Item 1. Report to Shareholders
T. Rowe Price Tax-Free Income Fund
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February 29, 2004
Certified Annual Report
This report is certified under the Sarbanes-Oxley Act of 2002, which requires
that public companies, including mutual funds, affirm that the information
provided in their annual and semiannual shareholder reports fully and fairly
represents their financial position.
T. Rowe Price Tax-Free Income Fund
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Certified Annual Report
Performance Comparison
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This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
[Graphic Omitted]
TAX-FREE INCOME FUND
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As of 2/29/04
Tax-Free Income Fund $17,860
Lipper General Municipal Debt Funds Average $16,838
Lipper General Municipal
Debt Funds Average Tax-Free Income Fund
2/94 $10,000 $10,000
2/95 10,065 10,190
2/96 11,072 11,240
2/97 11,594 11,781
2/98 12,680 12,885
2/99 13,305 13,591
2/00 12,678 13,127
2/01 14,127 14,774
2/02 14,919 15,660
2/03 15,845 16,821
2/04 16,838 17,860
Note: Performance for the Advisor Class will vary due to the differing fee
structure. See returns table below.
Average Annual Compound Total Return
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Since Inception
Periods Ended 2/29/04 1 Year 5 Years 10 Years Inception Date
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Tax-Free Income Fund 6.17% 5.61% 5.97% - -
Lipper General Municipal Debt
Funds Average 5.94 4.84 5.34 - -
Tax-Free Income Fund-
Advisor Class 5.82 - - 4.84% 9/30/02
Lipper General Municipal
Debt Funds Average 5.94 - - 4.53
Returns do not reflect taxes that the shareholder may pay on fund distributions
or the redemption of fund shares. Past performance cannot guarantee future
results.
T. Rowe Price Tax-Free Income Fund
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Certified Annual Report
Dear Shareholder,
We are pleased to report that your fund posted a solid return of 6.17% during
the 12 months ended February 29, 2004, surpassing the Lipper General Municipal
Debt Funds Average during the period, as shown in the table on the preceding
page. The fund's results were largely due to our credit decisions and low
expenses. The Advisor shares slightly lagged due to higher expenses for
additional services.
As you know, the fund seeks to provide a high level of income that is exempt
from federal income taxes by investing primarily in long-term investment-grade
municipal bonds. The fund's weighted average maturity is normally around 15
years or longer.
Major Index Returns
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Period Ended 2/29/04 12-Month Return
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Lehman Brothers U.S. Aggregate Index 4.54%
Lehman Brothers Municipal Bond Index 6.30
Lehman Brothers High Yield
Municipal Bond Index 16.15
The Major Index Returns table shows how various quality bonds performed over the
fund's fiscal year. High-yield municipal bonds far outperformed their
higher-rated counterparts--the types of securities in which we invest--in both
the tax-exempt and taxable markets over the 12-month period.
Top 5 Sectors
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Percent of Net Assets
Periods Ended 2/28/03 2/29/04
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Hospital Revenue 15.4% 13.4%
Electric Revenue 12.8 11.7
Prerefunded Bonds 9.8 10.9
Dedicated Tax Revenue 7.0 8.1
General Obligation - Local 7.9 7.5
The Top 5 Sectors table shows how portfolio assets were allocated during the
reporting period. Hospital and electric revenue securities accounted for 13.4%
and 11.7% of fund assets, respectively, followed by prerefunded bonds at 10.9%,
dedicated tax revenue bonds at 8.1%, and local general obligations at 7.5%.
The Portfolio Characteristics table shows various portfolio details as of
February 29, 2004, compared with one year earlier. The weighted average maturity
of the portfolio fell from 14.9 to 14.0 years, the 30-day standardized yield to
maturity slipped from 3.60% to 3.06% as rates declined in general, and the
portfolio's weighted average quality remained stable at AA-.
Portfolio Characteristics
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Periods Ended 2/28/03 2/29/04
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Tax-Free Income Fund
Share Price $10.05 $10.21
Dividends Per Share for
12 Months 0.47 0.44
30-Day Standardized Yield
to Maturity 3.60% 3.06%
Tax-Free Income Fund-Advisor
Class Share Price $10.05 $10.21
Dividends Per Share for
12 Months - 0.41
30-Day Standardized Yield
to Maturity 3.23% 2.71%
Weighted Average
Maturity (years) 14.9 14.0
Weighted Average Effective
Duration (years) 6.1 5.4
Weighted Average Quality * AA- AA-
* Based on T. Rowe Price research.
Note: Yield will vary and is not guaranteed.
Finally, I'm sure you are aware that mutual fund companies have recently come
under scrutiny for their trading policies. The investigations have led to
allegations that executives of several mutual fund companies permitted or
engaged in improper mutual fund trading. In addition, certain intermediaries
that process fund transactions are alleged to have assisted some investors in
executing improper mutual fund trades. I want T. Rowe Price shareholders to know
that we emphatically condemn the abuses that have been revealed or alleged
against other firms in our industry. Our firm has not entered and will not enter
into any agreements with any investors or intermediaries that authorize
after-hours trading or excessive short-term trading in any of our funds. T. Rowe
Price investors can be assured that our firm unequivocally opposes illegal or
inappropriate trading of any nature and has policies and procedures in place
designed to protect the best interests of our long-term shareholders. We have
reviewed
trading by T. Rowe Price personnel in the T. Rowe Price mutual funds over the
last several years and did not uncover the existence of any of the abusive
trading practices described in recent regulatory enforcement actions relating to
fund portfolio managers and senior fund executives. You may find out more about
our trading policies and the steps we take to protect your interests by visiting
our Web site (troweprice.com). These policies are also spelled out in your
fund's prospectus.
We thank you for your continued support.
Respectfully,
James S. Riepe
Chairman
March 19, 2004
T. Rowe Price Tax-Free Income Fund
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Certified Annual Report
Financial Highlights For a share outstanding throughout each period
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Tax-Free Income class
Year
Ended
2/29/04 2/28/03 2/28/02 2/28/01 2/29/00
NET ASSET VALUE
Beginning of period $ 10.05 $ 9.81 $ 9.72 $ 9.10 $ 9.94
Investment activities
Net investment
income (loss) 0.44 0.47 0.48 0.49 0.49
Net realized and
unrealized gain (loss) 0.16 0.24 0.09 0.62 (0.83)
Total from
investment activities 0.60 0.71 0.57 1.11 (0.34)
Distributions
Net investment income (0.44) (0.47) (0.48) (0.49) (0.49)
Net realized gain - - - - (0.01)
Total distributions (0.44) (0.47) (0.48) (0.49) (0.50)
NET ASSET VALUE
End of period $ 10.21 $ 10.05 $ 9.81 $ 9.72 $ 9.10
-------------------------------------------------
Ratios/Supplemental Data
Total return^ 6.17% 7.42% 5.99% 12.55% (3.42%)
Ratio of total expenses to
average net assets 0.54% 0.55% 0.54% 0.54% 0.55%
Ratio of net investment
income (loss) to average
net assets 4.47% 4.78% 4.95% 5.25% 5.24%
Portfolio turnover rate 26.9% 24.4% 28.2% 28.6% 44.3%
Net assets, end of period
(in millions) $ 1,509 $ 1,501 $ 1,442 $ 1,403 $ 1,311
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Income Fund
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Certified Annual Report
Financial Highlights For a share outstanding throughout each period
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Advisor Class
Year 9/30/02
Ended Through
2/29/04 2/28/03
NET ASSET VALUE
Beginning of period $ 10.05 $ 10.13
Investment activities
Net investment income 0.41 0.18*
Net realized and
unrealized gain (loss) 0.16 (0.08)**
Total from investment activities 0.57 0.10
Distributions
Net investment income (0.41) (0.18)
NET ASSET VALUE
End of period $ 10.21 $ 10.05
---------------------------
Ratios/Supplemental Data
Total return^ 5.82% 1.02%*
Ratio of total expenses to
average net assets 0.86% 0.90%*!
Ratio of net investment
income (loss) to average
net assets 4.10% 4.48%*!
Portfolio turnover rate 26.9% 24.4%
Net assets, end of period
(in thousands) $ 165 $ 147
** The amount presented is calculated pursuant to a methodology prescribed
by the Securities and Exchange Commission for a share outstanding
throughout the period. This amount is inconsistent with the fund's
aggregate gains and losses because of the timing of sales and redemptions
of fund shares in relation to fluctuating market values for the investment
portfolio.
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* Excludes expenses in excess of a 0.90% contractual expense limitation in
effect through 6/30/04.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Income Fund
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Certified Annual Report February 29, 2004
Portfolio of Investments (ss.) Par Value
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($ 000s)
ALABAMA 1.5%
Alabama, GO, 5.00%, 9/1/16 5,810 6,365
Alabama Water Pollution Control Auth.,
6.75%, 8/15/17 (AMBAC Insured) 2,685 2,902
Alexander Special Care Fac. Fin., Russell Hosp.,
6.00%, 12/1/22 750 754
Baldwin County Eastern Shore Hosp. Auth.
Thomas Hosp.
5.75%, 4/1/27 1,005 980
6.75%, 4/1/21 1,450 1,507
Camden Ind. Dev. Board IDRB, Weyerhaeuser,
6.125%, 12/1/24 2,500 2,711
Phoenix County IDB, PCR, MeadWestvaco,
6.10%, 5/15/30 3,750 3,960
Tuscaloosa County Board of Ed.,
VRDN (Currently 0.94%) 5,330 5,330
Total Alabama (Cost $23,532) 24,509
ALASKA 0.6%
Alaska HFC
5.30%, 12/1/17 2,760 2,913
5.85%, 12/1/14 (MBIA Insured) 1,705 1,780
5.88%, 12/1/24 (MBIA Insured) 5,510 5,728
Valdez Marine, BP Amoco, VRDN (Currently 0.99%) 100 100
Total Alaska (Cost $9,781) 10,521
ARIZONA 0.7%
Arizona School Fac. Board, 5.50%, 7/1/18 5,000 5,701
Salt River Agricultural Improvement & Power,
5.00%, 1/1/08 2,250 2,502
Scottsdale IDA, Scottsdale Healthcare,
5.80%, 12/1/31 2,000 2,133
Yavapai County IDA, Yavapai Regional
Medical Center, 6.00%, 8/1/33 1,100 1,145
Total Arizona (Cost $10,595) 11,481
ARKANSAS 0.5%
Little Rock Health Fac. Board, Baptist Health,
6.85%, 11/1/08 2,495 2,935
North Little Rock, 6.50%, 7/1/15
(MBIA Insured) 4,000 5,037
Total Arkansas (Cost $6,479) 7,972
CALIFORNIA 9.7%
California, GO
5.00%, 2/1/10 5,520 6,072
5.00%, 2/1/33 3,750 3,744
5.10%, 2/1/34 5,000 5,010
5.50%, 11/1/33 7,500 7,837
5.65%, 6/1/30 2,500 2,652
California CDA
Community Hosp. of Monterey Peninsula,
5.25%, 6/1/23 (FSA Insured) 2,000 2,155
Sutter Health, 5.63%, 8/15/42 3,850 4,043
California Dept. of Water Resources
5.38%, 5/1/21 2,000 2,133
5.75%, 5/1/17 3,000 3,387
Central Valley Project,
5.00%, 12/1/13 (FGIC Insured) 8,000 9,081
California Public Works Board
Dept. Corrections
5.00%, 6/1/25 4,810 4,821
5.25%, 6/1/28 10,000 10,192
Capistrano Unified School Dist.,
5.875%, 9/1/23 1,415 1,452
Folsom, 5.875%, 9/1/28 3,000 3,055
Foothill / Eastern Transportation Corridor Agency
Zero Coupon, 1/1/15 (Escrowed to Maturity) 5,000 3,257
Zero Coupon, 1/1/17 (Escrowed to Maturity) 18,000 10,488
Golden State Tobacco Securitization Corp.
5.00%, 6/1/38 (AMBAC Insured) 5,100 5,272
5.50%, 6/1/33 7,500 7,674
5.625%, 6/1/38 8,500 8,749
Los Angeles, 6.00%, 9/1/14 (Prerefunded 9/1/04!)
(MBIA Insured) 5,000 5,229
Los Angeles County, Marina del Rey, COP,
6.50%, 7/1/08 3,250 3,325
Los Angeles Dept. of Water & Power, 5.00%, 7/1/23
(MBIA Insured) 5,000 5,310
Los Angeles Harbor, 7.60%, 10/1/18
(Escrowed to Maturity) 3,440 4,452
Orange County, Residual Interest Bond / Inverse
Floater (Currently 10.50%),
7/1/19 (MBIA Insured) 3,000 3,698
San Francisco Public Utility Comm., 5.00%, 11/1/27
(FSA Insured) 8,000 8,362
Southern California Public Power Auth.,
6.75%, 7/1/11 4,050 5,022
Union Elementary School Dist., GO
Zero Coupon, 9/1/12 (FGIC Insured) 2,945 2,176
Zero Coupon, 9/1/13 (FGIC Insured) 3,520 2,460
Univ. of California Regents
5.125%, 5/15/15 (AMBAC Insured) 6,900 7,782
5.125%, 5/15/17 (AMBAC Insured) 10,000 11,145
West Hollywood, East Side Redev.,
5.625%, 9/1/28 2,015 2,045
Total California (Cost $148,685) 162,080
COLORADO 1.7%
Colorado HFA
Adventist Health Systems, 6.50%, 11/15/31 2,500 2,773
Catholic Health Initiatives
VRDN (Currently 1.00%) 3,000 3,000
5.25%, 9/1/21 1,860 1,951
Covenant Retirement Communities,
6.125%, 12/1/33 2,000 2,084
Sisters of Charity of Leavenworth,
VRDN (Currently 0.96%) 2,000 2,000
Colorado Housing & Fin. Auth., Single Family
Mortgage, VRDN (Currently 0.96%) 15,860 15,860
E-470 Public Highway Auth., Zero Coupon, 8/31/26
(Prerefunded 8/31/05!) 5,500 1,126
Total Colorado (Cost $28,156) 28,794
CONNECTICUT 1.5%
Connecticut
4.00%, 9/1/05 (FGIC Insured) 10,000 10,435
7.125%, 6/1/10 7,350 9,138
Mohegan Tribe Indians
5.25%, 1/1/33 3,000 3,004
6.00%, 1/1/16 2,250 2,487
Total Connecticut (Cost $22,876) 25,064
DELAWARE 0.2%
Delaware HFA, Beebe Medical Center,
6.75%, 6/1/14 3,500 3,595
Total Delaware (Cost $3,446) 3,595
DISTRICT OF COLUMBIA 2.7%
District of Columbia, GO
5.125%, 6/1/17 (AMBAC Insured) 12,720 14,088
5.25%, 6/1/27 (MBIA Insured) 8,645 9,186
6.00%, 6/1/14 (MBIA Insured) 4,400 5,366
6.00%, 6/1/15 (MBIA Insured) 1,550 1,884
6.00%, 6/1/17 (MBIA Insured) 4,250 5,192
District of Columbia
5.25%, 6/1/27 (Prerefunded 6/1/08!)
(MBIA Insured) 1,330 1,521
6.00%, 6/1/14 (Escrowed to Maturity)
(MBIA Insured) 2,305 2,836
District of Columbia Tobacco Corp.,
5.25%, 5/15/09 5,000 5,037
Total District of Columbia (Cost $40,497) 45,110
FLORIDA 3.5%
Dade County, Zero Coupon, 2/1/09
(MBIA Insured) 12,185 10,290
Florida, GO, 5.00%, 7/1/32 6,030 6,335
Florida Board of Ed.
5.00%, 1/1/15 (MBIA Insured) 10,185 11,430
5.50%, 7/1/14 (AMBAC Insured) 5,470 6,371
GO, 5.00%, 6/1/05 1,425 1,494
Highlands County HFA
Adventist Health Systems
5.875%, 11/15/29 7,000 7,545
6.00%, 11/15/31 2,750 2,965
Lee County Hosp., Memorial Health Systems
VRDN (Currently 0.99%) 3,200 3,200
Orange County HFA, Westminster
Community Care, 6.75%, 4/1/34 2,500 1,953
Port St. Lucie Utility
Zero Coupon, 9/1/16 (Prerefunded 9/1/06!)
(FGIC Insured) 5,000 2,705
Zero Coupon, 9/1/26 (Prerefunded 9/1/06!)
(FGIC Insured) 5,000 1,420
Santa Rosa HFA, Baptist Health Care,
VRDN (Currently 0.95%) 3,000 3,000
Total Florida (Cost $55,742) 58,708
GEORGIA 4.9%
Chatham County Hosp. Auth., Memorial Univ.
Medical Center, 6.125%, 1/1/24 4,000 4,353
Coweta County Residential Care Fac. for the Elderly
Wesley Woods of Newnan-Peachtree City
8.20%, 10/1/16 1,350 1,413
8.25%, 10/1/26 1,800 1,886
Forsyth County School Dist., GO,
5.75%, 2/1/18 2,800 3,251
Fulton-Dekalb Hosp. Auth.
Grady Memorial Hosp.
6.80%, 1/1/07 (Escrowed to Maturity)
(AMBAC Insured) 5,530 6,331
6.80%, 1/1/08 (Escrowed to Maturity)
(AMBAC Insured) 5,905 6,968
6.85%, 1/1/09 (Escrowed to Maturity)
(AMBAC Insured) 6,310 7,645
6.85%, 1/1/10 (Escrowed to Maturity)
(AMBAC Insured) 6,745 8,351
Georgia Private Colleges & Univ. Auth.,
Emory Univ., 5.50%, 11/1/24 6,225 6,905
Gwinnett County School Dist., GO,
6.40%, 2/1/11 1,905 2,346
Metropolitan Atlanta Rapid Transit Auth.,
6.90%, 7/1/16 (Prerefunded 7/1/04!)
(MBIA Insured) 5,655 5,884
Municipal Electric Auth. of Georgia
5.50%, 1/1/20 3,000 3,461
5.70%, 1/1/19 (FGIC Insured) 5,100 6,081
6.40%, 1/1/07 (Escrowed to Maturity)
(AMBAC Insured) 845 958
6.40%, 1/1/07 (AMBAC Insured) 6,655 7,518
7.25%, 1/1/24 (AMBAC Insured) 6,500 8,967
Total Georgia (Cost $70,505) 82,318
HAWAII 0.5%
Hawaii Airport System, 5.75%, 7/1/21
(FGIC Insured) 4,000 4,545
Hawaii Dept. of Budget & Fin.,
Hawaii Pacific Health, 6.25%, 7/1/21 4,000 4,187
Total Hawaii (Cost $7,817) 8,732
IDAHO 0.2%
Nez Perce County IDRB, PCR, Potlatch,
7.00%, 12/1/14 2,600 2,827
Total Idaho (Cost $2,600) 2,827
ILLINOIS 3.7%
Chicago, GO
5.50%, 1/1/14 (FSA Insured) 5,000 5,867
5.50%, 1/1/18 (AMBAC Insured) 3,880 4,535
Chicago, 6.75%, 1/1/35 (Prerefunded 7/1/10!)
(FGIC Insured) 5,000 6,289
Chicago O'Hare Int'l. Airport, United Airlines,
6.30%, 5/1/16 * 4,555 1,133
Cook County High School District # 201, GO,
J Sterling Morton Township, Zero Coupon, 12/1/07
(AMBAC Insured) 5,000 4,615
Illinois
5.50%, 6/15/16 2,000 2,278
6.125%, 6/15/16 2,000 2,371
Illinois EFA, Northwestern Univ., 5.25%, 11/1/32
(Tender 11/1/14) 4,000 4,600
Illinois HFA
VRDN (Currently 0.94%) 3,000 3,000
Central Dupage Health, VRDN
(Currently 1.00%) 1,600 1,600
Glen Oaks Medical Center, 7.00%, 11/15/19
(Escrowed to Maturity) 3,300 3,381
Metropolitan Pier & Expo Auth., Zero Coupon,
6/15/18 (FGIC Insured) 14,160 7,431
Regional Transportation Auth.
6.70%, 11/1/21 (FGIC Insured) 5,000 6,556
7.75%, 6/1/19 (FGIC Insured) 5,350 7,597
Total Illinois (Cost $56,526) 61,253
INDIANA 1.2%
Goshen, Greencroft Obligated Group,
5.75%, 8/15/19 3,000 2,982
Indiana HFFA, Clarian Health Partners,
5.50%, 2/15/16 6,705 7,097
Indiana State Office Building Commission,
5.50%, 7/1/20 (Prerefunded 7/1/05!)
(AMBAC Insured) 4,500 4,853
Indiana Transportation Fin. Auth.,
5.375%, 12/1/25 4,000 4,325
Total Indiana (Cost $17,567) 19,257
IOWA 0.6%
Iowa Fin. Auth.
Single Family Mortgage, 5.70%, 1/1/27 3,340 3,506
Wesley Retirement Services, 6.25%, 2/1/12
(Prerefunded 8/1/05!) 2,400 2,587
Scott County, Ridgecrest Village,
7.25%, 11/15/26 4,000 4,156
Total Iowa (Cost $9,480) 10,249
KANSAS 0.3%
Kansas Department Transportation, VRDN
(Currently 0.95%) 5,400 5,400
Total Kansas (Cost $5,400) 5,400
LOUISIANA 0.4%
Calcasieu Parish, PCR, Entergy, 5.45%,
7/1/10 1,750 1,759
West Feliciana Parish PCR, Entergy,
5.65%, 9/1/28 (Tender 9/1/04) 5,000 5,093
Total Louisiana (Cost $6,750) 6,852
MAINE 0.2%
Maine Housing Auth., 6.10%, 11/15/15
(AMBAC Insured) 3,000 3,184
Total Maine (Cost $3,000) 3,184
MARYLAND 3.1%
Baltimore City, Convention Center, 6.00%, 9/1/17
(Prerefunded 9/1/04!) (FGIC Insured) 1,750 1,795
Baltimore IDA, GO, VRDN (Currently 0.94%) 1,300 1,300
Calvert County Economic Dev., Asbury Solomons
Obligation Group, VRDN (Currently 0.95%) 2,700 2,700
Frederick County EFA, Mount. St. Mary's College
VRDN (Currently 0.94%) 2,000 2,000
Maryland CDA
Single Family
5.95%, 4/1/16 5,000 5,277
6.45%, 4/1/14 1,390 1,420
Maryland HHEFA
Beth Tfiloh Dahan Community School,
VRDN (Currently 0.95%) 3,300 3,300
Carnegie Institution of Washington,
VRDN (Currently 0.96%) 2,700 2,700
Johns Hopkins Hosp., Zero Coupon, 7/1/19 7,675 3,788
Loyola College, VRDN (Currently 0.96%)
(MBIA Insured) 400 400
Mercy Ridge Retirement Community,
6.00%, 4/1/35 2,535 2,576
Sheppard & Enoch Pratt Foundation,
1.25%, 7/1/28 (RAA Insured) 9,500 9,500
Univ. of Maryland Medical System,
7.00%, 7/1/22 (FGIC Insured) 1,500 1,990
Maryland Transportation Auth.,
Baltimore/Washington Airport,
VRDN (Currently 0.90%) 2,000 2,000
Prince George's County, Dimensions Health,
5.30%, 7/1/24 6,685 4,897
Univ. of Maryland, Auxiliary Fac. & Tuition,
5.75%, 4/1/17 (Prerefunded 4/1/06!) 5,000 5,509
Total Maryland (Cost $49,339) 51,152
MASSACHUSETTS 5.3%
Massachusetts
GO, VRDN (Currently 0.99%) 13,130 13,130
5.25%, 8/1/16 (Prerefunded 8/1/13!) 10,000 11,589
Massachusetts Bay Transportation Auth., GO
7.00%, 3/1/14 3,150 4,047
7.00%, 3/1/21 6,200 8,160
Massachusetts Dev. Fin. Agency, Boston Univ.,
5.375%, 5/15/39 (XLCA Insured) 5,000 5,719
Massachusetts HEFA
Harvard Univ.
6.00%, 7/1/35 (Prerefunded 7/1/10!) 3,500 4,263
6.25%, 4/1/20 5,000 6,346
Partners Healthcare System, 5.75%, 7/1/32 4,400 4,779
Massachusetts Housing Fin. Agency,
6.30%, 12/1/14 2,040 2,131
Massachusetts Municipal Wholesale Electric,
5.25%, 7/1/04 (MBIA Insured) 7,000 7,101
Massachusetts Port Auth., 5.75%, 7/1/29 5,000 5,535
Massachusetts Water Pollution Abatement Trust
5.25%, 8/1/20 3,750 4,157
5.75%, 8/1/29 5,000 5,709
6.00%, 8/1/19 5,000 6,209
Total Massachusetts (Cost $78,686) 88,875
MICHIGAN 1.2%
Michigan Building Auth., 5.50%, 10/15/19 5,000 5,659
Michigan Hosp. Fin. Auth.
Ascension Health, 5.25%, 11/15/26 3,570 3,716
Trinity Health, 6.00%, 12/1/20 1,500 1,684
Michigan Strategic Fund Limited Obligation,
Ford Motor Company, 7.10%, 2/1/06 1,180 1,289
Michigan Strategic Fund, IDRB, Detroit Edison,
5.45%, 9/1/29 5,000 5,232
Univ. of Michigan, Univ. of Michigan Medical
Savings Plan, VRDN (Currently 0.98%) 2,505 2,505
Total Michigan (Cost $18,852) 20,085
MINNESOTA 0.6%
Minneapolis & St. Paul Metropolitan Airport,
5.25%, 1/1/32 (FGIC Insured) 10,000 10,703
Total Minnesota (Cost $9,743) 10,703
MISSISSIPPI 0.7%
Gulfport Hosp. Fac., Memorial Hosp. at Gulfport,
5.75%, 7/1/31 3,500 3,663
Mississippi Business Fin., PCR, Entergy,
5.90%, 5/1/22 7,000 7,052
Warren County, PCR, Entergy, 7.00%, 4/1/22 1,500 1,532
Total Mississippi (Cost $11,896) 12,247
MISSOURI 0.1%
Good Shepherd Nursing Home Dist.,
5.90%, 8/15/23 2,000 1,791
Total Missouri (Cost $2,000) 1,791
NEBRASKA 0.2%
Omaha Public Power Dist., 6.20%, 2/1/17
(Escrowed to Maturity) 3,000 3,711
Total Nebraska (Cost $2,990) 3,711
NEVADA 1.8%
Clark County, Fuel Tax, 5.125%, 7/1/16
(AMBAC Insured) 10,870 12,139
Clark County Airport, McCarran Int'l.
Airport, 4.75%, 7/1/22 (MBIA Insured) 2,970 3,037
Clark County IDRB, PCR, Southwest Gas,
5.45%, 3/1/38 (Tender 3/1/13) 5,000 5,409
Clark County School Dist., GO,
7.00%, 6/1/11 (MBIA Insured) 3,500 4,435
Nevada, 7.25%, 11/1/10 (Escrowed to
Maturity) 3,050 3,095
Truckee Meadows Water Auth., 5.50%,
7/1/19 (FSA Insured) 2,500 2,825
Total Nevada (Cost $28,066) 30,940
NEW HAMPSHIRE 2.2%
New Hampshire Business Fin. Auth., PCR,
5.45%, 5/1/21 (MBIA Insured) 14,500 16,108
New Hampshire HHEFA
Covenant Health System, 6.00%, 7/1/22 3,400 3,630
Dartmouth-Hitchcock Obligation Group,
5.50%, 8/1/27 (FSA Insured) 7,930 8,697
Elliot Hosp., 5.60%, 10/1/22 1,500 1,543
Wentworth-Douglas Hosp.,
5.375%, 1/1/15 (MBIA Insured) 5,600 6,371
Total New Hampshire (Cost $33,413) 36,349
NEW JERSEY 1.0%
Middlesex County Improvement Auth.
Student Housing
5.00%, 8/15/18 1,000 1,050
5.00%, 8/15/23 500 510
New Jersey Economic Dev. Auth., Harrogate,
5.875%, 12/1/26 3,500 3,543
New Jersey Economic Development Auth.,
Winchester Gardens at Ward Homestead,
5.75%, 11/1/24 2,000 2,009
New Jersey HFFA
Pascack Valley Hosp. Assoc., 6.50%, 7/1/23 3,000 3,141
Pascack Valley Hosp. Assoc., 6.625%, 7/1/36 1,000 1,044
New Jersey Sports & Exhibition Auth.,
Monmouth, 8.00%, 1/1/25 (Prerefunded 1/1/05!) 4,500 4,853
Total New Jersey (Cost $14,831) 16,150
NEW MEXICO 0.9%
Farmington PCR
El Paso Electric, 6.375%, 6/1/32
(Tender 8/1/05) 2,500 2,618
Public Service Co. of New Mexico,
2.75%, 4/1/33 (Tender 4/1/04) 7,500 7,507
Jicarilla Apache Nation, 5.50%, 9/1/23 3,890 4,126
Total New Mexico (Cost $14,044) 14,251
NEW YORK 17.1%
Dormitory Auth. of the State of New York
5.75%, 7/1/13 10,000 11,821
5.75%, 7/1/18 (AMBAC Insured) 5,000 6,045
5.75%, 5/15/19 (Prerefunded 5/15/10!)
(FGIC Insured) 4,945 5,929
State Univ. Ed. Fac.
5.25%, 5/15/19 3,325 3,775
6.00%, 7/1/14 10,000 11,869
State Univ. of New York, 5.25%, 5/15/15
(AMBAC Insured) 3,600 4,149
Long Island Power Auth., 5.00%, 9/1/24 2,000 2,072
Metropolitan Transportation Auth.
5.00%, 4/1/29 (Prerefunded 10/1/14!)
(FSA Insured) 7,290 8,397
5.125%, 11/15/31 7,000 7,302
5.25%, 11/15/31 2,945 3,105
5.25%, 11/15/32 10,000 10,617
5.75%, 7/1/21 (Prerefunded 1/1/08!)
(MBIA Insured) 12,750 14,744
New York
6.00%, 10/15/26 (Prerefunded 10/15/07!) 280 325
6.00%, 5/15/30 (Prerefunded 5/15/10!) 2,360 2,864
GO, 5.00%, 8/1/06 3,000 3,243
5.25%, 8/1/13 5,000 5,641
6.00%, 5/15/30 520 579
New York City
6.00%, 12/1/18 (Escrowed to Maturity)
(FSA Insured) 5,000 5,062
6.00%, 2/15/25 (Prerefunded 2/15/05!) 1,990 2,105
GO, 5.50%, 6/1/21 7,500 8,254
6.00%, 10/15/26 1,670 1,869
6.25%, 8/1/09 5,050 5,619
New York City Municipal Water Fin. Auth.
5.00%, 6/15/32 10,000 10,371
5.50%, 6/15/33 9,000 9,954
6.00%, 6/15/33 (Prerefunded 6/15/10!) 2,220 2,698
New York City Transitional Fin. Auth.
5.00%, 8/1/32 5,000 5,229
5.25%, 2/1/29 STEP 16,640 18,910
5.75%, 11/15/20 4,990 5,774
5.75%, 11/15/20 (Prerefunded 5/15/10!) 510 612
6.00%, 8/15/17 (Prerefunded 8/15/09!) 4,000 4,808
New York Environmental Fac. Corp., PCR,
6.90%, 11/15/15 215 228
New York State Environmental Fac. Corp., PCR,
6.90%, 11/15/15 (Prerefunded 11/15/04!) 5,145 5,466
New York State Medical Care Fac.
6.50%, 8/15/24 (Prerefunded 8/15/04!) 5,895 6,165
6.50%, 8/15/29 (Prerefunded 2/15/05!)
(AMBAC Insured) 4,625 4,958
New York State Mortgage Agency, 5.70%,
4/1/16 4,090 4,401
New York State Thruway Auth.
5.00%, 4/1/19 (AMBAC Insured) 5,000 5,411
5.50%, 3/15/20 3,000 3,388
New York State Urban Dev. Corp.
5.50%, 7/1/26 10,000 10,886
Corrections & Youth Fac.,
5.25%, 1/1/21 (Tender 1/1/09) 7,500 8,416
Tobacco Settlement Fin. Corp.
5.00%, 6/1/08 5,720 6,292
5.25%, 6/1/20 (AMBAC Insured) 6,000 6,644
5.50%, 6/1/19 2,500 2,763
Asset Backed, 5.00%, 6/1/06 3,715 3,976
Triborough Bridge & Tunnel Auth.
5.25%, 1/1/28 (Prerefunded 1/1/22!) 10,000 11,349
5.50%, 1/1/17 (Escrowed to Maturity) 18,275 21,591
Total New York (Cost $253,649) 285,676
NORTH CAROLINA 1.5%
Cumberland County, Civic Center, 6.40%, 12/1/24
(Prerefunded 12/1/04!) (AMBAC Insured) 2,750 2,918
North Carolina, GO, VRDN (Currently 0.99%) 960 960
North Carolina Eastern Municipal Power Agency
5.30%, 1/1/15 1,000 1,082
5.375%, 1/1/16 2,000 2,158
6.70%, 1/1/19 3,965 4,507
7.50%, 1/1/10 4,330 5,265
7.50%, 1/1/10 (Escrowed to Maturity) 4,650 5,879
North Carolina Municiple Power Agency,
Catawba Electric, 5.50%, 1/1/13 2,250 2,547
Total North Carolina (Cost $21,960) 25,316
NORTH DAKOTA 0.3%
Mercer County, PCR, Basin Electric Power Co-Op.,
6.05%, 1/1/19 (AMBAC Insured) 4,500 4,772
Total North Dakota (Cost $4,531) 4,772
OHIO 1.7%
Cuyahoga County Hosp., Cleveland Clinic
Obligation Group, 6.00%, 1/1/32 5,000 5,404
Montgomery County Hosp., Catholic Health
Initiatives, 6.00%, 12/1/19 6,500 7,386
Ohio Air Quality Dev. Auth., PCR, FirstEnergy,
5.80%, 6/1/16 (Tender 12/1/04) 5,950 6,104
Ohio State Univ., 5.25%, 6/1/17
(Tender 12/1/16) 5,000 5,628
Ohio Water Dev. Auth., PCR, FirstEnergy,
7.70%, 8/1/25 3,950 4,286
Total Ohio (Cost $26,810) 28,808
OKLAHOMA 0.4%
Jackson County Memorial Hosp. Auth.,
Jackson County Memorial Hosp., 7.30%, 8/1/15 2,000 2,025
Tulsa County Home Fin. Auth., 6.90%, 8/1/10
(Escrowed to Maturity) (FGIC Insured) 4,250 5,324
Total Oklahoma (Cost $6,044) 7,349
OREGON 0.4%
Oregon Housing & Community Services Dept.,
6.00%, 7/1/20 3,445 3,734
Umatilla County Hosp. Fac. Auth.,
Catholic Health Initiatives,
5.50%, 3/1/22 2,210 2,357
Total Oregon (Cost $5,636) 6,091
PENNSYLVANIA 2.7%
Allegheny County Hosp. Dev. Auth.,
West Penn Allegheny Health System,
9.25%, 11/15/22 3,000 3,290
Beaver County IDA, PCR, FirstEnergy,
7.75%, 7/15/25 3,900 4,222
Chester County HEFA, Jefferson Health
System, 5.375%, 5/15/27 11,000 11,276
Cumberland County Municipal Auth.,
Wesley Affiliated Services,
7.125%, 1/1/25 3,000 3,026
Pennsylvania Intergov't. Cooperative Auth.,
6.75%, 6/15/21 (Prerefunded 6/15/05!)
(FGIC Insured) 4,750 5,097
Pennsylvania Turnpike Commission, 5.50%,
7/15/33 (AMBAC Insured) 3,500 3,814
Southcentral Pennsylvania General Auth.,
GO, 4.50%, 6/1/30 (AMBAC Insured)
(Tender 12/1/08) 10,000 11,017
West Shore Area Auth., Holy Spirit Hosp.,
6.20%, 1/1/26 3,250 3,401
Total Pennsylvania (Cost $42,276) 45,143
PUERTO RICO 0.4%
Puerto Rico Housing Fin. Auth., 5.00%,
12/1/20 6,425 6,940
Total Puerto Rico (Cost $6,750) 6,940
RHODE ISLAND 0.1%
Tobacco Settlement Fin. Corp., 6.125%, 6/1/32 2,500 2,333
Total Rhode Island (Cost $2,410) 2,333
SOUTH CAROLINA 2.5%
Connector 2000 Assoc.
Zero Coupon, 1/1/09 2,700 1,313
Zero Coupon, 1/1/10 3,400 1,619
Zero Coupon, 1/1/11 2,200 96
Zero Coupon, 1/1/29 20,500 1,538
Georgetown County PCR, Int'l. Paper,
5.70%, 4/1/14 4,000 4,528
Piedmont Municipal Power Agency,
6.50%, 1/1/14 (FGIC Insured) 3,000 3,741
Piedmont Municipal Power Agency, 6.50%,
1/1/14 (Escrowed to Maturity)
(FGIC Insured) 500 629
South Carolina Public Service Auth.
5.875%, 1/1/23 (FGIC Insured) 8,030 8,752
6.25%, 1/1/22 (AMBAC Insured) 17,750 19,602
Total South Carolina (Cost $42,541) 41,818
TENNESSEE 1.2%
Chattanooga Health Ed. & Housing Fac. Board
6.625%, 9/1/07 (Escrowed to Maturity)
(MBIA Insured) 2,950 3,447
6.625%, 9/1/08 (Escrowed to Maturity)
(MBIA Insured) 3,150 3,776
Metropolitan Nashville & Davidson
Counties Water & Sewer,
7.70%, 1/1/12 STEP (FGIC Insured) 6,250 8,106
Shelby County Health Ed. & Housing Board,
5.50%, 8/15/12 (Escrowed to Maturity)
(MBIA Insured) 4,000 4,622
Total Tennessee (Cost $16,931) 19,951
TEXAS 8.6%
Abilene Health Fac. Dev. Corp.,
Sears Methodist Retirement,
7.00%, 11/15/33 3,500 3,692
Amarillo Health Fac. Dev. Corp.,
Sears Panhandle Retirement,
7.75%, 8/15/26 (Prerefunded 8/15/06!) 5,000 5,871
Austin, 5.13%, 5/15/27 (FSA Insured) ++ 10,955 11,472
Brazos River Auth., PCR, Centerpoint Energy,
7.75%, 12/1/18 4,000 4,409
Denison Hosp. Auth., Texoma Medical Center,
7.00%, 8/15/14 4,245 4,352
Harris County, GO, Zero Coupon,
8/15/04 (MBIA Insured) 6,000 5,971
Harris County Health Fac. Dev.
Memorial Hermann Healthcare System,
6.375%, 6/1/29 4,000 4,357
Memorial Hosp., 7.125%, 6/1/15
(Prerefunded 6/1/02!) 1,110 1,128
St. Luke's Episcopal Hosp., 5.375%,
2/15/26 5,500 5,696
Texas Childrens Hosp.
VRDN (Currently 0.99%) (MBIA Insured) 5,410 5,410
5.25%, 10/1/19 5,000 5,258
Harris County Hosp. Dist., 7.40%, 2/15/10
(Escrowed to Maturity) (AMBAC Insured) 515 586
Houston
6.40%, 6/1/27 4,250 4,670
GO, 5.50%, 3/1/18 (FSA Insured) 2,750 3,116
Houston Airport Systems
5.50%, 7/1/18 (FSA Insured) 2,265 2,572
5.50%, 7/1/19 (FSA Insured) 2,000 2,258
Houston Higher Ed. Fin. Corp., Rice Univ.,
5.375%, 11/15/29 11,450 12,434
Houston Independent School Dist., GO,
5.00%, 7/15/20 (FSA Insured) 3,000 3,216
Houston Water & Sewer System,
5.75%, 12/1/18 (AMBAC Insured) 3,000 3,511
Lower Colorado River Auth.,
6.00%, 5/15/12 (FSA Insured) 6,095 7,163
Sabine River Auth., TXU Energy, 5.50%, 5/1/22
(Tender 11/1/11) 4,580 4,997
Sabine River Auth., PCR
Intl. Paper, 6.20%, 2/1/25 2,500 2,699
TXU Energy
5.80%, 7/1/22 1,500 1,549
6.15%, 8/1/22 2,850 3,022
San Antonio Electric & Gas, VRDN
(Currently 0.99%) 5,000 5,000
Texas A&M Univ.
5.25%, 5/15/15 5,000 5,688
5.25%, 5/15/16 5,000 5,655
5.375%, 5/15/16 4,750 5,362
5.375%, 5/15/18 2,570 2,881
Texas Dept. of Housing & Community Affairs,
6.40%, 1/1/27 (Prerefunded 1/1/07!) 5,820 6,705
Univ. of Texas, Board of Regents, 5.25%,
8/15/17 2,925 3,385
Total Texas (Cost $132,670) 144,085
VERMONT 0.4%
Vermont Ed. & Health Buildings Fin. Agency
Fletcher Allen Healthcare
6.15%, 9/1/13, VR, (FGIC Insured) 4,650 4,761
6.25%, 9/1/23, VR, (FGIC Insured) 2,000 2,048
Total Vermont (Cost $6,650) 6,809
VIRGINIA 3.0%
Chesapeake IDA, PCR, Virginia Electric & Power,
5.25%, 2/1/08 3,000 3,158
Fairfax County Water Auth.
6.00%, 4/1/22 3,835 4,310
6.00%, 4/1/22 (Prerefunded 4/1/07!) 3,815 4,396
Fredericksburg IDA, Medicorp Health System,
5.25%, 6/15/27 2,750 2,813
Greater Richmond Convention Center,
6.125%, 6/15/29 8,550 9,670
Henrico County Economic Dev. Auth.,
Bon Secours Health System,
5.75%, 11/15/30 (Tender 11/15/04) 10,000 10,340
James City IDA Residential Care Facility,
Williamsburg Landing, 6.125%, 3/1/32 2,000 2,058
Virginia Public School Auth., GO,
5.00%, 8/1/28 6,000 6,306
Virginia Resources Auth.
Goochland County Water & Sewer
Zero Coupon, 11/1/18 1,540 806
Zero Coupon, 11/1/21 1,590 691
Virginia Transportation Board,
5.25%, 5/15/20 4,620 5,083
Total Virginia (Cost $45,907) 49,631
WASHINGTON 5.0%
Chelan County Public Utility Dist. #1, Rock
Island Hydro, Zero Coupon, 6/1/18
(MBIA Insured) 10,100 5,248
King County Public Hosp., Valley Medical
Center, 5.75%, 9/1/20 (AMBAC Insured) 10,950 12,986
Port of Seattle, 5.50%, 2/1/26
(MBIA Insured) 6,000 6,583
Snohomish County Housing Auth., Millwood Estates,
5.50%, 6/1/29 3,750 3,842
Tacoma Solid Waste Utility
5.50%, 12/1/17 (Prerefunded 12/1/07!)
(AMBAC Insured) 2,420 2,775
5.50%, 12/1/17 (AMBAC Insured) 12,080 13,526
Washington, GO
5.00%, 1/1/26 (AMBAC Insured) 11,000 11,549
5.70%, 10/1/15 14,000 16,630
6.625%, 1/1/25 6,100 7,245
Washington Public Power Supply System,
5.25%, 7/1/16 (FSA Insured) 3,000 3,326
Total Washington (Cost $73,955) 83,710
WEST VIRGINIA 1.3%
Mason County PCR, Appalachian Power Company,
5.50%, 10/1/22 8,000 8,114
West Virginia Building Commission, GO,
5.375%, 7/1/18 (AMBAC Insured) 2,915 3,366
West Virginia Hosp. Fin. Auth.
Charleston Area Medical Center,
5.75%, 9/1/13 (MBIA Insured) 4,200 4,539
Oak Hill Hosp., 6.75%, 9/1/22
(Prerefunded 9/1/10!) 5,000 6,293
Total West Virginia (Cost $20,091) 22,312
WISCONSIN 1.4%
Manitowoc, 5.25%, 10/1/34 (FGIC Insured) 9,000 9,418
Wisconsin HEFA
Froedert & Community Health
5.625%, 10/1/14 1,000 1,107
5.625%, 10/1/15 1,100 1,212
5.625%, 10/1/17 3,725 4,053
Thedacare, 5.50%, 12/15/16
(MBIA Insured) 6,540 7,286
Total Wisconsin (Cost $21,731) 23,076
WYOMING 0.6%
Wyoming CDA
5.30%, 6/1/17 4,600 4,925
5.70%, 12/1/35 5,175 5,454
Total Wyoming (Cost $9,764) 10,379
U. S. VIRGIN ISLANDS 0.1%
Virgin Islands Public Fin. Auth.,
GO, 4.00%, 10/1/05 1,500 1,552
Total U. S. Virgin Islands (Cost $1,546) 1,552
Total Investments in Securities
100.4% of Net Assets (Cost $1,535,146) $1,679,911
----------
Futures Contracts
- -------------------------------------------------------------------------------
($ 000s)
Contract Unrealized
Expiration Value Gain (Loss)
------------- --------------- -------------
Short, 100 U.S. Treasury
10 Year contracts,
$300 par of Austin Texas,
5.13% pledged as initial
margin 3/04 $ (11,538) $ (161)
Net payments (receipts)
of variation margin to date 117
Variation margin receivable
(payable) on open futures
contracts $ (44)
-------------
(ss.) Denominated in U.S. dollar unless otherwise noted
* In default with respect to payment of principal and interest
++ All or a portion of this security is pledged to cover margin
requirements on futures contracts at February 29, 2004.
! Used in determining portfolio maturity
AMBAC AMBAC Assurance Corp.
CDA Community Development Administration
COP Certificates of Participation
EFA Educational Facility Authority
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance Inc.
GO General Obligation
HEFA Health & Educational Facility Authority
HFA Health Facility Authority
HFC Housing Finance Corp.
HFFA Health Facility Financing Authority
HHEFA Health & Higher Educational Facility Authority
IDA Industrial Development Authority/Agency
IDB Industrial Development Bond
IDRB Industrial Development Revenue Bond
MBIA MBIA Insurance Corp.
PCR Pollution Control Revenue
RAA Radian Asset Assurance Inc.
STEP Stepped coupon bond for which the coupon rate of interest will adjust
on specified future date(s)
VR Variable Rate
VRDN Variable-Rate Demand Note
XLCA XL Capital Assurance Inc.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report February 29, 2004
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
($ 000s)
Assets
Investments in securities, at value (cost $1,535,146) $ 1,679,911
Other assets 21,709
Total assets 1,701,620
Liabilities
Total liabilities 28,039
NET ASSETS $ 1,673,581
------------
Net Assets Consist of:
Undistributed net investment income (loss) $ 2,437
Undistributed net realized gain (loss) (1,178)
Net unrealized gain (loss) 144,604
Paid-in-capital applicable to 163,925,748 shares of
$1.00 par value capital stock outstanding;
500,000,000 shares authorized 1,527,718
NET ASSETS $ 1,673,581
------------
NET ASSET VALUE PER SHARE
Tax-Free Income class
($1,508,850,232/147,799,143 shares outstanding) $ 10.21
------------
Advisor Class
($164,730,879/16,126,605 shares outstanding) $ 10.21
------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Statement of Operations
- --------------------------------------------------------------------------------
($ 000s)
Year
Ended
2/29/04
Investment Income (Loss)
Interest income $ 78,222
Expenses
Investment management 7,315
Shareholder servicing
Tax-Free Income class 652
Advisor Class 71
Custody and accounting 236
Distribution and service (12b-1) - Advisor Class 187
Registration 96
Prospectus and shareholder reports
Tax-Free Income class 56
Advisor Class 23
Legal and audit 22
Directors 10
Miscellaneous 11
Total expenses 8,679
Expenses paid indirectly (1)
Net expenses 8,678
Net investment income (loss) 69,544
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 6,602
Written options 95
Futures 98
Net realized gain (loss) 6,795
Change in net unrealized gain (loss)
Securities 18,932
Futures (79)
Change in net unrealized gain (loss) 18,853
Net realized and unrealized gain (loss) 25,648
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 95,192
----------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
($ 000s)
Year
Ended
2/29/04 2/28/03
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 69,544 $ 70,062
Net realized gain (loss) 6,795 3,207
Change in net unrealized gain (loss) 18,853 30,869
Increase (decrease) in net assets from operations 95,192 104,138
Distributions to shareholders
Net investment income
Tax-Free Income class (66,063) (69,358)
Advisor Class (2,986) (2)
Decrease in net assets from distributions (69,049) (69,360)
Capital share transactions *
Shares sold
Tax-Free Income class 181,840 190,501
Advisor Class 170,913 145
Distributions reinvested
Tax-Free Income class 44,495 46,518
Advisor Class 2,986 2
Shares redeemed
Tax-Free Income class (241,651) (213,110)
Advisor Class (11,868) -
Increase (decrease) in net assets from
capital share transactions 146,715 24,056
Net Assets
Increase (decrease) during period 172,858 58,834
Beginning of period 1,500,723 1,441,889
End of period $ 1,673,581 $ 1,500,723
------------------------
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
($ 000s)
Year
Ended
2/29/04 2/28/03
*Share information
Shares sold
Tax-Free Income class 18,141 19,343
Advisor Class 17,004 14
Distributions reinvested
Tax-Free Income class 4,437 4,713
Advisor Class 298 -
Shares redeemed
Tax-Free Income class (24,132) (21,619)
Advisor Class (1,190) -
Increase (decrease) in shares outstanding 14,558 2,451
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report February 29, 2004
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Tax-Free Income, Inc. (the fund) is registered under the
Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end
management investment company. The fund seeks to provide a high level of income
exempt from federal income taxes by investing primarily in long-term
investment-grade municipal securities. The fund has two classes of shares:
Tax-Free Income (Tax-Free Income class), offered since October 26, 1976, and
Tax-Free Income--Advisor Class (Advisor Class), offered since September 30,
2002. Advisor Class shares are sold only through brokers and other financial
intermediaries that are compensated by the class for distribution and certain
administrative services under a Board-approved Rule 12b-1 plan. Each class has
exclusive voting rights on matters related solely to that class, separate voting
rights on matters that relate to both classes, and, in all other respects, the
same rights and obligations as the other class.
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the use of estimates made by fund management.
Valuation
The fund values its investments and computes its net asset value per share at
the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day
that the NYSE is open for business. Debt securities are generally traded in the
over-the-counter market. Securities are valued at prices furnished by dealers
who make markets in such securities or by an independent pricing service, which
considers yield or price of bonds of comparable quality, coupon, maturity, and
type, as well as prices quoted by dealers who make markets in such securities.
Investments in mutual funds are valued at the mutual fund's closing net asset
value per share on the day of valuation. Financial futures contracts are valued
at closing settlement prices.
Other investments and those for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by the T. Rowe Price Valuation Committee,
established by the fund's Board of Directors.
Class Accounting
The Advisor Class pays distribution and administrative expenses in the form of
Rule 12b-1 fees, in an amount not exceeding 0.25% of the class's average daily
net assets. Shareholder servicing, prospectus, and shareholder report expenses
incurred by each class are charged directly to the class to which they relate.
Expenses common to both classes and investment income are allocated to the
classes based upon the relative daily net assets of each class's settled shares;
realized and unrealized gains and losses are allocated based upon the relative
daily net assets of each class's outstanding shares.
Credits
The fund earns credits on temporarily uninvested cash balances at the custodian
that reduce the fund's custody charges. Custody expense in the accompanying
financial statements is presented before reduction for credits, which are
reflected as expenses paid indirectly.
Investment Transactions, Investment Income, and Distributions
Income and expenses are recorded on the accrual basis. Premiums and discounts on
debt securities are amortized for financial reporting purposes. Investment
transactions are accounted for on the trade date. Investment transactions are
accounted for on the trade date. Realized gains and losses are reported on the
identified cost basis. Payments ("variation margin") made or received to settle
the daily fluctuations in the value of futures contracts are recorded as
unrealized gains or losses until the contracts are closed. Unrealized gains and
losses on futures contracts are included in other assets and other liabilities,
respectively, and in the change in net unrealized gain or loss in the
accompanying financial statements. Distributions to shareholders are recorded on
the ex-dividend date. Income distributions are declared by each class on a daily
basis and paid monthly. Capital gain distributions, if any, are declared and
paid by the fund, typically on an annual basis.
Other
In the normal course of business, the fund enters into contracts that provide
general indemnifications. The fund's maximum exposure under these arrangements
is dependent on claims that may be made against the fund in the future and,
therefore, cannot be estimated; however, based on experience, the risk of
material loss from such claims is considered remote.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment
objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Futures Contracts
During the year ended February 29, 2004, the fund was a party to futures
contracts, which provide for the future sale by one party and purchase by
another of a specified amount of a specific financial instrument at an agreed
upon price, date, time, and place. Risks arise from possible illiquidity of the
futures market and from movements in security values.
Options
Call and put options on futures contracts give the holder the right to purchase
or sell, respectively, a particular futures contract at a specified price on a
certain date. Risks arise from possible illiquidity of the options market and
from movements in underlying futures prices. Transactions in options written and
related premiums received during the year ended February 29, 2004, were as
follows:
- --------------------------------------------------------------------------------
Number of
Contracts Premiums
Outstanding at beginning of period - $ -
Written 100 99,000
Expired (100) (99,000)
Outstanding at end of period - $ -
------------------------------
Other
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $504,668,000 and $396,764,000, respectively, for the period ended
February 29, 2004.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code and distribute to shareholders all of its income and
gains. Federal income tax regulations differ from generally accepted accounting
principles; therefore, distributions determined in accordance with tax
regulations may differ significantly in amount or character from net investment
income and realized gains for financial reporting purposes. Financial reporting
records are adjusted for permanent book/tax differences to reflect tax
character. Financial records are not adjusted for temporary differences.
Distributions during the year ended February 29, 2004 totaled $69,049,000 and
were characterized as tax-exempt income for tax purposes. At February 29, 2004,
the tax-basis components of net assets were as follows:
- --------------------------------------------------------------------------------
Unrealized appreciation $ 155,328,000
Unrealized depreciation (10,251,000)
Net unrealized appreciation (depreciation) 145,077,000
Undistributed tax-exempt income 786,000
Paid-in capital 1,527,718,000
Net assets $ 1,673,581,000
------------------
For federal income tax purposes, market discount is recognized as income at the
time of sale in the amount of the lesser of gain or scheduled amortization.
Accordingly, at February 29, 2004, amortization of $1,651,000 that has been
recognized as income for financial reporting purposes is treated as unrealized
appreciation for tax purposes.
For the year ended February 29, 2004, the fund recorded the following permanent
reclassifications to reflect tax character. Reclassifications to paid-in capital
relate primarily to a tax practice that treats a portion of the proceeds from
each redemption of capital shares as a distribution of taxable net investment
income. Results of operations and net assets were not affected by these
reclassifications.
- --------------------------------------------------------------------------------
Undistributed net investment income $ (708,000)
Undistributed net realized gain (6,227,000)
Paid-in capital 6,935,000
At February 29, 2004, the cost of investments for federal income tax purposes
was $1,534,673,000.
NOTE 4 - RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The
investment management agreement between the fund and the manager provides
for an annual investment management fee, which is computed daily and paid
monthly. The fee consists of an individual fund fee, equal to 0.15% of the
fund's average daily net assets, and the fund's pro-rata share of a group fee.
The group fee is calculated based on the combined net assets of certain mutual
funds sponsored by Price Associates (the group) applied to a graduated fee
schedule, with rates ranging from 0.48% for the first $1 billion of assets to
0.295% for assets in excess of $120 billion. The fund's portion of the group fee
is determined by the ratio of its average daily net assets to those of the
group. At February 29, 2004, the effective annual group fee rate was 0.32%, and
investment management fee payable totaled $609,000.
The Advisor Class is also subject to a contractual expense limitation through
June 30, 2004. During the limitation period, the manager is required to waive
its management fee and reimburse the class for any expenses, excluding interest,
taxes, brokerage commissions, and extraordinary expenses, that would otherwise
cause the class's ratio of total expenses to average net assets (expense ratio)
to exceed its expense limitation of 0.90%. Through June 30, 2006, the class is
required to repay the manager for expenses previously reimbursed and management
fees waived to the extent its net assets have grown or expenses have declined
sufficiently to allow repayment without causing the class's expense ratio to
exceed its expense limitation. For the year ended February 29, 2004, the Advisor
Class operated below its expense limitation.
In addition, the fund has entered into service agreements with Price Associates
and a wholly owned subsidiary of Price Associates (collectively, Price). Price
Associates computes the daily share prices and maintains the financial records
of the fund. T. Rowe Price Services, Inc., provides shareholder and
administrative services in its capacity as the fund's transfer and dividend
disbursing agent. Expenses incurred pursuant to these service agreements totaled
$547,000 for the year ended February 29, 2004, of which $47,000 was payable at
period-end.
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
T. Rowe Price Tax-Free Income Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of T. Rowe Price Tax-Free Income Fund,
Inc. (the "Fund") at February 29, 2004, and the results of its operations, the
changes in its net assets and the financial highlights for each of the fiscal
periods presented, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
February 29, 2004 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
March 22, 2004
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Tax Information (Unaudited) for the Tax Year Ended 2/29/04
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
o $2,020,000 from short-term capital gains
o $4,915,000 from long-term capital gains subject to the
15% rate gains category.
o $68,698,000 which qualified as exempt-interest dividends.
Information on Proxy Voting
- --------------------------------------------------------------------------------
A description of the policies and procedures that the T. Rowe Price Tax-Free
Income Fund uses to determine how to vote proxies relating to portfolio
securities is available, without charge, upon request by calling 1-800-225-5132.
It also appears in the fund's Statement of Additional Information (Form 485B),
which can be found on the SEC's Web site, www.sec.gov.
T. Rowe Price Tax-Free Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
About the Fund's Directors and Officers
- --------------------------------------------------------------------------------
Your fund is governed by a Board of Directors that meets regularly to review
investments, performance, expenses, and other business matters, and is
responsible for protecting the interests of shareholders. The majority of the
fund's directors are independent of T. Rowe Price Associates, Inc. (T. Rowe
Price); "inside" directors are officers of T. Rowe Price. The Board of Directors
elects the fund's officers, who are listed in the final table. The business
address of each director and officer is 100 East Pratt Street, Baltimore, MD
21202. The Statement of Additional Information includes additional information
about the fund directors and is available without charge by calling a T. Rowe
Price representative at 1-800-225-5132.
Independent Directors
Name
(Year of Birth) Principal Occupation(s) During Past 5 Years and
Year Elected* Directorships of Other Public Companies
Anthony W. Deering Director, Chairman of the Board, President, and
(1945) Chief Executive Officer, The Rouse Company,
1983 (Tax-Exempt real estate developers; Director, Mercantile
Money, Tax-Free Bank (4/03 to present)
Short-Intermediate,
Tax-Free Income)
1984 (Tax-Free High Yield)
1992 (Tax-Free
Intermediate Bond)
Donald W. Dick, Jr. Principal, EuroCapital Advisors, LLC, an
(1943) acquisition and management advisory firm
2001 (all tax-free funds)
David K. Fagin Director, Golden Star Resources Ltd., Canyon
(1938) Resources Corp. (5/00 to present), and
2001 (all tax-free funds) Pacific Rim Mining Corp. (2/02 to present);
Chairman and President, Nye Corp.
Karen N. Horn Managing Director and President, Global Private
(1943) Client Services, Marsh Inc.; Managing Director
2003 (all tax-free funds) and Head of International Private Banking,
Bankers Trust; Director, Eli Lilly and Company
F. Pierce Linaweaver President, F. Pierce Linaweaver & Associates,
(1934) Inc., consulting environmental and civil engineers
1979 (Tax-Free Income)
1983 (Tax-Exempt Money,
Tax-Free Short-Intermediate)
1984 (Tax-Free High Yield)
1992 (Tax-Free
Intermediate Bond)
* Each independent director oversees 111 T. Rowe Price portfolios and serves
until retirement, resignation, or election of a successor.
Independent Directors (continued)
Name
(Year of Birth) Principal Occupation(s) During Past 5 Years and
Year Elected* Directorships of Other Public Companies
John G. Schreiber Owner/President, Centaur Capital Partners, Inc., a
(1946) real estate investment company; Senior Advisor
1992 (all tax-free funds) and Partner, Blackstone Real Estate Advisors,
L.P.; Director, AMLI Residential Properties Trust,
Host Marriott Corp., and The Rouse Company
* Each independent director oversees 111 T. Rowe Price portfolios and serves
until retirement, resignation, or election of a successor.
Inside Directors
Name
(Year of Birth)
Year Elected**
[Number of T. Rowe Price Principal Occupation(s) During Past 5 Years and
Portfolios Overseen] Directorships of Other Public Companies
William T. Reynolds,CFA, CIC Director and Vice President, T. Rowe Price
(1948) and T. Rowe Price Group, Inc.; Director,
1989 (Tax-Free High Yield) T. Rowe Price Global Asset Management Limited
1990 (Tax-Free Income)
1991 (Tax-Exempt Money)
1994 (Tax-Free Short-
Intermediate, Tax-Free
Intermediate Bond)
[37]
James S. Riepe Director and Vice President, T. Rowe Price;
(1943) Vice Chairman of the Board, Director, and
1983 (Tax-Exempt Money, Vice President, T. Rowe Price Group, Inc.;
Tax-Free Short- Chairman of the Board and Director, T. Rowe
Intermediate, Tax-Free Price Global Asset Management Limited, T. Rowe
Income) Price Global Investment Services, Inc., T. Rowe
1984 (Tax-Free High Yield) Price Retirement Plan Services, Inc., and
1992 (Tax-Free T. Rowe Price Services, Inc.; Chairman of the
Intermediate Bond) Board, Director, President, and Trust Officer,
[111] T. Rowe Price Trust Company; Director, T. Rowe
Price International, Inc.; Chairman of the Board
(all tax-free funds)
** Each inside director serves until retirement, resignation, or election of a
successor.
Inside Directors (continued)
Name
(Year of Birth)
Year Elected**
[Number of T. Rowe Price Principal Occupation(s) During Past 5 Years and
Portfolios Overseen] Directorships of Other Public Companies
M. David Testa, CFA, CIC Director and Vice President, T. Rowe Price and
(1944) T. Rowe Price Trust Company; Vice Chairman of
1997 (all tax-free funds) the Board, Director, and Vice President, T. Rowe
[111] Price Group, Inc.; Chairman of the Board and
Director, T. Rowe Price International, Inc.;
Director, T. Rowe Price Global Asset Management
Limited and T. Rowe Price Global Investment
Services Limited
** Each inside director serves until retirement, resignation, or election of a
successor.
Officers
Name (Year of Birth)
Title and Fund(s) Served Principal Occupation(s)
Stephen V. Booth, CPA (1961) Vice President, T. Rowe Price, T. Rowe
Vice President, all tax-free funds Price Group, Inc., and T. Rowe Price
Trust Company
Steven G. Brooks, CFA (1954) Vice President, T. Rowe Price and
Vice President, Tax-Exempt Money Fund T. Rowe Price Group, Inc.
Joseph A. Carrier, CPA (1960) Vice President, T. Rowe Price, T. Rowe
Treasurer, all tax-free funds Price Group, Inc., and T. Rowe Price
Investment Services, Inc.
Maria H. Condez (1962) Employee, T. Rowe Price
Assistant Vice President,
Tax-Exempt Money Fund
G. Richard Dent (1960) Vice President, T. Rowe Price and
Vice President, Tax-Exempt Money, T. Rowe Price Group, Inc.
Tax-Free High Yield, and
Tax-Free Income Funds
Roger L. Fiery III, CPA (1959) Vice President, T. Rowe Price, T. Rowe
Vice President, all tax-free funds Price Group, Inc., T. Rowe Price Trust
Company, and T. Rowe Price
International, Inc.
Gregory S. Golczewski (1966) Vice President, T. Rowe Price and
Vice President, Tax-Exempt Money, T. Rowe Price Trust Company
Tax-Free High Yield, Tax-Free Income,
Tax-Free Intermediate Bond, and
Tax-Free Short-Intermediate Funds
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Officers (continued)
Name (Year of Birth)
Title and Fund(s) Served Principal Occupation(s)
Charles B. Hill (1961)
President, Tax-Free Intermediate Bond Vice President, T. Rowe Price and
and Tax-Free Short-Intermediate Funds; T. Rowe Price Group, Inc.
Vice President, Tax-Free High Yield
and Tax-Free Income Funds
Henry H. Hopkins (1942) Director and Vice President, T. Rowe
Vice President, all tax-free funds Price Group, Inc., T. Rowe Price
Investment Services, Inc., T. Rowe
Price Services, Inc., and T. Rowe Price
Trust Company; Vice President, T. Rowe
Price, T. Rowe Price International,
Inc., and T. Rowe Price Retirement
Plan Services, Inc.
T. Dylan Jones (1971) Assistant Vice President, T. Rowe Price
Assistant Vice President,
Tax-Exempt Money Fund
Marcy M. Lash (1963) Vice President, T. Rowe Price and
Vice President, Tax-Exempt Money, T. Rowe Price Group, Inc.
Tax-Free High Yield, Tax-Free Income,
and Tax-Free Short-Intermediate Funds
Alan D. Levenson (1958) Vice President, T. Rowe Price
Vice President, Tax-Exempt Money Fund and T. Rowe Price Group, Inc.
Patricia B. Lippert (1953) Assistant Vice President, T. Rowe
Secretary, all tax-free funds Price and T. Rowe Price Investment
Services, Inc.
Joseph K. Lynagh, CFA (1958) Vice President, T. Rowe Price and
President, Tax-Exempt Money Fund T. Rowe Price Group, Inc.
Konstantine B. Mallas (1963) Vice President, T. Rowe Price and
Vice President, Tax-Free High Yield, T. Rowe Price Group, Inc.
Tax-Free Income, Tax-Free
Intermediate Bond, and Tax-Free
Short-Intermediate Funds
James M. McDonald (1949) Vice President, T. Rowe Price,
Vice President, Tax-Exempt Money Fund T. Rowe Price Group, Inc., and
T. Rowe Price Trust Company
Hugh D. McGuirk, CFA (1960) Vice President, T. Rowe Price
Vice President, Tax-Free High Yield, and T. Rowe Price Group, Inc.
Tax-Free Income, Tax-Free
Intermediate Bond, and Tax-Free
Short-Intermediate Funds
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Officers (continued)
Name (Year of Birth)
Title and Fund(s) Served Principal Occupation(s)
Mary J. Miller, CFA (1955) Vice President, T. Rowe Price and
President, Tax-Free High Yield and T. Rowe Price Group, Inc.
Tax-Free Income Funds; Executive Vice
President, Tax-Free Intermediate Bond
Fund; Vice President, Tax-Exempt Money
and Tax-Free Short-Intermediate Funds
James M. Murphy, CFA (1967) Vice President, T. Rowe Price and
Executive Vice President, T. Rowe Price Group, Inc.; formerly
Tax-Free High Yield Fund Portfolio Manager, Prudential
Investments (to 2000)
Stephen P. Richter, CFA (1969) Vice President, T. Rowe Price; formerly
Vice President, Tax-Free High Yield Vice President, Euler ACI (to 2000)
and Tax-Free Income Funds
Timothy G. Taylor (1975) Employee, T. Rowe Price
Assistant Vice President, Tax-Free
Intermediate Bond and Tax-Free
Short-Intermediate Funds
Edward A. Wiese, CFA (1959) Vice President, T. Rowe Price, T. Rowe
Vice President, Tax-Exempt Money, Price Group, Inc., and T. Rowe Price
Tax-Free Intermediate Bond, and Trust Company; Director, Vice President,
Tax-Free Short-Intermediate Funds and Chief Investment Officer,
T. Rowe Price Savings Bank
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Item 2. Code of Ethics.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. A copy of this code of
ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were
approved or waivers were granted to this code of ethics during the period
covered by this report.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Directors/Trustees has determined that Mr. David K.
Fagin qualifies as an audit committee financial expert, as defined in Item 3 of
Form N-CSR. Mr. Fagin is considered independent for purposes of Item 3 of Form
N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) - (d) Aggregate fees billed to the registrant for the last two fiscal years
for professional services rendered by the registrant's principal accountant were
as follows:
2004 2003
Audit Fees $13,110 $9,918
Audit-Related Fees 1,174 --
Tax Fees 3,655 2,508
All Other Fees 124 129
Audit fees include amounts related to the audit of the registrant's annual
financial statements and services normally provided by the accountant in
connection with statutory and regulatory filings. Audit-related fees include
amounts reasonably related to the performance of the audit of the registrant's
financial statements, specifically the issuance of a report on internal
controls. Tax fees include amounts related to tax compliance, tax planning, and
tax advice. Other fees include the registrant's pro-rata share of amounts for
agreed-upon procedures in conjunction with service contract approvals by the
registrant's Board of Directors/Trustees.
(e)(1) The registrant's audit committee has adopted a policy whereby audit and
non-audit services performed by the registrant's principal accountant for the
registrant, its investment adviser, and any entity controlling, controlled by,
or under common control with the investment adviser that provides ongoing
services to the registrant require pre-approval in advance at regularly
scheduled audit committee meetings. If such a service is required between
regularly scheduled audit committee meetings, pre-approval may be authorized by
one audit committee member with ratification at the next scheduled audit
committee meeting. Waiver of pre-approval for audit or non-audit services
requiring fees of a de minimis amount is not permitted.
(2) No services included in (b) - (d) above were approved pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate fees billed for the most recent fiscal year and the preceding
fiscal year by the registrant's principal accountant for non-audit services
rendered to the registrant, its investment adviser, and any entity controlling,
controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant were $719,000 and $671,000, respectively, and
were less than the aggregate fees billed for those same periods by the
registrant's principal accountant for audit services rendered to the T. Rowe
Price Funds.
(h) All non-audit services rendered in (g) above were pre-approved by the
registrant's audit committee. Accordingly, these services were considered by the
registrant's audit committee in maintaining the principal accountant's
independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The registrant's principal executive officer and principal financial officer
are aware of no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 11. Exhibits.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is
attached.
(2) Separate certifications by the registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(3) Not applicable.
(b) A certification by the registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Tax-Free Income Fund, Inc.
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date April 16, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date April 16, 2004
By /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date April 16, 2004