Legg Mason Tax Free Income Fund N-CSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF

REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-06223

Legg Mason Tax-Free Income Fund

Name of Fund:

100 Light Street, Baltimore, MD 21202

Address of Principal Executive Offices:

Richard M. Wachterman, Esq.

Legg Mason & Co., LLC

100 Light Street

Baltimore, MD 21202

Name and address of agent for service:

Registrant’s telephone number, including area code: (410) 539-0000

Date of fiscal year end: March 31, 2008

Date of reporting period: March 31, 2008

Item 1. Report to Shareholders

Annual Report to Shareholders 1

To Our Shareholders,

We are pleased to provide you with the annual report for Legg Mason Maryland Tax-Free Income Trust for the year ended March 31, 2008.

The following table summarizes key statistics for the Fund, as of March 31, 2008:

	SEC YieldA		Average Weighted Maturity	Net Asset Value Per Share
Maryland Tax-Free Trust	3.89	%	11 years	$	15.89

^A The SEC yield reported is for the 30 days ended March 31, 2008. The Fund’s yield reflects voluntary fee waivers and/or reimbursements which may be reduced or terminated at any time. If no fees had been waived by the adviser, the 30-day SEC yield for Maryland Tax-Free would have been 3.37%.

Information about the Fund’s performance over longer periods of time is shown in the Performance Information section within this report.

PricewaterhouseCoopers LLP; the Fund’s independent registered public accounting firm, has completed its annual examination of the Fund, and audited financial statements for the fiscal year ended March 31, 2008, are included in this report.

For the year ended March 31, 2008, total return for Maryland Tax-Free was 1.76%. Total return measures investment performance in terms of appreciation or depreciation in net asset value per share plus dividends and any capital gain distributions. It assumes that dividends and distributions were reinvested at the time they were paid. Past performance does not guarantee future results.

The Fund may purchase only securities which have received investment grade ratings from Moody’s Investors Service or Standard & Poor’s or which are judged by their investment adviser to be of comparable quality. Moody’s ratingsB of securities currently owned by the Fund are:

	Maryland Tax-Free
Aaa	25.6	%
Aa	24.5	%
A	25.5	%
Baa	11.6	%
BBB	8.5	%
Short-term securities	4.3	%

Many Primary Class shareholders invest regularly in Fund shares on a dollar cost averaging basis. Most do so by authorizing automatic, monthly transfers of $50 or more from their bank checking or brokerage accounts. Dollar cost averaging is a convenient and sensible way to invest, as it encourages continued purchases over time regardless of fluctuating price levels. Of course, it does not ensure a profit nor protect against declines in the value of your investment. Your financial advisor will be happy to help you establish a dollar cost averaging account should you wish to do so.

^B S&P ratings are used for any security not rated by Moody’s.

2 Annual Report to Shareholders

Sincerely,

Mark R. Fetting

President

April 21, 2008

Annual Report to Shareholders 3

Management’s Discussion of Fund Performance

Legg Mason Maryland Tax-Free Income Trust

Maryland Tax-Free Income Trust’s total return for various periods ended March 31, 2008 is shown below with the total returns of its respective benchmark:

	First				Average Annual Total Returns
	Quarter 2008		One Year		Five Years		Ten Years
Maryland Tax-Free Income Trust — Primary Class:	–0.15	%	+1.76	%	+3.38	%	+4.30	%
Lehman Brothers Municipal Bond IndexA	–0.61	%	+1.90	%	+3.92	%	+4.99	%

The performance data quoted represent past performance and do not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information for the Primary Class please visit www.leggmason.com/individualinvestors. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Calculations assume reinvestment of dividends and capital gain distributions. Performance would have been lower if fees had not been waived in various periods. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.

The Federal Reserve Board’s^B (“Fed”) aggressive policy moves have been of marginal help to the municipal market, which is working through a “perfect storm” of dislocations unique to that market. Despite a significant drop in Treasury yields following the recent flight-to-quality trade, the deteriorating credit quality of the monoline insurance companies and subsequent credit downgrades generated a wave of margin calls and forced selling among hedge funds. As tax-free yields adjusted higher in response to the unrelenting quantity of bid lists, levered arbitrage accounts betting on municipals outperforming Treasuries got squeezed, creating additional selling pressure. Concurrently, the $330 billion auction-market seized up for the first time in its 24-year history, as the dealer community refused to commit capital to support the auction process. With bank balance sheets shrinking following $230 billion of write-downs, liquidity for the secondary market dried up, and municipal yields as a percentage of Treasuries routinely topped 120% in February. Data showing slowing sales and

^A A total return performance benchmark for the long-term investment grade tax-exempt bond market. Although it is not possible to invest directly in an index, it is possible to purchase investment vehicles designed to track the performance of certain indices.

^B Federal Reserve Board (“Fed”) — is charged with, among other things, managing the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.

4 Annual Report to Shareholders

property tax revenues at the local government level and talk of municipal bankruptcies in Vallejo, California and Jefferson County, Alabama fed the environment of risk aversion, and yields for high-quality municipals rose in excess of 5% for longer maturities. Sensing yields were unsustainable on a relative basis and attractive in absolute terms compared to historical risk-adjusted returns of other asset classes, individual investors increasingly allocated dollars to municipals. Mutual funds benefiting from solid inflows likewise started to put money to work, providing support to the market for the balance of the quarter.

In this difficult market environment, the Maryland Tax-Free Income Trust returned 1.76% for the fiscal year ended March 31, 2008. The Fund underperformed its primary benchmark, the Lehman Brothers Municipal Bond Index, by 14 basis pointsC during the period. Within the Lipper Maryland Municipal Bond Fund category performance was strong, as the Fund finished the fiscal year 277 basis points (bps) ahead of the average Maryland fund, placing it eighth of forty funds.D The Fund’s focus on high credit quality (AA average credit rating) and relatively low exposure to insured municipal bonds (13% of fund assets) drove performance during the year, as the credit crisis and weakening credit profile among the insurance companies favored issuers with strong credit profiles. In addition, the Fund’s heavy weighting to escrowed and pre-refunded bonds helped fund performance. Pre-refunded bonds are escrowed in Treasury securities and are of the highest quality. In addition, these bonds are characterized by relatively short maturities, and performed well in an environment of aggressive monetary policy and numerous rate cuts engineered by the Fed. Our barbell strategy detracted from returns, as the steepening of the yield curve favored more bulleted structures focusing on intermediate maturities. Likewise, the Fund’s heavy exposure to the hospital sector hurt performance, as the difficult credit environment penalized the low investment-grade issuers that characterize this sector. We expect this sector to bounce back significantly, as soon as the credit dislocations unwind, and we established a position in a long-maturity Washington County Hospital during the weak market in February. Finally, our significant weighting to the higher education sector hindered results, as lower-rated issuers such as the Maryland Institute of Art and McDaniel College suffered during this period of widening credit spreads.

R. Scott Pierce, CFA

April 21, 2008

Past performance is no guarantee of future results

^C 100 basis points (bps) = 1%

^D Within the same Lipper category, Maryland Tax-Free Income Trust ranked fifth out of thirty-five funds for the five year period and fifth out of twenty-seven funds for the ten year period.

Annual Report to Shareholders 5

Expense Example

Legg Mason Maryland Tax-Free Income Trust

As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and service (12b-1) fees on Primary Class shares; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested on October 1, 2007, and held through March 31, 2008. The ending value assumes dividends were reinvested at the time they were paid.

Actual Expenses

The first line for the Fund in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for the Fund under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account if your shares were held through the entire period.

Hypothetical Example for Comparison Purposes

The second line for the Fund in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example, with the 5% hypothetical examples that appear in the shareholder reports of other funds.

	Beginning Account Value 10/1/07		Ending Account Value 3/31/08		Expenses PaidA During the Period 10/1/07 to 3/31/08
Primary Class:
Actual	$	1,000.00	$	1,008.90	$	3.52
Hypothetical (5% return before expenses)	$	1,000.00	$	1,021.57	$	3.54

^A These calculations are based on expenses incurred in the most recent fiscal half-year. The dollar amount shown as “Expenses Paid” is equal to the annualized expense ratio of 0.70% for Maryland Tax-Free, multiplied by the average values over the period, multiplied by the number of days in the most recent fiscal half-year (183) and divided by 366.

6 Annual Report to Shareholders

Legg Mason Maryland Tax-Free Income Trust

Sector Diversification

March 31, 2008

	% of Net Assets		Market Value
Education Revenue	15.1	%	$	22,488,752
Escrowed	6.0			8,913,214
General Obligation- Local	6.4			9,624,110
General Obligation- School	5.1			7,591,530
General Obligation- State	1.4			2,143,900
Health Care and Hospital Revenue	20.3			30,267,050
Health Care-Services	0.7			1,069,677
Housing Revenue	3.9			5,905,004
Industrial Development	0.9			1,386,813
Lease Revenue	3.1			4,612,777
Port Facilities Revenue	4.1			6,106,440
Pre-Refunded Bonds	13.1			19,591,904
Solid Waste Revenue	2.4			3,623,616
Transportation Revenue	2.3			3,393,420
Water and Sewer Revenue	11.1			16,616,300
Short-Term Investments	2.9			4,270,000
Other Assets less Liabilities	1.2			1,787,743
	100.0	%	$	149,392,250

Guide to Investment Abbreviations:

AMBAC	AMBAC Indemnity Corporation
AMT	Alternative Minimum Tax
FGIC	Federal Guaranty Insurance Company
FSA	Financial Security Assurance
GO	General Obligation
IDA	Industrial Development Authority
MBIA	Municipal Bond Insurance Association
VRDN	Variable Rate Demand Note

Annual Report to Shareholders 7

Performance Information

Legg Mason Maryland Tax-Free Income Trust

The graph on the following page compares the Fund’s total returns to that of the Lehman Brothers Municipal Bond Index. The graph illustrates the cumulative total return of an initial $10,000 investment in Primary Class shares of the Fund for the periods indicated. The line for the Fund represents the total return after deducting all Fund investment management and other administrative expenses and the transaction costs of buying and selling portfolio securities. The line representing the index does not take into account any transaction costs associated with buying and selling securities in the index or other administrative expenses. Both the Fund’s results and the index’s results assume reinvestment of all dividends and distributions.

Total return measures investment performance in terms of appreciation or depreciation in the Fund’s net asset value per share, plus dividends and any capital gain distributions. Average annual returns tend to smooth out variations in a fund’s return, so that they differ from actual year-to-year results.

8 Annual Report to Shareholders

Performance Information — Continued

Growth of a $10,000 Investment — Primary Class

Periods Ended March 31, 2008

	Cumulative Total Return		Average Annual Total Return
One Year	+1.76	%	+1.76	%
Five Years	+18.08	%	+3.38	%
Ten Years	+52.37	%	+4.30	%

The performance data quoted represent past performance and do not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month-end performance information please visit www.leggmason.com/individualinvestors. The investment return and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Calculations assume reinvestment of dividends and capital gain distributions. Performance would have been lower if fees had not been waived in various periods.

The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Annual Report to Shareholders 9

Portfolio of Investments

Legg Mason Maryland Tax-Free Income Trust

March 31, 2008

	Rate		Maturity Date	Par		Value
Municipal Bonds — 94.5%
Maryland — 93.2%
Anne Arundel County, Maryland, GO Bonds, Consolidated General Improvement Bonds, Series 2007	4.500	%	3/1/23	$	1,000,000	$	1,003,610
Baltimore County, Maryland, GO Bonds, Consolidated Public Improvement Bonds, Series 1998 (Pre-refunded 7/1/08)	4.750	%	7/1/18		3,150,000		3,205,219	A
Baltimore County, Maryland, GO Bonds, Metropolitan District Bonds (70th Issue)	4.250	%	9/1/26		1,000,000		926,980
Baltimore County, Maryland, Revenue Bonds, Catholic Health Initiatives, Series 2006A	5.000	%	9/1/20		1,050,000		1,069,677
Baltimore County, Maryland, Revenue Bonds, (Oak Crest Village Inc.), Series 2007A	5.000	%	1/1/22		500,000		468,265
City of Annapolis, Maryland, Economic Development Revenue and Refunding Revenue Bonds (St. John’s College Facility)
Series 1998	5.500	%	10/1/18		240,000		243,506
Series 1998	5.500	%	10/1/23		490,000		497,159
Series 1998 (Pre-refunded 10/1/08)	5.500	%	10/1/18		760,000		773,855	A
Series 1998 (Pre-refunded 10/1/08)	5.500	%	10/1/23		1,510,000		1,537,527	A
Series 2007B	5.000	%	10/1/27		1,135,000		1,054,301
City of Baltimore, Maryland, (Mayor and City Council of Baltimore), Project and Refunding Revenue Bonds (Wastewater Projects)
Series 1994A (FGIC insured)	5.000	%	7/1/22		1,910,000		1,950,034
Series 1996A (Pre-refunded 7/1/09)	5.500	%	7/1/26		1,000,000		1,046,520	A
City of Baltimore, Maryland, (Mayor and City Council of Baltimore), Project and Refunding Revenue Bonds (Water Projects)
Series 1994A	5.000	%	7/1/24		3,800,000		3,917,458
Series 1994A	5.000	%	7/1/24		1,890,000		1,923,623

10 Annual Report to Shareholders

Portfolio of Investments — Continued

Legg Mason Maryland Tax-Free Income Trust — Continued

	Rate		Maturity Date	Par		Value
Maryland — Continued
City of Baltimore, Maryland, Project Revenue Bonds, Series 2007 C (AMBAC insured)	5.000	%	7/1/23	$	1,000,000	$	1,023,730
Community Development Administration, Maryland Department of Housing and Community Development Residential Revenue Bonds
Series 1999D AMT	5.375	%	9/1/24		2,000,000		2,001,400
Series 2001B AMT	5.375	%	9/1/22		310,000		310,208
Series 2001H AMT	5.200	%	9/1/22		1,790,000		1,782,196
Series 2007D AMT	4.750	%	9/1/27		2,000,000		1,811,200
Department of Transportation of Maryland, Consolidated Transportation Bonds, Series 2002	5.500	%	2/1/15		3,000,000		3,393,420
Frederick County, Maryland, GO Bonds, Public Facilities Refunding Bonds, Series 1998A	5.000	%	7/1/15		1,000,000		1,104,700
Howard County, Maryland, GO Bonds, Consolidated Public Improvement Project and Refunding Bonds, Series 2004A	5.000	%	8/15/19		1,000,000		1,095,210
IDA of Prince George’s County, Maryland, Subordinated Lease Revenue Bonds (Upper Marlboro Justice Center Expansion Project), (MBIA insured)	5.125	%	6/30/15		3,340,000		3,574,067
Series 2003B
Series 2003B	5.000	%	6/30/19		1,000,000		1,038,710
Maryland Economic Development Corporation, Economic Development Revenue (Lutheran World Relief Inc. and Immigration and Refugee Service), Series 2007	5.250	%	4/1/29		565,000		528,851
Maryland Economic Development Corporation, Utility Infrastructure Revenue Bonds (University of Maryland, College Park Project), Series 2001 (AMBAC insured)	5.375	%	7/1/16		985,000		1,046,198

Annual Report to Shareholders 11

	Rate		Maturity Date	Par		Value
Maryland — Continued
Maryland Health and Higher Educational Facilities Authority, Refunding Revenue Bonds, Kennedy Krieger Issue, Series 1997	5.125	%	7/1/22	$	3,000,000	$	2,866,770
Maryland Health and Higher Educational Facilities Authority, Refunding Revenue Bonds, MedStar Health Issue, Series 2004	5.500	%	8/15/25		785,000		778,877
Maryland Health and Higher Educational Facilities Authority, Refunding Revenue Bonds, The Johns Hopkins University Issue
Series 1997	5.625	%	7/1/17		1,000,000		1,022,560
Series 1998	6.000	%	7/1/08		1,000,000		1,010,490
Series 1998	5.125	%	7/1/20		3,000,000		3,070,770
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Board of Child Care Issue, Series 2002	5.500	%	7/1/18		1,110,000		1,155,910
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Calvert Health Systems Issue, Series 2004	5.500	%	7/1/39		2,000,000		1,996,840
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Carroll County General Hospital Issue
Series 2002	5.750	%	7/1/22		1,000,000		1,016,450
Series 2002	6.000	%	7/1/26		2,000,000		2,040,280
Series 2002	5.750	%	7/1/27		1,050,000		1,057,360
Series 2002	5.800	%	7/1/32		2,000,000		2,002,780
Series 2002	6.000	%	7/1/37		1,000,000		1,008,450
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, College of Notre Dame of Maryland Issue, Series 1998 (MBIA insured)	5.300	%	10/1/18		925,000		1,011,913
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Hebrew Home of Greater Washington Issue, Series 2002	5.800	%	1/1/32		2,250,000		2,257,267

12 Annual Report to Shareholders

Portfolio of Investments — Continued

Legg Mason Maryland Tax-Free Income Trust — Continued

	Rate		Maturity Date	Par		Value
Maryland — Continued
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Helix Health Issue, Series 1997 (AMBAC insured)	5.125	%	7/1/11	$	2,000,000	$	2,156,320
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Howard County General Hospital Issue, Series 1993	5.500	%	7/1/21		2,825,000		2,839,436
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Johns Hopkins Medicine, Howard County General Hospital Acquisition Issue, Series 1998 (MBIA insured)	5.000	%	7/1/29		2,000,000		1,974,080
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, LifeBridge Health Issue, Series 2004A (Pre-refunded 7/1/14)	5.250	%	7/1/18		1,640,000		1,817,235	A
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Loyola College Issue, Series 2006A	5.000	%	10/1/40		2,000,000		1,944,000
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Maryland Institute College of Art Issue, Series 2006	5.000	%	6/1/30		3,500,000		3,165,015
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Peninsula Regional Medical Center Issue, Series 2006	5.000	%	7/1/26		2,435,000		2,361,098
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Suburban Hospital Issue, Series 2004A	5.500	%	7/1/16		500,000		530,855
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, The Johns Hopkins Hospital Issue
Series 1990	0.000	%	7/1/19		4,000,000		2,333,680	B
Series 2001	5.000	%	5/15/12		1,500,000		1,582,770

Annual Report to Shareholders 13

	Rate		Maturity Date	Par		Value
Maryland — Continued
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, The Johns Hopkins University Issue, Series 2004A	5.000	%	7/1/33	$	3,000,000	$	2,978,490
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, Union Hospital of Cecil County Issue, Series 2002	5.500	%	7/1/22		250,000		254,043
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, University of Maryland Medical System Issue
Series 2000 (Pre-refunded 7/1/10)	6.750	%	7/1/30		1,250,000		1,381,650	A
Series 2001 (Pre-refunded 7/1/11)	5.750	%	7/1/21		3,000,000		3,271,980	A
Series 2002 (Pre-refunded 7/1/12)	6.000	%	7/1/32		1,000,000		1,116,280	A
Maryland Health And Higher Educational Facilities Authority, Revenue Bonds, Washington County Hospital Issue
Series 2008	4.000	%	1/1/15		500,000		474,645
Series 2008	4.750	%	1/1/16		1,000,000		982,770
Series 2008	6.000	%	1/1/43		1,000,000		973,860
Maryland IDA, Economic Development Revenue Bonds (National Aquarium in Baltimore Facility), Series 2002B	5.000	%	11/1/19		500,000		514,045
Maryland IDA, Refunding Revenue Bonds (American Center for Physics Headquarters Facility), Series 2001	5.250	%	12/15/15		320,000		343,917
Mayor and City Council of Baltimore (Cityof Baltimore, Maryland), GO Bonds, Consolidated Public Improvement Refunding Bonds, Series 1995A (FGICinsured)	0.000	%	10/15/11		940,000		760,526	B
Mayor and City Council of Baltimore, Port Facilities Revenue Bonds (Consolidation Coal Sales Company Project)
Series 1984A	6.500	%	10/1/11		5,000,000		5,088,700
Series 1984B	6.500	%	10/1/11		1,000,000		1,017,740

14 Annual Report to Shareholders

Portfolio of Investments — Continued

Legg Mason Maryland Tax-Free Income Trust — Continued

	Rate		Maturity Date	Par		Value
Maryland — Continued
Montgomery County, Maryland, GO Bonds, Consolidated Public Improvement, Refunding Bonds
Series 1992A	0.000	%	7/1/10	$	3,000,000	$	2,827,470	B
Series 1999A (Pre-refunded 5/1/09)	5.000	%	5/1/18		3,000,000		3,136,230	A
Northeast Maryland Waste Disposal Authority, Solid Waste Refunding Revenue Bonds (Montgomery County Solid Waste Disposal System), Series 2003 AMT (AMBAC insured)	5.500	%	4/1/16		3,425,000		3,623,616
Prince George’s County, Maryland, GO Bonds, Consolidated Public Improvement Bonds, (FSA insured)
Series 1999 (Pre-refunded 10/1/09)	5.500	%	10/1/13		2,000,000		2,124,800	A
Series 1999 (Pre-refunded 10/1/09)	5.500	%	10/1/13		170,000		180,608	A
Queen Anne’s County, Maryland, Public Facilities Refunding Bonds, Series 2005 (MBIA insured)	5.000	%	11/15/16		500,000		545,585
State of Maryland, GO Bonds, State and Local Facilities Loan
Series 2000, First Series	5.500	%	8/1/10		2,000,000		2,143,900
Series 2001, First Series	5.500	%	3/1/15		5,000,000		5,680,750
The Maryland-National Capital Park and Planning Commission, Prince George’s County, Maryland, Park Acquisition and Development GO Bonds, Series 2001Z-2	5.125	%	5/1/21		1,310,000		1,360,029
University System of Maryland Auxiliary Facility and Tuition Revenue Bonds, Series 2006A	5.000	%	10/1/21		2,500,000		2,636,800
Washington Suburban Sanitary District, Maryland, (Montgomery and Prince George’s Counties), Water Supply Refunding Bonds
Series 1997	5.250	%	6/1/16		1,650,000		1,859,352
Series 1997	5.750	%	6/1/17		2,000,000		2,326,140
Series 1997	6.000	%	6/1/18		2,705,000		3,194,794
Series 1997	6.000	%	6/1/19		3,665,000		4,338,627

Annual Report to Shareholders 15

	Rate		Maturity Date	Par		Value
Maryland — Continued
Westminster, Maryland, Education Facilities Refunding Revenue Bonds, (McDaniel College Inc.)
Series 2006	5.000	%	11/1/21	$	1,000,000	$	975,890
Series 2006	5.000	%	11/1/31		2,000,000		1,831,660
							139,273,727
Puerto Rico — 1.3%
Commonwealth of Puerto Rico, GO Bonds, Public Improvement Bonds,
Series 2005A	5.000	%	7/1/25		2,000,000		1,910,780
Total Municipal Bonds (Cost — $136,175,564)							141,184,507
Variable Rate Demand ObligationsD – 4.3%
Alaska — 1.0%
Valdez, Alaska, Marine Terminal Refunding Revenue Bonds, (Exxon Pipeline Co. Project) Series 2001 VRDN	0.860	%	4/1/08		1,500,000		1,500,000
Maryland — 3.3%
Baltimore County, Maryland, Economic Development Revenue, (Garrison Forest School Inc. Project), Series 2006 VRDN	1.200	%	4/1/08		500,000		500,000
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds Series 1985 B VRDN	2.030	%	4/2/08		500,000		500,000
Maryland Health and Higher Educational Facilities Authority, Revenue Bonds, University of Maryland Medical System Issue
Series 2004 (AMBAC insured)	8.000	%	4/3/08		2,150,000		2,150,000
Series 2006E VRDN (FGIC insured)	7.000	%	4/3/08		800,000		800,000

16 Annual Report to Shareholders

Portfolio of Investments — Continued

Legg Mason Maryland Tax-Free Income Trust — Continued

	Rate		Maturity Date	Par		Value
Maryland — Continued
Maryland Stadium Authority Sports Facilities Lease Revenue (Football Stadium) Series 2007 VRDN	2.000	%	4/3/08	$	970,000	$	970,000
							4,920,000
Total Variable Rate Demand Obligations (Cost — $6,420,000)							6,420,000
Total Investments — 98.8% (Cost — $142,595,564)E							147,604,507
Other Assets Less Liabilities — 1.2%							1,787,743
Net Assets — 100.0%						$	149,392,250

^A Pre-refunded bond — Bonds are referred to as pre-refunded when the issue has been advance refunded by a subsequent issue. The original issue is usually escrowed with U.S. Treasury securities in an amount sufficient to pay the interest, principal and call premium, if any, to the earliest call date. On that call date, the bond “matures.” The pre-refunded date is used in determining weighted average portfolio maturity.

^B Zero coupon bond — A bond with no periodic interest payments which is sold at such a discount as to produce a current yield to maturity.

^C The coupon rates shown on variable rate securities are the rates at March 31, 2008. These rates vary with the weighted average coupon of the underlying loans.

^D The rate shown is the rate as of March 31, 2008, and the maturity shown is the longer of the next interest readjustment date or the date the original principal amount owed can be recovered through demand. E At March 31, 2008, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

Gross unrealized appreciation	$	6,566,915
Gross unrealized depreciation		(1,630,362	)
Net unrealized appreciation	$	4,936,553

See notes to financial statements.

Annual Report to Shareholders 17

Statement of Assets and Liabilities

Legg Mason Maryland Tax-Free Income Trust

March 31, 2008

Assets:
Investment securities at market value (cost – $136,175,564)			$	141,184,507
Short-term securities at value (cost – $6,420,000)				6,420,000
Cash				85,036
Interest receivable				2,059,867
Receivable for fund shares sold				185,268
Other assets				1,404
Total assets				149,936,082
Liabilities:
Income distribution payable	$	239,053
Payable for fund shares repurchased		180,851
Accrued distribution and service fees		31,303
Accrued management fee		25,068
Accrued expenses		67,557
Total liabilities				543,832
Net Assets			$	149,392,250
Net assets consist of:
Accumulated paid-in-capital			$	144,545,929
Undistributed net investment income				22,343
Accumulated net realized loss on investments				(184,965	)
Unrealized appreciation of investments				5,008,943
Net Assets			$	149,392,250
Net Asset Value Per Share:
Primary Class (9,401,575 shares outstanding)			$	15.89

See notes to financial statements.

18 Annual Report to Shareholders

Statement of Operations

Legg Mason Maryland Tax-Free Income Trust

For the Year Ended March 31, 2008

Investment Income:
Interest				$	7,194,103
Expenses:
Management fees	$	815,469
Distribution and service fees:
Primary Class		370,668
Audit and legal fees		39,381
Custodian fees		35,490
Trustees’ fees and expenses		38,839
Registration fees		17,709
Reports to shareholders		28,868
Transfer agent and shareholder servicing expense		36,087
Other expenses		40,830
		1,423,341
Less: Fees waived		(374,514	)
Compensating balance credits		(10,958	)
Net expenses					1,037,869
Net Investment Income					6,156,234
Net Realized and Unrealized(Loss) on Investments:
Net realized loss on investments		(184,965	)
Change in unrealized appreciation/(depreciation) of investments		(3,318,666	)
Net Realized and Unrealized Loss on Investments					(3,503,631	)
Change in Net Assets Resulting From Operations				$	2,652,603

See notes to financial statements.

Annual Report to Shareholders 19

Statement of Changes in Net Assets

Legg Mason Maryland Tax-Free Income Trust

	For the Year Ended March 31, 2008			For the Year Ended March 31, 2007
Change in Net Assets:
Net investment income	$	6,156,234		$	5,949,620
Net realized gain/(loss)		(184,965	)		289,314
Change in unrealized appreciation/(depreciation)		(3,318,666	)		206,354
Change in net assets resulting from operations		2,652,603			6,445,288
Distributions to shareholders from:
Net investment income:
Primary Class		(6,156,234	)		(5,949,619	)
Net realized gain on investments:
Primary Class		(26,781	)		(289,334	)
Change in net assets from fund share transactions:
Primary Class		8,363,838			(1,492,371	)
Change in net assets		4,833,426			(1,286,036	)
Net Assets:
Beginning of year		144,558,824			145,844,860
End of year	$	149,392,250		$	144,558,824
Undistributed net investment income	$	22,343		$	22,376

See notes to financial statements.

20 Annual Report to Shareholders

Financial Highlights

Legg Mason Maryland Tax-Free Income Trust

For a share of each class of capital stock outstanding:

Primary Class:

	Years Ended March 31,
	2008			2007			2006			2005			2004
Net asset value, beginning of year	$	16.28		$	16.25		$	16.40		$	16.77		$	16.63
Investment operations:
Net investment income		.67	A		.68	A		.67			.65			.68
Net realized and unrealized gain/(loss)		(.39	)		.06			(.15	)		(.28	)		.15
Total from investment operations		.28			.74			.52			.37			.83
Distributions from:
Net investment income		(.67	)		(.68	)		(.67	)		(.66	)		(.69	)
Net realized gain on investments		—	B		(.03	)		—	B		(.08	)		—
Total distributions		(.67	)		(.71	)		(.67	)		(.74	)		(.69	)
Net asset value, end of year	$	15.89		$	16.28		$	16.25		$	16.40		$	16.77
Total return		1.76	%		4.64	%		3.22	%		2.22	%		5.06	%
Ratios to Average Net Assets:C
Total expenses		.96	%		.97	%		.97	%		.93	%		.95	%
Expenses net of waivers, if any		.71	%		.70	%		.70	%		.70	%		.70	%
Expenses net of all reductions		.70	%		.70	%		.70	%		.70	%		.70	%
Net investment income		4.15	%		4.16	%		4.10	%		3.91	%		4.05	%
Supplemental Data:
Portfolio turnover rate		6.30	%		8.9	%		4.7	%		9.2	%		7.5	%
Net assets, end of year (in thousands)	$	149,392		$	144,559		$	145,845		$	156,066		$	169,741

^A Computed using average daily shares outstanding.

^B Amount less than $.01 per share.

^C Total expenses reflects operating expenses prior to any voluntary expense waivers and/or compensating balance credits. Expenses net of waivers reflects total expenses before compensating balance credits but net of any voluntary expense waivers. Expenses net of all reductions reflects expenses less any compensating balance credits and/or voluntary expense waivers.

See notes to financial statements.

Annual Report to Shareholders 21

Notes to Financial Statements

Legg Mason Tax-Free Income Trust Fund

1. Organization and Significant Accounting Policies:

The Legg Mason Tax-Free Income Fund (“Trust”), consisting of the Maryland Tax-Free Income Trust (“Maryland Tax-Free”) (“Fund”), is registered under the Investment Company Act of 1940, as amended, (“1940 Act”) as an open-end management investment company. The Fund is non-diversified.

The Fund consists of two classes of shares: Primary Class and Institutional Class. The Institutional Class of the Fund is not currently active.

Preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements:

Security Valuation

The Fund’s securities are valued on the basis of readily available market quotations or, lacking such quotations, at fair value as determined under policies approved by and under the general oversight of the Board of Trustees. In determining fair value, all relevant qualitative and quantitative factors known to the Fund are considered. These factors are subject to change over time and are reviewed periodically. A Fund may use fair value pricing instead of market quotations to value one or more securities if the Fund believes that, because of special circumstances, doing so would more accurately reflect the prices the Fund would expect to realize on the current sale of those securities. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from quoted or published values or from the values that would have been used had a ready market for the investments existed, and the differences could be material.

Maryland Tax-Free follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting Maryland and certain of its public bodies and municipalities may affect the ability of issuers within that state to pay interest on, or repay principal of, municipal obligations held by the Fund.

Security Transactions

Security transactions are accounted for as of the trade date. Realized gains and losses from security transactions are reported on an identified cost basis for both financial reporting and federal income tax purposes.

22 Annual Report to Shareholders

Notes to Financial Statements — Continued

Legg Mason Tax-Free Income Trust Fund — Continued

For the year ended March 31, 2008, security transactions (excluding short-term investments) were:

Purchases	Proceeds From Sales
$18,597,062	$	8,820,649

Investment Income and Distributions to Shareholders

Interest income and expenses are recorded on the accrual basis. Bond premiums and discounts are amortized for financial reporting and federal income tax purposes. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income are declared daily and paid monthly. When available, net capital gain distributions are declared and paid annually in June. An additional distribution may be made in December, to the extent necessary, in order to comply with Federal excise tax regulations. Distributions are determined in accordance with federal income tax regulations, which may differ from those determined in accordance with accounting principles generally accepted in the United States of America. Accordingly, periodic reclassifications are made within the Fund’s capital accounts to reflect income and gains available for distribution under federal income tax regulations.

Compensating Balance Credits

The Fund has an arrangement with its custodian bank, whereby a portion of the custodian’s fee is paid indirectly by credits earned on the Fund’s cash on deposit with the bank. This deposit arrangement is an alternative to purchasing overnight investments.

Credit and Market Risk

Investments in structured securities collateralized by residential real estate mortgages are subject to certain credit and liquidity risks. When market conditions result in an increase in default rates of the underlying mortgages and the foreclosure values of underlying real estate properties are materially below the outstanding amount of these underlying mortgages, collection of accrued interest and principal on these investments may be doubtful. Such market conditions may significantly impair the value of these investments resulting in a lack of correlation between their credit ratings and values.

Other

In the normal course of business, the Fund enters into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is dependent upon claims that may be made against the Fund in the future and, therefore, cannot be estimated; however, based on experience, the risk of material loss from such claims is considered remote.

Annual Report to Shareholders 23

2. Federal Income Taxes:

It is the Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute substantially all of its taxable income and net realized gains, if any, to shareholders each year. Therefore, no federal income tax provision is required in the Fund’s financial statements.

Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years and has concluded that as of March 31, 2008, no provision for income tax would be required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Reclassifications:

Accounting principles generally accepted in the United States of America require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. During the current year, the following reclassifications^A have been made:

Undistributed Net Investment Income	Accumulated Net Realized Loss
$(33)	$	33

^A Reclassifications are primarily due to book/tax differences in the treatment of various items.

24 Annual Report to Shareholders

Notes to Financial Statements — Continued

Legg Mason Tax-Free Income Trust Fund — Continued

Distributions to Shareholders:

The tax character of distributions paid during the fiscal years ended March 31, were as follows:

	2008		2007
Distributions paid from:
Tax-Exempt Income	$	6,129,286	$	5,893,848
Ordinary Income		26,981		55,771
Net Long-term Capital Gains		26,748		289,334
Total Taxable Distributions	$	53,729	$	345,105
Total Distributions Paid	$	6,183,015	$	6,238,953

Accumulated Earnings on a Tax Basis:

As of March 31, 2008, the components of accumulated earnings on a tax basis were as follows:

Undistributed tax-exempt income — net	$	63,026
Capital loss carryforward*		(112,575	)
Other book/tax temporary differences		(40,683	)A
Unrealized appreciation/(depreciation)		4,936,553	B
Total accumulated earnings/(losses) — net	$	4,846,321

* The Fund had the following net capital loss carryforward remaining:

Year of Expiration	Amount
3/31/16	$	(112,575	)

This amount will be available to offset any future taxable capital gains.

^A Other book/tax temporary differences are attributable primarily to book/tax differences in the timing of the deductibility of various expenses.

^B The difference between book-basis and tax-basis unrealized appreciation / (depreciation) is attributable primarily to the tax deferral of losses on wash sales.

Tax Cost of Investments:

As of March 31, 2008, the aggregate cost of investments for federal income tax purposes was $142,667,954.

Annual Report to Shareholders 25

3. Transactions With Affiliates:

The Trust has an investment advisory and management agreement with Legg Mason Fund Adviser, Inc. (“LMFA”). Pursuant to the agreement, LMFA provides the Fund with investment management and administrative services for which the Fund pays a fee, computed daily and payable monthly, at an annual rate of 0.55% of the Fund’s average daily net assets.

LMFA has voluntarily agreed to waive its fees in any month to the extent the Fund’s expenses (exclusive of taxes, interest, brokerage and extraordinary expenses) exceed during that month certain annual rates of the Fund’s average daily net assets. This waiver is currently expected to continue until August 1, 2008, but may be terminated at any time. The following chart summarizes the management fees and expense limitations for the Fund:

					Year Ended March 31, 2008
Fund	Advisory Fee		Expense Limitation		Management Fees Waived
Maryland Tax-Free	0.55	%	0.70	%	$	374,514

On June 8, 2007, Legg Mason Investment Counsel, LLC (“LMIC”) replaced Legg Mason Investment Counsel & Trust Co., N.A. (“LM Trust”) as Investment Sub-Adviser of the Fund. LMIC is a wholly owned subsidiary of LM Trust, which is a wholly owned subsidiary of Legg Mason, Inc., and the advisory personnel who managed the Fund as employees of LM Trust continue to do so as employees of LMIC. The compensation arrangement between LMFA, the Fund’s Investment Manager, and LMIC is identical to the previous arrangement between LMFA and LM Trust. The Board of Trustees of the Fund approved the replacement of LM Trust by LMIC at a meeting held on May 24, 2007.

LMIC serves as investment adviser to the Fund pursuant to a sub-advisory agreement with LMFA. LMFA (not the Fund) pays a fee, computed daily and payable monthly, at an annual rate of 0.50% of the Fund’s average daily net assets.

Legg Mason Investor Services, LLC (“LMIS”) serves as distributor of the Fund. LMIS receives an annual distribution fee and an annual service fee, based on the Fund’s Primary Class’s average daily net assets, computed daily and payable monthly as follows:

Fund	Distribution Fee		Service Fee
Maryland Tax-Free	0.125	%	0.125	%

LM Fund Services, Inc. (“LMFS”) a registered transfer agent, had an agreement with the Fund’s transfer agent pursuant to which LMFS received payments from the Fund’s transfer agent with respect to accounts where third parties provided certain services to

26 Annual Report to Shareholders

Notes to Financial Statements — Continued

Legg Mason Tax-Free Income Trust Fund — Continued

the Fund. These payments were used to offset the Fund’s expenses for such services. These payments totaled $4,123 for the year ended March 31, 2008. The agreement was terminated effective August 1, 2007, and LMFS no longer receives payments from the Fund’s transfer agent.

LMFA, LM Trust, LMIS and LMFS are corporate affiliates and wholly owned subsidiaries of Legg Mason, Inc.

Under a Deferred Compensation Plan (the “Plan”), trustees may elect to defer receipt of all or a specified portion of their compensation. A participating trustee may select one or more funds in which his or her deferred trustee’s fees will be deemed to be invested. Deferred amounts remain in the Fund until distributed in accordance with the Plan.

4. Line of Credit:

The Fund, along with certain other Legg Mason Funds, participates in a $400 million line of credit (“Credit Agreement”) to be used for temporary or emergency purposes. Pursuant to the Credit Agreement, each participating fund is liable only for principal and interest payments related to borrowings made by that fund. Borrowings under the Credit Agreement bear interest at a rate equal to the prevailing federal funds rate plus the federal funds rate margin. The Fund did not utilize the line of credit during the fiscal year ended March 31, 2008.

5. Fund Share Transactions:

At March 31, 2008, there were unlimited shares authorized at $.001 par value for the Fund. Share transactions for the Fund were as follows:

	Year Ended March 31, 2008					Year Ended March 31, 2007
	Shares		Amount			Shares		Amount
Primary Class
Shares sold	1,646,528		$	26,501,372		945,860		$	15,426,453
Shares issued on reinvestment	280,578			4,506,397		270,652			4,404,733
Shares repurchased	(1,407,628	)		(22,643,931	)	(1,311,756	)		(21,323,557	)
Net Increase (Decrease)	519,478		$	8,363,838		(95,244	)	$	(1,492,371	)

6. Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation 48 (“FIN 48” or the “Interpretation”), Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement 109. FIN 48 supplements FASB Statement 109, Accounting for Income Taxes and establishes financial reporting rules

Annual Report to Shareholders 27

regarding recognition, measurement, presentation, and disclosure in its financial statements of tax positions that a fund has taken or expects to take on a tax return. FIN 48 became effective for fiscal periods beginning after December 15, 2006. Effective April 1, 2007, the Fund adopted FIN 48. There was no material impact to the financial statements or disclosure thereto as a result of this adoption.

In September 2006, the FASB released Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (“FAS 157”). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Management has evaluated the implications of FAS 157 and does not believe the adoption of FAS 157 will materially impact the amounts recorded in the financial statements, however, additional disclosure will be required in subsequent reports.

In March 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about a fund’s derivative and hedging activities, including how such activities are accounted for and their effect on a fund’s financial position, performance and cash flows. Management is currently evaluating the impact the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.

28 Annual Report to Shareholders

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Legg Mason Tax-Free Income Fund and Shareholders of Maryland Tax-Free Income Trust:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Maryland Tax-Free Income Trust (comprising the Legg Mason Tax-Free Income Fund, the “Fund”) at March 31, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 March 31, 2008 by correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Baltimore, Maryland

May 27, 2008

Annual Report to Shareholders 29

Important Tax Information (Unaudited)

99.57% and 99.53% of the net investment income distributions paid monthly by the Fund from April 2007 through December 2007 and from January 2008 through March 2008, respectively, qualify as tax-exempt interest dividends for Federal income tax purposes.

Additionally, the Fund paid a long-term capital gain distribution of $0.00289 per share to shareholders of record on June 14th, 2007.

Please retain this information for your records.

30 Annual Report to Shareholders

Trustees and Officers

The table below provides information about each of the Trust’s trustees and officers, including biographical information about their business experience and information about their relationships with Legg Mason, Inc. and its affiliates. The mailing address of each trustee and officer is 100 Light Street, Attn: Fund Secretary, 32nd Floor, Baltimore, Maryland 21202.

Name, (Year of Birth) and Position with Trust	Term of Office and Length of Time ServedA	Number of Funds in Fund Complex Overseen	Other Directorships Held	Principal Occupation(s) During the Past Five Years
INDEPENDENT TRUSTEESB :
Hearn, Ruby P. (1940) Trustee	Since 2004	14	None	Senior Vice President Emerita of The Robert Wood Johnson Foundation (non-profit) since 2001. Formerly: Senior Vice President of The Robert Wood Johnson Foundation (1996-2001).
Lehman, Arnold L. (1944) Lead Independent Trustee	Since 1990	14	None	Director of the Brooklyn Museum since 1997; Trustee of American Federation of Arts since 1998. Formerly: Director of The Baltimore Museum of Art (1979- 1997).
Masters, Robin J.W. (1955) Trustee	Since 2002	14	Director of Cheyne Capital International Limited (investment advisory firm). Director/Trustee of Legg Mason Asian Funds plc, Legg Mason Institutional Funds plc, WA Fixed Income Funds plc., and Western Asset Debt Securities Fund plc.	Retired. Formerly: Chief Investment Officer of ACE Limited (insurance) (1986-2000).
McGovern, Jill E. (1944) Trustee	Since 1990	14	None	Senior Consultant, American Institute for Contemporary German Studies (AICGS) since 2007. Formerly: Chief Executive Officer of The Marrow Foundation (non-profit) (1993- 2007); Executive Director of the Baltimore International Festival (1991-1993); Senior Assistant to the President of The Johns Hopkins University (1986-1990).

Annual Report to Shareholders 31

Name, (Year of Birth) and Position with Trust	Term of Office and Length of Time ServedA	Number of Funds in Fund Complex Overseen	Other Directorships Held	Principal Occupation(s) During the Past Five Years
Mehlman, Arthur S. (1942) Trustee	Since 2002	Director/Trustee of all Legg Mason funds consisting of 14 portfolios; Director/Trustee of the Royce Family of Funds consisting of 27 portfolios.	Director of Municipal Mortgage & Equity, LLC.	Retired. Formerly: Partner, KPMG LLP (international accounting firm) (1972-2002).
O’Brien, G. Peter (1945) Trustee	Since 1999	Director/Trustee of all Legg Mason funds consisting of 14 portfolios; Director/Trustee of the Royce Family of Funds consisting of 27 portfolios.	Director of Technology Investment Capital Corp.	Retired. Trustee Emeritus of Colgate University; Board Member, Hill House, Inc. (residential home care); Board Member, Bridges School (pre- school). Formerly: Managing Director, Equity Capital Markets Group of Merrill Lynch & Co. (1971-1999).
Rowan, S. Ford (1943) Trustee	Since 2002	14	None	Chairman, National Center for Critical Incident Analysis, National Defense University, since 2004; Director of Santa Fe Institute (scientific research institute) since 1999. Formerly: Consultant, Rowan & Blewitt Inc. (management consulting) (1984- 2007).
Tarola, Robert M. (1950) Trustee	Since 2004	14	None	Senior Vice President of W. R. Grace & Co. (specialty chemicals) since 1999. Member, Standing Advisory Group of the Public Company Accounting Oversight Board since 2007. Formerly: Chief Financial Officer of W. R. Grace & Co. (specialty chemicals) (1999- 2008) and of MedStar Health, Inc. (healthcare) (1996-1999); Partner, Price Waterhouse, LLP (accounting and auditing) (1984-1996).

32 Annual Report to Shareholders

Trustees and Officers — Continued

Name, (Year of Birth) and Position with Trust	Term of Office and Length of Time ServedA	Number of Funds in Fund Complex Overseen	Other Directorships Held	Principal Occupation(s) During the Past Five Years
INTERESTED TRUSTEESC :
Curley Jr., John F. (1939) Chairman and Trustee	Since 1990	14	None	Chairman of the Board of all Legg Mason Funds. Formerly: Vice Chairman and Director of Legg Mason, Inc. and Legg Mason Wood Walker, Incorporated (1982- 1998); Director of Legg Mason Fund Adviser, Inc. (1982-1998) and Western Asset Management Company (1986-1998) (each a registered investment adviser).
Fetting, Mark R. (1954) President and Trustee	President since 2001; and Trustee since 2002	President and Director/Trustee of all Legg Mason funds consisting of 14 portfolios; Director/Trustee of the Royce Family of Funds consisting of 27 portfolios.	None	President, CEO and Director of Legg Mason, Inc. since 2008. Formerly: Senior Executive Vice President of Legg Mason, Inc., Director and/or officer of various Legg Mason, Inc. affiliates (2000- 2008). Formerly: Division President and Senior Officer of Prudential Financial Group, Inc. and related companies, including fund boards and consulting services to subsidiary companies (1991- 2000); Partner, Greenwich Associates (financial consulting); Vice President, T. Rowe Price Group, Inc.
EXECUTIVE OFFICERSD :
Karpinski, Marie K. (1949) Vice President and Chief Financial Officer	Since 1990	14	None	Vice President and Chief Financial Officer of all Legg Mason Funds. Vice President and Treasurer of Legg Mason Fund Adviser, Inc. Vice President and Principal Financial and Accounting Officer of Western Asset Funds, Inc., Western Asset Income Fund and Western Asset Premier Bond Fund; Treasurer and Principal Financial and Accounting Officer of Western Asset/Claymore Inflation-Linked Securities & Income Fund (2003- present), and Western Asset/Claymore Inflation-Linked Opportunities & Income Fund (2004-present).

Annual Report to Shareholders 33

Name, (Year of Birth) and Position with Trust	Term of Office and Length of Time ServedA	Number of Funds in Fund Complex Overseen	Other Directorships Held	Principal Occupation(s) During the Past Five Years
Merz, Gregory T. (1958) Vice President and Chief Legal Officer	Since 2003	14	None	Vice President and Deputy General Counsel of Legg Mason, Inc. since 2003. Formerly: Associate General Counsel, Fidelity Investments (1993-2002).
Becker, Ted P. (1951) Vice President and Chief Compliance Officer	Since 2007	14	None	Director of Global Compliance at Legg Mason (2006 to present); Managing Director of Compliance at Legg Mason & Co. (2005 to present); Chief Compliance Officer with certain mutual funds associated with Legg Mason & Co. (since 2006); Chief Compliance Officer of Legg Mason Partners Funds and certain affiliates; Managing Director of Compliance at Citigroup Asset Management (2002 to 2005). Prior to 2002, Managing Director-Internal Audit & Risk Review at Citigroup Inc.
Wachterman, Richard M. (1947) Secretary	Since 2004	14	None	Associate General Counsel of Legg Mason, Inc. since 2004. Formerly: Managing Director, Victory Capital Management, Inc. (investment management) (1993- 2003).

34 Annual Report to Shareholders

Trustees and Officers — Continued

Name, (Year of Birth) and Position with Trust	Term of Office and Length of Time ServedA	Number of Funds in Fund Complex Overseen	Other Directorships Held	Principal Occupation(s) During the Past Five Years
Morris, Erin K. (1966) Treasurer	Since 2006	3	None	Assistant Vice President and Manager, Funds Accounting, Legg Mason & Co., LLC (2005-present); Assistant Vice President (2002- 2005) and Manager, Funds Accounting (2000-2005), of Legg Mason Wood Walker, Incorporated; Treasurer (2006-present) of Legg Mason Income Trust, Inc., Legg Mason Tax-Free Income Fund, Western Asset Income Fund and Western Asset Premier Bond Fund; Assistant Treasurer Western Asset/Claymore Inflation-Linked Opportunities & Income Fund (2004-present), Western Asset/Claymore Inflation-Linked Securities & Income Fund (2003- present) and Legg Mason Partners fixed income Funds (2007-present), Assistant Treasurer of the Western Asset Income Fund (2001-2006), Western Asset Funds, Inc. (2001- 2006), Western Asset Premier Bond Fund (2001-2006), Legg Mason Income Trust, Inc. (2001-2006), and Legg Mason Tax-Free Income Fund (2001-2006).

ADDITIONAL INFORMATION ABOUT THE TRUST’S TRUSTEES

AND OFFICERS IS CONTAINED IN THE STATEMENT OF ADDITIONAL

INFORMATION, AVAILABLE WITHOUT CHARGE UPON REQUEST BY

CALLING 1-800-822-5544 OR ON THE

SECURITIES AND EXCHANGE COMMISSION

WEBSITE (http://www.sec.gov)

^A Officers of the Trust are elected annually to serve until their successors are elected and qualified. Trustees of the Trust serve a term of indefinite length until their retirement, resignation or removal, and stand for re-election by shareholders only as and when required by the 1940 Act.

^B Each of the Independent Trustees serves on the standing committees of the Board of Trustees, which include the Audit Committee (chair: Arthur Mehlman), the Nominating Committee (co-chairs: Peter O’Brien and Jill McGovern), and the Independent Trustees Committee (chair: Arnold Lehman).

^C Mr. Curley and Mr. Fetting are considered to be interested persons, as defined in the 1940 Act, of the Trust on the basis of their current or former employment with the Trust’s investment advisor or its affiliated entities (including the Trust’s principal underwriter) and Legg Mason Inc., the parent holding company of these entities as well as their ownership of Legg Mason Inc. stock.

^D Officers of the Trust are interested persons (as defined in the 1940 Act).

Annual Report to Shareholders 35

Board Consideration of Legg Mason Maryland Tax-Free Income Trust’s Investment Advisory and Management Agreement and Sub-Advisory Agreement

At its November 2007 meeting, the Board of Trustees (the “Board”), including all of the Independent Trustees, approved the continuation of the Investment Advisory and Management Agreement between Legg Mason Fund Adviser, Inc. (the “Manager”) and Legg Mason Tax-Free Income Fund on behalf of Legg Mason Maryland Tax-Free Income Trust (“Maryland Tax-Free”), and the Sub-Advisory Agreement between the Manager and Legg Mason Investment Counsel, LLC (the “Sub-Adviser”) (each an “Agreement”). In voting to approve the continuation of each Agreement, the Board considered whether continuance would be in the best interest of Maryland Tax-Free and its shareholders, an evaluation largely based on the nature and quality of the services provided under each Agreement and the overall fairness of each Agreement to Maryland Tax-Free. In considering each Agreement, the Board did not identify any single factor or item of information as all-important or controlling. Based on its evaluation of all material factors, including those described below, the Board concluded that the terms of each Agreement are reasonable and fair and that the continuation of each Agreement is in the best interest of Maryland Tax-Free and its shareholders.

Prior to the Board action, the Independent Trustees met as a committee to consider their recommendation as to continuance of each Agreement. As part of the process to consider each Agreement, legal counsel to Maryland Tax-Free requested certain information from the Manager and the Sub-Adviser on behalf of the Independent Trustees, and in response, the Manager and the Sub-Adviser provided extensive reports that addressed specific factors designed to inform the Board’s consideration of each Agreement. Counsel also provided the Independent Trustees and the Board with a memorandum detailing their responsibilities pertaining to the continuance of each Agreement.

In addition to the November meeting, the Independent Trustees meeting as a committee held an additional meeting in October 2007 at which they reviewed and analyzed materials relating to each Agreement. The Independent Trustees also retained independent consultants to assist them in their review and analysis of each Agreement. The Board meets at least another three times per year in order to oversee the Legg Mason Funds, including meetings at which the portfolio manager of Maryland Tax-Free or others submit or make presentations and discuss performance, compliance and other applicable issues. The Board also drew upon its long association with the Manager, the Sub-Adviser and their personnel and the Board members’ familiarity with their culture and the manner in which the management entities have sought to strengthen and enhance themselves.

With respect to the nature, scope and quality of the services provided, the Board considered the experience and commitment of the Manager’s and the Sub-Adviser’s personnel and their efforts to build and support a strong service team. The Board also

36 Annual Report to Shareholders

considered the nature and quality of the Sub-Adviser’s investment process. In assessing performance, the Board compared Maryland Tax-Free’s returns to the average of an appropriate Lipper category, a specified benchmark index and a peer group of investment companies pursuing similar strategies, all over multiple time periods. The Board noted Maryland Tax-Free’s performance record and the measures that the Manager and the Sub-Adviser were taking in an effort to maintain attractive long-term performance for Maryland Tax-Free. The Board also considered the level of service provided by the Manager to Maryland Tax-Free, including oversight of the transfer agent and the custodian and preparation of regulatory filings. The Board considered the Sub-Adviser’s procedures for executing portfolio transactions for Maryland Tax-Free. The Board also reviewed the Sub-Adviser’s report on its policies and procedures for the selection of brokers and dealers.

In determining whether the terms of each Agreement are reasonable and fair, the Board considered the terms and fee structure of each Agreement. In that connection, the Board considered the costs to the Manager and the Sub-Adviser in providing services to Maryland Tax-Free and profitability for the Manager and its affiliates from their overall association with Maryland Tax-Free. The Board reviewed information about the advisory fee schedule and overall expense ratio of Maryland Tax-Free and comparable fee schedules and expense ratios of a peer group of funds. Although Maryland Tax-Free has not grown to a size where any potential economies of scale might become apparent, the Board satisfied itself that the fees paid by Maryland Tax-Free at its current asset level are appropriate and noted that the Manager has voluntarily waived fees for Maryland Tax-Free. Finally, the Board considered other benefits accruing to the Manager, the Sub-Adviser and their affiliates by virtue of their relationship to Maryland Tax-Free.

After an evaluation of all material factors, including those in the foregoing discussion, the Board concluded that the continuation of each Agreement is in the best interest of Maryland Tax-Free.

Notes

Notes

Fund Information

Investment Manager

Legg Mason Fund Adviser, Inc.

Baltimore, MD

Investment Adviser

Legg Mason Investment Counsel, LLC

Baltimore, MD

Board of Trustees

John F. Curley, Jr., Chairman

Mark R. Fetting, President

Dr. Ruby P. Hearn

Arnold L. Lehman

Robin J.W. Masters

Dr. Jill E. McGovern

Arthur S. Mehlman

G. Peter O’Brien

S. Ford Rowan

Robert M. Tarola

Officers

Marie K. Karpinski, Vice President and Chief Financial Officer

Gregory T. Merz, Vice President and Chief Legal Officer

Ted P. Becker, Vice President and Chief Compliance Officer

Erin K. Morris, Treasurer

Susan C. Curry, Assistant Treasurer

Richard M. Wachterman, Secretary

Peter J. Ciliberti, Assistant Secretary

Transfer and Shareholder Servicing Agent

Boston Financial Data Services

Braintree, MA

Custodian

State Street Bank & Trust Company

Boston, MA

Counsel

Kirkpatrick & Lockhart Preston Gates Ellis LLP

Washington, DC

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP

Baltimore, MD

About the Legg Mason Funds

Equity Funds American Leading Companies Trust Classic Valuation Fund Growth Trust Special Investment Trust U.S. Small-Capitalization Value Trust Value Trust	Legg Mason, Inc., based in Baltimore, Maryland, has built its reputation, at least in part, on the success of the Legg Mason Funds, introduced in 1979. The primary purpose of our funds is to enable investors to diversify their portfolios across various asset classes and, consequently, enjoy the stability and growth prospects generally associated with diversification.
Specialty Fund Opportunity Trust	The success of our funds is contingent on the experience, discipline, and acumen of our fund managers. We believe the quality of our managers is crucial to investment success. Unlike many firms, which focus on a particular asset class or the fluctuations of the market, at Legg Mason we focus on providing a collection of top-notch managers in all the major asset classes.
Global Funds Emerging Markets Trust International Equity Trust Taxable Bond Funds Investment Grade Income Portfolio Limited Duration Bond Portfolio	Information about the policies and procedures that the Fund uses to determine how to vote proxies relating to its portfolio securities is contained in the Statement of Additional Information, available without charge upon request by calling 1-800-822-5544 or on the Securities and Exchange Commission’s (“SEC”) website (http://www.sec.gov). Information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is also available on the SEC’s website or through the Legg Mason Funds’ website at www.leggmason.com/individual investors.
Tax-Free Bond Fund Maryland Tax-Free Income Trust	The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. You may obtain a free copy of the Fund’s portfolio holdings, as filed on Form N-Q, by contacting the Fund at the appropriate phone number, address or website listed below. Additionally, the Fund’s Form N-Q is available on the SEC’s website or may be reviewed and copied at the SEC’s Public Reference Room in Washington D.C. Information about the operation of the Public Reference Room can be obtained by calling 1-800-SEC-0330.

This report must be preceded or accompanied by a free prospectus. Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the Fund. For a free prospectus for this or any other Legg Mason Fund, visit www.leggmason.com/individualinvestors. Please read the prospectus carefully before investing.

Legg Mason Funds	Legg Mason Investor Services—Institutional
For Primary Class Shareholders	For R, FI and I Class Shareholders
c/o BFDS,	c/o BFDS
P.O. Box 55214	P.O. Box 8037
Boston, MA 02205-8504	Boston, MA 02206-8037
800-822-5544	888-425-6432
www.leggmason.com/individualinvestors	www.lminstitutionalfunds.com

Legg Mason Investor Services, LLC, Distributor   A Legg Mason, Inc. subsidiary

LMF030-TN08-2142/A (05/08)

Item 2. Code of Ethics Applicable to Registrant’s Principal Executive Officer and Principal Financial Officer

(a) Legg Mason Tax-Free Income Fund (“Registrant”) has adopted a Code of Ethics, as defined in the instructions to Form N-CSR that applies to the Registrant’s President and Treasurer, which is designed to deter wrongdoing and to promote:

• Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

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• Full, fair, accurate, timely and understandable disclosure in reports and documents the Registrant files with, or submits to, the SEC or in other public communications made by the Registrant;

• Compliance with applicable governmental laws, rules and regulations;

• Prompt internal reporting of violations of the Code of Ethics to an appropriate person or persons identified in the Code of Ethics; and

• Accountability for adherence to the Code of Ethics.

(b) No response required.

(c) Not applicable.

(d) The Registrant has not granted a waiver, including an implicit waiver, from a provision of the Code of Ethics to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions during the period covered by this report.

(e) Not applicable.

(f) A copy of the Code of Ethics is attached as Exhibit 12(a)(1) to this Form N-CSR.

Item 3. Audit Committee Financial Expert

(a)	(1)	The Registrant’s Board of Directors have determined that the Registrant has at least one Audit Committee financial expert serving on its Audit Committee.
(a)	(2)	The Audit Committee’s financial experts are Mr. Arthur S. Mehlman and Mr. Robert M. Tarola. They are “independent” as defined in Form N-CSR Item 3(a)(2).

Item 4. Principal Accounting Fees and Services

(a) Audit Fees

PricewaterhouseCoopers LLP

Fiscal Year Ended March 31, 2007 – $31,795

Fiscal Year Ended March 31, 2008 – $23,750

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(b) Audit-Related Fees

There were no additional fees billed to the Registrant during either of the last two fiscal years in addition to those disclosed in Item 4(a).

There were no fees billed to the Registrant for assurance and related services that required preapproval by the Audit Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the Registrant’s last two fiscal years.

(c) Tax Fees

PricewaterhouseCoopers LLP

Fiscal Year Ended March 31, 2007 - $3,300

Fiscal Year Ended March 31, 2008 - $2,400

Services include preparation of federal and state income tax returns and preparation of excise tax returns.

There were no fees billed to the Registrant for tax services that required preapproval by the Audit Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the Registrant’s last two fiscal years.

(d) All Other Fees

There were no fees billed to the Registrant during either of the last two fiscal years in addition to those disclosed in Item 4(a) through Item 4(c) above.

There were no fees billed to the Registrant for services not included in Items 4(a) through 4(c) above that required preapproval by the Audit Committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the Registrant’s last two fiscal years.

(e)	(1)	The Audit Committee’s policy is to delegate to its chairperson the authority to preapprove items prior to the next meeting of the Committee. Such preapprovals are reported at the next quarterly meeting of the Audit Committee.
	(2)	There were no services provided to the Registrant that were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

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There were no fees billed to the Registrant for services where pre-approval by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X during the Registrant’s last two fiscal years.

(f) The percentage of hours expended by the principal accountant’s engagement to audit the Registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountants’ full-time, permanent employees was zero.

(g) Non-Audit Fees for services rendered to Registrant or Registrant’s investment manager and any entity controlling, controlled by, or under common control with the investment manager.

PricewaterhouseCoopers LLP

Fiscal Year Ended March 31, 2007 – $953,316

Fiscal Year Ended March 31, 2008 – $1,249,000

(h) The members of the Registrant’s Audit Committee have considered whether the non-audit services that were rendered by the Registrant’s principal accountant to the Registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are compatible with maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants

The Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.

Item 6. Schedule of Investments

The schedule of investments in securities of unaffiliated issuers is included in the annual report.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Not applicable.

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Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders

The Nominating Committee will accept recommendations for nominations from shareholders. Shareholders may forward recommendations to the Legal and Compliance Department at 100 Light Street, 32nd Floor, Baltimore, Maryland 21202, Attn.: Fund Secretary.

Item 11. Controls and Procedures

(a) The Registrant’s principal executive and principal financial officers have concluded, based on their evaluation of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within 90 days of the filing date of this report, that the Registrant’s disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the SEC’s rule and forms and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) during the Registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 12. Exhibits

(a) File the exhibits listed below as part of this Form.

(1) The Registrant’s Code of Ethics applicable to Registrant’s principal executive officer and principal financial officer is attached hereto.

(2) Separate certifications for the Registrant’s chief executive officer and chief financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940 are attached hereto.

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(b) Separate certifications for the Registrant’s chief executive officer and chief financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Legg Mason Tax-Free Income Fund
By:	/s/ Mark R. Fetting
Mark R. Fetting
President, Legg Mason Tax-Free Income Fund
Date:	June 5, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

By:	/s/ Mark R. Fetting
Mark R. Fetting
President, Legg Mason Tax-Free Income Fund
Date:	June 5, 2008
By:	/s/ Marie K. Karpinski
Marie K. Karpinski
Vice President and Chief Financial Officer, Legg Mason Tax-Free Income Fund
Date:	June 5, 2008

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