long-Term $12 6
--------------------------------------------------------------------------------
D. During the six months ended May 31, 2000, the Insured Long-Term Tax-Exempt
Fund purchased $72,143,000 of investment securities and sold $86,947,000 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 May 31, 2000, net unrealized depreciation of Insured Long-Term Tax-Exempt
Fund investment securities for federal income tax purposes was $15,626,000,
consisting of unrealized gains of $20,768,000 on securities that had risen in
value since their purchase and $36,394 ,000 on securities that had fallen in
value since their purchase (see Note E).
26
<PAGE>
At May 31, 2000, the aggregate settlement value of open futures contracts
expiring in September 2000 and the related unrealized appreciation
(depreciation) were:
--------------------------------------------------------------------------------
(000)
----------------------------
AGGREGATE UNREALIZED
NEW JERSEY TAX-EXEMPT FUND/ NUMBER OF LONG SETTLEMENT APPRECIATION
FUTURES CONTRACTS (SHORT) CONTRACTS VALUE (DEPRECIATION)
--------------------------------------------------------------------------------
Insured Long-Term/
U.S. Treasury Bond (45) $ 4,303 $(107)
U.S. Treasury Note 190 18,388 178
--------------------------------------------------------------------------------
27
<PAGE>
THE VANGUARD(R)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(TM) 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(TM) 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(TM) Fund
Windsor(TM) II Fund
BALANCED FUNDS
---------------------------------------
Asset Allocation Fund
Balanced Index Fund
Global Asset Allocation Fund
LifeStrategy(R) Conservative
Growth Fund
LifeStrategy(R) Growth Fund
LifeStrategy(R) Income Fund
LifeStrategy(R) Moderate
Growth Fund
STAR(TM) Fund
Tax-Managed Balanced Fund
Wellesley(R) Income Fund
Wellington(TM) Fund
BOND FUNDS
---------------------------------------
Admiral(TM) Intermediate-Term
Treasury Fund
Admiral(TM)Long-Term Treasury Fund
Admiral(TM)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(TM) 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.
28
<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.
Seven of Vanguard's eight 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 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.
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.
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
AmeriSource Health Corporation, 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 Quantitative Equity Group.
<PAGE>
[SHIP]
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, Pennsylvania 19482-2600
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.
WORLD WIDE WEB
www.vanguard.com
FUND INFORMATION
1-800-662-7447
INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
This report is intended for the funds'
shareholders. It may not be distributed
to prospective investors unless it
is preceded or accompanied by the
current fund prospectus.
Q142 072000
(C)2000 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing
Corporation, Distributor.
