Strategy And Objective

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 fund will invest so that, under normal market conditions, at least 80% of its net assets (including any borrowings for investment purposes) are invested in bonds that pay interest exempt from federal and Maryland state and local income taxes, and at least 80% of the funds income is expected to be exempt from federal and Maryland state and local income taxes. While the fund may buy securities of any maturity, the funds weighted average maturity is not expected to exceed three years. Most investments are in investment-grade securities, which are securities rated in one of the four highest credit rating categories by at least one major credit rating agency or, if unrated, deemed to be of comparable quality by T. Rowe Price. However, the fund may invest up to 10% of its total assets in non investment-grade securities, known as junk bonds, including those with the lowest credit rating. In addition, up to 20% of the funds income could be derived from securities subject to the alternative minimum tax.