N-30D 1 newjersey.txt NEW JERSEY SEMIANNUAL REPORT VANGUARD(R) NEW JERSEY TAX-EXEMPT FUNDS Semiannual Report May 31, 2001 BOND [PHOTO OF COMPASS/SHIP] [THE VANGUARD GROUP(R) LOGO] SOME LESSONS FROM THE MARKETS Although the past year has been a trying period for many investors, it reinforced some investment truths worth keeping in mind as you build and maintain your portfolio. These include: * THINGS CHANGE. It's difficult--bordering on impossible--to consistently or precisely predict when the financial markets will turn up or down, when the economy will accelerate or slow, and which investments will lead or lag. Don't risk your hard-earned money by betting on such forecasts. * DIVERSIFICATION MATTERS. If you build and maintain a portfolio that includes different asset classes--as well as types of securities within asset classes--you give yourself a valuable buffer against severe damage from any one market segment. True, your diversified portfolio will never top the short-term performance charts. But a balanced investment approach will help you to meet your financial goals without taking undue risks. * PERSPECTIVE IS PARAMOUNT. Market declines are always painful. Yet they're inevitable if you seek the long-term rewards of investing. If you keep your focus on your long-term goals, you'll find periodic downturns much easier to endure, and you'll avoid making emotion-driven mistakes. SUMMARY * Vanguard New Jersey Insured Long-Term Tax-Exempt Fund earned a solid fiscal half-year return of 4.8%, topping the performances of its comparative measures. * Interest rates generally declined during the six months, providing a boost to prices of all but the longest-maturity securities. * Municipal bonds performed well during the period, easily outpacing the returns from stocks, which continued to struggle. CONTENTS 1 Letter from the Chairman 5 Report from the Adviser 7 Fund Profiles 9 Glossary of Investment Terms 10 Performance Summaries 11 Financial Statements LETTER from the Chairman Dear Shareholder, In an environment that was friendly to bonds but hostile to stocks, VANGUARD NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND earned a robust six-month total return of 4.8%. As you can see in the table at right, for the period ended May 31, 2001, your fund's total return (capital change plus reinvested dividends) bested those of its average peer and its unmanaged benchmark index. The fund's return is based on an increase in net asset value from $11.52 per share on November 30, 2000, to $11.78 per share on May 31, 2001, and is adjusted for dividends totaling $0.294 per share paid from net investment income. TOTAL RETURNS SIX MONTHS ENDED MAY 31, 2001 ------------------------------------------------------------- VANGUARD NEW JERSEY TAX-EXEMPT MONEY MARKET FUND 1.7% (SEC 7-Day Annualized Yield: 2.92%) Average New Jersey Tax-Exempt Money Market Fund* 1.5 ------------------------------------------------------------- VANGUARD NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND 4.8% Average New Jersey Municipal Debt Fund* 4.7 Lehman Municipal Bond Index 4.7 ------------------------------------------------------------- *Derived from data provided by Lipper Inc. ------------------------------------------------------------- Admiral Shares* ------------------------------------------------------------- VANGUARD NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND 0.4% ------------------------------------------------------------- *Return since inception on May 14, 2001. The table also presents the six-month return of VANGUARD NEW JERSEY TAX-EXEMPT MONEY MARKET FUND, which outperformed its average peer during the period. The fund's net asset value remained at $1 per share, as was expected but not guaranteed. In addition, the table includes the return for the Admiral(TM) Shares of the Insured Long-Term Tax-Exempt Fund since their debut in May. (Admiral Shares are lower-cost shares for long-standing shareholders and individuals with substantial investments in the fund.) On May 31, the Insured Long-Term Tax-Exempt Fund's yield stood at 4.38%, down from 4.89% at the end of November 2000; the Money Market Fund's yield was 2.92%, down from 3.88%. For New Jersey residents, income earned by the fund is exempt from federal and New Jersey income taxes, but may be subject to local taxes and to the federal alternative minimum tax. That means that for taxpayers in the highest federal income tax bracket (39.6%), the taxable equivalent yields were about 7.3% for the Insured Long-Term Tax-Exempt Fund and about 4.8% for the Tax-Exempt Money Market Fund at the end of the fiscal half-year. 1 MARKET BAROMETER TOTAL RETURNS PERIODS ENDED MAY 31, 2001 -------------------------------------------------------------------------------- SIX ONE FIVE MOnTHS YEAR YEARS* -------------------------------------------------------------------------------- BONDS Lehman Aggregate Bond Index (Entire market) 5.1% 13.1% 7.7% Lehman 10 Year Municipal Bond Index 4.6 11.8 6.7 Salomon Smith Barney 3-Month U.S. Treasury Bill Index 2.7 5.8 5.2 -------------------------------------------------------------------------------- STOCKS S&P 500 Index (Large-caps) -3.9% -10.6% 15.1% Russell 2000 Index (Small-caps) 12.2 5.7 8.0 Wilshire 5000 Index (Entire market) -2.5 -10.1 13.3 MSCI EAFE Index (International) -7.6 -16.9 4.2 -------------------------------------------------------------------------------- CPI Consumer Price Index 2.1% 3.6% 2.6% -------------------------------------------------------------------------------- *Annualized. FINANCIAL MARKETS IN REVIEW During the six months ended May 31, the U.S. economy was marked by two opposing trends: strength among consumers and weakness in the industrial sectors. Housing starts and sales were strong, and consumer spending remained healthy. Un-employment edged up--in May 4.4% of the labor force was unemployed-- but consumers stayed relatively calm. Indeed, a survey of consumer confidence showed improved sentiment in May, although the confidence level was well below the January 2000 high. The industrial economy fared worse. Businesses trimmed spending on capital equipment, with especially sharp cutbacks in outlays for computers and software. Industrial production declined throughout the half-year. Overall, a strong consumer economy and a weak industrial economy added up to modest growth. In the first quarter of 2001, inflation-adjusted gross domestic product increased at a 1.2% annual rate, far below the 4.8% pace during the same period in 2000. The Federal Reserve Board's Open Market Committee responded to the mixed economic picture with five reductions in its target for short-term interest rates. The first cut came in January and the most recent on May 15. In total, the FOMC sliced 250 basis points (2.5 percentage points) from short-term rates in an effort to stimulate capital spending and sustain consumers' upbeat mood. The U.S. stock market's course reflected the uncertainty in the broad economy. After a swift fall early in the six months, U.S. stocks rallied in April and May. Continued weakness in large-capitalization technology stocks kept the broad stock market in negative territory, but smaller stocks and value stocks--those issues with low prices relative to fundamental measures such as earnings and book value--thrived. Bonds turned in good results during the period. The prices of bonds with maturities of less than 5 years enjoyed the biggest gains, as their yields declined in step with the FOMC's rate cuts. (Bond prices move in the opposite direction from their yields.) The yields on longer-term bonds rose slightly, heightening 2 the difference between the cost of short-term and long-term borrowing. At the end of May, the difference between the yield of the 30-year U.S. Treasury bond and that of the 3-year Treasury note stood at 116 basis points (1.16 percentage points), up from just 3 basis points six months earlier. THE MUNI MARKET Municipal bonds also enjoyed strong returns during the six months. The gap between the yields of long-term U.S. Treasuries and long-term municipal bonds widened a bit during the period, but remained relatively narrow. In fact, on May 31, the yield of the 30-year U.S. Treasury bond was just 48 basis points (0.48 percentage point) higher than that of a high-quality, long-term muni bond. In other words, municipal bonds, whose interest is exempt from federal income taxes, offer a yield that is more than 91% of that of Treasury bonds, which are fully taxable at a rate of up to 39.6%. (As a result of the new tax law, the top rate will drop to 38.6% on July 1.) The yield of short-term munis fell 145 basis points to 2.75%, while that of the 3-month Treasury bill fell more than 250 basis points during the period to 3.62%. The Report from the Adviser, which begins on page 5, provides more details about the municipal bond market. PERFORMANCE OVERVIEW The 4.8% return of the New Jersey Insured Long-Term Tax-Exempt Fund was quite good, both on an absolute basis and relative to the average return of its peer mutual funds. During the half-year, the fund's 2.5% income return was augmented by a price increase of 2.3%. ------------------------ THE PRICES OF BONDS WITH MATURITIES OF LESS THAN 5 YEARS ENJOYED BIG GAINS, AS THEIR YIELDS DECLINED IN STEP WITH THE FED'S RATE CUTS. ------------------------ A six-month return, of course, does not provide a complete picture of a bond fund's performance. That's because semiannual returns for bond funds account for only half of the year's interest income, while price changes immediately reflect current movements in interest rates--rising when rates fall and falling when rates rise. For perspective, it's important to consider a full year's interest income when evaluating a bond fund. For the 12 months ended May 31, 2001, the Insured Long-Term Tax-Exempt Fund earned an excellent total return of 12.7%, consisting of an income return of 5.6% and a price increase of 7.1%. Keep in mind that while falling interest rates have a salutary impact on bond prices, a rate decline also means a reduction in the income paid by fixed income investments. When interest rates drop, bond prices rise immediately, but over the long haul, lower rates diminish the income earned on reinvested dividends. 3 Though bond prices rise and fall over time, it is interest income that accounts for virtually all of a bond fund's long-term total return. Therefore, the best indicator of a bond fund's future long-term returns--though it is a far-from-perfect measure--is the fund's yield, currently about 4.4% for both share classes of the Insured Long-Term Tax-Exempt Fund. Your funds' fine relative results over the past six months--and over their lifetimes--can be attributed to their significant cost advantage over similar funds and to skillful investment management. Investor Shares of our Insured Long-Term Tax-Exempt and Tax-Exempt Money Market Funds have annualized expense ratios (expenses as a percentage of average net assets) of 0.20% and 0.19% (or $2.00 and $1.90 per $1,000 invested), respectively--a fraction of the 1.05% charged by the average New Jersey tax-exempt fund and the 0.66% charged by the average New Jersey tax-exempt money market fund, according to Lipper Inc. The combination of excellent investment management by Vanguard's Fixed Income Group, which oversees all of our municipal bond portfolios, and our cost advantage provides our shareholders with benefits that have proven difficult to beat. We thank you for your confidence in our approach and for entrusting your money to us. IN SUMMARY During the stock market turbulence of the past year, many investors seemed to have rediscovered the benefits of bonds. Of course, we believe that the diversification and interest income provided by fixed income securities always have been--and always will be--valuable pieces of a solid investment program. And for investors in higher tax brackets, municipal bonds play an especially beneficial role. We believe that a diversified portfolio of stock, bond, and money market funds--apportioned in accordance with your goals and risk tolerance--is the best response to the market's ever-present uncertainties. Once you've devised such a portfolio, we recommend sticking with your plan for the long haul. /s/ JOHN J. BRENNAN Chairman and Chief Executive Officer June 12, 2001 [PHOTO OF JOHN J. BRENNAN] JOHN J. BRENNAN CHAIRMAN AND CHIEF EXECUTIVE OFFICER 4 REPORT from the Adviser VANGUARD FIXED INCOME GROUP Municipal bonds performed well during the six months ended May 31, 2001. Prices generally rose during the fiscal half-year of VANGUARD NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND, supplementing the fund's interest income and resulting in a solid total return of 4.8%. VANGUARD NEW JERSEY TAX-EXEMPT MONEY MARKET fund earned a six-month return of 1.7% that topped that of its average peer. ------------------------------------------ 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 Over the past several months, low economic visibility has hampered forecasters' ability to predict the future. Conflicting signals about the health of the economy and the outlook for corporate profits continue to make short-term forecasts--not to mention long-term estimates--very difficult. Corporate capital spending is weak and the manufacturing sector is suffering. But consumer spending has remained relatively strong, even in the face of higher fuel costs and a softening job market. The Federal Reserve Board has dealt with the economic slowdown-- real (inflation-adjusted) gross domestic product slipped to an annual rate of 1.2% during the first quarter of 2001--by cutting its target for short-term interest rates. The Fed trimmed the federal funds rate by a total of 250 basis points (2.5 percentage points) over the past six months, and further cuts are likely. The decline in short-term interest rates has resulted in a dramatic steepening in the yield curves (a representation of yields across maturities) for both U.S. Treasury securities and municipal bonds. President George Bush's tax-cut plan will bring refunds of $300 to $600 to taxpayers in the coming months and will phase in lower tax rates across all brackets. The immediate effect of these changes on munis is unclear because the phase-in period will last five years. STATE BUDGETS UNDER SCRUTINY State tax revenues have been mounting substantially over the past several years, and the improving fiscal health of many states led to upgrades in their bond credit ratings. Over the past several months, however, the expansion in tax revenues has slowed as the pace of economic growth decelerated. Most states have built solid rainy-day funds and have reduced debt--both positive developments in the face of the economic slowdown--but some states have also reduced income tax rates. In this environment, revenue estimates and budgets will be under close scrutiny. Consequently, the trend of upgrading states' credit quality has probably already peaked. 5 MOVEMENT IN MUNI YIELDS During the six months, municipal bonds outperformed Treasuries across most maturities, coming up short only among 1-year securities. The Treasury yield curve steepened more than the muni curve, which tends to be more stable. This means that yields of shorter-term Treasury securities declined more sharply than those of shorter-term munis. The yield of the 1-year Treasury note slipped 234 basis points (2.34 percentage points), while the yield of the comparable muni fell 153 basis points (1.53 percentage points). For intermediate-term issues, the yield of the 10-year Treasury note declined slightly during the period, falling just 9 basis points. The yield of the 10-year muni declined 27 basis points. Among bonds with maturities of 30 years, Treasury yields actually rose a bit--reflecting heightened inflation concerns and a belief that federal budget surpluses won't be as large as previously forecast--and muni yields slipped 16 basis points. Overall, the relative attractiveness of munis declined somewhat during the fiscal half-year, but for investors in most tax brackets, municipal bonds continue to provide solid value. On May 31, a 10-year muni provided a tax-exempt yield equal to about 82% of the taxable yield of a comparable Treasury bond, down from about 86% six months earlier. Nationwide, muni bond issuance is up 41% over the past year; supply in New Jersey dropped 57% over the 12 months ended May 31. OUR INVESTMENT APPROACH Because volatility in the equity markets showed no signs of letting up during the half-year, bonds remained a relatively popular choice for investors seeking to balance their investment portfolios. Going forward, we pledge to maintain our focus on providing a high-quality, low-cost fund that can play an important role in the portfolios of many investors. Ian A. MacKinnon, Managing Director Christopher M. Ryon, Principal Pamela Wisehaupt Tynan, Principal Christopher W. Alwine, Principal Kathryn Allen, Principal June 13, 2001 6 FUND PROFILE As of May 31, 2001 for New Jersey Tax-Exempt Money Market Fund This Profile provides a snapshot of the fund's characteristics. Key terms are defined on page 9. ---------------------------------- FINANCIAL ATTRIBUTES Yield 2.9% Average Maturity 59 days Average Quality MIG-1 Expense Ratio 0.19%* ---------------------------------- ---------------------------------- DISTRIBUTION BY CREDIT QUALITY (% of portfolio) MIG-1/SP-1+ 73.1% A-1/P-1 24.0 AAA/AA 2.9 A 0.0 ---------------------------------- Total 100.0% ---------------------------------- *Annualized. [PHOTO OF COMPUTER] VISIT OUR WEBSITE WWW.VANGUARD.COM FOR REGULARLY UPDATED FUND INFORMATION. 7 This Profile provides a snapshot of the fund's characteristics, compared where appropriate with an unmanaged index. Key terms are defined on page 9. --------------------------------------------------------- FINANCIAL ATTRIBUTES --------------------------------------------------------- LEHMAN FUND INDEX* --------------------------------------------------------- Number of Issues 286 40,955 Yield 4.4% 4.6% Yield--Admiral Shares 4.4% 4.6% Yield to Maturity 4.6% -- Average Coupon 5.0% 5.4% Average Maturity 9.2 years 13.6 years Average Quality AAA AA+ Average Duration 6.6 years 7.7 years Expense Ratio 0.20%** -- Expense Ratio-Admiral Shares 0.14%** -- Cash Investments 0.0% -- --------------------------------------------------------- ---------------------------------------- DISTRIBUTION BY CREDIT QUALITY (% of portfolio) ---------------------------------------- AAA 92.9% AA 6.9 A 0.2 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 5.8% 1-5 Years 16.6 5-10 Years 45.7 10-20 Years 24.8 20-30 Years 7.0 Over 30 Years 0.1 ---------------------------------- Total 100.0% ---------------------------------- ---------------------------------- INVESTMENT FOCUS (% of portfolio) ---------------------------------- CREDIT QUALITY LONG AVERAGE MATURITY HIGH ---------------------------------- * Lehman Municipal Bond Index. **Annualized. [PHOTO OF COMPUTER] VISIT OUR WEBSITE WWW.VANGUARD.COM FOR REGULARLY UPDATED FUND INFORMATION. 8 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 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-SQUARD. 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 a fund's returns bore no relationship to the market's returns, its R-squared would be 0. -------------------------------------------------------------------------------- YIELD. A snapshot of a fund's interest income. The yield, expressed as a percentage of the fund's net asset value, is based on income earned over the past 30 days (7 days for money market funds) and is annualized, or projected forward for the coming year. -------------------------------------------------------------------------------- YIELD TO MATURITY. The rate of return an investor would receive if the securities held by a fund were held to their maturity dates. -------------------------------------------------------------------------------- 9 PERFORMANCE SUMMARIES In the performance summaries below, all of the data represent past performance, which cannot be used to predict future returns that may be achieved by the funds. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund. For bond funds, both share price and return can fluctuate widely. An investor's shares, when redeemed, could be worth more or less than their original cost. NEW JERSEY TAX-EXEMPT MONEY MARKET FUND -------------------------------------------------------------------------------- TOTAL INVESTMENT RETURNS (%) NOVEMBER 30, 1990-MAY 31, 2001 -------------------------------------------------------------------------------- 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 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 2001** 1.7 1.5 -------------------------------------------------------------------------------- SEC 7-Day Annualized Yield (5/31/2001): 2.92% -------------------------------------------------------------------------------- *Average New Jersey Tax-Exempt Money Market Fund; derived from data provided by Lipper Inc. **Six months ended May 31,2001. See Financial Highlights table on page 25 for dividend information for the past five years. -------------------------------------------------------------------------------- NEW JERSEY INSURED LONG-TERM TAXS-EXEMPT FUND -------------------------------------------------------------------------------- TOTAL INVESTMENT RETURNS (%) NOVEMBER 30, 1990-MAY 31, 2001 -------------------------------------------------------------------------------- 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 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 2001** 2.3 2.5 4.8 4.7 -------------------------------------------------------------------------------- *Lehman Municipal Bond Index. **Six months ended May 31, 2001. See Financial Highlights table on page 26 for dividend and capital gains information for the past five years. -------------------------------------------------------------------------------- 10 FINANCIAL STATEMENTS May 31, 2001 (unaudited) STATEMENT OF NET ASSETS This Statement provides a detailed list of each fund's municipal bond holdings, including each security's market value on the last day of the reporting period and information on credit enhancements (insurance or letters of credit). Securities are grouped and subtotaled according to their insured or noninsured status. Other assets are added to, and liabilities are subtracted from, the value of Total Municipal Bonds to calculate the fund's Net Assets. Finally, Net Assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) Per Share. At the end of the Statement of Net Assets of each fund, you will find a table displaying the composition of the fund's net assets. 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 (99.5%) --------------------------------------------------------------------------------------------------- Burlington County NJ BAN 2.78% 6/7/2002* 9,248 9,252 Burlington County NJ BAN 3.20% 4/19/2002 4,730 4,732 Burlington County NJ BAN 3.30% 3/8/2002 4,362 4,363 Burlington County NJ BAN 4.80% 8/10/2001 8,300 8,308 Burlington County NJ BAN 5.25% 6/8/2001 5,750 5,752 Cherry Hill Township NJ BAN 4.55% 10/11/2001 39,474 39,518 Cranbury Township NJ BAN 4.70% 10/3/2001 4,963 4,970 Delaware River & Bay Auth. of New Jersey & Delaware VRDO 2.65% 6/7/2001 7,500 7,500 Englewood NJ BAN 4.80% 7/13/2001 5,353 5,356 Essex County NJ Improvement Auth. Rev. VRDO (County Asset Sale Project) 2.70% 6/6/2001(2) 10,150 10,150 Essex County NJ Improvement Auth. Rev. VRDO (Pooled Govt. Loan) 2.45% 6/6/2001LOC 42,800 42,800 Florham Park NJ BAN 4.60% 11/2/2001 8,775 8,786 Freehold NJ Regional High School Dist. TOB VRDO 2.80% 6/7/2001(3)Y 9,690 9,690 Freehold Township NJ BAN 4.75% 11/9/2001 9,050 9,068 Gloucester County NJ BAN 4.75% 7/31/2001 5,300 5,304 Gloucester County NJ PCR VRDO (Mobil Oil Refining Corp. Project) 2.40% 6/6/2001 20,200 20,200 Holmdel Township NJ BAN 3.70% 2/12/2002 5,829 5,845 Mendham Township NJ School Dist. GO 4.85% 7/18/2001 6,791 6,795 Mercer County NJ BAN .75% 12/13/2001 51,380 51,503 Middlesex County NJ BAN 4.75% 7/24/2001 24,717 24,736 Millburn Township NJ School Dist. GO 3.25% 9/21/2001 9,800 9,808 11 --------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE^ NEW JERSEY TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000) --------------------------------------------------------------------------------------------------- Monmouth County NJ Improvement Auth. Rev. (Capital Equipment Pooled Lease Program) 6.00% 10/1/2001 2,025 2,045 Monmouth County NJ Improvement Auth. Rev. VRDO (Pooled Govt. Loan Program) 2.65% 6/6/2001LOC 53,115 53,115 Moorestown Township NJ BAN 3.30% 5/30/2002 16,700 16,781 Morris County NJ GO 4.625% 9/15/2001 3,990 3,995 Morris Township NJ BAN 4.60% 9/19/2001 5,991 5,998 New Jersey Building Auth. Rev. TOB VRDO 2.82% 6/7/2001(1)Y 42,065 42,065 New Jersey COP 5.00% 6/15/2001 5,895 5,897 New Jersey Econ. Dev. Auth. CP (Chambers Cogeneration Limited Partnership Project) 2.70% 8/7/2001 21,300 21,300 New Jersey Econ. Dev. Auth. CP (Chambers Cogeneration Limited Partnership Project) 2.95% 7/10/2001 12,000 12,000 New Jersey Econ. Dev. Auth. CP (Chambers Cogeneration Limited Partnership Project) 3.00% 7/12/2001 13,900 13,900 New Jersey Econ. Dev. Auth. CP (Chambers Cogeneration Limited Partnership Project) 3.10% 7/17/2001 10,000 10,000 New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 2.95% 7/10/2001 25,900 25,900 New Jersey Econ. Dev. Auth. Fac. Rev. CP (Logan Project) 3.10% 7/11/2001 9,200 9,200 New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO (New Jersey Natural Gas Project) 3.05% 6/4/2001(2)LOC 6,500 6,500 New Jersey Econ. Dev. Auth. PCR VRDO (Exxon Project) 2.05% 6/4/2001 12,000 12,000 New Jersey Econ. Dev. Auth. PCR VRDO (Public Service Electric & Gas Co.) 2.50% 6/6/2001(1) 8,620 8,620 New Jersey Econ. Dev. Auth. TOB VRDO (New Jersey Transit Corp. Light Rail Transit System Project) 2.80% 6/7/2001(4)Y 7,465 7,465 New Jersey Econ. Dev. Auth. VRDO (Bennedictine Abbey Newark) 2.80% 6/6/2001 21,925 21,925 New Jersey Econ. Dev. Auth. VRDO (Lawrence School Project) 2.25% 6/4/2001LOC 24,100 24,100 New Jersey Econ. Dev. Auth. VRDO (Natural Gas Fac. NUI Corp.) 3.00% 6/4/2001(2)LOC 31,800 31,800 New Jersey Econ. Dev. Auth. VRDO (Russell Berrie) 2.85% 6/6/2001LOC 7,000 7,000 New Jersey Econ. Dev. Auth. VRDO (United States Golf Association) 2.85% 6/7/2001LOC 3,700 3,700 New Jersey Econ. Dev. Auth. Water Fac. TOB VRDO (New Jersey American Water Co. Project) 2.86% 6/7/2001(3)Y 4,850 4,850 New Jersey Econ. Dev. Auth. Water Fac. VRDO (United Water Co.) 3.25% 6/4/2001(2) 200 200 New Jersey Educ. Fac. Auth. Rev. VRDO (College of New Jersey) 2.70% 6/7/2001(2)LOC 32,100 32,100 New Jersey Educ. Fac. Auth. Rev. VRDO (Institutional Defense Analyses) 2.95% 6/7/2001 13,695 13,695 New Jersey GO 5.00% 3/1/2002 13,205 13,391 New Jersey GO 6.50% 9/15/2001(Prere.) 1,500 1,534 New Jersey GO TOB VRDO 2.80% 6/7/2001Y 26,660 26,660 New Jersey Health Care Fac. Financing Auth. Rev. VRDO (Holy Name Hosp.) 2.60% 6/7/2001LOC 7,900 7,900 New Jersey Health Care Fac. Financing Auth. Rev. VRDO (Hosp. Capital Asset Pooled Program) 2.65% 6/7/2001LOC 65,100 65,100 New Jersey Health Care Fac. Financing Auth. Rev. VRDO (Princeton Medical Center) 2.60% 6/7/2001 4,100 4,100 New Jersey Housing & Mortgage Finance Agency Rev. TOB VRDO 2.86% 6/7/2001(1)Y 5,700 5,700 12 --------------------------------------------------------------------------------------------------- FACE MARKET MATURITY AMOUNT VALUE^ NEW JERSEY TAX-EXEMPT MONEY MARKET FUND COUPON DATE (000) (000) --------------------------------------------------------------------------------------------------- New Jersey TRAN CP 3.20% 6/7/2001 27,900 27,900 New Jersey TRAN CP 4.15% 6/12/2001 10,000 10,000 New Jersey Transp. Corp. COP TOB VRDO 2.85% 6/7/2001Y 4,995 4,995 New Jersey Transp. Corp. Rev. 5.25% 9/1/2001(ETM) 7,000 7,043 New Jersey Transp. Trust Fund Auth. Rev. 4.25% 6/15/2001 10,255 10,255 New Jersey Transp. Trust Fund Auth. Rev 4.25% 6/15/2002 14,370 14,586 New Jersey Transp. Trust Fund Auth. Rev. 5.00% 6/15/2001 3,000 3,001 New Jersey Transp. Trust Fund Auth. Rev. 5.25% 6/15/2001 12,970 12,975 New Jersey Transp. Trust Fund Auth. Rev. TOB VRDO 2.80% 6/7/2001(1)Y 9,520 9,520 New Jersey Transp. Trust Fund Auth. Rev. TOB VRDO 2.85% 6/7/2001(4)Y 26,820 26,820 New Jersey Transp. Trust Fund Auth. Rev. TOB VRDO 2.90% 6/7/2001(4)Y 19,955 19,955 New Jersey Turnpike Auth. Rev. TOB VRDO 2.85% 6/7/2001(1)Y 12,990 12,990 New Jersey Turnpike Auth. Rev. TOB VRDO 2.85% 6/7/2001(1)Y 21,345 21,345 New Jersey Turnpike Auth. Rev. VRDO 2.70% 6/6/2001(3)LOC 129,650 129,650 Port Auth. of New York & New Jersey CP 2.65% 9/6/2001 8,360 8,360 Port Auth. of New York & New Jersey CP 3.00% 8/21/2001 17,820 17,820 Port Auth. of New York & New Jersey CP 3.10% 8/9/2001 18,200 18,200 Port Auth. of New York & New Jersey TOB VRDO 2.85% 6/7/2001(1)Y 27,995 27,995 Princeton Township NJ BAN 3.20% 9/14/2001 5,000 5,004 Princeton Township NJ BAN 4.50% 12/14/2001 4,300 4,307 Princeton Univ. NJ CP 2.50% 8/27/2001 6,800 6,800 Princeton Univ. NJ CP 2.70% 8/9/2001 4,300 4,300 Princeton Univ. NJ CP 2.90% 7/17/2001 12,000 12,000 Readington Township NJ BAN 3.30% 1/11/2002 7,421 7,434 Readington Township NJ BAN 3.30% 4/25/2002 10,254 10,276 Salem County NJ PCR Finance Auth. (PECO Project) 2.65% 8/8/2001 19,000 19,000 Scotch Plains Township NJ BAN 4.95% 6/8/2001 5,250 5,250 Secaucus NJ School Dist. GO 4.90% 6/27/2001 6,546 6,548 Somerset County NJ Ind. Finance Auth. PCR VRDO (American Cyanamid Co. Project) 3.00% 6/6/2001 10,900 10,900 Union County NJ BAN 3.60% 2/22/2002 23,100 23,162 Union County NJ PCR VRDO (Exxon Project) 2.20% 6/4/2001 22,100 22,100 Union County NJ PCR VRDO (Exxon Project) 2.25% 6/4/2001 25,300 25,300 Vineland NJ BAN 3.75% 1/17/2002 12,000 12,055 Warren Township NJ BAN 3.40% 5/15/2002 5,000 5,030 West Windsor Township NJ BAN 4.60% 12/7/2001 14,973 14,996 West Windsor Township NJ BAN 4.75% 10/25/2001 11,480 11,501 Outside New Jersey: Puerto Rico Electric Power Auth. Rev. TOB VRDO 2.60% 6/7/2001(4)Y 4,100 4,100 Puerto Rico Govt. Dev. Bank VRDO 2.55% 6/6/2001(1) 700 700 Puerto Rico Highway & Transp. Auth. TOB VRDO 2.60% 6/7/2001(1)Y 7,740 7,740 Puerto Rico Highway & Transp. Auth. TOB VRDO 2.60% 6/7/2001(4)Y 5,305 5,305 Puerto Rico Highway & Transp. Auth. VRDO 2.50% 6/6/2001(2) 6,700 6,700 Puerto Rico Ind. Medical & Environmental Fac. Finance Auth. PCR PUT (Abbott Laboratories Project) 4.00% 3/1/2002 8,750 8,750 Puerto Rico Infrastructure Financing Auth. Special Tax Rev. TOB VRDO 2.60% 6/7/2001(2)Y 15,380 15,380 --------------------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (COST $1,453,020) 1,453,020 --------------------------------------------------------------------------------------------------- 13 --------------------------------------------------------------------------------------------------- MARKET VALUE^ NEW JERSEY TAX-EXEMPT MONEY MARKET FUND (000) --------------------------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (0.5%) --------------------------------------------------------------------------------------------------- Other Assets--Note B 24,124 Liabilities (17,222) ---------- 6,902 ---------- --------------------------------------------------------------------------------------------------- NET ASSETS (100%) --------------------------------------------------------------------------------------------------- Applicable to 1,459,908,274 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $1,459,922 =================================================================================================== NET ASSET VALUE PER SHARE $1.00 ===================================================================================================
^See Note A in Notes to Financial Statements. *Securities purchased on a when-issued or delayed delivery basis for which the fund has not taken delivery as of May 31, 2001. +Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At May 31, 2001, the aggregate value of these securities was $252,575,000, representing 17.3% of net assets. For key to abbreviations and other references, see page 22. -------------------------------------------------------------------------------- AT MAY 31, 2001, NET ASSETS CONSISTED OF: -------------------------------------------------------------------------------- AMOUNT PER (000) SHARE -------------------------------------------------------------------------------- Paid-in Capital $1,459,924 $1.00 Undistributed Net Investment Income -- -- Accumulated Net Realized Losses (2) -- Unrealized Appreciation -- -- -------------------------------------------------------------------------------- NET ASSETS $1,459,922 $1.00 ================================================================================ 14
------------------------------------------------------------------------------------------------------ FACE MARKET MATURITY AMOUNT VALUE^ NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) ------------------------------------------------------------------------------------------------------ MUNICIPAL BONDS (101.6%) ------------------------------------------------------------------------------------------------------ ISSUER INSURED (85.1%) Atlantic City NJ Board of Educ. GO 6.00% 12/1/2012(4) 4,600 5,214 Atlantic City NJ Board of Educ. GO 6.10% 12/1/2015(4) 2,000 2,278 Atlantic City NJ GO 5.25% 12/15/201(4) 1,990 2,087 Atlantic City NJ GO 5.25% 12/15/201(4) 2,190 2,261 Atlantic County NJ COP 6.00% 3/1/2014(3) 3,685 4,129 Atlantic County NJ COP 6.00% 3/1/2015(3) 1,480 1,654 Atlantic County NJ COP 7.40% 3/1/2010(3) 1,755 2,140 Atlantic County NJ COP 7.40% 3/1/2011(3) 4,025 4,926 Atlantic County NJ Util. Auth. Sewer Rev. 5.85% 1/15/2015(2) 3,000 3,132 Bergen County NJ Util. Auth. Water PCR 5.50% 6/15/2002(3)(Prere.) 5,000 5,138 Camden County NJ Improvement Auth. Lease Rev. 5.375% 9/1/2019(4) 850 866 Camden County NJ Improvement Auth. Lease Rev. 5.50% 9/1/2015(4) 1,470 1,542 Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2004(3) 8,345 7,363 Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2005(3) 18,545 15,653 Camden County NJ Muni. Util. Auth. Sewer Rev. 0.00% 9/1/2006(3) 18,545 14,917 Cape May County NJ Muni. Util. Auth. Rev. 5.75% 1/1/2016(1) 14,675 15,094 Cape May County NJ PCR (Atlantic City Electric) 6.80% 3/1/2021(1) 15,400 18,624 Chathams Dist. NJ Board of Educ. GO 5.10% 1/15/2022(1) 1,155 1,155 Cherry Hill Township NJ School Dist. GO 4.70% 2/15/2013(4) 1,125 1,130 Delaware River & Bay Auth. Rev. 5.375% 1/1/2013(2) 750 795 Delaware River & Bay Auth. Rev. 5.75% 1/1/2029(2) 5,000 5,270 Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.40% 1/1/2013(3) 6,750 7,036 Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.50% 1/1/2026(3) 22,885 23,390 Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.625% 1/1/2026(4) 5,000 5,187 Delaware River Port Auth. Pennsylvania & New Jersey Rev. 5.75% 1/1/2022(4) 10,000 10,518 Egg Harbor Township NJ School Dist. GO 5.00% 7/15/2012(3) 2,640 2,754 Egg Harbor Township NJ School Dist. GO 5.00% 7/15/2013(3) 2,780 2,873 Egg Harbor Township NJ School Dist. GO 5.00% 7/15/2020(3) 2,000 1,983 Egg Harbor Township NJ School Dist. GO 5.00% 7/15/2021(3) 2,000 1,977 Egg Harbor Township NJ School Dist. GO 5.10% 7/15/2022(3) 2,950 2,950 Elizabeth City NJ GO 6.60% 8/1/2001(1)(Prere.) 8,525 8,747 Elizabeth City NJ GO 6.60% 8/1/2006(1)(Prere.) 225 231 Essex County NJ Correctional Fac. Lease Rev. 5.75% 10/1/2030(3) 2,650 2,784 Essex County NJ Improvement Auth. Lease Rev. 5.50% 12/1/2008(2) 2,560 2,693 Essex County NJ Improvement Auth. Lease Rev. 5.50% 12/1/2013(2) 5,150 5,332 Essex County NJ Improvement Auth. Lease Rev. 5.75% 10/1/2014(3) 3,390 3,664 Essex County NJ Improvement Auth. Lease Rev. 5.75% 10/1/2015(3) 5,090 5,466 Essex County NJ Util. Auth. Solid Waste Rev. 0.00% 4/1/2010(4) 1,000 674 Essex County NJ Util. Auth. Solid Waste Rev. 4.875% 4/1/2018(4) 3,500 3,418 Essex County NJ Util. Auth. Solid Waste Rev. 5.60% 4/1/2006(4)(Prere.) 2,200 2,417 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 3,197 Gloucester Township NJ Muni. Util. Auth. Rev. 5.65% 3/1/2018(2) 2,755 2,966 Hamilton Township NJ Muni. Util. Auth. Rev. 6.00% 8/15/2002(3)(Prere.) 1,000 1,056 Higher Educ. Assistance Auth. of New Jersey Student Loan Rev. 6.00% 6/1/2013(1) 3,000 3,239 Higher Educ. Assistance Auth. of New Jersey Student Loan Rev. 6.00% 6/1/2015(1) 5,575 5,933 Higher Educ. Assistance Auth. of New Jersey Student Loan Rev. 6.10% 6/1/2016(1) 3,000 3,199 Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2003(1) 3,800 3,533 Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2004(1) 3,750 3,344 Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2005(1) 3,805 3,247 Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 0.00% 8/1/2006(1) 2,000 1,631 15 ------------------------------------------------------------------------------------------------------ FACE MARKET MATURITY AMOUNT VALUE^ NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) ------------------------------------------------------------------------------------------------------ Hoboken-Union City-Weehawken NJ Sewer Auth. Rev. 6.25% 8/1/2013(1)Y 9,590 11,071 Hopewell Valley NJ Regional School Dist. GO 5.00% 8/15/2013(3) 2,315 2,378 Hudson County NJ Correctional Fac. COP 6.50% 12/1/2011(1) 9,000 9,420 Hudson County NJ GO 6.55% 7/1/2007(3) 1,300 1,474 Hudson County NJ GO 6.55% 7/1/2009(3) 635 731 Irvington Township NJ GO 0.00% 8/1/2007(1) 1,000 776 Irvington Township NJ GO 0.00% 8/1/2009(1) 2,580 1,805 Irvington Township NJ GO 0.00% 8/1/2010(1) 2,080 1,381 Lenape NJ Regional High School Dist. GO 5.00% 4/1/2011(3) 1,625 1,674 Marlboro Township NJ Board of Educ. GO 5.25% 7/15/2013(4) 2,625 2,734 Marlboro Township NJ Board of Educ. GO 5.25% 7/15/2014(4) 2,790 2,887 Marlboro Township NJ Board of Educ. GO 5.25% 7/15/2018(4) 2,850 2,891 Middlesex County NJ Import Auth. Util. Systems Rev. (Perth Amboy Project) 0.00% 9/1/2015(2) 2,000 979 Middlesex County NJ Import Auth. Util. Systems Rev. (Perth Amboy Project) 0.00% 9/1/2016(2) 3,000 1,380 Middlesex County NJ Import Auth. Util. Systems Rev. (Perth Amboy Project) 0.00% 9/1/2018(2) 4,550 1,851 Middlesex County NJ Util. Auth. Sewer Rev. 5.125% 12/1/2016(3) 3,050 3,080 Middlesex County NJ Util. Auth. Sewer Rev. 5.25% 3/15/2010(2) 1,740 1,826 Middlesex County NJ Util. Auth. Sewer Rev. 5.375% 9/15/2015(2) 3,775 3,875 Middletown Township NJ Board of Educ. GO 5.00% 8/1/2014(4) 2,735 2,789 Middletown Township NJ Board of Educ. GO 5.00% 8/1/2015(4) 2,015 2,040 Monmouth County NJ Improvement Auth. Rev. (Howell Township Board of Educ.) 5.80% 7/15/2017(2) 1,180 1,242 Monroe Township NJ Muni. Util. Auth. Middlesex County Rev. 5.25% 2/1/2013(3) 1,210 1,265 Monroe Township NJ Muni. Util. Auth. Middlesex County Rev. 5.25% 2/1/2014(3) 1,235 1,281 Mount Laurel Township NJ Muni. Util. Auth. Util. System Rev. 6.00% 7/1/2004(1)(Prere.) 2,580 2,773 Mount Laurel Township NJ Muni. Util. Auth. Util. System Rev. 6.00% 7/1/2015(1) 1,670 1,740 New Brunswick NJ Housing & Urban Dev. Rev. 5.75% 7/1/2002(1)(Prere. 13,200 13,867 New Brunswick NJ Housing & Urban Dev. Rev. 5.75% 7/1/2024(1) 440 449 New Brunswick NJ Housing & Urban Dev. Rev. 6.00% 7/1/2012(1) 195 203 New Jersey Econ. Dev. Auth. Lease Rev. (Bergen County Administration Complex) 5.50% 11/15/201(1) 4,375 4,652 New Jersey Econ. Dev. Auth. Lease Rev. (Bergen County Administration Complex) 5.625% 11/15/201(1) 4,870 5,160 New Jersey Econ. Dev. Auth. Lease Rev. (Bergen County Administration Complex) 5.75% 11/15/201(1) 5,440 5,757 New Jersey Econ. Dev. Auth. Lease Rev. (Bergen County Administration Complex) 5.75% 11/15/201(1) 6,080 6,391 New Jersey Econ. Dev. Auth. Market Transition Fac. Rev. 5.80% 7/1/2007(1) 1,000 1,070 New Jersey Econ. Dev. Auth. Market Transition Fac. Rev. 5.80% 7/1/2009(1) 7,250 7,824 New Jersey Econ. Dev. Auth. Market Transition Fac. Rev. 5.875% 7/1/2011(1) 23,175 25,044 New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO (Natural Gas Fac. NUI Corp.) 3.00% 6/4/2001(2)LOC 2,700 2,700 New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO (New Jersey Natural Gas Project) 2.75% 6/6/2001(2)LOC 3,200 3,200 New Jersey Econ. Dev. Auth. Natural Gas Fac. Rev. VRDO (New Jersey Natural Gas Project) 3.05% 6/4/2001(2)LOC 900 900 New Jersey Econ. Dev. Auth. Rev. (Hillcrest Health Service) 0.00% 1/1/2012(2) 2,500 1,518 New Jersey Econ. Dev. Auth. Rev. (Hillcrest Health Service) 0.00% 1/1/2013(2) 3,000 1,716 New Jersey Econ. Dev. Auth. Rev. (School Fac.) 5.125% 6/15/2014(2) 11,925 12,259 New Jersey Econ. Dev. Auth. Rev. (School Fac.) 5.25% 6/15/2015(2) 5,495 5,664 16 ------------------------------------------------------------------------------------------------------ FACE MARKET MATURITY AMOUNT VALUE^ NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) ------------------------------------------------------------------------------------------------------ New Jersey Econ. Dev. Auth. Rev. (School Fac.) 5.25% 6/15/2016(2) 6,725 6,888 New Jersey Econ. Dev. Auth. Rev. (School Fac.) 5.25% 6/15/2017(2) 7,040 7,172 New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2008(1) 2,305 1,706 New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2011(1) 4,650 2,931 New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2012(1) 4,550 2,698 New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2013(1) 4,500 2,513 New Jersey Econ. Dev. Auth. Rev. (St. Barnabas Project) 0.00% 7/1/2014(1) 4,210 2,212 New Jersey Econ. Dev. Auth. Rev. (Transp. Project) 5.25% 5/1/2017(4) 4,500 4,561 New Jersey Econ. Dev. Auth. Rev. (Transp. Project) 5.875% 5/1/2015(4) 3,465 3,720 New Jersey Educ. Fac. Auth. Rev. 5.00% 9/1/2019(4) 2,715 2,683 New Jersey Educ. Fac. Auth. Rev. 5.75% 9/1/2016(4) 8,425 8,991 New Jersey Educ. Fac. Auth. Rev. (Drew Univ.) 5.00% 7/1/2017(1) 1,650 1,645 New Jersey Educ. Fac. Auth. Rev. (Higher Educ. Technology) 5.875% 9/1/2007(2) 5,890 6,512 New Jersey Educ. Fac. Auth. Rev. (Higher Educ. Technology) 5.875% 9/1/2008(2) 6,165 6,853 New Jersey Educ. Fac. Auth. Rev. (Kean College) 6.60% 7/1/2001(1)(Prere.) 3,700 3,785 New Jersey Educ. Fac. Auth. Rev. (New Jersey Institute of Technology) 6.00% 7/1/2024(1) 1,500 1,571 New Jersey Educ. Fac. Auth. Rev. (Ramapo College) 5.625% 7/1/2019(1) 2,105 2,197 New Jersey Educ. Fac. Auth. Rev. (Rider College) 6.20% 7/1/2017(2) 4,000 4,135 New Jersey Educ. Fac. Auth. Rev. (Rowan Univ.) 5.25% 7/1/2014(3) 2,305 2,401 New Jersey Educ. Fac. Auth. Rev. (Rowan Univ.) 5.25% 7/1/2015(3) 1,880 1,942 New Jersey Educ. Fac. Auth. Rev. (Rowan Univ.) 5.25% 7/1/2016(3) 2,050 2,104 New Jersey Educ. Fac. Auth. Rev. (Rowan Univ.) 5.25% 7/1/2024(3) 11,210 11,258 New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.25% 7/1/2010(2) 1,500 1,606 New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.25% 7/1/2012(2) 1,275 1,341 New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.60% 7/1/2016(1) 1,000 1,039 New Jersey Educ. Fac. Auth. Rev. (Seton Hall Univ.) 5.625% 7/1/2019(1) 3,625 3,747 New Jersey Educ. Fac. Auth. Rev. (Trenton State College) 6.00% 7/1/2012(2) 3,005 3,130 New Jersey Educ. Fac. Auth. Rev. (William Patterson) 5.20% 7/1/2015(3) 755 773 New Jersey Educ. Fac. Auth. Rev. (William Patterson) 5.25% 7/1/2016(3) 805 823 New Jersey Educ. Fac. Auth. Rev. (William Patterson) 5.30% 7/1/2017(3) 250 255 New Jersey Educ. Fac. Auth. Rev. (William Patterson) 5.375% 7/1/2018(3) 905 926 New Jersey Educ. Fac. Auth. Rev. (William Patterson) 5.375% 7/1/2019(3) 360 367 New Jersey Health Care Fac. Financing Auth. Rev. (Burdette Tomlin Memorial Hosp.) 6.50% 7/1/2001(3)(Prere.) 1,285 1,314 New Jersey Health Care Fac. Financing Auth. Rev. (Burdette Tomlin Memorial Hosp.) 6.50% 7/1/2012(3) 215 220 New Jersey Health Care Fac. Financing Auth. Rev. (Community Medical Center/Kimball Medical Center/Kensington Manor Care Center) 5.00% 7/1/2010(4) 4,695 4,907 New Jersey Health Care Fac. Financing Auth. Rev. (Community Medical Center/Kimball Medical Center/Kensington Manor Care Center) 5.25% 7/1/2009(4) 5,500 5,881 New Jersey Health Care Fac. Financing Auth. Rev. (Community Medical Center/Kimball Medical Center/Kensington Manor Care Center) 5.25% 7/1/2012(4) 1,500 1,567 New Jersey Health Care Fac. Financing Auth. Rev. (Hackensack Univ. Medical Center) 5.00% 1/1/2028(1) 9,860 9,536 New Jersey Health Care Fac. Financing Auth. Rev. (Hackensack Univ. Medical Center) 5.375% 1/1/2013(1) 2,355 2,458 New Jersey Health Care Fac. Financing Auth. Rev. (Hackensack Univ. Medical Center) 5.375% 1/1/2014(1) 2,965 3,078 17 ------------------------------------------------------------------------------------------------------ FACE MARKET MATURITY AMOUNT VALUE^ NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) ------------------------------------------------------------------------------------------------------ New Jersey Health Care Fac. Financing Auth. Rev. (Holy Name Hosp.) 5.25% 7/1/2020(2) 4,100 4,127 Jersey Health Care Fac. Financing Auth. Rev. (Jersey Shore Medical Center) 6.20% 7/1/2004(2)(Prere.) 3,540 3,885 New Jersey Health Care Fac. Financing Auth. Rev. (Jersey Shore Medical Center) 6.20% 7/1/2013(2) 1,345 1,446 New Jersey Health Care Fac. Financing Auth. Rev. (Jersey Shore Medical Center) 6.20% 7/1/2014(2) 1,320 1,420 New Jersey Health Care Fac. Financing Auth. Rev. (Jersey Shore Medical Center) 6.25% 7/1/2004(2)(Prere.) 1,140 1,253 New Jersey Health Care Fac. Financing Auth. Rev. (Jersey Shore Medical Center) 6.25% 7/1/2016(2) 860 926 New Jersey Health Care Fac. Financing Auth. Rev. (Mercer Medical Center) 6.50% 7/1/2010(1) 6,000 6,136 New Jersey Health Care Fac. Financing Auth. Rev. (Meridian Health System Obligated Group) 5.25% 7/1/2029(4) 13,450 13,459 New Jersey Health Care Fac. Financing Auth. Rev. (Meridian Health System Obligated Group) 5.625% 7/1/2013(4) 7,355 7,887 New Jersey Health Care Fac. Financing Auth. Rev. (Mountainside Hosp.) 5.35% 7/1/2007(1) 3,215 3,363 New Jersey Health Care Fac. Financing Auth. Rev. (Newark Beth Israel Medical Center) 6.00% 7/1/2004(4)(Prere.) 8,500 9,279 New Jersey Health Care Fac. Financing Auth. Rev. (Riverside Medical Center) 6.25% 7/1/2010(2) 2,935 3,359 New Jersey Health Care Fac. Financing Auth. Rev. (Society of the Valley Hosp.) 6.625% 7/1/2010(1) 2,750 2,758 New Jersey Health Care Fac. Financing Auth. Rev. (St. Barnabas Health Care) 0.00% 7/1/2021(1) 3,000 1,041 New Jersey Health Care Fac. Financing Auth. Rev. (St. Barnabas Health Care) 4.75% 7/1/2028(1) 14,000 12,984 New Jersey Health Care Fac. Financing Auth. Rev. (St. Barnabas Health Care) 5.25% 7/1/2013(1) 3,000 3,118 New Jersey Health Care Fac. Financing Auth. Rev. (St. Barnabas Health Care) 5.25% 7/1/2016(1) 3,300 3,364 New Jersey Health Care Fac. Financing Auth. Rev. (St. Clares Riverside Medical Center) 5.75% 7/1/2014(1) 8,500 8,895 New Jersey Health Care Fac. Financing Auth. Rev. (Virtua Health) 5.25% 7/1/2014(4) 11,000 11,385 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 4.95% 6/1/2010(2) 6,325 6,572 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.05% 6/1/2011(2) 5,100 5,294 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.05% 6/1/2012(1) 1,000 1,030 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.10% 6/1/2013(1) 2,255 2,312 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.125% 6/1/2014(1) 1,300 1,324 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.15% 6/1/2012(2) 5,250 5,433 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.20% 6/1/2013(2) 8,240 8,491 New Jersey Higher Educ. Assistance Auth. Student Loan Rev. 5.25% 6/1/2018(1) 705 709 New Jersey Highway Auth. Garden State Parkway General Rev. 5.50% 1/1/2013(3)* 10,000 10,681 New Jersey Highway Auth. Garden State Parkway General Rev. 5.50% 1/1/2014(3)* 7,500 7,981 New Jersey Highway Auth. Garden State Parkway General Rev. 5.50% 1/1/2015(3)* 7,500 7,943 New Jersey Highway Auth. Garden State Parkway General Rev. 5.50% 1/1/2016(3)* 2,000 2,110 New Jersey Highway Auth. Garden State Parkway General Rev. 5.60% 1/1/2017(3) 7,535 7,931 New Jersey Housing & Mortgage Finance Agency Home Buyer Rev. 5.40% 10/1/2020(1) 2,000 2,044 18 ------------------------------------------------------------------------------------------------------ FACE MARKET MATURITY AMOUNT VALUE^ NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) ------------------------------------------------------------------------------------------------------ New Jersey Housing & Mortgage Finance Agency Multi-Family Housing Rev. 5.70% 5/1/2020(4) 5,000 5,177 New Jersey Sports & Exposition Auth. Rev. 5.50% 3/1/2017(1) 5,755 6,111 New Jersey Sports & Exposition Auth. Rev. VRDO 2.65% 6/7/2001(1) 11,405 11,405 New Jersey Transp. Corp. COP 5.50% 9/15/2012(2) 20,000 21,643 New Jersey Transp. Corp. COP 5.75% 9/15/2014(2) 2,000 2,150 New Jersey Transp. Corp. COP 6.00% 9/15/2013(2) 10,000 10,998 New Jersey Transp. Trust Fund Auth. Rev. 5.50% 6/15/2013(1) 3,000 3,138 New Jersey Transp. Trust Fund Auth. Rev. 6.00% 6/15/2011(1) 31,280 34,653 New Jersey Turnpike Auth. Rev. 5.375% 1/1/2020(1) 3,500 3,569 New Jersey Turnpike Auth. Rev. 5.75% 1/1/2016(1) 2,285 2,430 New Jersey Turnpike Auth. Rev. 5.75% 1/1/2017(1) 10,000 10,582 New Jersey Turnpike Auth. Rev. 6.50% 1/1/2013(1) 20,000 23,245 New Jersey Turnpike Auth. Rev. VRDO 2.70% 6/6/2001(3)LOC 14,800 14,800 New Jersey Water Supply Auth. Delaware & Raritan Water System Rev. 5.375% 11/1/2010(1) 2,230 2,378 New Jersey Water Supply Auth. Delaware & Raritan Water System Rev. 5.375% 11/1/2011(1) 2,345 2,482 New Jersey Water Supply Auth. Delaware & Raritan Water System Rev. 5.375% 11/1/2013(1) 2,600 2,708 Newark NJ GO 5.50% 10/1/2008(2) 1,660 1,800 North Bergen Township NJ GO 8.00% 8/15/2006(4) 1,885 2,249 North Brunswick Township NJ Board of Educ. GO 5.50% 2/1/2008(3) 1,915 2,067 North Hudson NJ Sewer Auth. Rev. 5.125% 8/1/2008(3) 2,000 2,111 North Hudson NJ Sewer Auth. Rev. 5.125% 8/1/2022(3) 4,000 3,987 North Hudson NJ Sewer Auth. Rev. 5.25% 8/1/2016(3) 14,360 14,599 North Jersey Water Dist. Rev. (Wanaque South Project) 6.00% 7/1/2012(1) 10,125 10,620 Ocean County NJ Util. Auth. Waste Water Rev. 5.00% 1/1/2014(3) 1,250 1,250 Ocean County NJ Util. Auth. Waste Water Rev. 6.60% 1/1/2018(3)(ETM) 2,500 2,911 Old Bridge Township NJ Muni. Util. Auth. Rev. 6.25% 11/1/2016(3) 1,400 1,481 Old Bridge Township NJ Muni. Util. Auth. Rev. 6.40% 11/1/2009(3) 3,000 3,192 Passaic Valley NJ Sewer Comm. Rev. 5.75% 12/1/2008(2) 4,450 4,638 Passaic Valley NJ Sewer Comm. Rev. 5.75% 12/1/2013(2) 4,000 4,141 Plainfield NJ Board of Educ. GO 5.00% 8/1/2020(4) 2,000 1,978 Plainfield NJ GO 6.25% 7/15/2007(2) 6,930 7,307 Port Auth. of New York & New Jersey Rev. 5.125% 11/15/2012(3) 2,500 2,584 Port Auth. of New York & New Jersey Rev. 5.125% 11/15/2013(3) 5,735 5,875 Port Auth. of New York & New Jersey Rev. 5.125% 11/15/2014(3) 6,025 6,122 Port Auth. of New York & New Jersey Rev. 5.125% 10/15/2030(1) 15,000 14,786 Port Auth. of New York & New Jersey Rev. 5.20% 7/15/2021(2) 3,250 3,261 Port Auth. of New York & New Jersey Rev. 5.875% 9/15/2015(3) 10,000 10,502 Salem County NJ PCR VRDO (Atlantic City Electric Co.) 2.70% 6/6/2001(1) 4,760 4,760 Salem County NJ PCR VRDO (Atlantic City Electric Co.) 2.75% 6/6/2001(1) 3,000 3,000 South Brunswick Township NJ Board of Educ. GO 5.25% 8/1/2020(3) 1,785 1,797 South Brunswick Township NJ Board of Educ. GO 5.25% 8/1/2022(3) 3,000 3,015 South Brunswick Township NJ Board of Educ. GO 6.40% 8/1/2005(3)(Prere.) 2,205 2,442 South Jersey Transp. Auth. New Jersey Transp. System Rev. 5.00% 11/1/2029(2) 13,850 13,421 South Jersey Transp. Auth. New Jersey Transp. System Rev. 5.25% 11/1/2013(2) 4,000 4,190 South Jersey Transp. Auth. New Jersey Transp. System Rev. 5.25% 11/1/2014(2) 4,125 4,289 South Jersey Transp. Auth. New Jersey Transp. System Rev. 5.90% 11/1/2006(1) 1,470 1,540 South Jersey Transp. Auth. New Jersey Transp. System Rev. 5.90% 11/1/2007(1) 1,090 1,140 South Jersey Transp. Auth. New Jersey Transp. System Rev. 6.00% 11/1/2002(1)(Prere.) 3,005 3,188 South Jersey Transp. Auth. New Jersey Transp. System Rev. 6.00% 11/1/2012(1) 2,245 2,352 19 ------------------------------------------------------------------------------------------------------ FACE MARKET MATURITY AMOUNT VALUE^ NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) ------------------------------------------------------------------------------------------------------ Stafford NJ Muni. Util. Auth. Water & Sewer Rev. 5.50% 6/1/2011(3) 3,100 3,368 Sussex County NJ Muni. Util. Auth. Solid Waste Rev. 5.75% 12/1/2009(1) 19,820 20,623 Sussex County NJ Muni. Util. Auth. Waste Water Rev. 5.25% 12/1/2008(1) 850 888 Toms River NJ School Dist. GO 5.00% 1/15/2020(4) 1,510 1,488 Toms River NJ School Dist. GO 5.00% 1/15/2021(4) 1,600 1,572 Union County NJ Improvement Auth. Rev. (Plainfield Board of Educ.) 5.80% 8/1/2007(3) 4,000 4,442 Union County NJ Util. Auth. Rev. (Ogden Martin) 5.25% 6/1/2006(2) 5,375 5,704 Union County NJ Util. Auth. Rev. (Ogden Martin) 5.375% 6/1/2011(2) 8,375 8,857 Union County NJ Util. Auth. Rev. (Ogden Martin) 5.375% 6/1/2012(2) 8,995 9,441 Union County NJ Util. Auth. Rev. (Ogden Martin) 5.375% 6/1/2013(2) 9,445 9,850 Vernon Township NJ School Dist. GO 5.25% 12/1/2014(3) 1,200 1,242 Vernon Township NJ School Dist. GO 5.30% 12/1/2015(3) 1,200 1,238 Vernon Township NJ School Dist. GO 5.375% 12/1/2017(3) 1,200 1,232 Vernon Township NJ School Dist. GO 5.375% 12/1/2018(3) 1,200 1,228 West Orange NJ Board of Educ. COP 5.625% 10/1/2019(1) 2,500 2,617 West Orange NJ Board of Educ. COP 5.625% 10/1/2029(1) 2,000 2,080 West Orange NJ Board of Educ. COP 6.00% 10/1/2024(1) 1,000 1,079 Outside New Jersey: Guam Govt. Ltd. Obligation Infrastructure Improvement Rev. 5.125% 11/1/2011(2) 3,400 3,586 Puerto Rico Electric Power Auth. Power Rev. 5.25% 7/1/2017(1) 3,200 3,267 Puerto Rico GO 5.00% 7/1/2013(3)* 4,000 4,236 Puerto Rico GO 5.00% 7/1/2014(3)* 2,000 2,114 Puerto Rico GO 5.00% 7/1/2018(1) 11,500 11,525 Puerto Rico GO 5.00% 7/1/2024(1) 2,910 2,863 Puerto Rico GO 5.00% 7/1/2024(4)* 10,000 9,838 Puerto Rico Govt. Dev. Bank VRDO 2.55% 6/6/2001(1) 900 900 Puerto Rico Infrastructure Finance Auth. Special Tax Rev. 5.00% 7/1/2021(2) 8,000 7,940 Puerto Rico Infrastrusture Finance Auth. Special Tax Rev. 5.00% 7/1/2028(2) 12,600 12,316 Puerto Rico Muni. Finance Agency 5.50% 8/1/2019(4) 2,000 2,082 Puerto Rico Public Building 0.00% 7/1/2002(3) 4,000 3,876 ---------- 1,161,155 ---------- SECONDARY MARKET INSURED (7.3%) Atlantic County NJ Util. Auth. Sewer Rev. 6.875% 1/1/2012(2)(ETM) 2,840 3,241 New Jersey Building Auth. Rev. 5.00% 6/15/2012(4) 10,000 10,300 New Jersey Highway Auth. Garden State Parkway Rev. 6.00% 1/1/2002(2)(Prere.) 470 479 New Jersey Highway Auth. Garden State Parkway Rev. 6.00% 1/1/2016(2) 4,530 4,562 New Jersey Highway Auth. Garden State Parkway Rev. 6.20% 1/1/2010(2) 20,000 22,687 New Jersey Sports & Exposition Auth. Rev. 6.50% 3/1/2013(1) 10,000 11,557 New Jersey Turnpike Auth. Rev. 6.50% 1/1/2016(1) 23,270 27,030 Port Auth. of New York & New Jersey Rev. 5.375% 7/15/2022(3) 15,000 15,238 Univ. of Medicine & Dentistry New Jersey Rev. 6.50% 12/1/2012(1) 4,000 4,637 ---------- 99,731 ---------- NONINSURED (9.2%) Burlington County NJ Bridge Comm. Rev. 5.30% 10/1/2013 9,500 9,686 Cherry Hill Township NJ GO 6.30% 6/1/2002(Prere.) 2,635 2,777 Cherry Hill Township NJ GO 6.30% 6/1/2012 1,110 1,158 Essex County NJ Improvement Auth. Rev. VRDO (Pooled Govt. Loan) 2.45% 6/6/2001LOC 1,200 1,200 Marlboro Township NJ Board of Educ. GO 5.00% 7/15/2012 1,005 1,041 Marlboro Township NJ Board of Educ. GO 5.00% 7/15/2013 1,000 1,027 Marlboro Township NJ Board of Educ. GO 5.00% 7/15/2014 1,045 1,065 20 ------------------------------------------------------------------------------------------------------ FACE MARKET MATURITY AMOUNT VALUE^ NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND COUPON DATE (000) (000) ------------------------------------------------------------------------------------------------------ Mercer County NJ Improvement Auth. Library System Rev. 6.00% 12/1/2003(Prere.) 1,000 1,085 Mercer County NJ Improvement Auth. Solid Waste Rev. 5.375% 9/15/2012 11,120 11,731 Mercer County NJ Improvement Auth. Special Services School Dist. Rev. 5.75% 12/15/2008 1,165 1,288 Mercer County NJ Improvement Auth. Special Services School Dist. Rev. 5.95% 12/15/2012 4,895 5,513 Monmouth County NJ Improvement Auth. Rev. (Correctional Fac.) 6.40% 8/1/2001(Prere.) 1,850 1,898 New Jersey COP 5.25% 6/15/2011 3,530 3,749 New Jersey COP 5.25% 6/15/2012 13,350 14,036 New Jersey Econ. Dev. Auth. Rev. (Masonic Charity Foundation) 5.50% 6/1/2031 1,000 988 New Jersey Econ. Dev. Auth. Rev. (Masonic Charity Foundation) 5.875% 6/1/2018 1,250 1,309 New Jersey Econ. Dev. Auth. Rev. (Masonic Charity Foundation) 6.00% 6/1/2025 1,000 1,045 New Jersey Econ. Dev. Auth. Rev. VRDO (Hoffman-La Roche Project) 3.00% 6/4/2001LOC 7,700 7,700 New Jersey Educ. Fac. Auth. Rev. 5.00% 9/1/2020 11,405 11,238 New Jersey Educ. Fac. Auth. Rev. 5.75% 9/1/2012 7,595 8,425 New Jersey Environmental Infrastructure Trust Wastewater Treatment Rev. 5.00% 9/1/2017 1,525 1,523 New Jersey Environmental Infrastructure Trust Wastewater Treatment Rev. 5.125% 9/1/2015 5,090 5,201 New Jersey Health Care Fac. Financing Auth. VRDO (Hosp. Capital Asset Pooled Program) 2.65% 6/7/2001LOC 2,500 2,500 New Jersey TRAN CP 3.15% 6/7/2001 5,000 5,000 New Jersey Transp. Trust Fund Auth. Rev. 5.75% 6/15/2020 5,000 5,425 New Jersey Transp. Trust Fund Auth. Rev. 6.00% 6/15/2019 5,000 5,398 Ocean County NJ Util. Auth. Waste Water Rev. 6.30% 1/1/2005(Prere.) 2,215 2,433 Ocean County NJ Util. Auth. Waste Water Rev. 6.35% 1/1/2005(Prere.) 4,875 5,363 Rutgers State Univ. New Jersey GO 6.40% 5/1/2013 3,000 3,434 Union County NJ PCR VRDO (Exxon Project) 2.25% 6/4/2001 1,800 1,800 ---------- 126,036 ---------- ------------------------------------------------------------------------------------------------------ TOTAL MUNICIPAL BONDS (COST $1,320,072) 1,386,922 ------------------------------------------------------------------------------------------------------ OTHER ASSETS AND LIABILITIES (-1.6%) ------------------------------------------------------------------------------------------------------ Other Assets--Note B 27,484 Payables for Investment Securities Purchased (46,000) Other Liabilities (3,176) ---------- (21,692) ---------- ------------------------------------------------------------------------------------------------------ NET ASSETS (100%) $1,365,230 ======================================================================================================
^ See Note A in Notes to Financial Statements. * Securities purchased on a when-issued or delayed delivery basis for which the fund has not taken delivery as of May 31, 2001. + Securities with a value of $2,424,000 have been segregated as initial margin for open futures contracts. For key to abbreviations and other references, see page 22. 21 -------------------------------------------------------------------------------- AT MAY 31, 2001, NET ASSETS CONSISTED OF: -------------------------------------------------------------------------------- AMOUNT NEW JERSEY TAX-EXEMPT FUND (000) -------------------------------------------------------------------------------- Paid-in Capital $1,299,873 Undistributed Net Investment Income -- Accumulated Net Realized Losses (1,537) Unrealized Appreciation--Note F Investment Securities 66,850 Futures Contracts 44 -------------------------------------------------------------------------------- NET ASSETS $1,365,230 ================================================================================ Investor Shares-Net Assets Applicable to $93,221,139 outstanding $0.01 par value shares of beneficial interest (unlimited authorization) $1,098,342 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE- INVESTOR SHARES $11.78 ================================================================================ Admiral Shares--Net Assets Applicable to 22,651,896 outstanding $.001 par value shares of beneficial interest (unlimited authorization) $266,888 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE- ADMIRAL SHARES $11.78 ================================================================================ 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. 22 STATEMENT OF OPERATIONS This Statement shows interest earned by each fund during the reporting period, and details the operating expenses charged to each class of its shares. 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 TAX-EXEMPT INSURED LONG-TERM MONEY MARKET FUND TAX-EXEMPT FUND ------------------------------------ SIX MONTHS ENDED MAY 31, 2001 ------------------------------------ (000) (000) -------------------------------------------------------------------------------- INVESTMENT INCOME INCOME Interest $ 25,315 $ 34,081 -------------------------------------------------------------------------------- Total Income 25,315 34,081 -------------------------------------------------------------------------------- EXPENSES The Vanguard Group--Note B Investment Advisory Services 89 79 Management and Administrative--Investor Shares 1,115 1,086 Management and Administrative--Admiral Shares* -- 11 Marketing and Distribution--Investor Shares 125 79 Marketing and Distribution--Admiral Shares* -- -- Custodian Fees 9 8 Auditing Fees 5 5 Shareholders' Reports--Investor Shares 11 11 Shareholders' Reports--Admiral Shares* -- -- -------------------------------------------------------------------------------- TRUSTEES' FEES AND EXPENSES 1 1 Total Expenses 1,355 1,280 Expenses Paid Indirectly--Note C (9) (29) -------------------------------------------------------------------------------- Net Expenses 1,346 1,251 -------------------------------------------------------------------------------- NET INVESTMENT INCOME 23,969 32,830 -------------------------------------------------------------------------------- REALIZED NET GAIN (LOSS) Investment Securities Sold 10 330 Futures Contracts -- (144) -------------------------------------------------------------------------------- REALIZED NET GAIN (LOSS) 10 186 -------------------------------------------------------------------------------- CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) Investment Securities -- 27,132 Futures Contracts -- 44 -------------------------------------------------------------------------------- CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) -- 27,176 -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $23,979 $60,192 ================================================================================ *The New Jersey Tax-Exempt Money Market Fund does not offer Admiral Shares. 23 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 net amount shareholders invested in or redeemed from the fund. Distributions and Capital Share Transactions are shown separately for each class of shares.
--------------------------------------------------------------------------------------------------------------------------- NEW JERSEY NEW JERSEY TAX-EXEMPT INSURED LONG-TERM MONEY MARKET FUND TAX-EXEMPT FUND --------------------------------------------------------------------------------------------------------------------------- SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED MAY 31, 2001 NOV. 30, 2000 MAY 31, 2001 NOV. 30, 2000 (000) (000) (000) (000) --------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net Investment Income $ 23,969 $ 49,399 $ 32,830 $ 61,245 Realized Net Gain (Loss) 10 3 186 1,103 Change in Unrealized Appreciation (Depreciation) -- -- 27,176 32,168 --------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Net Assets Resulting from Operations 23,979 49,402 60,192 94,516 --------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS Net Investment Income Investor Shares (23,969) (49,399) (32,429) (61,245) Admiral Shares* -- -- (401) -- Realized Capital Gain Investor Shares -- -- -- -- Admiral Shares* -- -- -- -- --------------------------------------------------------------------------------------------------------------------------- Total Distributions (23,969) (49,399) (32,830) (61,245) --------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS--Note H Investor Shares 32,562 164,325 (163,520) 46,690 Admiral Shares* -- -- 266,535 -- --------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) from Capital Share Transactions 32,562 164,325 103,015 46,690 --------------------------------------------------------------------------------------------------------------------------- Total Increase (Decrease) 32,572 164,328 130,377 79,961 --------------------------------------------------------------------------------------------------------------------------- NET ASSETS Beginning of Period 1,427,350 1,263,022 1,234,853 1,154,892 --------------------------------------------------------------------------------------------------------------------------- End of Period $1,459,922 $1,427,350 $1,365,230 $1,234,853 =========================================================================================================================== *The New Jersey Tax-Exempt Money Market Fund does not offer Admiral Shares.
24 FINANCIAL HIGHLIGHTS This table summarizes each fund's investment results and distributions to shareholders on a per-share basis for each class of shares. 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 SIX MONTHS ENDED ------------------------------------------------ THROUGHOUT EACH PERIOD MAY 31, 2001 2000 1999 1998 1997 1996 ---------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ---------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .016 .036 .028 .031 .033 .032 Net Realized and Unrealized Gain (Loss) on Investments -- -- -- -- -- -- ---------------------------------------------------------------------------------------------------- Total from Investment Operations .016 .036 .028 .031 .033 .032 ---------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.016) (.036) (.028) (.031) (.033) (.032) Distributions from Realized Capital Gains -- -- -- -- -- -- ---------------------------------------------------------------------------------------------------- Total Distributions (.016) (.036) (.028) (.031) (.033) (.032) ---------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ==================================================================================================== TOTAL RETURN 1.66% 3.68% 2.86% 3.18% 3.32% 3.22% ==================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $1,460 $1,427 $1,263 $1,179 $1,016 $918 Ratio of Total Expenses to Average Net Assets 0.19%* 0.18% 0.20% 0.20% 0.20% 0.20% Ratio of Net Investment Income to Average Net Assets 3.29%* 3.62% 2.82% 3.12% 3.27% 3.17% ==================================================================================================== *Annualized.
25
----------------------------------------------------------------------------------------------------- NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND YEAR ENDED NOVEMBER 30, FOR A SHARE OUTSTANDING SIX MONTHS ENDED ------------------------------------------------- THROUGHOUT EACH PERIOD MAY 31, 2001 2000 1999 1998 1997 1996 ----------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $11.52 $11.19 $11.98 $11.72 $11.64 $11.78 ----------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .294 .599 .590 .599 .608 .616 Net Realized and Unrealized Gain (Loss) on Investments .260 .330 (.738) .271 .112 (.082) ----------------------------------------------------------------------------------------------------- Total from Investment Operations .554 .929 (.148) .870 .720 .534 ----------------------------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.294) (.599) (.590) (.599) (.608) (.616) Distributions from Realized Capital Gains -- -- (.052) (.011) (.032) (.058) ----------------------------------------------------------------------------------------------------- Total Distributions (.294) (.599) (.642) (.610) (.640) (.674) ----------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $11.78 $11.52 $11.19 $11.98 $11.72 $11.64 ===================================================================================================== TOTAL RETURN 4.82% 8.57% -1.31% 7.59% 6.40% 4.75% ===================================================================================================== RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $1,098 $1,235 $1,155 $1,112 $940 $849 Ratio of Total Expenses to Average Net Assets 0.20%* 0.19% 0.19% 0.20% 0.18% 0.20% Ratio of Net Investment Income to Average Net Assets 4.98%* 5.33% 5.06% 5.04% 5.26% 5.35% Portfolio Turnover Rate 8%* 14% 11% 14% 13% 11% ===================================================================================================== *Annualized.
-------------------------------------------------------------------------------- NEW JERSEY INSURED LONG-TERM TAX-EXEMPT FUND ADMIRAL SHARES -------------------------------------------------------------------------------- FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD MAY 31, 2001 -------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $11.76 -------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net Investment Income .027 Net Realized and Unrealized Gain (Loss) on Investments .020 -------------------------------------------------------------------------------- Total from Investment Operations .047 -------------------------------------------------------------------------------- DISTRIBUTIONS Dividends from Net Investment Income (.027) Distributions from Realized Capital Gains -- -------------------------------------------------------------------------------- Total Distributions (.027) -------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $11.78 -------------------------------------------------------------------------------- TOTAL RETURN 0.40% -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (Millions) $267 Ratio of Total Expenses to Average Net Assets 0.14%** Ratio of Net Investment Income to Average Net Assets 5.00%** Portfolio Turnover Rate 8%** -------------------------------------------------------------------------------- *Inception. **Annualized. 26 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. The Insured Long-Term Tax-Exempt Fund offers two classes of shares, Investor Shares and Admiral Shares. Admiral Shares were first issued on May 14, 2001. Admiral Shares are designed for investors that meet certain administrative, servicing, tenure, and account size criteria. Investor Shares are offered to all other investors. 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. Each class of shares has equal rights to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts 27 (included in Management and Administrative expenses) and shareholder reporting. Marketing and Distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and realized and unrealized gains and losses on investments are allocated to each class of shares based on its relative net assets. B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to each fund under methods approved by the board of trustees. Each fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At May 31, 2001, the funds had contributed capital to Vanguard (included in Other Assets) of: -------------------------------------------------------------------------------- CAPITAL CONTRIBUTION PERCENTAGE PERCENTAGE OF NEW JERSEY TO VANGUARD OF FUND VANGUARD'S TAX-EXEMPT FUND (000) NET ASSETS CAPITALIZATION -------------------------------------------------------------------------------- Money Market $272 0.02% 0.3% Insured Long-Term 252 0.02 0.3 -------------------------------------------------------------------------------- The funds' trustees and officers are also directors and officers of Vanguard. C. The funds' investment adviser may direct new issue purchases, subject to obtaining the best price and execution, to underwriters who have agreed to rebate or credit to the funds part of the underwriting fees generated. Such rebates or credits are used solely to reduce the funds' management and administrative expenses. The funds' custodian bank has also agreed to reduce its fees when the funds maintain cash on deposit in their non-interest-bearing custody accounts. For the six months ended May 31, 2001, these arrangements reduced expenses by: -------------------------------------------------------------------------------- EXPENSE REDUCTION (000) -------------------------------- MANAGEMENT AND CUSTODIAN NEW JERSEY TAX-EXEMPT FUND ADMINISTRATIVE FEES -------------------------------------------------------------------------------- Money Market -- $9 Insured Long-Term $21 8 -------------------------------------------------------------------------------- D. During the six months ended May 31, 2001, the Insured Long-Term Tax-Exempt Fund purchased $169,429,000 of investment securities and sold $49,290,000 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 May 31, 2001, net unrealized appreciation of Insured Long-Term Tax-Exempt Fund investment securities for federal income tax purposes was $65,687,000, consisting of unrealized gains of $67,606,000 on securities that had risen in value since their purchase and $1,919,000 on securities that had fallen in value since their purchase (see Note E). 28 At May 31, 2001, the aggregate settlement value of open futures contracts expiring through September 2001 and the related unrealized appreciation were: -------------------------------------------------------------------------------- (000) ---------------------------- AGGREGATE NEW JERSEY TAX-EXEMPT NUMBER OF SETTLEMENT UNREALIZED FUND/FUTURES CONTRACTS LONG CONTRACTS VALUE APPRECIATION -------------------------------------------------------------------------------- Insured Long-Term/Municipal Bond Index 58 $5,932 $44 -------------------------------------------------------------------------------- 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. H. Capital share transactions for each class of shares were:
--------------------------------------------------------------------------------------------------------------- SIX MONTHS YEAR ENDED ENDED MAY 31, 2001 NOVEMBER 30, 2000 ------------ ----------------- AMOUNT SHARES AMOUNT SHARES (000) (000) (000) (000) --------------------------------------------------------------------------------------------------------------- New Jersey Tax-Exempt Money Market Fund Investor Shares Issued $642,196 642,196 $1,344,025 1,344,025 Issued in Lieu of Cash Distributions 23,020 23,020 47,337 47,337 Redeemed (632,654) (632,654) (1,227,037) (1,227,037) Net Increase (Decrease)--Investor Shares 32,562 32,562 164,325 164,325 New Jersey Insured Long-Term Tax-Exempt Fund Investor Shares Issued $175,629 14,820 $266,668 23,733 Issued in Lieu of Cash Distributions 23,517 1,988 44,986 3,998 Redeemed (362,666) (30,773) (264,964) (23,713) Net Increase (Decrease)--Investor Shares (163,520) (13,965) 46,690 4,018 Admiral Shares Issued 266,541 22,652 -- -- Issued in Lieu of Cash Distributions 301 26 -- -- Redeemed (307) (26) -- -- Net Increase (Decrease)--Admiral Shares 266,535 22,652 -- -- ===============================================================================================================
29 THE ADVANTAGES OF GETTING CONNECTED Visit Vanguard.com [COMPUTER GRAPHIC] Why wait for the mail? You can get fund reports like this one sooner--and reduce the amount of mail you receive from us. Simply choose to view your fund reports online. Consider the benefits of using VANGUARD.COM. On our website, you can: **Choose to receive all fund reports, as well as prospectuses, online. **Request a courtesy e-mail to notify you when a new fund report or prospectus is available. When you receive fund reports and prospectuses online, you lower Vanguard's printing and postage costs--and that helps to reduce the expense ratios of your funds. You will continue to receive confirmations of purchases, redemptions, and other account activity by mail. HOW TO NOTIFY US ABOUT YOUR MAILING PREFERENCES You can easily tell us to stop mailing your fund reports and prospectuses. Just log on to Vanguard.com (or follow the easy steps to register for secure, online access to your accounts) and update your Web profile. Registered users can also view their account values; download records of recent transactions; research and track the performance of individual securities and funds; buy, exchange, and sell fund shares; and much more. If you invest directly with us, you can also elect to receive all of your account statements online or to continue the mailing of only your year-end statements, which detail every transaction you make during the year. However, if you invest with us through an employer-sponsored retirement plan or a financial intermediary, some of these options may not be available to you. All Vanguard shareholders can choose to receive our electronic newsletters: ECONOMIC WEEK IN REVIEW, a recap of each week's key economic reports and market activity; and WHAT'S NEW AT VANGUARD, a monthly update on our mutual funds, services, and online resources. YOUR ONLINE INFORMATION IS SECURE Vanguard.com uses some of the most secure forms of online communication available, including data encryption and Secure Sockets Layer (SSL) protocol. These technologies provide a high level of security and privacy when you access your account information, initiate online transactions, or send us messages. 30 THE VANGUARD(R) Family of Funds STOCK FUNDS 500 Index Fund Calvert Social Index(TM) Fund Capital Opportunity Fund Convertible Securities Fund Developed Markets Index Fund Emerging Markets Stock Index Fund Energy Fund Equity Income Fund European Stock Index Fund Explorer(TM) Fund Extended Market Index Fund Global Equity Fund Growth and Income Fund Growth Equity Fund Growth Index Fund Health Care Fund Institutional Developed Markets Index Fund Institutional Index Fund Institutional Total Stock Market Index Fund International Growth Fund International Value Fund Mid-Cap Index Fund Morgan(TM) Growth Fund Pacific Stock Index Fund Precious Metals Fund PRIMECAP Fund REIT Index Fund Selected Value Fund Small-Cap Growth Index Fund Small-Cap Index Fund Small-Cap Value Index Fund Strategic Equity Fund Tax-Managed Capital Appreciation Fund Tax-Managed Growth and Income Fund Tax-Managed International Fund Tax-Managed Small-Cap Fund Total International Stock Index Fund Total Stock Market Index Fund U.S. Growth Fund U.S. Value Fund Utilities Income Fund Value Index Fund Windsor(TM) Fund Windsor(TM) II Fund BALANCED FUNDS Asset Allocation Fund Balanced Index Fund LifeStrategy(R) Conservative Growth Fund LifeStrategy(R) Growth Fund LifeStrategy(R) Income Fund LifeStrategy(R) Moderate Growth Fund STAR(TM) Fund Tax-Managed Balanced Fund Wellesley(R) Income Fund Wellington(TM) Fund BOND FUNDS GNMA Fund High-Yield Corporate Fund High-Yield Tax-Exempt Fund Inflation-Protected Securities Fund Insured Long-Term Tax-Exempt Fund Intermediate-Term Bond Index Fund Intermediate-Term Corporate Fund Intermediate-Term Tax-Exempt Fund Intermediate-Term Treasury Fund Limited-Term Tax-Exempt Fund Long-Term Bond Index Fund Long-Term Corporate Fund Long-Term Tax-Exempt Fund Long-Term Treasury Fund Short-Term Bond Index Fund Short-Term Corporate Fund Short-Term Federal Fund Short-Term Tax-Exempt Fund Short-Term Treasury Fund State Tax-Exempt Bond Funds (California, Florida, Massachusetts, New Jersey, New York, Ohio, Pennsylvania) Total Bond Market Index Fund MONEY MARKET FUNDS Admiral(TM) Treasury Money Market Fund Federal Money Market Fund Prime Money Market Fund State Tax-Exempt Money Market Funds (California, New Jersey, New York, Ohio, Pennsylvania) Tax-Exempt Money Market Fund Treasury Money Market Fund VARIABLE ANNUITY PLAN Balanced Portfolio Diversified Value Portfolio Equity Income Portfolio Equity Index Portfolio Growth Portfolio High-Grade Bond Portfolio High Yield Bond Portfolio International Portfolio Mid-Cap Index Portfolio Money Market Portfolio REIT Index Portfolio Short-Term Corporate Portfolio Small Company Growth Portfolio For information about Vanguard funds and our variable annuity plan, including charges and expenses, obtain a prospectus from The Vanguard Group, P.O. Box 2600, Valley Forge, PA 19482-2600. Read it carefully before you invest or send money. 31 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. CHARLES D. ELLIS (2001) Retired Managing Partner of Greenwich Associates; Successor Trustee of Yale University; Overseer of the Stern School of Business at New York University; Trustee of the Whitehead Institute for Biomedical Research. 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. BRUCE K. MACLAURY (1990) President Emeritus of The Brookings Institution; Director of American Express Bank Ltd., The St. Paul Companies, Inc., and National Steel Corp. BURTON G. MALKIEL (1977) Chemical Bank Chairman's Professor of Economics, Princeton University; Director of Prudential Insurance Co. of America, Banco Bilbao 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. [SHIP GRAPHIC] THE VANGUARD GROUP(R) 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 he 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 DIRECT INVESTOR 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. Q142 072001