<PAGE>
- --------------------------------------------------------------------------------
Fellow Shareholders
- --------------------------------------------------------------------------------
Vigorous economic growth and Federal Reserve tightening dominated the fixed-
income markets in 1994. Real growth of 4% last year exceeded the historical
trend of approximately 2.5%. The target for the fed funds rate climbed with the
economy's strong pace, rising from 3% at the beginning of last year to 6% after
the most recent tightening on February 1, 1995. The Federal Reserve pursued its
monetary policy to slow economic growth to a level that will contain inflation.
Future Fed action will reflect its goal of preventing excessive inflation
without spurring significantly higher unemployment.
Rising yields characterized the tax-exempt market during most of 1994.
The yield on one-year AAA General Obligation (GO) bonds peaked in December at
4.9%, up from 3% at the end of February 1994. However, as the market
strengthened over the last several months, the one-year yield retreated to 4.4%
by the funds' fiscal year-end. The five-year AAA GO bond yield ended this
quarter at 5%, 70 basis points higher than a year ago but 50 basis points lower
than at the end of November (100 basis points equal one percent). On the long
end, the yield on 30-year AAA GO bonds was almost 6%, up from 5.6% a year
earlier but down from its November peak of 6.8%.
Yields declined after the Fed's sixth tightening of the year in
November. Anticipation of a slowing economy, good news on inflation, and
- --------------------------------------------------------------------------------
Municipal Bond and Note Yields
- --------------------------------------------------------------------------------
[CHART APPEARS HERE]
limited supply of tax-exempt bonds all contributed to the recent drop in yields.
Issuance fell to a four-year low last year and could be even lower in 1995.
TAX-EXEMPT MONEY FUND
Last year's rise in interest rates was bad news for bond investors but good
news for money market investors as current yields rose substantially during
the past 12 months. Your fund's seven-day compound yield stood at 3.57% at
the end of the fiscal year, compared with 2.21% a year ago.
During the past 12 months, the municipal short-term yield curve has
steepened substantially. For example, the difference in yield between an
overnight investment and a one-year security averaged 1.21 percentage points
over the past year, compared with an average difference of 0.48 of a percentage
point during the preceding 12-month period. The long end of the money market
curve followed the rate rise orchestrated by the Fed, while very short-term
yields stayed low, responding to light supply and strong investor demand in a
tightening environment.
Issuance of short-term securities fell to $34.1 billion from $45.4
billion during the fiscal year, the lowest level in five years, the result of
more long-term bonds being sold in 1992 and 1993 to lock in historically low
borrowing costs. At the moment, we see nothing on the horizon that will
increase short-term supply.
Your fund closed the fiscal year with a weighted average maturity of 44
days, modestly longer than our peer group average of 40 days, but significantly
shorter than the fund's 55-day average at the beginning of the year. We expect
the short-term market to remain sensitive to further rate hikes. However, the
light supply of new issues, low dealer inventories, and solid demand induce us
to keep maturities slightly longer than the average for our peer group to gain
extra yield.
Your fund's performance was in line with its peer group during the
past three months, and above the average for the entire fiscal year.
<PAGE>
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/28/95
3 Mos. 12 Mos.
-------- ---------
<S> <C> <C>
Tax-Exempt Money Fund 0.80% 2.63%
IBC/Donoghue Money Fund
Report Average* 0.80 2.56
- --------------------------------------------------------------------------------
</TABLE>
*Stockbroker and General Purpose Funds.
TAX-FREE SHORT-INTERMEDIATE FUND
In the past year we maintained a relatively short, defensive portfolio
duration, focusing on high-quality securities and avoiding bonds with low
coupons selling at deep discounts, which do not perform well when interest
rates are going up. Duration, which measures price sensitivity to changes in
interest rates, dipped as low as 2.2 years in mid-October, but lengthened to
2.5 by year-end.
We extended duration for several reasons. First, short-term yields
seemed to have overshot reasonable expectations of Fed tightening. Second,
although new issuance was low, secondary supply was high, providing more
investment choices. Third, we anticipated increasing demand for tax-free bonds
in January 1995 with coupon payments due and older bonds maturing.
Our investment strategy resulted in an increase in your fund's
annualized yield for the quarter to 4.5% from 4% a year ago. We intend to
proceed with caution in the months ahead, maintaining a neutral duration
combined with a defensive high credit quality and high coupon structure. Your
fund's objective is to provide a higher yield than money market funds offer,
with small share price fluctuation.
Our strategy served us well through 1994, allowing the fund to
significantly outperform the peer group average for both the quarter and the
fiscal year ended February 28.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/28/95
3 Mos. 12 Mos.
-------- ---------
<S> <C> <C>
Tax-Free Short-Intermediate
Fund 2.68% 2.91%
Lipper Short Municipal
Debt Fund Average 2.38 2.10
- --------------------------------------------------------------------------------
</TABLE>
TAX-FREE INSURED INTERMEDIATE BOND FUND
Our investment strategy for the fund was similar to that of the Short-
Intermediate Fund. Essentially, we maintained a short or defensive duration,
focused on securities with relatively high credit quality, and stayed away from
low coupon bonds selling at significant discounts, which decline in value more
than high coupon bonds when rates are rising.
When bonds looked particularly attractive in November, we extended
maturities to take advantage of low prices and high yields. We raised your
portfolio's duration to 5.4 years by the end of December, after it had fallen as
low as 4.9 years in mid-October.
Federal Reserve Chairman Alan Greenspan has recently given the market
mixed signals on the direction of monetary policy. Signs that the economy could
be slowing from its strong pace prompted him to suggest that the Fed may have
finished tightening, at least for a while. However, he also warned that further
rate hikes could lie ahead if the weakness of the U.S. dollar leads to higher
inflation. Accordingly, we will continue to maintain a neutral duration and a
defensive posture with high credit quality and high coupons in the near term.
Our strategy resulted in a stronger performance than our peer group
average during the fiscal year. Fourth quarter performance was robust, although
slightly behind the average for similar funds.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/28/95
3 Mos. 12 Mos.
-------- ---------
<S> <C> <C>
Tax-Free Insured Intermediate
Bond Fund 5.47% 2.65%
Lipper Intermediate Municipal
Debt Fund Average 5.66 1.65
- --------------------------------------------------------------------------------
</TABLE>
TAX-FREE INCOME FUND
With last year's strong economy, the Federal Reserve's tightening, and poor
cash flow into municipal funds, we believed rates would likely rise, driving
bond prices down. In this environment, we managed your fund conservatively
for most of the last 12 months.
First and foremost, we attempted to dampen the fund's sensitivity to
changing interest rates
2
<PAGE>
by reducing the weighted average maturity and duration. Throughout most of
1993, we kept the fund's average maturity in the 18- to 20-year range and
effective duration to around eight years. During the first three quarters of
1994, the average maturity was less than 18 years and we attempted to keep
duration under 7.5 years. (Duration, a time-weighted measure of a bond's cash
flow expressed in years, shows a bond or bond fund's price sensitivity to a
change in interest rates.)
Second, we attempted to make the fund less sensitive to rising rates
by swapping lower coupon bonds for those with higher coupons. Low coupon
bonds selling at a discount usually decline in price more than high coupon
bonds when rates rise. Also, a change in the 1993 tax law subjected some
gains realized from sales of market discount bonds to ordinary income taxes,
rendering these securities less desirable to some investors. Finally, we
gradually increased the reserves portion of the portfolio from the beginning
of the year through October.
As rates rose steeply in the fall, and investors anticipated some
slowing in economic growth in 1995, we felt the fund would benefit from a
more aggressive strategy. Therefore, we extended average maturity closer to
18 years from 16.3 years in October, increased duration to 7.8 years from a
low of about 7 years, and reduced reserves to less than 5% of the portfolio
from more than 10%. We took these actions to allow the fund to perform in
line with the rally in municipal bonds. However, we did not see sufficient
evidence of a slowdown to warrant a fully aggressive strategy.
Last year saw major changes in interest rates, and the fund's
performance reflects this movement. While results were modest for the fiscal
year, we are pleased that your fund provided an excellent three-month return and
outperformed its peer group average during both reporting periods.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/28/95
3 Mos. 12 Mos.
-------- ---------
<S> <C> <C>
Tax-Free Income Fund 8.76% 1.90%
Lipper General Municipal
Debt Fund Average 8.60 0.64
- --------------------------------------------------------------------------------
</TABLE>
TAX-FREE HIGH YIELD FUND
The high yield sector of the municipal market was not immune to last year's
volatility. For the most part, we sought to maintain a neutral to somewhat
defensive stance for your fund versus the overall market. This meant keeping
duration in a range of 7.25 to 7.75 years, with cash levels averaging between
5% and 6%. We also maintained a weighted average maturity of 19 to 20 years,
down from 22 years during the strong markets of 1993.
Our aim was to provide a cushion against rising interest rates and to
maintain sufficient liquidity, balanced against our constant goal of generating
high yields. To meet the last objective, we kept a minimum of 82% of holdings in
maturities exceeding 10 years.
Although low issuance presented a challenge for all municipal investors,
reduced supply was even more pronounced in the high yield area. While credit
spreads widened in selected sectors, particularly health care, this was offset
at times by a limited supply of new high yield issues. Despite these challenges,
we were still able to select lower quality issues that brought value to the
fund. Overall credit quality was unchanged at BBB+.
Despite the market's volatility, your fund outperformed its peer group
for the fiscal year, and performed strongly in the quarter, although it lagged
the competition. The fund has exceeded the average performance of other tax-free
high yield funds for the past seven years, and for eight of its 10 complete
fiscal years since inception.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/28/95
3 Mos. 12 Mos.
-------- ---------
<S> <C> <C>
Tax-Free High Yield Fund 7.05% 1.26%
Lipper High Yield Municipal
Debt Fund Average 7.55 1.06
- --------------------------------------------------------------------------------
</TABLE>
OUTLOOK
The U.S. economy should continue to grow, although at a lower rate than in 1994.
To date, the Fed's actions appear to be starting to slow the pace of growth,
keeping inflation in check.
3
<PAGE>
However, in the near term, we do expect some acceleration in inflation based on
tight labor markets and relatively high capacity utilization. This may result in
somewhat higher interest rates over the next few months, but most likely lower
than the levels reached in the fall. Moreover, light new issuance combined with
continued strong demand for tax-exempt bonds could result in better overall
returns in the municipal bond market in 1995.
It is worth noting that 1994 was tumultuous for fixed income
investors because of rising interest rates, widespread misuse of derivatives,
and a large municipal bankruptcy. We want to assure you that we will continue
to make investments that are appropriate for each fund's risk profile. In those
funds that can purchase derivatives, our exposure has been modest and has not
introduced undue risk for shareholders. In addition, our avoidance of the Orange
County crisis reinforces the value of thorough, independent credit research.
We appreciate the continued trust our shareholders have placed in us.
Respectfully submitted,
/s/ William T. Reynolds
William T. Reynolds
Director, Fixed Income Division
March 17, 1995
- --------------------------------------------------------------------------------
Financial Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value Dividend Per Share/+/ Dividend Yield*
Per Share 3 Months Ended 3 Months Ended
------------------ ---------------------- --------------------
11/30/94 02/28/95 11/30/94 02/28/95 11/30/94 02/28/95
<S> <C> <C> <C> <C> <C> <C>
Tax-Exempt Money $ 1.00 $ 1.00 $ 0.007 $ 0.008 3.12% 3.57%
- --------------------------------------------------------------------------------------------------------------------
Tax-Free Short-Intermediate 5.17 5.25 0.06 0.06 4.28 4.52
- --------------------------------------------------------------------------------------------------------------------
Tax-Free Insured Intermediate Bond 9.93 10.35 0.12 0.12 4.68 4.86
- --------------------------------------------------------------------------------------------------------------------
Tax-Free Income 8.63 9.25 0.13 0.13 6.02 6.01
- --------------------------------------------------------------------------------------------------------------------
Tax-Free High Yield 11.03 11.62 0.18 0.18 6.46 6.61
</TABLE>
* Dividends earned and reinvested for the periods indicated are annualized and
divided by the average daily net asset values per share for the same period.
Money Fund reports seven-day compound yield.
+ Taxability of dividends. 100% of the dividends paid for the 12 months ended
2/28/95 were exempt from federal income tax.
- --------------------------------------------------------------------------------
Quality Diversification
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quality Ratings* Weighted Average Quality*
-------------------------------------- ---------------------------
1 2 3 4 5-10 11/30/94 02/28/95
<S> <C> <C> <C> <C> <C> <C> <C>
Tax-Exempt Money 12% 86% 2% 0% 0% 1.9 1.9
- -----------------------------------------------------------------------------------------------------------------
Tax-Free Short-Intermediate 42 40 17 1 0 1.9 1.8
- -----------------------------------------------------------------------------------------------------------------
Tax-Free Insured Intermediate Bond 34 57 9 0 0 2.0 1.8
- -----------------------------------------------------------------------------------------------------------------
Tax-Free Income 10 53 25 12 0 2.4 2.4
- -----------------------------------------------------------------------------------------------------------------
Tax-Free High Yield 4 19 17 36 24 3.6 3.6
</TABLE>
* On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest
quality.
4
<PAGE>
- --------------------------------------------------------------------------------
Duration and Maturity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Effective Duration (years) Maturity (years)
-------------------------- ---------------------
11/30/94 02/28/95 11/30/94 02/28/95
<S> <C> <C> <C> <C>
Tax-Exempt Money -- -- 43.0* 44.0*
- ---------------------------------------------------------------------------------------------------
Tax-Free Short-Intermediate 2.5 2.5 3.1 3.1
- ---------------------------------------------------------------------------------------------------
Tax-Free Insured Intermediate Bond 5.5 5.1 7.4 7.0
- ---------------------------------------------------------------------------------------------------
Tax-Free Income 7.9 7.8 17.2 17.9
- ---------------------------------------------------------------------------------------------------
Tax-Free High Yield 7.7 7.3 19.0 19.9
</TABLE>
* Maturity is in days.
- --------------------------------------------------------------------------------
Fiscal-Year Performance
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/28/95
----------------------------------------------------------
1 Year 5 Years 10 Years Since Inception
<S> <C> <C> <C> <C> <C>
Tax-Exempt Money 2.63% 3.18% 4.06% 4.73% (4/81)
- ----------------------------------------------------------------------------------------------------------
Tax-Free Short-Intermediate 2.91 5.56 5.90 6.02 (12/83)
- ----------------------------------------------------------------------------------------------------------
Tax-Free Insured Intermediate Bond 2.65 N/A N/A 6.69 (11/92)
- ----------------------------------------------------------------------------------------------------------
Tax-Free Income 1.90 8.08 8.59 7.18 (10/76)
- ----------------------------------------------------------------------------------------------------------
Tax-Free High Yield 1.26 8.16 -- 9.73 (3/85)
</TABLE>
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
- --------------------------------------------------------------------------------
Fiscal-Year Performance Comparison --
Tax-Free Insured Intermediate Bond Fund
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
5
<PAGE>
- --------------------------------------------------------------------------------
Fiscal-Year Performance Comparison -- Tax-Free Short-Intermediate Fund
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
Fiscal-Year Performance Comparison -- Tax-Free Income Fund
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
Fiscal-Year Performance Comparison -- Tax-Free High Yield Fund
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
6
<PAGE>
- --------------------------------------------------------------------------------
Shareholder Services
- --------------------------------------------------------------------------------
To help shareholders monitor their current investments and make decisions
that accurately reflect their financial goals, T. Rowe Price offers a wide
variety of information and services--at no extra cost.
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE--Shareholder service representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m., ET. Call
1-800-225-5132 to speak directly with a representative who will be able to
assist you with your accounts.
IN PERSON--Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
AUTOMATED 24-HOUR SERVICES
Tele*Access/(R)/ (1-800-638-2587) provides information such as account
balance, date and amount of your last transaction, latest dividend payment, and
fund prices and yields. Additionally, you have the ability to request
prospectuses, statements, and account and tax forms; reorder checks; and
initiate purchase, redemption, and exchange orders for identically registered
accounts.
PC*Access/(R)/ provides the same information as Tele*Access, but on a
personal computer via dial-up modem.
ACCOUNT SERVICES
Checking--Write checks for $500 or more on any money market and bond
fund accounts (except the High Yield Fund and Emerging Markets Bond Fund).
Automatic Investing--Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one fund
account into another, such as from a money fund into a stock fund. A low, $50
minimum makes it easy to get started.
Automatic Withdrawal--If you need money from your fund account on a
regular basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options--Reinvest all or some of your
distributions, or take them in cash. We give you maximum flexibility and
convenience.
INVESTMENT INFORMATION
Combined Statement--A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides total
portfolio value, and lists your investments by type--stock, bond, and money
market. Detail pages itemize account transactions by fund.
Quarterly Shareholder Reports--Portfolio managers review the performance
of the funds in plain language and discuss T. Rowe Price's economic outlook.
The T. Rowe Price Report--A quarterly newsletter with relevant articles
on market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Insights--A library of information that includes reports on mutual fund
tax issues, investment strategies, and financial markets.
Detailed Investment Guides--Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also
available on disk for PC use), and Guide to Risk-Adjusted Performance can help
you determine and reach your investment goals.
DISCOUNT BROKERAGE
You can trade stocks, bonds, options, precious metals, and other securities at a
substantial savings over regular commission rates. Call a shareholder service
representative for more information.
7
<PAGE>
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
T. Rowe Price
- -------------
TAX-FREE FUNDS
FEBRUARY 28, 1995
FOR YIELD, PRICE, LAST TRANSACTION,
AND CURRENT BALANCE, 24 HOURS,
7 DAYS A WEEK, CALL:
1-800-638-2587 toll free
625-7676 Baltimore area
FOR ASSISTANCE WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. ROWE PRICE
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus of the T. Rowe Price Tax-Free Funds.
T. Rowe Price
Invest With Confidence(R)
TFF
<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
TAX-FREE INCOME FUND
February 28, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Investment Record
- --------------------------------------------------------------------------------
The table below shows the investment record of one share of the T. Rowe Price
Tax-Free Income Fund, purchased at the original offering price of $10.00. Over
this time, interest rates have been volatile. The results shown should not be
considered a representation of the dividend income or capital gain or loss which
may be realized from an investment made in the Fund today.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Fiscal Capital With With Dividends
Year Net Asset Income Gain Dividends and Capital Gains Total
Ended Value Dividends Distributions/2/ Reinvested Reinvested Return
- ------------ --------- --------- ---------------- ---------- ----------------- ------
<S> <C> <C> <C> <C> <C> <C>
12/31/76/1/ $10.20 $0.09 $10.29 $10.29 2.87%
- ------------------------------------------------------------------------------------------------------------------------
1977 10.28 0.54 10.93 10.93 6.20
- ------------------------------------------------------------------------------------------------------------------------
1978 9.54 0.53 $0.01 10.69 10.69 -2.11
- ------------------------------------------------------------------------------------------------------------------------
1979 9.20 0.53 10.90 10.90 1.96
- ------------------------------------------------------------------------------------------------------------------------
1980 8.06 0.67 10.33 10.34 -5.20
- ------------------------------------------------------------------------------------------------------------------------
1981 7.26 0.73 10.24 10.24 -0.91
- ------------------------------------------------------------------------------------------------------------------------
1982 8.58 0.80 13.39 13.39 30.77
- ------------------------------------------------------------------------------------------------------------------------
2/28/83/3/ 8.85 0.13 14.01 14.02 4.65
- ------------------------------------------------------------------------------------------------------------------------
1984 8.48 0.72 14.58 14.58 4.04
- ------------------------------------------------------------------------------------------------------------------------
1985 8.41 0.65 15.63 15.64 7.24
- ------------------------------------------------------------------------------------------------------------------------
1986 9.73 0.71 19.60 19.61 25.37
- ------------------------------------------------------------------------------------------------------------------------
1987 10.27 0.68 22.16 22.17 13.07
- ------------------------------------------------------------------------------------------------------------------------
1988 8.81 0.59 0.54 20.33 21.47 -3.17
- ------------------------------------------------------------------------------------------------------------------------
1989 8.57 0.59 21.17 22.35 4.11
- ------------------------------------------------------------------------------------------------------------------------
1990 8.66 0.59 22.89 24.17 8.15
- ------------------------------------------------------------------------------------------------------------------------
1991 8.79 0.57 24.82 26.20 8.40
- ------------------------------------------------------------------------------------------------------------------------
1992 9.09 0.57 27.34 28.86 10.17
- ------------------------------------------------------------------------------------------------------------------------
1993 9.84 0.56 31.41 33.16 14.88
- ------------------------------------------------------------------------------------------------------------------------
1994 9.66 0.54 0.18 32.55 34.98 5.50
- ------------------------------------------------------------------------------------------------------------------------
1995 9.25 0.53 0.04 33.02 35.65 1.90
- ------------------------------------------------------------------------------------------------------------------------
TOTAL $11.32 $0.77
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ From inception 10/26/76 to 12/31/76.
/2/ Includes short-term capital gain of $0.08 on 12/10/93; $0.01 on 3/29/94.
/3/ Fiscal year end changed from December 31 to February 28; figures are for
two months from 12/31/82-2/28/83.
TFI
<PAGE>
- --------------------------------------------------------------------------------
Sector Diversification / February 28, 1995
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
Percent of
Net Assets
----------
Hospital Revenue 16%
Nuclear Revenue 11
Dedicated Tax Revenue 9
General Obligation - State 8
Lease Revenue 8
Electric Revenue 7
General Obligation - Local 7
Pre-refunded Bonds 6
Water & Sewer Revenue 6
Percent of
Net Assets
----------
Housing Finance Revenue 6%
Escrowed to Maturity 5
Ground Transportation Revenue 4
Educational Revenue 4
Industrial & Pollution Control Revenue 1
Air & Sea Transportation Revenue 1
Miscellaneous Revenue 1
Solid Waste Revenue 1
Other Assets Less Liabilities - 1
- --------------------------------------------------------------------------------
Statement of Net Assets
T. Rowe Price Tax-Free Income Fund / February 28, 1995
- --------------------------------------------------------------------------------
(amounts in thousands, except capital stock information)
<TABLE>
<CAPTION>
Face Amount Value
----------- ----------
<S> <C> <C>
ALABAMA -- 1.8%
Alabama, GO, Zero Coupon, 9/1/03..................................................... $ 10,000 $ 6,225
Zero Coupon, 3/1/04.......................................................... 10,000 6,003
Zero Coupon, 9/1/04.......................................................... 5,500 3,183
Alabama Water Pollution Control Auth., (AMBAC Insured), 5.00%, 8/15/15............... 4,000 3,519
6.75%, 8/15/17............................................................... 2,750 2,915
Mobile, Capital Improvement Warrants, GO, (MBIA Insured),
Zero Coupon, 8/15/16......................................................... 4,330 1,096
Zero Coupon, 8/15/17......................................................... 4,435 1,045
- ---------------------------------------------------------------------------------------------------------------------------
ALASKA -- 0.1%
Alaska HFC, VRDN (Currently 4.10%)................................................... 2,000 2,000
- ---------------------------------------------------------------------------------------------------------------------------
ARIZONA -- 1.0%
Phoenix, GO, VRDN (Currently 4.00%).................................................. 600 600
Salt River Agricultural Improvement & Power Dist., Electric System,
5.75%, 1/1/19................................................................ 5,000 4,775
6.50%, 1/1/22................................................................ 8,000 8,206
- ---------------------------------------------------------------------------------------------------------------------------
ARKANSAS -- 0.9%
Arkansas Dev. Fin. Auth., Sisters of Mercy, VRDN (Currently 4.05%)................... 5,000 5,000
Little Rock Health Fac. Board, Baptist Medical Center, 6.85%, 11/1/08................ 2,495 2,683
North Little Rock, Electric System Refunding, (MBIA Insured),
6.50%, 7/1/15................................................................ 4,000 4,367
- ---------------------------------------------------------------------------------------------------------------------------
CALIFORNIA -- 9.6%
California Public Works Board, Univ. of California, 5.50%, 6/1/14.................... 2,000 1,806
Concord Redev. Agency, GO, (AMBAC Insured), 5.25%, 7/1/19............................ 4,055 3,609
Glendale Redev. Agency, Central Glendale Redev., (AMBAC Insured),
5.60%, 12/1/16............................................................... 4,030 3,793
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Amount Value
----------- ----------
<S> <C> <C>
CALIFORNIA (cont'd)
Los Angeles, GO, (MBIA Insured), 6.00%, 9/1/14....................................... $ 5,000 $ 5,004
Wastewater System, 7.15%, 6/1/20 (Pre-refunded 6/1/00+)...................... 10,500 11,668
Los Angeles County, Marina del Rey, COP, 6.25%, 7/1/03............................... 4,000 4,032
6.50%, 7/1/08................................................................ 3,250 3,210
Los Angeles County Metropolitan Transportation Auth., Sales Tax,
7.40%, 7/1/15........................................................... 5,530 5,874
(MBIA Insured), 6.25%, 7/1/13................................................ 8,965 9,135
Los Angeles Dept. of Water & Power, 7.375%, 2/1/29................................... 6,500 7,083
Los Angeles Harbor Dept., 7.60%, 10/1/18 (Escrowed to Maturity)...................... 3,200 3,583
Modesto Irrigation Dist., Geysers Geothermal Power, COP, 7.25%, 10/1/15.............. 5,000 5,168
Port of Oakland, (BIGI Insured), 7.30%, 11/1/09...................................... 1,650 1,737
7.25%, 11/1/16............................................................... 12,275 12,919
Sacramento County, Main Detention Center, COP, (MBIA Insured),
5.75%, 6/1/15................................................................ 3,000 2,889
Sacramento Fin. Auth., (AMBAC Insured), 5.375%, 11/1/14.............................. 4,000 3,726
5.40%, 11/1/20............................................................... 7,000 6,419
San Bernardino, Sisters of Charity Health Care System, 7.00%, 7/1/21................. 3,000 3,093
San Diego County, GO, TRAN, 4.50%, 9/29/95........................................... 5,000 4,900
San Diego, IDR, San Diego Gas & Electric, (AMBAC Insured), 5.90%, 6/1/18............. 5,000 4,876
5.90%, 9/1/18................................................................ 4,250 4,144
San Mateo County Transit Dist., (MBIA Insured), 5.25%, 6/1/16........................ 6,000 5,443
5.25%, 6/1/17................................................................ 2,000 1,810
Southern California Public Power Auth., 6.75%, 7/1/11................................ 4,050 4,276
Floating Rate, 7/1/12 (Currently 5.858%)..................................... 5,000 4,920
Southern Transmission, 6.125%, 7/1/18........................................ 2,000 1,991
- ---------------------------------------------------------------------------------------------------------------------------
COLORADO -- 1.3%
Boulder County, Longmont United Hosp.,
8.20%, 12/1/20 (Pre-refunded 12/1/00+)....................................... 2,000 2,316
Colorado HFA, Sisters of Charity Health Care System, 5.25%, 5/15/14.................. 3,000 2,624
Douglas County, Highlands Ranch Metropolitan Dist., GO,
8.68%, 10/15/95 (Escrowed to Maturity).................................. 1,625 1,671
Highlands Ranch Water & Sewer Dist., GO,
8.68%, 10/15/95 (Escrowed to Maturity).................................. 2,260 2,323
Jefferson County School Dist., GO, (AMBAC Insured), 6.00%, 12/15/12.................. 8,500 8,727
- ---------------------------------------------------------------------------------------------------------------------------
CONNECTICUT -- 1.1%
Connecticut, State Special Tax, GO, 7.125%, 6/1/10................................... 7,350 8,334
Connecticut HEFA, Yale-New Haven Hosp., (MBIA Insured), 7.10%, 7/1/25................ 5,825 6,251
- ---------------------------------------------------------------------------------------------------------------------------
DELAWARE -- 1.3%
Delaware HFA, Beebe Medical Center, 6.75%, 6/1/14.................................... 3,500 3,458
Medical Center of Delaware, (MBIA Insured), 9.25%, 10/1/95................... 13,000 13,348
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
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T. Rowe Price Tax-Free Income Fund / Statement of Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Amount Value
----------- ----------
<S> <C> <C>
DISTRICT OF COLUMBIA -- 0.7%
Dist. of Columbia, American Univ., VRDN (Currently 4.15%)............................ $ 2,000 $ 2,000
Washington D.C. Metropolitan Transit Auth., (FGIC Insured),
5.25%, 7/1/14................................................................ 7,500 6,813
- ---------------------------------------------------------------------------------------------------------------------------
FLORIDA -- 3.2%
Broward County Resource Recovery, Broward Waste Energy, L.P. North,
7.95%, 12/1/08.......................................................... 11,415 12,477
Broward Waste Energy, L.P. South, 7.95%, 12/1/08............................. 935 1,022
Florida, Board of Ed. (Public Ed. Capital Outlay), GO, 5.875%, 6/1/14................ 2,500 2,464
5.875%, 6/1/23............................................................... 5,000 4,849
7.25%, 6/1/23................................................................ 5,640 6,159
7.25%, 6/1/23 (Pre-refunded 6/1/00+)......................................... 35 39
Jacksonville Electric Auth., St. John River, 5.50%, 10/1/13.......................... 5,400 5,117
Jacksonville HFA, Baptist Medical Center, (MBIA Insured),
VRDN (Currently 3.95%)....................................................... 600 600
Jacksonville Transportation Auth., GO, 7.375%, 7/1/20
(Pre-refunded 7/1/00+)....................................................... 8,750 9,838
- ---------------------------------------------------------------------------------------------------------------------------
GEORGIA -- 7.5%
Fulton-Dekalb Hosp. Auth., Grady Memorial Hosp., GO, (AMBAC Insured),
6.80%, 1/1/07 (Escrowed to Maturity).................................... 5,530 6,124
6.80%, 1/1/08 (Escrowed to Maturity).................................... 5,905 6,519
6.85%, 1/1/09 (Escrowed to Maturity).................................... 6,310 6,998
6.85%, 1/1/10 (Escrowed to Maturity).................................... 6,745 7,478
(MBIA Insured), 5.50%, 1/1/12................................................ 2,000 1,913
5.50%, 1/1/20........................................................... 3,400 3,136
Gwinnett County, Water & Sewage Auth., Zero Coupon, 8/1/09........................... 2,750 1,197
Gwinnett County School Dist., GO, 6.40%, 2/1/09...................................... 3,415 3,660
6.40%, 2/1/10................................................................ 3,655 3,910
6.40%, 2/1/11................................................................ 3,905 4,167
6.40%, 2/1/12................................................................ 1,255 1,335
Henry County School Dist., GO, 6.45%, 8/1/11......................................... 2,000 2,100
Metropolitan Atlanta Rapid Transit Auth., Sales Tax, 6.90%, 7/1/16................... 5,655 6,064
6.55%, 7/1/20................................................................ 5,500 5,648
Municipal Electric Auth. of Georgia, (AMBAC Insured), 6.40%, 1/1/07.................. 7,500 8,027
7.25%, 1/1/24........................................................... 6,500 7,637
(FGIC Insured), 5.50%, 1/1/12................................................ 1,800 1,735
6.125%, 1/1/14.......................................................... 5,500 5,546
8.125%, 1/1/17.......................................................... 5,680 6,173
5.70%, 1/1/19........................................................... 5,100 4,888
Paulding County, Water & Sewer, (MBIA Insured), 6.00%, 12/1/13....................... 5,000 5,084
- ---------------------------------------------------------------------------------------------------------------------------
IDAHO -- 0.1%
Idaho Housing Agency, (FHA Guaranteed), 7.70%, 7/1/17................................ 905 962
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
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<TABLE>
<CAPTION>
Face Amount Value
----------- ----------
<S> <C> <C>
ILLINOIS -- 1.5%
Chicago Board of Education, GO, (MBIA Insured), 6.00%, 1/1/20........................ $ 5,000 $ 4,930
Cook, Dupage, Kane, Lake, McHenry, and Will Counties Regional
Transportation Auth., (FGIC Insured), 7.75%, 6/1/19.......................... 5,350 6,514
Illinois EFA, Field Museum of Natural History, VRDN (Currently 4.15%)................ 1,100 1,100
Northwestern Univ., VRDN (Currently 4.15%)................................... 100 100
VRDN (Currently 4.10%).................................................. 300 300
Illinois HFA, Children's Memorial Hosp., VRDN (Currently 4.15%)...................... 200 200
Hinsdale Health System, 9.00%, 11/15/15...................................... 4,850 5,467
Holy Cross Hosp., 6.70%, 3/1/14.............................................. 1,000 954
- ---------------------------------------------------------------------------------------------------------------------------
INDIANA -- 0.2%
St. Joseph's County Hosp Auth., St. Joseph's Medical Center, (MBIA Insured),
6.70%, 12/1/02............................................................... 1,985 2,145
- ---------------------------------------------------------------------------------------------------------------------------
IOWA -- 0.9%
Muscatine Electric, (AMBAC Insured), 6.125%, 1/1/12.................................. 12,305 12,450
- ---------------------------------------------------------------------------------------------------------------------------
KANSAS -- 0.7%
Johnson County, Internal Improvement, GO, 6.125%, 9/1/12............................. 4,000 4,057
Kansas, DOT, 5.375%, 3/1/13.......................................................... 5,500 5,197
- ---------------------------------------------------------------------------------------------------------------------------
KENTUCKY -- 1.8%
Carroll County, PCR, Kentucky Utilities, 7.45%, 9/15/16.............................. 15,000 16,371
Kentucky Turnpike Auth., Economic Dev., 7.25%, 5/15/10
(Pre-refunded 5/15/00+)...................................................... 1,000 1,109
(AMBAC Insured), 5.50%, 7/1/11............................................... 7,000 6,837
- ---------------------------------------------------------------------------------------------------------------------------
LOUISIANA -- 1.1%
East Baton Rouge Mortgage Fin. Auth., 7.375%, 3/1/10
(Escrowed to Maturity)....................................................... 2,800 3,002
Louisiana Offshore Terminal Auth., LOOP, 7.60%, 9/1/10............................... 10,440 11,227
- ---------------------------------------------------------------------------------------------------------------------------
MARYLAND -- 5.4%
Baltimore City, Convention Center, (FGIC Insured), 6.00%, 9/1/17..................... 5,000 5,011
Baltimore County, Pickersgill Retirement Community, 7.70%, 1/1/21.................... 2,000 2,094
Gaithersburg, Asbury Methodist Home, 7.85%, 1/1/20 (Pre-refunded 1/1/00+)............ 3,000 3,397
Maryland CDA, Single Family, 6.45%, 4/1/14........................................... 2,000 2,033
7.60%, 4/1/17................................................................ 7,810 8,324
7.25%, 4/1/19................................................................ 2,500 2,615
Maryland HHEFA, Good Samaritan Hosp., 5.75%, 7/1/19.................................. 3,000 2,726
Howard County General Hosp., 5.50%, 7/1/13................................... 3,750 3,180
Johns Hopkins Hosp., Zero Coupon, 7/1/19..................................... 9,000 2,021
Johns Hopkins Univ., 7.50%, 7/1/20........................................... 9,475 10,182
Kennedy Kreiger Institute, 6.75%, 7/1/22..................................... 1,500 1,449
Pooled Loan Program, VRDN (Currently 4.35%).................................. 600 600
Suburban Hosp., 5.125%, 7/1/21............................................... 2,200 1,802
Univ. of Maryland Medical System, 9.50%, 1/1/14
(Pre-refunded 7/22/96+)................................................. 5,415 5,868
</TABLE>
5
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T. Rowe Price Tax-Free Income Fund / Statement of Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Amount Value
----------- ----------
<S> <C> <C>
MARYLAND (cont'd)
Maryland HHEFA (cont'd)
Univ. of Maryland Medical System (cont'd)
(FGIC Insured), 5.00%, 7/1/20........................................... $ 8,005 $ 6,848
7.00%, 7/1/22........................................................ 1,500 1,725
Maryland Water Quality Fin. Administration, Revolving Loan Fund,
7.25%, 9/1/12................................................................ 1,950 2,122
Montgomery County Housing Opportunities Commission, Single Family,
7.50%, 7/1/17................................................................ 1,105 1,169
Prince George's County, Dimensions Health Corp., 5.30%, 7/1/24....................... 11,000 8,961
- ---------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS -- 1.5%
Massachusetts Bay Transportation Auth., General Transportation, GO,
7.00%, 3/1/14................................................................ 3,150 3,547
7.00%, 3/1/21................................................................ 6,200 7,074
Massachusetts HEFA, Harvard Univ., 6.25%, 4/1/20..................................... 5,000 5,274
Massachusetts General Hosp., (AMBAC Insured), 6.00%, 7/1/15.................. 4,500 4,484
- ---------------------------------------------------------------------------------------------------------------------------
MICHIGAN -- 0.7%
Michigan Building Auth., 5.30%, 10/1/12.............................................. 5,000 4,659
Michigan HDA, 6.45%, 12/1/14......................................................... 2,120 2,157
7.55%, 12/1/15............................................................... 1,750 1,866
Michigan Hosp. Fin. Auth., Bay Medical Center, 8.25%, 7/1/12......................... 1,000 1,058
- ---------------------------------------------------------------------------------------------------------------------------
MINNESOTA -- 3.0%
Minnesota, GO, 5.30%, 8/1/10......................................................... 8,530 8,082
5.30%, 8/1/11................................................................ 5,000 4,712
Northern Minnesota Municipal Power Agency, 7.35%, 1/1/02............................. 5,000 5,481
Ramsey County, Capital Improvement, GO, 5.75%, 12/1/07............................... 1,915 1,958
5.85%, 12/1/08............................................................... 2,000 2,052
Rochester Health Care Fac., Mayo Foundation/Mayo Medical Center,
5.875%, 11/15/08............................................................. 2,880 2,938
5.90%, 11/15/09.............................................................. 2,000 2,033
5.90%, 11/15/10.............................................................. 4,000 4,036
6.25%, 11/15/21.............................................................. 3,000 3,017
Univ. of Minnesota, Residual Interest Bond/Inverse Floater, 8/15/03
(Currently 5.159%)........................................................... 5,800 5,293
- ---------------------------------------------------------------------------------------------------------------------------
MISSISSIPPI -- 0.5%
Claiborne County, PCR, Systems Energy Resources, 9.875%, 12/1/14..................... 3,400 3,887
Mississippi Home Corp., Single Family Mortgage, (FGIC Insured),
9.25%, 3/1/95................................................................ 1,005 1,090
Warren County, PCR, Mississippi Power and Light, 7.00%, 4/1/22....................... 1,500 1,520
- ---------------------------------------------------------------------------------------------------------------------------
MISSOURI -- 0.7%
Joplin IDA, Tri-State Osteopathic Hosp. Assoc., 8.25%, 12/15/14...................... 1,440 1,451
</TABLE>
6
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<TABLE>
<CAPTION>
Face Amount Value
----------- ----------
<S> <C> <C>
MISSOURI (cont'd)
Missouri HEFA, Bethesda Health Group, 7.50%, 8/15/12................................. $ 1,250 $ 1,269
Sisters of Mercy Health, VRDN (Currently 4.05%).............................. 1,200 1,200
SSM Health Care, (MBIA Insured), 6.25%, 6/1/07............................... 2,690 2,815
St. Anthony's Medical Center, VRDN (Currently 4.05%)......................... 2,300 2,300
- ---------------------------------------------------------------------------------------------------------------------------
NEBRASKA -- 0.2%
Omaha Public Power Dist., Electric System, 6.20%, 2/1/17............................. 3,000 3,095
- ---------------------------------------------------------------------------------------------------------------------------
NEVADA -- 1.1%
Clark County School Dist., Limited Tax School Improvement, GO,
(MBIA Insured), 7.00%, 6/1/11................................................ 3,500 3,918
Nevada, Municipal Bond Bank, GO, 7.25%, 11/1/10 (Escrowed to Maturity)............... 3,050 3,420
Nevada Housing Division, 12.50%, 10/1/96............................................. 30 32
7.85%, 10/1/15............................................................... 1,090 1,152
Washoe County School Dist., GO, (MBIA Insured), 5.75%, 6/1/14........................ 7,000 6,762
- ---------------------------------------------------------------------------------------------------------------------------
NEW JERSEY -- 1.9%
New Jersey Sports & Exposition Auth., Monmouth Park, 8.00%, 1/1/25................... 4,500 4,699
New Jersey Turnpike Auth., 6.50%, 1/1/16............................................. 19,000 19,957
- ---------------------------------------------------------------------------------------------------------------------------
NEW MEXICO -- 0.2%
Gallup, PCR, Plains Electric Generation and Transmission Coop.,
(MBIA Insured), 6.65%, 8/15/17............................................... 2,000 2,087
- ---------------------------------------------------------------------------------------------------------------------------
NEW YORK -- 13.4%
Dormitory Auth. of the State of New York, City Univ., 5.75%, 7/1/13.................. 10,000 9,313
6.00%, 7/1/14........................................................... 14,000 13,457
6.00%, 7/1/16........................................................... 6,700 6,390
5.75%, 7/1/18........................................................... 11,480 10,568
New York State Dept. of Health, 5.50%, 7/1/23................................ 4,250 3,712
State Univ. Ed. Fac., 6.25%, 5/15/20......................................... 2,000 1,962
Vassar College, 7.25%, 7/1/15................................................ 2,000 2,140
Municipal Assistance Corp. for the City of New York, 7.375%, 7/1/08.................. 2,500 2,621
New York City, GO, 6.375%, 8/1/04.................................................... 4,145 4,135
7.50%, 2/1/08........................................................... 2,500 2,636
8.00%, 8/1/16........................................................... 180 208
8.00%, 8/1/16 (Pre-refunded 8/1/01+).................................... 8,820 10,302
7.25%, 8/15/19.......................................................... 7,800 8,095
(FSA Insured), 6.00%, 12/1/18 (Escrowed to Maturity)......................... 5,000 4,974
(MBIA Insured), 7.00%, 8/15/16............................................... 2,625 2,666
New York City Municipal Water Fin. Auth., (FGIC Insured), 6.00%, 6/15/16............. 3,000 2,996
(MBIA Insured), 5.50%, 6/15/15.......................................... 6,960 6,569
Water & Sewer Systems, (FGIC Insured), VRDN (Currently 3.90%)................ 3,900 3,900
New York State Environmental Fac. Corp., PCR, State Water Revolving
Fund, 6.90%, 11/15/15........................................................ 5,365 5,766
New York State Housing Fin. Agency, State Univ. Construction,
7.80%, 5/1/01 (Escrowed to Maturity)......................................... 2,000 2,286
</TABLE>
7
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T. Rowe Price Tax-Free Income Fund / Statement of Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Amount Value
----------- ----------
<S> <C> <C>
NEW YORK (cont'd)
New York State Local Gov't. Assistance Corp., 6.25%, 4/1/18.......................... $ 5,000 $ 5,007
6.25%, 4/1/21........................................................... 6,330 6,329
Public Benefit Corp., 7.20%, 4/1/04.......................................... 5,000 5,496
6.00%, 4/1/14........................................................... 9,750 9,705
New York State Medical Care Fac. Fin. Agency, Albany & St. John's Medical
Center, (FHA Guaranteed), 6.20%, 2/15/28................................ 3,980 3,969
Buffalo General Hosp., (FHA Guaranteed), 6.00%, 8/15/14...................... 9,090 9,048
Mental Health Services, 5.375%, 2/15/14...................................... 3,500 3,085
6.50%, 8/15/24.......................................................... 6,000 6,019
Mount Sinai Hosp., (FHA Guaranteed), 5.75%, 8/15/19.......................... 5,000 4,742
New York Hosp., (AMBAC Insured), 6.50%, 8/15/29.............................. 4,625 4,725
Presbyterian Hosp., (FHA Guaranteed), 5.50%, 8/15/24......................... 5,000 4,473
St. Luke-Roosevelt, (FHA Guaranteed), 5.60%, 8/15/13......................... 2,275 2,172
New York State Power Auth., 7.375%, 1/1/18 (Pre-refunded 1/1/96+).................... 1,600 1,667
New York State Thruway Auth., (FGIC Insured), 5.50%, 1/1/23.......................... 5,000 4,606
6.00%, 1/1/25................................................................ 2,000 1,981
- ---------------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA -- 2.5%
Charlotte-Mecklenberg Hosp. Auth., North Carolina Health Care System,
6.25%, 1/1/20................................................................ 2,500 2,520
Cumberland County, Civic Center, COP, (AMBAC Insured), 6.40%, 12/1/24................ 2,750 2,839
North Carolina Eastern Municipal Power Agency, 7.50%, 1/1/10......................... 4,330 4,751
7.50%, 1/1/10 (Escrowed to Maturity).................................... 4,650 5,369
6.50%, 1/1/18 (Escrowed to Maturity).................................... 2,655 2,795
6.00%, 1/1/26........................................................... 3,500 3,173
(MBIA Insured), 5.75%, 1/1/20................................................ 6,000 5,777
North Carolina Housing Fin. Agency, 7.40%, 3/1/28.................................... 2,250 2,355
North Carolina Medical Care Commission, Stanley Memorial Hosp.,
7.80%, 10/1/19............................................................... 3,000 3,139
- ---------------------------------------------------------------------------------------------------------------------------
OHIO -- 2.1%
Cleveland, Waterworks, (MBIA Insured), 5.50%, 1/1/13................................. 4,765 4,569
Columbus, Sewerage System, 6.25%, 6/1/08............................................. 2,250 2,333
Waterworks Enlargement, GO, 6.00%, 5/1/13.................................... 2,000 2,010
Franklin County, GO, 6.80%, 12/1/09 (Pre-refunded 12/1/00+).......................... 2,860 3,144
6.80%, 12/1/10 (Pre-refunded 12/1/00+).................................. 3,240 3,562
County Courthouse (Limited Tax), GO, 6.375%, 12/1/17
(Pre-refunded 12/1/01+)................................................. 2,000 2,165
Hamilton County, The Metropolitan Sewer Dist. of Greater Cincinnati,
(FGIC Insured), 5.00%, 12/1/14............................................... 8,000 7,209
Montgomery County Hosp. Fac., Kettering Medical Center, (MBIA Insured),
7.375%, 4/1/02............................................................... 2,500 2,717
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
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<TABLE>
<CAPTION>
Face Amount Value
----------- ----------
<S> <C> <C>
OKLAHOMA -- 0.3%
Tulsa County Home Fin. Auth., Single Family Mortgage, (FGIC Insured),
6.90%, 8/1/10 (Escrowed to Maturity)......................................... $ 4,250 $ 4,600
- ---------------------------------------------------------------------------------------------------------------------------
OREGON -- 0.4%
Oregon, Veterans' Welfare, GO, VRDN (Currently 4.05%)................................ 1,700 1,700
Portland, Sewer System, 6.25%, 6/1/15................................................ 4,250 4,332
- ---------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA -- 2.7%
Allegheny County Hosp. Dev. Auth., Montefiore Hosp. Assoc. of Western
Pennsylvania, 9.75%, 7/1/05 (Pre-refunded 7/1/96+)........................... 12,000 13,018
Pennsylvania, GO, (MBIA Insured), 5.60%, 6/15/14..................................... 11,000 10,646
Pennsylvania IDA, Economic Dev., (AMBAC Insured), 5.50%, 1/1/14...................... 6,250 5,954
Pennsylvania Intergovernmental Cooperative Auth., Special Tax,
(FGIC Insured), 6.75%, 6/15/21............................................... 4,750 5,013
Pennsylvania Public School Building Auth., Commonwealth of Pennsylvania,
9.625%, 11/1/03 (Pre-refunded 11/1/95+)...................................... 910 940
- ---------------------------------------------------------------------------------------------------------------------------
PUERTO RICO -- 3.4%
Puerto Rico Aqueduct & Sewer Auth., 7.875%, 7/1/17................................... 11,500 12,603
GO, 7.90%, 7/1/07............................................................ 2,000 2,174
Puerto Rico Housing Bank & Fin. Agency, Loan Insurance Claims,
4.125%, 12/1/96.............................................................. 10,660 10,377
Puerto Rico Ind., Med., Higher Ed. & Environmental Pollution Control Fac.
Fin. Auth., Catholic Univ. of Puerto Rico, 9.25%, 12/1/97.................... 4,930 5,456
Puerto Rico Infrastructure Fin. Auth., 7.75%, 7/1/08................................. 1,740 1,878
7.50%, 7/1/09................................................................ 9,955 10,585
Puerto Rico Public Fin. Corp., 6.35%, 7/1/95 (Escrowed to Maturity).................. 1,685 1,696
- ---------------------------------------------------------------------------------------------------------------------------
RHODE ISLAND -- 1.5%
Rhode Island Health & Ed. Building Corp., Bryant College, (MBIA Insured),
6.125%, 6/1/19.......................................................... 5,000 4,934
Rhode Island Hosp., (FGIC Insured), Residual Interest Bond/Inverse
Floater, 8/15/21 (Currently 9.299%)..................................... 1,000 1,079
Rhode Island Housing & Mortgage Fin. Corp., Homeownership Opportunity,
6.70%, 10/1/14............................................................... 5,000 5,121
7.85%, 10/1/16............................................................... 8,000 8,518
- ---------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA -- 2.3%
Darlington County, PCR, Carolina Power & Light, (MBIA Insured),
6.60%, 11/1/10............................................................... 4,000 4,254
Greenville Hosp. System, Board of Trustees, Hosp. Fac., 5.50%, 5/1/16................ 5,250 4,728
Piedmont Municipal Power Agency, (FGIC Insured), 6.50%, 1/1/14....................... 3,500 3,747
(MBIA Insured), 5.375%, 1/1/25............................................... 3,900 3,508
</TABLE>
9
<PAGE>
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T. Rowe Price Tax-Free Income Fund / Statement of Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Amount Value
----------- ----------
<S> <C> <C>
SOUTH CAROLINA (cont'd)
South Carolina Public Service Auth., (AMBAC Insured), 6.25%, 1/1/22**................ $ 6,500 $ 6,349
(FGIC Insured), 5.875%, 1/1/23.......................................... 6,500 6,305
Santee Cooper, 7.00%, 7/1/12 (Pre-refunded 7/1/01+).......................... 1,650 1,830
- ---------------------------------------------------------------------------------------------------------------------------
SOUTH DAKOTA -- 0.9%
South Dakota Building Auth., 7.50%, 12/1/16.......................................... 10,000 10,458
South Dakota HDA, Homeownership Mortgage, 6.65%, 5/1/14.............................. 2,000 2,046
- ---------------------------------------------------------------------------------------------------------------------------
TENNESSEE -- 1.8%
Chattanooga Health, Ed. & Housing Fac. Board, Memorial Hosp.,
(MBIA Insured), 6.625%, 9/1/07............................................... 2,950 3,216
6.625%, 9/1/08.......................................................... 3,150 3,419
Chattanooga Ind. Dev. Board, Dupont, 6.35%, 7/1/22................................... 2,000 2,032
Memphis, Sanitary Sewerage System, 5.75%, 10/1/14.................................... 3,715 3,629
Nashville & Davidson County Health & Ed. Fac. Board, Vanderbilt Univ.,
5.125%, 7/1/13............................................................... 4,000 3,614
Shelby County Health Ed. and Housing Fac. Board, Le Bonhuer Children's
Medical Center, (MBIA Insured), 5.50%, 8/15/12............................... 4,250 4,026
Tennessee, GO, BAN, VRDN (Currently 4.00%)........................................... 3,600 3,600
- ---------------------------------------------------------------------------------------------------------------------------
TEXAS -- 6.4%
Arlington Independent School Dist., Capital Appreciation, GO,
Zero Coupon, 2/15/16......................................................... 9,650 2,568
Brazos River Auth., Houston Lighting & Power, 8.25%, 5/1/15.......................... 18,000 19,462
Denison Hosp. Auth., Texoma Medical Center, 7.00%, 8/15/14........................... 4,245 4,240
Harris County, GO, (MBIA Insured), Zero Coupon, 8/15/04.............................. 6,000 3,541
Toll Road, (MBIA Insured), 6.375%, 8/15/24................................... 2,250 2,295
Harris County Health Fac. Dev. Corp., Memorial Hosp., 7.125%, 6/1/15................. 2,500 2,588
Sisters of Charity of the Incarnate Word, 7.10%, 7/1/21...................... 4,000 4,189
St. Luke's Episcopal Hosp., VRDN (Currently 3.75%)........................... 2,500 2,500
Texas Medical Center, (MBIA Insured), 7.375%, 5/15/20........................ 7,645 8,182
Harris County Hosp. Dist., (AMBAC Insured), 7.40%, 2/15/10........................... 1,500 1,725
Matagorda County Navigation Dist. Number One, PCR, Central
Power & Light, 7.50%, 12/15/14............................................... 1,500 1,600
Houston Lighting & Power, (FGIC Insured), 7.20%, 12/1/18..................... 3,600 3,860
Texas PFA, GO, 7.00%, 10/1/08 (Pre-refunded 10/1/99+)................................ 3,000 3,239
Texas Veterans, GO, 8.25%, 12/1/10................................................... 3,900 4,075
6.25%, 12/1/15............................................................... 6,200 6,381
7.40%, 12/1/20............................................................... 14,205 15,261
- ---------------------------------------------------------------------------------------------------------------------------
UTAH -- 0.9%
Intermountain Power Agency, 7.20%, 7/1/19............................................ 6,200 6,475
7.50%, 7/1/21................................................................ 4,750 5,049
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
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<TABLE>
<CAPTION>
Face Amount Value
----------- ----------
<S> <C> <C>
VERMONT -- 0.8%
Vermont Ed. and Health Buildings Fin. Agency, Medical Center Hosp. of
Vermont, (FGIC Insured), 7.35%, 9/1/13....................................... $ 4,650 $ 4,690
7.45%, 9/1/23........................................................... 2,000 2,027
Middlebury College, 6.00%, 11/1/22........................................... 4,585 4,488
- ---------------------------------------------------------------------------------------------------------------------------
VIRGINIA -- 5.7%
Augusta County IDA, Augusta Hosp. Corp., (AMBAC Insured),
5.50%, 9/1/15................................................................ 2,000 1,867
Chesapeake Bay Bridge & Tunnel Dist., (MBIA Insured), 5.75%, 7/1/25.................. 5,750 5,496
Fairfax County Water Auth., 6.00%, 4/1/22............................................ 12,500 12,400
Henrico County IDA, Bon Secours Health System, St. John's Hosp.,
7.50%, 9/1/15........................................................... 1,900 2,051
Bon Secours Health System, St. Mary's Hosp., 7.50%, 9/1/07................... 1,735 1,873
Richmond Metropolitan Auth., Expressway, (FGIC Insured), 6.375%, 7/15/16............. 5,400 5,559
5.75%, 7/15/22............................................................... 3,375 3,249
Roanoke IDA, Roanoke Memorial Hosp., Carilion Health System,
VRDN (Currently 3.75%).................................................. 700 700
Virginia HDA, 6.25%, 7/1/11.......................................................... 5,000 5,009
6.90%, 7/1/13................................................................ 11,100 11,439
6.75%, 7/1/14................................................................ 7,435 7,667
6.80%, 7/1/17................................................................ 8,900 9,154
Virginia Transportation Board, Northern Virginia Transportation Dist.,
5.25%, 5/15/19.......................................................... 3,000 2,648
U.S. Route 58 Corridor Dev. Program, 6.00%, 5/15/19.......................... 2,925 2,892
Winchester IDA, Winchester Medical Center, Inc., (AMBAC Insured),
Embedded Interest Rate Swap, 1/1/05 (Currently 4.51%)........................ 1,500 1,345
1/1/06 (Currently 4.61%)................................................ 1,500 1,344
1/1/07 (Currently 4.71%)................................................ 1,600 1,434
- ---------------------------------------------------------------------------------------------------------------------------
WASHINGTON -- 4.7%
Port of Seattle, 7.40%, 12/1/09...................................................... 1,000 1,128
Tacoma Electric System, (AMBAC Insured), Residual Interest Bond/Inverse
Floater, 1/1/15 (Currently 7.521%)........................................... 5,000 5,213
(FGIC Insured), 6.25%, 1/1/15........................................... 7,550 7,656
Washington HFA, Sisters of Providence, VRDN (Currently 3.95%)........................ 11,900 11,900
Washington Public Power Supply System, 7.25%, 7/1/09................................. 3,000 3,278
7.25%, 7/1/15 (Pre-refunded 1/1/00+).................................... 2,200 2,430
7.50%, 7/1/15........................................................... 2,800 3,019
7.50%, 7/1/15 (Pre-refunded 7/1/99+).................................... 4,310 4,791
VRDN (Currently 4.15%).................................................. 5,000 5,000
(FSA Insured), 6.25%, 7/1/12................................................. 5,000 5,063
(MBIA Insured), 5.60%, 7/1/15................................................ 7,500 6,951
6.25%, 7/1/17........................................................... 6,000 6,004
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price Tax-Free Income Fund / Statement of Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Amount Value
----------- ----------
<S> <C> <C>
WEST VIRGINIA -- 0.7%
Kanawha County Building Commission, Charleston Area Medical Center,
7.50%, 11/1/08............................................................... $ 2,250 $ 2,409
West Virginia State Parkways, Economic Dev. & Tourism Auth.,
(FGIC Insured), Residual Interest Bond/Inverse Floater, 5/16/19
(Currently 7.271%)........................................................... 3,600 3,267
West Virginia State Univ. Board of Trustees, (AMBAC Insured),
6.00%, 4/1/12................................................................ 3,025 3,036
- ---------------------------------------------------------------------------------------------------------------------------
WISCONSIN -- 0.1%
Wisconsin Public Power Agency, (AMBAC Insured), 7.00%, 7/1/02........................ 1,500 1,631
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 100.6% OF NET ASSETS (COST -- $1,284,812)......... 1,336,788
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES........................................................ (8,113)
----------
NET ASSETS CONSIST OF: Value
----------
Accumulated net investment income -- net of distributions............................ $ 632
Accumulated realized gains/losses -- net of distributions............................ (25,311)
Net unrealized gain (loss)........................................................... 51,976
Paid-in-capital applicable to 143,580,423 shares of $1.00 par
value capital stock outstanding; 500,000,000 shares authorized............... 1,301,378
----------
Net Assets........................................................................... $1,328,675
==========
Net Asset Value Per Share............................................................ $9.25
=====
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
** - When issued security
+ - Used in determining portfolio maturity
AMBAC - AMBAC Indemnity Corp.
BAN - Bond Anticipation Note
BIGI - Bond Investors Guaranty Insurance
CDA - Community Development Administration
COP - Certificates of Participation
DOT - Department of Transportation
EFA - Educational Facility Authority
FGIC - Financial Guaranty Insurance Company
FHA - Federal Housing Authority
FSA - Financial Security Assurance Corp.
GO - General Obligation
HDA - Housing Development Authority
HEFA - Health & Educational Facility Authority
HFA - Health Facility Authority
HFC - Housing Financing Corporation
HHEFA - Health & Higher Educational Facility Authority
IDA - Industrial Development Authority
IDR - Industrial Development Revenue
MBIA - Municipal Bond Insurance Association Corp.
PCR - Pollution Control Revenue
PFA - Public Facility Authority
TRAN - Tax Revenue Anticipation Note
VRDN - Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
T. Rowe Price Tax-Free Income Fund / Year Ended February 28, 1995
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income............................................................. $ 84,759
--------
Expenses
Investment management..................................................... 6,547
Shareholder servicing..................................................... 793
Custody and accounting.................................................... 262
Prospectus and shareholder reports........................................ 82
Registration.............................................................. 54
Legal and audit........................................................... 38
Proxy and annual meeting.................................................. 37
Directors................................................................. 27
Miscellaneous............................................................. 25
--------
Total expenses............................................................ 7,865
--------
Net investment income....................................................... 76,894
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities................................................................ (23,805)
Futures................................................................... 615
Options................................................................... (158)
--------
Net realized gain (loss).................................................. (23,348)
Change in net unrealized gain or loss on securities......................... (34,914)
--------
Net realized and unrealized gain (loss)..................................... (58,262)
--------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS........................... $ 18,632
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
T. Rowe Price Tax-Free Income Fund
(in thousands)
<TABLE>
<CAPTION>
Year Ended February 28,
1995 1994
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income................................... $ 76,894 $ 79,920
Net realized gain (loss)................................ (23,348) 45,315
Change in net unrealized gain or loss................... (34,914) (44,503)
---------- ----------
Increase (decrease) in net assets from operations....... 18,632 80,732
---------- ----------
Distributions to shareholders
Net investment income................................... (76,894) (79,920)
Net realized gain....................................... (5,930) (27,101)
---------- ----------
Decrease in net assets from distributions............... (82,824) (107,021)
---------- ----------
Capital share transactions*
Shares sold............................................. 197,393 265,837
Distributions reinvested................................ 57,113 76,861
Shares redeemed......................................... (314,220) (305,474)
---------- ----------
Increase (decrease) in net assets from
capital share transactions.......................... (59,714) 37,224
---------- ----------
Increase (decrease) in net assets......................... (123,906) 10,935
NET ASSETS
Beginning of period..................................... 1,452,581 1,441,646
---------- ----------
End of period........................................... $1,328,675 $1,452,581
========== ==========
- -----------------------------------------------------------------------------------------------------
*Share information
Shares sold........................................... 21,817 26,880
Distributions reinvested.............................. 6,296 7,772
Shares redeemed....................................... (34,848) (30,902)
========== ==========
Increase (decrease) in shares outstanding............. (6,735) 3,750
========== ==========
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price Tax-Free Income Fund / February 28, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Tax-Free Income Fund (the fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
A) Valuation - Debt securities are generally traded in the over-the-counter
market. Investments in securities with remaining maturities of one year or more
are stated at fair value as furnished by dealers who make markets in such
securities or by an independent pricing service, which considers yield or price
of bonds of comparable quality, coupon, maturity, and type, as well as prices
quoted by dealers who make markets in such securities. Securities with remaining
maturities less than one year are stated at fair value which is determined by
using a matrix system that establishes a value for each security based on money
market yields.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
B) Premiums and Discounts - Premiums and discounts on municipal securities
are accounted for in accordance with federal income tax regulations, which
require the amortization of all premiums and discounts except market
discounts. Market discounts are included in the gain or loss recorded on
disposition of the security for financial reporting purposes and ordinary
income for tax purposes.
C) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on an identified cost basis. Distributions to shareholders are recorded
by the fund on the ex-dividend date. Income and capital gain distributions are
determined in accordance with federal income tax regulations and may differ from
those determined in accordance with generally accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks and enhance performance. The
investment objective, policies, program, risk factors and following practices
of the fund are described more fully in the fund's Prospectus and Statement
of Additional Information.
A) Options - Call and put options on futures contracts give the holder the
right to purchase or sell, respectively, a particular futures contract at a
specified price on a certain date. Risks arise from possible illiquidity of
the options market and from movements in underlying futures prices.
Transactions in options written and related premiums received during the
period ended February 28, 1995, were as follows:
<TABLE>
<CAPTION>
Face Amount
Subject to Options Premiums
------------------ ----------
<S> <C> <C>
Options Outstanding at
Beginning of Period $ -- $ --
Options Written 30,000,000 135,000
Options Closed (30,000,000) (135,000)
------------ ---------
Options Outstanding at
End of Period $ -- $ --
============ =========
</TABLE>
B) Other - Purchases and sales of portfolio securities, other than short-term
securities, aggregated $635,467,000 and $622,786,000, respectively, for the
period ended February 28, 1995.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its income. The fund has unused realized capital loss carryforwards for
federal income tax purposes of $16,746,000 which expire in 2003. The fund
intends to retain gains realized in future periods that
15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Cont'd)
- --------------------------------------------------------------------------------
may be offset by available capital loss carryforwards.
In order for the fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, $178,000
of undistributed net realized gains was reclassified as a decrease to paid-in-
capital during the period ended February 28, 1995. The results of operations
and net assets were not affected by the reclassifications.
At February 28, 1995, the aggregate cost of investments for federal
income tax and financial reporting purposes was $1,284,812,000 and net
unrealized gain aggregated $51,976,000, of which $61,948,000 related to
appreciated investments and $9,972,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the Manager) provides for an annual investment management
fee, of which $494,000 was payable at February 28, 1995. The fee is computed
daily and paid monthly, and consists of an Individual Fund Fee equal to 0.15%
of average daily net assets and a Group Fee. The Group Fee is based on the
combined assets of certain mutual funds sponsored by the Manager or Rowe-
Price Fleming International, Inc. (the Group). The Group Fee rate ranges from
0.48% for the first $1 billion of assets to 0.31% for assets in excess of $34
billion. At February 28, 1995, and for the period then ended, the effective
annual Group Fee rate was 0.34%. The fund pays a pro rata share of the Group
Fee based on the ratio of its net assets to those of the Group.
In addition, the fund has entered into agreements with the Manager
and a wholly-owned subsidiary of the Manager, pursuant to which the fund
receives certain other services. The Manager computes the daily share price
and maintains the financial records of the fund. T. Rowe Price Services, Inc.
(TRPS) is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. The fund incurred
expenses pursuant to these related party agreements totaling approximately
$678,000 for the period ended February 28, 1995, of which $76,000 was payable
at period end.
16
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
T. Rowe Price Tax-Free Income Fund
<TABLE>
<CAPTION>
For a share outstanding throughout each period
-------------------------------------------------------------------------
Year Ended
Feb. 28, Feb. 28, Feb. 28, Feb. 29, Feb. 28,
1995 1994 1993 1992 1991
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $9.66 $9.84 $9.09 $8.79 $8.66
----- ----- ----- ----- -----
Investment Activities
Net investment income.......................... 0.53 0.54 0.56 0.57 0.57
Net realized and unrealized gain (loss)........ (0.37) -- 0.75 0.30 0.13
----- ----- ----- ----- -----
Total from Investment Activities............... 0.16 0.54 1.31 0.87 0.70
----- ----- ----- ----- -----
Distributions
Net investment income.......................... (0.53) (0.54) (0.56) (0.57) (0.57)
Net realized gain.............................. (0.04) (0.18) -- -- --
----- ----- ----- ----- -----
Total Distributions............................ (0.57) (0.72) (0.56) (0.57) (0.57)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD................... $9.25 $9.66 $9.84 $9.09 $8.79
===== ===== ===== ===== =====
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total Return..................................... 1.90% 5.50% 14.88% 10.17% 8.40%
Ratio of Expenses to Average Net Assets.......... 0.59% 0.59% 0.61% 0.62% 0.63%
Ratio of Net Investment Income
to Average Net Assets.......................... 5.80% 5.40% 5.98% 6.34% 6.59%
Portfolio Turnover Rate.......................... 49.3% 71.2% 76.7% 57.9% 79.7%
Net Assets, End of Period (in thousands)......... $1,328,675 $1,452,581 $1,441,646 $1,245,297 $1,128,635
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
T. Rowe Price Tax-Free Income Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the selected per
share data and information (which appears under the heading "Financial
Highlights") present fairly, in all material respects, the financial position
of T. Rowe Price Tax-Free Income Fund, Inc. at February 28, 1995, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the selected per share
data and information for each of the five years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and selected per share data and information (hereafter referred to
as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements
in accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at February 28, 1995 by correspondence with the
custodian and brokers and, where appropriate, the application of alternative
auditing procedures for unsettled security transactions, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
March 17, 1995
18
<PAGE>
- --------------------------------------------------------------------------------
Shareholder Services
- --------------------------------------------------------------------------------
To help shareholders monitor their current investments and make decisions
that accurately reflect their financial goals, T. Rowe Price offers a wide
variety of information and services--at no extra cost.
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE--Shareholder Service representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m., E.T. Call
1-800-225-5132 to speak directly with a representative who will be able to
assist you with your accounts.
IN PERSON--Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
AUTOMATED 24-HOUR SERVICES
Tele*Access/(R)/ (1-800-638-2587) provides information such as account
balance, date and amount of your last transaction, latest dividend payment, and
fund prices and yields. Additionally, you have the ability to request
prospectuses, statements, account and tax forms, reorder checks, and initiate
purchase, redemption, and exchange orders for identically registered accounts.
PC*Access/(R)/ provides the same information as Tele*Access, but on a
personal computer via dial-up modem.
ACCOUNT SERVICES
Checking--Write checks for $500 or more on any money market and most
bond fund accounts.
Automatic Investing--Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one fund
account into another, such as from a money fund into a stock fund. A low, $50
minimum makes it easy to get started.
Automatic Withdrawal--If you need money from your fund account on a
regular basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options--Reinvest all or some of
your distributions, or take them in cash. We give you maximum flexibility and
convenience.
INVESTMENT INFORMATION
Combined Statement--A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides total
portfolio value, and lists your investments by type--stock, bond, and money
market. Detail pages itemize account transactions by fund.
Quarterly Shareholder Reports--Portfolio managers review the performance
of the funds in plain language and discuss T. Rowe Price's economic outlook.
The T. Rowe Price Report--A quarterly newsletter with relevant articles
on market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Insights--A library of information that includes reports on mutual fund
tax issues, investment strategies, and financial markets.
Detailed Investment Guides--Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also
available on disk for PC use), and Guide to Risk-Adjusted Performance can help
you determine and reach your investment goals.
DISCOUNT BROKERAGE
You can trade stocks, bonds, options, precious metals, and other securities at a
substantial savings over regular commission rates. Call a shareholder service
representative for more information.
19
<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price No-Load Mutual Funds
- --------------------------------------------------------------------------------
STABILITY
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money
Market
Tax-Exempt Money
CONSERVATIVE INCOME
Adjustable Rate
U.S. Government
Short-Term Bond
Short-Term Global Income
Summit Limited-Term Bond
U.S. Treasury Intermediate
Florida Insured Intermediate
Tax-Free
Maryland Short-Term
Tax-Free Bond
Summit Municipal
Intermediate
Tax-Free Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
INCOME
Global Government Bond
GNMA
New Income
Spectrum Income
Summit GNMA
U.S. Treasury Long-Term
California Tax-Free Bond
Georgia Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Tax-Free Income
Virginia Tax-Free Bond
AGGRESSIVE INCOME
Emerging Markets Bond
High Yield
International Bond
Tax-Free High Yield
CONSERVATIVE GROWTH
Balanced
Capital Appreciation
Dividend Growth
Equity Income
Equity Index
Growth & Income
Spectrum Growth
Value
GROWTH
Blue Chip Growth
European Stock
Growth Stock
International Stock
Japan
Mid-Cap Growth
New Era
Small-Cap Value
AGGRESSIVE GROWTH
Capital Opportunity
Emerging Markets Stock
International Discovery
Latin America
New America Growth
New Asia
New Horizons
OTC
Science & Technology
PERSONAL STRATEGY FUNDS
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
Call if you want to know about any T. Rowe Price fund. We'll send you a
prospectus with more complete information, including management fees and other
expenses. Read it carefully before you invest or send money.
20
