- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
SemiAnnual Report
California Tax-Free Funds
- --------------------------------------------------------------------------------
August 31, 1997
- --------------------------------------------------------------------------------
Report Highlights
================================================================================
California Tax-Free Funds
* The environment for bonds was generally favorable during the six months
ended August 31, 1997, as the Federal Reserve held the line after raising
rates in March.
* California's economy continued to expand at rates above national levels,
but both the state and localities face financial challenges.
* The funds provided solid returns for the period; the Money Fund matched its
peer group average and the Bond Fund lagged slightly.
* The Money Fund's maturity posture was neutral in advance of a looming
increase in short-term securities; the Bond Fund maintained a conservative
tilt.
* Despite strong economic growth, we believe the environment is still
favorable for fixed income investors due to low inflation and fiscal
restraint.
FELLOW SHAREHOLDERS
The municipal bond market and the California tax-free funds provided solid
returns during the six months ended August 31. Long-term interest rates declined
on balance, while money market rates showed little net change despite interim
fluctuations. Strong economic growth continued into the first quarter of 1997,
and in March the Federal Reserve raised the federal funds rate a quarter-point
to 5.50%. With inflation remaining subdued, the Fed subsequently left rates
unchanged, creating a generally favorable environment for bonds.
<PAGE>
MARKET ENVIRONMENT
Interest rates fluctuated as the market wrestled with a conflicting
combination of strong economic growth and declining inflation. Both money market
and longer-term bond yields began rising before the March rate hike and
continued to rise for a short time afterward in anticipation of further
tightening. However, excellent news on inflation, progress on controlling the
federal budget deficit, and little evidence of wage pressures diminished fears
of further rate increases. Short-term taxable rates subsequently fell in
mid-April to their earlier levels. Taxable bond yields also began to fall in the
late spring after climbing to more than 7% in April. The 30-year Treasury bond
yield averaged just over 6.50% in July and August and 6.80% for the past six
months, almost identical to its average over the two preceding years.
[Interest Rate Levels. A 2-line chart showing the T. Rowe Price index of
California bond and money market yields from 8/31/96 to 8/31/97][wrap above
paragraph around it Source: T. Rowe Price Associates].
Municipal interest rates, including yields on California bonds, followed a
similar pattern, rising in March, peaking in April, then falling in late June
and July when preliminary data signaled a slowdown. Rates reversed in August as
stronger-than-expected economic data changed the outlook for the third quarter.
Municipal bonds outperformed Treasuries throughout most of the period. The yield
on long-term AAA general obligation (GO) bonds began the six-month period at
5.50% and ranged between 5.75% and 5.15% before settling at 5.35% at the end of
August. Five-year AAA GO yields were 4.40% six months ago and finished at 4.35%,
while one-year notes ended higher at 3.85%, up from 3.70% last February.
Overall, both the municipal and Treasury yield curves flattened, as short-term
rates rose modestly in anticipation of further Fed tightening, and long-term
rates trended lower on positive inflation news.
California's economy continued to expand at a healthy pace. In the 12
months ending July 1997, employment grew by 2.9%, led by job growth in
construction, versus 2.2% for the nation. The state's financial picture is
stronger than in the early 1990s, but spending pressures in the current fiscal
year have reversed the favorable trend. After a four-year record of operating
surpluses, the 1998 budget, which includes a large one-time repayment to the
state pension fund, projects a deficit. California general obligation bonds are
rated A+ (with AAA being the highest possible rating); among the rating
agencies, Moody's and Fitch have "positive" outlooks on the state while Standard
& Poor's outlook is "stable."
We continue to monitor the effects of Proposition 218, a voter initiative
adopted in November 1996. This initiative requires voter approval for a wide
variety of tax and fee increases for cities, counties, and special districts,
and also mandates voter ratification of a number of existing taxes. Large urban
counties, such as Los Angeles, are especially vulnerable. Stressed by heavy
social service burdens, localities often depend on one-time funding devices, and
their reserves have become thin. The long-run implications of Proposition 218
are, of course, unknown.
<PAGE>
CALIFORNIA TAX-FREE MONEY FUND
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 8/31/97 6 Months 12 Months
- --------------------------------------------------------------------------------
California Tax-Free
Money Fund 1.51% 2.96%
Lipper California Tax-Exempt
Money Market Funds Average 1.51 2.96
================================================================================
Your fund's performance was exactly in line with the average of similar
funds for both the six-month and one-year periods, as shown in the table.
The tax-exempt short-term market was quite well behaved during the past six
months. Even though the period began with a hike in the federal funds rate and
the Fed "on alert" for signs of rising inflation, the short-term market moved to
modestly higher rates in a calm and measured fashion. One-year securities closed
the period 15 basis points higher than on February 28 (fiscal year-end) and
fluctuated only 25 basis points between the period's high and low. (One hundred
basis points equal one percent.) Strong demand, coupled with contracting supply,
helped considerably in forestalling potentially wide yield movements. During the
period, tax-exempt money fund assets expanded to a record $154.2 billion-up $14
billion so far in 1997-and California tax-exempt retail funds also rose,
reaching the $19 billion mark in August. Meanwhile, short-term new issuance so
far in 1997 has run $4.2 billion behind last year's volume, attributable largely
to the postponement to September of the state's annual short-term financing,
totaling $3 billion this year.
The fund ended the six-month period with a weighted average maturity (WAM)
of 46 days, similar to the 44-day WAM at fiscal year-end and equal to our
competitive peer group average. For most of the period, our maturity posture was
quite similar to the average because we did not want to lengthen in advance of
the seasonal California issuance. We expect to extend our maturity somewhat in
the near term, provided, of course, that such strategy coincides with our
general outlook for short-term rates.
CALIFORNIA TAX-FREE BOND FUND
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 8/31/97 6 Months 12 Months
- --------------------------------------------------------------------------------
California Tax-Free
Bond Fund 3.88% 9.03%
Lipper California Municipal
Debt Funds Average 4.06 8.98
================================================================================
<PAGE>
The fund's returns lagged the peer group average over the past six months
but were a bit higher than the average for the 12-month period. We lost some
ground during the six months as our more conservative interest rate and credit
strategy kept the fund from participating fully in the periods of market
strength.
The fund's duration ranged from 7.1 to 7.8 years over the past six months,
slightly below the estimated 7.5 to 8.0 years for our benchmark. (Duration is a
measure of interest rate sensitivity. For example, a duration of seven years
means a fund's share price would rise or fall about 7% for each
one-percentage-point fall or rise in interest rates, respectively.) This
strategy worked well from February through April but hurt us when the market
rallied and rates declined between May and July. In August, as rates reversed
course, we elected to keep duration at the lower end of this range and to wait
for opportunities to extend at higher interest rates.
==============================
. . . we were encouraged by
the continuing strength of the
california economy . . .
- ------------------------------
On the credit front, we were encouraged by the continuing strength of the
California economy and what this means for bond issuers. At the same time, we
were somewhat thwarted by the high percentage of insured bonds in the
marketplace. By some accounts, over 80% of new California bond issues and an
increasing amount of secondary market bonds now carry insurance. This makes it
difficult to realize price appreciation from uninsured bonds with improving
credit fundamentals. Currently, just over half of the fund's holdings are
insured, and another 10% have been prerefunded or escrowed to maturity with U.S.
Treasuries as collateral. This very high credit quality (over 60% of the
holdings carry AAA ratings from the rating agencies) will serve us well when
yield differences between the quality sectors widen, but there is little
evidence of that happening soon. Accordingly, we are using our credit research
resources to look for ways to uncover uninsured investments with solid
fundamentals that will enhance fund performance.
California bond supply is running well below 1996 levels-down 18% through
August. In recent years, June was a particularly heavy month, usually providing
an opportunity to buy California bonds at attractive yields relative to national
levels. This opportunity did not present itself this summer as supply was both
lower and more evenly spread out. Issuance is slated to increase in September
and October, and we hope to take advantage of that. Recently we purchased some
one-year notes issued annually by the state, since the relative flatness of the
yield curve made these yields seem attractive when balanced with our long-term
investments.
<PAGE>
OUTLOOK
The national municipal market is facing a pickup in supply in coming
months, as issuers line up to borrow over both the short and long term. Interest
rates have stayed within the narrow range established over the past two years,
with relatively low volatility, and remain attractive for issuers. At the same
time, we would expect demand for municipals to remain solid, since the Taxpayer
Relief Act of 1997 did not lower personal income tax rates and did maintain
favorable tax treatment for corporations that purchase municipals.
Given the high level of consumer and business confidence, we expect the
economy to continue to perform well, although not quite as strongly as in the
first half of the year. The Federal Reserve has expressed uncertainty about why
inflation has remained so low at this stage of the expansion and is maintaining
a bias toward tightening to keep inflation in check. Until visible signs of
rising inflation appear, however, there is little reason for us to adopt
defensive postures in the funds. Despite the strong economy, we believe the
overall environment for fixed income securities remains favorable due to
continuing low inflation and fiscal restraint.
Respectfully submitted,
/s/
Patrice L. Berchtenbreiter
Chairman of the Investment Advisory Committee
California Tax-Free Money Fund
/s/
Mary J. Miller
Chairman of the Investment Advisory Committee
California Tax-Free Bond Fund
September 22, 1997
<PAGE>
T. Rowe Price California Tax-Free Funds
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
Key statistics
2/28/97 8/31/97
California Tax-Free Money Fund
- --------------------------------------------------------------------------------
Price Per Share $ 1.00 $ 1.00
Dividends Per Share
For 6 months .................................... 0.014 0.015
For 12 months ................................... 0.028 0.029
Dividend Yield (7-Day Compound) * ................... 2.85% 2.80%
Weighted Average Maturity (days) .................... 44 46
Weighted Average Quality ** ......................... First Tier First Tier
California Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Price Per Share $ ................................... 10.47 $ 10.60
Dividends Per Share
For 6 months .................................... 0.28 0.27
For 12 months ................................... 0.55 0.55
Dividend Yield *
For 6 months .................................... 5.35% 5.21%
For 12 months ................................... 5.40 5.35
Weighted Average Maturity (years) ................... 17.2 17.3
Weighted Average Effective Duration (years) ......... 7.6 7.1
Weighted Average Quality *** ........................ AA- AA-
* Dividends earned and reinvested for the periods indicated are annualized
and divided by the average daily net asset values per share for the same
period.
** All securities purchased in the money fund are rated in the two highest
categories (tiers) as established by national rating agencies or, if
unrated, are deemed of comparable quality by T. Rowe Price.
*** Based on T. Rowe Price research.
<PAGE>
T. Rowe Price California Tax-Free Funds
================================================================================
Portfolio Highlights
Sector Diversification
Percent of Percent of
Net Assets Net Assets
2/28/97 8/31/97
California Tax-Free Money Fund
- --------------------------------------------------------------------------------
Hospital Revenue ....................................... 15% 22%
Water and Sewer Revenue 15 ............................. 15
Lease Revenue .......................................... 10 13
General Obligation-Local ............................... 18 10
Nuclear Revenue 6 ...................................... 8
Air and Sea Transportation Revenue ..................... 3 7
Electric Revenue ....................................... 6 6
Dedicated Tax Revenue .................................. -- 5
Industrial and Pollution Control Revenue ............... 9 4
Pooled Loan Revenue 4 .................................. 4
All Other .............................................. 13 3
Other Assets Less Liabilities .......................... 1 3
Total .................................................. 100% 100%
California Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Dedicated Tax Revenue .................................. 16% 16%
Lease Revenue .......................................... 13 14
Water and Sewer Revenue 11 ............................. 11
Air and Sea Transportation Revenue ..................... 7 9
Prerefunded Bonds ...................................... 9 9
Housing Finance Revenue 8 .............................. 7
General Obligation - Local ............................. 6 7
Nuclear Revenue 7 ...................................... 6
Hospital Revenue ....................................... 5 5
General Obligation - State ............................. 4 3
Industrial and Pollution Control Revenue ............... 2 2
Electric Revenue ....................................... 2 2
Escrowed to Maturity ................................... 2 2
All Other .............................................. 7 5
Other Assets Less Liabilities .......................... 1 2
Total .................................................. 100% 100%
<PAGE>
T. Rowe Price California 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 a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[California Tax-Free Money Fund SEC Chart Shown here]
[California Tax-Free Bond Fund SEC chart shown here]
================================================================================
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.
================================================================================
Periods Ended 8/31/97 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
California Tax-Free Money Fund 2.96% 3.04% 2.63% 3.50%
California Tax-Free Bond Fund 9.03 7.70 6.93 7.67
Investment return represents past performance and will vary. Shares of the
bond funds may be worth more or less at redemption than at original purchase.
The Money Fund's $1.00 share price is not guaranteed, nor is the fund insured by
the U.S. government.
================================================================================
<PAGE>
T. Rowe Price California Tax-Free Money Fund
================================================================================
Unaudited
<TABLE>
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
6 Months Year
Ended Ended
8/31/97 2/28/97 2/29/96 2/28/95 2/28/94 2/28/93
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment activities
Net investment income ... 0.015* 0.028* 0.032* 0.025* 0.019* 0.023*
Distributions
Net investment income ... (0.015) (0.028) (0.032) (0.025) (0.019) (0.023)
NET ASSET VALUE
End of period ............... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Ratios/Supplemental Data
Total return ................ 1.51%* 2.87%* 3.24%* 2.55%* 1.92%* 2.31%*
Ratio of expenses to
average net assets .......... 0.55%*+ 0.55%* 0.55%* 0.55%* 0.55%* 0.55%*
Ratio of net investment
income to average
net assets .................. 3.00%*+ 2.82%* 3.20%* 2.51%* 1.90%* 2.29%*
Net assets, end of period
(in thousands) .............. $ 83,827 $ 82,210 $ 72,739 $ 76,289 $ 74,016 $ 66,617
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* Excludes expenses in excess of a 0.55% voluntary expense limitation in effect through 2/28/99.
+ Annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price California Tax-Free Bond Fund
================================================================================
Unaudited
<TABLE>
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
6 Months Year
Ended Ended
8/31/97 2/28/97 2/29/96 2/28/95 2/28/94 2/28/93
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ............ $ 10.47 $ 10.45 $ 10.00 $ 10.43 $ 10.65 $ 9.85
Investment activities
Net investment income ...... 0.27 0.55 0.55 0.55* 0.56* 0.57*
Net realized and
unrealized gain (loss) ..... 0.13 0.02 0.45 (0.41) 0.01 0.80
Total from
investment activities ...... 0.40 0.57 1.00 0.14 0.57 1.37
Distributions
Net investment income ...... (0.27) (0.55) (0.55) (0.55) (0.56) (0.57)
Net realized gain .......... -- -- -- (0.02) (0.23) --
Total distributions ........ (0.27) (0.55) (0.55) (0.57) (0.79) (0.57)
NET ASSET VALUE
End of period .................. $ 10.60 $ 10.47 $ 10.45 $ 10.00 $ 10.43 $ 10.65
Ratios/Supplemental Data
Total return ................... 3.88% 5.64% 10.28% 1.60%* 5.37%* 14.41%*
Ratio of expenses to
average net assets ............. 0.59%+ 0.62% 0.63% 0.60%* 0.60%* 0.60%*
Ratio of net investment
income to average
net assets ..................... 5.15%+ 5.29% 5.40% 5.60%* 5.19%* 5.69%*
Portfolio turnover rate ........ 31.6%+ 47.3% 61.9% 78.0% 73.4% 57.5%
Net assets, end of period
(in thousands) ................. $ 176,039 $ 160,813 $ 146,194 $ 131,953 $ 151,936 $ 143,973
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* Excludes expenses in excess of a 0.60% voluntary expense limitation in effect through 2/28/95.
+ Annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price California Tax-Free Money Fund
================================================================================
Unaudited August 31, 1997
================================================================================
Statement of Net Assets
Par Value
- --------------------------------------------------------------------------------
In thousands
CALIFORNIA 95.2%
ABAG Fin. Auth. for Nonprofit
Packard Children's, COP
VRDN (Currently 2.95%)
(AMBAC Insured) ................................ $ 1,500 $ 1,500
Alameda County, GO, TRAN, 4.50%, 7/22/98 ............... 1,000 1,005
California Dept. of Water Resources, TECP
3.55 - 3.75%, 9/22 - 9/30/97 ................... 4,041 4,041
California EFA
California Institute of Technology
VRDN (Currently 3.05%) ......................... 500 500
Stanford Univ., VRDN (Currently 2.95%) ............. 500 500
California HFFA
Catholic Healthcare West
VRDN (Currently 3.00%)
(MBIA Insured) ................................. 3,100 3,100
Kaiser Permanente, VRDN (Currently 3.00%) .......... 600 600
Pooled Loan Program
VRDN (Currently 3.05%)
(FGIC Insured) ................................. 3,000 3,000
Santa Barbara Cottage Hosp .........................
VRDN (Currently 3.00%) ......................... 3,365 3,365
California Pollution Control Fin. Auth., PCR
Pacific Gas and Electric
VRDN (Currently 3.05%) * ....................... 500 500
VRDN (Currently 3.10%) * ....................... 3,500 3,500
Shell Oil, VRDN (Currently 3.45%) * ................ 1,000 1,000
California Statewide CDA
Chevron, VRDN (Currently 3.50%) * .................. 1,700 1,700
Kaiser Permanente, VRDN (Currently 3.00%) .......... 3,100 3,100
St. Joseph Health, VRDN (Currently 2.95%) .......... 2,300 2,300
Chula Vista IDA, San Diego Gas and Electric
VRDN (Currently 3.75%) * ....................... 2,500 2,500
Irvine Public Fac. and Infrastructure Auth .............
VRDN (Currently 3.10%) ......................... 3,545 3,545
Irvine Ranch Water Dist., VRDN (Currently 3.40%) ....... 1,800 1,800
Kern High School Dist., GO, TRAN
4.50%, 8/20/98 ................................. $ 1,000 $ 1,006
Kern High School Dist., Golden Empire Schools
VRDN (Currently 3.10%) ......................... 1,100 1,100
Long Beach Harbor, TECP, 3.60 - 3.65%, 9/8 - 10/7/97 * . 2,000 2,000
<PAGE>
Los Angeles County, GO
6.40%, 9/1/97 .................................. 25 25
TRAN, 4.50%, 6/30/98 ............................... 2,000 2,010
Pension Obligation
VRDN (Currently 2.95%)
(AMBAC Insured) ................................ 1,500 1,500
Los Angeles County, Wastewater, TECP
3.55 - 3.60%, 9/11 - 10/7/97 ................... 2,100 2,100
Los Angeles County Metropolitan Transportation Auth ....
Sales Tax
VRDN (Currently 3.45%) ......................... 4,000 4,000
8.00%, 7/1/18 (Prerefunded 7/1/98+) ............ 1,575 1,659
Metropolitan Water Dist. of Southern California
VRDN (Currently 3.00%)
(AMBAC Insured) ................................ 1,390 1,390
TECP, 3.55 - 3.60%, 10/8 - 10/10/97 ................ 2,400 2,400
MSR Public Power Agency, San Juan
VRDN (Currently 3.00%)
(AMBAC Insured) ................................ 1,000 1,000
Newport Beach, Hoag Memorial Hosp ......................
VRDN (Currently 3.40%) ......................... 4,500 4,500
Oakland, COP, VRDN (Currently 3.30%) ................... 4,100 4,100
Orange County, Airport, 5.00%, 7/1/98 (MBIA Insured) * . 1,500 1,513
Riverside County, GO, TRAN, 4.50%, 6/30/98 ............. 2,000 2,009
Riverside County, COP
VRDN (Currently 3.00%) ......................... 500 500
VRDN (Currently 3.10%) ......................... 1,392 1,392
Sacramento County, GO, TRAN, 4.50%, 9/30/97 ............ 480 480
San Francisco City and County Int'l. Airport, TECP
3.65 - 3.70%, 10/23 - 10/24/97 * ............... 2,000 2,000
San Jose/Santa Clara Water Fin. Auth ...................
VRDN (Currently 2.95%) ......................... 1,000 1,000
Santa Clara/El Camino Hosp. Dist., Valley Medical Center
VRDN (Currently 3.20%) ......................... $490 $490
Southern California Public Power Auth ..................
VRDN (Currently 2.95%)
(AMBAC Insured) ................................ 4,100 4,100
Total California (Cost $79,830) ........................ 79,830
WYOMING 1.2%
Uinta County, PCR, Chevron, VRDN (Currently 3.80%) ..... 1,000 1,000
Total Wyoming (Cost $1,000) ........................... 1,000
Total Investments in Securities
96.4% of Net Assets (Cost $80,830) .................... $ 80,830
Other Assets Less Liabilities .......................... 2,997
NET ASSETS ............................................. $ 83,827
Net Assets Consist of:
Accumulated net investment income -
net of distributions ................................... $ 4
<PAGE>
Accumulated net realized gain/loss -
net of distributions ................................... (101)
Paid-in-capital applicable to 83,927,860
no par value shares of beneficial
interest outstanding; unlimited
number of shares authorized ............................ 83,924
NET ASSETS ............................................. $ 83,827
NET ASSET VALUE PER SHARE .............................. $ 1.00
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
CDA Community Development Administration
COP Certificates of Participation
EFA Educational Facility Authority
FGIC Financial Guaranty Insurance Company
GO General Obligation
HFFA Health Facility Financing Authority
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
TECP Tax-Exempt Commercial Paper
TRAN Tax Revenue Anticipation Note
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
T. Rowe Price California Tax-Free Bond Fund
================================================================================
Unaudited August 31, 1997
================================================================================
Statement of Net Assets
Par Value
- --------------------------------------------------------------------------------
In thousands
CALIFORNIA 96.2%
Alameda County, Public Fac., COP
6.00%, 9/1/21 (MBIA Insured) ....................... $980 $1,033
Anaheim PFA, Public Improvements
5.00%, 9/1/27 (FSA Insured) ........................ 3,435 3,198
Brea PFA, Tax Allocation Redev .............................
6.75%, 8/1/22 (MBIA Insured) ....................... 1,435 1,571
California, GO
5.25%, 10/1/20 ..................................... 1,700 1,656
6.40%, 2/1/20* ..................................... 2,200 2,264
<PAGE>
California Dept. of Water Resources
Central Valley
7.00%, 12/1/11 ..................................... 1,730 2,087
7.00%, 12/1/12 ..................................... 1,000 1,207
California EFA
Pooled College and Univ ................................
5.60%, 12/1/14 ..................................... 1,000 1,008
5.60%, 12/1/20 ..................................... 1,000 993
St. Mary's College of California
7.50%, 10/1/20 (Prerefunded 10/1/00+) .............. 2,000 2,232
Stanford Univ., 5.25%, 12/1/26 ......................... 1,500 1,467
California Health Fac. Fin. Auth., Pomona Valley Hosp ......
5.75%, 7/1/15 (MBIA Insured) ....................... 1,800 1,858
California HFFA
Catholic Healthcare West
VRDN (Currently 3.00%)
(MBIA Insured) ..................................... 200 200
5.25%, 7/1/23 (AMBAC Insured) ...................... 1,000 958
California Housing Fin. Agency
6.15%, 8/1/16 * .................................... 1,000 1,033
6.70%, 8/1/15 ...................................... 1,100 1,156
6.70%, 8/1/25 * .................................... 940 994
6.85%, 8/1/17 ...................................... 3,015 3,177
7.20%, 8/1/09 ...................................... 260 272
7.25%, 8/1/10 ...................................... 185 193
7.25%, 8/1/17 ...................................... 1,000 1,076
7.625%, 8/1/09 ..................................... 720 740
California Housing Fin. Agency
7.875%, 8/1/19 ..................................... $365 $377
8.00%, 8/1/19 ...................................... 185 193
8.10%, 8/1/07 ...................................... 190 194
8.20%, 8/1/17 ...................................... 230 235
California Pollution Control Fin. Auth., PCR
Laidlaw Enviromental, 6.70%, 7/1/07 .................... 1,000 1,018
Pacific Gas and Electric
5.85%, 12/1/23 (MBIA Insured) * .................... 2,000 2,030
Resource Recovery, WMX Technologies
7.15%, 2/1/11 * .................................... 1,500 1,631
Shell Oil
VRDN (Currently 3.40%) ............................. 900 900
VRDN (Currently 3.45%) * ........................... 400 400
Southern California Edison
6.85%, 12/1/08 (AMBAC Insured) ..................... 1,000 1,063
California Public Works Board
Dept. of Corrections
6.875%, 11/1/14
(Prerefunded 11/1/04+) ............................. 1,000 1,165
Univ. of California
5.50%, 6/1/14 ...................................... 2,000 2,041
6.40%, 12/1/16 (AMBAC Insured)
(Prerefunded 12/1/02+) ............................. 1,000 1,117
<PAGE>
California Statewide CDA
Chevron, VRDN (Currently 3.50%) * ...................... 400 400
Sutter Health, COP
5.50%, 8/15/23 (MBIA Insured) ...................... 2,000 1,962
Castaic Lake Water Agency
Water System Improvement, COP
7.00%, 8/1/12 (MBIA Insured) ....................... 1,000 1,204
7.00%, 8/1/13 (MBIA Insured) ....................... 1,700 2,049
Castaic Union School Dist., GO
Zero Coupon, 5/1/18 (FGIC Insured) ................. 5,175 1,639
Central Coast Water Auth., State Water Project Regional Fac
6.60%, 10/1/22 (AMBAC Insured)
(Prerefunded 10/1/02+) ............................. 1,000 1,123
Chula Vista IDA, San Diego Gas and Electric
VRDN (Currently 3.75%) * ........................... 1,600 1,600
Contra Costa County, Merrithew Memorial Hosp., COP
5.375%, 11/1/17 (MBIA Insured) ..................... $2,185 $2,149
Contra Costa Water Dist ....................................
7.625%, 10/1/08
(Prerefunded 10/1/98+) ............................. 500 530
Corona Redev. Agency, Tax Allocation
6.25%, 9/1/13 (FGIC Insured) ....................... 1,000 1,085
Coronado CDA, Tax Allocation, 5.70%, 9/1/12 (FSA Insured) .. 1,000 1,049
Dry Creek Joint Elementary School Dist., GO
Capital Appreciation
Zero Coupon, 8/1/13 (FSA Insured) .................. 1,300 550
Zero Coupon, 8/1/14 (FSA Insured) .................. 1,340 532
East Bay Municipal Utility Dist., Water, 6.00%, 6/1/12 ..... 2,000 2,100
Emeryville PFA, Housing Increment Loan, 6.20%, 9/1/25 ...... 1,000 1,024
Escondido, Multi-Family Housing
Terrace Gardens Apartments, 5.40%, 1/1/27 .............. 1,000 1,028
Fontana Unified School Dist., GO, Capital Appreciation
Zero Coupon, 7/1/11 (MBIA Insured) ................. 1,100 528
Foothill / Eastern Transportation Corridor Agency
California Toll Road, Zero Coupon, 1/1/17 .............. 4,000 1,273
Fresno Joint Powers Fin. Auth, 5.75%, 9/2/98 ............... 300 302
Inglewood Redev. Agency, Century Redev., 6.125%, 7/1/23 .... 2,800 2,856
Inland Empire Solid Waste Fin. Auth ........................
San Bernardino County Landfills
6.25%, 8/1/11 (FSA Insured) * ...................... 1,000 1,101
Kern County Union High School Dist., GO
7.00%, 8/1/10 (MBIA Insured) ....................... 1,000 1,195
Long Beach
Harbor
5.25%, 5/15/25 (MBIA Insured) * .................... 2,000 1,907
7.25%, 5/15/19 * ................................... 2,500 2,603
Los Angeles City
Dept. of Water, Power and Electric
6.40%, 5/15/28 ..................................... 2,500 2,672
Wastewater, 7.10%, 6/1/18 .............................. 1,000 1,065
<PAGE>
Los Angeles County
Civic Center Heating and Refrigerating Plant, COP
8.00%, 6/1/10 (Prerefunded 6/1/98+) ................ 500 525
Los Angeles County
Marina del Rey, COP, 6.50%, 7/1/08 ..................... $1,000 $1,060
Museum of Art, VRDN (Currently 3.15%) .................. 600 600
Los Angeles County Metropolitan Transportation Auth ........
Sales Tax
3.45%, 7/1/17 ...................................... 625 625
6.00%, 7/1/26 (MBIA Insured) ....................... 2,000 2,094
7.40%, 7/1/15 ...................................... 515 553
Los Angeles County Public Works Fin. Auth ..................
Multiple Capital Fac ...................................
5.125%, 6/1/17 (AMBAC Insured) ..................... 4,000 3,853
5.125%, 12/1/17 (AMBAC Insured) .................... 1,500 1,442
Rowland Heights, 5.50%, 10/1/18 (FSA Insured) .......... 1,500 1,527
Los Angeles Harbor Dept ....................................
6.50%, 8/1/25 (Prerefunded 8/1/02+) ................ 1,000 1,115
6.625%, 8/1/19 * ................................... 2,500 2,702
7.60%, 10/1/18
(Escrowed to Maturity) ............................. 3,000 3,741
Los Angeles Municipal Improvement Central Library
6.35%, 6/1/20 ...................................... 1,500 1,593
Midpeninsula Regional Open Space Dist ......................
5.90%, 9/1/14 (AMBAC Insured) ...................... 1,250 1,310
Modesto Health Fac., Memorial Hosp .........................
5.125%, 6/1/17 (MBIA Insured) ...................... 745 716
Modesto Irrigation Dist. Fin. Auth .........................
Geysers, Geothermal Project
6.00%, 10/1/15 (MBIA Insured) ...................... 1,500 1,590
Mojave Water Agency, Morongo Basin
5.75%, 9/1/15 (FGIC Insured) ....................... 2,000 2,069
Mt. Diablo Hosp. Dist ......................................
8.00%, 12/1/11 (AMBAC Insured)
(Prerefunded 12/1/00+) ............................. 1,250 1,419
Newport Beach
Hoag Memorial Hosp .....................................
VRDN (Currently 3.40%) ............................. 1,800 1,800
Oakland, GO, 7.60%, 8/1/21 (FGIC Insured) .................. 3,500 3,674
Orange County
Juvenile Justice Center, COP
7.625%, 6/1/19 (Prerefunded 6/1/99+) ............... 1,750 1,888
Orange County
Recovery
6.00%, 6/1/10 (MBIA Insured) ....................... $2,500 $2,723
COP, 6.00%, 7/1/26 (MBIA Insured) .................. 1,000 1,048
Orange County Local Transportation Auth., Sales Tax
6.00%, 2/15/09 (AMBAC Insured) ..................... 750 827
Orchard School Dist., GO, 6.50%, 8/1/19 (FGIC Insured) ..... 1,000 1,114
Placentia PFA, Special Tax, 6.60%, 9/1/15 .................. 1,000 1,020
<PAGE>
Pomona Unified School Dist., GO
6.15%, 8/1/15 (MBIA Insured) ....................... 1,000 1,102
Rancho Mirage Joint Powers Fin. Auth .......................
Eisenhower Medical Center
5.25%, 7/1/17 (MBIA Insured) ....................... 1,000 970
Riverside County, Desert Justice Fac., COP
6.00%, 12/1/12 (MBIA Insured) ...................... 1,000 1,057
Sacramento City Fin. Auth., Lease, 5.00%, 11/1/14 .......... 2,000 1,950
Sacramento County, Public Fac ..............................
Coroner Crime Laboratory, COP
6.375%, 10/1/14 (AMBAC Insured) .................... 1,000 1,082
Saddleback Valley Unified School Dist ......................
Special Tax
Zero Coupon, 9/1/19 (FSA Insured) .................. 2,370 692
6.00%, 9/1/15 (FSA Insured) ........................ 1,375 1,501
San Bernardino County
Medical Center, COP, 5.50%, 8/1/07 ..................... 1,500 1,569
West Valley Detention Center
7.70%, 11/1/18 (Prerefunded 11/1/98+) .............. 500 531
San Diego, IDR, San Diego Gas and Electric
6.40%, 9/1/18 (MBIA Insured) ....................... 1,175 1,275
San Francisco Bay Area Rapid Transit, Sales Tax
5.50%, 7/1/15 (FGIC Insured) ....................... 1,800 1,820
San Francisco City and County Airport Commission
Int'l. Airport
5.625%, 5/1/21 (FGIC Insured) ...................... 1,750 1,763
5.80%, 5/1/21 (FGIC Insured) * ..................... 1,000 1,011
6.30%, 5/1/25 (FGIC Insured) * ..................... 1,000 1,049
6.50%, 5/1/18 (AMBAC Insured) * .................... 4,000 4,337
San Francisco City and County Public Utility Commission
6.00%, 11/1/15 ..................................... $3,000 $3,110
8.00%, 11/1/11 ..................................... 1,000 1,027
San Jose Redev. Agency, Merged Area Redev ..................
VRDN (Currently 3.70%) ............................. 400 400
Santa Ana Housing Auth., Villa Del Sol Apartments
5.65%, 11/1/21 * ................................... 1,000 1,035
Santa Clara, Electric, 6.25%, 7/1/19 (MBIA Insured) ........ 2,000 2,145
Santa Clara County Fin. Auth., VMC Fac .....................
7.75%, 11/15/11 (AMBAC Insured) .................... 1,000 1,282
Santa Clara Redev. Agency, Bayshore North
7.00%, 7/1/10 (AMBAC Insured) ...................... 3,000 3,592
Santa Margarita/Dana Point Auth ............................
7.25%, 8/1/10 (MBIA Insured) ....................... 1,000 1,222
South Orange County PFA, 7.00%, 9/1/07 (MBIA Insured) ...... 2,000 2,371
Southern California Public Power Auth ......................
VRDN (Currently 2.95%)
(AMBAC Insured) .................................... 200 200
6.75%, 7/1/10 ...................................... 2,100 2,427
6.75%, 7/1/12 ...................................... 1,700 1,974
Torrance, Little Co. of Mary Hosp., 6.875%, 7/1/15 ......... 1,275 1,370
<PAGE>
Tri City Hosp. Dist ........................................
7.50%, 2/1/17 (MBIA Insured)
(Prerefunded 2/1/02+) .............................. 2,000 2,292
Tulare County, Capital Improvement, COP
6.00%, 2/15/16 (MBIA Insured) ...................... 1,000 1,049
Walnut Valley Unified School Dist., GO
7.20%, 2/1/16 (MBIA Insured) ....................... 1,000 1,208
Total California (Cost $158,902) ........................... 169,304
PUERTO RICO 1.5%
Puerto Rico Electric Power Auth
7.00%, 7/1/21 (Prerefunded 7/1/01+) ........... 1,000 1,116
Puerto Rico Public Building Auth., GO, Gov't. Fac
5.00%, 7/1/27 (AMBAC Insured) ................. 1,700 1,604
Total Puerto Rico (Cost $2,585) ....................... 2,720
Total Investments in Securities
97.7% of Net Assets (Cost $161,487) ................... $ 172,024
Other Assets Less Liabilities ......................... 4,015
NET ASSETS ............................................ $ 176,039
Net Assets Consist of:
Accumulated net investment income -
net of distributions .................................. $ 6
Accumulated net realized gain/loss -
net of distributions .................................. (732)
Net unrealized gain (loss) ............................ 10,537
Paid-in-capital applicable to 16,607,647
no par value shares of beneficial
interest outstanding; unlimited
number of shares authorized ........................... 166,228
NET ASSETS ............................................ $ 176,039
NET ASSET VALUE PER SHARE ............................. $10.60
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
CDA Community Development Administration
COP Certificates of Participation
EFA Educational Facility Authority
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GO General Obligation
HFFA Health Facility Financing Authority
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
PFA Public Facility Authority
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price California Tax-Free Funds
================================================================================
Unaudited
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
Money Fund Bond Fund
---------- ---------
6 Months 6 Months
Ended Ended
8/31/97 8/31/97
Investment Income
Interest income ........................................ $1,511 $ 4,820
Expenses
Investment management .............................. 122 357
Custody and accounting ............................. 48 51
Shareholder servicing .............................. 45 62
Prospectus and shareholder reports ................. 6 9
Legal and audit .................................... 6 5
Trustees ........................................... 3 3
Registration ....................................... 2 8
Miscellaneous ...................................... 2 3
Total expenses ..................................... 234 498
Net investment income .................................. 1,277 4,322
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities ......................................... 4 614
Futures ............................................ -- (178)
Net realized gain (loss) ........................... 4 436
Change in net unrealized gain or loss on securities .... -- 1,737
Net realized and unrealized gain (loss) ................ 4 2,173
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ................................. $1,281 $ 6,495
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price California Tax-Free Funds
================================================================================
Unaudited
<TABLE>
====================================================================================================================================
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
In thousands
<CAPTION>
Money Fund Bond Fund
------------------------------ -------------------------------
6 Months Year 6 Months Year
Ended Ended Ended Ended
8/31/97 2/28/97 8/31/97 2/28/97
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ........................ $ 1,277 $ 2,134 $ 4,322 $ 7,940
Net realized gain (loss) ..................... 4 13 436 39
Change in net unrealized
gain or loss ................................. -- -- 1737 323
Increase (decrease) in
net assets from operations ................... 1,281 2,147 6,495 8,302
Distributions to shareholders
Net investment income ........................ (1,277) (2,134) (4,322) (7,940)
Capital share transactions *
Shares sold .................................. 38,579 78,584 23,087 32,731
Distributions reinvested ..................... 1,186 1,995 2,984 5,523
Shares redeemed .............................. (38,152) (71,121) (13,018) (23,997)
Increase (decrease) in
net assets from capital
share transactions ........................... 1,613 9,458 13,053 14,257
Net Assets
Increase (decrease)
during period .................................... 1,617 9,471 15,226 14,619
Beginning of period .............................. 82,210 72,739 160,813 146,194
End of period .................................... $ 83,827 $ 82,210 $ 176,039 $ 160,813
*Share information
Shares sold .................................. 38,579 78,584 2,203 3,166
Distributions reinvested ..................... 1,186 1,995 284 535
Shares redeeemed ............................. (38,152) (71,121) (1,243) (2,328)
Increase (decrease)
in shares outstanding ........................ 1,613 9,458 1,244 1,373
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price California Tax-Free Funds
================================================================================
Unaudited August 31, 1997
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price California Tax-Free Income Trust (the trust) is registered
under the Investment Company Act of 1940. The California Tax-Free Money Fund
(the Money Fund) and the California Tax-Free Bond Fund (the Bond Fund),
diversified, open-end management investment companies, are two of the portfolios
established by the trust and commenced operations on September 15, 1986.
VALUATION Debt securities are generally traded in the over-the-counter
market. Except for securities held by the Money Fund, 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. Securities held by the
Money Fund are valued at amortized cost.
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.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities for the Bond Fund, other than
short-term securities, aggregated $35,672,000 and $25,063,000, respectivly, for
the six months ended August 31, 1997.
<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. The Money Fund has unused realized capital loss carryforwards for
federal income tax purposes of $105,000, of which $9,000 expires in 1998, and
$96,000 in 2003. The Bond Fund has unused realized capital loss carry-forwards
for federal income tax purposes of $1,085,000, of which $1,084,000 expires in
2003, and $1,000 in 2005. Each fund intends to retain gains realized in future
periods that may be offset by available capital loss carryforwards.
At August 31, 1997, the aggregate costs of investments for the Money and
Bond Funds for federal income tax and financial reporting purposes were
$80,830,000 and $161,487,000, respectively. For the Money Fund, amortized cost
is equivalent to value; and for the Bond Fund, net unrealized gain aggregated
$10,537,000, of which $10,596,000 related to appreciated investments and $59,000
to depreciated investments.
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 $20,000 and $63,000 were payable at August 31, 1997 by the Money 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
for the Money and Bond Funds, 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 0.30% for assets in excess of $80
billion. At August 31, 1997, and for the six months then ended, the effective
annual group fee rates were 0.32% and 0.33%, respectively. 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, 1999, for the Money Fund
which would cause the Money Fund's ratio of expenses to average net assets to
exceed 0.55%. Pursuant to this agreement, $59,000 of management fees were not
accrued by the Money Fund for the six months ended August 31, 1997, and $271,000
remain unaccrued from a prior period. Subject to shareholder approval, the Money
Fund may reimburse the manager for these expenses, provided that average net
assets have grown or expenses have declined sufficiently to allow reimbursement
without causing the fund's ratio of expenses to average net assets to exceed
0.55%.
<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 Money and Bond Funds incurred expenses
pursuant to these related party agreements totaling approximately $69,000 and
$85,000, respectively, for the six months ended August 31, 1997, of which
$13,000 and $16,000, respectively, were payable at period-end.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access [Registration Mark]:
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
www.troweprice.com
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 of the
T. Rowe Price California Tax-Free Funds.
<PAGE>
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. C05-051 8/31/97
