Item 1. Report to Shareholders
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
February 29, 2004
Certified Annual Report
This report is certified under the Sarbanes-Oxley Act of 2002, which requires
that public companies, including mutual funds, affirm that the information
provided in their annual and semiannual shareholder reports fully and fairly
represents their financial position.
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Performance Comparison
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the 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.
[Graphic Omitted]
NEW JERSEY TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
As of 2/29/04
New Jersey Tax-Free Bond Fund $17,600
Lehman Brothers Municipal Bond Index $18,600
Lipper New Jersey Municipal Debt Funds Average $16,760
Lehman Brothers Lipper New New Jersey
Municipal Jersey Municipal Tax-Free
Bond Index Debt Funds Average Bond Fund
2/94 10,000 10,000 10,000
2/95 10,188 10,027 10,037
2/96 11,314 11,010 11,107
2/97 11,937 11,534 11,615
2/98 13,028 12,536 12,688
2/99 13,829 13,223 13,426
2/00 13,541 12,655 12,881
2/01 15,212 14,166 14,450
2/02 16,252 14,963 15,383
2/03 17,498 15,873 16,589
2/04 18,600 16,760 17,600
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
Periods Ended 2/29/04 1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
New Jersey Tax-Free Bond Fund 6.10% 5.56% 5.82%
Lipper New Jersey Municipal
Debt Funds Average 5.83 4.79 5.29
Returns do not reflect taxes that the shareholder may pay on fund distributions
or the redemption of fund shares. Past performance cannot guarantee future
results.
Dear Shareholder,
We are pleased to report that the New Jersey Tax-Free Bond Fund generated a
solid 6.10% return for the 12 months ended February 29, 2004. As shown in the
table on the preceding page, we outperformed the Lipper New Jersey Municipal
Debt Funds Average during the latest 12-month period and for the past five and
10 years. Several of the portfolio's best-performing credits over the past 12
months were lower-rated, investment-quality credits. Nevertheless, the fund's
weighted average quality remained AA-, unchanged from its rating 12 months ago.
As you know, the fund seeks to provide the highest level of income exempt from
federal and New Jersey income taxes, consistent with prudent portfolio
management, by investing primarily in investment-grade New Jersey municipal
bonds.
The Major Index Returns table shows how various bond indexes performed over the
fund's fiscal year. Municipals outperformed the broad-based Lehman Brothers U.S.
Aggregate Index of taxable investment-grade corporate bonds over the 12-month
period. And as shown in the table, high-yield municipal bonds generated far and
away the best total return over the past year.
Major Index Returns
- --------------------------------------------------------------------------------
Period Ended 2/29/04 12-Month Return
- --------------------------------------------------------------------------------
Lehman Brothers U.S. Aggregate Index 4.54%
Lehman Brothers Municipal Bond Index 6.30
Lehman Brothers High Yield
Municipal Bond Index 16.15
The Portfolio Characteristics table shows various portfolio details as of
February 29, 2004, compared with one year earlier. The portfolio's weighted
average maturity fell to 14.7 years from 15.7, and duration was shortened to 5.3
years. The falling interest rate environment over the last 12 months caused the
fund's 30-day dividend yield and its standardized yield to maturity to dip from
year-ago levels.
Portfolio Characteristics
- --------------------------------------------------------------------------------
Periods Ended 2/28/03 2/29/04
- --------------------------------------------------------------------------------
Price Per Share $ 11.84 $ 12.03
Dividends Per Share
for 12 Months 0.54 0.51
30-Day Standardized
Yield to Maturity 3.44% 3.00%
Weighted Average
Maturity (years) 15.7 14.7
Weighted Average Effective
Duration (years) 5.9 5.3
Weighted Average Quality * AA- AA-
* Based on T. Rowe Price research.
Note: Yield will vary and is not guaranteed.
Prerefunded bonds were among the fund's best performers over the past 12 months
as municipal issuers took advantage of lower interest rates to decrease their
interest expense. During this period, the fund's prerefunded bonds allocation
moved significantly higher, to 19.0% from 13.7%. Concurrently, the portfolio
trimmed its exposure in general obligation - local and educational revenue
bonds.
Top 5 Sectors
- --------------------------------------------------------------------------------
Percent of Net Percent of
Net Assets Net Assets
Periods Ended 2/28/03 2/29/04
- --------------------------------------------------------------------------------
Prerefunded Bonds 13.7% 19.0%
General Obligation - Local 14.9 12.9
Hospital Revenue 9.5 10.6
Educational Revenue 11.6 10.1
Ground Transportation Revenue 6.1 7.7
Finally, I'm sure you are aware that mutual fund companies have recently come
under scrutiny for their trading policies. The investigations have led to
allegations that executives of several mutual fund companies permitted or
engaged in improper mutual fund trading. In addition, certain intermediaries
that process fund transactions are alleged to have assisted some investors in
executing improper mutual fund trades. I want T. Rowe Price shareholders to know
that we emphatically condemn the abuses that have been revealed or alleged
against other firms in our industry. Our firm has not entered and will not enter
into any agreements with any investors or intermediaries that authorize
after-hours trading or excessive short-term trading in any of our funds. T. Rowe
Price investors can be assured that our firm unequivocally opposes illegal or
inappropriate trading of any nature and has policies and procedures in place
designed to protect the best interests of our long-term shareholders. We have
reviewed trading by T. Rowe Price personnel in the T. Rowe Price mutual funds
over the last several years and did not uncover the existence of any of the
abusive trading practices described in recent regulatory enforcement actions
relating to fund portfolio managers and senior fund executives. You may find out
more about our trading policies and the steps we take to protect your interests
by visiting our Web site (troweprice.com). These policies are also spelled out
in your fund's prospectus.
We thank you for your continued support.
Respectfully,
James S. Riepe
Chairman
March 12, 2004
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Financial Highlights For a share outstanding throughout each period
- --------------------------------------------------------------------------------
Year
Ended
2/29/04 2/28/03 2/28/02 2/28/01 2/29/00
NET ASSET VALUE
Beginning of period $ 11.84 $ 11.50 $ 11.33 $ 10.62 $ 11.62
Investment activities
Net investment income
(loss) 0.51 0.54 0.54 0.55 0.54
Net realized and
unrealized gain
(loss) 0.19 0.34 0.17 0.71 (1.00)
Total from
investment
activities 0.70 0.88 0.71 1.26 (0.46)
Distributions
Net investment income (0.51) (0.54) (0.54) (0.55) (0.54)
NET ASSET VALUE
End of period $ 12.03 $ 11.84 $ 11.50 $ 11.33 $10.62
---------------------------------------------------------
Ratios/Supplemental Data
Total return^ 6.10% 7.83% 6.46% 12.18% (4.06)%
Ratio of total expenses
to average net assets 0.58% 0.59% 0.60% 0.63% 0.65%
Ratio of net investment
income (loss) to average
net assets 4.37% 4.63% 4.80% 5.04% 4 .84%
Portfolio turnover rate 14.0% 14.7% 17.0% 24.6% 50.2%
Net assets, end of
period(in thousands) $ 160,883 $ 148,333 $ 129,504 $ 121,824 $ 104,298
^ 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.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report February 29, 2004
Portfolio of Investments ss. Par Value
- --------------------------------------------------------------------------------
($ 000s)
NEW JERSEY 91.0%
Bordentown Sewage Auth., 5.50%,
12/1/25 (FGIC Insured) 1,300 1,435
Burlington County Bridge Commission,
GO, 5.25%, 8/15/19 825 913
Cape May PCR, Atlantic City Electric,
6.80%, 3/1/21(MBIA Insured) 1,520 2,018
Egg Harbor Township School Dist., GO,
5.00%, 7/15/16 (FGIC Insured) 1,000 1,108
Essex County, GO, 5.75%, 10/1/30
(FGIC Insured) 1,500 1,713
Gloucester County Improvement Auth.,
5.00%, 7/15/11 (MBIA Insured) 705 808
Gloucester County Improvement Auth.,
IDRB, Waste Management
6.85%, 12/1/29 (Tender 12/1/09) 1,100 1,300
Hopewell Valley Regional School Dist.,
GO, 5.00%, 8/15/15
(FGIC Insured) 2,000 2,212
Hudson County Improvement Auth., GO,
Union City, 5.20% 7/15/24 (FGIC Insured) 2,000 2,123
Mercer County Improvement Auth., GO
School Dist., 5.25%, 1/15/23 (FGIC Insured) 1,460 1,595
Solid Waste, 5.75%, 9/15/16 2,000 2,282
Middlesex County Improvement Auth., GO
5.25%, 9/15/20 1,500 1,674
Middlesex County Improvement Auth.
North Brunswick Township, 5.00%, 10/1/12
(FGIC Insured) 1,130 1,297
Student Housing
5.00%, 8/15/18 250 263
5.00%, 8/15/35 1,250 1,256
Middlesex County Utilities Auth., 8.634%,
8/15/10 (MBIA Insured) 500 583
Morris County, 5.25%, 11/15/20
(Prerefunded 11/15/09!) 725 838
New Jersey, GO
5.00%, 8/1/22 (FGIC Insured) 1,500 1,602
5.50%, 5/1/17 (Prerefunded 5/1/10!) 1,000 1,174
7.05%, 7/15/12 (Prerefunded 7/15/05!) # 1,335 1,459
New Jersey Building Auth., 5.375%, 6/15/19
(Prerefunded 6/15/09!) 3,000 3,465
New Jersey Economic Dev. Auth.
5.25%, 6/15/19 (AMBAC Insured) 1,500 1,660
6.00%, 5/1/16 (Prerefunded 5/1/09!)
(FSA insured) # 1,000 1,183
American Water, 6.875%, 11/1/34
(FGIC Insured) # 1,000 1,057
Ed. Testing Services, 4.75%, 5/15/25
(MBIA Insured) 1,950 1,985
Franciscan Oaks, 5.75%, 10/1/23 375 337
Harrogate
5.50%, 12/1/06 400 427
5.65%, 12/1/08 200 218
5.75%, 12/1/16 500 516
5.875%, 12/1/26 1,000 1,012
IDRB, Continental Airlines, 7.00%,
11/15/30 # 1,000 948
Kapkowski Road Landfill
Zero Coupon, 4/1/10
(Escrowed to Maturity) 1,025 863
5.75%, 10/1/21 250 259
Keswick Pines
5.70%, 1/1/18 500 506
5.75%, 1/1/24 850 844
Lawrenceville School, 5.75%, 7/1/16 2,000 2,221
Liberty State Park, 5.00%, 3/1/24 1,500 1,588
Masonic Charity Foundation
5.50%, 6/1/31 1,000 1,077
6.00%, 6/1/25 1,000 1,127
Presbyterian Homes at Montgomery,
6.375%, 11/1/31 800 815
St. Barnabas Health Care Systems
Zero Coupon, 7/1/16 (MBIA Insured) 3,500 2,113
The Evergreens, 6.00%, 10/1/22 965 977
The Seeing Eye, 6.20%, 12/1/24 1,000 1,133
Waste Management, 4.00%, 11/1/13
(Tender 10/31/04) # 200 203
Winchester Gardens at Ward Homestead
5.80%, 11/1/31 660 662
8.625%, 11/1/25 (Prerefunded 11/1/06!) 500 599
New Jersey EFA
5.00%, 9/1/19 (FSA Insured) 1,000 1,077
5.375%, 7/1/17 (FGIC Insured) 1,330 1,504
Georgian Court College, 6.50%, 7/1/33 500 559
Monmouth Univ.
5.25%, 7/1/09 480 531
5.60%, 7/1/12 450 486
Princeton Univ., 5.875%, 7/1/14
(Prerefunded 7/1/04!) ++ 1,050 1,068
Public Library Grant, 5.00%, 9/1/22
(AMBAC Insured) 1,000 1,066
Ramapo College, 5.00%, 7/1/25
(AMBAC Insured) 600 629
Rider Univ., 5.00%, 7/1/17 (RAA Insured) 500 540
Rowan Univ.
5.125%, 7/1/30 (FGIC Insured) 1,000 1,065
5.25%, 7/1/22 (FGIC Insured) 1,175 1,284
6.00%, 7/1/21 (Prerefunded 7/1/06!)
(AMBAC Insured) 1,000 1,118
Stevens Institute of Technology, 5.375%, 7/1/11 585 645
New Jersey Environmental Infrastructure Trust
5.25%, 9/1/20 1,500 1,660
Waste Water Treatment
6.30%, 4/1/10 (Prerefunded 4/1/04!) 1,180 1,209
6.375%, 4/1/11 (Prerefunded 4/1/04!) 200 205
New Jersey HEFA, 5.80%, 6/1/16
MBIA Insured) # 825 852
New Jersey HFFA
Atlantic City Medical Center, 5.75%,
7/1/25 2,000 2,132
Hackensack Univ. Medical Center, 6.00%,
1/1/34 1,750 1,854
Irvington General Hosp.
5.875%, 8/1/06 (Prerefunded 8/1/04!) 240 250
6.375%, 8/1/15 (Prerefunded 8/1/04!) 500 521
Kennedy Health Systems, 5.50%, 7/1/21 1,000 1,054
Pascack Valley Hosp. Assoc., 6.50%,
7/1/23 750 785
Robert Wood Johnson Univ. Hosp., 5.75%,
7/1/25 1,500 1,626
Somerset Medical Center, 5.50%, 7/1/33 2,500 2,551
South Jersey Hosp., 5.875%, 7/1/21 2,250 2,411
St. Peters Univ. Hosp., 6.875%, 7/1/30 1,000 1,118
Trinitas Hosp.
6.00%, 7/1/14 750 786
6.00%, 7/1/20 570 582
New Jersey Higher Ed. Assistance Auth.
6.00%, 6/1/15 (MBIA Insured) # 1,695 1,814
New Jersey Highway Auth., Garden State Parkway
5.75%, 1/1/13 (Prerefunded 1/1/10!) 2,000 2,378
New Jersey Housing & Mortgage Fin. Agency
Multi-Family Housing
5.20%, 5/1/14 (FSA Insured) 1,995 2,174
5.50%, 5/1/22 (FSA Insured) # 480 511
5.55%, 11/1/09 (FSA Insured) 1,000 1,092
5.70%, 5/1/20 (FSA Insured) 455 493
6.25%, 11/1/26 (FSA Insured) 1,000 1,080
Single Family Housing
5.70%, 10/1/17 (MBIA Insured) 965 1,016
6.35%, 10/1/27 (MBIA Insured) # 545 566
New Jersey Sports & Exhibition Auth., Monmouth
8.00%, 1/1/25 (Prerefunded 1/1/05!) 650 701
New Jersey Transit Corp.
5.50%, 2/1/06 (AMBAC Insured) 500 539
5.50%, 2/1/08 (AMBAC Insured) 3,000 3,387
New Jersey Transportation Trust Fund Auth.
5.125%, 6/15/15 (Prerefunded 6/15/09!) 1,635 1,868
6.00%, 12/15/19 (Prerefunded 12/15/11!)
(MBIA Insured)" 1,250 1,529
New Jersey Turnpike Auth.
VRDN (Currently 0.93%) (FSA Insured) 4,000 4,000
5.00%, 1/1/27 (FGIC Insured) 700 739
5.50%, 1/1/25 (MBIA Insured) 1,025 1,129
5.75%, 1/1/10 (Escrowed to Maturity)
(MBIA Insured) 215 254
5.75%, 1/1/10 (MBIA Insured) 1,250 1,467
North Hudson Sewage Auth.
Zero Coupon, 8/1/20 (MBIA Insured) 2,350 1,119
5.25%, 8/1/18 (FGIC Insured) 2,000 2,233
Ocean County, GO
5.125%, 9/1/18 1,590 1,739
5.35%, 12/1/17 (Prerefunded 12/1/09!) 1,695 1,983
Ocean County Utilities Auth., 6.30%, 1/1/11
(Prerefunded 1/1/05!) 1,300 1,371
Port Auth. of New York & New Jersey
5.00%, 12/15/24 (AMBAC Insured) # 1,000 1,042
5.00%, 7/15/34 1,000 1,050
5.125%, 1/15/36 # 1,000 1,031
5.875%, 9/15/15 (FGIC Insured) # 1,000 1,099
6.125%, 7/15/22 # 1,000 1,028
6.50%, 7/15/19 (FGIC Insured) # 500 526
6.75%, 10/1/11 # 1,000 1,046
Salem County PCR
Du Pont De Nemours, 6.50%, 11/15/21 # 2,000 2,015
PSEG Power, 5.75%, 4/1/31 # 1,000 1,046
Public Service Electric & Gas Co.
6.25%, 6/1/31 (MBIA Insured) 1,500 1,549
South Brunswick Township Board of Ed.
6.40%, 8/1/09 (Prerefunded 8/1/05!)
(FGIC Insured) 1,250 1,344
6.40%, 8/1/10 (Prerefunded 8/1/05!)
(FGIC Insured) 1,500 1,612
South Jersey Transportation Auth., IDRB,
Raytheon Air 6.15%, 1/1/22 # 660 670
Tobacco Settlement Fin. Corp.
6.75%, 6/1/39 450 441
7.00%, 6/1/41 300 302
Union County, GO, 5.00%, 3/1/17 1,500 1,647
Univ. of Medicine & Dentistry, 5.00%,
12/1/31 (AMBAC Insured) 1,000 1,050
Wanaque Valley Regional Sewage Auth., GO
5.75%, 9/1/18 (AMBAC Insured) 3,115 3,729
Winslow Township Board of Ed., 5.20%, 8/1/16
(Prerefunded 8/1/09!) (FGIC Insured) 2,010 2,308
Total New Jersey (Cost $134,022) 146,333
DELAWARE 0.7%
Delaware River & Bay Auth.
5.50%, 1/1/15 (AMBAC Insured) 500 573
5.50%, 1/1/16 (AMBAC Insured) 500 571
Total Delaware (Cost $995) 1,144
PENNSYLVANIA 0.7%
Delaware River Joint Toll Bridge Commission,
5.00%, 7/1/28 1,140 1,185
Total Pennsylvania (Cost $1,118) 1,185
PUERTO RICO 5.5%
Children's Trust Fund, Tobacco Settlement,
6.00%, 7/1/26 (Prerefunded 7/1/10!) 1,500 1,822
Puerto Rico, GO
5.00%, 7/1/27 1,400 1,451
6.45%, 7/1/17 (Prerefunded 7/1/04!) 500 517
Puerto Rico Electric Power Auth.,
5.00%, 7/1/08 1,500 1,675
Puerto Rico Highway & Transportation Auth.
5.00%, 7/1/26 (FSA Insured)
(Tender 7/1/10) 2,000 2,286
5.00%, 7/1/36 500 522
5.50%, 7/1/18 500 547
Puerto Rico Infrastructure Fin. Auth.,
7.50%, 7/1/09 50 51
Total Puerto Rico (Cost $8,226) 8,871
U. S. VIRGIN ISLANDS 1.0%
Virgin Islands PFA
GO, 5.00%, 10/1/33 (RAA Insured) 1,000 1,039
PCR, Hovensa Refinery, 6.125%, 7/1/22 500 534
Total U. S. Virgin Islands (Cost $1,485) 1,573
Total Investments in Securities
98.9% of Net Assets (Cost $145,846) $159,106
-----------
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Futures Contracts
($ 000s)
Contract Unrealized
Expiration Value Gain (Loss)
------------ ------------ ------------
Short, 5 U.S. Treasury
10 year contracts,
$60 par of 5.875%
New Jersey EFA,
Princeton Univ. bonds
pledged as initial margin 3/04 $ (577) $ ( 23)
Net payments (receipts)
of variation
margin to date
21
Variation margin receivable
(payable) on open futures
contracts $ (2)
------
ss. Denominated in U.S. dollar unless otherwise noted
# Interest subject to alternative minimum tax
++ All or a portion of this security is pledged to cover margin requirements
on futures contracts at February 29, 2004.
! Used in determining portfolio maturity
AMBAC AMBAC Assurance Corp.
EFA Educational Facility Authority
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Inc.
GO General Obligation
HEFA Health & Educational Facility Authority
HFFA Health Facility Financing Authority
IDRB Industrial Development Revenue Bond
MBIA MBIA Insurance Corp.
PCR Pollution Control Revenue
PFA Public Finance Authority
RAA Radian Asset Assurance Inc.
VRDN Variable-Rate Demand Note
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report February 29, 2004
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
($ 000s)
Assets
Investments in securities, at value
(cost $ 145,846) $ 159,106
Other assets 2,127
Total assets 161,233
Liabilities
Total liabilities 350
NET ASSETS $ 160,883
-----------
Net Assets Consist of:
Undistributed net investment income (loss) $ 107
Undistributed net realized gain (loss) (2,299)
Net unrealized gain (loss) 13,237
Paid-in-capital applicable to 13,378,054
no par value shares of beneficial interest
outstanding; unlimited number of shares authorized 149,838
NET ASSETS $ 160,883
-----------
NET ASSET VALUE PER SHARE $ 12.03
-----------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Statement of Operations
- --------------------------------------------------------------------------------
($ 000s)
Year
Ended
2/29/04
Investment Income (Loss)
Interest income $ 7,576
Expenses
Investment management 640
Custody and accounting 110
Shareholder servicing 92
Prospectus and shareholder reports 19
Legal and audit 15
Registration 6
Trustees 5
Miscellaneous 5
Total expenses 892
Expenses paid indirectly (1)
Net expenses 891
Net investment income (loss) 6,685
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 301
Futures (55)
Written options 12
Net realized gain (loss) 258
Change in net unrealized gain (loss)
Securities 2,111
Futures (17)
Change in net unrealized gain (loss) 2,094
Net realized and unrealized gain (loss) 2,352
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 9,037
-----------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
($ 000s)
Year
Ended
2/29/04 2/28/03
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 6,685 $ 6,402
Net realized gain (loss) 258 288
Change in net unrealized gain (loss) 2,094 3,842
Increase (decrease) in net assets
from operations 9,037 10,532
Distributions to shareholders
Net investment income (6,664) (6,378)
Capital share transactions *
Shares sold 27,076 29,173
Distributions reinvested 5,165 5,006
Shares redeemed (22,064) (19,504)
Increase (decrease) in net assets
from capital share transactions 10,177 14,675
Net Assets
Increase (decrease) during period 12,550 18,829
Beginning of period 148,333 129,504
End of period $ 160,883 $ 148,333
----------------------------------
*Share information
Shares sold 2,289 2,517
Distributions reinvested 437 431
Shares redeemed (1,872) (1,687)
Increase (decrease) in shares
outstanding 854 1,261
The accompanying notes are an integral part of these financial statements.
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report February 29, 2004
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1 - Significant Accounting Policies
T. Rowe Price State Tax-Free Income Trust (the trust) is registered under the
Investment Company Act of 1940 (the 1940 Act). The New Jersey Tax-Free Bond Fund
(the fund), a nondiversified, open-end management investment company, is one
portfolio established by the trust and commenced operations on April 30, 1991.
The fund seeks to provide the highest level of income exempt from federal and
New Jersey state income taxes, consistent with prudent portfolio management, by
investing primarily in investment-grade New Jersey municipal bonds.
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the use of estimates made by fund management.
Valuation
The fund values its investments and computes its net asset value per share at
the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day
that the NYSE is open for business. Debt securities are generally traded in the
over-the-counter market. Securities are valued at prices 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.
Purchased and written options on futures contracts are valued at the last sale
price. Financial futures contracts are valued at closing settlement prices.
Other investments and those 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 the T. Rowe Price Valuation Committee,
established by the fund's Board of Trustees.
Credits
The fund earns credits on temporarily uninvested cash balances at the custodian
that reduce the fund's custody charges. Custody expense in the accompanying
financial statements is presented before reduction for credits, which are
reflected as expenses paid indirectly.
Investment Transactions, Investment Income, and Distributions
Income and expenses are recorded on the accrual basis. Premiums and discounts on
debt securities are amortized for financial reporting purposes. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis.
Payments ("variation margin") made or received 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 other assets and other liabilities, respectively, and in the
change in net unrealized gain or loss in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income
distributions are declared on a daily basis and paid monthly. Capital gain
distributions, if any, are declared and paid by the fund, typically on an annual
basis.
Other
In the normal course of business, the fund enters into contracts that provide
general indemnifications. The fund's maximum exposure under these arrangements
is dependent on claims that may be made against the fund in the future and,
therefore, cannot be estimated; however, based on experience, the risk of
material loss from such claims is considered remote.
Note 2 - Investment Transactions
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Futures Contracts
During the year ended February 29, 2004, the fund was a party to futures
contracts, which provide for the future sale by one party and purchase by
another of a specified amount of a specific financial instrument at an agreed
upon price, date, time, and place. Risks arise from possible illiquidity of the
futures market and from movements in security values and interest rates.
Options
Call and put options on futures contracts give the holder the right to purchase
or sell, respectively, a particular futures contract at a specified price on a
certain date. Risks arise from possible illiquidity of the options market and
from movements in underlying futures prices. Transactions in options written and
related premiums received during the year ended February 29, 2004, were as
follows:
Number of
Contracts Premiums
- --------------------------------------------------------------------------------
Outstanding at beginning of period - $ -
Written 20 12,000
Expired (20) (12,000)
Outstanding at end of period - $ -
Other
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $30,576,000 and $20,386,000, respectively, for the year ended
February 29, 2004.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code and distribute to shareholders all of its income and
gains. Federal income tax regulations differ from generally accepted accounting
principles; therefore, distributions determined in accordance with tax
regulations may differ significantly in amount or character from net investment
income and realized gains for financial reporting purposes. Financial reporting
records are adjusted for permanent book/tax differences to reflect tax
character. Financial records are not adjusted for temporary differences.
Distributions during the year ended February 29, 2004 totaled $6,664,000 and
were characterized as tax-exempt income for tax purposes. At February 29, 2004,
the tax-basis components of net assets were as follows:
- --------------------------------------------------------------------------------
Unrealized appreciation $ 13,424,000
Unrealized depreciation (329,000)
Net unrealized appreciation (depreciation) 13,095,000
Undistributed tax-exempt income 10,000
Capital loss carryforwards (2,060,000)
Paid-in capital 149,838,000
Net assets $ 160,883,000
--------------------
Federal income tax regulations require the fund to defer recognition of capital
losses realized on certain options and futures transactions; accordingly,
$262,000 of realized losses reflected in the accompanying financial statements
have not been recognized for tax purposes as of February 29, 2004.The fund
intends to retain realized gains to the extent of available capital loss
carryforwards for federal income tax purposes. During the fiscal year ended
February 29, 2004, the fund utilized $400,000 of capital loss carryforwards. As
of February 29, 2004, the fund had $947,000 of capital loss carryforwards that
expire in fiscal 2008 and $1,113,000 that expire in fiscal 2009.
At February 29, 2004, the cost of investments for federal income tax purposes
was $145,988,000.
Note 4 - Related Party Transactions
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The
investment management agreement between the fund and the manager provides for an
annual investment management fee, which is computed daily and paid monthly. The
fee consists of an individual fund fee, equal to 0.10% of the fund's average
daily net assets, and the fund's pro-rata share of a group fee. The group fee is
calculated based on the combined net assets of certain mutual funds sponsored by
Price Associates (the group) applied to a graduated fee schedule, with rates
ranging from 0.48% for the first $1 billion of assets to 0.295% for assets in
excess of $120 billion. The fund's portion of the group fee is determined by the
ratio of its average daily net assets to those of the group. At February 29,
2004, the effective annual group fee rate was 0.32%, and investment management
fee payable totaled $52,000.
In addition, the fund has entered into service agreements with Price Associates
and a wholly owned subsidiary of Price Associates (collectively, Price). Price
Associates computes the daily share price and maintains the financial records of
the fund. T. Rowe Price Services, Inc., provides shareholder and administrative
services in its capacity as the fund's transfer and dividend disbursing agent.
Expenses incurred pursuant to these service agreements totaled $126,000 for the
year ended February 29, 2004, of which $11,000 was payable at period-end.
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Board of Trustees of T. Rowe Price State Tax-Free Income Trust and
Shareholders of New Jersey Tax-Free Bond Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of New Jersey Tax-Free Bond Fund (one
of the portfolios comprising T. Rowe Price State Tax-Free Income Trust,
hereafter referred to as the "Fund") at February 29, 2004, and the results of
its operations, the changes in its net assets and the financial highlights for
each of the fiscal periods presented, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
February 29, 2004 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 22, 2004
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Tax Information (Unaudited) for the Tax Year Ended 2/29/04
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included $6,619,000 which qualified as
exempt-interest dividends.
Information on Proxy Voting
- --------------------------------------------------------------------------------
A description of the policies and procedures that the T. Rowe Price New Jersey
Tax-Free Bond Fund uses to determine how to vote proxies relating to portfolio
securities is available, without charge, upon request by calling 1-800-225-5132.
It also appears in the fund's Statement of Additional Information (Form 485B),
which can be found on the SEC's Web site, www.sec.gov.
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report
About the Fund's Trustees and Officers
- --------------------------------------------------------------------------------
Your fund is governed by a Board of Trustees that meets regularly to review
investments, performance, expenses, and other business matters, and is
responsible for protecting the interests of shareholders. The majority of the
fund's trustees are independent of T. Rowe Price Associates, Inc. (T. Rowe
Price); "inside" trustees are officers of T. Rowe Price. The Board of Trustees
elects the fund's officers, who are listed in the final table. The business
address of each trustee and officer is 100 East Pratt Street, Baltimore, MD
21202. The Statement of Additional Information includes additional information
about the fund trustees and is available without charge by calling a T. Rowe
Price representative at 1-800-225-5132.
Independent Trustees
Name
(Year of Birth)
Year Elected*
Principal Occupation(s) During Past 5 Years and Directorships of Other Public
Companies
Anthony W. Deering
(1945)
1986
Director, Chairman of the Board, President, and Chief Executive Officer,
The Rouse Company, real estate developers; Director, Mercantile Bank
(4/03 to present)
Donald W. Dick, Jr.
(1943)
2001
Principal, EuroCapital Advisors, LLC, an acquisition and management advisory
firm
David K. Fagin
(1938)
2001
Director, Golden Star Resources Ltd., Canyon Resources Corp.
(5/00 to present), and Pacific Rim Mining Corp. (2/02 to present); Chairman and
President, Nye Corp.
Karen N. Horn
(1943)
2003
Managing Director and President, Global Private Client Services, Marsh Inc.;
Managing Director and Head of International Private Banking, Bankers Trust;
Director, Eli Lilly and Company
F. Pierce Linaweaver
(1934)
1986
President, F. Pierce Linaweaver & Associates, Inc., consulting environmental
and civil engineers
John G. Schreiber
(1946)
1992
Owner/President, Centaur Capital Partners, Inc., a real estate investment
company; Senior Advisor and Partner, Blackstone Real Estate Advisors, L.P.;
Director, AMLI Residential Properties Trust, Host Marriott Corp., and The
Rouse Company
* Each independent trustee oversees 111 T. Rowe Price portfolios and serves
until retirement, resignation, or election of a successor.
T. Rowe Price New Jersey Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Inside Trustees
Name
(Year of Birth)
Year Elected*
[Number of T. Rowe Price Portfolios Overseen]
Principal Occupation(s) During Past 5 Years and Directorships of Other Public
Companies
William T. Reynolds, CFA, CIC
(1948)
1991
[37]
Director and Vice President, T. Rowe Price and T. Rowe Price Group, Inc.;
Director, T. Rowe Price Global Asset Management Limited
James S. Riepe
(1943)
1986
[111]
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Trust
Company, and T. Rowe Price International, Inc. Director and Vice President,
T.Rowe Price; Vice Chairman of the Board, Director, and Vice President, T. Rowe
Price Group, Inc.; Chairman of the Board and Director, T. Rowe Price Global
Asset Management Limited, T. Rowe Price Global Investment Services Limited,
T.Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services,
Inc., and T. Rowe Price Services, Inc.; Chairman of the Board, Director,
President, and Trust Officer, T. Rowe Price Trust Company; Director, T. Rowe
Price International, Inc.; Chairman of the Board, State Tax-Free Income Trust
M. David Testa, CFA, CIC
(1944)
1997
[111]
Director and Vice President, T. Rowe Price and T. Rowe Price Trust Company;
Vice Chairman of the Board, Director, and Vice President, T. Rowe Price Group,
Inc.; Chairman of the Board and Director, T. Rowe Price International, Inc.;
Director, T. Rowe Price Global Asset Management Limited and T. Rowe Price
Global Investment Services Limited
* Each inside trustee serves until retirement, resignation, or election of a
successor.
Officers
Name (Year of Birth)
Title and Fund(s) Served
Principal Occupation(s)
Stephen V. Booth, CPA (1961)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price
Trust Company
Linda A. Brisson (1959)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Steven G. Brooks, CFA (1954)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Joseph A. Carrier, CPA (1960)
Treasurer, State Tax-Free Income Trust
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price
Investment Services, Inc.
Unless otherwise noted, officers have been employees of T. Rowe Price or
T. Rowe Price International for at least five years.
Officers (continued)
Name (Year of Birth)
Title and Fund(s) Served
Principal Occupation(s)
Jonathan M. Chirunga (1966)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price
Maria H. Condez (1962)
Assistant Vice President, State Tax-Free Income Trust
Employee, T. Rowe Price
G. Richard Dent (1960)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Roger L. Fiery III, CPA (1959)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Trust
Company, and T. Rowe Price International, Inc.
Gregory S. Golczewski (1966)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price and T. Rowe Price Trust Company
Charles B. Hill (1961)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Henry H. Hopkins (1942)
Vice President, State Tax-Free Income Trust
Director and Vice President, T. Rowe Price Group, Inc., T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company;
Vice President, T. Rowe Price, T. Rowe Price International, Inc., and T. Rowe
Price Retirement Plan Services, Inc.
T. Dylan Jones (1971)
Assistant Vice President, State Tax-Free Income Trust
Assistant Vice President, T. Rowe Price
Marcy M. Lash (1963)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price
Alan D. Levenson (1958)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Patricia B. Lippert (1953)
Secretary, State Tax-Free Income Trust
Assistant Vice President, T. Rowe Price and T. Rowe Price Investment Services,
Inc.
Joseph K. Lynagh, CFA (1958)
Executive Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Konstantine B. Mallas (1963)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
James M. McDonald (1949)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price
Trust Company
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Officers (continued)
Name (Year of Birth)
Title and Fund(s) Served
Principal Occupation(s)
Hugh D. McGuirk, CFA (1960)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Mary J. Miller, CFA (1955)
President, State Tax-Free Income Trust
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.
Timothy G. Taylor (1975)
Assistant Vice President, State Tax-Free
Income Trust
Employee, T. Rowe Price
Edward A. Wiese, CFA (1959)
Vice President, State Tax-Free Income Trust
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price
Trust Company; Director, Vice President, and Chief Investment Officer,
T. Rowe Price Savings Bank
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Item 2. Code of Ethics.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. A copy of this code of
ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were
approved or waivers were granted to this code of ethics during the period
covered by this report.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Directors/Trustees has determined that Mr. David K.
Fagin qualifies as an audit committee financial expert, as defined in Item 3 of
Form N-CSR. Mr. Fagin is considered independent for purposes of Item 3 of Form
N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) - (d) Aggregate fees billed to the registrant for the last two fiscal years
for professional services rendered by the registrant's principal accountant were
as follows:
2004 2003
Audit Fees $8,145 $7,983
Audit-Related Fees 697 --
Tax Fees 2,271 2,019
All Other Fees 124 129
Audit fees include amounts related to the audit of the registrant's annual
financial statements and services normally provided by the accountant in
connection with statutory and regulatory filings. Audit-related fees include
amounts reasonably related to the performance of the audit of the registrant's
financial statements, specifically the issuance of a report on internal
controls. Tax fees include amounts related to tax compliance, tax planning, and
tax advice. Other fees include the registrant's pro-rata share of amounts for
agreed-upon procedures in conjunction with service contract approvals by the
registrant's Board of Directors/Trustees.
(e)(1) The registrant's audit committee has adopted a policy whereby audit and
non-audit services performed by the registrant's principal accountant for the
registrant, its investment adviser, and any entity controlling, controlled by,
or under common control with the investment adviser that provides ongoing
services to the registrant require pre-approval in advance at regularly
scheduled audit committee meetings. If such a service is required between
regularly scheduled audit committee meetings, pre-approval may be authorized by
one audit committee member with ratification at the next scheduled audit
committee meeting. Waiver of pre-approval for audit or non-audit services
requiring fees of a de minimis amount is not permitted.
(2) No services included in (b) - (d) above were approved pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate fees billed for the most recent fiscal year and the preceding
fiscal year by the registrant's principal accountant for non-audit services
rendered to the registrant, its investment adviser, and any entity controlling,
controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant were $719,000 and $671,000, respectively, and
were less than the aggregate fees billed for those same periods by the
registrant's principal accountant for audit services rendered to the T. Rowe
Price Funds.
(h) All non-audit services rendered in (g) above were pre-approved by the
registrant's audit committee. Accordingly, these services were considered by the
registrant's audit committee in maintaining the principal accountant's
independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The registrant's principal executive officer and principal financial officer
are aware of no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 11. Exhibits.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is
attached.
(2) Separate certifications by the registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(3) Not applicable.
(b) A certification by the registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price State Tax-Free Income Trust
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date April 16, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date April 16, 2004
By /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date April 16, 2004