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T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus of the T. Rowe Price Virginia
Tax-Free Bond Funds.
Virginia Tax-Free
Bond Funds
February 28, 1995
VAB
Fellow Shareholders
Vigorous economic growth and Federal Reserve tightening dominated the
fixed-income markets in 1994. Real growth of 4% last year exceeded the
historical trend of approximately 2.5%. The target for the fed funds rate
climbed with the economy's strong pace, rising from 3% at the beginning of
last year to 6% on February 1, 1995. The Federal Reserve pursued its monetary
policy to slow economic growth to a level that will contain inflation. Future
Fed action will most likely reflect its goal of preventing excessive inflation
without spurring significantly higher unemployment.
Rising yields characterized the tax-exempt market during most of 1994.
The yield on one-year AAA General Obligation (GO) bonds peaked in December at
4.9%, up from 3% at the end of February 1994. However, as the market
strengthened over the last several months, the one-year yield retreated to
4.4% by fiscal year-end. The five-year GO AAA bond yield ended this quarter at
5%, 70 basis points higher than a year ago but 50 basis points lower than at
the end of November (100 basis points equal one percent). On the long end, the
yield on 30-year GO AAA bonds was almost 6%, up from 5.6% a year earlier but
down from its November peak of 6.8%.
Yields declined after the Fed's sixth tightening of the year in
November. Anticipation of a slowing economy, good news on inflation, and
limited supply of tax-exempt bonds all contributed to the recent drop in
yields. Issuance fell to a four-year low last year and was particularly light
in the first two months of 1995.
Virginia's diverse economy gained momentum in 1994. Nonfarm job growth
was 3% for the year and the unemployment rate of 4.9% at year-end was one of
the lowest in the country. Business services and retail trade led the
expansion. The impact of reduced defense and nondefense federal spending has
tempered activity in some regions, particularly Hampton Roads and northern
Virginia. However, advantages in high technology and a highly trained work
force should buoy future growth. The state has embarked on a significant
prison expansion program; criminal justice legislation was enacted to extend
sentences, which should lead to related bond issues. Virginia continues to
offer securities with solid credit quality.
Chart 1 - Virginia Bond Yields
Source: T. Rowe Price
Virginia Short-Term Tax-Free Bond Fund
We would like to welcome shareholders to the Virginia Short-Term Tax-Free Bond
Fund. By the end of its fiscal year on February 28, assets had grown rapidly
to $5 million.
Since the fund's inception on November 30, 1994, we have maintained a
neutral portfolio duration and bought higher quality bonds, typically with
high coupons. Duration, which measures the fund's price sensitivity to changes
in interest rates, stood at 1.95 years at fiscal year-end. This strategy led
us to emphasize prerefunded bonds, which composed 74% of assets on February
28.
There are some signs that the U.S. economy is slowing, lessening the
need for further Fed tightening. However, if higher inflation develops in
coming months, the Fed may have to intervene again with higher rates. These
conflicting scenarios have clouded the outlook for short-term investments.
Therefore, we intend to continue our current investment strategy of market
neutrality.
Your fund's performance slightly lagged the peer group average during
the past three months.
Performance Comparison
Period Ended 2/28/95
3 Months (Since Inception)
______________________
Virginia Short-Term
Tax-Free Bond Fund 2.28%
Lipper Short Municipal
Debt Fund Average 2.38
Virginia Tax-Free Bond Fund
In this fund we maintained a defensive strategy, with a duration near 7.5
years and a weighted average maturity of 18 years or shorter during the first
three quarters. This approach was warranted by sharp interest rate rises in
the spring, then again in the fall. (Duration is a more accurate measure than
maturity of a fund's sensitivity to changing interest rates.)
We took advantage of market weakness for much of the year, trading
older, low-yielding securities for higher-yielding bonds without changing
maturities. We also kept credit quality high in anticipation that
lower-quality securities would not do well over the last few months. While we
are somewhat concentrated (22%) in the hospital sector, our research here has
been thorough, and more than half of these positions are insured.
Chart 2 - Virginia Bond Issues
Source: Securities Data Co.
In November, we changed course modestly, increasing our exposure to
long-term bonds to 85% from 80% of total assets when yields topped 7%. We also
have about 15% of the portfolio in housing bonds, which provide superior
yield. Low supply has been a problem in our effort to structure the fund for
maximum performance. The calendar of new issues is growing for March and
April, allowing us more latitude to improve diversification and yield.
In a difficult environment, your fund significantly outperformed its
peer group for the fiscal year. Fourth quarter performance was very strong,
although it lagged the peer group average.
Performance Comparison
Periods Ended 2/28/95
3 Months 12 Months
_____________________
Virginia Tax-Free
Bond Fund 8.61% 1.51%
Lipper Virginia Municipal
Debt Fund Average 9.42 0.32
Outlook
The U.S. economy should continue to grow, although at a lower rate than in
1994. To date, the Fed's actions appear to have succeeded in slowing the pace
of growth and keeping inflation in check. However, in the near term, we do
expect some acceleration in inflation based on tight labor markets and
relatively high capacity utilization. This may result in somewhat higher
interest rates over the next few months, but most likely lower than the levels
reached in the fall. Moreover, light new issuance combined with continued
strong demand for tax-exempt bonds could result in better overall returns in
the municipal bond market in 1995.
We appreciate the continued confidence all our shareholders have placed
in us.
Respectfully submitted,
Mary J. Miller
Chairman of the
Investment Advisory Committee
March 17, 1995
Statistical Highlights
Virginia Short-Term Tax-Free Bond Fund
Key Statistics
Periods Ended
Dividend Yield* 2/28/95
___________________ ______________
3 Months 4.34%
Dividend Per Share
_____________________
3 Months! $0.05
Change in Price Per Share
__________________________
3 Months (From $5.00 to $5.06) $0.06
Weighted Average Quality** 1.3
Weighted Average Maturity 2.3 years
Weighted Average Effective Duration 2.0 years
* Dividends earned and reinvested for the periods
indicated are annualized and divided by the average
daily net asset values per share for the same period.
** On a T. Rowe Price scale of 1 to 10, with Grade 1
! Taxability of dividends. 100% and 94.6% of dividends
are exempt from federal and Virginia state income taxes,
respectively.
Virginia Tax-Free Bond Fund
Key Statistics
Periods Ended
Dividend Yield* 2/28/95
____________________ _______________
3 Months 5.78%
12 Months 5.63
Dividend Per Share
____________________
3 Months $0.15
12 Months! 0.57
Change in Price Per Share
__________________________
3 Months (From $9.86 to $10.56) $0.70
12 Months (From $11.00 to $10.56) -0.44
Weighted Average Quality** 2.2
Weighted Average Maturity 18.4 years
Weighted Average Effective Duration 7.6 years
* Dividends earned and reinvested for the periods
indicated are annualized and divided by the average
daily net asset values per share for the same period.
** On a T. Rowe Price scale of 1 to 10, with Grade 1
representing highest quality.
! Taxability of dividends. 100% and 98.9% of dividends
are exempt from federal and Virginia state income taxes,
respectively.
Virginia Short-Term Tax-Free Bond Fund
Sector Diversification
Percent of Net Assets
_____________________
2/28/95
_____________________
Pre-refunded Bonds 74%
Hospital Revenue 10
General Obligation - Local 10
Industrial & Pollution Control Revenue 4
Educational Revenue 3
Housing Finance Revenue 3
Escrowed to Maturity 2
General Obligation - State 2
Other Assets Less Liabilities -8
Chart 3 - Fiscal Year Performance Comparison
Virginia Tax-Free Bond Fund
Sector Diversification
Percent of Net Assets
_____________________
2/28/95
_____________________
Hospital Revenue 22%
Housing Finance Revenue 15
Educational Revenue 10
Pre-refunded Bonds 8
Lease Revenue 8
Industrial & Pollution Control Revenue 7
Dedicated Tax Revenue 5
Ground Transportation Revenue 5
Water & Sewer Revenue 5
Air & Sea Transportation Revenue 5
General Obligation - State 3
General Obligation - Local 3
Miscellaneous Revenue 2
Solid Waste Revenue 2
Electric Revenue 1
Other Assets Less Liabilities -1
Fiscal-Year Performance
Virginia Tax-Free Bond Fund
Periods ended February 28, 1995
Since Inception
1 Year (4/30/91)*
_________ _______________
1.51% 7.67%
*Average Annual Compound Total Return
Income return and principal value represent past performance
and will vary. Shares may be worth more or less at redemption
than at original purchase.
Investment Record
T. Rowe Price Virginia Tax-Free Bond Fund
The table below shows the investment record of one share of
the T. Rowe Price Virginia Tax-Free Bond Fund, purchased at
the original offering price of $10.00. Over this time,
interest rates have been volatile. The results shown should
not be considered a representation of the dividend income
or capital gain or loss which may be realized from an
investment made in the fund today.
Per-Share Data
With
Dividends
Capital With and
Fiscal Net Gain Dividends Capital
Year Asset Income Distri- Re- Gains Total
Ended Value Dividends butions2 invested Reinvested Return
______ ______ _________ ________ ________ __________ _______
02/29/921$10.27 $0.48 $0.04 $10.77 $10.81 8.12%
1993 11.06 0.58 0.03 12.25 12.34 14.11
1994 11.00 0.56 0.15 12.82 13.08 5.99
1995 10.56 0.57 0.01 13.00 13.27 1.51
Total $2.19 $0.23
1From inception 4/30/91 to 2/29/92.
2Includes short-term capital gain of $0.04 on 12/11/91;
$0.01 on 3/18/92; $0.02 on 12/11/92; $0.02 on 3/29/93;
$0.09 on 12/10/93.
Portfolio of Investments
T. Rowe Price Virginia Short-Term Tax-Free Bond Fund /
February 28, 1995
(amounts in thousands)
Face
Amount Value
_________ _________
VIRGINIA - 107.6%
Augusta County IDA, Augusta Hosp.,
(AMBAC Insured), 6.10%, 9/1/00 . . . . . . . $ 60 $ 62
Chesapeake, GO, 6.80%, 7/1/03
(Pre-refunded 7/1/97!) . . . . . . . . . . . 450 478
Chesapeake Hosp. Auth., Chesapeake General
Hosp., (BIGI Insured), 7.625%, 7/1/18
(Pre-refunded 7/1/98!) . . . . . . . . . . . 85 93
Chesapeake Water & Sewer Systems, 7.75%, 7/1/17
(Pre-refunded 7/1/97!) . . . . . . . . . . . 90 98
Fairfax County, GO, 6.85%, 4/1/99
(Pre-refunded 4/1/97!) . . . . . . . . . . . 100 105
Fairfax County IDA, Fairfax Hosp. System, VRDN
(Currently 4.05%). . . . . . . . . . . . . . 100 100
Inova Health System, VRDN
(Currently 4.05%). . . . . . . . . . . . 100 100
Fairfax County Water Auth., 7.25%, 1/1/27
(Pre-refunded 1/1/00!) . . . . . . . . . . . 100 111
Frederick, Winchester Service Auth., (AMBAC
Insured), 6.55%, 10/1/97
(Escrowed to Maturity) . . . . . . . . . . . 50 52
Fredericksburg, GO, 5.85%, 12/1/96 . . . . . . . 20 20
Hampton, GO, 6.625%, 1/1/10
(Pre-refunded 1/1/00!) . . . . . . . . . . . 100 108
Henrico County, GO, 6.40%, 10/1/99
(Pre-refunded 10/1/98!). . . . . . . . . . . 180 190
Newport News, 6.40%, 4/1/96. . . . . . . . . . . 95 97
GO, 7.25%, 1/1/98. . . . . . . . . . . . . . 75 79
Norfolk, GO, 4.30%, 6/1/95 . . . . . . . . . . . 95 95
Norfolk IDA, Medical Center Hosp., 6.40%,
11/1/99 (Pre-refunded 11/1/97!). . . . . . . 130 135
Peninsula Ports Auth., Shell Oil, VRDN
(Currently 3.75%). . . . . . . . . . . . . . 200 200
Portsmouth, GO, 7.25%, 11/1/04
(Pre-refunded 11/1/95!). . . . . . . . . . . 100 104
Prince William County, GO,
6.00%, 2/1/96. . . . . . . . . . . . . . . . 100 101
Prince William County IDA, Potomac
Hospital Corp., 5.90%, 10/1/97 . . . . . . . 50 51
Richmond, GO, 7.00%, 1/15/20
(Pre-refunded 1/15/00!). . . . . . . . . . . 80 88
Public Utilities, 7.60%, 1/15/04
(Pre-refunded 1/15/98!). . . . . . . . . 340 371
Roanoke IDA, Roanoke Memorial Hosp.,
Carilion Health System,
VRDN (Currently 3.75%) . . . . . . . . . . 200 200
Southeastern Public Service Auth., Regional
Solid Waste System, 9.00%, 7/1/05
(Pre-refunded 7/1/96!) . . . . . . . . . 95 102
Suffolk, GO, 7.30%, 8/1/03
(Pre-refunded 8/1/97!) . . . . . . . . . . . 50 54
Univ. of Virginia, VRDN
(Currently 4.15%). . . . . . . . . . . . . . 100 100
Univ. of Virginia Hosp., 8.60%, 6/1/99
(Pre-refunded 6/1/95!) . . . . . . . . . . . 50 52
7.15%, 6/1/17 (Pre-refunded 6/1/98!) . . . . 50 54
Virginia, GO, 6.00%, 6/1/96. . . . . . . . . . . 75 76
6.75%, 7/1/04 (Pre-refunded 7/1/96!) . . . . 60 63
Transportation Fac., GO, 7.00%, 7/1/11
(Pre-refunded 7/1/96!) . . . . . . . . . . 400 420
Virginia Beach, GO, 6.75%, 5/1/97. . . . . . . . 30 31
7.50%, 5/1/04 (Pre-refunded 5/1/97!) . . . . 200 215
6.875%, 3/1/11 (Pre-refunded 3/1/01!). . . . 100 110
Virginia Ed. Loan Auth., Student Loan, 5.40%,
3/1/01 * . . . . . . . . . . . . . . . . . . 70 69
Virginia HDA, 5.75%, 11/1/97 . . . . . . . . . . 95 96
6.40%, 1/1/05 *. . . . . . . . . . . . . . . 50 51
Virginia Public Building Auth., Main Street
Station, 6.75%, 5/1/95 (Escrowed to
Maturity). . . . . . . . . . . . . . . . . 50 50
Virginia Public School Auth., 6.20%, 1/1/99
(Pre-refunded 1/1/97!) . . . . . . . . . . . $ 500 $ 523
6.60%, 6/1/00. . . . . . . . . . . . . . . . 50 52
6.20%, 1/1/03 (Pre-refunded 1/1/99!) . . . . 50 53
7.10%, 1/1/10 (Pre-refunded 1/1/98!) . . . . 75 81
Winchester, GO, 6.85%, 10/15/05 (Pre-refunded
10/15/97!) . . . . . . . . . . . . . . . . . 50 53
Total Investments in Securities -107.6% of
Net Assets (Cost $5,303) . . . . . . . . . . . . 5,343
* - Interest subject to alternative minimum tax
! - Used in determining portfolio maturity
AMBAC - AMBAC Indemnity Corp.
BIGI - Bond Investors Guaranty Insurance
GO - General Obligation
HDA - Housing Development Authority
IDA - Industrial Development Authority
VRDN - Variable Rate Demand Note
Statement of Assets and Liabilities
T. Rowe Price Virginia Short-Term Tax-Free Bond Fund /
February 28, 1995
(in thousands, except capital stock information)
ASSETS
Investments in securities, at value (cost $5,303) . . . . . $ 5,343
Receivable for investment securities sold. . . . . . . . . . 400
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 110
_______
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 5,853
_______
LIABILITIES
Payable for investment securities purchased. . . . . . . . . 867
Other liabilities. . . . . . . . . . . . . . . . . . . . . . 21
_______
Total liabilities. . . . . . . . . . . . . . . . . . . . . . 888
_______
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,965
_______
_______
Net Assets Consist of:
Net unrealized gain (loss) . . . . . . . . . . . . . . . . . 40
Paid-in-capital applicable to 981,491 no par value shares of
beneficial interest outstanding; unlimited number of shares
authorized. . . . . . . . . . . . . . . . . . . . . . . . . 4,925
_______
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,965
_______
_______
NET ASSET VALUE PER SHARE. . . . . . . . . . . . . . . . . . $ 5.06
_______
_______
The accompanying notes are an integral part of these financial statements.
Statement of Net Assets
T. Rowe Price Virginia Tax-Free Bond Fund /
February 28, 1995
(amounts in thousands, except capital stock information)
Face
Amount Value
_________ _________
VIRGINIA - 92.1%
Alexandria IDA, Alexandria / Arlington
Waste-to-Energy Fac.
(Ogden Martin Systems), 7.40%, 1/1/08. . . . $ 2,450 $ 2,491
Arlington County IDA, Arlington Hosp.,
7.00%, 9/1/11 (Pre-refunded 9/1/01!) . . . . 1,205 1,341
7.125%, 9/1/21 (Pre-refunded 9/1/01!). . . . 800 896
Augusta County IDA, Augusta Hosp.,
(AMBAC Insured), 6.625%, 9/1/12. . . . . . . 3,000 3,113
5.50%, 9/1/15. . . . . . . . . . . . . . . . 1,550 1,437
Chesterfield County, Water & Sewer,
6.375%, 11/1/08. . . . . . . . . . . . . . . 1,000 1,044
Covington - Alleghany County IDA,
Alleghany Regional Hosp.,
6.875%, 4/1/22 . . . . . . . . . . . . . . . 1,500 1,513
Covington - Alleghany County IDA, PCR,
Westvaco Corp., 6.65%, 9/1/18. . . . . . . . 1,500 1,533
Danville, General Improvement, GO, 7.25%, 3/1/07
(Pre-refunded 3/1/99!) . . . . . . . . . . . 350 384
Fairfax County, Sewer Revenue, (AMBAC Insured),
7.00%, 11/15/16
(Pre-refunded 11/15/99!) . . . . . . . . . . 900 987
Fairfax County IDA, Fairfax Hosp. System, VRDN
(Currently 4.05%). . . . . . . . . . . . . . 900 900
Inova Health System, VRDN
(Currently 4.05%). . . . . . . . . . . . . . 1,000 1,000
Fairfax County Redev. and Housing Auth.,
FCRHA Office Building,
7.50%, 6/15/18 . . . . . . . . . . . . . . . 2,340 2,371
Fairfax County Water Auth., 7.30%, 1/1/21
(Pre-refunded 1/1/00!) . . . . . . . . . . . 900 999
6.00%, 4/1/22. . . . . . . . . . . . . . . . 5,500 5,456
Frederick County IDA, Government Complex
Facilities Project,
(MBIA Insured), 6.50%, 12/1/14 . . . . . . . 1,500 1,562
Fredericksburg IDA, MWH MediCorp Obligated Group,
(FGIC Insured), Residual Interest Bond /
Inverse Floater, 8/15/23
(Currently 6.60%). . . . . . . . . . . . . . 6,000 6,152
Hampton, Museum, 7.30%, 1/1/14
(Pre-refunded 1/1/00!) . . . . . . . . . . . 1,100 1,218
Hampton Roads Medical College,
6.875%, 11/15/11 . . . . . . . . . . . . . . 1,500 1,568
6.875%, 11/15/16 . . . . . . . . . . . . . . 500 516
Harrisonburg IDA, Rockingham Memorial Hosp.,
(MBIA Insured),
5.75%, 12/1/13 . . . . . . . . . . . . . . . 3,200 3,117
Henrico County IDA, Bon Secours Health System,
St. John's Hosp., 7.50%, 9/1/15. . . . . . . 1,900 2,051
Bon Secours Health System, St. Mary's Hosp.,
7.50%, 9/1/07. . . . . . . . . . . . . . . . 435 470
Regional Jail Project, 7.00%, 8/1/13 . . . . 1,485 1,607
6.00%, 8/1/15. . . . . . . . . . . . . . . . 2,415 2,415
Isle of Wight IDA, Union Camp Corp.,
6.55%, 4/1/24 *. . . . . . . . . . . . . . . 5,000 4,948
Loudoun County Sanitation Auth., Water & Sewer,
(MBIA Insured), 5.25%, 1/1/25. . . . . . . . 1,000 889
Martinsville IDA, Memorial Hosp. of Martinsville
and Henry County, 7.00%, 1/1/11. . . . . . . 950 985
Norfolk IDA, Children's Hosp. of The King's
Daughters, (AMBAC Insured),
7.00%, 6/1/11 (Pre-refunded 6/1/01!) . . . . 1,150 1,277
Sentara Hosp., 7.10%, 11/1/10
(Pre-refunded 11/1/00!). . . . . . . . . . . 850 945
7.00%, 11/1/20 (Pre-refunded
11/1/00!). . . . . . . . . . . . . . . . . 1,045 1,157
Peninsula Ports Auth., Riverside Health System,
6.625%, 7/1/10 . . . . . . . . . . . . . . . $ 1,500 $ 1,546
Shell Oil, VRDN (Currently 3.75%). . . . . . 3,750 3,750
Portsmouth, GO, 6.375%, 8/1/10 . . . . . . . . . 1,030 1,074
Richmond, GO, 7.00%, 1/15/20
(Pre-refunded 1/15/00!). . . . . . . . . . . 1,515 1,663
Public Improvement, GO,
6.25%, 1/15/18 . . . . . . . . . . . . . . 2,450 2,463
Richmond Metropolitan Auth., Expressway,
(FGIC Insured), 5.75%, 7/15/22 . . . . . . . 5,250 5,054
Roanoke IDA, Roanoke Memorial Hosp Carilion
Health System, (MBIA Insured),
6.125%, 7/1/17 . . . . . . . . . . . . . . 3,905 3,931
7.25%, 7/1/17 (Pre-refunded 7/1/00!) . . . . 1,000 1,112
VRDN (Currently 3.75%) . . . . . . . . . . . 1,700 1,700
Univ. of Virginia, VRDN (Currently 4.15%). . . . 1,000 1,000
Univ. of Virginia Hosp., 7.00%, 6/1/10 . . . . . 855 906
7.00%, 6/1/10 (Pre-refunded 6/1/99!) . . . . 545 595
Virginia, GO, 5.25%, 12/1/13 . . . . . . . . . . 1,675 1,554
6.50%, 6/1/15. . . . . . . . . . . . . . . . 3,000 3,146
Virginia Beach, GO, 5.85%, 11/1/12 . . . . . . . 1,100 1,094
Virginia Beach Dev. Auth., Sentara Bayside Hosp.,
6.60%, 11/1/09 . . . . . . . . . . . . . . . 1,000 1,028
Virginia Beach General Hosp., (AMBAC Insured),
6.00%, 2/15/10 . . . . . . . . . . . . . . 1,000 1,018
Virginia College Building Auth., Univ. of Richmond,
6.25%, 11/1/12 . . . . . . . . . . . . . . . 2,000 2,042
6.40%, 11/1/22 . . . . . . . . . . . . . . . 2,375 2,498
Washington and Lee Univ.,
5.75%, 1/1/14. . . . . . . . . . . . . . . . 2,830 2,754
Virginia Ed. Loan Auth., Student Loan Program,
5.95%, 9/1/09 *. . . . . . . . . . . . . . . 2,000 1,983
5.55%, 9/1/10 *. . . . . . . . . . . . . . . 2,715 2,569
Virginia HDA, 6.35%, 11/1/01 . . . . . . . . . . 1,000 1,033
6.80%, 7/1/06 *. . . . . . . . . . . . . . . 1,000 1,037
7.40%, 7/1/09. . . . . . . . . . . . . . . . 300 316
7.625%, 7/1/09 . . . . . . . . . . . . . . . 460 488
6.70%, 7/1/11. . . . . . . . . . . . . . . . 2,660 2,745
6.50%, 5/1/13 *. . . . . . . . . . . . . . . 2,000 2,008
7.10%, 5/1/13. . . . . . . . . . . . . . . . 1,500 1,568
6.90%, 7/1/13. . . . . . . . . . . . . . . . 1,800 1,855
7.10%, 1/1/17. . . . . . . . . . . . . . . . 2,230 2,323
6.85%, 7/1/17. . . . . . . . . . . . . . . . 1,000 1,019
6.90%, 7/1/17. . . . . . . . . . . . . . . . 3,500 3,626
7.05%, 5/1/18. . . . . . . . . . . . . . . . 840 876
7.10%, 1/1/22. . . . . . . . . . . . . . . . 4,760 4,936
Virginia Public Building Auth.,
6.50%, 8/1/11. . . . . . . . . . . . . . . . 3,500 3,635
6.25%, 8/1/15. . . . . . . . . . . . . . . . 1,550 1,583
Virginia Public School Auth., 7.125%, 1/1/10
(Pre-refunded 1/1/98!) . . . . . . . . . . . 100 108
6.50%, 8/1/12. . . . . . . . . . . . . . . . 1,700 1,759
5.90%, 7/15/13 . . . . . . . . . . . . . . . 1,525 1,521
Virginia Resources Auth., Water & Sewer Pooled
Loan Program, 7.50%, 11/1/17 . . . . . . . . 750 792
Virginia Transportation Board, Northern Virginia
Transportation Dist., 6.375%, 5/15/20. . . . $ 2,500 $ 2,559
U.S. Route 58 Corridor Dev. Program,
5.625%, 5/15/13. . . . . . . . . . . . . . 3,750 3,599
Washington County IDA, Johnston Memorial Hosp.,
6.75%, 7/1/12. . . . . . . . . . . . . . . . 1,500 1,538
Winchester IDA, Winchester Medical Center, Inc.,
(AMBAC Insured), Embedded Interest Rate Swap,
1/1/04 (Currently 4.41%) . . . . . . . . . 1,400 1,257
_____________________________________________________________________
DISTRICT OF COLUMBIA - 6.3%
Washington D.C. Metropolitan Airport Auth.,
5.75%, 10/1/20 * . . . . . . . . . . . . . . 3,750 3,534
(MBIA Insured), 6.625%, 10/1/19 *. . . . . . 3,750 3,842
Washington D.C. Metropolitan Transit Auth.,
6.00%, 7/1/07. . . . . . . . . . . . . . . . 2,315 2,401
_____________________________________________________________________
PUERTO RICO - 2.2%
Puerto Rico Commonwealth, GO, 7.75%, 7/1/13
(Pre-refunded 7/1/98!) . . . . . . . . . . . 100 111
7.75%, 7/1/17 (Pre-refunded 7/1/99!) . . . . 250 280
Puerto Rico Electric Power Auth.,
7.00%, 7/1/07. . . . . . . . . . . . . . . . 1,000 1,051
8.00%, 7/1/08 (Pre-refunded 7/1/98!) . . . . 125 139
Puerto Rico Infrastructure Fin. Auth.,
7.75%, 7/1/08. . . . . . . . . . . . . . . . 115 124
7.50%, 7/1/09. . . . . . . . . . . . . . . . 1,500 1,595
Puerto Rico Public Buildings Auth., GO,
7.25%, 7/1/17 (Pre-refunded 7/1/98!) . . . . 100 109
Total Investments in Securities -100.6% of Net
Assets (Cost $151,857) . . . . . . . . . . . 156,189
Other Assets Less Liabilities. . . . . . . . . . (911)
__________
Net Assets Consist of: Value
_______
Accumulated net investment income -
net of distributions . . . . . . . . . . . . $ 3
Accumulated net realized gain/loss -
net of distributions . . . . . . . . . . . . (6,181)
Net unrealized gain (loss) . . . . . . . . . . . 4,332
Paid-in-capital applicable to 14,706,214 no par
value shares of beneficial interest
outstanding; unlimited number of shares
authorized . . . . . . . . . . . . . . . . . 157,124
NET ASSETS . . . . . . . . . . . . . . . . . . . $155,278
________
________
NET ASSET VALUE PER SHARE. . . . . . . . . . . . $10.56
_______
_______
* - Interest subject to alternative minimum tax
! - Used in determining portfolio maturity
AMBAC - AMBAC Indemnity Corp.
FGIC - Financial Guaranty Insurance Company
GO - General Obligation
HDA - Housing Development Authority
IDA - Industrial Development Authority
MBIA - Municipal Bond Investors Assurance Corp.
PCR - Pollution Control Revenue
VRDN - Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price Virginia Tax-Free Funds
(in thousands)
Short-Term Bond
Bond Fund Fund
_____________ _______
From
Nov. 30, 1994
(Commencement
of Operations Year
to Feb. Ended Feb.
28, 1995 28, 1995
___________ __________
INVESTMENT INCOME
Interest income. . . . . . . . . . . . . . . $ 32 $ 9,420
Expenses
Investment management. . . . . . . . . . . . - 611
Shareholder servicing. . . . . . . . . . . . 1 204
Custody and accounting . . . . . . . . . . . 20 115
Prospectus and shareholder reports . . . . . 1 18
Registration . . . . . . . . . . . . . . . . - 16
Legal and audit. . . . . . . . . . . . . . . 3 13
Trustees . . . . . . . . . . . . . . . . . . 2 7
Proxy and annual meeting . . . . . . . . . . - 7
Miscellaneous. . . . . . . . . . . . . . . . - 6
Reimbursed by Manager. . . . . . . . . . . . (23) -
________ ________
Total expenses . . . . . . . . . . . . . . . 4 997
________ ________
Net investment income. . . . . . . . . . . . . . 28 8,423
________ ________
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities . . . . . . . . . . . . . . . . . - (5,888)
Futures. . . . . . . . . . . . . . . . . . . - (187)
________ ________
Net realized gain (loss) . . . . . . . . . . - (6,075)
Change in net unrealized gain or loss
on securities. . . . . . . . . . . . . . . . 40 (1,060)
________ ________
Net realized and unrealized gain (loss). . . . . 40 (7,135)
________ ________
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS . . . . . . . . . . . . . . . . . $ 68 $ 1,288
________ ________
________ ________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price Virginia Tax-Free Funds
(in thousands)
Short-Term Bond
Bond Fund Fund
____________ _________
From Nov. 30,
1994
(Commencement
of Operations)
to Year Ended Feb. 28,
Feb. 28, 1995 1995 1994
______________ _________ _________
INCREASE (DECREASE) IN NET
ASSETS FROM
Operations
Net investment income. . . . . . $ 28 $ 8,423 $ 7,321
Net realized gain (loss) . . . . - (6,075) 1,952
Change in net unrealized
gain or loss. . . . . . . . . 40 (1,060) (1,414)
_________ ___________ _________
Increase (decrease) in net assets
from operations . . . . . . . 68 1,288 7,859
_________ ___________ _________
Distributions to shareholders
Net investment income. . . . . . (28) (8,423) (7,321)
Net realized gain. . . . . . . . - (151) (2,033)
_________ ___________ _________
Decrease in net assets from
distributions. . . . . . . . (28) (8,574) (9,354)
_________ ___________ _________
Capital share transactions*
Shares sold. . . . . . . . . . . 4,921 42,140 93,072
Distributions reinvested . . . . 4 6,686 7,628
Shares redeemed. . . . . . . . . - (54,977) (42,195)
_________ ___________ _________
Increase (decrease) in net assets
from capital share
transactions. . . . . . . . 4,925 (6,151) 58,505
_________ ___________ _________
Increase (decrease) in net
assets . . . . . . . . . . . . . 4,965 (13,437) 57,010
NET ASSETS
Beginning of period. . . . . . . . - 168,715 111,705
_________ ___________ _________
End of period. . . . . . . . . . . $ 4,965 $ 155,278 $168,715
_________ ___________ _________
_________ ___________ _________
*Share information
Shares sold. . . . . . . . . . . 981 4,058 8,339
Distributions reinvested . . . . - 645 683
Shares redeemed. . . . . . . . . - (5,337) (3,782)
_________ ___________ _________
Increase (decrease) in shares
outstanding . . . . . . . . . 981 (634) 5,240
_________ ___________ _________
_________ ___________ _________
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Virginia Tax-Free Funds / February 28, 1995
Note 1 - Significant Accounting Policies
T. Rowe Price State Tax-Free Income Trust (the Trust) is registered under the
Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The Virginia Short-Term Tax-Free Bond Fund (the Short-Term
Bond Fund) and the Virginia Tax-Free Bond Fund (the Bond Fund) are two of the
portfolios established under the Trust.
A) Valuation - Debt securities are generally traded in the over-the-counter
market. Invest-ments in securities with remaining maturities of one year or
more are stated at fair value as furnished by dealers who make markets in such
securities or by an independent pricing service, which considers yield or
price of bonds of comparable quality, coupon, maturity, and type, as well as
prices quoted by dealers who make markets in such securities. Securities with
remaining maturities less than one year are stated at fair value which is
determined by using a matrix system that establishes a value for each security
based on money market yields.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Trustees.
B) Premiums and Discounts - Premiums and discounts on municipal securities are
accounted for in accordance with federal income tax regulations, which require
the amortization of all premiums and discounts except market discounts. Market
discounts are included in the gain or loss recorded on disposition of the
security for financial reporting purposes and ordinary income for tax
purposes.
C) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on an identified cost basis. Distributions to shareholders are
recorded by each fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting principles.
Note 2 - Organization
The Short-Term Bond Fund was organized on November 9, 1994, and had no
operations prior to November 30, 1994, other than those related to
organizational matters.
Note 3 - Investment Transactions
Purchases and sales of portfolio securities, other than short-term securities,
for the period ended February 28, 1995, were as follows:
Short-Term
Bond Fund Bond Fund
______________ _____________
Purchases $ 4,303,000 $ 130,373,000
Sales 95,000 134,354,000
Note 4 - Federal Income Taxes
No provision for federal income taxes is required since each fund intends to
continue to qualify as a regulated investment company and distribute all of
its income. The Bond Fund has unused realized capital loss carryforwards for
federal income tax purposes of $4,381,000 which expire in 2003. Each fund
intends to retain gains realized in future periods that may be offset by
available capital loss carryforwards.
In order for the Bond Fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, $3,000 of
undistributed net investment income and $11,000 of undistributed net realized
gains were reclassified as an $8,000 increase to paid-in-capital during the
period ended February 28, 1995. The results of operations and net assets were
not affected by the reclassifications.
At February 28, 1995, the aggregate cost of investments for the
Short-Term Bond and Bond Funds for federal income tax and financial reporting
purposes was $5,303,000 and $151,857,000, respectively. Net unrealized gain on
investments was as follows:
Short-Term Bond
Bond Fund Fund
___________ _____________
Appreciated
Investments $ 40,200 $ 4,579,000
Depreciated
Investments (200) (247,000)
_________ ___________
Net Unrealized Gain $ 40,000 $ 4,332,000
_________ ___________
_________ ___________
Note 5 - Related Party Transactions
The investment management agreement between each fund and T. Rowe Price
Associates, Inc. (the Manager) provides for an annual investment management
fee, of which $45,000 for the Bond Fund was payable at February 28, 1995. The
fee is computed daily and paid monthly, and consists of an Individual Fund Fee
equal to 0.10% of average daily net assets and a Group Fee. The Group Fee is
based on the combined assets of certain mutual funds sponsored by the Manager
or Rowe-Price Fleming International, Inc. (the Group). The Group Fee rate
ranges from 0.48% for the first $1 billion of assets to 0.31% for assets in
excess of $34 billion. At February 28, 1995, and for the period then ended,
the effective annual Group Fee rate was 0.34%. Each fund pays a pro rata share
of the Group Fee based on the ratio of its net assets to those of the Group.
Under the terms of the investment management agreement, the Manager is
required to bear any expenses through February 29, 1996, for the Short-Term
Bond Fund and through February 28, 1995, for the Bond Fund, which would cause
each fund's ratio of expenses to average net assets to exceed 0.65%.
Thereafter through February 28, 1998, for the Short-Term Bond Fund and
February 28, 1997 for the Bond Fund, each fund is required to reimburse the
Manager for these expenses, provided that average net assets have grown or
expenses have declined sufficiently to allow reimbursement without causing the
fund's ratio of expenses to average net assets to exceed 0.65%. Pursuant to
this agreement, $3,000 and $69,000 of management fees were not accrued by the
Short-Term Bond and Bond Funds, respectively, for the period ended February
28, 1995, and $23,000 of other expenses for the Short-Term Bond Fund were
borne by the Manager. Additionally, $119,000 of unaccrued fees for the Bond
Fund from the prior periods are subject to reimbursement through February 28,
1997. Pursuant to a previous agreement, $292,000 of unaccrued fees and other
expenses borne by the Manager in the Bond Fund were permanently waived at
February 28, 1995.
In addition, each fund has entered into agreements with the Manager and a
wholly-owned subsidiary of the Manager, pursuant to which each fund receives
certain other services. The Manager computes the daily share price and
maintains the financial records of each fund. T. Rowe Price Services, Inc.
(TRPS) is each fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to each fund. The Short-Term Bond and
Bond Funds incurred expenses pursuant to these related party agreements
totaling approximately $16,000 and $216,000, respectively, for the period
ended February 28, 1995, of which $10,000 and $23,000, respectively, were
payable at period end.
Financial Highlights
T. Rowe Price Virginia Short-Term Tax-Free Bond Fund
For a share outstanding throughout each period
______________________________________________
From Nov. 30, 1994
(Commencement
of Operations) to
Feb. 28, 1995
______________________________________________
NET ASSET VALUE, BEGINNING
OF PERIOD. . . . . . . . . . $ 5.00
________
Investment Activities
Net investment
income . . . . . . . . 0.05*
Net realized and unrealized
gain . . . . . . . . . 0.06
________
Total from Investment
Activities . . . . . . 0.11
________
Distributions
Net investment
income . . . . . . . . . (0.05)
________
NET ASSET VALUE, END OF
PERIOD . . . . . . . . . . . $ 5.06
________
________
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . 2.28%
Ratio of Expenses to Average
Net Assets. . . . . . . 0.65%*!
Ratio of Net Investment
Income to Average
Net Assets . . . . . . 4.43%!
Portfolio Turnover
Rate . . . . . . . . . . 14.8%!
Net Assets, End of Period
(in thousands) . . . . . $ 4,965
* Excludes expenses in excess of a 0.65% voluntary
expense limitation in effect through February 29, 1996.
! Annualized.
Financial Highlights
T. Rowe Price Virginia Tax-Free Bond Fund
For a share outstanding throughout each period
_________________________________________________
April 30,
1991
Year (Commencement
Ended of Operations)
Feb. 28, Feb. 28, Feb. 28, to
1995 1994 1993 Feb. 29, 1992
_________________________________________________
NET ASSET VALUE, BEGINNING OF
PERIOD . . . . . . . . . . . $11.00 $11.06 $10.27 $10.00
_______ _______ _______ _______
Investment Activities
Net investment
income . . . . . . . . . . . 0.57* 0.56* 0.58* 0.48*
Net realized and unrealized
gain (loss). . . . . . . . . (0.43) 0.09 0.82 0.31
_______ _______ _______ _______
Total from Investment
Activities . . . . . . . . 0.14 0.65 1.40 0.79
_______ _______ _______ _______
Distributions
Net investment
income . . . . . . . . . . . (0.57) (0.56) (0.58) (0.48)
Net realized gain. . . . . . (0.01) (0.15) (0.03) (0.04)
_______ _______ _______ _______
Total Distributions. . . . . (0.58) (0.71) (0.61) (0.52)
_______ _______ _______ _______
NET ASSET VALUE, END OF
PERIOD . . . . . . . . . . . $10.56 $11.00 $11.06 $10.27
_______ _______ _______ _______
_______ _______ _______ _______
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . . 1.51% 5.99% 14.11% 8.12%
Ratio of Expenses to Average
Net Assets . . . . . . . . . 0.65%* 0.65%* 0.65%* 0.65%!*
Ratio of Net Investment
Income to Average Net
Assets . . . . . . . . . . 5.49% 5.03% 5.53% 5.80%!
Portfolio Turnover Rate. . . . 89.1% 61.8% 68.5% 76.3%!
Net Assets, End of Period
(in thousands) . . . . . . .$155,278 $168,715 $111,705 $44,198
* Excludes expenses in excess of a 0.65% voluntary expense limitation in
effect through February 28, 1995.
! Annualized.
Report of Independent Accountants
To the Shareholders and Board of Trustees of
T. Rowe Price Virginia Tax-Free Funds
We have audited the accompanying statement of assets and liabilities of
T. Rowe Price Virginia Short-Term Tax-Free Bond Fund, including the portfolio
of investments, and statement of net assets of T. Rowe Price Virginia Tax-Free
Bond Fund (two of the portfolios comprising the T. Rowe Price State Tax-Free
Income Trust) as of February 28, 1995, and the related statement of
operations, the statement of changes in net assets, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of February 28, 1995, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of T. Rowe Price Virginia Short-Term Tax-Free Bond Fund and T. Rowe
Price Virginia Tax-Free Bond Fund as of February 28, 1995, the results of
their operations, the changes in their net assets, and financial highlights
for each of the periods presented, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
March 17, 1995
Shareholder Services
To help shareholders monitor their current investments and make decisions that
accurately reflect their financial goals, T. Rowe Price offers a wide variety
of information and services-at no extra cost.
Knowledgeable Service Representatives
By Phone-Shareholder service representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m ET. Call
1-800-225-5132 to speak directly with a representative who will be able to
assist you with your accounts.
In Person-Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
Automated 24-Hour Services
Tele*Access(registered trademark) (1-800-638-2587) provides information
such as account balance, date and amount of your last transaction, latest
dividend payment, and fund prices and yields. Additionally, you have the
ability to request prospectuses, statements, account and tax forms; reorder
checks; and initiate purchase, redemption, and exchange orders for identically
registered accounts.
PC*Access(registered trademark) provides the same information as
Tele*Access, but on a personal computer via dial-up modem.
Account Services
Checking-Write checks for $500 or more on any money market and most bond
fund accounts.
Automatic Investing-Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one fund
account into another, such as from a money fund into a stock fund. A low, $50
minimum makes it easy to get started.
Automatic Withdrawal-If you need money from your fund account on a
regular basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options-Reinvest all or some of your
distributions, or take them in cash. We give you maximum flexibility and
convenience.
Investment Information
Combined Statement-A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides total
portfolio value, and lists your investments by type-stock, bond, and money
market. Detail pages itemize account transactions by fund.
Quarterly Shareholder Reports-Portfolio managers review the performance
of the funds in plain language and discuss T. Rowe Price's economic outlook.
The T. Rowe Price Report-A quarterly newsletter with relevant articles on
market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Insights-A library of information that includes reports on mutual fund
tax issues, investment strategies, and financial markets.
Detailed Investment Guides-Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also
available on disk for PC use), and Guide to Risk-Adjusted Performance can help
you determine and reach your investment goals.
Discount Brokerage
You can trade stocks, bonds, options, precious metals, and other securities at
a substantial savings over regular commission rates. Call a shareholder
service representative for more information.
T. Rowe Price No-Load Mutual Funds
STABILITY
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money
Market
Tax-Exempt Money
CONSERVATIVE INCOME
Adjustable Rate
U.S. Government
Short-Term Bond
Short-Term Global Income
Summit Limited-Term Bond
U.S. Treasury Intermediate
Florida Insured Intermediate
Tax-Free
Maryland Short-Term
Tax-Free Bond
Summit Municipal
Intermediate
Tax-Free Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
INCOME
Global Government Bond
GNMA
New Income
Spectrum Income
Summit GNMA
U.S. Treasury Long-Term
California Tax-Free Bond
Georgia Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Tax-Free Income
Virginia Tax-Free Bond
AGGRESSIVE INCOME
Emerging Markets Bond
High Yield
International Bond
Tax-Free High Yield
CONSERVATIVE
GROWTH
Balanced
Capital Appreciation
Dividend Growth
Equity Income
Equity Index
Growth & Income
Spectrum Growth
Value
GROWTH
Blue Chip Growth
European Stock
Growth Stock
International Stock
Japan
Mid-Cap Growth
New Era
Small-Cap Value
AGGRESSIVE GROWTH
Capital Opportunity
Emerging Markets Stock
International Discovery
Latin America
New America Growth
New Asia
New Horizons
OTC
Science & Technology
PERSONAL STRATEGY FUNDS
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
Call if you want to know about any T. Rowe Price fund. We'll send you a
prospectus with more complete information, including management fees and other
expenses. Read it carefully before you invest or send money.
Chart 1 - Municipal bond and note yield chart showing Virginia Bond Index and
3-yr. note index, Feb. 94 to Feb. 95.
Chart 2 - Bar graph showing Virginia Bond Issues from Jan. 1994 through Feb.
1995.
Chart 3 - Fiscal-Year Performance Comparison line graphs for Virginia Tax-Free
Funds annual report (Feb. 28, 1995) shows $10,000 investments in Virginia
Tax-Free Bond Fund and Lehman Municipal Bond Index from 1991 to 1995.
