- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
Maryland Tax-Free Bond Fund
- --------------------------------------------------------------------------------
February 28, 1998
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REPORT HIGHLIGHTS
================================================================================
MARYLAND TAX-FREE FUNDS
* Municipal bonds, nationally and in Maryland, performed well during the past
6- and 12-month periods, buoyed by subdued inflation and credit upgrades.
* Maryland Short-Term Tax-Free Bond Fund's six-month return was ahead of its
peer group, but 12-month results were modestly lower.
* Maryland Tax-Free Bond Fund outperformed its peers for the six months and
the full year.
* A focus on income and prudent interest rate strategies helped both funds
keep distributions in line with previous periods.
* We expect slower economic growth and low inflation in 1998, which bodes
well for municipal bonds.
FELLOW SHAREHOLDERS
The municipal bond market and your funds enjoyed good returns for the past
6- and 12-month periods, fueled by low inflation and credit upgrades both in
Maryland and across the nation. In the aftermath of the crises in Southeast
Asia, domestic bonds, including municipals, benefited from a flight to the
relative stability of the U.S. fixed income markets.
<PAGE>
Market Environment
During the six months ended February 28, 1998, municipal bond prices rose
as yields declined, with long-term AAA-rated bonds breaking below the 5% level.
Intermediate yields fell in tandem with long-term rates, but short-term rates
fell less sharply. Maryland bond yields followed national trends, as shown in
the chart.
[A line chart showing the Maryland Bond Index yields and the Maryland
3-year General Obligation Bond yields between 2/28/97 and 2/28/98.]
The major influence on rates was, and continues to be, the lack of rising
inflationary pressures. In 1997, consumer prices increased at an annual rate of
1.7%, the lowest since 1986. Despite an impressive rate of economic growth, the
Federal Reserve did not see any need to change short-term interest rates after
March 1997, and taxable as well as tax-free bonds have benefited strongly. Yet
the healthy economic environment led to improving credit quality in the
municipal market, with upgrades exceeding downgrades by seven to one.
Performance in the Maryland municipal market was somewhat subdued compared
with many other states. For example, even though municipal issuance rose 20%
nationwide in 1997, new issuance in Maryland for 1997 fell 5% versus 1996. As a
result, long-term bonds, which benefit most when interest rates decline, were
relatively scarce. In addition, due to its high overall credit quality, the
Maryland market missed out on much of a recent rally in low-quality municipal
bonds.
Our view of the Maryland economy remains constructive. Although its
economic growth rate has lagged the nation's in the 1990s, due to slower growth
in the government, defense, and manufacturing sectors, the state has managed its
fiscal affairs well. For the past two years, Maryland has generated budget
surpluses above expectations even while personal income tax cuts are being
phased in. The state continues to carry AAA ratings from all the rating
agencies, and many local issuers are gaining strength. Howard County, for
example, was upgraded by Standard & Poor's to AAA from AA+ this past year.
MARYLAND SHORT-TERM TAX-FREE BOND FUND
The fund gained 2.76% over the last six months, ahead of the Lipper Short
Municipal Debt Funds Average. The fund's returns comprised a 1.96% income gain
and a 0.80% gain in share price. One-year gains were close to those for the peer
group but fell modestly short due to our conservative posture in the first half
of the year.
<PAGE>
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/28/98 6 Months 12 Months
- --------------------------------------------------------------------------------
Maryland Short-Term
Tax-Free Bond Fund 2.76% 4.56%
Lipper Short Municipal
Debt Funds Average 2.53 4.60
================================================================================
Having taken a cautious stance against interest rate risk during the first
half of 1997, we began extending the fund's average duration in August, when a
mild uptick in rates pushed down the prices on longer bonds and allowed us to
move to a more neutral position. (Duration is a measure of interest rate risk,
where prices of longer duration issues react more strongly to interest rate
fluctuations.) In the fall, a combination of lower Treasury yields and heavy
municipal issuance improved the relative value of municipal investments compared
with taxable securities, and we took advantage by extending duration further. By
the end of the fiscal year, duration stood at 2.3 years versus 1.8 years at the
end of August.
We accomplished this change by increasing the fund's allocation to bonds
with maturities longer than five years from 0% to 7%. In the rest of the
portfolio, however, the maturity structure was basically unchanged. The fund's
holdings are still "laddered," with roughly 25% of assets maturing in two years
and 40% in three years.
Adding five-year issues to the portfolio also helped us avoid increasing
exposure to two- and three-year bonds. The outstanding supply in the short-term
Maryland market is currently skewed toward bonds maturing in the next three
years. This is due to the large amount of bonds issued in 1989, 1990, and 1991
that have since been prerefunded to their first 10-year call date, meaning that
funding is already in place to buy back these bonds within the next three years.
As these bonds mature, demand for short-term Maryland bonds will probably
outstrip supply. By extending our maturity exposure today, we hope to sidestep
the pending supply/demand imbalances we expect over the next three years.
MARYLAND TAX-FREE BOND FUND
Benefiting from surging markets and falling interest rates over the past
six months, your fund ended the year with an 8.68% total return, above its peer
group average of 8.55%. Our showing was due to a more aggressive interest rate
posture in the second half of the year, as well as to a significant income
advantage. The fund's seasoned nature (March 1998 will be its 11-year
anniversary) means that we carry many bonds issued in higher interest rate
environments, when coupon rates were more generous.
<PAGE>
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/28/98 6 Months 12 Months
- --------------------------------------------------------------------------------
Maryland Tax-Free
Bond Fund 4.90% 8.68%
Lipper Maryland Municipal
Debt Funds Average 4.62 8.55
================================================================================
We continued to hold a significant percentage of these high-coupon bonds,
priced at a premium because their income was attractive, and they helped us
maintain a relatively stable dividend even as interest rates declined. We also
wished to avoid the capital gains liability that would be generated by their
sale. However, many of the older bond positions have been advance refunded,
wherein assets are set aside to call the bonds on the first allowable dates. In
the past year, approximately 4% of the longer bonds in the portfolio were
refunded to call dates between 2000 and 2002.
The steady stream of refundings, along with a comparatively high income
stream, kept fund duration short. Shorter duration investments benefit less from
declining interest rates. To reduce the portfolio's overweighting in short-term
bonds, we increased our holdings in the long end of the market during a fourth
quarter 1997 pickup in supply. Large issues by Johns Hopkins University and
Baltimore County were attractive, and we increased our holdings in Puerto Rico
bonds because their interest is exempt from Maryland state tax and they further
diversify our portfolio. In addition, we added noncallable bonds and bonds with
longer call protection to the portfolio to better manage our exposure to
interest rate movements.
Compared with a year ago, we now own more bonds with maturities longer than
10 years as well as more bonds maturing inside of five years (because of advance
refundings). This barbelled structure was helpful in a flattening yield curve
environment.
==============================
We added exposure to local
general obligation credits,
which are thriving in a strong
economy . . .
- ------------------------------
<PAGE>
The fund's sector exposure changed only by degrees. We trimmed our holdings
in the hospital sector from 16% last summer to 13% today, as accelerated merger
activity has reduced the potential number of issuers. Maryland hospitals are
under increasing cost pressures from the growing presence of managed-care
providers and efforts by state regulatory agencies to reduce profit margins. We
added exposure to local general obligation credits, which are thriving in a
strong economy, as well as bonds issued by colleges, which are benefiting from
positive demographic trends and a stock market-related surge in endowment funds.
OUTLOOK
The problems in Asia could affect the U.S. economy and slice a bit off 1998
growth, but the so-called Asian flu does not appear serious enough to
precipitate a downturn while domestic consumer demand remains healthy. Recent
Congressional testimony by the Federal Reserve suggests that it will leave
monetary policy unchanged until it fully appraises the impact of Asia's problems
on the U.S. economy.
Municipal bonds produced good results over the last 12 months despite the
steady growth of new issuance. However, we ended the year with a slightly more
cautious view. A surge in issuance in the first quarter of 1998 meant we were
paid to be patient as yields rose from their lows in mid-January. Municipal
bonds look attractive compared with taxable alternatives, which could represent
an opportunity to buy bonds at higher yields.
We anticipate slower economic growth in 1998, continued low inflation, and
stable monetary policy, all of which should be favorable for the municipal bond
market.
Respectfully submitted,
/s/
Charles B. Hill
Chairman of the Investment Advisory Committee
Maryland Short-Term Tax-Free Bond Fund
/s/
Mary J. Miller
Chairman of the Investment Advisory Committee
Maryland Tax-Free Bond Fund
March 20, 1998
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
Key statistics
8/31/97 2/28/98
Maryland Short-Term Tax-Free Bond Fund
Price Per Share ...................................... $ 5.10 $ 5.14
Dividends Per Share
For 6 months ................................. 0.10 0.10
For 12 months ................................ 0.20 0.20
Dividend Yield *
For 6 months ................................. 3.90% 3.95%
For 12 months ................................ 4.01 3.96
Weighted Average Maturity (years) .................... 2.0 2.6
Weighted Average Effective Duration (years) .......... 1.8 2.3
Weighted Average Quality ** .......................... AA AA
Maryland Tax-Free Bond Fund
Price Per Share ...................................... $10.44 $10.67
Dividends Per Share
For 6 months ................................. 0.28 0.28
For 12 months ................................ 0.56 0.55
Dividend Yield *
For 6 months ................................. 5.41% 5.34%
For 12 months ................................ 5.55 5.45
Weighted Average Maturity (years) .................... 15.7 15.2
Weighted Average Effective Duration (years) .......... 6.7 6.5
Weighted Average Quality ** .......................... AA AA
* Dividends earned and reinvested for the periods indicated are annualized
and divided by the average daily net asset values per share for the same
period.
** Based on T. Rowe Price research.
================================================================================
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
Sector Diversification
Percent of Percent of
Net Assets Net Assets
8/31/97 2/28/98
Maryland Short-Term Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Prerefunded Bonds ...................................... 33% 39%
General Obligation - Local ............................. 18 17
General Obligation - State ............................. 13 12
Hospital Revenue ....................................... 2 7
Solid Waste Revenue .................................... 4 6
Ground Transportation Revenue .......................... 5 5
Life Care/Nursing Home Revenue ......................... 4 4
Educational Revenue .................................... 4 4
Lease Revenue .......................................... 4 4
Industrial and Pollution Control Revenue ............... 5 3
All Other .............................................. 10 2
Other Assets Less Liabilities .......................... -2 -3
- --------------------------------------------------------------------------------
Total .................................................. 100% 100%
Maryland Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Prerefunded Bonds ...................................... 17% 18%
Housing Finance Revenue 16 ............................. 15
Hospital Revenue ....................................... 16 13
General Obligation - Local ............................. 9 13
Educational Revenue .................................... 4 6
Ground Transportation Revenue .......................... 5 5
General Obligation - State ............................. 6 5
Solid Waste Revenue .................................... 5 5
Water and Sewer Revenue 4 .............................. 4
Dedicated Tax Revenue .................................. 2 4
Miscellaneous Revenue .................................. 4 4
Lease Revenue .......................................... 4 3
Life Care/Nursing Home Revenue ......................... 1 3
Escrowed to Maturity ................................... 1 2
Nuclear Revenue 1 ...................................... 2
All Other .............................................. 5 3
Other Assets Less Liabilities .......................... -- -5
- --------------------------------------------------------------------------------
Total .................................................. 100% 100%
================================================================================
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
These charts show the value of a hypothetical $10,000 investment in each
fund over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[Maryland Short-Term Tax-Free Bond Fund SEC chart shown here]
[Maryland Tax-Free Bond Fund SEC chart shown here]
================================================================================
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how each fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
================================================================================
Since Inception
Periods Ended 2/28/98 1 Year 5 Years 10 Years Inception Date
Maryland Short-Term
Tax-Free Bond Fund 4.56% 4.08% -- 4.35% 1/29/93
Maryland Tax-Free Bond Fund 8.68 6.19 7.57% 6.86 3/31/87
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
================================================================================
<PAGE>
<TABLE>
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
====================================================================================================================================
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year
Ended
2/28/98 2/28/97 2/29/96 2/28/95 2/28/94
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ..................... $ 5.11 $ 5.15 $ 5.04 $ 5.09 $ 5.07
Investment activities
Net investment income ........... 0.20 0.20* 0.21* 0.18* 0.15*
Net realized and
unrealized gain (loss) .......... 0.03 (0.04) 0.11 (0.05) 0.02
Total from
investment activities ........... 0.23 0.16 0.32 0.13 0.17
Distributions
Net investment income ........... (0.20) (0.20) (0.21) (0.18) (0.15)
NET ASSET VALUE
End of period ........................... $ 5.14 $ 5.11 $ 5.15 $ 5.04 $ 5.09
Ratios/Supplemental Data
Total return ............................ 4.56% 3.26%* 6.49%* 2.64%* 3.49%*
Ratio of expenses to
average net assets ...................... 0.65% 0.65%* 0.65%* 0.65%* 0.65%*
Ratio of net investment
income to average
net assets .............................. 3.89% 3.98%* 4.14%* 3.59%* 3.09%*
Portfolio turnover rate ................. 60.4% 21.4% 39.3% 105.3% 20.5%
Net assets, end of period
(in thousands) .......................... $ 109,424 $ 102,252 $ 85,784 $ 74,808 $ 76,049
<FN>
* Excludes expenses in excess of a 0.65% voluntary expense limitation in effect through 2/28/99.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price Maryland Tax-Free Bond Fund
====================================================================================================================================
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year
Ended
2/28/98 2/28/97 2/29/96 2/28/95 2/28/94
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ...................... $ 10.35 $ 10.40 $ 9.99 $ 10.45 $ 10.50
Investment activities
Net investment income ............ 0.55 0.56 0.57 0.56 0.56
Net realized and
unrealized gain (loss) ........... 0.32 (0.05) 0.41 (0.44) 0.05
Total from
investment activities ............ 0.87 0.51 0.98 0.12 0.61
Distributions
Net investment income ............ (0.55) (0.56) (0.57) (0.56) (0.56)
Net realized gain ................ -- -- -- (0.02) (0.10)
Total distributions .............. (0.55) (0.56) (0.57) (0.58) (0.66)
NET ASSET VALUE
End of period ............................ $ 10.67 $ 10.35 $ 10.40 $ 9.99 $ 10.45
Ratios/Supplemental Data
Total return ............................. 8.68% 5.12% 10.00% 1.43% 5.93%
Ratio of expenses to
average net assets ....................... 0.51% 0.54% 0.54% 0.57% 0.57%
Ratio of net investment
income to average
net assets ............................... 5.31% 5.47% 5.53% 5.73% 5.31%
Portfolio turnover rate .................. 19.2% 26.2% 23.9% 28.9% 24.3%
Net assets, end of period
(in thousands) ........................... $ 926,416 $ 819,981 $ 798,589 $ 724,823 $ 821,402
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
================================================================================
February 28, 1998
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
Par Value
In thousands
MARYLAND 94.1%
Anne Arundel County, GO, Water and Sewer
4.75%, 9/1/01 ................................ $1,030 $1,057
Baltimore City, GO
Consolidated Public Improvement
5.125%, 10/15/99 (FGIC Insured) .............. 1,025 1,049
7.50%, 10/15/00 (FGIC Insured) ............... 500 545
8.90%, 10/15/99 (MBIA Insured) ............... 650 703
Baltimore City
Wastewater
6.50%, 7/1/20 (MBIA Insured)
(Prerefunded 7/1/00+) ........................ 1,305 1,382
Water Projects
6.50%, 7/1/20 (MBIA Insured)
(Prerefunded 7/1/00+) ........................ 130 137
Baltimore County, GO
Consolidated Public Improvement
6.90%, 4/1/06 (Prerefunded 4/1/00+) .......... 1,000 1,079
Metropolitan Dist ....................................
6.80%, 4/1/00 ................................ 500 530
6.80%, 4/1/01 (Prerefunded 4/1/00+) .......... 1,000 1,077
Baltimore County, Stella Maris
7.50%, 3/1/21 (Prerefunded 3/1/01+) .......... 1,000 1,115
Charles County, GO, 6.375%, 12/1/03 (Prerefunded 12/1/99+) ... 1,580 1,680
Charles County
County Commissioners, Fox Chase Apartments
7.25%, 10/1/01 ............................... 390 393
County Commissioners, New Forest Apartments
7.25%, 11/1/01 ............................... 745 751
Gaithersburg Economic Auth., Asbury Methodist Home
7.85%, 1/1/20 (Prerefunded 1/1/00+) .......... 2,000 2,172
Howard County
Metropolitan Dist ....................................
7.125%, 5/15/11 (Prerefunded 5/15/00+) ....... 500 539
7.15%, 5/15/20 (Prerefunded 5/15/00+) ........ 500 539
Maryland, GO
6.50%, 3/15/05 (Prerefunded 3/15/01+) ........ 2,000 2,168
6.70%, 7/15/99 ............................... 500 521
<PAGE>
Maryland, GO
State and Local Fac ..................................
4.75%, 8/1/00 ................................ $4,000 $4,092
5.00%, 10/15/02 .............................. 930 971
Maryland, State and Local Fac ................................
6.80%, 7/15/04 (Prerefunded 7/15/00+) ........ 1,050 1,134
Maryland DOT
6.70%, 8/15/05 (Prerefunded 8/15/99+) ........ 2,625 2,786
6.80%, 11/1/05 (Prerefunded 11/1/99+) ........ 525 561
Maryland Economic Dev. .......................................
Roland Park Country School, 5.50%, 11/1/98 ........... 725 733
Maryland Energy Fin. Admin ...................................
Solid Waste Disposal, 5.10%, 12/1/99 * ............... 450 459
Wheelabrator Water Technologies
5.75%, 12/1/04 ............................... 2,570 2,750
Maryland HHEFA
Bradford Oaks Nursing and Rehabilitation Center
4.875%, 1/1/99 ............................... 180 181
5.125%, 1/1/00 ............................... 200 202
5.375%, 1/1/01 ............................... 200 203
Broadmead
4.60%, 7/1/01 ................................ 375 378
4.90%, 7/1/04 ................................ 250 255
Charity Obligation Group, 4.60%, 11/1/26 ............. 2,250 2,291
Doctor's Community Hosp ..............................
8.75%, 7/1/22 (Prerefunded 7/1/00+) .......... 5,615 6,326
Francis Scott Key Medical Center
6.75%, 7/1/23 (FGIC Insured)
(Prerefunded 7/1/00+) ........................ 4,790 5,186
Good Samaritan Hosp ..................................
4.90%, 7/1/00 (Escrowed to Maturity) ......... 1,020 1,044
Greater Baltimore Medical Center
6.75%, 7/1/19 (Prerefunded 7/1/01+) .......... 1,000 1,102
Howard County General Hosp., 4.55%, 7/1/98 ........... 200 201
Johns Hopkins Univ., 5.50%, 7/1/02 ................... 2,500 2,642
Kaiser Permanente, VRDN (Currently 3.65%) ............ 100 100
Kennedy Krieger Institute
6.00%, 7/1/01 ................................ 125 132
6.00%, 7/1/02 ................................ 220 234
Maryland HHEFA
Kennedy Krieger Institute
6.00%, 7/1/03 ................................ $ 380 $ 408
6.00%, 7/1/04 ................................ 405 438
6.00%, 7/1/05 ................................ 430 467
Mercy Medical Center
7.90%, 7/1/09 (Prerefunded 7/1/99+) .......... 150 161
Pooled Loan Program, VRDN (Currently 3.40%) .......... 400 400
Stella Maris, 4.75%, 7/1/21 .......................... 3,000 3,055
Univ. of Maryland Medical System
7.00%, 7/1/17 (FGIC Insured)
(Prerefunded 7/1/01+) ........................ 2,250 2,491
<PAGE>
Maryland Industrial Dev. Fin. Auth ...........................
Holy Cross Health, 5.00%, 12/1/98 .................... 1,460 1,475
Way Station, 4.90%, 12/31/11 ......................... 2,310 2,329
Maryland Transportation Auth .................................
Transportation Fac ...................................
5.20%, 7/1/00 ................................ 4,000 4,122
6.10%, 7/1/00 ................................ 850 892
Maryland Water Quality Fin. Administration
Revolving Loan Fund, 5.60%, 9/1/99 ................... 500 514
Maryland-National Capital Park and Planning Commission, GO
Prince George's County, 5.50%, 1/15/00 ............... 1,000 1,031
Prince George's County, BAN
VRDN (Currently 3.70%) ....................... 1,500 1,500
Montgomery County, GO
6.30%, 4/1/02 ................................ 1,250 1,360
Consolidated Public Improvement
6.80%, 11/1/02 (Prerefunded 11/1/99+) ........ 2,000 2,136
6.80%, 11/1/09 (Prerefunded 11/1/99+) ........ 850 908
Northeast Waste Disposal Auth ................................
Solid Waste
5.30%, 7/1/00 * .............................. 1,765 1,810
5.90%, 7/1/05 * .............................. 1,250 1,355
Prince George's County
Collington Episcopal, 5.40%, 4/1/02 .................. 450 463
Dimensions Health
7.25%, 7/1/17 (Prerefunded 7/1/02+) .......... 1,000 1,140
Equipment Acquistion Program, COP
5.00%, 10/15/00 (MBIA Insured) ............... 4,050 4,162
Prince George's County Housing Auth., Largo Oxford
4.50%, 12/1/07 (Prerefunded 12/1/01+) ........ $2,000 $2,035
Prince George's County IDA, Upper Marlboro Justice Center
7.00%, 6/30/19 (MBIA Insured)
(Prerefunded 6/30/99+) ....................... 600 637
Prince George's County, PCR, Int'l. Paper, 4.05%, 1/15/14 .... 2,900 2,906
Univ. of Maryland
Auxiliary Fac. and Tuition
7.00%, 10/1/99 ............................... 1,000 1,051
7.00%, 10/1/05 (Prerefunded 10/1/99+) ........ 500 534
7.00%, 10/1/07 (Prerefunded 10/1/99+) ........ 225 241
Equipment Loan Program
VRDN (Currently 3.35%) ....................... 100 100
Washington Suburban Sanitary Dist., GO
6.00%, 6/1/99 ................................ 3,750 3,859
6.25%, 6/1/99 ................................ 300 310
6.70%, 7/1/00 (Prerefunded 7/1/99+) .......... 1,000 1,058
7.00%, 6/1/01 ................................ 1,480 1,614
8.00%, 1/1/00 ................................ 3,295 3,540
Worcester County, GO, Consolidated Public Improvement
5.00%, 8/1/99 ................................ 1,000 1,019
Total Maryland (Cost $101,531) .............................. 102,921
<PAGE>
PUERTO RICO 9.3%
Puerto Rico Commonwealth, GO, Public Improvement
5.50%, 7/1/99 ................................ 5,000 5,115
Puerto Rico Electric Power Auth ..............................
7.125%, 7/1/14 (Prerefunded 7/1/99+) ......... 2,070 2,192
Puerto Rico Municipal Fin. Agency, GO
5.50%, 7/1/00 (FSA Insured) .................. 2,790 2,898
Total Puerto Rico (Cost ...................................... $10,047) 10,205
Total Investments in Securities
103.4% of Net Assets (Cost $111,578) ......................... $113,126
Other Assets Less Liabilities ................................ (3,702)
NET ASSETS ................................................... $ 109,424
Net Assets Consist of:
Accumulated net investment income -
net of distributions ......................................... $ 2
Accumulated net realized gain/loss -
net of distributions ......................................... (651)
Net unrealized gain (loss) ................................... 1,548
Paid-in-capital applicable to 21,309,166
no par value shares of beneficial
interest outstanding; unlimited number
of shares authorized ......................................... 108,525
NET ASSETS ................................................... $ 109,424
NET ASSET VALUE PER SHARE .................................... $ 5.14
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
BAN Bond Anticipation Note
COP Certificates of Participation
DOT Department of Transportation
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GO General Obligation
HHEFA Health & Higher Educational Facility Authority
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Maryland Tax-Free Bond Fund
================================================================================
February 28, 1998
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
Par Value
In thousands
MARYLAND 98.5%
Allegany Co., PCR, Westvaco, 6.20%, 1/1/08 ................... $ 1,350 $ 1,489
Anne Arundel County, GO
TECP, 3.35 - 3.50%, 3/2 - 4/7/98 ..................... 12,600 12,595
Consolidated General Improvement
6.30%, 8/1/16 ................................ 775 863
6.30%, 8/1/19 ................................ 725 807
6.30%, 8/1/20 ................................ 705 785
6.30%, 8/1/21 ................................ 790 880
Consolidated Water and Sewer
6.30%, 8/1/22 ................................ 450 501
6.30%, 8/1/24 ................................ 720 802
7.20%, 4/15/13 (Prerefunded 4/15/00+) ........ 625 679
7.20%, 4/15/14 (Prerefunded 4/15/00+) ........ 625 678
Anne Arundel County, Port. Fac ...............................
Baltimore Gas and Electric, TECP, 3.30%, 4/2/98 ...... 2,000 2,000
Baltimore City, GO
Consolidated Public Improvement
Zero Coupon, 10/15/06 (FGIC Insured) ......... 3,100 2,102
Zero Coupon, 10/15/08 (FGIC Insured) ......... 3,800 2,266
Zero Coupon, 10/15/09 (FGIC Insured) ......... 4,600 2,565
Zero Coupon, 10/15/11 (FGIC Insured) ......... 7,500 3,639
7.00%, 10/15/07 (MBIA Insured) ............... 500 601
7.00%, 10/15/08 (MBIA Insured) ............... 5,190 6,306
7.50%, 10/15/09 (FGIC Insured) ............... 2,635 3,339
Baltimore City
Board of Ed. Administration Headquarters, COP
7.25%, 4/1/16 (MBIA Insured) ................. 3,200 3,450
Convention Center, 6.00%, 9/1/17 (FGIC Insured) ...... 5,180 5,509
Parking Fac ..........................................
5.90%, 7/1/12 (FGIC Insured) ................. 1,195 1,339
6.00%, 7/1/14 (FGIC Insured) ................. 5,155 5,837
6.00%, 7/1/15 (FGIC Insured) ................. 5,460 6,177
6.00%, 7/1/16 (FGIC Insured) ................. 5,785 6,534
6.00%, 7/1/17 (FGIC Insured) ................. 6,135 6,922
6.00%, 7/1/18 (FGIC Insured) ................. 6,505 7,365
<PAGE>
Baltimore City
Rivoli Office Building Fac., COP
7.20%, 4/1/10 (MBIA Insured)
(Prerefunded 4/1/00+) ........................ $ 3,250 $ 3,507
7.25%, 4/1/16 (MBIA Insured)
(Prerefunded 4/1/00+) ........................ 7,500 8,087
Tindeco Wharf Apartments
6.60%, 12/20/24 (GNMA Guaranteed) ............ 1,000 1,064
Wastewater
5.60%, 7/1/13 (MBIA Insured) ................. 19,300 20,982
5.65%, 7/1/20 (MBIA Insured) ................. 2,000 2,165
Water
5.80%, 7/1/15 (FGIC Insured) ................. 3,350 3,603
6.00%, 7/1/15 (FGIC Insured) ................. 6,250 7,070
Baltimore City, Port Fac., E.I. DuPont - Conoco
6.50%, 10/1/11 ............................... 10,400 11,462
Baltimore County, GO
TECP, BAN, 3.35%, 4/2/98 ............................. 4,000 4,000
Pension Funding
5.125%, 8/1/11 ............................... 7,605 7,950
5.125%, 8/1/14 ............................... 4,300 4,413
5.125%, 8/1/15 ............................... 4,195 4,278
7.10%, 10/1/12 (Prerefunded 10/1/99+) ........ 3,195 3,420
Baltimore County
TECP, BAN, 3.35%, 4/2/98 ............................. 4,400 4,400
Golf Systems, VRDN (Currently 3.50%) ................. 1,000 1,000
North Brooke Apartments
6.35%, 1/20/21 (GNMA Guaranteed) ............. 3,000 3,212
Pickersgill Retirement Community
7.70%, 1/1/21 (Prerefunded 1/1/02+) .......... 3,550 4,050
Stella Maris, 7.50%, 3/1/21 (Prerefunded 3/1/01+) .... 2,760 3,076
Baltimore County PCR, Baltimore Gas and Electric, TECP
3.35 - 3.45%, 3/5 - 4/2/98 ................... 6,600 6,640
Calvert County Economic Dev. .................................
Asbury Solomons Islands Facility
5.00%, 1/1/09 (MBIA Insured) ................. 1,000 1,028
5.00%, 1/1/10 (MBIA Insured) ................. 1,000 1,021
5.00%, 1/1/27 (MBIA Insured) ................. 2,500 2,440
Calvert County, PCR, Baltimore Gas and Electric
5.55%, 7/15/14 ............................... $ 6,490 $ 6,761
Carroll County, GO
Commissioners Hosp., 5.625%, 10/1/20 ................. 1,900 1,997
Consolidated Public Improvement
6.00%, 11/1/06 (Prerefunded 11/1/99+) ........ 800 844
7.30%, 10/1/20 (Prerefunded 10/1/00+) ........ 2,000 2,204
Carroll County
Copper Ridge, 7.75%, 1/1/18 .......................... 3,000 3,248
Fairhaven, 7.75%, 1/1/11 ............................. 1,000 1,076
Charles County
County Commissioners, New Forest Apartments
6.10%, 11/1/28 (FHA Guaranteed) .............. 5,000 5,289
Holly Station, 6.45%, 5/1/26 (FHA Guaranteed) ........ 1,780 1,905
<PAGE>
Damascus Gardens Dev., Multi Family
7.375%, 11/1/21 (FHA Guaranteed) ............. 3,851 3,864
Frederick City, GO, General Improvement
6.125%, 12/1/09 (FGIC Insured) ............... 1,840 2,019
Frederick County, GO, 7.20%, 4/1/05 (Prerefunded 4/1/99+) .... 1,000 1,057
Frederick County Retirement Community
Buckinghams Choice, 5.90%, 1/1/17 .................... 1,655 1,676
Gaithersburg Economic Auth., Asbury Methodist Home
5.50%, 1/1/20 ................................ 7,000 7,036
7.85%, 1/1/20 (Prerefunded 1/1/00+) .......... 6,500 7,059
Gaithersburg Hosp. Fac., Shady Grove Adventist Hosp ..........
6.50%, 9/1/12 (FSA Insured) .................. 5,000 5,922
Howard County, GO
Consolidated Public Improvement
5.60%, 2/15/12 (Prerefunded 2/15/03+) ........ 1,070 1,150
5.60%, 2/15/13 (Prerefunded 2/15/03+) ........ 2,300 2,471
5.875%, 5/15/12 (Prerefunded 5/15/03+) ....... 1,520 1,644
Metropolitan Dist ....................................
4.75%, 2/15/27 ............................... 2,200 2,081
7.15%, 5/15/14 (Prerefunded 5/15/00+) ........ 1,005 1,084
7.15%, 5/15/15 (Prerefunded 5/15/00+) ........ 1,080 1,164
7.15%, 5/15/16 (Prerefunded 5/15/00+) ........ 1,160 1,251
7.15%, 5/15/17 (Prerefunded 5/15/00+) ........ 1,245 1,342
Howard County
COP, 8.15%, 2/15/20 .................................. $ 470 $ 639
Golf Course Fac ......................................
6.00%, 2/15/21 ............................... 3,110 3,340
6.90%, 7/1/07 (MBIA Insured)
(Prerefunded 7/1/01+) ........................ 1,000 1,107
7.00%, 7/1/09 (MBIA Insured)
(Prerefunded 7/1/01+) ........................ 550 610
Maryland, GO
7.00%, 10/15/03 (Prerefunded 10/15/00+) ...... 2,000 2,173
7.10%, 10/15/04 (Prerefunded 10/15/00+) ...... 3,000 3,281
State and Local Fac. Loan
5.70%, 3/15/10 ............................... 5,000 5,423
RITES, (Currently 7.116%), 8/1/12 ............ 10,000 10,438
Maryland CDA
Infrastructure
8.375%, 6/1/08 ............................... 775 800
8.50%, 6/1/18 ................................ 1,350 1,395
Single Family
5.85%, 7/1/27 * .............................. 7,000 7,264
5.875%, 7/1/16 ............................... 3,950 4,152
5.875%, 4/1/17 * ............................. 1,630 1,674
5.875%, 9/1/25 * ............................. 3,500 3,636
6.00%, 4/1/17 ................................ 2,500 2,634
6.45%, 4/1/14 ................................ 1,000 1,067
6.75%, 4/1/10 * .............................. 5,000 5,333
6.75%, 4/1/26 * .............................. 4,015 4,305
<PAGE>
6.80%, 4/1/22 * .............................. 3,830 4,096
6.80%, 4/1/24 * .............................. 2,720 2,909
6.85%, 4/1/11 ................................ 4,895 5,182
7.00%, 4/1/14 ................................ 2,720 2,927
7.05%, 4/1/17 ................................ 4,750 5,110
7.25%, 4/1/11 * .............................. 2,000 2,114
7.25%, 4/1/19 * .............................. 9,000 9,511
7.25%, 4/1/27 ................................ 9,250 9,777
7.375%, 4/1/10 ............................... 495 520
7.40%, 4/1/17 ................................ 5,395 5,610
Maryland CDA
Single Family
7.60%, 4/1/17 ................................ $ 2,200 $ 2,298
7.625%, 4/1/29 * ............................. 1,725 1,786
7.875%, 4/1/07 ............................... 300 306
8.00%, 4/1/18 ................................ 1,200 1,225
Maryland DOT, 6.80%, 11/1/05 (Prerefunded 11/1/99+) .......... 5,500 5,875
Maryland Energy Fin. Administration
Wheelabrator Technologies
6.30%, 12/1/10 * ............................. 5,395 5,885
6.45%, 12/1/16 ............................... 2,600 2,859
Maryland HHEFA
Bradford Oaks Nursing and Rehabilitation Center
6.375%, 1/1/19 ............................... 1,500 1,551
6.375%, 1/1/27 ............................... 2,000 2,069
Broadmead
7.625%, 7/1/10 (Prerefunded 7/1/99+) ......... 1,380 1,475
Charlestown Community
VRDN (Currently 3.45%) ....................... 2,000 2,000
Deaton Hosp., VRDN (Currently 3.45%) ................. 2,500 2,500
Doctor's Community Hosp ..............................
5.50%, 7/1/24 ................................ 3,000 3,027
8.75%, 7/1/22 (Prerefunded 7/1/00+) .......... 6,800 7,660
Francis Scott Key Medical Center
5.00%, 7/1/18 (FGIC Insured) ................. 4,880 4,788
5.00%, 7/1/23 (FGIC Insured) ................. 3,000 2,937
7.00%, 7/1/10 (FGIC Insured)
(Prerefunded 7/1/00+) ........................ 2,000 2,175
Franklin Square Hosp .................................
7.50%, 7/1/19 (MBIA Insured)
(Prerefunded 7/1/99+) ........................ 4,750 5,073
Frederick Memorial Hosp ..............................
5.00%, 7/1/23 (FGIC Insured) ................. 5,500 5,383
5.00%, 7/1/28 (FGIC Insured) ................. 3,750 3,664
Good Samaritan Hosp ..................................
5.60%, 7/1/06 ................................ 1,545 1,684
5.70%, 7/1/07 ................................ 1,875 2,065
5.75%, 7/1/13 (Escrowed to Maturity) ......... 2,480 2,691
<PAGE>
Maryland HHEFA
Good Samaritan Hosp ..................................
5.75%, 7/1/13 (AMBAC Insured) ................ $ 1,520 $ 1,677
7.40%, 7/1/09 (Prerefunded 7/1/99+) .......... 1,000 1,067
7.50%, 7/1/21 (Prerefunded 7/1/99+) .......... 4,000 4,272
Helix Health
5.00%, 7/1/17 (AMBAC Insured) ................ 2,930 2,890
5.00%, 7/1/27 (AMBAC Insured) ................ 11,150 10,898
5.125%, 7/1/10 (AMBAC Insured) ............... 2,585 2,688
5.125%, 7/1/11 (AMBAC Insured) ............... 1,440 1,484
Helix Health System, VRDN (Currently 3.45%) .......... 5,000 5,000
Holy Cross Hosp ......................................
7.125%, 7/1/10 (AMBAC Insured)
(Prerefunded 7/1/00+) ........................ 1,400 1,527
7.50%, 7/1/01 (AMBAC Insured)
(Prerefunded 7/1/00+) ........................ 1,655 1,818
Howard County General Hosp., 5.50%, 7/1/21 ........... 5,600 5,671
Johns Hopkins Hosp ...................................
TECP, 3.60%, 3/4/98 .......................... 1,000 1,000
VRDN (Currently 3.35%) ....................... 1,000 1,000
Zero Coupon, 7/1/19 .......................... 9,460 3,136
7.00%, 7/1/23 (Prerefunded 7/1/00+) .......... 1,305 1,420
Johns Hopkins Medical Institute Parking Fac ..........
5.375%, 7/1/20 (AMBAC Insured) ............... 5,550 5,649
Johns Hopkins Univ ...................................
5.125%, 7/1/20 ............................... 8,000 7,951
5.25%, 7/1/15 ................................ 5,000 5,148
5.25%, 7/1/16 ................................ 5,000 5,124
5.25%, 7/1/17 ................................ 2,000 2,040
7.375%, 7/1/08 ............................... 1,500 1,546
7.50%, 7/1/20 ................................ 11,015 11,356
Kennedy Kreiger Institute
6.75%, 7/1/22 (Prerefunded 7/1/01+) .......... 2,850 3,087
7.40%, 7/1/11 (Prerefunded 7/1/01+) .......... 370 414
Loyola College, 5.375%, 10/1/26 (MBIA Insured) ....... 7,070 7,198
Maryland General Hosp ................................
6.20%, 7/1/24 (MBIA Insured) ................. 4,000 4,404
Maryland HHEFA
Mercy Medical Center
5.75%, 7/1/26 (FSA Insured) .................. $ 3,760 $ 3,985
6.50%, 7/1/13 (FSA Insured) .................. 2,155 2,552
7.90%, 7/1/09 (Prerefunded 7/1/99+) .......... 2,000 2,147
8.00%, 7/1/20 (Prerefunded 7/1/99+) .......... 6,500 6,985
Peninsula Regional Medical Center
5.00%, 7/1/23 (MBIA Insured) ................. 10,000 9,788
Pooled Loan Program, VRDN (Currently 3.40%) .......... 2,500 2,500
Sinai Hosp ...........................................
7.30%, 7/1/05 (AMBAC Insured)
(Prerefunded 7/1/00+) ........................ 2,000 2,189
Union Hosp. of Cecil County, 6.625%, 7/1/12 .......... 1,545 1,663
<PAGE>
Union Memorial Hosp ..................................
6.60%, 7/1/06 (MBIA Insured)
(Prerefunded 7/1/01+) ........................ 500 549
6.75%, 7/1/11 (MBIA Insured)
(Prerefunded 7/1/01+) ........................ 3,000 3,300
6.75%, 7/1/21 (MBIA Insured)
(Prerefunded 7/1/01+) ........................ 7,895 8,680
Univ. of Maryland Medical System
VRDN (Currently 3.45%) ....................... 1,000 1,000
5.00%, 7/1/20 (FGIC Insured) ................. 5,875 5,758
7.00%, 7/1/11 (MBIA Insured)
(Prerefunded 7/1/01+) ........................ 4,550 5,048
7.00%, 7/1/17 (FGIC Insured)
(Prerefunded 7/1/01+) ........................ 7,770 8,621
7.00%, 7/1/22 (FGIC Insured) ................. 2,000 2,533
Maryland Ind. Dev. Fin. Auth .................................
American Center for Physics Headquarters Fac .........
6.25%, 1/1/07 ................................ 5,770 6,176
6.375%, 1/1/12 ............................... 5,900 6,336
6.625%, 1/1/17 ............................... 4,250 4,606
Associated Catholic Charities, 9.00%, 1/1/10 ......... 790 852
Bon Secours Health
5.929%, 8/26/22 (FSA Insured) ................ 15,000 16,845
Holy Cross Health, 5.60%, 12/1/09 .................... 2,780 3,022
Maryland Local Gov't. Income Trust
Capitalization Program, GO, COP
6.80%, 8/1/01 ................................ $ 1,615 $ 1,736
7.125%, 8/1/09 ............................... 3,000 3,258
Maryland Stadium Auth ........................................
Baltimore Convention Center Expansion
5.875%, 12/15/11 (AMBAC Insured) ............. 2,025 2,206
Sports Fac ...........................................
5.60%, 3/1/14 (AMBAC Insured) ................ 1,000 1,057
5.75%, 3/1/22 (AMBAC Insured) ................ 6,705 7,086
5.80%, 3/1/26 (AMBAC Insured) ................ 3,800 4,029
Maryland Transportation Auth .................................
Zero Coupon, 7/1/07 (FGIC Insured) ........... 8,500 5,644
Zero Coupon, 7/1/08 (FGIC Insured) ........... 2,000 1,262
Zero Coupon, 7/1/09 (FGIC Insured) ........... 10,410 6,228
6.80%, 7/1/16 (Escrowed to Maturity) ......... 10,500 12,426
Baltimore-Washington Int'l. Airport
6.25%, 7/1/14 (FGIC Insured) * ............... 3,105 3,382
6.40%, 7/1/19 (FGIC Insured) * ............... 9,170 9,785
Maryland Water Quality Fin. Administration
Revolving Loan Fund
Zero Coupon, 9/1/02 .......................... 1,185 984
Zero Coupon, 9/1/07 .......................... 1,125 738
6.00%, 9/1/15 ................................ 1,600 1,711
6.70%, 9/1/13 (Prerefunded 9/1/01+) .......... 1,280 1,414
7.10%, 9/1/13 (Prerefunded 9/1/01+) .......... 985 1,100
7.25%, 9/1/11 (Prerefunded 9/1/00+) .......... 1,700 1,867
7.25%, 9/1/12 (Prerefunded 9/1/00+) .......... 2,000 2,197
<PAGE>
Maryland-National Capital Park and Planning Commission, GO
Prince George's County
5.375%, 1/15/16 .............................. 1,300 1,345
5.375%, 1/15/17 .............................. 1,200 1,235
6.90%, 7/1/05 (Prerefunded 7/1/00+) .......... 1,400 1,519
6.90%, 7/1/06 (Prerefunded 7/1/00+) .......... 1,350 1,465
6.90%, 7/1/07 (Prerefunded 7/1/00+) .......... 1,400 1,519
6.90%, 7/1/08 (Prerefunded 7/1/00+) .......... 1,400 1,519
6.90%, 7/1/09 (Prerefunded 7/1/00+) .......... 1,400 1,519
BAN, Prince George's County
VRDN (Currently 3.70%) ....................... 300 300
Maryland-National Capital Park and Planning Commission
Little Bennett Golf Fac ..............................
8.25%, 10/1/11 (Prerefunded 10/1/02+) ........ $ 2,160 $ 2,559
Consolidated Public Improvement
5.375%, 5/1/09 ............................... 2,850 3,075
5.375%, 5/1/16 ............................... 5,750 5,978
5.375%, 5/1/17 ............................... 5,750 5,957
6.125%, 10/1/13 .............................. 2,500 2,809
6.125%, 10/1/14 .............................. 3,150 3,540
6.80%, 11/1/09 (Prerefunded 11/1/99+) ........ 1,145 1,223
7.10%, 10/1/09 (Prerefunded 10/1/00+) ........ 1,000 1,097
7.10%, 10/1/10 (Prerefunded 10/1/00+) ........ 1,840 2,019
Montgomery County
TECP, GO, BAN, 3.10 - 3.25%, 4/2/98 .................. 4,700 4,700
Golf Course, 6.125%, 10/1/22 ......................... 2,260 2,411
Montgomery County Economic Dev. Auth .........................
Howard Hughes Medical Fac ...........................
VRDN (Currently 3.40%) ....................... 500 500
Montgomery County Housing Opportunities Commission
Multi-Family
6.25%, 7/1/25 ................................ 5,500 5,806
7.50%, 7/1/24 ................................ 3,000 3,195
Single Family
5.75%, 7/1/13 ................................ 2,000 2,102
5.80%, 7/1/17 ................................ 1,000 1,051
5.90%, 7/1/17 ................................ 2,000 2,103
6.00%, 7/1/17 ................................ 4,595 4,863
6.50%, 7/1/11 ................................ 2,880 3,068
6.65%, 7/1/16 ................................ 2,320 2,486
6.80%, 7/1/17 ................................ 2,855 3,008
6.90%, 7/1/19 ................................ 2,000 2,093
7.50%, 7/1/17 ................................ 1,790 1,886
7.625%, 7/1/17 ............................... 3,580 3,672
Montgomery County, PCR, Potomac Electric, 5.375%, 2/15/24 .... 4,560 4,643
Morgan State Univ., Academic Fees and Auxiliary Fac ..........
6.05%, 7/1/15 (MBIA Insured) ................. 1,050 1,194
Northeast Maryland Waste Disposal Auth .......................
Montgomery County Resources
6.00%, 7/1/08 * $ ............................ 10,000 $10,977
6.20%, 7/1/10 * .............................. 7,750 8,289
6.30%, 7/1/16 (MBIA Insured) * ............... 13,985 15,215
<PAGE>
Prince George's County
Dimensions Health
5.375%, 7/1/14 ............................... 2,685 2,736
7.00%, 7/1/01 ................................ 2,450 2,657
7.00%, 7/1/22 (Prerefunded 7/1/02+) .......... 2,660 3,005
7.20%, 7/1/06 (Prerefunded 7/1/02+) .......... 2,405 2,736
Solid Waste Management
6.90%, 6/30/05 (Prerefunded 6/30/00+) ........ 1,500 1,628
6.90%, 6/30/06 (Prerefunded 6/30/00+) ........ 1,000 1,086
7.00%, 6/30/07 (Prerefunded 6/30/00+) ........ 1,120 1,218
7.00%, 6/30/09 (Prerefunded 6/30/00+) ........ 1,255 1,365
Prince George's County Housing Auth ..........................
New Keystone, 6.80%, 7/1/25 (MBIA Insured) ........... 2,600 2,765
Riverview Terrace Apartments
6.70%, 6/20/20 (GNMA Guaranteed) * ........... 1,500 1,621
Single Family
5.75%, 8/1/30 (GNMA Guaranteed) * ............ 2,000 2,056
Stevenson Apartments
6.35%, 7/20/20 (GNMA Guaranteed) ............. 2,200 2,316
Prince George's County IDA
Gabriel DuVall Law Building, 8.00%, 9/1/07 ........... 1,185 1,221
Upper Marlboro Justice Center
5.25%, 6/30/19 (MBIA Insured) ................ 1,500 1,503
Prince George's County, PCR, Potomac Electric
6.375%, 1/15/23 .............................. 5,000 5,384
Univ. of Maryland
Auxiliary Fac. and Tuition
5.60%, 4/1/11 ................................ 3,155 3,378
5.75%, 4/1/17 ................................ 4,500 4,805
6.375%, 4/1/09 ............................... 2,100 2,328
6.50%, 4/1/12 ................................ 440 489
7.00%, 10/1/05 (Prerefunded 10/1/99+) ........ 2,000 2,137
7.20%, 10/1/09 (Prerefunded 10/1/99+) ........ 1,400 1,501
Washington County Sanitary Dist., GO
6.875%, 2/1/10 (Prerefunded 2/1/00+) ......... $3,500 $3,758
7.00%, 2/1/15 (Prerefunded 2/1/00+) .......... 2,000 2,152
Washington Suburban Sanitary Dist., GO
6.20%, 6/1/11 ................................ 2,400 2,614
6.20%, 6/1/12 ................................ 1,500 1,633
6.40%, 1/1/15 ................................ 2,270 2,476
6.625%, 6/1/18 (Prerefunded 6/1/04+) ......... 3,665 4,137
6.90%, 6/1/08 (Prerefunded 6/1/00+) .......... 1,500 1,625
6.90%, 6/1/09 (Prerefunded 6/1/00+) .......... 2,300 2,492
Sewer Disposal
5.00%, 6/1/10 ................................ 2,085 2,166
5.00%, 6/1/11 ................................ 2,060 2,133
Water Supply
5.00%, 6/1/10 ................................ 2,580 2,680
5.00%, 6/1/11 ................................ 2,545 2,635
Worcester County Sanitary Dist
6.50%, 8/15/12 (Prerefunded 8/15/02+) ........ 2,000 2,220
Total Maryland (Cost $844,435) 912,351
<PAGE>
PUERTO RICO 6.5%
Puerto Rico Commonwealth, GO
6.25%, 7/1/11 (MBIA Insured) ................. 2,000 2,331
6.25%, 7/1/12 (MBIA Insured) ................. 1,750 2,036
Public Improvement, 4.50%, 7/1/23 .................... 9,500 8,556
Puerto Rico Electric Power Auth ..............................
7.00%, 7/1/11 (Prerefunded 7/1/01+) .......... 1,200 1,333
Puerto Rico Highway and Transportation Auth ..................
5.00%, 7/1/38 ................................ 6,000 5,701
5.50%, 7/1/15 (FSA Insured) .................. 5,000 5,403
5.50%, 7/1/36 ................................ 3,500 3,648
Puerto Rico Infrastructure Fin. Auth., GO
5.125%, 7/1/09 (AMBAC Insured) ............... 16,000 16,922
Puerto Rico Municipal Fin. Agency, GO
5.50%, 7/1/17 (FSA Insured) .................. 3,100 3,247
5.50%, 7/1/21 (FSA Insured) .................. 2,375 2,470
6.00%, 7/1/12 (FSA Insured) .................. 5,000 5,667
6.00%, 7/1/14 (FSA Insured) .................. 3,030 3,303
Total Puerto Rico (Cost $57,716) ............................. 60,617
Total Investments in Securities
105.0% of Net Assets (Cost $902,151) ......................... $ 972,968
Other Assets Less Liabilities ................................ (46,552)
NET ASSETS ................................................... $ 926,416
Net Assets Consist of:
Accumulated net investment income -
net of distributions ......................................... $ 7
Accumulated net realized gain/loss -
net of distributions ......................................... (618)
Net unrealized gain (loss) ................................... 70,817
Paid-in-capital applicable to 86,808,068
no par value shares of beneficial
interest outstanding; unlimited number
of shares authorized ......................................... 856,210
NET ASSETS ................................................... $ 926,416
NET ASSET VALUE PER SHARE .................................... $ 10.67
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
BAN Bond Anticipation Note
CDA Community Development Administration
COP Certificates of Participation
DOT Department of Transportation
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance Corp.
GNMA Government National Mortgage Association
GO General Obligation
HHEFA Health & Higher Educational Facility Authority
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
TECP Tax-Exempt Commercial Paper
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
In thousands
Year Year
Ended Ended
2/28/98 2/28/98
Investment Income
Interest income ......................................... $ 4,797 $50,154
Expenses
Investment management ........................... 488 3,659
Custody and accounting .......................... 91 136
Shareholder servicing ........................... 77 500
Legal and audit ................................. 8 7
Prospectus and shareholder reports .............. 7 44
Trustees ........................................ 6 12
Registration .................................... 5 5
Miscellaneous ................................... 5 9
Total expenses .................................. 687 4,372
Net investment income ................................... 4,110 45,782
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities ...................................... 273 2,795
Futures ......................................... (104) 194
Net realized gain (loss) ........................ 169 2,989
Change in net unrealized gain or loss on securities ..... 273 23,953
Net realized and unrealized gain (loss) ................. 442 26,942
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS .................................. $ 4,552 $72,724
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price Maryland Tax-Free Funds
====================================================================================================================================
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
In thousands Short-Term Bond Fund Bond Fund
<CAPTION>
Year Year
Ended Ended
2/28/98 2/28/97 2/28/98 2/28/97
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ...................... $ 4,110 $ 3,677 $ 45,782 $ 43,258
Net realized gain (loss) ................... 169 54 2,989 1,198
Change in net unrealized
gain or loss ............................... 273 (566) 23,953 (5,486)
Increase (decrease) in
net assets from operations ................. 4,552 3,165 72,724 38,970
Distributions to shareholders
Net investment income ...................... (4,110) (3,677) (45,782) (43,258)
Capital share transactions *
Shares sold ................................ 43,923 51,238 168,610 129,303
Distributions reinvested ................... 3,502 3,177 33,254 31,917
Shares redeemed ............................ (40,695) (37,435) (122,371) (135,540)
Increase (decrease) in
net assets from capital
share transactions ......................... 6,730 16,980 79,493 25,680
Net Assets
Increase (decrease)
during period ...................................... 7,172 16,468 106,435 21,392
Beginning of period ................................ 102,252 85,784 819,981 798,589
End of period ...................................... $ 109,424 $ 102,252 $ 926,416 $ 819,981
*Share information
Shares sold ................................ 8,599 10,043 16,096 12,632
Distributions reinvested ................... 686 623 3,171 3,113
Shares redeeemed ........................... (7,970) (7,338) (11,712) (13,257)
Increase (decrease)
in shares outstanding ...................... 1,315 3,328 7,555 2,488
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
================================================================================
February 28, 1998
================================================================================
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 Maryland Short-Term Tax-Free Bond Fund
(the Short-Term Bond Fund) and the Maryland Tax-Free Bond Fund (the Bond Fund),
nondiversified, open-end management investment companies, are two of the
portfolios established by the trust and commenced operations on January 29,
1993, and March 31, 1987, respectively.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
VALUATION Debt securities are generally traded in the over-the-counter
market. Investments in securities are stated at fair value as furnished by
dealers who make markets in such securities or by an independent pricing
service, which considers yield or price of bonds of comparable quality, coupon,
maturity, and type, as well as prices quoted by dealers who make markets in such
securities.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of that
fund, as authorized by the Board of Trustees.
PREMIUMS AND DISCOUNTS Premiums and original issue discounts on municipal
securities are amortized for both financial reporting and tax purposes. Market
discounts are recognized upon disposition of the security as gain or loss for
financial reporting purposes and as ordinary income for tax purposes.
OTHER Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Distributions to shareholders are
recorded by each fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting principles.
<PAGE>
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, for the year ended February 28, 1998, were as follows:
================================================================================
Short-Term
Bond Fund Bond Fund
Purchases $ 75,731,000 $ 259,775,000
Sales 63,205,000 161,198,000
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since each fund intends
to continue to qualify as a regulated investment company and distribute all of
its income. The Short-Term Bond Fund has unused realized capital loss
carryforwards for federal income tax purposes of $549,000, of which $96,000
expires in 2003, and $453,000 in 2004. Capital loss carryforwards utilized by
the Short-Term Bond Fund in fiscal 1998 amounted to $258,000. Capital loss
carryforwards utilized by the Bond Fund in fiscal 1998 amounted to $2,760,000.
The Short-Term Bond Fund intends to retain gains realized in future periods that
may be offset by available capital loss carryforwards.
In order for the Bond Fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended February 28, 1998. The results
of operations and net assets were not affected by the increases/(decreases) to
these accounts.
================================================================================
Undistributed net investment income $ 4,000
Undistributed net realized gain (7,000)
Paid-in-capital 3,000
At February 28, 1998, the aggregate costs of investments for the
Short-Term Bond and Bond Funds for federal income tax and financial reporting
purposes were $111,578,000 and $902,151,000, respectively. Net unrealized gain
(loss) on investments was as follows:
================================================================================
Short-Term
Bond Fund Bond Fund
Appreciated investments $ 1,556,000 $ 71,206,000
Depreciated investments (8,000) (389,000)
Net unrealized gain (loss) $ 1,548,000 $ 70,817,000
<PAGE>
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between each fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management fee,
of which $35,000 and $300,000 were payable at February 28, 1998 by the
Short-Term Bond and Bond Funds, respectively. The fee is computed daily and paid
monthly, and consists of an individual fund fee equal to 0.10% of average daily
net assets and a group fee. The group fee is based on the combined assets of
certain mutual funds sponsored by the manager or Rowe Price-Fleming
International, Inc. (the group). The group fee rate ranges from 0.48% for the
first $1 billion of assets to 0.30% for assets in excess of $80 billion. At
February 28, 1998, and for the year then ended, the effective annual group fee
rate was 0.32%. Each fund pays a pro-rata share of the group fee based on the
ratio of its net assets to those of the group.
Under the terms of the investment management agreement, the manager is
required to bear any expenses through February 28, 1999, which would cause the
Short-Term Bond Fund's ratio of expenses to average net assets to exceed 0.65%.
Thereafter, through February 28, 2001, the Short-Term Bond Fund is required to
reimburse the manager for these expenses, provided that average net assets have
grown or expenses have declined sufficiently to allow reimbursement without
causing the fund's ratio of expenses to average net assets to exceed 0.65%.
Pursuant to a previous agreement, $39,000 of unaccrued 1996-1997 fees were
repaid during the year ended February 28, 1998, and $13,000 remains subject to
reimbursement through February 28, 1999.
In addition, each fund has entered into agreements with the manager and a
wholly owned subsidiary of the manager, pursuant to which each fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of each fund. T. Rowe Price Services, Inc., is each fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the funds. The Short-Term Bond and Bond Funds
incurred expenses pursuant to these related party agreements totaling
approximately $125,000 and $472,000, respectively, for the year ended February
28, 1998, of which $10,000 and $40,000, respectively, were payable at
period-end.
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
================================================================================
Report of Independent Accountants
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
T. ROWE PRICE MARYLAND TAX-FREE FUNDS
We have audited the accompanying statement of net assets of T. Rowe Price
Maryland Short-Term Tax-Free Bond Fund and T. Rowe Price Maryland Tax-Free Bond
Fund (two of the portfolios comprising the T. Rowe Price State Tax-Free Income
Trust) as of February 28, 1998, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
February 28, 1998, by correspondence with the custodian and the brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of T. Rowe Price Maryland Short-Term Tax-Free Bond Fund and T. Rowe
Price Maryland Tax-Free Bond Fund as of February 28, 1998, the results of their
operations, the changes in their net assets, and financial highlights for each
of the periods stated in the first paragraph, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
March 18, 1998
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
================================================================================
================================================================================
Tax Information (unaudited) for the Tax Year Ended 2/28/98
- --------------------------------------------------------------------------------
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 Short-Term Bond Fund's dividend income included $4,087,000 which
qualified as exempt-interest dividends. The Bond Fund's dividend income included
$45,421,000 which qualified as exempt-interest dividends.
- --------------------------------------------------------------------------------
<PAGE>
T. Rowe Price Shareholder Services
================================================================================
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE Shareholder service representatives are available from 8
a.m. to 10 p.m. ET Monday through Friday and from 8:30 a.m. to 5
p.m. ET on weekends. Call 1-800-225-5132 to speak directly with a
representative who will be able to assist you with your accounts.
IN PERSON Visit one of our investor center locations to meet with
a representative who will be able to assist you with your
accounts. You can also drop off applications or obtain
prospectuses and other literature at these centers.
AUTOMATED 24-HOUR SERVICES
TELE*ACCESS [Registration Mark] Call 1-800-638-2587 to obtain
information such as account balance, date and amount of your last
transaction, latest dividend payment, fund prices, and yields.
Additionally, you have the ability to request prospectuses,
statements, and account and tax forms; to reorder checks; and to
initiate purchase, redemption, and exchange orders for
identically registered accounts.
T.ROWE PRICE ONLINE Through a personal computer via dial-up
modem, you can replicate all the services available on
Tele*Access plus conduct transactions in your Discount Brokerage
and Variable Annuity accounts.
ACCOUNT SERVICES
CHECKING Write checks for $500 or more on any money market and
most bond fund accounts (except the High Yield and Emerging
Markets Bond Funds).
AUTOMATIC INVESTING Build your account over time by investing
directly from your bank account or paycheck with Automatic Asset
Builder. Additionally, Automatic Exchange enables you to set up
systematic investments from one fund account into another, such
as from a money fund into a stock fund. A $50 minimum makes it
easy to get started.
AUTOMATIC WITHDRAWAL If you need money from your fund account on
a regular basis, you can establish scheduled, automatic
redemptions.
<PAGE>
DIVIDEND AND CAPITAL GAINS PAYMENT OPTIONS Reinvest all or some
of your distributions, or take them in cash. We give you maximum
flexibility and convenience.
DISCOUNT BROKERAGE*
INVESTMENTS AVAILABLE You can trade stocks, bonds, options,
precious metals, and other securities at a savings over regular
commission rates.
TO OPEN AN ACCOUNT Call a shareholder service representative for
more information.
INVESTMENT INFORMATION
COMBINED STATEMENT A comprehensive overview of your T. Rowe Price
accounts is provided. The summary page gives you earnings by tax
category, provides total portfolio value, and lists your
investments by type-stock, bond, and money market. Detail pages
itemize account transactions by fund.
SHAREHOLDER REPORTS Portfolio managers review the performance of
the funds in plain language and discuss T. Rowe Price's economic
outlook.
T. ROWE PRICE REPORT This is a quarterly newsletter with relevant
articles on market trends, personal financial planning, and T.
Rowe Price's economic perspective.
PERFORMANCE UPDATE This quarterly report reviews recent market
develop- ments and provides comprehensive performance information
for every T. Rowe Price fund.
INSIGHTS This library of information includes reports on mutual
fund tax issues, investment strategies, and financial markets.
DETAILED INVESTMENT GUIDES Our widely acclaimed Asset Mix
Worksheet, College Planning Kit, Diversifying Overseas: A Guide
to International Investing, Retirees Financial Guide, and
Retirement Planning Kit (also available on disk for PC use) can
help you determine and reach your investment goals.
* A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
<PAGE>
T. Rowe Price Mutual Funds
================================================================================
STOCK FUNDS
- --------------------------------------------------------------------------------
DOMESTIC
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500*
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications**
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons***
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value***
Spectrum Growth
Total Equity Market Index
Value
INTERNATIONAL/GLOBAL
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
<PAGE>
BOND FUNDS
- --------------------------------------------------------------------------------
DOMESTIC TAXABLE
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
DOMESTIC TAX-FREE
California Tax-Free Bond
Florida Insured
Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
INTERNATIONAL/GLOBAL
Emerging Markets Bond
Global Government Bond
International Bond
MONEY MARKET FUNDS+
- --------------------------------------------------------------------------------
TAXABLE
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
<PAGE>
TAX-FREE
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
- --------------------------------------------------------------------------------
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
- --------------------------------------------------------------------------------
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Formerly the Equity Index Fund.
** Formerly the closed-end New Age Media Fund. Converted to open-end status
on 7/28/97.
*** Closed to new investors.
+ Neither the funds nor their share prices are guaranteed or insured by the
U.S. government.
Please call for a prospectus. Read it carefully before you invest or send money.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
<PAGE>
FOR YIELD, PRICE, LAST TRANSACTION,
CURRENT BALANCE, OR TO CONDUCT
TRANSACTIONS, 24 HOURS, 7 DAYS
A WEEK, CALL TELE*ACCESS [REGISTRATION MARK]:
1-800-638-2587 toll free
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
TO OPEN A DISCOUNT BROKERAGE
ACCOUNT OR OBTAIN INFORMATION,
CALL: 1-800-638-5660 toll free
INTERNET ADDRESS:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
Maryland Tax-Free Funds.
INVESTOR CENTERS:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. C12-050 2/28/98
