<PAGE>
================================================================================
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
February 29, 2000
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
NEW JERSEY TAX-FREE BOND FUND
- -----------------------------
* The Federal Reserve continued to raise interest rates, causing prices of
municipal bonds to fall.
* The New Jersey Tax-Free Bond Fund suffered a loss, but performed notably
better than its peer group average.
* Our interest rate strategy and a temporary increase in cash reserves
contributed to relative outperformance.
* Interest rates may still rise, but New Jersey's municipal market should
offer attractive total return opportunities.
UPDATES AVAILABLE
- -----------------
For updates on T. Rowe Price funds following the end of each calendar
quarter, please see our Web site at www.troweprice.com.
FELLOW SHAREHOLDERS
- -------------------
The Federal Reserve raised the federal funds rate three times in 1999 and
twice so far in 2000 (as of March 22) in a continuing effort to slow economic
growth to a pace that will constrain inflationary pressures. As a result of a
powerful economy and higher interest rates, bonds overall posted weak returns
during the past 6- and 12-month periods. Your fund endured in a highly negative
environment, performing better than its peer group average.
MARKET ENVIRONMENT
- ------------------
*******************************************************************************
NEW JERSEY BOND YIELD INDEX
---------------------------
2/28 5.1
5.19
5.19
5/31 5.27
5.37
5.43
8/31 5.6
5.76
5.93
11/30 5.87
6.01
6.2
2/29 6.15
Source: T. Rowe Price Associates.
*******************************************************************************
<PAGE>
The Fed has drawn a clear line in the sand in the face of a persistently
strong economy, which surged more than 6% in the second half of 1999. By early
2000, it was evident that domestic demand was not slowing sufficiently to temper
the powerful economy, which has been augmented by a recovery in U.S. exports as
well as greater government spending. In this environment, Fed Chairman Alan
Greenspan left no room for doubt that the Fed will remain diligent in its fight
to contain inflation.
Interest rates, and municipal bond yields, trended upward steadily in
response to repeated Fed hikes in key short-term rates. Longer-term rates did
ease somewhat in February, but that resulted largely from unusual activity in
the Treasury market, when the Treasury Department announced its intention to pay
down federal debt further through the repurchase of Treasury bonds. The proposed
reduction in federal debt sent investors scrambling and led to an inversion of
the yield curve, with 30-year Treasury yields falling below two-year yields.
During this period, the municipal yield curve maintained a positive slope but
flattened considerably, reflecting comparatively weak price performance by
shorter-term issues.
After outperforming taxable bonds during the first half of 1999, municipals
lost ground in the second half. Year-end was particularly challenging for
municipal markets due to a confluence of events. Municipals began to weaken when
some buyers fled into higher-yielding corporate bonds, which flooded the market
in the third quarter. In the fourth quarter, normally strong demand from retail
investors waned because of competition from the surging stock market and from
selling to realize tax losses at year-end. Redemptions from municipal bond funds
increased as a result. One factor that aided municipals in 1999 was the
relatively light supply of new issues, down 21% nationwide from the previous
year.
New Jersey has certainly done its share to contribute to the nation's
strong economic growth. The state's financial health, excellent during the past
several years, only improved during the most recent 12-month period. A
Comprehensive Annual Report dated June 30, 1999, noted that New Jersey's revenue
growth had exceeded expenditure growth 4% to 2%, that its surplus had grown from
$1.8 billion to $2.2 billion, and that its rainy day fund had jumped from $534
million to $627 million. Personal income for 1999 rose by 5.8%, and the state's
property tax rebate program is helping keep more money in the pockets of
residents. When unemployment fell to 3.9% in January 2000, it represented the
first time in about a decade that the state's rate was below the national
average.
<PAGE>
STRATEGY AND PERFORMANCE REVIEW
- -------------------------------
================================================================================
PERFORMANCE COMPARISON
----------------------
Periods Ended 2/29/00 6 Months 12 Months
--------------------- -------- ---------
New Jersey Tax-Free
Bond Fund -1.17% -4.06%
Lipper New Jersey Municipal
Debt Funds Average -1.70 -4.67
================================================================================
For the six months, your fund's total return was -1.17%. Although dividends
remained steady dur ing the period at $0.27 per share, a $0.40 price decline,
owing to higher interest rates, pushed returns into the red. At -4.06%, returns
for the full year also reflected the challenges of a rising rate environment.
However, prudent management of the portfolio's interest rate exposure as well as
a temporary cash buffer helped the fund outperform its Lipper peer group average
for both periods. The fund's low expense ratio, which remains well below the
average for its Lipper group, also contributed to good relative returns. The
fund's 30-day standardized yield ended the period at 5.16% -- equivalent to an
8.06% yield on a taxable bond for investors in the 36% tax bracket.
Nearly all of the fund's holdings finished the period down because of the
rise in interest rates. Yet we were able to mitigate losses by employing a
"barbell" strategy. In barbell portfolios, assets are gen-erally divided between
short and long bonds, with relatively few intermediate-maturity holdings in
between. We increased our holdings in longer-term bonds -- those with maturity
dates 20 years or more into the future. Because the Fed's tightening caused
short rates to rise faster than long rates, shorter-term issues became a good
sector to avoid. The long-term bonds we purchased went down less and also
provided higher coupon income.
***************************************
The fund's 30-day standardized
yield ended the period at 5.16% --
equivalent to an 8.06% yield on a
taxable bond for investors in the
36% tax bracket.
***************************************
On the short end of the barbell, our decision in mid-1999 to increase cash
holdings in the fund also augmented relative performance. As Y2K approached, we
prepared for the possibility of industry-wide redemptions by modestly raising
cash through the summer and fall. The strategy was fruitful for two reasons.
First, the market did move lower in the second half, and our cash position
helped cushion the effect on results. Second, high levels of reserves enabled us
to buy during market weakness instead of selling.
<PAGE>
We returned to normal cash levels early in 2000 as the market environment
improved. In addition, we will likely spread our positions more evenly among
short, intermediate, and long bonds -- a "ladder" posture -- when we become
comfortable that the Fed has neared the end of its tightening program.
Our shift to a barbell did not greatly affect the portfolio's overall
duration, which rose to 8.3 years at February 29 from 8.0 years six months ago.
(Duration is a measure of price sensitivity to changes in interest rates. A fund
having a duration of eight years should have an 8% appreciation or decline in
price in response to a one-percentage-point fall or rise, respectively, in
interest rates.) This duration is about neutral compared with our Lipper peer
group average.
The fund remained highly diversified by sector within the New Jersey
market. Changes among sectors were minor overall. However, we reduced our
hospital holdings further as financial performance in this area showed continued
signs of weakness. We added to our stake in industrial revenue bonds, also known
as corporate-backed municipals, because underperformance in recent months
enhanced their yields.
OUTLOOK
- -------
Although New Jersey's stellar growth is expected to moderate in 2000, its
eight-year economic expansion appears to be in little danger. We also expect
some good news for New Jersey's state and local general obligation bonds. As is
the case for the federal government, state tax revenues are increasing and the
need for debt is diminishing. The trend should trim supply of these bonds and
make existing issues more attractive.
Except for soaring oil and some other commodity prices, overall inflation
remains in check. However, the strong pace of economic growth is straining the
supply of both labor and products. As long as inflation remains a threat, the
Fed is likely to move short-term rates higher in the months ahead. While these
increases in interest rates are hard on bond-fund shareholders, they should have
positive long-term effects, including higher tax-free income and a reduced
chance of taxable capital gain distributions.
Respectfully submitted,
/s/
William F. Snider
Chairman of the Investment Advisory Committee
March 23, 2000
CHANGE IN MANAGEMENT
- --------------------
Effective April 1, 2000, Konstantine B. Mallas is Chairman of the New
Jersey Tax-Free Bond Fund's Investment Advisory Committee, responsible for its
day-to-day management. Mr. Mallas joined the firm in 1987 and has been involved
in the tax-exempt bond management process since 1991. He is a vice president of
T. Rowe Price and has been a member of the fund's advisory committee since 1994.
He succeeds William F. Snider, who has left T. Rowe Price to pursue new
opportunities.
This updates the portfolio management section of the New Jersey Tax-Free
Bond Fund prospectus dated July 1, 1999.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- -------------------------------------------
PORTFOLIO HIGHLIGHTS
- --------------------
KEY STATISTICS
- --------------
8/31/99 2/29/00
- --------------------------------------------------------------------------
Price Per Share $ 11.02 $ 10.62
- --------------------------------------------------------------------------
Dividends Per Share
- --------------------------------------------------------------------------
For 6 months 0.27 0.27
- --------------------------------------------------------------------------
For 12 months 0.54 0.54
- --------------------------------------------------------------------------
Dividend Yield *
- --------------------------------------------------------------------------
For 6 months 4.83% 5.16%
- --------------------------------------------------------------------------
For 12 months 4.95 5.14
- --------------------------------------------------------------------------
30-Day Standardized Yield 4.63 5.16
- --------------------------------------------------------------------------
Weighted Average Maturity (years) 17.2 17.2
- --------------------------------------------------------------------------
Weighted Average Effective Duration (years) 8.0 8.3
- --------------------------------------------------------------------------
Weighted Average Quality ** AA- A+
- --------------------------------------------------------------------------
* Dividends earned and reinvested for the periods indicated are annualized
and divided by the fund's net asset value at the end of the period.
** Based on T. Rowe Price research.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- -------------------------------------------
PORTFOLIO HIGHLIGHTS
- --------------------
SECTOR DIVERSIFICATION
- ----------------------
Percent of Percent of
Net Assets Net Assets
8/31/99 2/29/00
- ------------------------------------------------------------------------------
General Obligation - Local 13% 14%
- ------------------------------------------------------------------------------
Prerefunded Bonds 8 9
- ------------------------------------------------------------------------------
Educational Revenue 9 9
- ------------------------------------------------------------------------------
Hospital Revenue 13 8
- ------------------------------------------------------------------------------
Industrial and Pollution Control Revenue 4 8
- ------------------------------------------------------------------------------
Housing Finance Revenue 6 7
- ------------------------------------------------------------------------------
Dedicated Tax Revenue 8 7
- ------------------------------------------------------------------------------
Water and Sewer Revenue 7 6
- ------------------------------------------------------------------------------
Lease Revenue 5 5
- ------------------------------------------------------------------------------
General Obligation - State 5 5
- ------------------------------------------------------------------------------
Air and Sea Transportation Revenue 5 4
- ------------------------------------------------------------------------------
Electric Revenue 4 4
- ------------------------------------------------------------------------------
Nuclear Revenue 3 3
- ------------------------------------------------------------------------------
Life Care/Nursing Home Revenue 3 3
- ------------------------------------------------------------------------------
Ground Transportation Revenue 6 3
- ------------------------------------------------------------------------------
All Other 3 2
- ------------------------------------------------------------------------------
Other Assets Less Liabilities -2 3
- ------------------------------------------------------------------------------
Total 100% 100%
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- -------------------------------------------
PERFORMANCE COMPARISON
- ----------------------
This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
Lehman Municipal Lipper New Jersey New Jersey Tax-Free
Bond Index Municipal Debt Funds Average Bond Fund
4/30/91 10000 10000 10000
2/92 10850 10833 10855
2/93 12343 12402 12582
2/94 13027 13067 13332
2/95 13272 13142 13381
2/96 14738 14397 14809
2/97 15550 15072 15486
2/98 16972 16383 16916
2/99 18015 17278 17900
2/00 17640 16535 17174
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 2/29/00 1 Year 3 Years 5 Years Inception Date
- --------------------- ------ ------- ------- --------- ----
New Jersey Tax-Free Bond Fund -4.06% 3.51% 5.12% 6.31% 4/30/91
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- -------------------------------------------
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
- --------------------
Year
Ended
2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
NET ASSET VALUE
Beginning of period $ 11.62 $ 11.51 $ 11.08 $ 11.16 $ 10.63
- ------------------------------------------------------------------------------
Investment activities
Net investment income(loss) 0.54 0.55* 0.57* 0.57* 0.58*
Net realized and
unrealized gain (loss) (1.00) 0.11 0.43 (0.08) 0.53
- ------------------------------------------------------------------------------
Total from
investment activities (0.46) 0.66 1.00 0.49 1.11
- ------------------------------------------------------------------------------
Distributions
Net investment income (0.54) (0.55) (0.57) (0.57) (0.58)
- ------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 10.62 $ 11.62 $ 11.51 $ 11.08 $ 11.16
Ratios/Supplemental=Data
Total return** (4.06)% 5.81%* 9.24%* 4.57%* 10.67%*
- ------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 0.65% 0.65%* 0.65%* 0.65%* 0.65%*
- ------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 4.84% 4.72%* 5.05%* 5.18%* 5.28%*
- ------------------------------------------------------------------------------
Portfolio turnover rate 50.2% 25.5% 34.3% 78.9% 98.4%
- ------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $104,298 $121,637 $ 99,765 $ 80,289 $ 70,304
** 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.
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- ------------------------------------------- February 29, 2000
STATEMENT OF NET ASSETS
- -----------------------
Par Value
In thousands
NEW=JERSEY==90.4%==============================================================
Cape May County Industrial Pollution Control Fin. Auth.
6.80%, 3/1/21 (MBIA Insured) $ 1,520 $ 1,705
- -------------------------------------------------------------------------------
Edison Township, GO, 6.50%, 6/1/08 350 381
- -------------------------------------------------------------------------------
Freehold Township, GO, Water and Sewer
6.35%, 10/1/11 (MBIA Insured) 250 273
- -------------------------------------------------------------------------------
Gloucester County Improvement Auth.
Waste Management, 6.85%, 12/1/09 1,000 1,005
- -------------------------------------------------------------------------------
Hudson County Improvement Auth.
Union City Lease Project
5.20%, 7/15/24 (FGIC Insured) 2,500 2,241
- -------------------------------------------------------------------------------
Jersey City, GO
6.25%, 10/1/10 445 475
- -------------------------------------------------------------------------------
6.50%, 2/15/04 500 523
- -------------------------------------------------------------------------------
Mercer County Public Improvement Auth., GO, Solid Waste
5.75%, 9/15/16 2,000 2,004
- -------------------------------------------------------------------------------
Middlesex County PollutionControl Fin.Auth.,Amerada Hess
6.875%, 12/1/22 1,500 1,511
- -------------------------------------------------------------------------------
Middlesex County Utilities Auth., Sewer
6.25%, 8/15/10 (MBIA Insured) 500 531
- -------------------------------------------------------------------------------
Monmouth County Improvement Auth., GO
Capital Equipment
5.00%, 10/1/08 1,255 1,242
- -------------------------------------------------------------------------------
5.00%, 10/1/09 1,020 1,005
- -------------------------------------------------------------------------------
Morris County, GO
5.00%, 7/15/14 1,300 1,219
- -------------------------------------------------------------------------------
5.25%, 11/15/20 725 669
- -------------------------------------------------------------------------------
New Jersey, GO, 7.05%, 7/15/12 * 1,335 1,474
- -------------------------------------------------------------------------------
New Jersey Building Auth., GO, 5.375%, 6/15/19 3,000 2,803
- -------------------------------------------------------------------------------
<PAGE>
New Jersey Economic Dev. Auth.
American Water
6.00%, 5/1/36 (FGIC Insured) * 1,000 987
- -------------------------------------------------------------------------------
6.875%, 11/1/34 (FGIC Insured) * 1,000 1,061
- -------------------------------------------------------------------------------
Continental Airlines
6.25%, 9/15/19 * 2,000 1,832
- -------------------------------------------------------------------------------
New Jersey Economic Dev. Auth.
Educational Testing, 4.75%, 5/15/25 (MBIAInsured) $ 2,250 $ 1,864
- -------------------------------------------------------------------------------
Franciscan Oaks, 5.75%, 10/1/23 375 301
- -------------------------------------------------------------------------------
Harrogate
5.50%, 12/1/06 400 383
- -------------------------------------------------------------------------------
5.65%, 12/1/08 200 187
- -------------------------------------------------------------------------------
5.75%, 12/1/16 500 431
- -------------------------------------------------------------------------------
5.875%, 12/1/26 750 630
- -------------------------------------------------------------------------------
Kapkowski Road Landfill, Zero Coupon, 4/1/10 1,025 518
- -------------------------------------------------------------------------------
Keswick Pines, 5.75%, 1/1/24 600 473
- -------------------------------------------------------------------------------
Lawrenceville School, 5.75%, 7/1/16 2,000 1,998
- -------------------------------------------------------------------------------
Natural Gas, VRDN (Currently 3.80%)
(AMBAC Insured) * 1,000 1,000
- -------------------------------------------------------------------------------
Saint Barnabas
Zero Coupon, 7/1/16 (MBIA Insured) 3,500 1,313
- -------------------------------------------------------------------------------
The Evergreens, 6.00%, 10/1/22 965 803
- -------------------------------------------------------------------------------
The Seeing Eye, 6.20%, 12/1/24 1,000 1,003
- -------------------------------------------------------------------------------
Transportation Project
5.75%, 5/1/12 (FSA Insured) 2,000 2,051
- -------------------------------------------------------------------------------
6.00%, 5/1/16 (FSA Insured) 1,000 1,022
- -------------------------------------------------------------------------------
New Jersey EFA
Monmouth Univ.
5.25%, 7/1/09 480 465
- -------------------------------------------------------------------------------
5.60%, 7/1/11 425 417
- -------------------------------------------------------------------------------
5.60%, 7/1/12 450 438
- -------------------------------------------------------------------------------
<PAGE>
Princeton Univ., 5.875%, 7/1/14(Prerefunded7/1/04+) 1,050 1,088
- -------------------------------------------------------------------------------
Rowan College, 6.00%, 7/1/21 (AMBAC Insured) 1,000 1,008
- -------------------------------------------------------------------------------
Saint Peter's College
5.375%, 7/1/12 250 238
- -------------------------------------------------------------------------------
5.50%, 7/1/27 500 440
- -------------------------------------------------------------------------------
Seton Hall Univ.
6.875%, 7/1/10 375 393
- -------------------------------------------------------------------------------
7.00%, 7/1/21 (Prerefunded 7/1/01+) 200 210
- -------------------------------------------------------------------------------
Stevens Institute Technology, 5.375%, 7/1/11 585 573
- -------------------------------------------------------------------------------
New Jersey HFFA
Atlantic City Medical Center, 6.80%, 7/1/11 2,000 2,097
- -------------------------------------------------------------------------------
Bayonne Hosp., 4.75%, 7/1/27 (FSA Insured) 2,500 2,025
- -------------------------------------------------------------------------------
New Jersey HFFA
Irvington General Hosp.
5.875%, 8/1/06 (FHA Guaranteed)
(Prerefunded 8/1/04+) $ 940 $ 988
- -------------------------------------------------------------------------------
6.375%, 8/1/15 (FHA Guaranteed)
(Prerefunded 8/1/04+) 500 536
- -------------------------------------------------------------------------------
Kennedy Health
5.00%, 7/1/10 (MBIA Insured) 300 291
- -------------------------------------------------------------------------------
5.25%, 7/1/15 (MBIA Insured) 500 472
- -------------------------------------------------------------------------------
St. Elizabeth Hosp.
6.00%, 7/1/14 1,500 1,287
- -------------------------------------------------------------------------------
6.00%, 7/1/20 570 466
- -------------------------------------------------------------------------------
St. Joseph Hosp. and Medical Center
5.75%, 7/1/16 1,000 997
- -------------------------------------------------------------------------------
New Jersey Higher Ed. Assistance Auth., Student Loan
5.80%, 6/1/16 (MBIA Insured) * 1,130 1,126
- -------------------------------------------------------------------------------
New Jersey Highway Auth., Senior Parkway, 5.75%, 1/1/13 2,000 2,045
- -------------------------------------------------------------------------------
<PAGE>
New Jersey Housing and Mortgage Fin. Agency
6.35%, 10/1/27 (MBIA Insured) * 2,000 2,010
- -------------------------------------------------------------------------------
7.10%, 11/1/11 300 312
- -------------------------------------------------------------------------------
7.10%, 11/1/12 175 182
- -------------------------------------------------------------------------------
Home Buyer
5.70%, 10/1/17 (MBIA Insured) 1,500 1,474
- -------------------------------------------------------------------------------
5.90%, 10/1/29 (MBIA Insured) * 1,500 1,435
- -------------------------------------------------------------------------------
Multi-Family
5.55%, 11/1/09 (FSA Insured) 1,000 1,008
- -------------------------------------------------------------------------------
6.25%, 11/1/26 (FSA Insured) 1,000 1,002
- -------------------------------------------------------------------------------
New Jersey Sports & Exposition Auth., Monmouth Park
8.00%, 1/1/25 (Prerefunded 1/1/05+) 650 742
- -------------------------------------------------------------------------------
New Jersey Transportation Trust Fund Auth.
4.50%, 6/15/19 (FSA Insured) 500 409
- -------------------------------------------------------------------------------
5.25%, 6/15/15 3,000 2,842
- -------------------------------------------------------------------------------
New Jersey Turnpike Auth.
10.375%, 1/1/03 (Escrowed to Maturity) 1,170 1,286
- -------------------------------------------------------------------------------
New Jersey Wastewater Treatment Trust
6.30%, 4/1/10 (Prerefunded 4/1/04+) 1,180 1,256
- -------------------------------------------------------------------------------
6.375%, 4/1/11 (Prerefunded 4/1/04+) 750 801
- -------------------------------------------------------------------------------
Newark, GO
School Qualified Bond Act
5.30%, 9/1/11 (MBIA Insured) $ 1,000 $ 993
- -------------------------------------------------------------------------------
5.30%, 9/1/17 (MBIA Insured) 1,000 938
- -------------------------------------------------------------------------------
Ocean County Utilities Auth., GO
5.35%, 12/1/17 1,695 1,607
- -------------------------------------------------------------------------------
Wastewater, 6.30%, 1/1/11 1,300 1,378
- -------------------------------------------------------------------------------
<PAGE>
Port Auth. of New York and New Jersey
5.875%, 9/15/15 (FGIC Insured) * 1,000 1,006
- -------------------------------------------------------------------------------
6.125%, 7/15/22 * 1,000 1,003
- -------------------------------------------------------------------------------
6.125%, 6/1/94 1,000 1,025
- -------------------------------------------------------------------------------
6.50%, 10/1/01 * 400 406
- -------------------------------------------------------------------------------
6.50%, 7/15/19 (FGIC Insured) * 500 516
- -------------------------------------------------------------------------------
6.50%, 11/1/26 * 1,000 1,014
- -------------------------------------------------------------------------------
Special Project, 6.75%, 10/1/11 * 1,000 1,019
- -------------------------------------------------------------------------------
Salem County Pollution Control Fin. Auth., PCR
E. I. DuPont, 6.50%, 11/15/21 * 2,000 2,017
- -------------------------------------------------------------------------------
Public Service Electric and Gas Co
6.25%, 6/1/31 (MBIA Insured) 1,500 1,528
- -------------------------------------------------------------------------------
South Brunswick Township
Board of Ed.
6.40%, 8/1/09 (FGIC Insured)
(Prerefunded 8/1/05+) 1,250 1,331
- -------------------------------------------------------------------------------
6.40%, 8/1/10 (FGIC Insured)
(Prerefunded 8/1/05+) 1,500 1,597
- -------------------------------------------------------------------------------
South Jersey Transportation Auth.
5.25%, 11/1/12 (AMBAC Insured) 1,000 983
- -------------------------------------------------------------------------------
Raytheon Aircraft Service, 6.15%, 1/1/22 * 960 870
- -------------------------------------------------------------------------------
Southeast Morris County Municipal Utilities Auth., Water
6.50%, 1/1/11 (FGIC Insured) 750 777
- -------------------------------------------------------------------------------
Wanaque Valley Regional Sewage Auth.
5.75%, 9/1/18 (AMBAC Insured) 3,115 3,133
- -------------------------------------------------------------------------------
Winslow Township Board of Ed., GO
5.20%, 8/1/16 (FGIC Insured) 2,010 1,878
- -------------------------------------------------------------------------------
Total New Jersey (Cost $95,284) 94,296
PUERTO=RICO==6.0%==============================================================
Puerto Rico Commonwealth, GO
6.45%, 7/1/17 (Prerefunded 7/1/04+) $ 500 $ 540
- -------------------------------------------------------------------------------
<PAGE>
Puerto Rico Highway and Transportation Auth.
5.00%, 7/1/36 500 413
- -------------------------------------------------------------------------------
6.375%, 7/1/08 (FSA Insured) 1,000 1,048
- -------------------------------------------------------------------------------
6.625%, 7/1/12 1,000 1,049
- -------------------------------------------------------------------------------
6.625%, 7/1/12 (FSA Insured) 500 525
- -------------------------------------------------------------------------------
Puerto Rico Commonwealth Infrastructure Fin. Auth.
7.50%, 7/1/09 105 106
- -------------------------------------------------------------------------------
Puerto Rico Electric Power Auth., 5.50%, 7/1/25 2,750 2,545
- -------------------------------------------------------------------------------
Total Puerto Rico (Cost $6,095) 6,226
U.=S.=VIRGIN=ISLANDS==0.9%=====================================================
Virgin Islands PFA, GO, Gross Receipts Taxes,
6.50%, 10/1/24 1,000 989
- -------------------------------------------------------------------------------
Total U. S. Virgin Islands (Cost $1,000) 989
97.3% of Net Assets (Cost $102,379) $101,511
Other Assets Less Liabilities 2,787
NET ASSETS $104,298
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 4
Accumulated net realized gain/loss -
net of distributions (3,681)
Net unrealized gain (loss) (868)
Paid-in-capital applicable to 9,823,520 no par
value shares of beneficial interest
outstanding; unlimited number of shares authorized 108,843
NET ASSETS $104,298
NET ASSET VALUE PER SHARE $ 10.62
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
EFA Educational Facility Authority
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance Corp.
GO General Obligation
HFFA Health Facility Financing Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
PFA Public Facility Authority
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- -------------------------------------------
STATEMENT OF OPERATIONS
- ----------------------- In thousands
Year
Ended
2/29/00
Investment Income (Loss)
Interest income $ 6,393
- ----------------------------------------------------------------------
Expenses
Investment management 506
Shareholder servicing 105
Custody and accounting 104
Prospectus and shareholder reports 22
Legal and audit 13
Trustees 6
Miscellaneous 4
- ----------------------------------------------------------------------
Total expenses 760
Expenses paid indirectly (3)
- ----------------------------------------------------------------------
Net expenses 757
- ----------------------------------------------------------------------
Net investment income (loss) 5,636
- ----------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (2,778)
Futures 30
- ----------------------------------------------------------------------
Net realized gain (loss) (2,748)
Change in net unrealized gain or loss on securities (7,890)
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) (10,638)
- ----------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (5,002)
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- -------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------- In thousands
Year
Ended
2/29/00 2/28/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 5,636 $ 5,213
Net realized gain (loss) (2,748) 379
Change in net unrealized gain or loss (7,890) 604
- ---------------------------------------------------------------------------
Increase (decrease) in net assets from operations (5,002) 6,196
- ---------------------------------------------------------------------------
Distributions to shareholders
Net investment income (5,636) (5,213)
- ---------------------------------------------------------------------------
Capital share transactions *
Shares sold 22,651 38,168
Distributions reinvested 4,527 4,136
Shares redeemed (33,879) (21,415)
- ---------------------------------------------------------------------------
Increase (decrease) in net assets from capital
share transactions (6,701) 20,889
- ---------------------------------------------------------------------------
Net Assets
Increase (decrease) during period (17,339) 21,872
Beginning of period 121,637 99,765
- ---------------------------------------------------------------------------
End of period $ 104,298 $ 121,637
* Share information
Shares sold 2,039 3,296
Distributions reinvested 411 357
Shares redeemed (3,096) (1,850)
- ---------------------------------------------------------------------------
Increase (decrease) in shares outstanding (646) 1,803
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
- ------------------------------------------- February 29, 2000
NOTES TO FINANCIAL STATEMENTS
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
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T. Rowe Price State Tax-Free Income Trust (the trust) is registered under
the Investment Company Act of 1940. The New Jersey Tax-Free Bond Fund (the
fund), a nondiversified, open-end management investment company, is one of the
portfolios established by the trust and commenced operations on April 30, 1991.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
Valuation Debt securities are generally traded in the over-the-counter
market. Investments in securities are stated at fair value as furnished by
dealers who make markets in such securities or by an independent pricing
service, which considers yield or price of bonds of comparable quality, coupon,
maturity, and type, as well as prices quoted by dealers who make markets in such
securities.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Trustees.
Premiums and Discounts Premiums and original issue discounts on municipal
securities are amortized for both financial reporting and tax purposes. Market
discounts are recognized upon disposition of the security as gain or loss for
financial reporting purposes and as ordinary income for tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Distributions to shareholders are
recorded by the fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting prin-ciples. Expenses paid indirectly reflect credits earned on daily
uninvested cash balances at the custodian and are used to reduce the fund's
custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
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Purchases and sales of portfolio securities, other than short-term
securities, aggregated $56,401,000 and $67,564,000, respectively, for the year
ended February 29, 2000.
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NOTE 3 - FEDERAL INCOME TAXES
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No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
income. As of February 29, 2000, the fund has capital loss carryforwards for
federal income tax purposes of $2,098,000, of which $169,000 expires in 2003,
$420,000 in 2005, and $1,509,000 in 2008. The fund intends to retain gains
realized in future periods that may be offset by available capital loss
carryforwards.
At February 29, 2000, the cost for federal income tax purposes was
substantially the same as for financial reporting and totaled $102,379,000. Net
unrealized loss aggregated $868,000 at period-end, of which $1,634,000 related
to appreciated investments and $2,502,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
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The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management fee,
of which $35,000 was payable at February 29, 2000. 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 0.295% for assets in excess of $120 billion. At
February 29, 2000, 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 had
been required to bear any expenses through February 28, 1999, which would cause
the fund's ratio of total expenses to average net assets to exceed 0.65%.
Thereafter, through February 28, 2001, the fund is required to reimburse the
manager for these expenses, provided that average net assets have grown or
expenses have declined sufficiently to allow reimbursement without causing the
fund's ratio of total expenses to average net assets to exceed 0.65%. Pursuant
to this agreement, $17,000 of unaccrued 1998-1999 fees were repaid during the
year ended February 29, 2000, and $8,000 remains 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 $156,000 for the year
ended February 29, 2000, of which $17,000 was payable at period-end.
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T. Rowe Price New Jersey Tax-Free Bond Fund
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REPORT OF INDEPENDENT ACCOUNTANTS
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To the Board of Trustees of T. Rowe Price State Tax-Free Income Trust
and Shareholders of New Jersey Tax-Free Bond Fund
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
New Jersey Tax-Free Bond Fund (one of the portfolios comprising T. Rowe Price
State Tax-Free Income Trust, hereafter referred to as "the Fund") at February
29, 2000, 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 accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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 Feb ruary 29, 2000, by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 17, 2000
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T. Rowe Price New Jersey Tax-Free Bond Fund
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TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 2/29/00
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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 distributions to shareholders included $5,650,000 which
qualified as exempt-interest dividends.
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For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance with
your existing fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account or
obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus appropriate
to the fund or funds covered in this report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
<PAGE>
Colorado Springs
4410 ArrowsWest Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
T. Rowe Price Investment Services, Inc., Distributor. F47-050 2/29/00
