- --------------------------------------------------------------------------------
T. Rowe Price
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Annual Report
Georgia Tax-Free Funds
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February 28, 1999
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REPORT HIGHLIGHTS
================================================================================
Georgia Tax-Free Bond Fund
* Tax-free municipal bonds fared well amid the sometimes turbulent financial
market conditions of the past 12 months.
* Yields on tax-free bonds approached parity with yields on taxable bonds
before easing in recent months.
* The Georgia Bond Fund's 6- and 12-month returns of 2.19% and 5.73%,
respectively, exceeded the average return of similar funds for both
periods.
* Performance benefited from the fund's low expense ratio, a longer duration,
and a focus on high-quality bonds.
* Continued low inflation and slower economic growth should benefit municipal
bonds in coming months.
================================================================================
<PAGE>
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 Georgia Bond Fund
provided solid returns that exceeded its peer group average 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 -- a classic flight
to quality. 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, especially in longer maturities--a highly unusual occurrence in the
absence of serious proposals to alter the federal tax structure.
[Edgar description: A line chart showing the T. Rowe Price Georgia Bond
Yield Index from 2/28/98 to 2/28/99. Source: T. Rowe Price Associates]
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, while 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 its policy stance 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. Georgia bond yields, shown in the chart on page 1, followed
national trends.
<PAGE>
==================================
Georgia continued to show the
vitality and population growth
that have distinguished the
state as an economic leader . . .
==================================
Georgia continued to show the vitality and population growth that have
distinguished the state as an economic leader for several years. Unemployment
rates reached a new low of 3.9% compared with 4.4% in 1998 and the current
national average of 4.3%. In January of 1999, the state's employment gains of
3.1% ranked twelfth among all states. The strongest sectors continued to be
construction, services, and finance/real estate. While employment growth in
manufacturing was minimal, at least it did not decline as in the U.S. as a
whole.
Once again, revenue collections exceeded projections, enabling the state to
fully fund its reserves and provide a cushion for the future. The revenue
shortfall reserve and lottery reserve funds have been steadily rebuilt since the
recession of the early 1990s, when reserves were drawn down to zero.
Additionally, the increased collections have allowed the state to distribute a
record $251.2 million in state aid to local county and city governments and
school boards. In his 1999 budget proposal, newly elected Governor Roy Barnes
has proposed further local relief in the form of an $83 million property tax
cut.
The Atlanta metro region, home to over 2.5 million people, remains a
dominant economic center for the Southeast. Unlike much of the state, which has
a manufacturing-based economy, the metro region is an increasingly
service-oriented area with significant expansion in trade and transportation.
During the recent period of rapid suburban population growth and residential and
commercial development, local governments have faced budgetary and
infrastructure-related pressures. So far, regional leadership has successfully
managed its growth without unduly burdening taxpayers or jeopardizing the strong
credit ratings the region currently enjoys.
<PAGE>
Performance and Strategy Review
The municipal market in Georgia was virtually unchanged for the six-month
period. The fund's share price closed at $11.03, just a penny lower than on
August 31, 1998. Your fund provided solid returns for the 6- and 12- month
periods that again surpassed those of its peer group average. Results benefited
from the relatively low volatility and were driven by income, with dividends per
share totaling $0.25 for each six-month period. In particular, the longer-term
return of 5.73% substantially exceeded the average, as shown in the table.
Favorable performance versus our peers was also aided by low expenses. The
fund's expense ratio of 0.65% is lower than three-quarters of the 34 funds in
its Lipper peer group, which enables a high level of income to pass through to
shareholders.
================================================================================
Performance Comparison
----------------------
Periods Ended 2/28/99 6 Months 12 Months
--------------------- -------- ---------
Georgia Tax-Free
Bond Fund 2.19% 5.73%
Lipper Georgia Municipal
Debt Funds Average 1.84 5.03
================================================================================
Our strategy over the past six-month period was basically unchanged. We
maintained a slightly longer than average duration for most of the period,
reflecting optimism that interest rates would fall modestly. In fact, long-term
rates were little changed, but the portfolio did benefit from falling short- and
intermediate-term rates, as nearly one-quarter of our holdings have maturities
shorter than 10 years.
<PAGE>
For some time now we have emphasized the 15-year range in our security
selection, in part to dampen the negative effects on the portfolio of a
potential rise in rates. This focus also contributed to the fund's performance
advantage as this area of the yield curve earned the best total returns of all
maturity ranges for the past six months. We continue to target this maturity
range in our purchases for its favorable long-term risk/return characteristics.
=====================================================
High Rating for Risk-Adjusted Returns
The Georgia Bond Fund received a high
Morningstar Ratingtrademark of four stars for
overall risk-adjusted returns as of February 28,
1999. The well-known mutual fund research
company's ratings reflect longer-term performance
as well as the amount of risk taken to achieve it.
The fund was rated among 1,576 and 1,109 municipal
bond funds for the three- and five-year periods
ended February 28, 1999. The top 10% of funds in a
category receive five stars, and the next 22.5%
receive four stars.* Of course, past trends may
not continue.
* Morningstar proprietary ratings reflect
historical risk-adjusted performance as of
2/28/99. Ratings may change monthly and are
calculated from the fund's 3- and 5-year average
annual returns in excess of the 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 received 4
stars for the 3- and 5-year periods.
=====================================================
<PAGE>
The fund's overall high quality contributed to its performance advantage
for the period. Despite a modest increase in the yields available on
lower-quality securities compared with those of higher quality, we maintained a
high-quality bias. In our view, investors still were not compensated adequately
for the increased credit risk of lower-quality securities. Additionally, the
underlying strength of the issuers around the state meant that there were only
limited opportunities to add securities rated BBB or below. We continue to
navigate these credit quality waters with caution.
Returns did not benefit from our first half additions of tax-exempt bonds
of corporate issuers such as Procter & Gamble, Fort James Paper, and
Georgia-Pacific, which were generally among the poorer performers for the past
six months. Pressure from taxable markets--the flight to quality mentioned
earlier--spilled over to these corporate issuers. We believe these are well-run
companies with good prospects and that their bonds should perform well over
time.
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 rate later
this year. The Federal Reserve appears to have adopted a neutral monetary policy
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 Georgia, we also expect a
somewhat lower supply than in 1998, which should be positive for bond
performance. Overall, however, yields on tax-free bonds, including those issued
in Georgia, are still appealing relative to taxable yields on other fixed income
securities. Continued low inflation and slower economic growth should be
favorable for the tax-free bond market in coming months.
Respectfully submitted,
/s/
Hugh D. McGuirk
Chairman of the Investment Advisory Committee
March 19, 1999
<PAGE>
================================================================================
T. Rowe Price Georgia Tax-Free Bond Fund
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Portfolio Highlights
Key statistics
8/31/98 2/28/99
------- -------
Price Per Share $11.04 $11.03
Dividends Per Share
For 6 months 0.25 0.25
For 12 months 0.51 0.50
Dividend Yield *
For 6 months 4.66% 4.63%
For 12 months 4.78 4.67
30-Day Standardized Yield 4.19 3.95
Weighted Average Maturity (years) 15.9 15.2
Weighted Average Effective Duration (years) 7.7 7.7
Weighted Average Quality ** AA- AA-
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* 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 Georgia Tax-Free Bond Fund
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Portfolio Highlights
SECTOR Diversification
Percent of Percent of
Net Assets Net Assets
8/31/98 2/28/99
------- -------
General Obligation - Local 11% 13%
Water and Sewer Revenue 14 13
Prerefunded Bonds 12 13
Hospital Revenue 7 10
Nuclear Revenue 11 8
Industrial and Pollution Control Revenue 9 7
General Obligation - State 6 7
Housing Finance Revenue 8 7
Escrowed to Maturity 6 5
Electric Revenue - 4
Dedicated Tax Revenue 6 3
Educational Revenue 2 3
Air and Sea Transportation Revenue 2 2
Life Care/Nursing Home Revenue 2 2
Miscellaneous Revenue 2 2
All Other 1 1
Other Assets Less Liabilities 1 -
---- ----
Total 100% 100%
================================================================================
<PAGE>
T. Rowe Price Georgia Tax-Free Bond Fund
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Performance Comparison
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[Placed here is the SEC chart for Georgia Tax-Free Bond Fund]
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.
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
- --------------------- ------ ------- ------- --------- ----
Georgia Tax-Free Bond Fund 5.73% 6.84% 6.47% 6.90% 3/31/93
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 Georgia Tax-Free Bond Fund
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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 $ 10.92 $ 10.44 $ 10.44 $ 9.93 $ 10.37
- -------------------------------------------------------------------------------
Investment activities
Net investment income 0.50* 0.51* 0.52* 0.52* 0.51*
Net realized and
unrealized gain (loss) 0.11 0.48 - 0.51 (0.39)
- -------------------------------------------------------------------------------
Total from
investment activities 0.61 0.99 0.52 1.03 0.12
- -------------------------------------------------------------------------------
Distributions
Net investment income (0.50) (0.51) (0.52) (0.52) (0.51)
Net realized gain - - - - (0.05)
- -------------------------------------------------------------------------------
Total distributions (0.50) (0.51) (0.52) (0.52) (0.56)
- -------------------------------------------------------------------------------
NET ASSET VALUE
===============================================================================
End of period $ 11.03 $ 10.92 $ 10.44 $ 10.44 $ 9.93
Ratios/Supplemental=Data=======================================================
Total return** 5.73%* 9.70%* 5.15%* 10.62%* 1.42%
- -------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 0.65%* 0.65%* 0.65%* 0.65%* 0.65%
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Ratio of net investment
income to average
net assets 4.59%* 4.79%* 5.01%* 5.09%* 5.26%
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Portfolio turnover rate 19.9% 49.0% 71.1% 71.5% 170.2%
- -------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 62,037 $ 49,455 $ 38,726 $ 32,500 $ 23,338
- -------------------------------------------------------------------------------
** 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.
* Excludes expenses in excess of a 0.65% voluntary expense limitation in
effect through 2/28/99.
The accompanying notes are an integral part of these financial statements.
<PAGE>
================================================================================
T. Rowe Price Georgia Tax-Free Bond Fund
Statement of Net Assets
Par Value
In thousands
GEORGIA 94.0%
Albany Dougherty Payroll Dev. Auth., Solid
Waste Disposal
Procter and Gamble Paper Products
5.30%, 5/15/26 * $ 500 $ 505
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Athens-Clarke Residential Care Fac., Wesley
Woods of Athens
6.375%, 10/1/27 600 611
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Atlanta Airport Fac.
Zero Coupon, 1/1/10 * 1,285 725
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6.50%, 1/1/13 (FGIC Insured) * 500 532
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Atlanta Special Purpose Fac., Delta Airlines,
7.90%, 12/1/18 * 415 434
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Brunswick and Glynn County Dev., Georgia-Pacific
5.55%, 3/1/26 * 1,000 994
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Burke County Dev. Auth., PCR
Georgia Power
VRDN (Currently 3.30%) 200 200
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VRDN (Currently 3.55%) 200 200
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5.75%, 9/1/23 (MBIA Insured) 550 562
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Oglethorpe Power
7.80%, 1/1/08 (MBIA Insured)
(Prerefunded 1/1/03+) 560 655
- ------------------------------------------------------------------------------
<PAGE>
Cartersville Dev. Auth., PCR, Anheuser Busch,
6.75%, 2/1/12 * 1,000 1,093
- ------------------------------------------------------------------------------
Chatham County Hosp. Auth., Memorial Medical Center
5.25%, 1/1/11 (AMBAC Insured) 500 525
- ------------------------------------------------------------------------------
Chatham County School Dist., GO
5.00%, 8/1/10 1,000 1,048
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6.25%, 8/1/16, (Prerefunded 8/1/03+) 625 698
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6.75%, 8/1/18 (MBIA Insured)
(Prerefunded 8/1/03+) 750 855
- ------------------------------------------------------------------------------
Cherokee County School Dist., GO, 5.00%, 2/1/14 500 516
- ------------------------------------------------------------------------------
Cherokee County Water and Sewage Auth.
5.20%, 8/1/25 750 768
- ------------------------------------------------------------------------------
5.50%, 8/1/23 (MBIA Insured) 1,000 1,079
- ------------------------------------------------------------------------------
Cobb County Hosp. Auth., 4.75%, 4/1/26 1,000 949
- ------------------------------------------------------------------------------
Cobb-Marietta Coliseum and Exhibition Hall Auth.
5.50%, 10/1/18 (MBIA Insured) 500 538
- ------------------------------------------------------------------------------
Coffee County Hosp. Auth., Coffee Regional Med. Center
6.25%, 12/1/06 500 522
- ------------------------------------------------------------------------------
Columbia County, Courthouse/Detention Center
5.625%, 2/1/20 $ 1,500 $ 1,576
- ------------------------------------------------------------------------------
Coweta County Residential Care Fac. for the Elderly Auth.
Wesley Woods of Newnan-Peachtree City
8.25%, 10/1/26 500 575
- ------------------------------------------------------------------------------
<PAGE>
Dalton Dev. Auth., Hamilton Health Care
5.25%, 8/15/10 (MBIA Insured) 520 550
- ------------------------------------------------------------------------------
DeKalb County Dev. Auth., Emory Univ., 6.00%, 10/1/14 550 606
- ------------------------------------------------------------------------------
Effingham County Dev. Auth., Fort James,
5.625%, 7/1/18 * 500 501
- ------------------------------------------------------------------------------
Forsyth County School Dist., 5.125%, 7/1/15 500 516
- ------------------------------------------------------------------------------
Fulco Hosp. Auth.
Catholic Health East
5.25%, 11/15/11 (MBIA Insured) 500 532
- ------------------------------------------------------------------------------
5.25%, 11/15/13 (MBIA Insured) 1,555 1,628
- ------------------------------------------------------------------------------
Fulton County
6.375%, 1/1/14 (FGIC Insured)
(Escrowed to Maturity) 600 709
- ------------------------------------------------------------------------------
Fulton County Dev. Auth., PCR, Special Fac., Delta Airlines
6.95%, 11/1/12 500 541
- ------------------------------------------------------------------------------
Fulton County Housing Auth., Single Family
6.55%, 3/1/18 (GNMA Guaranteed) * 165 177
- ------------------------------------------------------------------------------
Fulton County School Dist., GO, 6.375%, 5/1/17 830 983
- ------------------------------------------------------------------------------
Fulton County Water and Sewage
4.75%, 1/1/28 (FGIC Insured) 1,000 953
- ------------------------------------------------------------------------------
6.25%, 1/1/09 (FGIC Insured) 1,000 1,158
- ------------------------------------------------------------------------------
Gainesville Water and Sewage,
6.00%, 11/15/12 (FGIC Insured) 1,000 1,150
- ------------------------------------------------------------------------------
<PAGE>
Georgia, GO
6.30%, 3/1/09 425 498
- ------------------------------------------------------------------------------
6.50%, 4/1/09 550 653
- ------------------------------------------------------------------------------
5.25%, 2/1/10 500 543
- ------------------------------------------------------------------------------
Georgia Housing and Fin. Auth.
Home Ownership, 6.60%, 6/1/25 * 250 268
- ------------------------------------------------------------------------------
Single Family Mortgage
6.05%, 12/1/16 * 500 531
- ------------------------------------------------------------------------------
6.125%, 12/1/15 420 448
- ------------------------------------------------------------------------------
6.25%, 12/1/28 * 500 536
- ------------------------------------------------------------------------------
6.50%, 12/1/17 (FHA Guaranteed) * 1,000 1,067
- ------------------------------------------------------------------------------
6.60%, 12/1/23 (FHA Guaranteed) * 555 593
- ------------------------------------------------------------------------------
6.65%, 12/1/20 * 480 515
- ------------------------------------------------------------------------------
Georgia Municipal Gas Auth.
Gas Portfolio, VRDN (Currently 2.95%) $ 800 $ 800
- ------------------------------------------------------------------------------
Southern Storage Gas, 6.00%, 7/1/04 500 547
- ------------------------------------------------------------------------------
Georgia Private Colleges & Univ. Auth.,
Agnes Scott College
4.75%, 6/1/28 (MBIA Insured) 500 476
- ------------------------------------------------------------------------------
Gwinnett County Water and Sewer Auth., 5.25%, 8/1/18 600 614
- ------------------------------------------------------------------------------
<PAGE>
Hall County School Dist., GO
6.30%, 12/1/07 (AMBAC Insured)
(Prerefunded 12/1/04+) 1,000 1,143
- ------------------------------------------------------------------------------
Henry County School Dist., GO
6.00%, 8/1/14 (MBIA Insured) 330 365
- ------------------------------------------------------------------------------
Jackson County School Dist., GO
6.00%, 7/1/14 (MBIA Insured) 1,000 1,120
- ------------------------------------------------------------------------------
Lee County Utilities Auth. Water and Sewage
5.00%, 7/1/18 (FSA Insured) 1,000 996
- ------------------------------------------------------------------------------
Macon Water Auth., 5.25%, 10/1/16 500 516
- ------------------------------------------------------------------------------
Metropolitan Atlanta Rapid Transit Auth.
Sales Tax
5.50%, 7/1/17 (MBIA Insured) 1,000 1,045
- ------------------------------------------------------------------------------
6.90%, 7/1/20 (MBIA Insured)
(Prerefunded 7/1/04+) 1,300 1,513
- ------------------------------------------------------------------------------
7.00%, 7/1/11 (Escrowed to Maturity) 1,335 1,651
- ------------------------------------------------------------------------------
7.00%, 7/1/11 (MBIA Insured)
(Escrowed to Maturity) 635 786
- ------------------------------------------------------------------------------
Milledgeville, Water and Sewer,
6.00%, 12/1/21 (FSA Insured) 500 573
- ------------------------------------------------------------------------------
Monroe County Dev. Auth., PCR, Gulf Power
VRDN (Currently 3.55%) 1,600 1,600
- ------------------------------------------------------------------------------
<PAGE>
Municipal Electric Auth. of Georgia
Zero Coupon, 1/1/09 1,000 596
- ------------------------------------------------------------------------------
5.70%, 1/1/19 (MBIA Insured) 300 327
- ------------------------------------------------------------------------------
6.50%, 1/1/12 520 605
- ------------------------------------------------------------------------------
6.50%, 1/1/12 (Prerefunded 1/1/08+) 165 194
- ------------------------------------------------------------------------------
6.60%, 1/1/18 1,035 1,219
- ------------------------------------------------------------------------------
7.25%, 1/1/24 (AMBAC Insured) 1,000 1,316
- ------------------------------------------------------------------------------
Paulding County
Water and Sewer, 6.00%, 12/1/13 (MBIA Insured) $ 1,000 $ 1,149
- ------------------------------------------------------------------------------
School Dist., GO, 6.00%, 2/1/13 (MBIA Insured) 1,000 1,143
- ------------------------------------------------------------------------------
Peach County School Dist., GO,
6.40%, 2/1/19 (MBIA Insured) 500 573
- ------------------------------------------------------------------------------
Private Colleges and Universities Auth., Emory Univ.
5.25%, 11/1/13 500 525
- ------------------------------------------------------------------------------
Putnam County Dev. Auth., PCR, Georgia Power
Plant Branch Project
VRDN (Currently 3.15%) 200 200
- ------------------------------------------------------------------------------
Rockdale County Dev. Auth., Solid Waste Disposal,
Visy Paper
7.40%, 1/1/16 * 475 505
- ------------------------------------------------------------------------------
Rockdale County School Dist., GO, 6.50%, 1/1/09 1,000 1,134
- ------------------------------------------------------------------------------
Savannah Economic Dev. Auth., Union Camp, 6.15%, 3/1/17 500 565
- ------------------------------------------------------------------------------
<PAGE>
Savannah Hosp. Auth.
5.00%, 7/1/18 (FSA Insured) 500 495
- ------------------------------------------------------------------------------
5.25%, 7/1/13 (FSA Insured) 1,000 1,048
- ------------------------------------------------------------------------------
Smyrna Downtown Dev. Auth.
6.70%, 2/1/20 (MBIA Insured)
(Prerefunded 2/1/05+) 1,000 1,161
- ------------------------------------------------------------------------------
Total Georgia (Cost $54,964) 58,316
PUERTO=RICO==5.8%=============================================================
Puerto Rico, GO, Public Improvement, 4.50%, 7/1/23 1,000 918
- ------------------------------------------------------------------------------
Puerto Rico Highway and Transportation Auth.
6.625%, 7/1/12 (FSA Insured) 1,000 1,096
- ------------------------------------------------------------------------------
Puerto Rico Municipal Fin. Agency, GO
5.50%, 7/1/21 (FSA Insured) 1,000 1,051
- ------------------------------------------------------------------------------
Puerto Rico Public Building Auth., GO, Gov't. Fac.
5.25%, 7/1/21 500 502
- ------------------------------------------------------------------------------
Total Puerto Rico (Cost $3,409) 3,567
<PAGE>
Total Investments in Securities
99.8% of Net Assets (Cost $58,373) $ 61,883
Other Assets Less Liabilities 154
NET ASSETS $ 62,037
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 1 Accumulated net
realized gain/loss - net of distributions (429) Net unrealized gain (loss)
3,510 Paid-in-capital applicable to 5,626,809 no par value shares of beneficial
interest outstanding; unlimited number of shares authorized 58,955
NET ASSETS $ 62,037
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance Corp.
GNMA Government National Mortgage Association
GO General Obligation
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
================================================================================
<PAGE>
T. Rowe Price Georgia Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Statement of Operations
In thousands
Year
Ended
2/28/99
=Investment=Income===========================================
Interest income $ 2,875
- -------------------------------------------------------------
Expenses
Investment management 157
Custody and accounting 96
Shareholder servicing 64
Prospectus and shareholder reports 12
Legal and audit 11
Registration 8
Trustees 6
Miscellaneous 3
- -------------------------------------------------------------
Total expenses 357
Expenses paid indirectly (1)
- -------------------------------------------------------------
Net expenses 356
- -------------------------------------------------------------
Net investment income 2,519
- -------------------------------------------------------------
=Realized=and=Unrealized=Gain=(Loss)=========================
Net realized gain (loss)
Securities 239
Futures 6
- -------------------------------------------------------------
Net realized gain (loss) 245
Change in net unrealized gain or loss on securities 258
- -------------------------------------------------------------
Net realized and unrealized gain (loss) 503
- -------------------------------------------------------------
INCREASE (DECREASE) IN NET
=============================================================
ASSETS FROM OPERATIONS $ 3,022
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Georgia 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 $ 2,519 $ 2,093
Net realized gain (loss) 245 323
Change in net unrealized gain or loss 258 1,669
- -------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 3,022 4,085
- -------------------------------------------------------------------------------
Distributions to shareholders
Net investment income (2,519) (2,093)
- -------------------------------------------------------------------------------
Capital share transactions *
Shares sold 20,966 15,932
Distributions reinvested 1,991 1,573
Shares redeemed (10,878) (8,768)
- -------------------------------------------------------------------------------
Increase (decrease) in net assets from capital
share transactions 12,079 8,737
==Net=Assets===================================================================
Increase (decrease) during period 12,582 10,729
Beginning of period 49,455 38,726
End of period $ 62,037 $ 49,455
===============================================================================
* Share information
Shares sold 1,909 1,494
Distributions reinvested 181 148
Shares redeemed (993) (821)
- -------------------------------------------------------------------------------
Increase (decrease) in shares outstanding 1,097 821
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Georgia 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 Georgia 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 March 31, 1993.
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.
<PAGE>
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.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $20,637,000 and $10,611,000, 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 $247,000 in fiscal 1999.
As of February 28, 1999, the fund has capital loss carryforwards for federal
income tax purposes of $363,000, all of which expires in 2003. The fund intends
to retain gains realized in future periods that may be offset by available
capital loss carryforwards.
At February 28, 1999, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$58,373,000. Net unrealized gain aggregated $3,510,000 at period-end, of which
$3,555,000 related to appreciated investments and $45,000 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 $15,000 was payable 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,
$74,000 of management fees were not accrued by the fund for the year ended
February 28, 1999. Additionally, $78,000 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 $119,000 for the year
ended February 28, 1999, of which $10,000 was payable at period-end.
<PAGE>
================================================================================
T. Rowe Price Georgia 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 Georgia 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
Georgia 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 Georgia 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 $2,468,000 which qualified as
exempt-interest dividends.
================================================================================
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.
<PAGE>
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. F92-050 2/28/99
