Semiannual Report
Georgia
Tax-Free
Bond Fund
August 31, 2000
T. Rowe Price
REPORT HIGHLIGHTS
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Georgia Tax-Free Bond Fund
o Municipal bonds surged over the six months ended August 31, aided by heavy
demand and falling interest rates.
o The fund posted strong total returns, outpacing the average Georgia
municipal bond fund for both the 6- and 12-month periods.
o Our move to lock in higher long-term rates paid off as the market improved.
o With the Fed's tightening cycle likely nearing its end, we expect stable to
improving municipal bond prices.
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
Municipal bonds rebounded sharply over the past six months, due primarily to
strong demand but also aided by falling interest rates, the result of heightened
investor confidence stemming from the Federal Reserve's firm commitment to
maintaining domestic economic growth at a sustainable, noninflationary level.
These factors were particularly favorable to intermediate and long-term funds
such as the Georgia Tax-Free Bond Fund, which posted excellent returns for the
six months ended August 31.
MARKET ENVIRONMENT
Georgia Bond Yield Index
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8/31/99 5.67
5.87
6.06
11/99 5.94
6.14
6.19
2/00 6.08
5.79
5.92
5/00 6.02
5.83
5.68
8/31/00 5.52
Source: T. Rowe Price Associates
The Fed's determination to keep inflation in check appears to be paying
off. Six interest rate hikes since June 1999-including increases totaling
three-quarters of a percentage point in the past six months-have the
economy on track to meet the central bank's expressed goal of a soft
landing. While rising rates hit bond markets hard in 1999 and early in
2000, the Fed's anti-inflationary medicine proved a tonic for bonds
beginning in the spring, and since May investors have shown confidence that
the Fed's monetary policy will result in a favorable environment for bonds.
The tightening program also injected a note of sobriety into equity
markets, where returns are not only far from the stellar results of the
past few years, but have been accompanied by wild price swings. The
heightened volatility in stocks increased the allure of the steadier bond
markets, especially for more conservative buyers.
Bond prices also rallied after the Treasury announced in January its
intention to reduce the government's debt load by repurchasing Treasury
bonds. This created a scarcity premium as investors focused on the
likelihood of a significant reduction, and perhaps the complete
disappearance, of Treasuries. As the first to be repurchased, long-term
Treasury bonds gained the most, returning 15% year-to-date. The buyback
program coupled with the Fed's short-term rate hikes contributed to an
inverted yield curve, in which yields on short-term Treasuries are higher
than yields on long-term issues. Although the yield curve has remained
inverted since January, intermediate and longer-term Treasury yields have
fallen dramatically since May, partly due to the diminishing supply of
Treasuries as well as investors' increasing conviction that the Fed's
monetary policy is working.
Municipal bond yields have fallen along with Treasuries due to heavy demand
from buyers enticed by high taxable-equivalent yields and a diminished
supply of available issues.
The municipal yield curve did not invert, but it remains flatter than
historical norms. Municipal bond yields have fallen along with Treasuries
due to heavy demand from buyers enticed by high taxable-equivalent yields
and a diminished supply of available issues. New issues are down 20%
nationally through August versus the same period last year as a result of
higher borrowing costs and lower borrowing needs of state and local
governments. High-yield bonds lagged the general market as the yield
differential between lower- and higher-quality bonds widened.
Georgia's economy remained strong, with the state's employment base
expanding at a 4.6% rate for 2000 versus 2.4% nationally. The state's
population is growing faster than the national average as well, due in
large part to the attractiveness of the Atlanta area and its evolving role
as a regional hub for technology, commerce, education, and transportation.
Fueled by the promise of good jobs, the Atlanta area has seen a tremendous
inflow of new residents and development, but is suffering also from air and
water pollution, water capacity constraints, and traffic congestion. State
leaders will be struggling with these challenges in the next few years, and
proposals for additional bond issuance and increased spending reflect plans
that address some of these issues.
Befitting its longstanding status as an AAA rated state, Georgia saw
favorable financial results again for the most recent fiscal year. Strong
revenue growth and controlled spending enabled the state to post a higher
operating surplus in 1999 than 1998. As a result, the state was able to
increase its reserves to their highest levels ever. Debt levels remain
manageable, due to mandated policies that ensure that outstanding debt will
not increase beyond target levels.
PERFORMANCE AND STRATEGY REVIEW
Performance Comparison
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Periods Ended 8/31/00 6 Months 12 Months
Georgia Tax-Free Bond Fund 6.58% 6.12%
Lipper Georgia Municipal
Debt Funds Average 6.57 5.51
The municipal market in Georgia regained strength along with the national
market, and your fund posted solid gains for both the 6- and 12-month
periods ended August 31. Returns kept pace with the fund's Lipper category
average when rates fell during the most recent period, while our more
defensive posture during the previous six months helped us exceed the
average Georgia bond fund for the year. Income of $0.26 per share combined
with a $0.40 per share price increase for a 6.58% total return over the six
months. The fund's 12-month dividend yield declined slightly to 4.97%,
which roughly translates to a 7.77% taxable equivalent yield for investors
in the 36% federal tax bracket.
In our last report, we noted that we had modestly lengthened duration in
January and February when municipal rates were at their highest levels in
years. (Duration measures price sensitivity to changes in interest rates. A
fund with a duration of six years will have a 6% appreciation or decline in
price in response to a one-percentage-point fall or rise, respectively, in
interest rates.) We wanted to lock in those higher rates to maintain a
steady income stream and to realize better principal appreciation when
rates fell. This move enabled the fund's share price to rise in line with
the market and also maintain its dividend per share distributions for the
year. As the market continued to improve over the summer, however, we
shifted back to a slightly more conservative duration. Overall, the
weighted average duration fell from 8.4 years at the end of February to 7.9
years at the end of August. If rates continue to fall, we expect to keep up
with but not exceed peer group averages. We will, of course, continually
evaluate this strategy as the economic picture becomes clearer.
We have long sought a good balance between higher-coupon, premium-priced
bonds, which bolster income, and lower-coupon, discounted bonds, which have
better potential for significant price appreciation if rates fall. While we
still own both discount and premium bonds, recently we have directed most
new cash flow into higher-coupon bonds, seeking to rebuild emphasis on
income over price appreciation. This approach should moderate swings of
share price movement, particularly in a rising rate environment.
Unlike the national municipal market, the supply of new Georgia municipal
bonds has been steady in 2000. This has enabled us to invest in
high-quality issuers around the state, including Forsyth, Clayton, and
DeKalb Counties and the city of Roswell. The stellar national economy and
the robust growth in Georgia in particular have contributed to the strong
overall credit quality of these holdings, making them, in our view,
excellent additions to the portfolio.
OUTLOOK
We began the year believing that after an especially weak period in 1999,
municipal bonds were significantly undervalued compared to taxable
alternatives. The municipal market recovered much of that ground in 2000,
and we now expect performance to be more in line with the taxable bond
markets.
Economically the picture is bright. Despite higher oil prices, the outlook
for inflation is benign. Rather than increasing overall inflation, oil
prices are acting like a tax on consumer activity, helping to slow consumer
demand, reducing the need for inventory buildup, and easing pressures on
production and hiring. This economic backdrop suggests stable to improving
municipal bond prices, barring a change in the outlook for inflation.
The outlook for Georgia municipal securities remains favorable. While the
supply of bonds has remained in line with historical averages, we appear to
be entering a period of lower issuance. However, we expect the consistent
demand to provide some cushion for Georgia municipals if rates rise and
provide an extra push if rates fall.
Respectfully submitted,
Hugh D. McGuirk
Chairman of the Investment Advisory Committee
September 22, 2000
T. Rowe Price Georgia Tax-Free Bond Fund
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Portfolio Highlights
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KEY STATISTICS
2/29/00 8/31/00
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Price Per Share $ 10.15 $ 10.55
Dividends Per Share
For 6 months 0.25 0.26
For 12 months 0.50 0.51
Dividend Yield *
For 6 months 5.08% 4.92%
For 12 months 5.05 4.97
30-Day Standardized Yield 5.11 4.68
Weighted Average Maturity (years) 16.1 15.8
Weighted Average Effective Duration (years) 8.4 7.9
Weighted Average Quality ** AA- AA-
* Dividends earned and reinvested for the periods indicated are annualized
and divided by the fund's net asset value per share at the end of the
period.
** Based on T. Rowe Price research.
T. Rowe Price Georgia Tax-Free Bond Fund
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Portfolio Highlights
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SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
2/29/00 8/31/00
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General Obligation - Local 15% 17%
Water and Sewer Revenue 10 16
Prerefunded Bonds 13 11
Educational Revenue 6 10
Nuclear Revenue 9 9
Industrial and Pollution Control Revenue 8 6
Escrowed to Maturity 6 6
Housing Finance Revenue 8 6
Life Care/Nursing Home Revenue 5 5
Air and Sea Transportation Revenue 2 4
General Obligation - State 5 3
Miscellaneous Revenue 3 2
Dedicated Tax Revenue 4 2
Hospital Revenue 2 2
All Other 1 2
Other Assets Less Liabilities 3 -1
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Total 100% 100%
T. Rowe Price Georgia Tax-Free Bond Fund
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Performance Comparison
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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.
GEORGIA TAX-FREE BOND FUND
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Lehman Brothers Lipper Georgia Georgia
Municipal Municipal Debt Tax-Free
Bond Index Funds Average Bond Fund
3/31/93 10,000 10,000 10,000
8/93 10,556 10,645 10,712
8/94 10,571 10,532 10,627
8/95 11,508 11,312 11,482
8/96 12,111 11,895 12,219
8/97 13,230 12,966 13,320
8/98 14,375 14,026 14,519
8/99 14,447 13,797 14,386
8/00 15,425 14,609 15,267
Average Annual Compound Total Return
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This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
Since Inception
Periods Ended 8/31/00 1 Year 3 Years 5 Years Inception Date
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Georgia Tax-Free Bond Fund 6.12% 4.65% 5.86% 5.87% 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.
T. Rowe Price Georgia Tax-Free Bond Fund
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Unaudited
Financial Highlights For a share outstanding throughout each period
--------------------------------------------------------------------------------
6 Months Year
Ended Ended
8/31/00 2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
NET ASSET VALUE
Beginning of period $ 10.15 $ 11.03 $ 10.92 $ 10.44 $ 10.44 $ 9.93
Investment activities
Net investment
income (loss) 0.26* 0.50* 0.50* 0.51* 0.52* 0.52*
Net realized and
unrealized gain
(loss) 0.40 (0.88) 0.11 0.48 -- 0.51
Total from
investment
activities 0.66 (0.38) 0.61 0.99 0.52 1.03
Distributions
Net investment
income (0.26) (0.50) (0.50) (0.51) (0.52) (0.52)
NET ASSET VALUE
End of period $ 10.55 $ 10.15 $ 11.03 $ 10.92 $ 10.44 $ 10.44
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Ratios/Supplemental Data
Total
return(diamond) 6.58%* (3.46)% 5.73%* 9.70%* 5.15%* 10.62%*
Ratio of total
expenses to average
net assets 0.65%*! 0.65%* 0.65%* 0.65%* 0.65%* 0.65%*
Ratio of net
investment income
(loss) to average
net assets 4.99%*! 4.78%* 4.59%* 4.79%* 5.01%* 5.09%*
Portfolio
turnover rate 47.4%! 48.5% 19.9% 49.0% 71.1% 71.5%
Net assets,
end of period
(in thousands) $ 62,052 $ 57,380 $ 62,037 $ 49,455 $ 38,726 $32,500
(diamond) 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 2/28/01.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Georgia Tax-Free Bond Fund
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Unaudited August 31, 2000
Statement of Net Assets Par Value
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In thousands
GEORGIA 98.2%
Albany Dougherty Payroll Dev. Auth.,
Solid Waste Disposal Proctor & Gamble,
5.20%, 5/15/28 * $ 1,000 $ 924
Americus and Sumter County Hosp.
Auth., Magnolia Manor
6.25%, 5/15/19 1,000 872
Athens-Clarke Residential Care Fac.
Wesley Woods of Athens
5.30%, 10/1/01 500 498
6.375%, 10/1/27 600 526
Atlanta Airport Fac.
Zero Coupon, 1/1/10 (MBIA Insured) * 1,285 753
5.50%, 1/1/26 (FGIC Insured) 1,000 993
6.25%, 1/1/14 (FGIC Insured) * 1,000 1,088
6.50%, 1/1/13 (FGIC Insured)
(Prerefunded 1/1/01!) * 500 513
Burke County Dev. Auth., PCR
Georgia Power
5.40%, 5/1/34 500 464
Oglethorpe Power
7.80%, 1/1/08 (MBIA Insured)
(Prerefunded 1/1/03!) 560 617
Power Plant Vogtle
VRDN (Currently 4.30%) 1,300 1,300
VRDN (Currently 4.40%) 450 450
Cartersville Dev. Auth., PCR,
Anheuser Busch, 6.75%, 2/1/12 * 1,000 1,049
Chatham County School Dist., GO
6.25%, 8/1/16 (Prerefunded 8/1/03!) 625 667
6.75%, 8/1/18 (MBIA Insured)
(Prerefunded 8/1/03!) 750 812
Cherokee County Water and Sewage Auth.
5.50%, 8/1/23 (MBIA Insured) 1,000 1,016
Clayton County Water Auth., Water and Sewage,
6.25%, 5/1/16 1,000 1,087
Cobb - Marietta Coliseum and Exhibit Hall Auth.
5.625%, 10/1/26 (MBIA Insured) 1,000 1,031
Columbia County, Courthouse/Detention Center, GO
5.625%, 2/1/20 1,250 1,261
Columbia County Water and Sewage Auth.
6.25%, 6/1/18 (FGIC Insured) 1,000 1,075
Coweta County Residential Care Fac.
Wesley Woods of Newnan-Peachtree City
8.25%, 10/1/26 $ 500 $ 536
DeKalb County Water and Sewage Auth.,
5.00%, 10/1/28 1,000 919
DeKalb County Dev. Auth., Emory Univ.,
6.00%, 10/1/14 550 577
Effingham County Dev. Auth., PCR, Fort James
5.625%, 7/1/18 * 1,600 1,488
Fayette County Public Fac. Auth., GO,
Criminal Justice Center
6.25%, 6/1/20 500 540
Forsyth County, GO, 6.00%, 3/1/16 1,250 1,337
Forsyth County School Dist., GO,
6.00%, 2/1/16 1,000 1,069
Forsyth County Water & Sewage Auth., GO,
6.25%, 4/1/20 1,000 1,077
Fulton County
6.375%, 1/1/14 (FGIC Insured)
(Escrowed to Maturity) 1,390 1,563
Fulton County Dev. Auth., PCR, Delta Airlines
6.95%, 11/1/12 500 514
Fulton County Housing Auth.,
Single Family
6.55%, 3/1/18 (GNMA Guaranteed) * 120 123
Fulton County Residential Care Fac.
for the Elderly Canterbury Court,
6.30%, 10/1/24 500 461
Fulton County School Dist., GO,
6.375%, 5/1/17 830 932
Fulton County Water and Sewage Auth.
4.75%, 1/1/28 (FGIC Insured) 1,000 877
6.25%, 1/1/09 (FGIC Insured) 1,000 1,107
6.375%, 1/1/14 (FGIC Insured) 20 22
Gainesville Water and Sewage
6.00%, 11/15/12 (FGIC Insured) 1,000 1,097
Georgia, GO
6.25%, 4/1/14 1,000 1,117
6.50%, 4/1/09 550 622
Georgia Housing and Fin. Auth.
Home Ownership,
6.60%, 6/1/25 * 225 231
Single Family Mortgage
5.80%, 12/1/26 * 995 986
6.05%, 12/1/16 * 500 512
6.125%, 12/1/15 420 426
6.25%, 12/1/28 * 500 512
6.50%, 12/1/17 (FHA Guaranteed) * 1,000 1,023
Georgia Municipal Gas Auth., Southern Storage Gas
6.00%, 7/1/04 $ 500 $ 524
Henry County Water and Sewage Auth.
5.625%, 2/1/30 (FGIC Insured) 1,000 1,003
Jackson County School Dist., GO
6.00%, 7/1/14 (MBIA Insured)
(Prerefunded 7/1/04!) 1,000 1,072
Macon Water Auth., 5.25%, 10/1/16 500 496
Medical Center Hosp. Auth.
Columbus Regional Healthcare Systems
5.50%, 8/1/25 (MBIA Insured) 1,000 985
Metropolitan Atlanta Rapid Transit Auth.
Sales Tax
6.90%, 7/1/20 (MBIA Insured)
(Prerefunded 7/1/04!) 1,325 1,462
7.00%, 7/1/11 (Escrowed to Maturity) 1,335 1,582
7.00%, 7/1/11 (MBIA Insured)
(Escrowed to Maturity) 635 744
Monroe County Dev. Auth., PCR, Georgia Power
VRDN (Currently 4.40%) 300 300
Municipal Electric Auth. of Georgia
5.70%, 1/1/19 (MBIA Insured) 170 176
6.50%, 1/1/12 520 583
6.60%, 1/1/18 1,035 1,165
7.25%, 1/1/24 (AMBAC Insured) 1,000 1,243
Newton County Hosp. Auth., GO, Newton Health Systems
6.00%, 2/1/20 (AMBAC Insured) 1,000 1,038
Paulding County School Dist., GO
6.00%, 2/1/13 (MBIA Insured) 1,000 1,091
Paulding County Water and Sewer
6.00%, 12/1/13 (MBIA Insured) 1,000 1,094
Peach County School Dist., GO
6.40%, 2/1/19 (MBIA Insured)
(Prerefunded 2/1/05!) 500 547
Private Colleges and Univ. Auth
Agnes Scott College,
4.75%, 6/1/28 (MBIA Insured) $ 500 $ 438
Emory Univ.,
VRDN (Currently 4.15%) 1,000 1,000
5.50%, 11/1/25 1,000 996
5.50%, 11/1/33 1,500 1,482
Mercer Univ., 5.375%, 10/1/29 1,000 934
Putnam County Dev. Auth., PCR,
Georgia Power Plant
VRDN (Currently 4.30%) 100 100
Rockdale County Dev. Auth., Solid Waste Disposal
Visy Paper, 7.40%, 1/1/16 * 455 465
Rockdale County School Dist., GO,
6.50%, 1/1/09 1,000 1,086
Roswell, GO,
5.50%, 2/1/14 1,000 1,034
Savannah Economic Dev. Auth.,
College of Art & Design
6.80%, 10/1/19 500 514
Smyrna Downtown Dev. Auth.
6.70%, 2/1/20 (MBIA Insured)
(Prerefunded 2/1/05!) 1,000 1,106
Total Georgia (Cost $59,205) 60,924
PUERTO RICO 2.5%
Puerto Rico Commonwealth, Highway
and Transportation Auth.
6.625%, 7/1/12 (FSA Insured) 1,000 1,050
Puerto Rico Ind. Tourist, Ed.,
Medical & Environmental Fac.
Cogen Fac., 6.625%, 6/1/26 * 500 521
Total Puerto Rico (Cost $1,519) 1,571
Total Investments in Securities
100.7% of Net Assets (Cost $60,724) $ 62,495
Other Assets Less Liabilities (443)
NET ASSETS $ 62,052
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Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 1
Accumulated net realized gain/loss -
net of distributions (1,550)
Net unrealized gain (loss) 1,771
Paid-in-capital applicable to 5,883,416 no
par value shares of beneficial interest outstanding;
unlimited number of shares authorized 61,830
NET ASSETS $ 62,052
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NET ASSET VALUE PER SHARE $ 10.55
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* 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
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Georgia Tax-Free Bond Fund
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Unaudited
Statement of Operations
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In thousands
6 Months
Ended
8/31/00
Investment Income (Loss)
Interest income $ 1,684
Expenses
Investment management 97
Custody and accounting 46
Shareholder servicing 29
Prospectus and shareholder reports 9
Legal and audit 7
Trustees 3
Registration 1
Miscellaneous 2
Total expenses 194
Net investment income (loss) 1,490
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (304)
Futures (3)
Net realized gain (loss) (307)
Change in net unrealized gain or loss on securities 2,591
Net realized and unrealized gain (loss) 2,284
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 3,774
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The accompanying notes are an integral part of these financial statements.
T. Rowe Price Georgia Tax-Free Bond Fund
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Unaudited
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
8/31/00 2/29/00
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 1,490 $ 2,928
Net realized gain (loss) (307) (814)
Change in net unrealized
gain or loss 2,591 (4,330)
Increase (decrease) in net
assets from operations 3,774 (2,216)
Distributions to shareholders
Net investment income (1,490) (2,928)
Capital share transactions *
Shares sold 7,218 16,784
Distributions reinvested 1,096 2,272
Shares redeemed (5,926) (18,569)
Increase (decrease) in net
assets from capital
share transactions 2,388 487
Net Assets
Increase (decrease) during period 4,672 (4,657)
Beginning of period 57,380 62,037
End of period $ 62,052 $ 57,380
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*Share information
Shares sold 702 1,593
Distributions reinvested 106 217
Shares redeemed (578) (1,784)
Increase (decrease) in
shares outstanding 230 26
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Georgia Tax-Free Bond Fund
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Unaudited August 31, 2000
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 fund seeks to provide, consistent with prudent portfolio
management, the highest level of income exempt from federal and Georgia
state income taxes by investing primarily in investment-grade Georgia
municipal bonds.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation - Debt securities are generally traded in the over-the-counter
market. Investments in securities are stated at fair value as furnished by
dealers who make markets in such securities or by an independent pricing
service, which considers yield or price of bonds of comparable quality,
coupon, maturity, and type, as well as prices quoted by dealers who make
markets in such securities.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the
officers of the fund, as authorized by the Board of Trustees.
Premiums and Discounts - Premiums and original issue discounts on municipal
securities are amortized for both financial reporting and tax purposes.
Market discounts are recognized upon disposition of the security as gain or
loss for financial reporting purposes and as ordinary income for tax
purposes.
Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Distributions to shareholders
are recorded by the fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with
generally accepted accounting principles. Credits earned on daily
uninvested cash balances at the custodian and are used to reduce the fund's
custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $16,286,000 and $13,614,000, respectively, for the
six months ended August 31, 2000.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its income. As of February 29, 2000, the fund had capital loss
carryforwards for federal income tax purposes of $682,000, of which
$363,000 expires in 2003 and $319,000 in 2008. The fund intends to retain
gains realized in future periods that may be offset by available capital
loss carryforwards.
At August 31, 2000, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$60,724,000. Net unrealized gain aggregated $1,771,000 at period-end, of
which $2,239,000 related to appreciated investments and $468,000 to
depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management
fee, of which $17,000 was payable August 31, 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
T. Rowe Price 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 August 31, 2000, and for the six months then
ended, the effective annual group fee rate was 0.32%. The fund pays a
pro-rata share of the group fee based on the ratio of its net assets to
those of the group.
Under the terms of the investment management agreement, the manager is
required to bear any expenses through February 28, 2001, which would cause
total expenses to average net assets to exceed 0.65%. Thereafter, through
February 28, 2003, 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, $27,000 of management fees were not accrued by the fund for
the six months ended August 31, 2000, and $61,000 remains unaccrued from a
prior period. Additionally, $158,000 of unaccrued management fees related
to a previous expense limitation 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
$55,000 for the six months ended August 31, 2000, of which $11,000 was
payable at period-end.
T. Rowe Price Georgia Tax-Free Bond Fund
--------------------------------------------------------------------------------
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(registered trademark)
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.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services,
Inc., Member NASD/SIPC.
** Based on a July 2000 survey for representative-assisted stock trades.
Services vary by firm, and commissions may vary depending on size of order.
T. Rowe Price Mutual Funds
--------------------------------------------------------------------------------
STOCK FUNDS
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Developing Technologies
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Tax-Efficient Growth
Total Equity Market Index
Value
International/Global
Emerging Europe & Mediterranean
Emerging Markets Stock
European Stock
Global Stock
Global Technology
International Discovery*
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government*
Spectrum Income
Summit GNMA
Summit Limited-Term Bond*
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond*
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Bond*
International Bond
MONEY MARKET FUNDS!
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Closed to new investors.
! Investments in the funds are not insured or guaranteed by the FDIC or any
other government agency. Although the funds seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the funds.
Please call for a prospectus, which contains complete information, including
fees and expenses. Read it carefully before investing.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
T. Rowe Price Advisory Services and Retirement Resources
--------------------------------------------------------------------------------
Advisory Services, Retirement Resources
T. Rowe Price is your full-service retirement specialist. We have developed
unique advisory services that can help you meet the most difficult
retirement challenges. Our broad array of retirement plans is suitable for
individuals, the self-employed, small businesses, corporations, and
nonprofit organizations. We also provide recordkeeping, communications, and
investment management services, and our educational materials, self-help
planning guides, and software tools are recognized as among the industry's
best. For information or to request literature, call us at 1-800-638-5660,
or visit our Web site at www.troweprice.com.
ADVISORY SERVICES
T. Rowe Price Retirement Income ManagerSM helps retirees or those within
two years of retirement determine how much income they can take in
retirement. The program uses extensive statistical analysis and the input
of financial planning professionals to suggest an income plan that best
meets your objectives.
T. Rowe Price Rollover Investment Service offers asset allocation advice to
those planning a major change in their qualified retirement plans, such as
a 401(k) rollover from a previous employer or an IRA transfer.
RETIREMENT RESOURCES AT T. ROWE PRICE
Traditional, Roth, and Rollover IRAs
SEP-IRA and SIMPLE IRA
Profit Sharing
Money Purchase Pension
"Paired" Plans (Money Purchase
Pension and Profit Sharing Plans)
401(k) and 403(b)
457 Deferred Compensation
Planning and Informational Guides
Minimum Required Distributions Guide
Retirement Planning Kit
Retirees Financial Guide
Tax Considerations for Investors
Insights Reports
The Challenge of Preparing for Retirement
Financial Planning After Retirement
The Roth IRA: A Review
Software Packages
T. Rowe Price Retirement Planning
AnalyzerTM CD-ROM or diskette $19.95.
To order, please call 1-800-541-5760.
Also available on the Internet for $9.95.
T. Rowe Price Variable Annuity AnalyzerTM
CD-ROM or diskette, free. To order,
please call 1-800-469-5304.
T. Rowe Price Immediate Variable
Annuity (Income Account)
Investment Kits
We will be happy to send you one of our
easy-to-follow investment kits when you
are ready to invest in any T. Rowe Price
retirement vehicle, including IRAs, quali-
fied plans, small-business plans, or our
no-load variable annuities.
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
For the hearing impaired, call:
1-800-367-0763
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 - new address
105 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
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 Invest with Confidence (registered trademark)
T. Rowe Price Investment Services, Inc., Distributor. F92-051 8/31/00
