T. Rowe Price
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Semiannual Report
New Jersey Tax-Free Bond Fund
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August 31, 2000
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REPORT HIGHLIGHTS
-----------------
* During the six months ended August 31, falling interest rates,
combined with strong demand and limited supply, improved municipal
bond prices.
* The New Jersey Tax-Free Bond Fund had a strong six-month gain,
although it modestly trailed its Lipper peer group.
* We shifted our strategy to bolster the portfolio's interest rate
sensitivity.
* We emphasized a balance between high quality and attractive yields in
the portfolio's sector breakdown.
* The economic environment favors a stable to improving market barring
unforeseen inflation.
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 turned in a strong performance for the six months ended
August 31, largely due to falling interest rates and favorable supply-and-demand
factors in the market. Investors were also encouraged by the Federal Reserve's
aggressive efforts to curb above-average economic growth and stem inflation.
Your fund posted a strong total return in this environment, the result of both
net asset value gains and a rising dividend.
MARKET ENVIRONMENT
------------------
Fixed-income markets in 2000 have been largely influenced by the Federal
Reserve's interest rate tightening program. Fed activity, which included federal
funds rate increases of 75 basis points during the past six months, finally
seemed to moderate economic growth and cool inflation concerns. (One hundred
basis points equal one percent.) The Fed's expressed determination to slow
economic growth and engineer a soft landing has injected volatility and a note
of sobriety into equity markets, which has also heightened interest in
more-stable fixed income investments.
<PAGE>
New Jersey Index
----------------
8/31/1999 5.60
5.76
5.93
11/30/1999 5.87
6.01
6.20
2/29/2000 6.15
5.82
5.92
5/31/2000 5.94
5.82
5.64
8/31/2000 5.49
Long-term Treasury bonds have returned about 15% so far this year due to a
scarcity premium: since the government announced a Trea sury buyback program to
reduce outstanding debt, investors have feared a dwindling supply of long-term
Treasuries. The Treasury yield curve has been inverted since January, as Fed
rate hikes have put upward pressure on short-term yields while long-term yields
have come down. Municipal bond yields have also fallen in all states, New Jersey
included, as muni bond prices have rallied. Between February 29 and August 31,
the New Jersey Bond Yield Index fell 66 basis points, with the majority of that
drop occurring during the last three months of the period. The trend was aided
by a supply/demand imbalance. The supply of new issues is down 20% nationwide
through August versus the same period last year. In New Jersey, the dropoff was
only 7% over the prior year, but would have been much greater except for one
very large New Jersey turnpike issue worth nearly $1.5 billion. Supply has
dwindled because borrowing costs have climbed and the borrowing needs of state
and local governments have declined. But demand, particularly from buyers of
individual bonds, has been quite strong as municipal yields have been very
attractive compared with taxable alternatives.
New Jersey continues to benefit from higher-than-expected revenues and
rising budget surpluses. Revenues for 2000, for example, are now predicted to be
$26 million higher than the optimistic forecast offered at the beginning of the
year, and next year's revenue projections are already being revised upwards, to
more than $21 billion. Budget surpluses, which were anticipated to be about $750
million by year-end 2000, are now expected to easily exceed $1 billion. Personal
income growth has now reached a highly attractive 6.3% for 2000, helped by
strong growth in telecommunications and other high-tech industries.
<PAGE>
STRATEGY AND PERFORMANCE REVIEW
-------------------------------
A positive interest rate environment and the broad bond market rally of the
past three months helped your fund post a strong 6.45% return for the six months
ended August 31, 2000. That result contributed to a 5.20% 12-month advance,
despite weakness as rates rose earlier in the year. The fund's returns were
modestly behind the Lipper category for the six-month period, but a conservative
strategy helped produce strong outperformance versus the Lipper for the full
year. Dividends for both periods slightly improved, although the majority of
recent gains came from a $0.40 rise in net asset value after February 29. At
5.06%, the fund's 12-month dividend yield at the end of the period was roughly
equivalent to a 7.91% taxable yield for an investor in the 36% tax bracket.
PERFORMANCE COMPARISON
----------------------
Periods Ended 8/31/00 6 Months 12 Months
--------------------- -------- ---------
New Jersey Tax-Free Bond Fund 6.45% 5.20%
Lipper New Jersey Municipal
Debt Funds Average 6.52 4.70
Over the past six months, issuance of municipal bonds continued to decline
nationwide, and the New Jersey bond market was no exception to this phenomenon.
Low supply and continued demand, particularly from individual investors, allowed
municipals to outperform most other bond asset classes. In light of this dearth
of new issuance, we kept cash reserves low and remained as fully invested in
bonds as possible during the period.
The fund's duration remained in a range we consider neutral relative to our
Lipper peer group average. Although interest rates eased during the period, we
did not assume an aggressive interest rate posture because of our concerns over
the Fed's lingering tightening bias and also because of the generally pricey
levels for New Jersey bonds, caused by lack of supply. Duration (a measure of
price sensitivity to interest rates where higher numbers indicate greater
potential volatility) in fact declined from 8.3 years to 7.5 years. This largely
occurred because rising prices caused the portfolio's bonds to trade to their
call dates, which are shorter than their maturity dates.
A shorter duration limits the fund's opportunity for gain when rates are
falling, so we sought to offset this trend by selling bonds with maturities
shorter than 15 years and buying 15- to 30-year bonds. In addition, we improved
the portfolio's call protection to promote a more stable duration if interest
rates fluctuate in the future. This was accomplished by selling bonds with
near-term call dates and reinvest-ing in bonds whose call dates are closer to 10
years in the future.
<PAGE>
We continued to maintain a good balance in the portfolio, with many sectors
represented. Our largest sector holding remained local general obligations
(GOs). We slightly increased this stake from 14% to 17% of assets, and also
heightened exposure to state GOs from 5% to 8%, largely because budget balances
consistently exceeded projections at both state and local levels. Partly as a
result of these moves, the portfolio's weighted average quality rose slightly
from A+ to AA-. In a reversal from the past, we chose to increase exposure to
hospital bonds from 8% to 11% of assets. While losses continue to mount for many
hospital systems, we focused on bonds issued by hospitals that are the dominant
provider within their territory and that carry solid A ratings. These holdings
benefit the portfolio by providing a greater yield than comparably rated
non-hospital bonds.
We cut our holdings in Puerto Rico debt from 5% of assets to 2.5%. These
bonds are exempt from federal, state, and local tax in all 50 states, and
investors have long purchased them when they appeared more attractive than local
issues. With the nationwide decline in new issuance, particularly in high-tax
states, substituting with Puerto Rico has dramatically increased and caused this
debt to trade at extremely rich levels. However, issuance of Puerto Rico bonds
should rise in the near future, and we expect to rebuild our holdings when
prices are closer to traditional levels.
OUTLOOK
-------
Higher oil prices have not yet spoiled an otherwise positive inflation
outlook, though they are acting like a tax on consumer activity. Slower consumer
demand growth should contribute to the hoped-for soft landing. As a result, it
appears increasingly likely that the Fed's tightening cycle may have ended for
the foreseeable future. In addition, the economic backdrop, as well as the
current mix of low supply and strong demand, favor stable to improving municipal
bond prices barring a change in the outlook for inflation. This is good news for
your fund for the coming period. We will continue to try to find higher-yiel
ding issues while also keeping an eye toward reducing risk in our high-priced
market.
Respectfully submitted,
/s/
Konstantine B. Mallas
Chairman of the Investment Advisory Committee
September 21, 2000
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<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
-------------------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
KEY STATISTICS
--------------
2/29/00 8/31/00
------- -------
Price Per Share $ 10.62 $ 11.02
Dividends Per Share
For 6 months 0.27 0.28
For 12 months 0.54 0.55
Dividend Yield *
For 6 months 5.16% 5.02%
For 12 months 5.14 5.06
30-Day Standardized Yield 5.16 4.79
Weighted Average Maturity (years) 17.2 17.9
Weighted Average Effective Duration (years) 8.3 7.5
Weighted Average Quality ** A+ 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.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
-------------------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
SECTOR DIVERSIFICATION
----------------------
Percent of Percent of
Net Assets Net Assets
2/29/00 8/31/00
------- -------
General Obligations - Local 14% 17%
Prerefunded Bonds 9 11
Hospital Revenue 8 11
Educational Revenue 9 11
General Obligations - State 5 8
Housing Finance Revenue 7 8
Air and Sea Transportation 4 7
Industrial and Pollution Control Revenue 8 5
Ground Transportation Revenue 3 4
Life Care/Nursing Home Revenue 3 3
Nuclear Revenue 3 3
Dedicated Tax Revenue 7 3
Lease Revenue 5 2
Water and Sewer Revenue 6 2
All Other 6 3
Other Assets Less Liabilities 3 2
Total 100% 100%
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<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
Bond Index Municipal Debt Tax-Free
Date Funds Average Bond Fund
Apr-1991 $10000 $10000 $10000
Aug-1991 10336 10365 10361
Aug-1992 11490 11510 11582
Aug-1993 12892 12997 13237
Aug-1994 12910 12830 13038
Aug-1995 14055 13751 14072
Aug-1996 14791 14405 14820
Aug-1997 16158 15629 16103
Aug-1998 17556 16933 17523
Aug-1999 17644 16765 17377
Aug-2000 18839 17635 18281
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 8/31/00 1 Year 3 Years 5 Years Inception Date
--------------------- ------ ------- ------- --------- ---------
New Jersey Tax-Free Bond Fund 5.20% 4.32% 5.37% 6.68% 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
------------------------------------------- Unaudited
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
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 $ 10.62 $ 11.62 $ 11.51 $ 11.08 $ 11.16 $ 10.63
--------------------------------------------------------------------------------
Investment activities
Net investment
income (loss) 0.28 0.54 0.55* 0.57* 0.57* 0.58*
Net realized and
unrealized gain (loss) 0.40 (1.00) 0.11 0.43 (0.08) 0.53
--------------------------------------------------------------------------------
Total from
investment activities 0.68 (0.46) 0.66 1.00 0.49 1.11
--------------------------------------------------------------------------------
Distributions
Net investment income (0.28) (0.54) (0.55) (0.57) (0.57) (0.58)
NET ASSET VALUE
End of period $ 11.02 $ 10.62 $ 11.62 $ 11.51 $ 11.08 $ 11.16
======== ======== ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
------------------------
Total return ** 6.45% (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%* 0.65%*
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Ratio of net investment
income (loss) to average
net assets 5.08%+ 4.84% 4.72%* 5.05%* 5.18%* 5.28%*
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Portfolio turnover rate 35.9%+ 50.2% 25.5% 34.3% 78.9% 98.4%
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Net assets,end of period
(in thousands) $108,784 $104,298 $121,637 $ 99,765 $ 80,289 $ 70,304
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** 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.
+ Annualized
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
-------------------------------------------
Unaudited August 31, 2000
STATEMENT OF NET ASSETS
-----------------------
Par Value
In thousands
NEW JERSEY 96.0%
Cape May County Industrial Pollution Control Fin. Auth.
Atlantic City Electric
6.80%, 3/1/21 (MBIA Insured) $ 1,520 $ 1,792
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Delaware River & Bay Auth.
5.50%, 1/1/15 (AMBACInsured) 500 517
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5.50%, 1/1/16 (AMBACInsured) 500 513
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Edison Township, GO, 6.50%, 6/1/08 350 392
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Essex County Improvement Auth.
County Correctional Facility, GO
5.75%, 10/1/30 (FGIC Insured) 2,500 2,561
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Freehold Township, GO, Water and Sewer
6.35%, 10/1/11 (MBIA Insured) 250 283
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Gloucester County Improvement Auth., Waste Management
6.85%, 12/1/29 1,000 1,039
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Hudson County Improvement Auth.
Union City Lease Project
5.20%, 7/15/24 (FGIC Insured) 2,500 2,414
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Jersey City, GO, 6.50%, 2/15/04 500 523
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Mercer County Public Improvement Auth., GO, Solid Waste
5.75%, 9/15/16 2,000 2,086
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<PAGE>
Middlesex County Pollution Control Fin. Auth.,
Amerada Hess
6.875%, 12/1/22 1,500 1,549
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Middlesex County Utilities Auth., Sewer
6.25%, 8/15/10 (MBIA Insured) 500 549
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Monmouth County, GO, 5.00%, 7/15/11 1,450 1,480
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Monmouth County Improvement Auth., GO, Capital Equipment
5.00%, 10/1/09 1,020 1,047
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Morris County, GO
5.00%, 7/15/14 1,300 1,297
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5.25%, 11/15/20 725 719
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Newark, GO, School Qualified Bond
5.30%, 9/1/17 (MBIA Insured) 1,000 1,000
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New Jersey, GO
5.50%, 5/1/17 1,000 1,021
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7.05%, 7/15/12 (Prerefunded 7/15/05+) * 1,335 1,500
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New Jersey Building Auth., GO, 5.375%, 6/15/19 3,000 2,994
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New Jersey Economic Dev. Auth.,Transportation Project,GO
5.75%, 5/1/12 (FSA Insured) $ 1,000 $ 1,064
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6.00%, 5/1/16 (FSA Insured) 1,000 1,063
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<PAGE>
New Jersey Economic Dev. Auth.
American Water
6.875%, 11/1/34 (FGIC Insured) * 1,000 1,088
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Continental Airlines
6.25%, 9/15/19 * 250 237
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Educational Testing, 4.75%, 5/15/25 (MBIA Insured) 2,250 2,015
--------------------------------------------------------------------------------
Franciscan Oaks, 5.75%, 10/1/23 375 309
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Harrogate
5.50%, 12/1/06 400 394
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5.65%, 12/1/08 200 192
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5.75%, 12/1/16 500 446
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5.875%, 12/1/26 750 640
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Kapkowski Road Landfill, Zero Coupon, 4/1/10 1,025 540
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Keswick Pines, 5.75%, 1/1/24 600 480
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Lawrenceville School, 5.75%, 7/1/16 2,000 2,069
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St. Barnabas
Zero Coupon, 7/1/16 (MBIA Insured) 3,500 1,489
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The Evergreens, 6.00%, 10/1/22 965 811
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The Seeing Eye, 6.20%, 12/1/24 1,000 1,056
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Winchester Gardens, 8.625%, 11/1/25 500 529
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New Jersey EFA, GO
5.00%, 9/1/19 (FSA Insured) 1,250 1,197
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5.125%, 9/1/15 (FSA Insured) 1,500 1,497
--------------------------------------------------------------------------------
New Jersey EFA
Monmouth Univ.
5.25%, 7/1/09 480 483
--------------------------------------------------------------------------------
5.60%, 7/1/12 450 458
--------------------------------------------------------------------------------
Princeton Univ., 5.875%,7/1/14 (Prerefunded 7/1/04+) 1,050 1,104
--------------------------------------------------------------------------------
Rowan College, 6.00%, 7/1/21 (AMBAC Insured) 1,000 1,045
--------------------------------------------------------------------------------
Seton Hall Univ.
6.875%, 7/1/10 (Prerefunded 7/1/01+) 375 390
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7.00%, 7/1/21 (Prerefunded 7/1/01+) 200 208
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St. Peter's College
5.375%, 7/1/12 $ 250 $ 246
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5.50%, 7/1/27 500 452
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Stevens Institute Technology, 5.375%, 7/1/11 585 598
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<PAGE>
New Jersey HFFA
Atlantic City Medical Center, 6.80%, 7/1/11 2,000 2,097
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Bayonne Hosp., 4.75%, 7/1/27 (FSA Insured) 2,500 2,192
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Hackensack Univ. Medical Center, 6.00%, 1/1/34 2,000 2,001
--------------------------------------------------------------------------------
Irvington General Hosp.
5.875%, 8/1/06 (Prerefunded 8/1/04+) 860 918
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6.375%, 8/1/15 (Prerefunded 8/1/04+) 500 542
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Kennedy Health, 5.00%, 7/1/10 (MBIA Insured) 300 305
--------------------------------------------------------------------------------
Robert Wood Johnson Univ. Hosp., 5.75%, 7/1/25 1,500 1,481
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St. Elizabeth Hosp.
6.00%, 7/1/14 750 691
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6.00%, 7/1/20 570 510
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St. Joseph Hosp. and Medical Center
5.75%, 7/1/16 1,000 1,029
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<PAGE>
New Jersey Higher Ed. Assistance Auth., Student Loan
5.80%, 6/1/16 (MBIA Insured) * 1,095 1,133
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New Jersey Higher Ed. Student Assistance Auth.
6.00%, 6/1/15 (MBIA Insured) * 2,000 2,090
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New Jersey Highway Auth., Senior Parkway, 5.75%, 1/1/13 2,000 2,131
--------------------------------------------------------------------------------
New Jersey Housing and Mortgage Fin. Agency
5.70%, 5/1/20 (FSA Insured) 1,000 1,013
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6.35%, 10/1/27 (MBIA Insured) * 2,000 2,063
--------------------------------------------------------------------------------
7.10%, 11/1/11 300 311
--------------------------------------------------------------------------------
7.10%, 11/1/12 175 182
--------------------------------------------------------------------------------
Home Buyer
5.70%, 10/1/17 (MBIA Insured) 1,500 1,524
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5.90%, 10/1/29 (MBIA Insured) * 1,500 1,523
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Multi-Family
5.55%, 11/1/09 (FSA Insured) 1,000 1,027
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6.25%, 11/1/26 (FSA Insured) 1,000 1,038
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New Jersey Sports & Exhibition Auth., Monmouth Park
8.00%, 1/1/25 (Prerefunded 1/1/05+) $ 650 $ 751
--------------------------------------------------------------------------------
New Jersey Transportation Auth., Trust Fund
4.50%, 6/15/19 (FSA Insured) 500 441
--------------------------------------------------------------------------------
New Jersey Turnpike Auth.
VRDN (Currently 4.10%) (FGIC Insured) 1,000 1,000
--------------------------------------------------------------------------------
5.50%, 1/1/25 (MBIA Insured) 1,025 1,027
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10.375%, 1/1/03 (Escrowed to Maturity) 1,170 1,262
--------------------------------------------------------------------------------
New Jersey Wastewater Treatment Trust
6.30%, 4/1/10 (Prerefunded 4/1/04+) 1,180 1,273
--------------------------------------------------------------------------------
6.375%, 4/1/11 (Prerefunded 4/1/04+) 200 216
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Ocean County, GO, 5.35%, 12/1/17 1,695 1,706
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Ocean County Utilities Auth., Wastewater
6.30%, 1/1/11 (Prerefunded 1/1/05+) 1,300 1,404
--------------------------------------------------------------------------------
<PAGE>
Port Auth. of New York and New Jersey
4.25%, 10/1/26 (FGICInsured) 2,000 1,623
--------------------------------------------------------------------------------
5.875%, 9/15/15 (FGIC Insured) * 1,000 1,041
--------------------------------------------------------------------------------
6.125%, 7/15/22 * 1,000 1,032
--------------------------------------------------------------------------------
6.125%, 6/1/94 1,000 1,081
--------------------------------------------------------------------------------
6.50%, 10/1/01 * 300 303
--------------------------------------------------------------------------------
6.50%, 7/15/19 (FGIC Insured) * 500 528
--------------------------------------------------------------------------------
6.50%, 11/1/26 * 1,000 1,022
--------------------------------------------------------------------------------
6.75%, 10/1/11 * 1,000 1,031
--------------------------------------------------------------------------------
Rutgers Univ., 5.20%, 5/1/27 1,000 955
--------------------------------------------------------------------------------
Salem County Pollution Control Fin. Auth., PCR
E. I. Du Pont, 6.50%, 11/15/21 * 2,000 2,057
--------------------------------------------------------------------------------
Public Service Electric and Gas Co.
6.25%, 6/1/31 (MBIA Insured) 1,500 1,573
--------------------------------------------------------------------------------
South Brunswick Township, GO
Board of Ed.
6.40%, 8/1/09 (FGICInsured)
(Prerefunded 8/1/05+) 1,250 1,357
--------------------------------------------------------------------------------
6.40%, 8/1/10 (FGIC Insured)
(Prerefunded 8/1/05+) 1,500 1,629
--------------------------------------------------------------------------------
South Jersey Transportation Auth., Raytheon
Aircraft Service
6.15%, 1/1/22 * 960 891
--------------------------------------------------------------------------------
Southeast Morris County Municipal Utilities Auth., Water
6.50%, 1/1/11 (FGIC Insured) $ 750 $ 769
--------------------------------------------------------------------------------
Wanaque Valley Regional Sewage Auth., GO
5.75%, 9/1/18 (AMBAC Insured) 3,115 3,284
--------------------------------------------------------------------------------
Winslow Township Board of Ed., GO
5.20%, 8/1/16 (FGIC Insured) 2,010 2,012
--------------------------------------------------------------------------------
Total New Jersey (Cost $101,595) 104,445
--------------------------------------------------------------------------------
<PAGE>
PUERTO RICO 2.5%
Puerto Rico Commonwealth, GO
6.45%, 7/1/17 (Prerefunded 7/1/04+) 500 548
--------------------------------------------------------------------------------
Puerto Rico Commonwealth
Highway and Transportation Auth.
5.00%, 7/1/36 500 457
--------------------------------------------------------------------------------
6.625%, 7/1/12 1,000 1,048
--------------------------------------------------------------------------------
6.625%, 7/1/12 (FSA Insured) 500 525
--------------------------------------------------------------------------------
Puerto Rico Commonwealth Infrastructure Fin. Auth.
7.50%, 7/1/09 105 105
--------------------------------------------------------------------------------
Total Puerto Rico (Cost $2,519) 2,683
--------------------------------------------------------------------------------
98.5% of Net Assets (Cost $104,114) $ 107,128
Other Assets Less Liabilities 1,656
NET ASSETS $ 108,784
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 4
Accumulated net realized gain/loss - net of distributions (3,533)
Net unrealized gain (loss) 3,014
Paid-in-capital applicable to 9,867,264 no par value
shares of beneficial interest outstanding; unlimited
number of shares authorized 109,299
--------------------------------------------------------------------------------
NET ASSETS $ 108,784
NET ASSET VALUE PER SHARE $ 11.02
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
EFA Educational Facility Authority
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GO General Obligation
HFFA Health Facility Financing Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
------------------------------------------- Unaudited
In thousands
STATEMENT OF OPERATIONS
-----------------------
6 Months
Ended
8/31/00
Investment Income (Loss)
Interest income $ 3,051
--------------------------------------------------------------------------------
Expenses
Investment management 230
Custody and accounting 47
Shareholder servicing 44
Prospectus and shareholder reports 11
Legal and audit 7
Trustees 3
Miscellaneous 2
--------------------------------------------------------------------------------
Total expenses 344
Expenses paid indirectly (1)
--------------------------------------------------------------------------------
Net expenses 343
--------------------------------------------------------------------------------
Net investment income (loss) 2,708
--------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 147
Futures 1
--------------------------------------------------------------------------------
Net realized gain (loss) 148
Change in net unrealized gain or loss on securities 3,882
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 4,030
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 6,738
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
------------------------------------------- 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) $ 2,708 $ 5,636
Net realized gain (loss) 148 (2,748)
Change in net unrealized gain or loss 3,882 (7,890)
--------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 6,738 (5,002)
--------------------------------------------------------------------------------
Distributions to shareholders
Net investment income (2,708) (5,636)
--------------------------------------------------------------------------------
Capital share transactions *
Shares sold 8,147 22,651
Distributions reinvested 2,137 4,527
Shares redeemed (9,828) (33,879)
--------------------------------------------------------------------------------
Increase (decrease) in net assets from capital
share transactions 456 (6,701)
--------------------------------------------------------------------------------
Net Assets
Increase (decrease) during period 4,486 (17,339)
Beginning of period 104,298 121,637
--------------------------------------------------------------------------------
End of period $ 108,784 $ 104,298
* Share information
Shares sold 758 2,039
Distributions reinvested 198 411
Shares redeemed (912) (3,096)
--------------------------------------------------------------------------------
Increase (decrease) in shares outstanding 44 (646)
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price New Jersey Tax-Free Bond Fund
-------------------------------------------
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 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 fund seeks to provide, consistent with prudent portfolio management, the
highest level of income exempt from federal and New Jersey income taxes by
investing primarily in investment-grade New Jersey municipal bonds.
Valuation Debt securities are generally traded in the over-the-counter
market. Investments in securities are stated at fair value as furnished by
dealers who make markets in such securities or by an independent pricing
service, which considers yield or price of bonds of comparable quality, coupon,
maturity, and type, as well as prices quoted by dealers who make markets in such
securities.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Trustees.
Premiums and Discounts Premiums and original issue discounts on municipal
securities are amortized for both financial reporting and tax purposes. Market
discounts are recognized upon disposition of the security as gain or loss for
financial reporting purposes and as ordinary income for tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Distributions to shareholders are
recorded by the fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting principles. Expenses paid indirectly reflect credits earned on daily
uninvested cash balances at the custodian 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 $20,039,000 and $18,471,000, 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 $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 August 31, 2000, the cost for federal income tax purposes was
substantially the same as for financial reporting and totaled $104,114,000. Net
unrealized gain aggregated $3,014,000 at period-end, of which $3,780,000 related
to appreciated investments and $766,000 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 $38,000 was payable at 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 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, $8,000 of unaccrued 1998-1999 fees were repaid during the six
months ended August 31, 2000.
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 $68,000 for the six months
ended August 31, 2000, of which $14,000 was payable at period-end.
================================================================================
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*AccessRegistration 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.
* 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 Shareholder Services
================================================================================
<PAGE>
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
<PAGE>
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
<PAGE>
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.
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.
================================================================================
<PAGE>
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
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. F47-051 8/31/00
