LEGG MASON TAX FREE INCOME FUND, 485BPOS, 2000-07-27

LEGG MASON TAX FREE INCOME FUND
485BPOS, 2000-07-27

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As filed with the Securities and Exchange Commission on July 27, 2000.

1933 Act File No. 33-37971
1940 Act File No. 811-6223

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM N-lA

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No: [ ]
Post-Effective Amendment No: 14 [X]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No: 15

LEGG MASON TAX-FREE INCOME FUND
(Exact Name of Registrant as Specified in Charter)

100 Light Street
Baltimore, Maryland 21202
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (410) 539-0000

Copies to:

MARC R. DUFFY, ESQ. ARTHUR C. DELIBERT, ESQ.
Legg Mason Wood Walker, Incorporated Kirkpatrick & Lockhart LLP
100 Light Street 1800 Massachusetts Ave., NW
Baltimore, Maryland 21202 Second Floor
(Name and Address of Agent for Service) Washington, D.C. 20036-1800

It is proposed that this filing will become effective:

[ ] immediately upon filing pursuant to Rule 485(b)
[X] on July 31, 2000 pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(i)
[ ] on , 2000 pursuant to Rule 485(a)(i)
[ ] 75 days after filing pursuant to Rule 485(a)(ii)
[ ] on , 2000 pursuant to Rule 485(a)(ii)

If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE>

Legg Mason Tax-Free Income Fund

Contents of Registration Statement

This registration statement consists of the following papers and documents.

Cover Sheet

Contents of Registration Statement

Legg Mason Maryland Tax-Free Income Trust
Legg Mason Pennsylvania Tax-Free Income Trust
Legg Mason Tax-Free Intermediate-Term Income Trust
Part A - Primary Class Prospectus

Legg Mason Maryland Tax-Free Income Trust
Legg Mason Pennsylvania Tax-Free Income Trust
Legg Mason Tax-Free Intermediate-Term Income Trust
Part A - Navigator Class Prospectus

Legg Mason Maryland Tax-Free Income Trust
Legg Mason Pennsylvania Tax-Free Income Trust
Legg Mason Tax-Free Intermediate-Term Income Trust
Part B - Statement of Additional Information
Primary Class Shares and Navigator Class Shares

Part C - Other Information

Signature Page

Exhibits

<PAGE>

LEGG MASON
TAX-FREE INCOME FUND:
--------------------
LEGG MASON MARYLAND TAX-FREE INCOME TRUST
LEGG MASON PENNSYLVANIA TAX-FREE INCOME TRUST
LEGG MASON TAX-FREE INTERMEDIATE-TERM INCOME TRUST

PRIMARY CLASS PROSPECTUS July 31, 2000

[LOGO]
LEGG
MASON
FUNDS
THE ART OF INVESTING(SM)

As with all mutual funds, the Securities and Exchange Commission
has not passed upon the accuracy or adequacy of this prospectus, nor has it
approved or disapproved these securities. It is a criminal offense
to state otherwise.

Not every fund listed in this Prospectus is available for purchase in every
state. Please consult your Legg Mason Financial Advisor concerning the
availability of a particular fund.

<PAGE>

T A B LE O F C O N T E N T S

A b o u t t h e f u n d s:
--------------------------------------------------------------------------------

1 Investment objectives

4 Principal risks

6 Performance

8 Fees and expenses of the funds

9 Management

A b o u t y o u r i n v e s t m e n t:
--------------------------------------------------------------------------------

10 How to invest

12 How to sell your shares

13 Account policies

14 Services for investors

15 Distributions and taxes

16 Financial highlights

<PAGE>

LEGG MASON TAX-FREE INCOME FUND

[icon] I N V E S T M E N T O B J E C T I V E S

LEGG MASON MARYLAND TAX-FREE INCOME TRUST

INVESTMENT OBJECTIVE: a high level of current income exempt from federal and
Maryland state and local income taxes, consistent with prudent investment risk
and preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES:

The fund invests primarily in debt instruments issued by or on behalf of the
State of Maryland, its political subdivisions, municipalities, agencies,
instrumentalities or public authorities, the interest on which, in the opinion
of counsel to the issuers of those instruments, is exempt from federal and
Maryland state and local income taxes. Securities considered for investment must
be investment grade. Investment grade securities are those rated within the four
highest grades by Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's, Inc. ("S&P") or Fitch Investors Service, Inc. ("Fitch") or, if unrated,
deemed by the adviser to be of comparable quality. The fund may invest 25% or
more of its total assets in a particular segment of the municipal securities
market, such as hospital revenue bonds, housing agency bonds, private activity
bonds or airport bonds, or in securities the interest on which is paid from
revenues of a similar type of project.

Under normal circumstances, the fund will maintain at least 80% of its total
assets in Maryland municipal obligations the interest on which is not a tax
preference item for purposes of the federal alternative minimum tax.

The fund may invest in securities of any maturity. When selecting securities for
the fund, the adviser maintains the fund's dollar-weighted average maturity
between 12 and 24 years. The adviser establishes a duration target for the fund
based on the adviser's investment outlook. This outlook is determined by the
adviser's analysis of the economy, fiscal and monetary policy, and international
events. Factors directly impacting the municipal market, such as supply, demand,
and legislative developments, are also incorporated in the adviser's outlook.

The adviser analyzes each industry and issuer to determine its credit
fundamentals and outlook. Issuers are scrutinized not only for their ability to
make timely interest and principal payments, but for the stability of their
financial position and ratings. The tax consequences of trading activity are
always considered, and only those trades that the adviser believes add value to
shareholders on an after-tax basis are ordinarily executed.

Securities may be sold because their credit fundamentals have changed, or in
order to buy a security that the adviser believes will produce greater
risk-adjusted returns.

For temporary defensive purposes, when in the adviser's opinion, no suitable
municipal securities are available, for liquidity purposes, or pending the
investment of the proceeds of the sale of shares, the fund may invest in taxable
short-term investments. The fund may also temporarily invest more than 20% of
its total assets in municipal obligations the interest on which is exempt from
federal income tax but is a tax preference item and/or is subject to Maryland
state and local income taxes. If the fund invests substantially in such
instruments, the fund may not be pursuing its principal investment strategies
and the fund may not achieve its investment objective.

LEGG MASON PENNSYLVANIA TAX-FREE INCOME TRUST

INVESTMENT OBJECTIVE: a high level of current income exempt from federal income
tax and Pennsylvania personal income tax consistent with prudent investment risk
and preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES:

The fund invests primarily in debt instruments issued by or on behalf of the
Commonwealth of Pennsylvania, its political subdivisions, municipalities,

<PAGE>

agencies, instrumentalities or public authorities, the interest on which, in the
opinion of counsel to the issuers of those instruments, is exempt from federal
income tax and Pennsylvania personal income tax. Securities considered for
investment must be rated investment grade. Investment grade securities are those
rated within the four highest grades by Moody's, S&P or Fitch, or, if unrated,
deemed by the adviser to be of comparable quality. Pennsylvania Tax-Free's
shares are exempt from Pennsylvania county personal property tax to the extent
that it invests in Pennsylvania municipal obligations. The fund may invest 25%
or more of its total assets in a particular segment of the municipal securities
market, such as hospital revenue bonds, housing agency bonds, private activity
bonds or airport bonds, or in securities the interest on which is paid from
revenues of a similar type of project.

Under normal circumstances, the fund will maintain at least 80% of its total
assets in Pennsylvania municipal obligations the interest on which is not a tax
preference item for purposes of the federal alternative minimum tax.

Securities may be sold because their credit fundamentals have changed, or in
order to buy a security that the adviser believes will produce greater
risk-adjusted returns.

For temporary defensive purposes, when in the adviser's opinion, no suitable
municipal securities are available, for liquidity purposes, or pending the
investment of the proceeds of the sale of shares, the fund may invest in taxable
short-term investments. The fund may also temporarily invest more than 20% of
its total assets in municipal obligations the interest on which is exempt from
federal income tax but is a tax preference item and/or is subject to
Pennsylvania personal income tax. If the fund invests substantially in such
instruments, the fund may not be pursuing its principal investment strategies
and the fund may not achieve its investment objective.

LEGG MASON TAX-FREE INTERMEDIATE-TERM INCOME TRUST

INVESTMENT OBJECTIVE: a high level of current income exempt from federal income
tax, consistent with prudent investment risk.

PRINCIPAL INVESTMENT STRATEGIES:

The fund invests primarily in debt instruments issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia and
their respective authorities, agencies, instrumentalities and political
subdivisions, the interest on which, in the opinion of counsel to the issuers of
those instruments, is exempt from federal income tax. Securities considered for
investment must be rated investment grade. Investment grade securities are those
rated within the four highest grades by Moody's, S&P or Fitch, or, if unrated,
deemed by the adviser to be of comparable quality. The fund may invest 25% or
more of its total assets in a particular segment of the municipal securities
market, such as hospital revenue bonds, housing agency bonds, private activity
bonds or airport bonds, or in securities the interest on which is paid from
revenues of a similar type of project.

Under normal circumstances the fund will maintain at least 80% of its total
assets in municipal obligations the interest on which is not a tax preference
item for purposes of the federal alternative minimum tax.

The fund may invest in securities of any maturity. When selecting securities for
the fund, the adviser maintains the fund's dollar-weighted average maturity

<PAGE>

between 2 and 10 years. The adviser establishes a duration target for the fund
based on the adviser's investment outlook. This outlook is determined by the
adviser's analysis of the economy, fiscal and monetary policy, and international
events. Factors directly impacting the municipal market, such as supply, demand,
and legislative developments, are also incorporated in the adviser's outlook.

Securities may be sold because their credit fundamentals have changed, or in
order to buy a security which the adviser believes will produce greater
risk-adjusted returns.

For temporary defensive purposes, when in the adviser's opinion, no suitable
municipal securities are available, for liquidity purposes, or pending the
investment of the proceeds of the sale of shares, the fund may invest in taxable
short-term investments. The fund may also temporarily invest more than 20% of
its total assets in municipal obligations the interest on which is exempt from
federal income tax but is a tax preference item. If the fund invests
substantially in such instruments, the fund may not be pursuing its principal
investment strategies and the fund may not achieve its investment objective.

<PAGE>

[icon] P R I N C I P A L R I S K S

IN GENERAL:

There is no assurance that a fund will meet its investment objective; investors
could lose money by investing in a fund. As with all mutual funds, an investment
in any of these funds is not insured or guaranteed by the Federal Deposit
Insurance Company or any other government agency.

INTEREST RATE RISK:

Debt securities are subject to interest rate risk, which is the possibility that
the market prices of each fund's investments may decline due to an increase in
market interest rates. Generally, the longer the maturity of a fixed income
security, the greater is the effect on its value when rates change.

RISK OF CHANGES IN ECONOMIC CONDITIONS OR GOVERNMENTAL POLICIES:

Changes in economic conditions in, or governmental policies of, the State of
Maryland or the Commonwealth of Pennsylvania could have a significant impact on
the performance of Maryland Tax-Free and Pennsylvania Tax-Free, respectively.

SECTOR FOCUS AND ISSUER NON-DIVERSIFICATION:

A fund focusing a significant portion of its investments in a single sector of
the municipal securities market will be more susceptible to factors adversely
affecting that sector than would a fund not following this practice.

Each fund is a non-diversified fund. The percentage of each fund's assets
invested in any single issuer is not limited by the Investment Company Act of
1940. When a fund's assets are invested in the securities of a limited number of
issuers or it holds a large portion of its assets in a few issuers, the value of
its shares will be more susceptible to any single economic, political or
regulatory event affecting those issuers or their securities than shares of a
diversified fund.

The funds may invest in securities issued by hospitals and other healthcare
providers. The hospital industry throughout the nation has been subjected to
pressure to reduce expenses and to limit lengths of stay. That pressure may
adversely affect the financial health of some hospitals.

CREDIT RISK:

Not all obligations of the U.S. Government, its agencies and instrumentalities
are backed by the full faith and credit of the United States; some are backed
only by the credit of the issuing agency or instrumentality. The credit quality
of private activity bonds is usually directly related to the credit standing of
the corporate user of the facilities. Accordingly, there may be some risk of
default by the issuer.

There is a risk that a fixed-income security could be downgraded or could
default in payment of principal or interest. Credit ratings are the opinions of
the private companies that rate companies or their securities; they are not
guarantees.

Each fund may invest in bonds that are issued by or on behalf of public
authorities to finance privately operated facilities. Payment of principal and
interest on these bonds depends on the stream of revenue from the facility or
the credit standing of the private operator; they are not supported by the
taxing power of the public authority that issued them.

<PAGE>

CALL RISK:

Many fixed-income securities, especially those issued at high interest rates,
provide that the issuer may repay them early. Issuers often exercise this right
when interest rates are low. Accordingly, holders of callable securities may not
benefit fully from the increase in value that other fixed-income securities
experience when rates decline. Furthermore, the funds reinvest the proceeds of
the payoff at current yields, which are lower than those paid by the security
that was paid off.

OTHER RISKS:

Current efforts to restructure the federal budget and the relationship between
the federal government and state and local governments may impact the financing
of some issuers of municipal securities. Some states and localities at times
experience substantial deficits and may find it difficult for political or
economic reasons to increase taxes. Some local jurisdictions have invested
heavily in derivative instruments and may now hold portfolios of uncertain
valuation. Each of these factors may affect the ability of an issuer of
municipal securities to meet its obligations. Efforts by the federal government
to restructure the federal income tax system could adversely affect the value of
municipal securities.

<PAGE>

[icon] P E R F O R M A N C E

The information below provides an indication of the risks of investing in a fund
by showing changes in each fund's performance from year to year. Annual returns
assume reinvestment of all dividends and distributions. Historical performance
of a fund does not necessarily indicate what will happen in the future.

MARYLAND TAX-FREE INCOME TRUST - PRIMARY CLASS SHARES

Year by year total return as of December 31 of each year (%)*

1992 1993 1994 1995 1996 1997 1998 1999
--------------------------------------------------------------------------
8.32 12.16 -3.12 14.81 3.58 7.69 5.59 -3.36

* The fund's year-to-date total return as of June 30, 2000 was 4.29%.

During the past eight calendar years:

Quarter Ended Total Return
------------- ------------
Best quarter: March 31, 1995 5.73%
Worst quarter: March 31, 1994 -3.92%

In the following table, the average annual total return for the years ended
December 31, 1999 is compared with the Lehman Brothers Municipal Bond Index.

--------------------------------------------------------------------------------
1 Year 5 Years Life of Class
--------------------------------------------------------------------------------
Maryland Tax-Free Income Trust -3.36% 5.50% 6.00%(a)
--------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.68%(b)
--------------------------------------------------------------------------------

(a) May 1, 1991 (commencement of operations) to December 31, 1999.

(b) April 30, 1991 to December 31, 1999.

PENNSYLVANIA TAX-FREE INCOME TRUST - PRIMARY CLASS SHARES

Year by year total return as of December 31 of each year (%)*

1992 1993 1994 1995 1996 1997 1998 1999
--------------------------------------------------------------------------
9.46 12.77 -3.82 15.25 3.29 8.09 5.76 -3.29

* The fund's year-to-date total return as of June 30, 2000 was 4.66%.

During the past eight calendar years:

Quarter Ended Total Return
------------- ------------
Best quarter: March 31, 1995 6.26%
Worst quarter: March 31, 1994 -4.51%

<PAGE>

In the following table, the average annual total return for the years ended
December 31, 1999 is compared with the Lehman Brothers Municipal Bond Index.

--------------------------------------------------------------------------------
1 Year 5 Years Life of Class
--------------------------------------------------------------------------------
Pennsylvania Tax-Free Income Trust -3.29% 5.65% 6.19%(a)
--------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.63%(b)
--------------------------------------------------------------------------------

(a) August 1, 1991 (commencement of operations) to December 31, 1999.

(b) July 31, 1991 to December 31, 1999.

TAX-FREE INTERMEDIATE-TERM INCOME TRUST - PRIMARY CLASS SHARES

Year by year total return as of December 31 of each year (%)*

1993 1994 1995 1996 1997 1998 1999
----------------------------------------------------------------
9.95 -1.96 11.95 3.49 6.09 5.26 -0.74

* The fund's year-to-date total return as of June 30, 2000 was 2.99%.

During the past seven calendar years:

Quarter Ended Total Return
------------- ------------
Best quarter: March 31, 1995 4.70%
Worst quarter: March 31, 1994 -2.83%

In the following table, the average annual total return for the years ended
December 31, 1999 is compared with the Lehman Brothers Seven-Year Municipal Bond
Index.

--------------------------------------------------------------------------------
1 Year 5 Years Life of Class
--------------------------------------------------------------------------------
Tax-Free Intermediate-Term
Income Trust -0.74% 5.13% 4.88%(a)
--------------------------------------------------------------------------------
Lehman Brothers Seven-Year
Municipal Bond Index -0.14% 6.35% 5.77%(b)
--------------------------------------------------------------------------------

(a) November 9, 1992 (commencement of operations) to December 31, 1999.

(b) October 31, 1992 to December 31, 1999.

7
<PAGE>

[icon] F E E S A N D E X P E N S E S O F T H E F U N D S

The tables below describe the fees and expenses you will incur as an investor in
a fund. Each fund pays operating expenses directly out of its assets so they
lower the fund's share price and dividends. Other expenses include transfer
agency, custody, professional and registration fees.

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)

Maryland Pennsylvania Tax-Free
Tax-Free Tax Free Intermediate
-------- ------------ ------------

Management fees (a) 0.55% 0.55% 0.55%

Distribution and Service
(12b-1) fees 0.25% 0.25% 0.25%

Other Expenses 0.16% 0.22% 0.22%
----------------------------------------
Total Annual Fund Operating
Expenses (a) 0.96% 1.02% 1.02%

(a) The adviser has voluntarily agreed to waive fees so that Primary Class
share expenses (exclusive of taxes, interest, brokerage fees, and
extraordinary expenses) do not exceed an annual rate of 0.70% of average
daily net assets attributable to Primary Class shares of each fund. These
waivers remain in effect for a fund until the earlier of August 1, 2001 or
when the fund's net assets reach the following level: Maryland Tax-Free,
$200 million; Pennsylvania Tax-Free, $125 million; Tax-Free Intermediate,
$100 million. With these waivers, the management fee and total operating
expenses for the fiscal year ended March 31, 2000 were: 0.29% and 0.70%
for Maryland Tax-Free; 0.19% and 0.66% for Pennsylvania Tax-Free; and
0.23% and 0.70% for Tax-Free Intermediate.

Example:

This example helps you compare the cost of investing in a fund with the cost of
investing in other mutual funds. Although your actual costs may be higher or
lower, you would pay the following expenses on a $10,000 investment in a fund,
assuming (1) a 5% return each year, (2) the fund's operating expenses remain the
same as shown in the table above, and (3) you redeem all of your shares at the
end of the time periods shown.

--------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
Maryland Tax-Free Income Trust $98 $306 $531 $1178
--------------------------------------------------------------------------------
Pennsylvania Tax-Free Income Trust $104 $325 $563 $1248
--------------------------------------------------------------------------------
Tax-Free Intermediate-Term Income Trust $104 $325 $563 $1248
--------------------------------------------------------------------------------

<PAGE>

[icon] M A N A G E M E N T

MANAGER AND ADVISER:

Legg Mason Fund Adviser, Inc. ("LMFA"), 100 Light Street, Baltimore, Maryland
21202, is the funds' manager. As manager, LMFA is responsible for investment
management and administrative services and for overseeing the funds'
relationships with outside service providers, such as the custodian, transfer
agent, accountants and lawyers. Each fund has contracted to pay LMFA a fee equal
to an annual rate of 0.55% of each fund's average daily net assets.

Legg Mason Trust, fsb ("LM Trust"), 100 Light Street, Baltimore, Maryland,
21202, is the funds' adviser. As adviser, LM Trust is responsible for the
investment management of the funds, including the responsibility for making
investment decisions and placing orders to buy, sell or hold a particular
security. LMFA, not the funds, pays LM Trust for providing advisory services to
the funds.

Because of fee waivers, the funds paid advisory fees for the fiscal year ended
March 31, 2000, as follows:

Maryland Tax-Free 0.29%
Pennsylvania Tax-Free 0.19%
Tax-Free Intermediate 0.23%

On June 1, 2000, LMFA became the manager and LM Trust the investment adviser to
the funds. The advisory personnel who previously managed the funds as employees
of Legg Mason Capital Management, Inc. ("LMCM"), continue to do so as employees
of LM Trust.

PORTFOLIO MANAGEMENT:

An investment committee is responsible for the day-to-day management of each
fund.

DISTRIBUTOR OF THE FUNDS' SHARES:

Legg Mason Wood Walker, Incorporated ("Legg Mason"), 100 Light Street,
Baltimore, Maryland 21202, distributes the funds' shares. Each fund has adopted
a plan under Rule 12b-1 that allows it to pay distribution fees and/or
shareholder service fees for the sale of its shares and for services provided to
shareholders. The fees are calculated daily and paid monthly.

Under each plan, a fund may pay Legg Mason an annual fee equal to an annual rate
of 0.25% of that fund's average daily net assets attributable to Primary Class
shares.

Because these fees are paid out of the fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.

Legg Mason may enter into agreements with other brokers to sell Primary Class
shares of each fund. Legg Mason pays these brokers up to 90% of the service fee
that it receives from a fund for those sales.

Legg Mason, LMFA, LMCM and LM Trust are wholly owned subsidiaries of Legg Mason,
Inc., a financial services holding company.

<PAGE>

[icon] H O W T O I N V E S T

To open an account, contact a Legg Mason Financial Advisor, Legg Mason Funds
Investor Services ("FIS") or another entity that has entered into an agreement
with Legg Mason to sell shares of the funds. The minimum initial investment is
$1,000 and the minimum for each purchase of additional shares is $100.

Certain investment methods may be subject to lower minimum initial and
additional investments. Arrangements may also be made with some employers and
financial institutions for regular automatic monthly investments of $50 or more
in shares of a fund. Contact your financial adviser or FIS with any questions
regarding your investment options.

Once your account is open, you may use the following methods to purchase shares
of the funds:

--------------------------------------------------------------------------------
In Person Give your financial adviser a check for $100 or
more payable to a fund.
--------------------------------------------------------------------------------
Mail Mail your check, payable to a fund, for $100 or
more to your financial adviser or to Legg Mason
Funds Investor Services at P.O. Box 17023,
Baltimore, MD 21297-0356.
--------------------------------------------------------------------------------
Telephone or Wire Call your financial adviser or FIS at
1-800-822-5544 to transfer available cash
balances in your brokerage account or to
transfer money from your bank directly. Wire
transfers may be subject to a service charge by
your bank.
--------------------------------------------------------------------------------
Internet or TeleFund FIS clients may purchase shares of a fund
through Legg Mason's Internet site at
http://www.leggmasonfunds.com or through a
telephone account management service,
"TeleFund," at 1-877-6-LMFUNDS.
--------------------------------------------------------------------------------
Automatic Investments Arrangements may be made with some employers and
financial institutions for regular automatic
monthly investments of $50 or more in shares of
a fund. You may also reinvest dividends from
certain unit investment trusts in shares of a
fund.
--------------------------------------------------------------------------------
Future First Systematic Contact a Legg Mason Financial Advisor to enroll
Investment Plan in Legg Mason's Future First Systematic
Investment Plan. Under this plan, you may
arrange for automatic monthly investments in a
fund of $50 or more. The transfer agent will
transfer funds monthly from your Legg Mason
account or from your checking/savings account to
purchase shares of the desired fund.
--------------------------------------------------------------------------------

Investments made through entities other than Legg Mason may be subject to
transaction fees or other purchase conditions established by those entities. You
should consult their program literature for further information.

Purchase orders received by your financial adviser, FIS or other authorized
entity before the close of the New York Stock Exchange ("Exchange") (normally
4:00 p.m., Eastern time) will be processed at a fund's net asset value as of the
close of the Exchange on that day. Orders received after the close of the
Exchange will be processed at a fund's net asset value as of the close of the
Exchange on the next day the Exchange is open. Payment must be made within three
business days to Legg Mason.

You will begin to earn dividends on shares of the funds as of the settlement
date, which is normally the third business day after you place your order.

If you do not make payment in federal funds, your order will be processed when
payment is converted into federal funds, which is usually completed in two days,
but may take up to ten days. Most bank wires are federal funds.

<PAGE>

Navigator Class shares, which are not subject to a Rule 12b-1 fee, are offered
through a separate prospectus only to certain investors.

<PAGE>

[icon] H O W T O S E L L Y O U R S H A R E S

You may use any of the following methods to sell shares of the funds:

--------------------------------------------------------------------------------
Telephone Call your financial adviser or FIS at 1-800-822-5544 or
entity offering a fund to request a redemption. Please
have the following information ready when you call: the
name of the fund, the number of shares (or dollar amount)
to be redeemed and your shareholder account number.

Proceeds will be credited to your brokerage account or a
check will be sent to you, at your direction, at no
charge to you. Wire requests will be subject to a fee of
$12. Be sure that your financial adviser has your bank
account information on file.
--------------------------------------------------------------------------------
Internet or FIS clients may request a redemption of fund shares
TeleFund through Legg Mason's Internet site at
http://www.leggmasonfunds.com or through TeleFund at
1-877-6-LMFUNDS.
--------------------------------------------------------------------------------
Mail Send a letter to a fund requesting redemption of your
shares. The letter should be signed by all of the owners
of the account and their signatures guaranteed without
qualification. Redemption requests for shares valued at
$10,000 or more, or when proceeds are to be paid to
someone other than the accountholder, will require a
signature guarantee. You may obtain a signature guarantee
from most banks or securities dealers.
--------------------------------------------------------------------------------
Securities Legg Mason has special redemption procedures for
Purchases at Legg investors who wish to purchase stocks, bonds or other
Mason securities at Legg Mason. Once you've placed an
order for securities, and have not indicated any other
payment method, fund shares will be redeemed on the
settlement date for the amount due. Fund shares may also
be redeemed to cover debit balances in your brokerage
account.
--------------------------------------------------------------------------------

The funds will follow reasonable procedures to ensure the validity of any
telephone or internet redemption request, such as requesting identifying
information from users or employing identification numbers. Unless you specify
that you do not wish to have telephone redemption privileges, you may be held
responsible for any fraudulent telephone order.

Fund shares will be sold at the next net asset value calculated after your
redemption request is received by your financial adviser, FIS or another
authorized entity offering the fund.

Redemption orders will be processed promptly. You will generally receive the
proceeds within a week. Payment of redemption proceeds with respect to shares
that were recently purchased by check or acquired through reinvestment of
distributions on such shares may be delayed for up to 10 days from the purchase
date in order to allow for the check to clear.

Additional documentation may be required from corporations, executors,
partnerships, administrators, trustees or custodians.

Redemptions made through authorized entities other than Legg Mason may be
subject to transaction fees or other conditions established by those entities.
You should consult their program literature for further information.

Each fund has reserved the right under certain conditions to redeem its shares
in kind by distributing portfolio securities in payment for redemptions.

<PAGE>

[icon] A C C O U N T P O L I C I E S

CALCULATION OF NET ASSET VALUE:

Net asset value per Primary Class share is determined daily as of the close of
regular trading on the Exchange, on every day the Exchange is open. The Exchange
is normally closed on all national holidays and Good Friday. To calculate each
fund's Primary Class share price, the fund's assets attributable to Primary
Class shares are valued and totaled, liabilities attributable to that class are
subtracted, and the resulting net assets are divided by the number of Primary
Class shares outstanding. Each fund's securities are valued on the basis of
market quotations or, lacking such quotations, at fair value as determined under
policies approved by the Board of Trustees. Each fund may use fair value pricing
instead of market quotations to value a security if a fund's Valuation Committee
believes that, because of special circumstances, doing so would more accurately
reflect the price the fund could realize on a current sale of the security.

Securities for which market quotations are readily available are valued at the
last available bid price for a comparable position. Where such market quotations
are not readily available, securities are valued based upon appraisals received
from an independent pricing service. Securities with remaining maturities of 60
days or less are valued at amortized cost.

OTHER:

Fund shares may not be held in, or transferred to, an account with any firm that
does not have an agreement with Legg Mason or its affiliates.

If your account in a fund falls below $500, the fund may ask you to increase
your balance. If, after 60 days, your account is still below $500, the fund may
close your account and send you the proceeds. A fund will not redeem accounts
that fall below $500 solely as a result of a reduction in net asset value per
share.

Each fund reserves the right to:

o reject any order for shares or suspend the offering of shares for a period
of time,

o change its minimum investment amounts, and

o delay sending out redemption proceeds for up to seven days. This generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions. The funds may delay redemptions beyond
seven days, or suspend redemptions, only as permitted by the Securities
and Exchange Commission (SEC).

<PAGE>

[icon] S E R V I C E S F O R I N V E S T O R S

For further information regarding any of the services below, please contact your
financial advisor or other entity offering the funds for sale.

CONFIRMATIONS AND ACCOUNT STATEMENTS:

You will receive from Legg Mason a confirmation after each transaction involving
Primary Class shares (except a reinvestment of dividends, capital gain
distributions and purchases made through the Future First Systematic Investment
Plan or through automatic investments or withdrawals made through the Systematic
Withdrawal Plan). Legg Mason or the entity through which you invest will send
you account statements monthly unless there has been no activity in the account,
in which case a statement will be sent to you quarterly. Legg Mason will send
you statements quarterly if you participate in the Future First Systematic
Investment Plan or if you purchase shares through automatic investments.

SYSTEMATIC WITHDRAWAL PLAN:

If you are purchasing or already own shares of a fund with a net asset value of
$5,000 or more, you may elect to make systematic withdrawals from the fund. The
minimum amount for each withdrawal is $50. You should not purchase shares of the
fund when you are a participant in the plan.

EXCHANGE PRIVILEGE:

Primary Class shares may be exchanged for Primary Class shares of any of the
other Legg Mason funds, provided these funds are eligible for sale in your state
of residence. You can request an exchange in writing or by phone. Be sure to
read the current prospectus for any fund into which you are exchanging.

There is currently no fee for exchanges; however, you may be subject to a sales
charge when exchanging into a fund that has one. In addition, an exchange of a
fund's shares will be treated as a sale of the shares and any gain on the
transaction may be subject to tax.

Each fund reserves the right to:

o terminate or limit the exchange privilege of any shareholder who makes more
than four exchanges from the fund in one calendar year.

o terminate or modify the exchange privilege after 60 days' written notice to
shareholders.

<PAGE>

[icon] D I S T R I B U T I O N S A N D T A X E S

Each fund declares any dividends from its net investment income daily and pays
them monthly.

Dividends from any net short-term capital gain and distributions of
substantially all net capital gain (the excess of net long-term capital gain
over net short-term capital loss) generally are declared and paid after the end
of the taxable year in which the gain is realized. A second distribution of net
capital gain may be necessary in some years to avoid imposition of a federal
excise tax.

Your dividends and other distributions will be automatically reinvested in the
same class of shares of the distributing fund unless you elect to receive your
dividends and/or other distributions in cash. To change your election, you must
notify the distributing fund at least ten days before the next dividend and/or
other distribution is paid.

If the postal or other delivery service is unable to deliver your check, your
distribution option will automatically be converted to having all dividends and
other distributions reinvested in fund shares. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.

A dividend will be an "exempt-interest" dividend if, at the close of each
quarter of a fund's taxable year, at least 50% of the value of its total assets
consists of certain obligations the interest on which is excludable from gross
income for federal income tax purposes. Exempt-interest dividends are excludable
from a shareholder's gross income; however, the amount of those dividends must
be reported on the recipient's federal income tax return.

Generally, distributions paid by Maryland Tax-Free to Maryland residents
attributable to interest received or capital gains recognized by the fund on
Maryland municipal obligations are exempt from Maryland state and local income
taxes. Distributions attributable to interest received or capital gains
recognized by the fund on certain U.S. Government obligations also are exempt
from those taxes. Similarly, individual shareholders of Pennsylvania Tax-Free
who are otherwise subject to the Pennsylvania personal income tax will generally
not be subject to that tax on distributions by the fund that are attributable to
interest on Pennsylvania municipal obligations.

Fund dividends and other distributions are taxable to investors whether received
in cash or reinvested in additional shares of a fund. Dividends from investment
company taxable income (which includes taxable net investment income and net
short-term capital gain) are taxable as ordinary income. Distributions of a
fund's net capital gain are taxable as long-term capital gain, regardless of how
long you have held your fund shares.

The sale or exchange of fund shares may result in a taxable gain or loss,
depending on whether the proceeds are more or less than the cost of your shares.

A tax statement is sent to you at the end of each year detailing the tax status
of your distributions.

Each fund will withhold 31% of all taxable dividends, capital gain distributions
and redemption proceeds payable to individuals and certain other non-corporate
shareholders who do not provide the fund with a valid taxpayer identification
number. Each fund will also withhold 31% of all taxable dividends and capital
gain distributions payable to such shareholders who are otherwise subject to
backup withholding.

Because each investor's tax situation is different, please consult your tax
adviser about federal, state and local tax considerations.

<PAGE>

[icon] F I N A N C I A L H I G H L I G H T S

The financial highlights table is intended to help you understand each fund's
financial performance for the past 5 years. Total return represents the rate
that an investor would have earned (or lost) on an investment in a fund,
assuming reinvestment of all dividends and distributions. This information has
been audited by the funds' independent accountants, PricewaterhouseCoopers LLP,
whose report, along with the funds' financial statements, is incorporated by
reference into the Statement of Additional Information (see back cover) and is
included in the annual report. The annual report is available upon request by
calling toll-free 1-800-822-5544.

Investment Operations
-------------------------------------------------------------------------------
Net Asset Net Realized
Value, Net And Unrealized Total From
For the Years Beginning Investment Gain/(Loss) on Investment
Ended March 31, of Year Income Investments Operations
-------------------------------------------------------------------------------
Maryland Tax Free Income Trust - Primary Class
2000 $16.39 $.77 D ($0.91) ($0.14)
1999 16.39 .78 D 0.05 0.83
1998 15.91 .81 D 0.59 1.40
1997 16.07 .83 D (0.09) 0.74
1996 15.87 .86 D 0.25 1.11
-------------------------------------------------------------------------------
Pennsylvania Tax Free Income Trust - Primary Class
2000 $16.53 $.79 E ($0.94) ($0.15)
1999 16.48 .80 E 0.10 0.90
1998 15.80 .81 E 0.71 1.52
1997 16.10 .83 E (0.11) 0.72
1996 16.02 .89 E 0.15 1.04
-------------------------------------------------------------------------------
Tax Free Intermediate-Term Income Trust - Primary Class
2000 $15.68 $.67 F ($0.59) ($0.08)
1999 15.61 .67 F 0.08 0.75
1998 15.22 .67 F 0.39 1.06
1997 15.34 .68 F (0.12) 0.56
1996 15.06 .68 F 0.28 0.96
-------------------------------------------------------------------------------

Distributions
------------------------------------------------------------------------------
From Net From Net Net Asset
For the Years Investment Realized Gain Total Value,
Ended March 31, Income On Investments Distributions End Year
------------------------------------------------------------------------------
Maryland Tax Free Income Trust - Primary Class
2000 ($0.77) ($0.06) ($0.83) $15.42
1999 (0.78) (0.05) (0.83) 16.39
1998 (0.81) (0.11) (0.92) 16.39
1997 (0.83) (0.07) (0.90) 15.91
1996 (0.86) (0.05) (0.91) 16.07
------------------------------------------------------------------------------
Pennsylvania Tax Free Income Trust - Primary Class
2000 ($0.79) ($0.02) ($0.81) $15.57
1999 (0.80) (0.05) (0.85) 16.53
1998 (0.81) (0.03) (0.84) 16.48
1997 (0.83) (0.19) (1.02) 15.80
1996 (0.89) (0.07) (0.96) 16.10
------------------------------------------------------------------------------
Tax Free Intermediate-Term Income Trust - Primary Class
2000 ($0.67) $ --- ($0.67) $15.09
1999 (0.67) (0.01) (0.68) 15.68
1998 (0.67) --- (0.67) 15.61
1997 (0.68) --- (0.68) 15.22
1996 (0.68) --- (0.68) 15.34
------------------------------------------------------------------------------

<PAGE>

Ratios/Supplement Data
<TABLE>
<CAPTION>
Net
Investment
Total Expenses Net Expenses Income to Portfolio Net Assets,
For the Years Total To Average To Average Average Turnover End of Year
Ended March 31, Return A Net Assets B Net Assets C Net Assets Rate (in thousands)
---------------------------------------------------------------------------------------------------------
Maryland Tax Free Income Trust - Primary Class
<S> <C> <C> <C> <C> <C> <C>
2000 (0.79%) .70% D .70% D 4.94% D 23.00% $141,953
1999 5.16% .70% D .70% D 4.71% D 12.90% 166,458
1998 8.97% .70% D .70% D 4.97% D 18.90% 154,468
1997 4.73% .67% D .66% D 5.18% D 6.00% 145,974
1996 7.11% .59% D .58% D 5.29% D 14.1%D 146,645
---------------------------------------------------------------------------------------------------------
Pennsylvania Tax Free Income Trust - Primary Class
2000 (0.84% .66% E .66% E 5.03% E 28.60% $69,195
1999 5.54% .70% E .70% E 4.82% E 10.60% 75,093
1998 9.80% .71% E .70% E 5.00% E 14.10% 68,048
1997 4.61% .67% E .66% E 5.20% E 13.60% 64,875
1996 6.52% .54% E .53% E 5.42% E 17.20% 65,275
---------------------------------------------------------------------------------------------------------
Tax Free Intermediate-Term Income Trust - Primary Class
2000 0.58% .70% F .70% F 4.40% F 35.60% $55,641
1999 4.82% .70% F .70% F 4.24% F 17.90% 63,502
1998 7.12% .71% F .70% F 4.34% F 9.00% 59,255
1997 3.71% .67% F .66% F 4.43% F 8.90% 54,736
1996 6.47% .57% F .56% F 4.41% F ---- 60,042
---------------------------------------------------------------------------------------------------------
</TABLE>

A-Excluding sales charge, Sales charges have been waived since November 3, 1997.
B-This ratio reflects total expenses before compensating balance credits, but
net of the voluntary expense waivers described below.
C-This ratio reflects expenses net of compensating balance credits and voluntary
expense waivers described below.
D-Net of fees waived by the adviser in excess of voluntary expense limitations
as follows: 0.55% until July 31, 1995; 0.60% until March 31, 1996; 0.65% until
December 31, 1996; and 0.70% through July 31, 2000. If no fees had been waived
by the adviser, the annualized ratio of expenses to average daily net assets
for each year ended March 31 would have been as follows: 2000, 0.96%; 1999,
0.94%; 1998, 0.93%; 1997, 0.96%; and 1996, 0.95%.
E-Net of fees waived by the adviser in excess of voluntary expense limitations
as follows: 0.50% until July 31, 1995; 0.55% until March 31, 1996; 0.65% until
December 31, 1996; and 0.70% through July 31, 2000. If no fees had been waived
by the adviser, the annualized ratio of expenses to average daily net assets
for each year ended March 31 would have been as follows: 2000, 1.02%; 1999,
1.00%; 1998, 1.00%; 1997, 1.04%; and 1996, 1.02%.
F-Net of fees waived by the adviser in excess of voluntary expense limitations
as follows: 0.35% until July 31, 1995; 0.65% until December 31, 1996; and
0.70% through July 31, 2000. If no fees had been waived by the adviser, the
annualized ratio of expenses to average daily net assets for each year ended
March 31 would have been as follows: 2000, 1.02%; 1999, 1.03%; 1998, 1.06%;
1997, 1.11%; and 1996, 1.10%.

<PAGE>

L e g g M a s o n T a x-F r e e I n c o m e F u n d

The following additional information about each fund is available upon request
and without charge:

STATEMENT OF ADDITIONAL INFORMATION (SAI) - The SAI is filed with the SEC and is
incorporated by reference into (is considered part of) the prospectus. The SAI
provides further information and additional details about each fund and its
policies.

ANNUAL AND SEMI-ANNUAL REPORTS - Additional information about each fund's
investments is available in the funds' annual and semi-annual reports to
shareholders. In the funds' annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected each
fund's performance during its last fiscal year.

To request the SAI or any reports to shareholders, or to obtain more
information:

o call toll-free 1-800-822-5544
o visit us on the Internet via http://www.leggmasonfunds.com
o write to us at: Legg Mason Wood Walker, Incorporated
100 Light Street, P.O. Box 1476
Baltimore, Maryland 21203-1476

Information about each fund, including the SAI, can be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C. Information on the operation
of the Public Reference Room may be obtained by calling the Commission at
1-202-942-8090. Reports and other information about each fund are available on
the EDGAR database on the SEC's Internet site at http://www.sec.gov. Investors
may also obtain this information, after paying a duplication fee, by electronic
request at the following e-mail address: [email protected] or by writing the
SEC's Public Reference Section, Washington, D.C. 20549- 0102.

LMF-038 SEC file number 811-6223

<PAGE>

LEGG MASON TAX-FREE INCOME FUND:
-------------------------------

Navigator Class of Legg Mason Maryland Tax-Free Income Trust
Navigator Class of Legg Mason Pennsylvania Tax-Free Income Trust
Navigator Class of Legg Mason Tax-Free Intermediate-Term Income Trust

NAVIGATOR CLASS PROSPECTUS July 31, 2000

[LOGO]
LEGG
MASON
FUNDS
THE ART OF INVESTING(SM)

Not every fund listed in this Prospectus is available for purchase in every
state. Please consult your Legg Mason Financial Advisor concerning the
availability of a particular fund.

<PAGE>

T A B LE O F C O N T E N T S

A b o u t t h e f u n d s:
--------------------------------------------------------------------------------

1 Investment objectives

4 Principal risks

6 Performance

9 Fees and expenses of the funds

10 Management

A b o u t y o u r i n v e s t m e n t:
--------------------------------------------------------------------------------

11 How to invest

13 How to sell your shares

15 Account policies

16 Services for investors

17 Distributions and taxes

18 Financial highlights

<PAGE>

LEGG MASON TAX-FREE INCOME FUND

[icon] I N V E S T M E N T O B J E C T I V E S
-----

LEGG MASON MARYLAND TAX-FREE INCOME TRUST

INVESTMENT OBJECTIVE: a high level of current income exempt from federal and
Maryland state and local income taxes, consistent with prudent investment risk
and preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES:

Securities may be sold because their credit fundamentals have changed, or in
order to buy a security that the adviser believes will produce greater
risk-adjusted returns.

LEGG MASON PENNSYLVANIA TAX-FREE INCOME TRUST

INVESTMENT OBJECTIVE: a high level of current income exempt from federal income
tax and Pennsylvania personal income tax consistent with prudent investment risk
and preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES:

The fund invests primarily in debt instruments issued by or on behalf of the
Commonwealth of Pennsylvania, its political subdivisions, municipalities,

<PAGE>

Securities may be sold because their credit fundamentals have changed, or in
order to buy a security that the adviser believes will produce greater
risk-adjusted returns.

For temporary defensive purposes, when in the adviser's opinion, no suitable
municipal securities are available, for liquidity purposes, or pending the
investment of the proceeds of the sale of shares, the fund may invest in taxable
short-term investments. The fund may also temporarily invest more than 20% of
its total assets in municipal obligations the interest on which is exempt from
federal income tax but is a tax preference item and/or is subject to
Pennsylvania personal income tax. If the fund invests substantially in such
instruments, the fund may not be pursuing its principal investment strategies
and the fund may not achieve its investment objective.

LEGG MASON TAX-FREE INTERMEDIATE-TERM INCOME TRUST

INVESTMENT OBJECTIVE: a high level of current income exempt from federal income
tax, consistent with prudent investment risk.

PRINCIPAL INVESTMENT STRATEGIES:

The fund may invest in securities of any maturity. When selecting securities for
the fund, the adviser maintains the fund's dollar-weighted average maturity

<PAGE>

between two and ten years. The adviser establishes a duration target for the
fund based on the adviser's investment outlook. This outlook is determined by
the adviser's analysis of the economy, fiscal and monetary policy, and
international events. Factors directly impacting the municipal market, such as
supply, demand, and legislative developments, are also incorporated in the
adviser's outlook.

Securities may be sold because their credit fundamentals have changed, or in
order to buy a security which the adviser believes will produce greater
risk-adjusted returns.

For temporary defensive purposes, when in the adviser's opinion, no suitable
municipal securities are available, for liquidity purposes, or pending the
investment of the proceeds of the sale of shares, the fund may invest in taxable
short-term investments. The fund may also temporarily invest more than 20% of
its total assets in municipal obligations the interest on which is exempt from
federal income tax but is a tax preference item. If the fund invests
substantially in such instruments, the fund may not be pursuing its principal
investment strategies and the fund may not achieve its investment objective.

<PAGE>

[icon] P R I N C I P A L R I S K S

IN GENERAL:

INTEREST RATE RISK:

RISK OF CHANGES IN ECONOMIC CONDITIONS OR GOVERNMENTAL POLICIES:

SECTOR FOCUS AND ISSUER NON-DIVERSIFICATION:

CREDIT RISK:

<PAGE>

CALL RISK:

OTHER RISKS:

<PAGE>

[icon] P E R F O R M A N C E

Each fund has two authorized classes of shares: Primary Class shares and
Navigator Class shares. As of the date of this prospectus, Navigator Class
shares of Maryland Tax-Free Income Trust and Tax-Free Intermediate-Term Income
Trust have not yet commenced operations. The returns presented for these funds
are for the Primary Class shares, which are not offered in this prospectus.
Navigator Class shares and Primary Class shares are invested in the same
portfolio of securities, and the annual returns for each class of shares would
differ only to the extent that the Navigator Class shares would pay lower
expenses, and therefore would have higher returns. Each class is subject to
different expenses. The information below provides an indication of the risks of
investing in a fund by showing changes in the fund's performance from year to
year. Annual returns assume reinvestment of all dividends and distributions.
Historical performance of a fund does not necessarily indicate what will happen
in the future.

MARYLAND TAX-FREE INCOME TRUST - PRIMARY CLASS SHARES

YEAR BY YEAR TOTAL RETURN AS OF DECEMBER 31 OF EACH YEAR (%)*

25%

20%

15%
12.16 14.81
10%
8.32 7.69
5% 5.59
3.58
0%
-3.12
-5% -3.36

1992 1993 1994 1995 1996 1997 1998 1999

*The fund's year-to-date total return as of June 30, 2000 is 4.29%.

DURING THE PAST EIGHT CALENDAR YEARS:

Quarter Ended Total Return
-------------- ------------
Best quarter: March 31, 1995 5.73%
Worst quarter: March 31, 1994 -3.92%

In the following table, the average annual total return for the years ended
December 31, 1999 is compared with the Lehman Brothers Municipal Bond Index.

--------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE OF CLASS
--------------------------------------------------------------------------------
Maryland Tax-Free Income Trust--
Primary Class -3.36% 5.50% 6.00%(a)
--------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.68%(b)
--------------------------------------------------------------------------------

(a) May 1, 1991 (commencement of operations of this class) to December 31, 1999.

(b) April 30, 1991 to December 31, 1999.

<PAGE>

PENNSYLVANIA TAX-FREE INCOME TRUST - NAVIGATOR CLASS SHARES

YEAR BY YEAR TOTAL RETURN AS OF DECEMBER 31 OF EACH YEAR (%)*

16%

14%

12%

10%

-2%
-3.07
-4%
1999

*The fund's year-to-date total return as of June 30, 2000 is 4.76%.

During the Last Calendar Year:

Quarter Ended Total Return
------------- ------------
Best quarter: March 31, 1999 0.88%
Worst quarter: June 30, 1999 -1.63%

In the following table, the average annual total return for the years ended
December 31, 1999 is compared with the Lehman Brothers Municipal Bond Index.

--------------------------------------------------------------------------------
1 YEAR LIFE OF CLASS
--------------------------------------------------------------------------------
Pennsylvania Tax-Free Income Trust--
Navigator Class -3.07% 1.21%(a)
--------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index -2.06% 1.73%(b)
--------------------------------------------------------------------------------

(a) March 10, 1998 (commencement of operations of this class) to December 31,
1999.

(b) March 1, 1998 to December 31, 1999.

<PAGE>

TAX-FREE INTERMEDIATE-TERM INCOME TRUST - PRIMARY CLASS SHARES

YEAR BY YEAR TOTAL RETURN AS OF DECEMBER 31 OF EACH YEAR (%)*

1993 1994 1995 1996 1997 1998 1999
----------------------------------------------------------------
9.95 -1.96 11.95 3.49 6.09 5.26 0.74

*The fund's year-to-date total return as of June 30, 2000 was 2.99%.

DURING THE PAST SEVEN CALENDAR YEARS:

Quarter Ended Total Return
------------- ------------
Best quarter: March 31, 1995 4.70%
Worst quarter: March 31, 1994 -2.83%

In the following table, the average annual total return for the years ended
December 31, 1999 is compared with the Lehman Brothers Seven-Year Municipal Bond
Index.

--------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE OF CLASS
--------------------------------------------------------------------------------
Tax-Free Intermediate-Term
Income Trust -0.74% 5.13% 4.88%(a)
--------------------------------------------------------------------------------
Lehman Brothers Seven-Year
Municipal Bond Index -0.14% 6.35% 5.77%(b)
--------------------------------------------------------------------------------

(a) November 9, 1992 (commencement of operations of this class) to December 31,
1999.

(b) October 31, 1992 to December 31, 1999.

<PAGE>

[icon] F E E S A N D E X P E N S E S O F T H E F U N D S

The table below describes the fees and expenses you will incur as an investor in
a fund. Each fund pays operating expenses directly out of its assets so they
lower the fund's share price and dividends. Other expenses include transfer
agency, custody, professional and registration fees.

Annual Fund Operating Expenses
(expenses that are deducted from fund assets)

Maryland Pennsylvania Tax-Free
Tax-Free Tax-Free Intermediate
-------- ------------ ------------

Management fees (a) 0.55% 0.55% 0.55%

Distribution and/or Service
(12b-1) fees None None None

Other Expenses (b) 0.16% 0.26% 0.22%

Total Annual Fund Operating
Expenses (a) 0.71% 0.81% 0.77%

(a) The adviser has voluntarily agreed to waive fees so that Navigator Class
share expenses (exclusive of taxes, interest, brokerage fees, and
extraordinary expenses) do not exceed an annual rate of 0.45% of average
daily net assets attributable to Navigator Class shares of each fund. These
waivers remain in effect until the earlier of August 1, 2001 or when the
fund's net assets reach the following level: Maryland Tax-Free, $200
million; Pennsylvania Tax-Free, $125 million; Tax-Free Intermediate, $100
million. With these waivers, the management fee and total operating
expenses are as follows: 0.29% and 0.45% for Maryland Tax-Free; 0.19% and
0.45% for Pennsylvania Tax-Free; and 0.23% and 0.45% for Tax-Free
Intermediate.

(b) Other expenses for Maryland Tax-Free and Tax-Free Intermediate are based on
estimated amounts for the current fiscal year.

EXAMPLE:

--------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
Maryland Tax-Free $73 $227 $395 $883
--------------------------------------------------------------------------------
Pennsylvania Tax-Free $83 $259 $450 $1002
--------------------------------------------------------------------------------
Tax-Free Intermediate $79 $246 $428 $954
--------------------------------------------------------------------------------

9
<PAGE>

[icon] M A N A G E M E N T

MANAGER AND ADVISER:

Legg Mason Fund Adviser, Inc. ("LMFA"), 100 Light Street, Baltimore, Maryland
21202, is the manager of the funds. As manager, LMFA is responsible for
investment management and administrative services and for overseeing the funds'
relationships with outside service providers, such as the custodian, transfer
agent, accountants and lawyers. Each fund has contracted to pay LMFA a fee equal
to an annual rate of 0.55% of each fund's average daily net assets.

Legg Mason Trust, fsb ("LM Trust"), 100 Light Street, Baltimore, Maryland,
21202, is the funds' adviser. As adviser, LM Trust is responsible for the
investment management of the funds, including the responsibility for making
investment decisions and placing orders to buy, sell or hold a particular
security. LMFA, not each fund, pays LM Trust for providing advisory services to
the funds.

For its services during the fiscal year ended March 31, 2000, the funds paid
LMFA the following percentages of their average daily net assets (net of any fee
waivers):

Maryland Tax-Free 0.29%
Pennsylvania Tax-Free 0.19%
Tax-Free Intermediate 0.23%

PORTFOLIO MANAGEMENT:

An investment committee is responsible for the day-to-day management of each
fund.

DISTRIBUTOR OF THE FUNDS' SHARES:

Legg Mason Wood Walker, Incorporated ("Legg Mason"), 100 Light Street,
Baltimore, Maryland 21202, distributes each fund's shares pursuant to separate
Underwriting Agreements. Each Underwriting Agreement obligates Legg Mason to pay
certain expenses for offering fund shares, including compensation to financial
advisors, the printing and distribution of prospectuses, statements of
additional information and shareholder reports (after these have been printed
and mailed to existing shareholders at the funds' expense), supplementary sales
literature and advertising materials.

Legg Mason, LMFA and LM Trust may pay non-affiliated entities out of their own
assets to support the distribution of Navigator Class shares and shareholder
servicing.

Legg Mason, LMFA, LMCM and LM Trust are wholly owned subsidiaries of Legg Mason,
Inc., a financial services holding company.

<PAGE>

[icon] H O W T O I N V E S T

Navigator Class shares are currently offered for sale only to:

o Institutional Clients of Legg Mason Trust, fsb for which they exercise
discretionary investment management responsibility and accounts of the
customers with such Institutional Clients ("Customers").

o Qualified retirement plans managed on a discretionary basis and having net
assets of at least $200 million.

o Any qualified retirement plan having net assets of at least $300 million.

o Clients of Bartlett who, as of December 19, 1996, were shareholders of
Bartlett Short-Term Bond Fund or Bartlett Fixed Income Fund and for whom
Bartlett acts as an ERISA fiduciary.

o Any qualified retirement plan of Legg Mason, Inc. or of any of its
affiliates.

o Certain institutions who were clients of Fairfield Group, Inc. as of
February 28, 1999 for investment of their own monies and monies for which
they act in a fiduciary capacity.

o Shareholders of Class Y shares of Bartlett Europe Fund or Bartlett
Financial Services Fund on October 5, 1999.

o Any open-end management investment company advised or managed by LMFA or
LMFM or by any person controlling, controlled by, or under common control
with LMFA or LMFM.

Prior to or concurrent with the initial purchase of Navigator Class shares, each
investor must open an account for the fund by completing and signing an
application and mailing it to Legg Mason Institutional Advisors, Inc. ("LMIA"),
at the following address: Legg Mason, P.O. Box 17635, Baltimore, Maryland
21297-1635, Attn: LMIA.

Eligible investors may purchase Navigator Class shares by contacting LMIA
directly or through a brokerage account at Legg Mason. The minimum initial
investment is $50,000 and the minimum for each purchase of additional shares is
$100. Institutional Clients may set different minimums for their Customers'
investments in accounts invested in Navigator Class shares.

Customers of certain Institutional Clients that have omnibus accounts with the
funds' transfer agent can purchase shares through those Institutions. Legg Mason
may pay such Institutional Clients for account servicing. Institutional Clients
may charge their Customers for services provided in connection with the purchase
and redemption of shares. Information concerning these services and any
applicable charges will be provided by the Institutional Clients. This
prospectus should be read by Customers in connection with any such information
received by Institutional Clients. Any such fees, charges or requirements
imposed by Institutional Clients will be in addition to the fees and
requirements of this prospectus.

Purchase orders received by Legg Mason before the close of the New York Stock
Exchange ("Exchange") (normally 4:00 p.m., Eastern time) will be processed at
the funds' net asset value as of the close of the Exchange on that day. The
funds are open for business every day the Exchange is open. Orders received
after the close of the Exchange will be processed at the funds' net asset value
as of the close of the Exchange on the next day the Exchange is open. Payment
must be made within three business days to the selling organization.

Certain institutions that have agreements with Legg Mason or the funds may be
authorized to accept purchase and redemption orders on their behalf. Once the
authorized institution accepts the order, you will receive the next determined
net asset value. Orders received by certain retirement plans and other financial
intermediaries by the close of the Exchange and communicated to Legg Mason by
9:00 a.m., Eastern time, on the following business day will be processed at the
net asset value determined on the prior business day. You should consult with

<PAGE>

your institution to determine the time by which it must receive your order to
get that day's share price. It is the institution's responsibility to transmit
your order to the funds in a timely fashion.

Purchases of Navigator Class shares can be made by wiring federal funds to State
Street Bank and Trust Company. Before wiring federal funds, the investor must
first telephone Legg Mason at 1-888-425-6432 to receive instructions for wire
transfer. On the telephone, the following information will be required:
shareholder name; name of the person authorizing the transaction; shareholder
account number; name of the fund; amount being wired; and name of the wiring
bank.

Funds should be wired through the Federal Reserve System to:
State Street Bank and Trust Company
ABA #011-000-028
DDA #99014649
Legg Mason [insert name of fund]
[Insert account name and number]

The wire should state that the funds are for the purchase of Navigator Class
shares of a specific fund and include the account name and number.

Primary Class shares of the funds are offered through a separate prospectus.

<PAGE>

[icon] H O W T O S E L L Y O U R S H A R E S

Navigator Class shares may be redeemed through three methods: (1) by sending a
written request for redemption to Legg Mason, P.O. Box 17635, Baltimore,
Maryland 21297-1635, Attn: LMIA (2) by calling 1-888-425-6432, or (3) by wire
communication. In each case, the investor should first notify Legg Mason at
1-888-425-6432 of the intention to redeem. No charge is made for redemptions.
Shareholders who wish to be able to redeem by telephone or wire communication
must complete an authorization form in advance. Redemptions over $10,000,000 may
be initiated by telephone, but must be confirmed in writing prior to processing.

Upon receipt of a request for redemption as described below (a request "in good
order") before the close of the Exchange on any day the Exchange is open, Legg
Mason will redeem fund shares at that day's net asset value per share. Requests
for redemption received by Legg Mason after the close of the Exchange will be
executed at the net asset value next determined. However, orders received by
certain retirement plans and other financial intermediaries by the close of the
Exchange and communicated to Legg Mason by 9:00 a.m., Eastern time, on the
following business day will be effected at the net asset value determined on the
prior business day.

Requests for redemption should indicate:

1) the number of shares or dollar amount to be redeemed and the investor's
shareholder account number;

2) the investor's name and the names of any co-owner of the account, using
exactly the same name or names used in establishing the account;

3) proof of authorization to request redemption on behalf of any co-owner of
the account (please contact Legg Mason for further details); and

4) the name, address, and account number to which the redemption payment
should be sent.

Other supporting legal documents, such as copies of the trust instrument or
power of attorney, may be required from corporations or other organizations,
fiduciaries or persons other than the shareholder of record making the request
for redemption. If you have a question concerning the sale or redemption of
shares, please contact Legg Mason by calling 1-888-425-6432.

Customers of Institutional Clients may redeem only in accordance with
instructions and limitations pertaining to their account at the Institution.

Payment of the proceeds of redemption normally will be made by wire one business
day after receipt of a redemption request in good order. Payment of the proceeds
of redemptions of shares that were recently purchased by check or acquired
through reinvestment of dividends on such shares may be delayed for up to 10
days from the purchase date in order to allow for the check to clear.

Each fund has reserved the right under certain conditions to redeem its shares
in kind by distributing portfolio securities in payment for redemptions.

SIGNATURE GUARANTEE:

When a signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his or her signature and guaranteed by any of the
following entities: U.S. banks, foreign banks having a U.S. correspondent bank,
credit unions, savings associations, U.S. registered dealers and brokers,
municipal securities dealers and brokers, government securities dealers and
brokers, national securities exchanges, registered securities associations and
clearing agencies (each an "Eligible Guarantor Institution"). Each fund and its
agents reserve the right to reject any signature guarantee pursuant to written
signature guarantee standards or procedures, which may be revised in the future
to permit them to reject signature guarantees from Eligible Guarantor

13
<PAGE>

Institutions that do not, based on credit guidelines, satisfy such written
standards or procedures. Any fund may change the signature guarantee
requirements from time to time without prior notice to shareholders.

<PAGE>

[icon] A C C O U N T P O L I C I E S

CALCULATION OF NET ASSET VALUE:

Net asset value per Navigator Class share is determined daily as of the close of
the Exchange, on every day the Exchange is open. The Exchange is normally closed
on all national holidays and Good Friday. To calculate each fund's Navigator
Class share price, the fund's assets attributable to Navigator Class shares are
valued and totaled, liabilities attributable to that class of shares are
subtracted, and the resulting net assets are divided by the number of shares
outstanding for that class. Each fund's securities are valued on the basis of
market quotations or, lacking such quotations, at fair value as determined under
the guidance of the Board of Directors. Each fund may use fair value pricing
instead of market quotations to value a security if a fund's Valuation Committee
believes that, because of special circumstances, doing so would more accurately
reflect the price the fund could realize on a current sale of the security.

OTHER:

Fund shares may not be held in, or transferred to, an account with any firm that
does not have an agreement with Legg Mason or its affiliates regarding Navigator
Class shares.

Each fund reserves the right to:

o reject any order for shares or suspend the offering of shares for a period
of time;

o change its minimum investment amounts; and

<PAGE>

[icon] S E R V I C E S F O R I N V E S T O R S

CONFIRMATION AND ACCOUNT STATEMENTS:

Confirmations will be sent to Institutional Clients after each transaction
involving Navigator Class shares which will include the total number of shares
being held in safekeeping by the transfer agent. The transfer agent will send
confirmations of each purchase and redemption transaction (except a reinvestment
of dividends or capital gain distributions). Beneficial ownership of shares by
Customer accounts will be recorded by the Institutional Client and reflected in
their regular account statements.

ACCOUNT REGISTRATION CHANGES:

Changes in registration or account privileges may be made in writing to Legg
Mason. Signature guarantees may be required. See "Signature Guarantee" above.
All correspondence must include the account number and must be sent to:

Legg Mason
P.O. Box 17635
Baltimore, Maryland 21297-1635
Attn: LMIA

EXCHANGE PRIVILEGE:

Navigator Class shares of a fund may be exchanged for shares of the Legg Mason
Cash Reserve Trust or Navigator Class shares of any other Legg Mason funds
except Legg Mason Opportunity Trust, provided these funds are eligible for sale
in your state of residence. You can request an exchange in writing or by phone.
Be sure to read the current prospectus for any fund into which you are
exchanging.

Each fund reserves the right to:

o terminate or limit the exchange privilege of any shareholder who makes more
than four exchanges from the fund in one calendar year; and

o terminate or modify the exchange privilege after 60 days' written notice to
shareholders.

Some Institutional Clients may not offer all of the Navigator Funds for
exchange.

<PAGE>

[icon] D I S T R I B U T I O N S A N D T A X E S

Each fund declares any dividends from its net investment income daily and pays
them monthly.

The sale or exchange of fund shares may result in a taxable gain or loss,
depending on whether the proceeds are more or less than the cost of your shares.

A tax statement is sent to you at the end of each year detailing the tax status
of your distributions.

Each fund will withhold 31% of all dividends, capital gain distributions and
redemption proceeds payable to individuals and certain other non-corporate
shareholders who do not provide the fund with a valid taxpayer identification
number. Each fund will also withhold 31% of all dividends and capital gain
distributions payable to such shareholders who are otherwise subject to backup
withholding.

Because each investor's tax situation is different, please consult your tax
adviser about federal, state and local tax considerations.

<PAGE>

[icon] F I N A N C I A L H I G H L I G H T S

The financial highlights table is intended to help you understand Pennsylvania
Tax-Free's financial performance since inception. Certain information reflects
financial results for a single fund share. Total return represents the rate that
an investor would have earned (or lost) on an investment in a fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by the fund's independent accountants, PricewaterhouseCoopers LLP, whose
report, along with the fund's financial statements, is incorporated by reference
into the Statement of Additional Information (see back cover) and is included in
the annual report. The annual report is available upon request by calling
toll-free 1-888-425-6432.

Investment Operations
------------------------------------------------------------------------------
Net Asset Net Net Realized Total From
Value, Investment And Unrealized Investment
For the Years Beginning Income Gain/(Loss) on Operations
Ended March 31, of Year Investments
------------------------------------------------------------------------------

Pennsylvania Tax Free Income Trust - Navigator Class
2000 $16.53 $.82 C ($0.94) ($0.12)
1999 16.48 .84 C 0.10 0.94
1998 D 16.44 .05 C 0.04 0.09
------------------------------------------------------------------------------

Distributions

------------------------------------------------------------------------------
From Net From Net Total Net Asset
For the Years Investment Realized Gain Distributions Value,
Ended March 31, Income On Investments End Year
------------------------------------------------------------------------------

Pennsylvania Tax Free Income Trust - Navigator Class
2000 ($0.82) ($0.02) ($0.84) 15.57
1999 ( 0.84) ( 0.05) ( 0.89) 16.53
1998 D ( 0.05) ---- ( 0.05) 16.48

------------------------------------------------------------------------------

<PAGE>

Ratios/Supplement Data
<TABLE>
<CAPTION>
Net
Investment
Total Expenses Net Expenses Income to Portfolio
For the Years Total To Average To Average Average Turnover Net Assets,
Ended March 31, Return A Net Assets B Net Assets C Net Assets Rate End of Year
---------------------------------------------------------------------------------------------------------
Pennsylvania Tax Free Income Trust - Navigator Class

<S> <C> <C> <C> <C> <C> <C>
2000 (0.62%) .45% C .45% C 5.13% C 28.60% $66,000
1999 5.79% .46% C .45% C 5.04% C 10.60% 277,000
1998 D 0.55% .45% C,F .45% C, F 4.82% C, F 14.1% F 90,000

</TABLE>

A-This ratio reflects total expenses before compensating balance credits, but
net of the voluntary expense waivers described below.
B-This ratio reflects expenses net of compensating balance credits and voluntary
expense waivers described below.
C-Net of fees waived by the adviser in excess of a voluntary expense limitation
of 0.45%. If no fees had been waived by the adviser, the annualized ratio of
expenses to average daily net assets for each period would have been as
follows: for the years ended March 31, 2000, 0.81%; 1999, 0.75%; and for the
period ended March 31, 1998, 0.75%.
D-For the period March 10, 1998 (commencement of sale of Navigator Class shares)
to March 31, 1998.
E-Not annualized.
F-Annualized.

<PAGE>

Legg Mason Tax-Free Income Fund

The following additional information about each fund is available upon request
and without charge:

To request the SAI or any reports to shareholders, or to obtain more
information:

o call toll-free 1-888-425-6432
o visit us on the Internet via http://www.leggmasonfunds.com
o write to us at: Legg Mason Wood Walker, Incorporated
100 Light Street, P.O. Box 1476
Baltimore, Maryland 21203-1476
Attn: LMIA

LMF-038 SEC file number 811-6223

<PAGE>

LEGG MASON TAX-FREE INCOME FUND:
Legg Mason Maryland Tax-Free Income Trust
Legg Mason Pennsylvania Tax-Free Income Trust
Legg Mason Tax-Free Intermediate-Term Income Trust

PRIMARY CLASS SHARES and NAVIGATOR CLASS SHARES

STATEMENT OF ADDITIONAL INFORMATION

July 31, 2000

This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectuses for Primary Class shares and for
Navigator Class shares of the funds, each dated July 31, 2000, which have been
filed with the Securities and Exchange Commission ("SEC"). The funds' annual
report is incorporated by reference into this Statement of Additional
Information. Copies of either the annual report or the Prospectuses are
available without charge by writing or calling the funds' distributor, Legg
Mason Wood Walker, Incorporated ("Legg Mason") (address and telephone numbers
listed below).

Legg Mason Wood Walker,
Incorporated
--------------------------------------------------
100 Light Street
P.O. Box 1476
Baltimore, Maryland 21203-1476
(410) 539-0000 (800) 822-5544

<PAGE>

TABLE OF CONTENTS

PAGE

DESCRIPTION OF THE FUNDS....................................................3
FUND POLICIES...............................................................3
INVESTMENT STRATEGIES AND RISKS.............................................4
SPECIAL FACTORS AFFECTING MARYLAND TAX-FREE AND PENNSYLVANIA TAX-FREE......15
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.............................19
ADDITIONAL TAX INFORMATION.................................................20
VALUATION OF FUND SHARES...................................................23
PERFORMANCE INFORMATION....................................................23
MANAGEMENT OF THE TRUST....................................................29
THE FUNDS' INVESTMENT ADVISER/MANAGER......................................31
THE FUNDS' DISTRIBUTOR.....................................................33
PORTFOLIO TRANSACTIONS AND BROKERAGE.......................................36
DESCRIPTION OF THE TRUST...................................................37
OTHER INFORMATION..........................................................38
THE TRUST'S CUSTODIAN AND TRANSFER AND DIVIDEND-DISBURSING AGENT...........38
THE TRUST'S LEGAL COUNSEL..................................................38
THE TRUST'S INDEPENDENT ACCOUNTANTS........................................38
FINANCIAL STATEMENTS.......................................................38
APPENDIX A - RATINGS OF SECURITIES........................................A-1

No person has been authorized to give any information or to make any
representations not contained in the Prospectuses or this Statement of
Additional Information in connection with the offerings made by the Prospectuses
and, if given or made, such information or representations must not be relied
upon as having been authorized by any fund or its distributor. The Prospectuses
and this Statement of Additional Information do not constitute offerings by any
fund or by the distributor in any jurisdiction in which such offerings may not
lawfully be made.

<PAGE>

DESCRIPTION OF THE FUNDS

Legg Mason Tax-Free Income Fund ("Trust") is an open-end management
investment company which was established as a Massachusetts business trust under
a Declaration of Trust dated November 21, 1990. Legg Mason Maryland Tax-Free
Income Trust ("Maryland Tax-Free"), Legg Mason Pennsylvania Tax-Free Income
Trust ("Pennsylvania Tax-Free") and Legg Mason Tax-Free Intermediate-Term Income
Trust ("Tax-Free Intermediate") are separate series of the Trust.

FUND POLICIES

Maryland Tax-Free's investment objective is to seek a high level of
current income exempt from federal and Maryland state and local income taxes,
consistent with prudent investment risk and preservation of capital.
Pennsylvania Tax-Free's investment objective is to seek a high level of current
income exempt from federal income tax and Pennsylvania personal income tax,
consistent with prudent investment risk and preservation of capital. Tax-Free
Intermediate's investment objective is to seek a high level of current income
exempt from federal income tax, consistent with prudent investment risk.

The following information supplements the information concerning each
fund's investment objectives, policies and limitations found in the
Prospectuses. Each fund has adopted certain fundamental investment limitations
that cannot be changed except by a vote of the shareholders of that fund. The
following are each fund's fundamental investment limitations set forth in their
entirety. Each fund may not:

1. Borrow money, except from banks or through reverse repurchase
agreements for temporary purposes in an aggregate amount not
to exceed 10% of the value of the total assets of the fund;
provided that borrowings, including reverse repurchase
agreements, in excess of 5% of such value will be only from
banks (although not a fundamental policy subject to
shareholder approval, the fund will not purchase securities if
borrowings, including reverse repurchase agreements, exceed 5%
of its total assets);

2. Issue bonds or any other class of securities preferred over
shares of the fund in respect of the fund's assets or
earnings, provided that the Trust may issue separate series of
shares in accordance with its Declaration of Trust;

3. Underwrite the securities of other issuers except insofar as
the fund may be deemed an underwriter under the Securities Act
of 1933, as amended, in disposing of a portfolio security;

4. Buy or hold any real estate other than municipal bonds secured
by real estate or interests therein;

5. Purchase or sell any commodities or commodities contracts,
except that the fund may purchase or sell interest rate
futures contracts, options on securities indexes and options
on interest rate futures contracts;

6. Purchase or sell any oil, gas or mineral exploration or
development programs;

7. Make loans, except loans of portfolio securities and except to
the extent the purchase of a portion of an issue of publicly
distributed notes, bonds or other evidences of indebtedness,
the entry into repurchase agreements, or deposits with banks
and other financial institutions may be considered loans;

8. Buy securities on "margin," except for short-term credits
necessary for clearance of portfolio transactions and except
that the fund may make margin deposits in connection with the
use of interest rate futures contracts and options on interest
rate futures contracts;

<PAGE>

9. Make short sales of securities or maintain a short position,
except that the fund may (a) make short sales and maintain
short positions in connection with its use of options, futures
contracts and options on futures contracts and (b) sell short
"against the box" (although not a fundamental policy, the fund
does not intend to make short sales in excess of 5% of its
assets during the coming year);

10. Invest 25% or more of its total assets in the securities of
issuers in any one industry, provided that this limitation
does not apply to (a) obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities or
repurchase agreements thereon; (b) Pennsylvania municipal
obligations for Pennsylvania Tax-Free and Maryland municipal
obligations for Maryland Tax-Free; and (c) municipal
obligations for Tax-Free Intermediate. For the purpose of this
restriction, private activity bonds issued by non-governmental
users will not be considered municipal obligations.

The investment objective and fundamental investment limitations of each
fund, described in the preceding paragraphs and in the Prospectus, may be
changed only with the vote of a majority of the fund's outstanding voting
securities. Under the Investment Company Act of 1940, as amended ("1940 Act"), a
"vote of a majority of the voting securities" of the fund means the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of the fund or
(2) 67% or more of the shares present at a shareholders' meeting if more than
50% of the outstanding shares are represented at the meeting in person or by
proxy.

As a non-fundamental investment limitation (which may be changed by the
vote of the Trust's Board of Trustees without shareholder approval), each fund
will not invest more than 10% of its net assets in illiquid securities, a term
which means securities that cannot be disposed of within seven days in the
normal course of business at approximately the amount at which the fund has
valued the securities and includes, among other things, repurchase agreements
maturing in more than seven days.

If any percentage restriction is adhered to at the time of an
investment or transaction, a later increase or decrease in percentage resulting
from a change in value of portfolio securities or amount of total assets of a
fund will not be considered a violation of any of the foregoing fundamental or
non-fundamental limitations. If through a change in values, net assets or other
circumstances, a fund was in a position where more than 10% of its net assets
were invested in illiquid securities, it would consider appropriate steps to
protect liquidity.

Unless otherwise specified, the funds' investment policies and
limitations set forth in the prospectuses or this Statement of Additional
Information are not fundamental and can be changed without shareholder approval.
Each fund anticipates being as fully invested as practicable in municipal
obligations; however, there may be occasions when, as a result of maturities of
portfolio securities, or sales of a fund's shares, or in order to meet
anticipated redemption requests, a fund may hold cash which is not earning
income or make use of repurchase agreements, the income from which would be
taxable.

INVESTMENT STRATEGIES AND RISKS

The following information applies to all of the funds:

Municipal Obligations

Municipal obligations include obligations issued to obtain funds for
various public purposes, including constructing a wide range of public
facilities, such as bridges, highways, housing, hospitals, mass transportation,
schools and streets. Other public purposes for which municipal obligations may
be issued include the refunding of outstanding obligations, the obtaining of
funds for general operating expenses and the making of loans to other public
institutions and facilities. In addition, certain types of private activity
bonds ("PABs") are issued by or on behalf of public authorities to finance
various privately operated facilities, including certain pollution control
facilities, convention or trade show facilities, and airport, mass transit, port
or parking facilities. Interest on certain tax-exempt PABs will constitute a tax
preference item for purposes of the federal alternative minimum tax ("Tax

<PAGE>

Preference Item"). Accordingly, under normal circumstances, each fund's
investment in obligations the interest on which is a Tax Preference Item,
including PABs, will be limited to a maximum of 20% of its total assets.

Municipal obligations also include short-term tax anticipation notes,
bond anticipation notes, revenue anticipation notes and other forms of
short-term debt obligations. Such notes may be issued with a short-term maturity
in anticipation of the receipt of tax payments, the proceeds of bond placements
or other revenues.

The two principal classifications of municipal obligations are "general
obligation" and "revenue" bonds. "General obligation" bonds are secured by the
issuer's pledge of its faith, credit and taxing power. "Revenue" bonds are
payable only from the revenues derived from a particular facility or class of
facilities or from the proceeds of a special excise tax or other specific
revenue source such as the corporate user of the facility being financed. PABs
are usually revenue bonds and are not payable from the unrestricted revenues of
the issuer. The credit quality of the PABs is usually directly related to the
credit standing of the corporate user of the facilities.

The municipal obligations in which each fund may invest include
municipal leases and participation interests therein. These obligations, which
may take the form of a lease, an installment purchase or a conditional sales
contract, are issued by state and local governments and authorities to acquire
land and a wide variety of equipment and facilities, such as fire and sanitation
vehicles, telecommunications equipment and other capital assets. Rather than
holding such obligations directly, a fund may purchase a participation interest
in a municipal lease obligation from a bank or other third party. A
participation interest gives a fund a specified, undivided pro rata interest in
the total amount of the obligation.

Municipal lease obligations have risks distinct from those associated
with general obligation or revenue bonds. State constitutions and statutes set
forth requirements that states or municipalities must meet to incur debt. These
may include voter referenda, interest rate limits or public sale requirements.
Leases, installment purchase contracts or conditional sale contracts (which
normally provide for title to the leased asset to pass to the governmental
issuer) have evolved as a means for governmental issuers to acquire property and
equipment without meeting their constitutional and statutory requirements for
the issuance of debt. The debt-issuance limitations are deemed inapplicable
because of the inclusion in many leases and contracts of "non-appropriation"
clauses providing that the governmental user has no obligation to make future
payments under the lease or contract unless money is appropriated for such
purpose by the appropriate legislative body on a yearly or other periodic basis.

In determining the liquidity of a municipal lease obligation, the
adviser will distinguish between simple or direct municipal leases and municipal
lease-backed securities, the latter of which may take the form of a lease-backed
revenue bond or other investment structure using a municipal lease-purchase
agreement as its base. While the former may present special liquidity issues,
the latter are based on a well established method of securing payment of a
municipal obligation. A fund's investment in municipal lease obligations and
participation interests therein will be treated as illiquid unless the adviser
determines, pursuant to guidelines established by the Board of Trustees, that
the security could be disposed of within seven days in the normal course of
business at approximately the amount at which the fund has valued the security.

The municipal obligations in which each fund may invest also include
zero coupon bonds and deferred interest bonds, although each fund currently does
not intend to invest more than 5% of the value of its total assets in such
instruments during the coming year. Zero coupon and deferred interest bonds are
debt obligations which are issued at a significant discount from face value.
Like other municipal securities, the price can also reflect a premium or
discount to par reflecting the market's judgment as to the issuer's
creditworthiness, the interest rate or other similar factors. The discount
approximates the total amount of interest the bonds will accrue and compound
over the period until maturity or the first interest payment date at a rate of
interest reflecting the market rate of the security at the time of issuance.
While zero coupon bonds do not require the periodic payment of interest,
deferred interest bonds provide for a delay before the regular payment of
interest begins. Such instruments benefit the issuer by mitigating its need for
cash to meet debt service, but also require a higher rate of return to attract

<PAGE>

investors who are willing to defer receipt of such cash. Such instruments may
experience greater volatility in market value than debt obligations which make
regular payments of interest. Each fund will accrue income on such investments
for accounting purposes, which income must be distributed to shareholders for
tax purposes.

An issuer's obligations under its municipal obligations are subject to
the provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws that may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations. There is also the possibility that as a result of
litigation or other conditions the power or ability of issuers to meet their
obligations for the payment of interest and principal on their municipal
obligations may be materially and adversely affected.

Opinions relating to the validity of municipal obligations, to the
exemption of interest thereon from federal income tax, Maryland state and local
income taxes and Pennsylvania personal income tax, and to the lack of treatment
of that interest as a Tax Preference Item, respectively, are rendered by counsel
to the issuers at the time of issuance. Neither the funds nor the adviser will
independently review the basis for such opinions.

The United States Supreme Court has held that Congress may subject the
interest on municipal obligations to federal income tax. It can be expected
that, as in the past, proposals will be introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal obligations. Proposals also may be introduced in state
legislatures which could affect the state tax treatment of each fund's
distributions. If any such proposals were enacted, the availability of municipal
obligations for investment by the funds and the value of their assets could be
materially and adversely affected. In such event, each fund would re-evaluate
its investment objective and policies and consider changes in its structure or
possible dissolution.

Concentration

Each fund may invest 25% or more of its total assets in a particular
segment of the municipal securities market, such as hospital revenue bonds,
housing agency bonds, private activity bonds or airport bonds, or in securities
the interest on which is paid from revenues of a similar type of project. In
such circumstances, economic, business, political or other changes affecting one
issue of bonds (such as proposed legislation affecting healthcare or the
financing of a project, shortages or price increases of needed materials, or
declining markets or needs for the projects) would most likely affect other
bonds in the same segment, thereby potentially increasing market risk. As a
result, each fund is subject to greater risk than other funds that do not follow
this practice.

When-Issued Securities

Each fund may enter into commitments to purchase municipal obligations
or other securities on a when-issued basis. Such securities are often the most
efficiently priced and have the best liquidity in the bond market. When a fund
purchases securities on a when-issued basis, it assumes the risks of ownership,
including the risk of price fluctuation, at the time of purchase, not at the
time of receipt. Each fund does not expect that its commitment to purchase
when-issued securities will at any time exceed, in the aggregate, 25% of total
assets.

Delivery of and payment for when-issued securities normally take place
15 to 45 days after the date of the commitment. Interest rates on when-issued
securities are normally fixed at the time of the commitment. Consequently,
increases in the market rate of interest between the commitment date and
settlement date may result in a market value for the security on the settlement
date that is less than its purchase price. Thus, fluctuation in the value of the
security from the purchase date will affect a fund's net asset value, and share
price. Typically, no interest accrues to the purchaser until the security is
delivered.

With regard to each such commitment, a fund maintains in a segregated
account with the custodian, commencing on the date of such commitment, cash,
U.S. government securities or other appropriate liquid debt securities at least

<PAGE>

equal in value to the purchase price for the when-issued securities due on the
settlement date. Each fund only makes when-issued commitments with the intention
of actually acquiring the securities subject thereto, but a fund may sell these
securities before the settlement date if market conditions warrant. When payment
is due for when-issued securities, a fund meets its obligations from
then-available cash flow, from the sale of securities or, although it would not
normally expect to do so, from the sale of the when-issued securities themselves
(which may have a market value greater or less than the fund's payment
obligation).

Callable Bonds

Callable municipal bonds are municipal bonds which carry a provision
permitting the issuer to redeem the bonds prior to their maturity dates at a
specified price which typically reflects a premium over the bonds' original
issue price. If the proceeds of a bond owned by a fund called under
circumstances favorable to the issuer are reinvested, the result may be a lower
overall yield on such proceeds upon reinvestment because of lower prevailing
interest rates. If the purchase price of such bonds included a premium related
to the appreciated value of the bonds, some or all of that premium may not be
recovered by bondholders, such as the funds, depending on the price at which
such bonds were redeemed.

Each callable bond is "marked-to-market" daily based on the bond's call
date so that the call of some or all of a fund's callable bonds is not expected
to have a material impact on that fund's net asset value. In light of the
previously described pricing policies and because each fund follows certain
amortization procedures required by the Internal Revenue Service, each fund does
not expect to suffer any material adverse impact in connection with a call of
bonds purchased at a premium. Notwithstanding such policies, however, as with
any investment strategy, a call may have a more substantial impact than
anticipated.

Callable bonds generally have call-protection (that is, a period of
time during which the bonds may not be called) which usually lasts for 7 to 10
years from the date of issue, after which time such bonds may be redeemed by the
issuer. An issuer may generally be expected to call its bonds, or a portion of
them, during periods of declining interest rates, when borrowings may be
replaced at lower rates than those obtained in prior years. If interest rates
decline as the call-protection on callable bonds expires, there is an increased
likelihood that a number of such bonds may in fact be redeemed by the issuers.

Stand-By Commitments

Each fund may acquire "stand-by commitments" with respect to its
investments in municipal obligations. A stand-by commitment is a put (that is,
the right to sell the underlying security within a specified period of time at a
specified exercise price that may be sold, transferred or assigned only with the
underlying security) that entitles the fund to same-day settlement. Under a
stand-by commitment, a broker, dealer or bank agrees to purchase, at the fund's
option, specified municipal obligations at amortized cost plus accrued interest.
The total amount paid for outstanding stand-by commitments held by a fund will
not exceed 25% of the fund's total assets calculated immediately after each
stand-by commitment is acquired.

When a fund exercises a stand-by commitment that it has acquired from a
dealer with respect to municipal obligations held by it, the dealer normally
pays the fund an amount equal to (1) the fund's acquisition cost of the
municipal obligations (excluding any accrued interest which the fund paid on its
acquisition) less any amortized market premium or plus any amortized market or
original issue discount during the period the fund owned the securities, plus
(2) all interest accrued on the securities since the last interest payment date
or the date the securities were purchased by the fund, whichever is later. The
fund's right to exercise stand-by commitments is unconditional and unqualified
and exercisable by the fund at any time prior to the underlying securities'
maturity.

A stand-by commitment is not transferable by a fund without the
underlying securities, although the fund could sell the underlying municipal
obligations to a third party at any time. The fund may pay for stand-by
commitments either separately in cash or by paying a higher price for portfolio

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securities which are acquired subject to such a commitment (thus reducing the
yield to maturity otherwise available for the same securities). Each fund
intends to enter into stand-by commitments only with those banks, brokers and
dealers that in the adviser's opinion present minimal credit risks.

Each fund intends to acquire stand-by commitments solely to facilitate
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The acquisition of a stand-by commitment would not ordinarily affect
the valuation or assumed maturity of the underlying municipal obligations.
Stand-by commitments would not affect the average weighted maturity of the
assets of a fund.

Fixed, Variable and Floating Rate Obligations

Each fund may invest in fixed, variable and floating rate municipal
obligations. A variable rate obligation differs from an obligation with a fixed
rate coupon, the value of which fluctuates in inverse relation to interest rate
changes; that is, the market value of fixed-rate obligations generally declines
when market interest rates increase, and increases when market interest rates
decline. If interest rates decline below the coupon rate, generally the
obligation sells at a premium. Should interest rates increase above the coupon
rate, generally the obligation sells at a discount. The magnitude of such
fluctuations is also a function of the period of time remaining until the
obligation matures. Short-term fixed rate obligations are minimally affected by
interest rate changes; the greater the remaining period until maturity, the
greater the fluctuation in value of a fixed rate obligation is likely to be.
Variable rate obligation coupons are not fixed for the full term of the
obligation, but are adjusted periodically based upon changes in prevailing
interest rates. As a result, the value of variable rate obligations is less
affected by changes in interest rates. The more frequently such obligations are
adjusted, the less such obligations are affected by interest rate changes during
the period between adjustments. The value of a variable rate obligation,
however, may fluctuate in response to market factors and changes in the
creditworthiness of the issuer.

By investing in variable rate obligations, a fund hopes to take
advantage of the normal yield curve function that usually results in higher
yields on longer-term investments. This policy also means that should interest
rates decline, the yield of the fund will decline, and the fund and its
shareholders will forego the opportunity for, respectively, capital appreciation
of its portfolio investments and of their shares. Should interest rates
increase, the yield of the fund will increase, and the fund and its shareholders
will forego the opportunity for, respectively, capital depreciation of its
portfolio investments and of their shares. There is no limitation on the
percentage of a fund's assets that may be invested in variable rate obligations.
However, each fund will limit the value of its investments in any variable rate
securities that are illiquid and in all other illiquid securities to 10% or less
of its net assets.

Floating rate obligations also are not fixed, but are adjusted as
specified benchmark interest rates change. In other respects, their
characteristics are similar to variable rate obligations, as discussed above.

Each fund may also invest in floating rate and variable rate demand
notes. Demand notes provide that the holder may demand payment of the note at
its par value plus accrued interest. These notes may be supported by an
unconditional bank letter of credit guaranteeing payment of the principal or
both the principal and accrued interest. Because each fund invests in such
securities backed by banks and other financial institutions, changes in the
credit quality of these institutions could cause losses to a fund. Floating rate
demand notes have an interest rate related to a known lending rate, such as the
prime rate, and are automatically adjusted when such known rate changes. Such
securities often react to changes in market interest rates in a manner similar
to shorter-term securities that mature at the time of the next interest rate
reset for the variable or floating rate instrument. In calculating its
dollar-weighted average maturity, a fund may determine the maturity of a
variable or floating rate note according to the interest rate reset date, or the
date principal can be recovered on demand, rather than the date of ultimate
maturity.

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Yield Factors and Ratings

The yield of a municipal obligation is dependent on a variety of
factors, including general municipal securities market conditions, general
fixed-income market conditions, the financial condition of the issuer, the size
of the particular offering, the maturity of the obligation, the credit quality
and rating of the issue and expectations regarding changes in income tax rates.

Standard & Poor's ("S&P"), Moody's Investors Service, Inc. ("Moody's")
and Fitch Investors Service, Inc. ("Fitch") are private services that provide
ratings of the credit quality of obligations. A description of the ratings
assigned to obligations by Moody's, S&P and Fitch is included in Appendix A. A
fund may consider these ratings in determining whether to purchase, sell or hold
a security. The ratings represent Moody's, S&P's and Fitch's opinions as to the
quality of the obligations which they undertake to rate. Ratings are general and
are not absolute standards of quality. Consequently, obligations with the same
maturity, interest rate and rating may have different market prices. In addition
to ratings assigned to individual bond issues, the adviser will analyze interest
rate trends and developments that may affect individual issuers, including
factors such as liquidity, profitability and asset quality. Credit rating
agencies attempt to evaluate the safety of principal and interest payments and
do not evaluate the risks of fluctuations in market value. Also, rating agencies
may not make timely changes in credit ratings in response to subsequent events,
so that an issuer's current financial condition may be better or worse than the
rating indicates.

Each fund may only invest in investment grade securities. Investment
grade securities are those rated within the four highest grades by Moody's, S&P,
or Fitch or, if unrated, deemed by the adviser to be of comparable quality.
Subsequent to its purchase by a fund, an issue of obligations may cease to be
rated or its rating may be reduced below investment grade. If as a result of
such a downgrading, or, for unrated securities, if the adviser determines they
are no longer of comparable quality to investment grade securities, more than 5%
of a fund's total assets are represented by securities rated below investment
grade or the equivalent, the adviser will, as soon as practicable consistent
with achieving an orderly disposition of the securities, sell such holdings
until they represent 5% or less of the fund's total assets. Securities rated
below investment grade are subject to greater fluctuations in value and risk of
loss of income and principal due to default by the issuer, than are higher rated
securities. These securities may be less liquid which means that the funds may
have difficulty selling them at times, and may have to apply a greater degree of
judgment in establishing a price. The adviser will carefully monitor the
continuing creditworthiness of issuers that have been downgraded.

In addition to the agency ratings, there are other criteria which will
be used by the adviser in selecting securities for a fund. Consideration will be
given to the maturity and duration of each bond as well as its effect on the
overall average maturity and duration of the portfolio. Analysis of the current
and historical yield spreads is done to determine the relative value in any bond
considered for purchase. The coupon level and call features also figure in the
decision on the relative merits of an investment. Consideration is also given to
the type of bond - whether it is a general obligation or a revenue bond. In
addition to this examination of bond characteristics, significant effort is
devoted to analysis of the creditworthiness of the bond issuer at the time of
purchase and on an ongoing basis.

Securities Lending

Each fund may engage in securities lending and may invest in zero
coupon and deferred interest bonds. Any income from securities lending would be
taxable.

A fund may lend portfolio securities to dealers in municipal
securities, brokers or dealers in corporate or government securities, banks or
other recognized institutional borrowers of securities, provided that cash or
equivalent collateral, equal to at least 100% of the market value of the
securities loaned, is continuously maintained by the borrower with the fund.
During the time portfolio securities are on loan, the borrower will pay the fund
an amount equivalent to any dividends or interest paid on such securities, and
the fund may invest the cash collateral and earn income, or it may receive an
agreed upon amount of taxable interest income from the borrower who has
delivered equivalent collateral. These loans are subject to termination at the
option of the fund or the borrower. A fund may pay reasonable administrative and

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custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The funds do not have the right to vote securities on loan, but each
fund would terminate the loan and regain the right to vote if voting was
considered important with respect to the investment. The risks of securities
lending are similar to those of reverse repurchase agreements. Because interest
from securities lending is taxable, each fund presently does not intend to loan
more than 5% of its portfolio securities at any given time.

Reverse Repurchase Agreements

A reverse repurchase agreement is a portfolio management technique in
which a fund temporarily transfers possession of a portfolio instrument to
another person, such as a financial institution or broker-dealer, in return for
cash. At the same time, the fund agrees to repurchase the instrument at an
agreed upon time (normally within seven days) and price, including interest
payment. A fund may engage in reverse repurchase agreements as a means of
raising cash to satisfy redemption requests or for other temporary or emergency
purposes without the necessity of selling portfolio instruments. A fund may also
engage in reverse repurchase agreements in order to reinvest the proceeds in
other securities or repurchase agreements. Such a use of reverse repurchase
agreements would constitute a form of leverage.

When a fund reinvests the proceeds of a reverse repurchase agreement in
other securities, any fluctuations in the market value of either the securities
transferred to another party or the securities in which the proceeds are
invested would affect the market value of the fund's assets. As a result, such
transactions could increase fluctuation in the fund's net asset value. If a fund
reinvests the proceeds of the agreement at a rate lower than the cost of the
agreement, engaging in the agreement will lower the fund's yield. While engaging
in reverse repurchase agreements, each fund will maintain cash or other
appropriate liquid securities in a segregated account at its custodian bank with
a value at least equal to the fund's obligation under the agreements.

The ability of a fund to engage in reverse repurchase agreements is
subject to the fund's fundamental investment limitation concerning borrowing
described above.

Repurchase Agreements

A repurchase agreement is an agreement under which U.S. government
obligations or other high-quality debt securities are acquired by a fund from a
securities dealer or bank subject to resale at a previously agreed-upon price
and date. The resale price reflects an agreed interest rate effective for the
period the securities are held and is unrelated to the interest rate provided by
the securities. In these transactions, the securities acquired by the fund are
held by a custodian bank until resold and will be supplemented by additional
collateral if necessary to maintain a total value equal to or in excess of the
value of the repurchase agreements. Repurchase agreements are usually for
periods of one week or less, but may be for longer periods. Each fund will not
enter into repurchase agreements of more than seven days duration if more than
10% of its net assets would be invested in such agreements and other illiquid
investments. A fund's income from repurchase agreements would be taxable.

A fund may suffer a loss to the extent that proceeds from the sale upon
a default of the obligation to repurchase are less than the repurchase price. In
addition, if bankruptcy proceedings are commenced with respect to the seller of
the security, realization upon the collateral by a fund could be delayed or
limited. However, the adviser has adopted standards for the parties with whom it
will enter into repurchase agreements that it believes are reasonably designed
to assure that each party presents no serious risk of becoming involved in
bankruptcy proceedings within the time frame contemplated by the repurchase
agreement.

Other Taxable Investments

For temporary, defensive purposes, when, in the adviser's opinion, no
suitable municipal securities are available, for liquidity purposes, or pending
the investment of the proceeds of the sale of shares, the funds may invest in

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taxable short-term investments consisting of: (i) obligations of the U.S.
Government, its agencies and instrumentalities; (ii) certificates of deposit and
bankers' acceptances of U.S. domestic banks with assets of one billion dollars
or more; (iii) commercial paper or other corporate notes of high quality; and
(iv) any of such items subject to short-term repurchase agreements.

Futures and Option Strategies

To protect against the effect of adverse changes in interest rates,
each fund may purchase and sell interest rate futures contracts and options on
securities indexes, and may purchase put options on interest rate futures
contracts (practices known as "hedging"). A fund may purchase put options on
interest rate futures contracts or sell interest rate futures contracts (that
is, enter into a futures contract to sell the underlying security) to attempt to
reduce the risk of fluctuations in its share value. A fund may purchase an
interest rate futures contract (that is, enter into a futures contract to
purchase the underlying security) to attempt to establish more definitely the
return on securities the fund intends to purchase. The funds may not use these
instruments for speculation or leverage. In addition, a fund's ability to use
these strategies may be limited by market conditions, regulatory limits and tax
considerations. Any gains from futures and options transactions would be
taxable.

The success of a fund's strategies in reducing risks depends on may
factors, the most significant of which is the adviser's ability to predict
market interest rate changes correctly, which differs from its ability to select
portfolio securities. In addition, a hedge could be unsuccessful if the changes
in the value of a fund's futures contract or option positions do not correlate
to the changes in the value of its investments. It is also possible that a fund
may be unable to purchase or sell a portfolio security at a time that otherwise
would be favorable for it to do so, or that a fund may need to sell a portfolio
security at a disadvantageous time, due to the need for the fund to maintain
"cover" or to segregate securities in connection with hedging transactions.
Because the markets for futures and options are not always liquid, a fund may be
unable to close out or liquidate its hedged position and may be locked in during
a market decline. The adviser attempts to minimize the possible negative effects
of these factors through careful selection and monitoring of each fund's futures
and options positions. The adviser is of the opinion that a fund's investments
in futures transactions will not have a material adverse effect on that fund's
liquidity or ability to honor redemptions.

The purchase and sale of options and futures contracts involve risks
different from those involved with direct investments in securities, and also
require different skills from the adviser in managing the portfolios. While
utilization of options, future contracts and similar instruments may be
advantageous to a fund, if the adviser is not successful in employing such
instruments in managing a fund's investments or in predicting interest rate
changes, that fund's performance will be worse than if the fund did not use such
instruments. In addition, a fund will pay commissions and other costs in
connection with such investments, which may increase that fund's expenses and
reduce its yield.

Each fund's current policy is to limit options and futures transactions
to those described above. Each fund currently does not intend to purchase put
and call options having a value in excess of 5% of its total assets.

Interest Rate Futures Contracts

Interest rate futures contracts, which are traded on commodity futures
exchanges, provide for the sale by one party and the purchase by another party
of a specified type and amount of financial instruments (or an index of
financial instruments) at a specified future date. Interest rate futures
contracts currently exist covering such financial instruments as U.S. Treasury
bonds, notes and bills, Government National Mortgage Association certificates,
bank certificates of deposit and 90-day commercial paper. An interest rate
futures contract may be held until the underlying instrument is delivered and
paid for on the delivery date, but most contracts are closed out before then by
taking an offsetting position on a futures exchange.

A fund may purchase an interest rate futures contract (that is, enter
into a futures contract to purchase an underlying financial instrument) when it
intends to purchase fixed income securities but has not yet done so. This

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strategy is sometimes called an anticipatory hedge. This strategy is intended to
minimize the effects of an increase in the price of the securities the fund
intends to purchase (but may also reduce the effects of a decrease in price),
because the value of the futures contract would be expected to rise and fall in
the same direction as the price of the securities the fund intends to purchase.
The fund could purchase the intended securities either by holding the contract
until delivery and receiving the financial instrument underlying the futures
contract, or by purchasing the securities directly and closing out the futures
contract position. If the fund no longer wished to purchase the securities, it
would close out the futures contract before delivery.

A fund may sell a futures contract (that is, enter into a futures
contract to sell an underlying financial instrument) to offset price changes of
securities it already owns. This strategy is intended to minimize any price
changes in the securities the fund owns (whether increases or decreases) caused
by interest rate changes, because the value of the futures contract would be
expected to move in the opposite direction from the value of the securities
owned by the fund. The funds do not expect ordinarily to hold futures contracts
they have sold until delivery or to use securities they own to satisfy delivery
requirements. Instead, each fund expects to close out such contracts before the
delivery date.

The prices of interest rate futures contracts depend primarily on the
value of the instruments on which they are based, the price changes of which, in
turn, primarily reflect changes in current interest rates. Because there are a
limited number of types of interest rate futures contracts, it is likely that
the standardized futures contracts available to a fund will not exactly match
the securities the fund wishes to hedge or intends to purchase, and consequently
will not provide a perfect hedge against all price fluctuation. Because fixed
income instruments all respond similarly to changes in interest rates, however,
a futures contract, the underlying instrument of which differs from the
securities the fund wishes to hedge or intends to purchase, may still provide
protection against changes in interest rate levels. To compensate for
differences in historical volatility between positions a fund wishes to hedge
and the standardized futures contracts available to it, the fund may purchase or
sell futures contracts with a greater or lesser value than the securities it
wishes to hedge or intends to purchase.

Futures Trading

If a fund does not wish to hold a futures contract position until the
underlying instrument is delivered and paid for on the delivery date, it may
attempt to close out the contract by entering into an offsetting position on a
futures exchange that provides a secondary market for the contract. A futures
contract is closed out by entering into an opposite position in an identical
futures contract (for example, by purchasing a contract on the same instrument
and with the same delivery date as a contract the fund had sold) at the current
price as determined on the futures exchange. A fund's gain or loss on closing
out a futures contract depends on the difference between the price at which the
fund entered into the contract and the price at which the contract is closed
out. Transaction costs in opening and closing futures contracts must also be
taken into account. There can be no assurance that a fund will be able to offset
a futures position at the time it wishes to, or at a price that is advantageous.
If a fund were unable to enter into an offsetting position in a futures
contract, it might have to continue to hold the contract until the delivery
date, in which case it would continue to bear the risk of price fluctuation in
the contract until the underlying instrument was delivered and paid for.

At the time a fund enters into an interest rate futures contract, it is
required to deposit with its custodian, in the name of the futures broker (known
as a futures commission merchant, or "FCM"), a percentage of the contract's
value. This amount, which is known as initial margin, generally equals 5% or
less of the value of the futures contract. Initial margin is in the nature of a
good faith deposit or performance bond, and is returned to the fund when the
futures position is terminated, after all contractual obligations have been
satisfied. Futures margin does not represent a borrowing by a fund, unlike
margin extended by a securities broker, and depositing initial margin in
connection with futures positions does not constitute purchasing securities on
margin for the purposes of a fund's investment limitations. Initial margin may
be maintained either in cash or in appropriate liquid securities such as U.S.
government securities.

As the contract's value fluctuates, payments known as variation margin
or maintenance margin are made to or received from the FCM. If the contract's
value moves against a fund (i.e., the fund's futures position declines in

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value), the fund may be required to make payments to the FCM, and, conversely,
the fund may be entitled to receive payments from the FCM if the value of its
futures position increases. This process is known as marking-to-market and takes
place on a daily basis.

In addition to initial margin deposits, a fund will instruct its
custodian to segregate additional cash and appropriate liquid securities to
cover its obligations under futures contracts it has purchased. The value of the
assets held in the segregated account will be equal to the daily market value of
all outstanding futures contracts purchased by a fund, less the amount deposited
as initial margin. When a fund has sold futures contracts to hedge securities it
owns, it will not sell those securities (or lend to another party) while the
contracts are outstanding, unless it substitutes other similar securities for
the securities sold or lent. A fund will not sell futures contracts with a value
exceeding the value of securities it owns, except that a fund may do so to the
extent necessary to adjust for differences in historical volatility between the
securities owned and the contracts used as a hedge.

Risks of Interest Rate Future Contracts

By purchasing an interest rate futures contract, a fund in effect
becomes exposed to price fluctuations resulting from changes in interest rates,
and by selling a futures contract a fund neutralizes those fluctuations. If
interest rates fall, a fund would expect to profit from an increase in the value
of the instrument underlying a futures contract it had purchased, and if
interest rates rise, a fund would expect to offset the resulting decline in the
value of the securities it owns by profits in a futures contract it has sold. If
interest rates move in the direction opposite that which was contemplated at the
time of purchase, however, a fund's positions in futures contracts could have a
negative effect on the fund's net asset value. If interest rates rise when a
fund has purchased futures contracts, the fund could suffer a loss in its
futures positions. Similarly, if interest rates fall, losses in a futures
contract a fund has sold could negate gains on securities the fund owns, or
could result in a net loss to the fund. In this sense, successful use of
interest rate futures contracts by a fund will depend on the adviser's ability
to hedge the fund in the correct way at the appropriate time.

Other than the risk that interest rates will not move as expected, the
primary risk in employing interest rate futures contracts is that the market
value of the futures contracts may not move in concert with the value of the
securities a fund wishes to hedge or intends to purchase. This may result from
differences between the instrument underlying the futures contracts and the
securities a fund wishes to hedge or intends to purchase, as would be the case,
for example, if a fund hedged U.S. Treasury bonds by selling futures contracts
on U.S. Treasury notes.

Even if the securities which are the objects of a hedge are identical
to those underlying the futures contract, there may not be perfect price
correlation between the two. Although the value of interest rate futures
contracts is primarily determined by the price of the underlying financial
instruments, the value of interest rate futures contracts is also affected by
other factors, such as current and anticipated short-term and long-term interest
rates, the time remaining until expiration of the futures contract, and
conditions in the futures markets, which may not affect the current market price
of the underlying financial instruments in the same way. In addition, futures
exchanges establish daily price limits for interest rate futures contracts, and
may halt trading in the contracts if their prices move upward and downward more
than a specified daily limit on a given day. This could distort the relationship
between the price of the underlying instrument and the futures contract, and
could prevent prompt liquidation of unfavorable futures positions. The value of
a futures contract may also move differently from the price of the underlying
financial instrument because of inherent differences between the futures and
securities markets, including variations in speculative demand for futures
contracts and for debt securities, the differing margin requirements for futures
contracts and debt securities, and possible differences in liquidity between the
two markets.

Put Options on Interest Rate Futures Contracts

Purchasing a put option on an interest rate futures contract gives a
fund the right to assume a seller's position in the contract at a specified
exercise price at any time up to the option's expiration date. In return for

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this right, the fund pays the current market price for the option (known as the
option premium), as determined on the commodity futures exchange where the
option is traded.

A fund may purchase put options on interest rate futures contracts to
hedge against a decline in the market value of securities the fund owns. Because
a put option is based on a contract to sell a financial instrument at a certain
price, its value will tend to move in the opposite direction from the price of
the financial instrument underlying the futures contract; that is, the put
option's value will tend to rise when prices fall, and fall when prices rise. By
purchasing a put option on an interest rate futures contract, a fund would
attempt to offset potential depreciation of securities it owns by appreciation
of the put option. This strategy is similar to selling the underlying futures
contract directly.

A fund's position in a put option on an interest rate futures contract
may be terminated either by exercising the option (and assuming a seller's
position in the underlying futures contract at the option's exercise price) or
by closing out the option at the current price as determined on the futures
exchange. If the put option is not exercised or closed out before its expiration
date, the entire premium paid would be lost by a fund. A fund could profit from
exercising a put option if the current market value of the underlying futures
contract were less than the sum of the exercise price of the put option and the
premium paid for the option because the fund would, in effect, be selling the
futures contract at a price higher than the current market price. A fund could
also profit from closing out a put option if the current market price of the
option is greater than the premium the fund paid for the option. Transaction
costs must also be taken into account in these calculations. A fund may close
out an option it had purchased by selling an identical option (that is, an
option on the same futures contract, with the same exercise price and expiration
date) in a closing transaction on a futures exchange that provides a secondary
market for the option. A fund is not required to make futures margin payments
when it purchases an option on an interest rate futures contract.

Compared to the purchase or sale of an interest rate futures contract,
the purchase of a put option on an interest rate futures contract involves a
smaller potential risk to a fund, because the maximum amount at risk is the
premium paid for the option (plus related transaction costs). If prices of debt
securities remain stable, however, purchasing a put option may involve a greater
probability of loss than selling a futures contract, even though the amount of
the potential loss is limited. The adviser will consider the different risk and
reward characteristics of options and futures contracts when selecting hedging
instruments.

Risks of Transactions in Options on Interest Rate Futures Contracts

Options on interest rate futures contracts are subject to risks similar
to those described above with respect to interest rate futures contracts. These
risks include the risk that the adviser may not hedge a fund in the correct way
at the appropriate time, the risk of imperfect price correlation between the
option and the securities being hedged, and the risk that there may not be an
active secondary market for the option. There is also a risk of imperfect price
correlation between the option and the underlying futures contract.

Although the adviser will purchase and write only those options for
which there appears to be a liquid secondary market, there can be no assurance
that such a market will exist for any particular option at any particular time.
If there were no liquid secondary market for a particular option, a fund might
have to exercise an option it had purchased in order to realize any profit, and
might continue to be obligated under an option it had written until the option
expired or was exercised.

Regulatory Notification of Futures and Options Strategies

The Trust has filed on behalf of the funds a notice of eligibility for
exclusion from the definition of the term "commodity pool operator" with the
Commodity Futures Trading Commission ("CFTC") and the National Futures
Association, which regulate trading in the futures markets. Under regulations
adopted by the CFTC, futures contracts and related options may be used by a fund
(a) for hedging purposes, without quantitative limits, and (b) for other
purposes to the extent that the amount of margin deposit on all such non-hedging
futures contracts owned by the fund, together with the amount of premiums paid

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by the fund on all such non-hedging options held on futures contracts, does not
exceed 5% of the market value of the fund's net assets. Each fund will not
purchase futures contracts or related options if as a result more than 25% of
the fund's total assets would be so invested. These limits on the funds'
investments in futures contracts are not fundamental and may be changed by the
Board of Trustees as regulatory agencies permit. Each fund will not modify these
limits to increase its permissible futures and related options activities
without supplying additional information in a supplement to a current Prospectus
or Statement of Additional Information that has been distributed or made
available to the fund's shareholders.

SPECIAL FACTORS AFFECTING MARYLAND TAX-FREE AND PENNSYLVANIA TAX-FREE

Overview

Because Maryland Tax-Free and Pennsylvania Tax-Free each focus
investments in a specific state, certain risks associated with investment in
each such fund are more pronounced if those funds' investments were more widely
diversified. These risks include the possible enactment of new legislation in
the applicable state which could affect Maryland or Pennsylvania municipal
obligations, economic factors which could affect these obligations and varying
levels of supply and demand for Maryland or Pennsylvania municipal obligations.

The following only highlights some of the more significant financial
trends and problems and is based on information drawn from official statements
and prospectuses relating to securities offerings of the states of the United
States, the State of Maryland and the Commonwealth of Pennsylvania, their
agencies and instrumentalities, as available on the date of this Statement of
Additional Information. The funds assume no obligation to update this
information.

Maryland Tax-Free

STATE DEBT The Maryland Constitution prohibits the contracting of State
general obligation debt unless it is authorized by a law levying an annual tax
or taxes sufficient to pay the debt service within 15 years and prohibiting the
repeal of the tax or taxes or their use for another purpose until the debt is
paid. As a uniform practice, each separate enabling act which authorizes the
issuance of general obligation bonds for a given object or purpose has
specifically levied and directed the collection of an ad valorem property tax on
all taxable property in the State. The Board of Public Works is directed by law
to fix by May 1 of each year the precise rate of such tax necessary to produce
revenue sufficient for debt service requirements of the next fiscal year, which
begins July 1. However, the taxes levied need not be collected if or to the
extent that funds sufficient for debt service requirements in the next fiscal
year have been appropriated in the annual State budget. Accordingly, the Board,
in annually fixing the rate of property tax after the end of the regular
legislative session in April, takes account of appropriations of general funds
for debt service.

There is no general debt limit imposed by the Maryland Constitution or
public general laws, but a special committee created by statute annually submits
to the Governor an estimate of the maximum amount of new general obligation debt
that prudently may be authorized. Although the committee's responsibilities are
advisory only, the Governor is required to give due consideration to the
committee's findings in preparing a preliminary allocation of new general debt
authorization for the ensuing fiscal year. The continuation of the credit
ratings on State debt is dependent upon several economic and political factors,
including the ability to continue to fund a substantial portion of the debt
service on general obligation debt from general fund revenues in the annual
State budget or to raise the rate of State property tax levies, and the ability
to maintain the amount of authorized debt within the range of affordability.

Consolidated Transportation Bonds are limited obligations issued by the
Maryland Department of Transportation, the principal of which must be paid
within 15 years from the date of issue, for highway, port, transit, rail or
aviation facilities or any combination of such facilities. Debt service on
Consolidated Transportation Bonds is payable from those portions of the excise
tax on each gallon of motor vehicle fuel and the motor vehicle titling tax, all
mandatory motor vehicle registration fees, motor carrier fees, and the corporate
income tax as are credited to the Maryland Department of Transportation, plus

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all departmental operating revenues and receipts. Holders of such bonds are not
entitled to look to other sources for payment.

The Maryland Transportation Authority operates certain highway, bridge
and tunnel toll facilities in the State. The tolls and other revenues received
from these facilities are pledged as security for revenue bonds of the Authority
issued under, and secured by, a trust agreement between the Authority and a
corporate trustee. As of March 31, 1999, $340.8 million of the Transportation's
revenue bonds were outstanding.

Certain other instrumentalities of the State government are authorized
to borrow money under legislation which expressly provides that the loan
obligations shall not be deemed to constitute a debt or a pledge of the faith
and credit of the State. The Community Development Administration of the
Department of Housing and Community Development, higher educational institutions
(including St. Mary's College of Maryland, the University of Maryland System,
and Morgan State University), the Maryland Transportation Authority, the
Maryland Water Quality Financing Administration, and the Maryland Environmental
Service have issued and have outstanding bonds of this type. The principal of
and interest on bonds issued by these bodies are payable solely from various
sources, principally fees generated from use of the facilities or enterprises
financed by the bonds.

The Port of Baltimore is one of the larger foreign trade ports in the
United States and in the world and is a significant factor in Maryland's
economy. The total cargo tonnage at the Port declined from 30,682,730 in 1982 to
25,274,403 in 1998. The Port handles both high value general cargo, including
containers and automobiles, as well as bulk cargo such as coal and grain. The
value of the tonnage handled increased from $14.2 billion in 1982 to $18.8
billion in 1998. The ability of the Port to sustain and improve its volume and
value of cargoes is dependent, in part, upon national and worldwide economic
conditions.

The Maryland Stadium Authority is responsible for financing and
directing the acquisition and construction of one or more new professional
sports facilities in Maryland. Currently, the Authority operates Oriole Park at
Camden Yards, which opened in 1992. In connection with the construction of that
facility, the Authority issued $155 million in notes and bonds. Those notes and
bonds are lease-backed revenue obligations, the payment of which is secured by,
among other things, an assignment of revenues received under a lease of Oriole
Park at Camden Yards from the Stadium Authority to the State. Annual net debt
service on the Authority's obligations is $14 million.

The Stadium Authority also was assigned responsibility for constructing
expansions of the Convention Centers in Baltimore and Ocean City. The Baltimore
Convention Center expansion cost $167 million and was financed through a
combination of funding from Baltimore City bonds Stadium Authority revenue
bonds, and State general obligation bonds. The Ocean City Convention Center
expansion cost $33.2 million and was financed through a combination of funding
from Ocean City and the Stadium Authority. Annual debt service on the
obligations attributable to the Baltimore and Ocean City expansion projects is
projected to be $9,800,000 and $1,490,000, respectively.

The Stadium Authority currently operates PSINET Stadium, which opened
in 1998. In connection with the construction of that facility, the Stadium
Authority sold $87.565 million in lease-backed revenue bonds on May 1, 1996. The
proceeds from the bonds, along with cash available from State lottery proceeds,
investment earnings, and other sources were used to pay project design and
construction expenses of approximately $229 million. The bonds are solely
secured by an assignment of revenues received under a lease of the project from
the Stadium Authority to the State. Authority debt service on the bonds will be
$7.3 million annually.

The Authority has also been assigned responsibility for construction of
a conference center in Montgomery County. The center is expected to cost
$27,500,000 and is being financed through a combination of funding from
Montgomery County and the Authority. The Authority is authorized to issue up to
$17,600,000 in revenue bonds which it expects to sell during the fiscal year
2000.

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The State has financed and expects to continue to finance the
construction and acquisition of various facilities through conditional purchase,
sale-leaseback, and similar transactions. All of the lease payments under these
arrangements are subject to annual appropriation by the Maryland General
Assembly. In the event that appropriations are not made, the State may not be
held contractually liable for the payments.

LOCAL SUBDIVISION DEBT The counties and incorporated municipalities in
Maryland issue general obligation debt for general governmental purposes. The
general obligation debt of the counties and incorporated municipalities is
generally supported by ad valorem taxes on real estate, tangible personal
property and intangible personal property subject to taxation. The issuer
typically pledges its full faith and credit and unlimited taxing power to the
prompt payment of the maturing principal and interest on the general obligation
debt and to the levy and collection of the ad valorem taxes as and when such
taxes become necessary in order to provide sufficient funds to meet the debt
service requirements. The amount of debt which may be authorized may in some
cases be limited by the requirement that it not exceed a stated percentage of
the assessable base upon which such taxes are levied.

OTHER RISK FACTORS The manufacturing sector of Maryland's economy,
which historically has been a significant element of the State's economic
health, has experienced severe financial pressures and an overall contraction in
recent years. This is due in part to the reduction in defense-related contracts
and grants, which has had an adverse impact that is substantial and is believed
to be disproportionately large compared with the impact on most other states.
The State has endeavored to promote economic growth in other areas, such as
financial services, health care and high technology. Whether the State can
successfully make the transition from an economy reliant on heavy industries to
one based on service and science-oriented businesses is uncertain. Moreover,
future economic difficulties in the service sector and high technology
industries being promoted by Maryland could have an adverse impact on the
finances of the State and its subdivisions, and could adversely affect the
market value of the Bonds in the Maryland Trust or the ability of the respective
obligors to make payments of interest and principal due on such Bonds. In
addition, Maryland's relatively high concentration of governmental employment
makes the state potentially vulnerable to any decrease in federal, including
military, and state governmental spending.

The State and its subdivisions, and their respective officers and
employees, are defendants in numerous legal proceedings, including alleged tort
and breaches of contract and other alleged violations of laws. Although adverse
decisions in these matters could require extraordinary appropriations not
budgeted for, in the opinion of the Attorney General of Maryland, the legal
proceedings are not likely to have a material adverse effect on the State's
financial position.

Pennsylvania Tax-Free

STATE DEBT Pennsylvania may incur debt to rehabilitate areas affected
by disaster, debt approved by the electorate, debt for certain capital projects
(such as highways, public improvements, transportation assistance, flood
control, redevelopment assistance, site development and industrial development)
and tax anticipation debt payable in the fiscal year of issuance. Pennsylvania
had outstanding general obligation debt of $4,924.5 million at June 30, 1999.
Pennsylvania is not permitted to fund deficits between fiscal years with any
form of debt. All year-end deficit balances must be funded within the succeeding
fiscal year's budget. As of January 15, 2000, all outstanding general obligation
bonds of Pennsylvania were rated AA by S&P and Aa3 by Moody's (see Appendix A).
There can be no assurance that the current ratings will remain in effect in the
future. Pennsylvania Tax-Free assumes no obligation to update this rating
information. Over the five-year period ending June 30, 2004, Pennsylvania has
projected that it will issue bonds totaling $3,449 million and retire bonded
debt in the principal amount of $2,542.4 million.

Certain agencies created by Pennsylvania have statutory authorization
to incur debt for which Pennsylvania appropriations to pay debt service thereon
is not required. As of June 30, 1999, the combined total debt outstanding for
all above-mentioned agencies was $9,802 million. The debt of these agencies is
supported by assets of, or revenues derived from, the various projects financed
and is not an obligation of Pennsylvania. Some of these agencies, however, are
indirectly dependent on Pennsylvania appropriations. The only obligations of

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agencies in Pennsylvania that bear a moral obligation of Pennsylvania are those
issued by the Pennsylvania Housing Finance Agency ("PHFA"), a state-created
agency which provides housing for lower and moderate income families, and The
Hospitals and Higher Education Facilities Authority of Philadelphia ("Hospital
Authority"), an agency created by the City of Philadelphia to acquire and
prepare various sites for use as intermediate care facilities for the mentally
retarded.

LOCAL GOVERNMENT DEBT Numerous local government units in Pennsylvania
issue general obligations (i.e., backed by taxing power) debt, including
counties, cities, boroughs, townships and school districts. School district
obligations are supported indirectly by Pennsylvania. The issuance of
non-electoral general obligation debt is limited by constitutional and statutory
provisions. Electoral debt, i.e., that approved by the voters, is unlimited. In
addition, local government units and municipal and other authorities may issue
revenue obligations that are supported by the revenues generated from particular
projects or enterprises. Examples include municipal authorities (frequently
operating water and sewer systems), municipal authorities formed to issue
obligations benefiting hospitals and educational institutions, and industrial
development authorities, whose obligations benefit industrial or commercial
occupants. In some cases, sewer or water revenue obligations are guaranteed by
taxing bodies and have the credit characteristics of general obligation debt.

LITIGATION Pennsylvania is currently involved in certain litigation
where adverse decisions could have an adverse impact on its ability to pay debt
service. For instance, County of Allegheny v. Commonwealth of Pennsylvania
involves litigation regarding the state constitutionality of the statutory
scheme for county funding of the judicial system. In Pennsylvania Association of
Rural and Small Schools v. Casey, the constitutionality of Pennsylvania's system
for funding local school districts has been challenged. No estimates for the
amount of these claims are available.

OTHER FACTORS Pennsylvania historically has been identified as a heavy
industry state, although that reputation has changed with the decline of the
coal, steel and railroad industries and the resulting diversification of
Pennsylvania's industrial composition. The major new sources of growth are in
the service sector, including trade, medical and health services, educational
and financial institutions. Manufacturing has fallen behind both the services
sector and the trade sector as the largest single source of employment in
Pennsylvania. Between 1989 and 1998, employment in Pennsylvania has grown each
year at a rate slightly in excess of the growth in employment in the
mid-Atlantic region, but less than that of the U.S. as a whole, during the same
period. Pennsylvania's average unemployment rate for the years 1994 through 1998
remained slightly above the nation's annual average unemployment rate. However,
the unadjusted unemployment rate for Pennsylvania for April, 2000 was 3.6% and
for the United States for April, 2000 was 3.7%. The population of Pennsylvania,
12 million people in 1998, according to the U.S. Bureau of the Census,
represents a slight increase from the 1989 estimate of 11.876 million. Per
capita income in Pennsylvania was $26,792 for calendar year 1998, slightly above
the per capita income of the United States of $26,412. Pennsylvania's General
Fund, which receives all tax receipts and most other revenues and through which
debt service on all general obligations of Pennsylvania are made, closed fiscal
years ended June 30, 1997, June 30, 1998 and June 30, 1999 with fund balances of
$1,365 million, $1,959 million, and $2,863 million respectively.

Changes in local economic conditions or local governmental policies
within Pennsylvania, which can vary substantially by region, could also have a
significant impact on the performance of municipal obligations held by the fund.
The City of Philadelphia, for example, experienced severe financial problems
which impaired its ability to borrow money and adversely affected the ratings of
its obligations and their marketability. While the fund may invest in
obligations that are secured obligors other than Pennsylvania or its political
subdivisions (such as hospitals, universities, corporate obligors and corporate
credit and liquidity providers) and obligations limited to specific revenue
pledges (such as sewer authority bonds), the creditworthiness of these obligors
may be partly dependent on the creditworthiness of Pennsylvania or its municipal
authorities.

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ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Each fund offers two classes of shares, known as Primary Class shares
and Navigator Class shares. Primary Class shares are available from Legg Mason,
certain of its affiliates and unaffiliated entities having an agreement with
Legg Mason. Navigator Class shares are currently offered for sale only to:
Institutional Clients of Legg Mason Trust, fsb ("LM Trust") for which LM Trust
exercises discretionary investment management responsibility and accounts of
customers with such Institutional Clients, qualified retirement plans managed on
a discretionary basis and having net assets of at least $200 million, any
qualified retirement plan having net assets of at least $300 million, clients of
Bartlett & Co. ("Bartlett") who, as of December 19, 1996 were shareholders of
Bartlett Short Term Bond Fund or Bartlett Fixed Income Fund and for whom
Bartlett acts as an ERISA fiduciary, any qualified retirement plan of Legg
Mason, Inc. or of any of its affiliates, certain institutions who were clients
of Fairfield Group, Inc. as of February 28, 1999 for investment of their own
monies and monies for which they act in a fiduciary capacity, and any open-end
management investment company advised or managed by Legg Mason Fund Adviser,
Inc. ("LMFA") or Legg Mason Funds Management, Inc. ("LMFM") or by any person
controlling, controlled by, or under common control with LMFA or LMFM. Navigator
Class shares may not be purchased by individuals directly, but Institutional
Clients may purchase shares for Customer Accounts maintained for individuals.
Primary Class shares are available to all other investors.

Future First Systematic Investment Plan

If you invest in Primary Class shares, the Prospectus for those shares
explains that you may buy Primary Class shares through the Future First
Systematic Investment Plan. Under this plan you may arrange for automatic
monthly investments in Primary Class shares of $50 or more by authorizing Boston
Financial Data Services ("BFDS"), the funds' transfer agent, to transfer funds
each month from your Legg Mason account or from your checking account to be used
to buy Primary Class shares of the fund you selected at the per share net asset
value determined on the day the funds are sent from your bank. An account
statement will be sent to you quarterly. You may terminate the Future First
Systematic Investment Plan at any time without charge or penalty. Forms to
enroll in the Future First Systematic Investment Plan are available from any
Legg Mason or affiliated office.

Redemption Services

Each fund reserves the right to modify or terminate the wire or
telephone redemption services described in its Prospectuses at any time.

A redemption request received by your Legg Mason Financial Advisor may
be treated as a request for repurchase and, if it is accepted, your shares will
be purchased at the net asset value per share determined as of the next close of
the New York Stock Exchange ("Exchange"). The date of payment for redemption may
not be postponed for more than seven days, and the right of redemption may not
be suspended, except (a) for any periods during which the Exchange is closed
(other than for customary weekend and holiday closings), (b) when trading in
markets a fund normally utilizes is restricted or an emergency, as defined by
rules and regulations of the SEC, exists, making disposal of the fund's
investments or determination of its net asset value not reasonably practicable,
or (c) for such other periods as the SEC, by order, may permit for protection of
a fund's shareholders. In the case of any such suspension, you may either
withdraw your request for redemption or receive payment based upon the net asset
value next determined after the suspension is lifted.

Each fund reserves the right under certain conditions to honor any
request for redemption, or combination of requests from the same shareholder in
any 90-day period, totaling $250,000 or 1% of the net assets of the fund,
whichever is less, by making payment in whole or in part by securities valued in
the same way as they would be valued for purposes of computing each fund's net
asset value per share. Any such redemption payments shall be made with portfolio
securities that are readily marketable. If payment is made in securities, a
shareholder generally will incur brokerage expenses in converting those
securities into cash and will be subject to fluctuation in the market price of
those securities until they are sold. The funds do not redeem in kind under
normal circumstances, but would do so where the adviser determines that it would
be in the best interests of the shareholders as a whole. Although each fund may

<PAGE>

elect to redeem any shareholder account with a current value of less than $500,
a fund will not redeem accounts that fall below $500 solely as a result of a
reduction in net asset value per share.

ADDITIONAL TAX INFORMATION

The following is a general summary of certain tax considerations
affecting each fund and its shareholders. Investors are urged to consult their
own tax advisers for more detailed information regarding any federal, state or
local taxes that may apply to them.

General

For federal tax purposes, each fund is treated as a separate
corporation. Each fund intends to continue to qualify for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code of 1986, as
amended ("Code"), so that it will be relieved of federal income tax on that part
of its investment company taxable income (generally, taxable net investment
income and any net short-term capital gain) and net capital gain (i.e., the
excess of net long-term capital gain over net short-term capital loss) that it
distributes to its shareholders. If a fund so qualifies and, at the close of
each quarter of its taxable year, at least 50% of the value of its total assets
consists of certain obligations the interest on which is excludable from gross
income under section 103(a) of the Code, that fund may pay "exempt-interest"
dividends to its shareholders. Those dividends constitute the portion of the
aggregate dividends (excluding capital gain distributions), as designated by the
fund, equal to the excess of the fund's excludable interest over certain amounts
disallowed as deductions. Exempt-interest dividends are excludable from a
shareholder's gross income; however, the amount of those dividends must be
reported on the recipient's federal income tax return.

To continue to qualify for treatment as a RIC under the Code, each fund
must distribute annually to its shareholders at least 90% of the sum of its net
interest income excludable from gross income under section 103(a) of the Code
plus its investment company taxable income (generally, taxable net investment
income plus net short-term capital gain, if any) ("Distribution Requirement")
and must meet several additional requirements. For each fund, these requirements
include the following: (1) the fund must derive at least 90% of its gross income
each taxable year from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of securities, or other
income (including gains from options and futures contracts) derived with respect
to its business of investing in securities ("Income Requirement"); (2) at the
close of each quarter of the fund's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S. government
securities, securities of other RICs and other securities, with those other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the value of the fund's total assets; and (3) at the close of each
quarter of the fund's taxable year, not more than 25% of the value of its total
assets may be invested in the securities (other than U.S. government securities
or the securities of other RICs) of any one issuer.

If any fund failed to qualify for treatment as a RIC for any taxable
year, (i) it would be taxed at corporate rates on the full amount of its taxable
income for that year without being able to deduct the distributions it makes to
its shareholders and (ii) the shareholders would treat all those distributions,
including distributions of net capital gain and distributions that otherwise
would be "exempt-interest dividends" described in the following paragraph, as
dividends (that is, ordinary income) to the extent of the fund's earnings and
profits. In addition, the fund could be required to recognized unrealized gains,
pay substantial taxes and interest and make substantial distributions before
requalifying for RIC treatment.

If and to the extent a fund receives interest on certain PABs, a
proportionate part of the exempt-interest dividends paid by the fund will be
treated as a Tax Preference Item. In addition, exempt-interest dividends
received by a corporate shareholder may be indirectly subject to the federal
alternative minimum tax without regard to whether the distributing fund's
tax-exempt interest is attributable to PABs.

To the extent a fund's dividends are derived from taxable income from
temporary investments, from net short-term capital gain or from the use of
certain investment techniques, they are taxable to its shareholders as ordinary
income (whether paid in cash or reinvested in fund shares) to the extent of its
earnings and profits. No portion of those dividends will qualify for the

<PAGE>

corporate dividends-received deduction. Distributions derived from net capital
gain, if any, are taxable to shareholders as long-term capital gain regardless
of the length of time they have held their fund shares (and irrespective of
whether those distributions are paid in cash or reinvested in fund shares). The
maximum tax rate applicable to a noncorporate taxpayer's net capital gain
recognized on capital assets held for more than one year is 20%. In the case of
a RIC such as a fund, the relevant holding period is determined by how long the
fund has held the portfolio security on which the gain was realized, not by how
long you have held your fund shares.

Interest on indebtedness incurred or continued by a shareholder to
purchase or carry fund shares generally is not deductible. Persons who are
"substantial users" (or related persons) of facilities financed by PABs should
consult their tax advisers before purchasing shares of a fund because, for users
of certain of these facilities, the interest on those bonds is not exempt from
federal income tax. For these purposes, a "substantial user" includes a
non-exempt person who regularly uses in trade or business a part of a facility
financed from the proceeds of PABs.

Up to 85% of social security and railroad settlement benefits may be
included in taxable income for recipients whose adjusted gross income (including
income from tax-exempt sources such as a fund) plus 50% of their benefits
exceeds certain base amounts. Exempt-interest dividends from a fund still are
tax-exempt to the extent described above; they are only included in the
calculation of whether a recipient's income exceeds the established amounts.

A redemption of fund shares may result in taxable gain or loss to the
redeeming shareholder, depending on whether the redemption proceeds are more or
less than the shareholder's adjusted basis for the redeemed shares (which
normally includes any sales charge paid). An exchange of shares of any fund for
shares of any other Legg Mason fund generally will have similar tax
consequences. However, special tax rules apply if (1) a shareholder disposes of
fund shares through a redemption or exchange within 90 days after the
shareholder acquired the shares and (2) the shareholder subsequently acquires
shares of that fund or of another Legg Mason fund without the imposition of a
sales charge that otherwise would have been imposed except for the reinstatement
privilege or exchange privilege. In these cases, any sales charge that was
imposed on the purchase of the original shares will not be taken into account in
determining the amount of gain or loss on the redemption or exchange - the tax
effect of that charge will instead be deferred by being treated as having been
incurred in connection with the newly acquired shares. In addition, if fund
shares are purchased within 30 days before or after redeeming, at a loss, other
shares of the same fund (regardless of class), all or part of that loss will not
be deductible and instead will increase the basis of the newly purchased shares.

If fund shares are sold at a loss after being held for six months or
less, the loss will be disallowed to the extent of any exempt-interest dividends
received with respect to those shares, and any portion of the loss that is not
disallowed will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received with respect thereto.

Each fund will withhold 31% of all taxable dividends, capital gain
distributions and redemption proceeds payable to individuals and certain other
non-corporate shareholders who do not provide the fund with a valid taxpayer
identification number. Each fund will also withhold 31% of all dividend and
capital gain distributions payable to such shareholders who are otherwise
subject to backup withholding.

Each fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary (taxable) income for that year and capital
gain net income for the one-year period ending on October 31 of that year, plus
certain other amounts. For this and other purposes, dividends and capital gain
distributions declared by a fund in December of any year and payable to
shareholders of record on a date in that month will be deemed to have been paid
by the fund and received by the shareholders on December 31 if the distributions
are paid by the fund during the following January. Accordingly, those
distributions will be reportable by shareholders for the year in which that
December 31 falls.

A fund may purchase zero coupon or other municipal obligations issued
with original issue discount. As a holder of those securities, a fund must take
into account for purposes of the Income Requirement the original issue discount

<PAGE>

that accrues thereon during the taxable year, even if the fund receives no
corresponding payment on the securities during the year. Because each fund
annually must distribute substantially all of its income, including accrued
original issue discount (even if that discount is tax-exempt), to satisfy the
Distribution Requirement, it may be required in a particular year to distribute
as a dividend an amount that is greater than the total amount of cash it
actually receives. Those distributions will be made from the fund's cash assets
or from the proceeds of sales of portfolio securities, if necessary. The fund
may realize capital gains or losses from those dispositions, which would
increase or decrease its investment company taxable income and/or net capital
gain.

Hedging Instruments

The use of hedging instruments, such as writing (selling) and
purchasing options and futures contracts, involves complex rules that will
determine for income tax purposes the amount, character and timing of
recognition of the gains and losses a fund realizes in connection therewith.
Gains from options and futures contracts derived by a fund with respect to its
business of investing in securities will be taxable and will be treated as
qualifying income under the Income Requirement.

Maryland Taxes

Distributions paid by Maryland Tax-Free to Maryland residents
attributable to interest received or capital gains recognized by the fund on
Maryland municipal obligations are exempt from Maryland state and local income
taxes. Distributions attributable to interest received or capital gains
recognized by the fund on certain U.S. government obligations also are exempt
from Maryland state and local income taxes. Distributions attributable to the
fund's other income or gains generally are subject to these taxes.

Interest on indebtedness incurred by a shareholder to purchase or carry
fund shares generally is not deductible for purposes of either Maryland state or
local income tax. Fund shares held by an individual are not subject to the
Maryland personal property tax. Dividends paid by the fund with respect to
Maryland municipal obligations and profits realized on the sale or exchange of
such obligations are not subject to the Maryland Franchise Tax imposed on
"financial institutions" and measured by net earnings.

In the case of individuals, Maryland imposes an income tax on Tax
Preference Items. Interest paid on certain PABs is a Tax Preference Item.
Accordingly if the fund holds such bonds, 50% of the interest thereon in excess
of a threshold amount is subject to Maryland state and local tax.

Dividends derived from interest on Maryland municipal obligations
generally will not be exempt from taxation under the laws of states other than
Maryland.

Pennsylvania Taxes

Individual shareholders of Pennsylvania Tax-Free who are otherwise
subject to the Pennsylvania personal income tax will not be subject to that tax
on distributions by the fund that are attributable to interest on Pennsylvania
municipal obligations. Distributions attributable to most other sources,
including gains, will not be exempt from Pennsylvania personal income tax.

Shares that are held by individual shareholders who are Pennsylvania
residents will be exempt from the Pennsylvania county personal property tax to
the extent that the fund's portfolio consists of Pennsylvania municipal
obligations on the annual assessment date. Nonresidents of Pennsylvania are not
subject to this tax. Corporations are not subject to any of these personal
property taxes. For shareholders who are residents of the City of Philadelphia,
distributions of interest derived from Pennsylvania municipal obligations are
not taxable for purposes of the Philadelphia School District investment net
income tax, provided that the fund reports to its shareholders the percentage of
Pennsylvania municipal obligations held by it for the year. The fund will report
such percentage to its shareholders.

Distributions of interest, but not gains realized, on Pennsylvania
municipal obligations are not subject to the Pennsylvania corporate net income
tax. The Pennsylvania Department of Revenue also takes the positions that shares

<PAGE>

of funds similar to the fund are not considered exempt assets of a corporation
for the purposes of determining its capital stock value subject to Pennsylvania
capital stock and franchise taxes.

Dividends derived from interest on Pennsylvania municipal obligations
generally will not be exempt from taxation under the laws of states other than
Pennsylvania.

Other State and Local Income Taxes

The exemption of certain interest income for federal income tax
purposes does not necessarily result in exemption thereof under the income or
other tax laws of any state or local taxing authority. A shareholder may be
exempt from state and local taxes on dividends attributable to interest income
derived from obligations of the state and municipalities or other localities of
the state in which he or she is a resident, but generally will be taxed on
dividends attributable to interest income derived from obligations of other
jurisdictions. Shareholders receive notification annually of the portion of each
fund's tax-exempt income attributable to each state. Shareholders should consult
their tax advisers about the tax status in their own states and localities of
distributions from each fund.

VALUATION OF FUND SHARES

Net asset value of a fund share is determined daily for each class as
of the close of the Exchange, on every day that the Exchange is open, by
dividing the value of the total assets attributable to that class, less
liabilities attributable to that class, by the number of shares of that class
outstanding. Pricing will not be done on days when the Exchange is closed. The
Exchange currently observes the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. When market quotations are
readily available, portfolio securities are valued based upon market quotations,
provided such quotations adequately reflect, in the adviser's judgment, the fair
value of the security. Pursuant to policies adopted by the Board of Trustees, a
fund may also use fair value pricing instead of market quotations to value a
security if the fund's Valuation Committee believes because of special
circumstances doing so would more accurately reflect the price that could be
realized on a current sale of the security. For valuation purposes, the market
quotation shall be the last available bid price for a comparable position. Where
such market quotations are not readily available, securities are valued based
upon appraisals received from an independent pricing service using a
computerized matrix system or based upon appraisals derived from information
concerning the security or similar securities received from recognized dealers
in those securities. The methods used by the pricing service and the quality of
the valuations so established are reviewed by the adviser under the general
supervision of the Board of Trustees. The amortized cost method of valuation is
used with respect to obligations with 60 days or less remaining to maturity. All
other assets are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Premiums received on the sale of
put and call options are included in each fund's net asset value, and the
current market value of options sold by a fund will be subtracted from its net
assets.

PERFORMANCE INFORMATION

The following tables show the value, as of the end of each fiscal year,
of a hypothetical investment of $10,000 made in Primary Class shares of each
fund and Navigator Class shares of Pennsylvania Tax-Free at each fund's
respective commencement of operations. As of the date of this Statement of
Additional Information, Navigator Class shares of Maryland Tax-Free and Tax-Free
Intermediate have not yet commenced operations. Each table assumes that all
dividends and capital gain distributions are reinvested in the respective fund.
Each table includes the effect of all charges and fees applicable to the
respective class of shares the respective fund has paid. (There are no
redemption fees.)

The tables do not include the effect of any income tax that an investor
would have to pay on distributions. Performance data is only historical and is
not intended to indicate any fund's future performance.

<PAGE>

For Maryland Tax-Free Primary Class shares:

Value of Original Shares Value of Shares
Plus Shares Obtained Acquired Through
Through Reinvestment of Reinvestment of
Fiscal Year Capital Gain Distributions Income Dividends Total Value
--------------------------------------------------------------------------------
1992* $ 9,942 $ 561 $10,503

1993 10,569 1,244 11,813

1994 10,395 1,832 12,227

1995 10,507 2,527 13,034

1996 10,637 3,323 13,960

1997 10,643 3,977 14,620

1998 11,067 4,865 15,932

1999 11,068 5,633 16,701

2000 10,518 6,104 16,622

* May 1, 1991 (commencement of operations) to March 31, 1992.

If the investor had not reinvested dividends and capital gain
distributions, the total value of the hypothetical investment as of March 31,
2000 would have been $10,198, and the investor would have received a total of $
5,140 in distributions. If the adviser had not waived certain fund expenses in
each of the fiscal years, returns would have been lower.

For Pennsylvania Tax-Free Primary Class shares:

1993 10,602 1,113 11,715

1994 10,450 1,711 12,161

1995 10,595 2,421 13,016

1996 10,702 3,162 13,864

1997 10,668 3,835 14,503

1998 11,151 4,774 15,925

1999 11,624 5,593 16,857

2000 10,594 6,034 16,628

* August 1, 1991 (commencement of operations) to March 31, 1992.

<PAGE>

For Pennsylvania Tax-Free Navigator Class Shares:

1999* $10,107 $556 $10,663

2000 9,507 1,064 10,571

* March 10, 1998 (commencement of operations) to March 31, 1999.

With respect to Primary Class shares, if the investor had not
reinvested dividends and capital gain distributions, the total value of the
hypothetical investment as of March 31, 2000 would have been $10,298, and the
investor would have received a total of $5,119 in distributions. With respect to
Navigator Class shares, if the investor had not reinvested dividends and capital
gain distributions, the total value of the hypothetical investment as of March
31, 2000 would have been $9,471 and the investor would have received a total of
$1,081 in distributions. If the adviser had not waived certain fund expenses in
each of the fiscal years, returns would have been lower.

For Tax-Free Intermediate Primary Class shares:

1994 9,980 640 10,620

1995 10,047 1,187 11,234

1996 10,234 1,462 11,696

1997 10,154 2,251 12,405

1998 10,414 2,848 13,262

1999 10,465 3,437 13,902

2000 10,072 3,937 14,009

* November 9, 1992 (commencement of operations) to March 31, 1993.

If the investor had not reinvested dividends and capital gain
distributions, the total value of the hypothetical investment as of March 31,
2000 would have been $10,060, and the investor would have received a total of
$3,386 in distributions. If the adviser had not waived certain fund expenses in
each fiscal year, returns would have been lower.

<PAGE>

Total Return Calculations Average annual total return quotes used in
each fund's advertising and other promotional materials ("Performance
Advertisements") are calculated according to the following formula:

P(1+T)n = ERV

where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of that period.

Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated at least to
the last day of the most recent quarter prior to submission of the Performance
Advertisements for publication. Total return, or "T" in the formula above, is
computed by finding the average annual change in the value of an initial $1,000
investment over the period. In calculating the ending redeemable value, all
dividends and capital gain distributions by a fund are assumed to have been
reinvested at net asset value on the reinvestment dates during the period.
Year-by-year and average annual returns for the calendar year ended December 31,
1999 are contained in each fund's Prospectus.

YIELD Yield figures used in each fund's Performance Advertisements are
calculated by dividing the fund's net investment income for a 30-day period
("Period"), by the average number of shares entitled to receive dividends during
the Period, and expressing the result as an annualized percentage (assuming
semi-annual compounding) of the maximum offering price per share at the end of
the Period. Yield quotations are calculated according to the following formula:

YIELD = 2[(a-b + 1)6] - 1
---
cd
where: a = dividends and interest earned during the Period
b = expenses accrued for the Period (net of reimbursements)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last day
of the Period.

Except as noted below, in determining net investment income earned
during the Period (variable "a" in the above formula), each fund calculates
interest earned on each debt obligation held by it during the Period by (1)
computing the obligation's yield to maturity based on the market value of the
obligation (including actual accrued interest) on the last business day of the
Period or, if the obligation was purchased during the Period, the purchase price
plus accrued interest and (2) dividing the yield to maturity by 360, and
multiplying the resulting quotient by the market value of the obligation
(including actual accrued interest). Once interest earned is calculated in this
fashion for each debt obligation held by a fund, interest earned during the
Period is then determined by totaling the interest earned on all debt
obligations. For purposes of these calculations, the maturity of an obligation
with one or more call provisions is assumed to be the next date on which the
obligation reasonably can be expected to be called or, if none, the maturity
date.

Tax-exempt yield is calculated according to the same formula except
that a = interest exempt from federal income tax earned during the Period. This
tax-exempt yield is then translated into tax equivalent yield according to the
following formula:

TAX EQUIVALENT YIELD = ( E ) = t
---
l - p

E = tax-exempt yield
p = stated income tax rate
t = taxable yield

<PAGE>

From time to time, Maryland Tax-Free may also illustrate the effect of
tax equivalent yields using information such as that set forth below:

Maryland Tax-Free Income Trust
<TABLE>
<CAPTION>
Federal State & TAXABLE YIELD
Marginal Local Blended
Single MFJ Rates Rates Rate 5.00% 5.50% 6.00% 6.50% 7.00%
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Not over $26,250 Not over $43,850 15.0% 7.90% 21.7% 3.91% 4.31% 4.70% 5.09% 5.48%
$43,850 to
$26,250 to $63,550 $105,950 28.0% 7.90% 33.7% 3.32% 3.65% 3.98% 4.31% 4.64%
$105,950 to
$63,550 to $132,600 $161,450 31.0% 7.90% 36.5% 3.18% 3.50% 3.81% 4.13% 4.45%
$161,450 to
$132,600 to $288,350 $288,350 36.0% 7.90% 41.1% 2.95% 3.24% 3.54% 3.83% 4.13%

Over $288,350 Over $288,350 39.6% 7.90% 44.4% 2.78% 3.06% 3.34% 3.62% 3.89%

^ Based on 2000 federal individual income tax rates and 1999 Maryland tax rates using a state rate of 4.85% and a
local rate of 3.05% for a combined rate of 7.90%. Actual local rates will vary depending on the applicable county or city.

</TABLE>

From time to time, Pennsylvania Tax-Free may also illustrate the effect
of tax equivalent yields using information such as that set forth below:

Pennsylvania Tax-Free Income Trust
<TABLE>
<CAPTION>
Marginal State & TAXABLE YIELD
Federal Local Blended
Single MFJ Rates Rates Rate 5.00% 5.50% 6.00% 6.50% 7.00%
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Not over $26,250 Not over $43,850 15.0% 2.8% 17.4% 4.13% 4.54% 4.96% 5.37% 5.78%
$43,850 to
$26,250 to $63,550 $105,950 28.0% 2.8% 30.0% 3.50% 3.85% 4.20% 4.55% 4.90%
$105,950 to
$63,550 to $132,600 $161,450 31.0% 2.8% 32.9% 3.35% 3.69% 4.02% 4.36% 4.69%
$161,450 to
$132,600 to $288,350 $288,350 36.0% 2.8% 37.8% 3.11% 3.42% 3.73% 4.04% 4.35%

Over $288,350 Over $288,350 39.6% 2.8% 41.3% 2.94% 3.23% 3.52% 3.82% 4.11%

^ Based on 2000 federal individual income tax rates and 1999 Pennsylvania tax rates.

</TABLE>

From time to time, Tax-Free Intermediate may also illustrate the effect
of tax equivalent yields using information such as that set forth below:

Tax-Free Intermediate-Term Trust
<TABLE>
<CAPTION>
Marginal TAXABLE YIELD
Federal
Single MFJ Rates 5.00% 5.50% 6.00% 6.50% 7.00%
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Not over $26,250 Not over $43,850 15.0% 4.25% 4.68% 5.10% 5.53% 5.95%

$26,250 to $63,550 $43,850 to $105,950 28.0% 3.60% 3.96% 4.32% 4.68% 5.04%

$63,550 to $132,600 $105,950 to $161,450 31.0% 3.45% 3.80% 4.14% 4.49% 4.83%

$132,600 to $288,350 $161,450 to $288,350 36.0% 3.20% 3.52% 3.84% 4.16% 4.48%
Over $288,350 Over $288,350 39.6% 3.02% 3.32% 3.62% 3.93% 4.23%

^ Based on 2000 federal individual income tax rates.

</TABLE>
27
<PAGE>

For the 30-day period ended March 31, 2000, Maryland Tax-Free's Primary
Class shares yield and tax equivalent yield (assuming a 21.7% blended tax rate)
were 4.73% and 6.04%. Pennsylvania Tax-Free's Primary Class shares yield and tax
equivalent yield (assuming an 17.4% blended tax rate) for the same period were
4.80% and 5.81%. Tax-Free Intermediate's Primary Class shares yield and tax
equivalent yield (assuming a 15% tax rate) for the same period were 4.26% and
5.01%.

OTHER INFORMATION From time to time, in reports and promotional
literature, each class of shares of a fund's performance may be compared to
indices of broad groups of managed and unmanaged securities considered to be
representative of or similar to fund portfolio holdings such as the Bond Buyer
20, Lipper General Purpose Municipal Bond Average, Lipper Maryland State
Municipal Bond Fund Average (Maryland Tax-Free only) and Shearson
Lehman/American Express Municipal Bond Index. Securities indices may take no
account of the cost of investing or of any tax consequences of distributions.
The funds may invest in securities not included in the indices to which they
make such comparisons.

A fund may also cite rankings and ratings and compare the return of a
class with data published by Lipper Analytical Services, Inc. ("Lipper"), CDA
Investment Technologies, Inc., Wiesenberger Investment Company Services, Value
Line, Morningstar, and other services or publications that monitor, compare
and/or rank the performance of investment companies. A fund may also refer in
such materials to mutual fund performance rankings, ratings and comparisons with
funds having similar investment objectives and other mutual funds reported
periodically in national financial publications such as MONEY Magazine, FORBES,
BUSINESS WEEK and BARRON's.

A fund may compare the investment return of a class to the return on
certificates of deposit and other forms of bank deposits, and may quote from
organizations that track the rates offered on such deposits. Bank deposits are
insured by an agency of the federal government up to specified limits. In
contrast, fund shares are not insured, the value of fund shares may fluctuate,
and an investor's shares, when redeemed, may be worth more or less than the
investor originally paid for them. Unlike the interest paid on a certificate of
deposit, which remains at a specified rate for a specified period of time, the
return of each class of shares will vary.

In advertising, a fund may illustrate hypothetical investment plans
designed to help investors meet long-term financial goals, such as saving for a
child's college education or for retirement. Sources such as the Internal
Revenue Service, the Social Security Administration, the Consumer Price Index
and Chase Global Data and Research may supply data concerning interest rates,
college tuitions, the rate of inflation, Social Security benefits, mortality
statistics and other relevant information. A fund may use other recognized
sources as they become available.

A fund may use data prepared by Ibbotson Associates and Frontier
Analytics, Inc. to compare the returns of various capital markets and to show
the value of a hypothetical investment in a capital market. Typically, different
indices are used to calculate the performance of common stocks, corporate and
government bonds and Treasury bills.

A fund may illustrate and compare the historical volatility of
different portfolio compositions where the performance of stocks is represented
by the performance of an appropriate market index, such as the S&P 500 and the
performance of bonds is represented by a nationally recognized bond index, such
as the Lehman Brothers Long-Term Government Bond Index.

A fund may also include in advertising biographical information on key
investment and managerial personnel.

A fund may advertise examples of the potential benefits of periodic
investment plans, such as dollar cost averaging, a long-term investment
technique designed to lower average cost per share. Under such a plan, an
investor invests in a mutual fund at regular intervals a fixed dollar amount,
thereby purchasing more shares when prices are low and fewer shares when prices
are high. Although such a plan does not guarantee profit or guard against loss
in declining markets, the average cost per share could be lower than if a fixed

<PAGE>

number of shares were purchased at the same intervals. Investors should consider
their ability to purchase shares through low price levels.

A fund may discuss Legg Mason's tradition of service. Since 1899, Legg
Mason and its affiliated companies have helped investors meet their specific
investment goals and have provided a full spectrum of financial services. Legg
Mason affiliates serve as investment advisers for private accounts and mutual
funds with assets of approximately $112 billion as of March 31, 2000.

MANAGEMENT OF THE TRUST

The Trust's officers are responsible for the operation of the Trust
under the direction of the Board of Trustees. The officers and trustees and
their principal occupations during the past five years are set forth below. An
asterisk (*) indicates those officers and/or trustees who are "interested
persons" of the Trust as defined by the Investment Company Act of 1940 ("1940
Act"). The business address of each officer and trustee is 100 Light Street,
Baltimore, Maryland, unless otherwise indicated.

JOHN F. CURLEY, JR.* [7/24/39], Chairman of the Board and Trustee;
President and/or Chairman of the Board and Director/Trustee of all Legg Mason
retail funds. Retired: Vice Chairman and Director of Legg Mason, Inc. and Legg
Mason Wood Walker, Inc. Formerly: Director of LMFA and Western Asset Management
Company (each a registered investment adviser); Officer and/or Director of
various other affiliates of Legg Mason, Inc.

EDMUND J. CASHMAN, Jr. * [8/31/36], President and Trustee; Senior
Executive Vice President and Director of Legg Mason Wood Walker, Inc.;
President/Vice-Chairman and/or Director/Trustee of Legg Mason Cash Reserve
Trust, Legg Mason Income Trust, Inc., and Legg Mason Tax Exempt Trust, Inc.;
Officer and/or Director of various other affiliates of Legg Mason, Inc.; Vice
Chairman of the Board and Director of Legg Mason Income Trust, Inc.

EDWARD A. TABER, III* [8/25/43], Trustee; Senior Executive Vice
President of Legg Mason, Inc. and Legg Mason Wood Walker, Inc.; Vice Chairman
and Director of LMFA; Director of Legg Mason Fund Adviser and Western Asset
Management Company (each a registered investment adviser); President and/or
Director/Trustee of all Legg Mason retail funds except Legg Mason Tax Exempt
Trust. Formerly: Executive Vice President of T. Rowe Price-Fleming
International, Inc. (1986-1992) and Director of the Taxable Fixed Income
Division at T. Rowe Price Associates, Inc. (1973-1992).

NELSON A. DIAZ [5/23/47], Trustee; One Logan Square, Philadelphia, PA.
Partner, Blank Rome Comisky, & McCauley LLP since 1997; Trustee of Temple
University and of Philadelphia Museum of Art; Board member of U.S. Hispanic
Leadership Institute, Democratic National Committee, and National Association
for Hispanic Elderly; Director/Trustee of all Legg Mason retail funds except
Legg Mason Income Trust, Inc. and Legg Mason Tax Exempt Trust, Inc. Formerly:
General Counsel, United States Department of Housing and Urban Development
(1993-1997).

RICHARD G. GILMORE [6/9/27], Trustee; 10310 Tamo Shanter Place,
Bradenton, Florida. Independent Consultant. Director of CSS Industries, Inc.
(diversified holding company whose subsidiaries are engaged in the manufacture
and sale of decorative paper products, business forms, and specialty metal
packaging); Director of PECO Energy Company (formerly Philadelphia Electric
Company); Director/Trustee of all Legg Mason retail funds. Formerly: Senior Vice
President and Chief Financial Officer of Philadelphia Electric Company (now PECO
Energy Company); Executive Vice President and Treasurer, Girard Bank, and Vice
President of its parent holding company, the Girard Company; and Director of
Finance, City of Philadelphia.

ARNOLD L. LEHMAN [7/18/44], Trustee; The Brooklyn Museum of Art, 200
Eastern Parkway, Brooklyn, New York. Director of the Brooklyn Museum of Art;
Director/Trustee of all Legg Mason retail funds. Formerly: Director of the
Baltimore Museum of Art.

JILL E. McGOVERN [8/29/44], Trustee; 400 Seventh Street NW, Washington,

<PAGE>

DC. Chief Executive Officer of the Marrow Foundation. Director/Trustee of all
Legg Mason retail funds. Formerly: Executive Director of the Baltimore
International Festival (January 1991 - March 1993); and Senior Assistant to the
President of The Johns Hopkins University (1986-1991).

G. PETER O'BRIEN [10/13/45], Trustee; Trustee of Colgate University;
Director/Trustee of all Legg Mason retail funds except Legg Mason Income Trust,
Inc. and Legg Mason Tax Exempt Trust, Inc. Retired: Managing Director/Equity
Capital Markets Group of Merrill Lynch & Co. (1971-1999).

T.A. RODGERS [10/22/34], Trustee; 2901 Boston Street, Baltimore,
Maryland. Principal, T.A. Rodgers & Associates (management consulting);
Director/Trustee of all Legg Mason retail funds. Formerly: Director and Vice
President of Corporate Development, Polk Audio, Inc. (manufacturer of audio
components).

The executive officers of the Corporation, other than those who also
serve as trustees, are:

MARIE K. KARPINSKI* [1/1/49], Vice President and Treasurer; Treasurer
of LMFA; Vice President and Treasurer of all Legg Mason retail funds.

PATRICIA A. MAXEY* [7/10/67], Secretary; Secretary of all Legg Mason
retail funds; employee of Legg Mason since November 1999. Formerly: Employee of
Select Appointments International, Inc. (1998-1999) and Fidelity Investments
(1995-1997).

WM. SHANE HUGHES* [4/24/68], Assistant Secretary and Assistant
Treasurer; employee of Legg Mason since May 1997. Formerly: Senior Associate of
C.W. Amos and Co. (a regional public accounting firm).

Officers and trustees of the Trust who are "interested persons" thereof
receive no salary or fees from the Trust. Independent Trustees of the Trust
receive an annual retainer and a per meeting fee based on the average net assets
of each fund at December 31 of the previous year.

The Nominating Committee of the Board of Trustees is responsible for
the selection and nomination of disinterested trustees. The Committee is
composed of Messrs. Diaz, Gilmore, Lehman, Rodgers, O'Brien and Dr. McGovern.

On July 3, 2000, the trustees and officers of the Trust, in the
aggregate, owned less than 1% of the outstanding shares of Maryland Tax-Free
Income Trust, Pennsylvania Tax-Free Income Trust and Tax-Free Intermediate-Term
Income Trust.

Set forth below is a table which contains the name, address and
percentage ownership of each person who is known by a fund to own beneficially
and/or of record five percent or more of its outstanding shares as of June 30,
2000:

Name and Address Fund Name % of Navigator Class Held
---------------- --------- -------------------------

Sentrust Pennsylvania Tax-Free 100%
C/o Sentry Trust Co
1930 Scotland Avenue
Chambersburg PA 17201-1450

<PAGE>

The following table provides certain information relating to the compensation of
the Trust's trustees for the fiscal year ended March 31, 2000. None of the Legg
Mason funds has any retirement plan for its trustees.

COMPENSATION TABLE

--------------------------------------------------------------------------------
Name of Aggregate Total Compensation From
Person and Compensation From Trust and Fund Complex
Position the Trust* Paid to Trustees**
--------------------------------------------------------------------------------
John F. Curley, Jr.
Chairman of the Board and Trustee None None
--------------------------------------------------------------------------------
Edward A. Taber, III
Trustee None None
--------------------------------------------------------------------------------
Edmund J. Cashman, Jr.
President and Trustee None None
--------------------------------------------------------------------------------
Richard G. Gilmore
Trustee $ 3,600 $41,100
--------------------------------------------------------------------------------
Arnold L. Lehman
Trustee $ 3,600 $41,100
--------------------------------------------------------------------------------
Jill E. McGovern
Trustee $ 3,600 $41,100
--------------------------------------------------------------------------------
T. A. Rodgers
Trustee $ 3,600 $41,100
--------------------------------------------------------------------------------
G. Peter O'Brien
Trustee*** $ 2,700 $15,000
--------------------------------------------------------------------------------
Nelson A. Diaz
Trustee**** $ None None
--------------------------------------------------------------------------------

* Represents fees paid to each trustee during the fiscal year ended March
31, 2000.
** Represents aggregate compensation paid to each trustee during the calendar
year ended December 31, 1999. There are twelve open-end investment
companies in the Legg Mason Complex (with a total of twenty-four funds).
*** Mr. O'Brien was appointed to the Board on November 11, 1999.
**** Mr. Diaz was appointed to the Board on February 10, 2000.

THE FUNDS' INVESTMENT ADVISER/MANAGER

Legg Mason Fund Adviser, Inc. ("LMFA"), a Maryland corporation, is
located at 100 Light Street, Baltimore, Maryland 21202. The adviser is a wholly
owned subsidiary of Legg Mason, Inc. (a financial services holding company),
which also is the parent of Legg Mason. The adviser serves as each fund's
investment adviser and manager under an Investment Advisory and Management
Agreement ("Advisory Agreement") dated June 1, 2000. Effective June 1, 2000, the
Advisory Agreement was transferred to LMFA; from January 1, 1998 to May 31,
2000, Legg Mason Capital Management, Inc. ("LMCM"), a wholly owned subsidiary of
Legg Mason, Inc., served as each fund's investment adviser and manager under the
Advisory Agreement. LMFA also served as each fund's adviser and manager under
the Advisory Agreement prior to January 1, 1998. The Advisory Agreement provides
that, subject to overall direction by the Board of Trustees, the adviser manages
the investment and other affairs of each fund. The adviser is responsible for
managing each fund consistent with the funds' investment objectives and policies
described in their Prospectuses and this Statement of Additional Information.
The adviser also is obligated to (a) furnish each fund with office space and
executive and other personnel necessary for the operations of the fund; (b)
supervise all aspects of each fund's operations; (c) bear the expense of certain
informational and purchase and redemption services to each fund's shareholders;

<PAGE>

(d) arrange, but not pay for, the periodic updating of prospectuses, proxy
material, tax returns and reports to shareholders and state and federal
regulatory agencies; and (e) report regularly to the Trust's officers and
trustees. The adviser and its affiliates pay all the compensation of trustees
and officers of the Trust who are employees of the adviser. Each fund pays all
its other expenses which are not expressly assumed by the adviser. These
expenses include, among others, interest expense, taxes, auditing and accounting
fees, distribution fees, if any, fees and expenses of the independent trustees
of the Trust, brokerage fees and commissions, expenses of preparing prospectuses
and of printing and distributing prospectuses annually to existing shareholders,
custodian charges, transfer agency fees, legal expenses, insurance expenses,
association membership dues, governmental fees, expenses of registering and
qualifying fund shares for sale under federal and state law, and the expense of
reports to shareholders, shareholders' meetings and proxy solicitations. Each
fund also pays the expenses for maintenance of its financial books and records,
including computation of the fund's daily net asset value per share and
dividends. Each fund is also liable for such nonrecurring expenses as may arise,
including litigation to which the fund may be a party. Each fund also may have
an obligation to indemnify the trustees and officers of the Trust with respect
to litigation.

Under the Advisory Agreement, the adviser will not be liable for any
error of judgment or mistake of law or for any loss suffered by a fund in
connection with the performance of the Advisory Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations or duties thereunder.

With respect to each fund, the Advisory Agreement terminates
automatically upon assignment. It also is terminable at any time without penalty
by vote of the Trust's Board of Trustees, by vote of a majority of each fund's
outstanding voting securities, or by the adviser, on not less than 60 days'
notice to the other party to the Agreement and may be terminated immediately
upon the mutual written consent of both parties to the Agreement.

As explained in the Prospectuses, the adviser receives for its services
a fee, calculated daily and payable monthly, at an annual rate of 0.55% of the
average daily net assets of each fund. The adviser has agreed to waive its fees
to the extent its expenses (exclusive of taxes, interest, brokerage and
extraordinary expenses) exceed during any month annual rates of each fund's
average daily net assets for such month in accordance with the following
schedules. The fee waiver for each fund will expire on the earlier of August 1,
2001, or when the fund's net assets reach the following amount: Maryland
Tax-Free, $200 million; Pennsylvania Tax-Free, $125 million; Tax-Free
Intermediate, $100 million.

Expense Limit
-------------
For Maryland Tax-Free:
Primary Class shares: 0.70%
Navigator Class shares: 0.45%

For Pennsylvania Tax-Free:
Primary Class shares: 0.70%
Navigator Class shares: 0.45%

For Tax-Free Intermediate:
Primary Class shares: 0.70%
Navigator Class shares: 0.45%

<PAGE>

For the fiscal years ended March 31, the funds paid advisory fees of:

2000 1999 1998

Maryland Tax-Free $454,741 $502,640 $490,247
Pennsylvania Tax-Free $138,050 $177,786 $169,409
Tax-Free Intermediate $143,820 $136,658 $111,172

For the fiscal years ended March 31, the following advisory fees were
waived:

2000 1999 1998

Maryland Tax-Free $396,834 $383,889 $336,314
Pennsylvania Tax-Free $264,184 $213,136 $195,443
Tax-Free Intermediate $190,222 $197,395 $209,159

Under the Advisory Agreement, each fund has the non-exclusive right to
use the name "Legg Mason" until that Agreement is terminated or until the right
is withdrawn in writing by the adviser.

Pursuant to a Sub-Advisory Agreement between LMFA and LM Trust dated
June 1, 2000 ("Sub-Advisory Agreement"), LM Trust acts as each fund's
sub-adviser. LM Trust is also a wholly owned subsidiary of Legg Mason, Inc.
Under the Sub-Advisory Agreement, LM Trust is responsible, subject to the
general supervision of LMFA and the Trust's Board of Trustees, for the actual
management of each fund's assets, including responsibility for making decisions
and placing orders to buy, sell or hold a particular security. For LM Trust's
services to the funds, LMFA (not the funds) pays LM Trust a fee, computed daily
and payable monthly, at an annual rate of 0.50% of each fund's average daily net
assets (net of any waivers or reimbursements by LMFA of its fee).

Under the Sub-Advisory Agreement, LM Trust will not be liable for an
error of judgment or mistake of law or for any loss suffered by the adviser or
the funds in connection with the performance of the Sub-Advisory Agreement,
except that LM Trust may be liable for a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligation or duties thereunder.

Prior to June 1, 2000, LMFA served as the funds' administrator pursuant
to an agreement with the adviser dated January 1, 1998 ("Administration
Agreement"). Under the Administration Agreement, the adviser paid LMFA a fee
equal to an annual rate of 0.05% of each fund's average daily net assets. For
the period January 1, 1998 to March 31, 1998, and the fiscal years ended March
31, 1999 and 2000, the adviser paid LMFA $11,295, $45,695, $41,325 for services
provided to Maryland Tax-Free; $4,037, $16,162, $12,555 for services provided to
Pennsylvania Tax-Free; and $3,080, $12,423, $13,075 for services provided to
Tax-Free Intermediate.

The funds, LM Trust, LMFA and Legg Mason each has adopted a code of
ethics under Rule 17j-1 of the 1940 Act, which permits personnel covered by the
code to invest in securities that may be purchased or held by a fund, but
prohibits fraudulent, deceptive or manipulative conduct in connection with that
personal investing.

THE FUNDS' DISTRIBUTOR

Legg Mason, 100 Light Street, Baltimore, Maryland 21202, acts as
distributor of each fund's shares pursuant to an Underwriting Agreement with the
Trust. The Underwriting Agreement obligates Legg Mason to promote the sale of
fund shares and to pay certain expenses in connection with its distribution
efforts, including expenses for the printing and distribution of prospectuses
and periodic reports used in connection with the offering to prospective

<PAGE>

investors (after the prospectuses and reports have been prepared, set in type
and mailed to existing shareholders at the fund's expense) and for supplementary
sales literature and advertising costs.

Under the Underwriting Agreement, each fund has the non-exclusive right
to use the name "Legg Mason" until that agreement is terminated, or until the
right is withdrawn in writing by Legg Mason.

Legg Mason and LMFA may pay non-affiliated entities out of their own
assets to support the distribution of Navigator Shares and shareholder
servicing. Each fund has adopted a Distribution and Shareholder Services Plan
("Plan") which, among other things, permits each fund to pay Legg Mason fees for
its services related to sales and distribution of Primary Class shares and the
provision of ongoing services to Primary Class shareholders. Payments are made
only from assets attributable to Primary Class shares. Under the Plan, the
aggregate fees may not exceed an annual rate of 0.25% of the fund's average
daily net assets attributable to Primary Class shares. Distribution activities
for which such payments may be made include, but are not limited to,
compensation to persons who engage in or support distribution and redemption of
shares, printing of prospectuses and reports for persons other than existing
shareholders, advertising, preparation and distribution of sales literature,
overhead, travel and telephone expenses, all with respect to Primary Class
shares only. Legg Mason may pay all or a portion of the fees to its financial
advisors. The Plan has been amended to make clear that, of the aggregate 0.25%
fees, 0.125% is paid for distribution services and 0.125% is paid for ongoing
services to shareholders. The amendments also specify that the fund may not pay
more in distribution fees than 6.25% of total new gross assets, plus interest,
as specified in the rules of the National Association of Securities Dealers,
Inc. ("NASD").

The Plan was adopted, as required by Rule 12b-1 under the 1940 Act, by
a vote of the Board of Trustees, including a majority of the trustees who are
not "interested persons" of the Trust as that term is defined in the 1940 Act,
and who have no direct or indirect financial interest in the operation of the
Plan or the Underwriting Agreement ("12b-1 Trustees"). In approving the
establishment or continuation of the Plan, in accordance with the requirements
of Rule 12b-1, the Trustees determined that there was a reasonable likelihood
that the Plan would benefit each fund and its Primary Class shareholders. The
trustees considered, among other things, the extent to which the potential
benefits of the Plan to each fund's Primary Class shareholders could offset the
costs of the Plan; the likelihood that the Plan would succeed in producing such
potential benefits; the merits of certain possible alternatives to the Plan; and
the extent to which the retention of assets and additional sales of each fund's
Primary Class shares would be likely to maintain or increase the amount of
compensation paid by a fund to its adviser.

In considering the costs of the Plan, the trustees gave particular
attention to the fact that any payments made by a fund to Legg Mason under the
Plan would increase the fund's level of expenses in the amount of such payments.
Further, the trustees recognized that the adviser would earn greater management
fees if a fund's assets were increased, because such fees are calculated as a
percentage of the fund's assets and thus would increase if net assets increase.
The trustees further recognized that there can be no assurance that any of the
potential benefits described below would be achieved if the Plan were
implemented.

Among the potential benefits of the Plan, the trustees noted that the
payment of commissions and service fees to Legg Mason and its investment
executives could motivate them to improve their sales efforts with respect to
each fund's Primary Class shares and to maintain and enhance the level of
services they provide to the funds' Primary Class shareholders. These efforts,
in turn, could lead to increased sales and reduced redemptions, eventually
enabling a fund to achieve economies of scale and lower per share operating
expenses. Any reduction in such expenses would serve to offset, in whole or in
part, the additional expenses incurred by a fund in connection with the Plan.
Furthermore, the investment management of a fund could be enhanced, as net
inflows of cash from new sales might enable its portfolio manager to take
advantage of attractive investment opportunities, and reduced redemptions could
eliminate the potential need to liquidate attractive securities positions in
order to raise the funds necessary to meet the redemption requests.

The Plan will continue in effect only so long as it is approved at
least annually by the vote of a majority of the Board of Trustees, including a

<PAGE>

majority of the 12b-1 Trustees, cast in person at a meeting called for the
purpose of voting on the Plan. The Plan may be terminated with respect to a fund
by a vote of a majority of 12b-1 Trustees or by vote of a majority of the
outstanding Primary Class shares of that fund. Any change in the Plan that would
materially increase the distribution costs to a fund requires shareholder
approval; otherwise, the Plan may be amended by the trustees, including a
majority of the 12b-1 Trustees.

Rule 12b-1 requires that any person authorized to direct the
disposition of monies paid or payable by a fund, pursuant to a Plan or any
related agreement shall provide to that fund's Board, and the Trustees shall
review, at least quarterly, a written report of the amounts so expended and the
purposes for which the expenditures were made. Rule 12b-1 also provides that a
fund may rely on that Rule only if, while a Plan is in effect, the nomination
and selection of that fund's Independent Trustees is committed to the discretion
of such Independent Trustees.

As compensation for its services and expenses, Legg Mason receives from
each fund an annual distribution fee equivalent to 0.125% of its average daily
net assets attributable to Primary Class shares and a service fee equivalent to
0.125% of its average daily net assets attributable to Primary Class shares in
accordance with the Plan. The distribution and service fees are calculated daily
and payable monthly. Legg Mason has voluntarily agreed to waive its fees and
reimburse each fund if and to the extent its expenses (exclusive of taxes,
interest, brokerage and extraordinary expenses) exceed during any month annual
rates of each fund's average daily net assets attributable to Primary Class
shares for such month, or certain asset levels, whichever occurs first, in
accordance with the schedules described previously.

For the years ended March 31, the funds paid Legg Mason distribution and service
fees of:

2000 1999 1998

Maryland Tax-Free $387,080 $402,968 $375,710
Pennsylvania Tax-Free $182,589 $177,046 $165,830
Tax-Free Intermediate $151,837 $151,842 $145,605

For the fiscal year ended March 31, 2000, Legg Mason incurred the following
expenses:

--------------------------------------------------------------------------------
Maryland Pennsylvania Tax-Free
Tax-Free Tax-Free Intermediate
--------------------------------------------------------------------------------
Compensation to sales personnel $728,235 $454,627 $304,739
--------------------------------------------------------------------------------
Advertising $97,967 $97,967 $97,967
--------------------------------------------------------------------------------
Printing and mailing of prospectuses
to prospective shareholders $32,969 $32,969 $32,969
--------------------------------------------------------------------------------
Other $76,000 $73,000 $54,000
--------------------------------------------------------------------------------
Total expenses $935,171 $658,563 $489,675
--------------------------------------------------------------------------------

The foregoing are estimated and do not include all expenses fairly
allocable to Legg Mason's or its affiliates' efforts to distribute each fund's
Primary Class shares.

Any initial sales charges on purchases of shares of the funds are paid
to Legg Mason. A sales charge was imposed on the sale of Primary Class shares of
Maryland Tax-Free and Pennsylvania Tax-Free until November 3, 1997 and Primary
Class shares of Tax-Free Intermediate until August 1, 1995. The Board of

<PAGE>

Trustees may consider from time to time reinstituting the sales charge on sales
of a fund's shares.

Sales charges received by Legg Mason from sales of each fund were as
follows:

Year Ended Year Ended Year Ended
March 31, 2000 March 31, 1999 March 31, 1998

Maryland Tax-Free $0 $0 $191,000

Pennsylvania Tax-Free $0 $0 $84,000

Tax-Free Intermediate $0 $0 $0

PORTFOLIO TRANSACTIONS AND BROKERAGE

Under each Advisory Agreement, LMFA is responsible for the execution of
portfolio transactions. Corporate, municipal and government debt securities are
generally traded on the over-the-counter ("OTC") market on a "net" basis without
a stated commission, through dealers acting for their own account and not as
brokers. Prices paid to a dealer in debt securities will generally include a
"spread," which is the difference between the price at which the dealer is
willing to purchase and sell the specific security at the time, and includes the
dealer's normal profit. Some portfolio transactions may be executed through
brokers acting as agent. In selecting brokers or dealers, the adviser must seek
the most favorable price (including the applicable dealer spread) and execution
for such transactions, subject to the possible payment as described below of
higher brokerage commissions to brokers who provide research and analysis. The
funds may not always pay the lowest commission or spread available. Rather, in
placing orders on behalf of a fund, the adviser also takes into account such
factors as size of the order, difficulty of execution, efficiency of the
executing broker's facilities (including the services described below) and any
risk assumed by the executing broker.

Consistent with the policy of most favorable price and execution, the
adviser may give consideration to research, statistical and other services
furnished by brokers or dealers to the adviser for its use, may place orders
with brokers who provide supplemental investment and market research and
securities and economic analysis, and may pay to these brokers a higher
brokerage commission than may be charged by other brokers. Such research and
analysis may be useful to the adviser in connection with services to clients
other than the funds. The adviser's fee is not reduced by reason of its
receiving such brokerage and research services.

Although the funds do not expect to purchase securities on a commission
basis, the funds may use Legg Mason to effect agency transactions in listed
securities at commission rates and under circumstances consistent with the
policy of best execution. Commissions paid to Legg Mason will not exceed "usual
and customary brokerage commissions." Rule 17e-1 under the 1940 Act defines
"usual and customary" commissions to include amounts which are "reasonable and
fair compared to the commission, fee or other remuneration received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." In the OTC market, the funds generally will deal with responsible primary
market makers unless a more favorable execution can otherwise be obtained.

Except as permitted by SEC rules or orders, the funds may not buy
securities from, or sell securities to, Legg Mason or its affiliated persons as
principal. The Board of Trustees has adopted procedures in conformity with Rule
10f-3 under the 1940 Act whereby each fund may purchase securities that are
offered in certain underwritings in which Legg Mason or any of its affiliated
persons is a participant. These procedures, among other things, limit a fund's
investment in the amount of securities of any class of securities offered in an
underwriting in which Legg Mason or any of its affiliated persons is a
participant so that the fund together with all other registered investment
companies having the same adviser, may not purchase more than 25% of the
principal amount of the offering of such class. In addition, a fund may not
purchase securities during the existence of an underwriting if Legg Mason is the

<PAGE>

sole underwriter of those securities or if such purchase is designated as a
"group sale" in an underwriting in which Legg Mason participates. Because Legg
Mason is a principal underwriter of municipal obligations and because new issues
of municipal securities often are sold pursuant to group sales, the funds may be
precluded from purchasing certain new issues of municipal securities or may be
permitted to make only limited investments therein.

Section 11(a) of the Securities Exchange Act of 1934 prohibits Legg
Mason from receiving compensation for executing transactions on an exchange for
its affiliates, such as the funds, unless the affiliate expressly consents by
written contract. The Advisory Agreements expressly provide such consent.

Investment decisions for each fund are made independently from those of
other funds and accounts advised by the adviser. However, the same security may
be held in the portfolios of more than one fund or account. When two or more
accounts simultaneously engage in the purchase or sale of the same security, the
prices and amounts will be equitably allocated to each account. In some cases,
this procedure may adversely affect the price or quantity of the security
available to a particular fund. In other cases, however, a fund's ability to
participate in large-volume transactions may produce better executions and
prices.

Portfolio Turnover

The portfolio turnover rate is computed by dividing the lesser of
purchases or sales of securities for the period by the average value of
portfolio securities for that period. Short-term securities are excluded from
the calculation. Each fund's portfolio turnover rate may vary from year to year,
depending on market conditions. A high turnover rate (100% or more) will involve
correspondingly greater transaction costs, which will be borne directly by a
fund. It may also change the character of capital gains, if any, realized by a
fund and would affect dividends paid to shareholders because short-term capital
gains are taxable as ordinary income. For the years ended March 31, 2000, and
March 31, 1999, Maryland Tax-Free's portfolio turnover rates were 23% and 12.9%;
Pennsylvania Tax-Free's portfolio turnover rates were 28.6% and 10.6%; and
Tax-Free Intermediate's portfolio turnover rates were 35.6% and 17.9%.

DESCRIPTION OF THE TRUST

The Declaration of Trust authorizes the Trust to issue an unlimited
number of shares and to create additional series, each of which may issue
separate classes of shares. Each fund currently offers two classes of shares,
Primary Class shares and Navigator Class shares. The two classes represent
interests in the same pool of assets. A separate vote is taken by a class of
shares of a fund if a matter affects just that class of shares. Each class of
shares may bear certain differing class-specific expenses and sales charges.
Salespersons and others entitled to receive compensation for selling or
servicing fund shares may receive more with respect to one class than another.

The Board of Trustees does not anticipate that there will be any
conflicts among the interests of the holders of the different classes of fund
shares. The Board will consider whether any such conflict exists and, if so,
take appropriate action. Shareholders of the funds are entitled to one vote per
share and fractional votes for fractional shares held. Voting rights are not
cumulative. All shares of the funds are fully paid and nonassessable and have no
preemptive or conversion rights.

Shareholders' meetings will not be held except where the 1940 Act
requires a shareholder vote on certain matters (including the election of
trustees, approval of an advisory contract, and approval of a plan of
distribution pursuant to Rule 12b-1). The Trust will call a special meeting of
the shareholders at the request of 10% or more of the shares entitled to votes;
shareholders wishing to call such a meeting should submit a written request to
their respective fund at 100 Light Street, Baltimore, Maryland 21202, stating
the purpose of the proposed meeting and the matters to be acted upon.

Each fund acknowledges that it is solely responsible for the
information or any lack of information about it in the joint Prospectuses and in
this joint Statement of Additional Information, and no other fund is responsible

<PAGE>

therefor. There is a possibility that one fund might be deemed liable for
misstatements or omissions regarding another fund in the Prospectuses or in the
joint Statement of Additional Information; however, the funds deem this
possibility slight.

OTHER INFORMATION

The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of each fund could, under
certain circumstances, be held personally liable for the obligations of that
fund and of the Trust. However, the Trust's Declaration of Trust disclaims
shareholder liability for acts or obligations of the Trust or the funds and
requires that notice of such disclaimer be given in each note, bond, contract,
instrument, certificate or undertaking made or issued by the trustees or by any
officers or officer by or on behalf of the Trust, a fund, the trustees or any of
them in connection with the Trust. The Declaration of Trust provides for
indemnification from each fund's property for all losses and expenses of any
fund shareholder held personally liable for the obligations of that fund. Thus,
the risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which a fund itself would be unable to
meet its obligations, a possibility which the adviser believes is remote. Upon
payment of any liability incurred by a fund shareholder solely by reason of
being or having been a shareholder, the shareholder paying such liability will
be entitled to reimbursement from the general assets of that fund. The trustees
intend to conduct the operations of each fund in such a way as to avoid, as far
as reasonably possible, ultimate liability of the shareholders for liabilities
of each fund.

THE TRUST'S CUSTODIAN AND
TRANSFER AND DIVIDEND-DISBURSING AGENT

State Street Bank and Trust Company ("State Street"), P.O. Box 1713,
Boston Massachusetts, serves as custodian of each fund's assets. BFDS, P.O. Box
953, Boston, Massachusetts 02103, as agent for State Street, serves as transfer
and dividend-disbursing agent and administrator of various shareholder services.
Legg Mason also assists BFDS with certain of its duties as transfer agent, for
which BFDS pays Legg Mason a fee. Each fund reserves the right, upon 60 days'
written notice, to make other charges to investors to cover administrative
costs.

THE TRUST'S LEGAL COUNSEL

Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W.,
Washington, D.C. 20036, serves as counsel to the Trust.

THE TRUST'S INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 250 W. Pratt Street, Baltimore, Maryland
21201, serves as the Trust's independent accountants.

FINANCIAL STATEMENTS

The Statements of Net Assets as of March 31, 2000; the Statements of
Operations for the year ended March 31, 2000; the Statements of Changes in Net
Assets for the years ended March 31, 2000 and 1999; the Financial Highlights for
the periods presented, the Notes to Financial Statements and the Reports of the
Independent Accountants, for each fund, all of which are included in the
combined annual report of the Legg Mason Tax-Free Income Fund for the year ended
March 31, 2000, are hereby incorporated by reference in this Statement of
Additional Information.

<PAGE>

APPENDIX A

RATINGS OF SECURITIES

1. Description of Moody's Investors Service, Inc. ("Moody's") Ratings
------------------------------------------------------------------

Municipal Bonds

Aaa--Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make long-term risks appear somewhat larger than in Aaa securities.

A--Bonds which are rated A possess many favorable investment attributes
and are to be considered upper medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa--Bonds which are rated Baa are considered medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Municipal Notes

Moody's ratings for state and municipal notes and other short-term
obligations are designated Moody's Investment Grade ("MIG") and for variable
rated demand obligations are designated Variable Moody's Investment Grade
("VMIG"). This distinction is in recognition of the differences between
short-term credit risk and long-term credit risk. Notes bearing the designation
MIG-1 or VMIG-1 are of the best quality, enjoying strong protection by
established cash flows, superior liquidity support or demonstrated broad-based
access to the market for refinancing.

Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating, the modifier 2 indicates a
mid-range rating; the modifier 3 indicates that the issue ranks in the lower end
of its generic rating.

Commercial Paper

The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers with a Prime-1 ("P-1") rating will normally have the following
characteristics: (1) leading market positions in well-established industries;
(2) high rates of return on funds employed; (3) conservative capitalization
structures with moderate reliance on debt and ample asset protection; (4) broad
margins in earning coverage of fixed financial charges and high internal cash
generation; and (5) well-established access to a range of financial markets and
assured sources of alternate liquidity.

A-1

<PAGE>

2. Description of Standard & Poor's ("S&P")
-----------------------------------------

Municipal Bonds

`AAA--This is the highest rating assigned by S&P to an obligation and
indicates an extremely strong capacity to pay principal and interest.

AA--Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.

A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB--Bonds which are rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the A category.

S & P may assign (+) or (-) modifiers to indicate relative strength or
weakness within a particular rating category.

Municipal Notes

Municipal notes with maturities of three years or less are usually given
note ratings by S&P to distinguish more clearly the credit quality of notes as
compared to bonds. Notes rated SP-1 have a very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics are given the designation SP-1+.

Commercial Paper

A-1. This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess extremely strong safety characteristics are denoted with a plus (+) sign
designation.

A-2. Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".

3. Description of Fitch Investors Service, Inc. ("Fitch") Ratings
--------------------------------------------------------------

Investment Grade Bonds

AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonable foreseeable
events.

AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1+".

A--Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse change in economic conditions and
circumstances than bonds with higher ratings.

BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore

A-2

<PAGE>

impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.

Plus (+) Minus (-)--Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.

Short-term Ratings

F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely payment.

F-1--Very Strong Credit Quality. Issues assigned this rating reflect
assurance of timely payment only slightly less in degree than issues rated
"F-1+".

A-3
<PAGE>

Legg Mason Tax-Free Income Fund

Part C. Other Information

Item 23. Exhibits

(a) (i) Declaration of Trust (1)
(ii) Amendment to Declaration of Trust dated January 31, 1991 (1)
(iii) Amendment to Declaration of Trust dated March 11, 1991 (1)
(iv) Amendment to Declaration of Trust dated July 30, 1992 (1)
(v) Amendment to Declaration of Trust dated September 14, 1999 -
filed herewith
(b) By-Laws (1)
(c) Instruments defining the rights of security holders with respect to
Maryland Tax-Free Income Trust, Pennsylvania Tax-Free Income Trust
and Tax-Free Intermediate Term Income Trust are contained in the
Declaration of Trust and By-Laws which are incorporated by reference
to Exhibit (b) to Post-Effective Amendment No. 10 to Registrant's
Registration Statement (SEC File No. 33-37971), filed July 31, 1997.
(d) (i) Investment Advisory and Management Agreement - filed herewith
(ii) Sub-Advisory Agreement - filed herewith
(e) Amended Underwriting Agreement with respect to the Maryland,
Pennsylvania and Tax-Free Intermediate-Term Income Portfolios (1)
(f) Bonus, profit sharing or pension plans - none
(g) Custodian Agreement (1)
(h) (i) Transfer Agency and Service Agreement (1)
(ii) Credit Agreement (3)
(iii) Amendment to Credit Agreement (5)
(i) Opinion and Consent of counsel - filed herewith
(j) Accountant's consent - filed herewith
(k) Financial statements omitted from Item 22 - none
(l) (i) Agreement for providing initial capital with respect to the
Registrant and the Maryland, Pennsylvania and High Quality
Portfolios (1)
(ii) Agreement for providing initial capital with respect to the
Tax-Free Intermediate-Term Income Portfolio (1)
(m) Amended Plan pursuant to Rule 12b-1 with respect to the Maryland,
Pennsylvania and Tax-Free Intermediate-Term Income Portfolios (1)
(n) Financial Data Schedules - not applicable
(o) Form of Plan Pursuant to Rule 18f-3 (4)
(p) Code of Ethics for the funds, their investment advisers, and their
principal underwriter (5)

(1) Incorporated herein by reference to corresponding Exhibit of Post-Effective
Amendment No. 10 to the Registration Statement, SEC File No. 33-37971, filed
July 31, 1997.

(2) Incorporated herein by reference to corresponding Exhibit of Post-Effective
Amendment No. 11 to the Registration Statement, SEC File No. 33-37971, filed
July 31, 1998.

(3) Incorporated herein by reference to corresponding Exhibit of Post-Effective
Amendment No.26 to Legg Mason Value Trust, Inc.'s Registration Statement, SEC
File No. 2-75766, filed May 28, 1999.

(4) Incorporated herein by reference to corresponding Exhibit of Post-Effective
Amendment No. 13 to the Registration Statement, SEC File No. 33-37971, filed
July 30, 1999.

(5) Incorporated herein by reference to corresponding Exhibit of Post-Effective
Amendment No. 2 to the Registration Statement of Legg Mason Investment Trust,
Inc., SEC File No. 333-88715 filed March 28, 2000.

<PAGE>

Item 24. Persons Controlled By or Under Common Control with Registrant

None

Item 25. Indemnification

This item is incorporated by reference to Item 27 of Part C of
Post-Effective Amendment No. 11, SEC File No. 33-37971, filed July
31, 1998.

Item 26. Business and Other Connections of Manager and Investment Adviser

I. Legg Mason Fund Adviser, Inc. ("LMFA") is an investment adviser registered
with the Securities and Exchange Commission under the Investment Advisers Act of
1940. The following is a list of other substantial business activities in which
directors, officers or partners of LMFA have been engaged as director, officer,
employee, partner, or trustee.

Nancy T. Denin Senior Vice President, LMFA
Senior Vice President, LMFM

Robert G. Hagstrom, Jr. Senior Vice President, LMFA
Senior Vice President, LMFM

Raymond A. Mason Chairman and Director, LMFA
Chairman and Director, LMFM
Chairman, President, and CEO, Legg Mason, Inc.
Chairman and CEO, LMWW
Director, Batterymarch
Director, Howard Weil
Director, Gray, Seifert
Director, Brandywine
Director, Berkshire
Director, Bartlett
Director, LMRE
Director, LMCM
Director, WAMCL
Director, WAM

William H. Miller III President, CEO and Director, LMFA
President, CEO and Director, LMFM
Director, LMIA
Director, LMCM Managing Member, LMM

Jennifer W. Murphy Senior Vice President, COO, CFO and Director, LMFA
Senior Vice President, COO, CFO and Director, LMFM
COO, LMM

David E. Nelson Senior Vice President, LMFA
Senior Vice President, LMFM

Lisa O'Dell Rapuano Senior Vice President, LMFA
Vice President, LMFM

<PAGE>

Timothy C. Scheve Director, LMFA
Director, LMFM
Executive Vice President, Legg Mason, Inc.
Director, Executive Vice President and Treasurer, LMWW
Director, LMCM
Director, LMT
Director, WAMCL
Director, WAM

Edward A. Taber III Director, LMFA
Director, LMFM
Senior Executive Vice President/Head of Investment
Management, Legg Mason, Inc.
Director and Senior Executive Vice President, LMWW
Director and Chairman, LMIA
Director, Batterymarch
Director, Bartlett
Director, Brandywine
Director, Gray, Seifert
Director, Howard Weil
Director, LMCM
Director, LMT
Director, WAMCL
Director, WAM

II. Legg Mason Trust, fsb ("LMT") is an investment adviser registered with the
Securities and Exchange Commission under the Investment Advisers Act of 1940.
The following is a list of other substantial business activities in which
directors, officers or partners of LMT have been engaged as director, officer,
employee, partner, or trustee.

James W. Brinkley Director, LMT
President, COO and Director, LMWW
Director, Howard Weil
Director, LMFP

Charles W. Cole, Jr. Chairman, CEO and Director, LMT
Director, Berkshire
Director, Bingham Legg

Timothy C. Scheve Director, LMT
Executive Vice President, Legg Mason, Inc.
Director, Executive Vice President and Treasurer, LMWW
Director, LMFA
Director, LMCM
Director, LMFM
Director, WAMCL
Director, WAM

Edward A. Taber III Director, LMT
Senior Executive Vice President/Head of Investment
Management, Legg Mason, Inc.
Director and Senior Executive Vice President, LMWW
Director and Chairman, LMIA
Director, LMFA

<PAGE>

Director, LMCM
Director, LMFM
Director, Batterymarch
Director, Howard Weil
Director, Gray, Seifert
Director, Brandywine
Director, Bartlett
Director, WAMCL
Director, WAM

Bartlett & Co. ("Bartlett")
36 East Fourth Street
Cincinnati, OH 45202

Batterymarch Financial Management, Inc. ("Batterymarch")
200 Clarendon Street
Boston, MA 02116

Berkshire Asset Management, Inc. ("Berkshire")
46 Public Square, Suite 700
Wilkes-Barre, PA 18701

Bingham Legg Advisers LLC ("Bingham Legg")
150 Federal Street
Boston, MA 02110

Brandywine Asset Management, Inc. ("Brandywine")
Three Christina Centre, Suite 1200
201 North Walnut Street
Wilmington, DE 19801

Gray, Seifert & Co., Inc. ("Gray, Seifert")
380 Madison Avenue
New York, NY 10017

Howard, Weil, Labouisse, Friedrichs, Inc. ("Howard Weil")
1100 Poydras Street
New Orleans, LA 70163

Legg Mason Capital Management, Inc. ("LMCM")
100 Light Street
Baltimore, MD 21202

LM Financial Partners ("LMFP")
100 Light Street
Baltimore, MD 21202

Legg Mason Fund Adviser, Inc. ("LMFA")
100 Light Street
Baltimore, MD 21202

Legg Mason Funds Management, Inc. ("LMFM")
100 Light Street
Baltimore, MD 21202

<PAGE>

Legg Mason, Inc.
100 Light Street
Baltimore, MD 21202

Legg Mason Wood Walker, Incorporated ("LMWW")
100 Light Street
Baltimore, MD 21202

LM Institutional Advisors, Inc. ("LMIA")
100 Light Street
Baltimore, MD 21202

Western Asset Management Company ("WAM")
117 East Colorado Boulevard
Pasadena, CA 91105

Western Asset Management Company Limited ("WAMCL")
155 Bishopsgate
London EC2M 3XG
England

Item 27. Principal Underwriters

(a) Legg Mason Cash Reserve Trust
Legg Mason Income Trust, Inc.
Legg Mason Tax-Exempt Trust, Inc.
Legg Mason Value Trust, Inc.
Legg Mason Total Return Trust, Inc.
Legg Mason Special Investment Trust, Inc.
Legg Mason Focus Trust, Inc.
Legg Mason Global Trust, Inc.
Legg Mason Investors Trust, Inc.
Legg Mason Light Street Trust, Inc.
Legg Mason Investment Trust, Inc.
LM Institutional Fund Advisors I, Inc.
LM Institutional Fund Advisors II, Inc.

(b) The following table sets forth information concerning each
director and officer of the Registrant's principal underwriter,
Legg Mason Wood Walker, Incorporated ("LMWW").

Raymond A. Mason Chairman of the None
Board and Director

<PAGE>

Name and Principal Position and Offices Positions and Offices
Business Address* with Underwriter - with Registrant
LMWW
--------------------------------------------------------------------------------
James W. Brinkley President, Chief None
Operating Officer
and Director

Edmund J. Cashman, Jr. Senior Executive Trustee and
Vice President and President
Director

Richard J. Himelfarb Senior Executive None
Vice President and
Director

Edward A. Taber III Senior Executive Trustee
Vice President

Robert G. Donovan Executive Vice None
President

Robert A. Frank Executive Vice None
President

Robert G. Sabelhaus Executive Vice None
President

Timothy C. Scheve Executive Vice None
President and
Treasurer and
Director

Manoochehr Abbaei Senior Vice President None

Charles A. Bacigalupo Senior Vice None
President and
Secretary

F. Barry Bilson Senior Vice President None

D. Stuart Bowers Senior Vice President None

W. William Brab Senior Vice President None

<PAGE>

Thomas M. Daly, Jr. Senior Vice President None

Jeffrey W. Durkee Senior Vice President None

Harry M. Ford, Jr. Senior Vice President None

Dennis A. Green Senior Vice President None

Thomas E. Hill Senior Vice President None
218 N. Washington Street
Suite 31
Easton, MD 21601

Arnold S. Hoffman Senior Vice President None
1735 Market Street
Philadelphia, PA 19103

Carl Hohnbaum Senior Vice President None
2500 CNG Tower
625 Liberty Avenue
Pittsburgh, PA 15222

William B. Jones, Jr. Senior Vice President None
1747 Pennsylvania Avenue, N.W.
Washington, D.C. 20006

Laura L. Lange Senior Vice President None

Horace M. Lowman, Jr. Senior Vice None
President and Asst.
Secretary

Marvin H. McIntyre Senior Vice President None
1747 Pennsylvania Avenue, N.W.
Washington, D.C. 20006

Thomas P. Mulroy Senior Vice President None

<PAGE>

Mark I. Preston Senior Vice President None

Robert F. Price Senior Vice None
President and
General Counsel

Thomas L. Souders Senior Vice None
President and Chief
Financial Officer

Elisabeth N. Spector Senior Vice President None

Joseph A. Sullivan Senior Vice President None

Richard L. Baker Vice President None

William H. Bass, Jr. Vice President None

Nathan S. Betnun Vice President None

John C. Boblitz Vice President None

Andrew J. Bowden Vice President and None
Deputy General
Counsel

Edwin J. Bradley, Jr. Vice President None

Carol A. Brown Vice President None

Scott R. Cousino Vice President None

Thomas W. Cullen Vice President None

Charles J. Daley, Jr. Vice President and None
Controller

Norman C. Frost, Jr. Vice President None

<PAGE>

Name and Principal Position and Offices Positions and Offices
Business Address* with Underwriter - with Registrant
LMWW
--------------------------------------------------------------------------------
James E. Furletti Vice President None
Legg Mason Center, Suite 200
600 Washington Avenue
Towson, MD 21204-3712

John R. Gilner Vice President None

Daniel R. Greller Vice President None

Richard A. Jacobs Vice President None

C. Gregory Kallmyer Vice President None
56 West Main Street
Newark, DE 19702

Kurt A. Lalomia Vice President None

Edward W. Lister, Jr. Vice President None

Theresa McGuire Vice President None

Julia A. McNeal Vice President None

Gregory B. McShea Vice President None

Edward P. Meehan Vice President None
12021 Sunset Hills Road
Suite 100
Reston, VA 20190

Thomas C. Merchant Vice President and None
Assistant General
Counsel

Paul Metzger Vice President None

Mark C. Micklem Vice President None
1747 Pennsylvania Ave., N.W.
Washington, DC 20006

John A. Moag, Jr. Vice President None

Hance V. Myers, III Vice President None
1100 Poydras St.
New Orleans, LA 70163

Ann O'Shea Vice President None

<PAGE>

Name and Principal Position and Offices Positions and Offices
Business Address* with Underwriter - with Registrant
LMWW
--------------------------------------------------------------------------------
Robert E. Patterson Vice President and None
Deputy General
Counsel

Gerard F. Petrik, Jr. Vice President None

Douglas F. Pollard Vice President None

Judith L. Ritchie Vice President None

Thomas E. Robinson Vice President None

Theresa M. Romano Vice President None

James A. Rowan Vice President None
1747 Pennsylvania Avenue, N.W.
Washington, D.C. 20006

Douglas M. Schmidt Vice President None

B. Andrew Schmucker Vice President None
1735 Market Street
Philadelphia, PA 19103

Robert W. Schnakenberg Vice President None

Henry V. Sciortino Vice President None
1735 Market St.
Philadelphia, PA 19103

Chris A. Scitti Vice President None

Eugene B. Shephard Vice President None
1111 Bagby St.
Houston, TX 77002-2510

Lawrence D. Shubnell Vice President None

Jane Soybelman Vice President None

Alexsander M. Stewart Vice President None

L. Kay Strohecker Vice President None

Joseph E. Timmins III Vice President None

Joyce Ulrich Vice President None

<PAGE>

Sheila M. Vidmar Vice President and None
Deputy General
Counsel

Lewis T. Yeager Vice President None

Carol Converso-Burton Assistant Vice None
President

Diana L. Deems Assistant Vice None
President and
Assistant Controller

Ronald N. McKenna Assistant Vice None
President

Suzanne E. Peluso Assistant Vice None
President

Lauri F. Smith Assistant Vice None
President

Janet B. Straver Assistant Vice None
President

Leslee Stahl Assistant Secretary None

* All addresses are 100 Light Street, Baltimore, Maryland 21202, unless
otherwise indicated.

(c) The Registrant has no principal underwriter who is not an
affiliated person of the Registrant or an affiliated person of
such an affiliated person.

Item 28. Location of Accounts and Records

State Street Bank and Trust Company Legg Mason Fund Adviser, Inc.
P. O. Box 1713 and 100 Light Street
Boston, Massachusetts 02105 Baltimore, Maryland 21202

Item 29. Management Services

None

Item 30. Undertakings

None

<PAGE>

SIGNATURE PAGE

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Legg Mason Tax-Free Income Fund, certifies
that it meets all the requirements for effectiveness of this Post-Effective
Amendment No. 14 to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, duly authorized, in the City of
Baltimore and State of Maryland, on the 27th day of July, 2000.

Legg Mason Tax-Free Income Fund

By:/s/ Marie K. Karpinski
-------------------------------------
Marie K. Karpinski
Vice President and Treasurer

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 14 to the Registrant's Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated:

Signature Title Date
--------- ----- ----

/s/ John F. Curley, Jr.*
----------------------------- Chairman of the Board
John F. Curley, Jr. and Trustee July 27, 2000

/s/ Edmund J. Cashman, Jr.*
----------------------------- President and Trustee July 27, 2000
Edmund J. Cashman, Jr.

/s/ Edward A. Taber, III*
----------------------------- Trustee July 27, 2000
Edward A. Taber, III

/s/ Richard G. Gilmore*
----------------------------- Trustee July 27, 2000
Richard G. Gilmore

/s/ Arnold L. Lehman*
----------------------------- Trustee July 27, 2000
Arnold L. Lehman

/s/ Jill E. McGovern*
----------------------------- Trustee July 27, 2000
Jill E. McGovern

/s/ T. A. Rodgers*
----------------------------- Trustee July 27, 2000
T. A. Rodgers

/s/ G. Peter O'Brien*
----------------------------- Trustee July 27, 2000
G. Peter O'Brien

/s/ Nelson A. Diaz**
----------------------------- Trustee July 27, 2000
Nelson A. Diaz

/s/ Marie K. Karpinski
----------------------------- Vice President July 27, 2000
Marie K. Karpinski and Treasurer

*Signatures affixed by Marc R. Duffy pursuant to a Power of Attorney dated
November 12, 1999, a copy of which is filed herewith.

**Signature affixed by Marc R. Duffy pursuant to a Power of Attorney dated May
12, 2000, a copy of which is filed herewith.

<PAGE>

POWER OF ATTORNEY

I, the undersigned Director/Trustee of one or more of the following investment
companies (as set forth in the companies' Registration Statements on form N-1A):

LEGG MASON CASH RESERVE TRUST LEGG MASON VALUE TRUST, INC.
LEGG MASON INCOME TRUST, INC. LEGG MASON TOTAL RETURN TRUST, INC.
LEGG MASON GLOBAL TRUST, INC. LEGG MASON SPECIAL INVESTMENT TRUST, INC.
LEGG MASON TAX EXEMPT TRUST, INC. LEGG MASON INVESTORS TRUST, INC.
LEGG MASON TAX-FREE INCOME FUND LEGG MASON LIGHT STREET TRUST, INC.
LEGG MASON FOCUS TRUST, INC. LEGG MASON INVESTMENT TRUST, INC.

plus any other investment company for which Legg Mason Fund Adviser, Inc. acts
as investment adviser or manager and for which the undersigned individual serves
as Director/Trustee hereby severally constitute and appoint each of MARIE K.
KARPINSKI, MARC R. DUFFY, ANDREW J. BOWDEN, ARTHUR J. BROWN and ARTHUR C.
DELIBERT my true and lawful attorney-in-fact, with full power of substitution,
and with full power to sign for me and in my name in the appropriate capacity
and only for those above-listed companies for which I serve as Director/Trustee,
any Registration Statements on Form N-lA, all Pre-Effective Amendments to any
Registration Statements of the Funds, any and all subsequent Post-Effective
Amendments to said Registration Statements, and any and all supplements or other
instruments in connection therewith, to file the same with the Securities and
Exchange Commission and the securities regulators of appropriate states and
territories, and generally to do all such things in my name and behalf in
connection therewith as said attorney-in-fact deems necessary or appropriate, to
comply with the provisions of the Securities Act of 1933 and the Investment
Company Act of 1940, all related requirements of the Securities and Exchange
Commission and all requirements of appropriate states and territories. I hereby
ratify and confirm all that said attorney-in-fact or their substitutes may do or
cause to be done by virtue hereof.

WITNESS my hand on the date set forth below.

SIGNATURE DATE
--------- ----

/s/ Edmund J. Cashman, Jr. November 12, 1999
--------------------------
Edmund J. Cashman, Jr.

/s/ John F. Curley, Jr. November 12, 1999
-----------------------
John F. Curley, Jr.

/s/ Richard G. Gilmore November 12, 1999
----------------------
Richard G. Gilmore

/s/ Arnold L. Lehman November 12, 1999
--------------------
Arnold L. Lehman

/s/ Raymond A. Mason November 12, 1999
--------------------
Raymond A. Mason

/s/ Jill E. McGovern November 12, 1999
--------------------
Jill E. McGovern

/s/ Jennifer W. Murphy November 12, 1999
----------------------
Jennifer W. Murphy

/s/ G. Peter O'Brien November 12, 1999
--------------------
G. Peter O'Brien

/s/ T. A. Rodgers November 12, 1999
------------------
T. A. Rodgers

/s/ Edward A. Taber, III November 12, 1999
------------------------
Edward A. Taber, III

<PAGE>

POWER OF ATTORNEY

I, the undersigned Director/Trustee of one or more of the following investment
companies:

LEGG MASON CASH RESERVE TRUST LEGG MASON VALUE TRUST, INC.
LEGG MASON LIGHT STREET TRUST, INC. LEGG MASON TOTAL RETURN TRUST, INC.
LEGG MASON GLOBAL TRUST, INC. LEGG MASON SPECIAL INVESTMENT TRUST, INC.
LEGG MASON INVESTORS TRUST, INC. LEGG MASON INVESTMENT TRUST, INC.
LEGG MASON TAX-FREE INCOME FUND LEGG MASON FOCUS TRUST, INC.

plus any other investment company for which Legg Mason Fund Adviser, Inc. or one
of its affiliates acts as investment adviser or manager and for which the
undersigned individual serves as Director/Trustee ("Funds"), hereby severally
constitute and appoint each of MARIE K. KARPINSKI, MARC R. DUFFY, ANDREW J.
BOWDEN, ARTHUR J. BROWN and ARTHUR C. DELIBERT my true and lawful
attorney-in-fact, with full power of substitution, and with full power to sign
for me and in my name in the appropriate capacity and only for those Funds for
which I serve as Director/Trustee, any Registration Statements of the Funds on
Form N-1A, all Pre-Effective Amendments to any Registration Statements of the
Funds, any and all subsequent Post-Effective Amendments to said Registration
Statements, and any and all supplements or other instruments in connection
therewith, to file the same with the Securities and Exchange Commission and the
securities regulators of appropriate states and territories, and generally to do
all such things in my name and behalf in connection therewith as said
attorney-in-fact deems necessary or appropriate to comply with the provisions of
the Securities Act of 1933 and the Investment Company Act of 1940, all related
requirements of the Securities and Exchange Commission and all requirements of
appropriate states and territories. I hereby ratify and confirm all that said
attorneys-in-fact or their substitutes may do or cause to be done by virtue
hereof.

WITNESS my hand on the date set forth below.

SIGNATURE DATE

/s/ Nelson A. Diaz May 12, 2000
-----------------------------
Nelson A. Diaz

<PAGE>

Legg Mason Tax-Free Income Fund
Exhibit Index

Exhibit (a)(v) Amendment to Declaration of Trust dated September 14, 1999

Exhibit (d)(i) Investment Advisory and Management Agreement

Exhibit (d)(ii) Sub-Advisory Agreement

Exhibit (i) Opinion and Consent of Counsel

Exhibit (j) Accountant's Consent