ANNUAL REPORT
______________________________
NEW JERSEY TAX-FREE
BOND FUND
______________________________
FEBRUARY 28, 1995
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 distri-bution 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.
2
<PAGE>
- --------------------------------------------------------------------------------
Fellow Shareholders
- --------------------------------------------------------------------------------
Vigorous economic growth and Federal Reserve tightening dominated the
fixed-in come 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 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 AAA GO 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 AAA GO bonds was almost 6%, up from 5.6% a year earlier but down from
its November peak of 6.8%.
[municipal yield chart showing New Jersey Index from 2/28/94 through 12/28/95]
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 could be even lower in 1995.
STRATEGY AND PERFORMANCE REVIEW
After the low interest rates of 1993, the fund began the year with a
weighted average maturity of 18.5 years. We took several steps to limit the
portfolio's exposure to falling prices in 1994. Throughout the first three
quarters of the fiscal year we shortened the fund's average maturity to
approximately 16.5 years. By November, we felt that the municipal market was
oversold, and we lengthened maturities.
In addition, performance was helped by our decision to avoid low coupon
bonds. These bonds are typically more volatile than higher coupon bonds and lose
value quickly when rates begin to rise. By buying bonds with higher coupons, we
not only limited the fund's exposure to rising rates but also improved the
fund's yield, which rose to 5.8% last quarter compared with 4.9% a year ago.
Rising rates had the worst overall impact in 1994, but New Jersey's market
performance was also hampered by developments in the health care and solid waste
sectors. Several solid waste facilities recently suffered a credit downgrade as
a result of a Supreme Court decision in May affecting waste disposal practices.
At the time of the downgrades, our only holding in this sector was guaranteed by
municipal bond insurance and, thus, was unaffected.
In the health care sector, the state's reduced reimbursements for charity
cases hurt hospital bonds. Although statewide cuts totaled 10%, some hospitals
saw their funding entirely eliminated. We believe this area will be targeted for
future budget cuts, and we sold our positions in hospitals that appeared
particularly vulnerable.
3
<PAGE>
[bar graph showing New Jersey Bond Issues from Jan. 1994 through Feb. 1995]
During the first two months of 1995, bonds rallied strongly because of
limited supply and the belief the economy would slow. Fourth quarter performance
was strong. For the fiscal year, the fund's return slightly exceeded its peer
group average.
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
Periods Ended 2/28/95
3 Months 12 Months
---------------------
New Jersey Tax-Free
Bond Fund 8.13% 0.37%
Lipper New Jersey Municipal
Debt Fund Average 8.39 0.00
================================================================================
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 be starting to slow 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 they will most likely be 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.
It is worth noting that 1994 was tumultuous for fixed-income investors
because of rising interest rates, widespread misuse of derivatives, and a large
municipal bankruptcy. We want to assure you that we will continue to make
investments that are appropriate for each fund's risk profile. In those funds
that can purchase derivatives, our exposure has been modest and has not
introduced undue risk for shareholders. In addition, our avoidance of the Orange
County crisis reinforces the value of thorough credit research.
We appreciate the continued confidence all our shareholders have placed in
us.
Respectfully submitted,
[signature]
William T. Reynolds
President and Chairman of the
Investment Advisory Committee
March 17, 1995
4
<PAGE>
- --------------------------------------------------------------------------------
Statistical Highlights
- --------------------------------------------------------------------------------
Key Statistics
- --------------------------------------------------------------------------------
Periods Ended
Dividend Yield* 2/28/95
- --------------------------- ---------------
3 Months 5.80%
12 Months 5.56
Dividend Per Share
- ---------------------------
3 Months $0.15
12 Months(1) 0.57
Change in Price Per Share
- ---------------------------
3 Months (From $9.97 to $10.63) $ 0.66
12 Months (From $11.19 to $10.63) -0.56
Weighted Average Quality** 2.6
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.
(1)Taxability of dividends. 100% and 97.6% of dividends are exempt from
federal and New Jersey state income taxes, respectively.
5
<PAGE>
================================================================================
Sector Diversification
- --------------------------------------------------------------------------------
Percent of Net Assets
---------------------
2/28/95
---------------------
Hospital Revenue 16%
Water and Sewer Revenue 11
Housing Finance Revenue 9
Dedicated Tax Revenue 9
Ground Transportation Revenue 8
General Obligation - Local 7
Educational Revenue 7
Escrowed to Maturity 6
Air and Sea Transportation Revenue 6
Pre-refunded Bonds 4
Nuclear Revenue 4
General Obligation - State 3
Industrial and Pollution Control Revenue 3
Miscellaneous Revenue 3
Electric Revenue 2
Solid Waste Revenue 1
Other Assets Less Liabilities 1
================================================================================
6
<PAGE>
- --------------------------------------------------------------------------------
Investment Record
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
The table below shows the investment record of one share of the T. Rowe
Price New Jersey 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 as a representation of the dividend income or capital
gain or loss which may be realized from an investment made in the fund today.
<TABLE>
<CAPTION>
Per-Share Data
- ------------------------------------------------------------------------------------------------------------------------------------
Capital With With Dividends
Fiscal Net Asset Income Gain Dividends and Capital Total
Year Ended Value Dividends Distributions Reinvested Gains Reinvested Return
- ---------- --------- --------- --------------- ---------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C>
2/29/92(1) $10.30 $0.50 0.04 $10.81 $10.86 8.55%
1993 11.23 0.58 0.07 12.45 12.58 15.90
1994 11.19 0.56 0.14 13.03 13.33 5.97
1995 10.63 0.57 0.01 13.06 13.38 0.37
- ------------------------------------------------------------------------------------------------------------------------------------
Total $2.21 $0.26
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1)From inception 4/30/91 to 2/29/92.
(2)Includes short-term capital gains of $0.04 on 12/11/91, $0.04 on
3/18/92, $0.03 on 12/11/92, $0.06 on 3/29/93, $0.07 on 12/10/93, and $0.01 on
3/29/94.
</FN>
====================================================================================================================================
</TABLE>
[Fiscal-Year Performance Comparison line graph for New Jersey Bond Fund
annual report(Feb. 28, 1995). Shows $10,000 investment in New Jersey Tax-Free
Bond Fund and Lehman Municipal bond Index from 4/91 to 2/95.]
Fiscal-Year Performance
- --------------------------------------------------------------------------------
Periods ended February 28, 1995
Since Inception
1 Year (4/30/91)*
------- -------------
0.37% 7.89%
- -------------------------------------------------------------------------------
*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.
================================================================================
7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Statement of Net Assets
T. Rowe Price New Jersey Tax-Free Bond Fund / February 28, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(amounts in thousands, except capital stock information)
Face Amount Value
----------- -----------
<S> <C> <C>
NEW JERSEY -- 84.1%
Cape May County, ePollution Control Fin. Auth., Atlantic
City Elec.,(MBIA Insured), 6.80%, 3/1/21.............................. $ 1,500 $ 1,694
Edison Township, Middlesex County, GO, 6.50%, 6/1/08.................... 350 378
Jersey City, School Bonds, GO, 6.50%, 2/15/04........................... 500 536
Middlesex County Pollution Control Fin. Auth., Amerada Hess Corp.,
6.875%, 12/1/22................................................... 1,500 1,515
Middlesex County Utilities Auth., Sewer, (MBIA Insured),
Residual Interest Bond / Inverse Floater, 8/15/10 (Currently 6.90%)... 500 508
Monmouth County Water & Sewer, GO, (MBIA Insured),
6.35%, 10/1/11.................................................... 250 267
New Jersey, GO, 7.05%, 7/15/12 *........................................ 1,335 1,445
Wastewater Treatment, 6.30%, 4/1/10................................... 1,180 1,225
6.375%, 4/1/11.................................................... 750 781
New Jersey Economic Dev. Auth., Public Schools Small Project Loan,
4.80%, 8/15/03.................................................... 1,000 951
New Jersey Economic Dev. Auth., PCR, Jersey Central Power & Light,
(FSA Insured), 7.10%, 7/1/15........................................ 390 423
Natural Gas Fac. (New Jersey Natural Gas), 7.05%, 3/1/16.............. 250 259
New Jersey EFA, Princeton Univ., 5.875%, 7/1/14......................... 1,050 1,047
Seton Hall Univ., 6.875%, 7/1/10...................................... 350 362
7.00%, 7/1/21..................................................... 200 207
New Jersey HFFA, Chilton Memorial Hosp., 5.00%, 7/1/13.................. 1,000 839
Columbus Hosp., 7.50%, 7/1/21......................................... 870 860
Hackensack Medical Center, (FGIC Insured), 6.625%, 7/1/11............. 1,000 1,046
6.625%, 7/1/17.................................................... 500 519
Irvington General Hosp., (FHA Insured), 5.875%, 8/1/06................ 1,595 1,632
6.375%, 8/1/15.................................................... 500 506
Monmouth Medical Center, (CGIC Insured), 6.25%, 7/1/24................ 1,000 1,007
Morristown Memorial Hosp., 7.00%, 7/1/17.............................. 800 825
Overlook Hosp. Assoc., (FGIC Insured), 6.70%, 7/1/13.................. 855 886
Raritan Bay Medical Center, 7.25%, 7/1/27............................. 690 643
Wayne General Hosp., 5.75%, 8/1/11 *.................................. 750 726
New Jersey Highway Auth., Garden State Parkway, 7.25%, 1/1/09
(Pre-refunded 1/1/99 **).............................................. 200 219
7.25%, 1/1/16 (Pre-refunded 1/1/99 **)............................ 260 285
New Jersey Housing & Mortgage Fin. Agency, 7.10%, 11/1/11............... 300 314
7.10%, 11/1/12.................................................... 175 183
6.70%, 11/1/28.................................................... 1,000 1,011
(MBIA Insured), 6.90%, 10/1/16 *.................................... 1,000 1,052
5.375%, 4/1/25 *.................................................. 2,070 1,794
6.20%, 10/1/25 *.................................................. 1,000 978
New Jersey Sports & Exposition Auth., Monmouth Park,
8.00%, 1/1/25..................................................... 650 679
New Jersey Turnpike Auth., 10.375%, 1/1/03 (Escrowed to Maturity)....... 2,895 3,526
6.50%, 1/1/16..................................................... 3,225 3,387
(FGIC Insured), VRDN (Currently 3.75%).............................. 400 400
8
<PAGE>
NEW JERSEY (cont'd)
Ocean County Utilities Auth., Wastewater, 6.125%, 1/1/01................ 500 522
6.125%, 1/1/02.................................................... 500 524
6.30%, 1/1/11..................................................... 1,300 1,348
Port Auth. of New York & New Jersey, 6.125%, 7/15/22 *.................. 1,250 1,231
7.875%, 3/1/24 *.................................................. 1,500 1,560
VRDN (Currently 3.90%) *.......................................... 700 700
(FGIC Insured), 6.50%, 7/15/19 *.................................... 500 514
Rutgers, The State Univ., 6.35%, 5/1/06................................. 1,000 1,058
6.85%, 5/1/21..................................................... 395 415
South Brunswick Township, Board of Education, GO, (FGIC Insured),
6.40%, 8/1/09..................................................... 1,250 1,319
6.40%, 8/1/10..................................................... 1,500 1,582
Southeast Morris County Municipal Utilities Auth., Water Revenue,
(FGIC Insured), 6.50%, 1/1/11......................................... 750 786
Union County, General Improvement, GO, 6.50%, 2/1/11
(Pre-refunded 2/1/01 **).............................................. 100 109
Univ. of Medicine & Dentistry, (MBIA Insured), 6.50%, 12/1/18........... 750 785
Warren County, PCR, Warren Energy Resource Co., (MBIA Insured),
6.55%, 12/1/06.................................................... 600 656
Woodbridge Township, GO, 6.30%, 8/15/10 (Pre-refunded 8/15/02 **)....... 750 810
- ------------------------------------------------------------------------------------------------------------------------------------
GUAM -- 0.9%
Guam Power Auth., 6.625%, 10/1/14....................................... 500 503
- ------------------------------------------------------------------------------------------------------------------------------------
9
<PAGE>
PUERTO RICO-- 13.8%
Puerto Rico Aqueduct & Sewer Auth., 7.875%, 7/1/17...................... 500 548
GO, 7.90%, 7/1/07................................................... 500 543
Puerto Rico Commonwealth, GO, 7.625%, 7/1/10 (Pre-refunded 7/1/00 **)... 80 91
7.75%, 7/1/13 (Pre-refunded 7/1/98 **)............................ 25 28
5.25%, 7/1/20..................................................... 1,000 879
6.80%, 7/1/21 (Pre-refunded 7/1/02 **)............................ 200 223
Puerto Rico Electric Power Auth., 8.00%, 7/1/08 (Pre-refunded 7/1/98 **) 625 697
7.125%, 7/1/14.................................................... 825 871
Puerto Rico Highway & Transportation Auth., 6.375%, 7/1/08.............. 1,000 1,020
6.625%, 7/1/12.................................................... 1,500 1,547
7.75%, 7/1/16 (Pre-refunded 7/1/00 **)............................ 10 11
6.625%, 7/1/18.................................................... 1,000 1,031
Puerto Rico Infrastructure Fin. Auth., 7.75%, 7/1/08.................... 45 49
7.50%, 7/1/09..................................................... 475 505
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 98.8% OF NET ASSETS (COST $55,362)... $ 57,380
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES........................................... 694
---------
NET ASSETS CONSIST OF: Value
-----------
Accumulated realized gains/losses - net of distributions................ $ (2,896)
Net unrealized gain (loss) ............................................. 2,018
Paid-in-capital applicable to 5,460,670 no par value shares of beneficial
interest outstanding; unlimited number of shares authorized........... 58,952
-----------
NET ASSETS.............................................................. $ 58,074
=========
NET ASSET VALUE PER SHARE............................................... $ 10.63
=========
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
*Interest subject to alternative minimum tax
**Used in determining portfolio maturity
CGIC Capital Guaranty Insurance Corp.
EFA Educational Facility Authority
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Advisor
GO General Obligation
HFFA Health Facility Financing Authority
MBIA Municipal Bond Insurance Association
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
</FN>
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
T. Rowe Price New Jersey Tax-Free Bond Fund / Year Ended February 28, 1995
(in thousands)
INVESTMENT INCOME
Interest income.................................................... $ 3,525
---------
Expenses
Investment management............................................ 135
Custody and accounting........................................... 102
Shareholder servicing............................................ 96
Legal and audit.................................................. 13
Prospectus and shareholder reports............................... 9
Registration..................................................... 9
Trustees......................................................... 6
Proxy and annual meeting......................................... 4
Miscellaneous.................................................... 4
---------
Total expenses................................................... 378
---------
Net investment income............................................ 3,147
---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities....................................................... (2,770)
Futures.......................................................... (5)
Options.......................................................... (37)
---------
Net realized gain (loss)......................................... (2,812)
Change in net unrealized gain or loss on securities................ (419)
---------
Net realized and unrealized gain (loss)............................ (3,231)
---------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.................. $(84)
=========
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
(in thousands)
Year Ended February 28,
1995 1994
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income......................................................... $ 3,147 $ 2,526
Net realized gain (loss)...................................................... (2,812) 377
Change in net unrealized gain or loss......................................... (419) (219)
---------- ----------
Increase (decrease) in net assets from operations.............................. (84) 2,684
---------- ----------
Distributions to shareholders
Net investment income......................................................... (3,147) (2,526)
Net realized gain............................................................. (56) (603)
---------- ----------
Decrease in net assets from distributions..................................... (3,203) (3,129)
---------- ----------
Capital share transactions*
Shares sold................................................................... 17,020 37,467
Distributions reinvested...................................................... 2,430 2,509
Share redeemed................................................................ (21,249) (14,718)
---------- ----------
Increase (decrease) in net assets from capital share transactions............... (1,799) 25,258
---------- ----------
Increase (decrease) in net assets............................................... (5,086) 24,813
NET ASSETS
Beginning of period............................................................. 63,160 38,347
---------- ----------
End of period................................................................... $ 58,074 $ 63,160
========== ==========
- ------------------------------------------------------------------------------------------------------------------------------------
*Share information
Shares sold................................................................... 1,623 3,310
Distributions reinvested...................................................... 232 222
Shares redeemed............................................................... (2,041) (1,301)
---------- ----------
Increase (decrease) in shares outstanding..................................... (186) 2,231
========== ==========
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price New Jersey Tax-Free Bond Fund / 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 New Jersey Tax-Free Bond Fund (the fund) is one of the
portfolios established under 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 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 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.
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) 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. Transactions in options written and related premiums received
during the period ended February 28, 1995, were as follows:
13
<PAGE>
Face Amount
Subject to Options Premiums
------------------ --------
Options Outstanding at
Beginning of Period $ -- $ --
Options Written 13,000,000 63,000
Options Closed (13,000,000) (63,000)
------------ ---------
Options Outstanding at
End of Period $ -- $ --
============ =========
B) Other - Purchases and sales of portfolio securities, other than
short-term securities, aggregated $77,627,000 and $77,729,000, respectively, for
the period ended February 28, 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 carry forwards 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 carry forwards.
In order for the Fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, $17,000 of undistributed
net realized gains were reclassified as a decrease 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 federal
income tax and financial reporting purposes was $55,362,000 and net unrealized
gain aggregated $2,018,000, of which $2,180,000 related to appreciated
investments and $162,000 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 $9,000 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%. The fund pays a pro rata share of the Group Fee based on the
ratio of its net assets to those of the Group.
14
<PAGE>
Under the terms of the investment management agreement, the Manager is
required to bear any expenses through February 28 1995, which would cause the
fund's ratio of expenses to average net assets to exceed 0.65%. Thereafter
through February 28, 1997, 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,
$123,000 of management fees were not accrued by the fund for the period ended
February 28, 1995. Additionally, $144,000 of unaccrued fees from the prior
periods are subject to reimbursement through February 28, 1997. Pursuant to a
previous agreement, $260,000 of unaccrued fees and other expenses borne by the
Manager in the fund were permanently waived at February 28, 1995.
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. (TRPS) 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 $136,000 for the period
ended February 28, 1995, of which $13,000 was payable at period end.
15
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price New Jersey Tax-Free Bond Fund
For a share outstanding throughout each period
--------------------------------------------------
April 30, 1991
Year Ended (Commencement
of Operations) to
Feb. 28, Feb. 28, Feb. 28, Feb. 29,
1995 1994 1993 1992
----------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................................. $11.19 $11.23 $10.30 $10.00
------ ------ ------ ------
Investment Activities
Net investment income.............................................. 0.57* 0.56* 0.58* 0.50*
Net realized and unrealized gain (loss)............................ (0.55) 0.10 1.00 0.34
------ ------ ------ ------
Total from Investment Activities................................... 0.02 0.66 1.58 0.84
------ ------ ------ ------
Distributions
Net investment income.............................................. (0.57) (0.56) (0.58) (0.50)
Net realized gain.................................................. (0.01) (0.14) (0.07) (0.04)
------ ------ ------ ------
Total Distributions................................................ (0.58) (0.70) (0.65) (0.54)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD....................................... $10.63 $11.19 $11.23 $10.30
====== ====== ====== ======
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total Return......................................................... 0.37% 5.97% 15.90% 8.55%
Ratio of Expenses to Average Net Assets.............................. 0.65%* 0.65%* 0.65%* 0.65%(1)*
Ratio of Net Investment Income
to Average Net Assets.............................................. 5.41% 4.90% 5.47% 5.86%(1)
Portfolio Turnover Rate.............................................. 139.1% 68.8% 103.3% 152.2%(1)
Net Assets, End of Period (in thousands)............................. $58,074 $63,160 $38,347 $14,303
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
*Excludes expenses in excess of a 0.65% voluntary expense limitation in
effect through February 28, 1995.
(1)Annualized.
</FN>
====================================================================================================================================
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
T. Rowe Price New Jersey Tax-Free Bond Fund
We have audited the accompanying statement of net assets of T. Rowe Price
New Jersey Tax-Free Bond Fund (one of the portfolios comprising the T. Rowe
Price State Tax-Free Income Trust) as of February 28, 1995, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the three years in the period then ended and the period
April 30, 1991 (commencement of operations) to February 29, 1992. These
financial statements and financial highlights are the responsibility of the
Fund's 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 custodia n 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 New Jersey Tax-Free Fund as of February 28, 1995, the results of its
operations, the changes in its net assets, and financial highlights for each of
the respective periods stated in the first paragraph, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
March 17, 1995
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Shareholder Services
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To help shareholders monitor their current investments and make decisions
that accu- rately 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*ACCESSRegistration Mark (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*ACCESSRegistration Mark provides the same information as Tele*Acces s,
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.
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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.
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T. Rowe Price No-Load Mutual Funds
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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
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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
International Discovery
Emerging Markets Stock
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.
