----------------------
SEMIANNUAL REPORT
----------------------
NEW JERSEY TAX-FREE BOND FUND
----------------------
FOR YIELD, PRICE, LAST TRANSACTION,
AND CURRENT BALANCE, 24 HOURS,
7 DAYS A WEEK, CALL:
1-800-638-2587 toll free
625-7676 Baltimore area
----------------------
FOR ASSISTANCE WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
----------------------
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 New
Jersey Tax-Free Bond Fund.
<PAGE>
- --------------------------------------------------------------------------------
Fellow Shareholders
- --------------------------------------------------------------------------------
While stocks have captured most of the headlines so far this year, bonds
also delivered strong returns for investors. Bond prices rose and yields fell
sharply, although long-term tax-exempt issues trailed their taxable equivalents.
Despite the Federal Reserve's ease in July, municipal and taxable bonds gave
back some of their gains after revised economic data indicated the economy was
not slowing to the extent originally believed.
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
- --------------------------------------------------------------------------------
Municipals turned in their strongest performance this year in January and
February, when the yield on 30-year AAA general obligation bonds fell to 5.95%
from 6.65%. However, during the six months covered in this report, that yield
declined by only another 10 basis points to 5.85%, compared with an
80-basis-point drop in the 30-year Treasury bond yield.
The tax-exempt market's lagging performance relative to Treasuries can be
attributed largely to investor concerns about tax reform proposals in Washington
(see sidebar on page 2). One effect of this key issue was the divergence between
intermediate-and long-term tax-exempt bonds. During the six months ended August
31, bonds maturing in 5 to 10 years provided higher total returns than long-term
bonds.
[Edgar description: A 1-line chart showing New Jersey Bond Yield
Index from 8/31/94 through 8/31/95.]
The municipal yield curve steepened significantly (short-term yields fell
and long-term yields were steady), because investors demonstrated their
reluctance to assume the additional risk of buying bonds with long maturities
until tax uncertainties are cleared up.
The supply of new tax-exempt issues has been light so far this year,
especially in New Jersey, where new issuance was down 37% compared with a 22%
drop nationwide. Most new issues in New Jersey represented borrowing by local
governments for general needs, while the state came to market only once during
the period. The state's health care sector was also a less active issuer, having
completed the bulk of its financing needs in 1993 and 1994. Overall, New Jersey
maintained a balanced budget by reducing spending on employee health and
retirement programs.
- --------------------------------------------------------------------------------
STRATEGY AND PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
<PAGE>
Over the past six months, we made several moves to respond to falling
interest rates and the effect of tax overhaul proposals. We trimmed the fund's
effective duration at the end of May, when tax reform discussions put pressure
on the municipal market, particularly long-term issues. By the end of June, we
lengthened slightly to a duration of 7.7 years after the municipal market
adjusted to cheaper relationships versus Treasuries; at 5.9%, 30-year AAA GO
bonds were yielding nearly 90% of the 30-year Treasury bond yield. We continued
lengthening during the summer as tax-exempt yields held steady against their
taxable counterparts, offering good prospects for appreciation. The fund ended
with a duration of eight years on August 31.
In an effort to insulate the portfolio from the effect of potential bond
calls, which hinders performance when interest rates fall, we stepped up our
purchases of noncallable bonds. These moves also helped extend duration.
The health care sector showed signs of improvement in New Jersey as
hospitals adjust to a more competitive environment. That brightened the
prospects for some hospital bonds, which represent 12% of the fund's holdings.
Two of our hospital bonds were upgraded by Moody's, resulting in above-average
returns.
Your fund's performance compared favorably with its peer group average
in both the last quarter and six-month periods.
- --------------------------------------------------------------------------------
Performance Comparison
Periods Ended 8/31/95
---------------------
3 Months 6 Months
---------------------
New Jersey Tax-Free
Bond Fund 0.88% 5.16%
---------------------
Lipper New Jersey Municipal
Debt Fund Average 0.70 4.72
---------------------
- --------------------------------------------------------------------------------
OUTLOOK
- --------------------------------------------------------------------------------
For the past three months, the 30-year Treasury bond yield has hovered in a
range between 6.5% and 7%. While recent economic growth has slowed significantly
from last year's rapid pace, it may not have slowed to the extent the Federal
Reserve believed when it loosened monetary policy in July. Second quarter GDP,
initially reported to have increased by a paltry 0.5% annualized rate, was
subsequently revised to 1.1%. Growth in the third and fourth quarters should be
closer to the long-term trend of 2.5%.
<PAGE>
Until the economy shows clearer signs of veering from moderate to either
slower or more rapid growth, long bond yields are likely to remain close to
current levels. Despite the emerging picture of a rebound in growth, the
combination of benign inflation and the growing sense of fiscal responsibility
in Washington may reassure the bond market.
The municipal market is also likely to trade in its range of the past six
months, with long-term rates fluctuating between 5.5% and 6.0%. Unless tax
reform proposals disappear altogether, we do not expect municipal bonds to
outperform Treasuries, and investors may continue to prefer tax-exempt bonds
with short maturities. Overall, we anticipate that economic developments will
have a greater impact than tax reform proposals on the municipal market.
In New Jersey, the economy should grow in line with the national average.
To accommodate the personal tax reductions championed by Governor Whitman, the
state intends to further reduce the cost of its work force in upcoming
collective bargaining agreements, and also cut Medicaid expenditures. So far,
the tax cuts, which are being implemented in several steps, have not had a
meaningful impact on the state's bonds. However, the largest cut is pending and
could exert some downward pressure on New Jersey mu nicipal bond prices by
reducing their tax advantage. On the other hand, the low supply of new issues
may offset the tax reductions.
Respectfully submitted,
[signature]
William T. Reynolds
President and Chairman of the
Investment Advisory Committee
September 20, 1995
========================================
Municipal Bonds Hindered by
Tax Reform Proposals
========================================
In recent months, proposals for tax
reform in Washington have trimmed
returns on municipal bonds. Most of
these proposals are still in rudimentary
form, but they center on the possibility
of a flat tax with a low income tax
rate, and the elimination of taxes on
the income from taxable securities. As a
result, investors demanded higher yields
on long-term tax-exempt issues relative
to Treasuries to compensate for the risk
that new legislation might reduce the
tax advantages of municipals. Tax-exempt
securities with short maturities have
performed better, because they are less
vulnerable to any changes in the tax
laws.
<PAGE>
Tax reform discussions could
continue to affect the municipal market
adversely, but we believe the likelihood
of a genuine flat tax is slim. In our
experience, the market often overreacts
to proposed changes in the tax code,
creating periods of market weakness that
we view as buying opportunities.
Accordingly, we have taken advantage of
the demand for short-term tax-exempt
bonds and have purchased long-term bonds
when their yields approached those of
long-term Treasuries.
========================================
================================================================================
Portfolio Highlights
Key Statistics
- --------------------------------------------------------------------------------
Periods Ended
Dividend Yield 8/31/95
- --------------------------- ---------------
3 Months* 5.33%
6 Months* 5.44
SEC 30-Day Yield 5.21
Dividend Per Share
- ---------------------------
3 Months $0.14
6 Months 0.29
Change in Price Per Share
- ---------------------------
3 Months (From $10.93 to $10.88) $-0.05
6 Months (From $10.63 to $10.88) 0.25
Weighted Average Quality** 2.6
Weighted Average Maturity 19.0 years
Weighted Average Effective Duration 8.0 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.
<PAGE>
** On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest
quality.
================================================================================
Sector Diversification
- --------------------------------------------------------------------------------
Percent of Net Assets
8/31/95
-----------------
Water and Sewer Revenue 15%
Hospital Revenue 12
General Obligation - Local 10
Educational Revenue 9
Dedicated Tax Revenue 7
Industrial and Pollution Control Revenue 6
Electric Revenue 5
General Obligation - State 5
Lease Revenue 5
Air and Sea Transportation Revenue 5
Ground Transportation Revenue 4
Escrowed to Maturity 4
Housing Finance Revenue 4
Nuclear Revenue 3
Prerefunded Bonds 3
Miscellaneous Revenue 2
Solid Waste Revenue 1
================================================================================
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
Periods ended August 31, 1995
Since
Inception
1 Year (4/30/91)
------- --------
7.93% 8.20%
Note: For the above periods ended 6/30/95, the fund's returns were 8.08%,
and 8.06%, respectively. Investment return and principal value represent past
performance and will vary. Shares may be worth more or less at redemption than
at original purchase.
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
Statement of Net Assets
T. Rowe Price New Jersey Tax-Free Bond Fund / August 31, 1995 (Unaudited)
(AMOUNTS IN THOUSANDS, EXCEPT CAPITAL STOCK INFORMATION)
<S> <C> <C>
Amount Value
----------- -----------
NEW JERSEY -- 79.3%
Cape May County, Industrial Pollution Control Fin. Auth., Atlantic City
Electric, (MBIA Insured), 6.80%, 3/1/21. . . . . . . . . . . . . . . . . . . $1,500 $1,720
Edison Township, GO, 6.50%, 6/1/08. . . . . . . . . . . . . . . . . . . . . . . 350 386
Jersey City, School Bonds, GO, 6.50%, 2/15/04. . . . . . . . . . . . . . . . . . 500 549
Middlesex County Pollution Control Fin. Auth., Amerada Hess Corp.,
6.875%, 12/1/22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 1,544
Middlesex County Utilities Auth., Sewer, (MBIA Insured),
Residual Interest Bond / Inverse Floater, 8/15/10 (Currently 7.35%). . . . . . 500 538
Monmouth County Water & Sewer, GO, (MBIA Insured), 6.35%, 10/1/11. . . . . . . 250 274
Morris County, GO, 5.00%, 7/15/09. . . . . . . . . . . . . . . . . . . . . . . . 500 484
5.00%, 7/15/12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 1,868
New Jersey, GO, 7.05%, 7/15/12 *. . . . . . . . . . . . . . . . . . . . . . . . 1,335 1,495
Wastewater, 6.30%, 4/1/10. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,180 1,248
6.375%, 4/1/11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750 794
New Jersey Building Auth., 5.00%, 6/15/16. . . . . . . . . . . . . . . . . . . . 3,500 3,135
New Jersey Economic Dev. Auth., PCR, Dow Chemical / El Dorado,
VRDN (Currently 3.35%). . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 1,200
PCR, Exxon Corp., VRDN (Currently 3.35%). . . . . . . . . . . . . . . . . . . 900 900
Water Fac., American Water Company, (FGIC Insured),
5.50%, 6/1/23 *. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 1,883
6.875%, 11/1/34 *. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 1,604
New Jersey EFA, Princeton Univ., 5.875%, 7/1/14. . . . . . . . . . . . . . . . . 1,050 1,062
5.25%, 7/1/15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,245 1,168
Seton Hall Univ., 6.875%, 7/1/10. . . . . . . . . . . . . . . . . . . . . . . 375 394
7.00%, 7/1/21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 212
New Jersey HFFA, Atlantic City Medical Center, 6.80%, 7/1/11. . . . . . . . . . 625 654
Columbus Hosp., 7.50%, 7/1/21. . . . . . . . . . . . . . . . . . . . . . . . . 990 1,021
Hackensack Medical Center, (FGIC Insured), 6.625%, 7/1/11. . . . . . . . . . . 500 530
6.625%, 7/1/17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 528
Irvington General Hosp., (FHA Guaranteed), 5.875%, 8/1/06. . . . . . . . . . . 1,525 1,589
6.375%, 8/1/15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 516
Monmouth Medical Center, (CGIC Insured), 6.25%, 7/1/24. . . . . . . . . . . . 1,000 1,024
Morristown Memorial Hosp., 7.00%, 7/1/17. . . . . . . . . . . . . . . . . . . 800 852
Overlook Hosp. Assoc., (FGIC Insured), 6.70%, 7/1/13. . . . . . . . . . . . . 500 526
Raritan Bay Medical Center, 7.25%, 7/1/27. . . . . . . . . . . . . . . . . . . 690 688
New Jersey Highway Auth., Garden State Parkway, 7.25%, 1/1/09
(Pre-refunded 1/1/99). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 222
7.25%, 1/1/16 (Pre-refunded 1/1/99). . . . . . . . . . . . . . . . . . . . 260 288
New Jersey Housing & Mortgage Fin. Agency, 7.10%, 11/1/11. . . . . . . . . . . . 300 318
7.10%, 11/1/12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 185
(MBIA Insured), 6.90%, 10/1/16 *. . . . . . . . . . . . . . . . . . . . . . . 1,000 1,060
5.375%, 4/1/25 *. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 885
<PAGE>
Amount Value
----------- -----------
New Jersey Sports & Exposition Auth., (MBIA Insured), VRDN
(Currently 3.35%). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 600
Monmouth Park, 8.00%, 1/1/25. . . . . . . . . . . . . . . . . . . . . . . . . 650 709
New Jersey Turnpike Auth., 10.375%, 1/1/03 (Escrowed to Maturity). . . . . . . 2,145 2,633
New Jersey Turnpike Auth., 6.50%, 1/1/16. . . . . . . . . . . . . . . . . . . . 2,560 2,759
Ocean County Utilities Auth., Wastewater, 6.125%, 1/1/01. . . . . . . . . . . . 500 537
6.125%, 1/1/02. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 540
6.30%, 1/1/11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,300 1,370
Port Auth. of New York & New Jersey, 6.125%, 7/15/22 *. . . . . . . . . . . . . 1,000 1,003
7.875%, 3/1/24 *. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 1,567
(FGIC Insured), 6.50%, 7/15/19 *. . . . . . . . . . . . . . . . . . . . . . . 500 528
Salem County Industrial Pollution Control Fin. Auth., Public Service
Electric & Gas, (MBIA Insured), 5.45%, 2/1/32 *. . . . . . . . . . . . . . . . 650 595
South Brunswick Township, Board of Education, GO, (FGIC Insured),
6.40%, 8/1/09. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,250 1,347
6.40%, 8/1/10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 1,619
Southeast Morris County Municipal Utilities Auth., Water Revenue,
(FGIC Insured), 6.50%, 1/1/11. . . . . . . . . . . . . . . . . . . . . . . . . 750 798
Union County, General Improvement, GO, 6.50%, 2/1/11
(Pre-refunded 2/1/01). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 111
Univ. of Medicine & Dentistry, (MBIA Insured), 6.50%, 12/1/18. . . . . . . . . . 750 790
Warren County, PCR, Warren Energy Resource Co., (MBIA Insured),
6.55%, 12/1/06. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 664
PUERTO RICO -- 20.9%
Puerto Rico Aqueduct & Sewer Auth., 7.875%, 7/1/17. . . . . . . . . . . . . . . 500 557
Puerto Rico Commonwealth, GO, 7.625%, 7/1/10 (Pre-refunded 7/1/00t). . . . . . 80 93
7.75%, 7/1/13 (Pre-refunded 7/1/98t). . . . . . . . . . . . . . .. . . . . 25 28
6.80%, 7/1/21 (Pre-refunded 7/1/02t). . . . . . . . . . . . . . .. . . . . 200 228
(MBIA Insured), 5.375%, 7/1/22. . . . . . . . . . . . . . . . . . . .. . . . 1,000 935
Puerto Rico Electric Power Auth., 8.00%, 7/1/08 (Pre-refunded 7/1/98t).. . . . . 625 702
7.125%, 7/1/14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 539
5.50%, 7/1/20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 1,850
5.50%, 7/1/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,250 1,156
Puerto Rico Highway & Transportation Auth., 6.375%, 7/1/08. . . . . . . . . . . 1,000 1,074
6.625%, 7/1/12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,050
7.75%, 7/1/16 (Pre-refunded 7/1/00). . . . . . . . . . . . . . . . . . . . 10 12
6.625%, 7/1/18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,043
(FSA Insured), 6.625%, 7/1/12. . . . . . . . . . . . . . . . . . . . . . . 500 534
Puerto Rico Infrastructure Fin. Auth., 7.75%, 7/1/08. . . . . . . . . . . . . . 45 50
7.50%, 7/1/09. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475 522
Puerto Rico Public Buildings Auth., Gov't. Fac., GO, (AMBAC Insured),
Zero Coupon, 7/1/07. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 1,088
Univ. of Puerto Rico, (MBIA Insured), Zero Coupon, 6/1/09. . . . . . . . . . . . 1,000 469
Zero Coupon, 6/1/10. . . . . . . . . . . . . . . . . . . . . . . . . . . . 580 255
5.25%, 6/1/25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 1,372
<PAGE>
Amount Value
----------- -----------
OPTIONS PURCHASED -- 0.0%
Put options expiring 11/18/95 on December 1995 U.S. Treasury Note futures
contracts with a strike price of $110.00, and a current market
price of $112.75 tt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 11
</TABLE>
================================================================================
<TABLE>
<S> <C>
Value
-----------
TOTAL INVESTMENTS IN SECURITIES -- 100.2% OF NET ASSETS
(COST $62,162). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$65,082
FUTURES CONTRACTS
Contract Unrealized
Expiration Value Gain (Loss)
---------- ------- -----------
Short, 22 U.S. Treasury thirty-year
contracts, $140,000 of Municipal Bonds
pledged as initial margin. . . . . . . . . . 12/95 $(2,481) $(15)
Net payments (receipts) of variation
margin to date. . . . . . . . . . . . . . . . 2
---------
Variation margin receivable (payable) on open
futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(13)
Other Assets Less Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (120)
---------
NET ASSETS CONSIST OF:
Value
---------
Accumulated net realized gain/loss - net of distributions. . . . . . . . . . . . (2,362)
Net unrealized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . 2,905
Paid-in-capital applicable to 5,967,643 no par value shares of beneficial
interest outstanding; unlimited number of shares authorized. . . . . . . . . 64,406
---------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$64,949
----------
----------
NET ASSET VALUE PER SHARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10.88
=======
<FN>
<PAGE>
* -Interest subject to alternative minimum tax
t -Used in determining portfolio maturity
tt -Non-income producing
AMBAC -AMBAC Indemnity Corp.
CGIC -Capital Guaranty Insurance Corp.
EFA -Educational Facility Authority
FGIC -Financial Guaranty Insurance Company
FHA -Federal Housing Authority
FSA -Financial Security Assurance Corp.
GO -General Obligation
HFFA -Health Facility Financing Authority
MBIA -Municipal Bond Investors Assurance Corp.
PCR -Pollution Control Revenue
VRDN -Variable Rate Demand Note
</FN>
</TABLE>
Statement of Operations
T. Rowe Price New Jersey Tax-Free Bond Fund / Six Months Ended August 31,
1995 (Unaudited)
(IN THOUSANDS)
INVESTMENT INCOME
Interest income. . . . . . . . . . . . . . . . . . . $1,855
-----------
Expenses
Investment management. . . . . . . . . . . . . . . . 97
Custody and accounting. . . . . . . . . . . . . . . . 49
Shareholder servicing. . . . . . . . . . . . . . . . 42
Legal and audit. . . . . . . . . . . . . . . . . . . 6
Prospectus and shareholder reports. . . . . . . . . . 2
Trustees. . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . 2
----------
Total expenses. . . . . . . . . . . . . . . . . . . . 200
-----------
Net investment income. . . . . . . . . . . . . . . . . 1,655
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities. . . . . . . . . . . . . . . . . . . . . 578
Futures. . . . . . . . . . . . . . . . . . . . . . (34)
Options. . . . . . . . . . . . . . . . . . . . . . (10)
-----------
Net realized gain (loss). . . . . . . . . . . . . . 534
-----------
Change in net unrealized gain or loss on:
Securities. . . . . . . . . . . . . . . . . . . . . 902
Futures. . . . . . . . . . . . . . . . . . . . . . . (15)
-----------
Change in net unrealized gain or loss. . . . . . . . 887
-----------
Net realized and unrealized gain (loss). . . . . . . . 1,421
-----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. . . $3,076
===========
<PAGE>
The accompanying notes are an integral part of these financial statements.
================================================================================
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
T. Rowe Price New Jersey Tax-Free Bond Fund (Unaudited)
(IN THOUSANDS)
<S> <C> <C>
Six Months Ended Year Ended
Aug. 31, 1995 Feb. 28, 1995
----------------- ----------------
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,655 $ 3,147
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . 534 (2,812)
Change in net unrealized gain or loss. . . . . . . . . . . . . . . . . . . . . 887 (419)
------------- ----------
Increase (decrease) in net assets from operations. . . . . . . . . . . . . . . . 3,076 (84)
------------- ----------
Distributions to shareholders
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,655) (3,147)
Net realized gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (56)
------------- ----------
Decrease in net assets from distributions. . . . . . . . . . . . . . . . . . . (1,655) (3,203)
------------- ----------
Capital share transactions*
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,175 17,020
Distributions reinvested. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,250 2,430
Shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,971) (21,249)
------------- ----------
Increase (decrease) in net assets from capital share transactions. . . . . . . . 5,454 (1,799)
------------- ----------
Increase (decrease) in net assets. . . . . . . . . . . . . . . . . . . . . . . . 6,875 (5,086)
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,074 63,160
------------- ----------
End of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $64,949 $58,074
============= ==========
<PAGE>
Six Months Ended Year Ended
Aug. 31, 1995 Feb. 28, 1995
----------------- ----------------
*Share information
Shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 945 1,623
Distributions reinvested. . . . . . . . . . . . . . . . . . . . . . . . . . . 116 232
Shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (554) (2,041)
------------- ----------
Increase (decrease) in shares outstanding. . . . . . . . . . . . . . . . . . 507 (186)
============= ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
================================================================================
Notes to Financial Statements
T. Rowe Price New Jersey Tax-Free Bond Fund / August 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
T. Rowe Price State Tax-Free Income Trust (the Trust) is registered under
the Investment Company Act of 1940. The New Jersey Tax-Free Bond Fund (the
fund), a non-diversified, open-end management investment company, is one of the
portfolios established by the Trust. A) Valuation - Debt securities are
generally traded in the over-the-counter market. Investments 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 of 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. Financial
futures contracts and options on futures contracts are valued at closing
settlement prices.
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 original issue discounts on municipal securities are amortized for
both financial reporting and tax purposes. Market discounts are recognized upon
disposition of the security as gain or loss for financial reporting purposes and
as 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 the 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. Payments ("variation margin") made or
received by the fund to settle the daily fluctuations in the value of futures
contracts, are recorded as unrealized gain or loss until the contracts are
closed. Unrealized gains and losses on futures contracts are included in Change
in net unrealized gain or loss in the accompanying financial statements.
<PAGE>
- --------------------------------------------------------------------------------
NOTE 2 - INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks and enhance performance. The
investment objective, policies, program, risk factors, and following practices
of the fund are described more fully in the fund's Prospectus and Statement of
Additional Information. A) Futures Contracts - At August 31, 1995, the fund was
a party to futures contracts, which provide for the future sale by one party and
purchase by another of a specified amount of a specific financial instrument at
an agreed upon price, date, time and place. Risks arise from possible
illiquidity of the futures market and from movements in security values. B)
Options - Call and put options on futures contracts give the holder the right to
purchase or sell, respectively, a particular futures contract at a specified
price on a certain date. Risks arise from possible illiquidity of the options
market and from movements in underlying futures prices. Options are reflected in
the fund's accompanying Statement of Net Assets at market value. C) Other -
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $33,205,000 and $28,506,000, respectively, for the six months ended
August 31, 1995.
- --------------------------------------------------------------------------------
NOTE 3 - FEDERAL INCOME TAXES
- --------------------------------------------------------------------------------
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
income. The fund has unused realized capital loss carryforwards for federal
income tax purposes of $1,834,000, which expire in 2003. The fund intends to
retain gains realized in future periods that may be offset by available capital
loss carryforwards.
At August 31, 1995, the aggregate cost of investments for federal income
tax and financial reporting purposes was $62,162,000 and net unrealized gain
aggregated $2,920,000, of which $2,956,000 related to appreciated investments
and $36,000 to depreciated investments.
- --------------------------------------------------------------------------------
NOTE 4 - RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the Manager) provides for an annual investment management fee,
of which $18,000 was payable at August 31, 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
August 31, 1995, and for the six months then ended, the effective annual Group
Fee rate was 0.34%. The fund pays a pro rata share of the Group Fee based on the
ratio of its net assets to those of the Group.
<PAGE>
Under the terms of the investment management agreement, the Manager is
required to bear any expenses through February 28, 1997, which would cause the
fund's ratio of expenses to average net assets to exceed 0.65%. Thereafter,
through February 28, 1999, the 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,
$39,000 of management fees were not accrued by the fund for the six months ended
August 31, 1995. Additionally, $267,000 of unaccrued management fees related to
a previous expense limitation are subject to reimbursement through February 28,
1997.
In addition, the fund has entered into agreements with the Manager and a
wholly owned subsidiary of the Manager, pursuant to which the fund receives
certain other services. The Manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc. is the fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. The fund incurred expenses pursuant to
these related party agreements totaling approximately $68,000 for the six months
ended August 31, 1995, of which $14,000 was payable at period-end.
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
T. Rowe Price New Jersey Tax-Free Bond Fund (Unaudited)
<S> <C> <C> <C> <C> <C>
For a share outstanding throughout each period
Six Months Year Ended April 30,1991
Ended ------------------------- (Commencement
Feb. 28, Feb. 28, Feb. 28, of Operations) to
Aug. 31, 1995 1995 1994 1993 Feb. 29, 1992
---------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD . . . $ 10.63 $ 11.19 $ 11.23 $ 10.30 $ 10.00
---------- ---------- ---------- ---------- ------------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . 0.29* 0.57* 0.56* 0.58* 0.50
Net realized and unrealized gain (loss) . . . . . . . 0.25 (0.55) 0.10 1.00 0.34
---------- ---------- ---------- ---------- ------------
Total from Investment Activities . . . . . . . . . . . 0.54 0.02 0.66 1.58 0.84
---------- ---------- ---------- ---------- ------------
Distributions
Net investment income . . . . . . . . . . . . . . . (0.29) (0.57) (0.56) (0.58) (0.50)
Net realized gain . . . . . . . . . . . . . . . . . -- (0.01) (0.14) (0.07) (0.04)
---------- ---------- ---------- ---------- ------------
Total Distributions . . . . . . . . . . . . . . . . (0.29) (0.58) (0.70) (0.65) (0.54)
---------- ---------- ---------- ---------- ------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . $ 10.88 $10.63 $11.19 $11.23 $10.30
========== ========== ========== ========== ============
RATIOS / SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . . . . . . . . . . 5.16% 0.37% 5.97% 15.90% 8.55%
Ratio of Expenses to Average Net Assets . . . . . . 0.65%* 0.65%* 0.65%* 0.65%* 0.65%*
Ratio of Net Investment Income to Average Net Assets 5.40% 5.41% 4.90% 5.47% 5.86%
Portfolio Turnover Rate . . . . . . . . . . . . . . 97.4% 139.1% 68.8% 103.3% 152.2
Net Assets, End of Period (in thousands) . . . . . . $64,949 $58,074 $63,160 $38,347 $14,303
Annualized
<FN>
*Excludes expenses in excess of a 0.65% voluntary expense limitation in
effect through February 28, 1997.
</FN>
</TABLE>
