<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
TAX-FREE HIGH YIELD FUND
August 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sector Diversification
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
Net Assets
----------
<S> <C>
Hospital Revenue 25%
- --------------------------------------------------------------------------------
Housing Finance Revenue 12
- --------------------------------------------------------------------------------
Industrial and Pollution
Control Revenue 11
- --------------------------------------------------------------------------------
Nuclear Revenue 10
- --------------------------------------------------------------------------------
Ground Transportation Revenue 7
- --------------------------------------------------------------------------------
Life Care/Nursing Home Revenue 7
- --------------------------------------------------------------------------------
Solid Waste Revenue 6
- --------------------------------------------------------------------------------
General Obligation - Local 4
- --------------------------------------------------------------------------------
Dedicated Tax Revenue 3
- --------------------------------------------------------------------------------
Pre-refunded Bonds 3
- --------------------------------------------------------------------------------
Lease Revenue 3
- --------------------------------------------------------------------------------
General Obligation - State 3
- --------------------------------------------------------------------------------
Miscellaneous Revenue 2
- --------------------------------------------------------------------------------
Electric Revenue 1
- --------------------------------------------------------------------------------
Water and Sewer Revenue 1
- --------------------------------------------------------------------------------
Escrowed to Maturity 1
- --------------------------------------------------------------------------------
Educational Revenue 1
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Statement of Net Assets
T. Rowe Price Tax-Free High Yield Fund/August 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
(amounts in thousands)
<TABLE>
<CAPTION>
Amount Value
--------- ---------
<S> <C> <C>
ALABAMA -- 3.5%
Baldwin County Eastern Shore Hosp. Auth., Thomas Hosp., 8.50%, 4/1/16............. $ 4,000 $ 4,302
Courtland IDB, Solid Waste Disposal, Champion Int'l, 5.90%, 2/1/17................ 8,000 7,680
Marshall County Health Care Auth., Guntersville - Arab Medical Center,
7.00%, 10/1/13........................................................... 2,100 2,123
10.25%, 10/1/13.......................................................... 6,750 8,117
Mobile, Capital Improvement Warrants, GO, (MBIA Insured),
Zero Coupon, 2/15/18..................................................... 1,030 242
Zero Coupon, 8/15/18..................................................... 4,550 1,033
Zero Coupon, 2/15/19..................................................... 905 198
Zero Coupon, 8/15/19..................................................... 4,675 988
Zero Coupon, 2/15/20..................................................... 770 157
Zero Coupon, 8/15/20..................................................... 4,810 945
Mobile Airport Auth., 8.875%, 10/1/15*............................................ 2,000 2,250
Mobile IDB, Solid Waste Disposal, Mobile Energy Services, 6.95%, 1/1/20........... 1,400 1,441
Shelby County, GO, 7.40%, 8/1/07.................................................. 2,000 2,208
7.70%, 8/1/17............................................................ 1,000 1,115
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
TFH
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
--------- ---------
<S> <C> <C>
ARIZONA -- 0.7%
Maricopa County, PCR, Arizona Public Service, VRDN (Currently 3.50%).............. $ 2,500 $ 2,500
Scottsdale IDA, Westminster Village,
10.00%, 6/1/07 (Pre-refunded 6/1/97+).................................... 1,235 1,389
10.00%, 6/1/17 (Pre-refunded 6/1/97+).................................... 750 844
Tempe IDA, Friendship Village of Tempe, 6.75%, 12/1/13............................ 1,950 1,904
- -----------------------------------------------------------------------------------------------------------------------
ARKANSAS -- 0.3%
Independence County, PCR, Mississippi Power and Light, 7.625%, 7/1/12............. 3,000 3,176
- -----------------------------------------------------------------------------------------------------------------------
CALIFORNIA -- 7.5%
California HFFA, Daughters of Charity Health Systems
(St. Francis Medical Center), 5.75%, 10/1/23................................ 6,515 6,443
California Public Works Board, Univ. of California, 5.50%, 6/1/14................. 5,000 4,625
Foothill/Eastern Transportation Corridor Agency, California Toll Road,
Zero Coupon, 1/1/15...................................................... 2,500 651
Zero Coupon, 1/1/17...................................................... 7,265 1,629
Zero Coupon, 1/1/19...................................................... 10,000 1,950
Zero Coupon, 1/1/26...................................................... 20,000 2,374
6.00%, 1/1/34............................................................ 6,000 5,468
5.00%, 1/1/35............................................................ 4,000 3,123
Fresno Joint Powers Fin. Auth., 6.55%, 9/2/12..................................... 3,000 3,014
Inglewood Redev. Agency, Century Redev., 6.125%, 7/1/23........................... 3,440 3,183
Los Angeles County, Marina del Rey, COP, 6.50%, 7/1/08............................ 3,250 3,250
Los Angeles County Metropolitan Trans. Auth., Sales Tax,
(AMBAC Insured), 5.00%, 7/1/25.............................................. 4,000 3,472
San Joaquin Hills Transportation Corridor Agency, Toll Road,
Zero Coupon, 1/1/03...................................................... 5,600 3,204
Zero Coupon, 1/1/10...................................................... 13,100 4,218
Zero Coupon, 1/1/19...................................................... 23,425 4,535
Zero Coupon, 1/1/25...................................................... 25,000 3,164
Zero Coupon, 1/1/28...................................................... 15,000 1,115
7.00%, 1/1/30............................................................ 2,850 2,918
6.75%, 1/1/32............................................................ 4,000 4,033
San Jose Redev. Agency, Tax Allocation, (MBIA Insured), 5.25%, 8/1/16............. 4,000 3,685
Southern California Public Power Auth., 6.00%, 7/1/12............................. 3,800 3,686
- -----------------------------------------------------------------------------------------------------------------------
COLORADO -- 4.0%
Arapahoe County, Capital Improvement Public Highway,
Zero Coupon, 8/31/09..................................................... 10,000 3,714
Zero Coupon, 8/31/15..................................................... 7,500 1,737
7.00%, 8/31/26........................................................... 5,500 5,624
Boulder County, Longmont United Hosp.,
8.20%, 12/1/20 (Pre-refunded 12/1/00+)................................... 1,540 1,812
Boulder County IDR, Boulder Medical Center, 8.625%, 1/1/07*....................... 820 869
8.75%, 1/1/12*........................................................... 1,205 1,277
8.875%, 1/1/17*.......................................................... 1,190 1,252
</TABLE>
2
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
--------- ---------
<S> <C> <C>
Colorado Housing Fin. Auth., 9.60%, 8/1/01*....................................... $ 650 $ 688
8.65%, 8/1/03............................................................ 915 955
9.00%, 8/1/03............................................................ 895 930
9.40%, 8/1/03*........................................................... 760 794
8.70%, 11/1/04*.......................................................... 1,520 1,589
Denver City and County, Airport System, United Air Lines,
6.875%, 10/1/32*......................................................... 8,000 8,050
Sisters of Charity of Leavenworth Health Services, 5.00%, 12/1/23.............. 4,000 3,399
El Paso County, School Dist. No. 20, GO, TAN, 6.35%, 12/15/06..................... 3,000 3,233
Westminster, Special Improvement Dist., 9.25%, 12/1/03............................ 1,475 1,559
- -----------------------------------------------------------------------------------------------------------------------
DELAWARE -- 1.3%
Delaware Economic Dev. Auth., Delmarva Power and Light,
(FGIC Insured), 7.15%, 7/1/18............................................... 2,500 2,773
Peninsula United Methodist Homes, 8.50%, 5/1/22................................ 2,500 2,680
Delaware HFA, Beebe Medical Center, 6.75%, 6/1/14................................. 3,975 4,023
Wilmington Osteopathic Hosp. Assoc. of Delaware, Riverside Hosp.,
10.20%, 10/1/18 (Pre-refunded 10/1/98+).................................. 2,000 2,368
- -----------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 0.4%
Dist. of Columbia, American Geophysical Union, 5.875%, 9/1/23..................... 1,750 1,500
American Univ., VRDN (Currently 3.60%)......................................... 1,900 1,900
- -----------------------------------------------------------------------------------------------------------------------
FLORIDA -- 3.5%
Brevard County Tourist Dev., Florida Marlins Spring Training Fac.,
6.875%, 3/1/13........................................................... 1,520 1,569
Broward County Resource Recovery, Broward Waste Energy, L.P. North,
7.95%, 12/1/08........................................................... 4,830 5,407
Broward Waste Energy, L.P. South, 7.95%, 12/1/08............................... 4,910 5,497
Charlotte County, IDR, Beverly Enterprises, 10.00%, 6/1/11........................ 955 1,117
Collier County IDA, Beverly Enterprises, 10.75%, 3/1/03........................... 865 1,014
Dade County, (MBIA Insured), Zero Coupon, 2/1/12.................................. 14,715 5,620
Escambia, County IDR, Beverly Enterprises, 9.80%, 6/1/11.......................... 475 545
Hernando County, IDR, Beverly Enterprises, 10.00%, 9/1/95......................... 45 45
10.00%, 9/1/11........................................................... 915 1,075
Jacksonville HFA, Baptist Medical Center, (MBIA Insured),
VRDN (Currently 3.55%)................................................... 400 400
New Children's Hosp. at Baptist Medical Center,
VRDN (Currently 3.60%)................................................... 2,300 2,300
Jacksonville, IDR, Beverly Enterprises, 9.75%, 10/1/95............................ 35 35
9.75%, 10/1/11........................................................... 930 1,048
Leon County, IDR, Beverly Enterprises, 9.80%, 6/1/11.............................. 475 541
Manatee County Housing Fin. Auth., Capital Appreciation,
Zero Coupon, 10/1/15..................................................... 8,055 964
</TABLE>
3
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
--------- ---------
<S> <C> <C>
Orange County IDA, Beverly Enterprises, 9.25%, 8/1/10............................. $ 460 $ 519
Santa Rosa County HFA, Gulf Breeze Hosp., 8.60%, 10/1/02.......................... 1,000 1,108
St. John's County IDA, Vicar's Landing, 6.75%, 2/15/12............................ 4,000 3,992
- -----------------------------------------------------------------------------------------------------------------------
GEORGIA -- 2.3%
Fulco Hosp. Auth., Georgia Baptist Health Care System, 6.25%, 9/1/13.............. 6,700 6,475
6.375%, 9/1/22........................................................... 2,500 2,347
Putnam County Dev. Auth., PCR, Georgia Power, (FGIC Insured),
7.25%, 7/1/21............................................................ 3,000 3,144
Rockdale County Dev. Auth., Solid Waste Disposal, Visy Paper, Inc.,
7.40%, 1/1/16*........................................................... 4,500 4,515
7.50%, 1/1/26*........................................................... 4,400 4,523
- -----------------------------------------------------------------------------------------------------------------------
IDAHO -- 0.6%
Gem County, PCR, Boise Cascade, Floating Rate,
1/5/97 (Currently 5.775%)................................................ 333 333
Idaho Housing Agency, Single Family Mortgage, 7.80%, 1/1/23*...................... 2,330 2,459
Idaho Student Loan Marketing Assoc., 6.70%, 10/1/07*.............................. 2,500 2,538
- -----------------------------------------------------------------------------------------------------------------------
ILLINOIS -- 6.1%
Aurora, Dreyer Medical Clinic, 8.75%, 7/1/14...................................... 4,485 4,977
Chicago - O'Hare Int'l. Airport, American Airlines, 7.875%, 11/1/25*.............. 2,500 2,670
Illinois Dev. Fin. Auth., Palos Community Hosp., VRDN (Currently 3.60%)........... 2,000 2,000
Illinois HFA, Community Hosp. of Ottawa, 6.85%, 8/15/24........................... 3,775 3,700
Covenant Retirement Community, 7.60%, 12/1/12.................................. 2,665 2,756
Glen Oaks Medical Center, 9.50%, 11/15/15...................................... 2,240 2,624
Hinsdale Health System, 9.00%, 11/15/15........................................ 4,855 5,559
Holy Cross Hosp., 6.75%, 3/1/24................................................ 4,000 3,892
Memorial Hosp., 7.25%, 5/1/22.................................................. 9,500 9,669
Morris Hosp., 6.125%, 12/1/23.................................................. 3,100 2,778
Wabash General Hosp. Dist., 11.35%, 9/1/05 (Pre-refunded 9/1/95+).............. 1,770 1,820
Metropolitan Pier and Exposition Auth., McCormick Place,
(FGIC Insured), Zero Coupon, 6/15/14........................................ 5,400 1,730
Robbins Village, Resource Recovery, 9.25%, 10/15/14*.............................. 9,000 9,882
Southwestern Illinois Dev. Auth., Anderson Hosp., 7.00%, 8/15/22.................. 2,500 2,455
- -----------------------------------------------------------------------------------------------------------------------
INDIANA -- 1.6%
Evansville Hosp. Auth., Daughters of Charity Health Systems
(St. Mary's Medical Center), 10.125%, 11/1/15.................................. 5,000 5,155
Hammond, Sewage and Solid Waste Disposal, American Maize Products,
8.00%, 12/1/24*.......................................................... 4,000 4,368
Indianapolis Airport Auth., United Air Lines, 6.50%, 11/15/31*.................... 5,000 4,870
- -----------------------------------------------------------------------------------------------------------------------
KENTUCKY -- 3.2%
Florence Housing Fac., Bluegrass RHF Housing, 9.50%, 7/1/17....................... 1,920 2,053
Jefferson County, Louisville Gas and Electric, 7.45%, 6/15/15..................... 4,250 4,669
</TABLE>
4
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
--------- ---------
<S> <C> <C>
Jefferson County HFA, Beverly Enterprises, 9.75%, 8/1/07.......................... $ 865 $ 972
Kenton County Airport Board, Delta Airlines, 7.50%, 2/1/12*....................... 3,600 3,790
7.50%, 2/1/20*........................................................... 5,250 5,527
6.125%, 2/1/22*.......................................................... 6,315 5,923
Kentucky Dev. Fin. Auth., Berea Hosp., 8.375%, 7/1/12............................. 2,780 2,884
St. Claire Medical Center, 7.125%, 9/1/21 (Pre-refunded 9/1/01+)............... 3,600 4,090
- -----------------------------------------------------------------------------------------------------------------------
LOUISIANA -- 3.7%
Lake Charles Harbor and Terminal Dist., Panhandle Eastern Corp.,
7.75%, 8/15/22........................................................... 5,000 5,573
Louisiana Offshore Terminal Auth., LOOP, 7.60%, 9/1/10............................ 8,500 9,377
Louisiana PFA, IDR, Beverly Enterprises, 8.25%, 9/1/08............................ 1,425 1,521
St. James Place of Baton Rouge, 10.00%, 11/1/21................................ 4,500 5,082
Plaquemines Parish IDB, PCR, AMAX Inc., 7.25%, 10/1/09............................ 1,280 1,283
Saint Charles Parish, Louisiana Power and Light, 8.00%, 12/1/14................... 6,865 7,598
West Feliciana Parish, PCR, Gulf States Utilities, 8.00%, 12/1/24................. 4,000 4,220
- -----------------------------------------------------------------------------------------------------------------------
MAINE -- 0.5%
Maine HHEFA, Waterville Osteopathic Hosp., 9.875%, 7/1/13
(Pre-refunded 7/1/97+)...................................................... 4,280 4,851
- -----------------------------------------------------------------------------------------------------------------------
MARYLAND -- 3.2%
Baltimore County, Spring Hill Apartments, (GNMA Guaranteed),
VRDN (Currently 3.60%)................................................... 2,100 2,100
Stella Maris, 7.50%, 3/1/21.................................................... 1,000 1,047
Berlin, Atlantic General Hosp., 8.375%, 6/1/22.................................... 1,960 2,094
Gaithersburg, Asbury Methodist Home,
7.85%, 1/1/20 (Pre-refunded 1/1/00+)..................................... 2,000 2,285
Maryland CDA, Single Family, 7.25%, 4/1/19........................................ 2,500 2,640
Zero Coupon, 4/1/29*..................................................... 25,695 1,734
Maryland HHEFA, Doctor's Community Hosp., 5.50%, 7/1/24........................... 3,200 2,582
Pooled Loan Program, VRDN (Currently 3.60%).................................... 1,100 1,100
Union Hosp. of Cecil County, 6.70%, 7/1/22..................................... 2,725 2,642
Maryland Ind. Dev. Fin. Auth., Associated Catholic Charities,
9.00%, 1/1/10............................................................ 1,650 1,834
Economic Dev., American Association of Blood Banks,
7.25%, 8/1/13............................................................ 2,700 2,782
Economic Dev., Georgetown Bakery Management Corp. Fac.,
9.25%, 9/1/95*........................................................... 100 100
9.25%, 9/1/04*........................................................... 1,475 1,599
Maryland-National Capital Park and Planning Commission,
Little Bennett Golf Fac., 8.25%, 10/1/11....................................... 2,355 2,572
Montgomery County Housing Opportunities Commission, Multifamily,
Strathmore Court at White Flint, 8.75%, 7/1/27................................. 2,000 2,062
Single Family, 7.50%, 7/1/17................................................... 685 728
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
--------- ---------
<S> <C> <C>
MASSACHUSETTS -- 3.1%
Massachusetts, GO, 7.50%, 6/1/04.................................................. $ 2,750 $ 3,243
Massachusetts Bay Transportation Auth., General Transportation
System, GO, 7.00%, 3/1/19...................................................... 2,500 2,856
7.00%, 3/1/21............................................................ 2,000 2,288
Massachusetts HEFA, New England Deaconess Hosp., 7.20%, 4/1/22.................... 3,535 3,724
Massachusetts Housing Fin. Agency, Capital Asset Pool, (MBIA Insured),
6.375%, 4/1/21........................................................... 2,000 2,000
Single Family, 6.35%, 6/1/17................................................... 5,750 5,820
Massachusetts Ind. Fin. Agency, Nevins Home, 7.875%, 7/1/23....................... 5,460 5,536
New England Memorial Hosp., 8.875%, 7/1/13 (Pre-refunded 7/1/98+).............. 2,730 3,080
- -----------------------------------------------------------------------------------------------------------------------
MICHIGAN -- 3.2%
Dickinson County, Economic Dev., Champion Int'l,
Floating Rate, 10/1/18 (Currently 5.85%)................................. 4,000 3,792
Meridian Economic Dev. Corp., Burcham Hills Retirement Center III,
9.625%, 7/1/19........................................................... 2,825 3,075
Michigan, Dow Chemical, VRDN (Currently 3.45%).................................... 2,820 2,820
Michigan HDA, 6.50%, 12/1/17...................................................... 4,000 4,099
7.75%, 12/1/19*.......................................................... 1,175 1,251
Michigan Hosp. Fin. Auth., Bay Medical Center, 8.25%, 7/1/12...................... 2,000 2,136
Daughters of Charity Health Systems (St. Mary's Hosp.),
10.00%, 11/1/15.......................................................... 1,480 1,526
Saratoga Community Hosp., 8.75%, 6/1/10........................................ 2,700 2,842
Sisters of Mercy Health Corp., 7.50%, 2/15/18.................................. 1,650 1,889
Michigan State Hosp. Fin. Auth., Pontiac Osteopathic Hosp.,
6.00%, 2/1/24............................................................ 3,475 3,033
Monroe County, PCR, Detroit Edison, 10.125%, 9/1/95............................... 920 943
Univ. of Michigan Hosp., VRDN (Currently 3.45%)................................... 2,400 2,400
- -----------------------------------------------------------------------------------------------------------------------
MINNESOTA -- 0.3%
Minnesota Housing Fin. Agency, Single Family Mortgage, 6.70%, 1/1/18.............. 2,000 2,089
9.00%, 8/1/18*........................................................... 1,000 1,073
- -----------------------------------------------------------------------------------------------------------------------
MISSISSIPPI -- 2.2%
Adams County, Jefferson Davis Memorial Hosp., 8.00%, 10/1/16...................... 3,805 4,049
Claiborne County, PCR, Systems Energy Resources, 9.50%, 12/1/13................... 2,000 2,322
9.875%, 12/1/14.......................................................... 6,100 7,155
7.30%, 5/1/25............................................................ 1,100 1,131
Mississippi Home Corp., Single Family Mortgage, (FGIC Insured),
9.25%, 3/1/12............................................................ 310 338
Mississippi Hosp. Equipment and Fac. Auth., Magnolia Hosp.,
7.375%, 10/1/21.......................................................... 3,000 2,927
Rush Memorial Foundation, 8.75%, 1/1/16........................................ 2,000 2,195
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
--------- ---------
<S> <C> <C>
MISSOURI -- 2.4%
Hannibal IDA, Hannibal Medical Center, 9.50%, 3/1/22.............................. $ 4,000 $ 4,803
Joplin IDA, Tri-State Osteopathic Hosp. Assoc., 8.25%, 12/15/14................... 1,205 1,232
Lees Summit IDA, John Knox Village, 7.125%, 8/15/12............................... 1,500 1,578
Missouri HEFA, Bethesda Health Group, 7.50%, 8/15/12.............................. 1,250 1,292
SSM Health Care, (MBIA Insured), VRDN (Currently 3.50%)........................ 5,000 5,000
Still Regional Medical Center, 7.70%, 2/1/13................................... 4,250 4,445
Ray County, Ray County Memorial Hosp., 9.625%, 11/15/13........................... 3,200 3,624
- -----------------------------------------------------------------------------------------------------------------------
MONTANA -- 1.5%
Montana Board of Housing, (FHA Guaranteed), 9.20%, 10/1/01*....................... 580 603
8.50%, 10/1/02........................................................... 745 778
8.525%, 10/1/02.......................................................... 715 743
8.95%, 10/1/02*.......................................................... 770 806
8.40%, 10/1/03*.......................................................... 820 852
7.85%, 10/1/04........................................................... 830 877
Montana Board of Investments, Yellowstone Energy Limited Partnership,
7.00%, 12/31/19*......................................................... 9,500 9,124
- -----------------------------------------------------------------------------------------------------------------------
NEBRASKA -- 0.9%
Douglas County Hosp. Auth., Immanuel Medical Center,
(AMBAC Insured), 7.00%, 9/1/21.............................................. 5,500 6,023
Nebraska Investment Fin. Auth., Single Family Mortgage,
(GNMA Guaranteed), Residual Interest Bond/Inverse Floater,
3/15/22 (Currently 10.963%)*............................................. 800 889
Residual Interest Bond/Inverse Floater, 9/10/30 (Currently 11.253%)*........... 1,600 1,800
- -----------------------------------------------------------------------------------------------------------------------
NEVADA -- 2.2%
Clark County IDR, Southwest Gas, 7.30%, 9/1/27.................................... 3,000 3,176
7.50%, 9/1/32*........................................................... 5,000 5,291
Clark County School Dist., Limited Tax School Improvement, GO,
(MBIA Insured), 5.50%, 6/15/16.............................................. 10,000 9,398
Nevada Housing Division, Sub Lien, 9.375%, 10/1/00*............................... 425 444
9.35%, 10/1/02........................................................... 460 474
9.65%, 10/1/02*.......................................................... 685 726
9.45%, 10/1/03*.......................................................... 715 749
- -----------------------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE -- 0.4%
New Hampshire HHEFA, Catholic Medical Center, 8.25%, 7/1/13....................... 2,000 2,153
New Hampshire Housing Fin. Auth., 8.625%, 7/1/13*................................. 1,885 1,986
- -----------------------------------------------------------------------------------------------------------------------
NEW JERSEY -- 2.4%
New Jersey Economic Dev. Auth., Holt Hauling and Warehouse System,
10.25%, 9/15/14.......................................................... 500 545
9.75%, 12/15/16*......................................................... 1,000 1,095
Keswick Pines, 8.75%, 1/1/24................................................... 6,000 6,234
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
--------- ---------
<S> <C> <C>
New Jersey HFFA, Raritan Bay Medical Center, 7.25%, 7/1/27........................ $ 5,000 $ 4,987
New Jersey Sports and Exposition Auth., Monmouth Park, 8.00%, 1/1/25.............. 5,250 5,724
New Jersey Turnpike Auth., 6.50%, 1/1/16.......................................... 3,755 4,047
- -----------------------------------------------------------------------------------------------------------------------
NEW YORK -- 6.4%
Babylon IDA, Babylon Community Waste Management, 7.875%, 7/1/06
(Pre-refunded 7/1/99+)...................................................... 1,000 1,141
Babylon Recycling Center, 8.875%, 3/1/11*++.................................... 1,895 853
Ogden Martin Systems, 8.50%, 1/1/19............................................ 1,015 1,143
Dormitory Auth. of the State of New York, City Univ., 6.00%, 7/1/14............... 2,730 2,708
New York City Court Fac., 5.50%, 5/15/23....................................... 3,000 2,701
State Univ. Ed. Fac., 5.875%, 5/15/17.......................................... 3,000 2,909
5.00%, 5/15/18........................................................... 2,000 1,686
5.25%, 5/15/19........................................................... 5,000 4,431
Metropolitan Transportation Auth., Contract Transit Fac., 7.125%, 7/1/09.......... 4,000 4,323
New York City, GO, 6.00%, 8/1/06.................................................. 2,000 1,992
6.20%, 8/1/07............................................................ 5,000 5,027
7.625%, 2/1/15........................................................... 3,000 3,266
7.75%, 8/15/15........................................................... 2,500 2,735
(FGIC Insured), VRDN (Currently 3.60%)...................................... 300 300
New York City Municipal Water Fin. Auth., Water and Sewer,
5.50%, 6/15/23........................................................... 5,000 4,594
New York State Energy Research and Dev. Auth., Electric Fac.,
Long Island Lighting, 7.15%, 6/1/20*........................................... 8,000 8,092
6.90%, 8/1/22*........................................................... 1,500 1,502
New York State Mortgage Agency, Capital Appreciation Home Ownership,
Zero Coupon, 4/1/20...................................................... 11,800 1,727
Homeowner Mortgage, 6.45%, 10/1/17............................................. 2,400 2,450
7.50%, 4/1/26*........................................................... 3,000 3,201
New York State Urban Dev. Corp., Correctional Capital Fac.,
Zero Coupon, 1/1/08...................................................... 5,000 2,417
- -----------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA -- 0.4%
North Carolina Medical Care Commission, Stanley Memorial Hosp.,
7.80%, 10/1/19........................................................... 1,000 1,056
Valdese General Hosp., 8.75%, 10/1/16.......................................... 2,110 2,277
- -----------------------------------------------------------------------------------------------------------------------
OHIO -- 4.5%
Cambridge, Guernsey Memorial Hosp., 8.00%, 12/1/11................................ 1,500 1,597
Cleveland Parking Fac., 8.10%, 9/15/22............................................ 12,000 12,725
Franklin County Hosp., Holy Cross Health Systems,
VRDN (Currently 3.50%)................................................... 4,300 4,300
Marion County Health Care Fac., United Church Homes, 8.875%, 12/1/12
(Pre-refunded 12/1/99+)..................................................... 3,225 3,844
Middleburg Heights, Southwest General Hosp., 7.20%, 8/15/19....................... 2,000 2,132
Ohio Air Quality Dev. Auth., PCR, Toledo Edison, 8.00%, 5/15/19................... 2,750 2,874
</TABLE>
8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
--------- ---------
<S> <C> <C>
Ohio Housing Fin. Agency, Single Family Mortgage, (GNMA Guaranteed),
Residual Interest Bond/Inverse Floater, 3/31/31 (Currently 9.573%)*......... $ 740 $ 782
Ohio Water Dev. Auth., PCR, Cleveland Electric Illuminating,
9.75%, 11/1/22*.......................................................... 2,000 2,142
7.70%, 8/1/25............................................................ 2,800 2,877
Toledo Edison, 7.55%, 6/1/23................................................... 4,500 4,601
8.00%, 10/1/23........................................................... 3,700 3,880
- -----------------------------------------------------------------------------------------------------------------------
OKLAHOMA -- 3.2%
Jackson County Memorial Hosp. Auth., 7.30%, 8/1/15................................ 4,300 4,238
LeFlore County Hosp. Auth., Eastern Oklahoma Medical Center,
9.40%, 5/1/06............................................................ 2,000 2,215
Oklahoma County IDA, Epworth Villa, 10.25%, 4/1/19................................ 2,970 3,323
Oklahoma Dev. Fin. Auth., Solid Waste Disposal Fac.
(Midway Environmental Management), 9.50%, 9/1/95*.............................. 125 125
9.50%, 9/1/99*........................................................... 520 525
9.50%, 9/1/15*........................................................... 3,105 3,105
Tulsa Municipal Airport, American Airlines, 9.375%, 6/1/04........................ 3,000 3,100
7.375%, 12/1/20*......................................................... 2,000 2,085
7.60%, 12/1/30*.......................................................... 5,240 5,545
Washington County Medical Auth., Jane Phillips Episcopal Hosp.,
8.50%, 11/1/10........................................................... 5,200 5,671
- -----------------------------------------------------------------------------------------------------------------------
OREGON -- 0.2%
Western Generation Agency, Wauna Cogeneration, 7.25%, 1/1/09*..................... 2,000 2,087
- -----------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA -- 4.3%
Allegheny County Hosp. Dev. Auth., Health and Ed. Rehabilitation
Institute of Pittsburgh, 7.00%, 6/1/22......................................... 2,000 2,004
Beaver County IDA, PCR, Cleveland Electric Illuminating, 7.625%, 5/1/25........... 3,400 3,472
Toledo Edison, 12.25%, 9/15/15................................................. 1,000 1,023
7.75%, 5/1/20............................................................ 2,000 2,063
Berks County IDA, Lutheran Home at Topton, 6.875%, 1/1/23......................... 5,000 4,864
Blair County Hosp. Auth., Mercy Hosp., 8.125%, 2/1/14............................. 2,700 2,836
Butler County IDA, Herr-Voss, 8.60%, 11/1/99*..................................... 600 622
Clarion IDA Health Fac., Beverly Enterprises, 10.125%, 5/1/07..................... 865 995
Greene County IDA, Greene Health Care Assoc., Beverly Enterprises,
6.875%, 3/1/13........................................................... 2,430 2,435
Montgomery County Higher Ed. and Health Auth., Brittany Pointe,
8.50%, 1/1/22............................................................ 2,500 2,658
Redeemer Long Term Care and Elder Services, 8.20%, 6/1/06...................... 880 926
8.00%, 6/1/22............................................................ 5,755 5,925
Pennsylvania Higher Ed. Fac. Auth., Medical College of Pennsylvania
8.375%, 3/1/11........................................................... 2,200 2,383
Pennsylvania Housing Fac. Auth., Residual Interest Bond/Inverse Floater,
10/31/23 (Currently 9.817%)*............................................. 1,500 1,599
Schuylkill County IDA, Schuylkill Energy Resources, Inc., 6.50%, 1/1/10*.......... 6,500 6,553
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
--------- ---------
<S> <C> <C>
PUERTO RICO -- 1.6%
Puerto Rico Aqueduct and Sewer Auth., GO, 7.90%, 7/1/07........................... $ 2,500 $ 2,787
Puerto Rico Commonwealth, 5.50%, 7/1/15........................................... 3,000 2,820
GO, (MBIA Insured), 5.375%, 7/1/22.......................................... 2,300 2,150
Puerto Rico Commonwealth Highway and Transportation Auth.,
5.50%, 7/1/15............................................................ 3,000 2,820
Puerto Rico Infrastructure Fin. Auth., 7.50%, 7/1/09.............................. 2,365 2,597
Univ. of Puerto Rico, (MBIA Insured), 5.25%, 6/1/25............................... 2,000 1,829
- -----------------------------------------------------------------------------------------------------------------------
RHODE ISLAND -- 1.4%
Rhode Island Health and Ed. Building Corp., Rhode Island Hosp.,
(FGIC Insured), Residual Interest Bond/Inverse Floater, 4/1/24
(Currently 9.911%).......................................................... 1,000 1,113
Rhode Island Housing and Mortgage Fin. Corp., 8.05%, 4/1/22*...................... 5,000 5,358
Residual Interest Bond/Inverse Floater, 8/15/21
(Currently 9.614%)*......................................................... 1,000 1,063
Homeownership Opportunity, 6.70%, 10/1/14...................................... 5,000 5,221
- -----------------------------------------------------------------------------------------------------------------------
SOUTH DAKOTA -- 0.8%
South Dakota Building Auth., 7.50%, 12/1/16....................................... 4,400 4,613
South Dakota HDA, Homeownership Mortgage, 6.65%, 5/1/14........................... 2,500 2,601
- -----------------------------------------------------------------------------------------------------------------------
TENNESSEE -- 1.1%
Chattanooga and Hamilton County Hosp. Auth., Erlanger Medical Center,
VRDN (Currently 3.50%)................................................... 5,900 5,900
Tennessee Housing Dev. Agency, 7.625%, 7/1/22*.................................... 1,900 2,019
5.95%, 7/1/28............................................................ 2,500 2,409
- -----------------------------------------------------------------------------------------------------------------------
TEXAS -- 7.0%
Bell County Health Fac. Dev. Corp., King's Daughter Hosp., 9.25%, 7/1/08.......... 3,305 3,742
Brazos River Auth., Houston Lighting and Power, (MBIA Insured),
6.375%, 4/1/12........................................................... 10,000 10,387
Denison Hosp. Auth., Texoma Medical Center, 7.10%, 8/15/24........................ 3,650 3,675
Gainesville IDC, Valenite, 8.90%, 5/15/11*........................................ 3,270 3,567
Gulf Coast Waste Disposal Auth., Houston Lighting and Power,
Floating Rate , 6/1/98 (Currently 5.40%)................................. 5,000 5,005
Harris County, Toll Road, (MBIA Insured), 6.375%, 8/15/24......................... 2,500 2,570
GO, VRDN (Currently 3.50%).................................................. 3,000 3,000
Harris County Health Fac. Dev. Corp., Memorial Hosp., 7.125%, 6/1/15.............. 5,000 5,274
Methodist Hosp., VRDN (Currently 3.40%)........................................ 2,200 2,200
Texas Medical Center, (MBIA Insured), 7.375%, 5/15/20.......................... 2,350 2,581
Houston Independent School Dist., Capital Appreciation, GO,
Zero Coupon, 8/15/12..................................................... 1,900 697
Matagorda County Navigation Dist., PCR, Central Power and Light,
7.50%, 12/15/14.......................................................... 2,000 2,212
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
--------- ---------
<S> <C> <C>
Paris Health Fac. Dev. Corp., McCuistion Regional Medical Center,
7.60%, 2/1/12............................................................ $ 4,500 $ 4,736
San Antonio Electric and Gas, (FGIC Insured), Zero Coupon, 2/1/10................. 5,000 2,170
Texas, Veterans Housing Assistance, GO, 6.25%, 12/1/15............................ 3,940 4,016
Tomball Hosp. Auth., Tomball Regional Hosp., 6.10%, 7/1/08........................ 5,000 4,934
Weslaco Health Fac. Dev. Corp., Knapp Medical Center, 10.375%, 6/1/16
(Pre-refunded 6/1/98+)...................................................... 3,500 4,093
- -----------------------------------------------------------------------------------------------------------------------
UTAH -- 1.6%
Davis County, Solid Waste Management and Energy Recovery
Special Service Dist., 6.125%, 6/15/09......................................... 6,000 5,780
Intermountain Power Agency, 5.25%, 7/1/14......................................... 1,000 919
Utah Housing Fin. Agency, 7.75%, 7/1/05........................................... 960 1,025
Sub Lien, 9.875%, 1/1/99*...................................................... 135 145
10.50%, 1/1/99*.......................................................... 130 138
10.625%, 7/1/99*......................................................... 120 128
9.30%, 7/1/00*........................................................... 120 125
8.70%, 7/1/01............................................................ 285 294
9.25%, 7/1/01............................................................ 385 405
9.60%, 7/1/02*........................................................... 85 88
9.75%, 7/1/02............................................................ 140 144
9.85%, 7/1/02*........................................................... 295 304
8.55%, 7/1/04............................................................ 410 425
8.65%, 7/1/04............................................................ 745 771
6.25%, 7/1/05............................................................ 760 807
7.50%, 7/1/05............................................................ 970 1,032
7.60%, 7/1/05............................................................ 970 1,034
8.40%, 7/1/08*........................................................... 260 274
9.00%, 1/1/19*........................................................... 690 739
7.75%, 1/1/23*........................................................... 530 565
- -----------------------------------------------------------------------------------------------------------------------
VERMONT -- 0.2%
Vermont Ed. and Health Buildings Fin. Agency, Medical Center
Hosp. of Vermont, (FGIC Insured), 7.45%, 9/1/23................................ 1,400 1,458
- -----------------------------------------------------------------------------------------------------------------------
VIRGINIA -- 2.0%
Henrico County IDA, Bon Secours Health System (Maryview Hosp.),
7.50%, 9/1/11............................................................ 1,825 2,092
Norfolk Port and Ind. Auth., Henson Aviation, 9.625%, 8/1/12*..................... 920 1,040
Roanoke IDA, Roanoke Memorial Hosp., Carilion Health System,
VRDN (Currently 3.50%)................................................... 6,400 6,400
Virginia HDA, 7.10%, 1/1/22....................................................... 4,000 4,189
7.10%, 1/1/25............................................................ 5,000 5,243
Zero Coupon, 7/1/29*..................................................... 870 65
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
--------- ---------
<S> <C> <C>
WASHINGTON -- 1.3%
Washington, GO, 5.70%, 10/1/15.................................................... $ 7,500 $ 7,333
Washington Public Power Supply System, 7.25%, 7/1/09.............................. 1,000 1,116
6.30%, 7/1/12............................................................ 2,000 2,027
Zero Coupon, 7/1/14...................................................... 6,400 1,954
- -------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA -- 0.2%
West Virginia Hosp. Fin. Auth., West Virginia Univ. Hosp., (MBIA Insured),
Residual Interest Bond/Inverse Floater, 1/1/18 (Currently 8.98%)............ 2,000 2,009
- -------------------------------------------------------------------------------------------------------------------
WISCONSIN -- 1.1%
Wisconsin HFA, Villa Clement, 8.75%, 6/1/12....................................... 1,500 1,520
Wisconsin Housing and Economic Dev. Auth., 7.75%, 9/1/17.......................... 4,460 4,787
8.00%, 3/1/21*........................................................... 3,475 3,630
- -------------------------------------------------------------------------------------------------------------------
WYOMING -- 2.0%
Lincoln County, PCR, Pacificorp, (AMBAC Insured),
VRDN (Currently 3.40%)................................................... 1,000 1,000
Sweetwater County, Solid Waste Disposal, FMC Corp., (AMBAC Insured),
6.90%, 9/1/24*........................................................... 5,000 5,100
Wyoming CDA., Single Family Mortgage,6.70%, 6/1/17................................ 3,500 3,641
6.00%, 6/1/23............................................................ 9,000 8,716
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 100.3% OF NET ASSETS
(COST $888,979).................................................................. 932,840
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUTURES CONTRACTS
Contract Unrealized
Expiration Value Gain (Loss)
---------- -------- -----------
<S> <C> <C> <C> <C>
Short, 100 U.S. Treasury thirty-year
contracts, $700,000 of Municipal Bonds
pledged as initial margin........................ 12/95 $ (11,275) $ (66)
Net payments (receipts) of variation margin to date................... 6
Variation margin receivable (payable) on open future contracts........ (60)
OTHER ASSETS LESS LIABILITIES......................................... (2,549)
---------
NET ASSETS CONSIST OF: Value
----------
Accumulated net investment income - net of distributions.............. $ 47
Accumulated net realized gain/loss - net of distributions............. (14,145)
Net unrealized gain (loss)............................................ 43,795
Paid-in-capital applicable to 78,361,596 of $0.01 par
value capital stock outstanding; 1,000,000,000 shares authorized... 900,534
----------
NET ASSETS............................................................ $ 930,231
=========
NET ASSET VALUE PER SHARE............................................. $11.87
======
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
* - Interest subject to alternative minimum tax
+ - Used in determining portfolio maturity
++ - Non-income producing
AMBAC - AMBAC Indemnity Corp.
CDA - Community Development Administration
COP - Certificates of Participation
FGIC - Financial Guaranty Insurance Company
FHA - Federal Housing Authority
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority
HEFA - Health and Educational Facility Authority
HFA - Health Facility Authority
HFFA - Health Facility Financing Authority
HHEFA - Health and Higher Educational Facility Authority
IDA - Industrial Development Authority
IDB - Industrial Development Bond
IDC - Industrial Development Corporation
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
PCR - Pollution Control Revenue
PFA - Public Finance Authority
TAN - Tax Anticipation Note
VRDN - Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
T. Rowe Price Tax-Free High Yield Fund/Six Months Ended August 31, 1995
(Unaudited)
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income........................................... $ 31,474
----------
Expenses
Investment management..................................... 2,906
Shareholder servicing..................................... 299
Custody and accounting.................................... 119
Legal and audit........................................... 23
Prospectus and shareholder reports........................ 18
Registration.............................................. 15
Directors................................................. 8
Miscellaneous............................................. 15
----------
Total expenses............................................ 3,403
----------
Net investment income........................................ 28,071
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities................................................ 2,672
Futures................................................... 11
----------
Net realized gain (loss).................................. 2,683
----------
Change in net unrealized gain or loss on:
Securities................................................ 16,583
Futures................................................... (66)
----------
Change in net unrealized gain or loss..................... 16,517
----------
Net realized and unrealized gain (loss)...................... 19,200
----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS............ $ 47,271
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
T. Rowe Price Tax-Free High Yield Fund (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
Aug. 31, 1995 Feb. 28, 1995
---------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income.................................................... $ 28,071 $ 54,310
Net realized gain (loss)................................................. 2,683 (16,226)
Change in net unrealized gain or loss.................................... 16,517 (31,366)
---------- ----------
Increase (decrease) in net assets from operations........................ 47,271 6,718
---------- ----------
Distributions to shareholders
Net investment income.................................................... (28,071) (54,310)
Net realized gain........................................................ -- (2,999)
---------- ----------
Decrease in net assets from distributions................................ (28,071) (57,309)
---------- ----------
Capital share transactions*
Shares sold.............................................................. 128,235 258,095
Distributions reinvested................................................. 19,419 40,053
Shares redeemed.......................................................... (110,169) (315,306)
---------- ----------
Increase (decrease) in net assets from capital share transactions........ 37,485 (17,158)
---------- ----------
Increase (decrease) in net assets........................................... 56,685 (67,749)
NET ASSETS
Beginning of period......................................................... 873,546 941,295
---------- ----------
End of period............................................................... $ 930,231 $ 873,546
========== ==========
- -------------------------------------------------------------------------------------------------------------------------
*Share information
Shares sold.............................................................. 10,903 22,361
Distributions reinvested................................................. 1,650 3,474
Shares redeemed.......................................................... (9,382) (27,429)
---------- ----------
Increase (decrease) in shares outstanding................................ 3,171 (1,594)
========== ==========
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
Notes To Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price Tax-Free High Yield Fund/August 31, 1995 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Tax-Free High Yield Fund (the fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company.
A) Valuation - Debt securities are generally traded in the over-the-counter
market. Investments in securities with remaining maturities of one year or more
are stated at fair value as furnished by dealers who make markets in such
securities or by an independent pricing service, which considers yield or price
of bonds of comparable quality, coupon, maturity, and type, as well as prices
quoted by dealers who make markets in such securities. Securities with remaining
maturities of 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.
B) 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.
C) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on an identified cost basis. Distributions to shareholders are recorded
by the fund on the ex-dividend date. Income and capital gain distributions are
determined in accordance with federal income tax regulations and may differ from
those determined in accordance with generally accepted accounting principles.
Payments ("variation margin") made or received by the fund to settle the daily
fluctuations in the value of futures contracts, are recorded as unrealized gain
or loss until the contracts are closed. Unrealized gains and losses on futures
contracts are included in Change in net unrealized gain or loss in the
accompanying financial statements.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks and enhance performance. The
investment objective, policies, program, risk factors, and following practices
of the fund are described more fully in the fund's Prospectus and Statement of
Additional Information.
A) Noninvestment-Grade Debt Securities - At August 31, 1995, the fund held
investments in noninvestment-grade debt securities, commonly referred to as
"high yield" or "junk" bonds. A real or perceived economic downturn or higher
interest rates could adversely affect the liquidity or value, or both, of such
securities because such events could lessen the ability of issuers to make
principal and interest payments.
B) Futures Contracts - At August 31, 1995, the fund was a party to futures
contracts, which provide for the future sale by one party and purchase by
another of a specified amount of a specific financial instrument at an agreed
upon price, date, time and place. Risks arise from possible illiquidity of the
futures market and from movements in security values.
C) Other - Purchases and sales of portfolio securities, other than short-term
securities, aggregated $199,280,000 and $166,519,000, respectively, for the six
months ended August 31, 1995.
16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 $11,104,000 which expire in 2003. The fund intends to
retain gains realized in future periods that may be offset by available capital
loss carryforwards.
At August 31, 1995, the aggregate cost of investments for federal income
tax and financial reporting purposes was $888,979,000 and net unrealized gain
aggregated $43,861,000, of which $47,986,000 related to appreciated investments
and $4,125,000 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 $493,000 was payable at August 31, 1995. The fee is computed daily and
paid monthly, and of an Individual Fund Fee equal to 0.30% of average daily net
assets and a Group Fee. The Group Fee is based on the combined assets of certain
mutual funds sponsored by the Manager or Rowe-Price Fleming International, Inc.
(the Group). The Group Fee rate ranges from 0.48% for the first $1 billion of
assets to 0.31% for assets in excess of $34 billion. At August 31, 1995, and for
the six months then ended, the effective annual Group Fee rate was 0.34%. The
fund pays a pro rata share of the Group Fee based on the ratio of its net assets
to those of the Group.
In addition, the fund has entered into agreements with the Manager and a
wholly owned subsidiary of the Manager, pursuant to which the fund receives
certain other services. The Manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc. 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 $293,000 for the six
months ended August 31, 1995, of which $58,000 was payable at period-end.
17
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
T. Rowe Price Tax-Free High Yield Fund (Unaudited)
<TABLE>
<CAPTION>
For a share outstanding throughout each period
----------------------------------------------------------------------------------
Year Ended
Six Months ---------------------------------------------------------------
Ended Feb. 28, Feb. 28, Feb. 28, Feb. 29, Feb. 28,
August 31, 1995 1995 1994 1993 1992 1991
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD............................. $11.62 $12.26 $12.33 $11.65 $11.40 $11.39
------ ------ ------ ------ ------ ------
Investment Activities
Net investment income................. 0.36 0.73 0.74 0.78 0.81 0.83
Net realized and unrealized
gain (loss)........................ 0.25 (0.60) 0.16 0.78 0.35 0.04
------ ------ ------ ------ ------ ------
Total from Investment Activities...... 0.61 0.13 0.90 1.56 1.16 0.87
------ ------ ------ ------ ------ ------
Distributions
Net investment income................. (0.36) (0.73) (0.74) (0.78) (0.81) (0.83)
Net realized gain..................... -- (0.04) (0.23) (0.10) (0.10) (0.03)
------ ------ ------ ------ ------ ------
Total Distributions................... (0.36) (0.77) (0.97) (0.88) (0.91) (0.86)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD........... $11.87 $11.62 $12.26 $12.33 $11.65 $11.40
====== ====== ====== ====== ====== ======
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total Return............................. 5.37% 1.26% 7.49% 13.94% 10.56% 7.93%
Ratio of Expenses to Average Net Assets.. 0.75%+ 0.79% 0.79% 0.81% 0.83% 0.85%
Ratio of Net Investment Income to
Average Net Assets..................... 6.19%+ 6.29% 5.95% 6.58% 7.01% 7.30%
Portfolio Turnover Rate.................. 38.9%+ 59.6% 59.3% 34.7% 51.0% 51.2%
Net Assets, End of Period (in thousands). $930,231 $873,546 $941,295 $853,185 $623,877 $505,025
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
18
<PAGE>
- --------------------------------------------------------------------------------
Shareholder Services
- --------------------------------------------------------------------------------
To help shareholders monitor their current investments and make decisions that
accurately reflect their financial goals, T. Rowe Price offers a wide variety of
information and services--at no extra cost.
Knowledgeable Service Representatives
By Phone--Shareholder service representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m ET. Call
1-800-225-5132 to speak directly with a representative who will be able to
assist you with your accounts.
In Person--Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
Automated 24-Hour Services
Tele*Access(R)(1-800-638-2587) provides information such as account
balance, date and amount of your last transaction, latest dividend payment, and
fund prices and yields. Additionally, you have the ability to request
prospectuses, statements, account and tax forms; reorder checks; and initiate
purchase, redemption, and exchange orders for identically registered accounts.
PC*Access(R) provides the same information as Tele*Access, but on a
personal computer via dial-up modem.
Account Services
Checking--Write checks for $500 or more on any money market and most bond
fund accounts (except the High Yield Fund and Emerging Markets Bond Fund).
Automatic Investing--Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one fund
account into another, such as from a money fund into a stock fund. A low, $50
minimum makes it easy to get started.
Automatic Withdrawal--If you need money from your fund account on a regular
basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options--Reinvest all or some of your
distributions, or take them in cash. We give you maximum flexibility and
convenience.
Investment Information
Combined Statement--A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides total
portfolio value, and lists your investments by type--stock, bond, and money
market. Detail pages itemize account transactions by fund.
Shareholder Reports--Portfolio managers review the performance of the funds
in plain language and discuss T. Rowe Price's economic outlook.
The T. Rowe Price Report--A quarterly newsletter with relevant articles on
market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Insights--A library of information that includes reports on mutual fund tax
issues, investment strategies, and financial markets.
Detailed Investment Guides--Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also
available on disk for PC use), and Guide to Risk-Adjusted Performance can help
you determine and reach your investment goals.
Discount Brokerage
You can trade stocks, bonds, options, precious metals, and other securities at a
substantial savings over regular commission rates. Call a shareholder service
representative for more information.
19
<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price No-Load Mutual Funds
- --------------------------------------------------------------------------------
STABILITY
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
CONSERVATIVE INCOME
Short-Term Bond
Short-Term Global Income
Short-Term U.S. Government
Summit Limited-Term Bond
U.S. Treasury Intermediate
Florida Insured Intermediate Tax-Free
Maryland Short-Term Tax-Free Bond
Summit Municipal Intermediate
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
INCOME
Global Government Bond
GNMA
New Income
Spectrum Income
Summit GNMA
U.S. Treasury Long-Term
California Tax-Free Bond
Georgia Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Tax-Free Income
Virginia Tax-Free Bond
AGGRESSIVE INCOME
Emerging Markets Bond
High Yield
International Bond
Tax-Free High Yield
CONSERVATIVE GROWTH
Balanced
Capital Appreciation
Dividend Growth
Equity Income
Equity Index
Growth & Income
Spectrum Growth
Value
GROWTH
Blue Chip Growth
European Stock
Growth Stock
International Stock
Japan
Mid-Cap Growth
New Era
Small-Cap Value
AGGRESSIVE GROWTH
Capital Opportunity
Emerging Markets Stock
International Discovery
Latin America
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Call if you want to know about any T. Rowe Price fund. We'll send you a
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T. Rowe Price Investment
Services, Inc., Distributor.
20
<PAGE>
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Fellow Shareholders
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While stocks have captured most of the headlines so far this year, bonds also
delivered strong returns for investors. Bond prices rose and yields fell
sharply, although long-term tax-exempt issues trailed their taxable equivalents.
Despite the Federal Reserve's ease in July, municipal and taxable bonds gave
back some of their gains after revised economic data indicated the economy was
not slowing to the extent originally believed.
MARKET ENVIRONMENT
Municipals turned in their strongest performance this year in January and
February, when the yield on 30-year AAA general obligation bonds fell to 5.95%
from 6.65%. However, during the six months covered in this report, that yield
declined by only another 10 basis points to 5.85% compared with an 80-basis-
point drop in 30-year Treasury bonds.
The tax-exempt market's lagging performance relative to Treasuries can be
attributed largely to investor concerns about tax reform proposals in Washington
(see sidebar on page 4). One effect of this key issue was the divergence between
intermediate- and long-term tax-exempt bonds. During the six
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Municipal Bond and Note Yield
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[CHART APPEARS HERE]
months ended August 31, bonds maturing in 5 to 10 years provided higher total
returns than long-term bonds. The municipal yield curve steepened significantly
(short-term yields fell and long-term yields were steady), because investors
demonstrated their reluctance to assume the additional risk of buying bonds with
long maturities until tax uncertainties are cleared up.
TAX-EXEMPT MONEY FUND
Short-term municipal yields changed little during the quarter ended August 31,
despite the usual gyrations due to technical factors (large cash flows from July
1 coupon and maturity payments, and high seasonal note issuance). The money
market yield curve is currently rather flat, as the difference between the daily
and one-year security yields averaged a meager one-quarter percentage point
during the quarter. By comparison, the gap averaged nearly three-quarters of a
percentage point during the past 12 months.
Your fund began the quarter with a weighted average maturity 10 days longer
than its peer group average, a posture we believed was appropriate in view of
slower economic growth and the possibility of Fed easing. Early in the quarter,
we allowed maturities to shorten to take advantage of seasonal issuance, which
usually puts upward pressure on yields. Our maturity posture at quarter-end was
once again in neutral territory. We expect to remain neutral to slightly
aggressive going forward because we believe the Fed will maintain a stable
monetary policy near term, new short-term issuance will be lower, and money fund
assets will continue to grow about 10% this year.
Your fund's performance, as shown on the next page, was slightly ahead of
its peer group during the past three- and six-month periods ended August 31.
<PAGE>
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Performance Comparison
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<TABLE>
<CAPTION>
Periods Ended 8/31/95
---------------------
3 Months 6 Months
-------- --------
<S> <C> <C>
Tax-Exempt Money Fund 0.82% 1.73%
IBC/Donoghue Money Fund
Report Average* 0.80 1.70
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*Stockbroker and General Purpose Funds
</TABLE>
TAX-FREE SHORT-INTERMEDIATE FUND
We began the six-month period ended August 31 with a neutral weighted average
maturity, a focus on one- to five-year maturities, and increasing exposure to
states with favorable supply and demand factors. Further along in the period,
evidence of economic slowing prompted us to extend maturities to capture higher
yields as rates fell. However, recent data showing strength in home and
automobile sales triggered a more cautious posture once again. We ended the
fund's most recent fiscal quarter with a weighted average maturity just under
three years, down from 3.42 years on May 31 and 3.15 years at the end of
February.
Our focus on one- to five-year maturities contributed significantly to
performance. Investor demand for these securities, triggered by tax reform
concerns, pushed prices higher and yields lower relative to long-term bonds.
Until there is a clear indication of what type of changes will be made in the
tax code, investors are still likely to position themselves cautiously in
shorter-term bonds.
Our strategy allowed the fund to outperform its peer group average during
both the quarter and the six months ended August 31.
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Performance Comparison
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<TABLE>
<CAPTION>
Periods Ended 8/31/95
---------------------
3 Months 6 Months
-------- --------
<S> <C> <C>
Tax-Free Short-Intermediate
Fund 1.50% 3.80%
Lipper Short Municipal
Debt Fund Average 1.46 3.63
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</TABLE>
TAX-FREE INSURED INTERMEDIATE BOND FUND
Our strategy here was similar to that of the Tax-Free Short-Intermediate Fund.
We began the six-month period with a neutral duration, a focus on 5- to 10-year
maturities, and increasing exposure to states with favorable supply and demand
factors. As the economy slowed, we lengthened maturities and then shortened them
again in the second fiscal quarter when economic data suggested renewed
strength. Investors flocked to bonds with maturities shorter than seven years
because of uncertainty surrounding tax-reform discussions. As a result, your
fund's allocation to securities with two- to seven-year maturities helped
performance.
We have also increased our allocation to bonds issued by high-tax states,
such as New York and Maryland. The added tax advantages for local residents
should create stronger demand for these issues, propelling prices higher. We
anticipate that 1995 will see the lowest issuance of municipal bonds since 1990,
helping bonds from these areas outperform bonds issued by states with lower tax
rates.
This strategy resulted in a stronger performance than our peer group
average during the second quarter and the first half of your fund's fiscal year.
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Performance Comparison
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<TABLE>
<CAPTION>
Periods Ended 8/31/95
---------------------
3 Months 6 Months
-------- --------
<S> <C> <C>
Tax-Free Insured
Intermediate Bond Fund 1.71% 5.59%
Lipper Intermediate Municipal
Debt Fund Average 1.55 5.05
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</TABLE>
TAX-FREE INCOME FUND
Two opposing forces dominated the long end of the municipal market during the
past six months. On one hand, the slowing economy provided an environment for
declining yields and rising bond prices. On the other hand,
2
<PAGE>
concerns about tax reform suggested that long-term municipal bond yields might
not fall as much as their taxable counterparts.
Uncertainty surrounding the tax reform issue kept us from becoming overly
aggressive on the direction of tax-exempt yields. Throughout most of the first
two fiscal quarters, we maintained the fund's weighted average maturity at about
18 years, and the fund's duration, which measures sensitivity to changes in
interest rates, near 7.75 years.
We were more certain in our outlook on credit quality spreads. Believing
that medium-quality, higher-yielding bonds were undervalued, we took the
opportunity to add securities in this sector to the portfolio. Subsequently,
these bonds rose in price and their yields moved closer to those of higher-
quality bonds, aiding fund performance through both price appreciation and the
higher income we had captured.
By the end of June, the municipal bond market appeared to have overreacted
to talk of tax reform. Yields on long-term municipals approached 90% of the 30-
year Treasury bond yield, and we were able to buy long-term bonds with
attractive yields. Your fund's performance lagged modestly during the quarter
but performed in line with the average for similar funds during the first six
months of the fiscal year.
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Performance Comparison
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<TABLE>
<CAPTION>
Periods Ended 8/31/95
---------------------
3 Months 6 Months
-------- --------
<S> <C> <C>
Tax-Free Income Fund 0.45% 4.62%
Lipper General Municipal Debt Fund Average 0.57 4.62
- --------------------------------------------------------------------------------
</TABLE>
TAX-FREE HIGH YIELD FUND
Your fund started the calendar year with a somewhat defensive maturity posture,
which served shareholders well throughout last year's difficult environment.
Going into the fiscal year last March, however, we began to make two adjustments
that worked out well through the quarter ended August 31. First, we shifted
toward a neutral to slightly aggressive position versus the competition. This
entailed keeping the fund's duration in a range of 7.3 to 7.6 years, reducing
cash levels to about 3%, and extending the weighted average maturity to just
beyond 20 years.
The second change was an increased weighting in below-investment-grade
holdings to 30% from 24% of net assets. Yield spreads between high- and lower-
quality bonds had increased significantly in 1994, which provided an opportunity
to bolster the fund's yield. We recently cut back our purchases in this sector
as yield spreads have narrowed once again. This shift in emphasis lowered your
fund's average credit quality only slightly, since a portion of these purchases
were funded by the sale of BBB-rated bonds.
These adjustments helped the fund outperform its peer group average over
the past three- and six-month periods. Going forward, however, we expect to
adopt a more cautious posture since bonds could well have registered most of the
gains we anticipate for 1995.
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Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 8/31/95
---------------------
3 Months 6 Months
-------- --------
<S> <C> <C>
Tax-Free High Yield Fund 1.22% 5.37%
Lipper High Yield Municipal Debt Fund Average 1.05 4.89
- --------------------------------------------------------------------------------
</TABLE>
OUTLOOK
For the past three months, the 30-year Treasury bond yield has hovered in a
range between 6.5% and 7%. While recent economic growth has slowed significantly
from last year's rapid pace, it may not have slowed to the extent the Federal
Reserve believed when it loosened monetary policy in July. Second quarter GDP,
initially reported to have increased by a paltry 0.5% annualized rate, was
subsequently revised to 1.1%. Growth in the third and fourth quarters should be
closer to the long-term trend of 2.5%.
3
<PAGE>
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Municipal Bonds Hindered by Tax Reform Proposals
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In recent months, proposals for tax reform in Washington have trimmed returns on
municipal bonds. Most of these proposals are still in rudimentary form, but they
center on the possibility of a flat tax with a low income tax rate and the
elimination of taxes on the income from taxable securities. As a result,
investors demanded higher yields on long-term tax-exempt issues relative to
Treasuries to compensate for the risk that new legislation might reduce the tax
advantages of municipals. Tax-exempt securities with short maturities have
performed better, because they are less vulnerable to any changes in the tax
laws.
Tax reform discussions could continue to affect the municipal market
adversely, but we believe the likelihood of a genuine flat tax is slim. In our
experience, the market often overreacts to proposed changes in the tax code,
creating periods of market weakness we view as buying opportunities.
Accordingly, we have taken advantage of the demand for short-term tax-exempt
bonds and have purchased long-term bonds when their yields have approached those
of long-term Treasury bonds.
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Until the economy shows clearer signs of veering from moderate to either
slower or more rapid growth, long bond yields are likely to remain close to
current levels. Despite the emerging picture of a rebound in growth, the
combination of benign inflation and the growing sense of fiscal responsibility
in Washington may reassure the bond market.
The municipal market is also likely to trade in its range of the past six
months, with long-term rates fluctuating between 5.5% and 6.0%. Unless tax
reform proposals disappear altogether, we do not expect municipal bonds to
outperform Treasuries, and investors may continue to prefer tax-exempt bonds
with short maturities. Overall, we anticipate that economic developments will
have a greater impact than tax reform proposals on the municipal market.
Respectfully submitted,
/s/ William T. Reynolds
William T. Reynolds
Director
Fixed Income Division
September 20, 1995
4
<PAGE>
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Financial Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEC
Net Asset Value Dividend Per Share Dividend Yield* 30-Day
Per Share 3 Months Ended 3 Months Ended Yield
5/31/95 8/31/95 5/31/95 8/31/95 5/31/95 8/31/95 8/31/95
------------------- ------------------- -------------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Tax-Exempt Money $ 1.00 $ 1.00 $ 0.009 $ 0.008 3.56% 3.26% --
- ------------------------------------------------------------------------------------------------------------------------------
Tax-Free Short-Intermediate 5.31 5.33 0.06 0.06 4.44 4.43 3.92%
- ------------------------------------------------------------------------------------------------------------------------------
Tax-Free Insured Intermediate Bond 10.62 10.68 0.12 0.12 4.66 4.54 4.33
- ------------------------------------------------------------------------------------------------------------------------------
Tax-Free Income 9.50 9.41 0.13 0.13 5.60 5.58 5.35
- ------------------------------------------------------------------------------------------------------------------------------
Tax-Free High Yield 11.91 11.87 0.18 0.18 6.25 6.17 5.88
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Dividends earned and reinvested for the periods indicated are annualized and
divided by the average daily net asset values per share for the same period.
Money Fund reports seven-day compound yield.
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Quality Diversification
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quality Ratings* Weighted Average Quality*
----------------------------------------- -------------------------
1 2 3 4 5-10 5/31/95 8/31/95
<S> <C> <C> <C> <C> <C> <C> <C>
Tax-Exempt Money 14% 86% -- -- -- 1.9 1.9
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Tax-Free Short-Intermediate 42 36 18% 4% -- 1.8 1.8
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Tax-Free Insured Intermediate Bond 30 60 10 -- -- 1.9 1.8
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Tax-Free Income 11 51 25 10 3% 2.4 2.4
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Tax-Free High Yield 4 17 18 32 29 3.6 3.7
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest
quality.
5
<PAGE>
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Duration and Maturity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Effective Duration (years) Maturity (years)
-------------------------- ---------------------
5/31/95 8/31/95 5/31/95 8/31/95
<S> <C> <C> <C> <C>
Tax-Exempt Money -- -- 49* 55*
- -----------------------------------------------------------------------------------------------
Tax-Free Short-Intermediate 2.7 2.5 3.4 3.0
- -----------------------------------------------------------------------------------------------
Tax-Free Insured Intermediate Bond 5.6 5.4 7.6 7.2
- -----------------------------------------------------------------------------------------------
Tax-Free Income 7.6 7.8 18.0 18.1
- -----------------------------------------------------------------------------------------------
Tax-Free High Yield 7.2 7.3 20.1 20.1
- -----------------------------------------------------------------------------------------------
</TABLE>
* Maturity is in days.
- --------------------------------------------------------------------------------
Average Annual Compound Total Return - Calendar Year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 6/30/95
-----------------------------------------------------------
1 Year 5 Years 10 Years Since Inception
<S> <C> <C> <C> <C> <C>
Tax-Exempt Money 3.14% 3.06% 4.01% 4.70% (4/81)
- --------------------------------------------------------------------------------------------------------
Tax-Free Short-Intermediate 5.85 5.76 5.77 6.09 (12/83)
- --------------------------------------------------------------------------------------------------------
Tax-Free Insured Intermediate Bond 7.72 -- -- 7.27 (11/92)
- --------------------------------------------------------------------------------------------------------
Tax-Free Income 8.66 8.18 8.16 7.20 (10/76)
- --------------------------------------------------------------------------------------------------------
Tax-Free High Yield 8.04 8.40 9.50 9.77 (3/85)
- --------------------------------------------------------------------------------------------------------
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
6
<PAGE>
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Shareholder Services
- --------------------------------------------------------------------------------
To help shareholders monitor their current investments and make decisions that
accurately reflect their financial goals, T. Rowe Price offers a wide variety of
information and services--at no extra cost.
Knowledgeable Service Representatives
By Phone--Shareholder service representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m ET. Call
1-800-225-5132 to speak directly with a representative who will be able to
assist you with your accounts.
In Person--Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
Automated 24-Hour Services
Tele*Access(R)(1-800-638-2587) provides information such as account
balance, date and amount of your last transaction, latest dividend payment, and
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PC*Access(R) provides the same information as Tele*Access, but on a
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Account Services
Checking--Write checks for $500 or more on any money market and most bond
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Automatic Investing--Build your account over time by investing directly
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Automatic Exchange enables you to set up systematic investments from one fund
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Automatic Withdrawal--If you need money from your fund account on a regular
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Dividend and Capital Gains Payment Options--Reinvest all or some of your
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Investment Information
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Shareholder Reports--Portfolio managers review the performance of the funds
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You can trade stocks, bonds, options, precious metals, and other securities at a
substantial savings over regular commission rates. Call a shareholder service
representative for more information.
7
<PAGE>
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- --------------------------------------------
FOR YIELD, PRICE, LAST TRANSACTION,
AND CURRENT BALANCE, 24 HOURS,
7 DAYS A WEEK, CALL:
1-800-638-2587 toll free
625-7676 Baltimore area
FOR ASSISTANCE WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. ROWE PRICE
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus of the T. Rowe Price Tax-Free Funds.
Invest With Confidence/(R)/ [LOGO APPEARS HERE]
T. Rowe Price
TFF
- ------------------------------------
SEMIANNUAL REPORT
- ------------------------------------
T. Rowe Price
-------------
TAX-FREE FUNDS
AUGUST 31, 1995
[LOGO APPEARS HERE]
