Item 1. Report to Shareholders
T. Rowe Price Georgia Tax-Free Bond Fund
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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 Georgia Tax-Free Bond Fund
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Certified Annual Report
Performance Comparison
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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]
GEORGIA TAX-FREE BOND FUND
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As of 2/29/04
Georgia Tax-Free Bond Fund $17,923
Lehman Brothers Municipal Bond Index $18,600
Lipper Georgia Municipal Debt Funds Average $16,939
Lehman Brothers Lipper Georgia Georgia
Municipal Bond Municipal Debt Tax-Free
Index Funds Average Bond Fund
2/94 10,000 10,000 10,000
2/95 10,188 10,043 10,142
2/96 11,314 11,021 11,219
2/97 11,937 11,523 11,796
2/98 13,028 12,597 12,940
2/99 13,829 13,244 13,681
2/00 13,541 12,685 13,208
2/01 15,212 14,186 14,804
2/02 16,252 15,019 15,735
2/03 17,498 16,006 1,860
2/04 18,600 16,939 17,923
Average Annual Compound Total Return
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Periods Ended 2/29/04 1 Year 5 Years 10 Years
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Georgia Tax-Free Bond Fund 6.30% 5.55% 6.01%
Lipper Georgia Municipal
Debt Funds Average 5.55 4.98 5.40
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.
T. Rowe Price Georgia Tax-Free Bond Fund
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Certified Annual Report
Dear Shareholder,
We are pleased to report that the Georgia Tax-Free Bond Fund generated a solid
6.30% return for the 12 months ended February 29, 2004. As shown in the table on
the preceding page, we outperformed the Lipper Georgia Municipal Debt Funds
Average during the latest 12-month period and have outpaced the benchmark for
the past five and 10 years. For the year, the fund's return reflects price
appreciation of $0.23 per share and dividend income of $0.46.
As you know, the fund seeks to provide the highest level of income exempt from
federal and Georgia income taxes, consistent with prudent portfolio management,
by investing primarily in investment-grade Georgia municipal bonds.
Major Index Returns
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Period Ended 2/29/04 12-Month Return
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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 Major Index Returns table shows how various bond indexes performed over the
fund's fiscal year. The Lehman Brothers Municipal Bond Index, which tracks the
national tax-free bond market, outperformed Lehman's U.S. Aggregate Index of
taxable investment-grade 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.
Portfolio Characteristics
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Periods Ended 2/28/03 2/29/04
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Price Per Share $ 11.27 $ 11.50
Dividends Per Share for 12 Months 0.49 0.46
30-Day Standardized Yield
to Maturity 3.42% 2.91%
Weighted Average Maturity (years) 14.3 14.4
Weighted Average Effective
Duration (years) 6.0 5.6
Weighted Average Quality * AA AA
*Based on T. Rowe Price research.
Note: Yield will vary and is not guaranteed.
The Portfolio Characteristics table shows various fund details as of February
29, 2004, compared with one year earlier. The portfolio's weighted average
maturity ended the period at 14.4 years, virtually unchanged
from a year ago, and duration narrowed to 5.6 years. The portfolio's average
quality of its holdings was unchanged at AA. Declining interest rates over the
past 12 months caused the fund's 30-day standardized yield to maturity to dip
from year-ago levels.
Top 5 Sectors
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Percent of Percent of
Net Assets Net Assets
Periods Ended 2/28/03 2/29/04
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Water and Sewer Revenue 19.8% 26.2%
General Obligation - Local 17.1 15.9
Prerefunded Bonds 12.7 15.5
Hospital Revenue 5.9 6.8
Educational Revenue 7.0 6.6
The Top 5 Sectors table shows how the fund's assets were allocated at the end of
the reporting period versus its year-earlier allocation. During this period, the
fund's water and sewer revenue allocations rose significantly, to 26.2% from
19.8% a year ago. The portfolio trimmed its exposure to general obligation bonds
and increased its allocation to prerefunded bonds.
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 submitted,
James S. Riepe
Chairman
March 20, 2004
T. Rowe Price Georgia Tax-Free Bond Fund
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Certified Annual Report
Financial Highlights For a share outstanding throughout each period
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Year
Ended
2/29/04 2/28/03 2/28/02 2/28/01 2/29/00
NET ASSET VALUE
Beginning of
period $ 11.27 $ 10.99 $ 10.83 $ 10.15 $ 11.03
Investment activities
Net investment
income (loss) 0.46 0.49 0.51* 0.52* 0.50*
Net realized and
unrealized
gain (loss) 0.23 0.28 0.16 0.68 (0.88)
Total from
investment
activities 0.69 0.77 0.67 1.20 (0.38)
Distributions
Net investment
income (0.46) (0.49) (0.51) (0.52) (0.50)
NET ASSET VALUE
End of period $ 11.50 $ 11.27 $ 10.99 $ 10.83 $ 10.15
--------- --------- --------- --------- ---------
Ratios/Supplemental Data
Total return^ 6.30% 7.15% 6.29%* 12.08%* (3.46)%*
Ratio of total
expenses to
average
net assets 0.65% 0.65% 0.65%* 0.65%* 0.65%*
Ratio of net
investment
income (loss)
to average
net assets 4.13% 4.39% 4.65%* 4.93%* 4.78%*
Portfolio
turnover rate 29.2% 24.8% 32.1% 33.9% 48.5%
Net assets,
end of period
(in thousands) $ 91,714 $ 86,622 $ 77,807 $ 69,874 $ 57,380
^ 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 0.65% contractual expense limitation in
effect through 2/28/03.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Georgia Tax-Free Bond Fund
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Certified Annual Report February 29, 2004
Portfolio of Investments (ss.) Par Value
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($ 000s)
GEORGIA 94.5%
Americus & Sumter County Hosp. Auth.,
Magnolia Manor, 6.25%, 5/15/19 1,000 1,002
Assoc. County Commoners Leasing Program,
Public Purpose Project, COP, 5.25%, 4/1/24
(XLCA Insured) 1,000 1,098
Athens - Clarke County Residential Care Fac.,
Wesley Woods of Athens, 6.375%, 10/1/27 600 531
Atlanta & Fulton County Recreation, GO,
5.75%, 12/1/18 (AMBAC Insured) 1,500 1,756
Atlanta Airport
Zero Coupon, 1/1/10 (MBIA Insured) # 1,060 805
5.50%, 1/1/26 (Prerefunded 1/1/10!)
(FGIC Insured) 1,000 1,174
5.60%, 1/1/30 (Prerefunded 1/1/10!)
(FGIC Insured) 1,895 2,236
6.25%, 1/1/14 (FGIC Insured) # 1,000 1,174
5.00%, 1/1/07 (FGIC Insured) # 500 543
Atlanta Water & Sewer
VRDN (Currently 0.95%) (FSA Insured) 800 800
5.00%, 11/1/33 (MBIA Insured) 1,000 1,043
Augusta Water & Sewer, 5.00%, 10/1/27
(FSA Insured) 1,000 1,049
Chatham County Hosp. Auth., Memorial Univ.
Medical Center, 6.125%, 1/1/24 1,230 1,338
Cherokee County Water & Sewer Auth.,
5.50%, 8/1/23 (MBIA Insured) 1,000 1,161
Clayton County Water Auth.
5.00%, 5/1/20 1,000 1,096
6.25%, 5/1/16 1,000 1,201
Cobb - Marietta Water Auth., 5.25%, 11/1/21 1,000 1,114
Cobb County Hosp. Auth., Wellstar Health System,
5.25%, 4/1/23 (AMBAC Insured) 1,000 1,095
Columbia County, GO, 5.625%, 2/1/20 1,250 1,403
Columbia County Water & Sewer, 6.25%, 6/1/18
(Prerefunded 6/1/10!) (FGIC Insured) 1,000 1,218
Coweta County Residential Care Fac.
for the Elderly, Wesley Woods of
Newnan-Peachtree City, 8.25%, 10/1/26 500 524
Crisp County Dev. Auth., International Paper Co.,
6.20%, 2/1/20 # 1,000 1,084
Dekalb County Dev. Auth., 6.00%, 10/1/14
(Prerefunded 10/1/04!) 410 430
Dekalb County Hosp. Auth., Series A,
5.00%, 9/1/11 (FSA Insured) 1,000 1,135
Dekalb County Water And Sewage
5.00%, 10/1/22 1,000 1,069
5.00%, 10/1/35 2,000 2,094
5.125%, 10/1/31 1,000 1,051
Downtown Smyrna Dev. Auth., 6.70%, 2/1/20
(Prerefunded 2/1/05!) (MBIA Insured) 1,000 1,072
Fayette County Public Fac. Auth.
6.00%, 6/1/30 (Prerefunded 6/1/10!) 500 606
6.25%, 6/1/20 (Prerefunded 6/1/10!) 500 613
Floyd County Hosp. Auth., GO, 5.00%, 7/1/33
(MBIA Insured) 730 769
Forsyth County
6.00%, 3/1/16 (Prerefunded 3/1/10!) 1,250 1,507
GO, 5.25%, 3/1/19 760 856
Forsyth County School Dist., GO,
6.00%, 2/1/16 1,250 1,483
Forsyth County Water & Sewer Auth.
5.00%, 4/1/21 1,060 1,131
5.00%, 4/1/32 1,000 1,049
6.25%, 4/1/20 (Prerefunded 4/1/10!) 1,000 1,222
Fulton County Dev. Auth., Georgia Tech
Foundation, 5.00%, 11/1/21 1,000 1,067
Fulton County Residential Care Fac.
for the Elderly, Canterbury Court,
6.30%, 10/1/24 500 522
Fulton County Water & Sewage Auth.,
6.25%, 1/1/09 (FGIC Insured) 1,000 1,178
Fulton Dekalb Hosp. Auth., GO,
5.25%, 1/1/20 (FSA Insured) 1,000 1,108
Gainesville Water & Sewer,
6.00%, 11/15/12 (FGIC Insured) 1,000 1,216
Georgia, GO, 6.50%, 4/1/08 1,000 1,176
Georgia Housing & Fin. Auth.
5.65%, 12/1/21 # 1,000 1,060
5.75%, 12/1/31 # 930 980
5.80%, 12/1/21 # 670 708
5.80%, 12/1/26 # 430 455
6.05%, 12/1/16 # 500 526
6.60%, 6/1/25 # 165 169
Georgia Municipal Gas Auth.,
Southern Storage Gas, 6.00%, 7/1/04 500 508
Georgia Private Colleges & Univ. Auth.
Emory Univ.
5.50%, 11/1/20 500 566
5.50%, 11/1/25 1,975 2,174
5.50%, 11/1/33 1,500 1,660
Glynn County Water & Sewer,
5.00%, 4/1/23 (AMBAC Insured) 1,000 1,061
Griffin Utility, 5.125%, 1/1/27
(AMBAC Insured) 1,000 1,071
Gwinnett County School Dist., GO,
5.00%, 2/1/07 500 549
Gwinnett County Water & Sewage Auth., GO
4.75%, 8/1/24 1,000 1,034
5.25%, 8/1/24 1,000 1,084
Hall County & Gainsville Hosp. Auth.,
Northeast Health System, 5.50%, 5/15/31 1,500 1,555
Henry County Water & Sewer Auth.
5.00%, 2/1/07 (MBIA Insured) 1,000 1,095
5.125%, 2/1/20 (MBIA Insured) 1,000 1,108
5.625%, 2/1/30 (FGIC Insured) 1,000 1,120
Jackson County School Dist., 6.00%, 7/1/14
(Prerefunded 7/1/04!) (MBIA Insured) 1,000 1,037
Macon - Bibb County Urban Dev. Auth., GO,
5.50%, 10/1/22 1,000 1,118
Macon Water & Sewage Auth., 5.00%, 10/1/21 1,000 1,068
Medical Center Hosp. Auth.,
Columbus Regional Healthcare System,
5.50%, 8/1/25 (MBIA Insured) 1,000 1,080
Metropolitan Atlanta Rapid Transit Auth.
6.90%, 7/1/20 (Prerefunded 7/1/04!)
(MBIA Insured) 1,325 1,379
7.00%, 7/1/11 (Escrowed to Maturity) 2,050 2,577
7.00%, 7/1/11 (Escrowed to Maturity)
(MBIA Insured) 635 798
Municipal Electric Auth. of Georgia
6.50%, 1/1/12 (Escrowed to Maturity) 80 98
6.50%, 1/1/12 440 528
6.50%, 1/1/17 (MBIA Insured) 205 257
6.60%, 1/1/18 (Escrowed to Maturity) 175 224
6.60%, 1/1/18 860 1,080
7.25%, 1/1/24 (AMBAC Insured) 1,000 1,379
Newton County Hosp. Auth., GO, 6.00%, 2/1/20
(AMBAC Insured) 1,000 1,167
Paulding County School Dist., GO, 6.00%, 2/1/13
(MBIA Insured) 1,000 1,211
Paulding County Water & Sewer, 6.00%, 12/1/13
(MBIA Insured) 1,000 1,223
Peach County School Dist., 6.40%, 2/1/19
(Prerefunded 2/1/05!) (MBIA Insured) 500 535
Rockdale County Dev. Auth., Pratt Industries USA,
7.40%, 1/1/16 # 385 387
Rockdale County School Dist., GO, 6.50%, 1/1/09
(Prerefunded 1/1/05!) 1,000 1,066
Roswell, 5.50%, 2/1/14
(Prerefunded 2/1/09!) 1,000 1,162
Savannah, Savannah Airport Commision,
5.25%, 1/1/17 (FSA Insured) 1,000 1,095
Savannah Economic Dev. Auth.
7.40%, 1/1/24 420 429
Savannah College of Art & Design,
6.80%, 10/1/19 500 550
Total Georgia (Cost $79,468) 86,730
PUERTO RICO 3.7%
Puerto Rico Electric Power Auth.,
5.00%, 7/1/08 2,000 2,233
Puerto Rico Highway & Transportation Auth.,
5.00%, 7/1/26
(Tender 7/1/10) (FSA Insured) 1,000 1,143
Total Puerto Rico (Cost $3,272) 3,376
OPTIONS PURCHASED 0.0%
U.S. Treasury Note 10 Year Future,
20 contracts (for 100 shares each),
Put, 3/31/04 @ $110.00* 2 2
Total Options Purchased (Cost $17) 2
Total Investments in Securities
98.2% of Net Assets (Cost $82,757) $90,108
-------
(ss.) Denominated in U.S. dollar unless otherwise noted
# Interest subject to alternative minimum tax
* Non-income producing
! Used in determining portfolio maturity
AMBAC AMBAC Assurance Corp.
COP Certificates of Participation
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Inc.
GO General Obligation
MBIA MBIA Insurance Corp.
VRDN Variable-Rate Demand Note
XLCA XL Capital Assurance Inc.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Georgia Tax-Free Bond Fund
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Certified Annual Report February 29, 2004
Statement of Assets and Liabilities
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($ 000s)
Assets
Total investments in securities, at value
(cost $82,757) $ 90,108
Other assets 1,815
Total assets 91,923
Liabilities
Total liabilities 209
NET ASSETS $ 91,714
--------------------
Net Assets Consist of:
Undistributed net investment income (loss) $ 36
Undistributed net realized gain (loss) (441)
Net unrealized gain (loss) 7,351
Paid-in-capital applicable to
7,976,957 no par value shares
of beneficial interest outstanding;
unlimited number of shares authorized 84,768
NET ASSETS $ 91,714
--------------------
NET ASSET VALUE PER SHARE $ 11.50
--------------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Georgia Tax-Free Bond Fund
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Certified Annual Report
Statement of Operations
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($ 000s)
Year
Ended
2/29/04
Investment Income (Loss)
Interest income $ 4,191
Expenses
Investment management 367
Custody and accounting 103
Shareholder servicing 54
Legal and audit 15
Prospectus and shareholder reports 11
Registration 7
Trustees 5
Miscellaneous 5
Reductions/repayments pursuant to expense limitation
Investment management fees (waived) repaid 6
Total expenses 573
Expenses paid indirectly (2)
Net expenses 571
Net investment income (loss) 3,620
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 613
Futures (112)
Written options 35
Net realized gain (loss) 536
Change in net unrealized gain (loss)
Securities 1,164
Futures 41
Change in net unrealized gain (loss) 1,205
Net realized and unrealized gain (loss) 1,741
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 5,361
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The accompanying notes are an integral part of these financial statements.
T. Rowe Price Georgia Tax-Free Bond Fund
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Certified Annual Report
Statement of Changes in Net Assets
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($ 000s)
Year
Ended
2/29/04 2/28/03
Increase (Decrease) in Net Assets
Operations
Net investment income $ 3,620 $ 3,635
Net realized gain (loss) 536 287
Change in net unrealized gain (loss) 1,205 1,816
Increase (decrease) in
net assets from operations 5,361 5,738
Distributions to shareholders
Net investment income (3,612) (3,626)
Capital share transactions *
Shares sold 21,300 19,391
Distributions reinvested 2,538 2,662
Shares redeemed (20,495) (15,350)
Increase (decrease) in
net assets from capital
share transactions 3,343 6,703
Net Assets
Increase (decrease) during period 5,092 8,815
Beginning of period 86,622 77,807
End of period $ 91,714 $ 86,622
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*Share information
Shares sold 1,882 1,756
Distributions reinvested 225 241
Shares redeemed (1,819) (1,390)
Increase (decrease) in shares outstanding 288 607
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Georgia Tax-Free Bond Fund
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Certified Annual Report February 29, 2004
Notes to Financial Statements
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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 Georgia Tax-Free Bond Fund
(the fund), a nondiversified, open-end management investment company, is one
portfolio established by the trust and commenced operations on March 31, 1993.
The fund seeks to provide the highest level of income exempt from federal and
Georgia state income taxes, consistent with prudent portfolio management, by
investing primarily in investment-grade Georgia 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. 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. Distributions to
shareholders are recorded on the ex-dividend date. Income distributions are
declared on a daily basis and paid monthly. Capital gains 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.
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. Options are reflected in the
accompanying Portfolio of Investments at market value. 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 25 15,000
Expired (25) (15,000)
Outstanding at end of period -- $ --
-----------------------------
Other
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $29,141,000 and $24,373,000, 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 $3,612,000 and
were characterized as tax-exempt income for tax purposes. At February 29, 2004,
the tax-basis components of net assets were as follows:
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Unrealized appreciation $ 7,463,000
Unrealized depreciation (310,000)
Net unrealized appreciation (depreciation) 7,153,000
Undistributed tax-exempt income 4,000
Capital loss carryforwards (211,000)
Paid-in capital 84,768,000
Net assets $ 91,714,000
--------------------
Federal income tax regulations require the fund to defer recognition of capital
losses realized on certain covered option and futures transactions; accordingly,
$245,000 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 $739,000 of capital loss carryforwards. As
of February 29, 2004, the fund had $193,000 of capital loss carryforwards that
expire in fiscal 2009, and $18,000 that expire in fiscal 2010.
For the year ended February 29, 2004, the fund recorded the following permanent
reclassifications to reflect tax character. Reclassifications to paid-in capital
relate primarily to a tax practice that treats a portion of the proceeds from
each redemption of capital shares as a distribution of taxable net investment
income and/or realized capital gain. Results of operations and net assets were
not affected by these reclassifications.
- --------------------------------------------------------------------------------
Undistributed net investment income $ (9,000)
Undistributed net realized gain 7,000
Paid-in capital 2,000
At February 29, 2004, the cost of investments for federal income tax purposes
was $82,955,000.
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 $30,000.
The fund is also subject to a contractual expense limitation through February
28, 2003. During the limitation period, the manager is required to waive its
management fee and reimburse the fund for any expenses, excluding interest,
taxes, brokerage commissions, and extraordinary expenses, that would otherwise
cause the fund's ratio of total expenses to average net assets (expense ratio)
to exceed its expense limitation of 0.65%. Through February 28, 2005, the fund
is required to repay the manager for expenses previously reimbursed and
management fees waived to the extent its net assets have grown or expenses have
declined sufficiently to allow repayment without causing the fund's expense
ratio to exceed its expense limitation. At February 29, 2004, management fees
waived remain subject to repayment by the fund in the amount of $4,000 through
February 28, 2005.
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 $101,000 for the
year ended February 29, 2004, of which $8,000 was payable at period-end.
T. Rowe Price Georgia Tax-Free Bond Fund
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Certified Annual Report
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Board of Trustees of T. Rowe Price State Tax-Free Income Trust and
Shareholders of Georgia 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 Georgia 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 Georgia Tax-Free Bond Fund
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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:
o $2,000 from short-term capital gains
o $3,600,000 which qualified as exempt-interest dividends.
Information on Proxy Voting
- --------------------------------------------------------------------------------
A description of the policies and procedures that the T. Rowe Price Georgia
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 Georgia Tax-Free Bond Fund
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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.
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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.
- --------------------------------------------------------------------------------
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]
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.
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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 $8,009 $7,892
Audit-Related Fees 683 --
Tax Fees 2,233 1,996
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