- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
SemiAnnual Report
New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
August 31, 1997
- --------------------------------------------------------------------------------
Report Highlights
================================================================================
New Jersey Tax-Free Bond Fund
* Municipal bonds outperformed Treasuries during most of the past six months
as inflation remained subdued despite strong economic growth.
* The New Jersey Tax-Free Bond Fund's total return exceeded the Lipper New
Jersey Municipal Debt Funds Average for the period, and its income was
consistent with previous periods.
* Investments in longer-term bonds and the addition of several new BBB rated
issues contributed to the fund's performance and income levels.
* Despite strong economic growth, we believe the environment is still
favorable for fixed income investors due to low inflation and fiscal
restraint.
Fellow Shareholders
- --------------------------------------------------------------------------------
The municipal bond market generated attractive returns during the six
months ended August 31, 1997, and your fund's performance surpassed its peer
average. Strong economic growth in the first quarter of 1997 led the Federal
Reserve to raise the federal funds target rate a quarter-point to 5.50% in March
because of concerns that inflation might accelerate. However, despite continued
robust growth, the Fed has left rates unchanged since March as inflation
remained subdued.
<PAGE>
Market Environment
- --------------------------------------------------------------------------------
Interest rates fluctuated as the market wrestled with a conflicting
combination of strong economic growth and declining inflation. Both money market
and longer-term bond yields began rising before the March rate hike and
continued to rise for a short time afterward in anticipation of further
tightening. However, excellent news on inflation, progress on controlling the
federal budget deficit, and little evidence of wage pressures diminished fears
of further rate increases. Short-term taxable rates subsequently fell in
mid-April to their earlier levels. Long-term taxable bond yields also began to
fall in the late spring after climbing to more than 7% in April. The 30-year
Treasury bond yield averaged just over 6.50% in July and August and 6.80% for
the past six months, almost identical to its average over the two preceding
years.
[yield chart showing the New Jersey Bond Yield Index from 8/96 through
8/97. Source: T. Rowe Price Associates]
Municipal interest rates, in New Jersey and across the nation, followed a
similar pattern: rising in March, peaking in April, then falling in late June
and July when preliminary data signaled a slowdown. Rates reversed in August as
stronger-than-expected economic data changed the outlook for the third quarter.
Municipal bonds outperformed Treasuries throughout most of the period except for
June, when the highest monthly supply in four years exceeded demand. New Jersey
bond yields began the six-month period at 5.63% and ranged between 5.82% and
5.31% before settling at 5.45% at the end of August. Overall, both the municipal
and Treasury yield curves flattened as short-term rates rose modestly in
anticipation of further Fed tightening and long-term rates trended lower on
positive inflation news.
In New Jersey, the economy and overall employment continued to show modest
growth rates that were slightly below national averages. Nonetheless, the state
has maintained an adequate cash balance while implementing a 30% personal income
tax reduction. Going forward, the state plans to enact spending reduction
measures to ensure budgetary balance amid slow revenue growth.
The supply of newly issued tax-exempt bonds in New Jersey was on a par with
last year. However, the state floated a huge $2.75 billion taxable issue to fund
a portion of its pension liability. Though the issue generated some controversy
within the state, it actually represented a shifting of a contingent liability
to a fixed obligation while providing some immediate budget savings.
<PAGE>
Strategy and Performance Review
- --------------------------------------------------------------------------------
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 8/31/97 6 Months 12 Months
- --------------------------------------------------------------------------------
New Jersey Tax-Free
Bond Fund 3.98% 8.66%
Lipper New Jersey Municipal
Debt Funds Average 3.57 8.18
- --------------------------------------------------------------------------------
Our emphasis on income and on long-term investments contributed to solid
fund performance for the period. Robust six-month and one-year total returns of
3.98% and 8.66%, respectively, compared favorably with the Lipper New Jersey
Municipal Debt Funds Average, and income payouts were in line with past levels.
Maintaining a yield advantage over our competitors was an important part of our
strategy, since we attempt to generate as much of your returns through tax-free
income as possible. Our below-average expense ratio also contributed to this
goal.
==============================
We consider the fund to be
postured neutrally compared
with its peer group of other
New Jersey bond funds.
- ------------------------------
The fund began the fiscal year fairly close to where it stood at the
halfway mark, with an average duration of 7.6 years and an average maturity of
19.3 years. (Duration is a measure of sensitivity to interest rate changes.) We
consider the fund to be postured neutrally compared with its peer group of other
New Jersey bond funds. We did take on a slightly more aggressive interest rate
stance after the Fed raised rates in March and the market responded negatively.
This positioned us for a very favorable summer, as rates fell in anticipation of
a slowing economy. We also felt our risks were muted by progress on the federal
budget deficit and the reduced prospect of a near-term tightening by the Federal
Reserve.
We took advantage of some BBB issuance earlier this year to add income to
the fund in an otherwise low-yield environment. In particular, we increased our
holdings in the hospital sector as well as in Puerto Rican debt, whose income is
tax-exempt in New Jersey. We did this for two reasons: first, thorough research
gave us confidence in the underlying financial abilities of the hospitals we
purchased, and second, we believe there is a trend toward shrinking yield
premiums for low-quality issuers, which could provide some price appreciation.
We continue to be selective, but when we find a credit that we like, we are
aggressive in acquiring it for the fund.
<PAGE>
Outlook
- --------------------------------------------------------------------------------
Moving forward we expect to maintain our average duration and maturity
within a neutral band as long as the economy remains strong with low inflation.
Our position in hospitals and lower-rated credits will be monitored closely, and
we will survey new issues for additions that might enhance our yield or total
return potential.
The national municipal market is facing a pickup in supply in coming
months, as issuers line up to borrow over both the short and long term. Interest
rates have stayed within the narrow range established over the past two years,
with relatively low volatility, and remain attractive for issuers. At the same
time, we would expect demand for municipals to remain solid, since the Taxpayer
Relief Act of 1997 did not lower personal income tax rates and did maintain
favorable tax treatment for corporations that purchase municipals.
Given the high level of consumer and business confidence, we expect the
U.S. economy to continue to perform well, although not quite as well as in the
first half of the year. The Federal Reserve has expressed uncertainty about why
inflation has remained so low at this stage of the expansion and is maintaining
a bias toward tightening in an effort to keep inflation in check. We expect the
New Jersey economy to continue on its modest growth path, leading to continued
good financial performance for the state and typical issuance patterns.
Until visible signs of accelerating inflation appear, there is little
reason for us to adopt a defensive posture. The overall environment for fixed
income investors is still favorable, due to continuing low inflation and fiscal
restraint despite above-trend economic growth.
Respectfully submitted,
/s/
William F. Snider
Chairman of the Investment Advisory Committee
September 19, 1997
<PAGE>
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
Key statistics
2/28/97 8/31/97
- --------------------------------------------------------------------------------
Price Per Share $ ................................... 11.08 $ 11.23
Dividends Per Share
For 6 months .................................... 0.29 0.28
For 12 months ................................... 0.57 0.57
Dividend Yield *
For 6 months .................................... 5.27% 5.18%
For 12 months ................................... 5.29 5.29
Weighted Average Maturity (years) ................... 19.4 19.3
Weighted Average Effective Duration (years) ......... 7.2 7.6
Weighted Average Quality ** ......................... A+ A+
* 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
- --------------------------------------------------------------------------------
Sector Diversification
Percent of Percent of
Net Assets Net Assets
2/28/97 8/31/97
- --------------------------------------------------------------------------------
Hospital Revenue ....................................... 17% 21%
Water and Sewer Revenue ................................ 19 12
Dedicated Tax Revenue .................................. 12 10
Educational Revenue .................................... 10 9
Air and Sea Transportation Revenue ..................... 5 7
Prerefunded Bonds ...................................... 3 6
Industrial and Pollution Control Revenue ............... 7 6
General Obligation Local ............................... 5 5
Electric Revenue ....................................... 3 5
General Obligation State ............................... 3 5
Nuclear Revenue ........................................ 4 4
Housing Finance Revenue ................................ 4 3
Miscellaneous Revenue .................................. 3 3
Escrowed to Maturity ................................... 3 3
All Other .............................................. 2 3
Other Assets Less Liabilities .......................... -- -2
- --------------------------------------------------------------------------------
Total .................................................. 100% 100%
================================================================================
<PAGE>
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[New Jersey Tax-Free Bond Fund SEC Chart shown here]
================================================================================
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
================================================================================
Since Inception
Periods Ended 8/31/97 1 Year 3 Years 5 Years Inception Date
- --------------------------------------------------------------------------------
New Jersey Tax-Free Bond Fund 8.66% 7.29% 6.81% 7.81% 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>
<TABLE>
T. Rowe Price New Jersey Tax-Free Bond Fund
====================================================================================================================================
Unaudited
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
6 Months Year
Ended Ended
8/31/97 2/28/97 2/29/96 2/28/95 2/28/94 2/28/93
NET ASSET VALUE
Beginning of period ............... $ 11.08 $ 11.16 $ 10.63 $ 11.19 $ 11.23 $ 10.30
Investment activities
Net investment income ......... 0.28* 0.57* 0.58* 0.57* 0.56* 0.58*
Net realized and
unrealized gain (loss) ........ 0.15 (0.08) 0.53 (0.55) 0.10 1.00
Total from
investment activities ......... 0.43 0.49 1.11 0.02 0.66 1.58
Distributions
Net investment income ......... (0.28) (0.57) (0.58) (0.57) (0.56) (0.58)
Net realized gain ............. -- -- -- (0.01) (0.14) (0.07)
Total distributions ........... (0.28) (0.57) (0.58) (0.58) (0.70) (0.65)
NET ASSET VALUE
End of period ..................... $ 11.23 $ 11.08 $ 11.16 $ 10.63 $ 11.19 $ 11.23
Ratios/Supplemental Data
Total return ...................... 3.98%* 4.57%* 10.67%* 0.37%* 5.97%* 15.90%*
Ratio of expenses to
average net assets ................ 0.65%*+ 0.65%* 0.65%* 0.65%* 0.65%* 0.65%*
Ratio of net investment
income to average
net assets ........................ 4.84%*+ 5.18%* 5.28%* 5.41%* 4.90%* 5.47%*
Portfolio turnover rate ........... 37.6%+ 78.9% 98.4% 139.1% 68.8% 103.3%
Net assets, end of period
(in thousands) .................... $ 88,002 $ 80,289 $ 70,304 $ 58,074 $ 63,160 $ 38,347
====================================================================================================================================
<FN>
* Excludes expenses in excess of a 0.65% voluntary expense limitation in effect through 2/28/99.
+ Annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
================================================================================
Unaudited August 31, 1997
================================================================================
Statement of Net Assets
Par Value
- --------------------------------------------------------------------------------
In thousands
NEW JERSEY 86.3%
Cape May County, Industrial Pollution Control Fin. Auth ......
Atlantic City Electric
6.80%, 3/1/21 (MBIA Insured) ......................... $1,500 $1,789
Edison Township, GO, 6.50%, 6/1/08 ........................... 350 397
Freehold Township, GO, Monmouth County Water and Sewer
6.35%, 10/1/11 (MBIA Insured) ........................ 250 284
Jersey City, GO, School Bonds, 6.50%, 2/15/04 ................ 500 546
Mercer County Public Improvement Auth., GO, Solid Waste
5.75%, 9/15/16 ....................................... 2,000 2,061
Middlesex County Pollution Control Fin. Auth
Amerada Hess 6.875%, 12/1/22 ............................. 1,500 1,629
Middlesex County Utilities Auth., Sewer
6.25%, 8/15/10 (MBIA Insured) ....................... 500 556
New Jersey, GO, 7.05%, 7/15/12 * ............................. 1,335 1,527
New Jersey Economic Dev. Auth
American Water
6.00%, 5/1/36 (FGIC Insured) * ....................... 1,000 1,033
6.875%, 11/1/34 (FGIC Insured) * ..................... 1,000 1,111
Harrogate
5.50%, 12/1/06 ....................................... 400 405
5.65%, 12/1/08 ....................................... 200 202
5.75%, 12/1/16 ....................................... 500 502
Lawrenceville School, 5.75%, 7/1/16 ...................... 2,000 2,060
PCR, Dow Chemical El Dorado
VRDN (Currently 3.00%) ............................... 400 400
Saint Barnabas
Zero Coupon, 7/1/15 (MBIA Insured) ................... 2,310 885
Zero Coupon, 7/1/16 (MBIA Insured) ................... 3,500 1,269
Zero Coupon, 7/1/17 (MBIA Insured) ................... 1,500 510
5.375%, 7/1/27 (MBIA Insured) ........................ 1,000 980
New Jersey EFA
Monmouth Univ
5.60%, 7/1/11 ........................................ 425 425
5.60%, 7/1/12 ........................................ 450 448
Princeton Univ., 5.875%, 7/1/14 .......................... 1,050 1,099
Rowan College, 6.00%, 7/1/21 (AMBAC Insured) ............. 1,000 1,053
<PAGE>
New Jersey EFA
Seton Hall Univ
5.60%, 7/1/16 (MBIA Insured) ......................... 1,000 1,021
6.875%, 7/1/10 ....................................... 375 400
7.00%, 7/1/21 ........................................ 200 213
New Jersey Health Care Fac. Fin. Auth., AHS
5.00%, 7/1/27 (AMBAC Insured) ........................ 1,000 931
New Jersey HFFA
Atlantic City Medical Center, 6.80%, 7/1/11 .............. 1,500 1,640
Chilton Memorial Hosp., 5.00%, 7/1/13 .................... 750 717
Columbus Hosp., 7.50%, 7/1/21 ............................ 2,580 2,765
Hackensack Medical Center
6.625%, 7/1/11 (FGIC Insured) ........................ 500 544
6.625%, 7/1/17 (FGIC Insured) ........................ 500 543
Holy Name Hosp
5.25%, 7/1/20 (AMBAC Insured) ........................ 1,050 1,015
Irvington General Hosp
5.875%, 8/1/06 (FHA Guaranteed) ...................... 1,240 1,315
6.375%, 8/1/15 (FHA Guaranteed) ...................... 500 534
Morristown Memorial Hosp., 7.00%, 7/1/17 ................. 800 847
Overlook Hosp. Assoc
6.70%, 7/1/13 (FGIC Insured) ......................... 500 512
Raritan Bay Medical Center, 7.25%, 7/1/27 ................ 700 743
St. Elizabeth Hosp
6.00%, 7/1/14 ........................................ 1,500 1,534
6.00%, 7/1/20 ........................................ 570 584
St. Joseph Hosp. and Medical Center
5.75%, 7/1/16 ........................................ 1,000 1,028
New Jersey Higher Ed. Assistance Auth., Student Loan
5.80%, 6/1/16 (MBIA Insured) * ....................... 1,250 1,281
New Jersey Highway Auth
Garden State Parkway
7.25%, 1/1/09 (Prerefunded 1/1/99+) .................. 200 212
7.25%, 1/1/16 (Prerefunded 1/1/99+) .................. 260 276
New Jersey Housing and Mortgage Fin. Agency
6.35%, 10/1/27 (MBIA Insured) * ...................... 2,000 2,091
7.10%, 11/1/11 ....................................... 300 318
7.10%, 11/1/12 ....................................... 175 186
New Jersey Sports and Exposition Auth
VRDN (Currently 3.15%)
(MBIA Insured) ....................................... 200 200
Monmouth Park, 8.00%, 1/1/25 ............................. 650 727
New Jersey Transportation Trust Fund Auth., 5.25%, 6/15/15 ... 3,000 2,956
New Jersey Turnpike Auth
10.375%, 1/1/03
(Escrowed to Maturity) ............................... 1,875 2,209
New Jersey Wastewater Treatment Trust
6.30%, 4/1/10 ........................................ 1,180 1,282
6.375%, 4/1/11 ....................................... 750 816
<PAGE>
Newark, GO, School Qualified Bond Act
5.30%, 9/1/11 (MBIA Insured) ......................... 500 504
5.30%, 9/1/17 (MBIA Insured) ......................... 1,000 981
North Hudson Sewage Auth., 5.25%, 8/1/16 (FGIC Insured) ...... 1,000 981
Ocean County Utilities Auth
Wastewater
6.125%, 1/1/02 ....................................... 500 533
6.30%, 1/1/11 ........................................ 1,300 1,404
Port Auth. of New York and New Jersey
VRDN (Currently 3.60%) ............................... 500 500
VRDN (Currently 3.65%) ............................... 1,600 1,600
6.125%, 7/15/22 * .................................... 1,000 1,054
6.125%, 6/1/94 ....................................... 1,000 1,093
6.50%, 10/1/01 * ..................................... 500 529
6.50%, 7/15/19 (FGIC Insured) * ...................... 500 540
6.50%, 11/1/26 * ..................................... 1,000 1,069
6.75%, 10/1/11 * ..................................... 1,000 1,083
Salem County Pollution Control Fin. Auth., PCR
Atlantic City Electric
VRDN (Currently 3.00%)
(MBIA Insured) ....................................... 500 500
E. I. Du Pont, 6.50%, 11/15/21 * ......................... 1,230 1,301
Public Service Electric and Gas
6.25%, 6/1/31 (MBIA Insured) ......................... 1,500 1,614
South Brunswick Township, GO
Board of Ed ..............................................
6.40%, 8/1/09 (FGIC Insured)
(Prerefunded 8/1/05+) ................................ 1,250 1,394
South Brunswick Township, GO
Board of Ed ..............................................
6.40%, 8/1/10 (FGIC Insured)
(Prerefunded 8/1/05+) ................................ $ 1,500 $ 1,672
South Jersey Transportation Auth .............................
Raytheon Aircraft Service, 6.15%, 1/1/22 * ............... 1,010 1,041
Southeast Morris County Municipal Utilities Auth, Water
6.50%, 1/1/11 (FGIC Insured) ......................... 750 807
Union County, GO, 6.50%, 2/1/11 (Prerefunded 2/1/01+) ........ 100 108
Union County Utilities Auth., Solid Waste, 7.15%, 6/15/09 * .. 500 505
Univ. of Medicine and Dentistry of New Jersey
5.00%, 9/1/22 (MBIA Insured) ......................... 1,000 942
6.50%, 12/1/18 (MBIA Insured)
(Prerefunded 12/1/01+) ............................... 750 825
Wanaque Valley Regional Sewage Auth ..........................
5.75%, 9/1/18 (AMBAC Insured) ........................ 2,000 2,126
Warren County, PCR, Warren Energy Resource
6.55%, 12/1/06 (MBIA Insured) ........................ 600 664
Total New Jersey (Cost $72,193) .............................. 75,981
<PAGE>
PUERTO RICO 15.4%
Puerto Rico Commonwealth, GO
6.45%, 7/1/17 ...................................... 500 548
6.80%, 7/1/21 (Prerefunded 7/1/02+) ................ 200 224
7.625%, 7/1/10 (Prerefunded 7/1/00+) ............... 80 89
7.75%, 7/1/13 (Prerefunded 7/1/98+) ................ 25 26
Puerto Rico Electric Power Auth
5.50%, 7/1/11 ...................................... 1,250 1,271
5.50%, 7/1/25 ...................................... 2,750 2,711
7.125%, 7/1/14 ..................................... 500 534
8.00%, 7/1/08 (Prerefunded 7/1/98+) ................ 625 659
Puerto Rico Highway and Transportation Auth
5.00%, 7/1/36 ...................................... 500 462
5.50%, 7/1/15 (MBIA Insured) ....................... 1,000 1,037
5.50%, 7/1/26 ...................................... 800 787
6.375%, 7/1/08 (FSA Insured) ....................... 1,000 1,084
6.625%, 7/1/12 ..................................... 1,000 1,092
6.625%, 7/1/12 (FSA Insured) ....................... 500 547
7.75%, 7/1/16 (Prerefunded 7/1/00+) ................ 10 11
Puerto Rico Infrastructure Fin. Auth
7.50%, 7/1/09 ...................................... 475 499
7.75%, 7/1/08 ...................................... 45 47
Puerto Rico Public Building Auth., GO
Gov't. Fac
5.00%, 7/1/27 (AMBAC Insured) ...................... 1,000 944
5.25%, 7/1/21 ...................................... 1,000 958
Total Puerto Rico (Cost .................................... $ 12,961) 13,530
Total Investments in Securities
101.7% of Net Assets (Cost ................................. $ 85,154) $89,511
Other Assets Less Liabilities .............................. (1,509)
NET ASSETS ................................................. $ 88,002
Net Assets Consist of:
Accumulated net investment income -
net of distributions ....................................... $ 2
Accumulated net realized gain/loss -
net of distributions ....................................... (1,482)
Net unrealized gain (loss) ................................. 4,357
Paid-in-capital applicable to
7,835,122.801 no par value of
beneficial interest outstanding;
unlimited number of shares authorized ...................... 85,125
NET ASSETS ................................................. $ 88,002
NET ASSET VALUE PER SHARE .................................. $ 11.23
<PAGE>
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
EFA Educational Facility Authority
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance Corp.
GO General Obligation
HFFA Health Facility Financing 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>
T. Rowe Price New Jersey Tax-Free Bond Fund
================================================================================
Unaudited
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
6 Months
Ended
8/31/97
Investment Income
Interest income ................................................. $ 2,405
Expenses
Investment management ....................................... 157
Shareholder servicing ....................................... 46
Custody and accounting ...................................... 44
Prospectus and shareholder reports .......................... 9
Registration ................................................ 4
Legal and audit ............................................. 4
Trustees .................................................... 3
Miscellaneous ............................................... 4
Total expenses .............................................. 271
Net investment income ........................................... 2,134
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities .................................................. 384
Futures ..................................................... (59)
Net realized gain (loss) .................................... 325
Change in net unrealized gain or loss on securities ............. 810
Net realized and unrealized gain (loss) ......................... 1,135
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS .......................................... $ 3,269
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
================================================================================
Unaudited
================================================================================
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
8/31/97 2/28/97
Increase (Decrease) in Net Assets
Operations
Net investment income .............................. $ 2,134 $ 3,842
Net realized gain (loss) ........................... 325 (381)
Change in net unrealized gain or loss .............. 810 (65)
Increase (decrease) in net assets from operations .. 3,269 3,396
Distributions to shareholders
Net investment income .............................. (2,134) (3,842)
Capital share transactions *
Shares sold ........................................ 13,261 20,966
Distributions reinvested ........................... 1,612 2,921
Shares redeemed .................................... (8,295) (13,456)
Increase (decrease) in net assets from capital
share transactions ................................. 6,578 10,431
Net Assets
Increase (decrease) during period ...................... 7,713 9,985
Beginning of period .................................... 80,289 70,304
End of period .......................................... $ 88,002 $ 80,289
*Share information
Shares sold ........................................ 1,193 1,913
Distributions reinvested ........................... 145 266
Shares redeemed .................................... (751) (1,230)
Increase (decrease) in shares outstanding .......... 587 949
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
================================================================================
Unaudited August 31, 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 New Jersey Tax-Free Bond Fund (the
fund), a nondiversified, open-end management investment company, is one of the
portfolios established by the trust and commenced operations on April 30, 1991.
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 Trustees.
PREMIUMS AND DISCOUNTS Premiums and original issue discounts on municipal
securities are amortized for both financial reporting and tax purposes. Market
discounts are recognized upon disposition of the security as gain or loss for
financial reporting purposes and as ordinary income for tax purposes.
OTHER Income and expenses are recorded on the accrual basis. Investment
trans-actions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Distributions to shareholders are
recorded by the fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $21,947,000 and $15,113,000, respectively, for the six
months ended August 31, 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 $1,718,000, of which $1,298,000 expires in 2003, and
$420,000 in 2005. The fund intends to retain gains realized in future periods
that may be offset by available capital loss carryforwards.
At August 31, 1997, the aggregate cost of investments for federal income
tax and financial reporting purposes was $85,154,000, and net unrealized gain
aggregated $4,357,000, of which $4,450,000 related to appreciated investments
and $93,000 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 $26,000 was payable at August 31, 1997. 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 0.30% for assets in excess of $80 billion. At
August 31, 1997, and for the six months then ended, the effective annual group
fee rates were 0.32% and 0.33%, respectively. 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, 1999, which would cause the
fund's ratio of expenses to average net assets to exceed 0.65%. Thereafter,
through February 28, 2001, the fund is required to reimburse the manager for
these expenses, provided that average net assets have grown or expenses have
declined sufficiently to allow reimbursement without causing the fund's ratio of
expenses to average net assets to exceed 0.65%. Pursuant to this agreement,
$21,000 of management fees were not accrued by the fund for the six months ended
August 31, 1997. Additionally, $151,000 of unaccrued management fees related to
a previous expense limitation are subject to reimbursement through February 28,
1999.
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 $69,000 for the six months
ended August 31, 1997, of which $13,000 was payable at period-end.
<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
410-625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
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 New Jersey Tax-Free Bond 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. F47-051 8/31/97
