T. ROWE PRICE TAX-FREE FUNDS

HIGHLIGHTS

■	Overcoming bouts of volatility, the broad municipal bond market produced modest positive returns for the 12 months ended February 28, 2021. In the tax-exempt money market, yields were very low due to Federal Reserve policy actions and other technical factors.

■	In this environment, T. Rowe Price’s Tax-Free Funds produced positive returns and delivered mixed results versus their respective Bloomberg Barclays benchmarks and Lipper peer group averages.

■	We continue to favor revenue-backed debt over general obligation bonds due to our longer-term concerns about the unfunded retirement liabilities many state and local governments face.

■	However, we believe that the overall asset class remains high quality and that direct federal aid to states and localities will add support to near-term fundamental conditions.

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CIO Market Commentary

Dear Shareholder

Nearly all major stock and bond indexes produced positive results during your fund’s fiscal year, the 12-month period ended February 28, 2021. After the spread of the coronavirus caused a steep sell-off at the start of the period, extraordinary fiscal and monetary support from global governments and central banks helped spur a rebound, and the emergence of vaccines later in 2020 provided hope that the end of the pandemic was in sight.

The Federal Reserve played a key role in setting the stage for a recovery. In March, the central bank quickly cut interest rates to near zero and began purchasing massive amounts of government, mortgage-backed, and corporate bonds to stimulate the economy and increase liquidity in the fixed income market. In addition, the federal government has provided over $3 trillion in coronavirus relief, and Congress appeared poised to pass another $1.9 trillion aid package as the period was coming to an end.

The economy began to grow again by the second half of the year, marking one of the fastest recoveries on record. Although unemployment has remained elevated, recent economic data have been more encouraging. Retail sales for January exceeded expectations, jumping 5.3%, helped by a 10% increase in personal income that was bolstered by direct payments to individuals as part of the late-December stimulus package. Durable goods orders were better than expected, and the housing market also remained strong.

While consumer inflation remained muted, some investors became concerned that stronger growth and additional fiscal stimulus could spark higher inflation. As a result, bond yields rose and stocks pulled back at the end of the period.

Despite the stumble at the end of February, U.S. equities produced remarkable gains over the period. The small-cap Russell 2000 Index and the technology-heavy Nasdaq Composite Index both advanced more than 50% over the 12 months, while the large-cap S&P 500 Index was up over 30%. Within the S&P 500, information technology and consumer discretionary shares led the way.

Corporate earnings were resilient during the period. According to FactSet, overall earnings for the S&P 500 in the fourth quarter rose nearly 4% versus the year before—a large upward revision from the more than 9% decline analysts expected before earnings reporting season began. Price-to-earnings ratios remained well above longer-term averages, however.

Within the fixed income universe, Treasuries recorded negative results overall as concerns about a pickup in inflation caused intermediate- and longer-term yields to jump from the record lows they reached early in the pandemic. However, most bond sectors produced positive returns over the 12 months. Corporate debt outperformed, and the market easily absorbed a torrent of new issuance as solid corporate earnings provided fundamental support. Municipal bonds experienced unprecedented volatility at the start of the period, but munis benefited from federal aid, and state tax revenues held up far better than many expected.

As we look ahead, the widespread rollout of coronavirus vaccines provides hope for a return to normal, and very supportive monetary and fiscal policies, along with pent-up consumer demand, could provide support for additional market gains. However, we are aware that there are risks as well as opportunities in this environment. There are signs of speculation in markets, as shown by the rapid rise in cryptocurrencies and the frothy prices recorded by some initial public offerings.

While valuations are still attractive in some areas, many sectors are trading at elevated levels, and a meaningful increase in inflation could result in a regime change in financial markets. We believe that strong fundamental analysis and skilled active security selection will remain a critical component of investment success.

Thank you for your continued confidence in T. Rowe Price.

Sincerely,

Robert Sharps
Group Chief Investment Officer

Management’s Discussion of Fund Performance

TAX-EXEMPT MONEY FUND

INVESTMENT OBJECTIVE

The fund seeks to provide preservation of capital, liquidity, and, consistent with these objectives, the highest current income exempt from federal income taxes.

FUND COMMENTARY

How did the fund perform in the past 12 months?

The Tax-Exempt Money Fund returned 0.19% for the 12 months ended February 28, 2021, compared with 0.31% for the Lipper Tax-Exempt Money Market Funds Index. (Returns for I Class shares varied slightly, reflecting a different fee structure. Past performance cannot guarantee future results.)

What factors influenced the fund’s performance?

The initial shock of the coronavirus led to brief bouts of illiquidity in fixed income markets, causing a temporary spike in municipal money market rates at the start of the period. In response to turmoil in the economy and financial markets, the Federal Reserve (Fed) cut its policy interest rate to near 0% in March 2020 and, among a range of additional policy interventions, implemented a special-purpose facility to relieve stress in the tax-exempt market. The Fed’s actions and other technical factors helped drive municipal money market yields to ultralow levels over the remainder of the period.

Relatedly, yields on seven-day municipal securities—which jumped from 1.14% at the start of the period to 4.39% at the end of March 2020—plunged to 0.03% by the end of February 2021. Longer-term rates declined by approximately 0.78% over the 12 months, with one-year tax-exempt securities yielding roughly 0.16% at the end of the period. Variable rate yields also declined, averaging 0.09% since the fund’s semiannual report, compared with 0.70% during the prior six months.

Although we were able to take advantage of the temporary spike in yields at the start of the period, the ensuing market environment limited the fund’s return potential. Yields on short-term municipal securities continued to be hampered by a lack of tax-exempt supply, which was exacerbated by the prevalence of taxable debt issuance in the municipal market. In addition, healthy demand for short-term securities from municipal bond portfolios—due to robust cash flows into bond funds and separately managed accounts—exerted downward pressure on yields.

How is the fund positioned?

Variable rate demand notes (VRDNs) composed the fund’s largest allocation, totaling 56% of its net assets as of February 28, 2021. However, this position represented a slight underweight relative to peers. Due to their comparatively higher yields than VRDNs, we favored longer-dated fixed rate notes and bonds as well as commercial paper with maturities out to 90 days.

The fund’s weighted average maturity (WAM) increased from 31 days to 36 days over the past 12 months, concluding the period slightly longer than that of its peer group. As opportunities among longer-maturity money market securities arise, we will look to further extend the fund’s WAM.

Overall, however, we maintained an overweight exposure to the shorter end of the yield curve. We believed this positioning would provide us with greater flexibility to respond to changes in the interest rate outlook or adjustments in supply and demand dynamics, such as an uptick in tax-exempt issuance or a reversal of cash flows.

Consistent with the fund’s objective, we continued to rely on our fundamental credit research process when selecting individual securities. Within the revenue-backed health care space, which remained the fund’s largest sector allocation, we held prominent positions in Yale New Haven Health Obligated Group (Connecticut) and Trinity Health Corporation. Within the general obligation (GO) sector, we maintained a strong preference for highly rated issuers. Notable general obligation purchases during the period included VRDNs issued by the State of Texas for the Veterans Housing Assistance Fund. (Please refer to the portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)

What is portfolio management’s outlook?

We expect the Fed to maintain an accommodative stance for several years given continuing concerns about the pandemic’s longer-term impact on the economy. We also believe supply and demand imbalances could continue to limit yield increases in the municipal money market.

As a result of these factors, we are pursuing a strategy that will allow the fund to quickly respond to a change in interest rate sentiment, an increase in issuance, or changing patterns of cash flows into or out of the muni money market. We believe the fund’s positioning in VRDNs and commercial paper is appropriate in this environment.

As always, we remain committed to managing a high-quality, diversified portfolio focused on liquidity and stability of principal, which we deem of utmost importance to our shareholders.

TAX-FREE SHORT-INTERMEDIATE FUND

INVESTMENT OBJECTIVE

The fund seeks to provide, consistent with modest price fluctuation, a high level of income exempt from federal income taxes by investing primarily in short- and intermediate-term investment-grade municipal securities.

FUND COMMENTARY

How did the fund perform in the past 12 months?

The Tax-Free Short-Intermediate Fund returned 1.82% for the 12-month period ended February 28, 2021. The fund outperformed its benchmark, the Bloomberg Barclays 1–5 Year Blend (1–6 Year Maturity) Index, and its Lipper peer group average. (Results for Advisor and I Class shares varied, reflecting their different fee structures. Past performance cannot guarantee future results.)

What factors influenced the fund’s performance?

Robust demand supported the broad municipal market and helped push tax-exempt bond yields to record lows in early February 2021. However, the reporting period was bookended by heightened volatility and related pricing pressures—especially at the outset of the coronavirus pandemic—that dulled returns. Total municipal issuance increased since the fund’s prior fiscal year, yet this was mostly due to a rise in taxable borrowing, as issuers’ ability to advance refund their debt on a tax-advantaged basis remained prohibited by tax law changes in 2017. Consequently, the supply of tax-exempt bonds was modest, further aiding the market’s technical conditions.

In this environment, yield curve management was the main driver of the fund’s relative outperformance. Although the fund’s duration—a key measure of its interest rate sensitivity—was slightly shorter than the benchmark’s duration as of February 28, 2021, the portfolio maintained a modestly longer position during most of the period, which aided performance as yields declined on average. However, our positioning along the yield curve weighed modestly on performance. The fund held an overweight to bonds with 10-year maturities and an underweight to those with two-year maturities. This hindered results because longer-term yields rose and shorter-term yields declined over the period, resulting in a steeper yield curve.

Security selection also benefited relative returns. Within revenue-backed debt, our selections of industrial revenue/pollution control and special tax revenue bonds contributed to performance. In the general obligation (GO) sector, our tactical selections of lower-quality state issuers also added value as low-rated bonds rallied later in the period. Asset allocation among revenue-backed subsectors further supported excess returns. Most notably, our strategic overweight exposures to health care and transportation revenue bonds benefited relative performance, as did our underweight to the water and sewer subsector.

How is the fund positioned?

The fund’s weighted average duration decreased from 2.48 years to 2.41 years over the period. We kept its duration within a generally close range of its benchmark, consistent with our preference for avoiding large bets on potential interest rate changes. Earlier in the period, we sought to take advantage of attractive valuations in lower-quality intermediate- and long-dated credits through sales of high-grade, short-maturity prerefunded bonds. Taken together, these actions naturally extended the fund’s duration. However, after yields markedly declined, we allowed its duration to decrease toward the end of the period and, as noted previously, the fund finished its fiscal year with a shorter duration posture versus the benchmark.

In terms of sector allocations, we continue to favor revenue-backed bonds from issuers with strong balance sheets and healthy liquidity metrics, especially those from the transportation and health care revenue subsectors. These areas of the market typically offer above-average yields and are largely insulated from the unfunded liabilities many traditional state and local government issuers face. In addition, we believe that the transportation and health care subsectors provide ample opportunities for us to apply our rigorous credit research process to uncover bonds that, in our view, have been overlooked or undervalued by market participants.

Although the initial outbreak of the coronavirus in the U.S. and corresponding lockdown measures weighed heavily on the performance of transportation and health care revenue bonds early in the period, strengthening economic activity and generally solid fundamental factors helped enable a strong rally for the subsectors. Furthermore, we believe that their long-term outlooks—particularly the toll road, major airport, and large hospital segments—remain generally favorable.

During the period, notable investments in large nonprofit hospital networks included Illinois Finance Authority revenue bonds issued for OSF Healthcare System. In the transportation subsector, we saw attractive valuations in select large-hub airports—namely, those that we believe are essential to their respective regional economies and have robust cash balances to withstand periods of significant travel declines. To that end, we added revenue bonds from Metropolitan Washington Airports Authority (Washington, D.C.) and Hartsfield-Jackson Atlanta International Airport. (Please refer to the portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)

We remain cautious on the GO sector due to the substantial pension and other post-employment benefit liabilities burdening many states and municipalities. Accordingly, we continued to concentrate our GO investments in higher-quality issuers, such as the State of California, whose tax collections have exceeded bleak forecasts at the start of the pandemic. Although we generally avoid obligors with beleaguered pension systems and low “rainy day” reserve balances, we also look for opportunities to initiate tactical positions in such names depending on relative valuations. After their credit spreads widened to levels not seen in several years, we increased our exposure to GO debt from the State of New Jersey and the State of Illinois, as we felt comfortable investing in their bonds with shorter maturities. (Credit spreads are the yield differences between higher- and lower-quality bonds of similar maturity.)

The fund’s weighted average credit quality was unchanged over the period. As shown in the Credit Quality Diversification pie chart, at the end of February 2021, approximately 56% of the fund’s assets were invested in bonds within the two highest credit rating categories (AAA and AA). In terms of relative value, we continue to believe that the A and BBB ratings segments—which represented a meaningful share of the fund’s holdings—typically offer the most attractive opportunities to earn incremental risk-adjusted yield. We also maintained a small allocation in non-investment-grade bonds (rated BB or lower) to enhance the fund’s yield profile, as well as modest exposure to unrated bonds.

What is portfolio management’s outlook?

After a strong start in 2021, municipal bonds have faced recent headwinds amid volatility across fixed income markets. Despite consistently dovish signals from the Federal Reserve, inflation concerns have led market participants to pull forward their expected timeline for rate hikes, causing yields to rise and the municipal curve to steepen. Still, the technical conditions that have powered the municipal market through most of the pandemic—namely, robust demand and modest levels of tax-exempt issuance—remain in place despite waning slightly amid rate volatility and expectations for increased supply this spring.

Overall fundamental credit conditions remain solid, and most borrowers continue to demonstrate prudent fiscal management. Although state and local governments still face fiscal stress balancing the escalating costs of providing essential services and funding their long-term liabilities, tax receipts in many jurisdictions have been far stronger than initially projected at the outset of the pandemic. We believe that resilient revenues and additional direct support through the American Rescue Plan Act of 2021 will result in cash windfalls for state and local governments and relieve current budget pressures.

While additional fiscal relief will bolster the near-term finances of state and local issuers, we expect the longer-term situation to remain challenging for those that entered the crisis with existing budget stresses and significant long-term liabilities. In our view, large segments of the revenue sector are poised to benefit from vaccine rollouts and increased economic activity, although some revenue-backed bond issuers will grapple with their own financial pressures due to revenue shortfalls.

Nevertheless, due to its underlying credit strength, we anticipate that the municipal asset class will remain high quality, with low defaults and high recovery rates relative to other areas of fixed income. With the Federal Reserve’s monetary policy likely staying accommodative over the near term, we believe that demand for tax-free income and other technical factors should remain generally constructive, keeping borrowing costs for issuers low and bond prices high. Ultimately, we feel that in-depth credit research is essential and believe that our fundamental, bottom-up approach should help our clients navigate the market environment.

TAX-FREE INCOME FUND

INVESTMENT OBJECTIVE

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.

FUND COMMENTARY

How did the fund perform in the past 12 months?

The Tax-Free Income Fund returned 0.51% for the 12 months ended February 28, 2021. The fund underperformed the Bloomberg Barclays Municipal Bond Index, which gained 1.06%, and its Lipper peer group average, which returned 0.64%. (Results for Advisor and I Class shares varied, reflecting their different fee structures. Past performance cannot guarantee future results.)

What factors influenced the fund’s performance?

The broad municipal market was supported by robust demand and modest levels of tax-exempt issuance, which helped push tax-exempt bond yields to record lows in early February 2021. However, the reporting period was bookended by heightened volatility and related pricing pressures—especially at the outset of the coronavirus pandemic—that dulled returns.

In this environment, credit selection in the revenue sector drove the fund’s relative underperformance. Our selections in the health care, leasing, and transportation subsectors—which were hit hard by coronavirus-related economic pressures—hurt returns most significantly. However, this was partially offset by positive selections in the industrial revenue/pollution control and power subsectors. In the general obligation (GO) sector, our tactical selections of lower-quality state issuers added value as low-rated bonds rallied later in the period.

Asset allocation hindered relative returns, specifically our overweight to revenue bonds and underweight to GO debt, while yield curve management supported performance. The fund’s duration—a key measure of its interest rate sensitivity—was longer than that of the benchmark, thereby aiding relative returns as yields declined on average. However, our positioning along the yield curve detracted from results. The fund held an overweight to long-maturity bonds and an underweight to those maturing in five years or less. This hindered results because long-term rates rose and front-end rates declined over the period, resulting in a steeper yield curve.

How is the fund positioned?

The fund’s weighted average duration decreased from 4.97 years to 4.89 years during the past 12 months. Earlier in the period, we sought to take advantage of attractive valuations in lower-quality, long-dated credits through sales of high-grade prerefunded bonds with short maturities. Taken together, these actions naturally extended the fund’s duration. However, after yields markedly declined, we decreased the fund’s duration toward the end of the period, and the fund finished its fiscal year with a modestly longer duration posture versus the benchmark.

We continue to favor revenue-backed debt, which we believe provides ample opportunities for us to apply our rigorous credit research process to uncover bonds that, in our view, have been overlooked or undervalued by market participants. Within the sector, we upheld strategic overweight exposures to health care and transportation revenue bonds, which typically offer above-average yields and are largely insulated from the unfunded liabilities many traditional state and local government issuers face.

Although the initial outbreak of the coronavirus in the U.S. and corresponding lockdown measures weighed heavily on the performance of health care and transportation revenue bonds early in the period, strengthening economic activity and generally solid fundamental factors helped enable a strong rally for the subsectors. Furthermore, we believe that their long-term outlooks—particularly the toll road, major airport, and large hospital segments—remain generally favorable.

Our largest revenue-backed bond purchases during the period came from the leasing subsector. Most notably, we added lease revenue bonds issued by the Maryland Stadium Authority on behalf of the Baltimore City Schools Construction and Revitalization Program. We also purchased Buckeye Tobacco Settlement Financing Authority (Ohio) tobacco-securitized bonds at attractive pricing levels during the height of the market sell-off. (Please refer to the portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)

From a longer-term perspective, we remain cautious on the GO sector due to the substantial pension and other post-employment benefit liabilities burdening many states and municipalities. Although we generally avoid obligors with beleaguered pension systems and low “rainy day” reserve balances, we also look for opportunities to initiate tactical positions in such names dependent on relative valuations. After their credit spreads widened to levels not seen in several years, we increased our exposure to GO debt from the State of New Jersey and the State of Illinois, as we felt comfortable investing in their bonds with shorter maturities. (Credit spreads are the yield differences between higher- and lower-quality bonds of similar maturity.) We also bought GO bonds from the Commonwealth of Puerto Rico, which extended their rally near the end of the period after creditors in the Puerto Rico bankruptcy case reached a tentative settlement.

The fund’s weighted average credit quality was unchanged over the past 12 months. As shown in the Credit Quality Diversification pie chart, at the end of February 2021, approximately 36% of the fund’s assets were invested in bonds within the two highest credit rating categories (AAA and AA). In terms of relative value, we continue to believe that the most attractive opportunities to earn incremental risk-adjusted yield exist among mid- to lower-rated investment-grade bonds, particularly those rated A—which represented our largest allocation—and BBB. For additional credit quality diversification and enhanced return potential, we also maintained a small position in non-investment-grade debt (rated BB or lower).

What is portfolio management’s outlook?

TAX-FREE HIGH YIELD FUND

INVESTMENT OBJECTIVE

The fund seeks to provide a high level of income exempt from federal income taxes by investing primarily in long-term low- to upper-medium-grade municipal securities.

FUND COMMENTARY

How did the fund perform in the past 12 months?

The Tax-Free High Yield Fund returned 0.70% over the 12-month period and outperformed its Lipper peer group average, which returned 0.23%. However, the fund underperformed its benchmark, the Bloomberg Barclays 65% High-Grade/35% High-Yield Index, which gained 1.23%. (Results for Advisor and I Class shares varied, reflecting their different fee structures. Past performance cannot guarantee future results.)

What factors influenced the fund’s performance?

The municipal market was supported by robust demand and modest levels of tax-exempt issuance, which helped push tax-exempt bond yields to record lows in early February 2021. However, the reporting period was bookended by heightened volatility and related pricing pressures—especially at the outset of the coronavirus pandemic—that dulled returns. Illiquidity-driven sell-offs in March and April 2020 hurt higher-yielding segments most significantly, yet these areas also led the market’s rebound over the remainder of the period.

In this environment, credit selection in the revenue-backed sector drove the fund’s relative underperformance versus the benchmark. Our selections in the health care subsector hurt returns most significantly, followed by the industrial revenue/pollution control (IDR/PCR) and transportation subsectors. However, this was partially offset by positive selections of power and water and sewer revenue bonds. Within the general obligation (GO) sector, our tactical selections of certain low-quality state bonds added value as lower-rated debt rallied strongly over the second half of the period.

Asset allocation among revenue-backed subsectors weighed on returns, largely due to our overweight to health care revenue bonds, while yield curve management benefited relative performance. On average, the fund’s duration—a key measure of its interest rate sensitivity—was longer than that of the benchmark, thereby aiding relative results as yields declined during the period. However, our positioning along the yield curve detracted from results. Specifically, the fund held an overweight to longer-dated bonds and an underweight to those maturing in five years or less. This hindered results because long-term rates rose and front-end rates declined over the period, resulting in a steeper yield curve.

How is the fund positioned?

The fund’s weighted average duration decreased from 4.89 years to 4.72 years over the past 12 months. Earlier in the period, we sought to take advantage of attractive valuations in lower-quality, longer-dated credits through sales of high-grade prerefunded bonds with short maturities. Taken together, these actions naturally extended the fund’s duration. However, after yields markedly declined, we allowed the fund’s duration to decrease toward the end of the period, and the fund finished its fiscal year with a modestly shorter duration posture versus the benchmark.

We maintained a strong preference for revenue-backed debt, which we believe provides ample opportunities to apply our rigorous credit research process to uncover bonds that, in our view, have been overlooked or undervalued by market participants. Within the sector, we upheld strategic overweight exposures to health care revenue bonds—including those from large hospital systems and nonprofit continuing care retirement communities—as well as IDR/PCR and transportation revenue bonds. These areas of the market typically offer above-average yields and are largely insulated from the unfunded liabilities many traditional state and local government issuers face.

Although the initial outbreak of the coronavirus in the U.S. and corresponding lockdown measures weighed heavily on health care, transportation, and corporate-backed IDR/PCR issuers early in the period, strengthening economic activity and generally solid fundamentals helped enable a strong rally for the subsectors. Notable purchases for the fund included Parish of St. James (Louisiana) IDR/PCR bonds issued for NuStar Logistics, L.P., and bonds issued by the Texas Municipal Gas Acquisition and Supply Corporation for Macquarie Group Limited. (Please refer to the portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)

We continued to take a careful approach within the tobacco sector, where we purchased bonds from Buckeye Tobacco Settlement Financing Authority (Ohio). Despite exceeding projections during the pandemic, cigarette consumption still faces long-term headwinds from regulatory pressures and the wide availability of alternative tobacco products. Moreover, we believe that many tobacco-securitized deals are highly speculative in nature. At the same time, we see notable dispersion in the underlying credit conditions of tobacco issuers and maintain confidence investing in select tobacco bonds with sound credit metrics and solid deal structures. In addition, we believe that the technical environment will likely remain generally supportive of the sector over the near term, with low interest rates and strong demand for yield enabling many issuers to refinance their debt and extend maturities without impairment.

From a longer-term perspective, we also remained cautious on the GO sector due to the substantial pension and other post-employment benefit liabilities burdening many states and municipalities. Although we generally avoid obligors with beleaguered pension systems and low “rainy day” reserve balances, we also look for opportunities to initiate tactical positions in such names dependent on relative valuations. After their credit spreads widened to levels not seen in several years, we increased our exposure to GO debt from the State of Illinois and the State of New Jersey as we felt comfortable investing in their bonds with shorter maturities. (Credit spreads are the yield differences between higher- and lower-quality bonds of similar maturity.) We also purchased Commonwealth of Puerto Rico GO bonds, which extended their rally near the end of the period after creditors in the Puerto Rico bankruptcy case reached a tentative settlement.

Within the broader Puerto Rico bond complex, we purchased bonds from the Puerto Rico Aqueduct and Sewer Authority, the Puerto Rico Sales Tax Financing Corporation, and, to a smaller degree, the Puerto Rico Electric Power Authority—all of which fared well during the period.

The fund’s weighted average credit quality was unchanged over the past 12 months. As shown in the Credit Quality Diversification pie chart, the BBB rated segment composed the fund’s largest allocation as of February 28, 2021. We also continued to hold meaningful exposure to non-investment-grade credits (rated BB or lower) for enhanced return potential and additional credit quality diversification, as well as an allocation to nonrated bonds.

What is portfolio management’s outlook?

INTERMEDIATE TAX-FREE HIGH YIELD FUND

INVESTMENT OBJECTIVE

The fund seeks to provide a high level of income exempt from federal income taxes.

FUND COMMENTARY

How did the fund perform in the past 12 months?

The Intermediate Tax-Free High Yield Fund returned 0.60% for the 12 months ended February 28, 2021. The fund underperformed the Bloomberg Barclays 65% High-Grade/35% High-Yield Intermediate Competitive (1–17 Year Maturity) Index, but outperformed its peer group, the Lipper High Yield Municipal Debt Funds Average, which encompasses funds with various maturity and duration constraints. (Results for Advisor and I Class shares varied, reflecting their different fee structures. Past performance cannot guarantee future results.)

What factors influenced the fund’s performance?

In this environment, credit selection in revenue-backed debt was the main detractor from relative performance versus the benchmark, largely due to our selections of health care revenue bonds. Our investments in the industrial revenue/pollution control (IDR/PCR) and housing subsectors also weighed on results, although this was offset by positive selections of special tax, education, and leasing revenue bonds. Within the general obligation (GO) sector, tactical selections of certain low-quality state bonds added value as lower-rated debt rallied strongly over the second half of the period.

Asset allocation modestly detracted from relative performance, namely due to our overweight to health care revenue bonds. On the broad sector level, our overweight to revenue-backed debt and underweight to GOs added support to relative returns.

Yield curve management hindered relative returns. The fund’s duration—a key measure of its interest rate sensitivity—was modestly shorter than that of the benchmark, which detracted from performance as yields declined on average. In addition, the fund held an overweight at the long end of the yield curve and underweight exposures to bonds with two- and five-year maturities. This impeded results because long-term rates rose and front-end rates declined over the period, resulting in a steeper yield curve.

How is the fund positioned?

The fund’s weighted average duration increased from 3.80 years to 4.06 years over the past 12 months. Earlier in the period, we sought to take advantage of attractive valuations in lower-quality, longer-dated credits through sales of high-grade prerefunded bonds with shorter maturities. Taken together, these actions naturally extended the fund’s duration. However, after yields markedly declined, we allowed the fund’s duration to decrease toward the end of the period, and the fund finished its fiscal year with a modestly shorter duration posture versus the benchmark.

We maintained a strong preference for revenue-backed debt, which we believe provides ample opportunities to apply our rigorous credit research process to uncover bonds that, in our view, have been overlooked or undervalued by market participants. Within the sector, we upheld strategic overweight allocations to health care revenue bonds—including those from large hospital systems and nonprofit continuing care retirement communities—and corporate-backed IDR/PCR revenue bonds. These areas of the market typically offer above-average yields and are largely insulated from the unfunded liabilities many traditional state and local government issuers face.

Although the initial outbreak of the coronavirus in the U.S. and corresponding lockdown measures weighed heavily on health care and IDR/PCR issuers early in the period, strengthening economic activity and generally solid fundamentals helped enable a strong rally for the subsectors. Notable purchases for the fund included Garnet Health Medical Center (New York) hospital revenue bonds and bonds issued by the Texas Municipal Gas Acquisition and Supply Corporation for Macquarie Group Limited. (Please refer to the portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)

We continued to take a careful approach within the tobacco sector, where we purchased bonds from the Michigan Tobacco Settlement Financing Authority. Despite exceeding projections during the pandemic, cigarette consumption still faces long-term headwinds from regulatory pressures and the wide availability of alternative tobacco products. Moreover, we believe that many tobacco-securitized deals are highly speculative in nature. At the same time, we see notable dispersion in the underlying credit conditions of tobacco issuers and maintain confidence investing in select tobacco bonds with sound credit metrics and solid deal structures. In addition, we believe that the technical environment will likely remain generally supportive of the sector over the near term, with low interest rates and strong demand for yield enabling many issuers to refinance their debt and extend maturities without impairment.

From a longer-term perspective, we also remained cautious on the GO sector due to the substantial pension and other post-employment benefit liabilities burdening many states and municipalities. Although we generally avoid obligors with beleaguered pension systems and low “rainy day” reserve balances, we also look for opportunities to initiate tactical positions in such names dependent on relative valuations. After their credit spreads widened to levels not seen in several years, we added to our exposure in GO debt from the State of New Jersey and the State of Illinois as we felt comfortable investing in their bonds with shorter maturities. (Credit spreads are the yield differences between higher-and lower-quality bonds of similar maturity.) We also purchased Commonwealth of Puerto Rico GO bonds, which extended their rally near the end of the period after creditors in the Puerto Rico bankruptcy case reached a tentative settlement.

As shown in the Credit Quality Diversification pie chart, the BBB rated segment composed the fund’s largest allocation as of February 28, 2021. Relying on our fundamental credit analysis to identify opportunities for potential yield enhancement, we increased the fund’s exposure to non-investment-grade credits—specifically those rated B or lower. Due in part to our buying activity in lower-rated credits, the fund’s weighted average credit quality decreased slightly over the past 12 months. We also maintained an allocation to bonds rated A or higher, as well as those that are nonrated.

What is portfolio management’s outlook?

The views expressed reflect the opinions of T. Rowe Price as of the date of this report and are subject to change based on changes in market, economic, or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

RISKS OF INVESTING IN THE TAX-EXEMPT MONEY FUND

You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

RISKS OF INVESTING IN FIXED INCOME SECURITIES

Bonds are subject to interest rate risk (the decline in bond prices that usually accompanies a rise in interest rates) and credit risk (the chance that any fund holding could have its credit rating downgraded or that a bond issuer will default by failing to make timely payments of interest or principal), potentially reducing the fund’s income level and share price. Investments in high yield bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. Municipal bond funds may be highly impacted by events tied to the overall municipal securities markets, including unfavorable legislative or political developments and adverse changes in the financial conditions of municipal bond issuers and the economy. Some income may be subject to state and local taxes and the federal alternative minimum tax.

BENCHMARK INFORMATION

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GROWTH OF $10,000

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 include a broad-based market index and may also include 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.

GROWTH OF $10,000

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 includes a broad-based market index and may also include 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.

GROWTH OF $10,000

AVERAGE ANNUAL COMPOUND TOTAL RETURN

EXPENSE RATIOS

FUND EXPENSE EXAMPLE

As a mutual fund shareholder, you may incur two types of costs: (1) transaction costs, such as redemption fees or sales loads, and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the entire period.

Please note that the Intermediate Tax-Free High Yield Fund, Tax-Free High Yield Fund, Tax-Free Income Fund, and Tax-Free Short-Intermediate Fund and have three share classes: The original share class (Investor Class) charges no distribution and service (12b-1) fee, the Advisor Class shares are offered only through unaffiliated brokers and other financial intermediaries and charge a 0.25% 12b-1 fee, and the I Class shares are available to institutionally oriented clients and impose no 12b-1 or administrative fee payment. The Tax-Exempt Money Fund has two share classes: The original share class (Investor Class) charges no distribution and service (12b-1) fee, and the I Class shares are also available to institutionally oriented clients and impose no 12b-1 or administrative fee payment. Each share class is presented separately in the table.

Actual Expenses
The first line of the following table (Actual) provides information about actual account values and actual expenses. You may use the information on this line, together with your account balance, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes
The information on the second line of the table (Hypothetical) is based on hypothetical account values and expenses derived from the fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the fund’s actual return). You may compare the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.

Note: T. Rowe Price charges an annual account service fee of $20, generally for accounts with less than $10,000. The fee is waived for any investor whose T. Rowe Price mutual fund accounts total $50,000 or more; accounts electing to receive electronic delivery of account statements, transaction confirmations, prospectuses, and shareholder reports; or accounts of an investor who is a T. Rowe Price Personal Services or Enhanced Personal Services client (enrollment in these programs generally requires T. Rowe Price assets of at least $250,000). This fee is not included in the accompanying table. If you are subject to the fee, keep it in mind when you are estimating the ongoing expenses of investing in the fund and when comparing the expenses of this fund with other funds.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs, such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total cost of owning that fund is higher.

QUARTER-END RETURNS

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 three classes of shares: the Tax-Free Income Fund (Investor Class), the Tax-Free Income Fund–Advisor Class (Advisor Class) and the Tax-Free Income Fund–I Class (I Class). Advisor Class shares are sold only through various brokers and other financial intermediaries. I Class shares require a $1 million initial investment minimum, although the minimum generally is waived for retirement plans, financial intermediaries, and certain other accounts. The Advisor Class operates under a Board-approved Rule 12b-1 plan pursuant to which the class compensates financial intermediaries for distribution, shareholder servicing, and/or certain administrative services; the Investor and I Classes do not pay Rule 12b-1 fees. Each class has exclusive voting rights on matters related solely to that class; separate voting rights on matters that relate to all classes; and, in all other respects, the same rights and obligations as the other classes.

Basis of Preparation The fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 (ASC 946). The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), including, but not limited to, ASC 946. GAAP requires the use of estimates made by management. Management believes that estimates and valuations are appropriate; however, actual results may differ from those estimates, and the valuations reflected in the accompanying financial statements may differ from the value ultimately realized upon sale or maturity.

Investment Transactions, Investment Income, and Distributions Investment transactions are accounted for on the trade date basis. Income and expenses are recorded on the accrual basis. Realized gains and losses are reported on the identified cost basis. Premiums and discounts on debt securities are amortized for financial reporting purposes. Paydown gains and losses are recorded as an adjustment to interest income. Income tax-related interest and penalties, if incurred, are recorded as income tax expense. Non-cash dividends, if any, are recorded at the fair market value of the asset received. Distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared by each class daily and paid monthly. A capital gain distribution may also be declared and paid by the fund annually.

Class Accounting Shareholder servicing, prospectus, and shareholder report expenses incurred by each class are charged directly to the class to which they relate. Expenses common to all 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. The Advisor Class pays Rule 12b-1 fees, in an amount not exceeding 0.25% of the class’s average daily net assets.

Capital Transactions Each investor’s interest in the net assets of the fund is represented by fund shares. The fund’s net asset value (NAV) per share is computed at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day the NYSE is open for business. However, the NAV per share may be calculated at a time other than the normal close of the NYSE if trading on the NYSE is restricted, if the NYSE closes earlier, or as may be permitted by the SEC. Purchases and redemptions of fund shares are transacted at the next-computed NAV per share, after receipt of the transaction order by T. Rowe Price Associates, Inc., or its agents.

New Accounting Guidance In March 2020, the FASB issued Accounting Standards Update (ASU), ASU 2020–04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The guidance is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management expects that the adoption of the guidance will not have a material impact on the fund's financial statements.

Indemnification In the normal course of business, the fund may provide indemnification in connection with its officers and directors, service providers, and/or private company investments. The fund’s maximum exposure under these arrangements is unknown; however, the risk of material loss is currently considered to be remote.

Fair Value The fund’s financial instruments are valued at the close of the NYSE and are reported at fair value, which GAAP defines as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The T. Rowe Price Valuation Committee (the Valuation Committee) is an internal committee that has been delegated certain responsibilities by the fund’s Board of Directors (the Board) to ensure that financial instruments are appropriately priced at fair value in accordance with GAAP and the 1940 Act. Subject to oversight by the Board, the Valuation Committee develops and oversees pricing-related policies and procedures and approves all fair value determinations. Specifically, the Valuation Committee establishes policies and procedures used in valuing financial instruments, including those which cannot be valued in accordance with normal procedures or using pricing vendors; determines pricing techniques, sources, and persons eligible to effect fair value pricing actions; evaluates the services and performance of the pricing vendors; oversees the pricing process to ensure policies and procedures are being followed; and provides guidance on internal controls and valuation-related matters. The Valuation Committee provides periodic reporting to the Board on valuation matters.

Various valuation techniques and inputs are used to determine the fair value of financial instruments. GAAP establishes the following fair value hierarchy that categorizes the inputs used to measure fair value:

Level 1 – quoted prices (unadjusted) in active markets for identical financial instruments that the fund can access at the reporting date

Level 2 – inputs other than Level 1 quoted prices that are observable, either directly or indirectly (including, but not limited to, quoted prices for similar financial instruments in active markets, quoted prices for identical or similar financial instruments in inactive markets, interest rates and yield curves, implied volatilities, and credit spreads)

Level 3 – unobservable inputs (including the fund's own assumptions in determining fair value)

Observable inputs are developed using market data, such as publicly available information about actual events or transactions, and reflect the assumptions that market participants would use to price the financial instrument. Unobservable inputs are those for which market data are not available and are developed using the best information available about the assumptions that market participants would use to price the financial instrument. GAAP requires valuation techniques to maximize the use of relevant observable inputs and minimize the use of unobservable inputs. When multiple inputs are used to derive fair value, the financial instrument is assigned to the level within the fair value hierarchy based on the lowest-level input that is significant to the fair value of the financial instrument. Input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level but rather the degree of judgment used in determining those values.

Valuation Techniques Debt securities generally are traded in the over-the-counter (OTC) market and are valued at prices furnished by independent pricing services or by broker dealers who make markets in such securities. When valuing securities, the independent pricing services consider the yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities.

Assets and liabilities other than financial instruments, including short-term receivables and payables, are carried at cost, or estimated realizable value, if less, which approximates fair value.

Investments for which market quotations or market-based valuations are not readily available or deemed unreliable are valued at fair value as determined in good faith by the Valuation Committee, in accordance with fair valuation policies and procedures. The objective of any fair value pricing determination is to arrive at a price that could reasonably be expected from a current sale. Financial instruments fair valued by the Valuation Committee are primarily private placements, restricted securities, warrants, rights, and other securities that are not publicly traded. Factors used in determining fair value vary by type of investment and may include market or investment specific considerations. The Valuation Committee typically will afford greatest weight to actual prices in arm’s length transactions, to the extent they represent orderly transactions between market participants, transaction information can be reliably obtained, and prices are deemed representative of fair value. However, the Valuation Committee may also consider other valuation methods such as market-based valuation multiples; a discount or premium from market value of a similar, freely traded security of the same issuer; discounted cash flows; yield to maturity; or some combination. Fair value determinations are reviewed on a regular basis and updated as information becomes available, including actual purchase and sale transactions of the investment. Because any fair value determination involves a significant amount of judgment, there is a degree of subjectivity inherent in such pricing decisions, and fair value prices determined by the Valuation Committee could differ from those of other market participants.

Valuation Inputs On February 28, 2021, all of the fund’s financial instruments were classified as Level 2, based on the inputs used to determine their fair values.

Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks and/or to 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.

Restricted Securities The fund invests in securities that are subject to legal or contractual restrictions on resale. Prompt sale of such securities at an acceptable price may be difficult and may involve substantial delays and additional costs.

LIBOR The fund may invest in instruments that are tied to reference rates, including LIBOR. On July 27, 2017, the United Kingdom’s Financial Conduct Authority announced a decision to transition away from LIBOR by the end of 2021 (although it is possible that publication of certain USD LIBOR settings may be extended to the end of June 2023). There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate. Any potential effects of the transition away from LIBOR on the fund, or on certain instruments in which the fund invests, are not known. The transition process may result in, among other things, an increase in volatility or illiquidity of markets for instruments that currently rely on LIBOR, a reduction in the value of certain instruments held by the fund, or a reduction in the effectiveness of related fund transactions such as hedges. Any such effects could have an adverse impact on the fund’s performance.

Other Purchases and sales of portfolio securities other than short-term securities aggregated $384,461,000 and $488,589,000, respectively, for the year ended February 28, 2021.

Generally, 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. Distributions determined in accordance with federal income tax regulations may differ in amount or character from net investment income and realized gains for financial reporting purposes.

The fund files U.S. federal, state, and local tax returns as required. The fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return but which can be extended to six years in certain circumstances. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

Financial reporting records are adjusted for permanent book/tax differences to reflect tax character but are not adjusted for temporary differences. The permanent book/tax adjustments have no impact on results of operations or net assets and 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 or realized capital gain and differences between book/tax amortization policies. For the year ended February 28, 2021, the following reclassification was recorded:

Distributions during the years ended February 28, 2021 and February 29, 2020, totaled $74,528,000 and $83,610,000, respectively, and were characterized as tax-exempt income. At February 28, 2021, the tax-basis cost of investments and components of net assets were as follows:

The fund intends to retain realized gains to the extent of available capital loss carryforwards. Net realized capital losses may be carried forward indefinitely to offset future realized capital gains. During the year ended February 28, 2021, the fund utilized $7,940,000 of capital loss carryforwards.

The fund is managed by T. Rowe Price Associates, Inc. (Price Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. (Price Group). The investment management agreement between the fund and Price Associates 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 a group fee. The group fee rate 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 0.260% for assets in excess of $845 billion. The fund’s group fee is determined by applying the group fee rate to the fund’s average daily net assets. The fee is computed daily and paid monthly. At February 28, 2021, the effective annual group fee rate was 0.28%.

The I Class is subject to an operating expense limitation (I Class Limit) pursuant to which Price Associates is contractually required to pay all operating expenses of the I Class, excluding management fees; interest; expenses related to borrowings, taxes, and brokerage; and other non-recurring expenses permitted by the investment management agreement, to the extent such operating expenses, on an annualized basis, exceed the I Class Limit. This agreement will continue through the expense limitation date indicated in the table below, and may be renewed, revised, or revoked only with approval of the fund’s Board. The I Class is required to repay Price Associates for expenses previously paid to the extent the class’s net assets grow or expenses decline sufficiently to allow repayment without causing the class’s operating expenses (after the repayment is taken into account) to exceed the lesser of: (1) the I Class Limit in place at the time such amounts were paid; or (2) the current I Class Limit. However, no repayment will be made more than three years after the date of a payment or waiver.

In addition, the fund has entered into service agreements with Price Associates and a wholly owned subsidiary of Price Associates, each an affiliate of the fund (collectively, Price). Price Associates provides certain accounting and administrative services to the fund. T. Rowe Price Services, Inc. provides shareholder and administrative services in its capacity as the fund’s transfer and dividend-disbursing agent. For the year ended February 28, 2021, expenses incurred pursuant to these service agreements were $67,000 for Price Associates and $415,000 for T. Rowe Price Services, Inc. All amounts due to and due from Price, exclusive of investment management fees payable, are presented net on the accompanying Statement of Assets and Liabilities.

The fund may participate in securities purchase and sale transactions with other funds or accounts advised by Price Associates (cross trades), in accordance with procedures adopted by the fund’s Board and Securities and Exchange Commission rules, which require, among other things, that such purchase and sale cross trades be effected at the independent current market price of the security. During the year ended February 28, 2021, the aggregate value of purchases and sales cross trades with other funds or accounts advised by Price Associates was less than 1% of the fund’s net assets as of February 28, 2021.

Unpredictable events such as environmental or natural disasters, war, terrorism, pandemics, outbreaks of infectious diseases, and similar public health threats may significantly affect the economy and the markets and issuers in which a fund invests. Certain events may cause instability across global markets, including reduced liquidity and disruptions in trading markets, while some events may affect certain geographic regions, countries, sectors, and industries more significantly than others, and exacerbate other pre-existing political, social, and economic risks. During 2020, a novel strain of coronavirus (COVID-19) resulted in disruptions to global business activity and caused significant volatility and declines in global financial markets.

These types of events, such as the global pandemic caused by COVID-19, may also cause widespread fear and uncertainty, and result in, among other things: enhanced health screenings, quarantines, cancellations, and travel restrictions, including border closings; disruptions to business operations and supply chains and customer activity; exchange trading suspensions and closures, and overall reduced liquidity of securities, derivatives, and commodities trading markets; reductions in consumer demand and economic output; and significant challenges in healthcare service preparation and delivery. The fund could be negatively impacted if the value of a portfolio holding were harmed by such political or economic conditions or events. In addition, the operations of the fund, its investment advisers, and the fund’s service providers may be significantly impacted, or even temporarily halted, as a result of any impairment to their information technology and other operation systems, extensive employee illnesses or unavailability, government quarantine measures, and restrictions on travel or meetings and other factors related to public emergencies.

Governmental and quasi-governmental authorities and regulators have in the past responded to major economic disruptions with a variety of significant fiscal and monetary policy changes, including but not limited to, direct capital infusions into companies, new monetary programs, and dramatically lower interest rates. An unexpected or quick reversal of these policies, or the ineffectiveness of these policies, could negatively impact overall investor sentiment and further increase volatility in securities markets.

To the Board of Directors and Shareholders of
T. Rowe Price Tax-Free Income Fund, Inc.

Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of T. Rowe Price Tax-Free Income Fund, Inc. (the “Fund”) as of February 28, 2021, the related statement of operations for the year ended February 28, 2021, the statement of changes in net assets for each of the two years in the period ended February 28, 2021, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of February 28, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended February 28, 2021 and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of February 28, 2021 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more investment companies in the T. Rowe Price group of investment companies since 1973.

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.

A description of the policies and procedures used by T. Rowe Price funds to determine how to vote proxies relating to portfolio securities is available in each fund’s Statement of Additional Information. You may request this document by calling 1-800-225-5132 or by accessing the SEC’s website, sec.gov.

The description of our proxy voting policies and procedures is also available on our corporate website. To access it, please visit the following Web page:

Scroll down to the section near the bottom of the page that says, “Proxy Voting Policies.” Click on the Proxy Voting Policies link in the shaded box.

Each fund’s most recent annual proxy voting record is available on our website and through the SEC’s website. To access it through T. Rowe Price, visit the website location shown above, and scroll down to the section near the bottom of the page that says, “Proxy Voting Records.” Click on the Proxy Voting Records link in the shaded box.

The fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s reports on Form N-PORT are available electronically on the SEC’s website (sec.gov). In addition, most T. Rowe Price funds disclose their first and third fiscal quarter-end holdings on troweprice.com.

Your fund is overseen by a Board of Directors (Board) that meets regularly to review a wide variety of matters affecting or potentially affecting the fund, including performance, investment programs, compliance matters, advisory fees and expenses, service providers, and business and regulatory affairs. The Board elects the fund’s officers, who are listed in the final table. At least 75% of the Board’s members are considered to be independent, i.e., not “interested persons” as defined in Section 2(a)(19) of the 1940 Act, of the Boards of T. Rowe Price Associates, Inc. (T. Rowe Price), and its affiliates; “interested” directors and officers are employees of T. Rowe Price. The business address of each director and officer is 100 East Pratt Street, Baltimore, Maryland 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 1-800-638-5660.

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.

The registrant’s Board of Directors/Trustees has determined that Mr. Bruce W. Duncan qualifies as an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mr. Duncan is considered independent for purposes of Item 3 of Form N-CSR.

(a) – (d) Aggregate fees billed for the last two fiscal years for professional services rendered to, or on behalf of, the registrant by the registrant’s principal accountant were as follows:

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 and specifically include the issuance of a report on internal controls and, if applicable, agreed-upon procedures related to fund acquisitions. Tax fees include amounts related to services for tax compliance, tax planning, and tax advice. The nature of these services specifically includes the review of distribution calculations and the preparation of Federal, state, and excise tax returns. All 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) Less than 50 percent of the hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.

(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 $3,315,000 and $3,586,000, respectively.

(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.

(a) Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

There has been no change to the procedures by which shareholders may recommend nominees to the registrant’s board of directors.

(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 change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

(3) Written solicitation to repurchase securities issued by closed-end companies: not applicable.

INDEPENDENT DIRECTORS

Name (Year of Birth) Year Elected [Number of T. Rowe Price Portfolios Overseen]		Principal Occupation(s) and Directorships of Public Companies and Other Investment Companies During the Past Five Years

Teresa Bryce Bazemore (1959) 2018 [191]		President, Radian Guaranty (2008 to 2017); Chief Executive Officer, Bazemore Consulting LLC (2018 to present); director, Chimera Investment Corporation (2017 to present); director, First Industrial Realty Trust (2020 to present); director, Federal Home Loan Bank of Pittsburgh (2017 to 2019)

Ronald J. Daniels (1959) 2018 [191]		President, The Johns Hopkins University^(b) and Professor, Political Science department, The Johns Hopkins university (2009 to present); director, Lyndhurst Holdings (2015 to present); director, BridgeBio Pharma, Inc. (2020 to present)

Bruce W. Duncan (1951) 2013 [191]		President, Chief Executive Officer, and director, CyrusOne, Inc. (2020 to present); Chief Executive Officer and director (2009 to 2016), Chair of the Board (2016 to 2020), and President (2009 to 2016), First Industrial Realty Trust, owner and operator of industrial properties; Chair of the Board (2005 to 2016) and director (1999 to 2016), Starwood Hotels & Resorts, a hotel and leisure company; member, Investment Company Institute Board of Governors (2017 to 2019); member, Independent directors Council Governing Board (2017 to 2019); Senior Advisor, KKR (2018 to present); director, Boston Properties (2016 to present); director, marriott International, Inc. (2016 to 2020)

Robert J. Gerrard, Jr. (1952) 2013 [191]		Advisory Board member, Pipeline Crisis/Winning Strategies, a collaborative working to improve opportunities for young African Americans (1997 to 2016); Chair of the Board, all funds (since July 2018)

Paul F. McBride (1956) 2013 [191]		Advisory Board member, Vizzia Technologies (2015 to present); Board Member, Dunbar Armored (2012 to 2018)

Cecilia E. Rouse, Ph.d. (1963) 2013 [191]		Dean, Princeton School of Public and International Affairs (2012 to present); Professor and Researcher, Princeton university (1992 to present); director of Education Studies Committee, mdRC, a nonprofit education and social policy research organization (2011 to 2020); member, national Academy of Education (2010 to present); Board member, national Bureau of Economic Research (2011 to present); Board member of the Council on Foreign Relations (2018 to present); Board member, The Pennington School (2017 to present); Board member, the university of Rhode Island (2020 to present); Chair of Committee on the Status of minority Groups in the Economic Profession of the American Economic Association (2012 to 2018); Vice President (2015 to 2016) and Board member (2018 to present), American Economic Association

John G. Schreiber (1946) 1992 [191]		Owner/President, Centaur Capital Partners, Inc., a real estate investment company (1991 to present); Cofounder, Partner, and Cochair of the Investment Committee, Blackstone Real Estate Advisors, L.P. (1992 to 2015); director, Blackstone mortgage Trust, a real estate finance company (2012 to 2016); director and Chair of the Board, Brixmor Property Group, Inc. (2013 to present); director, Hilton Worldwide (2007 to present); director, Hudson Pacific Properties (2014 to 2016); director, Invitation Homes (2014 to 2017); director, JmB Realty Corporation (1980 to present)

^(a)All information about the independent directors was current as of December 31, 2020, unless otherwise indicated, except for the number of portfolios overseen, which is current as of the date of this report.
^(b)William J. Stromberg, Chief Executive Officer of T. Rowe Price Group, Inc., the parent company of the Price Funds’ investment advisor, has served on the Board of Trustees of Johns Hopkins University since 2014.

INTERESTED DIRECTORS^(a)

Name (Year of Birth) Year Elected [Number of T. Rowe Price Portfolios Overseen]		Principal Occupation(s) and Directorships of Public Companies and Other Investment Companies During the Past Five Years

David Oestreicher (1967) 2018 [191]		General Counsel, Vice President, and Secretary, T. Rowe Price Group, Inc.; Chair of the Board, Chief Executive Officer, President, and Secretary, T. Rowe Price Trust Company; director, Vice President, and Secretary, T. Rowe Price, T. Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price Services, Inc.; Vice President and Secretary, T. Rowe Price International; Vice President, T. Rowe Price Hong Kong (Price Hong Kong), T. Rowe Price Japan (Price Japan), and T. Rowe Price Singapore (Price Singapore); Principal Executive Officer and Executive Vice President, all funds

Robert W. Sharps, CFA, CPA (1971) 2019 [191]		Director and Vice President, T. Rowe Price; President, T. Rowe Price Group, Inc.; Vice President, T. Rowe Price Trust Company

^(a)All information about the interested directors was current as of December 31, 2020, unless otherwise indicated, except for the number of portfolios overseen, which is current as of the date of this report.

OFFICERS

Name (Year of Birth) Position Held With Tax-Free Income Fund		Principal Occupation(s)

R. Lee Arnold, Jr., CFA, CPA (1970) Vice President		Vice President, T. Rowe Price and T. Rowe Price Group, Inc.

Alan S. Dupski, CPA (1982) Principal Financial Officer, Vice President, and Treasurer		Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company

Sarah J. Engle (1979) Vice President		Vice President, T. Rowe Price and T. Rowe Price Group, Inc.

John R. Gilner (1961) Chief Compliance Officer		Chief Compliance Officer and Vice President, T. Rowe Price; Vice President, T. Rowe Price Group, Inc., and T. Rowe Price Investment Services, Inc.

Gary J. Greb (1961) Vice President		Vice President, T. Rowe Price, T. Rowe Price International, and T. Rowe Price Trust Company

Charles B. Hill, CFA (1961) Vice President		Vice President, T. Rowe Price and T. Rowe Price Group, Inc.

Paul J. Krug, CPA (1964) Vice President		Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company

Marcy M. Lash (1963) Vice President		Vice President, T. Rowe Price and T. Rowe Price Group, Inc.

James T. Lynch, CFA (1983) Vice President		Vice President, T. Rowe Price and T. Rowe Price Group, Inc.

Konstantine B. Mallas (1963) President		Vice President, T. Rowe Price and T. Rowe Price Group, Inc.

Hugh d. McGuirk, CFA (1960) Vice President		Vice President, T. Rowe Price and T. Rowe Price Group, Inc.

James M. Murphy, CFA (1967) Vice President		Vice President, T. Rowe Price and T. Rowe Price Group, Inc.

Fran M. Pollack-Matz (1961) Vice President and Secretary		Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Investment Services, Inc., and T. Rowe Price Services, Inc.

Shannon H. Rauser (1987) Assistant Secretary		Assistant Vice President, T. Rowe Price

Timothy G. Taylor, CFA (1975) Vice President		Vice President, T. Rowe Price and T. Rowe Price Group, Inc.

Megan Warren (1968) Vice President		Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Retirement Plan Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company; formerly, Executive director, JPmorgan Chase (to 2017)

Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least 5 years.

		By	/s/ David Oestreicher
			David Oestreicher
			Principal Executive Officer

Date	April 20, 2021


		By	/s/ Alan S. Dupski
			Alan S. Dupski
			Principal Financial Officer

Date	April 20, 2021

■	$108,000.from short-term capital gains,

■	$75,322,000.which qualified as exempt-interest dividends.

/s/ David Oestreicher

David Oestreicher

Principal Executive Officer

April 20, 2021