<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Tax-Exempt Money Fund
February 29, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sector Diversification
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
Net Assets
----------
<S> <C>
Hospital Revenue 30%
Educational Revenue 14
General Obligation - Local 13
General Obligation - State 11
Industrial and Pollution
Control Revenue 9
Prerefunded Bonds 5
Nuclear Revenue 4
<CAPTION>
Percent of
Net Assets
----------
<S> <C>
Water and Sewer Revenue 3%
Air and Sea Transportation Revenue 3
Pooled Loan Revenue 2
Electric Revenue 2
Lease Revenue 2
Miscellaneous Revenue 1
Escrowed to Maturity 1
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Statement of Net Assets
T. Rowe Price Tax-Exempt Money Fund / February 29, 1996
- --------------------------------------------------------------------------------
(amounts in thousands)
<TABLE>
<CAPTION>
Amount Value
------- -------
<S> <C> <C>
ALABAMA -- 5.3%
Birmingham, GO, VRDN (Currently 3.375%)................................ $ 6,700 $ 6,700
VRDN (Currently 3.35%)............................................ 4,650 4,650
Jefferson County, GO, VRDN (Currently 3.35%)........................... 10,000 10,000
Jefferson County Sewer, RAW, VRDN (Currently 3.35%).................... 12,000 12,000
Montgomery, IDR, PCR, Solid Waste Disposal (General Electric), TECP,
3.30%, 5/21/96.................................................... 2,500 2,500
- ----------------------------------------------------------------------------------------------
ALASKA -- 0.1%
Anchorage, GO, (FGIC Insured), 8.125%, 6/1/11 (Prerefunded 6/1/96+).... 500 515
- ----------------------------------------------------------------------------------------------
ARIZONA -- 1.7%
Maricopa County, GO, TAN, 4.50%, 7/31/96............................... 5,800 5,812
Phoenix, GO, 5.375%, 7/1/96............................................ 500 503
Salt River Project, Agricultural Improvement and Power Dist.,
TECP, 3.25%, 5/14/96.............................................. 5,000 5,000
- ----------------------------------------------------------------------------------------------
</TABLE>
TEM RPTTEM 2/29/96
<PAGE>
<TABLE>
<CAPTION>
Amount Value
------- -------
<S> <C> <C>
ARKANSAS -- 1.5%
Arkansas Dev. Fin. Auth., Sisters of Mercy, VRDN (Currently 3.15%)..... $10,200 $10,200
- ----------------------------------------------------------------------------------------------
CALIFORNIA -- 3.1%
Oakland, COP, VRDN (Currently 3.40%)................................... 6,500 6,500
Pittsburg Redev. Agency, Los Medanos Community Dev.,
7.75%, 8/1/08 (Prerefunded 8/1/96+)............................... 3,540 3,663
Sacramento Municipal Utility Dist., Electric, (FGIC Insured),
6.625%, 2/1/17 (Prerefunded 2/1/97+).............................. 1,000 1,050
Sonoma County, GO, TRAN, 4.25%, 11/1/96................................ 10,000 10,026
- ----------------------------------------------------------------------------------------------
COLORADO -- 3.0%
Colorado HFA, Kaiser Permanente, VRDN (Currently 3.25%)................ 12,600 12,600
Sisters Of Charity, VRDN (Currently 3.25%)............................ 5,400 5,400
Denver, IDR, W. W. Grainger, VRDN (Currently 3.35%).................... 2,190 2,190
- ----------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 1.9%
Dist. of Columbia, American Univ., VRDN (Currently 3.30%).............. 12,990 12,990
- ----------------------------------------------------------------------------------------------
FLORIDA -- 1.2%
Florida Board of Ed., 6.90%, 6/1/97 (Prerefunded 6/1/96+).............. 500 514
7.10%, 6/1/99 (Prerefunded 6/1/96+)............................... 2,000 2,058
Orange County IDA, W. W. Grainger, VRDN (Currently 3.35%).............. 1,185 1,185
Sunshine State Gov't. Fin. Commission, TECP, 3.20%, 4/9 - 4/11/96...... 4,600 4,600
- ----------------------------------------------------------------------------------------------
GEORGIA -- 2.6%
Atlanta, 7.50%, 12/1/08 (Prerefunded 12/1/96+)......................... 810 851
Burke County Dev. Auth., PCR, Oglethorpe Power, (FGIC Insured),
VRDN (Currently 3.05%)............................................ 6,500 6,500
Fulton County Building Auth., Judicial Center Fac., 8.20%, 1/1/15
(Prerefunded 1/1/97+)............................................. 1,370 1,452
Georgia, GO, 6.70%, 9/1/96............................................. 3,000 3,048
6.50%, 12/1/96.................................................... 1,100 1,127
6.75%, 9/1/99 (Prerefunded 9/1/96+)............................... 1,000 1,036
Georgia Municipal Electric Auth., 7.90%, 1/1/01 (Prerefunded 1/1/97+).. 2,000 2,109
Georgia Tech Foundation Fac. Auth., Wardlaw Project,
VRDN (Currently 3.25%)............................................ 1,700 1,700
- ----------------------------------------------------------------------------------------------
HAWAII -- 0.2%
Hawaii, GO, 6.45%, 6/1/96.............................................. 1,300 1,310
Honolulu City and County, GO, 6.90%, 10/1/96 (Escrowed to Maturity).... 300 305
- ----------------------------------------------------------------------------------------------
IDAHO -- 1.3%
Idaho, GO, TAN, 4.50%, 6/27/96......................................... 5,000 5,017
Idaho HFA, St. Luke's Regional Med. Center, VRDN (Currently 3.40%)..... 3,500 3,500
- ----------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Amount Value
------- -------
<S> <C> <C>
ILLINOIS -- 12.8%
Chicago, GO, 3.10%, 2/4/97............................................. $ 8,300 $ 8,300
Chicago Public Building Commission, (FGIC Insured),
7.45%, 1/1/97 (Escrowed to Maturity).............................. 1,200 1,238
Chicago School Fin. Auth., 7.625%, 6/1/05 (Prerefunded 6/1/96+)........ 800 824
Illinois, 7.60%, 6/1/03 (Prerefunded 6/1/96+).......................... 500 515
GO, (FGIC Insured), 5.125%, 12/1/96............................... 14,500 14,649
Illinois Dev. Fin. Auth., Palos Community Hosp.,
VRDN (Currently 3.25%)............................................ 18,400 18,400
Illinois EFA, Northwestern Univ., VRDN (Currently 3.30%)............... 14,900 14,900
VRDN (Currently 4.125%)........................................... 1,500 1,500
Illinois HFA, Children's Memorial Hosp., VRDN (Currently 3.25%)........ 9,200 9,200
Grant Hosp., 7.50%, 6/1/13 (Prerefunded 12/1/96+)..................... 2,500 2,626
Resurrection Health Care Systems, VRDN (Currently 3.50%).............. 1,400 1,400
Univ. of Chicago Hosp., (MBIA Insured), VRDN (Currently 3.25%)........ 12,400 12,400
Niles Village, IDR, W. W. Grainger, VRDN (Currently 3.35%)............. 1,000 1,000
- ----------------------------------------------------------------------------------------------
INDIANA -- 0.8%
Gary, IDR, W. W. Grainger, VRDN (Currently 3.35%)...................... 730 730
Indiana HFFA, Daughters of Charity, VRDN (Currently 3.20%)............. 3,700 3,700
Mount Vernon, PCR, General Electric, TECP, 3.30%, 5/23/96.............. 1,000 1,000
- ----------------------------------------------------------------------------------------------
KENTUCKY -- 0.2%
Kentucky Turnpike Auth., Economic Dev., 7.60%, 1/1/99
(Prerefunded 7/1/96+)............................................... 1,150 1,187
7.875%, 7/1/04 (Prerefunded 7/1/96+).............................. 500 517
- ----------------------------------------------------------------------------------------------
LOUISIANA -- 3.6%
Louisiana PFA, Willis Knighton Medical Center, (AMBAC Insured),
VRDN (Currently 3.25%)............................................ 12,700 12,700
New Orleans Aviation Board, (MBIA Insured), VRDN (Currently 3.20%)..... 11,600 11,600
- ----------------------------------------------------------------------------------------------
MARYLAND -- 8.2%
Baltimore County, 7.00%, 8/1/99 (Prerefunded 8/1/96+).................. 1,000 1,035
GO, TECP, BAN, 3.35%, 4/2/96...................................... 5,000 5,000
Sheppard and Enoch Pratt Hosp. Fac., VRDN (Currently 3.25%)........... 6,900 6,900
Carroll County, County Commissioners, Consolidated Public
Improvement, GO, 4.45%, 11/1/96....................................... 1,000 1,004
Frederick County, Sheppard Pratt Residential, VRDN (Currently 3.25%)... 2,000 2,000
Howard County, GO, TECP, BAN, 3.30%, 3/25/96........................... 5,000 5,000
Maryland HHEFA, Johns Hopkins Univ., 6.20%, 7/1/96..................... 10,255 10,256
Pooled Loan Program, VRDN (Currently 3.25%)........................... 8,500 8,500
Montgomery County, GO, TECP, BAN, 3.30 - 3.55%, 3/7 - 4/12/96.......... 7,200 7,200
Consolidated Public Improvement, GO, 5.20%, 10/1/96................... 1,000 1,010
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Amount Value
------- -------
<S> <C> <C>
Montgomery County Economic Dev., Howard Hughes Medical Fac.,
VRDN (Currently 3.20%)............................................ $ 5,000 $ 5,000
Univ. of Maryland, Various Equipment Loan Program,
VRDN (Currently 3.15%)............................................ 1,400 1,400
Washington Suburban Sanitation Dist., General Construction, GO,
7.375%, 1/1/07 (Prerefunded 1/1/97+).............................. 1,200 1,264
- ----------------------------------------------------------------------------------------------
MASSACHUSETTS -- 0.2%
Massachusetts HEFA, Harvard Univ., TECP, 3.30%, 3/27/96................ 1,300 1,300
- ----------------------------------------------------------------------------------------------
MICHIGAN -- 2.8%
Michigan, GO, TAN, 4.00%, 9/30/96...................................... 15,000 15,086
Univ. of Michigan Hosp., VRDN (Currently 3.45%)........................ 3,700 3,700
- ----------------------------------------------------------------------------------------------
MINNESOTA -- 2.8%
Becker, PCR, Northern States Power Co., TECP, 3.35%, 5/22/96........... 3,000 3,000
Cottage Grove, PCR, Minnesota Mining and Mfg., VRDN (Currently 3.62%).. 2,000 2,000
Rochester Health Care Fac., Mayo Medical Center,
VRDN (Currently 3.40%)............................................ 10,400 10,400
Univ. of Minnesota, 3.25%, 8/1/96...................................... 2,400 2,400
TECP, 3.35%, 5/23/96.............................................. 1,250 1,250
- ----------------------------------------------------------------------------------------------
MISSISSIPPI -- 0.2%
Rankin County, PCR, Siemens Energy and Automation,
VRDN (Currently 3.30%)............................................ 1,600 1,600
- ----------------------------------------------------------------------------------------------
MISSOURI -- 3.6%
Missouri Environmental Improvement & Energy Resources Auth.,
Union Electric, TECP, 3.35%, 4/4 - 4/8/96............................ 10,000 10,000
Missouri HEFA, Sisters Of Mercy, 3.60%, 12/1/96........................ 750 750
SSM Health Care, (MBIA Insured), VRDN (Currently 3.30%).............. 11,300 11,300
Washington Univ., VRDN (Currently 3.40%)............................. 2,500 2,500
- ----------------------------------------------------------------------------------------------
NEW HAMPSHIRE -- 0.5%
New Hampshire HHEFA, Dartmouth Ed. Loan Corp., 4.10%, 6/1/96........... 3,250 3,250
- ----------------------------------------------------------------------------------------------
NEW MEXICO -- 0.4%
Albuquerque, VRDN (Currently 3.25%).................................... 3,000 3,000
- ----------------------------------------------------------------------------------------------
NEW YORK -- 1.8%
Connetquot Central School Dist., Suffolk County, GO, TAN, 4.50%, 6/27/96 3,900 3,907
Copiague Union Free School Dist., GO, TAN, 4.50%, 6/28/96.............. 3,000 3,005
Great Neck Union Free School Dist., GO, TAN, 4.50%, 6/28/96............ 2,500 2,505
- ----------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Amount Value
------- -------
<S> <C> <C>
New York City, GO, RAN, 4.50%, 4/11/96................................. $ 1,000 $ 1,001
West Islip Union Free School Dist., GO, TAN, 4.50%, 6/27/96............ 2,000 2,003
- ----------------------------------------------------------------------------------------------
NORTH CAROLINA -- 1.2%
North Carolina Eastern Municipal Power Agency, 7.50%, 1/1/15
(Prerefunded 1/1/97+).............................................. 5,705 6,019
North Carolina EFA, Bowman Gray School of Medicine,
VRDN (Currently 3.25%)............................................. 1,950 1,950
Winston Salem, GO, COP, VRDN (Currently 3.30%)......................... 500 500
- ----------------------------------------------------------------------------------------------
OHIO -- 0.8%
Akron, Sanitary Sewer System, VRDN (Currently 3.35%)................... 500 500
Cleveland - Cuyahoga County Port Auth., Rock and Roll Hall of Fame
Museum, VRDN (Currently 3.35%)....................................... 2,000 2,000
Erie County, Firelands Community Hosp., 8.875%, 1/1/15
(Prerefunded 1/1/97+).............................................. 1,060 1,117
Ohio Public Fac. Commission, Mental Health, (MBIA Insured),
4.50%, 12/1/96................................................... 1,900 1,918
- ----------------------------------------------------------------------------------------------
PENNSYLVANIA -- 0.2%
Montgomery County, IDA, W. W. Grainger, VRDN (Currently 3.35%)......... 1,230 1,230
- ----------------------------------------------------------------------------------------------
SOUTH CAROLINA -- 1.1%
South Carolina Public Service Auth., 8.00%, 7/1/19
(Prerefunded 7/1/96+).............................................. 1,000 1,043
Spartanburg County, Siemens Energy and Automation,
VRDN (Currently 3.30%)........................................... 6,400 6,400
- ----------------------------------------------------------------------------------------------
SOUTH DAKOTA -- 1.5%
South Dakota HEFA, Sioux Valley Hosp., VRDN (Currently 3.35%).......... 10,200 10,200
- ----------------------------------------------------------------------------------------------
TENNESSEE -- 4.3%
Metropolitan Gov't. of Nashville and Davidson County, Vanderbilt Univ.,
(FGIC Insured), 4.35%, 5/1/96...................................... 2,250 2,250
3.50%, 1/15/97................................................... 10,000 10,000
Tennessee, GO, BAN, VRDN (Currently 3.25%)............................. 17,000 17,000
- ----------------------------------------------------------------------------------------------
TEXAS -- 21.2%
Dallas County Community College Dist., VRDN (Currently 3.35%).......... 19,200 19,200
Gulf Coast Waste Disposal Auth., Amoco Corp., 3.75%, 3/1/96............ 7,000 7,000
Harris County, Toll Road, GO, VRDN (Currently 3.15%)................... 800 800
Harris County Health Fac. Dev. Corp., Methodist Hosp.,
VRDN (Currently 3.45%).......................................... 21,600 21,600
Sisters of Charity of the Incarnate Word, TECP,
3.20 - 3.30%, 3/12 - 5/9/96..................................... 18,400 18,400
St. Luke's Episcopal Hosp., VRDN (Currently 3.45%).................... 22,400 22,400
- ----------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Amount Value
------- -------
<S> <C> <C>
Harris County IDC, Lubrizol Corp., VRDN (Currently 3.25%).............. $10,400 $10,400
Houston, GO, 5.50%, 4/1/96............................................. 1,000 1,001
GO, TECP, 3.25 - 3.30%, 4/4 - 5/10/96............................. 6,000 6,000
Houston Water and Sewer System, 6.60%, 12/1/99
(Prerefunded 12/1/96+).............................................. 1,000 1,045
(BIGI Insured), 8.10%, 12/1/09 (Prerefunded 12/1/96+)............... 2,000 2,105
Midland, IDC, W. W. Grainger, VRDN (Currently 3.35%)................... 775 775
North Central Texas, Kaiser Permenente, VRDN (Currently 3.30%)......... 3,400 3,400
Plano Independent School Dist., GO, (FGIC Insured),
8.625%, 2/15/97 (Escrowed to Maturity)........................... 2,100 2,200
Texas, GO, TRAN, 4.75%, 8/30/96........................................ 13,500 13,546
Univ. of Texas Board of Regents, TECP, 3.15%, 5/24/96.................. 4,088 4,088
Westside Calhoun County Dev. Corp., Sohio Chemical,
VRDN (Currently 3.45%)........................................... 9,800 9,800
- ----------------------------------------------------------------------------------------------
VERMONT -- 0.4%
Vermont Ed. and Health Buildings Fin. Agency, Middlebury College,
4.35%, 5/1/96.................................................... 3,000 3,000
- ----------------------------------------------------------------------------------------------
VIRGINIA -- 3.1%
Big Stone Gap Redev. and Housing, Wallens Ridge Dev., 4.25%, 9/1/96.... 2,815 2,818
Fairfax County IDA, Inova Health System, VRDN (Currently 3.40%)........ 1,100 1,100
Hampton Roads Sanitation Dist., 6.30%, 7/1/02 (Prerefunded 7/1/96+).... 1,000 1,029
Peninsula Ports Auth., Shell Oil, VRDN (Currently 3.40%)............... 5,100 5,100
Rockingham County IDA, Merck and Company, VRDN
(Currently 3.40%).................................................. 2,400 2,400
Univ. of Virginia, VRDN (Currently 3.40%).............................. 4,500 4,500
Virginia, GO, TECP, 3.35%, 5/17/96..................................... 4,000 4,000
- ----------------------------------------------------------------------------------------------
WASHINGTON -- 2.6%
Municipality of Metropolitan Seattle, Limited Sales Tax, GO,
7.20%, 1/1/20 (Prerefunded 1/1/97+).............................. 2,630 2,758
Port of Seattle, GO, VRDN (Currently 3.30%)............................ 5,900 5,900
Seattle, Water Systems, VRDN (Currently 3.30%)......................... 8,000 8,000
Washington, GO, TAN, 7.40%, 9/1/97 (Prerefunded 9/1/96+)............... 1,000 1,017
- ----------------------------------------------------------------------------------------------
WEST VIRGINIA -- 0.9%
Marshall County, PCR, Mountaineer Carbon Company,
VRDN (Currently 3.45%)........................................... 6,000 6,000
- ----------------------------------------------------------------------------------------------
WISCONSIN -- 0.3%
Milwaukee, GO, 7.70%, 12/1/96.......................................... 1,330 1,373
Oak Creek, Wisconsin Electric Power Co., VRDN (Currently 3.40%)........ 500 500
- ----------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Amount Value
------- -------
<S> <C> <C>
WYOMING -- 2.2%
Converse County, PCR, Pacificorp, (AMBAC Insured),
VRDN (Currently 3.55%)............................................ $ 1,000 $1,000
TECP, 3.75%, 3/7/96............................................... 6,485 6,485
Lincoln County, PCR, Pacificorp, (AMBAC Insured),
VRDN (Currently 3.55%)............................................ 3,100 3,100
Sweetwater County, PCR, Pacificorp, (AMBAC Insured),
VRDN (Currently 3.55%)............................................ 1,760 1,760
Uinta County, PCR, Amoco, 3.98%, 12/1/96............................... 2,500 2,503
- ----------------------------------------------------------------------------------------------
Total Investments in Securities -- 99.6% of Net Assets (Cost $676,753) 676,753
- ----------------------------------------------------------------------------------------------
Other Assets Less Liabilities.......................................... 2,390
--------
<CAPTION>
Net Assets Consist of: Value
---------
Accumulated net investment income - net of distributions............... $ 142
Accumulated net realized gain/loss - net of distributions.............. (189)
Paid-in-capital applicable to 679,266,022 shares of $0.01 par
value capital stock outstanding; 5,000,000,000 shares authorized... 679,190
---------
NET ASSETS............................................................. $679,143
========
NET ASSET VALUE PER SHARE.............................................. $1.00
=====
- ----------------------------------------------------------------------------------------------
</TABLE>
+ Used in determining portfolio maturity
AMBAC AMBAC Indemnity Corp.
BAN Bond Anticipation Note
BIGI Bond Investors Guaranty Insurance
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 Financing Authority
HHEFA Health & Higher Educational Facility Authority
IDA Industrial Development Authority
IDC Industrial Development Corp.
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance Corp.
PCR Pollution Control Revenue
PFA Public Facility Authority
RAN Revenue Anticipation Note
RAW Revenue Anticipation Warrant
TAN Tax Anticipation Note
TECP Tax-Exempt Commercial Paper
TRAN Tax Revenue Anticipation Note
VRDN Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
T. Rowe Price Tax-Exempt Money Fund / Year Ended February 29, 1996
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income.................................................. $26,584
-------
Expenses
Investment management........................................... 2,993
Shareholder servicing........................................... 509
Custody and accounting.......................................... 189
Registration.................................................... 49
Prospectus and shareholder reports.............................. 46
Legal and audit................................................. 32
Directors....................................................... 12
Miscellaneous................................................... 14
-------
Total expenses.................................................. 3,844
-------
Net investment income............................................ 22,740
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on securities........................... 56
Change in net unrealized gain or loss on securities.............. 92
-------
Net realized and unrealized gain (loss).......................... 148
-------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................ $22,888
=======
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
T. Rowe Price Tax-Exempt Money Fund
(in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended
Feb. 29, 1996 Feb. 28, 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income................................................. $ 22,740 $ 19,513
Net realized gain (loss).............................................. 56 22
Change in net unrealized gain or loss................................. 92 24
--------- ---------
Increase (decrease) in net assets from operations..................... 22,888 19,559
--------- ---------
Distributions to shareholders
Net investment income................................................. (22,740) (19,513)
--------- ---------
Capital share transactions*
Shares sold........................................................... 665,684 852,803
Distributions reinvested.............................................. 21,267 18,088
Shares redeemed....................................................... (694,978) (916,815)
--------- ---------
Increase (decrease) in net assets from capital share transactions..... (8,027) (45,924)
--------- ---------
Increase (decrease) in net assets...................................... (7,879) (45,878)
NET ASSETS
Beginning of period.................................................... 687,022 732,900
--------- ---------
End of period.......................................................... $ 679,143 $ 687,022
========= =========
- --------------------------------------------------------------------------------------------------------
*Share information
Shares sold........................................................... 665,684 852,803
Distributions reinvested.............................................. 21,267 18,088
Shares redeemed....................................................... (694,978) (916,815)
--------- ---------
Increase (decrease) in shares outstanding............................. (8,027) (45,924)
========= =========
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
- --------------------------------------------------------------------------------
Notes To Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price Tax-Exempt Money Fund / February 29, 1996
Note 1 - Significant Accounting Policies
T. Rowe Price Tax-Exempt Money Fund, Inc. (the fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company.
A) Valuation - Securities are valued at amortized cost. Assets and liabilities
for which such valuation procedures 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 and original issue discounts on municipal
securities are amortized for both financial reporting and tax purposes. Market
discounts are recognized upon disposition of the security as gain or loss for
financial reporting purposes and as ordinary income for tax purposes.
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 the 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
and may differ from those determined in accordance with generally accepted
accounting principles.
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 $183,000 which expire in 1998. Capital loss
carryforwards utilized in fiscal 1996 amounted to $61,000. The fund intends to
retain gains realized in future periods that may be offset by available capital
loss carryforwards.
At February 29, 1996, the aggregate cost of investments for federal income tax
and financial reporting purposes was $676,753,000.
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,
of which $227,000 was payable at February 29, 1996. The fee is computed daily
and paid monthly, and consists 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.
At February 29, 1996, and for the year then ended, the effective annual Group
Fee rate was 0.33% and 0.34%, respectively. The fund pays a pro rata share of
the Group Fee based on the ratio of its net assets to those of the Group.
In addition, the fund has entered into agreements with the Manager and a
wholly owned subsidiary of the Manager, pursuant to which the fund receives
certain other services. The Manager computes the daily share price and
maintains the financial records of the fund. T. Rowe Price Services, Inc., is
the fund's transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. The fund incurred expenses pursuant to
these related party agreements totaling approximately $500,000 for the year
ended February 29, 1996, of which $44,000 was payable at period-end.
10
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------
T. Rowe Price Tax-Exempt Money Fund
<TABLE>
<CAPTION>
For a share outstanding throughout each period
--------------------------------------------------------
Year Ended
--------------------------------------------------------
Feb. 29, Feb. 28, Feb. 28, Feb. 28, Feb. 29,
1996 1995 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------
Investment activities
Net investment income................... 0.033 0.026 0.020 0.023 0.036
Distributions
Net investment income................... (0.033) (0.026) (0.020) (0.023) (0.036)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR............. $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
- ------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total return............................. 3.38% 2.63% 2.05% 2.36% 3.69%
Ratio of expenses to average net assets.. 0.56% 0.58% 0.59% 0.60% 0.61%
Ratio of net investment income
to average net assets................... 3.33% 2.59% 2.04% 2.35% 3.65%
Net assets, end of year (in thousands)... $679,143 $687,022 $732,900 $695,699 $801,846
- ------------------------------------------------------------------------------------------------------
</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 29, 1996, 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 29, 1996, 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 29, 1996, the results of
its operations, the 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 L.L.P.
Baltimore, Maryland
March 19, 1996
12
<PAGE>
- --------------------------------------------------------------------------------
Fellow Shareholders
- --------------------------------------------------------------------------------
The fiscal year ended February 29, 1996, was a banner year for bonds and the
funds that invest in them. Prices rose as yields fell through much of the year,
generating good returns for investors in fixed income securities. We were
pleased that all the T. Rowe Price municipal funds discussed here outperformed
their peer group averages over the entire fiscal year.
Market Environment
The economy slowed in 1995, and the rate of inflation remained moderate. After
tightening monetary policy in 1994 and early 1995, the Federal Reserve reversed
course when it became clear that the economy was running out of steam. Since
July, the Fed has lowered the key federal funds rate three times, from 6% to
5.25% at the end of the fiscal year.
Against a background of slower growth, moderate inflation, and apparent
progress on reducing the federal budget deficit, bond yields tumbled. The
30-year Treasury yield, nearly 7.5% a year ago, fell briefly below 6% in late
December. At fiscal year-end, the long bond yield had edged back up to 6.5%, as
efforts to come up with deficit reduction
- --------------------------------------------------------------------------------
Municipal Bond and Note Yields
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
Source: T. Rowe Price Associates
legislation flagged in early 1996. Signs that stronger economic growth might
resume in 1996 also contributed to recent uneasiness in the bond market.
After moving only slightly lower during the first half of the fiscal year
ended February 29, long-term municipal yields fell further in the second half.
Thirty-year prime general obligation (GO) bonds yielded 5.95% on February 28,
1995, and on August 31 were only 10 basis points lower (100 basis points equal
one percent). During the most recent six months, prices rose further as yields
dropped an additional 45 basis points to 5.40%.
Municipal bonds with short maturities followed a different pattern as their
yields fell more in the first half of the year than in the second. After falling
70 basis points to 4.30% on August 31, the yield of five-year prime GO bonds
fell only 10 basis points more by February 29, 1996. The net result was a lower
and steeper yield curve that led to significant price appreciation from 1994's
lows.
New issuance of municipal bonds hit a five-year low in 1995 -- 3% below 1994's
levels. Light supply for the second year in a row would have been more of a
problem if demand had not also been soft due to strong stock market returns and
tax reform discussions. Although new supply declined overall, the use of bond
insurance grew, and insured bonds constituted 43% of newly issued securities.
Bond insurers were willing to insure new issues as well as bonds in the
secondary market at a fairly low cost.
Tax-Exempt Money Fund
Short-term rates fell during the past year, with six-month to one-year yields
declining further than yields on shorter maturities. Compared with year-ago
levels, one- to seven-day yields were 50 to 70 basis points lower, while the
longer yields were 100 to 130 basis points lower. This led to a flattening in
the money
<PAGE>
market yield curve, meaning that longer maturities did not offer significantly
higher yields than short maturities (occasionally, long yields were actually
lower).
In this environment, we adopted a "barbell" strategy, concentrating
investments at both ends of the money market maturity range. The longer
maturities enabled us to lock in yields that we believed would move lower as the
Federal Reserve continued to reduce interest rates, while the short-maturity
holdings provided a high level of income considering their low level of risk.
Another indication of the remarkable shift in the yield curve was the average
spread between overnight and one-year yields -- a meager 13 basis points over
the past 12 months versus 121 basis points during the preceding 12-month period.
The yields on short-term tax-exempt issues remained relatively low compared
with the yields on their taxable counterparts, making them attractive only to
those in the highest tax brackets. Nevertheless, assets in all tax-exempt money
funds grew a robust 16% to $134 billion over the year.
Our barbell strategy, plus our lengthening weighted average maturity in recent
months, enabled your fund to outperform its peer group average during the 6- and
12-month periods ended February 29.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/29/96
6 Months 12 Months
-------- ---------
<S> <C> <C>
Tax-Exempt Money Fund 1.62% 3.38%
IBC/Donoghue Money Fund
Report Average* 1.58 3.31
- ------------------------------------------------------------------------------
</TABLE>
*Stockholder and General Purpose Funds
Tax-Free Short-Intermediate Fund
For most of the past six months, your fund sought to maintain an aggressive
posture on weighted average maturity. The combination of a weak economic
environment and prospects for federal deficit reduction enhanced the possibility
that the Federal Reserve would loosen monetary policy by lowering the fed funds
rate.
In an effort to benefit from this anticipated move, we gradually lengthened
the fund's weighted average maturity from 3.0 years at the beginning of
September to as long as 3.8 years in January. As yields fell to extremely low
levels in January and budget negotiations stalled in Washington, we began to
shorten maturities. By fiscal year-end, the weighted average maturity declined
to 3.6 years.
This strategy allowed the fund to provide solid returns and outperform its
peer group average during both the 6- and 12-month periods ended February 29.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/29/96
6 Months 12 Months
-------- ---------
<S> <C> <C>
Tax-Free Short-Intermediate
Fund 2.95% 6.87%
Lipper Short-Intermediate
Debt Funds Average 2.67 6.79
- ------------------------------------------------------------------------------
</TABLE>
Tax-Free Insured Intermediate Bond Fund
Our strategy was similar to that of the Tax-Free Short-Intermediate Fund for the
reasons outlined there. We began the six-month period with a shorter duration (a
measure of a bond fund's price sensitivity to changes in interest rates) than
our more aggressive posture at the end of May. As we moved through the final
months of 1995, we reversed course and began to lengthen from 5.4 years at the
end of August to a high of 5.7 years in January.
Another component of our strategy entailed taking advantage of supply and
demand imbalances. Relative values in the municipal market are dictated to a
great extent by the supply of new issues. Bond values rise in states with low
supply and decline in states where supply is abundant. We adopted a strategy of
rotating out of low supply states into high supply states to take advantage of
the lower prices. For example, during the last six months, we sold bonds issued
in Florida and California and replaced them with New York
2
<PAGE>
and Georgia securities, which allowed us to increase the fund's return without
assuming additional interest rate risk.
This overall strategy resulted in strong returns that surpassed our peer group
average for both periods shown below.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/29/96
6 Months 12 Months
-------- ---------
<S> <C> <C>
Tax-Free Insured
Intermediate Bond Fund 3.77% 9.57%
Lipper Intermediate Municipal
Debt Funds Average 3.72 8.97
- ------------------------------------------------------------------------------
</TABLE>
Tax-Free Income Fund
Given the sluggish economic environment that persisted over most of the last 12
months, we maintained a modestly aggressive posture throughout the year. Our
relatively long market profile was reflected by a duration of 7.5 years or
higher and a weighted average maturity in the range of 18 to 19 years. We also
focused on buying individual bonds with the potential for significant price
appreciation. Our sizable positions in noncallable and discount bonds, typically
the best performing structures in falling rate environments, contributed to our
aggressive posture.
From the credit perspective, our strategy focused on minimizing exposure to
areas our analysts perceived as vulnerable. For example, we identified the
electric utility sector as one that would be susceptible to proposed legislative
and regulatory changes. This proved to be the case, as many credits were
downgraded by the rating agencies. Insured bonds also played an important role
in our portfolio last year. The heavy issuance of insured bonds, discussed
earlier, provided an opportunity to pick up additional safety at relatively low
cost.
The fund provided excellent returns over the last six months and the fiscal
year, outperforming the average for similar funds by about the same margin in
each period.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/29/96
6 Months 12 Months
-------- ---------
<S> <C> <C>
Tax-Free Income Fund 5.44% 10.31%
Lipper General Municipal
Debt Funds Average 4.99 9.87
- ------------------------------------------------------------------------------
</TABLE>
The fund is still positioned somewhat aggressively, but we are looking for
opportunities to reduce its duration and weighted average maturity. A more
positive outlook on the economy and continued prospects of anemic cash flows to
bond funds merit a neutral to slightly defensive posture. Additionally, we plan
to sell some of the noncallable and discount bonds that performed so well last
year and replace them with bonds whose income we expect to be the dominant
component of returns.
Tax-Free High Yield Fund
The municipal high yield market enjoyed a solid comeback last year, recovering
nicely from the beating it took in 1994. Your fund began the year with a neutral
market stance and a relatively low concentration in below investment-grade
securities. Over the following months, and particularly in the first half of the
year, we lengthened duration slightly. For much of calendar 1995, the fund
maintained a duration of 7.2 to 7.5 years and a weighted average maturity of
about 20 years. Cash reserves averaged between 4% and 6% of assets. Late in the
year, duration drifted to a more neutral stance of 7.0 to 7.2 years, ending the
fiscal year at 7.2 years.
Additionally, the bond market decline of 1994 increased the yield spread
between higher- and lower-quality securities, providing us with an opportunity
to increase your fund's below investment-grade holdings from 24% to 27% of net
assets. Much of this move occurred during the first half of the year. We believe
this worked out well for three reasons. First, it provided the opportunity to
lock in attractive yields while taking reasonable credit risk.
3
<PAGE>
Second, credit quality spreads narrowed significantly as the market rallied
through the year. This meant that, on average, lower-quality bonds enjoyed
larger relative price gains. Third, the move entailed only a slight diminution
of your fund's overall credit quality. As always, we sought to maximize
diversification when buying lower-quality bonds.
Your fund outperformed its peer group over the fiscal year and slightly lagged
it during the most recent six-month period. The fund has exceeded the average
performance of other tax-free high yield funds, measured by the benchmark shown
below, for the past eight fiscal years and for nine of its 11 complete fiscal
years.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/29/96
6 Months 12 Months
-------- ---------
<S> <C> <C>
Tax-Free High Yield Fund 4.98% 10.62%
Lipper High Yield Municipal
Debt Funds Average 5.15 10.18
- ------------------------------------------------------------------------------
</TABLE>
At this time we have adopted a more cautious stance for the fund amid signs
that economic growth could be picking up. We scaled back our purchases of
lower-quality bonds, as mentioned. Credit quality spreads have narrowed
significantly, particularly during the second half of 1995, due to modest
issuance and continued strong demand. At present, the fund's average credit
quality stands at BBB+ with no material change currently anticipated.
Outlook
The municipal market paid substantial attention to the topic of tax reform last
year. Concerns that proposed revisions to the tax code would be detrimental to
municipal bonds kept municipal securities from performing quite as well as
taxable alternatives. As we anticipated, these fears have lessened somewhat as
tax reform discussions have faded from prominence. Municipals have already
recaptured some of the ground lost to taxable bonds, which we attribute to
reduced worries about the impact of tax reform.
The unusually fierce weather this winter, as well as the partial government
shutdowns, tended to delay and distort many recent economic statistics, but it
looks as though the economy is on track for a year of moderate growth. This
should be enough to keep the unemployment rate in its current zone without
significantly exacerbating inflationary pressures. This March the economic
upturn completed its fifth year, making it one of the longest peacetime
expansions on record, but still without signs of an impending recession.
Further easing by the Federal Reserve may be slow in coming, since the Fed is
concerned about the risk of fueling inflationary pressures when the economy has
only limited margins of excess capacity. The prospects for sharp deficit
reduction and the moderate inflation outlook that gave the bond market
confidence last year are not as compelling so far in 1996. Consequently, we
expect the bulk of returns this year to come from coupon income rather than
capital appreciation.
Respectfully submitted,
/s/ William T. Reynolds
William T. Reynolds
Director
Fixed Income Division
/s/ Mary J. Miller
Mary J. Miller
Director
Municipal Bond Department
March 20, 1996
4
<PAGE>
- --------------------------------------------------------------------------------
Financial Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value Dividend Per Share* Dividend Yield**
Per Share 6 Months Ended 6 Months Ended
8/31/95 2/29/96 8/31/95 2/29/96 8/31/95 2/29/96
------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Tax-Exempt Money $ 1.00 $ 1.00 $0.017 $0.016 3.26% 2.95%
Tax-Free Short-Intermediate 5.33 5.37 0.12 0.11 4.46 4.38
Tax-Free Insured Intermediate Bond 10.68 10.84 0.24 0.24 4.62 4.48
Tax-Free Income 9.41 9.66 0.26 0.26 5.63 5.45
Tax-Free High Yield 11.87 12.10 0.36 0.36 6.26 6.00
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Taxability of dividends: 100% of the dividends paid for the 12 months ended
2/29/96 were exempt from federal income tax.
** 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.
Tax-Exempt Money reports a seven-day compound yield.
- --------------------------------------------------------------------------------
Quality Diversification
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quality Ratings* Weighted Average Quality*
1 2 3 4 5-10 8/31/95 2/29/96
--------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Tax-Exempt Money 13% 87% -- -- -- 1.9 1.9
Tax-Free Short-Intermediate 41 35 20% 4% -- 1.8 1.9
Tax-Free Insured Intermediate Bond 21 66 13 -- -- 1.8 1.9
Tax-Free Income 10 50 25 12 3% 2.4 2.4
Tax-Free High Yield 4 21 16 32 27 3.7 3.6
- ---------------------------------------------------------------------------------------------------
</TABLE>
* On a T. Rowe Price scale of 1 to 10, with Grade 1 representing highest
quality.
- --------------------------------------------------------------------------------
Performance Comparison -- Tax-Exempt Money Fund
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
As of
2/29/96
-----------
<S> <C>
Tax-Exempt Money Fund $14,659
Lipper Tax-Exempt Money $14,593
Market Funds Average
</TABLE>
Note: The index return does not reflect expenses, which have been deducted from
the fund's return.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Duration and Maturity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Effective Duration (years) Maturity (years)
8/31/95 2/29/96 8/31/95 2/29/96
-------------------------- -------------------------
<S> <C> <C> <C> <C>
Tax-Exempt Money -- -- 55* 65*
Tax-Free Short-Intermediate 2.5 3.0 3.0 3.6
Tax-Free Insured Intermediate Bond 5.4 5.5 7.2 7.2
Tax-Free Income 7.8 8.3 18.1 18.1
Tax-Free High Yield 7.3 7.2 20.1 20.0
- ----------------------------------------------------------------------------------------------
</TABLE>
* Maturity is in days.
- --------------------------------------------------------------------------------
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 2/29/96
1 Year 5 Years 10 Years or Since Inception
--------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Exempt Money 3.38% 2.82% 3.90%
Tax-Free Short-Intermediate 6.87 5.52 5.27
Tax-Free Insured Intermediate Bond 9.57 -- -- 7.57% (11/92)
Tax-Free Income 10.31 8.46 7.21
Tax-Free High Yield 10.62 8.69 8.46
- -----------------------------------------------------------------------------------------
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
- ------------------------------------------
Performance Comparison --
Tax-Free Insured Intermediate Bond Fund
- ------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
As of
2/29/96
-----------
<S> <C>
Tax-Free Insured $12,672
Intermediate Bond Fund
Lehman 7-Year GO $12,460
Bond Index
</TABLE>
Note: The index return does not reflect
expenses, which have been deducted from
the fund's return.
- ------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Performance Comparison -- Tax-Free Short-Intermediate Fund
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
As of
2/29/96
-----------
<S> <C>
Tax-Free Short-Intermediate Fund $17,193
Lehman 3-Year GO Bond Index $18,355
</TABLE>
Note: The index return does not reflect expenses, which have been deducted from
the fund's return.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Performance Comparison -- Tax-Free Income Fund
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
As of
2/29/96
-----------
<S> <C>
Tax-Free Income Fund $20,054
Lehman Municipal Bond Index $22,001
</TABLE>
Note: The index return does not reflect expenses, which have been deducted from
the fund's return.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Performance Comparison -- Tax-Free High Yield Fund
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
As of
2/29/96
-----------
<S> <C>
Tax-Free High Yield Fund $22,562
Lehman Revenue Bond Index $23,188
</TABLE>
Note: The index return does not reflect expenses, which have been deducted from
the fund's return.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
Annual Report
- --------------------------------------------------------------------------------
For yield, price, last transaction, T. Rowe Price
and current balance, 24 hours, -------------
7 days a week, call:
1-800-638-2587 toll free Tax-Free Funds
625-7676 Baltimore area
For assistance with your existing
fund account, call:
Shareholder Service Center February 29, 1996
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 distribution
only to shareholders and to others who have
received a copy of the prospectus of the
T. Rowe Price Tax-Free Funds.
[LOGO OF T. ROWE PRICE APPEARS HERE]
TFF RPTTFF 2/29/96
