<PAGE>
Fellow Shareholders
By virtually every measure, the economy strengthened during the Funds' fiscal
year ended February 28, 1994. Gross domestic product grew at an annual rate of
nearly 1.5% for the first six months of calendar 1993, then surged at an annual
rate of more than 5% in the second half. Unemployment dropped steadily, capacity
utilization rose, and personal income gains were impressive. Based on stronger
spending by consumers on durable goods and housing, and by businesses on fixed
equipment, economic momentum seemed to carry over into early 1994 even though
the Arctic cold snap east of the Rockies and the earthquake in Los Angeles
tended to depress business activity.
The swing in the economy's thrust was reflected in the credit markets.
Perceived weakness in the economy through the autumn of 1993 and the Federal
Reserve's continued easy monetary policy encouraged a substantial decline in
note and bond yields. Between the end of February 1993 and mid-October, the
yield on the Treasury's benchmark 30-year bond dropped more than one full
percentage point, reaching a low of 5.78%. As it became increasingly apparent
that the economy was entering a phase of stronger growth, interest rates began
to rise--a trend that was accelerated by the Fed's announcement of a tightening
in early February. Despite reaching new lows last autumn, short- and
intermediate-term interest rates on taxable notes and bonds actually closed the
Funds' year-end 30 to 75 basis points higher than 12 months earlier, though
long-term Treasury bond yields closed a bit lower.
The tax-exempt sector experienced the same trend in yields. After declining
to 20-year lows in October, municipal yields closed the Funds' fiscal year
higher in every maturity range, with the most significant moves occurring during
the final quarter. From November 30 to February 28, short- and intermediate-term
rates rose about 30 basis points while long-term yields increased approximately
20 basis points.
The municipal market can be volatile during periods of uncertainty, and the
recent past was no exception. Unlike taxable markets, which include individuals,
foreign and domestic corporations, mutual funds, pension funds, and government
entities, the municipal market is now dominated by individual investors. As a
result, tax-exempt securities can be very sensitive to changes in supply and
demand, often becoming overbought or oversold. In September and October 1993,
for example, long-term yields dipped to low levels and prices rose as investors
rapidly increased their tax-free mutual fund holdings. Since October, the
pendulum has swung in the opposite direction, and cash flows into long-term bond
funds have abated. Municipal investors have drifted to the sidelines with a
wait-and-see attitude, and the reduced liquidity in the marketplace has sent
bond prices lower. As a result, our bond funds reflected share-price declines
for the quarter. Our money funds, of course, are managed to maintain a stable
$1.00 per share value.
[GRAPH APPEARS HERE]
Municipal Interest Rate Levels
A line graph compares the yields of the 30-year Prime General Obligation bond,
the five-year Prime General Obligation bond, and the six-month Moody's
Investment Grade 1 Note.
TAX-EXEMPT MONEY FUND
During the past three months, the short-term, tax-exempt money market managed to
post both its lowest and highest interest rates of the fiscal year. As the
quarter began, yields reached record lows amid concerns about massive
reinvestment of proceeds from maturing bonds and coupon payments made on January
1, 1994. By February, however, the focus turned to the Federal Reserve's efforts
to push short-term rates higher. As a result, yields on six-month and one-year
notes fluctuated 70 to 100 basis points in a very short time.
<PAGE>
Assets in the tax-exempt money fund industry expanded by 11% over the
fiscal year to a record $112.7 billion, indicating a strong desire among
investors for principal stability. Much of this cash flow was invested in the
one- to 30-day maturity area as portfolio managers sought to preserve
flexibility in a rising rate environment. This caused yields of very short
maturities to move lower, while maturities of 90 days or more moved higher in
tandem with the general direction of short-term rates.
We kept the Tax-Exempt Money Fund's weighted average maturity at more than
60 days during December and January, but shortened to 55 days by quarter-end.
For most of the Fund's fiscal year, our maturity target was equal to or longer
than the peer group average.
<TABLE>
<CAPTION>
Portfolio Characteristics
Periods Ended
2/28/93 11/30/93 2/28/94
------- -------- -------
<S> <C> <C> <C>
Weighted Avg. Quality* 2.0 1.9 2.0
Weighted Avg. Maturity (days) 55 61 55
</TABLE>
*On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest quality.
This more aggressive posture helped put the Fund's performance in the top
quartile of tax-exempt money funds for both the three and 12 months ended
February 28, 1994.
<TABLE>
<CAPTION>
Performance Comparison
Periods Ended 2/28/94
3 Mos. 12 Mos.
------ -------
<S> <C> <C>
Tax-Exempt Money Fund 0.53% 2.05%
Donoghue's Tax-Free
Money Fund Average* 0.45 1.91
</TABLE>
*Stockbroker and General Purpose Funds.
Over the next quarter, we expect gradually rising rates as the Federal
Reserve continues to move away from the stimulative stance it pursued during the
past five years. Accordingly, Fund shareholders should enjoy moderately higher
returns during the ensuing fiscal year. We expect to maintain your Fund's
weighted average maturity more or less in line with its peer group.
TAX-FREE SHORT-INTERMEDIATE FUND
The short-intermediate municipal market enjoyed a favorable balance of supply
and demand during the fiscal year ended February 28, 1994, as record new
issuance and a growing supply of intermediate, pre-refunded bonds met strong
investor demand. As investors sought out less aggressive, fixed-income
investments, the many new intermediate-term mutual funds were strong buyers in
this range.
Based on our early 1993 forecast for slow economic growth and tame
inflation, your Fund maintained a weighted average maturity of nearly 3.5 years
from March through October, a figure higher than its historical average. We
focused on three- to four-year maturities whose yields were at least a full
percentage point above money market instruments. We also emphasized market
sectors yielding more than usual due to excess supply. Heavy issuance in New
York, California, and Maryland, for example, made the bonds of those high-tax
states attractive relative to other states.
<TABLE>
<CAPTION>
Portfolio Characteristics
Periods Ended
2/28/93 11/30/93 2/28/94
------- -------- -------
<S> <C> <C> <C>
Weighted Avg. Quality* 2.3 2.3 2.2
Weighted Avg. Maturity (years) 3.4 3.4 3.1
Weighted Avg. Effective
Duration (years) 2.9 2.9 2.7
</TABLE>
*On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest quality.
As evidence of a stronger economy began to emerge in late 1993, we began
shortening the Fund's average maturity by selling more vol-atile bonds while at
the same time emphasizing higher-quality bonds. When the Fed tightened on
February 4, 1994, the weighted average maturity stood at 3.1 years and average
credit quality was AA. The sharp yield increase in February eliminated the price
gains made earlier in the past year and reduced the Fund's total return at year-
end. Even so, the Fund's performance slightly exceeded its peer group average
for both the quarter and the year.
<TABLE>
<CAPTION>
Performance Comparison
Periods Ended 2/28/94
3 Mos. 12 Mos.
------ -------
<S> <C> <C>
Tax-Free Short-Intermediate
Fund 0.61% 3.49%
Lipper Short Municipal
Debt Fund Average 0.59 3.31
</TABLE>
2
<PAGE>
Entering the Fund's new fiscal year, our focus is on improving yield where
possible and keeping price volatility moderate by maintaining a shorter
duration. At present, we think the two-year-maturity range, where prices already
reflect the impact of further tightening by the Fed, looks attractive. In
addition, new legislation subjecting certain discount bonds to ordinary income
taxes increases the appeal of high-coupon, premium bonds, which dovetails with
our more conservative strategy.
TAX-FREE INSURED INTERMEDIATE BOND FUND
The municipal market's record issuance in 1993 included 37% of insured bonds, a
sector that has grown steadily since 1990. Since over half of the supply was
used for advance refundings of older, higher-coupon bonds with call dates within
10 years, the result was a huge increase in the overall supply of intermediate
maturities, many of which were insured. This large issuance resulted in
attractive prices and yields on insured securities for most of 1993, but the
supply also made the sector more vulnerable to downward price pressure when
interest rates rose in February.
<TABLE>
<CAPTION>
Portfolio Characteristics
Periods Ended
2/28/93 11/30/93 2/28/94
------- -------- -------
<S> <C> <C> <C>
Weighted Avg. Quality* 2.1 2.1 2.1
Weighted Avg. Maturity (years) 8.0 7.9 7.9
Weighted Avg. Effective
Duration (years) 5.3 5.8 5.8
</TABLE>
*On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest quality.
We postured the portfolio aggressively for the first six months of the
fiscal year, then started reducing our risk profile in September. Based on our
outlook in early 1993 for slow economic growth and low inflation, we had
maintained the Fund's average maturity at around nine years, near the long end
of its five- to 10-year maturity range as outlined in the prospectus. When signs
of the improving economy began to emerge, we reacted by shortening the weighted
average maturity to approximately 7.5 years and by purchasing bonds less
sensitive to price fluctuations, such as those with higher coupons. We also
sought to take advantage of the excessive supply of bonds issued in high-tax
states and in those with heavy demand for municipal bonds. Typically, bonds
issued by states such as New York, Virginia, Maryland, and Florida trade at
higher prices than those issued by other states. As issuance slows in 1994, we
anticipate that increased demand for these bonds will cause their values to
improve relative to the rest of the market.
Our efforts throughout the year paid off with top quartile performance for
the 12-month period ended February 28, even though the Fund slightly
underperformed its peer group average for the quarter.
<TABLE>
<CAPTION>
Performance Comparison
Periods Ended 2/28/94
3 Mos. 12 Mos.
------ -------
<S> <C> <C>
Tax-Free Insured Intermediate
Bond Fund 0.49% 5.49%
Lipper Intermediate Municipal
Debt Fund Average 0.54 4.76
</TABLE>
Keeping with our outlook for gradually rising interest rates, we are
continuing to shorten the portfolio's duration. By purchasing bonds in the six-
to seven-year range, we expect to deliver 80% of the yield of a 30-year bond,
with significantly less price fluctuation.
TAX-FREE INCOME FUND
As highlighted in our general overview, the long end of the bond market had
quite a ride over the last 12 months. Our investment strategy during this
turbulent period was marked by two distinct phases. In the spring and summer, we
were aggressive, extending the Fund's average maturity and duration so that
long-term bonds represented 85% to 90% of assets. As autumn began, however,
interest rates dropped to 20-year lows and the economy was showing signs of
accelerating. We concluded that an aggressive Fund posture was no longer
warranted under such conditions and reduced our risk profile by shortening the
portfolio's duration and weighted average maturity. For example, the Fund's
duration during the summer months was eight years or longer and the weighted
average maturity was in the 19 1/2- to 20-year range. From September through
mid-December, however, duration averaged 7 1/2
3
<PAGE>
years and the weighted average maturity was reduced to 18 1/2 years.
<TABLE>
<CAPTION>
Portfolio Characteristics
Periods Ended
2/28/93 11/30/93 2/28/94
------- -------- -------
<S> <C> <C> <C>
Weighted Avg. Quality* 2.5 2.4 2.4
Weighted Avg. Maturity (years) 20.0 18.5 18.0
Weighted Avg. Effective
Duration (years) 7.3 7.6 7.7
</TABLE>
*On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest quality.
During the last three months, we continued in a cautious direction as the
strength in the economy became more apparent and after the Federal Reserve
announced in February its first tightening move in five years. We maintained the
high credit quality of the portfolio throughout the fiscal year, believing that
the yield on lower-quality holdings did not adequately compensate for the
additional risks.
The Fund's performance exceeded its peer group average for the three and 12
months ended February 28, 1994. The narrow margin in the final quarter reflected
our more cautious stance; the Fund's investment posture was in line with that of
the average municipal bond fund. In essence, our earlier aggressiveness enabled
the Fund to outperform its peer group as interest rates declined, while our
neutral posture over the last half of the year resulted in average performance
when rates rose.
<TABLE>
<CAPTION>
Performance Comparison
Periods Ended 2/28/94
3 Mos. 12 Mos.
------ -------
<S> <C> <C>
Tax-Free Income Fund 0.47% 5.50%
Lipper General Municipal
Debt Fund Average 0.45 5.24
</TABLE>
TAX-FREE HIGH YIELD FUND
On balance, the Fund's fiscal year was a good one for the high-yield sector of
the municipal bond market though it was subject to the same price volatility
that characterized the entire market for much of the year. Our investment
strategy, while influenced by the same factors that affected our management of
other long-term funds, did not display as significant a shift in investment
posture as those funds, reflecting the strong income orientation of the Tax-Free
High Yield Fund. We did extend the Fund's weighted average maturity to
approximately 21 years and effective duration to 7.4 years based on our outlook
for declining interest rates during the first half of the year. Long-term bonds
during this period represented 88% to 90% of net assets. Beginning in the fall,
we shifted the portfolio to a more neutral stance versus its peer group and
generally held that position into February. Recently, average maturity and
effective duration were extended as we were able to add positions at what we
felt were very attractive levels.
Demand was consistently strong last year for the medium- and lower-quality
bonds that your Fund usually holds. Yield spreads between low- and high-quality
bonds, narrow for the most of the year, widened somewhat during the last quarter
as interest rates rose and issuance increased. During this time, we increased
the Fund's exposure to lower-quality bonds. By year-end, 26% of Fund assets were
invested in below-investment-grade credits (i.e., bonds rated below the BBB
category), up from 22% at the start of the year.
<TABLE>
<CAPTION>
Portfolio Characteristics
Periods Ended
2/28/93 11/30/93 2/28/94
------- -------- -------
<S> <C> <C> <C>
Weighted Avg. Quality* 3.7 3.7 3.8
Weighted Avg. Maturity (years) 21.9 20.9 21.3
Weighted Avg. Effective
Duration (years) 6.7 7.2 7.4
</TABLE>
*On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest quality.
Your Fund extended its record of favorable performance, finishing in the
top quartile for the 12 months ended February 28, 1994, and exceeding the peer
group average for the last quarter. Over an even longer time horizon, the Fund's
performance has exceeded its peer group average for each of the past six years.
<TABLE>
<CAPTION>
Performance Comparison
Periods Ended 2/28/94
3 Mos. 12 Mos.
------ -------
<S> <C> <C>
Tax-Free High Yield Fund 1.04% 7.49%
Lipper High Yield Municipal
Debt Fund Average 0.84 6.15
</TABLE>
4
<PAGE>
CAPITAL GAIN DISTRIBUTIONS
While the Funds' primary objective is to earn a high level of tax-exempt income
consistent with each portfolio's composition and risk profile, capital gains
will arise in the course of managing the portfolios. A dividend consisting of a
fund's undistributed net gains as of October 31 must be declared by the end of
each calendar year, and a second distribution is required if the fund has
undistributed net gains as of the close of its fiscal year. Accordingly, three
of the municipal bond funds declared capital gain distributions (shown below),
payable March 31 to shareholders of record March 28. Your check or statement
reflecting these distributions was mailed separately. These distributions are
taxable to you for 1994 and will be reported on Form 1099-DIV mailed in January
1995.
<TABLE>
<CAPTION>
Short-Term Long-Term Total
---------- --------- -----
<S> <C> <C> <C>
Tax-Free Insured
Intermediate Bond $0.02 $0.01 $0.03
Tax-Free Income $0.01 $0.03 $0.04
Tax-Free High Yield -- $0.04 $0.04
</TABLE>
OUTLOOK
As the Funds enter a new fiscal year, the bond markets are cautious about a
robust economy as well as a vigilant Federal Reserve Board. Fed Chairman Alan
Greenspan clearly intends to contain inflation by raising short-term interest
rates as the economy approaches full labor and capital utilization over the next
year or two. The Fed's most recent hike was greeted more constructively by long-
term investors; in sharp contrast to the reaction in February, bond yields fell
on March 22, the day the Fed announced that the federal funds rate would be
increased another one-quarter of one percent. Inflation currently does not look
threatening and, if the Fed's strategy works, bond investors may be reassured by
the inflation-fighting stance. Still, commodity prices are moving up, labor
markets could start tightening later this year or early next, and the global
economy continues to strengthen, so the bond market's nervousness is
understandable. On balance, we expect modestly increasing yields though the
course may be choppy in 1994 as inflation expectations wax and wane.
Despite these strong economic fundamentals, the municipal market retains
certain advantages. First, as a result of the sharp sell-off experienced in
recent weeks, yields on securities in many maturities are at attractive levels
relative to comparable taxable issues, appealing to taxpayers in all but the
lowest tax brackets. Second, the projected 30% to 40% decline in new issuance in
1994 should bring supply and demand into better balance and support municipal
prices. Third, tax-advantaged investments and the value they offer should come
into the limelight as high income taxpayers prepare to file their first returns
at the new, higher tax rates.
We encourage all shareholders to make sure their current investments are
consistent with their personal financial objectives. If, as a result of your
review, you want additional information on the funds, our investor service
representatives will be happy to assist you. We look forward to the challenges
and opportunities that await us in the new fiscal year and appreciate your
continued confidence in us.
Respectfully submitted,
/s/ William T. Reynolds
William T. Reynolds
Assistant Director,
Fixed-Income Division
March 25, 1994
Duration as a Guide to Interest Rate Risk
Starting with this report, we've added a new measure to the statistical tables
that more accurately defines a fund's interest rate sensitivity. Unlike
maturity, which merely indicates when the bond repays principal, "duration"
incorporates the cash flows of all interest and principal payments over the life
of the bond to reflect the recovery of your original investment. Future payments
are discounted to reflect their present value. These payments are then
multiplied by the number of years over which they will be received to produce a
value that is expressed in years, i.e., the duration. Effective duration is an
even better measure of a bond's sensitivity to interest rate changes because it
takes into account call features and sinking fund payments which may shorten a
bond's life.
You can multiply the duration by the potential change in interest rates to
estimate the change in principal value. For example, a bond or bond fund with a
duration of five years would rise or fall roughly 5% in price if rates fell or
rose by one percentage point.
5
<PAGE>
<TABLE>
<CAPTION>
Financial Summary
Net Asset Value Dividend Per Share+ Dividend Yield*
Per Share 3 Months Ended 3 Months Ended
--------------------- --------------------- ---------------------
11/30/93 02/28/94 11/30/93 02/28/94 11/30/93 02/28/94
<S> <C> <C> <C> <C> <C> <C>
Tax-Exempt Money $ 1.00 $ 1.00 $0.005 $0.005 2.15% 2.15%
Tax-Free Short-Intermediate 5.34 5.32 0.055 0.053 4.12 4.02
Tax-Free Insured Intermediate Bond 10.68 10.58 0.115 0.115 4.29 4.33
Tax-Free Income 9.92 9.66 0.134 0.131 5.35 5.42
Tax-Free High Yield 12.49 12.26 0.184 0.182 5.87 5.95
</TABLE>
* Dividends earned and reinvested for the periods indicated are annualized and
divided by the average daily net asset values per share for the same period.
+ Taxability of dividends. 100% of the dividends paid for the 12 months ended
2/28/94 were exempt from federal income tax.
<TABLE>
<CAPTION>
Average Annual Compound Total Return
Periods Ended 12/31/93
----------------------------------------------------
1 Year 5 Years 10 Years Since Inception
<S> <C> <C> <C> <C> <C>
Tax-Exempt Money 2.01% 3.94% 4.45% 4.93% (4/81)
Tax-Free Short-Intermediate 6.32 6.63 6.55 6.49 (12/83)
Tax-Free Insured Intermediate Bond 12.66 - - 13.04 (11/92)
Tax-Free Income 12.77 9.85 9.51 7.66 (10/76)
Tax-Free High Yield 12.97 10.36 - 11.00 (3/85)
</TABLE>
[GRAPH APPEARS HERE]
Tax-Free Insured Intermediate Fund Performance Comparison
A line graph compares the 2/28/94 value of a hypothetical $10,000 investment
made in the Tax-Free Insured Intermediate Fund at its inception (11/30/92) and a
similar investment made concurrently in the Lehman 7-Year G.O. Bond Index. At
2/28/94, the Fund investment would have been worth $11,267 and the Lehman Index
investment would have been worth $10,995.
<TABLE>
<CAPTION>
Fiscal-Year Performance
Periods Ended 2/28/94
-------------------------------
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Short-Intermediate 3.49% 6.46% 6.39%
Insured Intermediate
Bond* 5.49 - -
Income 5.50 9.38 9.14
High Yield** 7.49 9.87 -
</TABLE>
* Since inception 11/92: 10.05%
** Since inception 3/85: 10.71%
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
6
<PAGE>
[GRAPH APPEARS HERE]
Tax-Free Short-Intermediate Fund Performance Comparison
A line graph compares the 2/28/94 value of a hypothetical $10,000 investment
made in the Tax-Free Short-Intermediate Fund at its inception (12/23/83) and a
similar investment made concurrently in the Lehman 3 Year Bond Index. At
2/28/94, the Fund investment would have been worth $17,243 and the Lehman Index
investment would have been worth $18,473.
[GRAPH APPEARS HERE]
Tax-Free Income Fund Performance Comparison
A line graph compares the 2/28/94 value of a hypothetical $10,000 investment
made ten years earlier in both the Tax-Free Income Fund and the Lehman Municipal
Bond Index. At 2/28/94, the Fund investment would have been worth $23,986, the
Lehman Index investment would have been worth $27,680.
[GRAPH APPEARS HERE]
Tax-Free High-Yield Fund Performance Comparison
A line graph compares the 2/28/94 value of a hypothetical $10,000 investment
made in the Tax-Free High-Yield Fund at its inception (3/1/85) and a similar
investment made concurrently in the Lehman Revenue Bond Index. At 2/28/94, the
Fund investment would have been worth $24,982 and the Lehman Index investment
would have been worth $26,711.
7
<PAGE>
ANNUAL REPORT
FOR YIELD, PRICE, LAST TRANSACTION, T. Rowe Price
AND CURRENT BALANCE, 24 HOURS, -------------
7 DAYS A WEEK, CALL: TAX-FREE FUNDS
1-800-638-2587 toll free
625-7676 Baltimore area
FEBRUARY 28, 1994
FOR ASSISTANCE WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. ROWE PRICE
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distri-
bution only to shareholders and to
others who have received a copy of
the prospectus of the T. Rowe Price
Tax-Free Funds.
T. Rowe Price
Invest With Confidence(R)
TFF
<PAGE>
T. Rowe Price
TAX-EXEMPT MONEY FUND
February 28, 1994
Investment Record
The table below shows the investment record of one share of the T. Rowe Price
Tax-Exempt Money Fund, purchased at the original offering price of $1.00. Over
this time, interest rates have been volatile. The results shown should not be
considered a representation of the dividend income or capital gain or loss which
may be realized from an investment made in the Fund today.
<TABLE>
<CAPTION>
================================================================================================================
Adjusted to Reflect Reinvestment
--------------------------------
Income Cumulative Dollars Annual
Dividend ------------------ Return on
Fiscal Net Asset Taken In Income Value of Investment
----------
Year Ended Value Cash Dividend Investment Total Return
---------- ----- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
2/28/82/1/ $1.00 $0.07 $0.07 $1.07 6.89%
1983 1.00 0.07 0.15 1.15 7.10
1984 1.00 0.05 0.21 1.21 5.22
1985 1.00 0.06 0.28 1.28 5.93
1986 1.00 0.05 0.34 1.34 5.02
1987 1.00 0.04 0.40 1.40 4.30
1988 1.00 0.04 0.46 1.46 4.47
1989 1.00 0.05 0.53 1.53 5.08
1990 1.00 0.06 0.63 1.63 5.87
1991 1.00 0.05 0.71 1.71 5.22
1992 1.00 0.04 0.77 1.77 3.69
1993 1.00 0.02 0.81 1.81 2.36
1994 1.00 0.02 0.85 1.85 2.05
----------------------------------------------------------------------------------------------------------
TOTAL $0.62
----------------------------------------------------------------------------------------------------------
</TABLE>
/1/ From inception 4/8/81 to 2/28/82.
<PAGE>
T. Rowe Price Tax-Exempt Money Fund
Sector Diversification / February 28, 1994
<TABLE>
<CAPTION>
Percent of
Net Assets
----------
<S> <C>
Hospital Revenue 23%
Educational Revenue 16
General Obligation - State 15
General Obligation - Local 10
Industrial & Pollution
Control Revenue 7
Water & Sewer Revenue 6
Housing Finance Revenue 5
Pooled Loan Revenue 4%
Pre-Refunded Bonds 4
Nuclear Revenue 4
Miscellaneous Revenue 2
Electric Revenue 1
Lease Revenue 1
Other Assets Less Liabilities 2
</TABLE>
T. Rowe Price Tax-Exempt Money Fund
Statement of Net Assets / February 28, 1994
<TABLE>
<CAPTION>
Amounts in Thousands
--------------------
Face Amount Value
----------- -----
<S> <C> <C>
ALABAMA -- 0.3%
Montgomery IDR, PCR & Solid Waste Disposal (General Electric),
TECP, 2.25%, 4/7/94......................................................................... $ 2,000 $ 2,000
- -----------------------------------------------------------------------------------------------------------------------------------
ARIZONA -- 1.2%
Phoenix, Street & Highway User, 7.60%, 7/1/05 (Pre-refunded 7/1/94+)......................... 2,170 2,248
Salt River Project, Agricultural Improvement & Power Dist.,
TECP, 2.45%, 4/19/94........................................................................ 6,772 6,772
- ------------------------------------------------------------------------------------------------------------------------------------
ARKANSAS -- 1.9%
Arkansas Dev. Health Care Fin. Auth., Sisters of Mercy,
VRDN (Currently 2.35%)...................................................................... 14,000 14,000
- ------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA -- 8.1%
Beverly Hills, Beverly Hills Civic Center,
COP, 10.625%, 6/1/04 (Pre-refunded 6/1/94+)................................................. 1,000 1,050
California HFFA, Kaiser Permanente, VRDN (Currently 2.35%)................................... 6,000 6,000
California Pollution Control Fin. Auth., Pacific Gas & Electric,
TECP, 2.35%, 3/23/94........................................................................ 3,500 3,500
Los Angeles Dept. Water & Power, TECP, 2.85%, 3/25/94........................................ 9,350 9,354
Los Angeles Waste Water Systems, TECP, 2.90%, 3/15/94........................................ 4,000 4,001
Oakland, COP, VRDN (Currently 2.75%)......................................................... 6,700 6,700
Sacramento County, GO, TRAN, 3.00%, 7/29/94.................................................. 5,000 5,004
San Diego, GO, TAN, 3.00%, 6/30/94........................................................... 10,000 10,007
GO, TRAN, 3.50%, 8/10/94.................................................................... 10,000 10,029
Solano County, GO, TRAN, 3.25%, 11/1/94...................................................... 4,000 4,009
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Amounts in Thousands
--------------------
Face Amount Value
----------- -----
<S> <C> <C>
COLORADO -- 1.0%
Colorado, TRAN, 3.25%, 6/27/94............................................................... $ 5,000 $ 5,006
Denver IDR, W. W. Grainger, VRDN (Currently 2.50%)........................................... 2,190 2,190
- -----------------------------------------------------------------------------------------------------------------------------------
CONNECTICUT -- 2.2%
Connecticut, GO, VRDN (Currently 2.55%)...................................................... 9,800 9,800
Connecticut HEFA, Yale University, TECP, 2.60%, 3/11/94...................................... 6,000 6,000
- -----------------------------------------------------------------------------------------------------------------------------------
DELAWARE -- 0.1%
Delaware, GO, 6.80%, 5/1/94.................................................................. 1,000 1,007
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 1.1%
Dist. of Columbia, American Univ., VRDN (Currently 2.50%).................................... 8,130 8,130
- -----------------------------------------------------------------------------------------------------------------------------------
FLORIDA -- 5.9%
Fort Pierce Utilities Auth., 8.00%, 10/1/94, (Escrowed to Maturity).......................... 1,000 1,031
Homestead, Special Insurance Assessment, Hurricane Andrew,
(MBIA Insured), 2.875%, 3/1/94............................................................. 1,000 1,000
Jacksonville Electric Auth., VRDN (Currently 2.60%).......................................... 1,000 1,000
TECP, 2.30 - 2.50%, 4/6 - 5/20/94........................................................... 9,200 9,196
Jacksonville HFA, Baptist Medical Center, (MBIA Insured),
VRDN (Currently 2.25%)...................................................................... 700 700
Orange County IDA, W. W. Grainger, VRDN (Currently 2.50%).................................... 1,185 1,185
Orlando Waste Water, TECP, 2.30 - 2.35%, 4/7 - 5/20/94....................................... 17,000 16,978
Sunshine State Gov't. Fin. Commission,
TECP, 2.25 - 2.50%, 3/11 - 5/27/94.......................................................... 12,400 12,397
- -----------------------------------------------------------------------------------------------------------------------------------
GEORGIA -- 1.6%
Atlanta Water and Sewer, VRDN (Currently 2.60%).............................................. 2,000 2,000
Dekalb County Hosp. Auth., RAN, VRDN (Currently 2.45%)....................................... 500 500
Fulton County Dev. Auth., National Red Cross,
VRDN (Currently 2.50%)...................................................................... 550 550
Fulton County Water & Sewage, (FGIC Insured),
VRDN (Currently 2.60%)...................................................................... 4,000 4,000
Georgia State, GO, VRDN (Currently 2.55%).................................................... 1,500 1,500
Municipal Electric Auth. of Georgia, 9.70%, 1/1/98 (Pre-refunded 1/1/95+).................... 500 538
10.00%, 1/1/01 (Pre-refunded 1/1/95+)....................................................... 1,250 1,348
10.50%, 10/1/20 (Pre-refunded 1/1/95+)...................................................... 1,000 1,083
- -----------------------------------------------------------------------------------------------------------------------------------
HAWAII -- 1.2%
Hawaii Dept. of Budget & Fin., Queens Medical Center, (FGIC Insured),
VRDN (Currently 2.45%)...................................................................... 4,600 4,600
Honolulu City & County, GO, 10.00%, 11/1/99 (Pre-refunded 11/1/94+).......................... 1,000 1,062
GO, TECP, 2.30 - 2.50%, 4/13 - 4/20/94...................................................... 3,300 3,299
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Amounts in Thousands
--------------------
Face Amount Value
----------- -----
<S> <C> <C>
IDAHO -- 0.1%
Idaho, TAN, GO, 3.00%, 6/30/94............................................................... $ 1,000 $ 1,001
- -----------------------------------------------------------------------------------------------------------------------------------
ILLINOIS -- 11.8%
Chicago Park Dist., GO, 3.00%, 4/1/94........................................................ 5,000 5,002
Illinois EFA, DePaul Univ., VRDN (Currently 2.60%)........................................... 3,000 3,000
Field Museum of Natural History, VRDN (Currently 2.55%)..................................... 2,000 2,000
Northwestern Univ., VRDN (Currently 2.50%).................................................. 14,300 14,300
VRDN (Currently 2.55%).................................................................... 4,000 4,000
VRDN (Currently 3.00%).................................................................... 1,500 1,500
Illinois HFA, Pooled Loan, VRDN (Currently 2.40%)............................................ 1,700 1,700
TECP, 2.70%, 3/3/94....................................................................... 5,800 5,800
Children's Memorial Hosp., 10.50%, 1/1/01 (Pre-refunded 1/1/95+)............................ 1,000 1,063
Evangelical Hosp. Corp., VRDN (Currently 2.50%)............................................. 3,000 3,000
Hosp. Equipment, VRDN (Currently 2.40%)..................................................... 3,400 3,400
Palos Community Hosp., VRDN (Currently 2.45%)............................................... 21,500 21,500
Resurrection Health Care Systems, VRDN (Currently 2.30%).................................... 700 700
Illinois State, 9.00%, 1/1/02 (Pre-refunded 1/1/95+)......................................... 1,030 1,102
GO, 3.25%, 4/15/94.......................................................................... 3,200 3,202
3.25%, 5/16/94............................................................................ 10,000 10,011
3.50%, 6/15/94............................................................................ 4,000 4,008
Niles Village IDR, W. W. Grainger, VRDN (Currently 2.50%).................................... 1,000 1,000
- -----------------------------------------------------------------------------------------------------------------------------------
INDIANA -- 1.2%
Gary IDR, W. W. Grainger, VRDN (Currently 2.50%)............................................. 730 730
Mount Vernon PCR, General Electric, TECP, 2.55%, 3/10/94..................................... 8,200 8,200
- -----------------------------------------------------------------------------------------------------------------------------------
KENTUCKY -- 1.1%
Trimble County PCR, Louisville Gas and Electric,
TECP, 2.30 - 2.40%, 4/6 - 5/12/94........................................................... 8,000 7,997
- -----------------------------------------------------------------------------------------------------------------------------------
LOUISIANA -- 4.2%
Louisiana PFA, Knighton Medical Center, (AMBAC Insured),
VRDN (Currently 2.45%).................................................................... 14,300 14,300
Sisters of Charity of the Incarnate Word, TECP, 2.55%, 4/22/94.............................. 2,100 2,100
Louisiana State Gov't., 9.30%, 1/1/99 (Pre-refunded 1/1/95+)................................. 1,000 1,072
New Orleans Aviation Board, (MBIA Insured), VRDN (Currently 2.45%)........................... 1,000 1,000
Orleans Levee Dist., Levee Improvement, VRDN (Currently 3.95%)............................... 4,420 4,420
Public Improvement, VRDN (Currently 3.95%).................................................. 8,000 8,000
- -----------------------------------------------------------------------------------------------------------------------------------
MARYLAND -- 7.5%
Baltimore County, Sheppard and Enoch Pratt Hosp. Fac.,
VRDN (Currently 2.45%)...................................................................... 7,500 7,500
Maryland HHEFA, John Hopkins Univ., 6.20%, 7/1/94............................................ 5,850 5,916
Kennedy Kreiger Institute, VRDN (Currently 2.60%)........................................... 2,500 2,500
Loyola College, VRDN (Currently 2.25%)...................................................... 7,600 7,600
Pooled Loan Program, VRDN (Currently 2.50%)................................................. 4,300 4,300
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Amounts in Thousands
--------------------
Face Amount Value
----------- -----
<S> <C> <C>
MARYLAND (cont'd)
Maryland State, GO, VRDN (Currently 2.55%)................................................... $ 13,140 $ 13,140
Maryland State Dept. of Transportation, 6.40%, 8/1/94........................................ 600 609
Mayor & City Council of Baltimore, Highway User, GO, RAN, 3.25%, 6/9/94...................... 9,000 9,010
Montgomery County, GO, VRDN (Currently 2.50%)................................................ 500 500
Consolidated Public Improvement, GO, 7.25%, 4/1/94.......................................... 500 502
Rockville, GO, 9.60%, 3/15/98 (Pre-refunded 3/15/94+)........................................ 500 516
Washington Suburban Sanitary Dist., Administration Building Construction, GO,
4.50%, 6/1/94............................................................................. 500 502
Sewage Disposal, GO, 4.50%, 6/1/94.......................................................... 750 754
Water Supply, GO, 4.50%, 6/1/94............................................................. 1,245 1,251
- -----------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS -- 2.6%
Boston Water and Sewer Commission, 10.50%, 1/1/09 (Pre-refunded 1/1/95+)..................... 2,250 2,436
Massachusetts HEFA, Capital Asset Pool, (MBIA Insured),
VRDN (Currently 2.35%)...................................................................... 5,800 5,800
Massachusetts State, (MBIA Insured), VRDN (Currently 2.65%).................................. 4,800 4,800
GO, TECP, 2.50 - 2.55%, 4/12 - 4/18/94...................................................... 6,000 6,000
- -----------------------------------------------------------------------------------------------------------------------------------
MICHIGAN -- 0.8%
Louisville & Jefferson Counties, Metropolitan Sewer, (MBIA Insured),
VRDN (Currently 2.65%)...................................................................... 6,000 6,000
- -----------------------------------------------------------------------------------------------------------------------------------
MINNESOTA -- 4.8%
Cottage Grove PCR, Minnesota Mining & Mfg., VRDN (Currently 2.64%)........................... 2,000 2,000
Maine State, GO, TAN, 3.50%, 6/30/94......................................................... 3,000 3,005
Regents of the Univ. of Minnesota, TECP, 2.30 - 2.40%, 4/7 - 5/27/94......................... 5,325 5,321
Rochester Health Care Fac., Mayo Foundation/Mayo Medical Center,
VRDN (Currently 2.60%)...................................................................... 11,100 11,100
TECP, 2.40 - 2.55%, 3/8 - 4/12/94........................................................... 10,600 10,600
Univ. of Minnesota, TECP, 2.30%, 4/7/94...................................................... 3,000 3,000
- -----------------------------------------------------------------------------------------------------------------------------------
MISSISSIPPI -- 0.3%
Mississippi, Institutions of Higher Learning, Historic Properties and Fairground
Renovation Projects, GO, 11.00%, 12/15/94................................................... 735 781
Rankin County PCR, Siemens Energy & Automation, VRDN (Currently 2.45%)....................... 1,600 1,600
- -----------------------------------------------------------------------------------------------------------------------------------
MISSOURI -- 2.1%
Independence, Water Utility Revenue, TECP, 2.60%, 3/11/94.................................... 2,000 2,000
Missouri HEFA, Barnes Jewish Hosp., 2.70%, 5/15/94........................................... 2,750 2,750
St. Anthony's Medical Center, VRDN (Currently 2.55%)........................................ 10,800 10,800
- -----------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY -- 1.0%
New Jersey State, 9.00%, 10/1/99 (Pre-refunded 10/1/94+)..................................... 200 211
GO, TRAN, 3.00%, 6/15/94.................................................................... 7,300 7,305
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Amounts in Thousands
--------------------
Face Amount Value
----------- -----
<S> <C> <C>
NEW YORK -- 1.8%
Connetquot Central School Dist., GO, TAN, 3.25%, 6/30/94..................................... $ 1,000 $ 1,002
New York City, GO, RAN, 3.25%, 4/15/94....................................................... 7,800 7,806
3.50%, 6/30/94.............................................................................. 3,500 3,508
TAN, 3.125%, 4/8/94......................................................................... 585 585
- -----------------------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA -- 1.5%
New Hanover County Fac. PCR, Siemens Energy & Automation, VRDN
(Currently 2.45%)........................................................................... 7,500 7,500
North Carolina Eastern Municipal Power Agency,
8.50%, 1/1/11 (Pre-refunded 1/1/95+)........................................................ 2,000 2,093
9.00%, 1/1/13 (Pre-refunded 1/1/95+)........................................................ 1,000 1,070
- -----------------------------------------------------------------------------------------------------------------------------------
OHIO -- 0.6%
Cleveland Cuyahoga County Port Auth., VRDN (Currently 2.55%)................................. 2,000 2,000
Miami County Hosp. Fac., Dettmer Hosp.,
13.25%, 6/1/13 (Pre-refunded 6/1/94+)....................................................... 2,430 2,568
- -----------------------------------------------------------------------------------------------------------------------------------
OREGON -- 1.4%
Oregon, Veterans' Welfare, GO, VRDN (Currently 2.40%)........................................ 10,100 10,100
- -----------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA -- 0.2%
Montgomery County IDR, W. W. Grainger, VRDN (Currently 2.50%)................................ 1,230 1,230
- -----------------------------------------------------------------------------------------------------------------------------------
RHODE ISLAND -- 0.3%
Rhode Island State, TAN, 3.25%, 6/30/94...................................................... 2,000 2,003
- -----------------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA -- 2.1%
Piedmont Municipal Power Agency, 11.00%, 1/1/14 (Pre-refunded 1/1/95+)....................... 1,825 2,000
9.50%, 1/1/18 (Pre-refunded 1/1/95+)........................................................ 1,000 1,084
(AMBAC Insured), 10.50%, 1/1/19 (Pre-refunded 1/1/95+)...................................... 1,000 1,092
South Carolina Housing Fin. and Dev. Auth., Homeownership Mortgage,
2.80%, 6/1/94............................................................................... 5,000 4,999
Spartanburg County, Siemens Energy & Automation, VRDN (Currently 2.45%)...................... 6,400 6,400
- -----------------------------------------------------------------------------------------------------------------------------------
SOUTH DAKOTA -- 1.6%
South Dakota State HEFA, Sioux Valley Hosp., VRDN (Currently 2.55%).......................... 11,500 11,500
- -----------------------------------------------------------------------------------------------------------------------------------
TENNESSEE -- 2.2%
Clarksville Public Building Auth., Pooled Loan, (MBIA Insured),
VRDN (Currently 2.30%)...................................................................... 500 500
Memphis, General Improvement, GO, VRDN (Currently 2.55%)..................................... 7,000 7,000
Metropolitan Gov't. of Nashville & Davidson County, Health & Ed. Fac. Board
Vanderbilt Univ., (FGIC Insured), 2.55%, 5/1/94............................................. 1,000 1,000
Tennessee, GO, BAN, VRDN (Currently 2.40%)................................................... 7,500 7,500
- -----------------------------------------------------------------------------------------------------------------------------------
TEXAS -- 15.8%
Dallas County Community College Dist., VRDN (Currently 2.60%)................................ 21,600 21,600
Dallas Fort Worth, Regional Airport, TECP, 2.80%, 7/20/94.................................... 1,300 1,297
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Amounts in Thousands
--------------------
Face Amount Value
----------- -----
<S> <C> <C>
TEXAS (cont'd)
Harris County Health Fac. Dev. Corp., Sisters of Charity of the Incarnate Word,
TECP, 2.40 - 2.55%, 3/9 - 7/21/94........................................................... $ 21,700 $ 21,695
St. Luke's Episcopal Hosp., VRDN (Currently 2.30%).......................................... 1,500 1,500
Harris County IDC, Lubrizol Corp., VRDN (Currently 2.40%).................................... 3,200 3,200
Hockley County IDC, Amoco, 2.75%, 3/1/94..................................................... 7,500 7,500
Houston Health Fac. Dev. Corp., Methodist Hosp., VRDN (Currently 2.30%)...................... 7,500 7,500
Texas A & M Univ., Permanent Univ. Fund, TECP, 2.40 - 2.45%, 3/4 - 7/21/94................... 6,300 6,295
Texas PFA, TECP, 2.40 - 2.65%, 5/4 - 9/7/94.................................................. 23,200 23,171
University of Texas Board of Regents, TECP, 2.40 - 2.45%, 4/20 - 5/19/94..................... 22,107 22,084
- -----------------------------------------------------------------------------------------------------------------------------------
UTAH -- 2.3%
Utah Housing Fin. Agency, Single Family Mortgage, VRDN (Currently 2.45%)..................... 16,600 16,600
- -----------------------------------------------------------------------------------------------------------------------------------
VERMONT -- 0.1%
Vermont Ed. and Health Buildings Fin. Agency, Middlebury College,
2.55%, 5/1/94............................................................................... 1,000 1,000
- -----------------------------------------------------------------------------------------------------------------------------------
VIRGINIA -- 6.2%
Fairfax County IDA, Inova Health System, TECP, 2.30 - 2.60%, 3/9 - 10/20/94.................. 19,100 19,075
Hampton Roads Sanitation Dist., 2.80%, 10/1/94............................................... 6,090 6,086
Roanoke County, Water Systems, (FGIC Insured), VRDN (Currently 2.60%)........................ 2,000 2,000
Rockingham County PCR, Merck & Company, VRDN (Currently 2.65%)............................... 2,400 2,400
Virginia, GO, 3.50%, 6/1/94.................................................................. 1,215 1,218
Virginia Housing Dev. Auth., 3.00%, 12/15/94................................................. 15,000 14,982
- -----------------------------------------------------------------------------------------------------------------------------------
WASHINGTON -- 1.3%
King County, GO, 4.00%, 1/1/95............................................................... 2,735 2,759
Municipality of Metropolitan Seattle, 7.00%, 1/1/16 (Pre-refunded 1/1/95+)................... 3,535 3,723
Washington Public Power Supply System, Bonneville Power Administration,
VRDN (Currently 2.45%)...................................................................... 3,000 3,000
- -----------------------------------------------------------------------------------------------------------------------------------
WISCONSIN -- 0.4%
Oak Creek, Wisconsin Electric Power Co., VRDN (Currently 2.35%).............................. 2,900 2,900
===================================================================================================================================
TOTAL INVESTMENTS IN SECURITIES -- 99.9% (COST -- $732,231).................................. $732,116
===================================================================================================================================
Other Assets Less Liabilities -- 0.1%........................................................ 784
--------
NET ASSETS CONSISTING OF:
Accumulated net investment income - net of distributions..................................... $ 142
Accumulated realized gains/losses - net of distributions..................................... (267)
Unrealized depreciation of investments....................................................... (115)
Paid-in-capital applicable to 733,216,044 shares of $0.01 par value
capital stock outstanding; 5,000,000,000 shares authorized.................................. 733,140
--------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Amounts in Thousands
--------------------
Face Amount Value
----------- -----
<S> <C> <C>
NET ASSETS -- 100.0%......................................................................... $732,900
NET ASSET VALUE PER SHARE.................................................................... $1.00
</TABLE>
+ -- Used in determining portfolio maturity
AMBAC -- American Municipal Bond Assurance Corporation
BAN -- Bond Anticipation Note
COP -- Certificates of Participation
EFA -- Educational Facility Authority
FGIC -- Financial Guaranty Insurance Company
GO -- General Obligation
HEFA -- Health & Educational Facility Authority
HFA -- Health Facility Authority
HFFA -- Health Facility Finance Authority
HHEFA -- Health & Higher Educational Facility Authority
IDA -- Industrial Development Authority
IDC -- Industrial Development Corporation
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Insurance Association
PCR -- Pollution Control Revenue
PFA -- Public Facility Authority
RAN -- Revenue Anticipation Note
TAN -- Tax Anticipation Note
TECP -- Tax-Exempt Commercial Paper
TRAN -- Tax Revenue Anticipation Note
VRDN -- Variable Rate Demand Note
T. Rowe Price Tax-Exempt Money Fund
Statement of Operations / Year Ended February 28, 1994
<TABLE>
<CAPTION>
Amounts in Thousands
<S> <C>
INVESTMENT INCOME
Interest income............................................ $18,349
Expenses
Investment management fees............................... $ 3,132
Shareholder servicing fees & expenses.................... 600
Custodian and accounting fees & expenses................. 206
Registration fees & expenses............................. 54
Prospectus & shareholder reports......................... 46
Legal & auditing fees.................................... 36
Directors' fees & expenses............................... 15
Miscellaneous............................................ 19
-------
Total expenses........................................... 4,108
-------
Net investment income...................................... 14,241
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss)
Net realized gain on securities.......................... 1,171
Change in unrealized appreciation or depreciation........ (713)
Net gain on investments.................................... 458
-------
INCREASE IN NET ASSETS FROM OPERATIONS..................... $14,699
=======
===========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
T. Rowe Price Tax-Exempt Money Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in Thousands
---------------------------------------
Year Ended Year Ended
Feb. 28, 1994 Feb. 28, 1993
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income.................................... $ 14,241 $ 17,610
Net realized gain on investments......................... 1,171 145
Change in unrealized appreciation or depreciation
of investments......................................... (713) 44
---------- ---------
Increase in net assets from operations................... 14,699 17,799
---------- ----------
Distributions to shareholders
Net investment income.................................... (14,241) (17,610)
---------- ----------
Capital share transactions ($1.00 per share)
Proceeds from sales of shares............................ 909,622 746,802
Distributions reinvested................................. 13,181 16,266
Payment for shares redeemed.............................. (886,060) (869,404)
---------- ----------
Increase (decrease) in net assets from capital
share transactions..................................... 36,743 (106,336)
---------- ----------
Total increase (decrease).................................. 37,201 (106,147)
NET ASSETS
Beginning of year........................................ 695,699 801,846
---------- ----------
End of year.............................................. $ 732,900 $ 695,699
========== ==========
</TABLE>
T. Rowe Price Tax-Exempt Money Fund
Notes to Financial Statements / February 28, 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Tax-Money Money Fund (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
A) Security valuation - Securities with more than 60 days remaining to maturity
are stated at fair value which is determined by using a matrix system that
establishes a value for each security based on money market yields. Securities
with remaining maturities of 60 days or less are valued at amortized cost.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by, or under the supervision of, the officers of the
Fund, as authorized by the Board of Directors.
B) Premiums and Discounts - Premiums on municipal securities are amortized for
both financial and tax reporting purposes. Discounts, other than original
issue, are not amortized for financial reporting purposes.
9
<PAGE>
C) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on an identified cost basis. Distributions to shareholders are
recorded by the Fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles.
D) Accounting Change - Effective as of the beginning of the year, the Fund
adopted a recently issued accounting standard related to shareholder
distributions. This change resulted in a reclassification to paid-in-capital of
permanent differences between tax and financial reporting of net investment
income and net realized gains/losses. The cumulative effect of this change as
of February 28, 1993, increased Accumulated net investment income - net of
distributions by $142,000, decreased Accumulated net realized gains/losses - net
of distributions by $64,000 and decreased Paid-in-capital by $78,000. The
results of operations, shareholder distributions and net assets were not
affected by this change.
NOTE 2 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the Fund intends to
continue to qualify as a regulated investment company and distribute all of its
income. The Fund has unused realized capital loss carryforwards for federal
income tax purposes of $266,000 at February 28, 1994, which expire in 1998.
At February 28, 1994, the aggregate cost of investments for federal income
tax and finan-cial reporting purposes was $732,231,000 and net unrealized
depreciation aggregated $115,000, of which $100,000 related to appreciated
investments and $215,000 to depreciated investments.
NOTE 3 - RELATED PARTY TRANSACTIONS
The investment management agreement between the Fund and T. Rowe Price
Associates, Inc. (the Manager) provides for an annual investment management fee,
computed daily and paid monthly, consisting of an Individual Fund Fee equal to
0.10% of average daily net assets and a Group Fee. The Group Fee is based on
the combined assets of certain mutual funds sponsored by the Manager or Rowe
Price-Fleming International, Inc. (the Group). The Group Fee rate ranges from
0.48% for the first $1 billion of assets to 0.31% for assets in excess of $34
billion. The effective annual Group Fee rate at February 28, 1994, was 0.34%,
and for the year then ended was 0.35%. The Fund pays a pro rata portion of the
Group Fee based on the ratio of the Fund's net assets to those of the Group.
T. Rowe Price Services, Inc. (TRPS) is a wholly owned subsidiary of the
Manager. TRPS provides transfer and dividend disbursing agent functions and
shareholder services for all accounts. The Manager, under a separate agreement,
calculates the daily share price and maintains the financial records of the
Fund. For the year ended February 28, 1994, the Fund incurred fees totalling
approximately $554,000 for these services provided by related parties. At
February 28, 1994, investment management and service fees payable were $292,000.
10
<PAGE>
T. Rowe Price Tax-Exempt Money Fund
Financial Highlights
<TABLE>
<CAPTION>
For a share outstanding throughout each year ended
----------------------------------------------------------------------------
Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 28,
1994 1993 1992 1991 1990
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment Activities
Net investment income........................ 0.020 0.023 0.036 0.051 0.057
Distributions
Net investment income........................ (0.020) (0.023) (0.036) (0.051) (0.057)
NET ASSET VALUE, END OF YEAR................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total Return................................... 2.05% 2.36% 3.69% 5.22% 5.87%
Ratio of Expenses to Average Net Assets........ 0.59% 0.60% 0.61% 0.60% 0.60%
Ratio of Net Investment Income
to Average Net Assets........................ 2.04% 2.35% 3.65% 5.12% 5.75%
Net Assets, End of Year (in thousands)......... $732,900 $695,699 $801,846 $977,638 $1,064,141
Number of Shareholder Accounts,
End of Year.................................. 19,000 19,000 21,000 23,000 24,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Directors of
T. Rowe Price Tax-Exempt Money Fund, Inc.
We have audited the accompanying statement of net assets of T. Rowe Price
Tax-Exempt Money Fund, Inc., as of February 28, 1994, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
February 28, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of T.
Rowe Price Tax-Exempt Money Fund, Inc., as of February 28, 1994, the results of
its operations, changes in its net assets and financial highlights for each of
the respective periods stated in the first paragraph in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND
Baltimore, Maryland
March 17, 1994
Officers and Directors
George J. Collins, Chairman
Patrice L. Berchtenbreiter, President
Calvin W. Burnett, Director
Anthony W. Deering, Director
F. Pierce Linaweaver, Director
William T. Reynolds, Vice President/Director
James S. Riepe, Vice President/Director
John Sagan, Director
John G. Schreiber, Director
Janet G. Albright, Vice President
Paul W. Boltz, Vice President
Michael P. Buckley, Vice President
Patricia S. Deford, Vice President
Charles O. Holland, Vice President
Henry H. Hopkins, Vice President
Mary J. Miller, Vice President
Alan P. Richman, Vice President
C. Stephen Wolfe II, Vice President
Lenora V. Hornung, Secretary
Carmen F. Deyesu, Treasurer
David S. Middleton, Controller
12
