<PAGE>
T. Rowe Price
Tax-Free Short-Intermediate Fund
August 31, 1994
Sector Diversification
Percent of
Net Assets
----------
Pre-Refunded Bonds 19%
General Obligation-State 15
General Obligation-Local 14
Dedicated Tax Revenue 8
Educational Revenue 8
Hospital Revenue 8
Housing Finance Revenue 7
Electric Revenue 6
Industrial & Pollution
Control Revenue 4
Percent of
Net Assets
----------
Nuclear Revenue 3%
Water & Sewer Revenue 3
Lease Revenue 3
Escrowed to Maturity 1
Pooled Loan Revenue 1
Air & Sea Transportation Revenue 1
Miscellaneous Revenue 1
Other Assets Less Liabilities (2)
Statement of Net Assets / August 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Amounts in Thousands
------------------------------
Face Amount Value
----------- -----
<S> <C> <C>
ALABAMA -- 2.0%
Jefferson County, Capital Appreciation Warrants, GO, (MBIA Insured),
Zero Coupon, 4/1/98................................................ $ 3,545 $ 2,976
Mobile, Capital Improvement Warrants, GO, (MBIA Insured), 4.75%, 2/15/96... 1,650 1,660
4.75%, 8/15/96..................................................... 1,715 1,729
4.95%, 2/15/97..................................................... 1,755 1,772
4.95%, 8/15/97..................................................... 1,700 1,720
- ---------------------------------------------------------------------------------------------------------------------------
ARIZONA -- 5.7%
Arizona, COP, (AMBAC Insured), 5.40%, 9/1/98............................... 1,000 1,022
Arizona Transportation Board Excise Tax, Maricopa County Regional Area
Road Fund, TRAN, 7.30%, 7/1/98.......................................... 4,500 4,818
Maricopa County, Gilbert School Dist., GO, (FGIC Insured),
Zero Coupon, 7/1/95................................................ 4,000 3,865
Kyrene Elementary School Dist., GO, (FGIC Insured),
Zero Coupon, 7/1/95................................................ 1,500 1,449
Zero Coupon, 1/1/96................................................ 1,250 1,178
Zero Coupon, 7/1/96................................................ 1,500 1,380
Mesa Unified School Dist. No. 4, GO, (FGIC Insured), Zero Coupon, 7/1/98 2,675 2,213
Unified School Dist., (FGIC Insured), 4.25%, 7/1/95..................... 3,000 3,002
</TABLE>
<PAGE>
T. Rowe Price Tax-Free Short-Intermediate Fund
Statement of Net Assets
<TABLE>
<CAPTION>
Amounts in Thousands
----------------------------
Face Amount Value
----------- -----
<S> <C> <C>
ARIZONA (cont'd)
Mesa, GO, (AMBAC Insured), 6.75%, 7/1/98................................... $ 5,800 $ 6,202
Phoenix, Street and Highway User, 7.30%, 7/1/98 (Escrowed to Maturity)..... 900 974
Tucson, 7.90%, 7/1/15 (Pre-refunded 7/1/96+)............................... 2,000 2,160
- ---------------------------------------------------------------------------------------------------------------------------
ARKANSAS -- 0.6%
Pulaski County Health Fac. Board, Sisters of Charity,
9.375%, 11/1/02 (Pre-refunded 11/1/95+)............................ 2,830 3,047
- ---------------------------------------------------------------------------------------------------------------------------
CALIFORNIA -- 8.0%
Alameda County Transportation Auth., Sales Tax,
(FGIC Insured), 4.60%, 11/1/96..................................... 3,000 3,018
4.75%, 5/1/97...................................................... 2,300 2,313
5.00%, 5/1/98...................................................... 1,000 1,010
California, RAW, 5.75%, 4/25/96............................................ 7,000 7,115
(AMBAC Insured), 5.00%, 8/1/95.......................................... 5,000 5,033
(FGIC Insured), 5.75%, 4/25/96.......................................... 3,000 3,052
California Housing Fin. Agency, Multi. Unit Rental, 5.75%, 8/1/98.......... 1,000 1,017
Newport Beach, Hoag Memorial Hosp. Presbyterian,
VRDN (Currently 3.05%)............................................. 2,600 2,600
Sacramento Municipal Utility Dist., (FGIC Insured), 5.70%, 7/1/98.......... 2,500 2,587
Sacramento Regional County Sanitation Dist., GO, 5.25%, 2/1/98............. 2,200 2,207
San Diego, GO, 4.50%, 9/29/95.............................................. 9,375 9,366
- ---------------------------------------------------------------------------------------------------------------------------
COLORADO -- 0.7%
Colorado Student Obligation Bond Auth., Student Loan Program,
5.70%, 9/1/94...................................................... 2,300 2,300
6.125%, 12/1/98.................................................... 1,345 1,383
- ---------------------------------------------------------------------------------------------------------------------------
CONNECTICUT -- 1.4%
Connecticut, GO, 5.375%, 8/15/97........................................... 4,500 4,616
Connecticut Resources Recovery Auth., Mid-Connecticut System,
5.10%, 11/15/96.................................................... 2,360 2,391
- ---------------------------------------------------------------------------------------------------------------------------
DELAWARE -- 0.5%
Delaware State, GO, 4.60%, 3/1/96.......................................... 2,240 2,254
- ---------------------------------------------------------------------------------------------------------------------------
FLORIDA -- 5.1%
Celebration Community Dev. Dist., Osceola County,
(MBIA Insured), 4.90%, 5/1/98...................................... 4,085 4,115
East County Water Control Dist., Lee County Drain,
14.00%, 11/1/00 (Pre-refunded 11/1/96+)............................ 1,075 1,328
14.00%, 11/1/01 (Pre-refunded 11/1/96+)............................ 1,220 1,507
Florida Municipal Power Agency, St. Lucie Project,
7.00%, 10/1/97 (Pre-refunded 10/1/96+)............................. 1,000 1,069
Gainesville, Utilities Systems, 7.875%, 10/1/10 (Pre-refunded 6/1/97+)..... 3,525 3,914
Jacksonville, Excise Tax, (MBIA Insured), 6.90%, 10/1/98................... 3,610 3,906
Jacksonville Electric Auth., 6.90%, 10/1/19 (Pre-refunded 4/1/97+)......... 5,000 5,347
St. John River Power Park System, 3.75%, 10/1/96........................ 4,000 3,968
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Amounts in Thousands
----------------------------
Face Amount Value
----------- -----
<S> <C> <C>
GEORGIA -- 5.1%
Fulton County School Dist., 7.625%, 5/1/17 (Pre-refunded 5/1/97+).......... $ 9,400 $ 10,352
Georgia, GO, 5.80%, 3/1/96................................................. 5,500 5,631
7.00%, 11/1/97..................................................... 1,000 1,075
5.95%, 3/1/98...................................................... 2,000 2,091
Gwinnett County Water & Sewerage Auth., COP, GO, 8.05%, 8/1/98............. 1,000 1,115
Municipal Electric Auth. of Georgia, 7.20%, 1/1/97......................... 3,000 3,164
7.40%, 1/1/98...................................................... 1,500 1,578
- ---------------------------------------------------------------------------------------------------------------------------
HAWAII -- 0.8%
Hawaii, GO, 5.60%, 11/1/98................................................. 3,000 3,103
Hawaii Airport System, (AMBAC Insured), 4.25%, 7/1/96 *.................... 1,000 996
- ---------------------------------------------------------------------------------------------------------------------------
ILLINOIS -- 4.4%
Chicago Public Building Commission, Chicago Board of Ed., (FGIC Insured),
7.45%, 1/1/97 (Escrowed to Maturity)............................... 1,200 1,276
7.50%, 1/1/98 (Escrowed to Maturity)............................... 1,000 1,085
Cook County, GO, (FGIC Insured), 4.10%, 11/15/95........................... 1,250 1,250
Illinois Dev. Fin. Auth., Palos Community Hosp., VRDN (Currently 3.05%).... 7,500 7,500
Illinois HFA, Resurrection Health Care Systems, VRDN (Currently 3.35%)..... 1,200 1,200
Kane, Cook & DuPage County School Dist., GO, (FGIC Insured), 9.00%, 1/1/98. 1,350 1,520
Metropolitan Pier and Exposition Auth., Dedicated State Tax, 7.60%, 6/1/98. 1,500 1,609
(AMBAC Insured), Zero Coupon, 6/15/95................................... 2,285 2,215
Metropolitan Water Reclamation Dist. of Greater Chicago, Cook County,
7.50%, 1/1/98...................................................... 1,000 1,080
Township High School Dist., GO, (FGIC Insured), 5.60%, 6/1/98.............. 3,000 3,097
- ---------------------------------------------------------------------------------------------------------------------------
INDIANA -- 0.3%
Indiana HFFA, Methodist Hosp., 4.00%, 9/1/94............................... 500 500
4.30%, 9/1/95...................................................... 500 500
4.60%, 9/1/96...................................................... 545 546
- ---------------------------------------------------------------------------------------------------------------------------
IOWA -- 0.3%
Muscatine, Electric, (AMBAC Insured), 4.80%, 1/1/97........................ 1,700 1,701
- ---------------------------------------------------------------------------------------------------------------------------
KANSAS -- 0.4%
Kansas City Utility System, (AMBAC Insured), 4.45%, 9/1/94................. 2,000 2,000
- ---------------------------------------------------------------------------------------------------------------------------
KENTUCKY -- 1.0%
Kentucky Housing Corp., 3.65%, 7/1/96...................................... 2,000 1,972
Owensboro Electric Light and Power System, (AMBAC Insured),
Zero Coupon, 1/1/96................................................ 2,000 1,884
Zero Coupon, 1/1/98................................................ 1,000 852
- ---------------------------------------------------------------------------------------------------------------------------
LOUISIANA -- 4.1%
Louisiana, GO, (MBIA Insured), 8.00%, 5/1/98............................... 2,000 2,214
Louisiana Housing Fin. Agency, Zero Coupon, 3/1/95......................... 5,000 4,903
</TABLE>
3
<PAGE>
T. Rowe Price Tax-Free Short-Intermediate Fund
Statement of Net Assets
<TABLE>
<CAPTION>
Amounts in Thousands
----------------------------
Face Amount Value
----------- -----
<S> <C> <C>
LOUISIANA (cont'd)
Louisiana Offshore Terminal Auth., Deepwater Port, 6.75%, 9/1/94........... $ 2,000 $ 2,000
4.60%, 9/1/95...................................................... 5,890 5,917
Louisiana PFA, Student Loan, 6.10%, 9/1/00................................. 2,500 2,583
Sisters of Mercy Health System, 7.25%, 6/1/98........................... 1,000 1,076
Louisiana Recovery Dist., (AMBAC Insured), 7.375%, 7/1/96.................. 1,620 1,693
- ---------------------------------------------------------------------------------------------------------------------------
MAINE -- 1.0%
Maine Ed. Loan Marketing Corp., Student Loan, 5.75%, 11/1/01............... 5,000 5,036
- ---------------------------------------------------------------------------------------------------------------------------
MARYLAND -- 5.6%
Baltimore City IDA, Days Inn Project, 12.625%, 12/1/04
(Pre-refunded 12/1/97+)........................................... 7,315 9,061
Maryland HHEFA, Johns Hopkins Hosp., 7.20%, 7/1/09 (Pre-refunded 7/1/00+).. 3,000 3,377
Peninsula Regional Medical Center, 4.375%, 7/1/00....................... 1,000 941
4.50%, 7/1/01...................................................... 1,200 1,121
4.60%, 7/1/02...................................................... 1,175 1,090
4.70%, 7/1/03...................................................... 1,250 1,153
Univ. of Maryland Medical System, 9.50%, 1/1/14 (Pre-refunded 7/22/96+) 10,000 11,104
- ---------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS -- 3.3%
Massachusetts Bay Transportation Auth., General Transportation,
6.00%, 3/1/00...................................................... 9,980 10,440
Massachusetts HEFA, Pooled Loan, (MBIA Insured), VRDN (Currently 3.05%).... 2,200 2,200
Massachusetts Housing Fin. Agency, 4.80%, 10/1/98.......................... 2,700 2,684
Insured Rental, (AMBAC Insured), 4.90%, 1/1/97 *........................ 1,000 999
- ---------------------------------------------------------------------------------------------------------------------------
MINNESOTA -- 1.1%
Minnesota PFA, Water Pollution Control, 5.70%, 3/1/99...................... 2,000 2,067
Southern Minnesota Municipal Power Agency, 4.40%, 1/1/00................... 3,500 3,369
- ---------------------------------------------------------------------------------------------------------------------------
MISSISSIPPI -- 2.1%
Mississippi Higher Ed. Assistance Corp., Student Loan, 6.00%, 7/1/00....... 5,000 5,076
6.10%, 1/1/01...................................................... 5,000 5,081
- ---------------------------------------------------------------------------------------------------------------------------
MISSOURI -- 1.7%
Kansas City School Dist., Elementary School Project, (FGIC Insured),
3.45%, 2/1/96...................................................... 1,300 1,286
Missouri, Board of Public Buildings (State Office Building),
8.50%, 8/1/06 (Pre-refunded 8/1/95+)............................... 3,000 3,171
Missouri Economic Dev., Export & Infrastructure Board, 6.75%, 9/1/96....... 835 843
Missouri Higher Ed. Loan Auth., Student Loan (Pattonville R-3 School Dist.),
5.375%, 2/15/99.................................................... 3,000 3,010
- ---------------------------------------------------------------------------------------------------------------------------
MONTANA -- 0.5%
Montana Higher Ed. Student Assistance Corp., Student Loan, 4.00%, 12/1/95 * 2,500 2,491
- ---------------------------------------------------------------------------------------------------------------------------
NEBRASKA -- 0.4%
Omaha Public Power Dist., 5.20%, 2/1/00.................................... 2,000 2,026
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Amounts in Thousands
----------------------------
Face Amount Value
----------- -----
<S> <C> <C>
NEVADA -- 0.3%
Clark County, Transportation Improvement, GO,
(AMBAC Insured), 5.50%, 6/1/98 $ 1,335 $ 1,371
- ---------------------------------------------------------------------------------------------------------------------------
NEW JERSEY -- 3.0%
New Jersey, GO, 5.80%, 1/15/96............................................. 3,300 3,368
New Jersey Housing and Mortgage Fin. Agency, 4.80%, 5/1/96................. 3,530 3,545
New Jersey Sports & Exposition Auth., GO, 7.60%, 1/1/96.................... 3,500 3,649
New Jersey Transportation Trust Fund Auth., 5.40%, 6/15/97................. 4,315 4,402
- ---------------------------------------------------------------------------------------------------------------------------
NEW MEXICO -- 2.6%
Albuquerque, Hosp. System (Presbyterian Healthcare Services),
(MBIA Insured), 5.40%, 8/1/98...................................... 2,985 3,061
Albuquerque IDR, Ethicon Inc., 10/1/94, Floating Rate (Currently 4.805%)... 1,600 1,602
Farmington, San Juan Unit Project, 13.625%, 7/1/01 (Pre-refunded 7/1/96+).. 2,000 2,320
Gallup, PCR, Plains Electric Generation and Transmission Coop.,
(MBIA Insured), 5.50%, 8/15/98..................................... 1,640 1,681
New Mexico, Severance Tax, 5.20%, 7/1/95................................... 1,550 1,562
5.30%, 7/1/97...................................................... 1,000 1,017
New Mexico Mortgage Fin. Auth., 5.90%, 1/1/99.............................. 1,630 1,648
- ---------------------------------------------------------------------------------------------------------------------------
NEW YORK -- 4.1%
New York City, GO, VRDN (Currently 3.20%).................................. 1,600 1,600
VRDN (Currently 3.10%)............................................. 1,000 1,000
5.625%, 8/1/01.......................................................... 5,000 5,018
New York City Municipal Water Fin. Auth., (FGIC Insured),
VRDN (Currently 3.15%)............................................. 2,000 2,000
New York State Urban Dev. Corp., Correctional Capital Fac.,
6.50%, 1/1/21 (Pre-refunded 1/1/01+)............................... 4,900 5,300
Triborough Bridge and Tunnel Auth., 7.625%, 1/1/14 (Pre-refunded 1/1/96+).. 5,200 5,534
- ---------------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA -- 2.8%
North Carolina Eastern Municipal Power Agency, 7.75%, 1/1/15
(Pre-refunded 1/1/96+)............................................. 9,545 10,241
Catawba Electric, (FGIC Insured), 5.10%, 1/1/99.................... 3,500 3,535
- ---------------------------------------------------------------------------------------------------------------------------
OHIO -- 0.8%
Butler County Hosp. Fac., Middletown Regional Hosp., (FGIC Insured),
6.00%, 11/15/97.................................................... 1,260 1,309
Franklin County, American Chemical Society, 4.35%, 4/1/95.................. 2,750 2,755
- ---------------------------------------------------------------------------------------------------------------------------
OKLAHOMA -- 0.7%
Tulsa Public Fac. Auth., Capital Improvement, 4.05%, 5/1/95................ 3,460 3,460
- ---------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA -- 5.6%
New Castle Area Hosp. Auth., St. Frances Hosp., Zero Coupon, 11/15/97...... 2,535 2,155
Pennsylvania, GO, 5.50%, 10/15/98.......................................... 3,000 3,036
Pennsylvania Higher Ed. Fac. Auth., Thomas Jefferson Univ., 5.75%, 8/15/98. 3,380 3,502
</TABLE>
5
<PAGE>
T. Rowe Price Tax-Free Short-Intermediate Fund
Statement of Net Assets
<TABLE>
<CAPTION>
Amounts in Thousands
----------------------------
Face Amount Value
----------- -----
<S> <C> <C>
PENNSYLVANIA (cont'd)
Pennsylvania Housing Fin. Agency, Rental Housing, (FNMA Insured)
5.00%, 7/1/98...................................................... $ 1,250 $ 1,255
Pennsylvania IDA, Economic Dev., (AMBAC Insured), 5.00%, 1/1/96............ 1,575 1,586
6.00%, 1/1/99...................................................... 3,000 3,118
6.00%, 7/1/99...................................................... 4,575 4,773
Pennsylvania Intergovernmental Cooperation Auth., Special Tax Revenue,
(FGIC Insured), 5.60%, 6/15/98..................................... 5,000 5,137
Philadelphia, Water & Sewer Revenue, 8.40%, 10/1/96 (Pre-refunded 10/1/95+) 1,255 1,333
8.55%, 10/1/97 (Pre-refunded 10/1/95+)............................. 1,500 1,596
- ---------------------------------------------------------------------------------------------------------------------------
RHODE ISLAND -- 0.4%
Rhode Island Student Loan, 6.20%, 12/1/98.................................. 2,000 2,069
- ---------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA -- 1.3%
Charleston County School Dist. Dev. Corp., Central Administrative Building,
COP, 5.00%, 2/1/99................................................. 2,500 2,501
South Carolina, Capital Improvement, GO, 5.70%, 2/1/98..................... 2,400 2,460
South Carolina Public Service Auth., Electric Systems Expansion,
7.875%, 7/1/21 (Pre-refunded 1/1/96+).............................. 1,590 1,693
- ---------------------------------------------------------------------------------------------------------------------------
SOUTH DAKOTA -- 0.5%
South Dakota HDA, Homeownership Mortgage, 6.50%, 5/1/96.................... 2,005 2,047
7.10%, 5/1/96...................................................... 390 397
- ---------------------------------------------------------------------------------------------------------------------------
TENNESSEE -- 0.2%
Chattanooga-Hamilton County Hosp. Auth., Erlanger Medical Center, VRDN
(Currently 3.15%).................................................. 1,000 1,000
- ---------------------------------------------------------------------------------------------------------------------------
TEXAS -- 8.9%
Anderson County, Coffield State Prison, (AMBAC Insured), 6.50%, 3/15/98.... 2,000 2,113
Arlington, GO, 6.70%, 5/1/95............................................... 1,000 1,018
Brazos Higher Ed. Auth. Inc., Student Loan, 5.45%, 6/1/98 *................ 1,000 1,004
5.60%, 6/1/99 *.................................................... 1,000 1,014
5.85%, 6/1/01 *.................................................... 1,000 1,007
5.95%, 6/1/02 *.................................................... 1,000 1,014
Dallas, Water and Sewer, 9.50%, 4/1/97..................................... 1,515 1,692
Dallas Independent School Dist., 8.70%, 8/1/95 (Escrowed to Maturity)...... 3,000 3,119
8.00%, 8/15/97 (Pre-refunded 8/15/95+)............................. 3,700 3,917
Dallas-Fort Worth Regional Airport, 5.50%, 11/1/98......................... 2,000 2,045
Goose Creek Consolidated Independent School Dist., GO,
Zero Coupon, 2/15/98............................................... 1,200 1,014
Zero Coupon, 2/15/99............................................... 1,200 958
Harris County Health Fac. Dev. Corp., St. Luke's Episcopal Hosp.,
6.20%, 2/15/98..................................................... 1,420 1,477
Methodist Hosp., VRDN (Currently 3.15%)................................. 3,500 3,500
Hays Consolidated Independent School Dist., GO, Zero Coupon, 2/15/98....... 1,050 887
Houston, Water and Sewer, (FGIC Insured), 5.55%, 12/1/95................... 2,050 2,084
Lubbock, Waterworks System, GO, 8.75%, 2/15/97............................. 510 558
8.75%, 2/15/98..................................................... 510 573
</TABLE>
6
<PAGE>
T. Rowe Price Tax-Free Short-Intermediate Fund
Statement of Net Assets
<TABLE>
<CAPTION>
Amounts in Thousands
----------------------------
Face Amount Value
----------- -----
<S> <C> <C>
TEXAS (cont'd)
Plano Independent School Dist., GO, (FGIC Insured), 8.625%, 2/15/97................ $ 2,100 $ 2,292
Port of Houston Auth., Capital Appreciation,
Zero Coupon, 10/1/96....................................................... 2,360 2,147
Zero Coupon, 10/1/97....................................................... 2,660 2,301
San Antonio, GO, 8.625%, 8/1/97.................................................... 1,200 1,330
Water System, GO, (FGIC Insured), 5.60%, 5/15/98........................... 5,000 5,127
Texas Housing Agency, 6.15%, 3/1/97................................................ 1,060 1,082
6.80%, 7/1/97.............................................................. 150 154
6.25%, 3/1/98.............................................................. 330 338
6.25%, 9/1/98.............................................................. 275 281
- ---------------------------------------------------------------------------------------------------------------------------
UTAH -- 3.1%
Board of Regents of the Univ. of Utah, Student Loan, 4.45%, 11/1/95................ 1,500 1,498
Univ. Hosp., 5.50%, 5/15/97..................................................... 1,860 1,895
Intermountain Power Agency, Utah Power Supply, 9.00%, 7/1/95....................... 1,500 1,558
5.00%, 7/1/97.............................................................. 5,615 5,672
10.375%, 7/1/16............................................................ 3,795 4,073
Utah Housing Fin. Agency, 6.00%, 1/1/99............................................ 490 497
- ---------------------------------------------------------------------------------------------------------------------------
VIRGINIA -- 3.3%
Peninsula Ports Auth., Shell Oil, VRDN (Currently 3.10%)........................... 1,000 1,000
Virginia College Building Auth., 4.10%, 8/1/95..................................... 2,795 2,790
Virginia Ed. Loan Auth., Student Loan Program, 4.30%, 9/1/94....................... 1,700 1,700
5.40%, 9/1/98.............................................................. 1,205 1,220
Virginia HDA, 9.875%, 9/1/95....................................................... 295 300
4.65%, 5/1/96 *............................................................ 1,500 1,498
5.20%, 1/1/97 *............................................................ 4,300 4,330
5.75%, 1/1/99 *............................................................ 1,390 1,389
5.90%, 1/1/00 *............................................................ 1,865 1,868
- ---------------------------------------------------------------------------------------------------------------------------
WASHINGTON -- 5.2%
North Shore School Dist. No. 417, GO, (FGIC Insured), 5.35%, 12/1/97............... 2,575 2,631
Washington, GO, 3.35%, 10/1/95..................................................... 4,245 4,221
3.70%, 8/1/96.............................................................. 5,500 5,449
5.10%, 9/1/98.............................................................. 3,050 3,096
Washington HFA, Franciscan Health System, St. Joseph's Hosp. & Health
Center, (MBIA Insured), 4.15%, 1/1/97...................................... 1,560 1,535
The Children's Hosp. and Medical Center, (FGIC Insured), 5.55%, 10/1/98........ 1,325 1,361
Virginia Mason Medical Center, (MBIA Insured), 6.80%, 7/1/96................... 1,000 1,040
7.20%, 7/1/98.............................................................. 1,000 1,079
Washington Public Power Supply System, 3.50%, 7/1/96............................... 3,355 3,275
3.75%, 7/1/96.............................................................. 2,000 1,962
- ---------------------------------------------------------------------------------------------------------------------------
WISCONSIN -- 0.6%
Wisconsin HFA, Childrens Hosp., 9.375%, 8/1/15 (Pre-refunded 8/1/95+).............. 3,000 3,194
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Amounts in Thousands
----------------------------
Face Amount Value
----------- -----
<S> <C> <C>
MULTI-STATE -- 2.1%
IVRC Trust, Tax-Exempt Inverse Floating Rate Certificate, Residual Interest
Bond 144a, 1/1/13 (Currently 15.155%), (Pre-refunded 9/15/97+)..... $ 8,000 $ 10,220
TOTAL INVESTMENTS IN SECURITIES - 101.6% (COST - $498,844)................. 502,520
Other Assets Less Liabilities - (1.6%) .................................... (7,680)
----------
NET ASSETS CONSISTING OF:
Accumulated net investment income - net of distributions................... 8
Accumulated realized gains/losses - net of distributions................... (2,887)
Net unrealized appreciation of investments................................. 3,676
Paid-in-capital applicable to 94,026,433 shares of $0.01 par value capital
stock outstanding; 1,000,000,000 shares authorized................. 494,043
------------
NET ASSETS - 100.0%........................................................ $ 494,840
==========
NET ASSET VALUE PER SHARE.................................................. $5.26
======
</TABLE>
144a - Security was purchased pursuant to Rule 144a
under the Securities Act of 1933 and may not
be resold subject to that rule except to the
qualified institutional buyers.
* - Interest subject to alternative minimum tax
+ - Used in determining portfolio maturity
AMBAC - AMBAC Indemnity Corp.
COP - Certificates of Participation
FGIC - Financial Guaranty Insurance Company
FNMA - Federal National Mortgage Association
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
IDR - Industrial Development Revenue
IVRC - Inverse Variable Rate Certificates
MBIA - Municipal Bond Investors Assurance
Corporation
PCR - Pollution Control Revenue
PFA - Public Facility Authority
RAW - Revenue Anticipation Warrant
VRDN - Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
T. Rowe Price Tax-Free Short-Intermediate Fund
Statement of Operations / Six Months Ended August 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Amounts in Thousands
--------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income............................................................... $11,816
Expenses
Investment management fees.................................................. $ 1,138
Shareholder servicing fees & expenses....................................... 204
Custodian and accounting fees & expenses.................................... 83
Registration fees & expenses................................................ 34
Legal & auditing fees....................................................... 19
Prospectus & shareholder reports............................................ 15
Directors' fees & expenses.................................................. 7
Proxy & annual meeting...................................................... 4
Miscellaneous............................................................... 7
-------
Total expenses.............................................................. 1,511
-------
Net investment income......................................................... 10,305
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss)
Securities.................................................................. (1,483)
Futures..................................................................... 238
-------
Net realized loss........................................................... (1,245)
Change in net unrealized appreciation or depreciation......................... (5,143)
-------
Net loss on investments....................................................... (6,388)
-------
INCREASE IN NET ASSETS FROM OPERATIONS........................................ $ 3,917
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
T. Rowe Price Tax-Free Short-Intermediate Fund
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Amounts in Thousands
----------------------------------------------
Six Months Ended Year Ended
Aug. 31, 1994 Feb. 28, 1994
---------------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income.......................................... $ 10,305 $ 21,073
Net realized gain (loss) on investments........................ (1,245) 3,525
Change in net unrealized appreciation or depreciation
of investments................................................. (5,143) (7,342)
---------- ----------
Increase in net assets from operations......................... 3,917 17,256
---------- ----------
Distributions to shareholders
Net investment income.......................................... (10,305) (21,073)
---------- ----------
Capital share transactions
Sold 16,219 and 55,259 shares.................................. 85,402 295,712
Distributions reinvested of 1,535 and 3,098 shares............. 8,068 16,568
Redeemed 25,286 and 41,461 shares.............................. (132,970) (221,897)
---------- ----------
Increase (decrease) in net assets from capital share (39,500) 90,383
transactions ---------- ----------
Total increase (decrease)........................................ (45,888) 86,566
NET ASSETS
Beginning of period............................................ 540,728 454,162
---------- ----------
End of period.................................................. $ 494,840 $ 540,728
========== ==========
</TABLE>
T. Rowe Price Tax-Free Short-Intermediate Fund
Notes to Financial Statements / August 31, 1994 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Tax-Free Short-Intermediate Fund (the Fund) is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company.
A) Security 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.
Financial futures contracts are valued at closing settlement prices.
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.
10
<PAGE>
B) Premiums and Discounts - Premiums on municipal securities are amortized
for both financial and tax reporting purposes. Discounts, other than
original issue, are not amortized for financial reporting 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 which may differ
from generally accepted accounting principles. Payments ("variation margin")
made or received by the Fund, dependent on the daily fluctuations in the value
of the futures contracts, are recorded as unrealized gains or losses until the
contracts are closed.
NOTE 2 - PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $208,855,000 and $245,682,000, respectively, for the
six months ended August 31, 1994.
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 $1,062,000 which expire in 1996 through 1998.
Capital loss carryforwards utilized in the fiscal year ending February 28,
1994 amounted to $3,352,000. The Fund intends to retain gains realized in
future periods that may be offset by available capital loss carryforwards.
At August 31, 1994, the aggregate cost of investments for federal income
tax and financial reporting purposes was $498,844,000 and net unrealized
appreciation aggregated $3,676,000, of which $5,183,000 related to appreciated
investments and $1,507,000 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, computed daily and paid monthly, consisting of an Individual Fund Fee
equal to 0.10% 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. The effective annual Group Fee rate at August 31,
1994, and for the six months then ended was 0.34%. The Fund pays a pro rata
portion of the Group Fee based on the ratio of the Fund's net assets to those
of the Group.
T. Rowe Price Services, Inc. (TRPS) is a wholly owned subsidiary of the
Manager. TRPS provides transfer and dividend disbursing agent functions and
shareholder services for all accounts. The Manager, under a separate agreement,
calculates the daily share price and maintains the financial records of the
Fund. For the six months ended August 31, 1994, the Fund incurred fees totalling
approximately $198,000 for these services provided by related parties. At August
31, 1994, investment management and service fees payable were $237,000.
11
<PAGE>
T. Rowe Price Tax-Free Short-Intermediate Fund
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
For a share outstanding throughout each period
----------------------------------------------------------------------
Six Months Year Ended
Ended -----------------------------------------------------------
Aug. 31, Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 28,
1994 1994 1993 1992 1991 1990
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 5.32 $ 5.36 $ 5.22 $ 5.15 $ 5.09 $ 5.03
------- --------- ------- ------- -------- --------
Investment Activities
Net investment income................. 0.11 0.22 0.24 0.28 0.29 0.30
Net realized and unrealized gain (loss) (0.06) (0.04) 0.14 0.07 0.06 0.06
------- --------- ------- ------- -------- --------
Total from Investment Activities............ 0.05 0.18 0.38 0.35 0.35 0.36
------- --------- ------- ------- -------- --------
Distributions
Net investment income................. (0.11) (0.22) (0.24) (0.28) (0.29) (0.30)
------- --------- ------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD.............. $ 5.26 $ 5.32 $ 5.36 $ 5.22 $ 5.15 $ 5.09
======= ========= ======= ======= ======== ========
RATIOS/SUPPLEMENTAL DATA
Total Return................................ 0.90% 3.49% 7.51% 6.94% 7.06% 7.36%
Ratio of Expenses to Average Net Assets..... 0.59%+ 0.60% 0.63% 0.67% 0.74% 0.75%
Ratio of Net Investment Income
to Average Net Assets................. 4.02%+ 4.18% 4.61% 5.34% 5.67% 5.93%
Portfolio Turnover Rate..................... 85.4%+ 51.1% 38.5% 81.3% 190.1% 190.8%
Net Assets, End of Period (in thousands).... $494,840 $540,728 $454,162 $328,312 $232,923 $223,180
</TABLE>
+ Annualized.
12
<PAGE>
Fellow Shareholders
Solid economic growth continued through the summer despite increases in
interest rates during late winter and spring. Real GDP increased 3.8% in the
second quarter, and payroll employment gains averaged 270,000 per month in
the three months ended August 31. The civilian unemployment rate remained
around 6.1% while the capacity utilization rate stayed at about 84% -- both
measures indicating little slack left in the economy. The Federal Reserve
paused to reassess the health of the economy in July, but continued to
increase rates in August when the strength of the economy became clearer. In
addition, fears of a pickup in inflation became evident.
Short-term interest rates continued to rise during the three months
ended August 31 because of these concerns and the Fed's fifth tightening
move, which raised its target for the federal funds rate another 50 basis
points to 4.75%. Intermediate-term interest rates did not rise as much as
short-term rates, while the yield on the benchmark 30-year Treasury bond was
essentially unchanged during the period. This contrasts with the preceding
quarter, when note and bond yields rose between 75 and 125 basis points in
response to earlier Fed moves.
In the tax-exempt market, short-term yields also rose while
intermediate- and long-term yields were mostly flat. The yield on six-month
notes closed the quarter at 3.65%, 40 basis points higher than at the end of
the May 31 quarter. Intermediate-term bonds with five-year maturities
actually rose slightly in price with yields declining five basis points to
4.75%, while the yield on AAA 30-year General Obligation bonds was up five
basis points to 6.1% during the period. This yield continued to average about
82% of the yield on long-term Treasury bonds, indicating that long-term
municipal bonds would benefit investors in income tax brackets over 18%.
Municipal Bond and Note Yields
[ARTWORK APPEARS HERE]
The disproportionate rise in short-term rates relative to longer-term
rates has led to a "flattening" of the yield curve typical of an economic
expansion. Notwithstanding the sharp rise in long-term rates earlier this
year, bond yields ordinarily do not fluctuate as much as money market yields
over the business cycle since bonds, with their long-term horizons, are less
susceptible to cyclical pressures. As a result, the "slope" of the yield
curve usually flattens in times of prosperity and steepens when the economy
is slowing down.
SUMMARY AND OUTLOOK
We expect the general rise in interest rates to lead to slower economic
growth during the second half of the year--but not to a decisive slowdown.
The Federal Reserve is likely to lift its target for the fed funds rate even
further to ensure that the economy does not continue growing at above-average
rates, spurring inflationary pressures. Further tightening moves will surely
lead to higher yields on money market securities, but the outlook for
intermediate- and long-term interest rates is more complex. To the extent
that economic growth slows, the 200-basis-point increase in long-term rates
over year-ago levels may be enough of a cushion against moderately higher
inflation. If economic growth is above average or if inflation gains
<PAGE>
momentum, however, we would expect intermediate- and long-term rates to trend
higher.
We are a bit more optimistic about the tax-exempt market than the
taxable market since demand for tax-free income remains strong. In addition,
the supply of new issues is down from levels of the past two years--a
situation that we expect to continue for the balance of the year. This
combination of strong demand and reduced supply should help tax-free bonds
outperform their taxable equivalents.
We appreciate the continued confidence that all of our shareholders
have placed in us.
Respectfully submitted,
/s/ William T. Reynolds
William T. Reynolds
Director
Fixed-Income Division
September 23, 1994
A Word About Derivatives
As you are probably aware, derivatives are securities whose returns are
determined by an underlying index, asset, or security. Some derivatives can
be extremely risky and others conservative, actually serving to reduce risk.
We have historically been cautious regarding the use of these instruments.
Over the past quarter, derivative usage other than for hedging principal
volatility represented less than 3% of any municipal bond fund's assets.
While our past use of derivatives has not been significant, we feel
that there are times when certain types of derivatives are appropriate. We
want to assure you that, as with any investment of your money, we will employ
a prudent and professional approach in the use of derivatives.
TAX-EXEMPT MONEY FUND
We began the quarter with expectations that tax-exempt short-term interest
rates would rise sharply because of both fundamental and technical factors.
Our fundamental outlook was validated by the Fed's mid-August tightening
move, but the market's reaction to the heavy seasonal slate of new offerings
was different from past experience. Typically, municipal note yields rise in
late July and August as supply outstrips demand and yields become attractive
relative to taxable securities until the new supply is absorbed.
This year, the move to higher yields from technical considerations
was muted for several reasons, including: an overall reduction in seasonal
borrowings from previous years; an extension in maturities past money market
range; and the restructuring of newly issued notes into variable rate
securities. While these factors alleviated supply pressures, on the demand
side money fund assets were firm throughout the quarter, and the short-term
market received support from long-term investors who held higher-than-normal
cash positions against rising interest rates.
Even though yields on short-term tax-exempt securities remained less
attractive than in the past compared with taxable equivalents, we extended
our weighted average maturity late in the quarter as it became apparent that
we might not see the previously favorable relationships. Our note purchases
were concentrated in the four- to nine-month maturity range. This maturity
range offers higher yields than shorter-term securities while preserving our
flexibility to take advantage of rising rates. Your Fund turned in favorable
performances for the three- and six-month periods, as is shown below.
Performance Comparison
<TABLE>
<CAPTION>
Periods Ended 8/31/94
3 Months 6 Months
--------- ---------
<S> <C> <C>
Tax-Exempt Money Fund 0.58% 1.10%
Donoghue's Tax-Free
Money Fund Average* 0.55 1.06
=========================================================
</TABLE>
*Stockbroker and General Purpose Funds.
2
<PAGE>
TAX-FREE SHORT-INTERMEDIATE FUND
Intermediate-term interest rates took a breather after a volatile first
quarter, moving in a narrow range and ending the quarter virtually unchanged.
The contraction in the number of new issues and steady demand for
intermediate-term bonds, which are more defensive than long-term bonds, lent
stability to this part of the market. Issuance of new debt is about 40% below
year-ago levels throughout the country, with certain regional exceptions, and
new issuance of intermediate-term bonds has been particularly light.
We used this stable environment to lower our effective duration and
weighted average maturity slightly to 2.4 and 2.9 years, respectively, from
their levels at the end of the previous fiscal quarter. The weighted average
quality of portfolio securities was virtually unchanged at the AA level. In
line with our defensive posture, we emphasized higher-coupon bonds with
shorter durations rather than bonds with lower coupons, and avoided the
potential tax problem posed by "market discount" bonds, which allows capital
gains to be taxed as ordinary income in certain instances.
With inflationary pressures likely to increase, we expect to keep the
Fund's duration at the short end of our neutral range. Your Fund performed in
line with the average for its peer group during the quarter and outperformed
for the longer period, as shown below.
Performance Comparison
<TABLE>
<CAPTION>
Periods Ended 8/31/94
3 Months 6 Months
---------- --------
<S> <C> <C>
Tax-Free Short-Intermediate
Fund 1.03% 0.90%
Lipper Short Municipal
Debt Fund Average 1.01 0.64
========================================================
</TABLE>
TAX-FREE INSURED INTERMEDIATE BOND FUND
A stable market environment during the quarter, strong demand for tax-free
income, and a reduction in the supply of new issues caused municipal bond
yields in the five- to 10-year range to decline by five basis points. AAA
General Obligation yields in this maturity range closed the quarter 70% to
73%, respectively, of the yields on similar Treasuries--versus 71% and 74% at
the end of May.
Portfolio duration was extended slightly from 5.3 years to 5.4 years
during the quarter. The weighted average maturity was also slightly longer at
7.2 years, compared with 7.0 years in May. We sold securities in the five- to
seven-year area and reinvested the proceeds in both cash and 10-year
securities. This type of maturity structure should set the stage for better
relative performance as the yield curve flattens. Your Fund also emphasized
high coupon bonds that cushion price declines when rates rise and eliminate
the "market discount" problem (which allows capital gains to be taxed as
income in some instances).
Over the past six months this Fund has performed well against its
peers with a somewhat defensive posture. At this point we see little reason
to change course, considering our expectation for higher interest rates. An
even more defensive posture could be warranted if the economy continues to
grow strongly.
Performance Comparison
<TABLE>
<CAPTION>
Periods Ended 8/31/94
3 Months 6 Months
--------- ---------
<S> <C> <C>
Tax-Free Insured Intermediate
Bond Fund 1.31% 0.36%
Lipper Intermediate Municipal
Debt Fund Average 1.37 -0.28
=========================================================
</TABLE>
3
<PAGE>
TAX-FREE INCOME FUND
During the last three- and six-month periods we managed the Fund less
aggressively than in prior years, believing that stronger economic growth and
the Federal Reserve's tightening would result in higher interest rates. The
Fund's duration, which measures sensitivity to changing rates, remained in
the 7.5- to 7.7-year range and reflects a neutral posture relative to the
market. The Fund's weighted average maturity of approximately 17 1/2 years is
down significantly from year-ago levels, and the Fund's portfolio contains
less volatile bonds than in the past.
Throughout the first eight months of the year, we have been buying
securities exhibiting relatively low volatility, whose expected returns are
generated primarily by income. Specifically, we have been concentrating on
bonds with higher coupons with maturities in the vicinity of 20 years. In
most instances we preferred high-quality bonds since the yields on
lower-quality securities are not high enough to compensate for the additional
risk.
We chose not to be fully defensive in the last quarter since rates
have already risen substantially and municipal bonds offered good value
compared with other fixed-income securities on an after-tax basis.
A major benefit of the rise in rates so far this year is an increase
in the Fund's dividend yield from 5.57% to 5.74%. Additionally, your Fund
outperformed its peer group in both the three- and six-month periods.
Performance Comparison
<TABLE>
<CAPTION>
Periods Ended 8/31/94
3 Months 6 Months
--------- ---------
<S> <C> <C>
Tax-Free Income Fund 1.45% -1.39%
Lipper General Municipal
Debt Fund Average 1.38 -1.83
=========================================================
</TABLE>
TAX-FREE HIGH YIELD FUND
The quarter ended August 31 was favorable for the Fund. We maintained a neutral
posture as our concern about rising interest rates was offset significantly by
favorable market conditions for municipal bonds. We currently define as neutral
a duration between 6.75 and 7.5 years and a weighted average maturity (WAM)
between 20 and 22 years. We maintained an effective duration of 7.5 and a WAM of
around 20 years. The percentage of securities with maturities of 10 years or
longer was unchanged at 85% from the previous quarter. The Fund's weighted
average credit quality held steady at BBB+, and exposure to below-investment-
grade securities was unchanged at 24% of net assets.
The relatively low level of new issues coming to market served as
support for tax-exempt bond prices, as previously discussed. Looking ahead to
the third fiscal quarter, we may adopt a slightly more defensive posture,
particularly if inflationary pressures show signs of building up. The Fund's
three- and six-month results compared favorably with peer group averages
shown below.
Performance Comparison
<TABLE>
<CAPTION>
Periods Ended 8/31/94
3 Months 6 Months
--------- ----------
<S> <C> <C>
Tax-Free High Yield Fund 1.73% -1.01%
Lipper High Yield Municipal
Debt Fund Average 1.58 -1.47
=========================================================
</TABLE>
4
<PAGE>
Financial Summary
<TABLE>
<CAPTION>
Net Asset Value Dividend Per Share Dividend Yield*
Per Share 3 Months Ended 3 Months Ended
------------------ ------------------ -------------------
05/31/94 08/31/94 05/31/94 08/31/94 05/31/94 08/31/94
<C> <C> <C> <C> <C> <C>
Tax-Exempt Money $ 1.00 $ 1.00 $ 0.005 $ 0.006 2.38% 2.66%
Tax-Free Short-Intermediate 5.26 5.26 0.053 0.054 4.00 4.08
Tax-Free Insured Intermediate Bond 10.34 10.36 0.111 0.114 4.28 4.41
Tax-Free Income 9.22 9.22 0.129 0.133 5.57 5.74
Tax-Free High Yield 11.71 11.73 0.180 0.181 6.07 6.18
</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;
the Tax-Exempt Money Fund reports a 7-day compound yield.
Quality Diversification
<TABLE>
<CAPTION>
Weighted Average
Quality Ratings* Quality*
---------------------------------------------- ---------------------
1 2 3 4 5-10 05/31/94 08/31/94
<S> <C> <C> <C> <C> <C> <C> <C>
Tax-Exempt Money 13% 85% 2% 0% 0% 1.9 1.9
Tax-Free Short-Intermediate 22 54 22 2 - 2.1 2.1
Tax-Free Insured Intermediate Bond 14 74 12 - - 1.9 2.0
Tax-Free Income 10 52 26 11 1 2.4 2.4
Tax-Free High Yield 5 18 16 36 25 3.6 3.6
</TABLE>
* On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest
quality.
5
Duration and Maturity
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Effective Duration (years) Maturity (years)
-------------------------- ------------------
05/31/94 08/31/94 05/31/94 08/31/94
<S> <C> <C> <C> <C>
Tax-Exempt Money - - 49* 58*
Tax-Free Short-Intermediate 2.6 2.4 3.1 2.9
Tax-Free Insured Intermediate Bond 5.3 5.4 7.0 7.2
Tax-Free Income 7.6 7.7 17.6 17.8
Tax-Free High Yield 7.3 7.5 19.6 20.6
</TABLE>
* Maturity is in days.
5
<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 bond
fund accounts (except the High Yield 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.
6
<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
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
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
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.
7
<PAGE>
SemiAnnual Report
T. Rowe Price
- -------------
Tax-Free Funds
August 31, 1994
[LOGO OF RAM APPEARS HERE]
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 distri-
bution only to shareholders and to
others who have received a copy of
the prospectus of the T. Rowe Price
Tax-Free Funds.
[LOGO OF T. ROWE PRICE APPEARS HERE]
<PAGE>
Chart for Tax-Free Funds semiannual report (Aug. 31, 1994)
Chart 1. Municipal bond and note yields. Line graphs of 30-year AAA GO bonds,
5-year AAA GO, and 6-month Moody's Investment Grade 1 Note, showing yields from
8/31/93 through 8/31/94.
