T. Rowe Price
--------------------------------------------------------------------------------
Semiannual Report
California Tax-Free Funds
--------------------------------------------------------------------------------
August 31, 2000
--------------------------------------------------------------------------------
REPORT HIGHLIGHTS
-----------------
* Municipal bonds rallied during the six months ended August 31 aided by
strong demand and aggressive Federal Reserve action to slow the
economy.
* The California Tax-Free Money Fund's returns for the 6- and 12-month
periods were in line with the Lipper peer group average.
* Performance was strong for the California Tax-Free Bond Fund during
both periods, but mixed versus the Lipper category.
* With the Fed's tightening program near an end and California's economy
robust, the outlook for the state's tax-exempt bond market remains
excellent.
UPDATES AVAILABLE
-----------------
For updates on T. Rowe Price funds following the end of each calendar
quarter, please see our Web site at www.troweprice.com.
FELLOW SHAREHOLDERS
-------------------
Municipal bonds rebounded sharply over the past six months, due primarily
to strong demand and limited supply. Investors were encouraged by the Federal
Reserve's aggressive action to curb above-average economic growth and stem
inflation. These factors were particularly favorable to intermediate- and
long-term California bonds, which posted excellent performance during the
period. While bonds rallied, money market yields rose following Fed rate hikes
early in the period.
MARKET ENVIRONMENT
------------------
Fixed-income markets in 2000 have been largely influenced by the Federal
Reserve's tightening program, heightened volatility in the equity market, and
the government's buyback of U.S. Treasury bonds. Fed activity, which included
federal funds rate increases totaling one percentage point in the first half of
the year, finally seems to be exerting some weight on the resilient U.S.
economy. The Fed's expressed determination to slow economic growth and engineer
a soft landing has injected a note of sobriety into equity markets.
<PAGE>
California California
Bond Index Money Index
---------- -----------
8/31/1999 5.71 2.85
5.80 3.35
6.06 3.20
Nov-1999 5.94 3.40
6.15 4.95
6.23 2.20
Feb-2000 6.13 2.90
5.88 3.30
5.98 5.15
May-2000 6.01 3.70
5.80 4.45
5.70 4.15
8/31/2000 5.50 3.60
Long-term Treasury bonds, on the other hand, have returned about 15% so far
this year due to a scarcity premium for the bonds since the government announced
its buyback program, which led to investor fears of a dwindling supply of
long-term Treasuries. The Treasury yield curve remained inverted throughout the
period, with yields on short-term Treasuries higher than long-term yields as Fed
actions have put upward pressure on the short end.
Municipal bond yields have also fallen, aided by outsized demand for
tax-exempt securities. The supply of new issues, down 20% nationally through
August versus the same period last year, has been capped by higher borrowing
costs and the lower borrowing needs of state and local governments. Issuance in
California declined even more significantly, down 28%. Demand, particularly from
buyers of individual bonds, has been strong as attractive taxable-equivalent
yields have enticed both traditional fixed-income investors and others seeking
to rebalance their portfolios. High-yield bonds, however, have lagged the
general market and the yield differential between lower- and higher-quality
bonds widened. This sector continues to feel pressure due to profitability
problems among health care providers and various corporate issuers. The prospect
of slower economic growth has also weighed on the high-yield market. Money
market yields moved higher due to the Fed rate hikes.
*****************************
The California economy
continues to outperform
the nation's, spurred by
both the high technology
and construction sectors.
*****************************
<PAGE>
The California economy continues to outperform the nation's, spurred by
both the high technology and construction sectors. California exports have also
been strong. Nonfarm employment grew 3.2% in both June an d July compared with
the same months in 1999. California's unemployment rate was 5.0% in July and is
expected to average 4.8% for the entire year. Personal income grew an impressive
7.4% in 1999 and is expected to rise 6.7% this year. Retail sales increased 9.3%
in 1999 and are expected to grow 7.8% this year. Home affordability and
availability continue to be significant issues, posing a slight risk to
California's economic outlook. Median existing home sale prices are escalating
and new home construction is not keeping pace with demand, primarily due to
difficulty in securing land and permits.
The state's financial condition has strengthened, primarily due to surging
personal income tax and sales tax receipts. Revenues for the fiscal year ended
June 30 were substantially higher than expected, and the extra funds have been
allocated in the 2001 budget to education, tax cuts, and, to a lesser extent,
increased reserves. This led to recent rating agency upgrades. In September,
Standard & Poor's upgraded California's general obligation debt rating to AA
from AA- and Moody's upgraded it to Aa2 from Aa3. Fitch upgraded California's
general obligation bond rating to AA from AA- in February. These moves followed
a similar round of upgrades over the previous two years. Further testament to
California's strong economy is that, for the first time in 20 years, the state
will not issue any short-term debt. The state's revenue anticipation note had
been the bellwether issue of the entire short-term market, but issuance has
fallen every year for the past five years, from $5 billion to zero.
CALIFORNIA TAX-FREE MONEY FUND
------------------------------
PERFORMANCE COMPARISON
----------------------
Periods Ended 8/31/00 6 Months 12 Months
--------------------- -------- ---------
California Tax-Free Money Fund 1.6% 2.89%
Lipper California Tax-Exempt
Money Market Funds Average 1.6 2.91
Your fund returned 1.60% and 2.89%, respectively, for the 6- and 12-month
periods ended August 31, as shown in the table. Both results were in line with
those of the Lipper California Tax-Exempt Money Market Funds Average. Dividends
per share over the past 12 months rose to $0.029 from $0.024 in the previous
12-month period. Our weighted average maturity of 42 days at the end of the
period, as shown in the table on page 7, was seven days shorter than that of our
average competitor. Our maturity posture was generally less aggressive than our
peers throughout the period, which crimped results. We had anticipated that
seasonal issuance would, at least temporarily, increase short-term California
yields relative to national yields, but that did not materialize. Even though
California notes with longer maturities currently provide a yield advantage over
short-term securities, state issues overall are not priced favorably relative to
the national market (California yields are comparatively low). Our desire to
avoid poor price performance among longer maturity notes in the event California
yields rose was another reason we maintained a cautious maturity posture.
However, with the outlook for Fed rate hikes much more benign than six months
ago, we expect to extend maturity to the same level as our peer group as we find
opportunities going forward.
<PAGE>
During the past six months, the national short-term tax-exempt note market
reacted less to Fed actions than would be expected, as yields rose just 20 basis
points to 4.25% in the six-month range and only 10 basis points to 4.30% in the
one-year range. (One hundred basis points equal one percentage point.)
Meanwhile, the fed funds target rate was increased 75 basis points over the same
span. Evidence of higher short-term rates was more readily apparent in the
tax-exempt variable rate sector where yields during the period averaged 4.18%,
about 70 basis points higher than over the previous six-month period. The larger
move in the variable-rate market (one- and seven-day maturities) made the yield
curve flat. On August 31, a one-day investment in the tax-exempt market actually
yielded the same as a one-year investment (4.30%).
In the California market, however, the short-term yield curve remained
steep over the past six months due to consistent strong demand and the continued
shrinkage of short-term supply. Overnight rates were 3.50% on August 31 versus
4.00% on one-year securities. As discussed in the Market Environment section,
the strong economy has reduced the state's short-term borrowing needs
substantially. California tax-exempt securities have offered low yields relative
to national issues for some time now and this will most likely continue for the
foreseeable future due to strong demand and limited supply.
CALIFORNIA TAX-FREE BOND FUND
-----------------------------
PERFORMANCE COMPARISON
----------------------
Periods Ended 8/31/00 6 Months 12 Months
--------------------- -------- ---------
California Tax-Free Bond Fund 7.38% 7.21%
Lipper California Municipal
Debt Funds Average 8.00 6.47
Your fund posted strong absolute performance over the past six months, as
shown in the table, bouncing back from weak results in the rising interest rate
environment of 1999 with a 7.38% total return. The California market has
outpaced the rest of the country this year, with total returns beating national
averages by over 150 basis points year-to-date (100 basis points equal one
percentage point). This exceptional performance reflects very strong demand for
tax-exempt bonds from individual investors along with a 28% decline in new
issuance compared with last year. The fund's net asset value rose $0.47 to
$10.58 during the past six months, as shown in the table on page 7. This price
appreciation was complemented by higher dividend income N $0.27 per share during
the period compared with $0.26 from the previous six months. The fund's 12-month
dividend yield held roughly steady at 5.10% from 5.11% during the previous
12-month period. For an investor in the 36% tax bracket, that is equivalent to a
taxable yield of 7.97%.
<PAGE>
*****************************
With signs that the economy
is beginning to slow, we are
moving . . . to a longer
duration posture.
*****************************
Performance exceeded that of the Lipper category over the past 12 months,
but lagged during the latest six months. After pursuing a defensive strategy
throughout 1999, which significantly reduced our losses compared with the peer
group average, we changed course this year, extending the portfolio's maturity
and duration. (Duration is a measure of a bond fund's sensitivity to interest
rates. A fund with a duration of eight years would fall or rise about 8% in
price in response to a one-percentage-point rise or fall in interest rates.)
However, we did not move quickly enough to catch the entire benefit of the
strong updraft in the California market. In addition, a small holding in an
industrial development bond (0.4% of net assets) encountered financial problems
that severely eroded its value and detracted from performance. While we always
strive to avoid credit problems, we also keep our portfolio well diversified to
protect against unantici-pated events.
Our goals for the past six months included maintaining the portfolio's
income stream by taking advantage of the higher yields available in early 2000,
and extending our call protection by selling bonds with shorter call dates.
(When market yields fall below a bond's coupon rate, call risk increases and the
bond no longer trades based on its stated maturity but on its call date N the
date when the issuer gains the right to retire the bond before maturity.)
Exposure to sectors with positive credit outlooks was also increased. We added
to our holdings in state general obligation debt, public power providers, and
transportation project bonds. Each sector is a beneficiary of California's
strong economy. Overall credit quality was unchanged for the period at AA-, and
our sector weightings also were little changed.
Duration declined to 7.7 years at the end of August compared with 8.3 years
six months ago, mainly because more bonds began trading to their call dates as
rates fell. Weighted average maturity increased during the period, reflecting a
shift to bonds with ultimate maturities longer than 20 years. With signs that
the economy is beginning to slow, we are moving the portfolio back to a longer
duration posture.
<PAGE>
OUTLOOK
-------
While the higher price of oil has not yet caused significant deterioration
in the inflation outlook, it is acting like a tax on consumer activity. Slower
consumer demand growth and the reduced need to build inventory will continue to
restrain production and hiring. Energy price pressures may persist, but other
costs should continue to ease as production growth moderates. As a result, it
appears increasingly likely that the Fed may be done raising interest rates for
the foreseeable future.
We began the year believing that the municipal market was substantially
undervalued after a particularly weak period in late 1999. Municipal bonds have
recovered much ground in 2000, and we expect the current environment of low
supply and strong demand to continue. The economic backdrop suggests stable to
improving municipal bond prices barring an increase in inflation. The credit
outlook for California is exceptional.
Respectfully submitted,
/s/
Patrice L. Berchtenbreiter
Chairman of the Investment Advisory Committee
California Tax-Free Money Fund
/s/
Mary J. Miller
Chairman of the Investment Advisory Committee
California Tax-Free Bond Fund
September 19, 2000
================================================================================
<PAGE>
T. Rowe Price California Tax-Free Funds
---------------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
KEY STATISTICS
--------------
2/29/00 8/31/00
------- -------
CALIFORNIA TAX-FREE MONEY FUND
------------------------------
Price Per Share $ 1.00 $ 1.00
Dividends Per Share
For 6 months 0.013 0.016
For 12 months 0.025 0.029
Dividend Yield (7-Day Compound) * 2.21% 3.24%
Weighted Average Maturity (days) 39 42
Weighted Average Quality ** First Tier First Tier
CALIFORNIA TAX-FREE BOND FUND
-----------------------------
Price Per Share $10.11 $10.58
Dividends Per Share
For 6 months 0.26 0.27
For 12 months 0.52 0.53
Dividend Yield *
For 6 months 5.25% 5.04%
For 12 months 5.26 5.10
30-Day Standardized Yield 5.07 4.67
Weighted Average Maturity (years) 16.1 16.8
Weighted Average Effective Duration (years) 8.3 7.7
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 as established by the national rating agencies or,
if unrated, are deemed of comparable quality by T. Rowe Price.
*** Based on T. Rowe Price research.
================================================================================
<PAGE>
T. Rowe Price California Tax-Free Funds
---------------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
SECTOR DIVERSIFICATION
----------------------
Percent of Percent of
Net Assets Net Assets
2/29/00 8/31/00
------- -------
CALIFORNIA TAX-FREE MONEY FUND
------------------------------
General Obligations - Local 7% 16%
Water and Sewer Revenue 17 11
Housing Finance Revenue 13 11
Educational Revenue 8 10
Lease Revenue 11 8
General Obligations - State 2 7
Hospital Revenue 12 6
Industrial and Pollution Control Revenue - 6
Electric Revenue 6 6
Nuclear Revenue 7 5
All Others 16 6
Other Assets Less Liabilities 1 8
Total 100% 100%
CALIFORNIA TAX-FREE BOND FUND
-----------------------------
Dedicated Tax Revenue 18% 14%
Lease Revenue 14 12
General Obligations - Local 8 9
General Obligations - State 6 9
Prerefunded Bonds 10 8
Housing Finance Revenue 10 8
Air and Sea Transportation Revenue 5 7
Water and Sewer Revenue 7 7
Educational Revenue 4 6
Escrowed To Maturity 5 5
Hospital Revenue 3 4
Electric Revenue - 3
Nuclear Revenue 3 3
Ground Transportation Revenue 2 2
All Others 4 3
Other Assets Less Liabilities 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 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.
Lipper California Tax-Exempt Money California Tax-Free
Market Funds Average Money Fund
-------------------- ----------
8/90 10000 10000
8/91 10452 10407
8/92 10779 10714
8/93 11008 10932
8/94 11238 11150
8/95 11599 11506
8/96 11952 11849
8/97 12312 12200
8/98 12675 12558
8/99 12989 12864
8/00 13367 13237
Lehman Municipal Lipper California Municipal California Tax-Free
Bond Index Debt Funds Average Bond Fund
---------- ------------------ ---------
8/90 10000 10000 10000
8/91 11179 11134 11130
8/92 12427 12303 12383
8/93 13944 13869 14030
8/94 13963 13699 13858
8/95 15201 14688 14939
8/96 15997 15547 15879
8/97 17476 16973 17313
8/98 18988 18453 18852
8/99 19083 18215 18763
8/00 20375 19423 20115
<PAGE>
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 8/31/00 1 Year 3 Years 5 Years 10 Years
--------------------- ------ ------- ------- --------
California Tax-Free Money Fund 2.89% 2.76% 2.84% 2.84%
California Tax-Free Bond Fund 7.21 5.13 6.13 7.24
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, as
their principal value will fluctuate. 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.
================================================================================
T. Rowe Price California Tax-Free Money Fund
-------------------------------------------- Unaudited
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
--------------------
6 Months Year
Ended Ended
8/31/00 2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
NET ASSET VALUE
Beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
--------------------------------------------------------------------------------
Investment activities
Net investment
income (loss) 0.016* 0.025* 0.026* 0.030* 0.028* 0.032*
Distributions
Net investment income (0.016) (0.025) (0.026) (0.030) (0.028) (0.032)
--------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
RATIOS/SUPPLEMENTAL DATA
Total return** 1.60%* 2.51%* 2.65%* 3.01%* 2.87%* 3.24%*
--------------------------------------------------------------------------------
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 (loss) to average
net assets 3.16%*+ 2.48%* 2.62%* 2.98%* 2.82%* 3.20%*
--------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 104,612 $108,219 $102,346 $ 92,406 $ 82,210 $ 72,739
--------------------------------------------------------------------------------
** 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.
================================================================================
<PAGE>
T. Rowe Price California Tax-Free Bond Fund
-------------------------------------------- Unaudited
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
--------------------
6 Months Year
Ended Ended
8/31/00 2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
NET ASSET VALUE
Beginning of period $ 10.11 $ 10.96 $ 10.88 $ 10.47 $ 10.45 $ 10.00
-------------------------------------------------------------------------------
Investment activities
Net investment
income (loss) 0.27 0.52 0.52 0.54 0.55 0.55
Net realized and
unrealized gain (loss) 0.47 (0.84) 0.11 0.41 0.02 0.45
-------------------------------------------------------------------------------
Total from
investment activities 0.74 (0.32) 0.63 0.95 0.57 1.00
-------------------------------------------------------------------------------
Distributions
Net investment income (0.27) (0.52) (0.52) (0.54) (0.55) (0.55)
Net realized gain - (0.01) (0.03) - - -
-------------------------------------------------------------------------------
Total distributions (0.27) (0.53) (0.55) (0.54) (0.55) (0.55)
-------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 10.58 $ 10.11 $ 10.96 $ 10.88 $ 10.47 $ 10.45
RATIOS/SUPPLEMENTAL DATA
------------------------
Total return** 7.38% (2.94)% 5.95% 9.31% 5.64% 10.28%
-------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 0.54%+ 0.56% 0.58% 0.58% 0.62% 0.63%
-------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 5.12%+ 4.99% 4.80% 5.09% 5.29% 5.40%
-------------------------------------------------------------------------------
Portfolio turnover rate 44.6%+ 40.8% 27.2% 35.0% 47.3% 61.9%
-------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $228,460 $211,898 $226,001 $195,100 $160,813 $146,194
-------------------------------------------------------------------------------
** 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.
+ Annualized
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price California Tax-Free Money Fund
--------------------------------------------
Unaudited August 31, 2000
PORTFOLIO OF INVESTMENTS
------------------------ Par Value
In thousands
CALIFORNIA 91.2%
Alameda County, GO, TRAN, 5.00%, 7/2/01 $ 3,000 $ 3,017
-------------------------------------------------------------------------------
California, GO
5.00%, 10/1/00 200 201
-------------------------------------------------------------------------------
5.10%, 10/1/00 250 250
-------------------------------------------------------------------------------
5.70%, 9/1/00 500 500
-------------------------------------------------------------------------------
5.70%, 10/1/00 120 120
-------------------------------------------------------------------------------
6.00%, 9/1/00 950 950
-------------------------------------------------------------------------------
6.60%, 2/1/01 200 202
-------------------------------------------------------------------------------
TECP, 3.90%, 10/19/00 5,000 5,000
-------------------------------------------------------------------------------
California Community Dev. Auth., Sunrise Danville
VRDN (Currently 3.70%)
(FNMA Guaranteed)* 3,765 3,765
-------------------------------------------------------------------------------
California Dept. of Water Resources, 9.25%, 12/1/00 1,495 1,514
-------------------------------------------------------------------------------
California EFA
Stanford Univ.
VRDN (Currently 3.60%) 3,000 3,000
-------------------------------------------------------------------------------
Pepperdine Univ.
VRDN (Currently 3.70%) 2,000 2,000
-------------------------------------------------------------------------------
California Institute of Technology
VRDN (Currently 3.80%) 500 500
-------------------------------------------------------------------------------
California Housing Fin. Agency
Home Mortgage
VRDN (Currently 3.70%)
(FSA Insured) * 1,000 1,000
-------------------------------------------------------------------------------
VRDN (Currently 3.90%)
(FSA Insured) * 1,000 1,000
-------------------------------------------------------------------------------
VRDN (Currently 3.90%)
(AMBAC Insured) * 1,000 1,000
-------------------------------------------------------------------------------
4.05%, 6/1/01 * 1,500 1,500
-------------------------------------------------------------------------------
<PAGE>
California HFFA
Pooled Loan Program
VRDN (Currently 3.60%) (FGIC Insured) 1,500 1,500
-------------------------------------------------------------------------------
Santa Barbara Cottage Hosp.
VRDN (Currently 3.70%) 3,200 3,200
-------------------------------------------------------------------------------
California Infrastructure & Economic Dev.
Independent Systems Operating
VRDN (Currently 3.55%) (MBIA Insured) 2,000 2,000
-------------------------------------------------------------------------------
California Pollution Control Fin. Auth., PCR
Pacific Gas and Electric
VRDN (Currently 3.50%) $ 1,300 $ 1,300
-------------------------------------------------------------------------------
VRDN (Currently 3.55%) * 1,800 1,800
-------------------------------------------------------------------------------
Shell Oil
VRDN (Currently 3.45%) * 2,900 2,900
-------------------------------------------------------------------------------
VRDN (Currently 3.55%) 2,100 2,100
-------------------------------------------------------------------------------
California Public Works Board,Univ.of California Regents
7.00%, 9/1/10 (Prerefunded 9/1/00+) 400 408
-------------------------------------------------------------------------------
California Statewide CDA, Chevron, VRDN(Currently 3.50%) * 1,000 1,000
-------------------------------------------------------------------------------
Dublin San Ramon Service Dist.
VRDN (Currently 3.70%) (MBIA Insured) 3,000 3,000
-------------------------------------------------------------------------------
Fresno County, GO, TRAN, 5.00%, 7/2/01 2,000 2,012
-------------------------------------------------------------------------------
Glendale, VRDN (Currently 3.50%) 3,000 3,000
-------------------------------------------------------------------------------
Golden Gate Bridge Highway & Transportation Dist.
TECP, 3.80%, 10/17/00 1,000 1,000
-------------------------------------------------------------------------------
Irvine Public Fac. and Infrastructure Auth.
VRDN (Currently 3.50%) 1,005 1,005
-------------------------------------------------------------------------------
Irvine Ranch Water Dist.,GO, VRDN (Currently 3.60%) 1,000 1,000
-------------------------------------------------------------------------------
Kings River Conservation Dist.
6.375%, 1/1/12 (Prerefunded 1/1/01+) 220 226
-------------------------------------------------------------------------------
Long Beach Harbor, 7.20%, 5/15/01 1,000 1,023
-------------------------------------------------------------------------------
<PAGE>
Los Angeles, GO
VRDN (Currently 3.88%) (FGIC Insured) 1,250 1,250
-------------------------------------------------------------------------------
5.10%, 9/1/00 (MBIA Insured) 150 150
-------------------------------------------------------------------------------
Los Angeles County, COP
6.50%, 9/1/13 (MBIA Insured)
(Prerefunded 9/1/00+) 395 402
-------------------------------------------------------------------------------
Los Angeles Harbor Dept., 4.875%, 11/1/00 395 396
-------------------------------------------------------------------------------
Metropolitan Water Dist. of Southern California
GO, 5.00%, 3/1/01 1,000 1,006
-------------------------------------------------------------------------------
VRDN (Currently 3.55%) 300 300
-------------------------------------------------------------------------------
VRDN (Currently 3.60%) 2,500 2,500
-------------------------------------------------------------------------------
Newport Beach, Hoag Memorial Hosp.
VRDN (Currently 3.55%) 2,000 2,000
-------------------------------------------------------------------------------
Oakland, COP, VRDN (Currently 3.50%) 3,730 3,730
-------------------------------------------------------------------------------
Sacramento County Sanitation Dist. Fin. Auth.
4.75%, 12/1/00 3,970 3,979
-------------------------------------------------------------------------------
Sacramento Utility Dist., TECP
3.90 - 4.20%, 9/7 - 10/13/00 $ 3,000 $ 3,000
-------------------------------------------------------------------------------
San Diego County, TAN, GO 5.00%, 9/29/00 4,000 4,003
-------------------------------------------------------------------------------
San Diego County COP, San Diego Museum of Art
VRDN (Currently 3.65%) 1,000 1,000
-------------------------------------------------------------------------------
San Diego Housing Auth.
VRDN (Currently 3.45%)
(FHLMC Guaranteed) 3,000 3,000
-------------------------------------------------------------------------------
San Diego IDR
VRDN (Currently 3.88%)
(AMBAC Insured) 2,295 2,295
-------------------------------------------------------------------------------
San Francisco Bay Transport Tax
TECP, 3.30%, 9/7/00 1,000 1,000
-------------------------------------------------------------------------------
VRDN (Currently 3.88%) (FGIC Insured) 1,000 1,000
-------------------------------------------------------------------------------
<PAGE>
Santa Clara County, GO, VRDN (Currently 4.50%) 4,000 4,000
-------------------------------------------------------------------------------
Santa Clara Electric
VRDN (Currently 3.50%) (AMBAC Insured) 940 940
-------------------------------------------------------------------------------
Santa Clara/El Camino Hosp. Dist., Valley Medical Center
VRDN (Currently 3.35%) 390 390
-------------------------------------------------------------------------------
Univ. of California
VRDN (Currently 3.88%) (MBIA Insured) 2,700 2,700
-------------------------------------------------------------------------------
Multi Purpose Projects
6.10%, 9/1/00 (MBIA Insured) 2,400 2,400
-------------------------------------------------------------------------------
Total California (Cost $95,434) 95,434
-------------------------------------------------------------------------------
PUERTO RICO 0.6%
Puerto Rico Electric Power Auth.
7.00%, 7/1/21 (Prerefunded 7/1/01+) 500 520
-------------------------------------------------------------------------------
Puerto Rico Telephone Auth., 4.80%, 1/1/01
(Escrowed to Maturity) 140 140
-------------------------------------------------------------------------------
Total Puerto Rico (Cost $660) 660
-------------------------------------------------------------------------------
U.S. VIRGIN ISLANDS 0.2%
Virgin Islands PFA, 7.30%, 10/1/18 (Prerefunded 10/1/00+) 145 147
-------------------------------------------------------------------------------
Total U. S. Virgin Islands (Cost $147) 147
-------------------------------------------------------------------------------
Total Investments in Securities
92.0% of Net Assets (Cost $96,241) $ 96,241
Other Assets Less Liabilities 8,371
NET ASSETS $104,612
-------------------------------------------------------------------------------
* 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
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
FSA Financial Security Assurance Corp.
GO General Obligation
HFFA Health Facility Financing Authority
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
PFA Public Finance Authority
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.
================================================================================
<PAGE>
T. Rowe Price California Tax-Free Money Fund
--------------------------------------------
Unaudited August 31, 2000
In thousands
STATEMENT OF ASSETS AND LIABILITIES
'-----------------------------------
ASSETS
------
Investments in securities, at value (cost $96,241) $ 96,241
Receivable for securities sold 7,528
Other assets 992
----------------------------------------------------------------------------
Total assets 104,761
LIABILITIES
-----------
Total liabilities 149
----------------------------------------------------------------------------
NET ASSETS $ 104,612
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 4
Accumulated net realized gain/loss - net of distributions (69)
Paid-in-capital applicable to 104,680,943 no par value shares
of beneficial interest outstanding; unlimited
numbers of shares authorized 104,677
NET ASSETS $ 104,612
NET ASSET VALUE PER SHARE $ 1.00
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price California Tax-Free Bond Fund
-------------------------------------------
Unaudited August 31, 2000
STATEMENT OF NET ASSETS Par Value
----------------------- --- -----
In thousands
CALIFORNIA 98.1%
Anaheim Public Fin. Auth., Public Improvements
5.00%, 9/1/27 (FSA Insured) $ 2,435 $ 2,294
--------------------------------------------------------------------------------
Antioch Public Fin. Auth., 5.85%, 9/2/15 2,470 2,496
--------------------------------------------------------------------------------
Brea Public Fin. Auth., Tax Allocation
6.75%, 8/1/22 (MBIA Insured) 1,435 1,495
--------------------------------------------------------------------------------
California, GO
VRDN (Currently 3.88%) (FGIC Insured) 1,500 1,500
--------------------------------------------------------------------------------
5.00%, 2/1/25 (MBIA Insured) 1,000 946
--------------------------------------------------------------------------------
5.00%, 8/1/29 (MBIA Insured) 2,000 1,875
--------------------------------------------------------------------------------
5.25%, 10/1/20 1,700 1,694
--------------------------------------------------------------------------------
5.375%, 6/1/26 (FGIC Insured) 1,500 1,497
--------------------------------------------------------------------------------
5.40%, 12/1/16 (FSA Insured) * 1,000 1,013
--------------------------------------------------------------------------------
5.50%, 6/1/22 3,000 3,041
--------------------------------------------------------------------------------
5.625%, 5/1/22 2,000 2,049
--------------------------------------------------------------------------------
5.625%, 5/1/26 2,000 2,039
--------------------------------------------------------------------------------
6.40%, 2/1/20 * 2,200 2,203
--------------------------------------------------------------------------------
TECP, 3.80%, 9/1/00 2,000 2,000
--------------------------------------------------------------------------------
California Dept. of Water Resources
Central Valley
7.00%, 12/1/11 1,730 2,112
--------------------------------------------------------------------------------
7.00%, 12/1/12 1,000 1,227
--------------------------------------------------------------------------------
<PAGE>
California EFA
Loyola Marymount
Zero Coupon, 10/1/13
(MBIA Insured) 4,755 2,387
--------------------------------------------------------------------------------
St. Mary's College of California
7.50%, 10/1/20
(Prerefunded 10/1/00+) 2,000 2,046
--------------------------------------------------------------------------------
Stanford Univ., 5.25%, 12/1/26 2,000 1,966
--------------------------------------------------------------------------------
Univ. of Southern California, 5.50%, 10/1/27 3,545 3,559
--------------------------------------------------------------------------------
California HFFA
Cedars Sinai Medical Center
6.125%, 12/1/19 2,000 2,061
--------------------------------------------------------------------------------
Pomona Valley Hosp.
5.75%, 7/1/15 (MBIA Insured) 1,800 1,911
--------------------------------------------------------------------------------
California Housing Fin. Agency
6.15%, 8/1/16 * $ 1,000 $ 1,015
--------------------------------------------------------------------------------
6.70%, 8/1/15 1,100 1,144
--------------------------------------------------------------------------------
6.70%, 8/1/25 * 565 579
--------------------------------------------------------------------------------
6.85%, 8/1/17 3,015 3,102
--------------------------------------------------------------------------------
7.25%, 8/1/17 735 752
--------------------------------------------------------------------------------
Home Mortgage
5.85%, 8/1/16 (MBIA Insured) 1,970 2,048
--------------------------------------------------------------------------------
California Pollution Control Fin. Auth., PCR
Laidlaw Enviromental, 6.70%, 7/1/07 * 1,000 38
--------------------------------------------------------------------------------
Resource Recovery, VRDN (Currently 3.55%) * 200 200
--------------------------------------------------------------------------------
Shell Oil, VRDN (Currently 3.45%) * 1,800 1,800
--------------------------------------------------------------------------------
Southern California Edison, VRDN (Currently 3.60%) 100 100
--------------------------------------------------------------------------------
USA Waste Services, 5.00%, 6/1/18 2,100 1,931
--------------------------------------------------------------------------------
<PAGE>
California Public Works Board
Dept. of Corrections
6.875%, 11/1/14
(Prerefunded 11/1/04+) 1,000 1,125
--------------------------------------------------------------------------------
Univ. of California
5.50%, 6/1/14 2,000 2,139
--------------------------------------------------------------------------------
6.40%, 12/1/16 (AMBAC Insured)
(Prerefunded 12/1/02+) 1,000 1,070
--------------------------------------------------------------------------------
California Statewide CDA
Chevron, VRDN (Currently 3.50%) * 300 300
--------------------------------------------------------------------------------
Internext Group, 5.375%, 4/1/17 2,500 2,301
--------------------------------------------------------------------------------
Carmichael Water Dist., Water & Sewer, COP
5.125%, 9/1/29 (MBIA Insured) 2,000 1,911
--------------------------------------------------------------------------------
Castaic Lake Water Agency
Water System Improvement
5.125%, 8/1/30 (AMBAC Insured) 2,000 1,910
--------------------------------------------------------------------------------
7.00%, 8/1/12 (MBIA Insured) 1,000 1,222
--------------------------------------------------------------------------------
7.00%, 8/1/13 (MBIA Insured) 1,700 2,081
--------------------------------------------------------------------------------
Castaic Union School Dist., GO
Zero Coupon, 5/1/18 (FGIC Insured) 5,175 2,005
--------------------------------------------------------------------------------
Central Coast Water Auth., State Water Project Regional Fac.
6.60%, 10/1/22 (AMBAC Insured)
(Prerefunded 10/1/02+) 1,000 1,070
--------------------------------------------------------------------------------
Chula Vista, Sub-Gateway Town Center
7.50%, 1/1/32 * $ 4,500 $ 4,223
--------------------------------------------------------------------------------
Corona Redev. Agency, Tax Allocation
6.25%, 9/1/13 (FGIC Insured) 1,000 1,084
--------------------------------------------------------------------------------
Coronado Community Dev. Agency
5.60%, 9/1/30 (MBIA Insured) 2,000 2,031
--------------------------------------------------------------------------------
Dry Creek Joint Elementary School Dist., GO
Zero Coupon, 8/1/13 (FSA Insured) 1,300 687
--------------------------------------------------------------------------------
Zero Coupon, 8/1/14 (FSA Insured) 1,340 664
--------------------------------------------------------------------------------
<PAGE>
East Palo Alto Redev. Agency, Univ. Circle Gateway
6.625%, 10/1/29 1,500 1,569
--------------------------------------------------------------------------------
Escondido, Multi-Family Housing
Terrace Gardens Apartments
5.40%, 7/1/07 (FNMA Guaranteed) 1,000 1,014
--------------------------------------------------------------------------------
Fontana Redev. Agency, Jurupa Hills, 5.50%, 10/1/27 3,400 3,178
--------------------------------------------------------------------------------
Fontana Unified School Dist., GO
Zero Coupon, 7/1/16 (MBIA Insured) 2,350 1,027
--------------------------------------------------------------------------------
Foothill / Eastern Transportation Corridor Agency
Zero Coupon, 1/1/07
(Escrowed to Maturity) 1,000 853
--------------------------------------------------------------------------------
Zero Coupon, 1/1/17
(Escrowed to Maturity) 4,000 1,683
--------------------------------------------------------------------------------
Zero Coupon, 1/15/17
(MBIA Insured) 2,500 1,017
--------------------------------------------------------------------------------
Zero Coupon, 1/1/25
(Escrowed to Maturity) 850 219
--------------------------------------------------------------------------------
Zero Coupon, 1/1/27
(Escrowed to Maturity) 1,910 440
--------------------------------------------------------------------------------
California Toll Road
Zero Coupon, 1/1/29
(Escrowed to Maturity) 8,335 1,710
--------------------------------------------------------------------------------
5.00%, 1/1/35 (MBIA Insured) 4,495 4,197
--------------------------------------------------------------------------------
Health Fac. Auth., Sutter Health, 6.25%, 8/15/31 2,000 2,074
--------------------------------------------------------------------------------
Hillsborough Water & Sewer, Water & Sewer Systems
VRDN (Currently 3.65%) 1,000 1,000
--------------------------------------------------------------------------------
Infrastructure & Economic Dev. Bank
Scripps Research Institute, 5.75%, 7/1/30 1,000 1,022
--------------------------------------------------------------------------------
Inglewood Redev. Agency
6.125%, 7/1/23 $ 1,780 $ 1,796
--------------------------------------------------------------------------------
6.125%, 7/1/23 (Prerefunded 7/1/03+) 1,020 1,089
--------------------------------------------------------------------------------
<PAGE>
Inland Empire Solid Waste Fin. Auth.
San Bernardino County Landfills
6.25%, 8/1/11 (FSA Insured)
(Escrowed to Maturity)* 1,000 1,118
--------------------------------------------------------------------------------
Intermodal Container Transfer Fac.
Intermodal Container
5.75%, 11/1/14 (AMBAC Insured) 1,500 1,648
--------------------------------------------------------------------------------
Jefferson Union High School Dist., GO
6.45%, 8/1/25 (MBIA Insured) 1,250 1,449
--------------------------------------------------------------------------------
6.45%, 8/1/29 (MBIA Insured) 1,000 1,166
--------------------------------------------------------------------------------
Kern County Union High School Dist., GO
7.00%, 8/1/10 (MBIA Insured)
(Escrowed to Maturity) 1,000 1,209
--------------------------------------------------------------------------------
Long Beach Harbor, 6.00%, 5/15/17 (FGIC Insured) * 1,000 1,094
--------------------------------------------------------------------------------
Los Angeles City, Dept. of Water and Power, 6.40%, 5/15/28 2,000 2,056
--------------------------------------------------------------------------------
Los Angeles County, COP, Marina del Rey, 6.50%, 7/1/08 1,000 1,060
--------------------------------------------------------------------------------
Los Angeles County Metropolitan Transportation Auth.
6.00%, 7/1/26
(MBIA Insured) (Prerefunded 7/1/06+) 2,000 2,211
--------------------------------------------------------------------------------
Los Angeles County Public Works Fin. Auth.
Rowland Heights
5.50%, 10/1/18 (FSA Insured) 1,500 1,574
--------------------------------------------------------------------------------
Los Angeles Harbor
6.50%, 8/1/25 (Prerefunded 8/1/02+) 1,000 1,064
--------------------------------------------------------------------------------
6.625%, 8/1/19 * 2,500 2,628
--------------------------------------------------------------------------------
7.60%, 10/1/18
(Escrowed to Maturity) 3,045 3,822
--------------------------------------------------------------------------------
Los Angeles Unified School Dist., GO
5.375%, 7/1/25 (FGIC Insured) 1,500 1,497
--------------------------------------------------------------------------------
Midpeninsula Regional Open Space Auth.
Capital Appreciation
Zero Coupon, 8/1/18
(AMBAC Insured) 3,500 1,218
--------------------------------------------------------------------------------
Fin. Auth., 5.90%, 9/1/14 (AMBAC Insured) 1,250 1,333
--------------------------------------------------------------------------------
<PAGE>
Modesto Irrigation Dist. Fin. Auth., Geysers
6.00%, 10/1/15 (MBIA Insured) $ 1,500 $ 1,619
--------------------------------------------------------------------------------
Mojave Water Agency, Morongo Basin, GO
5.75%, 9/1/15 (FGIC Insured) 2,000 2,122
--------------------------------------------------------------------------------
Mt. Diablo Hosp. Dist.
8.00%, 12/1/11 (AMBAC Insured)
(Prerefunded 12/1/00+) 1,250 1,287
--------------------------------------------------------------------------------
Newport Beach, Hoag Memorial Hosp.
VRDN (Currently 3.55%) 3,000 3,000
--------------------------------------------------------------------------------
Northern California Power Agency
Public Power Hydroelectric
5.00%, 7/1/28 (MBIA Insured) 2,030 1,905
--------------------------------------------------------------------------------
Orange County, Recovery
7.615%, 7/1/19 (MBIA Insured) 6,000 6,594
--------------------------------------------------------------------------------
COP, 6.00%, 7/1/26 (MBIA Insured) 2,820 2,958
--------------------------------------------------------------------------------
Orange County Transportation Auth., Sales Tax
6.00%, 2/15/09 (AMBAC Insured) 750 841
--------------------------------------------------------------------------------
Orchard School Dist., 6.50%, 8/1/19 (FGIC Insured)
(Prerefunded 8/1/05+) 1,000 1,124
--------------------------------------------------------------------------------
Pasadena Parking Fac., GO, 6.25%, 1/1/18 3,000 3,350
--------------------------------------------------------------------------------
Placentia Public Fin. Auth., Special Tax, 6.60%, 9/1/15 1,000 1,024
--------------------------------------------------------------------------------
Placer County Water Agency, Capital Improvement Project
5.50%, 7/1/29 (AMBAC Insured) 1,750 1,756
--------------------------------------------------------------------------------
Pomona Unified School Dist., GO
6.15%, 8/1/15 (MBIA Insured) 1,000 1,126
--------------------------------------------------------------------------------
Port of Oakland, 5.75%, 11/1/29 (FGIC Insured) * 5,000 5,107
--------------------------------------------------------------------------------
Poway Community Fac. Dist., 6.75%, 8/15/15 800 856
--------------------------------------------------------------------------------
Riverside County, Desert Justice Fac., COP
6.00%, 12/1/12 (MBIA Insured)
(Prerefunded 12/1/04+) 1,000 1,084
--------------------------------------------------------------------------------
<PAGE>
Sacramento City Fin. Auth.
5.00%, 11/1/14 2,000 2,033
--------------------------------------------------------------------------------
5.40%, 11/1/20 6,000 6,073
--------------------------------------------------------------------------------
Sacramento County Public Fac., Coroner Crime Lab., COP
6.375%, 10/1/14 (AMBAC Insured) 1,000 1,096
--------------------------------------------------------------------------------
Sacramento Fin. Auth. Revenue, Capital Improvement
5.625%, 6/1/30 1,350 1,370
--------------------------------------------------------------------------------
Saddleback Valley Unified School Dist.
Special Tax
Zero Coupon, 9/1/19 (FSA Insured) $ 2,370 $ 844
--------------------------------------------------------------------------------
6.00%, 9/1/15 (FSA Insured) 1,375 1,539
--------------------------------------------------------------------------------
San Bernardino County, GO, RAN, 5.50%, 9/28/01 2,000 2,025
--------------------------------------------------------------------------------
San Diego IDR, VRDN (Currently 3.88%) (AMBAC Insured) 2,000 2,000
--------------------------------------------------------------------------------
San Francisco City and County
Int'l. Airport
6.30%, 5/1/25 (FGIC Insured) * 1,000 1,043
--------------------------------------------------------------------------------
6.50%, 5/1/18 (AMBAC Insured) * 4,000 4,295
--------------------------------------------------------------------------------
San Jose Multifamily Housing
Helzer Courts Apartments
6.40%, 12/1/41 * 1,000 929
--------------------------------------------------------------------------------
Santa Ana Housing Auth., Villa Del Sol Apartments
5.65%, 11/1/21 (FNMA Guaranteed) * 1,000 1,020
--------------------------------------------------------------------------------
Santa Clara, Electric
6.25%, 7/1/19 (MBIA Insured)
(Prerefunded 7/1/01+) 2,000 2,076
--------------------------------------------------------------------------------
Santa Clara County Fin. Auth., VMC Fac.
7.75%, 11/15/11 (AMBAC Insured) 1,000 1,286
--------------------------------------------------------------------------------
Santa Clara Redev. Agency, Bayshore North
7.00%, 7/1/10 (AMBAC Insured) 3,000 3,532
--------------------------------------------------------------------------------
Santa Cruz County Housing Auth., Northgate Apartments
5.35%, 7/20/22 (GNMA Guaranteed) * 1,000 958
--------------------------------------------------------------------------------
<PAGE>
Santa Margarita/Dana Point Auth.
7.25%, 8/1/10 (MBIA Insured) 1,000 1,230
--------------------------------------------------------------------------------
South Orange County Public Fin. Auth.
7.00%, 9/1/07 (MBIA Insured) 2,000 2,337
--------------------------------------------------------------------------------
Southern California Public Power Auth.
6.75%, 7/1/10 2,100 2,455
--------------------------------------------------------------------------------
6.75%, 7/1/12 1,700 2,005
--------------------------------------------------------------------------------
Torrance, Little Co. of Mary Hosp.
6.875%, 7/1/15
(Escrowed to Maturity) 1,160 1,228
--------------------------------------------------------------------------------
Tri City Hosp. Dist.
7.50%, 2/1/17 (MBIA Insured)
(Prerefunded 2/1/02+) 2,000 2,133
--------------------------------------------------------------------------------
Tulare County, Capital Improvement, COP
6.00%, 2/15/16 (MBIA Insured)
(Prerefunded 2/15/06+) $ 1,000 $ 1,108
--------------------------------------------------------------------------------
Turlock Irrigation Dist., 6.00%, 1/1/20 2,500 2,501
--------------------------------------------------------------------------------
Union Elementary School Dist, GO
Zero Coupon, 9/1/14 (FGIC Insured) 3,665 1,808
--------------------------------------------------------------------------------
Univ. of California Regents, Multi Purpose Project
5.375%, 9/1/25 (FGIC Insured) 1,635 1,632
--------------------------------------------------------------------------------
Univ. of California, VRDN (Currently 3.88%) (MBIA Insured) 3,000 3,000
--------------------------------------------------------------------------------
Walnut Valley Unified School Dist., GO
7.20%, 2/1/16 (MBIA Insured) 1,000 1,208
--------------------------------------------------------------------------------
Total California (Cost $214,811) 224,030
--------------------------------------------------------------------------------
PUERTO RICO 1.9%
Puerto Rico Ind. Tourist, Ed., Medical & Environmental
Cogen Fac.
6.625%, 6/1/26 * 1,000 1,042
--------------------------------------------------------------------------------
Hospital de la Concepcion
6.375%, 11/15/15 500 549
--------------------------------------------------------------------------------
<PAGE>
Puerto Rico Electric Power Auth.
7.00%, 7/1/21
(Prerefunded 7/01/01+) 1,000 1,043
--------------------------------------------------------------------------------
Puerto Rico Municipal Fin. Agency, GO, 5.50%, 8/1/02 1,670 1,707
--------------------------------------------------------------------------------
Total Puerto Rico (Cost $4,220) 4,341
--------------------------------------------------------------------------------
100.0% of Net Assets (Cost $219,031) $ 228,371
Futures Contracts
In thousands
Contract Unrealized
Expiration Value Gain (Loss)
---------- ------- -----------
Short, 30 Bond Buyer 40 Muni Bond Index
contracts 120,000 par of Santa Clara,
Electric bonds pledged as initial margin 12/00 ($2,976) $ -
Net payments (receipts) of variation
margin to date (16)
--------------------------------------------------------------------------------
Variation margin receivable
(payable) on open futures contracts (16)
Other Assets Less Liabilities 105
NET ASSETS $ 228,460
Net Assets Consist of:
Accumulated net investment income - net of distributions $ (5)
Accumulated net realized gain/loss - net of distributions (1,501)
Net unrealized gain (loss) 9,340
Paid-in-capital applicable to 21,584,347 no par value
shares of beneficial interest outstanding;
unlimited number of shares authorized 220,626
NET ASSETS $ 228,460
NET ASSET VALUE PER SHARE $ 10.58
* 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
FNMA Federal National Mortgage Association
FSA Financial Security Assurance Corp.
GNMA Government National Mortgage Association
GO General Obligation
HFFA Health Facility Financing Authority
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
RAN Revenue Anticipation Note
TECP Tax-Exempt Commercial Paper
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price California Tax-Free Funds
--------------------------------------- Unaudited
In thousands
STATEMENT OF OPERATIONS
----------------------- Money Fund Bond Fund
6 Months 6 Months
Ended Ended
8/31/00 8/31/00
Investment Income (Loss)
Interest income $ 1,921 $ 6,182
-------------------------------------------------------------------------------
Expenses
Investment management 176 454
Custody and accounting 44 50
Shareholder servicing 43 67
Legal and audit 7 7
Prospectus and shareholder reports 5 10
Trustees 3 3
Registration 1 1
Miscellaneous 6 2
-------------------------------------------------------------------------------
Total expenses 285 594
Expenses paid indirectly (1) (3)
-------------------------------------------------------------------------------
Net expenses 284 591
-------------------------------------------------------------------------------
Net investment income (loss) 1,637 5,591
-------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 5 562
Futures - 41
-------------------------------------------------------------------------------
Net realized gain (loss) 5 603
Change in net unrealized gain or loss on securities - 9,502
-------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 5 10,105
-------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 1,642 $ 15,696
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price California Tax-Free Funds
--------------------------------------- Unaudited
In thousands
STATEMENT OF CHANGES IN NET ASSETS
---------------------------------- Money Fund Bond Fund
6 Months Year 6 Months Year
Ended Ended Ended Ended
8/31/00 2/29/00 8/31/00 2/29/00
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 1,637 $ 2,505 $ 5,591 $ 11,058
Net realized gain (loss) 5 8 603 (1,973)
Change in net unrealized
gain or loss - - 9,502 (16,110)
-------------------------------------------------------------------------------
Increase (decrease) in
net assets from operations 1,642 2,513 15,696 (7,025)
-------------------------------------------------------------------------------
Distributions to shareholders
Net investment income (1,637) (2,505) (5,611) (11,058)
Net realized gain - - - (209)
-------------------------------------------------------------------------------
Decrease in net assets
from distributions (1,637) (2,505) (5,611) (11,267)
-------------------------------------------------------------------------------
Capital share transactions *
Shares sold 42,087 98,632 19,278 53,047
Distributions reinvested 1,551 2,350 3,534 7,557
Shares redeemed (47,250) (95,117) (16,335) (56,415)
-------------------------------------------------------------------------------
Increase (decrease) in
net assets from capital
share transactions (3,612) 5,865 6,477 4,189
-------------------------------------------------------------------------------
Net Assets
Increase (decrease) during period (3,607) 5,873 16,562 (14,103)
Beginning of period 108,219 102,346 211,898 226,001
-------------------------------------------------------------------------------
End of period $ 104,612 $ 108,219 $ 228,460 $ 211,898
*Share information
Shares sold 42,087 98,632 1,876 5,040
Distributions reinvested 1,551 2,350 343 724
Shares redeemed (47,250) (95,117) (1,593) (5,418)
-------------------------------------------------------------------------------
Increase (decrease)
in shares outstanding (3,612) 5,865 626 346
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price California Tax-Free Funds
---------------------------------------
Unaudited August 31, 2000
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
Money Fund seeks preservation of capital, liquidity, and consistent with these
objectives, the highest level of income exempt from federal and California state
income taxes by investing primarily in high-quality California municipal
securities. The Bond Fund seeks to provide, consistent with prudent portfolio
management, the highest level of income exempt from federal and California state
income taxes by investing primarily in investment-grade California municipal
bonds.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
Valuation Debt securities are generally traded in the over-the-counter
market. 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. Financial futures contracts are valued
at closing settlement prices.
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. Variation margin made or received by the fund to settle
the daily fluctuations in the value of futures contracts are recorded as
unrealized gains or losses until the contracts are closed. Unrealized gains and
losses on futures contracts are included in Change in net unrealized gain or
loss in the accompanying financial statements. Expenses paid indirectly reflect
credits earned on daily uninvested cash balances at the custodian and are used
to reduce each fund's custody charges.
<PAGE>
NOTE 2 - INVESTMENT TRANSACTIONS
--------------------------------
Purchases and sales of portfolio securities for the Bond Fund, other than
short-term securities, aggregated $46,948,000 and $46,036,000 respectively, for
the six months ended August 31, 2000.
NOTE 3 - FEDERAL INCOME TAXES
-----------------------------
No provision for federal income taxes is required since each fund intends
to continue to qualify as a regulated investment company and distribute all of
its income. As of February 29, 2000, the Money Fund had capital loss
carryforwards for federal income tax purposes of $74,000, all of which expires
in 2003, and the Bond Fund had capital loss carryforwards of 1,330,000, all of
which expires in 2008. Each fund intends to retain gains realized in future
periods that may be offset by available capital loss carryforwards.
At August 31, 2000, the costs of investments for the Money and Bond Funds
for federal income tax purposes were substantially the same as for financial
reporting and totaled $96,241,000 and $219,031,000, respectively. For the Money
Fund, amortized cost is equivalent to value. For the Bond Fund, net unrealized
gain aggregated $9,340,000 at period-end, of which $11,577,000 was related to
appreciated investments and $2,237,000 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 $29,000 and $80,000 were payable at August 31, 2000 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 T. Rowe Price International, Inc. (the group).
The group fee rate ranges from 0.48% for the first $1 billion of assets to
0.295% for assets in excess of $120 billion. At August 31, 2000 and 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. 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, $39,000 of management fees were not accrued
by the Money Fund for the six months ended August 31, 2000, and $268,000 remains
unaccrued from prior periods. 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%.
<PAGE>
In addition, each fund has entered into agreements with the manager and a
wholly owned subsidiary of the manager, pursuant to which each fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of each fund. T. Rowe Price Services, Inc. is each fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the funds. The Money and Bond Funds incurred expenses
pursuant to these related party agreements totaling approximately $67,000 and
$86,000, respectively, for the six months ended August 31, 2000, of which
$13,000 and $18,000, respectively, were payable at period-end.
================================================================================
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.
<PAGE>
WALK-IN INVESTOR CENTERS:
For directions, call 1-800-225-5132
or visit our Web site
BALTIMORE AREA
DOWNTOWN
101 East Lombard Street
OWINGS MILLS
Three Financial Center
4515 Painters Mill Road
BOSTON AREA
386 Washington Street
Wellesley
COLORADO SPRINGS
4410 ArrowsWest Drive
LOS ANGELES AREA
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
TAMPA
4200 West Cypress Street
10th Floor
WASHINGTON, D.C.
900 17th Street N.W.
Farragut Square
T. Rowe Price Investment Services, Inc., Distributor. C05-051 8/31/00
