================================================================================
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
Virginia Tax-Free Funds
- --------------------------------------------------------------------------------
February 29, 2000
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
VIRGINIA TAX-FREE FUNDS
- -----------------------
* Higher interest rates hurt returns for long-term Virginia municipal bonds,
while shorter-term issues fared better.
* The Virginia Short-Term Tax-Free Bond Fund comfortably outdistanced its
peer group average for the six-month period ended February 29, 2000.
* The Virginia Tax-Free Bond Fund declined, but defensive moves helped it
outperform its Lipper average for both the 6- and 12-month periods.
* Our funds moved to lock in higher yields late in 1999 and early in 2000.
* We will be looking for opportunities to lock in higher yields as interest
rates continue to rise in 2000.
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 stem inflationary pressures in the economy
took a toll on the bond markets over the past year. Total returns could not
withstand four interest rate hikes, intended to slow a roaring national economy.
Long-term Virginia municipals, which are the most sensitive to rising rates,
generally posted weak or negative returns during the past 6- and 12-month
periods, while shorter-term issues fared better. This rising-rate environment
produced mixed results for your funds.
<PAGE>
MARKET ENVIRONMENT
- ------------------
*******************************************************************************
VIRGINIA BOND YIELDS
--------------------
Virginia Bond Index Virginia 3-year GO Bond
2/28/99 5.05 3.58
5.08 3.6
5.08 3.6
5/31 5.19 3.78
5.44 4.1
5.48 4.08
8/31 5.69 4.17
5.86 4.23
6.07 4.32
11/30 5.95 4.27
6.13 4.48
6.28 4.68
2/29/00 6.18 4.7
Source: T. Rowe Price Associates.
*******************************************************************************
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 s pending 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.
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 funds' 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 discern 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 fell 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.
<PAGE>
Virginia's economy continues to grow at a healthy pace. The unemployment
rate was an extremely low 2.6% in December -- the lowest December rate in 30
years -- as new jobs grew 1.9% from the previous year. Virginia's employment
base continues to diversify away from a dependence on the federal government and
into the services and high-tech industries.
The commonwealth's financial profile remains strong. Revenue collections
for the first seven months of the 2000 fiscal year are 11% ahead of the prior
year's seven-month level and 2% above official forecasts. This has been the case
despite recent tax-relief measures and other initiatives. As a result of
Virginia's sound fiscal policies, the need to borrow has been reduced, and
consequently the supply of municipal securities remains tight.
Transportation needs and how to pay for them continue to dominate current
General Assembly discussions. It now appears unlikely that Virginia will issue
tobacco settlement securitization bonds to fund transportation projects, as
advocated by Governor Gilmore. However, GARVEE bonds (backed by federal
transportation grants) of as much as $800 million may be issued for
transportation needs as part of a $2.1 to $2.5 billion transportation plan
currently under discussion.
VIRGINIA SHORT-TERM TAX-FREE BOND FUND
- --------------------------------------
Higher interest rates made progress difficult for the six months ended
February 29, but results were positive nonetheless. Dividends per share held
steady at $0.09 for the period, more than offsetting a $0.04 decline in per
share price. Our resulting 1.26% six-month total return comfortably outdistanced
the Lipper benchmark of 1.07%. Returns for the 12-month period matched the
Lipper average.
For the past six months we carried higher cash balances as yields moved
higher. Our strategy was to keep duration short in the face of the Fed's
tightening moves, while pursuing bonds that offer more yield whenever they are
available -- which is not often because of the high quality of the Virginia
municipal market. (Duration measures a bond or bond fund's price sensitivity to
changes in interest rates. The price of a bond fund with a duration of two
years, for example, would drop 2% if rates rose by one percentage point.)
The fund's duration ranged between 1.75 and 2.15 years after July 1999,
considerably shorter than the 2.15 to 2.55 range we previously maintained. In
October, however, five-year yields approached 5% for the first time since March
1995, and we saw an opportunity to extend duration again, to 2.15 years. The
portfolio finished the period with an average duration of 1.8 years. Given the
recent high yields, we would like to buy as many four-year bonds as possible,
but we are mindful of not becoming too aggressive while the Fed continues to
tighten.
Our portfolio is skewed toward higher-yielding sectors of the
investment-grade market, including hospital (11%), lease revenue (11%), and
solid waste revenue bonds (7%). In the fall we purchased $1.1 million of Halifax
County IDA Old Dominion Electric -- issues we rarely have the opportunity to buy
- -- which pushed our electric revenue exposure to 5%. We prefer to pursue these
quality, higher-yielding opportunities because over time the yield component
adds significantly to shareholder total returns, a combination of dividends and
price appreciation.
<PAGE>
The fund's largest allocations are to prerefunded bonds at 23% of assets
and local general obligation bonds at 18%, up from 13% six months ago. While
these numbers seem high, they are significantly below their share of outstanding
debt in the short-term sector of the Virginia municipal market.
VIRGINIA TAX-FREE BOND FUND
- ---------------------------
The pressure on fixed income markets over the past year did not spare the
Virginia municipal market or your fund. Although income returns were steady,
principal was down for both the 6- and 12-month periods. For the six months,
dividends of $0.27 per share nearly offset a $0.31 price decline, and the
12-month annualized dividend yield of 5.23% offered an attractive
taxable-equivalent yield of 8.17% for investors in the 36% federal tax bracket.
Although total retur ns for both periods were negative, they surpassed the
fund's peer group averages, aided by our more defensive strategy and low fees.
In the first half of the year, we shifted to a more conservative interest
rate posture as steadily rising rates were taking their toll on the municipal
market. In particular, we kept a shorter average maturity (generally, sho rter
maturity bonds have less principal volatility than longer bonds), and we
purchased more issues with 10- to 20-year maturities while selling longer, more
interest rate-sensitive bonds. This mitigated the decline in principal value, as
the longest maturity bonds had a particularly difficult year. As rising rates
improved yields late in 1999 and in the first two months of 2000, we shifted the
fund into modestly longer i ssues in an effort to lock in a better income
stream.
Market movements did not dictate all moves. As a caution against any market
dislocations because of Y2K concerns, we maintained a higher level of cash
reserves than normal for the last several months of 1999. While 2000 arrived
with little noticeable effect on the market or anywhere, the higher levels of
cash reduced the fund's interest rate exposure during a difficult fourth quarter
1999 and early 2000.
We shifted some sector allocations with mixed results. We reduced our
already low allocation to high-yield issues and maintained an above-average
stake in industrial revenue bonds. Performance in the high-yield sector was
particularly poor and corporate credits such as Georgia Pacific and Waste
Management also weakened and detracted from performance. Our allocation to
hospitals, while lower than prior periods, is still relatively high at 14%. This
sector also produced poor performance.
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 rest of 2000, we believe there is cause for optimism.
Municipal interest rates are at their highest levels since 1995, and when
compared historically to various taxable alternatives, the municipal market
appears attractive.
<PAGE>
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 are cautiously optimistic that current market conditions are an
opportunity to lock in higher yields, and we will diligently and prudently
scrutinize the Virginia municipal market for such opportunities.
Respectfully submitted,
/s/
Charles B. Hill
Chairman of the Investment Advisory Committee
Virginia Short-Term Tax-Free Bond Fund
/s/
Hugh D. McGuirk
Chairman of the Investment Advisory Committee
Virginia Tax-Free Bond Fund
March 22, 2000
================================================================================
***************************
The commonwealth's
financial profile
remains strong.
***************************
PERFORMANCE COMPARISON
----------------------
Periods Ended 2/29/00 6 Months 12 Months
--------------------- -------- ---------
Virginia Short-Term
Tax-Free Bond Fund 1.26% 1.48%
Lipper Short Municipal
Debt Funds Average 1.07 1.48
PERFORMANCE COMPARISON
----------------------
Periods Ended 2/29/00 6 Months 12 Months
--------------------- -------- ---------
Virginia Tax-Free Bond Fund -0.33% -3.16%
Lipper Virginia Municipal
Debt Funds Average -1.10 -3.76
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
- -------------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
KEY STATISTICS
--------------
8/31/99 2/29/00
Virginia Short-Term Tax-Free Bond Fund
- -------------------------------------------------------------------------------
Price Per Share $ 5.10 $ 5.06
- -------------------------------------------------------------------------------
Dividends Per Share
- -------------------------------------------------------------------------------
For 6 months 0.09 0.09
- -------------------------------------------------------------------------------
For 12 months 0.19 0.18
- -------------------------------------------------------------------------------
Dividend Yield *
- -------------------------------------------------------------------------------
For 6 months 3.57% 3.73%
- -------------------------------------------------------------------------------
For 12 months 3.70 3.70
- -------------------------------------------------------------------------------
30-Day Standardized Yield 3.62 4.10
- -------------------------------------------------------------------------------
Weighted Average Maturity (years) 2.3 2.1
- -------------------------------------------------------------------------------
Weighted Average Effective Duration (years) 2.0 1.8
- -------------------------------------------------------------------------------
Weighted Average Quality ** AA AA
- -------------------------------------------------------------------------------
Virginia Tax-Free Bond Fund
- -------------------------------------------------------------------------------
Price Per Share $ 10.86 $ 10.55
- -------------------------------------------------------------------------------
Dividends Per Share
- -------------------------------------------------------------------------------
For 6 months 0.27 0.27
- -------------------------------------------------------------------------------
For 12 months 0.54 0.54
- -------------------------------------------------------------------------------
Dividend Yield *
- -------------------------------------------------------------------------------
For 6 months 4.96% 5.23%
- -------------------------------------------------------------------------------
For 12 months 5.11 5.23
- -------------------------------------------------------------------------------
30-Day Standardized Yield 4.74 5.15
- -------------------------------------------------------------------------------
Weighted Average Maturity (years) 14.9 15.7
- -------------------------------------------------------------------------------
Weighted Average Effective Duration (years) 7.8 8.3
- -------------------------------------------------------------------------------
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 Virginia Tax-Free Funds
- -------------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
SECTOR DIVERSIFICATION
----------------------
Sector Diversification
Percent of Percent of
Net Assets Net Assets
8/31/99 2/29/00
Virginia Short-Term Tax-Free Bond Fund
- -------------------------------------------------------------------------------
Prerefunded Bonds 28% 23%
- -------------------------------------------------------------------------------
General Obligation - Local 13 18
- -------------------------------------------------------------------------------
Lease Revenue 5 11
- -------------------------------------------------------------------------------
Hospital Revenue 14 11
- -------------------------------------------------------------------------------
Solid Waste Revenue 7 7
- -------------------------------------------------------------------------------
Electric Revenue 1 5
- -------------------------------------------------------------------------------
Air and Sea Transportation Revenue 6 5
- -------------------------------------------------------------------------------
Water and Sewer Revenue 6 4
- -------------------------------------------------------------------------------
Ground Transportation Revenue 4 3
- -------------------------------------------------------------------------------
Industrial and Pollution Control Revenue 4 3
- -------------------------------------------------------------------------------
Dedicated Tax Revenue - 3
- -------------------------------------------------------------------------------
General Obligation - State 2 2
- -------------------------------------------------------------------------------
Life Care/Nursing Home Revenue 2 2
- -------------------------------------------------------------------------------
Educational Revenue 7 2
- -------------------------------------------------------------------------------
All Other 1 2
- -------------------------------------------------------------------------------
Other Assets Less Liabilities - -1
- -------------------------------------------------------------------------------
Total 100% 100%
Virginia Tax-Free Bond Fund
- ------------------------------------------------------------------------------
Prerefunded Bonds 12% 14%
- ------------------------------------------------------------------------------
Hospital Revenue 16 14
- ------------------------------------------------------------------------------
<PAGE>
General Obligation - Local 14 12
- ------------------------------------------------------------------------------
Educational Revenue 8 8
- ------------------------------------------------------------------------------
Housing Finance Revenue 8 7
- ------------------------------------------------------------------------------
Dedicated Tax Revenue 4 6
- ------------------------------------------------------------------------------
Industrial and Pollution Control Revenue 6 6
- ------------------------------------------------------------------------------
Solid Waste Revenue 6 5
- ------------------------------------------------------------------------------
Lease Revenue 5 5
- ------------------------------------------------------------------------------
Ground Transportation Revenue 4 4
- ------------------------------------------------------------------------------
Water and Sewer Revenue 3 4
- ------------------------------------------------------------------------------
Other Revenue 3 4
- ------------------------------------------------------------------------------
Air and Sea Transportation Revenue 3 3
- ------------------------------------------------------------------------------
Life Care/Nursing Home Revenue 2 3
- ------------------------------------------------------------------------------
Escrowed to Maturity 2 2
- ------------------------------------------------------------------------------
All Other 4 1
- ------------------------------------------------------------------------------
Other Assets Less Liabilities - 2
- ------------------------------------------------------------------------------
Total 100% 100%
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
- -------------------------------------
PERFORMANCE COMPARISON
- ----------------------
These charts show the value of a hypothetical $10,000 investment in each
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 3-Year State Lipper Short Municipal Virginia Short-Term
GO Bond Index Debt Funds Average Tax-Free Bond Fund
------------- ------------------ ------------------
11/30/94 10000 10000 10000
2/95 10195 10210 10228
2/96 11017 10830 10886
2/97 11505 11236 11248
2/98 12115 11747 11752
2/99 12752 12264 12282
2/00 12929 12453 12463
******************************************************************
Lehman Municipal Lipper Virginia Municipal Virginia
Bond Index Debt Funds Average Tax-Free Bond Fund
------------- ------------------ ------------------
4/31/91 10000 10000 10000
2/92 10850 10768 10812
2/93 12343 12213 12337
2/94 13027 12900 13077
2/95 13272 13033 13274
2/96 14738 14312 14692
2/97 15550 14980 15427
2/98 16972 16293 16820
2/99 18015 17172 17833
2/00 17640 16557 17269
******************************************************************
AVERAGE ANNUAL COMPOUND TOTAL RETURN
- ------------------------------------
This table shows how each 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
- --------------------- ------ ------- ------- --------- -------
Virginia Short-Term
Tax-Free Bond Fund 1.48% 3.48% 4.03% 4.29% 11/30/94
Virginia Tax-Free Bond Fund -3.16 3.83 5.40 6.38 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 Virginia Short-Term 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 $ 5.18 $ 5.15 $ 5.13 $ 5.16 $ 5.06
- -------------------------------------------------------------------------------
Investment activities
Net investment income(loss) 0.18* 0.19* 0.19* 0.20* 0.21*
Net realized and
unrealized gain (loss) (0.11) 0.04 0.03 (0.03) 0.11
- -------------------------------------------------------------------------------
Total from
investment activities 0.07 0.23 0.22 0.17 0.32
- -------------------------------------------------------------------------------
Distributions
Net investment income (0.18) (0.19) (0.19) (0.20) (0.21)
Net realized gain (0.01) (0.01) (0.01) - (0.01)
- -------------------------------------------------------------------------------
Total distributions (0.19) (0.20) (0.20) (0.20) (0.22)
- -------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 5.06 $ 5.18 $ 5.15 $ 5.13 $ 5.16
Ratios/Supplemental=Data=======================================================
Total returnu 1.48%* 4.51%* 4.48%* 3.33%* 6.43%*
- -------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 0.60%* 0.62%* 0.65%* 0.65%* 0.65%*
- -------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 3.61%* 3.65%* 3.81%* 3.84%* 4.07%*
- -------------------------------------------------------------------------------
Portfolio turnover rate 39.3% 22.5% 75.0% 32.5% 36.4%
- -------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 27,620 $ 26,772 $ 20,361 $ 16,314 $ 12,480
- -------------------------------------------------------------------------------
** 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 6/30/98, and a 0.60% voluntary expense limitation in effect
from 7/1/98 through 2/29/00.
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Virginia 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 $ 11.45 $ 11.45 $ 11.05 $ 11.09 $ 10.56
- --------------------------------------------------------------------------------
Investment activities
Net investment income(loss) 0.54 0.55 0.57 0.57* 0.57*
Net realized and
unrealized gain (loss) (0.90) 0.12 0.40 (0.04) 0.53
- --------------------------------------------------------------------------------
Total from
investment activities (0.36) 0.67 0.97 0.53 1.10
- --------------------------------------------------------------------------------
Distributions
Net investment income (0.54) (0.55) (0.57) (0.57) (0.57)
Net realized gain - (0.12) - - -
- --------------------------------------------------------------------------------
Total distributions (0.54) (0.67) (0.57) (0.57) (0.57)
- --------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 10.55 $ 11.45 $ 11.45 $ 11.05 $ 11.09
Ratios/Supplemental=Data========================================================
Total returnu (3.16%) 6.02% 9.03% 5.00%* 10.69%*
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 0.55% 0.57% 0.58% 0.65%* 0.65%*
- --------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 4.96% 4.83% 5.12% 5.23%* 5.27%*
- --------------------------------------------------------------------------------
Portfolio turnover rate 48.1% 47.3% 64.3% 66.2% 93.7%
- --------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $261,992 $278,812 $238,282 $195,783 $178,750
- --------------------------------------------------------------------------------
** 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 2/28/97.
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Virginia Short-Term Tax-Free Bond Fund
- ---------------------------------------------------- February 29, 2000
STATEMENT OF NET ASSETS
- -----------------------
Par Value
In thousands
VIRGINIA 90.0%
Abington IDA, Johnston Memorial Hosp., 5.00%, 7/1/02 $ 765 $ 764
- --------------------------------------------------------------------------------
Alexandria IDA, Ogden Martin, VRDN (Currently 3.90%) * 500 500
- --------------------------------------------------------------------------------
Arlington County IDA, Alexandria/Arlington Waste to Energy
5.25%, 1/1/03 (FSA Insured) 1,000 1,011
- --------------------------------------------------------------------------------
Augusta County IDA, Augusta Hosp.
6.10%, 9/1/00 (AMBAC Insured) 60 61
- --------------------------------------------------------------------------------
Bedford County IDA, Georgia-Pacific, 4.60%, 8/1/04 300 294
- --------------------------------------------------------------------------------
Chesapeake Bay Bridge and Tunnel
5.10%, 7/1/01 (FGIC Insured) 945 953
- --------------------------------------------------------------------------------
6.375%, 7/1/22 (MBIA Insured)
(Prerefunded 7/1/01+) 690 720
- --------------------------------------------------------------------------------
Fairfax County, GO, Public Improvement, 5.50%, 6/1/01 675 684
- --------------------------------------------------------------------------------
Fairfax County Sewer, 5.625%, 7/15/01 1,000 1,015
- --------------------------------------------------------------------------------
Halifax County IDA, Old Dominion Electric, 5.25%, 12/1/02 * 1,130 1,124
- --------------------------------------------------------------------------------
Henrico County Economic Dev. Auth., Regional Jail
5.00%, 11/1/02 585 589
- --------------------------------------------------------------------------------
Henrico County IDA, Bon Secours Health
7.50%, 9/1/07 (Prerefunded 8/1/00+) 650 672
- --------------------------------------------------------------------------------
Hopewell IDA
Westport Convalescent Center
5.45%, 10/1/02 220 216
- --------------------------------------------------------------------------------
5.60%, 10/1/03 235 230
- --------------------------------------------------------------------------------
Leesburg Utility System
6.30%, 7/1/17 (MBIA Insured)
(Prerefunded 7/1/02+) 500 526
- --------------------------------------------------------------------------------
Peninsula Port Auth.
Riverside Health Systems
5.00%, 7/1/01 345 346
- --------------------------------------------------------------------------------
5.00%, 7/1/02 360 359
- --------------------------------------------------------------------------------
5.90%, 7/1/00 120 121
- --------------------------------------------------------------------------------
<PAGE>
Petersburg Hosp. Auth.
Southside Regional Medical Center, 5.60%, 7/1/00 700 703
- --------------------------------------------------------------------------------
Portsmouth, GO
5.60%, 8/1/01 500 507
- --------------------------------------------------------------------------------
Public Improvement
5.90%, 11/1/01 125 128
- --------------------------------------------------------------------------------
6.10%, 11/1/03 750 780
- --------------------------------------------------------------------------------
Richmond, 6.25%, 1/15/21 (Prerefunded 1/15/01+) $ 25 $ 26
- --------------------------------------------------------------------------------
Richmond Metropolitan Auth., Expressway
5.75%, 7/15/22 (FGIC Insured)
(Prerefunded 7/15/02+) 320 327
- --------------------------------------------------------------------------------
Roanoke IDA
Carilion Health Systems
VRDN (Currently 3.85%) 700 700
- --------------------------------------------------------------------------------
6.50%, 7/1/25 (MBIA Insured)
(Prerefunded 7/1/00+) 1,000 1,008
- --------------------------------------------------------------------------------
Southeastern Public Service Auth.
5.00%, 7/1/03 (AMBAC Insured) 545 532
- --------------------------------------------------------------------------------
Upper Occoquan Sewage Auth.
6.50%, 7/1/17 (MBIA Insured)
(Prerefunded 7/1/01+) 1,430 1,495
- --------------------------------------------------------------------------------
Virginia, GO, 5.00%, 6/1/02 500 504
- --------------------------------------------------------------------------------
Virginia Beach, GO, 6.70%, 3/1/05 (Prerefunded 3/1/01+) 600 626
- --------------------------------------------------------------------------------
Virginia College Building Auth.
Equipment Leasing Program
4.75%, 2/1/02 1,325 1,328
- --------------------------------------------------------------------------------
5.00%, 2/1/02 200 201
- --------------------------------------------------------------------------------
Hampton Univ., 5.20%, 4/1/02 435 439
- --------------------------------------------------------------------------------
Virginia Ed. Loan Auth., 5.40%, 9/1/01
(Escrowed to Maturity) * 400 404
- --------------------------------------------------------------------------------
Virginia HDA, 4.90%, 1/1/03 200 199
- --------------------------------------------------------------------------------
Virginia Public Building Auth.
5.625%, 8/1/02 675 689
- --------------------------------------------------------------------------------
5.70%, 8/1/03 250 257
- --------------------------------------------------------------------------------
6.50%, 8/1/11 (Prerefunded 8/1/01+) 1,000 1,046
- --------------------------------------------------------------------------------
<PAGE>
Virginia Public School Auth., GO
4.90%, 1/1/03 550 552
- --------------------------------------------------------------------------------
5.00%, 1/1/04 1,000 1,004
- --------------------------------------------------------------------------------
5.00%, 8/1/04 1,000 1,005
- --------------------------------------------------------------------------------
6.00%, 8/1/01 200 204
- --------------------------------------------------------------------------------
Total Virginia (Cost $25,041) 24,849
- --------------------------------------------------------------------------------
district=of=columbia==4.9%======================================================
Metropolitan Washington D.C. Airports Auth.
5.75%, 10/1/03 (FGIC Insured) * 300 307
- --------------------------------------------------------------------------------
6.40%, 10/1/04 (MBIA Insured) * 1,000 1,051
- --------------------------------------------------------------------------------
Total District of Columbia (Cost $1,370) 1,358
- --------------------------------------------------------------------------------
PUERTO=RICO==4.5%===============================================================
Puerto Rico Ind. Medical and Environmental PCR
4.25%, 9/1/03 $ 500 $ 485
- --------------------------------------------------------------------------------
Puerto Rico Municipal Fin. Agency, 5.50%, 8/1/02 750 762
- --------------------------------------------------------------------------------
Total Puerto Rico (Cost $1,264) 1,247
- --------------------------------------------------------------------------------
U.=S.=VIRGIN=ISLANDS==1.1%======================================================
Virgin Island Water and Power Auth., 5.00%, 7/1/02 300 298
- --------------------------------------------------------------------------------
Total U. S. Virgin Islands (Cost $303) 298
<PAGE>
=Total=Investments=in=Securities================================================
100.5% of Net Assets (Cost $27,978) $ 27,752
Other Assets Less Liabilities (132)
NET ASSETS $ 27,620
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 2
Accumulated net realized gain/loss - net of distributions (33)
Net unrealized gain (loss) (226)
Paid-in-capital applicable to 5,461,371 no par value
shares of beneficial interest outstanding; unlimited
number of shares authorized 27,877
NET ASSETS $ 27,620
NET ASSET VALUE PER SHARE $ 5.06
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GO General Obligation
HDA Housing Development Authority
IDA Industrial Development 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.
================================================================================
T. Rowe Price Virginia Tax-Free Bond Fund
- ----------------------------------------- February 29, 2000
STATEMENT OF NET ASSETS
- -----------------------
Par Value
In thousands
VIRGINIA 92.0%
Alexandria IDA
Episcopal High School, 5.875%, 1/1/23 $ 1,250 $ 1,229
- -----------------------------------------------------------------------------
Ogden Martin, VRDN (Currently 3.90%) * 2,450 2,450
- -----------------------------------------------------------------------------
Arlington County, GO, 6.00%, 6/1/11 1,000 1,059
- -----------------------------------------------------------------------------
<PAGE>
Arlington County IDA
Alexandria/Arlington Waste
5.375%, 1/1/13 (FSA Insured) * 3,000 2,885
- -----------------------------------------------------------------------------
Arlington Hosp.
7.00%, 9/1/11 (Prerefunded 9/1/01+) 1,205 1,271
- -----------------------------------------------------------------------------
The Nature Conservancy
5.40%, 7/1/17 1,815 1,727
- -----------------------------------------------------------------------------
5.45%, 7/1/27 2,905 2,672
- -----------------------------------------------------------------------------
Augusta County Service Auth., Water and Sewer
5.00%, 11/1/24 (MBIA Insured) 1,000 857
- -----------------------------------------------------------------------------
Bedford County IDA, Nekoosa Packaging
5.60%, 12/1/25 * 4,000 3,394
- -----------------------------------------------------------------------------
6.30%, 12/1/25 * 2,000 1,886
- -----------------------------------------------------------------------------
Charles County Ind. Dev.,
Waste Management, 4.875%, 2/1/09 * 2,250 1,889
- -----------------------------------------------------------------------------
Chesapeake Toll Road, Expressway, 5.625%, 7/15/19 1,250 1,168
- -----------------------------------------------------------------------------
Clarke County IDA Hosp. Fac.,
Winchester Medical Center
VRDN (Currently 3.90%) (FSA Insured) 4,000 4,000
- -----------------------------------------------------------------------------
Covington and Alleghany County IDA, PCR, Westvaco
6.65%, 9/1/18 1,500 1,559
- -----------------------------------------------------------------------------
Danville IDA
Danville Regional Medical Center
5.20%, 10/1/18 (AMBAC Insured) 3,735 3,425
- -----------------------------------------------------------------------------
6.50%, 10/1/24 (FGIC Insured)
((Prerefunded 10/1/04+) 3,000 3,210
- -----------------------------------------------------------------------------
Fairafax County Economic Dev. Auth.
Greenspring Retirement Community
7.50%, 10/1/29 2,500 2,383
- -----------------------------------------------------------------------------
National Wildlife Federation
5.25%, 9/1/17 (MBIA Insured) 2,000 1,874
- -----------------------------------------------------------------------------
Vienna II Metrorail
6.00%, 9/1/19 1,975 2,003
- -----------------------------------------------------------------------------
6.00%, 9/1/20 2,090 2,112
- -----------------------------------------------------------------------------
Fairfax County Housing Auth.
FCRHA Office Building
7.50%, 6/15/18 (Prerefunded 12/15/02+) $ 2,125 $ 2,288
- -----------------------------------------------------------------------------
<PAGE>
Fairfax County Water Auth.
5.00%, 4/1/21 2,500 2,198
- -----------------------------------------------------------------------------
5.80%, 1/1/16 (Escrowed to Maturity) 5,935 5,999
- -----------------------------------------------------------------------------
Frederick County IDA, Gov't. Complex Fac.
6.50%, 12/1/14 (MBIA Insured) 1,500 1,583
- -----------------------------------------------------------------------------
Fredericksburg IDA, Hosp. Fac. (MWH Medicorp
Obligated Group)
Residual Interest Bond / Inverse Floater
(Currently 9.114%), 8/15/23 (FGIC Insured)
(Prerefunded 8/15/01+) 3,000 3,296
- -----------------------------------------------------------------------------
Giles County IDA, Hoechst Celanese, 6.625%, 12/1/22 * 1,485 1,452
- -----------------------------------------------------------------------------
Goochland County IDA, Nekoosa Packaging
5.65%, 12/1/25 * 750 641
- -----------------------------------------------------------------------------
Greater Richmond Convention Center Auth.
Convention Center Expansion, 6.125%, 6/15/29 4,000 3,970
- -----------------------------------------------------------------------------
Halifax County IDA, Halifax Regional Long-Term Care
5.625%, 7/1/12 1,585 1,382
- -----------------------------------------------------------------------------
Hampton, Public Improvement, GO, 5.125%, 1/15/15 1,500 1,410
- -----------------------------------------------------------------------------
Hampton IDA, Sentara Health, 5.375%, 11/1/15 5,300 4,940
- -----------------------------------------------------------------------------
Hampton Roads Medical College
6.875%, 11/15/11 500 524
- -----------------------------------------------------------------------------
6.875%, 11/15/11 (Prerefunded 11/15/01+) 1,000 1,048
- -----------------------------------------------------------------------------
6.875%, 11/15/16 (Prerefunded 11/15/01+) 500 528
- -----------------------------------------------------------------------------
Hanover County IDA
Memorial Regional Medical Center
6.50%, 8/15/10 (MBIA Insured) 1,300 1,406
- -----------------------------------------------------------------------------
Henrico County Economic Dev. Auth., Regional Jail
6.125%, 11/1/19 2,000 2,039
- -----------------------------------------------------------------------------
Henrico County IDA
Bon Secours Health
6.00%, 8/15/16 (MBIA Insured) 1,045 1,076
- -----------------------------------------------------------------------------
6.25%, 8/15/20 (MBIA Insured) 1,750 1,826
- -----------------------------------------------------------------------------
7.50%, 9/1/07 (Prerefunded 8/1/00+) 325 336
- -----------------------------------------------------------------------------
St. John's Hosp.
7.50%, 9/1/15 (Prerefunded 7/1/00+) 1,650 1,701
- -----------------------------------------------------------------------------
<PAGE>
Henrico County IDA
Regional Jail
6.00%, 8/1/15 (Prerefunded 8/1/05+) $ 2,415 $ 2,523
- -----------------------------------------------------------------------------
7.00%, 8/1/13 (Prerefunded 8/1/05+) 1,485 1,643
- -----------------------------------------------------------------------------
Henry County IDA, Memorial Hosp., 6.00%, 1/1/27 4,250 4,085
- -----------------------------------------------------------------------------
Hopewell IDA
Colonial Heights Convalescent Center
5.75%, 10/1/04 150 145
- -----------------------------------------------------------------------------
Forest Hill Convalescent Center
5.60%, 10/1/03 (Prerefunded 10/1/02+) 100 105
- -----------------------------------------------------------------------------
5.90%, 10/1/05 (Prerefunded 10/1/02+) 240 254
- -----------------------------------------------------------------------------
Westport Convalescent Center, 5.75%, 10/1/04 290 281
- -----------------------------------------------------------------------------
Isle of Wight IDA, Union Camp, 6.55%, 4/1/24 * 4,250 4,229
- -----------------------------------------------------------------------------
Loudoun County, GO
5.25%, 12/1/13 1,360 1,329
- -----------------------------------------------------------------------------
Public Improvement
5.75%, 12/1/18 1,685 1,679
- -----------------------------------------------------------------------------
5.75%, 12/1/19 1,185 1,178
- -----------------------------------------------------------------------------
Lynchburg IDA
Centra Health
5.25%, 1/1/11 1,890 1,777
- -----------------------------------------------------------------------------
5.375%, 1/1/13 1,000 929
- -----------------------------------------------------------------------------
Manassas, GO, 5.25%, 1/1/11 1,550 1,538
- -----------------------------------------------------------------------------
Martinsville IDA
Memorial Hosp. of Martinsville and Henry County
7.00%, 1/1/11 (Prerefunded 1/1/01+) 950 971
- -----------------------------------------------------------------------------
Medical College of Virginia Hosp. Auth.
5.25%, 7/1/14 (MBIA Insured) 3,185 3,052
- -----------------------------------------------------------------------------
5.25%, 7/1/15 (MBIA Insured) 2,600 2,463
- -----------------------------------------------------------------------------
Montgomery County IDA, 5.125%, 1/15/19 (MBIA Insured) 750 676
- -----------------------------------------------------------------------------
Newport News, GO
5.50%, 7/1/12 (MBIA Insured) 2,500 2,512
- -----------------------------------------------------------------------------
5.625%, 7/1/14 (MBIA Insured) 2,580 2,586
- -----------------------------------------------------------------------------
<PAGE>
Norfolk, GO
5.00%, 7/1/12 (FGIC Insured) 1,995 1,908
- -----------------------------------------------------------------------------
5.25%, 6/1/14 2,750 2,643
- -----------------------------------------------------------------------------
Norfolk IDA
Children's Hosp. of The King's Daughters
7.00%, 6/1/11 (AMBAC Insured)
(Prerefunded 6/1/01+) $ 1,150 $ 1,208
- -----------------------------------------------------------------------------
Sentara Hosp.
7.00%, 11/1/20 (Prerefunded 11/1/00+) 1,045 1,085
- -----------------------------------------------------------------------------
7.10%, 11/1/10 (Prerefunded 11/1/00+) 850 883
- -----------------------------------------------------------------------------
Norfolk Redev. and Housing Auth.
Merrimack Landing, 5.50%, 12/1/13 1,000 969
- -----------------------------------------------------------------------------
Peninsula Port Auth.
Dominion Terminal, 7.375%, 6/1/20 2,000 2,055
- -----------------------------------------------------------------------------
Riverside Health
6.625%, 7/1/18 (Prerefunded 7/1/02+) 3,020 3,196
- -----------------------------------------------------------------------------
Pocahontas Parkway Assoc., Toll Road
Zero Coupon, 8/15/18 3,000 741
- -----------------------------------------------------------------------------
Zero Coupon, 8/15/24 (MBIA Insured) 5,000 936
- -----------------------------------------------------------------------------
Portsmouth, GO, 5.00%, 8/1/17 (FGIC Insured) 2,000 1,806
- -----------------------------------------------------------------------------
Prince William County Park Auth., 5.875%, 10/15/19 4,135 4,011
- -----------------------------------------------------------------------------
Prince William County Service Auth.,
Water and Sewer Systems
4.75%, 7/1/29 (FGIC Insured) 2,525 2,030
- -----------------------------------------------------------------------------
Richmond Metropolitan Auth., Expressway
5.25%, 7/15/17 (FGIC Insured) 2,700 2,528
- -----------------------------------------------------------------------------
5.25%, 7/15/22 (FGIC Insured) 5,550 5,053
- -----------------------------------------------------------------------------
Riverside, Regional Jail,5.875%, 7/1/14(MBIA Insured) 4,000 4,058
- -----------------------------------------------------------------------------
Roanoke, GO, Public Improvement, 6.00%, 10/1/19 4,810 4,886
- -----------------------------------------------------------------------------
Roanoke County IDA, Hollins College, 5.20%, 3/15/17 1,150 1,022
- -----------------------------------------------------------------------------
Roanoke IDA
Carilion Health Systems, VRDN (Currently 3.85%) 1,150 1,150
- -----------------------------------------------------------------------------
Roanoke Memorial Hosp., Carilion Health System
6.125%, 7/1/17 (MBIA Insured) 3,905 4,060
- -----------------------------------------------------------------------------
<PAGE>
Southeastern Public Service Auth.
5.00%, 7/1/02 1,475 1,454
- -----------------------------------------------------------------------------
5.00%, 7/1/03 1,000 977
- -----------------------------------------------------------------------------
5.00%, 7/1/15 (AMBAC Insured) 3,550 3,257
- -----------------------------------------------------------------------------
Univ. of Virginia
5.20%, 6/1/15 2,050 1,940
- -----------------------------------------------------------------------------
5.25%, 6/1/13 3,880 3,782
- -----------------------------------------------------------------------------
Upper Occoquan Sewage Auth., 4.75%, 7/1/29 3,000 2,398
- -----------------------------------------------------------------------------
Virginia Beach Dev. Auth.
Beverly Enterprises, 10.00%, 4/1/10 $ 1,910 $ 1,971
- -----------------------------------------------------------------------------
Sentara Bayside Hosp., 6.60%, 11/1/09
(Prerefunded 11/1/01+) 3,650 3,837
- -----------------------------------------------------------------------------
Virginia Beach General Hosp., 6.00%, 2/15/10
(AMBAC Insured) 1,000 1,041
- -----------------------------------------------------------------------------
Westminster Canterbury, 7.25%, 11/1/32 1,500 1,446
- -----------------------------------------------------------------------------
Virginia College Building Auth.
Randolph Macon College, 6.625%, 5/1/13
(Prerefunded 5/1/02+) 1,000 1,057
- -----------------------------------------------------------------------------
Washington and Lee Univ.
5.25%, 1/1/26 (MBIA Insured) 2,320 2,101
- -----------------------------------------------------------------------------
5.25%, 1/1/31 (MBIA Insured) 2,000 1,780
- -----------------------------------------------------------------------------
Virginia Commonwealth Univ., 5.75%, 5/1/21 1,550 1,507
- -----------------------------------------------------------------------------
Virginia HDA
5.60%, 11/1/18 5,160 4,852
- -----------------------------------------------------------------------------
5.85%, 7/1/12 1,000 1,011
- -----------------------------------------------------------------------------
6.35%, 11/1/01 1,000 1,015
- -----------------------------------------------------------------------------
6.375%, 1/1/26 * 620 624
- -----------------------------------------------------------------------------
6.45%, 7/1/28 (MBIA Insured) * 2,000 2,006
- -----------------------------------------------------------------------------
6.50%, 5/1/13 * 2,000 2,064
- -----------------------------------------------------------------------------
6.70%, 1/1/22 * 795 797
- -----------------------------------------------------------------------------
7.05%, 5/1/18 840 880
- -----------------------------------------------------------------------------
7.10%, 5/1/13 1,500 1,549
- -----------------------------------------------------------------------------
Rental Housing
5.35%, 2/1/11 * 1,085 1,041
- -----------------------------------------------------------------------------
5.45%, 2/1/12 * 1,150 1,106
- -----------------------------------------------------------------------------
5.50%, 2/1/13 * 1,175 1,133
- -----------------------------------------------------------------------------
<PAGE>
Virginia Polytechnic Institute and State Univ.
Univ. Services
5.40%, 6/1/11 1,250 1,250
- -----------------------------------------------------------------------------
5.50%, 6/1/16 3,000 2,918
- -----------------------------------------------------------------------------
5.50%, 6/1/20 2,100 1,980
- -----------------------------------------------------------------------------
Virginia Public Building Auth.
6.25%, 8/1/15 (Prerefunded 8/1/04+) 1,550 1,641
- -----------------------------------------------------------------------------
Virginia Public School Auth., GO
5.00%, 8/1/18 2,035 1,816
- -----------------------------------------------------------------------------
5.375%, 8/1/17 2,245 2,144
- -----------------------------------------------------------------------------
Virginia Public School Auth., GO
6.50%, 8/1/12 (Prerefunded 8/1/01+) $ 1,700 $ 1,779
- -----------------------------------------------------------------------------
6.50%, 8/1/16 2,890 3,048
- -----------------------------------------------------------------------------
Virginia Resources Auth., Revolving Water Fund,
5.625%, 10/1/22 1,900 1,826
- -----------------------------------------------------------------------------
Virginia Transportation Board
Northern Virginia Transportation Dist.
5.125%, 5/15/19 2,000 1,806
- -----------------------------------------------------------------------------
5.50%, 5/15/22 805 758
- -----------------------------------------------------------------------------
Oak Grove Connector, 5.25%, 5/15/22 3,000 2,712
- -----------------------------------------------------------------------------
Route 28 Project, 6.50%, 4/1/18 1,000 1,026
- -----------------------------------------------------------------------------
Route 58 Project, 5.125%, 5/15/19 2,855 2,579
- -----------------------------------------------------------------------------
Washington County IDA
Johnston Memorial Hosp.
6.25%, 7/1/06 (Prerefunded 7/1/05+) 1,660 1,742
- -----------------------------------------------------------------------------
6.75%, 7/1/12 (Prerefunded 7/1/02+) 1,500 1,588
- -----------------------------------------------------------------------------
York County, Sewer, 5.875%, 6/1/24 1,000 982
- -----------------------------------------------------------------------------
Total Virginia (Cost $247,251) 241,100
- -----------------------------------------------------------------------------
<PAGE>
DISTRICT=OF=COLUMBIA==3.4%===================================================
Metropolitan Washington D.C. Airport Auth.
5.50%, 10/1/23 * 4,000 3,637
- -----------------------------------------------------------------------------
5.75%, 10/1/11 (MBIA Insured) * 1,500 1,529
- -----------------------------------------------------------------------------
6.625%, 10/1/19 (MBIA Insured) * 3,550 3,650
- -----------------------------------------------------------------------------
Total District of Columbia (Cost $8,911) 8,816
- -----------------------------------------------------------------------------
PUERTO=RICO==2.7%============================================================
Puerto Rico Highway and Transportation Auth.
5.50%, 7/1/15 (FSA Insured) 2,000 2,000
- -----------------------------------------------------------------------------
6.25%, 7/1/14 1,500 1,595
- -----------------------------------------------------------------------------
Puerto Rico Municipal Fin. Agency, GO
5.50%, 7/1/21 (FSA Insured) 3,565 3,405
- -----------------------------------------------------------------------------
Total Puerto Rico (Cost $7,087) 7,000
- -----------------------------------------------------------------------------
98.1% of Net Assets (Cost $263,249) $ 256,916
Other Assets Less Liabilities 5,076
NET ASSETS $ 261,992
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 12
Accumulated net realized gain/loss -
net of distributions (3,638)
Net unrealized gain (loss) (6,333)
Paid-in-capital applicable to 24,835,930 no par
value shares of beneficial interest outstanding;
unlimited number of shares authorized 271,951
NET ASSETS $ 261,992
NET ASSET VALUE PER SHARE $ 10.55
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GO General Obligation
HDA Housing Development Authority
IDA Industrial Development 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 Virginia Tax-Free Funds
- -------------------------------------
STATEMENT OF OPERATIONS
- -----------------------
In thousands Short-Term
Bond Fund Bond Fund
Year Year
Ended Ended
2/29/00 2/29/00
------- -------
Investment Income (Loss)
Interest income $ 1,149 $ 15,363
- -------------------------------------------------------------------------------
Expenses
Investment management 19 1,171
Shareholder servicing 29 204
Custody and accounting 89 114
Prospectus and shareholder reports 4 28
Legal and audit 13 13
Trustees 5 6
Registration - 5
Miscellaneous 5 4
- -------------------------------------------------------------------------------
Total expenses 164 1,545
Expenses paid indirectly (1) (3)
- -------------------------------------------------------------------------------
Net expenses 163 1,542
- -------------------------------------------------------------------------------
Net investment income (loss) 986 13,821
- -------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 14 (3,575)
Futures - (13)
- -------------------------------------------------------------------------------
Net realized gain (loss) 14 (3,588)
Change in net unrealized gain (loss) on securities (624) (19,551)
- -------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (610) (23,139)
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 376 $ (9,318)
===============================================================================
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
- -------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
In thousands Short-Term
Bond Fund Bond Fund
Year Year
Ended Ended
2/29/00 2/28/99 2/29/00 2/28/99
------- ------- ------- -------
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 986 $ 887 $ 13,821 $ 12,390
Net realized gain (loss) 14 28 (3,588) 1,657
Change in net unrealized
gain or loss (624) 210 (19,551) 901
- --------------------------------------------------------------------------------
Increase (decrease) in
net assets from operations 376 1,125 (9,318) 14,948
- --------------------------------------------------------------------------------
Distributions to shareholders
Net investment income (986) (887) (13,821) (12,390)
Net realized gain (55) (42) - (2,672)
- --------------------------------------------------------------------------------
Decrease in net assets
from distributions (1,041) (929) (13,821) (15,062)
- --------------------------------------------------------------------------------
Capital share transactions *
Shares sold 14,102 16,469 60,639 66,340
Distributions reinvested 929 799 10,389 11,719
Shares redeemed (13,518) (11,053) (64,709) (37,415)
- --------------------------------------------------------------------------------
Increase (decrease) in
net assets from capital
share transactions 1,513 6,215 6,319 40,644
- --------------------------------------------------------------------------------
Net Assets
Increase (decrease)
during period 848 6,411 (16,820) 40,530
Beginning of period 26,772 20,361 278,812 238,282
- --------------------------------------------------------------------------------
End of period $ 27,620 $ 26,772 $ 261,992 $ 278,812
* Share information
Shares sold 2,759 3,196 5,498 5,793
Distributions reinvested 182 155 956 1,022
Shares redeemed (2,646) (2,143) (5,976) (3,267)
- --------------------------------------------------------------------------------
Increase (decrease)
in shares outstanding 295 1,208 478 3,548
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
- ------------------------------------- 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 Virginia Short-Term Tax-Free Bond Fund
(the Short-Term Bond Fund) and the Virginia Tax-Free Bond Fund (the Bond Fund),
nondiversified, open-end management investment companies, are two of the
portfolios established by the trust and commenced operations on November 30,
1994, and April 30, 1991, respectively.
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 that
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 each 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 each fund's
custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
- --------------------------------
- --------------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
--------- ---------
Purchases $ 11,427,000 $ 128,542,000
Sales 10,354,000 127,088,000
- --------------------------------------------------------------------------------
Purchases and sales of portfolio securities, other than short-term
securities, for the year ended February 29, 2000, were as follows:
<PAGE>
NOTE 3 - FEDERAL INCOME TAXES
- -----------------------------
No provision for federal income taxes is required since each fund intends
to continue to qualify as a regulated investment company and distribute all of
its income. As of February 29, 2000, the Bond Fund has capital loss
carryforwards for federal income tax purposes of $2,059,000, all of which
expires in 2008. The Bond Fund intends to retain gains realized in future
periods that may be offset by available capital loss carryforwards.
In order for the Short-Term Bond Fund's capital accounts and distributions
to shareholders to reflect the tax character of certain transactions, the
following reclassifications were made during the year ended February 29, 2000.
The results of operations and net assets were not affected by the
increases/(decreases) to these accounts.
- --------------------------------------------------------------------------------
Undistributed net investment income $ 1,000
Undistributed net realized gain 2,000
Paid-in-capital (3,000)
- --------------------------------------------------------------------------------
At February 29, 2000, the costs of investments for the Short-Term Bond and
Bond Funds for federal income tax purposes was substantially the same as for
financial reporting and totaled $27,978,000 and $263,249,000, respectively. Net
unrealized gain (loss) on investments were as follows:
- --------------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
--------- ---------
Appreciated investments $ 6,000 $ 3,139,000
Depreciated investments (232,000) (9,472,000)
Net unrealized gain (loss) $ (226,000) $ (6,333,000)
- --------------------------------------------------------------------------------
NOTE 4 - RELATED PARTY TRANSACTIONS
- -----------------------------------
The investment management agreement between each fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management fee,
of which $86,000 was payable at February 29, 2000 by the Bond Fund. The fee is
computed daily and paid monthly, and consists of an individual fund fee equal to
0.10% of average daily net assets and a group fee. The group fee is based on the
combined assets of certain mutual funds sponsored by the manager or Rowe
Price-Fleming International, Inc. (the group). The group fee rate ranges from
0.48% for the first $1 billion of assets to 0.295% for assets in excess of $120
billion. At February 29, 2000, and for the year then ended, the effective annual
group fee rate was 0.32%. Each 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 29, 2000, which would cause the
Short-Term Bond Fund's ratio of total expenses to average net assets to exceed
0.60%. Thereafter, through February 28, 2002, the Short-Term Bond 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
wit hout causing the fund's ratio of total expenses to average net assets to
exceed 0.60%. Pursuant to this agreement, $96,000 of management fees were not
accrued by the Short-Term Bond Fund for the year ended February 29, 2000, and
$97,000 remain unaccrued from a prior period.
<PAGE>
In addition, each fund has entered into agreements with the manager and a
wholly owned subsidiary of the manager, pursuant to which each fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of each fund. T. Rowe Price Services, Inc. is each fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the funds. The Short-Term Bond and Bond Funds
incurred expenses pur suant to these related party agreements totaling
approximately $90,000 and $235,000, respectively, for the year ended February
29, 2000, of which $8,000 and $25,000, respectively, were payable at period-end.
================================================================================
T. Rowe Price Virginia Tax-Free Funds
- -------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
To the Board of Trustees of T. Rowe Price State Tax-Free Income Trust
and Shareholders of Virginia Short-Term Tax-Free Bond Fund and
Virginia Tax-Free Bond Fund
In our opinion, the accompanying statements 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
Virginia Short-Term Tax-Free Bond Fund and Virginia Tax-Free Bond Fund (two of
the portfolios comprising T. Rowe Price State Tax-Free Income Trust, hereafter
referred to as "the Funds") at February 29, 2000, and the results of each of
their operations, the changes in each of their net assets and the financial
highlights for each of their 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 Funds' 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-erally 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
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
- -------------------------------------
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 Short-Term Bond Fund's distributions to shareholders included:
* $55,000 from long-term capital gains, subject to the 20% rate
gains category,
* $983,000 which qualified as exempt-interest dividends.
The Bond Fund's distributions to shareholders included:
* $13,773,000 which qualified as exempt-interest dividends.
================================================================================
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
<PAGE>
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 September 1999
survey for
representative-assisted stock
trades. Services vary by firm,
and commissions may vary
depending on size of order.
================================================================================
<PAGE>
T. Rowe Price Mutual Funds
- --------------------------
STOCK FUNDS
- -----------
DOMESTIC
- --------
Blue Chip Growth
Capital Appreciation
Capital Opportunity
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 Markets Stock
European Stock
Global Stock
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
<PAGE>
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
<PAGE>
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. 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. C14-050 2/29/00
