- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
California Tax-Free Funds
- --------------------------------------------------------------------------------
February 28, 1999
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
* Municipal bonds fared well amid the sometimes turbulent financial market
conditions of the past year.
* Yields on tax-free bonds approached parity with yields on taxable bonds
before easing in recent months.
* Both funds' 6- and 12-month returns exceeded their respective Lipper peer
group averages, aided by portfolio management decisions and below-average
expenses.
* California's economy remained strong, fueled by rapid growth in employment
and personal income.
* We expect continued low inflation and slowing economic growth to benefit
municipal bonds, which still carry attractive yields relative to taxable
bonds.
================================================================================
FELLOW SHAREHOLDERS
- --------------------------------------------------------------------------------
Municipal bonds and your funds provided good returns for the 6- and
12-month periods ended February 28, 1999. The tax-exempt market avoided much of
the tur moil in other fixed income markets. Treasury yields plunged from August
to October in a massive flight to quality and then bounced back as the global
financial crisis eased and the U.S. economy remained remarkably strong. The
funds outperformed their benchmarks for both periods, a reflection of our
management decisions and below-average expenses.
================================================================================
MARKET ENVIRONMENT
- --------------------------------------------------------------------------------
Major economic developments here and overseas during the fiscal year
affected the fixed income markets. In the first half, investors expected the
global turmoil to hurt the U.S. economy and began pushing interest rates lower.
Russia's debt default in August created havoc in many markets and caused a
global liquidity crisis that contributed to the flight to U.S. Treasuries.
Yields on 30-year Treasuries fell to a record low of 4.72% in October from 5.92%
last February. Municipal yields also fell, but the decline was more muted as
long-term rates dropped to 4.64% in October from 5.08% last February. As a
result, municipal yields approached parity with Treasury yields in longer
maturities, an unusual event in a year when major tax reform was not under
discussion. In response to the credit crunch, the Federal Reserve cut interest
rates three times last fall to cushion the domestic economy from weakness abroad
and restore investor confidence.
[Line graph showing California Bond Index and California Money Index from
2/98 through 2/99; Source: T. Rowe Price Associates]
<PAGE>
Yields reversed in December following signs of stronger-than-expected U.S.
growth and a sense that the liquidity crunch had abated. Early this year, news
of robust fourth quarter GDP growth (6.1%) helped fuel the rise in rates. As a
result, 30-year Treasury yields ended the period nearly a full percentage point
above their October lows. Municipal yields also rose but, again, not as much as
Treasury yields. Interest rates on most municipal securities ended the 12 months
virtually unchanged except among short-term issues, as shown in the chart on
page 1.
The yield curve steepened as short-term and money market securities
followed the Fed's lead lower while heavy supply helped exert upward pressure on
long-term rates. For the calendar year, new bond issuance reached $284 billion
nationwide, up 29% from 1997, a level only surpassed in 1993.
California's economy continued to expand at a healthy pace last year, with
employment growth of 3.2% and personal income growth of 6.4%. The state's
unemployment rate in December was 5.9%, compared with 6.3% in December 1997. The
state's forecast is for slower growth this year, but employment growth is still
expected to average 2.1% in 1999 (versus an estimated 1.4% U.S. average) and
2.4% in 2000. Personal income growth is projected at 5.1% in 1999 (compared with
4.7% for the nation) and 5.5% in 2000. The state's high-tech manufacturing
sector has been affected by the Asian crisis, but growth in demand for software
and services has been an offsetting factor.
==================================================
Risk-Adjusted Performance
- --------------------------------------------------
The California Tax-Free Bond Fund is highly
rated by Morningstar for its risk-adjusted
performance, which takes into account the
volatility experienced in earning a particular
return. (Money funds are not rated.) As of
February 28, 1999, the fund was rated four stars
overall. The top 10% of the funds in each category
receive five stars, the next 22.5% receive four
stars, and the next 35% receive three stars. The
fund was rated among 1,576, 1,109, and 369
municipal bond funds for the 3-, 5-, and 10-year
periods ended February 28, 1999, respectively.* Of
course, past performance does not guarantee future
results.
* Morningstar proprietary ratings reflect
historical risk-adjusted performance as of 2/28/99
and may change monthly. Ratings are calculated
from the fund's 3-, 5-, and 10-year average annual
returns in excess of 90-day Treasury bill returns
with appropriate fee adjustments and a risk factor
that reflects fund performance below 90-day
Treasury bill returns. The California Tax-Free
Bond Fund was rated 4 stars for the 3-year period,
4 stars for the 5-year period, and 3 stars for the
10-year period.
==================================================
<PAGE>
Continued economic improvement boosted California's fiscal condition,
leading Moody's Investors Services, Inc., to upgrade its rating on California's
general obligation debt to Aa3 from A1 in October. Standard & Poor's maintains
an A+ rating with a positive outlook, and Fitch upgraded the state's general
obligation bond rating from A+ to AA- in late 1997. For the fiscal year ended
June 30, 1998, California's general fund balance increased to $2.8 billion from
$0.7 billion a year earlier. Another noteworthy event, indicating that
California residents are confident about the future, was voter approval in
November of Proposition 1A, which permits the issuance of a record $9.2 billion
of bonds for public school construction and renovation and for higher education
facilities.
================================================================================
CALIFORNIA TAX-FREE MONEY FUND
- --------------------------------------------------------------------------------
Performance Comparison
----------------------
Periods Ended 2/28/99 6 Months 12 Months
--------------------- -------- ---------
California Tax-Free
Money Fund 1.20% 2.65%
Lipper California Tax-Exempt
Money Market Funds Average 1.19 2.62
================================================================================
Your fund delivered returns of 1.20% and 2.65%, respectively, for the 6-
and 12-month periods ended February 28, as shown in the table. Both results were
slightly higher than those of our peer group average.
Over the past 12 months, our strategy has been to maintain a
longer-than-average maturity during a time of generally declining yields. At the
end of the period, the fund had a weighted average maturity of 51 days compared
with our peer group average of 40 days. Fund results were aided by our maturity
posture and by our below-average expense ratio of 0.55%, about eight basis
points lower than the average of 55 California tax-exempt money funds tracked by
Lipper, Inc.
In addition to the Fed's rate cuts, supply and demand conditions played a
key role in pushing money market rates lower in recent months. On the supply
front, the improved financial condition of many municipalities, along with low
long-term rates, has drastically reduced the short-term borrowing needs of
issuers. For example, last year the volume of municipal note issuance in the
U.S. was the lowest since 1989, and borrowings by the State of California,
typically a mainstay of the municipal note market, were just over half of 1997's
total. Demand has been solid, although municipals did not receive anything like
the flood of money that sought refuge in the taxable money market last summer
and fall. This combination of reduced supply and steady demand has kept yields
on tax-free money market securities low relative to those on taxable issues.
We expect to continue our more aggressive strategy in the coming months,
based on the imbalance between supply and demand coupled with our expectation of
a stable monetary policy.
<PAGE>
================================================================================
CALIFORNIA TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
Performance Comparison
----------------------
Periods Ended 2/28/99 6 Months 12 Months
--------------------- -------- ---------
California Tax-Free Bond Fund 2.38% 5.95%
Lipper California Municipal
Debt Funds Average 2.09 5.43
================================================================================
Your fund delivered solid returns of 2.38% and 5.95%, respectively, for the
6- and 12-month periods ended February 28. Both results exceeded those of our
peer group average. The fund's six-month returns came exclusively from coupon
income, as the share price fell slightly to $10.96 from $10.98 on August 31.
(For information, see the Key Statistics table on page 7.) For the 12-month
period, the fund benefited from a modest rise in share price from $10.88 to
$10.96. Income for the past year was 52 cents per share, accounting for most of
your return. Fund results were aided by our longer-than-average duration, the
fund's generally high credit quality, our focus on maintaining income, and our
below-average expenses. The fund's expense ratio of 0.58% is nearly a half
percentage point below the average of 102 California tax-exempt bond funds
tracked by Lipper, Inc.
We kept duration slightly long due to several factors: the absence of any
inflationary pressures, the global demand for U.S. Treasury bonds as a result of
the global financial crisis, and the exceptional value offered in the municipal
market due to imbalances in supply and demand. (Duration is a measure of a bond
fund's sensitivity to interest rates. For example, a fund with a duration of
seven years would fall or rise about 7% in price in response to a
one-percentage-point rise or fall in interest rates.) This strategy proved
rewarding especially during late summer and early fall. Our longer-term bonds
provided higher income and greater price appreciation as long-term interest
rates declined to 30-year lows. Municipal yields have moved in a narrow range
since then, though they trended higher in February. In the past two months, we
have moved duration lower for several reasons: concerns about continued economic
strength, a shift in the Federal Reserve's posture away from a bias toward
easing, and the historical evidence that the first quarter is often not a strong
one for the municipal market. If municipal yields move higher from here,
however, we would likely extend duration again, because we believe the
low-inflation trend will remain intact.
The fund's average credit quality remained high at AA-, largely a
reflection of the high number of California bond issues carrying insurance.
While a year ago we regretted not having more exposure to lower-quality
(higher-yielding) bonds, our high credit quality benefited the fund over the
past year as lower-quality issues underperformed. At this point we see some
opportunities to buy lower-quality bonds with attractive yields, and will do so
if they meet our credit standards. Our sector diversification has changed
somewhat since our last report. We added to local general obligation bonds and
to transportation bonds, in recognition of both the growing tax base and
above-normal issuance for transportation projects. We also raised our exposure
to housing bonds with higher yields.
<PAGE>
High tax-free income is, of course, the fund's principal objective. With
the passage of time in a lower interest rate environment, the fund's income
declines as older, higher-yielding holdings mature or are called by the issuer.
For example, dividends per share for the 12 months ended February 28 were 52
cents compared with 54 cents for the preceding fiscal year. While we can't
change the course of interest rates, we can mitigate the effects by holding onto
higher-yielding bonds and putting new cash to work in the long end of the market
where rates are highest. We have overweighted noncallable bonds in the portfolio
as a way to preserve income. Strong cash flow over the past year (assets are up
15%) has also permitted us to limit our holdings of lower-yielding cash
reserves.
================================================================================
OUTLOOK
- --------------------------------------------------------------------------------
As noted, California enjoys a robust economy, state coffers are full, and
the state's debt ratings have been upgraded. Looking nationally, we believe the
forces supporting low inflation will remain intact for the foreseeable future.
Despite the economy's strong pace through the beginning of the year, we expect a
decline in growth toward a more modest and sustainable level later this year.
The Federal Reserve appears to have adopted a neutral monetary bias in the
belief that the economy contains an equal measure of upside and downside risks.
So far this year, decreasing municipal issuance, strong demand, and
better-than-expected economic growth have helped tax-exempt bonds outperform
Treasuries, where yields have continued to rise from last year's lows. As a
result, municipal yields are no longer near parity with taxable yields. Overall,
however, the taxable equivalent yields available on tax-free bonds are still
very appealing, and we are optimistic about the outlook for municipal bonds
through the rest of the year.
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
March 19, 1999
==================================================
NEW INVESTOR CENTER
- --------------------------------------------------
We are pleased to announce that T. Rowe Price
will soon open a new Investor Center in the Los
Angeles area. The current Investor Center in
downtown Los Angeles, on South Flower Street, will
close on May 14. Details about the new facility
will be provided to shareholders in a few weeks.
===================================================
================================================================================
<PAGE>
T. Rowe Price California Tax-Free Funds
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
- --------------------
KEY STATISTICS
- --------------
8/31/98 2/28/99
------- -------
CALIFORNIA TAX-FREE MONEY FUND
- ------------------------------
Price Per Share $1.00 $1.00
Dividends Per Share
For 6 months 0.014 0.012
For 12 months 0.029 0.026
Dividend Yield (7-Day Compound) * 2.62% 2.17%
Weighted Average Maturity (days) 49 51
Weighted Average Quality ** First Tier First Tier
CALIFORNIA TAX-FREE BOND FUND
- -----------------------------
Price Per Share $10.98 $10.96
Dividends Per Share
For 6 months 0.26 0.26
For 12 months 0.53 0.52
Dividend Yield *
For 6 months 4.89% 4.84%
For 12 months 5.05 4.89
30-Day Standardized Yield 4.23 3.97
Weighted Average Maturity (years) 17.7 16.3
Weighted Average Effective Duration (years) 7.6 7.2
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.
** 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
8/31/98 2/28/99
------- -------
CALIFORNIA TAX-FREE MONEY FUND
- ------------------------------
Hospital Revenue 23% 17%
Water and Sewer Revenue 10 12
Lease Revenue 8 12
General Obligation N Local 13 12
Nuclear Revenue 8 10
Prerefunded Revenue 11 10
Industrial and Pollution Control Revenue 7 6
Educational Revenue 1 5
Air and Sea Transportation Revenue 11 5
Dedicated Tax Revenue 5 3
Electric Revenue 1 3
All Other 3 2
Other Assets Less Liabilities -1 3
- ----------------------------- -- -
Total 100% 100%
CALIFORNIA TAX-FREE BOND FUND
- -----------------------------
Dedicated Tax Revenue 26% 24%
Lease Revenue 10 10
Prerefunded Bonds 9 10
General Obligation N Local 7 9
Air and Sea Transportation Revenue 5 7
Water and Sewer Revenue 9 7
Housing Finance Revenue 5 7
Nuclear Revenue 4 5
Hospital Revenue 5 5
General Obligation N State 5 4
Escrowed to Maturity 2 3
Electric Revenue 3 3
Ground Transportation Revenue 3 2
All Other 6 5
Other Assets Less Liabilities 1 -1
- ----------------------------- - --
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.
[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 2/28/99 1 Year 3 Years 5 Years 10 Years
- --------------------- ------ ------- ------- --------
California Tax-Free Money Fund 2.65% 2.84% 2.86% 3.22%
California Tax-Free Bond Fund 5.95 6.95 6.51 7.73
Investment return represents past performance and will vary. Shares of the
bond fund may be worth more or less at redemption than at original purchase.
Investments in the Money Fund are not insured or guaranteed by the FDICor any
other government agency. Although it seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
fund.
================================================================================
T. Rowe Price California Tax-Free Money Fund
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
- --------------------
Year
Ended
2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
------- ------- ------- ------- -------
NET ASSET VALUE
- ---------------
Beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment activities
Net investment income 0.026* 0.030* 0.028* 0.032* 0.025*
Distributions
Net investment income (0.026) (0.030) (0.028) (0.032) (0.025)
NET ASSET VALUE
End of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
<PAGE>
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Total return # 2.65%* 3.01%* 2.87%* 3.24%* 2.55%*
Ratio of total expenses to
average net assets 0.55%* 0.55%* 0.55%* 0.55%* 0.55%*
Ratio of net investment
income to average
net assets 2.62%* 2.98%* 2.82%* 3.20%* 2.51%*
Net assets, end of period
(in thousands) $ 102,346 $ 92,406 $ 82,210 $ 72,739 $ 76,289
- --------------------------------------------------------------------------------
# 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 0.55% voluntary expense limitation in
effect through 2/28/99.
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price California Tax-Free Money Fund
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
- --------------------
Year
Ended
2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
------- ------- ------- ------- -------
NET ASSET VALUE
- ---------------
Beginning of period $ 10.88 $ 10.47 $ 10.45 $ 10.00 $ 10.43
Investment activities
Net investment income 0.52 0.54 0.55 0.55 0.55*
Net realized and
unrealized gain (loss) 0.11 0.41 0.02 0.45 (0.41)
Total from
investment activities 0.63 0.95 0.57 1.00 0.14
Distributions
Net investment income (0.52) (0.54) (0.55) (0.55) (0.55)
Net realized gain (0.03) - - - (0.02)
Total distributions (0.55) (0.54) (0.55) (0.55) (0.57)
<PAGE>
NET ASSET VALUE
- ---------------
End of period $ 10.96 $ 10.88 $ 10.47 $ 10.45 $ 10.00
Ratios/Supplemental Data
Total return# 5.95% 9.31% 5.64% 10.28% 1.60%*
Ratio of total expenses to
average net assets 0.58% 0.58% 0.62% 0.63% 0.60%*
Ratio of net investment
income to average
net assets 4.80% 5.09% 5.29% 5.40% 5.60%*
Portfolio turnover rate 27.2% 35.0% 47.3% 61.9% 78.0%
Net assets, end of period
(in thousands) $ 226,001 $ 195,100 $160,813 $ 146,194 $ 131,953
- --------------------------------------------------------------------------------
# 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 0.60% voluntary expense limitation in
effect through 2/28/95.
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price California Tax-Free Money Fund
- --------------------------------------------------------------------------------
February 28, 1999
STATEMENT OF NET ASSETS
Par Value
In thousands
CALIFORNIA 96.3%
Alameda County, GO, TAN, 4.50%, 7/7/99 2,000 $ 2,006
California, GO
5.00%, 10/1/99 200 202
5.50%, 9/1/99 830 841
6.60%, 5/1/99 250 252
8.90%, 10/1/99 100 103
California Dept. of Water Resources, 8.75%, 12/1/99 3,050 3,182
California Ed. Fac. Auth.
Claremont Mckenna College, 2.80%, 11/1/99 150 150
Stanford Univ., VRDN (Currently 2.30%) 4,000 4,000
California EFA
California Institute of Technology
VRDN (Currently 2.40%) 500 500
Stanford Univ., VRDN (Currently 2.30%) 500 500
California HFFA
Catholic Healthcare West
VRDN (Currently 2.60%) (MBIA Insured) 2,100 2,100
Hosp. Adventist, VRDN (Currently 3.10%)
(MBIA Insured) 1,400 1,400
Pooled Loan Program
VRDN (Currently 2.10%) (FGIC Insured) 2,900 2,900
Santa Barbara Cottage Hosp.
VRDN (Currently 2.50%) 3,285 3,285
Scripps Health
VRDN (Currently 2.50%) (MBIA Insured) 4,500 4,500
Sutter Health, VRDN (Currently 3.10%) 400 400
<PAGE>
California Pollution Control Fin. Auth., PCR
Pacific Gas and Electric VRDN (Currently 2.50%) * 2,000 2,000
Shell Oil
VRDN (Currently 3.00%) * 3,400 3,400
VRDN (Currently 3.10%) * 1,600 1,600
California Statewide CDA, Chevron,
VRDN (Currently 3.15%) * 1,100 1,100
Chula Vista IDA, San Diego Gas and Electric
VRDN (Currently 3.60%) * 2,900 2,900
Compton Community Redev. Agency
8.10%, 8/1/03 (Prerefunded 8/1/99+) 1,000 1,041
Elk Grove Unified School Dist., GO, 4.50%, 6/30/99 1,500 $ 1,504
Irvine Public Fac. and Infrastructure Auth.
VRDN (Currently 2.40%) 3,205 3,205
Long Beach Harbor, TECP, 2.25 - 2.80%, 3/9/99 * 3,900 3,900
Los Angeles, GO
4.00%, 6/30/99 2,000 2,003
4.30%, 9/1/99 (FGIC Insured) 100 101
Los Angeles, Convention & Exhibition Center Auth., COP
7.375%, 8/15/18 (Prerefunded 8/15/99+) 6,665 6,894
Los Angeles County, GO, 4.50%, 6/30/99 2,000 2,005
Los Angeles County, Wastewater, TECP, 2.50%, 3/4/99 500 500
Los Angeles County Metropolitan Transportation
VRDN (Currently 2.95%) (AMBAC Insured) 2,000 2,000
5.50%, 7/1/99 (MBIA Insured) 385 388
Los Angeles County Pension, GO
VRDN (Currently 2.50%) (AMBAC Insured) 2,000 2,000
Los Angeles County Unified School Dist.
Belmont Learning Complex, COP
VRDN (Currently 2.50%) 580 580
GO, 4.00%, 7/1/99 300 301
Los Angeles Wastewater Systems
7.10%, 6/1/18 (Prerefunded 6/1/99+) 500 515
Los Angeles Water and Power, TECP, 2.30%, 4/1/99 3,000 3,000
Metropolitan Water Dist., Southern California
VRDN (Currently 2.40%) 1,000 1,000
TECP, 2.80 - 3.00%, 3/9/99 2,400 2,400
GO, 4.00%, 3/1/99 150 150
Mojave Water Agency, Improvement Morongo Basin
5.875%, 9/1/99 225 228
Newport Beach, Hoag Memorial Hosp.
VRDN (Currently 3.10%) 3,000 3,000
Oakland, COP, VRDN (Currently 2.95%) 4,830 4,830
Pasadena, Pasadena Civic Improvement
7.00%, 12/1/14 (Prerefunded 12/1/99+) 250 262
Poway Redev. Agency Tax Allocation
7.60%, 12/15/22 (Prerefunded 12/15/99+) 50 53
Sacramento Utility Dist., 5.75%, 7/1/99 (FGIC Insured) 1,500 1,513
San Bernardino County, TRAN, GO, 4.50%, 9/30/99 1,000 1,009
San Diego County, Regional Transportation Commission
7.375%, 4/1/06 (Prerefunded 4/1/99+) 775 $ 793
San Diego County Transport Commission
5.00%, 4/1/99 (MBIA Insured) 50 50
San Diego County Water Auth., TECP, 2.05%, 3/10/99 2,500 2,500
<PAGE>
San Francisco
6.50%, 10/1/11 (AMBAC Insured)
(Prerefunded 10/1/99+) 200 208
San Francisco Bay, TECP, 2.05%, 3/4/99 1,000 1,000
San Francisco Building Auth.
VRDN (Currently 2.72%) (AMBAC Insured) 3,545 3,545
San Francisco City and County Int'l. Airport
TECP, 2.60%, 3/17/99 1,210 1,210
San Francisco Unified School Dist., GO, 4.50%, 9/22/99 1,000 1,006
San Jose/Santa Clara Water Fin. Auth.
VRDN (Currently 2.50%) 1,000 1,000
Santa Clara/El Camino Hosp. Dist.
Valley Medical Center, VRDN (Currently 2.20%) 490 490
Southern California Public Power Auth.
VRDN (Currently 2.50%) (AMBAC Insured) 1,000 1,000
Palo Verde Project, VRDN (Currently 2.50%) 1,100 1,100
Vallecitos Water Dist., Twin Oaks Reservoir
VRDN (Currently 2.60%) 2,000 2,000
Water & Power of Los Angeles Electric, TECP,
2.15%, 4/6/99 1,000 1,000
Total California (Cost $98,605) 98,605
PUERTO RICO 0.2%
Puerto Rico Commonwealth, GO
7.75%, 7/1/17 (Prerefunded 7/1/99+) 180 186
Total Puerto Rico (Cost $186) 186
Total Investments in Securities
96.5% of Net Assets (Cost $98,791) 98,791
Other Assets Less Liabilities 3,555
NET ASSETS 102,346
Net Assets Consist of:
Accumulated net investment income -
net of distributions 4
Accumulated net realized gain/loss -
net of distributions (82)
Paid-in-capital applicable to 102,427,717
no par value shares of beneficial
interest outstanding; unlimited number
of shares authorized 102,424
<PAGE>
NET ASSETS 102,346
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
TAN Tax Anticipation Note
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
- --------------------------------------------------------------------------------
February 28, 1999
STATEMENT OF NET ASSETS
Par Value
In thousands
CALIFORNIA 97.9%
Alameda County, Public Fac., COP
6.00%, 9/1/21 (MBIA Insured) 960 $ 1,055
Alameda Corridor Transportation Auth.
5.125%, 10/1/16 (MBIA Insured) 6,165 6,336
Anaheim PFA, Public Improvements
5.00%, 9/1/27 (FSA Insured) 2,435 2,417
Antioch Public Fin. Auth., 5.85%, 9/2/15 3,000 2,997
Brea PFA, Tax Allocation, 6.75%, 8/1/22 (MBIA Insured) 1,435 1,562
California, GO
5.25%, 10/1/20 1,700 1,725
5.40%, 12/1/16 (FSA Insured) * 1,000 1,023
5.45%, 12/1/25 3,000 3,044
6.40%, 2/1/20 * 2,200 2,228
Veterans, 5.05%, 12/1/11 1,485 1,531
California Dept. of Water Resources
Central Valley
7.00%, 12/1/11 1,730 2,173
7.00%, 12/1/12 1,000 1,262
<PAGE>
California EFA
Pooled College and Univ.
5.60%, 12/1/14 1,000 1,063
5.60%, 12/1/20 1,000 1,050
St. Mary's College of California
7.50%, 10/1/20 (Prerefunded 10/1/00+) 2,000 2,175
California HFA
5.35%, 8/15/28 (MBIA Insured) 2,000 2,051
Sutter Health, VRDN (Currently 3.10%) (FSA Insured) 700 700
California HFFA
Catholic Healthcare West
5.25%, 7/1/23 (AMBAC Insured) 1,000 1,013
Pomona Valley Hosp.
5.75%, 7/1/15 (MBIA Insured) 1,800 1,952
St. Joseph's Health, VRDN (Currently 3.10%) 1,000 1,000
Sutter Health, VRDN (Currently 3.10%) 1,300 1,300
California Housing Fin. Agency
6.15%, 8/1/16 * 1,000 $ 1,068
6.70%, 8/1/15 1,100 1,183
6.70%, 8/1/25 * 925 992
6.85%, 8/1/17 3,015 3,192
7.20%, 8/1/09 190 197
7.25%, 8/1/10 185 192
7.25%, 8/1/17 1,000 1,080
7.625%, 8/1/09 245 251
7.875%, 8/1/19 300 306
California Pollution Control Fin. Auth.
Pacific Gas and Electric, 5.85%, 12/1/23 * 1,765 1,857
California Pollution Control Fin. Auth., PCR
Laidlaw Enviromental, 6.70%, 7/1/07 * 1,000 1,043
Pacific Gas and Electric
VRDN (Currently 2.50%) * 600 600
5.85%, 12/1/23 (MBIA Insured) * 2,000 2,115
Shell Oil, VRDN (Currently 3.10%) * 900 900
USA Waste Services, 5.00%, 6/1/18 2,500 2,529
California Public Works Board
Dept. of Corrections
6.875%, 11/1/14 (Prerefunded 11/1/04+) 1,000 1,181
Univ. of California
5.50%, 6/1/14 2,000 2,186
6.40%, 12/1/16 (AMBAC Insured)
(Prerefunded 12/1/02+) 1,000 1,121
California Statewide CDA, Sutter Health, COP
5.50%, 8/15/23 (MBIA Insured) 2,000 2,068
Castaic Lake Water Agency
Water System Improvement, COP
7.00%, 8/1/12 (MBIA Insured) 1,000 1,244
7.00%, 8/1/13 (MBIA Insured) 1,700 2,117
Castaic Union School Dist., GO
Zero Coupon, 5/1/18 (FGIC Insured) 5,175 1,966
Central Coast Water Auth., State Water Project
Regional Fac.
6.60%, 10/1/22 (AMBAC Insured)
(Prerefunded 10/1/02+) 1,000 1,124
<PAGE>
Central Valley School Dist. Fin. Auth., GO,
Capital Appreciation
Zero Coupon, 8/1/10 (MBIA Insured) 2,500 $ 1,508
Chula Vista, Sub-Gateway Town Center, 7.50%, 1/1/32 * 4,500 4,483
Contra Costa County, Merrithew Memorial Hosp., COP
5.375%, 11/1/17 (MBIA Insured) 2,185 2,270
Corona Redev. Agency, Tax Allocation
6.25%, 9/1/13 (FGIC Insured) 1,000 1,124
Coronado CDA, Tax Allocation, 5.70%,
9/1/12 (FSA Insured) 1,000 1,088
Dry Creek Joint Elementary School Dist., GO
Capital Appreciation
Zero Coupon, 8/1/13 (FSA Insured) 1,300 658
Zero Coupon, 8/1/14 (FSA Insured) 1,340 638
East Bay Municipal Utility Dist., Water Systems
5.25%, 6/1/16 1,690 1,763
6.00%, 6/1/12 (FSA Insured) 2,000 2,167
Emeryville PFA, 6.20%, 9/1/25 (Prerefunded 9/1/05+) 1,000 1,120
Escondido, Multi-Family Housing
Terrace Gardens Apartments, 5.40%, 1/1/27 1,000 1,056
Fontana Redev. Agency, Jurupa Hills, 5.50%, 10/1/27 3,400 3,452
Foothill / Eastern Transportation Corridor Agency
Toll Road
Zero Coupon, 1/1/17 4,000 1,573
Zero Coupon, 1/1/25 850 212
Zero Coupon, 1/1/27 1,910 424
Fresno Unified School Dist., GO
6.40%, 8/1/16 (MBIA Insured) 1,000 1,181
6.55%, 8/1/20 (MBIA Insured) 1,000 1,185
Gateway Refinancing Auth., 5.50%, 9/1/19 2,000 2,025
Inglewood Redev. Agency, Century Redev.,
6.125%, 7/1/23 2,800 2,934
Inland Empire Solid Waste Fin. Auth.
San Bernardino County Landfills
6.25%, 8/1/11 (FSA Insured) * 1,000 1,141
Irvine Ranch Water Dist., VRDN (Currently 3.10%) 2,900 2,900
Kern County Union High School Dist., GO
7.00%, 8/1/10 (MBIA Insured)
(Escrowed to Maturity) 1,000 1,246
Long Beach Harbor, 6.00%, 5/15/17 (FGIC Insured) * 1,000 1,127
Los Angeles City, Wastewater, 7.10%, 6/1/18 1,000 1,031
Los Angeles County, GO, COP, Marina del Rey,
6.50%, 7/1/08 1,000 $ 1,094
Los Angeles County Metropolitan Transportation Auth.
Sales Tax
6.00%, 7/1/26 (MBIA Insured) 2,000 2,174
7.40%, 7/1/15 515 533
Los Angeles County Public Works Fin. Auth.
Multiple Capital Fac.
5.125%, 6/1/17 (AMBAC Insured) 2,000 2,030
Rowland Heights, 5.50%, 10/1/18 (FSA Insured) 1,500 1,615
Los Angeles Harbor Dept.
6.50%, 8/1/25 (Prerefunded 8/1/02+) 1,000 1,115
6.625%, 8/1/19 * 2,500 2,748
7.60%, 10/1/18 (Escrowed to Maturity) 3,000 3,914
<PAGE>
Los Angeles Municipal Improvement, Central Library
6.35%, 6/1/20 1,500 1,609
Los Angeles Unified School Dist., GO
5.375%, 7/1/16 (FGIC Insured) 3,000 3,155
Midpeninsula Regional Open Space Dist., Fin. Auth.
5.90%, 9/1/14 (AMBAC Insured) 1,250 1,369
Modesto Irrigation Dist. Fin. Auth.
Zero Coupon, 7/1/16 (AMBAC Insured) 3,320 1,374
Geysers, 6.00%, 10/1/15 (MBIA Insured) 1,500 1,655
Mojave Water Agency, Morongo Basin
5.75%, 9/1/15 (FGIC Insured) 2,000 2,177
Mountain View Shoreline Regional Park, Tax Allocation
5.50%, 8/1/21 (MBIA Insured) 3,135 3,300
Mt. Diablo Hosp. Dist.
8.00%, 12/1/11 (AMBAC Insured)
(Prerefunded 12/1/00+) 1,250 1,378
Newport Beach, Hoag Memorial Hosp.
VRDN (Currently 3.10%) 100 100
Oakland, COP, VRDN (Currently 2.95%) 2,200 2,200
Orange County
Juvenile Justice Center, COP
7.625%, 6/1/19 (Prerefunded 6/1/99+) 1,750 1,806
Recovery, COP
6.00%, 6/1/10 (MBIA Insured) 4,120 4,736
6.00%, 7/1/26 (MBIA Insured) 1,000 1,094
Orange County Local Transportation Auth., Sales Tax
6.00%, 2/15/09 (AMBAC Insured) 750 $ 856
Orange County PFA, Waste Management
5.75%, 12/1/09 (AMBAC Insured) * 2,000 2,226
Orchard School Dist., GO, 6.50%,
8/1/19 (FGIC Insured) 1,000 1,150
Palmdale Civic Auth., 6.60%,
9/1/34 (Prerefunded 9/1/04+) 5,000 5,682
Pasadena Parking Fac., COP, 6.25%, 1/1/18 3,000 3,457
Placentia PFA, Special Tax, 6.60%, 9/1/15 1,000 1,040
Pomona Unified School Dist., GO
6.15%, 8/1/15 (MBIA Insured) 1,000 1,150
Poway Community Fac. Dist., 6.75%, 8/15/15 1,275 1,390
Riverside County, Desert Justice Fac., COP
6.00%, 12/1/12 (MBIA Insured)
(Prerefunded 12/1/04+) 1,000 1,127
Sacramento City Fin. Auth., Lease, 5.00%, 11/1/14 2,000 2,055
Sacramento County Public Fac., Coroner Crime Lab., COP
6.375%, 10/1/14 (AMBAC Insured) 1,000 1,132
Sacramento Redev. Agency, 5.25%, 11/1/13 (FSA Insured) 2,240 2,380
Saddleback Valley Unified School Dist., Special Tax
Zero Coupon, 9/1/19 (FSA Insured) 2,370 832
6.00%, 9/1/15 (FSA Insured) 1,375 1,575
San Diego Community College Dist.
6.125%, 12/1/16 (MBIA Insured)
(Prerefunded 12/1/06+) 1,250 1,457
San Diego County Water Auth., 4.50%,
5/1/24 (FGIC Insured) 1,500 1,389
<PAGE>
San Diego, IDR, San Diego Gas and Electric
6.40%, 9/1/18 (MBIA Insured) 1,175 1,291
San Francisco Bay Area Rapid Transit, Sales Tax
5.25%, 7/1/18 1,250 1,288
5.50%, 7/1/15 (FGIC Insured) 1,800 1,895
San Francisco City and County, Int'l. Airport
5.80%, 5/1/21 (FGIC Insured) * 1,000 1,064
6.30%, 5/1/25 (FGIC Insured) * 1,000 1,102
6.50%, 5/1/18 (AMBAC Insured) * 4,000 4,481
San Joaquin Hills Transportation Corridor Agency
Toll Road, Zero Coupon, 1/15/14 (MBIA Insured) 6,500 3,176
San Jose Redev. Agency, Merged Area Redev.
VRDN (Currently 2.15%) 1,700 1,700
San Jose Unified School Dist., Capital Appreciation
Zero Coupon, 8/1/20 (FGIC Insured) 3,580 $ 1,174
Santa Ana Housing Auth., Villa Del Sol Apartments
5.65%, 11/1/21 * 1,000 1,062
Santa Clara, Electric
6.25%, 7/1/19 (MBIA Insured)
(Prerefunded 7/1/01+) 2,000 2,172
Santa Clara County Fin. Auth., VMC Fac.
7.75%, 11/15/11 (AMBAC Insured) 1,000 1,317
Santa Clara Redev. Agency, Bayshore North
7.00%, 7/1/10 (AMBAC Insured) 3,000 3,691
Santa Margarita/Dana Point Auth.
7.25%, 8/1/10 (MBIA Insured) 1,000 1,266
South Orange County PFA, 7.00%, 9/1/07 (MBIA Insured) 2,000 2,410
Southern California Public Power Auth.
6.75%, 7/1/10 2,100 2,525
6.75%, 7/1/12 1,700 2,061
Temecula Community Fac., 5.45%, 9/1/11 1,045 1,055
Torrance, Little Co. of Mary Hosp.
6.875%, 7/1/15 (Escrowed to Maturity) 1,240 1,392
Torrance Redev. Agency, 5.50%, 9/1/28 (MBIA Insured) 2,000 2,035
Tri City Hosp. Dist.
7.50%, 2/1/17 (MBIA Insured)
(Prerefunded 2/1/02+) 2,000 2,258
Tulare County, Capital Improvement, COP
6.00%, 2/15/16 (MBIA Insured) 1,000 1,145
Walnut Valley Unified School Dist., GO
7.20%, 2/1/16 (MBIA Insured) 1,000 1,244
Total California (Cost $205,662) 21,353
PUERTO RICO 2.7%
Puerto Rico Electric Power Auth.
4.75%, 7/1/24 3,000 2,843
7.00%, 7/1/21 (Prerefunded 7/1/01+) 1,000 1,101
Puerto Rico Public Fin., Commonwealth Appropriation
5.375%, 6/1/17 (AMBAC Insured) 2,000 2,141
Total Puerto Rico (Cost $5,828) 6,085
<PAGE>
Total Investments in Securities
100.6% of Net Assets (Cost $211,490) $227,438
Other Assets Less Liabilities (1,437)
NET ASSETS $226,001
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 7
Accumulated net realized gain/loss -
net of distributions 98
Net unrealized gain (loss) 15,948
Paid-in-capital applicable to 20,611,540
no par shares of beneficial
interest outstanding; unlimited
number of shares authorized 209,948
NET ASSETS $226,001
NET ASSET VALUE PER SHARE $ 10.96
* 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
HFA Health Facility Authority
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 Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -----------------------
Money Fund Bond Fund
In thousands
Year Year
Ended Ended
2/28/99 2/28/99
------- -------
Investment Income
Interest income $ 3,169 $ 11,207
Expenses
Investment management 333 878
Custody and accounting 92 118
Shareholder servicing 90 146
Prospectus and shareholder reports 13 23
Registration 11 16
Trustees 6 6
Legal and audit 4 11
Miscellaneous 3 3
Total expenses 552 1,201
Expenses paid indirectly (3) (1)
Net expenses 549 1,200
Net investment income 2,620 10,007
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 10 882
Futures - (103)
Net realized gain (loss) 10 779
Change in net unrealized gain or loss on securities - 1,387
Net realized and unrealized gain (loss) 10 2,166
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 2,630 $ 12,173
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price California Tax-Free Funds
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
Money Fund Bond Fund
In thousands
Year Year
Ended Ended
2/28/99 2/28/98 2/28/99 2/28/98
------- ------- ------- -------
Increase (Decrease) in Net Assets
Operations
Net investment income $ 2,620 $ 2,545$ 10,007 $ 8,911
Net realized gain (loss) 10 13 779 1,067
Change in net unrealized
gain or loss - - 1,387 5,761
Increase (decrease) in
net assets from operations 2,630 2,558 12,173 15,739
<PAGE>
Distributions to shareholders
Net investment income (2,620) (2,545 (10,007) (8,911)
Net realized gain - - (578) -
Decrease in net assets
from distributions (2,620) (2,545 (10,585) (8,911)
Capital share transactions *
Shares sold 88,664 86,397 58,571 47,467
Distributions reinvested 2,456 2,371 7,355 6,191
Shares redeemed (81,190) (78,585) (36,613) (26,199)
Increase (decrease) in
net assets from capital
share transactions 9,930 10,183 29,313 27,459
Net Assets
Increase (decrease)
during period 9,940 10,196 30,901 34,287
Beginning of period 92,406 82,210 195,100 160,813
- ------------- --------- ------- ------- ---------
End of period $ 102,346 $ 92,406$ 226,001 $ 195,100
*Share information
Shares sold 88,664 86,397 5,359 4,460
Distributions reinvested 2,456 2,371 673 581
Shares redeemed (81,190) (78,585 (3,359) (2,466)
------------- --------- ------- ------- ---------
Increase (decrease)
in shares outstanding 9,930 10,183 2,673 2,575
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price California Tax-Free Funds
- --------------------------------------------------------------------------------
February 28, 1999
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.
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.
<PAGE>
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. Expenses paid indirectly reflect credits earned on daily,
uninvested cash balances at the custodian, used to reduce the funds' custody
charges.
================================================================================
NOTE 2 - INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Purchases and sales of portfolio securities for the Bond Fund, other than
short-term securities, aggregated $82,006,000 and $55,314,000, respectively, for
the year ended February 28, 1999.
================================================================================
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 utilized capital loss carryforwards of $11,000 in
fiscal 1999. As of February 28, 1999, the Money Fund has capital loss
carryforwards for federal income tax purposes of $82,000, all of which expires
in 2003. The Money Fund intends to retain gains realized in future periods that
may be offset by available capital loss carryforwards.
At February 28, 1999, the costs of investments for the Money and Bond Funds
for federal income tax purposes were substantially the same as for financial
reporting and totaled $98,791,000 and $211,490,000, respectively. For the Money
Fund, amortized cost is equivalent to value; and for the Bond Fund, net
unrealized gain aggregated $15,948,000 at period-end, of which $16,037,000 was
related to appreciated investments and $89,000 to depreciated investments.
<PAGE>
================================================================================
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 $24,000 and $73,000 were payable at February 28, 1999 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
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 February 28, 1999, and for the
year then ended, the effective annual group fee rate was 0.32%. Each fund pays a
pro-rata share of the group fee based on the ratio of its net assets to those of
the group.
Under the terms of the investment management agreement, the manager is
required to bear any expenses through February 28, 1999, which would cause the
Money Fund's ratio of expenses to average net assets to exceed 0.55%. Pursuant
to this agreement, $89,000 of management fees were not accrued by the Money Fund
for the year ended February 28, 1999, and $99,000 remains 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%.
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 $140,000 and
$190,000, respectively, for the year ended February 28, 1999, of which $13,000
and $17,000, respectively, were payable at period-end.
================================================================================
<PAGE>
T. Rowe Price California Tax-Free Funds
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Board of Trustees of T. Rowe Price California Tax-Free Income
Trust and Shareholders of California Tax-Free Money Fund and California
Tax-Free Bond Fund
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
California Tax-Free Money Fund and California Tax-Free Bond Fund (two of the
portfolios comprising T. Rowe Price California Tax-Free Income Trust, hereafter
referred to as "the Funds") at February 28, 1999, and the results of each of
their operations, the changes in each of their net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at February 28, 1999 by
correspondence with custodians, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 17, 1999
================================================================================
T. Rowe Price California Tax-Free Funds
- --------------------------------------------------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 2/28/99
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The Bond Fund's distributions to shareholders included: * $198,000 from
short-term capital gains, * $380,000 from long-term capital gains, subject to
the 20% rate gains category,
The Money Fund and Bond Fund's dividend income included $2,639,000 and
$9,879,000, respectively, which qualified as exempt-interest dividends.
================================================================================
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 BROKERAGE ACCOUNT
OR OBTAIN INFORMATION, CALL:
1-800-638-5660 toll free
<PAGE>
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 Small-Cap Value Fund.
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
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. C05-050 2/28/99
