================================================================================
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
Georgia Tax-Free Bond Fund
- --------------------------------------------------------------------------------
February 29, 2000
- --------------------------------------------------------------------------------
<PAGE>
REPORT HIGHLIGHTS
================================================================================
GEORGIA TAX-FREE BOND FUND
- --------------------------
* Higher interest rates hurt returns for municipal bond investors over
the past 12 months.
* Our defensive moves during much of 1999 cushioned but could not
overcome the impact of higher rates on the portfolio.
* Although total returns were negative, the fund outperformed the
average Georgia bond fund for both the 6- and 12-month periods.
* Late in 1999 and early in 2000 we moved to lock in higher long-term
yields.
* With municipal interest rates at their highest levels since 1995, the
tax-exempt market appears attractive relative to taxable alternatives.
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's efforts to slow the economy to head off inflationary
pressures took a toll on bond funds over the past year. Total returns could not
withstand a roaring national economy and the Fed's four interest rate hikes.
Most long-term funds, including the Georgia Tax-Free Bond Fund, posted weak or
negative returns during the past 6- and 12-month periods, although the tone of
the market began to improve early this year.
MARKET ENVIRONMENT
- ------------------
*******************************************************************************
GEORGIA BOND YIELD INDEX
------------------------
2/28/99 5.07
5.1
5.1
5/31 5.21
5.44
5.49
8/31 5.67
5.87
6.06
11/30 5.94
6.14
6.19
2/29/00 6.08
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 and
by increased government spending made possible by soaring tax receipts. In this
environment, Fed Chairman Alan Greenspan left no room for doubt that the Fed
will remain diligent in its fight to contain inflation.
*****************************
One Factor that aided
municipals in 1999 was
the relatively light
supply of new
issues . . .
*****************************
Interest rates, and municipal bond yields, trended upward in response to
the Fed's hikes in key short-term rates. After outperforming taxable bonds
during the first half of 1999, municipals lost ground in the second half as
lower-quality tax-exempt securities, in particular, did poorly. Year-end was
particularly challenging for municipal bond funds 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 of these factors.
One factor that aided municipals in 1999 was the relatively light supply of new
issues, which was down 21% from the previous year.
The fund's fiscal year ended on a positive note, however, as prices climbed
and long-term municipal yields fell in February along with longer-term Treasury
yields. The rally in bond prices began when the Treasury announced its intention
to repurchase Treasury bonds. The proposal sent shock waves through the bond
market as investors scrambled to discer n which maturities would be affected
most and searched for alternative securities. The Treasury's buyback program led
to an inversion of the yield curve, as 30-year Treasury yields dropped below
two-year yields. The municipal yield curve, however, maintained a positive
slope, although it is flatter than it was last year when the difference between
short- and long-term yields was greater.
Georgia's economy entered 2000 with strong momentum. The state's employment
base continued to expand, registering a 3.4% increase compared to the national
rate of 2.1%. Much of the growth was in the technology and financial services
sectors, a sign that Georgia has become a home for New Economy industries. The
state has also pooled the resources of regional research universities to provide
a well-trained and focused work force to sustain the area's thriving growth
rates. Georgia's growth is expected to outperform the nation's thanks to its
labor force investments, good geography, access to export markets, and
business-friendly environment.
<PAGE>
Fueled by the promise of good jobs, the Atlanta area especially has seen a
tremendous increase in new residents. Henry and Forsyth counties were among the
five fastest-growing counties in the nation in 1999. This growth has not,
however, been without costs, as the strain of urban pollution, water concerns,
and traffic congestion threaten the unparalleled expansion. Additionally, the
state must contend with slower growth in rural regions, where manufacturing
industries have contracted and the labor force tends to be less skilled.
In keeping with its AAA rating, Georgia continues to manage its finances
responsibly. Revenue growth was strong again in 1999, and the state was able to
increase its reserves to their highest levels ever. It is worth noting that
Georgia is heavily dependent on the sales tax, thus making it vulnerable to
revenue decreases if Internet commerce continues to expand at a dizzying rate.
Although we do not think that this is a major threat at this point, we will
monitor the trend closely.
State bond issuance decreased 7% in 1999, due in part to rising interest
rates and to efforts by state officials to cap debt at "affordable" levels.
Issuance in 2000 is likely to remain at last year's level but to drop in the
next few years. New issues expected in 2000 will include financing for Atlanta's
Hartsfield Airport to continue its ongoing expansion as well as for many
Atlanta-area school districts, which are struggling to keep up with growing
enrollments.
PERFORMANCE AND STRATEGY REVIEW
- -------------------------------
*********************************************************************
PERFORMANCE COMPARISON
----------------------
Periods Ended 2/29/00 6 Months 12 Months
--------------------- -------- ---------
Georgia Tax-Free Bond Fund -0.42% -3.46%
Lipper Georgia Municipal
Debt Funds Average -0.99 -4.31
*********************************************************************
The pressure on fixed income markets over the past year did not spare the
Georgia municipal market or your fund. Income returns were steady while
principal was down for both the 6- and 12-month periods. For the past six
months, income of $0.25 per share offset most of the price decline of $0.30, and
the fund's 5.08% 12-month annualized dividend yield offered an attractive 7.94%
taxable equivalent yield to investors in the 36% federal tax bracket. Although
total returns for both periods were negative, our more defensive structure and
low fees helped us surpass the fund's peer group averages.
In the first half of 1999, we shifted the fund to a more conservative
posture as interest rate pressures mounted on the municipal market. We
maintained this position for much of the period in an effort to cushion the
effect of higher interest rates. In particular, we shortened average maturity
(generally, shorter maturity bonds have less principal volatil ity than longer
bonds), and we directed purchases more to the 10- to 20-year maturity range
while selling longer, more interest rate-sensitive bonds. This mitigated the
decline in share value, as the longest maturity bonds had a particularly
difficult year. As interest rates rose late in 1999 and in the first two months
of 2000, we shifted the fund modestly longer to lock in the higher yields
available.
<PAGE>
*****************************
As interest rates
rose . . . we
shifted the fund
modestly longer to
lock in the higher
yields available.
*****************************
Market movements did not dictate all moves. As a caution against
Y2K-oriented selling, we maintained a higher level of cash reserves in the
closing months of 1999. While the rollover to the new year occurred with little
noticeable effect on financial markets or the economy, the higher levels of cash
reduced the fund's interest rate exposure during a difficult fourth quarter 1999
and early 2000.
We shifted some credit sector allocations with mixed results. We maintained
a low exposure to hospitals, a particularly weak performer in the past year, and
we added to the high-yield sector as yields rose considerably in these
securities. While high-yield (lower-quality) bonds also performed poorly in the
past year, we expect the incremental yield they provide to reward investors over
the longer term. Finally, our prior addi tions of industrial revenue bonds
performed poorly, especially the corporate-b acked issues of paper companies
Fort James, Georgia Pacific, and Union Camp. Nevertheless, we believe that their
yields have adjusted to levels that make these securities attractive despite
weaker short-term results.
OUTLOOK
- -------
A retrospective look at 1999 reveals a trying time for municipal investors,
especially in light of another year of sizzling equity performance. Yet, as we
look forward to the remainder of 2000, we believe there is cause for optimism in
the municipal market. Municipal interest rates are at their highest levels since
1995, and when compared historically to various taxable alternatives, the
municipal market appears attractive.
The Federal Reserve has made it clear that it will raise short-term rates
until the economy slows, but multiple moves are anticipated by the market and
have been factored into current valuations. If equity markets stumble, as some
say the Federal Reserve would like, demand for the less volatile returns
available from the fixed income market should increase, giving municipal returns
a boost.
We thank you for your perseverance through this past year and assure you
that we are doing everything we can to increase our tax-free dividend. Although
there is no guarantee that the seas won't continue to be stormy, we can promise
a steady hand as we navigate these waters. We are cautiously optimistic that
current market conditions offer an opportunity to lock in higher yields, and we
will diligently and prudently scrutinize the Georgia municipal market for such
opportunities.
Respectfully submitted,
/s/
Hugh D. McGuirk
Chairman of the Investment Advisory Committee
March 22, 2000
<PAGE>
================================================================================
T. Rowe Price Georgia Tax-Free Bond Fund
- ----------------------------------------
PORTFOLIO HIGHLIGHTS
- --------------------
KEY STATISTICS
- --------------
Key statistics
8/31/99 2/29/00
- --------------------------------------------------------------------
Price Per Share $ 10.45 $ 10.15
- --------------------------------------------------------------------
Dividends Per Share
- --------------------------------------------------------------------
For 6 months 0.25 0.25
- --------------------------------------------------------------------
For 12 months 0.50 0.50
- --------------------------------------------------------------------
Dividend Yield *
- --------------------------------------------------------------------
For 6 months 4.76% 5.08%
- --------------------------------------------------------------------
For 12 months 4.88 5.05
- --------------------------------------------------------------------
30-Day Standardized Yield 4.61 5.11
- --------------------------------------------------------------------
Weighted Average Maturity (years) 15.3 16.1
- --------------------------------------------------------------------
Weighted Average Effective Duration (years) 7.8 8.4
- --------------------------------------------------------------------
Weighted Average Quality ** AA- AA-
- --------------------------------------------------------------------
* Dividends earned and reinvested for the periods indicated are
annualized and divided by the fund's net asset value at the end of the
period.
** Based on T. Rowe Price research.
================================================================================
<PAGE>
T. Rowe Price Georgia 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 14% 15%
- ----------------------------------------------------------------------
Prerefunded Bonds 12 13
- ----------------------------------------------------------------------
Water and Sewer Revenue 11 10
- ----------------------------------------------------------------------
Nuclear Revenue 17 9
- ----------------------------------------------------------------------
Industrial and Pollution Control Revenue 8 8
- ----------------------------------------------------------------------
Housing Finance Revenue 8 8
- ----------------------------------------------------------------------
Escrowed to Maturity 5 6
- ----------------------------------------------------------------------
Educational Revenue 3 6
- ----------------------------------------------------------------------
Life Care/Nursing Home Revenue 4 5
- ----------------------------------------------------------------------
General Obligation - State 4 5
- ----------------------------------------------------------------------
Dedicated Tax Revenue 3 4
- ----------------------------------------------------------------------
Miscellaneous Revenue 2 3
- ----------------------------------------------------------------------
Air and Sea Transportation Revenue 2 2
- ----------------------------------------------------------------------
Hospital Revenue 3 2
- ----------------------------------------------------------------------
All Other 3 1
- ----------------------------------------------------------------------
Other Assets Less Liabilities 1 3
- ----------------------------------------------------------------------
Total 100% 100%
================================================================================
<PAGE>
T. Rowe Price Georgia 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 Georgia Municipal
Bond Debt Funds Average Georgia Tax-Free
3/31/93 10000 10000 10000
2/94 10666 10727 10845
2/95 10867 10824 10999
2/96 12068 11896 12167
2/97 12732 12468 12793
2/98 13896 13598 14034
2/99 14751 14281 14838
2/00 14444 13660 14325
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
- --------------------- ------ ------- ------- --------- ----
Georgia Tax-Free Bond Fund -3.46% 3.84% 5.43% 5.33% 3/31/93
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
================================================================================
<PAGE>
T. Rowe Price Georgia Tax-Free Bond Fund
- ----------------------------------------
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 $ 11.03 $ 10.92 $ 10.44 $ 10.44 $ 9.93
- ----------------------------------------------------------------------------
Investment activities
Net investment income
(loss) 0.50* 0.50* 0.51* 0.52* 0.52*
Net realized and
unrealized gain (loss) (0.88) 0.11 0.48 - 0.51
- ----------------------------------------------------------------------------
Total from
investment activities (0.38) 0.61 0.99 0.52 1.03
- ----------------------------------------------------------------------------
Distributions
Net investment income (0.50) (0.50) (0.51) (0.52) (0.52)
- ----------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 10.15 $ 11.03 $ 10.92 $ 10.44 $ 10.44
Ratios/Supplemental=Data====================================================
Total return** (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%*
- ----------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 4.78%* 4.59%* 4.79%* 5.01%* 5.09%*
- ----------------------------------------------------------------------------
Portfolio turnover rate 48.5% 19.9% 49.0% 71.1% 71.5%
- ----------------------------------------------------------------------------
Net assets, end of period
(in thousands) $57,380 $ 62,037 $49,455 $ 38,726 $ 32,500
- ----------------------------------------------------------------------------
** 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.
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Georgia Tax-Free Bond Fund
- ---------------------------------------- February 29, 2000
STATEMENT OF NET ASSETS
- -----------------------
Par Value
In thousands
GEORGIA 93.2%
Albany Dougherty Payroll Dev. Auth., Solid Waste Disposal
5.20%, 5/15/28 * $1,000 $ 862
- --------------------------------------------------------------------------------
Americus and Sumter County Hosp. Auth., Magnolia Manor
6.25%, 5/15/19 1,000 860
- --------------------------------------------------------------------------------
Athens-Clarke Residential Care Fac. Auth.
Wesley Woods of Athens
5.30%, 10/1/01 500 495
- --------------------------------------------------------------------------------
6.375%, 10/1/27 600 519
- --------------------------------------------------------------------------------
Atlanta Airport Fac.
Zero Coupon, 1/1/10 (MBIA Insured) * 1,285 710
- --------------------------------------------------------------------------------
6.50%, 1/1/13 (FGIC Insured) * 500 515
- --------------------------------------------------------------------------------
Atlanta Special Purpose Fac., Delta Airlines, 7.90%, 12/1/18 * 450 458
- --------------------------------------------------------------------------------
Brunswick and Glynn County Dev., Georgia-Pacific
5.55%, 3/1/26 * 1,000 837
- --------------------------------------------------------------------------------
Burke County Dev. Auth., PCR
Georgia Power, VRDN (Currently 3.80%) 100 100
- --------------------------------------------------------------------------------
Oglethorpe Power
7.80%, 1/1/08 (MBIA Insured)
(Prerefunded 1/1/03+) 560 618
- --------------------------------------------------------------------------------
Power Plant Vogtle, 5.40%, 5/1/34 1,500 1,289
- --------------------------------------------------------------------------------
Cartersville Dev. Auth., PCR, Anheuser Busch, 6.75%, 2/1/12 * 1,000 1,049
- --------------------------------------------------------------------------------
Chatham County School Dist.
6.25%, 8/1/16 (Prerefunded 8/1/03+) 625 662
- --------------------------------------------------------------------------------
6.75%, 8/1/18 (MBIA Insured)
(Prerefunded 8/1/03+) 750 808
- --------------------------------------------------------------------------------
Cherokee County Water and Sewage Auth.
5.50%, 8/1/23 (MBIA Insured) 1,000 950
- --------------------------------------------------------------------------------
Cobb - Marietta Coliseum and Exhibit Hall Auth.
5.625%, 10/1/26 (MBIA Insured) 1,000 963
- --------------------------------------------------------------------------------
Columbia County, Courthouse/Detention Center, GO
5.625%, 2/1/20 1,250 1,196
- --------------------------------------------------------------------------------
<PAGE>
Coweta County Residential Care Fac. Auth.
Wesley Woods of Newnan-Peachtree City
8.25%, 10/1/26 500 534
- --------------------------------------------------------------------------------
DeKalb County Dev. Auth., Emory Univ., 6.00%, 10/1/14 $ 550 $ 562
- --------------------------------------------------------------------------------
DeKalb County Housing Auth., Clairmont Crest
VRDN (Currently 3.90%) (FNMA Guaranteed) 800 800
- --------------------------------------------------------------------------------
Effingham County Dev. Auth., Fort James, 5.625%, 7/1/18 * 600 521
- --------------------------------------------------------------------------------
Forsyth County School Dist., GO, 6.00%, 2/1/16 750 770
- --------------------------------------------------------------------------------
Fulton County
6.375%, 1/1/14 (FGIC Insured) 20 22
- --------------------------------------------------------------------------------
6.375%, 1/1/14 (FGIC Insured)
(Escrowed to Maturity) 1,390 1,502
- --------------------------------------------------------------------------------
Fulton County Dev. Auth., PCR, Special Fac., Delta Airlines
6.95%, 11/1/12 500 509
- --------------------------------------------------------------------------------
Fulton County Fac. Corp., GO, COP, Public Purpose
5.50%, 11/1/18 (AMBAC Insured) 1,000 957
- --------------------------------------------------------------------------------
Fulton County Housing Auth., Single Family
6.55%, 3/1/18 (GNMA Guaranteed) * 120 122
- --------------------------------------------------------------------------------
Fulton County Residential Care Fac. for the Elderly
Canterbury Court, 6.30%, 10/1/24 500 447
- --------------------------------------------------------------------------------
Fulton County School Dist., GO, 6.375%, 5/1/17 830 894
- --------------------------------------------------------------------------------
Fulton County Water and Sewage
4.75%, 1/1/28 (FGIC Insured) 1,000 808
- --------------------------------------------------------------------------------
6.25%, 1/1/09 (FGIC Insured) 1,000 1,070
- --------------------------------------------------------------------------------
Gainesville Water and Sewage, 6.00%, 11/15/12 (FGIC Insured) 1,000 1,055
- --------------------------------------------------------------------------------
Georgia, GO
6.25%, 4/1/14 1,000 1,080
- --------------------------------------------------------------------------------
6.50%, 4/1/09 550 601
- --------------------------------------------------------------------------------
<PAGE>
Georgia Housing and Fin. Auth.
Home Ownership, 6.60%, 6/1/25 * 225 229
- --------------------------------------------------------------------------------
Single Family Mortgage
5.80%, 12/1/26 * 1,000 941
- --------------------------------------------------------------------------------
6.05%, 12/1/16 * 500 497
- --------------------------------------------------------------------------------
6.125%, 12/1/15 420 422
- --------------------------------------------------------------------------------
6.25%, 12/1/28 * 500 503
- --------------------------------------------------------------------------------
6.50%, 12/1/17 (FHA Guaranteed) * 1,000 1,015
- --------------------------------------------------------------------------------
Georgia Municipal Gas Auth.
Southern Storage Gas, 6.00%, 7/1/04 500 517
- --------------------------------------------------------------------------------
Georgia Private Colleges & Univ. Auth., Emory Univ.
5.50%, 11/1/25 1,250 1,159
- --------------------------------------------------------------------------------
Gwinnett County Water and Sewer Auth., GO, 5.25%, 8/1/18 $ 500 $ 468
- --------------------------------------------------------------------------------
Hall County School Dist.
6.30%, 12/1/07 (AMBAC Insured)
(Prerefunded 12/1/04+) 1,000 1,072
- --------------------------------------------------------------------------------
Henry County School Dist., GO
6.00%, 8/1/14 (MBIA Insured) 330 337
- --------------------------------------------------------------------------------
Jackson County School Dist.
6.00%, 7/1/14 (MBIA Insured)
(Prerefunded 7/1/04+) 1,000 1,057
- --------------------------------------------------------------------------------
Macon Water Auth., 5.25%, 10/1/16 500 470
- --------------------------------------------------------------------------------
Medical Center Hosp. Auth., Columbus Regional
Healthcare Systems
5.50%, 8/1/25 (MBIA Insured) 1,000 911
- --------------------------------------------------------------------------------
Metropolitan Atlanta Rapid Transit Auth.
Sales Tax
5.50%, 7/1/17 (MBIA Insured) 1,000 969
- --------------------------------------------------------------------------------
6.90%, 7/1/20 (MBIA Insured)
(Prerefunded 7/1/04+) 1,325 1,447
- --------------------------------------------------------------------------------
7.00%, 7/1/11 (Escrowed to Maturity) 1,335 1,505
- --------------------------------------------------------------------------------
7.00%, 7/1/11 (MBIA Insured)
(Escrowed to Maturity) 635 716
- --------------------------------------------------------------------------------
Milledgeville, Water and Sewer, 6.00%, 12/1/21 (FSA Insured) 500 509
- --------------------------------------------------------------------------------
<PAGE>
Municipal Electric Auth. of Georgia
Zero Coupon, 1/1/09 1,010 588
- --------------------------------------------------------------------------------
5.70%, 1/1/19 (MBIA Insured) 300 296
- --------------------------------------------------------------------------------
6.50%, 1/1/12 520 559
- --------------------------------------------------------------------------------
6.60%, 1/1/18 1,035 1,117
- --------------------------------------------------------------------------------
7.25%, 1/1/24 (AMBAC Insured) 1,000 1,167
- --------------------------------------------------------------------------------
Newton County Hosp. Auth., GO, Newton Health Systems
6.00%, 2/1/20 (AMBAC Insured) 1,000 995
- --------------------------------------------------------------------------------
Paulding County
School Dist., GO, 6.00%, 2/1/13 (MBIA Insured) 1,000 1,051
- --------------------------------------------------------------------------------
Water and Sewer, 6.00%, 12/1/13 (MBIA Insured) 1,000 1,051
- --------------------------------------------------------------------------------
Peach County School Dist., GO
6.40%, 2/1/19 (MBIA Insured)
(Prerefunded 2/1/05+) 500 537
- --------------------------------------------------------------------------------
Private Colleges and Univ. Auth.
Agnes Scott College, 4.75%, 6/1/28 (MBIA Insured) $ 750 $ 605
- --------------------------------------------------------------------------------
Mercer Univ., 5.375%, 10/1/29 1,000 861
- --------------------------------------------------------------------------------
Putnam County Dev. Auth., PCR, Georgia Power Plant
VRDN (Currently 3.85%) 200 200
- --------------------------------------------------------------------------------
Rockdale County, Public Purpose, COP
5.625%, 7/1/20 (AMBAC Insured) 250 239
- --------------------------------------------------------------------------------
Rockdale County Dev. Auth., Solid Waste Disposal, Visy Paper
7.40%, 1/1/16 * 460 468
- --------------------------------------------------------------------------------
Rockdale County School Dist., GO, 6.50%, 1/1/09 1,000 1,069
- --------------------------------------------------------------------------------
Rockdale County Water and Sewer Auth., GO
5.625%, 7/1/22 (MBIA Insured) 750 719
- --------------------------------------------------------------------------------
Savannah Economic Dev. Auth.
College of Art & Design, 6.80%, 10/1/19 500 491
- --------------------------------------------------------------------------------
Union Camp, 6.15%, 3/1/17 500 504
- --------------------------------------------------------------------------------
Smyrna Downtown Dev. Auth.
6.70%, 2/1/20 (MBIA Insured)
(Prerefunded 2/1/05+) 1,000 1,088
- --------------------------------------------------------------------------------
Total Georgia (Cost $54,280) 53,494
- --------------------------------------------------------------------------------
<PAGE>
PUERTO=RICO==3.5%===============================================================
Puerto Rico Commonwealth, Highway and Transportation Auth.
6.625%, 7/1/12 (FSA Insured) 1,000 1,050
- --------------------------------------------------------------------------------
Puerto Rico Municipal Fin. Agency, GO
5.50%, 7/1/21 (FSA Insured) 1,000 955
- --------------------------------------------------------------------------------
Total Puerto Rico (Cost $2,039) 2,005
96.7% of Net Assets (Cost $56,319) $ 55,499
Other Assets Less Liabilities 1,881
NET ASSETS $ 57,380
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 1
Accumulated net realized gain/loss - net of distributions (1,243)
Net unrealized gain (loss) (820)
Paid-in-capital applicable to 5,652,874 no par value
shares of beneficial interest outstanding; unlimited
number of shares authorized 59,442
NET ASSETS $ 57,380
NET ASSET VALUE PER SHARE $ 10.15
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
COP Certificates of Participation
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FNMA Federal National Mortgage Association
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.
================================================================================
<PAGE>
T. Rowe Price Georgia Tax-Free Bond Fund
- ----------------------------------------
STATEMENT OF OPERATIONS
- -----------------------
In thousands
Year
Ended
2/29/00
Investment Income (Loss)
Interest income $ 3,325
- -------------------------------------------------------------------------------
Expenses
Investment management 191
Custody and accounting 98
Shareholder servicing 64
Prospectus and shareholder reports 20
Legal and audit 14
Trustees 6
Registration 3
Miscellaneous 3
- -------------------------------------------------------------------------------
Total expenses 399
Expenses paid indirectly (2)
- -------------------------------------------------------------------------------
Net expenses 397
- -------------------------------------------------------------------------------
Net investment income (loss) 2,928
- -------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (812)
Futures (2)
- -------------------------------------------------------------------------------
Net realized gain (loss) (814)
Change in net unrealized gain or loss on securities (4,330)
- -------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (5,144)
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (2,216)
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Georgia Tax-Free Bond Fund
- ----------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
In thousands
Year
Ended
2/29/00 2/28/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 2,928 $ 2,519
Net realized gain (loss) (814) 245
Change in net unrealized gain or loss (4,330) 258
- ------------------------------------------------------------------------------
Increase (decrease) in net assets from operations (2,216) 3,022
- ------------------------------------------------------------------------------
Distributions to shareholders
Net investment income (2,928) (2,519)
- ------------------------------------------------------------------------------
Capital share transactions *
Shares sold 16,784 20,966
Distributions reinvested 2,272 1,991
Shares redeemed (18,569) (10,878)
- ------------------------------------------------------------------------------
Increase (decrease) in net assets from capital
share transactions 487 12,079
- ------------------------------------------------------------------------------
Net Assets
Increase (decrease) during period (4,657) 12,582
Beginning of period 62,037 49,455
- ------------------------------------------------------------------------------
End of period $ 57,380 $ 62,037
==============================================================================
* Share information
Shares sold 1,593 1,909
Distributions reinvested 217 181
Shares redeemed (1,784) (993)
- ------------------------------------------------------------------------------
Increase (decrease) in shares outstanding 26 1,097
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. ROWE PRICE GEORGIA TAX-FREE BOND FUND
February 29, 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 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. 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 $28,545,000 and $27,842,000, respectively, for the year
ended February 29, 2000.
<PAGE>
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 has 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 February 29, 2000, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$56,319,000. Net unrealized loss aggregated $820,000 at period-end, of which
$925,000 related to appreciated investments and $1,745,000 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 $13,000 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 Fe
bruary 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 is
required to bear any expenses through February 28, 2001, which would cause the
fund's ratio of 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, $61,000 of management fees were not accrued by the fund for
the year ended February 29, 2000. 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 $122,000 for
the year ended February 29, 2000, of which $12,000 was payable at period-end.
================================================================================
<PAGE>
T. Rowe Price Georgia Tax-Free Bond Fund
- ----------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
To the Board of Trustees of T. Rowe Price State Tax-Free Income Trust
and Shareholders of Georgia Tax-Free Bond Fund
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Georgia Tax-Free Bond Fund (one of the portfolios comprising T. Rowe Price State
Tax-Free Income Trust, hereafter referred to as "the Fund") at February 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 gen-erall y 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 February 29, 2000, by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 17, 2000
================================================================================
T. Rowe Price Georgia Tax-Free Bond Fund
- ----------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 2/29/00
----------------------------------------------------------
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 $2,912,000 which
qualified as exempt-interest dividends.
================================================================================
<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. F92-050 2/29/00
