-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fl7FaR1oYpaUVbrOIitr3e2cyb8y817JeWsaS3NOD3VG1YMfsk5x1WWmMefehc/Z lSxy3wKJM7rM6WzZFJHdrw== 0000202927-03-000020.txt : 20031024 0000202927-03-000020.hdr.sgml : 20031024 20031024153953 ACCESSION NUMBER: 0000202927-03-000020 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030831 FILED AS OF DATE: 20031024 EFFECTIVENESS DATE: 20031024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE TAX FREE INCOME FUND INC CENTRAL INDEX KEY: 0000202927 IRS NUMBER: 521067817 FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02684 FILM NUMBER: 03956486 BUSINESS ADDRESS: STREET 1: 100 EAST PRATT STREET CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4105472000 N-CSRS 1 tfi.txt T. ROWE PRICE TAX-FREE INCOME FUND Item 1. Report to Shareholders T. Rowe Price Tax-Free Income Fund - -------------------------------------------------------------------------------- August 31, 2003 Certified Semiannual 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 - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Financial Highlights For a share outstanding throughout each period - -------------------------------------------------------------------------------- Tax-Free Income shares - -------------------------------------------------------------------------------- 6 Months Year Ended Ended 8/31/03 2/28/03 2/28/02 2/28/01 2/29/00 2/28/99 - -------------------------------------------------------------------------------- NET ASSET VALUE Beginning of period $ 10.05 $ 9.81 $ 9.72 $ 9.10 $ 9.94 $ 9.95 Investment activities Net investment income (loss) 0.22 0.47 0.48 0.49 0.49 0.50 Net realized and unrealized gain (loss) (0.26) 0.24 0.09 0.62 (0.83) 0.03 Total from investment activities (0.04) 0.71 0.57 1.11 (0.34) 0.53 Distributions Net investment income (0.22) (0.47) (0.48) (0.49) (0.49) (0.50) Net realized gain -- -- -- -- (0.01) (0.04) Total distributions (0.22) (0.47) (0.48) (0.49) (0.50) (0.54) NET ASSET VALUE End of period $ 9.79 $ 10.05 $ 9.81 $ 9.72 $ 9.10 $ 9.94 ----------------------------------------------------------------- Ratios/Supplemental Data Total return^ (0.38)% 7.42% 5.99% 12.55% (3.42)% 5.48% Ratio of total expenses to average net assets 0.54%! 0.55% 0.54% 0.54% 0.55% 0.55% Ratio of net investment income (loss) to average net assets 4.50%! 4.78% 4.95% 5.25% 5.24% 5.06% Portfolio turnover rate 33.4%! 24.4% 28.2% 28.6% 44.3% 34.1% Net assets, end of period (in millions) $ 1,443 $ 1,501 $ 1,442 $ 1,403 $1,311 $ 1,483 ^ Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions ! Annualized The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------- T. Rowe Price Tax-Free Income Fund - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Financial Highlights For a share outstanding throughout each period - -------------------------------------------------------------------------------- Tax-Free Income-Advisor Class shares - -------------------------------------------------------------------------------- 6 Months 9/30/02 Ended Through 8/31/03 2/28/03 - -------------------------------------------------------------------------------- NET ASSET VALUE Beginning of period $ 10.05 $ 10.13 Investment activities Net investment income 0.21 0.18* Net realized and unrealized gain (loss) (0.25) (0.08)** Total from investment activities (0.04) 0.10 Distributions Net investment income (0.21) (0.18) NET ASSET VALUE End of period $ 9.80 $ 10.05 ------------------------------------- Ratios/Supplemental Data Total return^ (0.43)% 1.02%* Ratio of total expenses to average net assets 0.74%! 0.90%*! Ratio of net investment income (loss) to average net assets 4.08%! 4.48%*! Portfolio turnover rate 33.4%! 24.4% Net assets, end of period (in thousands) $ 92,967 $ 147 * Excludes expenses in excess of a 0.90% contractual expense limitation in effect through 6/30/04. ** 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. ! Annualized The accompanying notes are an integral part of these financial statements. T. Rowe Price Tax-Free Income Fund - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) August 31, 2003 Statement of Net Assets Par Value - -------------------------------------------------------------------------------- In thousands ALABAMA 1.6% Alabama Water Pollution Control Auth. 6.75%, 8/15/17 (AMBAC Insured) $ 2,685 $ 2,934 Alexander Special Care Fac. Fin., Russell Hosp. 6.00%, 12/1/22 1,000 944 Baldwin County Eastern Shore Hosp. Auth. Thomas Hosp. 5.75%, 4/1/27 2,175 1,939 6.75%, 4/1/21 1,450 1,466 Camden Ind. Dev. Board, Weyerhaeuser, 6.125%, 12/1/24 2,500 2,514 Jefferson County Sewer Revenue 5.00%, 2/1/41 (Prerefunded 8/1/12!) (FGIC Insured) 5,385 5,846 Phoenix County IDB, PCR, MeadWestvaco, 6.10%, 5/15/30 3,750 3,765 Tuscaloosa County Board of Ed., VRDN (Currently 0.85%) 5,635 5,635 Total Alabama (Cost $24,966) 25,043 ALASKA 0.9% Alaska HFC 5.30%, 12/1/17 2,760 2,832 5.85%, 12/1/14 (MBIA Insured) 1,705 1,740 5.875%, 12/1/24 (MBIA Insured) 5,510 5,613 Valdez Marine, Phillips Petroleum, 2.00%, 1/1/04 4,000 4,010 Total Alaska (Cost $13,683) 14,195 ARIZONA 1.6% Arizona School Fac. Board, 5.50%, 7/1/18 5,000 5,385 Arizona Transportation Board, 5.00%, 7/1/13 5,000 5,376 Salt River Agricultural Improvement & Power 5.00%, 1/1/04 8,300 8,413 5.00%, 1/1/08 2,250 2,467 Scottsdale IDA, Scottsdale Healthcare, 5.80%, 12/1/31 2,000 2,007 Yavapai County IDA, Yavapai Regional Medical Center 6.00%, 8/1/33 1,100 1,102 Total Arizona (Cost $24,292) 24,750 ARKANSAS 0.5% Little Rock Health Fac. Board, Baptist Health 6.85%, 11/1/08 $ 2,495 $ 2,878 North Little Rock, 6.50%, 7/1/15 (MBIA Insured) 4,000 4,795 Total Arkansas (Cost $6,478) 7,673 CALIFORNIA 7.4% California, GO, 5.00%, 2/1/31 (MBIA Insured) 5,000 4,890 California Dept. of Water Resources 5.375%, 5/1/21 2,000 2,028 5.50%, 5/1/14 (AMBAC Insured) 5,000 5,484 5.75%, 5/1/17 3,000 3,218 Central Valley Project 5.00%, 12/1/13 (FGIC Insured) 8,000 8,588 California Infrastructure & Economic Dev. Bank Bay Area Toll 5.00%, 7/1/36 (AMBAC Insured) 10,700 10,464 California Statewide CDA Community Hosp. of Monterey Peninsula 5.25%, 6/1/23 (FSA Insured) 2,000 2,024 Sutter Health 5.625%, 8/15/42 3,850 3,858 Foothill / Eastern Transportation Corridor Agency Zero Coupon, 1/1/15 (Escrowed to Maturity) 5,000 2,975 Zero Coupon, 1/1/17 (Escrowed to Maturity) 18,000 9,462 Zero Coupon, 1/1/26 (Escrowed to Maturity) 5,000 1,491 Los Angeles, GO 6.00%, 9/1/14 (Prerefunded 9/1/04!) (MBIA Insured) 5,000 5,348 Los Angeles County, Marina del Rey, COP, 6.50%, 7/1/08 3,250 3,348 Los Angeles Dept. of Water & Power 5.00%, 7/1/23 (MBIA Insured) 5,000 5,003 Los Angeles Harbor, 7.60%, 10/1/18 (Escrowed to Maturity) 3,440 4,256 Los Angeles Unified School Dist., GO 5.00%, 7/1/21 (FSA Insured) $ 7,500 $ 7,581 North Orange County Community College Dist. 5.00%, 2/1/27 (MBIA Insured) 7,000 6,922 Orange County Residual Interest Bond / Inverse Floater (Currently 10.62%), 7/1/19 (MBIA Insured) 3,000 3,651 San Francisco Public Utility Comm. 5.00%, 11/1/27 (FSA Insured) 8,000 7,892 Southern California Public Power Auth., 6.75%, 7/1/11 4,050 4,808 Union Elementary School Dist., GO Zero Coupon, 9/1/12 (FGIC Insured) 2,945 1,991 Zero Coupon, 9/1/13 (FGIC Insured) 3,520 2,238 Univ. of California Regents 5.125%, 5/15/15 (AMBAC Insured) 5,900 6,302 Total California (Cost $107,092) 113,822 COLORADO 0.7% Colorado HFA Adventist Health System, 6.50%, 11/15/31 2,500 2,671 Catholic Health Initiatives VRDN (Currently 0.90%) 3,000 3,000 5.25%, 9/1/21 1,860 1,864 Covenant Retirement Communities, 6.125%, 12/1/33 2,000 1,942 E-470 Public Highway Auth. Zero Coupon, 8/31/26 (Prerefunded 8/31/05!) 5,500 1,112 Total Colorado (Cost $10,259) 10,589 CONNECTICUT 1.4% Connecticut Special Tax Obligation 4.00%, 9/1/05 (FGIC Insured) 10,000 10,513 7.125%, 6/1/10 7,350 8,943 Mohegan Tribe Indians, 6.00%, 1/1/16 2,250 2,362 Total Connecticut (Cost $20,097) 21,818 DELAWARE 0.2% Delaware HFA, Beebe Medical Center, 6.75%, 6/1/14 $ 3,500 $ 3,635 Total Delaware (Cost $3,444) 3,635 DISTRICT OF COLUMBIA 1.8% District of Columbia, GO 5.25%, 6/1/27 (MBIA Insured) 8,645 8,718 6.00%, 6/1/14 (MBIA Insured) 4,400 5,043 6.00%, 6/1/15 (MBIA Insured) 1,550 1,783 6.00%, 6/1/17 (MBIA Insured) 3,250 3,738 District of Columbia 5.25%, 6/1/27 (Prerefunded 6/1/08!) (MBIA Insured) 1,330 1,494 6.00%, 6/1/14 (Escrowed to Maturity) (MBIA Insured) 2,305 2,687 District of Columbia Tobacco Corp., 5.25%, 5/15/09 5,000 4,749 Total District of Columbia (Cost $25,808) 28,212 FLORIDA 2.9% Dade County, Zero Coupon, 2/1/09 (MBIA Insured) 12,185 9,923 Florida Board of Ed., GO 5.00%, 6/1/05 1,425 1,515 5.00%, 1/1/15 (MBIA Insured) 10,185 10,835 5.50%, 7/1/14 (AMBAC Insured) 4,470 4,909 Highlands County HFA, Adventist Health System/Sunbelt 6.00%, 11/15/31 2,750 2,862 Hillsborough IDA, Tampa Electric, 5.50%, 10/1/23 1,955 1,897 Jacksonville HFA, Genesis Rehabilitation Hosp. VRDN (Currently 0.85%) 4,200 4,200 Orange County HFA, Westminster Community Care 6.75%, 4/1/34 2,500 1,910 Port St. Lucie Utility Zero Coupon, 9/1/16 (Prerefunded 9/1/06!) (FGIC Insured) 5,000 2,651 Zero Coupon, 9/1/26 (Prerefunded 9/1/06!) (FGIC Insured) 5,000 1,392 Santa Rosa HFA, Baptist Health Care VRDN (Currently 0.85%) $ 3,000 $ 3,000 Total Florida (Cost $43,715) 45,094 GEORGIA 6.5% Albany-Dougherty County Hosp. Auth. Phoebe Putney Memorial Hosp. VRDN (Currently 0.81%) (AMBAC Insured) 1,700 1,700 Athens-Clarke County Unified Gov't. Dev. Auth. Univ. of Georgia Athletic Assoc. VRDN (Currently 0.85%) 4,500 4,500 Atlanta Airport VRDN (Currently 0.80%) (MBIA Insured) 2,500 2,500 VRDN (Currently 0.82%) (MBIA Insured) 5,000 5,000 Atlanta Water & Sewer, VRDN (Currently 0.85%) (FSA Insured) 1,000 1,000 Chatham County Hosp. Auth. Memorial Univ. Medical Center, 6.125%, 1/1/24 4,000 4,206 Coweta County Residential Care Fac. for the Elderly Wesley Woods of Newnan-Peachtree City 8.20%, 10/1/16 1,350 1,411 8.25%, 10/1/26 1,800 1,885 DeKalb County Hosp. Auth. DeKalb Regional Healthcare System VRDN (Currently 0.85%) 2,000 2,000 DeKalb County Water & Sewage, 5.125%, 10/1/31 3,000 3,009 Forsyth County School Dist., GO, 5.75%, 2/1/18 2,800 3,078 Fulton-Dekalb Hosp. Auth. Grady Memorial Hosp. 6.80%, 1/1/07 (Escrowed to Maturity) (AMBAC Insured) 5,530 6,341 6.80%, 1/1/08 (Escrowed to Maturity) (AMBAC Insured) 5,905 6,921 6.85%, 1/1/09 (Escrowed to Maturity) (AMBAC Insured) 6,310 7,511 6.85%, 1/1/10 (Escrowed to Maturity) (AMBAC Insured) 6,745 8,069 Georgia Private Colleges & Univ. Auth. Emory Univ., 5.50%, 11/1/24 6,225 6,495 Gwinnett County School Dist., GO, 6.40%, 2/1/11 $ 1,905 $ 2,242 Metropolitan Atlanta Rapid Transit Auth. 6.90%, 7/1/16 (Prerefunded 7/1/04!) (MBIA Insured) 5,655 6,046 Municipal Electric Auth. of Georgia 5.50%, 1/1/20 3,000 3,240 5.70%, 1/1/19 (FGIC Insured) 5,100 5,671 6.40%, 1/1/07 (Escrowed to Maturity) (AMBAC Insured) 7,500 8,478 7.25%, 1/1/24 (AMBAC Insured) 6,500 8,402 Total Georgia (Cost $90,165) 99,705 HAWAII 0.5% Hawaii Airport System, 5.75%, 7/1/21 (FGIC Insured) 4,000 4,268 Hawaii Dept. of Budget & Fin., Hawaii Pacific Health 6.25%, 7/1/21 4,000 4,078 Total Hawaii (Cost $7,814) 8,346 IDAHO 0.2% Nez Perce County IDRB, PCR, Potlatch, 7.00%, 12/1/14 2,600 2,616 Total Idaho (Cost $2,600) 2,616 ILLINOIS 3.7% Chicago 6.75%, 1/1/35 (Prerefunded 7/1/10!) (FGIC Insured) 5,000 6,040 Chicago, GO 5.50%, 1/1/14 (FSA Insured) 5,000 5,514 5.50%, 1/1/18 (AMBAC Insured) 3,880 4,239 Chicago O'Hare Int'l. Airport, United Airlines 6.30%, 5/1/16 * 4,555 1,002 Chicago Water, 5.75%, 11/1/30 (AMBAC Insured) 1,400 1,551 Illinois 5.50%, 6/15/16 2,000 2,164 6.125%, 6/15/16 2,000 2,260 Illinois EFA, Northwestern Univ., 5.25%, 11/1/14 4,000 4,335 Illinois HFA Herman M. Finch Univ. VRDN (Currently 0.85%) $ 3,000 $ 3,000 Glen Oaks Medical Center 7.00%, 11/15/19 (Escrowed to Maturity) 3,300 3,402 Metropolitan Pier & Expo Auth. Zero Coupon, 6/15/08 (FGIC Insured) 130 112 Zero Coupon, 6/15/18 (FGIC Insured) 14,160 6,616 Zero Coupon, 12/15/24 (MBIA Insured) 10,000 3,060 Regional Transportation Auth. 6.70%, 11/1/21 (FGIC Insured) 5,000 6,129 7.75%, 6/1/19 (FGIC Insured) 5,350 7,133 Total Illinois (Cost $54,759) 56,557 INDIANA 1.2% Goshen, Greencroft Obligated Group, 5.75%, 8/15/19 3,000 2,723 Indiana HFFA, Clarian Health Partners, 5.50%, 2/15/16 6,705 6,908 Indiana State Office Building Commission, GO 5.50%, 7/1/20 (AMBAC Insured) 4,500 4,681 Indiana Transportation Fin. Auth., 5.375%, 12/1/25 4,000 4,102 Total Indiana (Cost $17,554) 18,414 IOWA 0.7% Iowa Fin. Auth. Single Family Mortgage, 5.70%, 1/1/27 4,150 4,241 Wesley Retirement Services, 6.25%, 2/1/12 2,400 2,362 Scott County, Ridgecrest Village, 7.25%, 11/15/26 4,000 4,044 Total Iowa (Cost $10,248) 10,647 LOUISIANA 0.4% Calcasieu Parish, PCR, Entergy, 5.45%, 7/1/10 1,750 1,698 West Feliciana Parish PCR, Entergy, 5.65%, 9/1/04 5,000 5,098 Total Louisiana (Cost $6,750) 6,796 MAINE 0.2% Maine Housing Auth., 6.10%, 11/15/15 (AMBAC Insured) 3,000 3,148 Total Maine (Cost $3,000) 3,148 MARYLAND 3.4% Baltimore City, Convention Center 6.00%, 9/1/17 (Prerefunded 9/1/04!) (FGIC Insured) $ 1,750 $ 1,837 Baltimore County, GO, VRDN (Currently 0.90%) 1,000 1,000 Baltimore County Mortgage, Springhill Housing VRDN (Currently 0.85%) (GNMA Guaranteed) 1,000 1,000 Baltimore IDA, GO, VRDN (Currently 0.83%) 1,300 1,300 Calvert County Economic Dev. Asbury Solomons Obligation Group VRDN (Currently 0.85%) 2,700 2,700 Frederick County EFA, Hood College VRDN (Currently 0.85%) 1,660 1,660 Maryland CDA Single Family 5.95%, 4/1/16 5,000 5,219 6.45%, 4/1/14 2,000 2,054 Maryland HHEFA Catholic Health Initiatives, VRDN (Currently 0.90%) 2,100 2,100 Charlestown Community Health VRDN (Currently 0.84%) 1,030 1,030 Johns Hopkins Hosp., Zero Coupon, 7/1/19 7,675 3,409 Loyola College VRDN (Currently 0.92%) (MBIA Insured) 400 400 Mercy Ridge Retirement Community 6.00%, 4/1/35 2,535 2,437 Sheppard & Enoch Pratt Foundation Residual Interest Bond / Inverse Floater (Currently 1.05%), 7/1/28 (RAA Insured) 5,000 5,000 Univ. of Maryland Medical System 7.00%, 7/1/22 (FGIC Insured) 1,500 1,857 Prince George's County, Dimensions Health, 5.30%, 7/1/24 6,685 4,336 Univ. of Maryland, 5.75%, 4/1/17 (Prerefunded 4/1/06!) 5,000 5,546 Washington Suburban Sanitary District, GO VRDN (Currently 0.83%) 10,000 10,000 Total Maryland (Cost $52,129) 52,885 MASSACHUSETTS 5.8% Massachusetts, GO 5.25%, 8/1/16 $ 10,000 $ 10,660 Central Artery VRDN (Currently 0.87%) 4,750 4,750 Massachusetts Bay Transportation Auth., GO 7.00%, 3/1/14 3,150 3,869 7.00%, 3/1/21 6,200 7,732 Massachusetts Dev. Fin. Agency, Boston Univ. 5.375%, 5/15/39 (XLCA Insured) 5,000 5,058 Massachusetts HEFA Harvard Univ. 5.00%, 7/15/22 7,450 7,594 6.00%, 7/1/35 (Prerefunded 7/1/10!) 3,500 4,093 6.25%, 4/1/20 5,000 5,892 Partners Healthcare System, 5.75%, 7/1/32 4,400 4,525 Massachusetts Housing Fin. Agency, 6.30%, 12/1/14 2,900 3,009 Massachusetts Municipal Wholesale Electric 5.25%, 7/1/04 (MBIA Insured) 7,000 7,244 Massachusetts Port Auth., 5.75%, 7/1/29 5,000 5,143 Massachusetts Water Pollution Abatement Trust 5.00%, 8/1/32 5,000 4,954 5.25%, 8/1/20 3,750 3,882 5.75%, 8/1/29 5,000 5,337 6.00%, 8/1/19 5,000 5,772 Total Massachusetts (Cost $83,615) 89,514 MICHIGAN 1.7% Michigan Building Auth., GO, 5.50%, 10/15/19 5,000 5,354 Michigan Hosp. Fin. Auth. Ascension Health, 5.25%, 11/15/26 3,570 3,509 Trinity Health, 6.00%, 12/1/20 1,500 1,611 Michigan Public Power Agency, 5.25%, 1/1/18 (MBIA Insured) 2,750 2,945 Michigan Strategic Fund, IDRB, Detroit Edison, 5.45%, 9/1/29 5,750 5,788 Univ. of Michigan Board of Trustees VRDN (Currently 0.80%) 3,300 3,300 Univ. of Michigan Univ. of Michigan Hosp. VRDN (Currently 0.80%) $ 2,300 $ 2,300 Univ. of Michigan Medical Savings Plan VRDN (Currently 0.85%) 800 800 Total Michigan (Cost $25,227) 25,607 MINNESOTA 0.7% Minneapolis & St. Paul Metropolitan Airport 5.25%, 1/1/32 (FGIC Insured) 10,000 10,066 Total Minnesota (Cost $9,741) 10,066 MISSISSIPPI 1.1% Gulfport Hosp. Fac., Memorial Hosp. at Gulfport 5.75%, 7/1/31 3,500 3,552 Mississippi, GO, 5.25%, 11/1/14 4,000 4,386 Mississippi Business Fin., PCR, Entergy, 5.90%, 5/1/22 7,000 6,883 Warren County, PCR, Entergy, 7.00%, 4/1/22 1,500 1,524 Total Mississippi (Cost $16,281) 16,345 MISSOURI 0.3% Good Shepherd Nursing Home Dist., 5.90%, 8/15/23 2,000 1,749 Missouri Environmental Improvement & Energy Resource Auth. 5.375%, 7/1/18 2,595 2,836 Total Missouri (Cost $4,795) 4,585 MONTANA 0.6% Forsyth PCR, Puget Sound Energy 5.00%, 3/1/31 (AMBAC Insured) 10,000 9,897 Total Montana (Cost $10,288) 9,897 NEBRASKA 0.5% Lincoln Electric Systems, 5.00%, 9/1/23 4,060 4,063 Omaha Public Power Dist. 6.20%, 2/1/17 (Escrowed to Maturity) 3,000 3,502 Total Nebraska (Cost $7,190) 7,565 NEVADA 1.9% Clark County, Fuel Tax, 5.125%, 7/1/16 (AMBAC Insured) $ 10,870 $ 11,530 Clark County Airport, McCarran Int'l. Airport 4.75%, 7/1/22 (MBIA Insured) 2,970 2,873 Clark County IDRB, PCR, Southwest Gas, 5.45%, 3/1/13 5,000 5,024 Clark County School Dist., GO, 7.00%, 6/1/11 (MBIA Insured) 3,500 4,245 Nevada, GO, 7.25%, 11/1/10 (Escrowed to Maturity) 3,050 3,094 Truckee Meadows Water Auth., 5.50%, 7/1/19 (FSA Insured) 2,500 2,670 Total Nevada (Cost $28,083) 29,436 NEW HAMPSHIRE 2.2% New Hampshire Business Fin. Auth., PCR Public Service Co. of New Hampshire 5.45%, 5/1/21 (MBIA Insured) 14,500 15,183 New Hampshire HHEFA Covenant Health System, 6.00%, 7/1/22 3,400 3,480 Dartmouth-Hitchcock Obligation Group 5.50%, 8/1/27 (FSA Insured) 7,930 8,271 Wentworth-Douglas Hosp. 5.375%, 1/1/15 (MBIA Insured) 5,600 6,030 Total New Hampshire (Cost $31,960) 32,964 NEW JERSEY 0.8% New Jersey Economic Dev. Auth., Harrogate 5.875%, 12/1/26 3,500 3,309 New Jersey HFFA Pascack Valley Hosp. Assoc. 6.50%, 7/1/23 3,000 2,991 6.625%, 7/1/36 1,000 995 New Jersey Sports & Exhibition Auth., Monmouth Park 8.00%, 1/1/25 (Prerefunded 1/1/05!) 4,500 4,990 Total New Jersey (Cost $11,303) 12,285 NEW MEXICO 0.7% Farmington PCR El Paso Electric, 6.375%, 8/1/05 $ 2,500 $ 2,585 Public Service of New Mexico, 2.75%, 4/1/04 7,500 7,485 Total New Mexico (Cost $10,101) 10,070 NEW YORK 15.6% Dormitory Auth. of the State of New York VRDN (Currently 0.85%) (FGIC Insured) 3,921 3,921 5.75%, 7/1/13 10,000 11,238 5.75%, 7/1/18 (AMBAC Insured) 5,000 5,677 5.75%, 5/15/19 (Prerefunded 5/15/10!) (FGIC Insured) 4,945 5,691 State Univ. Ed. Fac. 5.25%, 5/15/19 3,325 3,551 6.00%, 7/1/14 10,000 11,383 State Univ. of New York 5.25%, 5/15/15 (AMBAC Insured) 3,600 3,929 Long Island Power Auth., 5.00%, 9/1/24 2,000 1,944 Metropolitan Transportation Auth. 5.00%, 4/1/29 (Prerefunded 10/1/14!) (FSA Insured) 7,290 7,910 5.125%, 11/15/31 7,000 6,861 5.25%, 11/15/31 2,945 2,915 5.25%, 11/15/32 10,000 9,896 5.75%, 7/1/21 (Prerefunded 1/1/08!) (MBIA Insured) 12,750 14,587 New York City, GO 5.50%, 6/1/21 7,500 7,728 6.00%, 12/1/18 (Escrowed to Maturity) 5,000 5,053 6.00%, 2/15/25 (Prerefunded 2/15/05!) 1,990 2,146 6.00%, 10/15/26 1,950 2,033 6.00%, 5/15/30 2,880 3,067 6.25%, 8/1/09 5,050 5,594 New York City Municipal Water Fin. Auth. 5.00%, 6/15/32 10,000 9,805 5.50%, 6/15/33 $ 9,000 $ 9,323 6.00%, 6/15/33 (Prerefunded 6/15/10!) 2,220 2,591 New York City Transitional Fin. Auth. STEP, 5.25%, 2/1/29 16,640 17,842 5.75%, 11/15/20 4,990 5,454 5.75%, 11/15/20 (Prerefunded 5/15/10!) 510 587 6.00%, 8/15/17 (Prerefunded 8/15/09!) 4,000 4,692 New York State Environmental Fac. Corp., PCR 6.90%, 11/15/15 215 232 6.90%, 11/15/15 (Prerefunded 11/15/04!) 5,150 5,613 New York State Medical Care Fac. 6.50%, 8/15/24 (Prerefunded 8/15/04!) 5,895 6,319 6.50%, 8/15/29 (Prerefunded 2/15/05!) (AMBAC Insured) 4,625 5,064 New York State Mortgage Agency, 5.70%, 4/1/16 4,090 4,244 New York State Thruway Auth. 5.00%, 4/1/19 (AMBAC Insured) 5,000 5,123 5.50%, 3/15/20 3,000 3,182 New York State Urban Dev. Corp., 5.50%, 7/1/26 10,000 10,384 Tobacco Settlement Fin. Corp., 5.50%, 6/1/19 2,500 2,572 Triborough Bridge & Tunnel Auth. 5.25%, 1/1/28 (Prerefunded 1/1/07!) 10,000 10,556 5.50%, 1/1/17 (Escrowed to Maturity) 18,275 20,365 Total New York (Cost $219,309) 239,072 NORTH CAROLINA 1.6% Cumberland County, Civic Center 6.40%, 12/1/24 (Prerefunded 12/1/04!) (AMBAC Insured) 2,750 2,986 North Carolina, GO, VRDN (Currently 0.88%) 960 960 North Carolina Eastern Municipal Power Agency 5.30%, 1/1/15 1,000 1,015 5.375%, 1/1/16 2,000 2,025 6.70%, 1/1/19 3,965 4,269 7.50%, 1/1/10 4,330 5,053 7.50%, 1/1/10 (Escrowed to Maturity) 4,650 5,763 North Carolina Municipal Power Agency, Catawba Electric 5.50%, 1/1/13 2,250 2,390 Total North Carolina (Cost $21,966) 24,461 NORTH DAKOTA 0.3% Mercer County, PCR, Basin Electric Power Co-Op. 6.05%, 1/1/19 (AMBAC Insured) $ 4,500 $ 4,817 Total North Dakota (Cost $4,532) 4,817 OHIO 2.0% Cuyahoga County, Cleveland Clinic Obligation Group 6.00%, 1/1/32 5,000 5,218 Montgomery County Hosp., Catholic Health Initiatives 6.00%, 12/1/19 6,500 6,918 Ohio Air Quality Dev. Auth., PCR, FirstEnergy, 5.80%, 12/1/04 5,950 6,091 Ohio State Univ. 5.25%, 6/1/14 3,005 3,260 5.25%, 12/1/16 5,000 5,314 Ohio Water Dev. Auth., PCR, FirstEnergy, 7.70%, 8/1/25 3,950 4,258 Total Ohio (Cost $30,097) 31,059 OKLAHOMA 0.5% Jackson County Memorial Hosp. Auth. Jackson County Memorial Hosp. 7.30%, 8/1/15 2,000 1,892 Tulsa County Home Fin. Auth. 6.90%, 8/1/10 (Escrowed to Maturity) (FGIC Insured) 4,250 5,125 Total Oklahoma (Cost $6,039) 7,017 OREGON 0.5% Oregon Housing & Community Services Dept., 6.00%, 7/1/20 4,450 4,662 Umatilla County Hosp. Fac. Auth. Catholic Health Initiatives, 5.50%, 3/1/22 2,210 2,256 Total Oregon (Cost $6,641) 6,918 PENNSYLVANIA 2.6% Allegheny County Hosp. Dev. Auth. West Penn Allegheny Health System 9.25%, 11/15/22 3,000 2,913 9.25%, 11/15/30 $ 200 $ 194 Beaver County IDA, PCR, FirstEnergy, 7.75%, 7/15/25 3,900 4,202 Chester County HEFA, Jefferson Health System 5.375%, 5/15/27 12,000 11,801 Cumberland County Municipal Auth., Wesley Affiliated Services 7.125%, 1/1/25 3,000 2,956 Pennsylvania Convention Center Auth. 6.70%, 9/1/14 (FSA Insured) 5,000 5,350 Pennsylvania Intergov't. Cooperative Auth. 6.75%, 6/15/21 (Prerefunded 6/15/05!) (FGIC Insured) 4,750 5,205 Pennsylvania Turnpike Commission 5.50%, 7/15/33 (AMBAC Insured) 3,500 3,648 West Shore Area Auth., Holy Spirit Hosp., 6.20%, 1/1/26 3,250 3,283 Total Pennsylvania (Cost $37,653) 39,552 RHODE ISLAND 0.1% Tobacco Settlement Fin. Corp., 6.125%, 6/1/32 2,500 1,987 Total Rhode Island (Cost $2,410) 1,987 SOUTH CAROLINA 2.7% Connector 2000 Assoc. Zero Coupon, 1/1/09 2,700 1,325 Zero Coupon, 1/1/10 3,400 1,516 Zero Coupon, 1/1/11 2,200 508 Zero Coupon, 1/1/29 20,500 925 Georgetown County PCR, Int'l. Paper, 5.70%, 4/1/14 4,000 4,181 Piedmont Municipal Power Agency 6.50%, 1/1/14 3,000 3,524 6.50%, 1/1/14 (Escrowed to Maturity) (FGIC Insured) 500 602 South Carolina Public Service Auth. 5.875%, 1/1/23 (FGIC Insured) 8,030 8,717 6.25%, 1/1/22 (AMBAC Insured) 17,750 19,497 Total South Carolina (Cost $42,219) 40,795 TENNESSEE 1.6% Chattanooga Health Ed. & Housing Fac. Board 6.625%, 9/1/07 (Escrowed to Maturity) (MBIA Insured) $ 2,950 $ 3,433 6.625%, 9/1/08 (Escrowed to Maturity) (MBIA Insured) 3,150 3,731 Clarksville Public Building Auth., GO VRDN (Currently 0.85%) 2,680 2,680 Metropolitan Nashville & Davidson Counties Water & Sewer 7.70%, 1/1/12 (FGIC Insured) 6,250 7,829 Sevier County Public Building Auth., GO VRDN (Currently 0.82%) (FSA Insured) 1,685 1,685 Shelby County Health Ed. & Housing Board Le Bonhuer Children's Medical Center 5.50%, 8/15/12 (Escrowed to Maturity) (MBIA Insured) 4,000 4,416 Total Tennessee (Cost $21,325) 23,774 TEXAS 8.3% Abilene Health Fac. Dev. Corp. Sears Methodist Retirement System 7.00%, 11/15/33 3,500 3,375 Amarillo Health Fac. Dev. Corp. Sears Panhandle Retirement 7.75%, 8/15/26 (Prerefunded 8/15/06!) 5,000 5,936 Austin, 5.125%, 5/15/27 (FSA Insured) 10,955 10,942 Bell County Health Fac. Dev. Corp. Scott & White Memorial Hosp. VRDN (Currently 0.80%) (MBIA Insured) 2,000 2,000 Brazos River Auth., PCR, Centerpoint Energy, 7.75%, 12/1/18 4,000 4,317 Denison Hosp. Auth., Texoma Medical Center, 7.00%, 8/15/14 4,245 4,259 Harris County, GO, Zero Coupon, 8/15/04 (MBIA Insured) 6,000 5,939 Harris County Health Fac. Dev. 7.125%, 6/1/15 (Prerefunded 6/1/02!) 1,110 1,161 Memorial Hermann Healthcare System 6.375%, 6/1/29 4,000 4,234 St. Luke's Episcopal Hosp. 5.375%, 2/15/26 $ 5,500 $ 5,475 Texas Childrens Hosp. VRDN (Currently 0.87%) (MBIA Insured) 5,200 5,200 5.25%, 10/1/19 5,000 5,036 Harris County Hosp. Dist. 7.40%, 2/15/10 (Escrowed to Maturity) (AMBAC Insured) 625 704 Houston 6.40%, 6/1/27 4,250 4,601 GO, 5.50%, 3/1/18 (FSA Insured) 2,750 2,937 Houston Airport Systems 5.50%, 7/1/18 (FSA Insured) 2,265 2,417 5.50%, 7/1/19 (FSA Insured) 2,000 2,120 Houston Higher Ed. Fin. Corp., Rice Univ. 5.375%, 11/15/29 11,450 11,685 Houston Independent School Dist., GO 5.00%, 7/15/20 (FSA Insured) 3,000 3,035 Houston Water & Sewer System 5.75%, 12/1/18 (AMBAC Insured) 3,000 3,284 Lower Colorado River Auth., 6.00%, 5/15/12 (FSA Insured) 6,095 6,886 Sabine River Auth., PCR TXU Energy 4.00%, 11/1/03 3,500 3,507 5.50%, 11/1/11 4,580 4,732 5.80%, 7/1/22 1,500 1,450 Intl. Paper, 6.20%, 2/1/25 2,500 2,537 San Antonio Electric & Gas, VRDN (Currently 0.95%) 5,000 5,000 Texas A&M Univ. 5.375%, 5/15/16 4,750 5,087 5.375%, 5/15/18 2,570 2,719 Texas Dept. of Housing & Community Affairs 6.40%, 1/1/27 3,500 3,552 Texas Water Dev. Board, VRDN (Currently 0.85%) 295 295 Univ. of Texas, Board of Regents, 5.25%, 8/15/17 2,925 3,160 Total Texas (Cost $122,081) 127,582 VERMONT 0.4% Vermont Ed. & Health Buildings Fin. Agency Fletcher Allen Healthcare VR, 6.15%, 9/1/13 (FGIC Insured) $ 4,650 $ 4,760 VR, 6.25%, 9/1/23 (FGIC Insured) 2,000 2,047 Total Vermont (Cost $6,650) 6,807 VIRGINIA 2.6% Chesapeake IDA, PCR, Virginia Electric & Power 5.25%, 2/1/08 3,000 3,104 Fairfax County Water Auth. 6.00%, 4/1/22 3,835 4,236 6.00%, 4/1/22 (Prerefunded 4/1/07!) 3,815 4,373 Fredericksburg IDA, Medicorp Health System, 5.25%, 6/15/27 2,750 2,663 Greater Richmond Convention Center, 6.125%, 6/15/29 8,550 9,236 Henrico County Economic Dev. Auth. Bon Secours Health System 5.75%, 11/15/04 (Prerefunded 11/15/04!) 10,000 10,556 Virginia Resources Auth. Goochland County Water & Sewer Zero Coupon, 11/1/18 1,680 777 Zero Coupon, 11/1/21 1,615 616 Virginia Transportation Board, 5.25%, 5/15/20 4,620 4,797 Total Virginia (Cost $37,721) 40,358 WASHINGTON 5.4% Chelan County Public Utility Dist., Rock Island Hydro Zero Coupon, 6/1/18 (MBIA Insured) 10,100 4,618 King County Public Hosp., Valley Medical Center 5.75%, 9/1/20 (AMBAC Insured) 9,950 10,906 King County Water & Sewer, 5.00%, 1/1/35 (FSA Insured) 10,000 9,757 Port of Seattle, 5.50%, 2/1/26 (MBIA Insured) 5,000 5,170 Snohomish County Housing Auth., Millwood Estates 5.50%, 6/1/29 3,750 3,714 Tacoma Electric System 6.25%, 1/1/15 (Prerefunded 1/1/04!) (FGIC Insured) ** 7,550 7,835 Tacoma Solid Waste Utility 5.50%, 12/1/17 (AMBAC Insured) $ 12,080 $ 12,997 5.50%, 12/1/17 (Prerefunded 12/1/07!) (AMBAC Insured) 2,420 2,749 Washington, GO 5.70%, 10/1/15 14,000 15,665 6.625%, 1/1/25 6,100 6,985 Washington Public Power Supply System 5.25%, 7/1/16 (FSA Insured) 3,000 3,161 Total Washington (Cost $77,420) 83,557 WEST VIRGINIA 1.8% Mason County PCR, Appalachian Power Company 5.50%, 10/1/22 8,000 7,770 West Virginia Building Commission, GO 5.375%, 7/1/18 (AMBAC Insured) 2,915 3,143 West Virginia Building Commission 5.375%, 7/1/21 (AMBAC Insured) 5,500 5,848 West Virginia Hosp. Fin. Auth. Charleston Area Medical Center 5.75%, 9/1/13 (MBIA Insured) 4,200 4,525 Oak Hill Hosp. 6.75%, 9/1/22 (Prerefunded 9/1/10!) 5,000 6,053 Total West Virginia (Cost $25,824) 27,339 WISCONSIN 0.8% Wisconsin HEFA Froedert & Community Health 5.625%, 10/1/14 1,000 1,050 5.625%, 10/1/15 1,100 1,149 5.625%, 10/1/17 3,725 3,838 United Health, 5.50%, 12/15/16 (MBIA Insured) 6,540 6,861 Total Wisconsin (Cost $12,312) 12,898 WYOMING 0.7% Wyoming CDA 5.30%, 6/1/17 $ 4,600 $ 4,711 5.70%, 12/1/35 5,175 5,295 Total Wyoming (Cost $9,764) 10,006 Total Investments in Securities 99.6% of Net Assets (Cost $1,447,400) $1,530,278 Futures Contracts Contract Unrealized Expiration Value Gain (Loss) ----------- ----------- ----------- In thousands Short, 100 ten year U.S. Treasury contracts, $233,000 par of 6.25% Tacoma Electric System bonds pledged as initial margin 9/03 $ (11,153) $ 15 Short, 50 thirty year U.S. Treasury contracts, $117,000 par of 6.25% Tacoma Electric System bonds pledged as initial margin 9/03 (5,370) (9) Net payments (receipts) of variation margin to date 22 Variation margin receivable (payable) on open futures contracts 28 Other Assets Less Liabilities 5,659 NET ASSETS $ 1,535,965 ----------- Value - -------------------------------------------------------------------------------- In thousands Net Assets Consist of: Undistributed net investment income (loss) $ 2,983 Undistributed net realized gain (loss) 468 Net unrealized gain (loss) 82,884 Paid-in-capital applicable to 156,848,392 shares of $1.00 par value capital stock outstanding; 500,000,000 shares authorized 1,449,630 NET ASSETS $ 1,535,965 ----------- NET ASSET VALUE PER SHARE Tax-Free Income shares ($1,442,997,389/147,359,675 shares outstanding) $ 9.79 ----------- Tax-Free Income-Advisor Class shares ($92,967,306/9,488,717 shares outstanding) $ 9.80 ----------- ** All or a portion of this security is pledged to cover margin requirements on futures contracts at August 31, 2003 ! Used in determining portfolio maturity * Non-income producing 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. GNMA Government National Mortgage Association 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 Semiannual Report (Unaudited) Statement of Operations - -------------------------------------------------------------------------------- In thousands 6 Months Ended 8/31/03 - -------------------------------------------------------------------------------- Investment Income (Loss) Interest income $ 38,654 Expenses Investment management 3,603 Shareholder servicing Tax-Free Income shares 341 Tax-Free Income-Advisor Class shares 4 Custody and accounting 122 Registration 36 Prospectus and shareholder reports Tax-Free Income shares 30 Distribution-Tax-Free Income-Advisor Class shares 30 Legal and audit 10 Directors 5 Miscellaneous 5 Total expenses 4,186 Net investment income (loss) 34,468 Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities 2,498 Futures (380) Written options 96 Net realized gain (loss) 2,214 Change in net unrealized gain (loss) Securities (42,955) Futures 88 Change in net unrealized gain (loss) (42,867) Net realized and unrealized gain (loss) (40,653) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ (6,185) ---------- The accompanying notes are an integral part of these financial statements. T. Rowe Price Tax-Free Income Fund - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Statement of Changes in Net Assets - -------------------------------------------------------------------------------- In thousands 6 Months Year Ended Ended 8/31/03 2/28/03 - -------------------------------------------------------------------------------- Increase (Decrease) in Net Assets Operations Net investment income (loss) $ 34,468 $ 70,062 Net realized gain (loss) 2,214 3,207 Change in net unrealized gain (loss) (42,867) 30,869 Increase (decrease) in net assets from operations (6,185) 104,138 Distributions to shareholders Net investment income Tax-Free Income shares (33,598) (69,358) Tax-Free Income-Advisor Class shares (537) (2) Decrease in net assets from distributions (34,135) (69,360) Capital share transactions * Shares sold Tax-Free Income shares 94,627 190,501 Tax-Free Income-Advisor Class shares 98,188 145 Distributions reinvested Tax-Free Income shares 22,488 46,518 Tax-Free Income-Advisor Class shares 548 2 Shares redeemed Tax-Free Income shares (136,791) (213,110) Tax-Free Income-Advisor Class shares (3,498) -- Increase (decrease) in net assets from capital share transactions 75,562 24,056 Net Assets Increase (decrease) during period 35,242 58,834 Beginning of period 1,500,723 1,441,889 End of period $1,535,965 $1,500,723 ---------- ---------- T. Rowe Price Tax-Free Income Fund - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Statement of Changes in Net Assets - -------------------------------------------------------------------------------- In thousands 6 Months Year Ended Ended 8/31/03 2/28/03 - -------------------------------------------------------------------------------- *Share information Shares sold Tax-Free Income shares 9,433 19,343 Tax-Free Income-Advisor Class shares 9,772 14 Distributions reinvested Tax-Free Income shares 2,250 4,713 Tax-Free Income-Advisor Class shares 56 -- Shares redeemed Tax-Free Income shares (13,676) (21,619) Tax-Free Income-Advisor Class shares (354) -- Increase (decrease) in shares outstanding 7,481 2,451 The accompanying notes are an integral part of these financial statements. T. Rowe Price Tax-Free Income Fund - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) August 31, 2003 Notes to Financial Statements - -------------------------------------------------------------------------------- NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES T. Rowe Price Tax-Free Income Fund, 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 Fund (Tax-Free Income class), offered since October 26, 1976, and Tax-Free Income Fund-Advisor Class (Advisor Class), which was first offered on 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 Investments are valued 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. Purchased and written options on futures contracts are valued at the last sale price. 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 or under the supervision of the officers of the fund, as authorized by the Board of Directors. Premiums and Discounts Premiums and discounts on municipal securities are amortized for financial reporting purposes. 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 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 shares outstanding. Income distributions are declared by each class on a daily basis and paid monthly. Expenses Paid Indirectly Credits earned on temporarily uninvested cash balances at the custodian are used to reduce the fund's custody charges. Other Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded by the fund on the ex-dividend date. Payments ("variation margin") made or received by the fund 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 Change in net unrealized gain or loss in the accompanying financial statements. NOTE 2 - INVESTMENT TRANSACTIONS Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks 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 six months ended August 31, 2003, 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 and/or interest rates. 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 six months ended August 31, 2003, 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 $266,381,000 and $241,430,000, respectively, for the six months ended August 31, 2003. NOTE 3 - FEDERAL INCOME TAXES No provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company and distribute 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 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. Temporary differences are not adjusted. The amount and character of tax-basis distributions and composition of net assets are finalized at fiscal year-end; accordingly, tax-basis balances have not been determined as of August 31, 2003. At August 31, 2003, the cost of investments for federal income tax purposes was $1,445,907,000. Net unrealized gain aggregated $84,377,000 at period-end, of which $98,216,000 related to appreciated investments and $13,839,000 related to depreciated investments. 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 net assets to those of the group. At August 31, 2003, the effective annual group fee rate was 0.32%, and investment management fee payable totaled $605,000. Through June 30, 2004, the manager is required to bear any expenses, excluding interest, taxes, brokerage commissions, and extraordinary expenses, for the Advisor Class that would cause the class's ratio of total expenses to average net assets (expense ratio) to exceed 0.90%. Thereafter, through June 30, 2006, the Advisor Class is required to reimburse the manager for these expenses, provided that its average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed 0.90% for the Advisor Class. This agreement had no impact on the fund's total expenses during the six months ended August 31, 2003 and, at that date, no amounts were subject to future reimbursement by the fund. 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 $282,000 for the six months ended August 31, 2003, of which $51,000 was payable at period-end. Item 2. Code of Ethics. Not required at this time. Item 3. Audit Committee Financial Expert. Not required at this time. Item 4. Principal Accountant Fees and Services. Not required at this time. Item 5. Audit Committee of Listed Registrants. Not required at this time. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. [Reserved] Item 9. 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 10. Exhibits. (a)(1) Not required at this time. (a)(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. (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 October 17, 2003 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 October 17, 2003 By /s/ Joseph A. Carrier Joseph A. Carrier Principal Financial Officer Date October 17, 2003 EX-99.906 2 ex-99_906cert.txt 906 CERTIFICATIONS Item 10(b). CERTIFICATION UNDER SECTION 906 OF SARBANES-OXLEY ACT OF 2002 Name of Issuer: T. Rowe Price Tax-Free Income Fund In connection with the Report on Form N-CSR for the above named issuer, the undersigned hereby certifies, to the best of his knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: October 17, 2003 /s/ James S. Riepe James S. Riepe Principal Executive Officer Date: October 17, 2003 /s/ Joseph A. Carrier Joseph A. Carrier Principal Financial Officer EX-99.CERT 3 ex-99cert.txt 302 CERTIFICATIONS Item 10(a)(2). CERTIFICATIONS I, James S. Riepe, certify that: 1. I have reviewed this report on Form N-CSR of T. Rowe Price Tax-Free Income Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: October 17, 2003 /s/ James S. Riepe James S. Riepe Principal Executive Officer CERTIFICATIONS I, Joseph A. Carrier, certify that: 1. I have reviewed this report on Form N-CSR of T. Rowe Price Tax-Free Income Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: October 17, 2003 /s/ Joseph A. Carrier Joseph A. Carrier Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----