<PAGE>
Annual Report
New York
Tax-Free
Funds
---------------------
February 28, 1997
---------------------
[LOGO APPEARS HERE]
T. Rowe Price
<PAGE>
REPORT HIGHLIGHTS
-----------------------------------------------------------------------------
. 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.
. Returns of 2.91% and 5.02% for the New York Tax-Free Money and New York Tax-
Free Bond Funds, respectively, surpassed the average returns of their peer
groups for the fiscal year ended February 28.
. The economies of both New York State and City improved last year, although
growth still trails that of the nation as a whole.
. 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.
<PAGE>
FELLOW SHAREHOLDERS
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.
MARKET ENVIRONMENT
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.
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
[LINE GRAPH APPEARS HERE]
Source: T. Rowe Price Associates
1
<PAGE>
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 at 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.
In New York, economic growth and overall employment continued to lag the
national averages. Nevertheless, the state's finances improved during
the year, and a sizable operating surplus is now projected. New York
City's finances were also stable as Wall Street continued to prosper.
New issuance in the state was up, with more than $21 billion coming to
market, a 16% increase over 1995. In general, these deals were well
received as demand remained strong for New York bonds.
NEW YORK TAX-FREE MONEY FUND
Our longer maturity strategy resulted in attractive returns, enabling
your fund to outperform its peer group during both the 6- and 12-month
periods ended February 28, 1997.
- ----------------------
Performance Comparison
- --------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/28/97 6 Months 12 Months
- --------------------------------------------------------------
<S> <C> <C>
New York Tax-Free
Money Fund 1.46% 2.91%
- --------------------------------------------------------------
Lipper New York Tax-Exempt
Money Market Funds Average 1.43 2.87
- --------------------------------------------------------------
</TABLE>
Despite last year's stable monetary policy, the yields of 6- and 12-
month municipal notes managed to vacillate in a range of 70 basis
points. At the end of the fiscal year, yields of one- to 30-day
maturities were little changed from a year ago, but yields on 60-day to
1-year maturities were 20 to 50 basis points higher. Interest rate
levels on New York tax-exempt issues averaged 10 to 15 basis points
lower than on comparable national issues across the yield curve. The one
exception was overnight variable rate demand notes, which tended to be
priced on a national scale.
2
<PAGE>
The fund ended the fiscal year with a weighted average maturity of 63
days, which was the same as at the end of August and longer than the
average for our peer group. Lending support to our longer maturity
posture was robust demand generated by cash inflows to tax-exempt money
funds, which expanded to a record $147 billion. An additional $12
billion in new cash inflows more than offset a $5 billion increase in
the supply of new issues. New York money funds as a group grew 6% to
$9.8 billion.
We emphasized longer maturities throughout the year, since we felt
reasonably confident that the Federal Reserve would wait for more
concrete evidence of rising inflation before raising the federal funds
rate, particularly during the presidential campaign. We took advantage
of the upward sloping yield curve by concentrating more on 6- and 12-
month municipal notes, which provided an average of 40 basis points more
yield than shorter maturities. We also reduced the percentage of
variable rate securities in the portfolio. We will carefully consider
recent remarks by Chairman Greenspan about a preemptive move against
inflation (see the Outlook section) as we establish our maturity
strategy in coming months.
NEW YORK TAX-FREE BOND FUND
Our strategy of duration management enabled us to generate returns
roughly in line with our peer group average during the past six months
and ahead of it for the entire year. We are happy to report that this is
the fifth consecutive fiscal year in which we have outperformed the peer
group.
The fund began the year positioned well for the rising interest rate
environment, with the average duration and maturity within a neutral
range. (Duration is a measure of a fund's sensitivity to changes in
interest rates.) As rates rose, we opted to capture higher yields by
buying more long-term bonds and adopting a more aggressive duration.
However, as the year progressed, interest rates entered a trading range
contained by good news on inflation on one hand and by the healthy
economy
- ----------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/28/97 6 Months 12 Months
-------------------------------------------------------------------
<S> <C> <C>
New York Tax-Free
Bond Fund 4.71% 5.02%
-------------------------------------------------------------------
Lipper New York Municipal
Debt Funds Average 4.76 4.44
-------------------------------------------------------------------
</TABLE>
3
<PAGE>
and low unemployment on the other. We shifted to a more neutral duration
and ended the year close to where we started.
We continued to look for bonds that offered attractive yields in an
otherwise low yield environment, and also attempted to diversify the
fund more thoroughly with less concentration in various sectors. Moving
forward, we will monitor New York City for signs of financial
improvement and search for potential additions to the portfolio. The
city's finances have benefited from the bull market on Wall Street but
could be vulnerable to a major downturn. A new issuer, the Transitional
Finance Authority, is scheduled to surface later this year, its bonds
backed by a portion of the New York City personal income tax. Overall,
however, we expect issuance for the city to be moderate and possibly
lower than it was last year.
OUTLOOK
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.
WE WOULD REGARD HIGHER RATES AS AN OPPORTUNITY TO PROVIDE ADDITIONAL YIELD . . .
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. 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
4
<PAGE>
rates will move in a relatively narrow channel, we would regard higher
rates as an opportunity to provide additional yield in the funds. Over-
all, 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.
We believe New York's economy will continue to grow modestly. The large
annual surplus, bolstered by the strong financial services sector and
spending constraints, may allow the state to implement the last stage of
its tax cut smoothly. Should the budget for the current year also end in
surplus, a credit upgrade from one of the rating agencies cannot be
ruled out, which would enhance the value of New York bonds.
Respectfully submitted,
/s/ Patrice L. Berchtenbreiter
Patrice L. Berchtenbreiter
Chairman of the Investment Advisory Committee
New York Tax-Free Money Fund
/s/ William F. Snider
William F. Snider
Chairman of the Investment Advisory Committee
New York Tax-Free Bond Fund
March 21, 1997
- --------------------------------------------------------------------------------
William F. Snider has assumed day-to-day responsibility for management of the
New York Tax-Free Bond Fund as chairman of the fund's Investment Advisory
Committee. Mr. Snider joined T. Rowe Price's municipal bond department in 1991
and has been managing assets for the past four years. He has been a member of
the fund's Investment Advisory Committee since 1994 and worked closely with
William T. Reynolds, the fund's previous manager and now director of the Fixed
Income Division, who will remain on the fund's Investment Advisory Committee.
5
<PAGE>
T. Rowe Price New York Tax-Free Funds
- --------------------------------------------------------------------------------
- --------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KEY STATISTICS
8/31/96 2/28/97
<S> <C> <C>
New York Tax-Free Money Fund
- --------------------------------------------------------------------------------
Price Per Share $ 1.00 $ 1.00
Dividends Per Share +
- --------------------------------------------------------------------------------
For 6 months 0.014 0.015
-------------------------------------------------------------------------------
For 12 months 0.030 0.029
-------------------------------------------------------------------------------
Dividend Yield (7-Day Compound)* 2.85% 2.95%
- --------------------------------------------------------------------------------
Weighted Average Maturity (days) 63 63
- --------------------------------------------------------------------------------
Weighted Average Quality** First Tier First Tier
- --------------------------------------------------------------------------------
New York Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Price Per Share $ 10.59 $10.80
- --------------------------------------------------------------------------------
Dividends Per Share +
- --------------------------------------------------------------------------------
For 6 months 0.29 0.28
-------------------------------------------------------------------------------
For 12 months 0.58 0.57
-------------------------------------------------------------------------------
Dividend Yield*
- --------------------------------------------------------------------------------
For 6 months 5.42% 5.40%
-------------------------------------------------------------------------------
For 12 months 5.47 5.49
-------------------------------------------------------------------------------
Weighted Average Maturity (years) 18.1 18.5
- --------------------------------------------------------------------------------
Weighted Average Effective Duration (years) 7.6 7.4
- --------------------------------------------------------------------------------
Weighted Average Quality*** A+ A+
- --------------------------------------------------------------------------------
</TABLE>
+ Taxability of dividends: 100% and 97.8% of the New York Tax-Free Money Fund
dividends paid for the 12 months ended 2/28/97 were exempt from federal and
New York income taxes, respectively; 100% of the New York Tax-Free Bond Fund
dividends paid for the 12 months ended 2/28/97 were exempt from federal and
New York 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.
** All securities purchased in the money fund are rated in the two highest
categories (tiers) as established by national rating agencies or, if
unrated, are deemed of comparable quality by T. Rowe Price.
*** Based on T. Rowe Price research.
6
<PAGE>
T. Rowe Price New York Tax-Free Funds
- --------------------------------------------------------------------------------
- --------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
8/31/96 2/28/97
<S> <C> <C>
New York Tax-Free Money Fund
- --------------------------------------------------------------------------------
Miscellaneous Revenue 19% 19%
- --------------------------------------------------------------------------------
General Obligation - Local 11 11
- --------------------------------------------------------------------------------
Prerefunded Bonds 9 11
- --------------------------------------------------------------------------------
Water and Sewer Revenue 10 10
- --------------------------------------------------------------------------------
Dedicated Tax Revenue 7 7
- --------------------------------------------------------------------------------
Educational Revenue 7 7
- --------------------------------------------------------------------------------
Hospital Revenue 6 5
- --------------------------------------------------------------------------------
Ground Transportation Revenue 5 5
- --------------------------------------------------------------------------------
Nuclear Revenue 3 5
- --------------------------------------------------------------------------------
General Obligation - State 2 4
- --------------------------------------------------------------------------------
Electric Revenue 4 4
- --------------------------------------------------------------------------------
Industrial and Pollution Control Revenue 7 4
- --------------------------------------------------------------------------------
Life Care/Nursing Home Revenue 4 3
- --------------------------------------------------------------------------------
Escrowed to Maturity 6 2
- --------------------------------------------------------------------------------
All Others - 2
- --------------------------------------------------------------------------------
Other Assets Less Liabilities - 1
================================================================================
Total 100% 100%
New York Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Dedicated Tax Revenue 15% 14%
- --------------------------------------------------------------------------------
Educational Revenue 14 11
- --------------------------------------------------------------------------------
General Obligation - Local 12 10
- --------------------------------------------------------------------------------
Water and Sewer Revenue 10 10
- --------------------------------------------------------------------------------
Lease Revenue 10 8
- --------------------------------------------------------------------------------
Prerefunded Bonds 8 8
- --------------------------------------------------------------------------------
Miscellaneous Revenue 5 7
- --------------------------------------------------------------------------------
Housing Finance Revenue 6 7
- --------------------------------------------------------------------------------
Air and Sea Transportation Revenue 6 7
- --------------------------------------------------------------------------------
Hospital Revenue 7 6
- --------------------------------------------------------------------------------
Ground Transportation Revenue 6 4
- --------------------------------------------------------------------------------
Solid Waste Revenue - 4
- --------------------------------------------------------------------------------
Nuclear Revenue 2 3
- --------------------------------------------------------------------------------
All Others 2 2
- --------------------------------------------------------------------------------
Other Assets Less Liabilities -3 -1
================================================================================
Total 100% 100%
</TABLE>
7
<PAGE>
T. Rowe Price New York Tax-Free Funds
- --------------------------------------------------------------------------------
- ----------------------
Performance Comparison
- --------------------------------------------------------------------------------
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.
NEW YORK TAX-FREE MONEY FUND
----------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
New York Tax-Free Lipper New York Tax-Exempt
Money Fund Money Market Funds Average
----------------- --------------------------
<S> <C> <C>
2/87 $10,000 $10,000
2/97 14,038 14,178
</TABLE>
NEW YORK TAX-FREE BOND FUND
----------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
New York Tax-Free Lehman Municipal Lipper New York Municipal
Bond Fund Bond Index Debt Funds Average
----------------- ---------------- -------------------------
<S> <C> <C> <C>
2/87 $10,000 $10,000 $10,000
2/97 19,366 20,690 19,171
</TABLE>
- ------------------------------------
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
Periods Ended 2/28/97 1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York Tax-Free Money Fund 2.91% 2.89% 2.54% 3.45%
--------------------------------------------------------------------------
New York Tax-Free Bond Fund 5.02 5.33 7.54 6.83
--------------------------------------------------------------------------
</TABLE>
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
8
<PAGE>
T. Rowe Price New York Tax-Free Money Fund
- --------------------------------------------------------------------------------
- --------------------
Financial Highlights For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended
2/28/97 2/29/96 2/28/95 2/28/94 2/28/93
NET ASSET VALUE
<S> <C> <C> <C> <C> <C>
Beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------
Investment activities
Net investment income 0.029* 0.032* 0.025* 0.018* 0.022*
Distributions
Net investment income (0.029) (0.032) (0.025) (0.018) (0.022)
----------------------------------------------------
NET ASSET VALUE
End of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
====================================================
Ratios/Supplemental Data
Total return 2.91%* 3.26%* 2.49%* 1.84%* 2.22%*
- -----------------------------------------------------------------------------------
Ratio of expenses to
average net assets 0.55%* 0.55%* 0.55%* 0.55%* 0.55%*
- -----------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 2.86%* 3.21%* 2.48%* 1.82%* 2.21%*
- -----------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 82,729 $ 71,040 $ 66,154 $ 57,736 $53,904
- -----------------------------------------------------------------------------------
</TABLE>
* Excludes expenses in excess of a 0.55% voluntary expense limitation in effect
through 2/28/97.
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
T. Rowe Price New York Tax-Free Bond Fund
- --------------------------------------------------------------------------------
- --------------------
Financial Highlights For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended
2/28/97 2/29/96 2/28/95 2/28/94 2/28/93
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 10.85 $ 10.37 $ 10.98 $ 11.05 $ 10.12
------------------------------------------------------
Investment activities
Net investment income 0.57* 0.58* 0.58* 0.59* 0.62*
Net realized and
unrealized gain (loss) (0.05) 0.48 (0.53) 0.09 0.93
------------------------------------------------------
Total from
investment activities 0.52 1.06 0.05 0.68 1.55
------------------------------------------------------
Distributions
Net investment income (0.57) (0.58) (0.58) (0.59) (0.62)
Net realized gain - - (0.08) (0.16) -
------------------------------------------------------
Total distributions (0.57) (0.58) (0.66) (0.75) (0.62)
------------------------------------------------------
NET ASSET VALUE
End of period $ 10.80 $ 10.85 $ 10.37 $ 10.98 $ 11.05
======================================================
Ratios/Supplemental Data
Total return 5.02%* 10.44%* 0.74%* 6.31%* 15.79%*
- -----------------------------------------------------------------------------------------
Ratio of expenses to
average net assets 0.65%* 0.65%* 0.60%* 0.60%* 0.60%*
- -----------------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 5.35%* 5.42%* 5.71%* 5.31%* 5.91%*
- -----------------------------------------------------------------------------------------
Portfolio turnover rate 96.9% 116.0% 134.3% 84.9% 41.5%
- -----------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $144,532 $134,933 $117,847 $130,347 $112,026
- -----------------------------------------------------------------------------------------
</TABLE>
* Excludes expenses in excess of a 0.65% voluntary expense limitation in effect
3/1/95 through 2/28/97, a 0.60% voluntary expense limitation in effect
through 2/28/95.
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
T. Rowe Price New York Tax-Free Money Fund
- --------------------------------------------------------------------------------
February 28, 1997
<TABLE>
<CAPTION>
- -----------------------
Statement of Net Assets Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
NEW YORK 97.4%
Dormitory Auth. of the State of New York
City Univ.
8.00%, 7/1/07 (Prerefunded 7/1/97+) $ 350 $ 361
-------------------------------------------------------------------------
8.125%, 7/1/17 (Prerefunded 7/1/97+) 500 517
-------------------------------------------------------------------------
Cornell Univ., VRDN (Currently 3.30%) 1,400 1,400
---------------------------------------------------------------------------
Masonic Hall Asylum, VRDN (Currently 3.15%)
(AMBAC Insured) 2,600 2,600
-------------------------------------------------------------------------
Memorial Sloan-Kettering Cancer Center
TECP, 3.40 - 3.50%, 4/4 - 6/27/97 4,465 4,465
-------------------------------------------------------------------------
Metropolitan Museum of Art
VRDN (Currently 3.20%) 3,200 3,200
-------------------------------------------------------------------------
Oxford Univ. Press, VRDN (Currently 3.45%) 3,885 3,885
-----------------------------------------------------------------------------
Erie County Water Auth., VRDN (Currently 3.15%)
(AMBAC Insured) 2,950 2,950
-----------------------------------------------------------------------------
Great Neck Union Free School Dist., GO, TAN, 4.25%, 6/30/97 2,000 2,002
-----------------------------------------------------------------------------
Great Neck Water Auth., VRDN (Currently 3.20%)
(FGIC Insured) 2,400 2,400
-----------------------------------------------------------------------------
Metropolitan Transportation Auth.
Commuter Fac., 8.50%, 7/1/17
(Prerefunded 7/1/97+) 1,625 1,682
-------------------------------------------------------------------------
Service Contract, 8.50%, 7/1/17
(Prerefunded 7/1/97+) 1,000 1,036
-----------------------------------------------------------------------------
Municipal Assistance Corp. of New York City
4.00%, 7/1/97 2,000 2,001
-------------------------------------------------------------------------
6.00%, 7/1/97 800 805
-------------------------------------------------------------------------
6.90%, 7/1/97 25 25
-------------------------------------------------------------------------
7.00%, 7/1/97 700 708
-----------------------------------------------------------------------------
Nassau County IDA, Cold Spring Harbor Laboratory
VRDN (Currently 3.40%) 3,700 3,700
-----------------------------------------------------------------------------
New York City
GO, 5.50%, 10/1/97 (Escrowed to Maturity) 150 152
---------------------------------------------------------------------------
GO, 6.75%, 3/15/97 (Escrowed to Maturity) 1,200 1,201
---------------------------------------------------------------------------
GO, 7.50%, 8/15/97 (Escrowed to Maturity) 85 87
---------------------------------------------------------------------------
GO, 8.00%, 11/15/97 (Escrowed to Maturity) 55 57
---------------------------------------------------------------------------
GO, 8.00%, 8/1/07 (Prerefunded 8/1/97+) 155 160
---------------------------------------------------------------------------
GO, RAN, 4.50%, 4/15/97 2,000 2,002
-----------------------------------------------------------------------------
</TABLE>
11
<PAGE>
T. Rowe Price New York Tax-Free Money Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
New York City Municipal Water Fin. Auth.
Water and Sewer
7.00%, 6/15/18 (Prerefunded 6/15/97+) $ 325 $ 333
-------------------------------------------------------------------------
7.625%, 6/15/16 (Prerefunded 6/15/97+) 1,000 1,026
-------------------------------------------------------------------------
9.00%, 6/15/17 (Prerefunded 6/15/97+) 1,000 1,034
-------------------------------------------------------------------------
8.25%, 6/15/16 (BIGI Insured)
(Prerefunded 6/15/97+) 200 207
-------------------------------------------------------------------------
VRDN (Currently 3.55%) (FGIC Insured) 1,300 1,300
-------------------------------------------------------------------------
7.00%, 6/15/18 (MBIA Insured)
(Prerefunded 6/15/97+) 550 563
-------------------------------------------------------------------------
7.80%, 6/15/18 (MBIA Insured)
(Prerefunded 6/15/97+) 220 227
-----------------------------------------------------------------------------
New York City Trust for Cultural Resources of New York City
American Museum of National History
VRDN (Currently 3.15%) (MBIA Insured) 3,600 3,600
-----------------------------------------------------------------------------
New York State Energy Research and Dev. Auth.
Orange and Rockland Utilities,
VRDN (Currently 3.15%) (FGIC Insured) 3,400 3,400
-----------------------------------------------------------------------------
New York State Environmental Fac. Corp., PCR
Solid Waste Disposal, General Electric
TECP, 3.45 - 3.55%, 5/9 - 6/20/97 * 3,150 3,150
-------------------------------------------------------------------------
State Water Revolving to New York City
6.40%, 6/15/97 920 927
-------------------------------------------------------------------------
7.00%, 6/15/97 750 756
-----------------------------------------------------------------------------
New York State Housing Fin. Agency, Health Fac.
6.60%, 11/1/97 (Escrowed to Maturity) 500 509
-----------------------------------------------------------------------------
New York State Local Gov't. Assistance Corp.
VRDN (Currently 3.15%) 2,500 2,500
-------------------------------------------------------------------------
VRDN (Currently 3.20%) 1,000 1,000
-----------------------------------------------------------------------------
New York State Medical Care Fac. Fin. Agency
Columbia Presbyterian Hosp., 8.00%, 2/15/25
(FHA Guaranteed)
(Prerefunded 8/15/97+) 45 47
-------------------------------------------------------------------------
General Improvement, 8.875%, 8/15/07
(Prerefunded 8/15/97+) 400 417
-------------------------------------------------------------------------
Greater New York Health Insurance Plan
8.50%, 11/1/15 (Prerefunded 12/1/97+) 1,000 1,033
-------------------------------------------------------------------------
Hosp. and Nursing Home, 8.00%, 2/15/08
</TABLE>
12
<PAGE>
T. Rowe Price New York Tax-Free Money Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
- ---------------------------------------------------------------------------------
In thousands
<S> <C> <C>
(FHA Guaranteed)
(Prerefunded 2/15/98+) $ 475 $ 502
------------------------------------------------------------------------------
New York State Mortgage Agency, Homeowner
4.05%, 10/1/97 * 510 510
------------------------------------------------------------------------------
New York State Power Auth.
TECP, 3.20 - 3.51%, 3/6 - 5/14/97 5,120 5,120
--------------------------------------------------------------------------
General Purpose, 3.70%, 3/1/97 2,195 2,195
------------------------------------------------------------------------------
New York State Thruway Auth., 5.00%, 1/1/98 (FGIC Insured) 300 303
------------------------------------------------------------------------------
New York State Urban Dev. Corp., Correctional Fac.
8.125%, 1/1/98 (AMBAC Insured)
(Prerefunded 1/1/98+) 30 32
------------------------------------------------------------------------------
Port Auth. of New York and New Jersey
4.90%, 9/1/97 * 495 495
--------------------------------------------------------------------------
TECP, 3.25 - 3.30%, 3/7/97 * 1,390 1,390
--------------------------------------------------------------------------
Versatile Structures, VRDN (Currently 3.50%) * 2,700 2,700
------------------------------------------------------------------------------
Rochester, GO, BAN, 4.50%, 10/30/97 2,000 2,010
------------------------------------------------------------------------------
Syracuse IDA, Syracuse Univ., VRDN (Currently 3.30%) 2,700 2,700
------------------------------------------------------------------------------
Westchester County
GO, 3.80%, 12/15/97 175 175
----------------------------------------------------------------------------
GO, TAN, 3.48%, 12/11/97 2,000 2,000
------------------------------------------------------------------------------
White Plains, GO, BAN, 4.25%, 7/25/97 1,000 1,001
------------------------------------------------------------------------------
Total New York (Cost $80,558) 80,558
-------
MISSOURI 1.7%
Missouri HEFA, Washington Univ., VRDN (Currently 3.45%) 1,400 1,400
------------------------------------------------------------------------------
Total Missouri (Cost $1,400) 1,400
-------
PUERTO RICO 0.3%
Puerto Rico Commonwealth, Public Improvement,
7.00%, 7/1/97 (FGIC Insured) 250 253
------------------------------------------------------------------------------
Total Puerto Rico (Cost $253) 253
-------
</TABLE>
13
<PAGE>
T. Rowe Price New York Tax-Free Money Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
- --------------------------------------------------------------------------------
In thousands
<S> <C>
Total Investments in Securities
99.4% of Net Assets (Cost $82,211) $ 82,211
Other Assets Less Liabilities 518
-------------
NET ASSETS $ 82,729
=============
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 3
Accumulated net realized gain/loss - net of distributions (3)
Paid-in-capital applicable to 82,732,383 no par value shares
of beneficial interest outstanding; unlimited number of
shares authorized 82,729
-------------
NET ASSETS $ 82,729
=============
NET ASSET VALUE PER SHARE $ 1.00
=============
</TABLE>
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
BAN Bond Anticipation Note
BIGI Bond Investors Guaranty Insurance
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
GO General Obligation
HEFA Health & Educational Facility Authority
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
RAN Revenue Anticipation Note
TAN Tax Anticipation Note
TECP Tax-Exempt Commercial Paper
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
T. Rowe Price New York Tax-Free Bond Fund
- --------------------------------------------------------------------------------
February 28, 1997
<TABLE>
<CAPTION>
- -----------------------
Statement of Net Assets Par Value
- ----------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
NEW YORK 93.1%
Albany County Airport Auth., 5.50%, 12/15/19 (FSA Insured)* $ 2,000 $ 1,915
-------------------------------------------------------------------------------------
Battery Park City Auth.
5.25%, 11/1/17 2,500 2,316
---------------------------------------------------------------------------------
5.50%, 11/1/29 (AMBAC Insured) 2,500 2,426
-------------------------------------------------------------------------------------
Dormitory Auth. of the State of New York
City Univ.
8.20%, 7/1/13 350 375
---------------------------------------------------------------------------------
5.75%, 7/1/11 (AMBAC Insured) 2,000 2,089
-----------------------------------------------------------------------------------
Cornell Univ.
VRDN (Currently 3.30%) 600 600
---------------------------------------------------------------------------------
7.375%, 7/1/20 1,500 1,658
-----------------------------------------------------------------------------------
Dept. of Health, 6.50%, 7/1/09 500 532
-----------------------------------------------------------------------------------
Judicial Fac. (Suffolk County), 9.50%, 4/15/14 1,000 1,167
-----------------------------------------------------------------------------------
Nyack Hosp.
5.35%, 7/1/99 750 757
---------------------------------------------------------------------------------
6.00%, 7/1/06 1,750 1,781
-----------------------------------------------------------------------------------
Rockefeller Univ., 6.75%, 7/1/11 1,365 1,493
-----------------------------------------------------------------------------------
St. John's Univ., 5.70%, 7/1/26 (MBIA Insured) 2,000 1,991
-----------------------------------------------------------------------------------
St. Joseph's Hosp., 5.25%, 7/1/18 (MBIA Insured) 3,255 3,114
-----------------------------------------------------------------------------------
State Univ. Ed. Fac.
5.40%, 5/15/23 2,500 2,294
---------------------------------------------------------------------------------
7.25%, 5/15/18 (Prerefunded 5/15/02+) 1,000 1,145
---------------------------------------------------------------------------------
7.50%, 5/15/11 2,130 2,491
-----------------------------------------------------------------------------------
Vassar College
5.00%, 7/1/25 3,500 3,198
---------------------------------------------------------------------------------
7.25%, 7/1/15 500 556
-------------------------------------------------------------------------------------
Erie County Water Auth.
Zero Coupon, 12/1/17 (AMBAC Insured) 665 151
-------------------------------------------------------------------------------------
Hempstead Town IDA, American Fuel
5.00%, 12/1/09 (MBIA Insured) 2,000 1,948
-------------------------------------------------------------------------------------
Mount Sinai Union Free School Dist., GO
6.20%, 2/15/17 (AMBAC Insured) 1,025 1,122
---------------------------------------------------------------------------------
6.20%, 2/15/18 (AMBAC Insured) 515 563
-------------------------------------------------------------------------------------
Municipal Assistance Corp. for the City of New York
6.00%, 7/1/08 525 527
---------------------------------------------------------------------------------
6.875%, 7/1/07 1,500 1,544
---------------------------------------------------------------------------------
6.90%, 7/1/07 1,500 1,543
---------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
T. Rowe Price New York Tax-Free Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
7.625%, 7/1/08 $ 500 $ 531
----------------------------------------------------------------------------
Nassau County, GO, 6.50%, 11/1/13 (FGIC Insured) 3,360 3,754
----------------------------------------------------------------------------
Nassau County IDA
Cold Spring Harbor Laboratory
VRDN (Currently 3.40%) 1,800 1,800
------------------------------------------------------------------------
Hofstra Univ.
6.75%, 1/1/10 270 296
------------------------------------------------------------------------
6.90%, 1/1/14 350 385
------------------------------------------------------------------------
6.90%, 1/1/15 375 413
----------------------------------------------------------------------------
New Rochelle, GO
6.25%, 3/15/17 (MBIA Insured) 375 400
------------------------------------------------------------------------
6.25%, 3/15/18 (MBIA Insured) 400 425
------------------------------------------------------------------------
6.25%, 3/15/19 (MBIA Insured) 425 452
----------------------------------------------------------------------------
New York City, GO
5.75%, 10/15/13 1,100 1,071
------------------------------------------------------------------------
6.00%, 8/1/14 2,250 2,243
------------------------------------------------------------------------
6.25%, 8/1/09 1,750 1,818
------------------------------------------------------------------------
7.625%, 2/1/14 415 460
------------------------------------------------------------------------
7.625%, 2/1/14 (Prerefunded 2/1/02+) 85 98
------------------------------------------------------------------------
7.75%, 8/15/15 215 239
------------------------------------------------------------------------
7.75%, 8/15/15 (Prerefunded 8/15/01+) 940 1,078
----------------------------------------------------------------------------
New York City IDA
Civil Fac., YMCA Greater New York Project
5.80%, 8/1/16 500 487
------------------------------------------------------------------------
Nightingale Bamford School
5.85%, 1/15/20 1,000 998
------------------------------------------------------------------------
Solid Waste Disposal, Visy Paper
7.95%, 1/1/28 * 500 539
------------------------------------------------------------------------
Terminal One Group Assoc., 6.00%, 1/1/19 * 2,000 1,988
--------------------------------------------------------------------------
USTA National Tennis Center
6.375%, 11/15/14 (FSA Insured) 1,000 1,083
----------------------------------------------------------------------------
New York City Municipal Water Fin. Auth.
Water and Sewer
5.875%, 6/15/26 5,000 5,001
------------------------------------------------------------------------
5.00%, 6/15/17 (FGIC Insured) 2,000 1,835
----------------------------------------------------------------------------
New York City Trust for Cultural Resources
Museum of Modern Art
5.50%, 1/1/16 (AMBAC Insured) 2,000 1,963
----------------------------------------------------------------------------
</TABLE>
16
<PAGE>
T. Rowe Price New York Tax-Free Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
New York State, GO
7.125%, 11/15/16 (Prerefunded 11/15/00+) $ 500 $ 557
----------------------------------------------------------------------------
New York State Energy Research and Dev. Auth.
Con Ed., 6.75%, 1/15/27 * 2,350 2,476
----------------------------------------------------------------------------
New York State Environmental Fac. Corp., PCR
New York City Municipal Water
6.50%, 6/15/14 500 537
------------------------------------------------------------------------
7.25%, 6/15/10 500 555
------------------------------------------------------------------------
7.50%, 6/15/12 500 550
------------------------------------------------------------------------
State Water Revolving Fund
5.75%, 6/15/12 1,000 1,045
------------------------------------------------------------------------
6.90%, 5/15/15 940 1,069
------------------------------------------------------------------------
6.90%, 11/15/15 750 850
----------------------------------------------------------------------------
New York State Housing Fin. Agency
Service Contract Obligations
7.25%, 9/15/12 1,700 1,875
------------------------------------------------------------------------
7.375%, 9/15/21 (Prerefunded 3/15/02+) 150 172
------------------------------------------------------------------------
7.80%, 9/15/20 (Prerefunded 3/15/01+) 500 572
------------------------------------------------------------------------
State Univ. Construction
8.00%, 5/1/11 (Escrowed to Maturity) 1,000 1,251
----------------------------------------------------------------------------
New York State Job Dev. Auth., Special Purpose, GO
5.25%, 3/1/10 2,000 1,958
----------------------------------------------------------------------------
New York State Local Gov't. Assistance Corp.
5.00%, 4/1/23 3,000 2,675
------------------------------------------------------------------------
6.50%, 4/1/15 500 531
------------------------------------------------------------------------
6.50%, 4/1/20 3,000 3,224
------------------------------------------------------------------------
7.00%, 4/1/21 (Prerefunded 4/1/01+) 900 1,006
------------------------------------------------------------------------
Public Benefit Corp., 6.00%, 4/1/14 2,000 2,123
----------------------------------------------------------------------------
New York State Medical Care Fac. Fin. Agency
Ellis Hosp., 8.00%, 2/15/08 (FHA Guaranteed) 905 959
--------------------------------------------------------------------------
Mental Health Services
6.375%, 8/15/10 (FGIC Insured) 450 482
------------------------------------------------------------------------
New York Hosp.
6.50%, 8/15/29 (AMBAC Insured) 2,000 2,178
------------------------------------------------------------------------
St. Vincent/Staten Island Hosp.
6.125%, 2/15/14 (FHA Guaranteed) 405 420
----------------------------------------------------------------------------
</TABLE>
17
<PAGE>
T. Rowe Price New York Tax-Free Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
New York State Mortgage Agency
Homeowner Mortgage
Zero Coupon, 4/1/20 $3,955 $ 655
-----------------------------------------------------------------------
6.40%, 4/1/27 * 1,000 1,029
-----------------------------------------------------------------------
7.50%, 4/1/26 * 3,245 3,509
-----------------------------------------------------------------------
7.75%, 4/1/16 500 530
-----------------------------------------------------------------------
7.95%, 10/1/15 1,135 1,173
----------------------------------------------------------------------------
New York State Power Auth., 5.25%, 1/1/18 1,125 1,060
----------------------------------------------------------------------------
New York State Urban Dev. Corp.
Correctional Capital Fac., 7.00%, 1/1/21
(Prerefunded 1/1/02+) 500 563
-----------------------------------------------------------------------
Senior Lien Corp., 5.375%, 7/1/22 3,000 2,866
----------------------------------------------------------------------------
Newburgh, GO, 5.875%, 9/15/97 215 215
----------------------------------------------------------------------------
Niagara Frontier Transportation Airport Auth.
Greater Buffalo Int'l. Airport, 6.125%, 4/1/14
(AMBAC Insured) * 1,385 1,439
----------------------------------------------------------------------------
Onondaga County IDA, Community General Hosp.
6.625%, 1/1/18 500 512
----------------------------------------------------------------------------
Port Auth. of New York and New Jersey
5.875%, 7/1/11 * 1,000 1,037
-----------------------------------------------------------------------
6.125%, 6/1/94 1,000 1,057
-----------------------------------------------------------------------
6.50%, 11/1/26 * 1,500 1,595
-----------------------------------------------------------------------
6.50%, 7/15/19 (FGIC Insured) * 2,000 2,180
-----------------------------------------------------------------------
5.50%, 9/1/12 (MBIA Insured) * 1,000 1,003
-----------------------------------------------------------------------
6.75%, 4/15/26 (MBIA Insured) * 500 535
-----------------------------------------------------------------------
Special Project
6.50%, 10/1/01 * 600 620
-----------------------------------------------------------------------
6.75%, 10/1/11 * 1,000 1,030
----------------------------------------------------------------------------
Rensselaer County, GO
Zero Coupon, 5/1/12 (FGIC Insured) 1,000 447
-----------------------------------------------------------------------
Zero Coupon, 5/1/13 (FGIC Insured) 1,500 620
----------------------------------------------------------------------------
Suffolk County IDA, Dowling College, 6.70%, 12/1/20 1,000 1,028
----------------------------------------------------------------------------
Syracuse IDA
St. Joseph's Hosp. Health Center, 7.50%, 6/1/18
(Prerefunded 6/1/01+) 1,000 1,129
-----------------------------------------------------------------------
Syracuse Univ., VRDN (Currently 3.30%) 3,900 3,900
----------------------------------------------------------------------------
</TABLE>
18
<PAGE>
T. Rowe Price New York Tax-Free Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Triborough Bridge and Tunnel Auth.
6.625%, 1/1/12 $ 1,000 $ 1,143
-------------------------------------------------------------------------
8.125%, 1/1/12 400 421
-------------------------------------------------------------------------
General Purpose, 5.20%, 1/1/22 2,000 1,886
-----------------------------------------------------------------------------
Westchester County IDA, Wheelabrator
6.00%, 7/1/08 (AMBAC Insured) * 4,330 4,612
-----------------------------------------------------------------------------
Western Nassau County, Water Auth.
5.65%, 5/1/26 (AMBAC Insured) 1,000 989
-----------------------------------------------------------------------------
Total New York (Cost $128,128) 134,501
----------
PUERTO RICO 7.7%
Puerto Rico Aqueduct and Sewer Auth., 7.875%, 7/1/17
(Pre-refunded 7/1/98+) $ 1,000 $ 1,075
-----------------------------------------------------------------------------
Puerto Rico Commonwealth, GO
7.25%, 7/1/10 (Prerefunded 7/1/00+) 500 555
-------------------------------------------------------------------------
7.30%, 7/1/20 (Prerefunded 7/1/00+) 250 279
-------------------------------------------------------------------------
7.625%, 7/1/10 (Prerefunded 7/1/00+) 500 563
-------------------------------------------------------------------------
8.00%, 7/1/07 330 353
-------------------------------------------------------------------------
8.00%, 7/1/07 (Prerefunded 7/1/98+) 1,170 1,256
-----------------------------------------------------------------------------
Puerto Rico Electric Power Auth.
5.25%, 7/1/21 1,000 921
-------------------------------------------------------------------------
7.125%, 7/1/14 1,000 1,073
-------------------------------------------------------------------------
8.00%, 7/1/08 (Prerefunded 7/1/98+) 100 108
-----------------------------------------------------------------------------
Puerto Rico Highway and Transportation Auth.
5.00%, 7/1/36 1,000 885
-------------------------------------------------------------------------
6.375%, 7/1/08 (FSA Insured) 1,000 1,077
-----------------------------------------------------------------------------
Puerto Rico Infrastructure Fin. Auth., Special Tax
7.75%, 7/1/08 2,750 2,929
-----------------------------------------------------------------------------
Puerto Rico Public Buildings Auth., Public Ed. and
Health Fac., GO
7.875%, 7/1/16 (Prerefunded 7/1/97+) 110 114
-----------------------------------------------------------------------------
Total Puerto Rico (Cost $ 10,546) 11,188
---------
</TABLE>
19
<PAGE>
T. Rowe Price New York Tax-Free Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
- ---------------------------------------------------------------------------------------
In thousands
<S> <C>
Total Investments in Securities
100.8% of Net Assets (Cost $138,674) $ 145,689
Other Assets Less Liabilities (1,157)
-------------
NET ASSETS $ 144,532
=============
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 8
Accumulated net realized gain/loss - net of distributions (568)
Net unrealized gain (loss) 7,015
Paid-in-capital applicable to 13,382,223 no par value shares of
beneficial interest outstanding; unlimited number of shares authorized 138,077
-------------
NET ASSETS $ 144,532
=============
NET ASSET VALUE PER SHARE $ 10.80
=============
</TABLE>
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance Corp.
GO General Obligation
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
T. Rowe Price New York Tax-Free Funds
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------
Statement of Operations
- --------------------------------------------------------------------------------
In thousands Money Fund Bond Fund
Year Year
Ended Ended
2/28/97 2/28/97
<S> <C> <C>
Investment Income
Interest income $ 2,638 $ 8,169
----------------------
Expenses
Investment management 205 582
Custody and accounting 101 120
Shareholder servicing 77 137
Registration 14 7
Legal and audit 10 10
Prospectus and shareholder reports 8 15
Trustees 6 6
Miscellaneous 5 8
----------------------
Total expenses 426 885
----------------------
Net investment income 2,212 7,284
----------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (3) 67
Futures -- (36)
Written options -- 55
----------------------
Net realized gain (loss) (3) 86
----------------------
Change in net unrealized gain or loss
Securities -- (750)
Futures -- 14
----------------------
Change in net unrealized gain or loss -- (736)
----------------------
Net realized and unrealized gain (loss) (3) (650)
----------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 2,209 $ 6,634
======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
T. Rowe Price New York Tax-Free Funds
- --------------------------------------------------------------------------------
- ----------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands Money Fund Bond Fund
<TABLE>
<CAPTION>
Year Year Year Year
Ended Ended Ended Ended
2/28/97 2/29/96 2/28/97 2/29/96
<S> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets
Operations
Net investment income $ 2,212 $ 2,224 $ 7,284 $ 6,848
Net realized gain (loss) (3) -- 86 3,909
Change in net unrealized
gain or loss -- (1) (736) 1,698
---------------------------------------------
Increase (decrease) in
net assets from operations 2,209 2,223 6,634 12,455
---------------------------------------------
Distributions to shareholders
Net investment income (2,212) (2,224) (7,284) (6,848)
---------------------------------------------
Capital share transactions *
Shares sold 74,643 57,135 30,633 28,784
Distributions reinvested 2,153 2,142 5,537 5,205
Shares redeemed (65,104) (54,390) (25,921) (22,510)
---------------------------------------------
Increase (decrease) in
net assets from capital
share transactions 11,692 4,887 10,249 11,479
---------------------------------------------
Net Assets
Increase (decrease)
during period 11,689 4,886 9,599 17,086
Beginning of period 71,040 66,154 134,933 117,847
---------------------------------------------
End of period $ 82,729 $ 71,040 $144,532 $134,933
=============================================
*Share information
Shares sold 74,643 57,135 2,867 2,700
Distributions reinvested 2,153 2,142 518 488
Shares redeeemed (65,104) (54,390) (2,435) (2,115)
---------------------------------------------
Increase (decrease)
in shares outstanding 11,692 4,887 950 1,073
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
T. Rowe Price New York Tax-Free Funds
- --------------------------------------------------------------------------------
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 New York Tax-Free Money Fund (the Money
Fund) and the New York Tax-Free Bond Fund (the Bond Fund), nondiversified,
open-end management investment companies, are two of the portfolios
established by the trust and commenced operations on August 28, 1986.
Valuation Debt securities are generally traded in the over-the-counter
market. Except for securities held by the Money Fund, 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.
Securities held by the Money Fund are valued at amortized cost.
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.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objectives, the Bond Fund engages in the
following practices to manage exposure to certain risks or enhance
performance. The investment objective, policies, program, and risk factors
of the fund are
23
<PAGE>
T. Rowe Price New York Tax-Free Funds
- --------------------------------------------------------------------------------
described more fully in the fund's prospectus and Statement of Additional
Information.
Options Call and put options on futures contracts give the holder the right
to purchase or sell, respectively, a particular futures contract at a
specified price on a certain date. Risks arise from possible illiquidity of
the options market and from movements in underlying futures prices.
Transactions in options written and related premiums received for the Bond
Fund during the year ended February 28, 1997, were as follows:
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Contracts Premiums
<S> <C> <C>
Outstanding at beginning of period -- $ --
Written 88 98,000
Closed (88) (98,000)
------------------------
Outstanding at end of period -- $ --
========================
</TABLE>
Other Purchases and sales of portfolio securities for the Bond Fund, other
than short-term securities, aggregated $138,677,000 and $127,259,000,
respectively, for the year ended February 28, 1997.
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 Money Fund has unused realized capital loss carryforwards
for federal income tax purposes of $3,000, which expires in 2005. The Bond
Fund has unused realized capital loss carryforwards for federal income tax
purposes of $481,000, of which $452,000 expires in 2003, and $29,000 in 2005.
Each fund intends to retain gains realized in future periods that may be
offset by available capital loss carryforwards.
In order for the Bond Fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, 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.
24
<PAGE>
T. Rowe Price New York Tax-Free Funds
- --------------------------------------------------------------------------------
-----------------------------------------------------------------------------
<TABLE>
<S> <C>
Undistributed net investment income $ 3,000
Undistributed net realized gain (14,000)
Paid-in-capital 11,000
</TABLE>
At February 28, 1997, the aggregate costs of investments for the Money and
Bond Funds for federal income tax and financial reporting purposes were
$82,211,000 and $138,674,000, respectively. For the Money Fund, amortized
cost is equivalent to value; and for the Bond Fund, net unrealized gain
aggregated $7,015,000, of which $7,263,000 related to appreciated investments
and $248,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between each fund and the manager
provides for an annual investment management fee, of which $13,000 and
$46,000 were payable at February 28, 1997, by the Money and Bond Funds,
respectively. The fee is computed daily and paid monthly, and consists of an
individual fund fee equal to 0.10% of average daily net assets and a group
fee. The group fee is based on the combined assets of certain mutual funds
sponsored by the manager or Price Associates (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, 1997, for the Money and
Bond Funds which would cause each fund's ratio of expenses to average net
assets to exceed 0.55% and 0.65%, respectively. Pursuant to this agreement,
$127,000 and $3,000 of management fees were not accrued by the Money and Bond
Funds for the year ended February 28, 1997, and $131,000 and $5,000,
respectively, remain unaccrued from the prior period. Subject to shareholder
approval, each fund may reimburse the manager for these expenses, provided
that average net assets have grown or expenses have declined sufficiently to
allow reimbursement without causing each fund's ratio of expenses to average
net assets to exceed 0.55% and 0.65%, respectively.
25
<PAGE>
T. Rowe Price New York Tax-Free Funds
- --------------------------------------------------------------------------------
In addition, each fund has entered into agreements with the manager and a
wholly owned subsidiary of the manager, pursuant to which each fund receives
certain other services. The manager computes the daily share price and
maintains the financial records of each fund. T. Rowe Price Services, Inc.,
is each fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the funds. The Money and Bond
Funds incurred expenses pursuant to these related party agreements totaling
approximately $125,000 and $174,000, respectively, for the year ended
February 28, 1997, of which $11,000 and $17,000, respectively, were payable
at period-end.
26
<PAGE>
T. Rowe Price New York Tax-Free Funds
- --------------------------------------------------------------------------------
- ---------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
T. Rowe Price New York Tax-Free Funds
We have audited the accompanying statement of net assets of T. Rowe Price New
York Tax-Free Money Fund and T. Rowe Price New York Tax-Free Bond Fund (two
of the portfolios comprising the T. Rowe Price State Tax-Free Income Trust)
as of February 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 each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments owned as of February 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 New York Tax-Free Money Fund and T. Rowe Price New York 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 periods
presented, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
March 19, 1997
27
<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(R) 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.
28
<PAGE>
T. Rowe Price Mutual Funds
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STOCK FUNDS BOND FUNDS
- ------------------------ ------------------------ -----------------------
<S> <C> <C>
Domestic Domestic Taxable International/Global
Balanced Corporate Income Global Government Bond
Blue Chip Growth GNMA Emerging Markets Bond
Capital Appreciation High Yield International Bond
Capital Opportunity New Income
Dividend Growth Short-Term Bond MONEY MARKET FUNDS
Equity Income Short-Term U.S. Government ------------------
Equity Index Spectrum Income
Financial Services Summit GNMA Taxable
Growth & Income Summit Limited-Term Bond Prime Reserve
Growth Stock U.S. Treasury Intermediate Summit Cash Reserves
Health Sciences U.S. Treasury Long-Term U.S. Treasury Money
Mid-Cap Growth
Mid-Cap Value Domestic Tax-free Tax-Free
New America Growth California Tax-Free Bond California Tax-Free Money
New Era Florida Insured New York Tax-Free Money
New Horizons* Intermediate Tax-Free Summit Municipal
OTC** Georgia Tax-Free Bond Money Market
Science & Technology Maryland Short-Term Tax-Exempt Money
Small-Cap Value* Tax-Free Bond
Spectrum Growth Maryland Tax-Free Bond BLENDED ASSET FUNDS
Value New Jersey Tax-Free Bond -------------------
New York Tax-Free Bond
International/Global Summit Municipal Income Personal Strategy Income
Emerging Markets Stock Summit Municipal Intermediate Personal Strategy Balanced
European Stock Tax-Free High Yield Personal Strategy Growth
Global Stock Tax-Free Income
International Discovery Tax-Free Insured T. ROWE PRICE NO-LOAD
International Stock Intermediate Bond VARIABLE ANNUITY
Japan Tax-Free Short-Intermediate ---------------------
Latin America Virginia Short-Term
New Asia Tax-Free Bond Equity Income Portfolio
Spectrum International Virginia Tax-Free Bond International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
</TABLE>
*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.
29
<PAGE>
For yield, price, last transaction, Investor Centers:
current balance, or to conduct 101 East Lombard St.
transactions, 24 hours, 7 days Baltimore, MD 21202
a week, call Tele*Access(R):
1-800-638-2587 toll free T. Rowe Price
Financial Center
For assistance 10090 Red Run Blvd.
with your existing Owings Mills, MD 21117
fund account, call:
Shareholder Service Center Farragut Square
1-800-225-5132 toll free 900 17th Street, N.W.
625-6500 Baltimore area Washington, D.C. 20006
To open a Discount Brokerage
account or obtain information, ARCO Tower
call: 1-800-638-5660 toll free 31st Floor
515 South Flower St.
Internet address: Los Angeles, CA 90071
http://www.troweprice.com
4200 West Cypress St.
T. Rowe Price Associates 10th Floor
100 East Pratt Street Tampa, FL 33607
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 York Tax-Free Funds.
Invest With Confidence(R)
T.Rowe Price [LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor. RPRTNYC 2/28/97
