<PAGE>
Semiannual Report
CALIFORNIA
TAX-FREE
FUNDS
AUGUST 31, 1999
[LOGO OF T. ROWE PRICE APPEARS HERE]
<PAGE>
Report Highlights
California Tax-Free Funds
. Surprising economic strength and rising interest rates hurt bond market
performance over the past six and 12 months.
. The California Tax-Free Money Fund's returns for both periods trailed its
Lipper category average slightly.
. Returns were negative for the California Tax-Free Bond Fund but well ahead of
its Lipper benchmark for both periods.
. The interest rate outlook is uncertain for the months ahead, but tax-free bond
yields remain attractive compared with taxable alternatives.
UPDATES AVAILABLE
For updates on each fund following the end of every calendar quarter, please see
our Web site at www.troweprice.com.
<PAGE>
FELLOW SHAREHOLDERS
The U.S. economy's above-average growth during the six months ended August 31
was good for consumers but not so good for bond investors. Interest rates rose
throughout the period as investors worried about a buildup in inflationary
pressures and the possibility -- which became a reality -- of monetary
tightening by the Federal Reserve. As a result, declines in taxable and
municipal bond prices led to meager or negative returns on most longer-term bond
funds for the period. The California Tax-Free Bond Fund was not immune to this
trend, but held up better than its Lipper peer group average. The California
Tax-Free Money Fund delivered respectable results but slightly trailed its
Lipper benchmark.
Market Environment
The U. S. economy continued its robust growth, driven by
exuberant consumer spending. Although broad inflation measures
did not rise appreciably, tight labor markets, low unemployment,
and a rebound in energy prices raised fears that inflationary
pressures were building. The fixed income markets reacted
nervously to these developments as well as to the increasing
likelihood of action by the Federal Reserve. Indeed, as summer
approached, Fed Chairman Alan Greenspan served clear warning
that the central bank would act to preempt a rise in inflation.
Actions soon followed words as the Fed raised key short-term
interest rates on June 30 and again on August 24, pushing the
[GRAPH APPEARS HERE]
California Bond Index California Money Index
Aug-98 5.01 2.55
4.78 3
4.97 2.85
Nov-98 4.99 3.1
5.02 3.65
4.93 2.3
Feb-99 5.05 2.5
5.04 2.75
5.07 3.85
May-99 5.22 3
5.47 3.2
5.5 2.6
Aug-99 5.71 2.85
<PAGE>
- -------------------------------------------
MARKET CHANGES SPELL HIGHER TAZ-FREE YIELDS
- -------------------------------------------
Structural changes are taking place in the fixed income markets resulting in
higher tax-free yields for investors.
The chart below tracks the yield on 30-year, AAA general obligation municipal
bonds as a percentage of long-term Treasury bond yields since 1981.
Historically, the yield on these municipal bonds has averaged about 85% of the
Treasury yield. This discount reflected both the tax benefit of municipals and
uncertainty about future tax laws. Investors in the 31% federal tax bracket, for
example, keep only 69% of their income from taxable bonds. Therefore, they would
logically be attracted to high-quality municipal bonds offering 85% or more of
the prevailing Treasury yield.
The sharp spike in municipal yields in 1986 reflects the tax reform debate,
which posed a threat to municipal bonds' federal tax exemption. Accordingly,
municipal bond yields reached parity with Treasury yields. However, when the Tax
Reform Act of 1986 left the tax benefit intact, municipal bond prices rose
sharply until yields had fallen to more normal levels.
Recently, different forces have been at work that go beyond the impact of 1998's
global financial crisis. At that time, shaky world markets prompted foreign
investors (who have no need for U.S. tax-exempt bonds) to buy Treasuries, and
Treasury yields plunged to near parity with municipals.
Since then, Treasury yields have returned to pre-crisis levels, but municipal
yields are again unusually high at about 94% of Treasury yields. According to
Mary Miller, director of the T. Rowe Price municipal bond department, the
current relationship is "illogical from a tax standpoint" but unlikely to change
soon.
For one thing, the supply of Treasury debt is shrinking due to the federal
budget surplus, while outstanding municipal supply continues to grow. In
addition, the supply of taxable bonds outside of Treasuries--including
corporate, asset-backed and mortgage-backed bonds--has also risen, and this has
created more competition in the market. As a result, even as tax-exempt yields
have risen in relation to Treasury yields over the past two years, they have
fallen in relation to the yields on other high-quality taxable bonds.
Over time, income makes up the vast majority of a bond investor's total return.
Therefore, these developments have given investors the opportunity to earn
higher-than-expected tax-free income with little or no sacrifice of credit
quality.
MUNICIPAL/TREASURY YIELD RATIO
Treasury Ratio Treasury Average
79 84.5
78.4 84.5
'81 83.2 84.5
81.6 84.5
86.6 84.5
86.3 84.5
93.3 84.5
88.4 84.5
87.6 84.5
89.2 84.5
88.3 84.5
86.3 84.5
86.6 84.5
84.8 84.5
'82 82.1 84.5
85.5 84.5
86.3 84.5
91.9 84.5
86.5 84.5
84.1 84.5
81.9 84.5
83.7 84.5
81.4 84.5
84.9 84.5
81.9 84.5
78.8 84.5
'83 78.4 84.5
80.1 84.5
79.7 84.5
81 84.5
78.7 84.5
78.3 84.5
77.6 84.5
76.1 84.5
75.5 84.5
76.5 84.5
76.3 84.5
75.9 84.5
'84 77.6 84.5
80.4 84.5
85.1 84.5
84 84.5
83.7 84.5
79.3 84.5
79.2 84.5
80.4 84.5
79.4 84.5
80.1 84.5
80.4 84.5
82.5 84.5
'85 84.5 84.5
87.2 84.5
83.7 84.5
83.4 84.5
88 84.5
81 84.5
81.5 84.5
89.4 84.5
93.1 84.5
97.3 84.5
100.9 84.5
97 84.5
'86 93.1 84.5
89.5 84.5
87.3 84.5
87.8 84.5
87.6 84.5
85.6 84.5
86.4 84.5
86.1 84.5
90.8 84.5
89.2 84.5
90 84.5
85.5 84.5
'87 83.6 84.5
86.3 84.5
89.2 84.5
86.3 84.5
84.6 84.5
86.2 84.5
88.3 84.5
88.1 84.5
83.4 84.5
83.7 84.5
85.9 84.5
82.5 84.5
'88 81.7 84.5
83 84.5
81.9 84.5
82.2 84.5
82.3 84.5
79.9 84.5
81.2 84.5
83.1 84.5
81.3 84.5
81.4 84.5
85.3 84.5
85.9 84.5
'89 85.4 84.5
87.4 84.5
90.4 84.5
87.5 84.5
85.9 84.5
83.5 84.5
82 84.5
83 84.5
81.8 84.5
81.6 84.5
84.5 84.5
82.7 84.5
'90 80.7 84.5
81 84.5
80.9 84.5
82.2 84.5
85 84.5
83.5 84.5
83.7 84.5
84.3 84.5
83.2 84.5
82.3 84.5
82.7 84.5
82.2 84.5
'91 83.2 84.5
84.6 84.5
82.9 84.5
83.2 84.5
86.6 84.5
84.5 84.5
83.5 84.5
82.9 84.5
80.9 84.5
81.7 84.5
80.4 84.5
79.1 84.5
'92 82.4 84.5
84 84.5
84.7 84.5
81.7 84.5
82.5 84.5
83.4 84.5
79.8 84.5
83.8 84.5
81.5 84.5
81.7 84.5
81.7 84.5
83.8 84.5
'93 87 84.5
86.3 84.5
87.1 84.5
85.7 84.5
82 84.5
83.4 84.5
84.1 84.5
86.8 84.5
84.1 84.5
81.5 84.5
82.8 84.5
81.9 84.5
'94 81.9 84.5
81.3 84.5
81.7 84.5
84.4 84.5
83.8 84.5
80.5 84.5
80 84.5
80.1 84.5
81.8 84.5
84.8 84.5
89.1 84.5
86 84.5
'95 87.9 84.5
89.5 84.5
88.5 84.5
87.2 84.5
87.5 84.5
87.1 84.5
84.4 84.5
85.6 84.5
84.1 84.5
84.4 84.5
83.4 84.5
81.8 84.5
'96 80.9 84.5
80.1 84.5
82.8 84.5
84.2 84.5
82.2 84.5
81.8 84.5
80.9 84.5
81 84.5
80.7 84.5
79.6 84.5
80.4 84.5
81.8 84.5
'97 81 84.5
82 84.5
85 84.5
85.7 84.5
84.8 84.5
86.2 84.5
85.8 84.5
86.5 84.5
87.4 84.5
87.1 84.5
89.7 84.5
89.2 84.5
'98 93.8 84.5
97.3 84.5
95.6 84.5
96.3 84.5
97.4 84.5
95.5 84.5
89.5 84.5
89.7 84.5
89.8 84.5
88.5 84.5
89.2 84.5
88.5 84.5
Aug-99 92.3 84.5
2
<PAGE>
federal funds target rate up a total of 50 basis points (one-half of a
percentage point) to 5.25%. With these moves the Fed effectively rescinded two
of its three rate reductions of last fall, when it had moved swiftly to ease a
global financial crisis. Indeed, the beginnings of recovery in many of the Asian
and Latin American nations most affected by that crisis helped push the dollar
lower and interest rates higher.
Interest rates rose across all maturities, with the bellwether 30-year Treasury
bond rising from near 5% at the beginning of the year to over 6% for the first
time since mid-1998. Short-term yields rose a bit more than intermediates and
long-term bonds over the period, which created a flatter yield curve -- a
typical occurrence when the Fed is actively raising short-term rates. Municipal
market interest rates also rose throughout the period, as shown in the chart on
page 1. Municipals were helped by strong, seasonal demand in July from the
reinvestment of proceeds from maturing bonds and other cash flows. For much of
the period under review, overall returns on municipals compared favorably with
their taxable counterparts, although both were modest at best.
In August, however, this trend reversed. A huge supply of corporate bonds came
to market, pushing up yields on these taxable bonds and attracting "crossover"
institutional buyers -- those who buy either corporate or municipal bonds
depending on their after-tax yields. The drop in demand for municipals from
these institutional investors -- some of whom also sold municipals from their
portfolios -- combined with a reluctance by dealers to add to their bond
inventories created a weak market tone. After outperforming taxable bonds
through July, municipals lost ground in August and ended the six-month period
more in line with taxables.
California's economy also continued to expand at a healthy pace during the first
half of 1999. Nonfarm payrolls were 3% higher in June than they had been a year
earlier, and the unemployment rate fell to 5.3% from 5.9% the previous June.
Employment growth was strongest in Southern California, led by the construction
sector, and weakest in the San Francisco Bay area, because of a decline in high
technology exports. Personal income grew an impressive 8% in the first quarter
compared with the year-earlier period, while retail sales increased nearly 9%.
3
<PAGE>
The state's financial condition has improved hand-in-hand with the economy,
leading Standard & Poor's to upgrade California's general obligation debt rating
in August to AA- from A+. Moody's Investors Services upgraded its rating to Aa3
last October from A1. (Fitch IBCA had upgraded its rating in late 1997 to AA-
from A+.) On June 29, 1999, Governor Gray Davis signed the 1999-2000 budget, the
first California budget to be enacted on time in six years.
California Tax-Free Money Fund
- ----------------------
PERFORMANCE COMPARISON
- ---------------------------------------------------
Periods Ended 8/31/99 6 Months 12 Months
California Tax-Free Money Fund 1.22% 2.44%
..................................................
Lipper California Tax-Exempt
Money Market Funds Average 1.24 2.47
..................................................
Your fund returned 1.22% and 2.44%, respectively, for the 6- and 12-month
periods ended August 31, as shown in the table. Both results were slightly below
those of our Lipper benchmark. We began the six-month period with a weighted
average maturity of 51 days, compared with 40 days for the peer group average.
As we approached the summer months, we allowed average maturity to shorten as
notes matured, and we refrained from reinvesting the proceeds in the new
seasonal offerings and opted instead to reinvest in the very short-term
variable-rate market. Our average maturity thus declined to 38 days as of August
31, as shown in the table on page 8, below that of our peer group. We believed
this shorter-maturity posture was more appropriate since the Federal Reserve was
apt to raise rates in the near term and we did not want to lock in one-year
levels right before such an event. Now that the Fed has raised rates twice, we
intend to modestly lengthen our average maturity again to at least neutral
compared with our peers. As we do so, the additional yield should help the fund
to be more in line with the Lipper average.
Money market yields increased sharply over the past six months, especially among
longer maturities (such as one-year notes). By the end of the period, 30- to 90-
day yields were 50 basis points higher than six months earlier and 6- and 12-
month note yields rose 75 basis points. Over the latter part of the period, the
short-term tax-exempt yield curve became noticeably steeper as one-year
securities, at 3.75%, yielded 65 basis points more than one- to seven-day
securities. Six months ago, one-year notes provided just 15 basis points
additional yield.
4
<PAGE>
Assets in tax-free money funds have grown this year but at a markedly slower
pace than in recent years. Modest growth in demand was well balanced by supply,
and as a result tax-free money yields remained low compared with taxable
alternatives.
The vastly improved financial condition of the State of California has slashed
the need for short-term borrowing. Once the bellwether issuer of the municipal
note market, California expects to issue just $1 billion of revenue anticipation
notes in late September, which should be easily absorbed by the marketplace.
That's the lowest level of cash flow borrowing by the State since the early
1980s and contrasts with the approximately $7 billion level as recently as 1995.
Yields on California notes stayed low compared with those of other states -- and
20 to 30 basis points below national debt of similar maturity and quality -- and
should remain so due to the reduced supply and improved credit ratings.
California Tax-Free Bond Fund
Periods Ended 8/31/99 6 Months 12 Months
- ---------------------------------------------------
California Tax-Free Bond Fund -2.79% -0.47%
...................................................
Lipper California Municipal
Debt Funds Average -3.52 -1.49
...................................................
Though returns for both the 6- and 12-month periods ending August 31 were
negative, performance was significantly better than that of the peer group
average, as shown in the table, aided by our lower-than-average expense ratio.
In the past year's difficult environment, the fund's income did not entirely
offset its declining share price. Our goals for the past six months included
keeping duration at the low end of what we consider a neutral range and
improving yield as market rates rose.
We changed course at the beginning of calendar year 1999, generally shortening
our duration and raising cash reserves from very low levels at the end of last
year. We kept the fund's effective duration in the 7.25- to 7.50-year range from
March through July, generally half a year shorter than the prior six-month
period. (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.)
5
<PAGE>
In August, when long-term municipal rates rose sharply, duration rose to eight
years, as shown in the Key Statistics table on page 8, as many bonds that had
been trading to call dates began trading to maturity. (In a declining interest
rate environment, older, higher-yielding bonds trade at a premium to par value
and are susceptible to being "called" by the issuer, or bought back from
investors at par, once their call protection runs out. The issuer then floats
new bonds at lower interest rates, thereby refinancing its debt. The interest
rate sensitivity of premium bonds is therefore reduced because it is tied to the
dates their call protection expires, which come well before their stated
maturities. When interest rates rise, however, existing bonds can fall below par
value, which eliminates call risk, and the bonds begin trading with much greater
sensitivity to interest rates.) Despite the higher duration measure, the fund's
weighted average maturity was shorter on August 31 than either six months or one
year ago. Cash reserves rose from 1% to 2% at the end of last year to as high as
6% in the summer, reflecting our more cautious posture and the desire to raise
funds to reinvest at higher interest rates.
While overall credit quality was unchanged for the period at AA-, we made some
adjustments to the mix, selling some A and BBB rated bonds to buy both higher-
and lower-rated bonds. Essentially, this "barbell" approach to credit quality
allows us to take advantage of higher yields in the below-investment-grade
sector, in which we are permitted to invest up to 5% of fund assets. We made few
changes in our sector weightings other than decreasing hospital exposure and
increasing our stake in education bonds. The hospital sector continues to show
poor financial performance, and as a result, we have reduced exposure to just 2%
of the portfolio.
Finally, while it is never pleasant to see the fund's net asset value decline,
we are focused on replacing bonds that have incurred losses with new higher-
yielding positions to improve shareholder income. An important side benefit is
that by recognizing these losses we limit or avoid taxable capital gain
distributions in the future.
6
<PAGE>
Outlook
THE FED IS KEEPING
A CLOSE EYE ON
THE BUILDUP OF
INFLATIONARY
PRESSURES...
Interest rates may well move higher in the coming months given the backdrop of
global economic recovery and persistent strength in the U.S. economy. The Fed is
keeping a close eye on the buildup of inflationary pressures, particularly in
the labor markets, and could tighten another 25 basis points if it intends to
move the federal funds rate back to its pre-crisis level. With greater stability
in the global economy, the Fed can now focus on the domestic economy. On the
other hand, the Fed wants to maintain a liquid and orderly market as we approach
the end of the year and the transition to year 2000, which could serve to
moderate future rate increases. It's also important to recognize that we've had
a healthy increase in rates this year that should begin to slow certain sectors
of the economy. For now, we are focused on the higher yields available in the
marketplace and the current appeal of tax-free municipal bonds relative to
taxable securities. The credit outlook for California remains very good.
Respectfully submitted,
/s/ Patrice L. Berchtenbreiter
Patrice L. Berchtenbreiter
Chairman of the Investment Advisory Committee
California Tax-Free Money Fund
/s/ Mary J. Miller
Mary J. Miller
Chairman of the Investment Advisory Committee
California Tax-Free Bond Fund
September 21, 1999
7
<PAGE>
T. ROWE PRICE CALIFORNIA TAX-FREE FUNDS
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
KEY STATISTICS
2/28/99 8/31/99
California Tax-Free Money Fund
- --------------------------------------------------------------------------------
Price Per Share $ 1.00 $ 1.00
................................................................................
Dividends Per Share
................................................................................
For 6 months 0.012 0.012
..........................................................................
For 12 months 0.026 0.024
..........................................................................
Dividend Yield (7-Day Compound) * 2.17% 2.43%
................................................................................
Weighted Average Maturity (days) 51 38
Weighted Average Quality ** First Tier First Tier
................................................................................
California Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Price Per Share $ 10.96 $ 10.39
................................................................................
Dividends Per Share
................................................................................
For 6 months 0.26 0.26
..........................................................................
For 12 months 0.52 0.52
..........................................................................
Dividend Yield *
................................................................................
For 6 months 4.84% 5.00%
..........................................................................
For 12 months 4.89 5.11
..........................................................................
30-Day Standardized Yield 3.97 4.76
................................................................................
Weighted Average Maturity (years) 16.3 16.1
................................................................................
Weighted Average Effective Duration (years) 7.2 8.0
................................................................................
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.
8
<PAGE>
T. ROWE PRICE CALIFORNIA TAX-FREE FUNDS
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
2/28/99 8/31/99
California Tax-Free Money Fund
- --------------------------------------------------------------------------------
Hospital Revenue 17% 20%
- --------------------------------------------------------------------------------
Water and Sewer Revenue 12 18
- --------------------------------------------------------------------------------
General Obligation - Local 12 9
- --------------------------------------------------------------------------------
Educational Revenue 5 9
- --------------------------------------------------------------------------------
Housing Finance Revenue -- 8
- --------------------------------------------------------------------------------
Nuclear Revenue 10 8
- --------------------------------------------------------------------------------
Air and Sea Transportation Revenue 5 6
- --------------------------------------------------------------------------------
Prerefunded Bonds 10 5
- --------------------------------------------------------------------------------
General Obligation - State 1 4
- --------------------------------------------------------------------------------
All Other 13 1
- --------------------------------------------------------------------------------
Other Assets Less Liabilities 3 --
- --------------------------------------------------------------------------------
Total 100% 100%
California Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Dedicated Tax Revenue 24% 23%
- --------------------------------------------------------------------------------
Lease Revenue 10 13
- --------------------------------------------------------------------------------
Prerefunded Bonds 10 8
- --------------------------------------------------------------------------------
General Obligation - Local 9 8
- --------------------------------------------------------------------------------
Water and Sewer Revenue 7 8
- --------------------------------------------------------------------------------
Housing Finance Revenue 7 7
- --------------------------------------------------------------------------------
General Obligation - State 4 5
- --------------------------------------------------------------------------------
Air and Sea Transportation Revenue 7 5
- --------------------------------------------------------------------------------
Nuclear Revenue 5 4
- --------------------------------------------------------------------------------
Ground Transportation Revenue 2 3
- --------------------------------------------------------------------------------
Educational Revenue 1 3
- --------------------------------------------------------------------------------
Escrowed to Maturity 3 3
- --------------------------------------------------------------------------------
Solid Waste Revenue 1 3
- --------------------------------------------------------------------------------
Hospital Revenue 5 2
- --------------------------------------------------------------------------------
Electric Revenue 3 2
- --------------------------------------------------------------------------------
All Other 3 2
- --------------------------------------------------------------------------------
Other Assets Less Liabilities -1 1
- --------------------------------------------------------------------------------
Total 100% 100%
9
<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 benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
CALIFORNIA TAX-FREE MONEY FUND
- --------------------------------------------------------------------------------
[LINEGRAPH APPEARS HERE]
CALIFORNIA TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
[LINEGRAPH APPEARS HERE]
Lipper California California
Lehman Municipal Municipal Debt Tax-Free
Date Bond Index Funds Average Bond Fund Fund-Area
---- ---------- ------------- --------- ---------
Aug-89 $ 10,000 $ 10,000 $ 10,000 $ 10,000
Aug-90 $ 10,642 $ 10,503 $ 10,460 $ 10,460
Aug-91 $ 11,897 $ 11,686 $ 11,642 $ 11,642
Aug-92 $ 13,225 $ 12,904 $ 12,953 $ 12,953
Aug-93 $ 14,838 $ 14,539 $ 14,675 $ 14,675
Aug-94 $ 14,859 $ 14,354 $ 14,496 $ 14,496
Aug-95 $ 16,176 $ 15,388 $ 15,626 $ 15,626
Aug-96 $ 17,024 $ 16,288 $ 16,610 $ 16,610
Aug-97 $ 18,598 $ 17,780 $ 18,109 $ 18,109
Aug-98 $ 20,207 $ 19,328 $ 19,719 $ 19,719
Aug-99 $ 20,307 $ 19,077 $ 19,626 $ 19,626
- ------------------------------------
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 8/31/99 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
California Tax-Free Money Fund 2.44% 2.78% 2.90% 3.05%
- --------------------------------------------------------------------------------
California Tax-Free Bond Fund -0.47 5.72 6.25 6.98
- --------------------------------------------------------------------------------
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 FDIC or 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.
10
<PAGE>
T. ROWE PRICE CALIFORNIA TAX-FREE MONEY FUND
- --------------------------------------------------------------------------------
Unaudited
- --------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
8/31/99 2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
<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 0.012* 0.026* 0.030* 0.028* 0.032* 0.025*
Distributions
Net investment income (0.012) (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 $ 1.000
------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------
Total return** 1.22%* 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%* 0.55%*
- -----------------------------------------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 2.41%*+ 2.62%* 2.98%* 2.82%* 3.20%* 2.51%*
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 101,125 $ 102,346 $ 92,406 $ 82,210 $ 72,739 $ 76,289
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
** 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 2/28/01.
+ Annualized.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
T. ROWE PRICE CALIFORNIA TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
Unaudited
- --------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
8/31/99 2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 10.96 $ 10.88 $ 10.47 $ 10.45 $ 10.00 $ 10.43
----------------------------------------------------------------------------
Investment activities
Net investment income 0.26 0.52 0.54 0.55 0.55 0.55*
Net realized and
unrealized gain (loss) (0.56) 0.11 0.41 0.02 0.45 (0.41)
----------------------------------------------------------------------------
Total from
investment activities (0.30) 0.63 0.95 0.57 1.00 0.14
----------------------------------------------------------------------------
Distributions
Net investment income (0.26) (0.52) (0.54) (0.55) (0.55) (0.55)
Net realized gain (0.01) (0.03) -- -- -- (0.02)
----------------------------------------------------------------------------
Total distributions (0.27) (0.55) (0.54) (0.55) (0.55) (0.57)
----------------------------------------------------------------------------
NET ASSET VALUE
----------------------------------------------------------------------------
End of period $ 10.39 $ 10.96 $ 10.88 $ 10.47 $ 10.45 $ 10.00
============================================================================
- ---------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------
Total return** (2.79)% 5.95% 9.31% 5.64% 10.28% 1.60%*
- ---------------------------------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 0.56%+ 0.58% 0.58% 0.62% 0.63% 0.60%*
- ---------------------------------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 4.80%+ 4.80% 5.09% 5.29% 5.40% 5.60%*
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate 46.3%+ 27.2% 35.0% 47.3% 61.9% 78.0%
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 222,023 $ 226,001 $ 195,100 $ 160,813 $ 146,194 $ 131,953
- ---------------------------------------------------------------------------------------------------------
</TABLE>
** 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.
+ Annualized
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
T. ROWE PRICE CALIFORNIA TAX-FREE MONEY FUND
- --------------------------------------------------------------------------------
Unaudited August 31, 1999
- -----------------------
STATEMENT OF NET ASSETS Par Value
- --------------------------------------------------------------------------------
In thousands
- -----------------------------------------------------------
CALIFORNIA 98.9%
- -----------------------------------------------------------
California, GO
VRDN (Currently 3.04%) (FGIC Insured) $1,500 $1,500
------------------------------------------------------------------------
5.00%, 10/1/99 200 200
------------------------------------------------------------------------
5.50%, 9/1/99 830 830
------------------------------------------------------------------------
8.90%, 10/1/99 100 101
- -----------------------------------------------------------------------------
California Dept. of Water Resources
8.75%, 12/1/99 3,050 3,094
------------------------------------------------------------------------
TECP, 2.90 - 3.35%, 10/1 - 10/7/99 2,309 2,309
- -----------------------------------------------------------------------------
California EFA
Claremont Mckenna College, 2.80%, 11/1/99 150 150
-------------------------------------------------------------------------
California Institute of Technology
VRDN (Currently 2.65%) 500 500
----------------------------------------------------------------------
Pepperdine Univ., VRDN (Currently 2.80%) 3,000 3,000
-------------------------------------------------------------------------
Stanford Univ., VRDN (Currently 2.75%) 4,000 4,000
- -----------------------------------------------------------------------------
California HFFA
VRDN (Currently 2.85%) (MBIA Insured) 4,000 4,000
----------------------------------------------------------------------
Good Samaritan Health System
7.00%, 5/1/20 (Prerefunded 5/1/00+) 230 240
----------------------------------------------------------------------
Hosp. Adventist
VRDN (Currently 2.65%) (MBIA Insured) 3,700 3,700
----------------------------------------------------------------------
Pooled Loan Program
VRDN (Currently 2.90%) (FGIC Insured) 2,500 2,500
----------------------------------------------------------------------
Santa Barbara Cottage Hosp
VRDN (Currently 3.00%) 3,285 3,285
----------------------------------------------------------------------
St. Joseph's Health, VRDN (Currently 2.40%) 700 700
-------------------------------------------------------------------------
Sutter Health, VRDN (Currently 2.40%) (FSA Insured) 2,650 2,650
- -----------------------------------------------------------------------------
California Housing Fin. Auth
Home Mortgage, 3.02%, 4/30/00 * 1,000 1,000
-------------------------------------------------------------------------
Single Family, 3.40%, 8/1/00 * 3,000 3,000
- -----------------------------------------------------------------------------
California Pollution Control Fin. Auth., PCR
Pacific Gas and Electric
VRDN (Currently 2.70%) * 200 200
----------------------------------------------------------------------
VRDN (Currently 2.95%) * 1,800 1,800
----------------------------------------------------------------------
13
<PAGE>
T. ROWE PRICE CALIFORNIA TAX-FREE MONEY FUND
- --------------------------------------------------------------------------------
Par Value
- --------------------------------------------------------------------------------
In thousands
Chula Vista IDA, San Diego Gas and Electric
VRDN (Currently 2.65%) * $ 400 $ 400
- -----------------------------------------------------------------------------
Fresno County, GO, TRAN, 4.00%, 6/30/00 1,000 1,006
- -----------------------------------------------------------------------------
Golden Empire Schools Fin. Auth., Kern High School Dist.
3.10%, 2/1/00 4,000 4,000
- -----------------------------------------------------------------------------
Irvine Public Fac. and Infrastructure Auth.
VRDN (Currently 2.95%) 3,205 3,205
- -----------------------------------------------------------------------------
Long Beach Harbor
VRDN (Currently 3.09%) (FGIC Insured) 2,000 2,000
----------------------------------------------------------------------
TECP, 2.95%, 10/8/99 4,000 4,000
- -----------------------------------------------------------------------------
Los Angeles, GO
VRDN (Currently 3.04%) (FGIC Insured) 1,250 1,250
----------------------------------------------------------------------
4.30%, 9/1/99 (FGIC Insured) 100 100
- -----------------------------------------------------------------------------
Los Angeles City, Wastewater
7.15%, 6/1/20 (Prerefunded 6/1/00+) 100 105
- -----------------------------------------------------------------------------
Los Angeles County, GO
VRDN (Currently 2.80%) (AMBAC Insured) 2,000 2,000
----------------------------------------------------------------------
Los Angeles Water and Power
TECP, 3.15 - 3.20%, 9/8 - 9/10/99 3,000 3,000
----------------------------------------------------------------------
Electric Plant, 9.00%, 12/15/99 1,250 1,269
- -----------------------------------------------------------------------------
Metropolitan Water Dist. of Southern California
VRDN (Currently 2.65%) 2,000 2,000
----------------------------------------------------------------------
VRDN (Currently 2.75%) 2,000 2,000
----------------------------------------------------------------------
Waterworks, 6.25%, 7/1/00 200 204
- -----------------------------------------------------------------------------
Mojave Water Agency, Improvement Morongo Basin
5.875%, 9/1/99 225 225
- -----------------------------------------------------------------------------
Newport Beach, Hoag Memorial Hosp
VRDN (Currently 2.75%) 2,900 2,900
- -----------------------------------------------------------------------------
Oakland, COP, VRDN (Currently 2.95%) 4,830 4,830
- -----------------------------------------------------------------------------
Pasadena, Pasadena Civic Improvement
7.00%, 12/1/14 (Prerefunded 12/1/99+) 250 257
- -----------------------------------------------------------------------------
Poway Redev. Agency, Tax Allocation
7.60%, 12/15/22 (Prerefunded 12/15/99+) 50 52
- -----------------------------------------------------------------------------
San Bernardino County, TRAN, GO, 4.50%, 9/30/99 1,000 1,001
- -----------------------------------------------------------------------------
San Diego County Water Auth., TECP, 2.85%, 10/4/99 2,500 2,500
- -----------------------------------------------------------------------------
San Diego Housing Auth.
VRDN (Currently 2.75%) (FHA Insured) 4,000 4,000
- -----------------------------------------------------------------------------
14
<PAGE>
T. ROWE PRICE CALIFORNIA TAX-FREE MONEY FUND
- --------------------------------------------------------------------------------
Par Value
- --------------------------------------------------------------------------------
In thousands
San Francisco
City and County Sewer
6.50%, 10/1/11 (AMBAC Insured)
(Prerefunded 10/1/99+) $ 200 $ 204
- --------------------------------------------------------------------------------
San Francisco Unified School Dist., GO, 4.50%, 9/22/99 1,000 1,001
- --------------------------------------------------------------------------------
San Jose/Santa Clara Water Fin. Auth.
VRDN (Currently 2.80%) 1,000 1,000
- --------------------------------------------------------------------------------
Santa Clara County, VRDN (Currently 3.10%) 3,000 3,000
- --------------------------------------------------------------------------------
Santa Clara Electric, VRDN (Currently 3.30%) (AMBAC Insured) 1,000 1,000
- --------------------------------------------------------------------------------
Santa Clara Valley Water Dist., COP
6.60%, 2/1/15 (Prerefunded 2/1/00+) 100 103
- --------------------------------------------------------------------------------
Santa Clara/El Camino Hosp. Dist.
Valley Medical Center, VRDN (Currently 2.50%) 490 490
- --------------------------------------------------------------------------------
Univ. of California
Multi-Purpose
6.75%, 9/1/23 (AMBAC Insured)
(Prerefunded 9/1/99+) 3,000 3,060
-------------------------------------------------------------------------
10.00%, 9/1/99 (AMBAC Insured) 1,700 1,700
- --------------------------------------------------------------------------------
Vallecitos Water Dist., Twin Oaks Reservoir
VRDN (Currently 2.75%) 2,000 2,000
- --------------------------------------------------------------------------------
Water & Power of Los Angeles Electric, TECP, 3.10%, 9/10/99 1,000 1,000
- --------------------------------------------------------------------------------
West Basin Municipal Water Dist.
VRDN (Currently 2.75%) 3,400 3,400
-------------------------------------------------------------------------
VRDN (Currently 3.00%) 1,000 1,000
-------------------------------------------------------------------------
Total California (Cost $100,021) 100,021
-----------
- -------------------------------------------------------
PUERTO RICO 0.6%
- -------------------------------------------------------
Puerto Rico Commonwealth, GO
7.625%, 7/1/10 (Prerefunded 7/1/00+) 575 606
- --------------------------------------------------------------------------------
Total Puerto Rico (Cost $606) 606
-----------
15
<PAGE>
T. ROWE PRICE CALIFORNIA TAX-FREE MONEY FUND
- --------------------------------------------------------------------------------
Value
- --------------------------------------------------------------------------------
In thousands
- ----------------------------------------------
Total Investments in Securities
- ----------------------------------------------
99.5% of Net Assets (Cost $ 100,627) $100,627
- ----------------------------------------------
Other Assets Less Liabilities 498
- ---------------------------------------------- ----------
NET ASSETS $ 101,125
==========
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 101,206,995 no par value
shares of beneficial interest outstanding; unlimited
number of shares authorized 101,203
----------
NET ASSETS $ 101,125
==========
NET ASSET VALUE PER SHARE $ 1.00
==========
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
COP Certificates of Participation
EFA Educational Facility Authority
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance Corp.
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.
16
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE CALIFORNIA TAX-FREE BOND FUND
- ----------------------------------------------------------------------------------
Unaudited August 31, 1999
- -----------------------
STATEMENT OF NET ASSETS Par Value
- ----------------------------------------------------------------------------------
In thousands
<S> <C> <C>
CALIFORNIA 98.7%
Alameda County, Public Fac., COP
6.00%, 9/1/21 (MBIA Insured) $ 960 $ 988
-------------------------------------------------------------------------------
Anaheim PFA, Public Improvements
5.00%, 9/1/27 (FSA Insured) 2,435 2,204
-------------------------------------------------------------------------------
Antioch Public Fin. Auth., 5.85%, 9/2/15 2,975 2,853
-------------------------------------------------------------------------------
Brea PFA, Tax Allocation, 6.75%, 8/1/22 (MBIA Insured) 1,435 1,524
-------------------------------------------------------------------------------
California, GO
5.25%, 10/1/20 1,700 1,615
------------------------------------------------------------------------
Veterans
5.05%, 12/1/11 1,485 1,471
------------------------------------------------------------------------
5.20%, 12/1/11 (FSA Insured) * 2,000 2,002
------------------------------------------------------------------------
5.40%, 12/1/16 (FSA Insured) * 1,000 981
------------------------------------------------------------------------
5.45%, 12/1/25 3,000 2,926
------------------------------------------------------------------------
6.40%, 2/1/20 * 2,200 2,218
------------------------------------------------------------------------
California Dept. of Water Resources
Central Valley
7.00%, 12/1/11 1,730 2,037
------------------------------------------------------------------------
7.00%, 12/1/12 1,000 1,176
-------------------------------------------------------------------------------
California EFA
Pooled College and Univ.
5.60%, 12/1/14 1,000 1,007
------------------------------------------------------------------------
5.60%, 12/1/20 1,000 983
------------------------------------------------------------------------
St. Mary's College of California
7.50%, 10/1/20 (Prerefunded 10/1/00+) 2,000 2,120
------------------------------------------------------------------------
Univ. of Southern California, 5.50%, 10/1/27 1,250 1,223
-------------------------------------------------------------------------------
California HFFA, Pomona Hosp
5.75%, 7/1/15 (MBIA Insured) 1,800 1,835
-------------------------------------------------------------------------------
California Housing Fin. Agency
6.15%, 8/1/16 * 1,000 1,028
------------------------------------------------------------------------
6.70%, 8/1/15 1,100 1,163
------------------------------------------------------------------------
6.70%, 8/1/25 * 730 758
------------------------------------------------------------------------
6.85%, 8/1/17 3,015 3,140
------------------------------------------------------------------------
7.20%, 8/1/09 190 195
------------------------------------------------------------------------
7.25%, 8/1/10 185 190
------------------------------------------------------------------------
7.25%, 8/1/17 1,000 1,029
-------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE CALIFORNIA TAX-FREE BOND FUND
- ---------------------------------------------------------------------------------------
Par Value
- ---------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
California Pollution Control Fin. Auth., PCR
Laidlaw Enviromental, 6.70%, 7/1/07 * $ 1,000 $ 1,016
--------------------------------------------------------------------------------
Pacific Gas and Electric
5.85%, 12/1/23 (MBIA Insured) * 2,000 2,015
-----------------------------------------------------------------------------
USA Waste Services, 5.00%, 6/1/18 2,500 2,361
------------------------------------------------------------------------------------
California Public Works Board
Dept. of Corrections
6.875%, 11/1/14 (Prerefunded 11/1/04+) 1,000 1,137
-----------------------------------------------------------------------------
Univ. of California
5.50%, 6/1/14 2,000 2,038
-----------------------------------------------------------------------------
6.40%, 12/1/16 (AMBAC Insured)
(Prerefunded 12/1/02+) 1,000 1,089
------------------------------------------------------------------------------------
California Statewide CDA
Sutter Health, COP, 5.50%, 8/15/23 (MBIA Insured) 2,000 1,966
--------------------------------------------------------------------------------
The Internext Group, 5.375%, 4/1/17 3,500 3,250
------------------------------------------------------------------------------------
Carmichael Water District, Water & Sewer, COP
5.125%, 9/1/29 (MBIA Insured) 2,000 1,838
------------------------------------------------------------------------------------
Castaic Lake Water Agency
Water System Improvement, COP
5.125%, 8/1/30 (AMBAC Insured) 2,000 1,837
-----------------------------------------------------------------------------
7.00%, 8/1/12 (MBIA Insured) 1,000 1,161
-----------------------------------------------------------------------------
7.00%, 8/1/13 (MBIA Insured) 1,700 1,973
------------------------------------------------------------------------------------
Castaic Union School Dist., GO
Zero Coupon, 5/1/18 (FGIC Insured) 5,175 1,803
------------------------------------------------------------------------------------
Central Coast Water Auth., State Water Project Regional Fac.
6.60%, 10/1/22 (AMBAC Insured)
(Prerefunded 10/1/02+) 1,000 1,092
------------------------------------------------------------------------------------
Chula Vista, Sub-Gateway Town Center, 7.50%, 1/1/32 * 4,500 4,301
------------------------------------------------------------------------------------
Chula Vista IDA, San Diego Gas and Electric
VRDN (Currently 2.65%) * 1,900 1,900
------------------------------------------------------------------------------------
Contra Costa County, Merrithew Memorial Hosp., COP
5.375%, 11/1/17 (MBIA Insured) 2,185 2,134
------------------------------------------------------------------------------------
Corona Redev. Agency, Tax Allocation
6.25%, 9/1/13 (FGIC Insured) 1,000 1,074
------------------------------------------------------------------------------------
Coronado CDA, Tax Allocation, 5.70%, 9/1/12 (FSA Insured) 1,000 1,031
------------------------------------------------------------------------------------
Dry Creek Joint Elementary School Dist., GO
Capital Appreciation
Zero Coupon, 8/1/13 (FSA Insured) 1,300 614
-----------------------------------------------------------------------------
Zero Coupon, 8/1/14 (FSA Insured) 1,340 594
------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE CALIFORNIA TAX-FREE BOND FUND
- ---------------------------------------------------------------------------------------
Par Value
- ---------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
East Bay Municipal Utility Dist.
Water Systems
5.25%, 6/1/16 $ 1,690 $ 1,666
-----------------------------------------------------------------------------
5.25%, 6/1/18 1,395 1,361
-----------------------------------------------------------------------------
6.00%, 6/1/12 (FSA Insured) 2,000 2,098
------------------------------------------------------------------------------------
Emeryville PFA
6.20%, 9/1/25 510 543
-----------------------------------------------------------------------------
6.20%, 9/1/25 (Prerefunded 9/1/05+) 490 522
-----------------------------------------------------------------------------
Escondido, Multi-Family Housing
Terrace Gardens Apartments, 5.40%, 1/1/27 1,000 1,028
------------------------------------------------------------------------------------
Fontana Redev. Agency
Jurupa Hills
5.20%, 10/1/10 1,615 1,578
-----------------------------------------------------------------------------
5.50%, 10/1/27 3,400 3,201
------------------------------------------------------------------------------------
Foothill / Eastern Transportation Corridor Agency
Toll Road
Zero Coupon, 1/1/07 1,000 803
-----------------------------------------------------------------------------
Zero Coupon, 1/1/17 4,000 1,520
-----------------------------------------------------------------------------
Zero Coupon, 1/15/17 (MBIA Insured) 2,500 907
-----------------------------------------------------------------------------
Zero Coupon, 1/1/25 850 200
-----------------------------------------------------------------------------
Zero Coupon, 1/1/27 1,910 398
------------------------------------------------------------------------------------
Fresno Unified School Dist., GO
6.40%, 8/1/16 (MBIA Insured) 1,000 1,107
------------------------------------------------------------------------------------
Gateway Refinancing Auth., 5.50%, 9/1/19 2,000 1,900
------------------------------------------------------------------------------------
Inglewood Redev. Agency, Century Redev., 6.125%, 7/1/23 2,800 2,819
------------------------------------------------------------------------------------
Inland Empire Solid Waste Fin. Auth.
San Bernardino County Landfills
6.25%, 8/1/11 (FSA Insured) * 1,000 1,076
------------------------------------------------------------------------------------
Kern County Union High School Dist., GO
7.00%, 8/1/10 (MBIA Insured)
(Escrowed to Maturity) 1,000 1,171
------------------------------------------------------------------------------------
Long Beach Harbor, 6.00%, 5/15/17 (FGIC Insured) * 1,000 1,055
------------------------------------------------------------------------------------
Los Angeles County, COP, Marina del Rey, 6.50%, 7/1/08 1,000 1,061
------------------------------------------------------------------------------------
Los Angeles County Metropolitan Transportation Auth.
Sales Tax, 6.00%, 7/1/26 (MBIA Insured) 2,000 2,193
------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE CALIFORNIA TAX-FREE BOND FUND
- ---------------------------------------------------------------------------------------
Par Value
- ---------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Los Angeles County Public Works Fin. Auth.
Multiple Capital Fac.
5.125%, 6/1/17 (AMBAC Insured) $ 2,000 $ 1,915
-----------------------------------------------------------------------------
Rowland Heights, 5.50%, 10/1/18 (FSA Insured) 1,500 1,500
------------------------------------------------------------------------------------
Los Angeles Harbor Dept.
6.50%, 8/1/25 (Prerefunded 8/1/02+) 1,000 1,084
-----------------------------------------------------------------------------
6.625%, 8/1/19 * 2,500 2,662
-----------------------------------------------------------------------------
7.60%, 10/1/18 (Escrowed to Maturity) 3,000 3,682
------------------------------------------------------------------------------------
Los Angeles Municipal Improvement, Central Library
6.35%, 6/1/20 1,500 1,549
------------------------------------------------------------------------------------
Los Angeles Unified School Dist., GO
VRDN (Currently 3.10%) 2,000 2,000
-----------------------------------------------------------------------------
5.375%, 7/1/16 (FGIC Insured) 3,000 2,988
------------------------------------------------------------------------------------
Midpeninsula Regional Open Space Auth.
Capital Appreciation
Zero Coupon, 8/1/18 (AMBAC Insured) 3,500 1,112
-----------------------------------------------------------------------------
5.90%, 9/1/14 (AMBAC Insured) 1,250 1,294
------------------------------------------------------------------------------------
Modesto Irrigation Dist. Fin. Auth., Geysers
6.00%, 10/1/15 (MBIA Insured) 1,500 1,572
------------------------------------------------------------------------------------
Mojave Water Agency, Morongo Basin
5.75%, 9/1/15 (FGIC Insured) 2,000 2,049
------------------------------------------------------------------------------------
Mt. Diablo Hosp. Dist.
8.00%, 12/1/11 (AMBAC Insured)
(Prerefunded 12/1/00+) 1,250 1,338
------------------------------------------------------------------------------------
Newport Beach, Hoag Memorial Hosp.
VRDN (Currently 2.75%) 1,600 1,600
------------------------------------------------------------------------------------
Oakland, COP, VRDN (Currently 2.95%) 1,200 1,200
------------------------------------------------------------------------------------
Orange County
Recovery, COP
6.00%, 6/1/10 (MBIA Insured) 4,120 4,473
-----------------------------------------------------------------------------
6.00%, 7/1/26 (MBIA Insured) 1,000 1,026
-----------------------------------------------------------------------------
8.385%, 7/1/19 (MBIA Insured) 5,000 5,209
------------------------------------------------------------------------------------
Orange County Local Transportation Auth., Sales Tax
6.00%, 2/15/09 (AMBAC Insured) 750 815
------------------------------------------------------------------------------------
Orange County PFA, Waste Management
5.75%, 12/1/09 (AMBAC Insured) * 2,000 2,103
------------------------------------------------------------------------------------
Orchard School Dist., GO, 6.50%, 8/1/19 (FGIC Insured) 1,000 1,084
------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE CALIFORNIA TAX-FREE BOND FUND
- ---------------------------------------------------------------------------------------
Par Value
- ---------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Palmdale Civic Auth.,
6.60%, 9/1/34 $ 2,045 $ 2,238
-----------------------------------------------------------------------------
6.60%, 9/1/34 (Prerefunded 9/1/04+) 2,955 3,234
------------------------------------------------------------------------------------
Pasadena Parking Fac., GO, COP, 6.25%, 1/1/18 3,000 3,237
------------------------------------------------------------------------------------
Placentia PFA, Special Tax, 6.60%, 9/1/15 1,000 1,018
------------------------------------------------------------------------------------
Pomona Unified School Dist., GO
6.15%, 8/1/15 (MBIA Insured) 1,000 1,078
------------------------------------------------------------------------------------
Poway Community Fac. Dist., 6.75%, 8/15/15 1,275 1,345
------------------------------------------------------------------------------------
Riverside County, Desert Justice Fac., COP
6.00%, 12/1/12 (MBIA Insured)
(Prerefunded 12/1/04+) 1,000 1,088
------------------------------------------------------------------------------------
Sacramento City Fin. Auth.
Lease
5.00%, 11/1/14 2,000 1,912
-----------------------------------------------------------------------------
5.40%, 11/1/20 6,000 5,841
------------------------------------------------------------------------------------
Sacramento County Public Fac., Coroner Crime Lab., COP
6.375%, 10/1/14 (AMBAC Insured) 1,000 1,101
------------------------------------------------------------------------------------
Sacramento Redev. Agency, 5.25%, 11/1/13 (FSA Insured) 2,240 2,246
------------------------------------------------------------------------------------
Saddleback Valley Unified School Dist.,
Special Tax
Zero Coupon, 9/1/19 (FSA Insured) 2,370 760
-----------------------------------------------------------------------------
6.00%, 9/1/15 (FSA Insured) 1,375 1,473
------------------------------------------------------------------------------------
San Diego, IDR, San Diego Gas and Electric
6.40%, 9/1/18 (MBIA Insured) 1,175 1,245
------------------------------------------------------------------------------------
San Francisco Bay Area Rapid Transit, Sales Tax
5.50%, 7/1/15 (FGIC Insured) 1,800 1,813
------------------------------------------------------------------------------------
San Francisco Bay Area Transit Fin. Auth., Bridge Toll Notes
5.00%, 2/1/07 750 745
------------------------------------------------------------------------------------
San Francisco City and County
Int'l. Airport
5.80%, 5/1/21 (FGIC Insured) * 1,000 1,000
-----------------------------------------------------------------------------
6.30%, 5/1/25 (FGIC Insured) * 1,000 1,046
-----------------------------------------------------------------------------
6.50%, 5/1/18 (AMBAC Insured) * 4,000 4,243
------------------------------------------------------------------------------------
San Joaquin Hills Transportation Corridor Agency
Toll Road, Zero Coupon, 1/15/14 (MBIA Insured) 6,500 2,951
------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE CALIFORNIA TAX-FREE BOND FUND
- ------------------------------------------------------------------------------------------
Par Value
- ------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
San Jose Multifamily Housing, Helzer Courts Apartments
6.40%, 12/1/41 * $ 1,000 $ 959
---------------------------------------------------------------------------------------
Santa Ana Housing Auth., Villa Del Sol Apartments
5.65%, 11/1/21 * 1,000 1,036
---------------------------------------------------------------------------------------
Santa Clara, Electric
6.25%, 7/1/19 (MBIA Insured)
(Prerefunded 7/1/01+) 2,000 2,119
---------------------------------------------------------------------------------------
Santa Clara County, GO, VRDN (Currently 3.10%) 2,000 2,000
---------------------------------------------------------------------------------------
Santa Clara County Fin. Auth., VMC Fac.
7.75%, 11/15/11 (AMBAC Insured) 1,000 1,244
---------------------------------------------------------------------------------------
Santa Clara Redev. Agency, Bayshore North
5.375%, 6/1/16 (AMBAC Insured) 2,000 1,966
--------------------------------------------------------------------------------
7.00%, 7/1/10 (AMBAC Insured) 3,000 3,422
---------------------------------------------------------------------------------------
Santa Cruz County Housing Auth., Northgate Apartments
5.35%, 7/20/22 (GNMA Guaranteed) * 1,000 937
---------------------------------------------------------------------------------------
Santa Margarita/Dana Point Auth.
7.25%, 8/1/10 (MBIA Insured) 1,000 1,192
---------------------------------------------------------------------------------------
South Orange County PFA, 7.00%, 9/1/07 (MBIA Insured) 2,000 2,304
---------------------------------------------------------------------------------------
Southern California Public Power Auth.
VRDN (Currently 2.80%) (AMBAC Insured) 3,000 3,000
--------------------------------------------------------------------------------
6.75%, 7/1/10 2,100 2,385
--------------------------------------------------------------------------------
6.75%, 7/1/12 1,700 1,929
---------------------------------------------------------------------------------------
Temecula Community Fac., 5.45%, 9/1/11 1,045 1,011
---------------------------------------------------------------------------------------
Torrance, Little Co. of Mary Hosp.
6.875%, 7/1/15 (Escrowed to Maturity) 1,205 1,312
---------------------------------------------------------------------------------------
Torrance Redev. Agency, 5.50%, 9/1/28 (MBIA Insured) 2,000 1,963
---------------------------------------------------------------------------------------
Tri City Hosp. Dist.
7.50%, 2/1/17 (MBIA Insured)
(Prerefunded 2/1/02+) 2,000 2,193
---------------------------------------------------------------------------------------
Tulare County, Capital Improvement, COP
6.00%, 2/15/16 (MBIA Insured) 1,000 1,100
---------------------------------------------------------------------------------------
Univ. of California Regents, Multi Purpose Project
5.375%, 9/1/25 (FGIC Insured) 3,135 3,010
---------------------------------------------------------------------------------------
Walnut Valley Unified School Dist., GO
7.20%, 2/1/16 (MBIA Insured) 1,000 1,174
---------------------------------------------------------------------------------------
Total California (Cost $214,395) 219,222
-------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE CALIFORNIA TAX-FREE BOND FUND
- ------------------------------------------------------------------------------------------
Value
- ------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
PUERTO RICO 0.5%
Puerto Rico Electric Power Auth.
7.00%, 7/1/21 (Prerefunded 7/1/01+) $ 1,000 $ 1,072
-------------------------------------------------------------------------------------
Total Puerto Rico (Cost $1,009) 1,072
-------------
Total Investments in Securities
99.2% of Net Assets (Cost $215,404) $ 220,294
Other Assets Less Liabilities 1,729
-------------
NET ASSETS $ 222,023
=============
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 7
Accumulated net realized gain/loss - net of distributions (1,068)
Net unrealized gain (loss) 4,890
Paid-in-capital applicable to 21,361,268 no par
shares of beneficial interest outstanding; unlimited
number of shares authorized 218,194
-------------
NET ASSETS $ 222,023
=============
NET ASSET VALUE PER SHARE $ 10.39
=============
</TABLE>
* 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.
GNMA Government National Mortgage Association
GO General Obligation
HFFA Health Facility Financing Authority
IDA Industrial Development 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.
23
<PAGE>
T. ROWE PRICE CALIFORNIA TAX-FREE FUNDS
- --------------------------------------------------------------------------------
Unaudited
- -----------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands Money Fund Bond Fund
6 Months 6 Months
Ended Ended
8/31/99 8/31/99
Investment Income
Interest income $ 1,480 $ 6,163
------------------------
Expenses
Investment management 166 483
Custody and accounting 47 62
Shareholder servicing 45 79
Legal and audit 6 7
Prospectus and shareholder reports 4 7
Trustees 3 3
Registration 1 1
Miscellaneous 2 5
------------------------
Total expenses 274 647
------------------------
Net investment income 1,206 5,516
------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities -- (915)
Futures -- (42)
------------------------
Net realized gain (loss) -- (957)
Change in net unrealized gain or loss on securities -- (11,058)
------------------------
Net realized and unrealized gain (loss) -- (12,015)
------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 1,206 $ (6,499)
------------------------
The accompanying notes are an integral part of these financial statements.
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T. ROWE PRICE CALIFORNIA TAX-FREE Funds
- --------------------------------------------------------------------------------
Unaudited
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
In thousands Money Fund Bond Fund
6 Months Year 6 Months Year
Ended Ended Ended Ended
8/31/99 2/28/99 8/31/99 2/28/99
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,206 $ 2,620 $ 5,516 $ 10,007
Net realized gain (loss) -- 10 (957) 779
Change in net unrealized
gain or loss -- -- (11,058) 1,387
----------------------------------------------
Increase (decrease) in
net assets from operations 1,206 2,630 (6,499) 12,173
----------------------------------------------
Distributions to shareholders
Net investment income (1,206) (2,620) (5,516) (10,007)
Net realized gain -- -- (209) (578)
----------------------------------------------
Decrease in net assets from
distributions (1,206) (2,620) (5,725) (10,585)
----------------------------------------------
Capital share transactions *
Shares sold 45,347 88,664 31,306 58,571
Distributions reinvested 1,124 2,456 3,944 7,355
Shares redeemed (47,692) (81,190) (27,004) (36,613)
----------------------------------------------
Increase (decrease) in
net assets from capital
share transactions (1,221) 9,930 8,246 29,313
----------------------------------------------
Net Assets
Increase (decrease)
during period (1,221) 9,940 (3,978) 30,901
Beginning of period 102,346 92,406 226,001 195,100
----------------------------------------------
End of period $ 101,125 $ 102,346 $ 222,023 $ 226,001
----------------------------------------------
*Share information
Shares sold 45,347 88,664 2,905 5,359
Distributions reinvested 1,124 2,456 369 673
Shares redeemed (47,692) (81,190) (2,524) (3,359)
----------------------------------------------
Increase (decrease)
in shares outstanding (1,221) 9,930 750 2,673
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
T. ROWE PRICE CALIFORNIA TAX-FREE Funds
- --------------------------------------------------------------------------------
Unaudited August 31, 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.
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. Credits earned on daily
uninvested cash balances at the custodian are used to reduce each fund's
custody charges.
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T. ROWE PRICE CALIFORNIA TAX-FREE FUNDS
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NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities for the Bond Fund, other than
short-term securities, aggregated $54,514,000 and $50,140,000,
respectively, for the six months ended August 31, 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. As of February 28, 1999, the Money Fund had 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 August 31, 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 $100,627,000 and $215,404,000,
respectively. For the Money Fund, amortized cost is equivalent to value;
and for the Bond Fund, net unrealized gain aggregated $4,890,000 at
period-end, of which $8,069,000 was related to appreciated investments and
$3,179,000 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 $31,000 and $80,000 were payable at August 31, 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 August 31, 1999, and for the six months then ended, the
effective annual group fee rate was 0.32%. Each fund pays a pro-rata share
of the group fee based on the ratio of its net assets to those of the
group.
29
<PAGE>
T. ROWE PRICE CALIFORNIA TAX-FREE FUNDS
- --------------------------------------------------------------------------------
Under the terms of the investment management agreement, the manager is
required to bear any expenses through February 28, 2001, which would cause
the Money Fund's ratio of total expenses to average net assets to exceed
0.55%. Pursuant to this agreement, $43,000 of management fees were not
accrued by the Money Fund for the six months ended August 31, 1999.
Additionally, $188,000 of prior period fees remains unaccrued from a
previous agreement. 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 total 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 $71,000 and $101,000, respectively, for the six months ended
August 31, 1999, of which $13,000 and $19,000, respectively, were payable
at period-end.
30
<PAGE>
T. ROWE PRICE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to
10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(R) and the T. Rowe
Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and
other securities at a savings over full-service commission rates.**
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial
markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
** Based on a January 1999 survey for representative-assisted stock
trades. Services vary by firm, and commissions may vary depending on
size of order.
29
<PAGE>
For fund and account information or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance with your existing fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account or obtain information, call:
1-800-638-5660
Internet address: www.troweprice.com
Plan Account Lines for retirement plan participants:
The appropriate 800 number appears on your retirement account statement.
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus appropriate to the fund or funds
covered in this report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
4410 ArrowsWest Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
[LOGO OF INVEST WITH CONFIDENCE/R/ T.ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor. C05-051 8/31/99
32
