ANNUAL REPORT
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Virginia Tax-Free Funds
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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.
* Municipal bonds outperformed Treasuries during most of the year.
* For the 6- and 12-month periods ended February 28, the Virginia
Short-Term Tax-Free Bond Fund returned 2.53% and 3.33%, respectively,
trailing its peer group in both periods.
* The Virginia Tax-Free Bond Fund returned 4.52% and 5.00% for the 6-
and 12-month periods, respectively, outperforming its peer group for
the full year and essentially matching it for the shorter period. *
With the economy showing ongoing strength and the Federal Reserve
indicating a bias toward tighter monetary policy, our outlook is
somewhat cautious for the coming months.
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FELLOW SHAREHOLDERS
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The municipal bond market and your funds generated moderate returns during
the fiscal year ended February 28, 1997. Interest rates fluctuated during the
year and ended slightly higher than where they started at the end of 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.
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MARKET ENVIRONMENT
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Much of the movement in interest rates reflected the market's anticipation
of action or inaction by the Federal Reserve. The fiscal year began with
interest rates rising due to signs of both 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 investors once again perceived strength in the economy and anticipated
possible tightening by the Federal Reserve.
<PAGE>
[edgar description: a 2-line chart showing yields on the Virginia Bond
Index and Virginia 3-year GO bonds from 2/29/96 through 2/28/97]
Source: T. Rowe Price Associates
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 slightly above year-ago levels. 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. One-year note rates traded within a 70-basis-point range during
the year, ending at 3.70% compared with 3.25% a year ago.
Municipals provided higher returns than long-term Treasuries throughout
most of the fiscal year, as concerns regarding tax reform and flat tax
legislation diminished. As a result, 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.
Virginia's economy was strong in 1996, with nonfarm employment growing by
2.1%, in line with the national average. The 3.9% unemployment rate was lower
than the rest of the country. The downsizing in federal government jobs and
slowing growth in the tobacco industry continued to be balanced by expansion in
the high-technology, communications, and tourist industries. Construction of
three new computer chip plants will add $5.7 billion in investment along with
several thousand new jobs over the next few years. The state's credit remained
strong due to conservative fiscal management.
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VIRGINIA SHORT-TERM TAX-FREE BOND FUND
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At the beginning of the fiscal year, the fund's duration (a measure of a
fund's sensitivity to changes in interest rates) was aggressively positioned at
2.3 years, which enabled the fund to significantly outperform its benchmark a
year earlier. However, an unexpectedly strong employment report in early March
pushed short-term rates abruptly higher. As a result, your fund's aggressive
posture hindered performance, which trailed the average for similar funds during
the 6- and 12-month periods ended February 28.
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<PAGE>
PERFORMANCE COMPARISON
Periods Ended 2/28/97 6 Months 12 Months
- --------------------- -------- ---------
Virginia Short-Term
Tax-Free Bond Fund 2.53% 3.33%
Lipper Short Municipal
Debt Funds Average 2.63 3.84
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Returns were also restrained because of the fund's objective to provide
income exempt from Virginia taxes. The low supply of short-term Virginia bonds
led to lower yields compared with those of similar bonds in other states. This
further explains the fund's performance relative to the Lipper benchmark (shown
in the table), which consists of 28 national funds and two single-state funds:
the T. Rowe Price Virginia and Maryland Short-Term Funds.
As economic strength accelerated into the summer, the Federal Reserve
adopted a bias toward tighter monetary policy, prompting us to shorten the
fund's duration toward a slightly defensive posture, where it remained at the
end of February.
Income is the second component of total return, along with capital
appreciation or depreciation, and many national funds benefited from narrowing
yield differences between higher-and lower-quality securities. In this instance,
too, the situation in Virginia limited our opportunity to benefit from
tightening yield spreads. Nevertheless, we were able to increase your fund's
exposure to the higher-yielding revenue sectors, including hospitals, electric
utilities, and airports. We also anticipate increasing exposure to Puerto Rican
bonds, which are exempt from Virginia income taxes, since we believe an
increasing supply of new Puerto Rican issuance should make their yields more
attractive than those of short-term Virginia bonds.
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VIRGINIA TAX-FREE BOND FUND
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The municipal market in Virginia recovered nicely over the last six months.
After a virtually flat return in the first half of its fiscal year, your fund
performed essentially in line with its peer group in the second half and closed
the 12-month period with a 5.00% return, ahead of its competitors. We are
pleased to report that your fund was ranked #1 among 22 Virginia municipal bond
funds based on total return for the three-year period ended February 28,
according to Lipper Analytical Services. (For the one-year period, the fund
ranked #8 among 31 similar funds. For the five-year period, the fund ranked #3
out of 11 funds. Of course, there is no guarantee that these trends will
continue.)
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<PAGE>
PERFORMANCE COMPARISON
Periods Ended 2/28/97 6 Months 12 Months
- --------------------- -------- ---------
Virginia Tax-Free Bond Fund 4.52% 5.00%
Lipper Virginia Municipal
Debt Funds Average 4.57 4.42
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During the last six months, we maintained a cautious stance on interest
rates, keeping the fund's duration in neutral territory. By the end of February,
we had trimmed duration to 7.4 years, down from 7.7 years last August, to reduce
exposure to interest rate risk. (A shorter duration helps cushion the fund's
price depreciation when interest rates rise.) We also shortened the portfolio's
average maturity from 17.7 years to 17.4 years.
- -----------------------
WE CONTINUE TO
EMPHASIZE . . .
HOUSING AND
HOSPITALS.
=======================
We continued to emphasize two sectors that typically offer higher yields
and less price volatility than many other areas -- housing and hospitals.
Together, these accounted for 38% of net assets at the end of February, as shown
in the table following this letter. In the second half, hospital holdings
representing 3% of fund assets were prerefunded, providing nice gains in price
and helping to further shorten the fund's overall duration. Several of the major
hospital systems in the state offer attractive prospects, and we will continue
to look for opportunities in that sector.
Looking ahead, we remain cautious and expect to maintain our neutral
stance. If the Federal Reserve does raise rates in the first half of 1997, we
may extend duration to capture both higher yields and potential price
appreciation when rates eventually decline again. The Virginia municipal market
remains strong, and an anticipated increase in supply in coming months should
present still more attractive buying opportunities.
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OUTLOOK
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The economy is in its sixth year of expansion, and while it has exhibited
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.
<PAGE>
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 remains 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. This
was not the case in 1994, when the Fed was forced to move aggressively.
The supply of municipal bonds should increase over the near term, possibly
exerting some downward pressure on bond prices if demand does not increase
commensurately. Given our expectation that interest rates will move in a
relatively narrow channel, we would regard higher rates as an opportunity to
provide additional yield in the funds. Overall, however, 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
Virginia Short-Term Tax-Free Bond Fund
/s/Hugh D. McGuirk
Hugh D. McGuirk
Chairman of the Investment Advisory Committee
Virginia Tax-Free Bond Fund
March 21, 1997
Hugh D. McGuirk has assumed day-to-day responsibility for management of the
Virginia Tax-Free Bond fund as chairman of the fund's Investment Advisory
Committee. With previous experience in the municipal finance area of a
brokerage firm, Mr. McGuirk joined T. Rowe Price's municipal bond
department in 1993 and has worked closely with Mary Miller as a member of
the fund's Investment Advisory Committee for the past three years. Ms.
Miller, who is the director of the municipal bond department, remains on
the fund's Investment Advisory Committee.
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<PAGE>
PORTFOLIO HIGHLIGHTS
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KEY STATISTICS
8/31/96 2/28/97
------- -------
Virginia Short-Term Tax-Free Bond Fund
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Price Per Share $5.10 $5.13
Dividends Per Share+
For 6 months 0.10 0.10
For 12 months 0.20 0.20
Dividend Yield *
For 6 months 3.86% 3.89%
For 12 months 3.99 3.91
Weighted Average Maturity (years) 1.8 1.9
Weighted Average Effective Duration (years) 1.7 1.7
Weighted Average Quality ** AAA- AA+
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Virginia Tax-Free Bond Fund
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Price Per Share $10.85 $11.05
Dividends Per Share
For 6 months 0.29 0.28
For 12 months 0.57 0.57
Dividend Yield *
For 6 months 5.26% 5.31%
For 12 months 5.32 5.36
Weighted Average Maturity (years) 17.7 17.4
Weighted Average Effective Duration (years) 7.7 7.4
Weighted Average Quality ** AA AA
+ Taxability of dividends: 100% of dividends paid for the 12 months
ended 2/28/97 were exempt from federal and Virginia 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.
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<PAGE>
PORTFOLIO HIGHLIGHTS
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SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
8/31/96 2/28/97
---------- ----------
Virginia Short-Term Tax-Free Bond Fund
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Prerefunded Bonds 58% 62%
Hospital Revenue 7 11
Miscellaneous Revenue 6 5
Air and Sea Transportation Revenue 2 5
Lease Revenue 5 4
General Obligation - Local 8 4
Electric Revenue -- 3
Solid Waste Revenue 6 3
All Other 10 3
Other Assets Less Liabilities -2 --
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Total 100% 100%
=== ===
Virginia Tax-Free Bond Fund
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Hospital Revenue 19% 22%
Housing Finance Revenue 15 16
Prerefunded Bonds 11 12
Water and Sewer Revenue 10 7
Educational Revenue 4 7
Lease Revenue 11 6
Dedicated Tax Revenue 3 6
Industrial and Pollution Control Revenue 5 5
General Obligation - Local 8 5
Solid Waste Revenue 5 3
Miscellaneous Revenue 3 3
Ground Transportation Revenue -- 2
Air and Sea Transportation Revenue 2 2
Escrowed to Maturity 2 2
All Other 1 1
Other Assets Less Liabilities 1 1
Total 100% 100%
=== ===
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<PAGE>
PERFORMANCE COMPARISON
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These charts show the value of a hypothetical $10,000 investment in each
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 Virginia Tax-Free Funds 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 each 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 5 Years Inception Date
- --------------------- ------ ------- ------- --------- ----
Virginia Short-Term
Tax-Free Bond Fund 3.33% -- -- 5.38% 11/30/94
Virginia Tax-Free Bond Fund 5.00 5.66% 7.37% 7.71 4/30/91
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 11/30/94
Ended to
2/28/97 2/29/96 2/28/95
------- ------- -------
NET ASSET VALUE
Beginning of period $ 5.16 $5.06 $5.00
======= ===== =====
Investment activities
Net investment income 0.20* 0.21* 0.05*
Net realized and
unrealized gain (loss) (0.03) 0.11 0.06
Total from
investment activities 0.17 0.32 0.11
Distributions
Net investment income (0.20) (0.21) (0.05)
Net realized gain -- (0.01) --
Total distributions (0.20) (0.22) (0.05)
NET ASSET VALUE
End of period $ 5.13 $5.16 $5.06
======= ===== =====
RATIOS/SUPPLEMENTAL DATA
Total return 3.33%* 6.43%* 2.28%*
Ratio of expenses to
average net assets 0.65%* 0.65%* 0.65%*
Ratio of net investment
income to average
net assets 3.84%* 4.07%* 4.43%*
Portfolio turnover rate 32.5% 36.4% 14.8%
Net assets, end of period
(in thousands) $16,314 $12,480 $4,965
*Excludes expenses in excess of a 0.65% voluntary expense limitation in
effect through 2/29/98. Annualized.
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
For a share outstanding throughout each period
Year
Ended
2/28/97 2/29/96 2/28/95 2/28/94 2/28/93
------- ------- ------- ------- -------
NET ASSET VALUE
Beginning of period $11.09 $10.56 $11.00 $11.06 $10.27
Investment activities
Net investment income 0.57* 0.57* 0.57* 0.56* 0.58*
Net realized and
unrealized gain (loss) (0.04) 0.53 (0.43) 0.09 0.82
Total from
investment activities 0.53 1.10 0.14 0.65 1.40
Distributions
Net investment income (0.57) (0.57) (0.57) (0.56) (0.58)
Net realized gain -- -- (0.01) (0.15) (0.03)
Total distributions (0.57) (0.57) (0.58) (0.71) (0.61)
NET ASSET VALUE
End of period $11.05 $11.09 $10.56 $11.00 $11.06
Ratios/Supplemental Data
Total return 5.00%* 10.69%* 1.51%* 5.99%* 14.11%*
Ratio of expenses to
average net assets 0.65%* 0.65%* 0.65%* 0.65%* 0.65%*
Ratio of net investment
income to average
net assets 5.23%* 5.27%* 5.49%* 5.03%* 5.53%*
Portfolio turnover rate 66.2% 93.7% 89.1% 61.8% 68.5%
Net assets, end of period
(in thousands) $195,783 $178,750 $155,278 $168,715 $111,705
- --------------------------------------------------------------------------------
* Excludes expenses in excess of a 0.65% voluntary expense limitation in
effect through 2/28/97.
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Virginia Short-Term Tax-Free Bond Fund
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February 28, 1997
Statement of Net Assets
Par Value
In thousands
------------
VIRGINIA 96.9%
Augusta County IDA, Augusta Hosp ...........................
6.10%, 9/1/00 (AMBAC Insured) ...................... $ 60 $ 63
Chesapeake
Water and Sewer
7.10%, 12/1/05 (Prerefunded 12/1/98+) .............. 250 268
7.75%, 7/1/17 (Prerefunded 7/1/97+) ................ 90 93
Chesapeake Hosp. Auth., Chesapeake General Hosp., 7.625%
7/1/18 (BIGI Insured) (Prerefunded 7/1/98+) ........ 85 91
Fairfax County
GO, 6.00%, 4/1/99
(Prerefunded 4/1/98+) .............................. 200 205
GO, 6.50%, 4/1/05
(Prerefunded 4/1/98+) .............................. 250 262
Sewer, 7.00%, 11/15/16 (AMBAC Insured)
(Prerefunded 11/15/99+) ............................ 150 164
Fairfax County, Ogden Martin, 7.20%, 2/1/99 * .............. 450 472
Fairfax County IDA, Fairfax Hosp. System
VRDN (Currently 3.35%) ............................. 200 200
Fairfax County Water Auth ..................................
6.125%, 1/1/29 (Prerefunded 1/1/00+) ............... 250 262
7.30%, 1/1/21 (Prerefunded 1/1/00+) ................ 265 291
Hampton, GO, 6.625%, 1/1/10 (Prerefunded 1/1/00+) .......... 100 108
Hampton IDA, Sentara Health Systems, 5.00%, 11/1/99 ........ 640 652
Hampton Roads Sanitation Dist ..............................
7.10%, 7/1/98 (Escrowed to Maturity) ............... 125 130
7.20%, 7/1/09 (Prerefunded 7/1/99+) ................ 500 544
Henrico County, GO, 6.40%, 10/1/99 (Prerefunded 10/1/98+) .. 180 188
Henrico County IDA, Henrico County Jail, 5.80%, 8/1/99 ..... 150 156
James City and County IDA
Residential Care Fac., Williamsburg Landing
4.85%, 3/1/98 ...................................... 150 151
<PAGE>
Loudoun County Sanitation Auth .............................
Water and Sewer
7.25%, 1/1/03 (AMBAC Insured) (Preref 350d 137799+)
7.50%, 1/1/10 (AMBAC Insured)
(Prerefunded 1/1/99+) .............................. 225 243
Manassas, GO, 5.50%, 9/1/98 * .............................. 325 333
Metropolitan Washington D.C. Airports Auth .................
6.80%, 10/1/98 (FGIC Insured) * .................... 250 261
6.00%, 10/1/00 (MBIA Insured) * .................... 500 526
Norfolk, GO, 7.00%, 10/1/09 (Prerefunded 10/1/98+) ......... 450 480
Prince William County, GO, 6.125%, 2/1/03
(Prerefunded 2/1/99+) .............................. 500 525
Prince William County IDA, Potomac Hosp. Corp. .............
5.90%, 10/1/97 ..................................... 50 51
Roanoke IDA, Roanoke Memorial Hosp .........................
Carilion Health System, 6.50%, 7/1/25 (MBIA Insured)
(Prerefunded 7/1/00+) .............................. 1,000 1,068
Univ. of Virginia Hosp., 7.15%, 6/1/17 (Prerefunded 6/1/98+) 50 53
Virginia
Higher Ed. Institution, GO
6.40%, 6/1/04 (Prerefunded 6/1/99+) ................ 500 534
6.60%, 6/1/05 (Prerefunded 6/1/98+) ................ 500 527
6.60%, 6/1/08 (Prerefunded 6/1/98+) ................ 625 659
Virginia Beach, GO
6.10%, 8/1/99 ...................................... 250 262
6.75%, 5/1/97 ...................................... 30 30
6.875%, 5/1/03 (Prerefunded 5/1/98+) ............... 1,000 1,055
Virginia Beach Hosp. Auth., Sentara Bayside Hosp ...........
5.65%, 11/1/98 ..................................... 500 512
Virginia HDA, Multi-Family Housing, 5.75%, 11/1/97 ......... 95 96
Virginia Public Building Auth ..............................
5.70%, 8/1/00 ...................................... 300 314
Correctional Fac .......................................
6.90%, 2/1/99 ...................................... 175 184
7.375%, 2/1/04 (Prerefunded 8/1/98+) ............... 350 374
Virginia Public School Auth ................................
5.60%, 1/1/99 ...................................... 275 283
6.00%, 8/1/98 ...................................... 500 515
6.20%, 1/1/03 (Prerefunded 1/1/99+) ................ 50 53
6.70%, 1/1/07 (Prerefunded 1/1/99+) ................ 150 160
<PAGE>
Virginia Public School Auth ................................
6.75%, 1/1/11 (Prerefunded 1/1/99+) $ .............. 400 427
6.90%, 8/1/06 (MBIA Insured)
(Prerefunded 8/1/98+) .............................. 160 170
Henrico County Schools, 6.60%, 1/15/00
(Prerefunded 1/15/99+) ............................. 250 263
Prince William County, GO, 6.60%, 6/1/00
(Prerefunded 6/1/97+) .............................. 50 51
Virginia Transportation Board
U.S. Route 58 Corridor
5.00%, 5/15/99 ..................................... 235 240
6.80%, 5/15/04 (Prerefunded 5/15/98+) .............. 500 527
Washington County IDA, Johnston Memorial Hosp ..............
5.375%, 7/1/98 ..................................... 290 295
Winchester, GO, 6.85%, 10/15/05 (Prerefunded 10/15/97+)..... 50 52
Total Virginia (Cost $15,679) 15,800
- --------------------------------------------------------------------------------
PUERTO RICO 3.1%
Puerto Rico Electric Power Auth., 5.00%, 7/1/98............. 500 507
Total Puerto Rico (Cost $505) ............................. 507
- --------------------------------------------------------------------------------
Total Investments in Securities
100.0% of Net Assets (Cost $16,184)........................ $ 16,307
Other Assets Less Liabilities............................... 7
NET ASSETS ................................................ $ 16,314
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 1
Accumulated net realized gain/loss - net of distributions 21
Net unrealized gain (loss) 123
Paid-in-capital applicable to 3,179,299
no par value shares of beneficial
interest outstanding; unlimited
number of shares authorized 16,169
NET ASSETS $ 16,314
=========
NET ASSET VALUE PER SHARE $ 5.13
=========
- --------------------------------------------------------------------------------
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
BIGI Bond Investors Guaranty Insurance
FGIC Financial Guaranty Insurance Company
GO General Obligation
HDA Housing Development Authority
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
VRDN Variable Rate Demand Note
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Bond Fund
- --------------------------------------------------------------------------------
February 28, 1997
Statement of Net Assets
Par Value
In thousands
------------
VIRGINIA 96.1%
Alexandria IDA
Ogden Martin
VRDN (Currently 3.55%) * ......................... $3,200 $3,200
7.40%, 1/1/08 .................................... 2,450 2,465
Alexandria Redev. and Housing Auth
Residential Care Fac., Goodwin House
6.60%, 10/1/26 ................................... 2,000 2,001
Arlington County, GO, 6.00%, 8/1/14 ...................... 1,085 1,142
Arlington County IDA
Arlington Hosp .......................................
7.00%, 9/1/11 (Prerefunded 9/1/01+) .............. 1,205 1,350
7.125%, 9/1/21 (Prerefunded 9/1/01+) ............. 800 900
Augusta County Service Auth., Water and Sewer
5.00%, 11/1/24 (MBIA Insured) .................... 3,000 2,732
Big Stone Gap Redev. and Housing Auth
Correctional Fac., Wallens Ridge Dev. ................
5.25%, 9/1/10 .................................... 1,800 1,785
Brunswick County IDA, Correctional Fac ...................
5.50%, 7/1/17 (MBIA Insured) ..................... 1,390 1,363
Capital Region Airport Commission, Richmond Int'l. Airport
VRDN (Currently 3.15%) (AMBAC Insured) .............. 200 200
Chesapeake Bay Bridge and Tunnel Commission
General Resolution, 5.25%, 7/1/19 (MBIA Insured) ..... 5,000 4,742
Covington and Alleghany County IDA, PCR, Westvaco
6.65%, 9/1/18 .................................... 1,500 1,624
Danville, GO, 7.25%, 3/1/07 (Prerefunded 3/1/99+) ........ 350 378
Danville IDA, Danville Regional Medical Center
6.50%, 10/1/24 (FGIC Insured) .................... 3,000 3,239
Fairfax County Housing Auth., FCRHA Office Building
7.50%, 6/15/18 ................................... 2,265 2,381
<PAGE>
Fairfax County IDA
Fairfax Hosp. System
VRDN (Currently 3.35%) ........................... 3,200 3,200
Inova Health Care System, 6.00%, 8/15/26 ............. 500 505
Fairfax County Water Auth ................................
5.80%, 1/1/16 (Escrowed to Maturity) ............. $3,505 $3,702
6.00%, 4/1/22 .................................... 2,925 2,995
7.30%, 1/1/21 (Prerefunded 1/1/00+) .............. 900 988
Frederick County IDA, Gov't. Complex Fac .................
6.50%, 12/1/14 (MBIA Insured) .................... 1,500 1,653
Fredericksburg IDA
Hosp. Fac. (MWH MediCorp Obligated Group)
Residual Interest Bond / Inverse Floater
(Currently 9.519%), 8/15/23 (FGIC Insured)
(Prerefunded 8/15/01+) ........................... 3,000 3,634
Medicorp Health System
5.25%, 6/15/16 (AMBAC Insured) ................... 3,475 3,309
5.25%, 6/15/23 (AMBAC Insured) ................... 3,000 2,805
George Mason Univ., 6.375%, 2/1/13 (MBIA Insured) ........ 1,415 1,539
Giles County IDA, Hoechst Celanese, 6.625%, 12/1/22 *..... 1,485 1,562
Hampton, Museum, 7.30%, 1/1/14 (Prerefunded 1/1/00+) ..... 1,100 1,205
Hampton IDA, Sentara Health Systems, 5.375%, 11/1/15 ..... 3,300 3,188
Hampton Roads Medical College
6.875%, 11/15/11 ................................. 1,500 1,609
6.875%, 11/15/16 ................................. 500 534
Hanover County IDA
Memorial Regional Medical Center
6.375%, 8/15/18 (MBIA Insured) ................... 2,185 2,392
6.50%, 8/15/08 (MBIA Insured) .................... 1,000 1,125
6.50%, 8/15/10 (MBIA Insured) .................... 1,300 1,465
Henrico County IDA
Bon Secours Health System
6.25%, 8/15/20 (MBIA Insured) .................... 1,550 1,691
Bon Secours Health System, St. John's Hosp
7.50%, 9/1/15 (Prerefunded 7/1/00+) .............. 1,800 1,999
Bon Secours Health System, St. Mary's Hosp ...........
7.50%, 9/1/07 (Prerefunded 8/1/00+) .............. 400 441
6.00%, 8/15/16 (MBIA Insured) .................... 1,000 1,061
Regional Jail
6.00%, 8/1/15 .................................... 2,415 2,456
7.00%, 8/1/13 .................................... 1,485 1,675
<PAGE>
Isle of Wight IDA, Union Camp Corp., 6.55%, 4/1/24 * ..... $4,250 $4,493
Loudoun County Sanitation Auth ...........................
Water and Sewer
5.25%, 1/1/30 (FGIC Insured) ..................... 2,500 2,340
5.25%, 1/1/25 (MBIA Insured) ..................... 1,750 1,634
Lynchburg Housing Auth., Walden Pond, 6.125%, 7/20/15..... 1,170 1,195
Martinsville IDA, Memorial Hosp. of Martinsville and
Henry County, 7.00%, 1/1/11 .......................... 950 995
Metropolitan Washington D.C. Airport Auth ................
6.625%, 10/1/19 (MBIA Insured) * ................. 2,800 3,008
Norfolk, Water, 5.875%, 11/1/20 (MBIA Insured) ........... 4,500 4,562
Norfolk IDA
Children's Hosp. of The King's Daughters
7.00%, 6/1/11 (AMBAC Insured)
(Prerefunded 6/1/01+) ............................ 1,150 1,283
Sentara Hosp .........................................
7.00%, 11/1/20 (Prerefunded 11/1/00+) ............ 1,045 1,158
7.10%, 11/1/10 (Prerefunded 11/1/00+) ............ 850 944
Norfolk Redev. and Housing Auth., Merrimack Landing.....
5.50%, 12/1/13 ................................... 1,000 986
Peninsula Port Auth ......................................
Dominion Terminal, 7.375%, 6/1/20 .................... 2,000 2,127
Riverside Health Systems, 6.625%, 7/1/18 ............. 3,020 3,197
Portsmouth, GO, 5.00%, 8/1/17 (FGIC Insured) ............. 5,215 4,849
Roanoke County, Public Improvement, GO, 5.00%, 6/1/21..... 600 552
Roanoke IDA
Roanoke Memorial Hosp., Carilion Health System
VRDN (Currently 3.25%) ........................... 725 725
6.125%, 7/1/17 (MBIA Insured) .................... 3,905 4,206
7.25%, 7/1/17 (MBIA Insured).....
(Prerefunded 7/1/00+) ............................ 1,000 1,108
Univ. of Virginia Hosp ...................................
7.00%, 6/1/10 .................................... 855 905
7.00%, 6/1/10 (Prerefunded 6/1/99+) .............. 545 589
Virginia, GO, 6.50%, 6/1/15 (Prerefunded 6/1/03+) ........ 3,000 3,359
Virginia Beach, GO, 5.75%, 2/1/16 ........................ 2,900 2,954
<PAGE>
Virginia Beach Dev. Auth .................................
Sentara Bayside Hosp., 6.60%, 11/1/09 ................ $3,650 $3,893
Virginia Beach General Hosp ..........................
6.00%, 2/15/10 (AMBAC Insured) ................... 1,000 1,079
Virginia College Building Auth ...........................
Randolph Macon College, 6.625%, 5/1/13 ............... 1,000 1,065
Univ. of Richmond, VRDN (Currently 3.30%) ............ 1,100 1,100
Washington and Lee Univ., 5.75%, 1/1/19 .............. 1,120 1,125
Virginia Ed. Loan Auth., Student Loan Program
5.55%, 9/1/10 (Prerefunded 3/1/06+) * ............ 1,800 1,867
Virginia HDA
6.00%, 1/1/17 .................................... 1,500 1,522
6.35%, 11/1/01 ................................... 1,000 1,047
6.375%, 1/1/26 * ................................. 2,000 2,046
6.50%, 5/1/13 * .................................. 2,000 2,087
6.70%, 7/1/11 .................................... 2,660 2,825
6.80%, 7/1/06 * .................................. 1,000 1,057
6.85%, 7/1/17 .................................... 1,000 1,037
6.90%, 7/1/13 .................................... 1,800 1,867
6.90%, 7/1/17 .................................... 3,500 3,702
7.05%, 5/1/18 .................................... 840 889
7.10%, 5/1/13 .................................... 1,500 1,587
7.10%, 1/1/17 .................................... 2,230 2,325
7.10%, 1/1/22 .................................... 5,510 5,736
6.45%, 7/1/28 (MBIA Insured) * ................... 2,000 2,051
Virginia Polytechnic Institute and State Univ ............
Univ. Services
5.40%, 6/1/11 .................................... 1,250 1,252
5.50%, 6/1/16 .................................... 3,000 2,954
5.50%, 6/1/20 .................................... 2,100 2,066
Virginia Port Auth., Commonwealth Port, 5.55%, 7/1/12 *... 1,255 1,259
Virginia Public Building Auth ............................
6.25%, 8/1/15 (Prerefunded 8/1/04+) .............. 1,550 1,715
Virginia Public School Auth ..............................
6.50%, 8/1/12 .................................... 1,700 1,824
6.50%, 8/1/16 .................................... 2,890 3,117
7.125%, 1/1/10 (Prerefunded 1/1/98+) ............. 100 105
Virginia Transportation Board
Northern Virginia Transportation Dist ................
5.125%, 5/15/21 $ ................................ 5,000 $4,699
Route 28 Project, 6.50%, 4/1/18 ...................... 1,000 1,070
<PAGE>
Washington County IDA
Johnston Memorial Hosp ...............................
6.25%, 7/1/06 .................................... 1,660 1,770
6.75%, 7/1/12 .................................... 1,500 1,590
Winchester IDA, Winchester Medical Center
Embedded Interest Rate Swap
(Currently 5.23%), 1/1/04 (AMBAC Insured) ........ 1,400 1,390
Total Virginia (Cost $180,924) 188,122
- --------------------------------------------------------------------------------
PUERTO RICO 3.4%
Puerto Rico Commonwealth, GO
7.75%, 7/1/13 (Prerefunded 7/1/98+) .............. 100 107
7.75%, 7/1/17 (Prerefunded 7/1/99+) .............. 250 275
Puerto Rico Electric Power Auth ..........................
7.00%, 7/1/07 (Prerefunded 7/1/99+) .............. 630 680
8.00%, 7/1/08 (Prerefunded 7/1/98+) .............. 125 134
Puerto Rico Highway and Transportation Auth ..............
6.25%, 7/1/14 .................................... 1,500 1,633
5.50%, 7/1/15 (FSA Insured) ...................... 2,000 2,030
Puerto Rico Infrastructure Fin. Auth .....................
7.50%, 7/1/09 .................................... 1,500 1,593
7.75%, 7/1/08 .................................... 115 123
Puerto Rico Public Buildings Auth., GO
7.25%, 7/1/17 (Prerefunded 7/1/98+) .............. 100 106
Total Puerto Rico (Cost $6,358) 6,681
Total Investments in Securities
99.5% of Net Assets (Cost $187,282) $ 194,803
Other Assets Less Liabilities 980
NET ASSETS $ 195,783
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 8
Accumulated net realized gain/loss - net of distributions (1,671)
Net unrealized gain (loss) 7,521
Paid-in-capital applicable to 17,711,093 no par value
shares of beneficial interest outstanding; unlimited
number of shares authorized 189,925
NET ASSETS $195,783
NET ASSET VALUE PER SHARE $ 11.05
- --------------------------------------------------------------------------------
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GO General Obligation
HDA Housing Development 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
-----------------------
Short-Term
Bond Fund Bond Fund
--------- ---------
In thousands
Year
Ended
2/28/97 2/28/97
------- -------
Investment Income
Interest income $ 635 $ 10,714
Expenses
Investment management -- 829
Custody and accounting 86 114
Shareholder servicing 22 189
Legal and audit 8 10
Trustees 6 7
Registration 3 3
Prospectus and shareholder reports 2 26
Miscellaneous 6 7
Reimbursed by Manager (41) --
Total expenses 92 1,185
Net investment income 543 9,529
Realized and Unrealized Gain (Loss)
- -----------------------------------
Net realized gain (loss)
Securities 21 595
Futures -- 93
Net realized gain (loss) 21 688
Change in net unrealized gain (loss)
Securities (71) (1,166)
Futures -- 14
Change in net unrealized gain or loss (71) (1,152)
Net realized and unrealized gain (loss) (50) (464)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 493 $ 9,065
===== ========
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
Short-Term
Bond Fund Bond Fund
In thousands
Year Year
Ended Ended
2/28/97 2/29/96 2/28/97 2/29/96
------- ------- ------- -------
Increase (Decrease) in Net Assets
Operations
Net investment income $ 543 $ 401 $9,529 $8,881
Net realized gain (loss) 21 30 688 3,837
Change in net unrealized
gain or loss (71) 154 (1,152) 4,341
Increase (decrease) in
net assets from operations 493 585 9,065 17,059
Distributions to shareholders
Net investment income (543) (401) (9,529) (8,881)
Net realized gain -- (23) -- --
Decrease in net assets
from distributions (543) (424) (9,529) (8,881)
Capital share transactions *
Shares sold 8,796 10,194 42,556 38,919
Distributions reinvested 399 284 7,302 6,804
Shares redeemed (5,311) (3,124) (32,361) (30,429)
Increase (decrease) in
net assets from capital
share transactions 3,884 7,354 17,497 15,294
Net Assets
Increase (decrease)
during period 3,834 7,515 17,033 23,472
Beginning of period 12,480 4,965 178,750 155,278
End of period $ 16,314 $ 12,480 $195,783 $ 178,750
*Share information
Shares sold 1,719 1,991 3,894 3,592
Distributions reinvested 78 55 668 627
Shares redeeemed (1,038) (607) (2,970) (2,805)
Increase (decrease)
in shares outstanding 759 1,439 1,592 1,414
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 Virginia Short-Term Tax-Free Bond Fund
(the Short-Term Bond Fund) and the Virginia Tax-Free Bond Fund (the Bond Fund),
nondiversified, open-end management investment companies, are two of the
portfolios established by the trust and commenced operations on November 30,
1994, and April 30, 1991, respectively.
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 that
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 each 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
- --------------------------------------------------------------------------------
Other Purchases and sales of portfolio securities, other than short-term
securities, for the year ended February 28, 1997, were as follows:
- --------------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
--------- ---------
Purchases $ 9,067,000 $ 132,430,000
Sales 4,295,000 114,375,000
================================================================================
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 $1,653,000, which expires in 2003. Capital loss
carryforwards utilized by the Bond Fund in fiscal 1997 amounted to $665,000. The
Bond Fund intends to retain gains realized in future periods that may be offset
by available capital loss carryforwards.
In order for each 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.
- --------------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
--------- ---------
Undistributed net investment income $ 1,000 $ 2,000
Undistributed net realized gain (7,000) (12,000)
Paid-in-capital 6,000 10,000
================================================================================
At February 28, 1997, the aggregate costs of investments for the Short-Term
Bond and Bond Funds for federal income tax and financial reporting purposes were
$16,184,000 and $187,282,000, respectively. Net unrealized gain on investments
was as follows:
- --------------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
--------- ---------
Appreciated investments $ 124,000 $7,647,000
Depreciated investments (1,000) (126,000)
Net unrealized gain (loss) $ 123,000 $7,521,000
<PAGE>
================================================================================
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 $70,000 was payable at February 28, 1997, by the Bond Fund. 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 0.305% 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%. 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, 1998, which would cause the
Short-Term Bond Fund's ratio of expenses to average net assets to exceed 0.65%.
Thereafter, through February 29, 2000, the Short-Term Bond Fund is required to
reimburse the manager for these expenses, provided that average net assets have
grown or expenses have declined sufficiently to allow reimbursement without
causing the fund's ratio of expenses to average net assets to exceed 0.65%.
Pursuant to this agreement, $61,000 of management fees were not accrued by the
fund for the year ended February 28, 1997, and $41,000 of other expenses were
borne by the manager. Pursuant to a previous agreement, $138,000 of unaccrued
fees and expenses remain subject to reimbursement through February 28, 1998, for
the Short-Term Bond Fund.
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 Short-Term Bond and Bond Funds
incurred expenses pursuant to these related party agreements totaling
approximately $78,000 and $209,000, respectively, for the year ended February
28, 1997, of which $7,000 and $20,000, respectively, were payable at period-end.
- --------------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
--------- ---------
Appreciated investments $ 124,000 $7,647,000
Depreciated investments (1,000) (126,000)
Net unrealized gain (loss) $ 123,000 $7,521,000
================================================================================
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Shareholders and Board of Trustees of
T. Rowe Price Virginia Tax-Free Funds
We have audited the accompanying statement of net assets of T. Rowe Price
Virginia Short-Term Tax-Free Bond Fund and T. Rowe Price Virginia Tax-Free Bond
Fund (two of the portfolios comprising the T. Rowe Price State Tax-Free Income
Trust) 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
years in the period then ended, and the financial highlights for the periods
presented. 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 Virginia Short-Term Tax-Free Bond Fund and T. Rowe Price Virginia
Tax-Free Bond Fund as of February 28, 1997, the results of their operations, the
changes in their 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
================================================================================
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
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
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
<PAGE>
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 FUNDS
- --------------------------------------------------------------------------------
TAXABLE
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
TAX-FREE
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
- --------------------------------------------------------------------------------
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.
<PAGE>
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.
================================================================================
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 N stocks, bonds, options, and others N at
considerable commission savings over full-service brokers. 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 select 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.
================================================================================
<PAGE>
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
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 Virginia Tax-Free Bond Funds.
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. RPRTVAC 2/28/97
