Item 1. Report to Shareholders
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
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February 29, 2004
Certified Annual Report
This report is certified under the Sarbanes-Oxley Act of 2002, which requires
that public companies, including mutual funds, affirm that the information
provided in their annual and semiannual shareholder reports fully and fairly
represents their financial position.
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
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Certified Annual Report
Performance Comparison
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This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
[Graphic Omitted]
MARYLAND SHORT-TERM TAX-FREE BOND FUND
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As of 2/29/04
Maryland Short-Term Tax-Free Bond Fund $14,786
Lipper Short Municipal Debt Funds Average $14,746
Lehman Brothers 3-Year State GO Bond Index $16,217
Lehman Brothers Lipper Short Maryland
3-Year State Municipal Short-Term
GO Bond Debt Funds Tax-Free
Index Average Bond Fund
2/94 $ 10,000 $ 10,000 $ 10,000
2/95 10,262 10,214 10,264
2/96 11,090 10,847 10,930
2/97 11,582 11,268 11,286
2/98 12,196 11,803 11,800
2/99 12,837 12,331 12,327
2/00 13,016 12,508 12,470
2/01 14,017 13,270 13,292
2/02 14,936 13,916 13,999
2/03 15,773 14,448 14,505
2/04 16,217 14,746 14,786
Average Annual Compound Total Return
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Periods Ended 2/29/04 1 Year 5 Years 10 Years
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Maryland Short-Term Tax-Free Bond Fund 1.94% 3.70% 3.99%
Lipper Short Municipal Debt Funds Average 2.11 3.57 3.96
Returns do not reflect taxes that the shareholder may pay on fund distributions
or the redemption of fund shares. Past performance cannot guarantee future
results.
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
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Certified Annual Report
Dear Shareholder,
We are pleased to report that the Maryland Short-Term Tax-Free Bond Fund
generated a respectable 1.94% return for the 12 months ended February 29, 2004.
As shown in the table on the preceding page, we modestly lagged the Lipper Short
Municipal Debt Funds Average during the latest 12-month period but slightly
outperformed the Lipper yardstick for the past five and 10 years. Over the past
12 months, we were challenged to find high-quality, short-term Maryland bonds
with three-year maturities.
As you know, the fund seeks to provide the highest level of income exempt from
federal and Maryland state and local income taxes, consistent with modest
fluctuation in principal value, by investing primarily in short-term,
investment-grade Maryland municipal bonds.
Major Index Returns
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Period Ended 2/29/04 12-Month Return
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Lehman Brothers U.S. Aggregate Index 4.54%
Lehman Brothers Municipal Bond Index 6.30
Lehman Brothers High Yield
Municipal Bond Index 16.15
The Major Index Returns table shows how various bond indexes performed over the
fund's fiscal year. The broad-based Lehman Brothers U.S. Aggregate Index of
taxable investment-grade bonds underperformed Lehman's municipal bond index over
the 12-month period. And as shown in the table, high-yield municipal bonds
generated far and away the best total return over the past year.
This table shows various fund details as of February 29, 2004, compared with one
year earlier. The portfolio's weighted average maturity climbed to 2.5 years
from 2.0, and duration rose to 2.1 years. The portfolio's average quality of its
holdings was unchanged from one year ago at AA+. Despite the falling interest
rate environment, we were able to boost the fund's 30-day standardized yield to
maturity from year-ago levels.
We added to our weighting in general obligation bonds over the past 12 months,
which now account for slightly more than half of the portfolio's assets. We also
modestly increased our holdings in hospital revenue and trimmed our allocation
in solid waste revenue and prerefunded bonds.
Portfolio Characteristics
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Periods Ended 2/28/03 2/29/04
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Price Per Share $5.30 $5.28
Dividends Per Share
for 12 Months 0.15 0.12
30-Day Standardized
Yield to Maturity 1.07% 1.21%
Weighted Average
Maturity (years) 2.0 2.5
Weighted Average Effective
Duration (years) 1.9 2.1
Weighted Average Quality * AA+ AA+
* Based on T. Rowe Price research.
Note: Yield will vary and is not guaranteed.
Top 5 Sectors
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Periods Ended 2/28/03 2/29/04
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General Obligation - Local 30.9% 37.1%
General Obligation - State 15.9 14.1
Hospital Revenue 9.3 9.5
Solid Waste Revenue 8.5 7.7
Prerefunded Bonds 7.5 6.9
Finally, I'm sure you are aware that mutual fund companies have recently come
under scrutiny for their trading policies. The investigations have led to
allegations that executives of several mutual fund companies permitted or
engaged in improper mutual fund trading. In addition, certain intermediaries
that process fund transactions are alleged to have assisted some investors in
executing improper mutual fund trades. I want T. Rowe Price shareholders to know
that we emphatically condemn the abuses that have been revealed or alleged
against other firms in our industry. Our firm has not entered and will not enter
into any agreements with any investors or intermediaries that authorize
after-hours trading or excessive short-term trading in any of our funds. T. Rowe
Price investors can be assured that our firm unequivocally opposes illegal or
inappropriate trading of any nature and has policies and procedures in place
designed to protect the best interests of our long-term shareholders. We have
reviewed trading by T. Rowe Price personnel in the T. Rowe Price mutual funds
over the last several years and did not uncover the existence of any of the
abusive trading practices described in recent regulatory enforcement actions
relating to fund portfolio managers and senior fund executives. You may find out
more about our trading policies and the steps we take to protect your interests
by visiting our Web site (troweprice.com).
These policies are also spelled out in your fund's prospectus.
We thank you for your continued support.
Respectfully,
James S. Riepe
Chairman
March 19, 2004
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
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Certified Annual Report
Financial Highlights For a share outstanding throughout each period
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Year
Ended
2/29/04 2/28/03 2/28/02 2/28/01 2/29/00
NET ASSET VALUE
Beginning of period $ 5.30 $ 5.26 $ 5.17 $ 5.04 $ 5.17
Investment activities
Net investment
income (loss) 0.12 0.15 0.18 0.20* 0.19*
Net realized and
unrealized gain (loss) (0.02) 0.04 0.09 0.13 (0.13)
Total from
investment activities 0.10 0.19 0.27 0.33 0.06
Distributions
Net investment income (0.12) (0.15) (0.18) (0.20) (0.19)
NET ASSET VALUE
End of period $ 5.28 $ 5.30 $ 5.26 $ 5.17 $ 5.04
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Ratios/Supplemental Data
Total return^ 1.94% 3.62% 5.32% 6.60%* 1.16%*
Ratio of total expenses
to average net assets 0.53% 0.54% 0.59% 0.60%* 0.60%*
Ratio of net investment
income (loss) to average
net assets 2.31% 2.76% 3.45% 3.85%* 3.70%*
Portfolio turnover
rate 35.5% 31.9% 23.8% 29.2% 41.4%
Net assets, end of period
(in thousands) $251,648 $229,461 $158,145 $117,477 $124,135
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* Excludes expenses in excess of a 0.60% contractual expense limitation in
effect through 2/28/03.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
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Certified Annual Report February 29, 2004
Portfolio of Investments (ss.) Par Value
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($ 000s)
MARYLAND 94.8%
Allegany County PCR, Meadwestvaco Corp.,
5.90%, 7/1/04 1,000 1,011
Anne Arundel County, GO, 5.00%, 3/1/07 525 577
Baltimore City
Board of Ed. Administration, COP
5.25%, 4/1/04 (MBIA Insured) 2,160 2,169
5.25%, 4/1/05 (MBIA Insured) 2,025 2,118
Baltimore City School Board, GO
5.00%, 5/1/05 1,870 1,958
5.00%, 5/1/07 1,000 1,105
Baltimore County, GO
5.50%, 8/1/04 1,000 1,019
Consolidated Public Improvement
5.00%, 6/1/05 1,000 1,050
5.50%, 6/1/04 1,000 1,012
Metropolitan Dist. 66th Issue,
5.00%, 7/1/07 195 217
Partnership Equipment Acquisition,
4.00%, 8/1/05 3,695 3,851
Public Improvement, 5.00%, 6/1/07 2,175 2,412
Refunding Pension, 5.00%, 8/1/09 750 844
Baltimore County Economic Dev.,
Maryvale Preparatory School 6.50%, 5/1/08 780 778
Calvert County, GO
5.00%, 7/15/09 3,450 3,920
5.375%, 1/1/07 (Tender 1/1/06) 275 298
Easton, GO, 5.00%, 9/1/07 (MBIA Insured) 1,215 1,355
Frederick County, GO, 5.00%, 7/1/04 2,505 2,539
Harford County, GO,
Consolidated Public Improvement
5.00%, 12/1/10 2,765 3,186
Howard County, GO
Consolidated Public Improvement
5.00%, 2/15/06 700 751
5.00%, 8/15/08 2,000 2,259
Metropolitan Dist. Project
5.00%, 8/15/08 1,075 1,214
5.00%, 8/15/10 1,295 1,487
Public Improvement, 5.00%, 8/15/07 750 836
Maryland, GO
Capital Improvement
5.25%, 3/1/06 1,050 1,134
5.25%, 3/1/08 5,000 5,643
State & Local Fac.
5.00%, 7/15/04 2,975 3,021
5.00%, 2/1/05 3,000 3,112
5.00%, 7/15/05 1,500 1,582
5.00%, 2/1/06 2,600 2,787
5.00%, 7/15/06 650 707
5.00%, 3/1/07 1,850 2,036
5.00%, 7/15/07 3,700 4,113
5.00%, 8/1/09 2,075 2,365
5.20%, 3/15/04 1,740 1,744
5.25%, 7/15/05 1,650 1,746
5.25%, 7/15/06 4,000 4,372
5.50%, 3/1/10 1,000 1,169
Maryland DOT
4.00%, 12/15/05 2,000 2,102
5.00%, 9/1/04 3,000 3,062
5.00%, 10/15/05 # 1,050 1,113
5.25%, 9/1/05 1,085 1,153
5.25%, 2/1/08 2,700 3,034
Maryland Economic Dev. Corp.
Associated Jewish Charities
5.50%, 7/15/04 340 344
5.50%, 7/15/05 360 376
5.50%, 7/15/06 380 407
5.50%, 7/15/07 400 434
Federation of American Societies,
VRDN (Currently 0.99%) 400 400
Maryland Aviation Admin.
5.00%, 6/1/08 (FSA Insured) # 1,425 1,583
5.00%, 6/1/09 (FSA Insured) # 2,395 2,673
Univ. Village at Sheppard Pratt
4.40%, 7/1/05 (ACA Insured) 250 260
4.55%, 7/1/06 (ACA Insured) 250 266
Waste Management, 4.65%, 4/1/16 (Tender 4/1/04) # 1,200 1,203
Maryland Energy Fin. Admin., Baltimore Wastewater
5.75%, 12/1/04 # 2,570 2,647
Maryland HHEFA
VRDN (Currently 0.95%) 1,300 1,300
Board of Child Care
5.00%, 7/1/04 1,000 1,013
5.00%, 7/1/05 1,010 1,061
Broadmead, 4.90%, 7/1/04 250 253
Calvert Memorial Hosp., 275 300
4.75%, 7/1/09
Johns Hopkins Hosp.
5.00%, 8/1/04 3,500 3,559
5.00%, 8/1/06 2,665 2,892
5.00%, 5/15/08 1,640 1,827
Johns Hopkins Univ.
6.00%, 7/1/07 1,000 1,141
6.00%, 7/1/39 4,195 5,018
(Prerefunded 7/1/09!)
Kennedy Krieger Institute
6.00%, 7/1/04 405 412
6.00%, 7/1/05 430 456
Memorial Hosp. at Easton
5.00%, 7/1/04 (MBIA Insured) 410 415
5.00%, 7/1/05 (MBIA Insured) 430 453
Mercy Medical Center, 5.15%,
7/1/04 (FSA Insured) 250 254
Mercy Ridge Retirement Community,
5.00%, 4/1/08 2,000 2,072
Sheppard & Enoch Pratt Foundation
1.25%, 7/1/28 (RAA Insured) 5,500 5,500
5.00%, 7/1/05 1,000 1,048
5.00%, 7/1/06 1,300 1,398
Univ. of Maryland Medical System
5.00%, 7/1/04 1,000 1,012
5.00%, 7/1/05 1,020 1,069
6.00%, 7/1/05 250 264
Maryland IDA, Sheppard & Enoch Pratt Foundation
2.00%, 12/31/11 (Tender 1/1/05) 1,605 1,607
Maryland National Capital Park &
Planning Commission, GO
Prince Georges County
1.00%, 5/1/22, VR 3,000 3,000
6.25%, 1/15/07 1,250 1,413
Maryland Transportation Auth., 5.80%, 7/1/06 4,000 4,409
Montgomery County, GO
4.75%, 2/1/05 1,320 1,366
5.00%, 10/1/05 2,000 2,124
5.00%, 7/1/10 1,130 1,296
5.10%, 4/1/04 380 381
6.30%, 4/1/04 950 955
Consolidated Public Improvement
5.375%, 1/1/07 250 277
5.60%, 7/1/04 5,000 5,080
5.70%, 7/1/05 965 1,025
Montgomery County
COP, 4.00%, 6/1/04 3,000 3,023
Consolidated Public Improvement
5.375%, 5/1/11 (Prerefunded 5/1/07!) 500 568
5.375%, 5/1/13 (Prerefunded 5/1/07!) 1,160 1,318
5.50%, 4/1/13 (Prerefunded 4/1/06!) 3,400 3,763
5.50%, 4/1/16 (Prerefunded 4/1/06!) 3,000 3,321
Northeast Maryland Waste Disposal Auth.
Montgomery County Resources Fac.
5.25%, 4/1/09 (AMBAC Insured) # 4,850 5,450
5.80%, 7/1/04 (MBIA Insured) # 2,875 2,921
5.80%, 7/1/04 # 900 913
5.90%, 7/1/05 # 2,250 2,369
6.00%, 7/1/06 # 4,170 4,528
Ocean City, GO, 5.00%, 3/1/07 (MBIA Insured) 3,440 3,781
Prince Georges County, GO
Consolidated Public Improvement
5.00%, 5/15/04 5,000 5,043
5.00%, 5/15/05 (FSA Insured) 1,000 1,048
5.00%, 5/15/07 (FSA Insured) 3,930 4,343
5.00%, 10/1/07 2,000 2,234
5.50%, 3/15/16 (Tender 3/15/06)
(MBIA Insured) 535 586
Prince Georges County, Equipment Acquisition Program,
COP 4.50%, 6/15/05 (MBIA Insured) 1,065 1,113
Prince Georges County Solid Waste Management Systems
5.00%, 6/15/06 (MBIA Insured) 1,750 1,896
Queen Annes County, GO, School & Public Fac.,
5.125%, 1/15/09 (FGIC Insured) 1,530 1,733
Univ. of Maryland
Auxiliary Fac. & Tuition
5.00%, 4/1/04 2,000 2,008
5.00%, 4/1/05 3,325 3,470
5.00%, 4/1/06 2,500 2,691
5.00%, 4/1/09 3,000 3,392
Washington County, GO, Public Improvement,
5.00%, 1/1/06 (FSA Insured) 3,025 3,233
Washington Suburban Sanitary Dist., GO
4.00%, 6/1/04 350 353
4.50%, 6/1/05 4,385 4,575
5.00%, 6/1/05 3,150 3,307
5.00%, 6/1/06 5,000 5,417
5.00%, 6/1/07 885 979
5.00%, 6/1/09 3,800 4,319
5.25%, 6/1/08 1,030 1,169
6.25%, 6/1/08 (Prerefunded 6/1/04!) 1,000 1,014
Washington Suburban Sanitary Dist.
6.10%, 6/1/07 (Prerefunded 6/1/04!) 500 507
6.60%, 6/1/15 (Prerefunded 6/1/04!) 1,000 1,015
Worcester County, GO,
Consolidated Public Improvement
5.10%, 8/1/04 1,000 1,018
Total Maryland (Cost $234,585) 238,622
DISTRICT OF COLUMBIA 0.5%
Washington Metropolitan Area Transit Auth.,
6.00%, 7/1/09 (FGIC Insured) 1,000 1,186
Total District of Columbia (Cost $1,128) 1,186
PUERTO RICO 4.9%
Children's Trust Fund, Tobacco Settlement,
4.90%, 7/1/05 (Escrowed to Maturity) 585 615
Puerto Rico Electric Power Auth.
4.00%, 7/1/05 3,760 3,905
5.00%, 7/1/06 3,000 3,244
Puerto Rico Highway & Transportation Auth.,
5.00%, 7/1/26 (Tender 7/1/10) (FSA Insured) 2,000 2,286
Puerto Rico Municipal Fin. Agency, GO, 5.50%, 8/1/07
(FSA Insured) 2,000 2,258
Total Puerto Rico (Cost $11,984) 12,308
Total Investments in Securities
100.2% of Net Assets (Cost $247,697) $252,116
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(ss.) Denominated in U.S. dollar unless otherwise noted
# Interest subject to alternative minimum tax
! Used in determining portfolio maturity
ACA American Capital Access Financial Guaranty Corp.
AMBAC AMBAC Assurance Corp.
COP Certificates of Participation
DOT Department of Transportation
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Inc.
GO General Obligation
HHEFA Health & Higher Educational Facility Authority
IDA Industrial Development Authority/Agency
MBIA MBIA Insurance Corp.
PCR Pollution Control Revenue
RAA Radian Asset Assurance Inc.
VR Variable Rate
VRDN Variable-Rate Demand Note
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
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Certified Annual Report February 29, 2004
Statement of Assets and Liabilities
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($ 000s)
Assets
Total investments in securities, at value (cost $247,697) $ 252,116
Other assets 4,089
Total assets 256,205
Liabilities
Total liabilities 4,557
NET ASSETS $ 251,648
-----------
Net Assets Consist of:
Undistributed net investment income (loss) $ 2
Net unrealized gain (loss) 4,419
Paid-in-capital applicable to 47,619,406 no par
value shares of beneficial interest outstanding;
unlimited number of shares authorized 247,227
NET ASSETS $ 251,648
-----------
NET ASSET VALUE PER SHARE $ 5.28
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The accompanying notes are an integral part of these financial statements.
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
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Certified Annual Report
Statement of Operations
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($ 000s)
Year
Ended
2/29/04
Investment Income (Loss)
Interest income $ 6,936
Expenses
Investment management 1,023
Custody and accounting 112
Shareholder servicing 105
Legal and audit 15
Prospectus and shareholder reports 14
Registration 10
Directors 5
Miscellaneous 5
Total expenses 1,289
Net investment income (loss) 5,647
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 135
Change in net unrealized gain (loss) on securities (827)
Net realized and unrealized gain (loss) (692)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 4,955
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The accompanying notes are an integral part of these financial statements.
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
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Certified Annual Report
Statement of Changes in Net Assets
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($ 000s)
Year
Ended
2/29/04 2/28/03
Increase (Decrease) in Net Assets
Operations
Net investment income $ 5,647 $ 5,265
Net realized gain (loss) 135 223
Change in net unrealized gain or loss (827) 1,517
Increase (decrease) in net assets 4,955 7,005
from operations
Distributions to shareholders
Net investment income (5,647) (5,265)
Capital share transactions *
Shares sold 111,864 125,639
Distributions reinvested 4,473 4,382
Shares redeemed (93,458) (60,445)
Increase (decrease) in net assets
from capital share transactions 22,879 69,576
Net Assets
Increase (decrease) during period 22,187 71,316
Beginning of period 229,461 158,145
End of period $ 251,648 $ 229,461
----------------------
*Share information
Shares sold 21,214 23,879
Distributions reinvested 849 832
Shares redeemed (17,740) (11,485)
Increase (decrease) in shares outstanding 4,323 13,226
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
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Certified Annual Report February 29, 2004
Notes to Financial Statements
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price State Tax-Free Income Trust, Inc. (the trust) is registered under
the Investment Company Act of 1940 (the 1940 Act). The Maryland Short-Term
Tax-Free Bond Fund (the fund), a nondiversified, open-end management investment
company, is one portfolio established by the trust and commenced operations on
January 29, 1993. The fund seeks to provide the highest level of income exempt
from federal and Maryland state and local income taxes consistent with modest
fluctuation in principal value.
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the use of estimates made by fund management.
Valuation
The fund values its investments and computes its net asset value per share at
the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day
that the NYSE is open for business. Debt securities are generally traded in the
over-the-counter market. Securities are valued at prices furnished by dealers
who make markets in such securities or by an independent pricing service, which
considers yield or price of bonds of comparable quality, coupon, maturity, and
type, as well as prices quoted by dealers who make markets in such securities.
Other investments and those for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by the T. Rowe Price Valuation Committee,
established by the fund's Board of Trustees.
Credits
The fund earns credits on temporarily uninvested cash balances at the custodian
that reduce the fund's custody charges. Custody expense in the accompanying
financial statements is presented before reduction for credits.
Investment Transactions, Investment Income, and Distributions
Income and expenses are recorded on the accrual basis. Premiums and discounts on
debt securities are amortized for financial reporting purposes. 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 on the ex-dividend date. Income distributions are declared on a daily
basis and paid monthly. Capital gain distributions, if any, are declared and
paid by the fund, typically on an annual basis.
Other
In the normal course of business, the fund enters into contracts that provide
general indemnifications. The fund's maximum exposure under these arrangements
is dependent on claims that may be made against the fund in the future and,
therefore, cannot be estimated; however, based on experience, the risk of
material loss from such claims is considered remote.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term, aggregated
$115,908,000 and $85,277,000 respectively, for the year ended February 29, 2004.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code and distribute to shareholders all of its income and
gains. Federal income tax regulations differ from generally accepted accounting
principles; therefore, distributions determined in accordance with tax
regulations may differ significantly in amount or character from net investment
income and realized gains for financial reporting purposes. Financial reporting
records are adjusted for permanent book/tax differences to reflect tax
character. Financial records are not adjusted for temporary differences.
Distributions during the year ended February 29, 2004 totaled $5,647,000 and
were characterized as tax-exempt income for tax purposes. At February 29, 2004,
the tax-basis components of net assets were as follows:
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Unrealized appreciation $ 4,427,000
Unrealized depreciation (8,000)
Net unrealized appreciation (depreciation) 4,419,000
Undistributed tax-exempt income 2,000
Paid-in capital 247,227,000
Net assets $ 251,648,000
---------------
For the year ended February 29, 2004, the fund recorded the following permanent
reclassifications to reflect tax character. Reclassifications to paid-in capital
relate primarily to a tax practice that treats a portion of the proceeds from
each redemption of capital shares as a distribution of taxable net investment
income and/or realized capital gain. Results of operations and net assets were
not affected by these reclassifications.
- --------------------------------------------------------------------------------
Undistributed net realized gain $ (135,000)
Paid-in capital 135,000
At February 29, 2004, the cost of investments for federal income tax purposes
was $247,697,000.
NOTE 4- RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The
investment management agreement between the fund and the manager provides for an
annual investment management fee, which is computed daily and paid monthly. The
fee consists of an individual fund fee, equal to 0.10% of the fund's average
daily net assets, and the fund's pro-rata share of a group fee. The group fee is
calculated based on the combined net assets of certain mutual funds sponsored by
Price Associates (the group) applied to a graduated fee schedule, with rates
ranging from 0.48% for the first $1 billion of assets to 0.295% for assets in
excess of $120 billion. The fund's portion of the group fee is determined by the
ratio of its average daily net assets to those of the group. At February 29,
2004 the effective annual group fee rate was 0.32%, and investment management
fee payable totaled $82,000.
In addition, the fund has entered into service agreements with Price Associates
and a wholly owned subsidiary of Price Associates (collectively, Price). Price
Associates computes the daily share price and maintains the financial records of
the fund. T. Rowe Price Services, Inc., provides shareholder and administrative
services in its capacity as the fund's transfer and dividend disbursing agent.
Expenses incurred pursuant to these service agreements totaled $134,000 for the
year ended February 29, 2004, of which $11,000 was payable at period-end.
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
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Certified Annual Report
Report of Independent Auditors
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To the Board of Trustees of T. Rowe Price State Tax-Free Income Trust and
Shareholders of Maryland Short-Term Tax-Free Bond Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Maryland Short-Term Tax-Free Bond
Fund (one of the portfolios comprising T. Rowe Price State Tax-Free Income
Trust, hereafter referred to as the "Fund") at February 29, 2004, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at February 29, 2004 by correspondence with the
custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 22, 2004
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Tax Information (Unaudited) for the Tax Year Ended 2/29/04
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We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
o $135,000 from long-term capital gains subject to the 15% rate gains
category
o $5,638,000 which qualified as exempt-interest dividends.
Information on Proxy Voting
- --------------------------------------------------------------------------------
A description of the policies and procedures that the T. Rowe Price Maryland
Short-Term Tax-Free Bond Fund uses to determine how to vote proxies relating to
portfolio securities is available, without charge, upon request by calling
1-800-225-5132. It also appears in the fund's Statement of Additional
Information (Form 485B), which can be found on the SEC's Web site, www.sec.gov.
T. Rowe Price Maryland Short-Term Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Certified Annual Report
About the Fund's Trustees and Officers
- --------------------------------------------------------------------------------
Your fund is governed by a Board of Trustees that meets regularly to review
investments, performance, expenses, and other business matters, and is
responsible for protecting the interests of shareholders. The majority of the
fund's trustees are independent of T. Rowe Price Associates, Inc. (T. Rowe
Price); "inside" trustees are officers of T. Rowe Price. The Board of Trustees
elects the fund's officers, who are listed in the final table. The business
address of each trustee and officer is 100 East Pratt Street, Baltimore, MD
21202. The Statement of Additional Information includes additional information
about the fund trustees and is available without charge by calling a T. Rowe
Price representative at 1-800-225-5132.
Independent Trustees
Name
(Year of Birth) Principal Occupation(s) During Past 5 Years and
Year Elected* Directorships of Other Public Companies
Anthony W. Deering Director, Chairman of the Board, President, and
(1945) Chief Executive Officer, The Rouse Company,
1986 real estate developers; Director, Mercantile
Bank (4/03 to present)
Donald W. Dick, Jr. Principal, EuroCapital Advisors, LLC, an
(1943) acquisition and management advisory firm
2001
David K. Fagin Director, Golden Star Resources Ltd., Canyon
(1938) Resources Corp. (5/00 to present), and Pacific
2001 Rim Mining Corp. (2/02 to present); Chairman
and President, Nye Corp.
Karen N. Horn Managing Director and President, Global Private
(1943) Client Services, Marsh Inc.; Managing Director
2003 and Head of International Private Banking,
Bankers Trust; Director, Eli Lilly and Company
F. Pierce Linaweaver President, F. Pierce Linaweaver & Associates,
(1934) Inc., consulting environmental and civil engineers
1986
John G. Schreiber Owner/President, Centaur Capital Partners, Inc.,
(1946) a real estate investment company; Senior Advisor
1992 and Partner, Blackstone Real Estate Advisors,
L.P.; Director, AMLI Residential Properties Trust,
Host Marriott Corp., and The Rouse Company
* Each independent trustee oversees 111 T. Rowe Price portfolios and serves
until retirement, resignation, or election of a successor.
Inside Trustees
Name
(Year of Birth)
Year Elected*
[Number of T. Rowe Price Principal Occupation(s) During Past 5 Years and
Portfolios Overseen] Directorships of Other Public Companies
William T. Reynolds, Director and Vice President, T. Rowe
CFA, CIC Price and T. Rowe Price Group, Inc.; Director,
(1948) T. Rowe Price Global Asset Management Limited
1991
[37]
James S. Riepe Director and Vice President, T. Rowe Price; Vice
(1943) Chairman of the Board, Director, and Vice
1986 President, T. Rowe Price Group, Inc.;
[111] Chairman of the Board and Director, T. Rowe Price
Global Asset Management Limited, T. Rowe Price
Global Investment Services Limited, T. Rowe Price
Investment Services, Inc., T. Rowe Price
Retirement Plan Services, Inc., and T. Rowe Price
Services, Inc.; Chairman of the Board, Director,
President, and Trust Officer, T. Rowe Price Trust
Company; Director, T. Rowe Price International,
Inc.; Chairman of the Board, State Tax-Free
Income Trust
M. David Testa, CFA, CIC Director and Vice President, T. Rowe Price and
(1944) T. Rowe Price Trust Company; Vice Chairman of the
1997 Board, Director, and Vice President, T. Rowe
[111] Price Group, Inc.; Chairman of the Board and
Director, T. Rowe Price International, Inc.;
Director, T. Rowe Price Global Asset Management
Limited and T. Rowe Price Global Investment
Services Limited
* Each inside trustee serves until retirement, resignation, or election of a
successor.
Officers
Name (Year of Birth)
Title and Fund(s) Served Principal Occupation(s)
Stephen V. Booth, CPA (1961) Vice President, T. Rowe Price, T. Rowe
Vice President, State Tax-Free Price Group, Inc., and T. Rowe Price
Income Trust Trust Company
Linda A. Brisson (1959) Vice President, T. Rowe Price and
Vice President, State Tax-Free T. Rowe Price Group, Inc.
Income Trust
Steven G. Brooks, CFA (1954) Vice President, T. Rowe Price and
Vice President, State Tax-Free T. Rowe Price Group, Inc.
Income Trust
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Officers (continued)
Name (Year of Birth)
Title and Fund(s) Served Principal Occupation(s)
Joseph A. Carrier, CPA (1960) Vice President, T. Rowe Price, T. Rowe
Treasurer, State Tax-Free Income Price Group, Inc., and T. Rowe Price
Trust Investment Services, Inc.
Jonathan M. Chirunga (1966) Vice President, T. Rowe Price
Vice President, State Tax-Free
Income Trust
Maria H. Condez (1962) Employee, T. Rowe Price
Assistant Vice President, State
Tax-Free Income Trust
G. Richard Dent (1960) Vice President, T. Rowe Price and
Vice President, State Tax-Free T. Rowe Price Group, Inc.
Income Trust
Roger L. Fiery III, CPA (1959) Vice President, T. Rowe Price, T. Rowe
Vice President, State Tax-Free Price Group, Inc., T. Rowe Price Trust
Income Trust Company, and T. Rowe Price
International, Inc.
Gregory S. Golczewski (1966) Vice President, T. Rowe Price and
Vice President, State Tax-Free T. Rowe Price Trust Company
Income Trust
Charles B. Hill (1961) Vice President, T. Rowe Price and
Vice President, State Tax-Free T. Rowe Price Group, Inc.
Income Trust
Henry H. Hopkins (1942) Director and Vice President, T. Rowe
Vice President, State Tax-Free Price Group, Inc., T. Rowe Price
Income Trust Investment Services, Inc., T. Rowe
Price Services, Inc., and T. Rowe Price
Trust Company; Vice President, T. Rowe
Price, T. Rowe Price International,
Inc., and T. Rowe Price Retirement Plan
Services, Inc.
T. Dylan Jones (1971) Assistant Vice President, T. Rowe Price
Assistant Vice President,
State Tax-Free Income
Trust
Marcy M. Lash (1963) Vice President, T. Rowe Price
Vice President, State Tax-Free
Income Trust
Alan D. Levenson (1958) Vice President, T. Rowe Price and
Vice President, State Tax-Free T. Rowe Price Group, Inc.
Income Trust
Patricia B. Lippert (1953) Assistant Vice President, T. Rowe
Secretary, State Tax-Free Income Price and T. Rowe Price Investment
Trust Services, Inc.
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Officers (continued)
Name (Year of Birth)
Title and Fund(s) Served Principal Occupation(s)
Joseph K. Lynagh, CFA (1958) Vice President, T. Rowe Price and
Executive Vice President, T. Rowe Price Group, Inc.
State Tax-Free Income Trust
Konstantine B. Mallas (1963) Vice President, T. Rowe Price and
Vice President, State Tax-Free T. Rowe Price Group, Inc.
Income Trust
James M. McDonald (1949) Vice President, T. Rowe Price,
Vice President, State Tax-Free T. Rowe Price Group, Inc., and
Income Trust T. Rowe Price Trust Company
Hugh D. McGuirk, CFA (1960) Vice President, T. Rowe Price and
Vice President, State Tax-Free T. Rowe Price Group, Inc.
Income Trust
Mary J. Miller, CFA (1955) Vice President, T. Rowe Price and
President, State Tax-Free Income T. Rowe Price Group, Inc.
Trust
Timothy G. Taylor (1975) Employee, T. Rowe Price
Assistant Vice President, State
Tax-Free Income Trust
Edward A. Wiese, CFA (1959) Vice President, T. Rowe Price, T. Rowe
Vice President, State Tax-Free Price Group, Inc., and T. Rowe Price
Income Trust Trust Company; Director, Vice President,
and Chief Investment Officer, T. Rowe
Price Savings Bank
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Item 2. Code of Ethics.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. A copy of this code of
ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were
approved or waivers were granted to this code of ethics during the period
covered by this report.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Directors/Trustees has determined that Mr. David K.
Fagin qualifies as an audit committee financial expert, as defined in Item 3 of
Form N-CSR. Mr. Fagin is considered independent for purposes of Item 3 of Form
N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) - (d) Aggregate fees billed to the registrant for the last two fiscal years
for professional services rendered by the registrant's principal accountant were
as follows:
2004 2003
Audit Fees $8,288 $8,249
Audit-Related Fees 707 --
Tax Fees 2,311 2,086
All Other Fees 124 129
Audit fees include amounts related to the audit of the registrant's annual
financial statements and services normally provided by the accountant in
connection with statutory and regulatory filings. Audit-related fees include
amounts reasonably related to the performance of the audit of the registrant's
financial statements, specifically the issuance of a report on internal
controls. Tax fees include amounts related to tax compliance, tax planning, and
tax advice. Other fees include the registrant's pro-rata share of amounts for
agreed-upon procedures in conjunction with service contract approvals by the
registrant's Board of Directors/Trustees.
(e)(1) The registrant's audit committee has adopted a policy whereby audit and
non-audit services performed by the registrant's principal accountant for the
registrant, its investment adviser, and any entity controlling, controlled by,
or under common control with the investment adviser that provides ongoing
services to the registrant require pre-approval in advance at regularly
scheduled audit committee meetings. If such a service is required between
regularly scheduled audit committee meetings, pre-approval may be authorized by
one audit committee member with ratification at the next scheduled audit
committee meeting. Waiver of pre-approval for audit or non-audit services
requiring fees of a de minimis amount is not permitted.
(2) No services included in (b) - (d) above were approved pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate fees billed for the most recent fiscal year and the preceding
fiscal year by the registrant's principal accountant for non-audit services
rendered to the registrant, its investment adviser, and any entity controlling,
controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant were $719,000 and $671,000, respectively, and
were less than the aggregate fees billed for those same periods by the
registrant's principal accountant for audit services rendered to the T. Rowe
Price Funds.
(h) All non-audit services rendered in (g) above were pre-approved by the
registrant's audit committee. Accordingly, these services were considered by the
registrant's audit committee in maintaining the principal accountant's
independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The registrant's principal executive officer and principal financial officer
are aware of no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 11. Exhibits.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is
attached.
(2) Separate certifications by the registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(3) Not applicable.
(b) A certification by the registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price State Tax-Free Income Trust
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date April 16, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date April 16, 2004
By /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date April 16, 2004