PRICE T ROWE CORPORATE INCOME FUND INC, PRE 14A, 1998-08-12

PRICE T ROWE CORPORATE INCOME FUND INC
PRE 14A, 1998-08-12

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PAGE 1
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)

Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Section Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))

T. Rowe Price Corporate Income Fund, Inc. 033-62275/811-07353
T. Rowe Price Fixed Income Series, Inc. 033-52749/811-07153
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. Rowe Price GNMA Fund, Inc. 033-01041/811-4441
T. Rowe Price High Yield Fund, Inc. 002-93707/811-4119
T. Rowe Price New Income Fund, Inc. 002-48848/811-2396
T. Rowe Price Prime Reserve Fund, Inc. 002-54926/811-2603
T. Rowe Price Short-Term Bond Fund, Inc. 002-87568/811-3894
T. Rowe Price Short-Term U.S. Government Fund, Inc. 033-42206/811-6386
T. Rowe Price State Tax-Free Income Trust 033-06533/811-4521
Florida Insured Intermediate Tax-Free Fund
T. Rowe Price Summit Funds, Inc. 033-50319/811-7093
T. Rowe Price Summit Cash Reserves Fund
T. Rowe Price Summit Limited-Term Bond Fund
T. Rowe Price Summit GNMA Fund
T. Rowe Price Tax-Exempt Money Fund, Inc. 002-67029/811-3055
T. Rowe Price Tax-Free Insured Intermediate Bond Fund, Inc.
033-49117/811-7051
T. Rowe Price U.S. Treasury Funds, Inc. 033-30531/811-5860
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund
_________________________________________________________________
(Name of Registrant as Specified in its Charter)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
1) Title of each class of securities to which transaction applies:
_________________________________________________________
2) Aggregate number of securities to which transaction applies:
_________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): (1)
_________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________
5) Total fee paid:
_________________________________________________________
[ ] Fee paid previously with preliminary materials.
_________________________________________________________

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
1) Amount previously paid:
_________________________________________________________
2) Form, schedule, or Registration Statement no.:
_________________________________________________________
3) Filing party:
_________________________________________________________
4) Date filed:
_________________________________________________________
PAGE 2

<PAGE>

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
T. Rowe Price Funds
100 East Pratt Street
Baltimore, Maryland 21202

Patricia S. Butcher
Secretary

September 3, 1998

An Annual Meeting of Shareholders of the Funds, all Maryland corporations, with
the exception of T. Rowe Price GNMA Fund and Florida Insured Intermediate
Tax-Free Fund, which are Massachusetts business trusts, will be held on
Thursday, October 15, 1998, at 8:30 a.m., eastern time, in the offices of the
Funds at 100 East Pratt Street, Baltimore, Maryland. The following matters will
be acted upon at that time:

1. To elect seven trustees/directors to serve on the Board of each Fund (except
Florida Insured Intermediate Tax-Free Fund) until the next annual meeting, if
any, or until their successors shall have been duly elected and qualified;

2. To ratify or reject the selection of the firm of PricewaterhouseCoopers LLP,
as the independent accountants for each Fund's current fiscal year;

3. To approve or disapprove amending the investment objectives of Florida
Insured Intermediate Tax-Free Fund and T. Rowe Price Tax-Free Insured
Intermediate Bond Fund, Inc., to remove the requirement that each Fund invest
primarily (at least 65% of total assets) in insured bonds;

T. Rowe Price Corporate Income Fund, Inc.
T. Rowe Price Fixed Income Series, Inc.,
consisting of its series:
T. Rowe Price Limited-Term Bond
Portfolio
T. Rowe Price Prime Reserve Portfolio
T. Rowe Price GNMA Fund
T. Rowe Price High Yield Fund., Inc.
T. Rowe Price New Income Fund, Inc.
T. Rowe Price Prime Reserve Fund, Inc.
T. Rowe Price Short-Term Bond Fund, Inc.
T. Rowe Price Short-Term U.S.
Government Fund, Inc.
T. Rowe Price State Tax-Free Income Trust,
consisting of one of its series:
Florida Insured Intermediate
Tax-Free Fund
T. Rowe Price Summit Funds, Inc.,
consisting of its series:
T. Rowe Price Summit Cash Reserves
Fund
T. Rowe Price Summit Limited-Term
Bond Fund
T. Rowe Price Summit GNMA Fund
T. Rowe Price Tax-Exempt Money Fund, Inc.
T. Rowe Price Tax-Free Insured
Intermediate Bond Fund, Inc.
T. Rowe Price U.S. Treasury Funds, Inc.,
consisting of its series:
U.S. Treasury Intermediate Fund
U.S. Treasury Long-Term Fund
U.S. Treasury Money Fund

(Collectively the "Funds" and,
individually, a "Fund")
<PAGE>

4. To approve or disapprove amending the Articles of Incorporation of T. Rowe
Price New Income Fund, Inc., and T. Rowe Price Tax-Exempt Money Fund, Inc., to
authorize creating different series and classes and to conform the provisions
describing classes and series to those standard for other T. Rowe Price funds;
and

5. To transact such other business as may properly come before the meeting and
any adjournments thereof.

The shareholders of each Fund will vote only on those proposals that apply to
their Fund(s). Only shareholders of record of common stock at the close of
business on August 14, 1998, are entitled to notice of, and to vote at, this
meeting or any adjournment thereof. THE BOARDS OF THE FUNDS RECOMMEND THAT YOU
VOTE IN FAVOR OF EACH PROPOSAL.

PATRICIA S. BUTCHER

<TABLE>
<CAPTION>
YOUR VOTE IS IMPORTANT
- - ------------------------------------------------------------------------------
<S> <C>

SHAREHOLDERS ARE URGED TO DESIGNATE THEIR CHOICES ON EACH OF THE MATTERS TO BE
ACTED UPON BY USING ONE OF THE FOLLOWING THREE METHODS:

1. VOTE BY INTERNET.

. Read the Proxy Statement.

. Go to the Proxy Voting link (www.proxyweb.com)

. Enter the 12-digit control number found in the upper-left corner
of your Proxy Card.

. Follow the instructions using your Proxy Card as a guide.

2. VOTE BY TELEPHONE.

. Read the Proxy Statement.

. Call toll-free 1-800-______________

. Enter the 12-digit control number found in the upper-left corner
of your Proxy Card.

. Follow the recorded instructions using your Proxy Card as a guide.

3. VOTE BY MAIL.

. Date, sign, and return the enclosed Proxy Card in the envelope
provided, which requires no postage if mailed in the United States.

YOUR PROMPT RESPONSE WILL HELP ASSURE A QUORUM AT THE MEETING AND AVOID THE
ADDITIONAL EXPENSE TO THE FUNDS OF FURTHER SOLICITATION.
- - ------------------------------------------------------------------------------
</TABLE>

PAGE 2
<PAGE>

T. ROWE PRICE FIXED INCOME FUNDS

Annual Meeting of Shareholders -- October 15, 1998

PROXY STATEMENT

This document gives you information you need in order to vote on the matters
coming before the Annual Meeting and is furnished in connection with the
solicitation of proxies by the Funds, all Maryland corporations, with the
exception of the T. Rowe Price GNMA Fund and the Florida Insured Intermediate
Tax-Free Fund, which are Massachusetts business trusts. If you have any
questions, please feel free to call us toll free, 1-800-231-8432.

Who is asking for my vote?

The Boards of the Funds have asked that you vote on the matters listed in the
Notice of Annual Meeting of Shareholders. The votes will be formally counted at
the Annual Meeting on Thursday, October 15, 1998, and if the Annual Meeting is
adjourned, at any later meeting. You may vote in person at the Annual Meeting,
by Internet, by telephone, or by returning your completed Proxy Card in the
postage-paid envelope provided. Details can be found on the enclosed proxy
insert. Do not mail the Proxy Card if you are voting by Internet or telephone.

Who is eligible to vote?

Shareholders of record at the close of business on August 14, 1998, (the "RECORD
DATE") are notified of the meeting and are entitled to vote. The Notice of
Annual Meeting, the Proxy Card, and the Proxy Statement were mailed to
shareholders of record on or about September 3, 1998.

Shareholders are entitled to one vote for each full share and a proportionate
vote for each fractional share of the Fund(s) they held as of August 14, 1998.
Under Maryland and Massachusetts law, shares owned by two or more persons
(whether as joint tenants, co-fiduciaries, or otherwise) will be voted as
follows, unless a written instrument or court order providing to the contrary
has been filed with the Fund(s): (1) if only one votes, that vote will bind all;
(2) if more than one votes, the vote of the majority will bind all; and (3) if
more than one votes and the vote is evenly divided, the vote will be cast
proportionately.

PAGE 3
<PAGE>

What are shareholders being asked to vote on?

At a meeting held on July 22, 1998, the Boards of the Funds, including the
independent directors and trustees, unanimously approved submitting the
following proposals:

<TABLE>
<CAPTION>
PROPOSAL FUNDS AFFECTED
- - ---------------------------------------------------------------------
<S> <C>
1. To elect seven All Funds except Florida
directors/trustees to the Board. Insured Intermediate
Tax-Free Fund
2. To ratify the selection of the All Funds
firm of PricewaterhouseCoopers LLP,
as independent accountants for the
funds' current fiscal year.
3. To approve the amendment of the Florida Insured Intermediate
investment objectives of Florida Tax-Free Fund and T. Rowe
Insured Intermediate Tax-Free Fund Price Tax-Free Insured
and T. Rowe Price Tax-Free Insured Intermediate Bond Fund,
Intermediate Bond Fund, Inc., to Inc., only
remove the requirement that each
Fund invest primarily in insured
bonds
4. To approve the amendment of the T. Rowe Price New Income
Articles of Incorporation of T. Fund, Inc., and T. Rowe
Rowe Price New Income Fund, Inc., Price Tax-Exempt Money
and T. Rowe Price Tax-Exempt Money Fund, Inc., only
Fund, Inc., to authorize creating
different series and classes and to
conform the provisions describing
classes and series to those
standard for other T. Rowe Price
funds.
5. To transact such other business All Funds
as may properly come before the
meeting and any adjournments
thereof.
</TABLE>

PAGE 4
<PAGE>

How can I get more information about the Funds?

A COPY OF EACH FUND'S MOST CURRENT SHAREHOLDER REPORT WAS MAILED TO ALL
SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS FOR THE FUND'S FISCAL
PERIOD-END. IF YOU WOULD LIKE TO RECEIVE ADDITIONAL COPIES OF ANY REPORT, PLEASE
CONTACT T. ROWE PRICE BY CALLING 1-800-231-8432; WRITING TO 100 EAST PRATT
STREET, BALTIMORE, MARYLAND 21202; OR VISITING OUR WEBSITE AT
WWW.TROWEPRICE.COM. ALL COPIES ARE PROVIDED FREE OF CHARGE.

PROPOSAL NO. 1 -- ELECTION OF DIRECTORS AND TRUSTEES

ALL FUNDS (except Florida Insured Intermediate Tax-Free Fund)

Who are the nominees for Director or Trustee?

The Boards have proposed a slate of the seven persons listed in Table 1 for
election as director or trustee, each to hold office until the next annual
meeting (if any) or until his successor is duly elected and qualified. Each of
the nominees is a member of the present Board of Trustees/Directors of each Fund
and has served in that capacity since originally elected.

A shareholder using the enclosed Proxy Card can vote for all or any of the
nominees or withhold his or her vote from all or any of such nominees. If the
Proxy Card is properly executed but unmarked, it will be voted for all of the
nominees. Each of the nominees has agreed to serve as a trustee or director if
elected; however, should any nominee become unable or unwilling to accept
nomination or election, the persons named in the proxy will exercise their
voting power in favor of such other person or persons as the Boards of the Funds
may recommend. There are no family relationships among these nominees.

Shareholders are being asked to elect the Board of Trustees/Directors of their
respective Fund(s) only.

PAGE 5
<PAGE>

<TABLE>
Table 1 Nominees to Each Fund's Board of
Trustees/Directors
<CAPTION>
All Other Price
Name, Date of Birth, Address, Fund Shares Beneficially Owned, Funds' Shares
Position on Fund Board, and Directly or Indirectly, as of Owned Directly as
Principal Occupations/a/ 6/30/98/b/ of 6/30/98
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

- - -------------------------------------------------------------------------------------------------
*William T. Reynolds, 5/26/48 Prime Reserve 1,268,590
451
100 E. Pratt Street, Baltimore, MD 21202 Short-Term Bond
11,122
Chairman of the Board or Director/ Trustee Tax-Exempt Money 25,838
of the Funds

Managing Director and Director, T. Rowe
Price; Director, T. Rowe Price Fixed
Income Division, TRP Finance, Inc.;
Officer and/or Director/Trustee of the 36
T. Rowe Price Fixed Income and Municipal
Funds/Trusts; Officer of Personal Strategy
Funds and Tax-Efficient Balanced Fund
- - -------------------------------------------------------------------------------------------------
*James S. Riepe, 6/25/43 Summit Cash 1,732,755 1,342,916
Reserves
100 E. Pratt Street, Baltimore, MD 21202

Director/Trustee of the Funds

Vice Chairman of the Board and Managing
Director, T. Rowe Price; Chairman of the
Board, T. Rowe Price Investment Services,
Inc., T. Rowe Price Services, Inc., T.
Rowe Price Trust Company, T. Rowe Price
Retirement Plan Services, Inc.; Director,
Rowe Price-Fleming International, Inc.,
and General Re Corporation; Officer and/or
Director/ Trustee of the 86 T. Rowe Price
Funds/ Trusts
- - -------------------------------------------------------------------------------------------------
*M. David Testa, 4/22/44 Summit Cash 569,942 181,191
Reserves
100 E. Pratt Street, Baltimore, MD 21202

Director/Trustee of the Funds

Vice Chairman of the Board, Chief
Investment Officer, Managing Director, T.
Rowe Price; Chairman of the Board, Rowe
Price-Fleming International, Inc., Vice
President and Director, T. Rowe Price
Trust Company; Officer and/or
Director/Trustee of 85 of the T. Rowe
Price Funds/Trusts
- - -------------------------------------------------------------------------------------------------
Calvin W. Burnett, Ph.D., 3/16/32 High Yield 212
122
2500 West North Avenue, Baltimore, MD Prime Reserve 1,404
21216

Director/Trustee of the Funds

President, Coppin State College; Director,
Maryland Chamber of Commerce, Provident
Bank of Maryland; Director/Trustee of the
36 T. Rowe Price Fixed Income Funds/Trusts
- - -------------------------------------------------------------------------------------------------
Anthony W. Deering, 1/28/45 GNMA 4,780
125
10275 Little Patuxent Parkway, High Yield
Columbia, MD 21044 308
New Income
Director/Trustee of the Funds 226
Prime Reserve
Director, Chairman of the Board, 982
President, and Chief Operating Officer, Short-Term Bond
The Rouse Company, real estate developers, 325
Columbia, Maryland; Advisory Director, Tax-Exempt Money
Kleinwort, Benson (North America) 2,996
Corporation, a registered broker-dealer; U.S. Treasury 1,164
Director/ Trustee of the 49 T. Rowe Price Money
Fixed Income and International
Funds/Trusts
- - -------------------------------------------------------------------------------------------------
F. Pierce Linaweaver, 8/22/34 Prime Reserve 6,468 175

Green Spring Station, 2360 West Joppa
Road, Suite 224, Lutherville, MD 21093

Director/Trustee of the Funds

President, F. Pierce Linaweaver &
Associates, Inc., Consulting Environmental
& Civil Engineers; Director:
Daft-McCune-Walker, Inc; formerly,
formerly Executive Vice President, EA
Engineering, Science, and Technology,
Inc., and President,
EA Engineering, Inc., Baltimore, Maryland;
Director/Trustee of the 36
T. Rowe Price Fixed Income Funds/Trusts
- - -------------------------------------------------------------------------------------------------
John G. Schreiber, 10/21/46 GNMA 93,287
16,185
1115 East Illinois Road, Lake Forest, IL High Yield
60045 21,524
New Income
Director/Trustee of the Funds 17,382
Prime Reserve
President, Schreiber Investments, Inc., 29,111
a real estate investment company; Short-Term Bond
Director, JMB Realty Corporation, 29,297
AMLI Residential Properties Trust and U.S. Treasury
Urban Shopping Centers, Inc., Long-Term 15,492
Host Marriott Corporation, Brickman
Holdings Corporation; Partner, Blackstone U.S. Treasury 28,779
Real Estate Partners, L.P.; Intermediate 128,732
Director/Trustee of the 36 T. Rowe Price
Fixed Income Funds/Trusts U.S. Treasury
Money
- - -------------------------------------------------------------------------------------------------
</TABLE>

PAGE 6
<PAGE>

* Nominees considered "interested persons" of T. Rowe Price.

/a/Except as otherwise noted, each individual has held the office indicated, or
other offices in the same company, for the last five years.

/b/In addition to the shares owned beneficially and of record by each of the
nominees, the amounts shown reflect the proportionate interests of Messrs.
Reynolds, Riepe, and Testa in 2,277,475 shares of the Funds which are owned by
a wholly owned subsidiary of the Funds' investment manager, T. Rowe Price, and
also their proportionate interests in 158,838,851 shares of the Funds owned by
T. Rowe Price.

PAGE 7
<PAGE>

Table 2 sets forth the year each director/trustee was first elected to the Fund.

<TABLE>
Table 2 Year of Original Election to Each Fund's
Board
<CAPTION>
T. Rowe Price
Fund Burnett Deering Linaweaver Schreiber Reynolds Riepe Testa
- - ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>

- - ---------------------------------------------------------------------------------
Corporate 1995 1995 1995 1995 1997 1995 1997
Income
- - ---------------------------------------------------------------------------------
Fixed Income 1994 1994 1994 1994 1997 1994 1997
Series
- - ---------------------------------------------------------------------------------
GNMA 1993 1985 1985 1992 1997 1985 1997
- - ---------------------------------------------------------------------------------
High Yield 1993 1984 1984 1992 1997 1984 1997
- - ---------------------------------------------------------------------------------
New Income 1993 1980 1983 1992 1997 1983 1997
- - ---------------------------------------------------------------------------------
Prime Reserve 1993 1979 1980 1992 1995 1994 1997
- - ---------------------------------------------------------------------------------
Short-Term 1993 1983 1983 1992 1997 1983 1997
Bond
- - ---------------------------------------------------------------------------------
Short-Term 1993 1991 1991 1992 1997 1991 1997
U.S.
Government
- - ---------------------------------------------------------------------------------
Summit Funds 1993 1993 1993 1993 1997 1993 1997
- - ---------------------------------------------------------------------------------
Tax-Exempt 1993 1983 1983 1992 1991 1983 1997
Money
- - ---------------------------------------------------------------------------------
Tax-Free 1993 1992 1992 1992 1994 1992 1997
Insured
Intermediate
Bond
- - ---------------------------------------------------------------------------------
U.S. Treasury 1993 1989 1989 1992 1997 1989 1997
Funds
- - ---------------------------------------------------------------------------------
</TABLE>

Do the nominees have a stake in the Funds?

The Boards of the Funds believe it is important that each nominee for trustee
and director have an investment in the T. Rowe Price funds. The nominees
allocate their investments among the 86 T. Rowe Price funds based on their own
investment objectives. Table 1 lists each nominee's investment in the Funds as
well as his total investment in all of the T. Rowe Price funds.

What are the primary responsibilities of each Fund's Board members?

They are responsible for the general oversight of each Fund's business and for
assuring that each Fund is managed in the best interests of its shareholders.
The trustees/directors periodically review the performance, expenses, and
service providers of the Funds based on reports provided by T. Rowe Price
personnel, auditors, and legal counsel.

PAGE 8
<PAGE>

How often does each Fund's Board meet?

The Board of Trustees/Directors of the Funds held five meetings during fiscal
year 1997, and each director/trustee standing for reelection attended 75% or
more of those meetings. The Boards of Trustees/Directors have held three
meetings so far during fiscal year 1998, and each director/trustee standing for
reelection has attended all of the meetings with the exception of Mr. Deering,
who has attended one meeting. Each Board currently has three committees,
described in the following paragraphs.

The Executive Committee is authorized to assume all the powers of the Board to
manage each Fund in the intervals between meetings of the Board, except the
powers prohibited by statute from being delegated. If all nominees are elected,
this committee will continue to consist of the interested trustees/directors of
each Fund, Messrs. Reynolds, Riepe, and Testa. The Committee does not normally
hold board meetings.

The Nominating Committee, which functions only in an advisory capacity, is
responsible for reviewing and recommending to the full Board candidates for
election as independent directors or trustees to fill vacancies on each Fund's
Board. The Nominating Committee will consider written recommendations from
shareholders for possible nominees. Shareholders should submit their
recommendations to the Secretary of the Funds. Members of the Nominating
Committee are Messrs. Burnett, Deering, Linaweaver, and Schreiber. They met
informally during the last fiscal year, but the Committee as such held no formal
meetings.

The Joint Audit Committee includes at least one independent trustee/ director
representing each of the T. Rowe Price funds. Messrs. Schreiber and Linaweaver,
nominees of the Funds, are members of the Committee. The other members are
Donald W. Dick, Jr., and Hubert D. Vos, independent directors of other T. Rowe
Price funds. These directors also receive a fee of $1,000 for each Committee
meeting attended. The Audit Committee holds two regular meetings during each
fiscal year, at which time it meets with the independent accountants of the T.
Rowe Price funds to review: (1) the services provided; (2) the findings of the
most recent audit; (3) management's response to the findings of the most recent
audit; (4) the scope of the audit to be performed; (5) the accountants' fees;
and (6) any accounting or other questions relating to particular areas of the T.
Rowe Price funds' operations or the operations of parties dealing with the T.
Rowe Price funds, as circumstances indicate. The Audit Committee met twice in
1997 and once so far in 1998. All members of the Committee participated in the
meetings.

PAGE 9
<PAGE>

What are the directors/trustees paid for their services to the Funds?

Messrs. Reynolds, Riepe, and Testa are employed by, and thus are considered
"interested persons" of, T. Rowe Price. Therefore, they are not entitled to
compensation or benefits from the Funds for their service as trustees/directors
of the Funds.

Messrs. Burnett, Deering, Linaweaver, and Schreiber are the independent, or
noninterested, trustees/directors of the Funds. Their trustees'/directors' fees
are based on the following fee schedule applicable to all independent
directors/trustees of the T. Rowe Price funds: an annual retainer of $65,000 per
year for service on the boards of the T. Rowe Price Domestic Funds, an
additional annual retainer of $15,000 for service on the boards of the T. Rowe
Price International Funds, and a fee of $1,000 for each Audit Committee meeting
attended. The Price Fund group included 86 funds at June 30, 1998. The
independent trustees/directors of the Funds do not receive any pension or
retirement benefits from the Funds or T. Rowe Price.

Table 3 provides the independent trustees'/directors' accrued compensation for
the most recently completed fiscal year of each Fund and their total
compensation for the period January 1, 1997, through December 31, 1997. The Fund
complex included 84 funds as of December 31, 1997. The fees are allocated to
each Fund under a formula which includes a base fee and a fee based on the net
assets of each fund relative to the other funds.

<TABLE>
Table 3 Compensation to Fund Trustees/Directors
<CAPTION>
Aggregate Compensation From T. Director/Trustee
Rowe Price Fund ----------------------------------------------------
- - --------------------------------Black /a/ Burnett Deering Linaweaver Schreiber
----------------------------------------------------
<S> <C> <C> <C> <C> <C>

- - ------------------------------------------------------------------------------------
Corporate Income $ 1,474 $ 1,474 $ 1,193 $ 1,474 $ 1,474
- - ------------------------------------------------------------------------------------
Fixed Income Series 1,037 1,037 1,006 1,037 1,037
- - ------------------------------------------------------------------------------------
GNMA 2,752 2,752 1,694 2,752 2,752
- - ------------------------------------------------------------------------------------
High Yield 3,630 3,630 2,037 3,630 3,630
- - ------------------------------------------------------------------------------------
New Income 4,205 4,205 2,265 4,205 4,205
- - ------------------------------------------------------------------------------------
Prime Reserve 8,713 8,713 4,057 8,713 8,713
- - ------------------------------------------------------------------------------------
Short-Term Bond 1,611 1,611 1,240 1,611 1,611
- - ------------------------------------------------------------------------------------
Short-Term U.S. Government 1,340 1,340 1,140 1,340 1,340
- - ------------------------------------------------------------------------------------
Summit Funds 5,016 5,016 3,768 5,016 5,016
- - ------------------------------------------------------------------------------------
Tax-Exempt Money 2,973 2,973 1,763 2,973 2,973
- - ------------------------------------------------------------------------------------
Tax-Free Insured Intermediate 1,166 1,166 1,057 1,166 1,166
Bond
- - ------------------------------------------------------------------------------------
U.S. Treasury Intermediate 1,292 1,292 1,124 1,292 1,292
- - ------------------------------------------------------------------------------------
U.S. Treasury Long-Term 2,412 2,412 1,559 2,412 2,412
- - ------------------------------------------------------------------------------------
U.S. Treasury Money 1,383 1,383 1,157 1,383 1,383
- - ------------------------------------------------------------------------------------
Total Compensation From Funds $65,000 $65,000 $81,000 $66,000 $65,500
and Fund Complex
- - ------------------------------------------------------------------------------------
</TABLE>

PAGE 10
<PAGE>

/a /Mr. Black retired from his position with the Funds on April 22, 1998.

What vote is required to elect the trustees/directors?

For all Funds other than the Fixed Income Series, the Summit Funds, and the U.S.
Treasury Funds, each Fund votes separately and a plurality of the votes of each
Fund cast at the meeting is sufficient to approve the election of a
trustee/director of that Fund. For the Fixed Income Series, the Summit Funds,
and the U.S. Treasury Funds (each a "Corporation"), each Corporation votes
separately but all Funds of each Corporation vote together. A plurality of the
combined votes cast at the meeting by the shareholders of all Funds of each
Corporation is sufficient to approve the election of a director of that
Corporation. THE BOARD OF TRUSTEES/DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR ALL OF THE PROPOSED NOMINEES.

PROPOSAL NO. 2 -- SELECTION OF INDEPENDENT ACCOUNTANTS

ALL FUNDS

The selection by the Board of Trustees/Directors of the firm of
PricewaterhouseCoopers LLP, as the independent accountants for the Funds for
their current fiscal year is to be submitted for ratification or rejection by
the shareholders at the Annual Meeting. The firm of PricewaterhouseCoopers LLP,
has served each Fund as independent accountants since its inception. The
independent accountants have advised the Funds that they have no direct or
material indirect financial interest in the Funds. Representatives of the firm
of PricewaterhouseCoopers LLP, are expected to be present at the Annual Meeting
and will be available to make a statement, if they desire to do

PAGE 11
<PAGE>

so, and to respond to appropriate questions which the shareholders may wish to
address to them. Table 4 lists the various fiscal year-ends for the Funds.

<TABLE>
Table 4 Fiscal Year-Ends
<CAPTION>
T. Rowe Price Fund Fiscal Year-End
- - -------------------------------------------------------
<S> <C>

- - -------------------------------------------------------
Corporate Income May 31, 1999
- - -------------------------------------------------------
Fixed Income Series December 31, 1998
- - -------------------------------------------------------
GNMA May 31, 1999
- - -------------------------------------------------------
High Yield May 31, 1999
- - -------------------------------------------------------
New Income May 31, 1999
- - -------------------------------------------------------
Prime Reserve May 31, 1999
- - -------------------------------------------------------
Short-Term Bond May 31, 1999
- - -------------------------------------------------------
Short-Term U.S. Government May 31, 1999
- - -------------------------------------------------------
Summit Funds October 31, 1998
- - -------------------------------------------------------
Tax-Exempt Money February 28, 1999
- - -------------------------------------------------------
Tax-Free Insured Intermediate Bond February 28, 1999
- - -------------------------------------------------------
U.S. Treasury Funds May 31, 1999
- - -------------------------------------------------------
</TABLE>

What vote is required to ratify the Funds' independent accountants?

Each Fund votes separately. Approval of the proposal requires an affirmative
vote by a majority of the shares cast at the meeting of each Fund in person or
by proxy. THE BOARD OF TRUSTEES/DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE PROPOSAL.

PROPOSAL NO. 3 -- AMENDMENT OF THE INVESTMENT OBJECTIVES OF FLORIDA INSURED
INTERMEDIATE TAX-FREE FUND AND T. ROWE PRICE TAX-FREE INSURED INTERMEDIATE BOND
FUND, INC.

The directors/trustees of the Tax-Free Insured Intermediate Bond and Florida
Insured Intermediate Funds recommend a change in each Fund's investment
objective, specifically, removing the requirement that each Fund's assets be
invested primarily in insured bonds. The Board of Directors/Trustees believes
you will be better served over time if your fund managers have more flexibility
in selecting bonds for the portfolios while still maintaining high credit
quality.

PAGE 12
<PAGE>

As you no doubt know, diversification of assets typically reduces the volatility
of a portfolio while increasing opportunities to enhance returns. Volatility is
reduced because different types of bonds may respond differently to changes in
interest rates and economic conditions, smoothing out the impact of such changes
on a portfolio. At the same time, returns may be increased by using research to
find good values, for example, bonds whose credit ratings seem likely to improve
or that seem temporarily mispriced by the market.

A portfolio consisting primarily of insured bonds inhibits a manager's ability
to capitalize on such opportunities for two main reasons. First, prices of
insured bonds are affected mainly by interest rate changes, thereby increasing
the portfolio's overall volatility. And second, by essentially eliminating
differences in credit quality, insurance limits the ability of our managers to
take full advantage of T. Rowe Price's extensive research resources.

Today, about 50% of new municipal bonds coming to market carry bond insurance
compared with about 20% earlier in the decade when your Funds began. As a
result, even if the proposed change is approved, the Funds are likely to
continue holding a large number of insured bonds, and each Fund's average credit
quality will remain high. At the same time, a greater diversification in credit
quality could reduce the portfolios' overall risk and may increase their
long-term return potential. Of course, it is always possible that a fund
consisting primarily of insured bonds would have reduced volatility or
experience fewer credit problems.

If you approve this change in the Funds' investment objectives, the Board of
Directors/Trustees expects to remove the reference to insurance in their names
to reflect their broader diversification. Their names would be the Tax-Free
Intermediate Bond Fund and the Florida Intermediate Tax-Free Fund.

What vote is required to approve this amendment to each Fund's investment
program?

Proposal No. 3 requires the affirmative vote of the lesser of (a) 67% of the
shares present at the meeting of the Fund in person or by proxy or (b) a
majority of the Fund's outstanding shares. THE BOARD OF DIRECTORS/TRUSTEES OF
EACH FUND RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL.

PAGE 13
<PAGE>

PROPOSAL NO. 4 -- AMENDMENT OF ARTICLES OF INCORPORATION TO AUTHORIZE CREATION
OF SERIES AND CLASSES AND TO CONFORM THE PROVISIONS DESCRIBING CLASSES AND
SERIES TO THOSE STANDARD FOR OTHER T. ROWE PRICE FUNDS

T. Rowe Price New Income Fund, Inc. T. Rowe Price Tax-Exempt Money Fund, Inc.

The Articles of Incorporation of the two Funds listed above do not authorize
their Boards to divide fund shares into series or classes. This proposal asks
shareholders to approve or disapprove amending the Articles of Incorporation for
each Fund to permit the use of series or classes. The change would bring these
charters in line with similar provisions in the charters of other T. Rowe Price
funds.

These amendments would authorize each Fund's Board to create separate series of
shares. Each series would be its own "fund" and would represent an exclusive
interest in a separate portfolio of securities. The amendments would also
authorize each Fund's Board of Directors to subdivide the shares (or any series
if the common stock is divided into series) into classes with identical voting,
dividend, and liquidation rights. Under the proposed amendments, shares of the
classes could be subject to differing front-end loads, contingent deferred sales
loads, expenses (including distribution expenses under a Rule 12b-1 plan and
administrative expenses under an administration or service agreement),
conversion rights, and class voting rights, to the extent permitted by Maryland
law, the Investment Company Act of 1940, and the rules and regulations of the
National Association of Securities Dealers, Inc.

These amendments, if approved, would give the Funds additional flexibility in
two areas:

. LEVELS OF SERVICE. The ability to create classes of shares would enable us
to customize service levels for shareholders while allocating expenses
associated with those services to those who elect to use them. For example, a
separate class of Tax-Exempt Money Fund shares could be used as part of a
cash management-type account offering a debit card and unlimited check
writing. Investors desiring this type of account would purchase shares in the
new class, which, in turn, would bear the expense of the services.

. DISTRIBUTION OF SHARES. The various fee structures that can be used for
different classes of shares could allow investors to choose the purchasing
method best suited to their situation and, thus, attract shareholders to the
Fund. Generally, higher asset totals increase investment flexibility and can
decrease some expenses due to economies of scale.

PAGE 14
<PAGE>

In addition, the potential to create share classes could help the Funds
competitively, since many of their peers have or are seeking similar
authorization. For your reference, a complete version of the proposed Articles
of Amendment for the Funds are contained in Exhibits I and II.

We want to emphasize that neither Fund's Board has any current intention of
imposing sales loads or distribution expenses, and that any such action would
require advance notice to shareholders and, in certain instances, shareholder
approval.

What vote is required to approve this amendment to the Funds' Articles of
Incorporation?

Proposal No. 4 requires the affirmative vote of a majority of each Fund's
outstanding shares. THE BOARD OF DIRECTORS OF EACH FUND RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE PROPOSAL.

FURTHER INFORMATION ABOUT VOTING AND THE SHAREHOLDER MEETING

What is the required quorum?

To hold the meeting, a majority of each Fund's shares entitled to be voted must
have been received by proxy or be present at the meeting. In the event that a
quorum is present but sufficient votes in favor of one or more of the proposals
are not received by the meeting date, the persons named as proxies may propose
one or more adjournments to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of the shares
present in person or by proxy at the meeting to be adjourned. The persons named
as proxies will vote in favor of such adjournment if they determine that
additional solicitation is reasonable and in the interests of the Fund's
shareholders.

How are the votes counted?

The individuals named as proxies (or their substitutes) on the enclosed Proxy
Card (or cards, if you have multiple funds or accounts) will vote according to
your directions if your proxy is received properly executed, or in accordance
with your instructions given when voting by telephone or Internet. You may
direct the proxy holders to vote your shares on a proposal by checking the
appropriate box "FOR" or "AGAINST," or instruct them not to vote those shares on
the proposal by checking the "ABSTAIN" box. Alternatively, you may simply sign,
date, and return your Proxy Card(s) with no specific instructions as to

PAGE 15
<PAGE>

the proposals. IF YOU PROPERLY EXECUTE YOUR PROXY CARD AND GIVE NO VOTING
INSTRUCTIONS WITH RESPECT TO A PROPOSAL, YOUR SHARES WILL BE VOTED FOR THE
PROPOSAL.

Abstentions and "broker non-votes" (as defined below) are counted for purposes
of determining whether a quorum is present for purposes of convening the
meeting. "Broker non-votes" are shares held by a broker or nominee for which an
executed proxy is received by the Fund but are not voted as to one or more
proposals because instructions have not been received from the beneficial owners
or persons entitled to vote, and the broker or nominee does not have
discretionary voting power. If a proposal must be approved by a percentage of
votes cast on the proposal (Proposals 1 and 2), abstentions and broker non-votes
will not be counted as "votes cast" on the proposal and will have no effect on
the result of the vote. If the proposal must be approved by a percentage of
voting securities present at the meeting or a majority of the Fund's outstanding
shares (Proposals 3 and 4), abstentions and broker non-votes will be considered
to be voting securities that are present and will have the effect of being
counted as votes against the proposal.

Can additional matters be acted upon at the Annual Meeting?

The management of the Funds knows of no other business which may come before the
meeting. However, if any additional matters are properly presented at the
meeting, it is intended that the persons named in the enclosed proxy, or their
substitutes, will vote on such matters in accordance with their judgment.

How can proxies be recorded?

You may record your votes on the Proxy Card enclosed with this statement and
mail it in the prepaid envelope provided to Management Information Services
Corp., who the Funds have retained to tabulate the votes. In addition, the Funds
have arranged to have votes recorded through the Internet or by telephone. The
telephone and Internet voting procedures are designed to authenticate
shareholders' identities, to allow shareholders to authorize the voting of their
shares in accordance with their instructions, and to confirm that their
instructions have been properly recorded.

How can proxies be solicited, and who pays for the costs involved?

Directors, officers, or employees of the Funds or of its investment manager, T.
Rowe Price, may solicit proxies by mail, in person, or by telephone. In the
event that votes are solicited by telephone, shareholders would be called at the
telephone number T. Rowe Price has in its records for their accounts, and would
be asked for their Social Security number or other identifying information. The
shareholders would then be given an opportunity to authorize proxies

PAGE 16
<PAGE>

to vote their shares at the meeting in accordance with their instructions. To
ensure that shareholders' instructions have been recorded correctly,
confirmation of the instructions is also mailed. A special toll-free number will
be available in case the information contained in the confirmation is incorrect.

The costs of the meeting, including the solicitation of proxies, will be paid by
the Funds. To ensure that sufficient shares of common stock are represented at
the meeting to permit approval of the proposals outlined in the Proxy Statement,
the Funds may retain the services of a proxy solicitor to assist them in
soliciting proxies for a fee plus reimbursement of out-of-pocket expenses.
Securities brokers, custodians, fiduciaries, and other persons holding shares as
nominees will be reimbursed, upon request, for their reasonable expenses in
sending solicitation materials to the principals of the accounts.

The approximate date on which this Proxy Statement and Proxy Card are first
being mailed to shareholders is September 3, 1998.

Can I change my vote after I mail my proxy?

Any proxy, including those given via the Internet or by telephone, may be
revoked at any time before it is voted by filing a written notice of revocation
with the Funds, by delivering a properly executed proxy bearing a later date, or
by attending the meeting and voting in person.

Are the Funds required to hold annual meetings?

Under Maryland and Massachusetts law, the Funds are not required to hold annual
meetings. The Board of Trustees/Directors of each Fund have determined that the
Funds will take advantage of these Maryland and Massachusetts law provisions to
avoid the significant expense associated with holding annual meetings, including
legal, accounting, printing, and mailing fees incurred in preparing proxy
materials. Accordingly, no annual meetings shall be held in any year in which a
meeting is not otherwise required to be held by the 1940 Act unless the Boards
determine otherwise. However, special meetings will be held in accordance with
applicable law or when otherwise determined by each Fund's Board.

If a shareholder wishes to present a proposal to be included in the Proxy
Statement for the next shareholder meeting, the proposal must be submitted in
writing and received by Patricia S. Butcher, Secretary of the Funds, T. Rowe
Price Associates, Inc., 100 East Pratt Street, Baltimore, Maryland 21202, within
a reasonable time before the Funds begin to print and mail their proxy
materials.

PAGE 17
<PAGE>

GENERAL INFORMATION ABOUT THE FUNDS

Who are the Funds' executive officers?

Table 5 lists the executive officers of the Funds (other than the nominees for
election as trustees/directors) and their positions with T. Rowe Price. Each
executive officer has been an officer of T. Rowe Price and the Funds for at
least the last five years

<TABLE>
Table 5 Executive Officers of the Funds
<CAPTION>
Officer, Date of Birth Position With Fund Position With T. Rowe Price
- - -----------------------------------------------------------------------------------------
<S> <C> <C>

- - -----------------------------------------------------------------------------------------
Corporate Income
- - -----------------------------------------------------------------------------------------
William T. Reynolds, 5/26/48 Chairman of the Board Managing Director and Director
- - -----------------------------------------------------------------------------------------
Peter Van Dyke, 11/29/38 President Managing Director
- - -----------------------------------------------------------------------------------------
Robert M. Rubino, 8/2/53 Executive Vice President Vice President
- - -----------------------------------------------------------------------------------------
Mark J. Vaselkiv, 7/22/58 Executive Vice President Vice President
- - -----------------------------------------------------------------------------------------
Fixed Income Series
- - -----------------------------------------------------------------------------------------
William T. Reynolds, 5/26/48 Chairman of the Board Managing Director and Director
- - -----------------------------------------------------------------------------------------
Peter Van Dyke, 11/29/38 President Managing Director
- - -----------------------------------------------------------------------------------------
Edward A. Wiese, 4/12/59 Executive Vice President Vice President
- - -----------------------------------------------------------------------------------------
GNMA

- - -----------------------------------------------------------------------------------------
Peter Van Dyke, 11/29/38 President Managing Director
- - -----------------------------------------------------------------------------------------
High Yield

- - -----------------------------------------------------------------------------------------
William T. Reynolds, 5/26/48 Chairman of the Board Managing Director and Director
- - -----------------------------------------------------------------------------------------
Edward A. Wiese, 4/12/59 President Vice President
- - -----------------------------------------------------------------------------------------
Short-Term U.S. Government
- - -----------------------------------------------------------------------------------------
William T. Reynolds, 5/26/48 Chairman of the Board Managing Director and Director
- - -----------------------------------------------------------------------------------------
Peter Van Dyke, 11/29/38 President Managing Director
- - -----------------------------------------------------------------------------------------
Heather R. Landon, 7/8/54 Executive Vice President Vice President
- - -----------------------------------------------------------------------------------------
State Tax-Free Income Trust
- - -----------------------------------------------------------------------------------------
William T. Reynolds, 5/26/48 Chairman of the Board Managing Director and Director
- - -----------------------------------------------------------------------------------------
Mary J. Miller, 7/19/55 President Managing Director
- - -----------------------------------------------------------------------------------------
Summit Funds
- - -----------------------------------------------------------------------------------------
William T. Reynolds, 5/26/48 Chairman of the Board Managing Director and Director
- - -----------------------------------------------------------------------------------------
Peter Van Dyke, 11/29/38 President Managing Director
- - -----------------------------------------------------------------------------------------
Edward A. Wiese, 4/12/59 Executive Vice President Vice President
- - -----------------------------------------------------------------------------------------
Tax-Exempt Money
- - -----------------------------------------------------------------------------------------
William T. Reynolds, 5/26/48 Chairman of the Board Managing Director and Director
- - -----------------------------------------------------------------------------------------
Patrice Berchtenbreiter Ely, President Vice President
1/13/53
- - -----------------------------------------------------------------------------------------
Tax-Free Insured Intermediate Bond
- - -----------------------------------------------------------------------------------------
Charles B. Hill, 9/22/61 President Vice President
- - -----------------------------------------------------------------------------------------
Mary J. Miller, 7/19/55 Executive Vice President Managing Director
- - -----------------------------------------------------------------------------------------
U.S. Treasury Funds
- - -----------------------------------------------------------------------------------------
Charles P. Smith, 12/4/43 Executive Vice President Managing Director
- - -----------------------------------------------------------------------------------------
Peter Van Dyke, 11/29/38 President Managing Director
- - -----------------------------------------------------------------------------------------
Edward A. Wiese, 4/12/59 Executive Vice President Vice President
- - -----------------------------------------------------------------------------------------
</TABLE>

PAGE 18
<PAGE>

Who is the investment adviser and principal underwriter to each Fund?

T. Rowe Price serves as the investment adviser and principal underwriter to each
of the Funds covered in this Proxy Statement. The Funds have an Underwriting
Agreement with T. Rowe Price Investment Services, Inc. ("INVESTMENT SERVICES")
and a Transfer Agency Agreement with T. Rowe Price Services, Inc. ("PRICE
SERVICES"). The address of T. Rowe Price and Investment Services is 100 East
Pratt Street, Baltimore, Maryland 21202, and the address of Price Services is
10090 Red Run Boulevard, Owings Mills, Maryland 21117. Each is a wholly owned
subsidiary of T. Rowe Price.

PAGE 19
<PAGE>

What is the share ownership of each Fund?

Table 6 presents the shares of the capital stock of each Fund outstanding as of
June 30, 1998.

<TABLE>
Table 6 Outstanding Shares of Capital Stock
<CAPTION>
Outstanding Shares of
T. Rowe Price Fund Capital Stock
- - -------------------------------------------------------------------------------
<S> <C>

- - -------------------------------------------------------------------------------
Corporate Income 4,585,815
- - -------------------------------------------------------------------------------
Limited-Term Bond Portfolio 6,877,450
- - -------------------------------------------------------------------------------
Prime Reserve Portfolio 15,069,637
- - -------------------------------------------------------------------------------
GNMA 118,753,006
- - -------------------------------------------------------------------------------
High Yield 197,005,028
- - -------------------------------------------------------------------------------
New Income 230,415,498
- - -------------------------------------------------------------------------------
Prime Reserve 4,832,105,410
- - -------------------------------------------------------------------------------
Short-Term Bond 69,055,367
- - -------------------------------------------------------------------------------
Short-Term U.S. Government 23,719,645
- - -------------------------------------------------------------------------------
State Tax-Free Income Trust - Florida Insured 8,090,276
Intermediate
- - -------------------------------------------------------------------------------
Summit Cash Reserves 1,511,352,459
- - -------------------------------------------------------------------------------
Summit Limited-Term Bond 7,875,298
- - -------------------------------------------------------------------------------
Summit GNMA 4,205,282
- - -------------------------------------------------------------------------------
Tax-Exempt Money 728,194,314
- - -------------------------------------------------------------------------------
Tax-Free Insured Intermediate Bond 10,092,020
- - -------------------------------------------------------------------------------
U.S. Treasury Intermediate 38,562,915
- - -------------------------------------------------------------------------------
U.S. Treasury Long-Term 24,423,089
- - -------------------------------------------------------------------------------
U.S. Treasury Money 850,363,453
- - -------------------------------------------------------------------------------
</TABLE>

Who are the principal holders of each Fund's shares?

Table 7 sets forth the persons owning more than 5% of each Fund's outstanding
common stock as of June 30, 1998.

<TABLE>
Table 7 Beneficial Ownership of Fund Shares
<CAPTION>
Fund Name Owner % Ownership
- - -------------------------------------------------------------------------------
<S> <C> <C>

- - -------------------------------------------------------------------------------
GNMA Yachtcrew & Co., c/o T. Rowe Price 39%
Assoc., 100 E. Pratt St., Baltimore,
MD 21202
- - -------------------------------------------------------------------------------
High Yield Bond Yachtcrew & Co., c/o T. Rowe Price 26
Assoc., 100 E. Pratt St., Baltimore,
MD 21202
- - -------------------------------------------------------------------------------
Limited-Term Bond Security Benefit Life Insurance Co., 24%
Portfolio Attn.: Mark Young, 700 SW Harrison
St., Topeka, KS 66636-0002
----------------------------------------------------
United of Omaha-Series V, Attn.: John 65
Martin, Corp. General Ledger, Mutual
- - ---------------------------of Omaha Plaza, Omaha, NE 68175
----------------------------------------------------
New Income Yachtcrew & Co., c/o T. Rowe Price 34
Assoc., 100 E. Pratt St., Baltimore,
MD 21202
- - -------------------------------------------------------------------------------
Prime Reserve Portfolio Security Benefit Life Insurance Co., 78
Attn.: Mark Young, 700 SW Harrison
St., Topeka, KS 66636-0002
----------------------------------------------------
First Security Benefit Life & Annuity 6
Company of New York, Attn.: Mark
Young, 700 SW Harrison St., Topeka,
- - ---------------------------KS 66636-0002
----------------------------------------------------
U.S. Treasury First American Trust Co., Managed 6
Intermediate Omnibus, 421 N. Main St., Santa Ana,
CA 92701-4699
- - -------------------------------------------------------------------------------
U.S. Treasury Long-Term Yachtcrew & Co., c/o T. Rowe Price 60
Assoc., 100 E. Pratt St., Baltimore,
MD 21202
- - -------------------------------------------------------------------------------
</TABLE>

PAGE 20
<PAGE>

As of June 30, 1998, the executive officers and trustees/directors of each Fund,
as a group, beneficially owned, directly or indirectly, 2,757,933 shares,
representing less than 1% of each Fund's outstanding stock. More detailed
information on the share ownership of the Fund's management is provided in Table
8.

<TABLE>
Table 8 Security Ownership of Management
<CAPTION>
Name of Fund, Name of Beneficial Owner and Amount and Nature of Beneficial
Position With Fund Ownership as of June 30, 1998/a/
- - -------------------------------------------------------------------------------
<S> <C>

- - -------------------------------------------------------------------------------
All Funds
- - -------------------------------------------------------------------------------
Calvin W. Burnett - Trustee/Director 1,526
- - -------------------------------------------------------------------------------
Anthony W. Deering - Trustee/Director 6,126
- - -------------------------------------------------------------------------------
F. Pierce Linaweaver - Trustee/Director 6,468
- - -------------------------------------------------------------------------------
William T. Reynolds - Trustee/Director 37,411
- - -------------------------------------------------------------------------------
James S. Riepe - Trustee/Director 1,732,755
- - -------------------------------------------------------------------------------
John G. Schreiber - Trustee/Director 286,503
- - -------------------------------------------------------------------------------
M. David Testa - Trustee/Director 569,942
- - -------------------------------------------------------------------------------
Corporate Income
- - -------------------------------------------------------------------------------
Peter Van Dyke, President 0
- - -------------------------------------------------------------------------------
Robert M. Rubino, Executive Vice President 0
- - -------------------------------------------------------------------------------
Mark J. Vaselkiv, Executive Vice President 0
- - -------------------------------------------------------------------------------
Fixed Income Series
- - -------------------------------------------------------------------------------
Peter Van Dyke, President 0
- - -------------------------------------------------------------------------------
Edward A. Wiese, Executive Vice President 0
- - -------------------------------------------------------------------------------
GNMA
- - -------------------------------------------------------------------------------
Peter Van Dyke, President 0
- - -------------------------------------------------------------------------------
High Yield

- - -------------------------------------------------------------------------------
Mark J. Vaselkiv, President 0
- - -------------------------------------------------------------------------------
New Income

- - -------------------------------------------------------------------------------
Peter Van Dyke, President 0
- - -------------------------------------------------------------------------------
Robert M. Rubino, Executive Vice President 0
- - -------------------------------------------------------------------------------
Prime Reserve
- - -------------------------------------------------------------------------------
Edward A. Wiese, President 4,472
- - -------------------------------------------------------------------------------
Robert P. Campbell, Executive Vice --
President
- - -------------------------------------------------------------------------------
James M. McDonald, Executive Vice President 26,905
- - -------------------------------------------------------------------------------
Short-Term Bond

- - -------------------------------------------------------------------------------
Edward A. Wiese, President 0
- - -------------------------------------------------------------------------------
Short-Term U.S. Government
- - -------------------------------------------------------------------------------
Peter Van Dyke, President 0
- - -------------------------------------------------------------------------------
Heather R. Landon, Executive Vice President 0
- - -------------------------------------------------------------------------------
State Tax-Free Income Trust
- - -------------------------------------------------------------------------------
Mary J. Miller, President --
- - -------------------------------------------------------------------------------
Summit Funds
- - -------------------------------------------------------------------------------
Peter Van Dyke, President 66,414
- - -------------------------------------------------------------------------------
Edward A. Wiese, Executive Vice President 0
- - -------------------------------------------------------------------------------
Tax-Exempt Money
- - -------------------------------------------------------------------------------
Patrice L. Berchtenbreiter Ely, President 19,411
- - -------------------------------------------------------------------------------
Tax-Free Insured Intermediate Bond
- - -------------------------------------------------------------------------------
Charles B. Hill, President 0
- - -------------------------------------------------------------------------------
Mary J. Miller, Executive Vice President --
- - -------------------------------------------------------------------------------
U.S. Treasury Funds
- - -------------------------------------------------------------------------------
Peter Van Dyke, President 0
- - -------------------------------------------------------------------------------
Charles P. Smith, Executive Vice President 0
- - -------------------------------------------------------------------------------
Edward A. Wiese, Executive Vice President 0
- - -------------------------------------------------------------------------------
MANAGEMENT AS A GROUP

- - -------------------------------------------------------------------------------
</TABLE>

PAGE 22

/a/ All securities listed represent ownership in shares of common stock.

INFORMATION ABOUT T. ROWE PRICE

Who are the Directors of T. Rowe Price?

The Funds' investment manager is T. Rowe Price, a Maryland corporation, 100 East
Pratt Street, Baltimore, Maryland 21202. The principal executive officer of T.
Rowe Price is George A. Roche, who together with Messrs. Riepe and Testa, James
E. Halbkat, Jr., Henry H. Hopkins, James A. C. Kennedy III, John H. Laporte,
Richard L. Menschel, William T. Reynolds, Brian C. Rogers, John W. Rosenblum,
Robert L. Strickland, Philip C. Walsh, and Anne Marie Whittemore, constitute its
Board of Directors.

The address of each of these persons, with the exception of Messrs. Halbkat,
Menschel, Rosenblum, Strickland, Walsh, and Mrs. Whittemore, is 100 East Pratt
Street, Baltimore, Maryland 21202, and, with the exception of Messrs. Halbkat,
Menschel, Rosenblum, Strickland, Walsh, and Mrs. Whittemore, all are employed by
T. Rowe Price.

Mr. Halbkat is President of U.S. Monitor Corporation, a provider of public
response systems. Mr. Halbkat's address is: P.O. Box 23109, Hilton Head Island,
South Carolina 29925.

Mr. Menschel is a limited partner of The Goldman Sachs Group, L.P. Mr.
Menschel's address is 85 Broad Street, 2nd Floor, New York, New York 10004.

Mr. Rosenblum is the Dean of the Jepson School of Leadership Studies at the
University of Richmond and a director of: Comdial Corporation, a manufacturer of
telephone systems for businesses; Cone Mills Corporation, a textiles producer;
and Providence Journal Company, a publisher of newspapers and owner of broadcast
television stations. Mr. Rosenblum's address is: University of Richmond,
Richmond, Virginia 23173.

PAGE 23
<PAGE>

Mr. Strickland retired as Chairman of Lowe's Companies, Inc., as of January 31,
1998. He is a director of Hannaford Bros., Co., a food retailer. Mr.
Strickland's address is 604 Two Piedmont Plaza Building, Winston-Salem, North
Carolina 27104.

Mr. Walsh is a Consultant to Cyprus Amax Minerals Company, Englewood, Colorado
and director of Piedmont Mining Company, Inc., in Charlotte, North Carolina. Mr.
Walsh's address is: Pleasant Valley, Peapack, New Jersey 07977.

Mrs. Whittemore is a partner of the law firm of McGuire, Woods, Battle & Boothe
and is a director of Owens & Minor, Inc.; USF&G Corporation; the James River
Corporation of Virginia; and Albemarle Corporation. Mrs. Whittemore's address is
One James Center, Richmond, Virginia 23219.

TRANSACTIONS IN T. ROWE PRICE STOCK

The following information pertains to transactions involving common stock of T.
Rowe Price, par value $0.20 per share ("STOCK"), during the period January 1,
1997, through December 31, 1997. There were no transactions during the period by
any director/trustee or officer of the Funds, or any director or officer of T.
Rowe Price which involved more than 1% of the outstanding stock of T. Rowe
Price. These transactions did not involve, and should not be mistaken for,
transactions in the stock of the Funds.

During the period, certain employees exercised their options for a total of
3,653,090 shares of stock at an average price $27.96 per share. Pursuant to the
terms of T. Rowe Price's Employee Stock Purchase Plan, eligible employees of T.
Rowe Price and its subsidiaries purchased an aggregate (including dividends
reinvested) of 97,676.472 shares of stock at fair market value. Such shares were
purchased in the open market during this period for employees' accounts.

T. Rowe Price's Board of Directors has approved the repurchase of shares of its
stock in the open market. During 1997, T. Rowe Price purchased 460,000 shares of
stock under this plan, leaving 4,940,000 shares of stock authorized for future
repurchase at December 31, 1997.

During the period, T. Rowe Price issued 2,600,796 common stock options with an
average exercise price of $31.16 per share to certain employees and directors
under terms of the 1990, 1993, and 1996 Stock Incentive Plans and the 1995
Director Stock Option Plan.

PAGE 24
<PAGE>

EXHIBIT I

T. ROWE PRICE NEW INCOME FUND, INC.
-----------------------------------

ARTICLES OF AMENDMENT
---------------------

T. Rowe Price New Income Fund, Inc., a Maryland corporation, having its
principal office in the City of Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:

FIRST: The Charter of the Corporation is hereby amended by deleting in its
-----
entirety Articles FIFTH and SEVENTH of the Articles of Incorporation and
substituting in lieu thereof the following:

FIFTH: (a) The total number of shares of stock of all classes and series which
the Corporation shall have the authority to issue is Three Hundred Million
(300,000,000) shares of capital stock of the par value of One Dollar ($1.00)
each, and of the aggregate par value of Three Hundred Million Dollars
($300,000,000). All of such shares are classified as "COMMON STOCK" of the "T.
ROWE PRICE NEW INCOME" series. The Board of Directors may classify and
reclassify any unissued shares of capital stock (whether or not such shares have
been previously classified or reclassified) by setting or changing in any one or
more respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such shares of stock.

(b)
The following is a description of the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption of the shares of Common Stock classified as
the "T. ROWE PRICE NEW INCOME" series and any additional series of Common Stock
of the Corporation (unless provided otherwise by the Board of Directors with
respect to any such additional series at the time it is established and
designated):

(1)ASSETS BELONGING TO SERIES. All consideration received by the
Corporation from the issue or sale of shares of a particular series,
together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any investment or
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of account
of the Corporation. Such consideration, assets, income, earnings,
profits and proceeds, together with any General Items allocated to that
series as provided in the following sentence, are herein referred to
collectively as "assets belonging to" that series. In the event that
there are

PAGE 25
<PAGE>

any assets, income, earnings, profits or proceeds which are not readily
identifiable as belonging to any particular series (collectively,
"GENERAL ITEMS"), such General Items shall be allocated by or under the
supervision of the Board of Directors to and among any one or more of
the series established and designated from time to time in such manner
and on such basis as the Board of Directors, in its sole discretion,
deems fair and equitable; and any General Items so allocated to a
particular series shall belong to that series. Each such allocation by
the Board of Directors shall be conclusive and binding for all purposes.

(2)
LIABILITIES OF SERIES. The assets belonging to each particular series
shall be charged with the liabilities of the Corporation in respect of
that series and all expenses, costs, charges and reserves attributable
to that series, and any general liabilities, expenses, costs, charges or
reserves of the Corporation which are not readily identifiable as
pertaining to any particular series, shall be allocated and charged by
or under the supervision of the Board of Directors to and among any one
or more of the series established and designated from time to time in
such manner and on such basis as the Board of Directors, in its sole
discretion, deems fair and equitable. The liabilities, expenses, costs,
charges and reserves allocated and so charged to a series are herein
referred to collectively as "liabilities of" that series. Each
allocation of liabilities, expenses, costs, charges and reserves by or
under the supervision of the Board of Directors shall be conclusive and
binding for all purposes.

(3)
DIVIDENDS AND DISTRIBUTIONS. Dividends and capital gains distributions
on shares of a particular series may be paid with such frequency, in
such form and in such amount as the Board of Directors may determine by
resolution adopted from time to time, or pursuant to a standing
resolution or resolutions adopted only once or with such frequency as
the Board of Directors may determine, after providing for actual and
accrued liabilities of that series. All dividends on shares of a
particular series shall be paid only out of the income belonging to that
series and all capital gains distributions on shares of a particular
series shall be paid only out of the capital gains belonging to that
series. All dividends and distributions on shares of a particular series
shall be distributed pro rata to the holders of that series in
proportion to the number of shares of that series held by such holders
at the date and time of record established for the payment of such
dividends or distributions, except that in connection with any dividend
or distribution program or procedure, the Board of Directors may
determine that no dividend or

PAGE 26
<PAGE>

distribution shall be payable on shares as to which the shareholder's
purchase order and/or payment have not been received by the time or
times established by the Board of Directors under such program or
procedure. Dividends and distributions may be paid in cash, property or
additional shares of the same or another series, or a combination
thereof, as determined by the Board of Directors or pursuant to any
program that the Board of Directors may have in effect at the time for
the election by shareholders of the form in which dividends or
distributions are to be paid. Any such dividend or distribution paid in
shares shall be paid at the current net asset value thereof.

(4)
VOTING. On each matter submitted to a vote of the shareholders, each
holder of shares shall be entitled to one vote for each share standing
in his name on the books of the Corporation, irrespective of the series
thereof, and all shares of all series shall vote as a single class
("SINGLE CLASS VOTING"); provided, however, that (i) as to any matter
with respect to which a separate vote of any series is required by the
Investment Company Act or by the Maryland General Corporation Law, such
requirement as to a separate vote by that series shall apply in lieu of
Single Class Voting; (ii) in the event that the separate vote
requirement referred to in (i) above applies with respect to one or more
series, then, subject to (iii) below, the shares of all other series
shall vote as a single class; and (iii) as to any matter which does not
affect the interest of a particular series, including liquidation of
another series as described in subsection (7) below, only the holders of
shares of the one or more affected series shall be entitled to vote.

(5)
REDEMPTION BY SHAREHOLDERS. Each holder of shares of a particular series
shall have the right at such times as may be permitted by the
Corporation to require the Corporation to redeem all or any part of his
shares of that series, at a redemption price per share equal to the net
asset value per share of that series next determined after the shares
are properly tendered for redemption, less such redemption fee or sales
charge, if any, as may be established by the Board of Directors in its
sole discretion and disclosed in the current Prospectus or Statement of
Additional Information for the Corporation. Payment of the redemption
price shall be in cash; provided, however, that if the Board of
Directors determines, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or
undesirable, the Corporation may, to the extent and in the manner
permitted by the Investment Company Act, make payment wholly or partly
in securities or other assets

PAGE 27
<PAGE>

belonging to the series of which the shares being redeemed are a part,
at the value of such securities or assets used in such determination of
net asset value. Notwithstanding the foregoing, the Corporation may
postpone payment of the redemption price and may suspend the right of
the holders of shares of any series to require the Corporation to redeem
shares of that series during any period or at any time when and to the
extent permissible under the Investment Company Act.

(6)REDEMPTION BY CORPORATION. The Board of Directors may cause the
Corporation to redeem at net asset value the shares of any series from a
holder (i) if the Board of Directors of the Corporation determines in
its sole discretion that failure to so redeem such shares may have
materially adverse consequences to the holders of shares of the
Corporation or any series, or (ii) upon such other conditions with
respect to the maintenance of shareholder accounts of a minimum amount
as may from time to time be established by the Board of Directors in its
sole discretion and disclosed in the Prospectus or Statement of
Additional Information for the Corporation.

(7)
LIQUIDATION. In the event of the liquidation of a particular series, the
shareholders of the series that is being liquidated shall be entitled to
receive, as a class, when and as declared by the Board of Directors, the
excess of the assets belonging to that series over the liabilities of
that series. The holders of shares of any particular series shall not be
entitled thereby to any distribution upon liquidation of any other
series. The assets so distributable to the shareholders of any
particular series shall be distributed among such shareholders in
proportion to the number of shares of that series held by them and
recorded on the books of the Corporation. The liquidation of any
particular series in which there are shares then outstanding may be
authorized by vote of a majority of the Board of Directors then in
office, subject to the approval of a majority of the outstanding voting
securities of that series, as defined in the Investment Company Act, and
without the vote of the holders of shares of any other series. The
liquidation of a particular series may be accomplished, in whole or in
part, by the transfer of assets of such series to another series or by
the exchange of shares of such series for the shares of another series.

(8)
NET ASSET VALUE PER SHARE. The net asset value per share of any series
shall be the quotient obtained by dividing the value of the net assets
of that series (being the value of the assets belonging to that series
less the liabilities of that series) by the total number of shares of
that series outstanding, all as

PAGE 28
<PAGE>

determined by or under the direction of the Board of Directors in
accordance with generally accepted accounting principles and the
Investment Company Act. Subject to the applicable provisions of the
Investment Company Act, the Board of Directors, in its sole discretion,
may prescribe and shall set forth in the By-Laws of the Corporation or
in a duly adopted resolution of the Board of Directors such bases and
times for determining the value of the assets belonging to, and the net
asset value per share of outstanding shares of, each series, or the net
income attributable to such shares, as the Board of Directors deems
necessary or desirable. The Board of Directors shall have full
discretion, to the extent not inconsistent with the Maryland General
Corporation Law and the Investment Company Act, to determine which items
shall be treated as income and which items as capital and whether any
item of expense shall be charged to income or capital. Each such
determination and allocation shall be conclusive and binding for all
purposes.

The Board of Directors may determine to maintain the net asset value per
share of any series at a designated constant dollar amount and in
connection therewith may adopt procedures not inconsistent with the
Investment Company Act for the continuing declaration of income
attributable to that series as dividends and for the handling of any
losses attributable to that series. Such procedures may provide that in
the event of any loss, each shareholder shall be deemed to have
contributed to the capital of the Corporation attributable to that
series his pro rata portion of the total number of shares required to be
canceled in order to permit the net asset value per share of that series
to be maintained, after reflecting such loss, at the designated constant
dollar amount. Each shareholder of the Corporation shall be deemed to
have agreed, by his investment in any series with respect to which the
Board of Directors shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any
such loss.

(9)CONVERSION OR EXCHANGE RIGHTS. Subject to compliance with the
requirements of the Investment Company Act, the Board of Directors shall
have the authority to provide that holders of shares of any series shall
have the right to convert or exchange said shares into shares of one or
more other classes or series of shares in accordance with such
requirements and procedures as may be established by the Board of
Directors and as disclosed in the Corporation's current Prospectus or
Statement of Additional Information.

PAGE 29
<PAGE>

(c)
The shares of Common Stock of the Corporation, or of any series of Common Stock
of the Corporation to the extent such Common Stock is divided into series, may
be further subdivided into classes (which may, for convenience of reference, be
referred by a term other than "class"). Unless otherwise provided in the
Articles Supplementary establishing such classes, all such shares, or all shares
of a series of Common Stock in a series, shall have identical voting, dividend,
and liquidation rights. Shares of the classes shall also be subject to such
front-end sales loads, contingent deferred sales charges, expenses (including,
without limitation, distribution expenses under a Rule 12b-1 plan and
administrative expenses under an administration or service agreement, plan or
other arrangement, however designated), conversion rights, and class voting
rights as shall be consistent with Maryland law, the Investment Company Act of
1940, and the rules and regulations of the National Association of Securities
Dealers and shall be contained in Articles Supplementary establishing such
classes.

(d)For the purposes hereof and of any articles supplementary to the charter
providing for the classification or reclassification of any shares of capital
stock or of any other charter document of the Corporation (unless otherwise
provided in any such articles or document), any class or series of stock of the
Corporation shall be deemed to rank:

(1)prior to another class or series either as to dividends or upon
liquidation, if the holders of such class or series shall be entitled to
the receipt of dividends or of amounts distributable on liquidation,
dissolution or winding up, as the case may be, in preference or priority
to holders of such other class or series;

(2)
on a parity with another class or series either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates
or redemption or liquidation price per share thereof be different from
those of such others, if the holders of such class or series of stock
shall be entitled to receipt of dividends or amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or redemption or
liquidation prices, without preference or priority over the holders of
such other class or series; and

(3)junior to another class or series either as to dividends or upon
liquidation, if the rights of the holders of such class or series shall
be subject or subordinate to the rights of the holders of such other
class or series in respect of the receipt of dividends or the amounts
distributable upon liquidation, dissolution or winding up, as the case
may be.

(e)
Unless otherwise prohibited by law, so long as the Corporation is registered as
an open-end management investment company under the Investment Company Act, the
Board of Directors shall have the power and authority, without the approval of
the holders of any outstanding shares, to

PAGE 30
<PAGE>

increase or decrease the number of shares of capital stock or the number of
shares of capital stock of any class or series that the Corporation has
authority to issue.

(f)
The Corporation may issue and sell fractions of shares of capital stock having
pro rata all the rights of full shares, including, without limitation, the right
to vote and to receive dividends, and wherever the words "share" or "shares" are
used in the charter or By-Laws of the Corporation, they shall be deemed to
include fractions of shares, where the context does not clearly indicate that
only full shares are intended.

(g)
The Corporation shall not be obligated to issue certificates representing shares
of any class or series of capital stock. At the time of issue or transfer of
shares without certificates, the Corporation shall provide the shareholder with
such information as may be required under the Maryland General Corporation Law.

SEVENTH: (a) The following provisions are hereby adopted for the purpose of
defining, limiting, and regulating the powers of the Corporation and of the
directors and shareholders:

(1)
The Board of Directors is hereby empowered to authorize the issuance
from time to time of shares of its stock of any class or series, whether
now or hereafter authorized, or securities convertible into shares of
its stock of any class or series, whether now or hereafter authorized,
for such consideration as may be deemed advisable by the Board of
Directors and without any action by the shareholders.

(2)
No holder of any stock or any other securities of the Corporation,
whether now or hereafter authorized, shall have any preemptive right to
subscribe for or purchase any stock or any other securities of the
Corporation other than such, if any, as the Board of Directors, in its
sole discretion, may determine and at such price or prices and upon such
other terms as the Board of Directors, in its sole discretion, may fix;
and any stock or other securities which the Board of Directors may
determine to offer for subscription may, as the Board of Directors in
its sole discretion shall determine, be offered to the holders of any
class, series or type of stock or other securities at the time
outstanding to the exclusion of the holders of any or all other classes,
series or types of stock or other securities at the time outstanding.

(3)The Board of Directors of the Corporation shall, consistent with
applicable law, have power in its sole discretion to determine from time
to time in accordance with sound accounting practice or other reasonable
valuation methods what constitutes annual or other net profits,
earnings, surplus, or net assets in excess of capital; to determine that
retained earnings or surplus shall remain in the hands of the
Corporation; to set apart out of any funds of the Corporation

PAGE 31
<PAGE>

such reserve or reserves in such amount or amounts and for such proper
purpose or purposes as it shall determine and to abolish any such
reserve or any part thereof; to distribute and pay distributions or
dividends in stock, cash or other securities or property, out of surplus
or any other funds or amounts legally available therefor, at such times
and to the shareholders of record on such dates as it may, from time to
time, determine; and to determine whether and to what extent and at what
times and places and under what conditions and regulations the books,
accounts and documents of the Corporation, or any of them, shall be open
to the inspection of shareholders, except as otherwise provided by
statute or by the By-Laws, and, except as so provided, no shareholder
shall have any right to inspect any book, account or document of the
Corporation unless authorized so to do by resolution of the Board of
Directors.

(4)
Notwithstanding any provision of law requiring the authorization of any
action by a greater proportion than a majority of the total number of
shares of all classes and series of capital stock or of the total number
of shares of any class or series of capital stock entitled to vote as a
separate class, such action shall be valid and effective if authorized
by the affirmative vote of the holders of a majority of the total number
of shares of all classes and series outstanding and entitled to vote
thereon, or of the class or series entitled to vote thereon as a
separate class, as the case may be, except as otherwise provided in the
charter of the Corporation.

(5)The Corporation reserves the right from time to time to make any
amendments of its charter which may now or hereafter be authorized by
law, including any amendments changing the terms or contract rights, as
expressly set forth in its charter, of any of its outstanding stock by
classification, reclassification or otherwise.

(b)
The enumeration and definition of particular powers of the Board of Directors
included in the foregoing shall in no way be limited or restricted by reference
to or inference from the terms of any other clause of this or any other Article
of the charter of the Corporation, or construed as or deemed by inference or
otherwise in any manner to exclude or limit any powers conferred upon the Board
of Directors under the General Laws of the State of Maryland now or hereafter in
force.

SECOND: The amendment does not change the outstanding capital stock of the
------
Corporation or the aggregate par value thereof.

PAGE 32
<PAGE>

THIRD: The Board of Directors of the Corporation declared these Articles to
-----
be advisable and adopted them at a meeting of the Board of Directors held on
July 22, 1998. The Board of Directors then recommended that these Amendments to
the Articles be submitted to the stockholders for approval.

FOURTH: At a meeting of the stockholders held on October 15, 1998, the
------
Corporation's Common Stock, the only class of capital stock of the Corporation
entitled to vote, adopted and approved these Articles of Amendment.

FIFTH: The foregoing amendment shall be effective as of 12:01 a.m. on October
------
__, 1998.

IN WITNESS WHEREOF, T. ROWE PRICE NEW INCOME FUND, INC., has caused these
Articles of Amendment to be signed in its name and on its behalf by its Vice
President, and witnessed by its Secretary, on October __, 1998, and its Vice
President acknowledges under penalties of perjury that these Articles of
Amendment are the corporate act of the Corporation and that to the best of his
knowledge, information, and belief, these matters and facts set forth herein
with respect to the authorization and approval thereof, are true in all material
respects.

T. ROWE PRICE NEW INCOME FUND, INC.

By: ___________________________

Henry H. Hopkins, Vice President

ATTEST:

________________________

Patricia S. Butcher, Secretary

PAGE 33
<PAGE>

EXHIBIT II

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.
-----------------------------------------

ARTICLES OF AMENDMENT
---------------------

T. Rowe Price Tax-Exempt Money Fund, Inc., a Maryland corporation, having its
principal office in the City of Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:

FIRST: The Charter of the Corporation is hereby amended by deleting in its
-----
entirety Articles FIFTH and SEVENTH of the Articles of Incorporation and
substituting in lieu thereof the following:

FIFTH: (a) The total number of shares of stock of all classes and series which
the Corporation shall have the authority to issue is Five Billion
(5,000,000,000) shares of capital stock of the par value of One Cent ($0.01) per
share, and of the aggregate par value of Fifty Million Dollars ($50,000,000).
All of such shares are classified as "COMMON STOCK" of the "T. ROWE PRICE
TAX-EXEMPT MONEY" series. The Board of Directors may classify and reclassify any
unissued shares of capital stock (whether or not such shares have been
previously classified or reclassified) by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such shares of stock.

(b)
The following is a description of the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption of the shares of Common Stock classified as
the "T. ROWE PRICE TAX-EXEMPT MONEY" series and any additional series of Common
Stock of the Corporation (unless provided otherwise by the Board of Directors
with respect to any such additional series at the time it is established and
designated):

PAGE 34
<PAGE>

PAGE 35
<PAGE>

PAGE 36
<PAGE>

PAGE 37
<PAGE>

PAGE 38
<PAGE>

PAGE 39
<PAGE>

increase or decrease the number of shares of capital stock or the number of
shares of capital stock of any class or series that the Corporation has
authority to issue.

SEVENTH: (a) The following provisions are hereby adopted for the purpose of
defining, limiting, and regulating the powers of the Corporation and of the
directors and shareholders:

PAGE 40
<PAGE>

earnings or surplus shall remain in the hands of the Corporation; to set
apart out of any funds of the Corporation such reserve or reserves in
such amount or amounts and for such proper purpose or purposes as it
shall determine and to abolish any such reserve or any part thereof; to
distribute and pay distributions or dividends in stock, cash or other
securities or property, out of surplus or any other funds or amounts
legally available therefor, at such times and to the shareholders of
record on such dates as it may, from time to time, determine; and to
determine whether and to what extent and at what times and places and
under what conditions and regulations the books, accounts and documents
of the Corporation, or any of them, shall be open to the inspection of
shareholders, except as otherwise provided by statute or by the By-Laws,
and, except as so provided, no shareholder shall have any right to
inspect any book, account or document of the Corporation unless
authorized so to do by resolution of the Board of Directors.

SECOND: The amendment does not change the outstanding capital stock of the
------
Corporation or the aggregate par value thereof.

PAGE 41
<PAGE>

FIFTH: The foregoing amendment shall be effective as of 12:01 a.m. on October
------
__, 1998.

IN WITNESS WHEREOF, T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC., has caused
these Articles of Amendment to be signed in its name and on its behalf by its
Vice President, and witnessed by its Secretary, on October __, 1998, and its
Vice President acknowledges under penalties of perjury that these Articles of
Amendment are the corporate act of the Corporation and that to the best of his
knowledge, information, and belief, these matters and facts set forth herein
with respect to the authorization and approval thereof, are true in all material
respects.

T. ROWE PRICE TAX-EXEMPT MONEY FUND, INC.

By: ___________________________

Henry H. Hopkins, Vice President

ATTEST:

________________________

Patricia S. Butcher, Secretary

PROXY CARD INSERT -- TEXT TO BE PROVIDED

<PAGE>

T. Rowe Price Associates, Inc.
- - --------------------------------------------------------------------------------
100 East Pratt Street Baltimore, Maryland 21202
James S. Riepe Vice Chairman of the Board

September 3, 1998

Dear Shareholder:

We cordially invite you to attend the Annual Meeting of Shareholders of the T.
Rowe Price Fixed Income Funds on Thursday, October 15, 1998. Several important
issues affecting your funds will be on the agenda, and we ask you to read the
enclosed information carefully and register your vote.

The directors and management of the Tax-Free Insured Intermediate Bond and
Florida Insured Intermediate Funds recommend a change in each fund's investment
objective, specifically, removing the requirement that each fund invest
primarily (at least 65% of assets) in insured bonds. We believe you will be
better served over time if your fund managers have more flexibility in selecting
bonds, while maintaining high credit quality, for the following reasons:

. REDUCED VOLATILITY. As you no doubt know, diversification of assets
typically reduces the volatility of a portfolio while increasing
opportunities to enhance returns. Volatility is reduced because different
types of bonds may respond differently to changes in interest rates and
economic conditions, smoothing out the impact of such changes on a portfolio.
At the same time, returns may be increased by using research to find good
values -- for example, bonds whose credit ratings are likely to improve or
that seem undervalued by the market;

. INCREASED OPPORTUNITIES. A portfolio consisting primarily of insured bonds
inhibits a manager's ability to capitalize on opportunities for two main
reasons. First, insured bonds are generally more sensitive than uninsured
bonds to interest rate changes, thereby increasing the portfolio's overall
volatility. Second, by essentially eliminating differences in credit quality,
insurance limits our efforts to take full advantage of T. Rowe Price's
extensive research resources;

. LOWER OVERALL RISK. About 50% of new municipal bonds coming to market today
carry bond insurance, compared with about 20% earlier in the decade when your
funds began. As a result, even if the proposed change is approved, the funds
are likely to continue holding a large number of insured bonds, and each
fund's average credit quality will remain high. At the same time, greater
diversification in credit quality could reduce the portfolios' overall risk
and may increase their long-term return potential.

If you approve this change in the funds' investment programs, the directors
expect to remove the reference to insurance in their names to reflect their
broader diversification. Their names would become the Tax-Free Intermediate Bond
Fund and the Florida Intermediate Tax-Free Fund.

Shareholders of both funds will also be voting on a selection of independent
accountants, and shareholders of the Tax-Free Insured Intermediate Bond Fund
will be voting on the election of directors and trustees. Your vote is important
on all proposals, which are explained in detail in the following pages.

If you have any questions, please call us at 1-800-225-5132. YOUR VOTE IS
EXTREMELY IMPORTANT. Instructions on how to vote by mail, by telephone, or on
the Internet are contained on the card, which is enclosed for your convenience.

Sincerely,

/s/James S. Riepe
James S. Riepe

<PAGE>

September 3, 1998

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of the T.
Rowe Price Fixed Income Funds on Thursday, October 15, 1998. Several important
issues affecting your funds will be on the agenda, and we ask you to read the
enclosed information carefully and register your vote.

The funds are holding shareholder meetings in 1998 to elect directors and
trustees, and to ratify the selection of independent accountants. In addition,
the directors of the New Income and Tax-Exempt Money Funds recommend changing
their charters to permit the creation of classes of shares for those funds. The
changes would conform their charters to those of other T. Rowe Price funds.
These provisions would enable us to provide various services for investors who
want them, and allocate expenses accordingly. For example:

. A new class of shares in Tax-Exempt Money Fund would allow the fund to offer
cash management services, including a debit card and checkwriting privileges,
with additional expenses paid by shareholders who use those services rather
than by existing shareholders.

. Separate classes would permit us to pursue other distribution channels,
although we have no current plans to do so.

We believe you will be better served over time by voting for these amendments.
Since most of the proposals are common to all of the funds, we have combined our
discussion into a single proxy statement to reduce fund expenses. If you own
more than one fund, the combined proxy will also save you the time of reading
more than one document. Please note, however, that if you own more than one
fund, you must vote on a separate card for each fund.

We realize that it may be difficult for you to attend the meeting and vote your
shares in person. However, WE DO NEED YOUR VOTE. YOU CAN VOTE BY MAIL,
TELEPHONE, OR THROUGH THE INTERNET, AS EXPLAINED ON THE ENCLOSED PROXY INSERT.
By voting promptly, you help the funds avoid the expense of additional mailings.
If you later decide to attend the meeting, you may revoke your proxy and vote
your shares in person if you wish.

Remember, this is your opportunity to voice your opinion on matters affecting
the funds. Your participation is extremely important. If you would like
additional information concerning the matters proposed for action at the
meeting, please let us know.

Sincerely,

/s/James S. Riepe
James S. Riepe

<PAGE>

VOTE BY TOUCH-TONE PHONE OR THE INTERNET
- - ----------------------------------------

CALL TOLL-FREE: 1-800-_________ OR VISIT THE WEBSITE WWW.PROXYWEB.COM

[SEE THE ENCLOSED INSERT FOR FURTHER INSTRUCTIONS ON VOTING BY PHONE OR
INTERNET.]

Please detach card at perforation before mailing

- - -------------------------------------------------------------------------------

FUND NAME ("Fund") MEETING TIME: 8:30 A.M. EASTERN TIME THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF TRUSTEES/DIRECTORS

By my signature below, I appoint James S. Riepe and Patricia S. Butcher as
proxies to vote all Fund shares that I am entitled to vote at the Annual Meeting
of Shareholders to be held in the offices of the Fund at 100 East Pratt Street,
Baltimore, MD 21202, on October 15, 1998, at 8:30 a.m., ET and at any
adjournments of the meeting. Any one or more of Mr. Riepe or Ms. Butcher may
vote the shares designated below, and they may appoint substitutes to vote the
shares designated below on their behalf. I instruct Mr. Riepe and Ms. Butcher to
vote this proxy as specified on the reverse side, and I revoke any previous
proxies that I have executed. I acknowledge receipt of the Fund's Notice of
Annual Meeting of Shareholders and proxy statement.

PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE IF
YOU ARE NOT VOTING BY PHONE OR
INTERNET.

Date_____________________

NOTE: Please sign exactly as
your name appears on this
proxy. Joint owners should
each sign personally.
Directors and other
fiduciaries should indicate
the capacity in which they
sign, and where more than one
name appears, a majority must
sign. If a corporation, this
signature should be that of an
authorized officer who should
state his or her title.
______________________________
CONTINUED ON REVERSE SIDE Signature(s) (and Title(s),
if applicable)

<PAGE>

Please refer to the Proxy Statement discussion of these proposals. THE PROXY
WILL BE VOTED FOR THE PROPOSALS IF YOU DO NOT SPECIFY OTHERWISE. Your appointed
attorneys will vote any other matters that arise at the meeting in accordance
with their best judgment. THE BOARD OF DIRECTORS/TRUSTEES RECOMMENDS A VOTE FOR
EACH OF THE FOLLOWING:

Please detach at perforation before mailing.

- - --------------------------------------------------------------------------------

Please vote by checking the appropriate box(es) below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>

FOR ALL WITHHOLD
NOMINEES AUTHORITY FOR ALL EXCEPT
1. To elect the directors/trustees / / / / / /
listed below.
Calvin W. Burnett Anthony W.
Deering F. Pierce Linaweaver
William T. Reynolds James S.
Riepe John G. Schreiber
M. David Testa
NOTE: IF YOU DO NOT WISH YOUR
SHARES VOTED "FOR" A PARTICULAR
NOMINEE, MARK THE "FOR ALL
EXCEPT" BOX AND STRIKE A LINE
THROUGH THE NAME(S) OF THE
NOMINEE(S). YOUR SHARES WILL BE
VOTED FOR THE REMAINING
NOMINEES.
FOR AGAINST ABSTAIN
2. To ratify the appointment of / / / / / /
PricewaterhouseCoopers LLP, as
independent accountants of the
Fund its current fiscal year.

3. SHAREHOLDERS OF FLORIDA INSURED / / / / / /
INTERMEDIATE TAX-FREE AND T.
ROWE PRICE TAX-FREE INSURED
INTERMEDIATE BOND FUNDS ONLY. To
amend the investment objectives
of each Fund to remove the
requirement that each Fund's
total assets be invested
primarily in insured bonds.

4. SHAREHOLDERS OF T. ROWE PRICE / / / / / /
NEW INCOME AND T. ROWE PRICE
TAX-EXEMPT MONEY FUNDS ONLY. To
amend each Fund's Articles of
Incorporation to authorize
creating different classes and
series and to conform the
provisions describing classes
and series to those standard for
other T. Rowe Price funds.
</TABLE>

PLEASE SIGN ON REVERSE SIDE