- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
Virginia Tax-Free Funds
- --------------------------------------------------------------------------------
February 28, 1999
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
* After trending lower through most of the period, interest rates rose in
February as economic growth surged at year-end.
* Both the Virginia Short-Term Tax-Free Bond Fund and the Virginia Tax-Free
Bond Fund posted results above their peer group averages.
* The Virginia Short-Term Tax-Free Bond Fund achieved better returns by
maintaining a longer duration than its peer group.
* Performance in the Virginia Tax-Free Bond Fund was helped by a focus on
high-quality bonds and those with 15-year maturities.
* We expect continued low inflation and slowing economic growth to benefit
municipal securities, whose yields are still attractive relative to other
fixed income investments.
================================================================================
FELLOW SHAREHOLDERS
- --------------------------------------------------------------------------------
The environment for municipal bonds was generally positive during your
fund's fiscal year ended February 28, 1999, as most interest rates were
unchanged to somewhat lower on balance. Against this background, the Virginia
tax-free funds provided solid returns that exceeded their peer group averages
for both the 6- and 12-month periods.
================================================================================
MARKET ENVIRONMENT
- --------------------------------------------------------------------------------
The municipal bond market avoided much of the disorder that roiled other
fixed income markets over the past year. Worldwide economic turmoil, especially
from August to October, drove 30-year Treasury yields to a record low of 4.7% as
investors sought the safe haven of the U.S. Treasury market. Municipal yields
also moved lower, but in a more muted fashion. During this same period, 30-year
AAA municipal yields approached 4.6%. Consequently, taxable Treasury yields
approached parity with tax-exempt municipals, among longer maturities--a highly
unusual occurrence in the absence of serious proposals to alter the federal tax
structure.
[Chart showing Virginia Bond Yields from 2/98 through 2/99.]
<PAGE>
To blunt the effects of a global financial crisis triggered by Russia's
midsummer debt default, the Federal Reserve cut the key federal funds rate in
three steps from 5.50% to 4.75% during the fall of 1998. By year-end, hints of
stability had appeared worldwide, and the U.S. economy remained robust. The
sustained strength of the U.S. economy surprised market participants, and
interest rates rose during the winter as investors worried that the Fed might
reverse course and raise rates to stem growth. Long-term Treasury yields
retreated above 5.5%, and long-term municipal yields, again reacting more
moderately, rose to approximately 5.0%. 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 as well as
strong demand for municipal money market securities. Virginia municipal bond
yields performed in line with their national counterparts as longer rates rose
in February to negate declines earlier in the period, while shorter-term yields
were lower than six months ago.
National municipal bond issuance reached $284 billion, up 29% from 1997 and
very near the record levels seen during the low interest rate environment of
1993. Issuance in Virginia was also up markedly in 1998 to $5.7 billion, an
increase of 52% from 1997. Other things being equal, heavy supply typically puts
pressure on intermediate and longer-term municipal yields. Thus far, 1999 has
seen lighter supply, which has helped municipals outperform Treasuries since
year-end.
Virginia continued to enjoy solid employment growth. In December 1998,
employment increased 2.3% while the unemployment rate dropped to 2.7%--the
lowest December rate in 29 years. Job growth occurred primarily in the services
sector, which helped reduce the heavy dependence of the state's employment base
on federal employment.
==================================================
Risk-Adjusted Performance
- --------------------------------------------------
The Virginia Tax-Free Funds are highly rated
by Morningstar. Both funds carried an overall
Morningstar Ratingtrademark of four out of five
stars for risk-adjusted performance as of February
28, 1999. The ratings reflect both the funds'
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 Virginia
Short-Term Tax-Free Bond Fund was rated among
1,576 municipal fixed income funds for the
three-year period; the Virginia Tax-Free Bond 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.
<PAGE>
Morningstar proprietary ratings reflect
historical risk-adjusted performance as of 2/28/99
and may change monthly. Ratings are calculated
from the funds' 3-, 5-, and 10-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. Virginia Short-Term
Tax-Free Bond Fund had 4 stars for the 3-year
period; Virginia Tax-Free Bond Fund had 4 stars
for the 3- and 5-year periods.
==================================================
The state's AAA credit rating continued to be supported by conservative
fiscal management. For the fiscal year ended June 30, 1998, Virginia earned a
surplus of $868 million. Revenue collections through the first seven months of
fiscal year 1999 were up 10.4% over the same period one year ago, much of which
was attributable to higher individual income tax collections based on strong
wage and salary growth. A growing budget surplus allowed the state to both
continue a five-year phaseout of the personal property tax and announce some new
education and tax-cut initiatives without affecting the state's credit profile.
================================================================================
VIRGINIA SHORT-TERM TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/28/99 6 Months 12 Months
--------------------- -------- ---------
Virginia Short-Term
Tax-Free Bond Fund 2.23% 4.51%
Lipper Short Municipal
Debt Funds Average 1.95 4.24
================================================================================
Your fund posted solid returns over both the six and 12 months ended
February 28, 1999, and outperformed its Lipper peer group. Although the share
price rose over these periods, the majority of these results derived from
income, as dividends per share were stable from the prior 6- and 12-month
periods. Performance was also aided by low costs: the fund's expense ratio of
0.62% as of December 31, 1998 is below the 0.63% average of the 31 funds in its
Lipper peer group. The fund continued to meet its broader objective of providing
higher income than a money market fund while maintaining moderate price
fluctuation. In the past six months and year, national tax-exempt money funds
returned 1.31% and 2.81%, respectively, as measured by Lipper, Inc.
<PAGE>
Our strategy over the past six months was to maintain a duration slightly
longer than our benchmark. (Duration is a measure of price sensitivity to
changes in interest rates. A fund having a duration of two years will have a 2%
appreciation or decline in price in response to a one-percentage point fall or
rise, respectively, in interest rates.) The absence of inflationary pressures
throughout the period as well as the heightened global demand for Treasury bonds
resulting from problems in Asia suggested to us that interest rates were likely
to decline. In addition, supply and demand imbalances in the intermediate and
longer-term municipal markets made these sectors an exceptional value.
Longer-term holdings provide the fund with additional income and the potential
for appreciation if rates fall. Our positioning was rewarded in autumn when the
Fed eased, pushing money market and short-term interest rates lower and bond
prices higher.
We maintained a long-duration approach toward the end of 1998. Economic
growth in the year's fourth quarter exceeded expectations, and Treasury bond
yields began to rise. The yield curve changed sharply as short-term taxable bond
yields moved from below the federal funds target rate to above it. These events
suggested a souring of market expectations as the effects of earlier global
crises receded and the potential inflationary implications of an accommodative
Fed and high growth rates took center stage. We did not immediately become
defensive, however. Municipal yields did not fall as much as Treasuries and thus
offered unusually attractive yields on a tax-equivalent basis. Furthermore, we
anticipated that increasing year-end demand for municipals, combined with waning
supply over the Christmas holiday, would help keep municipal prices steady.
These decisions proved fruitful.
=============================
AS INTEREST RATES HAVE
DECLINED . . . WE HAVE
WORKED HARD TO MAINTAIN
THE FUND'S DIVIDENDS . . .
=============================
Only at the end of the period, after municipal yields had moved lower in
January, did we alter our approach. Beginning in February, we shortened duration
slightly while waiting for valuations to improve. We view this as a temporary
condition, however. We would likely use any significant rise in yields to extend
duration as our forecast for continued low inflation has not changed.
As interest rates have declined over the past several years, we have worked
hard to maintain the fund's dividends by seeking issues of various sectors and
credit qualities that offer higher yields. Six months ago, the portfolio had a
combined 58% exposure to two high-quality, modest-yielding sectors: general
obligations and prerefunded bonds. Over the last six months, we reduced these
weightings to 50%, and shifted assets toward higher-yielding hospital and
education revenue bonds of varying quality. As a result, the fund's weighted
average credit quality declined slightly from AA+ to AA. However, since income
tends to be the greatest contributor to this fund's returns over longer time
periods, we are making every effort to purchase higher-yielding issues that have
received favorable reviews from our credit research staff.
<PAGE>
================================================================================
VIRGINIA TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/28/99 6 Months 12 Months
--------------------- -------- ---------
Virginia Tax-Free Bond Fund 2.22% 6.02%
Lipper Virginia Municipal
Debt Funds Average 1.78 5.01
================================================================================
A healthy income stream generated solid total returns for your fund. For
both the six months and the year, returns again exceeded the Lipper peer group
average--in particular, the 12-month return of 6.02% substantially exceeded the
average as shown in the accompanying table. The performance advantage reflected
steady income and greater emphasis on issues with 15-year maturities. Finally,
our low fund expense ratio aided performance relative to the universe of
comparable Virginia funds. At 0.57%, the fund's expense ratio is among the
least-costly 10% of its Lipper peer group as of December 31, 1998. Lower
expenses enable the fund to pass through a higher level of income to you.
There were no significant changes in strategy over the past six months. We
maintained a slightly longer-than-average duration for most of the period,
reflecting our optimism that interest rates would fall modestly. (See Virginia
Short-Term Tax-Free Bond Fund for an explanation of duration.) While long-term
rates were little changed, the fund did benefit from falling rates on short- and
intermediate-term issues, as approximately one-fifth of the portfolio had
maturities shorter than 10 years.
In addition, issues with maturities in the 15-year range helped
performance, as this area of the yield curve earned the best total returns of
all maturity ranges for the past six months. We have favored these securities
for some time, in part because they offer some protection against the negative
effects of a potential rise in rates. We sold a few 30-year issues to enhance
our weighting of bonds in the 15-year range, and the average maturity and yield
of the fund decreased slightly from six months ago as a result. It is likely we
will target this range in our future purchases because of its favorable
long-term risk/return characteristics.
=============================
THE FUND'S OVERALL HIGH
QUALITY WAS AN IMPORTANT
COMPONENT OF ITS OUTPER-
ORMANCE.
=============================
<PAGE>
The fund's overall high quality was an important component of its
outperformance. Quality spreads (that is, the difference in yield between bonds
with various credit ratings) widened modestly but are still narrow. The fund has
therefore kept a high quality bias,as, in our view, investors are not
compensated adequately to purchase lower-quality securities. In addition,
because the underlying strength of the state's issuers is quite high, there are
limited opportunities to buy issues rated BBB or below. Nonetheless, we are
watchful for higher-yielding securities that meet our general credit quality
standards.
================================================================================
OUTLOOK
- --------------------------------------------------------------------------------
We believe the forces supporting low inflation will remain intact for the
foreseeable future. Despite the economy's strong pace so far in the first
quarter, we expect growth to slow to a more modest and sustainable level later
this year. The Fed appears to have adopted a neutral monetary bias in the belief
that the economy contains an equal measure of upside and downside risks.
Thus far in 1999, a decreasing supply of municipal issues combined with
strong demand has strengthened prices and helped move tax-exempt yields toward
more normal relationships with taxable yields. In Virginia, we also expect a
somewhat lower supply than in 1998, which should be positive for bond
performance. Overall, yields on tax-free bonds, including those issued in
Virginia, are still appealing relative to taxable yields on other fixed income
securities, and we expect continued low inflation and slowing economic growth to
benefit municipal securities.
Respectfully submitted,
/s/
Charles B. Hill
Chairman of the Investment Advisory Committee
Virginia Short-Term Tax-Free Bond Fund
/s/
Hugh D. McGuirk
Chairman of the Investment Advisory Committee
Virginia Tax-Free Bond Fund
March 19, 1999
<PAGE>
================================================================================
T. Rowe Price Virginia Tax-Free Funds
- --------------------------------------------------------------------------------
Portfolio Highlights
KEY STATISTICS
8/31/98 2/28/99
------- -------
VIRGINIA SHORT-TERM TAX-FREE BOND FUND
- --------------------------------------
Price Per Share $ 5.16 $ 5.18
Dividends Per Share
For 6 months 0.09 0.09
For 12 months 0.19 0.19
Dividend Yield *
For 6 months 3.66% 3.70%
For 12 months 3.77 3.70
30-Day Standardized Yield 3.38 2.88
Weighted Average Maturity (years) 2.7 2.5
Weighted Average Effective Duration (years) 2.4 2.3
Weighted Average Quality ** AA+ AA
VIRGINIA TAX-FREE BOND FUND
- ---------------------------
Price Per Share $ 11.53 $ 11.45
Dividends Per Share
For 6 months 0.28 0.27
For 12 months 0.56 0.55
Dividend Yield *
For 6 months 4.92% 4.88%
For 12 months 5.08 4.94
30-Day Standardized Yield 4.29 4.09
Weighted Average Maturity (years) 16.9 16.0
Weighted Average Effective Duration (years) 7.4 7.4
Weighted Average Quality ** AA- 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.
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
8/31/98 2/28/99
------- -------
VIRGINIA SHORT-TERM TAX-FREE BOND FUND
- --------------------------------------
Prerefunded Bonds 41% 32%
General Obligation - Local 15 16
Hospital Revenue 9 12
Water and Sewer Revenue 9 10
Solid Waste Revenue 9 6
Educational Revenue 2 5
Lease Revenue - 4
Industrial and Pollution Control Revenue 4 4
Ground Transportation Revenue 4 4
General Obligation - State 2 2
Air and Sea Transportation Revenue 2 2
Life Care/Nursing Home Revenue 2 2
All Other 2 3
Other Assets Less Liabilities -1 -2
Total 100% 100%
VIRGINIA TAX-FREE BOND FUND
- ---------------------------
Hospital Revenue 21% 21%
Prerefunded Bonds 12 12
General Obligation - Local 9 9
Housing Finance Revenue 8 8
Educational Revenue 6 7
General Obligation - State 6 6
Industrial and Pollution Control Revenue 6 5
Lease Revenue 7 5
Miscellaneous Revenue 3 5
Solid Waste Revenue 4 5
Air and Sea Transportation Revenue 3 4
Dedicated Tax Revenue 4 4
Ground Transportation Revenue 3 3
Life Care/Nursing Home Revenue 3 2
Escrowed to Maturity 2 2
Water and Sewer Revenue 2 2
All Other 1 -
Other Assets Less Liabilities - -
Total 100% 100%
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
- ----------------------
These charts show the value of a hypothetical $10,000 investment in each
fund over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[SEC chart showing Virginia Short-term Tax-Free Bond Fund]
[SEC chart showing Virginia Tax-Free Bond Fund]
AVERAGE ANNUAL COMPOUND TOTAL RETURN
- ------------------------------------
This table shows how each fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Since Inception
Periods Ended 2/28/99 1 Year 3 Years 5 Years Inception Date
- --------------------- ------ ------- ------- --------- ----
Virginia Short-Term
Tax-Free Bond Fund 4.51% 4.10% - 4.96% 11/30/94
Virginia Tax-Free Bond Fund 6.02 6.67 6.40% 7.66 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.
T. Rowe Price Virginia Short-Term Tax-Free Bond Fund
- ----------------------------------------------------
For a share outstanding throughout each period
Financial Highlights
Year 11/30/94
Ended Through
2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
NET ASSET VALUE
Beginning of period $ 5.15 $ 5.13 $ 5.16 $ 5.06 $ 5.00
- -----------------------------------------------------------------------------
Investment activities
Net investment income 0.19* 0.19* 0.20* 0.21* 0.05*
Net realized and
unrealized gain (loss) 0.04 0.03 (0.03) 0.11 0.06
- -----------------------------------------------------------------------------
Total from
investment activities 0.23 0.22 0.17 0.32 0.11
- -----------------------------------------------------------------------------
Distributions
Net investment income (0.19) (0.19) (0.20) (0.21) (0.05)
Net realized gain (0.01) (0.01) - (0.01) -
- -----------------------------------------------------------------------------
Total distributions (0.20) (0.20) (0.20) (0.22) (0.05)
- -----------------------------------------------------------------------------
NET ASSET VALUE
<PAGE>
End of period $ 5.18 $ 5.15 $ 5.13 $ 5.16 $ 5.06
Ratios/Supplemental=Data=====================================================
Total return** 4.51%* 4.48%* 3.33%* 6.43%* 2.28%*+
- -----------------------------------------------------------------------------
Ratio of total expenses to
average net assets 0.62%* 0.65%* 0.65%* 0.65%* 0.65%*+
- -----------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 3.65%* 3.81%* 3.84%* 4.07%* 4.43%*+
- -----------------------------------------------------------------------------
Portfolio turnover rate 22.5% 75.0% 32.5% 36.4% 14.8%+
- -----------------------------------------------------------------------------
Net assets, end of period
(in thousands) $26,772 $ 20,361 $ 16,314 $ 12,480 $ 4,965
- -----------------------------------------------------------------------------
** Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* Excludes expenses in excess of a 0.65% voluntary expense limitation in
effect through 6/30/98, and a 0.60% voluntary expense limitation in effect
from 7/1/98 through 2/29/00.
+ Annualized
The accompanying notes are an integral part of these financial statements.
==============================================================================
T. Rowe Price Virginia Tax-Free Bond Fund
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
Financial Highlights
Year
Ended
2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
------- ------- ------- ------- -------
NET ASSET VALUE
Beginning of period $ 11.45 $ 11.05 $ 11.09 $ 10.56 $ 11.00
- -------------------------------------------------------------------------------
Investment activities
Net investment income 0.55 0.57 0.57* 0.57* 0.57*
Net realized and
unrealized gain (loss) 0.12 0.40 (0.04) 0.53 (0.43)
- -------------------------------------------------------------------------------
Total from
investment activities 0.67 0.97 0.53 1.10 0.14
- -------------------------------------------------------------------------------
Distributions
Net investment income (0.55) (0.57) (0.57) (0.57) (0.57)
Net realized gain (0.12) - - - (0.01)
- -------------------------------------------------------------------------------
Total distributions (0.67) (0.57) (0.57) (0.57) (0.58)
NET ASSET VALUE
===============================================================================
<PAGE>
End of period $ 11.45 $ 11.45 $ 11.05 $ 11.09 $ 10.56
Ratios/Supplemental Data
Total returns 6.02% 9.03% 5.00%* 10.69%* 1.51%*
- -------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 0.57% 0.58% 0.65%* 0.65%* 0.65%*
- -------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 4.83% 5.12% 5.23%* 5.27%* 5.49%*
- -------------------------------------------------------------------------------
Portfolio turnover rate 47.3% 64.3% 66.2% 93.7% 89.1%
- -------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $278,812 $ 238,282 $195,783 $178,750 $155,278
- -------------------------------------------------------------------------------
** Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* Excludes expenses in excess of a 0.65% voluntary expense limitation in
effect through 2/28/97.
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price Virginia Short-Term Tax-Free Bond Fund
- --------------------------------------------------------------------------------
February 28, 1999
Statement of Net Assets
Par Value
In thousands
VIRGINIA 96.8%
Abington IDA, Johnston Memorial Hosp., 5.00%, 7/1/02 $ 765 $ 792
- -------------------------------------------------------------------------------
Arlington County, GO, 5.40%, 8/1/01 1,000 1,048
- -------------------------------------------------------------------------------
Arlington County IDA
Alexandria/Arlington Waste to Energy
5.00%, 1/1/02 (FSA Insured) 1,000 1,033
- -------------------------------------------------------------------------------
Augusta County IDA, Augusta Hosp.
6.10%, 9/1/00 (AMBAC Insured) 60 62
- -------------------------------------------------------------------------------
Bedford County IDA, Georgia-Pacific, 4.60%, 8/1/04 600 607
- -------------------------------------------------------------------------------
Chesapeake Bay Bridge and Tunnel
5.10%, 7/1/01 (FGIC Insured) 945 980
- -------------------------------------------------------------------------------
6.375%, 7/1/22 (MBIA Insured)
(Prerefunded 7/1/01+) 690 748
- -------------------------------------------------------------------------------
Chesterfield County, Water & Sewer, 5.625%, 11/1/01 500 528
- -------------------------------------------------------------------------------
Fairfax County, GO, Public Improvement
5.50%, 6/1/01 675 707
- -------------------------------------------------------------------------------
<PAGE>
Fairfax County Sewer, 5.625%, 7/15/01 1,000 1,050
- -------------------------------------------------------------------------------
Fairfax County IDA, Fairfax Hosp. System
VRDN (Currently 2.95%) 200 200
- -------------------------------------------------------------------------------
Harrisonburg Redev. & Housing Auth., 4.20%, 3/1/04 200 200
- -------------------------------------------------------------------------------
Henrico County IDA
Bon Secours Health, St. Mary's Hosp.
7.50%, 9/1/07 (Prerefunded 8/1/00+) 700 751
- -------------------------------------------------------------------------------
Hopewell IDA
Westport Convalescent Center
5.45%, 10/1/02 220 225
- -------------------------------------------------------------------------------
5.60%, 10/1/03 235 242
- -------------------------------------------------------------------------------
Leesburg Utility System, 6.30%, 7/1/17 (MBIA Insured) 500 551
- -------------------------------------------------------------------------------
Newport News, GO, 5.00%, 7/1/04 645 682
- -------------------------------------------------------------------------------
Northern Virginia Transportation Dist., Commuter Rail
7.00%, 7/1/05 (FSA Insured)
(Prerefunded 7/1/00+) 970 1,037
- -------------------------------------------------------------------------------
Peninsula Port Auth.
Riverside Health Systems
5.00%, 7/1/01 345 355
- -------------------------------------------------------------------------------
5.00%, 7/1/02 360 373
- -------------------------------------------------------------------------------
5.90%, 7/1/00 120 124
- -------------------------------------------------------------------------------
Petersburg Hosp. Auth.
Southside Regional Medical Center
5.60%, 7/1/00 $ 700 $ 720
- -------------------------------------------------------------------------------
Portsmouth, GO
5.60%, 8/1/01 500 525
- -------------------------------------------------------------------------------
Public Improvement
5.90%, 11/1/01 125 133
- -------------------------------------------------------------------------------
6.10%, 11/1/03 750 810
- -------------------------------------------------------------------------------
Prince William County Service Auth., Water and Sewer
6.00%, 7/1/00 (FGIC Insured) 1,000 1,036
- -------------------------------------------------------------------------------
Richmond Metropolitan Auth., Expressway
5.75%, 7/15/22 (FGIC Insured) 320 341
- -------------------------------------------------------------------------------
Roanoke, GO, 5.80%, 8/1/00 500 518
- -------------------------------------------------------------------------------
<PAGE>
Roanoke IDA, Roanoke Memorial Hosp.
Carilion Health System
VRDN (Currently 3.25%) 400 400
- -------------------------------------------------------------------------------
VRDN (Currently 3.30%) 100 100
- -------------------------------------------------------------------------------
6.50%, 7/1/25 (MBIA Insured)
(Prerefunded 7/1/00+) 2,000 2,085
- -------------------------------------------------------------------------------
Southeastern Public Service Auth.
5.00%, 7/1/03 (AMBAC Insured) 545 558
- -------------------------------------------------------------------------------
Upper Occoquan Sewage Auth.
6.50%, 7/1/17 (MBIA Insured)
(Prerefunded 7/1/01+) 1,205 1,310
- -------------------------------------------------------------------------------
Virginia, GO, 5.00%, 6/1/02 500 522
- -------------------------------------------------------------------------------
Virginia Public School Auth., 6.00%, 8/1/01 200 212
- -------------------------------------------------------------------------------
Virginia Beach, GO, 6.70%, 3/1/05 (Prerefunded 3/1/01+) 600 648
- -------------------------------------------------------------------------------
Virginia College Building Auth.
Hampton Univ., 5.20%, 4/1/02 435 453
- -------------------------------------------------------------------------------
Univ. of Richmond, VRDN (Currently 2.90%) 130 130
- -------------------------------------------------------------------------------
Virginia Polytechnic Institute and State Univ.,
5.375%, 6/1/01 750 781
- -------------------------------------------------------------------------------
Virginia Public Building Auth.
5.625%, 8/1/02 675 718
- -------------------------------------------------------------------------------
6.10%, 8/1/00 500 519
- -------------------------------------------------------------------------------
6.50%, 8/1/11 (Prerefunded 8/1/01+) 1,000 1,089
- -------------------------------------------------------------------------------
Total Virginia (Cost $25,529) 25,903
- -------------------------------------------------------------------------------
DISTRIC=OF=COLUMBIA==1.9%======================================================
Metropolitan Washington D.C. Airports Auth.
6.00%, 10/1/00 (MBIA Insured) * $ 500 $ 520
- -------------------------------------------------------------------------------
Total District of Columbia (Cost $509) 520
- -------------------------------------------------------------------------------
<PAGE>
PUERTO=RICO==1.9%==============================================================
Puerto Rico Ind. Medical and Environmental PCR
4.25%, 9/1/13 500 507
- -------------------------------------------------------------------------------
Total Puerto Rico (Cost $500) 507
- -------------------------------------------------------------------------------
U.=S.=VIRGIN=ISLANDS==1.1%=====================================================
Virgin Island Water and Power Auth., 5.00%, 7/1/02 300 310
- -------------------------------------------------------------------------------
Total U. S. Virgin Islands (Cost $304) 310
=Total=Investments=in=Securities
101.7% of Net Assets (Cost $26,842) $ 27,240
Other Assets Less Liabilities (468)
NET ASSETS $ 26,772
Net Assets Consist of:
Accumulated net investment income - net
of distributions $ 1
Accumulated net realized gain/loss - net
of distributions 6
Net unrealized gain (loss) 398
Paid-in-capital applicable to 5,165,540
no par value shares of beneficial
interest outstanding; unlimited number
of shares authorized 26,367
NET ASSETS $ 26,772
NET ASSET VALUE PER SHARE $ 5.18
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GO General Obligation
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Bond Fund
February 28, 1999
Statement of Net Assets
Par Value
In thousands
VIRGINIA 91.0%
Alexandria IDA, Ogden Martin, VRDN (Currently 3.20%) * $ 1,300 $ 1,300
- -----------------------------------------------------------------------------
Alexandria Redev. and Housing Auth., Residential Care Fac.
Goodwin House, 6.60%, 10/1/26 1,500 1,560
- -----------------------------------------------------------------------------
Arlington County, GO
5.375%, 12/1/12 1,000 1,073
- -----------------------------------------------------------------------------
6.00%, 6/1/11 1,000 1,157
- -----------------------------------------------------------------------------
Arlington County IDA
Alexandria, 5.375%, 1/1/13 (FSA Insured) * 3,000 3,134
- -----------------------------------------------------------------------------
Arlington Hosp.
7.00%, 9/1/11 (Prerefunded 9/1/01+) 1,205 1,329
- -----------------------------------------------------------------------------
The Nature Conservancy, 5.40%, 7/1/17 1,815 1,876
- -----------------------------------------------------------------------------
Augusta County Service Auth., Water and Sewer
5.00%, 11/1/24 (MBIA Insured) 1,000 987
- -----------------------------------------------------------------------------
Bedford County IDA, Kekoosa Packaging
5.60%, 12/1/25 * 4,000 4,049
- -----------------------------------------------------------------------------
Charles County Ind. Dev., Waste Management
4.875%, 2/1/09 * 1,750 1,739
- -----------------------------------------------------------------------------
Chesapeake Bay Bridge and Tunnel Dist.
5.50%, 7/1/25 (MBIA Insured) 2,000 2,158
- -----------------------------------------------------------------------------
Covington and Alleghany County IDA, PCR, Westvaco
6.65%, 9/1/18 1,500 1,648
- -----------------------------------------------------------------------------
Danville IDA
Danville Regional Medical Center
5.20%, 10/1/18 (AMBAC Insured) 6,735 6,970
- -----------------------------------------------------------------------------
6.50%, 10/1/24 (FGIC Insured) 3,000 3,419
- -----------------------------------------------------------------------------
Fairfax County Housing Auth., FCRHA Office Building
7.50%, 6/15/18 2,175 2,486
- -----------------------------------------------------------------------------
Fairfax County IDA
Fairfax Hosp. System
VRDN (Currently 2.95%) 800 800
- -----------------------------------------------------------------------------
Inova Health
VRDN (Currently 2.95%) 200 200
- -----------------------------------------------------------------------------
6.00%, 8/15/26 3,315 3,598
- -----------------------------------------------------------------------------
<PAGE>
Fairfax County Water Auth.
5.80%, 1/1/16 (Escrowed to Maturity) 5,290 5,855
- -----------------------------------------------------------------------------
Frederick County IDA, Gov't. Complex Fac.
6.50%, 12/1/14 (MBIA Insured) 1,500 1,691
- -----------------------------------------------------------------------------
Fredericksburg IDA
Hosp. Fac. (MWH MediCorp Obligated Group)
Residual Interest Bond / Inverse Floater
(Currently 9.975%), 8/15/23 (FGIC Insured)
(Prerefunded 8/15/01+) $ 3,000 $ 3,518
- -----------------------------------------------------------------------------
George Mason Univ., 6.375%, 2/1/13 (MBIA Insured) 1,415 1,594
- -----------------------------------------------------------------------------
Giles County IDA, Hoechst Celanese, 6.625%, 12/1/22 * 1,485 1,588
- -----------------------------------------------------------------------------
Goochland County IDA, Kekoosa Packaging
5.65%, 12/1/25 * 500 499
- -----------------------------------------------------------------------------
Halifax County IDA, Halifax Regional Long-Term Care
5.625%, 7/1/12 1,585 1,573
- -----------------------------------------------------------------------------
Hampton
Public Improvement, 5.125%, 1/15/15 1,500 1,549
- -----------------------------------------------------------------------------
Museum, 7.30%, 1/1/14 (Prerefunded 1/1/00+) 1,100 1,159
- -----------------------------------------------------------------------------
Hampton IDA, Sentara Health, 5.375%, 11/1/15 5,300 5,500
- -----------------------------------------------------------------------------
Hampton Roads Medical College
6.875%, 11/15/11 1,500 1,627
- -----------------------------------------------------------------------------
6.875%, 11/15/16 500 553
- -----------------------------------------------------------------------------
Hampton Roads Regional Jail Auth.
5.625%, 7/1/16 (MBIA Insured) 1,575 1,676
- -----------------------------------------------------------------------------
Hanover County IDA
Memorial Regional Medical Center
6.375%, 8/15/18 (MBIA Insured) 2,185 2,580
- -----------------------------------------------------------------------------
6.50%, 8/15/10 (MBIA Insured) 1,300 1,544
- -----------------------------------------------------------------------------
Henrico County IDA
Bon Secours Health
6.25%, 8/15/20 (MBIA Insured) 1,750 2,043
- -----------------------------------------------------------------------------
St. John's Hosp.
7.50%, 9/1/15 (Prerefunded 7/1/00+) 1,700 1,826
- -----------------------------------------------------------------------------
St. Mary's Hosp.
6.00%, 8/15/16 (MBIA Insured) 1,045 1,184
- -----------------------------------------------------------------------------
7.50%, 9/1/07 (Prerefunded 8/1/00+) 350 376
- -----------------------------------------------------------------------------
<PAGE>
Browning Ferris, 5.45%, 1/1/14 * 1,000 1,046
- -----------------------------------------------------------------------------
Regional Jail
6.00%, 8/1/15 2,415 2,638
- -----------------------------------------------------------------------------
7.00%, 8/1/13 1,485 1,736
- -----------------------------------------------------------------------------
Henry County IDA, Memorial Hosp., 6.00%, 1/1/27 4,250 4,560
- -----------------------------------------------------------------------------
Hopewell IDA
Colonial Heights Convalescent Center
5.75%, 10/1/04 $ 150 $ 154
- -----------------------------------------------------------------------------
Forest Hill Convalescent Center
5.60%, 10/1/03 100 103
- -----------------------------------------------------------------------------
5.90%, 10/1/05 240 250
- -----------------------------------------------------------------------------
Westport Convalescent Center, 5.75%, 10/1/04 290 300
- -----------------------------------------------------------------------------
Isle of Wight IDA, Union Camp, 6.55%, 4/1/24 * 4,250 4,605
- -----------------------------------------------------------------------------
Loudoun County, GO
5.00%, 8/1/14 1,000 1,018
- -----------------------------------------------------------------------------
5.25%, 12/1/13 1,360 1,445
- -----------------------------------------------------------------------------
Loudoun County Sanitation Auth., Water and Sewer
4.75%, 1/1/21 (MBIA Insured) 1,000 959
- -----------------------------------------------------------------------------
Lynchburg IDA
Centra Health
5.20%, 1/1/23 2,000 2,000
- -----------------------------------------------------------------------------
5.25%, 1/1/11 1,890 1,974
- -----------------------------------------------------------------------------
5.375%, 1/1/13 1,000 1,042
- -----------------------------------------------------------------------------
Manassas, GO, 5.25%, 1/1/11 1,550 1,657
- -----------------------------------------------------------------------------
Martinsville IDA
Memorial Hosp. of Martinsville and Henry County
7.00%, 1/1/11 (Prerefunded 1/1/01+) 950 1,008
- -----------------------------------------------------------------------------
Medical College of Virginia Hosp. Auth.
5.25%, 7/1/14 (MBIA Insured) 3,185 3,292
- -----------------------------------------------------------------------------
5.25%, 7/1/15 (MBIA Insured) 3,350 3,466
- -----------------------------------------------------------------------------
Newport News, GO
5.00%, 7/1/06 1,500 1,591
- -----------------------------------------------------------------------------
5.625%, 7/1/14 (MBIA Insured) 4,030 4,307
- -----------------------------------------------------------------------------
<PAGE>
Newport News Redev. and Housing Auth., 5.85%, 12/20/30 1,400 1,478
- -----------------------------------------------------------------------------
Norfolk, GO
5.00%, 7/1/12 (FGIC Insured) 2,245 2,318
- -----------------------------------------------------------------------------
5.25%, 6/1/13 1,000 1,041
- -----------------------------------------------------------------------------
5.25%, 6/1/14 2,750 2,851
- -----------------------------------------------------------------------------
Norfolk IDA
Children's Hosp. of The King's Daughters
7.00%, 6/1/11 (AMBAC Insured)
(Prerefunded 6/1/01+) 1,150 1,260
- -----------------------------------------------------------------------------
Sentara Hosp.
7.00%, 11/1/20 (Prerefunded 11/1/00+) 1,045 1,128
- -----------------------------------------------------------------------------
7.10%, 11/1/10 (Prerefunded 11/1/00+) 850 918
- -----------------------------------------------------------------------------
Norfolk Redev. and Housing Auth., Merrimack Landing
5.50%, 12/1/13 $ 1,000 $ 1,034
- -----------------------------------------------------------------------------
Northern Virginia Transportation Dist.
Commuter Rail
5.375%, 7/1/14 (FSA Insured) 3,200 3,382
- -----------------------------------------------------------------------------
6.00%, 7/1/09 (MBIA Insured) 1,170 1,334
- -----------------------------------------------------------------------------
Peninsula Port Auth.
Dominion Terminal, 7.375%, 6/1/20 2,000 2,174
- -----------------------------------------------------------------------------
Riverside Health
4.75%, 7/1/21 3,500 3,329
- -----------------------------------------------------------------------------
6.625%, 7/1/18 3,020 3,349
- -----------------------------------------------------------------------------
Pocahontas Parkway Assoc., Toll Road
Zero Coupon, 8/15/18 3,000 931
- -----------------------------------------------------------------------------
Zero Coupon, 8/15/24 (ACA Insured) 5,000 1,181
- -----------------------------------------------------------------------------
Portsmouth, GO, 5.00%, 8/1/17 (FGIC Insured)
(Prefunded 8/1/06+) 2,000 2,000
- -----------------------------------------------------------------------------
Prince William County Service Auth.
Water and Sewer Systems
4.75%, 7/1/29 (FGIC Insured) 1,450 1,376
- -----------------------------------------------------------------------------
Richmond, GO, Public Improvement, 5.50%, 1/15/16 1,100 1,146
- -----------------------------------------------------------------------------
Richmond Metropolitan Auth., Expressway
5.25%, 7/15/22 (FGIC Insured) 5,550 5,795
- -----------------------------------------------------------------------------
Richmond Public Utility, 5.125%, 1/15/28 1,500 1,488
- -----------------------------------------------------------------------------
<PAGE>
Roanoke County IDA
Carilion Health, VRDN (Currently 3.30%) 3,700 3,700
- -----------------------------------------------------------------------------
Hollins College, 5.20%, 3/15/17 1,150 1,157
- -----------------------------------------------------------------------------
Roanoke Memorial Hosp., Carilion Health System
VRDN (Currently 2.85%) 700 700
- -----------------------------------------------------------------------------
VRDN (Currently 3.25%) 700 700
- -----------------------------------------------------------------------------
6.125%, 7/1/17 (MBIA Insured) 3,905 4,474
- -----------------------------------------------------------------------------
Southeastern Public Service Auth.
5.00%, 7/1/02 (AMBAC Insured) 1,475 1,506
- -----------------------------------------------------------------------------
5.00%, 7/1/03 (AMBAC Insured) 1,000 1,023
- -----------------------------------------------------------------------------
5.00%, 7/1/15 (AMBAC Insured) 4,050 4,150
- -----------------------------------------------------------------------------
Univ. of Virginia
VRDN (Currently 2.90%) 1,250 1,250
- -----------------------------------------------------------------------------
5.20%, 6/1/15 2,300 2,351
- -----------------------------------------------------------------------------
5.25%, 6/1/13 3,880 4,079
- -----------------------------------------------------------------------------
Univ. of Virginia Hosp., 7.00%, 6/1/10 $ 855 $ 881
- -----------------------------------------------------------------------------
Virginia, GO
5.25%, 12/1/13 4,000 4,192
- -----------------------------------------------------------------------------
5.375%, 6/1/16 1,700 1,766
- -----------------------------------------------------------------------------
Virginia Beach, GO, Refunding and Public Improvement
5.25%, 8/1/13 1,000 1,053
- -----------------------------------------------------------------------------
Virginia Beach Dev. Auth.
Beverly Enterprises, 10.00%, 4/1/10 1,910 2,046
- -----------------------------------------------------------------------------
Sentara Bayside Hosp.
6.60%, 11/1/09 (Prerefunded 11/1/01+) 3,650 4,006
- -----------------------------------------------------------------------------
Sentara Health, 4.75%, 11/1/21 3,375 3,208
- -----------------------------------------------------------------------------
Virginia Beach General Hosp.
6.00%, 2/15/10 (AMBAC Insured) 1,000 1,144
- -----------------------------------------------------------------------------
Virginia College Building Auth.
21st Century College Program, 5.00%, 8/1/10 2,860 2,993
- -----------------------------------------------------------------------------
Randolph Macon College
6.625%, 5/1/13 (Prerefunded 5/1/02+) 1,000 1,105
- -----------------------------------------------------------------------------
Univ. of Richmond, VRDN (Currently 2.90%) 100 100
- -----------------------------------------------------------------------------
<PAGE>
Virginia Commonwealth Univ., 5.75%, 5/1/21 1,800 1,928
- -----------------------------------------------------------------------------
Virginia HDA
5.60%, 11/1/18 2,500 2,584
- -----------------------------------------------------------------------------
5.85%, 7/1/12 1,000 1,045
- -----------------------------------------------------------------------------
6.35%, 11/1/01 1,000 1,041
- -----------------------------------------------------------------------------
6.375%, 1/1/26 * 2,000 2,141
- -----------------------------------------------------------------------------
6.45%, 7/1/28 (MBIA Insured) * 2,000 2,133
- -----------------------------------------------------------------------------
6.50%, 5/1/13 * 2,000 2,148
- -----------------------------------------------------------------------------
6.55%, 1/1/17 1,000 1,044
- -----------------------------------------------------------------------------
6.60%, 7/1/04 * 1,200 1,246
- -----------------------------------------------------------------------------
6.70%, 7/1/11 2,660 2,852
- -----------------------------------------------------------------------------
7.05%, 5/1/18 840 915
- -----------------------------------------------------------------------------
7.10%, 5/1/13 1,500 1,589
- -----------------------------------------------------------------------------
Virginia Polytechnic Institute and State Univ.
Univ. Services
5.40%, 6/1/11 1,250 1,337
- -----------------------------------------------------------------------------
5.50%, 6/1/16 3,000 3,148
- -----------------------------------------------------------------------------
5.50%, 6/1/20 2,100 2,174
- -----------------------------------------------------------------------------
Virginia Port Auth., Commonwealth Port Fund,
5.55%, 7/1/12 * 1,255 1,341
- ------------------------------------------------------------------------------
Virginia Public Building Auth.
6.25%, 8/1/15 (Prerefunded 8/1/04+) $ 1,550 $ 1,742
- ------------------------------------------------------------------------------
Virginia Public School Auth.
5.00%, 8/1/18 5,385 5,378
- ------------------------------------------------------------------------------
5.375%, 8/1/17 2,245 2,326
- ------------------------------------------------------------------------------
6.50%, 8/1/12 (Prerefunded 8/1/01+) 1,700 1,852
- ------------------------------------------------------------------------------
6.50%, 8/1/16 2,890 3,298
- ------------------------------------------------------------------------------
Virginia Transportation Board
Northern Virginia Transportation Dist.
5.125%, 5/15/19 2,250 2,265
- ------------------------------------------------------------------------------
Route 28 Project, 6.50%, 4/1/18 1,000 1,090
- ------------------------------------------------------------------------------
<PAGE>
Washington County IDA
Johnston Memorial Hosp.
6.25%, 7/1/06 (Prerefunded 7/1/05+) 1,660 1,851
- ------------------------------------------------------------------------------
6.75%, 7/1/12 (Prerefunded 7/1/02+) 1,500 1,666
- ------------------------------------------------------------------------------
Total Virginia (Cost $241,903) 53,800
DISTRICT=OF=COLUMBIA==3.5%====================================================
Metropolitan Washington D.C. Airport Auth.
5.50%, 10/1/23 * 5,000 5,113
- ------------------------------------------------------------------------------
5.75%, 10/1/11 (MBIA Insured) * 1,500 1,634
- ------------------------------------------------------------------------------
6.625%, 10/1/19 (MBIA Insured) * 2,800 3,083
- ------------------------------------------------------------------------------
Total District of Columbia (Cost $9,181) 9,830
PUERTO=RICO==5.8%=============================================================
Puerto Rico Commonwealth, GO
Public Improvement
Zero Coupon, 7/1/17 2,000 801
- ------------------------------------------------------------------------------
Zero Coupon, 7/1/18 6,500 2,463
- ------------------------------------------------------------------------------
4.50%, 7/1/23 3,500 3,213
- ------------------------------------------------------------------------------
Puerto Rico Highway and Transportation Auth.
5.50%, 7/1/15 (FSA Insured) 2,000 2,189
- ------------------------------------------------------------------------------
5.50%, 7/1/18 2,145 2,224
- ------------------------------------------------------------------------------
6.25%, 7/1/14 1,500 1,743
- ------------------------------------------------------------------------------
Puerto Rico Municipal Fin. Agency, GO
5.50%, 7/1/21 (FSA Insured) 3,300 3,467
- ------------------------------------------------------------------------------
Total Puerto Rico (Cost $15,428) 16,100
Total=Investments=in=Securities
100.3% of Net Assets (Cost $266,512) $ 279,730
Other Assets Less Liabilities (918)
NET ASSETS $ 278,812
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 12
Accumulated net realized gain/loss - net of distributions (50)
Net unrealized gain (loss) 13,218
Paid-in-capital applicable to 24,358,489 no par
value shares of beneficial
interest outstanding; unlimited
number of shares authorized 265,632
<PAGE>
NET ASSETS $ 278,812
NET ASSET VALUE PER SHARE $ 11.45
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
ACA American Credit Access
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GO General Obligation
HDA Housing Development Authority
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price Virginia Tax-Free Funds
- --------------------------------------------------------------------------------
Statement of Operations
Short-Term
Bond Fund Bond Fund
In thousands
Year Year
Ended Ended
2/28/99 2/28/99
Investment=Income===============================================
Interest income $ 1,036 $ 13,849
- ----------------------------------------------------------------
Expenses
Investment management 5 1,081
Custody and accounting 87 114
Shareholder servicing 30 199
Legal and audit 9 12
Trustees 7 8
Registration 4 13
Prospectus and shareholder reports 4 32
Miscellaneous 3 4
- ----------------------------------------------------------------
Total expenses 149 1,463
Expenses paid indirectly - (4)
- ----------------------------------------------------------------
Net expenses 149 1,459
- ----------------------------------------------------------------
Net investment income 887 12,390
Realized=and=Unrealized=Gain=(Loss)=============================
Net realized gain (loss)
Securities 28 1,602
Futures - 55
- ----------------------------------------------------------------
<PAGE>
Net realized gain (loss) 28 1,657
Change in net unrealized gain
(loss) on securities 210 901
- ----------------------------------------------------------------
Net realized and unrealized gain (loss) 238 2,558
- ----------------------------------------------------------------
INCREASE (DECREASE) IN NET
================================================================
ASSETS FROM OPERATIONS $ 1,125 $ 14,948
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price Virginia Tax-Free Funds
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
Short-Term
Bond Fund Bond Fund
In thousands
Year Year
Ended Ended
2/28/99 2/28/98 2/28/99 2/28/98
Increase (Decrease) in Net Assets
Operations
Net investment income $ 887 $ 704 $ 12,390 $ 10,788
Net realized gain (loss) 28 31 1,657 2,575
Change in net unrealized
gain or loss 210 65 901 4,796
- -------------------------------------------------------------------------------
Increase (decrease) in
net assets from operations 1,125 800 14,948 18,159
- -------------------------------------------------------------------------------
Distributions to shareholders
Net investment income (887) (704) (12,390) (10,788)
Net realized gain (42) (32) (2,672) -
- -------------------------------------------------------------------------------
Decrease in net assets
from distributions (929) (736) (15,062) (10,788)
- -------------------------------------------------------------------------------
Capital share transactions *
Shares sold 16,469 10,594 66,340 61,472
Distributions reinvested 799 583 11,719 8,215
Shares redeemed (11,053) (7,194) (37,415) (34,559)
- -----------------------------------------------------------------------------
Increase (decrease) in
net assets from capital
share transactions 6,215 3,983 40,644 35,128
Net=Assets
Increase (decrease) during
period 6,411 4,047 40,530 42,499
Beginning of period 20,361 16,314 238,282 195,783
End of period $ 26,772 $ 20,361 $ 278,812 $ 238,282
<PAGE>
*Share information
Shares sold 3,196 2,068 5,793 5,461
Distributions reinvested 155 114 1,022 731
Shares redeemed (2,143) (1,404) (3,267) (3,092)
Increase (decrease)
in shares outstanding 1,208 778 3,548 3,100
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price Virginia Tax-Free Funds
- --------------------------------------------------------------------------------
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 Virginia Short-Term Tax-Free Bond Fund
(the Short-Term Bond Fund) and the Virginia Tax-Free Bond Fund (the Bond Fund),
nondiversified, open-end management investment companies, are two of the
portfolios established by the trust and commenced operations on November 30,
1994, and April 30, 1991, respectively.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
Valuation Debt securities are generally traded in the over-the-counter
market. Investments in securities are stated at fair value as furnished by
dealers who make markets in such securities or by an independent pricing
service, which considers yield or price of bonds of comparable quality, coupon,
maturity, and type, as well as prices quoted by dealers who make markets in such
securities.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of that
fund, as authorized by the Board of Trustees.
Premiums and Discounts Premiums and original issue discounts on municipal
securities are amortized for both financial reporting and tax purposes. Market
discounts are recognized upon disposition of the security as gain or loss for
financial reporting purposes and as ordinary income for tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Distributions to shareholders are
recorded by each fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting principles. Expenses paid indirectly reflect credits earned on daily,
uninvested cash balances at the custodian are used to reduce each fund's custody
charges.
<PAGE>
================================================================================
NOTE 2 - INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Purchases and sales of portfolio securities, other than short-term
securities, for the year ended February 28, 1999, were as follows:
- --------------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
--------- ---------
Purchases $ 11,748,000 $ 156,029,000
Sales 5,336,000 120,105,000
================================================================================
NOTE 3 - FEDERAL INCOME TAXES
- --------------------------------------------------------------------------------
No provision for federal income taxes is required since each fund intends
to continue to qualify as a regulated investment company and distribute all of
its income.
In order for the Bond Fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended February 28, 1999. The results
of operations and net assets were not affected by the increases/(decreases) to
these accounts.
Undistributed net investment income $ 1,000
Undistributed net realized gain 70,000
Paid-in-capital (71,000)
At February 28, 1999, the costs of investments for the Short-Term Bond and
Bond Funds for federal income tax purposes was substantially the same as for
financial reporting and totaled $26,842,000 and $266,512,000, respectively. Net
unrealized gain (loss) on investments were as follows:
- --------------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
--------- ---------
Appreciated investments $ 398,000 $ 13,364,000
Depreciated investments - (146,000)
Net unrealized gain (loss) $ 398,000 $ 13,218,000
================================================================================
NOTE 4 - RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
The investment management agreement between each fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management fee,
of which $5,000 and $89,000 were payable at February 28, 1999, by the Short-Term
Bond and Bond Funds' respectively. The fee is computed daily and paid monthly,
and consists of an individual fund fee equal to 0.10% of average daily net
assets and a group fee. The group fee is based on the combined assets of certain
mutual funds sponsored by the manager or 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%. Each
fund pays a pro-rata share of the group fee based on the ratio of its net assets
to those of the group.
<PAGE>
Under the terms of the investment management agreement, the manager is
required to bear any expenses through February 29, 2000, which would cause the
Short-Term Bond Fund's ratio of expenses to average net assets to exceed 0.60%.
Thereafter, through February 28, 2002, the Short-Term Bond Fund is required to
reimburse the manager for these expenses, provided that average net assets have
grown or expenses have declined sufficiently to allow reimbursement without
causing the fund's ratio of expenses to average net assets to exceed 0.60%.
Pursuant to this agreement, $97,000 of management fees were not accrued by the
Short-Term Bond Fund for the year ended February 28, 1999. Pursuant to a
previous agreement, $184,000 of unaccrued fees and expenses remain subject to
reimbursement through February 29, 2000.
In addition, each fund has entered into agreements with the manager and a
wholly owned subsidiary of the manager, pursuant to which each fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of each fund. T. Rowe Price Services, Inc. is each fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the funds. The Short-Term Bond and Bond Funds
incurred expenses pursuant to these related party agreements totaling
approximately $88,000 and $225,000, respectively, for the year ended February
28, 1999, of which $8,000 and $20,000, respectively, were payable at period-end.
===============================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Board of Trustees of T. Rowe Price State Tax-Free Income Trust
and Shareholders of Virginia Short-Term Tax-Free Bond Fund and Virginia
Tax-Free Bond Fund
In our opinion, the accompanying statements 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
Virginia Short-Term Tax-Free Bond Fund and Virginia Tax-Free Bond Fund (two of
the portfolios comprising the T. Rowe Price State Tax-Free Income Trust,
hereafter referred to as "the Funds") at February 28, 1999, and the results of
each of their operations, the changes in each of their 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 Funds' 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
================================================================================
T. Rowe Price Virginia Tax-Free Funds
- --------------------------------------------------------------------------------
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 Short-Term Bond Fund's distributions to shareholders included:
* $42,000 from long-term capital gains, subject to the 20% rate gains
category,
* $867,000 which qualified as exempt-interest dividends.
The Bond Fund's distributions to shareholders included:
* $674,000 from short-term capital gains,
* $1,998,000 from long-term capital gains, subject to the 20% rate gains
category,
* $12,235,000 which qualified as exempt-interest dividends.
================================================================================
<PAGE>
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
Investment Services And Information
- --------------------------------------------------------------------------------
KNOWLEDGEABLE SERVICE REPRESENTATIVES
-------------------------------------
By Phone 1-800-225-5132 Available Monday through Friday from
8 a.m. to 10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
----------------
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your
distributions.
Automated 24-Hour Services Including Tele*Access[registration mark] and the
T. Rowe Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
-------------------
Individual Investments Stocks, bonds, options, precious metals,
and other securities at a savings over full-service commission rates.
INVESTMENT INFORMATION
----------------------
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund managers' reviews of their strategies and
results.
T. Rowe Price Report Quarterly investment newsletter discussing
markets and financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund
results.
Insights Educational reports on investment strategies and financial
markets.
Investment Guides Asset Mix Worksheet, College Planning Kit,
Diversifying Overseas: A Guide to International Investing, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning
Kit.
================================================================================
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. C14-050 2/28/99
