- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
Maryland Tax-Free Funds
- --------------------------------------------------------------------------------
February 28, 1999
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
* After trending lower through most of the period, interest rates rose in
February as economic growth surged.
* Both the Maryland Short-Term Tax-Free Bond and the Maryland Tax-Free Bond
Funds provided solid 6- and 12-month returns that exceeded their peer group
averages.
* Below-average expenses and com-paratively strong income streams enhanced
the funds' results.
* Consistent with our quality standards and duration strategy, we continued
to seek bonds with attractive yields.
* We believe Maryland municipal bonds offer good value for state residents at
every income tax level.
================================================================================
FELLOW SHAREHOLDERS
- --------------------------------------------------------------------------------
The environment for municipal bonds was generally positive during your
fund's fiscal year ended February 28, 1999, as most interest rates were
unchanged to somewhat lower on balance. Against this background, the Maryland
Tax-Free Funds provided solid returns that exceeded their peer group averages
for both the 6- and 12-month periods, a reflection of management decisions and
below-average expenses.
================================================================================
MARKET ENVIRONMENT
- --------------------------------------------------------------------------------
Municipal bonds moved through the past year relatively unscathed by the
turmoil that hit other fixed income markets. The municipal market was far less
volatile than the Treasury market, which benefited from a massive flight to
quality that drove 30-year yields to a record low of 4.72% in October from 5.92%
in February of 1998. Municipal yields also fell, but the decline was more muted
as long-term rates dropped from 5.08% to 4.64% over that same time period. As a
result, municipal yields approached parity with Treasury yields among longer
maturities, an unusual event in a year when significant tax reform was not under
discussion.
<PAGE>
[Chart Showing Maryland Bond Yields from 2/98 through 2/99; Source: T.Rowe
Price Associates]
Major economic developments here and overseas during the funds' fiscal year
affected the fixed income markets. In the first half, many economists expected
global turmoil to slow the U.S. economy, and declining interest rates reflected
these expectations. Russia's debt default in August created havoc in several
markets, causing a global liquidity crisis that contributed to the flight to
U.S. Treasuries. In response, the Federal Reserve cut the federal funds target
rate three times last fall to cushion the domestic economy from weakness abroad
and restore investor confidence. In December, however, interest rates reversed
direction following signs of stronger-than-expected U.S. growth and a growing
sense that the global liquidity crisis had abated. News in early 1999 that GDP
had soared at a 6.1% rate in the fourth quarter further fueled the rise in
rates. As a result, 30-year Treasury yields were nearly 100 basis points (one
percentage point) higher at the end of February than in October. Municipal
yields rose only 38 basis points, once again showing less volatility.
On balance, municipal yields did not change significantly during the past
12 months except for one-year rates. Maryland municipal bond yields, shown in
the chart on page 1, performed in line with their national counterparts, as
longer rates rose in February to negate declines earlier in the period, while
shorter-term yields were lower than six months ago. A steeper yield curve
resulted, as money market and short-term rates fell in reaction to strong demand
and the Fed's easing, while long-term yields rose in the face of heavy supply.
During the past six months, intermediate-term bonds turned in the best
performance.
==================================================
RISK-ADJUSTED PERFORMANCE
- --------------------------------------------------
The Maryland Tax-Free Funds are highly rated
by Morningstar. Each carried an overall
Morningstar Ratingtrademark of four out of five
stars for its risk-adjusted performance as of
February 28, 1999. The ratings reflect the funds'
returns as well as the degree of volatility
experienced in earning those results. The top 10%
of the funds in each rating category receive five
stars, the next 22.5% receive four stars, and the
next 35% receive three stars. For periods ended
February 28, 1999, both funds were rated among
1,576 and 1,109 municipal fixed income funds for
three and five years, respectively, and the
Maryland Tax-Free Bond Fund was also rated among
369 funds for the 10-year period. Of course, past
trends may not continue.
<PAGE>
Morningstar proprietary ratings reflect
historical risk-adjusted performance as of 2/28/99
and may change monthly. Ratings are calculated
from the funds' 3-, 5-, and 10-year average annual
returns in excess of 90-day Treasury bill returns
with appropriate fee adjustments and a risk factor
that reflects fund performance below 90-day
Treasury bill returns. Maryland Short-Term
Tax-Free Bond Fund had 4 stars for the 3- and
5-year periods. Maryland Tax-Free Bond Fund had 4
stars for the 3- and 5-year periods and 3 stars
for the 10-year period.
==================================================
Maryland's economic growth rate has fully recovered from the recession of
the early 1990s. Official data suggest the state matched the national employment
growth rate of about 2% in 1998. Maryland per capita income was recently
measured at 112% of the national average, another sign of economic strength. As
a result, state and local government finances are in solid shape, with tax
revenues running ahead of forecasts. A history of conservative fiscal management
reassures us that Maryland's budget will remain balanced even as planned income
tax cuts are phased in.
[Shown here bar chart with data on new issue volume from 1993 through 1998.
Data and sample for the chart are attached; Source: Securities Data Co.]
New debt issuance in Maryland rose sharply in 1998 to $3.8 billion, up 33%
from 1997 and the highest level since 1993. The increase reflected the state's
strong economy and also refinancings by issuers taking advantage of lower
interest rates. Steady issuance of general obligation debt from the state and
local governments as well as a series of large financings for hospitals,
including the Helix Health System, the Upper Chesapeake Hospitals group, and the
Johns Hopkins Medical System, gave us welcome opportunities to purchase new
issues.
================================================================================
MARYLAND SHORT-TERM TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
Performance Comparison
----------------------
Periods Ended 2/28/99 6 Months 12 Months
--------------------- -------- ---------
Maryland Short-Term
Tax-Free Bond Fund 2.28% 4.46%
Lipper Short Municipal
Debt Funds Average 1.95 4.24
================================================================================
<PAGE>
Your fund posted solid returns for both the six and 12 months ended
February 28, 1999, and outperformed its Lipper peer group. The majority of these
results were derived from income, as the fund's dividends per share were
virtually unchanged and its expense ratio of 0.62% was below the average for the
31 funds in its peer group. The fund continued to meet its broader objective of
providing higher income than a money market fund while maintaining moderate
price fluctuation. In the past six months and year, national tax-exempt money
funds returned 1.31% and 2.81%, respectively, as measured by Lipper, Inc.
===============================
OUR STRATEGY WAS REWARDED
IN AUTUMN WHEN THE FED EASED,
PUSHING SHORT-TERM INTEREST
RATES LOWER . . .
===============================
Our strategy over the past six months was to maintain a duration slightly
longer than neutral. (Duration is a measure of price sensitivity to changes in
interest rates. A fund having a duration of two years will have a 2% rise or
fall in price in response to a one-percentage-point fall or rise in interest
rates.) The absence of any inflationary pressures throughout the period as well
as heightened global demand for Treasury bonds suggested to us that interest
rates were likely to decline. In addition, supply and demand imbalances in the
intermediate- and longer-term municipal market made these bonds an exceptional
value. Our strategy was rewarded in autumn when the Fed eased, pushing
short-term interest rates lower and bond prices higher.
We maintained a long-duration approach through 1998. Economic growth in the
fourth quarter exceeded expectations, and Treasury bond yields began to rise.
The yield curve changed sharply as short-term taxable bond yields moved from
below the federal funds target rate to above it. These events suggested a
souring of market expectations as the effects of global crises receded and
investors worried about the inflationary implications of the Fed's accommodative
policy and high growth rates. Nevertheless, we did not immediately become
defensive. Municipal yields did not fall as much as Treasuries and thus offered
unusually attractive yields on a taxable-equivalent basis. Furthermore, we
anticipated that increasing year-end demand for municipals, combined with waning
supply over the Christmas holiday, would help keep municipal prices steady. Our
strategy proved fruitful.
Only near the end of the period, after municipal yields had declined in
January, did we alter our approach. Beginning in February, as short-term
municipals resumed a more typical relationship to Treasury yields, we began to
shorten duration slightly. However, we view this as a temporary tactic and will
likely use any significant rise in yields to extend duration, since we expect
inflation to remain low.
<PAGE>
As interest rates have declined over the past several years, we have made
considerable headway in maintaining the fund's income by seeking bonds of
various sectors and credit qualities that offer higher yields. In our August
report, we noted that the fund's combined exposure to two high-quality,
modest-yielding sectors -- general obligations and prerefunded issues -- had
declined from 68% to 61%. Over the last six months, we reduced this total
further to 50% and shifted assets toward higher-yielding hospital, solid waste,
and education revenue bonds of various qualities. As a result, the fund's
average credit quality declined slightly from AA+ to AA. Since income tends to
be the greatest contributor to this fund's returns over longer time periods, we
make every effort to purchase higher-yielding issues that are viewed favorably
by our credit research staff.
================================================================================
MARYLAND TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
Performance Comparison
----------------------
Periods Ended 2/28/99 6 Months 12 Months
--------------------- -------- ---------
Maryland Tax-Free
Bond Fund 2.35% 5.80%
Lipper Maryland Municipal
Debt Funds Average 1.91 5.04
================================================================================
The fund's results were well above its Lipper peer group average for the
past 6- and 12-month periods. The majority of total return was generated by
income. Net asset value was marginally lower than six months ago and was only
modestly higher from one year ago, while dividends per share remained fairly
steady.
Low expenses were an important part of this success. As of December 31,
1999, the fund's expense ratio of 0.51% was in the lowest 10% of the 35 funds in
its category and was less than half the category average of 1.09%, according to
Lipper, Inc. This made it possible to distribute higher levels of income. We
have also sought to preserve our dividend yield by opting to hold many bonds
purchased years ago in higher interest rate environments. When these bonds
mature, we will reinvest the proceeds (as well as new cash) in longer-term
securities to take advantage of the better yields available on longer bonds.
We extended duration in the second quarter of 1998 to seven years and
maintained this posture through the end of the period, taking advantage of
strong supply trends in the final months of 1998. (See Maryland Short-Term
Tax-Free Bond Fund for an explanation of duration.) The fund's sector
positioning shifted modestly as the period progressed. Our holdings of
high-quality prerefunded bonds declined slightly from 18% to 16% of the
portfolio as some of these bonds either matured or were sold to buy new
longer-term issues. Our exposure to hospital revenue bonds rose from 15% to 17%.
We also increased our holdings of educational revenue bonds, principally issues
of The Johns Hopkins University and the University of Maryland.
<PAGE>
===============================
AT YEAR-END, WE BECAME
A BIT MORE CAUTIOUS . . .
AND BUILT UP OUR CASH
RESERVES MODESTLY.
===============================
At year-end, we became a bit more cautious about the municipal environment
and, therefore, built up our short-term reserves modestly. This approach
reflected our concerns about greater-than-expected economic strength and the
Fed's less-accommodative stance. We were also mindful that the first quarter is
often not a strong one for municipal bonds. Should municipals come under
pressure, we expect to use these cash reserves to take advantage of higher
yields.
Credit quality remained high for the fund overall. T. Rowe Price's own
credit analysts rate the portfolio at a relatively high AA- average quality,
while the national rating agencies rate it even higher, at AA. There are only
limited opportunities in Maryland to buy lower-quality, high-yield bonds, but
when such investments are available, our analysts carefully review them for
suitability for the fund.
================================================================================
OUTLOOK
- --------------------------------------------------------------------------------
Recent increases in municipal yields have caused us to take a more neutral
stance in our portfolios over the short term. However, we expect problems
overseas to result in slower economic growth later in 1999. Consumer spending in
the U.S. is likely to slow as a result of an upward drift in unemployment, a low
or nonexistent savings rate, and moderating stock market gains. These factors
should keep inflation in check and pave the way for stable to lower interest
rates as the year progresses, which should be positive for bonds. Moreover,
municipal bonds are appealing relative to other fixed income securities. Going
forward, we think Maryland municipal bonds offer good value for state residents
at every income tax level.
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 19, 1999
<PAGE>
================================================================================
T. Rowe Price Maryland Tax-Free Funds
- --------------------------------------------------------------------------------
Portfolio Highlights
KEY STATISTICS
8/31/98 2/28/99
------- -------
Maryland Short-Term Tax-Free Bond Fund
- --------------------------------------
Price Per Share $ 5.15 $ 5.17
Dividends Per Share
For 6 months 0.10 0.10
For 12 months 0.20 0.19
Dividend Yield *
For 6 months 3.86% 3.80%
For 12 months 3.94 3.85
30-Day Standardized Yield 3.40 2.93
Weighted Average Maturity (years) 2.8 2.6
Weighted Average Effective Duration (years) 2.5 2.3
Weighted Average Quality ** AA+ AA
Maryland Tax-Free Bond Fund
- ---------------------------
Price Per Share $ 10.75 $ 10.73
Dividends Per Share
For 6 months 0.27 0.27
For 12 months 0.55 0.54
Dividend Yield *
For 6 months 5.18% 5.15%
For 12 months 5.33 5.21
30-Day Standardized Yield 4.31 4.03
Weighted Average Maturity (years) 15.9 15.8
Weighted Average Effective Duration (years) 6.9 6.9
Weighted Average Quality ** AA AA
- --------------------------------------------------------------------------------
* Dividends earned and reinvested for the periods indicated are annualized
and divided by the fund's net asset value at the end of the period.
** 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
8/31/98 2/28/99
------- -------
MARYLAND SHORT-TERM TAX-FREE BOND FUND
- --------------------------------------
Prerefunded Bonds 39% 32%
Hospital Revenue 7 11
General Obligation - State 8 10
Solid Waste Revenue 6 10
Educational Revenue 7 10
General Obligation - Local 14 8
Life Care/Nursing Home Revenue 5 6
Ground Transportation Revenue 5 4
Lease Revenue 4 3
Housing Finance Revenue 1 2
Nuclear Revenue - 2
All Other 3 3
Other Assets Less Liabilities 1 -1
Total 100% 100%
MARYLAND TAX-FREE BOND FUND
- ---------------------------
Hospital Revenue 15% 17%
Prerefunded Bonds 18 16
Housing Finance Revenue 15 14
General Obligation - Local 9 9
Educational Revenue 4 6
Ground Transportation Revenue 5 5
Escrowed to Maturity 3 5
General Obligation - State 5 4
Solid Waste Revenue 4 4
Lease Revenue 3 4
Water and Sewer Revenue 4 3
Electric Revenue 4 3
Miscellaneous Revenue 3 3
Dedicated Tax Revenue 2 3
Life Care/Nursing Home Revenue 2 2
All Other 3 3
Other Assets Less Liabilities 1 -1
Total 100% 100%
================================================================================
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.
<PAGE>
================================================================================
AVERAGE ANNUAL COMPOUND TOTAL RETURN
- --------------------------------------------------------------------------------
This table shows how each fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
Since Inception
Periods Ended 2/28/99 1 Year 5 Years 10 Years Inception Date
- --------------------- ------ ------- -------- --------- ---------
Maryland Short-Term
Tax-Free Bond Fund 4.46% 4.27% -- 4.37% 1/29/93
Maryland Tax-Free Bond Fund 5.80 6.17 7.63% -- 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.
================================================================================
T. ROWE PRICE MARYLAND SHORT-TERM TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
Financial Highlights
Year
Ended
2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
------- ------- ------- ------- -------
NET ASSET VALUE
Beginning of period $ 5.14 $ 5.11 $ 5.15 $ 5.04 $ 5.09
- ------------------------------------------------------------------------------
Investment activities
Net investment income 0.19* 0.20* 0.20* 0.21* 0.18*
Net realized and
unrealized gain (loss) 0.03 0.03 (0.04) 0.11 (0.05)
- ------------------------------------------------------------------------------
Total from
investment activities 0.22 0.23 0.16 0.32 0.13
- ------------------------------------------------------------------------------
Distributions
Net investment income (0.19) (0.20) (0.20) (0.21) (0.18)
- ------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 5.17 $ 5.14 $ 5.11 $ 5.15 $ 5.04
<PAGE>
Ratios/Supplemental=Data======================================================
Total return** 4.46%* 4.56%* 3.26%* 6.49%* 2.64%*
- ------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 0.62%* 0.65%* 0.65%* 0.65%* 0.65%*
- ------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 3.80%* 3.89%* 3.98%* 4.14%* 3.59%*
- ------------------------------------------------------------------------------
Portfolio turnover rate 46.4% 60.4% 21.4% 39.3% 105.3%
- ------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $122,552 $109,424 $102,252 $ 85,784 $ 74,808
- ------------------------------------------------------------------------------
** 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.
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. ROWE PRICE MARYLAND TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
Financial Highlights
Year
Ended
2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
------- ------- ------- ------- -------
NET ASSET VALUE
Beginning of period $ 10.67 $ 10.35 $ 10.40 $ 9.99 $ 10.45
- -------------------------------------------------------------------------------
Investment activities
Net investment income 0.54 0.55 0.56 0.57 0.56
Net realized and
unrealized gain (loss) 0.06 0.32 (0.05) 0.41 (0.44)
- -------------------------------------------------------------------------------
Total from
investment activities 0.60 0.87 0.51 0.98 0.12
- -------------------------------------------------------------------------------
Distributions
Net investment income (0.54) (0.55) (0.56) (0.57) (0.56)
Net realized gain - - - - (0.02)
- -------------------------------------------------------------------------------
Total distributions (0.54) (0.55) (0.56) (0.57) (0.58)
- -------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 10.73 $ 10.67 $ 10.35 $ 10.40 $ 9.99
===============================================================================
Ratios/Supplemental=Data=======================================================
Total return** 5.80% 8.68% 5.12% 10.00% 1.43%
- -------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 0.51% 0.51% 0.54% 0.54% 0.57%
- -------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 5.10% 5.31% 5.47% 5.53% 5.73%
- -------------------------------------------------------------------------------
Portfolio turnover rate 15.4% 19.2% 26.2% 23.9% 28.9%
- -------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,063,161 $926,416 $ 819,981 $798,589 $ 724,823
- -------------------------------------------------------------------------------
** Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. ROWE PRICE MARYLAND SHORT-TERM TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
February 28, 1999
STATEMENT OF NET ASSETS
Par Value
In thousands
MARYLAND==93.9%
Anne Arundel County, GO
TECP, 2.40%, 3/1/99 $ 2,000 $ 2,000
- -------------------------------------------------------------------------------
Consolidated Solid Waste
5.75%, 2/1/04 * 350 379
- -------------------------------------------------------------------------------
6.00%, 2/1/01 * 350 366
- -------------------------------------------------------------------------------
6.00%, 2/1/02 * 350 372
- -------------------------------------------------------------------------------
6.00%, 2/1/03 * 325 351
- -------------------------------------------------------------------------------
Water and Sewer, 4.75%, 9/1/01 1,030 1,064
- -------------------------------------------------------------------------------
Baltimore City, GO, Consolidated Public Improvement
7.50%, 10/15/00 (FGIC Insured) 500 533
- -------------------------------------------------------------------------------
Baltimore City
Water Projects
6.50%, 7/1/20 (MBIA Insured)
(Prerefunded 7/1/00+) 195 203
- -------------------------------------------------------------------------------
Consolidated Public Improvement
6.90%, 4/1/06 (Prerefunded 4/1/00+) 1,000 1,060
- -------------------------------------------------------------------------------
Metropolitan Dist., 6.80%, 4/1/00 500 519
- -------------------------------------------------------------------------------
Baltimore County
Consolidated Public Improvement
6.00%, 7/1/05 (Prerefunded 7/1/02+) 500 546
- -------------------------------------------------------------------------------
Spring Hill Apartments
VRDN (Currently 2.95%) (GNMA Guaranteed) 1,400 1,400
- -------------------------------------------------------------------------------
Stella Maris
7.50%, 3/1/21 (Prerefunded 3/1/01+) 1,000 1,097
- -------------------------------------------------------------------------------
Baltimore County Economic Dev.
Maryvale Preparatory School Fac.
6.50%, 5/1/08 1,000 1,008
- -------------------------------------------------------------------------------
Charles County, County Commissioners
Fox Chase Apartments, 7.25%, 10/1/01 290 293
- -------------------------------------------------------------------------------
New Forest Apartments, 7.25%, 11/1/01 555 561
- -------------------------------------------------------------------------------
Howard County, GO, Consolidated Public Improvement
5.875%, 5/15/12 (Prerefunded 5/15/03+) 1,520 1,647
- -------------------------------------------------------------------------------
<PAGE>
Howard County, Metropolitan Dist.
7.125%, 5/15/11 (Prerefunded 5/15/00+) 500 528
- -------------------------------------------------------------------------------
7.15%, 5/15/20 (Prerefunded 5/15/00+) 500 529
- -------------------------------------------------------------------------------
Laurel, 6.60%, 7/1/03 (MBIA Insured) (Prerefunded 7/1/99+) 375 409
- -------------------------------------------------------------------------------
Maryland, GO
6.50%, 3/15/05 (Prerefunded 3/15/01+) 2,000 $ 2,150
- -------------------------------------------------------------------------------
State and Local Fac.
5.00%, 7/15/01 5,000 5,186
- -------------------------------------------------------------------------------
5.00%, 10/15/02 930 975
- -------------------------------------------------------------------------------
7.00%, 10/15/02 (Prerefunded 10/15/00+) 1,000 1,065
- -------------------------------------------------------------------------------
Maryland Energy Fin. Admin.
Solid Waste Disposal, 5.10%, 12/1/99 * 450 457
- -------------------------------------------------------------------------------
Wheelabrator Water Technologies
5.75%, 12/1/04 2,570 2,784
- -------------------------------------------------------------------------------
Maryland HHEFA
Bradford Oaks Nursing and Rehabilitation Center
5.125%, 1/1/00 200 201
- -------------------------------------------------------------------------------
5.375%, 1/1/01 200 204
- -------------------------------------------------------------------------------
Broadmead
4.60%, 7/1/01 375 381
- -------------------------------------------------------------------------------
4.90%, 7/1/04 250 258
- -------------------------------------------------------------------------------
Charity Obligation Group, 4.60%, 11/1/26 4,210 4,282
- -------------------------------------------------------------------------------
Charlestown Community VRDN (Currently 2.95%) 975 975
- -------------------------------------------------------------------------------
Daughters of Charity Hosp. VRDN (Currently 2.90%) 1,500 1,500
- -------------------------------------------------------------------------------
Doctor's Community Hosp.
8.75%, 7/1/22 (Prerefunded 7/1/00+) 5,815 6,347
- -------------------------------------------------------------------------------
Easton Memorial Hosp.
5.00%, 7/1/00 (MBIA Insured) 335 342
- -------------------------------------------------------------------------------
5.00%, 7/1/01 (MBIA Insured) 360 370
- -------------------------------------------------------------------------------
5.00%, 7/1/02 (MBIA Insured) 370 383
- -------------------------------------------------------------------------------
5.00%, 7/1/03 (MBIA Insured) 390 406
- -------------------------------------------------------------------------------
5.00%, 7/1/04 (MBIA Insured) 410 428
- -------------------------------------------------------------------------------
5.00%, 7/1/05 (MBIA Insured) 430 450
- -------------------------------------------------------------------------------
<PAGE>
Francis Scott Key Medical Center
6.75%, 7/1/23 (FGIC Insured)
(Prerefunded 7/1/00+) 5,170 5,509
- -------------------------------------------------------------------------------
Good Samaritan Hosp
4.90%, 7/1/00 (Escrowed to Maturity) 1,020 1,042
- -------------------------------------------------------------------------------
Greater Baltimore Medical Center
6.75%, 7/1/19 (Prerefunded 7/1/01+) 2,025 2,214
- -------------------------------------------------------------------------------
Maryland HHEFA
Johns Hopkins Univ.
5.50%, 7/1/01 2,500 $ 2,619
- -------------------------------------------------------------------------------
5.50%, 7/1/02 4,000 4,240
- -------------------------------------------------------------------------------
Kennedy Krieger Institute
6.00%, 7/1/01 125 131
- -------------------------------------------------------------------------------
6.00%, 7/1/02 220 233
- -------------------------------------------------------------------------------
6.00%, 7/1/03 380 406
- -------------------------------------------------------------------------------
6.00%, 7/1/04 405 437
- -------------------------------------------------------------------------------
6.00%, 7/1/05 430 468
- -------------------------------------------------------------------------------
Pooled Loan Program, VRDN (Currently 2.95%) 1,200 1,200
- -------------------------------------------------------------------------------
Stella Maris, 4.75%, 7/1/21 4,625 4,690
- -------------------------------------------------------------------------------
Union Hosp. of Cecil County
6.70%, 7/1/22 (Prerefunded 7/1/02+) 1,225 1,362
- -------------------------------------------------------------------------------
Univ. of Maryland Medical System
7.00%, 7/1/17 (FGIC Insured)
(Prerefunded 7/1/01+) 2,250 2,473
- -------------------------------------------------------------------------------
Maryland Ind. Dev. Fin. Auth.
American Center for Physics Headquarters Fac.
5.80%, 1/1/01 400 413
- -------------------------------------------------------------------------------
Way Station, 4.90%, 12/31/11 2,310 2,332
- -------------------------------------------------------------------------------
Maryland Transportation Auth.
Transportation Fac.
5.20%, 7/1/00 4,000 4,103
- -------------------------------------------------------------------------------
6.10%, 7/1/00 1,100 1,140
- -------------------------------------------------------------------------------
Maryland Water Quality Fin. Admin.
Revolving Loan Fund
6.70%, 9/1/13 (Prerefunded 9/1/01+) 1,165 1,278
- -------------------------------------------------------------------------------
<PAGE>
Montgomery County, GO
6.30%, 4/1/02 1,250 1,348
- -------------------------------------------------------------------------------
9.75%, 6/1/01 1,700 1,930
- -------------------------------------------------------------------------------
Northeast Maryland Waste Disposal Auth.
Montgomery County Resource Recovery
5.70%, 7/1/03 * 4,000 4,267
- -------------------------------------------------------------------------------
Southwest Resource Recovery Fac.
7.05%, 1/1/02 (MBIA Insured) 500 544
- -------------------------------------------------------------------------------
Northeast Waste Disposal Auth.
Solid Waste
5.30%, 7/1/00 * 1,765 $ 1,807
- -------------------------------------------------------------------------------
5.90%, 7/1/05 * 2,250 2,466
- -------------------------------------------------------------------------------
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 6,214
- -------------------------------------------------------------------------------
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 2,054
- -------------------------------------------------------------------------------
Univ. of Maryland
Auxiliary Fac. and Tuition
5.00%, 4/1/02 3,145 3,274
- -------------------------------------------------------------------------------
6.40%, 4/1/06 (Prerefunded 10/1/02+) 500 556
- -------------------------------------------------------------------------------
6.50%, 4/1/11 1,000 1,055
- -------------------------------------------------------------------------------
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 1,097
- -------------------------------------------------------------------------------
7.00%, 6/1/01 1,480 1,594
- -------------------------------------------------------------------------------
8.00%, 1/1/02 1,460 1,630
- -------------------------------------------------------------------------------
Total Maryland (Cost $113,325) 15,032
- -------------------------------------------------------------------------------
<PAGE>
PUERTO=RICO==6.6%==============================================================
Puerto Rico Commonwealth, GO, Public Improvement
5.50%, 7/1/01 (AMBAC Insured) 3,500 3,665
- -------------------------------------------------------------------------------
Puerto Rico Ind. Medical and Environmental PCR
4.25%, 9/1/13 1,500 1,522
- -------------------------------------------------------------------------------
Puerto Rico Municipal Fin. Agency, GO
5.50%, 7/1/00 (FSA Insured) 2,790 2,872
- -------------------------------------------------------------------------------
Total Puerto Rico (Cost $7,971) 8,059
- -------------------------------------------------------------------------------
U.=S.=VIRGIN=ISLANDS==1.0%
Virgin Island Water and Power Auth., 5.00%, 7/1/02 1,200 1,241
Total U. S. Virgin Islands (Cost $1,217) 1,241
=Total=Investments=in=Securities
101.5% of Net Assets (Cost $122,513) $ 124,332
Other Assets Less Liabilities (1,780)
NET ASSETS $ 122,552
Net Assets Consist of:
Accumulated net investment income - net
of distributions $ 2
Accumulated net realized gain/loss - net
of distributions (216)
Net unrealized gain (loss) 1,819
Paid-in-capital applicable to 23,712,461
no par value shares of beneficial
interest outstanding; unlimited
number of shares authorized 120,947
NET ASSETS $ 122,552
NET ASSET VALUE PER SHARE $ 5.17
- --------------------------------------------------------------------------------
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
COP Certificates of Participation
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GNMA Government National Mortgage Association
GO General Obligation
HHEFA Health & Higher Educational Facility 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 BOND FUND
- --------------------------------------------------------------------------------
February 28, 1999
STATEMENT OF NET ASSETS
Par Value
In thousands
MARYLAND==95.2%
Allegany Co., PCR, Westvaco, 6.20%, 1/1/08 $ 1,350 $ 1,500
- -----------------------------------------------------------------------------
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%, 8/1/16 775 870
- -----------------------------------------------------------------------------
6.30%, 8/1/19 725 814
- -----------------------------------------------------------------------------
6.30%, 8/1/20 705 791
- -----------------------------------------------------------------------------
6.30%, 8/1/21 790 887
- -----------------------------------------------------------------------------
Consolidated Water and Sewer
6.30%, 8/1/22 450 505
- -----------------------------------------------------------------------------
6.30%, 8/1/24 720 808
- -----------------------------------------------------------------------------
7.20%, 4/15/13
(Prerefunded 4/15/00+) 625 665
- -----------------------------------------------------------------------------
7.20%, 4/15/14
(Prerefunded 4/15/00+) 625 665
- -----------------------------------------------------------------------------
TECP, 2.40 - 2.90%, 3/1 - 3/2/99 2,500 2,500
- -----------------------------------------------------------------------------
Anne Arundel County
Special Tax Dist., Farmington Village
Zero Coupon, 10/15/08 (FGIC Insured)
(Prerefunded 10/15/05) 3,800 2,413
- -----------------------------------------------------------------------------
Zero Coupon, 10/15/09 (FGIC Insured)
(Prerefunded 10/15/05+) 4,600 2,748
- -----------------------------------------------------------------------------
Zero Coupon, 10/15/11 (FGIC Insured)
(Prerefunded 10/15/05+) 7,500 3,943
- -----------------------------------------------------------------------------
6.25%, 6/1/25 4,222 4,168
- -----------------------------------------------------------------------------
<PAGE>
Consolidated Public Improvement
Zero Coupon, 10/15/06 (FGIC Insured) 3,100 2,187
- -----------------------------------------------------------------------------
Zero Coupon, 10/15/11 (FGIC Insured) 2,240 1,262
- -----------------------------------------------------------------------------
5.50%, 10/15/09 (FGIC Insured) 1,860 2,057
- -----------------------------------------------------------------------------
5.50%, 10/15/10 (FGIC Insured) 2,615 2,898
- -----------------------------------------------------------------------------
5.50%, 10/15/16 (FGIC Insured) 1,775 1,928
- -----------------------------------------------------------------------------
7.00%, 10/15/07 (MBIA Insured) 500 600
- -----------------------------------------------------------------------------
7.00%, 10/15/08 (MBIA Insured) 5,190 6,309
- -----------------------------------------------------------------------------
7.50%, 10/15/09 (FGIC Insured) 2,635 3,359
- -----------------------------------------------------------------------------
Baltimore City
Board of Ed. Admin. Headquarters, COP
5.00%, 4/1/13 (MBIA Insured) $ 3,460 $ 3,481
- -----------------------------------------------------------------------------
5.25%, 4/1/09 (MBIA Insured) 2,790 2,916
- -----------------------------------------------------------------------------
5.25%, 4/1/10 (MBIA Insured) 2,940 3,062
- -----------------------------------------------------------------------------
7.25%, 4/1/16 (MBIA Insured) 3,200 3,384
- -----------------------------------------------------------------------------
Convention Center
5.50%, 9/1/14 (MBIA Insured) 4,000 4,315
- -----------------------------------------------------------------------------
6.00%, 9/1/17 (FGIC Insured)
(Prerefunded 9/1/04+) 5,180 5,740
- -----------------------------------------------------------------------------
Parking Fac.
5.25%, 7/1/21 (FGIC Insured) 2,000 2,097
- -----------------------------------------------------------------------------
5.90%, 7/1/11 (FGIC Insured) 590 674
- -----------------------------------------------------------------------------
5.90%, 7/1/12 (FGIC Insured) 1,195 1,364
- -----------------------------------------------------------------------------
5.90%, 7/1/13 (FGIC Insured) 1,000 1,138
- -----------------------------------------------------------------------------
6.00%, 7/1/14 (FGIC Insured) 5,155 5,918
- -----------------------------------------------------------------------------
6.00%, 7/1/15 (FGIC Insured) 5,460 6,256
- -----------------------------------------------------------------------------
6.00%, 7/1/16 (FGIC Insured) 5,785 6,618
- -----------------------------------------------------------------------------
6.00%, 7/1/17 (FGIC Insured) 6,135 7,018
- -----------------------------------------------------------------------------
6.00%, 7/1/18 (FGIC Insured) 6,505 7,455
- -----------------------------------------------------------------------------
<PAGE>
Rivoli Office Building Fac., COP
7.20%, 4/1/10 (MBIA Insured)
(Prerefunded 4/1/00+) 3,250 3,443
- -----------------------------------------------------------------------------
7.25%, 4/1/16 (MBIA Insured)
(Prerefunded 4/1/00+) 7,500 7,933
- -----------------------------------------------------------------------------
Tindeco Wharf Apartments
6.60%, 12/20/24 (GNMA Guaranteed) 1,000 1,066
- -----------------------------------------------------------------------------
Wastewater
5.60%, 7/1/13 (MBIA Insured) 19,300 21,350
- -----------------------------------------------------------------------------
5.65%, 7/1/20 (MBIA Insured) 2,000 2,200
- -----------------------------------------------------------------------------
Water
5.80%, 7/1/15 (FGIC Insured) 3,350 3,627
- -----------------------------------------------------------------------------
6.00%, 7/1/15 (FGIC Insured) 6,250 7,161
- -----------------------------------------------------------------------------
Baltimore City, Port Fac., E.I. DuPont - Conoco
6.50%, 10/1/11 10,400 11,400
- -----------------------------------------------------------------------------
Baltimore County, GO
COP, 7.10%, 10/1/12 (Prerefunded 10/1/99+) 3,195 3,336
- -----------------------------------------------------------------------------
Baltimore County, GO
Pension Funding
5.125%, 8/1/12 $ 4,000 $ 4,229
- -----------------------------------------------------------------------------
5.125%, 8/1/14 4,300 4,484
- -----------------------------------------------------------------------------
5.125%, 8/1/15 4,195 4,344
- -----------------------------------------------------------------------------
Baltimore County
Golf Systems, VRDN (Currently 3.00%) 250 250
- -----------------------------------------------------------------------------
North Brooke Apartments
6.35%, 1/20/21 (GNMA Guaranteed) 3,000 3,221
- -----------------------------------------------------------------------------
Pickersgill Retirement Community
7.70%, 1/1/21 (Prerefunded 1/1/02+) 3,550 3,989
- -----------------------------------------------------------------------------
Stella Maris, 7.50%, 3/1/21 (Prerefunded 3/1/01+) 2,760 3,028
- -----------------------------------------------------------------------------
Baltimore County Economic Dev.
Maryvale Preparatory School Fac., 6.50%, 5/1/11 600 606
- -----------------------------------------------------------------------------
Calvert County, PCR, Baltimore Gas and Electric
5.55%, 7/15/14 5,550 5,870
- -----------------------------------------------------------------------------
Calvert County Economic Dev.
Asbury Solomons Islands Facility
5.00%, 1/1/27 (MBIA Insured) 2,500 2,481
- -----------------------------------------------------------------------------
<PAGE>
Carroll County, GO
Consolidated Public Improvement
County Commissioners
5.625%, 10/1/20 1,900 2,018
- -----------------------------------------------------------------------------
6.00%, 11/1/06 (Prerefunded 11/1/99+) 800 832
- -----------------------------------------------------------------------------
7.30%, 10/1/20 (Prerefunded 10/1/00+) 2,000 2,164
- -----------------------------------------------------------------------------
Carroll County
Copper Ridge, 7.75%, 1/1/18 3,000 3,224
- -----------------------------------------------------------------------------
Fairhaven, 7.75%, 1/1/11 1,000 1,057
- -----------------------------------------------------------------------------
Charles County
Holly Station, 6.45%, 5/1/26 (FHA Guaranteed) 1,780 1,920
- -----------------------------------------------------------------------------
New Forest Apartments
6.10%, 11/1/28 (FHA Guaranteed) 5,000 5,331
- -----------------------------------------------------------------------------
Damascus Gardens Dev., Multi Family
7.375%, 8/15/17 (FHA Guaranteed)
(Escrowed to Maturity) 3,780 4,682
- -----------------------------------------------------------------------------
Frederick City, GO, General Improvement
6.125%, 12/1/09 (FGIC Insured) 1,840 2,021
- -----------------------------------------------------------------------------
Frederick County, Buckinghams Choice, 5.90%, 1/1/17 1,655 1,656
- -----------------------------------------------------------------------------
Gaithersburg Hosp. Fac.
Asbury Methodist Home
5.50%, 1/1/20 7,000 7,006
- -----------------------------------------------------------------------------
Gaithersburg Hosp. Fac.
7.85%, 1/1/20 (Prerefunded 1/1/00+) $ 6,500 $ 6,871
- -----------------------------------------------------------------------------
Shady Grove Adventist Hosp.
6.50%, 9/1/12 (FSA Insured) 5,000 6,015
- -----------------------------------------------------------------------------
Howard County, GO
Metropolitan Dist.
7.15%, 5/15/14 (Prerefunded 5/15/00+) 1,005 1,062
- -----------------------------------------------------------------------------
7.15%, 5/15/15 (Prerefunded 5/15/00+) 1,080 1,141
- -----------------------------------------------------------------------------
7.15%, 5/15/16 (Prerefunded 5/15/00+) 1,160 1,226
- -----------------------------------------------------------------------------
7.15%, 5/15/17 (Prerefunded 5/15/00+) 1,245 1,316
- -----------------------------------------------------------------------------
Howard County
COP, 8.15%, 2/15/20 470 660
- -----------------------------------------------------------------------------
Golf Course Fac., 6.00%, 2/15/21 3,110 3,359
- -----------------------------------------------------------------------------
Laurel, GO
<PAGE>
6.90%, 7/1/07 (MBIA Insured)
(Prerefunded 7/1/01+) 1,000 1,097
- -----------------------------------------------------------------------------
7.00%, 7/1/09 (MBIA Insured)
(Prerefunded 7/1/01+) 550 604
- -----------------------------------------------------------------------------
Maryland, GO
5.25%, 6/15/09 1,250 1,341
- -----------------------------------------------------------------------------
5.70%, 3/15/10 5,000 5,471
- -----------------------------------------------------------------------------
6.84%, 8/1/12 10,000 10,775
- -----------------------------------------------------------------------------
7.00%, 10/15/03 (Prerefunded 10/15/00+) 2,000 2,139
- -----------------------------------------------------------------------------
7.10%, 10/15/04 (Prerefunded 10/15/00+) 3,000 3,227
- -----------------------------------------------------------------------------
7.15%, 7/15/13 7,500 8,372
- -----------------------------------------------------------------------------
Maryland CDA
Residential, 5.15%, 3/1/18 * 5,000 4,995
- -----------------------------------------------------------------------------
Single Family
4.70%, 4/1/10 * 2,105 2,090
- -----------------------------------------------------------------------------
5.60%, 4/1/18 4,250 4,352
- -----------------------------------------------------------------------------
5.85%, 7/1/27 * 7,000 7,349
- -----------------------------------------------------------------------------
5.875%, 7/1/16 3,950 4,194
- -----------------------------------------------------------------------------
5.875%, 4/1/17 * 870 898
- -----------------------------------------------------------------------------
5.875%, 9/1/25 * 3,500 3,649
- -----------------------------------------------------------------------------
6.00%, 4/1/17 2,500 2,648
- -----------------------------------------------------------------------------
6.45%, 4/1/14 1,000 1,068
- -----------------------------------------------------------------------------
6.75%, 4/1/10 * 5,000 5,304
- -----------------------------------------------------------------------------
Maryland CDA
Single Family
6.75%, 4/1/26 * $ 4,015 $ 4,305
- -----------------------------------------------------------------------------
6.80%, 4/1/22 * 3,680 3,926
- -----------------------------------------------------------------------------
6.80%, 4/1/24 * 2,720 2,902
- -----------------------------------------------------------------------------
6.85%, 4/1/11 4,895 5,140
- -----------------------------------------------------------------------------
7.00%, 4/1/14 2,720 2,925
<PAGE>
- -----------------------------------------------------------------------------
7.05%, 4/1/17 4,750 5,108
- -----------------------------------------------------------------------------
7.25%, 4/1/11 2,000 2,098
- -----------------------------------------------------------------------------
7.25%, 4/1/19 * 9,000 9,459
- -----------------------------------------------------------------------------
7.25%, 4/1/27 9,250 9,705
- -----------------------------------------------------------------------------
7.375%, 4/1/10 495 514
- -----------------------------------------------------------------------------
7.40%, 4/1/17 5,395 5,513
- -----------------------------------------------------------------------------
7.60%, 4/1/17 2,200 2,277
- -----------------------------------------------------------------------------
7.875%, 4/1/07 30 30
- -----------------------------------------------------------------------------
Maryland DOT, 6.80%, 11/1/05 (Prerefunded 11/1/99+) 5,500 5,750
- -----------------------------------------------------------------------------
Maryland Economic Dev., Chesapeake Bay Foundation
VRDN (Currently 2.90%) 1,000 1,000
- -----------------------------------------------------------------------------
Maryland Energy Fin. Admin.
Wheelabrator Technologies
6.30%, 12/1/10 * 6,145 6,796
- -----------------------------------------------------------------------------
6.45%, 12/1/16 * 2,600 2,845
- -----------------------------------------------------------------------------
Maryland HHEFA
Anne Arundel Medical Center
5.10%, 7/1/18 (FSA Insured) 1,000 1,012
- -----------------------------------------------------------------------------
5.125%, 7/1/28 (FSA Insured) 4,000 4,039
- -----------------------------------------------------------------------------
5.125%, 7/1/33 (FSA Insured) 2,000 2,011
- -----------------------------------------------------------------------------
5.25%, 7/1/12 (FGIC Insured) 1,510 1,598
- -----------------------------------------------------------------------------
5.25%, 7/1/13 (FSA Insured) 1,000 1,053
- -----------------------------------------------------------------------------
Bradford Oaks Nursing and Rehabilitation Center
6.375%, 1/1/19 1,500 1,548
- -----------------------------------------------------------------------------
6.375%, 1/1/27 2,000 2,063
- -----------------------------------------------------------------------------
Broadmead, 7.625%, 7/1/10 (Prerefunded 7/1/99+) 1,320 1,367
- -----------------------------------------------------------------------------
Calvert Memorial Hosp., 5.00%, 7/1/28 1,800 1,742
- -----------------------------------------------------------------------------
Catholic Health Service, VRDN (Currently 3.00%) 3,800 3,800
- -----------------------------------------------------------------------------
Charlestown Community, VRDN (Currently 2.90%) 1,000 1,000
- -----------------------------------------------------------------------------
<PAGE>
Maryland HHEFA
Daughters of Charity Hosp.
VRDN (Currently 2.90%) $ 4,000 $ 4,000
- -----------------------------------------------------------------------------
5.00%, 11/1/29 3,000 2,949
- -----------------------------------------------------------------------------
Deaton Hosp., VRDN (Currently 3.00%) 1,000 1,000
- -----------------------------------------------------------------------------
Doctor's Community Hosp.
5.50%, 7/1/24 3,000 2,975
- -----------------------------------------------------------------------------
8.75%, 7/1/22 (Prerefunded 7/1/00+) 6,800 7,422
- -----------------------------------------------------------------------------
Francis Scott Key Medical Center
5.00%, 7/1/18 (FGIC Insured) 4,880 4,882
- -----------------------------------------------------------------------------
5.00%, 7/1/23 (FGIC Insured) 3,000 2,967
- -----------------------------------------------------------------------------
7.00%, 7/1/10 (FGIC Insured)
(Prerefunded 7/1/00+) 2,000 2,137
- -----------------------------------------------------------------------------
Frederick Memorial Hosp.
5.00%, 7/1/23 (FGIC Insured) 5,500 5,439
- -----------------------------------------------------------------------------
5.00%, 7/1/28 (FGIC Insured) 3,750 3,704
- -----------------------------------------------------------------------------
Good Samaritan Hosp.
5.60%, 7/1/06 (Escrowed to Maturity) 1,545 1,695
- -----------------------------------------------------------------------------
5.70%, 7/1/07 (Escrowed to Maturity) 1,875 2,081
- -----------------------------------------------------------------------------
5.75%, 7/1/13 (Escrowed to Maturity) 2,480 2,786
- -----------------------------------------------------------------------------
5.75%, 7/1/13 (AMBAC Insured)
(Escrowed to Maturity) 1,520 1,703
- -----------------------------------------------------------------------------
7.50%, 7/1/21 (Prerefunded 7/1/99+) 4,000 4,142
- -----------------------------------------------------------------------------
Greater Baltimore Medical Center
VRDN (Currently 3.00%) 1,000 1,000
- -----------------------------------------------------------------------------
Helix Health
5.00%, 7/1/27 (AMBAC Insured)
(Escrowed to Maturity) 8,700 8,692
- -----------------------------------------------------------------------------
5.125%, 7/1/10 (AMBAC Insured)
(Escrowed to Maturity) 2,585 2,760
- -----------------------------------------------------------------------------
5.125%, 7/1/11 (AMBAC Insured)
(Escrowed to Maturity) 2,850 3,017
- -----------------------------------------------------------------------------
5.125%, 7/1/12 (AMBAC Insured)
(Escrowed to Maturity) 2,055 2,157
- -----------------------------------------------------------------------------
5.25%, 8/15/38 (AMBAC Insured) 20,000 20,836
- -----------------------------------------------------------------------------
<PAGE>
Holy Cross Hosp.
7.125%, 7/1/10 (AMBAC Insured),
(Prerefunded 7/1/00+) 1,400 1,499
- -----------------------------------------------------------------------------
7.50%, 7/1/01 (AMBAC Insured)
(Prerefunded 7/1/00+) 1,655 1,779
- -----------------------------------------------------------------------------
Maryland HHEFA
Howard County General Hosp.
5.50%, 7/1/13 (Escrowed to Maturity) $ 595 $ 630
- -----------------------------------------------------------------------------
5.50%, 7/1/21 (Escrowed to Maturity) 5,600 5,881
- -----------------------------------------------------------------------------
Johns Hopkins Hosp.
VRDN (Currently 2.90%) 1,000 1,000
- -----------------------------------------------------------------------------
Zero Coupon, 7/1/19 9,460 3,342
- -----------------------------------------------------------------------------
7.00%, 7/1/23 (Prerefunded 7/1/00+) 1,305 1,395
- -----------------------------------------------------------------------------
Johns Hopkins Medical Institute Parking Fac.
5.375%, 7/1/20 (AMBAC Insured) 5,550 5,712
- -----------------------------------------------------------------------------
Johns Hopkins Medicine HCGH,
5.00%, 7/1/29 (MBIAInsured) 10,750 10,666
- -----------------------------------------------------------------------------
Johns Hopkins Univ.
5.125%, 7/1/20 15,350 15,580
- -----------------------------------------------------------------------------
5.25%, 7/1/15 5,000 5,230
- -----------------------------------------------------------------------------
5.25%, 7/1/16 7,540 7,847
- -----------------------------------------------------------------------------
5.25%, 7/1/17 3,100 3,210
- -----------------------------------------------------------------------------
Kennedy Kreiger Institute
VRDN (Currently 3.00%) 700 700
- -----------------------------------------------------------------------------
6.75%, 7/1/22 (Prerefunded 7/1/01+) 2,850 3,059
- -----------------------------------------------------------------------------
7.40%, 7/1/11 (Prerefunded 7/1/01+) 370 409
- -----------------------------------------------------------------------------
Loyola College
VRDN (Currently 2.95%) (MBIA Insured) 3,700 3,700
- -----------------------------------------------------------------------------
5.375%, 10/1/26 (MBIA Insured) 6,820 7,029
- -----------------------------------------------------------------------------
Maryland General Hosp., 6.20%, 7/1/24 (MBIAInsured) 4,000 4,435
- -----------------------------------------------------------------------------
Memorial Hosp. at Easton
5.00%, 7/1/09 1,030 1,073
- -----------------------------------------------------------------------------
<PAGE>
Mercy Medical Center
5.75%, 7/1/26 (FSA Insured) 3,760 4,041
- -----------------------------------------------------------------------------
6.50%, 7/1/13 (FSA Insured) 2,155 2,584
- -----------------------------------------------------------------------------
North Arundel Hosp., VRDN (Currently 3.00%) 3,100 3,100
- -----------------------------------------------------------------------------
Peninsula Regional Medical Center
5.00%, 7/1/23 (MBIA Insured) 10,000 9,888
- -----------------------------------------------------------------------------
Pooled Loan Program, VRDN (Currently 2.95%) 10,100 10,100
- -----------------------------------------------------------------------------
Sinai Hosp.
7.30%, 7/1/05 (AMBAC Insured)
(Prerefunded 7/1/00+) 2,000 2,145
- -----------------------------------------------------------------------------
Union Hosp. of Cecil County
4.70%, 7/1/10 275 277
- -----------------------------------------------------------------------------
Maryland HHEFA
Union Hosp. of Cecil County
4.80%, 7/1/11 $ 580 $ 583
- -----------------------------------------------------------------------------
6.625%, 7/1/12 1,545 1,714
- -----------------------------------------------------------------------------
Union Memorial Hosp.
6.60%, 7/1/06 (MBIA Insured) (Prerefunded 7/1/01+) 500 545
- -----------------------------------------------------------------------------
6.75%, 7/1/11 (MBIA Insured) (Prerefunded 7/1/01+) 3,000 3,278
- -----------------------------------------------------------------------------
6.75%, 7/1/21 (MBIA Insured) (Prerefunded 7/1/01+) 7,895 8,626
- -----------------------------------------------------------------------------
Univ. of Maryland Medical System
5.00%, 7/1/20 (FGIC Insured) 5,875 5,814
- -----------------------------------------------------------------------------
7.00%, 7/1/11 (MBIA Insured)
(Prerefunded 7/1/01+) 4,550 5,001
- -----------------------------------------------------------------------------
7.00%, 7/1/17 (FGIC Insured)
(Prerefunded 7/1/01+) 7,770 8,539
- -----------------------------------------------------------------------------
7.00%, 7/1/22 (FGIC Insured) 2,020 2,579
- -----------------------------------------------------------------------------
Upper Chesapeake Hosp.
5.125%, 1/1/33 (FSA Insured) 16,075 16,154
- -----------------------------------------------------------------------------
5.125%, 1/1/38 (FSA Insured) 6,160 6,191
- -----------------------------------------------------------------------------
5.50%, 1/1/20 (FSA Insured) 3,000 3,134
- -----------------------------------------------------------------------------
<PAGE>
Maryland Ind. Dev. Fin. Auth.
American Center for Physics Headquarters Fac.
6.25%, 1/1/07 5,770 6,116
- -----------------------------------------------------------------------------
6.375%, 1/1/12 5,900 6,255
- -----------------------------------------------------------------------------
6.625%, 1/1/17 4,250 4,587
- -----------------------------------------------------------------------------
Associated Catholic Charities, 9.00%, 1/1/10 725 759
- -----------------------------------------------------------------------------
Bon Secours Health
5.929%, 8/26/22 (FSA Insured) 15,000 17,166
- -----------------------------------------------------------------------------
Holy Cross Health, 5.60%, 12/1/09 2,780 3,071
- -----------------------------------------------------------------------------
Maryland Local Gov't. Income Trust Capitalization
Program, COP
6.80%, 8/1/01 1,615 1,714
- -----------------------------------------------------------------------------
7.125%, 8/1/09 3,000 3,206
- -----------------------------------------------------------------------------
Maryland Stadium Auth.
Baltimore Convention Center Expansion
5.875%, 12/15/11 (AMBAC Insured) 2,025 2,241
- -----------------------------------------------------------------------------
Sports Fac.
5.60%, 3/1/14 (AMBAC Insured) 1,000 1,067
- -----------------------------------------------------------------------------
5.75%, 3/1/22 (AMBAC Insured) 6,705 7,148
- -----------------------------------------------------------------------------
5.80%, 3/1/26 (AMBAC Insured) 3,875 4,155
- -----------------------------------------------------------------------------
Maryland Transportation Auth.
Zero Coupon, 7/1/07 (FGIC Insured) $ 8,500 $ 6,008
- -----------------------------------------------------------------------------
Zero Coupon, 7/1/08 (FGIC Insured) 2,000 1,348
- -----------------------------------------------------------------------------
Zero Coupon, 7/1/09 (FGIC Insured) 10,410 6,662
- -----------------------------------------------------------------------------
6.80%, 7/1/16 (Escrowed to Maturity) 12,385 15,031
- -----------------------------------------------------------------------------
Baltimore-Washington Int'l. Airport
6.25%, 7/1/14 (FGIC Insured) * 3,105 3,417
- -----------------------------------------------------------------------------
6.40%, 7/1/19 (FGIC Insured) * 4,555 4,820
- -----------------------------------------------------------------------------
<PAGE>
Maryland Water Quality Fin. Admin.
Revolving Loan Fund
Zero Coupon, 9/1/02 1,185 1,037
- -----------------------------------------------------------------------------
Zero Coupon, 9/1/07 1,125 782
- -----------------------------------------------------------------------------
6.00%, 9/1/15 1,600 1,754
- -----------------------------------------------------------------------------
6.70%, 9/1/13 (Prerefunded 9/1/01+) 1,280 1,404
- -----------------------------------------------------------------------------
7.10%, 9/1/13 (Prerefunded 9/1/01+) 985 1,090
- -----------------------------------------------------------------------------
7.25%, 9/1/11 (Prerefunded 9/1/00+) 1,700 1,833
- -----------------------------------------------------------------------------
7.25%, 9/1/12 (Prerefunded 9/1/00+) 2,000 2,157
- -----------------------------------------------------------------------------
Maryland-National Capital Park and Planning Commission, GO
Prince George's County
5.375%, 1/15/16 1,300 1,358
- -----------------------------------------------------------------------------
5.375%, 1/15/17 1,200 1,253
- -----------------------------------------------------------------------------
6.90%, 7/1/05 (Prerefunded 7/1/00+) 1,400 1,494
- -----------------------------------------------------------------------------
6.90%, 7/1/06 (Prerefunded 7/1/00+) 1,350 1,440
- -----------------------------------------------------------------------------
6.90%, 7/1/07 (Prerefunded 7/1/00+) 1,400 1,494
- -----------------------------------------------------------------------------
6.90%, 7/1/08 (Prerefunded 7/1/00+) 1,400 1,494
- -----------------------------------------------------------------------------
6.90%, 7/1/09 (Prerefunded 7/1/00+) 1,400 1,494
- -----------------------------------------------------------------------------
Maryland-National Capital Park and Planning Commission
Little Bennett Golf Fac.
8.25%, 10/1/11 (Prerefunded 10/1/02+) 2,070 2,416
- -----------------------------------------------------------------------------
Montgomery County
Consolidated Public Improvement
4.875%, 5/1/11 3,770 3,916
- -----------------------------------------------------------------------------
5.375%, 5/1/09 2,850 3,120
- -----------------------------------------------------------------------------
5.375%, 5/1/16 5,750 6,032
- -----------------------------------------------------------------------------
5.375%, 5/1/17 5,750 6,004
- -----------------------------------------------------------------------------
6.125%, 10/1/13 (Prerefunded 10/1/04+) 2,500 2,830
- -----------------------------------------------------------------------------
6.125%, 10/1/14 (Prerefunded 10/1/04+) 3,150 3,565
- -----------------------------------------------------------------------------
7.10%, 10/1/09 (Prerefunded 10/1/00+) 1,000 1,079
- -----------------------------------------------------------------------------
<PAGE>
Montgomery County
Consolidated Public Improvement
7.10%, 10/1/10 (Prerefunded 10/1/00+) $ 1,840 $ 1,986
- -----------------------------------------------------------------------------
GO, 6.80%, 11/1/09 (Prerefunded 11/1/99+) 1,145 1,197
- -----------------------------------------------------------------------------
Golf Course, 6.125%, 10/1/22 2,260 2,383
- -----------------------------------------------------------------------------
Montgomery County Housing Opportunities Commission
Multi-Family
6.25%, 7/1/25 5,500 5,867
- -----------------------------------------------------------------------------
7.50%, 7/1/24 3,000 3,220
- -----------------------------------------------------------------------------
Single Family
Zero Coupon, 7/1/28 13,500 2,775
- -----------------------------------------------------------------------------
5.05%, 7/1/28 1,715 1,699
- -----------------------------------------------------------------------------
5.40%, 7/1/16 450 459
- -----------------------------------------------------------------------------
5.75%, 7/1/13 2,000 2,122
- -----------------------------------------------------------------------------
5.80%, 7/1/17 1,000 1,047
- -----------------------------------------------------------------------------
5.90%, 7/1/17 2,000 2,119
- -----------------------------------------------------------------------------
6.00%, 7/1/17 4,110 4,379
- -----------------------------------------------------------------------------
6.50%, 7/1/11 2,830 3,022
- -----------------------------------------------------------------------------
6.65%, 7/1/16 2,235 2,397
- -----------------------------------------------------------------------------
6.80%, 7/1/17 2,750 2,881
- -----------------------------------------------------------------------------
6.90%, 7/1/19 2,000 2,055
- -----------------------------------------------------------------------------
7.50%, 7/1/17 1,775 1,849
- -----------------------------------------------------------------------------
7.625%, 7/1/17 2,105 2,135
- -----------------------------------------------------------------------------
Montgomery County, PCR, Potomac Electric, 5.375%, 2/15/24 4,560 4,657
- -----------------------------------------------------------------------------
Morgan State Univ., Academic Fees and Auxiliary Fac.
6.05%, 7/1/15 (MBIA Insured) 1,090 1,254
- -----------------------------------------------------------------------------
Northeast Maryland Waste Disposal Auth.
Montgomery County Resources
6.00%, 7/1/08 * 10,000 11,109
- -----------------------------------------------------------------------------
6.20%, 7/1/10 * 7,750 8,357
- -----------------------------------------------------------------------------
6.30%, 7/1/16 (MBIA Insured) * 13,985 15,344
- -----------------------------------------------------------------------------
<PAGE>
Prince George's County
Dimensions Health
5.375%, 7/1/14 2,685 2,650
- -----------------------------------------------------------------------------
7.00%, 7/1/01 1,900 2,039
- -----------------------------------------------------------------------------
7.00%, 7/1/22 (Prerefunded 7/1/02+) 2,660 2,985
- -----------------------------------------------------------------------------
7.20%, 7/1/06 (Prerefunded 7/1/02+) 2,405 2,707
- -----------------------------------------------------------------------------
Prince George's County
Solid Waste Management
6.90%, 6/30/05 (Prerefunded 6/30/00+) $ 1,500 $ 1,601
- -----------------------------------------------------------------------------
6.90%, 6/30/06 (Prerefunded 6/30/00+) 1,000 1,068
- -----------------------------------------------------------------------------
7.00%, 6/30/07 (Prerefunded 6/30/00+) 1,120 1,197
- -----------------------------------------------------------------------------
7.00%, 6/30/09 (Prerefunded 6/30/00+) 1,255 1,341
- -----------------------------------------------------------------------------
Prince George's County, PCR
Potomac Electric
5.75%, 3/15/10 6,750 7,579
- -----------------------------------------------------------------------------
6.375%, 1/15/23 7,175 7,840
- -----------------------------------------------------------------------------
Prince George's County Housing Auth.
New Keystone, 6.80%, 7/1/25 (MBIA Insured) 2,600 2,766
- -----------------------------------------------------------------------------
Riverview Terrace Apartments
6.70%, 6/20/20 (GNMA Guaranteed) * 1,500 1,628
- -----------------------------------------------------------------------------
Single Family, 5.75%, 8/1/30 (GNMA Guaranteed) * 1,980 2,052
- -----------------------------------------------------------------------------
Stevenson Apartments
6.35%, 7/20/20 (GNMA Guaranteed) 2,200 2,319
- -----------------------------------------------------------------------------
Prince George's County IDA
Gabriel DuVall Law Building, 8.00%, 9/1/07 1,185 1,213
- -----------------------------------------------------------------------------
Upper Marlboro Justice Center
5.25%, 6/30/19 (MBIA Insured) 1,500 1,524
- -----------------------------------------------------------------------------
Univ. of Maryland
VRDN (Currently 2.90%) 500 500
- -----------------------------------------------------------------------------
<PAGE>
Auxiliary Fac. and Tuition
5.00%, 4/1/14 2,590 2,637
- -----------------------------------------------------------------------------
5.00%, 4/1/15 3,595 3,634
- -----------------------------------------------------------------------------
5.60%, 4/1/11 3,155 3,412
- -----------------------------------------------------------------------------
5.75%, 4/1/17 4,500 4,837
- -----------------------------------------------------------------------------
6.375%, 4/1/09 2,100 2,331
- -----------------------------------------------------------------------------
6.50%, 4/1/12 440 490
- -----------------------------------------------------------------------------
7.00%, 10/1/05 (Prerefunded 10/1/99+) 2,000 2,087
- -----------------------------------------------------------------------------
7.20%, 10/1/09 (Prerefunded 10/1/99+) 1,400 1,463
- -----------------------------------------------------------------------------
Equipment Loan Program
VRDN (Currently 2.90%) 2,500 2,500
- -----------------------------------------------------------------------------
Washington County Sanitary Dist., GO
6.875%, 2/1/10 (Prerefunded 2/1/00+) 3,500 3,687
- -----------------------------------------------------------------------------
7.00%, 2/1/15 (Prerefunded 2/1/00+) 2,000 2,109
- -----------------------------------------------------------------------------
Washington Suburban Sanitary Dist., GO
6.20%, 6/1/11 $ 2,400 $ 2,607
- -----------------------------------------------------------------------------
6.20%, 6/1/12 1,500 1,629
- -----------------------------------------------------------------------------
6.40%, 1/1/15 2,270 2,463
- -----------------------------------------------------------------------------
6.625%, 6/1/18 (Prerefunded 6/1/04+) 3,665 4,145
- -----------------------------------------------------------------------------
6.90%, 6/1/08 (Prerefunded 6/1/00+) 1,500 1,598
- -----------------------------------------------------------------------------
6.90%, 6/1/09 (Prerefunded 6/1/00+) 2,300 2,449
- -----------------------------------------------------------------------------
General Construction, 5.125%, 6/1/20 1,000 1,008
- -----------------------------------------------------------------------------
Sewer Disposal
5.00%, 6/1/10 2,085 2,218
- -----------------------------------------------------------------------------
5.00%, 6/1/11 2,060 2,182
- -----------------------------------------------------------------------------
Water Supply
5.00%, 6/1/10 2,580 2,744
- -----------------------------------------------------------------------------
5.00%, 6/1/11 2,545 2,696
- -----------------------------------------------------------------------------
Worcester County Sanitary Dist.
6.50%, 8/15/12 (Prerefunded 8/15/02+) 2,000 2,212
- -----------------------------------------------------------------------------
Total Maryland (Cost $940,562) 1,011,783
- -----------------------------------------------------------------------------
<PAGE>
PUERTO=RICO==5.3%============================================================
Puerto Rico Commonwealth, GO
6.25%, 7/1/11 (MBIA Insured) 2,000 2,354
- -----------------------------------------------------------------------------
6.25%, 7/1/12 (MBIA Insured) 1,750 2,062
- -----------------------------------------------------------------------------
Puerto Rico Electric Power Auth.
4.75%, 7/1/24 11,500 10,899
- -----------------------------------------------------------------------------
7.00%, 7/1/11 (Prerefunded 7/1/01+) 1,200 1,321
- -----------------------------------------------------------------------------
Puerto Rico Highway and Transportation Auth.
5.50%, 7/1/15 (FSA Insured) 5,000 5,470
- -----------------------------------------------------------------------------
5.50%, 7/1/36 3,500 3,693
- -----------------------------------------------------------------------------
Puerto Rico Infrastructure Fin. Auth., GO
5.125%, 7/1/09 (AMBAC Insured) 10,000 10,795
- -----------------------------------------------------------------------------
Puerto Rico Municipal Fin. Agency, GO
5.50%, 7/1/17 (FSA Insured) 3,100 3,286
- -----------------------------------------------------------------------------
5.50%, 7/1/21 (FSA Insured) 2,375 2,495
- -----------------------------------------------------------------------------
6.00%, 7/1/12 (FSA Insured) 5,000 5,768
- -----------------------------------------------------------------------------
6.00%, 7/1/14 (FSA Insured) 3,060 3,367
- -----------------------------------------------------------------------------
Puerto Rico Public Finance,
Commonwealth Appropriation
5.375%, 6/1/17 (AMBAC Insured) 5,000 5,353
- -----------------------------------------------------------------------------
Total Puerto Rico (Cost $52,930) 56,863
100.5% of Net Assets (Cost $993,492) $ 1,068,646
Other Assets Less Liabilities (5,485)
NET ASSETS $ 1,063,161
Net Assets Consist of:
Accumulated net investment income - net
of distributions $ 18
Accumulated net realized gain/loss - net
of distributions (181)
Net unrealized gain (loss) 75,154
Paid-in-capital applicable to 99,119,594
no par value shares of beneficial
interest outstanding; unlimited
number of shares authorized 988,170
NET ASSETS $ 1,063,161
NET ASSET VALUE PER SHARE $ 10.73
- --------------------------------------------------------------------------------
* Interest subject to alternative minimum tax
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
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
2/28/99 2/28/99
==Investment=Income================================================
Interest income $ 4,971 $ 55,334
- -------------------------------------------------------------------
Expenses
Investment management 468 4,157
Custody and accounting 100 177
Shareholder servicing 89 582
Legal and audit 11 18
Registration 10 18
Prospectus and shareholder reports 8 60
Trustees 6 9
Miscellaneous 4 19
- -------------------------------------------------------------------
Total expenses 696 5,040
Expenses paid indirectly (2) (5)
- -------------------------------------------------------------------
Net expenses 694 5,035
- -------------------------------------------------------------------
Net investment income 4,277 50,299
- -------------------------------------------------------------------
==Realized=and=Unrealized=Gain=(Loss)==============================
Net realized gain (loss)
Securities 435 463
Futures - 26
- -------------------------------------------------------------------
Net realized gain (loss) 435 489
Change in net unrealized gain or
loss on securities 271 4,337
===================================================================
Net realized and unrealized gain (loss) 706 4,826
- -------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 4,983 $ 55,125
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. ROWE PRICE MARYLAND TAX-FREE FUNDS
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
Short-Term Bond Fund Bond Fund
In thousands
Year Year
Ended Ended
2/28/99 2/28/98 2/28/99 2/28/98
Increase=(Decrease)=in=Net=Assets============================================
Operations
Net investment income $ 4,277 $ 4,110 $ 50,299 $ 45,782
Net realized gain (loss) 435 169 489 2,989
Change in net unrealized
gain or loss 271 273 4,337 23,953
- -----------------------------------------------------------------------------
Increase (decrease) in
net assets from operations 4,983 4,552 55,125 72,724
- -----------------------------------------------------------------------------
Distributions to shareholders
Net investment income (4,277) (4,110) (50,299) (45,782)
- -----------------------------------------------------------------------------
Capital share transactions *
Shares sold 50,730 43,923 225,022 168,610
Distributions reinvested 3,552 3,502 36,608 33,254
Shares redeemed (41,860) (40,695) (129,711) (122,371)
- -----------------------------------------------------------------------------
Increase (decrease) in
net assets from capital
share transactions 12,422 6,730 131,919 79,493
Net=Assets===================================================================
Increase (decrease)
during period 13,128 7,172 136,745 106,435
Beginning of period 109,424 102,252 926,416 819,981
- ------------------- ------- ------- ------- -------
End of period $ 122,552 $ 109,424 $1,063,161 $926,416
- --------------------------------------------------------------------------------
*Share information
Shares sold 9,854 8,599 21,026 16,096
Distributions reinvested 690 686 3,419 3,171
Shares redeemed (8,141) (7,970) (12,133) (11,712)
- -----------------------------------------------------------------------------
Increase (decrease)
in shares outstanding 2,403 1,315 12,312 7,555
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
- --------------------------------------------------------------------------------
February 28, 1999
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. Expenses paid indirectly reflect credits earned on daily,
uninvested cash balances at the custodian, used to reduce each fund's custody
charges.
================================================================================
<PAGE>
NOTE 2 - INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Purchases and sales of portfolio securities, other than short-term
securities, for the year ended February 28, 1999, were as follows:
- --------------------------------------------------------------------------------
Short-Term Bond Fund Bond Fund
-------------------- ---------
Purchases $ 58,340,000 $ 253,356,000
Sales 51,389,000 149,135,000
================================================================================
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. Capital loss carryforwards utilized by the Short-Term Bond Fund in
fiscal 1999 amounted to $428,000. The Short-Term Bond Fund has capital loss
carryforwards for federal income tax purposes of $121,000, all of which expire
in 2004. 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, 1999. The results
of operations and net assets were not affected by the increases/(decreases) to
these accounts.
- --------------------------------------------------------------------------------
Undistributed net investment income $ 11,000
Undistributed net realized gain (52,000)
Paid-in-capital 41,000
================================================================================
At February 28, 1999, the costs of investments for the Short-Term Bond and
Bond Funds were substantially the same for federal income tax purposes as for
financial reporting and totaled $122,513,000 and $993,492,000, respectively. Net
unrealized gain (loss) on investments was as follows:
- --------------------------------------------------------------------------------
Short-Term Bond Fund Bond Fund
-------------------- ---------
Appreciated investments $ 1,819,000 $ 75,573,000
Depreciated investments -- (419,000)
Net unrealized gain (loss) $ 1,819,000 $ 75,154,000
================================================================================
<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 $36,000 and $342,000 were payable at February 28, 1999 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, 1999, 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%
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, $7,000 of management fees were not
accrued by the Short-Term Bond Fund for the year ended 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 $139,000 and $540,000, respectively, for the year ended February
28, 1999, of which $12,000 and $48,000, respectively, were payable at
period-end.
================================================================================
<PAGE>
T. Rowe Price Maryland Tax-Free Funds
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Board of Trustees of T. Rowe Price State Tax-Free
Income Trust and Shareholders of Maryland Short-Term Tax-Free
Bond Fund and Maryland Tax-Free Bond Fund
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Maryland Short-Term Tax-Free Bond Fund and Maryland Tax-Free Bond Fund (two of
the portfolios comprising T. Rowe Price State Tax-Free Income Trust, hereafter
referred to as "the Funds") at February 28, 1999, and the results of each of
their operations, the changes in each of their net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at February 28, 1999, by
correspondence with custodians, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 17, 1999
================================================================================
T. Rowe Price Maryland Tax-Free Funds
- --------------------------------------------------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 2/28/99
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 and Bond Funds' dividend income included $4,244,000 and
$49,696,000, respectively, which qualified as exempt-interest dividends.
================================================================================
<PAGE>
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 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 Small-Cap Value Fund.
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
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. C12-050 2/28/99
