Strategy. Normally, at least 80% of the funds income will be exempt from federal income taxes. The fund does not normally invest in assets subject to the alternative minimum tax; however, up to 20% of the funds income could be derived from securities subject to the alternative minimum tax. Any derivatives that provide exposure to the investment focus suggested by the funds name, or to one or more market risk factors associated with the investment focus suggested by the funds name, are counted (as applicable) toward compliance with the funds 80% investment policy. Although the fund may purchase securities of any maturity, the fund generally seeks longer-term municipal securities. Most investments are in investment-grade securities, which are securities rated in one … Show more… Normally, at least 80% of the funds income will be exempt from federal income taxes. The fund does not normally invest in assets subject to the alternative minimum tax; however, up to 20% of the funds income could be derived from securities subject to the alternative minimum tax. Any derivatives that provide exposure to the investment focus suggested by the funds name, or to one or more market risk factors associated with the investment focus suggested by the funds name, are counted (as applicable) toward compliance with the funds 80% investment policy. Although the fund may purchase securities of any maturity, the fund generally seeks longer-term municipal securities. Most investments are in investment-grade securities, which are securities rated in one of the four highest credit rating categories by at least one credit rating agency or, if unrated, deemed by the adviser to be of comparable quality. The fund may invest up to 10% of its total assets in below investment-grade securities, known as junk bonds, including those with the lowest credit ratings. T. Rowe Prices active investment management approach emphasizes the value of in-depth fundamental credit research, diversification, and risk management practices. By using fundamental research, T. Rowe Price seeks to select investments for the funds portfolio based on its outlook for the different sectors of the tax-free municipal market (for example, T. Rowe Price may emphasize revenue bonds instead of state and local general obligation debt) and specific issuers or securities. The goal of this approach is to seek higher yields while taking a risk-conscious approach. Risk management practices include managing the funds duration (which is a measurement of the price sensitivity of a bond or bond fund to changes in interest rates), while also focusing on striking a balance between (i) investing more heavily in certain sectors or issuers and (ii) diversifying the funds investments across the broader municipal market. From time to time, the fund may invest a significant portion of its assets in sectors with special risks, such as health care, transportation, utilities, or private activity bonds. Show less