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who have received a copy of the prospectus of the T. Rowe Price New York
Tax-Free Funds.
Invest With Confidence (registered trademark)
T. Rowe Price
NYC
REPTNYC 2/29/96
Annual Report
T. Rowe Price
New York Tax-Free Funds
February 29, 1996
Fellow Shareholders
The fiscal year ended February 29, 1996, was a banner year for bonds and the
funds that invest in them. Prices rose as yields fell through much of the
year, generating good returns for investors in fixed income securities. We
were pleased that both T. Rowe Price New York funds outperformed their peer
group averages during the fiscal year.
Market Environment
The economy slowed in 1995, and the rate of inflation remained moderate. After
tightening monetary policy in 1994 and early 1995, the Federal Reserve
reversed course when it became clear that the economy was running out of
steam. The Fed lowered the key federal funds rate three times since July, from
6% to 5.25% at the end of the fiscal year.
Against a background of slower growth, moderate inflation, and apparent
progress on reducing the federal budget deficit, bond yields tumbled. The
30-year Treasury yield, nearly 7.5% a year ago, fell briefly below 6% in late
December. At fiscal year-end, the long bond yield had edged back up to 6.5%,
as efforts to come up with deficit reduction legislation flagged in early
1996. Signs that stronger economic growth might resume in 1996 also
contributed to recent uneasiness in the bond market.
After moving only slightly lower during the first half of the fiscal
year ended February 29, long-term municipal yields fell further in the second
half. Thirty-year prime general obligation (GO) bonds yielded 5.95% on
February 28, 1995, and on August 31 they were only 10 basis points lower (100
basis points equal one percent). During the most recent six months, prices
rose further and yields dropped an additional 45 basis points to 5.4%.
Municipal bonds with short maturities followed a different pattern, as
their yields fell more in the first half of the year than in the second. After
falling 70 basis points to 4.3% on August 31, the yield of five-year prime GO
bonds fell only 10 basis points more by February 29, 1996. The net result was
a lower and steeper yield curve that led to significant price appreciation
from 1994's lows.
Chart 1: New York Yield Indexes
Source: T. Rowe Price
Although New York State's budget for the fiscal year ending March 31,
1996, is on track, the proposed budget for next year requires difficult
decisions in a weak economic environment. State nonfarm job growth was only
0.7% in 1995, less than one-third the national average. The state faces a $3.9
billion budget gap, partly resulting from previously enacted personal income
and business tax cuts. While the governor's budget proposal attempts to
restrain spending and relies on reasonable revenue assumptions, it depends on
additional federal funding that, in turn, hinges on budget negotiations in
Washington. We expect resolution of next year's state budget to be contentious
once again and New York State's credit rating to have limited upside
potential.
New York City's credit rating remains under pressure. Following a
downgrade last year to BBB+ by Standard & Poor's, both Moody's and Fitch
placed the city's debt rating under review for possible downgrade, pending
release of next year's financial plan. Multibillion-dollar budget gaps
persist, and New York City's economy has been lackluster despite a significant
pickup in tourism.
The supply of New York issues was virtually unchanged after a large
decrease in 1994. A substantial increase in general purpose borrowing was
offset by a reduction in health care issues. Also, issuance was affected by
rejection at the polls of a proposed debt reform package.
New York Tax-Free Money Fund
Short-term rates fell during the past year, with six-month to one-year yields
declining further than yields on shorter maturities. Compared with year-ago
levels, one- to seven-day yields are 50 to 70 basis points lower, while the
longer yields are 100 to 130 basis points lower. This condition led to a
flattening in the money market yield curve, meaning that we were unable to
increase yields significantly by lengthening maturities.
In this environment, we adopted a so-called "barbell" strategy,
concentrating investments in both very short and very long maturities.
The longer maturities enabled us to lock in yields that we believed would move
lower as the Federal Reserve continued its accommodative monetary policy,
while the short-maturity holdings provided a higher level of income than is
usually available with such low risk.
Another indication of the remarkable shift in the money market yield
curve was the average yield spread between overnight and one-year maturities-a
meager 13 basis points over the past 12 months versus 121 basis points during
the preceding 12-month period.
The yields on short-term tax-exempt issues are relatively low compared
with those on their taxable counterparts, making them attractive only to those
in the highest tax brackets. Nevertheless, assets in all tax-exempt money
funds grew a robust 16% to $134 billion over the year. New York money market
funds grew at a more rapid 23% pace.
Our barbell strategy, plus our longer weighted average maturity in
recent months, enabled your fund's results to compare favorably with its peer
group average during the 6- and 12-month periods ended February 29.
Performance Comparison
Periods Ended 2/29/96
6 Months 12 Months
_________ _________
New York Tax-Free
Money Fund 1.55% 3.26%
IBC/Donoghue Money Fund
Report Average* 1.53 3.19
*State-specific Stockbroker and General Purpose New York
New York Tax-Free Bond Fund
The fund began the last six-month period with an aggressive weighted average
maturity of 19.2 years, which we reduced to a more neutral 18.2 years at the
end of February. Earlier, your fund benefited from the long-maturity
positions, which appreciated sharply in price when interest rates declined. As
yields fell, however, we grew concerned that most of the runup in prices was
over and began to shorten maturities. This strategy served us well when prices
fell and yields rose in February on the heels of stronger-than-expected
economic data and stalled progress on budget negotiations in Washington.
We increased our lease revenue bond holdings when the opportunity arose
to buy new issues with favorable call provisions, which perform well when
interest rates fall. We are now looking to pare these securities because of
our outlook on rates and for the state, a major backer of the leases. We also
reduced the portfolio's exposure to Puerto Rican issues because most balanced
budget proposals would phase out tax breaks for U.S. companies that do
business in the commonwealth. In our opinion, these proposals could affect the
credit quality and market value of certain issues. Nevertheless, we still hold
some bonds that we believe are good value.
We are happy to report that your fund's return for the fiscal year
(shown on page 3) exceeded its Lipper peer group average for the fourth
consecutive year and surpassed the average New York bond fund during the past
six months as well.
Performance Comparison
Periods Ended 2/29/96
6 Months 12 Months
_________ _________
New York Tax-Free
Bond Fund 5.20% 10.44%
Lipper New York Municipal
Debt Funds Average 4.80 9.70
Outlook
The municipal market paid substantial attention to the topic of tax reform
last year. Concerns that proposed revisions to the tax code would be
detrimental to municipal bonds kept municipal securities from performing quite
as well as taxable alternatives. As we anticipated, these fears have lessened
somewhat as tax reform discussions have been put on hold for the moment at
least. Municipals have already recaptured some of the ground lost to taxable
bonds, which we attribute to reduced worries about the impact of tax reform.
The unusually fierce weather this winter tended to distort many recent
economic statistics, but it looks as though the economy is on track for a year
of moderate growth. This should be enough to keep the unemployment rate in its
current zone without significantly exacerbating inflationary pressures. This
March the economic upturn completed its fifth year, making it one of the
longest peacetime expansions on record, but still without signs of an
impending recession.
Further easing by the Federal Reserve may be slow in coming, since the
Fed is concerned about the risk of fueling inflationary pressures when the
economy has only limited margins of excess capacity. The prospects for sharp
deficit reduction and the moderate inflation outlook that gave the bond market
confidence last year are not as compelling so far in 1996. Consequently, we
expect the bulk of returns this year to come from coupon income rather than
capital appreciation.
In New York, the economy should expand modestly, with personal income
and job gains lagging the U.S. average. We expect private sector expansion to
offset government job loss. Although Wall Street's profits were healthy last
year, New York City's health care and public sectors face considerable
pressure attributable to local and national policy changes. Both the state and
city are managing tight budgets while attempting to downsize government. We
are concerned about the trend of New York City's credit standing but believe
that strong financial management and oversight will continue to support an
investment-grade credit rating.
Respectfully submitted,
Patrice L. Berchtenbreiter
Chairman of the Investment Advisory Committee,
New York Tax-Free Money Fund
William T. Reynolds
President and Chairman of the Investment Advisory Committee,
New York Tax-Free Bond Fund
March 20, 1996
Portfolio Highlights
New York Tax-Free Bond Fund
Key Statistics
Dividend Yield Periods Ended
(7-Day Compound)* 2/29/96
_____________________________ _______________
On 2/28/95 3.45%
On 8/31/95 3.19
On 2/29/96 2.83
Dividend Per Share
_____________________________
6 Months $0.015
12 Months** 0.032
Weighted Average Quality*** 1.9
Weighted Average Maturity 72 days
* 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.
** Taxability of dividends: 100% and 99.0% of dividends were exempt from
federal and New York state income taxes, respectively.
*** On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest
quality.
New York Tax-Free Money Fund
Key Statistics
Periods Ended
Dividend Yield* 2/29/96
_____________________________ _______________
6 Months 5.37%
12 Months 5.55
Dividend Per Share
_____________________________
6 Months $0.29
12 Months** 0.58
Change in Price Per Share
_____________________________
6 Months (From $10.59 to $10.85) $0.26
12 Months (From $10.37 to $10.85) 0.48
Weighted Average Quality*** 2.7
Weighted Average Maturity 18.2 years
Weighted Average
Effective Duration 7.7 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.
** Taxability of dividends: 100% of dividends were exempt from federal and
New York state income taxes.
*** On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest
quality.
Average Annual Compound Total Return
Periods ended February 29, 1996
Since Inception
1 Year 5 Years (8/28/86)
_______ _______ _____________
3.26% 2.68% 3.50%
Investment return represents past performance and will vary. There is no
assurance the fund will be able to maintain a stable $1.00 net asset value.
Average Annual Compound Total Return
Periods ended February 29, 1996
Since Inception
1 Year 5 Years (8/28/86)
_______ _______ _____________
10.44% 8.67% 7.39%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
Chart 2 -- Performance Comparison New York Tax-Free Money Fund
Chart 3 -- Performance Comparison New York Tax-Free Bond Fund
Note: The index return does not reflect expenses, which have been deducted
from the fund's shares.
Key Statistics
New York Tax-Free Money Fund
Sector Diversification
Percent of Net Assets
2/29/96
_________________
General Obligation -- Local 21%
Prerefunded Bonds 18
Miscellaneous Revenue 15
Hospital Revenue 8
Ground Transportation Revenue 7
Industrial and Pollution Control Revenue 6
Electric Revenue 5
Dedicated Tax Revenue 5
Nuclear Revenue 4
Life Care/Nursing Home Revenue 4
Water and Sewer Revenue 4
General Obligation -- State 3
Educational Revenue 1
Escrowed to Maturity 1
Other Assets Less Liabilities -2
New York Tax-Free Bond Fund
Sector Diversification
Percent of Net Assets
2/29/96
_________________
Lease Revenue 17%
Dedicated Tax Revenue 13
General Obligation -- Local 12
Educational Revenue 12
Water and Sewer Revenue 10
Prerefunded Bonds 7
Air and Sea Transportation Revenue 5
Housing Finance Revenue 4
Hospital Revenue 4
Ground Transportation Revenue 3
Escrowed to Maturity 3
Electric Revenue 2
Nuclear Revenue 2
General Obligation -- State 2
Miscellaneous Revenue 1
Solid Waste Revenue 1
Industrial and Pollution Control Revenue 1
Other Assets Less Liabilities 1
Statement of Net Assets
T. Rowe Price New York Tax-Free Money Fund / February 29, 1996
(amounts in thousands)
Amount Value
_______ ______
NEW YORK - 101.2%
Buffalo Sewer Auth., (AMBAC Insured), 7.625%,
7/1/06 (Prerefunded 7/1/96!) . . . . . . . . . . . $ 2,000 $ 2,085
Connetquot Central School Dist.,
GO, TAN, 4.50%, 6/27/96. . . . . . . . . . . . . . 1,000 1,002
Copiague Union Free School Dist.,
GO, TAN, 4.50%, 6/28/96. . . . . . . . . . . . . . 1,000 1,002
Dormitory Auth. of the State of New York,
Long Beach Medical Center,
(FHA Guaranteed), 4.00%, 8/1/96. . . . . . . . . . 685 686
Masonic Hall Asylum, (AMBAC Insured),
VRDN (Currently 2.90%) . . . . . . . . . . . . . 3,200 3,200
Memorial Sloan-Kettering Cancer Center, TECP,
3.10 - 3.30%, 3/21 - 7/25/96 . . . . . . . . . . 3,900 3,900
Metropolitan Museum of Art,
VRDN (Currently 3.05%) . . . . . . . . . . . . . 2,900 2,900
Oxford Univ. Press Inc., VRDN
(Currently 3.25%). . . . . . . . . . . . . . . . 500 500
Great Neck Union Free School Dist.,
GO, TAN, 4.50%, 6/28/96. . . . . . . . . . . . . . 1,500 1,503
Great Neck Water Auth., (FGIC Insured),
VRDN (Currently 3.00%) . . . . . . . . . . . . . . 900 900
Metropolitan Transportation Auth.,
8.00%, 7/1/12 (Prerefunded 7/1/96!). . . . . . . 430 445
8.375%, 7/1/16 (Prerefunded 7/1/96!) . . . . . . 2,000 2,069
8.50%, 7/1/11 (Prerefunded 7/1/96!). . . . . . . 1,655 1,715
8.50%, 7/1/05 (Prerefunded 7/1/96!). . . . . . . 305 316
Monroe County, GO, 7.375%, 6/1/96. . . . . . . . . 1,000 1,009
GO, BAN, 4.50%, 6/7/96 . . . . . . . . . . . . . 1,000 1,002
Municipal Assistance Corp. for the City of
New York, 6.80%, 7/1/96. . . . . . . . . . . . . . 500 505
7.80%, 7/1/97 (Prerefunded 7/1/96!). . . . . . . 2,110 2,18
7.375%, 7/1/08 (Prerefunded 7/1/96!) . . . . . . 225 232
Nassau County, GO, TAN, 4.50%, 4/15/96 . . . . . . 2,000 2,003
GO, TAN, 4.50%, 3/15/96. . . . . . . . . . . . . 750 750
Nassau County IDA, Cold Spring Harbor Laboratory,
VRDN (Currently 3.45%) . . . . . . . . . . . . . . 3,300 3,300
New York City, GO, RAN, 4.50%, 4/11/96 . . . . . . 1,500 1,501
New York City Municipal Water Fin. Auth.,
Water and Sewer, TECP, 3.10%, 5/6/96 . . . . . . . 1,500 1,500
7.00%, 6/15/14 (Prerefunded 6/15/96!). . . . . . 385 396
(FGIC Insured), VRDN (Currently 3.35%) . . . . . 200 200
(MBIA Insured), 7.00%, 6/15/14
(Prerefunded 6/15/96!) . . . . . . . . . . . . . 200 206
New York State, 8.00%, 8/15/08
(Prerefunded 8/15/96!) . . . . . . . . . . . . . . 2,870 2,973
GO, TECP, 3.05 - 3.10%, 3/7 - 4/8/96 . . . . . . 2,000 2,000
New York State Power Auth., TECP, 3.25%,
3/18 - 5/9/96. . . . . . . . . . . . . . . . . . . 3,200 3,200
New York State Energy Research and Dev. Auth.,
Orange and Rockland Utilities, (FGIC Insured),
VRDN (Currently 2.90%) . . . . . . . . . . . . . . 3,400 3,400
New York State Environmental Fac. Corp.,
PCR, Solid Waste Disposal, General Electric,
TECP, 3.10 - 3.35%, 4/9 - 5/16/96 *. . . . . . . . 4,150 4,150
New York State Housing Fin. Agency, 8.00%,
11/1/16 (Prerefunded 5/1/96!). . . . . . . . . . . 45 46
6.55%, 11/1/96 (Escrowed to Maturity). . . . . 500 511
Memorial Sloan-Kettering Cancer Center,
VRDN (Currently 3.00%) . . . . . . . . . . . . . . 1,100 1,100
New York State Local Gov't. Assistance Corp.,
VRDN (Currently 3.10%) . . . . . . . . . . . . . . 3,300 3,300
Onondaga County, GO, 4.40%, 2/15/97. . . . . . . . 2,050 2,072
Port Auth. of New York and New Jersey,
4.70%, 7/15/96 . . . . . . . . . . . . . . . . . . 110 110
TECP, 3.30 - 3.35%, 3/1 - 5/21/96 *. . . . . . . 1,760 1,760
Syracuse IDA, Syracuse Univ.,
VRDN (Currently 3.40%) . . . . . . . . . . . . . . $ 600 $ 600
Triborough Bridge and Tunnel Auth.,
(FGIC Insured), VRDN (Currently 3.25%) . . . . . . 3,300 3,300
Trust for Cultural Resources of New York City,
American Museum of National History,
(MBIA Insured), VRDN (Currently 2.90%) . . . . . . 3,400 3,400
West Islip Union Free School Dist.,
GO, TAN, 4.75%, 6/27/96. . . . . . . . . . . . . . 1,000 1,002
Westchester County, GO, 5.75%, 9/15/96 . . . . . . 965 978
GO, TAN, 3.75%, 12/11/96 . . . . . . . . . . . . 1,000 1,005
PUERTO RICO - 0.4%
Univ. of Puerto Rico, 7.55%,
6/1/99 (Prerefunded 6/1/96!) . . . . . . . . . . . 250 257
Total Investments in Securities -
101.6% of Net Assets (Cost $72,172). . . . . . . . 72,172
Other Assets Less Liabilities . . . . . . . . . . (1,132)
__________
Net Assets Consist of: Value
__________
Accumulated net investment income -
net of distributions . . . . . . . . . . . . . . . $ 3
Paid-in-capital applicable to 71,039,711
no par value shares of beneficial interest
outstanding; unlimited number
of shares authorized . . . . . . . . . . . . . . . 71,037
__________
NET ASSETS . . . . . . . . . . . . . . . . . . . . $ 71,040
__________
__________
NET ASSET VALUE PER SHARE. . . . . . . . . . . . . $ 1.00
______
______
* Interest subject to alternative minimum tax
! Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
BAN Bond Anticipation Note
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
GO General Obligation
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
RAN Revenue Anticipation Note
TAN Tax Anticipation Note
TECP Tax-Exempt Commercial Paper
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
Statement of Net Assets
T. Rowe Price New York Tax-Free Bond Fund / February 29, 1996
(amounts in thousands)
Amount Value
_______ _______
NEW YORK - 89.2%
Dormitory Auth. of the State of New York,
City Univ., 8.20%, 7/1/13. . . . . . . . . . . . . $ 350 $ 387
(AMBAC Insured), 5.75%, 7/1/11 . . . . . . . . 2,000 2,100
(FGIC Insured), 5.375%, 7/1/14 . . . . . . . . 1,500 1,476
Cornell Univ., 6.875%, 7/1/14. . . . . . . . . . 2,000 2,058
7.375%, 7/1/20 . . . . . . . . . . . . . . . . 1,500 1,685
VRDN (Currently 3.40%) . . . . . . . . . . . . 1,600 1,600
Dept. of Health, 6.50%, 7/1/09 . . . . . . . . . 500 536
5.50%, 7/1/20. . . . . . . . . . . . . . . . . 1,000 950
Devereux Foundation, (MBIA Insured),
5.00%, 7/1/15. . . . . . . . . . . . . . . . . . 500 472
Judicial Fac. (Suffolk County),
9.50%, 4/15/14 . . . . . . . . . . . . . . . . . 1,000 1,166
Rockefeller Univ., 6.75%, 7/1/11 . . . . . . . . 1,365 1,491
State Univ. Ed. Fac., 7.50%, 5/15/11 . . . . . . 2,130 2,535
5.50%, 5/15/13 . . . . . . . . . . . . . . . . 2,000 1,958
7.25%, 5/15/18 (Prerefunded 5/15/02!). . . . . 1,000 1,174
(AMBAC Insured), 5.25%, 7/1/14 . . . . . . . . 2,485 2,419
Vassar College, 7.25%, 7/1/15. . . . . . . . . . 500 569
5.00%, 7/1/25. . . . . . . . . . . . . . . . . 3,500 3,256
Erie County, GO, (FGIC Insured),
5.50%, 6/15/14 . . . . . . . . . . . . . . . . . . 1,500 1,495
Erie County Water Auth., (AMBAC Insured),
Zero Coupon, 12/1/17 . . . . . . . . . . . . . . . 665 139
Metropolitan Transportation Auth.,
5.50%, 7/1/17. . . . . . . . . . . . . . . . . . . 1,000 971
(FGIC Insured), Zero Coupon, 7/1/12. . . . . . . 2,285 953
Mount Sinai Union Free School Dist., GO,
(AMBAC Insured), 6.20%, 2/15/17. . . . . . . . . . 1,025 1,131
6.20%, 2/15/18 . . . . . . . . . . . . . . . . . 515 567
Municipal Assistance Corp. for the City of
New York, 6.875%, 7/1/07 . . . . . . . . . . . . . 1,500 1,579
6.90%, 7/1/07. . . . . . . . . . . . . . . . . . 1,500 1,578
6.00%, 7/1/08. . . . . . . . . . . . . . . . . . 2,525 2,640
7.625%, 7/1/08 . . . . . . . . . . . . . . . . . 500 544
Nassau County, GO, (FGIC Insured),
6.50%, 11/1/13 . . . . . . . . . . . . . . . . . . 3,360 3,756
Nassau County IDA, Hofstra Univ.,
6.75%, 1/1/10. . . . . . . . . . . . . . . . . . 270 296
6.90%, 1/1/14. . . . . . . . . . . . . . . . . . 350 383
6.90%, 1/1/15. . . . . . . . . . . . . . . . . . 375 410
New Rochelle, GO, (MBIA Insured),
6.25%, 3/15/17 . . . . . . . . . . . . . . . . . 375 402
6.25%, 3/15/18 . . . . . . . . . . . . . . . . . 400 429
6.25%, 3/15/19 . . . . . . . . . . . . . . . . . 425 456
New York City, GO, 7.375%, 8/15/96 . . . . . . . . 175 178
7.375%, 8/15/96 (Escrowed to Maturity) . . . . . 825 840
5.30%, 2/15/02 . . . . . . . . . . . . . . . . . 1,500 1,492
7.625%, 2/1/14 . . . . . . . . . . . . . . . . . 500 557
7.75%, 8/15/15 . . . . . . . . . . . . . . . . . 1,000 1,120
5.75%, 2/1/19. . . . . . . . . . . . . . . . . . 2,000 1,879
(FGIC Insured), VRDN (Currently 3.35%) . . . . . 1,100 1,100
New York City IDA, Civic Fac., Rockefeller
Foundation, 5.375%, 7/1/23 . . . . . . . . . . . . 950 939
Solid Waste Disposal, Visy Paper,
7.95%, 1/1/28 *. . . . . . . . . . . . . . . . . 1,000 1,030
Terminal One Group Assoc.,
6.00%, 1/1/19 *. . . . . . . . . . . . . . . . . 3,000 2,985
USTA National Tennis Center, (FSA Insured),
6.375%, 11/15/14 . . . . . . . . . . . . . . . . 1,000 1,080
New York City Municipal Water Fin. Auth.,
Water and Sewer, 5.50%, 6/15/23. . . . . . . . . . $ 1,000 $ 963
(FGIC Insured), 5.00%, 6/15/17 . . . . . . . . . 3,380 3,133
VRDN (Currently 3.35%) . . . . . . . . . . . . . 900 900
New York State, GO, 5.70%, 8/15/12 . . . . . . . . 340 347
7.125%, 11/15/16 . . . . . . . . . . . . . . . . 500 558
New York State Energy Research and Dev. Auth.,
Brooklyn Union Gas Co., (MBIA Insured),
5.50%, 1/1/21. . . . . . . . . . . . . . . . . . . 1,000 983
Con Ed. Company, 6.75%, 1/15/27 *. . . . . . . . 2,350 2,463
Orange and Rockland Utilities, (FGIC Insured),
VRDN (Currently 2.90%) . . . . . . . . . . . . . 400 400
New York State Environmental Fac. Corp.,
PCR, New York City Municipal Water, 7.25%,
6/15/10. . . . . . . . . . . . . . . . . . . . 500 567
7.50%, 6/15/12 . . . . . . . . . . . . . . . . 500 558
6.50%, 6/15/14 . . . . . . . . . . . . . . . . 3,900 4,216
State Water Revolving Fund,
5.75%, 6/15/12 . . . . . . . . . . . . . . . . 1,000 1,051
6.90%, 5/15/15 . . . . . . . . . . . . . . . . 980 1,126
6.90%, 11/15/15. . . . . . . . . . . . . . . . 750 858
New York State Housing Fin. Agency,
Service Contract Obligations,
7.25%, 9/15/12 . . . . . . . . . . . . . . . . 1,700 1,900
7.80%, 9/15/20 (Prerefunded 3/15/01!). . . . . 500 589
7.375%, 9/15/21 (Prerefunded 3/15/02!) . . . . 150 177
State Univ. Construction, 7.90%,
11/1/06 (Prerefunded 5/1/96!). . . . . . . . . . 160 164
8.00%, 5/1/11 (Escrowed to Maturity) . . . . . . 2,400 3,052
New York State Local Gov't. Assistance Corp.,
6.50%, 4/1/15. . . . . . . . . . . . . . . . . 500 531
6.50%, 4/1/20. . . . . . . . . . . . . . . . . 3,000 3,232
7.00%, 4/1/21 (Prerefunded 4/1/01!). . . . . . 900 1,028
5.00%, 4/1/23. . . . . . . . . . . . . . . . . 3,000 2,716
New York State Medical Care Fac. Fin. Agency,
Ellis Hosp., (FHA Guaranteed),
8.00%, 2/15/08 . . . . . . . . . . . . . . . . . . 985 1,075
Hosp. & Nursing Home Program, (FHA Guaranteed),
6.125%, 2/15/14. . . . . . . . . . . . . . . . . 445 467
Mental Health Services, (FGIC Insured),
6.375%, 8/15/10. . . . . . . . . . . . . . . . 450 488
5.25%, 8/15/14 . . . . . . . . . . . . . . . . 1,400 1,338
New York Hosp., (AMBAC Insured),
6.50%, 8/15/29 . . . . . . . . . . . . . . . . . 2,000 2,167
St. Luke's-Roosevelt Hosp. Center,
(FHA Guaranteed), 7.45%, 2/15/29
(Prerefunded 2/15/00!) . . . . . . . . . . . . . 1,500 1,707
New York State Mortgage Agency,
Homeowner Mortgage, 7.95%, 10/1/15 . . . . . . . . 1,135 1,206
7.75%, 4/1/16. . . . . . . . . . . . . . . . . 500 534
Zero Coupon, 4/1/20. . . . . . . . . . . . . . 3,955 594
7.50%, 4/1/26 *. . . . . . . . . . . . . . . . 3,250 3,430
New York State Urban Dev. Corp., Correctional
Capital Fac., Zero Coupon, 1/1/09. . . . . . . . . 1,200 576
Zero Coupon, 1/1/10. . . . . . . . . . . . . . 3,000 1,342
7.00%, 1/1/21 (Prerefunded 1/1/02!). . . . . . 500 577
5.375%, 1/1/25 . . . . . . . . . . . . . . . . 5,000 4,638
Newburgh, GO, 5.625%, 9/15/96. . . . . . . . . . . 215 217
5.875%, 9/15/97. . . . . . . . . . . . . . . . 215 221
Niagara Frontier Transportation Airport Auth.,
Greater Buffalo Int'l. .Airport, (AMBAC Insured),
6.125%, 4/1/14 * . . . . . . . . . . . . . . . . . $ 1,385 $ 1,451
Port Auth. of New York and New Jersey,
(FGIC Insured), 6.50%, 7/15/19 * . . . . . . . . . 2,000 2,178
(MBIA Insured), 6.75%, 4/15/26 * . . . . . . . 500 547
Rensselaer County, GO, (FGIC Insured),
Zero Coupon, 5/1/12. . . . . . . . . . . . . . 1,000 421
Zero Coupon, 5/1/13. . . . . . . . . . . . . . 1,500 596
Syracuse IDA, St. Joseph's Hosp. Health Center,
7.50%, 6/1/18. . . . . . . . . . . . . . . . . . . 1,000 1,064
Triborough Bridge and Tunnel Auth.,
6.625%, 1/1/12 . . . . . . . . . . . . . . . . 500 570
8.125%, 1/1/12 . . . . . . . . . . . . . . . . 400 435
5.00%, 1/1/17. . . . . . . . . . . . . . . . . 2,695 2,488
(FGIC Insured), VRDN (Currently 3.25%) . . . . . 1,000 1,000
Westchester County, GO, 4.75%, 12/15/15. . . . . . 750 692
PUERTO RICO - 9.8%
Puerto Rico Aqueduct and Sewer Auth., 7.875%,
7/1/17 (Prerefunded 7/1/00!) . . . . . . . . . . . 1,250 1,388
Puerto Rico Commonwealth, GO,
8.00%, 7/1/07. . . . . . . . . . . . . . . . . 330 363
8.00%, 7/1/07 (Prerefunded 7/1/98!). . . . . . 1,170 1,301
7.25%, 7/1/10 (Prerefunded 7/1/00!). . . . . . 500 569
7.625%, 7/1/10 (Prerefunded 7/1/00!) . . . . . 500 578
7.30%, 7/1/20 (Prerefunded 7/1/00!). . . . . . 250 286
(MBIA Insured), 5.375%, 7/1/22 . . . . . . . . . 1,000 977
Puerto Rico Electric Power Auth., 8.00%, 7/1/08
(Prerefunded 7/1/98!). . . . . . . . . . . . . . . 100 111
7.125%, 7/1/14 . . . . . . . . . . . . . . . . 1,000 1,100
5.25%, 7/1/21. . . . . . . . . . . . . . . . . 1,500 1,399
Puerto Rico Highway and Transportation Auth.,
(FSA Insured), 6.375%, 7/1/08. . . . . . . . . . . 1,000 1,092
Puerto Rico Infrastructure Fin. Auth.,
Special Tax, 7.75%, 7/1/08 . . . . . . . . . . . . 2,750 3,012
Puerto Rico Public Buildings Auth., Public Ed.
and Health Fac., GO, 7.875%, 7/1/16
(Prerefunded 7/1/97!). . . . . . . . . . . . . . . 110 118
Univ. of Puerto Rico, (MBIA Insured),
5.25%, 6/1/25. . . . . . . . . . . . . . . . . . . 1,000 961
Value
___________
Total Investments in Securities -
99.0% of Net Assets (Cost $125,782). . . . . . . . $133,547
Futures Contracts
Contract Unrealized
Expiration Value Gain (Loss)
________ ________ __________
Long, 25 U.S. Treasury
thirty-year contracts,
$278,000 of Municipal Bonds
pledged as
initial margin 6/96 $ 2,858 $(14)
Net payments (receipts)
of variation margin to date. . . . . . . . . . . . 16
____
Variation margin receivable
(payable) on open futures contracts. . . . . . . . 2
Other Assets Less Liabilities . . . . . . . . . . 1,384
__________
Net Assets Consist of: Value
_______
Accumulated net investment income -
net of distributions . . . . . . . . . . . . . . . 5
Accumulated net realized gain/loss -
net of distributions . . . . . . . . . . . . . . . (640)
Net unrealized gain (loss) . . . . . . . . . . . . 7,751
Paid-in-capital applicable to
12,431,862 shares of no par
value of beneficial interest
outstanding; unlimited number
of shares authorized . . . . . . . . . . . . . . . 127,817
__________
NET ASSETS . . . . . . . . . . . . . . . . . . . . $134,933
__________
__________
NET ASSET VALUE PER SHARE. . . . . . . . . . . . . $10.85
_______
_______
* Interest subject to alternative minimum tax
! Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance Corp.
GO General Obligation
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 New York Tax-Free Funds / Year Ended February 29, 1996
(in thousands)
Money Fund Bond Fund
____________ ____________
INVESTMENT INCOME
Interest income. . . . . . . . . . . . . . . $ 2,605 $ 7,670
___________ ___________
Expenses
Investment management. . . . . . . . . . . 172 550
Custodian and accounting . . . . . . . . . 100 124
Shareholder servicing. . . . . . . . . . . 73 115
Legal & audit. . . . . . . . . . . . . . . 12 14
Prospectus and shareholder reports . . . . 4 7
Trustees . . . . . . . . . . . . . . . . . 6 6
Registration . . . . . . . . . . . . . . . 9 -
Miscellaneous. . . . . . . . . . . . . . . 5 6
___________ ___________
Total expenses . . . . . . . . . . . . . . 381 822
___________ ___________
Net investment income. . . . . . . . . . . . 2,224 6,848
___________ ___________
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities . . . . . . . . . . . . . . . . - 4,088
Futures. . . . . . . . . . . . . . . . . . - (179)
___________ ___________
Net realized gain (loss) . . . . . . . . . . - 3,909
___________ ___________
Change in net unrealized gain or loss on:
Securities . . . . . . . . . . . . . . . . (1) 1,712
Futures. . . . . . . . . . . . . . . . . . - (14)
___________ ___________
Change in net unrealized gain or loss. . . (1) 1,698
___________ ___________
Net realized and unrealized gain (loss). . . (1) 5,607
___________ ___________
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS. . . . . . . . . . . . . . . $ 2,223 $ 12,455
___________ ___________
___________ ___________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price New York Tax-Free Funds
(in thousands)
Money Fund Bond Fund
___________________ ___________________
Year Year Year Year
Ended Feb. Ended Feb. Ended Feb. Ended Feb.
29, 1996 28, 1995 29, 1996 28, 1995
_________ _________ _________ ________
INCREASE (DECREASE) IN
NET ASSETS FROM
Operations
Net investment
income. . . . . . . . . $ 2,224 $ 1,565 $ 6,848 $ 6,736
Net realized gain
(loss). . . . . . . . . - - 3,909 (4,418)
Change in net
unrealized gain
or loss . . . . . . . . (1) 9 1,698 (2,118)
________ ________ ________ ________
Increase (decrease)
in net assets
from operations . . . . 2,223 1,574 12,455 200
________ ________ ________ ________
Distributions to
shareholders
Net investment
income. . . . . . . . . (2,224) (1,565) (6,848) (6,736)
Net realized gain . . . - - - (932)
________ ________ ________ _______
Decrease in net
assets from
distributions . . . . . (2,224) (1,565) (6,848) (7,668)
_______ ________ ________ ________
Capital share
transactions*
Shares sold . . . . . . 57,135 66,703 28,784 31,799
Distributions
reinvested. . . . . . . 2,142 1,498 5,205 5,980
Shares redeemed . . . . (54,390) (59,792) (22,510) (42,811)
________ ________ ________ ________
Increase (decrease)
in net assets from
capital share
transactions. . . . . . 4,887 8,409 11,479 (5,032)
________ ________ ________ ________
Increase (decrease) in
net assets . . . . . . . . 4,886 8,418 17,086 (12,500)
NET ASSETS
Beginning of period. . . . 66,154 57,736 117,847 130,347
________ ________ ________ ________
End of period. . . . . . . $ 71,040 $ 66,154 $134,933 $117,847
________ ________ ________ ________
________ ________ _________ ________
*Share information
Shares sold . . . . . . 57,135 66,703 2,700 3,123
Distributions
reinvested. . . . . . . 2,142 1,498 488 584
Shares redeemed . . . . (54,390) (59,792) (2,115) (4,222)
________ ________ ________ ________
Increase (decrease)
in shares
outstanding . . . . . . 4,887 8,409 1,073 (515)
________ ________ ________ ________
________ ________ ________ ________
The accompanying notes are an integral part of these financial statements.
Notes To Financial Statements
T. Rowe Price New York Tax-Free Funds / February 29, 1996
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 York Tax-Free Money Fund (the Money
Fund) and the New York Tax-Free Bond Fund (the Bond Fund), nondiversified,
open-end management investment companies, are two of the portfolios
established by the Trust.
A) Valuation -- Debt securities are generally traded in the over-the-counter
market. Except for securities held by the Money Fund, investments in
securities originally issued with 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 held by the Bond Fund
with maturities when issued 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. Securities held by the Money Fund are
valued at amortized cost. Financial 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
each 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 the identified cost basis. 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
Bond 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.
Note 2 - Investment Transactions
Consistent with its investment objective, the Bond Fund engages in the
following practices to manage exposure to certain risks or enhance
performance. The investment objective, policies, program, and risk factors of
the fund are described more fully in the fund's prospectus and Statement of
Additional Information.
A) Futures Contracts -- At February 29, 1996, the Bond 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) Other -- Purchases and sales of portfolio securities for the Bond Fund,
other than short-term securities, aggregated $150,523,000 and $141,487,000,
respectively, for the year ended February 29, 1996.
Note 3 - 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 $452,000, which expires in 2003. Capital loss
carryforwards utilized in fiscal 1996 amounted to $3,142,000. The 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, $1,000 of
undistributed net investment income was reclassified as a decrease to
undistributed net realized gains during the year ended February 29, 1996. The
results of operations and net assets were not affected by the
reclassifications.
At February 29, 1996, the aggregate cost of investments for the Money
and Bond funds for federal income tax and financial reporting purposes was
$72,172,000 and $125,782,000, respectively. For the Money Fund, amortized cost
is equivalent to value; and for the Bond Fund, net unrealized gain aggregated
$7,765,000, of which $8,047,000 related to appreciated investments and
$282,000 to depreciated investments.
Note 4 - 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 $14,000 and $47,000 was payable at February 29, 1996 by the
Money Fund and Bond Fund, respectively. 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 29, 1996, and for the year then ended, the effective annual Group Fee
rate was 0.33% and 0.34%, respectively. 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 28, 1997, for the Money and
Bond funds which would cause each fund's ratio of expenses to average net
assets to exceed 0.55% and 0.65%, respectively. Pursuant to this agreement,
$131,000 and $5,000 of management fees were not accrued by the Money and Bond
funds for the year ended February 29, 1996. Pursuant to a prior agreement,
$535,000 and $359,000 of management fees remain unaccrued for the Money and
Bond funds, respectively, as a result of each fund's ratio of expenses to net
assets exceeding 0.55% and 0.60%, respectively, in prior periods. Subject to
shareholder approval, each fund may reimburse the Manager for these expenses,
provided that average net assets have grown or expenses have declined
sufficiently to allow reimbursement without causing each fund's ratio of
expenses to average net assets to exceed 0.55% and 0.65%, respectively, for
the current limitation period and 0.55% and 0.60%, respectively, for the prior
periods.
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., is
each fund's transfer and dividend disbursing agent and provides shareholder
and administrative services to the funds. The Money and Bond funds incurred
expenses pursuant to these related party agreements totaling approximately
$127,000 and $164,000, respectively, for the year ended February 29, 1996, of
which $11,000 and $15,000, respectively, were payable at period-end.
Financial Highlights
T. Rowe Price New York Tax-Free Money Fund
For a share outstanding throughout each period
______________________________________________
Year Ended
______________________________________________
Feb. 29, Feb. 28, Feb. 28, Feb. 28,Feb. 29,
1996 1995 1994 1993 1992
__________________________________________
NET ASSET VALUE, BEGINNING
OF PERIOD. . . . . . . . . $1.000 $1.000 $1.000 $1.000 $1.000
Investment activities
Net investment income. . . 0.032* 0.025* 0.018* 0.022* 0.035*
Distributions
Net investment income. . . (0.032) (0.025) (0.018) (0.022) (0.035)
______ ______ ______ ______ ______
NET ASSET VALUE,
END OF PERIOD. . . . . . . . $1.000 $1.000 $1.000 $1.000 $1.000
______ ______ ______ ______ ______
______ ______ ______ ______ ______
RATIOS/SUPPLEMENTAL DATA
Total return . . . . . . . . 3.26% 2.49% 1.84% 2.22% 3.60%
Ratio of expenses to
average net assets . . . . . 0.55%* 0.55%* 0.55%* 0.55%* 0.55%*
Ratio of net investment
income to average
net assets . . . . . . . . . 3.21% 2.48% 1.82% 2.21% 3.54%
Net assets,
end of period
(in thousands) . . . . . . . $71,040 $66,154 $57,736 $53,904 $53,429
* Excludes expenses in excess of a 0.55% voluntary expense limitation in
effect November 7, 1990 through February 28, 1997.
Financial Highlights
T. Rowe Price New York Tax-Free Bond Fund
For a share outstanding throughout each period
______________________________________________
Year Ended
______________________________________________
Feb. 29, Feb. 28, Feb. 28, Feb. 28, Feb. 29,
1996 1995 1994 1993 1992
__________________________________________
NET ASSET VALUE, BEGINNING
OF PERIOD. . . . . . . . $10.37 $10.98 $11.05 $10.12 $ 9.74
______ ______ ______ ______ ______
Investment activities
Net investment
income . . . . . . . . . 0.58* 0.58* 0.59* 0.62* 0.63*
Net realized and
unrealized
gain (loss). . . . . . . 0.48 (0.53) 0.09 0.93 0.38
______ ______ ______ ______ ______
Total from investment
activities . . . . . . . 1.06 0.05 0.68 1.55 1.01
______ ______ ______ ______ ______
Distributions
Net investment
income . . . . . . . . . (0.58) (0.58) (0.59) (0.62) (0.63)
Net realized gain. . . . - (0.08) (0.16) - -
______ ______ ______ ______ ______
Total distributions. . . (0.58) (0.66) (0.75) (0.62) (0.63)
______ ______ ______ ______ ______
NET ASSET VALUE,
END OF PERIOD. . . . . . . $10.85 $10.37 $10.98 $11.05 $10.12
______ ______ ______ ______ ______
______ ______ ______ ______ ______
RATIOS/SUPPLEMENTAL DATA
Total return . . . . . . . 10.44% 0.74% 6.31% 15.79% 10.67%
Ratio of expenses to
average net assets . . . . 0.65%* 0.60%* 0.60%* 0.60%* 0.60%*
Ratio of net investment
income to average
net assets . . . . . . . . 5.42% 5.71% 5.31% 5.91% 6.33%
Portfolio turnover
rate . . . . . . . . . . . 116.0% 134.3% 84.9% 41.5% 48.7%
Net assets,
end of period
(in thousands) . . . . $134,933 $117,847 $130,347 $112,026 $74,243
* Excludes expenses in excess of a 0.65% voluntary expense limitation in
effect March 1, 1995 through February 28, 1997, a 0.60% voluntary expense
limitation in effect November 7, 1990 through February 28, 1995.
Report of Independent Accountants
To the Shareholders and Board of Trustees of T. Rowe Price New York Tax-Free
Funds
We have audited the accompanying statement of net assets of T. Rowe Price New
York Tax-Free Money Fund and T. Rowe Price New York Tax-Free Bond Fund (two of
the portfolios comprising the T. Rowe Price State Tax-Free Income Trust) as of
February 29, 1996, 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 five years in
the period then ended. 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 29, 1996, 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 New York Tax-Free Money Fund and T. Rowe Price New York Tax-Free
Bond Fund as of February 29, 1996, 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 19, 1996
Chart 1 : line graph showing New York Bond and New York Money
Indexes from 2/95 to 2/96.
Chart 2 SEC chart showing growth of $10,000 in New York Tax-Free
Money Fund versus benchmarks from 8/86 through 2/96.
Chart 3 SEC chart showing growth of $10,000 in New York Tax-Free
Bond Fund versus benchmarks from 8/86 through 2/96.
