ANNUAL REPORT
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Florida Insured Intermediate Tax-Free Fund
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February 28, 1997
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REPORT HIGHLIGHTS
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* Interest rates ended the fiscal year slightly higher than a year ago,
resulting in moderate returns for municipal bond investors.
* Florida's economy and overall financial condition remained strong, although
a recent voter initiative could complicate future tax law changes.
* The Florida Insured Intermediate Tax-Free Fund's 3.90% and 3.81% returns
for the 6- and 12-month periods, respectively, exceeded the Lipper peer
group average.
* Performance was enhanced by a strategic move to a longer duration last
fall, just before a sharp fall in interest rates.
* Given the economy's ongoing strength and the Federal Reserve's bias toward
a tighter monetary policy, our outlook remains somewhat cautio us for the
coming months.
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FELLOW SHAREHOLDERS
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The municipal bond market and your fund generated moderate returns during
the fiscal year ended February 28, 1997. Interest rates fluctuated during the
year but ended slightly higher than where they were last February. The U.S.
economy was characterized by modest wage inflation with low unemployment,
prompting the Federal Reserve to leave monetary policy unchanged since January
1996.
<PAGE>
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MARKET ENVIRONMENT
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Much of the movement in interest rates last year reflected the market's
anticipation of action or inaction by the Federal Reserve. Your fund's fiscal
year began with interest rates rising due to signs of stronger growth and the
realization that balanced budget legislation would not be passed in 1996. As
market expectations for a tightening in monetary policy grew throughout the
first half, rates continued to increase. The long-term Treasury bond yield
remained in a trading range between 6.75% and 7.20% during the third quarter.
Intermediate and long-term rates then reversed course and fell through November,
as it became evident that the economy was slowing in the third quarter and the
Federal Reserve was not going to raise rates. Another uptick in rates took place
late in 1996 as the economy showed renewed strength and investors once again
anticipated possible tightening by the Federal Reserve.
[edgar description: yield chart showing 30-year AAA GO, 5-year AAA GO, and
1- year MIG1 note from 2/29/96 through 2/28/97]
In the municipal market, rates came full circle over the year, rising about
45 basis points (100 basis points equal one percent) during the first six months
before settling at virtually the same level as a year ago. Long-term high-grade
general obligation bonds yielded 5.50% on February 28, 1997, versus 5.75% on
August 31, 1996, and 5.45% a year ago. Five-year high-grade bonds were 20 basis
points higher in yield than in February 1996. Short-term rates (maturities less
than 90 days) traded within a 45-basis-point range during the year, ending at
3.40% compared with 3.25% a year ago.
As concerns regarding tax reform and flat tax legislation diminished,
municipals provided higher returns than long-term Treasuries throughout most of
the fiscal year. As a result, the yield ratio of municipals to Treasuries
decreased from 87% last year to slightly less than 81%. The higher the ratio,
the more attractive tax-exempt securities are for investors. In other words,
long-term municipal yields were 81% of the yield on comparable Treasuries on
February 28, a level that benefits investors in brackets above 19%, whereas a
year ago with the ratio at 87%, investors in brackets upwards of 13% benefited
from municipals.
- -----------------------------
THE HEALTHY ECONOMY ENABLED
THE STATE TO SOLIDIFY ITS
FINANCIAL POSITION . . .
=============================
Florida's economy remains strong with above average growth in jobs and
personal income. Nonfarm employment increased 3.1% in December 1996 over the
previous year, led by the service, transportation, and trade sectors, which
offset a loss of manufacturing jobs. The unemployment rate was 4.4%, or 88% of
the U.S. average. The healthy economy enabled the state to solidify its
financial position by increasing reserves and adding to a budget stabilization
fund. While the economy was improving the state's financial condition, however,
voters reduced its ability to raise revenues. Last November, voters passed a
ballot measure to require two-thirds approval to impose any future taxes. This
change has no impact on the state's current creditworthiness, but it will make
future changes in tax policy more difficult.
<PAGE>
The state was also forced to create an oversight board for the City of
Miami to resolve a financial crisis prompted by poor management and controls. We
consider Miami's fiscal distress an isolated case, since most municipal
governments in Florida have adequate credit profiles. While the fund did not own
any bonds issued by Miami, it does own bonds backed by Dade County. In contrast
to Miami, Dade County benefits from a large tax base and adequate general fund
position, so it has a stable credit picture despite ongoing spending pressures.
There was some concern that Miami's problems would adversely affect Dade County
bonds, but so far this has not happened. In fact, Dade County recently sold
bonds at a historically high price relative to other Florida bonds.
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PERFORMANCE AND STRATEGY REVIEW
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Your fund performed well in an interest rate environment that didn't appear
to offer much room to maneuver. Interest rates over the past 12 months have been
confined to a relatively tight range compared with recent years. Nevertheless,
we were able to enhance performance through moderate changes in duration.
(Duration measures a fund's sensitivity to interest rate changes. For instance,
a duration of five years tells you that the fund's price would fall or rise
about 5% in response to a one percentage point increase or decrease in interest
rate levels.)
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PERFORMANCE COMPARISON
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Periods Ended 2/28/97 6 Months 12 Months
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Florida Insured
Intermediate Tax-Free Fund 3.90% 3.81%
Lipper Florida Intermediate
Municipal Debt Funds Average 3.60 3.40
================================================================================
As the fund's fiscal year got under way, we were maintaining a relatively
short duration primarily because interest rates were so low. Then, in early
March, a surprisingly strong employment report caused intermediate rates to
spike 25 basis points higher in a single day. This was followed by further
evidence of the economy's strength, leading us to maintain a defensive posture
for most of the summer. Moving into the fall, we detected signs of weakness in
the economy, which prompted us to push the duration out to a more aggressive
position. As a result, the fund benefited nicely when rates subsequently fell by
about 50 basis points. This was instrumental in helping the fund outperform its
peer group for both the 6- and 12-month periods, as shown in the table. In
December, we once again pared our risk exposure by adopting the slightly
defensive position that we maintain today.
<PAGE>
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OUTLOOK
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The economy is in its sixth year of expansion, and while it has exhib-ited
few signs of inflationary pressure, the Federal Reserve remains on alert. Fed
chairman Alan Greenspan stated in recent testimony to the Senate Banking
Committee that the Fed cannot rule out a preemptive tightening in monetary
policy before signs of actual higher inflation become evident.
We expect economic growth and inflation to remain moderate throughout the
rest of 1997, with no evidence of recession visible to date. Consumer and
business sentiment remain high, inventories are not excessive, and availability
of credit is ample. The Federal Reserve, as indicated, could push the fed funds
rate higher to keep prices in check, but we believe any increase will be small
since short-term rates are well above the recent trend rate of inflation.
Overall, we do not expect to see a significant move in bond prices in the months
ahead. As in the past year, the returns from municipal securities should come
primarily from income.
Respectfully submitted,
/s/Charles B. Hill
Charles B. Hill
Chairman of the Investment Advisory Committee
/s/William T. Reynolds
William T. Reynolds
Director, Fixed Income Division
March 21, 1997
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Charles B. Hill has assumed day-to-day responsibility for management of the
Florida Insured Intermediate Tax-Free Fund as chairman of the fund's Investment
Advisory Committee. Mr. Hill joined T. Rowe Price's municipal bond department in
1991 and has managed portfolios for the past four years. He became a member of
the Investment Advisory Committee shortly after the fund's inception in 1993 and
worked closely with Mr. Reynolds, the fund's previous manager, over the ensuing
years.
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<PAGE>
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PORTFOLIO HIGHLIGHTS
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KEY STATISTICS
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8/31/96 2/28/97
------- -------
Price Per Share $10.35 $10.52
Dividends Per Share +
For 6 months 0.23 0.23
For 12 months 0.46 0.46
Dividend Yield *
For 6 months 4.37% 4.50%
For 12 months 4.43 4.48
Weighted Average Maturity (years) 7.5 8.2
Weighted Average Effective Duration (years) 5.7 5.6
Weighted Average Quality ** AA AA
+ Taxability of dividends: 100% of dividends were exempt from federal income
taxes.
* 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.
** Based on T. Rowe Price research.
================================================================================
PORTFOLIO HIGHLIGHTS
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SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
8/31/96 2/28/97
---------- ----------
Dedicated Tax Revenue 19% 20%
Air and Sea Transportation Revenue 11 11
General Obligation - Local 11 10
Water and Sewer Revenue 12 9
Electric Revenue -- 8
Prerefunded Bonds 16 8
Lease Revenue 7 6
Hospital Revenue 4 4
Ground Transportation Revenue 5 4
Nuclear Revenue 6 4
Solid Waste Revenue 4 3
LifeCare/Nursing Home Revenue -- 3
General Obligation - State -- 3
Housing Finance Revenue 3 3
All Other 1 --
Other Assets Less Liabilities 1 4
Total 100% 100%
<PAGE>
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PERFORMANCE COMPARISON
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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 - a line chart showing the cumulative growth of $10,000 invested in
Florida Insured Intermediate Tax-Free Fund from inception compared with $10,000
invested in a broad-based index or average over the same peroiod.)
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AVERAGE ANNUAL COMPOUND TOTAL RETURN
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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 2/28/97 1 Year 3 Years Inception Date
- --------------------- ------ ------- --------- ----
Florida Insured Intermediate
Tax-Free Fund 3.81% 5.37% 5.87% 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
--------------------
For a share outstanding throughout each period
Year 3/31/93
Ended to
2/28/97 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 0.46* 0.47* 0.43* 0.37*
Net realized and
unrealized gain (loss) (0.07) 0.47 (0.14) 0.31
Total from
investment activities 0.39 0.94 0.29 0.68
Distributions
Net investment income (0.46) (0.47) (0.43) (0.37)
Net realized gain (0.02) -- (0.02) (0.01)
Total distributions (0.48) (0.47) (0.45) (0.38)
NET ASSET VALUE
End of period $10.52 $10.61 $10.14 $10.30
Ratios/Supplemental Data
Total return 3.81%* 9.41%* 3.01%* 6.84%*
Ratio of expenses to
average net assets 0.60%* 0.60%* 0.60%* 0.60%+*
Ratio of net investment
income to average
net assets 4.39%* 4.47%* 4.38%* 3.57%*+
Portfolio turnover rate 75.8% 98.7% 140.5% 70.6%+
Net assets, end of period
(in thousands) $ 78,783 $ 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>
February 28, 1997
PORTFOLIO OF INVESTMENTS
------------------------
Par Value
In thousands
-----------------
FLORIDA 95.0%
Brevard County HFA, Holmes Regional Medical Center
5.20%, 10/1/05 (MBIA Insured) ................... $ 2,000 $ 2,050
Charlotte County, Utility, 6.875%, 10/1/21
(FGIC Insured)
(Prerefunded 10/1/01+) .......................... 2,000 2,239
Dade County
Aviation
5.40%, 10/1/03 (MBIA Insured) * ................. 1,140 1,189
6.60%, 10/1/22 (MBIA Insured) * ................. 3,000 3,242
Resource Recovery Fac ...............................
6.00%, 10/1/06 (AMBAC Insured) * ................ 2,500 2,663
Dade County HFA, Miami Children's Hosp ..................
VRDN (Currently 3.50%) .......................... 200 200
Dade County IDA, PCR, Florida Power and Light
VRDN (Currently 3.45%) .......................... 1,200 1,200
Dade County School Dist., GO
5.50%, 8/1/04 (MBIA Insured) .................... 2,000 2,110
Duval County School Dist., GO
6.125%, 8/1/04 (AMBAC Insured) .................. 2,000 2,172
Florida Board of Ed., Public Ed., GO, 5.625%, 6/1/02 .... 2,000 2,112
Florida Division of Bond Fin ............................
Dept. of Environmental Preservation
5.50%, 7/1/07 (AMBAC Insured) ................... 2,000 2,089
6.00%, 7/1/05 (MBIA Insured) .................... 500 543
6.00%, 7/1/06 (MBIA Insured) .................... 4,350 4,729
Florida Housing Fin. Agency
Multi-Family Housing
5.80%, 2/1/08 ................................... 1,000 1,024
5.80%, 8/1/08 ................................... 1,000 1,023
Florida Municipal Power Agency
All - Requirements Power Supply
6.25%, 10/1/21 (AMBAC Insured)
(Prerefunded 10/1/02+) .......................... 1,700 1,877
<PAGE>
Florida State Dept. of Corrections
Okeechobee Correctional
5.70%, 3/1/01 (AMBAC Insured) ................... $ 1,355 $ 1,419
5.80%, 3/1/02 (AMBAC Insured) ................... 1,005 1,064
Florida Turnpike Auth ...................................
5.50%, 7/1/03 (AMBAC Insured) ................... 2,000 2,108
5.50%, 7/1/05 (AMBAC Insured) ................... 1,000 1,053
Gainesville Utilities Systems, 6.40%, 10/1/05 ........... 1,500 1,644
Hillsborough County
Environmentally Sensitive
Lands Acquisition and Protection
6.20%, 7/1/05 (AMBAC Insured) ................... 1,485 1,604
Improvement Program
6.00%, 8/1/04 (FGIC Insured) .................... 1,895 2,055
Hillsborough County Port Dist., Tampa Port Auth .........
6.50%, 6/1/04 (FSA Insured) * ................... 2,000 2,209
Hillsborough County School Dist., GO
7.00%, 8/15/05 (MBIA Insured) ................... 1,500 1,734
Indian Trace Community Dev. Dist ........................
Basin 1 Water Management
5.50%, 5/1/06 (MBIA Insured) .................... 1,215 1,275
5.50%, 5/1/07 (MBIA Insured) .................... 550 575
Jacksonville
Excise Taxes, 5.20%, 10/1/04 (FGIC Insured) * ....... 2,455 2,518
Water and Sewer
6.00%, 10/1/04 (MBIA Insured) ................... 1,845 2,004
Jacksonville Beach Utilities, 6.75%, 10/1/20
(MBIA Insured)
(Prerefunded 10/1/01+) .......................... 500 557
Jacksonville Electric Auth., St. John's River,
6.00%, 10/1/04 2,000 2,170
Lakeland Electric and Water, 6.50%, 10/1/04 (FGIC Insured 3,755 4,197
Lee County School Board, COP, 6.30%, 8/1/01 (FSA Insured) 2,000 2,150
Manatee County, Public Utilities
6.75%, 10/1/05 (MBIA Insured) ................... 2,000 2,281
Orange County, Public Service Tax
5.60%, 10/1/07 (FGIC Insured) ................... 500 529
<PAGE>
Orlando Utilities Commission, Water and Electric
6.50%, 10/1/20
(Prerefunded 10/1/01+) .......................... $ 1,385 $ 1,530
Osceola County HFA
Evangelical Lutheran Good Samaritan Society
5.50%, 5/1/03 (AMBAC Insured) ................... 660 687
5.50%, 5/1/04 (AMBAC Insured) ................... 700 728
5.50%, 5/1/05 (AMBAC Insured) ................... 735 763
Palm Beach County
GO, 6.875%, 12/1/03 ............................. 325 369
Airport, 7.50%, 10/1/00 (MBIA Insured) .............. 1,980 2,181
Pinellas County Water Auth ..............................
5.50%, 10/1/04 (AMBAC Insured) .................. 2,500 2,639
Reedy Creek Improvement Dist., GO
6.375%, 6/1/05 (MBIA Insured) ................... 500 535
Sarasota County, Utility Systems
5.70%, 10/1/01 (FGIC Insured) ................... 500 527
Venice, Health Care, Bon Secours Health Systems
5.40%, 8/15/08 (MBIA Insured) ................... 1,290 1,313
Total Florida (Cost $72,779) 74,880
- --------------------------------------------------------------------------------
CALIFORNIA 1.0%
Pomona Unified School Dist., GO
6.15%, 8/1/15 (MBIA Insured) .................... 730 788
Total California (Cost $ 766) 788
- --------------------------------------------------------------------------------
Total Investments in Securities
96.0% of Net Assets (Cost $73,545) $ ................... 75,668
Other Assets Less Liabilities ........................... 3,115
-----
NET ASSETS .............................................. $78,783
=======
* 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>
February 28, 1997
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------
In thousands
ASSETS
Total investments in securities, at value (cost $73,545) $ 75,668
Receivable for investment securities sold 4,229
Other assets 1,243
-----
Total assets 81,140
LIABILITIES
Total liabilities 2,357
NET ASSETS $ 78,783
==========
Net Assets Consist of:
Accumulated net realized gain/loss -
net of distributions $ (401)
Net unrealized gain (loss) 2,123
Paid-in-capital applicable to 7,489,593 no par
value shares of beneficial interest outstanding;
unlimited number of shares authorized 77,061
------
NET ASSETS $ 78,783
==========
NET ASSET VALUE PER SHARE $ 10.52
==========
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
STATEMENT OF OPERATIONS
-----------------------
In thousands
Year
Ended
2/28/97
---------
INVESTMENT INCOME
Interest income $ 3,474
--------
Expenses
Investment management 211
Custody and accounting 96
Shareholder servicing 64
Prospectus and shareholder reports 15
Registration 12
Legal and audit 10
Trustees 6
Miscellaneous 4
--------
Total expenses 418
--------
Net investment income 3,056
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Securities (318)
Futures (32)
--------
Net realized gain (loss) (350)
Change in net unrealized gain or loss on securities (64)
--------
Net realized and unrealized gain (loss) (414)
--------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 2,642
=========
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
In thousands
Year
Ended
2/28/97 2/29/96
------- -------
Increase (Decrease) in Net Assets
Operations
Net investment income $ 3,056 $ 2,561
Net realized gain (loss) (350) 1,139
Change in net unrealized gain or loss (64) 1,352
--------- --------
Increase (decrease) in net assets from operations 2,642 5,052
--------- --------
Distributions to shareholders
Net investment income (3,056) (2,561)
Net realized gain (123) --
--------- --------
Decrease in net assets from distributions (3,179) (2,561)
--------- --------
Capital share transactions *
Shares sold 41,212 38,353
Distributions reinvested 2,144 1,730
Shares redeemed (31,296) (27,236)
--------- --------
Increase (decrease) in net assets from capital
share transactions 12,060 12,847
--------- --------
Net Assets
Increase (decrease) during period 11,523 15,338
Beginning of period 67,260 51,922
--------- --------
End of period $ 78,783 $ 67,260
========= =========
*Share information
Shares sold 3,942 3,662
Distributions reinvested 206 166
Shares redeemed (2,997) (2,610)
--------- --------
Increase (decrease) in shares outstanding 1,151 1,218
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
February 28, 1997
NOTES TO FINANCIAL STATEMENTS
-----------------------------
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
transactions 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.
- --------------------------------------------------------------------------------
NOTE 2 - INVESTMENT TRANSACTIONS
================================================================================
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $61,162,000 and $50,032,000, respectively, for the year
ended February 28, 1997.
<PAGE>
- --------------------------------------------------------------------------------
NOTE 3 - FEDERAL INCOME TAXES
================================================================================
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
income. The fund has unused realized capital loss carryforwards for federal
income tax purposes of $355,000, which expires in 2005. The fund intends to
retain gains realized in future periods that may be offset by available capital
loss carryforwards.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended February 28, 1997. The results
of operations and net assets were not affected by the reclassifications.
================================================================================
T. Rowe Price Florida Insured Intermediate Tax-Free Fund
Undistributed net investment income --
Undistributed net realized gain 23,000
Paid-in-capital (23,000)
================================================================================
At February 28, 1997, the aggregate cost of investments for federal income
tax and financial reporting purposes was $73,545,000, and net unrealized gain
aggregated $2,123,000, of which $2,137,000 related to appreciated investments
and $14,000 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 $17,000 was payable at February 28, 1997. 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
February 28, 1997, and for the year 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,
$53,000 of management fees were not accrued by the fund for the year ended
February 28, 1997, and $70,000 remains unaccrued from the prior period.
<PAGE>
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 $114,000 for the year
ended February 28, 1997, of which $10,000 was payable at period-end.
================================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Shareholders and Board of Trustees of
T. Rowe Price Florida Insured Intermediate Tax-Free Fund
We have audited the accompanying statement of assets and liabilities of T.
Rowe Price Florida Insured Intermediate Tax-Free Fund (one of the portfolios
comprising the T. Rowe Price State Tax-Free Income Trust) including the
portfolio of invesments, as of February 28, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two year in the periods the ended, and financial highlights for the
each of the three years in the period then ended and the period March 31, 1993
(commencement of operations) to February 28, 1994. 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, 1997, by correspondence with the custodian. 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 Florida Insured Intermediate Tax-Free Fund as of February 28, 1997,
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 19, 1997
<PAGE>
T. ROWE PRICE SHAREHOLDER SERVICES
----------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from
8 a.m. to 10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access (Registration Mark) and
T.Rowe Price OnLine.
DISCOUNT BROKERAGE*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over regular commission rates.
INVESTMENT INFORMATION
Combined Statement Overview of your T. Rowe Price accounts.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial
markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning Kit.
* A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
<PAGE>
T. ROWE PRICE MUTUAL FUNDS
--------------------------
MUTUAL FUNDS
- ------------
STOCK FUNDS
============
Domestic
- --------------------------------------------------------------------------------
Balanced
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Dividend Growth
Equity Income
Equity Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
OTC **
Science & Technology
Small-Cap Value*
Spectrum Growth
Value
International/Global
- --------------------------------------------------------------------------------
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
<PAGE>
- --------------------------------------------------------------------------------
BOND FUNDS
================================================================================
Domestic Taxable
- --------------------------------------------------------------------------------
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-free
- --------------------------------------------------------------------------------
California Tax-Free Bond
Florida Insured Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
International/Global
- --------------------------------------------------------------------------------
Global Government Bond
Emerging Markets Bond
International Bond
Money Market
================================================================================
Taxable
- --------------------------------------------------------------------------------
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
<PAGE>
Tax-Free
- --------------------------------------------------------------------------------
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
Blended Asset
================================================================================
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
T. Rowe Price No-Load Variable Annuity
================================================================================
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Closed to new investors.
**Effective May 1, 1997, the fund's name will change to Small-Cap Stock.
Please call for a prospectus. Read it carefully before you invest or send
money.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc., T. Rowe Price Insurance
Agency, Inc., and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
================================================================================
<PAGE>
T. ROWE PRICE DISCOUNT BROKERAGE
--------------------------------
DISCOUNT BROKERAGE
A DIVISION OF T. ROWE PRICE INVESTMENT SERVICES, INC., MEMBER NASD/SIPC
This low-cost service gives you the opportunity to easily consolidate all
your investments with one company. Through T. Rowe Price Discount Brokerage, you
can buy and sell individual securities -- stocks, bonds, options, and others
- --at considerable commission savings. We also provide a wide range of services,
including:
Automated Telephone and Computer Services You can enter trades, access
quotes, and review account information 24 hours a day, seven days a week. Any
trades executed through these programs save you an additional 10% on
commissions.*
Investor Information A variety of informative reports, such as our
Brokerage Insights series, S&P Market Month newsletter, and optional S&P Stock
Reports, can help you better evaluate economic trends and investment
opportunities.
Dividend Reinvestment Service Virtually all stocks held in customer
accounts are eligible for this service, free of charge.
*Discount applies to our current commission schedule; subject to our $35
minimum commission.
================================================================================
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access (Registration Mark):
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
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
http://www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
<PAGE>
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.
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 Investment Services, Inc., Distributor. RPRTFLI 2/28/97
