-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CyPM3d9J4gicv6755i5BS0w5l6CmXHPTtYxuFrQkt8sIkHFMEra6BYSh1SBd9xvL LHHaeuL5KJaYuZTG2HJu6Q== 0000932471-01-000114.txt : 20010212 0000932471-01-000114.hdr.sgml : 20010212 ACCESSION NUMBER: 0000932471-01-000114 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001130 FILED AS OF DATE: 20010209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VANGUARD NEW JERSEY TAX FREE FUND CENTRAL INDEX KEY: 0000821404 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05340 FILM NUMBER: 1529607 BUSINESS ADDRESS: STREET 1: 100 VANGUARD BLVD CITY: MALVERN STATE: PA ZIP: 19355 BUSINESS PHONE: 6106696289 N-30D 1 0001.txt ANNUAL REPORT VANGUARD (R)NEW JERSEY TAX-EXEMPT FUNDS ANNUAL REPORT NOVEMBER 30, 2000 [SHIP GRAPHIC] INCLUDED WITHIN THIS REPORT: VANGUARD NEW JERSEY TAX-EXEMPT MONEY MARKET FUND VANGUARD NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND MEMBERS OF THE VANGUARD GROUP (R) [LOGO] OUR REPORTS TO THE OWNERS At Vanguard, we regard our investors not as mere customers but as owners of the enterprise. For that's exactly what a mutual fund shareholder is--part owner of an investment company. In our reports to you on how the company is doing, we have tried to convey information without hyperbole and in the context of broad market trends and relevant benchmarks. We've introduced several changes to this year's annual reports to make them even more useful. Among the changes: **Larger type and redesigned graphics to make the reports easier to read. **An at-a-glance summary of key points about fund performance and the financial markets. **A table--included for many funds--in which the investment adviser highlights significant changes in holdings. We hope you'll find that these changes make the reports even more accessible and informative. SUMMARY * The Vanguard New Jersey Tax-Exempt Funds earned solid returns that topped those of their average competitors. * Our Insured Long-Term Tax-Exempt Fund benefited from the market's preference for higher-quality bonds. * During the 12 months ended November 30, most fixed income securities far outperformed stocks, many of which took a sound beating. CONTENTS 1 Letter from the Chairman 7 Report from the Adviser 10 Fund Profiles 12 Glossary of Investment Terms 13 Performance Summaries 15 Financial Statements 32 Report of Independent Accountants 1 LETTER FROM THE CHAIRMAN Dear Shareholder, During the 12 months ended November 30, 2000, municipal bonds provided excellent returns, as a decline in long-term interest rates and a generally tighter supply of munis helped boost prices. In this environment, the returns of both of the VANGUARD NEW JERSEY TAX-EXEMPT FUNDS outpaced the average returns of competing mutual funds. The table at right presents each fund's 12-month return along with those of our average mutual fund competitors. Our bond fund is also compared with the Lehman Brothers Municipal Bond Index, a broad measure of the muni market. 2000 TOTAL RETURNS Fiscal Year Ended November 30 - ----------------------------------------------------------------------- VANGUARD NEW JERSEY TAX-EXEMPT MONEY MARKET FUND 3.7% (SEC 7-Day Annualized Yield: 3.88%) Average New Jersey Tax-Exempt Money Market Fund* 3.4 - ----------------------------------------------------------------------- VANGUARD NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND 8.6% Average New Jersey Municipal Debt Fund* 6.7 Lehman Municipal Bond Index 8.2 - ----------------------------------------------------------------------- *Derived from data provided by Lipper Inc. The total return (capital change plus reinvested dividends) of our Insured Long-Term Tax-Exempt Fund is based on an increase in net asset value from $11.19 per share on November 30, 1999, to $11.52 per share on November 30, 2000, and is adjusted for dividends totaling $0.599 per share paid from net investment income. The Money Market Fund's net asset value remained at $1 per share, as was expected but not guaranteed. At the end of the fiscal year, the Insured Long-Term Fund's yield was 4.89%, down from 5.07% a year earlier; the Money Market Fund's yield was 3.88%, up from 3.34%. 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. FINANCIAL MARKETS IN REVIEW Overall, it was an extremely difficult and volatile period for the U.S. stock market. Most broad market indexes notched negative returns for the 12 months. Technology-related stocks slid, but many other segments also suffered--in part because the U.S. economy seemed to be losing some steam. In late November, the tech-heavy Nasdaq Composite Index was off nearly 50% from the all-time high it reached on March 10. Despite the broad 2 market's decline, there were pockets of excellent performance within the stock market. In fact, the slump in growth stocks that began in the spring coincided with a surge in value-oriented shares--the stocks of companies with below-average prices in relation to measures such as earnings and book value. And mid-capitalization stocks, particularly those with a value bent, notched excellent 12-month returns. MARKET BAROMETER AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED NOVEMBER 30, 2000 ONE THREE FIVE YEAR YEARS YEARS - -------------------------------------------------------------------------------- BONDS Lehman Aggregate Bond Index (Entire market) 9.1% 6.1% 6.4% Lehman 10 Year Municipal Bond Index 7.7 5.0 5.6 Salomon Smith Barney 3-Month U.S. Treasury Bill Index 5.9 5.2 5.2 - -------------------------------------------------------------------------------- STOCKS S&P 500 Index (Large-caps) -4.2% 12.7% 18.7% Russell 2000 Index (Small-caps) -0.6 2.4 9.1 Wilshire 5000 Index (Entire market) -5.8 10.8 16.7 MSCI EAFE Index (International) -9.5 8.7 7.5 - -------------------------------------------------------------------------------- CPI Consumer Price Index 3.4% 2.5% 2.5% - -------------------------------------------------------------------------------- For bonds, it was an entirely different story. As you can see in the table above, the returns of three major fixed income indexes surpassed those of many stock market measures in the past year. Long-term Treasury bonds performed particularly well. A decline in long-term interest rates boosted prices, as did the federal government's buyback of long-term Treasuries--a continuing effort aimed at paring the national debt. The Lehman Long U.S. Treasury Index returned an excellent 15.7% for the fiscal year. Returns of broader bond market measures were not quite so strong, but were still solid in absolute terms. Signs of decelerating growth--a product of the Federal Reserve Board's campaign to raise short-term interest rates to head off inflation--were welcomed by some segments of the bond market. However, for lower-quality securities, an economic slowdown is undeniably bad news. Slower growth can lead to erosion in corporate profits, which, in turn, can damage a company's ability to repay its debt obligations. The Lehman High Yield Index returned -6.6% for the fiscal year, about 15 percentage points behind the return of the broad bond market. MUNI AND TREASURY YIELDS MOVE CLOSER Municipal bonds performed well during the fiscal year. Overall, the difference between the yield of the 30-year U.S. Treasury bond and the yield of an insured long-term, high-quality municipal bond narrowed during the period to an extraordinarily slim 6 basis points (0.06 percentage point). The narrowing was the result of a 45-basis-point decline in the yield of muni bonds to 5.55% and a slightly steeper decline (68 basis points) in the yield of the 30-year Treasury to 5.61%. Such a tiny yield differential makes muni bonds extremely 3 attractive because the interest paid on municipal bonds is exempt from federal income taxes while that paid on Treasuries is taxable at a rate of up to 39.6%. Short-term muni rates rose 40 basis points to 4.20%, while the yield of the 3-month U.S. Treasury bill climbed 90 basis points to 6.20%. Muni bonds benefited from a decline in new issuance, which helped support prices. For more detailed information on the municipal bond market, see the Report from the Adviser beginning on page 7. FISCAL 2000 PERFORMANCE OVERVIEW For Vanguard New Jersey Insured Long-Term Tax-Exempt Fund, the fiscal year produced a return that was excellent both on an absolute basis and relative to the average New Jersey municipal bond fund. Our 8.6% total return consisted of an income return of 5.7% and a price increase of 2.9%. (The Performance Summary on page 14 presents a similar breakdown of the fund's returns for the last ten years.) There are two key distinctions between our fund and its competitors: quality and costs. During fiscal 2000, both of these worked in our favor. - ------------------------------------------------------------------------ OUR COST AND CREDIT-QUALITY DIFFERENCES HELPED OUR RELATIVE PERFORMANCE. - ------------------------------------------------------------------------ QUALITY AND COST MATTER Generally, our holdings have a higher average credit quality than those of our peers. When investors are focusing on high credit quality--for example, during periods of uncertainty about an economic slowdown or in the midst of stock market stress--our emphasis on quality results in relatively strong returns. However, our relative results can lag when lower-quality bonds outpace higher-quality securities. While our high credit quality can in the short run be an advantage or a detriment, the cost difference between our fund and its peers is always an advantage to our shareholders. Our low cost also directly supports our quality mandate. Higher-quality bonds pay less interest than lower-quality bonds. However, our rock-bottom costs enable us to offer above-average net yields nonetheless. This is because fund operating and administrative expenses are deducted from a fund's income; by forfeiting less of our income to expenses, we can offer both above-average yields and above-average quality. Our Insured Long-Term Tax-Exempt and Tax-Exempt Money Market Funds have expense ratios (annual expenses as a percentage of average net assets) of 0.19% and 0.18%, respectively--a fraction of 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. This advantage aids us each year in our pursuit of superior results, and is especially powerful over longer periods. The combination of this cost advantage and the skillful management of Vanguard's Fixed Income Group has benefited 4 our shareholders over the past decade, and we expect it to continue to do so in the future. It's also important to note that our fiscal-year return exceeded that of the Lehman Municipal Bond Index, which includes muni bonds from across the country. The index is a notoriously tough competitor because it does not incur the "real world" operating expenses and transaction costs that all mutual funds must bear. The Tax-Exempt Money Market Fund provided a total return of 3.7%, outpacing the 3.4% return of its average peer. Here, too, cost was the key reason for our margin of outperformance. THE MUNICIPAL BOND TAX ADVANTAGE For New Jersey residents, the income earned by our funds is exempt from federal, state, and, in most cases, local income taxes. At current yields, that means that investors in the New Jersey Insured Long-Term Tax-Exempt Fund who are taxed at the highest marginal federal tax rate (39.6%) can earn about 65% more after-tax income than they could in a comparable long-term U.S. Treasury bond fund. Our Money Market Fund also offers New Jersey residents an advantage over taxable investments with similar maturities. On November 30, the yield of MIG-1 notes was about 14% higher than the after-tax yield of 90-day U.S. Treasury bills. For New Jersey taxpayers subject to the highest tax rates, a yield of 5.6% on a tax-exempt long-term bond is the equivalent of a 9.3% taxable yield. For a tax-exempt short-term yield of 4.2%, the taxable equivalent is 7.0%. These remarkable advantages are illustrated in the table below, which compares the annual net income earned on U.S. Treasury and tax-exempt securities as of November 30, 2000, assuming a $100,000 investment. COMPARISON FROM A HYPOTHETICAL $100,000 OF INCOME INVESTMENT BASED ON YIELDS AS OF NOVEMBER 30, 2000 SHORT-TERM LONG-TERM - -------------------------------------------------------------------------------- TAXABLE GROSS INCOME $6,200 $5,600 LESS TAXES (39.6%) (2,500) (2,200) NET AFTER-TAX INCOME 3,700 3,400 - -------------------------------------------------------------------------------- TAX-EXEMPT INCOME $4,200 $5,600 - -------------------------------------------------------------------------------- TAX-EXEMPT INCOME ADVANTAGE $ 500 $2,200 - -------------------------------------------------------------------------------- PERCENTAGE ADVANTAGE 14% 65% - -------------------------------------------------------------------------------- This illustration assumes current yields (as of November 30, 2000) of 5.6% for long-term U.S. Treasury bonds, 6.2% for U.S. Treasury bills, 5.6% for long-term municipals, and 4.2% for short-term municipals. The tax adjustment assumes a typical itemized tax return based on a federal tax rate of 39.6%. Income from U.S. Treasuries is not subject to state taxes; local taxes are not considered. The illustration is not intended to represent future results. When considering this example, keep in mind that there is an important distinction between state-specific municipal bond funds and U.S. Treasury bonds. Treasury securities are backed by the full faith and credit of the U.S. government and 5 therefore have unmatched credit quality. Also, municipal bond funds that confine their investments to a single state lack broad diversification; their returns can be influenced by purely local matters. However, private insurance on the bonds in our Long-Term Tax-Exempt Fund reduces these additional credit risks. Though the insurance does not protect against fluctuations in the fund's value, it guarantees full payment of interest and principal for our bond holdings. This insurance, however, is not generally available for short-term securities. Our investment adviser is responsible for carefully analyzing securities to preserve the principal value of the Tax-Exempt Money Market Fund. Money market mutual funds are not guaranteed by the Federal Deposit Insurance Corporation, which insures bank accounts and certificates of deposit. LONG-TERM PERFORMANCE OVERVIEW Though an annual review of any investment is a useful exercise, it's more important to examine performance over longer periods. The table below compares the performance of our funds over the past ten years with that of their average peer mutual funds. It also presents the current value of hypothetical $10,000 investments made a decade ago. As you can see, the Vanguard New Jersey Tax-Exempt Funds have established excellent records versus their competitors, largely because of our cost advantage. IN SUMMARY During the past five years, when big gains from stocks seemed routine, our reminders about the value of diversification, I fear, too often fell on deaf ears. But the financial markets have a way of reinforcing investment principles. We certainly take no pleasure in the stock market's decline over the past 12 months. Rather, we view the disappointing returns as an instructive, though painful, part of investing. For those who built their investment programs for the long haul--constructing a mix of a variety of stock funds, bond funds, and short-term investments--such a decline should have little
TOTAL RETURNS TEN YEARS ENDED NOVEMBER 30, 2000 AVERAGE FINAL VALUE OF A $10,000 ANNUAL RETURN INITIAL INVESTMENT* --------------------------- ---------------------------------------- AVERAGE AVERAGE VANGUARD COMPETING VANGUARD COMPETING VANGUARD NEW JERSEY TAX-EXEMPT FUND FUND FUND FUND FUND ADVANTAGE - ------------------------------------------------------------------------------------------------------------- MONEY MARKET 3.2% 2.9% $13,734 $13,340 $ 394 INSURED LONG-TERM 6.9 6.1 19,566 18,160 1,406 - ------------------------------------------------------------------------------------------------------------- *Assuming reinvestment of all income dividends and capital gains distributions.
6 long-term impact. The key to long-term investment success is to build a diversified portfolio, to realize that the road may get rough from time to time, and to stick with your plan no matter what the financial markets throw your way. Sincerely, /S/ JOHN J. BRENNAN December 13, 2000 [PHOTO] JOHN J. BRENNAN Chairman and Chief Executive Officer 7 REPORT FROM THE ADVISER VANGUARD FIXED INCOME GROUP Municipal bonds provided strong returns during the 12 months ended November 30, 2000, as rising prices augmented interest income. Prices were bolstered by declining long-term interest rates and by a reduction in the issuance of new municipal bonds. Our TAX-EXEMPT MONEY MARKET FUND earned a total return of 3.7% for the fiscal year, while our INSURED LONG-TERM TAX-EXEMPT FUND returned 8.6%. Both funds outpaced their average peers by solid margins. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- THE ECONOMIC ENVIRONMENT The fiscal year began amid abundant signs that the U.S. economy continued to steam ahead. Economic growth surged, unemployment dipped below 4%, and inflation seemed well under control. But as the period progressed, concerns about overheating gave way to fears among stock investors that the nation's economy was getting too cool for comfort. Real (inflation-adjusted) gross domestic product expanded at an annual rate of 2.2% during the third calendar quarter of 2000, compared with a rate of 8.3% during the fourth quarter of 1999, when our fiscal year began. The slowdown was largely a product of the Federal Reserve Board's monetary tightening campaign, which began in June 1999. During the fiscal year, the Fed hiked its target for short-term interest rates by a total of 1 percentage point--from 5.5% to 6.5%--in three separate moves. The latest boost came in May, when the Fed raised the target by 0.50 percentage point (50 basis points). Several other factors weighed on the minds of investors during the fiscal year: **Oil prices nearly doubled. Per-barrel oil prices rose from $18.61 to nearly $34 and played a key role in curbing economic growth. **Inflation rose to an annual rate of 3.4%. However, the core inflation rate, which excludes food and energy prices, remained relatively docile, rising 2.6%. **Stock prices declined sharply. The slide that began in the spring dented consumer confidence and threatened to crimp Americans' spending, a big driver of economic growth. **Finally, the close presidential election and ensuing court battles added an element of uncertainty to the economic outlook during the final weeks of 8 the fiscal year, leaving economists and traders speculating on the fate of the budget surplus and the implications of a divided Congress. THE VALUE IN MUNIS During the fiscal year, municipal bonds generally underperformed U.S. Treasury bonds. Treasury prices were buoyed by the signs of an economic slowdown, which eased some inflation fears; by the stock market's volatility, which sent some investors fleeing to safety; and by the federal government's buyback of long-term bonds, which decreased supply. The yield of the 30-year Treasury bond, which moves in the opposite direction from its price, declined by about 70 basis points (0.70 percentage point) during the 12 months, ending November at 5.61%. The yield of a similar-maturity, insured AAA-rated muni bond decreased 45 basis points from a year earlier to end the period at 5.55%. That means that the insured municipal's tax-exempt yield was equal to 99% of the taxable yield of a 30-year Treasury. This was significantly above the longer-term average of about 89% and made munis very attractive relative to Treasuries. At the short end of the bond spectrum, yields generally rose in response to the Fed's rate hikes. Overall, short-term tax-exempt notes became more attractive relative to comparable Treasury securities. The yield of the 1-year U.S. Treasury bill rose 24 basis points to end the period at 5.92%, while the yield of the benchmark 1-year MIG-1 climbed 43 basis points to 4.30%. As a result, the ratio of the 1-year muni's yield to that of the 1-year Treasury bill rose from about 68% a year ago to about 73% at the end of November 2000. BUDGET SURPLUSES = GOOD NEWS FOR MUNIS The economy's impressive expansion over the past several years created a twofold benefit for muni bonds during fiscal 2000. First, strong economic growth resulted in surpluses in many state treasuries that allowed governments to finance projects without borrowing. Overall, from January through November, national muni issuance was off 16% from the same period a year earlier. Issuance in New Jersey, however, rose 9%. In addition, the credit quality of many state and local governments improved as a result of the healthier condition of their finances. Generally, higher-quality bonds performed better during fiscal 2000 than lower-quality issues. Many investors shifted away from more speculative credits and toward higher-quality ones in response to signs of decelerating economic growth. Slower growth increases the likelihood of defaults on municipal bonds issued to finance projects. The spread, or difference, between the yield of a AAA-rated municipal bond and a BBB-rated issue widened from about 34 basis points when the period began to 67 basis points at its end. 9 We can offer higher quality while maintaining above-average tax-exempt income--an apparent investment paradox--because of our low costs. Higher-quality bonds offer lower yields than their lower-quality counterparts. However, because our expenses take a smaller bite from the interest income paid by our bonds, we can maintain a more conservatively managed portfolio without sacrificing yield. LOOKING AHEAD We begin the 2001 fiscal year as we do every year, with an unwavering commitment to providing prudently managed, low-cost portfolios. This desirable combination has served our investors well in the past, and we fully expect it to continue to do so in the future. Ian A. MacKinnon, Managing Director Christopher M. Ryon, Principal Pamela Wisehaupt Tynan, Principal Christopher W. Alwine, Principal Kathryn Allen, Principal December 13, 2000 10 FUND PROFILE AS OF NOVEMBER 30, 2000 FOR NEW JERSEY TAX-EXEMPT MONEY MARKET FUND This Profile provides a snapshot of the fund's characteristics. Key terms are defined on page 12. - ------------------------------- FINANCIAL ATTRIBUTES Yield 3.9% Average Maturity 56 days Average Quality MIG-1 Expense Ratio 0.18% - ------------------------------- - ------------------------------- DISTRIBUTION BY CREDIT QUALITY (% of portfolio) MIG-1/SP-1+ 70.2% A-1/P-1 27.3 AAA/AA 2.5 A 0.0 - ------------------------------- Total 100.0% - ------------------------------- 11 FUND PROFILE AS OF NOVEMBER 30, 2000 FOR NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND This Profile provides a snapshot of the fund's characteristics, compared where appropriate with an unmanaged index. Key terms are defined on page 12. - --------------------------------------------- FINANCIAL ATTRIBUTES LEHMAN FUND INDEX* - --------------------------------------------- Number of Issues 253 39,476 Yield 4.9% 5.1% Yield to Maturity 4.9% -- Average Coupon 5.2% 5.5% Average Maturity 10.4 years 13.8 years Average Quality AAA AA+ Average Duration 7.1 years 7.3 years Expense Ratio 0.19% -- Cash Investments 1.1% -- - --------------------------------------------- - ------------------------------- DISTRIBUTION BY CREDIT QUALITY (% of portfolio) AAA 95.8% AA 4.2 A 0.0 BBB 0.0 BB 0.0 B 0.0 - ------------------------------- Total 100.0% - ------------------------------- - --------------------------------------------- VOLATILITY MEASURES LEHMAN Fund Index* - --------------------------------------------- R-Squared 0.99 1.00 Beta 1.10 1.00 - --------------------------------------------- - ------------------------- DISTRIBUTION BY MATURITY (% of portfolio) Under 1 Year 8.3% 1-5 Years 14.8 5-10 Years 38.5 10-20 Years 24.3 20-30 Years 14.1 Over 30 Years 0.0 - ------------------------- Total 100.0% - ------------------------- - -------------------------- INVESTMENT FOCUS [CHART] CREDIT QUALITY HIGH AVERAGE MATURITY LONG - -------------------------- *Lehman Municipal Bond Index. VISIT OUR WEBSITE [GRAPHIC] WWW.VANGUARD.COM FOR REGULARLY UPDATED FUND INFORMATION. 12 GLOSSARY OF INVESTMENT TERMS 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 INVESTMENTS. 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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 returns were precisely synchronized with the overall market's return, its R-squared would be 1.00. If the fund's returns bore no relationship to the market's returns, its R-squared would be 0. - -------------------------------------------------------------------------------- YIELD. A snapshot of a fund's interest income. The yield, expressed as a percentage of the fund's net asset value, is based on income earned over the past 30 days (7 days for money market funds) and is annualized, or projected forward for the coming year. - -------------------------------------------------------------------------------- YIELD TO MATURITY. The rate of return an investor would receive if the securities held by a fund were held to their maturity dates. - -------------------------------------------------------------------------------- 13 PERFORMANCE SUMMARY FOR NEW JERSEY TAX-EXEMPT MONEY MARKET FUND All of the data on this page represent past performance, which cannot be used to predict future returns that may be achieved by the fund. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund. - -------------------------------------------------------------------------------- TOTAL INVESTMENT RETURNS (%) NOVEMBER 30, 1990-NOVEMBER 30, 2000 - -------------------------------------------------------------------------------- NEW JERSEY TAX-EXEMPT AVERAGE MONEY MARKET FUND FUND* FISCAL TOTAL TOTAL YEAR RETURN RETURN - -------------------------------------------------------------------------------- 1991 4.5% 4.5% 1992 3.0 2.8 1993 2.3 2.0 1994 2.5 2.2 1995 3.6 3.3 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NEW JERSEY TAX-EXEMPT AVERAGE MONEY MARKET FUND FUND* FISCAL TOTAL TOTAL YEAR RETURN RETURN - -------------------------------------------------------------------------------- 1996 3.2% 2.9% 1997 3.3 3.0 1998 3.2 2.8 1999 2.9 2.5 2000 3.7 3.4 - -------------------------------------------------------------------------------- SEC 7-DAY ANNUALIZED YIELD (11/30/2000): 3.88% - -------------------------------------------------------------------------------- *Average New Jersey Tax-Exempt Money Market Fund; derived from data provided by Lipper Inc. See Financial Highlights table on page 28 for dividend information for the past five years. - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------- CULMULATIVE PERFORMANCE [GRAPH] NOVEMBER 30, 1990-NOVEMBER 30, 2000 INITIAL INVESTMENT OF $10,000 QUARTER ENDED NEW JERSEY AVERAGE NEW JERSEY TAX-EXEMPT TAX-EXEMPT MONEY MARKET MONEY MARKET FUND FUND - ----------------------------------------------------------------------------------------------------- 199011 10000 10000 199102 10126 10125 199105 10239 10234 199108 10346 10338 199111 10455 10446 199202 10545 10531 199205 10629 10607 199208 10700 10667 199211 10773 10734 199302 10837 10791 199305 10899 10842 199308 10959 10891 199311 11023 10949 199402 11080 10999 199405 11144 11053 199408 11212 11109 199411 11297 11190 199502 11394 11277 199505 11503 11374 199508 11602 11459 199511 11703 11555 199602 11799 11641 199605 11894 11723 199608 11985 11801 199611 12080 11889 199702 12175 11976 199705 12277 12063 199708 12378 12148 199711 12482 12243 199802 12580 12334 199805 12684 12421 199808 12782 12500 199811 12878 12588 199902 12964 12667 199905 13056 12742 199908 13146 12814 199911 13247 12905 200002 13353 13003 200005 13478 13109 200008 13603 13219 200011 13734 13340
AVERAGE ANNUAL TOTAL RETURNS FINAL VALUE PERIODS ENDED NOVEMBER 30, 2000 OF A $10,000 ------------------------------------- INVESTMENT 1 YEAR 5 YEARS 10 YEARS - ----------------------------------------------------------------------------------------------------- NEW JERSEY TAX-EXEMPT MONEY MARKET FUND 3.68% 3.25% 3.22% $13,734 AVERAGE NEW JERSEY TAX-EXEMPT MONEY MARKET FUND* 3.37 2.92 2.92 13,340 - ----------------------------------------------------------------------------------------------------- *Derived from data provided by Lipper Inc. - -----------------------------------------------------------------------------------------------------
14 PERFORMANCE SUMMARY FOR NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND All of the data on this page represent past performance, which cannot be used to predict future returns that may be achieved by the fund. Note, too, that both share price and return can fluctuate widely. An investor's shares, when redeemed, could be worth more or less than their original cost. - -------------------------------------------------------------------------------- TOTAL INVESTMENT RETURNS (%) NOVEMBER 30, 1990-NOVEMBER 30, 2000 - -------------------------------------------------------------------------------- NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND LEHMAN* FISCAL CAPITAL INCOME TOTAL TOTAL YEAR RETURN RETURN RETURN RETURN - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND LEHMAN* FISCAL CAPITAL INCOME TOTAL TOTAL YEAR RETURN RETURN RETURN RETURN - -------------------------------------------------------------------------------- 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 2.9 5.7 8.6 8.2 - -------------------------------------------------------------------------------- *Lehman Municipal Bond Index. See Financial Highlights table on page 29 for dividend and capital gains information for the past five years. - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------- CUMULATIVE PERFORMANCE NOVEMBER 30, 1990-NOVEMBER 30, 2000 INITIAL INVESTMENT OF $10,000 QUARTER ENDED NEW JERSEY AVERAGE NEW JERSEY LEHMAN MUNICIPAL INSURED LONG-TERM MUNICIPAL FUND BOND INDEX TAX-EXEMPT FUND - ------------------------------------------------------------------------------------------------------ 199011 10000 10000 10000 199102 10311 10259 10267 199105 10524 10508 10500 199108 10734 10781 10757 199111 10901 11002 11026 199202 11188 11270 11292 199205 11422 11531 11531 199208 11886 11972 11958 199211 12043 12080 12131 199302 12929 12892 12846 199305 13050 12930 12911 199308 13544 13467 13417 199311 13553 13496 13476 199402 13627 13589 13556 199405 13296 13121 13229 199408 13505 13282 13441 199411 12726 12501 12772 199502 14003 13589 13817 199505 14563 14186 14439 199508 14633 14234 14633 199511 15228 14755 15187 199602 15360 14876 15344 199605 15064 14669 15099 199608 15350 14896 15400 199611 15951 15459 16080 199702 16039 15535 16189 199705 16201 15741 16349 199708 16614 16115 16824 199711 16972 16455 17233 199802 17392 16841 17669 199805 17618 17092 17883 199808 18008 17407 18279 199811 18261 17608 18570 199902 18518 17720 18756 199905 18453 17724 18718 199908 18057 17211 18371 199911 18021 17017 18371 200002 18055 16893 18365 200005 18203 17091 18557 200008 19316 18020 19615 200011 19566 18160 19874
AVERAGE ANNUAL TOTAL RETURNS FINAL VALUE PERIODS ENDED NOVEMBER 30, 2000 OF A $10,000 ------------------------------------ INVESTMENT 1 YEAR 5 YEARS 10 YEARS - ----------------------------------------------------------------------------------------------------- NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND 8.57% 5.14% 6.94% $19,566 AVERAGE NEW JERSEY MUNICIPAL FUND* 6.72 4.24 6.15 18,160 LEHMAN MUNICIPAL BOND INDEX 8.18 5.53 7.11 19,874 - ----------------------------------------------------------------------------------------------------- *Derived from data provided by Lipper Inc.
15 FINANCIAL STATEMENTS NOVEMBER 30, 2000 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.
- ----------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* NEW JERSEY TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000) - ----------------------------------------------------------------------------------------------------------------------------- MUNICIPAL BONDS (99.2%) - ----------------------------------------------------------------------------------------------------------------------------- Avalon NJ BAN 5.50% 5/25/2001 $ 8,150 $ 8,171 Burlington County NJ BAN 4.65% 3/9/2001 4,545 4,551 Burlington County NJ BAN 4.80% 8/10/2001 8,300 8,328 Cherry Hill Township NJ BAN 4.55% 10/11/2001 39,474 39,577 Cranbury Township NJ BAN 4.70% 10/3/2001 4,963 4,979 Englewood NJ BAN 4.80% 7/13/2001 5,353 5,368 Essex County NJ Improvement Auth. Pooled Govt. Loan VRDO 3.65% 12/6/2000 LOC 41,100 41,100 Essex County NJ Improvement Auth. VRDO (County Asset Sale Project) 3.90% 12/6/2000 (2) 10,150 10,150 Fair Lawn NJ BAN 4.50% 12/15/2000 8,564 8,565 Florham Park NJ BAN 4.60% 11/2/2001 8,775 8,798 Fort Lee NJ BAN 4.50% 3/1/2001 8,340 8,345 Freehold NJ BAN 4.75% 11/9/2001 9,050 9,088 Freehold NJ Regional High School GO 5.00% 3/1/2001 2,640 2,646 Freehold NJ Regional High School TOB VRDO 4.02% 12/7/2000 (3) Y 9,690 9,690 Gloucester County NJ BAN 4.75% 7/31/2001 5,300 5,316 Gloucester County NJ PCR VRDO (Mobil Oil Refining Corp. Project) 3.70% 12/6/2000 20,200 20,200 Mendham Township NJ School Dist. GO 4.85% 7/18/2001 6,791 6,812 Mercer County NJ BAN 4.30% 12/14/2000 41,953 41,960 Middlesex County NJ BAN 4.75% 7/24/2001 24,717 24,802 Middlesex County NJ TAN 4.60% 2/22/2001 19,000 19,024 Middlesex County NJ Util. Auth. Sewer Rev. 6.50% 3/15/2001 (3)(Prere.) 6,300 6,467 Monmouth County NJ Improvement Auth. Rev. VRDO (Pooled Govt. Loan Program) 3.80% 12/6/2000 LOC 52,415 52,415
16
- ----------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* NEW JERSEY TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000) - ----------------------------------------------------------------------------------------------------------------------------- Montgomery Township NJ BAN 4.75% 2/7/2001 4,405 4,410 Moorestown Township NJ BAN 5.50% 6/1/2001 9,000 9,042 Morris County NJ GO 4.625% 9/15/2001 3,990 4,002 Morris Township NJ BAN 4.60% 9/19/2001 5,991 6,008 New Jersey Building Auth. Rev. TOB VRDO 4.02% 12/7/2000 (1) Y 42,070 42,070 New Jersey Econ. Dev. Auth. CP (Chambers Cogeneration Limited Partnership Project) 3.80% 12/8/2000 LOC 12,200 12,200 New Jersey Econ. Dev. Auth. CP (Chambers Cogeneration Limited Partnership Project) 4.20% 12/8/2000 LOC 1,700 1,700 New Jersey Econ. Dev. Auth. CP (Chambers Cogeneration Limited Partnership Project) 4.30% 3/14/2001 LOC 21,300 21,300 New Jersey Econ. Dev. Auth. CP (Chambers Cogeneration Limited Partnership Project) 4.30% 3/15/2001 LOC 12,000 12,000 New Jersey Econ. Dev. Auth. CP (Chambers Cogeneration Limited Partnership Project) 4.30% 4/10/2001 LOC 4,200 4,200 New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 4.30% 3/15/2001 LOC 25,900 25,900 New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 4.30% 4/10/2001 LOC 9,200 9,200 New Jersey Econ. Dev. Auth. PCR VRDO (Exxon Project) 3.25% 12/4/2000 12,000 12,000 New Jersey Econ. Dev. Auth. PCR VRDO (Public Service Electric & Gas Co.) 3.80% 12/6/2000 (1) 21,420 21,420 New Jersey Econ. Dev. Auth. Rev. TOB VRDO (Transportation Project) 4.02% 12/7/2000 (4) Y 7,465 7,465 New Jersey Econ. Dev. Auth. Rev. VRDO (Lawrence School Project) 3.20% 12/4/2000 LOC 24,100 24,100 New Jersey Econ. Dev. Auth. Rev. VRDO (Natural Gas Fac. NUI Corp.) 4.15% 12/4/2000 (20)LOC 29,000 29,000 New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO (NJ Natural Gas Project) 4.15% 12/4/2000 (2) LOC 6,500 6,500 New Jersey Econ. Dev. Auth. Rev. VRDO (United States Golf Association) 4.05% 12/7/2000 LOC 3,800 3,800 New Jersey Econ. Dev. Auth. Water Fac. TOB VRDO (NJ American Water Co. Project) 4.07% 12/7/2000 (3) Y 4,850 4,850 New Jersey Econ. Dev. Auth. Water Fac. VRDO (Elizabethtown Water Co. Project) 3.85% 12/6/2000 (2) LOC 22,500 22,500 New Jersey Econ. Dev. Auth. Water Fac. VRDO (Elizabethtown Water Co. Project) 4.05% 12/6/2000 (2) LOC 12,800 12,800 New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co.) 4.55% 12/4/2000 (2) 200 200 New Jersey Educ. Fac. Auth. Rev. VRDO (College of New Jersey) 3.90% 12/7/2000 (2) 32,300 32,300 New Jersey Educ. Fac. Auth. Rev. VRDO (Inst. Defense Analyses) 4.15% 12/7/2000 (2) 13,695 13,695 New Jersey GO TOB VRDO 4.00% 12/7/2000 Y 26,660 26,660 New Jersey Health Care Fac. Finance Auth. VRDO (Holy Name Hosp.) 3.95% 12/7/2000 LOC 7,900 7,900 New Jersey Health Care Fac. Finance Auth. VRDO (Hosp. Capital Asset Pooled Program) 3.80% 12/7/2000 LOC 65,100 65,100 New Jersey Health Care Fac. Finance Auth. VRDO (Princeton Medical Center) 3.95% 12/7/2000 LOC 4,100 4,100 New Jersey Housing & Mortgage Finance Agency Rev. TOB VRDO 4.07% 12/7/2000 (1) Y 5,700 5,700 New Jersey Sports & Exposition Auth. Rev. VRDO 3.75% 12/7/2000 (1) 4,130 4,130 New Jersey TRAN CP 4.25% 2/8/2001 10,000 10,000 New Jersey TRAN CP 4.25% 3/9/2001 4,000 4,000
17
- ----------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* NEW JERSEY TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000) - ----------------------------------------------------------------------------------------------------------------------------- New Jersey TRAN CP 4.30% 3/7/2001 $ 2,000 $ 2,000 New Jersey TRAN CP 4.30% 3/15/2001 15,000 15,000 New Jersey TRAN CP 4.40% 4/10/2001 10,000 10,000 New Jersey Transp. Corp. TOB VRDO 4.02% 12/7/2000 Y 4,995 4,995 New Jersey Transp. Trust Fund Auth. Rev. 4.25% 6/15/2001 10,255 10,252 New Jersey Transp. Trust Fund Auth. Rev. 5.00% 6/15/2001 3,000 3,010 New Jersey Transp. Trust Fund Auth. Rev. 5.25% 6/15/2001 2,970 2,984 New Jersey Transp. Trust Fund Auth. TOB VRDO 4.02% 12/7/2000 (1) Y 47,865 47,865 New Jersey Turnpike Auth. Rev. TOB VRDO 4.05% 12/7/2000 (1) Y 29,340 29,340 New Jersey Turnpike Auth. Rev. TOB VRDO 4.02% 12/6/2000 (1) Y 4,995 4,995 New Jersey Turnpike Auth. Rev. VRDO 3.95% 12/6/2000 (3) LOC 147,950 147,950 Parsippany-Troy Hills Township NJ BAN 4.35% 12/8/2000 7,000 7,001 Port Auth. of New York & New Jersey CP 4.15% 12/8/2000 LOC 16,900 16,900 Port Auth. of New York & New Jersey CP 4.15% 12/11/2000 LOC 16,225 16,225 Port Auth. of New York & New Jersey CP 4.15%12 12/2000 LOC 21,440 21,440 Port Auth. of New York & New Jersey CP 4.35% 3/16/2001 LOC 3,780 3,780 Port Auth. of New York & New Jersey CP 4.35% 4/9/2001 LOC 6,300 6,300 Princeton Township NJ BAN 4.25% 12/15/2000 5,700 5,701 Princeton Univ. NJ CP 3.90% 12/8/2000 14,400 14,400 Princeton Univ. NJ CP 3.90% 12/12/2000 20,500 20,500 Princeton Univ. NJ CP 3.95% 12/8/2000 2,000 2,000 Saddle Brook Township NJ BAN 4.75% 2/8/2001 3,454 3,458 Salem County NJ PCR Finance Auth. CP (PECO Project) 4.50% 12/15/2000 LOC 19,000 19,000 Salem County NJ PCR VRDO (Atlantic City Electric Co.) 3.75% 12/6/2000 (1) LOC 5,900 5,900 Salem County NJ PCR VRDO (Public Service Electric & Gas) 4.10% 12/6/2000 (1) LOC 1,400 1,400 Scotch Plains Township NJ BAN 4.95% 6/8/2001 5,250 5,259 Secaucus NJ School Dist. 4.90% 6/27/2001 6,546 6,564 Somerset County NJ Ind. PCR Finance Auth. VRDO (American Cyanamid Co. Project) 3.95% 12/6/2000 11,500 11,500 Union County NJ BAN 4.45% 2/23/2001 20,000 20,012 Union County NJ BAN 4.50% 2/23/2001 20,000 20,013 Union County NJ PCR VRDO (Exxon Project) 3.10% 12/4/2000 27,300 27,300 Union County NJ PCR VRDO (Exxon Project) 3.40% 12/4/2000 21,200 21,200 Vineland NJ BAN 5.50% 1/19/2001 18,500 18,516 West Windsor Township NJ BAN 4.75% 10/25/2001 11,480 11,527 OUTSIDE NEW JERSEY: Puerto Rico Govt. Dev. Bank VRDO 3.85% 12/6/2000 (1) 700 700 Puerto Rico Highway & Transp. Auth. TOB VRDO 3.82% 12/7/2000 (1) Y 7,740 7,740 Puerto Rico Highway & Transp. Auth. TOB VRDO 3.82% 12/7/2000 (4) Y 5,305 5,305 Puerto Rico Highway & Transp. Auth. VRDO 3.60% 12/6/2000 (2) 5,800 5,800 Puerto Rico Ind. Medical & Environmental Fac. Finance Auth. PCR PUT (Abbott Laboratories Project) 4.00% 3/1/2001 Y 8,750 8,750 Puerto Rico Infrastructure Finance Auth. Special Tax Rev. TOB VRDO 3.82% 12/7/2000 Y 6,515 6,515 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (COST $1,415,701) 1,415,701 - ----------------------------------------------------------------------------------------------------------------------------
18
- ----------------------------------------------------------------------------------------------------------------- MARKET VALUE* NEW JERSEY TAX-EXEMPT MONEY MARKET FUND (000) - ----------------------------------------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (0.8%) - ----------------------------------------------------------------------------------------------------------------- Other Assets--Note B $ 22,704 Liabilities (11,055) ---------- 11,649 - ----------------------------------------------------------------------------------------------------------------- NET ASSETS (100%) - ----------------------------------------------------------------------------------------------------------------- Applicable to 1,427,345,841 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $1,427,350 ================================================================================================================= NET ASSET VALUE PER SHARE $1.00 ================================================================================================================= *See Note A in Notes to Financial Statements. Y Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At November 30, 2000, the aggregate value of these securities was $211,940,000, representing 14.9% of net assets. For key to abbreviations and other references, see page 25. - ----------------------------------------------------------------------------------------------- AT NOVEMBER 30, 2000, NET ASSETS CONSISTED OF: - ----------------------------------------------------------------------------------------------- AMOUNT PER (000) SHARE - ----------------------------------------------------------------------------------------------- Paid-in Capital $ 1,427,362 $1.00 Undistributed Net Investment Income -- -- Accumulated Net Realized Losses (12) -- Unrealized Appreciation -- -- - ----------------------------------------------------------------------------------------------- NET ASSETS $1,427,350 $1.00 - -----------------------------------------------------------------------------------------------
19
- --------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) - --------------------------------------------------------------------------------------------------------------------------- MUNICIPAL BONDS (98.9%) - --------------------------------------------------------------------------------------------------------------------------- ISSUER INSURED (85.2%) Atlantic City NJ Board of Educ. GO 6.00% 12/1/2012(4) 4,600 5,068 Atlantic City NJ Board of Educ. GO 6.10% 12/1/2015(4) 2,000 2,217 Atlantic County NJ COP 6.00% 3/1/2014(3) 3,685 4,027 Atlantic County NJ COP 6.00% 3/1/2015(3) 1,480 1,615 Atlantic County NJ COP 7.40% 3/1/2010(3) 1,755 2,096 Atlantic County NJ COP 7.40% 3/1/2011(3) 4,025 4,850 Atlantic County NJ Util. Auth. Sewer Rev. 5.85% 1/15/2015(2) 3,000 3,098 Bergen County NJ Util. Auth. Water PCR 5.50% 6/15/2002(3)(Prere.) 5,000 5,083 Camden County NJ Improvement Auth. Lease Rev. 5.375% 9/1/2019(4) 850 852 Camden County NJ Improvement Auth. Lease Rev. 5.50% 9/1/2015(4) 1,470 1,507 Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2004(3) 8,345 7,005 Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2005(3) 18,545 14,830 Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2006(3) 18,545 14,116 Cape May County NJ Muni. Util. Auth. Rev. 5.75% 1/1/2016(1) 14,675 14,984 Cape May County NJ PCR (Atlantic City Electric) 6.80% 3/1/2021(1) 15,400 18,233 Cherry Hill Township NJ School Dist. GO 4.70% 2/15/2013(4) 1,125 1,083 Delaware River & Bay Auth. New Jersey & Delaware Rev. 5.75% 1/1/2029(2) 5,000 5,153 Delaware River & Bay Auth. New Jersey & Delaware Rev. VRDO 3.95% 12/7/2000(2) 5,200 5,200 Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.40% 1/1/2013(3) 6,750 6,909 Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.50% 1/1/2026(3) 22,885 22,964 Delaware River Port Auth. Pennsylvania & New Jersey Rev. (Port Dist. Project) 5.625% 1/1/2026(4) 5,000 5,065 Delaware River Port Auth. Pennsylvania & New Jersey Rev. (Port Dist. Project) 5.75% 1/1/2022(4) 10,000 10,306 Elizabeth City NJ GO 6.60% 8/1/2001(1)(Prere.) 8,525 8,816 Elizabeth City NJ GO 6.60% 8/1/2006(1)(Prere.) 225 232 Essex County NJ Correctional Fac. Lease Rev. 5.75% 10/1/2014(3) 3,390 3,583 Essex County NJ Correctional Fac. Lease Rev. 5.75% 10/1/2015(3) 5,090 5,351 Essex County NJ Correctional Fac. Lease Rev. 5.75% 10/1/2030(3) 2,650 2,726 Essex County NJ Improvement Auth. Lease Rev. 5.50% 12/1/2008(2) 2,560 2,663 Essex County NJ Improvement Auth. Lease Rev. 5.50% 12/1/2013(2) 5,150 5,270 Essex County NJ Util. Auth. Solid Waste Rev. 0.00% 4/1/2010(4) 1,000 632 Essex County NJ Util. Auth. Solid Waste Rev. 4.875% 4/1/2018(4) 4,000 3,792 Essex County NJ Util. Auth. Solid Waste Rev. 5.00% 4/1/2022(4) 3,500 3,319 Essex County NJ Util. Auth. Solid Waste Rev. 5.60% 4/1/2006(4)(Prere.) 2,200 2,342 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 3,114 Gloucester Township NJ Muni. Util. Auth. Rev. 5.65% 3/1/2018(2) 2,755 2,890 Hamilton Township NJ Muni. Util. Auth. Rev. 6.00% 8/15/2002(3)(Prere.) 1,000 1,045 Higher Educ. Assistance Auth. of New Jersey Student Loan Rev. 6.00% 6/1/2013(1) 3,000 3,158 Higher Educ. Assistance Auth. of New Jersey Student Loan Rev. 6.00% 6/1/2015(1) 5,575 5,836 Higher Educ. Assistance Auth. of New Jersey Student Loan Rev. 6.10% 6/1/2016(1) 3,000 3,156 Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2003(1) 3,800 3,359 Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2004(1) 3,750 3,160 Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2006(1) 2,000 1,528 Honoken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2005(1) 3,805 3,055 Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 6.25% 8/1/2013(1) 9,590 10,781 Hudson County NJ Correctional Fac. COP 6.50% 12/1/2011(1) 9,000 9,350 Hudson County NJ GO 6.55% 7/1/2007(3) 1,300 1,436 Hudson County NJ GO 6.55% 7/1/2009(3) 635 714 Irvington Township NJ GO 0.00% 8/1/2007(1) 1,000 728
20
- --------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) - --------------------------------------------------------------------------------------------------------------------------- Irvington Township NJ GO 0.00% 8/1/2009(1) $ 2,580 $ 1,696 Irvington Township NJ GO 0.00% 8/1/2010(1) 2,080 1,296 Lenape NJ Regional High School Dist. GO 5.00% 4/1/2011(3) 1,625 1,643 Lenape NJ Regional High School Dist. GO 5.00% 4/1/2019(3) 3,000 2,892 Lenape NJ Regional High School Dist. GO 5.00% 4/1/2021(3) 2,500 2,392 Lenape NJ Regional High School Dist. GO 5.00% 4/1/2022(3) 4,000 3,813 Lenape NJ Regional High School Dist. GO 5.00% 4/1/2023(3) 4,000 3,803 Marlboro Township Board of Educ. GO 5.25% 7/15/2013(4) 2,625 2,672 Marlboro Township Board of Educ. GO 5.25% 7/15/2014(4) 2,790 2,827 Marlboro Township Board of Educ. GO 5.25% 7/15/2018(4) 2,850 2,840 Middlesex County NJ Import Auth. Util. Systems Rev. (Perth Amboy Project) 0.00% 9/1/2015(2) 2,000 909 Middlesex County NJ Import Auth. Util. Systems Rev. (Perth Amboy Project) 0.00% 9/1/2016(2) 3,000 1,283 Middlesex County NJ Import Auth. Util. Systems Rev. (Perth Amboy Project) 0.00% 9/1/2018(2) 4,550 1,716 Middlesex County NJ Util. Auth. Sewer Rev. 5.125% 12/1/2016(3) 3,050 3,022 Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 3/15/2010(2) 1,740 1,789 Middlesex County NJ Util. Auth. Sewer Rev. 5.375% 9/15/2015(2) 3,775 3,816 Monmouth County NJ Improvement Auth. Rev. (Howell Township Board of Educ.) 5.80% 7/15/2017(2) 1,180 1,223 Mount Laurel Township NJ Muni. Auth. Util. System Rev. 6.00% 7/1/2004(1)(Prere.) 2,580 2,708 Mount Laurel Township NJ Muni. Auth. Util. System Rev. 6.00% 7/1/2015(1) 1,670 1,733 New Brunswick NJ Housing & Urban Dev. Rev. 5.75% 7/1/2002(1)(Prere.) 13,200 13,716 New Brunswick NJ Housing & Urban Dev. Rev. 5.75% 7/1/2024(1) 440 446 New Brunswick NJ Housing & Urban Dev. Rev. 6.00% 7/1/2012(1) 195 202 New Jersey Econ. Dev. Auth. Lease Rev. (Bergen County Administration Complex) 5.50%11/15/2012(1) 4,375 4,545 New Jersey Econ. Dev. Auth. Lease Rev. (Bergen County Administration Complex) 5.625%11/15/2014(1) 4,870 5,056 New Jersey Econ. Dev. Auth. Lease Rev. (Bergen County Administration Complex) 5.75%11/15/2016(1) 5,440 5,662 New Jersey Econ. Dev. Auth. Lease Rev. (Bergen County Administration Complex) 5.75%11/15/2018(1) 6,080 6,280 New Jersey Econ. Dev. Auth. Market Transition Fac. Rev. 5.80% 7/1/2007(1) 1,000 1,055 New Jersey Econ. Dev. Auth. Market Transition Fac. Rev. 5.80% 7/1/2009(1) 7,250 7,628 New Jersey Econ. Dev. Auth. Market Transition Fac. Rev. 5.875% 7/1/2011(1) 23,175 24,347 New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO (NJ Natural Gas Project) 3.95% 12/6/2000(2) LOC 3,200 3,200 New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO (NJ Natural Gas Project) 4.15% 12/4/2000(2) LOC 900 900 New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO (NJ Natural Gas Project) 4.15% 12/4/2000(2) 900 900 New Jersey Econ. Dev. Auth. Rev. (Hillcrest Health Service) 0.00% 1/1/2012(2) 2,500 1,418 New Jersey Econ. Dev. Auth. Rev. (Hillcrest Health Service) 0.00% 1/1/2013(2) 3,000 1,602 New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2008(1) 2,305 1,599 New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2011(1) 4,650 2,734 New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2012(1) 4,550 2,516 New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2013(1) 4,500 2,341 New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2014(1) 4,210 2,060 New Jersey Econ. Dev. Auth. Rev. (Transportation Project) 5.25% 5/1/2017(4) 4,500 4,490 New Jersey Econ. Dev. Trans. Project (NJ Transit Corp. Light Rail Transit System Project) 5.875% 5/1/2015(4) 3,465 3,647
21
- --------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) - --------------------------------------------------------------------------------------------------------------------------- New Jersey Econ. Dev. Auth. Water Fac. VRDO (Elizabethtown Water Co. Project) 4.05% 12/6/2000(2) LOC $ 800 $ 800 New Jersey Educ. Fac. Auth. Rev. 5.00% 9/1/2019(4) 2,715 2,612 New Jersey Educ. Fac. Auth. Rev. 5.75% 9/1/2016(4) 8,425 8,815 New Jersey Educ. Fac. Auth. Rev. (Drew Univ.) 5.00% 7/1/2017(1) 1,650 1,601 New Jersey Educ. Fac. Auth. Rev. (Higher Educ. Technology) 5.875% 9/1/2007(2) 5,890 6,325 New Jersey Educ. Fac. Auth. Rev. (Higher Educ. Technology) 5.875% 9/1/2008(2) 6,165 6,660 New Jersey Educ. Fac. Auth. Rev. (Kean College) 6.60% 7/1/2001(1)(Prere.) 3,700 3,820 New Jersey Educ. Fac. Auth. Rev. (NJ Institute of Technology) 6.00% 7/1/2024(1) 1,500 1,552 New Jersey Educ. Fac. Auth. Rev. (Ramapo College) 5.625% 7/1/2019(1) 2,105 2,153 New Jersey Educ. Fac. Auth. Rev. (Rider College) 6.20% 7/1/2017(2) 4,000 4,141 New Jersey Educ. Fac. Auth. Rev. (Rowan Univ.) 5.25% 7/1/2024(3) 11,210 10,928 New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.25% 7/1/2010(2) 1,500 1,561 New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.25% 7/1/2012(2) 1,275 1,307 New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.60% 7/1/2016(1) 1,000 1,025 New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.625% 7/1/2019(1) 3,625 3,686 New Jersey Educ. Fac. Auth. Rev. (Trenton State College) 6.00% 7/1/2012(2) 3,005 3,119 New Jersey Educ. Fac. Auth. Rev. (William Patterson) 5.20% 7/1/2015(3) 755 758 New Jersey Educ. Fac. Auth. Rev. (William Patterson) 5.25% 7/1/2016(3) 805 808 New Jersey Educ. Fac. Auth. Rev. (William Patterson) 5.30% 7/1/2017(3) 250 251 New Jersey Educ. Fac. Auth. Rev. (William Patterson) 5.375% 7/1/2018(3) 905 910 New Jersey Educ. Fac. Auth. Rev. (William Patterson) 5.375% 7/1/2019(3) 360 361 New Jersey Health Care Fac. Finance Auth. Rev. (Burdette Tomlin Memorial Hosp.) 6.50% 7/1/2001(3)(Prere.) 1,285 1,326 New Jersey Health Care Fac. Finance Auth. Rev. (Burdette Tomlin Memorial Hosp.) 6.50% 7/1/2012(3) 215 221 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 4,754 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 5,684 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 1,524 New Jersey Health Care Fac. Finance Auth. Rev. (Hackensack Univ. Medical Center) 5.00% 1/1/2028(1) 21,860 20,184 New Jersey Health Care Fac. Finance Auth. Rev. (Hackensack Univ. Medical Center) 5.375% 1/1/2013(1) 2,355 2,397 New Jersey Health Care Fac. Finance Auth. Rev. (Hackensack Univ. Medical Center) 5.375% 1/1/2014(1) 2,965 3,005 New Jersey Health Care Fac. Finance Auth. Rev. (Holy Name Hosp.) 5.25% 7/1/2020(2) 4,100 4,002 New Jersey Health Care Fac. Finance Auth. Rev. (Jersey Shore Medical Center) 6.20% 7/1/2004(2)(Prere.) 3,540 3,792 New Jersey Health Care Fac. Finance Auth. Rev. (Jersey Shore Medical Center) 6.20% 7/1/2013(2) 1,345 1,425 New Jersey Health Care Fac. Finance Auth. Rev. (Jersey Shore Medical Center) 6.20% 7/1/2014(2) 1,320 1,398 New Jersey Health Care Fac. Finance Auth. Rev. (Jersey Shore Medical Center) 6.25% 7/1/2004(2)(Prere.) 1,140 1,223 New Jersey Health Care Fac. Finance Auth. Rev. (Jersey Shore Medical Center) 6.25% 7/1/2016(2) 860 912
22
- --------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) - --------------------------------------------------------------------------------------------------------------------------- New Jersey Health Care Fac. Finance Auth. Rev. (Mercer Medical Center) 6.50% 7/1/2010(1) $ 6,000 $ 6,184 New Jersey Health Care Fac. Finance Auth. Rev. (Meridian Health System Obligated Group) 5.25% 7/1/2029(4) 13,450 12,893 New Jersey Health Care Fac. Finance Auth. Rev. (Meridian Health System Obligated Group) 5.625% 7/1/2013(4) 7,355 7,667 New Jersey Health Care Fac. Finance Auth. Rev. (Mountainside Hosp.) 5.35% 7/1/2007(1) 3,215 3,303 New Jersey Health Care Fac. Finance Auth. Rev. (Newark Beth Israel Medical Center) 6.00% 7/1/2004(4) 8,500 9,048 New Jersey Health Care Fac. Finance Auth. Rev. (Riverside Medical Center) 6.25% 7/1/2010(2) 2,935 3,271 New Jersey Health Care Fac. Finance Auth. Rev. (Society of the Valley Hosp.) 6.625% 7/1/2010(1) 2,750 2,782 New Jersey Health Care Fac. Finance Auth. Rev. (St. Barnabas Health Care) 0.00% 7/1/2021(1) 3,000 949 New Jersey Health Care Fac. Finance Auth. Rev. (St. Barnabas Health Care) 4.75% 7/1/2028(1) 14,000 12,302 New Jersey Health Care Fac. Finance Auth. Rev. (St. Barnabas Health Care) 5.00% 7/1/2024(1) 5,500 5,110 New Jersey Health Care Fac. Finance Auth. Rev. (St. Barnabas Health Care) 5.25% 7/1/2013(1) 3,000 3,032 New Jersey Health Care Fac. Finance Auth. Rev. (St. Barnabas Health Care) 5.25% 7/1/2016(1) 3,300 3,282 New Jersey Health Care Fac. Finance Auth. Rev. (St. Clares Riverside Medical Center) 5.75% 7/1/2014(1) 8,500 8,757 New Jersey Health Care Fac. Finance Auth. Rev. (Virtua Health) 5.25% 7/1/2014(4) 11,000 11,068 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 4.95% 6/1/2010(2) 6,325 6,292 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.05% 6/1/2011(2) 5,100 5,071 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.05% 6/1/2012(1) 1,000 1,001 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.10% 6/1/2013(1) 2,255 2,251 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.125% 6/1/2014(1) 1,300 1,291 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.15% 6/1/2012(2) 5,250 5,218 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.20% 6/1/2013(2) 8,240 8,165 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.25% 6/1/2018(1) 705 692 New Jersey Highway Auth. Rev. (Garden State Parkway) 5.60% 1/1/2017(3) 7,535 7,771 New Jersey Housing & Mortgage Finance Agency Rev. (Home Buyer) 5.40% 10/1/2020(1) 2,120 2,108 New Jersey Housing & Mortgage Finance Agency Rev. (Multi-Family) 5.70% 5/1/2020(4) 5,000 5,070 New Jersey Sports & Exposition Auth. Rev. 5.50% 3/1/2017(1) 5,755 5,962 New Jersey Sports & Exposition Auth. Rev. VRDO 3.75% 12/7/2000(1) 2,775 2,775 New Jersey Transit Corp. Certificate Federal Transp. Administration 5.75% 9/15/2014(2) 2,000 2,102 New Jersey Transit Corp. Certificate Federal Transp. Administration 6.00% 9/15/2013(2) 10,000 10,748 New Jersey Transit Corp. COP 5.50% 9/15/2012(2) 20,000 21,082 New Jersey Transp. Trust Fund Auth. Rev. 5.50% 6/15/2013(1) 3,000 3,078 New Jersey Transp. Trust Fund Auth. Rev. 6.00% 6/15/2011(1) 31,280 33,732 New Jersey Turnpike Auth. Rev. 5.375% 1/1/2020(1) 3,500 3,506 New Jersey Turnpike Auth. Rev. 5.75% 1/1/2016(1) 2,285 2,385 New Jersey Turnpike Auth. Rev. 5.75% 1/1/2017(1) 10,000 10,394 New Jersey Turnpike Auth. Rev. 6.50% 1/1/2013(1) 20,000 22,715 New Jersey Turnpike Auth. Rev. VRDO 3.95% 12/6/2000(3) LOC 300 300
23
- --------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) - --------------------------------------------------------------------------------------------------------------------------- New Jersey Water Supply Auth. Delaware & Raritan Water System Rev. 5.375% 11/1/2010(1) $ 2,230 $ 2,306 New Jersey Water Supply Auth. Delaware & Raritan Water System Rev. 5.375% 11/1/2011(1) 2,345 2,408 New Jersey Water Supply Auth. Delaware & Raritan Water System Rev. 5.375% 11/1/2013(1) 2,600 2,636 Newark NJ GO 5.50% 10/1/2008(2) 1,660 1,751 North Bergen Township NJ GO 8.00% 8/15/2006(4) 1,885 2,204 North Brunswick Township NJ Board of Educ. GO 5.50% 2/1/2008(3) 1,915 2,017 North Hudson NJ Sewer Auth. Rev. 5.125% 8/1/2008(3) 2,000 2,061 North Hudson NJ Sewer Auth. Rev. 5.125% 8/1/2022(3) 4,000 3,860 North Hudson NJ Sewer Auth. Rev. 5.25% 8/1/2016(3) 14,360 14,377 North Jersey Water Dist. Rev. (Wanaque South Project) 6.00% 7/1/2012(1) 10,125 10,583 Ocean County NJ Util. Auth. Waste Water Rev. 5.00% 1/1/2014(3) 1,250 1,237 Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/2018(3) 4,000 4,046 Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/2018(3)(ETM) 2,500 2,836 Old Bridge Township NJ Muni. Util. Auth. Rev. 6.25% 11/1/2016(3) 1,400 1,465 Old Bridge Township NJ Muni. Util. Auth. Rev. 6.40% 11/1/2009(3) 3,000 3,158 Passaic Valley NJ Sewer Comm. Rev. 5.75% 12/1/2008(2) 4,450 4,622 Passaic Valley NJ Sewer Comm. Rev. 5.75% 12/1/2013(2) 4,000 4,115 Plainfield NJ Board of Educ. GO 5.00% 8/1/2020(4) 4,620 4,429 Plainfield NJ GO 6.25% 7/15/2007(2) 6,930 7,240 Port Auth. of New York & New Jersey Rev. 5.125%10/15/2030(1) 15,000 14,263 Port Auth. of New York & New Jersey Rev. 5.125%11/15/2012(3) 2,500 2,516 Port Auth. of New York & New Jersey Rev. 5.125%11/15/2013(3) 5,735 5,737 Port Auth. of New York & New Jersey Rev. 5.125%11/15/2014(3) 6,025 5,980 Port Auth. of New York & New Jersey Rev. 5.20% 7/15/2021(2) 3,250 3,177 Port Auth. of New York & New Jersey Rev. 5.875% 9/15/2015(3) 10,000 10,412 Rutgers State Univ. NJ Rev. 5.00% 5/1/2023(3) 3,000 2,841 Salem County NJ PCR VRDO (Atlantic City Electric Co.) 3.85% 12/6/2000(1) LOC 3,000 3,000 South Brunswick Township NJ Board of Educ. GO 5.25% 8/1/2020(3) 1,785 1,763 South Brunswick Township NJ Board of Educ. GO 5.25% 8/1/2022(3) 3,000 2,943 South Brunswick Township NJ Board of Educ. GO 6.40% 8/1/2005(3)(Prere.) 2,205 2,378 South Jersey Transp. Auth. NJ Transp. System Rev. 5.00% 11/1/2029(2) 13,850 12,928 South Jersey Transp. Auth. NJ Transp. System Rev. 5.25% 11/1/2013(2) 4,000 4,083 South Jersey Transp. Auth. NJ Transp. System Rev. 5.25% 11/1/2014(2) 4,125 4,187 South Jersey Transp. Auth. NJ Transp. System Rev. 5.90% 11/1/2006(1) 1,470 1,533 South Jersey Transp. Auth. NJ Transp. System Rev. 5.90% 11/1/2007(1) 1,090 1,136 South Jersey Transp. Auth. NJ Transp. System Rev. 6.00% 11/1/2002(1)(Prere.) 3,005 3,148 South Jersey Transp. Auth. NJ Transp. System Rev. 6.00% 11/1/2012(1) 2,245 2,338 Stafford NJ Muni. Util. Auth. Water & Sewer Rev. 5.50% 6/1/2011(3) 3,100 3,285 Sussex County NJ Muni. Util. Auth. Solid Waste Rev. 5.75% 12/1/2009(1) 19,820 20,557 Sussex County NJ Muni. Util. Auth. Waste Water Rev. 5.25% 12/1/2008(1) 850 872 Union County NJ Improvement Auth. Rev. (Plainfield Board of Educ.) 5.80% 8/1/2007(3)(Prere.) 4,000 4,302 Union County NJ Util. Auth. Ogden Martin Rev. 5.25% 6/1/2006(2) 5,375 5,522 Union County NJ Util. Auth. Ogden Martin Rev. 5.375% 6/1/2011(2) 8,375 8,636 Union County NJ Util. Auth. Ogden Martin Rev. 5.375% 6/1/2012(2) 8,995 9,207 Union County NJ Util. Auth. Ogden Martin Rev. 5.375% 6/1/2013(2) 9,445 9,610 Vernon Township NJ School Dist. 5.25% 12/1/2014(3) 1,200 1,216 Vernon Township NJ School Dist. 5.30% 12/1/2015(3) 1,200 1,214 Vernon Township NJ School Dist. 5.375% 12/1/2016(3) 1,200 1,217 Vernon Township NJ School Dist. 5.375% 12/1/2017(3) 1,200 1,212 Vernon Township NJ School Dist. 5.375% 12/1/2018(3) 1,200 1,207
24
- ---------------------------------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE* NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) - ---------------------------------------------------------------------------------------------------------------------------- West Orange NJ Board of Educ. COP 5.625% 10/1/2019(1) $ 2,500 $ 2,558 West Orange NJ Board of Educ. COP 5.625% 10/1/2029(1) 2,000 2,023 West Orange NJ Board of Educ. COP 6.00% 10/1/2024(1) 1,000 1,057 OUTSIDE NEW JERSEY: Guam Govt. Ltd. Obligation Infrastructure Improvement Rev. 5.125% 11/1/2011(2) 3,400 3,512 Puerto Rico Electric Power Auth. Rev. 5.25% 7/1/2017(1) 3,200 3,246 Puerto Rico GO 5.00% 7/1/2018(1) 11,500 11,333 Puerto Rico GO 5.00% 7/1/2024(1) 2,910 2,778 Puerto Rico Govt. Dev. Bank VRDO 3.85% 12/6/2000(1) 11,400 11,400 Puerto Rico Highway & Transp. Auth. VRDO 3.60% 12/6/2000(2) 1,100 1,100 Puerto Rico Infrastructure Finance Auth. Special Tax Rev. 5.00% 7/1/2021(2) 8,000 7,701 Puerto Rico Infrastrusture Finance Auth. Special Tax Rev. 5.00% 7/1/2028(2) 12,600 11,924 Puerto Rico Muni. Finance Agency 5.50% 8/1/2019(4) 2,000 2,055 Puerto Rico Public Building Auth. Rev. 0.00% 7/1/2002(3) 4,000 3,736 ------------- 1,051,756 ------------- SECONDARY MARKET INSURED (7.9%) Atlantic County NJ Util. Auth. Sewer Rev. 6.875% 1/1/2012(2)(ETM) 3,000 3,310 New Jersey Building Auth. Rev. 5.00% 6/15/2012(4) 10,000 10,055 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 4,572 New Jersey Highway Auth. Rev. (Garden State Parkway) 6.20% 1/1/2010(2) 20,000 22,119 New Jersey Sports & Exposition Auth. Rev. 6.50% 3/1/2013(1) 10,000 11,238 New Jersey Turnpike Auth. Rev. 6.50% 1/1/2016(1) 23,270 26,493 Port Auth. of New York & New Jersey Rev. 5.375% 7/15/2022(3) 15,000 14,952 Univ. of Medicine & Dentistry New Jersey Rev. 6.50% 12/1/2012(1) 4,000 4,591 ------------- 97,808 ------------- NONINSURED (5.8%) Burlington County NJ Bridge Comm. Rev. 5.30% 10/1/2013 9,500 9,598 Cherry Hill Township NJ GO 6.30% 6/1/2002(Prere.) 2,635 2,756 Cherry Hill Township NJ GO 6.30% 6/1/2012 1,110 1,156 Mercer County NJ Improvement Auth. Library System Rev. 6.00% 12/1/2003(Prere.) 1,000 1,060 Mercer County NJ Improvement Auth. Solid Waste Rev. 5.375% 9/15/2012 11,120 11,453 Mercer County NJ Improvement Auth. Special Services School Dist. Rev. 5.75% 12/15/2008 1,165 1,249 Mercer County NJ Improvement Auth. Special Services School Dist. Rev. 5.95% 12/15/2012 4,895 5,371 Monmouth County NJ Improvement Auth. Rev. (Correctional Fac.) 6.40% 8/1/2001(Prere.) 1,850 1,911 Monmouth County NJ Improvement Auth. VRDO (Pooled Govt. Loan Program) 3.80% 12/6/2000LOC 700 700 New Jersey Econ. Dev. Auth. Rev. VRDO (Hoffman-La Roche Project) 4.20% 12/4/2000LOC 6,100 6,100 New Jersey Econ. Dev. Auth. Rev. VRDO (Russell Berrie) 4.00% 12/6/2000LOC 7,000 7,000 New Jersey Environmental Infrastructure Trust Waste Water Treatment 5.00% 9/1/2017 1,525 1,475 New Jersey Transp. Trust Fund Auth. Rev. 5.75% 6/15/2020 5,000 5,278 New Jersey Transp. Trust Fund Auth. Rev. 6.00% 6/15/2019 5,000 5,294 Ocean County NJ Util. Auth. Waste Water Rev. 6.30% 1/1/2005(Prere.) 2,215 2,376 Ocean County NJ Util. Auth. Waste Water Rev. 6.35% 1/1/2005(Prere.) 4,875 5,239 Rutgers State Univ. NJ GO 6.40% 5/1/2013 3,000 3,369 ------------- 71,385 ------------- - ----------------------------------------------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (Cost $1,181,231) 1,220,949 - -----------------------------------------------------------------------------------------------------------------------------
25
- ------------------------------------------------------------------------------------------------------------------------ MARKET VALUE* (000) - ------------------------------------------------------------------------------------------------------------------------ OTHER ASSETS AND LIABILITIES (1.1%) - ------------------------------------------------------------------------------------------------------------------------ Other Assets--Note B 22,923 Liabilities (9,019) ------------- 13,904 ------------- - ------------------------------------------------------------------------------------------------------------------------ NET ASSETS (100%) - ------------------------------------------------------------------------------------------------------------------------ Applicable to 107,186,226 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $1,234,853 ======================================================================================================================== NET ASSET VALUE PER SHARE $11.52 ======================================================================================================================== *See Note A in Notes to Financial Statements. For key to abbreviations and other references, see below. - ------------------------------------------------------------------------------------------------------------------------ AT NOVEMBER 30, 2000, NET ASSETS CONSISTED OF: - ------------------------------------------------------------------------------------------------------------------------ AMOUNT PER (000) SHARE - ------------------------------------------------------------------------------------------------------------------------ Paid-in Capital $ 1,196,858 $11.17 Undistributed Net Investment Income -- -- Accumulated Net Realized Losses--Note E (1,723) (.02) Unrealized Appreciation--Note F 39,718 .37 - ------------------------------------------------------------------------------------------------------------------------- NET ASSETS $1,234,853 $11.52 =========================================================================================================================
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. 26 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 ------------------------------------ YEAR ENDED NOVEMBER 30, 2000 ------------------------------------ (000) (000) - -------------------------------------------------------------------------------- INVESTMENT INCOME INCOME Interest $51,863 $63,387 - -------------------------------------------------------------------------------- Total Income 51,863 63,387 - -------------------------------------------------------------------------------- EXPENSES The Vanguard Group--Note B Investment Advisory Services 153 130 Management and Administrative 2,057 1,862 Marketing and Distribution 232 148 Custodian Fees 17 13 Auditing Fees 8 8 Shareholders' Reports 12 14 Trustees' Fees and Expenses 2 1 - -------------------------------------------------------------------------------- Total Expenses 2,481 2,176 Expenses Paid Indirectly--Note C (17) (34) - -------------------------------------------------------------------------------- Net Expenses 2,464 2,142 - -------------------------------------------------------------------------------- NET INVESTMENT INCOME 49,399 61,245 - -------------------------------------------------------------------------------- REALIZED NET GAINS Investment Securities Sold 3 343 Futures Contracts -- 760 - -------------------------------------------------------------------------------- REALIZED NET GAIN 3 1,103 - -------------------------------------------------------------------------------- CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES -- 32,168 - -------------------------------------------------------------------------------- CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- 32,168 - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $49,402 $94,516 ================================================================================ 27 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.
- ------------------------------------------------------------------------------------------------------------------------------ New Jersey New Jersey Tax-Exempt Insured Long-Term Money Market Fund Tax-Exempt Fund -------------------------------- ------------------------------- YEAR ENDED NOVEMBER 30, ------------------------------------------------------------------ 2000 1999 2000 1999 (000) (000) (000) (000) - ------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net Investment Income $ 49,399 $ 34,553 $ 61,245 $ 58,789 Realized Net Gain 3 15 1,103 192 Change in Unrealized Appreciation (Depreciation) -- -- 32,168 (75,240) - ------------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) in Net Assets Resulting from Operations 49,402 34,568 94,516 (16,259) - ------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS Net Investment Income (49,399) (34,553) (61,245) (58,789) Realized Capital Gain -- -- -- (4,837) - ------------------------------------------------------------------------------------------------------------------------------ Total Distributions (49,399) (34,553) (61,245) (63,626) - ------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS1 Issued 1,344,025 1,136,944 266,668 306,834 Issued in Lieu of Cash Distributions 47,337 32,995 44,986 48,412 Redeemed (1,227,037) (1,086,203) (264,964) (232,335) - ------------------------------------------------------------------------------------------------------------------------------ Net Increase from Capital Share Transactions 164,325 83,736 46,690 122,911 - ------------------------------------------------------------------------------------------------------------------------------ Total Increase 164,328 83,751 79,961 43,026 - ------------------------------------------------------------------------------------------------------------------------------ NET ASSETS Beginning of Year 1,263,022 1,179,271 1,154,892 1,111,866 - ------------------------------------------------------------------------------------------------------------------------------ End of Year $1,427,350 $1,263,022 $1,234,853 $1,154,892 ============================================================================================================================== 1Shares Issued (Redeemed) Issued 1,344,025 1,136,944 23,733 26,241 Issued in Lieu of Cash Distributions 47,337 32,995 3,998 4,163 Redeemed (1,227,037) (1,086,203) (23,713) (20,010) - ------------------------------------------------------------------------------------------------------------------------------ Net Increase in Shares Outstanding 164,325 83,736 4,018 10,394 ==============================================================================================================================
28 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.
- ------------------------------------------------------------------------------------------------------------------------------ NEW JERSEY TAX-EXEMPT MONEY MARKET FUND YEAR ENDED NOVEMBER 30, ---------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 - ------------------------------------------------------------------------------------------------------------------------------ INVESTMENT OPERATIONS Net Investment Income .036 .028 .031 .033 .032 Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------ Total from Investment Operations .036 .028 .031 .033 .032 - ------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS Dividends from Net Investment Income (.036) (.028) (.031) (.033) (.032) Distributions from Realized Capital Gains -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------ Total Distributions (.036) (.028) (.031) (.033) (.032) - ------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 ============================================================================================================================== TOTAL RETURN 3.68% 2.86% 3.18% 3.32% 3.22% ============================================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Year (Millions) $1,427 $1,263 $1,179 $1,016 $918 Ratio of Total Expenses to Average Net Assets 0.18% 0.20% 0.20% 0.20% 0.20% Ratio of Net Investment Income to Average Net Assets 3.62% 2.82% 3.12% 3.27% 3.17% ==============================================================================================================================
29
- ------------------------------------------------------------------------------------------------------------------------------ NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND YEAR ENDED NOVEMBER 30, ----------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR $11.19 $11.98 $11.72 $11.64 $11.78 - ------------------------------------------------------------------------------------------------------------------------------ INVESTMENT OPERATIONS Net Investment Income .599 .590 .599 .608 .616 Net Realized and Unrealized Gain (Loss) on Investments .330 (.738) .271 .112 (.082) - ------------------------------------------------------------------------------------------------------------------------------ Total from Investment Operations .929 (.148) .870 .720 .534 - ------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS Dividends from Net Investment Income (.599) (.590) (.599) (.608) (.616) Distributions from Realized Capital Gains -- (.052) (.011) (.032) (.058) - ------------------------------------------------------------------------------------------------------------------------------ Total Distributions (.599) (.642) (.610) (.640) (.674) - ------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF YEAR $11.52 $11.19 $11.98 $11.72 $11.64 ============================================================================================================================== TOTAL RETURN 8.57% -1.31% 7.59% 6.40% 4.75% ============================================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Year (Millions) $1,235 $1,155 $1,112 $940 $849 Ratio of Total Expenses to Average Net Assets 0.19% 0.19% 0.20% 0.18% 0.20% Ratio of Net Investment Income to Average Net Assets 5.33% 5.06% 5.04% 5.26% 5.35% Portfolio Turnover Rate 14% 11% 14% 13% 11% ==============================================================================================================================
30 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 U.S. 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. 31 B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to each fund under methods approved by the board of trustees. Each fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At November 30, 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 $265 0.02% 0.3% Insured Long-Term 226 0.02 0.2 - -------------------------------------------------------------------------------- The funds' trustees and officers are also directors and officers of Vanguard. C. The funds' investment adviser may direct new issue purchases, subject to obtaining the best price and execution, to underwriters who have agreed to rebate or credit to the funds part of the underwriting fees generated. Such rebates or credits are used solely to reduce the funds' management and administrative expenses. The funds' custodian bank has also agreed to reduce its fees when the funds maintain cash on deposit in their non-interest-bearing custody accounts. For the year ended November 30, 2000, these arrangements reduced expenses by: - -------------------------------------------------------------------------------- EXPENSE REDUCTION (000) -------------------------------- MANAGEMENT AND CUSTODIAN NEW JERSEY TAX-EXEMPT FUND ADMINISTRATIVE FEES - -------------------------------------------------------------------------------- Money Market -- $17 Insured Long-Term $21 13 - -------------------------------------------------------------------------------- D. During the year ended November 30, 2000, the Insured Long-Term Tax-Exempt Fund purchased $192,142,000 of investment securities and sold $150,302,000 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 $1,163,000 through November 30, 2000, 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, 2000, the fund had available capital losses of $560,000 to offset future net capital gains through November 30, 2007. F. At November 30, 2000, net unrealized appreciation of Insured Long-Term Tax-Exempt Fund investment securities for federal income tax purposes was $38,555,000, consisting of unrealized gains of $46,146,000 on securities that had risen in value since their purchase and $7,591,000 on securities that had fallen in value since their purchase (see Note E). G. In November 2000, the American Institute of Certified Public Accountants issued new accounting guidelines for investment companies which will require the Insured Long-Term Tax Exempt Fund to change its accounting policies to begin to accrete market discounts on municipal bonds effective for the fiscal year ending November 30, 2002. This accounting change will not affect the fund's net asset value, total return, or distributions to shareholders, but may result in certain amounts being reclassified from realized and unrealized gain to interest income for financial statement purposes. Management believes this change will have no material effect on the financial statements. 32 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Trustees of Vanguard New Jersey Tax-Exempt Funds In our opinion, the accompanying statements of net assets and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Vanguard New Jersey Tax-Exempt Money Market Fund and Vanguard New Jersey Insured Long-Term Tax-Exempt Fund (constituting Vanguard New Jersey Tax-Exempt Funds, hereafter referred to as the "Funds") at November 30, 2000, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at November 30, 2000 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania January 9, 2001 - -------------------------------------------------------------------------------- SPECIAL 2000 TAX INFORMATION (UNAUDITED) FOR VANGUARD NEW JERSEY TAX-EXEMPT FUNDS This information for the fiscal year ended November 30, 2000, is included pursuant to provisions of the Internal Revenue Code. Each fund designates 100% of its income dividends as exempt-interest dividends. THE PEOPLE Who Govern Your Fund The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are part owner of the fund. Your fund trustees also serve on the board of directors of The Vanguard Group, which is owned by the funds and exists solely to provide services to them on an at-cost basis. The majority of Vanguard's board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. They bring distinguished backgrounds in business, academia, and public service to their task of working with Vanguard officers to establish the policies and oversee the activities of the funds. Among board members' responsibilities are selecting investment advisers for the funds; monitoring fund operations, performance, and costs; reviewing contracts; nominating and selecting new trustees/ directors; and electing Vanguard officers. The list below provides a brief description of each trustee's professional affiliations. The year in which the trustee joined the Vanguard board is noted in parentheses. - -------------------------------------------------------------------------------- TRUSTEES JOHN J. BRENNAN (1987) Chairman of the Board, Chief Executive Officer, and Director/Trustee of The Vanguard Group, Inc., and of 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 & Johnson*Merck 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 Argentaria, Gestion, BKF Capital, The Jeffrey Co., NeuVis, Inc., 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. (Food Products); retired Vice Chairman and Director of RJR Nabisco (Food and Tobacco Products); Director of TECO Energy, Inc., and Kmart Corp. J. LAWRENCE WILSON (1985) Retired Chairman and Chief Executive Officer 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, Direct Investor Services. 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. - -------------------------------------------------------------------------------- JOHN C. BOGLE Founder; Chairman and Chief Executive, 1974-1996. [VANGUARD SHIP LOGO] Post Office Box 2600 Valley Forge, PA 19482-2600 ABOUT OUR COVER Our cover art evokes both Vanguard's rich past and the course we've set for the future--our determination to provide superior investment performance and top-notch service. The image is based on two works: a painting titled The First Journey of "Victory," by the English artist W.L. Wyllie (1851-1931), and a sculpture of a compass rose on Vanguard's campus near Valley Forge, Pennsylvania. 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, 500, S&P MidCap 400, and S&P SmallCap 600 are trademarks of The McGraw-Hill Companies, Inc. All other index names may contain trademarks and are the exclusive property of their respective owners. WORLD WIDE WEB www.vanguard.com FUND INFORMATION 1-800-662-7447 INDIVIDUAL ACCOUNT SERVICES 1-800-662-2739 INSTITUTIONAL INVESTOR SERVICES 1-800-523-1036 This report is intended for the fund's shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current fund prospectus. (C) 2001 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corporation, Distributor. Q140 012001 -----END PRIVACY-ENHANCED MESSAGE-----