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T. Rowe Price
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Semiannual Report
Virginia Tax-Free Funds
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August 31, 1998
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REPORT HIGHLIGHTS
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Virginia Tax-Free Funds
* Low inflation, budget surpluses, and cash flows into fixed income
investments benefited municipal securities nationwide and in Virginia
during the past six months.
* Your funds matched or outpaced their peer group averages for both the 6-
and 12-month periods.
* Virginia Short-Term Tax-Free Bond Fund benefited from an aggressive
duration strategy and by shifting some assets to higher-paying market
sectors.
* Virginia Tax-Free Bond Fund's emphasis on 15- to 20-year bonds helped
performance.
* Municipal securities offer good value compared with taxable counterparts,
which should reward investors in this market over time.
<PAGE>
FELLOW SHAREHOLDERS
Low inflation, budget surpluses at the federal and state levels, and asset
shifts toward fixed income investments aided the municipal market during the six
months ended August 31. Your funds benefited in this environment, turning in
performances on a par with or ahead of their benchmarks for the past 6- and
12-month periods, a reflection of our portfolio management decisions and
below-average expenses.
MARKET ENVIRONMENT
[Insert Virginia Bond Yield Index chart here. Edgar description: chart
showing Virginia Bond Index and Virginia 3-Year General Obligation Bond for
8/31/97 through 8/31/98.]
Municipal bond prices rose during the past six months, and yields across
the maturity spectrum fell as a result. These gains owed largely to excellent
economic conditions in individual states as well as nationwide. The performance
of tax-exempt securities exceeded most asset classes but was not as strong as
the Treasury market, which further solidified its position as a safe haven for
global investors seeking refuge from problems in Asia, Russia, and Latin
America.
The gap between yields on municipal and Treasury securities continued to
narrow, making tax-exempt investments particularly attractive compared with
Treasuries. A near-record supply of tax-exempt bond issues constrained the
municipal market somewhat throughout the year and contributed to the contracting
yield spread. During the same period, Treasury issuance continued to decline.
The 30-year AAA general obligation bond yield fell 15 basis points (100
basis points equal one percent) from the end of February through August 31. By
comparison, the bellwether 30-year Treasury yield declined 60 basis points,
including a 40-basis point drop in August alone. When income taxes are taken
into account, municipals now yield substantially more than most other types of
bonds.
<PAGE>
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Preparing For The Year 2000
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The Year 2000 draws closer every day, and it holds special meaning beyond
the arrival of a new millennium. The issue for investors is that many computer
programs throughout the world use two digits instead of four to identify the
year and may assume the next century starts with 1900. If these programs are not
modified, they will not be able to correctly handle the century change when the
year changes from "99" to "00" on January 1, 2000, and they will no longer be
able to perform necessary functions. The Year 2000 issue affects all companies
and organizations. T. Rowe Price has been taking steps to assure that its
computer systems and processes are capable of functioning in the Year 2000.
Detailed plans for remediation efforts have been developed and are currently
being executed.
OUR PLAN OF ACTION
We began to address these issues several years ago by requiring that all
new systems process and store four-digit years. We plan to complete all
reprogramming efforts for the major application systems, including business
applications required to service our customers and processing infrastructure
necessary to ensure the integrity of customer data and investments, by December
31, 1998, leaving a full 12 months for system testing. Because we exchange data
electronically with customers and vendors, we are working with them to assess
the adequacy of their own compliance efforts. Our goal is to ensure the
continuation of the same level of service to all our mutual fund shareholders
and clients after December 31, 1999.
We are asking all vendors and companies we do business with for a Year 2000
compliance status, with the expectation that some organizations will not be able
to modify their interface files prior to December 31, 1999. Our goal is to
identify any noncompliant files so that we can implement alternative solutions.
In addition, we are scheduling tests for critical vendors and companies that
claim Year 2000 compliance to ensure that time-related data and calculations
function properly as we move into the next century.
SMOOTH TRANSITION EXPECTED
We believe our programs and initiatives will provide a smooth transition
into the next millennium. We are assessing all systems providing products or
services to our retail mutual fund shareholders, retirement plan sponsors and
participants, and we are taking steps to make modifications where necessary for
the Year 2000. Our plan provides time to develop solutions for all noncompliant
systems and data files from customers or vendors.
<PAGE>
The Securities Industry Association (SIA) is coordinating Year 2000 testing
to assure that securities markets, clearing corporations, depositories, and
third party software and hardware vendors can send, receive, and process files
and transactions accurately. T. Rowe Price will participate in this
industry-wide effort.
For a more detailed discussion of our Year 2000 effort, as well as
continuing updates on our progress, please check our Web site
(WWW.TROWEPRICE.COM).
================================================================================
The Virginia economy continued to be exemplary. State employment grew at a
3% rate, better than the 2% national average. Likewise, unemployment rates were
favorable at 3%-approximately 70% of the U.S. average. About 60% of the new jobs
created in fiscal year 1998 were in the services sector; high-tech manufacturing
and construction also experienced significant job gains. The outcome has been
continued diversification in the state's employment base, away from a dependence
on federal employment.
Virginia's credit remains very high, supported by conservative fiscal
policies. Actual revenue growth for the fiscal year ended June 30, 1998,
exceeded projections at 10.4%, reflecting a 14.3% increase in personal income
tax receipts. The unreserved general fund balance increased to 13% of
expenditures from 9% last year. Legislation was passed in 1998 to phase out the
personal property tax over five years and monies from the general fund will be
used to offset the revenue loss to local governments. As a result, we do not
expect any serious credit impact from this initiative. Statewide, the supply of
long-term municipal bond issues has increased 76% year-to-date, largely because
of the favorable interest rate environment.
VIRGINIA SHORT-TERM TAX-FREE BOND FUND
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Performance Comparison
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Periods Ended 8/31/98 6 Months 12 Months
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Virginia Short-Term
Tax-Free Bond Fund 2.23% 4.79%
Lipper Short Municipal
Debt Funds Average 2.19 4.77
================================================================================
<PAGE>
Your fund gained 2.23% over the last six months and 4.79% for the 12-month
period, staying just ahead of the Lipper Short Municipal Debt Funds Average for
the same periods. The fund's gains largely reflected its income distribution to
shareholders, which has remained fairly consistent over the past 18 months
despite falling interest rates. In general, performance continues to meet our
broader objective of providing higher income than a tax-free money market fund
with only moderate price fluctuation. Over the last 6- and 12-month periods,
national tax-exempt money funds returned 1.5% and 3.04%, respectively, as
measured by Lipper Analytical Services.
Our strategy for the last six months was to maintain the relatively
aggressive duration reached at the end of 1997. (Duration is a measure of price
sensitivity to changes in interest rates. A fund having a duration of two years
will have a 2% appreciation or decline in price in response to a
one-percentage-point fall or rise, respectively, in interest rates.) At that
time, duration had been extended from 1.8 to 2.5 years because of relatively low
inflation and our belief that the Federal Reserve would not increase the federal
funds target rate. Problems in Asia, which have now spilled into Russia and
Latin America, put additional pressure on the Fed to maintain the status quo, or
even to lower rates. Therefore, we chose to maintain duration around 2.4 years
fairly long in our universe - where yields are more attractive.
The significant amount of new issuance in the state, as well as activity in
the secondary market, provided opportunities to trade into sectors with slightly
more yield. We increased solid waste and hospital revenue bond exposures while
trimming prerefunded and general obligation sectors. However, the fund still
maintains a fairly large position in prerefunded bonds, partly because of the
availability of these issues in our market, and partly because we did not want
to sell holdings that would cause the fund to realize significant taxable
capital gains. The portfolio's overall credit quality improved slightly, from AA
six months ago to AA+ at the period's end.
VIRGINIA TAX-FREE BOND FUND
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Performance Comparison
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Periods Ended 8/31/98 6 Months 12 Months
Virginia Tax-Free
Bond Fund 3.72% 8.73%
Lipper Virginia Municipal
Debt Funds Average 3.18 8.38
================================================================================
<PAGE>
In contrast to the volatile equity markets, your fund maintained steady
performance for the six-month period, as it has over longer periods. Its 3.72%
six-month and 8.73% one-year returns easily surpassed the 6- and 12-month gains
for the Lipper Virginia Municipal Debt Funds Average, as shown in the table. The
fund achieved this outperformance through a combination of steady income, some
price appreciation as yields declined over the summer, and low expenses relative
to our peer group average.
Over the past six months we made modest shifts in our interest rate
strategy. We extended the fund's duration to 7.4 years at the end of August from
6.8 years this past February to better take advantage of falling interest
rates(See the Virginia Short-Term Tax-Free Bond Fund report for a definition of
duration.) We felt that the global low-inflation environment, as well as
investor concern about some foreign markets, would lead to lower interest
rates-even though rates are already near the bottom of historical ranges. In
addition, we shifted the maturity emphasis of the fund by reducing our position
in volatile 30-year issues while increasing holdings in the less risky 15- to
20-year maturity range. We felt this positioning would soften the negative
impact of rising interest rates on the portfolio should our outlook be wrong.
Some of our best-performing holdings for the period were in the 15- to 20-year
range.
==============================
We continued to emphasize
noncallable bonds . . . when
we could find them.
- ------------------------------
We continued to emphasize noncallable bonds in the fund when we could find
them, a strategy that contributed to performance. During the period, we raised
the noncallable portion of our 10 year-and-longer bonds from 15% to 20% of
assets. Noncallable bonds perform better in periods of rapidly falling interest
rates and have more stable durations than similar callable bonds. The
frustration of call risk was brought home during the period when the Virginia
Housing Authority called (that is, paid off prematurely) high-coupon housing
bonds amounting to about 3% of the portfolio. Despite our best efforts to look
into the crystal ball and predict when calls might come (we had earlier sold
other housing positions), we could not prevent the loss of these holdings. As a
result, the housing portion of the portfolio underperformed the municipal market
this period. The fact that the fund comfortably outperformed its peer group
averages nonetheless highlights one of the benefits of owning a diversified
mutual fund rather than individual securities. We expect our remaining housing
bonds to be good, long-term performers for the fund, and we will rebuild our
housing position opportunistically.
<PAGE>
The overall average credit quality of the fund remained quite high.
Municipal bond investors showed a preference for higher-quality bonds during the
period, a trend that benefited our performance. Because Virginia's market is
generally of very high quality, we have stayed with a higher-quality portfolio,
adding to lower-rated bonds only modestly and after rigorous proprietary
research. As the portfolio grows, we seek to hold a geographically diversified
portfolio that benefits from the general high quality of issuers around the
state. Unless lower-quality bond yields become more attractive, we do not expect
to increase our holdings in noninvestment-grade bonds.
OUTLOOK
Fed chairman Alan Greenspan recently suggested that the next move by the
Fed could well be a lowering of key short-term rates in the face of turmoil
overseas. Just weeks before, it was widely anticipated that the Fed was leaning
toward a possible interest rate hike because of concerns about tight labor
markets and wage pressures.
We believe the rate of growth for the domestic economy as a whole will slow
through the remainder of the year. Exports may fall further because of weak
international markets and the strength of the U.S. dollar, and consumer spending
could decline in the aftermath of the correction in stock prices. Commodity
prices have also been under pressure, further restraining inflation. In this
environment, the trend toward lower overall interest rates should remain intact,
in our view. Virginia's economy will reflect national trends but should retain
somewhat stronger growth rates.
We expect municipal securities to remain undervalued compared with
Treasuries until demand catches up with heavy supply, which could rise further
in the fall following the pattern of recent years. However, investors should
eventually recognize the attractive yields available in the municipal market
compared with taxable-bond yields, and rising demand would benefit municipal
bond investors over the long term.
Respectfully submitted,
/s/
Charles B. Hill
Chairman of the Investment Advisory Committee
Virginia Short-Term Tax-Free Bond Fund
/s/
Hugh D. McGuirk
Chairman of the Investment Advisory Committee
Virginia Tax-Free Bond Fund
September 23, 1998
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
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================================================================================
Portfolio Highlights
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Key statistics
2/28/98 8/31/98
Virginia Short-Term Tax-Free Bond Fund
Price Per Share ...................................... $ 5.15 $ 5.16
Dividends Per Share
For 6 months .................................... 0.10 0.09
For 12 months ................................... 0.19 0.19
Dividend Yield *
For 6 months .................................... 3.83% 3.66%
For 12 months ................................... 3.88 3.77
30-Day Standardized Yield ............................ 3.30 3.38
Weighted Average Maturity (years) .................... 2.8 2.7
Weighted Average Effective Duration (years) .......... 2.5 2.4
Weighted Average Quality ** .......................... AA AA+
Virginia Tax-Free Bond Fund
Price Per Share ...................................... $11.45 $11.53
Dividends Per Share
For 6 months .................................... 0.29 0.28
For 12 months ................................... 0.57 0.56
Dividend Yield *
For 6 months .................................... 5.12% 4.92%
For 12 months ................................... 5.24 5.08
30-Day Standardized Yield ............................ 4.29 4.29
Weighted Average Maturity (years) .................... 17.3 16.9
Weighted Average Effective Duration (years) .......... 6.8 7.4
Weighted Average Quality ** .......................... AA- AA-
* 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.
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
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================================================================================
Portfolio Highlights
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Sector Diversification
Percent of Percent of
Net Assets Net Assets
2/28/98 8/31/98
Virginia Short-Term Tax-Free Bond Fund
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Prerefunded Bonds ...................................... 44% 41%
General Obligation - Local ............................. 19 15
Solid Waste Revenue .................................... 2 9
Hospital Revenue ....................................... 2 9
Water and Sewer Revenue ................................ 10 9
Industrial and Pollution Control Revenue ............... 3 4
Ground Transportation Revenue .......................... 5 4
Educational Revenue .................................... -- 2
Air and Sea Transportation Revenue ..................... 3 2
General Obligation - State ............................. 6 2
All Other .............................................. 5 4
Other Assets Less Liabilities .......................... 1 -1
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Total .................................................. 100% 100%
Virginia Tax-Free Bond Fund
Hospital Revenue ....................................... 20% 21%
Prerefunded Bonds ...................................... 10 12
General Obligation - Local ............................. 8 9
Housing Finance Revenue ................................ 11 8
Lease Revenue .......................................... 6 7
Industrial and Pollution Control Revenue ............... 6 6
General Obligation - State ............................. 6 6
Educational Revenue .................................... 8 6
Solid Waste Revenue .................................... 2 4
Dedicated Tax Revenue .................................. 5 4
Air and Sea Transportation Revenue ..................... 7 3
Ground Transportation Revenue .......................... -- 3
Miscellaneous Revenue .................................. 3 3
Life Care/Nursing Home Revenue ......................... 1 3
Escrowed to Maturity ................................... 2 2
All Other .............................................. 7 3
Other Assets Less Liabilities .......................... -2 --
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Total .................................................. 100% 100%
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
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================================================================================
Performance Comparison
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These charts show the value of a hypothetical $10,000 investment in each
fund over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[Virginia Short-Term Tax-Free Bond Fund graph shown here]
[Virginia Tax-Free Bond Fund graph shown here]
================================================================================
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.
================================================================================
Since Inception
Periods Ended 8/31/98 1 Year 3 Years 5 Years Inception Date
Virginia Short-Term
Tax-Free Bond Fund 4.79% 4.23% -- 5.01% 11/30/94
Virginia Tax-Free Bond Fund 8.73 7.92 6.11% 7.88 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 Virginia Short-Term Tax-Free Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
6 Months Year 11/30/94
Ended Ended Through
8/31/98 2/28/98 2/28/97 2/29/96 2/28/95
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period .................. $ 5.15 $ 5.13 $ 5.16 $ 5.06 $ 5.00
Investment activities
Net investment income .......... 0.09* 0.19* 0.20* 0.21* 0.05*
Net realized and
unrealized gain (loss) ......... 0.02 0.03 (0.03) 0.11 0.06
Total from
investment activities .......... 0.11 0.22 0.17 0.32 0.11
Distributions
Net investment income .......... (0.09) (0.19) (0.20) (0.21) (0.05)
Net realized gain .............. (0.01) (0.01) -- (0.01) --
Total distributions ............ (0.10) (0.20) (0.20) (0.22) (0.05)
NET ASSET VALUE
End of period ........................ $ 5.16 $ 5.15 $ 5.13 $ 5.16 $ 5.06
Ratios/Supplemental Data
Total return^ ........................ 2.23%* 4.48%* 3.33%* 6.43%* 2.28%*+
Ratio of expenses to
average net assets ................... 0.63%*+ 0.65%* 0.65%* 0.65%* 0.65%*+
Ratio of net investment
income to average
net assets ........................... 3.63%*+ 3.81%* 3.84%* 4.07%* 4.43%*+
Portfolio turnover rate .............. 16.2% 75.0% 32.5% 36.4% 14.8%+
Net assets, end of period
(in thousands) ....................... $ 24,412 $ 20,361 $ 16,314 $ 12,480 $ 4,965
<FN>
^ Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming
reinvestment of all distributions.
* Excludes expenses in excess of a 0.65% voluntary expense limitation in effect through 6/30/98, and a 0.60% voluntary expense
limitation in effect from 7/1/98 through 2/29/00.
+ Annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price Virginia Tax-Free Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
6 Months Year
Ended Ended
8/31/98 2/28/98 2/28/97 2/29/96 2/28/95 2/28/94
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ........... $ 11.45 $ 11.05 $ 11.09 $ 10.56 $ 11.00 $ 11.06
Investment activities
Net investment income ... 0.28 0.57 0.57* 0.57* 0.57* 0.56*
Net realized and
unrealized gain (loss) .. 0.13 0.40 (0.04) 0.53 (0.43) 0.09
Total from
investment activities ... 0.41 0.97 0.53 1.10 0.14 0.65
Distributions
Net investment income ... (0.28) (0.57) (0.57) (0.57) (0.57) (0.56)
Net realized gain ....... (0.05) -- -- -- (0.01) (0.15)
Total distributions ..... (0.33) (0.57) (0.57) (0.57) (0.58) (0.71)
NET ASSET VALUE
End of period ................. $ 11.53 $ 11.45 $ 11.05 $ 11.09 $ 10.56 $ 11.00
Ratios/Supplemental Data
Total returns ................. 3.72% 9.03% 5.00%* 10.69%* 1.51%* 5.99%*
Ratio of expenses to
average net assets ............ 0.58%+ 0.58% 0.65%* 0.65%* 0.65%* 0.65%*
Ratio of net investment
income to average
net assets .................... 4.87%+ 5.12% 5.23%* 5.27%* 5.49%* 5.03%*
Portfolio turnover rate ....... 28.1% 64.3% 66.2% 93.7% 89.1% 61.8%
Net assets, end of period
(in thousands) ................ $ 258,419 $ 238,282 $ 195,783 $ 178,750 $ 155,278 $ 168,715
<FN>
^ Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming
reinvestment of all distributions.
* Excludes expenses in excess of a 0.65% voluntary expense limitation in effect through 2/28/97.
+ Annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Virginia Short-Term Tax-Free Bond Fund
================================================================================
Unaudited August 31, 1998
================================================================================
Statement of Net Assets
Par Value
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In thousands
VIRGINIA 96.0%
Abington IDA, Johnston Memorial Hosp., 5.00%, 7/1/02 ....... $ 765 $ 791
Alexandria IDA, Ogden Martin, VRDN (Currently 3.35%) * ..... 200 200
Arlington County, GO, 5.40%, 8/1/01 ........................ 1,000 1,047
Arlington County IDA, Alexandria/Arlington Waste to Energy
5.00%, 1/1/02 (FSA Insured) ................ 1,000 1,032
Augusta County IDA, Augusta Hosp
6.10%, 9/1/00 (AMBAC Insured) .............. 60 63
Bedford County IDA, Georgia-Pacific, 4.60%, 8/1/04 ......... 500 505
Chesapeake Bay Bridge and Tunnel Dist
5.10%, 7/1/01 (FGIC Insured) ............... 945 978
6.375%, 7/1/22 (MBIA Insured)
(Prerefunded 7/1/01+) ...................... 690 751
Fairfax County, GO, Public Improvement, 5.50%, 6/1/01 ...... 675 707
Fairfax County
Sewer
5.625%, 7/15/01 ............................ 1,000 1,051
7.00%, 11/15/16 (AMBAC Insured)
(Prerefunded 11/15/99+) .................... 150 159
Fairfax County Economic Dev. Auth., Ogden Martin
7.20%, 2/1/99 * ............................ 450 457
Fairfax County IDA, Fairfax Hosp. System
VRDN (Currently 3.22%) ..................... 100 100
Fairfax County Water Auth
6.125%, 1/1/29 (Prerefunded 1/1/00+) ....... 250 258
7.30%, 1/1/21 (Prerefunded 1/1/00+) ........ 265 283
Hampton, GO, 6.625%, 1/1/10 (Prerefunded 1/1/00+) .......... 100 106
Henrico County IDA, Bon Secours Health, St. Mary's Hosp
7.50%, 9/1/07 (Prerefunded 8/1/00+) ........ 700 755
Hopewell IDA
Westport Convalescent Center
5.45%, 10/1/02 ............................. 220 224
5.60%, 10/1/03 ............................. 235 241
Leesburg Utility System, 6.30%, 7/1/17 (MBIA Insured) ...... 500 552
Northern Virginia Transportation Dist., Commuter Rail
7.00%, 7/1/05 (FSA Insured)
(Prerefunded 7/1/00+) ...................... $ 970 $ 1,045
Peninsula Port Auth., Riverside Health, 5.90%, 7/1/00 ...... 120 125
<PAGE>
Petersburg Hosp. Auth., Southside Regional Med. Center
5.60%, 7/1/00 .............................. 300 309
Portsmouth, GO
5.60%, 8/1/01 .............................. 500 525
Public Improvement
5.90%, 11/1/01 ............................. 125 133
6.10%, 11/1/03 ............................. 750 811
Prince William County Service Auth., Water and Sewer
6.00%, 7/1/00 (FGIC Insured) ............... 1,000 1,041
Richmond Metropolitan Auth., Expressway
5.75%, 7/15/22 (FGIC Insured) .............. 320 342
Roanoke, GO, 5.80%, 8/1/00 ................................. 500 520
Roanoke IDA, Roanoke Memorial Hosp
Carilion Health System
VRDN (Currently 3.30%) ..................... 500 500
VRDN (Currently 3.35%) ..................... 300 300
6.50%, 7/1/25 (MBIA Insured)
(Prerefunded 7/1/00+) ...................... 2,000 2,100
Southeastern Public Service Auth.,
5.00%, 7/1/03 (AMBAC Insured) .............. 545 560
Upper Occoquan Sewage Auth
6.50%, 7/1/17 (MBIA Insured)
(Prerefunded 7/1/01+) ...................... 1,205 1,315
Virginia, GO, 5.00%, 6/1/02 ................................ 500 522
Virginia Public School Auth., 6.00%, 8/1/01 ................ 200 212
Virginia Beach, GO, 6.70%, 3/1/05 (Prerefunded 3/1/01+) .... 600 651
Virginia College Building Auth
Hampton Univ., 5.20%, 4/1/02 ....................... 435 453
Univ. of Richmond, VRDN (Currently 3.25%) .......... 100 100
Virginia Public Building Auth
6.50%, 8/1/11 (Prerefunded 8/1/01+) ........ 1,000 1,092
Virginia Public School Auth
6.20%, 1/1/05 (Prerefunded 1/1/00+) ........ 500 526
Total Virginia (Cost $23,161) .............................. 23,442
DISTRICT OF COLUMBIA 2.1%
Metropolitan Washington D.C. Airports Auth.
6.00%, 10/1/00 (MBIA Insured) * ............ $ 500 $ 522
Total District of Columbia (Cost $512) ..................... 522
PUERTO RICO 2.1%
Puerto Rico Ind. Medical and Environmental, PCR
4.25%, 9/1/03 .............................. 500 506
Total Puerto Rico (Cost $500) ............................. 506
<PAGE>
U. S. VIRGIN ISLANDS 1.3%
Virgin Island Water and Power Auth., 5.00%, 7/1/02 ......... 300 308
Total U. S. Virgin Islands (Cost $305) .................... 308
Total Investments in Securities
101.5% of Net Assets (Cost $24,478) ........................ $ 24,778
Other Assets Less Liabilities .............................. (366)
NET ASSETS ................................................. $ 24,412
Net Assets Consist of:
Accumulated net investment income - net of distributions ... $ 1
Accumulated net realized gain/loss - net of distributions .. (9)
Net unrealized gain (loss) ................................. 300
Paid-in-capital applicable to 4,730,501 shares no par value
shares of beneficial interest outstanding; unlimited
number of shares authorized ................................ 24,120
NET ASSETS ................................................. $ 24,412
NET ASSET VALUE PER SHARE .................................. $ 5.16
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GO General Obligation
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Virginia Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Unaudited August 31, 1998
================================================================================
Statement of Net Assets
Par Value
- --------------------------------------------------------------------------------
In thousands
VIRGINIA 89.3%
Alexandria IDA, Ogden Martin, VRDN (Currently 3.35%) * ....... $1,400 $1,400
Alexandria Redev. and Housing Auth., Residential Care Fac ....
Goodwin House, 6.60%, 10/1/26 ........................ 2,000 2,088
Arlington County, GO
5.375%, 12/1/12 .............................. 1,000 1,073
6.00%, 6/1/11 ................................ 1,000 1,152
Arlington County IDA
Arlington Hosp .......................................
7.00%, 9/1/11 (Prerefunded 9/1/01+) .......... 1,205 1,336
The Nature Conservancy, 5.40%, 7/1/17 ................ 1,815 1,884
Augusta County Service Auth., Water and Sewer
5.00%, 11/1/24 (MBIA Insured) ................ 2,000 1,977
Bedford County IDA, Nekoosa Packaging/Georgia-Pacific
5.60%, 12/1/25 * ............................. 5,000 5,067
Chesapeake Water and Sewer, GO, 5.375%, 12/1/20 .............. 500 515
Covington and Alleghany County IDA, PCR, Westvaco
6.65%, 9/1/18 ................................ 1,500 1,675
Danville, GO, 7.25%, 3/1/07 (Prerefunded 3/1/99+) ............ 210 218
Danville IDA
Danville Regional Med. Center
5.20%, 10/1/18 (AMBAC Insured) ............... 5,000 5,196
6.50%, 10/1/24 (FGIC Insured) ................ 3,000 3,420
Fairfax County Economic Dev. Auth., Ogden Martin
7.75%, 2/1/11 * .............................. 2,000 2,091
Fairfax County Housing Auth., FCRHA Office Building
7.50%, 6/15/18 ............................... 2,175 2,492
Fairfax County IDA
Fairfax Hosp. System, VRDN (Currently 3.22%) ......... 1,400 1,400
Inova Health
5.00%, 8/15/25 ............................... 1,500 1,472
6.00%, 8/15/26 ............................... 3,315 3,616
Fairfax County Water Auth ....................................
5.80%, 1/1/16 (Escrowed to Maturity) ......... 4,690 5,129
Frederick County IDA, Gov't. Complex Fac .....................
6.50%, 12/1/14 (MBIA Insured) ................ 1,500 1,688
Fredericksburg IDA
Hosp. Fac. (MWH MediCorp Obligated Group)
Residual Interest Bond / Inverse Floater
(Currently 9.519%), 8/15/23 (FGIC Insured)
(Prerefunded 8/15/01+) ....................... $3,000 $3,570
<PAGE>
George Mason Univ., 6.375%, 2/1/13 (MBIA Insured) ............ 1,415 1,599
Giles County IDA, Hoechst Celanese, 6.625%, 12/1/22 * ........ 1,485 1,615
Halifax County IDA, Halifax Regional Long-Term Care
5.625%, 7/1/12 ............................... 1,585 1,596
Hampton, Museum, 7.30%, 1/1/14 (Prerefunded 1/1/00+) ......... 1,100 1,172
Hampton IDA, Sentara Health, 5.375%, 11/1/15 ................. 5,300 5,482
Hampton Roads Medical College
6.875%, 11/15/11 ............................. 1,500 1,638
6.875%, 11/15/16 ............................. 500 555
Hampton Roads Regional Jail Auth .............................
5.625%, 7/1/16 (MBIA Insured) ................ 1,575 1,685
Hanover County IDA
Memorial Regional Medical Center
6.375%, 8/15/18 (MBIA Insured) ............... 2,185 2,593
6.50%, 8/15/10 (MBIA Insured) ................ 1,300 1,544
Henrico County IDA
Bon Secours Health
6.25%, 8/15/20 (MBIA Insured) ................ 1,750 2,064
Bon Secours Health, St. John's Hosp ..................
7.50%, 9/1/15 (Prerefunded 7/1/00+) .......... 1,700 1,845
Bon Secours Health, St. Mary's Hosp ..................
6.00%, 8/15/16 (MBIA Insured) ................ 1,045 1,192
7.50%, 9/1/07 (Prerefunded 8/1/00+) .......... 350 378
Browning Ferris, 5.45%, 1/1/14 * ..................... 1,000 1,055
Regional Jail
6.00%, 8/1/15 ................................ 2,415 2,597
7.00%, 8/1/13 ................................ 1,485 1,739
Henry County IDA, Memorial Hosp., 6.00%, 1/1/27 .............. 4,250 4,601
Hopewell IDA
Colonial Heights Convalescent Center
5.75%, 10/1/04 ............................... 150 154
Forest Hill Convalescent Center
4.75%, 10/1/98 ............................... 125 125
5.60%, 10/1/03 ............................... 100 103
5.90%, 10/1/05 ............................... 240 249
Hopewell IDA
Westport Convalescent Center
4.75%, 10/1/98 ............................... $ 100 $ 100
5.75%, 10/1/04 ............................... 290 300
Isle of Wight IDA, Union Camp, 6.55%, 4/1/24 * ............... 4,250 4,674
Loudoun County, GO, 5.25%, 12/1/13 ........................... 1,360 1,445
Lynchburg IDA
Centra Health
Zero Coupon, 8/15/24 ......................... 5,000 1,150
5.20%, 1/1/23 ................................ 1,000 1,003
5.20%, 1/1/28 ................................ 1,000 1,002
5.25%, 1/1/11 ................................ 1,890 1,963
5.375%, 1/1/13 ............................... 1,000 1,037
Manassas, GO, 5.25%, 1/1/11 .................................. 1,550 1,652
<PAGE>
Martinsville IDA
Memorial Hosp. of Martinsville and Henry County
7.00%, 1/1/11 (Prerefunded 1/1/01+) .......... 950 1,016
Medical College of Virginia Hosp. Auth .......................
5.25%, 7/1/14 (MBIA Insured) ................. 3,185 3,313
5.25%, 7/1/15 (MBIA Insured) ................. 3,350 3,491
Newport News, GO, 5.625%, 7/1/14 (MBIA Insured) .............. 4,030 4,336
Newport News Redev. and Housing Auth., 5.85%, 12/20/30 ....... 1,400 1,466
Norfolk, GO
5.00%, 7/1/12 ................................ 2,245 2,313
5.25%, 6/1/13 ................................ 1,000 1,044
5.25%, 6/1/14 ................................ 2,750 2,863
Norfolk IDA
Children's Hosp. of The King's Daughters
7.00%, 6/1/11 (AMBAC Insured)
(Prerefunded 6/1/01+) ........................ 1,150 1,266
Sentara Hosp .........................................
7.00%, 11/1/20 (Prerefunded 11/1/00+) ........ 1,045 1,135
7.10%, 11/1/10 (Prerefunded 11/1/00+) ........ 850 925
Norfolk Redev. and Housing Auth., Merrimack Landing
5.50%, 12/1/13 ............................... 1,000 1,033
Northern Virginia Transportation Dist ........................
Commuter Rail
5.375%, 7/1/14 ............................... 3,200 3,400
6.00%, 7/1/09 (MBIA Insured) ................. 1,170 1,332
Peninsula Port Auth ..........................................
Dominion Terminal, 7.375%, 6/1/20 .................... $2,000 $2,209
Riverside Health, 6.625%, 7/1/18 ..................... 3,020 3,302
Pocahontas Parkway Assoc., Toll Road
Zero Coupon, 8/15/18 ......................... 3,000 915
Portsmouth, GO, 5.00%, 8/1/17 (FGIC Insured) ................. 3,000 3,007
Prince William County Service Auth ...........................
Water and Sewer Systems
4.75%, 7/1/29 (FGIC Insured) ................. 3,000 2,871
Rappahannock Regional Jail Auth ..............................
5.00%, 12/1/30 (MBIA Insured) ................ 2,840 2,804
Richmond, GO
VRDN (Currently 3.30%) ....................... 750 750
Public Improvement, 5.50%, 1/15/16 ................... 1,100 1,155
Richmond Metropolitan Auth., Expressway Revenue
5.25%, 7/15/22 (FGIC Insured) ................ 5,550 5,853
Roanoke IDA
Carilion Health Systems, VRDN (Currently 3.35%) ...... 100 100
Hollins College, 5.20%, 3/15/17 ...................... 1,150 1,161
Roanoke Memorial Hosp., Carilion Health System
VRDN (Currently 3.20%) ....................... 100 100
6.125%, 7/1/17 (MBIA Insured) ................ 3,905 4,503
Southeastern Public Service Auth .............................
5.00%, 7/1/02 (AMBAC Insured) ................ 1,475 1,512
5.00%, 7/1/03 (AMBAC Insured) ................ 1,000 1,027
5.00%, 7/1/15 (AMBAC Insured) ................ 3,550 3,644
<PAGE>
Univ. of Virginia, 5.20%, 6/1/15 ............................. 2,300 2,356
Univ. of Virginia Hosp., 7.00%, 6/1/10 (Prerefunded 6/1/99+) . 1,400 1,461
Virginia, GO
5.25%, 12/1/13 ............................... 4,000 4,176
5.375%, 6/1/16 ............................... 1,700 1,778
Virginia Beach, GO, Refunding and Public Improvement
5.25%, 8/1/13 ................................ 1,000 1,056
Virginia Beach Dev. Auth .....................................
Beverly Enterprises, 10.00%, 4/1/10 .................. 2,000 2,183
Sentara Bayside Hosp., 6.60%, 11/1/09 ................ 3,650 3,989
Virginia Beach General Hosp ..........................
6.00%, 2/15/10 (AMBAC Insured) ............... 1,000 1,140
Virginia College Building Auth ...............................
21st Century College Program
5.00%, 8/1/10 ................................ $2,860 $2,984
5.00%, 8/1/11 ................................ 1,000 1,036
Randolph Macon College, 6.625%, 5/1/13 ............... 1,000 1,109
Univ. of Richmond, VRDN (Currently 3.25%) ............ 300 300
Washington and Lee Univ ..............................
5.75%, 1/1/19 (Prerefunded 1/1/04+) .......... 1,070 1,175
Virginia HDA
5.60%, 11/1/18 ............................... 2,500 2,551
5.85%, 7/1/12 ................................ 1,000 1,045
6.35%, 11/1/01 ............................... 1,000 1,047
6.375%, 1/1/26 * ............................. 2,000 2,145
6.45%, 7/1/28 (MBIA Insured) * ............... 2,000 2,140
6.50%, 5/1/13 * .............................. 2,000 2,155
6.70%, 7/1/11 ................................ 2,660 2,861
6.80%, 7/1/06 * .............................. 1,000 1,031
6.85%, 7/1/17 ................................ 1,000 1,033
7.05%, 5/1/18 ................................ 840 904
7.10%, 5/1/13 ................................ 1,500 1,587
Virginia Polytechnic Institute and State Univ ................
Univ. Services
5.40%, 6/1/11 ................................ 1,250 1,339
5.50%, 6/1/16 ................................ 3,000 3,171
5.50%, 6/1/20 ................................ 2,100 2,185
Virginia Port Auth ...........................................
Commonwealth Port Fund, 5.55%, 7/1/12 * .............. 1,255 1,342
Port Fac., VRDN (Currently 3.45%) (MBIA Insured) * ... 1,500 1,500
Virginia Public Building Auth ................................
6.25%, 8/1/15 (Prerefunded 8/1/04+) .......... 1,550 1,742
Virginia Public School Auth ..................................
5.375%, 8/1/17 ............................... 2,245 2,340
6.50%, 8/1/12 (Prerefunded 8/1/01+) .......... 1,700 1,857
6.50%, 8/1/16 ................................ 2,890 3,308
Virginia State Univ., Commonwealth Univ., 5.75%, 5/1/21 ...... 1,800 1,928
Virginia Transportation Board, Route 28 Project
6.50%, 4/1/18 ................................ 1,000 1,093
<PAGE>
Washington County IDA
Johnston Memorial Hosp ...............................
6.25%, 7/1/06 ................................ $ 1,660 $1,846
6.75%, 7/1/12 ................................ 1,500 1,675
Total Virginia (Cost $217,713) ............................... 230,780
DISTRICT OF COLUMBIA 2.6%
Metropolitan Washington D.C. Airport Auth ....................
5.50%, 10/1/23 * ............................. 2,000 2,064
5.75%, 10/1/11 (MBIA Insured) * .............. 1,500 1,627
6.625%, 10/1/19 (MBIA Insured) * ............. 2,800 3,079
Total District of Columbia (Cost $6,089) ..................... 6,770
PUERTO RICO 7.6%
Puerto Rico Commonwealth, GO
7.75%, 7/1/17 (Prerefunded 7/1/99+) .......... 250 262
Public Improvement,
Zero Coupon, 7/1/17 .......................... 2,000 792
Zero Coupon, 7/1/18 .......................... 6,500 2,446
4.50%, 7/1/23 ................................ 3,500 3,229
Puerto Rico Electric Power Auth ..............................
4.75%, 7/1/24 ................................ 2,000 1,914
7.00%, 7/1/07 (Prerefunded 7/1/99+) .......... 630 657
Puerto Rico Highway and Transportation Auth ..................
5.50%, 7/1/15 (FSA Insured) .................. 2,000 2,190
5.50%, 7/1/18 ................................ 2,145 2,232
6.25%, 7/1/14 ................................ 1,500 1,746
Puerto Rico Infrastructure Fin. Auth., 5.00%, 7/1/28 ......... 750 747
Puerto Rico Municipal Fin. Agency, GO
5.50%, 7/1/21 (FSA Insured) .................. 3,300 3,490
Total Puerto Rico (Cost $18,821) ............................. 19,705
<PAGE>
Total Investments in Securities
99.5% of Net Assets (Cost $242,623) .............................. $257,255
Other Assets Less Liabilities .................................... 1,164
NET ASSETS ....................................................... $258,419
Net Assets Consist of:
Accumulated net investment income - net of distributions ......... $ 11
Accumulated net realized gain/loss - net of distributions ........ 590
Net unrealized gain (loss) ....................................... 14,632
Paid-in-capital applicable to 22,403,050 no par
value shares of beneficial interest outstanding;
unlimited number of shares authorized ............................ 243,186
NET ASSETS ....................................................... $258,419
NET ASSET VALUE PER SHARE ........................................ $ 11.53
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GO General Obligation
HDA Housing Development Authority
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
- --------------------------------------------------------------------------------
Unaudited
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Short-Term
Bond Fund Bond Fund
---------- ----------
6 Months 6 Months
Ended Ended
8/31/98 8/31/98
Investment Income
Interest income ........................................ $ 489 $ 6,750
Expenses
Investment management ............................ 2 522
Custody and accounting ........................... 44 58
Shareholder servicing ............................ 17 108
Legal and audit .................................. 5 6
Trustees ......................................... 4 4
Prospectus and shareholder reports ............... 2 19
Registration ..................................... 2 5
Miscellaneous .................................... 1 2
Reimbursed by Manager ............................ (5) --
Total expenses ................................... 72 724
Net investment income .................................. 417 6,026
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities ....................................... 13 773
Futures .......................................... -- (31)
Net realized gain (loss) ......................... 13 742
Change in net unrealized gain (loss) on securities ..... 112 2,315
Net realized and unrealized gain (loss) ................ 125 3,057
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ................................. $ 542 $ 9,083
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price Virginia Tax-Free Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited
====================================================================================================================================
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
In thousands
<CAPTION>
Short-Term
Bond Fund Bond Fund
----------------------------- ------------------------------
6 Months Year 6 Months Year
Ended Ended Ended Ended
8/31/98 2/28/98 8/31/98 2/28/98
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ...................... $ 417 $ 704 $ 6,026 $ 10,788
Net realized gain (loss) ................... 13 31 742 2,575
Change in net unrealized
gain or loss ............................... 112 65 2,315 4,796
Increase (decrease) in
net assets from operations ................. 542 800 9,083 18,159
Distributions to shareholders
Net investment income ...................... (417) (704) (6,026) (10,788)
Net realized gain .......................... (42) (32) (1,047) --
Decrease in net assets
from distributions ......................... (459) (736) (7,073) (10,788)
Capital share transactions *
Shares sold ................................ 8,109 10,594 30,088 61,472
Distributions reinvested ................... 390 583 5,477 8,215
Shares redeemed ............................ (4,531) (7,194) (17,438) (34,559)
Increase (decrease) in
net assets from capital
share transactions ......................... 3,968 3,983 18,127 35,128
Net Assets
Increase (decrease)
during period .................................... 4,051 4,047 20,137 42,499
Beginning of period .............................. 20,361 16,314 238,282 195,783
End of period .................................... $ 24,412 $ 20,361 $ 258,419 $ 238,282
*Share information
Shares sold ................................ 1,581 2,068 2,645 5,461
Distributions reinvested ................... 76 114 481 731
Shares redeemed ............................ (883) (1,404) (1,534) (3,092)
Increase (decrease)
in shares outstanding ...................... 774 778 1,592 3,100
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
- --------------------------------------------------------------------------------
Unaudited August 31, 1998
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price State Tax-Free Income Trust (the trust) is registered under
the Investment Company Act of 1940. The Virginia Short-Term Tax-Free Bond Fund
(the Short-Term Bond Fund) and the Virginia Tax-Free Bond Fund (the Bond Fund),
nondiversified, open-end management investment companies, are two of the
portfolios established by the trust and commenced operations on November 30,
1994, and April 30, 1991, respectively.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
VALUATION Debt securities are generally traded in the over-the-counter
market. Investments in securities are stated at fair value as furnished by
dealers who make markets in such securities or by an independent pricing
service, which considers yield or price of bonds of comparable quality, coupon,
maturity, and type, as well as prices quoted by dealers who make markets in such
securities.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of that
fund, as authorized by the Board of Trustees.
PREMIUMS AND DISCOUNTS Premiums and original issue discounts on municipal
securities are amortized for both financial reporting and tax purposes. Market
discounts are recognized upon disposition of the security as gain or loss for
financial reporting purposes and as ordinary income for tax purposes.
OTHER Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Distributions to shareholders are
recorded by each fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting principles.
<PAGE>
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, for the six months ended August 31, 1998, were as follows:
- --------------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
----------- ------------
Purchases $7,095,000 $84,448,000
Sales 3,560,000 68,351,000
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since each fund intends
to continue to qualify as a regulated investment company and distribute all of
its income.
At August 31, 1998, the aggregate costs of investments for the Short-Term
Bond and Bond Funds for federal income tax and financial reporting purposes were
$24,478,000 and $242,623,000, respectively. Net unrealized gain (loss) on
investments was as follows:
- --------------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
----------- ------------
Appreciated investments $ 300,000 $14,639,000
Depreciated investments -- (7,000)
Net unrealized gain (loss) $ 300,000 $14,632,000
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between each fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management fee,
of which $91,000 was payable at August 31, 1998 by the Bond Fund. The fee is
computed daily and paid monthly, and consists of an individual fund fee equal to
0.10% of average daily net assets and a group fee. The group fee is based on the
combined assets of certain mutual funds sponsored by the manager or Rowe
Price-Fleming International, Inc. (the group). The group fee rate ranges from
0.48% for the first $1 billion of assets to 0.30% for assets in excess of $80
billion. At August 31, 1998, and for the six months then ended, the effective
annual group fee rate was 0.32%. Each fund pays a pro-rata share of the group
fee based on the ratio of its net assets to those of the group.
<PAGE>
Under the terms of the investment management agreement, the manager is
required to bear any expenses through February 29, 2000, which would cause the
Short-Term Bond Fund's ratio of expenses to average net assets to exceed 0.65%
through June 30, 1998 and 0.60% thereafter through February 29, 2000.
Thereafter, through February 28, 2002, the Short-Term Bond Fund is required to
reimburse the manager for these expenses, provided that average net assets have
grown or expenses have declined sufficiently to allow reimbursement without
causing the fund's ratio of expenses to average net assets to exceed 0.60%.
Pursuant to this agreement, $48,000 of management fees were not accrued by the
Short-Term Bond Fund for the six months ended August 31, 1998, and $3,000 of
other expenses were borne by the manager. Additionally, $184,000 of unaccrued
management fees and expenses related to a previous expense limitiation are
subject to reimbursement through February 29, 2000.
In addition, each fund has entered into agreements with the manager and a
wholly owned subsidiary of the manager, pursuant to which each fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of each fund. T. Rowe Price Services, Inc., is each fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the funds. The Short-Term Bond and Bond Funds
incurred expenses pursuant to these related party agreements totaling
approximately $46,000 and $117,000, respectively, for the six months ended
August 31, 1998, of which $8,000 and $23,000, respectively, were payable at
period-end.
<PAGE>
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE Shareholder service representatives are available from 8 a.m.
to 10 p.m. ET Monday through Friday and from 8:30 a.m. to 5 p.m.
ET on weekends. Call 1-800-225-5132 to speak directly with a
representative who will be able to assist you with your accounts.
IN PERSON Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. You
can also drop off applications or obtain prospectuses and other
literature at these centers.
Automated 24-Hour Services
TELE*ACCESS [Registration Mark] Call 1-800-638-2587 to obtain
information such as account balance, date and amount of your last
transaction, latest dividend payment, fund prices, and yields.
Additionally, you have the ability to request prospectuses,
statements, and account and tax forms; to reorder checks; and to
initiate purchase, redemption, and exchange orders for identically
registered accounts.
INTERNET. T. ROWE PRICE WEB SITE: WWW.TROWEPRICE.COM All the
information and services available on Tele*Access are available on
our Web site, including transactions in your fund and Discount
Brokerage accounts (with preauthorized access).
ACCOUNT SERVICES
CHECKING Write checks for $500 or more on any money market and
most bond fund accounts (except the High Yield and Emerging Markets
Bond Funds).
AUTOMATIC INVESTING Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder.
Additionally, Automatic Exchange enables you to set up systematic
investments from one fund account into another, such as from a money
fund into a stock fund. A $50 minimum makes it easy to get started.
<PAGE>
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
AUTOMATIC WITHDRAWAL If you need money from your fund account on a
regular basis, you can establish scheduled, automatic redemptions.
DIVIDEND AND CAPITAL GAINS PAYMENT OPTIONS Reinvest all or some
of your distributions, or take them in cash. We give you maximum
flexibility and convenience.
DISCOUNT BROKERAGE*
INVESTMENTS AVAILABLE You can trade stocks, bonds, options, precious
metals, mutual funds, and other securities at a savings over regular
commission rates.
TO OPEN AN ACCOUNT Call a shareholder service representative for more
information.
INVESTMENT INFORMATION
COMBINED STATEMENT A comprehensive overview of your T. Rowe Price
accounts is provided. The summary page gives you earnings by tax
category, provides total portfolio value, and lists your
investments by type. Detail pages itemize account transactions.
SHAREHOLDER REPORTS Portfolio managers review the performance of the
funds in plain language and discuss T. Rowe Price's economic outlook.
T. ROWE PRICE REPORT This is a quarterly newsletter with relevant
articles on market trends, personal financial planning, and T. Rowe
Price's economic perspective.
PERFORMANCE UPDATE This quarterly report reviews recent market
developments and provides comprehensive performance information for
every T. Rowe Price fund.
INSIGHTS This library of information includes reports on mutual
fund tax issues, investment strategies, and financial markets.
DETAILED INVESTMENT GUIDES Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Diversifying Overseas: A Guide to International
Investing, Retirees Financial Guide, and Retirement Planning Kit
(also available on disk or CD-ROM for PC use) can help you determine
and reach your investment goals.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
<PAGE>
T. Rowe Price Mutual Funds
- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500*
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications**
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons***
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value***
Spectrum Growth
Total Equity Market Index
Value
INTERNATIONAL/GLOBAL
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
<PAGE>
BOND FUNDS
- --------------------------------------------------------------------------------
DOMESTIC TAXABLE
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
DOMESTIC TAX-FREE
California Tax-Free Bond
Florida Insured Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
INTERNATIONAL/GLOBAL
Emerging Markets Bond
Global Bond+
International Bond
MONEY MARKET FUNDS++
- --------------------------------------------------------------------------------
TAXABLE
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
TAX-FREE
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
<PAGE>
BLENDED ASSET FUNDS
- --------------------------------------------------------------------------------
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
- --------------------------------------------------------------------------------
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Formerly named Equity Index.
** Formerly the closed-end New Age Media Fund. Converted to open-end status on
7/28/97.
*** Closed to new investors.
+ Formerly named Global Government Bond.
++ Neither the funds nor their share prices are insured or guaranteed by the
U.S. government.
Please call for a prospectus. Read it carefully before investing.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by SECURITY
BENEFIT LIFE INSURANCE COMPANY. In NewYork, it [#FSB201(11-96)] is issued by
FIRST SECURITY BENEFIT LIFE INSURANCE COMPANY OF NEW YORK, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
<PAGE>
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 Virginia Tax-Free Funds.
INVESTOR CENTERS:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. C14-051 8/31/98
