Semiannual Report - Financial Statements
T. Rowe Price
Tax-Free
High Yield Fund
August 31, 1998
Portfolio Highlights
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SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
2/28/98 8/31/98
- --------------------------------------------------------------------------------
Hospital Revenue 15% 15%
Industrial and Pollution Control Revenue 12 12
Nuclear Revenue 10 10
General Obligation - Local 8 9
Life Care/Nursing Home Revenue 8 8
Housing Finance Revenue 10 8
Prerefunded Bonds 8 6
Ground Transportation Revenue 5 6
Lease Revenue 5 4
Dedicated Tax Revenue 4 4
Electric Revenue 2 3
General Obligation - State 3 3
Miscellaneous Revenue 2 3
Solid Waste Revenue 4 3
Escrowed to Maturity 2 2
All Others 2 3
Other Assets Less Liabilities -- 1
- --------------------------------------------------------------------------------
Total 100% 100%
T. Rowe Price Tax-Free High Yield Fund
- --------------------------------------------------------------------------------
Unaudited
For a share outstanding throughout each period
Financial Highlights
- --------------------------------------------------------------------------------
6 Months Year
Ended Ended
8/31/98 2/28/98 2/28/97 2/29/96 2/28/95 2/28/94
NET ASSET VALUE
Beginning of period $ 12.66 $ 12.12 $ 12.10 $ 11.62 $ 12.26 $ 12.33
Investment activities
Net investment
income 0.34 0.69 0.70 0.72 0.73 0.74
Net realized and
unrealized gain
(loss) 0.06 0.54 0.02 0.48 (0.60) 0.16
Total from
investment
activities 0.40 1.23 0.72 1.20 0.13 0.90
Distributions
Net investment
income (0.34) (0.69) (0.70) (0.72) (0.73) (0.74)
Net realized
gain -- -- -- -- (0.04) (0.23)
Total distributions (0.34) (0.69) (0.70) (0.72) (0.77) (0.97)
NET ASSET VALUE
End of period $ 12.72 $ 12.66 $ 12.12 $ 12.10 $ 11.62 $ 12.26
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Ratios/Supplemental Data
Total return(C) 3.18% 10.42% 6.22% 10.62% 1.26% 7.49%
Ratio of expenses to
average net assets 0.72%! 0.72% 0.74% 0.75% 0.79% 0.79%
Ratio of net
investment
income to average
net assets 5.32%! 5.59% 5.86% 6.07% 6.29% 5.95%
Portfolio
turnover rate 17.7% 24.4% 37.0% 39.3% 59.6% 59.3%
Net assets,
end of period
(in millions) $ 1,320 $ 1,242 $ 1,053 $ 990 $ 874 $ 941
(C) Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment of
all distributions.
! Annualized.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free High Yield Fund
- --------------------------------------------------------------------------------
Unaudited August 31, 1998
Statement of Net Assets
Par Value
- --------------------------------------------------------------------------------
In thousands
ALABAMA 3.3%
Alabama Docks Dept., Docks Fac.
5.50%, 10/1/22 (MBIA Insured) $ 3,000 $ 3,142
Alexander Special Care Fac.
Fin. Auth., Russell Hosp.
6.00%, 12/1/22 3,250 3,392
Baldwin County,
Eastern Shore Health Care Auth.
Thomas Hosp.
5.75%, 4/1/27 2,500 2,537
6.75%, 4/1/21 1,900 2,081
8.50%, 4/1/16 (Prerefunded 4/1/01!) 4,000 4,520
Courtland IDB, Solid Waste Disposal,
Champion Int'l.
5.90%, 2/1/17 8,000 8,403
Marshall County Health Care Auth.
Guntersville-Arab Medical Center
7.00%, 10/1/13 2,100 2,278
10.25%, 10/1/13 6,295 6,513
Mobile, GO
Capital Improvement Warrants
Zero Coupon, 8/15/18 (MBIA Insured) 4,550 1,311
Zero Coupon, 8/15/19 (MBIA Insured) 4,675 1,255
Zero Coupon, 8/15/20 (MBIA Insured) 4,810 1,204
Mobile Airport Auth.,
8.875%, 10/1/15 * 1,903 2,080
Special Care Facilities, BMC Montgomery
5.25%, 5/1/20 (AMBAC Insured) 2,000 2,003
Shelby County, GO
7.40%, 8/1/07 2,000 2,218
7.70%, 8/1/17 1,000 1,113
Total Alabama (Cost $39,431) 44,050
ALASKA 1.3%
Alaska Housing Fin.,
5.875%, 12/1/24 (MBIA Insured) 5,000 5,260
Alaska Industrial Dev. and Export Auth.
Upper Lynn Canal Regional Power
5.875%, 1/1/32 * 1,600 1,621
Valdez Marine Terminal,
British Petroleum Pipeline
5.50%, 10/1/28 10,000 10,181
Total Alaska (Cost $15,999) 17,062
ARIZONA 0.2%
Tempe IDA, Friendship Village of Tempe,
6.75%, 12/1/13 $ 1,950 $ 2,049
Total Arizona (Cost $1,861) 2,049
ARKANSAS 0.2%
Independence County, PCR,
Mississippi Power and Light
7.625%, 7/1/12 3,000 3,075
Total Arkansas (Cost $3,000) 3,075
CALIFORNIA 4.2%
California HFA,
Kaiser Permanente, 5.40%, 5/1/28 5,000 5,095
California HFFA,
Daughters of Charity Health Systems
St. Francis Medical Center
5.75%, 10/1/23 (Escrowed to Maturity) 6,515 6,829
Foothill / Eastern Transportation Corridor Agency
California Toll Road
Zero Coupon, 1/1/15 2,500 1,081
Zero Coupon, 1/1/17 12,265 4,760
Zero Coupon, 1/1/19 10,000 3,486
Zero Coupon, 1/1/25 8,000 2,018
Zero Coupon, 1/1/26 17,500 4,189
Zero Coupon, 1/1/28 10,000 2,156
Zero Coupon, 1/1/30 25,000 4,854
Fresno Joint Powers Fin. Auth.,
6.55%, 9/2/12 3,000 3,288
Inglewood Redev. Agency,
Century Redev., 6.125%, 7/1/23 3,440 3,627
Los Angeles County, GO,
Marina del Rey, COP
6.50%, 7/1/08 3,250 3,538
Los Angeles County Public
Works Fin. Auth.
Rowland Heights, 5.50%, 10/1/18
(FSA Insured) 2,750 2,996
Riverside County Asset Leasing,
Riverside Hosp.
Zero Coupon, 6/1/21 (MBIA Insured) 9,000 2,887
San Jose Redev. Agency, Tax Allocation
5.25%, 8/1/16 (MBIA Insured) 4,000 4,086
Total California (Cost $44,666) 54,890
COLORADO 1.8%
Colorado Housing Fin. Auth.
8.65%, 8/1/03 $ 550 $ 578
8.70%, 11/1/04 * 1,155 1,217
9.00%, 8/1/03 565 589
9.40%, 8/1/03 * 355 373
9.60%, 8/1/01 * 210 219
Denver City and County,
Airport System, United Air Lines
6.875%, 10/1/32 * 11,000 11,945
E-470 Public Highway Auth.
Zero Coupon, 9/1/13 (MBIA Insured) 10,000 4,866
El Paso County, GO,
School Dist. No. 20, 6.35%, 12/15/06 3,000 3,427
Total Colorado (Cost $20,581) 23,214
CONNECTICUT 0.7%
Connecticut Dev. Auth.,
Mystic Marinelife Aquarium
7.00%, 12/1/27 1,700 1,834
Connecticut Housing Fin. Auth.,
Mortgage Fin.
5.85%, 11/15/28 * 3,000 3,138
Mashantucket Western Pequot Tribe,
5.75%, 9/1/27 4,000 4,152
Total Connecticut (Cost $8,578) 9,124
DELAWARE 0.9%
Delaware Economic Dev. Auth.
Delmarva Power and Light
7.15%, 7/1/18 (FGIC Insured) 2,500 2,735
Peninsula Methodist Homes
8.50%, 5/1/22 (Prerefunded 5/1/02!) 2,500 2,912
Delaware HFA, Beebe Medical Center,
6.75%, 6/1/14 3,975 4,388
Wilmington, Riverside Osteopathic Hosp.
10.20%, 10/1/18 (Prerefunded 10/1/98!) 2,000 2,051
Total Delaware (Cost $10,859) 12,086
DISTRICT OF COLUMBIA 1.1%
Dist. of Columbia
American Geophysical Union,
5.875%, 9/1/23 $ 1,750 $ 1,778
Medlantic Health Care Group
5.75%, 8/15/26 (MBIA Insured) 6,000 6,398
Dist. of Columbia, GO,
5.50%, 6/1/17 (AMBAC Insured) 6,000 6,251
Total District of Columbia (Cost $13,240) 14,427
FLORIDA 3.1%
Brevard County Tourist Dev.
Florida Marlins Spring Training Fac.
6.875%, 3/1/13 1,520 1,650
Broward County Resource Recovery
Broward Waste Energy, L.P. North
7.95%, 12/1/08 4,315 4,627
Broward Waste Energy, L.P. South
7.95%, 12/1/08 4,380 4,697
Charlotte County, IDR,
Beverly Enterprises, 10.00%, 6/1/11 820 927
Collier County IDA,
Beverly Enterprises, 10.75%, 3/1/03 1,740 1,981
Dade County, Guaranteed Entitlement
Zero Coupon, 2/1/12 (MBIA Insured) 14,715 7,463
Escambia County
IDR, Beverly Enterprises, 9.80%, 6/1/11 435 476
PCR, Champion Int'l., 6.90%, 8/1/22 * 2,500 2,784
Hernando County, IDR,
Beverly Enterprises, 10.00%, 9/1/11 785 895
Jacksonville HFA,
Genesis Rehabilitation Hosp.
VRDN (Currently 3.35%) 5,400 5,400
Jacksonville, IDR,
Beverly Enterprises, 9.75%, 10/1/11 1,240 1,327
Lee County IDA, Cypress Cove,
6.375%, 10/1/25 2,600 2,722
Leon County, IDR,
Beverly Enterprises, 9.80%, 6/1/11 430 471
Manatee County Housing Fin. Auth.,
Capital Appreciation
Zero Coupon, 10/1/15 2,793 476
Orange County IDA,
Beverly Enterprises, 9.25%, 8/1/10 415 464
Santa Rosa County HFA,
Gulf Breeze Hosp., 8.60%, 10/1/02 630 644
St. John's County IDA,
Vicar's Landing, 6.75%, 2/15/12 4,000 4,274
Total Florida (Cost $38,807) 41,278
GEORGIA 2.9%
Athens-Clarke Residential Care Fac.,
Wesley Woods of Athens
6.375%, 10/1/27 $ 2,500 $ 2,577
Coweta County Residential Care Fac.
for the Elderly Auth.
Wesley Woods of Newnan-Peachtree City
8.25%, 10/1/26 3,145 3,675
Monroe County Dev. Auth., PCR, Gulf Power
VRDN (Currently 3.85%) 10,500 10,500
Municipal Electric Auth. of Georgia
5.50%, 1/1/20 (MBIA Insured) 6,500 7,012
6.25%, 1/1/17 4,000 4,564
Rockdale County Dev. Auth.
Solid Waste Disposal, Visy Paper
7.40%, 1/1/16 * 4,270 4,630
7.50%, 1/1/26 * 4,400 4,794
Total Georgia (Cost $35,521) 37,752
HAWAII 0.5%
Hawaii Dept. of Budget and Fin.
Kapiolani Health Obligated Group
6.20%, 7/1/16 2,000 2,186
6.25%, 7/1/21 4,000 4,364
Total Hawaii (Cost $6,050) 6,550
IDAHO 0.7%
Idaho HFA
Single Family
6.30%, 1/1/24 * 5,000 5,311
7.80%, 1/1/23 * 1,400 1,470
Idaho Student Loan Marketing Assoc.,
6.70%, 10/1/07 * 2,500 2,660
Total Idaho (Cost $8,895) 9,441
ILLINOIS 8.9%
Aurora, Dreyer Medical Clinic,
8.75%, 7/1/14 4,155 4,678
Chicago, GO
5.125%, 1/1/16 (FGIC Insured) $ 7,685 $ 7,792
6.25%, 1/1/15 (AMBAC Insured) 3,500 4,087
Chicago School Reform
Zero Coupon, 12/1/13 (AMBAC Insured) 5,000 2,369
Zero Coupon, 12/1/14 (AMBAC Insured) 5,000 2,255
Chicago Midway Airport,
5.00%, 1/1/35 (MBIA Insured) 4,200 4,096
Chicago-O'Hare Int'l. Airport
American Airlines, 7.875%, 11/1/25 * 2,500 2,711
United Airlines, 8.20%, 5/1/18 1,915 2,018
Chicago Water, 5.00%, 11/1/25
(FGIC Insured) 5,000 4,905
Illinois HFA
Centegra Health Systems, 5.25%, 9/1/24 5,325 5,280
Community Hosp. of Ottawa,
6.85%, 8/15/24 5,275 5,849
Covenant Retirement Community,
7.60%, 12/1/12 2,665 3,002
Glen Oaks Medical Center
7.00%, 11/15/19 (Escrowed to Maturity) 3,300 3,774
9.50%, 11/15/15 (Escrowed to Maturity) 2,020 2,302
Hinsdale Hosp.
7.00%, 11/15/19 (Escrowed to Maturity) 5,100 5,846
9.00%, 11/15/15 (Escrowed to Maturity) 4,570 5,159
Holy Cross Hosp., 6.75%, 3/1/24 4,000 4,393
Loyola Univ. Health
5.00%, 7/1/24 (MBIA Insured) 8,000 7,785
Riverside Medical Center,
5.75%, 11/15/20 2,620 2,726
Victory Health Services, 5.375%, 8/15/16 3,000 3,050
Metropolitan Pier and Exposition Auth.
McCormick Place
Zero Coupon, 6/15/11 (FGIC Insured) 5,000 2,716
Zero Coupon, 12/15/13 (MBIA Insured) 4,000 1,891
Zero Coupon, 6/15/22 (MBIA Insured) 13,455 4,105
Zero Coupon, 6/15/23 (MBIA Insured) 17,355 5,035
Zero Coupon, 6/15/25 12,125 3,180
Robbins Resource Recovery
8.375%, 10/15/10 * 2,000 1,940
8.375%, 10/15/16 * 8,900 8,633
Southwestern Illinois Dev. Auth.,
Anderson Hosp.
7.00%, 8/15/22 2,500 2,713
Village of Carol Stream, DuPage County
Windsor Park Manor
7.00%, 12/1/13 $ 2,000 $ 2,178
7.20%, 12/1/14 1,200 1,314
Total Illinois (Cost $108,216) 117,782
INDIANA 2.8%
Hammond, Sewage and Solid Waste Disposal
American Maize Products,
8.00%, 12/1/24 * 4,000 4,722
Indiana HFFA, Clarian Health Partners,
5.50%, 2/15/16 2,800 2,915
Indianapolis Airport Auth.
Federal Express
5.50%, 5/1/29 * 5,000 5,000
7.10%, 1/15/17 * 11,000 12,450
United Air Lines, 6.50%, 11/15/31 * 5,000 5,445
Indianapolis Gas Utility Distribution System
5.00%, 8/15/24 (AMBAC Insured) 5,000 4,914
St. Joseph County Economic Dev.
Madison Center
5.45%, 2/15/17 1,150 1,157
5.50%, 2/15/21 1,000 1,007
Total Indiana (Cost $35,470) 37,610
IOWA 0.9%
Iowa Finance Auth.,
Iowa Health Systems, 5.125%, 1/1/28 10,000 9,858
Iowa HFA, Wesley Retirement,
6.25%, 2/1/12 2,400 2,469
Total Iowa (Cost $12,107) 12,327
KENTUCKY 1.9%
Florence Housing Fac., Bluegrass RHF Housing
7.625%, 5/1/27 2,500 2,753
Jefferson County,
Louisville Gas and Electric,
7.45%, 6/15/15 4,250 4,574
Jefferson County HFA,
Beverly Enterprises, 9.75%, 8/1/07 770 819
Kenton County Airport Board
Delta Airlines
6.125%, 2/1/22 * $ 6,000 $ 6,164
7.50%, 2/1/12 * 3,600 3,965
7.50%, 2/1/20 * 5,250 5,797
Kentucky Economic Dev. Fin. Auth.,
Sisters of Charity of Nazareth
VRDN (Currently 3.55%) 700 700
Total Kentucky (Cost $22,441) 24,772
LOUISIANA 3.4%
Lake Charles Harbor and Terminal Dist.,
Panhandle Eastern
7.75%, 8/15/22 5,000 5,746
Louisiana Offshore Terminal Auth.,
Deepwater Port
7.60%, 9/1/10 4,050 4,371
Louisiana PFA
IDR, Beverly Enterprises, 8.25%, 9/1/08 1,215 1,349
Pendelton Memorial Methodist Hosp.
5.25%, 6/1/28 5,780 5,532
5.25%, 6/1/17 4,515 4,402
St. James Place of Baton Rouge,
10.00%, 11/1/21 4,500 5,102
Plaquemines Parish IDB, PCR, AMAX,
7.25%, 10/1/09 1,280 1,282
Saint Charles Parish,
Louisiana Power and Light
8.00%, 12/1/14 8,000 8,575
West Feliciana Parish, PCR
Gulf States Utilities
5.80%, 12/1/15 4,000 4,103
8.00%, 12/1/24 4,000 4,242
Total Louisiana (Cost $42,234) 44,704
MAINE 0.4%
Maine Housing Auth., Mortgage Purchase
6.45%, 11/15/26 (AMBAC Insured) * 5,000 5,410
Total Maine (Cost $5,000) 5,410
MARYLAND 3.0%
Berlin, Atlantic General Hosp.,
8.375%, 6/1/22 1,885 2,053
Gaithersburg Economic Dev.,
Asbury Methodist, 5.50%, 1/1/15 5,000 5,070
Maryland CDA
Single Family
Zero Coupon, 4/1/29 * $ 25,695 $ 2,298
5.95%, 7/1/23 3,730 3,945
7.25%, 4/1/19 2,500 2,630
Maryland HHEFA
Doctor's Community Hosp., 5.50%, 7/1/24 3,000 3,021
Pooled Loan Program, VRDN
(Currently 3.25%) 1,700 1,700
Union Hosp. of Cecil County,
6.70%, 7/1/22 2,725 2,946
Maryland Ind. Dev. Fin. Auth.
American Assoc. of Blood Banks,
7.25%, 8/1/13 2,700 2,922
Associated Catholic Charities,
9.00%, 1/1/10 1,315 1,401
Georgetown Bakery Management,
9.25%, 9/1/04 * 1,110 1,164
Maryland-National Capital Park and
Planning Commission
Little Bennett Golf Fac.
8.25%, 10/1/11 (Prerefunded 10/1/02!) 2,145 2,528
Montgomery County Housing
Opportunities Commission
Multifamily, Strathmore Court at
White Flint 8.75%, 7/1/27 2,000 2,140
Single Family
Zero Coupon, 7/1/28 13,500 2,648
6.10%, 7/1/27 1,975 2,107
7.50%, 7/1/17 670 703
Total Maryland (Cost $36,600) 39,276
MASSACHUSETTS 2.5%
Massachusetts, GO, 7.50%, 6/1/04 2,750 3,157
Massachusetts Bay Transportation Auth., GO
General Transportation
7.00%, 3/1/19 2,500 3,137
7.00%, 3/1/21 2,000 2,552
Massachusetts HEFA,
Melrose Wakefield Health Care
6.00%, 7/1/12 1,650 1,872
Massachusetts Housing Fin. Agency
Housing Project
6.375%, 4/1/21 (AMBAC Insured) $ 1,950 $ 2,073
Single Family, 6.35%, 6/1/17 1,750 1,876
Massachusetts Ind. Fin. Agency
Bradford College, 5.625%, 11/1/28 6,000 6,076
Nevins Home, 7.875%, 7/1/23 5,265 5,838
Ogden Haverhill, 5.40%, 12/1/11* 4,000 4,064
Massachusetts Turnpike Auth.,
Metropolitan Highway Systems
Zero Coupon, 1/1/21 (MBIA Insured) 7,500 2,489
Total Massachusetts (Cost $30,078) 33,134
MICHIGAN 3.1%
Dickinson County Economic Dev.,
Champion Int'l.
5.85%, 10/1/18 4,000 4,190
Flint Hosp. Building Auth.,
Hurley Medical Center
5.375%, 7/1/28 4,135 4,111
Garden City Hosp. Fin. Auth.
Garden City Hosp.
5.625%, 9/1/10 1,265 1,267
5.75%, 9/1/17 1,500 1,502
Michigan HDA
6.20%, 6/1/27 * 2,500 2,668
6.50%, 12/1/17 3,520 3,759
Michigan Hosp. Fin. Auth.
Bay Medical Center, 8.25%, 7/1/12 2,000 2,189
Genesys Regional Medical, 5.50%, 10/1/27 3,550 3,569
Henry Ford Health, 5.25%, 11/15/25 6,000 6,049
Pontiac Osteopathic Hosp., 6.00%, 2/1/24 3,150 3,260
Saratoga Community Hosp., 8.75%, 6/1/10 3,617 4,201
Michigan Strategic Fund
Holland Home
5.75%, 11/15/18 1,600 1,604
5.75%, 11/15/28 2,500 2,487
Total Michigan (Cost $37,337) 40,856
MINNESOTA 0.2%
Minnesota Housing Fin. Agency,
Single Family, 6.70%, 1/1/18 $ 1,885 $ 2,026
Total Minnesota (Cost $1,885) 2,026
MISSISSIPPI 1.1%
Claiborne County, PCR
Systems Energy Resources
7.30%, 5/1/25 1,100 1,160
9.50%, 12/1/13 2,000 2,082
9.875%, 12/1/14 7,800 8,129
Mississippi Home, Single Family
9.25%, 3/1/12 (FGIC Insured) 182 195
Mississippi Hosp. Equipment
and Fac. Auth., Magnolia Hosp.
7.375%, 10/1/21 3,000 3,348
Total Mississippi (Cost $14,275) 14,914
MISSOURI 1.5%
Good Shepherd Nursing Home Dist.
Nursing Home Facilities
5.45%, 8/15/08 1,175 1,183
5.90%, 8/15/23 2,000 2,027
Hannibal IDA, Hannibal Medical Center
9.50%, 3/1/22 (Prerefunded 9/1/01!) 3,750 4,471
Joplin IDA, Tri-State Osteopathic Hosp.,
8.25%, 12/15/14 1,125 1,285
Lee's Summit IDA,
John Knox Village, 7.125%, 8/15/12 1,500 1,602
Missouri HEFA
Bethesda Health Group, 7.50%, 8/15/12 1,250 1,407
Still Regional Medical Center,
7.70%, 2/1/13 4,250 4,684
Ray County, Memorial Hosp.,
9.625%, 11/15/13 3,200 3,335
Total Missouri (Cost $18,160) 19,994
MONTANA 0.2%
Montana Board of Housing
Sub. Lien
7.85%, 10/1/04 (FHA Guaranteed) 615 657
8.40%, 10/1/03 * 510 532
Montana Board of Housing
Sub. Lien
8.50%, 10/1/02 $ 355 $ 371
8.525%, 10/1/02 (FHA Guaranteed) 320 334
8.95%, 10/1/02 * 370 387
9.20%, 10/1/01 * 215 221
Total Montana (Cost $2,385) 2,502
NEBRASKA 1.4%
Kearney, Great Platte River Road,
6.75%, 1/1/23 5,000 4,900
Nebraska Investment Fin. Auth.
Single Family
6.45%, 3/1/28 (GNMA Guaranteed) * 4,825 5,179
Residual Interest Bond / Inverse Floater
(Currently 11.277%), 3/15/22
(GNMA Guaranteed) * 665 732
Residual Interest Bond / Inverse Floater
(Currently 11.45%), 9/10/30
(GNMA Guaranteed) * 1,200 1,341
Nebraska Public Power Dist., Electric
5.25%, 1/1/22 (MBIA Insured) 6,000 6,441
Total Nebraska (Cost $17,014) 18,593
NEVADA 1.0%
Clark County, IDR
Nevada Power, 5.50%, 10/1/30 3,000 3,025
Southwest Gas
7.30%, 9/1/27 3,000 3,324
7.50%, 9/1/32 * 5,000 5,554
Nevada Housing Division
Sub Lien
9.35%, 10/1/02 235 243
9.375%, 10/1/00 * 140 144
9.45%, 10/1/03 (FHA Guaranteed) * 480 505
9.65%, 10/1/02 * 385 406
Total Nevada (Cost $12,229) 13,201
NEW HAMPSHIRE 0.2%
New Hampshire HHEFA, Catholic Medical Center
8.25%, 7/1/13 $ 3,000 $ 3,133
Total New Hampshire (Cost $3,010) 3,133
NEW JERSEY 2.8%
Camden County Improvement Auth.
Kaighn Point Marine Terminal
8.00%, 6/1/27 * 4,000 4,529
Hudson County Improvement Auth. Fac.
Hudson County Lease Project
4.75%, 10/1/19 (FGIC Insured) 5,000 4,863
New Jersey Economic Dev. Auth.
Franciscan Oaks, 5.75%, 10/1/23 1,775 1,812
Kapkowski Road Landfill
6.375%, 4/1/18 2,000 2,000
6.375%, 4/1/31 2,000 2,000
Keswick Pines
5.60%, 1/1/12 1,100 1,107
5.75%, 1/1/24 3,810 3,857
8.75%, 1/1/24 6,000 7,398
The Evergreens, 6.00%, 10/1/17 1,300 1,369
New Jersey HFFA,
Raritan Bay Medical Center,
7.25%, 7/1/27 2,290 2,488
New Jersey Sports and Exposition Auth.,
Monmouth Park
8.00%, 1/1/25 5,250 6,001
Total New Jersey (Cost $33,834) 37,424
NEW MEXICO 0.6%
Farmington, PCR
Public Service Co. of New Mexico
6.30%, 12/1/16 2,400 2,602
6.375%, 4/1/22 4,300 4,694
Total New Mexico (Cost $6,700) 7,296
NEW YORK 13.0%
Dormitory Auth. of the State of New York
City Univ.
5.25%, 7/1/17 $ 5,000 $ 5,051
5.625%, 7/1/16 3,100 3,353
6.00%, 7/1/14 2,730 3,084
State Univ. Ed. Fac.
5.25%, 5/15/13 5,000 5,295
5.25%, 5/15/19 5,000 5,199
5.875%, 5/15/17 3,000 3,347
Long Island Power Auth.
Electric Systems, 3.25%, 5/1/33 3,000 3,000
RITES, (Currently 5.650%),
12/1/15 (FSA Insured) 5,000 5,106
Metropolitan Transportation Auth.
Service Contract
5.50%, 7/1/17 4,000 4,247
7.125%, 7/1/09 4,000 4,460
New York City, GO
5.00%, 8/1/15 5,000 4,989
5.00%, 8/1/23 5,500 5,377
5.125%, 8/1/11 6,000 6,180
5.25%, 8/1/14 5,000 5,116
5.25%, 8/1/21 15,000 15,061
5.75%, 2/1/14 8,140 8,672
5.875%, 3/15/13 2,750 2,964
6.00%, 8/1/06 2,000 2,191
6.00%, 4/15/09 4,000 4,428
6.00%, 2/15/16 2,810 3,039
6.00%, 8/1/17 4,500 4,907
6.20%, 8/1/07 4,825 5,319
6.20%, 8/1/07 (Prerefunded 8/1/04!) 175 197
6.25%, 8/1/09 7,000 7,917
RITES, (Currently 5.673%), 8/1/15 5,500 5,598
New York City Municipal Water Fin. Auth.,
Water and Sewer
5.50%, 6/15/23 5,000 5,122
New York City Transitional Fin. Auth.,
Future Tax
5.00%, 8/15/27 5,745 5,641
New York State Energy Research
and Dev. Auth., PCR
Long Island Lighting, 7.15%, 6/1/20 * $ 8,000 $ 8,781
New York State Mortgage Agency
Homeowner Mortgage
5.90%, 4/1/27 4,000 4,212
6.45%, 10/1/17 2,400 2,593
7.50%, 4/1/26 * 3,000 3,280
New York State Thruway Auth., VRDN
(Currently 3.40%) 2,900 2,900
New York State Urban Dev.
Correctional Capital Fac.
5.25%, 1/1/21 5,500 5,509
5.375%, 1/1/25 4,000 4,063
State Fac., 5.60%, 4/1/15 3,000 3,226
Yonkers IDA, Civic Fac.
St. Joseph Hosp., 6.15%, 3/1/15 2,500 2,531
Total New York (Cost $157,828) 171,955
NORTH CAROLINA 0.3%
North Carolina Medical Care Commission,
Valdese General Hosp.
8.75%, 10/1/16 1,995 2,245
Winston Salem, GO, VRDN
(Currently 3.25%) 2,100 2,100
Total North Carolina (Cost $4,065) 4,345
NORTH DAKOTA 0.3%
Mercer County, PCR, Basin Electrical Power
7.20%, 6/30/13 (AMBAC Insured) 3,500 4,371
Total North Dakota (Cost $4,028) 4,371
OHIO 4.8%
Akron, Municipal Baseball Stadium,
COP, STEP, 0%, 12/1/16 2,200 2,067
Cambridge, Guernsey Memorial Hosp.,
8.00%, 12/1/11 1,500 1,663
Cleveland Parking Fac., 8.10%, 9/15/22
(Prerefunded 9/15/02!) 10,000 11,702
Dayton, Special Fac.,
Emery Air Freight, 6.05%, 10/1/09 2,500 2,736
Fairfield Economic Dev. Auth.,
Beverly Enterprises
8.50%, 1/1/03 2,370 2,574
Marion County Health Care Fac.,
United Church Homes
8.875%, 12/1/12 (Prerefunded 12/1/99!) 3,225 3,523
Montgomery County Health Care Fac.,
Friendship Village
6.25%, 2/1/22 $ 2,900 $ 3,021
Montgomery County Hosp. Fac.
Grandview Hosp. and Medical Center
5.50%, 12/1/10 1,300 1,361
5.65%, 12/1/12 500 524
Ohio Air Quality Dev. Auth., PCR
Cleveland Electric, 6.00%, 8/1/20 2,700 2,819
Toledo Edison, 8.00%, 5/15/19 2,750 2,924
Ohio Housing Fin. Agency
Residential Mortgage, 5.75%, 9/1/28 * 4,400 4,553
Single Family
Residual Interest Bond / Inverse Floater
(Currently 9.842%), 3/31/31
(GNMA Guaranteed) * 565 634
Ohio Water Dev. Auth., PCR
Cleveland Electric
6.10%, 8/1/20 * 2,600 2,720
7.70%, 8/1/25 2,800 3,219
Toledo Edison
7.55%, 6/1/23 4,500 4,706
8.00%, 10/1/23 * 3,700 4,267
Ohio Water Dev. Auth.,
Solid Waste Disposal, Bay Shore Power
5.875%, 9/1/20 * 8,000 8,160
Total Ohio (Cost $58,217) 63,173
OKLAHOMA 1.1%
Jackson County Memorial Hosp. Auth.
Jackson County Memorial Hosp.,
7.30%, 8/1/15 4,300 4,687
LeFlore County Hosp. Auth.
Eastern Oklahoma Medical Center
9.40%, 5/1/06 (Prerefunded 5/1/99!) 2,000 2,116
Tulsa Municipal Airport
American Airlines
7.375%, 12/1/20 * 2,000 2,153
7.60%, 12/1/30 * 5,240 5,718
Total Oklahoma (Cost $13,480) 14,674
OREGON 0.2%
Western Generation Agency,
Wauna Cogeneration
7.25%, 1/1/09 * $ 1,900 $ 2,082
Total Oregon (Cost $1,893) 2,082
PENNSYLVANIA 3.6%
Allegheny County Hosp. Dev. Auth.
St. Francis Medical Center,
5.75%, 5/15/27 2,000 2,084
Beaver County IDA, PCR
Cleveland Electric, 7.625%, 5/1/25 2,400 2,739
Toledo Edison, 7.75%, 5/1/20 2,000 2,319
Berks County IDA,
Lutheran Home at Topton, 6.875%, 1/1/23 5,000 5,350
Blair County Hosp. Auth., Mercy Hosp.
8.125%, 2/1/14 (Prerefunded 2/1/99!) 2,700 2,804
Clarion IDA Health Fac.,
Beverly Enterprises, 10.125%, 5/1/07 735 778
Greene County IDA, Greene Health Care Assoc.
Beverly Enterprises, 6.875%, 3/1/13 2,430 2,461
Montgomery County Higher Ed. and Health Auth.
Brittany Pointe,
8.50%, 1/1/22 (Prerefunded 1/1/03!) 2,500 2,978
Redeemer Long Term Care and Elder Services
8.00%, 6/1/22 5,755 6,596
8.20%, 6/1/06 810 934
Pennsylvania, GO, 5.00%, 8/1/15 11,610 11,745
Philadelphia Auth. for Industrial Dev.,
Health Care Fac.
Baptist Home of Philadelphia,
5.60%, 11/15/28 2,750 2,728
Pauls Run Retirement Community
5.875%, 5/15/28 1,750 1,773
Pennsylvania Housing Fac. Auth.
Residual Interest Bond / Inverse Floater
(Currently 9.914%), 10/1/23 * 1,500 1,708
Total Pennsylvania (Cost $43,732) 46,997
PUERTO RICO 0.5%
Puerto Rico Highway and
Transportation Auth., 5.50%, 7/1/15 6,000 6,466
Total Puerto Rico (Cost $5,642) 6,466
RHODE ISLAND 0.7%
Rhode Island Health and Ed. Building,
Rhode Island Hosp.
Residual Interest Bond / Inverse Floater
(Currently 10.019%), 8/15/21
(FGIC Insured) (Escrowed to Maturity) $ 1,000 $ 1,204
Rhode Island Housing and Mortgage Fin.
Residual Interest Bond / Inverse Floater
(Currently 10.367%), 4/1/24 * 1,000 1,135
Homeownership Opportunitiy
6.70%, 10/1/14 5,000 5,399
8.05%, 4/1/22 * 1,115 1,168
Total Rhode Island (Cost $8,109) 8,906
SOUTH CAROLINA 2.3% Connector 2000 Assoc.
Greenville Toll Road
Zero Coupon, 1/1/08 2,600 1,478
Zero Coupon, 1/1/10 2,900 1,450
Zero Coupon, 1/1/12 2,800 1,234
Zero Coupon, 1/1/13 5,200 2,311
Zero Coupon, 1/1/20 9,900 2,840
Zero Coupon, 1/1/21 12,300 3,328
Zero Coupon, 1/1/26 6,700 1,335
Zero Coupon, 1/1/31 21,100 3,081
Zero Coupon, 1/1/32 10,000 1,376
Zero Coupon, 1/1/34 7,750 947
Zero Coupon, 1/1/36 10,000 1,084
5.25%, 1/1/23 5,000 4,743
South Carolina Public Service Auth.
5.875%, 1/1/23 (FGIC Insured) 5,000 5,399
Total South Carolina (Cost $31,224) 30,606
SOUTH DAKOTA 0.2%
South Dakota HDA, Homeownership,
6.65%, 5/1/14 2,500 2,700
Total South Dakota (Cost $2,500) 2,700
TENNESSEE 1.4%
Metropolitan Gov't. of Nashville
and Davidson Counties
Mur-Ci Homes, 7.75%, 12/1/26 $ 4,660 $ 4,898
Water and Sewer, STEP, 0%, 1/1/12
(FGIC Insured) 8,750 11,061
Tennessee Housing Dev. Agency
7.625%, 7/1/22 * 1,900 2,019
Homeownership, Zero Coupon, 7/1/17 * 3,000 1,036
Total Tennessee (Cost $17,697) 19,014
TEXAS 5.8%
Alliance Airport Auth.
American Airlines, 7.00%, 12/1/11 * 3,070 3,640
Federal Express, 6.375%, 4/1/21 * 8,500 9,245
Amarillo Health Fac.,
Sears Panhandle Retirement
7.75%, 8/15/26 4,800 5,449
Bell County Health Fac. Dev.,
King's Daughter Hosp.
9.25%, 7/1/08 2,820 2,990
Brazos River Auth., Houston Lighting and Power
6.375%, 4/1/12 (MBIA Insured) 10,000 11,003
Denison Hosp. Auth.,
Texoma Medical Center, 7.10%, 8/15/24 3,650 4,094
Gainesville IDC, GTE Valenite,
8.90%, 5/15/11 * 2,940 3,196
Harris County Health Fac. Dev.,
Memorial Hosp.
7.125%, 6/1/15 (Prerefunded 6/1/02!) 5,000 5,619
Matagorda County Navigation Dist., PCR
Central Power and Light, 7.50%, 12/15/14 2,000 2,141
Northwest Texas Independent School Dist., GO
School Buildings, Zero Coupon, 8/15/32 20,000 2,699
Paris Health Fac. Dev.,
McCuistion Regional Medical Center
7.60%, 2/1/12 4,500 5,089
Plano Health Fac. Dev.,
Texas Health Resources
5.00%, 2/15/22 (MBIA Insured) 5,000 4,919
San Antonio Electric and Gas
Zero Coupon, 2/1/10 (FGIC Insured) 5,000 2,942
Texas, GO, Veterans Housing Assistance,
6.25%, 12/1/15 1,370 1,426
Tomball Hosp. Auth.,
Tomball Regional Hosp., 6.10%, 7/1/08 5,000 5,259
Tyler Health Fac. Dev.
Mother Frances Hosp.
5.40%, 7/1/08 $ 1,315 $ 1,340
5.625%, 7/1/13 4,960 5,002
Total Texas (Cost $69,870) 76,053
UTAH 1.1%
Intermountain Power Agency
5.25%, 7/1/14 (MBIA Insured) 5,000 5,184
5.75%, 7/1/19 (MBIA Insured) 4,000 4,321
Tooele County, PCR, Laidlaw Environmental,
7.55%, 7/1/27 * 2,000 2,228
Utah Housing Fin. Agency
Sub. Lien
6.25%, 7/1/05 270 283
7.50%, 7/1/05 575 617
7.60%, 7/1/05 550 584
7.75%, 7/1/05 585 622
7.75%, 1/1/23 * 135 141
8.40%, 7/1/08 * 50 52
8.55%, 7/1/04 145 152
8.65%, 7/1/04 405 425
8.70%, 7/1/01 50 51
9.00%, 1/1/19 * 120 129
9.25%, 7/1/01 80 83
9.30%, 7/1/00 * 10 10
9.60%, 7/1/02 * 5 5
9.75%, 7/1/02 25 26
9.85%, 7/1/02 * 80 83
9.875%, 1/1/99 * 5 5
10.50%, 1/1/99 * 5 5
10.625%, 7/1/99 * 5 5
Total Utah (Cost $14,039) 15,011
VERMONT 0.1%
Vermont Ed. and Health Buildings Fin. Agency
Medical Center Hosp. of Vermont
7.45%, 9/1/23 (FGIC Insured) 1,400 1,542
Total Vermont (Cost $1,400) 1,542
VIRGINIA 2.2%
Bedford County IDA, Nekoosa Packaging/
Georgia-Pacific
5.60%, 12/1/25 * $ 6,000 $ 6,080
Lynchburg IDA, Centra Health
Capital Appreciation
Zero Coupon, 8/15/13 2,800 1,185
Zero Coupon, 8/15/14 3,100 1,229
Zero Coupon, 8/15/15 3,200 1,187
Zero Coupon, 8/15/19 4,000 1,150
Zero Coupon, 8/15/22 4,600 1,086
Zero Coupon, 8/15/23 4,700 1,045
Toll Road Revenue
Zero Coupon, 8/15/10 3,600 1,843
Zero Coupon, 8/15/18 15,000 4,951
Chesapeake Bay Bridge and Tunnel Commission
5.00%, 7/1/22 (MBIA Insured) 5,000 4,938
Fairfax County IDA, Fairfax Hosp. System
VRDN (Currently 3.22%) 200 200
Norfolk Port and Ind. Auth.,
Henson Aviation, 9.625%, 8/1/12 * 740 835
Univ. of Virginia, VRDN
(Currently 3.25%) 430 430
Virginia Beach Dev. Auth.,
Beverly Enterprises, 10.00%, 4/1/10 2,425 2,647
Total Virginia (Cost $28,085) 28,806
WASHINGTON 1.7%
Spokane County IDC,
Kaiser Aluminum and Chemical
7.60%, 3/1/27 * 2,500 2,839
Washington, GO, 5.70%, 10/1/15 7,500 8,329
Washington Public Power Supply System
Zero Coupon, 7/1/14 (FSA Insured) 6,400 2,883
6.30%, 7/1/12 2,000 2,305
Nuclear Project
5.50%, 7/1/17 5,000 5,030
7.25%, 7/1/09 1,000 1,193
Total Washington (Cost $20,042) 22,579
WEST VIRGINIA 0.7%
West Virginia, GO, State Road,
4.50%, 6/1/23 (FGIC Insured) $ 7,500 $ 6,950
West Virginia Hosp. Fin. Auth.,
West Virginia Univ. Hosp.
Residual Interest Bond / Inverse Floater
(Currently 9.50%), 1/1/18 (MBIA Insured) 2,000 2,261
Total West Virginia (Cost $8,773) 9,211
WISCONSIN 1.3%
Oconto Falls CDA, Oconto Falls Tissue,
7.75%, 12/1/22 * 2,800 2,988
Wisconsin HEFA
National Regency of New Berlin,
8.00%, 8/15/25 6,000 6,827
Waukesha Memorial Hosp.
5.25%, 8/15/19 (AMBAC Insured) 3,835 3,885
Wisconsin HFA, Villa Clement,
8.75%, 6/1/12 1,409 1,413
Wisconsin Housing and Economic Dev. Auth.
7.75%, 9/1/17 1,190 1,240
8.00%, 3/1/21 * 430 441
Total Wisconsin (Cost $15,134) 16,794
WYOMING 0.9%
Sweetwater County, PCR,
Solid Waste Disposal, FMC
6.90%, 9/1/24 * 5,000 5,531
Wyoming CDA
5.85%, 6/1/28 * 3,775 3,907
Single Family, 6.70%, 6/1/17 2,360 2,519
Total Wyoming (Cost $10,628) 11,957
Total Investments in Securities
99.0% of Net Assets (Cost $1,202,849) $1,307,194
Other Assets Less Liabilities 12,985
NET ASSETS $1,320,179
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 66
Accumulated net realized gain/loss -
net of distributions 1,269
Net unrealized gain (loss) 104,345
Paid-in-capital applicable to 103,783,743 shares
of $0.01 par value capital stock outstanding;
1,000,000,000 shares authorized 1,214,499
NET ASSETS $1,320,179
----------
NET ASSET VALUE PER SHARE $ 12.72
----------
* Interest subject to alternative minimum tax
! Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
CDA Community Development Administration
COP Certificates of Participation
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance Corp.
GNMA Government 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
IDB Industrial Development Bond
IDC Industrial Development Corp.
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
PFA Public Facility Authority
RITES Residual Interest Tax-Exempt Securities Receipts
STEP Stepped coupon bond for which the interest rate will adjust on
specified future date(s)
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free High Yield Fund
- --------------------------------------------------------------------------------
Unaudited
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
6 Months
Ended
8/31/98
Investment Income
Interest income $ 38,752
Expenses
Investment management 3,988
Shareholder servicing 420
Custody and accounting 117
Registration 43
Prospectus and shareholder reports 32
Legal and audit 7
Directors 6
Miscellaneous 5
Total expenses 4,618
Net investment income 34,134
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 8,882
Futures 70
Net realized gain (loss) 8,952
Change in net unrealized gain or loss on securities (2,210)
Net realized and unrealized gain (loss) 6,742
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 40,876
---------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free High Yield Fund
- --------------------------------------------------------------------------------
Unaudited
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
8/31/98 2/28/98
Increase (Decrease) in Net Assets
Operations
Net investment income $ 34,134 $ 63,062
Net realized gain (loss) 8,952 5,076
Change in net unrealized
gain or loss (2,210) 44,298
Increase (decrease)
in net assets
from operations 40,876 112,436
Distributions to shareholders
Net investment income (34,134) (63,062)
Capital share transactions*
Shares sold 160,031 306,000
Distributions reinvested 23,351 43,119
Shares redeemed (111,935) (209,609)
Increase (decrease) in
net assets from capital
share transactions 71,447 139,510
Net Assets
Increase (decrease) during period 78,189 188,884
Beginning of period 1,241,990 1,053,106
End of period $ 1,320,179 $ 1,241,990
---------------------------------
*Share information
Shares sold 12,701 24,772
Distributions reinvested 1,852 3,484
Shares redeemed (8,885) (17,044)
Increase (decrease) in shares outstanding 5,668 11,212
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free High Yield Fund
- --------------------------------------------------------------------------------
Unaudited August 31, 1998
Notes to Financial Statements
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Tax-Free High Yield Fund, Inc. (the fund) is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company and commenced operations on March 1, 1985.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation Debt securities are generally traded in the over-the-counter
market. Investments in securities are stated at fair value as furnished by
dealers who make markets in such securities or by an independent pricing
service, which considers yield or price of bonds of comparable quality,
coupon, maturity, and type, as well as prices quoted by dealers who make
markets in such securities.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the
officers of the fund, as authorized by the Board of Directors.
Premiums and Discounts Premiums and original issue discounts on municipal
securities are amortized for both financial reporting and tax purposes.
Market discounts are recognized upon disposition of the security as gain or
loss for financial reporting purposes and as ordinary income for tax
purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Distributions to shareholders
are recorded by the fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with
generally accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Noninvestment-Grade Debt Securities At August 31, 1998, 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.
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $277,168,000 and $220,615,000, respectively, for the
six months ended August 31, 1998.
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 $5,834,000, of which $5,600,000 expires in
2003, $135,000 in 2004, and $99,000 in 2005. The fund intends to retain
gains realized in future periods that may be offset by available capital
loss carryforwards.
At August 31, 1998, the aggregate cost of investments for federal income
tax and financial reporting purposes was $1,202,849,000, and net unrealized
gain aggregated $104,345,000, of which $106,765,000 related to appreciated
investments and $2,420,000 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 $689,000 was payable at August 31, 1998. The fee is computed
daily and paid monthly, and consists 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 0.30% for assets in
excess of $80 billion. At August 31, 1998, and for the six months then
ended, the effective annual group fee rate was 0.32%. The fund pays a
pro-rata share of the group fee based on the ratio of its net assets to
those of the group.
In addition, the fund has entered into agreements with the manager and a
wholly owned subsidiary of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and
maintains the financial records of the fund. T. Rowe Price Services, Inc.,
is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. The fund incurred
expenses pursuant to these related party agreements totaling approximately
$380,000 for the six months ended August 31, 1998, of which $73,000 was
payable at period-end.
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
Investment Services And Information
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10
p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(registered trademark) and
the T. Rowe Price Web site on the Internet. Address: www.troweprice.com
DISCOUNT BROKERAGE*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over regular commission rates.
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial
markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Tax-Free High Yield Fund.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
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31st Floor
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10th Floor
Tampa, FL 33607
Invest With Confidence(registered trademark)
T. Rowe Price Investment Services, Inc., Distributor. F59-051 8/31/98
Semiannual Report
Tax-Free Funds
August 31, 1998
T. Rowe Price
Report Highlights
Tax-Free Funds
o All five funds posted better returns than their peer group averages for the
6- and 12-month periods ended August 31, 1998.
o Fund results were aided by portfolio management decisions and below-average
expenses.
o Low inflation, budget surpluses, and cash flows into fixed income
investments benefited municipal securities during the past six months.
o Municipal prices rose and yields declined, but tax-exempt performance was
not as strong as that of Treasuries, which continued to be the haven of
choice for investors concerned about global turmoil.
o Municipal securities offer good value compared with their taxable
counterparts and should reward investors over time.
Fellow Shareholders
Low inflation, budget surpluses at federal and state levels, and asset shifts
toward fixed income investments aided the municipal market during the six months
ended August 31. Your funds benefited in this environment and turned in
performances ahead of their respective benchmarks for the past 6- and 12-month
periods, a reflection of our management decisions and below-average expenses.
MARKET ENVIRONMENT
Municipal bond prices rose during the past six months, and yields across the
maturity spectrum fell as a result. The performance of tax-exempt securities
exceeded most asset classes but was not as strong as the Treasury market, which
further solidified its position as a safe haven for global investors seeking a
refuge from problems in Asia, Russia, and Latin America. The gap between yields
on municipal and Treasury securities continued to narrow, making tax-exempt
investments particularly attractive compared with Treasuries. A near-record
supply of tax-exempt issues also constrained the municipal market somewhat
throughout the year and contributed to the contracting yield spread. During the
same period, Treasury issuance continued to decline.
Municipal Bond and Note Yields
30-Year 5-Year 1 Year
8/31/97 5.35 4.35 3.85
5.25 4.20 3.80
5.23 4.15 3.80
11/97 5.18 4.20 3.85
5.03 4.10 3.85
5.00 4.00 3.65
2/98 5.08 4.05 3.60
5.13 4.10 3.65
5.20 4.30 3.85
5/98 5.05 4.10 3.75
5.05 4.10 3.60
5.10 4.10 3.70
8/98 4.93 3.85 3.50
The 30-year AAA general obligation bond yield fell 15 basis points from the end
of February through August 31. By comparison, the bellwether 30-year Treasury
yield declined a more dramatic 60 basis points, including a 40-basis-point drop
in August alone. The pattern was similar for one- and five-year maturities,
whose yields slipped 10 and 20 basis points, respectively, while comparable
Treasury yields dropped more sharply. Therefore, when income taxes are
considered, municipal securities yielded substantially more than other fixed
income investments.
Preparing For The Year 2000
The Year 2000 draws closer every day, and it holds special meaning beyond the
arrival of a new millennium. The issue for investors is that many computer
programs throughout the world use two digits instead of four to identify the
year and may assume the next century starts with 1900. If these programs are not
modified, they will not be able to correctly handle the century change when the
year changes from "99" to "00" on January 1, 2000, and they will no longer be
able to perform necessary functions. The Year 2000 issue affects all companies
and organizations. T. Rowe Price has been taking steps to assure that its
computer systems and processes are capable of functioning in the Year 2000.
Detailed plans for remediation efforts have been developed and are currently
being executed.
OUR PLAN OF ACTION
We began to address these issues several years ago by requiring that all new
systems process and store four-digit years. We plan to complete all
reprogramming efforts for the major application systems, including business
applications required to service our customers and processing infrastructure
necessary to ensure the integrity of customer data and investments, by December
31, 1998, leaving a full 12 months for system testing. Because we exchange data
electronically with customers and vendors, we are working with them to assess
the adequacy of their own compliance efforts. Our goal is to ensure the
continuation of the same level of service to all our mutual fund shareholders
and clients after December 31, 1999. We are asking all vendors and companies we
do business with for a Year 2000 compliance status, with the expectation that
some organizations will not be able to modify their interface files prior to
December 31, 1999. Our goal is to identify any noncompliant files so that we can
implement alternative solutions. In addition, we are scheduling tests for
critical vendors and companies that claim Year 2000 compliance to ensure that
time-related data and calculations function properly as we move into the next
century.
SMOOTH TRANSITION EXPECTED
We believe our programs and initiatives will provide a smooth transition into
the next millennium. We are assessing all systems providing products or services
to our retail mutual fund shareholders, retirement plan sponsors and
participants, and we are taking steps to make modifications where necessary for
the Year 2000. Our plan provides time to develop solutions for all noncompliant
systems and data files from customers or vendors. The Securities Industry
Association (SIA) is coordinating Year 2000 testing to assure that securities
markets, clearing corporations, depositories, and third party software and
hardware vendors can send, receive, and process files and transactions
accurately. T. Rowe Price will participate in this industry-wide effort. For a
more detailed discussion of our Year 2000 effort, as well as continuing updates
on our progress, please check our Web site (www.troweprice.com).
TAX-EXEMPT MONEY FUND
Your fund's performance versus the peer group average was favorable for both the
six-month and one-year periods ended August 31, as we sought good value at both
ends of the short-term yield curve.
Performance Comparison
Periods Ended 8/31/98 6 Months 12 Months
- -----------------------------------------------------
Tax-Exempt Money Fund 1.57% 3.20%
Lipper Tax-Exempt Money
Market Funds Average 1.50 3.04
During the past six months, six-month and one-year municipal note yields were
fairly stable, varying only 35 basis points between high and low. On average,
one-year maturities offered only an additional 20 basis points over the shortest
maturities. Yields were most volatile in the variable rate sector, which
includes overnight and seven-day demand notes, vacillating 275 basis points
between their high and low points since the end of February.
We took advantage of this opportunity to overweight the portfolio in variable
rate securities when we believed the yields had reached the upper end of their
range. In addition, throughout the entire period, we maintained a longer
weighted average maturity than the peer group average by combining the variable
rate positions with one-year maturities. This fairly aggressive posture
succeeded in enhancing yield. The fund's maturity averaged 20 days longer than
competitive funds during the period and, at one point, was 28 days longer.
The supply of new issues in the municipal note market so far this year was 27%
below the same period in 1997. Considering the low long-term interest rates and
the improved financial condition of municipalities, there is no reason to
believe that short-term issuance will pick up during the rest of the year. As a
result, total short-term new issues may finish 1998 at the lowest level since
1990. In addition, cash flows into money market funds remain positive, so solid
demand coupled with lighter supply has helped keep rates in a narrow range.
Our strategy allowed us to pick up incremental yield at the long end of the
curve and to maintain our relatively long average maturity with little fear of
rising rates.
TAX-FREE SHORT-INTERMEDIATE FUND
Your fund posted good returns and outperformed the Lipper Short-Intermediate
Debt Funds Average for both the 6- and 12-month periods ended August 31. Returns
were enhanced by our slightly longer duration and low expense ratio. (Duration
is a measure of a bond fund's sensitivity to interest rates. For example, a fund
with a duration of three years would fall or rise about 3% in price in response
to a one-percentage-point rise or fall in interest rates.)
Performance Comparison
Periods Ended 8/31/98 6 Months 12 Months
- -----------------------------------------------------
Tax-Free Short-
Intermediate Fund 2.45% 5.60%
Lipper Short-Intermediate
Debt Funds Average 2.32 5.25
Our strategy since the third quarter of 1997 has been to maintain a slightly
long duration, since we see little evidence of inflationary pressure and believe
the trend toward lower interest rates is intact. While bonds with longer
maturities were constrained to some extent by a record supply of new issues in
the first half of the year, short- and intermediate-term municipals were not
under as much pressure. Our long duration helped performance when yields on
short-term bonds fell about 20 basis points.
Our credit strategy changed moderately. Over the past two years, the fund
purchased BBB rated bonds as the economic expansion improved credit conditions,
resulting in better performance for BBB bonds than for AAA bonds. This was
reflected in the narrowing gap between the yields of higher- and lower-quality
bonds. We currently see little potential for superior performance in the BBB
sector of the market and, therefore, have lowered our exposure. Lower-rated
bonds performed in line with or slightly below their high-quality counterparts
during the past six months.
In the spring we sought permission from the fund's Executive Committee to invest
up to 5% of fund assets in below-investment-grade BB securities (or, if unrated,
the T. Rowe Price equivalent rating). Permission was granted to invest in these
securities as of October 1, 1998, and the change was reflected in the prospectus
dated July 1, 1998. Although, as mentioned, we do not see a great deal of value
in lower-rated bonds at present, we felt it was important to have this
flexibility if the opportunity presented itself. As always, we will continue to
monitor yields among various credit qualities and use our in-house research
capabilities for opportunities to increase shareholder value.
TAX-FREE INSURED INTERMEDIATE BOND FUND
Returns on intermediate-term municipal bonds came mostly from their coupon
income, with a modest contribution from price appreciation. Fund results were
ahead of the Lipper Intermediate Municipal Debt Funds Average for both the 6-
and 12-month periods.
Performance Comparison
Periods Ended 8/31/98 6 Months 12 Months
- -------------------------------------------------------
Tax-Free Insured
Intermediate Bond Fund 3.04% 7.56%
Lipper Intermediate
Municipal Debt Funds Average 2.82 7.01
We kept duration in a range from neutral to long in our belief that bonds were
attractive relative to stock dividend yields, inflation, and global interest
rates. (For an explanation of duration, see the report for the Tax-Free
Short-Intermediate Fund.) This longer duration helped performance by providing a
higher yield with some principal appreciation as interest rates fell.
Our credit strategy became a bit more defensive during the period as we took
steps to reduce exposure to insured bonds with weaker underlying credit
characteristics. Specifically, we decreased holdings in the hospital sector and
increased positions in state and local general obligations after our hospital
bonds appreciated strongly relative to other sectors of the market. We believe
there may be an opportunity to increase hospital bond exposure at more
attractive prices in the future.
TAX-FREE INCOME FUND
Performance Comparison
Periods Ended 8/31/98 6 Months 12 Months
- --------------------------------------------------------
Tax-Free Income Fund 3.51% 8.87%
Lipper General Municipal
Debt Funds Average 3.03 8.20
Fund results exceeded those of the Lipper peer group average during the past 6-
and 12-month periods, due in part to our duration strategy, our fully invested
posture, and our underweighting in lower-quality bonds. (For an explanation of
duration, see the report for the Tax-Free Short-Intermediate Fund.) The fund's
relative performance also benefited from our below-average expenses.
Long-term bonds did well over the past six months, with a total return
reflecting mostly income plus some price appreciation as interest rates fell.
After trading in a narrow range between February and May, long-term rates came
down in the summer as international events sparked nervousness about the stock
market and the longevity of the economic expansion.
As mentioned, strong relative performance was related to an extension in fund
duration in June, which positioned the fund well for lower rates. A steady
increase in cash coming into the municipal bond market and your fund enabled us
to take advantage of heavier-than-normal supply and remain fully invested. The
fund benefited as well from our relative underweighting in lower-quality bonds,
which came under some modest pressure in the period. High-yield (junk) bonds
have been strong municipal performers during the past two years as the yield
spread narrowed between high- and lower-quality bonds, but this trend has
reversed. Accordingly, we did not add exposure in this area, and the fund's
weighted average credit quality was AA- at the end of August.
In addition, we focused on the 15- to 20-year maturity range where we see the
best risk-and-return characteristics. We continued to preserve income from
older, higher-yielding bonds in the portfolio, offsetting their defensive
characteristics with noncallable and lower-coupon bonds that respond well to
falling interest rates.
TAX-FREE HIGH YIELD FUND
Performance Comparison
Periods Ended 8/31/98 6 Months 12 Months
- ---------------------------------------------------------
Tax-Free High Yield Fund 3.18% 8.87%
Lipper High Yield Municipal
Debt Funds Average 3.03 8.62
The municipal high-yield market turned in a steady performance over the past six
months. Your fund was able to exceed the returns of its peer group average
through a combination of factors, including our below-average expenses and a
modest extension of duration. (For an explanation of duration, see the report
for the Tax-Free Short-Intermediate Fund.)
Yield spreads between high- and lower-quality municipal bonds increased over
this period, as the prices of lower-quality securities did not appreciate as
rapidly as their higher-quality counterparts. Credit quality spreads began the
period close to their all-time lows and subsequently increased an average of
about 25 basis points. Though muted, this widening occurred in sympathy with
trends in the corporate bond sector and adverse developments in a small number
of municipal high-yield issues. Despite this, however, the municipal high-yield
fund sector outperformed the general municipal sector for the past year and
matched it for the past six
months.
We believe these differences between credit quality yields could increase in
coming months, and this outlook has affected the way we manage the fund. As
noted in prior reports, we allowed fund exposure to lower-quality municipal
bonds to decline over time because we felt the rewards were insufficient. At the
end of August, the fund's weighting in below-investment-grade bonds was
approximately 24% of net assets. The fund's weighting in BBB and lower-rated
bonds together slipped a notch to 49% of net assets from 50% at the end of
February.
Quality Diversification
Tax-Free High Yield Fund
AAA 6%
AA 24%
A 21%
BBB 25%
BB and Below 24%
Based on net assets as of 8/31/98.
We began the period with a duration of 7.2 years. Duration ranged between 6.9
and 7.5 years during the past six months, although we generally maintained it
near the higher end of the range. This proved advantageous when interest rates
fell late in the period, largely a result of volatile equity markets. At
present, we expect to maintain this posture. In addition, we will maintain our
usual caution when investing in lower-quality issues. While we do not expect to
materially increase our exposure to them, we will also take advantage of
situations that we believe offer long-term value.
OUTLOOK
Federal Reserve Chairman Alan Greenspan recently implied that the Fed's next
move could well be a lowering of key short-term rates in the face of turmoil
overseas. Just weeks before, it was widely suspected that the Fed was leaning
toward a possible interest rate hike because of concerns about tight labor
markets and wage pressures.
We believe the rate of domestic economic growth will slow through the remainder
of the year. Exports may fall further because of weak international markets and
the strong dollar, and growth in consumer spending could decline in the
aftermath of the correction in stock prices. Commodity prices have also been
under pressure, further containing inflation. In this environment, the trend
toward lower overall interest rates should remain intact.
We expect municipal securities to remain undervalued compared with Treasuries
until demand catches up with heavy supply. However, investors should eventually
recognize the attractive yields available in the municipal market compared with
taxable yields, and rising demand would benefit municipal bond investors over
the long term.
Respectfully submitted,
Mary J. Miller
Director
Municipal Bond Department
September 18, 1998
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Portfolio Highlights
KEY STATISTICS
2/28/98 8/31/98
Tax-Exempt Money Fund
- --------------------------------------------------------------------------------
Price Per Share $ 1.00 $ 1.00
Dividends Per Share
For 6 months 0.016 0.016
For 12 months 0.032 0.032
Dividend Yield (7-Day Compound) * 3.03% 2.98%
Weighted Average Maturity (days) 59 59
Weighted Average Quality ** First Tier First Tier
Tax-Free Short-Intermediate Fund
- --------------------------------------------------------------------------------
Price Per Share $ 5.37 $ 5.39
Dividends Per Share
For 6 months 0.11 0.11
For 12 months 0.22 0.22
Dividend Yield *
For 6 months 4.28% 4.13%
For 12 months 4.32 4.24
30-Day Standardized Yield 3.54 3.59
Weighted Average Maturity (years) 4.1 4.4
Weighted Average Effective Duration (years) 3.0 2.9
Weighted Average Quality *** AA AA
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Portfolio Highlights
KEY STATISTICS
2/28/98 8/31/98
Tax-Free Insured Intermediate Bond Fund
- --------------------------------------------------------------------------------
Price Per Share $ 11.06 $ 11.13
Dividends Per Share
For 6 months 0.24 0.24
For 12 months 0.48 0.48
Dividend Yield *
For 6 months 4.49% 4.39%
For 12 months 4.52 4.49
30-Day Standardized Yield 3.69 3.78
Weighted Average Maturity (years) 8.4 8.8
Weighted Average Effective Duration (years) 5.5 5.6
Weighted Average Quality *** AA AA
Tax-Free Income Fund
- --------------------------------------------------------------------------------
Price Per Share $ 9.95 $ 10.03
Dividends Per Share
For 6 months 0.26 0.25
For 12 months 0.52 0.51
Dividend Yield *
For 6 months 5.33% 5.15%
For 12 months 5.44 5.31
30-Day Standardized Yield 4.28 4.35
Weighted Average Maturity (years) 17.1 17.1
Weighted Average Effective Duration (years) 7.4 7.6
Weighted Average Quality *** AA- AA-
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Portfolio Highlights
KEY STATISTICS
2/28/98 8/31/98
Tax-Free High Yield Fund
- --------------------------------------------------------------------------------
Price Per Share $ 12.66 $ 12.72
Dividends Per Share
For 6 months 0.34 0.34
For 12 months 0.69 0.68
Dividend Yield *
For 6 months 5.57% 5.38%
For 12 months 5.74 5.55
30-Day Standardized Yield 4.54 4.59
Weighted Average Maturity (years) 18.9 19.4
Weighted Average Effective Duration (years) 7.2 7.3
Weighted Average Quality *** A- A-
* Dividends earned and reinvested for the periods indicated are annualized
and divided by the average daily net asset values per share for the same
period.
** All securities purchased in the money fund are rated in the two highest
categories (tiers) as established by national rating agencies or, if
unrated, are deemed of comparable quality by T. Rowe Price.
*** Based on T. Rowe Price research.
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how each fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Since Inception
Periods Ended 8/31/98 1 Year 5 Years 10 Years Inception Date
- --------------------------------------------------------------------------------
Tax-Exempt Money 3.20% 2.99% 3.57% - 4/8/81
Tax-Free
Short-Intermediate 5.60 4.56 5.58 - 12/23/83
Tax-Free Insured
Intermediate Bond 7.56 5.63 - 6.80% 11/30/92
Tax-Free Income 8.87 6.06 7.92 - 10/26/76
Tax-Free High Yield 8.87 6.65 8.60 - 3/1/85
Investment returns represent past performance and will vary. Shares of the bond
funds may be worth more or less at redemption than at original purchase. The
Money Fund's $1.00 share price is not guaranteed, nor is the fund insured by the
U.S. government.
Performance Comparison
These charts show the value of a hypothetical $10,000 investment in each fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from each
fund's return.
TAX-EXEMPT MONEY FUND
- --------------------------------------------------------------------------------
As of 8/31/98
Lipper Tax-Exempt
Money Market Tax-Exempt
Funds Average Money Fund
8/88 10,000 10,000
8/89 10,583 10,588
8/90 11,170 11,169
8/91 11,696 11,662
8/92 12,063 12,010
8/93 12,311 12,261
8/94 12,558 12,529
8/95 12,960 12,939
8/96 13,361 13,348
8/97 13,766 13,768
8/98 14,186 14,208
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Performance Comparison
TAX-FREE SHORT-INTERMEDIATE FUND
- --------------------------------------------------------------------------------
As of 8/31/98
Lehman Lipper Short- Tax-Free
3-Year Intermediate Short-
GO Bond Debt Funds Intermdiate
Index Average Fund
8/88 10,000 10,000 10,000
8/89 10,667 10,647 10,571
8/90 11,370 11,318 11,249
8/91 12,374 12,259 12,079
8/92 13,461 13,236 12,935
8/93 14,348 14,215 13,774
8/94 14,719 14,479 14,073
8/95 15,725 15,334 14,900
8/96 16,343 15,905 15,473
8/97 17,251 16,780 16,298
8/98 18,246 17,674 17,210
TAX-FREE INSURED INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
As of 8/31/98
Lehman Lipper Tax-Free
7-Year Intermediate Insured
Municipal Municipal Debt Intermediate
Bond Fund Funds Average Bond Fund
11/30/92 10,000 10,000 10,000
8/93 10,883 10,895 11,103
8/94 11,037 11,016 11,308
8/95 12,007 11,815 12,212
8/96 12,475 12,308 12,696
8/97 13,446 13,201 13,572
8/98 14,471 14,158 14,599
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Performance Comparison
TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
As of 8/31/98
Lehman Lipper General Tax-Free
Municipal Municipal Debt Income
Bond Index Funds Average Fund
8/88 10,000 10,000 10,000
8/89 11,099 11,133 10,755
8/90 11,811 11,664 11,325
8/91 13,203 13,056 12,606
8/92 14,678 14,554 14,075
8/93 16,469 16,362 15,979
8/94 16,492 16,210 15,852
8/95 17,953 17,439 17,136
8/96 18,894 18,300 18,071
8/97 20,641 19,976 19,693
8/98 22,426 21,677 21,440
TAX-FREE HIGH YIELD FUND
- --------------------------------------------------------------------------------
As of 8/31/98
Lehman High-Yield Tax-Free
Revenue Municipal Debt High-Yield
Bond Index Funds Average Fund
8/88 10,000 10,000 10,000
8/89 11,231 11,155 11,068
8/90 11,972 11,668 11,842
8/91 13,469 12,812 13,113
8/92 15,060 14,125 14,614
8/93 17,023 15,691 16,542
8/94 16,997 15,798 16,667
8/95 18,510 17,030 17,966
8/96 19,590 17,983 19,014
8/97 21,512 19,751 20,968
8/98 23,423 21,467 22,827
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
Investment Services And Information
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10
p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed income funds ($500 minimum).
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Distribution Options Reinvest all, some, or none of your distributions.
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DISCOUNT BROKERAGE*
Individual Investments Stocks, bonds, options, precious metals, and other
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INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial
markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
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*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
T. Rowe Price Mutual Funds
- --------------------------------------------------------------------------------
STOCK FUNDS
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500*
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
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Mid-Cap Growth
Mid-Cap Value
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New Era
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Real Estate
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Small-Cap Stock
Small-Cap Value***
Spectrum Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
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Domestic Tax-Free
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Intermediate Tax-Free
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Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
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New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Bond!
International Bond
MONEY MARKET FUNDS!!
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Formerly named Equity Index.
** Formerly the closed-end New Age Media Fund. Converted to open-end status on
7/28/97.
*** Closed to new investors.
! Formerly named Global Government Bond.
!! Neither the funds nor their share prices are insured or guaranteed by the
U.S. government.
Please call for a prospectus. Read it carefully before investing.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
T. Rowe Price Discount Brokerage
- --------------------------------------------------------------------------------
DISCOUNT BROKERAGE
A Division of T. Rowe Price Investment Services, Inc., Member NASD/SIPC
This low-cost service gives you the opportunity to easily consolidate all
your investments with one company. Through T. Rowe price discount
brokerage, you can buy and sell individual securities-stocks, bonds,
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savings over full-service brokers.* We also provide a wide range of
services, including:
Automated Telephone and Internet Services You can enter trades, access
quotes, and review account information 24 hours a day, seven days a week.
Any trades executed through these programs provide additional savings on
commissions.**
Investor Information A variety of informative reports, such as our
Brokerage Insights series, S&P Market Month newsletter, and select stock
reports, can help you better evaluate economic trends and investment
opportunities.
Dividend Reinvestment Service Virtually all stocks held in customer
accounts are eligible for this service, free of charge.
* Based on an April 1998 survey for representative-assisted stock trades.
Services vary by firm, and commissions may vary by size of order.
** Discount applies to our current commission schedule. All trades subject to
a $35 minimum commission except equity trades placed through
Internet-Trader, which are subject to a $29.95 minimum commission.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
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For assistance
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account or obtain information,
call: 1-800-638-5660 toll free
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T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
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T. Rowe Price Investment Services, Inc., Distributor. C03-051 8/31/98
