T. Rowe Price
--------------------------------------------------------------------------------
Semiannual Report
Virginia Tax-Free Funds
--------------------------------------------------------------------------------
August 31, 2000
--------------------------------------------------------------------------------
REPORT HIGHLIGHTS
-----------------
* Municipal bonds posted strong returns, aided by heavy demand and
falling interest rates.
* The Virginia Short-Term Tax-Free Bond Fund's results lagged its peer
group average for the past six months, but were in line with it over
the year.
* The Virginia Tax-Free Bond Fund's solid gains outpaced the average
Virginia fund for both the 6- and 12-month periods.
* The economic environment favors a stable to improving market barring
unforeseen inflation.
UPDATES AVAILABLE
-----------------
For updates on T. Rowe Price funds following the end of each calendar
quarter, please see our Web site at www.troweprice.com.
FELLOW SHAREHOLDERS
-------------------
Municipal bonds rebounded sharply over the past six months, due primarily
to strong demand but also aided by falling interest rates, the result of
heightened investor confidence stemming from the Federal Reserve's firm
commitment to maintaining domestic economic growth at a sustainable,
noninflationary level. These factors were particularly favorable to longer-term
funds such as the Virginia Tax-Free Bond Fund, which posted solid returns for
the six months ended August 31. The Virginia Short-Term Tax-Free Bond Fund also
generated positive results.
MARKET ENVIRONMENT
------------------
The Fed's determination to keep inflation in check appears to be paying
off. Six interest rate hikes since June 1999 -- including increases totaling
three-quarters of a percentage point in the past six months -- have the economy
on track to meet the central bank's expressed goal of a soft landing. While
rising rates hit bond markets hard in 1999 and early in 2000, the Fed's
anti-inflationary medicine proved a tonic for bonds beginning in the spring, and
since May investors have shown confidence that the Fed's monetary policy will
result in a favorable environment for bonds. The rate hikes also injected a note
of sobriety into equity markets, and the heightened volatility in stocks
increased the allure of the steadier bond markets, especially for more
conservative investors.
<PAGE>
The U.S. Treasury Department's unprecedented buyback program also boosted
bonds over the last six months. Bond prices rallied after the Treasury announced
in January its intention to reduce the government's debt load by repurchasing
Treasury bonds. This created a scarcity premium as investors focused on the
likelihood of a significant reduction, and perhaps the complete disappearance,
of Treasuries. As the first to be repurchased, long-term Treasury bonds received
the biggest advance, returning 15% year-to-date. The buyback program coupled
with the Fed's short-term rate hikes contributed to an inverted yield curve, in
which yields on short-term Treasuries are higher than yields on long-term
issues. Although the yield curve has been inverted since January, intermediate
and longer-term Treasury yields have fallen sharply since May, partly due to the
diminishing supply of Treasuries as well as investors' increasing conviction
that the Fed's monetary policy is working.
*******************************
Virginia's economy continues
to grow at an impressive rate.
*******************************
The municipal yield curve did not invert, but it remains flatter than
historical norms. Municipal bond yields, including those in Virginia, have
fallen along with Treasuries due to heavy demand by buyers enticed by high
taxable-equivalent yields and a diminished supply of available issues. New
issues are down 20% nationally through August versus the same period last year
as a result of higher borrowing costs and lower borrowing needs of state and
local governments.
Virginia's economy continues to grow at an impressive rate. New jobs grew
2.3% for the fiscal year ended June 30, 2000 -- the fourth consecutive year over
2% -- and the 2.9% June unemployment rate was the lowest for that month in 47
years. Virginia's employment base, once dependent on the federal government, has
diversified into services and high-technology. Although the manufacturing sector
has been sluggish in the past, the Richmond Federal Reserve Board reported
strong shipments during June and July, with a few pockets of weakness, as
apparel, lumber, and fabricated metals noted a slight falloff in shipments.
The Commonwealth maintained its healthy financial profile. Despite recent
tax-relief measures, revenues for the fiscal year ended June 30, 2000, rose
10.5% over last year, with much of that attributable to increased income and
sales tax collections. Transportation Trust Fund Revenues through June 30, 2000,
were up 6.3% from last year, well ahead of forecasts. The supply of municipals
remains tight due to Virginia's sound fiscal policies.
Transportation needs remain the Commonwealth's chief concern. The Virginia
Transportation Act of 2000 increased funding for transportation and established
a priority-setting mechanism for projects. In addition, $800 million in GARVEE
bonds (backed by federal transportation grants) has been secured and one-third
of insurance premium tax revenue will be dedicated to transportation beginning
in 2003.
<PAGE>
VIRGINIA SHORT-TERM TAX-FREE BOND FUND
--------------------------------------
PERFORMANCE COMPARISON
----------------------
Periods Ended 8/31/00 6 Months 12 Months
--------------------- -------- ---------
Virginia Short-Term
Tax-Free Bond Fund 2.52% 3.81%
Lipper Short Municipal
Debt Funds Average 2.70 3.84
Falling interest rates late in the period and the heavy demand for Virginia
municipals helped your fund post a solid return for the six months ended August
31. The fund's 2.52% total return slightly under-performed the Lipper Short
Municipal Debt Funds Average, which measures short-term municipal funds
nationwide. The fund returned 3.81% for the 12-month period, in line with the
Lipper average. Income rose to $0.10 per share. The fund's 12-month dividend
yield of 3.78% was roughly equivalent to a 5.91% taxable yield for an investor
in the 36% federal bracket.
In our previous report, we noted that our strategy had been to keep
duration short while the Fed raised interest rates in 1999, but that with
municipal interest rates at their highest level in years, we saw an opportunity
to lock in those rates by extending duration. (Duration measures price
sensitivity to changes in interest rates. A fund with a duration of two years
will have a 2% appreciation or decline in price in response to a
one-percentage-point fall or rise, respectively, in interest rates.) We did
lengthen duration early in the period, but our position was still conservative
given the possibility of further rate increases. When the economy slowed in June
and the dire forecasts built into the market began to subside, short-term
interest rates fell dramatically. As this happened, we allowed the portfolio to
move to a shorter average duration. New cash flow received in July was held in
daily investments as valuations on three-year debt reached what we considered
unsustainable levels. At the end of the period, duration stood at 1.6 years,
down from 1.8 years at the end of February and 2.0 years a year ago.
PROPOSED MERGER
---------------
As you know, the Board of Directors of the Virginia
Short-Term Tax-Free Bond Fund has recommended merging the
fund's assets into the T. Rowe Price Tax-Free
Short-Intermediate Fund. If approved, the merger will take
place on October 31 and you will receive a letter confirming
the merger. Please keep in mind that the merger would have no
tax liabilities for you. Your cost basis and holding periods
for your shares would be carried over and applied to your
shares in the merged fund.
<PAGE>
Our portfolio remained well balanced. Local general obligation bonds now
represent the largest sector exposure at 28% of assets, up from 18% at the end
of February. This change came at the expense of our stake in shorter-term
prerefunded bonds that we either sold or that matured.
VIRGINIA TAX-FREE BOND FUND
---------------------------
PERFORMANCE COMPARISON
----------------------
Periods Ended 8/31/00 6 Months 12 Months
--------------------- -------- ---------
Virginia Tax-Free Bond Fund 6.61% 6.26%
Lipper Virginia Municipal
Debt Funds Average 6.31 5.14
Falling interest rates helped Virginia's tax-exempt market regain strength
in the most recent half year along with the national municipal market. Your fund
took advantage, posting a 6.61% six-month return that exceeded its Lipper peer
group average. This return reflected a favorable combination of strong income --
dividends per share increased slightly to $0.28 per share -- and a sharply
rising net asset value. We were especially pleased to outperform our Lipper
benchmark after having also reported superior performance in the more
challenging previous six-month period. The 12-month dividend yield ended the
period at 5.14%; an approximate taxable equivalent yield for investors in the
36% tax bracket would be 8.03%.
Duration management was an important part of the fund's recent success.
(For an explanation of duration, see the Virginia Short-Term Tax-Free Bond Fund
discussion.) After taking a conservative approach last year, we took on more
interest rate exposure at the outset of 2000 by shifting the portfolio's average
duration and maturity targets modestly longer. After a period of sustained
weakness, we felt municipals offered considerable value as yields neared their
highest levels in several years. We invested the portfolio's cash -- both new
cash flow and the proceeds of maturing bonds -- in the longer end of the market.
We wanted to lock in higher rates while also improving potential for principal
appreciation if rates fell. As rates subsequently declined, this strategy
enabled the share price to rise a notch ahead of our competitors and allowed the
fund to maintain its dividend per share distributions.
As the market continued to improve over the summer, we shifted the fund's
target duration back in line with the market. At the period's end, duration
stood at 7.1 years, somewhat shorter than six months ago. If rates continue to
fall, we would expect with our current posture to keep up with but not exceed
peer group averages.
<PAGE>
*******************************
We maintain a diversified
portfolio of holdings
across the state . . .
*******************************
We have long sought a balance between higher-coupon, premium-priced bonds
that bolster income and lower-coupon, discount bonds with better potential for
price appreciation when rates fall. More recently, we have directed most new
cash flow into higher-coupon bonds, seeking to rebuild emphasis on income over
price appreciation. This approach should moderate share price swings,
particularly in a rising rate environment.
As in the national market, new issue supply of Virginia municipal bonds has
been light in 2000, limiting opportunities to dramatically reposition the
portfolio. The fund's average credit quality has improved a notch to AA, and
allocation among sectors did not change significantly. We maintain a diversified
portfolio of holdings across the state, with emphasis on tax-supported holdings
that should benefit from the strong local economy.
OUTLOOK
-------
We began the year believing that after an especially weak period in 1999,
municipal bonds were significantly undervalued compared to taxable alternatives.
The municipal market recovered much of that ground in 2000, and we expect the
current mix of low supply and strong demand to continue.
Economically the picture is bright. Despite higher oil prices, the outlook
for inflation is benign. Rather than increasing overall inflation, oil prices
are acting like a tax on consumer activity, helping to slow consumer demand,
reducing the need for inventory buildup, and easing pressures on production and
hiring. This economic backdrop favors stable to improving municipal bond prices,
barring a change in the outlook for inflation.
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
September 22, 2000
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
-------------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
KEY STATISTICS
--------------
2/29/00 8/31/00
VIRGINIA SHORT-TERM TAX-FREE BOND FUND
--------------------------------------
Price Per Share $ 5.06 $ 5.09
Dividends Per Share
For 6 months 0.09 0.10
For 12 months 0.18 0.19
Dividend Yield *
For 6 months 3.73% 3.78%
For 12 months 3.70 3.78
30-Day Standardized Yield 4.10 3.87
Weighted Average Maturity (years) 2.1 1.8
Weighted Average Effective Duration (years) 1.8 1.6
Weighted Average Quality ** AA AA
Virginia Tax-Free Bond Fund
Price Per Share $10.55 $10.96
Dividends Per Share
For 6 months 0.27 0.28
For 12 months 0.54 0.55
Dividend Yield *
For 6 months 5.23% 5.11%
For 12 months 5.23 5.14
30-Day Standardized Yield 5.15 4.84
Weighted Average Maturity (years) 15.7 15.5
Weighted Average Effective Duration (years) 8.3 7.1
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
----------------------
Percent of Percent of
Net Assets Net Assets
2/29/00 8/31/00
------- -------
VIRGINIA SHORT-TERM TAX-FREE BOND FUND
--------------------------------------
General Obligation - Local 18% 28%
Prerefunded Bonds 23 14
Hospital Revenue 11 12
Solid Waste Revenue 7 8
Lease Revenue 11 6
Air and Sea Transportation Revenue 5 5
Electric Revenue 5 4
Housing Finance Revenue 1 3
Water and Sewer Revenue 4 3
Ground Transportation Revenue 3 3
Escrowed to Maturity 1 3
Industrial and Pollution Control Revenue 3 2
Dedicated Tax Revenue 3 2
General Obligation - State 2 2
All Other 4 4
Other Assets Less Liabilities -1 1
Total 100% 100%
VIRGINIA TAX-FREE BOND FUND
---------------------------
Hospital Revenue 14% 13%
Prerefunded Bonds 14 12
General Obligation - Local 12 11
Dedicated Tax Revenue 6 9
Housing Finance Revenue 7 8
Water and Sewer Revenue 4 7
Educational Revenue 8 7
Air and Sea Transportation Revenue 3 5
Industrial and Pollution Control Revenue 6 5
Lease Revenue 5 5
Ground Transportation Revenue 4 4
Other Revenue 4 3
Solid Waste Revenue 5 3
Life Care/Nursing Home Revenue 3 3
Escrowed to Maturity 2 2
All Other 1 2
Other Assets Less Liabilities 2 1
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.
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 8/31/00 1 Year 3 Years 5 Years Inception Date
--------------------- ------ ------- ------- --------- ---------
Virginia Short-Term
Tax-Free Bond Fund 3.81% 3.68% 3.79% 4.35% 11/30/94
Virginia Tax-Free Bond Fund 6.26 4.69 5.81 6.76 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.
================================================================================
T. Rowe Price Virginia Short-Term Tax-Free Bond Fund
---------------------------------------------------- Unaudited
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
--------------------
6 Months Year
Ended Ended
8/31/00 2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
NET ASSET VALUE
Beginning of period $ 5.06 $ 5.18 $ 5.15 $ 5.13 $ 5.16 $ 5.06
--------------------------------------------------------------------------------
Investment activities
Net investment
income (loss) 0.10* 0.18* 0.19* 0.19* 0.20* 0.21*
Net realized and
unrealized gain (loss) 0.03 (0.11) 0.04 0.03 (0.03) 0.11
--------------------------------------------------------------------------------
Total from
investment activities 0.13 0.07 0.23 0.22 0.17 0.32
--------------------------------------------------------------------------------
Distributions
Net investment income (0.10) (0.18) (0.19) (0.19) (0.20) (0.21)
Net realized gain - (0.01) (0.01) (0.01) - (0.01)
--------------------------------------------------------------------------------
Total distributions (0.10) (0.19) (0.20) (0.20) (0.20) (0.22)
--------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 5.09 $ 5.06 $ 5.18 $ 5.15 $ 5.13 $ 5.16
<PAGE>
Ratios/Supplemental Data
Total return** 2.52%* 1.48%* 4.51%* 4.48%* 3.33%* 6.43%*
--------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 0.60%+* 0.60%* 0.62%* 0.65%* 0.65%* 0.65%*
--------------------------------------------------------------------------------
Ratio of net investment
income(loss) to average
net assets 3.76%+* 3.61%* 3.65%* 3.81%* 3.84%* 4.07%*
--------------------------------------------------------------------------------
Portfolio turnover rate 28.4%+ 39.3% 22.5% 75.0% 32.5% 36.4%
--------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 32,827 $ 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 2/28/02.
+ Annualized
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price Virginia Tax-Free Bond Fund
----------------------------------------- Unaudited
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
--------------------
6 Months Year
Ended Ended
8/31/00 2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
NET ASSET VALUE
Beginning of period $ 10.55 $ 11.45 $ 11.45 $ 11.05 $ 11.09 $ 10.56
--------------------------------------------------------------------------------
Investment activities
Net investment
income (loss) 0.28 0.54 0.55 0.57 0.57* 0.57*
Net realized and
unrealized gain (loss) 0.41 (0.90) 0.12 0.40 (0.04) 0.53
--------------------------------------------------------------------------------
Total from
investment activities 0.69 0.36 0.67 0.97 0.53 1.10
--------------------------------------------------------------------------------
Distributions
Net investment income (0.28) (0.54) (0.55) (0.57) (0.57) (0.57)
Net realized gain - - (0.12) - - -
--------------------------------------------------------------------------------
Total distributions (0.28) (0.54) (0.67) (0.57) (0.57) (0.57)
--------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 10.96 $ 10.55 $ 11.45 $ 11.45 $ 11.05 $ 11.09
<PAGE>
Ratios/Supplemental Data
Total return** 6.61% (3.16%) 6.02% 9.03% 5.00%* 10.69%*
--------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 0.55%+ 0.55% 0.57% 0.58% 0.65%* 0.65%*
--------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 5.17%+ 4.96% 4.83% 5.12% 5.23%* 5.27%*
--------------------------------------------------------------------------------
Portfolio turnover rate 41.8%+ 48.1% 47.3% 64.3% 66.2% 93.7%
--------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 283,796 $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.
+ Annualized
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Virginia Short-Term Tax-Free Bond Fund
----------------------------------------------------
Unaudited August 31, 2000
STATEMENT OF NET ASSETS
----------------------- Par Value
In thousands
VIRGINIA 95.0%
Abington IDA, Johnston Memorial Hosp., 5.00%, 7/1/02 $ 765 $ 769
--------------------------------------------------------------------------------
Alexandria IDA, Ogden Martin, VRDN (Currently 4.35%) * 1,200 1,200
--------------------------------------------------------------------------------
Arlington County IDA, Alexandria/Arlington Waste to Energy
5.25%, 1/1/03 (FSA Insured) 1,000 1,018
--------------------------------------------------------------------------------
Augusta County IDA, Augusta Hosp.
6.10%, 9/1/00 (AMBAC Insured) 60 60
--------------------------------------------------------------------------------
Bedford County IDA, Georgia-Pacific, 4.60%, 8/1/04 280 277
--------------------------------------------------------------------------------
Chesapeake Bay Bridge and Tunnel
5.10%, 7/1/01 (FGIC Insured) 945 951
--------------------------------------------------------------------------------
6.375%, 7/1/22 (MBIA Insured)
(Prerefunded 7/1/01+) 690 715
--------------------------------------------------------------------------------
Fairfax County, GO, Public Improvement, 5.50%, 6/1/01 675 681
--------------------------------------------------------------------------------
Fairfax County IDA
Fairfax Hosp. System
VRDN (Currently 4.20%) 1,400 1,400
--------------------------------------------------------------------------------
Inova Health
VRDN (Currently 4.20%) 1,000 1,000
--------------------------------------------------------------------------------
Fairfax County Sewer, 5.625%, 7/15/01 1,000 1,011
--------------------------------------------------------------------------------
Halifax County IDA, Old Dominion Electric,5.25%, 12/1/02 * 1,130 1,132
--------------------------------------------------------------------------------
Henrico County Economic Dev. Auth., Regional Jail
5.00%, 11/1/02 585 592
--------------------------------------------------------------------------------
Hopewell IDA
Westport Convalescent Center
5.45%, 10/1/02 220 218
--------------------------------------------------------------------------------
5.60%, 10/1/03 235 233
--------------------------------------------------------------------------------
Leesburg Utility System
6.30%, 7/1/17 (MBIA Insured)
(Prerefunded 7/1/02+) 500 527
--------------------------------------------------------------------------------
<PAGE>
Metropolitan Washington D.C. Airports Auth.
5.75%, 10/1/03 (FGIC Insured) * 300 311
--------------------------------------------------------------------------------
6.40%, 10/1/04 (MBIA Insured)* 1,350 1,424
--------------------------------------------------------------------------------
Newport News, GO
5.50%, 5/1/04 500 518
--------------------------------------------------------------------------------
5.50%, 1/15/03 1,000 1,025
--------------------------------------------------------------------------------
Peninsula Ports Auth.
Riverside Health Systems
5.00%, 7/1/01 $ 345 $ 346
--------------------------------------------------------------------------------
5.00%, 7/1/02 360 363
--------------------------------------------------------------------------------
Portsmouth, GO
5.60%, 8/1/01 500 506
--------------------------------------------------------------------------------
5.90%, 11/1/01 125 127
--------------------------------------------------------------------------------
6.10%, 11/1/03 750 778
--------------------------------------------------------------------------------
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+) 320 328
--------------------------------------------------------------------------------
Southeastern Public Service Auth., 5.00%, 7/1/03 545 542
--------------------------------------------------------------------------------
Upper Occoquan Sewage Auth.
6.50%, 7/1/17 (MBIA Insured)
(Prerefunded 7/1/01+) 1,430 1,484
--------------------------------------------------------------------------------
Virginia, GO, 5.00%, 6/1/02 500 506
--------------------------------------------------------------------------------
Virginia Beach, GO, 6.70%, 3/1/05 (Prerefunded 3/1/01+) 600 619
--------------------------------------------------------------------------------
Virginia College Building Auth.
Equipment Leasing Program, 5.00%, 2/1/02 200 202
--------------------------------------------------------------------------------
Hampton Univ., 5.20%, 4/1/02 435 440
--------------------------------------------------------------------------------
Virginia Ed. Loan Auth.,
5.40%, 9/1/01 (Escrowed to Maturity) * 900 909
--------------------------------------------------------------------------------
Virginia HDA
4.90%, 1/1/03 200 201
--------------------------------------------------------------------------------
5.125%, 7/1/03 * 865 873
--------------------------------------------------------------------------------
<PAGE>
Virginia Public Building Auth.
5.625%, 8/1/02 675 690
--------------------------------------------------------------------------------
5.70%, 8/1/03 500 518
--------------------------------------------------------------------------------
6.50%, 8/1/11 (Prerefunded 8/1/01+) 1,000 1,039
--------------------------------------------------------------------------------
Virginia Public School Auth., GO
4.90%, 1/1/03 550 556
--------------------------------------------------------------------------------
5.00%, 8/1/02 2,790 2,822
--------------------------------------------------------------------------------
5.00%, 8/1/04 1,000 1,020
--------------------------------------------------------------------------------
6.00%, 8/1/01 200 203
--------------------------------------------------------------------------------
Virginia Public School Auth., GO,
School Financing, 5.00%, 1/1/04 1,000 1,017
--------------------------------------------------------------------------------
Total Virginia (Cost $31,155) 31,177
--------------------------------------------------------------------------------
<PAGE>
PUERTO RICO 3.3%
Puerto Rico Ind. Medical and Environmental PCR
4.25%, 9/1/03 $ 500 $ 492
--------------------------------------------------------------------------------
Puerto Rico Municipal Fin. Agency, GO, 5.50%, 8/1/02 575 588
--------------------------------------------------------------------------------
Total Puerto Rico (Cost $1,084) 1,080
--------------------------------------------------------------------------------
U.S. VIRGIN ISLANDS 0.9%
Virgin Island Water and Power Auth., 5.00%, 7/1/02 300 301
--------------------------------------------------------------------------------
Total U. S. Virgin Islands (Cost $302) 301
--------------------------------------------------------------------------------
Total Investments in Securities
99.2% of Net Assets (Cost $32,541) $ 32,558
Other Assets Less Liabilities 269
NET ASSETS $ 32,827
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 2
Accumulated net realized gain/loss -
net of distributions (45)
Net unrealized gain (loss) 17
Paid-in-capital applicable to 6,447,085
no par value shares of beneficial
interest outstanding; unlimited number
of shares authorized 32,853
NET ASSETS $ 32,827
NET ASSET VALUE PER SHARE $ 5.09
* 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 Bond Fund
-----------------------------------------
Unaudited August 31, 2000
STATEMENT OF NET ASSETS
----------------------- Par Value
In thousands
VIRGINIA 92.4%
Abingdon IDA, Johnston Memorial Hosp., 5.25%, 7/1/16 $ 1,500 $ 1,411
--------------------------------------------------------------------------------
Albemarle County IDA, Martha Jefferson Hosp., 5.50% 10/1/20 1,000 967
--------------------------------------------------------------------------------
Alexandria, GO
5.50%, 6/15/19 2,230 2,261
--------------------------------------------------------------------------------
5.75%, 6/15/20 2,980 3,096
--------------------------------------------------------------------------------
Alexandria IDA
Episcopal High School
5.875%, 1/1/23 1,250 1,278
--------------------------------------------------------------------------------
6.00%, 1/1/17 1,060 1,113
--------------------------------------------------------------------------------
Ogden Martin, VRDN (Currently 4.35%) * 1,050 1,050
--------------------------------------------------------------------------------
Arlington County, GO
Public Improvement
5.25%, 6/1/15 4,115 4,143
--------------------------------------------------------------------------------
5.25%, 6/1/17 2,750 2,744
--------------------------------------------------------------------------------
Arlington County IDA
Arlington Hosp.
7.00%, 9/1/11 (Prerefunded 9/1/01+) 1,255 1,312
--------------------------------------------------------------------------------
The Nature Conservancy
5.40%, 7/1/17 1,815 1,820
--------------------------------------------------------------------------------
5.45%, 7/1/27 1,905 1,872
--------------------------------------------------------------------------------
Bedford County IDA, Nekoosa Packaging
5.60%, 12/1/25 * 4,000 3,634
--------------------------------------------------------------------------------
6.30%, 12/1/25 * 2,000 1,992
--------------------------------------------------------------------------------
Capital Region Airport Commission
Richmond Int'l. Airport
VRDN (Currently 4.25%)
(AMBAC Insured) * 4,500 4,500
--------------------------------------------------------------------------------
Charles County Ind. Dev., Waste Management, 4.875%, 2/1/09 * 3,250 2,861
--------------------------------------------------------------------------------
<PAGE>
Chesapeake Bay Bridge and Tunnel Dist.
5.50%, 7/1/25 (MBIA Insured) 1,000 1,014
--------------------------------------------------------------------------------
Chesapeake Toll Road, Expressway, 5.625%, 7/15/19 1,250 1,238
--------------------------------------------------------------------------------
Clarke County IDA Hosp. Fac., Winchester Medical Center
VRDN (Currently 4.30%) (FSA Insured) 2,000 2,000
--------------------------------------------------------------------------------
Danville IDA
Danville Regional Medical Center
5.20%, 10/1/18 (AMBAC Insured) 3,735 3,654
--------------------------------------------------------------------------------
6.50%, 10/1/24 (FGIC Insured)
(Prerefunded 10/1/04+) 3,000 3,257
--------------------------------------------------------------------------------
Fairfax County Economic Dev. Auth.
Greenspring Retirement Community
7.50%, 10/1/29 $ 2,500 $ 2,545
--------------------------------------------------------------------------------
National Wildlife Federation
5.25%, 9/1/17 (MBIA Insured) 2,000 1,973
--------------------------------------------------------------------------------
Vienna II Metrorail
6.00%, 9/1/19 1,975 2,089
--------------------------------------------------------------------------------
6.00%, 9/1/20 2,090 2,205
--------------------------------------------------------------------------------
Fairfax County Housing Auth.
FCRHA Office Building
7.50%, 6/15/18 (Prerefunded 12/15/02+) 2,125 2,280
--------------------------------------------------------------------------------
Fairfax County IDA
Fairfax Hosp. System, VRDN (Currently 4.20%) 1,200 1,200
--------------------------------------------------------------------------------
Inova Health, VRDN (Currently 4.20%) 5,300 5,300
--------------------------------------------------------------------------------
Fairfax County Water Auth.
5.00%, 4/1/21 2,000 1,896
--------------------------------------------------------------------------------
5.80%, 1/1/16 (Escrowed to Maturity) 6,060 6,392
--------------------------------------------------------------------------------
6.00%, 4/1/15 1,140 1,226
--------------------------------------------------------------------------------
6.00%, 4/1/22 8,725 9,111
--------------------------------------------------------------------------------
Frederick County IDA, Gov't. Complex Fac.
6.50%, 12/1/14 (MBIA Insured) 1,500 1,617
--------------------------------------------------------------------------------
Fredericksburg IDA, Hosp. Fac.(MWH Medicorp Obligated Group)
Residual Interest Bond / Inverse Floater
(Currently 8.455%), 8/15/23 (FGIC Insured)
(Prerefunded 8/15/01+) 3,000 3,229
--------------------------------------------------------------------------------
<PAGE>
Giles County IDA, Hoechst Celanese, 6.625%, 12/1/22 * 1,485 1,493
--------------------------------------------------------------------------------
Glouchester County IDA, Virginia Courthouse
5.375%, 11/1/20 (MBIA Insured) 685 675
--------------------------------------------------------------------------------
Goochland County IDA, Nekoosa Packaging
5.65%, 12/1/25 * 750 686
--------------------------------------------------------------------------------
Greater Richmond Convention Center Auth.
Convention Center Expansion, 6.125%, 6/15/29 4,585 4,786
--------------------------------------------------------------------------------
Halifax County IDA, Halifax Regional Long-Term Care
5.625%, 7/1/12 1,585 1,400
--------------------------------------------------------------------------------
Hampton IDA, Sentara Health, 5.375%, 11/1/15 5,300 5,232
--------------------------------------------------------------------------------
Hampton Roads Medical College
6.875%, 11/15/11 1,000 1,040
--------------------------------------------------------------------------------
6.875%, 11/15/11 (Prerefunded 11/15/01+) 500 525
--------------------------------------------------------------------------------
6.875%, 11/15/16 (Prerefunded 11/15/01+) 500 524
--------------------------------------------------------------------------------
Hanover County IDA
Memorial Regional Medical Center
6.50%, 8/15/10 (MBIA Insured) $ 1,300 $ 1,466
--------------------------------------------------------------------------------
Henrico County Economic Dev. Auth., Regional Jail
6.125%, 11/1/19 2,000 2,129
--------------------------------------------------------------------------------
Henrico County IDA
Bon Secours Health
6.00%, 8/15/16 (MBIA Insured) 865 930
--------------------------------------------------------------------------------
6.25%, 8/15/20 (MBIA Insured) 1,750 1,926
--------------------------------------------------------------------------------
Regional Jail
6.00%, 8/1/15 (Prerefunded 8/1/05+) 2,415 2,578
--------------------------------------------------------------------------------
7.00%, 8/1/13 (Prerefunded 8/1/05+) 1,485 1,674
--------------------------------------------------------------------------------
Henry County IDA, Memorial Hosp., 6.00%, 1/1/27 3,250 3,277
--------------------------------------------------------------------------------
Hopewell IDA
Colonial Heights Convalescent Center
5.75%, 10/1/04 150 148
--------------------------------------------------------------------------------
Forest Hill Convalescent Center
5.60%, 10/1/03 (Prerefunded 10/1/02+) 100 106
--------------------------------------------------------------------------------
5.90%, 10/1/05 (Prerefunded 10/1/02+) 240 255
--------------------------------------------------------------------------------
Westport Convalescent Center, 5.75%, 10/1/04 290 286
--------------------------------------------------------------------------------
<PAGE>
Isle of Wight IDA, Union Camp, 6.55%, 4/1/24 * 4,250 4,305
--------------------------------------------------------------------------------
Loudoun County, GO, Public Improvement, 5.75%, 12/1/18 1,685 1,752
--------------------------------------------------------------------------------
Lynchburg IDA, Centra Health, 5.25%, 1/1/11 1,890 1,882
--------------------------------------------------------------------------------
Martinsville IDA
Memorial Hosp. of Martinsville and Henry County
7.00%, 1/1/11 (Prerefunded 1/1/01+) 950 958
--------------------------------------------------------------------------------
Medical College of Virginia Hosp. Auth.
5.25%, 7/1/14 (MBIA Insured) 3,185 3,194
--------------------------------------------------------------------------------
Metropolitan Washington D.C. Airport Auth.
5.50%, 10/1/23 * 3,350 3,264
--------------------------------------------------------------------------------
5.75%, 10/1/11 (MBIA Insured) * 1,500 1,558
--------------------------------------------------------------------------------
6.625%, 10/1/19 (MBIA Insured) * 3,550 3,720
--------------------------------------------------------------------------------
Newport News, GO, 5.50%, 7/1/12 (MBIA Insured) 2,000 2,071
--------------------------------------------------------------------------------
Norfolk, GO, 5.25%, 6/1/14 2,750 2,761
--------------------------------------------------------------------------------
Norfolk IDA
Children's Hosp. of the King's Daughters
7.00%, 6/1/11 (AMBAC Insured)
(Prerefunded 6/1/01+) 1,150 1,195
--------------------------------------------------------------------------------
Norfolk IDA
Sentara Hosp.
7.00%, 11/1/20 (Prerefunded 11/1/00+) $ 1,045 $ 1,070
--------------------------------------------------------------------------------
7.10%, 11/1/10 (Prerefunded 11/1/00+) 850 871
--------------------------------------------------------------------------------
Peninsula Port Auth.
Dominion Terminal, 7.375%, 6/1/20 2,000 2,062
--------------------------------------------------------------------------------
Riverside Health
6.625%, 7/1/18
(Prerefunded 7/1/01+) 3,020 3,194
--------------------------------------------------------------------------------
Pocahontas Parkway Assoc., Toll Road, Zero Coupon, 8/15/18 3,000 794
--------------------------------------------------------------------------------
Portsmouth, GO, 5.00%, 8/1/17 (FGIC Insured) 2,000 1,931
--------------------------------------------------------------------------------
Prince William County Park Auth., 5.875%, 10/15/19 4,135 4,207
--------------------------------------------------------------------------------
Prince William County Service Auth., Water and Sewer Systems
4.75%, 7/1/29 (FGIC Insured) 2,275 1,974
--------------------------------------------------------------------------------
<PAGE>
Richmond Metropolitan Auth.
Expressway
5.25%, 7/15/17 (FGIC Insured) 2,700 2,694
--------------------------------------------------------------------------------
5.25%, 7/15/22 (FGIC Insured) 5,550 5,457
--------------------------------------------------------------------------------
Riverside, Regional Jail, 5.875%, 7/1/14 (MBIA Insured) 4,000 4,172
--------------------------------------------------------------------------------
Roanoke, GO
Public Improvement
6.00%, 10/1/17 500 532
--------------------------------------------------------------------------------
6.00%, 10/1/19 4,810 5,098
--------------------------------------------------------------------------------
Roanoke County IDA
Hollins College
5.20%, 3/15/17 1,150 1,106
--------------------------------------------------------------------------------
5.25%, 3/15/23 1,000 943
--------------------------------------------------------------------------------
Roanoke IDA
Roanoke Memorial Hosp., Carilion Health System
6.125%, 7/1/17 (MBIA Insured) 3,905 4,238
--------------------------------------------------------------------------------
Southeastern Public Service Auth.
5.00%, 7/1/02 1,475 1,472
--------------------------------------------------------------------------------
5.00%, 7/1/03 1,000 995
--------------------------------------------------------------------------------
5.00%, 7/1/15 (AMBAC Insured) 3,550 3,470
--------------------------------------------------------------------------------
Univ. of Virginia, 5.25%, 6/1/13 3,880 3,940
--------------------------------------------------------------------------------
Upper Occoquan Sewage Auth., 4.75%, 7/1/29 (MBIA Insured) 3,000 2,602
--------------------------------------------------------------------------------
Virginia Beach Dev. Auth.
Beverly Enterprises, 10.00%, 4/1/10 1,810 1,868
--------------------------------------------------------------------------------
Virginia Beach Dev. Auth.
Sentara Bayside Hosp.
6.60%, 11/1/09
(Prerefunded 11/1/01+) $ 3,650 $ 3,816
--------------------------------------------------------------------------------
Virginia Beach General Hosp.
6.00%, 2/15/10
(AMBAC Insured) 1,000 1,085
--------------------------------------------------------------------------------
Westminster Canterbury, 7.25%, 11/1/32 1,500 1,489
--------------------------------------------------------------------------------
<PAGE>
Virginia College Building Auth.
Randolph Macon College
6.625%, 5/1/13
(Prerefunded 5/1/02+) 1,000 1,055
--------------------------------------------------------------------------------
Washington and Lee Univ.
5.25%, 1/1/26 (MBIA Insured) 2,320 2,269
--------------------------------------------------------------------------------
5.25%, 1/1/31 (MBIA Insured) 1,750 1,703
--------------------------------------------------------------------------------
Virginia HDA
5.60%, 11/1/18 5,160 5,107
--------------------------------------------------------------------------------
5.75%, 4/1/15 980 990
--------------------------------------------------------------------------------
5.85%, 7/1/12 1,000 1,034
--------------------------------------------------------------------------------
6.00%, 7/1/11 * 2,350 2,465
--------------------------------------------------------------------------------
6.35%, 11/1/01 1,000 1,014
--------------------------------------------------------------------------------
6.375%, 1/1/26 * 620 639
--------------------------------------------------------------------------------
6.40%, 7/1/22 (MBIA Insured) * 2,000 2,047
--------------------------------------------------------------------------------
6.45%, 7/1/28 (MBIA Insured) * 2,000 2,028
--------------------------------------------------------------------------------
6.50%, 5/1/13 * 2,000 2,106
--------------------------------------------------------------------------------
6.70%, 1/1/22 * 795 805
--------------------------------------------------------------------------------
7.05%, 5/1/18 840 877
--------------------------------------------------------------------------------
7.10%, 5/1/13 1,500 1,543
--------------------------------------------------------------------------------
Rental Housing
5.45%, 2/1/12 * 1,150 1,139
--------------------------------------------------------------------------------
5.50%, 2/1/13 * 1,175 1,164
--------------------------------------------------------------------------------
Virginia Polytechnic Institute and State Univ.
Univ. Services
5.40%, 6/1/11 1,000 1,033
--------------------------------------------------------------------------------
5.50%, 6/1/16 3,000 3,028
--------------------------------------------------------------------------------
5.50%, 6/1/20 1,600 1,596
--------------------------------------------------------------------------------
Virginia Port Auth.
5.50%, 7/1/11 * 2,270 2,337
--------------------------------------------------------------------------------
Port Fac., 5.50%, 7/1/24 (MBIA Insured) * 1,000 974
--------------------------------------------------------------------------------
<PAGE>
Virginia Public Building Auth.
6.25%, 8/1/15 (Prerefunded 8/1/04+) $ 1,550 $ 1,665
--------------------------------------------------------------------------------
Virginia Public School Auth., GO
5.375%, 8/1/17 2,245 2,247
--------------------------------------------------------------------------------
6.50%, 8/1/12 (Prerefunded 8/1/01+) 1,700 1,767
--------------------------------------------------------------------------------
6.50%, 8/1/16 2,890 3,151
--------------------------------------------------------------------------------
Virginia Resources Auth., Revolving Water Fund,
5.625%, 10/1/22 1,650 1,672
--------------------------------------------------------------------------------
Virginia Transportation Board
Northern Virginia Transportation Dist.
5.125%, 5/15/19 2,000 1,929
--------------------------------------------------------------------------------
Oak Grove Connector, 5.25%, 5/15/22 3,000 2,902
--------------------------------------------------------------------------------
Route 28 Project, 6.50%, 4/1/18 1,000 1,037
--------------------------------------------------------------------------------
Route 58 Project
5.125%, 5/15/19 2,855 2,753
--------------------------------------------------------------------------------
5.625%, 5/15/13 3,000 3,069
--------------------------------------------------------------------------------
Washington County IDA
Johnston Memorial Hosp.
6.25%, 7/1/06 (Prerefunded 7/1/05+) 1,660 1,767
--------------------------------------------------------------------------------
6.75%, 7/1/12 (Prerefunded 7/1/02+) 1,500 1,587
--------------------------------------------------------------------------------
York County, Sewer, 5.875%, 6/1/24 1,000 1,028
--------------------------------------------------------------------------------
Total Virginia (Cost $257,596) 262,141
--------------------------------------------------------------------------------
<PAGE>
PUERTO RICO 3.6%
Puerto Rico Electric Power Auth., 6.00%, 7/1/14 1,000 1,055
--------------------------------------------------------------------------------
Puerto Rico Highway & Transportation Auth.
5.50%, 7/1/15 (FSA Insured) 2,000 2,106
--------------------------------------------------------------------------------
6.00%, 7/1/31 1,000 1,055
--------------------------------------------------------------------------------
6.25%, 7/1/14 1,500 1,680
--------------------------------------------------------------------------------
6.50%, 7/1/27 2,470 2,751
--------------------------------------------------------------------------------
Puerto Rico Ind. Tourist, Ed.
Medical & Environmental Fac., Cogen Fac.
6.625%, 6/1/26 * 1,500 1,564
--------------------------------------------------------------------------------
Total Puerto Rico (Cost $9,551) 10,211
Total Investments in Securities
99.0% of Net Assets (Cost $275,240) $ 280,894
Other Assets Less Liabilities 2,902
NET ASSETS $ 283,796
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 12
Accumulated net realized gain/loss -
net of distributions (5,265)
Net unrealized gain (loss) 5,654
Paid-in-capital applicable to 25,900,888
no par value shares of beneficial
interest outstanding; unlimited
number of shares authorized 283,395
NET ASSETS $ 283,796
NET ASSET VALUE PER SHARE $ 10.96
* 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.
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
------------------------------------- Unaudited
STATEMENT OF OPERATIONS In thousands
----------------------- Short-Term
Bond Fund Bond Fund
6 Months 6 Months
Ended Ended
8/31/00 8/31/00
Investment Income (Loss)
Interest income $ 666 $ 7,766
--------------------------------------------------------------------------------
Expenses
Custody and accounting 43 52
Investment management 20 565
Shareholder servicing 14 96
Legal and audit 6 7
Trustees 3 3
Prospectus and shareholder reports 2 21
Registration 1 -
Miscellaneous 2 2
--------------------------------------------------------------------------------
Total expenses 91 746
Expenses paid indirectly - (4)
--------------------------------------------------------------------------------
Net expenses 91 742
--------------------------------------------------------------------------------
Net investment income (loss) 575 7,024
--------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (12) (1,617)
Futures - (10)
--------------------------------------------------------------------------------
Net realized gain (loss) (12) (1,627)
Change in net unrealized gain or loss on securities 243 11,987
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 231 10,360
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 806 $ 17,384
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
------------------------------------- Unaudited
STATEMENT OF CHANGES IN NET ASSETS In thousands
---------------------------------- Short-Term
Bond Fund Bond Fund
6 Months Year 6 Months Year
Ended Ended Ended Ended
8/31/00 2/29/00 8/31/00 2/29/00
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 575 $ 986 $ 7,024 $ 13,821
Net realized gain (loss) (12) 14 (1,627) (3,588)
Change in net unrealized
gain or loss 243 (624) 11,987 (19,551)
-----------------------------------------------------------------------------
Increase (decrease) in
net assets from operations 806 376 17,384 (9,318)
-----------------------------------------------------------------------------
Distributions to shareholders
Net investment income (575) (986) (7,024) (13,821)
Net realized gain - (55) - -
-----------------------------------------------------------------------------
Decrease in net assets
from distributions (575) (1,041) (7,024) (13,821)
-----------------------------------------------------------------------------
Capital share transactions *
Shares sold 9,819 14,102 26,003 60,639
Distributions reinvested 507 929 5,172 10,389
Shares redeemed (5,350) (13,518) (19,731) (64,709)
-----------------------------------------------------------------------------
Increase (decrease) in
net assets from capital
share transactions 4,976 1,513 11,444 6,319
-----------------------------------------------------------------------------
Net Assets
Increase (decrease)
during period 5,207 848 21,804 (16,820)
Beginning of period 27,620 26,772 261,992 278,812
-----------------------------------------------------------------------------
End of period $ 32,827 $ 27,620 $ 283,796 $261,992
*Share information
Shares sold 1,942 2,759 2,429 5,498
Distributions reinvested 100 182 481 956
Shares redeemed (1,056) (2,646) (1,845) (5,976)
-----------------------------------------------------------------------------
Increase (decrease)
in shares outstanding 986 295 1,065 478
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Virginia Tax-Free Funds
-------------------------------------
Unaudited August 31, 2000
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------
T. Rowe Price State Tax-Free Income Trust (the trust) is registered under
the Investment Company Act of 1940. The 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 Short-Term Bond Fund seeks the
highest level of income exempt from federal and Virginia state income taxes
consistent with modest fluctuation in principal value by investing primarily in
investment-grade Virginia municipal bonds. The Bond Fund seeks to provide,
consistent with prudent portfolio management, the highest level of income exempt
from federal and Virginia income taxes by investing in investment-grade Virginia
municipal bonds.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
Valuation Debt securities are generally traded in the over-the-counter
market. Investments in securities are stated at fair value as furnished by
dealers who make markets in such securities or by an independent pricing
service, which considers yield or price of bonds of comparable quality, coupon,
maturity, and type, as well as prices quoted by dealers who make markets in such
securities.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of 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.
<PAGE>
NOTE 2 - INVESTMENT TRANSACTIONS
--------------------------------
Purchases and sales of portfolio securities, other than short-term
securities, for the six months ended August 31, 2000, were as follows:
Short-Term
Bond Fund Bond Fund
Purchases $ 6,323,000 $ 60,375,000
Sales 4,010,000 53,204,000
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 had capital loss
carryforwards for federal income tax purposes of $2,059,000, all of which
expires in 2008. The fund intends to retain gains realized in future periods
that may be offset by available capital loss carryforwards.
At August 31, 2000, the 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 $32,541,000 and $275,240,000 respectively. Net
unrealized gain (loss) on investments were as follows:
Short-Term
Bond Fund Bond Fund
Appreciated investments $ 88,000 $ 8,060,000
Depreciated investments (71,000) (2,406,000)
Net unrealized gain (loss) $ 17,000 $ 5,654,000
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 $4,000 and $99,000 were payable at August 31, 2000 by the Short-Term
and Bond Funds, respectively. The fee is computed daily and paid monthly, and
consists of an individual fund fee equal to 0.10% of average daily net assets
and a group fee. The group fee is based on the combined assets of certain mutual
funds sponsored by the manager or T. Rowe Price International, Inc. (the group).
The group fee rate ranges from 0.48% for the first $1 billion of assets to
0.295% for assets in excess of $120 billion. At August 31, 2000 and the six
months 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 28, 2002, which would cause the
Short-Term Bond Fund's ratio of total expenses to average net assets to exceed
0.60%. Thereafter, through February 29, 2004, 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
without causing the Short-Term Bond Funds ratio of total expenses to average net
assets to exceed 0.60%. Pursuant to this agreement, $43,000 of management fees
were not accrued by the Short-Term Bond Fund for the six months ended August 31,
2000. Additionally, $193,000 of unaccrued management fees related to a previous
expense limitation are subject to reimbursement through February 28, 2002.
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 expe nses pursuant to these related party agreements totaling
approximately $44,000 and $112,000, respectively, for the six months ended
August 31, 2000, of which $8,000 and $23,000, respectively, were payable at
period-end.
================================================================================
<PAGE>
T. Rowe Price Shareholder Services
----------------------------------
INVESTMENT SERVICES AND INFORMATION
-----------------------------------
KNOWLEDGEABLE SERVICE REPRESENTATIVES
-------------------------------------
BY PHONE 1-800-225-5132 Available Monday through Friday from
8 a.m. to 10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
IN PERSON Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
----------------
CHECKING Available on most fixed-income funds ($500 minimum).
AUTOMATIC INVESTING From your bank account or paycheck.
AUTOMATIC WITHDRAWAL Scheduled, automatic redemptions.
DISTRIBUTION OPTIONS Reinvest all, some, or none of your distributions.
AUTOMATED 24-HOUR SERVICES Including Tele*AccessRegistration Mark and the
T. Rowe Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
-------------------
Individual Investments Stocks, bonds, options, precious metals,
and other securities at a savings over full-service commission rates. **
<PAGE>
INVESTMENT INFORMATION
----------------------
COMBINED STATEMENT Overview of all your accounts with T. Rowe Price.
SHAREHOLDER REPORTS Fund managers' reviews of their strategies and results.
T. ROWE PRICE REPORT Quarterly investment newsletter discussing
markets and financial strategies.
PERFORMANCE UPDATE Quarterly review of all T. Rowe Price fund results.
INSIGHTS Educational reports on investment strategies and financial markets.
INVESTMENT GUIDES Asset Mix Worksheet, College Planning Kit,
Diversifying Overseas: A Guide to International Investing, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
** Based on a July 2000 survey for representative-assisted stock trades.
Services vary by firm, and commissions may vary depending on size of
order.T. Rowe Price Shareholder Services
================================================================================
<PAGE>
T. Rowe Price Mutual Funds
--------------------------
STOCK FUNDS
-----------
DOMESTIC
--------
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Developing Technologies
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Tax-Efficient Growth
Total
Equity Market Index
Value
INTERNATIONAL/GLOBAL
--------------------
Emerging Europe & Mediterranean
Emerging Markets Stock
European Stock
Global Stock
Global Technology
International Discovery*
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
<PAGE>
BOND FUNDS
----------
DOMESTIC TAXABLE
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government *
Spectrum Income
Summit GNMA
Summit Limited-Term Bond *
U.S. Treasury Intermediate
U.S. Treasury Long-Term
DOMESTIC TAX-FREE
-----------------
California Tax-Free Bond
Florida Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond *
Virginia Tax-Free Bond
INTERNATIONAL/GLOBAL
--------------------
Emerging Markets Bond
Global Bond *
International Bond
MONEY MARKET FUNDS
------------------
TAXABLE
-------
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
<PAGE>
TAX-FREE
--------
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
---------------------
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
--------------------------------------
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced
Portfolio
Prime Reserve Portfolio
* Closed to new investors.
+ Investments in the funds are not insured or guaranteed by the FDIC or
any other government agency. Although the funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in the funds.
Please call for a prospectus, which contains complete information,
including fees and expenses. Read it carefully before investing.
Please call for a prospectus, which contains complete information,
including fees and expenses. Read it carefully before investing. The T. Rowe
Price No-Load Variable Annuity [#V6021] is issued by Security Benefit Life
Insurance Company. In New York, it [#FSB201(11-96)] is issued by First Security
Benefit Life Insurance Company of New York, White Plains, NY. T. Rowe Price
refers to the underlying portfolios' investment managers and the distributors,
T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance Agency, Inc.;
and T. Rowe Price Insurance Agency of Texas, Inc. The Security Benefit Group of
Companies and the T. Rowe Price companies are not affiliated. The variable
annuity may not be available in all states. The contract has limitations. Call a
representative for costs and complete details of the coverage.
================================================================================
<PAGE>
T. Rowe Price Advisory Services and Retirement Resources
--------------------------------------------------------
ADVISORY SERVICES, RETIREMENT RESOURCES
---------------------------------------
T. Rowe Price is your full-service retirement
specialist. We have developed unique advisory services
that can help you meet the most difficult retirement
challenges. Our broad array of retirement plans is
suitable for individuals, the self-employed, small
businesses, corporations, and nonprofit organizations.
We also provide recordkeeping, communications, and
investment management services, and our educational
materials, self-help planning guides, and software
tools are recognized as among the industry's best. For
information or to request literature, call us at
1-800-638-5660, or visit our Web site at
www.troweprice.com.
ADVISORY SERVICES
-----------------
T. Rowe Price Retirement Income Manager [SM] helps
retirees or those within two years of retirement
determine how much income they can take in retirement.
The program uses extensive statistical analysis and the
input of financial planning professionals to suggest an
income plan that best meets your objectives.
T. Rowe Price Rollover Investment Service offers
asset allocation advice to those planning a major
change in their qualified retirement plans, such as a
401(k) rollover from a previous employer or an IRA
transfer.
RETIREMENT RESOURCES AT T. ROWE PRICE
-------------------------------------
Traditional, Roth, and Rollover IRAs
SEP-IRA and SIMPLE IRA
Profit Sharing
Money Purchase Pension
"Paired" Plans (Money Purchase
Pension and Profit Sharing Plans)
401(k) and 403(b)
457 Deferred Compensation
Planning and Informational Guides
---------------------------------
Minimum Required Distributions Guide
Retirement Planning Kit
Retirees Financial Guide
Tax Considerations for Investors
<PAGE>
Insights Reports
----------------
The Challenge of Preparing for Retirement
Financial Planning After Retirement
The Roth IRA: A Review
Software Packages
-----------------
T. Rowe Price Retirement Planning
Analyzer [TM] CD-ROM or diskette $19.95.
To order, please call 1-800-541-5760.
Also available on the Internet for $9.95.
T. Rowe Price Variable Annuity Analyzer [TM]
CD-ROM or diskette, free. To order,
please call 1-800-469-5304.
T. ROWE PRICE IMMEDIATE VARIABLE ANNUITY (INCOME ACCOUNT)
Investment Kits
---------------
We will be happy to send you one of our
easy-to-follow investment kits when you are ready to
invest in any T. Rowe Price retirement vehicle,
including IRAs, qualified plans, small-business plans,
or our no-load variable annuities.
================================================================================
FOR FUND AND ACCOUNT INFORMATION
OR TO CONDUCT TRANSACTIONS,
24 HOURS, 7 DAYS A WEEK
By touch-tone telephone
TELE*ACCESS 1-800-638-2587
By Account Access on the Internet
WWW.TROWEPRICE.COM/ACCESS
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132
TO OPEN A BROKERAGE ACCOUNT
OR OBTAIN INFORMATION, CALL:
1-800-638-5660
INTERNET ADDRESS:
www.troweprice.com
<PAGE>
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. C14-051 8/31/00
