- --------------------------------------------------------------------------------
T. Rowe Price
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SemiAnnual Report
Florida Insured Intermediate Tax-Free
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August 31, 1996
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Report Highlights
================================================================================
* The last six months gave back the bond market gains of the prior six
months as the economy grew stronger and expectations of further easing
by the Federal Reserve evaporated.
* Florida's economy and finances remained in good shape, but borrowings
for new projects and services increased further.
* The Florida Insured Intermediate Tax-Free Fund posted a negative 0.09%
return for the past six months, in line with its peer group average,
while the solid 12-month return of 3.77% exceeded the average.
* Our strategy focused on reducing exposure to rising interest rates and
increasing investments in higher-yielding sectors of the Florida
market.
* The Fed may tighten monetary policy in the next few months. We expect
to manage the fund with a cautious outlook on municipal bond prices,
focusing on improving income when we can.
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Fellow Shareholders
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The last six months saw the fixed income markets give back the gains
realized during the prior six months, as the economy strengthened and market
expectations of further easing by the Federal Reserve evaporated. Although the
municipal market declined less than the taxable market after the issue of tax
reform faded, six-month municipal returns were virtually flat.
<PAGE>
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MARKET ENVIRONMENT
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The economy regained strength in 1996 after slowing in 1995, with only a
modest pickup in inflation. Stronger growth alone was enough to reverse
expectations of any further Federal Reserve easing after two interest rate cuts
in the second half of 1995 and one earlier this year. While the Fed has not yet
tightened in 1996, it adopted a bias toward tightening in July. Market rates
rose in anticipation of tighter monetary policy.
[Yield Chart showing 30-year AAA GO, 5-Year AAA GO, and 1-year MIG1 note from
8/31/95 through 8/31/96]
Most of the adjustment in interest rates occurred in the first quarter of
1996. The 30-year Treasury bond, which reached the 6% level at the end of 1995,
backed up to 6.75% in the first quarter and has since traded within a range of
approximately 6.75% to 7.25%.
In the municipal market, rates rose roughly 50 basis points (100 basis
points equal one percent) from the lowest point reached in early 1996, but not
as high as the levels of late 1994. Long-term, high-grade general obligation
bonds yielded 5.75% on August 31, 1996, versus 5.45% six months ago and 5.85% a
year ago. Five-year, high-grade bonds were 25 basis points higher in yield than
in August 1995. Very short-term rates (less than 90 days) moved lower over the
past year, while one-year rates ended the last 12 months unchanged at 3.9% but
65 basis points higher than six months ago. The net result over the past six
months was a higher and flatter yield curve.
All was not doom and gloom in the municipal bond market over the past six
months. The fading of tax reform concerns caused the municipal market to
outperform taxable markets by a wide margin. As rates approached and then
exceeded 6%, strong retail demand for municipals provided support for the
market. Last summer, long-term municipal yields equaled 90% or more of
comparable taxable yields; this year, yields moved down to 81% of taxable
alternatives, allowing the municipal market to regain the ground it lost.
Florida's economy has remained healthy so far this year, generating job and
personal income growth in line with the national economy. Nonfarm employment
growth averaged 3.1% during the first half of 1996, and the June unemployment
rate of 5% - the state's lowest since September 1988 - was a bit below the
national average. Tourism remained strong, with 10.3 million visitors during the
first half.
Florida's financial position was also strengthened by further additions to
its reserves and budget stabilization fund. Nevertheless, the state faces a
challenge in finding ways to finance increasing social needs, particularly for
school districts whose enrollments are projected to increase 20% over the next
five years. Although Florida's bond issuance rose only 7.5% through August of
this year, that increase came on top of a 29% rise in 1995. In addition, the
state's current budget authorizes roughly $1 billion of bonds for various needs.
Florida's net tax-supported debt, currently at $9 billion, has been growing but
remains manageable.
<PAGE>
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Performance and Strategy Review
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Performance Comparison
================================================================================
Periods Ended 8/31/96 6 Months 12 Months
- --------------------- -------- ---------
Florida Insured
Intermediate Tax-Free Fund -0.09% 3.77%
Lipper Florida Intermediate
Municipal Debt Funds Average -0.10 3.37
================================================================================
Reflecting the difficult market of the past six months, your fund's share
price declined $0.26, most of which was offset by income of $0.23 per share for
a slight negative return of less than a tenth of a percent. This was in line
with the fund's Lipper peer group average, as shown in the table. For the 12
months ended August 31, however, we are pleased to report that your fund
outperformed the average Florida intermediate municipal fund.
Our strategy for the six-month period focused on reducing exposure to
rising interest rates and increasing holdings of higher-yielding securities. We
sought to limit the negative effects of rising interest rates in three ways.
First, we sold lower- and current-coupon bonds because their prices fall faster
than above-market (premium) coupon bonds when rates are rising. Second, we
shortened the fund's weighted average maturity and duration. (Duration is a more
accurate measure than maturity of a fund's price sensitivity to interest rate
changes.) And finally, we established a position in housing bonds, which are
generally less sensitive to interest rate fluctuations.
We also took steps to increase our holdings in higher-yielding sectors of
the Florida insured market. With insured bond issuance running 40% above 1995's
level in a rising and volatile rate environment, prices in this market came
under pressure from time to time. We took advantage of this excellent
opportunity by increasing our positions in the more yield-oriented sectors,
especially hospitals, solid waste, and housing, as shown in the Sector
Diversification table following this letter.
<PAGE>
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Outlook
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The last six months have seen a major change in the outlook for the
economy, causing a shift in the shape and level of the municipal yield curve.
The risk of an overheating economy has grown, and the Fed will likely nudge
rates higher to cool things down in coming months. The current expansion is now
over five years old, roughly twice the length of an average expansion prior to
1982. However, old age is not a cause for an expansion to end. There is no
reason why the current expansion could not continue if interest rates are high
enough to restrain inflation, yet low enough to keep unemployment at bay.
- -----------------------------
Little has changed . . .
in terms of interest rate
levels, but much has changed
about market psychology.
=============================
Little has changed from a year ago in terms of interest rate levels, but
much has changed about market psychology. A year ago, this market was consumed
with worries about the impact of tax reform proposals on municipal bonds, and it
was convinced the economy was slowing down. Today, tax reform is on the back
burner and the economy has picked up steam.
As mentioned, we believe the Fed is likely to raise short-term rates, a
move that is at least partly discounted by the market. Municipal securities have
performed well this year in relation to their taxable counterparts, resulting in
lower yield relationships (as a percent of taxable yields) that will be
difficult to improve upon. An expected pickup in supply again after a quiet
summer may also put some pressure on the municipal market.
For these reasons, we expect to continue managing the fund with a cautious
perspective on interest rates, trying to add performance value both through
credit research and by taking advantage of trading ranges.
Respectfully submitted,
William T. Reynolds
President and Chairman of the Investment Advisory Committee
September 20, 1996
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Keeping Taxes To A Minimum
================================================================================
As the saying goes, it's not what you earn but what you keep that counts.
The ability to provide tax-exempt income is the chief appeal of municipal bond
funds, and investors in higher tax brackets often find these funds advantageous.
Some funds invest in securities that offer the triple benefit of being free from
federal, state, and local taxes.
<PAGE>
Investors should remember, however, that the total return on most municipal
bond funds may not be entirely tax-free. To avoid federal income taxes,
municipal funds must distribute all of their capital gains to shareholders each
year. These distributions are fully taxable. On infrequent occasions, municipal
funds may also purchase securities whose income is taxable, if permitted by the
prospectus.
Therefore, to judge accurately how well a fund minimizes taxes, investors
should focus not just on income but on the gain or loss from the sale of
securities, since both components make up total return. A fund's overall tax
efficiency -- the percentage of its return that actually winds up in
shareholders' pockets -- is calculated by dividing its after-tax total return by
its pretax total return. For example, an optimum tax effi-ciency of 100% would
indicate that these two returns were equal -- the shareholders paid no taxes. In
reality, most municipal funds fall somewhat below this level due primarily to
taxable capital gain distributions.
At T. Rowe Price, our main goal in managing municipal bond portfolios is to
provide competitive total return performance. At the same time, we strive to
minimize capital gain distributions and other factors that would saddle our
shareholders with taxes. "We don't allow tax considerations to drive our
portfolio management, but we remain sensitive to taxes in our overall approach
to management," says Mary J. Miller, Director of T. Rowe Price's Municipal Bond
Department.
- -----------------------------
WE REMAIN SENSITIVE TO TAXES
IN OUR OVERALL APPROACH . . .
=============================
Inevitably, there are times when market conditions necessitate the sale of
a security despite the tax consequences. However, we are generally able to
offset capital gains with losses incurred on the sale of other securities. Under
Internal Revenue Service rules, losses can be carried for up to eight years to
offset gains. "Our goal is to minimize capital gains by offsetting them with
losses, so there would be no taxable event to the shareholder," says Ms. Miller.
While not intentionally pursuing losses, T. Rowe Price aims to take
advantage of them when they occur. For instance, when municipal bond prices have
reached a cyclical low, we may sell some securities that are trading below our
purchase price and reinvest the proceeds in higher-yielding securities. That
strategy enhances the fund's income and also provides a tax loss that can be
employed anytime in the following eight years to offset capital gains.
According to Morningstar,* the Florida Insured Intermediate Tax-Free Fund's
average tax efficiency rating for the three-year period ended August 31, 1996,
was 98.7%. While our foremost goal is to provide competitive total returns, we
will continue to do our best to limit the amount of money you have to surrender
to the IRS.
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* Although data are gathered from reliable sources, completeness and
accuracy cannot be guaranteed.
<PAGE>
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Portfolio Highlights
================================================================================
Key statistics
2/29/96 8/31/96
Price Per Share ...................................... $ 10.61 $ 10.35
Dividends Per Share
For 6 months .................................... 0.23 0.23
For 12 months ................................... 0.47 0.46
Dividend Yield *
For 6 months .................................... 4.41% 4.37%
For 12 months ................................... 4.52 4.43
Weighted Average Maturity (years) .................... 8.4 7.5
Weighted Average Effective Duration (years) .......... 5.8 5.7
Weighted Average Quality ** .......................... AA AA
* Dividends earned and reinvested for the periods indicated are annualized
and divided bythe average daily net asset values per share for the same period.
** Based on T. Rowe Price research.
================================================================================
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Portfolio Highlights
================================================================================
SECTOR Diversification
Percent of Percent of
Net Assets Net Assets
2/29/96 8/31/96
Dedicated Tax Revenue .................................. 7% 19%
Prerefunded Bonds ...................................... 23 16
Water and Sewer Revenue ................................ 11 12
Air and Sea Transportation Revenue ..................... 14 11
General Obligation-Local ............................... 12 11
Lease Revenue .......................................... 7 7
Nuclear Revenue ........................................ 4 6
Ground Transportation Revenue .......................... 5 5
Hospital Revenue ....................................... -- 4
Solid Waste Revenue .................................... -- 4
Housing Finance Revenue ................................ -- 3
All Other .............................................. 14 1
Other Assets Less Liabilities .......................... 3 1
Total .................................................. 100% 100%
================================================================================
<PAGE>
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Performance Comparison
================================================================================
This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with a broad-based average or index. The index
return does not reflect expenses, which have been deducted from the fund's
return.
[SEC graph showing, Lehman 7-year GO, Lipper Florida Intermediate Municipal debt
funds average and Florida Insured Intermediate Tax-Free Fund.]
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Average Annual Compound Total Return
================================================================================
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Since Inception
Periods Ended 8/31/96 1 Year 3 Years Inception Date
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Florida Insured Inter-
mediate Tax-Free Fund 3.77% 4.47% 5.56% 3/31/93
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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>
Financial Highlights
Unaudited
For a share outstanding throughout each period
6 Months Year 3/31/93
Ended Ended to
8/31/96 2/29/96 2/28/95 2/28/94
------- ------- ------- -------
NET ASSET VALUE
Beginning of period $ 10.61 $ 10.14 $ 10.30 $ 10.00
Investment activities
Net investment income 0.23* 0.47* 0.43* 0.37*
Net realized and
unrealized gain (loss) (0.24) 0.47 (0.14) 0.31
Total from
investment activities (0.01) 0.94 0.29 0.68
Distributions
Net investment income (0.23) (0.47) (0.43) (0.37)
Net realized gain (0.02) -- (0.02) (0.01)
Total distributions (0.25) (0.47) (0.45) (0.38)
NET ASSET VALUE
End of period $ 10.35 $ 10.61 $ 10.14 $ 10.30
================================================================================
Ratios/Supplemental Data
Total return (0.09)%* 9.41%* 3.01%* 6.84%*
Ratio of expenses to
average net assets 0.61%*+ 0.60%* 0.60%* 0.60%*+
Ratio of net investment
income to average
net assets 4.40%*+ 4.47%* 4.38%* 3.57%*+
Portfolio turnover rate 96.1%+ 98.7% 140.5% 70.6%+
Net assets, end of period
(in thousands) $ 67,515 $ 67,260 $ 51,922 $ 37,868
* Excludes expenses in excess of a 0.60% voluntary expense limitation in
effect through 2/28/97.
+ Annualized.
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
Statement of Net Assets
Unaudited August 31, 1996
Par Value
In thousands
- --------------------------------------------------------------------------------
FLORIDA 92.8%
Brevard County HFA, Holmes Regional Medical Center
5.20%, 10/1/05 (MBIA Insured) .............. $ 2,000 $2,010
Charlotte County, Utility
6.875%, 10/1/21 (FGIC Insured)
(Prerefunded 10/1/01+) ..................... 2,000 2,230
Dade County
Aviation, 5.40%, 10/1/03 (MBIA Insured) * ........ 1,140 1,172
Resource Recovery Fac ............................
6.00%, 10/1/06 (AMBAC Insured) * ........... 2,500 2,611
Dade County School Dist., GO, 5.50%, 8/1/04 (MBIA Insured) 2,000 2,075
Duval County School Dist., GO
6.125%, 8/1/04 (AMBAC Insured) ............. 2,000 2,151
Florida Division of Bond Fin ..........................
Dept. of Environmental Preservation
5.50%, 7/1/07 (AMBAC Insured) ............... 2,000 2,032
6.00%, 7/1/06 (MBIA Insured) ................ 4,350 4,642
Florida Housing Fin. Agency
Multi-Family Housing
5.80%, 2/1/08 ............................... 1,000 1,009
5.80%, 8/1/08 ............................... 1,000 1,009
Florida Municipal Power Agency
All - Requirements Power Supply
6.25%, 10/1/21 (AMBAC Insured)
(Prerefunded 10/1/02+) ..................... 1,700 1,858
Stanton II Project, 6.50%, 10/1/20 (AMBAC Insured)
(Prerefunded 10/1/02+) ..................... 1,230 1,364
Florida State Dept. of Corrections
Okeechobee Correctional
5.70%, 3/1/01 (AMBAC Insured) ............... 1,355 1,411
5.80%, 3/1/02 (AMBAC Insured) ............... 1,005 1,054
<PAGE>
Florida Turnpike Auth .................................
5.50%, 7/1/03 (AMBAC Insured) ............... 2,000 2,078
5.50%, 7/1/05 (AMBAC Insured) ............... 1,000 1,034
Gainesville Utilities Systems, 6.40%, 10/1/05 ......... 1,500 1,629
Hillsborough County
Environmentally Sensitive Lands Acquisition and
Protection, 6.20%, 7/1/05 (AMBAC Insured) ........ $ 1,485 $1,589
Improvement Program
6.00%, 8/1/04 (FGIC Insured) ............... 1,895 2,027
Tampa Port Auth., 6.50%, 6/1/04 (FSA Insured) * .. 2,000 2,179
Hillsborough County IDA, PCR, Tampa Electric Co. ......
VRDN (Currently 4.00%) * ................... 700 700
Hillsborough County School Dist., GO
7.00%, 8/15/05 (MBIA Insured) .............. 1,500 1,706
Hollywood, Water and Sewer
6.875%, 10/1/21 (FGIC Insured)
(Prerefunded 10/1/01+) ..................... 3,100 3,457
Indian Trace Community Dev. Dist ......................
Basin 1 Water Management
5.50%, 5/1/06 (MBIA Insured) ................ 1,215 1,248
5.50%, 5/1/07 (MBIA Insured) ................ 550 558
VRDN (Currently 3.35%) (MBIA Insured) ....... 500 500
Jacksonville, Water and Sewer, 6.00%, 10/1/04
(MBIA Insured) 1,845 1,975
Jacksonville Beach Utilities
6.75%, 10/1/20 (MBIA Insured)
(Prerefunded 10/1/01+) ................ 500 555
Jacksonville HFA
Baptist Medical Center
VRDN (Currently 3.95%)
(MBIA Insured) ........................ 400 400
New Children's Hosp. at Baptist Medical Center
VRDN (Currently 4.00%) ................ 400 400
Jacksonville, PCR, Florida Power and Light
VRDN (Currently 3.75%) ................ 300 300
<PAGE>
Lee County School Board, COP, 6.30%, 8/1/01 (FSA Insured) 2,000 2,137
Manatee County, Public Utilities
6.75%, 10/1/05 (MBIA Insured) ......... 2,000 2,247
Orange County, Public Service Tax
5.60%, 10/1/07 (FGIC Insured) ......... 500 513
Orlando Utilities Commission, Water and Electric
6.50%, 10/1/20 (Prerefunded 10/1/01+) . $ 1,385 $ 1,522
Palm Beach County
GO, 4.60%, 7/1/07 ...................... 1,000 942
GO, 6.875%, 12/1/03 .................... 325 366
Airport, 7.50%, 10/1/00 (MBIA Insured) ...... 2,100 2,311
Pinellas County Water Auth .......................
5.50%, 10/1/04 (AMBAC Insured) ........ 2,500 2,596
Reedy Creek Improvement Dist., GO
6.375%, 6/1/05 (MBIA Insured) ......... 500 532
Sarasota County, Utility Systems
5.70%, 10/1/01 (FGIC Insured) ......... 500 522
Total Florida (Cost $61,601) 62,651
ARIZONA 3.1%
Phoenix, Airport, 5.65%, 7/1/01 (MBIA Insured) ... 2,000 2,085
Total Arizona (Cost $ 2,088) 2,085
SOUTH CAROLINA 3.1%
South Carolina Public Service Auth ...............
6.50%, 1/1/06 (FGIC Insured) .......... 1,900 2,081
Total South Carolina (Cost $ 2,070) 2,081
<PAGE>
Total Investments in Securities
99.0% of Net Assets (Cost $65,759) $66,817
Other Assets Less Liabilities .................... 698
NET ASSETS ....................................... $67,515
Net Assets Consist of:
Accumulated net realized gain/loss - net of distributions $ (482)
Net unrealized gain (loss) 1,058
Paid-in-capital applicable to 6,526,368 shares of no par
value shares of beneficial interest outstanding;
unlimited number of shares authorized 66,939
NET ASSETS $ 67,515
NET ASSET VALUE PER SHARE $ 10.35
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
COP Certificates of Participation
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GO General Obligation
HFA Health Facility Authority
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
================================================================================
In thousands
Unaudited
6 Months
Ended
8/31/96
-------
Investment Income
Interest income ............................................ $ 1,635
Expenses
Investment management ...................................... 99
Custody and accounting ..................................... 48
Shareholder servicing ...................................... 32
Prospectus and shareholder reports ......................... 6
Legal and audit ............................................ 5
Registration ............................................... 4
Trustees ................................................... 3
Miscellaneous .............................................. 2
Total expenses ............................................. 199
Net investment income ...................................... 1,436
Realized and Unrealized Gain/Loss
Net realized gain (loss) on
Securities ................................................. (428)
Futures .................................................... 20
Net realized gain (loss) ................................... (408)
Change in net unrealized gain or loss on securities ........ (1,129)
Net realized and unrealized gain (loss) .................... (1,537)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ..................................... $ (101)
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
================================================================================
In thousands
Unaudited
6 Months Year
Ended Ended
8/31/96 2/29/96
------- -------
Increase (Decrease) in Net Assets
Operations
Net investment income ................................ $ 1,436 $ 2,561
Net realized gain (loss) ............................. (408) 1,139
Change in net unrealized gain or loss ................ (1,129) 1,352
Increase (decrease) in net assets from operations .... (101) 5,052
Distributions to shareholders
Net investment income ................................ (1,436) (2,561)
Net realized gain .................................... (123) --
Decrease in net assets from distributions ............ (1,559) (2,561)
Capital share transactions *
Shares sold .......................................... 10,524 38,353
Distributions reinvested ............................. 1,055 1,730
Shares redeemed ...................................... (9,664) (27,236)
Increase (decrease) in net assets from capital
share transactions ................................... 1,915 12,847
Net Assets
Increase (decrease) during period .................... 255 15,338
Beginning of period .................................. 67,260 51,922
End of period ........................................ $ 67,515 $ 67,260
*Share information
Shares sold .......................................... 1,018 3,662
Distributions reinvested ............................. 101 166
Shares redeemed ...................................... (932) (2,610)
Increase (decrease) in shares outstanding ............ 187 1,218
================================================================================
<PAGE>
Notes to Financial Statements
Unaudited
August 31, 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 Florida Insured Intermediate Tax-Free
Fund (the fund), a nondiversified, open-end management investment company, is
one of the portfolios established by the trust and commenced operations on March
31, 1993.
Valuation
Debt securities are generally traded in the over-the-counter market.
Investments in securities 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.
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.
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.
Other
Income and expenses are recorded on the accrual basis. Investment
trans-actions are accounted for on the trade date. Realized gains and losses are
reported on the 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.
<PAGE>
- --------------------------------------------------------------------------------
NOTE 2 - INVESTMENT TRANSACTIONS
================================================================================
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $31,701,000 and $29,327,000, respectively, for the six
months ended August 31, 1996.
- --------------------------------------------------------------------------------
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. At August 31, 1996, the aggregate cost of investments for federal income
tax and financial reporting purposes was $65,759,000, and net unrealized gain
aggregated $1,058,000, of which $1,143,000 related to appreciated invest-ments
and $85,000 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, 1996. The fee is computed daily and
paid monthly, and consists of an individual fund fee equal to 0.05% 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 0.305% for assets in excess of $50 billion. At
August 31, 1996, and for the six months then ended, the effective annual group
fee rate was 0.33%. The 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, which would cause the
fund's ratio of expenses to average net assets to exceed 0.60%. 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 0.60%. Pursuant to this agreement,
$27,000 of management fees were not accrued by the fund for the six months ended
August 31, 1996, and $70,000 remains unaccrued from the prior period.
Additionally, $277,000 of unaccrued fees and expenses 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 $58,000 for the six months
ended August 31, 1996, of which $10,000 was payable at period-end.
<PAGE>
For yield, price, last transaction,
and current balance, 24 hours,
7 days a week, call:
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
http://www.troweprice.com
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 Florida Insured
Intermediate Tax-Free Fund.
T. Rowe Price Investment Services, Inc., Distributor RPRTFLI 8/31/96
