Annual Report -- Financial Statements
T. Rowe Price
Tax-Free
Income Fund
February 28, 1999
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Portfolio Highlights
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SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
8/31/98 2/28/99
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Hospital Revenue 17% 15%
Prerefunded Bonds 11 12
Nuclear Revenue 9 11
General Obligation - Local 9 11
Housing Finance Revenue 9 8
General Obligation - State 5 5
Dedicated Tax Revenue 6 5
Ground Transportation Revenue 6 5
Escrowed to Maturity 5 5
Lease Revenue 4 5
Educational Revenue 3 3
Electric Revenue 5 3
Air and Sea Transportation Revenue 3 3
Water and Sewer Revenue 3 3
Miscellaneous Revenue 3 2
All Other 3 3
Other Assets Less Liabilities -1 1
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Total 100% 100%
T. Rowe Price Tax-Free Income Fund
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Financial Highlights For a share outstanding throughout each period
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Year
Ended
2/28/99 2/28/98 2/28/97 2/29/96 2/28/95
NET ASSET VALUE
Beginning of period $ 9.95 $ 9.59 $ 9.66 $ 9.25 $ 9.66
Investment activities
Net investment income 0.50 0.52 0.52 0.52 0.53
Net realized and
unrealized gain (loss) 0.03 0.36 (0.07) 0.41 (0.37)
Total from
investment activities 0.53 0.88 0.45 0.93 0.16
Distributions
Net investment income (0.50) (0.52) (0.52) (0.52) (0.53)
Net realized gain (0.04) -- -- -- (0.04)
Total distributions (0.54) (0.52) (0.52) (0.52) (0.57)
NET ASSET VALUE
End of period $ 9.94 $ 9.95 $ 9.59 $ 9.66 $ 9.25
----------------------------------------------------
Ratios/Supplemental Data
Total returnaaa# 5.48% 9.37% 4.81% 10.31% 1.90%
Ratio of total expenses to
average net assets 0.55% 0.55% 0.57% 0.58% 0.59%
Ratio of net investment
income to average
net assets 5.06% 5.31% 5.41% 5.49% 5.80%
Portfolio turnover rate 34.1% 36.3% 40.7% 48.7% 49.3%
Net assets,
end of period
(in millions) $ 1,483 $ 1,396 $ 1,337 $ 1,376 $ 1,329
# Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Income Fund
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February 28, 1999
Statement of Net Assets Par Value
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In thousands
ALABAMA 2.9%
Alabama, GO
Zero Coupon, 9/1/03 $ 10,000 $ 7,843
Zero Coupon, 3/1/04 10,000 7,560
Zero Coupon, 9/1/04 5,500 4,009
Alabama Docks Dept.
Docks Fac.
5.25%, 10/1/10 (MBIA Insured) 2,400 2,574
5.50%, 10/1/22 (MBIA Insured) 5,000 5,239
Alabama Water Pollution Control Auth.,
Revolving Fund Loan
6.75%, 8/15/17 (AMBAC Insured) 2,685 3,039
Alexander Special Care Fac. Fin. Auth.,
Russell Hosp.
6.00%, 12/1/22 3,250 3,330
Baldwin County Eastern Shore Health Care Auth.
Thomas Hosp.
5.75%, 4/1/27 2,500 2,486
6.75%, 4/1/21 1,900 2,056
Columbia Industrial Dev. Board,
Alabama Power Project
VRDN (Currently 3.30%) 200 200
Mobile, GO
Zero Coupon, 8/15/20 (MBIA Insured) 5,000 1,598
Capital Improvement Warrants
Zero Coupon, 8/15/16 (MBIA Insured) 4,330 1,475
Zero Coupon, 8/15/17 (MBIA Insured) 4,435 1,409
Total Alabama (Cost $39,710) 42,818
ALASKA 1.3%
Alaska Housing Fin.
5.85%, 12/1/14 (MBIA Insured) 3,405 3,555
5.875%, 12/1/24 (MBIA Insured) 11,000 11,556
General Mortgage
Zero Coupon, 12/1/17 (MBIA Insured) 6,250 2,127
Valdez Marine, VRDN
(Currently 3.15%) 2,700 2,700
Total Alaska (Cost $18,762) 19,938
ARIZONA 0.6%
Maricopa County, PCR, Palo Verde,
VRDN (Currently 3.20%) $ 200 $ 200
Salt River Agricultural Improvement
and Power Dist.
Electric System
6.50%, 1/1/22 (FSA Insured)
(Prerefunded 1/1/01!) 8,000 8,581
Total Arizona (Cost $7,904) 8,781
ARKANSAS 0.5%
Little Rock Health Fac. Board,
Baptist Medical Center
6.85%, 11/1/08 2,495 2,970
North Little Rock, Electric System
6.50%, 7/1/15 (MBIA Insured) 4,000 4,779
Total Arkansas (Cost $6,476) 7,749
CALIFORNIA 6.0%
Foothill / Eastern Transportation Corridor Agency
California Toll Road
Zero Coupon, 1/1/15 5,000 2,220
Zero Coupon, 1/1/17 20,000 7,863
Zero Coupon, 1/1/26 5,000 1,174
Los Angeles City, GO
5.80%, 9/1/09 (FGIC Insured)
(Prerefunded 9/1/03!) 2,400 2,645
6.00%, 9/1/14 (MBIA Insured) 5,000 5,560
Los Angeles City, Wastewater
7.15%, 6/1/20 (Prerefunded 6/1/00!) 10,500 11,233
Los Angeles County, COP, Marina del Rey
6.25%, 7/1/03 4,500 4,740
6.50%, 7/1/08 3,250 3,555
Los Angeles County Metropolitan Transportation Auth.
Sales Tax
6.25%, 7/1/13 (MBIA Insured)
(Prerefunded 7/1/02!) 8,965 9,915
7.40%, 7/1/15 5,530 5,721
Los Angeles County Public Works Fin.
Auth., Rowland Heights
5.50%, 10/1/18 (FSA Insured) $ 7,000 $ 7,534
Los Angeles Harbor Dept.
7.60%, 10/1/18 (Escrowed to Maturity) 3,200 4,175
San Bernardino, Sisters of Charity Health Care
7.00%, 7/1/21 (Prerefunded 7/1/01!) 3,000 3,304
San Mateo County Transit Dist.,
5.25%, 6/1/16 (MBIA Insured) 6,000 6,321
Southern California Public Power
Auth., 6.75%, 7/1/11 4,050 4,888
Torrance Redev. Agency,
5.50%, 9/1/28 (MBIA Insured) 7,280 7,407
Total California (Cost $77,367) 88,255
COLORADO 2.9%
Boulder County, Longmont United Hosp.
8.20%, 12/1/20 (Prerefunded 12/1/00!) 2,000 2,184
Denver Airport System, City and County Airport
5.50%, 11/15/25 (MBIA Insured) 12,875 13,412
E-470 Public Highway Auth.
Zero Coupon, 9/1/13 (MBIA Insured) 10,000 4,967
Zero Coupon, 9/1/17 (MBIA Insured) 7,000 2,740
Zero Coupon, 8/31/26
(Prerefunded 8/31/05!) 7,000 1,121
4.75%, 9/1/23 10,000 9,554
Jefferson County School Dist., GO
6.00%, 12/15/12 (AMBAC Insured)
(Prerefunded 12/15/02!) 8,000 8,743
Total Colorado (Cost $40,419) 42,721
CONNECTICUT 0.9%
Connecticut, State Special Tax,
7.125%, 6/1/10 7,350 9,120
Connecticut Dev. Auth.,
Mystic Marinelife Aquarium
7.00%, 12/1/27 1,700 1,802
Mashantucket, 5.75%, 9/1/27 3,000 3,074
Total Connecticut (Cost $11,956) 13,996
DELAWARE 0.3%
Delaware HFA, Beebe Medical Center,
6.75%, 6/1/14 3,500 3,815
Total Delaware (Cost $3,425) 3,815
DISTRICT OF COLUMBIA 2.3%
Dist. of Columbia, GO
5.25%, 6/1/27 $ 9,000 $ 8,679
6.00%, 6/1/14 (MBIA Insured) 6,705 7,552
6.00%, 6/1/17 (MBIA Insured) 3,250 3,653
Howard Univ.
5.50%, 10/1/16 (MBIA Insured) 3,560 3,801
Dist. of Columbia
American Assoc. for the Advancement of Science
5.125%, 1/1/27 (AMBAC Insured) 3,000 2,971
Smithsonian Institution,
5.00%, 2/1/28 7,265 7,123
Total District of Columbia (Cost $33,158) 33,779
FLORIDA 3.4%
Broward County Resource Recovery
Broward Waste Energy, L.P. North
7.95%, 12/1/08 9,685 10,252
Broward Waste Energy, L.P. South
7.95%, 12/1/08 795 841
Dade County, Capital Appreciation
Zero Coupon, 2/1/09 (MBIA Insured) 12,185 7,868
Zero Coupon, 2/1/13 (MBIA Insured) 9,000 4,403
Florida Board of Ed., GO, Public Ed.,
Capital Outlay
7.25%, 6/1/23 6,210 6,595
Jacksonville HFA, Genesis Rehabilitation Hosp.
VRDN (Currently 3.20%) 5,850 5,850
Jacksonville Transportation Auth., GO
7.375%, 7/1/20 (Prerefunded 7/1/00!) 8,750 9,396
Jacksonville, PCR, Florida Power and Light
VRDN (Currently 3.15%) 800 800
Port St. Lucie
Capital Appreciation
Zero Coupon, 9/1/16 (FGIC Insured)
(Prerefunded 9/1/06!) 5,000 2,056
Zero Coupon, 9/1/26 (FGIC Insured)
(Prerefunded 9/1/06!) 5,000 1,080
Saint Lucie County, PCR, Florida Power and Light Co.
VRDN (Currently 3.15%) $ 1,700 $ 1,700
Total Florida (Cost $47,264) 50,841
GEORGIA 5.8%
Burke County Dev. Auth., PCR,
Georgia Power Co.
VRDN (Currently 3.25%) 2,900 2,900
Coweta County Residential Care Fac.
for the Elderly Auth.
Wesley Woods of Newnan-Peachtree City
8.20%, 10/1/16 1,350 1,550
8.25%, 10/1/26 1,800 2,072
Fulton-Dekalb Hosp. Auth.
Grady Memorial Hosp.
6.80%, 1/1/07 (AMBAC Insured)
(Escrowed to Maturity) 5,530 6,522
6.80%, 1/1/08 (AMBAC Insured)
(Escrowed to Maturity) 5,905 7,052
6.85%, 1/1/09 (AMBAC Insured)
(Escrowed to Maturity) 6,310 7,619
6.85%, 1/1/10 (AMBAC Insured)
(Escrowed to Maturity) 6,745 8,205
Fulton-DeKalb Private Hosp. Auth.
Childrens Health, VRDN
(Currently 2.95%) 1,000 1,000
Egleston Childrens Hosp.,
VRDN (Currently 2.95%) 4,000 4,000
Gwinnett County School Dist., GO
6.40%, 2/1/11 1,905 2,257
6.40%, 2/1/12 1,255 1,491
Henry County School Dist.,
GO, 6.45%, 8/1/11 2,100 2,490
Metropolitan Atlanta Rapid Transit Auth. Sales Tax
6.90%, 7/1/16 (MBIA Insured)
(Prerefunded 7/1/04!) 5,655 6,579
Municipal Electric Auth. of Georgia
5.50%, 1/1/20 3,000 3,142
5.70%, 1/1/19 (FGIC Insured) 5,100 5,579
6.125%, 1/1/14 (FGIC Insured) 5,500 5,978
6.40%, 1/1/07 (AMBAC Insured) 7,500 8,566
7.25%, 1/1/24 (AMBAC Insured) 6,500 8,556
Total Georgia (Cost $74,266) 85,558
IDAHO 0.2%
Idaho HFA, St Lukes Regional Med. Center
VRDN (Currently 3.25%) $ 2,600 $ 2,600
Total Idaho (Cost $2,600) 2,600
ILLINOIS 5.9%
Chicago, GO
5.50%, 1/1/18 (AMBAC Insured) 6,630 7,082
6.25%, 1/1/15 (AMBAC Insured) 1,000 1,162
Chicago Board of Ed., GO
Capital Appreciation School Reform
Zero Coupon, 12/1/15 10,000 4,257
Zero Coupon, 12/1/16 10,000 4,010
Chicago School Reform
5.25%, 12/1/21 10,000 10,337
5.75%, 12/1/27 (AMBAC Insured) 4,500 4,818
City of Chicago, GO,
5.50%, 1/1/14 (FGIC Insured) 5,000 5,418
Cook, Dupage, Kane, Lake, McHenry,
and Will Counties
Regional Transportation Auth.
7.75%, 6/1/19 (FGIC Insured) 5,350 7,235
Illinois EFA
Advocate Health Care Network
VRDN (Currently 3.05%) 8,000 8,000
Northwestern Univ.,
Zero Coupon, 11/1/32 4,000 4,221
Illinois HFA
Glen Oaks Medical Center
7.00%, 11/15/19
(Escrowed to Maturity) 3,300 3,814
Highland Park Hosp.
5.75%, 10/1/26 (MBIA Insured) 2,000 2,120
Hinsdale Hosp.
9.00%, 11/15/15
(Escrowed to Maturity) 4,460 4,980
Loyola Univ. Health
5.00%, 7/1/24 (MBIA Insured) 10,510 10,129
Illinois Regional Transportation Auth.
6.70%, 11/1/21 (FGIC Insured) 5,000 6,145
Village of Glenview, Valley Lo Towers,
5.20%, 12/1/27 3,500 3,614
Total Illinois (Cost $82,268) 87,342
INDIANA 1.7%
Goshen, Greencroft Oblig. Group,
5.75%, 8/15/19 $ 3,000 $ 2,911
Indiana HFFA
Ancilla Systems Obligated Group
5.25%, 7/1/22 (MBIA Insured) 5,000 4,986
Clarian Health Partners,
5.50%, 2/15/16 9,205 9,497
Indiana State Office Building Commission,
Correctional Fac.
5.50%, 7/1/20 (AMBAC Insured) 5,750 5,968
St. Joseph's County Hosp. Auth.,
St. Joseph's Medical Center
6.70%, 12/1/02 (MBIA Insured) 1,985 2,189
Total Indiana (Cost $23,977) 25,551
IOWA 0.2%
Iowa HFA, Wesley Retirement,
6.25%, 2/1/12 2,400 2,443
Total Iowa (Cost $2,400) 2,443
KENTUCKY 1.1%
Carroll County, PCR, Kentucky Utilities,
7.45%, 9/15/16 15,000 16,884
Total Kentucky (Cost $15,702) 16,884
LOUISIANA 1.6%
Ascension Parish, PCR, Shell Oil,
VRDN (Currently 3.25%) 800 800
Calcasieu Parish IDA,
Entergy Gulf States, 5.45%, 7/1/10 2,850 2,833
Jefferson Sales Tax Dist.
Capital Appreciation
Zero Coupon, 12/1/09 (FSA Insured) 4,485 2,781
Zero Coupon, 12/1/10 (FSA Insured) 5,755 3,371
Louisiana Offshore Terminal Auth.,
Deepwater Port 7.60%, 9/1/10
(Prerefunded 9/1/00!) 10,440 11,233
St. Tammany Public Trust Fin. Auth.,
Zero Coupon, 7/20/14 4,825 2,317
Total Louisiana (Cost $22,280) 23,335
MAINE 0.2%
Maine Housing Auth., 6.10%, 11/15/15
(AMBAC Insured) 3,000 3,212
Total Maine (Cost $3,000) 3,212
MARYLAND 4.6%
Baltimore City, Convention Center
6.00%, 9/1/17 (FGIC Insured)
(Prerefunded 9/1/04!) $ 1,750 $ 1,939
Baltimore County, Pickersgill Retirement Community
7.70%, 1/1/21 (Prerefunded 1/1/02!) 2,000 2,247
Gaithersburg Hosp. Fac., Asbury Methodist Home
7.85%, 1/1/20 (Prerefunded 1/1/00!) 3,000 3,171
Maryland, GO, 7.155%, 7/15/13 5,000 5,581
Maryland CDA
Single Family
5.60%, 4/1/18 4,400 4,505
5.95%, 4/1/16 7,380 7,837
5.95%, 7/1/23 3,730 3,967
6.45%, 4/1/14 2,000 2,136
7.25%, 4/1/19 2,500 2,616
7.60%, 4/1/17 7,810 8,082
Maryland HHEFA
Johns Hopkins Hosp.,
Zero Coupon, 7/1/19 7,675 2,711
Kennedy Kreiger Institute
6.75%, 7/1/22 (Prerefunded 7/1/01!) 1,500 1,610
Univ. of Maryland Medical System
7.00%, 7/1/22 (FGIC Insured) 1,500 1,916
Maryland Stadium Auth., Sports Fac.
5.75%, 3/1/18 (AMBAC Insured) 2,000 2,132
Maryland Water Quality Fin. Administration
Revolving Loan Fund
7.25%, 9/1/12 (Prerefunded 9/1/00!) 1,950 2,103
Montgomery County Housing Opportunities Commission
Single Family
Zero Coupon, 7/1/28 13,000 2,672
7.50%, 7/1/17 1,060 1,104
Prince George's County, Dimensions Health,
5.30%, 7/1/24 6,685 6,467
Univ. of Maryland, Auxiliary Fac.
and Tuition, 5.75%, 4/1/17 5,000 5,375
Total Maryland (Cost $62,476) 68,171
MASSACHUSETTS 3.6%
Massachusetts Bay Transportation Auth., GO
General Transportation
7.00%, 3/1/14 $ 3,150 $ 3,909
7.00%, 3/1/21 6,200 7,714
Massachusetts HEFA
Harvard Univ., 6.25%, 4/1/20 5,000 5,888
Massachusetts General Hosp.
Southcoast Health System
4.75%, 7/1/27 (MBIA Insured) 16,500 15,381
6.00%, 7/1/15 (AMBAC Insured) 4,500 4,792
Massachusetts Housing Fin. Agency,
6.30%, 12/1/14 6,250 6,685
Massachusetts Port Auth.,
5.00%, 7/1/28 10,000 9,715
Total Massachusetts (Cost $49,967) 54,084
MICHIGAN 1.6%
Detroit City School Dist.,
GO, 5.25%, 5/1/25 (FGIC Insured) 5,000 5,174
Michigan HDA
6.45%, 12/1/14 2,120 2,252
7.55%, 12/1/15 1,250 1,305
Michigan Hosp. Fin. Auth.
Bay Medical Center, 8.25%, 7/1/12 1,000 1,081
Mercy Health, 5.50%, 8/15/20 5,500 5,641
Michigan State Building Auth.,
6.905%, 10/15/16 6,250 6,606
Michigan Strategic Fund,
Holland Home, 5.25%, 11/15/08 2,100 2,062
Total Michigan (Cost $23,370) 24,121
MINNESOTA 0.6%
Rochester Health Care Fac.
Mayo Foundation/Mayo Medical Center
6.25%, 11/15/21 3,000 3,258
Univ. of Minnesota
Residual Interest Bond / Inverse Floater
(Currently 6.274%), 8/15/03 5,800 6,307
Total Minnesota (Cost $8,080) 9,565
MISSISSIPPI 1.0%
Claiborne County, PCR, Systems Energy Resources
7.30%, 5/1/25 $ 2,750 $ 2,880
Harrison County, PCR, E. I. du Pont
de Nemours and Company
VRDN (Currently 3.20%) 500 500
Mississippi Business Finance,
Systems Energy Resources
5.875%, 4/1/22 10,000 9,951
Warren County, PCR,
Mississippi Power and Light
7.00%, 4/1/22 1,500 1,640
Total Mississippi (Cost $14,675) 14,971
MISSOURI 0.2%
Good Shepherd Nursing Home Dist.,
Nursing Home Fac.
5.90%, 8/15/23 2,000 2,001
Joplin IDA, Tri-State Osteopathic Hosp.,
8.25%, 12/15/14 1,300 1,477
Total Missouri (Cost $3,266) 3,478
NEBRASKA 0.4%
City of Kearney, Great Platte River Road,
6.75%, 1/1/23 3,000 2,861
Omaha Public Power Dist., Electric
6.20%, 2/1/17 (Escrowed to Maturity) 3,000 3,414
Total Nebraska (Cost $5,914) 6,275
NEVADA 1.4%
Clark County Passenger Fac.,
McCarran Int'l. Airport
4.75%, 7/1/22 (MBIA Insured) 13,000 12,399
Clark County School Dist., GO
Limited Tax School Improvement
7.00%, 6/1/11 (MBIA Insured) 3,500 4,329
Nevada, GO, Municipal Bond Bank
7.25%, 11/1/10
(Escrowed to Maturity) 3,050 3,430
Total Nevada (Cost $18,743) 20,158
NEW HAMPSHIRE 0.4%
New Hampshire HHEFA, Wentworth Douglass Hosp.
5.375%, 1/1/15 (MBIA Insured) $ 5,600 $ 5,967
Total New Hampshire (Cost $5,579) 5,967
NEW JERSEY 0.5%
New Jersey Sports and Exposition Auth.,
Monmouth Park
8.00%, 1/1/25 (Prerefunded 1/1/05!) 4,500 5,483
New Jersey Turnpike Auth.,
6.50%, 1/1/16 (MBIA Insured) 2,000 2,389
Total New Jersey (Cost $6,537) 7,872
NEW MEXICO 0.2%
Farmington, PCR, Public Service Co.
of New Mexico
6.30%, 12/1/16 2,400 2,545
Total New Mexico (Cost $2,400) 2,545
NEW YORK 14.6%
Dormitory Auth. of the State of New York
City Univ.
5.75%, 7/1/13 10,000 11,042
5.75%, 7/1/18 (AMBAC Insured) 5,000 5,560
6.00%, 7/1/14 10,000 11,331
Court Fac. Westchester County,
5.25%, 8/1/15 6,000 6,264
New York Medical College
4.75%, 7/1/27 (MBIA Insured) 17,140 16,269
North Shore Health System
5.50%, 11/1/13 (MBIA Insured) 6,000 6,531
State Univ. Ed. Fac , 5.25%, 5/15/19 3,325 3,421
Vassar College, 7.25%, 7/1/15
(Prerefunded 7/1/00!) 2,000 2,144
Long Island Power Auth., Electric System
Zero Coupon, 12/1/09 (FSA Insured) 11,605 7,226
Metropolitan Transportation Auth. of New York
Commuter Fac., 5.75%, 7/1/21
(MBIA Insured) 12,750 13,677
New York City, GO
5.125%, 8/1/10 $ 10,025 $ 10,534
6.00%, 12/1/18 (FSA Insured)
(Escrowed to Maturity) 5,000 5,078
6.00%, 2/15/25 4,525 4,850
6.00%, 2/15/25 (Prerefunded 2/15/05!) 475 530
6.00%, 8/15/26 4,380 4,764
6.00%, 8/15/26 (Prerefunded 8/15/06!) 620 703
6.00%, 10/15/26 5,450 5,960
6.25%, 8/1/09 9,550 10,782
6.375%, 8/1/04 4,145 4,505
New York City Municipal Water Fin. Auth.
5.75%, 6/15/26 (AMBAC Insured) 6,000 6,448
New York City Transitional Fin. Auth.,
5.125%, 11/15/14 3,665 3,785
New York State Environmental Fac., PCR
State Water Revolving Fund,
6.90%, 11/15/15 5,365 6,212
New York State Housing Fin. Agency,
State Univ. Construction
7.80%, 5/1/01 (Escrowed to Maturity) 2,000 2,183
New York State Local Gov't. Assistance
7.20%, 4/1/04 (Prerefunded 4/1/01!) 5,000 5,466
New York State Medical Care Fac. Fin. Agency
Albany and St. John's Medical Center
6.20%, 2/15/28 (FHA Guaranteed) 3,480 3,773
Buffalo General Hosp.
6.00%, 8/15/14 (FHA Guaranteed) 8,835 9,403
Mental Health Service
6.50%, 8/15/24 (Prerefunded 8/15/04!) 6,000 6,850
New York Hosp.
6.50%, 8/15/29 (AMBAC Insured)
(Prerefunded 2/15/05!) 4,625 5,325
New York State Urban Dev.
Sr. Lien
5.375%, 7/1/22 5,000 5,135
5.50%, 7/1/26 10,000 10,414
Triborough Bridge and Tunnel Auth.,
5.50%, 1/1/17 18,500 19,946
Total New York (Cost $194,107) 216,111
NORTH CAROLINA 1.4%
Cumberland County, Civic Center, COP
6.40%, 12/1/24 (AMBAC Insured)
(Prerefunded 12/1/04!) $ 2,750 $ 3,159
North Carolina Eastern Municipal Power Agency
6.00%, 1/1/26 (CAPMAC Insured) 2,500 2,847
7.50%, 1/1/10 (Escrowed to Maturity) 8,980 11,087
North Carolina Medical Care Commission
Stanley Memorial Hosp.
7.80%, 10/1/19 (Prerefunded 10/1/99!) 3,000 3,144
Total North Carolina (Cost $17,361) 20,237
NORTH DAKOTA 0.3%
Mercer County, PCR, Basin Electric Power
6.05%, 1/1/19 (AMBAC Insured) 4,500 4,902
Total North Dakota (Cost $4,538) 4,902
OHIO 2.0%
Clermont County, Mercy Health System, VRDN
Currently 2.95%) 5,300 5,300
Cleveland, Waterworks,
5.50%, 1/1/13 (MBIA Insured) 4,765 5,200
Franklin County, GO
6.375%, 12/1/17 (Prerefunded 12/1/01!) 2,000 2,188
6.80%, 12/1/09 (Prerefunded 12/1/00!) 2,860 3,085
6.80%, 12/1/10 (Prerefunded 12/1/00!) 3,240 3,495
Montgomery County, Grandview Hosp.
and Medical Center
5.40%, 12/1/09 1,800 1,722
Ohio Air Quality Dev. Auth., PCR,
Cleveland Electric
6.00%, 8/1/20 3,500 3,542
Ohio Water Dev. Auth., PCR,
Cleveland Electric, 7.70%, 8/1/25 3,950 4,503
Total Ohio (Cost $27,345) 29,035
OKLAHOMA 0.4%
Tulsa County Home Fin. Auth., Single Family
6.90%, 8/1/10 (FGIC Insured)
(Escrowed to Maturity) 4,250 5,178
Total Oklahoma (Cost $4,227) 5,178
PENNSYLVANIA 1.7%
Beaver County IDA, PCR,
Cleveland Electric, 7.75%, 7/15/25 $ 3,900 $ 4,454
Chester County HEFA, Jefferson Health,
5.375%, 5/15/27 10,000 9,934
Pennsylvania Convention Center Auth.
6.70%, 9/1/14 (FSA Insured) 5,000 5,705
Pennsylvania Intergovernmental Cooperative Auth.
Special Tax
6.75%, 6/15/21 (FGIC Insured)
(Prerefunded 6/15/05!) 4,750 5,488
Total Pennsylvania (Cost $23,680) 25,581
RHODE ISLAND 1.4%
Rhode Island Health and Ed. Building
Bryant College, 6.125%, 6/1/19
(MBIA Insured) 5,000 5,411
Rhode Island Hosp.
Residual Interest Bond / Inverse Floater
(Currently 10.333%), 8/15/21
(FGIC Insured) (Escrowed to Maturity) 1,000 1,184
Rhode Island Housing and Mortgage Fin.
Homeownership Opportunity
6.70%, 10/1/14 5,000 5,378
7.85%, 10/1/16 8,000 8,380
Total Rhode Island (Cost $18,859) 20,353
SOUTH CAROLINA 3.5%
Connector 2000 Assoc.
Greenville Toll Road
Zero Coupon, 1/1/09 2,700 1,451
Zero Coupon, 1/1/10 3,400 1,842
Zero Coupon, 1/1/11 6,100 3,022
Florence County Hosp.,
McLeod Regional Medical Center
4.75%, 11/1/27 (MBIA Insured) 9,500 8,879
Piedmont Municipal Power Agency
5.25%, 1/1/21 2,500 2,390
6.50%, 1/1/14 (FGIC Insured)
(Escrowed to Maturity) 3,500 4,159
South Carolina Public Service Auth.
5.875%, 1/1/23 (FGIC Insured) $ 8,530 $ 9,184
Santee Cooper
6.25%, 1/1/22 (AMBAC Insured) 17,750 19,890
7.00%, 7/1/12 (Prerefunded 7/1/01!) 1,650 1,814
Total South Carolina (Cost $49,257) 52,631
SOUTH DAKOTA 0.1%
South Dakota HDA, Homeownership,
6.65%, 5/1/14 1,980 2,131
Total South Dakota (Cost $1,980) 2,131
TENNESSEE 2.1%
Chattanooga Health Ed. and Housing Fac. Board
Memorial Hosp.
6.625%, 9/1/07 (MBIA Insured) 2,950 3,474
6.625%, 9/1/08 (MBIA Insured) 3,150 3,749
Metropolitan Gov't. of Nashville
and Davidson Counties
Water and Sewer, 7.70%, 1/1/12
(FGIC Insured) 11,250 14,477
Shelby County Health Ed. and Housing Fac. Board
Le Bonheur Children's Medical Center
5.50%, 8/15/12 (MBIA Insured)
(Escrowed to Maturity) 4,250 4,590
Tennessee Housing Dev. Agency, Homeownership
Zero Coupon, 7/1/16 12,000 4,596
Total Tennessee (Cost $28,064) 30,886
TEXAS 6.3%
Amarillo Health Fac. Dev.,
Sears Panhandle Retirement
7.75%, 8/15/26
(Prerefunded 8/15/06!) 5,000 6,242
Arlington Independent School Dist., GO
Zero Coupon, 2/15/16 2,830 1,067
4.75%, 2/15/21 8,780 8,354
Arlington Independent School Dist.
Zero Coupon, 2/15/16
(Prerefunded 2/15/05!) 6,820 2,750
Denison Hosp. Auth., Texoma Medical Center,
7.00%, 8/15/14 4,245 4,656
Harris County, GO, Toll Road
Zero Coupon, 8/15/04
(MBIA Insured) $ 6,000 $ 4,819
Harris County Health Fac. Dev.
Memorial Hosp., 7.125%, 6/1/15
Prerefunded 6/1/02!) 2,500 2,800
Sisters of Charity of the Incarnate Word
7.10%, 7/1/21 (Prerefunded 7/1/01!) 4,000 4,396
St. Luke's Episcopal Hosp., VRDN
(Currently 3.35%) 7,200 7,200
Texas Medical Center
7.375%, 5/15/20 (MBIA Insured)
(Prerefunded 5/15/00!) 7,645 8,168
Harris County Hosp. Dist., 7.40%, 2/15/10
(AMBAC Insured) 1,500 1,812
Houston Independent School Dist., GO,
5.00%, 2/15/24 10,000 9,818
Matagorda County Navigation Dist., PCR
Central Power and Light,
7.50%, 12/15/14 1,500 1,580
Houston Lighting and Power
7.20%, 12/1/18 (FGIC Insured) 3,600 3,776
Northwest Texas Independent School Dist., GO
School Buildings,
Zero Coupon, 8/15/17 4,000 1,403
San Antonio Electric and Gas,
4.50%, 2/1/21 4,000 3,695
Texas, GO
Veterans Housing Assistance
6.25%, 12/1/15 1,500 1,560
7.40%, 12/1/20 14,205 15,291
Texas Dept. of Housing and Community Affairs
NHP Foundation, 6.40%, 1/1/27 3,500 3,751
Total Texas (Cost $86,482) 93,138
UTAH 0.2%
Intermountain Power Agency,
5.75%, 7/1/19 (MBIA Insured) 3,000 3,200
Total Utah (Cost $2,856) 3,200
VERMONT 0.5%
Vermont Ed. and Health Buildings Fin. Agency
Medical Center Hosp. of Vermont
7.35%, 9/1/13 (FGIC Insured) 4,650 5,106
7.45%, 9/1/23 (FGIC Insured) 2,000 2,218
Total Vermont (Cost $6,650) 7,324
VIRGINIA 3.2%
Fairfax County IDA, Inova Health,
6.00%, 8/15/26 $ 7,200 $ 7,814
Fairfax County Water Auth.
6.00%, 4/1/22
(Prerefunded 4/1/07!) 10,650 11,899
Hanover County IDA, Memorial
Regional Medical Center
6.375%, 8/15/18 (MBIA Insured) 6,185 7,304
Roanoke IDA, Carilion Health, VRDN
(Currently 3.30%) 800 800
Univ. of Virginia, 5.25%, 6/1/12 3,310 3,505
Virginia HDA
6.25%, 7/1/11 5,000 5,242
6.75%, 7/1/14 7,435 7,975
Virginia Transportation Board,
Route 28 Project, 6 50%, 4/1/18 3,000 3,270
Total Virginia (Cost $43,851) 47,809
WASHINGTON 6.2%
Chelan County Public Utility
Columbia River-Rock Hydroelectric
Zero Coupon, 6/1/18 (MBIA Insured) 10,100 3,715
King County, GO, 5.70%, 12/1/10 3,545 3,933
Tacoma
Electric
6.25%, 1/1/15 (FGIC Insured) 7,550 8,332
Residual Interest Bond / Inverse Floater
(Currently 9.565%), 1/2/15
(AMBAC Insured)
(Prerefunded 1/1/01!) 5,000 5,681
Solid Waste Utilities
5.50%, 12/1/17 (AMBAC Insured) 14,500 15,165
Washington, GO, 5.70%, 10/1/15 14,000 15,480
Washington Health Care Fac. Auth.,
Multicare Health System
5.375%, 8/15/11 (MBIA Insured) 5,000 5,335
Washington HFA
Fred Hutchinson Cancer Research Center
VRDN (Currently 3.60%) 200 200
Washington Public Power Supply,
5.125%, 7/1/13 6,750 6,905
Washington Public Power Supply System
Nuclear Project
5.25%, 7/1/16 (FSA Insured) 3,000 3,082
5.50%, 7/1/17 7,000 7,027
Washington Public Power Supply System
Nuclear Project
6.25%, 7/1/12 (Prerefunded 7/1/02!) $ 5,000 $ 5,473
6.25%, 7/1/17 (MBIA Insured) 5,175 5,628
7.25%, 7/1/09 3,000 3,571
7.25%, 7/1/15 (Prerefunded 1/1/00!) 2,200 2,317
Total Washington (Cost $83,590) 91,844
WEST VIRGINIA 2.1%
Charleston Urban Renewal Auth.,
5.30%, 12/15/22 (FSA Insured) 5,000 5,113
Kanawha County Building Commission
Charleston Area Medical Center
7.50%, 11/1/08 (Prerefunded 11/1/99!) 2,250 2,361
West Virginia, GO, State Road,
4.50%, 6/1/23 (FGIC Insured) 5,000 4,624
West Virginia Building Commission
5.375%, 7/1/18 (AMBAC Insured) 1,785 1,885
Regional Jail, 5.375%, 7/1/21
(AMBAC Insured) 8,005 8,428
West Virginia Hosp. Fin. Auth.
Charleston Area Medical Center
5.75%, 9/1/13 (MBIA Insured) 4,200 4,537
West Virginia State Parkways
Economic Dev. and Tourism Auth.
Residual Interest Bond / Inverse Floater
(Currently 8.135%), 5/16/19
(FGIC Insured) 3,600 4,091
Total West Virginia (Cost $29,696) 31,039
WISCONSIN 0.6%
Wisconsin HEFA, United Health Group
5.50%, 12/15/16 (MBIA Insured) 6,540 6,826
Wisconsin Public Power Agency
7.00%, 7/1/02 (AMBAC Insured) 1,500 1,598
Total Wisconsin (Cost $7,754) 8,424
Total Investments in Securities
98.9% of Net Assets (Cost $1,344,238) $1,466,648
Other Assets Less Liabilities 16,830
NET ASSETS $1,483,478
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 659
Accumulated net realized gain/loss -
net of distributions 55
Net unrealized gain (loss) 122,410
Paid-in-capital applicable to 149,213,516 shares
of $1.00 par value capital stock outstanding;
500,000,000 shares authorized 1,360,354
NET ASSETS $1,483,478
----------
NET ASSET VALUE PER SHARE $ 9.94
----------
! Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
CAPMAC Capital Markets Assurance Corp.
CDA Community Development Administration
COP Certificates of Participation
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
HFFA Health Facility Financing Authority
HHEFA Health & Higher Educational Facility Authority
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year
Ended
2/28/99
Investment Income
Interest income $ 80,888
Expenses
Investment management 6,800
Shareholder servicing 734
Custody and accounting 221
Prospectus and shareholder reports 61
Registration 37
Legal and audit 15
Directors 7
Miscellaneous 9
Total expenses 7,884
Expenses paid indirectly (3)
Net expenses 7,881
Net investment income 73,007
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 6,587
Futures 200
Net realized gain (loss) 6,787
Change in net unrealized gain or loss on securities (2,157)
Net realized and unrealized gain (loss) 4,630
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 77,637
---------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
Year
Ended
2/28/99 2/28/98
Increase (Decrease) in Net Assets
Operations
Net investment income $ 73,007 $ 71,861
Net realized gain (loss) 6,787 8,060
Change in net unrealized gain or loss (2,157) 42,319
Increase (decrease) in
net assets from operations 77,637 122,240
Distributions to shareholders
Net investment income (73,007) (71,861)
Net realized gain (5,851) --
Decrease in net assets
from distributions (78,858) (71,861)
Capital share transactions*
Shares sold 208,614 157,893
Distributions reinvested 52,194 47,065
Shares redeemed (172,397) (195,675)
Increase (decrease) in net
assets from capital
share transactions 88,411 9,283
Net Assets
Increase (decrease) during period 87,190 59,662
Beginning of period 1,396,288 1,336,626
End of period $ 1,483,478 $ 1,396,288
---------------------------------
*Share information
Shares sold 20,963 16,209
Distributions reinvested 5,238 4,830
Shares redeemed (17,320) (20,125)
Increase (decrease) in
shares outstanding 8,881 914
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
February 28, 1999
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Tax-Free Income Fund, Inc. (the fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company and commenced operations on October 26, 1976.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation Debt securities are generally traded in the over-the-counter
market. Investments in securities 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.
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.
Premiums and Discounts Premiums and original issue discounts on municipal
securities are amortized for both financial reporting and tax purposes.
Market discounts are recognized upon disposition of the security as gain or
loss for financial reporting purposes and as ordinary income for tax
purposes.
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 the 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. Expenses paid indirectly reflect
credits earned on daily, uninvested cash balances at the custodian, used to
reduce the fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $506,905,000 and $484,134,000, respectively, for the
year ended February 28, 1999.
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.
At February 28, 1999, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$1,344,238,000. Net unrealized gain aggregated $122,410,000 at period-end
of which $123,080,000 related to appreciated investments and $670,000 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 $536,000 was payable at February 28, 1999. 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 0.30% for
assets in excess of $80 billion. At February 28, 1999, and for the year
then ended, the effective annual group fee rate was 0.32%. 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.
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
$686,000 for the year ended February 28, 1999, of which $62,000 was payable
at period-end.
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
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 financial
highlights present fairly, in all material respects, the financial position
of T. Rowe Price Tax-Free Income Fund, Inc. ("the Fund") at February 28,
1999, and the results of its operations, the changes in its net assets and
the financial highlights for each of the fiscal periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (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, 1999 by correspondence
with the custodian, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 17, 1999
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 2/28/99
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
o $2,819,000 from short-term capital gains,
o $3,032,000 from long-term capital gains, subject to the 20% rate gains
category,
o $72,627,000 which qualified as exempt-interest dividends.
- --------------------------------------------------------------------------------
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a brokerage account
or obtain information, call:
1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
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 Income Fund.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
4200 West Cypress St.
10th Floor
Tampa, FL 33607
Invest With Confidence(registered trademark)
T. Rowe Price
T. Rowe Price Investment Services, Inc., Distributor. F45-050 2/28/99
THE SHAREHOLDER LETTER AND REPORT FOR THE COMBINED TAX-FREE FUNDS ARE ATTACHED
HERE BY ACCESSING THE FOLLOWING:
Annual Report
Tax-Free
Funds
February 28, 1999
T. Rowe Price
Report Highlights
- --------------------------------------------------------------------------------
Tax-Free Funds
o Municipal bonds were relatively unscathed by the turmoil in other fixed
income markets and were less volatile than Treasuries.
o The Tax-Exempt Money, Tax-Free Short-Intermediate, Tax-Free Intermediate
Bond, Tax-Free Income, and Tax-Free High Yield Funds outpaced their
respective Lipper benchmarks for both the 6- and 12-month periods.
o The funds' good performances were due primarily to management decisions and
low fund expenses.
o All funds benefited from their longer relative maturities and durations
when interest rates fell, and also from careful credit selection.
o We expect continued low inflation and slowing economic growth to benefit
municipal securities, which still carry attractive yields relative to other
fixed income investments.
Fellow Shareholders
The fixed income markets and your funds generated good returns for the 6- and
12-month periods ended February 28, 1999. The Tax-Exempt Money, Tax-Free
Short-Intermediate, Tax-Free Intermediate Bond, Tax-Free Income, and Tax-Free
High Yield Funds surpassed their respective benchmarks in both periods, a
reflection of our management decisions and below-average expenses.
Municipal bonds moved through the past year relatively unscathed by the turmoil
that hit other fixed income markets. The municipal market was far less volatile
than the Treasury market, which benefited from a massive flight to quality that
drove 30-year yields to a record low of 4.72% in October from 5.92% last
February. Municipal yields also fell, but the decline was more muted as
long-term rates dropped to 4.64% in October from 5.08% last February. As a
result, municipal yields approached parity with Treasury yields especially in
longer maturities, an unusual event in a year when major tax reform was not
under discussion.
MARKET ENVIRONMENT
Municipal Bond and Note Yields
- --------------------------------------------------------------------------------
30-Year AAA 5-Year AAA 1-Year Moody's
General General Investment
Obligation Obligation Grade 1Note
2/28/98 5.08 4.05 3.60
5.13 4.10 3.65
5.20 4.30 3.85
5/98 5.05 4.10 3.75
5.05 4.10 3.60
5.10 4.10 3.70
8/98 4.93 3.85 3.50
4.82 3.70 3.30
4.92 3.70 2.95
11/98 4.89 3.75 3.05
4.94 3.75 3.05
4.87 3.65 2.95
2/99 4.99 3.78 3.00
Source: T. Rowe Price Associates
Major economic developments here and overseas during the fiscal year affected
the fixed income markets. In the first half, many economists expected the global
turmoil to have a negative impact on the U.S. economy, causing interest rates to
fall. Russia's debt default last summer created havoc in many markets, leading
to a global liquidity crisis that contributed to the flight to U.S. Treasuries.
In response, the Federal Reserve cut short-term rates three times last fall to
cushion the domestic economy from weakness abroad and restore investor
confidence. In December, yields began to move up following signs of
stronger-than-expected U.S. growth and a growing sense that the global liquidity
crisis had abated. Robust GDP growth of 6.1% in the fourth quarter added fuel to
the fire, and by the end of February 30-year Treasury yields were nearly 100
basis points (one percentage point) higher than in October. Municipal yields
also rose but, once again, they were far less volatile.
Lower-quality municipal bonds also escaped major damage. In response to the
liquidity crisis, the taxable markets-including corporate, mortgage, and
emerging market bonds-came under severe pressure in the third quarter, and
differences in yield between high- and low-quality bonds (yield spreads) widened
abruptly. Lower-quality, high-yield municipals experienced only a modest
widening in yield spreads, mainly because of limited supply in this area of the
market and less sensitivity to global events. While high-yield returns suffered
modestly, this followed several years of above-average returns.
Overall, municipal yields did not change significantly from February 1998 to
February 1999 except for one-year rates, as can be seen in the chart on page 1.
In the money market area, solid cash flow and the lowest level of new issuance
in nine years led to lower yields. A steeper yield curve resulted as money
market and short-term bonds reacted to the Federal Reserve's rate cuts and to
strong demand, while long-term rates were more affected by heavy bond sales.
During the past six months, intermediate-term bonds turned in the best
performance. For the calendar year, new bond issuance reached $284 billion, up
29% from 1997, a level surpassed only in 1993.
High Ratings for Risk-Adjusted Returns
- --------------------------------------------------------------------------------
The four bond funds received a high Morningstar Rating(trademark) for their
risk-adjusted performance, which reflects the degree of volatility experienced
in earning a particular return. (Money funds are not rated.) As of February 28,
1999, the Tax-Free High Yield Fund had five stars overall, and the Tax- Free
Short-Intermediate Fund, Tax-Free Intermediate Bond Fund, and Tax-Free Income
Fund all received four stars. The top 10% of the funds in each investment
category receive five stars, the next 22.5% receive four stars, and the next 35%
receive three stars. The funds were rated among 1,576, 1,109, and 369 municipal
fixed income funds for the 3-, 5-, and 10-year periods ended February 28, 1999,
respectively. Of course, past trends may not continue.
Morningstar proprietary ratings reflect historical risk-adjusted performance as
of 2/28/99 and may change monthly. Ratings are calculated from the funds' 3-,
5-, and 10-year average annual returns in excess of 90-day Treasury bill returns
with appropriate fee adjustments and a risk factor that reflects fund
performance below 90-day Treasury bill returns. The Tax-Free High Yield Fund
received 5 stars for the 3-, 5-, and 10-year periods; Tax-Free Income 4 stars
for the 3- and 5- year periods and 3 stars for the 10-year period; Tax-Free
Intermediate Bond 3 and 4 stars for the 3- and 5-year periods; and Tax-Free
Short-Intermediate 4, 5, and 4 stars for the 3-, 5-, and 10-year periods,
respectively.
As mentioned, each fund was in the lowest expense quartile (25%) of its Lipper
category as of February 28. For a discussion of the new Tax-Exempt Money Fund
PLUS Class shares, see the shaded box on page 4.
TAX-EXEMPT MONEY FUND AND PLUS SHARES
Performance Comparison
- --------------------------------------------------------------------------------
Since Inception*
Periods Ended 2/28/99 6 Months 12 Months (PLUS Shares)
- --------------------------------------------------------------------------------
Tax-Exempt Money Fund 1.38% 2.97% -
Tax-Exempt Money Fund
PLUS Class - - 0.74%
Lipper Tax-Exempt Money
Market Funds Average 1.31 2.81 0.82
*11/1/98
The Tax-Exempt Money Fund posted good results relative to its peer group average
for both the 6- and 12-month periods ended February 28. Since its inception on
November 1, 1998, the Tax-Exempt Money Fund PLUS shares returned 0.74%, behind
the return of the Lipper average due to the higher expenses that accompany their
additional services.
Three consecutive easings in the fall by the Federal Reserve, amounting to a
total of 75 basis points, set the tone for the short-term tax-exempt market. At
the end of the fiscal year, the one-year yield was 60 basis points lower than it
was a year earlier, with most of the move occurring in the last six months.
Tax-Exempt Money Fund PLUS Class
- --------------------------------------------------------------------------------
Starting November 1, 1998, we created a new class of shares called The Tax-
Exempt Money - PLUS Class. The share class is offered as part of our new Asset
Manager Account, which incorporates a number of additional services, such as
unlimited checkwriting and a debit card. Both the Tax-Exempt Money Fund and
Tax-Exempt Money - PLUS are based on the same portfolio, and as such will be
reported on together in future annual and semiannual reports. However,
performance will differ because the classes of shares have different expense
ratios. Tax-Exempt Money - PLUS will have no impact on the expenses, share
price, or yield of the original Tax-Exempt Money Fund.
Note: To request a prospectus for any T. Rowe Price fund, please call 1-800-
638-5660. Read the prospectus carefully before investing.
Money market funds benefited from the volatility in other markets. As investors
shifted assets to safer havens, total money fund assets ballooned to a record
$1.4 trillion, an increase of 26% during the fiscal year. However, tax-exempt
money funds expanded at half the rate of the total industry-a result of reduced
demand due to lower tax-exempt money yields versus comparable taxable yields.
The improved financial condition of many municipalities, along with low
long-term rates, drastically reduced the short-term borrowing needs of issuers.
Annual municipal note issuance dipped to its lowest level since 1989. Reduced
supply and steady demand kept rates low versus taxable alternatives, which meant
that the tax-exempt money market appealed mostly to investors in high tax
brackets.
Throughout the fiscal year, we maintained a fairly long weighted average
maturity-53 days at the end of February, which was 11 days longer than our peer
group average. We continue to believe that the imbalance between supply and
demand in our specific market, combined with a stable monetary policy and
possible further easing by the Fed if economic growth slows later in the year,
supports our more aggressive stance.
TAX-FREE SHORT-INTERMEDIATE FUND
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/28/99 6 Months 12 Months
- --------------------------------------------------------------------------------
Tax-Free Short-Intermediate Fund 2.39% 4.90%
Lipper Short-Intermediate
Municipal Debt Funds Average 2.08 4.43
Your fund posted solid results that surpassed the Lipper Short-Intermediate
Municipal Debt Funds Average for both the 6- and 12-month periods ended February
28, 1999. Maintaining a slightly longer duration and a low expense ratio
enhanced returns. (Duration is a measure of a bond fund's sensitivity to
interest rates. For example, a fund with a duration of three years would fall or
rise about 3% in price in response to a one-percentage-point rise or fall in
interest rates.)
Our duration strategy reflected several factors: the absence of any inflationary
pressures, the global demand for U.S. Treasuries resulting from problems
overseas, and the exceptional value offered in the municipal market due to
imbalances in supply and demand. Our long position was rewarded in the fall when
the Federal Reserve cut short-term interest rates. As economic growth in the
fourth quarter exceeded expectations and global turmoil subsided, Treasury
yields began to rise. Maturities within five years, which had been yielding less
than the federal funds rate, rose above the fed funds rate and resulted in a
positively sloped yield curve. This shift reflected the change in investor focus
from the global crisis to an accommodative Fed and a potential pickup in
inflation.
Nevertheless, we maintained our relatively long duration even as Treasury yields
were rising from their October lows. Municipal yields had not fallen as far and
looked exceptionally attractive. In addition, we anticipated increasing demand
for municipals and a drop in supply over the holiday season; supply has remained
below expectations during the first two months of 1999.
Recently, relative yields have moved closer to historic averages as municipals
outperformed Treasuries. While we had a fairly long duration at the end of the
period, we have since been reducing it. However, we expect to take advantage of
any increase in yields to extend it again, since we anticipate continued low
inflation and interest rates in the months ahead.
TAX-FREE INTERMEDIATE BOND FUND
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/28/99 6 Months 12 Months
- --------------------------------------------------------------------------------
Tax-Free Intermediate Bond Fund 2.26% 5.37%
Lipper Intermediate
Municipal Debt Funds Average 2.15 5.05
Your fund posted good returns and outperformed the Lipper Intermediate Municipal
Debt Funds Average for both the 6- and 12-month periods. Our duration strategy
over the past six months was similar to that of the Tax-Free Short-Intermediate
Fund (see report on that fund for an explanation). As short-term rates fell more
than long-term rates, short bonds appreciated while longer bonds actually
depreciated, but the changes were modest. Five-year general obligation (GO)
yields were down seven basis points while 30-year GO yields rose six, which
meant that a fund's return was largely determined by its position along the
yield curve. In our case, we favored five-year bonds because we thought 10-year
maturities were overvalued, and the steepening yield curve was beneficial to
five-year maturities. Since the yield curve has recently begun to steepen even
further, we anticipate buying bonds with longer maturities and have begun to
favor 10-year bonds.
At the annual shareholders meeting in October, we received approval to remove
the insurance requirement for the fund and changed the fund's name to reflect
the new policy. We will continue to hold 95% of assets rated AAA or AA by at
least one national rating organization (Standard & Poor's, Moody's, or a similar
service), and up to 5% may be rated A at the time of purchase. We believe this
will allow for more prudent diversification among a variety of high-quality
issuers.
Our current strategy is to reduce exposure to insured bonds over time in a
manner that neither reduces income nor results in significant realized capital
gains. We sold three insured credits-hospital, solid-waste facility, and
start-up toll road securities-primarily because they allowed us to reach our
duration goals and we considered them overvalued compared with other bonds.
TAX-FREE INCOME FUND
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/28/99 6 Months 12 Months
- --------------------------------------------------------------------------------
Tax-Free Income Fund 1.91% 5.48%
Lipper General Municipal
Debt Funds Average 1.76 4.88
The fund had several goals for the past year: managing exposure to interest
rates with steady, gradual shifts in duration; preserving tax-free income as
lower rates and maturing older, higher-yielding bonds eroded the fund's yield;
and seeking good diversification among issuers and bond insurers in the
portfolio. The strategy along with low expenses paid off, and performance
surpassed the Lipper average for both periods shown in the table.
The fund's duration (defined in the Tax-Free Short-Intermediate Fund section),
which was extended last June to a more aggressive range, was reduced to neutral
in January. Recent concerns about continued economic strength and a shift in the
Federal Reserve's position, from a bias toward easing to a neutral stance, drove
our strategy. We were also aware that, historically, the first quarter has often
not been strong for municipal bonds as supply starts to grow and demand weakens
in anticipation of tax-payment season.
The fund's credit quality remains high at an overall level of AA-. A year ago we
regretted not having more exposure to lower-quality bonds, which had performed
well in a strong economy. However, this sector did not do as well in the past
year, and we saw a modest widening of yield spreads between lower- and
higher-rated bonds. As this trend continues, we are looking for opportunities to
add some lower-rated securities to the portfolio.
During the past six months, we reduced our exposure to hospital bonds and
increased our holdings of general obligation bonds. The hospital industry is
suffering from cost recovery pressures, while tax-supported debt is benefiting
from the strong economy. As always, we are seeking good diversification among
solid credits. While the insurance industry continues to penetrate the municipal
bond market (more than 50% of new issues were insured in 1998), we are also
focused on diversifying exposure among the bond insurers.
TAX-FREE HIGH YIELD FUND
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/28/99 6 Months 12 Months
- --------------------------------------------------------------------------------
Tax-Free High Yield Fund 1.57% 4.80%
Lipper High Yield Municipal
Debt Funds Average 1.46 4.51
The municipal high-yield market trailed the higher-quality market from the
summer of 1998 through the end of February. Total returns were still positive,
however, unlike those of our counterparts in the corporate bond market.
Performance for the year was bolstered by our strategy of steadily increasing
duration (see the report for the Tax-Free Short-Intermediate Fund for an
explanation of duration) to benefit from the drop in interest rates, and the
fund surpassed the average performance of its Lipper peer group in both periods.
Quality Diversification
- --------------------------------------------------------------------------------
Tax-Free High Yield Fund
AAA AA A BBB BB and below
6 25 21 26 22
Based on net assets as of 2/28/99.
Moderate returns in this sector of the municipal market have presented an
opportunity for investors. Compared with our peers, we have been underweighted
in below-investment-grade bonds and can now add selectively to our favorite
issuers at a time when yield spreads are wider than they have been during the
past two to three years. Currently, these holdings represent about 22% of total
assets, and the percentage should rise gradually. We are focusing specifically
on the long-term care, education, and corporate-backed sectors for new purchases
that should benefit from a strong domestic economy.
We are closely watching developments in the hospital sector as it comes under
pressure from increased competition and general overcapacity. Our percentage of
hospital holdings is among the lowest in the fund's history, and we will look to
increase it as opportunities unfold. Our overall strategy is designed to
increase the tax-free yield of the fund in a prudent manner.
Taxable vs. Tax-Exempt Yields
- --------------------------------------------------------------------------------
As of 2/28/99
Treasury Yield Treasury Yield Tax-Exempt
After Paying After Paying AAA General
Income Taxes Income Taxes Obligation
of 31% of 36% Yield
1 Yr 3.34 3.10 2.95
5 Yr 3.59 3.33 3.78
10 Yr 3.64 3.38 4.20
30 Yr 3.85 3.57 4.99
Source: T. Rowe Price Associates
OUTLOOK
Despite the economy's strong momentum from the fourth quarter of 1998 through
the early part of this year, we expect a decline in growth toward a more modest
and sustainable level later this year. We also believe the forces sustaining low
inflation are still in place. The Federal Reserve appears to have adopted a
neutral monetary bias in the belief that the economy contains an equal measure
of upside and downside risks.
So far this year, a decreasing supply of municipal issues combined with strong
demand has helped move tax-exempt yields into more normal relationships with
taxable yields. While Treasury yields across maturities have risen 50 to 60
basis points since the beginning of 1999, municipal yields were mostly
unchanged. The chart on the previous page shows the after-tax yield on Treasury
securities as of February 28, 1999, after paying federal income taxes at various
levels. Overall, municipal securities are still appealing relative to other
fixed income securities, and we are optimistic about their outlook for the rest
of the year.
Respectfully submitted,
Mary J. Miller
Director
Municipal Bond Department
March 19, 1999
- --------------------------------------------------------------------------------
Change in Management
C. Stephen Wolfe stepped down as manager of the Tax-Free High Yield Fund on
March 1, 1999, to devote himself full-time to research on high-yield securities.
He remains a member of the fund's Investment Advisory Committee. William F.
Snider, associate portfolio manager of this fund, has been appointed chairman of
the Tax-Free High Yield Fund's Investment Advisory Committee. He and Patricia S.
Deford will be co-managers of the fund responsible for day-to-day management of
the portfolio. Mr. Snider joined T. Rowe Price in 1991 and also serves as
portfolio manager of the New York and New Jersey Tax-Free Bond Funds. Ms.
Deford, who joined T. Rowe Price in 1990, served as research director for the
firm's municipal department and is vice president of all tax-free funds. Other
members of the fund's Investment Advisory Committee include Konstantine B.
Mallas, Mary J. Miller, William T. Reynolds, and Arthur S. Varnado.
The preceding updates the Tax-Free Funds prospectus of July 1, 1998.
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
KEY STATISTICS
8/31/98 2/28/99
Tax-Exempt Money Fund
- --------------------------------------------------------------------------------
Price Per Share $ 1.00 $ 1.00
Dividends Per Share
For 6 months 0.016 0.014
For 12 months 0.032 0.029
Dividend Yield (7-Day Compound) * 2.98% 2.54%
Weighted Average Maturity (days) 59 53
Weighted Average Quality ** First Tier First Tier
Tax-Exempt Money Fund PLUS Class Shares
- --------------------------------------------------------------------------------
Price Per Share $ -- $ 1.00
Dividends Per Share
For 6 months -- 0.007!
For 12 months -- --
Dividend Yield (7-Day Compound) * -- 2.07%
Weighted Average Maturity (days) -- 53
Weighted Average Quality ** -- First Tier
(continued on next page)
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
KEY STATISTICS
x 8/31/98 2/28/99
Tax-Free Short-Intermediate Fund
- --------------------------------------------------------------------------------
Price Per Share $ 5.39 $ 5.39
Dividends Per Share
For 6 months 0.11 0.11
For 12 months 0.22 0.22
Dividend Yield*
For 6 months 4.13% 4.07%
For 12 months 4.24 4.12
30-Day Standardized Yield 3.59 3.16
Weighted Average Maturity (years) 4.4 4.0
Weighted Average Effective Duration (years) 2.9 3.0
Weighted Average Quality *** AA AA
Tax-Free Intermediate Bond Fund
- --------------------------------------------------------------------------------
Price Per Share $ 11.13 $ 11.13
Dividends Per Share
For 6 months 0.24 0.24
For 12 months 0.48 0.48
Dividend Yield *
For 6 months 4.39% 4.39%
For 12 months 4.49 4.42
30-Day Standardized Yield 3.78 3.36
Weighted Average Maturity (years) 8.8 8.5
Weighted Average Effective Duration (years) 5.6 5.4
Weighted Average Quality *** AA AA
(continued on next page)
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
KEY STATISTICS
8/31/98 2/28/99
Tax-Free Income Fund
- --------------------------------------------------------------------------------
Price Per Share $ 10.03 $ 9.94
Dividends Per Share
For 6 months 0.25 0.25
For 12 months 0.51 0.50
Dividend Yield *
For 6 months 5.15% 5.13%
For 12 months 5.31 5.19
30-Day Standardized Yield 4.35 4.11
Weighted Average Maturity (years) 17.1 16.1
Weighted Average Effective Duration (years) 7.6 7.3
Weighted Average Quality *** AA- AA-
Tax-Free High Yield Fund
- --------------------------------------------------------------------------------
Price Per Share $ 12.72 $ 12.53
Dividends Per Share
For 6 months 0.34 0.33
For 12 months 0.68 0.66
Dividend Yield *
For 6 months 5.38% 5.34%
For 12 months 5.55 5.45
30-Day Standardized Yield 4.59 4.46
Weighted Average Maturity (years) 19.4 19.3
Weighted Average Effective Duration (years) 7.3 7.6
Weighted Average Quality *** A- A-
* 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.
** All securities purchased in the money fund are rated in the two highest
categories (tiers) as established by national rating agencies or, if
unrated, are deemed of comparable quality by T. Rowe Price.
*** Based on T. Rowe Price research.
! Dividends for the period 11/1/98 to 2/28/99.
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
These charts show the value of a hypothetical $10,000 investment in each fund
over the past 10 fiscal year periods or since inception (for funds lacking 10-
year records). The result is compared with a broad-based average or index. The
index return does not reflect expenses, which have been deducted from the fund's
return.
TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
As of 2/28/99
Lipper
Tax-Exempt
Money Market Tax-Exempt
Funds Average Money Fund
2/28/89 10,000 10,000
2/90 10,591 10,587
2/91 11,162 11,139
2/92 11,598 11,550
2/93 11,878 11,823
2/94 12,105 12,065
2/95 12,414 12,383
2/96 12,828 12,802
2/97 13,204 13,193
2/98 13,613 13,620
2/99 13,999 14,024
TAX-FREE SHORT-INTERMEDIATE FUND
- --------------------------------------------------------------------------------
As of 2/28/99
Lipper Short- Tax-Free
Lehman Intermediate Short-
3-Year Go Municipal Debt Intermediate
Bond Index Funds Average Fund
2/28/89 10,000 10,000 10,000
2/90 10,806 10,750 10,736
2/91 11,710 11,572 11,494
2/92 12,665 12,459 12,291
2/93 13,764 13,548 13,214
2/94 14,243 14,043 13,675
2/95 14,616 14,360 14,073
2/96 15,793 15,376 15,040
2/97 16,520 16,010 15,645
2/98 17,403 16,839 16,470
2/99 18,322 17,626 17,277
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
TAX-FREE INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
As of 2/28/99
Lipper
Lehman Intermediate
7-Year Municipal Tax-Free
Municipal Debt Funds Intermediate
Bond Index Average Bond Fund
11/30/92 10,000 10,000 10,000
2/93 10,542 10,537 10,681
2/94 11,008 11,034 11,267
2/95 11,277 11,250 11,566
2/96 12,434 12,276 12,672
2/97 13,050 12,824 13,204
2/98 14,043 13,778 14,168
2/99 14,880 14,500 14,929
TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
As of 2/28/99
Lipper
Lehman General
Municipal Municipal Tax-Free
Bond Debt Funds Income
Index Average Fund
2/28/89 10,000 10,000 10,000
2/90 11,026 10,888 10,815
2/91 12,042 11,781 11,724
2/92 13,245 12,984 12,916
2/93 15,068 14,845 14,838
2/94 15,902 15,654 15,654
2/95 16,202 15,791 15,951
2/96 17,991 17,387 17,595
2/97 18,982 18,217 18,441
2/98 20,717 19,932 21,070
2/99 21,991 20,950 21,275
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
TAX-FREE HIGH YIELD FUND
- --------------------------------------------------------------------------------
As of 2/28/99
Lipper
Lehman High Yield
Revenue Municipal Tax-Free
Bond Debt Funds High Yield
Index Average Fund
2/28/89 10,000 10,000 10,000
2/90 11,076 10,865 10,954
2/91 12,095 11,479 11,823
2/92 13,397 12,669 13,072
2/93 15,345 14,205 14,895
2/94 16,306 15,145 16,010
2/95 16,557 15,372 16,212
2/96 18,434 16,977 17,935
2/97 19,522 17,935 19,051
2/98 21,424 19,799 21,036
2/99 22,707 20,704 22,046
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how each fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Since Inception
Periods Ended 2/28/99 1 Year 5 Years 10 Years Inception Date
- --------------------------------------------------------------------------------
Tax-Exempt Money 2.97% 3.05% 3.44% - 4/8/81
Tax-Exempt Money PLUS - - - 0.74% 11/1/98
Tax-Free
Short-Intermediate 4.90 4.79 5.62 - 12/23/83
Tax-Free
Intermediate Bond 5.37 5.79 - 6.63 11/30/92
Tax-Free Income 5.48 6.33 7.84 - 10/26/76
Tax-Free High Yield 4.80 6.61 8.23 - 3/1/85
Investment returns represent past performance and will vary. Shares of the bond
funds may be worth more or less at redemption than at original purchase.
Investments in the Money Fund and PLUS Class shares are not insured or
guaranteed by the FDIC or any other government agency. Although they seek to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund and PLUS Class shares.
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Annual Meeting Results
The Tax-Free Intermediate Bond Fund held an annual meeting on October 15, 1998,
to elect directors of the fund, to amend the fund's investment objectives, and
to ratify the Board of Directors' selection of PricewaterhouseCoopers LLP as the
fund's independent accountants.
The results of voting were as follows (by number of shares):
For nominees to the Board of
Directors for the Tax-Free
Intermediate Bond Fund:
Calvin W. Burnett
In favor: 6,264,176.601
Withheld: 107,241.379
Anthony W. Deering
In favor: 6,282,061.082
Withheld: 89,356.898
F. Pierce Linaweaver
In favor: 6,269,403.700
Withheld: 102,014.280
William T. Reynolds
In favor: 6,282,440.529
Withheld: 88,977.451
James S. Riepe
In favor: 6,280,032.546
Withheld: 91,385.434
John G. Schreiber
In favor: 6,280,776.004
Withheld: 90,641.976
M. David Testa
In favor: 6,282,440.529
Withheld: 88,977.451
For PricewaterhouseCoopers LLP
as independent accountants:
In favor: 6,209,652.143
Withheld: 63,094.092
Abstained: 98,671.745
Amendment for investment objec-
tives to remove the requirement
that total assets be invested
primarily in insured bonds:
In favor: 4,892,656.486
Against: 851,482.266
Abstained: 434,617.228
Broker Non-Votes: 192,662.000
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
Investment Services And Information
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to
10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(registered trademark) and
the T. Rowe Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and other
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INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial
markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a brokerage account
or obtain information, call:
1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
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.
Investor Centers:
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T. Rowe Price
T. Rowe Price Investment Services, Inc., Distributor. C03-050 2/28/99
