<PAGE>
Semiannual Report
NEW JERSEY
TAX-FREE
BOND FUND
---------------
AUGUST 31, 1999
---------------
[GRAPHIC APPEARS HERE]
T. ROWE PRICE
<PAGE>
REPORT HIGHLIGHTS
-----------------------------------------------------------------------------
New Jersey Tax-Free Bond Fund
. Strong economic growth and rising interest rates hurt returns for municipal
bond investors.
. The fund posted negative results due to rising rates, but modest expenses and
solid income helped it outperform its peer group average.
. We have sought to boost results by rotating assets among attractive sectors
of our market.
. We are attracted to the income and price appreciation potential of longer-
term bonds, but we are mindful of the possibility of further rate increases.
UPDATES AVAILABLE
For updates on each fund following the end of every calendar quarter, please see
our Web site at www.troweprice.com.
<PAGE>
FELLOW SHAREHOLDERS
Above-average economic growth during the six months ended August 31 was good for
U.S. consumers but not so good for bond investors. Interest rates rose
throughout the period as investors worried about a buildup in inflationary
pressures and the possibility--which became an actuality--of monetary tightening
by the Federal Reserve. Resulting declines in taxable and municipal bond prices
weighed upon longer-term bond funds for the period and contributed to a loss for
your fund.
MARKET ENVIRONMENT
The U.S. economy continued its robust growth, driven by exuberant consumer
spending. Although broad inflation measures did not rise appreciably, tight
labor markets, low unemployment, and a rebound in energy prices raised fears
that inflationary pressures were building. The fixed income markets reacted
nervously to these developments as well as to the increasing likelihood of
action by the Federal Reserve. Indeed, as summer approached, Fed Chairman Alan
Greenspan served clear warning that the central bank would act to preempt a rise
in inflation. Actions soon followed words as the Fed raised key short-term
interest rates on June 30 and again on August 24, pushing the federal funds
target rate up a total of 50 basis points (one-half of a percentage point) to
5.25%. With these moves the Fed effectively rescinded two of its three rate
reductions of the previous fall, when it had moved swiftly to ease a global
financial crisis. Indeed, the beginnings of recovery in many of the Asian and
Latin American nations most affected by that crisis helped push the U.S. dollar
lower and interest rates higher.
Interest rates rose across all maturities, with the bellwether 30-year Treasury
bond rising from around 5% at the beginning
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
1
<PAGE>
- -------------------------------------------
MARKET CHANGES SPELL HIGHER TAX-FREE YIELDS
- --------------------------------------------------------------------------------
Structural changes are taking place in the fixed income markets resulting in
higher tax-free yields for investors.
The chart below tracks the yield on 30-year, AAA general obligation municipal
bonds as a percentage of long-term Treasury bond yields since 1981.
Historically, the yield on these municipal bonds has averaged about 85% of the
Treasury yield. This discount reflected both the tax benefit of municipals and
uncertainty about future tax laws. Investors in the 31% federal tax bracket, for
example, keep only 69% of their income from taxable bonds. Therefore, they would
logically be attracted to high-quality municipal bonds offering 85% or more of
the prevailing Treasury yield.
The sharp spike in municipal yields in 1986 reflects the tax reform debate,
which posed a threat to municipal bonds' federal tax exemption. Accordingly,
municipal bond yields reached parity with Treasury yields. However, when the Tax
Reform Act of 1986 left the tax benefit intact, municipal bond prices rose
sharply until yields had fallen to more normal levels.
Recently, different forces have been at work that go beyond the impact of 1998's
global financial crisis. At that time, shaky world markets prompted foreign
investors (who have no need for U.S. tax-exempt bonds) to buy Treasuries, and
Treasury yields plunged to near parity with municipals.
Since then, Treasury yields have returned to pre-crisis levels, but municipal
yields are again unusually high at about 94% of Treasury yields. According to
Mary Miller, director of the T. Rowe Price municipal bond department, the
current relationship is "illogical from a tax standpoint" but unlikely to change
soon.
For one thing, the supply of Treasury debt is shrinking due to the federal
budget surplus, while outstanding municipal supply continues to grow. In
addition, the supply of taxable bonds outside of Treasuries--including
corporate, asset-backed and mortgage-backed bonds--has also risen, and this has
created more competition in the market. As a result, even as tax-exempt yields
have risen in relation to Treasury yields over the past two years, they have
fallen in relation to the yields on other high-quality taxable bonds.
Over time, income makes up the vast majority of a bond investor's total return.
Therefore, these developments have given investors the opportunity to earn
higher-than-expected tax-free income with little or no sacrifice of credit
quality.
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
2
<PAGE>
of the year to over 6% for the first time since mid-1998. Short-term yields rose
a bit more than intermediates and long-term bonds over the period. This created
a flatter yield curve--a typical occurrence when the Fed is actively raising
short-term rates. New Jersey municipal bond yields also rose steadily throughout
the period, as shown in the chart. Municipals were helped by strong seasonal
demand in July from the proceeds of maturing bonds and distributed income. For
much of the period under review, New Jersey bond returns compared favorably with
their taxable counterparts, despite overall price declines.
In August, however, this trend changed. A heavy supply of corporate bonds came
to market, pushing up yields on these taxable bonds and attracting "crossover"
institutional buyers--those who buy either corporate or municipal bonds
depending on their after-tax yields. The drop in demand for municipals from
these institutional investors, some of whom also sold municipals from their
portfolios, came at a time when dealers were reluctant to add to their bond
inventories. The combination created a weak market tone. After outperforming
taxable bonds through July, New Jersey municipals lost ground in August, and
their performance fell in line with the taxable side for the entire six-month
period.
THE OVERALL FINANCIAL CONDITION OF NEW JERSEY REMAINED ROBUST.
- --------------------------------------------------------------
The overall financial condition of New Jersey remained robust. The state
reported in its 2000 budget that 1997/1998 was the best two-year period for
economic growth since 1987/1988 based on employment growth, personal income
growth, and real gross state product. Budget balances for the past fiscal year
were approximately $1 billion higher than originally projected, reflecting
stronger-than-expected revenue growth and below-budget expenditures. The state's
financial success is helping to keep its property tax rebate program--designed
to offset the school property taxes homeowners pay--on track. This is the first
year of a five-year plan that will provide $200 million of school property tax
relief annually, ultimately totaling $1 billion. When fully implemented,
households are expected to receive checks of approximately $600 each year.
3
<PAGE>
STRATEGY AND PERFORMANCE REVIEW
For the six months, your fund's total return was -2.92%. A $0.60 price decline
during the period accounted for that showing and helped pull 12-month returns
modestly into the red at -0.83%. Dividends per share slipped by one penny for
the six months, and two cents for the 12 months, reflecting the generally low
interest rates prior to this past summer. Despite a difficult environment, the
fund performed better than its Lipper benchmark for both periods, aided by a
focus on better-yielding bonds and an expense ratio well below its average peer
fund.
- ----------------------
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
Periods Ended 8/31/99 6 Months 12 Months
- --------------------------------------------------------------------------------
New Jersey Tax-Free Bond Fund -2.92% -0.83%
- --------------------------------------------------------------------------------
Lipper New Jersey Municipal
Debt Funds Average -3.05 -1.13
- --------------------------------------------------------------------------------
The fund began the six-month period with duration at a relatively long 7.7
years. (Duration is a measure of price sensitivity to changes in interest rates.
A fund having a duration of seven years will have a 7% appreciation or decline
in price in response to a one-percentage-point fall or rise, respectively, in
interest rates.) That posture made the portfolio comparatively sensitive to
interest rates, and as a result, the rising rate environment produced
significant price losses for your fund. Although we took steps to curb the
interest rate sensitivity of the portfolio during the period, we were challenged
by the callable nature of municipal bonds. Many munis have call provisions: when
interest rates decline, states may look to save money by calling back older,
higher-yielding bonds and replacing them with new bonds carrying lower yields.
When rates are low, therefore, bonds start behaving like intermediate-term
securities because they are trading to their call dates, which may be much
earlier than their actual maturity dates. As rates rise, however, calls become
less likely and the bonds behave like longer-term issues, extending fund
duration.
We think the market adjusted sufficiently to the current environment and that
rates adequately reflect the risk of continued inflation concerns. Therefore, we
allowed duration to climb slightly to 8.0 years by
4
<PAGE>
the period's end. This level improves the fund's income and perhaps its capital
appreciation potential if the current atmosphere of rising rates eases. We added
bonds with 15- to 20-year maturities, whose relatively generous income should
help us maintain or even increase the fund's dividend without increasing
holdings of lower-quality bonds.
WE MAINTAINED A LONG-TERM POLICY OF BROAD DIVERSIFICATION WITHIN THE NEW JERSEY
MARKET...
- --------------------------------------------------------------------------------
We maintained a long-term policy of broad diversification within the New Jersey
market with holdings spread across numerous sectors. Over the past 18 months, we
have steadily reduced exposure to the hospital revenue sector from 21% of assets
to 13% on August 31. Our analysis of this sector suggests that many issues
carrying more-marginal credit quality have been struggling and will continue to
wrestle with overcapacity and heightened competition. We rotated into other
sectors when prices became attractive during periods of unusually heavy supply.
In the previous six-month period, we increased holdings of education bonds, but
as the current six months wore on, we became more interested in ground
transportation revenue bonds when their supply increased and shifted assets
there. Over time, taking advantage of minor market inefficiencies in this way
benefits our relative performance. Changes were generally modest among other
sectors, as supply was light most of the period.
Our recent shifts among sectors had the effect of improving the fund's overall
credit quality: the weighted average quality of the portfolio rose to AA- from
A+ over the past six months. We believe this quality level provides an
attractive balance between high income and solid price performance.
OUTLOOK
Interest rates could move higher in coming months because of persistent strength
in the domestic economy and economic recovery overseas. The Fed is keeping a
close eye on inflationary pressure, particularly in the labor markets, and could
tighten another 25 basis points if it intends to move the federal funds rate
back to its level of a year ago.
5
<PAGE>
However, the Fed also wants to maintain a liquid and orderly market going into
the end of the year, which could serve to moderate future rate increases. At the
same time, the increase in rates so far this year could be enough to slow
certain sectors of the economy. These crosscurrents do not argue for an
aggressive interest rate posture. At present, we are focusing on the higher
yields available in the marketplace and on the current appeal of tax-free
municipal bonds relative to taxable securities.
Fortunately, investors should be able to rely on the high quality of New
Jersey's market. Although the state's economy may experience slower growth in
1999 and beyond, in keeping with national trends, New Jersey continues to have a
highly diversified economy and is one of the wealthiest states in the nation
based on per capita income. These factors are unlikely to change significantly
in the coming year.
Respectfully submitted,
/S/ WILLIAM F. SNIDER
William F. Snider
Chairman of the Investment Advisory Committee
September 20, 1999
6
<PAGE>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
KEY STATISTICS
2/28/99 8/31/99
- --------------------------------------------------------------------------------
Price Per Share $ 11.62 $ 11.02
- --------------------------------------------------------------------------------
Dividends Per Share
- --------------------------------------------------------------------------------
For 6 months 0.27 0.27
--------------------------------------------------------------------------
For 12 months 0.55 0.54
--------------------------------------------------------------------------
Dividend Yield *
- --------------------------------------------------------------------------------
For 6 months 4.71% 4.83%
--------------------------------------------------------------------------
For 12 months 4.81 4.95
--------------------------------------------------------------------------
30-Day Standardized Yield 4.00 4.63
- --------------------------------------------------------------------------------
Weighted Average Maturity (years) 17.6 17.2
- --------------------------------------------------------------------------------
Weighted Average Effective Duration (years) 7.7 8.0
- --------------------------------------------------------------------------------
Weighted Average Quality ** A+ AA-
- --------------------------------------------------------------------------------
* Dividends earned and reinvested for the periods indicated are annualized and
divided by the fund's net asset value at the end of the period.
** Based on T. Rowe Price research.
7
<PAGE>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
2/28/99 8/31/99
- --------------------------------------------------------------------------------
Hospital Revenue 14% 13%
- --------------------------------------------------------------------------------
General Obligation--Local 11 13
- --------------------------------------------------------------------------------
Educational Revenue 18 9
- --------------------------------------------------------------------------------
Prerefunded Bonds 8 8
- --------------------------------------------------------------------------------
Dedicated Tax Revenue 9 8
- --------------------------------------------------------------------------------
Water and Sewer Revenue 7 7
- --------------------------------------------------------------------------------
Housing Finance Revenue 4 6
- --------------------------------------------------------------------------------
Ground Transportation Revenue 1 6
- --------------------------------------------------------------------------------
Lease Revenue 3 5
- --------------------------------------------------------------------------------
Air and Sea Transportation Revenue 6 5
- --------------------------------------------------------------------------------
General Obligation--State 4 5
- --------------------------------------------------------------------------------
Industrial and Pollution Control Revenue 4 4
- --------------------------------------------------------------------------------
Electric Revenue 5 4
- --------------------------------------------------------------------------------
Escrowed to Maturity 3 3
- --------------------------------------------------------------------------------
Life Care/Nursing Home Revenue 3 3
- --------------------------------------------------------------------------------
Nuclear Revenue 3 3
- --------------------------------------------------------------------------------
Other Assets Less Liabilities -3 -2
- --------------------------------------------------------------------------------
Total 100% 100%
8
<PAGE>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
- ----------------------
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with benchmarks, which may include a broad-
based market index and a peer group average or index. Market indexes do not
include expenses, which are deducted from the fund returns as well as mutual
fund averages and indexes.
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
- -------------------------------------
AVERAGE ANNUAL COMPOUND TOTAL RETURN
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Since Inception
Periods Ended 8/31/99 1 Year 3 Years 5 Years Inception Date
- --------------------------------------------------------------------------------
New Jersey Tax-Free Bond Fund -0.83% 5.45% 5.91% 6.85% 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.
9
<PAGE>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
Unaudited
<TABLE>
<CAPTION>
- --------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- ------------------------------------------------------------------------------------------------------------------------
6 Months Year
Ended Ended
8/31/99 2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
NET ASSET VALUE
<S> <C> <C> <C> <C> <C> <C>
Beginning of period $ 11.62 $ 11.51 $ 11.08 $ 11.16 $ 10.63 $ 11.19
--------------------------------------------------------------------------------------------
Investment activities
Net investment income 0.27 0.55* 0.57* 0.57* 0.58* 0.57*
Net realized and
unrealized gain (loss) (0.60) 0.11 0.43 (0.08) 0.53 (0.55)
--------------------------------------------------------------------------------------------
Total from
investment activities (0.33) 0.66 1.00 0.49 1.11 0.02
--------------------------------------------------------------------------------------------
Distributions
Net investment income (0.27) (0.55) (0.57) (0.57) (0.58) (0.57)
Net realized gain -- -- -- -- -- (0.01)
--------------------------------------------------------------------------------------------
Total distributions (0.27) (0.55) (0.57) (0.57) (0.58) (0.58)
--------------------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 11.02 $ 11.62 $ 11.51 $ 11.08 $ 11.16 $ 10.63
============================================================================================
Ratios/Supplemental Data
Total return** (2.92)% 5.81%* 9.24%* 4.57%* 10.67%* 0.37%*
- ------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 0.65%+ 0.65%* 0.65%* 0.65%* 0.65%* 0.65%*
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 4.64%+ 4.72%* 5.05%* 5.18%* 5.28%* 5.41%*
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 52.7%+ 25.5% 34.3% 78.9% 98.4% 139.1%
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 118,613 $ 121,637 $ 99,765 $ 80,289 $ 70,304 $ 58,074
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
** 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 2/28/99.
+ Annualized
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
Unaudited August 31, 1999
<TABLE>
<CAPTION>
- -----------------------
STATEMENT OF NET ASSETS Par Value
- ---------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
NEW JERSEY 95.4%
Cape May County Industrial Pollution Control Fin. Auth.
Atlantic City Electric
6.80%, 3/1/21 (MBIA Insured) $ 1,520 $ 1,763
---------------------------------------------------------------------------------------
Cherry Hill Township, GO, 5.25%, 7/15/15 (FSA Insured) 1,375 1,362
---------------------------------------------------------------------------------------
Edison Township, GO, 6.50%, 6/1/08 350 390
---------------------------------------------------------------------------------------
Freehold Township, GO, Water and Sewer
6.35%, 10/1/11 (MBIA Insured) 250 278
---------------------------------------------------------------------------------------
Hudson County Improvement Auth. Fac.
Hudson County Lease Project
4.75%, 10/1/19 (FGIC Insured) 1,240 1,115
--------------------------------------------------------------------------------
5.375%, 10/1/24 (FGIC Insured) 385 376
--------------------------------------------------------------------------------
Union City Lease Project
5.20%, 7/15/24 (FGIC Insured) 3,000 2,855
---------------------------------------------------------------------------------------
Jersey City, GO
School Bonds
6.25%, 10/1/10 445 488
--------------------------------------------------------------------------------
6.50%, 2/15/04 500 532
---------------------------------------------------------------------------------------
Mercer County Public Improvement Auth., GO, Solid Waste
5.75%, 9/15/16 2,000 2,040
---------------------------------------------------------------------------------------
Middlesex County Pollution Control Fin. Auth.
Amerada Hess, 6.875%, 12/1/22 1,500 1,597
---------------------------------------------------------------------------------------
Middlesex County Utilities Auth., Sewer
6.25%, 8/15/10 (MBIA Insured) 1,500 1,629
---------------------------------------------------------------------------------------
Monmouth County Improvement Auth., GO
Capital Equipment
5.00%, 10/1/08 1,255 1,269
--------------------------------------------------------------------------------
5.00%, 10/1/09 1,020 1,024
---------------------------------------------------------------------------------------
New Jersey, GO
5.00%, 3/1/12 1,000 985
--------------------------------------------------------------------------------
5.25%, 8/1/12 2,500 2,512
--------------------------------------------------------------------------------
7.05%, 7/15/12 * 1,335 1,517
---------------------------------------------------------------------------------------
New Jersey Economic Dev. Auth.
American Water
6.00%, 5/1/36 (FGIC Insured) * 1,000 1,024
--------------------------------------------------------------------------------
6.875%, 11/1/34 (FGIC Insured) * 1,000 1,091
--------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
- --------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
New Jersey Economic Dev. Auth.
Dow Chemical-El Dorado
VRDN (Currently 2.60%) $ 500 $ 500
--------------------------------------------------------------------------
Educational Testing, 4.75%, 5/15/25 1,450 1,267
-----------------------------------------------------------------------------
Franciscan Oaks, 5.75%, 10/1/23 375 356
-----------------------------------------------------------------------------
Harrogate
5.50%, 12/1/06 400 400
--------------------------------------------------------------------------
5.65%, 12/1/08 200 198
--------------------------------------------------------------------------
5.75%, 12/1/16 500 472
--------------------------------------------------------------------------
5.875%, 12/1/26 650 612
--------------------------------------------------------------------------
Kapkowski Road Landfill, Zero Coupon, 4/1/10 1,025 521
-----------------------------------------------------------------------------
Keswick Pines, 5.75%, 1/1/24 500 468
-----------------------------------------------------------------------------
Lawrenceville School, 5.75%, 7/1/16 2,000 2,030
-----------------------------------------------------------------------------
Saint Barnabas
Zero Coupon, 7/1/15 (MBIA Insured) 2,310 959
--------------------------------------------------------------------------
Zero Coupon, 7/1/16 (MBIA Insured) 3,500 1,363
--------------------------------------------------------------------------
Zero Coupon, 7/1/17 (MBIA Insured) 1,500 550
--------------------------------------------------------------------------
The Evergreens, 6.00%, 10/1/22 965 958
-----------------------------------------------------------------------------
Transportation Project
6.00%, 5/1/16 (FSA Insured) 1,000 1,042
--------------------------------------------------------------------------
Trenton Office Complex
5.25%, 6/15/12 (FSA Insured) 1,000 1,003
---------------------------------------------------------------------------------
New Jersey EFA
Monmouth Univ.
5.25%, 7/1/09 480 468
--------------------------------------------------------------------------
5.60%, 7/1/11 425 428
--------------------------------------------------------------------------
5.60%, 7/1/12 450 450
--------------------------------------------------------------------------
Princeton Univ., 5.875%, 7/1/14 1,050 1,115
-----------------------------------------------------------------------------
Rowan College, 6.00%, 7/1/21 (AMBAC Insured) 1,000 1,024
-----------------------------------------------------------------------------
Saint Peter's College
5.375%, 7/1/12 250 241
--------------------------------------------------------------------------
5.50%, 7/1/27 500 465
--------------------------------------------------------------------------
Seton Hall Univ.
5.25%, 7/1/14 (AMBAC Insured) 1,500 1,495
--------------------------------------------------------------------------
6.875%, 7/1/10 375 400
--------------------------------------------------------------------------
7.00%, 7/1/21 130 137
--------------------------------------------------------------------------
7.00% 7/1/21 (Prerefunded 7/1/01+) 70 74
--------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- ---------------------------------------------------------------------------------------------------------------
Par Value
- ---------------------------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
New Jersey EFA
Stevens Institute Technology, 5.375%, 7/1/11 $ 585 $ 582
-----------------------------------------------------------------------------------------------------
New Jersey HFFA
Atlantic City Medical Center, 6.80%, 7/1/11 2,000 2,129
-----------------------------------------------------------------------------------------------------
Atlantic Health System
5.00%, 7/1/27 (AMBAC Insured) 1,000 915
--------------------------------------------------------------------------------------------------
Bayonne Hosp., 4.75%, 7/1/27 (FSA Insured) 1,500 1,298
-----------------------------------------------------------------------------------------------------
Hackensack Univ. Medical Center
5.375%, 1/1/13 (MBIA Insured) 1,500 1,499
--------------------------------------------------------------------------------------------------
Irvington General Hosp.
5.875%, 8/1/06 (FHA Guaranteed)
(Prerefunded 8/1/04+) 1,020 1,099
--------------------------------------------------------------------------------------------------
6.375%, 8/1/15 (FHA Guaranteed)
(Prerefunded 8/1/04+) 500 549
--------------------------------------------------------------------------------------------------
Kennedy Health
5.00%, 7/1/10 (MBIA Insured) 500 496
--------------------------------------------------------------------------------------------------
5.00%, 7/1/11 (MBIA Insured) 270 265
--------------------------------------------------------------------------------------------------
5.25%, 7/1/15 (MBIA Insured) 500 487
--------------------------------------------------------------------------------------------------
Meredian Health Systems
5.25%, 7/1/29 (FSA Insured) 1,000 948
--------------------------------------------------------------------------------------------------
St. Barnabas Health
4.75%, 7/1/28 (MBIA Insured) 2,000 1,720
--------------------------------------------------------------------------------------------------
St. Elizabeth Hosp.
6.00%, 7/1/14 1,500 1,458
--------------------------------------------------------------------------------------------------
6.00%, 7/1/20 570 549
--------------------------------------------------------------------------------------------------
St. Joseph Hosp. and Medical Center
5.75%, 7/1/16 1,000 1,010
---------------------------------------------------------------------------------------------------------
New Jersey Higher Ed. Assistance Auth., Student Loan
5.80%, 6/1/16 (MBIA Insured) * 1,185 1,207
---------------------------------------------------------------------------------------------------------
New Jersey Housing and Mortgage Fin. Agency
6.35%, 10/1/27 (MBIA Insured) * 2,000 2,078
--------------------------------------------------------------------------------------------------
7.10%, 11/1/11 300 314
--------------------------------------------------------------------------------------------------
7.10%, 11/1/12 175 183
--------------------------------------------------------------------------------------------------
Home Buyer
5.25%, 4/1/26 (MBIA Insured) 2,000 1,896
--------------------------------------------------------------------------------------------------
5.70%, 10/1/17 (MBIA Insured) 1,500 1,503
--------------------------------------------------------------------------------------------------
5.90%, 10/1/29 (MBIA Insured) * 1,500 1,502
---------------------------------------------------------------------------------------------------------
New Jersey Sports and Exposition Auth., Monmouth Park
8.00%, 1/1/25 (Prerefunded 1/1/05 +) 650 761
---------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- ------------------------------------------------------------------------------------------------
Par Value
- ------------------------------------------------------------------------------------------------
in thousands
<S> <C> <C>
New Jersey Transportation Trust Fund Auth.
Transportation Systems
4.50%, 6/15/19 $ 1,000 $ 859
-----------------------------------------------------------------------------------
5.25%, 6/15/15 3,000 2,943
-----------------------------------------------------------------------------------
5.75%, 6/15/15 1,500 1,562
------------------------------------------------------------------------------------------
New Jersey Turnpike Auth.
VRDN (Currently 2.60%) (FGIC Insured) 3,400 3,400
-----------------------------------------------------------------------------------
10.375%, 1/1/03 (Escrowed to Maturity) 3,490 3,874
------------------------------------------------------------------------------------------
New Jersey Wastewater Treatment Trust
6.30%, 4/1/10 (Prerefunded 4/1/04+) 1,180 1,287
-----------------------------------------------------------------------------------
6.375%, 4/1/11 (Prerefunded 4/1/04+) 750 821
------------------------------------------------------------------------------------------
Newark, GO
School Qualified Bond Act
5.30%, 9/1/11 (MBIA Insured) 1,545 1,558
-----------------------------------------------------------------------------------
5.30%, 9/1/17 (MBIA Insured) 1,000 978
------------------------------------------------------------------------------------------
Ocean County, GO, 5.125%, 10/1/12 1,250 1,246
------------------------------------------------------------------------------------------
Ocean County Utilities Auth., GO, Wastewater, 6.30%, 1/1/11 1,300 1,414
------------------------------------------------------------------------------------------
Port Auth. of New York and New Jersey
6.125%, 6/1/94* 1,000 1,068
-----------------------------------------------------------------------------------
6.125%, 7/15/22 * 1,000 1,032
-----------------------------------------------------------------------------------
6.50%, 10/1/01 * 400 411
-----------------------------------------------------------------------------------
6.50%, 7/15/19 (FGIC Insured) * 500 533
-----------------------------------------------------------------------------------
6.50%, 11/1/26 * 1,000 1,041
--------------------------------------------------------------------------------------
Special Project, 6.75%, 10/1/11 * 1,000 1,078
--------------------------------------------------------------------------------------
Versatile Structures, VRDN (Currently 2.60%) 2,500 2,500
------------------------------------------------------------------------------------------
Salem County Pollution Control Fin. Auth., PCR
E. I. Du Pont, 6.50%, 11/15/21 * 2,000 2,099
--------------------------------------------------------------------------------------
Public Service Electric and Gas Co.
6.25%, 6/1/31 (MBIA Insured) 1,500 1,570
------------------------------------------------------------------------------------------
South Brunswick Township, GO
Board of Ed.
6.40%, 8/1/09 (FGIC Insured)
(Prerefunded 8/1/05+) 1,250 1,369
-----------------------------------------------------------------------------------
6.40%, 8/1/10 (FGIC Insured)
(Prerefunded 8/1/05+) 1,500 1,642
------------------------------------------------------------------------------------------
South Jersey Transportation Auth.
5.00%, 11/1/29 (AMBAC Insured) 3,500 3,201
-----------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
South Jersey Transportation Auth.
Raytheon Aircraft Service, 6.15%, 1/1/22* $ 960 $ 965
- ------------------------------------------------------------------------------
Southeast Morris County Municipal Utilities Auth., Water
6.50%, 1/1/11 (FGIC Insured) 750 784
- ------------------------------------------------------------------------------
Univ. of Medicine and Dentistry of New Jersey
5.00%, 9/1/22 (MBIA Insured) 500 464
- ------------------------------------------------------------------------------
Wanaque Borough Sewage Auth., GO, 5.25%, 12/1/21 1,000 958
- ------------------------------------------------------------------------------
Wanaque Valley Regional Sewage Auth.
5.75%, 9/1/18 (AMBAC Insured) 3,115 3,221
- ------------------------------------------------------------------------------
Winslow Township Board of Ed., GO, 5.20%, 8/1/16 2,010 1,962
- ------------------------------------------------------------------------------
Total New Jersey (Cost $112,310) 113,131
-------------
- -----------------------------------------------------
PUERTO RICO 6.2%
- -----------------------------------------------------
Puerto Rico, GO, 6.45%, 7/1/17 (Prerefunded 7/1/04+) 500 552
- ------------------------------------------------------------------------------
Puerto Rico Commonwealth Infrastructure Fin. Auth.
7.50%, 7/1/09 105 106
- ------------------------------------------------------------------------------
Puerto Rico Highway and Transportation Auth.
5.00%, 7/1/36 500 443
-----------------------------------------------------------------------
6.375%, 7/1/08 (FSA Insured) 1,000 1,065
-----------------------------------------------------------------------
6.625%, 7/1/12 1,000 1,064
-----------------------------------------------------------------------
6.625%, 7/1/12 (FSA Insured) 500 532
- ------------------------------------------------------------------------------
Puerto Rico Electric Power Auth., 5.50%, 7/1/25 2,750 2,658
- ------------------------------------------------------------------------------
Puerto Rico Public Building Auth., GO, Gov't. Fac.
5.00%, 7/1/27 (AMBAC Insured) 1,000 916
- ------------------------------------------------------------------------------
Total Puerto Rico (Cost $7,023) 7,336
-------------
15
<PAGE>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
- --------------------------------------------------------------------------------------
In thousands
<S> <C>
Total Investments in Securities
101.6% of Net Assets (Cost $119,333) $ 120,467
Other Assets Less Liabilities (1,854)
--------------
NET ASSETS $ 118,613
==============
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 4
Accumulated net realized gain/loss - net of distributions (1,469)
Net unrealized gain (loss) 1,134
Paid-in-capital applicable to 10,765,259 no par value shares of
beneficial interest outstanding; unlimited number of shares authorized 118,944
--------------
NET ASSETS $ 118,613
==============
NET ASSET VALUE PER SHARE $ 11.02
==============
</TABLE>
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
EFA Educational Facility Authority
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance Corp.
GO General Obligation
HFFA Health Facility Financing Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
Unaudited
- ------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
6 Months
Ended
8/31/99
- ---------------------------------------------------------
Investment Income
- ---------------------------------------------------------
<S> <C>
Income
Interest income $ 3,237
------------
Expenses
Investment management 267
Custody and accounting 54
Shareholder servicing 54
Prospectus and shareholder reports 11
Legal and audit 6
Trustees 3
Miscellaneous 2
------------
Total expenses 397
Expenses paid indirectly (1)
------------
Net expenses 396
------------
Net investment income 2,841
- --------------------------------------------------------- ------------
Realized and Unrealized Gain (Loss)
- ---------------------------------------------------------
Net realized gain (loss)
Securities (562)
Futures 26
------------
Net realized gain (loss) (536)
Change in net unrealized gain or loss on securities (5,888)
------------
Net realized and unrealized gain (loss) (6,424)
------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (3,583)
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
Unaudited
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
8/31/99 2/28/99
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 2,841 $ 5,213
Net realized gain (loss) (536) 379
Change in net unrealized gain or loss (5,888) 604
---------------------------
Increase (decrease) in net assets from operations (3,583) 6,196
---------------------------
Distributions to shareholders
Net investment income (2,841) (5,213)
---------------------------
Capital share transactions*
Shares sold 13,369 38,168
Distributions reinvested 2,301 4,136
Shares redeemed (12,270) (21,415)
---------------------------
Increase (decrease) in net assets from capital
share transactions 3,400 20,889
---------------------------
Net Assets
Increase (decrease) during period (3,024) 21,872
Beginning of period 121,637 99,765
---------------------------
End of period $ 118,613 $ 121,637
===========================
*Share information
Shares sold 1,172 3,296
Distributions reinvested 203 357
Shares redeemed (1,080) (1,850)
---------------------------
Increase (decrease) in shares outstanding 295 1,803
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
Unaudited August 31, 1999
- -----------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price State Tax-Free Income Trust (the trust) is registered under
the Investment Company Act of 1940. The New Jersey Tax-Free Bond Fund (the
fund), a nondiversified, open-end management investment company, is one of
the portfolios established by the trust and commenced operations on April
30, 1991.
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 the fund, as authorized by the Board of Trustees.
Premiums and Discounts Premiums and original issue discounts on municipal
securities are amortized for both financial reporting and tax purposes.
Market discounts are recognized upon disposition of the security as gain or
loss for financial reporting purposes and as ordinary income for tax
purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Distributions to shareholders
are recorded by the fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with
generally accepted accounting principles. Expenses paid indirectly reflect
credits earned on daily uninvested cash balances at the custodian, which
are used to reduce the fund's custody charges.
19
<PAGE>
- --------------------------------------------------------------------------------
NOTE 2 - INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $31,434,000 and $33,235,000, respectively, for the
six months ended August 31, 1999.
- --------------------------------------------------------------------------------
NOTE 3 - FEDERAL INCOME TAXES
- --------------------------------------------------------------------------------
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its income. As of February 28, 1999, the fund had capital loss
carryforwards for federal income tax purposes of $589,000, of which
$169,000 expires in 2003, and $420,000 in 2005. The fund intends to retain
gains realized in future periods that may be offset by available capital
loss carryforwards.
At August 31, 1999, the cost for federal income tax purposes was
substantially the same as for financial reporting and totaled $119,333,000.
Net unrealized gain aggregated $1,134,000 at period-end, of which
$2,875,000 related to appreciated investments and $1,741,000 to depreciated
investments.
- --------------------------------------------------------------------------------
NOTE 4 - RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management
fee, of which $47,000 was payable at August 31, 1999. 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, 1999, and for the six months then
ended, the effective annual group fee rate was 0.32%. The fund pays a pro-
rata share of the group fee based on the ratio of its net assets to those
of the group.
Under the terms of the investment management agreement, the manager had
been required to bear any expenses through February 28, 1999, which would
cause the fund's ratio of total expenses to average net assets to exceed
0.65%. Thereafter, through February 28, 2001, the fund is required to
reimburse the
20
<PAGE>
T. ROWE PRICE NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
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 total expenses to average net assets to exceed 0.65%.
Pursuant to this agreement, $9,000 of unaccrued 1998-1999 fees were repaid
during the six months ended August 31, 1999, and $16,000 remains subject to
reimbursement.
In addition, the fund has entered into agreements with the manager and a
wholly owned subsidiary of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and
maintains the financial records of the fund. T. Rowe Price Services, Inc.
is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. The fund incurred
expenses pursuant to these related party agreements totaling approximately
$78,000 for the six months ended August 31, 1999, of which $14,000 was
payable at period-end.
21
<PAGE>
For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account
or obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears on your retirement account statement.
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 appropriate to the fund or funds
covered in this report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
4410 Arrows West Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
[LOGO APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor. F47-051 8/31/99
