money fund managed in compliance with Rule 2a-7 under the Investment
Company Act of 1940. The fund is managed to provide a stable share price of $1.00 by investing in high-quality
U.S. dollar-denominated municipal money market securities. The fund’s weighted average maturity
will not exceed 60 days, the fund’s weighted average life will not exceed 120 days, and the fund
will not purchase any security with a remaining maturity longer than 397 calendar days (unless otherwise
permitted by Rule 2a-7). When calculating its weighted average maturity, the fund may shorten its maturity
by using the interest rate resets of certain adjustable rate securities. The fund may not take into account
these resets when calculating its weighted average life.
The fund buys securities within the two highest
short-term rating categories assigned by established credit rating agencies or, if unrated, deemed to
be of comparable quality by T. Rowe Price. All securities purchased by the fund present minimal
credit risk in the opinion of T. Rowe Price. In selecting securities for the fund, the portfolio
manager may examine relationships among yields of various types and maturities of money market securities
in the context of interest rate outlooks. The fund’s yield will fluctuate with changes in short-term
interest rates.
Up to 20% of the fund’s income could be derived from securities that are subject
to the alternative minimum tax.
The fund may invest a significant portion of assets in securities
that are not general obligations of the state. These may be issued by local governments or public authorities
and are rated according to their particular creditworthiness, which may vary from the state’s general
obligation securities. From time to time, the fund may invest a significant portion of its assets in
sectors with special risks, such as health care, electric utility, or private activity bonds.
The fund may also invest in
obligations of the commonwealth of Puerto Rico and its public corporations (as well as the U.S. territories
of Guam and the Virgin Islands) whose interest is exempt from federal and Maryland state and local income
taxes. These securities are generally purchased when they offer a comparably attractive combination of
risk and return.
Due to seasonal variations in the supply of suitable Maryland municipal securities,
the fund may invest in other municipal securities whose interest is exempt from federal but not Maryland
income taxes. While efforts will be made to minimize such investments, they could comprise up to 10%
of the fund’s annual income.
The fund may sell holdings for a variety of reasons, such as to
adjust the portfolio’s average maturity, duration, or credit quality or to shift assets into and
out of higher-yielding securities.
Principal
Risks
As with any mutual fund, there can be no guarantee the fund will achieve its objective.
Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the fund.
An
investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Money funds have experienced significant pressures from shareholder redemptions,
issuer credit downgrades, illiquid markets, and historically low yields on the securities they can hold.
There have been a very small number of money funds in other fund complexes that have “broken the
buck,” which means that those funds’ investors did not receive $1.00 per share for their investment
in those funds. You should be aware that the fund’s investment adviser is under no obligation to
provide financial support to the fund or take other measures to ensure that you receive $1.00 per share
for your investment in the fund. The potential for realizing a loss of principal in the fund could derive
from:
Credit risk
This is the risk that
an issuer of a debt security could suffer an adverse change in financial condition that results in a
payment default, security downgrade, or inability to meet a financial obligation. Rule 2a-7 under the
Investment Company Act of 1940 requires that money funds invest in securities rated in the two highest
short-term credit rating categories. However, the credit quality of the securities held by the fund may
change rapidly in certain market environments.
Interest
rate risk
This is the risk that a decline in interest rates will lower a fund’s yield, or
that a rise in the overall level of interest rates will cause a decline in the prices of fixed income
securities held by a fund. The fund’s yield will vary; it is not fixed for a specific period like
the yield on a bank certificate of deposit. This is a disadvantage when interest rates are falling because
the fund would have to reinvest at lower interest rates. During periods of extremely low or negative
short-term interest rates, the fund may not be able to maintain a positive yield or yields on par with
historical levels. In addition, the adoption of more stringent regulations governing the management of
money funds could have a negative effect on the fund’s yield. Finally, the fund’s investment
adviser may discontinue its voluntary waiver of the fund’s management fee at any time, which could
also negatively affect the fund’s yield.
Municipal
securities risk
The fund will be highly impacted by events tied to the overall municipal securities
markets, which can be very volatile and significantly affected by unfavorable legislative or political
developments and adverse changes in the financial conditions of municipal securities issuers. Income
from municipal securities held by the fund could be declared taxable because of changes in tax laws or
interpretations by taxing authorities, or noncompliant conduct of a municipal security issuer. In addition,
a portion of the fund’s otherwise tax-exempt dividends may be taxable to those shareholders subject
to the alternative minimum tax. Any fund investments in obligations of Puerto Rico or U.S. territories
involve additional credit and tax risks.
Certain sectors of the municipal bond market have special risks
that can impact such sectors more significantly than the market as a whole. For example, health care
can be hurt by rising expenses and dependency on third party reimbursements, electric
utilities are subject to governmental rate regulation, and private
activity bonds rely on project revenues and the creditworthiness of the corporate user as opposed to
governmental support.
State-specific
risk
This refers to the risk that developments in Maryland will adversely affect the securities
held by the fund. Because the fund invests primarily in securities issued by Maryland and its municipalities,
it is more vulnerable to unfavorable developments in Maryland than are funds that invest in municipal
securities of many states. Adverse developments in an economic sector may have far-reaching impacts on
the overall Maryland municipal securities market. A bond default or credit rating downgrade, or even
negative perceptions of the ability to make timely bond payments, involving only a small number of Maryland
municipal securities issuers could affect the market values and marketability of all Maryland municipal
securities.
As of May 1, 2013, the state of Maryland’s general obligation debt was rated Aaa
by Moody’s and AAA by both Standard & Poor’s (S&P) and Fitch. While S&P and Fitch
maintain a stable outlook, Moody’s has assigned a negative outlook.
Liquidity risk
This is the risk that the fund may not be
able to sell a holding in a timely manner at a desired price. The fund may experience heavy redemptions,
particularly during periods of declining or illiquid markets, which could cause the fund to liquidate
its assets at inopportune times or at a depressed value and affect the fund’s ability to maintain
a $1.00 share price. In addition, the fund may suspend redemptions when permitted by applicable regulations.
The secondary market for certain municipal bonds tends to be less developed and liquid than many other
securities markets, which may adversely affect the fund’s ability to sell such municipal bonds at
attractive prices.
Performance
The bar chart showing calendar year returns and the average annual total returns table indicate risk
by illustrating how much returns can differ from one year to the next and how fund performance compares
with that of a comparable market index. The fund’s past performance is not necessarily an indication
of future performance.
The fund can also experience short-term performance swings, as shown by the best and
worst calendar quarter returns during the years depicted.
The fund’s return for the three months ended
3/31/13 was 0.00%.
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Average Annual Total Returns
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Periods
ended
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December
31, 2012
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1
Year
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5 Years
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10
Years
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Maryland Tax-Free Money Fund
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0.01
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%
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0.40
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%
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1.11
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%
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Lipper
Other States Tax-Exempt Money Market Funds Average
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0.01
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0.42
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1.13
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Updated performance information is available through troweprice.com or may be obtained
by calling 1-800-225-5132
.
