- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
February 28, 1999
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
* After trending lower through most of the past six months, interest rates
rose in February as economic growth surged.
* A focus on income plus low expenses helped the fund outpace its peer group
average for the 6- and 12-month periods.
* Over the past six months, we made timely shifts in duration and focused on
education bonds.
* We expect the economy to slow later in 1999. This should keep interest
rates stable or lower--a positive environment for bonds.
================================================================================
Fellow Shareholders
- --------------------------------------------------------------------------------
The municipal bond market and your fund generated solid returns during the
6- and 12-month periods ended February 28, 1999. Inflation remained tame in the
face of strong economic growth, and the fund was able to stay ahead of its
benchmarks for both periods, a reflection of management decisions and
below-average expenses.
[Insert yield chart near bottom of page 1. Edgar description: chart showing
Maryland Bond Yields from 2/98 through 2/99.Source: T. Rowe Price Associates]
<PAGE>
Municipal bonds moved through the past year relatively unscathed by the
turmoil that hit other fixed income markets. The municipal market was far less
volatile than the Treasury market, which benefited from a massive flight to
quality that drove 30-year yields to a record low of 4.72% in October from 5.92%
last February. Municipal yields also fell, but the decline was more muted as
long-term rates dropped to 4.64% in October from 5.08% last February. As a
result, municipal yields approached parity with Treasury yields among longer
maturities, an unusual event in a year when major tax reform was not under
discussion.
================================================================================
Market Environment
- --------------------------------------------------------------------------------
Major economic developments here and overseas during the fiscal year
affected the fixed income markets. In the first half, many economists expected
global turmoil to have a negative impact on the U.S. economy, causing a downward
trend in interest rates. Russia's debt default last summer created havoc in many
markets, causing a global liquidity crisis that contributed to the flight to
U.S. Treasuries. In response, the Federal Reserve cut interest rates three times
last fall to cushion the domestic economy from weakness abroad and restore
investor confidence. In December, yields began to move up following signs of
stronger-than-expected U.S. growth and a growing sense that the global liquidity
crisis had abated. News in early 1999 that GDP growth had soared at a 6.1% rate
in the fourth quarter further fueled the rise in rates. As a result, 30-year
Treasury yields were nearly 100 basis points (one percentage point) higher at
the end of February than in October. Municipal yields also rose but, once again,
they were far less volatile.
Overall, longer-term municipal yields did not change significantly during
the past 12 months. In contrast, short- and intermediate-term municipal yields
declined on balance during the period, reflecting the more direct impact of Fed
action on short-term rates. Longer-term New Jersey municipal bond yields, shown
on page 1, performed in line with their national counterparts, rising in
February to negate declines earlier in the period. During the past six months,
intermediate-term bonds turned in the best performance.
<PAGE>
New Jersey employment statistics finally exhibited the robust growth seen
earlier in other parts of the United States. The state now has 115,000 more jobs
than in 1989, the pre-recession high. As a result, income and tax collections
grew, generating a surplus of $130 million for the fiscal year and further
increasing the state's general fund balance. Capitalizing on the current
low-interest-rate environment and its own financial health, the state has been
increasing its borrowing over the last few years. While we think the debt level
is currently manageable, we are paying close attention to the pace of growth as
well as Governor Whitman's proposal to borrow billions more to finance a
statewide school building program.
==================================================
Risk-Adjusted Performance
- --------------------------------------------------
The New Jersey Tax-Free Bond Fund carried an
overall Morningstar Ratingtrademark of four out of
five stars for its risk-adjusted performance
through February 28, 1999. The ratings reflect
both the fund's returns and the degree of
volatility experienced in earning those results.
The top 10% of the funds in each rating category
receive five stars and the next 22.5% receive four
stars. The fund was rated among 1,576 and 1,109
municipal fixed income funds for the three- and
five-year periods ended February 28, 1999,
respectively. Of course, past trends may not
continue.
Morningstar proprietary ratings reflect
historical risk-adjusted performance as of 2/28/99
and may change monthly. Ratings are calculated
from the fund's 3- and 5- year average annual
returns in excess of 90-day Treasury bill returns
with appropriate fee adjustments and a risk factor
that reflects fund performance below 90-day
Treasury bill returns. The fund's 3- and 5-year
period ratings were 4-stars.
<PAGE>
================================================================================
Strategy and Performance Review
- --------------------------------------------------------------------------------
Returns for the 6- and 12-month periods ended February 28, 1999, moderated
from similar periods ended August 1998 as fluctuating interest rates limited
price gains. Positive results came mostly from income; during the past six
months, an income-oriented strategy helped your fund exceed its benchmark
despite a modest decline in price. For the year as a whole, the fund's 5.81%
gain --well ahead of its peer group's 5.22% result-- reflected a mixture of
relatively high income and solid price gains.
================================================================================
Performance Comparison
----------------------
Periods Ended 2/28/99 6 Months 12 Months
--------------------- -------- ---------
New Jersey Tax-Free
Bond Fund 2.15% 5.81%
Lipper New Jersey Municipal
Debt Funds Average 1.96 5.22
================================================================================
A multiyear trend toward lower interest rates has made it more challenging
to maintain a stable dividend payout, although dividends per share for the six
months slipped by only a penny from our last report. However, our emphasis on
long-term bonds helped keep the fund's yield among the highest in its category.
Also crucial to our success in this area was the fund's low expense ratio, which
is well below the Lipper category average and falls into the lowest-cost
quartile (25%) of the peer group.
<PAGE>
Outperformance over the past year resulted in part from appropriate
duration strategy. (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 in interest rates.) An aggressive posture early in the year positioned the
fund well for last summer's drop in interest rates. Greater interest rate
uncertainty as winter approached prompted us to take a more neutral duration
posture relative to our benchmark index, and this helped protect the price gains
we were able to capture earlier in the year. Only recently, after rates rose,
have we extended duration once again to take advantage of the higher yields on
longer-term bonds.
The fund remains well diversified among sectors and individual issuers.
However, we made some strategic moves within the portfolio during the past six
months, the most significant of which occurred in the hospital and education
sectors. We continued to cut back the fund's hospital exposure, which now stands
at 14% of assets compared with a 21% stake one year ago. We primarily reduced
holdings in lower-quality health care providers that had been suffering in an
increasingly competitive marketplace and had been showing signs of excess
capacity. We largely shifted the freed-up assets to the education sector, which
has grown from 9% of the fund to 18% since February 1998. The health of the
sector has increased recently, as education has attracted considerable national
attention over the past year. A strong economy and stock market have increased
alumni giving, and the endowments of many educational institutions have risen as
well.
While these changes trimmed some of the higher-yielding, lower-quality
holdings from the portfolio, average credit quality stayed the same at A+. We
continue to believe that this quality level provides an attractive balance
between high income and solid price performance.
<PAGE>
================================================================================
Outlook
- --------------------------------------------------------------------------------
We will continue to seek new holdings that can add to the fund's tax-free
yield. Lower-quality bonds may offer such opportunities. We cut back on this
segment during the past year, but lagging price performance is enhancing yields
and making these issues attractive again. In particular we are researching
opportunities among incinerator projects and in the long-term care market.
More broadly, we expect problems overseas to result in slower economic
growth later in 1999. Consumer spending in the U.S. is also likely to slow, the
result of an upward drift in unemployment, a low or nonexistent savings rate,
and moderating stock market gains. These factors should keep inflation in check
and pave the way for stable to lower interest rates as the year progresses.
Moreover, municipal bonds are appealing relative to other fixed income
securities. We, therefore, expect a good environment for municipal securities
for the rest of the year.
Respectfully submitted,
/s/
William F. Snider
Chairman of the Investment Advisory Committee
March 19, 1999
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Portfolio Highlights
Key statistics
8/31/98 2/28/99
------- -------
Price Per Share $11.64 $11.62
Dividends Per Share
For 6 months 0.28 0.27
For 12 months 0.56 0.55
Dividend Yield *
For 6 months 4.85% 4.71%
For 12 months 5.01 4.81
30-Day Standardized Yield 4.27 4.00
Weighted Average Maturity (years) 18.1 17.6
Weighted Average Effective Duration (years) 7.4 7.7
Weighted Average Quality ** A+ A+
================================================================================
* 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.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Portfolio Highlights
SECTOR Diversification
Percent of Percent of
Net Assets Net Assets
8/31/98 2/28/99
---------- ----------
Educational Revenue 13% 18%
Hospital Revenue 17 14
General Obligation - Local 8 11
Dedicated Tax Revenue 7 9
Prerefunded Bonds 6 8
Water and Sewer Revenue 8 7
Air and Sea Transportation Revenue 9 6
Electric Revenue 7 5
Industrial and Pollution Control Revenue 4 4
General Obligation - State 4 4
Housing Finance Revenue 4 4
Escrowed to Maturity 4 3
Nuclear Revenue 3 3
Lease Revenue 3 3
Life Care/Nursing Home Revenue 3 3
All Other 1 1
Other Assets Less Liabilities -1 -3
- --------------------------------------------------------------------------------
Total 100% 100%
================================================================================
<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 a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[SEC chart for NJ shown here]
Average Annual Compound Total Return
- ------------------------------------
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
Since Inception
Periods Ended 2/28/99 1 Year 3 Years 5 Years Inception Date
- --------------------- ------ ------- ------- --------- ---------
New Jersey Tax-Free Bond Fund 5.81% 6.52% 6.07% 7.72% 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>
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
Financial Highlights
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year
Ended
2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
------- ------- ------- ------- -------
NET ASSET VALUE
Beginning of period $ 11.51 $ 11.08 $ 11.16 $ 10.63 $ 11.19
- -----------------------------------------------------------------------------------------
Investment activities
Net investment income 0.55* 0.57* 0.57* 0.58* 0.57*
Net realized and
unrealized gain (loss) 0.11 0.43 (0.08) 0.53 (0.55)
- -----------------------------------------------------------------------------------------
Total from
investment activities 0.66 1.00 0.49 1.11 0.02
- -----------------------------------------------------------------------------------------
Distributions
Net investment income (0.55) (0.57) (0.57) (0.58) (0.57)
Net realized gain - - - - (0.01)
- -----------------------------------------------------------------------------------------
Total distributions (0.55) (0.57) (0.57) (0.58) (0.58)
- -----------------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 11.62 $ 11.51 $ 11.08 $ 11.16 $ 10.63
Ratios/Supplemental=Data=================================================================
Total return** 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%*
- -----------------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 4.72%* 5.05%* 5.18%* 5.28%* 5.41%*
- -----------------------------------------------------------------------------------------
Portfolio turnover rate 25.5% 34.3% 78.9% 98.4% 139.1%
- -----------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 121,637 $ 99,765 $ 80,289 $ 70,304 $ 58,074
- -----------------------------------------------------------------------------------------
<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 2/28/99.
</FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Statement of Net Assets
Par Value
In thousands
NEW JERSEY 91.7%
Cape May County Industrial Pollution Control Fin. Auth.
Atlantic City Electric
6.80%, 3/1/21 (MBIA Insured) $ 1,520 $ 1,894
- ------------------------------------------------------------------------------
Edison Township, GO, 6.50%, 6/1/08 350 409
- ------------------------------------------------------------------------------
Freehold Township, GO, Water and Sewer
6.35%, 10/1/11 (MBIA Insured) 250 296
- ------------------------------------------------------------------------------
Hudson County Improvement Auth. Fac.
Hudson County Lease Project
4.75%, 10/1/19 (FGIC Insured) 1,500 1,456
- ------------------------------------------------------------------------------
5.375%, 10/1/24 (FGIC Insured) 885 923
- ------------------------------------------------------------------------------
Jersey City, GO
School Bonds
6.25%, 10/1/10 445 519
- ------------------------------------------------------------------------------
6.50%, 2/15/04 500 545
- ------------------------------------------------------------------------------
Mercer County Public Improvement Auth., GO, Solid Waste
5.75%, 9/15/16 2,000 2,170
- ------------------------------------------------------------------------------
Middlesex County Improvement Auth., GO
Perth Amboy
Zero Coupon, 9/1/17 (AMBAC Insured) 500 197
- ------------------------------------------------------------------------------
5.00%, 9/1/29 (AMBAC Insured) 1,000 999
<PAGE>
- ------------------------------------------------------------------------------
Middlesex County Pollution Control Fin. Auth., Amerada Hess
6.875%, 12/1/22 1,500 1,626
- ------------------------------------------------------------------------------
Middlesex County Utilities Auth., Sewer
6.25%, 8/15/10 (MBIA Insured) 1,500 1,755
- ------------------------------------------------------------------------------
New Brunswick Housing Auth.,
5.00%, 7/1/13 (FGIC Insured) 700 719
- ------------------------------------------------------------------------------
New Jersey, GO, 7.05%, 7/15/12 * 1,335 1,575
- ------------------------------------------------------------------------------
New Jersey Economic Dev. Auth.
American Water
6.00%, 5/1/36 (FGIC Insured) * 1,000 1,090
- ------------------------------------------------------------------------------
6.875%, 11/1/34 (FGIC Insured) * 1,000 1,140
- ------------------------------------------------------------------------------
Economic Development
5.25%, 6/15/12 (FSA Insured) 1,000 1,071
- ------------------------------------------------------------------------------
Educational Testing, 4.75%, 5/15/25 2,000 1,930
- ------------------------------------------------------------------------------
Franciscan Oaks, 5.75%, 10/1/23 375 368
- ------------------------------------------------------------------------------
Harrogate
5.50%, 12/1/06 400 421
- ------------------------------------------------------------------------------
New Jersey Economic Dev. Auth.
Harrogate
5.65%, 12/1/08 $ 200 $ 209
- ------------------------------------------------------------------------------
5.75%, 12/1/16 500 506
- ------------------------------------------------------------------------------
5.875%, 12/1/26 650 663
<PAGE>
- ------------------------------------------------------------------------------
Kapkowski Road Landfill, Zero Coupon, 4/1/10 1,025 520
- ------------------------------------------------------------------------------
Lawrenceville School, 5.75%, 7/1/16 2,000 2,169
- ------------------------------------------------------------------------------
PCR, Dow Chemical El Dorado
VRDN (Currently 2.80%) 400 400
- ------------------------------------------------------------------------------
Saint Barnabas
Zero Coupon, 7/1/15 (MBIA Insured) 2,310 1,030
- ------------------------------------------------------------------------------
Zero Coupon, 7/1/16 (MBIA Insured) 3,500 1,473
- ------------------------------------------------------------------------------
Zero Coupon, 7/1/17 (MBIA Insured) 1,500 597
- ------------------------------------------------------------------------------
The Evergreens, 6.00%, 10/1/22 965 999
- ------------------------------------------------------------------------------
New Jersey EFA
Georgian Court College
5.00%, 7/1/10 645 649
- ------------------------------------------------------------------------------
5.10%, 7/1/11 675 681
- ------------------------------------------------------------------------------
Monmouth Univ.
5.25%, 7/1/09 480 496
- ------------------------------------------------------------------------------
5.60%, 7/1/11 425 453
- ------------------------------------------------------------------------------
5.60%, 7/1/12 450 475
- ------------------------------------------------------------------------------
Princeton Univ., 5.875%, 7/1/14 1,050 1,153
- ------------------------------------------------------------------------------
Rowan College, 6.00%, 7/1/21 (AMBAC Insured) 1,000 1,087
- ------------------------------------------------------------------------------
<PAGE>
Saint Peter's College
5.375%, 7/1/12 250 258
- ------------------------------------------------------------------------------
5.50%, 7/1/27 500 508
- ------------------------------------------------------------------------------
Seton Hall Univ.
5.00%, 7/1/18 (AMBAC Insured) 1,650 1,634
- ------------------------------------------------------------------------------
5.25%, 7/1/14 (AMBAC Insured) 2,000 2,069
- ------------------------------------------------------------------------------
6.875%, 7/1/10 375 401
- ------------------------------------------------------------------------------
7.00%, 7/1/21 200 214
- ------------------------------------------------------------------------------
Stevens Institute Technology
5.00%, 7/1/10 565 582
- ------------------------------------------------------------------------------
5.00%, 7/1/18 1,250 1,235
- ------------------------------------------------------------------------------
5.375%, 7/1/11 585 618
- ------------------------------------------------------------------------------
Univ. of Medicine and Dentistry
5.25%, 12/1/17 (AMBAC Insured) 1,000 1,028
- ------------------------------------------------------------------------------
New Jersey HFFA
Atlantic City Medical Center, 6.80%, 7/1/11 $ 2,000 $ 2,189
- ------------------------------------------------------------------------------
Atlantic Health System
5.00%, 7/1/27 (AMBAC Insured) 1,000 989
- ------------------------------------------------------------------------------
Bayonne Hosp., 4.75%, 7/1/27 (FSA Insured) 1,500 1,433
- ------------------------------------------------------------------------------
Hackensack Univ. Medical Center
5.375%, 1/1/13 (MBIA Insured) 1,500 1,581
- ------------------------------------------------------------------------------
<PAGE>
Irvington General Hosp.
5.875%, 8/1/06 (FHA Guaranteed)
(Prerefunded 8/1/04+) 1,095 1,220
- ------------------------------------------------------------------------------
6.375%, 8/1/15 (FHA Guaranteed)
(Prerefunded 8/1/04+) 500 569
- ------------------------------------------------------------------------------
Kennedy Health
5.00%, 7/1/10 (MBIA Insured) 500 524
- ------------------------------------------------------------------------------
5.00%, 7/1/11 (MBIA Insured) 500 519
- ------------------------------------------------------------------------------
5.25%, 7/1/15 (MBIA Insured) 700 725
- ------------------------------------------------------------------------------
Kimbal Medical Center
5.25%, 7/1/12 (FSA Insured) 1,250 1,309
- ------------------------------------------------------------------------------
St. Barnabas Health
4.75%, 7/1/28 (MBIA Insured) 1,500 1,431
- ------------------------------------------------------------------------------
St. Elizabeth Hosp.
6.00%, 7/1/14 1,500 1,563
- ------------------------------------------------------------------------------
6.00%, 7/1/20 570 594
- ------------------------------------------------------------------------------
St. Joseph Hosp. and Medical Center
5.75%, 7/1/16 1,000 1,069
- ------------------------------------------------------------------------------
New Jersey Higher Ed. Assistance Auth.
Student Loan
4.80%, 6/1/08 (AMBAC Insured) 3,000 3,056
- ------------------------------------------------------------------------------
5.80%, 6/1/16 (MBIA Insured) * 1,195 1,296
- ------------------------------------------------------------------------------
<PAGE>
New Jersey Housing and Mortgage Fin. Agency
6.35%, 10/1/27 (MBIA Insured) * 2,000 2,145
- ------------------------------------------------------------------------------
7.10%, 11/1/11 300 319
- ------------------------------------------------------------------------------
7.10%, 11/1/12 175 186
- ------------------------------------------------------------------------------
Home Buyer, 5.25%, 4/1/26 (MBIA Insured) 2,000 2,021
- ------------------------------------------------------------------------------
New Jersey Sports and Exposition Auth., Monmouth Park
8.00%, 1/1/25 650 792
- ------------------------------------------------------------------------------
New Jersey Transportation Auth., 5.25%, 6/15/09 2,000 2,137
- ------------------------------------------------------------------------------
New Jersey Transportation Trust Fund Auth.
5.25%, 6/15/15 $ 3,000 $ 3,118
- ------------------------------------------------------------------------------
Transport Systems, 4.50%, 6/15/19 1,000 939
- ------------------------------------------------------------------------------
New Jersey Turnpike Auth.
VRDN (Currently 2.60%) (FGIC Insured) 1,200 1,200
- ------------------------------------------------------------------------------
10.375%, 1/1/03 (Escrowed to Maturity) 3,490 4,013
- ------------------------------------------------------------------------------
New Jersey Wastewater Treatment Trust
6.30%, 4/1/10 (Prerefunded 4/1/04+) 1,180 1,331
- ------------------------------------------------------------------------------
6.375%, 4/1/11 (Prerefunded 4/1/04+) 750 849
- ------------------------------------------------------------------------------
Newark, GO
School Qualified Bond Act
5.30%, 9/1/11 (MBIA Insured) 1,545 1,636
- ------------------------------------------------------------------------------
5.30%, 9/1/17 (MBIA Insured) 1,000 1,030
- ------------------------------------------------------------------------------
<PAGE>
Ocean County, GO, 5.125%, 10/1/12 1,250 1,318
- ------------------------------------------------------------------------------
Ocean County Utilities Auth.
GO, 4.70%, 1/1/15 1,500 1,480
- ------------------------------------------------------------------------------
Wastewater, 6.30%, 1/1/11 1,300 1,444
- ------------------------------------------------------------------------------
Port Auth. of New York and New Jersey
VRDN (Currently 3.25%)* 100 100
- ------------------------------------------------------------------------------
5.00%, 10/1/22 2,000 1,972
- ------------------------------------------------------------------------------
6.125%, 6/1/94 1,000 1,154
- ------------------------------------------------------------------------------
6.125%, 7/15/22 * 1,000 1,080
- ------------------------------------------------------------------------------
6.50%, 10/1/01 * 400 421
- ------------------------------------------------------------------------------
6.50%, 7/15/19 (FGIC Insured) * 500 558
- ------------------------------------------------------------------------------
6.50%, 11/1/26 * 1,000 1,062
- ------------------------------------------------------------------------------
Special Project, 6.75%, 10/1/11 * 1,000 1,110
- ------------------------------------------------------------------------------
Versatile Structure
VRDN (Currently 3.15%) 1,100 1,100
- ------------------------------------------------------------------------------
VRDN (Currently 3.25%) * 100 100
- ------------------------------------------------------------------------------
Salem County Pollution Control Fin. Auth., PCR
E. I. Du Pont, 6.50%, 11/15/21 * 2,000 2,156
- ------------------------------------------------------------------------------
Public Service Electric and Gas Co.
6.25%, 6/1/31 (MBIA Insured) 1,500 1,668
- ------------------------------------------------------------------------------
<PAGE>
South Brunswick Township, GO
Board of Ed.
6.40%, 8/1/09 (FGIC Insured)
(Prerefunded 8/1/05+) 1,250 1,425
- ------------------------------------------------------------------------------
6.40%, 8/1/10 (FGIC Insured)
(Prerefunded 8/1/05+) 1,500 1,709
- ------------------------------------------------------------------------------
South Jersey Transportation Auth., Raytheon Aircraft Service
6.15%, 1/1/22 * $ 960 $ 1,013
- ------------------------------------------------------------------------------
Southeast Morris County Municipal Utilities Auth., Water
6.50%, 1/1/11 (FGIC Insured) 750 801
- ------------------------------------------------------------------------------
Univ. of Medicine and Dentistry of New Jersey
5.00%, 9/1/22 (MBIA Insured) 500 498
- ------------------------------------------------------------------------------
Wanaque Borough Sewage Auth., GO, 5.25%, 12/1/21 1,000 1,021
- ------------------------------------------------------------------------------
Wanaque Valley Regional Sewage Auth.
5.75%, 9/1/18 (AMBAC Insured) 3,015 3,351
- ------------------------------------------------------------------------------
Total New Jersey (Cost $105,466) 111,534
- ------------------------------------------------------------------------------
PUERTO=RICO==10.4%============================================================
Puerto Rico Commonwealth, GO
6.45%, 7/1/17 (Prerefunded 7/1/04+) 500 571
- ------------------------------------------------------------------------------
Public Improvement
4.50%, 7/1/23 1,250 1,147
- ------------------------------------------------------------------------------
6.80%, 7/1/21 (Prerefunded 7/1/02+) 200 223
- ------------------------------------------------------------------------------
<PAGE>
Puerto Rico Highway and Transportation Auth.
5.00%, 7/1/36 500 494
- ------------------------------------------------------------------------------
5.50%, 7/1/15 (MBIA Insured) 1,000 1,094
- ------------------------------------------------------------------------------
6.375%, 7/1/08 (FSA Insured) 1,000 1,095
- ------------------------------------------------------------------------------
6.625%, 7/1/12 1,000 1,088
- ------------------------------------------------------------------------------
6.625%, 7/1/12 (FSA Insured) 500 548
- ------------------------------------------------------------------------------
Puerto Rico Commonwealth Infrastructure Fin. Auth.
7.50%, 7/1/09 105 107
- ------------------------------------------------------------------------------
Puerto Rico Electric Power Auth.
4.75%, 7/1/24 1,000 948
- ------------------------------------------------------------------------------
5.50%, 7/1/25 2,750 2,825
- ------------------------------------------------------------------------------
7.125%, 7/1/14 500 515
- ------------------------------------------------------------------------------
Puerto Rico Public Building Auth., GO
Gov't. Fac.
5.00%, 7/1/27 (AMBAC Insured) 1,000 997
- ------------------------------------------------------------------------------
5.25%, 7/1/21 1,000 1,004
- ------------------------------------------------------------------------------
Total Puerto Rico (Cost $11,718) 12,656
U.=S.=VIRGIN=ISLANDS==0.8%====================================================
Virgin Islands Water and Power Auth., Electric System
5.30%, 7/1/18 1,000 1,006
- ------------------------------------------------------------------------------
<PAGE>
Total U. S. Virgin Islands (Cost $990) 1,006
- ------------------------------------------------------------------------------
=Total=Investments=in=Securities==============================================
102.9% of Net Assets (Cost $118,174) $ 125,196
===============================================================================
Other Assets Less Liabilities (3,559)
==============================================================================
NET ASSETS $ 121,637
==============================================================================
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 4
Accumulated net
realized gain/loss - net of distributions (933)
Net unrealized gain (loss) 7,022
Paid-in-capital applicable to 10,470,417
no par value shares of
beneficial interest outstanding;
unlimited number of shares authorized 115,544
NET ASSETS $ 121,637
NET ASSET VALUE PER SHARE $ 11.62
- --------------------------------------------------------------------------------
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
EFA Educational Facility Authority
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance Corp.
GO General Obligation
HFFA Health Facility Financing Authority
MBIA Municipal
Bond Investors Assurance Corp.
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Statement of Operations
In thousands
Year
Ended
2/28/99
=Investment=Income====================================
Interest income $ 5,931
- ------------------------------------------------------
Expenses
Investment management 462
Shareholder servicing 104
Custody and accounting 103
Prospectus and shareholder reports 23
Legal and audit 11
Registration 10
Trustees 6
Miscellaneous 4
- ------------------------------------------------------
Total expenses 723
Expenses paid indirectly (5)
- ------------------------------------------------------
Net expenses 718
- ------------------------------------------------------
Net investment income 5,213
- ------------------------------------------------------
=Realized=and=Unrealized=Gain=(Loss)==================
Net realized gain (loss)
Securities 318
Futures 61
- ------------------------------------------------------
Net realized gain (loss) 379
Change in net unrealized gain
or loss on securities 604
<PAGE>
- ------------------------------------------------------
Net realized and unrealized gain (loss) 983
- ------------------------------------------------------
INCREASE (DECREASE) IN NET
======================================================
ASSETS FROM OPERATIONS $ 6,196
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
In thousands
Year
Ended
2/28/99 2/28/98
==Increase=(Decrease)=in=Net=Assets============================================
Operations
Net investment income $ 5,213 $ 4,443
Net realized gain (loss) 379 504
Change in net unrealized gain or loss 604 2,871
- -------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 6,196 7,818
- -------------------------------------------------------------------------------
Distributions to shareholders
Net investment income (5,213) (4,443)
- -------------------------------------------------------------------------------
Capital share transactions *
Shares sold 38,168 28,813
Distributions reinvested 4,136 3,415
Shares redeemed (21,415) (16,127)
- -------------------------------------------------------------------------------
Increase (decrease) in net assets from capital
share transactions 20,889 16,101
<PAGE>
==Net=Assets===================================================================
Increase (decrease) during period 21,872 19,476
Beginning of period 99,765 80,289
End of period $ 121,637 $ 99,765
===============================================================================
*Share information
Shares sold 3,296 2,553
Distributions reinvested 357 303
Shares redeemed (1,850) (1,437)
- -------------------------------------------------------------------------------
Increase (decrease) in shares outstanding 1,803 1,419
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
February 28, 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, used to reduce the fund's custody
charges.
<PAGE>
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $48,819,000 and $28,005,000, respectively, for the year
ended February 28, 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. The fund utilized capital loss carryforwards of $495,000 in 1999. As of
February 28, 1999, the fund has 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.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended February 28, 1999. The results
of operations and net assets were not affected by the increases/(decreases) to
these accounts.
- --------------------------------------------------------------------------------
Undistributed net realized gain $ (2,000)
Paid-in-capital 2,000
At February 28, 1999, the cost for federal income tax purposes was
substantially the same as for financial reporting and totaled $118,174,000. Net
unrealized gain aggregated $7,022,000 at period end, of which $7,055,000 related
to appreciated investments and $33,000 to depreciated investments.
<PAGE>
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 $37,000 was payable at February 28, 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
February 28, 1999, and for the year 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 is
required to bear any expenses through February 28, 1999, which would cause the
fund's ratio of expenses to average net assets to exceed 0.65%. Thereafter,
through February 28, 2001, the fund is required to reimburse the manager for
these expenses, provided that average net assets have grown or expenses have
declined sufficiently to allow reimbursement without causing the fund's ratio of
expenses to average net assets to exceed 0.65%. Pursuant to this agreement,
$4,000 of management fees were not accrued by the fund for the year ended
February 28, 1999. Additionally, $21,000 of unaccrued management fees related to
a prior period are subject to reimbursement through February 28, 2001.
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 $151,000 for the year
ended February 28, 1999, of which $14,000 was payable at period-end.
<PAGE>
================================================================================
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Board of Trustees of T. Rowe Price State Tax-Free Income Trust
and Shareholders of New Jersey Tax-Free Bond Fund
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
New Jersey Tax-Free Bond Fund (one of the portfolios comprising T. Rowe Price
State Tax-Free Income Trust, hereafter referred to as "the Fund") at February
28, 1999, and the results of its operations, the changes in its net assets and
the financial highlights for each of the fiscal periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at February 28, 1999, by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 17, 1999
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 2/28/99
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's dividend income included $5,135,000 which qualified as
exempt-interest dividends.
================================================================================
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 BROKERAGE ACCOUNT
OR OBTAIN INFORMATION, CALL:
1-800-638-5660 toll free
<PAGE>
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 Small-Cap Value Fund.
INVESTOR CENTERS:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. F47-050 2/28/99
