<PAGE>
Semiannual Report
MARYLAND
TAX-FREE
FUNDS
AUGUST 31, 1998
[PICTURE APPEARS HERE]
T. ROWE PRICE
<PAGE>
REPORT HIGHLIGHTS
.............................................................................
MARYLAND TAX-FREE FUNDS
. Low inflation, budget surpluses, and cash flows into fixed income investments
benefited municipal securities nationwide and in Maryland during the past six
months.
. Your funds kept pace with or outperformed their peer group averages for both
the 6- and 12-month periods.
. Maryland Short-Term Tax-Free Bond Fund maintained an aggressive duration
strategy to keep yield relatively high.
. Maryland Tax-Free Bond Fund benefited from falling interest rates by
purchasing longer-term bonds in an active new-issue market.
. Municipal securities offer good value compared with taxable counterparts,
which should reward investors in this market over time.
<PAGE>
FELLOW SHAREHOLDERS
The municipal market and your funds continued to provide solid returns during
the six months ended August 31. Against a background of low inflation, budget
surpluses at federal and state levels, and asset shifts to fixed income
investments, bond prices rose and yields fell across the maturity spectrum. As a
result, municipals and other types of bonds have provided some of the best
returns among all asset classes thus far in 1998.
MARKET ENVIRONMENT
Interest rates continued to decline during the past six months but did
not drop as far as over the previous six-month period. Because many
investors around the globe sought refuge in the Treasury market from
problems in Asia, Russia, and Latin America, yield declines were
steepest on Treasury securities. For example, the 30-year Treasury bond
yield fell 60 basis points over the period, with most of the drop
occurring in August, but the 30-year AAA general obligation bond fell
only 15 basis points. (One hundred basis points equal one percent.) The
difference also reflected the heavy supply of new municipal issues in
recent months and the continued contraction of Treasury issuance. As a
result of these developments, yields on tax-exempt investments are now
only slightly lower than yields on fully taxable securities. When income
taxes are taken into account, municipals now yield substantially more
than most other types of bonds.
[CHART APPEARS HERE] As the chart shows, Maryland interest rates
followed the lead of the national averages,
remaining fairly steady throughout the six-
month period and dipping only slightly in
August.
1
<PAGE>
PREPARING FOR THE YEAR 2000
The Year 2000 draws closer every day, and it holds special meaning beyond the
arrival of a new millennium. The issue for investors is that many computer
programs throughout the world use two digits instead of four to identify the
year and may assume the next century starts with 1900. If these programs are not
modified, they will not be able to correctly handle the century change when the
year changes from "99" to "00" on January 1, 2000, and they will no longer be
able to perform necessary functions. The Year 2000 issue affects all companies
and organizations.
T. Rowe Price has been taking steps to assure that its computer systems and
processes are capable of functioning in the Year 2000. Detailed plans for
remediation efforts have been developed and are currently being executed.
OUR PLAN OF ACTION
We began to address these issues several years ago by requiring that all new
systems process and store four-digit years. We plan to complete all
reprogramming efforts for the major application systems, including business
applications required to service our customers and processing infrastructure
necessary to ensure the integrity of customer data and investments, by December
31, 1998, leaving a full 12 months for system testing. Because we exchange data
electronically with customers and vendors, we are working with them to assess
the adequacy of their own compliance efforts. Our goal is to ensure the
continuation of the same level of service to all our mutual fund shareholders
and clients after December 31, 1999.
We are asking all vendors and companies we do business with for a Year 2000
compliance status, with the expectation that some organizations will not be able
to modify their interface files prior to December 31, 1999. Our goal is to
identify any noncompliant files so that we can implement alternative solutions.
In addition, we are scheduling tests for critical vendors and companies that
claim Year 2000 compliance to ensure that time-related data and calculations
function properly as we move into the next century.
SMOOTH TRANSITION EXPECTED
We believe our programs and initiatives will provide a smooth transition into
the next millennium. We are assessing all systems providing products or services
to our retail mutual fund shareholders, retirement plan sponsors and
participants, and we are taking steps to make modifications where necessary for
the Year 2000. Our plan provides time to develop solutions for all noncompliant
systems and data files from customers or vendors.
The Securities Industry Association (SIA) is coordinating Year 2000 testing to
assure that securities markets, clearing corporations, depositories, and third
party software and hardware vendors can send, receive, and process files and
transactions accurately. T. Rowe Price will participate in this industry-wide
effort.
For a more detailed discussion of our Year 2000 effort, as well as continuing
updates on our progress, please check our Web site (WWW.TROWEPRICE.COM).
2
<PAGE>
We continued to view the Maryland fiscal environment favorably as the
state turned in strong financial results. Tax revenues and budget
surpluses at the state and local government levels exceeded projections,
and the state demonstrated sound budgetary practices by investing
surpluses to offset planned income tax cuts. Maryland's rate of
employment growth was strong enough to fuel an increase in personal
income to 113% of the U.S. average. The state's healthy economy and
sound management contribute to the AAA ratings it carries from all the
rating agencies.
MARYLAND SHORT-TERM TAX-FREE BOND FUND
Your fund gained 2.13% over the last six months, close to the 2.19%
return of the national Lipper Short Municipal Debt Funds Average. For
the 12-month period, your fund's 4.95% results outpaced the Lipper
average's 4.77% gain. Income for both periods remained steady from the
prior year. The fund continued to meet its broader objective of
providing higher income than a money market fund with moderate price
fluctuation: over the last 6- and 12-month periods, national tax-exempt
money funds returned 1.50% and 3.04%, respectively, as measured by
Lipper Analytical Services.
PERFORMANCE COMPARISON
-----------------------------------------------
Periods Ended 8/31/98 6 Months 12 Months
-----------------------------------------------
Maryland Short-Term
Tax-Free Bond Fund 2.13% 4.95%
................................................
Lipper Short Municipal
Debt Funds Average 2.19 4.77
................................................
Our strategy for the last six months was to maintain the relatively
aggressive duration reached at the end of 1997. (Duration is a measure
of price sensitivity to changes in interest rates. A fund having a
duration of two years will have about a 2% appreciation or decline in
price in response to a one-percentage-point fall or rise, respectively,
in interest rates.) At that time, duration had been extended from 1.8 to
2.3 years because of relatively low inflation and our belief that the
Federal Reserve would not increase the federal funds target rate. Events
in Asia, which have now affected Russia and Latin America, put
additional pressure on the Fed to retain the status quo, or even to
lower rates. We have since pushed duration out to 2.5 years--fairly long
in our universe--where yields are more attractive.
We changed the fund's sector allocations modestly. General obligation
and prerefunded bonds still compose the majority of assets at 61% of
3
<PAGE>
the portfolio, but were down from 68% at the end of February. New
issuance and the secondary market provided opportunities to pick up
yield by purchasing revenue bonds in sectors such as education,
hospitals, and life care. The portfolio maintained a relatively high AA+
weighted average credit quality, which reflects the generally high
quality of Maryland's tax-free issuers.
MARYLAND TAX-FREE BOND FUND
Your fund provided a solid return for the period. Its 3.36% six-month
and 8.43% one-year gains were well ahead of the Lipper Maryland
Municipal Debt Funds Average's 3.06% and 7.78% results, respectively.
The fund achieved this outperformance through a combination of steady
income, some modest price appreciation as yields declined over the
summer, and low expenses versus our peer group average.
PERFORMANCE COMPARISON
----------------------------------------------------
Periods Ended 8/31/98 6 Months 12 Months
----------------------------------------------------
Maryland Tax-Free
Bond Fund 3.36% 8.43%
....................................................
Lipper Maryland Municipal
Debt Funds Average 3.06 7.78
....................................................
We continued to devote a significant portion of assets to long-time bond
holdings, as the relatively higher coupons on these older issues help
preserve the income dividends to shareholders. Over the past six months,
we also used periods of above-average supply to add new issues to the
long end of the portfolio. Through the end of August, Maryland new
issuance was running 41% ahead of the same period in 1997 and was
particularly heavy from April through July. The hospital sector was well
represented among these new bonds, and we purchased several issues for
area hospitals.
The fund's average credit quality continues to be quite high: AA by
T. Rowe Price's credit rating system and even higher when measured by
the rating agencies. Our limited exposure to lower-quality bonds helped
performance over the period as bonds carrying more credit risk came
under some pressure in the marketplace. High-yield bonds were strong
performers in the municipal market over the past two years as the yield
spread narrowed between high- and low-quality bonds (and, with it, the
premium investors demanded for assuming higher credit
4
<PAGE>
risk). However, this trend appeared to come to an end as slowing growth
made investors demand better yields on lower-quality bonds.
Good cash flow into the fund over the last six months allowed us to
deploy new money into longer-term bonds. As a result, we extended our
duration between April and June from 6.5 to almost 7.0 years. (See the
Maryland Short-Term Tax-Free Bond Fund report for an explanation of
duration.) This timing was good as interest rates subsequently declined
in July and August at the same time that supply dried up. Going forward,
we will continue to focus attention on adding longer-term bonds, since
many of our older holdings are trading to their shorter call dates
(rather than their longer maturity dates) now that rates have moved
lower. We expect to see more supply again in the final months of 1998
and will pick our spots to invest.
OUTLOOK
Federal Reserve Board Chairman Alan Greenspan recently implied that the
next move by the Fed could well be a lowering of key short-term rates in
the face of turmoil overseas. Just weeks before, it was widely
anticipated that the Fed was leaning toward a possible interest rate
hike because of concerns about tight labor markets and wage pressures.
For the economy as a whole, we believe the rate of growth will slow
through the remainder of the year. Exports may fall further because of
weak international markets and the strength of the U.S. dollar, and
growth in consumer spending could decline in the aftermath of the sharp
correction in stock prices. Commodity prices have also been under
pressure, further restraining inflation. In this environment, the trend
toward lower overall interest rates should remain intact.
We expect municipal securities to remain undervalued compared with
Treasuries until demand catches up with heavy supply. However, investors
should recognize the attractive relative yields available in the
municipal market, which would benefit investors in this segment of the
fixed income market over the long term.
5
<PAGE>
We are pleased to announce that Hugh D. McGuirk was recently named co-
manager of the Maryland Tax-Free Bond Fund. Mr. McGuirk has been with T.
Rowe Price since 1993 and has been managing municipal portfolios since
1997.
Respectfully submitted,
/s/ Charles B. Hill
Charles B. Hill
Chairman of the Investment Advisory Committee
Maryland Short-Term Tax-Free Bond Fund
/s/ Mary J. Miller
Mary J. Miller
Chairman of the Investment Advisory Committee
Maryland Tax-Free Bond Fund
September 25, 1998
6
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
KEY STATISTICS
<TABLE>
<CAPTION>
2/28/98 8/31/98
<S> <C> <C>
MARYLAND SHORT-TERM TAX-FREE BOND FUND
---------------------------------------------------------------------------
Price Per Share $ 5.14 $ 5.15
Dividends Per Share
For 6 months 0.10 0.10
For 12 months 0.20 0.20
Dividend Yield *
For 6 months 3.95% 3.86%
For 12 months 3.96 3.94
30-Day Standardized Yield 3.28 3.40
Weighted Average Maturity (years) 2.6 2.8
Weighted Average Effective Duration (years) 2.3 2.5
Weighted Average Quality ** AA AA+
MARYLAND TAX-FREE BOND FUND
---------------------------------------------------------------------------
Price Per Share $ 10.67 $10.75
Dividends Per Share
For 6 months 0.28 0.27
For 12 months 0.55 0.55
Dividend Yield *
For 6 months 5.34% 5.18%
For 12 months 5.45 5.33
30-Day Standardized Yield 4.20 4.31
Weighted Average Maturity (years) 15.2 15.9
Weighted Average Effective Duration (years) 6.5 6.9
Weighted Average Quality ** AA AA
</TABLE>
* 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.
7
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
<TABLE>
<CAPTION>
Percent of Percent of
Net Assets Net Assets
2/28/98 8/31/98
<S> <C> <C>
MARYLAND SHORT-TERM TAX-FREE BOND FUND
---------------------------------------------------------------------------
Prerefunded Bonds 39% 39%
General Obligation - Local 17 14
General Obligation - State 12 8
Educational Revenue 4 7
Hospital Revenue 7 7
Solid Waste Revenue 6 6
Ground Transportation Revenue 5 5
Life Care/Nursing Home Revenue 4 5
Lease Revenue 4 4
All Other 5 4
Other Assets Less Liabilities - 3 1
---------------------------------------------------------------------------
Total 100% 100%
MARYLAND TAX-FREE BOND FUND
---------------------------------------------------------------------------
Prerefunded Bonds 18% 18%
Housing Finance Revenue 15 15
Hospital Revenue 13 15
General Obligation - Local 13 9
Ground Transportation Revenue 5 5
General Obligation - State 5 5
Solid Waste Revenue 5 4
Water and Sewer Revenue 4 4
Educational Revenue 6 4
Electric Revenue 1 4
Lease Revenue 3 3
Miscellaneous Revenue 4 3
Escrowed to Maturity 2 3
Dedicated Tax Revenue 4 2
Life Care/Nursing Home Revenue 3 2
All Other 4 3
Other Assets Less Liabilities - 5 1
---------------------------------------------------------------------------
Total 100% 100%
</TABLE>
8
<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
--------------------------------------
[GRAPH APPEARS HERE]
MARYLAND TAX-FREE BOND FUND
--------------------------------------
[GRAPH APPEARS 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.
<TABLE>
<CAPTION>
Since Inception
Periods Ended 8/31/98 1 Year 5 Years 10 Years Inception Date
<S> <C> <C> <C> <C> <C>
Maryland Short-Term
Tax-Free Bond Fund 4.95% 4.08% 4.34% 1/29/93
Maryland Tax-Free Bond Fund 8.43 5.84 7.86% 6.85 3/31/87
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
9
<PAGE>
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Unaudited
<TABLE>
<CAPTION>
Financial Highlights For a share outstanding throughout each period
- --------------------------------------------------------------------------------
6 Months Year
Ended Ended
8/31/98 2/28/98 2/28/97 2/29/96 2/28/95 2/28/94
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 5.14 $ 5.11 $ 5.15 $ 5.04 $ 5.09 $ 5.07
Investment activities
Net investment income 0.10* 0.20* 0.20* 0.21* 0.18* 0.15*
Net realized and
unrealized gain (loss) 0.01 0.03 (0.04) 0.11 (0.05) 0.02
Total from
investment activities 0.11 0.23 0.16 0.32 0.13 0.17
Distributions
Net investment income (0.10) (0.20) (0.20) (0.21) (0.18) (0.15)
NET ASSET VALUE
END OF PERIOD $ 5.15 $ 5.14 $ 5.11 $ 5.15 $ 5.04 $ 5.09
------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
TOTAL RETURN (.) 2.13%* 4.56%* 3.26%* 6.49%* 2.64%* 3.49%*
Ratio of expenses to
average net assets 0.63%*+ 0.65%* 0.65%* 0.65%* 0.65%* 0.65%*
Ratio of net investment
income to average
net assets 3.83%*+ 3.89%* 3.98%* 4.14%* 3.59%* 3.09%*
Portfolio turnover rate 27.0% 60.4% 21.4% 39.3% 105.3% 20.5%
Net assets, end of period
(in thousands) $ 111,270 $ 109,424 $102,252 $ 85,784 $ 74,808 $ 76,049
</TABLE>
(.) Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* Excludes expenses in excess of a 0.65% voluntary expense limitation in
effect through 6/30/98, and a 0.60% voluntary expense limitation in effect
from 7/1/98 through 2/28/99.
+ Annualized.
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
T. ROWE PRICE MARYLAND TAX-FREE BOND FUND
- -------------------------------------------------------------------------------
Unaudited
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- -------------------------------------------------------------------------------------------
6 Months Year
Ended Ended
8/31/98 2/28/98 2/28/97 2/29/96 2/28/95 2/28/94
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 10.67 $ 10.35 $ 10.40 $ 9.99 $ 10.45 $ 10.50
................................................................
Investment activities
Net investment income 0.27 0.55 0.56 0.57 0.56 0.56
Net realized and
unrealized gain (loss) 0.08 0.32 (0.05) 0.41 (0.44) 0.05
................................................................
Total from
investment activities 0.35 0.87 0.51 0.98 0.12 0.61
................................................................
Distributions
Net investment income (0.27) (0.55) (0.56) (0.57) (0.56) (0.56)
Net realized gain -- -- -- -- (0.02) (0.10)
................................................................
Total distributions (0.27) (0.55) (0.56) (0.57) (0.58) (0.66)
................................................................
NET ASSET VALUE
End of period $ 10.75 $ 10.67 $ 10.35 $ 10.40 $ 9.99 $ 10.45
----------------------------------------------------------------
Ratios/Supplemental Data
Total return (R) 3.36% 8.68% 5.12% 10.00% 1.43% 5.93%
..............................................................................................
Ratio of expenses to
average net assets 0.52%+ 0.51% 0.54% 0.54% 0.57% 0.57%
..............................................................................................
Ratio of net investment
income to average
net assets 5.12%+ 5.31% 5.47% 5.53% 5.73% 5.31%
..............................................................................................
Portfolio turnover rate 10.1% 19.2% 26.2% 23.9% 28.9% 24.3%
..............................................................................................
Net assets, end of period
(in thousands) $990,042 $926,416 $819,981 $798,589 $724,823 $821,402
..............................................................................................
</TABLE>
(R) Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
+ Annualized.
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
T. ROWE PRICE MARYLAND SHORT-TERM TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
Unaudited August 31, 1998
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS PAR VALUE
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
MARYLAND 93.6%
Anne Arundel County, GO
Consolidated Solid Waste
5.75%, 2/1/04 * $ 350 $ 378
.................................................................
6.00%, 2/1/01 * 350 368
.................................................................
6.00%, 2/1/02 * 350 373
.................................................................
6.00%, 2/1/03 * 325 351
.................................................................
Water and Sewer, 4.75%, 9/1/01 1,030 1,060
...........................................................................
Baltimore City, GO
Consolidated Public Improvement
5.125%, 10/15/99 (FGIC Insured) 1,025 1,043
.................................................................
7.50%, 10/15/00 (FGIC Insured) 500 538
.................................................................
8.90%, 10/15/99 (MBIA Insured) 650 689
...........................................................................
Baltimore City, Water Projects
6.50%, 7/1/20 (MBIA Insured)
(Prerefunded 7/1/00+) 195 205
...........................................................................
Baltimore County, GO
Consolidated Public Improvement
6.00%, 7/1/05 (Prerefunded 7/1/02+) 500 547
.................................................................
Metropolitan Dist.
6.80%, 4/1/00 500 524
.................................................................
6.80%, 4/1/01 (Prerefunded 4/1/00+) 1,000 1,068
.................................................................
Water Projects
6.90%, 4/1/06 (Prerefunded 4/1/00+) 1,000 1,069
...........................................................................
Baltimore County, Stella Maris
7.50%, 3/1/21 (Prerefunded 3/1/01+) 1,000 1,106
...........................................................................
Baltimore County Economic Dev.
Maryvale Preparatory School Fac., 6.50%, 5/1/08 1,000 1,012
...........................................................................
Charles County, GO
6.375%, 12/1/03 (Prerefunded 12/1/99+) 1,580 1,666
...........................................................................
Charles County
County Commissioners, Fox Chase Apartments
7.25%, 10/1/01 340 344
.................................................................
County Commissioners, New Forest Apartments
7.25%, 11/1/01 650 657
...........................................................................
Gaithersburg Hosp. Fac., Asbury Methodist Home
7.85%, 1/1/20 (Prerefunded 1/1/00+) 2,000 2,142
...........................................................................
</TABLE>
12
<PAGE>
T. ROWE PRICE MARYLAND SHORT-TERM TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Howard County, GO
Consolidated Public Improvement
5.875%, 5/15/12 (Prerefunded 5/15/03+) $1,520 $1,649
..........................................................................
Howard County
Metropolitan Dist.
7.125%, 5/15/11 (Prerefunded 5/15/00+) 500 533
................................................................
7.15%, 5/15/20 (Prerefunded 5/15/00+) 500 534
..........................................................................
Laurel, 6.60%, 7/1/03 (MBIA Insured) (Prerefunded 7/1/01+) 375 411
..........................................................................
Maryland, GO
6.50%, 3/15/05 (Prerefunded 3/15/01+) 2,000 2,160
................................................................
State and Local Fac.
5.00%, 7/15/01 5,000 5,177
................................................................
5.00%, 10/15/02 930 974
..........................................................................
Maryland DOT, 6.80%, 11/1/05 (Prerefunded 11/1/99+) 525 555
..........................................................................
Maryland Economic Dev., Roland Park Country School
5.50%, 11/1/98 725 727
..........................................................................
Maryland Energy Fin. Admin.
Solid Waste Disposal, 5.10%, 12/1/99 * 450 458
.....................................................................
Wheelabrator Water Technologies, 5.75%, 12/1/04 * 2,570 2,775
..........................................................................
Maryland HHEFA
Bradford Oaks Nursing and Rehabilitation Center
4.875%, 1/1/99 180 180
................................................................
5.125%, 1/1/00 200 202
................................................................
5.375%, 1/1/01 200 204
................................................................
Broadmead
4.60%, 7/1/01 375 381
................................................................
4.90%, 7/1/04 250 257
................................................................
Charity Obligation Group, 4.60%, 11/1/26 2,250 2,303
.....................................................................
Doctor's Community Hosp.
8.75%, 7/1/22 (Prerefunded 7/1/00+) 5,815 6,446
................................................................
Francis Scott Key Medical Center
6.75%, 7/1/23 (FGIC Insured)
(Prerefunded 7/1/00+) 5,110 5,487
................................................................
Good Samaritan Hosp.
4.90%, 7/1/00 (Escrowed to Maturity) 1,020 1,043
................................................................
Greater Baltimore Medical Center
6.75%, 7/1/19 (Prerefunded 7/1/01+) 2,025 2,224
................................................................
Johns Hopkins Univ., 5.50%, 7/1/02 2,500 2,647
.....................................................................
</TABLE>
13
<PAGE>
T. ROWE PRICEMARYLAND SHORT-TERM TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Maryland HHEFA
Kennedy Krieger Institute
6.00%, 7/1/01 $ 125 $ 131
................................................................
6.00%, 7/1/02 220 235
................................................................
6.00%, 7/1/03 380 409
................................................................
6.00%, 7/1/04 405 440
................................................................
6.00%, 7/1/05 430 471
.....................................................................
Pooled Loan Program, VRDN (Currently 3.25%) 800 800
.....................................................................
Stella Maris, 4.75%, 7/1/21 3,375 3,439
.....................................................................
Univ. of Maryland Medical System
7.00%, 7/1/17 (FGIC Insured)
(Prerefunded 7/1/01+) 2,250 2,486
..........................................................................
Maryland Ind. Dev. Fin. Auth.
American Center for Physics Headquarters Fac.
5.80%, 1/1/01 400 414
................................................................
Way Station, 4.90%, 12/31/11 2,310 2,342
...........................................................................
Maryland Transportation Auth.
Transportation Fac.
5.20%, 7/1/00 4,000 4,109
................................................................
6.10%, 7/1/00 1,100 1,147
..........................................................................
Maryland-National Capital Park and Planning Commission, GO
Prince George's County
VRDN (Currently 3.30%) 300 300
................................................................
5.50%, 1/15/00 1,000 1,025
..........................................................................
Montgomery County, GO
6.30%, 4/1/02 1,250 1,355
................................................................
9.75%, 6/1/01 1,700 1,962
Consolidated Public Improvement
6.80%, 11/1/02 (Prerefunded 11/1/99+) 2,000 2,114
................................................................
6.80%, 11/1/09 (Prerefunded 11/1/99+) 850 899
..........................................................................
Northeast Waste Disposal Auth.
Solid Waste
5.30%, 7/1/00 * 1,765 1,810
................................................................
5.90%, 7/1/05 * 1,250 1,368
................................................................
</TABLE>
14
<PAGE>
T. ROWE PRICE MARYLAND SHORT-TERM TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Prince George's County
Collington Episcopal, 5.40%, 4/1/02 $ 450 $ 466
.....................................................................
Dimensions Health
7.25%, 7/1/17 (Prerefunded 7/1/02+) 5,500 6,253
................................................................
Equipment Acquistion Program, COP
5.00%, 10/15/00 (MBIA Insured) 4,050 4,157
................................................................
Prince George's County Housing Auth., Largo Oxford
4.50%, 12/1/07 (Prerefunded 12/1/01+) 2,000 2,046
................................................................
Univ. of Maryland
Auxiliary Fac. and Tuition
5.00%, 4/1/02 3,145 3,269
................................................................
6.40%, 4/1/06 (Prerefunded 10/1/02+) 500 557
................................................................
7.00%, 10/1/05 (Prerefunded 10/1/99+) 500 528
................................................................
7.00%, 10/1/07 (Prerefunded 10/1/99+) 225 238
..........................................................................
Washington Suburban Sanitary Dist., GO
6.40%, 11/1/04 (Prerefunded 11/1/01+) 250 274
................................................................
6.50%, 11/1/13 (Prerefunded 11/1/01+) 1,000 1,100
................................................................
7.00%, 6/1/01 1,480 1,603
................................................................
8.00%, 1/1/00 3,295 3,480
................................................................
8.00%, 1/1/02 360 406
..........................................................................
Total Maryland (Cost $102,452) 104,100
.......
PUERTO RICO 3.9%
Puerto Rico Ind. Medical and Environmental, PCR
4.25%, 9/1/13 1,500 1,517
..........................................................................
Puerto Rico Municipal Fin. Agency, GO
5.50%, 7/1/00 (FSA Insured) 2,790 2,883
..........................................................................
Total Puerto Rico (Cost $4,331) 4,400
.......
U. S. VIRGIN ISLANDS 1.1%
Virgin Island Water and Power Auth., 5.00%, 7/1/02 1,200 1,233
..........................................................................
Total U. S. Virgin Islands (Cost $1,219) 1,233
.......
</TABLE>
15
<PAGE>
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
- ------------------------------------------------------------------------------------
in thousands
<S> <C>
Total Investments in Securities
98.6% of Net Assets (Cost $108,002) $109,733
Other Assets Less Liabilities 1,537
--------
NET ASSETS $111,270
--------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 2
Accumulated net realized gain/loss - net of distributions (470)
Net unrealized gain (loss) 1,731
Paid-in-capital applicable to 21,595,996 no par value shares of
beneficial interest outstanding; unlimited number of shares authorized 110,007
--------
NET ASSETS $111,270
--------
NET ASSET VALUE PER SHARE $ 5.15
--------
</TABLE>
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
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
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.
16
<PAGE>
T. Rowe Price Maryland Tax-Free Bond Fund
- -------------------------------------------------------------------
Unaudited August 31, 1998
Statement of Net Assets Par Value
- -------------------------------------------------------------------
in thousands
MARYLAND 91.7%
Allegany County, PCR, Westvaco, 6.20%, 1/1/08 $1,350 $1,498
Anne Arundel County, GO
5.125%, 2/1/22 1,340 1,351
5.125%, 2/1/23 1,340 1,351
Consolidated General Improvement
6.30%, 8/1/16 775 872
6.30%, 8/1/19 725 816
6.30%, 8/1/20 705 793
6.30%, 8/1/21 790 889
Consolidated Water and Sewer
6.30%, 8/1/22 450 507
6.30%, 8/1/24 720 810
7.20%, 4/15/13 (Prerefunded 4/15/00+) 625 672
7.20%, 4/15/14 (Prerefunded 4/15/00+) 625 671
Baltimore City, GO
Zero Coupon, 10/15/08 (FGIC Insured)
(Prerefunded 10/15/05+) 3,800 2,338
Zero Coupon, 10/15/09 (FGIC Insured)
(Prerefunded 10/15/05+) 4,600 2,658
Zero Coupon, 10/15/11 (FGIC Insured)
(Prerefunded 10/15/05+) 7,500 3,796
Consolidated Public Improvement
Zero Coupon, 10/15/06 (FGIC Insured) 3,100 2,136
Zero Coupon, 10/15/11 (FGIC Insured) 2,240 1,233
5.50%, 10/15/09 (FGIC Insured) 1,860 2,045
5.50%, 10/15/10 (FGIC Insured) 2,615 2,878
5.50%, 10/15/16 (FGIC Insured) 1,775 1,940
7.00%, 10/15/07 (MBIA Insured) 500 602
7.00%, 10/15/08 (MBIA Insured) 5,190 6,301
7.50%, 10/15/09 (FGIC Insured) 2,635 3,353
Baltimore City
Board of Ed. Administration Headquarters, COP
7.25%, 4/1/16 (MBIA Insured) 3,200 3,418
Convention Center
5.50%, 9/1/14 (MBIA Insured) 4,000 4,325
6.00%, 9/1/17 (FGIC Insured) 5,180 5,734
17
<PAGE>
T. Rowe Price Maryland Tax-Free Bond Fund
- --------------------------------------------------------------------------
Par Value
- --------------------------------------------------------------------------
in thousands
Baltimore City
Parking Fac.
5.90%, 7/1/11 (FGIC Insured) $ 590 $ 671
5.90%, 7/1/12 (FGIC Insured) 1,195 1,359
6.00%, 7/1/14 FGIC Insured) 5,155 5,941
6.00%, 7/1/15 (FGIC Insured) 5,460 6,289
6.00%, 7/1/16 (FGIC Insured) 5,785 6,663
6.00%, 7/1/17 (FGIC Insured) 6,135 7,057
6.00%, 7/1/18 (FGIC Insured) 6,505 7,478
Rivoli Office Building Fac., COP
5.25%, 7/1/21 (FGIC Insured) 2,000 2,110
7.20%, 4/1/10 (MBIA Insured)
(Prerefunded 4/1/00+) 3,250 3,475
7.25%, 4/1/16 (MBIA Insured)
(Prerefunded 4/1/00+) 7,500 8,011
Tindeco Wharf Apartments
6.60%, 12/20/24 (GNMA Guaranteed) 1,000 1,071
Wastewater
5.00%, 7/1/28 (FGIC Insured) 2,000 1,988
5.60%, 7/1/13 (MBIA Insured) 19,300 21,247
5.65%, 7/1/20 (MBIA Insured) 2,000 2,219
Water
5.80%, 7/1/15 (FGIC Insured) 3,350 3,634
6.00%, 7/1/15 (FGIC Insured) 6,250 7,199
Baltimore City IDA, Capital Acquisition Program
VRDN (Currently 3.20%) 200 200
Baltimore City, Port Fac., E.I. DuPont - Conoco
6.50%, 10/1/11 10,400 11,434
Baltimore County, GO
Pension Funding
5.125%, 8/1/14 4,300 4,478
5.125%, 8/1/15 4,195 4,338
7.10%, 10/1/12 (Prerefunded 10/1/99+) 3,195 3,379
Baltimore County
North Brooke Apartments
6.35%, 1/20/21 (GNMA Guaranteed) 3,000 3,230
Pickersgill Retirement Community
7.70%, 1/1/21 (Prerefunded 1/1/02+) 3,550 4,027
Stella Maris, 7.50%, 3/1/21 (Prerefunded 3/1/01+) 2,760 3,053
18
<PAGE>
T. Rowe Price Maryland Tax-Free Bond Fund
- ----------------------------------------------------------------------
Par Value
- ----------------------------------------------------------------------
in thousands
Baltimore County Economic Dev.
Maryvale Preparatory School Fac., 6.50%, 5/1/11 $ 600 $ 608
Calvert County Economic Dev.
Asbury Solomons Islands Facility
5.00%, 1/1/27 (MBIA Insured) 2,500 2,481
Calvert County, PCR, Baltimore Gas and Electric
5.55%, 7/15/14 5,490 5,786
Carroll County, GO
Commissioners Hosp., 5.625%, 10/1/20 1,900 2,019
Consolidated Public Improvement
6.00%, 11/1/06 (Prerefunded 11/1/99+) 800 839
7.30%, 10/1/20 (Prerefunded 10/1/00+) 2,000 2,182
Carroll County
Copper Ridge, 7.75%, 1/1/18 3,000 3,261
Fairhaven, 7.75%, 1/1/11 1,000 1,070
Charles County
County Commissioners, New Forest Apartments
6.10%, 11/1/28 (FHA Guaranteed) 5,000 5,339
Holly Station, 6.45%, 5/1/26 (FHA Guaranteed) 1,780 1,917
Damascus Gardens Dev. Multi Family
7.375%, 11/1/21 (FHA Guaranteed) 3,824 3,837
Frederick City, GO, General Improvement
6.125%, 12/1/09 (FGIC Insured) 1,840 2,022
Frederick County
Buckinghams Choice, 5.90%, 1/1/17 1,655 1,686
Sheppard and Enoch Pratt Hosp.
VRDN (Currently 3.25%) 1,000 1,000
Gaithersburg Hosp. Fac.
Asbury Methodist Home
5.50%, 1/1/20 7,000 7,064
7.85%, 1/1/20 (Prerefunded 1/1/00+) 6,500 6,962
Shady Grove Adventist Hosp.
6.50%, 9/1/12 (FSA Insured) 5,000 6,001
Howard County, GO
Metropolitan Dist.
7.15%, 5/15/14 (Prerefunded 5/15/00+) 1,005 1,072
7.15%, 5/15/15 (Prerefunded 5/15/00+) 1,080 1,153
19
<PAGE>
T. Rowe Price Maryland Tax-Free Bond Fund
- -------------------------------------------------------------------------
Par Value
- -------------------------------------------------------------------------
in thousands
Howard County, GO
Metropolitan Dist.
7.15%, 5/15/16 (Prerefunded 5/15/00+) $ 1,160 $ 1,238
7.15%, 5/15/17 (Prerefunded 5/15/00+) 1,245 1,329
Howard County
COP, 8.15%, 2/15/20 470 660
Golf Course Fac.
6.00%, 2/15/21 3,110 3,369
6.90%, 7/1/07 (MBIA Insured)
(Prerefunded 7/1/01+) 1,000 1,102
7.00%, 7/1/09 (MBIA Insured)
(Prerefunded 7/1/01+) 550 608
Maryland, GO
7.00%, 10/15/03 (Prerefunded 10/15/00+) 2,000 2,155
7.10%, 10/15/04 (Prerefunded 10/15/00+) 3,000 3,252
RITES (Currently 6.321%), 8/1/12 10,000 10,646
Residual Certificates (Currently 6.735%) 7/15/13 7,500 8,326
State and Local Fac. Loan
5.25%, 6/15/09 1,250 1,338
5.70%, 3/15/10 5,000 5,468
Maryland CDA
Single Family
5.60%, 4/1/18 4,250 4,352
5.85%, 7/1/27 * 7,000 7,296
5.875%, 7/1/16 3,950 4,193
5.875%, 4/1/17 * 1,525 1,576
5.875%, 9/1/25 * 3,500 3,652
6.00%, 4/1/17 2,500 2,653
6.45%, 4/1/14 1,000 1,071
6.75%, 4/1/10 * 5,000 5,332
6.75%, 4/1/26 * 4,015 4,320
6.80%, 4/1/22 * 3,800 4,071
6.80%, 4/1/24 * 2,720 2,914
6.85%, 4/1/11 4,895 5,171
7.00%, 4/1/14 2,720 2,936
7.05%, 4/1/17 4,750 5,127
7.25%, 4/1/11 2,000 2,111
7.25%, 4/1/19 * 9,000 9,506
20
<PAGE>
T. Rowe Price Maryland Tax-Free Bond Fund
- --------------------------------------------------------------------------
Par Value
- --------------------------------------------------------------------------
in thousands
Maryland CDA
Single Family
7.25%, 4/1/27 $9,250 $9,761
7.375%, 4/1/10 495 517
7.40%, 4/1/17 5,395 5,566
7.60%, 4/1/17 2,200 2,290
7.625%, 4/1/29 * 1,725 1,775
7.875%, 4/1/07 300 314
8.00%, 4/1/18 1,200 1,256
Maryland DOT, 6.80%, 11/1/05 (Prerefunded 11/1/99+) 5,500 5,814
Maryland Energy Fin. Administration
Wheelabrator Technologies
6.30%, 12/1/10 * 6,145 6,787
6.45%, 12/1/16 * 2,600 2,894
Maryland HHEFA
Anne Arundel Medical Center
5.125%, 7/1/28 (FSA Insured) 4,000 4,012
5.25%, 7/1/12 (FGIC Insured) 1,510 1,591
5.25%, 7/1/13 (FSA Insured) 1,000 1,051
Bradford Oaks Nursing and Rehabilitation Center
6.375%, 1/1/19 1,500 1,567
6.375%, 1/1/27 2,000 2,090
Broadmead, 7.625%, 7/1/10 (Prerefunded 7/1/99+) 1,320 1,390
Calvert Memorial Hosp., 5.00%, 7/1/28 2,800 2,736
Doctor's Community Hosp.
5.50%, 7/1/24 3,000 3,020
8.75%, 7/1/22 (Prerefunded 7/1/00+) 6,800 7,538
Francis Scott Key Medical Center
5.00%, 7/1/18 (FGIC Insured) 4,880 4,874
5.00%, 7/1/23 (FGIC Insured) 3,000 2,974
7.00%, 7/1/10 (FGIC Insured)
(Prerefunded 7/1/00+) 2,000 2,156
Franklin Square Hosp., 7.50%, 7/1/19 (MBIA Insured)
(Prerefunded 7/1/99+) 4,750 4,999
Frederick Memorial Hosp.
5.00%, 7/1/23 (FGIC Insured) 5,500 5,453
5.00%, 7/1/28 (FGIC Insured) 3,750 3,716
21
<PAGE>
T. Rowe Price Maryland Tax-Free Bond Fund
- -----------------------------------------------------------------------
Par Value
- -----------------------------------------------------------------------
in thousands
Maryland HHEFA
Good Samaritan Hosp.
5.60%, 7/1/06 $ 1,545 $ 1,700
5.70%, 7/1/07 1,875 2,089
5.75%, 7/1/13 (Escrowed to Maturity) 2,480 2,752
5.75%, 7/1/13 (AMBAC Insured) 1,520 1,703
7.50%, 7/1/21 (Prerefunded 7/1/99+) 4,000 4,210
Helix Health
5.00%, 7/1/27 (AMBAC Insured) 8,400 8,336
5.125%, 7/1/10 (AMBAC Insured) 2,585 2,717
5.125%, 7/1/11 (AMBAC Insured) 1,440 1,505
Holy Cross Hosp.
7.125%, 7/1/10 (AMBAC Insured)
(Prerefunded 7/1/00+) 1,400 1,512
7.50%, 7/1/01 (AMBAC Insured)
(Prerefunded 7/1/00+) 1,655 1,798
Howard County General Hosp.
5.00%, 7/1/29 (MBIA Insured) 10,750 10,666
5.50%, 7/1/21 5,600 5,847
Johns Hopkins Hosp.
Zero Coupon, 7/1/19 9,460 3,409
7.00%, 7/1/23 (Prerefunded 7/1/00+) 1,305 1,407
Johns Hopkins Medical Institute Parking Fac.
5.375%, 7/1/20 (AMBAC Insured) 5,550 5,749
Johns Hopkins Univ.
5.125%, 7/1/20 7,750 7,760
5.25%, 7/1/15 5,000 5,224
5.25%, 7/1/16 5,000 5,201
5.25%, 7/1/17 1,500 1,548
Kaiser Permanente, VRDN (Currently 3.30%) 3,200 3,200
Kennedy Kreiger Institute
6.75%, 7/1/22 (Prerefunded 7/1/01+) 2,850 3,074
7.40%, 7/1/11 (Prerefunded 7/1/01+) 370 412
Loyola College, 5.375%, 10/1/26 (MBIA Insured) 6,820 7,070
Maryland General Hosp.
6.20%, 7/1/24 (MBIA Insured) 4,000 4,426
Mercy Medical Center
5.75%, 7/1/26 (FSA Insured) 3,760 4,031
6.50%, 7/1/13 (FSA Insured) 2,155 2,586
22
<PAGE>
T. ROWE PRICE MARYLAND TAX-FREE BOND FUND
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
- ----------------------------------------------------------------------------
In thousands
Maryland HHEFA
<S> <C> <C>
Mercy Medical Center
7.90%, 7/1/09 (Prerefunded 7/1/99+) $ 2,000 $ 2,112
.....................................................................
8.00%, 7/1/20 (Prerefunded 7/1/99+) 6,500 6,867
.....................................................................
Peninsula Regional Medical Center
5.00%, 7/1/23 (MBIA Insured) 10,000 9,915
.....................................................................
Pooled Loan Program, VRDN (Currently 3.25%) 3,700 3,700
.......................................................................
Sinai Hosp.
7.30%, 7/1/05 (AMBAC Insured)
(Prerefunded 7/1/00+) 2,000 2,166
Union Hosp. of Cecil County, 6.625%, 7/1/12 1,545 1,712
.......................................................................
Union Memorial Hosp.
6.60%, 7/1/06 (MBIA Insured)
(Prerefunded 7/1/01+) 500 547
.....................................................................
6.75%, 7/1/11 (MBIA Insured)
(Prerefunded 7/1/01+) 3,000 3,290
.....................................................................
6.75%, 7/1/21 (MBIA Insured)
(Prerefunded 7/1/01+) 7,895 8,652
.....................................................................
Univ. of Maryland Medical System
5.00%, 7/1/20 (FGIC Insured) 5,875 5,828
.....................................................................
7.00%, 7/1/11 (MBIA Insured)
(Prerefunded 7/1/01+) 4,550 5,028
.....................................................................
7.00%, 7/1/17 (FGIC Insured)
(Prerefunded 7/1/01+) 7,770 8,587
.....................................................................
7.00%, 7/1/22 (FGIC Insured) 2,020 2,602
.....................................................................
Upper Chesapeake Hosp.
5.125%, 1/1/33 (FSA Insured) 8,675 8,699
.....................................................................
5.125%, 1/1/38 (FSA Insured) 6,160 6,154
.....................................................................
5.50%, 1/1/20 (FSA Insured) 2,000 2,090
.........................................................................
Maryland Ind. Dev. Fin. Auth.
American Center for Physics Headquarters Fac.
6.25%, 1/1/07 5,770 6,196
.....................................................................
6.375%, 1/1/12 5,900 6,337
.....................................................................
6.625%, 1/1/17 4,250 4,615
.....................................................................
Associated Catholic Charities, 9.00%, 1/1/10 790 841
.......................................................................
Bon Secours Health, 5.929%, 8/26/22 (FSA Insured) 15,000 17,284
.......................................................................
Holy Cross Health, 5.60%, 12/1/09 2,780 3,056
.........................................................................
</TABLE>
23
<PAGE>
T. ROWE PRICE MARYLAND TAX-FREE BOND FUND
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
- -------------------------------------------------------------------------------
In thousands
Maryland Local Gov't. Income Trust
<S> <C> <C>
Capitalization Program, GO, COP
6.80%, 8/1/01 $ 1,615 $ 1,725
........................................................................
7.125%, 8/1/09 3,000 3,233
...............................................................................
Maryland Stadium Auth. 2,025 2,231
Baltimore Convention Center Expansion
5.875%, 12/15/11 (AMBAC Insured)
........................................................................
Sports Fac.
5.60%, 3/1/14 (AMBAC Insured) 1,000 1,070
........................................................................
5.75%, 3/1/22 (AMBAC Insured) 6,705 7,150
........................................................................
5.80%, 3/1/26 (AMBAC Insured) 3,800 4,068
...............................................................................
Maryland Transportation Auth.
Zero Coupon, 7/1/07 (FGIC Insured) 8,500 5,862
......................................................................
Zero Coupon, 7/1/08 (FGIC Insured) 2,000 1,314
......................................................................
Zero Coupon, 7/1/09 (FGIC Insured) 10,410 6,483
......................................................................
6.80%, 7/1/16 (Escrowed to Maturity) 12,025 14,461
......................................................................
Baltimore-Washington Int'l. Airport
6.25%, 7/1/14 (FGIC Insured) * 3,105 3,407
......................................................................
6.40%, 7/1/19 (FGIC Insured) * 4,555 4,849
............................................................................
Maryland Water Quality Fin. Administration
Revolving Loan Fund
Zero Coupon, 9/1/02 1,185 1,014
......................................................................
Zero Coupon, 9/1/07 1,125 767
......................................................................
6.00%, 9/1/15 1,600 1,725
......................................................................
6.70%, 9/1/13 (Prerefunded 9/1/01+) 1,280 1,410
......................................................................
7.10%, 9/1/13 (Prerefunded 9/1/01+) 985 1,096
......................................................................
7.25%, 9/1/11 (Prerefunded 9/1/00+) 1,700 1,849
......................................................................
7.25%, 9/1/12 (Prerefunded 9/1/00+) 2,000 2,175
..........................................................................
Maryland-National Capital Park and Planning Commission, GO
Prince George's County
5.375%, 1/15/16 1,300 1,366
......................................................................
5.375%, 1/15/17 1,200 1,250
......................................................................
6.90%, 7/1/05 (Prerefunded 7/1/00+) 1,400 1,507
......................................................................
6.90%, 7/1/06 (Prerefunded 7/1/00+) 1,350 1,453
......................................................................
6.90%, 7/1/07 (Prerefunded 7/1/00+) 1,400 1,506
......................................................................
6.90%, 7/1/08 (Prerefunded 7/1/00+) 1,400 1,506
......................................................................
6.90%, 7/1/09 (Prerefunded 7/1/00+) 1,400 1,506
......................................................................
</TABLE>
24
<PAGE>
T. ROWE PRICE MARYLAND TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
PAR VALUE
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
Maryland-National Capital Park and Planning Commission
<S> <C> <C>
Little Bennett Golf Fac.
8.25%, 10/1/11 (Prerefunded 10/1/02+) $ 2,160 $ 2,545
.........................................................................
Consolidated Public Improvement
5.375%, 5/1/09 2,850 3,116
.........................................................................
5.375%, 5/1/16 5,750 6,077
.........................................................................
5.375%, 5/1/17 5,750 6,038
.........................................................................
6.125%, 10/1/13 2,500 2,827
.........................................................................
6.125%, 10/1/14 3,150 3,561
.........................................................................
6.80%, 11/1/09 (Prerefunded 11/1/99+) 1,145 1,210
.........................................................................
7.10%, 10/1/09 (Prerefunded 10/1/00+) 1,000 1,087
.........................................................................
7.10%, 10/1/10 (Prerefunded 10/1/00+) 1,840 2,001
.............................................................................
Montgomery County, Golf Course, 6.125%, 10/1/22 2,260 2,429
.............................................................................
Montgomery County Housing Opportunities Commission
Multi-Family
6.25%, 7/1/25 5,500 5,852
.........................................................................
7.50%, 7/1/24 3,000 3,227
.........................................................................
Single Family
Zero Coupon, 7/1/28 13,500 2,648
.........................................................................
5.40%, 7/1/16 450 459
.........................................................................
5.75%, 7/1/13 2,000 2,124
.........................................................................
5.80%, 7/1/17 1,000 1,062
.........................................................................
5.90%, 7/1/17 2,000 2,122
.........................................................................
6.00%, 7/1/17 4,110 4,386
.........................................................................
6.50%, 7/1/11 2,830 3,031
.........................................................................
6.65%, 7/1/16 2,235 2,405
.........................................................................
6.80%, 7/1/17 2,750 2,896
.........................................................................
6.90%, 7/1/19 2,000 2,077
.........................................................................
7.50%, 7/1/17 1,775 1,862
.........................................................................
7.625%, 7/1/17 2,105 2,153
.............................................................................
Montgomery County, PCR, Potomac Electric, 5.375%, 2/15/24 4,560 4,668
.............................................................................
Morgan State Univ., Academic Fees and Auxiliary Fac.
6.05%, 7/1/15 (MBIA Insured) 1,050 1,213
.............................................................................
Northeast Maryland Waste Disposal Auth.
Montgomery County Resources
6.00%, 7/1/08 * 10,000 11,105
.........................................................................
6.20%, 7/1/10 * 7,750 8,339
.........................................................................
6.30%, 7/1/16 (MBIA Insured) * 13,985 15,268
.............................................................................
</TABLE>
25
<PAGE>
T. ROWE PRICE MARYLAND TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
In thousands
Prince George's County
<S> <C> <C>
Dimensions Health
5.375%, 7/1/14 $2,685 $2,734
.........................................................................
7.00%, 7/1/01 1,900 2,053
.........................................................................
7.00%, 7/1/22 (Prerefunded 7/1/02+) 2,660 3,002
.........................................................................
7.20%, 7/1/06 (Prerefunded 7/1/02+) 2,405 2,727
.........................................................................
Solid Waste Management
6.90%, 6/30/05 (Prerefunded 6/30/00+) 1,500 1,615
.........................................................................
6.90%, 6/30/06 (Prerefunded 6/30/00+) 1,000 1,076
.........................................................................
7.00%, 6/30/07 (Prerefunded 6/30/00+) 1,120 1,207
.........................................................................
7.00%, 6/30/09 (Prerefunded 6/30/00+) 1,255 1,353
.............................................................................
Prince George's County Housing Auth.
New Keystone, 6.80%, 7/1/25 (MBIA Insured) 2,600 2,776
...........................................................................
Riverview Terrace Apartments
6.70%, 6/20/20 (GNMA Guaranteed) 1,500 1,628
.........................................................................
Single Family
5.75%, 8/1/30 (GNMA Guaranteed) * 2,000 2,072
.........................................................................
Stevenson Apartments
6.35%, 7/20/20 (GNMA Guaranteed) 2,200 2,327
.............................................................................
Prince George's County, PCR
Potomac Electric
5.75%, 3/15/10 4,000 4,473
.........................................................................
6.375%, 1/15/23 5,000 5,419
.............................................................................
Prince George's County IDA
Gabriel DuVall Law Building, 8.00%, 9/1/07 1,185 1,222
...........................................................................
Upper Marlboro Justice Center
5.25%, 6/30/19 (MBIA Insured) 1,500 1,521
.........................................................................
Univ. of Maryland
Auxiliary Fac. and Tuition
5.60%, 4/1/11 3,155 3,409
.........................................................................
5.75%, 4/1/17 4,500 4,842
.........................................................................
6.375%, 4/1/09 2,100 2,330
.........................................................................
6.50%, 4/1/12 440 491
.........................................................................
7.00%, 10/1/05 (Prerefunded 10/1/99+) 2,000 2,114
.........................................................................
7.20%, 10/1/09 (Prerefunded 10/1/99+) 1,400 1,482
.............................................................................
</TABLE>
26
<PAGE>
T. Rowe Price Maryland Tax-Free Bond Fund
- -----------------------------------------
Par Value
- -------------------------------------------------------------------------------
In thousands
Washington County 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 2,470
...........................................................................
Washington Suburban Sanitary Dist., GO
6.625%, 6/1/18 (Prerefunded 6/1/04+) 3,665 4,153
....................................................................
6.875%, 2/1/10 (Prerefunded 2/1/00+) 3,500 3,722
....................................................................
6.90%, 6/1/08 (Prerefunded 6/1/00+) 1,500 1,611
....................................................................
6.90%, 6/1/09 (Prerefunded 6/1/00+) 2,300 2,470
....................................................................
7.00%, 2/1/15 (Prerefunded 2/1/00+) 2,000 2,131
....................................................................
Sewer Disposal
5.00%, 6/1/10 2,085 2,201
....................................................................
5.00%, 6/1/11 2,060 2,167
....................................................................
Water Supply
VRDN (Currently 3.25%) 1,000 1,000
....................................................................
5.00%, 6/1/10 2,580 2,723
....................................................................
5.00%, 6/1/11 2,545 2,677
...........................................................................
Worcester County Sanitary Dist.
6.50%, 8/15/12 (Prerefunded 8/15/02+) 2,000 2,220
...........................................................................
Total Maryland (Cost $833,923) 907,396
........
PUERTO RICO 6.6%
Puerto Rico Commonwealth, GO
6.25%, 7/1/11 (MBIA Insured) 2,000 2,351
....................................................................
6.25%, 7/1/12 (MBIA Insured) 1,750 2,057
....................................................................
Public Improvement, 5.00%, 7/1/27 3,000 2,955
...........................................................................
Puerto Rico Electric Power Auth.
4.75%, 7/1/24 17,500 16,746
....................................................................
7.00%, 7/1/11 (Prerefunded 7/1/01+) 1,200 1,328
...........................................................................
Puerto Rico Highway and Transportation Auth.
5.50%, 7/1/15 (FSA Insured) 5,000 5,474
....................................................................
5.50%, 7/1/36 3,500 3,743
...........................................................................
Puerto Rico Infrastructure Fin. Auth., GO
5.125%, 7/1/09 (AMBAC Insured) 10,000 10,690
...........................................................................
Puerto Rico Municipal Fin. Agency, GO
5.50%, 7/1/17 (FSA Insured) 3,100 3,289
....................................................................
5.50%, 7/1/21 (FSA Insured) 2,375 2,512
....................................................................
27
<PAGE>
T. Rowe Price Maryland Tax-Free Bond Fund
- -----------------------------------------
<TABLE>
<CAPTION>
Par Value
- -------------------------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Puerto Rico Municipal Fin. Agency, GO
6.00%, 7/1/12 (FSA Insured) $ 5,000 $ 5,749
.................................................................................................
6.00%, 7/1/14 (FSA Insured) $ 3,030 3,335
........................................................................................................
Puerto Rico Public Finance, Commonwealth Appropriation
5.375%, 6/1/17 (AMBAC Insured) 5,000 5,365
........................................................................................................
Total Puerto Rico (Cost $ 61,298) 65,594
.........
U. S. VIRGIN ISLANDS 0.5%
Virgin Islands Water and Power Auth., Electric System
5.125%, 7/1/12 5,000 5,051
........................................................................................................
Total U. S. Virgin Islands (Cost $ 4,963) 5,051
.........
Total Investments in Securities
98.8% of Net Assets (Cost $900,184) $ 978,041
Other Assets Less Liabilities 12,001
---------
NET ASSETS $ 990,042
---------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 7
Accumulated net realized gain/loss - net of distributions (399)
Net unrealized gain (loss) 77,857
Paid-in-capital applicable to 92,107,966 no par value shares of beneficial
interest outstanding; unlimited number of shares authorized 912,577
---------
NET ASSETS $ 990,042
---------
NET ASSET VALUE PER SHARE $ 10.75
---------
</TABLE>
* 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
RITES Residual Interest Tax-Exempt Securities Receipts
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
- -------------------------------------
Unaudited
Statement of Operations
- -------------------------------------------------------------------------------
In thousands Short-Term
Bond Fund Bond Fund
6 Months 6 Months
Ended Ended
8/31/98 8/31/98
INVESTMENT INCOME
Interest income $ 2,437 $ 26,951
---------------------------
Expenses
Investment management 229 2,013
Custody and accounting 51 91
Shareholder servicing 48 305
Legal and audit 6 7
Prospectus and shareholder reports 4 30
Registration 3 16
Trustees 3 5
Miscellaneous 2 13
---------------------------
Total expenses 346 2,480
---------------------------
Net investment income 2,091 24,471
---------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Securities 181 (33)
Futures -- 252
---------------------------
Net realized gain (loss) 181 219
Change in net unrealized gain or loss on
securities 183 7,040
---------------------------
Net realized and unrealized gain (loss) 364 7,259
---------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 2,455 $ 31,730
---------------------------
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
- -------------------------------------
Unaudited
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
In thousands Short-Term
Bond Fund Bond Fund
6 Months Year 6 Months Year
Ended Ended Ended Ended
8/31/98 2/28/98 8/31/98 2/28/98
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 2,091 $ 4,110 $ 24,471 $ 45,782
Net realized gain (loss) 181 169 219 2,989
Change in net unrealized
gain or loss 183 273 7,040 23,953
------------------------------------------
Increase (decrease) in
net assets from operations 2,455 4,552 31,730 72,724
------------------------------------------
Distributions to shareholders
Net investment income (2,091) (4,110) (24,471) (45,782)
------------------------------------------
Capital share transactions *
Shares sold 22,499 43,923 108,623 168,610
Distributions reinvested 1,724 3,502 17,718 33,254
Shares redeemed (22,741) (40,695) (69,974) (122,371)
------------------------------------------
Increase (decrease) in
net assets from capital
share transactions 1,482 6,730 56,367 79,493
------------------------------------------
Net Assets
Increase (decrease)
during period 1,846 7,172 63,626 106,435
Beginning of period 109,424 102,252 926,416 819,981
------------------------------------------
End of period $111,270 $109,424 $990,042 $ 926,416
------------------------------------------
* Share information
Shares sold 4,391 8,599 10,220 16,096
Distributions reinvested 337 686 1,666 3,171
Shares redeemed (4,441) (7,970) (6,586) (11,712)
------------------------------------------
Increase (decrease)
in shares outstanding 287 1,315 5,300 7,555
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
T. ROWE PRICE MARYLAND TAX-FREE FUNDS
- --------------------------------------------------------------------------------
Unaudited August 31, 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.
31
<PAGE>
T. ROWE PRICE MARYLAND TAX-FREE FUNDS
- --------------------------------------------------------------------------------
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, for the six months ended August 31, 1998, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
<S> <C> <C>
Purchases $28,682,000 $133,793,000
Sales 30,757,000 94,467,000
</TABLE>
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. The Short-Term Bond Fund intends to
retain gains realized in future periods that may be offset by available
capital loss carryforwards.
At August 31, 1998, the aggregate costs of investments for the Short-Term
Bond and Bond Funds for federal income tax and financial reporting purposes
were $108,002,000 and $900,184,000, respectively. Net unrealized gain (loss)
on investments was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Short-Term
Bond Fund Bond Fund
<S> <C> <C>
Appreciated investments $ 1,731,000 $77,857,000
Depreciated Investments -- --
-----------------------------------
Net unrealized gain (loss) $ 1,731,000 $77,857,000
-----------------------------------
</TABLE>
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 $39,000 and $350,000 were payable at August 31, 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
32
<PAGE>
T. ROWE PRICE MARYLAND TAX-FREE FUNDS
- --------------------------------------------------------------------------------
International, Inc. (the group). The group fee rate ranges from 0.48% for
the first $1 billion of assets to 0.30% for assets in excess of $80 billion.
At August 31, 1998, and for the six months then ended, the effective annual
group fee rate was 0.32%. Each fund pays a pro-rata share of the group fee
based on the ratio of its net assets to those of the group.
Under the terms of the investment management agreement, the manager is
required to bear any expenses through February 28, 1999, which would cause
the Short-Term Bond Fund's ratio of expenses to average net assets to exceed
0.65% through June 30, 1998, and 0.60% thereafter through February 28, 1999.
The fund is then 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 0.60%. Pursuant to this agreement,
$1,000 of management fees were not accrued by the Short-Term Bond Fund for
the six months ended August 31, 1998 and remain subject to reimbursement
through February 28, 2001. Additionally, $13,000 of unaccrued management
fees related to a previous agreement are 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 $72,000 and $277,000, respectively, for the six months
ended August 31, 1998, of which $13,000 and $53,000, respectively, were
payable at period-end.
33
<PAGE>
FOR YIELD, PRICE, LAST TRANSACTION,
CURRENT BALANCE, OR TO CONDUCT
TRANSACTIONS, 24 HOURS, 7 DAYS
A WEEK, CALL TELE*ACCESS(R):
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
T. Rowe Price 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
[LOGO APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor. C12-051 8/31/98
