Annual Report - Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price
Tax-Free
Intermediate
Bond Fund
February 29, 2000
Portfolio Highlights
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
8/31/99 2/29/00
Dedicated Tax Revenue 12% 15%
General Obligation - State 10 12
General Obligation - Local 13 12
Solid Waste Revenue 10 10
Air and Sea Transportation Revenue 10 8
Nuclear Revenue 12 8
Electric Revenue 8 8
Hospital Revenue 12 6
Lease Revenue 4 4
Water and Sewer Revenue 3 4
Housing Finance Revenue 3 3
Ground Transportation Revenue 3 3
Educational Revenue -- 3
All Other 5 3
Other Assets Less Liabilities - 5 1
Total 100% 100%
T. Rowe Price Tax-Free Intermediate Bond Fund
For a share outstanding throughout each period
Financial Highlights
Year
Ended
2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
NET ASSET VALUE
Beginning of period $ 11.13 $ 11.06 $ 10.80 $ 10.84 $ 10.35
Investment activities
Net investment
income (loss) 0.48 0.48 0.48* 0.48* 0.48*
Net realized and
unrealized gain (loss) (0.63) 0.10 0.29 (0.04) 0.49
Total from
investment activities (0.15) 0.58 0.77 0.44 0.97
Distributions
Net investment income (0.48) (0.48) (0.48) (0.48) (0.48)
Net realized gain (0.04) (0.03) (0.03) -- --
Total distributions (0.52) (0.51) (0.51) (0.48) (0.48)
NET ASSET VALUE
End of period $ 10.46 $ 11.13 $ 11.06 $ 10.80 $ 10.84
Ratios/Supplemental Data
Total return (diamond) (1.37%) 5.37% 7.31%* 4.19%* 9.57%*
Ratio of total expenses
to average net assets 0.63% 0.65% 0.65%* 0.65%* 0.65%*
Ratio of net investment
income (loss) to average
net assets 4.46% 4.35% 4.43%* 4.47%* 4.52%*
Portfolio turnover rate 47.6% 24.3% 56.1% 76.8% 63.8%
Net assets, end of period
(in thousands) $111,844 $121,053 $108,256 $ 99,176 $ 92,153
(diamond) 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.
* Excludes expenses in excess of a 0.65% voluntary expense limitation
in effect through 2/28/98.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Intermediate Bond Fund
- --------------------------------------------------------------------------------
February 29, 2000
Statement of Net Assets Par Value
- --------------------------------------------------------------------------------
In thousands
ARIZONA 1.8%
Arizona Transportation Board,
Maricopa County, Excise Tax
5.60%, 7/1/02 (AMBAC Insured) $ 2,000 $ 2,041
Total Arizona (Cost $2,017) 2,041
CALIFORNIA 1.6%
California Public Works Board,
Dept. of Corrections
6.00%, 11/1/05 (MBIA Insured) 1,550 1,652
Foothill / Eastern Transportation Corridor Agency
Zero Coupon, 1/15/17 (MBIA Insured) 500 179
Total California (Cost $1,773) 1,831
COLORADO 2.4%
Denver City and County Airport
6.25%, 11/15/06 (MBIA Insured) * 2,500 2,638
Total Colorado (Cost $2,597) 2,638
DISTRICT OF COLUMBIA 1.3%
District of Columbia, GO,
5.25%, 6/1/27 (MBIA Insured) 1,000 869
Washington D.C. Metropolitan Airports Auth.
6.625%, 10/1/12 (MBIA Insured) * 500 527
Total District of Columbia (Cost $1,372) 1,396
FLORIDA 7.4%
Dade County, Resource Recovery Fac.
6.00%, 10/1/06 (AMBAC Insured) * 2,950 3,077
Florida Dept. of Natural Resources
Dept. of Environmental Preservation
5.50%, 7/1/07 (FSA Insured) 3,000 3,076
Florida Division of Bond Fin.,
Dept. of Environmental Preservation
6.00%, 7/1/05 (MBIA Insured) 2,000 2,096
Total Florida (Cost $8,204) 8,249
GEORGIA 4.3%
Georgia Private Colleges & Univ. Auth.,
Emory Univ. Project
5.75%, 11/1/14 $ 3,000 $ 3,033
Municipal Electric Auth. of Georgia
6.00%, 1/1/06 (AMBAC Insured) 1,770 1,840
Total Georgia (Cost $4,940) 4,873
HAWAII 6.2%
Hawaii, GO
6.00%, 3/1/07 (FSA Insured) 1,805 1,889
Hawaii Airport, 6.70%, 7/1/05
(MBIA Insured) * 3,000 3,123
Hawaii Dept. of Budget and Fin.,
Hawaiian Electric
4.95%, 4/1/12 (MBIA Insured) 2,000 1,893
Total Hawaii (Cost $7,009) 6,905
ILLINOIS 7.6%
Chicago, GO, 5.75%, 1/1/05 (AMBAC Insured) 5,200 5,338
Chicago Board of Ed., GO
Zero Coupon, 12/1/12 (FGIC Insured) 1,800 854
Metropolitan Pier & Expo Auth.,
McCormick Place Expansion
5.375%, 12/15/18 (FGIC Insured) 2,500 2,336
Total Illinois (Cost $8,774) 8,528
LOUISIANA 1.9%
Plaquemines Parish,
The British Petroleum Company
VRDN (Currently 3.90%) * 2,100 2,100
Total Louisiana (Cost $2,100) 2,100
MARYLAND 9.3%
Maryland CDA
Single Family
5.40%, 4/1/03 570 574
5.70%, 4/1/06 1,000 1,018
Montgomery County, GO,
Consolidated Public Improvement
5.25%, 5/1/04 3,000 3,047
Northeast Maryland Waste Disposal Auth.
Montgomery County Resources
6.30%, 7/1/16 (MBIA Insured) * $ 2,000 $ 2,044
7.10%, 1/1/03 (MBIA Insured) 3,500 3,701
Total Maryland (Cost $10,266) 10,384
MASSACHUSETTS 7.7%
Massachusetts, GO
5.25%, 8/1/15 625 594
6.30%, 11/1/05 (FGIC Insured) 1,250 1,327
Consolidated Loan
5.25%, 9/1/06 3,000 3,027
5.75%, 9/1/14 2,000 2,025
Massachusetts Water Pollution Abatement Trust
MWRA Program, 6.00%, 8/1/15 1,200 1,232
Massachusetts Water Resources Auth.
5.00%, 3/1/22 (MBIA Insured) 500 432
Total Massachusetts (Cost $8,630) 8,637
MICHIGAN 4.8%
Greater Detroit Resource Recovery Auth.
6.25%, 12/13/05 (AMBAC Insured) 2,000 2,116
Michigan Building Auth., Lease
6.25%, 10/1/03 (AMBAC Insured) 2,000 2,091
Michigan State Hosp. Fin. Auth.,
Ascension Health Credit
5.30%, 11/15/33 1,200 1,187
Total Michigan (Cost $5,340) 5,394
MINNESOTA 0.9%
Minneapolis and St. Paul Metropolitan
Airports Commission, GO
6.40%, 1/1/06 * 1,000 1,026
Total Minnesota (Cost $1,011) 1,026
NEBRASKA 1.8%
Omaha Public Power Dist., 5.50%, 2/1/07 2,000 2,039
Total Nebraska (Cost $2,088) 2,039
NEVADA 1.2%
Clark County Airport, Las Vegas McCarran Int'l.
5.00%, 7/1/16 (MBIA Insured) $ 1,500 $ 1,354
Total Nevada (Cost $1,341) 1,354
NEW JERSEY 3.2%
New Jersey Transportation Auth., Trust Fund
Transportation Systems
5.625%, 6/15/14 1,000 1,011
5.75%, 6/15/11 2,500 2,584
Total New Jersey (Cost $3,584) 3,595
NEW YORK 1.3%
Metropolitan Transportation Auth.
6.25%, 7/1/05 (MBIA Insured) 1,420 1,497
Total New York (Cost $1,459) 1,497
NORTH CAROLINA 3.9%
North Carolina Municipal Power Agency
Catawba Electric, 6.00%, 1/1/04
(MBIA Insured) 4,200 4,337
Total North Carolina (Cost $4,315) 4,337
PENNSYLVANIA 2.3%
Pennsylvania, GO, 5.375%, 11/15/03
(FGIC Insured) 2,500 2,546
Total Pennsylvania (Cost $2,538) 2,546
SOUTH CAROLINA 2.7%
Piedmont Municipal Power Agency
5.00%, 1/1/15 (MBIA Insured) 1,000 904
South Carolina, GO, School Fac.
5.75%, 1/1/08 1,995 2,071
Total South Carolina (Cost $2,949) 2,975
TENNESSEE 0.7%
Memphis-Shelby County Airport Auth.
6.25%, 2/15/11 (MBIA Insured) * $ 700 $ 737
Total Tennessee (Cost $728) 737
TEXAS 12.3%
Dallas-Fort Worth Regional Airport
7.75%, 11/1/03 (FGIC Insured) 1,000 1,092
Harris County Health Fac. Dev.
Texas Childrens Hosp., 5.375%, 10/1/12 1,695 1,623
Houston, Water and Sewer, 7.00%, 12/1/03
(AMBAC Insured) 2,650 2,833
Lower Colorado River Auth., Refunding
5.75%, 5/15/11 (FSA Insured) 2,000 2,042
5.875%, 5/15/14 (FSA Insured) 1,750 1,777
San Antonio Water
6.40%, 5/15/05 (Escrowed to Maturity)
(FGIC Insured) 20 21
6.40%, 5/15/05 (FGIC Insured) 85 90
6.40%, 5/15/05 (FGIC Insured)
(Prerefunded 5/15/02!) 45 47
Tarrant County Health Fac. Dev.,
Texas Health Resources
5.75%, 2/15/10 (MBIA Insured) 2,500 2,547
Texas Dept. of Housing and Community Affairs
Single Family Mortgage
5.75%, 3/1/10 (MBIA Insured) 1,705 1,722
Total Texas (Cost $13,839) 13,794
VERMONT 0.3%
Vermont Ed. and Health Buildings Fin. Agency
Medical Center Hosp. of Vermont
6.15%, 9/1/13 (FGIC Insured) 350 359
Total Vermont (Cost $350) 359
VIRGINIA 6.2%
Richmond Metropolitan Auth., Expressway
5.25%, 7/15/17 (FGIC Insured) 1,675 1,568
Riverside Regional Jail Auth., 5.60%, 7/1/06
(MBIA Insured) $ 1,100 $ 1,128
Virginia Ed. Loan Auth., Student Loan Program
5.80%, 3/1/05 (Escrowed to Maturity) * 980 1,006
Virginia Transportation Board
Northern Virginia Transportation Dist.
5.125%, 5/15/17 1,200 1,095
5.80%, 5/15/03 1,425 1,467
5.80%, 5/15/04 695 718
Total Virginia (Cost $7,009) 6,982
WASHINGTON 3.7%
Tacoma Electric
5.90%, 1/1/05 (FGIC Insured) 1,000 1,035
6.00%, 1/1/06 (FGIC Insured) 2,000 2,081
Washington Health Care Fac. Auth.
Virginia Mason Medical Center
6.00%, 8/15/08 (MBIA Insured) 1,000 1,041
Total Washington (Cost $4,160) 4,157
WEST VIRGINIA 0.5%
West Virginia, GO, Zero Coupon,
11/1/12 (FGIC Insured) 1,050 515
Total West Virginia (Cost $554) 515
WISCONSIN 2.1%
Milwaukee Metropolitan Sewage Dist.,
GO, 6.25%, 10/1/05 2,200 2,326
Total Wisconsin (Cost $2,325) 2,326
Total Investments in Securities
99.4% of Net Assets (Cost $111,272) $ 111,215
Other Assets Less Liabilities 629
NET ASSETS $ 111,844
----------
Net Assets Consist of:
Accumulated net investment income
- - net of distributions $ 55
Accumulated net realized gain/loss
- - net of distributions (1,539)
Net unrealized gain (loss) (57)
Paid-in-capital applicable to 10,696,197
shares of $0.01 par value capital stock
outstanding; 1,000,000,000 shares authorized 113,385
NET ASSETS $ 111,844
----------
NET ASSET VALUE PER SHARE $ 10.46
----------
* Interest subject to alternative minimum tax
! Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
CDA Community Development Administration
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Corp.
GO General Obligation
MBIA Municipal Bond Investors Assurance Corp.
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Intermediate Bond Fund
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year
Ended
2/29/00
Investment Income (Loss)
Interest income $ 5,934
Expenses
Investment management 455
Shareholder servicing 123
Custody and accounting 100
Prospectus and shareholder reports 20
Registration 17
Legal and audit 13
Directors 6
Miscellaneous 4
Total expenses 738
Expenses paid indirectly (2)
Net expenses 736
Net investment income (loss) 5,198
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (1,315)
Futures (33)
Net realized gain (loss) (1,348)
Change in net unrealized gain
or loss on securities (5,592)
Net realized and unrealized gain (loss) (6,940)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (1,742)
----------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Intermediate Bond Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
Year
Ended
2/29/00 2/28/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 5,198 $ 4,979
Net realized gain (loss) (1,348) 559
Change in net unrealized gain or loss (5,592) 454
Increase (decrease) in net
assets from operations (1,742) 5,992
Distributions to shareholders
Net investment income (5,198) (4,979)
Net realized gain (437) (303)
Decrease in net assets
from distributions (5,635) (5,282)
Capital share transactions*
Shares sold 20,124 27,045
Distributions reinvested 4,360 4,064
Shares redeemed (26,316) (19,022)
Increase (decrease) in net
assets from capital
share transactions (1,832) 12,087
Net Assets
Increase (decrease)
during period (9,209) 12,797
Beginning of period 121,053 108,256
End of period $ 111,844 $ 121,053
-----------------------
*Share information
Shares sold 1,880 2,443
Distributions reinvested 407 367
Shares redeemed (2,467) (1,718)
Increase (decrease) in
shares outstanding (180) 1,092
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Intermediate Bond Fund
- --------------------------------------------------------------------------------
February 29, 2000
Notes to Financial Statements
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Tax-Free Intermediate Bond 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 November
30, 1992.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation Debt securities are generally traded in the over-the-counter
market. Investments in securities are stated at fair value as furnished by
dealers who make markets in such securities or by an independent pricing
service, which considers yield or price of bonds of comparable quality,
coupon, maturity, and type, as well as prices quoted by dealers who make
markets in such securities.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the
officers of the fund, as authorized by the Board of Directors.
Premiums and Discounts Premiums and original issue discounts on municipal
securities are amortized for both financial reporting and tax purposes.
Market discounts are recognized upon disposition of the security as gain or
loss for financial reporting purposes and as ordinary income for tax
purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Distributions to shareholders
are recorded by the fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with
generally accepted accounting principles. Expenses paid indirectly reflect
credits earned on daily uninvested cash balances at the custodian and are
used to reduce the fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $53,288,000 and $55,084,000, respectively, for the
year ended February 29, 2000.
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. As of February 29, 2000, the fund has capital loss
carryforwards for federal income tax purposes of $949,000, all of which
expires in 2008. The fund intends to retain gains realized in future
periods that may be offset by available capital loss carryforwards.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended February 29, 2000. The
results of operations and net assets were not affected by the
increases/(decreases) to these accounts.
---------------------------------------------------------------------------
Undistributed net investment income $1,000
Undistributed net realized gain (2,000)
Paid-in-capital 1,000
At February 29, 2000, the cost for federal income tax purposes was
substantially the same as for financial reporting and totaled $111,272,000.
Net unrealized loss aggregated $57,000 at period-end, of which $1,006,000
was related to appreciated investments and $1,063,000 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 $33,000 was payable at February 29, 2000. The fee is computed
daily and paid monthly, and consists of an individual fund fee equal to
0.05% 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 0.295% for assets
in excess of $120 billion. At February 29, 2000, and for the year then
ended, the effective annual group fee rate was 0.32%. The fund pays a
pro-rata share of the group fee based on the ratio of its net assets to
those of the group.
Under the terms of the investment management agreement, the manager had
been required to bear any expenses through February 28, 1998, which would
cause the fund's ratio of total expenses to average net assets to exceed
0.65%. Thereafter, through February 29, 2000, the fund was required to
reimburse the manager for these expenses, provided that average net assets
have grown or expenses have declined sufficiently to allow reimbursement
without causing the fund's ratio of total expenses to average net assets to
exceed 0.65%. Pursuant to this agreement, $23,000 of unaccrued fees were
repaid during the year ended February 29, 2000.
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
$171,000 for the year ended February 29, 2000, of which $17,000 was payable
at period-end.
T. Rowe Price Tax-Free Intermediate Bond Fund
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
T. Rowe Price Tax-Free Intermediate Bond Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position
of T. Rowe Price Tax-Free Intermediate Bond Fund, Inc. ("the Fund") at
February 29, 2000, and the results of its operations, the changes in its
net assets and the financial highlights for each of the fiscal periods
presented, in conformity with accounting principles generally accepted in
the United States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at February 29, 2000, by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 17, 2000
T. Rowe Price Tax-Free Intermediate Bond Fund
- --------------------------------------------------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 2/29/00
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
o $77,000 from short-term capital gains,
o $360,000 from long-term capital gains, subject to the 20% rate gains
category,
o $5,188,000 which qualified as exempt-interest dividends.
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
Investment Services And Information
Knowledgeable Service Representatives
By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10
p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
Account Services
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(registered trademark) and
the T. Rowe Price Web site on the Internet. Address: www.troweprice.com
Brokerage services*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over full-service 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.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services,
Inc., Member NASD/SIPC.
** Based on a September 1999 survey for representative-assisted stock trades.
Services vary by firm, and commissions may vary depending on size of order.
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
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Tax-Efficient Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery*
International Growth & Income
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
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free 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
* Closed to new investors.
! Investments in the funds are not insured or guaranteed by the FDIC or any
other government agency. Although the funds seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the funds.
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 Advisory Services and Retirement Resources
- --------------------------------------------------------------------------------
Advisory Services, Retirement Resources
T. Rowe Price is your full-service retirement specialist. We have developed
unique advisory services that can help you meet the most difficult
retirement challenges. Our broad array of retirement plans is suitable for
individuals, the self-employed, small businesses, corporations, and
nonprofit organizations. We also provide recordkeeping, communications, and
investment management services, and our educational materials, self-help
planning guides, and software tools are recognized as among the industry's
best. For information or to request literature, call us at 1-800-638-5660,
or visit our Web site at www.troweprice.com.
ADVISORY SERVICES
T. Rowe Price Retirement Income ManagerSM helps retirees or those within
two years of retirement determine how much income they can take in
retirement. The program uses extensive statistical analysis and the input
of financial planning professionals to suggest an income plan that best
meets your objectives.
T. Rowe Price Rollover Investment Service offers asset allocation advice to
those planning a major change in their qualified retirement plans, such as
a 401(k) rollover from a previous employer or an IRA transfer.
RETIREMENT RESOURCES AT T. ROWE PRICE
---------------------------------------------------------------------------
Traditional, Roth, and Rollover IRAs
SEP-IRA and SIMPLE IRA
Profit Sharing
Money Purchase Pension
"Paired" Plans (Money Purchase
Pension and Profit Sharing Plans)
401(k) and 403(b)
457 Deferred Compensation
Planning and Informational Guides
Minimum Required Distributions Guide
Retirement Planning Kit
Retirees Financial Guide
Tax Considerations for Investors
Insights Reports
The Challenge of Preparing for Retirement
Financial Planning After Retirement
The Roth IRA: A Review
Software Packages
T. Rowe Price Retirement Planning
AnalyzerTM CD-ROM or diskette $19.95.
To order, please call
1-800-541-5760. Also available
on the Internet for $9.95.
T. Rowe Price Variable Annuity AnalyzerTM
CD-ROM or diskette, free. To order,
please call 1-800-469-5304.
T. Rowe Price Immediate Variable
Annuity (Income Account)
Investment Kits
We will be happy to send you one of our
easy-to-follow investment kits when you
are ready to invest in any T. Rowe Price
retirement vehicle, including IRAs, qualified
plans, small-business plans, or our
no-load variable annuities.
For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account
or obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
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 appropriate
to the fund or funds covered in this
report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
4410 ArrowsWest Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
T Rowe Price, Invest with Confidence (registered trademark)
T. Rowe Price Investment Services, Inc., Distributor. F49-050 2/29/00
Annual Report
Tax-Free Funds
February 29, 2000
T. Rowe Price
Report Highlights
- --------------------------------------------------------------------------------
Tax-Free Funds
o Interest rates rose and bond prices fell as the Fed tightened monetary
policy to constrain inflationary pressures.
o Money market funds benefited from rising rates, but the longer-term funds
were generally weaker in a difficult environment.
o A combination of duration and credit strategies helped boost the funds'
dividend yields as we positioned the portfolios for the year ahead.
o Municipal yields are currently very attractive compared with the yields
on similar taxable alternatives.
UPDATES AVAILABLE
For updates on T. Rowe Price funds following the end of each calendar quarter,
please see our Web site at www.troweprice.com.
Fellow Shareholders
The Federal Reserve raised the federal funds rate three times in 1999 and
twice so far in 2000 in a continuing effort to slow economic growth to a
pace that will constrain inflationary pressures. As a result of a powerful
economy and higher interest rates, many intermediate and longer-term funds
posted weak returns during the past 6- and 12-month periods, although the
tone of the market began to improve early this year. Only money market
funds benefited from rising short-term rates.
MARKET ENVIRONMENT
Municipal Bond and Note Yields
- --------------------------------------------------------------------------------
30 Year AAA 5-Year AAA 1-Year Moody's
General Obligation General Obligation Investment Grade 1 Note
02/28/99 4.99 3.78 3
5.04 3.83 3.15
5.08 3.85 3.2
5/99 5.16 4 3.2
5.33 4.33 3.5
5.41 4.3 3.55
8/99 5.6 4.4 3.75
5.7 4.43 3.75
5.89 4.58 3.95
11/99 5.87 4.53 3.95
5.93 4.68 4.1
6.03 4.9 4.1
2/29/00 5.9 4.94 4.2
Source: T. Rowe Price Associates
The Fed has drawn a clear line in the sand in the face of a persistently
strong economy, which surged more than 6% in the second half of 1999. By
early 2000, it was evident that domestic demand was not slowing
sufficiently to temper the powerful economy, which has been augmented by a
recovery in U.S. exports and by increased government spending made possible
by soaring tax receipts. In this environment, Fed Chairman Alan Greenspan
left no room for doubt that the Fed will remain diligent in its fight to
contain inflation.
Interest rates and municipal bond yields trended upward in response to the
Fed's hikes in key short-term rates. After outperforming taxable bonds
during the first half of 1999, municipals lost ground in the second half as
lower-quality tax-exempt securities, in particular, did poorly. Year-end
was particularly challenging for municipal bond funds due to a confluence
of events. Municipals began to weaken when some buyers fled into
higher-yielding corporate bonds, which flooded the market in the third
quarter. In the fourth quarter, normally strong demand from investors waned
because of competition from the surging stock market and from selling to
realize tax losses at year-end. Redemptions from municipal bond funds
increased as a result of these factors. One factor that aided municipals in
1999 was the relatively light supply of new issues, which was down 21% from
the previous year.
The funds' fiscal year ended on a positive note, however, as prices climbed
and long-term municipal yields fell in February along with longer-term
Treasury yields. The rally in bond prices began when the Treasury announced
its intention to reduce debt further through the purchase of Treasury
bonds. The proposed reduction in federal debt sent shock waves through the
bond market as investors scrambled to discern which maturities would be
affected most and searched for alternative securities. The Treasury's
buyback program led to an inversion of the yield curve, as two-year
Treasury yields rose above 30-year yields. The municipal yield curve,
however, maintained a positive slope, and the sharp drop in long-term
Treasury yields has made similar municipal yields attractive in comparison.
TAX-EXEMPT MONEY FUND AND PLUS SHARES
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/29/00 6 Months 12 Months
- --------------------------------------------------------------------------------
Tax-Exempt Money Fund 1.54% 2.94%
Tax-Exempt Money Fund
PLUS Class 1.46 2.79
Lipper Tax-Exempt Money
Market Funds Average 1.46 2.77
The Tax-Exempt Money Fund's results surpassed those of the Lipper peer
group average for both the 6- and 12-month periods ended February 29, 2000.
The six-month return for the Tax-Exempt Money Fund PLUS shares was in line
with the Lipper average, while the 12-month return was slightly ahead of
Lipper despite the PLUS shares' higher expenses that accompany their
additional services.
During the past six months, the Federal Reserve raised key short-term
interest rates three times following two earlier rate hikes, for a total of
125 basis points (100 basis points equal one percentage point). As would be
expected, tax-exempt money market yields moved higher by a similar amount.
For the entire fiscal year, 30- to 90-day rates rose about 100 basis
points, while six-month and one-year note rates climbed 115 and 120 basis
points to 4.05% and 4.20%, respectively.
The short-term municipal yield curve steepened during the 12-month period,
as six-month and one-year yields rose more than shorter-term yields. A year
ago, this was not the case. For the six months ended February 1999,
overnight and weekly securities offered the same average return as a
one-year security, so performance was not necessarily influenced by the
maturity structure of the portfolio. At the end of February 2000, overnight
and weekly investments averaged 3.49% over the previous six months while
one-year notes averaged 3.98%, a difference of 49 basis points.
These changes in money market yields benefited performance relative to our
peer group. While the portfolio's maturity remained fairly constant during
the year, our competitors have allowed their maturities to shorten,
enabling us to provide a higher yield than the average for our peer group.
We expect the Federal Reserve to apply gradual, but persistent, pressure to
the fed funds rate until economic growth slows to an acceptable level. It
is the Fed's gradual approach that has kept us so far from shortening our
maturity. We believe we can earn the additional income that the yield curve
offers without a quick pickup in rates, and we expect to increase our yield
as the move to higher interest rates unfolds in a measured fashion.
TAX-FREE SHORT-INTERMEDIATE FUND
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/29/00 6 Months 12 Months
- --------------------------------------------------------------------------------
Tax-Free Short-
Intermediate Fund 0.74% 0.67%
Lipper Short-Intermediate
Municipal Debt Funds Average 0.35 -0.39
Your fund managed to provide modest positive returns for the 6- and
12-month periods ended February 29, 2000, in an environment characterized
by falling prices and rising yields for all but the shortest maturities.
Fund results exceeded the Lipper Short-Intermediate Municipal Debt Funds
Average in both periods, largely because of our duration and credit
strategy and the fund's low expenses.
Earlier in the fund's fiscal year, we had maintained a conservative
duration to protect the portfolio against rising rates. In November, we
took advantage of an opportunity to extend the fund's duration when the
yield on 10-year municipal bonds approached 5.25%. (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.) Bond prices rallied
shortly afterward, and rates moved lower in December, at which time we took
the opportunity to shorten duration to a neutral position. In January,
rates on 10-year securities rose to 5.25%, and we lengthened once again.
More recently, with interest rates falling, we have been maintaining an
above-average duration because of the value we see in the market despite
the Fed's bias toward a tighter monetary policy. Ten-year municipal yields
are as high as they have been since 1994 and are extremely attractive in
both absolute and relative terms compared with similar Treasuries.
We had been overweighting sectors of the market that offer more yield to
take advantage of improving credit ratings. For example, we began to focus
on New York bonds about four years ago when the state started to benefit
from strength in the financial industry, and we currently hold about 18% of
fund assets in various New York issues-three times the amount of our
next-largest state allocation. Many of these securities were upgraded as
New York's economy improved. In addition, we focused on uninsured bonds in
three areas: electric/ nuclear revenue, lease-backed, and industrial
revenue/pollution control. All three sectors offer incremental yield and
improving fundamentals. Conversely, we have been underweighted in insured
and prerefunded bonds, which do not provide the yields we find in the other
areas.
Our goal was to raise the portfolio's yield by swapping securities for
others with higher yields. The six-month dividend yield rose from 4.03% to
4.22% over the past six months-equal to a taxable yield of 6.59% for
someone in the 36% income tax bracket.
TAX-FREE INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/29/00 6 Months 12 Months
Tax-Free Intermediate
Bond Fund 0.49% -1.37%
Lipper Intermediate
Municipal Debt Funds Average -0.05 -1.92
The fund's returns surpassed the Lipper Intermediate Municipal Debt Funds
Average in both periods but were negative for the fiscal year due to rising
interest rates. The better performance compared with the benchmark was
primarily attributable to our duration strategy and to relatively low fund
expenses.
In a generally negative environment for fixed income securities over the
past six months, we maintained the duration of the portfolio in a range
nearly half a year shorter than during the previous six months. (See the
report on the Tax-Free Short-Intermediate Fund for an explanation of the
effect duration has on bond funds when interest rates rise or fall.) In a
favorable environment, when bond prices are rising and rates falling, we
would ordinarily attempt to keep duration longer.
Earlier in the period, we had adopted a so-called "barbell" maturity
structure, with positions in cash equivalents and longer maturities, which
protects the portfolio against rising interest rates. Recently, we have
begun to unwind it in favor of a "laddered" structure with maturities
ranging between five and 12 years, since this area of the yield curve
provides a higher yield than the barbell structure. We accomplished this
shift by using cash reserves, as well as the proceeds from selling 20-year
bonds, to increase our holdings of 10-year bonds without significantly
changing the fund's overall duration.
Since we received approval to drop the fund's insurance requirement in
December 1998, we have been gradually reducing exposure to this sector,
from more than 80% a year ago to 64% at the end of February. We replaced
these securities largely with state general obligation and dedicated-tax
bonds, which carry high credit ratings. We have been particularly
overweighted in Massachusetts general obligations, whose credit out-look
has been improving, and in bonds issued by Chicago, which have recently
been upgraded.
We focused on raising the portfolio's income by trading into new securities
with higher yields. The fund's dividend yield for the past six months rose
from 4.45% last August to 4.66% at the end of February, which is equivalent
to a taxable yield of 7.28% for someone in the 36% income tax bracket.
TAX-FREE INCOME FUND
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/29/00 6 Months 12 Months
- --------------------------------------------------------------------------------
Tax-Free Income Fund -0.44% -3.42%
Lipper General Municipal
Debt Funds Average -1.31 -4.58
In a weak environment for bonds, your fund provided negative returns but
surpassed its peer group average in both periods through a combination of
our investment strategy, credit profile, and low expenses. In the first
half of the fund's fiscal year, we focused on maintaining a neutral
duration and buying bonds with more defensive characteristics. (See the
report on the Tax-Free Short-Intermediate Fund for an explanation of the
effect duration has on bond funds when interest rates rise or fall.) During
the past six months, as interest rates rose more sharply, we took
additional steps to manage the portfolio's interest rate exposure and take
advantage of the higher yields available in the marketplace. The fund's
six-month dividend yield rose from 5.28% to 5.51% since the end of
August-equivalent to a taxable yield of 8.61% for an investor in the 36%
income tax bracket.
The fund's weighted average maturity ranged between 15.5 and just over 16
years during the past six months, its shortest position in 10 years. We
accomplished this by underweighting bonds with maturities longer than 20
years and overweighting bonds in the 10- to 20-year range. We also raised
cash levels in August in anticipation of higher liquidity needs toward
year-end, which proved to be an accurate forecast. As a result, we were
able to weather higher-than-normal redemptions from November to January
without having to sell securities into a weak market.
We also focused on raising the portfolio's income by swapping bonds with
losses for new securities with higher yields. These losses are useful,
since they can be carried forward to offset capital gains. A year ago we
were concerned about preserving the portfolio's income as interest rates
fell, but the latter part of 1999 offered an opportunity to increase the
dividend yield.
From a credit perspective, the fund benefited from less exposure to
lower-rated bonds that performed poorly in the last six months as their
yield premiums widened relative to higher-quality yields. At year-end, our
overall credit sector allocation was little changed with a modest reduction
in hospital revenue bonds that continued to be under pressure. Our
weighting in BBB and lower-rated bonds may rise in coming months, since
they offer significantly higher yields in return for taking on greater
credit risk.
As rates continued to rise in January, we grew a bit more optimistic about
prospects for the municipal market. Long-term yields well above 6%, which
exceeded taxable Treasury yields on some days, looked attractive in an
environment of 2% to 2.5% inflation, particularly when compared with
taxable alternatives. The municipal new issues calendar is light, and some
year-end selling pressures appear to have abated. We took advantage of the
higher yields on long-term bonds and were pleased to see the market
strengthen in February. We are not out of the woods as far as the Fed's
tighter monetary policy is concerned, but so far it seems to be having more
of an impact on short-term securities.
TAX-FREE HIGH YIELD FUND
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 2/29/00 6 Months 12 Months
- --------------------------------------------------------------------------------
Tax-Free High Yield Fund -2.77% -5.41%
Lipper High Yield Municipal
Debt Funds Average -2.90 -4.75
The fund's fiscal year was characterized by two different periods for
tax-exempt high-yield investors, neither one favorable for investors.
High-yield bonds posted negative returns during the first six months but
outperformed investment-grade municipals. The past six months, however,
found our segment of the market lagging greatly. Our relatively low
allocation to lower-grade bonds helped us versus the competition during the
six months ended February 29, and the fund pulled ahead of the Lipper High
Yield Municipal Debt Funds Average. We lagged for the year as a whole since
the fund carried a longer duration and we were underweighted during the
first half when high-yield securities did better. In recent months, we have
been taking advantage of lower prices by adding to lower-grade bonds, and
we believe this strategy is beginning to bear fruit.
The high-yield market was hurt due to waning investor interest because of
the high yields available in AAA bonds, increased supply at year-end, and
heavy redemptions from November through January. Your fund was fairly well
positioned entering the second half with higher-than-normal cash reserves
and an ability to add lower-quality bonds as prices fell.
Quality Diversification
- --------------------------------------------------------------------------------
Tax Free High Yield Fund
Percent
AAA 8
AA 15
A 17
BBB 28
BB and Below 32
Our below investment-grade holdings represented 32% of fund assets on
February 29, 2000, compared with 22% a year ago, while exposure to BBB
securities was 28%, up from 26%. (See accompanying chart.) We reduced the
portfolio's component of hospital bonds to below 15%, where we intend to
keep it until we see signs of financial recovery in this troubled sector.
We increased our exposure to long-term care and corporate-backed holdings
to around 15% as part of our longer-term goal of holding approximately 40%
of the fund in below investment-grade and 25%-30% in BBB securities. In
addition, we reduced the fund's sensitivity to interest rates in
anticipation of further tightening by the Fed.
Many new holdings offer attractive yields, and we intend to add additional
bonds in the education, housing, and transportation sectors in coming
months. These strategies have contributed to an increase in the fund's
dividend yield to more than 6%, up from a bit over 5.5% six months ago. (A
tax-exempt yield of 6% is equivalent to a taxable yield of 9.38% for
investors in the 36% income tax bracket.) We remain confident that the
outlook for this segment of the municipal market is brighter following a
difficult period through most of last year.
OUTLOOK
The economy has yet to show signs of slowing to a level the Fed would
prefer. Rather, available economic data suggest that real GDP growth could
approach 5% in the first quarter of 2000. Except for soaring oil and some
other commodity prices, overall inflation remains in check. However, the
strong pace of economic growth is straining the supply of both labor and
products. Cost pressures have been mounting, and the Fed is concerned that
they will be reflected in higher inflation. As long as accelerating
inflation remains a threat, the Fed is likely to move short-term rates
higher in the months ahead.
Municipal prices have built up some momentum after their February gains.
Light municipal supply continues to benefit our segment of the fixed income
market, and there has been a slight pickup in cash flows into municipal
bond funds. Any slowdown in economic growth as a result of Fed tightening
should bode well for the overall bond market. Yields on municipal bonds are
extremely attractive compared with yields in the taxable market.
Respectfully submitted,
Mary J. Miller
Director
Municipal Bond Department
March 24, 2000
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
KEY STATISTICS
8/31/99 2/29/00
- --------------------------------------------------------------------------------
Tax-Exempt Money Fund
Price Per Share $ 1.00 $ 1.00
Dividends Per Share
For 6 months 0.014 0.015
For 12 months 0.027 0.029
Dividend Yield (7-Day Compound) * 2.80% 3.41%
Weighted Average Maturity (days) 54 55
Weighted Average Quality ** First Tier First Tier
Tax-Exempt Money Fund PLUS Shares
- --------------------------------------------------------------------------------
Price Per Share $ 1.00 $ 1.00
Dividends Per Share
For 6 months 0.013 0.015
For 12 months -- 0.028
Dividend Yield (7-Day Compound) * 2.67% 3.22%
Weighted Average Maturity (days) 54 55
Weighted Average Quality ** First Tier First Tier
To request a prospectus for any T. Rowe Price fund, please
call 1-800-638-5660. Read the prospectus carefully before investing.
(continued on next page)
- --------------------------------------------------------------------------------
Change in Management
Effective April 1, 2000, Mary J. Miller became Chairman of the Investment
Advisory Committee for the Tax-Free High Yield Fund, responsible for its
day-to-day management. Ms. Miller is Director of the Municipal Bond Department
and has been a member of the fund's advisory committee since its 1985 inception.
She has been with T. Rowe Price since 1983. She succeeds William F. Snider, who
has left T. Rowe Price to pursue new opportunities.
This updates the portfolio management section of the Tax-Free Funds prospectus
dated July 1, 1999.
T. Rowe Price Tax-Free Funds
Portfolio Highlights
- --------------------------------------------------------------------------------
KEY STATISTICS
8/31/99 2/29/00
Tax-Free Short-Intermediate Fund
- --------------------------------------------------------------------------------
Price Per Share $ 5.27 $ 5.20
Dividends Per Share
For 6 months 0.11 0.11
For 12 months 0.21 0.21
Dividend Yield *
For 6 months 4.03% 4.22%
For 12 months 4.14 4.19
30-Day Standardized Yield 3.97 4.48
Weighted Average Maturity (years) 4.2 4.3
Weighted Average Effective Duration (years) 3.0 3.1
Weighted Average Quality *** AA- AA-
Tax-Free Intermediate Bond Fund
- --------------------------------------------------------------------------------
Price Per Share $ 10.65 $ 10.46
Dividends Per Share
For 6 months 0.24 0.24
For 12 months 0.48 0.48
Dividend Yield *
For 6 months 4.45% 4.66%
For 12 months 4.56 4.64
30-Day Standardized Yield 4.16 4.61
Weighted Average Maturity (years) 7.3 8.0
Weighted Average Effective Duration (years) 5.1 5.5
Weighted Average Quality *** AA AA
(continued on next page)
T. Rowe Price Tax-Free Funds
Portfolio Highlights
- --------------------------------------------------------------------------------
KEY STATISTICS
8/31/99 2/29/00
Tax-Free Income Fund
- --------------------------------------------------------------------------------
Price Per Share $ 9.39 $ 9.10
Dividends Per Share
For 6 months 0.25 0.25
For 12 months 0.50 0.49
Dividend Yield *
For 6 months 5.28% 5.51%
For 12 months 5.42 5.55
30-Day Standardized Yield 4.81 5.23
Weighted Average Maturity (years) 15.5 16.1
Weighted Average Effective Duration (years) 7.7 8.2
Weighted Average Quality *** AA- AA-
Tax-Free High Yield Fund
- --------------------------------------------------------------------------------
Price Per Share $ 11.87 $ 11.21
Dividends Per Share
For 6 months 0.33 0.33
For 12 months 0.65 0.66
Dividend Yield *
For 6 months 5.52% 6.02%
For 12 months 5.65 6.01
30-Day Standardized Yield 5.10 5.85
Weighted Average Maturity (years) 18.4 18.7
Weighted Average Effective Duration (years) 8.2 8.6
Weighted Average Quality *** A- BBB+
* Dividends earned and reinvested for the periods indicated are annualized
and divided by the fund's net asset value at the end of the 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
- --------------------------------------------------------------------------------
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 benchmarks, which may
include a broad-based market index and a peer group average or index.
Market indexes do not include expenses, which are deducted from fund
returns as well as mutual fund averages and indexes.
Tax-Exempt Money Shares
- --------------------------------------------------------------------------------
Lipper TEMF
2/90 10.000 10.000
2/91 10.541 10.522
2/92 10.955 10.910
2/93 11.221 11.167
2/94 11.436 11.397
2/95 11.729 11.697
2/96 12.117 12.093
2/97 12.473 12.462
2/98 12.861 12.865
2/99 13.227 13.247
2/00 13.594 13.637
Tax-Exempt Money Plus Shares
- --------------------------------------------------------------------------------
Lipper TEM+-Line TEM+Area
10/31/98 10000 10000 10000
2/99 10083 10074 10074
2/00 10365 10355 10355
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Performance Comparison
Tax-Free Short-Intermediate Fund
- --------------------------------------------------------------------------------
Lehman Lipper TFS
2/90 10.000 10.000 10.000
2/91 10.837 10.780 10.706
2/92 11.720 11.631 11.449
2/93 12.738 12.704 12.308
2/94 13.181 13.172 12.738
2/95 13.527 13.448 13.109
2/96 14.616 14.434 14.009
2/97 15.288 15.025 14.572
2/98 16.105 15.843 15.341
2/99 16.956 16.582 16.093
2/00 17.197 16.602 16.200
Tax-Free Intermediate Bond Fund
- --------------------------------------------------------------------------------
Lehman Lipper TII
11/30/92 10.000 10.000 10.000
2/93 10.542 10.544 10.681
2/94 11.008 11.045 11.267
2/95 11.277 11.272 11.566
2/96 12.434 12.305 12.672
2/97 13.050 12.862 13.204
2/98 14.043 13.830 14.168
2/99 14.880 14.562 14.929
2/00 14.753 14.318 14.724
Tax-Free Income Fund
- --------------------------------------------------------------------------------
Lehman Lipper TFI
2/90 10.000 10.000 10.000
2/91 10.922 10.818 10.840
2/92 12.013 11.922 11.943
2/93 13.666 13.620 13.719
2/94 14.423 14.361 14.474
2/95 14.695 14.491 14.749
2/96 16.318 15.957 16.269
2/97 17.217 16.717 17.051
2/98 18.790 18.284 18.650
2/99 19.946 19.219 19.672
2/00 19.530 18.368 18.999
T. Rowe Price Tax-Free Funds
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
Tax-Free High Yield Fund
Lehman Lipper TFH
2/90 10.000 10.000 10.000
2/91 10.920 10.561 10.793
2/92 12.095 11.659 11.933
2/93 13.853 13.079 13.597
2/94 14.721 13.938 14.615
2/95 14.948 14.152 14.800
2/96 16.643 15.633 16.372
2/97 17.625 16.513 17.391
2/98 19.342 18.239 19.203
2/99 20.500 19.064 20.125
2/00 20.000 18.205 19.037
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how each fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Since Inception
Periods Ended 2/29/00 1 Year 5 Years 10 Years Inception Date
- --------------------------------------------------------------------------------
Tax-Exempt Money 2.94% 3.12% 3.15% - 4/8/81
Tax-Exempt Money PLUS 2.79 - - 2.67% 11/1/98
Tax-Free Short-Intermediate 0.67 4.33 4.94 - 12/23/83
Tax-Free Intermediate Bond -1.37 4.95 - 5.48 11/30/92
Tax-Free Income -3.42 5.20 6.63 - 10/26/76
Tax-Free High Yield -5.41 5.16 6.65 - 3/1/85
Investment returns represent past performance and will vary. Shares of the bond
funds may be worth more or less at redemption than at original purchase.
Investments in the Money Fund and PLUS Class shares are not insured or
guaranteed by the FDIC or any other government agency. Although they seek to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund and PLUS Class shares.
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
Investment Services And Information
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from
8 a.m. to 10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(registered trademark) and
the T. Rowe Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over full-service 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.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
** Based on a September 1999 survey for representative-assisted stock
trades. Services vary by firm, and commissions may vary depending on
size of order.
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
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Tax-Efficient Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery*
International Growth & Income
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
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free 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
* Closed to new investors.
! Investments in the funds are not insured or guaranteed by the FDIC or any
other government agency. Although the funds seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the funds.
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 Advisory Services and Retirement Resources
- --------------------------------------------------------------------------------
Advisory Services, Retirement Resources
T. Rowe Price is your full-service retirement specialist. We have developed
unique advisory services that can help you meet the most difficult
retirement challenges. Our broad array of retirement plans is suitable for
individuals, the self-employed, small businesses, corporations, and
nonprofit organizations. We also provide recordkeeping, communications, and
investment management services, and our educational materials, self-help
planning guides, and software tools are recognized as among the industry's
best. For information or to request literature, call us at 1-800-638-5660,
or visit our Web site at www.troweprice.com.
ADVISORY SERVICES
T. Rowe Price Retirement Income ManagerSM helps retirees or those within
two years of retirement determine how much income they can take in
retirement. The program uses extensive statistical analysis and the input
of financial planning professionals to suggest an income plan that best
meets your objectives.
T. Rowe Price Rollover Investment Service offers asset allocation advice to
those planning a major change in their qualified retirement plans, such as
a 401(k) rollover from a previous employer or an IRA transfer
RETIREMENT RESOURCES AT T. ROWE PRICE
Traditional, Roth, and Rollover IRAs
SEP-IRA and SIMPLE IRA
Profit Sharing
Money Purchase Pension
"Paired" Plans (Money Purchase
Pension and Profit Sharing Plans)
401(k) and 403(b)
457 Deferred Compensation
Planning and Informational Guides
Minimum Required Distributions Guide
Retirement Planning Kit
Retirees Financial Guide
Tax Considerations for Investors
Insights Reports
The Challenge of Preparing for Retirement
Financial Planning After Retirement
The Roth IRA: A Review
Software Packages
T. Rowe Price Retirement Planning
AnalyzerTM CD-ROM or diskette $19.95.
To order, please call
1-800-541-5760. Also available
on the Internet for $9.95.
T. Rowe Price Variable Annuity AnalyzerTM
CD-ROM or diskette, free. To order,
please call 1-800-469-5304.
T. Rowe Price Immediate Variable
Annuity (Income Account)
Investment Kits
We will be happy to send you one of our easy-to-follow investment kits when
you are ready to invest in any T. Rowe Price retirement vehicle, including
IRAs, qualified plans, small-business plans, or our no-load variable
annuities.
For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account
or obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
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 appropriate
to the fund or funds covered in this
report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
4410 ArrowsWest Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
T. Rowe Price, Invest with Confidence (registered trademark)
T. Rowe Price Investment Services, Inc., Distributor. C03-050 2/29/00
