N-CSR 1 tfi.txt T. ROWE PRICE TAX-FREE INCOME FUND Item 1. Report to Shareholders T. Rowe Price Tax-Free Income Fund -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- Certified Annual Report Performance Comparison -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- Since Inception Periods Ended 2/29/04 1 Year 5 Years 10 Years Inception Date -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- Period Ended 2/29/04 12-Month Return -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- Percent of Net Assets Periods Ended 2/28/03 2/29/04 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- Periods Ended 2/28/03 2/29/04 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- Certified Annual Report Financial Highlights For a share outstanding throughout each period -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- Certified Annual Report Financial Highlights For a share outstanding throughout each period -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- Certified Annual Report February 29, 2004 Portfolio of Investments (ss.) Par Value -------------------------------------------------------------------------------- ($ 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